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First Industrial Realty Trust Inc. (NYSE:FR)

Q4 2010 Earnings Conference Call

February 24, 2011, 11:00 am ET

Executives

Art Harmon – Senior Director IR

Bruce Duncan – President, CEO

Scott Musil – CFO

Jojo Yap – CIO

Chris Schneider – SVP Operations

Bob Walter – SVP Capital Markets

Analysts

Ki Bin Kim – Macquarie

Suzanne Kim – Credit Suisse

Michael Mueller – J.P. Morgan

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 Realty Trust Fourth quarter and Full Year 2010 Earnings 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 will now turn the call over to Mr. Art Harmon, Senior Director of Investor Relations. Sir, please go ahead.

Art Harmon

Thank you, Jody. Hello, everyone, and welcome to our call. Before we discuss our Fourth Quarter and Full Year 2010 results, let me remind everyone that the speakers on today’s call will make various remarks regarding future expectations, plans and prospects for First Industrial, such as those related to our liquidity, management of our debt maturities, portfolio performance, our overall capital deployment, our planned dispositions, our development and joint venture activities, continued compliance with our financial covenants, and expected earnings.

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 risks discussed in First Industrial’s 10-K for the year ending December 31st, 2009 filed with the SEC and subsequent ‘34 Act reports.

Reconciliation 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 is important to know that today’s call includes time-sensitive information that maybe accurate only as of today’s date, February 24, 2011.

Our call will begin with remarks by Bruce Duncan, our President and CEO; to be followed by Scott Musil, our acting Chief Financial Officer, who will discuss our results, our capital position, and 2011 guidance. After which we will be pleased to open it up for your questions.

Also in attendance today are Jojo Yap, our Chief Investment Officer; Chris Schneider, Senior Vice President of Operations; and, Bob Walter, Senior Vice President of Capital Markets.

Now, let me turn the call over to Bruce.

Bruce Duncan

Thanks, Art and thank you everyone for joining us on our call today. As you saw in our press release last night, with the benefit of the improving economy and stabilizing industrial fundamentals, our team delivered a 140 basis points increase in occupancy in the fourth quarter, growing our portfolio occupancy to 85%. This was our third consecutive quarter gain. During this three quarter period, we improved occupancy by 360 basis points.

Demand was broad-base as tenants to continue to actively seek industrial space. With a number looking to expand for growth while others are reconfiguring supply chains we gain efficiency. New demand is coming from businesses of all sizes and across all property types.

Active industries include 3PL serving the needs of a range of customers. Consumer products and food related companies as well as the aerospace, medical equipments, another specialty manufacturers.

As a point of comparison for you on occupancy, the overall national industrial market improved 30 basis points to 85.7% at the end of the fourth quarter according to CB Richard Ellis - Econometric Advisors after growing just 10 basis points in the third quarter, following 11 quarters of occupancy declines.

So we have outpaced the broader market with our recent occupancy gain but we still have work to do in our portfolio, which we view as an excellent opportunity to drive cash flow and value.

We expect first quarter occupancy to be down slightly versus our year end figure, which is fairly typical for us and our peers. We forecast occupancy to improve throughout the year with our average occupancy for 2011 expected to be in the range of 85% to 87%.

One piece of good news, we received this week with the major lease expansion with one of our largest tenants. Diapers.com exercised their option for 468,000 square feet, and beginning in the second quarter will fully occupy our 1.3 million square foot distribution facility at Central Pennsylvania.

Rents have stabilized in most of our markets, but recall, the industrial leases are typically around five years. So as an industry, we are coming off transactions primarily signed in much better times in 2005 and 2006. As a result, we expect to rent roll downs of roughly 10% to 12% this year.

As the overall market continues to get better and drive our activity higher and stabilize our portfolio, we would expect rates on new and renewal leases to improve. In our negotiations we are striving to minimize rent declines and reduce incentives like free rent. But at this point in time, we still have vacancy to lease and customers have alternatives, so we need to be competitive on pricing and incentives.

We continue to aim to keep lease terms shorter in order to preserve the value and long term NOI growth potential of our assets. Our average lease term for our long-term leases that commenced in 2010 that is our leases with terms greater than one year was 4.3 years, compared to our overall portfolio average of six years. If you include short-term leases those less than one year, the average term for 2010 was 3.6 years.

In 2009, recall that our average lease term on long-term leases was just 4.1 years. By focusing on keeping terms shorter during this leasing environment we believe we will have opportunity for further upside as the market recovers. And as we have previously noted, we’ve employed a strategy in certain markets of offering seasonal rates with lower entry level pricing and bigger than average rent escalations.

