First Industrial Realty Trust(FR)2024-10-17 21:48Financial Data and Key Metrics Changes - NAREIT funds from operations increased to 0.62 per share in Q3 2023, reflecting a growth of 9.7% year-over-year [9] - Cash same-store NOI growth for the quarter was 7.6%, driven by increases in rental rates on new and renewal leasing, with an adjusted growth of 11.9% when including tenant improvement reimbursements [9][10] - In-service occupancy finished at 95%, with approximately 200 basis points of lease-up opportunity from developments placed in service in 2023 and 2024 [10] Business Line Data and Key Metrics Changes - Renewal leasing remained strong, achieving a cash rental rate increase of 51% for 2024 expirations, following a 58% increase for 2023 commencements [6] - Approximately 3.5 million square feet of leases commenced in the quarter, with 500,000 square feet being new leases, 2.2 million square feet for renewals, and 900,000 square feet for developments and acquisitions [10] Market Data and Key Metrics Changes - The U.S. industrial market vacancy increased by 10 basis points to 5.8%, with third-quarter completions totaling 87 million square feet, down approximately 30% from the previous quarter [5] - In target markets, completions were 45 million square feet, down 40% from the prior quarter, while new starts totaled 36 million square feet, down 68% from the peak in Q3 2022 [5] Company Strategy and Development Direction - The company is focused on capital deployment and monitoring demand and competing supply in target investment markets, with a new development launched in Nashville projected at 82 million and has completed year-to-date dispositions totaling $157 million [8] - The impact of California's AB-98 legislation is expected to be a tailwind for the company, increasing the value of existing assets and putting upward pressure on rents [54][55] Q&A Session Summary Question: Can you discuss the drivers for occupancy guidance? - Management indicated that development leasing is key to achieving higher occupancy, with 400,000 square feet of development leasing included in guidance for Q4 [15][16] Question: What markets are poised for growth? - Management highlighted strong rent growth in Southern California, New Jersey, and South Florida, with traction also seen in Pennsylvania, Nashville, and Houston [17][18] Question: What is the status of the Boohoo lease? - Management confirmed that Boohoo is current on rent and plans to sublet the building, with a security deposit in place to cover potential rent shortfalls [21][23] Question: How does the election impact tenant decision-making? - Management noted that tenants are cautious about new growth investments until the economic landscape stabilizes post-election [38] Question: What is the outlook for market rent growth? - Management indicated that overall rents are flattish to slightly up, with Southern California seeing increases of 2% to 3% year-over-year [42] Question: How is the transaction market performing? - Management observed significant capital chasing opportunities, with increased competition for transactions and a decrease in cap rates by about 25 basis points over the last three months [44][45]