Rexford Industrial Realty(REXR) - 2021 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Financial Statements Presents unaudited consolidated financial statements and detailed notes for Rexford Industrial Realty, Inc. as of June 30, 2021 Consolidated Balance Sheets Consolidated Balance Sheet Highlights (in thousands): | Indicator | June 30, 2021 | December 31, 2020 | Change (%) | | :--- | :--- | :--- | :--- | | Total Assets | $5,265,726 | $4,951,174 | 6.35% | | Investments in real estate, net | $4,981,495 | $4,572,532 | 8.94% | | Cash and cash equivalents | $64,219 | $176,293 | -63.58% | | Total Liabilities | $1,432,954 | $1,420,582 | 0.87% | | Notes payable | $1,219,021 | $1,216,160 | 0.23% | | Total Equity | $3,832,772 | $3,530,592 | 8.56% | Consolidated Statements of Operations Consolidated Statements of Operations Highlights (in thousands): | Indicator | 3 Months Ended June 30, 2021 | 3 Months Ended June 30, 2020 | Change (%) | | :--- | :--- | :--- | :--- | | Total Revenues | $104,360 | $79,950 | 30.53% | | Net Income | $26,037 | $16,271 | 60.02% | | Net Income Attributable to Common Stockholders | $20,551 | $11,421 | 79.94% | | EPS - Basic | $0.15 | $0.10 | 50.00% | | Indicator | 6 Months Ended June 30, 2021 | 6 Months Ended June 30, 2020 | Change (%) | | :--- | :--- | :--- | :--- | | Total Revenues | $204,123 | $157,630 | 29.49% | | Net Income | $56,680 | $31,543 | 79.70% | | Net Income Attributable to Common Stockholders | $45,448 | $22,209 | 104.63% | | EPS - Basic | $0.34 | $0.19 | 78.95% | Consolidated Statements of Comprehensive Income Consolidated Statements of Comprehensive Income Highlights (in thousands): | Indicator | 3 Months Ended June 30, 2021 | 3 Months Ended June 30, 2020 | Change (%) | | :--- | :--- | :--- | :--- | | Net income | $26,037 | $16,271 | 60.02% | | Other comprehensive income (loss): cash flow hedge adjustment | $1,797 | $(226) | N/A | | Comprehensive income | $27,834 | $16,045 | 73.48% | | Indicator | 6 Months Ended June 30, 2021 | 6 Months Ended June 30, 2020 | Change (%) | | :--- | :--- | :--- | :--- | | Net income | $56,680 | $31,543 | 79.70% | | Other comprehensive income (loss): cash flow hedge adjustment | $5,706 | $(15,194) | N/A | | Comprehensive income | $62,386 | $16,349 | 281.69% | Consolidated Statements of Changes in Equity - Total Equity increased from $3,530,592 thousand at December 31, 2020, to $3,832,772 thousand at June 30, 2021, primarily driven by the issuance of common stock and net income[21] Key Equity Changes (Six Months Ended June 30, 2021, in thousands): | Item | Amount | | :--- | :--- | | Balance at December 31, 2020 | $3,530,592 | | Issuance of common stock, net of offering costs | $309,444 | | Net income | $56,680 | | Common stock dividends | $(65,190) | | Balance at June 30, 2021 | $3,832,772 | Consolidated Statements of Cash Flows Consolidated Statements of Cash Flows Highlights (Six Months Ended June 30, in thousands): | Activity | 2021 | 2020 | Change (2021 vs 2020) | | :--- | :--- | :--- | :--- | | Net cash provided by operating activities | $101,677 | $71,179 | +$30,498 | | Net cash used in investing activities | $(449,158) | $(210,317) | -$(238,841) | | Net cash provided by financing activities | $234,203 | $314,721 | -$(80,518) | | Increase (decrease) in cash, cash equivalents and restricted cash | $(113,278) | $175,583 | -$(288,861) | | Cash, cash equivalents and restricted cash, end of period | $64,245 | $254,440 | -$(190,195) | - The significant increase in cash used in investing activities was primarily due to a $250.3 million increase in cash paid for property acquisitions and related deposits, and a $16.3 million increase in capital expenditures[334] - The decrease in cash provided by financing activities was mainly attributable to a $64.9 million decrease in net cash proceeds from the issuance of common stock and a $16.0 million increase in dividends and distributions paid[335] Notes to the Consolidated Financial Statements Note 1. Organization - Rexford Industrial Realty, Inc. is a self-administered and self-managed REIT focused on owning and operating industrial properties in Southern California infill markets[31] - As of June 30, 2021, the consolidated portfolio consisted of 266 properties with approximately 33.0 million rentable square feet, and an additional 20 properties with 1.0 million rentable square feet were managed[31] Note 2. Summary of Significant Accounting Policies - Property acquisitions are generally accounted for as asset acquisitions, with costs allocated to individual assets and liabilities based on relative fair value[41][42] - Direct costs incurred in developing, renovating, rehabilitating, and improving real estate assets, including certain general and administrative costs, interest, real estate taxes, and insurance, are