Jul 24, 2019
First Industrial Realty Trust Reports Second Quarter 2019 Results
- Cash Rental Rates Were Up 13.4%, the Highest Quarterly Increase in First Industrial’s 25-Year History
- Occupancy of 97.3%, Up 40 Basis Points from 2Q18
- Cash Same Store NOI Grew 3.0%
- Signed 1.7 Million Square Feet of New Leases for Development and Value-Add Acquisitions in the Second Quarter; Third Quarter-to-Date, Signed a Full Building Lease for the 120,000 Square-Foot First Park at Central Crossing III in New Jersey
- Started Development of a New 644,000 Square-Foot Build-to-Suit in Phoenix; Estimated Total Investment of $48.6 Million
- In 3Q19, Started a 100,000 Square-Foot Development in Northeast Philadelphia; Estimated Investment of $12.3 Million
- Acquired Three Buildings Totaling of 117,000 Square Feet Plus Two Development Parcels for $30.3 Million; 3Q19 To-Date, Acquired Two Buildings and One Land Parcel in Southern California Plus the Philadelphia Development Site for a Total of $16.5 Million
- In 3Q19, Closed a $150 Million Private Placement Debt Offering
- 2019 FFO Guidance Increased $0.02 At Midpoint to $1.72 Per Share Reflecting Portfolio Operations and an Increase in Capitalized Interest
- Increased Midpoint of Cash Same Store NOI Guidance Range 25 Basis Points
CHICAGO, July 24, 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 second quarter of 2019. Diluted net income available to common stockholders per share (EPS) was $0.31 compared to $0.36 a year ago.
First Industrial's second quarter FFO was $0.43 per share/unit on a diluted basis, compared to $0.39 per share/unit a year ago.
"Low vacancy rates nationally and broad-based tenant demand continue to drive strong rent growth in our target markets," said Peter E. Baccile, First Industrial's president and chief executive officer. "Our cash rental rate growth of 13.4% for second quarter lease commencements established a new quarterly record for First Industrial over our 25-year history as a public company."
- In service occupancy was 97.3% at the end of the second quarter of 2019, compared to 97.3% at the end of the first quarter of 2019, and 96.9% at the end of the second quarter of 2018. Tenants were retained in 73.1% of square footage up for renewal.
- Same property cash basis net operating income (“SS NOI”) increased 3.0%, reflecting contractual rent escalations, increased rental rates on leasing, offset by a slight decrease in average occupancy and the negative impact of tax true-ups in markets where taxes are paid in arrears.
- Rental rates increased 13.4% on a cash basis, a quarterly record for the Company, and increased 27.3% on a straight-line basis; leasing costs were $2.42 per square foot.
- Cash rental rate change of 13.0% for the 83% of total 2019 rollovers signed through July 24th.
Development and Value-Add Acquisition Leasing
During the second quarter, the Company:
- Leased 100% of its 739,000 square-foot First Logistics Center @ I-78/81 Building A in Central Pennsylvania to Ferrero U.S.A., Inc. The lease will commence by the fourth quarter.
- Leased 100% of the 221,000 square-foot and 137,000 square-foot facilities at The Ranch by First Industrial in the Inland Empire, bringing that six-building park to 100% occupancy.
- Leased 100% of the 126,000 square-foot First 290 @ Guhn Road in Houston.
- Leased 67,000 square feet of a 171,000 square-foot value-add acquisition in Los Angeles.
- Leased 207,000 square feet of its 356,000 square-foot First Joliet Logistics Center in Chicago.
- Leased 57,000 square feet at First Grand Parkway Commerce Center, a two-building 371,000 square-foot development in Houston.
- Leased 45,000 square feet of its 67,000 square-foot First Glacier Logistics Center in Seattle.
- Leased 100% of a 58,000 square-foot value-add acquisition in Seattle.
During the third quarter to date, the Company:
- Leased 100% of its 120,000 square-foot First Park at Central Crossing III in Central New Jersey.
Investment and Disposition Activities
In the second quarter of 2019, the Company:
- Commenced development of a new 644,000 square-foot build-to-suit for Ferrero U.S.A., Inc. in Phoenix on a site acquired from our joint venture at the PV-303 business park; total estimated investment is $48.6 million.
- Acquired 28 acres in Dallas adjacent to its First Park 121 development for $7.4 million developable to 434,000 square feet.
- Acquired two buildings in the South Bay market of Los Angeles totaling 32,000 square feet for $7.1 million.
- Acquired an 85,000 square-foot building in Denver’s I-70 corridor for $9.0 million.
- Sold two units totaling 12,000 square feet in Miami for $1.6 million.
- Sold a 147-acre parcel in its First Park @ PV303 joint venture; First Industrial’s share of the sales price was $18.2 million.
In the third quarter to date, the Company:
- Acquired a 6.9-acre site in northeast Philadelphia for $2.0 million on which the Company has commenced development of a 100,000 square-foot building; total estimated investment of $12.3 million.
- Acquired two buildings in Southern California: a 44,000 square-foot building in the Inland Empire for $5.6 million and a 41,000 square-foot building in San Diego for $7.3 million.
- Acquired a two-acre land site in the Inland Empire West for $1.6 million developable to approximately 40,000 square feet.
- Sold a vacant 110,000 square-foot building in northeast Pennsylvania for $6.0 million and a land parcel in New Jersey for $0.2 million.
"We continue to identify profitable development opportunities and select acquisitions that can deliver long-term cash flow growth and value for our shareholders," said Johannson Yap, First Industrial's chief investment officer. "We had a number of key leasing wins during the quarter, including being selected for another logistics requirement by a repeat customer in our new Phoenix build-to-suit."
During the third quarter to date, the Company:
- Closed on a private placement offering on July 23 for $150 million of fixed rate senior unsecured notes with a coupon rate of 3.97%. The 3.97% Series E Guaranteed Senior Notes have a 10-year term and an effective interest rate of 4.23% reflecting the settlement of interest rate protection agreements related to the offering.
Outlook for 2019
Mr. Baccile stated, "We are increasing the midpoint of our FFO guidance by $0.02 for 2019 due to contributions from our portfolio as well as additional capitalized interest primarily related to our new development starts. Our team continues to deliver excellent results, increasing cash flow from our portfolio and executing on new investments for growth."
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 2.0% to 3.0% for the full year, an increase of 25 basis points at the midpoint.
- 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 July 24, 2019. In total, the Company expects to capitalize $0.04 per share of interest related to these development projects in 2019.
- Guidance reflects our private placement issuance of $150 million of senior unsecured notes discussed above.
- Guidance reflects the expected payoff of an approximately $33 million secured debt maturity in the third quarter and an approximately $1 million secured debt maturity in the fourth quarter with a weighted average interest rate of 7.5%.
- 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, July 25, 2019 at 11:00 a.m. CDT (12:00 p.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 Second quarter 2019 supplemental information can be viewed at www.firstindustrial.com under the "Investors" tab.
In accordance with the restated NAREIT definition of FFO adopted by the Company effective January 1, 2019, 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. For the comparative 2018 period, if applicable, gain and losses from the sale of non-depreciable real estate as well as impairment of non-depreciable real estate were not excluded from FFO.
For more information contact: Arthur Harmon, Vice President - Investor Relations and Marketing