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MOSCOW & LONDON--([ BUSINESS WIRE ])--Fitch Ratings has affirmed the credit ratings of First Industrial Realty Trust, Inc. (NYSE: FR) and its operating partnership, First Industrial, L.P. (collectively, First Industrial) as follows:

First Industrial Realty Trust, Inc.

--Issuer Default Rating (IDR) at 'BB';

--$275 million preferred stock at 'B+'.

First Industrial, L.P.

--IDR at 'BB';

--$644 million senior unsecured notes at 'BB'.

In addition, Fitch has assigned a 'BB' rating to First Industrial, L.P.'s $450 million unsecured revolving credit facility entered into on Dec. 14, 2011 and withdrawn the 'BB' rating on First Industrial, L.P.'s previous credit facility commitment, that included a $200 million term borrowing and an aggregate $200 million of revolving borrowings.

The Rating Outlook is Stable.

The affirmation of First Industrial's IDR at 'BB' reflects the company's low leverage for the rating category, solid liquidity position, limited development risk, and minimal tenant concentration. In addition, the company's industrial real estate portfolio spans numerous U.S. markets that are experiencing stabilizing property fundamentals. The ratings are balanced by a fixed-charge coverage ratio that remains low for the 'BB' rating and the company's continued migration towards a secured funding strategy that has reduced the size of the unencumbered pool and may limit financial flexibility over the longer term.

Leverage is low for the 'BB' rating. Net debt to recurring operating EBITDA was 7.0x as of March 31, 2012, down from 7.2x and 8.3x as of Dec. 31, 2011 and Dec. 31, 2010, respectively. Retained cash flow used for debt repayment has been the primary contributor towards leverage reductions.

Fitch does not anticipate the company reinstating a common stock dividend in the near term, which along with the deployment of asset sale proceeds for debt repayment and improving fundamentals should result in leverage sustaining between 6.5x and 7.0x over the next 12-to-24 months. In a stress case not anticipated by Fitch in which First Industrial repeats its 2009-2011 property-level performance over the next several years, leverage would approach 7.5x, which would remain appropriate for the 'BB' rating.

The company has limited development risk, consisting of only one project. As of March 31, 2012, the First Inland Logistics Center in the Inland Empire, California was not leased and represented an investment of $35.4 million, of which 85% was funded to date.

First Industrial's properties are leased to 1,955 tenants, with a negligible concentration of tenant credit risk. The top tenant, ADESA, comprised 2.7% of total rent as of March 31, 2012, followed by Ozburn-Hessey Logistics at 1.9%, General Services Administration of the U.S. Government (Fitch IDR of 'AAA', Negative Outlook) at 1.7%, Quidsi, Inc. at 1.4% and Exel, a Deutsche Post DHL entity, at 1.3%. No other tenant contributes more than 1.2% of total rent.

Portfolio performance is stabilizing as occupancy gains, offset by rental rate declines, led to positive same-store results in first quarter 2012 (1Q'12). Cash basis same-store net operating income (NOI) increased by 6.4% in 1Q'12 compared with negative 0.6% in 2011 and negative 2.7% in 2010. In-service occupancy was 87.4% as of March 31, 2012, slightly down from 87.9% as of Dec. 31, 2011 but up from 85.0% as of Dec. 31, 2010. Year-over-year, 1Q'12 cash on cash rental rates declined by 4.6%, a moderating decline after low- to mid-teen cash-on-cash rental rate declines throughout 2011.

As of March 31, 2012, upcoming lease expirations are heavy, with 9.6% of total leases expiring in 2012, followed by 20.4% in 2013 and 15.6% in 2014. Since First Industrial's average same-store rent per square foot across the portfolio remains lower than average net rent per square foot for 2013 and 2014 lease expirations, it is anticipated that rent rolldowns will continue during the near term. However, Fitch projects that tenant retention ranging from 65% to 70%, coupled with occupancy gains principally due to new leasing, will improve overall portfolio cash flow.

Along with low-single-digit same-store NOI growth, Fitch projects that fixed-charge coverage will be approximately 1.5x over the next 12-to-24 months. In a stress case not anticipated by Fitch in which First Industrial repeats its 2009-2011 performance over the next several years, coverage would fall just below 1.5x, which would remain appropriate for the 'BB' rating.

Fixed-charge coverage is low for the 'BB' rating. For the trailing 12 months ended March 31, 2012, fixed-charge coverage (recurring operating EBITDA less recurring capital expenditures and straight-line rent adjustments divided by total interest incurred and preferred stock dividends) was 1.2x, unchanged from 2010 and 2009. However, fixed-charge coverage was 1.5x in 1Q'12 due to moderating rental rates, lower interest expense due to a new unsecured credit facility, and lower first quarter recurring capital expenditures.

