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First Industrial Realty Trust Inc. (NYSE:FR)

Q4 2013 Results Earnings Conference Call

February 26, 2014 11:00 AM ET

Executives

Art Harmon - Senior Director, Investor Relations

Bruce Duncan - President and CEO

Scott Musil - Chief Financial Officer

Jojo Yap - Chief Investment Officer

Chris Schneider - Senior Vice President, Operations

Bob Walter - Senior Vice President, Capital Markets and Asset Management

Peter Schultz - Executive Vice President, East Region

Analysts

Craig Mailman - Keybanc Capital Markets

Ki Bin Kim - SunTrust Robinson Humphrey

John Guinee - Stifel

Dave Rodgers - Robert W. Baird

Mike Mueller - JP Morgan

Eric Frankel - Green Street

Operator

Good morning. My name is Jody, and I will be your conference operator today. At this time, I would like to welcome everyone to the First Industrial Fourth Quarter and Full Year 2013 Results Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. (Operator Instructions)

Thank you. I would now like to turn today’s conference over to Mr. Art Harmon, Senior Director, Investor Relations. Please go ahead, sir.

Art Harmon

Thanks, Jody. Hello, everyone, and welcome to our call. Before we discuss our fourth quarter and full year 2013 results and 2014 guidance, let me remind everyone that the speakers on today’s call will make various remarks regarding future expectations, plans and prospects for First Industrial. These remarks constitute forward-looking statements under the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995.

First Industrial assumes no obligation to update or supplement these forward-looking statements. Such forward-looking statements involve important factors that could cause actual results to differ materially from those in forward-looking statements, including those risk discussed in First Industrial’s 10-K for the year ending December 31, 2012, filed with the SEC, and subsequent Exchange Act reports.

Reconciliations from GAAP financial measures to non-GAAP financial measures are provided in our supplemental report available at firstindustrial.com under the Investor Relations tab.

Since this call maybe accessed via replay for a period of time, it’s important to note that today’s call includes time sensitive information, that maybe accurate only as of today’s date, February 26, 2014.

Our call will begin with remarks by Bruce Duncan, our President and CEO, as well as Scott Musil, our CFO after which, we will open it up for your questions. Also on the call today are Jojo Yap, our Chief Investment Officer; Chris Schneider, Senior Vice President of Operations; Bob Walter, Senior Vice President of Capital Markets and Asset Management; and Peter Schultz, Executive Vice President for our East Region.

Now, let me turn the call over to Bruce.

Bruce Duncan

Thanks, Art, and thanks to all of you for joining us today. 2013 was another successful year for First Industrial throughout a company, in leasing, in caring for our customers and upgrading our portfolio and strengthening our capital position. I would like to thank all of my team mates for their outstanding contribution.

We finished the fourth quarter at 92.9% occupancy, up 170 basis point from the end of the third quarter and 300 basis points for the year. Importantly, we exceeded the 92% year end goal for 2013 that we first established back in our November 2011 Investor Day.

Leasing carried today accounting for our 134 basis points of our gain, with sales contributing the other 36 basis points. At our latest Investor Day in November, we walked you through our potential opportunity to deliver total AFFO growth of as much as 70% to 90% by 2017.

With the benefits of our good leasing results in the fourth quarter, along with our outlook for improving cash flow in 2014 as we begin to realized that opportunity. Our Board of Directors declared a dividend of $10.25 per share for the first quarter, an increase of 20.6% versus the prior dividend of $8.05 per share.

The leasing market continued to be active as demand for space has increased, driven by the broader growth in U.S. economy. Fundamentals remained strong as the market has experienced positive net absorption for 14th consecutive quarter, while supply remains well below historical levels and concentrated in markets where demand supports it.

The leasing progress we made during the year with evidence in many of our markets across the country. Additionally, demand from small to mid size users was robust, which we saw in our portfolio in the form of occupancy gain in our non-bulk warehouse category.

We expect to capture additional demand and grow occupancy again this year as reflected in our guidance. For the first quarter, as we have experienced historically, we expect occupancy to dip and this quarter decline maybe larger than we have seen in recent years due an anticipated 400,000 square foot move out in Atlanta. We than see occupancy ramping up from there throughout the year.

