First Industrial Realty Trust Reports Third Quarter 2019 Results
- Cash Rental Rates Were Up 31.9%, Exceeding the Previous Quarterly Record Established in 2Q19
- Occupancy of 97.7%, Up 40 Basis Points from 2Q19; Cash Same Store NOI Grew 2.9%
- Started a 100,000 Square-Foot Development in Philadelphia; Estimated Total Investment of $12.3 Million
- Signed 141,000 Square Feet of New Leases for Existing Developments in the Third Quarter
- Preleased 77% of a 435,000 Square-Foot Planned New Fourth Quarter Start at First Park 121 in Dallas
- Added New Development Sites in the Inland Empire and South Florida in the Third and Fourth Quarter To-Date; Developable to 1.4 Million Square Feet
- Acquired Four Buildings Totaling 229,000 Square Feet for $34.4 Million
- Sold 1.6 Million Square Feet Plus Several Land Sites for $94.0 Million
- Closed on $150 Million Private Placement Offering
- Paid Off $40 Million of Mortgage Loans at a Weighted Average Interest Rate of 7.3%
- 2019 FFO Guidance Increased $0.01 at Midpoint to $1.73 Per Share
First Industrial Realty Trust, Inc. (NYSE: FR), a leading fully integrated owner, operator and developer of industrial real estate, today announced results for the third quarter of 2019. Diluted net income available to common stockholders per share (EPS) was $0.62 compared to $0.24 a year ago.
First Industrial's third quarter FFO was $0.44 per share/unit on a diluted basis, compared to $0.41 per share/unit a year ago. Excluding the approximately $0.01 per share gain on sales of land, third quarter 2018 FFO per share was $0.40.
"Our third quarter results reflect the strength of the industrial real estate sector, with strong occupancy levels and cash rental rate growth of 31.9% which exceeded the previous quarterly record established in 2Q19," said Peter E. Baccile, First Industrial's president and chief executive officer. "Our business continues to benefit from tenant demand for quality and well-located spaces to support their evolving supply chain requirements."
- In service occupancy was 97.7% at the end of the third quarter of 2019, compared to 97.3% at the end of the second quarter of 2019, and 97.6% at the end of the third quarter of 2018.
- Tenant retention by square footage was 82.3%.
- Same property cash basis net operating income ("SS NOI") increased 2.9%, reflecting contractual rent escalations and increased rental rates on leasing, offset by a slight decrease in average occupancy and the negative impact of tax true-ups in markets where taxes are paid in arrears.
- Rental rates increased 31.9% on a cash basis and increased 50.4% on a straight-line basis; leasing costs were $1.87 per square foot.
During the third quarter, the Company:
- Leased 100% of its 120,000 square-foot First Park at Central Crossing Building III in Central New Jersey. The lease will commence upon completion in the fourth quarter.
- Leased 21,000 square feet of its 67,000 square-foot First Glacier Logistics Center in Seattle to bring that building to 100% leased.
- Preleased 333,000 square feet, or 77%, of a 435,000 square-foot building in northwest Dallas at First Park 121; construction expected to start on this new facility in the fourth quarter.
Investment and Disposition Activities
In the third quarter of 2019, the Company:
- Acquired a 6.9-acre site in northeast Philadelphia for $2.0 million on which the Company commenced development of a 100,000 square-foot building; total estimated investment of $12.3 million.
- Acquired three land sites in the Inland Empire comprised of 42 acres for $19.0 million that can support development of up to 774,000 square feet.
- Entered into a 50-year ground lease in South Florida for a site that can support 374,000 square feet of development.
- Acquired three buildings in Southern California: a 91,000 square-foot building in the Inland Empire for $15.2 million, a 44,000 square-foot building in the Inland Empire for $5.6 million and a 41,000 square-foot building in San Diego for $7.3 million.
- Acquired a 54,000 square-foot building in Orlando for $6.3 million.
- Sold eight buildings plus two units comprised of 1.6 million square feet and several land parcels for $94.0 million.