For our long term leases commencing in 2010, average annualized rent escalations were 5.1% on about 74% of those leases. Historically, we have averaged 2.5% to 3% on about two-thirds of our leases.

Leasing traffic is up virtually across the board, notably New Jersey, Baltimore, Washington, and Indianapolis have all shown good activity. Looking at some of our more challenging markets Florida, Atlanta, and Phoenix are seeing a welcome increase in traffic, while leasing velocity in Columbus, Dallas, and Denver is less robust.

The supply side of the equation remains in balance. New construction is minimal, except for the occasional build-to-suit. You may see very select spec buildings in markets where large distribution facilities are becoming tough to find, like the Inland Empire, Houston, and Salt Lake City, though the current market rents as they are its difficult for spec developments to make sense in most U.S. markets.

Moving now to the capital side of our business. Since we announced our managed credit facility last quarter, we started the process of marketing select properties from our pool of non-strategic assets. Again in pursuing these sales we are focused on achieving appropriate pricing and value for our shareholders. We are not engaging in a fire sale.

We also want to be clear we are not marketing the entire non-strategic pool at one time (inaudible) an asset by asset execution which should delivered the best pricing for our shareholders.

During the fourth quarter, we closed $8.2 million of sales and another $7.7 million in the first quarter to date. We expect our sales to gain traction throughout the year for the goal of $100 million by year end and approximately $250 million in total by year-end 2012.

We continue to be focused on deleveraging and have a clear path on taking care of our upcoming maturity. In addition to our sales proceeds we issued approximately $41 million of equity in the fourth quarter through our ATM program. Our ATM program expired at the end of last year, but we anticipate filing a new ATM in the near future.

Equity remains part of our part of our arsenal to de-lever towards our debt to EBITDA target of 6.5 to 7.5 times. Using our fourth quarter EBITDA excluding onetime items and reflecting our anticipated 2011 G&A, we were at roughly 8.3 times. While the world has improved, we need to continue to de-lever as we cannot run our business for the long-term assuming interest rates will remain at these historically low levels.

The secured debt market remains active, if capital providers like insurance companies, regional banks, and securitized lenders look to deploy capital. As discussed on our last call, we completed the small secured financing transaction of about $10 million in the fourth quarter.

In the first quarter, we had executed a commitment with a life insurance company lender on a secured debt package that is expected to generate in excess of $175 million of proceeds. This commitment carries a 4.45% interest rates, 70% loan to value, a 7 year term, and 30 year amortization.

We had previously consummated our transaction with this lender and anticipate this financing will close in the second quarter. Please keep in mind that this transaction remains subject to due diligence and documentation and there could be no assurance that we able to close or generate the proceeds we anticipate.

If we’re able to close the transaction, the anticipated proceeds will nearly cover both our $129 million of convertible debt convertible debt due in September and our $62 million of 2012 unsecured notes. Scott will walk you through our updated capital roadmap in his comments.

On the sales front, the overall market continues to strengthen as the evidence by real capital analytics report of a 136% volume increase in the fourth quarter versus the year ago period. With financing availability and investor seeking yield in a way participate in the recovery, the overall sales market is heating up.

We had a notable sale in our net lease joint venture that demonstrates the approving strength of the market and continued recovery in leased property values. We completed the sales of a 236,000 square foot property in the West of Urban Chicago market. Net leased to a manufacturer that sold for $17.6 million or $75 per square foot which represents an in-place cap rates of 6.6%.

We are encouraged by the continuing improvement in the sales market in terms of capital availability and activity and its implications for values in the sector and more importantly our portfolio.

Well, our focus is on enhancing the value of our company through leasing and deleveraging, we are also attracting potential investment opportunities, but pricing for well located leased assets is challenging. Long-term, we will increase our capital allocation to markets which prospects for above average rental rate growth such as coastal markets and select the infill opportunity.

Now, as I have in prior quarter, I want to discuss the dividend. To gather REIT dividend is important to investors. We look forward to reinstating the dividend based on sustainable stable cash flow but we’re not forecasting a timetable for when we may reinstate it. Management of the Board will continue to review our position on a quarterly basis, as we progress on further de-levering our balance sheet and driving occupancy.

I remind you that our dividend policy is to distribute the minimum amount required to maintain our REIT status. Actual income levels are in part depended upon the level and nature of our asset sales.