capitalized during redevelopment and construction periods[47][48] - The company elected to account for COVID-19 related rent relief agreements (accelerated future rent concessions and/or rent deferrals) as lease modifications under ASC 842, with no material impact on financial statements to date[69] - As of June 30, 2021, $3.9 million (97.6%) of $4.6 million deferred contractual base rent payments from 2020 due by June 30, 2021, have been collected, with $0.6 million outstanding[70] Note 3. Investments in Real Estate Wholly-Owned Property Acquisitions (Six Months Ended June 30, 2021): | Metric | Value | | :--- | :--- | | Number of Properties | 21 | | Rentable Square Feet | 1,547,367 | | Number of Buildings | 41 | | Contractual Purchase Price | $420,400 thousand | Property Dispositions (Six Months Ended June 30, 2021): | Metric | Value | | :--- | :--- | | Number of Properties | 3 | | Rentable Square Feet | 117,463 | | Contractual Sales Price | $28,956 thousand | | Gain Recorded | $13,610 thousand | - As of June 30, 2021, the company did not have any properties classified as held for sale, compared to one property at December 31, 2020[96] Note 4. Acquired Lease Intangibles Acquired Lease Intangibles (in thousands): | Category | June 30, 2021 | December 31, 2020 | | :--- | :--- | :--- | | In-place lease intangibles, net | $80,837 | $83,864 | | Above-market tenant leases, net | $8,723 | $8,308 | | Acquired lease intangible assets, net | $89,560 | $92,172 | | Below-market tenant leases, net | $(65,646) | $(67,256) | | Acquired lease intangible liabilities, net | $(65,646) | $(67,256) | Amortization of Acquired Lease Intangibles (Six Months Ended June 30, in thousands): | Category | 2021 | 2020 | | :--- | :--- | :--- | | In-place lease intangibles (depreciation & amortization expense) | $14,697 | $11,574 | | Net below-market tenant leases (increase to rental income) | $(6,098) | $(5,071) | Note 5. Notes Payable Total Unsecured and Secured Debt (in thousands): | Date | Amount | | :--- | :--- | | June 30, 2021 | $1,226,083 | | December 31, 2020 | $1,223,494 | Contractual Debt Maturities (as of June 30, 2021, in thousands): | Period | Amount | | :--- | :--- | | July 1, 2021 - December 31, 2021 | $1,065 | | 2022 | $2,177 | | 2023 | $289,815 | | 2024 | $13,415 | | 2025 | $250,961 | | Thereafter | $668,650 | | Total | $1,226,083 | - On June 30, 2021, the company increased the authorized borrowing capacity of its unsecured revolving credit facility by $200.0 million to $700.0 million[107] - The company was in compliance with all required quarterly debt covenants as of June 30, 2021[117] Note 6. Leases Rental Income from Operating Leases (Six Months Ended June 30, in thousands): | Category | 2021 | 2020 | | :--- | :--- | :--- | | Fixed lease payments | $163,600 | $127,500 | | Variable lease payments | $34,200 | $24,700 | | Total rental income | $197,800 | $152,200 | Undiscounted Future Minimum Base Rents (as of June 30, 2021, in thousands): | Year | Amount | | :--- | :--- | | 2022 | $325,484 | | 2023 | $290,684 | | 2024 | $238,078 | | 2025 | $186,072 | | 2026 | $142,768 | | Thereafter | $358,438 | | Total | $1,541,524 | - As of June 30, 2021, total ROU assets were approximately $4.9 million and lease liabilities were approximately $5.8 million[122] Note 7. Interest Rate Swaps - The company uses interest rate swaps as part of its interest rate risk management strategy to add stability to interest expense and manage exposure to interest rate movements[128] Interest Rate Swaps Notional Value (in thousands): | Effective Date | Maturity Date | LIBOR Interest Strike Rate | Current Notional Value (June 30, 2021) | | :--- | :--- | :--- | :--- | | 2/14/2018 | 1/14/2022 | 1.3490 % | $125,000 | | 8/14/2018 | 1/14/2022 | 1.4060 % | $100,000 | | 7/22/2019 | 11/22/2024 | 2.7625 % | $150,000 | | Total | | | $375,000 | - An estimated $5.7 million will be reclassified from Accumulated Other Comprehensive Income (AOCI) into earnings as an increase to interest expense over the next twelve months[132] Note 8. Fair Value Measurements Fair Value of Interest Rate Swaps (in thousands): | Category | June 30, 2021 | December 31, 2020 | | :--- | :--- | :--- | | Interest Rate Swap Liability | $(12,694) | $(17,580) | Fair Value vs. Carrying Value of Notes Payable (in thousands): | Date | Total Fair Value | Carrying Value | | :--- | :--- | :--- | | June 30, 2021 | $1,255,250 | $1,219,021 | | December 31, 2020 | $1,276,217 | $1,216,160 | Note 9. Related Party Transactions Management, Leasing and Development Services Revenue from Related Party (in thousands): | Period | 2021 | 2020 | | :--- | :--- | :--- | | Three Months Ended June 30 | $0.1 | $0.1 | | Six Months Ended June 30 | $0.2 | $0.2 | Note 10. Commitments and Contingencies - As of June 30, 2021, the company