First Industrial Realty Trust, Inc.

Good day and welcome to the first Industrial Realty Trust second quarter 2026 results conference 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 and then two. Please note this event is being recorded. I would now like to turn the conference over to Art Harmon, Senior Vice President, Investor Relations and Marketing. Please go ahead.

Thank you, Dave. Hello, everyone, and welcome to our call. Before we discuss our second quarter 2026 results and our updated guidance for 2026, please note 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 23, 2026. 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. are available at firstindustrial.com under the Investors tab. Our call today will begin with remarks by Peter Baccile, our President and Chief Executive Officer, and Scott Musil, 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, Executive Vice President of Operations, and Bob Walter, Executive 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. Our team delivered another excellent quarter, building upon the momentum that took shape in Q1. Our confidence in leasing demand was Supporting new business growth has strengthened compared to earlier in the year and most certainly last year. We're seeing additional touring activity and enhanced decision-making overall, including for larger format spaces. Our team delivered some significant leasing wins in the quarter, including a full building lease for our 708,000 square foot building in central Pennsylvania, as well as for a few of our developments, which I'll detail shortly. On the strength of that leasing, we increased our FFO guidance midpoint by two cents per share. Scott will walk you through our guidance during his remarks. Turning to the overall market, industry fundamentals are trending positively with respect to net absorption, while the pace of new deliveries continues to moderate as expected. According to CBRE, the national vacancy improved by 20 basis points to 6.5% at the end of the second quarter. Net absorption was strong at 85 million square feet, nearly doubling Q1, and significantly exceeding new deliveries of 48 million square feet. The national construction pipeline ticked up modestly to 252 million square feet and is still well pre-leased at 38%. Turning now to our portfolio performance. We ended the quarter with in-service occupancy of 94.9%, up 60 basis points from the first quarter, primarily driven by the 708,000 square foot TA lease. Regarding our 2026 rollovers, we've now taken care of 80% by square footage, and our overall cash rental rate increase for new and renewal leasing for signed leases is 39%. Our cash rental rate guidance for 2026 commencements is 35% to 40%, which is an increase at the midpoint and a tightening of the range. Moving now to development leasing. Since last quarter's call, we saw more broad-based success across several markets, inking an additional 433,000 square feet, bringing the total signings in the quarter to 643,000 square feet. First, we expanded our existing tenant into the remaining 31,000 square feet at First Pompano Logistics Center in South Florida. In Dallas, we signed a full building lease for the just completed 176,000 square footer at First Park 121 to a wire and cable supplier that supports the data center industry. Lastly, we fully leased our recently completed 226,000 square foot building at First Park Newcastle in the Philadelphia market. With this full building lease, we're excited to announce the start of a second building in that park. The 613,000 square foot facility can accommodate up to four tenants with an estimated investment of $77 million and an estimated cash yield north of 8%. Now let me update you on our other investment and disposition activities since our last call. On the acquisition front, our regional team was successful in sourcing a recently completed development in the Great Southwest Submarket of Dallas. The 161,000 square foot facility is 50% leased, giving us the opportunity to add value through lease-up. The purchase price was $26 million, with a targeted cash yield of approximately 6%. We also acquired a 58-acre infill development site in the middle of the BW corridor, the largest sub-market in Baltimore for 39 million. The site is designed to accommodate three buildings totaling 629,000 square feet upon full entitlement and completion of infrastructure work. Regarding sales, as expected, we successfully closed on the $131 million land sale in Phoenix. Pricing was $30 per land square foot Just shy of three times industrial land values in that market. We also sold four buildings in Detroit, totaling 310,000 square feet for a total of $29 million. We have just one 16,000 square foot building remaining in that market. Before I turn it over to Scott, I'd like to thank everyone that invested the time to participate in the two property tours we recently hosted in Southern California and New Jersey. I know that you came away with a greater appreciation of our portfolio quality, value creation ability, and the expertise of our regional leadership. With that, I'll turn it over to Scott.

