First Industrial Realty Trust Reports First Quarter 2024 Results
- Signed 1.6 million square feet of new leases for speculative developments on balance sheet and 376,000 square feet in the joint venture in the first quarter.
- Achieved a 45% cash rental rate increase on leases signed to-date commencing in 2024.
- Reported a 10.0% growth in cash same store NOI.
- Sold nine buildings for $49 million.
- Increased the first quarter 2024 dividend to $0.37 per share, representing a 15.6% growth compared to the prior quarterly rate.
- Adjusted leasing assumptions within the same store portfolio for 2024 due to ongoing economic uncertainty.
- None.
Insights
The reported cash rental rate increase of approximately 45% on leases commencing in 2024 indicates a robust pricing power for First Industrial Realty Trust, potentially reflective of a strong demand for logistic real estate. Investors should note that such growth is substantial when compared to the industry averages, which could denote either market growth or strategic positioning by the company amidst broader economic uncertainties.
Moreover, the declaration of an increased dividend of
Occupancy rates remaining constant at
The cash basis same store net operating income (SS NOI) growth of
The completion of high-profile development projects, such as the pre-leasing of the entire First Stockton Logistics Center, is a testament to First Industrial's strategic forward-planning. This aggressive development strategy could serve to further solidify their market presence in strategic locations, though it also bears the risk of overexposure should market conditions deteriorate.
First Industrial's future guidance adjustments, reflecting decreased assumptions in certain areas, should remind investors that the real estate sector is cyclical and sensitive to broader macroeconomic factors. The forecasted SS NOI growth decrease of 75 basis points may warrant a cautious outlook in terms of expected profitability and operational performance going forward.
- Signed 1.6 Million Square Feet of New Leases for Speculative Developments on Balance Sheet and 376,000 Square Feet in the Joint Venture in the First Quarter
45% Cash Rental Rate Increase on Leases Signed To-Date Commencing in 2024- Cash Same Store NOI Growth of
10.0% - Sold Nine Buildings for
$49 Million - Increased First Quarter 2024 Dividend to
$0.37 15.6% Growth Compared to Prior Quarterly Rate
"We leased 1.6 million square feet of developments in the first quarter and captured strong rental rate increases on lease signings," said Peter E. Baccile, president and chief executive officer of First Industrial. "Our team is steadfastly focused on converting prospects into tenants to drive incremental cash flow and value."
Portfolio Performance
- In service occupancy was
95.5% at the end of the first quarter of 2024, compared to95.5% at the end of the fourth quarter of 2023, and98.7% at the end of the first quarter of 2023. - In the first quarter, cash rental rates on new and renewal leasing increased
44.8% and increased67.2% on a straight-line basis. - The Company has achieved a cash rental rate increase of approximately
45% on leases signed to-date commencing in 2024 reflecting68% of 2024 expirations by rental income. - Cash basis same store net operating income before termination fees and the aforementioned accelerated recognition of a tenant improvement reimbursement ("SS NOI") increased
10.0% reflecting increases in rental rates on new and renewal leasing, contractual rent escalations, and lower free rent, partially offset by lower average occupancy.
Development Leasing Highlights
During the first quarter, the Company:
- Pre-leased
100% of the 1.0 million square-foot First Stockton Logistics Center inNorthern California with an expected start date in the third quarter. - Leased
100% of the 500,000 square-foot First Rockdale IV inNashville . - Leased 40,000 square feet of its 200,000 square-foot First 76 Logistics Center in
Denver . - Leased
100% of the 376,000 square-foot Building A in its Camelback 303 joint venture inPhoenix to two tenants.
Investment and Disposition Highlights
In the first quarter, the Company:
- Sold nine buildings comprised of 443,000 square feet for a total of
$49 million Cincinnati ,Detroit andChicago .
Common Stock Dividend
The board of directors declared a common dividend of
Outlook for 2024
"With ongoing uncertainty in the overall economy and interest rate environment, some businesses continue to be measured in their leasing decision-making," said Mr. Baccile. "As a result, we have adjusted certain leasing assumptions within our same store portfolio that are reflected in our updated guidance."