had commitments of approximately $26.2 million for tenant improvement and construction work[150] - All properties are located in Southern California infill markets, exposing the company to regional economic, regulatory, and social factors, including the impact of COVID-19[152] - No single tenant accounted for more than 5% of total consolidated rental income during the six months ended June 30, 2021[154] Note 11. Stockholders' Equity - Under its $750 Million ATM Program, the company directly sold 2,415,386 common shares for $118.3 million net proceeds and settled forward equity sales for 1,797,787 shares for $91.2 million net proceeds during the six months ended June 30, 2021[156][158] - Approximately $508.1 million of common stock remains available to be sold under the $750 Million ATM Program as of June 30, 2021[159] - The company partially settled Forward Sales Agreements by issuing 1,809,526 common shares for $100.0 million net proceeds in June 2021, with 7,190,474 shares remaining to be settled for an estimated $395.5 million[161][162] - Noncontrolling interests, representing approximately 4.5% of the Operating Partnership as of June 30, 2021, include OP Units, fully-vested LTIP units, and performance units[165] Note 12. Incentive Award Plan - Stockholders approved the Second Amended and Restated 2013 Incentive Award Plan on June 17, 2021, with 3,121,463 shares/units remaining available for issuance as of June 30, 2021[167][168] - Total unrecognized compensation cost related to unvested share-based awards was $27.1 million as of June 30, 2021, expected to be recognized over a weighted average remaining period of 27 months[174] Note 13. Earnings Per Share Net Income Attributable to Common Stockholders Per Share - Basic: | Period | 2021 | 2020 | | :--- | :--- | :--- | | Three Months Ended June 30 | $0.15 | $0.10 | | Six Months Ended June 30 | $0.34 | $0.19 | Note 14. Subsequent Events Properties Acquired Subsequent to June 30, 2021: | Property | Submarket | Date of Acquisition | Rentable Square Feet | Contractual Purchase Price (in thousands) | | :--- | :--- | :--- | :--- | :--- | | 4181 Ruffin Road | San Diego - Central | 7/8/2021 | 150,144 | $35,750 | | 12017 Greenstone Avenue | Los Angeles - Mid-Counties | 7/16/2021 | — | $13,500 | | 1901 East Via Burton | Orange County - North | 7/26/2021 | — | $24,211 | | Total | | | 150,144 | $73,461 | - On July 12, 2021, the company announced the redemption of all 3,600,000 shares of its 5.875% Series A Cumulative Redeemable Preferred Stock on August 16, 2021, for a total payment of $90.7 million[183] - On July 19, 2021, the board declared a quarterly cash dividend of $0.24 per common share/OP Unit, payable October 15, 2021[184] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management's discussion of financial condition, operations, key highlights, future influences, non-GAAP measures, liquidity, and debt resources Forward-Looking Statements - The report contains forward-looking statements identified by words such as 'anticipates,' 'believes,' 'expects,' 'intends,' and 'may,' reflecting current views and assumptions about future plans and strategies[187] - Actual results may differ materially due to various risks and factors, including competitive environment, real estate risks, decreased rental rates, tenant defaults, acquisition risks, natural disasters, economic conditions, interest rates, regulatory changes, financing risks, and the ongoing COVID-19 pandemic[187][188] Company Overview - Rexford Industrial Realty, Inc. is a self-administered and self-managed REIT focused on acquiring, owning, improving, redeveloping, leasing, and managing industrial real estate primarily in Southern California infill markets[190] - As of June 30, 2021, the consolidated portfolio comprised 266 properties with approximately 33.0 million rentable square feet, and an additional 20 properties with 1.0 million rentable square feet were managed[191] - The company's goal is to generate attractive risk-adjusted returns by capitalizing on scarcity of available space and high barriers to new construction in Southern California infill markets through value-add renovations and redevelopments[192] 2021 Year to Date Highlights - Acquired 21 properties (1.5 million rentable sq ft) for $420.4 million during the first six months of 2021[90][194] - Sold 3 properties (0.1 million rentable sq ft) for $29.0 million, realizing $13.6 million in gains[95][194] - Issued 2.4 million common shares for $118.3 million net proceeds via ATM program and settled forward equity sales for 1.8 million shares for $91.2 million net proceeds. Entered into new forward equity sales for 9.0 million shares ($497.6 million initial price), partially settled 1.8 million shares for $100.0 million[156][158][160][161][194][195][198] - Increased