First Industrial (FR) Q1 2026 Earnings Transcript

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Date

Thursday, April 23, 2026 at 11:00 a.m. ET

Call participants

• President & Chief Executive Officer — Peter E. Baccile
• Chief Financial Officer — Scott A. Musil
• Executive Vice President, West Region — Johannson Yap
• Executive Vice President, East Region — Peter E. Schultz
• Senior Vice President, Capital Markets and Investor Relations — Art Harmon
• Executive Vice President & Chief Investment Officer — Christopher Schneider

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Takeaways

• In-Service Occupancy -- 94.3% at quarter end, matching management’s guided expectations.
• Development Leasing -- 383,000 square feet leased across several markets, including a full-building, 155,000 square foot lease at First Wilson 2 in the Inland Empire, and a 54,000 square foot lease at First Park 33 in Lehigh Valley.
• Renewal of Major Expiration -- 556,000 square foot Southern California renewal delivered a cash rent increase “significantly exceeded the top end of our annual guidance range of 40%.”
• Land Sale -- Phoenix market land sale under contract for $131 million, or approximately $30 per square foot, noted as “more than 3x industrial land values in that market,” expected to close in June.
• NAREIT FFO per Share -- $0.68 per diluted share, including a $0.04 per share expense from proxy campaign advisory costs; excluding these costs, FFO was $0.72 per share.
• Cash Same-Store NOI Growth -- 8.7% excluding termination fees, driven by rental rate increases, lower free rent, and contractual rent bumps, partially offset by lower average occupancy.
• Leasing Activity -- 2.4 million square feet of leases commenced in the quarter: 300,000 square feet were new, 2 million were renewals, and 100,000 pertained to developments and acquisitions with lease (components do not sum due to rounding and differing categories).
• Cumulative 2026 Rollover Progress -- 61% of 2026 lease expirations addressed by square footage, with blended cash rental rate increases for new and renewal leasing at 41%.
• FFO Guidance -- Full-year 2026 NAREIT FFO guidance maintained at $3.05-$3.15 per share (including $0.04 per share of proxy campaign advisory costs); range would be $3.09-$3.19 excluding those costs.
• Average Quarter-End In-Service Occupancy Guidance -- 94%-95% for 2026, reflecting 1.3 million square feet of incremental development leasing and a 708,000 square foot lease-up in Central Pennsylvania expected in the second half.
• Full-Year Same-Store NOI Growth Guidance -- 5%-6% before termination fees.
• G&A Expense Guidance -- $42 million–$43 million excluding $5.6 million in proxy contest advisory costs.
• Interest Capitalization -- Approximately $0.08 per share expected to be capitalized in 2026.
• Bad Debt Expense -- $100,000 in the quarter, versus a guidance of $250,000 per quarter for the remainder of 2026.
• Resolution with 3PL Credit Watch Tenant -- Management received a lump sum payment covering approximately 60% of the outstanding balance as of December 31, 2025; remaining owed amounts committed to be paid through 2026.
• Embedded Rent Bumps -- Newly signed 2026 leases carry average annual increases of about 3.6%; portfolio-wide in-place annual increases are approximately 3.4%.
• Cash Rental Rate Change Guidance -- 30%-40% targeted for 2026, with realized results year-to-date of about 41% primarily due to the Southern California renewal exceeding guidance.
• Rent Concessions Trend -- New leases typically include free rent equal to half to one month per year of term, with concessions “drifted upward a little bit.”
• Limited Disposition Activity -- Management stated, “there's really nothing else in the hopper” for notable asset sales beyond the Phoenix land transaction.
• Development Focus by Market -- Current development site activity centers on Dallas, Delaware (South Philly submarket), Lehigh Valley PA, South Florida, and Southern California, with selective approach based on local market availabilities.
• Buyback Program -- Share repurchases viewed as opportunistic when fundamentals remain solid, but market dislocations present sustained discounts to intrinsic value.

Summary

First Industrial Realty Trust (NYSE:FR) highlighted a quarter characterized by consistent in-service occupancy, strong cash rent spreads on key renewals, and diverse market leasing activity. Strategic monetization was reinforced by the pending Phoenix land sale at a premium to industrial benchmarks, while recurring FFO incorporated extraordinary proxy advisory expenses and remained on prior guidance. Operational execution evidenced material progress on 2026 rollover risk, with the company specifying that 61% of expirations are now addressed. Development pipeline execution continued at pace, especially in core target markets and asset classes, while asset disposition plans beyond the Phoenix sale are not material at this time.

