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

Explicit Guidance:

• FFO Guidance: Increased 2026 Neighborhood FFO midpoint by $0.01; range revised to $3.11–$3.15 per share (excluding $0.04 advisory costs from proxy campaign, range is $3.15–$3.19).
• Occupancy: Projected Q4 2026 in-service occupancy of 94.5%–96.5% (midpoint 95.5%); implies full-year average of 94%–95%. Includes assumption of 650,000 sq ft incremental development leasing by year-end.
• Same-Store NOI Growth: Q4 2026 cash same-store NOI growth (excluding termination fees) projected at 4%–6%; implies full-year 2026 growth of 6.25%–6.75% (midpoint increase of 75 bps).
• Interest Capitalization: Expect to capitalize approx. $0.08 per share of interest for full year 2026.
• G&A Expenses: Guidance range remains $42–$43 million, excluding $5.6 million proxy-related costs.

Business-Segment Outlook:

• Leasing Spreads (2027): Cash rental rate increases on signed 2027 expirations (covering 45% of next year's volume) are 16% to date. Management does not expect full-year 2027 spreads to differ meaningfully from YTD results; this includes 68% of leases originally signed in 2022–present (peak rent era). Without Southern California (SoCal) expirations, the increase exceeds 20%.
• SoCal Market: Showing signs of improvement; 50% of 2027 SoCal expirations signed thus far. Recent activity includes leasing of large vacancies (188k sq ft, 78k sq ft) and healthy interest in 200k sq ft facilities in Inland Empire East.
• Development Pipeline: Development leases signed YTD total 849,000 sq ft. Adjusted outlook for end-of-year development leasing is 650,000 sq ft (down 150k sq ft from prior guidance), with the shift pushing activity into 2027.
• Lease Retention: Expected 2027 lease retention rate between 65%–75%.
• Large Vacancies: Denver large box signed with modest spread; Atlanta largest remaining expiration in final discussions. New inquiries improving for large buildings in Denver and Nashville.

Market and Competitive Outlook:

• Supply/Demand: National vacancy down 10 bps to 6.3% (Q3 2026); net absorption of 105M sq ft outpaced completions (79M sq ft) for the quarter. YTD absorption (238M sq ft) exceeds completions (183M sq ft).
• Under Construction: Pipeline increased to 279M sq ft (from 252M sq ft); 36% is pre-leased. Annualized absorption pace (Q1–Q3 2026) exceeds total square footage under construction.
• Pricing Trends: Rental rate escalations (bumps) stable at approx. 3.4%–3.6% for 2026 signings. Market rent growth expected to remain in 3%–5% range.
• Tenant Demand: 3PL, e-commerce, wholesalers, advanced manufacturing, and data center tenants active. Fuel cost increases are driving tenant demand toward proximate locations (supporting industrial demand).

Macro / Industry Outlook:

• Interest Rates: Treasury and swap rates down; two swaps rolling off in 2027 ($150M and $425M) projected to impact 2027 earnings by $0.01–$0.02 per share. Management will continue evaluating the forward market to lock rates.
• Construction Costs: Petroleum-related fuel costs rising are increasing construction costs, thereby raising the "bar" for new supply, which favors existing inventory.
• Economic Environment: Management views the current period as a "decent landing" following the 2021–2022 volatility; no expectation of negative roll-down for the sector provided market rent growth remains positive.

Strategic Initiatives:

• Acquisitions: Closed Park 83 Logistics Center (Central PA) for $120M (5.1% in-place yield, potential 5.8% at market); acquired 32-acre infill site in McKinney, TX for $13M (target mid-6% yield on Phase 1).
• Development Starts: Evaluating starts in South Florida (Broward/Dade), Dallas, Northern California, Central PA, Chicago, and Miami. No specific new starts announced pending shovel-ready status; focus on "right half of the country" for land replenishment.
• Capital Allocation: Land bank replenishment focused on East and Central regions; SoCal land bank to be maintained or sold only at "right price."
• Data Center Opportunity: Pursuing power allocation and land sale opportunities to data center developers, primarily on the East Coast. Process is slow-moving due to utility load studies; value creation expected to be substantial.
• Buybacks: Remain opportunistic regarding share buybacks relative to valuation, liquidity, and core investment opportunities.

Risks and Headwinds to Outlook:

• Leasing Timing: Development leasing timing risk (150k sq ft shifted to 2027) dependent on corporate real estate decision speeds and municipal approvals.
• Market Rent Reset: Post-peak (2022–2023) lease rollovers will naturally lower year-over-year spread growth; management acknowledges spreads will be "modest" going forward compared to the post-pandemic surge.
• SoCal Drag: Southern California expirations (peak rents) currently compressing overall portfolio spread averages.
• Cost Volatility: Fluctuations in fuel and construction costs impacting tenant operating costs and new supply economics.
• Regulatory: Potential local moratoriums on development (though management views these as temporary).

Management Tone on the Future:

• Confidence: "Optimistic" regarding activity levels in in-service and development portfolios.
• Strategic Shift: Confident that core portfolio strength (3Q occupancy beat) can offset development leasing timing delays.
• Relative Performance: Expect to continue performing well relative to peers despite the normalization of rent spreads, driven by the "decent landing" narrative.
• Hedges: Explicitly notes 2027 spreads are not expected to differ meaningfully from YTD results; cautions that the trajectory of spreads will depend on broader market rent growth (3-5%) to keep the "curve" from bending negatively.

Miscellaneous:

• Leasing Volume: Q3 2026 saw 2.3M sq ft commence (400k new, 1.6M renewals, 300k dev/acq).
• Capex/Development Costs: Full-year guidance includes anticipated costs for developments under construction as of Sept 30, 2026.
• Proxy Campaign: $5.6M in advisory costs excluded from G&A and 2026 FFO guidance ranges.