The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the consolidated financial statements and notes thereto appearing elsewhere in this Form 10-Q. Unless stated otherwise or the context otherwise requires, the terms "we," "our" and "us" refer toFirst Industrial Realty Trust, Inc. (the "Company") and its subsidiaries, includingFirst Industrial, L.P. (the "Operating Partnership") and its consolidated subsidiaries. Forward-Looking Statements The following discussion 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 (the "Exchange Act"). 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; •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; •the uncertainty and economic impact of pandemics, epidemics or other public health emergencies or fear of such events, such as the recent outbreak of COVID-19; •potential natural disasters and other potentially catastrophic events such as acts of war and/or terrorism; •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 in this report, in Item 1A, "Risk Factors" and elsewhere in our annual report on Form 10-K for the year endedDecember 31, 2020 as well as those risks and uncertainties discussed from time to time in our other Exchange Act reports and in our other public filings with theSecurities and Exchange Commission (the "SEC"). We caution you not to place undue reliance on forward-looking statements, which reflect our outlook only and speak only as of the date of this report. We assume no obligation to update or supplement forward-looking statements. 27 --------------------------------------------------------------------------------
General
The Company is a self-administered and fully integrated real estate company which owns, manages, acquires, sells, develops and redevelops industrial real estate. The Company is aMaryland corporation organized onAugust 10, 1993 and a real estate investment trust ("REIT") as defined in the Internal Revenue Code of 1986 (the "Code"). As ofJune 30, 2021 , we owned 427 industrial properties located in 20 states, containing an aggregate of approximately 61.8 million square feet of gross leasable area ("GLA"). Of the 427 properties owned on a consolidated basis, none of them are directly owned by the Company. We began operations onJuly 1, 1994 . The Company's operations are conducted primarily through theOperating Partnership , of which the Company is the sole general partner (the "General Partner"), with an approximate 97.7% ownership interest ("General Partner Units") atJune 30, 2021 .The Operating Partnership also conducts operations through several other limited partnerships (the "Other Real Estate Partnerships"), numerous limited liability companies ("LLCs") and certain taxable REIT subsidiaries ("TRSs"), the operating data of which, together with that of theOperating Partnership , is consolidated with that of the Company as presented herein.The Operating Partnership holds at least a 99% limited partnership interest in each of the Other Real Estate Partnerships. The general partners of the Other Real Estate Partnerships are separate corporations, wholly-owned by the Company, each with at least a .01% general partnership interest in the Other Real Estate Partnerships. The Company does not have any significant assets or liabilities other than its investment in theOperating Partnership and its 100% ownership interest in the general partners of the Other Real Estate Partnerships. The noncontrolling interest in theOperating Partnership of approximately 2.3% atJune 30, 2021 represents the aggregate partnership interest held by the limited partners thereof ("Limited Partner Units" and together with the General Partner Units, the "Units"). We also own equity interests in, and provide various services to, two joint ventures (the "Joint Ventures"), each through a wholly-owned TRS of theOperating Partnership .The Joint Ventures are each accounted for under the equity method of accounting. The operating data of the Joint Ventures is not consolidated with that of theOperating Partnership or the Company as presented herein. Available Information We maintain a website at www.firstindustrial.com. Information on this website shall not constitute part of this Form 10-Q. Copies of our respective annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to such reports are available without charge on our website as soon as reasonably practicable after such reports are filed with or furnished to theSEC . You may also read and copy any document filed at the public reference facilities of theSEC at100 F Street, N.E. ,Washington, D.C. 20549. Please call theSEC at (800)SEC -0330 for further information about the public reference facilities. These documents also may be accessed through theSEC's Interactive Data Electronic Application via theSEC's home page on the Internet (www.sec.gov). In addition, the Company's Corporate Governance Guidelines, Code of Business Conduct andEthics, Audit Committee Charter, Compensation Committee Charter and Nominating/Corporate Governance Committee Charter, along with supplemental financial and operating information prepared by us, are all available without charge on the Company's website or upon request to the Company. Amendments to, or waivers from, our Code of Business Conduct and Ethics that apply to our executive officers or directors will also be posted to our website. We also post or otherwise make available on our website from time to time other information that may be of interest to our investors. Please direct requests as follows:First Industrial Realty Trust, Inc. 1 N. Wacker Drive , Suite 4200Chicago, IL 60606 Attention: Investor Relations 28
-------------------------------------------------------------------------------- Management's Overview Business Objectives and Growth Plans Our fundamental business objective is to maximize the total return to the Company's stockholders and theOperating Partnership's partners through an increase in cash flows and increases in the value of our properties and operations. Our long-term business growth plans include the following elements: •Internal Growth. We seek to grow internally by (i) increasing revenues by renewing or re-leasing spaces subject to expiring leases at higher rental levels; (ii) contractual rent escalations on our long-term leases; (iii) increasing occupancy levels at properties where vacancies exist and maintaining occupancy elsewhere; (iv) controlling and minimizing property operating expenses, general and administrative expenses and releasing costs; and (v) renovating existing properties. •External Growth. We seek to grow externally through (i) the development of best-in-class industrial properties; (ii) the acquisition of portfolios of industrial properties or individual properties which meet our investment parameters within our 15 target logistics markets; (iii) the