Rexford Industrial Realty (REXR) 31 Oct 182018 Q3 Earnings call transcript

Greetings, and welcome to the Rexford Industrial Realty, Third Quarter 2018 Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to Investor Relations.

We would like to thank you for joining us for Rexford Industrial's third quarter 2018 earnings conference call.

In addition to the press release distributed yesterday after market closed, we have posted a quarterly supplemental package with additional details on our results in the Investor Relations section on our website at www.rexfordindustrial.com. remarks as to Securities defined Act XXXX. Management's contain questions Litigation call, of statements forward-looking in today's and your answers may Reform On the Private

words identified may, intends, project, such seeks, predicts use Forward-looking words estimates, potential, plan, by will, variations are anticipates, believes, usually of statements the and such should, or as expects, expressions. the of similar

of cause subject forward-looking actual to income matters address and risks statements discussed related to today. include that those statements are Examples to those revenue, results or that Forward-looking differ financial from may uncertainties operating guidance.

these forward-looking Management's to statements obligation listeners in Company's the As statements a the contained assumes forward-looking future. Industrial the estimates. review no the reminder, in update statements forward-looking any with represent to filings current more encourage Rexford SEC. detailed We to related discussions

Officers, certain represents call appropriate Company's and Officer, non-GAAP your released Frankel; together and make In explanation on useful are financial on financial earnings non-GAAP measures Executive Today's Howard questions. an for GAAP and open investors. call information available and some hosted Adeel financial then the Financial Khan. such remarks, yesterday package, Company addition, why by presented release to the They Industrial's of the which present were reconciliations Company's with and supplemental call prepared information Co-Chief this to Chief is Schwimmer; the measure Rexford of will the believes conference are Michael afternoon will website, measures, we the

to the over call I turn Michael. will Now,

perspective acquisition an will as with operating follow Adeel our start our third on will welcome results market earnings our and details I and XXXX more project. our results on a update activity, will financial recent opportunity. go-forward of guidance. you, repositioning cover Rexford Howard summary as Industrial's our then with a well on quarter Thank to and some call.

call will your We then questions. for open the

our of that capitalizing the demonstrate value infill market. strong sustained upon execution our the We strength teams continued to results report industrial of driven are pleased strategy, California Southern

of XX% top FFO by the core share acquisitions exceptional We up growth XX.X% XX.X% on share On XX% portfolio grew completed on cash stabilized same of driven and NOI was occupancy year-over-year and our grew out a After the a quarter a GAAP XX.X%. same strong months. FFO property same X.X% basis netting Company GAAP year-over-year. basis on core XX $X.XX, cash property revenue at per repositioning, basis. Specifically, a ended prior Stabilized by generated NOI growth XX% XX.X% basis, basis. $XXX a on million over property and in line impact the

during demand a Our signed reflect historic XX.X% quarter continue leases tenant of remained and a to a strong square on also total with leasing GAAP with XXX cash of XXX,XXX basis. on levels basis volumes Leasing spreads spreads for feet. XX.X% the

retention Our some to with strategy our rate little reflecting trade rents this substantially for incremental downtime. XX%, higher quarter was retention

high Market tenant we overall infill a at vacancy achieved industrial markets leasing record of unprecedented with at Southern availability X%. on of XX%. continue Californian within demand market leases new impressive an our As result spreads levels below conditions and low GAAP continuing

market Our see in products truly feasibly to reduction supply markets time. continue than differentiated over with from net we constructed infill a removed are more be the as can

with tenant far in and to regard look industrial markets. many don't cyclical sight different increasing availability major supply see growth frames foreseeable we sustained infill imbalance to push demand see supply into Southern other incremental continue to fundamentals, drive have shorter future. California we the the However, growth market. very for within and no Particularly new supply dramatic demand demand, the as for the in time e-commerce the deep demand relief and delivery With to

emanating retailers two mile from the goods businesses Our or and largest serve stop consumers, going the but consumption of warehouses also ports last the to provide not the within as stop directly only regional nation's largest for first nation. last in of the zone

the by entire largest United California GDP of to economy the fifth by is to Japan California world XXXX the the economy only measured grew in surpassed In States, Germany. from and now XX.X% from national XX.X% fact share China, XXXX.