• The realized cap rate on the Phoenix land sale was reported as 5.3%.
• Demand for spaces under 200,000 square feet accelerated, as did broader touring activity. Slower decision-making persisted among larger user segments, notably in Denver.
• Activity from data center-related tenants and infrastructure suppliers is growing incrementally, but management emphasized these did not constitute material demand compared to 3PL and consumer staples users.
• Rent concessions on new leases have edged up somewhat, but renewals maintain low incentive levels and steady tenant improvement spending.
• Bad debt remained below guided levels for the quarter. No reserve adjustments were taken for watch-list tenants, reflecting confidence in rent collections following a major payment in March.
• Market prioritization for new development remains dynamic, with cautious timing in multi-phase project expansions pending additional leasing momentum, particularly in Central Pennsylvania and South Florida.
• Management maintained that occupancy and FFO guidance ranges already embed the latest leasing and disposition assumptions, citing routine re-evaluation and adjustments as part of their quarterly guidance process.
• Capital deployment continues to favor speculative development, with lesser allocation to acquisitions and opportunistic buybacks during pronounced market dislocations or special situations.
• Company-level shifts—such as the search for a new director, initiation of property tours, and staging of a share buyback—were explicitly linked to ongoing processes or prior board decisions, rather than activist or external pressure.

Industry glossary

• 3PL (Third-Party Logistics): Outsourced logistics providers managing inbound and outbound freight, warehousing, and fulfillment operations for tenants.
• NOI (Net Operating Income): Property-level income generated from operations, before deducting financing and capital costs; same-store NOI measures year-over-year growth for stabilized properties.
• FFO (Funds From Operations): A REIT-specific metric representing net income plus depreciation and amortization, excluding gains from property sales, to gauge core real estate earnings.
• NAREIT FFO: FFO metric as standardized and defined by the National Association of Real Estate Investment Trusts, used for comparability across REITs.
• Speculative (Spec) Development: New building construction without pre-leasing commitments, based on expectations of future tenant demand.

Full Conference Call Transcript

Peter Baccile: Thank you, Art, and thank you all for joining us today. I'd like to express my congratulations and gratitude to our team for their efforts in getting 2026 off to an excellent start. We delivered some significant development leasing wins and signed a key renewal in Southern California for our largest remaining 2026 expiration. . We're also capturing significant value creation via a pending $131 million land sale that I'll detail shortly. Turning to the overall market. Industry fundamentals continue to steady. According to CBRE, national vacancy was stable at 6.7% at the end of the first quarter. Net absorption was a solid 43 million square feet modestly below new deliveries of 55 million square feet.

New supply nationally continued to be disciplined with starts remaining muted at 39 million square feet. The national construction pipeline is 237 million square feet and highly pre-leased at 39%. In our portfolio, overall touring activity has increased for our availabilities with decision-making accelerating for space sizes under 200,000 square feet within our development portfolio. With respect to potential economic and demand consequences from the conflict in the Middle East, thus far, we've seen no discernible impact to leasing activity, but this is a risk we'll continue to monitor. From a portfolio standpoint, our in-service occupancy at quarter end was 94.3%, in line with our expectations. Since our last earnings call, we made further progress on our 2026 rollovers.

We've now taken care of 61% by square footage and our overall cash rental rate increase for new and renewal leasing is 41%. This includes our largest remaining 2026 expiration, the 556,000 square footer in Southern California for which we achieved a cash run rate change that significantly exceeded the top end of our annual guidance range of 40%. Moving now to development leasing. We saw some broad-based success across several markets, inking 383,000 square feet in total. These included a full building lease for our 155,000 square foot first Wilson 2 project in the Inland Empire. We also signed several sub-100,000 square foot leases in the markets of Chicago, South Florida, Central Florida as well as Central Pennsylvania.

There, we leased a 54,000 square foot space at the recently completed first phase of First Park 33 in the Lehigh Valley. As I noted in my opening comments, we're pleased to share with you that the ground lessee of 100 acres of land in the 303 quarter in the Phoenix market exercised its option to purchase the site for a sales price of $131 million. The proceeds are approximately $30 per land square foot, which is more than 3x industrial land values in that market. We expect this transaction to close in June. Before I turn it over to Scott, I would like to remind you of two upcoming property tours we will be hosting.