expansion of our properties; and (iv) possible additional joint venture investments. •Portfolio Enhancement. We continually seek to upgrade our overall portfolio via new investments as well as through the sale of select assets that we believe do not exhibit favorable characteristics for long-term cash flow growth. We target new investments located in 15 logistics markets where land is more scarce. We seek to refine our portfolio over the coming years by focusing on bulk and regional warehouses properties and downsizing our percentage of light industrial and R&D/flex buildings. Our ability to pursue our long-term growth plans is affected by market conditions and our financial condition and operating capabilities. Business Strategies We utilize the following strategies in connection with the operation of our business: •Organizational Strategy. We implement our decentralized property operations strategy through the deployment of experienced regional management teams and local property managers. We provide acquisition, development and financing assistance, asset management oversight and financial reporting functions from our headquarters inChicago, Illinois to support our regional operations. We believe the size of our portfolio enables us to realize operating efficiencies by spreading overhead among many properties and by negotiating purchasing discounts. •Market Strategy. Our market strategy is to concentrate on the top 15 industrial real estate markets inthe United States . These markets have one or more of the following characteristics: (i) favorable industrial real estate fundamentals, including improving industrial demand and constrained supply that can lead to long-term rent growth; (ii) favorable economic and business environments that should benefit from increases in distribution activity driven by growth in global trade and local consumption; (iii) population growth as it generally drives industrial demand; (iv) natural barriers to entry and scarcity of land which are key elements in delivering future rent growth; and (v) sufficient size to provide ample opportunity for growth through incremental investments as well as offer asset liquidity. •Leasing and Marketing Strategy. We have an operational management strategy designed to enhance tenant satisfaction and portfolio performance. We pursue an active leasing strategy, which includes broadly marketing available space, seeking to renew existing leases at higher rents per square foot and seeking leases which provide for the pass-through of property-related expenses to the tenant. We also have local and national marketing programs which focus on the business and real estate brokerage communities and multi-national tenants. •Acquisition/Development Strategy. Our investment strategy is primarily focused on developing and acquiring industrial properties in the top 15 key logistics markets with a coastal orientation inthe United States through the deployment of experienced regional management teams. When evaluating potential industrial property acquisitions and developments, we consider such factors as: (i) the geographic area and type of property; (ii) the location, construction quality, condition and design of the property; (iii) the terms of tenant leases, including the potential for rent increases; (iv) the potential for economic growth and the general business, tax and regulatory environment of the area in which the property is located; (v) the occupancy and demand by tenants for properties of a similar type in the vicinity; (vi) competition from existing properties and the potential for the construction of new properties in the area; (vii) the potential for capital appreciation of the property; (viii) the ability to improve 29 -------------------------------------------------------------------------------- the property's performance through renovation; and (ix) the potential for expansion of the physical layout of the property and/or the number of sites. •Disposition Strategy. We continually evaluate local market conditions and property-related factors in all of our markets for purposes of identifying assets suitable for disposition. We look to sell assets we believe have lower rent growth potential and redeploy the capital into assets we believe have higher rent growth potential in key logistics markets. We also seek to reduce our percentage of our holdings of light industrial and R&D/flex assets over time. •Financing Strategy. To finance acquisitions, developments and debt maturities, as market conditions permit, we may utilize a portion of proceeds from property sales, unsecured debt offerings, term loans, mortgage financings and borrowings under our$725.0 million unsecured revolving credit agreement (the "Unsecured Credit Facility") (See Subsequent Events), and proceeds from the issuance, when and as warranted, of additional equity securities. We also evaluate joint venture arrangements as additional sources of capital to finance acquisitions and developments. 30 -------------------------------------------------------------------------------- Summary of the Six Months EndedJune 30, 2021 Despite the COVID-19 pandemic, our operating results remained strong in the first half of 2021. Our quarter end in-service occupancy was 96.6%, which is a 90 basis point increase compared to our in-service occupancy atDecember 31, 2020 , and during the six months endedJune 30, 2021 , we grew cash rental rates by 13.3% on new and renewal leases (15.7% during the second quarter). After resuming speculative development in the fourth quarter of 2020, we started seven additional speculative buildings and one build-to-suit building comprising, in the aggregate, 4.1 million square feet of GLA in the first six months of 2021. We continued to position ourselves for future development activity by acquiring land located in our target markets. OnJuly 7, 2021 , we amended and restated our Unsecured Line of Credit that was scheduled to mature inOctober 2021 to, among other things, extend the maturity date toJuly 7, 2025 and increase our borrowing capacity thereunder to$750.0 million and we also amended and restated our$200.0 million unsecured term loan that was maturing inJuly 2021 to, among other things, extend the maturity date toJuly 7, 2026 . The credit spreads on our new$750.0 million revolving line of credit and$200.0 million unsecured term loan are now 32.5 basis points and 65 basis points, respectively, less than each prior facility. Although the impact of COVID-19 pandemic has had an overall minimal impact on us in 2020 and so far in 2021, we cannot predict the future impact it may have on our business, future financial condition and operating results. During the six months endedJune 30, 2021 , we completed the following significant real estate activities: •We acquired three