Good day, and welcome to the First Industrial Realty Trust Inc. Fourth Quarter Results Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist. There will be an opportunity to ask questions. To ask a question, you may press star then one on a touch-tone phone. Please note, this event is being recorded. I would now like to turn the conference over to Art Harmon. Thanks a lot. Hello, everybody, and welcome to our call. Before we discuss our fourth quarter and full year 2024 results, and our initial guidance for 2025, 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, February 6, 2025. 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-Ks 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 Baccili, 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, Executive Vice President of Operations, and Bob Walter, Executive Vice President of Capital Markets and Asset Management. Now let me hand it over to Peter.

Thank you, Art. Thank you all for joining us today. The First Industrial team wrapped up a successful 2024 highlighted by delivering strong cash rental rate growth on leasing and achieving our second highest volume year for development lease signings since we relaunched our program in 2012. We're equally excited about the impact this success is having on our 2025 FFO growth. Based on the midpoint of our guidance, we're expecting to grow FFO approximately 10%. Scott will walk you through the details later when he addresses our guidance. Before getting into specifics of our performance, let me comment on the industrial market trends. CBRE reports US industrial market vacancy hit 6.1% at year-end, a 30 basis point rise from Q3 '24. New construction start volume is 62% lower than the third quarter 2022 peak with just 43 million square feet breaking ground in Q4 '24. In our fifteen target markets, space under construction totals 143 million square feet, signaling future quarterly completions could fall well below the 46 million square feet delivered in the fourth quarter of '24. On the demand side, net absorption nationally was 24 million square feet in the fourth quarter, 15 million of which was in our target markets. With the election behind us, we're hopeful that this reduction in uncertainty will lead to a stronger commitment to growth investing and in turn, a more consistent pace of development leasing. From a portfolio perspective, we ended the year with in-service occupancy of 96.2% aided by some fourth quarter development leasing, which I will touch upon shortly. Our team also delivered a cash run rate which is the second highest in our thirty-year history. This marks back-to-back years of fifty plus percent for this metric. Looking at our 2025 lease expiration, we're making solid progress and are now through 59% by square footage. Together with new leasing, our cash rental rate increased for leases signed with 2025 commencement dates by 33%. Excluding the 1.3 million square foot fixed-rate renewal in Central Pennsylvania discussed on our last call, 2025 signed leases to date had a cash rental rate increase of 42%. For the full year, we expect cash rental rate growth to range from 30% to 40% overall and 35% to 45% excluding the aforementioned Central PA renewal. We ended the fourth quarter on a positive note with about 1 million square feet of signed development leasing, on balance sheet and another 463,000 square feet in our Phoenix joint venture. On balance sheet, we signed a full building lease for our 542,000 square footer in Nashville, with a repeat customer nine months ahead of the anticipated building completion. We also leased the remaining 350,000 square feet at our first logistics center at 283 building B in Pennsylvania and 100% of our 83,000 square foot First Elm building in the Inland Empire. As I noted at the start of the call, our team delivered an excellent year of development leasing. In total, for 2024, we signed 4.7 million square feet of development leases, inclusive of our joint venture. This compares to a budgeted number of 2.8 million square feet in our original 2024 guidance. Not only were we pleased with the amount of leasing, but the signings were broad-based, representing ten of our fifteen target markets which were Northern and Southern California, Nashville, Central Pennsylvania, Phoenix, Houston, Chicago, Seattle, Miami, and Denver. Many thanks to our regional teams for this fantastic performance. We've also started two new developments which will contribute to our long-term growth. On the heels of the 542,000 square foot lease at our first Rockdale Park in Nashville, we started a 317,000 square foot building. Our total projected investment is $33 million. Nashville's long-term growth drivers and current fundamentals are strong as vacancy stands around 3%, and unleased new supply represents 1.7% of total stock. In the Lehigh Valley in the I-78/81 corridor, we started our first phase at First Park 33. There, we're constructing two buildings totaling 362,000 square feet with a total estimated investment of $63 million. The building sizes and depths will allow us to target the smaller tenant segment, which we believe is underserved by new construction. As most availabilities are targeting tenants 200,000 square feet and up, the cash yield for each of the fourth quarter starts is expected to be north of 7%. We're also well-positioned for future development opportunities as submarket conditions warrant. In the fourth quarter, we were pleased to close on the final land parcel at our First Park Miami project for $16 million. With this addition, we can now develop an additional 1.1 million square feet of product in what will ultimately be a 2.5 million square foot park. In total, our land positions across our target markets can accommodate 15 million square feet of growth. Moving now to dispositions. We sold five buildings totaling 214,000 square feet for $25 million in the fourth quarter to bring our total for the year to $163 million. Since 2010, we've completed the sale of $2.4 billion of legacy assets achieving portfolio objectives for location, functionality, and growth prospects. Therefore, moving forward, you should assume property sales volume will be lower than prior years. For 2025, we expect asset sales of up to $75 million. Lastly, with respect to our dividend, given our performance and outlook, our Board of Directors declared a dividend of 44.5 cents per share. This is an increase of 20.3%, which is aligned with our anticipated cash flow growth. Before I turn it over to Scott, I'd like to express our heartfelt sympathies to the people of Southern California who have been impacted by the wildfires. The physical and emotional destruction is tragic and unprecedented, and we will continue to do what we can to support the impacted communities. With respect to our people and properties, we are fortunate and thankful to be able to say our teammates and their families are safe and sound and none of our buildings have been affected. With that, I'll turn it over to Scott.