So before turning it over to Scott, let me take a moment to acknowledge and thank the entire FR team for their efforts on a job well done throughout the past year. As a team we know we have more to do and are excited about our opportunity to build upon our progress to date.

We are committed to driving value for our investors through leasing, remain vigilant on expenses, executing our asset management program of sales of non-strategic assets, and improving our capital position towards our targeted debt levels, while positioning the company for future growth.

So with that, Scott?

Scott Musil

Thank you, Bruce. First, let me walk you through our results for the quarter and the year, which had a number of one-time items. For the quarter, funds from operations were a loss of $0.02 per share compared to income of $0.60 per share in the year ago quarter.

FFO results were impacted by a few one-time items during the quarter, such as a non-cash impairment charge of $21.5 million or $0.31 per share related to the non-strategic pool that we discussed last quarter.

In addition JV FFO included approximately $1.4 million or $0.02 per share, related to distributions from the sale of properties in the joint ventures that wound-out in the third quarter.

Comparing fourth quarter 2010 to the year ago quarter, excluding one-time items such as impairment charges on the balance sheet and the joint venture, gains and losses from debt repurchases, income taxes, and distributions from the joint ventures I just discussed, funds from operations were $0.28 per share compared to $0.25 per share in the year ago quarter.

EPS for the quarter was a loss of $0.43 per share versus income of $0.18 per share in the year ago quarter. For the year funds from operations were a loss of a $1.71 per share compared to income of $2.08 per share for the prior year.

Results for 2010 included $2.85 per share of impairment charges, $0.16 per share gain from the sale of interest from certain joint ventures, and a $0.06 per share loss from retirement of debt.

Excluding impairment charge in that balance sheet and the joint ventures, gains and losses from debt repurchases, income taxes, and the gain related to the sale of certain of our joint ventures, full year 2010 FFO with a $1.08 per share versus the $1.28 per share in 2009. Full year 2010 EPS was loss of $3.53 per share compared to loss of $0.28 per share in 2009.

Moving on to the portfolio. Our occupancy for in-service portfolio was 85%, up 140 basis points since the last quarter and 300 basis points since year end 2009. In the fourth quarter, we commenced 3.7 million square feet of leases on our balance sheet. Of these, 2.1 million square feet were new, 0.9 million were renewal, and 0.7 million were short-term. So far in the quarter, we have commenced another 2.7 million square feet of new and renewal leases. The 2.7 million figure excludes short-term leases.

For the quarter, tenant retention by square footage was 55% and our weighted average for the year was 65% in line with our expectations. For 2011, we expect retention to average approximately 65% to 70%.

Same store NOI to cash basis was down 2% excluding termination fees. This was better than expected primarily due to higher than expected occupancy as well as lower bad debt expense in property taxes. Termination fees totaled $1.1 million in the quarter.

Rental rates were down 17% cash-on-cash reflective of the competitive leasing market. On a GAAP basis, rental rates were down 13%. Leasing costs were $3.08 per square foot for the quarter, higher than recent quarters due to greater mix of new leasing versus renewals.

For the year, leasing costs averaged $2.27 per square foot in line with our expectations. For 2011, we expect leasing cost to be approximately $2.20 to $2.50 per square foot, where we end up in the range will be depended upon the mix of new and renewal business.

Moving on to our capital market activities and capital position. During the fourth quarter as Bruce discussed, we sold four buildings totaling 304,000 square feet plus two land parcels for sales proceeds of $8.2 million. For 2010, we completed approximately $71 million of sales. Since the end of the fourth quarter we sold three properties totaling 339,000 square feet for a total of $7.7 million.

As we reported on our last call, during the fourth quarter we closed one secured financing transaction for $9.8 million with a local bank secured by two properties with a 5-year maturity adding 5% interest rate.

In conjunction with the line of credit amendment we paid down approximately $100 million on October 22. On the equity front, we raised approximately $41 million by issuing 4.9 million shares through our ATM at approximately $8.24 per share. As Bruce mentioned, equity will continue to be part of our capital program.

Proceeds were used to repurchase $80 million of our September 2011 convertible notes and pay down $22 million on our line of credit. We also paid off and retired a $13 million mortgage loan that matured in the fourth quarter. Subsequent to quarter end, we prepaid and retired a 6.75% $14.5 million mortgage loan that we originated in 2009. This was partially funded with an $8.6 million mortgage loan receivable payoff we received in the first quarter.

