Q1 2021 Rexford Industrial Realty Inc Earnings Call
[music].
Greetings and welcome to Rexford Industrial Realty first quarter 2021 earnings call.
At this time all participants are in a listen only mode.
Question and answer session will follow the formal presentation.
And once you require operator <expletive>istance during the conference. Please press star zero on your telephone keypad.
And as a reminder, this conference is being recorded.
It is now my pleasure to introduce your host Kosta Carmagnole. This senior Vice President of corporate Finance and Investor Relations. Thank you you may begin.
Thank you for joining Rexford Industrial's first quarter 'twenty 'twenty One earnings conference call. In addition to the press release distributed yesterday after market close we posted a supplemental package and the Investor Relations section of our website Www Dot Rexford industrial Dot com.
Joining today's call are Rexford Industrial's co chief Executive officers, Michael Frankel, and Howard Schwimmer, along with Chief Financial Officer, Laura Clark and General Counsel, David Lanzer before we begin our prepared remarks, I would like to remind everyone on today's call management's remarks and answers to your questions contain forward looking.
Statements as defined in the private Securities Litigation Reform Act of 1995 forward looking statements address matters that are subject to risks and uncertainties that may cause actual results to differ from those discussed today for more information about these risk factors. We encourage you to review our 10-K and other SEC filings.
Industrial <expletive>umes no obligation to update any forward looking statement and the future and.
Additionally, certain financial information presented on this call represents non-GAAP financial measures our earnings release, and supplemental package present, GAAP reconciliations and and explanation of why such non-GAAP financial measures are useful to investors with that it is my pleasure to hand, the call over to Michael.
Thank you and welcome to Rexford Industrial's first quarter 2021 earnings call. We hope you and your families are well.
Today I'll begin with a brief overview Howard will then cover our transaction activity and Laura will discuss our financial results.
And then open the call for your questions.
With regard to the first quarter, we are pleased with our exceptional results for them and operational perspective, a robust 2 million square feet of leasing drove 98, 3% occupancy and our stabilized portfolio.
Releasing spreads continue at record levels, averaging 33% cash and 47% on a GAAP basis.
And our extraordinary internal growth coupled with our strong investment volume resulted in year over year core episode growth of 29 per cent and $12 one per se on a per share basis.
As we look forward infill southern California appears positioned to outperform.
Do you see it like economists project, California, and will grow faster than the rest of the United States driven by a diverse range of growing business sectors combined with lifting of some of the nation's most constraining pandemic restrictions.
Moreover, e-commerce continues to surge representing more than one dollar for every $5 Smith and retail purchases.
First quarter port volumes exceeded pre pandemic levels with imports growing 25 per cent compared with the first quarter of 2019 Mauro.
Moreover, with unprecedented tenant demand rexford is the last mile and portfolio is positioned to outperform within our markets due to our focus on the best locations delivered with superior functionality.
Within our infill markets, a dearth of developable land and high barriers constrained new construction, resulting and essentially no ability to introduce any material volume of net new supply.
In fact, our infill markets continue to lose supply on average year over year.
Consequently, CBRE projects greater Los Angeles rental rates to grow at a rate that is two and a half times greater than the remaining major markets outside of southern California into the next for years.
With an incurable supply demand imbalance, the infill southern California, and tenant base continues to prove itself as the strongest most resilient and highest demand and tenant base and the nation.
Looking forward the company is positioned for favorable internal and external growth.
Overall, we project approximately 18% of embedded NOI growth equal to $54 million within our in place portfolio, <expletive>uming no further acquisitions over the next 18 to 24 months rigor.
Regarding external growth the company has perhaps never been better positioned as our research and local relationship driven and origination methods and enable us to harvest a proprietary pipeline of investment opportunities.
We are well positioned to grow accretively significantly beyond our current 1.7% market share within infill Southern California.
The nation's most highly valued industrial market.
Regarding our Rexford team. This past March marked one year since we began working remotely.
We are truly humbled by the extraordinary manner with which our rexford team rose to the task.
Spite, many hardships to perform at the highest levels within the entire real estate industry.
I'd like to acknowledge and thank the rexford team for their tremendous dedication entrepreneurial spirit and market, leading performance and with that I'm very pleased to turn the call over to Howard.