Thanks, Peter. Let me recap our results. Day funds from operations were $0.71 per fully diluted share, compared to $0.63 per share in 4Q 2023. For the year, NAREIT FFO per fully diluted share grew 8.6% to $2.65 compared to $2.44 in 2023. Our cash same-store NOI growth for the quarter excluding termination fees was 9.3%. The results in the quarter were primarily driven by increases in rental rates and new and renewal leasing, better rate bumps embedded in our leases, partially offset by higher free rents. For the full year 2024, cash same-store NOI growth was 8.1% excluding the third quarter 2024 accelerated recognition of a tenant improvement reimbursement in Central Pennsylvania, and a similar accelerated reimbursement in the first quarter of 2023 related to a tenant in Dallas. We finished the quarter with in-service occupancy of 96.2%, up 120 basis points from the third quarter and 70 basis points from year-end 2023. As we stand today, we have approximately 140 basis points of lease-up opportunity from developments placed in service in 2023 and 2024. Summarizing our leasing activity during the fourth quarter, approximately 1.9 billion square feet of leases commenced. Of these, 600,000 were new, 800,000 were renewals, and 500,000 were for development acquisitions with leases. Now onto our 2025 initial FFO guidance. Our guidance range for NAREIT FFO is $2.87 to $2.97 per share. At the midpoint of $2.92 per share, this represents a 10% growth rate from 2024. Key assumptions are as follows: an average quarter-end in-service occupancy range of 95% to 96%. This assumes approximately 1.6 million square feet of development leasing during the year, the vast majority assumed to occur in the second half. Cash same-store NOI growth before termination fees of 6% to 7%. Note that the same-store guidance excludes the impact of the accelerated recognition of a tenant improvement reimbursement in 2024 related to the aforementioned Central Pennsylvania lease. Guidance includes the anticipated 2025 costs related to our completed and under-construction developments as of December 31. For the full year 2025, we expect to capitalize about $0.09 per share of interest, and our G&A expense guidance range is $40.5 to $41.5 million. Let me turn it back over to Peter.

2024 was an outstanding year, and I would once again like to extend my thanks to the entire First Industrial team. Your dedication to serving our customers and driving strong future cash flow growth from development leasing and rental rate increases are driving meaningful growth in shareholder value. And I know you share my excitement for the growth opportunities that lie ahead in 2025 and beyond. Operator, with that, we're ready to open it up for questions.

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. Our first question comes from Ki Bin Kim with Truist. Please go ahead.

Thank you. Good morning. Can we first start off with maybe getting your refreshed views on the Los Angeles and Inland Empire markets and if you're seeing any green shoots for demand growth?