Let me briefly update you on our planned sources and uses for 2012. On the uses side, as of December 31st, we have the $129 million of 4.625% September 2011 converts remaining, $62 million of our 6.875% 2012 notes, and $22 million of mortgage maturities through 2012 at an average interest rate of approximately 7%, plus we have another $76 million pay-downs on our unsecured credit facility to reach our target outstanding balance of $300 million, these totaled $289 million.

On the sources side, we have discussed our plan to sell approximately a $100 million from our non-strategic pool in 2011 and roughly another $150 million through year end 2012. Bruce discussed the $175 million of secured financing that we can under commitment which subject to due diligence and documentation, we anticipate closing in the second quarter.

Total sources approximate $425 million in excess of the uses I just discussed by a $136 million. We have a few logical choices for these excess funds. We have approximately $60 million of secured debt where it could be economical beneficial for us to prepay in 2011 with interest rates ranging from 6.42% to 7.5%. Prepayment penalties range from 2% to 4% of the outstanding balance.

We can also make additional pay-downs on our unsecured credit facilities. As you can see we have a clear plan in place to care of our maturities for 2012. Longer term, we will look for opportunities to deploy capital into new investments whether on balance sheet or through joint ventures. The new investment is depended on our visibility and our progress in deleveraging and securing our asset management strategy for select sales and stabilizing our current portfolio through incremental leasing.

Quickly summarizing our capital structure in current capital position, our weighted average maturity of our notes and mortgages is 7.3 years with a weighted average interest rate at 6.9%. These figures exclude our unsecured credit facility. Our cash position today is approximately $31 million; our credit facility balance stands at $386 million. And again as Bruce described, our debt to EBITDA ratio is approximately 8.3 times.

Moving on to our 2011 guidance, through our press release our initial guidance range for 2011 is for FFO per share of $0.81 to $0.91 per share. Key components of that guidance are as follows.

Average occupancy of 85% to 87%, same store NOI on a cash basis for the year is projected to be negative 1% to positive 1% primarily driven by higher average occupancy offset by rental rate changes on new leasing and renewals. G&A of $23 million to $24 million, JV FFO of $1.1 million related to our net lease joint venture. This assumes no further property sales in this joint venture or additional economics for the wind down of certain JVs we announced last year.

Guidance also assumes that we’re able to issue the $175 million of secured debt mentioned earlier at an interest rate of approximately 4.45% this second quarter. Note that guidance also reflects $0.02 per share of restructuring charges primarily related to the subleases of some office space in our corporate headquarters. Excluding these restructuring charges, our FFO guidance range is $0.83 to $0.93 per share.

Our 2011’s guidance does not reflect the impact of any further debt issuances, property sales nor any REIT compliant gains. Guidance also does not reflect any potential additional equity issuance.

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

Bruce Duncan

Thanks, Scott. Before we open it up to questions, let me offer a few final comments. As a team, we have strived to provide you with the clear plan of what we’re going to do for our portfolio, our expense management, and capital management.

We’ve been committed to meeting that plan and earning investor’s confidence by doing so. We still have some more to do and reaching our leverage target of debt to EBITDA of 6.5 to 7.5 times. And we’ve laid down our path for you on the capital side.

With occupancy at 85%, we still have room to drive cash flow even with our recent strong stock performance we continue to be at the bottom of our peer group on a price to forecasted FFO multiple.

On a cap rate basis, using our fourth quarter NOI annualize, we traded roughly at 80% cap rate at just 85% occupancy that is not factoring the embedded cash flow potential of our vacancy. On a price per pound basis, we traded just $41 per square foot substantially less than our peers and below replacement costs and sales comparables.

Additionally, the per square foot metric extracts no value to our platform, (inaudible) like in the industrial market and I assume to one left upon the completion of the anticipated AMB ProLogis merger. And we’re focused on what we need to do with our portfolio and our balance sheet to enhance value for our shareholders.

So with that we’d now be happy to take your questions. As a courtesy to our other callers, we have to – you limit your questions to one, one with a follow up in order to give other participants a chance to get their questions answered. Of course you’re welcome to get back into the queue. And so now Jody, can we please open it up for questions.

Question-and-Answer Session

Operator

(Operator instructions). Your first question comes from the line of Ki Bin Kim with Macquarie.

Ki Bin Kim – Macquarie

Good morning guys.

Bruce Duncan

Good morning.

Ki Bin Kim – Macquarie

Actually a little bit – very quick questions. First on diapers.com, is that in our guidance?