Thank you Michael and thank you everyone for joining us today.
And as fundamentals and infill southern California continued with unprecedented strength and the first quarter despite impacts <expletive>ociated with the pandemic.
They can see tightened and demand accelerated is a diverse group of growing industries and E. Commerce companies absorbed warehouse space at a torrid pace over the past 12 months. According to CBRE, our infill markets experienced strong rental rate growth with asking rents up for 1.9% on a weighted average basis.
For further perspective based on our internal portfolio and all the analytics, we believe market rents increased by an estimated 9.3% over the prior year for comparable product within our target infill Southern California markets.
Our target markets, which exclude the inland Empire East ended the first quarter at one 9% vacancy by comparison, our same property portfolio ended the first quarter with 98, 6% occupancy outperforming the market by 50 basis points, a testament to the high quality of the Rexford portfolio.
Our strong tenant retention and elevated new leasing volume volume.
Of our top 20 largest expiring leases this year approximately 80% of spaces, representing one 4 million square feet have already renewed been re tenanted or are in lease negotiations and the remaining 675000 square feet of top 20 spaces are headed for value add repositioning.
Inning, and future and lease up.
Our recent leasing example, and our San Gabriel Valley portfolio demonstrates the strength of our market.
During the quarter, a tenant occupying about 150000 square feet was dismayed with a higher renewal rate and spent months searching for alternative less expensive space.
Unable to find any similar functional space, the tenant and finally renewed with us but at a rent that was a full 21% higher than our original proposal had they not weighted.
And the and we generated a cash releasing spread of 95%.
This is representative of the unprecedented pace of rent growth within our infill markets and stuff.
Said another record for all time high rent for the sub market.
In addition, we obtained 3.25% contractual annual rent increases through the term of the lease which exceeds the 3% historical standard for our markets.
As a general note, we are increasingly pushing our annual rent bumps above 3% and in some cases as high as 4%.
Year to date, we've completed 11 acquisitions, which included 807000 square feet of buildings, including $26 nine acres of low coverage outdoor storage sites and land for future redevelopment for.
For an aggregate purchase price of $191 million.
82 per cent of these transactions were off market or lightly marketed enabled through our proprietary research driven sourcing methods. These investments are projected to generate and aggregate five 2% for greater stabilized yield on total investment and provide strong value add cash flow growth over time initially contributing.
[noise] about two cents of S F O per share through the remainder of 2021.
And growing to about nine cents per share after repositioning or redevelopment.
We currently have over $450 million of acquisitions under LOI or contract. These.
These acquisitions are subject to customary due diligence with no guarantee of closing we will keep you apprised as transactions are consummated.
And on the disposition front, we sold two properties totaling $21 million and the San Fernando Valley and inland Empire East Submarkets. The proceeds were used to tax efficiently fun and <unk>.
Portion of our acquisition activity moving forward, we expect to continue to sell <expletive>ets opportunistically to unlock value and recycle capital.
Turning to repositioning and redevelopment activities, we have over 3 million square feet of current and planned value add projects throughout our portfolio.
Of these 1.3 million square feet of current projects and repositioning redevelopment or lease up which are detailed in our supplemental are estimated to deliver and aggregate return on total investment of 6%.
These projects are expected to deliver a substantial value creation as our stabilized yield represents more than a 200 basis point premium compared to the sub 4% market cap rates that they would be valued at in today's market and.
With that I'm pleased to now turn the call over to Laura.
Thank you Howard I'll begin today with details around our operating and financial results.
And the first quarter stabilized same property NOI came in ahead of her for cats with six 8% growth on a GAAP basis, and eight 2% on a cash basis, driven by a 40 basis point pick up and average occupancy and strong leasing spreads.
And collections were over 98 per cent of contractual deadlines and the first quarter essentially at pre pandemic levels.
And it depends and it began we have provided for a relatively nominal amount of rent deferrals totaling $4 $8 million, representing about one five per cent of ADR and we have collected over 96 per cent of deferrals to date.
We currently have only $535000 remaining to collect and 2021.
In addition, bad debt came in better than expected at 50 basis points and revenue this quarter and lower bad debt levels are reflective of the health of our tenant base as well as the proactive efforts of the Rexford team.
