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First Industrial Realty Trust Inc (FR -0.91%)
Q2 2021 Earnings Call
Jul 22, 2021, 11:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good day, and thank you for standing by. Welcome to the First Industrial Second Quarter 2021 Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. [Operator Instructions]

I would now like to hand the conference over to your host, Mr. Art Harmon, Vice President of Investor Relations. Thank you. Please go ahead, sir.

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Arthur Harmon -- Vice President-Investor Relations And Marketing

Thank you, Katrina. Hello, everybody, and welcome to our call. Before we discuss our second quarter 2020 results as well as updated guidance, let me remind everyone that our call may include forward-looking statements as defined by federal securities laws. These statements are based on management's expectations, plans and estimates of our prospects. Today's statements may be time sensitive and accurate only as of today's date, Thursday, July 22, 2021.

We assume no obligation to update our statements or the other information we provide. Actual results may differ materially from our forward-looking statements and factors which could cause this are described in our 10-K and other SEC filings. You can find a reconciliation of non-GAAP financial measures discussed in today's call in our supplemental report and our earnings release.

The supplemental report, earnings release and our SEC filings are available at firstindustrial.com under the Investors tab. Our call will begin with remarks by Peter Baccile, our President and Chief Executive Officer; and Scott Musil, our Chief Financial Officer, after which, we will open it up for your questions.

Also on the call today are Jojo Yap, our Chief Investment Officer; Peter Schultz, Executive Vice President; Chris Schneider, Senior Vice President of Operations; and Bob Walter, Senior Vice President of Capital Markets and Asset Management.

Now let me turn the call over to Peter.

Peter E. Baccile -- President And Chief Executive Officer

Thanks, Art, and thank you all for joining us. Our team delivered another great quarter, highlighted by strong operating results, robust development leasing and more investment for growth. Our efforts were supported by the overall economy and the industrial real estate sector continued to gain momentum throughout the second quarter.

Due to strong second quarter performance and the overall strength of the sector, we are increasing our FFO guidance, which Scott will walk you through shortly. Per CBRE flash report, net absorption was a healthy 85 million square feet in the second quarter, while completions came in at a three year quarterly low of 52 million square feet. Completions were impacted by reduced construction activity in 2020 as well as the continuing limited availability of readily developable land in highly sought-after locations.

Through the first half of this year, net absorption was 150 million square feet, outpacing new supply of 106 million. In the second quarter, we were successful in driving occupancy while continuing to increase rental rates on new and renewal leasing. In-service occupancy at quarter end was 96.6%, an increase of 90 basis points from the end of last quarter.

This increase in occupancy was accompanied by a 15.7% increase in cash rental rates on new and renewal leasing. The strength and breadth of tenant demand also carried over to our development investments evidenced by 1.2 million square feet of development leases signed in the second quarter and third quarter to date. We are pleased to announce that our 250,000 square foot building at First Logistics Center at 78/81 in Central Pennsylvania is now 100% leased to a leading consumer products company.

This takes care of the largest vacancy among our completed developments. Also in Pennsylvania, we successfully leased the 100,000 square foot First Independence Logistics Center to the United States Postal Service. In Houston, at our First Grand Parkway Commerce Center, we signed two leases totaling 117,000 square feet, bringing the two building 372,000 square foot project there to 55% leased.

In Dallas, we just leased 97,000 square feet at First Park 121 to a logistics provider, bringing the two building 345,000 square foot phase of that park to 64% leased. This is in addition to the 125,000 square foot pre-lease at the last phase of the park that we started in the second quarter as discussed on our last call. We also achieved significant new leasing at our developments in process.

In South Florida, we pre-leased 100% of the 259,000 square foot Building two at First Park Miami to a logistics and transportation company. This building is scheduled for completion in the fourth quarter and the lease is expected to commence in mid-first quarter of 2022. This same tenant also pre-leased 50% of our next start in that park, which I will discuss shortly. We also leased 100% of the soon-to-be completed 141,000 square foot First 95 Distribution Center in Pompano.

The lease will commence by October 1. Given the strong demand and the ability of our team to replenish our pipeline with profitable development opportunities, we're excited to share several new development starts. In Nashville, we were successful in winning a 692,000 square foot build-to-suit with a leading specialty e-commerce retailer. Completion is slated for the third quarter of 2022.