Sure. I'll take that. When you look at post-election, we've guided more tours and more requests for proposals, so touring activity is up. In terms of ports, year to date, it's up 22%. We haven't seen a big impact of that. Although, as we've stated here, we've leased significant assets that might have impacted positively our leasing of those assets. We're not going to predict a big move because of the port activity. Bank of America did pick up for both LA and IE a little bit, but there's a couple of things that we're watching closely, and the trend is good. Overall, under construction for LAIE is down. In terms of quarter to quarter, completions were also down quarter to quarter. I'll start to significantly doubt. So if that trend continues, and the market continues to absorb what's been delivered in Q4 2024, the market should be firming up.

Okay. And on your development pipeline, roughly, like, how much square footage are you assuming that you're leasing up at, I guess, at the midpoint for your guidance, please?

Sure. We're assuming 1.6 million square feet of development lease-up. The vast majority of it is weighted to the second half of the year.

And our next question comes from Nicholas Yulico with Scotiabank. Please go ahead.

Hi. This is Greg McGinniss. On for Nick. Just hoping you could talk about the Denver market, what you're seeing on leasing there as occupancy has ticked down with the assets being placed into service there. Any updates on Aurora Commerce Center would be appreciated.

Sure, Greg. It's Peter. So Denver has been working through a little bit of elevated vacancy that continues to get leased. Market occupancy improved a little bit. In the fourth quarter, demand has been okay. Decision making continues to be elongated with some of the prospective tenants in the market. We have seen, as Jojo just commented about Southern California, an increased level of urgency and momentum from some tenants that are in the market. But we still clearly have work to do in Denver. However, we feel a little bit more optimistic with what we're seeing today than we felt for a good part of last year.

Okay. Thanks. And then with regards to future development, which geographies do you plan on focusing on?

Sure. We're not going to talk about volumes, but the markets right now that we would think about new starts, I'll just go by state really: Pennsylvania, Texas, and Florida are the places that we would focus on next.

Okay. And sorry. Just one final follow-up here. In terms of funding, with the decrease in dispositions, how are you thinking about funding the development?

It’s the same formula as the past. We're expected to spend $220 million in development. Excess cash flow, sales, and borrowings on the line of credit are going to be the sources.

And the next question comes from Craig Mailman with Citi. Please go ahead.

Hey. Good morning. Scott, on the 1.6 million square feet development leasing embedded in guidance, can you go through how much of that would be a portion of that hundred forty basis points of lease-up opportunity versus projects that are currently under construction?

Let me do a quick calculation. I think it's gonna be the vast majority of it. So, Craig, the 1.6 million fee is basically comprised of our developments placed in service not leased. So that's already in the occupancy number. And then the developments completed but not in service. So those are the two pieces that make up the 1.6 million. We're not assuming any lease-up in any development completions in 2025.

Okay. So that’s not only helping FFO, but also helping same store as well because that's currently a drag on, don't know why.

Developments placed in service, not leased, that could help same-store NOI. It just depends on what the free rent assumption is.

Okay. That's helpful. And then just more broadly, I know development leasing has had a big year this year, and you alluded to maybe things getting a little bit better on the ground. But just in the context of what some of your peers have been saying about demand kind of the trend bottoming and getting better and supporting maybe a second half 2025 reacceleration net absorption. Where do you guys stand on that?

I'll start with this, and then Jojo can jump in. You're looking at a classic U shape the way we look at this, not a V shape. So, predicting how strong this rebound that you referred to is going to be is not easy. What we have seen, even though development leasing times are a bit elongated, assets are getting leased. In 2024, 863 million square feet of leases were signed across the country, and that's the third highest year in history. So while we see falling rents in some markets or low rent growth in some markets, leases are getting signed. And little by little and slowly and methodically, we always talk about tenant alternatives. When we talk about markets with additional space, those alternatives are beginning to shrink, and equally helpful to that, obviously, is the fact that the national pipeline is now shrinking dramatically and new starts are staying pretty low level. Hard to say, Craig, what that inflection is gonna look like. We're pretty conservative on that front. But we see it coming and we feel good about the prospects. Craig, it's Peter. I'll just give you two specific examples. The deal we made in Pennsylvania we've been working on for nearly all of last year. So finally seeing some higher level of engagement. The deal we reported in Nashville with our repeat customer in the manufacturing business. They had a lot more urgency to get that done. So things are a little better, as we've said, and we're seeing higher engagement and more momentum. What we really want to see to Peter's point is that momentum continue to be persistent throughout the year.