As we discussed last quarter, our team successfully recapturing below market rent spaces and re tenant at substantially higher rates.
The combination of strong results generated core <unk> per share growth, although they're 12 per cent or 37 cents per share and the first quarter.
Turning now to our balance sheet and financing activity, we are maintaining our best in cl<expletive> low leveraged balance sheet, which allows us to be opportunistic during all phases of the capital cycle.
At quarter, and net debt to EBITDA with for time.
And at the low end of our target range of four to four and a half time with net debt to enterprise value at 13%.
During the quarter, we raised $197 million of equity for the ATM program at an average price of $50.10 per share.
$77 million of the total with issued on a forward basis, what settlement to occur within the next 12 months proceeds from next quarter's ATM activity for he used to fund the first quarter acquisition as well and they've identified to close later this year.
As of March 31st we had approximately $124 million of cash on hand, and we remain in a strong liquidity position with no debt maturities until 2020 three for full availability on our $500 million credit facility and approximately $524 million available and.
For our ATM program.
Turning to guidance, we are increasing our full year projected core <unk> per share range to $1 41 to $1 44.
Our revised midpoint represents 8% year over year growth.
As a reminder, and consistent with our prior practice our guidance does not include acquisition disposition or balance sheet activities that have not yet closed to date.
Other notable components of guidance include.
And increase to our stabilized same property NOI growth and 75 basis points at the midpoint to $3 seven and five $4 75 per cent on a GAAP basis, and $6 75 to 7.7 and 5% on a cash basis, driven by our strong first quarter performance.
Updated guidance includes the <expletive>umption of bad debt expense as a percentage of revenue of 110 basis points for the full year, a reduction of 15 basis points from our previous CEO.
We are increasing and our expectation for average occupancy and the stabilized same property pool to a range between 97 to 5% to 97.75% up 25 basis points at the midpoint driven by a robust first quarter leasing activity.
We included a guidance roll forward and our supplemental package that further details the components of our 2021 core <unk> per share guidance.
Before turning the call over for your questions. We are excited to announce that we will be publishing our annual ESG report at the end of the month.
At Rexford, and we are committed to optimizing positive impact for the environment, our communities, our tenants employees and shareholders.
This completes our prepared remarks, we now welcome your questions.
Thank you we will now be conducting a question and answer session. If you'd like to ask a question you May press star one on your telephone keypad.
Confirmation tone will indicate your line is and the question queue. You May Press Star two if you would like to remove your question from the Q4 and participants using speaker equipment and it may be necessary to pick up your handset before pressing the star key.
Our first question comes from the line of Emmanuel Korchman with Citi. Please proceed with your question.
Hey, everyone.
Good afternoon, and good morning.
Maybe just for one for Howard or Michael you've had a little bit of success with doing some unit deals to get transactions unlocked.
Amongst the pipeline and you talked about are there unit deals included in that or are those all can be sort of a straight cash sales.
Hi, Neely.
Howard and I supposed to hear your voice.
Yeah, the $450 million pipeline.
And there are some discussions within that but its funny a lot of times, they just turned into cash deals.
So you know it's hard.
Hard to comment really specifics right now and it but.
Free transaction pipeline is has been growing you know theres a lot we consummated last year and you know, we're we're optimistic of being able to talk more about the future of free transactions as well.
And then you guys talked about <unk> 18 per cent embedded NOI growth.
And thats exclusive of sort of just rental rate mark to market write that that's just if all other developments come and the way that you expect an annualized and sort of the growth from from closed acquisitions that gets you to the 18 per cent right.
And Manny it's Michael Great to hear from you and thanks for joining today and so that yes. It includes more than just the mark to market. So it includes also the repositioning.
Contributing about $30 million to $33 million of the 54 million and fact leasing spreads are only contributing about 17 $5 million of that $54 million.
Great. Thank you.
Our next question comes from the line of Blaine Heck with Wells Fargo. Please proceed with your question.
Great. Thanks, Good morning up there. So we continue to hear about the wall of capital chasing industrial product can you just talk a little bit more about the overall competitive environment and and southern California and your markets in particular and you know have you seen any change in and interest is cap rates have compressed to two.
Historic lows here.
Hi, Blaine it's Howard.