Our projected investment is $59 million and with a projected cash yield of 6.4%. Taking advantage of the tenant demand we are seeing in South Florida, at First Park Miami, we will start a 219,000 square footer known as Building 1. As I just noted, we inked a lease for 50% of the space in advance of going vertical. Total estimated investment is $39 million with a targeted cash yield of 5.3%.

We are also well positioned for future growth at that park. In addition to what's already underway, I remind you that we can develop another 405,000 square feet on land we own today, and we control another 59 acres developable to 1.3 million square feet for a total build-out of up to 2.5 million square feet. Also in Florida, in the Orlando market, we are starting First Loop Logistics Park.

First Loop is a 4-building project totaling 344,000 square feet with an estimated investment of $45 million and a cash yield of 5.6%. In Seattle, we've launched First Steele, a 129,000 square footer. Estimated total investment is $24 million, with a targeted cash yield of 4.7%. In the second quarter, we acquired a strategic site in the I-78/81 corridor of Central Pennsylvania for $83 million, known as First Logistics Center at 283, we have begun construction on the 1.1 million square foot Building A.

The site can also accommodate a 700,000 square foot building, which is permit-ready. This location is proximate to major parcel hubs for UPS, FedEx and the U.S. Postal Service, where tenants serve strong East Coast consumption zones. Our total projected investment for the first building is $125 million with completion targeted for the third quarter of 2022 and an estimated cash yield of 5.1%.

In summary, these newly announced development starts totaled 2.5 million square feet with an estimated investment of approximately $291 million and a cash yield of 5.4%. Including these planned new development starts, our developments in process totaled 5.7 million square feet with a total investment of $608 million, at a cash yield of 5.8%, our expected overall development margin on these projects is approximately 50%.

We are excited about this robust pipeline and what it means for future cash flow growth. To further bolster our development pipeline, we acquired the remaining 138 acres at our PV303 joint venture for $21.5 million. This price reflects a $10.2 million reduction from our share of the gain and are earned promote from the joint venture. This purchase closes out a very successful JV, which generated a largely unlevered 54% IRR for the partners and gives us another prime landholding to serve tenants' needs in this high-demand logistics corridor.

In addition, just last week, we closed on a 95-acre site in the Inland Empire East submarket of Banning for $27 million that can accommodate up to a 1.4 million square footer. Vacancy in the Inland Empire East is just around 2%, and there are limited sites that can meet customer requirements in this size range. In total, our balance sheet land today can support more than 12.5 million square feet of new investments and our share of the Camelback joint venture is around 3.8 million square feet.

So we are very well positioned for future growth. Second quarter building acquisitions were comprised of an 81,000 square foot distribution facility in Orlando and a 33,000 square foot regional warehouse in Denver. Total investment was $18.4 million, and the combined stabilized cash yield is 5.6%. Moving on to sales. During the quarter, we sold three properties and one unit for $26.2 million at an in-place cap rate of approximately 5.4%.

We also sold one land parcel for $11 million. In total, we have sold $104 million year-to-date and have reached the low end of our sales guidance range of $100 million to $150 million. Before I turn it over to Scott, who will discuss more details on the quarter and our line of credit and term loan executions, let me express my heartfelt thanks to the entire First Industrial team for their hard work and many contributions to our very successful second quarter.

With that, let me turn it over to Scott.

Scott Musil -- Chief Financial Officer

Thank you, Peter. Let me recap our results for the quarter. NAREIT funds from operations were $0.48 per fully diluted share compared to $0.40 per share in 2Q 2020 and our same-store NOI growth for the quarter on a cash basis, excluding termination fees, was 2.1% helped by an increase in rental rates on new and renewal leasing, rental rate bumps embedded in our leases and lower bad debt expense, slightly offset by a decrease in occupancy and an increase in real estate taxes.

Summarizing our leasing activity during the quarter, we commenced approximately 3.5 million square feet of leases. Of these, 1.1 million were new, two million were renewals and 400,000 were for developments and acquisitions with lease-up. Tenant retention by square footage was 71.1%. Cash rental rates for the quarter were up 15.7% overall, with renewals up 12.1% and new leasing up 22.7%.

And on a straight-line basis, overall rental rates were up 29.5% with renewals increasing 27% and new leasing up 34.4%. Moving on to the capital side. As Peter mentioned, we closed on two financing transactions this month for which the pricing demonstrates the strength of our balance sheet. First, we amended our line of credit which was scheduled to expire this October. Our new deal is for $750 million and it matures in four years with two six month extension options.

