Good morning. My name is Nicole and I will be your conference operator today. At this time, I would like to welcome everyone to the First Industrial Third Quarter Results 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] I would now like to hand the conference over to Mr. Art Harmon, Vice President of Investor Relations. Please go ahead, sir.

Thanks Nicole. Hello, everyone and welcome to our call. Before we discuss our third quarter 2016 results, let me remind everyone that our call may include forward-looking statements as defined by federal securities laws. These statements are based on management’s expectations, plans and estimates of our prospects. Today’s statements may be time-sensitive and accurate only as of today’s date, Friday, October 28, 2016. We assume no obligation to update our statements or the other information we provide. Actual results may differ materially from our forward-looking statements and factors which could cause this, are described in our 10-K and other SEC filings. You can find a reconciliation of non-GAAP financial measures discussed in today’s call in our supplemental report and our earnings release. The supplemental report, earnings release and our SEC filings are available at firstindustrial.com under the Investors tab. Our call will begin with remarks by Bruce Duncan, our Chairman and CEO; our President, Peter Baccile; and 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; Peter Schultz, Executive Vice President; Chris Schneider, Senior Vice President of Operations; and Bob Walter, Senior Vice President of Capital Markets and Asset Management. Now, let me turn the call over to Bruce.

Thanks, Art and thanks to everyone for joining us today. As Art noted we have members of our management team assembled today for this call including one new addition Peter Baccile, Peter welcome. As you know, Peter will be taking over the reins as CEO on December 1, and we are very pleased to have him onboard. And I will ask him to offer a few comments before we get into the business of the quarter and the state of the industrial real estate market.

Thanks so much Bruce. I’m honored and humbled to be chosen to lead First Industrial and build upon the accomplishments and track record that Bruce and the team have achieved. Bruce will leave some big shoes to fill, but he’s also assembled the talented team of hardworking and dedicated people. He has orchestrated a significant enhancement to assets of this Company since he took the helm in 2009. And he and the team have worked diligently to reestablish a strong balance sheet and investment grade credit rating. I look forward to working with the team to continue to grow our presence in our target markets. Further enhance the portfolio and maintain a balance sheet and credit profile that will outperform through the cycle. Since I joined the Company on September 29, I spent the vast majority of my time on the road. Seeing our assets and meeting with and getting to know our people. I’m about halfway through my scheduled travel, and in every market. I’ve been impressed with the First Industrial team. I thank them for such a warm welcome to the Company and all their insightful observations about our assets and the opportunities ahead. I’ve had the pleasure and the benefit of working with First Industrial for many years as a banking partner and advisor. Having now had the opportunity to see the Company from the inside, I’m even more enthusiastic about our prospects and again, humbled to have this opportunity to lead such a first-class organization. Thanks Bruce.

Thanks Peter. And as Chairman and as shareholder, I very much look forward to your stewardship. Now back to business. We had a solid third quarter. Our metrics are flat, our team’s strong performance and the continuing favorable fundamentals within our sector. Cash rental rate growth for the quarter was robust at 11% and cash rents have now been up 11 consecutive quarters. GAAP rents were up 20.4%, which marks the 19th positive quarter in a row. Cash same-store NOI growth before lease terminations fees was 3.5% and occupancy was 95.4% which was a dip from last quarter. Scott will walk you through the details in a bit. The industrial market continues to see broad-based demand across industries and markets, while supply remains measured. Through the third quarter CBRE Econometric Advisors is reporting net absorption of 203 million square feet against completion of a 132 million. Against this favorable backdrop, our team is focused on pushing rents and driving cash flow given this opportunity, our track record and the opportunities we continue to see in the marketplace to create value through development. We started three new projects in the third quarter that we touched on in our second quarter call. At First Park 94 in Chicago, we started our second building, a 602,000 square footer that is expandable to 700,000 square feet. This follows a successful lease up of our initial 601,000 square footer at this multi-building park. Estimated investment is $29.9 million with a targeted GAAP yield of 8%. As a reminder, we defined GAAP yield as first year’s cash NOI divided by the GAAP basis at the property at completion. In Phoenix, we started a 618,000 square foot facility at First Park at PV 303 with an expected investment of $32.8 million and an estimated GAAP yield of…

