First Industrial Realty Trust Inc (FR) 2011 Q4 法說會逐字稿

Good morning. My name is Brooke and I will be your conference operator today. At this time I would like to welcome everyone to the First Industrial fourth quarter and full-year Earnings Conference 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 turn the conference over to Art Harmon, Senior Director of Investor Relations. Thank you. Mr. Harmon, you may begin your conference.

Thanks, Brooke. Hello, everyone, and welcome to our call. Before we discuss our fourth quarter and full-year 2011 results, let me remind everyone that the speakers on today's call will make various remarks regarding future expectations, plans, and prospects for First Industrial, such as those related to our liquidity; management of our debt maturities; portfolio performance; our overall capital deployment, including investments; our planned dispositions; our development and joint venture activities; and expected earnings.

These remarks constitute forward-looking statements under the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. First Industrial assumes no obligation to update or supplement these forward-looking statements. Such forward-looking statements involve important factors that could cause actual results to differ materially from those in forward-looking statements, including those risks discussed in First Industrial's 10-K for the year ending December 31st, 2010, filed with the SEC and subsequent 34 Act reports.

Reconciliations from GAAP financial measures to non-GAAP financial measures are provided in our supplemental report, which is available at firstindustrial.com under the Investor Relations tab. Since this call may be accessed via replay for a period of time, it is important to note that today's call includes time-sensitive information that may be accurate only as of today's date, February 23, 2012.

Our call will begin with remarks by Bruce Duncan, our President and CEO, to be followed by Scott Musil, our Chief Financial Officer, who will discuss our financial results in detail, our capital position, and 2012 guidance, after which we will open it up for your questions.

Also here today are Jojo Yap, our Chief Investment Officer; 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 thank you to everyone for joining us today. I would like to take a few moments to reflect on what the First Industrial team achieved in the fourth quarter and throughout 2011. Because of these accomplishments, we are now positioned for growth, both within our existing portfolio and through new investments.

First and foremost, let me talk about the portfolio where our focus has been on driving occupancy and cash flow. In the fourth quarter, occupancy improved to 87.9%, up 130 basis points for the quarter and 290 basis points for the full year. Occupancy gains were broad-based, consistent with what is being seen in the national industrial market,which enjoyed its sixth consecutive quarter of positive absorption.

Given the cloud of economic uncertainty that hung over a great deal of the quarter, we were pleased to see tenants make decisions and move ahead with plans for the future. The recent economic news, including the latest jobs report, reflect and support those decisions. As we stand today, we are seeing significant tenant activity across our markets but we will feel better when more of the activity translates into signed leases.

As part of our leasing in the quarter, we made some headway on the top ten largest strategic vacancies we outlined at Investor Day. Within this group, we completed leases for 150,000 square feet in Chicago; 166,000 square feet in Philadelphia; and an opportunistic sale totalling 384,000 square feet in the Inland Empire.

We still have work to do with this group but we view these properties as a major part of our internal growth opportunity as they are well-located, functional distribution buildings that can meet the needs of a wide range of tenants. As of year-end, this roster represents approximately 275 basis points of potential occupancy growth, compared to 320 basis points stated on Investor Day.

Same-store NOI on a cash basis, excluding termination fees, was in positive territory for the second quarter in a row at 0.5%. Our rental rate change was negative 11.3% in the quarter and negative 11.8% for the year, in line with our forecast. We still face headway in re-doing leases signed near market peaks of 2007 and 2008. As the leasing market continues to recover, we are focused on structuring leases with above average escalations to help mitigate the impact of rent roll-downs.

For 2012, we expect steady absorption to continue for the industrial real estate market, supported by the backdrop of moderate growth in the economy and new supply being limited to a handful of markets, and almost exclusively the larger warehouse distribution product. In our portfolio, we will see a dip in occupancy in the first quarter due to typical seasonality, plus the impact of a 700,000 square foot lease term expiration in Columbus that we talked about at Investor Day.

We expect occupancy to increase from there and average 87.5% to 89% for the year, or 88.3% at the mid-point. This would represent a 200 basis point gain from our 86.3% average in 2011.

