First Industrial Realty Trust, Inc. — 2021 Form 10-K
Reporting period: Fiscal year ended December 31, 2021; this is an annual report, not a standalone fourth-quarter report. The filing combines the Company and First Industrial, L.P. (the Operating Partnership), which are managed as one enterprise. The Company held an approximately 97.8% interest in the Operating Partnership.
Business context
The Company owns, operates, acquires, develops and redevelops U.S. industrial real estate. At year-end, its in-service portfolio comprised 404 properties and approximately 60.7 million square feet across 19 states, with 98.1% occupancy and more than 950 tenants. Average annual base rent was $5.97 per square foot; the weighted-average lease term was 7.3 years.
Financial and operating results
| Metric | 2021 | 2020 | Change |
|---|---|---|---|
| Total revenue | $476.3 million | $448.0 million | +6.3% |
| Net income | $277.2 million | $200.2 million | +38.5% |
| Net income available to common stockholders and participating securities | $271.0 million | $196.0 million | +38.3% |
| Diluted earnings per share | $2.09 | $1.53 | +$0.56 |
| Funds from operations (FFO), available to common stockholders and participating securities | $256.0 million | $235.0 million | +8.9% |
| Same-store NOI | $303.5 million | $289.2 million | +5.0% |
| Cash from operating activities | $266.9 million | $240.4 million | +$26.5 million |
Net income growth benefited materially from real estate sale gains: $150.3 million in 2021 versus $86.8 million in 2020. Revenue from same-store properties increased 6.2%, while same-store property expenses rose 8.7%. Management reported 16.2% cash rental-rate growth on new and renewal leases. The leasing table reports 29.3% weighted-average straight-line rent growth for comparable new and renewal leases, a different measure.
Cash used in investing activities was $416.8 million, compared with $251.7 million in 2020, primarily reflecting increased property acquisition and development spending. Cash provided by financing activities was $9.1 million, down from $58.2 million. Year-end cash and cash equivalents were $58.6 million.
Debt, liquidity and capital allocation
- Total debt, excluding unamortized debt issuance costs, was approximately $1.617 billion at December 31, 2021. Fixed-rate debt represented 95.1% of total debt; variable-rate debt represented 4.9%. The filing reports $1.538 billion fixed-rate and $79.0 million variable-rate debt.
- The Company reported $666.3 million of additional borrowing capacity under its $750 million revolving credit facility at year-end; availability was approximately $570.3 million as of February 17, 2022.
- Debt maturities in 2022 totaled $329.5 million, including a $260 million term loan and $69.2 million of mortgage debt due in September. Management expected to meet these obligations through other debt or equity issuance.
- During 2021, the revolving facility was extended to July 2025 and increased to $750 million; a $200 million term loan maturity was extended to July 2026. The Company repaid $60.5 million of mortgage loans and issued 2.51 million shares through at-the-market offerings for net proceeds of $145.8 million.
- The annual dividend increased 8% to $1.08 per share or Unit. The Company stated it met its 2021 REIT distribution requirements.
Material changes, outlook and risks
- Year-end in-service occupancy increased 240 basis points from 2020. Seven developments totaling approximately 0.9 million square feet entered service during 2021 and were fully leased at year-end.
- The Company started 17 development projects totaling 5.8 million square feet. The projects were 39% leased at year-end, with estimated total investment of $633.5 million and $349.4 million remaining to fund. Three substantially completed projects totaling approximately 0.6 million square feet were 55% leased.
- Acquisitions totaled approximately $340.9 million, including 769.7 acres of land; property sales generated gross proceeds of approximately $243.4 million. The Company exited the Milwaukee market through dispositions.
- Management cited favorable industrial demand, low vacancy and supply-chain and e-commerce needs. It expected average cash rents on both renewal and new leases in 2022 to exceed comparable prior rents. No specific earnings or FFO guidance was provided.
- Management said the pandemic had an overall minimal impact in 2021, but future effects remain uncertain. Other notable risks include inflation and higher construction costs, supply-chain disruptions, tenant defaults or nonrenewals, development delays and lease-up, interest-rate increases, LIBOR transition, capital-market access, environmental liabilities, severe weather and cybersecurity.
- Environmental expenditures of approximately $5.4 million for identified issues in 2022 and beyond had been accrued. Outstanding letters of credit and performance bonds totaled $24.9 million. Routine legal proceedings were not expected to materially affect results, financial position or liquidity.
- Reported FFO and same-store NOI are non-GAAP supplemental measures and should not be treated as substitutes for GAAP earnings or operating cash flow. Management reported effective disclosure controls and internal control over financial reporting; the financial statements received an unqualified audit opinion.
Investor verification priorities
- Assess how much of the 2021 earnings increase came from property-sale gains versus recurring leasing and operating performance.
- Verify the current revolving-credit availability and funding plan for the 2022 maturities, development commitments and distributions.
- Track leasing and occupancy progress for the 5.8 million-square-foot development pipeline, including completion costs and lease-up timing.
- Review cash rental-rate growth, upcoming lease expirations and the impact of inflation on non-reimbursable expenses and construction budgets.
- Monitor floating-rate exposure, debt covenants, refinancing costs and the transition of LIBOR-linked borrowings and hedges.