The interest rate is LIBOR plus 77.5 basis points, a pricing reduction of 32.5 basis points from our previous facilities credit spread. We also financed our $200 million term loan that was due to mature earlier this month. The new term loan matures in July 2026 and has an interest rate of LIBOR plus 85 basis points. This is a 65 basis point reduction in the credit spread compared to our previous term loan. With our interest rate swaps in place, the new fixed interest rate on the term loan is 1.84%.

Given the strength of our credit metrics, the line of credit and term loan provide for pricing at a BBB plus, Baa1 level, which is one notch better than our current credit ratings of BBB flat, Baa2. This favorable pricing will be maintained as long as our consolidated leverage ratio as defined in the applicable agreements remains less than 32.5%.

We would like to thank our banking partners for their many years, strong support of First Industrial. Reflective of these two executions, the weighted average maturity of our unsecured notes, term loans and secured financings was 6.5 years with a weighted average interest rate of 3.4%. At June 30, our net debt plus preferred stock to adjusted EBITDA is 4.9 times.

In the second quarter, we paid off $58 million of mortgage loans at an interest rate of 4.85%, which leaves us with no other maturities for the remainder of the year. Moving on to our updated 2021 guidance per our earnings release last evening. Our guidance range for NAREIT FFO is now $1.89 to $1.97 per share with a midpoint of $1.93, which is a $0.03 per share increase at the midpoint, reflecting our second quarter performance and an increase in capitalized interest due to our announced development starts.

Key assumptions for guidance are as follows: quarter end average in-service occupancy of 96% to 97%, an increase of 25 basis points at the midpoint. Please note that our occupancy guidance now assumes that the lease-up of the 644,000 square foot former Pier one space will occur next year. Due to additional leasing in our portfolio, we were able to essentially backfill more than enough space as an offset and raise our occupancy guidance.

Same-store NOI growth on a cash basis before termination fees of 3.75% to 4.75%, an increase of 25 basis points at the midpoint due to our second quarter performance. Please note that our same-store guidance excludes the impact of approximately $1 million from the gain from an insurance settlement.

Our G&A expense guidance remains unchanged at $33 million to $34 million, and guidance includes the anticipated 2021 costs related to our completed and under construction developments at June 30, plus the expected third quarter groundbreakings of First Park Miami Building 1, First Loop Logistics Park and First Steele. In total, for the full year 2021, we expect to capitalize about $0.07 per share of interest.

Other than previously discussed, our guidance does not reflect the impact of any future sales, acquisitions or new development starts after this call; the impact of any future debt issuances, debt repurchases or repayments after this call; and guidance also excludes the potential issuance of equity.

Let me turn it back over to Peter.

Peter E. Baccile -- President And Chief Executive Officer

Thanks, Scott, and thanks again to the FR team for another great quarter as we continue to achieve success on all fronts. Importantly, our pipeline of future projects is the strongest it's been since the great recession, which positions us well to continue to drive long-term growth and value for shareholders and serve the space requirements of our tenants.

With that, operator, would you please open it up for questions? We ask that you please limit your questions to one plus a follow-up and then you're welcome to get back in the queue.

Questions and Answers:

Operator

Thank you, sir. [Operator Instructions] Our first question is from Craig Mailman from KeyBanc Capital Markets. Your line is open.

Craig Mailman -- KeyBanc Capital Markets -- Analyst

Hey, good morning guys. Could you just discuss a little bit of the prospects, activity at the Pier one space? And maybe what is it about the building or the submarket that is kind of elongating the backfill process there?

Peter E. Baccile -- President And Chief Executive Officer

Peter?

Peter Schultz -- Executive Vice President

Sure. Craig, good morning, it's Peter Schultz. Activity in the submarket continues to be good. The pipeline for new supply is very limited and tenants have relatively few choices. The lease signings to date have been in a couple of buildings that were bigger than us or smaller than us. Our building is positioned for immediate occupancy, which is really important in the environment where we're seeing elongated permitting process and delays on materials.

So we're ready to go. We've seen a couple of shorter term deals, and that's not really our preference. And some of the longer term deals are a little slower moving. So we remain optimistic about our success there in the mark-to-market. And as Scotty said in his remarks, given the strength of leasing in the portfolio, otherwise, that more than offset that. And we still have that as upside for the rest of the year. So we'll keep you posted on our progress.