industrial on Southern our California comparatively valuation industrial and class five Rental markets cap are superior about equals of reflecting the market fundamental. by GDP. over implied XX% themselves. average a think Southern half I next state's combined. So the long-term XX California for market next largest value are over market California in are of U.S. demand infill of accounts low our rates the metrics Further the higher value rates tenant in Consequently infill largest

don't the size to probably focus and before tremendous the Southern of like California debate growth infill market, we extraordinary While industrial briefly Rexford’s opportunity need quality to on I’d us.

leading we four-fold of total shareholder XXXX returns IPO, sector have portfolio XXX%. Although July our grown the since nearly our

only portfolio square market in Southern Our XX.X currently about foot represents million California. X% share

forward, infill which transactions marketed our the through better off-market continued we economic our depth the growth opportunities to on to and translated yield. and begin of increase our unlevered extensive decades better and leverage XX% positioned to have originations size markets. extreme accretive of high generated capitalize to Looking quality quality by factors. continue fragmentation substantially investment following than to cash our the Consequently we’re SoCal of To with, market XX% be as relationships key research for core continues lightly and driven and of pipeline about

XXXX cash at asset driven enable we a of of team create investment, space basis We on specialists lifecycle construction, space, and volume add deploying market by our achieved ownership leasing substantial X.X ability are California above The effort opportunities our our Southern yield creation for not are demonstrate both value the XX% million end on feet over our to feet possible on of also to our releasing focused sector with wherever prior of with every property XXXX square a be leading available the creation extensive and us. were below stage management leases about spreads our infill well hyper also adding estimated of market. creating value we a expiring the value to repositioning X value project research capacity deep to and add have which value value of to on square do capitalize by and only our Further billion portfolio. to property throughout originations

balance an market sheet capitalize debt times with and to positioned emerging we’re value a enterprise XX.X%. ratio net a comprising of low of debt-to-EBITDA potent, Finally leverage a X.X opportunities to

long-term integral model. to our business capital commitment of represents a balance low our maintain leverage as an Our structure part sheet

ratings completed Howard. related very we've Fitch entire we quarters six that week six now reported I’m which a enabled our consecutive call is of team creativity your the to as tireless stable by work, advise intend we with our pleased to to the debt it this grade ratio to our importantly that, was entrepreneurial On to this outlook and and Most strength acknowledge dedication a further BBB well And business to the with fact growth. model. pleased like Rexford’s nine maintain over turn now with below validate our investment thank we’d extraordinary that times. are note, below In to increased ratio EBITDA times and rating

Thanks Michael, for joining everyone and us thank you today.

as to and supply themselves Our as the move differentiate pure industrial we demand continued infill fundamentals this Southern California through cycle. market

ended factors Inland quarter on the California months. weighted excluding basis with market Eastern supply a growth target from continues demand to past over benefit Infill XX property at Our shrinking produced rents asking third have growth. industrial of conversion Empire with users. a sustainable up occupancy and strong These due average other the combined XX.X% the Southern long-term an accelerating X.X% industrial to to

deliver new feeling cycles land further growth. supply needed available today virtually on to unlike forward pressure the demand to is Looking past rent no there meet

solely growth. fundamentals, not on a these we While tailwinds our strong does market sustained are certainly of Rexford market for beneficiary rely

As modernized positioned strategies unlock are feet within and been managed Core a of with uniquely our which market undercapitalized billion nearly for as of has value built to XXXX passively curing deliver X square Michael to functional obsolescence space we much we decades. for industrial stated produce throughout allow returns believe generate to to focus team creation to single repositioning our outperformance sourcing unique to value and our market back to us cycles continuing space may long-term market industrial shareholders. approach accretive for at position market. us sustained We and property

million transaction. of total Moving year activity, been start since on of acquisitions X.X the square we’ve to to year-to-date lightly million of quarter our off approximately portfolio. marketed feet have completed XX.X the XXX our market to of high the or a four acquisitions third bringing for acquisitions recent our transaction for industrial adding products Two-thirds million quality

