First Industrial Realty Trust, Inc. — Q1 2013 10-Q
Reporting period: Three months ended March 31, 2013; comparisons are with Q1 2012 unless otherwise noted. The REIT owned 710 industrial properties totaling approximately 63.2 million square feet across 26 U.S. states and one Canadian province.
Financial performance
| Metric | Q1 2013 | Q1 2012 |
|---|---|---|
| Total revenue | $83.3 million | $80.2 million |
| Net income (loss) | $(1.1) million | $1.1 million |
| Net loss available to common stockholders | $(4.7) million; $(0.05) per share | $(3.5) million; $(0.04) per share |
| Cash provided by operating activities | $20.4 million | $30.2 million |
| Cash used in investing activities | $(25.4) million | $(1.4) million |
| Cash provided by (used in) financing activities | $23.4 million | $(36.9) million |
| Funds from operations (FFO), available to common stockholders and participating securities | $24.5 million | $22.0 million |
Revenue increased 3.8%. Same-store revenue rose 2.2%, primarily on higher occupancy and tenant recoveries; average same-store occupancy was 88.6%, up from 87.6%. Same-store net operating income (NOI), a non-GAAP measure, increased 2.4% to $55.7 million from $54.4 million. Property expenses increased 6.6%, with higher snow-removal costs contributing. Depreciation and other amortization fell 14.7%; management attributed part of the decrease to a $1.64 million adjustment reducing current-quarter depreciation and amortization for amounts attributable to previous periods.
Interest expense declined 16.4% to $19.0 million, reflecting lower average debt, a lower weighted-average interest rate (6.09% versus 6.18%), and higher capitalized interest. Net loss also reflected a $3.1 million loss on property sales and a $1.2 million loss from debt retirement. Q1 2012 included $6.2 million of gains on real estate sales. The filing reports no impairment charge in Q1 2013, compared with net impairment reversals/charges in Q1 2012.
Liquidity, debt and capital
At March 31, 2013, cash and cash equivalents were $23.3 million. Net indebtedness was approximately $1.234 billion: $745.8 million of mortgage loans, $470.5 million of senior unsecured notes and $18.0 million drawn on the unsecured credit facility. The company reported $432.0 million of additional facility availability at quarter-end, subject to restrictions; availability was approximately $307.0 million as of May 6. Debt maturities include $153.8 million in 2014, $295.3 million in 2016 and $174.2 million in 2017. Approximately 98.5% of debt was fixed-rate. Management reported covenant compliance and expected to remain compliant for the rest of 2013.
The company issued 8.4 million common shares in a public offering, generating approximately $132.1 million net of issuance costs. It repaid $14.3 million of mortgage debt early and repurchased $4.0 million principal of senior notes for $4.6 million. The quarterly common distribution was $0.085 per share. Development commitments covered three buildings totaling approximately 1.5 million square feet, with estimated total costs of $107.7 million and $32.3 million remaining to fund.
Outlook, risks and notable items
No specific earnings or operating guidance was provided. Management expected short-term liquidity needs to be met through operating cash flow and selected asset dispositions; longer-term requirements may be funded through asset sales, debt and equity issuance, subject to market conditions. The company intended to continue selectively marketing properties for sale and pursue acquisitions and development where appropriate.
Key risks cited include economic and industrial-property market conditions, occupancy and rents, tenant creditworthiness, access and cost of capital, interest rates, covenant compliance, competition, development delays or cost overruns, property valuations, and REIT qualification and tax rules. The company had agreed with the IRS on a tax adjustment relating to a 2009 refund; the Joint Committee on Taxation approved the settlement in 2013. Approximately $4.8 million of tax and $0.5 million of accrued interest were recorded in 2012, with interest stated as of March 31, 2013. Management said ordinary-course legal matters were not expected to materially affect financial condition, operations or liquidity.
After quarter-end, the company repaid $12.0 million of mortgage loans and redeemed remaining Series J preferred depositary shares for $100.0 million plus accrued dividends. From April 1 through May 6, it acquired land for $16.6 million and sold three properties for approximately $20.8 million. These subsequent transactions affect liquidity and capital allocation and should be considered alongside quarter-end balances.
Important facts for investors to verify
- Whether same-store occupancy, rent growth and NOI trends continued after Q1, and how lease renewals and concessions developed.
- Cash flow quality and the causes of the year-over-year decline in operating cash flow, including working-capital movements.
- Funding plans for upcoming maturities, development commitments and the post-quarter $100 million Series J redemption; confirm updated credit-facility availability.
- Whether the $1.64 million depreciation adjustment is fully understood and its impact on reported comparability.
- Progress and realized pricing on held-for-sale properties, and any further gains, losses or impairment charges.
- Final settlement payments and any remaining consequences of the IRS matter, as well as covenant compliance and access to capital.