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First Industrial Realty Trust Reports Second Quarter 2020 Results

  • Occupancy of 97.7%; Cash Same Store NOI Grew 6.3%; Cash Rental Rates Were Up 11.0%
  • Collected 98% of Second Quarter Monthly Rental Billings and 97% of July Billings To-Date
  • 2020 FFO Guidance Increased $0.02 at Midpoint to $1.80 Per Share/Unit Primarily Reflecting Portfolio Performance
  • Increased Midpoint of Cash Same Store NOI Guidance Range 25 Basis Points to 3.75%
  • Signed a Full Building Lease Ahead of Pro Forma for the 585,000 Square-Foot Nottingham Ridge Logistics Center Building A Development Forward in Baltimore
  • Signed a Build-to-Suit Lease for First Nandina II Logistics Center, a 221,000 Square-Foot Development in the Inland Empire; $22.4 Million Expected Total Investment
  • In 3Q20, Entered Into a Note and Guaranty Agreement for $300 Million of Long-Term Unsecured Notes in a Private Placement, Weighted Average Interest Rate of 2.81%
  • In 3Q20, Entered Into a New Unsecured Term Loan Facility That Refinances Its $200 Million Unsecured Term Loan Facility Previously Scheduled to Mature January 2021

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 22nd, 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 22nd.

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.”

Outlook for 2020 - As of 2Q20

The following assumptions were used:

  • Average quarter-end in service occupancy of 96.0% to 97.0%. This assumes Pier 1 Imports vacates September 1st.
  • 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.

A schedule of selected financial information can be found on the PDF version below. 

Contact:  Art Harmon, Vice President, Investor Relations and Marketing - (312) 344-4320

 

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