industrial properties comprised of approximately 0.2 million square feet of GLA located in theCentral Florida ,Denver andNorthern California markets for an aggregate purchase price of$30.7 million , excluding transactions costs. •We acquired approximately 320.6 acres of land for development located in theCentral Pennsylvania , Inland Empire,Northern California ,Philadelphia andPhoenix markets, for an aggregate purchase price of$116.5 million , excluding transaction costs. •We commenced speculative development of seven industrial buildings and one build-to-suit facility totaling 4.1 million square feet of GLA in ourCentral Pennsylvania ,Dallas ,Denver , Inland Empire,Nashville andPhoenix markets. •We sold six industrial properties and three industrial condominium units comprising approximately 1.5 million square feet of GLA and one land parcel for gross sales proceeds of$104.4 million . •One of the Joint Ventures sold its remaining 138 acres (for which the Company was the purchaser and such land purchase is included above) for a sale price of$31.7 million . Additionally, we netted our share of gain on sale and incentive fees of$10.2 million against the basis of the land. Our significant financing activities during the six months endedJune 30, 2021 were: •We paid off$57.9 million in mortgage loans payable, bringing the percentage of our real estate that is unencumbered to 95.5% atJune 30, 2021 . •We declared first and second quarter cash dividends of$0.27 per common share or Unit per quarter, an increase of 8.0% from the 2020 quarterly rate. •AtJune 30, 2021 , we have$660.9 million available for additional borrowings under our Unsecured Credit Facility and cash and cash equivalents was$55.6 million . 31 -------------------------------------------------------------------------------- Results of Operations The tables below summarize our revenues, property expenses and depreciation and other amortization by various categories for the three and six months endedJune 30, 2021 and 2020. Same store properties are properties owned prior toJanuary 1, 2020 and held as an in-service property throughJune 30, 2021 and developments and redevelopments that were placed in service prior toJanuary 1, 2020 . Properties which are at least 75% occupied at acquisition are placed in service, unless we anticipate tenant move-outs within two years of ownership would drop occupancy below 75%. Acquisitions that are less than 75% occupied at the date of acquisition and developments and redevelopments are placed in service as they reach the earlier of a) stabilized occupancy (defined as 90% occupied), or b) one year subsequent to acquisition or development/redevelopment construction completion. Acquired properties with occupancy greater than 75% at acquisition, but with tenants that we anticipate will move out within two years of ownership, will be placed in service upon the earlier of reaching 90% occupancy or twelve months after move out. Properties are moved from the same store classification to the redevelopment classification when capital expenditures for a project are estimated to exceed 25% of the undepreciated gross book value of the property. Acquired properties are properties that were acquired subsequent toDecember 31, 2019 and held as an operating property throughJune 30, 2021 . Sold properties are properties that were sold subsequent toDecember 31, 2019 . Developments and redevelopments (collectively referred to as "(Re)Developments") include (re)developments that were not: a) substantially complete 12 months prior toJanuary 1, 2020 ; or b) stabilized prior toJanuary 1, 2020 . Other revenues are derived from the operations of properties not placed in service under one of the categories discussed above, the operations of our maintenance company and other miscellaneous revenues. Other property expenses are derived from the operations of properties not placed in service under one of the categories discussed above, the operations of our maintenance company, vacant land expenses and other miscellaneous regional expenses. Our future financial condition and results of operations, including rental revenues, may be impacted by the future acquisition, (re)development and sale of properties. Our future revenues and expenses may vary materially from historical rates. 32 -------------------------------------------------------------------------------- Comparison of Six Months EndedJune 30, 2021 to Six Months EndedJune 30, 2020 Our net income was$116.7 million and$78.0 million for the six months endedJune 30, 2021 and 2020, respectively. For the six months endedJune 30, 2021 and 2020, the average daily occupancy rate of our same store properties was 95.9% and 96.9%, respectively. Six Months Ended June 30, 2021 2020 $ Change % Change ($ in 000's) REVENUES Same Store Properties$ 211,270 $ 201,092 $ 10,178 5.1 % Acquired Properties 6,598 496 6,102 1,230.2 % Sold Properties 2,351 12,177 (9,826) (80.7) % (Re)Developments 10,974 3,318 7,656 230.7 % Other 2,464 2,462 2 0.1 % Total Revenues$ 233,657 $ 219,545 $ 14,112 6.4 % Revenues from same store properties increased$10.2 million primarily due to an increase in rental rates and tenant recoveries and a decrease in reserves taken on receivable amounts, offset by a decrease in occupancy and final insurance settlement proceeds of$1.1 million received and recorded in 2020 as revenue related to a property that was destroyed by fire in 2016. Revenues from acquired properties increased$6.1 million due to the 11 industrial properties acquired subsequent toDecember 31, 2019 totaling approximately 1.7 million square feet of GLA. Revenues from sold properties decreased$9.8 million due to the 35 industrial properties sold subsequent toDecember 31, 2019 totaling approximately 3.4 million square feet of GLA as well as a lease we reclassified from an operating lease to a sales-type lease in 2019, for which the sale of such property subsequently closed in 2020. Revenues from (Re)Developments increased$7.7 million due to an increase in occupancy. Revenues from other remained relatively unchanged. Six Months Ended June 30, 2021 2020 $ Change % Change ($ in 000's) PROPERTY EXPENSES Same Store Properties$ 55,434 $ 48,232 $ 7,202 14.9 % Acquired Properties 1,302 120 1,182 985.0 % Sold Properties 220 2,743 (2,523) (92.0) % (Re)Developments 3,235 1,577 1,658 105.1 % Other 4,799 4,460 339 7.6 % Total Property Expenses$ 64,990 $ 57,132 $ 7,858 13.8 % Property expenses include real estate taxes, repairs and maintenance, property management, utilities, insurance and other property related expenses. Property expenses from same store properties increased$7.2 million primarily due to an increase in real estate tax expense and snow removal costs. Property expenses from acquired properties increased$1.2 million due to properties acquired subsequent toDecember 31, 2019 . Property expenses from sold properties (including expenses related to the lease reclassified as a sales-type lease) decreased$2.5 million due to properties sold subsequent toDecember 31, 2019 . Property expenses from (Re)Developments increased$1.7 million primarily due to the substantial completion of developments. Property expenses from other remained relatively unchanged. 33 -------------------------------------------------------------------------------- General and administrative expense decreased by$0.5 million , or 2.6%, primarily due to severance and regional wind-up expenses associated with the closing of ourIndianapolis office during the six months endedJune 30, 2020 . Six Months Ended June 30, 2021 2020 $ Change % Change ($ in 000's) DEPRECIATION AND OTHER AMORTIZATION Same Store Properties$ 55,763 $ 57,338 $ (1,575) (2.7) % Acquired Properties 3,286 538 2,748 510.8 % Sold Properties 307 2,396 (2,089) (87.2) % (Re) Developments 3,940 1,637 2,303 140.7 %
