First Industrial Realty Trust Inc (FR) 2015 Q4 法說會逐字稿

Ladies and gentlemen, thank you for standing by, and welcome to the First Industrial fourth-quarter and full-year results conference call. During the presentation, all participants will be in a listen-only mode. Afterwards we will conduct a question-and-answer session. (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, Kristin. 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 may be 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 of 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 known 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.

The 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 five buildings in three transactions totaling $93.9 million. Our largest acquisition was a two-building, 1 million square-foot portfolio in the I-95 North corridor of Baltimore/Washington for $61.9 million.

As discussed on our last call and at Investor Day last November, this transaction included a stabilized building and a value-add component. Upon lease-up of the 349 (sic - see press release, 349,000) square-foot vacant building, our expected combined stabilized yield is 6.3%.

As we also noted at Investor Day, we acquired a 100% leased 80,000 square-foot asset in the DFW Airport submarket of Dallas for $6.9 million at a 6.4% in-place cap rate. Lastly, we acquired Energy Commerce Center, a newly completed two-building development totaling 288,000 square feet for $25.1 million. The Center is located along Beltway 8 in the Southeast submarket of Houston. This submarket is seeing solid levels of tenant activity, led by the downstream petrochemical industry, which is benefiting from lower feedstock and energy prices.

The buildings are now 41% leased, and the projected stabilized GAAP yield is 6.6%. As a reminder, when we say GAAP yield, we are referring to our first-year stabilized cash yield over our GAAP investment basis. Like our developments, our underwriting for this and other acquisitions with vacancies assume one year of downtime.

For the full-year 2015, acquisitions totaled $169.2 million. They were comprised of $143.1 million of buildings at an expected weighted average stabilized cap rate of 5.9%. Approximately one-third of those acquisitions were in Los Angeles and the Inland Empire.

We also acquired $26.1 million of key land sites in 2015, including parcels in Chicago, Dallas, Phoenix, and Atlanta, where construction is already underway. Buying sites like these that we can fairly quickly move into production is central to our development strategy.

So now let me take some time to recap our development activity for you. In the fourth quarter we had one new development start that we talked about at our Investor Day. This is our build-to-suit in Atlanta in the I-75 South corridor to serve the needs of an existing customer. There we are expanding our tenant from its current 133,000 square-foot space to a 400,000 square-foot facility slated for completion in the fourth quarter. Total estimated investment is $23.3 million at a GAAP yield of 8%.

We also placed in service four new developments in the fourth quarter. The first two are our First Interstate North II building in Minneapolis and our First Northwest Commerce Center in Houston. These developments total 494,000 square feet and were 80% occupied at year-end. While we are disappointed that we didn't achieve 100% occupancy on these buildings within 12 months of construction completion, we have confidence in our team to get them leased.

The other two were at our First Park @ Ocean Ranch development in Southern California that we completed in the fourth quarter. Totaling 172,000 square feet, they are 100% leased, so we are very pleased to be beat our typical one-year lease-up assumption. In total in 2015, we placed in service seven buildings comprised of 1.8 million square feet, with an estimated investment of $109.2 million. As a group, they were 95% leased at year-end, with an average expected GAAP yield of 7.3%.

Moving now to our completed developments that are not yet in service, at December 31, this group included projects in Dallas, the Lehigh Valley, Phoenix, and Southern California that total 1.2 million square feet, with a total estimated investment of $82.4 million. They were 35% leased at quarter-end and have a targeted weighted average GAAP yield of 7%.

We also had four developments under construction at year-end, including the aforementioned build-to-suit in Atlanta, plus projects in the Inland Empire, Chicago, and Dallas. These total 1.4 million square feet and were 28% leased as of December 31, with an estimated investment of $78.9 million and a targeted weighted average GAAP yield of 7.5%. I refer you to page 20 of our supplemental for details on all of our developments.

