First Industrial Realty Trust(FR) - 2020 Q1 - Quarterly Report

PART I: FINANCIAL INFORMATION Item 1. Financial Statements Unaudited consolidated financial statements for First Industrial Realty Trust, Inc. and First Industrial, L.P., with detailed notes on key financial areas First Industrial Realty Trust, Inc. Consolidated Balance Sheets | Metric | March 31, 2020 (in thousands) | December 31, 2019 (in thousands) | | :--- | :--- | | Total Assets | $3,662,774 | $3,518,828 | | Cash and Cash Equivalents | $129,117 | $21,120 | | Unsecured Credit Facility | $320,000 | $158,000 | | Total Liabilities | $1,871,793 | $1,720,565 | | Total Equity | $1,790,981 | $1,798,263 | First Industrial Realty Trust, Inc. Consolidated Statements of Operations | Metric | Three Months Ended March 31, 2020 (in thousands) | Three Months Ended March 31, 2019 (in thousands) | YoY Change (%) | | :--- | :--- | :--- | :--- | | Total Revenues | $110,343 | $104,541 | +5.55% | | Total Expenses | $69,263 | $67,025 | +3.34% | | Gain (Loss) on Sale of Real Estate | $13,993 | $(208) | Significant increase | | Net Income | $41,529 | $24,340 | +70.62% | | Net Income Available to Common Stockholders | $40,634 | $23,803 | +70.71% | | Basic and Diluted Earnings Per Share | $0.32 | $0.19 | +68.42% | First Industrial Realty Trust, Inc. Consolidated Statements of Comprehensive Income | Metric | Three Months Ended March 31, 2020 (in thousands) | Three Months Ended March 31, 2019 (in thousands) | | :--- | :--- | | Net Income | $41,529 | $24,340 | | Mark-to-Market Loss on Derivative Instruments | $(14,590) | $(6,354) | | Comprehensive Income | $27,041 | $18,010 | | Comprehensive Income Attributable to First Industrial Realty Trust, Inc. | $26,459 | $17,613 | First Industrial Realty Trust, Inc. Consolidated Statements of Changes in Stockholders' Equity - Net Income for the three months ended March 31, 2020, was $40,634 thousand[28] - Other Comprehensive Loss for the three months ended March 31, 2020, was $(14,175) thousand[28] - Common Stock Dividends for the three months ended March 31, 2020, totaled $(31,874) thousand[28] First Industrial Realty Trust, Inc. Consolidated Statements of Cash Flows | Activity | Three Months Ended March 31, 2020 (in thousands) | Three Months Ended March 31, 2019 (in thousands) | | :--- | :--- | :--- | | Net Cash Provided by Operating Activities | $40,269 | $41,729 | | Net Cash Used in Investing Activities | $(183,052) | $(56,981) | | Net Cash Provided by (Used in) Financing Activities | $125,069 | $(4,232) | | Cash, Cash Equivalents and Restricted Cash, End of Period | $135,004 | $30,889 | - Acquisitions of Real Estate amounted to $(142,380) thousand for the three months ended March 31, 2020[31] - Net Proceeds from Sales of Investments in Real Estate were $26,030 thousand for the three months ended March 31, 2020[31] First Industrial, L.P. Consolidated Balance Sheets | Metric | March 31, 2020 (in thousands) | December 31, 2019 (in thousands) | | :--- | :--- | | Total Assets | $3,672,434 | $3,528,849 | | Total Liabilities | $1,871,793 | $1,720,565 | | Total Partners' Capital | $1,800,641 | $1,808,284 | First Industrial, L.P. Consolidated Statements of Operations | Metric | Three Months Ended March 31, 2020 (in thousands) | Three Months Ended March 31, 2019 (in thousands) | YoY Change (%) | | :--- | :--- | :--- | :--- | | Total Revenues | $110,343 | $104,541 | +5.55% | | Net Income | $41,529 | $24,340 | +70.62% | | Net Income Available to Unitholders | $41,479 | $24,314 | +70.59% | | Basic and Diluted Earnings Per Unit | $0.32 | $0.19 | +68.42% | First Industrial, L.P. Consolidated Statements of Comprehensive Income | Metric | Three Months Ended March 31, 2020 (in thousands) | Three Months Ended March 31, 2019 (in thousands) | | :--- | :--- | | Net Income | $41,529 | $24,340 | | Mark-to-Market Loss on Derivative Instruments | $(14,590) | $(6,354) | | Comprehensive Income | $27,041 | $18,010 | | Comprehensive Income Attributable to Unitholders | $26,991 | $17,984 | First Industrial, L.P. Consolidated Statements of Changes in Partners' Capital - Net Income for the three months ended March 31, 2020, was $41,529 thousand[46] - Other Comprehensive Loss for the three months ended March 