Same-store NOI is expected to be positive 2% to 4%. The anticipated same-store gains reflect improving occupancy and higher rental rate bumps, more than offsetting rental rate declines on rollovers. Quantifying the impact of bumps for you for 2012, note that about half of non-expiring long-term leases have bumps that average 5.2% occurring some time this year.

Moving on to dispositions. We completed $12.4 million in sales in the fourth quarter, bringing our total for the year to $86.6 million, slightly below our $100 million goal for the year. Overall, I am pleased with the sales as we have continued on our mission of selling assets that don't fit our long-term vision for the portfolio. We have strived to maximize value, reflected by the fact that our sales for the year were completed at prices exceeding their written-down book value by approximately 40%.

Our largest sale in the fourth quarter was a 384,000 square foot distribution complex in the east Inland Empire. We discussed this property at our Investor Day as a potential re-development opportunity. We received an attractive, unsolicited offer and compared bids with the risk return of a re-development scenario.

Due to the favorable price and the significant costs and timing of entitlement, selling the property made the most economic sense. As we have said previously, asset management is a dynamic process and this is a good example of that process in action. We were also successful in selling four smaller buildings, including another three in Detroit.

We are committed to refining the portfolio through sales, and for 2012, we are targeting the sale of approximately $75 million to $100 million, which we anticipate being largely weighted to the second half of the year. We will continue to look to extract the best value from our assets in the sales process. Our improved financial position enables us to say no where a deal doesn't make economic sense. User sales continue to be a priority and we also have some buildings that require some incremental leasing to maximize their value in the marketplace with selling to local investors.

With respect to the right side of the balance sheet, as we announced in December, we recast our line of credit on very attractive terms, indicative of the progress we have made as a company and the improvement in the financial markets. We greatly appreciate the support and continued confidence of our bank group. We were also able to buy back approximately $18 million in bonds during the quarter, and Scott will walk you through those details.

Moving now to a discussion of where we stand on the investment front. As I mentioned at the outset, external growth is again part of the First Industrial plan given our strength in balance sheet. Our team is working to identify attractive opportunity, focused on the acquisition and development of high-quality properties in the target markets we outlined for you at Investor Day; namely, Southern California, Seattle, Houston, Miami, New Jersey, the Baltimore/Washington corridor, and central Pennsylvania.

During the first quarter to date, we were pleased to acquire our partner's 85% interest in a 390,000 square foot Class A distribution building in central Pennsylvania. It is leased to Navistar on a long-term basis, with our total investment, including our original share, at $21.8 million at an approximately 7.1% going in cap rate.

Our 692,000 square foot First Inland Logistics Center in the Inland Empire in southern California is now complete. The market for large, modern distribution centers remains active and we look forward to the day when we can announce a lease.

Our capital allocation strategy remains the same. We will be disciplined as we deploy capital generated from sales, comparing our potential investment opportunities to the economics of debt repurchases. Through our leasing and capital markets activities, we are on our way towards our goal of being a dividend-paying REIT once again.

As we noted at Investor Day, we had two important milestones with regard to the dividend. We achieved the first by getting our new line of credit in place. The second milestone was to demonstrate greater progress in leasing. As we execute our plan this year, the dividend will continue to be important part of our regular discussion with our Board.

So in sum, thanks to all my teammates at First Industrial for a job well done in 2011. I know they share my excitement that we are getting after growth in 2012,first and foremost from the opportunities within our portfolio, as well as from new investments that meet our vision and deliver long-term shareholder value.

With that, let me turn it over to Scott. Scott?

Thanks, Bruce. First, let me walk you through our results for the quarter and the year. Funds from operations for the fourth quarter of 2011 were $0.23 per share compared to $0.15 per share in the fourth quarter of 2010.

Our 4Q 2011 FFO results include a $0.01 per share loss from retirement of debt, as well as a $0.01 per share reversal of impairment. Note that per recent NAREIT guidance, the definition of funds from operation now excludes impairment charges related to previously depreciated assets.

Comparing 4Q 2011 to 4Q 2010, the four one-time items such as losses from early retirement of debt, restructuring costs, and impairment of undepreciated real estate, funds from operations were $0.23 per share versus $0.30 per share in the year-ago quarter.