Low End of | High End of | |||
Guidance for 2024 | Guidance for 2024 | |||
(Per share/unit) | (Per share/unit) | |||
Net Income Available to Common Stockholders | $ 1.49 | $ 1.59 | ||
Add: Depreciation and Other Amortization of Real Estate | 1.26 | 1.26 | ||
Less: Gain on Sale of Real Estate, Net of Allocable Income Tax Provision | (0.22) | (0.22) | ||
NAREIT Funds From Operations (1) | $ 2.53 | $ 2.63 |
(1) 2024 NAREIT FFO per share/unit guidance is impacted by |
The following assumptions were used for guidance:
- Average quarter-end in service occupancy of
95.75% to96.75% , a decrease of 25 basis points at the midpoint. - SS NOI growth on a cash basis before termination fees of
7.25% to8.25% for the full year, a decrease of 75 basis points at the midpoint. SS NOI excludes$2.9 million - Includes the incremental costs expected in 2024 related to the Company's completed and under construction developments as of March 31, 2024. In total, the Company expects to capitalize
$0.05 - General and administrative expense ("G&A") of
$39.5 million $40.5 million $3.0 million - Guidance does not include the impact of any future investments, property sales, debt repurchases prior to maturity, debt issuances, or equity issuances post the date of this press release.
Conference Call
First Industrial will host its quarterly conference call on Thursday, April 18, 2024 at 10:00 a.m. CDT (11:00 a.m. EDT). The conference call may be accessed by dialing (877) 870-4263, 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 first quarter 2024 supplemental information can be viewed at www.firstindustrial.com under the "Investors" tab.
FFO Definition
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
Forward-Looking Statements
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 that 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) 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 outbreak of COVID-19; risks associated with security breaches through cyberattacks, cyber intrusions or otherwise, as well as other significant disruptions of our information technology networks and related systems; 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; technological developments, particularly those affecting supply chains and logistics; 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, 2023, 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 is attached.
FIRST INDUSTRIAL REALTY TRUST, INC. Selected Financial Data (Unaudited) (In thousands except per share/Unit data) | ||||
Three Months Ended | ||||
March 31, | March 31, | |||
2024 | 2023 | |||
Statements of Operations and Other Data: | ||||
Total Revenues | $ 162,272 | $ 149,423 | ||
Property Expenses | (47,014) | (42,182) | ||
General and Administrative | (11,781) | (9,354) | ||
Joint Venture Development Services Expense | (426) | (784) | ||
Depreciation of Corporate FF&E | (187) | (245) | ||
Depreciation and Other Amortization of Real Estate | (41,632) | (39,527) | ||
Total Expenses | (101,040) | (92,092) | ||
Gain on Sale of Real Estate | 30,852 | — | ||
Interest Expense | (20,897) | (16,119) | ||
Amortization of Debt Issuance Costs | (912) | (904) | ||
Income from Operations Before Equity in Income of Joint Venture and Income Tax Provision | $ 70,275 | $ 40,308 | ||
Equity in Income of Joint Venture | 1,402 | 27,634 | ||
Income Tax Provision | (1,179) | (7,167) | ||
Net Income | $ 70,498 | $ 60,775 | ||
Net Income Attributable to the Noncontrolling Interests | (2,046) | (4,808) | ||
Net Income Available to First Industrial Realty Trust, Inc.'s Common Stockholders and Participating Securities | $ 68,452 | $ 55,967 | ||
RECONCILIATION OF NET INCOME AVAILABLE TO FIRST INDUSTRIAL REALTY TRUST, INC.'S COMMON STOCKHOLDERS AND PARTICIPATING SECURITIES TO FFO (c) AND AFFO (c) | ||||
Net Income Available to First Industrial Realty Trust, Inc.'s Common Stockholders and Participating Securities | $ 68,452 | $ 55,967 | ||
Depreciation and Other Amortization of Real Estate | 41,632 | 39,527 | ||
Net Income Attributable to the Noncontrolling Interests | 2,046 | 4,808 | ||
Gain on Sale of Real Estate | (30,852) | — | ||
Gain on Sale of Real Estate from Joint Venture (a) | (132) | (27,632) | ||
Equity in FFO from Joint Venture Attributable to the Noncontrolling Interest (a) | (152) | — | ||
Income Tax Provision - Allocable to Gain on Sale of Real Estate, Including Joint Venture (b) | 928 | 6,997 | ||
Funds From Operations ("FFO") (NAREIT) (c) | $ 81,922 | $ 79,667 | ||