31, 2020, was $(14,488) thousand[46] - Unit Distributions for the three months ended March 31, 2020, totaled $(32,488) thousand[46] First Industrial, L.P. Consolidated Statements of Cash Flows | Activity | Three Months Ended March 31, 2020 (in thousands) | Three Months Ended March 31, 2019 (in thousands) | | :--- | :--- | :--- | | Net Cash Provided by Operating Activities | $40,630 | $41,772 | | Net Cash Used in Investing Activities | $(183,052) | $(56,981) | | Net Cash Provided by (Used in) Financing Activities | $124,708 | $(4,275) | | Cash, Cash Equivalents and Restricted Cash, End of Period | $135,004 | $30,889 | First Industrial Realty Trust, Inc. and First Industrial, L.P. Notes to the Consolidated Financial Statements 1. Organization - First Industrial Realty Trust, Inc. is a self-administered REIT and the sole general partner of First Industrial, L.P., holding an approximate 97.9% ownership interest at March 31, 2020[54][55] - As of March 31, 2020, the Company owned 436 industrial properties (approximately 62.6 million square feet of GLA) across 21 states, with operations primarily conducted through the Operating Partnership[58] 2. Summary of Significant Accounting Policies - The unaudited interim consolidated financial statements are prepared in accordance with GAAP and should be read in conjunction with the 2019 Form 10-K[59] - Preparation of financial statements requires management to make estimates and assumptions that affect reported amounts of assets, liabilities, revenues, and expenses[61] 3. Investment in Real Estate - During the three months ended March 31, 2020, the Company acquired four industrial properties (0.8 million square feet of GLA) and two land parcels for a total purchase price of $139,941 thousand[62] - Nine industrial properties (0.2 million square feet of GLA) were sold for gross proceeds of $26,500 thousand, resulting in a gain on sale of real estate of $13,993 thousand[64] - As of March 31, 2020, two industrial properties (0.2 million square feet of GLA) were held for sale[63] 4. Indebtedness | Type of Debt | Outstanding Balance (Net, in thousands) at March 31, 2020 | Interest Rate at March 31, 2020 | Maturity Date | | :--- | :--- | :--- | :--- | | Mortgage Loans Payable | $172,510 | 4.03% – 6.50% | July 2020 – August 2028 | | Senior Unsecured Notes | $694,144 | 3.86% – 7.75% | 2027 – 2032 | | Unsecured Term Loans | $458,129 | 2.89% – 3.39% | 2021 – 2022 | | Unsecured Credit Facility | $320,000 | 2.09% | October 2021 (extendable to 2022) | - The Company believes it was in compliance with all covenants relating to its mortgage loans, unsecured credit facility, unsecured term loans, and senior unsecured notes as of March 31, 2020[68][69] - The fair value of total indebtedness was approximately $1,651,660 thousand at March 31, 2020[70] 5. Variable Interest Entities - Other Real Estate Partnerships are variable interest entities (VIEs) consolidated by the Operating Partnership, which is also a VIE of the Company[72] | Metric | March 31, 2020 (in thousands) | | :--- | :--- | | Total Assets of Other Real Estate Partnerships | $287,253 | | Mortgage Loans Payable, Net of Other Real Estate Partnerships | $10,928 | - The Company holds a 49% equity interest in a Joint Venture, accounted for under the equity method due to substantive participation rights, and has provided guarantees for a construction loan and project completion[56][76][78] 6. Stockholders' Equity of the Company and Partners' Capital of the Operating Partnership - Noncontrolling Interests represent the approximate 2.1% equity interest in the Operating Partnership held by limited partners at March 31, 2020[79] - The Company entered into a 2020 ATM Program to sell up to 14,000,000 shares of common stock ($500,000 thousand aggregate gross sales proceeds), but no shares were issued during the three months ended March 31, 2020[80] 7. Accumulated Other Comprehensive Income | Metric | March 31, 2020 (in thousands) | | :--- | :--- | | Accumulated Other Comprehensive Loss of the Company | $(21,054) | | Accumulated Other Comprehensive Loss of the Operating Partnership | $(21,501) | - Other Comprehensive Loss Before Reclassifications for the Company was $(14,655) thousand for the three