Thank you, Peter. Let me recap our results for the second quarter. Native refunds from operations were $0.82 per fully diluted share versus $0.76 a year ago. Our cash seems to run a wide growth for the quarter, excluding termination fees with 6.7%. The results in the quarter were primarily driven by increases in rental rates on new and renewal leasing, contractual rent bumps, and lower free rent, partially offset by lower average occupancy. Summarizing our leasing activity during the second quarter, approximately 2.6 million square feet of leases commenced. Of these, 1.1 million were new, 1 million were renewals, and 500,000 were for developments and acquisitions with lease-ups. Also, we wanted to share with you a positive update related to tenant credit. Debenhams, formerly Boohoo, signed a full building sublease for our 1.1 million square footer in Pennsylvania. The subtenant is a 3PO that was already a valued FR tenant, so we are very pleased with this outcome. Now moving on to our guidance. As Peter noted, we increased our FFO midpoint guidance by $0.02 per share and narrowed our guidance range for 2026 NARID FFO to $3.08 to $3.16 per share. Recall that NARID FFO reflects $0.04 per share of advisory costs related to the contested proxy campaign incurred in the first quarter. Excluding these advisory costs, our 2026 FFO guidance range is $3.12 to $3.20 per share, which is also a $0.02 increase at the midpoint. Our other major guidance assumptions are as follows. Average quarter end in-service occupancy of 94% to 95%. This range reflects approximately 900,000 square feet of incremental development leasing out of an opportunity set of 1.7 million square feet. The development leasing is assumed to occur primarily in the fourth quarter. In terms of cadence, guidance assumes in-service occupancy to dip to around 93.5% at the end of 3Q. We expect to end the year at around 95.5% due to the assumed development leasing plus other core portfolio leasing. Cashed same-store NOI growth before termination fees of 5.25% to 6.25%, an increase of 25 basis points at the midpoint. Guidance includes the anticipated 2026 costs related to our completed and under-construction developments and today's announced start. For the full year 2026, we expect to capitalize about $0.08 per share of interest. Our G&A expense guidance range is $42 to $43 million, which excludes the $5.6 million of costs related to the contested proxy campaign. Let me turn it back over to Peter.

Thank you to all of my teammates at First Industrial for your outstanding efforts this quarter. We continue to be optimistic about the activity levels we're seeing within our development and portfolio availabilities across markets and size ranges. We're excited about our new investment opportunities, and we maintain our focus on driving long-term cash flow and value for shareholders. Operator, we're ready to open up for questions.

We will now begin the question and answer session. To ask a question, you may press star, then 1 on your touchtone phone. If you're using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star and then two. Also, please limit yourself to one question and one follow-up. The first question comes from Craig Mailman with Citi. Please go ahead.

Good morning. Peter, your commentary is pretty consistent with peers and brokers that things are getting better and decisions are being made quicker. I'm just kind of curious as we look from here and you have discussions with tenants and you see what vacancies you have left in the portfolio, like from a market condition standpoint, how real is, you know, I don't want to call it FOMO, but just with some bigger boxes being taken off the market, you had success with Boohoo finding a sublease tenant, you got 708 down in central PA, like some of the bigger availabilities are being taken off the market. How is this shaping The discussions you're having with tenants in terms of their mentality with less new supply coming on and the urgency they're getting, should we expect to see this continue to accelerate into the back half of the year? Are there something that we're missing in terms of other dynamics in the market? Can you just kind of give us your thoughts on how this could play out over the next two to three quarters?

Sure, I'll start out and then JoJo and Peter can weigh in. So net absorption is up pretty significantly. That has a lot to do with the fact that we've got a lot more activity with the bigger spaces now. So $700,000 to $1.2 million, that activity is up 127%. North of $1.2 million, that's up 117%. So you definitely have a scarcity value at the bigger spaces now. Activities up also across the other size ranges, but a little less. There are a little bit more alternatives that have yet to be taken up in the smaller size ranges. But the activity and the interest in investing in growth has definitely changed from a year ago. JoJo, you want to add anything?