We also have been busy since year-end on the investment front. We recently started a redevelopment project in the South Bay submarket of Los Angeles. There, we are demolishing a 162,000 square-foot building that we own to make way for a modern 53,000 square-foot transload facility that we have preleased to a third-party logistics provider for seven years. The initial GAAP yield on our cumulative investment of $17.6 million is 5.2%, while the yield on an economic basis is in the low 4s. This redevelopment will give us a state-of-the-art scarce asset in a very tight submarket.

We also acquired a high-quality 126,000 square-foot distribution building in an infill submarket of Orlando that was 100% leased. We like the fundamentals of the Orlando market, with overall vacancy below 7%. The purchase price was $9.3 million, and in-place yield was 7.8%, reflecting above-market rental rates. This is our second building in the market, and we will look to add to our holdings over time.

Lastly, we added an 11-acre land parcel in the Inland Empire near our other developments in this market. The purchase price was $1.7 million, and we expect to be able to build up to 236,000 square feet after we complete some entitlement work.

Moving onto dispositions, we were very active in the fourth quarter as we continued our disciplined program of selling assets that have lower expected cash flow growth to fund our new investments. In total, fourth-quarter sales were $108 million, comprised of 51 buildings, totaling 2.8 million square feet plus two land parcels.

The weighted in-place cap rate for these transactions was 7.6%. Portfolio sales in Chicago, Minneapolis, and Detroit accounted for more than half of our fourth-quarter volume. For all of 2015, sales totaled $158.4 million, comprised of 66 buildings totaling 3.8 million square feet, plus four land parcels. The average weighted in-place cap rates for these buildings was 6.7% with an expected stabilized NOI yield of 7.5%.

In the first quarter to date, we sold a 154,000 square-foot building in Chicago for $5.1 million. The transaction market continues to be active, and we expect to sell $150 million to $200 million of properties in 2016 as we continue our active portfolio management strategy. As we have discussed in the past, we may suffer some near-term dilution from these sales, as we expect to use both of the proceeds to self-fund incremental investments, primarily through development.

Now, onto the dividend: as we outlined for you at our November Investor Day, all of our efforts are aligned with driving cash flow for investors and, along with it, the dividend. As a result of our projected 2016 cash flow growth and potential taxable gains related to asset sales, our Board of Directors increased our quarterly dividend per share to $0.19, a 49% increase from our prior dividend, representing an AFFO payout ratio of approximately 70%. Scott will discuss this in more detail in a minute.

So for our whole team at First Industrial, it is business as usual. We are focused on delivering value for our shareholders by realizing the long-term cash flow growth opportunity we outlined at Investor Day and continuing to demonstrate the quality of our portfolio and the strength of our platform. With that, Scott?

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 Q4 2014. Funds from operations before one-time items such as the one-time restoration fee in 4Q of 2014, acquisition costs, and NAREIT compliant gains and losses, were $0.34 per fully diluted share compared to $0.32 in 4Q 2014.

EPS for the quarter was $0.39 versus $0.17 one year ago. For the year, NAREIT FFO 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 2014, 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, including termination fees but excluding the one-time restoration fee in the year-ago quarter, was 5.1%.

For the quarter, cash rental rates were up 5% overall. Breaking it down, renewals increased 4.9%, and new leases were up 5.8%. On a GAAP basis, the overall rental rates were up 17.2%, with renewals increasing 17.3% and new leasing up 16.9%.

As Bruce noted, we are focused on driving cash flow and, along with it, our dividend. In 2015, we delivered AFFO of $0.98 per share, representing 20% growth from 2014. The Board decided to raise the first-quarter 2016 dividend by 49% to $0.19 per share. At this level, based on our guidance, we would expect to be at an approximately 70% AFFO payout ratio for 2016, which is higher than what we have targeted the past three years. The higher expected payout ratio is partially being driven by the potential impact from our planned asset sales.

As Bruce discussed, we are targeting $150 million to $200 million of sales in 2016, and we expect to trigger tax gains related to these sales. Like prior years, we anticipate that the majority of our sales proceeds will be redeployed into new development, so we will have limited opportunities to complete 1031 exchanges. We still have NOLs to offset some of these gains, but we believe an increased dividend is also prudent.