We made good strides in the fourth quarter and our strategy of targeted sales to further improve our portfolio or addition by subtraction as we like say. Sales totaled $75.8 million in the fourth quarter and brought our full year total to $144.6 million, well ahead of our 2013 sales goal of $75 million to $100 million.

In the fourth quarter, we sold 48 properties, totaling $1.4 million square feet in two parcels of land. Sales included, a 384,000 square foot 27 building portfolio plus land parcel in Salt Lake City for $18.7 million. And a high finished portfolio of six buildings in Dallas totaling 245,000 square feet for $12.4 million. We also completed two separate sales in Denver both of which had significant office component comprising 157,000 square feet for a combined $20 million.

Overall, fourth quarter disposition was 73% occupied at the time of sale, with an in place cap rate of 6.8% and then 40% over book value including the land. Thus far in the first quarter we sold building in Detroit for $1.3 million. We also completed two sales in our net lease joint venture as we continue our strategy to wind it down with a goal of maximizing value for our partner and us.

For 2014, we are again targeting sales of $75 million to $100 million, as active portfolio management is a core element of our overall strategy. We would expect these sales to be backend loaded.

On the capital side, we’ve been active in the first quarter to-date. We successfully completed a new seven-year unsecured term loan totaling $200 million that we swapped to an effective initial fixed rate of 4.04%. This loan essentially prefunds our 2014 and 2015 maturities. We are pleased with this execution and appreciate the continuing support of our bank group.

With the benefits of our fourth quarter sales, we’re in the process of retiring the entire $50 million of our Series F Preferred Stock and $25 million of our Series G Preferred Stock, which had dividend rates of 6.275% and 7.236% respectively as of the first quarter.

Our solid capital position enables us to invest for growth and enhance our portfolio through targeted acquisition and development. Competition for quality acquisition remains strong but we’ve had a few recent successes. As we discussed on our last call, in October we acquired 627,000 square foot distribution center in the Southeast Wisconsin sub-market of Chicago for $26.3 million.

The building is 100% leased with an in-place yield of 6.7%. Thus far in the first quarter, we acquired a well located $252,000 square foot bulk warehouse in Minneapolis. That’s a 100% leased for $13.4 million and a 7.3% GAAP rate. Development continues to offer us the opportunity to deliver higher risk adjusted returns while adding high quality building to our portfolio.

Updating you on our current project, we’re on budget and on schedule with our 555,000 square foot First 36 Logistics Center at Moreno Valley in the Inland Empire. Our estimated total investment is $32 million with a planned second quarter completion.

Our $9 million 43,500 square foot First Figueroa Logistics Center in the South Bay of LA is also on budget and on track to be completed in the second quarter. Recall, that we allow ourselves one-year from construction completion for lease-up of a speculative project.

Our 250,000 square foot expansion for Rust-Oleum will be complete in the third quarter. During the third quarter -- during the fourth quarter of 2013, we completed the $489,000 square foot expansion First Bandini Logistics Center. In the Vernon Commerce submarket of LA as well as $708,000 square foot, first logistic center at I-83 in York, Pennsylvania.

Recall that our investments last year also included the second quarter acquisition of 509,000 square foot distribution center at the I-55 and I-80 in the Chicago market. We have nothing to report at this time in terms of new leases for these three buildings.

Next up, for our development pipeline, our two projects we discussed at our Investor Day. In the next few weeks, we expect to commence our First Pinnacle Industrial Center in Delhi. First Pinnacle will be a two-building totaling $598,000 square feet, with an estimated investments of $26 million.

We also closed to securing final approval for the $351,000 square foot First Northwest Commerce Center in Houston that we expect to start in the first half of this year. Estimated investments for First Northwest is $20 million.

So before I turn over to Scott, let me say that our focus has been and continues to be on driving cash flow and value. Leasing up our existing portfolio and new investments are at the center of that opportunity. As we push towards our new goal, a plus or minus 95% occupancy for year end 2015 that we said at Investor Day.

