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First Industrial Realty Trust Reports Second Quarter 2017 Results

CHICAGO, July 26, 2017 – 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 2017. Diluted net income available to common stockholders per share (EPS) was $0.32 in the second quarter, compared to $0.43 a year ago.

First Industrial's second quarter FFO was $0.38 per share/unit on a diluted basis, compared to $0.36 per share/unit a year ago. Second quarter 2017 results included a $0.01 per share impact from income tax related to the sale of a property from the Company's taxable REIT subsidiary.

"The U.S. industrial real estate market continues to exhibit healthy fundamentals that provide a supportive environment for continuing market rent growth," said Peter E. Baccile, First Industrial's president and CEO. "Our results reflect the underlying strength of the market and our team's efforts to drive future cash flow growth and value from our portfolio and new investments."

Portfolio Performance – Second Quarter 2017

  • In service occupancy was 95.7% at the end of the second quarter, compared to 95.8% at the end of the first quarter of 2017, and 95.8% at the end of the second quarter of 2016. Sales contributed 30 basis points to second quarter 2017 occupancy as compared to the first quarter of 2017.
  • Tenants were retained in 79.5% of square footage up for renewal.
  • Same property cash basis net operating income (NOI) increased 4.2%. Including lease termination fees, same property NOI increased 4.3%.
  • Rental rates increased 9.2% on a cash basis and increased 19.7% on a GAAP basis; leasing costs were $1.90 per square foot.

Capital Markets Activity

In the second quarter, the Company:
  • Closed on $200 million of fixed rate senior unsecured notes in a private placement offering with a weighted average interest rate of 4.34%. The notes are comprised of two tranches: $125 million with a 10-year term at an interest rate of 4.30% and $75 million with a 12-year term at an interest rate of 4.40%.
  • Paid off $102 million of its 5.95% 2017 Senior Unsecured Notes at maturity.
  • Had its Baa3 senior unsecured debt rating affirmed by Moody's Investor Service which also revised its rating outlook to "positive" from "stable."
  • Raised approximately $75 million via an underwritten offering of 2.56 million common shares.

"Our strong financial position supports our efforts to profitably grow our portfolio through targeted investments," said Scott Musil, chief financial officer. "Our return to the unsecured debt markets in the second quarter provided us with lower cost, long-term capital that contributes to cash flow growth."

Investment and Disposition Activities

In the second quarter, the Company:
  • Acquired four buildings totaling 514,000 square feet and two land parcels for $79.5 million comprising:
    • a 123,000 square-foot facility in San Diego for $21.5 million;
    • a 106,000 square-foot building in the Inland Empire for $12.5 million;
    • a 181,000 square-foot facility in Denver for $11.2 million;
    • a 103,000 square-foot building in Orlando for $8.0 million;
    • a 66-acre land parcel in Phoenix for $11.6 million fully leased to UPS; and
    • a 97-acre development site in Phoenix for $14.7 million.
  • Sold eight buildings comprised of 717,000 square feet for $38.6 million.

In the third quarter to date, the Company:
  • Sold three buildings totaling 389,000 square feet for $18.3 million.

"In a highly competitive investment market, our team was successful in sourcing four quality building acquisitions in markets with strong long-term rent growth characteristics," said Johannson Yap, chief investment officer of First Industrial. "Our disposition efforts continue to be an essential part of our portfolio management process, through which we seek to maximize value while providing capital for reinvestment."

Development Leasing

In the second quarter, the Company signed the following development lease:
  • 618,000 square feet plus a 66-acre land parcel at First Park @ PV 303 in Phoenix to UPS, a global leader in logistics.

Outlook for 2017

Mr. Baccile stated, "Excluding the loss on retirement of debt from our financing activities and the income tax impact from the sale of one of our assets during the second quarter, the midpoint of our revised FFO guidance is $0.01 higher than our prior guidance. The change largely reflects our Phoenix development lease and our second quarter same store NOI performance, partially offset by property sales dilution and short-term net dilution from our recent equity offering. Consistent with our overall strategy, our focus for the remainder of 2017 is to drive future cash flow growth from growing rents and leasing up opportunities within our portfolio including our developments and value-add investments."

The following assumptions were used:

  • Average quarter-end in service occupancy of 95.5% to 96.5%.
  • Same-store NOI growth on a cash basis before termination fees of 3.5% to 5.0% for the full year, an increase of 25 basis points at the midpoint, reflecting second quarter results.
  • General and administrative expense of approximately $26 million to $27 million.
  • Guidance includes the incremental costs expected in 2017 related to the Company's completed and under construction developments as of June 30, 2017. In total, the Company expects to capitalize $0.03 per share of interest related to these projects in 2017.
  • Guidance reflects the impact of the property sales in the third quarter to-date and the planned retirement of $55 million of its 7.5% 2017 Notes maturity in December.
  • 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 NAREIT-compliant gains or losses;
    • any future impairment gains or losses; or
    • any future equity issuance.

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.

Conference Call

First Industrial will host its quarterly conference call on Thursday, July 27, 2017 at 11:00 a.m. EDT (10:00 a.m. CDT). The conference call may be accessed by dialing (888) 823-7459, 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 second quarter 2017 supplemental information can be viewed at www.firstindustrial.com under the "Investors" tab.

FFO Definition

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