On May 12, we will tour our Inland Empire portfolio, and on June 4, we'll be touring our Central New Jersey assets. Please reach out to Art Harmon to register or for more information. With that, I'll turn it over to Scott.

Scott Musil: Thank you, Peter. First quarter 2026 NAREIT funds from operations were $0.68 per fully diluted share compared to $0.68 per share in the first quarter of 2025. The first quarter 2026 FFO per share was negatively impacted by $0.04 per share of advisory costs related to the contested proxy campaign that was initiated by landed buildings. . Excluding these costs, our FFO per share was $0.72. As we noted on our fourth quarter earnings call, FFO in the first quarter was impacted by higher G&A costs due to accelerated expense related to an accounting rule that requires us to fully expense the value of granted equity-based compensation for certain tenured employees.

Our cash same-store NOI growth for the quarter, excluding termination fees, was 8.7%. The results in the quarter were primarily driven by increases in rental rates on new and renewal leasing, lower free rent and contractual rent bumps, partially offset by lower average occupancy. Summarizing our leasing activity during the quarter, approximately 2.4 million square feet of leases commenced. Of these, 300,000 renew, 2 million were renewals and $100,000 were for developments and acquisitions with lease. Before I discuss guidance, let me update you on the 3PL tenant on our credit watch list. If you recall, we were collecting rent directly from a subtenant while working through the collection process.

We are pleased to announce that we signed an agreement with the 3PL that required a lump sum payment of approximately 60% of the balance Otis at December 31, 2025, which we received in March. In addition, the agreement calls for scheduled payments to pay off the remaining past due rent by the end of 2026. Now moving on to our guidance. Our guidance range for 200 NAREIT FFO is down $3.05 to $3.15 per share, reflecting $0.04 per share of incremental advisory costs relating to the land and buildings contested proxy campaign. 2026 FFO guidance range, absent these advisory costs is $3.09 to $3.19 per share, which is unchanged compared to our last call.

Our other major operating metric guidance assumptions are as follows: average quarter-end in-service occupancy of 94% to 95%. This range now reflects approximately 1.3 million square feet of incremental development leasing and the 708,000 square footer in Central Pennsylvania, all to occur in the second half of the year. Cash same-store NOI growth before termination fees of 5% to 6%. Guidance includes the anticipated 2026 costs related to our completed and under construction developments at March 31, for the full year 2026, we expect to capitalize about $0.08 per share of interest. Our G&A expense guidance range is $42 million to $43 million which excludes the $5.6 million of incremental advisory costs related to the content proxy campaign.

And our guidance assumes that the aforementioned forecasted land sale in Phoenix will close in June. Let me turn it back over to Peter.

Peter Baccile: We are optimistic about the activity levels we are seeing across our availabilities. As always, our team is focused on taking care of our customers gaining new ones and sourcing and executing on profitable investments to drive long-term cash flow and value for shareholders. . Operator, with that, we're ready to open it up for questions.

Operator: [Operator Instructions] The first question comes from Craig Mailman with Citi. .

Craig Mailman: Peter, you mentioned that touring activities improved, velocity in the 200,000 square feet has improved. Could you talk about other of your peers have talked about the data center adjacent demand. Could you talk about how much of this improvement is that segment of demand versus just either e-commerce or other broader industrial demand?

Peter Baccile: I mean, from what we're seeing, most of it is just broader industrial demand, 3PLs continue to be very active. Manufacturing has picked up, and that includes data center tech aerospace, et cetera. So that's picked up but it looks more like broader demand for industrial than completely data center-driven. .

Craig Mailman: And then -- sorry, Scott, I know you had mentioned the Central PA is now second half. Could you just talk about kind of the activity you're seeing at Denver and Central PA and kind of the prospects today versus maybe on the fourth quarter call?

Scott Musil: Craig, it's Scott. I think you mentioned that we pushed it to the second half, the 708,000 square footer. That's always been in the second half of the year for our 4Q guidance call. So I wanted to clarify that -- and then I'll turn it over to Peter for an update on that vacancy in the Denver development.

Peter Schultz: Craig, it's Peter. So in Denver, we continue to have interested prospects for our large vacancy there. Activity or decision-making, I would say, for larger users has been slow. Limited competitive supply. There were just 2 buildings that came back that will compete with us 1 from a business failure from another landlord and another from a lease expiration. But we continue to have prospects. They're just very slow in their decision-making. Smaller midsized tenants in Denver continue to be pretty active. Moving to Pennsylvania.

