雅虎香港財經 First Industrial Realty Trust, Inc. (NYSE:FR) Q1 2024 Earnings Call Transcript
First Industrial Realty Trust, Inc. (NYSE:FR) Q1 2024 Earnings Call Transcript April 18, 2024
First Industrial Realty Trust, Inc. isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).
Operator: Good day, and welcome to the First Industrial Realty Trust, Inc. First Quarter Results Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Art Harmon, Senior Vice President of Investor Relations and Marketing. Please go ahead.
Art Harmon: Thank you, Dave. Hello, everybody, and welcome to our call. Before we discuss our first quarter 2024 results and our updated guidance for the year, let me remind everyone that our call may include forward-looking statements as defined by federal securities laws. These statements are based on management's expectations, plans and estimates of our prospects. Today's statements may be time-sensitive and accurate only as of today's date, April 18, 2024. We assume no obligation to update our statements or the other information we provide. Actual results may differ materially from our forward-looking statements and factors which could cause this are described in our 10-K and other SEC filings. You can find a reconciliation of non-GAAP financial measures discussed in today's call in our supplemental report and our earnings release.
The supplemental report, earnings release and our SEC filings are available at firstindustrial.com under the Investors tab. Our call will begin with remarks by Peter Baccile, our President and Chief Executive Officer; and Scott Musil, our Chief Financial Officer, after which we'll open it up for your questions. Also with us today are Jojo Yap, Chief Investment Officer; Peter Schultz, Executive Vice President; Chris Schneider, Executive Vice President of Operations; and Bob Walter, Executive Vice President of Capital Markets and Asset Management. Now let me hand the call over to Peter.
Peter Baccile: Thank you, Art and thank you all for joining us today. Since our last call in February, our team has signed two big development leases and we continue to make progress on our 2024 renewals at strong cash rental rate increases both of which I will discuss shortly. Looking at the industrial market broadly, vacancies ticked up to about 5.3% as new development projects that were started in 2023 have come online. For 2024, CBRE projects completions of approximately 300 million square feet. As those projects are delivered, we expect national vacancy to increase to the mid-6% range in the coming quarters. Importantly, the market has demonstrated some discipline with respect to new starts. No doubt that the high cost of construction debt has helped.
For the past three quarters, starts have averaged just 42 million square feet, which is more than 60% below the recent peak of $114 million in the third quarter of 2022. The increased level of prospect traffic for our development that we experienced toward the end of 2023 has continued into 2024 and some significant leasing decisions have been made. To that end, we signed full building leases at our 500,000 square foot First Rockdale IV in Nashville and our 1 million-square-foot First Stockton Logistics Center in Northern California. Updating you on our progress on lease signings to date related to 2024 expirations, we've taken care of 68% weighted on-net rent. Including the impact of new leasing, our cash rental rate increase currently stands at 45%, which is near the midpoint of our 40% to 52% full-year forecast that we provided on our last earnings call.
Our results to date reflect a renewal of one of our three largest expirations, all of which are located in Southern California. For guidance purposes, we have assumed one of the remaining two will renew. Moving now to dispositions. In the first quarter, we sold nine properties comprised of 433,000 square feet for a total of $49 million. This puts us well on our way to achieving our full-year sales guidance of $100 million to $150 million. The largest sale was the five-building 278,000 square-foot portfolio in Cincinnati for $33 million that we discussed on our February call. The remaining $16 million consisted of 165,000 square feet located in Chicago and Detroit. As I noted on our last call, 2024 has been a particularly challenging year to project the pace and timing of leasing in our portfolio due to the economic uncertainty, increasing volatility in the capital markets and the interest-rate outlook and the rapidly evolving geopolitical environment.
Over the past few weeks, these factors have once again given some tenants reason for pause. As a result, with respect to our broad-based same-store leasing assumptions for the year, we decided to make some adjustments, which are reflected in our updated guidance. With that, I'll turn it over to Scott.
Scott Musil: Thanks, Peter. Let me recap our results for the quarter. NAREIT funds from operations were $0.60 per fully diluted share compared to $0.59 per share in 1Q 2023. As a reminder, our first quarter 2023 results included $0.02 per share of income related to the accelerated recognition of a tenant improvement reimbursement associated with a departing tenant. Excluding that $0.02 per share, first quarter 2023 FFO per share was $0.57. Our cash same-store NOI growth for the quarter excluding termination fees was 10%. The results of the quarter were driven by increases in rental rates on new and renewal leasing, rental rate bumps embedded in our leases and lower free rent, which were partially offset by lower average occupancy.
We finished the quarter with in-service occupancy of 95.5%, the same rate as year-end 2023 with our 500,000 square foot Nashville lease offsetting some expected move-outs. As we continue to lease up our developments, we expect our in-service occupancy to increase in the second half of the year. As we stated on our fourth quarter earnings call, developments that we placed in service in the third and fourth quarters of 2023 that were not fully leased had approximately 240 basis points of occupancy opportunity. With the lease-up of First Rockdale IV, the lease-up opportunity from these developments now stands at 160 basis points. Before I touch on guidance, let me remind you that on the capital front, we are strongly positioned with no debt maturities until 2026, assuming the exercise of extension options in two of our bank loans.
Also, our expected 2024 asset sales, combined with our excess cash flow after capital expenditures and dividends will exceed the amount required to fund completion of our developments in process. Moving on to our updated 2024 guidance per our earnings release last evening. Due to changes in some of our same-store leasing assumptions that Peter discussed, our guidance range for FFO is now $2.55 to $2.65 per share. This is an adjustment of $0.01 per share compared to our prior guidance. Note, as we detailed on our fourth-quarter earnings call, our guidance excludes approximately $0.02 per share of accelerated expense related to accounting rules that require us to fully expense the value of branded equity-based compensation for certain tenured employees.
Including this $0.02 per share of expense, our NAREIT FFO guidance range is $2.53 to $2.63 per share. Key assumptions for guidance are as follows: quarter-end average occupancy of 95.75% to 96.75%, a reduction of 25 basis points at the midpoint. Same-store NOI growth on a cash basis before termination fees of 7.25% to 8.25%, primarily driven by increases in rental rates on new and renewal leasing along with rental rate bumps embedded in our leases. This is an adjustment of 75 basis points at the midpoint. Note that the same-store calculation excludes the 2023 one-time tenant reimbursement that I discussed earlier. Guidance includes the anticipated 2024 costs related to our completed and under-construction developments at March 31st. For the full year 2024, we expect to capitalize about $0.05 per share of interest.
Our G&A expense guidance range is $39.5 million to $40.5 million, and this excludes the roughly $3 million in accelerated expense I referred to earlier. Lastly, guidance does not reflect the impact of any future sales, acquisitions, development starts, debt issuances, debt repurchases or repayments nor the potential issuance of equity after this call. Let me turn it back over to Peter.
Peter Baccile: Thanks, Scott. We're very pleased with the two major development leasing wins to kick-off the year. Our team is focused on building on that success with additional development leasing and capturing rent growth from lease signings in our in service portfolio. Operator, with that, we're ready to open it up for questions.
See also
15 Best Cruise Lines in the US and
19 Best Alternatives to Discord in 2024.
To continue reading the Q&A session, please click here.
