First Industrial Realty Trust, Inc. Q3 FY2025 earnings call

Peter Baccile mentioned the team delivered a solid quarter with development lease signings contributing to FFO guidance increase. Leasing activity had picked up in Q3 but tenant decision-making was deliberate due to tariff uncertainty. Portfolio results were in line with expectations with 94% in-service occupancy. Development leasing had wins like leasing remaining space in Camelback 303 and others. Scott Musil recapped results, mentioned FFO increase, cash same store NOI growth, balance sheet leasing activity, bad debt expense, and updated guidance.

NAREIT funds from operations were $0.76 per fully diluted share in 3Q 2025, compared to $0.68 per share in 3Q 2024. Cash same store NOI growth for the quarter, excluding termination fees, was 6.1%. In-service occupancy was 94% at quarter end. Development leasing saw successes like leasing remaining space in Camelback 303 joint venture and other properties. Rental rate growth was strong with cash rental rate increase of 32% for 2025 rollovers (excluding large fixed rate renewal, it's 37%) and 31% for 2026 rollovers to date.

Increased 2025 NAREIT FFO midpoint by $0.04 to $2.96 per share. End of fourth quarter in-service occupancy expected to be 94% - 96%. Fourth quarter cash same store NOI growth before termination fees 3% - 5%. Full year 2025 expected to capitalize about $0.09 per share of interest. G&A expense guidance range $40.5M - $41.5M.

Bad debt expense is a risk, with $245k in 3Q 2025 and year-to-date ~$750k. Debenhams Group remains current but added one 3PL tenant to credit watch list with confidentiality around collection process.

Q: With 75 days left in the quarter, what's the delta between the $0.04 FFO range? How do you get to the low end? How do you get to the high end? What's the key thing that can move on you?

A: Scott Musil said unanticipated credit challenges could cause low end, leasing more than 300k sq ft of in-service development could push to high end.

Q: Talk a little bit about the transaction market today, both in terms of the market for buying assets as well as selling assets?

A: Jojo Yap said leased assets are competitive with capital wanting to invest, product like leased at market in low to mid-5s cap rates, vacant property and land less robust.

Q: Touch a little bit on 2026, good progress there. Spreads are pretty stable year-on-year. But as we look at kind of '26 expirations, is there anything we should - that's worth calling out, whether it be size of tenants or like fixed rate renewals that could really swing the numbers?

A: Chris Schneider said largest remaining rollover is 550k sq ft expiration in Southern California in 3Q 2026.

Q: Company's appetite for future developments, how you're thinking about new starts today? And can you talk about the mix between spec and build-to-suits as you think about adding more product to the pipeline and what the yield expectations between the 2 are like today?

A: Peter Baccile said like South Florida, Greater Philly, Dallas, Houston, Nashville, considering starts in 2026, spec yields close to 7%, build-to-suits less, mix mostly spec.

Q: Just thinking about '26, you guys still have Aurora and your asset in New York to backfill. Can you talk through the kind of the competitive landscape in each of those markets and what the prospects you guys have to kind of address those vacancies?

A: Peter Schultz said in Denver, 1 of 2 buildings in size, supply improved, working with prospects; in Pennsylvania, 3 or 4 other buildings of similar size, activity up, talking to prospects for New York building.

Q: Just a quick question on your development leasing assumptions. So on the previous call, you mentioned 1.5 million square feet by the end of this quarter. Obviously, got pushed a bit. Just trying to understand whether it's end of first quarter or end of second quarter of 2026. Do you have a perspective on that?

A: Scott Musil said having budget process in December, fourth quarter call in early February will give better idea.

Q: Just wondering if you can maybe give us a little bit more color on some of the large lease-ups in particular, like the Federal-Mogul space, some of the other large lease-ups, more -- just not timing, but what sort of demand are you seeing relative to kind of what you typically see in the submarket? Anything unique you may be seeing any need to subdivide or, I guess, redevelop those assets? If you can walk through some of the bigger pieces you're trying to lease up and what sort of demand and what the strategy is behind those?

A: Peter Schultz said both buildings designed to be multi-tenanted, activity good, larger deals move slower.

Q: I was wondering if you guys could go through today how you're balancing the rate versus occupancy equation? How does it vary maybe by first-generation development properties versus the existing portfolio and then renewals?

A: Peter Baccile said all about NPV, base rate most important, renewals in '26 strong to date.

Q: The stock has been trading at a significant discount to NAV for several quarters now. Have you given consideration to selling assets and buying back shares as a way to create shareholder value?

A: Peter Baccile said selling assets and buying back shares not accretive mathematically, borrowing and buying back stock not accretive, considering converting properties to data centers for potential buyback.

Q: I was hoping to drill down a little bit on the supply landscape in your markets. Are there any markets where you're starting to see a pickup in development starts activity? Or is it still pretty quiet out there across the board?

A: Johannson Yap said no pickup, starts on decline, Peter Schultz said Pennsylvania has anticipated starts for 1 million sq ft plus buildings in next couple of quarters.

Q: I guess, for Scott, can you help connect the dots a little bit? I think you said earlier, part of the guidance increase was due to development leasing success, but it looks like you pushed off some of the, I guess, anticipated '25 leasing into 2026. And I know it sounds like that component was at year-end anyway, so it may not be a lot of impact there. But again, what was the portion of development leasing success that is pushing the numbers higher?

A: Scott Musil said about $0.01, leasing assumed to happen on 12/31 happened earlier.

Q: I guess, Scott, I know that the guidance range doesn't include leasing within the recently completed or in-process development projects. But I know that you guys continue to highlight some of your best markets and a lot of these buildings are in those markets. So can you talk a little bit about the activity that's happening at those specific properties? And what are the near-term leasing prospects of getting those leased up?

A: Peter Baccile said not much activity around current construction pipeline, recently completed assets have good foot traffic.

Q: I guess in the saga of the 10-year treasury throughout this year, it definitely seems to be trending downward, at least today, let's say, and spreads have been tightening a bit. I'm just curious what impact that's been having on cap rates for warehouses across your market and how you've seen those trend?

A: Johannson Yap said no material change from Q2 to Q3, demand for leased assets and quality buildings increased.

Q: You mentioned that there are some tenants out there that are still quite sensitive to tariffs. Can you describe their thought process? Is it that they're just out of the market while tariffs are in place or they're just waiting for tariffs to kind of settle into a final rate? Or any other considerations that might be keeping them on the sidelines but might be able to move them off in the future?

A: Peter Baccile said tenants are waiting to know cost of inputs and impact on margins, Peter Schultz said some companies actively looking but not making decisions.

Q: We've seen some weakening consumer data, jobs growth a little bit weaker. To what extent are prospective tenants factoring in this kind of change in the macro environment and just kind of waiting on the sidelines because of that as well.

A: Peter Baccile said depends on sector, economy has done well, prospects confident in base business; Johannson Yap said 3PL activity good, food and beverage, RFPs and tours increased, some softness in home related.

Q: Maybe just a follow-up to that last point on like where is stronger, where is weaker. I mean, yesterday, Prologis reported they had a record leasing volume in 3Q, and you mentioned that CBRE is forecasting '25 will be second only to 2021. Could you put your own leasing volume in 3Q into the context of your past? And if you have a view on the future of like how that should be trending, realizing that you might be more weighted to development, which makes it lumpier, but trying to figure out a trend there, if there is one.

A: Peter Baccile said hard to see trend, last year leased 4.7 million sq ft, this year less, not enough volume to identify trends.