EPS for the quarter was a loss of $0.05 per share versus a loss of $0.43 per share in the year-ago quarter. For the year, funds from operations per share were $0.89 compared to $0.80 per share for the prior year.

Results for 2010 include a $0.16 per share gain from the sale of interest in certain joint ventures. Excluding losses from debt repurchases, restructuring costs, impairment of undepreciated real estate, and the gain related to the sale of certain of our joint ventures, full-year 2011 FFO was $0.89 per share versus $1.06 per share in 2010. Full-year 2011 EPS was a loss of $0.34 per share compared to a loss of $3.53 per share in 2010.

Moving on to the portfolio. As Bruce discussed, our occupancy for our in-service portfolio was 87.9%, up 130 basis points from 86.6% last quarter and up 290 basis points from 85% at December 31st, 2010.

In the fourth quarter, we commenced 4 million square feet of leases on our balance sheet. Of these, 1.4 million square feet were new, 1.6 million were renewals, and 1 million were short-term.

Tenant retention was in line with our guidance at 69.9%. Thinking of our retention for 2012, we expect this metric to decline in the first quarter reflecting known move-outs. For the year, we expect retention to average 65% to 70%.

Same-store NOI on a cash basis was 0.5% excluding lease termination fees, reflective of our occupancy gains and rent bumps over the past year. Including lease termination fees, same-store NOI was negative 1.2%. Rental rates were down 11.3% cash-on-cash consistent with our guidance.

On a GAAP basis, rental rates were down 5.2%. We would expect cash rental rates to continue to be down in 2012, ranging from negative 5% to negative 10% as we continue to work through a number of leases signed at market heights.

Leasing costs were $2.93 per square foot for the quarter and averaged $2.64 for the year. For 2012, we expect leasing costs to come down a bit and average from $2.40 to $2.60 per square foot. Lease termination fees totalled $123,000 in the quarter.

Moving on to our capital market activities and capital position. As Bruce noted, our major capital market achievement in the fourth quarter was the closing of our new $450 million senior unsecured revolving credit facility. We were pleased to obtain greater capacity and better terms.

Reminding you of the details, our new facility carries a three-year term with a one-year extension option subject to certain conditions. Payments are interest-only initially at LIBOR plus 210 basis points based upon our leverage ratio. Plus importantly, a facility fee only on the unused portion that ranges from 25 to 35 basis points.

The facility includes an accordion feature that allows First Industrial to increase the aggregate revolving borrowing capacity to $500 million. We used $100 million of new borrowings under the new facility to pay off and retire the term loan portion of the prior credit facility, which bore interest at LIBOR plus 325 basis points.

Additionally, $52 million of new borrowings under the new facility were used to pay off and retire the revolving line of credit under the prior credit facility, which bore interest at LIBOR plus 275 basis points plus a 50 basis point facility fee. We currently have $262 million available on our credit facility. This provides us with significant flexibility and capacity, a portion of which will be used to retire a $62 million of the 6.875% notes due April of 2012.

During the quarter, we continued our efforts to reduce indebtedness and interest costs by repurchasing $17.7 million principal amount of our senior notes comprised of $6 million of our 2028 notes, $5.1 million of our 7.5% notes due 2017, $5 million of our 5.95% notes due 2017, $0.5 million of our 2016 notes, and $1.1 million of our 2014s. Overall, the yield to maturities on these repurchased average more than 7.5%.

Quickly summarizing our capital structure and current capital position. Our weighted average maturity of our unsecured notes and secured financings at 6.8 years with a weighted average interest rate of 6.6%. These figures exclude our credit facility. Our cash position today is approximately $23 million and our debt to EBITDA ratio was approximately 7.4 times at the quarter.

Moving on to our guidance. Per our press release, we initiated our 2012 FFO guidance range of $0.93 to $1.03 per share. At the midpoint of $0.98 per share, this would represent a 10% year-over-year FFO growth.