So I guess looking back over many cycles, we've always had quite a bit of capital are interested and penetrating into the southern California marketplace.
It's it's difficult because theres not a lot of transactions that are out there on the on and actively marketed basis. So people do have the difficulty penetrating so at this point and the cycle is no different than the past some of the names have changed some of the different other capital sources, obviously or shifting over and you know really it's really test.
And that to our unique access to the market, where we focus on and off market and and lightly marketed transactions as.
And as well as occasionally buy and Bang on market product you know less last quarter.
I think you know over and over 80% of our transactions were off market or lightly marketed and so it's interesting you know most most of that capital out there really never even had a chance to compete.
And with what we're buying.
So you know really nothing new and its no secret and southern California, as you know the best industrial market and in the country. So there's plenty of capital that's always look to place in our markets.
And Blayne. This is Michael I'll, just add a little more perspective.
We have seen a rotation from certain investors that might've targeted other <expletive>et cl<expletive>es, you know retail et cetera.
Increasingly you know go out and come into approach for industrial and so there's certainly more competition as Howard indicated, but what's really interesting about our business is if you look at the trend line for Rexford and.
For the prior eight nine years, our percentage of transactions through off market and lightly marketed transactions has actually increased despite there being more competition and the market.
And so for.
Five years six years ago, we were probably around hovering around 70% off market lightly marketed deals and today this year, we're over 80%.
Last year, we were close to 80%.
Despite increased volume of activity as well at Rexford.
So I think that that really tells the story. We are just digging deeper into the markets were better and what we do we're leveraging better technology. Our team has further developed.
And we're just penetrating deeper and deeper into into the marketplace.
Yeah, that's really helpful and I guess just related to that and and given how cap rates have continued to compress you know you guys. Certainly have your pick of of capital sources, but you know are you thinking anymore about opportunistic dispositions would you guys consider selling a small portfolio of <expletive>ets given whereabout.
And he wishes.
Well, we're always looking through the portfolio.
Most of our sales tend to be more opportunistic.
And no if you look at the overall portfolio the mark to market. It was about 11% in terms of where we sit below market and and lease rate. So there's always plenty of upside in our <expletive>ets.
And yes, it's funny, we get and we look back at a couple of things even today that we've been considering selling you know, even just a year ago and.
And the rent growth that we're experiencing we experienced and those <expletive>ets is astounding and so that value creation is very strong. So we really tend to really more focused and I have more focus on just the opportunistic sales that make they tend to outperform.
From a cap rate type sale or maybe another reason or two you know, sometimes some things a little bit more management intensive or we don't see our rents.
Rents growing as quickly and it's something we might consider salt Lake.
And maybe I'll, just and again, it's Michael to that you know, we're getting to a point, where rexford scale and the marketplace and supporting different levels of opportunity for both rexford and our customers and I'll give an example of that for instance, we recently.
I might have mentioned on prior call that we established a new customer solutions function at Rexford, and we're able to look at the market and offer our customers and prospective tenants and much more strategic opportunity throughout southern California, and so today, we're talking to tenants not just about one space.
And then maybe about their needs for 'twenty spaces or 30 spaces throughout the region.
And also as a company you know the scale is really beneficial in terms of achieving greater operating leverage within that within the portfolio. So I think youre going to start to see for exar as operating margins and you know.
Really start to accelerate over the next call. It 12 to 36 months.
As the you know the platform is fully built out and youre not going to see a lot of the heavy expenditure incrementally and the platform.
And as we move forward. So I think that's a really exciting time for the company and by the way Howard mentioned, the Mark to market, but if you look at expiring leases. This due to the end of the year the mark to market is around 20% and that's typically what he found that given the rate of market rent growth that as we approach next year.
That mark to market will probably be higher than and then the 11 per cent that we might be projecting out and is and the portfolio as a whole as well I think currently we're looking at about 14% for next year.
So a lot of a lot of regret for folks.
Yeah. Thanks, guys.
Yeah.
Okay.
Our next question comes from the line of Jamie Feldman with Bank of America Merrill Lynch. Please proceed with your question.
Great. Thank you.
I was just hoping to get a little bit more color on how the type of tenants leasing space has changed even into the first quarter I <expletive>ume theres been kind of a.
