First Industrial Realty Trust Reports Second Quarter 2020 Results

Rhea-AI Summary

On July 22, 2020, First Industrial Realty Trust (NYSE: FR) reported its Q2 2020 results, revealing a diluted EPS of $0.28, down from $0.31 year-on-year. However, funds from operations (FFO) increased to $0.46 per share, compared to $0.43 in the previous year. Occupancy rates improved to 97.7%, with strong cash collections at 98% for Q2 and 97% for July. The company engaged in significant acquisition activities and enhanced liquidity through a $300 million note offering at favorable rates. They raised their FFO guidance for the year, reflecting positive tenant activity despite ongoing COVID-19 impacts.

Positive

• FFO increased to $0.46 per share from $0.43 year-on-year.
• Occupancy rate improved to 97.7%, up from 97.1% in Q1 2020.
• Strong cash collections at 98% for Q2 and 97% for July.
• Engaged in substantial acquisition activities totaling $21.3 million.
• Increased FFO guidance midpoint by $0.02 for 2020.

Negative

• Diluted EPS decreased to $0.28 from $0.31 year-on-year.
• Bad debt expense increased slightly, impacting NOI.

CHICAGO, July 22, 2020 /PRNewswire/ -- First Industrial Realty Trust, Inc. (NYSE: FR), a leading fully integrated owner, operator and developer of industrial real estate, today announced results for the second quarter of 2020. Diluted net income available to common stockholders per share (EPS) was $0.28 compared to $0.31 a year ago.

First Industrial's second quarter FFO was $0.46 per share/unit on a diluted basis, compared to $0.43 per share/unit a year ago.

"The First Industrial team and portfolio delivered outstanding results in the face of the very challenging operating environment arising from the COVID-19 crisis," said Peter E. Baccile, First Industrial's president and chief executive officer. "Occupancy at quarter-end increased to 97.7% and our cash collections of monthly rental billings during the second quarter and July to-date were very strong."

Tenant Rent Collections During COVID-19 Pandemic

As of July 22^nd, the Company:

• Collected 98% of second quarter monthly rental billings.
• Collected 97% of July billings which is ahead of the pace experienced in the second quarter.

Portfolio Performance

• In service occupancy was 97.7% at the end of the second quarter of 2020, compared to 97.1% at the end of the first quarter of 2020, and 97.3% at the end of the second quarter of 2019.
• Tenant retention of square footage up for renewal was 88.7%.
• Same property cash basis net operating income before termination fees increased 6.3% reflecting increased rental rates on leasing, a decrease in free rent and contractual rent escalations, partially offset by an increase in bad debt expense and slightly lower average occupancy.
• Rental rates increased 11.0% on a cash basis and 32.4% on a straight-line basis; leasing costs were $2.48 per square foot.
• Cash rental rate change was 8.6% for the 83% of total 2020 rollovers signed through July 22^nd.

Development and Value –Add Acquisition Activity

During the second quarter, the Company:

• Leased 100% of the 585,000 square-foot Nottingham Ridge Logistics Center Building A development forward in Baltimore; acquired in the first quarter, the total two-building project is now 93% occupied ahead of the 12-month budgeted lease-up.

In the third quarter to-date, the Company:

• Signed a build-to-suit lease for First Nandina II Logistics Center in the Inland Empire; a new 221,000 square-foot build-to-suit development; total estimated investment of $22.4 million.

Investment and Disposition Activities

In the second quarter, the Company:

• Acquired a 39,000 square-foot building and an adjacent 46,000 square-foot building in the East Bay market of Northern California for $17.8 million.
• Acquired a 9.7-acre covered land investment in the Inland Empire for $3.5 million.
• Sold three buildings totaling 211,000 square feet located in Detroit, Chicago and our last asset in Indianapolis for a total of $14.6 million.

In the third quarter to-date, the Company:

• Acquired a 6.6-acre site in Seattle for $6.1 million that is developable to 129,000 square feet.

