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Press Release
First Industrial Realty Trust Reports Third Quarter 2023 Results
- 60% Cash Rental Rate Increase on Leases Signed To-Date Commencing in 2023
- 38% Cash Rental Rate Increase on 2024 Rollovers Signed To-Date
- Cash Same Store NOI Growth of 7.4% in 3Q23, 8.7% YTD 3Q23
- Sold 39 Acres in Phoenix On Balance Sheet for
$41 Million - Signed 955,000 Square Feet of New Leases for Speculative Developments in the Third Quarter and Fourth Quarter To-Date Inclusive of Joint Venture
- 2023 FFO Guidance Increased
$0.01 at Midpoint
"Our financial results reflect the continuing solid overall fundamentals in our sector and the strength of our operations," said
Portfolio Performance
- In service occupancy was 95.4% at the end of the third quarter of 2023, compared to 97.7% at the end of the second quarter of 2023, and 98.3% at the end of the third quarter of 2022. Third quarter 2023 occupancy excluding the impact of developments placed in service was 97.1%.
- Cash rental rates increased 39.4% and increased 59.7% on a straight-line basis in the third quarter of 2023.
- Cash rental rate increase of approximately 60% on leases signed to-date commencing in 2023 reflecting 97% of 2023 expirations.
- The Company has achieved a cash rental rate increase of approximately 38% on leases signed to-date commencing in 2024 reflecting 40% of 2024 expirations.
- Same store cash basis net operating income before termination fees ("SS NOI") increased 7.4% reflecting increases in rental rates on new and renewal leasing, contractual rent escalations, and lower free rent, partially offset by slightly lower average occupancy and an increase in real estate taxes.
During the third quarter, the Company:
- Leased 100% of the 132,000 square-foot
FirstGate Commerce Center inSouth Florida . - Leased 100% of the 421,000 square-foot
Building B at its Camelback 303 business park joint venture inPhoenix . The lease is expected to commence in the fourth quarter of 2023. - Leased 50% of the 699,000 square-foot
First Logistics Center @ 283Building B inCentral Pennsylvania .
In the fourth quarter to-date, the Company:
- Leased 100% of the 37,000 square-foot First 92 in
Northern California . The lease is expected to commence in the fourth quarter of 2023. - Leased 17,000 square feet at
First Loop Logistics Park Building 3 inOrlando . The lease commenced in the fourth quarter of 2023.
Disposition and Investment Highlights
In the third quarter, the Company:
- Sold 39 acres in
Phoenix on balance sheet for a total of$41 million . Additionally, we entered into a 5-year ground lease for the remaining 100 acres on balance sheet that includes a purchase option exercisable beginning in year three. - Sold three buildings in
Detroit comprised of 32,000 square feet for a total of$3 million . - Acquired one site in
Nashville for$3 million that can support up to 542,000 square feet of development.
Outlook for 2023
"We are capturing strong rental rate increases on our renewals with the benefit of the healthy market rent growth the past several years," added
Low End of |
High End of |
|||
Guidance for 2023 |
Guidance for 2023 |
|||
(Per share/unit) |
(Per share/unit) |
|||
Net Income |
$ 1.68 |
$ 1.72 |
||
Add: Real Estate Depreciation/Amortization |
1.20 |
1.20 |
||
Less: Gain on Sale of Real Estate, Net of Allocable Income Tax Provision (Including Joint Venture) and Net of Joint Venture Noncontrolling Interest, Through |
(0.48) |
(0.48) |
||
FFO (NAREIT Definition) |
$ 2.40 |
$ 2.44 |
||
Less: Income Related to Accelerated Recognition of a Tenant Improvement Reimbursement |
(0.02) |
(0.02) |
||
FFO Before Income Related to Accelerated Recognition of a Tenant Improvement Reimbursement |
$ 2.38 |
$ 2.42 |
The following assumptions were used for guidance:
- In service occupancy at year-end fourth quarter of 94.25% to 94.75%. This implies a full year quarter-end average in service occupancy of 96.5% to 96.6%, a decrease of 95 basis points at the midpoint. The midpoint of our end of fourth quarter occupancy guidance assumes the lease-up of the 644,000 square-foot facility in
Baltimore in 2024. Developments placed in service in the third and fourth quarters of 2023 are now also assumed to be leased up in 2024. - Fourth quarter SS NOI growth on a cash basis before termination fees of 6.0% to 7.5%. This implies a quarterly average SS NOI growth for the full year 2023 of 8.0% to 8.5%. These ranges exclude
$1.4 million of income related to insurance claim settlements recognized in 4Q22. - Includes
$0.01 per share related to revenue from the aforementioned ground lease to a data center user that is investment grade rated. The ground lease commenced late in the third quarter. - Includes the incremental costs expected in 2023 related to the Company's developments completed and under construction as
September 30, 2023 . In total, the Company expects to capitalize$0.10 per share of interest in 2023. - General and administrative expense of
$34.5 million to$35.5 million , an increase of$0.5 million at the midpoint. - Our guidance does not include the impact of any future investments, property sales, debt repurchases prior to maturity, debt issuances, or equity issuances post the date of this press release.
