First Industrial Realty Trust Reports Fourth Quarter and Full Year 2020 Results
- Cash Rental Rates Up 13.5% in 2020; Second Highest Annual Increase in Company History
- Signed 54% of 2021 Rollovers to Date at Cash Rental Rate Increase of 13%; Cash Rental Rates Expected to Increase 10% to 14% in 2021
- Signed 1.2 Million Square Feet of New Leases for Developments in the Fourth Quarter
- Three New Development Starts Announced for First Quarter 2021 Totaling 1.4 Million Square Feet and Estimated Investment of $100 Million
- Occupancy of 95.7%; Cash Same Store NOI 4.4% for the Year
- 2021 FFO Guidance Initiated at a Range of $1.85 to $1.95 Per Share/Unit
- Increased First Quarter 2021 Dividend to $0.27 Per Share, an 8.0% Increase
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 2020. Diluted net income available to common stockholders per share (EPS) was $0.65 in the fourth quarter, compared to $0.76 a year ago. Full year 2020 diluted net income available to common stockholders was $1.53 per share, compared to $1.88 per share in 2019.
First Industrial’s fourth quarter FFO was $0.44 per share/unit on a diluted basis, compared to $0.45 per share/unit a year ago. Full year 2020 FFO was $1.84 per share/unit on a diluted basis versus $1.74 per share/unit in 2019. Excluding the income related to two insurance settlements, partially offset by a restructuring charge and costs related to the accelerated vesting of equity awards for retirement-eligible employees, 2020 FFO was $1.80 per share/unit.
“The First Industrial team and portfolio delivered a strong finish in the fourth quarter, highlighted by some key lease signings,” said Peter E. Baccile, First Industrial's president and chief executive officer. “In a year in which the U.S. economy was impacted by the global pandemic, we were able to produce the second highest full year cash rental rate growth in the Company’s history, maintain strong occupancy and collect nearly all billed rents.”
- In service occupancy was 95.7% at the end of the fourth quarter of 2020, compared to 96.3% at the end of the third quarter of 2020, and 97.6% at the end of the fourth quarter of 2019.
- In the fourth quarter, rental rates increased 10.4% on a cash basis. For the full year, rental rates increased 13.5% on a cash basis, which is the second highest annual increase in company history.
- The Company, to date, has signed approximately 54% of 2021 rollovers by square footage at a cash rental rate increase of approximately 13%. We expect increases in cash rental rates for new and renewal lease commencements of 10% to 14% in 2021.
- For the fourth quarter, tenant retention of square footage up for renewal was 80.6% and leasing costs were $3.58 per square foot. For the full year, tenant retention of square footage up for renewal was 76.8% and leasing costs were $3.01 per square foot.
- Same property cash basis net operating income before termination fees (“SS NOI”) increased 1.3% reflecting increased rental rates on new and renewal leasing and contractual rent escalations, partially offset by lower average occupancy and an increase in free rent. For the full year, SS NOI increased 4.4%.
In 2020, the Company:
- Collected 99% of monthly rental billings every month from April through December. Factoring in reserves, collections were nearly 100% during this period.
- Collected 100% of amounts outstanding related to tenants with deferral agreements.
During the fourth quarter, the Company:
- Leased 100% of its 358,000 square-foot First Redwood Logistics Center I Building A in the Inland Empire.
- Leased 100% of its 72,000 square-foot First Redwood Logistics Center II Building C in the Inland Empire.
- Leased 100% of its three-building 377,000 square-foot First Cypress Creek Commerce Center in South Florida.
- Leased 101,000 square feet of its 434,000 square-foot First Park 121 Building E in Dallas to bring that building to 100% leased.
- Leased 100% of its 199,000 square-foot First Fossil Creek Commerce Center in Dallas.
- Leased 25,000 square feet of its 125,000 square-foot First Park 121 Building B in Dallas to bring that building to 100% leased.
- Leased 88,000 square feet of its 356,000 square-foot First Joliet Logistics Center in Chicago to bring that building to 100% leased.
In the first quarter of 2021 to date, the Company:
- Leased 100% of its 44,000 square-foot First Redwood Logistics Center I Building B in the Inland Empire.
Investment and Disposition Activities
In the fourth quarter, the Company:
- Commenced development of two projects in South Florida totaling 733,000 square feet, with an estimated total investment of $112.9 million comprised of:
- First Park Miami - three buildings totaling 592,000 square feet; $91.2 million estimated investment.
- First 95 Distribution Center - 141,000 square feet; $21.7 million estimated investment.