To the second part of your question, Pennsylvania probably is our most active or certainly one of our most active markets across the country in terms of prospect activity across a range of sizes in the industries, including Peter's comments about 3PLs being very active. We have several prospects for our 708,000 square foot building in Central Pennsylvania . All but one of which are full building users and all of those continue to be engaged in discussions with us.

Operator: The next question comes from Nick Thillman with Baird.

Nicholas Thillman: Maybe touching a little bit, Peter, just thought process on starting some new projects here given the land bank is a little bit more heavy concentrated in, say, the i.e., you did sign a lease there. But just how you're viewing the landscape and just thought process on overall activity and if that would warrant some starts here in the back half of the year?

Peter Baccile: Sure. We continue to evaluate opportunities for new starts. We're not going to guide on volume, of course. -- and the markets that we're focused on continue to be markets like Dallas, Delaware, which is really the South Philly submarket. Lehigh Valley PA, we have opportunity, South Florida -- and of course, we're continuing to try to acquire additional opportunity in the way of land and some of the other markets that we've been in and most active recently. So -- that's -- those are the markets we're focused on. Yes, we do have very good sites in Southern California, but those markets still have a number of availabilities.

So they are markets where we're going to be starting projects anytime soon.

Nicholas Thillman: And then, Scott, maybe just on the 3PL tenant. What was the lift in same-store from that within first quarter? And then can you just provide an update on what the bad debt expectations are for the full year? And I know boohoo, from the standpoint of just the credit agreement that you're covered for the full year, but just any updates on that kind of as well.

Scott Musil: Okay. So the 3PL tenant, no impact to same-store -- we never reserve that tenant back in 2025 when we discussed it being on our watch list. We just made you guys aware of it. We always thought it was collectible. . We updated you on this call with the big payment we received and the agreement we reached with the tenant. So again, there's no impact to FFO or same-store related to that. On boohoo, they continue to be current on their rent. They pay right at the end of the month, every month. And Peter, I'll turn it over to you to update them on the sublease potential in this space.

Peter Schultz: Thanks, Scott. Boohoo continues to market the building for sublet. There are a declining number of available 1 million square foot plus buildings in Pennsylvania activity. As I mentioned a few minutes ago, continues to be very good at that level as well. . Amazon is about to ink 2 more million square foot plus buildings in Pennsylvania as of today. So that's in process. And there are relatively few options. There likely will be some more starts in that size range given the strength of demand, but boohoo continues to market the building for sublet.

Scott Musil: And Nick, you had one other part of the question, our bad debt expense was $100,000 in the first quarter compared to our guidance of $250,000, and we kept our guidance the same in 2Q, 3Q and 4Q at $250,000 per quarter.

Operator: And the next question comes from Nicholas Yulico with Scotiabank. .

Viktor Fediv: This is ViKtor Fed on with Nick. So you posted really strong Q1, and it seems like year-to-date activity is also solid. So just trying to understand what's driving your decision to maintain your full year FFO and same-store NOI guidance instead of raising it?

Scott Musil: Okay. So Nick, this is Scott. We did lease up 400,000 square feet of development leasing. It did have slightly positive impact on our FFO compared to guidance. That's being offset by a couple of things. One is we have in our guidance, the land sale that's expected to close in June. That's the lease piece of land. So there's slight dilution from that sale because we're assuming the funds are used to pay on the line of credit. And the other piece of it is like what we do every quarter when we update guidance. We look at all of our leasing assumptions and guidance and we update them accordingly, and we make adjustments as we see fit.

So that's the reconciliation.

Viktor Fediv: Got it. And then a quick follow-up on the disposition of land, -- so how does this transaction kind of inform the time line and strategy for unlocking like similar higher and better use value for the rest of your land bank? Just how many similar opportunities you might have within your portfolio?

Peter Baccile: Yes. As you know, we have taken a pretty close look at every asset that we own, land and income-producing real estate properties. And -- we've narrowed it down now to about a handful of opportunities where we think we might be able to push forward and create significant value. We're in the process now of trying to secure power. That's a very lengthy process. And so we'll see where that goes. If we're successful with that, that would add significant value above and beyond the value of the industrial value for those particular assets.

Operator: And the next question comes from Todd Thomas with KeyBanc.