Scott Musil -- Chief Financial Officer

Yes, Craig, even with pushing out that lease up to 2022, we still plan to end the year around 97% occupancy. So all things being equal, the lease-up of Pier one is about one percentage point of occupancy that would push us to about 98%, which is rarefied air in the industrial sector.

Craig Mailman -- KeyBanc Capital Markets -- Analyst

I guess, Peter, are you guys close to the tenants or is it like your prospect pipeline is in a point?

Peter Schultz -- Executive Vice President

Craig, I would just reiterate, there's good activity in the market. We're evaluating a number of things. As I said, our preference would not be to do shorter term deals and some of the longer term deals are just slower moving.

Peter E. Baccile -- President And Chief Executive Officer

And we would prefer, Craig, for it to be a single tenant building as well. And so the size requirements in the market just need to match up. We just need to find the right match.

Craig Mailman -- KeyBanc Capital Markets -- Analyst

Okay. That helps. And then, Scott, as we think about your same-store guidance, you guys are running around a little over 2% for the first half of the year. Is it just going to be a big spike in 4Q as you kind of lap the Pier one move out that that's going to get you to the midpoint?

Scott Musil -- Chief Financial Officer

Yes, exactly. So if you do the math based upon our annual midpoint guidance of 4.25% that implies about a 6% same-store growth rate in the back half of the year. And Craig, you're right, the two main drivers. One is occupancy. So we're going to do better in occupancy in the back half of the year, which will add about 2.3 percentage points to the same store.

We're also going to do a little bit better in the back end of the year with increasing rental rates on new and renewal leasing, that's about a 0.6% increase compared to the first half of the year, and that takes care of the majority of the beta to get us to the 6% plus or minus that we think we'll achieve the back end of 2021.

Craig Mailman -- KeyBanc Capital Markets -- Analyst

Great. Thank you.

Operator

Our next question is from Ki Bin Kim from Truist. Your line is open.

Ki Bin Kim -- Truist -- Analyst

Thanks and good morning guys.

Peter E. Baccile -- President And Chief Executive Officer

Good morning, Ki Bin.

Ki Bin Kim -- Truist -- Analyst

Good morning. So you guys have made some pretty interesting investments in the Phoenix market. You obviously bought PV303, the remaining portion of the land to 100% ownership and you have that Camelback land as well. Can you just talk about the supply demand dynamics in that market, especially given that there seems to be about 23 million square feet being delivered in that market and only 25% pre-leased? I'm not sure how the broker reports are, but I just want to get your take on it.

Johannson Yap -- Chief Investment Officer

Sure, Ki Bin, hi, it's Jojo. Phoenix, I would say, had a record first half in terms of net absorption and it clearly trump the completions by almost double. First half of the year, year-to-date net absorption is about almost 12 million square feet, which is one of the highest I've seen it in the last 15 years. So again, very big demand, lot of 3PLs, a lot of e-commerce related, a lot of omnichannel. Manufacturers have come in as well and a lot of demand for data centers.

Historically, if you look at what we have, we -- every building that we've developed, we've leased actually either before completion or right after completion, minimal downtime. As you know, we have a 547,000 square feet on balance sheet development and expandable to about 925,000 and we're actually building proposals as we speak on that. So we've guided proposals, and we're looking at our options.

Just in terms of keeping the land that we bought. If you look at that basis, that base is sub-4, in fact, about $360 per square foot. I can tell you today, that's about 45% to 50% below market. So right off the bat, we believe we're in the money. And we think in the future that will yield -- given the basis of where the rents are today, that should be over six easy in terms of yields. So we're very, very bullish and we're feeling good about our current investments. And by the way, our portfolio there, existing portfolio is about 98% leased today and goes to 100% pretty shortly.

Ki Bin Kim -- Truist -- Analyst

Okay. thanks. And for you, Scott, I know sometimes you guys give some color on the lease spreads for deals that are signed but not commenced yet. So when you look at the pipeline of deals that you have currently, what kind of spreads are you -- should we continue to expect?

Scott Musil -- Chief Financial Officer

So the staff that we're seeing is, as of today, we've got 84% of the leases that are expiring this year signed, Ki Bin. So that, coupled with the new leasing that we've done for 2021, we're looking at a cash increase in rental rates of about 14.5%. So it's very healthy when you include the renewals, which we've pretty much made it through the year in the new leasing that we've done.

Ki Bin Kim -- Truist -- Analyst

Okay. Thank you.

Operator

Our next question is from Rob Stevenson from Janney. Your line is open.

