Rexford Industrial Realty, Inc. Q3 FY2025 earnings call

• Portfolio Performance: Rexford's portfolio outperformed the broader infill market. Net absorption in its portfolio was significantly higher than the overall market. Same-property occupancy increased, leasing spreads were healthy, and bad debt levels were low.
• Strategic Asset Management: The vertically integrated team proactively identifies opportunities. For example, the team procured leases at 2 properties in the San Gabriel Valley totaling 556,000 square feet and disposed of a 76,000 square foot property for an accretive capital recycling opportunity.
• Capital Allocation: Focused on driving risk-adjusted returns. Executed 845,000 square feet of repositioning and redevelopment leases. Sold 3 properties totaling $54 million in the quarter, with proceeds used for share repurchases.

Rexford's portfolio outperformed the broader infill Southern California market. Net absorption in Rexford's portfolio was 1.9 million square feet compared to the overall market's 400,000 square feet. Same-property ending occupancy was 96.8%, a 60 basis point increase from the prior quarter. Leasing spreads for comparable leases were 26% on a net effective basis and 10% on a cash basis. Bad debt levels were 30 basis points year-to-date. The portfolio's rent declined 1% sequentially, compared to a 2% decline in the overall infill Southern California market.

• Raised full-year 2025 core FFO per share midpoint to $2.40, up $0.01 from prior quarter.
• Increased same-property cash NOI midpoint to 4%, up 150 basis points from last quarter.
• Executed $150 million of share repurchases funded by disposition proceeds.
• Board authorized a new $500 million share repurchase program.
• Approximately $65 million of projected annualized NOI from repositioning and redevelopment, with $41 million tied to stabilized or lease-up projects.

• Macro-economic uncertainty and tariff policy could unpredictably impact tenant demand.
• Potential pressure on re-leasing spreads into 2026-2027.
• Uncertainty around when market rents will reach an inflection point.

Q: How should we think about the run rate of 3.3 million square feet of leasing?

A: Activity on about 80% of vacant spaces, encouraged by market signs but macroeconomic uncertainty remains.

Q: Trade-off of boosting occupancy vs. elevated concessions or rent?

A: Focus on driving NOI and occupancy, buildings are higher quality, and the team proactively drives demand.

Q: How much of assets could be sold and repositioning pipeline?

A: ~$160 million under contract or LOI, repositioning/redevelopment evaluated for optimal value creation.

Q: Credit and bad debt trends?

A: ~20 tenants on watch list, bad debt negligible, reserve of 70 basis points, potential to return to historical levels.

Q: Mark-to-market and rent spreads?

A: Net effective 10%, cash negative 1%, lease maturity staggered, repositioning/redevelopment mitigates pressure.

Q: Repositioning yields vs. underwriting?

A: Stabilized 14 properties YTD with average yield 5.8%, adjusting assumptions for capital allocation.

Q: Timing of market inflection?

A: Favorable market backdrop, strong tenant health, but macro uncertainty makes prediction hard.

Q: G&A trends?

A: Focus on operating leverage, progress made, optimistic about efficiency.

Q: Elliott communication?

A: Constructive dialogue, but details not disclosed.

Q: Occupancy vs. rate focus?

A: Focus on driving cash flow today, making decisions on rate, term, etc., to capture immediate NOI