1,254 (129) (10.3) % Total Depreciation and Other Amortization$ 64,421 $ 63,163 $ 1,258 2.0 % Depreciation and other amortization from same store properties remained relatively unchanged. Depreciation and other amortization from acquired properties increased$2.7 million due to properties acquired subsequent toDecember 31, 2019 . Depreciation and other amortization from sold properties decreased$2.1 million due to properties sold subsequent toDecember 31, 2019 . Depreciation and other amortization from (Re)Developments increased$2.3 million primarily due to an increase in depreciation and amortization related to completed developments. Depreciation from corporate furniture, fixtures and equipment and other remained relatively unchanged. For the six months endedJune 30, 2021 , we recognized$57.5 million of gain on sale of real estate related to the sale of six industrial properties and three industrial condominium units comprised of approximately 1.5 million square feet of GLA and one land parcel. For the six months endedJune 30, 2020 , we recognized$23.1 million of gain on sale of real estate related to the sale of 12 industrial properties comprised of approximately 0.4 million square feet of GLA. Interest expense remained relatively unchanged. However, the small decrease was caused by an increase in capitalized interest of$0.9 million caused by an increase in development costs eligible for capitalization during the six months endedJune 30, 2021 as compared to the six months endedJune 30, 2020 and decrease in the weighted average interest rate for the six months endedJune 30, 2021 (3.63%) as compared to the six months endedJune 30, 2020 (3.64%), offset by an increase in the weighted average debt balance outstanding for the six months endedJune 30, 2021 ($1,603.0 million ) as compared to the six months endedJune 30, 2020 ($1,578.8 million ). Amortization of debt issuance costs increased by$0.3 million , or 19.8%, primarily due to debt issuance costs incurred related to the refinancing of a$200.0 million unsecured term loan inJuly 2020 and the issuance of$300.0 million of private placement notes inSeptember 2020 . Equity in loss of Joint Ventures for both the six months endedJune 30, 2021 and 2020 was not significant. However, during the six months endedJune 30, 2021 , we deferred$10.2 million of equity in income and incentive fees earned from the sale of the remaining 138 acres of developable land from one of the Joint Ventures since the Company was the purchaser of the land. This deferral was netted against the basis of the land acquired. Income tax provision increased by$1.3 million , or 886.1%, primarily due to an increase in our pro-rata share of gain from the sale of real estate by one of the Joint Ventures as well as incentive fees we earned from one of the Joint Ventures. Our equity ownership in the Joint Ventures is owned through a wholly-owned TRS. 34 -------------------------------------------------------------------------------- Comparison of Three Months EndedJune 30, 2021 to Three Months EndedJune 30, 2020 Our net income was$53.2 million and$36.4 million for the three months endedJune 30, 2021 and 2020, respectively. For the three months endedJune 30, 2021 and 2020, the average daily occupancy rate of our same store properties was 96.1% and 97.0%, respectively. Three Months Ended June 30, 2021 2020 $ Change % Change ($ in 000's) REVENUES Same Store Properties$ 105,795 $ 100,075 $ 5,720 5.7 % Acquired Properties 3,575 449 3,126 696.2 % Sold Properties 925 5,731 (4,806) (83.9) % (Re)Developments 5,838 1,792 4,046 225.8 % Other 1,265 1,155 110 9.5 % Total Revenues$ 117,398 $ 109,202 $ 8,196 7.5 % Revenues from same store properties increased$5.7 million primarily due to an increase in rental rates and tenant recoveries and a decrease in reserves taken on receivable amounts, offset by a decrease in occupancy. Revenues from acquired properties increased$3.1 million due to the 11 industrial properties acquired subsequent toDecember 31, 2019 totaling approximately 1.7 million square feet of GLA. Revenues from sold properties decreased$4.8 million due to the 35 industrial properties sold subsequent toDecember 31, 2019 totaling approximately 3.4 million square feet of GLA as well as a lease we reclassified from an operating lease to a sales-type lease in 2019, for which the sale of such property subsequently closed in 2020. Revenues from (Re)Developments increased$4.0 million due to an increase in occupancy. Revenues from other remained relatively unchanged. Three Months Ended June 30, 2021 2020 $ Change % Change ($ in 000's) PROPERTY EXPENSES Same Store Properties$ 27,218 $ 23,750 $ 3,468 14.6 % Acquired Properties 642 104 538 517.3 % Sold Properties 41 1,217 (1,176) (96.6) % (Re)Developments 1,672 864 808 93.5 % Other 2,175 2,116 59 2.8 % Total Property Expenses$ 31,748 $ 28,051 $ 3,697 13.2 % Property expenses include real estate taxes, repairs and maintenance, property management, utilities, insurance and other property related expenses. Property expenses from same store properties increased$3.5 million primarily due to an increase in real estate tax expense and repair and maintenance costs. Property expenses from acquired properties increased$0.5 million due to properties acquired subsequent toDecember 31, 2019 . Property expenses from sold properties (including expenses related to the lease reclassified as a sales-type lease) decreased$1.2 million due to properties sold subsequent toDecember 31, 2019 . Property expenses from (Re)Developments increased$0.8 million primarily due to the substantial completion of developments. Property expenses from other remained relatively unchanged. 35 --------------------------------------------------------------------------------
General and administrative expense remained relatively unchanged.
