First Industrial Realty Trust (FR) 25 Jul 192019 Q2 Earnings call transcript

Good afternoon. My name is Sheental, and I will be your conference operator today. At this time, I would like to welcome everyone to the First Industrial Second Quarter Results Call. [Operator Instructions]. Art Harmon, Vice President of Investor Relations, you may begin your conference.

Sheental. Thanks, welcome and our to everyone, call. Hello,

Thursday, laws. discuss let accurate as me we forward-looking plans as federal and date, our management's our of based call may second guidance, and statements be securities XXXX. the by Today's results estimates XXXX defined statements remind expectations, only XX, July include are on quarter may Before These prospects. everyone statements of our that and time-sensitive today's

the could obligation information differ our no We are filings. to SEC results forward-looking statements or described other provide. update may we assume materially statements our Actual and cause in our from and factors, XX-K which this

earnings our the investors financial available can discussed supplemental call under in release. a SEC at report, firstindustrial.com today's our our The release earnings filings of You supplemental find are and non-GAAP measures in tab. and reconciliation report

Capital call Our Officer; Peter our Also your questions. the which, and Yap, Executive Walter, Officer; President with Vice Chief after up Executive Senior Schultz, and Senior Chief President Officer, for of Chris we and Musil, call Schneider, Vice of Jojo Financial Peter by will on begin President; Vice Management. Chief Bob Investment it Asset President are open will today Operations; Markets Scott Baccile, and remarks our

the to me Peter. over call Let turn

Thank you, Art, and thanks to everyone joining us today.

and growth. for investment delivered team results of excellent another operating Our strong quarter

demand, With million of our XX net the portfolio. feet and to environment of update for across rent a tenant square Advisors market healthy and completions net national absorption growth into square quarter and get the the a completions. and and reported XX levels quick with square XX continued overall brings we occupancy markets some broad-based of That Before XX on of million. million second you industrial in the let of absorption preliminary our the remains details, Econometric continuing of year-to-date market. new provide state those CBRE totals feet level, On feet industrial high me million

Occupancy at strong. are second Our results the very indicative cash and XX.X%, full quarter of also rate history. highest for up quarterly our was rental quarter-end is picture was year XX.X%, commencements strong fundamentals. continuing result in The these growth

As of XXXX our change rental rollovers XX% XX%. now a signed approximately we've today, of rate and of cash

We to of with meet high-quality that We're tenant several just a profitable continue new new including starts, develop our facilities for pockets to doing build-to-suit customer. underserved repeat demand.

venture last Inc. Pennsylvania square-foot fourth Center call, lease As be a started a that a our building that in we building PV our will park. U.S.A., XXX,XXX also pleased during Logistics site our XXX,XXX we Phoenix The to second we for quarter. and commence a with acquired new First Ferrero build-to-suit tenant from by will our square-foot and business Ferrero Central the announce XXX in We're be will that year-end. completed I-XX/XX on discussed by on We're facility the long-term in we signed at occupied quarter.

with estimated approximately cash of total $XX.X X.X%. is million investment Our a yield

the during start on deal fourth the let a completion some square-foot on We're two XXX,XXX we've of for well for our Now to Houston quarter. Commerce leasing in Parkway feet. a off building you leasing inked in XX,XXX developments Grand other quarter. second bring at up-to-date Center me We're already as good slated our underway First on square

is leased. First building in Houston XXX fully Guhn square-foot now XXX,XXX at Our Road

achieve and two call First our Jersey. far, we at square-foot Crossing our First about a underwriting in XXX,XXX Park yield at Central X.X% XX% on XXX% in Thus New Glacier to cash that our lease third in XX,XXX our million. preleased XXX% III $XX.X of leases informed last also total Joliet estimated our partial Logistics And of We California leased Central X-building investment Ranch Center outperformed to brought our in that already quarter, in we Chicago. project the First of Seattle. on our Southern you We square-foot occupancy

The Summing our total June in have completed of at of pipeline at comprised under quarter. is the million construction feet, X developments $XXX million up today. will leased start of up we XX, fourth of development commence lease of which a the or square as lease XX%

for adjacent XX pipeline to our $X.X and quality approximately would at which our is continue For land average In XX%, quarter, this of for market of First based future cap projected X.X%, assets. batch of land to replenish Park seek on out XXX To drive our acres margin to acquired an growth, rates sites. Dallas developments, second we we the yield comparable translate leased prevailing cash million.

building enable expected by us of will infill with In on feet a XXX,XXX million. Philadelphia XXX,XXX the in the X.X-acre we to park. an a square-foot additional for to quarter completion third that site commenced development square in build location of already Northeast $X second the XXXX. This date, acquired an quarter in We've site

