First Industrial Realty Trust, Inc. — 2020 Form 10-K
Reporting period: Fiscal year ended December 31, 2020. The filing combines the Company and its operating partnership, which are managed as one enterprise. The Company is a REIT focused on owning, leasing, acquiring, developing and selling U.S. industrial properties.
Business context and operating performance
At year-end, the in-service portfolio comprised 420 properties and 62.4 million square feet across 20 states, with more than 975 tenants. Portfolio occupancy was 95.7%, average annual base rent was $5.65 per square foot, and weighted-average lease term was 7.2 years. Management reported 13.5% growth in cash rental rates during 2020 and collection of 99% of monthly rent billings from April through December.
Key financial metrics
| Metric | 2020 | 2019 | Change |
|---|---|---|---|
| Total revenue | $448.0 million | $426.0 million | +5.2% |
| Net income attributable to common stockholders | $196.0 million | $238.8 million | -17.9% |
| Diluted EPS | $1.53 | $1.88 | -18.6% |
| FFO attributable to common stockholders and participating securities | $235.0 million | $221.1 million | +6.3% |
| Same-store NOI | $281.2 million | $269.3 million | +4.4% |
| Cash from operating activities | $240.4 million | $245.5 million | -$5.1 million |
| Cash used in investing activities | $251.7 million | $205.4 million | -$46.4 million |
Same-store revenue increased 2.6%; average same-store occupancy eased to 97.1% from 97.7%. Same-store NOI before adjustments was $283.9 million, versus $276.5 million. The filing does not present a conventional consolidated operating-margin measure; same-store NOI was approximately 74.7% of same-store revenue, compared with 73.4% in 2019.
Year-end cash and cash equivalents were $162.1 million, with $37.6 million of restricted cash, largely property-sale proceeds expected to be reinvested through tax-deferred exchanges. Total assets were $3.79 billion, total equity $1.95 billion, and indebtedness $1.595 billion. The $725 million revolving facility had no balance outstanding at year-end, with approximately $724.6 million available. All debt was fixed-rate or effectively fixed through swaps at December 31, 2020. Senior unsecured debt ratings were BBB/Stable (S&P), Baa2/Stable (Moody’s) and BBB/Stable (Fitch).
The annual common dividend increased 8.7% to $1.00 per share. Cash dividends and unit distributions paid totaled $127.3 million. The Company reported net income of $200.2 million, including $86.8 million of property-sale gains; in 2019, net income was $243.9 million and sale gains were $124.9 million.
Material changes and transactions
- Acquired eight industrial properties and land for an aggregate purchase price of approximately $224.0 million, including $69.6 million for land parcels. The properties were acquired at an expected stabilized capitalization rate of approximately 5.9%.
- Placed 10 development properties, totaling 2.5 million square feet, into service at an estimated total cost of $221.7 million; they were 79% leased at year-end. Eight additional projects totaling 1.3 million square feet were under construction, with estimated investment of $172.4 million and $92.0 million remaining to fund.
- Sold 29 properties totaling approximately 1.9 million square feet for gross proceeds of $153.4 million. Management also reported that a joint venture sold land and a newly constructed building for $60.0 million; the Company purchased the building.
- Issued $300 million of private placement notes: $100 million due 2030 at 2.74% and $200 million due 2032 at 2.84%. Issued 1.84 million shares through its at-the-market program for net proceeds of $78.7 million.
- Refinanced a $200 million term loan with a facility maturing July 2021 and two one-year extension options. The revolving credit facility and $58.8 million of mortgage loans also mature in 2021; the revolver matures in October and has a one-year extension option.
- COVID-19-related rent deferrals totaled $1.0 million and had been collected by year-end. The Company recorded $1.8 million of accounts-receivable reserves or cash-basis revenue adjustments and $1.7 million of deferred-rent reserves.
Outlook, risks and unusual items
Management expected 2021 average cash rental rates on both renewal and new leases to exceed comparative expiring or prior rents, citing low market vacancy and favorable industrial-market conditions. Speculative development was paused early in 2020, then resumed in the fourth quarter in target markets. These are expectations, not guarantees; the filing gives no specific 2021 earnings or FFO guidance.
Management said the pandemic’s overall impact on 2020 results was minimal but that future effects were uncertain. Key risks include tenant credit deterioration, lease nonrenewal or vacancy, economic and property-market shifts, development cost overruns or delays, financing access and covenant compliance, interest rates and the LIBOR transition, environmental liabilities, climate and casualty exposure, cybersecurity, joint-venture decision rights, and maintaining REIT qualification. The Company expected to meet 2021 maturities through extensions, refinancing or other debt or equity issuance; refinancing commitments were not disclosed. Environmental expenditures of approximately $5.0 million for currently identified issues, including about $2.3 million estimated for 2021, were accrued at year-end. Legal proceedings in the ordinary course were not expected to have a material impact.
Other items affecting comparability included lower property-sale gains and joint-venture income, higher general and administrative expense (including $0.9 million of severance tied to closing the Indianapolis regional office), and $6.5 million of casualty and involuntary-conversion proceeds reflected in operating cash-flow reconciliations. No real-estate impairment was recorded in 2020 or 2019.
Important facts for investors to verify
- Whether the expected rent growth and high occupancy persist, particularly as 8.0% of in-service GLA and 8.2% of annualized base rent are scheduled to expire in 2021.
- Progress on refinancing or extending the $200 million term loan, revolving credit facility and mortgage maturities due in 2021, and continued compliance with debt covenants.
- Actual leasing, completion costs and returns for developments under construction, including the $92.0 million of estimated remaining development costs.
- Tenant collections, receivable reserves and deferred-rent recoveries as pandemic-related economic effects evolve.
- The sustainability of earnings excluding property-sale gains and joint-venture contributions; FFO and NOI are non-GAAP measures and are not substitutes for GAAP earnings or operating cash flow.