First Industrial Realty Trust(US:FR)2023-02-09 20:16Financial Data and Key Metrics Changes - The company reported NAREIT funds from operations (FFO) of $0.60 per fully diluted share for Q4 2022, compared to $0.52 per share in Q4 2021, and for the full year, FFO per share was $2.28 versus $1.97 in 2021 [27] - Cash same-store NOI growth for the full year was a record 10.1%, with Q4 growth at 7.6%, driven by higher occupancy and rental rate increases [10][28] - The company declared a dividend of $0.32 per share for Q1 2023, an increase of 8.5% from the prior rate, with a payout ratio of approximately 70% based on anticipated AFFO for 2023 [8] Business Line Data and Key Metrics Changes - The company placed 4.1 million square feet of development in service during the year, all 100% leased at a cash yield of 6.6% [24] - Leasing activity in Q4 included approximately 2.1 million square feet of leases commenced, with tenant retention by square footage at 81% [11][28] - The company signed leases that commenced in 2023 at a cash rental rate increase of 33%, ahead of the previous year's pace [22] Market Data and Key Metrics Changes - Industrial vacancy was reported at 3% at year-end, with net absorption of 412 million square feet versus completions of 370 million for the full year [21] - The company anticipates cash rental rate changes for 2023 to be between 40% to 50% [22] - The company expects continued demand in key markets, particularly in high barrier markets on the East and West Coast [35] Company Strategy and Development Direction - The company is focused on maintaining strong fundamentals in the industrial real estate market, with plans for new developments in high-demand areas [32] - The company is managing its portfolio actively, with sales guidance for 2023 set between $50 million to $150 million [25] - The company is prepared for economic and geopolitical challenges while aiming to outperform through the cycle [32] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the industrial real estate market, citing strong fundamentals and continued demand despite potential economic headwinds [32] - The company is monitoring the economic landscape closely and is prepared for both challenges and opportunities [32] - Management noted that while there is a normalization of demand, the overall market remains strong with solid interest from tenants [72] Other Important Information - The company has a development pipeline of approximately $225 million, funded by excess cash flow after dividends [75] - The company has a strong liquidity position with $600 million available on its line of credit and no maturities until 2026 [94] - The company is seeing a decline in land values in certain markets, with adjustments made to reflect increased return requirements [106][119] Q&A Session Summary Question: Can you provide commentary on the development pipeline for '23? - Management indicated that development starts will depend on lease-up performance, with expectations for additional starts in high barrier markets [35] Question: How much pressure are you seeing on the same-store expense side? - Management noted minimal pressure on expenses, with most being recoverable under net leases [53][54] Question: What are the expectations for market rent growth across the portfolio? - Management expects market rent growth of 5% to 10% nationally, with higher growth in coastal markets [96] Question: Can you clarify the impact of ADESA on rental income? - ADESA accounted for 1.8% of rental income, and management believes the basis in land and current rents are below market [29][44] Question: What is the anticipated impact of rising interest rates on operations? - Management acknowledged the impact of rising interest rates on their line of credit and overall financing costs [89] Question: How is leasing progressing for newly completed projects? - Management reported active discussions and proposals for leasing new projects, with encouraging interest from various sectors [68]