Thanks, Bruce. Let me start with the overall results for the quarter. EPS for the quarter was $0.27 versus $0.13 one-year ago. Funds from operations were $0.37 per fully diluted share compared to $0.35 per share in 3Q 2015. Funds from operations before one-time items, namely our acquisition costs in 3Q 2016 and 2015 as well as our gain on sale of non-depressible real estate in 3Q 2015 were unchanged. As Bruce noted, we finished the quarter with occupancy at 95.4% down 40 basis points from the second quarter, and down 10 basis points year-over-year. Sales helped occupancy by 15 basis points since June 30. Regarding leasing volume in the third quarter, we commenced approximately 3 million square feet of long-term leases. Of these, 638,000 square feet were new, 1.4 million were renewals and 934,000 square feet were developments and not in service acquisitions. Tenant retention by square footage was 63.4%. Same-store NOI growth on a cash basis excluding termination fees was 3.5%, primarily reflected in place rental rate bumps, rental rate growth and leasing and a decrease in free rent. This was partly offset by lower average occupancy. Lease termination fees totaled $11,000 in the quarter and cash same-store NOI growth, including termination fees was 3.4%. For the quarter, cash rental rates were up 11% overall with renewals coming in at 8% and new leasing at 17.3%. On a GAAP basis, overall rental rates were up 20.4% with renewals increasing 17.4% and new leasing up 26.6%. Moving on to our balance sheet metrics. At the end of 3Q, our net debt plus preferred stock to EBITDA is 5.5 times adjusting EBITDA by normalizing G&A and excluding acquisition costs and adjusting debt by adding back loan fees. This is below the low end of our target range of six times…

Thanks, Scott. The industrial marketplace continues to be strong, enjoying broad-based demand helped by the secular tailwind of eCommerce. We will continue to capture the opportunity to serve this tenant demand throughout our portfolio and through targeted new developments and acquisitions. Since this will be my last earnings call. I’d like to take a few moments to publicly thank my teammates around the country. Together, we have accomplished many great things. And I know there are many more to come. Because as I always say there is work to be done, and we have the team here at FR that gets it done. I didn’t join First Industrial expecting to be doing this nearly eight years later. But it has truly been a great ride and great fun working together with all of you. And I am excited about what lies ahead for our company. You are in very capable hands with Peter and the leadership team. I would also like to thank our customers for the opportunities to serve your supply chain needs. We will continue to strive to provide you industry leading service and the right properties to support your business objectives. Thanks also to all of our financial and business partners for your past and continuing support. We appreciate it very much. And I also thank all of you analysts on the sell-side who have followed our transformation over the years. While we may not have always seen eye to eye on every matter as I have often said great minds can differ. I greatly appreciate your efforts to get to know our business and our team. Although I must admit that I might not miss the Q&A session of the calls during my retirement. But I know Peter and the team embrace it. Lastly, I would like to thank our shareholders for your confidence and your investment in us. We will keep working hard for you to drive cash flow and shareholder value. Thank you. And now we will open it up for 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 the other participants a chance to get their questions answered. You are of course welcome to get back into the queue. Nicole, may we open it up for questions.

Certainly. [Operator Instructions] Your first question comes from the line of Craig Mailman with Keybanc Capital Markets.

Thanks guys. Just want to first start congratulate you, Bruce - well-deserved retirement here. You’ve done a great job over your tenure. And it’s not often that you hear a thanks to the sell-side, so much appreciated.

You are welcome. And I appreciate all your work and help. Thank you.