Change and the types of tenants based on the fact that we're kind of coming off the bottom.
And then also if you can just address the bad debt expense and.
Just kind of any lingering downside to that or kind of how that how your approach has changed there as well.
Jamie I just wanted to understand the first part of your question change and tenant demand maybe.
Maybe I missed the question and by by business type are you, saying what is the nature of that demand.
And just the types of industries and the types of businesses that are leasing space today or have become more active over the last three or four or five months.
Things have started yet and then maybe I'll start from the first part and then Lori you can touch on bad debt.
And and and I heard you mentioned also you know that we're coming off the bottom and what's really interesting and infill southern California was that starting in June of last year, It's still early stages and the pandemic leasing activity really started to accelerate very dramatically. After a very brief pause and say March April may.
And so we we really started coming off what if there was a bottom much earlier in the cycle and infill southern California, and and we've and.
And and tenant demand as Howard described has really continued to accelerate beyond levels that we've ever seen and our and our 30 40 year careers here.
And really and truly driven by pretty broad range of industries, and everything from food consumer products, and Staples health care and health care products.
And pharmaceuticals, as you'd expect but also you know aerospace and space technology, and mobility and electric vehicles and all of these sectors, probably there they represent ecosystem.
It's not just electric vehicles, but it's the suppliers have all the components the batteries et cetera, as the service centers that supply those and those sectors for instance, and so it's been an extraordinarily broad based.
Set of demand drivers and from an industry perspective, and then you have e-commerce of course layered in and which we all we all know what's happening with e-commerce, but I think you know I.
I think based on what we're seeing and the market. There's reason to believe that we're still in the early stages of the impact from e-commerce, as it's going to impact our markets and a very positive way and just a couple of indicative. Examples you know people talk a lot about Walmart Amazon and and how Theyre penetrating these infill markets, but they're using the space is differently.
You know they bought a Uber like company not too long ago, and they're using these these vehicles and vans to distribute locally that's much more efficient and trucks and now you've seen Walmart do the same and now there was an announcement last week that target is doing the same and they're establishing these sortation centers that are gonna be and our warehouses. You know are very local and close to <unk>.
And points of distribution and so you're really seeing the initial stages of a wave of impacts.
The day e-commerce, driven demand for our products and and it also is impacting the way they use it the way that these properties are configured and frankly, it plays exceedingly well into what rexford delivers to the market, so where we couldnt be better positioned.
Yeah, and and I'll answer and one one other comment around and demand from different industries and we also are starting to see demand come back and some other sectors that have been slower to reopen and California and entertainment is one of those actually this quarter and we signed up and he said the tenant that's going to use.
Faith for studio production.
And theyre going to invest between five and 10 million to.
Do you want to convert this day. So it's good to see some of these industry that that had been shut down and that had been operating and net limited capacity and starting to come back to market and seeing demand from the other sectors as well.
In terms of your question around bad debt and and.
And I'll speak a little bit about the drivers for Q1, and then talk about full year expectation, so bad debt for the quarter as I mentioned and they call it 50 basis points and revenue.
The decline and bad debt this quarter as compared to the full year of 'twenty, and 'twenty, which was around 150 basis points.
The decline this quarter was primarily related to an anticipated payments and by a handful of our watchlist tenants.
And this resulted and cash recoveries or positive impact our bad debt for the quarter. So.
You know excluding these unforeseen cash recoveries, our bad debt expense would've been about 125 basis points, which is and in line with our full year, which was in line with our prior full year guidance. So in terms of our revised bad debt forecast of 110 basis points for the full year, it's really capturing that Q1 pick up and bad debt are better than <unk>.
The bad debt and Q1.
And a little color around those cash collections and they really came from tenants that are in categories that have been slower to reopen and entertainment being line travel related industries are being another and.
And where we're certainly optimistic that these tenants are going to be able to fulfill their rent obligations and once they are operating.
Its challenging to forecast the ability of the these tenants to pay rent consistently and the near term.
Especially given the fact that we're still moratoriums are still in place and they get tenants that unilateral right to their for rent. So.
And there's more claims are set to left and at the end of June but as we all know they've been pushed back several times and so with three quarters remaining this moratoriums and place, where we're being cautious and prudent.