- Recognized the sale of a 618,000 square-foot building in Phoenix for $54.5 million in which the tenant exercised its purchase option; transaction scheduled to close in 3Q20.
In the fourth quarter to date, the Company:
- Acquired a 19.6-acre future development site in South Florida for $19.8 million with three in-place land leases; potentially buildable up to 294,000 square feet.
- Sold one building in Minneapolis comprised of 84,000 square feet for $4.0 million.
"Given strong competition for industrial properties, we are executing on our portfolio management objectives through sales of select assets with proceeds primarily being invested in new developments to service tenant demand," said Johannson Yap, First Industrial's chief investment officer. "Through our platform, we successfully added several sites in high barrier-to-entry markets to support our future growth and value creation."
During the third quarter of 2019, the Company:
- Closed on a private placement offering on July 23 for $150 million of fixed rate senior unsecured notes with a coupon rate of 3.97%. The 3.97% Series E Guaranteed Senior Notes have a 10-year term and an effective interest rate of 4.23% reflecting the settlement of interest rate protection agreements related to the offering.
- Paid off $40 million of mortgage loans at a weighted average interest rate of 7.3%.
Outlook for 2019
Mr. Baccile stated, "Based on our performance in the third quarter and outlook for the remainder of the year, we are increasing the midpoint of our full-year 2019 FFO per share guidance by $0.01. Our team is serving our customers well while driving value and long-term cash flow growth from leasing, profitable investing and our portfolio management efforts."
The following assumptions were used:
- In service occupancy at year-end fourth quarter of 96.7% to 97.7%. This implies a full year quarter-end average in service occupancy of 97.25% to 97.5%.
- Fourth quarter same-store NOI growth on a cash basis before termination fees of 1.25% to 2.75%. This implies a quarterly average same-store NOI growth for the full year 2019 of 2.8% to 3.2%, an increase of 50 basis points at the midpoint compared to prior guidance due to third quarter performance.
- General and administrative expense of approximately $27.5 million to $28.5 million.
- Guidance includes the incremental costs expected in 2019 related to the Company’s developments completed and under construction as of October 23, 2019 and the aforementioned planned start in Dallas in the fourth quarter. In total, the Company expects to capitalize $0.04 per share of interest related to these development projects in 2019.
- Other than the above, guidance does not include the impact of:
- any other future debt repurchases prior to maturity or future debt issuances,
- any future investments or property sales after the date of this earnings release,
- any future gains related to the final settlement of two insurance claims for damaged properties previously disclosed, or
- any future equity issuances.
A number of factors could impact our ability to deliver results in line with our assumptions, such as interest rates, the economy, the supply and demand of industrial real estate, the availability and terms of financing to potential acquirers of real estate, the timing and yields for divestment and investment, and numerous other variables. There can be no assurance that First Industrial can achieve such results.
First Industrial will host its quarterly conference call on Thursday, October 24, 2019 at 11:00 a.m. CDT (12:00 p.m. EDT). The conference call may be accessed by dialing (888) 823-7459, passcode "First Industrial". The conference call will also be webcast live on the Investor Relations page of the Company's website at www.firstindustrial.com. The replay will also be available on the website.
The Company's third quarter 2019 supplemental information can be viewed at www.firstindustrial.com under the "Investors" tab.
In accordance with the restated NAREIT definition of FFO adopted by the Company effective January 1, 2019, First Industrial calculates FFO to be equal to net income available to First Industrial Realty Trust, Inc.'s common stockholders and participating securities, plus depreciation and other amortization of real estate, plus impairment of real estate, minus gain or plus loss on sale of real estate, net of any income tax provision or benefit associated with the sale of real estate. First Industrial also excludes the same adjustments from its share of net income from an unconsolidated joint venture. For the comparative 2018 period, gain and losses from the sale of non-depreciable real estate as well as impairment of non-depreciable real estate were not excluded from FFO.
For more information contact: Arthur Harmon, Vice President - Investor Relations and Marketing