Todd Thomas: First, I just wanted to follow up on the Central PA vacancy. I was just curious where things stand with the tenants that you're engaged with the regarding a lease or a sale is a sale still a potential outcome that's being contemplated?

Peter Schultz: Todd, it's Peter. All the prospects we're engaged with or for lease only today.

Todd Thomas: Okay. And then you talked about the increase in demand from tenants looking for space 200,000 square feet or less, that generally aligns with some of the more recent development starts. And I'm just wondering what the holdback is from increasing starts here a little bit more meaningfully. What are you sort of looking for in order to increase development start a bit further?

Peter Baccile: Yes, that's a market-by-market question. For example, as you know, we've got a number of availabilities in South Florida. We also have a number of opportunities to -- for new starts there. We want to make sure that we're not too concentrated with development in any one market at 1 time. And we just completed the project in the first phase of the project. in Central Pennsylvania. And that we've signed a small lease, a 54,000 square foot lease there. We'd like to see a little bit more leasing there before we begin Phase II. So it's really more of a concentration question.

Operator: And the next question comes from Michael Carroll with RBC Capital Markets. .

Michael Carroll: Scott, I wanted to circle back on your comments regarding the land sale. I mean how much rent is the JV paying on that land today? I mean just given the sale is 3x the industrial land value, I think that the corresponding cap rate would be pretty low and not dilutive to earnings.

Scott Musil: Well, it's not in the JV. This is on balance sheet. And in the supplemental Mike, if you look, we disclosed the cap rate, it's about a 5.3% cap rate. We got a great rent from the tenant when we leased the land to them back a couple of years ago.

Dave Rodgers: Okay. And then I just wanted to confirm, too, that you didn't change the expected timing of the 1.3 million square feet remaining development leasing in the PA space. Those are still the same timing as it was in the prior guidance that you provided in 4Q? I believe it was, but I just wanted to confirm that.

Scott Musil: That's correct. The only difference is the development leasing in the fourth quarter was $1.7 million. Now it's $1.3 million, and the decline has to do with the 400,000 square foot of development leases that we signed. .

Operator: The next question comes from Rich Anderson with Cantor Fitzgerald. .

Richard Anderson: So on the release 556, Kay, can you go through the economics of that transaction? I don't know if that's been provided some place, if I missed it, I apologize. .

Peter Baccile: So John, do you want to cover that? .

Johannson Yap: We can really go through the lease rate or the economics. But I can tell you, it's long term, we're very happy about the long-term renewal -- the space is very critical to the tenant, and it significantly exceeds the high end of our rent change guidance of 40%. .

Richard Anderson: Okay. So okay. up more than 40%. Is that right? .

Art Harmon: Yes. Yes. .

Richard Anderson: Okay. Second, I asked this question on EastGroup, I kind of buttered the question and see if I could do it better here. On the -- on the data center demand that you're seeing, I'm wondering how siloed that is in the confines of your broader business. I mean, to what degree is the data center demand sort of informing your core tenants, your kind of consumption-oriented tenants. -- and telling them I better act now because space is getting taken by this other way of using industrial space. And from your point of view, how does it change your strategy from a development point of view?

Does it does First Industrial have to go about things differently depending on the customer, whether it's a supplier or it's a consumption-oriented or e-commerce or whatever, like I'm curious how this is disruptive in any way or it's just pure new demand, and that's -- it's as simple as that.

Peter Baccile: We've talked in the past about what would be a catalyst for tenants to begin to make decisions faster. The decision-making now for a couple of years has been fairly slow, especially on the kind of larger spaces. And that -- the topic that you're discussing does create a cost to waiting. So it does help on the margin. The other topic, of course, is power. And while data centers need a lot of power, warehouses need their fair share as well. So that's also a topic. So these are both helpful on the margin to get tenants to make decisions sooner. But it hasn't really created a wave of new lease signings.

Peter and Joe, do you want to add anything to that? .

Peter Schultz: The only other thing I'd add to that, Rich, is there is a little bit of incremental demand as we commented earlier, from tenants that are supporting the construction of data centers and infrastructure. So we are seeing a little bit of that, but I wouldn't call it material to the overall demand profile.

Johannson Yap: Just to add just a little bit more detail there. If you look at the data center development, there's a lot of infrastructure-related switch gear, semiconductor, hikes, electrical supply, a lot of that and that has to be manufactured and distributed. And data center involved businesses need space to either distribute that equipment start at equipment and fulfill that equipment in or out of place in the U.S. So at the end of the day, they need warehouses where they can store these goods or do some light assembly. So that is the incremental demand that both Peter have mentioned. But if you look at the Q1, '26 they are not the biggest users.