Conference Call
The Company's third quarter 2023 supplemental information can be viewed at www.firstindustrial.com under the "Investors" tab.
FFO Definition
In accordance with the NAREIT definition of FFO,
About
Forward-Looking Statements
This press release and the presentation to which it refers may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, and Section 21E of the Securities Exchange Act of 1934. We intend for such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. Forward-looking statements are based on certain assumptions and describe our future plans, strategies and expectations, and are generally identifiable by use of the words "believe," "expect," "plan," "intend," "anticipate," "estimate," "project," "seek," "target," "potential," "focus," "may," "will," "should" or similar words. Although we believe the expectations reflected in forward-looking statements are based upon reasonable assumptions, we can give no assurance that our expectations will be attained or that results will not materially differ. Factors which could have a materially adverse effect on our operations and future prospects include, but are not limited to: changes in national, international, regional and local economic conditions generally and real estate markets specifically; changes in legislation/regulation (including changes to laws governing the taxation of real estate investment trusts) and actions of regulatory authorities; the uncertainty and economic impact of pandemics, epidemics or other public health emergencies or fear of such events, such as the outbreak of coronavirus disease 2019 (COVID-19); our ability to qualify and maintain our status as a real estate investment trust; the availability and attractiveness of financing (including both public and private capital) and changes in interest rates; the availability and attractiveness of terms of additional debt repurchases; our ability to retain our credit agency ratings; our ability to comply with applicable financial covenants; our competitive environment; changes in supply, demand and valuation of industrial properties and land in our current and potential market areas; our ability to identify, acquire, develop and/or manage properties on favorable terms; our ability to dispose of properties on favorable terms; our ability to manage the integration of properties we acquire; potential liability relating to environmental matters; defaults on or non-renewal of leases by our tenants; decreased rental rates or increased vacancy rates; higher-than-expected real estate construction costs and delays in development or lease-up schedules; potential natural disasters and other potentially catastrophic events such as acts of war and/or terrorism; technological developments, particularly those affecting supply chains and logistics; litigation, including costs associated with prosecuting or defending claims and any adverse outcomes; risks associated with our investments in joint ventures, including our lack of sole decision-making authority; and other risks and uncertainties described under the heading "Risk Factors" and elsewhere in our annual report on Form 10-K for the year ended
A schedule of selected financial information is attached.