First starting out on Phoenix, you guys have a little bit more work to do in Tolleson, and you guys started a new development. One of your peers seems to be seeing a little bit of softness in demand in this market. Just curious if you guys are seeing anything similar to that?

Sure. Let me ask Jojo to answer that.

Yes, hi. Basically in Phoenix net absorption continues, our vacancy that you refer to, we actually created a vacancy, one of the major influence of the current 88% occupancy was a vacancy we created as we grew a tenant from 79,000 square feet or 170,000 square feet. But nevertheless – so that really got us out of the chute on First Park Tolleson as 81% pre-leased. But there’s still a job to do for us to do in terms of leasing that space that was vacated that’s functional space. We like that space. It’s competitive in the marketplace. And we have another space at 74,000 square feet at First Park Tolleson that remains to be leased. Overall, we continue to get good prospect activity for those – both of those spaces Craig, but our job is to get that done. We’ll let you know as soon as we get those leased. In terms of the 618,000 square feet at First PV II or III that you mentioned, we’re very excited about that project. Once we are done with that we would be the highest quality building in that size range because of a number of things. Clear heights, loading, freeway frontage that’s just less than a mile from the junction of I-10 and 303s, the new Beltway, and it’s right between two interchanges, which is Camelback Road and Indian School Road. And we’re very excited about that project and there are already some bigger tenants in the marketplace looking for a space. So that will be done next year and we’ll report back to you when we get it leased.

That’s helpful. If you compare to 6 to 12 months ago, you’re not seeing any kind of changing demand dynamics in the market?

Craig, no. No we have not seen, in fact if you look at the last nine months, I would say most of the large boxes have been consumed or tenanted.

All right, great. Thank you.

Thank you.

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

Great. Peter, welcome aboard.

Thanks, John.

Big shoes to fill. Tell us a little bit about yourself, what your background is, where you are going to be living, all that sort of thing.

Sure. I’m going to be – I have an apartment here in Chicago. And so I’ll be living here for the most part. Look, I’ve been a banker obviously for 30 years. I started out at Morgan and spent 26 years there and had the opportunity over my career to work in this industry from the days when the market cap and REIT land was about $5 billion. So obviously a lot has happened between then and now. I’ve been involved in a lot of the consolidation that’s happened in this space over the years as well as the creation of new markets like the CMBS market as well as bringing what I would call corporate finance to real estate companies and getting investment grade rating et cetera. So I’ve had a lot of opportunities as well to work with a lot of the leaders of our businesses before they were leaders of our businesses in this industry. So I’ve had management opportunities over the years for the last 15 years or so. I’ve had the good fortune to be a global head of couple of different businesses. And so I’m looking forward to this challenge. We have a great team here. It’s a super opportunity for me and future looks bright. Thanks.

Great. Thank you.

[Operator Instructions] Your next question comes from the line of Dave Rodgers with Robert W. Baird.

Hey, Bruce, congratulations. Peter, welcome. And Bruce, we’ll leave value to the historians, but I think you…

I like that value to the historians.

We are prepared for the question.

I don’t even know what you prepared as an answer, but I’ll leave it at that. I don’t know if this one to go to Jojo or, Bruce, to you, clearly saw a little bit of retention decline here, in the most recent quarter occupancy declined. So kind of want to know the strategy that you’ve pushed as clearly we’ve seen a lot of rent growth, the spreads were extremely healthy. So I guess is that the strategy is to continue to push rents or have you kind of hit the point where it’s time to maybe moderate the pushing of rents to kind of maintain the occupancy level, just thoughts around that please?

I thought – number one we might have both, we’d like to have both great rental rate growth and increase occupancy. So again, we are pushing rents. We had a dip in the quarter. I would say as we see look around the country, we feel very bullish about supply demand. We feel very bullish about the opportunity to continue to push rates as well as increase occupancy. So this is a temporary dip and hopefully we will continue to show some growth. Peter do you want to just comment on some of the vacancies?