months ended March 31, 2020[82] - Amounts reclassified from accumulated other comprehensive loss to interest expense totaled $484 thousand for the three months ended March 31, 2020[82] 8. Earnings Per Share and Earnings Per Unit ("EPS"/"EPU") | Metric | Three Months Ended March 31, 2020 | Three Months Ended March 31, 2019 | | :--- | :--- | :--- | | Basic and Diluted EPS (Company) | $0.32 | $0.19 | | Basic and Diluted EPU (Operating Partnership) | $0.32 | $0.19 | 9. Long-Term Compensation - During Q1 2020, the Company granted 59,263 Performance Units and 322,477 Performance RLP Units (fair value $7,883 thousand) and 75,261 Service Units and 109,761 Service RLP Units (fair value $8,102 thousand)[85][86] - Compensation expense recognized for Q1 2020 was $3,641 thousand, compared to $1,762 thousand in Q1 2019[88] - Awards granted to retirement-eligible employees are non-forfeitable and expensed 100% at the grant date[87] 10. Derivatives - The Company entered into a 1-year interest rate swap (2020 Swap) with a notional value of $150,000 thousand, effective April 1, 2020, fixing the one-month LIBOR rate at 0.42% for its Unsecured Credit Facility[91] - Three 5-year interest rate swaps (2021 Swaps) with an aggregate notional value of $200,000 thousand were entered into, effective February 1, 2021, fixing the one-month LIBOR rate at 0.99% in anticipation of refinancing the 2014 Term Loan[92] - The estimated fair value of derivative liabilities for all swaps was $(17,779) thousand as of March 31, 2020[95] 11. Related Party Transactions - The Operating Partnership had receivable balances of $9,670 thousand at March 31, 2020, and $10,031 thousand at December 31, 2019, from a direct wholly-owned subsidiary of the Company[98] 12. Commitments and Contingencies - Legal actions arising from property ownership are not expected to have a materially adverse effect on the Company's financial position, operations, or liquidity[99] - As of March 31, 2020, nine industrial properties (1.5 million square feet of GLA) were under construction with an estimated total investment of $154,400 thousand, of which approximately $82,000 thousand remains to be funded[100] 13. Subsequent Events - From April 1 to April 28, 2020, the Company sold two industrial properties for $13,455 thousand and acquired one for $9,125 thousand[101] - On April 9, 2020, $15,115 thousand of mortgage loans payable with a July 2020 maturity were repaid[101] - The COVID-19 pandemic continues to severely impact the economy, leading to tenant rent relief requests, and could materially affect future financial and operational results[102] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses financial condition, operations, and liquidity, covering COVID-19 impact, key transactions, and supplemental earnings measures Forward-Looking Statements - The discussion contains forward-looking statements, which are subject to risks and uncertainties, particularly the ongoing impact of the COVID-19 pandemic[105][106] - It is difficult to fully assess the impact of COVID-19 due to uncertainties regarding its severity, duration, and the effectiveness of government responses[107] General - First Industrial Realty Trust, Inc. is a self-administered REIT that owns, manages, acquires, sells, develops, and redevelops industrial real estate, primarily through its Operating Partnership[110][111] - As of March 31, 2020, the Company owned 436 industrial properties, totaling approximately 62.6 million square feet of gross leasable area, located in 21 states[114] Management's Overview - The Company's financial condition and results of operations are primarily driven by leasing, acquisition and development, disposition of properties, and access to external capital[116] - Revenue growth depends on increasing occupancy and rental rates, maximizing tenant recoveries, and minimizing operating expenses, all subject to market and economic conditions[117] - Access to external capital on favorable terms is crucial for refinancing debt and funding future acquisitions and developments, influenced by market conditions, interest rates, and credit ratings[120] Impact of COVID-19 - As of April 28, 2020, the Company received April rent payments for approximately 