First Industrial Realty Trust(US:FR)2024-07-18 19:38Financial Data and Key Metrics Changes - NAREIT funds from operations (FFO) were $0.66 per fully diluted share compared to $0.61 per share in Q2 2023, indicating a year-over-year increase [27] - Cash same-store NOI growth for the quarter, excluding termination fees, was 5.6%, driven by increases in rental rates on new and renewal leasing [27] - Updated guidance for FFO is now $2.59 to $2.67 per share, which is $0.03 higher at the midpoint than prior guidance [28] Business Line Data and Key Metrics Changes - In the second quarter, approximately 2.9 million square feet of leases commenced, including 500,000 new leases, 1.2 million renewals, and 1.2 million for developments and acquisitions with lease-up [16] - The company signed six speculative development leases totaling approximately 1.1 million square feet, which is almost half of the 2.3 million square feet included in the updated 2024 FFO guidance [5][10] Market Data and Key Metrics Changes - The U.S. industrial market vacancy increased by 40 basis points to 5.7% as last year's starts continue to come online [8] - Year-to-date net absorption nationally was 70 million square feet, with 48 million within the company's target markets [9] - The South Florida market continues to outperform, with a third of the newly completed First Park Miami Building already leased [12] Company Strategy and Development Direction - The company is focused on leasing in 2024, with significant leasing wins in both core portfolio and development projects [7] - New projects are being initiated in South Florida and Houston, with expected cash yields of approximately 7% [13][14] - The company is committed to maintaining a strong capital position with no debt maturities until 2026 [16] Management's Comments on Operating Environment and Future Outlook - Management noted that while demand is improving, decision-making remains deliberate, and it is still early to determine the sustainability of this demand [56] - The national pipeline for industrial space has decreased to about 289 million square feet from a high of over 600 million, indicating a tightening market [58] - Management expressed optimism about the potential for net absorption to continue improving as the year progresses [58] Other Important Information - The company has sold an incremental $90 million of assets in the second quarter and third quarter to date, bringing the year-to-date total to $138 million [26] - The guidance for G&A expenses is set at $39.5 million to $40.5 million, including approximately $3 million in accelerated expenses [18] Q&A Session Summary Question: Health of the disposition market today versus last year - Management indicated that there is significant capital searching for new opportunities, with a strong number of NDAs and bids for assets being sold [37] Question: 200 basis points of occupancy upside from leasing - This occupancy upside is in addition to the leasing announced in the release and on the call, with expectations for further leasing in the fourth quarter [38] Question: Difference in yield for multi-tenant versus single-tenant leasing - The yield difference depends on the market and asset, with some cases showing a slight advantage for multi-tenant but not significantly [39][50] Question: Comments on leasing demand and sustainability - Management noted that while there is an uptick in inquiries and inspections, the pace of demand remains cautious, and long-term conclusions should not be drawn from one quarter of activity [56] Question: Opportunities in acquisition markets - The market remains competitive with abundant capital, and there is an active investment pace compared to previous quarters [59] Question: Trends in Southern California market - The market is very active, particularly for smaller spaces, while larger spaces are experiencing more supply and slower activity [98][100]