Bruce Duncan

That is in our guidance.

Ki Bin Kim – Macquarie

That is?

Bruce Duncan

Yes.

Ki Bin Kim – Macquarie

Okay. And second quick question, what does the cap rate lender view and who the capital lender for the $125 million secured financing that.

Bruce Duncan

I’m sorry, the question again, what is the cap rate?

Ki Bin Kim – Macquarie

Yes, what is the cap rate is on the deal or (inaudible).

Scott Musil

Yes, I would say on debt yield basis on our projected NOI for the portfolio is about 12.5%. The cap rate, it’s very difficult because it’s going to be asset by asset discussion and as Bruce mentioned in his prepared remarks it a major life insurance company as the lender.

Ki Bin Kim – Macquarie

Okay and last question. If I look at your occupancy for 2011, is see its 86% versus 2010 and it sounds substantially higher and I know (inaudible) pretty significant but, I mean trying to get a sense of why you are (inaudible) and why it would be flat in 2011?

Scott Musil

Chris you want to take that?

Chris Schneider

Yes, Ki but I want to direct you to some of the assumptions, the key assumptions. So, on the same store portfolio we’re looking at the average occupancy to be up about 200 to 250 basis points. On the downside, well free rent is, we are certain to ease a little bit on the number of months per year term, as we do to new leasing; you are going to have some increased free rent. So, free rent will still be up, 2010 to 2011.

Also on bad debt, in 2010 we had extraordinary year as far as bad debt. So we assume more of a more normalized rate in 2011 and closer to about $700,000 a quarter. And then obviously you mentioned on the rental rates, rental rates is still continuing to roll down about 10% to 12%. So that kind of gets you to where you are at as far as the midpoint of flat same store.

Ki Bin Kim – Macquarie

What is the dollar amount of the rent?

Chris Schneider

The dollar amount – for 2010 it was about $9 million, we are looking at 2011 of right around $11 million.

Bruce Duncan

Because we are doing more new leasing.

Chris Schneider

Because we are doing more leasing.

Ki Bin Kim – Macquarie

Thank you guys.

Bruce Duncan

All right, thank you.

Operator

Your next question comes from the line of Suzanne Kim with Credit Suisse.

Suzanne Kim – Credit Suisse

Hi. With regards to the leases, I didn’t catch that, I am not sure you’ve discussed this, but the rental rate discrete 17.2%. Just want to know about the terms of those leases and the annual step-ups on those leases. And then secondly what is the dollar amount of land that you can sell?

Bruce Duncan

Well, the first when we went through in the prepared remarks the amount of the lease terms, so you want to repeat that.

Scott Musil

Yes, so on the lease terms, we were right around four years as far as the lease terms and then the bonds for those particular leases are commencing in – they were commencing in 2010 in total, right around the 5.1%.

Bruce Duncan

In terms of your question on the land, we probably – in terms of our portfolio we have $70 million to $80 million with the land.

Suzanne Kim – Credit Suisse

And is that included in your real estate held for sale or?

Bruce Duncan

Yes.

Suzanne Kim – Credit Suisse

Okay, thank you.

Operator

Your next question comes from the line of Michael Mueller with J.P. Morgan.

Michael Mueller – J.P. Morgan

Yes, hi I was wondering if you can just talk a little bit about G&A, because it looks like in the fourth quarter what happened in the quarter came in below the prior guidance by considerable amount and it looks 2011 versus 2010 and the run rates are a lot lower than where it’s been trending. So what are you going to – just give us some color on that?

Bruce Duncan

Sure, what we have done, again our G&A, we have been very vigilant on expenses and if you look at what we’ve been, where we are, we keep that run rate of $23 million to $24 million is a good number. We don’t anticipate any more people cuts, if you will, last year we downsized a little bit as a result of the joint venture going away but we are focused on it and that’s a good run rate.

Michael Mueller – J.P. Morgan

Okay. And then secondly with portfolio occupancy at about 85% now, can you talk a little bit about where peak was, peak occupancy for the portfolio and then just kind of where you see full at this point?

Scott Musil

Sure, I would say in the peak we were in the mid 90s, so that and I think if you look at where we are going to get my guess is, we should easily be able to get the 92%, 93% range over the next two or three years.

Michael Mueller – J.P. Morgan

Okay, okay. Thank you.

Operator

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

Ki Bin Kim – Macquarie

Well I got come back on that quickly. In terms of your comments about equity issuances, it looks like, I think we are moving in that right direction and if the free rent brings out your debt to EBITDA will probably hit the high end of your target range of 7.5, by end of 2011 maybe 2012. How do you, with that in mind, how much equity do you relatively need?

