Q1 2024 Rexford Industrial Realty Inc Earnings Call

Speaker Change: [music].

Marvie Lu: Thank you for standing by. My name is Marvie Lu, and I will be your conference operator today. At this time, I would like to welcome everyone to the Rexford Industrial Realty Inc. first quarter 2024 earnings call. All lines have been placed on mute to prevent any background noise.

Thank you for standing by my name is far below and I will be your conference operator today at this time I would like to welcome everyone to the Rexford Industrial Realty, Inc. First quarter 'twenty 'twenty four earnings call all lines have been placed on mute to prevent any background.

Marvie Lu: After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one again. Thank you. I would now like to turn the conference over to David Lanzer, General Counsel. You may begin.

After the Speakers' remarks, there will be a question and answer session.

If you would like to ask a question. During this time simply press star followed by the number one on your telephone keypad.

If you would like to withdraw your question Press Star one again. Thank you I would now like to turn the conference over to David Lanzer General Counsel you may begin.

David E. Lanzer: Thank you for joining Rexford Industrial's first quarter 2024 earnings conference call. In addition to the press release distributed yesterday after the market closed, we posted a supplemental package and investor presentation in the investor relations section on our website at rexfordindustrial.com.

David E. Lanzer: We thank you for joining Rexford Industrial's first quarter 2024 earnings conference call.

David E. Lanzer: Vision to the press release distributed yesterday after market close we posted a supplemental package and investor presentation in the Investor Relations section on our website at Rexford industrial Dot com.

David E. Lanzer: On today's call, management's remarks and answers to your questions may contain forward-looking statements as defined by federal securities laws. Forward-looking statements address matters that are subject to risks and uncertainties that may cause actual results to differ. For more information about these risk factors, please review our 10-K and other SEC filings. Rexford Industrial assumes no obligation to update any forward-looking statements in the future. In addition, certain financial information presented on this call represents non-GAAP financial measures.

David E. Lanzer: On today's call management's remarks, and answers to your questions may contain forward looking statements as defined by federal Securities laws forward looking statements address matters that are subject to risks and uncertainties that may cause actual results to differ for more information about these risk factors. Please review our 10-K.

David E. Lanzer: <unk> and other SEC filings pressured industrial assumes no obligation to update any forward looking statements in the future.

David E. Lanzer: Certain financial information presented on this call represents non-GAAP financial measures our earnings release, and supplemental package present, GAAP reconciliations and an explanation of why such non-GAAP financial measures are useful to investors.

David E. Lanzer: Our earnings release and supplemental package present GAAP reconciliations and an explanation of why such non-GAAP financial measures are useful to investors. Today's conference call is hosted by Rexford Industrial's Co-Chief Executive Officers, Michael Frankel and Howard Schwimmer, together with Chief Financial Officer, Laura Clark. They will make some prepared remarks, and then we will open the call for your questions. Now, I will turn the call over to Michael.

Michael: Today's conference call is hosted by Rexford Industrials co Chief Executive officers, Michael Frankel, and Howard Schwimmer, together with Chief Financial Officer, Laura Clark They will make some prepared remarks, and then we will open the call for your questions now I will turn the call over to Michael.

Michael S. Frankel: Thank you, David, and welcome, everyone, to Rexford Industrial's first quarter earnings call. I'll begin with a few remarks, followed by Howard, who will provide market and operational detail. Then Laura will provide our financial results and outlets.

Michael S. Frankel: Thank you, David and welcome everyone to Rexford Industrial's first quarter earnings call.

Michael S. Frankel: I'll begin with a few remarks, Oh, the Howard who'll provide market and operational detail then Laura will provide our financial results and outlook.

Michael S. Frankel: I'd like to begin by thanking our Rexford team for their strong results and another quarter marked by substantial value creation across the Rexford platform. On the leasing front, the team completed 3.2 million square feet of leasing activity at very favorable spreads, as we continue to monetize the substantial mark-to-market for lease rates within our in-place portfolio. And notably, we extended our largest tenant, which Howard will detail shortly. On the investment front, our team completed over $1 billion of acquisitions delivering substantial initial and longer-term accretion.

Michael S. Frankel: I'd like to begin by thanking our expert teams for your strong results and another quarter marked by substantial value creation across the rexford platform on the <unk>.

Howard Schwimmer: Leasing front the team completed $3 2 million square feet of leasing activity at very favorable spreads as we continue to monetize the substantial mark to market for lease rates within our in place portfolio.

Howard Schwimmer: And notably we extended our largest tenant which howard will detail shortly.

Howard Schwimmer: On the investment front, our team completed over $1 billion of acquisitions, delivering substantial initial and longer term accretion are.

Michael S. Frankel: Our activity included a large off-market portfolio purchase acquired from a combination of Blackstone-affiliated entities for approximately $1 billion, comprising over 3 million square feet of high-quality warehouse product focused within the Premier, Los Angeles, and Orange County submarkets, with tenant sizes averaging 43,000 square feet. The transaction is notable for the high quality of assets and significant levels of cash flow accretion contributed to our portfolio. In 2024 alone, the portfolio is expected to contribute an incremental four cents of FFO per share net of funding costs, along with an estimated 25 to 50 basis point increase in operating margin.

Howard Schwimmer: Our activity included a large off market portfolio purchase acquired from a combination of Blackstone affiliated entities for approximately $1 billion comprising.

Howard Schwimmer: Comprising over 3 million square feet of high quality warehouse product focused within Premier Los Angeles, and Orange County, Submarkets with tenant sizes, averaging 43000 square feet.

Howard Schwimmer: The transaction is notable for the high quality of assets and significant levels of cash flow accretion contributed to our portfolio in 2024 alone. The portfolio is expected to contribute an incremental <unk> <unk> per share net of funding costs, along with an estimated 25 to 50 basis point increase in operating margin.

Michael S. Frankel: Additional growth over time will be driven by some value-add improvements, as well as the 3.9% embedded average annual rent increase within the portfolio. The investment was also unique, as it was the result of an off-market collaboration between the Rexford and Blackstone teams. We work together to curate the portfolio by selecting assets to optimize the blend of quality, return on investment, and accretion to our business. The transaction is a testament to the benefits associated with working principle-to-principle to drive a superior outcome for both parties.

Howard Schwimmer: Additional growth over time will be driven by some value add improvements as well as the three 9% embedded average annual rent increases within the portfolio.

Howard Schwimmer: The investment was also unique as it was the result of an off market collaboration between the Rexford and Blackstone teams.

Howard Schwimmer: We worked together to curate the portfolio by selecting assets to optimize the blend of quality return on investment and accretion tower business. The transaction is a testament to the benefits associated with working principle to principle to drive a superior outcome for both parties.

Michael S. Frankel: The transaction is also indicative of a range of portfolios that we continue to track, which may be catalyzed from time to time by potential sellers or market circumstances. With regard to market conditions, we are seeing some current choppiness, particularly within certain submarkets and size ranges. We expect some ongoing relative volatility within our markets through the near term, principally driven by heightened uncertainty in the interest rate environment, exacerbated by the current global geopolitical unrest.

Howard Schwimmer: Transaction is also indicative of a range of portfolios that we continue to track, which may be capitalized from time to time by potential seller or market circumstances.

Howard Schwimmer: With regard to market conditions, we are seeing some current choppiness, particularly within certain submarkets and size ranges we.

Howard Schwimmer: We expect some ongoing relative volatility within our markets through the near term principally driven by heightened uncertainty and the interest rate environment exacerbated by the current global geopolitical unrest.

Michael S. Frankel: However, despite some relative market uncertainty, we believe our infill Southern California industrial tenant base will continue to prove itself by demonstrating the nation's strongest tenant and supply-demand fundamentals over time. Although, we can't predict how our market may perform in future periods.

Howard Schwimmer: However, despite some relative market uncertainty, we believe our infill southern California industrial tenant base will continue to prove itself by demonstrating the nations strongest tenant and supply demand fundamentals overtime.

Howard Schwimmer: Although we can't predict how our market may perform in the future periods. So.

Michael S. Frankel: So far, we are seeing a distinct and accelerating differentiation between the stronger relative performance of our infill SoCal portfolio, whether measured by net absorption, change in rents, or related metrics, as compared to the relative performance of larger products sized over 200,000 square feet, primarily located in non-infill big box markets, such as the Inland Empire. Big Box, larger space is typically part of a super-regional or global logistics network where space needs are relatively fungible across locations, and where demand for any single space can be highly elastic and reactive to short-term demand drivers.

Howard Schwimmer: So far we are seeing a distinct and accelerating differentiation between the stronger relative performance of our Intel Socal portfolio, whether measured by net absorption change in rents or related metrics as compared to the relative performance of larger product sized over 200000 square feet, primarily located in non Intel <unk>.

Howard Schwimmer: <unk> markets, such as the inland Empire.

Howard Schwimmer: Big box larger space is typically part of a superregional, our global logistics network, where space needs are relatively fungible across locations and where demand for any single space can be highly elastic and reactive to short term demand drivers.

Michael S. Frankel: In contrast, our smaller infill tenants are generally serving the nation's largest first and last mile of distribution, focused on regional consumption within the nation's largest and most diverse regional economy, where performance through cycles has tended to be more durable. Big box markets, such as the Inland Empire, are also subject to volatility driven by substantial increases in new supply, impacting occupancy through cycles, as compared to our high-barrier infill market, which is subject to an ongoing scarcity of supply with a virtually incurable supply-demand imbalance over the long term.

Howard Schwimmer: In contrast, our smaller infill tenants are generally serving the nation's largest first and last mile of distribution focused on regional consumption within the nation's largest and most diverse regional economy, where our performance through cycles has tended to be more durable.

Howard Schwimmer: Big box markets, such as the inland Empire are also subject to volatility driven by substantial increases in new supply impacting occupancy through cycles as compared to our high barrier infill market, which is subject to an ongoing scarcity of supply with a virtually incurable supply demand imbalance over the long term.

Michael S. Frankel: Consequently, and as we've observed through prior cycles, our Rexford tenant base, which averages 26,000 square feet in size and is 100% located within prime high-barrier infill SoCal markets, is outperforming the big box markets and product types. Looking forward, the growth opportunity embedded within our existing portfolio continues to be substantial. Over just the next three years, we expect cash NOI to increase by $282 million, or 47%, growing to $876 million in total NOI.

Howard Schwimmer: Consequently, and as we've observed through prior cycles are retro tenant base, which averages 26000 square feet in size and is 100% located within prime high barrier infill Socal markets is outperforming the big box market and product type.

Howard Schwimmer: Looking forward the growth opportunity embedded within our existing portfolio continues to be substantial.

Over just the next three years, we expect cash NOI to increase by $282 million or 47% growing to $876 million in total NOI.

Michael S. Frankel: Importantly, this assumes today's rents and no future acquisitions, and is comprised of $94 million of incremental NOI related to repositioning and redevelopment stabilizing over the next three years, and $88 million from the conversion of below-market leases to market rents, assuming today's rents and no future market rent growth. $58 million dollars related to acquisitions closed year to date and $42 million dollars from the 3.6% embedded contractual rent steps within our current portfolio.