Capital

During the second quarter, the Company:

• Paid off a $15.1 million mortgage loan with an interest rate of 6.5%.

In the third quarter to-date, the Company:

• On July 7, 2020, entered into a note and guaranty agreement to issue $300 million of fixed rate senior unsecured notes in a private placement offering with a weighted average rate of 2.81%. The notes are comprised of two tranches: $100 million with a 10-year term at an interest rate of 2.74% and $200 million with a 12-year term at an interest rate of 2.84%. The Company anticipates closing the offering on or about September 17, 2020.
• On July 15, 2020, entered into a new unsecured term loan facility that refinances its $200 million unsecured term loan facility previously scheduled to mature January 29, 2021. The new loan has an initial maturity date of July 15, 2021 and includes two one-year extensions at the Company's option, subject to certain conditions. The new loan features interest-only payments and now bears an interest rate of LIBOR plus 150 basis points. The Company entered into new interest rate swap agreements that convert the new loan to a fixed interest rate of 2.49% beginning in February 2021.

"We further enhanced our liquidity position through the private placement offering and new unsecured term loan at attractive interest rates that additionally push out our maturities," said Scott Musil, Chief Financial Officer.

Board of Directors

Bruce W. Duncan has retired as chairman of the Company's board of directors given his new role as CEO of Cyrus One, Inc., a REIT in the data center sector. Matthew S. Dominski, who has served as a First Industrial director since 2010, has been appointed to the role of chairman of the board.

"We thank Bruce Duncan for his leadership and significant contributions to the growth and evolution of our company during his tenure as CEO and chairman of our board of directors and we wish him well in his new endeavor," said Mr. Baccile. "Matt Dominski is our new chairman, bringing many years of real estate investing, operating and board experience to that role. We look forward to his continued counsel and leadership."

Outlook for 2020

"We are increasing the midpoint of our FFO per share guidance by $0.02 from prior guidance driven primarily by the early lease up of our recently acquired 585,000 square-foot development forward in Baltimore and additional leasing revenue from a vacating tenant," added Mr. Baccile. "Tenant activity in the sector has been ramping up along with improved economic activity when compared to the March and April timeframes. COVID-19 continues to impact many businesses in the near term, but accelerated e-commerce adoption is a positive demand driver for our sector long term."

		Low End of		High End of
		Guidance for 2020		Guidance for 2020
		(Per share/unit)		(Per share/unit)
Net Income		$     0.94		$     1.02
Add:   Real Estate Depreciation/Amortization		1.00		1.00
Less:   Gain on Sale of Real Estate Through July 22, 2020		(0.18)		(0.18)
FFO (NAREIT Definition) (1)		$     1.76		$     1.84

(1)	FFO before severance costs related to the closure of our Indianapolis office, retirement benefit expense for accelerated vesting of equity awards and gain related to the final settlement of an insurance claim for a damaged property remains unchanged at $1.76 to $1.84 per share/unit.

The following assumptions were used:

• Average quarter-end in service occupancy of 96.0% to 97.0%. This assumes Pier 1 Imports vacates September 1^st.
• Same property NOI growth on a cash basis before termination fees of 3.25% to 4.25% for the full year, an increase of 25 basis points at the midpoint. This range assumes full year 2020 bad debt expense of $2.6 million, which includes approximately $0.8 million realized in the first half of 2020. This 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 June 30, 2020 and the aforementioned future start of First Nandina II Logistics Center. In total, the Company expects to capitalize $0.04 per share of interest in 2020.
• Guidance reflects the $300 million private placement offering expected to close in the third quarter and the new $200 term loan facility which refinances the $200 million term loan facility previously scheduled to mature January 29, 2021.
• 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 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.

Conference Call

First Industrial will host its quarterly conference call on Thursday, July 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 3467422. 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 second quarter 2020 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 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 64.0 million square feet of industrial space as of June 30, 2020. For more information, please visit us at www.firstindustrial.com.

