Business Context and Reporting Period
Company: First Industrial Realty Trust, Inc.
Filing Type: Form 10-Q (Quarterly Report)
Period Ended: September 30, 2009
Business Overview: The Company is a real estate investment trust (REIT) owning and operating industrial properties. As of September 30, 2009, it owned 787 industrial properties (including developments) across 28 U.S. states and one Canadian province, totaling approximately 69.7 million square feet of gross leaseable area. The Company also manages several joint ventures investing in industrial properties.
Key Financial Metrics
| Metric | Three Months Ended Sep 30, 2009 | Nine Months Ended Sep 30, 2009 |
|---|---|---|
| Total Revenues | $105.1 million | $323.9 million |
| Net Income (Loss) Attributable to Common Stockholders | $(1.9) million | $(25.1) million |
| EPS (Basic & Diluted) | $(0.04) | $(0.56) |
| Net Cash Provided by Operating Activities | N/A | $80.5 million |
| Cash and Cash Equivalents (Ending Balance) | $19.1 million | $19.1 million |
| Total Debt (Mortgage + Senior Unsecured + Line of Credit) | $1.99 billion | $1.99 billion |
| Unsecured Line of Credit Availability | $137.9 million (as of Nov 9, 2009) | $137.9 million (as of Nov 9, 2009) |
Material Changes vs. Prior Period
- Revenue Decline: Total revenues for the nine months ended September 30, 2009, decreased by 13.5% ($50.6 million) compared to the same period in 2008. This was driven by a 6.6% decrease in same-store property revenues due to lower occupancy and tenant recoveries, and a 48.1% drop in construction revenues.
- Net Loss vs. Profit: The Company reported a net loss of $25.1 million for the nine months ended September 30, 2009, compared to a net income of $92.9 million in the prior year period. This shift was primarily due to a significant reduction in gains from discontinued operations (property sales) and impairment charges.
- Impairment Charges: The Company recorded a $6.9 million impairment loss on a property in the Inland Empire market and a $3.9 million impairment on its interest in the 2006 Net Lease Co-Investment Program during the quarter.
- Debt Reduction: The Company repurchased approximately $158.7 million of senior unsecured notes at a discount during the nine-month period, recognizing a $22.2 million gain on early retirement of debt.
- Dividend Suspension: The Company did not pay common dividends in April, July, or October 2009 to retain capital, whereas it paid $2.16 per share in the prior year period.
Guidance, Outlook, and Risks
- Liquidity Strategy: Management plans to enhance liquidity and reduce indebtedness through capital retention (minimum dividends), mortgage financing, equity offerings, and asset sales. An underwritten public offering of 12.5 million shares was agreed to in late September 2009.
- Debt Covenants: The Company believes it is in compliance with financial covenants regarding coverage ratios and indebtedness limitations as of September 30, 2009. However, management notes that complex covenants and adverse economic conditions could impact future compliance.
- Market Risks: The global recession has pressured net operating income and impaired the ability to sell properties. The Company faces risks related to tenant defaults, occupancy rates, and the availability of external capital.
- Subsequent Events: Following the period end, the Company sold one property for $3.8 million, repurchased $12.6 million of debt, and obtained $54 million in new mortgage loans. New legislation regarding net operating loss carrybacks is expected to generate an additional tax refund of $10–15 million.
Investor Verification Checklist
- Covenant Compliance: Verify the Company's continued compliance with debt covenants given the economic downturn and reduced net operating income.
- Asset Sales Execution: Monitor the success of ongoing property sales discussions to ensure proceeds are sufficient to pay down debt as planned.
- Dividend Policy: Confirm whether the Company will pay any common dividends for the fourth quarter of 2009 to maintain REIT status.
- Impairment Exposure: Assess the potential for further impairment charges on the remaining portfolio if market conditions continue to deteriorate.
- Equity Offering Proceeds: Track the settlement and use of proceeds from the October 2009 equity offering to ensure funds are applied to debt reduction.