Howard Schwimmer: Importantly, this assumes todays rents and no future acquisitions and is comprised of $94 million of incremental NOI related to repositioning and redevelopments stabilizing over the next three years.

Howard Schwimmer: $88 million from the conversion of below market leases to market rents, assuming today's rents and no future market rent growth.

Howard Schwimmer: $58 million related to acquisitions closed year to date and $42 million from the three 6% embedded contractual rent steps within our current portfolio.

Michael S. Frankel: We continue to be positioned to execute upon our expected 11% to 13% three-year average annual core FFO per share growth forecast through 2026, which assumes no future acquisition. Please note that we plan to update our long-term core FFO per share growth forecast on an annual basis at the beginning of the year. With that, I'd like to thank the Rexford team once again for your tremendous dedication and results, and I'm pleased to turn the call over to Howard.

Howard Schwimmer: We continue to be positioned to execute upon our expected 11% to 13% three year average annual core <unk> per share growth through 2026, which assumes no future acquisitions.

Howard Schwimmer: Please note that we plan to update our long term core <unk> per share growth forecast on an annual basis at the beginning of the year.

With that I'd like to thank the exar team once again for your tremendous dedication and results and I am pleased to turn the call over to Howard.

Howard Schwimmer: Thank you, Michael, and thank you all for joining us today. Rexford began the year with strong execution across our value creation initiatives. During the first quarter, our team completed a very strong 3.2 million square feet of leasing by executing on the increased tenant activity we experienced during the first quarter, driving 140,000 square feet of positive net absorption. Notably, we extended Tyroko, our largest tenant, occupying 1.1 million square feet into 2027. During the quarter, Tireco's in-place rent increased by 4%, which was carried forward.

Howard Schwimmer: Thank you Michael and thank you all for joining us today.

Howard Schwimmer: <unk> began the year with strong execution across our value creation initiatives. During the first quarter. Our team completed a very strong $3 2 million square feet of leasing by X.

Howard Schwimmer: Hitting on the increased <unk> activity, we experienced during the first quarter driving a 140000 square feet of positive net absorption.

Howard Schwimmer: Notably, we extended tire coat, our largest tenant occupying $1 1 million square feet into 2027.

Howard Schwimmer: During the quarter tire codes in place rent increased by 4%, which was carried forward extension includes a 4% bump in year, two and two months rent concessions.

Howard Schwimmer: The extension includes a 4% bump in year two and a two-month rent concession. With this lease execution, we de-risked our largest near-term lease expiration, securing favorable and growing cash flow for the next three years. Excluding the TireCo extension, leasing spreads in the quarter were 53% and 34% on a net effective and cash basis, respectively, and were in line with our expectations. Concessions increased nominally from a weighted average of 1.2 to 1.4 months sequentially.

Howard Schwimmer: With this lease execution, we derisked, our largest near term lease expirations, securing favorable and growing cash flow over the next three years.

Howard Schwimmer: Excluding the tire co extension leasing spreads in the quarter were 53% and 34% on a net effective and cash basis, respectively.

Howard Schwimmer: We are in line with our expectations.

Howard Schwimmer: Concessions increased nominally from a weighted average one two to $1 four months sequentially. Additionally.

Howard Schwimmer: Additionally, annual embedded rent steps averaged 4% for the first quarter executed leases, continuing to demonstrate our diverse tenant base's ability to pay higher rents in future periods, within our portfolio with an average space size of 26,000 square feet. We observed market rent growth that was flat sequentially and approximately negative 2% year over year for highly functional product comparable in quality to our expert assets. As we have communicated, particularly with respect to select submarkets and size ranges, we expect to continue seeing some near-term fluctuations in market rents.

Howard Schwimmer: Additionally, annual embedded rent steps averaged 4% for the first quarter executed leases continuing to demonstrate our diverse tenant base is ability to pay higher rent in future periods.

Howard Schwimmer: Within our portfolio with an average space size of 26000 square feet.

Howard Schwimmer: We observed market rent growth, there was flat sequentially and approximately negative 2% year over year for highly functional product comparable in quality to our expert assets.

Howard Schwimmer: As we have communicated, particularly with respect to select Submarkets and size ranges. We expect to continue seeing some near term fluctuations in market rents. However, as demonstrated by the leasing activity within our portfolio and what we're seeing on the ground today.

Howard Schwimmer: However, as demonstrated by the leasing activity within our portfolio and what we are seeing on the ground today, tenants are expressing their comfort with today's rent levels, plus 4% embedded annual rent step. According to CBRE, vacancy in the infill markets increased 45 basis points sequentially to 3.2%. Notably, Rexford's portfolio continues to outperform the market due to its superior quality and functionality. By way of example, Rexford's first quarter in net absorption was positive 30 basis points in contrast to the overall market's negative 20 basis points of net absorption.

Howard Schwimmer: Tenants are evidenced during their comfort with today's rent levels, plus 4% embedded annual rent steps.

Howard Schwimmer: According to CBRE vacancy in the infill markets increased 45 basis points sequentially to three 2%.

Howard Schwimmer: Notably <unk> portfolio continues to outperform the market due to our superior quality and functionality.

Howard Schwimmer: By way of example record first quarter net absorption was positive 30 basis points in contrast to the overall market's negative 20 basis points of net absorption.

Howard Schwimmer: In analyzing net absorption in the market, similar to prior quarters, nearly 80% of buildings that contributed to negative absorption were of lower quality, dysfunctional, or off the lead, and generally not competitive with Rexford's portfolio. In stark contrast to the market, Rexford's strong new and renewal activity in the quarter drove an exceptional retention plus backfill rate of 87 percent.

Howard Schwimmer: In analyzing net absorption in the market.

The prior quarters, nearly 80% of buildings that contributed to the negative absorption.

Howard Schwimmer: Lower quality dysfunctional for obsolete and generally noncompetitive with restaurant portfolio.

Howard Schwimmer: In Stark contrast to the market for extra strong new and renewal activity in the quarter drove an exceptional retention plus backfill rate of 87%.

Howard Schwimmer: We continue to see relatively healthy tenant interest for our higher quality product with activity on approximately 85% of our vacant space. Turning to Rexford's investment activity during the quarter, we completed $1.1 billion in investments across 3.2 million square feet through off-market transactions. Subsequent quarter end, we closed one stabilized transaction for $27 million at a 5.5% initial unleveraged deal. Additionally, we have $275 million of pipeline acquisitions under contract or accepted offer, which are subject to customary closing conditions.

Howard Schwimmer: We continue to see relatively healthy tenant interest for a higher quality product with activity on approximately 85% of our vacant spaces turning to <unk> investment activity during the quarter, we completed $1 1 billion.

Howard Schwimmer: Restaurants across $3 2 million square feet through off market transactions.

Howard Schwimmer: Subsequent to quarter end, we closed one of stabilized transaction for $27 million at a five 5% initial unleveraged yield.

Howard Schwimmer: Additionally, we have $275 million of pipeline acquisitions under contract or accepted offer which are subject to customary closing conditions. The near term pipeline investments coupled with our year to date activity are projected to generate an aggregate initial yield of 5% growing to a five 7% unleveraged Steve.

Howard Schwimmer: The near-term pipeline investments, coupled with our year-to-date activity, are projected to generate an aggregate initial yield of 5%, growing to a 5.7% unleveraged, stabilized yield on total cost. Moving to our disposition and capital recycling program, subsequent to quarter end, we disposed of one property for $10 million, generating a 13% unlevered IRR. In addition, we have approximately $50 million of dispositions currently under contract or accepted offer, which are subject to customary closing conditions.

Howard Schwimmer: <unk> yield on total cost.

Howard Schwimmer: Moving to our position that capital recycling program subsequent to quarter end, we disposed of one property for $10 million generating a 13% Unlevered IRR. In addition, we have approximately $50 million of dispositions currently under contract or accepted offer which are subject to customary closing conditions.

Howard Schwimmer: Regarding our repositioning and redevelopment activity, during the quarter, we stabilized and leased approximately 40,000 square feet of repositioned property in central San Diego, achieving an aggregate 10.8% leveraged stabilized yield on total investment. Looking forward, we have 4.6 million square feet of value-add repositioning and redevelopments in process or projected to start within the next 18 months, with a remaining incremental spend of approximately $410 million, which we expect to deliver an aggregate unlevered stabilized yield on total investment of 6.2%. Finally, I'd like to thank our Rexford team for their innovation and collaboration, driving another strong quarter of results. Now, I'm pleased to turn the call over to Laura. Thank you, Howard, and thanks to the

Howard Schwimmer: Regarding our repositioning and redevelopment activity during the quarter, we stabilized and leased approximately 40000 square feet of repositioned the property in central San Diego, achieving an aggregate 10, 8% unlevered stabilized yield on total investments.

Howard Schwimmer: Looking forward, we have $4 6 million square feet.

Howard Schwimmer: <unk> repositioning and Redevelopments in process are projected to start within the next 18 months with the remaining incremental spend of approximately $410 million, which we expect to deliver an aggregate unlevered stabilized yield on total investment of six 2%.

Howard Schwimmer: Finally, I'd like to thank our rexford team for their innovation and collaboration driving another strong quarter of results now I am pleased to turn the call over to Laura <unk>.

Laura Elizabeth Clark: Thank you Howard and thanks to the Rexford team for your market, leading efforts that drive our strong near and long term value creation.

Laura Elizabeth Clark: Thank you, Howard, and thanks to the Rexford team for your market-leading efforts that drive our strong near- and long-term value creation. First quarter core FFO per share increased a strong 12% over the prior year quarter to $0.58 per share and was in line with our expectations. Same property NOI growth was 8.5% and 5.5% on a cash and net-effective basis, respectively. Leasing spreads over the trailing 12-month period of 71% on a net-effective basis and 52% on a cash basis drove strong rental income growth.

Laura Elizabeth Clark: First quarter core <unk> per share increased a strong 12% over the prior year quarter to <unk> 58 per share and was in line with our expectations.

Laura Elizabeth Clark: Same property NOI growth was eight 5% and five 5% on a cash and net effective basis, respectively.

Laura Elizabeth Clark: In fact over the trailing 12 month period of 71% on a net effective basis and 52% on a cash basis strong rental income growth.

Laura Elizabeth Clark: Turning to the balance sheet and capital markets activities, this quarter, we opportunistically leveraged the balance sheet to fund accretive external as well as internal growth opportunities, including funding an incremental spend of $455 million related to the near-term pipeline of repositionings and redevelopments that are projected to generate an incremental return of approximately 15%. At quarter end, net debt to EBITDA was 4.6 times, and we anticipate that embedded internal growth alone will reduce leverage to within our target 4 to 4.5 times range in the near term.

Laura Elizabeth Clark: Turning to the balance sheet and capital markets activities. This quarter, we opportunistically leveraged the balance sheet to fund accretive external as well as internal growth opportunities, including funding incremental spend of $455 million related to the near term pipeline of repositioning and redevelopments that are.

Laura Elizabeth Clark: Projected to generate an incremental return of approximately 15%.

Laura Elizabeth Clark: At quarter end net debt to EBITDA was four six times and we anticipate that embedded internal growth alone will reduce leverage within our target four to four five times range in the near term.

