First Industrial Hopes to Finish Year as Buyer

CHICAGO-Although its record so far this year makes it a net seller, First Industrial Realty Trust expects to be a net buyer through the end of the year. First Industrial was a net buyer in the second quarter to the tune of $10 million, as it acquired $121 million worth of real estate, including the two properties in Elk Grove Village, while selling properties for $111 million.

For the year, though, the REIT has been a net seller by a $31-million margin. The trend is borne out in this market. While its most recent acquisitions include two buildings in Elk Grove Village totaling 245,430 sf for $9.6 million, the REIT has sold off two properties in Burbank totaling 448,000 sf for $14.7 million.

However, the Chicago market is one of First Industrial’s strongest, reports executive vice president of operations David P. Draft during the company’s recent second quarter earnings conference call. During the last six weeks, the REIT has signed lease deals or is in negotiations to lease 500,000 sf of space. Those are new deals, Draft emphasizes, rather than renewals.

While that helped boost occupancy locally, First Industrial officials are not overly concerned its overall rate is 88.6% across the portfolio after five consecutive quarters of increases. “Our eye is on the value creation line,” says president and chief executive officer Michael Brennan.

The REIT controls 1,500 acres, on which it can build 23 million sf of industrial space, notes chief investment officer Johannson L. Yap. That includes 39 acres in this market, where it can build 850,000 sf.

The second-quarter sales were at an unleveraged internal rate of return of 25.4%, Yap says, while the acquisitions were at an average initial yield of 9.0%.

Yap adds the REIT should do more than $175 million in acquisitions and developments before the end of the year, perhaps as much as $200 million. About $180-million of second-half deals are under contract, he notes.

First Industrial paid $7.9 million a year ago for a 407,012-sf building at 5100 W. 70th Pl., according to property records, grossing $5.3 million when it sold the property less than a year later. The REIT held 5555 W. 70th Pl. for seven years, according to property records.