First Industrial Realty Trust Reports Third Quarter 2020 Results
- Cash Rental Rates Were Up 20.3%; Approximately 14% Cash Rental Rate Increase Expected for Full Year 2020; 12% Cash Rental Increase on 2021 Rollovers Signed To-Date
- Collected 99% of Second and Third Quarter Monthly Rental Billings
- Signed 339,000 Square Feet of New Leases for Development Projects in the Third Quarter and Fourth Quarter To-Date
- 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
- Two New South Florida Development Starts Planned in the Fourth Quarter Totaling 741,000 Square Feet; Total Estimated Investment of $112 Million
- Closed a New Unsecured Term Loan Facility That Refinances $200 Million Unsecured Term Loan Facility Previously Scheduled to Mature January 2021
- Closed on $300 Million Private Placement Offering
- Raised $78.7 Million of Net Proceeds Via At-The-Market Equity Offering Program
First Industrial Realty Trust, Inc. (NYSE: FR), a leading fully integrated owner, operator and developer of industrial real estate, today announced results for the third quarter of 2020. Diluted net income available to common stockholders per share (EPS) was $0.28 compared to $0.62 a year ago.
First Industrial’s third quarter FFO was $0.49 per share/unit on a diluted basis, compared to $0.44 per share/unit a year ago. Third quarter results for 2020 include $0.04 per share of income related to an insurance settlement. Excluding this settlement, FFO was $0.45 per share/unit.
“The First Industrial team and portfolio had another successful quarter highlighted by excellent collections, leasing, investment and capital markets execution,” said Peter E. Baccile, First Industrial's president and chief executive officer. “We delivered strong cash rental rate growth of 20.3%, led by the leasing efforts of our Southern California team.”
Tenant Rent Collections During COVID-19 Pandemic
As of October 21st, the Company:
- Collected 99% of monthly rental billings every month from April through September.
- Collected 99% of October monthly rental billings assuming collections from government-related tenants.
- In service occupancy was 96.3% at the end of the third quarter of 2020, compared to 97.7% at the end of the second quarter of 2020, and 97.7% at the end of the third quarter of 2019. Third quarter occupancy reflects the 110 basis point impact of the Pier 1 move-out in Baltimore at September 1st as previously disclosed.
- Rental rates increased 20.3% on a cash basis and 33.9% on a straight-line basis; cash rental rate growth for the full year 2020 is expected to be approximately 14%.
- The Company, to-date, has signed approximately 32% of 2021 rollovers by square footage at a cash rental rate increase of approximately 12%.
- Tenant retention of square footage up for renewal was 68.4%; Leasing costs were $3.18 per square foot.
- Same property cash basis net operating income before termination fees increased 1.3% reflecting increased rental rates on leasing and contractual rent escalations, partially offset by lower average occupancy, an increase in free rent and slightly higher bad debt expense.
During the third quarter, the Company:
- Signed a lease for First Nandina II Logistics Center in the Inland Empire; a 221,000 square-foot build-to-suit development; total estimated investment of $22.4 million.
- Leased 100% of its 103,000 square-foot First Sawgrass Commerce Center in South Florida. The lease will commence upon completion in the fourth quarter.
- Leased 37,000 square feet of its 125,000 square-foot First Park 121 Building B in Dallas to bring that building to 80% leased. The new lease is scheduled to commence on January 1st.
- Leased 100% of the 644,000 square-foot speculative development at the First Park @ PV303 joint venture in Phoenix. The lease will commence upon completion in early 2021.
In the fourth quarter to-date, the Company:
- Leased 100% of its 199,000 square-foot First Fossil Creek Commerce Center in Dallas. The lease is scheduled to commence on November 1st.
- Plans to start two new developments in South Florida in the fourth quarter.
- First Park Miami; three buildings totaling 600,000 square feet; $90 million estimated investment.
- First 95 Distribution Center; 141,000 square feet; $22 million estimated investment.
Investment and Disposition Activities
In the third quarter, the Company:
- Formed a new joint venture with Diamond Realty, the U.S. real estate investment arm of Mitsubishi Corporation, that acquired 569 acres at the Camelback 303 business park in Phoenix. The total purchase price was $70.5 million and First Industrial has a 43% interest in the venture.
- Acquired an 18,000 square-foot value-add building in Hayward in Northern California for $5.0 million.
- Acquired a 6.6-acre site in Seattle for $6.1 million that is developable to 129,000 square feet.
- Acquired a 26-acre site in Central Florida for $5.5 million that can accommodate up to four buildings totaling 329,000 square feet.
- Acquired a 3.1-acre site adjacent to our First Elm land site in the Inland Empire West for $3.6 million. With the additional acres, the site can accommodate an 84,000 square-foot development.
- Closed on the sale of a 618,000 square-foot building in Phoenix for $54.5 million. The transaction was recognized in the third quarter of 2019 at the time the tenant exercised its purchase option.
- Sold one building plus one unit comprised of 127,000 square feet for $15.2 million.
In the fourth quarter to-date, the Company:
- Sold 93 acres to two separate users at the First Park @ PV303 joint venture; First Industrial’s share of the sales price was $11.0 million.
- Sold two buildings totaling 194,000 square feet for a total of $5.6 million.
Capital Markets Activity
During the third quarter, the Company:
- 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.
- Closed on a private placement offering on September 17th for $300 million of fixed rate senior unsecured notes with a weighted average interest rate of 2.81%. The notes are comprised of two tranches: $100 million of 2.74% Series F Guaranteed Senior Notes with a 10-year term and $200 million of 2.84% Series G Guaranteed Senior Notes with a 12-year term.
- Issued 1.8 million shares of its common stock at an average price of $43.16 per share through its “at-the-market” equity offering program generating approximately $78.7 million in net proceeds.
“We strengthened our capital position to support the relaunch of our development program and lowered our long-term borrowing costs with our capital markets actions during the quarter,” said Scott Musil, Chief Financial Officer.
First Industrial will host a virtual Investor Day on Thursday, November 12th at 10:00 a.m. CST (11:00 a.m. EST). The webcast of the event will be available through First Industrial’s website www.firstindustrial.com.
Outlook for 2020
“We are experiencing an increased level of leasing activity with e-commerce as a key driver as the economy continues its recovery,” added Mr. Baccile. “As we restart our speculative development program and look ahead, we are excited to share a more in-depth look at our platform and growth opportunities at our Investor Day on November 12th.”
The following assumptions were used:
- In service occupancy at year-end fourth quarter of 94.5% to 95.5%. This implies a full year quarter-end average in service occupancy of 96.4% to 96.7%. This reflects the previously disclosed Pier 1 Imports move-out on September 1st.
- Fourth quarter same store NOI growth on a cash basis before termination fees of (0.75%) to 0.75%. This implies a quarterly average same store NOI growth for the full year 2020 of 3.8% to 4.2%. This range assumes full year 2020 bad debt expense of $2.1 million, which includes approximately $1.2 million realized in the nine months ended September 30, 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 September 30, 2020 and the aforementioned future starts of First Park Miami and First 95 Distribution Center. In total, the Company expects to capitalize $0.05 per share of interest in 2020.
- Other than the transactions discussed in this release, guidance does not include the impact of:
- any future debt repurchases prior to maturity or future debt issuances,
- any future investments or property sales, or
- any future equity issuances.
First Industrial will host its quarterly conference call on Thursday, October 22, 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 6459254. 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 third quarter 2020 supplemental information can be viewed at www.firstindustrial.com under the “Investors” tab.
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 unconsolidated joint ventures.
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 64.1 million square feet of industrial space as of September 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