Laura Elizabeth Clark: During the quarter, we executed on a number of capital markets transactions. We completed the issuance of $1.15 billion of 3- and 5-year exchangeable notes at an average coupon of 4.25% and a 30% conversion premium. Let me pause here and take a few minutes to describe the mechanics of these exchangeable notes, also known as converts.

Laura Elizabeth Clark: During the quarter, we executed on a number of capital markets transactions.

Laura Elizabeth Clark: We completed the issuance of $1, one 5 billion of three and five year exchangeable notes at an average coupon of 425% and a 30% conversion premium.

Speaker Change: Let me pause here and take a few minutes to describe the mechanics of these exchangeable notes also known as.

Laura Elizabeth Clark: Recent changes in accounting rules, combined with the ability to issue converts under the Net Share Settlement Method, known as Instrument C, have created a unique opportunity and additional attractive capital. Under the net share settlement method, the par value of the convert, which in this case is $1.15 billion in aggregate, is treated like a bond, whereby Rexford will pay the par value in cash at maturity. Regarding the conversion premium, if Rexford's share price at maturity is 30% or more than the price on the date of issuance, the excess conversion value over par is settled at maturity in cash, shares, or a combination of the two at Rexford's option. This provides us with maximum flexibility at any future point in the capital market cycle. The accounting for converts has also been substantially simplified.

Speaker Change: Recent changes in accounting rules combined with the ability to issue converts under the net share settlement method known as instrument C have created a unique opportunity and then additional attractive capital source.

Speaker Change: Under the net share settlement method, the par value of the convert which in this case is 115 billion in aggregate, it's treated like a bond whereby rexford will pay the par value in cash at maturity.

Speaker Change: Regarding the conversion premium if record share price at maturity is 30% or more than the price on the date of issuance the excess conversion value over par is settled at maturity in cash shares or a combination of the two at Rectrix option.

Speaker Change: This provides us with maximum flexibility at any future point in the capital market cycle.

Speaker Change: The accounting for our convert has also been substantially simplified on.

Laura Elizabeth Clark: On the income statement, the coupon, which averages 4.25% for our issuance, is reflected as interest expense. In regard to the share count, only the net shares equivalent to the excess conversion value are added to the share count if and when the stock is trading above the conversion price. Importantly, the par value of the convert has no impact on the share count as it is always settled in cash.

Speaker Change: On the income statement, the coupon, which averages for two 5% for our issuance is reflected as interest expense and.

Speaker Change: In regards to the share count only the net shares equivalent to the excess conversion value are added to the share count.

Speaker Change: And when the stock is trading above the conversion price.

Importantly, the par value of the convert has no impact to share count as it is always settled in cash.

Laura Elizabeth Clark: Under this structure and with the accounting rule changes, there is no immediate dilution upon issuance, and any potential future dilution is mitigated through the net share settlement mechanics, as well as the flexibility for Rexford to settle any excess share value above the 30% conversion premium in cash or shares in the future. Continuing with our first quarter activities and concurrent with the exchangeable note offering, we completed a public offering of 17.1 million shares of common stock to an existing long-only investor based on the West Coast, subject to forward equity sale agreements for a gross offering value of $841 million.

Speaker Change: Under this structure and with the accounting rule changes there is no immediate dilution upon issuance and any potential future dilution is mitigated through the net share settlement mechanics, as well as the flexibility for wrecked for to settle any excess fair value above the 30% conversion premium in cash or shares in the future.

Speaker Change: Continuing with our first quarter activity and concurrent with the exchangeable note offerings, we completed a public offering of $17 1 million shares of common stock to an existing long only investor based on the west coast subject to forward equity sale agreements for a growth offering.

Speaker Change: <unk> of $841 million and during the quarter, we settled the remaining forward equity sale agreements related to prior offerings for net proceeds of $290 million. We currently maintain substantial liquidity of $2 billion.

Laura Elizabeth Clark: And during the quarter, we settled the remaining forward equity agreements related to prior offerings for net proceeds of $290 million. We currently maintain substantial liquidity of $2 billion, comprised of $837 million of net forward equity remaining for settlement, and 185 million of cash on hand.

Speaker Change: Comprised of $837 million of net foreign equity remaining for settlement.

Speaker Change: $185 million of cash on hand.

Laura Elizabeth Clark: Full availability under our $1 billion revolver, as well as expected proceeds from our capital recycling program as we harvest value through disposition. Finally, we have no material debt maturities until 2026, inclusive of extension options. Moving to full year guidance, as a result of the positive contribution from our first quarter investment activity, we are increasing full year 2024 core FFO per share guidance to a range of $2.31 to $2.34 cents, up four cents at the midpoint when compared to our prior guidance.

Availability under our $1 billion revolver as well as expected proceeds from our capital recycling program as we harvest value through disposition.

Speaker Change: Finally, we have no material debt maturities until 2026 inclusive of extension options.

Speaker Change: Moving to full year guidance as.

Speaker Change: As a result of the positive contribution from our first quarter investment activity. We are increasing full year 2024 core <unk> per share guidance to a range of $2 31 to $2 34.

Speaker Change: Up four cents at the midpoint when compared to our prior guidance.

Laura Elizabeth Clark: Please note that our 2024 guidance range does not include acquisitions, dispositions, or related balance sheet activities that have not yet closed. In regard to our same property guidance, our forecast assumes a range of expectations and is based upon the market dynamics we are observing today, including leasing activity and demand, current supply, and the overall health of our tenant base. To the extent circumstances or markets deteriorate beyond the current levels we are experiencing today, we will update guidance accordingly.

Speaker Change: Please note that our 2024 guidance range does not include acquisitions dispositions are related balance sheet activities that have not yet closed and.

Speaker Change: In regard to our same property guidance, our forecast assumes a range of expectations and is based upon the market dynamics, we are observing today, including leasing activity and demand current supply and the overall health of our tenant base.

Speaker Change: To the extent circumstances, our markets deteriorate beyond the current levels. We are experiencing today, we will update guidance accordingly.

Laura Elizabeth Clark: Our 2024 Cash, Clean Property, and OI guidance remains unchanged and is projected to be in the range of 7 to 8 percent. Net effective 2024 same property NOI guidance has been increased to 4.25 to 5.25 percent, up from 4 to 5 percent, driven by the strong level of early renewal activity in the quarter that generates higher straight line rental revenue. Components of our projected same property guidance remain unchanged and include, full year average same property occupancy in the range of 96.5 to 97 percent, which is primarily driven by lease timing and average downtime, cash leasing spreads of approximately 50%, and net effective spreads of approximately 60%, excluding the impact of the aforementioned prior to lease extension.

Speaker Change: Our 2020 for cash same property NOI guidance remains unchanged and is projected to be in the range of 7% to 8% net.

Speaker Change: Net effective 2020 for same property NOI guidance has been increased to $4 two 5% to five 5% up from 4% to 5% driven by the strong level of early renewal activity in the quarter that generates higher straight line rental revenue.

Speaker Change: Components of our projected same property guidance remain unchanged and include full.

Speaker Change: Full year average same property occupancy in the range of 96, 5% to 97%, which is primarily driven by lease timing in average downtime.

Cash leasing spreads of approximately 50% and net effective spreads of approximately 60% excluding the impact of the aforementioned prior co lease extension.

Laura Elizabeth Clark: Note that leasing spread guidance incorporates current market rents, and leasing spreads quarter to quarter are impacted by the mix of leases we expect to execute. FAD debt as a percentage of revenue is expected to be in the 40 to 50 basis point range and in line with pre-pandemic levels and average concessions in the one and a half month area.

Speaker Change: Note that leasing spread guidance incorporates current market rents and leasing spreads quarter to quarter are impacted by the mix of leases, we expect to execute.

Speaker Change: Bad debt as a percentage of revenue is expected to be in the 40 to 50 basis point range and in line with pre pandemic level.

Speaker Change: And average concessions and the one five months area.

Laura Elizabeth Clark: Thanks again to the Rexford team for your outstanding work that differentiates our business and enables our ongoing success. We now welcome your questions. Operator

Speaker Change: Thanks again to the Rexford team for your outstanding work that differentiates our business and enables our ongoing success. We now welcome your questions operator.

Operator: Thank you. The floor is now open for questions. If you have dialed in and would like to ask a question, please press star 1 on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star 1 again. If you are called upon to ask your question and are listening via loudspeaker on your device, please pick up your handset and ensure that your phone is not on mute when asking your question. Again, press star 1 to join the Q&A. And your first question comes from the line of Blaine Heck with Wells Fargo.

Speaker Change: Thank you the floor is now open for questions. If you have dialed in and we would like to ask a question. Please press star one on your telephone keypad, Serratia hand, and joined the queue. If you will.

Speaker Change: I'd like to withdraw your question simply press Star One again, if you are called upon to ask your question is are listening via loud speaker on your device. Please pick up your handset and ensured that your phone is Bob unused been asking your question.

Speaker Change: Again fresh bar want to join the queue and your first question comes from the line of Blaine Heck with Wells Fargo.

Blaine Matthew Heck: Great, thanks. Good morning. So one of your peers gave an incrementally negative view on the timing of a rebound in activity in Southern California, but it seems as though your outlook is pretty consistent with your initial views. Michael, you gave some color earlier, which was really helpful, but can you just talk a little bit more about what might be driving that disparity, whether it be more conservatism in your initial view, just different size segments, or different sub-market exposures?

Blaine Matthew Heck: Please go ahead.

Great. Thanks. Good morning, So one of your peers gave incrementally negative view on the timing of a rebound in activity in southern California, but it seems as though your outlook is pretty consistent with your initial views. Michael you gave some color earlier, which was really helpful. But can you just talk a little bit more about what might be driving that.

Blaine Matthew Heck: Disparity whether it be more conservatism in your initial view just different size segments <unk> different submarket exposure.

Michael S. Frankel: Hey, Blaine, thanks so much for joining us today. I appreciate the question. And it's an important question, because I don't think it's just about Rexford having been maybe a little more or less conservative on a relative basis in setting expectations. I think the answer really gets more to the fundamentals of our market and the fact that the fundamentals surrounding the infill markets, where the average tenant size, for example, in our portfolio is under 30,000 square feet, are very, very different than the fundamentals that often drive the larger space, 200,000 square foot, or larger space markets, which tend to be more non-infill markets like the Inland Empire.

Michael S. Frankel: Hey, Blayne. Thanks, so much for joining us today I appreciate the question and it's an important question because I don't think its just about record having been maybe a little more or less conservative on a relative basis and setting expectations. I think the answer really gets more to the fundamentals of our market and the fact that the fundamentals fundamentals surrounding the infill markets.

Michael S. Frankel: Where are the average tenant size for example in our portfolio is under 30000 square feet are very very different than the fundamentals that often drive the larger space 200000 square foot or larger space markets, which tend to be more in non infill markets like the inland Empire and I think that's really where we get to the crux of it and it really also gets to the Sag.

Michael S. Frankel: And I think that's really where we get to the crux of it. And it really also gets to the fact that there are so many reasons that we designed this business to focus exclusively on infill Southern California. It is a truly differentiated market with its own drivers, and as I mentioned, our tenant base in the infill markets is disproportionately serving regional consumption. It's the largest first and last mile zone of distribution and the largest regional economy in the country.

