Release Date: April 17, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- First Industrial Realty Trust Inc (FR, Financial) reported a strong start to 2025 with successful leasing objectives and attractive new investments.
- The company renewed its line of credit and a $200 million term loan, extending debt maturities and enhancing financial stability.
- In-service occupancy was 95.3% at the end of the first quarter, aligning with expectations and demonstrating strong portfolio performance.
- The company achieved a 30% cash rental rate increase for new and renewal leasing, excluding a large fixed-rate renewal.
- First Industrial Realty Trust Inc (FR) plans to break ground on new developments in Dallas and Philadelphia, targeting high-demand submarkets with projected cash yields of approximately 8%.
Negative Points
- The evolving landscape surrounding tariffs poses uncertainty, potentially impacting business activity and leasing decisions.
- Vacancy rates in some submarkets, such as Denver, have been higher than desired, indicating potential challenges in those areas.
- The company faces potential risks from geopolitical and economic uncertainties, which could affect tenant demand and investment decisions.
- There is a concern about the impact of tariffs on tenant demand, particularly for international trade-related tenants.
- The company has a significant amount of speculative development, which could pose risks if leasing activity slows down.
Q & A Highlights
Q: How does the ongoing tariff negotiation impact your tenancy, particularly with Chinese 3PLs?
A: Johannson Yap, Executive Vice President and Chief Investment Officer, stated that their exposure to Chinese 3PLs is minimal, with only about 450,000 square feet leased to them. They have historically avoided deals with Asian 3PLs due to credit concerns.
Q: Can you clarify the timing and visibility of the 1.5 million square feet of development leasing expected in the fourth quarter?
A: Scott Musil, CFO, confirmed that the majority of the 1.5 million square feet is expected in the fourth quarter. Peter Schultz, Executive Vice President, added that while some deals are progressing slower due to tariff concerns, there is more interest now than in previous months.
Q: Are there any markets showing notable changes in operating fundamentals?
A: Peter Baccile, CEO, mentioned that there have been no significant changes in their target markets. They continue to favor South Florida, Nashville, and certain submarkets in Dallas and Houston. Denver is improving, but no major shifts have been observed.
Q: How are you approaching new development starts given the current market conditions and potential tariff impacts?
A: Peter Baccile explained that they remain opportunistic and cautious, focusing on unmet demand in specific markets like Texas, Florida, and Pennsylvania. They aim for good risk-adjusted returns while considering the evolving tariff situation.
Q: What is the impact of potential delays in development leasing on your financial guidance?
A: Scott Musil noted that if the 1.5 million square feet of development leasing does not occur as planned, it would impact FFO by about $0.02 per share. However, they remain confident in hitting the lower end of their guidance range even if leasing conditions remain challenging.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