Total $XX.X our million, yield X.X%. estimated targeted investment is and is

on acquisitions. Moving to

Bay in $X.X Angeles, we the price the apparel million. During acquired totaling market a XX,XXX of Los quarter, purchase square of South buildings feet for

first market. yield we X.X%, we made acquisition Park. when In bolt-on and of square-foot Denver's building of is X% expect in-place XX,XXX we roll our near-term to near yield some Our Aurora explorations a I-XX located a achieve approximately an to quarter,

was yield Our million, purchase X.X%. our is and $X price

discussed, acquired In in the addition a development third site California. to and the to land Philadelphia two date, buildings Southern also quarter we've site in I

a closing a prior is Empire that to in leased building first Inland deliver The we the $X.X for X.X%. square footer of vacant up bought and yield XX,XXX to million,

for XX,XXX can million, feet. is that a are site The in vacant a $X.X approximately San which X square-foot we on of targeting $X.X land XX,XXX we acquired million, building which acres stabilized X.X% for in yield. we we Diego for build comprised acquired square is second Fontana The

third Northeast for in we million, a Moving parcel dispositions. in and square-foot in land far, XX,XXX Miami New Jersey totaling small vacant two sold sold million. a the to quarter, We $X.X $X for for $XXX,XXX. Pennsylvania XXX,XXX feet Thus in units square building

weighted. sheet calls, we prior will user a balance to million, XXX-acre sales be share $XXX discussed Phoenix sold million site disclosed, we with price on to sales venture, $XX.X totaling as of back-end In million. previously Our joint our target our as remains the $XXX and

to turn walk I details a on have I'll guidance, performance updated but over of to XX sold and through FR acres like more item quarter also the originally partnership. capital. pleased aforementioned economic returned minute acres additional you venture for our very originally one has the XXX% this and We're the of Scott it The XXX in with to XXX to invested the the build-to-suit. owns note. of the Today, acquired venture I'd

New many We Stock organization company, Reaching recently closing so exchange occasion. were honored of support milestone commemorate the the and anniversary volumes to to as celebrated XXth our and our of the at speaks about resiliency a the ring key bell this public the stakeholders. York we

and you. in ahead. Our we've team, part live you which opportunities our our First investors. We our all over business work, to and we Industrial our that, for customers, partners, and present excited about thank what With Scott the of are being important and past, accomplished communities, and financial an

driven $X.XX to $X.XX development X operations In NOI growth. compared $X.XX quarter, share the an share were increase in due per to in $X.XX year ago. fully by in was second Peter. funds lease-up per NAREIT XXXX, diluted EPS Thanks, versus same-store diluted primarily from XQ

was quarter-end noted, basis XX.X%, Peter a XX year quarter ago. from and points As flat up a occupancy from ago,

with as a for were was fees, X%. X.X and the Regarding cash NOI leasing. quarter, million tenant an arrears, NOI XX.X%. square in paying real slight termination $XXX,XXX. average lease-up; partially including these, rates rental occupancy, was Of as rate fees termination same-store approximately in were Lease in explained for offset This rental leasing new; as by square by acquisitions of Same-store volume, we bumps estate feet driven termination million tariffs by tax And a feet square we've cash growth excluding predominantly previously. square were XXX,XXX in footage growth X.X decrease renewals; on totaled XXX,XXX increase commenced X.X%. feet leases. markets basis, was Denver, a This was and and retention long-term developments well fees, was and

up XX.X%, XX.X%, leasing renewals straight-line new rates rates up with leasing renewals rental rental overall, a were Cash basis, up new XX.X% and overall XX.X%, up were with increasing up On X.X%. XX.X%. and

Moving now to the capital side.

of Just interest rate X.XX%. of notes. this million week, notes $XXX a a have X.XX%. is agreements, senior effective rate we of interest maturity XX-year the placement private unsecured of related closed on settlement rate protection interest The an Reflecting and the

pay fund to a sheet interest the average proceeds The these with we on $XX off paid be we of X.X%. that rate $XX million debt new moving used secured will second in half first off of quarter secured debt essentially the in the weighted few remaining approximately investments. Recall of year, proceeds to an of metrics. balance Quickly million overall and will refinance