There are so many reasons that we designed this business to focus exclusively on infill southern California. It is a truly differentiated market with its own drivers and as I mentioned, our tenant base. In these infill markets are disproportionately serving regional consumption. It's a largest first and last milestone of distribution and the largest regional economy in the country.

Michael S. Frankel: And that's really the fundamental difference. The big box market is driven by super regional global trade flows. Global demand drivers tend to have a bigger impact on that. I think the greatest real world case study and example probably came during the Great Financial crisis.

That's really the fundamental difference the big box market is driven by Super Regional Global trade flows global demand drivers tend to have a bigger impact on that I think the greatest real World case study. An example, probably came during the great financial crisis.

Michael S. Frankel: And naturally, we had a dramatic drop in demand globally. But the way the big box market performed relative to the smaller tenant base like Rexford's was dramatic. For instance, at that time in the Eastern Empire, vacancy doubled, tripled, or worse, depending on the submarket. And vacancy and occupancy were actually relatively stable within our infill markets. And that was during the worst of times, nothing like today.

Michael S. Frankel: And actually we had a dramatic drop in demand globally, but if you saw the way the big box market performed relative to the smaller tenant base like Rexford was dramatic for instance at that time in the eastern and Empire vacancy doubled tripled or worst depending on the Submarket and vacancy was actually relative occupancy was actually relatively stable within our infill markets and that was done.

Michael S. Frankel: The worst of times nothing like today.

Michael S. Frankel: So I think that that's really the key driver of differentiation in terms of performance. And then you layer on the fact that within our infill markets, Rexford, our mandate is to deliver the highest functionality, best locations, and highest quality product within our sub market. So even within a sub market and an infill market that's going to outperform through cycles, the big box market, within our markets, we should see differentiated positive performance by Rexford within the sub market. So there's a lot to it.

Michael S. Frankel: So I think that's really the key driver in differentiation in terms of performance and then you layer on the fact that within our infill markets Rexford, our mandate is to deliver the highest functional best locations highest quality product within our submarket, so even within a sub market and into a market that's going to outperform through cycle.

Michael S. Frankel: So the big box market within our markets, we should see differentiated positive performance by Rexford within the Submarket.

Michael S. Frankel: So theres a lot to it I think we've observed it through cycles through many cycles I think the data is pretty clear you can go back almost 11 years and look at our disclosures. When we went public we tracked it then.

Michael S. Frankel: I think we've observed it through cycles, through many cycles. I think the data is pretty clear. You can go back almost 11 years and look at our disclosures when we went public. We tracked it then.

Michael S. Frankel: So I think it's fairly consistent and supported by the data out there. Additionally, I think we try to be conservative in how we look forward. And we try not to prognosticate about what may happen in the future. And that's why our guidance and our thoughts on the future really don't incorporate market rank growth and things like that.

Michael S. Frankel: I think it's fairly consistent supported by the data out there and.

Michael S. Frankel: And Additionally, I think we tried to take we do try to be conservative in how we look forward and we try not to prognosticate about what may happen in the future and Thats why our our guidance.

Michael S. Frankel: Our thoughts on the future really don't incorporate market rent growth and things like that.

Michael S. Frankel: Great. Very helpful, Michael. Second question.

Speaker Change: Great very helpful. Michael.

Michael S. Frankel: Second question last quarter, I believe you talked about an expectation for 40% cash rent spreads in 2020 for your spreads this quarter were $33 six excluding Tycho and I think you just mentioned Laura that the goal is now 50%, but correct me if I misheard that so just wondering if you guys can comment on what my.

Laura Elizabeth Clark: Last quarter, I believe you talked about an expectation of 40 percent cash rent spreads in 2024. Your spreads this quarter were 33.6, excluding Tyroko. And I think you just mentioned, Laura, that the goal is now 50 percent, but correct me if I misheard that. So just wondering if you guys can comment on what might be giving you confidence in higher spreads in the second through fourth quarters. Yeah, Blake.

Michael S. Frankel: I'll be giving you confidence in higher spreads in the second through fourth quarters.

Laura Elizabeth Clark: Yeah, Blayne just to clarify our cash same property guidance for the full year at 50% and that's in line with our expectations that we set last quarter. Our net effect. This guidance for the full year, 60% and also in line with expectations that we set last quarter, excluding entire echo so all that being said.

Laura Elizabeth Clark: Yeah, Blaine, just to clarify, our cash same property guidance for the full year is 50%, and that's in line with our expectations that we set last quarter. Our net effective guidance for the full year is 60%, and that is also in line with our expectations that we set last quarter, excluding Tireco.

Laura Elizabeth Clark: So all that being said, as you know, spreads in any given quarter can vary dependent upon the leases that are rolling and the leases that are executed in that quarter. This quarter, spreads came in right in line with our expectations for the leases that we expected to sign. As we look forward, we're trading paper on a number of new and renewals that give us comfort that we will be able to achieve our expectations around leasing spreads for the full year.

Laura Elizabeth Clark: As you know spreads in any given quarter.

Laura Elizabeth Clark: Can vary dependent upon the leases that are rolling and the leases that are executed in a quarter. This quarter spreads came in right in line with our expectations for the leases that we expected to sign as we look forward, we're trading paper on a number of new and renewals.

Laura Elizabeth Clark: Give us comfort that we will be able to achieve our expectations around leasing spreads for the full year.

Operator: Great, thank you all.

Speaker Change: Great. Thank you all.

Camille Bonnel: Your next question comes from the line of Camille Bonnel with Bank of America.

Your next question comes from the line of Neil <unk> with Bank of America.

Michael S. Frankel: Good morning. I have a few questions about your investment strategy. While the cost of capital you raised allows you to transact accretively, how do you balance deploying this capital in a market when rents continue to decline and there's risk to underwriting?

Neil: Good morning, I have a few questions about your investment strategy, while the cost of capital you raised allows you to transact Accretively, how do you balance deploying this capital in a market when rents continue to decline and theres risk to underwriting.

Michael S. Frankel: Hey, Camille, thanks so much for joining us today and thank you for the question. So the key focus of our investment strategy is value creation and the ability to overcome whatever cost of capital may be. In fact, we take a steady-state look at our cost of capital, which means when capital was very inexpensive, we didn't underwrite that in our investment strategy. And the key to our investment strategy is are we identifying opportunities to create value that overcome that cost of capital hurdle, if you will, and create value over the medium to long term.

Hey, <unk>. Thanks, so much for joining us today and thank you for the question. So the key focus around our investment strategy is about value creation and the ability to overcome whatever cost capital may be in fact, we take a steady state look at our cost of capital, which means when capital was very inexpensive we didn't underwrite that in our investment strategy and the key to our investment strategy is already.

Identifying opportunities to create value that overcome that cost of capital hurdle, if you will and create value over the medium to long term and that is the greatest differentiator of our business frankly, because even in an environment to your question, where you may have nominal or even declining market rents our investment strategy focused on value creation, where we increasingly.

Michael S. Frankel: And that is the greatest differentiator of our business, frankly, because even in an environment, to your question, where you may have nominal or even declining market rents, our investment strategy focused on value creation, where we're increasing the inherent cash flow generating capability of these assets with zero or even, in some cases, declining market rent growth, is truly unique and powerful. And I think that's where you're going to, the more that markets stabilize or the more that you see markets overall decline, the more Rexford is going to differentiate itself because we're going to continue to do the work increasing the inherent cash flow generating capabilities of properties through renovations and modernizations that enable them to increase cash flow with zero or even declining market rent.

Neil: Our cash flow generating capability of these assets with zero or even in some cases declining market rent growth is truly unique and powerful and I think that's where you're going to the more of that market stabilize or the more that you see markets overall decline the more retro is going to differentiate itself because we're going to continue to do the work increasing the inherent cash flow generating.

Neil: Both of these properties through the renovations and modernizations that enable us to increase cash flow with zero or even declining market rent growth.

Speaker Change: Got it and I understand that different points of your ownership Youll update the business plan. So if we look through to the tire co lease extensions and option you've created in 2027.

Howard Schwimmer: Got it. And I understand at different points in your ownership, you'll update the business plan. So if we look through to the Tire Co. lease extension and option you created in 2027, are there levers you can pull, or how confident are you in being able to position this asset so it performs in line or better than your initial underwriting?

Speaker Change: Are there levers you can pull or how confident are you in being able to position. This asset. So it performed in line or better than your initial underwriting.

Speaker Change: Yes, Hi, <unk>.

Speaker Change: Sure.

Speaker Change: Well first of all.

Speaker Change: The <unk> extension was done just after we increased rent 4% under the existing lease so.

Howard Schwimmer: Yeah, hi Camille, it's Howard. Well, first of all, the entire coextension was done just after we increased rent 4% under the existing lease. So that option they had had a fixed increase. And so we really only gave up a 4% initial bump, which we pick up again in another year under the lease. So we were pretty happy with that outcome.

Speaker Change: The third option they had had a fixed increase and so we really only gave up a 4% initial bump, which we pick up again.

Speaker Change: And another year under the lease so.

Speaker Change: We're pretty happy with that outcome. The lease also has a five year option in it so that the options at fair market value. So we're.

Howard Schwimmer: The lease also has a five-year option in it so that we're at the options at fair market value, so we're able to reset at the expiration to a market rent in 2020, which from what we see in the marketplace, there would be substantially fewer deliveries and competing products, even looking into expirations that could occur within the marketplace and any product that could come to market. So from our window, it looks like a much better time to be addressing that lease. And so we've left the window open to actually reset and continue the performance of the asset.

Speaker Change: We're able to reset at.

Speaker Change: The exploration to.

Speaker Change: Market rent.

Speaker Change: In 2020.

Speaker Change: Which from what we see in the marketplace, there would be substantially less delay.

Speaker Change: Deliveries.

Speaker Change: In competing product, even looking into explorations that could occur within the marketplace and any product that could come to market.

Speaker Change: So from our window it looks like a much better time to be addressing that lease.

Speaker Change: And so we've left the window opened actually to reset.

Speaker Change: And continue the performance of the asset.

Laura Elizabeth Clark: Appreciate the added color there. And you've built a lot, a lot of excess capital and closed the quarter with quite an elevated level of cash. So can you shed a bit more light on how you're thinking about the cash balance this year and what's been assumed in guidance? Yeah, Camille, thanks.

Speaker Change: I appreciate the added color there and you've built a loss a lot of excess capital and closed the quarter with quite a elevated level of cash. So can you shed a bit more light on how youre thinking about the cash balance this year and what's been assumed in guidance.

Laura Elizabeth Clark: Yeah, Camille, thanks for your question. In terms of our cash and liquidity, as we said today, we currently have about $2.1 billion of liquidity. That does include our $1 billion revolver. On top of that, included in the $2.1 billion is also $837 million of forward equity remaining for settlement, as well as $185 million of cash on hand. So when we look at the uses of that capital, we have about $275 million in acquisitions that are in the pipeline under accepted offers and then or under contract.

Speaker Change: Yeah. Thanks. Thanks for your question in terms of in terms of our cash and liquidity as we sit today.

