First Industrial Realty Trust, Inc. — Q2 2013 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2013; unaudited. The REIT owned 704 industrial properties in 25 states, totaling approximately 62.9 million square feet.
Financial performance
| Metric | Q2 2013 | Q2 2012 | Six months 2013 | Six months 2012 |
|---|---|---|---|---|
| Total revenue | $84.7 million | $81.6 million | $167.9 million | $161.7 million |
| Net income (loss) attributable to common stockholders and participating securities | $5.3 million | $(14.3) million | $0.6 million | $(17.8) million |
| Basic and diluted EPS | $0.05 | $(0.16) | $0.01 | $(0.20) |
| Operating cash flow | Not separately reported | Not separately reported | $45.7 million | $60.3 million |
| Funds from operations (FFO), non-GAAP | $21.9 million | $12.9 million | $46.4 million | $35.0 million |
Six-month same-store net operating income (SS NOI), a non-GAAP measure, rose to $112.4 million from $109.9 million. Same-store occupancy averaged 89.2% for the six months, versus 88.1%; Q2 occupancy was 89.6%, versus 88.3%. Six-month same-store revenue increased 2.3%, while related property expenses increased 6.2%.
At June 30, cash was $4.7 million and total debt carrying value was approximately $1.284 billion: $730.4 million in mortgage loans, $445.9 million in senior unsecured notes, and $108.0 million drawn on the credit facility. Debt was 91.6% fixed-rate and 8.4% variable-rate. Equity totaled $1.208 billion. The company reported $342 million of available borrowing capacity under its existing facility at quarter-end. Six-month distributions were $0.17 per common share/unit.
Changes versus the prior comparable period
- Six-month revenue increased 3.8%; same-store revenue growth and higher occupancy were partly offset by lower revenue from properties sold.
- Common-stockholder results improved from a loss of $17.8 million to income of $0.6 million for the six months. Results included $10.4 million of gains on property sales in discontinued operations; Q2 included $13.5 million of such gains.
- Six-month interest expense decreased $6.5 million, primarily because average debt was lower and more interest was capitalized, partly offset by a slightly higher average interest rate.
- Operating cash flow declined to $45.7 million from $60.3 million, mainly reflecting changes in operating assets and liabilities and higher debt-retirement-related cash payments.
- Debt carrying value declined from $1.336 billion at year-end 2012 to $1.284 billion. The company issued common equity and redeemed its remaining Series J preferred stock during the period.
Outlook, management commentary, risks and unusual items
- Management said it expected short-term needs—including the $81.8 million principal amount of 2014 Notes due June 1, 2014 and $22.3 million of mortgage maturities before June 30, 2014—to be met with credit-facility borrowings. It expected other liquidity needs to be funded from operating cash flow, asset dispositions, debt or equity issuance, as appropriate. No specific earnings or occupancy guidance was provided.
- Management planned to continue selectively marketing properties for sale. During the first half, the company acquired one industrial property and land parcels for approximately $46.5 million and sold 12 properties and two land parcels; net sale proceeds were approximately $50.4 million.
- After quarter-end, the company paid off $14.0 million of mortgage debt, redeemed $50.0 million of Series K preferred stock, and amended its credit facility, increasing capacity to $625 million, with a possible increase to $825 million subject to restrictions. The amended facility matures in September 2017, with a one-year extension option.
- The quarter included a $4.4 million loss from retirement of debt and a $1.4 million continuing-operations real estate impairment. For the six months, the company recorded a $1.6 million total net impairment. It also recorded a $1.6 million prior-period depreciation and amortization adjustment, which management said was not material.
- Development commitments covered two buildings totaling approximately 1.2 million square feet, with estimated construction costs of $88.2 million and approximately $21.6 million remaining to fund; actual costs could exceed estimates.
- Principal risks cited include economic and industrial-property market conditions, tenant creditworthiness and leasing, access to financing and interest rates, debt covenant compliance, asset valuations, development delays or cost overruns, and acquisition/disposition execution. Management reported covenant compliance at June 30 and anticipated continued compliance through 2013. Legal actions in the ordinary course were not expected to have a material adverse effect.
Important facts for investors to verify
- How much of reported earnings and FFO depends on property-sale gains, and how continuing-property operating performance is trending.
- The refinancing and repayment plan for 2014 maturities, and the availability and terms of the amended credit facility, including covenant headroom.
- Whether same-store rent growth and occupancy gains can outpace property expense growth, and the effect of lease concessions and renewal retention.
- Actual development spending and leasing progress against the $88.2 million estimated project cost and $21.6 million remaining commitment.
- The effects of common-equity issuance and preferred-stock redemptions on leverage, per-share results, and future distributions.