- Acquired a 644,000 square-foot 100% leased building in Phoenix for $42.6 million from our First Park @ PV303 joint venture upon completion. Purchase price is net of our $5.2 million share of the joint venture’s gain on sale and incentive fee.
- Sold 15 buildings totaling 1.3 million square feet for a total of $97.1 million.
- Sold 93 acres to two separate users at the First Park @ PV303 joint venture; First Industrial’s share of the sales price was $11.0 million.
For the full year 2020, the Company:
- Placed in service 10 developments, 79% leased, totaling 2.5 million square feet, with an estimated total investment of $221.7 million and a cash yield of 7.2%.
- Acquired eight buildings totaling 1.5 million square feet for $154.4 million.
- Acquired six land parcels totaling 128.8 acres for a total investment of $69.6 million.
- Formed a new joint venture with Diamond Realty, the U.S. real estate investment arm of Mitsubishi Corporation, that acquired 569 acres at the Camelback 303 business park in Phoenix. The total purchase price was $70.5 million and First Industrial has a 43% interest in the venture.
- Sold 28 buildings totaling 1.9 million square feet for a total of $153.4 million. This excludes the sale below in which the tenant exercised its purchase option.
- Closed on the sale of a 618,000 square-foot building in Phoenix for $54.5 million. The transaction was recognized in the third quarter of 2019 at the time the tenant exercised its purchase option.
In the first quarter of 2021, the Company:
- Expects to commence development of three projects totaling 1.4 million square feet, with an estimated total investment of $99.6 million comprised of:
- First Park @ PV303 Building C in Phoenix - 548,000 square feet; $42.6 million estimated investment, site wholly owned by FR.
- First Rockdale IV in Nashville - 500,000 square feet; $26.8 million estimated investment.
- First Wilson Logistics Center I in the Inland Empire - 303,000 square feet; $30.2 million estimated investment.
- Acquired a 4.9-acre land site adjacent to our First March Logistics Center site in the Inland Empire East for $2.7 million.
- Expects to sell one building in Houston totaling 664,000 square feet for an estimated sales price of $42 million.
“We are very pleased with the tenant demand we saw in the fourth quarter in our core portfolio and developments,” said Johannson Yap, First Industrial’s chief investment officer. “We are replenishing our development pipeline with several new projects in target markets to serve growing tenant demand and drive future cash flow growth.”
Common Stock Dividend Increased
The board of directors declared a common dividend of $0.27 per share/unit for the quarter ending March 31, 2021 payable on April 19, 2021 to stockholders of record on March 31, 2021. The new dividend rate represents an 8.0% increase from the prior rate of $0.25 per share/unit. This represents a payout ratio of approximately 69% of our anticipated 2021 Adjusted Funds from Operations (AFFO) as defined in our supplemental report.
Outlook for 2021
“We are optimistic about the economic recovery strengthening as COVID-19 vaccines are distributed, treatments continue to advance, and business activity broadens,” added Mr. Baccile. “We are well-positioned to grow as we serve the expanding needs of our customers, deploying our existing land positions and adding new sites sourced by our team.”
The following assumptions were used for guidance:
- Average quarter-end in service occupancy of 95.5% to 96.5%.
- Same store NOI growth on a cash basis before termination fees of 3.0% to 4.0% for the full year. This range assumes 2021 bad debt expense of $2.0 million which is consistent with last year’s pre-pandemic assumption and compares to $1.8 million of realized bad debt expense in 2020.
- General and administrative expense of approximately $33.0 million to $34.0 million.
- Includes the incremental costs expected in 2021 related to the Company’s developments completed and under construction as of December 31, 2020 and the aforementioned first quarter 2021 starts of First Park @ PV303 Building C, First Rockdale IV and First Wilson Logistics Center I. In total, the Company expects to capitalize $0.05 per share of interest in 2021.
- Reflects the expected payoff of an approximately $57.7 million secured debt maturity in the third quarter with an interest rate of 4.85%.
- Reflects the impact of the expected first quarter sale of the 664,000 square-foot building in Houston discussed above.
- Other than the transactions discussed in this release, guidance does not include the impact of:
- any future debt repurchases prior to maturity or future debt issuances,
- any future investments or property sales, or
- any future equity issuances.
First Industrial will host its quarterly conference call on Thursday, February 11, 2021 at 10:00 a.m. CST (11:00 a.m. EST). The conference call may be accessed by dialing (866) 542-2938 and entering the conference ID 4091295. 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 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 unconsolidated joint ventures.
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 December 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