Speaker Change: Currently have about $2 1 billion liquidity that does include our $1 billion revolver.

Speaker Change: On top of that.

Speaker Change: And included in the $2 1 billion is also.

$837 million afford equity remaining for settlement as well as $185 million of cash on hand.

Speaker Change: When we look at the uses of that capital we have about $275 million of acquisitions that are in the pipeline.

Speaker Change: Under accepted offer.

Speaker Change: And then or under contract. We also have about $250 million of capital to spend just this year on our repositioning and redevelopments that are in process. So that leaves us with substantial liquidity of about $600 million on top of the revolver with the revolver and really what we're thinking.

Laura Elizabeth Clark: We also have about $250 million of capital to spend just this year on our repositioning and redevelopments that are in process. So that leaves us with substantial liquidity of about $600 million on top of the revolver. And really, when we're thinking about other sources of, I mean, other uses of capital, we're going to continue to be very selective in terms of investing and driving and executing our investment strategy to find these opportunities where we can drive value creation, not just today, but into the future on an accretive basis.

Speaker Change: About other sources of other uses of capital we're going to continue to be very selective in terms of investing and driving and executing on our investment strategy to find these opportunities that we can drive value creation, not just today, but over but into the future on an accretive basis.

Speaker Change: Thank you.

Greg Michael McGinniss: The next question comes from the line of Gregory McGinniss with Scotiabank.

Speaker Change: Next question comes from the line of Greg again, goodness with Scotia Bank.

Greg Michael McGinniss: Hey, good afternoon. Um.

Greg: Hey, good afternoon.

Laura Elizabeth Clark: I guess, based on the data that you guys have sent us, showed us that market rents held steady quarter over quarter, down a little bit year over year, but what about net effective rents? Have you guys been seeing any increase in free rent or other concessions? And also, how are you determining market rent for the Rexford Comparable Portfolio? Yeah.

Greg: Yes.

Greg: Based on the data that you guys showed.

Greg: Showed us market rents held steady quarter over quarter down a little bit year over year, but what about on net effective rents have you guys been seeing any increase in free rent or other concessions and also how are you determining.

Greg: Market rent for the Rexford comparable portfolio.

Laura Elizabeth Clark: Yeah, I'll jump in here. Thanks, Greg, so much for joining us today.

Greg: Yes.

Speaker Change: I'll jump in here, thanks, Greg so much for joining us today in terms of concessions.

Laura Elizabeth Clark: In terms of concessions, as you can see, I mean, our concessions this quarter were 1.4 months, excluding the Tire Co lease. Our guidance for the full year is 1.5 months. I'll note that, you know, that's consistent with the guidance that we had last quarter. And concessions, we have estimated, as we did at the beginning of this year, to increase from one month on average in 2023. And really, that's what we think is more consistent with the normalized market in which we're operating.

Speaker Change: As you can see I mean, our concessions this quarter over one four months, excluding that higher co leads.

Speaker Change: Our guidance for the full year is one five months I will note that that's consistent with the guidance that we that we had last quarter and concessions. We have estimated as we did at the beginning of this year to increase from one month on average in 2023 and really Thats. What we think is more consistent with the normalized market in which we're operating.

Laura Elizabeth Clark: If you look back to the, you know, pre-pandemic years 2018-2019, we're assuming concessions more in line with those markets. When you look at our average concessions guidance, it includes new and concessions on new and renewal leases. And so when you look at, you know, our activity just this quarter, 75% of our activity was renewals that had lower concessions. Concessions on renewals this quarter were 1.2 months, compared to 2.1 months on our new leases. So that's certainly driving the average concession of one and a half months for the entire portfolio that we're projecting for the full year. But in terms of concessions, it certainly varies.

And if you look back to the pre pandemic. Your 2018 2019, we're assuming concessions more in line with those markets.

Speaker Change: When you look at our average.

Speaker Change: Our average concessions guidance it includes new and concessions on new and renewal leases and so when you look at our activity just this quarter, 75% of our activity was renewals that have lower concessions concessions on renewals. This quarter were $1 two months compared to two one months.

Speaker Change: On our new leases.

Speaker Change: That's certainly driving the average concessions of one five months for the entire portfolio that we're projecting for the full year in terms of concessions. It certainly varies it varies by Submarket. It varies by size across the markets and certainly varies as I mentioned between new and renewal leases.

Laura Elizabeth Clark: It varies by sub-market, it varies by size across the markets, and certainly varies, as I mentioned, between new and renewal leases. In terms of your second question around how we determine market rents and market rent growth within our portfolio, our team does an incredible job every single quarter. Thank you so much to the team, by the way, since you're on the call listening. But they do an incredible job every quarter.

Speaker Change: In terms of your second question around how we determine.

Speaker Change: Market rents and market rent growth within our portfolio.

Speaker Change: Our team does an incredible job every single quarter. Thank you so much to the team by the way that sensor on the call listening.

Speaker Change: But they do an incredible job every quarter bottoms up analysis, we have over 600 spaces within our portfolio and we apply a market rent to each space quarterly and that market rent. The rent that we believe that we would lease that space out today, and then we compare that rent back to the prior quarter and the market rent that we thought that we can.

Laura Elizabeth Clark: Bottom up analysis, we have over 1,600 spaces within our portfolio, and we apply a market rent to each space quarterly. And that market rent is the rent that we believe we would lease that space at today. And then we compare that rent back to the prior quarter and the market rent that we thought we could lease the space at in the prior quarter. And that's how we determine market rent growth for our portfolio.

Speaker Change: Lease the space out in the prior quarter and Thats, how we determined market rent growth for our portfolio.

Greg Michael McGinniss: Okay, and then I guess at the end of last year it seemed like there was a greater openness to utilizing dispositions to fund investment activities. Did you end up taking any steps to test the market? And what were you seeing on cap rates? And did that maybe kind of push you to stick with equity funding and the convert instead of asset sales?

Okay.

Speaker Change: And then I guess at the end of last year. It seemed like there was a greater.

Speaker Change: Openness to utilizing dispositions to fund investment activities did you end up taking any steps to test the market and what were you seeing on cap rates.

Speaker Change: And did that may be kind of push you. This sticking with equity funding in the convert instead of asset sales.

Michael S. Frankel: Yeah, hi. Actually, we have increased activity on dispositions this year. We announced a $10 million sale with $50 million of dispositions either under contract or accepted offer. And so we're actually providing more transparency this year on some increase in activity this year, actually. And maybe, to your point or question, maybe reflected the perception, at least earlier this year, that we were in a more stable interest rate environment.

Speaker Change: Yes, Hi, no actually we have increased activity on dispositions this year.

Speaker Change: We announced a $10 million sale with a $50 million of dispositions either under contract.

Our accepted offer and so we're actually providing more transparency this year on.

Speaker Change: Some increase in activity this year actually and.

Speaker Change: And maybe maybe to your.

Speaker Change: To your point or question, maybe reflected to the perception at least earlier this year.

Speaker Change: That we were in a more stable interest rate environment.

Michael S. Frankel: And I'll just add that Michael

Speaker Change: And I'll just add to Michael's comments.

Michael S. Frankel: And I'll just add to Michael's comment that for this position we completed for $10 million, the in-place cap rate was 4.2%.

Speaker Change: Dispositions, we completed for $10 million.

Speaker Change: In place cap rate was four 2%.

Michael S. Frankel: Okay, but it's not, but I guess there's not really any expectation that disposition will become a meaningful part of the capital structure in terms of how you're raising funds for acquisitions or for the repositioning redevelopment portfolio. Well, it depends how you define me.

Speaker Change: Okay.

Speaker Change: And I guess, there's not really any expectation that dispositions will become a meaningful part of the.

Capital structure in terms of how you are.

Speaker Change: Raising funds for acquisitions or for the repositioning redevelopment portfolio spend well it depends how you define meaningful but we think it is a very important part of our strategy. It's a very important source of accretive capital and so it really depends how you define meaning.

Michael S. Frankel: Well, it depends how you define meaningful, but we think it's a very important part of our strategy. It's a very important source of accretive capital. And so it really depends how you define meaningful. And that's why we also provide a little additional disclosure on the immediate pipeline to give folks a better sense of where the activity is.

Speaker Change: A meaningful and that's why we also provide a little additional disclosure on the immediate pipeline to give folks a better sense of where the activity is.

Greg Michael McGinniss: Okay, thank you.

Speaker Change: Okay. Thank you.

John P. Kim: Your next question comes from the line of John Kim with BMO Capital Markets.

Speaker Change: Your next question comes from the line of John Kim with BMO capital markets.

John P. Kim: I wanted to ask about the pricing of your off-market transactions with Blackstone. The 4-7 initial cap rate seems a little tight, just given the limited mark-to-market. It wasn't created for you, I realize, based on your cost of capital, but a lot of your competitors don't have that cost of capital. So I was wondering how you came up with that pricing and where you think this would go out in the open market. Yeah, I

John P. Kim: Thank you.

John P. Kim: I wanted to ask about the pricing of your off market transactions with Blackstone.

John P. Kim: Seven initial cap rate seems a little tight just given the limited mark to market. It was accretive to you I realized based on your cost of capital, but a lot of your competitors don't have that cost of capital. So I was wondering how you came up with that pricing and where you think this would go out in the open market.

Howard Schwimmer: Hi John, it's Howard. Well, we're seeing transactions in terms of the current market. There was one that just closed that was, you know, literally a three, I think it was a two seven, with some vacancy growing to a five in year two, with some with obviously some lease up risk in it. And there are quite a few other transactions under contract that when they close, I think they'll represent a little bit of cap rate compression, even some of the cap rates we've seen recently.

Howard Schwimmer: Hi, John its Howard.

Howard Schwimmer: We're seeing transactions in terms of the current market.

There was one that just closed there was literally.

Howard Schwimmer: Sure.

Howard Schwimmer: I think it was a two seven with some vacancy growing to a five in year two.

With some with obviously, some some lease up risk in it.

Howard Schwimmer: There's quite a few other transactions under contract.

Howard Schwimmer: When they close will represent a little bit of.

Howard Schwimmer: Cap rate compression and even some of the.

Howard Schwimmer: Cap rates, we've seen recently, but in terms of how we curated this portfolio it was a balance between.

Howard Schwimmer: But in terms of, you know, how we curated this portfolio, it was a balance between finding high-quality assets with great functionality and location that had some growth within them. And so, you know, the initial yield, the four seven growing to the five six, you know, had the upside we were looking for. And frankly, it's interesting, you know, in the past, you probably heard us talk about how we conservatively underwrite the portfolio is actually performing a little bit already. We've had some renewals and some rents that we've been able to put in place that are already outperforming underwriting.

Howard Schwimmer: Finding high quality assets with great functionality and location.

Howard Schwimmer: That had some growth.

Howard Schwimmer: Within them.

Howard Schwimmer: And so.

The initial yield of four seven growing too.

Howard Schwimmer: The five six.

Had the upside we were looking for and frankly, it's interesting in the past you've probably heard us talk about how we conservatively underwrite.

The portfolio is actually performing a little bit already we've we've had some.

Renewals and some rents so we've been able to put in place that are already outperforming underwriting.

