Ladies and gentlemen, thank you for standing by and welcome to the First Industrial Fourth Quarter and Full Year Results Conference Call. [Operator Instructions] It is now my pleasure to hand our program over to Art Harmon, Vice President of Investor Relations. Sir, the floor is yours.

Thanks, Kristen. Hello, everyone and welcome to our call. Before we discuss our fourth quarter and full year 2015 results, let me remind everyone that our call may include forward-looking statements as defined by federal securities laws. These are based on management’s expectations, plans and estimates of our prospects. Today’s statements maybe time sensitive and accurate only as of today’s date, Friday, February 19, 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, 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; 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, Arthur and thanks to everyone for joining us on our call today. 2015 was another very successful year for First Industrial throughout our organization. We ended the year with occupancy at 96.1%, an increase of 60 basis points in the fourth quarter and 180 basis points for the year. This is really a testament to the hard work of the entire First Industrial team, including the enhancements we have made to our portfolio, so many thanks to all my teammates around the country. Our strong performance was also exhibited in our other metrics. Fourth quarter same-store cash NOI was up 5.1% and up 5.2% for the year. Cash rental rates were up 5% in the fourth quarter, marking the eighth consecutive positive quarter for this metric. On a GAAP basis, rental rates were up 17.2% and we have now been positive on that basis for 16 consecutive quarters. While we are happy with our 2015 portfolio performance, there is always work to be done. As you know, in the first quarter, we typically expect to see a seasonal occupancy dip of 30 to 50 basis points. This year, we have a no move-out of a 400,000 square foot tenant at our lone asset in the Memphis market. As a result, our first quarter occupancy dip could be 100 to 125 basis points. Industrial sector fundamentals remain healthy, with demand continuing to outpace supply aided by tailwinds from the growth in e-commerce. While overall economic data has been mixed, our regional teams continue to see broad-based tenant activity. Against this backdrop, we expect overall cash rental rates to be positive once again in 2016. Turning now to our investments, we had an active fourth quarter. We acquired 5 buildings in three transactions totaling $93.9 million. Our largest acquisition was a…

Thanks Bruce. Let me start with the overall results for the quarter. Funds from operations were $0.37 per fully diluted share compared to $0.32 per share in 4Q 2014. Funds from operations before one-time items, such as the one-time restoration fee in 4Q of 2014, acquisition costs and NAREIT complaint gains and losses were $0.34 per fully diluted share compared to $0.32 in 4Q ‘14. EPS for the quarter was $0.39 versus $0.17 one year ago. For the year, NAREIT AFFO per diluted share was $1.27 compared to $1.16 in 2014. FFO before the one-time restoration fee in 2014, acquisition costs, NAREIT compliant gains and losses, the hedge loss, loss from retirement of debt and the loss from the redemption of preferred stock was $1.34 per fully diluted share versus $1.16 for 2014. EPS for 2015 was $0.66 per share compared to $0.42 per share in 2014. As Bruce noted, we finished the quarter with occupancy at 96.1%, which was up 60 basis points from the third quarter and up 180 basis points year-over-year. Sales accounted for 8 basis points of the gain quarter-over-quarter, partially offset by a 6 basis point impact from investments. Regarding leasing volume, we commenced approximately 3.6 million square feet of long-term leases in the fourth quarter. Of these, 506,000 square feet were new, 2.6 million were renewals and 460,000 were development leases. Tenant retention by square footage was a strong 89.1% for the quarter and 76.5% for the year. Same-store NOI growth on a cash basis, excluding termination fees and the large one-time restoration fee that we recognized in 4Q ‘14, was 5.1%. Same-store growth was primarily the result of higher average occupancy, contractual rent bumps and increased rental rates on leasing. Lease termination fees totaled $225,000 in the quarter and same-store cash NOI growth…