The key assumptions are as follows. Average occupancy of 87.5% to 89%, reflecting the anticipated dip in the first quarter Bruce discussed and ramping throughout the year. Same-store NOI on a cash basis for the year is projected to be positive 2% to 4%, G&A in the range of $21.5 million to $22.5 million,and JV FFO of approximately $0.8 million.

Please note that our guidance does not reflect the impact of any debt issuances or repurchases prior to mature; the potential issuance of equity; the planned $75 million to $100 million of property sales; any future investments or the related transaction costs, except the $21.8 million acquisition in central Pennsylvania that Bruce discussed. Guidance also excludes any NAREIT compliance gains for impairment charges.

With that, let me turn it back over to Bruce.

Thanks, Scott. Before we open it up to questions, let me offer a few brief concluding comments. Our balance sheet is in good shape. We have flexibility, capacity, and a clear runway for our upcoming maturities. As managers of our shareholders' capital, we continually look for opportunities to further strengthen our balance sheet and reduce borrowing costs, but the yeoman's work is done.

We remain focused on driving value from our portfolio through leasing and disciplined sales and we are positioned for new investment opportunities and we use our platform to put capital to work in a disciplined manner in the right properties and markets that can deliver long-term rental rate growth.

With that, we would now be happy to take 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 other participants a chance to get their questions answered. You're welcome to get back in the queue. For now, Brooke, may we please open it up for the first questions?

(Operator Instructions). Our first question comes from Craig Mailman with KeyBanc Capital Markets.

Good morning. On the sales front, I know you guys are putting $75 million to $100 million out there but it's not in guidance yet. But maybe could you offer some thoughts on maybe where pricing may come in? And also, just are these assets being marketed already or is this just sort of ones you identified that you want to get rid of this year?

Craig, we have a number of assets in the marketplace right now that are currently being marketed. And again, our goal for this year is to get to $75 million to $100 million. In terms of pricing on that, we really can't give guidance because we've got more than the $75 million in the marketplace right now. So we will have to wait and we'll report on that when we get deals closed. But again, we are very pleased with our progress last year in terms of our sales and the fact that they were sold at a price that exceeded our written-down book value by over 40%.

Okay. Then just quickly on the dividend. What's the Board when you guys talk about this? What sort of threshold are they looking for from either an occupancy perspective? Or maybe would they be willing to actually fund a dividend that wasn't necessarily where your taxable net income is still not positive but they just want to get something out there, or does taxable income really have to go positive before they would strongly consider putting a dividend out?

Well, again these are discussions that the Board has had and is going to have. But what we said to you all is that we need to make more progress in terms of where we are in leasing. We made good progress, but there's more work to be done, and again, as you can see by our guidance for this year, we're expecting average occupancy to be up 200 basis points. So if we can execute on that plan, again we're focused on becoming a dividend-paying stock and we will have more to report as we make progress in the leasing.

Great. Thanks, guys.

Thank you.

Your next question comes from Ki Bin Kim with Macquarie.

Thanks. Actually, I just wanted to follow up on that previous question. I noticed your assets held-for-sale went from 76 properties to 46 during the quarter. Could you comment around that first?

Sure. This is Scott Musil. Yes. Our held-for-sale bucket declined. It went from $160 million down to about $92 million and it's something that we have to evaluate every quarter in accordance with accounting. So what we're required to do is list for held-for-sales properties we're actively marketing for sale and properties that have been approved for sale, either by the management or the Board of the Company. So that's what the $92 million reflects. But currently, we also have another $68 million of properties that we're currently marketing. So if you add both together, it's about $160 million that's not going to qualify for held-for-sale until we have management approval to sell those properties. So I just want to make clear that the decrease in held-for-sale is more of a GAAP accounting issue and currently what we're marketing exceeds that. It's about $160 million. I hope that answers your question.

Yes, it does. That helps. I guess my question would be in your occupancy guidance for 2012 increasing to 87.5 to 89, could you talk about how you get there, especially with the expected decline in first quarter occupancy? And if you can frame your answer around how much of the occupancy gains are already locked in from early leasing and how much of it comes from top ten vacancies that you outlined at Investor Day and if there's any addition by subtraction, meaning does that include assumptions of selling empty buildings?