Yes, JoJo. I mean, what Peter just mentioned is that that dynamic is – Absolutely, what's going on in the West markets, including Chicago and Dallas, the largest spaces, as they decrease, I mean, tenants have fewer choices, and they have to make decisions quicker. So that's definitely happening. In the mid-size ranges, there are still available products for tenants to choose. So, I mean, it's been a little bit more better than Q1, but not as robust as largest spaces. That's across the country.

And then by category, you look at 3PL, that activity. I mean, they've been leading market share now for a while. That activity year over year is up 18%. Manufacturing, food and bev, auto, all up 25-plus percent. So it's not only across spaces but across categories that the activity has picked up.

And just one slight potato ad. I mean, if you look at the activity of, for example, Amazon, that has picked up as well. So they've taken large, large spaces. And then we have incremental additional demand that's happening over the past year or so from data center-related aerospace and defense. And that also has added to the demand. And a lot of them have taken larger spaces as well.

Hey, Craig, it's Peter. Just to add to JoJo and Peter's comment, to give you some color on the Boohoo outcome and our 708 Pennsylvania, we had multiple prospects for both of those spaces. So clearly there has been a pickup in the larger format, as you commented, and much fewer choices. But also the development lease that we signed in the Philadelphia suburbs in our first park, Newcastle, for 226, So just echoing the broad-based level of activity, but activity has certainly picked up on the bigger spaces where it's been a little thin up until recently.

That's helpful, Collar. I guess maybe a quick two-parter to stay under the two-question limit, but how does this kind of translate to what you guys have in terms of demand at First Aurora and then also Just what are your updated views on SoCal? Where do you kind of follow the debate there where we are in that recovery cycle?

Let me take Aurora and then JoJo can comment on SoCal. So we continue to have activity at the building for partial and full building users. We have a couple of new prospects since our last call. There's been no real change in the competitive set. What we really need are for some tenants to make decisions. Those that are in the market looking for more space, they need to decide if they're going to take more space or not. But it's not a lack of prospects. We just want to see more definitive decision-making. Jojo?

Greg, in terms of statistics for SoCal, if you look at Q2 compared to Q1 or earlier this year, it points to a market that's off the bottom and it's in the start of a recovery phase. And the reason is that if you look at growth absorption and net absorption, it significantly exceeded the deliveries. If you look at starts under construction, it's still at historic lows. And if you actually compare it to the base, it's de minimis. And also rents are kind of just like flat. And so when you're looking at that, it definitely did better than what we expected. So, yeah, so that's what's going on. with SoCal.

Great. Thank you, guys. And the next question comes from Nick Thillman with Baird. Please go ahead.

Hey, good morning, guys. Scott, maybe just wanted to comment a little bit on the occupancy guide and just timing. If there was any shift when it comes to just the assets from the lease-up standpoint, it seems as though you're somewhat running ahead and you guys did message second half for some of the leasing. I'm guessing it's more so to do with some of the larger boxes that you have available and actually getting occupancy, but just wanted to clarify that first.

I'll go into the development leasing first. The 900,000 square feet is basically the pure math. You take the 1.7 million square feet we discussed in our fourth quarter call, and you deduct what we signed to date. That number hasn't changed. It's gone down. We did make some adjustments to some of the development leasing. It's all in the fourth quarter now. The If we do not sign any of those leases, the FFO impact is a lot less than it was, say, last time that we had a call. It's only about a penny per share. And then, Nick, we made some other slight adjustments to some of our other core portfolio leasing assumptions in a variety of our markets. But I think the key thing to discuss here is even with these adjustments, we are forecasting to end the fourth quarter at an in-service occupancy rate of 95.5%.

That's helpful. And then maybe curious on just the acquisition appetite with the Dallas acquisition. And given the fact that where you kind of have the land bank today, there maybe is not as many opportunities as some of the markets where you've had some leasing success and development. So do you view that there is somewhat of an opportunity here on some of the value add from the acquisition standpoint in markets like the Texas's and the Pennsylvania's the world where you have been seeing some great activity on the leasing side?

