First Industrial Realty Trust, Inc.

Good day, and welcome to the first Industrial Realty Trust, Inc., third quarter results call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on a touch-tone phone. To withdraw your question, please press star, then two. Please limit yourself to one question and one follow-up. Please note this event is being recorded. I would now like to turn the conference over to Art Harmon, Vice President of Investor Relations and Marketing. Please go ahead.

Thank you, Dave. Hello, everybody, and welcome to our call. Before we discuss our third quarter results and our updated 2023 guidance, 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, October 19, 2023. 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 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 with us today are Jojo Yap, Chief Investment Officer, Peter Schultz, Executive Vice President, Chris Schneider, Senior Vice President of Operations, and Bob Walters, Senior Vice President of Capital Markets and Asset Management. Now let me hand the call over to Peter.

Thank you, Art, and thank you all for joining us today. We continue to deliver strong cash rental rate growth on new and renewal leasing, and we're making good progress on our 2024 expirations, which I will touch upon shortly. We also achieved some leasing wins at our developments in Pennsylvania, Northern California, and Orlando, and we're capturing significant value from the sale and ground lease of our on-balance sheet land sites in Phoenix. As expected, our quarter-end occupancy metric was impacted by a few recently placed-in service developments that remain in lease-up. As we noted on our last call, prospective tenants continue to be deliberate in making significant commitments for new space in the face of the uncertain interest rate, economic, and geopolitical environment. This is being reflected broadly in the national vacancy figures as new supply continues to come online. National vacancy was up 50 basis points in the third quarter, but still at an overall low 4.2%. In our 15 target markets, vacancy is 4%. As we discussed on our last call, there is a fair amount of new supply expected to be delivered nationally in roughly the next 12 months. Based on CBRE's analysis, there is approximately 475 million square feet under construction across the U.S., 30% of which is pre-leased. Focusing on our 15 target markets, completions are expected to be approximately 325 million square feet. New starts nationally have trended downward, with third quarter 2023 starts down more than 60% compared to third quarter 2022. This market response is being driven by the rapid increase in the cost of capital and the uncertain economic environment. In our portfolio, we're capturing strong rental rate increases on our renewals, realizing the benefit of the healthy market rent growth we've seen for the past several years. tenants continue to renew well in advance of their lease expiration dates, reflecting continued confidence in their core business. Overall, leasing market dynamics continue to favor the landlord, particularly with renewals given the low vacancy levels I discussed earlier. Through yesterday, with 97% of our 2023 lease expirations in the books, our cash rental rate increase is 60%, with average annual rental rate escalators of 3.8%. A big driver of our cash rental rate increases has been the outperformance of our Southern California assets, where we've achieved a cash rental rate increase of 151%. Looking ahead to 2024, we've taken care of 40% of next year's lease expirations and a cash rental rate increase of 38%, which is similar to our pace of progress at this time last year. Our 2023 rental rate increase has benefited from slightly more than 25% of rental income coming from leases signed in Southern California. Due to a few Southern California leases that expired in 2023 that are assumed to lease up in 2024, We expect the Southern California portion of lease signings by rental income in 2024 will be roughly the same as 2023 at a little over 25%. We will give you a refined view of our thoughts on our 2024 cash rental rate increase on our fourth quarter call with the benefit of our budget reviews. We anticipate our cash rental rate increase on new and renewal leasing will be in excess of the 38%. we've currently achieved on lease signings related to 2024 expirations. Moving on to development leasing. Since our last earnings call, we leased half of our 699,000 square foot first logistics center at 283 Building B in Central Pennsylvania. We also leased our 37,000 square footer in Northern California and a 17,000 square feet at our first loop park in Orlando. With these lease signings, the capacity on our self-imposed $800 million speculative leasing cap today stands at $108 million. We continue to monitor tenant demand for new growth to determine the appropriate time to start new developments. As I discussed earlier, tenants' decision-making on space for new growth continues to be deliberate. When we do decide on new starts, we're well-positioned with our existing coastally-oriented land bank that can accommodate 15.2 million square feet. This represents approximately 2.4 billion of potential new investment based on today's estimated construction costs and the land at our book basis. Moving now to dispositions. Since our last call, we completed a significant sale of 39 acres of land at our PB303 project in Phoenix for 41 million to a data center user. We also entered into a ground lease with that buyer for the remaining 100 acres of land at this project. The ground lease is for five years and includes a purchase option exercisable beginning in year three. Our year-to-date sales total 61 million. We now expect sales for the full year to be 75 to 150 million. With that, I'll turn it over to Scott for some additional commentary and updated guidance. Thanks, Peter.