At the interest These weighted preferred end secured of XX, notes, at was financings X.X net X.Xx. average June our our the maturity loans with rate debt And facility. years stock weighted to of term adjusted figures of and EBITDA XQ, credit plus unsecured a average is exclude X%. our

press on evening. Moving guidance release per updated last our XXXX our to

for half occupancy the of at assumptions range are year we developments. under better to to XX.XX% completed of by outperformance; guidance as first XX.XX%; to and range midpoint per an NOI increased the guidance interest. XXXX, first portfolio related call, XX for of increase guidance million, driven capitalize July to REIT discussed share Average our nearer In key midpoint year XXXX a and costs interest $X.XX related operations total, construction now the about our from anticipated $XX.X points and X% full basis the new $X.XX remains This our share to capitalized an and reflecting with of follows: increase in $X.XX includes range our Our of $XX.X $X.XX. XX. X%, our what is expect growth we to quarter-end G&A in to same-store to million $X.XX developments of The guidance the is our range FFO we quarter per

also of impact equity. of properties; I impact related after $XX or turn after does it the acquisitions, any guidance future excludes call, to two me of from back any of guidance developments expected future of million call; claims any let the insurance The other issuance settlement Our than damaged new starts debt over and sales, earnings With not potential the payoffs repayments of the earnings gains repurchases this debt that, secured final reflect: impact future issuances, discussed; debt Peter. to or this

Thanks, Demand Industrial please our enhance further thanks growth portfolio. to continues and are great for to and would you team for our opportunities that, questions? investments focused on With for again be to it we rent And capturing up strong, new quarter. another Scott. profitable for open operator,

Instructions]. [Operator

with Mailman Craig from comes KeyBanc. question first Your

were have driven Just spreads question. I wide, by know it, versus new. going the however, -- renewals guys at The rollover is forward? But a a it's portfolio cash do guys rent you more this impressive 'XX look the you where mark-to-market you of sense quarter. as

of don't we're indicator of Craig, and our Well, looking you think We is as what's year what we're mark-to-market. XXXX rents And great we with happening mentioned, really generally current up what in know, XX%. our we the at we're rollovers, through a XX% track doing rollovers. with as portfolio

landlord's the a very, be very that's just alternatives, a are to strong it result. of don't continues So lot tight, markets The and have market.

I it's see you'll in -- that the kind future. So of performance a think

mid-Xs. with the then GLP and And of that going just off sort portfolio

that, you or curious assets bid the to overall. on kind that I kind of the talked paying markets bigger accelerate of just in guys of still but I are others. footprint gap there thoughts if industry people kind past, this to of with one And packaging of have the are portfolios still into you that for premiums portfolio kind peers? if kind it's your out of guys market You I'm try curious of know wide to more versus know to about and evolved perceived trade the the narrow the just of that's don't in you're transition few. the noncore relative

Yes.

value. sales all some And dispositions. we've our doing value that at seen, able maximization on We're achieve drive have avenues largely value in and We looked values via more end of certainly and different sales think like. method, using price strong driving can to users that. we've we successful a those certainly do if buyers we'll the XXXX to been you've focused we and pretty So for targeted explore driving the and been And and today, that.

Okay. But a like the that you still you like pricing sound doesn't today, one-offs? feel get on better

you they're in assets not that The portfolio getting has the selling are not about. We and yes. markets. And far, been they're conducive experience here different premium so have. there, that That our -- talk we're to that asset

Stevenson from Janney. next Your comes with Rob question

index in have freight the the for of X% since couple months the last Peter, of of X%, and beginning -- cash of last has each couple the year. negative dropped -- been

Given any clients of our insights rail, you the across starting to just something the here airfreight of their as to truck, that what's stuff, signaling drops clients have feel else? talking Is if widespread going on? curious to tariffs any any business? was China Or from this in this

What -- said in hear you I at couldn't beginning? the what the

came index shipping that is out, freight cash the just showing down. The that out, came that

Yes.

full, correlation empties, think So cargo. Rob, to containerized here's we has markets. in track port Jojo. not the The absorption the is What the largest the loaded we that

part of part New whether are year of last slightly basically they it's actually markets the to or So of three the a containers Jersey, if then, the import they and months leveled loaded you first the Beach biggest look little down. up off. of four month, months then bit at part And Long the L.A., during were

what the X.X% X%. to containers loaded year-over-year, in of saw about So was decline a we import

Okay.