94% of its portfolio[123] - The Company has received rent relief requests from tenants, mostly for deferrals, and anticipates granting some while not forgoing contractual rights for others[123] - All new vertical development projects have been suspended for the foreseeable future, except for completing nine in-progress developments and two redevelopments, with projected completion costs of $100 million for the remainder of 2020 and $35 million for 2021[124] Summary of Significant Transactions During the Three Months Ended March 31, 2020 - Acquired four industrial properties (0.8 million square feet of GLA) for $89.0 million and 72.4 acres of land for development for $50.9 million[127] - Sold a portfolio of nine industrial properties (0.2 million square feet of GLA) for gross sales proceeds of $26.5 million[127] - Declared a first-quarter cash dividend of $0.25 per common share or Unit, an 8.7% increase from the 2019 quarterly rate[127] Results of Operations Comparison of Three Months Ended March 31, 2020 to Three Months Ended March 31, 2019 | Metric | Three Months Ended March 31, 2020 (in thousands) | Three Months Ended March 31, 2019 (in thousands) | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Net Income | $41,500 | $24,300 | $17,200 | 70.8% | | Total Revenues | $110,343 | $104,541 | $5,802 | 5.5% | | Total Property Expenses | $29,081 | $30,168 | $(1,087) | (3.6)% | | General and Administrative | $9,251 | $6,802 | $2,449 | 36.0% | | Depreciation and Other Amortization | $30,931 | $30,055 | $876 | 2.9% | | Gain (Loss) on Sale of Real Estate | $13,993 | $(208) | $14,201 | N/A | - Revenues from (re)developments increased significantly by $9.1 million (+19,385.1%) due to increased occupancy and a $1.1 million insurance settlement[129] - Interest expense remained relatively unchanged despite a higher average debt balance, due to a decrease in the weighted average interest rate (3.80% in 2020 vs. 4.22% in 2019) and increased capitalized interest[134] Leasing Activity | Lease Type | Number of Leases | Square Feet (in 000's) | Net Rent Per Square Foot | Straight Line Basis Rent Growth | Weighted Average Lease Term (Years) | Lease Costs Per Square Foot | Weighted Average Tenant Retention | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | New Leases | 23 | 459 | $7.11 | 24.8% | 5.2 | $5.59 | N/A | | Renewal Leases | 34 | 1,254 | $6.78 | 27.1% | 5.9 | $1.65 | 68.9% | | Development / Acquisition Leases | 4 | 925 | $5.76 | N/A | 10.3 | N/A | N/A | | Total / Weighted Average | 61 | 2,638 | $6.48 | 26.5% | 7.3 | $2.70 | 68.9% | - 22 leases commenced during Q1 2020 included rent concessions totaling $2,355 thousand, covering 1,231 thousand square feet[142] Liquidity and Capital Resources | Metric | March 31, 2020 (in millions) | | :--- | :--- | | Cash and Cash Equivalents | $129.1 | | Restricted Cash | $5.9 | | Available under Unsecured Credit Facility | $404.3 | - The Company has a $200.0 million term loan maturing in January 2021 and repaid $15.1 million in mortgage loans payable on April 9, 2020[145] - The COVID-19 pandemic could materially adversely affect the Company's financial condition, results of operations, and cash flows, leading to the suspension of new vertical development projects[148] Cash Flow Activity | Activity | 2020 (in thousands) | 2019 (in thousands) | | :--- | :--- | :--- | | Net cash provided by operating activities (Company) | $40,269 | $41,729 | | Net cash used in investing activities (Company) | $(183,052) | $(56,981) | | Net cash provided by (used in) financing activities (Company) | $125,069 | $(4,232) | - Cash used in investing activities increased by $126.1 million, primarily due to a $136.3 million increase in real estate acquisition and development, partially offset by increased proceeds from property dispositions[151][152] - Cash provided by financing activities increased by $129.3 million, driven by a $60.0 million increase in Unsecured Credit Facility proceeds and a $72.5 million decrease in mortgage loan repayments[151][152] Market Risk - At March 31, 2020, 80.6% ($1,331.6 million) of total debt was fixed rate, and 19.4% ($320.0 million) was variable rate[156] - The Company uses derivative instruments, such as interest rate