Thank you. Yes, acquisition is always part of our business. Our local teams are always scouring for good quality acquisitions with good yields. In this case in Dallas, this was an Arlington sub-market of the great southwest market of Dallas, very, very infilled, very active, and this was a lightly marketed deal. We came in with certainty, and we were able to acquire an asset, 50% lease, Projected yield 6%. We are an active investor. We've owned product in the Great Southwest for some time, so we really know that market. To your point, we're always looking for opportunities, whether it's in Dallas or you mentioned PA. And so we're going to continue to look for those. But it has to meet our functional investment quality and yield criteria. Yeah.

Dave Rogers, Raymond James

And then just a bigger picture question, you mentioned that you started Newcastle, kind of the next phase of that project. I guess, where else are you excited today about kind of putting money to work in the second half of the year, as clearly you leased up a good amount of your speculative space here in the first half?

Yeah, so Dave, so First Park Newcastle, the lease start date on that was in June, so it was a second quarter start. First Park 121, that's a third quarter lease start date. We signed it in the second quarter, but it starts in August. So that lease, even though it starts in the third quarter, is factored in our guidance, and that's how you get to the 900,000 square feet of remaining development leasing.

Dave, For new starts, of course, our teams are actively pursuing new land acquisition opportunities like the one we just finished in the BW Corridor. And with respect to perhaps more starts this year, we are evaluating opportunities in the portfolio in Pennsylvania and Florida, a smaller deal right here in Chicagoland. So we'll keep you posted.

And of course, just want to not forget the $70 million worth of projects. There's two projects, one in First Arlington, we call it First Arlington Commerce Center in Arlington, Texas, in our First Park, Miami building. That's two projects totaling $70 million. That's not going to be completed until the end of this year and early next year. I'm looking excited about those.

That's great. Thank you.

And the next question comes from Vikram Malhotra with Mizuho. Please go ahead.

Morning, thanks for the questions. Maybe just first I wanted to get to see if there's any update on sort of the, you know, potential to sell more land or I guess data center conversion land and how that pipeline may look. I think I narrate you and mentioned there were a couple of opportunities. So that's just the first one. And then second, you know, as we think about sort of any big renewals in the back half that, you know, may, I guess, make or break the top end of the guide. The same thing you can call out that may be sizable, whether it's in SoCal or any other markets. Thank you.

So with respect to our efforts in the portfolio, with respect to trying to convert to data center use, our teams continue to work on those projects. They're going to be long-term, as I said, at any rate. It's going to take a while. We are trying to pursue some power commitments. And there's really nothing else to report there. Nothing will happen. We've taken care of 80% of the expirations for 2026, so we're taking care of the lion's share of it.

If you look at the budgeted renewals that we have in our guidance, there's none that are over 100,000 square feet, so it's pretty granular.

And the next question comes from Blaine Heck with Wells Fargo. Please go ahead.

Great. Thanks. Good morning. So maybe just to add on to the questions on development, I guess, how are you thinking about the best time to deploy your 410 million? roughly 410 of spec capital into development. Is it now while some of the private players might still be on the sidelines given capital and land constraints, or do you guys feel as if you have a solid window of time to kind of be patient without running into the problem of excess competitive supply once you do deliver these projects?

Yeah, so that's with respect to the cap, that's a cap and not a target. We focus solely on profitability, and with respect to that, as we evaluate our land holdings and future land acquisitions, we're trying to deliver into the deepest part of the demand or unmet demand in a particular market, so that's how we evaluate where we're going to go next. We also, as I think you probably know, don't really want to have too many projects in any one park going at the same time. I mean, First Park Miami, we could start A couple of more buildings there, but we want to get some leasing as we go. So it's really not, we don't sit here and say, do we need to use that $400 million? We sit here and say, where is the demand? Where is it not being met? And where are we well positioned to deliver a property that's going to be competitive in that marketplace for the long term?

Yeah, that's fair. I guess the crux of the question was just, you know, do you feel like you have any impetus to put the money out, you know, soon before you have a lot of competition kind of coming into the marketplace and starting development as well?