Amortization of Equity Based Compensation | 9,108 | 6,141 | ||
Amortization of Debt Discounts and Hedge Costs | 104 | 104 | ||
Amortization of Debt Issuance Costs | 912 | 904 | ||
Depreciation of Corporate FF&E | 187 | 245 | ||
Non-incremental Building Improvements | (975) | (3,177) | ||
Non-incremental Leasing Costs | (5,218) | (8,861) | ||
Capitalized Interest | (2,637) | (3,981) | ||
Capitalized Overhead | (3,197) | (3,155) | ||
Straight-Line Rent, Amortization of Above (Below) Market Leases and Lease Inducements | (4,659) | (6,082) | ||
Adjusted Funds From Operations ("AFFO") (c) | $ 75,547 | $ 61,805 | ||
RECONCILIATION OF NET INCOME AVAILABLE TO FIRST INDUSTRIAL REALTY TRUST, INC.'S COMMON STOCKHOLDERS AND PARTICIPATING SECURITIES TO ADJUSTED | ||||
Three Months Ended | ||||
March 31, | March 31, | |||
2024 | 2023 | |||
Net Income Available to First Industrial Realty Trust, Inc.'s Common Stockholders and Participating Securities | $ 68,452 | $ 55,967 | ||
Interest Expense | 20,897 | 16,119 | ||
Depreciation and Other Amortization of Real Estate | 41,632 | 39,527 | ||
Income Tax Provision - Not Allocable to Gain on Sale of Real Estate (b) | 251 | 170 | ||
Net Income Attributable to the Noncontrolling Interests | 2,046 | 4,808 | ||
Equity in FFO from Joint Venture Attributable to the Noncontrolling Interest (a) | (152) | — | ||
Amortization of Debt Issuance Costs | 912 | 904 | ||
Depreciation of Corporate FF&E | 187 | 245 | ||
Gain on Sale of Real Estate | (30,852) | — | ||
Gain on Sale of Real Estate from Joint Venture (a) | (132) | (27,632) | ||
Income Tax Provision - Allocable to Gain on Sale of Real Estate, Including Joint Venture (b) | 928 | 6,997 | ||
Adjusted EBITDA (c) | $ 104,169 | $ 97,105 | ||
General and Administrative | 11,781 | 9,354 | ||
Equity in FFO from Joint Venture, Net of Noncontrolling Interest (a) | (1,118) | (2) | ||
Net Operating Income ("NOI") (c) | $ 114,832 | $ 106,457 | ||
Non-Same Store NOI | (2,968) | (1,336) | ||
Same Store NOI Before Same Store Adjustments (c) | $ 111,864 | $ 105,121 | ||
Straight-line Rent | (2,221) | (5,320) | ||
Above (Below) Market Lease Amortization | (656) | (727) | ||
Lease Termination Fees | (73) | (22) | ||
Same Store NOI (Cash Basis without Termination Fees) (c) | $ 108,914 | $ 99,052 | ||
Weighted Avg. Number of Shares/Units Outstanding - Basic | 135,068 | 134,686 | ||
Weighted Avg. Number of Shares Outstanding - Basic | 132,360 | 132,211 | ||
Weighted Avg. Number of Shares/Units Outstanding - Diluted | 135,387 | 135,231 | ||
Weighted Avg. Number of Shares Outstanding - Diluted | 132,406 | 132,299 | ||
Per Share/Unit Data: | ||||
Net Income Available to First Industrial Realty Trust, Inc.'s Common Stockholders and Participating Securities | $ 68,452 | $ 55,967 | ||
Less: Allocation to Participating Securities | (45) | (47) | ||
Net Income Available to First Industrial Realty Trust, Inc.'s Common Stockholders | $ 68,407 | $ 55,920 | ||
Basic and Diluted Per Share | $ 0.52 | $ 0.42 | ||
FFO (NAREIT) (c) | $ 81,922 | $ 79,667 | ||
Less: Allocation to Participating Securities | (152) | (185) | ||
FFO (NAREIT) Allocable to Common Stockholders and Unitholders | $ 81,770 | $ 79,482 | ||
Basic Per Share/Unit | $ 0.61 | $ 0.59 | ||
Diluted Per Share/Unit | $ 0.60 | $ 0.59 | ||
Common Dividends/Distributions Per Share/Unit | $ 0.37 | $ 0.32 | ||
Balance Sheet Data (end of period): | March 31, 2024 | December 31, 2023 | ||
Gross Real Estate Investment | $ 5,718,631 | $ 5,714,080 | ||
Total Assets | 5,200,381 | 5,175,765 | ||
Debt | 2,231,806 | 2,224,304 | ||
Total Liabilities | 2,527,113 | 2,540,660 | ||
Total Equity | 2,673,268 | 2,635,105 |
Three Months Ended | |||||
March 31, | March 31, | ||||
2024 | 2023 | ||||
(a) | Equity in Income of Joint Venture | ||||
Equity in Income of Joint Venture per GAAP Statements of Operations | $ 1,402 | $ 27,634 | |||
Gain on Sale of Real Estate from Joint Venture | (132) | (27,632) | |||
Equity in FFO from Joint Venture Attributable to the Noncontrolling Interest | (152) | — | |||
Equity in FFO from Joint Venture, Net of Noncontrolling Interest | $ 1,118 | $ 2 | |||
(b) | Income Tax Provision | ||||
Income Tax Provision per GAAP Statements of Operations | $ (1,179) | $ (7,167) | |||
Income Tax Provision - Allocable to Gain on Sale of Real Estate, Including Joint Venture | 928 | 6,997 | |||
Income Tax Provision - Not Allocable to Gain on Sale of Real Estate | $ (251) | $ (170) | |||
