First Industrial Realty Trust, Inc.

Good day and welcome to the first industrial second quarter results call. Today's conference is being recorded. At this time, I would like to turn the conference over to Art Harmon, VP of Investor Relations and Marketing. Please go ahead.

Thank you, Samara. Hello, everyone, and welcome to our call. Before we discuss our second quarter 2020-2022 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 july 21st 2022 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 filing are available at firstindustrial.com under the Investors tab. Our call will begin with remarks by Peter Basile, our President and Chief Executive Officer, and Scott Musil, our Chief Financial Officer, after which we'll open it up for your questions. Also on the call today are Jojo Yap, Chief Investment Officer, Peter Schultz, Executive Vice President, Chris Schneider, Senior Vice President of Operations, and Bob Walter, Senior Vice President of Capital Markets and Asset Management. Now let me turn the call over to Peter.

Thank you, Art, and thank you all for joining us today. Our team delivered another great quarter, which included several significant leasing successes and a large land sale in our Phoenix joint venture, which have culminated in an increase in our FFO per share guidance, which Scott will discuss shortly. The U.S. industrial market continues to exhibit strong fundamentals. CBRE EA reported second quarter national vacancy at 2.8%, a new all-time low. Net absorption was 57 million square feet, in line with new completions of 61 million square feet. New construction has been increasing to meet tenant demand, but at levels that are generally measured, especially in the coastal supply-constrained submarkets where we are focused. In our portfolio, we finished the quarter with an occupancy rate of 98.4%, and since our last earnings call, we signed a few key rollovers. We backfilled our largest remaining 2022 expiration, a 341,000 square footer in the Lehigh Valley, where we captured a 40% cash rental rate increase with only a few days of downtime. We also continue to achieve strong overall rental rate increases on our new and renewal leasing. Through yesterday, we had taken care of 89% of our 2022 rollovers. Currently, our overall cash rental rate change on new and renewal leasing is 23%. For the full year, we now expect cash rental rates to be up 22 to 25%, two percentage points higher at the midpoint than our expectations last quarter. I'll also note that the gap change for this population is 39%. Looking at 2023, we've already taken care of our two largest lease expirations. The first is a 627,000 square foot building in the Kenosha submarket of Chicago. We renewed this lease seven months in advance of expiration at a cash rental rate increase of 29%. The second is a 581,000 square foot tenant located in Minneapolis that we inked at a cash rental rate change of 15%. As of today, our largest expiration for 2023 is 366,000 square feet in the first quarter located in the Inland Empire which is one of the strongest markets in the United States. The in-place rent on this property is well below market. Moving on to development, I would like to highlight a few major successes since our last call. We leased our 1.1 million square footer at First Park 283 in central Pennsylvania to an e-commerce retailer. The building will be complete soon, and the tenant is taking occupancy in September. We also leased our 208,000 square footer in New Jersey with commencement upon completion in October. The rental rates achieved exceeded our initial underwriting by approximately 20%. We also signed another lease at First Park, Miami, bringing the 592,000 square foot first phase of that project to 89% lease. Moving on to new development starts, In addition to the 83,000 square foot facility in the Inland Empire that we spoke about on our last call, we started three more buildings. Our largest is the 699,000 square foot sister building at First Park 283 in Central Pennsylvania. Our estimated investment is 96 million with a projected yield of 5.4%. At First Park Miami, we will expand our investment there with a new 56,000-square-foot building with an estimated investment of $16 million and projected yield of 5.5%. Lastly, we started a 37,000-square-foot project in the Enfield 880 corridor of Northern California with an estimated investment of $20 million and a targeted yield of 4.7%. Including the second quarter development starts, Our developments in process total 5.8 million square feet with an investment of $776 million, which are 24% leased as of yesterday. The projected cash yield for these investments is 6.8%, which represents an expected overall development margin of approximately 75%. This margin calculation reflects an upward adjustment of 50 basis points on average in the assumed market cap rate compared to last quarter. We were also busy on the acquisition front during the quarter, investing a total of $99 million in a handful of buildings and a few land sites. All were in coastal markets, including southern and northern California, Miami, and Seattle. Thus far in the third quarter, we acquired two buildings comprised of 96,000 square feet in South Florida and Southern California, plus a small site in the Inland Empire for a total of $35 million. Overall, we continue to be well positioned to support future growth with balance sheet land today that can accommodate an additional 14 million square feet. This represents approximately $1.9 billion of potential new investment based on today's estimated construction costs and the land at our book basis. Lastly, we've been active with our Camelback 303 joint venture in Phoenix. We successfully completed the sale of 391 acres to a data center user for proceeds of $255 million. Our share of the gain and promote before tax was approximately $104 million. Our share of JV contributions to date totaled just $33 million, and the venture still owns 219 acres of land, all of which features desirable highway frontage. I'll conclude with a hearty thank you to the entire First Industrial team for all of your hard work and many successes as you continue to drive significant long-term shareholder value. And with that, I'll turn it over to Scott.