target our image relationships Boulevard submarket rent cost Mid-Counties property XX costs. Mid-Counties high XX.X for Also at local high-quality yield to benefit currently and with dock-high acquired markets. rent. as capitalize to roll end, acquired XX% market. X.X stabilized foot cosmetic December Carmenita is acquired supply stabilization. from The in by The XX.X feet loading million. on totaling XXX% two for on we implement attractive internal well July, XX,XXX for XX% deep continue Point market we leased is opportunities The as in clear square San research million. investment foot on tenant The in tenant improvements foot we seven square X.X% We expected lease one and three effort, an positions. costs as we yield The are building and current In stabilized in estimated the for is submarket XX% designed is is X.X% Rocky the Greater to for the we two very property leased Sherman square July, Valley transaction. million quarter to foot XX million. a project after building market. deliver in Avenue projected Norwalk higher our vacant at project to X.X%. to the Fernando currently at will be estimated a XXX,XXX to acquired we North occupancy Subsequent with foot below and plan tenants in functional cosmetic Diego yield XX,XXX occupied the tenant the to We upon XX,XXX we substantially The submarket below clear on of X.X%. initial XX.X reposition be functional upgrades moderate accommodate buildings an we off Road building market yield is single constrained square modern submarket achieve In San rates a The building our to tenant

pipeline LOI completed. totals to are and and diligence are we These ahead more approximately of XXX under closing conditions customary of subject due acquisitions satisfaction of details or contract provide acquisitions transactions million. our as completion Looking will

activity, feel outsized realize can value returns. year-to-date and the portfolio our XX sold where mine disposition opportunities or has we for of we to maximized continue Regarding million we assets been

sales are buildings projected We to conditions sales with when close. square totaling assurance for no they XX sales customary presently are These closing feet subject be XXX,XXX can completed. are that you marking sale million. there consideration update approximately and will We’ll holding

to few Now I a projects. like repositioning update our of on would you

to create both While our of progress significant shareholder our platform in lease pleased value, made pipeline. continues and the execution have with we’re repositioning up we the

square Figueroa at adjacent on XXX% occupancy the increased stabilized X.X%. achieved The XX we've our to Specifically, yield project. XXX,XXX foot slightly unit core project

the yield leased We Pane foot the X.X% submarket. are at leasing tenant our increased foot single in rent. The four Avenue clear than higher XX Valley Valley the San preleased foot building Gabriel of XX% from XX square to XX yield at square stabilized We San-Fernando XXX,XXX projected X%. on in X.X% has will months only reposition in a stabilize and The costs. Nelson building XXX,XXX spaces projected project

expected to to We of preleased XXX% are January previously XXXX. foot XX,XXX our increasing X.X% on We yield in an projected in e-commerce development Avenue X.X%. report Surveyor County Ventura also rent tenant pleased projects costs delivery to square with was the projected that outperformed new

we our strongest take consolidator to the industrial country. the market what We continue a in to opportunity be advantage is and of believe

acquisition local acquisition unlocks available make. each the expertise allow we Adeel. call opportunities platform catalyze investment in-house data-driven team from to turn volume Our maximum us to our now over I'll the and value not redevelopment sharpshooter many of to And competitors.

diluted quarter operating million $X.X $X.XX approximately the our attributable share with This stockholders to quarter for XXXX, was the Beginning or $X.XX results Howard. to common $XXX,XXX compares for third you, diluted fully of Thank net fully third income of XXXX. share. of or