Three Months Ended June 30, 2021 2020 $ Change % Change ($ in 000's) DEPRECIATION AND OTHER AMORTIZATION Same Store Properties$ 27,906 $ 29,026 $ (1,120) (3.9) % Acquired Properties 1,929 538 1,391 258.6 % Sold Properties 36 1,119 (1,083) (96.8) % (Re) Developments 2,002 926 1,076 116.2 % Corporate Furniture, Fixtures and Equipment and Other 573 623 (50) (8.0) % Total Depreciation and Other Amortization$ 32,446 $ 32,232 $ 214 0.7 % Depreciation and other amortization from same store properties remained relatively unchanged. Depreciation and other amortization from acquired properties increased$1.4 million due to properties acquired subsequent toDecember 31, 2019 . Depreciation and other amortization from sold properties decreased$1.1 million due to properties sold subsequent toDecember 31, 2019 . Depreciation and other amortization from (Re)Developments increased$1.1 million primarily due to an increase in depreciation and amortization related to completed developments. Depreciation from corporate furniture, fixtures and equipment and other remained relatively unchanged. For the three months endedJune 30, 2021 , we recognized$22.9 million of gain on sale of real estate related to the sale of three industrial properties and one industrial condominium unit comprised of approximately 0.4 million square feet of GLA and one land parcel. For the three months endedJune 30, 2020 , we recognized$9.1 million of gain on sale of real estate related to the sale of three industrial properties comprised of approximately 0.2 million square feet of GLA. Interest expense remained relatively unchanged. However, the small decrease was caused by an increase in capitalized interest of$0.5 million caused by an increase in development costs eligible for capitalization during the three months endedJune 30, 2021 as compared to the three months endedJune 30, 2020 and a decrease in the weighted average debt balance outstanding for the three months endedJune 30, 2021 ($1,604.2 million ) as compared to the three months endedJune 30, 2020 ($1,637.2 million ), offset by an increase in the weighted average interest rate for the three months endedJune 30, 2021 (3.57%) as compared to the three months endedJune 30, 2020 (3.48%). Amortization of debt issuance costs increased by$0.2 million , or 19.3%, primarily due to debt issuance costs incurred related to the refinancing of a$200.0 million unsecured term loan inJuly 2020 and the issuance of$300.0 million of private placement notes inSeptember 2020 . Equity in loss of Joint Ventures for both the three months endedJune 30, 2021 and 2020 was not significant. However, during the three months endedJune 30, 2021 , we deferred$10.2 million of equity in income and incentive fees earned from the sale of the remaining 138 acres of developable land from one of the Joint Ventures since the Company was the purchaser of the land. This deferral was netted against the basis of the land acquired. Income tax provision increased by$1.4 million , or 612.7%, primarily due to an increase in our pro-rata share of gain from the sale of real estate by the Joint Ventures as well as incentive fees we earned from one of the Joint Ventures. Our equity ownership in the Joint Ventures is owned through a wholly-owned TRS. 36 -------------------------------------------------------------------------------- Leasing Activity The following table provides a summary of our commenced leases for the three and six months endedJune 30, 2021 . The table does not include month-to-month leases or leases with terms less than twelve months. Number of Square Feet Weighted Lease Costs Weighted Leases CommencedNet Rent Per Straight Line Basis Average LeasePer Square Average Tenant Three Months Ended Commenced (in 000's) Square Foot (A) Rent Growth (B) Term (C) Foot (D) Retention (E) New Leases 32 1,083 $ 6.70 34.4 % 6.8$ 6.54 N/A Renewal Leases 37 2,015 $ 6.40 27.0 % 5.4$ 1.53 71.1 % Development / Acquisition Leases 4 418 $ 7.27 N/A 6.8 N/A - Total / Weighted Average 73 3,516 $ 6.60 29.5 % 6.0$ 3.28 71.1 % Six Months Ended New Leases 50 1,660 $ 6.70 34.8 % 6.2$ 6.11 N/A Renewal Leases 69 4,320 $ 5.85 22.2 % 4.1$ 1.21 73.9 % Development / Acquisition Leases 10 885 $ 8.52 N/A 8.3 N/A - Total / Weighted Average 129 6,865 $ 6.40 25.8 % 5.1$ 2.57 73.9 % _______________ (A) Net rent is the average base rent calculated in accordance with GAAP, over the term of the lease. (B) Straight line basis rent growth is a ratio of the change in net rent (including straight line rent adjustments) on a new or renewal lease compared to the net rent (including straight line rent adjustments) of the comparable lease. New leases where there were no prior comparable leases are excluded. (C) The lease term is expressed in years. Assumes no exercise of lease renewal options, if any. (D) Lease costs are comprised of the costs incurred or capitalized for improvements of vacant and renewal spaces, as well as the commissions paid and costs capitalized for leasing transactions. Lease costs per square foot represent the total turnover costs expected to be incurred on the leases that commenced during the period and do not reflect actual expenditures for the period. (E) Represents the weighted average square feet of tenants renewing their respective leases. The following table provides a summary of our leases that commenced during the three and six months endedJune 30, 2021 , which included rent concessions during the lease term. Number of Leases Square Feet Rent Concessions Three Months Ended With Rent Concessions (in 000's) ($) New Leases 23 911$ 1,769 Renewal Leases 4 152 118 Development / Acquisition Leases 3 318 775 Total 30 1,381$ 2,662 Six Months Ended New Leases 36 1,397$ 2,453 Renewal Leases 6 187 157 Development / Acquisition Leases 9 785 2,865 Total 51 2,369$ 5,475 37
