Business Context and Reporting Period
First Industrial Realty Trust, Inc. and its operating partnership reported unaudited results for the three months ended March 31, 2016, compared with the same period in 2015. The company is a REIT focused on owning, managing, acquiring, developing and selling industrial real estate. At quarter-end it owned 584 properties across 24 states, totaling approximately 63.2 million square feet. The company owned approximately 96.3% of the operating partnership.
Key Financial Metrics
| Metric | Q1 2016 | Q1 2015 / prior period |
|---|---|---|
| Total revenue | $93.5 million | $90.0 million; up 3.9% |
| Net income | $16.3 million; $15.7 million attributable to company stockholders | $2.5 million; $2.4 million attributable to company stockholders |
| Diluted earnings per share | $0.14 | $0.02 |
| Dividends per share | $0.19 | $0.1275 |
| Operating cash flow | $26.8 million | $28.0 million |
| Same-store NOI | $62.9 million | $57.3 million |
| Cash and restricted cash | $3.2 million and $4.3 million | Cash was $4.0 million at December 31, 2015 |
| Total debt, net carrying amount | Approximately $1.480 billion | Approximately $1.434 billion at December 31, 2015 |
Same-store occupancy averaged 94.4%, versus 93.1% in Q1 2015. Same-store revenue increased 3.6%; same-store property expenses declined 2.6%. Same-store NOI margin was approximately 71.9% of same-store revenue, compared with 68.0% a year earlier. The company reported $38.5 million of FFO attributable to common stockholders and participating securities, versus $21.8 million.
Material Changes Versus the Prior Comparable Period
- Net income rose mainly because the prior-year quarter included a $13.0 million mark-to-market loss on interest-rate protection agreements. Q1 2016 also included a $7.3 million gain on property sales; Q1 2015 included a $7.9 million gain.
- Revenue growth reflected improved same-store occupancy and rental rates, acquired properties and higher occupancy in developments. These gains were partly offset by lower revenue from properties sold.
- Property expenses fell 4.8%, while depreciation and other amortization increased 10.0%, including accelerated depreciation on a property slated for redevelopment.
- Cash used in investing activities was $48.4 million, principally reflecting real estate acquisitions and investment in properties, partly offset by sale proceeds and a decrease in escrows. Financing activities provided $20.8 million, including net credit-facility borrowings.
Debt, Liquidity and Capital
Debt comprised $505.5 million of net mortgage loans, $204.8 million of net senior unsecured notes, $456.1 million of net unsecured term loans and $313.5 million drawn on the unsecured credit facility. The company repaid $159.7 million of 2016 notes at maturity and paid off a $57.9 million mortgage loan during the quarter. At March 31, $310.6 million remained available under the credit facility; the company reported $381.4 million available as of April 28. About 78.9% of debt was fixed-rate, including $460 million of term loans effectively fixed by swaps; 21.1% was variable-rate. Management reported covenant compliance and expected to remain compliant for the rest of 2016.
On April 5, after quarter-end, the company issued 5.6 million shares, raising $124.9 million net of underwriting discount, and contributed the proceeds to the operating partnership. Q1 operating cash flow did not cover investing outflows and distributions on a standalone basis; the company also used borrowing capacity and asset-sale proceeds.
Outlook, Commentary and Risks
The filing provides no specific numerical earnings or operating guidance. Management expected short-term needs—including recurring expenses, acquisitions, development, debt service and distributions—to be met through operating cash flows and selected asset sales, with potential additional equity or debt financing and credit-facility borrowings. Longer-term needs, including scheduled maturities and capital investment, were expected to be funded through asset dispositions, secured or unsecured debt and equity issuance, subject to market conditions.
During Q1, the company acquired one industrial property and several land parcels for approximately $51.5 million, placed one development into service, and sold five properties for gross proceeds of approximately $16.3 million. Five properties totaling approximately 1.5 million square feet were under construction, with estimated total investment of $94.1 million and approximately $50.3 million remaining to fund; actual completion costs could exceed estimates. The company cited risks including economic and industrial-property market changes, tenant defaults or nonrenewals, vacancy and rent pressure, interest rates and access to capital, covenant compliance, acquisition and development execution, construction costs and REIT qualification. It reported no material change to previously disclosed risk factors and no legal proceedings expected to materially affect its financial condition, operations or liquidity.
Important Facts for Investors to Verify
- Whether same-store occupancy and rental-rate growth continue, and how lease renewals, tenant retention and leasing costs develop.
- Progress, remaining funding needs and final costs for the construction pipeline, including the five properties under construction.
- Credit-facility availability, covenant headroom, variable-rate exposure and refinancing needs; scheduled debt maturities include approximately $168.8 million in 2017 and $394.1 million in 2019.
- How the $124.9 million post-quarter equity proceeds are deployed and the resulting share dilution.
- Whether planned property sales and acquisitions occur on expected terms and support liquidity and portfolio performance.