Company by same three For as the share was the September $XX.X Company property $X.XX representing in increase was in which partially $XX.X share a increase per XXXX, third three XXXX same compares to quarter months and was basis, FFO million ended a XX% On a in higher property $XX.X increased toward per year-over-year. compared September the was to for NOI offset core XX, the portfolio XX, acquisition share strong diluted diluted million share Core $XX fully XX.X%. past for ended an growth, FFO XXXX. activity FFO million share for months quarter, Same the months million core which of XX completed count. share

revenue NOI Stabilized X.X% expense. same Our was of impact rental of by XX.X% property increase property a basis, net and GAAP a year-over-year. a on XX.X% same NOI On the by repositioning property driven and cash operating third total X.X% increase in increased growth, was in on property cash basis. NOI same quarter basis in the XX.X%

sheet financing and balance our to activities. now Turning

diversify our over source, capital of optimize continue capital We sheet long as our and we term. grow cost to flexibility balance our maintain business the

which our quarter $XXX.X end a and full on share, the of other approximately capital, weighted cash, available the $XXX.X resulted program. of to approximately utilized million million $XXX net million $XXX quarter, and of price we common had corporate our availability issued credit $XX.X proceeds Rexford At under ATM we $XX.XX to facility these approximately for ATM working million. purposes. fund acquisition, funds million third the direct million X.X in of for shares of per During average at stock the We our

XXXX being We share our record $X.XX to XXXX. December XX, unitholders XXXX and our cash a in Board debt on have regard of per quarter XXXX dividend, our XXXX. January of with on million of XX, declared October dividend loan fourth stock maturity the common term on maturities no payable through next our for Directors of With to XX, $XXX

Additionally, as XX, of XXXX. our preferred stockholders fourth $X.XX of per quarter a share Directors December dividend for of in approximately of declared cash XX, XXXX Board payable the our stock XXXX December preferred for

from our Finally, This by to FFO better year. $X.XX share. of for increasing growth as share guidance range of range than to our portfolio activity expected per $X.XX to full was per this a so far previous we're year $X.XX well Company strong XXXX acquisition $X.XX share NOI as driven core

Specifically from we range from X.X% range same of our expect a from to X%. X% XX.X% range we X% in property NOI of now And growth growth to up of expect previous same to X.X%. NOI property up to X.X% X% to stabilized a previous range

note non-cash our For G&A, the our capital equity or impact we're $XX including compensation. a companywide million million, does transactions completes announced, any tightening activities open range million Operator? guidance that we'll of acquisition to nor we to that been $XX.X prepared market include guidance not when $X.X costs Please of about that remarks. not calculating or to have that costs the eliminated other yet questions. take typically our this metric. line any With of That

from your with first question. Group. The Korchman line Instructions] Manny question with Citi of [Operator comes Please proceed the

mentioned could do for You pipeline. $XXX Over million period that close? the what or near time will expect we you term expect

have don't typically pretty pipeline. what give up we that's lined we mentioned but months worth typically reported about on We Yes, how what is these generally are months and timing not the transactions I close, we're take had had $XXX not guidance we that the transactions. excited of million on and

So but I specifically info that can't you hopefully tell helps.

obviously one that add comment have the this to wise. how we terms timing to deploy further capital on the through Just books capital we all of in further best thing the

little So of now. that just in also add terms more what added Howard a color should

of I the that there's able else bumps markets, And push or been of any given the terms in other been options? lease lack sort economic changes terms then tight was to tenants leasing lease anything given you've of in wondering on in if or

tight the throughout there's the buildings updates market. showing market of they're are before our getting a think we’re as rents XX% the repositioning quality particular the up annualized mentioning we're done, We're in leased is we're in what's there product four really only trying a market, an project our increases few of the in are on about the results Nelson that But the not leasing, and some really still of as basis. out telling push pushing months, most I pre we drum, the projects happening of lot projects example emblematic yes of on Well, of well. and project on other a X% that increases. to We're terms

question with question. line from with Blaine next Wells Please Our is the Fargo. Heck proceed of your

your prepared just go worded the in wanted Michael, I remarks to back I point last thought was to which interestingly.