Howard Schwimmer: Did you get a sense that if it didn't go to Rexford, then a similar pool of assets would have gone to one of your public peers?

Howard Schwimmer: Could you get a sense that if it didnt go to <unk>.

Howard Schwimmer: A similar pool of assets, we've gone to one of your public peers.

Howard Schwimmer: Not necessarily because we really curated the portfolio directly with Blackstone. There wasn't a broker involved. And this was really building upon 10 years of a relationship that we have with Blackstone Principals, where we've been seeking to be able to transact with them. And it was a unique opportunity that came up. And it wasn't a scenario where they said, hey, we're bringing something to market, and you want an early shot at it. It was really a collaboration between us.

Howard Schwimmer: No not necessarily because we really curated the portfolio directly with blackstone's or was there wasn't a broker involved and this was really building upon 10 years of relationship that we have with Blackstone principles.

Where we've been seeking to be able to transact with them and it was a unique opportunity that came up and it wasn't a scenario, where they said hey, we're bringing something to market you want an early shot out of it was really a collaboration here. So no. It really wasn't something that would have just gone to somebody else.

Howard Schwimmer: So, no, it really wasn't something that would have just gone to somebody else. And frankly, if Blackstone had, in fact, decided to market this particular portfolio, the marketplace right now, in terms of capital coming back to the market, we think, would have transacted, possibly a little tighter even.

Howard Schwimmer: Frankly, if Blackstone had in fact decided to market this particular portfolio.

Howard Schwimmer: The marketplace right now in terms of.

Howard Schwimmer: Capital coming back to the market we think.

Howard Schwimmer: Would have transacted, possibly a little tighter even.

Howard Schwimmer: And, John, just to provide an additional perspective, you know, these are assets that we are very familiar with. We've been underwriting them, offering on them, and many of them, long before Blackstone even owned them. So that gave us an inherent informational advantage in terms of crafting the portfolio together with Blackstone.

Speaker Change: John just to provide additional perspective. These are assets that we are very familiar with we've been underwriting them offering on them and many of them long before Blackstone even own them. So that gave us an inherent informational advantage.

Speaker Change: In terms of crafting the portfolio together with Blackstone.

Howard Schwimmer: Okay, I wanted to ask about your redevelopment and repositioning portfolio and the leasing interest that you have on projects under redevelopment, and particularly some of the larger assets, including 500 DuPont Avenue, if there's... Strong Demand or Weaker Demand for Larger Boxes. Redux.

Speaker Change: Okay I wanted to ask about your redevelopment and repositioning portfolio and the leasing interest that you have on.

Speaker Change: Projects under redevelopment and particularly some of the larger assets, including 500 coupon Avenue.

Speaker Change: If there is.

Speaker Change: <unk> demand or weaker demand for larger bonkers readouts.

Yeah, So well first of all I'll, just I'll just want to.

Howard Schwimmer: Yeah, so, well, first of all, I just want to frame how the market here functions. Most all of the assets in Southern California come to market generally on a speculative basis. You know, typically, there's not a lot of pre-leasing, but it does happen here and there. We have many instances where we've pre-leased some of the assets.

Speaker Change: Frame, how the market here functions, most all of the assets in southern California come to market generally on a speculative basis.

Speaker Change: Typically there's not a lot of pre leasing, but it does it does happen here and there we have many instances where we've pre lease some of the assets.

Howard Schwimmer: So, you know, we're on the right path. There's nothing unusual about our repo redevelopment pipeline right now or any of the activity associated with it. But that said, you know, we just completed the asset you were speaking about, the 275,000 feet in the Inland Empire West, and we do have very good activity on it. We actually have two parties we're trading paper with, and we're encouraged that we might exceed the lease-up timeframes with something in the very near future.

Speaker Change: So we're on we're on the right path, there's nothing unusual about.

Speaker Change: Our repo redevelopment pipeline right now.

Speaker Change: Any of the activity on it but that said, we just completed the asset you are speaking to the 275000 feet in the inland Empire West.

And we do have very good activity on it we actually have.

Speaker Change: Two parties, we're trading paper with.

Speaker Change: We are encouraged that we might exceed.

Lisa.

Speaker Change: The lease up Timeframes with something.

Speaker Change: In the very near future.

Howard Schwimmer: Your next question comes from the line of Craig Mailman with Citigroup.

Lisa: Great. Thank you.

Lisa: Your next question comes from the line of Craig Mailman with Citigroup.

Craig Allen Mailman: Hey guys, to go back to the rent question, I understand the methodology. I guess if you guys kind of just brought it out to a sub-market level in aggregate versus maybe what CBRE is reporting for the quarter, what's the sort of the outperformance of your specific pool versus what some of the brokerage firms have put out there? Could you give us a sense of whether that spread between where you guys are estimating your market rents is versus where the market view of rents is, if that's held pretty steady in terms of your hit rate on accuracy versus. The, you know, the bigger picture kind of view of the markets that we all kind of focus on here from that

Hey, guys.

If you go back to the direct question.

Craig Allen Mailman: I understand the methodology I guess.

Craig Allen Mailman: You guys kind of just.

Craig Allen Mailman: It out to a sub market level.

In aggregate versus maybe what CBRE.

Craig Allen Mailman: <unk> is reporting for the quarter, what sort of the outperformance of <unk>.

Craig Allen Mailman: Your specific pool versus what some of the brokerage firms have put out there could you give us a sense of.

Craig Allen Mailman: If that spread between where you guys are <unk>.

Craig Allen Mailman: Debating your market rents are versus where kind of the market view of rents are.

Craig Allen Mailman: Thats held pretty steady in terms of.

Craig Allen Mailman: Hit rate on accuracy versus the.

Craig Allen Mailman: The.

Craig Allen Mailman: Bigger picture kind of view of the markets that we all kind of focus on this year from the headlines.

Michael S. Frankel: Yeah, I think it's a great question, Craig. Thanks so much for joining us today.

Speaker Change: Yeah, I think it's a great question Craig Thanks, so much for joining us today.

Michael S. Frankel: And I think a couple of things. One, the primary difference in how we report rents versus what you're hearing in the market in general is that the market, in general, is fundamentally covering a different pool of assets. And I think consistently, to your question, consistently through time, we've observed that around 80% of the negative net absorption driving those numbers in the market overall is generally driven by very much lower quality, lower functionality, even obsolete products. And this is almost a 2 billion square foot market with over a billion square feet built well before 1980. So that is the vast majority of the marketplace.

Speaker Change: And I think a couple of things one the primary difference and how we report rents and versus what Youre hearing in the market in general is that the market in general is fundamentally covering a different pool of assets and I think consistently to your question consistently through time, we've observed that around 80% of the negative net absorption driving those numbers in the market.

Speaker Change: Overall is generally driven by very much lower quality lower functionality, even obsolete product and this is almost a 2 billion square foot market with over 1 billion square feet built well before 1980. So that is the vast majority of the marketplace.

Michael S. Frankel: And then, in terms of driving our performance, it's a function of higher quality, higher functionality, and better locations. And I think what's interesting is that each quarter, we tend to give our view of market rents, which is also informed by our actual leasing activity. So what we've also found is that our actual leasing activity as we move forward has tended to exceed what we thought our rents were for our portfolio. So I think that the answer to your question is that we've been pretty accurate and pretty consistent. If anything, actually, and this might be a little counterintuitive, it doesn't necessarily predict the future, we've probably been underestimating very slightly our portfolio.

Speaker Change: And then in terms of driving our performance, it's a function of the higher quality higher functionality better locations and I think what's interesting is that each quarter. We tend to give our view of market rents, which is also informed by our actual leasing activity, but what we've also found is that our actual leasing activity as we move forward has tended to exceed what we thought our rents.

Speaker Change: We're for our portfolio.

Speaker Change: So I think that to answer your question is we've been pretty accurate and pretty consistent if anything actually and this might be a little counterintuitive that doesn't necessarily predict the future, we've probably been underestimating very slightly for our portfolio.

Craig Allen Mailman: Okay, that's helpful. And then as we think about the Blackstone portfolio you guys just purchased, could you just go through a little bit of the characteristics of it from a sub-market perspective, how much of it is kind of traditional industrial versus maybe R&D, just any kind of deeper dive into kind of what

Speaker Change: Okay. That's helpful.

Speaker Change: And then as we think about the Blackstone portfolio you guys. Just purchase could you just go through a little bit.

Speaker Change: Kind of the.

Speaker Change: Characteristics of it from a submarket perspective, how much of it is probably the traditional industrial versus maybe.

Speaker Change: Randy just any kind of a deeper dive into kind of what.

Howard Schwimmer: Sure. Hi Craig.

Speaker Change: What it consist of.

Howard Schwimmer: It's Howard. Well, first of all, as I mentioned in a previous comment, we curated this portfolio with Blackstone. So it is right in the bullseye of the product that Rexford owns and operates in the marketplace. And what I mean by that is it's all low finish, a highly functional industrial. The product is primarily, you know, 70% of it was in the L.A. markets, 30% of it was in Orange County, and one minuscule 33,000-foot building was in Chino, which is the Inland Empire West.

Howard Schwimmer: Sure Craig its Howard.

Howard Schwimmer: Well first of all as I mentioned on a previous comment.

Speaker Change: We curated this portfolio with Blackstone.

Speaker Change: Oh It is right in the Bull's eye of the product the Rexford owns and operates in the marketplace and what I mean by that is it's all low finish.

Speaker Change: Highly functional industrial.

Speaker Change: The product is primarily.

Speaker Change: 70.

Speaker Change: Percent of it was in the la.

Speaker Change: Markets, 30% of it was in the Orange County.

Speaker Change: One munis.

Speaker Change: Munis skill 33000 foot building was in Chino, which is the inland Empire West. So it is it is exactly where we want to own real estate and it's the best performing markets.

Howard Schwimmer: So it is exactly where we want to own real estate, and it's the best performing market that we've seen through cycles. So, you know, that said, the average size space in that portfolio is 43,000 square feet. And if you had done some deep research on deliveries to the market, what you'd find is that for decades, no one has been able to deliver space in those size ranges to the marketplace because the math doesn't work between land values, construction costs, and rents. And so there are huge barriers in terms of any competition around that type of product.

Speaker Change: That we've seen through cycles.

Speaker Change: So that said the average sized space.

Speaker Change: In the portfolio was 43000 square feet.

Speaker Change: And if you had.

Speaker Change: <unk> done some deep research on <unk>.

Speaker Change: Deliveries to the market what you'd find is that for decades, no. One has been able to deliver space in those size ranges to the marketplace because the math doesn't work between land values construction costs and rents.

Speaker Change: And so there is.

Speaker Change: Huge barriers in terms of any.

Speaker Change: Competition around that type of product and especially when you get into the quality of the assets sort of back to Michael's comments about what really it comes to the market in terms of aging.

Howard Schwimmer: And especially when you get into the quality of the assets, you know, sort of back to Michael's comments about what really comes to the market in terms of age and quality. So, you know, and then looking at the portfolio, leases that were in place for about 10% below market value, rent steps average 3.9%. And the weighted average lease term is 3.2 years. So there's this near-term stabilization, which gets us up to that 5.6%.

