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

Financial Performance:

• FFO per share (Day refunds from operations) was $0.80, up from $0.76 a year ago.
• Cash same-store rentalized growth was 5.6%, driven by rental rate increases, leasing activity, and contractual bumps.
• In-service occupancy ended Q3 2026 at 94.1%, exceeding the 93.5% forecast.
• Leasing activity totaled 2.3 million square feet: 400,000 (new), 1.6 million (renewals), and 300,000 (development/acquisition lease-up).
• Cash rental rate increases on signed 2027 renewals reached 16% (45% of expiring leases), with potential to exceed 20% excluding Southern California.
• Net absorption for Q3 was 105 million square feet, the highest quarterly level since Q4 2022.

Guidance and Future Outlook:

• NAREID FFO guidance midpoint increased by $0.01 to a range of $3.11–$3.15 per share ($3.15–$3.19 excluding $0.04 proxy advisory costs).
• Full-year 2026 cash same-store NOI growth guidance raised by 75 bps to 6.25%–6.75%.
• Year-end in-service occupancy guidance remains 94.5%–96.5% (midpoint 95.5%).
• Q4 cash same-store NOI growth guidance is 4%–6%.
• Full-year 2027 cash rent spread expectations are not expected to be meaningfully different from the year-to-date 16% figure.
• Anticipated interest capitalization for 2026 is approximately $0.08 per share.
• G&A expense guidance remains $42–$43 million, excluding $5.6 million in contested proxy campaign costs.

Business Segments and Product Lines:

• Acquired Park 83 Logistics Center (764,000 sq ft) in Central PA for $120M; 100% leased to a Fortune 500 tenant with a 5.1% cash yield.
• Purchased a 32-acre infill site in McKinney, TX for $13M to develop two buildings (total 390,000 sq ft) targeting mid-6% cash yields.
• Signed a 32,000 sq ft lease at First Park Miami Building 12, bringing 2026 development leasing to 849,000 sq ft.
• Leased three vacancies in Q3: 188,000 sq ft and 78,000 sq ft in Inland Empire East, plus a transload facility in Los Angeles.
• Two 200,000 sq ft facilities in Inland Empire East show healthy tenant activity.
• Development portfolio includes opportunities in South Florida, Northern California, Central PA, and Chicago pending entitlements and lease-up.

Market and Competitive Landscape:

• National vacancy dropped 10 bps to 6.3% in Q3 2026; under-construction pipeline is 279 million sq ft (36% pre-leased).
• Southern California market is showing signs of improvement with activity from 3PLs, e-commerce, wholesalers, and advanced manufacturing.
• Denver and Nashville markets show active discussions for large vacancies, though lease-up timing depends on corporate decision cycles.
• Construction costs are rising due to energy/fuel prices, which supports the value of existing inventory and raises the barrier to new supply.
• First Industrial reports strong relative performance on rent spreads, though 2027 spreads are moderating compared to the 2022–2023 peak.

Risks and Challenges:

• Potential "air pocket" in 2027 cash rent growth as leases signed at peak rents (2022–2023) roll off, though management expects a "decent landing" with market rent growth stabilizing the curve.
• Large vacant facilities (e.g., 324,000 sq ft "First Rider" in Inland Empire East) face competition from broader market availability in the 250k–500k sq ft range.
• Corporate real estate decision timelines are difficult to forecast, impacting the speed of leasing large speculative spaces.
• Proxy campaign costs incurred in Q1 ($5.6M) impacted full-year financials, though excluded from core G&A guidance.
• Land prices showing an uptick in certain markets, potentially impacting new development yields.

Management Commentary and Tone:

• Management expressed optimism regarding demand depth, leasing wins, and capital allocation efficiency.
• Tone was confident in the portfolio's resilience, citing 94% of 2026 rollovers completed and 38% cash run rate increase for new/renewal leasing.
• Emphasized a "reset" from the post-COVID peak, with 2027 results expected to be strong but more modest than previous peaks.
• Reiterated commitment to not sacrificing rent for lease-up and maintaining strong Net Present Value (NPV) on all deals.

Analyst Questions and Answers:

• Development Leasing: Confirmed 650,000 sq ft development leasing assumption for year-end; 150,000 sq ft shift from Q4 to 2027 explained by stronger core occupancy.
• Rent Spreads: 68% of 2027 expirations are leases signed from 2022-present; pre-2022 leases command higher spreads, but overall 2027 spread expected to remain near 16%.
• Interest Rate Risk: Two swaps rolling off in 2027 ($150M and $425M) expected to impact earnings by $0.01–$0.02/share; management monitoring swap market for potential lock-ins.
• Capital Allocation: Buybacks remain opportunistic; primary focus remains on core business investments and development with minimum 50 bps spread on acquisitions and 100–125 bps on development.
• Data Centers: Actively pursuing land/flipping opportunities for data centers, primarily on the East Coast, though utility load studies slow the timeline.
• Lease Retention: Expected to be 65%–75% for 2027.

Other Key Points:

• 2027 lease renewal cash rent increase of 16% includes a significant portion of peak rent leases; excluding Southern California, this figure exceeds 20%.
• Management does not foresee the 2027 full-year rental spread guidance changing meaningfully from current YTD results.
• Focus on replenishing land bank in the "right half" of the country, with the new Texas acquisition serving as a key example.
• Escalation clauses (rent bumps) remain stable at approximately 3.5% across the portfolio.