Look, I think development is taking up in some markets. The demand right now for larger, I mean, very large million footers is not being met. So with respect to that, you know, that's something that we're looking at. As you know, we have some land holdings that can accommodate very large format properties.

Very helpful. And just sneaking in a quick second one. Sorry if I missed this, but can you break out the driver or drivers of the increased same-store rental line, given that occupancy guidance was held steady? Is that rent-related, bad debt-related, something else?

Yeah, if you look at where we performed a little bit better, just our average occupancy was up slightly, and cash rental rates benefited that. So that's really where the benefit was from. Great. Thanks, guys.

And the next question comes from Caitlin Burrows with Goldman Sachs. Please go ahead.

Hi there, everyone. Maybe just to follow up to one of those recent questions. So it sounds like you guys are evaluating a few markets where you could start developments. You started one in the second quarter. I guess, what are you seeing the rest of the market do? It sounds, I imagine, like land is competitive, so that would suggest maybe the rest of the market's trying to get active. But are they? I'm wondering if you can talk about what you're seeing kind of the rest of the market do.

Sure. I'll start, and then JoJo and Peter can add. Land is very, very difficult to come by. It's not getting any easier to get entitlements. There are real barriers there. We have seen, again, a tick up in starts, but it's a tough slog in terms of, again, getting entitlements, etc. So, you know, the market's going to rebound according to the pace of lease take-up. and we'll be there to take advantage of the opportunities that we see. Jojo?

Yeah, just to add to what Peter said, the land continues to be competitive. There are active developers there. There continues to be capital to support that development and that's the same for acquisitions. That's not really changed over the last, for the longest time that we've been in business. What we focus on is we try to focus on off-market deals. We try to use our brokerage relationships to try to get deals that are early in the stage. We have tenant relationships. We can lean on to try to have tenant in those situations where we can try to get a pre-lease in a property. So these are all platform strategies. We use our portfolio and our troops on the ground, which are great. to try to uncover these opportunities, and that hasn't changed.

Caitlin, it's Peter. The other thing I'd just add to that is as you look at where we own land and where we're focused on buying land to the earlier comments, those are generally more infill supply-constrained markets. So by definition, there's going to be a little less competition in some of those markets. But to your other point, Pennsylvania is seeing more new starts given the lack of availability of million footers. Nashville is seeing an increase in supply given how strong that market has been. And South Florida continues to see activity given the price of land. Developers can't really afford to wait and put that into production for the most part. But if you think about our Baltimore acquisition and the BW Corridor as an example, Very infill, very supply constrained, and that's part of our strategy.

And so on that, I was wondering if you could talk a little bit about the sourcing of land. I think you guys mentioned earlier in the call that the Baltimore location didn't necessarily have the entitlements yet. So versus I know sometimes when you buy land, it's like contingent on the entitlements. So yeah, can you talk about that, I guess, decision to move forward with that land purchase without the entitlements versus others when it's different? Sure.

Sure, so this is in the BW corridor, the largest submarket in that market. It's a very infill site. It was excess land as part of a horse racing track where they've been holding the Preakness while that track is under renovation. The owner of the land was more interested in getting a deal done quickly, so our view is we were able to secure the land at a discount. The entitlement process there is pretty straightforward. Our plan is a buy-right plan. It's zoned industrial. So it's simply a matter of when, not if, going through the process. That site should be ready for construction probably end of 28, early 29. And to emphasize the point on our pricing, initial yields are in the mid-7s.

That initial yield is like your expectation when you build?

Yes.

Got it. Thanks.

And the next question comes from Michael Carroll with RBC Capital Markets. Please go ahead.

Thanks. I wanted to follow up on some earlier topics about new development starts. I know that FR seems to be tracking much better tenant activity. Its cost of capital has continued to head in the right direction. I mean, does this give you guys more confidence to be a little bit more aggressive pursuing new development starts? Are there more projects out there that you're willing to break on today than maybe you wanted to wait on about six months ago?

