First Industrial Realty Trust, Inc. (FR) is a leading fully integrated owner, operator, and developer of logistics real estate in the United States. With a diversified portfolio of 412 in-service industrial properties spanning 19 states, the company has established itself as a dominant player in the industrial real estate sector.

Company History and Structure

Founded in 1993 and headquartered in Chicago, Illinois, First Industrial Realty Trust has a long and storied history of navigating the ebbs and flows of the commercial real estate market. The company was organized as a Maryland corporation on August 10, 1993, and began operations on July 1, 1994. It operates as a real estate investment trust (REIT) as defined in the Internal Revenue Code of 1986. First Industrial's operations are primarily conducted through its operating partnership, First Industrial, L.P., of which the company is the sole general partner. Additionally, the company conducts operations through several other limited partnerships, numerous limited liability companies, and certain taxable REIT subsidiaries.

Throughout its history, First Industrial has faced various challenges, including establishing itself as a successful REIT in its early years and building out its portfolio of industrial properties. The company has also had to navigate difficult market conditions, such as the Great Recession in the late 2000s, which significantly impacted the commercial real estate industry. Despite these obstacles, First Industrial has remained focused on its strategy of acquiring, developing, and leasing high-quality industrial properties in key markets, adapting to changes in tenant preferences and requirements, as well as advancements in technology and logistics.

Portfolio and Tenant Base

Today, First Industrial's portfolio comprises approximately 67.5 million square feet of gross leasable area, with a diverse base of around 900 tenants engaged in a wide variety of businesses, including e-commerce, third-party logistics, transportation, consumer products, and more. The company's properties are primarily located in 15 key logistics markets across the United States, with a strong focus on coastal markets that have demonstrated favorable long-term growth characteristics.

Financials

First Industrial's financial performance has been consistently strong, with the company reporting net income of $296 million and total revenues of $669.6 million in the fiscal year 2024. The company's NAREIT funds from operations (FFO) per fully diluted share grew 8.6% to $2.65 in 2024, compared to $2.44 in the prior year. This robust financial performance has been driven by the company's strategic focus on leasing, development, and asset management, as well as its disciplined approach to capital allocation.

In the fourth quarter of 2024, First Industrial reported revenue of $175.6 million and net income of $71.7 million. The increase in revenue and net income was primarily driven by higher rental rates and tenant recoveries, offset by a slight decrease in occupancy.

First Industrial's annual operating cash flow for 2024 was $352.5 million. The company's largest markets are California (Northern California and Southern California) and Pennsylvania, which represented 25.6% and 11.4% of consolidated net operating income in 2024, respectively.

Liquidity

First Industrial maintains a strong financial position with a debt-to-equity ratio of 0.81, calculated as total debt of $2.23 billion divided by total equity of $2.75 billion. As of December 31, 2024, the company had $44.5 million in cash and cash equivalents. Additionally, First Industrial had $467.5 million available for additional borrowings under its $750 million unsecured revolving credit facility. The company's current ratio stands at 0.39, while its quick ratio is 0.38.

Strategic Advantages

One of the key factors contributing to First Industrial's success has been its ability to effectively navigate the evolving industrial real estate landscape. The company has demonstrated a keen understanding of the changing needs of its tenants, investing in modern, technologically-advanced facilities that cater to the growing demands of the e-commerce and logistics sectors. This forward-thinking strategy has allowed First Industrial to maintain high occupancy levels, with in-service occupancy reaching 96.2% at the end of 2024, up from 95.5% a year earlier.

Development Initiatives

First Industrial has been proactive in its development efforts, starting seven new projects totaling approximately 2.0 million square feet of GLA in the fourth quarter of 2024. These developments, which are located in key markets such as Nashville, Tennessee and the Lehigh Valley in Pennsylvania, have already garnered significant leasing activity, with the company signing 4.7 million square feet of development leases in 2024, including 1.4 million square feet in the fourth quarter alone.

During 2024, the company acquired 5 industrial properties totaling 0.3 million square feet of GLA for $44.8 million, excluding transaction costs. First Industrial also acquired approximately 81 acres of land for future development projects for $25.9 million. The company placed 7 new industrial properties totaling 2.8 million square feet into service at a total estimated cost of $392 million. As of the end of 2024, First Industrial had 8 active development projects under construction, comprising 2.0 million square feet of GLA with an estimated total investment of $280.4 million.

As part of its portfolio management strategy, First Industrial selectively sells properties that lack strong long-term cash flow growth potential. In 2024, the company sold 22 industrial properties totaling 1.2 million square feet of GLA for gross proceeds of $162.8 million, recognizing a gain on sale of $112 million.

Future Outlook

Looking ahead, First Industrial remains well-positioned to capitalize on the continued growth in the industrial real estate sector. The company's robust development pipeline, strong balance sheet, and experienced management team are positioned to navigate any potential headwinds, making it an attractive investment opportunity for investors seeking exposure to the thriving industrial real estate market.

First Industrial has provided guidance for 2025, projecting NAREIT FFO in the range of $2.87 to $2.97 per share, with a midpoint of $2.92 per share. This represents a 10% growth rate from 2024. Key assumptions in the 2025 guidance include an average quarter-end in-service occupancy range of 95% to 96%, approximately 1.6 million square feet of development leasing during 2025 (mostly in the second half of the year), cash same-store NOI growth before termination fees of 6% to 7%, capitalization of about $0.09 per share of interest related to completed and under-construction developments, and a G&A expense guidance range of $40.5 to $41.5 million.

Industry Trends

The industrial real estate market has shown some signs of moderation, with national industrial market vacancy reaching 6.1% at year-end 2024, a 30 basis point rise from Q3 2024. New construction starts volume was 62% lower than the Q3 2022 peak, with just 43 million square feet breaking ground in Q4 2024. In First Industrial's 15 target markets, space under construction totaled 143 million square feet, signaling that future quarterly completions could fall well below the 46 million square feet delivered in Q4 2024. On the demand side, net absorption nationally was 24 million square feet in Q4 2024, with 15 million of that in the company's target markets.

Conclusion

In conclusion, First Industrial Realty Trust is a standout performer in the industrial REIT space, boasting a diversified portfolio, a disciplined approach to capital allocation, and a proven track record of successfully navigating the evolving commercial real estate landscape. With strong financial performance, strategic development initiatives, and a positive outlook for 2025, the company is well-positioned to continue delivering sustainable growth and value for its shareholders in the years to come.