In fact, I think they're growing, but that didn't even make the top 10. The biggest ones are the 3PLs, consumer goods, like Peter mentioned, broad-based construction and food and beverage.

Richard Anderson: I guess just to finish the question. From your point of view, when do you need -- if you're building something spec, when do you need to know that you're going to have an alternative user in the building? And how does that inform your development process? Or can you just -- or do you not need to know necessarily any specific time frame? .

Peter Schultz: That's not going to change our process or our philosophy around the quality location features and functionality that we build. .

Operator: And the next question comes from Caitlin Burrows with Goldman Sachs. .

Caitlin Burrows: Maybe it lines up with the markets you mentioned you'd be most interested in building. But can you go through which markets maybe three are strongest versus weakest today on demand and rents and what's driving that difference?

Dave Rodgers: Do you want to talk about PA? .

Peter Schultz: Sure. Caitlin, it's Peter. I would say, as I mentioned a couple of minutes ago, Pennsylvania is probably our most active market from a tenant perspective across really all size ranges reflective of the deal we signed in our just completed project in the Lehigh Valley. The activity we have on the 708, the activity from market participants for large buildings over 1 million square feet. Very, very active. We're seeing good activity in South Florida. We're seeing a little less activity in Nashville than we've seen in the last couple of years, but pretty tight from a supply standpoint. And as I mentioned, in Denver, slower decision-making from larger tenants.

But overall, markets are performing well. along the East Coast, rents are stable and still trending up a little bit? So pretty good shape there. Jojo, you want to talk about the West.

Johannson Yap: Yes. Thank you, Peter. If you look at gross leasing, Dallas, Houston and Phoenix have exhibited significant gross leasing. And that's been really continuing since the second half of '25 through Q1 of '26. What's most interesting is that gross leasing actually in the IE has been positive from Q-to-Q. And if you look at just activity from the large spaces over there, that's been pretty good in IE. But at the same time, in i.e., you have space ranges from 200,000 to 400,000 square feet is abundant in the market today that the -- basically the market has to digest antennas in that size range, 200 to 400 has quite a bit of choices.

Caitlin Burrows: Got it. Okay. And then maybe to talk about SoCal a little bit more. So you mentioned that other leases you guys did with the rent spreads meaningfully above 40%. I guess, can you go through what you're seeing more broadly from a leasing spread perspective in SoCal, I imagine some are up, some are down. Is it mostly a function of lease vintage certain building space types act 1 way versus another. Just what's the range you're seeing there?

Johannson Yap: Sure, sure. In terms of rent spreads, we will continue to see rent change, positive rent change in SoCal because when you look at it, it has come down from the high of Q1 2023. But the growth from recolte coal significantly still exceeds that. So over the next couple of years, we will still see positive rent change. In terms of actual Q-to-Q -- quarter-to-quarter in terms of rent growth, it's been flat. There are some deals that actually have shown some growth, but overall, it's been flattish.

Operator: The next question comes from Jason Belcher with Wells Fargo.

Unknown Analyst: Wondering if you could talk a little bit about your investment or capital allocation preferences in the current environment and how you're thinking about deploying capital for, say, acquisitions versus development versus share repurchase?

Peter Baccile: Sure. Look, we're going to -- the primary driver of our growth will continue to be speculative development. We're also always in the market, making offers for opportunities to acquire cash flowing buildings in the past that you've seen the majority of our capital go into development. So maybe 20% -- 25% cash flowing buildings. And with respect to the share purchase opportunity, the share authorization Look, again, the primary use of our capital is going to be to support the growth of development and acquisitions. But there have been several market disruptions in the recent past where our stock price has been pretty negatively impacted to levels that belie fundamentals and our long-term prospects.

And we have a very strong belief in the long-term value of our shares. So in those periods of dislocation we've concluded that would be value-enhancing to shareholders to opportunistically acquire shares. You can figure out, I suppose, on your own, what that means in terms of allocation to that versus the other 2 categories.

Unknown Analyst: Great. And then just as a follow-up. Can you give us an update on how your embedded rent increases are trending and what you're incorporating into newly signed leases. And if you can touch on any shifts you've seen there in recent quarters?