Sure. The major part of the decline in retention really happened in central Pennsylvania where we had a handful of tenants move out, the largest of which is 178,000 square feet. But as Bruce said, in this environment we continue to feel good about overall demand and continue to focus on pushing both rents and occupancy.

Great. That’s helpful. And then maybe follow-up to that on the development side of the equation. And Jojo, I think I calculated something like $235 million of capital at risk if you start the Ranch, but maybe you can correct me if I’m not right. Also maybe provide the updated denominator to that overall. And then I guess just more broadly with the development, you have a number of vacancies in there. What size tenant are you seeing activity on in the development pipeline? And what are you really going after with the buildings that you are building today?

Sure. Okay, in term of the $325 million internal revolving cap that we have set, we have $68.4 million in capacity, okay. So I just want to make sure you understand that includes the most recent lease that we did in Dallas, First Arlington Commerce Center, but that also includes the acquisition of the vacant property in Chicago, the 121,000 square feet in the large submarket of the I-55 Corridors in Chicago and that includes the to-be-built Ranch. For your next question of what – you know what we are trying to build, as you can see, we are building what we feel really bits of markets in where we think the fundamentals are greatest, so case in point, example Dallas. We have built a multi-tenant product right in the middle of great Southwest where the mid-sized tenant is clearly underserved, so we are very pleased to be able to announce that we have a full building lease for the 234,000 square feet. In addition, so another example, so we’ve targeted, for example Inland Empire East that mid-sized tenant underserved as well. As you know we built a 187,000 square feet First San Michele, we got that lease at completion and so now we are basically building a 242,000 square feet a little bit north to that. But overall, all our buildings are very functional necessity to get good clear, good access as a minimum good loading and good storage, storage and parking. So again, it really fits a multitude of tenants, because the demand from industrial real estate right now is broad-based, not only eCommerce, it comes from auto, it comes from food, it comes from 3PL and of course the migration of retailers to omnichannel we included in there to. Hope that answers your question.

It does. Thanks guys.

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

Thank you very much. First, Bruce, congratulations on a – obviously, a phenomenal tenure at First Industrial. I can only hope to retire twice like you, though. And Peter, welcome aboard and look forward to getting to know you better. My primary questions are, one, I think you obviously outlaid how solid demand has been this year relative to supply. We have seen some pipelines pick up in a few couple different markets, and I was hoping someone can comment on that, specifically some of the larger markets with no larger populations such as Chicago and Atlanta.

Sure, Jojo, you want to take that.

Sure. Eric, yes there is a supply pick up, but at the same time again the demand continues to significantly exceed the supply, for example CBRE just for Atlanta, you are thinking that year-to-date 16 million square feet year-to-date in that absorption. That of course doesn’t include the last quarter. If you look at 2015 that already exceeded 2015. In 2015, Atlanta had about 14.8 million square feet of net absorption. Chicago, year-to-date 16 million square feet year-to-date. And last year Chicago brought in 18 million. So it’s on track again to exceed the last years in absorption. Finally, you mentioned may be Dallas, Dallas year-to-date absorption 20.7 million square feet. Last year’s net absorption is 23.4, so it’s on track to match or exceed last year absorption. So anyway, what I wanted to paint to you is a picture wherein this year has been a good year and may exceed last year. Supply has picked up but demand continues to outstrip supply.

Is there any concern that this is some sort of one-time surge related to demand and where there’s developers that are building, that they are trying to forecast something that may not be there, though? I mean I’d just like to maybe understand better if there is a solid list of prospects that are kind of known that can fill up that space, and then have a better understanding of how that might impact market rent growth fundamentals.

Sure Eric, overall again the products that being built, again overall and across markets being leased, again, they are basically, primarily, you have to focus on some product. Some product maybe at equilibrium, but most products, especially the mid to mid-size tenant is still under served.