Rob Stevenson -- Janney -- Analyst

Good morning, guys. Can you talk a little bit about the Central PA land purchase and the 1.1 million square foot property you're building there? I mean the land cost alone is nearly two times what you paid on a per acre basis for the Inland Empire parcel, not used to seeing Central PA trading at that bigger a premium to the California land. And then where should rents be here versus the $5 per square foot on your existing Central PA portfolio?

Peter Schultz -- Executive Vice President

Rob, good morning, it's Peter Schultz. So a couple of things. In Pennsylvania, as we've said on prior calls, bigger continues to be better. Demand has been most active and consistent in the 700 million square foot range and plus. So that demand profile has been really strong. When you look at the supply, there has certainly been a fair number of million square footers that have been constructed. They're essentially all leased.

There's only one other building today that's under construction in addition to ours in Central Pennsylvania. So very limited choices for tenants with strong demand. The site, as Peter mentioned in the remarks, this is very close in to Harrisburg to the parcel hubs and the intermodal and importantly, a much better labor story than some of the sites, say, along the Southern 81 corridor or up in Northeast PA. So we really feel great about that combination of factors and location.

In terms of the price, that's about $46 on an FAR basis. So under the building, which is a site that is fully entitled, permitted, ready to go. So we started construction the day after. So Jojo can talk about the California site that is going through the entitlement process. But we think the opportunity here to create value is quite good with cap rates in that market, 3.75% and going lower today. Jojo, you want to talk about that?

Johannson Yap -- Chief Investment Officer

Yes, yes. In the Inland Empire East market, I wouldn't want to impact that as market because that's way below market. We got that deal by assembling six parcels to two different sellers. It took us a year off market. And right across the street, there are already a sale that's about 60% above our basis.

So that didn't hit the market, we're -- thanks to the team, to our LA Inland Empire team for getting that deal done, but that's definitely not market. If you look at it, that's under $7 a foot, land prices there, where we have this site should be closer to mid-teens. So, I wouldn't want to -- you shouldn't use that price as market because that's never hitting the market.

Rob Stevenson -- Janney -- Analyst

Okay. And then second question, the pipeline now is about $500 million. You've got $80-ish million rough numbers to be completed in the third quarter and a similar amount of announced starts. You guys have been doing a lot of significant pre-leasing on the pipeline. Do you sit here at the $500 million-ish level? And is that where you're comfortable today? Do you let that drift up as demand pulls you in that direction? Does it fall back to more sort of $350 million, $400-ish million? As you look forward, how should we be thinking about the pipeline?

Peter E. Baccile -- President And Chief Executive Officer

Yes, it's Peter. Look, we can build about 12.5 million feet on land that we own. That equates to about -- and that doesn't include the $291 million we talked about today. So that's net of that. That's about a $1.3 billion -- that's $1.3 billion worth of investments. We also control land where we can build -- we can invest another $320 million. And our share of the JV, Camelback JV is about another $340 million of investment.

So, if you add all that up, again, net of the $291 million we talked about today, that's pushing $2 billion of investment. You can see that our volumes are up today. I think going forward you can expect our development volumes to be higher than they have been historically. Don't forget, our company is much larger now today than it was even two or three years ago. So the numbers that you're quoting are probably closer to the go forward than the historical levels.

Rob Stevenson -- Janney -- Analyst

Okay. Thanks, guys. Appreciate it.

Operator

Our next question is from Caitlin Burrows from Goldman Sachs. Your line is open.

Caitlin Burrows -- Goldman Sachs -- Analyst

Hi. Good morning. Maybe just a follow-up on that last one. I guess, given the land banks that you have and that investment opportunity that you have, what keeps you from moving forward more quickly? Is it just things take time to assemble? Or is there anything else that is keeping you from moving more quickly?

Peter E. Baccile -- President And Chief Executive Officer

Well, every single project has a story and a time line, and it's really just working through that. We have -- entitlement process takes a long time. We do face as everyone else does, potential delays with commodity inputs. As you know, there are shortages on steel and other commodity inputs. So that influences the timing. You know we have a speculative development on leasing cap. We have to manage that. We want to make sure that we can to lease these new developments in a timely way.

Building is great, but if you don't lease the buildings, that's not good. And so far, as you've seen, we're way ahead of schedule or ahead of pro forma on the lease-up of many of these projects where they're being leased at or near completion and in some cases before we even go vertical. So that -- the market is very, very strong, where we own these great sites and we're going to continue to roll them out as they're ready to go.

