First Industrial Realty Trust(FR) - 2021 Q3 - Quarterly Report

Part I: Financial Information This section provides the company's unaudited consolidated financial statements and management's discussion and analysis for the period ended September 30, 2021 Financial Statements This section presents the unaudited consolidated financial statements for First Industrial Realty Trust, Inc. and First Industrial, L.P. as of September 30, 2021, and for the three and nine months then ended, including detailed notes First Industrial Realty Trust, Inc. Consolidated Financial Statements The consolidated financial statements for First Industrial Realty Trust, Inc. show increased assets and net income for the nine months ended September 30, 2021, driven by real estate investments and sales Consolidated Balance Sheet Highlights (in thousands) | Account | Sep 30, 2021 | Dec 31, 2020 | | :--- | :--- | :--- | | Net Investment in Real Estate | $3,575,488 | $3,255,240 | | Total Assets | $3,975,444 | $3,791,938 | | Total Liabilities | $1,901,862 | $1,844,618 | | Total Equity | $2,073,582 | $1,947,320 | Consolidated Statement of Operations Highlights (in thousands, except per share data) | Account | Nine Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2020 | | :--- | :--- | :--- | | Total Revenues | $354,739 | $335,739 | | Gain on Sale of Real Estate | $66,378 | $29,594 | | Net Income | $160,163 | $114,662 | | Diluted EPS | $1.21 | $0.88 | - Net cash provided by operating activities was $196.4 million for the nine months ended Sep 30, 2021, a slight increase from $190.1 million in the prior year period[37] - Net cash used in investing activities increased to $291.6 million, primarily due to higher acquisitions of real estate[37] First Industrial, L.P. Consolidated Financial Statements The financial statements for First Industrial, L.P. mirror the parent company's, showing increased assets and net income for the nine months ended September 30, 2021, with primary differences in capital presentation Consolidated Balance Sheet Highlights (in thousands) | Account | Sep 30, 2021 | Dec 31, 2020 | | :--- | :--- | :--- | | Net Investment in Real Estate | $3,575,488 | $3,255,240 | | Total Assets | $3,984,773 | $3,801,308 | | Total Liabilities | $1,901,862 | $1,844,618 | | Total Partners' Capital | $2,082,911 | $1,956,690 | Consolidated Statement of Operations Highlights (in thousands, except per unit data) | Account | Nine Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2020 | | :--- | :--- | :--- | | Total Revenues | $354,739 | $335,739 | | Net Income | $160,163 | $114,662 | | Diluted EPU | $1.21 | $0.88 | Notes to Consolidated Financial Statements The notes detail the company's 423 industrial properties, significant acquisitions and dispositions, and the amendment of its unsecured credit facility and term loan, enhancing financial flexibility - As of September 30, 2021, the company owned 423 industrial properties with approximately 62.1 million square feet of gross leasable area (GLA)[64] - During the first nine months of 2021, the company acquired four industrial properties and nine land parcels for a total purchase price of $216.4 million[70] - The company sold 12 industrial properties, seven industrial condominium units, and one land parcel for gross proceeds of $118.6 million, realizing a gain of $66.4 million during the first nine months of 2021[72][133] - On July 7, 2021, the company amended and restated its revolving credit agreement, increasing the capacity to $750 million and extending the maturity to July 7, 2025[76] - A $200 million unsecured term loan was also amended, extending its maturity to July 7, 2026[78] - As of September 30, 2021, the company had 17 industrial properties under construction, totaling approximately 5.6 million square feet, with an estimated remaining funding commitment of $355.6 million[108] Management's Discussion and Analysis of Financial Condition and Results of Operations Management reports strong operating results for the nine months ended September 30, 2021, with increased occupancy, rental rates, and net income, supported by strategic growth and strong liquidity Management's Overview The company's objective is to maximize stockholder return through internal growth, external growth in target logistics markets, and portfolio enhancement, achieving strong performance in occupancy and rental rates - The company's long-term growth plans focus on internal growth (increasing revenues, controlling expenses), external growth (development, acquisitions), and portfolio enhancement (selling non-core assets to invest in 15 target logistics markets)[118][119] Key Operating Metrics as of September 30, 2021 | Metric | Value | | :--- | :--- | | Quarter-end in-service occupancy | 97.1% | | YTD Cash rental rate growth (new/renewal) | 15.9% | | Q3 Cash rental rate growth (new/renewal) | 22.8% | - During the first nine months of 2021, the company commenced development on 14 buildings totaling 5.0 million square feet and acquired approximately 455.8 acres of land for future development[122][123] - Financing activities included amending and extending the Unsecured Line of Credit to $750 million, paying off $57.9 million in mortgage loans, and raising $59.0 million in net proceeds from ATM offerings[123] Results of Operations For the nine months ended September 30, 2021, total revenues increased 5.7% to $354.7 million, driven by same-store growth and acquisitions, with net income rising significantly due to higher real estate sales gains Comparison of Nine Months Ended Sep 30, 2021 vs 2020 (in thousands) | Account | 2021 | 2020 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Total Revenues | $354,739 | $335,739 | $19,000 | 5.7% | | Total Property Expenses | $98,386 | $87,487 | $10,899 | 12.5% | | Gain on Sale of Real Estate | $66,378 | $29,594 | $36,784 | 124.3% | | Interest