First Industrial Realty Trust Reports First Quarter 2020 Results
- Occupancy of 97.1%; Cash Same Store NOI Grew 8.4%; Cash Rental Rates Were Up 10.8%
- Collected 97% of March Billings and 93% of April Billings To-Date
- Issued Revised Guidance Related to Business Impact of COVID-19 Pandemic
- Placed in Service Ferrero Build-to-Suit Development at PV303 in Phoenix; $53.0 Million Total Investment
- Acquired Nottingham Ridge Logistics Center, a 751,000 Square-Foot Two-Building Development Forward in Baltimore; $82.0 Million Expected Total Investment; 15% Pre-Leased
- Acquired First Park Miami, a 63-Acre Infill Land Site for $48.9 Million
- Acquired a 23,000 Square-Foot Building in the East Bay Market of Northern California Along with a Land Site and a Building for Redevelopment in Southern California for a Total of $21.3 Million
- Completed $26.5 Million of Asset Sales in 1Q20; Additional $13.5 Million Closed in 2Q20 To-Date
First Industrial Realty Trust, Inc. (NYSE: FR), a leading fully integrated owner, operator and developer of industrial real estate, today announced results for the first quarter of 2020. Diluted net income available to common stockholders per share (EPS) was $0.32 compared to $0.19 a year ago.
First Industrial’s first quarter FFO was $0.45 per share/unit on a diluted basis, compared to $0.41 per share/unit a year ago. Excluding the income related to an insurance settlement, severance costs related to the closure of our Indianapolis office and costs related to the projected vesting of equity awards for retirement-eligible employees, first quarter 2020 FFO per share/unit remained $0.45.
“Our first quarter financial results and portfolio performance were strong, reflecting the economic and industry conditions prior to the impact of the COVID-19 pandemic on the U.S. economy,” said Peter E. Baccile, First Industrial's president and chief executive officer. “With our strong balance sheet, quality portfolio and dedicated team, our company is built to perform and serve our customers well through this turbulent environment.”
Tenant Rent Collections During COVID-19 Pandemic
- At the end of March, collected 97% of March billings which is in line with pre-COVID-19 monthly collections.
- As of April 22nd, collected 93% of April billings including rent from Pier 1 Imports for a 644,000 square-foot facility in Baltimore.
- In service occupancy was 97.1% at the end of the first quarter of 2020, compared to 97.6% at the end of the fourth quarter of 2019, and 97.3% at the end of the first quarter of 2019.
- Tenant retention of square footage up for renewal was 68.9% for the first quarter.
- Same property cash basis net operating income (“SS NOI”) increased 8.4%. Lower free rent accounted for 4.1%, with the remainder primarily reflecting contractual rent escalations and increased rental rates on leasing, partially offset by slightly lower average occupancy.
- In the first quarter, rental rates increased 10.8% on a cash basis and 26.5% on a straight-line basis; leasing costs were $2.70 per square foot.
During the first quarter, the Company:
- Placed in service the 644,000 square-foot Ferrero build-to-suit development at PV303 in Phoenix; total investment of $53.0 million and a stabilized yield of 7.9%.
Investment and Disposition Activities
In the first quarter, the Company:
- Acquired Nottingham Ridge Logistics Center, a two-building development forward totaling 751,000 square feet in Baltimore. The total estimated investment is $82.0 million with an expected cash yield of 5.7%. The project is currently 15% pre-leased.
- Acquired a 63-acre infill site for development of First Park Miami for $48.9 million; potentially buildable up to 1.2 million square feet.
- Acquired a 23,000 square-foot building in the East Bay market of Northern California for $4.9 million.
- Acquired a land site in the Inland Empire East and a building for redevelopment in the South Bay submarket of Los Angeles for a total of $16.4 million.
- Sold remaining 9-building portfolio in Tampa comprised of 226,000 square feet for $26.5 million.
In the second quarter to date, the Company:
- Acquired a 39,000 square-foot building in the East Bay market of Northern California for $9.1 million.
- Sold two buildings totaling 191,000 square feet located in Detroit and Chicago for a total of $13.5 million.
During the first quarter, the Company:
- Paid a common dividend of $0.25 per share/unit for the quarter ending March 31, 2020 on April 20, 2020 to stockholders of record on March 31, 2020, as previously disclosed. The new dividend rate represented an 8.7% increase from the prior rate of $0.23 per share/unit.
In the second quarter to date, the Company:
- Paid off a $15.1 million mortgage loan at an interest rate of 6.5%.
“Our balance sheet is well-positioned to weather the economic impact of COVID-19,” said Scott Musil, Chief Financial Officer. “We entered this period with low leverage, significant liquidity, a staggered debt maturity schedule and one of the lowest AFFO payout ratios in the REIT sector.”
