KeyBanc Capital Market analyst Todd M. Thomas downgraded First Industrial Realty Trust, Inc. (NYSE:FR) to Underweight from Sector Weight with a price target of $42.
The analyst sees risk to FY24 FFO estimates due to longer leasing timelines for new development projects, which could curb future growth outlook vs. its peers.
The analyst notes that about $346 million of development is expected to be placed in service in the next four quarters, with minimal pre-leasing completed to date.
Overall, FR’s development pipeline is about $786 million (recently completed and under construction), with a total pre-leasing percentage below 15%, according to Thomas’ estimates.
The analyst expects the slower pace of leasing to impact FY24 FFO estimates and lead to downward revisions in case cost capitalization ends ahead of lease start.
Consequently, the analyst is lowering the 2024 FFO per share estimate by $0.04 to $2.61 (vs. street view of $2.62) while maintaining it at $2.44 (vs. consensus of $2.42) for 2023. This reflects lower initial yields and near-term dilution related to developments.
FR is expected to release Q3 FY23 results on October 19, 2023.
Price Action: FR shares are down 3.54% at $45.42 on the last check Thursday.