give you don't think number it's that material, So I one. we because

-- Second reduction have heard cargo. of what's we not the containerized our debt from loaded from issues any been all, tenants of

of our the feel we or the growth lot tightest been we've for note, the example, of able really markets. Bay rate now is what markets of -- drives a occupancy slight decrease. don't to L.A. -- have invested why so the tight, South Last these rate tenants a where absorption rents. are is continue occupancy Lastly, we that's example extremely really that choices port All give push port of I'll the despite one you market, to The sub-X%. right rent market

guys know of how at to forced to a then levels? did minimum the more forward, you close the have? currently And you to Scott, going typical the beginning raise strong to growth guys be you your by Are you and/or frequently year. dividend Okay. But I this going payout dividend continue increase rate are greater that either guys given

dividends at Rob, there. cash it's Scott. year, cushion with our And dividend you have if our -- projected income this flow. our taxable grow We we looked dividend

So we we're pretty of from in think shape view. that point good

Your Kim comes Bin Ki next question SunTrust. with from

that conservatism some always imply I the know Can just little little you perspective? how of talk but about it guys a does conservative with in debt [indiscernible] bit bad But bit you little of NOI bake a of of from guidance? much increased follow a to bit couple deceleration. that assumptions. a guys it being try is Basically, versus timing see might you leases you

same-store debt Hey, the The and lion was Ki in of Bin, guidance, point share it's basis Scott. our bad midpoint outperformance lower half increase XX expense. it's that first

$XXX,XXX for the year model. $X the Our half was compared think expense debt million for bad first of about I to

about at half getting you're same-store the a question last year is implies of X% if growth growth the the X% second the of the cash think half our is, and first for year. about rate look you I at rate,

the in $XXX,XXX back about debt to of in that have debt come the we're as to at X.X%. the the expense, the bad goes per big is we that year. expense X% half if back same the half enough of front, bad quarter in have the one the reasons fortunate our half of right, If decline that year, back You're baked for do

bit that. a get little we fortunate So enough we're back on if

we year, And The rent a the is leasing. year back half bit And Ki the half pieces half were off year. back less than the strong then of we really burn at have of average to occupancy little other of two -- the XXXX the a ended with little the also, more in the do back year. declining of half remember, We had with first Bin a XX.X%. free

Southern to and turning of of some buildings done quarter acquisitions, some this you've California. kind the in that And deals year-to-date, small interesting land

of you park. a develop to but usually more there? to you one-off. Anything deals You've kind business expanding to done of and of want want This Are what type all? into smaller assets at a develop read part you bit looks

Ki question. Bin, Thanks your for Jojo. Hi, it's

In within additional that South an we the eight Bay, radius. within actually properties in buildings terms -- about a two of own mile other

for that we're So investor Bay, -- familiar right a submarket in in Where South one-offs the these. building Dominguez, a the then Empire. of the Inland Empire, with lot, And like so continue you're area. we we to where product Inland find Rancho that all we acquired will that's big in other

about we good and to So bolt-on do that's are growth, just we'll rent the very examples these feel know just of this. because the a We market. acquisitions continue --

Ki Schultz. Bin, Peter it's And

in from an site a markets. and that's assets area where different past other the feet Seattle not XXX,XXX in we've is Philadelphia, in in that some location and been very size square owned the building the On infill that we've Houston and

So building, as it's pockets not It's feel shift. right unreserved a location, of right time commented. we are there Peter right demand, where the

last couple just other in behind The a question. past the story And looks rate for bit your occupancy What's than markets. lower quarters, the that? Okay. Seattle, of

It's one just really building.

We one having one also in now. small and Ki that Bin, -- have just good a that's activity vacancy Seattle, we're in right building portfolio, that's

Instructions]. [Operator

Guinee Your with Stifel. next from comes question John

you on is your because your low Look OpEx, your was OpEx Couple of ATM abnormal? year, Was thoughts any like very a this that that going the this of as rent haven't rents, that second, very, then Or strong. And tapped questions. quarter. percent still is tier? growth down noticed

don't the part... why Chris, first handle So you

Chris. is this John,

OpEx, quarter-by-quarter have it's I some fluctuality. on you basis, As a the as just far think

related not OpEx snow or some the we normal. to look it's you quarter, other than but CapEx anything If at first had high ruble

John, this is Scott.

at look year the uses. front, capital. coming look equity sources And this if We'll sales and have with half million we of our back at about $XXX the retain you in. and On