It's still market by market. That's really what's driving it. And then what's happening in each sub-market, with respect to confidence, as we've always said, we've been asked, when will you develop more from a volume standpoint? and we've said when we see consistent signings of development leases and that's beginning to happen this year. So yes, I mean, the activity should be more robust over the coming six to 12 months than it was over the last six to 12 months.

Okay. And then Scott, how do you plan on funding some of these development projects? I mean, is there more Land sales or maybe data center opportunity type sales that FR is pursuing that can fund a lot of these projects? Or is there something where equity comes in mind if you can really start to ramp up some of the activity?

I tell you what, Mike, we don't really have a large expenditure requirement for the last six months of the year to fund our developments and process. It's about $75 million. and a half of that will be covered with excess cash flow after CapEx and dividends and we can use the line of credit to fund the remaining part of it. We've got a very low balance on our line of credit. As far as go-forward starts are concerned, I would probably say it would be the same formula there. Okay, great. Thanks.

The next question comes from Nicholas Uliko with Scotiabank. Please go ahead.

Hello, this is Victor Ferrione with NIC. I want to follow up on the leasing demand and types of tenants that you kind of interact with the most because last time you mentioned that data center adjacent demand isn't even in the top 10 of your kind of tenant discussions and now you lease full property in taxes to kind of data center adjacent tenants. So just trying to understand the breadth here and where in your sub-market you can see pickup of these type of demand?

Peter, you want to start with that one? Sure. I would say that data center-related demand has been incremental. I wouldn't say it's material. Certainly, we've signed a deal in Dallas. We've signed a deal in Atlanta. And we're seeing some of that. But demand overall continues to be very, very broad-based, as I think we've already commented, led by three PLs. manufacturing, food and beverage, automotive, home supply. Amazon, as we've called out on prior calls, continues to be very, very active, particularly on larger buildings in a number of markets around the country. So it's broad-based. The data set are related as incremental, but not overly material.

Understood. If you think about your occupancy guidance and what happened this quarter, because we saw some decline in occupancy in Southern California, and what might happen for you to end up at the higher end of your average occupancy for the full year? So based on your discussions you're having now, what needs to happen?

Well, certainly if we lease up the development pipeline, you've heard how we have an activity on a lot of these spaces, so obviously if the decisions get made and that happens, we'll certainly hit the higher end of our occupancy gains.

Thank you.

Again, if you have a question, please press star and then one. And the next question comes from Jessica Zhang with Green Street. Please go ahead.

Hi, good morning. I'm not sure if you've covered this already, but I'm wondering if you can share some color around same-store occupancy, which seems to have declined quarter over quarter despite the lease-up of the large central PA property. So I'm just curious, what was the offsetting factor there?

Yeah, we had some move-outs in some of the markets. So the move-outs of We had like three or four move outs in the 100,000 square foot range that did kind of offset the pickup of the 708,000 square feet.

Okay, great. Thank you. And if I could add a follow-on. Just curious if you're seeing any examples of data center developments crowding out industrial developments through elevated land pricing in any of the submarkets that you're in. Jojo?

Yes, data centers have been active acquirers or data center developers, whether it's hyperscalers or co-locators, they've been very active in acquiring land. And the land they acquire is primarily industrial, so it's put additional competition on potential land acquisition for industrial. In addition to that, in almost all cases, our data centers are willing to pay And the next question comes from Michael.

Mahler with JP Morgan. Please go ahead.

Yeah, hi. So for the two questions, first, for the in-service occupancy dip, Scott, that you talked about going down to 93.5, I believe, and then bouncing back to 95.5, is that being driven by adding new developments that aren't fully leased and kind of going into the portfolio, or is it all out? And then the second question is, when thinking about your year-to-date cash spreads of 39%, You know, when you look at the lease expiration schedule for 27, is there anything we should be thinking of as a positive or negative for that as we move forward?