Outlook for 2020
“The COVID-19 pandemic has caused a pause in our nation’s economic activity including that of some of our tenants,” said Mr. Baccile. “While our sector may benefit from widespread and accelerated adoption of e-commerce and increasing inventories, we are reducing our 2020 guidance to reflect a reserve for potential tenant defaults and slightly lower occupancy.”
The following assumptions were used:
- Average quarter-end in service occupancy of 96.0% to 97.0%, a reduction of 100 basis points at the midpoint. This assumes Pier 1 Imports vacates July 1st.
- Same property NOI growth on a cash basis before termination fees of 2.75% to 4.25% for the full year, a decrease of 125 basis points at the midpoint. This range assumes 2020 bad debt expense of $3.0 million, including approximately $300,000 realized in 1Q20. This is an increase of $1 million from prior guidance and excludes any potential non-cash write-offs of deferred rent receivables related to tenants that are having financial difficulties.
- General and administrative expense of approximately $31.0 million to $32.0 million. This range excludes $1.2 million of severance costs related to the closure of our Indianapolis office and retirement benefit expense for accelerated vesting of equity awards.
- Guidance includes the incremental costs expected in 2020 related to the Company’s developments completed and under construction as of March 31, 2020. In total, the Company expects to capitalize $0.04 per share of interest in 2020.
- Guidance reflects the second quarter payoff of an approximately $15.1 million secured debt maturity with an interest rate of 6.5%.
- Guidance reflects the impact of the expected sale of the 618,000 square-foot building in Phoenix for $55 million in 3Q20.
- 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,
- any future gain related to the final settlement of one insurance claim for a damaged property previously disclosed, or
- any future equity issuances.
First Industrial will host its quarterly conference call on Thursday, April 23, 2020 at 10:00 a.m. CDT (11:00 a.m. EDT). The conference call may be accessed by dialing (866) 542-2938 and entering the conference ID 4893626. 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 first quarter 2020 supplemental information can be viewed at www.firstindustrial.com under the “Investors” tab.
In accordance with the NAREIT definition of FFO, 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.
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 64.1 million square feet of industrial space as of March 31, 2020. For more information, please visit us at www.firstindustrial.com.
This press release and the presentation to which it refers may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, and Section 21E of the Securities Exchange Act of 1934. We intend for such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. Forward-looking statements are based on certain assumptions and describe our future plans, strategies and expectations, and are generally identifiable by use of the words "believe," "expect," “plan, "intend," “anticipate," "estimate," "project," "seek," "target," "potential," "focus," "may," "will," "should" or similar words. Although we believe the expectations reflected in forward-looking statements are based upon reasonable assumptions, we can give no assurance that our expectations will be attained or that results will not materially differ. Factors which could have a materially adverse effect on our operations and future prospects include, but are not limited to: changes in national, international, regional and local economic conditions generally and real estate markets specifically; changes in legislation/regulation (including changes to laws governing the taxation of real estate investment trusts) local economic conditions generally and real estate markets specifically; changes in legislation/regulation (including changes to laws governing the taxation of real estate investment trusts) and actions of regulatory authorities; the uncertainty and economic impact of pandemics, epidemics or other public health emergencies or fear of such events, such as the recent outbreak of coronavirus disease 2019 (COVID-19); our ability to qualify and maintain our status as a real estate investment trust; the availability and attractiveness of financing (including both public and private capital) and changes in interest rates; the availability and attractiveness of terms of additional debt repurchases; our ability to retain our credit agency ratings; our ability to comply with applicable financial covenants; our competitive environment; changes in supply, demand and valuation of industrial properties and land in our current and potential market areas; our ability to identify, acquire, develop and/or manage properties on favorable terms; our ability to dispose of properties on favorable terms; our ability to manage the integration of properties we acquire; potential liability relating to environmental matters; defaults on or non-renewal of leases by our tenants; decreased rental rates or increased vacancy rates; higher-than-expected real estate construction costs and delays in development or lease-up schedules; potential natural disasters and other potentially catastrophic events such as acts of war and/or terrorism; litigation, including costs associated with prosecuting or defending claims and any adverse outcomes; risks associated with our investments in joint ventures, including our lack of sole decision-making authority; and other risks and uncertainties described under the heading "Risk Factors" and elsewhere in our annual report on Form 10-K for the year ended December 31, 2019, as well as those risks and uncertainties discussed from time to time in our other Exchange Act reports and in our other public filings with the SEC. We caution you not to place undue reliance on forward-looking statements, which reflect our outlook only and speak only as of the date of this press release or the dates indicated in the statements. We assume no obligation to update or supplement forward-looking statements. For further information on these and other factors that could impact us and the statements contained herein, reference should be made to our filings with the SEC.
A schedule of selected financial information can be found on the PDF link below.
Contact: Art Harmon, Vice President, Investor Relations and Marketing - (312) 344-4320