-------------------------------------------------------------------------------- Liquidity and Capital Resources AtJune 30, 2021 , our cash and cash equivalents was approximately$55.6 million and restricted cash was approximately$27.0 million . We also had$660.9 million available for additional borrowings under our Unsecured Credit Facility as ofJune 30, 2021 . We have considered our short-term (throughJune 30, 2022 ) liquidity needs and the adequacy of our estimated cash flow from operations and other expected liquidity sources to meet these needs. AtJune 30, 2021 , we had a$200.0 million term loan maturing inJuly 2021 and our Unsecured Credit Facility matured inOctober 2021 . OnJuly 7, 2021 , we amended and restated the$200.0 million term loan to, among other things, extend its maturity date toJuly 7, 2026 (see Subsequent Events). Additionally, onJuly 7, 2021 , we amended and restated our Unsecured Credit Facility to, among other things, increase our borrowing capacity to$750.0 million and extend its maturity date toJuly 7, 2025 (see Subsequent Events). We believe that our principal short-term liquidity needs are to fund normal recurring expenses, property acquisitions, developments, renovations, expansions and other nonrecurring capital improvements, debt service requirements, the minimum distributions required to maintain the Company's REIT qualification under the Code and distributions approved by the Company's Board of Directors. We anticipate that these needs will be met with cash flows provided by operating activities as well as the disposition of select assets. These needs may also be met by the issuance of other debt or equity securities, subject to market conditions or borrowings under our Unsecured Credit Facility. We expect to meet long-term (afterJune 30, 2022 ) liquidity requirements such as property acquisitions, developments, scheduled debt maturities, major renovations, expansions and other nonrecurring capital improvements through the disposition of select assets, long-term unsecured and secured indebtedness and the issuance of additional equity securities, subject to market conditions. Our Unsecured Credit Facility contains certain financial covenants including limitations on incurrence of debt and debt service coverage. Our access to borrowings may be limited if we fail to meet any of these covenants. We believe that we were in compliance with our financial covenants as ofJune 30, 2021 , and we anticipate that we will be able to operate in compliance with our financial covenants for the next twelve months. As ofJuly 23, 2021 , we had approximately$606.8 million available for additional borrowings under our New Credit Facility (see Subsequent Events). Our senior unsecured notes have been assigned credit ratings fromStandard & Poor's , Moody's and Fitch Ratings of BBB/Stable, Baa2/Stable and BBB/Stable, respectively. In the event of a downgrade, we believe we would continue to have access to sufficient capital. However, our cost of borrowing would increase and our ability to access certain financial markets may be limited. 38 -------------------------------------------------------------------------------- Cash Flow Activity The following table summarizes our cash flow activity for the Company for the six months endedJune 30, 2021 and 2020: 2021
2020
(In
thousands)
Net cash provided by operating activities$ 118,484
Net cash used in investing activities (161,658)
(245,772)
Net cash (used in) provided by financing activities (73,870)
76,440
The following table summarizes our cash flow activity for the
2021
2020
(In
thousands)
Net cash provided by operating activities$ 118,502 $
117,871
Net cash used in investing activities (161,658)
(245,772)
Net cash (used in) provided by financing activities (73,888) 76,026
Changes in cash flow for the six months endedJune 30, 2021 , compared to the prior year comparable period are described as follows: Operating Activities: Cash provided by operating activities increased$1.0 million for the Company (increased$0.6 million for theOperating Partnership ), primarily due to the following: •increase in NOI from same store properties, acquired properties and recently developed properties of$13.9 million offset by a decrease in NOI due to the disposition of real estate of$7.3 million ; and •increase in accounts payable, accrued expenses, other liabilities, rents received in advance and security deposits due to timing of cash payments; offset by; •increase in tenant accounts receivable, prepaid expenses and other assets due to timing of cash receipts. Investing Activities: Cash used in investing activities decreased$84.1 million , primarily due to the following: •increase of$60.6 million in net proceeds received from the disposition of real estate in 2021 as compared to 2020; •increase in distributions and a decrease in contributions from our Joint Ventures of$24.0 million in 2021 as compared to 2020; •decrease of$7.1 million in escrow deposits; and •decrease of$8.2 million related to the acquisition of real estate; offset by: •increase of$14.1 million related to the development of real estate and payments for improvements and leasing commissions in 2021 as compared to 2020. Financing Activities: Cash used in financing activities increased$150.3 million for the Company (increased$149.9 million for theOperating Partnership ), primarily due to the following: •decrease in net borrowings of our Unsecured Credit Facility of$102.0 million in 2021 compared to 2020; •increase in repayments of mortgage loans payable of$42.8 million in 2021 compared to 2020; and •increase in dividend and unit distributions of$6.3 million due to the Company increasing the dividend rate in 2021. 39 -------------------------------------------------------------------------------- Market Risk The following discussion about our risk-management activities includes "forward-looking statements" that involve risk and uncertainties. Actual results could differ materially from those projected in the forward-looking statements. Our business subjects us to market risk from interest rates, as described below. Interest Rate Risk The following analysis presents the hypothetical gain or loss in earnings, cash flows or fair value of the financial instruments and derivative instruments which are held by us atJune 30, 2021 that are sensitive to changes in interest rates. While this analysis may have some use as a benchmark, it should not be viewed as a forecast. In the normal course of business, we also face risks that are either non-financial or non-quantifiable. Such risks principally include credit risk and legal risk and are not represented in the following analysis. AtJune 30, 2021 ,$1,542.4 