Escalations built into our existing and new leases will contribute to our growth. We’ve also reduced leasing cost as we move towards 95% occupancy since new leasing is significantly more costly than renewal. And on the capital side, we will continue to capture long-term cost savings as opportunities arise like our recent term loan.

We will also be pushing for higher rates to capture further recovery in market rents. This year we expect our cash rental rate to be about flat overall. As we discussed at Investor Day, we did not directly factor in market rent increases when outlining our potential cash flow opportunities and the impact is difficult to pinpoint

But as an owner of industrial real estate, we like the direction they are going. As we laid out in Investor Day, we believe our potential cash flow growth is a tremendous opportunity for our company and for our shareholders. And our job is to continue to deliver.

With that, let me turn it over to Scott. Scott.

Scott Musil

Thanks Bruce. First, let me walk you through our results for the quarter. Funds from operations were $0.27 per fully diluted share compared to $0.18 in 4Q 2012. Fourth quarter results included a $389,000 loss on retirement of debt, acquisition cost of $331,000 and $547,000 of NAREIT-compliant gains from land sales.

The four one-time items, namely the impact of the early retirement of debt and preferred stock redemption, NAREIT-compliant land gains and costs associated with our fourth quarter acquisition. Funds from operations were $0.28 per fully diluted share versus $0.23 in the year ago quarter.

EPS for the quarter was $0.18 versus a loss of $0.09 in the year ago quarter. For the full year, FFO per share was $0.98 versus $0.88 for 2012. Excluding one-time items such as NAREIT-compliant gains, losses from the early retirement of debt, losses from the redemption of preferred stock, the IRS settlement in 2012 and costs associated with our property acquisitions, FFO was a $1.08 versus a $1.02 in 2012.

Moving on to our portfolio, occupancy was 92.9%, up 170 basis points from the third quarter, and up 300 basis points from a year ago. Regarding leasing volume, we commenced approximately 4.9 million square feet of leases in the quarter. Of these, 1.4 million square feet were new, 2.9 million were renewal and 0.6 million were short-term. Tenant retention by square footage was 87.2%.

Same-store NOI on a cash basis, excluding termination fees was a positive 3.5%, due to the year-over-year occupancy growth, the impact of contractual rate bumps, partially offset by rental rate roll downs and higher free rent. Same-store NOI growth including termination fees was negative 1.1%. As you may recall, we had a large lease termination fee in the year ago quarter.

For the fourth quarter, lease termination fees totaled $453,000. Cash rental rates in the quarter were down 4.7% overall, with renewals a positive 2.6% and new leases down 14.6%. On a GAAP basis, the overall rental rate change was a positive 2.8%. Leasing costs were $2.43 per square foot.

Moving on to our capital market activities and capital positions, in the fourth quarter as we discussed in our last call, we paid off $32 million of mortgages with a weighted average interest rate of approximately 6.5%. As Bruce already discussed, we were pleased to close on our new seven-year unsecured term loan totaling $200 million. The rate is LIBOR plus 175 basis points at a current leverage levels.

We entered into swap agreements to effectively fix our initial rate at 4.04%. This all-in rate is based on our current leverage level and can be adjusted with changes to our leverage ratios or movements along the investment rate scale.

The $200 million of proceeds represents about 37% of our total maturities through 2017 that we outlined during Investor Day. The proceeds from this loan are sufficient to allow us to retire our 2014 and 2015 maturities and prepayment opportunities at a total approximately $150 million.

The weighted average interest rate of these maturities is 6.4%, so we will capture those savings long-term. This leaves us with approximately $50 million of additional proceeds we are using to pay down the line of credit, effectively costing us a penny per share of dilution in 2014.

One other capital goal we discussed at Investor Day was to achieve investment grade for our unsecured notes by the end of 2014. As you may have seen on Friday, we were pleased to know that S&P was the first firm to upgrade our unsecured debt rating to investment grade at a BBB minus rating.