Yeah, you know, first of all, on the diff for the occupancy, actually, you know, a part of that about 45 basis points is a new development coming into service in Nashville. So that comes into service in third quarter. And right now we're projecting that to lease up in the fourth quarter. So that's part of it. As far as 2027, I think that was the second part of your question. As far as right now, on 2027, we've taken care of about 26% of our rollovers there, and we'll give guidance on the rental rate change when we get a bigger population.

Thank you.

And the next question comes from Brendan Lynch with Barclays. Please go ahead. Great, thanks.

Good morning. Thanks for taking the question. Peter, you mentioned entitlements aren't getting any easier. Have there been periods in the past where entitlements have become really challenging to obtain like they are now and then eased? And what could change that dynamic now?

Interesting. Good question. I can't remember a time when entitlements got really easy to get, especially in the markets that we want to be in. It's one of the reasons we want to be there. We want the high barriers to entry. But there are times where tax revenue becomes a driver to that decision-making for a given municipality, and so you get the entitlements that you need. But generally speaking, you can go state by state. You know the states that are really tough. And even Tennessee or Nashville, the Nashville market now is getting tougher as the local community begins to see a lot more 53-foot trucks and trucks a lot more activity on the highways than they're used to seeing and they don't like it. It's a good and bad thing. It's a good thing because it limits supply, which increases the value of what we own and leads to higher rent growth. Again, that's why we're in those markets. On the other hand, it's tougher to acquire land and get it entitled. Again, I don't know a time when it got easier, but yet there are times when the municipalities need money and they will Grant Entitlements.

Great, thanks. That's helpful. It does seem like it seemed somewhat structural at this point, but I guess I could change in the very long term. Maybe a follow-up question just on the First Rider Logistics Center in Paris, California. Sounds like there's a lot of momentum in the surrounding area and some lease-up of the surrounding assets. You could just comment on the prospects of getting that one leased.

Yes. So the First Riders are about 325,000 to 34,000 square feet. Great product. It's designed to accommodate two tenants, up to two tenants. And at this point, if you look at the IE, definitely there's significant pickup in the larger size and the whole IE vacancies take down. But the most amount of choices that tenants have are in the size range of 250 to 500. So that is, I would say, kind of the softest part of the market. and still tenants have choices and the market has to digest. And that's basically what's affecting First Rider. Although the activity has picked up RFPs, inquiries and tours on that asset.

And then there may be sponsors slash landlords who are a little less sensitive to NPV than we are. So keep that in mind too.

Okay, very good. Thank you.

And the next question comes from Omoteyo Accusania with Deutsche Bank. Please go ahead.

Yes, good morning, everyone. I just wanted to focus on the full-year same-store cash NOI guidance. Again, you're running well ahead of that number in the first half of 2026. Just kind of walk us through second half of 2026, the expected deceleration, what's causing that, is it just kind of harder comps or is there additional fallout or anything we should be thinking about?

I'm sorry, you're asking about occupancy, correct? Oh, same story. I'm sorry, yes. So in the first half of the year, compared to the second half of the year, it really comes down to free rent benefit. The difference there is about 250 basis points. So that's really the whole story. Gotcha. Okay, that's helpful.

And then... I also want to talk about the Pennsylvania, the backbone of the Pennsylvania lease. Just talk a little bit about the economics of the new lease versus the old lease.

Peter?

Sure, it's Peter. I can't tell you the specifics given the confidentiality provision in the lease, but I can say it's a long-term lease, full building. The cash rental rate increase was over 60%, 6-0. TIs and concessions were typical, nothing unusual. And as we've said, it commenced in the end of the second quarter. And we had multiple prospects for that building. So we're very pleased with the result.

Gotcha. Thank you.

And the next question comes from Rich Anderson with Cantor Fitzgerald. Please go ahead.

Hey, thanks. Good morning. So on the cash releasing spread result and guidance of 35% to 40% for the year, that's a really good range and a really good outcome this quarter relative to peer results and so on. What do you attribute that to? We've talked about this before, and I've asked this to some of your peers about what the future is for cash releasing spreads for the industry. Is there anything about This year about markets and specific assets that's driving that up a little bit more than it would naturally be today. And, you know, where do you think cash releasing spreads start to trend down to as a company as over the next, you know, call it two to three years? Thanks.