Speaker Change: Age and quality.

Speaker Change: So then looking at the portfolio leases that were in place for about 10% below market in place rent steps averaged three 9%.

Speaker Change: The weighted average lease term is three two years so.

Speaker Change: There is there is near term stabilization, which gets us up to that five 6%, but we're locking in 4% eschar.

Howard Schwimmer: But we are, we're locking in 4% escalators in these leases. So, you know, there's a great compounding effect. And then there's a little bit of value-add work here and there, just to do some light modernization and some, you know, functional improvements, maybe a little bit of loading we can add and some fenced yards and so forth that'll add more value in future periods and potentially even more value creation down the road.

Speaker Change: Escalators in these leases.

Speaker Change: So theres a great compounding effect.

Speaker Change: And then theres, a little bit of value add work here and there just to do some light modernization.

Speaker Change: Functional improvements, maybe a little bit of loading we can add in some sense yard so forth that will add more value in the future periods and potentially even more value creation down the road.

Craig Allen Mailman: Great. And one last one.

Speaker Change: Great and one one last one Michael I know you guys.

Michael S. Frankel: Michael, I know you guys, you know, cost of capital. You try to find assets that are creative about that. And so it's not necessarily dependent on where your spot cost of capital is. But at these levels, would you be a buyer of assets here today at similar cap rates to what you just bought, or if there's cap rate compression, or would we expect to see Rexford kind of move to the sidelines until your cost of equity improves?

Of.

Speaker Change: Cost of capital.

Speaker Change: Try to find assets that are accretive to that and so it's not necessarily dependent on where your spot cost of capital is but at these levels.

Speaker Change: Would you be a buyer of assets here today at similar cap rates to what you just bought or if there is cap rate compression or would we expect to see rexford kind of move to the sidelines to your cost of equity improves.

Speaker Change: You know, we don't give guidance on what we haven't closed yet, but I will tell you that we're going to focus on investment opportunities that we believe give a lift to our costs to our stock price more than overcome the cost of capital at the time that we're buying.

Michael S. Frankel: You know, we don't give guidance on what we haven't closed yet, but I will tell you that we are going to focus on investment opportunities that we believe give a lift to our stock price that more than overcomes the cost of capital at the time that we're buying.

Speaker Change: Great. Thank you.

Nicholas Patrick Thillman: Your next question comes from the line of Nick Thillman with Baird.

Speaker Change: Your next question comes from the line of Nick <unk> with Baird.

Nicholas Patrick Thillman: Hey, good morning out there. Maybe touching a little bit on just scrolling through your leasing activity over the last five quarters, around 20 to 25% of leases expiring have been moved into repositioning or redevelopment. I guess looking into 24 and 25 expirations, are we expecting a similar level? Or is that just elevated from the acquisition activity we saw in 21 and 22?

Nick: Hey, good morning out there, maybe touching a little bit on just scrolling through your leasing activity over the last five quarters around like 20% to 25% of leases expiring about moved into repositioning or redevelopment I guess looking into 'twenty four 'twenty five explorations are we expecting a similar level or is that just elevated from like the acquisition.

Nick: The activity we saw in 2022.

Howard Schwimmer: Yeah, I mean, I think we talked a lot about last quarter, you know, the opportunities that we've, within the portfolio, to be able to execute on our value creation plans, and that comes, you know, at the point of acquisition where we set strategic plans around every single asset, and so last quarter we moved a number of projects, we actually moved ten projects into repositioning and redevelopment into the pipeline, and so we've looked, we try to look as far deep into the pipeline as possible and give you as much visibility as possible, and so we're incorporating projects that, that, you know, we believe that there's a reasonable likelihood that we'll execute on a repositioning and redevelopment plan over the next 12 to 18 months. You'll also notice that we didn't move any additional projects into repositioning and redevelopment this quarter because we're giving you that forward look, and we included those properties last quarter.

Speaker Change: Yeah, I mean, I think we talked a lot about last quarter and the opportunities that we have.

Speaker Change: Within the portfolio to be able to execute on our value creation plan and that comes at the point of acquisition were reset strategic plans around every single asset and so last quarter. We moved a number of projects based on the 10 projects into repositioning and redevelopment into the pipeline and so we've looked we try to look as far deepened.

Speaker Change: The pipeline as possible and give you as much visibility as possible and so we're incorporating projects that that we believe that there's a reasonable likelihood that we will execute on our repositioning and redevelopment plan over the next 12 to 18 months Youll also notice that we didnt move any additional projects into repositioning and redevelopment this quarter.

Speaker Change: Because we are giving any of that forward look and we included those properties last quarter.

Howard Schwimmer: So what's in the disclosure is kind of what you planned on, what you have visibility on today.

Speaker Change: So what's the disclosure as part of what you've planned on what you have visibility today if.

Howard Schwimmer: That's correct. In the next 12 to 18 months.

Speaker Change: If that's correct or then over the next 12 to 18 Yep.

Laura Elizabeth Clark: Okay. And then Laura, maybe just touching on bad debt in the quarter. You guys did call up one specific tenant, but then you reaffirmed kind of the guide expectations for the year. So just a little bit more color on that would be helpful. Yeah, absolutely. So our bad

Speaker Change: Okay, and then Laura maybe just touching a little bit on bad debt in the quarter you guys did call for one specific tenant, but then reaffirmed kind of the guide expectations for the year. So just a little more color on that would be helpful. Thank you.

Laura Elizabeth Clark: Yeah, absolutely. So our bad debt guidance for the full year is 40 to 50 basis points, in line with pre-pandemic levels. Our tenant health remains very stable. When we look at our watch list, we have less than five tenants on our watch list, and we have over 1,600 tenants within our portfolio. And that's remained very consistent in line with what we've seen in the past 12 to 24 months. However, in terms of this quarter, we did see an increase in bad debt.

Laura Elizabeth Clark: Yeah, absolutely so our bad debt guidance for the full year is 40% to 50 basis points in line with pre pandemic levels.

Laura Elizabeth Clark: Our tenant health remains very stable and when we look at our watch list, we have less than five tenants on our watch list and we have over 600 tenants within our portfolio and that's remained very consistent and in line with what we've seen in the past.

One month to 24 months in terms of this quarter, we did see an increase in bad debt. It was isolated to a single tenant.

Currently that tenant was on our pre watch list and that was already incorporated into guidance, which is why youre not seeing as increased guidance. So we feel good about where our bad debt expectations are for the full year.

Laura Elizabeth Clark: It was isolated to a single tenant. Importantly, that tenant was on our pre-watch list, and that was already incorporated into guidance, which is why you're not seeing increased guidance. So we feel good about where our bad debt expectations are for the full year. Currently, you know, for Q2 to Q4, that would imply bad debt of about 30 basis points through the rest of the year.

Laura Elizabeth Clark: Currently for Q2 to Q4 that would imply that that Oh.

Laura Elizabeth Clark: Of about 30 basis points through the rest of the year.

Speaker Change: That's it for me thank you.

Speaker Change: Thank you.

Speaker Change: Your next question comes from the line of Vikram Malhotra with Mizuho.

Vikram L. Malhotra: Your next question comes from the line of Vikram Malhotra on Mizoram.

Vikram L. Malhotra: Thanks for taking the questions maybe just first fund.

Vikram L. Malhotra: Thanks for the questions. Maybe just the first one, with the Tireco extension deal, what does that do to sort of your three-year outlook, kind of getting to the 14 to 17 for the next two years that you sort of outlined last quarter?

Vikram L. Malhotra: With the <unk> extension this video.

Vikram L. Malhotra: So what does that do to sort of your three year outlook kind of to get to the 14% to 17 for the next two years that you sort of outlined last quarter.

Laura Elizabeth Clark: No change in our outlook as we communicated; you know, this was within our expectations.

Speaker Change: There's no change in our in our outlook as we communicated them.

Speaker Change: This was within our expectations.

Laura Elizabeth Clark: So you're still expecting 25 and 26 to be for FFO to be about 14 to 17 percent?

Speaker Change: Okay.

Speaker Change: So you're still expecting a 20.

Speaker Change: 502006 to be practical to be about 14% to 17%.

Laura Elizabeth Clark: Well, based on the math, again, going back to our forecast for the next three years, it's an average annual growth of 11 to 13 percent. This year, we're anticipating growth of 6 percent on an FFO per share basis at the midpoint, so that would imply higher growth in 2025 and 2026, and importantly, that's being driven by the repositionings and redevelopments that we have in the pipeline or are projected to start and the delivery of those.

Speaker Change: Based on the math again going back to our our forecast for the next three years as an average annual growth of 11% to 13%. This year, we're anticipating growth of 6% on an <unk> per share basis at the midpoint. So that would imply that would imply higher growth in 'twenty five 'twenty six and importantly, that's been.

Speaker Change: Driven by the repositioning and redevelopment that we have in the pipeline are there or are projected to start and the delivery of those.

Laura Elizabeth Clark: Got it. Okay, that's helpful. Laura, I think you gave us the gap mark-to-market of the portfolio. Do you mind just giving us where the cash mark-to-market is today?

Got it okay. That's helpful.

Speaker Change: Laura I think you gave us the GAAP mark to market of the portfolio would you mind, just giving us where the cash mark to market is today.

Laura Elizabeth Clark: Yeah, the cash mark to market today is 33%. That compares to 38% at the end of the fourth quarter. I'll give you the drivers of that, which I'm sure you'll find helpful. So that's a five percentage point change, and that's being driven by 100 basis points from the leasing that we completed in the quarter, the conversion of the mark to market there. As a note, that equated to $7 million of NOI annually that we've been able to capture through the conversion of mark to market just this quarter. 100 basis point impact from any vacant units within the portfolio, 100 basis point impact from contractual rent steps of 3.6%, which is our portfolio average, and then a 200 basis point impact from our first quarter acquisition.

Laura Elizabeth Clark: The cash Mark to market today is 33% that compares to 38% at the end of fourth quarter I'll give you.

Laura Elizabeth Clark: The drivers of that which I'm sure you'll find helpful.

Laura Elizabeth Clark: So thats a five percentage point change.

Laura Elizabeth Clark: That's being driven by 100 clients from leasing that we that we completed in the quarter the conversion of the mark to market there.

Laura Elizabeth Clark: Note that equated to $7 million of NOI annually and that we've been able to capture through the conversion of mark to market just this quarter.

Laura Elizabeth Clark: <unk> basis point impact from any vacates within our portfolio of 100 basis point impact from contractual rent steps of three 6%, which is our portfolio average and then 200 basis point impact from our first quarter acquisition.

Vikram L. Malhotra: Okay, that's really helpful. And then just last one, some of your peers have called out, you know, 3PL weakness in the broader sort of SoCal market. I know your markets are different, your blocks are different, but do you have a rough sense of whether these are larger 3PLs or maybe the smaller regional ones? What's the portfolio exposure to 3PLs?

Speaker Change: Okay. That's really helpful. And then just last one I guess some of your peers have called out.

Speaker Change: PPL weakness in the broader sort of socal market I know your markets or just forget blocks that different but.