million or 96.3% of our total debt, excluding unamortized debt issuance costs, was fixed rate debt. As of the same date,$60.0 million , or 3.7% of our total debt, excluding unamortized debt issuance costs, was variable rate debt. AtDecember 31, 2020 , our total debt, excluding unamortized debt issuance costs, was$1,602.7 million and 100% was fixed rate debt. AtJune 30, 2021 andDecember 31, 2020 , the fixed rate debt amounts include variable rate debt that has been effectively swapped to a fixed rate through the use of derivative instruments with an aggregate notional amount outstanding of$460.0 million , that mitigate our exposure to our Unsecured Term Loans' variable interest rates, which are based on LIBOR. The use of derivative financial instruments allows us to manage the risks increases in interest rates would have on our earnings and cash flows. Currently, we do not enter into financial instruments for trading or other speculative purposes. For fixed rate debt, changes in interest rates generally affect the fair value of the debt, but not our earnings or cash flows. Conversely, for variable rate debt, changes in the base interest rate used to calculate the all-in interest rate generally do not impact the fair value of the debt, but would affect our future earnings and cash flows. The interest rate risk and changes in fair market value of fixed rate debt generally do not have a significant impact on us until we are required to refinance such debt. See Note 4 to the Consolidated Financial Statements for a discussion of the maturity dates of our various fixed rate debt. Our variable rate debt is subject to risk based upon prevailing market interest rates. If the LIBOR rates relevant to our variable rate debt were to have increased 10%, we estimate that our interest expense during the six months endedJune 30, 2021 would have increased by approximately$0.001 million based on our average outstanding floating-rate debt during the six months endedJune 30, 2021 . Additionally, if weighted average interest rates on our weighted average fixed rate debt during the six months endedJune 30, 2021 were to have increased by 10% due to refinancing, interest expense would have increased by approximately$2.9 million during the six months endedJune 30, 2021 . OnMarch 5, 2021 , theFinancial Conduct Authority ("FCA") that regulates LIBOR announced that USD-LIBOR will no longer be published afterJune 30, 2023 . The Alternative Reference Rates Committee ("ARRC") has proposed that the Secured Overnight Financing Rate ("SOFR") is the rate that represents best practice as the alternative to USD-LIBOR for use in derivatives and other financial contracts that are currently indexed to USD-LIBOR. ARRC has proposed a paced market transition plan to SOFR from USD-LIBOR and organizations are currently working on industry wide and company specific transition plans as it relates to derivatives and cash markets exposed to USD-LIBOR. We anticipate that LIBOR will continue to be available substantially in its current form at least untilJune 30, 2023 . Although many of our LIBOR-based obligations provide for alternative methods of calculating the interest rate payable if LIBOR is not reported, including the new debt agreements we entered into and disclosed in subsequent events, the extent and manner of any future changes with respect to methods of calculating LIBOR or replacing LIBOR with another benchmark are unknown and impossible to predict at this time and, as such, may result in interest rates that are materially higher than current interest rates.We are monitoring this activity and evaluating the related risks. As ofJune 30, 2021 , the estimated fair value of our debt was approximately$1,692.4 million based on our estimate of the then-current market interest rates. 40
-------------------------------------------------------------------------------- Supplemental Earnings Measure Investors in and industry analysts following the real estate industry utilize funds from operations ("FFO") and net operating income ("NOI") as supplemental operating performance measures of an equity REIT. Historical cost accounting for real estate assets in accordance with accounting principles generally accepted inthe United States of America ("GAAP") implicitly assumes that the value of real estate assets diminishes predictably over time through depreciation. Since real estate values instead have historically risen or fallen with market conditions, many industry analysts and investors prefer to supplement operating results that use historical cost accounting with measures such as FFO and NOI, among others. We provide information related to FFO and same store NOI ("SS NOI") both because such industry analysts are interested in such information, and because our management believes FFO and SS NOI are important performance measures. FFO and SS NOI are factors used by management in measuring our performance, including for purposes of determining the compensation of our executive officers under our 2021 incentive compensation plan. Neither FFO nor SS NOI should be considered as a substitute for net income, or any other measures derived in accordance with GAAP. Neither FFO nor SS NOI represents cash generated from operating activities in accordance with GAAP and neither should be considered as an alternative to cash flow from operating activities as a measure of our liquidity, nor is either indicative of funds available for our cash needs, including our ability to make cash distributions. Funds From OperationsThe National Association of Real Estate Investment Trusts ("NAREIT") has recognized and defined for the real estate industry a supplemental measure of REIT operating performance, FFO, that excludes historical cost depreciation, among other items, from net income determined in accordance with GAAP. FFO is a non-GAAP financial measure. FFO is calculated by us in accordance with the definition adopted by theBoard of Governors of NAREIT and may not be comparable to other similarly titled measures of other companies. In accordance with the restated NAREIT definition of FFO, we calculate FFO to be equal to net income available toFirst Industrial Realty Trust, Inc.'s common stockholders and participating