First Industrial Realty Trust’s Balanced Earnings Call

First Industrial Realty Trust ((FR)) has held its Q1 earnings call. Read on for the main highlights of the call.

First Industrial Realty Trust’s recent earnings call presented a balanced sentiment, highlighting significant achievements in leasing performance, development initiatives, and financial stability. However, these positive aspects were tempered by market uncertainties, particularly due to tariffs and a slight decline in occupancy. While the company demonstrated growth, external geopolitical factors pose challenges that could impact future performance.

Strong Leasing Performance

First Industrial Realty Trust reported a remarkable 30% cash rental rate increase for new and renewal leasing, with the potential to rise to 36% excluding a large fixed rate renewal. A notable achievement was the expansion of a tenant at the First 76 project in Denver by 99,000 square feet, reaching full occupancy in that building.

Development Initiatives

The company announced plans to break ground on a 176,000 square foot facility in Northwest Dallas, with an estimated investment of $23 million and a target cash yield of approximately 8%. Additionally, construction is set to begin on a 226,000 square foot facility in Philadelphia, with a projected investment of $31 million and a similar target cash yield.

Strategic Investments

First Industrial acquired two fully leased developments from a joint venture in Phoenix, totaling 796,000 square feet, at a 6.4% cash yield. This acquisition significantly exceeds market cap rates, showcasing the company’s strategic investment capabilities.

Financial Stability

The company renewed a $200 million term loan and increased its senior unsecured revolving credit facility by $100 million, extending maturity options to 2030. This move underscores First Industrial’s commitment to maintaining financial stability.

Strong FFO Growth

NAREIT funds from operations were reported at $0.68 per fully diluted share for the first quarter, compared to $0.60 per share in the first quarter of 2024, indicating robust financial performance.

Market Uncertainty Due to Tariffs

Concerns over tariffs and their potential impact on tenant demand and the operating environment were highlighted. The ongoing geopolitical situation has created uncertainty, affecting decision-making on new investments and growth.

In-Service Occupancy Decline

The quarter ended with an in-service occupancy rate of 95.3%, down 90 basis points from year-end and 20 basis points from the prior year, indicating a slight decline in occupancy levels.

Leasing Activity Delays

Some leasing conversations have paused due to tariff uncertainties, affecting potential leasing activity and decision-making timelines.

Forward-Looking Guidance

During the earnings call, First Industrial Realty Trust maintained its guidance for the fiscal year, projecting NAREIT funds from operations (FFO) at $2.87 to $2.97 per share. The company expects an average quarter-end in-service occupancy rate of 95% to 96% and cash same-store NOI growth of 6% to 7%. With 73% of its 2025 lease rollovers addressed, the company anticipates overall cash rental rate growth of 30% to 40% for the year. Despite potential geopolitical headwinds, First Industrial remains focused on its leasing and investment objectives.

In summary, First Industrial Realty Trust’s earnings call reflected a balanced outlook, with significant achievements in leasing and development initiatives. While financial stability and strong FFO growth were evident, market uncertainties, particularly due to tariffs, present challenges. The company’s forward-looking guidance remains optimistic, focusing on executing its strategic objectives despite external pressures.