Regarding our leverage metrics, at 4Q 2013, our net debt plus preferred stock to EBITDA is 6.6 times, in line with our target range of 6 to 7 times. At December 31st, the weighted average maturity of our unsecured notes and secured financings is 4.7 years with a weighted average interest rate of 6.2%. These figures exclude our credit facility.

Our credit line balance today is $21 million, and our cash position is approximately $29 million. Moving on to our 2014 guidance through our press release last evening, our FFO guidance range is $1.12 to $1.22 per share. Guidance includes a penny per share combined impact of the losses from the redemption of our Series F and G Preferred Stocks, and a significant one-time restoration fee of $0.02 per share.

Excluding these items, FFO per share is expected to be in the range of $1.11 to $1.21. The other key assumptions are as follows. Average in-service occupancy end of quarter of 92.5% to 93.5%, average quarterly same-store NOI on a cash basis of positive 3% to 5%. This range excludes the one-time restoration fee I just discussed. G&A of $23 million to $24 million.

Full year JV FFO is expected to be approximately $400,000, which includes the impact of the sale of two properties in the first quarter of 2014. Guidance includes the costs related to the planned development starts in Houston and Dallas, and the incremental costs related to the First 36 Logistics Center at Moreno Valley, the First Figueroa Logistics Center and the Rust-Oleum Expansion.

In total for 2014, we expect to capitalize $0.01 per share of interest related to our developments. Guidance assumes the lease-up of the First Bandini Logistics Center and First Logistics Center at I-83 in the fourth quarter, as well as the Chicago Distribution Center we acquired last year by the end of the second quarter. Recall that each of their pro formas assume one year for lease-up. Guidance reflects the impact of the $13.4 million Minneapolis acquisition completed in the first quarter.

And lastly, guidance assumes the payoff of $44 million of secured debt at an average interest rate of 6.8% and/or 6.42% 2014 notes in the amounts of $82 million. Other than what I have noted, our guidance does not reflect the impact of any future debt issuances, the impact of any future debt repurchases or repayments, any additional property sales, acquisitions or further developments, any future NAREIT compliance gains or losses or the impact of impairments, nor the potential issuance of equity.

With that, let me turn it back over to Bruce.

Bruce Duncan

Thanks, Scott. Before we open it up for questions, let me say the 2013 was a great year for First Industrial. But as I often say, there is no future in the past. Given our achievements in 2013, and our outlook for 2014, we raised the dividend by more than 20% while maintaining our conservative AFFO payout ratio rate of 50% to 60%. We are focused on realizing the potential long-term cash flow opportunities that we laid out at Investor Day. And the first step is with executing on our 2014 plan. We look forward to keeping you apprised of our further progress throughout the year.

With that, we will now take your questions. As a courtesy to other callers, we ask that you limit your questions to one, plus a follow-up in order to give other participants a chance to get their questions answered. You are welcome of course to get back into the queue. Operator, may we now open it up for questions?

Question-and-Answer Session

Operator

(Operator Instructions) Your first question comes from the line of Craig Mailman from Keybanc Capital Markets.

Craig Mailman - Keybanc Capital Markets

Good morning, guys. Just on Bandini and the Pennsylvania development, I think Scott, you just said guidance assumes they are leased by the fourth quarter. I am just curious what the activity level has been at those two assets, do you think we could come in a little bit ahead of that, just thoughts there?

Bruce Duncan

Let me take that in the sense that, we budget as Scott said a one-year downtime before we get things leased up, but we are encouraged in terms of the activity. Peter and Jojo can talk about specific assets, but we will be disappointed if we don’t have them leased by then, but again it’s our job to make it happen.

Jojo Yap

Yes, thanks, Bruce. In terms of First Bandini, our 489,000 square foot building in Commerce California, we have had showings and we continue to have showings in from various types of users. And our job is to get those leased and we will report to you once we get that done.

