Rexford Industrial Realty, Inc. Q4 FY2024 earnings call

• Welcomed Mike Fitzmaurice as new CFO and promoted Laura Clark to COO.
• Acknowledged wildfires in Los Angeles, with portfolio unaffected. Focus on supporting the team and community.
• Market conditions: Navigating choppiness post-pandemic, but long-term supply/demand in Southern California infill market intact. Rexford's infill locations outperform broader markets with rents down less than broader infill and larger box markets.
• Fourth quarter performance: Solid results, 1 million sq ft leasing, same-property occupancies down, 3 repositioning projects stabilized in Q4. Full-year acquisitions and development activity noted.
• Value creation: 3.5 million sq ft of projects under construction/lease-up with 6.1% unlevered stabilized yield. Proactive cost control to keep G&A flat despite 17% NOI growth in 2024.

In the fourth quarter, Rexford executed 1 million square feet of leasing at net effective leasing spreads of 55% and cash leasing spreads of 41% with annual embedded rent steps averaging 3.9%. Same-property average occupancies declined by 120 basis points sequentially. For the full year, the team stabilized 10 repositioning and redevelopment projects across 825,000 square feet, achieving a 7.5% unlevered stabilized yield on total investment. They closed $207 million in acquisitions in the fourth quarter and $1.5 billion of acquisitions for the full year projected to generate a 5.6% unlevered stabilized yield. Additionally, they built 5 properties for $44 million, generating a 12.8% unlevered IRR. Embedded growth is estimated at a 40% increase in total incremental NOI equal to $280 million, including annual embedded rent steps averaging 3.7% for the total portfolio, a 25% net effective portfolio lease mark-to-market, and projected incremental NOI of $75 million from repositioning and redevelopment projects under construction or in lease-up.

• 2025 core FFO per share guidance range of $2.37 to $2.41 per share.
• Same-property net effective NOI growth expected to be 1% driven by factors like longer downtime, bad debt, cash re-leasing spreads, and contractual increases.
• 2025 guidance midpoint based on current market conditions, with no assumptions on unclosed acquisitions/dispositions.

• Market choppiness, macroeconomic, interest rate, and political uncertainty impacting near-term growth.
• Longer projected downtime leading to occupancy decline, higher concessions, and increased bad debt.

Q: View on leasing activity improvement into 2025 and development leasing.

A: Leasing activity picked up in January, driven by tenant clarity on interest rates/politics and demand for quality functional space. Tenants still thoughtful, but conversions to executed leases will flow through results. $275M spend earmarked for repositioning/redevelopment in 2025.

Q: Capital allocation, acquisitions vs dispositions, buybacks.

A: Priorities shifted to capital recycling and repositioning/redevelopment. Dispositions at $105M under contract/accepted offer. Hurdle rates increased, so acquisitions would need to meet high hurdles. Stock buybacks part of capital allocation but subject to high hurdles.