First Industrial Realty Trust Reports Fourth Quarter and Full Year 2019 Results
- Cash Rental Rates Were Up 9.7% in 4Q19 and 13.9% in 2019
- Occupancy of 97.6%; Cash Same Store NOI Grew 2.1% in 4Q19 and 3.1% for the Year
- Increased First Quarter 2020 Dividend to $0.25 Per Share, an 8.7% Increase
- Completed $155 Million of Asset Sales in 4Q19; $261 Million for 2019; $26.5 Million in 1Q20 To-Date; Effectively Exited Indianapolis, St. Louis and Tampa Markets
- Leased 100% of the 556,000 Square-Foot First Aurora Commerce Center Building D in Denver
- Started Four New Development Projects Totaling 984,000 Square Feet in the Inland Empire West, Northwest Dallas and South Florida; Estimated Total Investment of $94.7 Million
- Placed in Service 13 Developments in 2019: 91% Leased, 4.4 Million Square Feet, Total Investment of $325 Million, Estimated Cash Yield of 6.7%
- Acquired Nine Buildings Totaling 542,000 Square Feet Plus 12 Land Parcels for $148 Million in 2019
First Industrial Realty Trust, Inc. (NYSE: FR), a leading fully integrated owner, operator and developer of industrial real estate, today announced results for the fourth quarter and full year 2019. Diluted net income available to common stockholders per share (EPS) was $0.76 in the fourth quarter, compared to $0.40 a year ago. Full year 2019 diluted net income available to common stockholders was $1.88 per share, compared to $1.31 per share in 2018.
First Industrial’s fourth quarter FFO was $0.45 per share/unit on a diluted basis, compared to $0.42 per share/unit a year ago. Excluding the approximately $0.01 per share/unit income related to insurance settlements, fourth quarter 2018 FFO per share was $0.41.
“Team FR delivered strong fourth quarter results to cap off a successful 2019. Our operating metrics, including record annual cash rental rate increases of 13.9%, demonstrate the quality of our portfolio and the solid fundamentals in the U.S. industrial real estate market,” said Peter E. Baccile, First Industrial's president and chief executive officer. “Through new development, acquisitions and dispositions, we continue to increase our presence in higher barrier markets.”
Portfolio Performance – Fourth Quarter and Full Year 2019
- In service occupancy was 97.6% at the end of the fourth quarter of 2019, compared to 97.7% at the end of the third quarter of 2019, and 98.5% at the end of the fourth quarter of 2018.
- Tenant retention of square footage up for renewal was 81.4% for the fourth quarter and 81.1% for the full year.
- Same property cash basis net operating income (“SS NOI”) increased 2.1%, primarily reflecting contractual rent escalations and increased rental rates on leasing, offset by lower average occupancy and the negative impact of tax true-ups in markets where taxes are paid in arrears. For the full year, SS NOI increased 3.1%.
- In the fourth quarter, rental rates increased 9.7% on a cash basis and 20.4% on a straight-line basis; leasing costs were $2.83 per square foot. For the full year, rental rates increased 13.9% on a cash basis and 26.0% on a straight-line basis; leasing costs were $2.03 per square foot.
Common Stock Dividend Increased
The board of directors declared a common dividend of $0.25 per share/unit for the quarter ending March 31, 2020 payable on April 20, 2020 to stockholders of record on March 31, 2020. The new dividend rate represents an 8.7% increase from the prior rate of $0.23 per share/unit. This represents a payout ratio of approximately 64% of our anticipated 2020 Adjusted Funds From Operations (AFFO) as defined in our supplemental report.
During the fourth quarter, the Company:
- Leased 100% of its 556,000 square-foot First Aurora Commerce Center Building D in Denver.
Investment and Disposition Activities
In the fourth quarter, the Company:
- Placed in service seven developments, 88% leased, totaling 2.1 million square feet with an estimated total investment of $164.5 million and a cash yield of 6.1%.
- Completed development of five buildings in lease-up in Dallas and Houston totaling 915,000 square feet with an estimated total investment of $68.4 million; 13% leased.
- Commenced development of four projects totaling 984,000 square feet, with an estimated total investment of $94.7 million comprised of:
- First Sawgrass Commerce Center; South Florida; 104,000 square feet; $15.3 million estimated investment.
- First Park 121 Building E; Northwest Dallas; 435,000 square feet; $31.2 million estimated investment.
- First Redwood Logistics Center II Building C; Inland Empire West; 72,000 square feet; $12.6 million estimated investment.
