First Industrial Realty Trust, Inc. — Q1 2022 Form 10-Q
Business context and reporting period. The filing covers the three months ended March 31, 2022 and is unaudited. First Industrial owns, operates, acquires and develops industrial real estate. At quarter-end, it held 414 properties in 19 states, totaling approximately 62.3 million square feet. The Company conducts substantially all operations through First Industrial, L.P.; the two registrants are presented as a combined enterprise.
Key financial metrics
| Metric | Q1 2022 | Q1 2021 / prior date |
|---|---|---|
| Total revenue | $125.5 million | $116.3 million; up 8.0% |
| Net income | $37.1 million | $63.6 million |
| Net income attributable to common stockholders; diluted EPS | $36.3 million; $0.27 | $62.2 million; $0.48 |
| FFO available to common stockholders and participating securities (non-GAAP) | $69.1 million | $59.5 million; up 16.3% |
| Same-store NOI (non-GAAP) | $86.2 million | $75.3 million; up 14.4% |
| Cash provided by operating activities | $59.9 million | $41.4 million |
| Cash used in investing activities | $203.0 million | $22.1 million |
| Cash and cash equivalents at quarter-end | $44.5 million | $58.6 million at Dec. 31, 2021 |
| Total debt, gross of unamortized costs | $1,772.6 million | $1,617.3 million at Dec. 31, 2021 |
| Available credit facility capacity | $510.3 million | $750 million facility |
Operating performance and margins. Average daily occupancy for same-store properties rose to 97.8% from 95.1%; quarter-end in-service occupancy was 98.0%. Cash rental rates on leases commenced during the quarter increased 12.7% on new and renewal leasing, according to management. Same-store NOI before adjustments was $89.2 million on revenue of $119.2 million; reported same-store NOI was $86.2 million after adjustments. GAAP net income margin was approximately 29.6%, versus 54.7% a year earlier, with the comparison heavily affected by a prior-year property-sale gain.
Material changes versus the prior comparable period
- Revenue increased 8.0%, primarily from higher same-store rental rates and occupancy, and increased tenant recoveries. Same-store revenue rose 8.2%.
- Net income and diluted EPS declined, mainly because Q1 2021 included a $34.6 million gain on real estate sales; no such gain was recorded in Q1 2022.
- Interest expense fell 24.0% to $9.6 million, reflecting lower average interest rates and more capitalized interest, partly offset by higher average debt outstanding.
- Operating cash flow increased by $18.5 million. Investing cash outflow increased as acquisitions, development, improvements and leasing costs rose, while Q1 2021 had included $65.5 million of property-sale proceeds.
- Financing provided $129.0 million, including increased net borrowings under the credit facility and $12.8 million of net ATM equity proceeds. The quarterly dividend increased 9.3% to $0.295 per share or unit.
Outlook, management commentary, risks and unusual items
- Management described operating results as strong and is pursuing internal rent and occupancy growth, acquisitions, development and selective asset sales. The filing provides no specific earnings or FFO guidance.
- At March 31, 21 development projects totaling approximately 6.3 million square feet were under construction, with estimated total investment of approximately $729.7 million and about $374 million remaining to fund. Actual completion costs could exceed estimates.
- On April 18, 2022, the Company replaced its $260 million term loan due in September 2022 with a $425 million unsecured term loan maturing October 18, 2027. The new loan is initially priced at daily SOFR plus 10 basis points and an 85-basis-point margin, subject to adjustments; $165 million was received and intended for general business purposes. The Company also reported $68.4 million of mortgage loans maturing in September 2022.
- Management reported $44.5 million of cash and $510.3 million of additional credit capacity at quarter-end, and stated it expected to meet near-term needs from operating cash flow and other sources. Available facility capacity was approximately $580.3 million as of April 21, 2022.
- Interest-rate exposure increased: variable-rate debt was 13.3% of gross debt at quarter-end versus 4.9% at year-end 2021; 86.7% was fixed-rate, including debt swapped to fixed. Management cited LIBOR transition, financing costs, covenant compliance, tenant defaults or vacancies, market conditions, and development costs and delays among relevant risks.
- The filing reports no material change to previously disclosed risk factors and no legal proceedings expected to materially affect the Company. It states that the Company was in compliance with debt covenants at quarter-end. Legal actions in the ordinary course and construction commitments remain potential exposures.
Important facts for investors to verify
- Whether leasing spreads, occupancy and same-store NOI growth persist, and whether they translate into cash collections and durable earnings.
- Funding, timing, leasing and final costs of the 21 development projects, including the approximately $374 million remaining commitment.
- Completion of the post-quarter debt refinancing and the impact of SOFR pricing, upcoming mortgage maturities, and changes in variable-rate exposure.
- Liquidity and covenant headroom as acquisition, development, dividend and debt-service needs compete for cash.
- The effect of any future property sales, acquisition activity, lease concessions and capitalized interest on comparisons with reported results and non-GAAP measures.