Moving on to our balance sheet metrics, at the end of 4Q, our net debt plus preferred stock to EBITDA, which excludes acquisition costs, is 6.1 times. This is at the low end of our target range of 6 to 7 times. At December 31, the weighted average maturity of our unsecured notes, term loans, and secured financings is 4.2 years, with a weighted average interest rate of 5.2%. These figures exclude our credit facility. Our credit line balance today is $256 million, and our cash position is approximately $15 million.

Now, reviewing our initial 2016 guidance per our press release last evening: our NAREIT FFO guidance range for 2016 is $1.41 to $1.51 per share. The key assumptions are as follows: average in-service occupancy of 95% to 96%, based on quarter-end results. As Bruce touched upon, we expect a first-quarter dip in occupancy and then expect to grow it for the balance of the year. Average quarterly same-store NOI on a cash basis before termination fees is expected to be 3% to 5%.

Our G&A guidance range is $25 million to $26 million. Note that we expect first-quarter G&A to be higher than what is implied by the full-year run rate due to accelerated vesting of CEO compensation. Our full-year G&A guidance reflects costs related to our CEO search but does not reflect any potential changes in CEO-related compensation.

Guidance includes the costs related to our developments under construction at December 31 in Southern California, Dallas, Atlanta, and Chicago. It also includes the impact of the build-to-suit redevelopment in Southern California we started in the first quarter. In total, for the full year of 2016, we expect to capitalize $0.01 a share of interest related to these developments.

Other than what I have noted, our guidance does not reflect the impact of anticipated sales of $150 million to $200 million, nor any acquisitions or developments other than those we discussed; the impact of any future debt issuances; the impact of any future debt repurchases or repayments, other than the first-quarter payoffs of our $160 million 5.75% unsecured notes and our $58 million of secured debt with an interest rate of 7.75%. Guidance also excludes any future NAREIT compliant gains or losses, or the impact of impairments, nor the potential issuance of equity.

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

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 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 a 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 every day; 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% leased developments 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 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, welcome to get back in the queue. So, Kristin, may we now open it up for questions?

(Operator Instructions) Craig Mailman, KeyBanc.

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 is the most important attributes that the Board is looking for in the new CEO?

Craig, I would say it is leadership. It is all about leadership and, I think, someone who can lead the Company forward. I think we want people that 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 leaderships the key quality.

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

I think all of the above. I think what you are looking for 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 is all of the above. I think you would 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 is going to be a number of factors that you are going to have to weigh. So we are pretty excited. We have good internal and external candidates.

Okay. Great. And then just 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 is happening to credit spreads?

Let me ask to Jojo to talk about that.

Sure. We haven't really seen any change. I mean, again, there is a lot of investors still looking at industrial product. And industrial product seems to be really underallocated in a lot 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 -- you know, the market has been a little jittery. So that may affect some leveraged buyers. But to date, as Jojo said, we have not seen any pushback.

Great. Thanks, guys.

Dave Rogers, Baird Capital.

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 where you stand against the $300 million or so that you would like to keep under, if I remember correctly? And then I guess the second part of that question is: where does that really put you for development starts for the year, or ability to go ahead and put more capital to work throughout the year?

Dave, let's let 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 is technically $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. 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 raise -- 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 2016.

As far as a 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 the extent or level that we are now, but again, really what we did in 2016 is we wanted -- we needed to increase it to cover taxable income from operations and help us a little bit with gains from sales.

But again, the preponderance of it is cash flows going up in terms of -- from operations.

That's a good problem to have. Thanks, guys.

(laughter) It is a high-class problem. We agree with you.

Eric Frankel, Green Street Advisors.

I guess it's a small detail, but I was hoping you would walk through the economics of that Southern California redevelopment. That looks like a fairly unique project.

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

Sure. So we have an asset that is currently entirely vacant. And so when we looked 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 transload facility.