Scott Musil

Yes, if you go back to the prepared remarks, if you look at our sources, the news is we are in very good shape as it relates to any maturities, I mean we excess proceeds to pay down debt but we do want to de-lever, we want to get that back to, we want to get down to 6.5, 7.5 times.

So we do take, we will issue equity over time but again equity is very dear to us, it will be, we want to make sure we do it at a decent price. So, again our focus is on leasing up, our best way to deleverage is leasing out the portfolio, but we will look do some equity.

Ki Bin Kim – Macquarie

Okay and to the extent you can, can you talk about any portfolio that you have for sale, I heard there might be something (inaudible) that you are seeing a lot of activity on?

Bruce Duncan

We’ll comment – keeping [ph] on our sales when they’re (inaudible).

Ki Bin Kim – Macquarie

Okay that’s fine. Thank you.

Bruce Duncan

Thanks.

Operator

Your next question comes from the line of (inaudible).

Unidentified Analyst

Yes, thanks a lot. You mentioned that your stock was undervalued to be equivalent $41 square foot in the nine cap and I’m shareholder and I actually agree, excuse me eight cap. So that’s why it bit reflects as to why you need to sell your shares in the open market at $36 a square foot and equivalent nine cap, when you’re still sending a very clear signal for the market, do you think your assets are worth a nine cap and $36 per square foot on the weighted average basis and I just, it’s absurd to me that you’d sell your shares that cheap in that market and that level is actually lower than where you IPO that in 1994.

Bruce Duncan

By wondering here there but I applaud your enthusiasm for our stock. I think when you’re running the business; you have to run a business assuming that interest rates normalize. If you look at the amount of leverage we have, we don’t want to get in the situation where we were in the last couple we’re very close to having a problem. So I guess we’re going to de-lever, we’re going to de-lever prudently and we’re going to get down to that debt to EBITDA ratio was 6.5 to 7.5 times and that could be done both by sales, sales of our assets at decent prices, it could be done by leasing up our portfolio and it could be done by issuing equity and we’ll probably look to do all three.

Operator

Your next question comes from the line of Alex Kastubee [ph] with Phoenix Investment.

Unidentified Analyst

Hi, you’ve been very broad to the capital structure and I was wondering if you are potentially looking to address the preferred security deals outstanding which still trading at a discount and you have a couple tranches there that to float with increasing interest rates and it seems like you do have a worry about interest rates increasing. So I was wondering if you’re looking to address that part of the capital structure while it’s still in the discount.

Bruce Duncan

Sure, I would say that our goal over the next two years is to de-lever to take debt out of the system. And as we said before, we plan to do with sales of properties and potentially additional issuance of equity. So I would say over the next couple of years, our focus is going to be paying off debt and not paying off prefers plus some of the rates that we have in the prefers are very attractive as far as long-term capital is concerned.

Operator

(Operator Instructions) Your next question comes from Suzanne Kim with Credit Suisse.

Suzanne Kim – Credit Suisse

Hi, with regard to ATM that you are planning to file this year, could you just give more color on that. Is it going to be similar sort of amount as last year?

Bruce Duncan

Yes, it will be a similar amount.

Suzanne Kim – Credit Suisse

Okay. And then also, do you have a GAAP same store NOI for 2011?

Bruce Duncan

Kim, we do not have that as far as projection. We do comment on the GAAP rental rate changes for the fourth quarter that was negative 13% versus the negative 17% cash.

Suzanne Kim – Credit Suisse

Okay. And finally, with regard to same store NOI, how do you kind of see the flex products versus your straight industrial products?

Bruce Duncan

I would say that what we’re dealing right now is demand for all asset classes I mean all types. I would say the flex property to me, is just – in general can be great but it also could be the – the negative is the higher TI viz-a-viz the straight industrial products.

Suzanne Kim – Credit Suisse

Okay, great. Thank you so much.

Bruce Duncan

Okay. Operator?

Operator

Thank you. I will now turn the call back over to Mr. Bruce Duncan for closing remarks.

Bruce Duncan

All right. Since, there are no more questions. I will now thank you all for being on the call participating and again we look forward to seeing you – some of you at the upcoming Citi Group conference in Florida. If you have any questions please give us a holler, call Scott or to myself, we’d love to talk to you. Thank you, I appreciate your support.

Operator

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

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