With our bad debt forecast as we look as we look through the next three quarters.
Okay. Thank you that's very helpful.
And then going back to the cap rate discussion can you maybe talk about what you think cap rates actually are in across your different Submarkets and then.
Even more importantly, what what <expletive>umptions do you think people are underwriting to get to those numbers.
Yeah, No that's a great question so.
We've obviously seen some cap rate compression on marketed transactions.
Especially when you have quality <expletive>ets with our tenants on longer term leases.
And today, you know those those transactions not unusual to see them some 4%.
And I think when you say what are some of the underwriting <expletive>umptions.
You know rexford underwrite cap rate expansion and and.
Our acquisition. So we don't we don't <expletive>ume that we're going to exit and.
Anywhere close to where cap rates are and the marketplace today, but what we do here is that there's a lot of allocators capital allocators out there that underwrite.
Similar cap rates at and exit.
And so really you know really having strong expectations of continued performance and in the marketplace.
And of course, as you know, Jamie where we're really not cap rate buyers were really more focused on where we're able to stabilize <expletive>ets.
You know over over the.
Near term short term periods of time and.
We've also seen the results of that in terms of our repositioning pipeline with Mike and I mentioned on the prepared remarked remarks are those <expletive>ets that were stabilizing over the near term are looking about a 6% stabilized yield on total costs, which as you know some credit substantial value compared to where these <expletive>ets would trade today and the marketplace.
And what do you think people are <expletive>uming for NOI growth.
For rent growth and I think I think if you talk to brokers out there.
You know, it's higher single digit growth over the first.
You're here something not too different maybe into next year, and then dropping down.
And to the into you know maybe a bit above 3% for the next year.
You're too where we're not underwriting that aggressive rent growth and.
And our acquisitions, we still would rather be pleasantly surprised and as opposed to pricing for absolute perfection and and how we buy it or a problem.
Okay, great. Thank you.
Yeah.
Our next question comes from the line of Conor So risky with.
Sternberg. Please proceed with your question.
Hey, everyone. Good morning over there thanks for having me on the call.
I'm thinking about what other peers calls from earlier this week on the development repositioning pipeline and I'm wondering if you're expecting any disruption here from rising cost of inputs steel specifically and if you could add some color on how you're approaching procurement and the current environment.
Sure I kind of nice to hear from you.
Well, what we're seeing out there is really some disruption on larger projects.
You know there are there are shortages and steel and some of them some of the other commodities used and constructing buildings.
But what's interesting is that you know and the middle of this pandemic. We saw construction costs actually go down we actually had some rebidding of some other projects that we were doing and locked in some real favorable pricing and so what we are really looking at it internally is we're seeing construction costs coming up off those.
Lower numbers, so not too far different than my where we might've been projecting maybe about a year ago.
But that said we are we are projecting.
Projecting from some higher cost increases and and our underwriting today just to be safe.
We view.
You know some of this disruption and something maybe over the next six six months to a year.
Interestingly, though on our smaller projects that are less than a million dollars, we're not seeing really any significant pricing fluctuations and we attribute that perhaps too.
A lot of other contractors coming into the space, having shifted out of other product categories. So theyre being more competitive in order to win jobs from us.
So hopefully that helps you.
And that's very helpful are you seeing any delays and schedules or not yet.
Yeah, no not necessarily I mean, a little bit we've adjusted on the repositioning page some of the complete projected completion dates.
Cause of some of those projected delays, but at this point nothing nothing dramatic that I could point to.
Okay Fair enough and then one last one for me apologies if I missed this earlier, but on the remaining lease roll for the year I think it's 11% of ABR is there any sense of timing whether this is back and waiting are spread throughout the next few quarters.
Yeah, Conor I can take that about 43 per cent of our lease expirations are in the fourth quarter.
And that's certainly impacting our occupancy <expletive>umptions and as we have less visibility and to those and.
And today's there's explorations and so as we get as we move through the year and we get more visibility, we'll provide updates around our from our.
Our <expletive>umptions around and lease up and timing.
And so that's good to hear.
Okay. Thanks, that's all for me.
Okay.
Our next question comes from the line of Dave Rodgers with Robert W. Baird. Please proceed with your question.
