First Industrial Realty (NYSE:FR), founded in 1993 and currently the third largest company in the industrial REIT pack, has seen improvements in its logistics market dynamics over the last few years. Pounded during the great recession, during which time funds from operations went negative and share prices plummeted from $ 32.13 (September of 2008) to a mere $1.76 (March of 2009), First Industrial’s dividend distribution went on hiatus for several years, until 2013. First Industrial owns 629 industrial properties located in 25 states, whose total amount of gross leasable area is about 63 million square feet.
The company focuses its strategy on top industrial real estate markets in the United States, especially where the fundamentals have been favorable, i.e., increasing demand and short supply. They also try to find niches that can benefit from global trade and local consumption growth. Such fundamentals have enabled First Industrial to thrive since 2010. Occupancy, cash rental and same-store net operating income have increased from 85 to 94, -15 to 2 and -3 to 6 percent respectively. The top markets have also been those of DCI Industrial — Southern California and Chicago — while other main markets have been Central Pennsylvania and Minneapolis.
In the first quarter of 2015, in comparison with the same period of 2015, First Industrial has demonstrated mixed results among its peers — on the one hand:
- Dividend yield of 2.4 percent has been one of the lowest.
- Debt-to-capitalization of 35 percent has been one of the highest.
- Funds from operations per share tanked by 18 percent because of interest rate protection write-off.
On the other hand:
- Dividend-per-share growth of 25 percent has been one of the highest.
- Dividend payout of 50 percent has been one of the lowest.
First Industrial has definitely not been lagging behind its peers like DCT Industrial — which has not increased dividends for six years — but it still is not an obvious purchasing choice in the industrial REIT sub-sector. I would continue monitoring.
Source: First Industrial Realty, Fast Graphs
Written by Heli Brecailo
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