Christopher Schneider: Yes. If you look at where we're at on the completed 2026 deals that we've signed the overall bumps are about 3.6%. And if you look at the entire portfolio as far as in-place funds in 2026, we're at about 3.4%. So we're still holding pretty strong.

Scott Musil: And if you're asking about the rental increase side of it, we're still consistent with our cash run rate change guidance of 30% to 40% for 2026 is I think we -- as Peter mentioned in the script, I think we're at about 41% for the leases that we've signed already in 2026. The reason that's a little bit higher is that 556,000 square foot renewal that Jojo spoke about that was significantly higher than the top end of our 40% range.

Operator: Our next question comes from Vince Tibone with Green Street Advisors. .

Vince Tibone: Some of the development leasing this quarter was for smaller suites within larger buildings. Curious if that reflects any change in strategy and kind of willing to carve up some of these boxes have taken a little longer to lease into multi-tenant spaces or suites? Or was that always the business plan for those properties? .

Peter Schultz: It's Peter. Yes, that was always the plan for those buildings. So they're all designed for multi-tenant use. Certainly, over the last several years, we've been fortunate to see some full building users. . But we always design flexibility into our buildings. As I mentioned on the question about our building in Central Pennsylvania for 708 just to contrast that size range really good activity there that we're seeing today, and there's a lot of activity for larger buildings from tenants in Pennsylvania and some of the other big markets. So I wouldn't take that tenant demand is limited to under 200,000 we built those buildings because we felt those pockets were underserved, and we're seeing the results of that.

The Lehigh Valley building that Peter mentioned, we just completed and we've seen good activity there and already have our first deal signed.

Vince Tibone: No, that's really helpful color. I appreciate that. And then maybe staying on development a bit. It seems that the 1 million square foot plus box is where you're seeing the most favorable kind of changes in supply/demand dynamics right now in most markets. . I'm curious, are you willing to kind of go spec at that ultra-large size range? I know you've done some of that in the past, but generally have been a little smaller billing size, like if demand stays strong for this ultra large box, could you pivot or don't go a bit more larger ultra large box when you're doing more some of these new spec deals?.

Peter Baccile: Sure. I mean we're always looking to maximize value of our land. We continue to seek out new land investment opportunities and some of which would involve large-format properties -- large-format buildings. It's part of the game plan. As you know, we do own some sites in SoCal that could accommodate very, very large format buildings. And we continue to evaluate those in light of the economic realities and leasing realities of that market.

Operator: The next question comes from Vikram Malhotra with Mizuho. .

Vikram Malhotra: I guess just first one to clarify, you're ahead on your development lease-up. You've got good rent growth, like rent spreads that you cited and good visibility. . So I'm wondering two things that you can maybe be more specific, like one, why not move up the occupancy guide specifically like what's the offset to not moving that up given the leasing? And then can you be more granular on like why the guide didn't go up because even what you described, it would still suggest you should be trending at least $0.01 or $0.02 higher.

Scott Musil: Vikram, this is Scott. And -- so the answer is, yes, we did pick up a little bit of FFO due to the 400,000 square feet of development leasing we announced -- that was offset by two items. One had to do with the projected land sale that we have in our guidance, that's a lease parcel. So when we sell that land parcel, we lose the NOI and we're paying down the line of credit. So there's a little bit of dilution there. And then the other item has to do with just our normal process of going through our lease availabilities and our leasing assumptions on a quarterly basis when we update guidance.

We made assumptions to some of those -- we did not make changes, though, to the 1.3 million square feet of development and the 700,000 square feet that we have in our guidance. So it's more some changes in some of the quarter leases. So those are the pieces.

Vikram Malhotra: But just to clarify, the occupancy piece, I don't think the land would sale would impact that, right? Like what offset the occupant? Is it just you've assumed lower real .

Scott Musil: We made some slight adjustments to some core lease-up assumptions as well. And also keep in mind that occupancy, we provide a range to it and we're comfortable with that occupancy range.

Vikram Malhotra: Got it. Okay. And then just maybe stepping back, you announced the buyback, you're doing use property tours. There's a change in sort of the Board as well. I'm just trying to understand, like can you walk through kind of each of these actions, like what are you sort of aiming for? There's obviously in the background, the quasi, I guess, activist that's pushing I'm just trying to understand like all these different actions, like are they related? Are they independent? What are driving those three things?

