Record-setting rental rates and leasing wins: First Industrial Realty Trust's strong performance and market outlook
2023-07-25
First Industrial Realty Trust, Inc. (FR) recently held a call meeting to discuss their second quarter results and provide updated guidance for 2023. During the meeting, the company highlighted their strong performance, including record-setting increases in cash rental rates and leasing wins at their developments.
The participants of the call included Art Harmon, Peter Baccile, Scott Musil, Jojo Yap, Peter Schultz, and Chris Schneider. The management discussed the market outlook, which is influenced by factors such as development leasing and overall market conditions. They emphasized the importance of assessing key market fundamentals, including leasing velocity, to identify opportunities for new projects. While the company has several promising projects in the pipeline, their focus is on prioritizing profitability over volume.
The management also mentioned a decrease in spending rate due to a decline in average occupancy, which has impacted same-store net operating income (NOI). This decline is attributed to lower cash rent increases, real estate taxes, and bad debt. In terms of specific markets, the Baltimore portfolio experienced a tenant move-out, but there is interest from potential new tenants. The completion of developments, particularly in Denver, has generated activity from partial building users and overall increased interest levels.
The key drivers of the business discussed during the meeting include development leasing, market fundamentals, leasing velocity, risk-adjusted returns, average occupancy, cash rent increases, real estate taxes, bad debt, supply in the submarket, interest from tenants, and activity levels.
The meeting also highlighted some important financial numbers. The company reported an EPS (Earnings Per Share) of $0.41, beating expectations by $0.12. Additionally, their revenue for the quarter was $152.22 million, showing a year-over-year growth of 17.05% and beating expectations by $2.49 million.
The competitive landscape in the real estate market was discussed, with varying rent growth trends in different regions. Southern Florida and New Jersey are experiencing significant rent growth, while Dallas and Phoenix are also seeing good rent growth due to population and business migration. In Southern California, rents have increased significantly in recent years, but going forward, rent growth is expected to be slightly lower due to companies taking a breather and reduced core traffic. However, there is still a positive outlook for rent growth in the region. The competitive landscape is influenced by factors such as market demand, population migration, and investment returns.
Based on the information provided during the meeting, the company's outlook for the quarter/year is uncertain and may be influenced by factors such as development leasing, market conditions, leasing velocity, average occupancy, cash rent increases, real estate taxes, and bad debt. The company may face challenges in maintaining the same level of performance in the back half of the year.