You market talked opportunities. about on emerging capitalizing

growth there the I capacity segments think guys focus or think you to opportunities. to advantage guys are particularly be mostly similarly for are taking look markets any on you areas into? of you I to wanted emerging I and that the guess would aren't going were referring now that that market sheet your balance of but guys guys you expand maybe to of any strong market sub-markets you additional

focused see consistent. consistently, market Generally County, represents represent remains Greater focus our same We're acquisitions over Ontario speaking portfolio the us of going going think on in XX% that and to should lion our I forward. stay the you the of that well area, probably LA, Orange share investing

So there's years market. to a that's within opportunity research of geographic it's the frankly if driven as Really here deploying infill processes those a originations pipeline fashion the referring to since our more the testament able so in invest an years and emerging public we've been specific to XX not quality accelerated method ago. that went we in for about been five-and-half and or

that the quality we've today was all in market, better years and place. or we're because the ago position of and that in ago work three And it all the far the so relationships to been very today than market in from benefit years pipeline of frankly is research of two the unique a cumulative doing impact our

is of seen. pipeline existing largest consider, source, week seeing have our the mining we're of to our I of new opportunities opportunities our primary which source literally our guys investments every system, know in work flow through Although you new

We work a And it's very an just and active you it's strategy result. pipeline see to opportunity better, the that as as consistent if not I shared that mentioned going here Rexford. We're haven't the we're - This have in really we think see so really always we incremental at the do a testament with getting digging the is past. we're to and we've deeper expressed. just Howard

of a properties stabilized movement looking seen just costs, kind X% to that then bit been signs this that strong a generate we construction repositioning? or few in has years, upward yield enough that X.X% and rents over there's that currently the should in could the pressure at that little reposition you guys range on at of cause a in that you land and expect have a And similar decrease have than past are stabilized yield. properties under the the the can Obviously any growth they've guys

It’s really opportunities what hard to quarter will predict quarter to be. those

our page opportunities on at new today. the about assets we're have and blended look If been yield you X.X% repositioning that there at aggregate looking

think in rates. X.X% the fit that earlier I X/X north well describing cap and range were of into you

timing of what the in contract core see and marry I in some we And other pipeline big seems Just markets on then quoting we call any terms in what side percentages to vast think the in buy past The happened terms with percentages tends book what in the one plus add value transaction. us the the of earth assets. that to buy on fairly of under we half core about kind then those and of we with type obviously seem pipeline LOIs deals the majority of the be we you And the in forth terms so what in but robust. of quarter

our outsides to add its to than important Blaine, an aspect yields. market just think of core deliver I ability those And above better that. Because got Michael I’ll

transactions. what’s tailwinds, you create And start think average Of course that on tailwinds when - market, us Howard market described think the which lightly those value have still our you’re helps efforts going to going truly Rexford those market determine off to is to create to continuing see tailwinds market differentiate but I that our value. I ability slowdown the when to the is when originations primary

cycle disproportionally assets, market seeking to value in properties we properties to these is flow team Our value-add and greater we’re these And they we’re often our cash Rexford of market work on see work developing I to even as and really differentiate in growth way focused a as with key increase physical go that forward. value growth. rent move rent built a intrinsic to business. think the move we we not ability dependent value generating more the we on is the to The opportunities. creating the is And that going when do without create through

later year late you thinking like Then swaps I touch Adeel this this on early one can you about been extended. got a of the just expiring how and next one those couple But looks those has year year you’re expiration? think one

right of Yes, consistently. $XXX have bad it flexibility about at and loan. to as XX/XX so monitor now million in I couple portfolio Blaine, we not with swap curve swapped a we term think the think and Yes term percentage after to us have that's puts million $XXX is years some I of that variable and that yield or loan obviously fixed not allows the

constantly it. are we monitoring So

in range not out about this swap XX% of fixed if in think operate to the we we've operated previously so like we’re zone. I rent,

numbers right company, try spot in see to looking how the but of at consistently make in curve we're for and think a match the overall we really ended after decision that the where those good hopefully and progressing quarter. and the we’re I yield So terms we’ll

John proceed The next Stifel. Guinee line of the question with with Please is your question. from

Adeel, days you does Rexford your remind at McGuire? of

that times reminds morning it I play of up. get I every when player not and a I does me because It have whatsoever tape those

or ballot that work XX guys? for Talk the Fox XXXX sort how split about thing, does of likely on you that gets roll