Thanks, Scott. As you know, we announced in January that I plan to retire by year end. I was honored to be appointed Chairman to continue serving shareholders now and after we determine my successor. We are conducting a search with the help of Korn Ferry and we will be looking at internal and external candidates. We are focused on selecting the right person, so we will take as much time as we need. It is the perfect time for this transition, because our company and our industry are in great shape. Our balance sheet is strong. We have a high-quality portfolio as reflected by our metrics that we are continuing to enhance everyday and we have a great team that has brought us where we are today and will take us further in the future. Before I open it up for questions, let me say, as we outlined at Investor Day in November, we have a path to generate strong AFFO growth with several potential drivers. From our portfolio through contractual rent escalations and the opportunity to drive rental rates higher by lower debt costs. From the 100% lease development contributing to our 2016 cash flow and from lease up of our other investments where we have already invested much of the capital through lower CapEx driven by our portfolio management efforts and by redeploying excess cash and sales proceeds into high-quality assets with strong cash flow growth potential. As always, our team is focused on meeting, and more importantly, exceeding our goals. We will now open it up for your questions. As a courtesy to our 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 welcomed to get back in the queue. So, Kristen, may we now open it up for questions?

Certainly. [Operator Instructions] Our first question comes from Craig Mailman with KeyBanc.

Hey, guys. Bruce, just on the CEO search, you have done a great job since you came in cleaning up the balance sheet and the portfolio. And just curious at this point in kind of FR’s cycle here, what’s the most important attributes that the board is looking for in a new CEO?

Craig, I would say, its leadership. It’s all about leadership. But I think someone who can lead the company forward I think we want people to have good real estate judgment. We want people that are commercial, that know how to make money and think about that. And again, it goes without saying integrity, high integrity, but leadership should follow.

I guess, more of what I was getting at is it something that you want with industrial backgrounds and more important to have a transactional, financial kind of, what’s the – is it to lead FR forward from here after you guys have done a lot of the cleanup work kind of what’s the most important thing you guys are looking for?

I think all of the above. I think what you are looking for is someone that has good financial skills, someone that understands the street, someone who has a good track record and the investors have confidence in, someone that your team will have confidence in. And I think it’s all of the above. I think you like someone with good real estate experience. Does it have to be industrial? No. If it is industrial, is that a positive? Probably, yes. But it’s going to be a number of factors that you are going to have to weigh. But we are pretty excited. We have got good internal and external candidates.

Alright, great. And then switching over, you had noted the transaction market remains active. Just curious as you guys are going out to sell – we have heard from others that bidding pools are getting a little bit more shallower, are you guys seeing that, is there any pushback on pricing given what’s happening to the credit spreads?

Let me ask Jojo to talk about that.

Sure. We haven’t really seen any change. I mean, again, there is lot of investors still looking at industrial product. Our industrial product seems to be really under-allocated in light of investors’ portfolios. And we see a lot of active investors out there.

That being said, Craig, we are going to watch the credit markets and see if the market has been a little jittery, so that may affect some leverage buyers, but today, as JoJo said, we have not seen any pushback.

Great. Thanks, guys.

Our next question comes from Dave Rodgers with Baird Capital.

Hey, good morning, guys. Real quickly, I guess, for Scott and maybe Bruce as a tie-in to this on development. Scott, maybe quickly run us through your capital at risk calculation for development and kind of where you stand against the $300 million or so that you would like to keep under, if I remember currently? And then I guess the second part of that question is where does that really puts you for development starts for the year or ability to go ahead and put more capital to work throughout the year?

Dave, let’s have Jojo answer that.

Sure. As you know, we have a self imposed $325 million speculative development cap. At this point in time, there is $155 million in that pool. So, that’s technically a $170 million of capacity. In terms of future pipeline, right now we have about $79 million of developments under construction. And we are out there looking for additional opportunities. And we will let you know of course as soon as we close on those additional opportunities.

Great. That’s helpful. And then maybe just a follow-up on the dividend increase and you did obviously go through the rationale for increasing the payout to 70%, Scott. I mean, should we read more into this about maybe greater asset sales in the future or just seeing greater gains coming out of the asset sales that you are going to partake here in the future as opposed to what we have seen over the last couple of years?

Yes, look Dave the dividend – the payout ratio increase was a mix of two things. One is just an increase in taxable income due to operations and again due to gains that we expect to realize in sales for our 2016. As far as the go-forward basis, Dave, asset management is a continual process. So we expect to probably sell properties over the next couple of years, maybe not to extent to a level that we are now. But again, really what we did in 2016 is we wanted to – we need an increase it to cover taxable income from operations and help us a little bit with the gains from sales.

