First Industrial Realty Trust, Inc. — Q1 2023 Form 10-Q
Business context and reporting period
Quarter ended March 31, 2023. First Industrial owns, operates, acquires and develops industrial real estate through First Industrial, L.P. At quarter-end, it owned 431 properties across 18 states, totaling approximately 65.7 million square feet. The Company owned approximately 97.5% of the Operating Partnership; the entities are managed as one enterprise and their results are substantially aligned.
Financial and operating results
| Metric | Q1 2023 | Q1 2022 / comparison |
|---|---|---|
| Total revenue | $149.4 million | $125.5 million; up 19.0% |
| Net income | $60.8 million | $37.1 million |
| Net income attributable to common stockholders; diluted EPS | $56.0 million; $0.42 | $36.3 million; $0.27 |
| FFO available to common stockholders and participating securities (non-GAAP) | $77.6 million | $69.1 million |
| Operating cash flow | $70.3 million | $59.9 million |
| Same-store NOI (non-GAAP) | $93.2 million | $86.2 million; up 8.1% |
Quarter-end in-service occupancy was 98.7%; average same-store occupancy was 98.4%, versus 97.7% a year earlier. For leases commenced during the quarter, management reported cash rental-rate increases of 58.3% on new and renewal leasing. The leasing table reports 85.3% weighted-average straight-line rent growth for comparable new and renewal leases; these measures use different bases.
Cash, cash equivalents and restricted cash totaled $71.7 million at quarter-end. The filing reports $69.8 million of liquidity-adjusted cash after excluding the joint venture partner’s share. Total debt was approximately $2.09 billion before unamortized costs; $157.0 million was outstanding on the unsecured credit facility. Debt was 92.5% fixed-rate, including swapped term loans. Interest expense rose 67.3% to $16.1 million. The company reported $590.1 million available under its facility at March 31 and $518.1 million at April 21; the filing does not clearly explain the decrease.
Material changes and unusual items
- Revenue growth reflected same-store rent, occupancy and tenant-recovery increases, recent acquisitions, and higher contribution from redevelopments. Same-store property expenses rose 5.6%, primarily due to real estate taxes and insurance.
- Net income included $27.6 million of equity income from the joint venture, including a $19.6 million share of gain on a Phoenix land sale and an $8.0 million incentive fee. These items materially contributed to year-over-year earnings growth; reported FFO excludes the gain and related adjustments.
- Operating cash flow increased, while investing outflows fell to $104.1 million from $203.0 million, largely because of lower real estate acquisition and development spending. Financing cash flow was a $39.6 million outflow, versus a $129.0 million inflow in Q1 2022.
- Declared quarterly dividend/distribution of $0.32 per share or unit, an 8.5% increase from the 2022 quarterly rate. The February 2023 at-the-market program authorizes up to $800 million in gross share sales; no shares were issued under it in Q1.
Outlook, risks and contingencies
No specific earnings or operating guidance was provided in the supplied filing text. Management expects short-term liquidity needs to be met through operating cash flow and selected asset sales, with facility borrowings or debt/equity issuance also available subject to market conditions. It anticipated covenant compliance over the next 12 months and reported compliance at quarter-end.
Eleven development projects totaling approximately 3.6 million square feet were under construction, with estimated total investment of $568.7 million and approximately $258.9 million remaining to fund. Completion costs may exceed estimates. The company guaranteed completion of the joint venture’s 1.8-million-square-foot project and provided customary non-recourse and environmental guarantees; it did not expect significant payments, but the amount of potential additional costs could not be estimated.
Management planned to modify LIBOR-linked debt and swaps before June 2023 and did not expect a material financial-statement impact. Key risks include interest rates and financing access, covenant compliance, tenant defaults or vacancies, rent and property-market changes, development cost overruns or delays, and joint-venture exposure. The filing reported no material risk-factor changes from the 2022 Form 10-K and no material legal proceedings.
Important facts for investors to verify
- How much of earnings growth came from recurring property operations versus the joint-venture land-sale gain and incentive fee.
- The reason for facility availability declining from $590.1 million at March 31 to $518.1 million at April 21.
- Development funding needs, leasing progress and actual completion costs relative to the $568.7 million estimate.
- Debt maturities—particularly $457.3 million in 2025 and $556.4 million in 2027—and refinancing costs and covenant headroom.
- Whether elevated rental-rate increases and high occupancy persist as leases roll and new development space is delivered.