First Industrial Realty Trust, Inc. — 2013 Form 10-K
Reporting period: Fiscal year ended December 31, 2013. The company is a REIT focused on owning, managing, acquiring, selling, developing and redeveloping industrial real estate.
Business context
At year-end, the in-service portfolio comprised 649 properties and approximately 61.3 million square feet in 25 states, with 93% occupancy and more than 1,800 tenants. The portfolio includes light industrial, R&D/flex, bulk warehouse and regional warehouse properties. The filing separately reports 652 consolidated properties overall, including assets not yet in service.
Key financial and operating metrics
| Metric | 2013 | 2012 |
|---|---|---|
| Total revenue | $328.2 million | $314.3 million |
| Net income (loss) available to common stockholders and participating securities | $25.9 million | ($22.1) million |
| EPS available to common stockholders | $0.24 | ($0.24) |
| Cash from operating activities | $125.8 million | $136.4 million |
| Cash from investing activities | ($61.3) million | ($42.2) million |
| Cash from financing activities | ($61.7) million | ($99.4) million |
| Total assets | $2.60 billion | $2.61 billion |
| Indebtedness | $1.30 billion | $1.34 billion |
| FFO available to common stockholders and participating securities | $105.0 million | $80.6 million |
| Same-store NOI | $219.6 million | $213.7 million |
Cash and cash equivalents were $7.6 million at year-end. The $625 million revolving credit facility had $173 million drawn and $452 million available at December 31; availability was approximately $604 million as of February 27, 2014. Debt-to-total-market-capitalization was 38.5%. Approximately 86.7% of debt was fixed-rate, with the balance variable-rate. The common distribution was $0.34 per share for 2013; no common distributions were paid in 2012.
Material changes versus 2012
- Revenue increased 4.4%; same-store revenue rose 2.7%, and average same-store occupancy increased to 90.1% from 88.3%.
- Common-stockholder results turned positive, but the improvement principally reflected property-sale gains: $34.3 million of gains in discontinued operations. Continuing operations generated $4.9 million of income before allocation effects, while loss from continuing operations available to common stockholders was $8.2 million.
- FFO increased to $105.0 million from $80.6 million; same-store NOI increased to $219.6 million from $213.7 million.
- Interest expense declined 11.9% to $73.6 million, reflecting lower average debt, a lower average interest rate and more capitalized interest. Property expenses increased 7.5% to $107.4 million.
- The company sold 67 properties totaling approximately 3.0 million square feet for gross proceeds of $144.6 million, and acquired two properties and land for approximately $72.8 million. It issued common shares that generated approximately $173.8 million net proceeds and redeemed $150 million of Series J and K preferred stock.
- Debt declined by approximately $39 million year over year. The company repaid $72.3 million of mortgage loans and repurchased $29.8 million principal of unsecured notes, recognizing a $6.6 million loss on debt retirement.
Outlook, risks and unusual items
- Operating outlook: Management expected 2014 cash renewal rents, on average, to be slightly above expiring rates; cash rents on new leases were expected to be lower than comparable prior leases. No quantified full-year earnings or FFO guidance is provided in the supplied filing text.
- Leasing and development: Leases covering 13% of portfolio GLA expire in 2014, 16% in 2015 and 18% in 2016. Two developments totaling about 1.2 million square feet were substantially complete but not in service; three projects totaling about 0.8 million square feet were under construction, with $23.9 million of estimated costs remaining. Cost overruns and delays remain risks.
- Near-term financing: $81.8 million of 6.42% notes matured June 2, 2014; the filing also identified $44.5 million of mortgage loans maturing before year-end or expected to be prepaid during 2014. Management expected to use the revolving facility and a new term loan to meet these obligations and preferred redemptions.
- Subsequent events: In January 2014, the company entered into a $200 million, seven-year unsecured term loan and swaps to fix its rate at approximately 4.04%. It announced redemption of Series F and G preferred stock for $75 million plus accrued distributions, scheduled for March 2014.
- Key risks: Tenant defaults or vacancies, lease rollover and rent levels, industrial-market and economic conditions, access to capital, floating interest rates, debt covenants and refinancing, property-sale liquidity, development execution, impairments, environmental liabilities and continued REIT qualification. $474.5 million of mortgage debt was cross-collateralized; the company reported compliance with debt covenants and expected to remain compliant in 2014.
- Unusual items and contingencies: The company paid approximately $5.3 million in 2013 to settle the IRS refund matter, including taxes and interest, following approval of an agreed adjustment. It recorded $2.7 million of total net real estate impairments. Ordinary-course legal proceedings were not expected to have a material effect; outstanding letters of credit and performance bonds totaled $8.1 million.
Most important facts for investors to verify
- How much of 2013 earnings and FFO improvement is repeatable from property operations versus one-time property-sale gains?
- Whether occupancy, same-store NOI and leasing spreads sustain their improvement, particularly as 2014–2016 lease expirations come due.
- Funding and final costs for 2014 maturities, the $200 million term loan, and the $75 million preferred-stock redemptions; also confirm actual credit-facility availability.
- Development completion, lease-up and cost performance, and the effect of asset sales on recurring rental income and portfolio quality.
- Whether common distributions remain supported by operating cash flow after capital expenditures, debt service and REIT distribution requirements.