Peter Schultz

Craig, its Peter. In terms of Pennsylvania and our building in New York, the activity has definitely increased as the building was completed. We continue to view the supply/demand dynamics in that market as very positive. There has been no new speculative supply started in central Pennsylvania since we started this building in Q3 of 2012. Today, there is only one other direct competitors in the same size. If you expanded a little bit to 500,000 square feet or more, there are only another two builds. As Bruce said, we will be disappointed if we didn’t neither beat our year end target, but we are pleased with the increase in activity that we’re seeing since completion.

Craig Mailman - Keybanc Capital Markets

That’s helpful. And then just staying on occupancy here, so the 400,000 square feet in the first quarter, that looks like it's about 60 basis points, I mean, how big could the drop be in 1Q before we see that ramp into the back half of the year?

Bruce Duncan

Craig, if you look at the last 3 or 4 years, we probably dropped between 30 and 50 basis points. And so if added in there 400,000 feet, that as you are right, it’s about 60 basis points. So you know it will be more than the 30 to 50 basis points that we’ve historically had, but again as we said, the market is good. We anticipate picking that backup over the year and ending up year and our goal is 94%.

Craig Mailman - Keybanc Capital Markets

Is any piece in that 400,000 already released or is it all coming back to you guys?

Peter Schultz

Craig, its Peter. This is the tenant that’s been more of a short-term occupant on the space and we do have activity on the space, but we’ll keep you posted on that on future calls.

Craig Mailman - Keybanc Capital Markets

Great. Thank you.

Operator

Your next question comes from the line of Ki Bin Kim from SunTrust.

Ki Bin Kim - SunTrust Robinson Humphrey

Thanks. So I guess you provided more color on page 12 of your supplemental, giving a little more details on your lease spreads. Maybe you could spend a couple of seconds on it. There seems to be a pretty widespread between the GAAP rent on rollovers for new versus renewal. Maybe if you could just talk a little bit about it, is that fairly typically that we see, should we expect going forward probably for 2014?

Chris Schneider

Yeah. Ki Bin, this is Chris. Yeah. If you look at overall in the GAAP, rental rate increases versus the cash, we have historically been about 500 basis point spread. So it has been pretty difficult for the last couple of years and we expect that going forward.

Bruce Duncan

And then Ki Bin, that, I am sorry, Ki Bin, go ahead.

Ki Bin Kim - SunTrust Robinson Humphrey

I mean the difference between new and renewal.

Bruce Duncan

Yeah. Ki Bin, there is always going to be usually differences between new and renewal leases, on renewal we have more leverage because the tenant is currently in the space and new leasing is a little bit more competitive in the marketplace just because the tenant has other options to look at.

So there is always going to be some sort of spread there. And when we are looking at 2014, we think we are going to be overall new and renewal negative 2.5% to positive 2.5%, so the mid-point is flat and we think our renewals are going to be flat to 5% so we still see positive traction there.

Ki Bin Kim - SunTrust Robinson Humphrey

And flat on GAAP or cash?

Bruce Duncan

Yeah. These are cash that I am giving you estimate on.

Ki Bin Kim - SunTrust Robinson Humphrey

Okay. And my second question, I mean, going back to your comments about the activity you are seeing for some of your development assets and the Chicago, then the Chicago building you guys bought I think a couple quarters ago. Is and its my concern, yeah, I mean, early on, so I don’t want to make it sound worse at it, but is as, I guess, not delay but it is, are you guys holding back on these new assets because there is a ton of -- a ton of demand or is that you are looking for the right price, if you could describe some of the dynamics going on when you are actually sitting down with tenants trying to lease these type of spaces?

Bruce Duncan

I would say, we feel pretty good about where we have been right now. We like the products we built and I would say, the two new developments with pricing is great if the market very well and we are encouraged by the activity. But again we are going to get a lease but we are very, I would say, just look at the growth we have had in occupancy in the fourth quarter, market is strong and market in Southern California strong, Central PA is strong. So we are encouraged.

Chicago -- Chicago we bought that building in the second quarter, end of the second quarter of last year and we haven’t lease it yet, I will be disappointed if not leased by June of this year when they close in-service portfolio but we have a lot of activity on it but again we are going to convert it, as Jojo said, we are going to convert this to leasing and so we are all.

