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CHICAGO-The largest buyer of US industrial real estate last year is off to a good start in 2006. So far this year, First Industrial Realty Trust has spent $166 million on properties for its own balance sheet and another $354 million with joint venture partners.
Another $347 million worth of deals are under contract, notes chief investment officer Johannson L. Yap, adding during the REIT's first quarter conference call the company is on track to hit its acquisition and investment target of $600 million to $700 million for its own balance sheet this year. In addition, $367 million worth of new developments are in the pipeline, almost evenly split between the REIT's own balance sheet and joint ventures. "Development will become a bigger engine for our growth," says president and chief executive officer Michael W. Brennan.
The first-quarter acquisitions for its own balance sheet, which totaled $147.1 million for 2.4 million sf, were bought at an 8.4% capitalization rate, according to the company's financial report. The purchases include 1111 Davis Rd. in Elgin, an 87,000-sf property bought for $3.7 million. The 1.2 million sf of new developments placed into service, worth $65.1 million, are expected to yield 7.5%. Meanwhile, First Industrial's $293.2 million in first-quarter sales were at a 6.8% capitalization rate.
The five joint ventures--First Industrial owns stakes ranging from 10% to 15%--now owns 311 properties totaling more than 25 million sf. The properties generated $1.8 million in funds from operation for the REIT, $16.7 million for the joint venture partners. The company expects FFO from the joint ventures to increase this year to more than $35 million. Acquisitions are expected to range from $800 million to $900 million, while the sales target is between $450 million to $550 million.
"We still have eight months to go in the year to look for more opportunities," says Yap, noting the company has hit 70% of its targets for balance-sheet and joint venture deals.
The most recent joint venture arrangement, a potential $900-million program with UBS Wealth Management-North American Property Fund, already has acquired four properties for about $100 million despite operating for little more than a month. The partnership seeks single-tenant, net-lease assets and expects holding periods ranging from seven to 10 years, says chief financial officer Michael J. Havala.
Institutional capital bought up the largest share of First Industrial's assets on the market, Yap says, but private investors, 1031 Exchange buyers and users may have their day. "It fluctuates quarter to quarter," he adds.
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