Yeah, that's a good question. I think, recall that we've had pretty significant cash leasing spreads now for quite a while. They were as high as 58% a few years ago and have ticked down because market rent growth obviously has come off since the peak. A lot of this has to do with the fact that most of our portfolio now is new. We leased it, if you want to say this at the right time, we had big spaces to lease pre-peak. And so we're enjoying the benefit of that now. And the markets that we're in, you know, SoCal obviously grew the most and came down the most, but the CAGR there is still kind of 11%, 12% over the last five or six years. and in the eastern half of the country where the markets didn't go quite as sky high, they also haven't fallen as much. So we're in the right places with the right product, the right functionality and the buildings that we have are very competitive in their marketplaces. So, you know, it doesn't happen by chance or by accident and it's a long way to say that our strategy is working.

Okay, fair enough. And second question, I probably asked this six months ago, but maybe the answer is changing. On Inland Empire land of 6.5 million FAR foot, you've said that you find that to be a valuable sort of option for you longer term, but you would think that you could do some selling in that portfolio. You're already pretty full on Southern California. I'm curious what your Strategy is on the land specifically and generally, you know, where you're comfortable, Southern California, i.e., whatever is a percentage of the total. Are you comfortable going significantly higher than we are now? So on, you know, any color you can give on that topic would be great. Thanks.

So over the last few years, all of our new development has been outside California. That has been the way to go given where the markets are. We continue to look for more land outside California. And so the balancing will happen that way. It'll happen more by investment in other places than it would by selling there or selling land. Now, we have some great sites there. And as the market, as you've heard on this call, the market is very short on million footers, million plus footers. And we have some fantastic opportunities in SoCal in that size range. They're a little bit further out because of the way that market has evolved since the peak, but those are going to be very, very important opportunities for us going forward. Having said that, we're not loving any of our real estate, and if somebody makes us a godfather offer, it will be sold.

All right.

Thanks very much.

And our final question comes from Dave Rogers with Raymond James. Please go ahead.

Yeah, just one follow-up, guys. I wanted to just kind of aggregate some of the numbers we talked about. I think everybody on the call, including me, did a good job of asking about every project that I think you have currently going on. But if you were to aggregate the amount of demand that would meet that 800,000 to 900,000 square feet of remaining spec leasing that I think you need to do, if my math is okay, for the rest of the year, what's the total demand for that kind of pool of assets that kind of gives you the continued confidence to get there? Is there a way you can aggregate that together?

I think we're all looking at each other here, Dave, wondering how to answer that question.

I think the one thing is that, Dave, the opportunity set is 1.7 million square feet, so we don't have to bet 100% with the developments we have. So that's one part of the answer.

Also, when you're touring a prospect, whether it's an RFP process or it's an expansion or a consolidation, or it's an inquiry, it's really kind of hard to tell to, you know, how, what the timing is and what the commitment of a particular prospect is. And then, you know, and if it's a renewal exercise. So, I mean, it's going to be, I mean, if we put out numbers of all of our tours, of course, it's going to be a big number. But I think it's disingenuous to put that because until you're really trading paper and gets to a letter of intent, that's where really the certainty happens.

All it takes is one. It's a tough thing to put a bracket around, David, because we've had assets where we've had really, really strong competition, a horse race, and we've had assets where we had one interested party and we drove a tough enough deal and they signed the lease. It's tough to give you a volume answer to that question.

Dave, it's Peter. The thing I would say is Back to what we talked about, the top end of the call is we are seeing more activity, more tours and inquiries. And while we have to convert, I think we're more optimistic today than we were at the beginning of the year.

That's really helpful. Thanks, everyone.

This concludes our question and answer session. I would like to turn the conference back over to Peter Bacile for any closing remarks.

Thank you, operator, and thanks to everyone for participating on our call today. If you have any follow-ups from our call, please reach out to Art, Scott, or me. Have a great day.

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.