Sure. This is Chris. As we said in the prepared remarks that first quarter we are dropping in the occupancy and we have the large expiration in our Columbus market, and then after that we expect incrementally that to go up each quarter; second, third, and fourth quarter. Your other question about does that have any built-in numbers for the impact of sales? It does not have any numbers built into that, so incrementally we just expect after the first quarter dip to go up a little bit each quarter.

And I guess as a third part of that question was how much of that lease of expirations have you already done? 2012 expirations?

Yes. So if you look at our expirations in our rollover schedule, right now at the end of the year we're at about 15% as the remaining rollovers in 2012. If you look back where we were a quarter ago, we were sitting at about 20%, so we've made some pretty good progress on that. And if you look at where we were a year ago, we were at about 16% on the rollovers so we're a little bit better shape than where we were a year ago. So right now it's very similar to where we were in past years, but we have in 2012, the remaining expiration is about 15%.

Okay. Thank you.

Thank you.

Your next question comes Dave Rodgers with RBC Capital Markets.

Hey, good morning, guys. I think you guys have made great progress on the leasing and the occupancy statistics. I think one thing that's held you back from maybe some of the peers out there is a higher proportion of smaller spaces in your portfolio. Can you talk about the leasing traction that you're seeing among smaller, maybe non-bulk distribution tenants that is helping you drive some of these numbers in occupancy, either in the fourth quarter or what you expect to see this year?

Dave, this is Bruce. I would say that we're seeing some decent pickup in activity is I mentioned in the comments in terms of really all over the country and both large tenants and small tenants. We've gotten decent traction in terms of markets like Denver and pickup in Tampa in terms of the smaller tenant spaces and so we're pretty encouraged because this is sort of broad-based.

Yes. This is Chris. I would add also that during the past year, we definitely saw much more of our increase in the larger spaces, in the bulk warehouse and our regional warehouses. Just to give you an idea, in the past year 2011, bulk warehouse went up about 400 basis points, regional warehouse went up about 500 basis points, and we are now starting to see more of that pickup or more of that traction in the smaller tenants. For instance, in our R&D flex portfolio, in the past quarter we went up about 200 basis points. So more and more from our smaller tenants we're seeing a lot more requests for expansion space and some leases getting signed. So we expect that to be a little bit from the small tenants to be good for 2012.

Great. And Bruce or Scott, you talked about being in a better position on the balance sheet and it clearly looks that way, but you did I guess leave yourselves the out of potentially issuing equity. The equity issuance only for opportunistic deployment or is there still a spot in the back of your mind where you would be happy to de-lever some more through additional equity?

Well, again, if you look at we spent some money in the first quarter buying our partner's interest in the building in central PA, about $20 million worth. And as we look at it, we still are a leveraged company. We have a debt to EBITDA of 7.4 times and remember that excludes the preferred. So if you add that in, we're in the 8, 7.88 times. So we could use it for the de-leveraging. Again we're very judicious in terms of very mindful of the dilution as evidenced by what we've done in the past, but we do need to continue to de-lever. Again, we set about this goal of 6.5 to 7.5 times debt to EBITDA with the high end of the range at 7.4, so there's still a little bit of work to be done.

Thank you.

(Operator Instructions). Your next question comes from Daniel Donlan with Janney Capital Markets.

Thank you. Scott, just going to the guidance, I'm just curious why you guys aren't assuming any debt issuance. Should we just read into that that you guys are just comfortable paying down everything with the line, given what's maturing and then what your cash requirements are this year?

Yes. Dan, this is Scott. On the debt maturity side, the only thing we have coming due in 2012 is $62 million of notes in April and we've got the line of credit earmarked to take those out. Other than that, we don't have any other obligations. Now, as we mentioned, we're going to sell $75 million to $100 million of property and we are then going to redeploy that capital either in investments in real estate or repurchasing debt. So our assumption at this point in time is that we're not going to be issuing any more debt.

Okay. And then, Bruce, you talked a little bit about your leverage. 7.4 net debt to EBITDA excluding the preferreds. I think your prior target was 6.5 to 7.5. I can't remember if that excluded the preferreds or not. But is that still your target range on the leverage side?

