First Industrial Realty Trust Reports Third Quarter 2018 Results
CHICAGO, October 24, 2018 – 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 2018. Diluted net income available to common stockholders per share (EPS) was $0.24 in the third quarter, compared to $0.36 a year ago.
First Industrial's third quarter FFO was $0.41 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. This compares with FFO of $0.39 per share in the third quarter 2017 excluding the mark-to-market of an interest rate protection agreement.
"Demand for logistics real estate continues to outpace new supply, driven by growth in the overall economy, consumption, and the secular shift in the supply chain resulting from the rapid growth of e-commerce," said Peter E. Baccile, First Industrial’s president and chief executive officer. "Our excellent third quarter results reflect the efforts of our team, the quality of our portfolio and the strength of the overall industrial leasing market."
Portfolio Performance – Third Quarter 2018
- In service occupancy was 97.6% at the end of the third quarter, compared to 96.9% at the end of the second quarter of 2018, and 97.2% at the end of the third quarter of 2017.
- Tenant retention by square footage was 84.3%.
- Same property cash basis net operating income (“SS NOI”) increased 6.8%, reflecting higher average occupancy, contractual rent escalations, increased rental rates on leasing and lower free rent. SS NOI results were also helped by 160 basis points due to lower landlord real estate taxes compared to the year ago quarter. Including lease termination fees, SS NOI increased 6.6%.
- Rental rates increased 9.0% on a cash basis and increased 19.7% on a straight-line basis; leasing costs were $2.25 per square foot.
During the third quarter, the Company:
- Leased 100% of the 644,000 square-foot Building B at First Park @ PV-303 in Phoenix. The lease will commence in the fourth quarter.
- Leased three full buildings at The Ranch by First Industrial in the Inland Empire West comprised of 301,000 square feet and 50,000 square feet, both of which commenced in the third quarter, and 71,000 square feet which commences in the fourth quarter. The 936,000 square-foot, six-building park is 62% leased.
Investment and Disposition Activities
In the third quarter, the Company:
- Placed in service two 100% leased buildings at the Ranch by First Industrial, the aforementioned 301,000 square-foot and 50,000 square-foot buildings.
- Commenced development of four projects totaling 1.2 million square feet with an estimated total investment of $96.5 million comprised of:
- First Aurora Commerce Center, Denver, 556,000 square feet, $38.3 million estimated investment.
- First Park 121, Dallas, two buildings, 345,000 square feet total, $27.5 million estimated investment.
- First Perry Logistics Center, Inland Empire East, 240,000 square feet, $20.5 million estimated investment.
- First Glacier Logistics Center, Seattle, 67,000 square feet, $10.2 million estimated investment.
- Acquired two adjacent five-acre land sites in the Inland Empire East for a total of $3.9 million that can accommodate up to 231,000 square feet of development.
- Sold four buildings comprised of 447,000 square feet and three land sites for $22.5 million.
In the fourth quarter to date, the Company:
- Acquired a 120,000 square-foot building and an adjacent site developable to 120,000 square feet in New Jersey for a total of $16.6 million.
- Sold one building in New Jersey comprised of 84,000 square feet for $4.2 million.
"Investors and users continue to exhibit significant demand for industrial properties, adding to an already-competitive investment environment," said Johannson Yap, chief investment officer. "Against this backdrop and the overall supply/demand picture, development remains our preferred vehicle to invest capital to achieve attractive risk-adjusted returns exceeding cap rates for leased assets."
Outlook for 2018
Mr. Baccile stated, "With strong occupancy levels in our portfolio and in the industrial market broadly, we will continue to take advantage of the opportunity to further increase rents, serve incremental tenant demand through our targeted development investments and acquisitions, and drive future cash flow and NAV growth."
The following assumptions were used:
- In service occupancy for fourth quarter-end of 97.0% to 98.0%. This implies a full-year average quarter-end in service occupancy of 97.1% to 97.4%, an increase of 25 basis points at the midpoint.
- Same-store NOI growth on a cash basis before termination fees of 4.5% to 6.0% for the fourth quarter. This implies a quarterly average same-store growth for full year 2018 of 5.5% to 5.9%, an increase of 70 basis points at the midpoint reflecting third quarter results.
- General and administrative expense of approximately $26.5 million to $27.5 million, an increase of $0.5 million at the midpoint due to an expected increase in performance-based compensation costs. The first quarter severance charge of $1.3 million is excluded from the general and administrative expense guidance range.
- Guidance includes the incremental costs expected in 2018 related to the Company’s developments completed and under construction as of September 30, 2018. In total, the Company expects to capitalize $0.05 per share of interest related to its development projects in 2018.
- Other than the above assumptions and the fourth quarter to-date acquisition and asset sale disclosed in this press 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,
- any future NAREIT-compliant gains or losses,
- any future impairment gains or losses,
- 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 25, 2018 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 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 2018 supplemental information can be viewed at www.firstindustrial.com under the "Investors" tab.
First Industrial reports FFO in accordance with the NAREIT definition to provide a comparative measure to other REITs. NAREIT recommends that REITs define FFO as net income, excluding gains (or losses) from the sale of previously depreciated property, plus depreciation and amortization, excluding impairments from previously depreciated assets, and after adjustments for unconsolidated partnerships and joint ventures.
For more information contact: Arthur Harmon, Vice President - Investor Relations and Marketing