Yes, good morning out there Howard and Michael I heard in your prepared comments I think you said, 9% market rent growth for your targeted Submarkets that I guess I was wondering if you could book and that a little bit by geography for you guys or maybe at the Submarkets that you think are performing well and arent and and how they compare to that overall average and and I guess with the rent growth that you see.
And is there any push it and the market for longer term leases I guess, mostly by the tenants I would <expletive>ume.
No.
And I'll give you a little color on some of that rent growth that we're seeing did you look and from accounting standpoint.
They are the largest rent growth that we saw was in the September do you know area, which covers the inland Empire west internally that looked like it was oh and the mid teens, followed by Orange County had a very strong rent growth.
In terms of.
Interestingly they sized spaces that we're seeing the rent growth, it's a it's pretty well dispersed.
I think the largest the largest rent growth we're seeing.
And Oh, Whoa, let's see as well a little over 11% and 100000 foot and greater category.
And the next strongest was just even smaller space five to 20000 foot space is a bit over 10%.
And what's what's very interesting, though David is that we've seen an acceleration and rent growth just over the last quarter.
And with within our Mark to market on the portfolio the portfolio M. L. A's are looking more like 4% growth.
From the end of Q4, two and through Q Q1.
So you know that that has every indication of continuing.
Throughout this year as well in terms of the strength of that growth.
And I'm sorry, you had one other parts of your question was what was Oh just on the lease terms the length of the lease terms any any push for tenants to get that out longer given the rent growth you're seeing.
Yeah, well this is certainly a time and the cycle for us to try and lock in some longer term leases based on.
These record setting a lease rates that we're achieving.
And as well as well.
And what lengths further comfort to for us to push those terms is the larger rent increases that we're now able to capture.
And the leases like I had mentioned earlier that we were achieving are.
Above three.
<unk> three per cent and even pushing now to for and many projects are so we don't have as much of a concern about being a bit behind and and growth and you don't want.
A longer term basis.
Also you know tenants certainly recognize Oh, we would just have a shortage of space and the markets and they're more interested and controlling space for a little bit longer period of time than they might have and the past.
But overall in terms of what you saw for the lengthening of our term a lot really can be attributed to just the average size.
Lease a.
And that we that we completed and this past quarter. It was about 50% higher than the average sized space leasing in Q4, and so when you do the math that that sort of attributes as well to be increased.
Term average time.
Great. That's helpful and maybe one follow up for Laurie, if I could and and the peso roll forward that you provided which was helpful. Thanks for doing that Laura.
Just curious on I think he bought a 160 plus million of <expletive>ets had about a two cent impact, but you sold 20 million and you had kind of a negative penny and there for them for that and anything in particular with those <expletive>ets that maybe had an outsized negative contribution again, realizing it's just a penny but was just kind of curious on the delta and those numbers.
Yeah.
I think it's I think it's more related to it and more of a function of what we've what we've acquired a year to date, which is 191 million and that includes the subsequent to quarter and acquisition.
And so as you mentioned you know, we're we're estimating that there's debt there's acquisitions will contribute two cents per share and as we discussed in our prepared remarks, and our acquisition activity today is very heavily weighted towards value add and core plus properties and with an expected yield a stabilized yield of five 2%. So.
That SSO per share contribution is expected to grow over time and growth of nine cents per share and will certainly contribute to our long term and by that NOI growth prospects.
That's helpful. Thank you.
Yeah.
As a reminder, it is star one to ask a question. Our next question comes from the line of Chris Lucas with capital One Securities. Please proceed with your question.
Hey, good morning out there.
Couple of quick ones and then a bigger picture question. So Laura I just wanted to go back to you.
And the bad debt for the first quarter was that the.
The improvement over expectations related to prior period recoveries is that specifically what it was.
And if it's related to cash collections that we received from tenants that are on the watch list. So prior reserves a.
That we read and we recently announced.
Announcer owed by those tenants.
And that is so.
And so thats cash tennant's cash basis tenants paying and the current year for the current period. That's correct. Yeah. That's correct. Okay. Okay. So okay. Great. That's helpful and then Howard I guess.
And just thinking about the.
You know at lease expiration schedule are there any major known move outs at this point.
Let's see we've handled all the predominance of our larger.