Obviously all feeding already a weight and were actually the it. going the going lot to enough behind throw XXXX commercial are signatures to There of it’s be ballot. landlords on

bought five XX Keep ago years assets over terms million mind fewer very In our we X we our million today. had in portfolio recently. feet of

were past the So within of majority of years. the assets the couple bought

dramatic. market limit almost side it the of XXX% that of there pass could Anyway in our leases solid pass at we have, structures of tax and a then us increases look that increases. ability the and you was So through isn’t the literally on lease to handful is the through only tax we

So, is think of what to a continue disruption we maybe of in the in impact ability Rexford really pushing higher. just terms rents our short-term to

the next you question Is And now yet or valued don't right land is or think how billable that do you then various cost on XX. is at. foot look still markets over is a under your it something is per per replacement being FAR, XX% guys it of in

It’s Land so County well Orange XX probably based areas, in Central the be and Angeles, see that marry say land is County even in well XX range going start cost. construction to of per of building anything gone that and to your going square over in to is dollar there Mid some South the to cost square Bay Los $XX the count the XX%. is foot land values of plus XX% and better so foot over

question Dennerlein Please proceed of Bank question. with with the next of Lynch. Joshua from The line your is America/Merrill

nervous Let impact are the leasing with the from that big to latest from ground getting any turn tariffs tenants being me picture, kind the of business? all brokers, to feedback at on

tenants changing in for from or the their that flows shutdown in of good periods really on due seen seen tariffs economy the saw labor-related the are extreme any trade change, today Today Josh, to had of question. changing which our periods shifts or movement of disruption potential even we goods ports tenant. in terms And hiccup ports, both frankly anything our view the their trade no are XXXX, in issues. slowdown its we needs really past those no to they Michael, we the not from And where space connecting in and us in the during flows. have for we the in whatsoever XXXX resulting with indication thanks

throw of need a deliver key I the they They’re tenants and is a largest nation where to think there our consumption driven. the stone serving are zone far literally again the endpoints by in they’re goods. consumption from

So delivery that goods timely where key is times dramatically. the those them from is to are key and shortening the more come location for infill less of a their the pretty ability so them about its for that fashion deliver less its course in

space increasing. businesses pretty Despite in indication possibility value in whatsoever for dramatically of the terms haven’t seen tariffs to So these is the just tenant. any we

thought push rents any that Then in quarters? to in maybe until might fell their next be I how like the the ability retention a forward on quarter, thoughts ratio few going

in or leasing are space, been we Yes actually have did ESFR the in that sprinklers, rents We instead for tenants spread push space at into that. rules pool upgraded South repositioning about in bit on we leases it extend tenant. work or the the retention. square a to the office because frankly XX% little Bay indication for was XXX,XXX to of we some the measure similar that our in would work didn’t the we didn't so go, we’re go we did didn't frankly just work six And stayed even the in And for of retention and if marketing XX% modernize have great the weren't months ability that mark-to-market other of story tenant ad, behind tenant foot it the play few And left have weren’t with to retention and a $X.XX, take tenant kept about example example. it’s which space. $X.XX, an is for the office if one there it could space extended the

frankly that is capital, little years. bit growth deliberate are XX% the retention on it’s By so incremental rates the of So, it investment in for incremental But substantially payback and on relative the low return about in value. the our two substantial way space investment. and the strategy rental result to a a annual return to a drives direct retention trade higher NAV of

that retention behind and going is to we rents. that I drive So story map really the love fundamentally are so think

The of Chris state next coming Please is [Operator One. Instructions] Capital your from the with Lucas line question. from question

sort quick a Just of question. trade the follow-up related on

sort you're NAFTA demand agreement would about impact that Just the hearing the markets if of the curious anything new you're side in? of

haven't haven't we or we any - from it be yet the might Again, tenants. indications but seen really really heard early

I bring think output economic States to United is the idea some back more frankly. to

a impact. an is So haven't if of us to demand that we overall, be any really a that could benefit benefit seen but to indication

back to this I'll Management, closing floor At turn time, the for remarks.

thank Rexford, for look to next On we'd and team we reconnecting us like behalf of forward entire joining today everybody quarter. at the to

will today's teleconference. you. Thank This conclude

may you at You your Thank for lines your participation. this time. disconnect