On January 22nd Seeking Alpha published my article predicting that First Industrial Realty Trust (FR) would, within its 4Q12 earnings report, reinstate a common share dividend and, subsequently, experience significant share price appreciation. If you don't test the results, financial journalism is no more than white noise.
So how did I do?
| Company Name | Ticker | Closing Price 01/20/13 ($) | Closing Price 03/05/2013 ($) | Delta (%) | Performance vs. RMZ |
| DCT Industrial Trust Inc. | (DCT) | 6.95 | 7.45 | 7.19% | 2.3x |
| EastGroup Properties Inc. | (EGP) | 55.09 | 57.17 | 3.78% | 1.2x |
| First Industrial Realty Trust | 14.70 | 16.40 | 11.56% | 3.7x | |
| Monmouth Real Estate | (MNR) | 10.27 | 11.06 | 7.69% | 2.5x |
| Prologis Inc. | (PLD) | 39.50 | 40.03 | 1.34% | 0.4x |
| STAG Industrial Inc. | (STAG) | 19.96 | 21.70 | 8.72% | 2.8x |
| Terreno Realty Corp. | (TRNO) | 16.40 | 18.02 | 9.88% | 3.2x |
| MSCIU REIT Index (RMZ) | RMZ | 935.12 | 964.38 | 3.13% | 1.0x |
My earlier article forecast that FR would reinstate a dividend and that in matching the sector average payout ratio FR would set a rate at $0.68/share. In their February 20th earnings report, FR reinstated the dividend at an annualized rate of $0.34/share. A huge miss on my part, but consistent with a conservative management who successfully averted disaster throughout the worst of times. In the conference call Q&A management expressed their intention to grow the dividend. It's a long way from $.34 to $0.68, but they'll get there.
In my prior article I forecast that the reinstatement of a dividend would generate legions of new shareholders for FR. I think the (anemic) reinstatement accomplished that, but on March 4th First Industrial Realty Trust announced a secondary offering of 8.4MM new common shares. That's a lot of new shareholders and the share price held stable.
THE REPORT CARD
Since the article's publication, FR has returned more than 3.7x the REIT index, but I forecast that the share price would approach $18. I overestimated management's willingness to disperse cashflow and the market will only pay so much for yield. FR will trade in the mid $16 and rise with the incremental increase of their dividend.
Even though the stock delivered 3.7X the index return over the period, I was too optimistic on share price. I deserve a B grade on the recommendation.
THE AMERICAN BANDSTAND RATING
Though the dividend level was a disappointment, all other aspects of operations at First Industrial are positive. Leasing is strong, development is strong, cost of capital/financial engineering is strong.
At 2nd Market Capital we track 150 REITs. In any given year we're long 30 different issues. Most of the time we're 90% invested in fewer than 10 companies
We are still long FR, FR-J, Fr-K. First Industrial's management team merits the most trust in our experience.
On the American Bandstand Scale First Industrial Realty Trust has a good beat and you can dance to it.
First Industrial Realty Trust is a good company.
Disclosure: 2nd Market Capital and its affiliated accounts are long FR, FR-J, and FR-K. This article is for informational purposes only. It is not a recommendation to buy or sell any security and is strictly the opinion of the writer.
Disclosure: I am long FR.
