Feb 13, 2019
First Industrial Realty Trust Reports Fourth Quarter and Full Year 2018 ResultsCHICAGO, February 13, 2019 – 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 2018. Diluted net income available to common stockholders per share (EPS) was $0.40 in the fourth quarter, compared to $0.81 a year ago. Full year 2018 diluted net income available to common stockholders was $1.31 per share, compared to $1.69 per share in 2017.
First Industrial's fourth quarter FFO was $0.42 per share/unit on a diluted basis, compared to $0.41 per share/unit a year ago. Fourth quarter results in both years include $0.01 per share of income related to insurance settlements.
Full year 2018 FFO was $1.60 per share/unit on a diluted basis versus $1.57 per share/unit in 2017. Excluding the impacts of the gain on the sale of land, impairment of land, severance charge and the gain related to an insurance settlement, FFO per share remained unchanged at $1.60. This compares with FFO of $1.56 per share in 2017 excluding the impacts of the gain on the sale of land, income tax expense associated with a property sale, the loss from retirement of debt, the settlement gain related to derivative instruments and the gain related to an insurance settlement.
"Our team and our portfolio performed very well in 2018, culminating in record year-end occupancy of 98.5%," said Peter E. Baccile, First Industrial's president and chief executive officer. "We continued to create value for our shareholders and to meet customers' space needs through our development program, including the largest lease in our history at our 1.4 million square-foot First Nandina Logistics Center in Southern California and two build-to-suit starts in Dallas and Atlanta totaling 1.6 million square feet. Tenants continue to actively seek logistics real estate as their supply chains grow and evolve and we are excited about the investments we are making to meet this demand."
Portfolio Performance – Fourth Quarter and Full Year 2018
- In service occupancy was 98.5% at the end of the fourth quarter, compared to 97.6% at the end of the third quarter of 2018, and 97.3% at the end of the fourth quarter of 2017.
- Tenants were retained in 82.2% of square footage up for renewal. For the year, tenant retention was 82.8%.
- Same property cash basis net operating income (“SS NOI”) increased 6.0% in the quarter, reflecting higher average occupancy, contractual rent escalations, increased rental rates on leasing and lower free rent. Including lease termination fees, SS NOI increased 7.3%. For the full year, SS NOI increased 5.8%. Including lease termination fees, SS NOI for 2018 increased 6.0%.
- In the fourth quarter, rental rates increased 6.5% on a cash basis and increased 17.3% on a straight-line basis; leasing costs were $2.34 per square foot. For the full year, rental rates increased 8.1% on a cash basis and increased 20.6% on a straight-line basis; leasing costs were $2.31 per square foot.
Common Stock Dividend Increased
The board of directors declared a common dividend of $0.23 per share/unit for the quarter ending March 31, 2019 payable on April 15, 2019 to stockholders of record on March 29, 2019. The new dividend rate represents a 5.7% increase from the prior rate of $0.2175 per share/unit. This represents a payout ratio of approximately 64% of our anticipated 2019 Adjusted Funds From Operations (AFFO) as defined in our supplemental report.
During the fourth quarter, the Company:
- Leased 100% of the 1.4 million square-foot building at First Nandina Logistics Center in the Inland Empire.
- Leased the remaining 301,000 square feet at the 602,000 square-foot First Park 94 Building II in the Chicago market.
In the first quarter of 2019 to date, the Company:
- Pre-leased 63,000 square feet of its 125,000 square-foot building at First Park 121 in Dallas.
Investment and Disposition Activities
In the fourth quarter, the Company:
- Placed in service three 100% leased buildings at the aforementioned 1.4 million square-foot building at First Nandina Logistics Center in Southern California, the 644,000 square-foot building at First Park @ PV-303 in Phoenix and the 71,000 square-foot building at The Ranch by First Industrial in Southern California.
- Completed three developments in lease-up in Houston and Pennsylvania totaling 1.1 million square feet with an estimated total investment of $75.5 million.
- Commenced development of two projects totaling 1.6 million square feet with an estimated total investment of $92.9 million comprised of:
- First Park Fairburn build-to-suit, Atlanta, 703,000 square feet, $40.4 million estimated investment.
- First Mountain Creek Distribution Center build-to-suit, Dallas, 863,000 square feet, $52.5 million estimated investment.
- Acquired four buildings totaling 511,000 square feet located in New Jersey, Houston and Seattle and two land parcels located in New Jersey and Miami for a total of $65.6 million.
- Sold 18 buildings comprised of 871,000 square feet and two land parcels for $71.5 million.
For the full year 2018, the Company:
- Placed in service eight buildings, 100% leased, totaling 3.5 million square feet with an estimated total investment of $226.6 million at a first year cash yield of 7.9%.
- Acquired ten buildings totaling 1.0 million square feet for $124.9 million.
- Acquired eight land parcels for a total investment of $42.6 million.
- Sold 52 buildings totaling 2.6 million square feet and six land parcels for a total of $192.0 million.
In the first quarter of 2019 to date, the Company:
- Commenced development of two projects totaling 249,000 square feet with an estimated total investment of $20.1 million comprised of:
- First Fossil Creek Commerce Center, Dallas, 199,000 square feet, $12.4 million estimated investment.
- Confidential build-to-suit, Phoenix, 50,000 square feet, $7.7 million estimated investment.
- Acquired one land parcel for the aforementioned build-to-suit in Phoenix for $1.8 million.
- Acquired a newly developed 173,000 square-foot vacant building in Chicago for $12.3 million.
"We continue to further enhance our portfolio by allocating capital to properties and markets that we believe will generate above-average rent growth that will contribute to our long-term cash flow growth," said Johannson Yap, chief investment officer. "Our portfolio in the high barrier-to-entry market of Southern California accounted for 16.7% of our rental income in the fourth quarter of 2018. Pro forma, we can increase our position there to approximately 19% of rental income given our 1.4 million square-foot lease at First Nandina and assuming lease-up of our other developments in process and value-add acquisitions."
Outlook for 2019
Mr. Baccile stated, "With continuing growth in the economy and strong demand for logistics facilities for e-commerce-related and other supply chain needs, we can drive cash flow growth from our existing portfolio, our development platform and overall portfolio management efforts. We will also benefit from opportunities to lower debt costs by refinancing higher cost debt maturities in 2019."
The following assumptions were used:
- Average quarter-end in service occupancy of 96.75% to 97.75%.
- Same-store NOI growth on a cash basis before termination fees of 1.5% to 3.0% for the full year. This range assumes 2019 bad debt expense of $2 million compared to $350,000 of realized bad debt expense in 2018. Same store guidance also reflects an estimated 80 basis point negative impact from tax true-ups in markets where taxes are paid in arrears.
- General and administrative expense of approximately $27.5 million to $28.5 million.
- Guidance includes the incremental costs expected in 2019 related to the Company’s developments completed and under construction as of December 31, 2018 plus the two aforementioned first quarter starts. In total, the Company expects to capitalize $0.02 per share of interest related to these development projects in 2019.
- Guidance includes the dilutive impact of approximately $0.01 per share related to the new lease accounting rules.
- Guidance reflects the expected payoff of approximately $72 million of secured debt maturities in the first quarter and approximately $35 million of secured debt maturities in the third quarter. These carry a weighted average interest rate of 7.74%,
- 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 after the date of this earnings release,
- 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, February 14, 2019 at 10:00 a.m. CST (11:00 a.m. EST). 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 fourth 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