Selected Financial Data (Unaudited) (In thousands except per share/Unit data) |
||||||||
Three Months Ended |
Nine Months Ended |
|||||||
|
|
|
|
|||||
2023 |
2022 |
2023 |
2022 |
|||||
Statements of Operations and Other Data: |
||||||||
Total Revenues |
$ 155,105 |
$ 139,753 |
$ 456,751 |
$ 395,315 |
||||
Property Expenses |
(42,559) |
(35,775) |
(124,498) |
(106,050) |
||||
General and Administrative |
(8,456) |
(8,227) |
(27,330) |
(25,217) |
||||
Joint Venture Development Services Expense |
(559) |
(318) |
(2,690) |
(318) |
||||
Depreciation of Corporate FF&E |
(206) |
(255) |
(665) |
(711) |
||||
Depreciation and Other Amortization of Real Estate |
(40,940) |
(38,077) |
(120,843) |
(108,001) |
||||
Total Expenses |
(92,720) |
(82,652) |
(276,026) |
(240,297) |
||||
Gain on Sale of Real Estate |
34,368 |
83,907 |
47,421 |
84,204 |
||||
Interest Expense |
(19,906) |
(13,094) |
(53,923) |
(33,104) |
||||
Amortization of Debt Issuance Costs |
(905) |
(801) |
(2,714) |
(2,287) |
||||
Income from Operations Before Equity in Income (Loss) of |
||||||||
Joint Venture and Income Tax Provision |
$ 75,942 |
$ 127,113 |
$ 171,509 |
$ 203,831 |
||||
Equity in Income (Loss) of Joint Venture |
1,530 |
(7) |
30,598 |
118,182 |
||||
Income Tax Provision |
(333) |
(231) |
(7,959) |
(24,339) |
||||
Net Income |
$ 77,139 |
$ 126,875 |
$ 194,148 |
$ 297,674 |
||||
Net Income Attributable to the Noncontrolling Interests |
(2,127) |
(2,987) |
(8,533) |
(20,537) |
||||
Net Income Available to |
$ 75,012 |
$ 123,888 |
$ 185,615 |
$ 277,137 |
||||
RECONCILIATION OF NET INCOME AVAILABLE TO STOCKHOLDERS AND PARTICIPATING SECURITIES TO FFO (c) AND AFFO (c) |
||||||||
Net Income Available to |
$ 75,012 |
$ 123,888 |
$ 185,615 |
$ 277,137 |
||||
Depreciation and Other Amortization of Real Estate |
40,940 |
38,077 |
120,843 |
108,001 |
||||
Net Income Attributable to the Noncontrolling Interests |
2,127 |
2,987 |
8,533 |
20,537 |
||||
Gain on Sale of Real Estate |
(34,368) |
(83,907) |
(47,421) |
(84,204) |
||||
Gain on Sale of Real Estate from Joint Venture (a) |
(142) |
— |
(27,804) |
(118,244) |
||||
Equity in FFO from Joint Venture Attributable to the |
||||||||
Noncontrolling Interest (a) |
(167) |
— |
(336) |
— |
||||
Income Tax Provision - Allocable to Gain on Sale of Real Estate, Including Joint Venture (b) |
— |
105 |
6,997 |
24,348 |
||||
Funds From Operations ("FFO") (NAREIT) (c) |
$ 83,402 |
$ 81,150 |
$ 246,427 |
$ 227,575 |
||||
Amortization of Equity Based Compensation |
3,436 |
3,584 |
12,846 |
12,577 |
||||
Amortization of Debt Discounts and Hedge Costs |
104 |
104 |
312 |
312 |
||||
Amortization of Debt Issuance Costs |
905 |
801 |
2,714 |
2,287 |
||||
Depreciation of Corporate FF&E |
206 |
255 |
665 |
711 |
||||
Non-incremental |
(4,335) |
(5,451) |
(15,387) |
(10,800) |
||||
Non-incremental Leasing Costs |
(6,930) |
(7,674) |
(25,155) |
(21,207) |
||||
Capitalized Interest |
(3,188) |
(4,117) |
(11,013) |
(12,551) |
||||
Capitalized Overhead |
(1,854) |
(2,330) |
(6,953) |
(7,622) |
||||
Straight- Leases and Lease Inducements |
(6,004) |
(7,919) |
(18,227) |
(17,210) |
||||
Adjusted Funds From Operations ("AFFO") (c) |
$ 65,742 |
$ 58,403 |
$ 186,229 |
$ 174,072 |
||||
RECONCILIATION OF NET INCOME AVAILABLE TO STOCKHOLDERS AND PARTICIPATING SECURITIES TO ADJUSTED EBITDA (c) AND NOI (c) |
||||||||
Three Months Ended |
Nine Months Ended |
|||||||
|
|
|
|
|||||
2023 |
2022 |