Explorations at this point and you know, we're we're sort of back to where we always went up for and it's really just blocking and tackling on.
Moderately sized spaces.
Okay. Thank you and then just taking a step back and both of them.
Where do you and Mike and Michael talked about.
The you know.
But last mile nature of your portfolio I guess I was curious as to whether you broken down your ABR exposure between those sort of tenants and our servicing the local economy. However, you want to define it of course is those that usually you know are in your portfolio and that heavy multi regional or multistate sort of reach.
You know the predominance of the predominance of our tenant base is really regionally focused.
And I think that's a function of many decades actually the evolution of the tenant base and they flow southern California, So its not unique to the rexford tenant base.
And it's not just consumer distribution, but it's also a business to business.
This is the largest economic zone and the nation.
And I have fairly substantial margin largest regional population of the nation.
And the most diverse economy and the nation. So.
And I said its own country I think it would be a yeah and one of the largest countries and the world. So its really reap more of a predominantly regional focus and and by the way by way of indication that you know we're not we're not as port driven as your big box.
Properties out of the eastern inland Empire or in Arizona, but.
It's estimated that upwards of 50% of the product imported through the two ports you know the two largest parts of the country of L. A and long beach are consumed or distributed regionally. So it just gives you a sense for the for the size of the regional economy.
And so the predominance Israeli regionally focused.
Great. Thank you that's all I had this afternoon.
Interest.
Our next question comes from the line of Mike Mueller with Jpmorgan. Please proceed with your question.
Yeah, I guess, Florida on the bad debt recovery, how significant was that and just asking because if you take the 37 cents and the quarter annualize that youre already well north of the range.
Yeah.
Yeah, absolutely that that's a really good question.
And as I mentioned, there's there's cash recoveries offset.
I'll start you know our bad debt expense. So had had we not had those cash recoveries or bad debt expense would've been closer to 125 basis points for for the line for the first quarter as a percentage of revenue and.
And in terms of you know in terms of your question around you know and realizing that 37 cents for the full year and first quarter included a few items first is the impact from that where bad debt that I just talked about.
The second and.
And I'll pick up and average occupancy and that's offset by them from nonrecurring G&A expense debt incurred in Q1 as well. So these items together equates to about one and a half cent per share. So if you use that as a run rate and if.
If you use that as a run rate you can get to the midpoint of our full year guidance.
Got it okay that makes sense.
And then I guess on the Shadow redevelopment repositioning pipeline and one 7 million square feet, that's not process and you give us a rough sense as to how soon.
That could go into process, and what and incremental investment could look like for it.
Sure.
I'll, just mention a bit about the projects and or you might want to.
And some color on some of those costs.
Yeah, we we will be starting quite a few projects before the end of the year.
And I don't I don't think at this time, we're prepared to give you any specifics around the.
And square footage of those and micro something we've talked about more off line and detail if you'd like to drill down project by project.
But now we're we're optimistic too to have some further starts and we'll update you more on the next quarterly call as we as we know more about the timing of walking in and I'll start.
But the one 7 million square feet and.
Only about 570000 square feet are really future repositioning and and.
And the rest of it you can kind of see the target completion dates for the majority of it in our supplemental page.
Yeah.
And I would add that I would add also that.
And we expect lease up of some of the current repositioning work up about one point, almost one 2 million square feet through the and.
The end of 2021.
Okay.
Yeah, Okay, one more one more other like is it on our own and they'll be for 15.
Getting paid for it we do provide.
And the projected repo cost on this repositioning and redevelopment.
And so for a pipeline if you total those together and it's about $189.
Got it okay.
And then the Q, yeah, and I'd say that just just looking over our notes to the $1 7 million square feet of future redevelopment.
The majority of that starts and completes you know within the next one to two years.
Right.
There are no further questions and the queue I'd like to hand, the call back to management for closing remarks.
Okay.
And we'd like to thank everybody for joining today I appreciate your focus and time on Rexford and we look forward to reconnecting and about three months and hope everybody stays well happy Earth day, and look forward to reconnecting soon.
Yeah.
Ladies and gentlemen, this does conclude today's teleconference. Thank you for your participation you may disconnect. Your lines at this time and have a wonderful day.
Alright.
Cut back their resumes.