I am sorry Jojo. Eric it’s Peter I would just add to what Jojo said you know the best news is that demand continues to be very good and broad-based across the number of different industries and size ranges and everybody talked about eCommerce but it’s not just eCommerce as we said we’re seeing a lot of activity from the third-party logistics providers, the parcel carriers, auto, food and beverage a number of different verticals. And there’s certainly more supply, but there’s also been some discipline about the supply and if you look at most of the markets as Jojo said you know demand continues to exceed supply we are seeing record absorption in just about every market. But overall I think that there are always a lot of tenants in the market, we discount some of that you never know it’s duplicative, but I think the best thing is that most of the activity that we’re seeing continues to be growth in additive it’s not just moving from a lateral move from one building to another. Almost all the deals we’re seeing today particular in our development pipeline a real growth.

And Eric, just when you look at things, we have – we underwrite like a year’s downtime. And if you look at what we’ve been able to accomplish, we have been able to lease these up quicker than that. And we continue to very encouraged by the demand, the strength of the demand in the marketplace across all regions basically.

Very helpful color. I appreciate that. Just one quick follow-up. Looking at your development summary on First Park 94 in Wisconsin, congrats on getting the first building lease. I did notice that the first - the second building seems comparable in size and presumably functionality to the first, yet the construction cost on a per-square-foot basis is roughly 8% higher. Can you comment on construction cost trends or whether there is some other costs thrown into the second building that was different than the first?

Yes. Just overall it’s the cost of the added infrastructure we added to the site, and an inflationary increase in basically building materials and labor.

Could you provide a rough breakout what that inflationary pressure is?

Yes. About 4% and that’s on additional infrastructure because again our basis in that site is very low and as a first class facility, as you know. And so we just added a little bit on the infrastructure.

But we like the size and we are seeing good activity there. So we are encouraged, but again as we always say, it’s on us to get this up built on time, on budget and get it leased.

Absolutely. No, that’s obviously, that project seems like it’s on a good path. So, thanks. We’ll jump back in the queue.

Okay. Thank you.

[Operator Instructions] Your next question comes from the line of Ki Bin Kim with SunTrust.

Thank you. And Bruce, congratulations and it’s been an amazing ride with FR. And Peter, welcome. So just a couple quick questions. If I look at your guidance and what it implies about the fourth quarter, it’s not much of a material change from where you ended the third quarter. If I typically look at a lot of the industrials, it’s small seasonality, the fourth quarter is a little bit better. So just curious, what are you seeing for the couple of vacancies that you have? And is the fourth quarter this year going to be a little bit different than what we’ve seen in the past?

Well, I mean in terms of vacancies, in terms of coming up, we don’t – in terms of – we’ve got the stuff in Central PA, which we are doing some back filling and…

Yes, Ki Bin, no large vacancies that we seek coming up in the fourth quarter just we got work to do backfill some of these vacancies. And on the retention, Peter mentioned earlier we had 250,000 square feet of move-outs in Central PA, so we are from that standpoint, but no large vacancies coming up in this fourth quarter.

And Ki Bin, when you look at our guidance, if you figured out with the fourth quarter with the guidance we have for 2016, it’s midpoints plus or minus 96%. So it’s showing a little bit of growth there compared to where we ended in the third quarter.

Okay. I know it’s probably pretty early, but how does the prospect list look like for some of your bigger vacancies?

Ki Bin, it’s Peter. I would say, our larger vacancies around the country continue to be in Minneapolis, as we’ve talked about on some prior calls in the Northwest quadrant where demand there has been a little bit weaker than supply. We did do some seasonal leasing with the post office in that building which contributed to a pick up in occupancy in the third and will be in place for the fourth quarter as well. We have our acquisition that we did last year in the I-95 North Corridor north of Baltimore that’s 348,000 square feet. That will be in service in the fourth quarter and is in our numbers, so that’s a building that we have nothing to report on today. But good activity in that submarket where there’s been some absorption both in a larger building and a smaller building and we have some work to do there as we acknowledge. And then the comments I made about Pennsylvania and the third quarter move-outs the largest space was a 178,000 feet and we’ll certainly keep everybody posted on our next call on our progress there.