2023 |
2022 |
|||||
Net Income Available to |
$ 75,012 |
$ 123,888 |
$ 185,615 |
$ 277,137 |
||||
Interest Expense |
19,906 |
13,094 |
53,923 |
33,104 |
||||
Depreciation and Other Amortization of Real Estate |
40,940 |
38,077 |
120,843 |
108,001 |
||||
Income Tax Provision (Benefit) - Not Allocable to Gain on Sale |
||||||||
of Real Estate (b) |
333 |
126 |
962 |
(9) |
||||
Net Income Attributable to the Noncontrolling Interests |
2,127 |
2,987 |
8,533 |
20,537 |
||||
Equity in FFO from Joint Venture Attributable to the |
||||||||
Noncontrolling Interest (a) |
(167) |
— |
(336) |
— |
||||
Amortization of Debt Issuance Costs |
905 |
801 |
2,714 |
2,287 |
||||
Depreciation of Corporate FF&E |
206 |
255 |
665 |
711 |
||||
Gain on Sale of Real Estate |
(34,368) |
(83,907) |
(47,421) |
(84,204) |
||||
Gain on Sale of Real Estate from Joint Venture (a) |
(142) |
— |
(27,804) |
(118,244) |
||||
Income Tax Provision - Allocable to Gain on Sale of Real Estate, Including Joint Venture (b) |
— |
105 |
6,997 |
24,348 |
||||
Adjusted EBITDA (c) |
$ 104,752 |
$ 95,426 |
$ 304,691 |
$ 263,668 |
||||
General and Administrative |
8,456 |
8,227 |
27,330 |
25,217 |
||||
Equity in FFO from Joint Venture, Net of Noncontrolling |
||||||||
Interest (a) |
(1,221) |
7 |
(2,458) |
62 |
||||
Net Operating Income ("NOI") (c) |
$ 111,987 |
$ 103,660 |
$ 329,563 |
$ 288,947 |
||||
Non-Same Store NOI |
(12,655) |
(10,567) |
(33,920) |
(16,515) |
||||
Same Store NOI Before Same Store Adjustments (c) |
$ 99,332 |
$ 93,093 |
$ 295,643 |
$ 272,432 |
||||
Straight-line Rent |
(2,170) |
(3,033) |
(8,223) |
(8,538) |
||||
Above (Below) Market Lease Amortization |
(677) |
(259) |
(1,092) |
(776) |
||||
Lease Termination Fees |
(53) |
(51) |
(287) |
(76) |
||||
Same Store NOI (Cash Basis without Termination Fees) (c) |
$ 96,432 |
$ 89,750 |
$ 286,041 |
$ 263,042 |
||||
Weighted Avg. Number of Shares/Units Outstanding - Basic |
134,704 |
134,282 |
134,697 |
134,212 |
||||
Weighted Avg. Number of Shares Outstanding - Basic |
132,264 |
132,092 |
132,241 |
131,986 |
||||
Weighted Avg. Number of Shares/Units Outstanding - Diluted |
135,166 |
134,761 |
135,214 |
134,616 |
||||
Weighted Avg. Number of Shares Outstanding - Diluted |
132,339 |
132,176 |
132,325 |
132,057 |
||||
Per Share/Unit Data: |
||||||||
Net Income Available to |
$ 75,012 |
$ 123,888 |
$ 185,615 |
$ 277,137 |
||||
Less: Allocation to |
(74) |
(124) |
(174) |
(258) |
||||
Net Income Available to Common Stockholders |
$ 74,938 |
$ 123,764 |
$ 185,441 |
$ 276,879 |
||||
Basic and Diluted Per Share |
$ 0.57 |
$ 0.94 |
$ 1.40 |
$ 2.10 |
||||
FFO (NAREIT) (c) |
$ 83,402 |
$ 81,150 |
$ 246,427 |
$ 227,575 |
||||
Less: Allocation to |
(218) |
(199) |
(619) |
(533) |
||||
FFO (NAREIT) Allocable to Common Stockholders and Unitholders |
$ 83,184 |
$ 80,951 |
$ 245,808 |
$ 227,042 |
||||
Basic and Diluted Per Share/Unit |
$ 0.62 |
$ 0.60 |
$ 1.82 |
$ 1.69 |
||||
Common Dividends/Distributions Per Share/Unit |
$ 0.320 |
$ 0.295 |
$ 0.960 |
$ 0.885 |
Balance Sheet Data (end of period): |
|
|
||
|
$ 5,656,337 |
$ 5,343,039 |
||
Total Assets |
5,151,664 |
4,954,322 |
||
Debt |
2,199,801 |
2,066,301 |
||
Total Liabilities |
2,544,961 |
2,424,023 |
||
Total Equity |
2,606,703 |
2,530,299 |
Three Months Ended |
Nine Months Ended |
||||||||
|
|
|
|
||||||
2023 |
2022 |
2023 |
2022 |
||||||
(a) |
Equity in Income (Loss) of Joint Venture |
||||||||