The preponderance of it is the cash flow is going up from operations.

That’s a good problem to have. Thanks guys.

It’s a high class problem, we agree with.

Our next question comes from Eric Frankel with Green Street Advisors.

Thank you. I was just – I guess the small detail, let’s hope you can walk through the economics of the Southern California redevelopment looks like a fairly unique project?

Sure. Jojo, why don’t you talk about it?

Sure. So we have an asset that is currently vacant. And so when we look at it, we always are looking to maximize value. So we have opportunities to either re-lease that asset or basically build another traditional warehouse or build a trans-load facility. When we look at the economics of each of those alternatives, the rental income was not significantly different. But we may – we are making our best with the trans-load facility will deliver us the highest quality cash flow not only in future rent growth, but activity. And the reason we say that, is that in South Bay, LA, our trans-load facilities are very unique assets and a scarce asset. In fact, what happened is we were just designing this facility and the word went out, we got it pre-leased for a 7-year term. So we are very pleased on what happened. In terms of economics, as Bruce has mentioned, in terms of our GAAP investment, it’s like 5.2 and then from an economic basis is the low 4s.

Can you just explain what you mean by economic basis?

Basically, what we did – the difference between that Eric is that, on the economic basis, we take the fair value of the land into the basis.

Okay, understood. I appreciate that. And then, a question for you Scott, any thoughts kind of with the choppiness of the credit markets given that you probably have a higher aspirational goal of your dispositions for ‘16, whether you take those proceeds and just pay down debt and de-lever your balance sheet a little bit further and wait and see what happens?

Yes. We ended the year with pretty low leverage, Eric. We are at 6.1x compared to – we are at the low end of our range. So we have got a share of our projected sales proceeds already earmarked towards completing the developments that we have in process. So any additional proceeds Eric, we will take a look at any new investment opportunities in the market. If we like that, we will do that. If not, we always have the ability to pay down line. On an interim basis and we have got some debt coming due in 2017, about $157 million at about a 6.5% interest rate. So we are going to look at both options, but we are continuing to scour the market for future investments.

Okay, thanks. I will jump back in the queue.

[Operator Instructions] Our next question comes from John Guinee with Stifel.

John?

Good afternoon. This is Erin Aslakson for John. Can you guys hear me?

Yes.

Okay. So what is your current view on supply and demand in Inland Empire for 2016, it seems to have a good amount of development going on there?

Alright. Let me ask Jojo to comment on that, supply and demand in the Inland Empire?

Yes. Supply and demand, we – our view is that, Inland Empire will continue to have positive net absorption, that means demand will outpace supply. The absorption has been robust in both Inland Empire West and Inland Empire East. Our view is that Inland Empire West will have stronger net absorption despite both markets having net absorption, because Inland Empire West is more or less constrained.

Okay. And where is your lease-up exposure there this year?

Basically, at this point we have a – here question was development exposure. We have a building, 187,000 square feet currently under construction in Inland Empire East. And we like that positioning, because there is not a lot of buildings that are being built in that size range. And also as you know, we have this great land site, First Nandina that we are out there currently looking for potential build-to-suits.

And that site accommodate up to 1,450,000 square feet.

Okay, very good. And then, you did mention the recent acquisition in Orlando to a tenant where the rents are above market, when would you expect that lease to expire?

Basically there is about 2.5 years to 3 years lease and of course, what we will do is we like the market a lot. Its land constrained and there is not much supply and we will let you know how we do with that lease negotiations.

Okay, great. Thank you very much.

Thank you.

Our next question comes from Michael Mueller with JPMorgan.

Yes. Hi. So first on the dispositions with the expected amount of asset sales picking up in 2016, is that more of a function of you are seeing more opportunities on the development side, more places to put capital in, so you are responding with higher asset sales or is it more the market is there for asset sales, regardless of what your starts are going to be like?

I would say again, if you look last year 2015, we did $158 million. If you look at what we had averaged over the last 3 years, it’s probably in the range of $125 million to $135 million. So going to $150 million to $200 million isn’t a big increase Mike, in terms of from where we have been. But again, our view as we talked about, we do want to self fund our investments. And again, there will be primarily be developments, we think. So the $150 million to $200 million seems right and as Scott said in the active portfolio management business. So we are going to continue upgrade the portfolio.

