First Industrial Realty Trust, Inc. — Q2 2022 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2022. The filing combines the Company and its operating partnership, which are managed as one enterprise. Unless noted, amounts below are in U.S. dollars; financial figures are in millions.
Business context
The Company is an industrial real estate REIT. At June 30, it owned 422 properties across 19 states, totaling approximately 64.0 million square feet. The Company held an approximately 97.7% interest in First Industrial, L.P.
Financial and operating performance
| Metric | Q2 2022 | Q2 2021 | Six months 2022 | Six months 2021 |
|---|---|---|---|---|
| Total revenue | $130.0 | $117.4 | $255.6 | $233.7 |
| Net income | $133.7 | $53.2 | $170.8 | $116.7 |
| Net income available to common stockholders | $117.0 | $51.9 | $153.2 | $114.1 |
| Diluted EPS | $0.88 | $0.40 | $1.16 | $0.88 |
| FFO available to common stockholders and participating securities | $74.2 | $62.5 | $143.3 | $122.0 |
| Same-store NOI growth | 9.4% | — | 11.8% | — |
Revenue rose 10.8% in Q2 and 9.4% in the first half. Same-store property revenue growth, improved occupancy, rent increases and development lease-up contributed. Same-store average daily occupancy was 98.0% in Q2 and 97.9% for the first half, versus 96.1% and 95.6%, respectively, in 2021. Cash rental rates on new and renewal leases commencing in the first half increased 19.6% (27.0% in Q2), as reported by management.
Q2 net income included $118.2 million of equity income from joint ventures. For the six months, that amount included the Company’s share of a joint-venture land-sale gain and incentive fee. Consequently, reported net income growth was substantially affected by this unusual joint-venture income. FFO, which excludes real estate sale gains under the company’s stated calculation, increased to $74.2 million in Q2 and $143.3 million in the first half.
Cash from operating activities was $258.9 million for the first half, compared with $118.5 million in 2021; it included $118.0 million of distributions from joint ventures, versus none in the prior-year period. Investing activities used $407.9 million, mainly for acquisitions and property investment. Financing activities provided $225.5 million. Cash and cash equivalents were $135.2 million at June 30.
Debt, liquidity and investment
- Total debt was approximately $1.916 billion at June 30, versus $1.617 billion at December 31, 2021. Debt fair value was estimated at $1.852 billion.
- Fixed-rate debt, including debt swapped to fixed, represented 76.7% of total debt, down from 95.1% at year-end 2021. The company reported $447.0 million, or 23.3%, as variable-rate debt.
- The company replaced a $260 million term loan due in 2022 with a $425 million unsecured term loan maturing in October 2027. Swaps are intended to fix the new loan’s rate beginning October 2022; management estimated an all-in rate of 3.64% from that date, based on then-current ratings and leverage.
- At June 30, $463.3 million was available under the revolving credit facility; the filing reports $358.3 million available as of July 22. Management said it expected to meet short- and long-term liquidity needs through operating cash flow, asset sales, debt and, subject to market conditions, equity issuance. It anticipated covenant compliance for the next 12 months.
- At June 30, 21 development projects totaling approximately 5.8 million square feet were under construction, with estimated total investment of $776.2 million and approximately $355.7 million remaining to fund. The company acquired seven industrial properties and eight land parcels in the first half.
Outlook, risks and other notable items
The filing provides no specific earnings or operating guidance. Management described operating results as strong and emphasized internal rent growth, acquisitions, development and portfolio optimization. Subsequent to quarter-end, the company acquired two industrial properties and one land parcel for $35.0 million, excluding transaction costs.
Risks include economic and real estate market changes, interest rates and financing availability, tenant defaults or non-renewals, vacancies and rent changes, construction cost overruns or delays, environmental matters, regulatory and REIT qualification requirements, and joint-venture risks. Management reported compliance with debt covenants at June 30. No material change to previously disclosed risk factors was reported; the company stated that legal proceedings were not expected to have a material adverse effect and listed none under Part II.
Important facts for investors to verify
- How much of reported earnings and cash flow growth is recurring: specifically, the joint-venture land sale, incentive fee and related distributions.
- Whether leasing spreads, occupancy and same-store NOI growth persist, and how much reflects rent increases versus occupancy and tenant recoveries.
- Development completion, lease-up and cost performance against the $776.2 million estimated investment and $355.7 million remaining funding requirement.
- Debt exposure to changing rates, the timing and effectiveness of interest-rate hedges, and liquidity after the decline in facility availability reported between June 30 and July 22.
- Debt covenant headroom, upcoming maturities and the company’s ability to finance planned investment and distributions.