Yes, Dan. The target we set out a couple years ago was 6.5 to 7.5 times which we hit last quarter. But we want to be at the lower end of that range so there's work to be done there. But again, the best way to do that is to lease up the portfolio.

Okay. And then just one more going back to the guidance. So at the low end, it assumes that you could potentially lose a little bit of occupancy at your same-store NOIs, still 2%, so we should definitely be thinking about that overall you guys are going to see a rental rate increase for the year in 2012, right?

On the rental rate increase?

Yes.

No. For the cash basis, we've guided that's going to be negative 5% to negative 10%.

So we have filled in bumps in the leases that are going to help us generate the increase in cash flow with same-store that we're talking about.

So Dan, If you're looking at the guidance range it's about $0.05 from the mid-point compared to the low and high. That's about $4.5 million. So if you look at the difference between our mid-point of occupancy and our low end, that's about $2.6 million of that difference. And then G&A we've guided to about $0.5 million between the mid-point and the low and high, and then the other $1.4 million is just assumptions regarding rental rate assumptions and debt assumptions, specifically LIBOR assumptions and our line of credit. So gets you pretty close to the difference between our low end of the guidance and our high end of the guidance.

Okay. Thanks.

Your next question comes from Ki Bin Kim with Macquarie.

Thanks. I just want to follow up on a previous question. From the remaining top ten original vacancies you outlined in your Investor Day, how does the activity volume look like for the seven that you haven't leased yet?

Bob, you want to it take that?

I think we've got, and this really goes across the entire portfolio as Bruce said in his prepared remarks, we've got good activity in basically all of our markets. It's just a function of bringing those leases home. So that includes the top ten vacancies.

Okay. And in your same-store NOI guidance, following up on the previous question. How much of that 2% to 4% growth is already locked up in purely based on escalators in your leases and also your comment on the flip side, how much NOI is not being booked from free rent periods and teaser rates?

If you look at the overall on the same-store guidance, just the major components of that is the same-store portfolio we're looking at about a 1.5% increase in the average occupancy over the entire year. And then as Bruce made in his comments about the contractual rent bumps that are in place for 2012, they're about a positive 5.2%. So those two factors together, we're picking up overall increase of about 5% and then what's offsetting that is still the rent roll-down, the negative rent roll-downs in the portfolio. The impact is about negative 2%. So the combination of those two are the net numbers there is how we get back to our positive 3% increase in the same-store NOI for the year 2011 over 2012.

At the mid-point.

At the mid-point.

Okay. Thank you very much.

Thanks.

(Operator Instructions). Your next question comes from Craig Mailman with KeyBanc Capital Markets.

Hi, guys. Just a quick follow-up. On the move-out in Columbus, what's the exact timing of that during the quarter?

The move-out began first month of the first quarter,

It's gone.

They're already gone?

Yes.

And that's 700,00 square feet, right?

Yes. Correct.

And then just one other one. This one may be hard to quantify, but I want to go back to your comment, Bruce, that you guys are seeing good activity but conversions are a little bit lower than you would like. I'm just curious if you guys have numbers on what a good conversion rate would be for prospects and where you guys are now in the pipeline?

Craig, we don't, but the good news is you're seeing good activity. You're seeing better activity today than we've seen six months ago, nine months ago, whatever. So the activity is good and it's good in terms of at all sizes of tenants. So we're encouraged by that. And again, our mission is to deliver and get that activity translated into leases.

Great. Thanks.

Thank you.

Your next question comes from John Stewart with Green Street Advisors.

Thank you. Sorry if I missed this in the comments and press release, but have you quantified at all what we should expect to see as far as the seasonal occupancy decline in the first quarter?

We haven't defined it. We just said it's going to be down and it's been down the last couple of years in a row since I have a been here. And again, it's going to be exacerbated by the 700,000-foot tenant in Columbus that's leaving.

Right. Okay. And, Bruce, you alluded to the day that you look forward to announcing a lease on the Inland Empire project. Can you give us an update there? Is that imminent?