Equity in Income (Loss) of Joint Venture per GAAP Statements of Operations |
$ 1,530 |
$ (7) |
$ 30,598 |
$ 118,182 |
|||||
Gain on Sale of Real Estate from Joint Venture |
(142) |
— |
(27,804) |
(118,244) |
|||||
Equity in FFO from Joint Venture Attributable to the Noncontrolling Interest |
(167) |
— |
(336) |
— |
|||||
Equity in FFO from Joint Venture, Net of Noncontrolling Interest |
$ 1,221 |
$ (7) |
$ 2,458 |
$ (62) |
|||||
(b) |
Income Tax (Provision) Benefit |
||||||||
Income Tax Provision per GAAP Statements of Operations |
$ (333) |
$ (231) |
$ (7,959) |
$ (24,339) |
|||||
Income Tax Provision - Allocable to Gain on Sale of Real Estate, Including Joint Venture |
— |
105 |
6,997 |
24,348 |
|||||
Income Tax (Provision) Benefit - Not Allocable to Gain on Sale of Real Estate |
$ (333) |
$ (126) |
$ (962) |
$ 9 |
(c) Investors in, and analysts following, the real estate industry utilize funds from operations ("FFO"), net operating income ("NOI"), adjusted EBITDA and adjusted funds from operations ("AFFO"), variously defined below, as supplemental performance measures. While we believe net income available to
In accordance with the NAREIT definition of FFO, we calculate FFO to be equal to net income available to
NOI is defined as our revenues, minus property expenses such as real estate taxes, repairs and maintenance, property management, utilities, insurance and other expenses.
Adjusted EBITDA is defined as NOI minus general and administrative expenses and the equity in FFO from our investment in joint venture.
AFFO is defined as adjusted EBITDA minus interest expense, minus capitalized interest and overhead, plus amortization of debt discounts and hedge costs, minus straight-line rent, amortization of above (below) market leases and lease inducements, minus provision for income taxes or plus benefit for income taxes not allocable to gain on sale of real estate, plus amortization of equity based compensation and minus non-incremental capital expenditures. Non-incremental capital expenditures refer to building improvements and leasing costs required to maintain current revenues plus tenant improvements amortized back to the tenant over the lease term. Excluded are first generation leasing costs, capital expenditures underwritten at acquisition and development/redevelopment costs.
FFO, NOI, adjusted EBITDA and AFFO do not represent cash generated from operating activities in accordance with GAAP and are not necessarily indicative of cash available to fund cash needs, including the repayment of principal on debt and payment of dividends and distributions. FFO, NOI, adjusted EBITDA and AFFO should not be considered substitutes for net income available to common stockholders and participating securities (calculated in accordance with GAAP) as a measure of results of operations, cash flows (calculated in accordance with GAAP) or as a measure of liquidity. FFO, NOI, adjusted EBITDA and AFFO as currently calculated by us may not be comparable to similarly titled, but variously calculated, measures of other REITs.
We consider cash-basis same store NOI ("SS NOI") to be a useful supplemental measure of our operating performance. Same store properties include all properties owned prior to
We define SS NOI as NOI, less NOI of properties not in the
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SOURCE
Art Harmon, Vice President, Investor Relations and Marketing, (312) 344-4320