Forward-Looking Information

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 is attached.

 

FIRST INDUSTRIAL REALTY TRUST, INC.
Selected Financial Data
(Unaudited)
(In thousands except per share/Unit data)
		Three Months Ended		Six Months Ended
		June 30,		June 30,		June 30,		June 30,
		2020		2019		2020		2019
Statements of Operations and Other Data:
Total Revenues		$        109,202		$        104,095		$        219,545		$        208,636
Property Expenses		(28,051)		(27,379)		(57,132)		(57,547)
General and Administrative (a)		(8,234)		(6,782)		(17,485)		(13,584)
Depreciation of Corporate FF&E		(200)		(171)		(394)		(371)
Depreciation and Other Amortization of Real Estate		(32,032)		(29,603)		(62,769)		(59,458)
Total Expenses		(68,517)		(63,935)		(137,780)		(130,960)
Gain on Sale of Real Estate		9,076		1,097		23,069		889
Interest Expense		(12,285)		(12,332)		(25,089)		(25,099)
Amortization of Debt Issuance Costs		(784)		(794)		(1,572)		(1,625)
Income from Operations Before Equity in (Loss) Income of
Joint Venture and Income Tax Provision		36,692		28,131		78,173		51,841
Equity in (Loss) Income of Joint Venture		(45)		15,516		(74)		16,360
Income Tax Provision		(221)		(2,934)		(144)		(3,148)
Net Income		36,426		40,713		77,955		65,053
Net Income Attributable to the Noncontrolling Interest		(757)		(913)		(1,652)		(1,450)
Net Income Available to First Industrial Realty Trust, Inc.'s
Common Stockholders and Participating Securities		$          35,669		$          39,800		$          76,303		$          63,603
RECONCILIATION OF NET INCOME AVAILABLE TO
FIRST INDUSTRIAL REALTY TRUST, INC.'S COMMON
STOCKHOLDERS AND PARTICIPATING SECURITIES TO
FFO (b) AND AFFO (b)
Net Income Available to First Industrial Realty Trust, Inc.'s
Common Stockholders and Participating Securities		$          35,669		$          39,800		$          76,303		$          63,603
Depreciation and Other Amortization of Real Estate		32,032		29,603		62,769		59,458
Noncontrolling Interest		757		913		1,652		1,450
Gain on Sale of Depreciable Real Estate		(9,076)		(1,097)		(23,069)		(889)
Gain on Sale of Real Estate from Joint Venture		-		(15,747)		-		(16,714)
Income Tax Provision - Gain on Sale of Real Estate from Joint Venture		-		2,877		-		3,095
Funds From Operations (NAREIT) ("FFO") (b)		$          59,382		$          56,349		$        117,655		$        110,003
Amortization of Stock Based Compensation		3,108		2,053		6,749		3,815
Amortization of Debt Discounts and Hedge Costs		104		25		208		50
Amortization of Debt Issuance Costs		784		794		1,572		1,625
Depreciation of Corporate FF&E		200		171		394		371
Non-incremental Building Improvements		(3,098)		(3,111)		(4,603)		(4,662)
Non-incremental Leasing Costs		(4,461)		(3,893)		(7,959)		(7,491)
Capitalized Interest		(1,900)		(1,376)		(3,458)		(2,320)
Capitalized Overhead		(99

FAQ

What was First Industrial Realty Trust's EPS for Q2 2020?

The diluted EPS for Q2 2020 was $0.28.

How much did First Industrial's FFO increase in Q2 2020?

First Industrial's FFO increased to $0.46 per share in Q2 2020.

What is First Industrial's occupancy rate as of Q2 2020?

The occupancy rate was 97.7% at the end of Q2 2020.

How much of the rental billings did First Industrial collect during Q2 2020?

First Industrial collected 98% of its monthly rental billings for Q2 2020.

What guidance did First Industrial provide for FFO in 2020?

The company increased its FFO guidance midpoint by $0.02 for 2020.