First Industrial Realty Trust, Inc. — Q1 2020 Form 10-Q
Business and period: The company is an industrial-property REIT operating primarily through First Industrial, L.P. For the three months ended March 31, 2020, it owned 436 properties totaling approximately 62.6 million square feet across 21 states. The filing combines the company’s and operating partnership’s reports; financial figures below are consolidated.
Financial performance and position
| Metric | Q1 2020 | Q1 2019 / comparison |
|---|---|---|
| Total revenue | $110.3 million | $104.5 million; up 5.5% |
| Net income | $41.5 million | $24.3 million |
| Net income available to common stockholders | $40.6 million; $0.32 per diluted share | $23.8 million; $0.19 per diluted share |
| FFO available to common stockholders and participating securities | $57.0 million | $52.5 million |
| Same-store NOI | $72.2 million; up 8.4% | $66.6 million |
| Same-store average daily occupancy | 97.4% | 97.6% |
| Operating cash flow | $40.3 million | $41.7 million |
| Cash, cash equivalents and restricted cash at quarter-end | $135.0 million | $30.9 million at March 31, 2019 |
Revenue growth reflected same-store rent increases, acquired properties and developments, partly offset by dispositions. The $14.0 million gain on property sales was a significant contributor to the increase in net income; the prior-year quarter recorded a $0.2 million loss on sales. Same-store revenue also included a $0.8 million write-off of a Pier 1 Imports deferred rent receivable. General and administrative expense rose 36.0% to $9.3 million, including severance, accelerated stock compensation and higher incentive compensation. Interest expense was broadly unchanged at $12.8 million.
Investing cash outflow was $183.1 million, including $142.4 million of acquisitions and $55.8 million of property additions and tenant improvements, partly offset by $26.0 million of sale proceeds. Financing cash inflow was $125.1 million, principally reflecting net borrowings under the unsecured credit facility. The quarterly dividend was $0.25 per share/unit, an 8.7% increase from the 2019 rate.
Debt, liquidity and capital spending
- Debt totaled approximately $1.652 billion at March 31, 2020, up from $1.491 billion at year-end 2019. The unsecured credit facility balance increased to $320 million from $158 million.
- Fixed-rate debt, including debt fixed through swaps, was 80.6% of total debt; variable-rate debt was 19.4%. The company reported compliance with debt covenants at quarter-end.
- At March 31, the company reported $129.1 million of cash and cash equivalents, $5.9 million of restricted cash and $404.3 million available under its credit facility. As of April 28, it reported approximately $70 million of cash and cash equivalents and the same facility availability.
- A $200 million term loan matures in January 2021; the company also cited approximately $63 million of mortgage debt due in October 2021. The credit facility matures in October 2021 and may be extended one year, subject to conditions. Management expected to meet the term-loan obligation through long-term debt, facility borrowings and/or asset sales.
- At March 31, nine properties totaling approximately 1.5 million square feet were under construction, with estimated total investment of $154.4 million and approximately $82 million remaining to fund. Management suspended new vertical development projects for the foreseeable future, apart from completing ongoing projects and specified permitting and horizontal work.
Material changes, outlook and risks
- Q1 results were described by management as in line with expectations, but the filing stated that COVID-19 could materially affect future results, operations and cash flows. The full impact could not be estimated.
- As of April 28, the company had received April rent payments for approximately 94% of its portfolio. It had received tenant relief requests, mainly for rent deferrals, and anticipated granting some relief; management cautioned that April collections might not predict future collections.
- The company identified risks including tenant defaults or non-renewals, reduced rental rates or occupancy, construction delays or cost overruns, constrained capital-market access, covenant compliance and potential asset impairment. Eviction moratoriums and restrictions on court access could limit enforcement of leases.
- Q1 transactions included four property acquisitions totaling approximately 0.8 million square feet and land acquisitions of approximately 72.4 acres. Nine properties totaling approximately 0.2 million square feet were sold. No shares were issued under the new ATM program during the quarter; it authorizes sales of up to 14 million shares for up to $500 million gross proceeds.
- Subsequent to quarter-end through April 28, two properties were sold for $13.5 million and one property was acquired for $9.1 million. On April 9, the company repaid $15.1 million of mortgage debt.
- The company’s 49%-owned Phoenix-area joint venture had a 0.6 million-square-foot building under development. The company provided completion and other guarantees; it did not expect significant payments but could not estimate potential costs under certain guarantees.
No specific earnings or operating guidance was provided. The company reported no material legal proceedings and stated that disclosure controls were effective.
Investor verification points
- Track rent collections, tenant relief granted and deferred-rent collectability, particularly given the 94% April collection figure and its stated limitations.
- Assess the effect of COVID-19 on occupancy, leasing, same-store NOI, tenant credit quality and the Pier 1 Imports receivable write-off.
- Verify refinancing and repayment plans for the 2021 maturities, credit-facility extension conditions, available liquidity and continued covenant compliance.
- Monitor remaining development commitments, completion costs and schedule, including the planned 2020 and 2021 spending.
- Separate recurring operating performance from property-sale gains when evaluating net income; compare with FFO and same-store NOI, which are non-GAAP measures.