Ki Bin Kim - SunTrust Robinson Humphrey

Okay. Thank you, guys.

Operator

Your next question comes from the line of John Guinee from Stifel.

John Guinee - Stifel

Great. Hey. Thank you, guys. Nice job. Just out of curiosity, you are selling $100 million to $150 million worth of assets and you will clearly be always pruning the portfolio but you -- and correct me if you have already said this, but there is a point at which you say, I like what I have, we got the core, we are in the market we want to be in and anything else is just incremental versus part of a strategic plan, what is the number in order to get down to the strategic plan level before you switch to incremental?

Bruce Duncan

I would say, John, we probably get another $100 million to $125 million before we get down to sort of a strategic…

Scott Musil

The core.

Bruce Duncan

The core.

John Guinee - Stifel

And does that include, is that in addition to what you allocated for ’14 or should we just assume another $100 to $150 for 2015 also?

Bruce Duncan

No. I would assume that you, that’s 2014 will be included in that number.

John Guinee - Stifel

Got you, okay. And then, is it safe to assume that you look at your AFFO at about $0.70 to $0.80 going forward given the new dividend?

Scott Musil

John, this is Scott. Our midpoint AFFO is about $0.79 a share, so like our FFO guidance deduct five and add five for range.

John Guinee - Stifel

Got you. Thank you.

Operator

Your next question comes from the line of Dave Rodgers from Robert W. Baird.

Dave Rodgers - Robert W. Baird

Good morning, guys. First, for Jojo, maybe give a little bit more color on the dispositions, obviously accelerated into the end of the year, it sounds like you're expecting another healthy year of dispos this year. Is that just a healthier First Industrial that can afford to kind of sell these assets off? Is it truly a better market for these vacant or nearly vacant assets that you're selling? And I guess if the latter, can you just kind of talk about the users and the buyers of the space that you're seeing now surfacing for the assets?

Jojo Yap

Sure. Like we said, I mean, our disposition is really part of our active asset management plan. And as we went into the fourth quarter, interest and activity significantly picked up. And as we've also told in the past, we're focused on getting appropriate value. And during the fourth quarter, we've got appropriate value for those assets. That’s why (inaudible) that our corporate values are going to be executed. In terms of users versus private investors, for the year -- for 2013 approximately 48% was the users by volume and 52% was the investors by volume. Does that answer your question?

Dave Rodgers - Robert W. Baird

Yes, it does. It sounds like the market continues to get better. Pricing was obviously better. And I guess maybe flipping then to capital deployment, one, and maybe for you, Bruce think about or tell us how you think about development yields, development return relative to your cost of capital, relative to acquisitions, are you seeing those spreads and how do you feel about putting new money to work in development today given the returns where they are?

Bruce Duncan

We're very encouraged in terms of put more money to work in development, especially if you look at the developments we've talked about in the Houston and Dallas, we’re going to start hopefully in the first half of this year, the returns are 7.5% and 8% for those two respectively. And we're very happy with those two. And we'd like to do more. As you know, we're entitling a site in Southern California for [1.3] square feet plus and we've got a good site in Allentown and we have a site in Covington where our Diapers.com building is, taking it to another 500,000 feet. So those are all good opportunities for us going forward and we're excited about those and we also have a great piece of land in stock -- and this is probably a few years out but they could do 200,000 square feet. So we like -- again, development does two things. We think that risk adjusted return is higher. It’s been -- I mean better risk adjusted return. And we think that we are getting high-quality properties.

Again the properties have a lot of parking, a lot of trailer parking, car parking and state-of-the-art products. And we are excited about that. Our job is always has been to get the things build on time, on budget and get them leased up at pro forma, ahead of pro forma within 12 months, and we’re on it.

Dave Rodgers - Robert W. Baird

Just on the acquisition front, can you talk a little bit about the acquisition strategy -- how you think about putting money to work in development versus acquisitions today? And I guess, just how we should think about the dispositions, funding acquisitions? Are you going to kind of be a net investor on the acquisition front going forward?