Speaker Change: Do you have a rough sense of whether these are larger GPS so maybe the smaller regional ones, what's the portfolio exposure to Cps.

Michael S. Frankel: Hey, Vikram. Thank you again so much for joining us today. It's Michael.

Speaker Change: Hey, Vic Rob. Thank you again, so much for joining us today is Michael and again, when we hear a peer mentioned three pills theyre talking about spaces larger than 200000 square feet actually averaging closer to $3 to 400000 square feet. So it really is a different type of tenant base and I think what we've seen within our infill markets is yes, some movement among <unk>.

Michael S. Frankel: And again, when we hear a peer mention 3PLs, they're talking about spaces larger than 200,000 square feet, actually averaging closer to 300,000 to 400,000 square feet. So it really is a different type of tenant base. And I think what we've seen within our infill markets is, yes, some movement among 3PLs, but not really dramatic relative to other tenants and other sectors and other industries. It's been pretty balanced, both on the demand side, which is positive, and also on the side where there's been a negative absorption. So it is a little more balanced within our infill market.

Speaker Change: Pls, but not really dramatic relative to other tenants in other sectors in other industries, it's been pretty balanced both on the demand side on a positive and also to the.

Speaker Change: Side, where theres many negative absorption so a little more balanced within our infill markets.

Nikita Vyacheslav Bely: Your next question comes from the line of Nikita Belli with J.P. Morgan.

Vic Rob: You got it thank you.

Vic Rob: Your next question comes from the line of Mickey the belly with JP Morgan.

Okay.

Vic Rob: Okay.

Nikita Vyacheslav Bely: Are you aware of any other fixed renewal situations that are similar to the tire code that you had in your portfolio, maybe over the next 12 to 18 months?

Mickey: Are you aware of any other fixed renewal situations that are similar to prior calls that you had in your portfolio maybe over the next 12 to 18 months.

Michael S. Frankel: material at this point.

Speaker Change: No material at this point.

Speaker Change: Okay.

Michael S. Frankel: And regarding demand, where are you seeing the most activity in terms of demand, and maybe specifically which tenant category is driving most of the activity today?

Speaker Change: Regarding the demand look where are you seeing most activity in terms of demand and maybe specifically, which tenant category. What is what is driving most of the activity to date.

Michael S. Frankel: Well, I think that's the beauty of our markets and our tenant base; it's extremely diverse. And I think the trend is that there's no strong single trend from a sector perspective, which is a great thing.

Speaker Change: Okay.

Speaker Change: Well I think thats, the beauty of our markets and our tenant base is extremely diverse and I think the trend is that theres no strong single trend from a sector perspective, which is a great thing. It's one of the many reasons we focus on.

Michael S. Frankel: It's one of the many reasons we focus on infill industrial in Southern California, and focusing on generic space, by the way, which enables us to appeal to the widest, deepest, broadest, and most diverse tenant base probably in the country, maybe the world. And so the sources of demand are very, very diverse, from aerospace to the electric vehicle sector, consumer products, the building trades, which we expect to, they've really shown some And by the way, you know, that's not surprising given the fact that California has a mandate to increase housing by at least 20%, representing over 1.5 million units of housing.

Phil industrial in southern California, and focusing on generic space by the way, which enables us to appeal to the widest deepest broadest and most diverse tenant base, probably in the country and maybe the world.

Speaker Change: So the sources of demand or are very very diverse from aerospace.

Speaker Change: Electric vehicle sector consumer products.

Speaker Change: The building trades, which we expect to they've really shown.

Speaker Change: Some some positive momentum and by the way that's not surprising given the fact that California has a mandate to inc's housing by at least 20% representing over $1 5 million units of housing and so thats actually we think that's going to give us some great tailwind in terms of demand for about the next 20 plus years.

Michael S. Frankel: And so that's actually, we think that's going to give us some great tailwinds in terms of demand for about the next 20 plus years. So, extremely diverse set of drivers, actually, we had a lot of interest and activity in terms of leasing activity from e-commerce-driven tenants, which actually was elevated this last quarter compared to prior quarters in a notable way. And that's not surprising, by the way, at all. We're still in the early stages of seeing the impact of e-commerce on our distribution market.

Speaker Change: So extremely diverse set of drivers actually we had a lot of interest in activity in terms of leasing activity from E Commerce, driven tenants, which actually was elevated this last quarter compared to prior quarters.

Speaker Change: And the notable way and Thats not surprising by the way at all we're still in the early stages of seeing the impacts of e-commerce on our distribution market.

Laura Elizabeth Clark: Laura, can I ask you one other question? I think at some point, correct me if I'm wrong, you talked about maybe the mark-to-market on the portfolio for the future, like year-end 24, year-end 25. Is that something that you guys are willing or can provide at this point, the recalculation of what you think your mark-to-market on the entire portfolio will be over the next several quarters?

Speaker Change: Got it that's great Laura.

Speaker Change: One other question I think at some point correct me if I'm wrong did you talked about maybe the mark to market on the portfolio for the future like year end 'twenty four 'twenty five.

Speaker Change: That something that you guys are willing or can provide at this point the recalculation of what you think your mark to market on the entire portfolio will be over the next several quarters.

Laura Elizabeth Clark: Yeah, I mean, as we've communicated, we communicated last quarter that we're going to provide the mark-to-market as we see it each quarter because, as we know, the mark-to-market changes actually daily. As we sign leases, we're resetting the mark-to-market and moving that, and moving the mark-to-market into, will change on a quarterly and annual basis, dependent upon the leases that So we think that it's most helpful to provide you all with visibility into the mark-to-market every quarter at a point in time.

Speaker Change: Yeah.

Speaker Change: As we've communicated we communicated last quarter that we're going to provide the mark to market as we see it each quarter.

Speaker Change: Because as we know the mark to market changes actually daily as we sign leases, we're resetting the mark to market and moving that and moving the mark to market into it we'll change on it on a quarterly and annual basis dependent upon the leases that we sign. So we think that's most helpful to provide you all with the visibility into the Mark to Mark.

Speaker Change: Every quarter at a point in time.

Anthony Hau: Okay, wonderful, thank you. Your next question comes from the line of Anthony Hau with Tourist Security. Hey guys, thanks for taking my question. I noticed that you guys added four million, four million.

Speaker Change: Okay wonderful thank.

Speaker Change: Thank you.

Speaker Change: Your next question comes from the line of Anthony Hau with <unk> Securities.

Anthony Hau: Hey, guys. Thanks for taking my question.

Anthony Hau: Just that you guys added four 4 million square feet of assets into the 'twenty 'twenty, 4% shortfall, mostly in the inland Empire West in Howard County, and these assets appear to be under lease compared to the 2023 pool.

Anthony Hau: Your next question comes from the line of Anthony Hau with Tourist Security. Hey guys, thanks for taking my question.

Laura Elizabeth Clark: Yeah, thanks, Anthony, for your question. In terms of the same store pool, yes, we did add a number of assets to the same store pool. There were a few assets in that pool that had lease-up opportunity. We've actually signed a number of leases this quarter that will contribute to occupancy of about 50 basis points, actually, as we move through the year. So we're excited about the prospects there and the prospects for opportunities for growth. Thanks. Again, if you would like to ask a question, press the star, then the number.

Anthony Hau: I'm curious if you can provide any color on these assets and maybe where you think that the occupancy is going to be at year end.

Speaker Change: Yes. Thanks, Anthony for your question in terms of in terms of the same store pool, Yes, we did add a number of assets into the same store pool there.

Speaker Change: There were a few assets in that pool that have lease up opportunity, we've actually signed a number of leases this quarter.

Speaker Change: That will contribute to occupancy of about 50 basis points actually as we move through the year.

Speaker Change: So we're excited about the prospects there.

Speaker Change: And the prospects for opportunity for growth.

Speaker Change: Thanks.

Speaker Change: Yeah.

Again, if you would like to ask a question Chris as far as the number one on your telephone keypad and our next question comes from the line of Vince <unk> with Green Street.

Operator: Again, if you would like to ask a question, press star, then the number one on your telephone keypad. And our next question comes from the line of Vince Tibone with... Hi, thanks for taking my question. Are you starting to see any distressed acquisition opportunities from speculative developers?

Vince: Hi, Thanks for taking my question are you starting to see any distressed acquisition opportunities from spec developers in inland Empire West and would you be willing to actually grow your footprint and he can take on some leasing risk if the price was right.

Vince James Tibone: Hi Vince, it's Howard. Nice to hear your voice. You know, I've heard a little bit, but I haven't seen anything, you know, in mass, in terms of any type of trend like that. As far as our appetite to take on larger vacancy in a market that has an up-to-date product supply, the answer would be as simple as no.

Hi, Vince it's Howard nice to hear your voice.

Howard Schwimmer: I've heard a little bit.

Howard Schwimmer: I haven't seen anything.

Howard Schwimmer: In mass in terms of any type of trend like that.

Howard Schwimmer: As far as our appetite.

Vince: To take on larger can see in a market that has slipped or that product supply. The answer is simple no. It's not an area that we're putting any focus.

Howard Schwimmer: It's not an area that we're focusing any attention on. You know, we're more interested if we're going to buy a thing in that market for a product that hasn't been delivered to market and is not really easily replicatable in terms of the underwriting side of it. Got it, makes sense. And then kind of as a follow-up to that, what do you think the stabilized cap rate spread is today between IE West and Infill LA, you know, adjusted for a similar lease mark to market?

Vince: We're more interested if we're going to buy a thing in that market.

Vince: In the product that hasnt been delivered to market and there is not really easily.

Vince: Replicable.

Vince: In terms of the underwriting side of it.

Speaker Change: Got it makes sense and then kind of as a follow up to that what do you think the stabilized cap rate spread today between ius and infill L. A adjusted for a similar lease mark to market.

Howard Schwimmer: Um, it's hard, it's hard to say. But, you know, from some of the transactions that I think we're starting to see or products that we know are under contract, it's probably somewhere in the plus or minus 50 basis point range.

Speaker Change:

Speaker Change: It's hard it's hard to say, but.

Speaker Change: From some of the transactions that I think we're starting to see or product that we know is under contract, it's probably somewhere in the plus or minus 50 basis point range.

Speaker Change: Great. Thank you.

Operator: That concludes our Q&A session. I will now turn the conference back over to the management team for closing remarks.

Speaker Change: Thanks.

Speaker Change: That concludes our Q&A session I will now turn the conference back over to the management team for closing remarks.

Michael S. Frankel: Thank you very much for joining Rexford Industrial on today's call. We look forward to reconnecting with you and wish you well for about the next three months.

Speaker Change: Thank you very much for joining rexford industrial on today's call. We look forward to reconnecting with you and wish you well for about the next three months.

Operator: This concludes today's conference call. You may now disconnect.

Speaker Change: This concludes today's conference call you may now disconnect.

Speaker Change: Okay.

Speaker Change: [music].

Speaker Change: Yeah.

Speaker Change: [music].

Speaker Change: Thanks.

Speaker Change: [music].

Okay.

Speaker Change: Okay.

Speaker Change: [music].

Speaker Change: Yes.

Speaker Change: [music].

Speaker Change: Okay.

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Speaker Change: Okay.

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Speaker Change: Thank you.

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