When we looked at the economics of each of those alternatives, the rental income was not significantly different, but we made -- we are making our bet that the transload 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, a transload facility is a very unique asset and a scarce asset. In fact, what happened is that when we were just designing this facility and the word went out, we got it pre-leased for a seven-year term. So we are very pleased in what happened. In terms of economics, as Bruce has mentioned, in terms of a GAAP investment, it is like a 5.2%, and then from an economic basis, it is in the low 4s.

Can you just explain what you mean by economic basis?

Basically, what we did in -- 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.

Okay.

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 2016, 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?

No, we ended the year with pretty low leverage, Eric. We are at 6.1 times compared to -- we are at the low end of our range. So we have got a share of our projected sales proceeds already earmarked toward 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 the 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're going to look at both options, but we are continuing to scour the market for future investments.

(Operator Instructions) John Guinee, Stifel.

This is Erin Aslakson for John. What is your current view on supply and demand in the Inland Empire for 2016? It seems to have a good amount of development going on there.

All right. Let me ask Jojo to comment on that -- supply and demand in the Inland Empire.

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

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

Basically, at this point, we have a -- if your question was development exposure, we have a building, 187,000 square feet, currently under construction in the 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 can 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 to three years left on the lease. And, of course, what we will do is that -- we like the market a lot. It is land-constrained, and there is not much supply. And we will let you know how we do with that lease negotiation.

Okay. Great. Thank you very much.

Michael Mueller, JPMorgan.

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, in 2015, we did $158 million. If you look at what we have averaged over the last three years, it is has probably been in the range of $125 million to $135 million.

So going to $150 million to $200 million isn't a big increase, in terms -- from where we have been. But again, our view of this, that we have talked about -- we do want to self-fund our investments. And, again, they will be primarily developments, we think. So the $150 million to $200 million seems right. And as Scott said, you know, we're in the active portfolio management business. So we are going to continue to upgrade the portfolio.

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

Yes, Jojo?

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

Okay. Thank you.

(Operator Instructions) Eric Frankel, Green Street Advisors.

Yes, a couple of quick follow-ups. Are there any other markets in the US where you see some supply concerns, other than perhaps -- you know, potentially Inland Empire?

Again, the Inland Empire, there has been great demand. I mean, great -- there is been increased supply, but demand continues to exceed it. So you have got to keep watching that. I would say you would put Dallas in that category. There has been good supply growth, but there is also great demand. So that seems to be fine.

Houston you have got to look at in terms of that market, and Indianapolis. But, again, right now, in the markets, we still feel pretty good about supply-demand in almost all the markets. So we are watching it, but we are encouraged by what we are seeing.

That's helpful. So question, I guess, or 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? Is it expected to be more of a tailwind 2016 structure, as has occurred in the past?

Eric, we really don't comment on where we are on it until 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'm not sure if you had a window or view into the financing with some of those buyers of those assets, but do you have a rough sense of what the cost of debt was for those buyers that did close, and whether you think that's has changed over 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 deals. So we can't comment on that.

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

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, a few other markets, Inland Empire; and it sounded like you were more concerning them than maybe you are today. Is that true? Have you seen any more discipline on the supply side?

Yes, I would say, Bill, that it is true in a sense, that -- you know, I was out in California just last week or whatever. And 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 have got to watch that, because that means that could get overbuilt. But right now, we feel it is 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 know, you worry -- in some of these markets, you worry about the big box stuff. I mean, i.e., you have got a bunch of big boxes in South Dallas, but given the absorption in Dallas has been pretty good, and most of what we have been building isn't 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 -- you know, 1 million square-footers. But that is really not the market we are in. But, Peter, why don't you talk?

Sure. 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 is across all of eastern and central Pennsylvania. So a pretty big area.

And about a dozen of those under construction or recently completed are 500,000 square feet or more. And six or so are about 1 million square feet. So we continue to see demand across a range of spaces, but absorption continues to be good.

Okay. Thanks for the color.

At 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, Kristin. And thank you all for joining us on the call today. 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 feel free to reach out to Scott, Art, or myself with any follow-up questions. Thank you very much. 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.