Expense | ($34,374) | ($37,864) | $3,490 | (9.2)% | | Net Income | $160,163 | $114,662 | $45,501 | 39.7% | - Same-store property revenue increased by $17.6 million (5.8%) due to higher rental rates and tenant recoveries[128] - Same-store property expenses increased by $8.3 million (11.1%) primarily from higher real estate taxes and snow removal costs[130] Comparison of Three Months Ended Sep 30, 2021 vs 2020 (in thousands) | Account | 2021 | 2020 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Total Revenues | $121,082 | $116,194 | $4,888 | 4.2% | | Total Property Expenses | $33,396 | $30,355 | $3,041 | 10.0% | | Net Income | $43,419 | $36,707 | $6,712 | 18.3% | Leasing Activity In the third quarter of 2021, the company commenced 60 leases totaling 2.4 million square feet, with a weighted average straight-line rent growth of 36.2% Leasing Activity Summary | Period | Leases Commenced | Square Feet (in 000's) | Straight Line Rent Growth | Tenant Retention | | :--- | :--- | :--- | :--- | :--- | | Q3 2021 | 60 | 2,358 | 36.2% | 84.7% | | New Leases | 26 | 465 | 39.5% | N/A | | Renewal Leases | 28 | 1,408 | 34.9% | 84.7% | | Nine Months 2021 | 189 | 9,223 | 28.6% | 76.2% | | New Leases | 76 | 2,125 | 36.0% | N/A | | Renewal Leases | 97 | 5,728 | 25.7% | 76.2% | Liquidity and Capital Resources As of September 30, 2021, the company maintained strong liquidity with $52.3 million in cash and $670.7 million available on its credit facility, supported by investment-grade credit ratings - At September 30, 2021, liquidity consisted of $52.3 million in cash and $670.7 million available on the Unsecured Credit Facility[151] - The company anticipates meeting its short-term liquidity needs through cash flow from operations and proceeds from asset sales[152] - The company holds investment-grade credit ratings: BBB/Stable from S&P, Baa2/Stable from Moody's, and BBB/Stable from Fitch Ratings[155] Cash Flow Activity For the nine months ended September 30, 2021, operating cash flow increased by $6.3 million to $196.4 million, while investing cash flow rose due to acquisitions, and financing cash flow shifted due to prior year's note issuance Cash Flow Summary (in thousands) | Activity | Nine Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2020 | | :--- | :--- | :--- | | Net cash provided by operating activities | $196,437 | $190,139 | | Net cash used in investing activities | ($291,602) | ($274,355) | | Net cash (used in) provided by financing activities | ($43,473) | $102,619 | - The increase in cash from operations was primarily due to higher Net Operating Income (NOI) from the property portfolio[157] - The increase in cash used for investing was driven by an $87.1 million rise in acquisition and development spending compared to the prior year[157] - The shift in financing cash flow was primarily due to a $300 million issuance of unsecured notes in 2020, which was not repeated in 2021, and higher mortgage repayments in 2021[158] Supplemental Earnings Measure The company provides supplemental performance measures including Funds From Operations (FFO) and Same Store Net Operating Income (SS NOI) Funds From Operations (FFO) Reconciliation (in thousands) | | Three Months Ended Sep 30 | Nine Months Ended Sep 30 | | :--- | :--- | :--- | | | 2021 | 2020 | 2021 | 2020 | | Net Income Available to Common Stockholders | $42,446 | $35,959 | $156,580 | $112,262 | | Adjustments (Depreciation, Gain on Sale, etc.) | $23,826 | $27,049 | $31,705 | $65,926 | | FFO Available to Common Stockholders | $66,272 | $63,008 | $188,285 | $178,188 | Same Store Net Operating Income (SS NOI) Growth (Cash Basis) | Period | 2021 (in thousands) | 2020 (in thousands) | % Change | | :--- | :--- | :--- | :--- | | Three Months Ended Sep 30 | $79,076 | $73,982 | 6.9% | | Nine Months Ended Sep 30 | $229,402 | $222,173 | 3.3% | Quantitative and Qualitative Disclosures About Market Risk The company's primary market risk is interest rate risk, largely mitigated by 95.4% fixed-rate debt and interest rate swaps, while actively monitoring the LIBOR transition - As of September 30, 2021, 95.4% ($1.54 billion) of the company's total debt was fixed-rate, with the remaining 4.6% ($74.0 million) being variable-rate[162] - The company utilizes interest rate swaps with an aggregate notional amount of $460.0 million to convert its variable-rate Unsecured Term Loans to fixed-rate debt, managing cash flow volatility[162][163] - The company is monitoring the planned cessation of USD-LIBOR after June 30, 2023, and the transition to alternative benchmark rates such as SOFR[166][167] Controls and Procedures Management concluded that disclosure controls and procedures were effective as of the reporting period, with no material changes to internal control over financial reporting - Management concluded that the disclosure controls and procedures for both the Company and the Operating Partnership were effective as of the end of the period covered by the report[181][183] - There were no changes in internal control over financial reporting during the fiscal quarter that materially affected, or are reasonably likely to materially affect, internal controls[182][184] Part II: Other Information This section covers other information including legal proceedings, risk factors, and unregistered sales of equity securities Legal Proceedings The company reported no material legal proceedings - There are no material legal proceedings to report for the period[187] Risk Factors There have been no material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K for the year ended December 31, 2020 - No material changes to the risk factors disclosed in the 2020 Form 10-K were reported[188] Unregistered Sales of Equity Securities and Use of Proceeds The company reported no unregistered sales of equity securities during the period - None reported[189]