Caitlin Burrows -- Goldman Sachs -- Analyst

Got it, OK. And then, maybe if you could just talk a little bit on what types of tenants you're seeing the most interest from and how deep that is? And if there's any visibility to how long you think that deep demand can continue for then supporting those leasing spreads that you were talking about earlier?

Peter E. Baccile -- President And Chief Executive Officer

Peter and Jojo, you want to add some color there?

Peter Schultz -- Executive Vice President

Sure. Hey, Caitlin, so demand is very good across markets and space sizes. The most active industries would include transportation and logistics companies, e-commerce, food and beverage, consumer products, some apparel, some homebuilding, home improvement. It continues to be very, very good. Tenants need space, and we continue to see a lot of activity across the portfolio. Jojo?

Johannson Yap -- Chief Investment Officer

Nothing really major to add, but existing tenants have not necessarily move that or just reconfiguring supply chain, because their online businesses continue to increase. So, they just need to add more space.

Peter Schultz -- Executive Vice President

Hey, Caitlin, it's Peter again. We're not seeing any slowdown to your question of demand at all.

Caitlin Burrows -- Goldman Sachs -- Analyst

Got it. Okay, great. Thank you.

Operator

[Operator Instructions] Our next question is from Michael Carroll from RBC Capital Markets. Your line is open.

Michael Carroll -- RBC Capital Markets -- Analyst

Yeah. Thanks. Can you guys provide some color on, I guess, current market rents? And how has that changed, I guess, over the past three to six months? And maybe highlight what type of rents that you're able to achieve on the $1.2 million spec development leasing this quarter versus underwriting? If you can provide details on that, would be great.

Peter E. Baccile -- President And Chief Executive Officer

You guys want to talk about market rent?

Johannson Yap -- Chief Investment Officer

Sure. Sure. For the first half of the year, market rent accelerated at one of the highest paces over the three-to-five-year period. I would say, the range would be 5% to 15%. It's hard to pick a number because it's different to market-by-market. But toward the higher range would be West Coast, and immediately behind that would be East Coastal markets and then everything in between in terms of rent growth. So it's been very, very robust. The thing is that what's happened in the market for the first half of the year is that supply did not meet the demand. And that's why there is a squeeze.

Peter Schultz -- Executive Vice President

And Mike, it's Peter. In terms of underwriting in general, all of the projects have leased earlier at higher rents at lower cost. As we've talked about, we've had a couple that took a little bit longer. But in general, we beat our underwriting across the board.

Michael Carroll -- RBC Capital Markets -- Analyst

Great. And then, can you update us on like maybe the development margins that you've achieved, I guess, on the developments that were stabilized in the -- I guess, the end of 2020? And then, maybe, I guess, I don't know if you provide these numbers yet, but on the developments that are in process right now that are 100% leased. I guess, how are those trending or where those at right now?

Johannson Yap -- Chief Investment Officer

Sure. So like Peter said -- Peter Baccile said that, out of the $605 million of development under construction at the end of the quarter plus the newly launched developments, our margin there is roughly 50%. And so, if you look at the recently announced, they're closer to the low 40s, still significantly above our targeted margins. So in terms of trending, I would say that overall, first half of -- first half of this year compared to first half of last year, the margins have compressed a bit, and here's the reason why, number one, land costs. Land prices have gone up and construction costs have gone up.

But the impact of that was much overweighed -- basically overcompensated by rental rate increases across markets and cap rate compression. So you have some margin compression a little bit. But that's primarily overweighed by the rental rate increases and cap rate compression. Does that answer your question?

Michael Carroll -- RBC Capital Markets -- Analyst

It does. It's perfect. Thanks.

Operator

And our next question is from Dave Rodgers from Baird. Your line is open.

Dave Rodgers -- Baird -- Analyst

Yeah. Good morning everybody. Just wanted to ask about size ranges in terms of where rent growth is at. If you mentioned it, I missed it. And I apologize I can go back. But can you talk about maybe some broad size ranges and how rent performance has been or trended even since the beginning of the year?

Christopher Schneider -- Senior Vice Presidnt of Operations and Chief Information Officer

Yeah, Dave, this is Chris. As far as from a size perspective, it's been pretty broad-based across all our size ranges. We're seeing healthy increases, double-digit plus increase across all our size ranges.

