First Industrial Realty Trust Third Quarter 2026 Results Conference Call - FIRST INDUSTRIAL REALTY TRUST INC

Explicit Guidance:

• Increased FY2026 Nareid FFO guidance midpoint by $0.01/share to $3.11–$3.15; excluding $0.04/share in proxy advisory costs, the range is $3.15–$3.19.
• FY2026 cash same-store NOI growth (excluding termination fees) guided to 6.25%–6.75% (75 bps midpoint increase).
• Q4 2026 cash same-store NOI growth guided to 4%–6%.
• FY2026 in-service occupancy at year-end expected 94.5%–96.5% (midpoint 95.5%); full-year average occupancy 94%–95%.
• FY2026 G&A expense guided to $42–$43 million (excluding $5.6M in proxy costs).
• FY2026 interest capitalization expected at $0.08/share.

Business-Segment Outlook:

• Leasing Spreads: 2027 cash rental rate increases on signed renewals currently 16% (covering 45% of 2027 expirations); excluding SoCal expirations, increases are >20%. Management expects full-year 2027 spreads to be comparable to YTD results (approx. 16%), noting a post-peak normalization from 2022-23 highs.
• Portfolio Occupancy: In-service occupancy ended Q3 2026 at 94.1% (beat guidance of 93.5%); 2026 rollovers 94% complete by square footage.
• Development Leasing: 2026 development leases signed reached 849,000 sq ft; year-end development leasing assumption revised to 650,000 sq ft (vs. prior 900k), with 150k sq ft deferred to 2027.
• Vacancy/Leasing Activity: 3 vacancies leased in Q3/Q4 (188k sq ft, 78k sq ft, and 1 transload facility); healthy activity noted in 200k sq ft range in Inland Empire East.
• Land Bank & Capital Allocation: Acquired 32-acre site in McKinney, TX (target 390k sq ft, 2 phases) targeting mid-6% cash yield on Phase 1; acquired $120M fully leased facility in Central PA (5.1% in-place yield). Focus on replenishing land bank in the "right half of the country" (e.g., Texas, South Florida, Central PA, Chicago, Northern California).
• Data Center Opportunities: Pursuing power allocation and potential land sales to data center developers on East Coast sites; described as a "slow-moving effort" with substantial value creation potential.

Market and Competitive Outlook:

• Demand/Supply Dynamics: National vacancy down 10 bps to 6.3%; Q3 net absorption (105M sq ft) exceeded completions (79M sq ft), highest quarterly absorption since Q4 2022. Under-construction pipeline increased to 279M sq ft (36% pre-leased); Q1-Q3 2026 annualized absorption pace exceeds total under-construction square footage.
• Pricing Power: Southern California showing signs of improvement with incremental leasing from tenants investing in growth; 3PL, e-commerce, wholesale, advanced manufacturing, and data center tenants active in Inland Empire.
• Fuel Costs: Rising fuel prices (35-45% of trucking operating costs) driving premium on proximity, favoring existing availabilities; also increasing construction costs/barriers to new supply.
• Construction Costs: Land prices stable in H1 2026 but showing an uptick due to development activity; new supply barriers rising.

Macro / Industry Outlook:

• Interest Rates/Debt: Treasury rates and swap rates down; two swaps ($150M and $425M) rolling off in 2027, with estimated impact of 1–2 cents/share vs. expiring rates. Management will evaluate forward curves to lock rates.
• Economic Environment: Management anticipates a "decent landing" post-COVID volatility; expects market rent growth to rebound to mid-single digits (3–5%), which will help reverse the "roll-down" curve for expiring peak-rent leases in 2027-2029.
• Regulation/Tariffs: No significant impact anticipated from upcoming midterm elections; occasional local moratoria expected to relax when municipalities need revenue.
• Capex/Opex: Development costs and land prices rising, increasing the hurdle rate for new supply.

Strategic Initiatives:

• Development Starts: No new starts announced in Q3 2026; pipeline includes potential near-term starts in South Florida (Broward/Dade), Dallas, Northern California, Central PA, and Chicago. Starts depend on lease-up confirmation and municipal approvals; company does not announce until "shovel in the ground."
• Acquisition Strategy: Continued selective acquisitions (e.g., Central PA cross-dock, Dallas infill site) targeting 50+ bps spread over cost of capital (minimums: 50 bps for acquisitions, 100-125 bps for developments).
• Capital Allocation: Remain opportunistic on share buybacks; prioritizes core business investment and liquidity over buybacks or debt paydown unless valuation is compelling.
• Re-leasing Strategy: Retention ratio for 2027 expirations expected 65%–75%; strategy involves signing early renewals (now 8 months in advance) to take risk off the table rather than sacrificing rent for speed.

Risks and Headwinds to Outlook:

• Rent Roll-down: Potential for rent declines in 2027-2029 as large volumes of leases signed at 2022-23 peak rents expire, though market rent rebound is expected to mitigate this.
• Leasing Timing: Development leasing slippage (150k sq ft deferred) highlights sensitivity to corporate real estate decision-making speed.
• Construction Costs: Rising petroleum-related costs may increase barriers to new supply but also elevate project costs.
• Market Digestion: Large vacant buildings (250k-500k sq ft) in markets like East IE face competition from new supply; multi-tenant strategies being considered for demising large spaces.
• Execution Risk: Land entitlement and infrastructure work (e.g., Dallas site) must be completed before Phase 1 leasing/development.

Management Tone on the Future:

• Confidence: Optimistic regarding activity levels in in-service and development portfolios; confident in achieving "modest" but strong post-peak growth.
• Hedges: Avoids committing to specific 2027 spread guidance, framing the 16% YTD result as indicative but dependent on final budget process outcomes.
• Shift in Strategy: Explicitly stated shift from targeting higher development leasing volumes to prioritizing higher core portfolio leasing (offsetting 150k sq ft dev shift with core strength).
• Long-term View: Expects relative outperformance compared to peers due to portfolio composition, even as absolute growth rates normalize from the COVID peak.

Miscellaneous:

• 2027 Expiration Composition: 68% of 2027 expirations by net rent were signed between 2022 and present (peak rent period).
• Tenant Profile: Recent successes include 3PLs, fastener/machinery manufacturers, and trucking freight forwarders dealing with CBP.
• Proxy Campaign Costs: $0.04/share of FFO excluded from non-GAAP guidance related to contested proxy campaign; $5.6M excluded from G&A guidance.