swaps, with a notional aggregate amount of $460.0 million, to mitigate exposure to variable interest rates on Unsecured Term Loans[157][161] - A hypothetical 10% increase in LIBOR rates would have increased interest expense by approximately $0.07 million during the three months ended March 31, 2020[159] Supplemental Earnings Measure Funds From Operations - Funds From Operations (FFO) is a non-GAAP financial measure, calculated in accordance with NAREIT's definition, used to supplement net income and improve understanding of REIT operating results[163][165][166] | Metric | Three Months Ended March 31, 2020 (in thousands) | Three Months Ended March 31, 2019 (in thousands) | | :--- | :--- | :--- | | FFO Available to Common Stockholders and Participating Securities | $57,014 | $52,468 | Same Store Net Operating Income - Same Store Net Operating Income (SS NOI) is a non-GAAP measure of rental operations, excluding depreciation, G&A, interest, and certain adjustments, to provide a better measure of actual cash basis rental growth[169] | Metric | Three Months Ended March 31, 2020 (in thousands) | Three Months Ended March 31, 2019 (in thousands) | % Change | | :--- | :--- | :--- | :--- | | Same Store Net Operating Income | $72,152 | $66,556 | 8.4% | Subsequent Events - From April 1 to April 28, 2020, the Company sold two industrial properties for $13.5 million and acquired one for $9.1 million[172] - On April 9, 2020, $15.1 million of mortgage loans payable were repaid[173] - The COVID-19 pandemic continues to impact the economy, leading to tenant rent relief requests, and its effects could materially impact future financial and operational results[174] Item 3. Quantitative and Qualitative Disclosures About Market Risk This item refers to the market risk discussion in Item 2, detailing interest rate exposure and derivative instrument use - The response to this item is included in Item 2, "Management's Discussion and Analysis of Financial Condition and Results of Operations"[175] Item 4. Controls and Procedures Disclosure controls and procedures for both entities were effective as of March 31, 2020, with no material changes to internal control - First Industrial Realty Trust, Inc.'s disclosure controls and procedures were effective as of March 31, 2020[176] - First Industrial, L.P.'s disclosure controls and procedures were effective as of March 31, 2020[178] - There were no material changes in internal control over financial reporting for either entity during the fiscal quarter[177][179] PART II: OTHER INFORMATION Item 1. Legal Proceedings No legal proceedings are reported for the period - None[181] Item 1A. Risk Factors An additional risk factor details the potential adverse effects of the COVID-19 pandemic on the Company's business and operations - A new risk factor highlights the adverse impact of the COVID-19 pandemic on the Company's business, including potential effects on tenants' ability to meet obligations, construction delays, and access to capital[182][185][186] - The full adverse impact of the COVID-19 pandemic is highly uncertain and cannot be predicted due to its rapid development and fluidity[187] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds No unregistered sales of equity securities or use of proceeds are reported - None[188] Item 3. Defaults Upon Senior Securities No defaults upon senior securities occurred during the reporting period - None[188] Item 4. Mine Safety Disclosures No mine safety disclosures are required - None[188] Item 5. Other Information No other information is reported - None[188] Item 6. Exhibits This section lists all exhibits filed with the Form 10-Q, including agreements, certifications, and XBRL financial statements - Exhibits include a Distribution Agreement, Certifications (31.1-31.4, 32.1-32.2), and XBRL formatted financial statements (101.1, 104)[191] SIGNATURES Official signatures of the CFO and CAO for both entities certify the report's accuracy and completeness as of April 28, 2020 - The report is signed by Scott A. Musil (Chief Financial Officer) and Sara E. Niemiec (Chief Accounting Officer) for both First Industrial Realty Trust, Inc. and First Industrial, L.P.[195] - The report was dated April 28, 2020[196]