Rexford Industrial Realty Inc Q4 2024 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Michael Mueller - J.P. Morgan Securities - Analyst : I was wondering, looking at the supplemental on Page 20, where you have the leasing volumes going from 3.2 million square feet in 1Q sequentially down to 1 million in 4Q. Can you talk a little bit about what's happening real time and how you see that graph playing out based on what you're guiding to for 2025?

Question: Blaine Heck - Wells Fargo Securities - Analyst : Great. And certainly, I want to pass along our sympathies to everyone affected by the wildfires. I guess with my one question, I just want to dig in a little bit more into the components of cash same-store NOI growth as possible. Obviously, there are some headwinds to occupancy, but maybe REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 06, 2025 / 6:00PM, REXR.N - Q4 2024 Rexford Industrial Realty Inc Earnings Call you can talk about the puts and takes related to rent spreads, rent bumps, bad debt. even margins and kind of the bridge or how that all builds up to get us closer to the midpoint of guidance.

Question: Andrew Berger - BofA Securities, Inc - Analyst : Hey, how's it going? I know you guys stopped providing commentary on market rent growth forecast. But I saw obviously in the presentation, you highlighted that rents for the comparable portfolio declined minus 1.5% during the quarter. And just curious if you have any high-level thoughts as to how close to the bottom we are and whether or not you think we'll see that stabilize this year.

Question: Steve Sakwa - Evercore ISI - Analyst : Yeah, thanks. Yes. As you look at your 25 lease expirations, you've got, I guess, a little over 7 million feet -- how would you sort of think about retention ratios on that? And are there any large known move-outs that you have in the portfolio this year?

Question: John Kim - BMO Capital Markets - Analyst : Thank you and good morning. Congrats to you, Mike. Can you just walk us through, again, the GAAP same-store NOI growth. I'm a little bit unclear as to why that would be lower than your cash same-store guidance the gap spreads would likely be higher than cash. You don't have the free rent impacting GAAP with cash. I know you went through the flat occupancy and the bad debt, but what else would be driving that gap same-store lower than cash? Unidentified Company Representative Yes. So the delta between our midpoint on cash at 2.5% and 1% on the net effective is really a straight-line rent as we burn off below-market leases, which are generally in our portfolio where we're at in our -- the evolution of our leases were in the back half of the leases. So that's the drag there.

Question: Greg McGinniss - Scotiabank - Analyst : Hey, good morning. I was just wondering if you could talk about your view on trying to understand the lease-up sorry, the leasing has improved or the view on leasing activity has somewhat improved into the beginning of this year, but then offset by that commentary on pushing out the development and leasing. So is that just a selective of the development leasing is what's happened recently versus kind of going on more recently on leasing? Or if you can just kind of reconcile those two comments for us? Appreciate it. Unidentified Company Representative Yes. I'll just from a guidance perspective in the range we set out there last night, it's based on today's realities with the most up-to-date information as of early this week, some of the commentary that Laura just shared with you on the nice momentum we're experiencing here over the last week with leasing activity. We take a very battle approach with budgeting every lease, every asset. We look at every specific assumption and align that with the risk of the market. And so we feel very good about where we're at with the range today and it takes into account all the information up until just a few days ago.

Question: Nicholas Thillman - Robert W. Baird & Co. - Analyst : Hey, good morning, Mike. I appreciate the commentary on redevelopment. So just and taking some of the NOI off-line. So just to drill down a little bit, you guys identified 3.3 million square feet of redevelopment and repositioning. But what percentage of that I guess, is from the 2025 expirations of the 7.5 million square feet. And what's the expected spend of that amount this year?

Question: Vikram Malhotra - Mizuho Securities USA - Analyst : Thanks for being the question. I guess I wanted to just touch on your slide. You've given some key messages. One of them is capital allocation, you referred to like no acquisitions but dispositions. So perhaps maybe just stepping back two parts to that. One, in this environment, given the superior quality you've outlined, if there is sort of a portfolio kind of once in generation that presents itself, your peers are maybe hurting more. Do you act upon that? And then capital allocation, wise, what about buybacks?

Question: Craig Mailman - Citigroup Investment Research - Analyst : Hey everyone. Just a follow-up on the capital allocation piece. It seems like you guys are clearly shying away from acquisitions, at least in the near term here. But could you just give us a sense of the stock has been depressed here for a couple of months now. Why go through with the December acquisition. Why not punt on that, use that capital for higher-yielding redevelopment and then use some of the ATM issuance you have to pull out for I guess you keep that on the balance sheet, it's not overly earnings dilutive and you can -- you saw it for buybacks -- why even spend the money on the recent acquisition at that yield given where your stock is trading?

Question: Blaine Heck - Wells Fargo Securities - Analyst : Yeah. Great. Clearly, we're still very early in the process of determining kind of the ultimate impact of the wildfires in the region. But can you share any early reads or anecdotes around potential demand that could arise for industrial space to support kind of the rebuilding effort and whether you think any specific submarkets or building sizes might see the most incremental demand?

Question: John Kim - BMO Capital Markets - Analyst : I do like the one question rule, but I did want to follow up on my question on the cap spreads you expect this year? You signed at 55% in the fourth quarter. I imagine a lot of that is going to commence in 2025. But what should we be modeling as far as GAAP spreads? Unidentified Company Representative Yeah. GAAP spreads are expected to be about 30% in 2025.

Question: Vikram Malhotra - Mizuho Securities USA - Analyst : Thanks for thanks for the follow ups too. So first on leasing. I think you said you've done 1 million square foot year-to-date. I was wondering if you could kind of break that out into new and renewal and clarify the comment you had on taking rents. I think you said were up 1.5% sequentially and 8% year-over-year. I'm just wondering how does that compare to what you have in the deck in terms of comparable rent growth? Thanks.

Question: Vikram Malhotra - Mizuho Securities USA - Analyst : The second was just you mentioned something about 8% year-over-year rent growth in taking rents and 1.5% sequentially. I just want to understand how does that compare? Or compared to what you put in the deck, which is year-over-year, your rent growth is down 8% and 1.5% sequentially.

Question: Steve Sakwa - Evercore ISI - Analyst : I just wanted to clarify, Laura, when you talked about the -- or Mike, when you talked about the 100 basis decline. Was that relating to the same-store occupancy decline, which is part of guidance? Or was that 100 basis point decline on kind of the overall portfolio, which has continued to drift down. I think it was a little over 91% at the end of the year. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 06, 2025 / 6:00PM, REXR.N - Q4 2024 Rexford Industrial Realty Inc Earnings Call