Dave Rodgers -- Baird -- Analyst

Okay. That's helpful.

Peter E. Baccile -- President And Chief Executive Officer

Yes. I think the slight difference in the last quarter. I don't know if you asked this question or somebody else did. I think last quarter we would have said, rents are growing a little bit faster in the smaller spaces. That's pretty much leveled out now and the larger spaces are growing pretty quickly as well.

Dave Rodgers -- Baird -- Analyst

It's pretty much back to clarity. Okay. That helps. And then has that changed what you're seeing in terms of maybe cap rate compression either between sizes or what we've seen, I guess, year-to-date from a market-by-market perspective? I think there's been some greater compression either in Bs and center of the country assets. It sounds like maybe would that also be starting to hit some parity, do you think? Or are you still seeing some differences in performance on cap rates?

Johannson Yap -- Chief Investment Officer

In terms of -- Dave, hi, it's Jojo. The terms of capex compression is across the board. The investors from -- for all sizes of real estate increase, you have the large portfolio buyers and the one-offs. They're very, very fierce. There's so much capital across the broad spectrum of sizes and the capital also is, across either, acquisition, lease, redevelopment, or development opportunities. There's basically competition on every part on size of the market today in industrial.

Peter E. Baccile -- President And Chief Executive Officer

I'd say cap rates have probably come in based on depending on the market, primary versus secondary kind of 25 basis points to 50 basis points.

Johannson Yap -- Chief Investment Officer

Anything above. Yes.

Dave Rodgers -- Baird -- Analyst

Okay. Yes. Thanks for that color. Peter Baccile, I think you mentioned the comment of development being larger going forward, sizing up with the company, maybe we'd argue on this number. But one thing you haven't really sized up is the disposition program, I think relative to the size of the company, as you accelerate your development this year, and it sounds like into next year and continue to have success. I mean, should we start to think about an increased level of asset sales, repositioning even more aggressively than you have been in funding development that way? Or do we think about it more from an equity perspective?

Peter E. Baccile -- President And Chief Executive Officer

I think the timing of sales and the volume of sales, there are a lot of different inputs. One is certainly the position of the particular assets that we're focused on, whether they're fully leased. We're looking to obviously maximize value on those assets. The volumes, I think, going forward, are going to be closer to that $100 million to $150 million range than maybe a few years ago when we were selling $225 million, $240 million.

But that can change. Sometimes we get some unsolicited offers that we can't refuse on assets that maybe we didn't have at the top of our list to dispose of, in which case we'll take that opportunity to dispose of those assets. So yes, we're not going to probably move up the disposition volume like we are. The development pipeline is really the answer to your question.

Dave Rodgers -- Baird -- Analyst

Thanks. I appreciate that. Scott, one for you on bad debt. Can you tell us what that was in the quarter and the impact? I think you said it did have a positive impact on same-store and that's been the case, I guess, for kind of many years now. But can you give us an update on that?

Scott Musil -- Chief Financial Officer

Dave, it was effectively zero for the second quarter, which means for the first six months of this year at zero bad debt expense. So credit metrics are doing fabulously and that added about 17 basis points to our same store, which is one of the reasons why we increased our guidance. So very good showing, very low bad debt.

Dave Rodgers -- Baird -- Analyst

All right. Thank you for that. Last one, I'm just going to go back to Pier 1. Is that a long-term hold asset for you guys if you get it leased up? I guess going back to Craig's very first question is I mean does it have the parking, the truck courts, the height, the column spacing that you want in a building long term?

Peter Schultz -- Executive Vice President

So we really like that. It's Peter Schultz, Dave. We really like that submarket. As we've talked about in prior calls, high barriers, supply constrained. And we look at all of our assets as we say, asset management is an ongoing basis. So we'll continue to evaluate that. But we like that submarket. The assets are very functional. There's this one and the one next to it, which is a little bit smaller, certainly meet the market and compete favorably.

Dave Rodgers -- Baird -- Analyst

Okay. Thanks, everyone.

Operator

And our next question is from Vince Tibone from Green Street. Your line is open.

Vince Tibone -- Green Street -- Analyst

Hi. Good morning. I had a follow-up on kind of your disposition commentary. I'm just curious, given the strength of the transaction market, why not be a little bit more active on property sales, not because you necessarily need the funds, but more to expedite portfolio goals, about going more coastal, I mean less flex that you laid out at the last Investor Day?

