First Industrial Realty Trust raises 2025 FFO midpoint to $2.96 supported by development leasing successes

Earnings Call Insights: First Industrial Realty Trust (FR) Q3 2025

MANAGEMENT VIEW

* President and CEO Peter Baccile highlighted "several development lease signings in the third quarter and fourth quarter to date, including a key win in the Inland Empire that contributed to our FFO guidance increase." Baccile stated that "the renewal side of our business is exceptionally healthy, and we have now largely taken care of our rollovers for 2025." He noted that "touring activity related to new leasing picked up in the third quarter," with tenant decision-making still deliberate due to tariff uncertainty. Baccile emphasized that the company's "results were in line with our expectations with in-service occupancy of 94% at quarter end" and a cash rental rate increase for new and renewal leasing of 32%, or 37% excluding a fixed rate renewal in Central Pennsylvania.
* Baccile also pointed out, "We're making good headway on our 2026 rollovers. Through yesterday, we've taken care of approximately 31% of our rollovers at a cash rental rate change of 31%."
* CFO Scott Musil recapped, "NAREIT funds from operations were $0.76 per fully diluted share compared to $0.68 per share in 3Q 2024." Musil noted, "Third quarter 2025 FFO was positively impacted by $0.01 per share related to an insurance claim recovery." He stated, "Our cash same store NOI growth for the quarter, excluding termination fees, was 6.1%...excluding the insurance recovery, cash same store NOI growth was 5.4%." Musil added, "We finished the quarter with in service occupancy of 94%, down 20 basis points from the second quarter."

OUTLOOK

* Musil announced, "We increased our 2025 NAREIT FFO midpoint by $0.04 to $2.96 per share. The $0.04 per share increase is primarily due to the development leasing successes, lower interest expense and the aforementioned insurance claim recovery. The tightened range is now $2.94 to $2.98 per share."
* Key assumptions include "end of fourth quarter in service occupancy of 94% to 96%" and "fourth quarter cash same store NOI growth before termination fees of 3% to 5%." The company expects "a 2025 quarterly average same store NOI growth of 7% to 7.5%."
* Musil stated, "For the full year 2025, we expect to capitalize about $0.09 per share of interest. And our G&A expense guidance range is $40.5 million to $41.5 million."

FINANCIAL RESULTS

* Musil reported, "NAREIT funds from operations were $0.76 per fully diluted share compared to $0.68 per share in 3Q 2024."
* Cash same store NOI growth was 6.1%, or 5.4% excluding the insurance recovery. In-service occupancy was 94%, down 20 basis points from Q2. Bad debt expense was $245,000 for the quarter, bringing year-to-date total to approximately $750,000.
* Leasing activity during the quarter included 2.2 million square feet of leases commenced: 400,000 new, 900,000 renewals, and 800,000 for developments and acquisitions with lease-up.

Q&A

* Robert Stevenson, Janney: Asked about the FFO range delta. Musil responded, "If you look at development leasing, we have 300,000 square feet of in service development...scheduled to lease up...on December 31, so that has no impact on the midpoint guidance. The only other thing...are unanticipated credit challenges...on the upside, leasing more than 300,000 square feet...would push us up to the top."
* Stevenson also inquired about the transaction market. Chief Investment Officer Johannson Yap explained, "In terms of the market for leased assets, it is very, very competitive...product like we have leased at market would be in the low to mid-5s [cap rates]...cap rates could fall below 5 [in certain markets]."
* Nicholas Thillman, Baird: Asked about 2026 expirations. EVP Christopher Schneider said, "Our largest remaining rollover today is a 550,000 square foot expiration in Southern California...we're in discussions with them about a renewal."
* Todd Thomas, KeyBanc: Inquired about development appetite. Baccile said, "Where we have land in [preferred] markets, we will be considering starts in 2026...our available opportunities are going to yield close to 7%."
* Craig Mailman, Citi: Questioned the competitive landscape for Aurora and New York assets. EVP Peter Schultz stated, "The supply picture in Denver has improved...not a lot of options for full building users...in Pennsylvania...almost 9 million square feet of deals...already signed...will be taking occupancy in the fourth quarter of this year and the first half of next year."
* Several questions focused on market rent trends, 3PL tenant credit, and the timing of lease-ups for development projects. Management highlighted strong activity in Atlanta, Baltimore/Washington, South Florida, and Dallas/Fort Worth.

SENTIMENT ANALYSIS

* Analysts frequently pressed for more details on leasing activity, credit concerns, and the timeline for development lease-ups, suggesting a neutral to slightly cautious tone regarding near-term growth visibility and credit risks.
* Management maintained a confident but measured tone during prepared remarks, with Baccile stating, "We're energized about our recent development leasing wins and encouraged by the overall increase in foot traffic for our availabilities." During Q&A, responses often referenced ongoing processes and future updates, indicating a balanced but non-committal stance.
* Compared to the previous quarter, management's tone remained steady, though slightly more positive on leasing progress. Analysts' caution persisted, particularly around credit and development lease-up timing.

QUARTER-OVER-QUARTER COMPARISON

* Guidance for NAREIT FFO midpoint increased from $2.92 in Q2 to $2.96 in Q3, with the range narrowed. The increase was attributed to development leasing, lower interest expense, and insurance recovery.
* Q2 same store NOI growth was 8.7%; Q3 reported 6.1% (5.4% excluding insurance recovery). In-service occupancy edged down from 94.2% to 94%.
* Leasing progress on 2025 rollovers improved from 88% to 95% by square footage. Cash rental rate increases for new/renewal leasing remained strong but dipped slightly from 33% to 32% overall.
* Management reiterated optimism about demand stabilizing and fundamentals improving, while analysts continued to probe for details on lease-up timing and credit exposure.

RISKS AND CONCERNS

* Musil disclosed a 3PL tenant was added to the credit watch list, with ongoing rent collection directly from a subtenant and unresolved issues regarding the lease obligation.
* Tariff uncertainty remains a headwind for tenant decision-making. Baccile noted, "uncertainty around tariffs continues to weigh on some prospects."
* Development lease-up timing carries risk, with 1.7 million square feet now slated for 2026 and guidance assuming 300,000 leased by year-end 2025.
* Market supply/demand balance is stable but sensitive to new construction starts and macroeconomic factors.

FINAL TAKEAWAY

First Industrial Realty Trust communicated progress on leasing, portfolio occupancy, and an improved 2025 FFO outlook, underpinned by recent development leasing wins and stable rental rate growth. Management remains focused on converting prospects, managing credit risk, and capitalizing on strong markets, while monitoring tariff-related uncertainty and maintaining a disciplined approach to development and asset value creation.

Read the full Earnings Call Transcript [https://seekingalpha.com/symbol/fr/earnings/transcripts]

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