Okay. And then, can you give us a little color on 400,000 square foot tenant that left and just kind of what the prospects are for re-leasing?

Yes. Jojo?

Basically, it was in the automotive industry. And basically, they have decided to move on. And right now, our focus is to – that’s our sole asset in Memphis. We are focused to trying to get the value out of that through leasing. And so we will let you know. At this moment we don’t have anything to announce, but we will let you know once we get that leased.

Okay. Thank you.

Thank you.

[Operator Instructions] We do have a follow-up question from the line of Eric Frankel with Green Street Advisors.

Thank you. Yes. A couple of quick follow-ups, are there any other markets in the U.S. where you see some supply concerns other than perhaps, potentially Inland Empire?

Again, Inland Empire has been a great demand – I mean great – there has been increased supply, but demand continues to exceed it. So you got to keep watching that. I would say, you put Dallas in that category. There has been good supply growth, but there is also the great demand, so that seems to be fine. Houston, you got to look at in terms of that that market and Indianapolis. But again, right now in the markets, we still feel pretty good about supply demand in almost all of the markets. So we are watching. But we are encouraged by what we are seeing.

That’s helpful. So a question I guess – a follow-up on the dispositions expected for this year, out of that $150 million to $200 million total, do you have a rough number of how much of that is in active negotiations now and is expected to be more as a tailwind 2016 structure as has occurred in the past?

Eric, we really don’t comment on where we are on until the things get closed. But I would say typically, in the disposition area, things are more back-end loaded than the early part of the year.

Okay. And then a follow-up question, I am not sure you had a window or a view into the financing with some of those buyers of those assets, but give a rough sense of what the cost of debt was for those buyers that did close and whether that you think that changed in the last couple of months?

No. I mean at this point, no. We don’t really get into the buyers’ cost of capital, when we sell the deal. So can’t comment on that.

Okay. Thanks.

Thank you.

There are no further – we do have a question from the line of Bill Crow with Raymond James.

Hi, good morning. Sorry for jumping in late here. But Bruce, you sounded a little bit more optimistic, I guess about supply pressure than you did at your Analyst Day, I think what stood out to me, one of the things was that you were talking about supply in a number of markets in Houston, Dallas, few other markets Inland Empire. And it sounded like you were more concerning than maybe you are today, is that true, have you seen any more discipline on the supply side?

Yes. I would say Bill it is true in a sense that, I was out in California just last week over there. The Inland Empire continues to amaze me in terms of the number one there is supply. No question about it. But the demand has been robust. I mean it really is exceeding supply and it has been very, very strong and we are pretty encouraged by what we are seeing out there. So you got to watch that, because I mean that could get overbuild. But right now we feel it’s in check and I feel stronger, better about it today than I probably did four months ago in terms of being a little bit more worried about it. I would say, in Texas, you worry some – some of these markets, you worry about the big box stuff. I mean i.e., you got a bunch of big boxes in South Dallas. But given the absorption in Dallas has been pretty good and most of it – what we have been doing in the big box stuff. And I would say, in Pennsylvania, Peter can talk about that. But there has been a lot of big box stuff, 1 million square footers, but that’s really not the market we are in. But Peter, do you want to…

Sure in – Bill in Pennsylvania, last year completed was about 9.5 million square feet, about 50% build-to-suit and 50% spec. And today, there is about 13 million square feet under construction. And again, that’s across all of Eastern and Central Pennsylvania, so a pretty big area. And about a dozen of those under construction are recently completed, 500,000 square feet or more and six or so are about 1 million square feet. So we continued to see demand across the range of spaces. But absorption continues to be good.

Okay. Thanks for the color.

Okay. Thanks a lot.

And this time, we have no further questions. I would like to turn the floor back over to Bruce Duncan for any closing or additional remarks.

Thank you, Kristen. And thank you, all for joining us on the call today. And we look forward to seeing many of you in a couple of weeks at the Citi Conference down in Florida. And as always, if you have any questions, please free to reach out to Scott or Art or myself with any follow-up questions. Thank you very much. I appreciate it.

Ladies and gentlemen, this does conclude First Industrial’s fourth quarter and full year earnings results. Please disconnect your lines at this time and have a wonderful afternoon.