Peter E. Baccile -- President And Chief Executive Officer

Yes. So we certainly think about that a lot. It's a good question. The nature of the buyers for what we're selling are typically focused on one-off deals, maybe they buy a couple at a time. Users buy about 30% of these assets that we're selling. You have the 1031 buyer who is active in these assets. And then you've got the local regional high net worth family offices who are also actively looking at the assets that we're selling.

So they don't really lend themselves to big portfolios and the way that we can maximize the present value of those assets is to sell them the way we have. It doesn't mean that we don't consider from time to time trying to pull some together and taking a look at the market that way. So we evaluate all the potential options. And so far, the way we've been doing it has really been the best way to maximize value.

Vince Tibone -- Green Street -- Analyst

So I mean is it possible to increase volumes in this kind of the way you're doing it? Or you kind of this $100 million to $150 million range is really the -- I don't know, just maybe from a human capital perspective, all we're able to dispose of doing it one at a time?

Peter E. Baccile -- President And Chief Executive Officer

No. I mean we have the resources internally to handle a bigger portfolio sale. And if you've seen in the last five years, we've sold to $200 million, $230 million in a crack. So that's not an issue. We're just, again, trying to maximize value and pace it out to do so.

Vince Tibone -- Green Street -- Analyst

Got it. That's helpful color. That's all I have. Thank you.

Peter E. Baccile -- President And Chief Executive Officer

And the other thing I'd say is that as we have done that and been patient with those sales, the pricing has gotten better and better and better over time and the leasing status in those assets has gotten better over time. Next question?

Operator

[Operator Instructions] Our next question is from Mike Mueller from JPMorgan. Your line is open.

Mike Mueller -- JPMorgan -- Analyst

Yes, hi. I guess on the acquisition side, it seems like you occasionally do something large, but you not got a lot of 20,000 to 60,000 square foot buildings. But on the development side, you tend to see a lot of 100,000 to 500,000 square feet. I'm curious what's driving that disconnect? Is it just you're seeing better economics on acquisitions of smaller buildings or just fewer bidders?

Peter E. Baccile -- President And Chief Executive Officer

Jojo, you want to take that?

Johannson Yap -- Chief Investment Officer

Yes, yes. Mike, a couple of reasons. One is exactly you're -- when you go in a little bit smaller size, you're competing to hopefully well less capitalized, less well capitalized competition, you might be dealing with less sophisticated sellers. And it's a more fertile ground to do unsolicited or off-market deals, larger and large. Large, large sellers typically are well represented and they try to do the most efficient process.

And therefore, there's no value, almost no value to be generated from those kind of acquisitions. So yes. So -- and then also, if you notice, we're always trying to increase our infill portfolio, so that infill portfolio is a very good strategy. And when you go infill, typically, the sizes are going to get smaller.

And if you look at a number of our acquisitions, we do a lot of bolt-ons. What do we mean by that? For example, this Denver portfolio, it's in Northeast. It's a neighboring property to our bigger development. So it's easy for us to get a small profitable deal there and the same thing with our recent acquisition in Orlando. So that's close to the properties that we already have.

Mike Mueller -- JPMorgan -- Analyst

Got it. That makes sense. That was all I had. Thanks.

Operator

And I am showing no further questions at this time. I will now turn the call back over to Mr. Peter Baccile for closing remarks.

Peter E. Baccile -- President And Chief Executive Officer

Thank you very much, and thanks to everyone for participating on our call today. As always, please feel free to reach out to me, Scott or Art with any follow-up questions, and we look forward to connecting with many of you in the near future. Be well.

Operator

[Operator Closing Remarks]

Duration: 49 minutes

Call participants:

Arthur Harmon -- Vice President-Investor Relations And Marketing

Peter E. Baccile -- President And Chief Executive Officer

Scott Musil -- Chief Financial Officer

Peter Schultz -- Executive Vice President

Johannson Yap -- Chief Investment Officer

Christopher Schneider -- Senior Vice Presidnt of Operations and Chief Information Officer

Craig Mailman -- KeyBanc Capital Markets -- Analyst

Ki Bin Kim -- Truist -- Analyst

Rob Stevenson -- Janney -- Analyst

Caitlin Burrows -- Goldman Sachs -- Analyst

Michael Carroll -- RBC Capital Markets -- Analyst

Dave Rodgers -- Baird -- Analyst

Vince Tibone -- Green Street -- Analyst

Mike Mueller -- JPMorgan -- Analyst

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