One last thing I'll add to that while we're on the subject of development, leasing and time frames, some of the assets that we have are completed and in service, and so are beyond the twelve-month downtime. We also have leased assets like we did last year: a million footer in Stockton at completion, the 540 in Nashville at completion, and the 360 in the Philly market at completion. So when you look at our vintages, we have to group them by vintages. That's the year we've started the project. If you look at by vintage going back to 2018, every vintage had leased on average below nine months. So some projects are simply going to take longer, maybe it's the market they're in, maybe it's the depth of the demand for the particular size of the asset. And some are gonna happen quickly. That those time frames are as difficult to judge today as they have been in the last couple of years.

Great. Thanks for the call.

And the next question comes from Vince Caboni with Green Street Advisors. Please go ahead.

Hi. Good morning. Are there any large move outs in 2025 that we should be aware of? And, generally, how do you think tenant retention rates could trend this year versus the 2024 levels?

Chris, do we? Obviously, we talked about the pullout of the seven hundred thousand square foot move out in Central PA, and we're not aware of any other significant moveouts. Tenant retention last year, we had one of our highest rates in the last three or four years at seventy-seven percent. So we expect that number to be very similar.

One more. That's helpful. Maybe just a quick related follow-up. How about bad debt? If you could share maybe where bad debt as a percentage of revenue came in for 2024, how are you thinking about 2025? Are you seeing any cracks in certain categories? Any commentary along there would be great.

Sure, Vince. It's Scott. Bad debt expense was $700,000 in 2024. That was ten basis points of gross revenue, so a very, very low number. We're assuming a million dollars assumption in 2025, like we have in the past several years. As for material tenants on the watch list, we talked about Boohoo. They have paid January rent. We're expected February's rent any day based on payment history. And keep in mind with that tenant, we do have a security deposit in the form of a letter credit that takes care of twelve months of rent.

And the next question comes from Todd Thomas with KeyBanc Capital Markets. Please go ahead.

Hi. Thanks. Good morning. I just wanted to go back to the 1.6 million square feet of development leasing in the guidance, which sounds like it's mostly related to projects that are already in the in-service portfolio. Can you just comment on the four projects that will transition to the in-service portfolio during the first half of 2025? You have a little lease at First Park Miami, but can you provide an update on interest for the remainder of that space and the three Inland Empire assets? Is there anything embedded in guidance for those properties as a transition?

Sure. Hi. It's Jojo. Right now, scheduled for in-service in 2025 are four projects. Three of the four are in the Inland Empire and one is in Miami. They range from three buildings at a hundred forty to a hundred sixty thousand square feet, and one is a three hundred twenty-five thousand square foot building.

Yeah. Can you just comment on the interest level for those assets and whether there's any expected leasing during the year as they transition?

Sure. Let me comment on the three buildings in the Inland Empire. As I said, they are class A. They're all in the 215 corridor. Very state-of-the-art facilities. They're looking at one hundred fifty-five thousand feet, one hundred sixty thousand square feet, and three hundred thirty-five thousand square feet. All of those projects are heading towards lease-up, and we're also responding to RFPs. In terms of leasing, we've assumed that they will be leasing in the second half of this year.

And then, Todd, it's Peter for Miami. We have active RFPs out for all of the remaining space in that building.

Okay. And then just curious if you could provide an update if there's any sort of forecast for 2025 for market rent growth across the portfolio or across the markets that you're targeting?

Generally speaking, we're expecting modest rent growth. Some markets will be down, some will be up a point or two, so maybe call it inflation plus a point. What we're expecting this year is Southern California probably flat to down a little bit.

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

Great. Thanks. Good morning. I know it's early on, but I was hoping you could talk about any change in tenant behavior you noticed in the Southern California market or even Houston or Phoenix given the increased tariffs on China and the delayed but potential implementation in Mexico. I guess, are you seeing any hesitation to lease in those markets or, on the flip side, any pull forward of activity?