Peter Baccile: A lot of topics in one question. Okay. So the whole topic around the new director, as you may know, we unexpectedly lost a director last year who passed away. Again, unexpectedly. At that point, we determined it would be prudent to go ahead and start a process for a new one. That process was extended on two occasions. First, to consider the candidacy of the LNB nominee, Pass nominee and then again to consider the canadacy of the two individuals that the L&B nominee suggested we talked to. So that whole process was well underway long before those conversations began.

With respect to the share buyback, Look, we took a look at what happened to our stock in certain periods, okay, such as COVID, such as when Amazon announced they were pulling back in April of '22. The tariffs impact on the shares, less so the war in the Middle East. And when you look at those time periods, you see significant falloff in share price when the fundamentals and long-term prospects for our shares did not. And those are times that will continue to happen with the volatility that we have experienced and will continue to experience.

And so it just simply makes sense to be in the market supporting the long-term value of our shares during those time periods. That, again, is a conversation that we have had with the Board for a long time. I've now forgotten the rest of your question.

Vikram Malhotra: Property tour .

Peter Baccile: Property tours. I would say, look, yes, we want to do whatever we can to get the word out on not only the transformation that we have completed, but also what's going on right now in some of our markets, we want you guys to be able to get to know our market leaders it just makes sense to take the opportunity to enhance shareholder engagement. .

Operator: The next question comes from Brendan Lynch with Barclays.

Brendan Lynch: You mentioned winning concessions contributed to the strong cash NOI growth in the quarter. Can you provide some more additional color on the current trends that you're seeing with concessions and what we should expect going forward? .

Peter Schultz: Yes, Brendan, it's Peter. Generally speaking, we're seeing rent concessions at half of 1 month to 1 month of rent per year of term. And I would say that's drifted upward a little bit, which is more of a market by market and in some cases, asset by asset, and that's on new leases. TIs have been roughly the same, just depends upon the specific requirements of the tenant.

Johannson Yap: And renewals have been pretty steady, still very low renewals and TIs -- in over renewals. .

Brendan Lynch: Okay. Great. And another question. We've seen a lot of discussion recently about how brokers are going to be disintermediated by AI or at least the broker fees are going to be pressured lower -- what is your view on how that cost dynamic will evolve for First Industrial and for the industry in general going forward?.

Peter Baccile: View on that, Joe.

Johannson Yap: Yes. There's -- we don't see material impact right now on AI in terms of brokerage services. Again, when we hire brokers, I mean, we feel we hire the best. They bring value to the table in terms of our leasing efforts. We've seen more very quick flow, efficient flow of information back and forth in the industry. but brokers play a key role in the industrial leasing business.

Peter Baccile: Yes. AI is going to provide a lot of data maybe these transactions happen more quickly for that reason, but intermediaries do bring value. And those negotiations, it always helps to have some distance. And we don't see the value of that community lessening over time because of AI.

Operator: [Operator Instructions] Our next question comes from Michael Mueller with JPMorgan.

Michael Mueller: I guess first, are the light assembly data center users that you've referenced -- are they generally shorter-term lease takers of space? Or are you seeing long-term leases there? And I guess at the completion of the data center, are they expected to kind of stick around or just that's the end of the lease may go away and space goes to a different type of user?

Johannson Yap: Let me give you some color there, Michael. The light assembly, usually, they're long -- midterm to longer-term leases because the assembly of the equipment -- it depends on how much data center development, a particular tenant is fulfilling. And if you have a multi-facet for example, development going on that the tenant is falling, that would take anywhere for a couple of years to long term as much as 10 years. So it really depends on what they're fulfilling. It also depends on how many regions that particular prospect will be serving. As you know, data center development and data center buildings take a longer time than industrial buildings. So that's another piece of color there.

But yes, so in terms of data center development, we cannot predict. You know as much as we do, if you look at the industry news and how much the hyperscalers 1 we will put out in the marketplace, and that's pretty -- it seems like a pretty long term, pretty huge dollars.

Michael Mueller: Got it. Okay. And then just a quick second one. Are there any notable disposition expectations beyond the Phoenix sale that's expected to close this year or just expected to be nominal.

Peter Baccile: No, there's really nothing else in the hopper that looks like that. .

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

Peter Baccile: Thank you, operator, and thanks to everyone for participating on our call today. You've got -- if you have any follow-ups from our call, please reach out to our Scott or me, and have a great day. .

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

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