(c) Investors in, and analysts following, the real estate industry utilize funds from operations ("FFO"), net operating income ("NOI"), adjusted EBITDA and adjusted funds from operations ("AFFO"), variously defined below, as supplemental performance measures. While we believe net income available to First Industrial Realty Trust, Inc.'s common stockholders and participating securities, as defined by GAAP, is the most appropriate measure, we consider FFO, NOI, adjusted EBITDA and AFFO, given their wide use by, and relevance to investors and analysts, appropriate supplemental performance measures. FFO, reflecting the assumption that real estate asset values rise or fall with market conditions, principally adjusts for the effects of GAAP depreciation and amortization of real estate assets. NOI provides a measure of rental operations, and does not factor in depreciation and amortization and non-property specific expenses such as general and administrative expenses. Adjusted EBITDA provides a tool to further evaluate the ability to incur and service debt and to fund dividends and other cash needs. AFFO provides a tool to further evaluate the ability to fund dividends. In addition, FFO, NOI, adjusted EBITDA and AFFO are commonly used in various ratios, pricing multiples/yields and returns and valuation calculations used to measure financial position, performance and value.
In accordance with the NAREIT definition of FFO, we calculate 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. We also exclude the same adjustments from our share of net income from an unconsolidated joint venture.
NOI is defined as our revenues, minus property expenses such as real estate taxes, repairs and maintenance, property management, utilities, insurance and other expenses.
Adjusted EBITDA is defined as NOI minus general and administrative expenses and the equity in FFO from our investment in joint venture, net of noncontrolling interest.
AFFO is defined as adjusted EBITDA minus interest expense, minus capitalized interest and overhead, plus amortization of debt discounts and hedge costs, minus straight-line rent, amortization of above (below) market leases and lease inducements, minus provision for income taxes or plus benefit for income taxes not allocable to gain on sale of real estate, plus amortization of equity based compensation and minus non-incremental capital expenditures. Non-incremental capital expenditures refer to building improvements and leasing costs required to maintain current revenues plus tenant improvements amortized back to the tenant over the lease term. Excluded are first generation leasing costs, capital expenditures underwritten at acquisition and development/redevelopment costs.
FFO, NOI, adjusted EBITDA and AFFO do not represent cash generated from operating activities in accordance with GAAP and are not necessarily indicative of cash available to fund cash needs, including the repayment of principal on debt and payment of dividends and distributions. FFO, NOI, adjusted EBITDA and AFFO should not be considered substitutes for net income available to common stockholders and participating securities (calculated in accordance with GAAP) as a measure of results of operations, cash flows (calculated in accordance with GAAP) or as a measure of liquidity. FFO, NOI, adjusted EBITDA and AFFO as currently calculated by us may not be comparable to similarly titled, but variously calculated, measures of other REITs.
We consider cash-basis same store NOI ("SS NOI") to be a useful supplemental measure of our operating performance. Same store properties include all properties owned prior to January 1, 2023 and held as an in service property through the end of the current reporting period (including certain income-producing land parcels), and developments and redevelopments that were placed in service prior to January 1, 2023 (the "Same Store Pool"). Properties which are at least
We define SS NOI as NOI, less NOI of properties not in the Same Store Pool, less the impact of straight-line rent, the amortization of above (below) market rent and the impact of lease termination fees. Same Store revenues for the three months ended March 31, 2023 exclude
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SOURCE First Industrial Realty Trust, Inc.
FAQ
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What adjustments were made to leasing assumptions for 2024 by First Industrial Realty Trust?