It's very early. I think there's a lot of chaos around this topic, the topic of tariffs. Clearly, if very large tariffs were put in place for a very long period of time, that's a negative. But at this point, who's to say what's really going to end up being the case and for what kind of term? It could be negotiating ploy, as you've seen. It's anyone's guess what happens with this. We have not seen yet any reaction to this. No one has actually brought it up, in terms of the tours that we're giving and the properties or conversations that we're having. People haven't stepped away on this subject. So it’s too early and too unpredictable at this point. Okay.

Okay. Great. That's helpful. And then, second question, can you talk a little bit more about the economics on incremental development? Just some color on how you've seen construction costs trending and expectations on the cost side this year. Given the slowdown in rent growth, what effects might that have on expected yield, if any?

Sure. Well, if you look at 2024, on average construction costs came down in the ten percent range. It's primarily driven by the decrease in contractor margins and a stabilizing and slight decrease on construction materials. Going into 2025, we're looking at flat to slightly down—maybe zero to three percent down. It has an impact on our total investment. Whenever your land is anywhere between twenty to twenty-five percent of your investment, of course, it's going to have a way of improving the yield slightly.

I just want to put some numbers around that. You know, we talked earlier about having fifteen million square feet of growth in our land holdings. Today, we could invest about two billion dollars that would pencil out to a high six yield. That includes today's market rents, as well as our anticipated and expected costs framework for those projects building in that reduction in some development cost. The two projects we just started are going to yield north of 7%.

And the next question comes from Rob Stevenson with Janney. Please go ahead.

Good morning, guys. I think you talked about this a little bit, but can you give a broader overview of which of your core markets you're seeing the best operating fundamentals and tenant demand, and which are the relatively weaker ones today besides Southern California?

Yeah. I mean, Nashville's the best market right now. Vacancies are at around three percent. Very limited new starts. It's not so easy to get entitlements in that market. We're fortunate there to have a lot of growth opportunity. Pennsylvania is not bad. Lehigh Valley is decent. South Florida has cooled from its blue-hot phase, but we're still very, very focused on South Florida. Texas, so Houston and Dallas, are doing very well. We're certainly looking for more land opportunities in the state of Texas, in those two markets. Of course, the right submarkets around Dallas, that's a very, very big market. Those would be the strongest markets. Aside from SoCal, while Denver is improving, it still has some room to run. Phoenix has a lot of vacany, but we're finding that the product we have on offer is attracting good tenant traffic and lease signings there. So being there very early and being in the right location and offering the right-sized product benefited us greatly in that market. But that would be how I would summarize the positives and negatives.

Okay. That's helpful. And then in terms of tenants today, are you seeing better demand at certain size levels? Or is the demand out there fairly widespread across the various buckets of square footage?

I would say smaller, midsize are more active generally speaking than larger. And as we've talked about on prior calls, that varies by market. What's small in Florida or Denver is different than what's small or midsize in Pennsylvania, as an example. Amazon had been pretty active in a couple of markets last year. There is demand for the larger sizes, but it's not as robust as it is in the smaller mid sizes today.

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

Yeah. Thanks. I wanted to follow-up on Blaine's question. How difficult do current market rents really support those developments broadly, or does development only work in the Pennsylvania, Florida, and Texas markets?

Well, the state of the existing opportunities in those markets that you just mentioned is positive. That's why we're focused on those markets. Underwriting new deals there is fine. It's not a problem. Projecting out which other markets, like Southern California, for example, when those markets are going to be ready is a little bit more difficult.

So in the Pennsylvania, Florida, and Texas markets, you don't need rent to go up, or you're not underwriting rents to go up to justify developments at the current market rents. You can get your seven-ish percent yields that you just discussed with the deals that you just broke ground recently. Correct?

Correct.

Then just last one. Can you talk about what's going on with broader tenant activity? Have tenants been much more active making decisions after the elections? Or has it just been kind of steady state for you, and that wasn't really a driver?

This isn't really a light switch topic. Meaning, it didn't exist on Friday, and on Monday, it does. This is more of an evolutionary thing. What we have noticed is that there is a sense that being more entrepreneurial is going to be rewarded. That means investing in growth, taking some risks, whereas prior to that, it was definitely risk-off. Investing tens of millions of dollars into a new lease and equipment and product. There's a lot more confidence around the fact that product will move. We're seeing that right now, and the result of that is more foot traffic. We're receiving a lot more RFPs. I would say prior to that, we were sending out more solicitations than we were receiving RFPs. That equation has changed. Now, I want to caution that we're cautiously optimistic. We have not seen, as Peter mentioned earlier, what we want to see is consistent and persistent development lease signings. And that is the question mark, and that's what we're keeping our eye on.