- First Cypress Creek Commerce Center; South Florida; three buildings totaling 374,000 square feet; $35.6 million estimated investment.
- Acquired a 23,000 square-foot building in Seattle and four land parcels located in Miami and Los Angeles for a total of $43.9 million.
- Sold 29 buildings comprised of 3.6 million square feet and one land parcel for $155.2 million; included effective exits of the Indianapolis and St. Louis markets, with one building remaining in each market.
For the full year 2019, the Company:
- Placed in service 13 developments, 91% leased, totaling 4.4 million square feet with an estimated total investment of $324.7 million and a cash yield of 6.7%.
- Acquired nine buildings totaling 542,000 square feet for $66.8 million.
- Acquired 12 land parcels for a total investment of $81.1 million.
- Entered into a 50-year ground lease in South Florida for a site on which 374,000 square feet of development has commenced.
- Sold 38 buildings totaling 5.2 million square feet and four land parcels for a total of $261.3 million. This excludes the sale of a 618,000 square-foot building in Phoenix for $54.5 million in which the tenant exercised its purchase option, which is scheduled to close in 3Q20.
In the first quarter of 2020 to date, the Company:
- Acquired the 63-acre infill site for development of First Park Miami for $48.9 million; developable up to 1.2 million square feet. Planned first phase consisting of three buildings totaling approximately 600,000 square feet, estimated total investment of $90.0 million; expect to break ground in the Summer of 2020.
- Acquired a 23,000 square-foot building in the East Bay market of Northern California for $4.9 million.
- Sold remaining nine-building portfolio in Tampa comprised of 226,000 square feet for $26.5 million.
“Our development program continues to create value above and beyond what is available from stabilized acquisitions, using local market knowledge and the strength of our platform,” said Johannson Yap, First Industrial's chief investment officer. “We are very excited about our efforts to expand our investments in South Florida, including our new First Park Miami project in the Airport/Medley submarket.”
Outlook for 2020
“Based on the continuing solid industrial real estate fundamentals, our 2020 leases signed to date, and our leasing expectations for the balance of the year, we expect to deliver additional growth in rental rates and cash flow in 2020,” said Mr. Baccile. “Through our development program, we continue to create opportunities to drive future growth and further enhance our portfolio.”
The following assumptions were used:
- Average quarter-end in service occupancy of 97.0% to 98.0%. For 1Q20, we anticipate a typical seasonal reduction of occupancy of approximately 75 to 100 basis points.
- Same property NOI growth on a cash basis before termination fees of 4.0% to 5.5% for the full year. This range assumes 2020 bad debt expense of $2.0 million compared to $516,000 of realized bad debt expense in 2019.
- General and administrative expense of approximately $31.0 million to $32.0 million. This excludes approximately $1.5 million of severance costs from the closure of our Indianapolis office and costs related to projected vesting of equity awards for retirement-eligible employees.
- Guidance includes the incremental costs expected in 2020 related to the Company’s developments completed and under construction as of December 31, 2019 and the aforementioned future start of First Park Miami. In total, the Company expects to capitalize $0.03 per share of interest related to these development projects in 2020.
- Guidance reflects the expected payoff of an approximately $15.1 million secured debt maturity in the second quarter with an interest rate of 6.5%.
- Guidance reflects the impact of the expected sale of the 618,000 square-foot building in Phoenix in 3Q20 discussed above.
- 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. We believe that providing this adjusted FFO, which excludes certain non-recurring expenses, is a useful supplemental measure of operating performance because investors may use this measure to help compare the operating performance of the Company between periods or other REITs on a consistent basis.
First Industrial will host its quarterly conference call on Thursday, February 13, 2020 at 10:00 a.m. CDT (11:00 a.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 Investors page of the Company’s website at www.firstindustrial.com. The replay will also be available on the website.
The Company’s fourth quarter and full year 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.
About First Industrial Realty Trust, Inc.
First Industrial Realty Trust, Inc. (NYSE: FR) is a leading fully integrated owner, operator, and developer of industrial real estate with a track record of providing industry-leading customer service to multinational corporations and regional customers. Across major markets in the United States, our local market experts manage, lease, buy, (re)develop, and sell bulk and regional distribution centers, light industrial, and other industrial facility types. In total, we own and have under development approximately 63.4 million square feet of industrial space as of December 31, 2019. For more information, please visit us at www.firstindustrial.com.
A schedule of selected financial information can be found on the PDF version below.
Contact: Art Harmon
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