securities, plus depreciation and other amortization of real estate, plus impairment of real estate, minus gain or plus loss on sale of real estate, net of any income tax provision or benefit associated with the sale of real estate. We also exclude the same adjustments from our share of net income from unconsolidated joint ventures. Management believes that the use of FFO available to common stockholders and participating securities, combined with net income (which remains the primary measure of performance), improves the understanding of operating results of REITs among the investing public and makes comparisons of REIT operating results more meaningful. Management believes that, by excluding gains or losses related to sales of real estate assets, impairment of real estate assets and real estate asset depreciation and amortization, investors and analysts are able to identify the operating results of the long-term assets that form the core of a REIT's activity and use these operating results for assistance in comparing these operating results between periods or to those of different companies. The following table shows a reconciliation of net income available to common stockholders and participating securities to the calculation of FFO available to common stockholders and participating securities for the three and six months endedJune 30, 2021 and 2020. Three Months Ended June 30, Six Months Ended June 30, 2021 2020 2021 2020 (In thousands) (In thousands) Net Income Available toFirst Industrial Realty Trust, Inc.'s Common Stockholders and Participating Securities$ 51,936 $ 35,669 $ 114,134 $ 76,303 Adjustments: Depreciation and Other Amortization of Real Estate 32,234 32,032 64,021 62,769 Gain on Sale of Real Estate (22,854) (9,076) (57,499) (23,069) Income Tax Provision - Allocable to Gain on Sale of Real Estate, including Joint Ventures 1,472 - 1,551 - Noncontrolling Interest Share of Adjustments (247) (484) (194) (848) Funds from Operations Available toFirst Industrial Realty Trust, Inc.'s Common Stockholders and Participating Securities$ 62,541 $
58,141
41 -------------------------------------------------------------------------------- Same Store Net Operating Income SS NOI is a non-GAAP financial measure that provides a measure of rental operations and, as calculated by us, that does not factor in depreciation and amortization, general and administrative expense, interest expense, income tax benefit and expense, and equity in income or loss from our joint ventures. We define SS NOI as revenues minus property expenses such as real estate taxes, repairs and maintenance, property management, utilities, insurance and other expenses, minus the NOI of properties that are not same store properties and minus the impact of straight-line rent, above and below market rent amortization and lease termination fees. We exclude straight-line rent and above (below) market rent in calculating SS NOI because we believe it provides a better measure of actual cash basis rental growth for a year-over-year comparison. As so defined, SS NOI may not be comparable to same store net operating income or similar measures reported by other REITs that define same store properties or NOI differently. The major factors influencing SS NOI are occupancy levels, rental rate increases or decreases and tenant recoveries increases or decreases. Our success depends largely upon our ability to lease space and to recover the operating costs associated with those leases from our tenants. The following table shows a reconciliation of the same store revenues and property expenses disclosed in the results of operations (and reconciled to revenues and expenses reflected on the statements of operations) to SS NOI for the three and six months endedJune 30, 2021 and 2020. Three Months Ended June 30, Six Months Ended June 30, 2021 2020 % Change 2021 2020 % Change (In thousands) (In thousands) Same Store Revenues$ 105,795 $ 100,075 $ 211,270 $ 201,092 Same Store Property Expenses (27,218) (23,750) (55,434) (48,232) Same Store Net Operating Income Before Same Store Adjustments$ 78,577 $ 76,325 3.0%$ 155,836 $ 152,860 1.9% Same Store Adjustments: Straight-line Rent (2,044) (1,393) (4,387) (3,038) Above / Below Market Rent Amortization (220) (249) (445) (530) Lease Termination Fees (130) (86) (255) (702)
Same Store Net Operating Income(A)
2.1%$ 150,749 $ 148,590 1.5% (A) The six months endedJune 30, 2020 includes$1.1 million of insurance settlement gain related to a building destroyed by fire in 2016. Excluding this gain, the percent increase to Same Store Net Operating Income would be 2.2% for the six months endedJune 30, 2020 . Subsequent Events FromJuly 1, 2021 toJuly 23, 2021 , we acquired one land parcel for a purchase price of$26.6 million , excluding transaction costs. OnJuly 7, 2021 , we amended and restated our Unsecured Credit Facility to, among other things, extend the maturity date and increase the borrowing capacity thereunder to$750.0 million (as amended and restated, the "New Credit Facility"). The New Credit Facility provides for interest-only payments initially at LIBOR plus 77.5 basis points and a facility fee of 15 basis points. The interest rate and facility fee are each subject to adjustment based on our leverage and investment grade rating. The New Credit Facility matures onJuly 7, 2025 , unless extended at our option pursuant to two six-month extension options, subject to certain conditions. We may request the borrowing capacity under the New Credit Facility be increased to$1.0 billion , subject to certain restrictions. Also onJuly 7, 2021 , we amended and restated our 2020 Unsecured Term Loan to, among other things, extend the maturity date of this$200.0 million unsecured term loan (as amended and restated, the "2021 Unsecured Term Loan"). The 2021 Unsecured Term Loan provides for interest-only payments initially at LIBOR plus 85 basis points. The interest rate is subject to adjustment based on our leverage and investment grade rating. The 2021 Unsecured Term Loan matures onJuly 7, 2026 . We may request the borrowing capacity under the 2021 Unsecured Term Loan to be increased to$460.0 million , subject to certain restrictions. 42
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