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

Hi. Good morning. You mentioned earlier that retention has been quite high and you expect it to continue, but I think a concern some people have is that some tenants have too much space, so reducing what they have. Just wondering what's your view. Are there tenants that have too much space that needs to be worked through? And how do you think automation could end up impacting space needs?

Yeah. I'll take the first part of that. So, the sublease space nationally is about 1.1% of existing stock. That's approximately double the long-term average. Within our own portfolio, we have some sublet space, none of which is impacting us from a revenue standpoint. We have good leases with good tenants on almost all that space. So we'll just have to work through that over time, and we're keeping an eye on that. Regarding automation, when you look across the board in our portfolio, we don't see tenants massively investing in automation that drives their utilization of space. Of course, you have the big tenants that are heavily automated, like the large e-commerce companies, but that's part of their business plan from day one. We're not seeing a sea change.

Got it. Okay. And then I think this topic came up at some point in the past, but in terms of the development projects that have taken longer to lease up, do you think that's a case where reducing price would help, or is it not really an issue of price? It's more about whether someone needs that space or not?

I would say it's not really price. We're market sensitive. It's more about, as we've talked about on the last several calls, just the pace of decision-making. Companies finally saying, okay, we need this space. You saw that in our development leasing results throughout last year, culminating in what we announced in the fourth quarter. So we just want to see more of that. It's frustrating for sure that tenants aren't making decisions at the pace that we've all seen in the last several years, but it's not about price. We're going to do what we need to do at least as we always have.

And the next question comes from Nick Thillman with Baird. Please go ahead.

Good morning. Maybe you wanted to touch a little bit just on the LA wildfire impact. I know it's early days and the rebuilding efforts are just starting. But where do you think what markets are most likely to benefit as kind of that rebuilding effort? Is it the IE or is it LA County proper? Just some thoughts there would be helpful.

First of all, the timing is going to be very hard to predict depending on how the permit process, cleanup process, and redevelopment process shakes out. But setting timing aside, a lot of investment will be dedicated to infrastructure and house construction. If you look at what components are needed for infrastructure and house disruption, that would need storage of building materials and actual infrastructure that goes basically underground. Going forward, we think that it necessitates outside storage of materials closer to where the tragic fires happened. We think LA might benefit the most.

That's helpful. And then just maybe touching a little bit on development, maybe on build-to-suit opportunities. Have you seen any sort of increase in that activity across your markets?

Not really. Particularly given that tenants have choices today in the existing inventory. Unless it's something really specific and unique. Certainly, we were glad to prelease the building in Nashville months ahead of completion. In essence, that someone wanted some influence over the design and specifications for them. But tenants still have choices today in the market. So build-to-suit's probably less active.

And our next question comes from Mike Mueller with JPMorgan.

Hi. I know you've addressed about sixty percent of the twenty-five expirations. Looking at the remaining forty percent, is there anything that stands out in terms of geography or size, or is it kind of more of the same as to what you've leased already?

Yeah. It's pretty much, you know, broad-based across, you know, our typical makeup of our the jack rate. So nothing stands out.

Okay. And then, Scott, I think you mentioned about two hundred twenty-five million of development spend for the year. It looks like maybe half of that applies to projects that are already underway. Is there a way you can kind of ballpark what you think development starts to be for the year?

We're not going to give volume on development starts. We have certain opportunities that we think we're going to move ahead with, but you know, as the global economy turns and as markets change, that could change. That's why we don't talk about volume. Talking about location is fine. As I mentioned, Pennsylvania, Texas, and Florida are the places we would go.

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

Thanks for the question, guys. Congrats on very strong execution in twenty-four. Just maybe first one, if you can clarify the development lease-up that you've done in twenty-four. You may have addressed it. I just wanted to get a better understanding of when this hits SFO or cash flow in twenty twenty-five and twenty-six. Is it mostly baked for twenty-five or is some of what you've leased in twenty-four actually hit next year?