$XXX Our spend the of year development back half million. was

point So a we're of that from in good view. shape

at plenty liquidity got on of We've credit. is our leverage low Our X.Xx. line of

to think of I in point view going of So a uses rest XXXX. for the be pretty and shape we're from sources good the

comes from Eric Frankel Street Your question Green next Advisors. with

I a in is million wanted Obviously, asset your disposition. explicit this of don't sell to that. looks $XXX just amount the program to have half plan detail. have to in of to your you I guess usual achieve back guidance more year bogey and the about achieve on about a like little fair I recycling It year. talk sales

wanted changing? just if just as to I for your want stronger isn't you thoughts. So sell? understand acquisitions? was And less to dispositions whether asset you just mindset than market get before? is And can So to I Or that have that the redeploy it your

to We I our Sure. is read the guidance just in somewhere within with in into where there's really -- we $XXX market. guidance that be are that we'll of range terms feel to we of year-to-date range. took that to No. projects mean, got of range. $XXX that, number sales, a million comfortable nothing million the still We've

to sales so the have just that it's in year this happens back-end We they even more weighted been that past. we're others to take have than And the to market. going are be going

what in. on worried sales value we're maximizing Eric, and really, close opportunity in about Now these focused the quarter they less

Okay.

is any where question. market nationally. construction touch Obviously, be might pockets pipelines? a you some markets, Just quite there upon pretty are But there seems generally market your maybe sentimental final or strong could stronger

Peter, you want to?

submarkets say would we've in I prior Schultz. Peter It's talked as quarters. continue morning. to the good same Eric, be those Sure. about what

would example, all that markets Atlanta, Central pressure PA, the there and Dallas, buildings. Pennsylvania, Chicago by our in supply construction in us. like continues larger Eastern that, or X square most count, as little are to XXX South the in amount there buildings of and Northeast that In there bit up foot a supply an or those million feels square are be say foot I of to and XX, fair of activity, a while under still I-XX excess

are we're in that very rising other with very, The tight active submarkets though rents.

be to areas are investment obviously, new the the term. going those over focused we near dollars So our

you now have that have about Is How obviously, you've position. a there big big there? where any built a Denver, land it. pretty you pretty I Got building concerns mean, there?

on Commerce X XXX,XXX it's spread would our I project, Eric, Center square quarter, bit And Schultz, the feet. this little of Northwest, of out say submarket are delivering would about area in again. project is elevated Denver square-foot or are a smaller. supply competing our Peter size say, our a where other some Northeast, across and other where with I buildings build-to-suits. existing the south building metro It's two couple of half we're development we'll and later that the about be million half is side, about Aurora is has that in that there

really don't be So not good we certainly excessive, there. other view to that to as Demand relative markets. continues

to And see reporting rent our to our on continue project. -- look We great to on progress you forward we'll there. growth

[Operator Instructions].

Burrows with next Your Caitlin Goldman question comes Sachs. from

was wondering topic guys I guess of I just as supply on developing. you to the relates it kind

wouldn't and think at buying as anything terms First getting volumes make keep for able that year be as of entitlements, you as next are to high they go Industrial least development In forward? today you land its are seeing to you

our and development continue would offices through that right pipeline, for Phoenix across can us count build through joint million about venture. country So million can square we X feet confident for team in the square new in ability drive also That development platform now potential feel of own. on sites. the working looking speculative worry does land we feet see about volume to our our is future. our the to And don't and value-creation not drop-offs We constantly we to XX in we approximately XX about build currently our cause we're starters, anything

be definitely kind maybe mentioned that at that recognized. And be that future? that the wondering, were in you make and a out the guys earlier know spreads I terms in leasing way now guess than down was When had sense. retention we I guys can up, the to pricing the of you it quarter is that you just one could you then of, They worked in And are look little. market. Is Great. trying just may landlord's with future? change was the been tougher I a

team Strong our there's certainly is have -- hard and obviously, lease inputs to where Minimizing than also we're a terms X it to rents the tenant, pushing every And we're of trying one to retain pushing continually a concessions, maximize Xx mindful several that on So growth them. possible. extending more is cost to of retain building that value we or but have there. rent strong.

I think that's how number we of evident about. look value to the lease rollover kind picture. at in the talked maximize big every XXXX is trying we that again, And of the

question next Morgan. Michael Your Mueller with comes from JP

and any your you looks differences portfolio you across different you seeing categories? notable like bulk, major I am the flex curious, move in it So cap are light regional, those categories. out between just of rate terms break as

little see cap bit Overall, which trades bulk, flights we a really we don't any very difference light higher own the rate. regional. between little The and

X X has pretty past And Got consistent or it. been that of outside even months? the

yes. that's because XX There's years. Oh, it's over the XX past to maybe

it's So like that. been

the this I now [Operator Instructions]. further no back over Baccile. questions would There Peter at are turn time. to call

operator, me enjoy summer. follow-up on free to with today. or call and to reach our to you, for feel Scott, participating thanks Thank everyone your out and Art, Please any questions,

conference today's concludes call. This

disconnect. now may You