first industrial realty trust november 20, 2008 brian bird ryan foelske
TRANSCRIPT
First Industrial Realty Trust
November 20, 2008
Brian BirdRyan Foelske
Overview
• Company Overview
• Industry Overview
• Macroeconomic
• Financials
• Valuation
• RCMP Portfolio
• Recommendation
Company Overview
• Headquartered in Chicago, Illinois• First Industrial Realty-Trust (FR), founded in
1994, is an established REIT and owner of industrial real estate serving customers worldwide.
• FR engages in the buying, selling, leasing, development and management of industrial real estate solutions for every stage of the industrial supply chain.
• Their mission is to create industrial real estate solutions that mutually benefit their customers and their investors.
Description of a REIT
• A Real Estate Investment Trust (REIT) is a company that owns and operates income-producing real estates.
• REITs’ shares are traded publicly on major stock exchanges, giving anyone the ability to invest in large-scale real estate.
• REITs are required to distribute 90% of their taxable income annually in the form of dividends, giving high yields to its investors
• Diversification advantage of REIT• Give individual investors opportunity to access real
estate market• Typically, relatively low correlation between REITs
and other stocks and bonds
First Industrial’s Portfolio
From FR Annual Report
Industry Overview
• Real Estate Investment Trust (REIT): a company that owns and operates income-producing real estate.
• REIT shares are publicly traded on major stock exchanges, giving anyone the ability to invest in large-scale real estate.
• REITs are required to distribute 90% of their annual income in the form of dividends, giving high dividend yields to its investors.
• Diversification advantage of REIT• Give individual investors opportunity to access
real estate market.• Fairly low correlation between REITs and other
risky assets.
Macroeconomic Outlook
• Increasing borrowing rates make expanding property holdings more difficult.
• Decline in property values means fewer will be sold, especially at a gain.
• Ability to meet current debt obligations in question as sale of property is a major part of income.
Macroeconomic Outlook
• Customers (occupants) of industrial property having financial issues:
– Automotive Manufacturers downsizing if not heading towards bankruptcy.
– Retail Industry expecting declining sales, meaning less need for warehouses.
SWOT Analysis
Strengths:Geographic Diversification
Most debt not mature until 2011
Large in-place joint ventures
Weaknesses:Large amounts of debt
Poor credit rating
Small player in industry
Opportunities:Purchase undervalued property
Continue to grow revenues related to contracting
Threats:Ability to raise capital
Meeting current debt obligations without selling properties at huge losses
Relative Valuation
FR PLD AMB DRE
Market Cap (Millions)
226.05 908.78 1,100.00 897.37
P/E 1.60 1.63 4.80 9.76
P/B 0.24 0.13 0.44 0.49
P/S 0.52 0.24 1.89 0.91
Book/Share 21.70 27.50 25.38 12.52
Relative ValuationFootball Chart
4.76
2.73
2.99
2.00
9.56
12.52
12.00
17.60
29.01
10.57
23.54
27.50
-1.00 4.00 9.00 14.00 19.00 24.00 29.00 34.00
P/E
P/B
P/S
Book/Share
DDM
DCF
Price
$2.75 $10.57
Current Position
• Purchased on Dec 10, 1999– 500 shares at $24.625 and 500 shares for
$24.75– Original Book Value of $24,687.50
• The current stock price is $5.88– Unrealized loss of $18,807.50
• 82.6 % Held by insiders
Portfolio CompositionPortfolio Composition
AEE12%
AEO10%
CPRT9%
DO7%
FR5%JKHY
6%
KMB16%
SRCL22%
WAG11%
WFR2%
Portfolio Correlation
Income Statement
From FR Supplemental Info
Debt Maturity Schedule• DEBT MATURITY• Debt Maturity By Year as of 9/30/08
– 2008 884– 2009 33,297– 2010 15,815– 2011 407,657– 2012 601,028– 2013 2,523– 2014 148,334– 2015 1,704– 2016 196,594– 2017 219,968– 2018 4,388– Thereafter 269,124– Total Debt $ 2,001,316
From FR Supplemental Info
WACC
Weight CostEquity 10.36% 14.20% Risk Free Rate 0.04Debt 89.64% 10.00% Beta 1.7
WACC 10.43499% Mkt Risk Prem. 0.06
Calculating Revenue
Values assumed are the minimum values the company needs to remain profitable.
Valuation
Values assumed are the minimum values the company needs to remain profitable.
Recommendation
• We recommend a market sale of 1000 shares of First Industrial. It is our belief that the values assumed are not capable under current economic conditions.
• This yielded an approximate loss of $18,807.50