First Industrial Realty Trust, Inc. — Q2 2021 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2021. The filing presents the Company and its operating partnership, First Industrial, L.P., as a combined enterprise. First Industrial is an industrial REIT; at quarter-end it owned 427 properties across 20 states, totaling approximately 61.8 million square feet.
Key financial results
Amounts are in millions, except per-share data. Comparisons are with the corresponding 2020 period.
| Metric | Q2 2021 | Q2 2020 | Six months 2021 | Six months 2020 |
|---|---|---|---|---|
| Total revenue | $117.4 | $109.2 | $233.7 | $219.5 |
| Net income | $53.2 | $36.4 | $116.7 | $78.0 |
| Net income available to Company common stockholders | $51.9 | $35.7 | $114.1 | $76.3 |
| Diluted EPS | $0.40 | $0.28 | $0.88 | $0.60 |
| FFO available to common stockholders and participating securities | $62.5 | $58.1 | $122.0 | $115.2 |
| Operating cash flow | Not separately reported for quarter | Not separately reported for quarter | $118.5 | $117.5 |
- Q2 lease revenue was $116.8 million, up from $108.6 million. Q2 property expenses rose 13.2% to $31.7 million; total expenses were $72.7 million.
- Q2 net income includes a $22.9 million real estate sale gain; first-half net income includes $57.5 million of gains, compared with $23.1 million a year earlier. The increase in reported earnings therefore reflects asset-sale gains as well as operating performance.
- Same-store NOI increased 2.1% in Q2 and 1.5% for the first half. First-half same-store NOI growth would have been 2.2% excluding a $1.1 million insurance settlement recognized in 2020.
- At June 30, assets were $3.86 billion, total liabilities $1.86 billion, and total equity $2.00 billion. Net real estate investment was $3.45 billion.
- Total debt was approximately $1.60 billion. Cash and cash equivalents were $55.6 million, with a further $27.0 million in restricted cash. First-half cash flow from operations was $118.5 million; investing activities used $161.7 million and financing activities used $73.9 million. Cash, cash equivalents and restricted cash declined by $117.0 million during the half.
Material changes and operating performance
- Total revenue grew 7.5% in Q2 and 6.4% in the first half. Management attributed same-store revenue growth primarily to higher rental rates and tenant recoveries, and lower reserves on receivables; acquisitions and completed developments also contributed.
- Average daily same-store occupancy was 96.1% in Q2 versus 97.0% in Q2 2020, and 95.9% for the first half versus 96.9%. Quarter-end in-service occupancy was 96.6%, up 90 basis points from December 31, 2020.
- Cash rental rates on new and renewal leases grew 15.7% in Q2 and 13.3% for the first half. First-half leases commenced covered 6.9 million square feet, with weighted-average straight-line rent growth of 25.8% on comparable new and renewal leases.
- Property expenses increased 13.8% in the first half, chiefly reflecting higher same-store real estate taxes and snow removal costs. General and administrative expense decreased 2.6%.
- First-half acquisitions included three industrial properties totaling approximately 0.2 million square feet and 320.6 acres of development land. The company sold six properties, three condominium units and a land parcel for gross proceeds of $104.4 million.
- First-half FFO rose 6.0%. FFO and same-store NOI are non-GAAP supplemental measures and should not be treated as substitutes for GAAP earnings or operating cash flow.
Liquidity, debt, outlook and risks
- At June 30, 96.3% of debt was fixed-rate, including variable-rate term loans hedged with swaps; 3.7% was variable-rate. The weighted-average interest rate on debt for the first half was 3.63%. The company reported compliance with debt covenants at quarter-end.
- Scheduled debt maturities and principal payments were $261.6 million for the remainder of 2021 and $332.0 million in 2022. Subsequent to quarter-end, the company extended its $200 million term loan maturity to July 2026 and amended its revolving credit facility, increasing capacity to $750 million and extending maturity to July 2025, with two six-month extension options. As of July 23, $606.8 million was available under the new facility.
- Management said COVID-19 had had minimal overall impact through the reporting date but that future effects could not be predicted. It expected short-term liquidity needs to be met through operating cash flows, asset dispositions and available financing; no quantified earnings or FFO guidance was provided.
- Thirteen properties totaling approximately 5.0 million square feet were under construction, with estimated total investment of $500.9 million and approximately $300.5 million remaining to fund. Management cautioned that actual completion costs could exceed estimates.
- Other key risks include tenant defaults or non-renewals, lower rents or occupancy, development delays and cost inflation, access to financing, covenant compliance, changing industrial property markets, environmental matters, joint-venture risks and uncertainty around transition from LIBOR. The filing reported no material change to previously disclosed risk factors and no material legal proceedings.
- The Board-approved quarterly dividend was $0.27 per share/unit, an 8% increase from the 2020 quarterly rate. The filing does not provide specific forward earnings or occupancy targets.
Investor facts to verify
- How much of earnings growth is attributable to recurring leasing and NOI versus property-sale gains; review GAAP results alongside FFO and cash flow.
- Whether occupancy stabilizes or improves and whether strong lease rent growth translates into sustained cash rental income.
- Development leasing, completion costs and funding needs, particularly the $300.5 million remaining commitment disclosed at quarter-end.
- Debt maturities, liquidity availability, covenant headroom and the final cost and terms of the July 2021 refinancings.
- Potential effects of LIBOR replacement and broader economic or pandemic developments on tenants, financing and property demand.