Scott Musil

At the end of the day long term, of course, we want to be a net investor. In terms of the my positions, remember, we are all-in a total return investors. So as total return investor, we focus on where minor trends are and where we can grow rent. So the focus is growing rents and our basis in the investment.

And so in terms of strategy, we’ll use our platform. You won’t be spending 100% of our time in auction bid type situations, because there is no value there. So we’ll use our platform, just like we have used in the past. We’re focused on total returns.

And in terms of development, just adding a little bit more color, what Bruce have said, if we go to development, we always would try to look for a 100 or 150 basis points premium in terms of deals. And that’s adding our cost of capital so we can get a risk-adjusted return, a higher risk-adjusted return. Does that answer your question?

Dave Rodgers - Robert W. Baird

It does. Thanks very much.

Operator

(Operator Instructions) Your next question comes from the line of Mike Mueller from JP Morgan.

Mike Mueller - JP Morgan

Hi. Just have two follow-up questions to prior questions that came up. First of all, if we’re thinking about disposition volumes, so once we get pass 2014, does it feel like a number of $25 million to $50 million a year, something like that. Is it a good number to think up for kind of the lower level of recycling that or recurring?

Bruce Duncan

I probably would keep it at, like 75 to 100 because we’re going to be continuously, sort of in every market continuing to operate portfolio. After management is an ongoing process, we’re focused on it. So I would say that -- I probably get number.

Mike Mueller - JP Morgan

Okay. Great. And then, second question, going back to the AFFO comments, what’s the CapEx expectation for 2014?

Bruce Duncan

It’s going to be around the $50 million area, which is about $0.45 a share like.

Mike Mueller - JP Morgan

Got it. Okay. That was it. Thank you.

Bruce Duncan

Thanks.

Operator

Your next question comes from the line of Eric Frankel from Green Street.

Eric Frankel - Green Street

Thank you for taking my call. I just have a question regarding development. Can you provide a little bit more color on the land market? It certainly seems that it's staying a little bit more competitive out there.

Bruce Duncan

Yes, Eric, land prices have increased year-over-year and it continues to increase. Of course, it varies market-by-market. And we do believe though that overall land prices will probably not increase on a percentage basis compared to year-over-year last year. Just because rents still have to grow before, have to grow a bit in order for some markets to develop. But in some markets, I think in some other markets, I think they will continue to increase. So at the end of the day, our job is to use our platform, our team of boots on the ground to identify land sites that would fit our criteria.

Eric Frankel - Green Street

Okay. Thank you. And Scott, can you just give a little more color on the restoration fee? What state is it in? Is it related to Atlanta, or is it somewhere else?

Scott Musil

It’s a restoration fee that we have on a roof to about $0.02 a share. And the reason that we’re just calling it out in the call because we know about it and it’s a one time big item. So we adjusted it out of our FFO before one-time items.

Eric Frankel - Green Street

Okay. Thank you.

Operator

(Operator Instructions) Your next question comes from the line of Eric Frankel from Green Street.

Bruce Duncan

Eric?

Operator

Mr. Frankel, your line is open.

Eric Frankel - Green Street

Sorry. Thank you. Maybe talk about your G&A guidance for next year, it seems like it is a little bit higher than in the past year. Is it related to the increased development starts?

Scott Musil

No, it’s not. I mean, our guidance is $23 million to $24 million. Our G&A for 2013 came in a little bit higher than top end of our G&A guidance. So, it’s really when you look at the difference, it’s really just normal expense increases from ’13 to ’14, but nothing out of the ordinary, Eric.

Eric Frankel - Green Street

Okay. Terrific. Thank you.

Operator

There are no further questions at this time. I will now turn it back over to Mr. Bruce Duncan for closing remarks.

Bruce Duncan

All right. Thank you, operator. Again, we appreciate your interest. If you have any question, please contact Scott, or Art, or me. And we look forward to seeing some of you down at the fun in the sun at the Citigroup thing next week. So, again, thank you very much.

Operator

Thank you. That concludes today’s conference call. You may now disconnect.

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Source: First Industrial's CEO Discusses Q4 2013 Results - Earnings Call Transcript
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