In December 2011, First Industrial closed a new $450 million senior unsecured revolving credit facility at a base rate initially at LIBOR plus 210 basis points plus an unused facility fee that ranges from 25 to 35 basis points. Borrowings were used to pay off and retire $100 million of term loan borrowings under the prior credit facility (LIBOR plus 325 basis points) and $52 million of revolving line of credit borrowings under the prior facility (LIBOR plus 275 basis points plus a 50 basis point facility fee) due September 2012.

First Industrial continues to encumber properties with mortgage debt. As of March 31, 2012, 64.4% of the company's properties were unencumbered, compared with 73.2%, 78.7%, and 95.6% as of year-end 2010, year-end 2009, and year-end 2008, respectively. However, the existing unencumbered pool provides contingent liquidity, as implied unencumbered asset value (unencumbered NOI for the trailing 12 months ended March 31, 2012 divided by a stressed capitalization rate of 8.5%) divided by unsecured debt was 2.0x as of March 31, 2012, which is good for the 'BB' rating. However, Fitch anticipates that the company will continue to access to secured debt markets instead of the unsecured debt markets in the near term due to relative interest savings, which may weaken the position of unsecured bondholders.

Despite the company's recent $86.9 million tender offer for certain senior unsecured notes funded by excess cash and draws on the company's credit facility, liquidity remains solid. Sources of liquidity cover uses of liquidity before additional capital raises by 2.2x for April 1, 2012 through Dec. 31, 2013. Sources of liquidity include unrestricted cash, availability under the company's unsecured revolving credit facility pro forma for the April 26, 2012 tender offer for certain notes, and retained cash flows from operating activities after preferred stock dividends. Uses of liquidity include debt maturities and projected recurring capital expenditures. For upcoming secured debt maturities, debt yields are healthy and signal strong refinancing capacity. If 80% of 2012 and 2013 secured debt maturities are refinanced, liquidity coverage would be 2.5x.

First Industrial's debt maturity schedule is manageable through year-end 2013, with 4.9% maturing in 2012 and 0.9% maturing in 2013 as of March 31, 2012. However, as of March 31, 2012, 18.7% of total debt matures in 2014 principally due to the company's unsecured revolving credit facility and 2014 notes maturities.

The Stable Outlook reflects Fitch's view that over the next 12-to-24 months, First Industrial's leverage will remain between 6.5x and 7.0x, which is solid for a 'BB' rating, fixed-charge coverage will remain at approximately 1.5x, which is appropriate for a 'BB' rating, unencumbered asset coverage of unsecured debt will remain approximately 2.0x, and liquidity coverage will remain above 1.0x.

The two-notch differential between First Industrial's IDR and preferred stock rating is consistent with Fitch's criteria for a U.S. REIT with an IDR of 'BB'. These shares are deeply subordinated and have loss absorption elements that would likely result in poor recoveries in the event of a corporate default.

The following factors may result in positive momentum on the ratings and/or outlook:

--Sustained positive trends in occupancy and same-store NOI levels;

--Fixed-charge coverage sustaining above 1.5x (coverage was 1.2x for the trailing 12 months ended March 31, 2012 and 1.5x in 1Q'12);

--Growth in the unencumbered asset pool while maintaining an unencumbered asset coverage ratio, based on capitalizing unencumbered NOI at a rate of 8.5% divided by unsecured debt, of between 1.5x and 2.0x (unencumbered asset coverage was 2.0x as of March 31, 2012).

The following factors may result in negative action on the ratings and/or Outlook:

--Fixed-charge coverage sustaining below 1.3x;

--Net debt to recurring EBITDA sustaining above 8.0x;

--A sustained liquidity coverage ratio of below 1.0x.

Additional information is available at '[ www.fitchratings.com ]'. The ratings above were solicited by, or on behalf of, the issuer, and therefore, Fitch has been compensated for the provision of the ratings

Applicable Criteria and Related Research:

--Recovery Ratings and Notching Criteria for Equity REITs, May 3, 2012.

--Criteria for Rating U.S. Equity REITs and REOCs, February 27, 2012.

--Treatment and Notching of Hybrids in Nonfinancial Corporate and REIT Credit Analysis, Dec. 15, 2011.

--Corporate Rating Methodology, Aug. 12, 2011.

--Parent and Subsidiary Rating Linkage, Aug. 11, 2011.

Applicable Criteria and Related Research:

Corporate Rating Methodology

[ http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=647229 ]

Treatment and Notching of Hybrids in Nonfinancial Corporate and REIT Credit Analysis

[ http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=656516 ]

Criteria for Rating U.S. Equity REITs and REOCs

[ http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=671869 ]

Recovery Ratings and Notching Criteria for Equity REITs

[ http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=677739 ]

Parent and Subsidiary Rating Linkage

[ http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=647210 ]

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