If you look at the fourth quarter leasing, the two deals that are expected to start at twenty-five are the joint venture deal, I think that's first quarter, Jojo. And then Peter's deal in Nashville is a three-q expected start date. Everything else started in 2024.

Got it. And then just in the model, as you've looked at occupancy, further lease up of the obviously, the development of one point six million. You also mentioned sixty percent of the expirations are covered. I'm just wondering, do you have higher than normal visibility or average visibility year than sort of prior years, given all the development lease up in the sixty percent you mentioned? Or is it kind of average?

It's more average. We're at a similar point with our rollovers as we always are at this time of the year. With respect to development leasing, I wouldn't say we had any more visibility than we had last year.

Got it. And then just lastly, the occupancy map. A lot of your peers have outlined a dip in the first half down to perhaps ninety-four to ninety-four plus percent and then an expectation of a pickup. Can you just sort of walk through how much of the guide is dependent on that backup recovery?

If you look at our occupancy that we're projecting for twenty twenty-five, we're going to be down in the first and second quarter. We've talked about the seven hundred thousand square foot move out in Central PA and the four developments are coming in service in the first and second quarter. So we'll definitely have a pickup in the last two quarters of the year.

And the next question comes from Tayo Okusanya with Deutsche Bank. Please go ahead.

Yes. Good morning. Again, congrats on a really strong outlook and really strong execution in twenty-four. I wanted to go back to Jojo's comment about Southern California. I think he mentioned that the rent growth in twenty-five is expected to be flat to maybe slightly down. I guess I'm trying to understand that number in the context of brokers and even some of your peers talking about rental rates down anywhere from ten to twenty percent on a year-over-year basis in twenty-four, and even rental rates would be still above pre-pandemic levels. So just trying to understand that flat to down comment relative to kind of all the other stuff going on in Southern California.

I mean, portfolio composition matters. We all operate in several markets. When I say we all, I mean our peers, whether public or private. Delivering the product that meets the demand has always been one of our primary focuses. Delivering product that's going to remain competitive in its submarket for the long term has been a key focus. We can't create rent growth and tenants out of nowhere, but we can deliver a product that is so competitive that it's amongst the first to lease. That’s why we might have a slightly different view on rent growth for our markets as others do.

And the next question comes from Brandon Lynch with Barclays. Please go ahead.

Great. Thanks for taking my question. Maybe just follow-up on that, looking more broadly at other markets around the country. Can you talk about your market pricing assumptions that are embedded in guidance?

We build up our budgets from the ground up lease by lease. It's a little different than what your question is asking. We don't take inputs necessarily from all the economic metrics to decide that. We really go based on what the market leaders who are talking to the tenants in the market and the brokers think about demand, and we match that up with the product that we have on offer. It's a little tougher to comment on the question with the stats you might be looking for.

Okay. Thank you. That's still helpful color to understand the process. Maybe you could also talk about different levels of demand that you're seeing with between different types of tenants and in particular three PLs.

Sure. The activity continues to be broad-based. Three PLs remain active. Certainly, they over-leased some space over the last couple of years, but they're still very active. On the prospects, we're seeing manufacturing, autos, e-commerce, food, and beverage. As we responded to Rob Stevenson's comment earlier, activity is better in the smaller and midsized ranges, generally speaking, around the country, which varies by market. But it continues to be pretty broad-based. Our smaller mid-sized spaces, for the most part, in our existing portfolio are highly leased and released fairly quickly should we have an availability.

Thanks for taking me back in the queue. Going back to your comments about dispositions being up to seventy-five million, I was curious, how much of that is a function of perhaps pricing not being quite there versus after selling two point four billion, are we much closer to I guess, you know, if you'd learn there longer term ideal portfolio and perhaps going forward, should we expect this reduced disposition level to continue?

It's basically the latter. We're happy with what we have. We have some trimming we'll do. You're always going to pull a GE every year in your bottom ten percent. We're always going to have something we'll sell, but in terms of any meaningful volume goals and targets, we don't have those anymore.

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

Thank you, operator, and thanks to everyone for participating. Very good questions, and we appreciate that. If you have any follow-up from our call, please reach out to Art, Scott, or me. Have a great weekend.

The conference has now concluded. Thank you for attending today's presentation.