Okay. And then just last quick one here. The new development project in Phoenix, the 600,000 square feet property, from what I understand, and I might be wrong here, is that maybe this is – Phoenix is not the big-box healthy market that perhaps it once used to be. Maybe some of the early occupiers of bigger space had more of a tax incentive to be there versus California, and maybe that demand profile changes going forward. So just curious, what was the investment rationale for building a big-box space in Phoenix?

Sure. Ki Bin this is Jojo. If you look at the last nine months there has been quite a bit of a good absorption in the large box activity in Phoenix. And when I define as large drop 300,000 to 600,000 square feet, in fact if you are a user of over 400,000 square feet today and you want to define a Class A building you are virtually kind of other choices. Now this building that we’ve designed, we provided the ability to in addition to being the highest quality 600,000 to 625,000 square feet when it’s done. We have the ability to actually demise it to four spaces, because we have provided four points of access. We can actually provide even secured truck course each and every tenant. It is a very, very functional building and hopefully you’ll get a chance to see it. So we’re very excited going to be able to offer this building to multiple tenants or a single tenant. But again, our job is to get it better leased and that we’re making a – we think it’s in a high quality location and for our jobs to get at least given.

And Ki Bin we’re very excited about that. The locations great and Jojo’s point about the functionality of the building, we think this going to be great building, but its on all us to get at leased and be pro forma and were all over so we will report back.

Okay. See you guys soon.

Thank you.

You now have a follow-up question from Eric Frankel with Green Street Advisors.

Hi, this is Vince Tibone. Could you discuss your refinancing plans for the roughly $150 million of unsecured notes that are maturing in 2017? And can you also touch on how you think about public versus private debt and the length of term that would be best at this time?

Vince, this is Scott. Just a summary we’ve got about $157 million of bonds coming due. On 2017 it’s higher costs that the weighted average interest rates about 6.5%. So we’ve got nothing baked into our guidance or capital plan for 2016. What we’re thinking more of now is probably in early 2017 execution. Having said that, we constantly look at the financing markets and if we see a pocket in 2016 we want to go, we will. We’re looking at a couple of different markets. We’re looking at the public bond market. We’re looking at the private placement market. We’re looking at the bank market. The benefits of the public bond market are going to be size; you can do a really big deal in that market. I would say the benefits of the private placement market or you can do a smaller size deal, you can do sub $250 million and not take a hit on rate, you can do a delayed draw in that market as well. The bank market’s a good market as well. I’d say the downside on that is you’re not going to get the same tenor that you’re going to get in the bond market or the private placement market; you’re not going to be able to get a 10-year deal in the bank market. So we’re looking at all three markets at this point in time and we’ve got a lot of choice which is a good thing to have.

But our bias will probably be a longer-term.

Great. Thank you. That’s all I have.

[Operator Instructions] You have a follow-up question from the line of John Guinee with Stifel.

Hi, yes, Good afternoon. It’s Erin Aslakson. Bruce, congratulations as well from me. Quick question on the continuation of the asset sales. You guys have done a good job of continuing to sell out or reposition your capital out of older assets into new. Do you, I would assume, plan to continue that effort into 2017 and perhaps increase it?

Asset Management is an ongoing process and I’m sure the team’s going to have a lot to report on the guidance in terms of – on the fourth quarter call in February.

Okay. Thank you.

Thank you. End of Q&A

And we’re showing no further audio questions at this time. I would like to hand the conference back to Mr. Bruce Duncan.

Great. Well thank you very much. We appreciate it. And we look forward to seeing many of you out at NAREIT in Phoenix and go Cubs. We need to bring it home. Thank you very much.

Thanks everybody.

This does conclude today’s conference call. We thank you for your participation and ask that you please disconnect your lines.