John, I'm looking forward. I will call you straight off when we get it. There's good activity out there, but again, our mission, I really believe the team plays in deeds, not words. So we will let you know when we have something done.

Okay. And just lastly, on the disposition target, I guess you would call it, of $75 million to $100 million, and appreciate that you don't really want to discuss pricing yet, but can you help us think about what the potential impact on earnings would be? How much NOI would we be looking at coming off? And the related point, how much of that are we talking about vacant space and what's ten caps in Detroit? What's the mix look like there?

Again, it's hard to quantify because we've got a number of properties out there, so we'll let you know when it happens. But if you look at what we did last year, last year we were very pleased. We were able to sell properties. The income-producing properties, the buildings, the yield was about a little over 6% yield trailing 12 months, and if you looked at the land, if you add that in the mix, it was probably less than a 5% cap rate. But, again that was last year. The land component will be much less this year so, again, your yields, who knows what they will be, but they will be higher than what they were in 2011. And then the question is what do we do with the proceeds, whether we buy back debt, which we've been successful doing this year, or investing it in assets like the Navistar building.

You said the yield will be higher than 2011, so if we were just to think about making reasonable assumptions, you would not advise that the low end, you would say $75 million of vacant buildings and land with no yield and then $100 million at a ten cap at the other end?

You're the expert on that. I'm just saying that I would not anticipate a repeat of this year's number of less than 5%. Maybe we will be lucky and be able to do that, but I would anticipate a higher number than that.

Okay. Thank you.

Thank you, John.

(Operator Instructions). Your next question comes from Daniel Donlan with Janney Capital Markets.

Yes. Thank you. Just real quick. Bruce, I wonder if you could talk a little bit about who acquired the properties in Detroit and Philadelphia. And then going forward, do we need to see more of a rebound in lending in the secondary and tertiary markets to some of these smaller private firms to get your disposition volume going? What's your thought process there?

Overall for our sales last year, about 55% were sold to users and about 45% were sold to investors. So that is by and far the large goes across the board. In terms of the fourth quarter, the properties in Detroit were sold to users. Does that answer your question?

Yes. What do you need to see for investors to become more active in buying some of these properties you have there in the market? Is it more of a finance issue for them? Is it just timing? Why isn't this happening sooner rather than later?

Because, Dan, again, our focus is on selling to users. We think we get the best execution that way. Witness what we were able to achieve last year in terms of the sales prices we received. So our focus is on users versus investors and we're going to continue that in 2012.

And everything else being the same, again like Bruce had mentioned, and we are trying to increase the occupancy of some of our properties, because the more stabilized they are, the more value we get.

Okay. Thank you very much.

Thank you.

Your next question comes from Michael Mueller with JPMorgan.

Hey, guys. It's Joe Dazio here with Mike. Question about external growth. I know you talked about the $75 million to $100 million of dispositions targeted for 2012. Is there anything specific you can speak to that you're targeting with regards to either acquisitions or also perhaps some debt pay-down, or is it sort of a wait-and-see mode at this point?

I think it's depending on what opportunities we find to invest in and we're going to compare that versus buying back debt.

Is there anything at all with respect to either of those that's baked into the guidance at this point or is none of that contemplated in the range?

Yes. Our guidance assumes no impact from sales or investment or debt repurchases. So as Bruce mentioned, what's going to happen is we'll have dollars coming for the sales. We'll look at our investment pipeline, determine if we like what we see. If we do, we'll put money into investments. If we're not too enamored with what we have at that point in time, we'll look into repurchase some debt. We've repurchased debt the last several years under our bonds in the open market. We had that opportunity. We also have about $13 million of mortgage debt that we can pre-pay at the later half the year for a fixed pre-payment fee, and the interest rate is about 7.5%. So I think the benefit that we have is we have two different homes potentially for our sales capital.

Okay. Thank you.

Thank you.

At this time there are no further questions. I would like to turn the conference back to Bruce Duncan for closing remarks.

Thank you, operator and thank you all for participating in our call today. Please feel free to call us with any of your questions and we look forward to seeing some of you at the Citigroup conference next month. Thanks.

Thank you. This concludes the conference. You may now disconnect.