unsecured revolving credit facility to $700.0 million and amended $150 million unsecured term loan to reduce LIBOR margin[107][112][198] - Stabilized 0.4 million rentable square feet from redevelopment projects and completed repositioning/redevelopment of several properties, with many becoming 100% leased or pre-leased[198] Factors That May Influence Future Results of Operations COVID-19 Update - Most Southern California municipalities mandated commercial eviction moratoriums and rent deferral rights due to COVID-19, with many restrictions set to expire by September 30, 2021[197] - As of July 22, 2021, the company collected 98.7% of its second quarter 2021 contractual billings[199] - As of June 30, 2021, the company collected approximately $3.9 million (97.6%) of deferred rent payments due, with $0.6 million outstanding ($0.4 million due through remainder of 2021). No additional rent deferrals were granted in 2021[200][207] Market and Portfolio Fundamentals - The infill Southern California industrial real estate sector continues to exhibit strong fundamentals, with approximately 98% occupancy and limited new supply due to high barriers and land scarcity[203] - Tenant demand is robust across diverse sectors (consumer products, healthcare, aerospace, food, construction, logistics, electric vehicle industry) and is increasingly driven by e-commerce growth and last-mile distribution needs[204] General Market Conditions - Los Angeles County, Orange County, San Diego, Ventura County, and Inland Empire West all experienced strong market fundamentals in Q2 2021, with increased average asking lease rates and decreased or historically low vacancy rates[207][208][209][210][211] - Current market conditions indicate rents are likely to continue increasing throughout 2021 due to strong demand, near-capacity occupancy, and limited new development[208][209][211] Acquisitions and Value-Add Repositioning and Redevelopment of Properties - The company's growth strategy involves acquiring stabilized properties and those with value-add opportunities, including properties with below-market occupancy/rent or near-term lease roll-over, and land for ground-up redevelopment[212][213] - As of June 30, 2021, seven properties were under current repositioning/redevelopment, and three were in the lease-up stage. An additional 12 projects are in the pipeline for construction between Q3 2021 and Q3 2022[217] - Capitalized $1.6 million of interest expense and $0.8 million of insurance and real estate tax expenses during the six months ended June 30, 2021, related to repositioning and redevelopment projects[221] Rental Revenues - Operating results are primarily dependent on generating rental revenue, influenced by occupancy levels and rental rates, and the ability to lease vacant space and re-lease expiring space at favorable rates[222] Occupancy Rates Occupancy Rates (as of June 30, 2021): | Portfolio Type | Occupancy Rate | | :--- | :--- | | Consolidated Portfolio (inclusive of repositioning space) | 95.4% | | Stabilized Consolidated Portfolio (exclusive of repositioning space) | 98.2% | - Vacant space at properties under current repositioning/redevelopment or in lease-up represents 2.9% of the total consolidated portfolio square footage[224] Leasing Activity and Rental Rates New Leases (Six Months Ended June 30, 2021): | Metric | Value | | :--- | :--- | | Number of Leases | 123 | | Rentable Square Feet | 2,117,210 | | Weighted Average Lease Term | 5.5 years | | Effective Rent Per Square Foot | $14.21 | | GAAP Leasing Spreads | 40.8% | | Cash Leasing Spreads | 25.8% | Renewal Leases (Six Months Ended June 30, 2021): | Metric | Value | | :--- | :--- | | Number of Leases | 138 | | Rentable Square Feet | 2,031,328 | | Weighted Average Lease Term | 4.3 years | | Effective Rent Per Square Foot | $12.46 | | GAAP Leasing Spreads | 39.2% | | Cash Leasing Spreads | 26.7% | | Retention Rate | 76.6% | Scheduled Lease Expirations Scheduled Lease Expirations (as of June 30, 2021): | Period | Percentage of Total Owned Square Feet | | :--- | :--- | | Remainder of 2021 | 5.4% | | 2022 | 14.6% | - In-place rents for leases expiring in the remainder of 2021 and 2022 are estimated to be below current market asking rates, suggesting potential for positive renewal rates and leasing spreads[236] Conditions in Our Markets - The company's properties are primarily located in Southern California infill markets, making overall performance susceptible to regional economic and other conditions, including the ongoing COVID-19 pandemic[237] Property Expenses - Property expenses, including utilities, real estate taxes, and insurance, are generally recovered from tenants through triple net provisions or modified gross expense reimbursements[238] - Most leases include contractual 3% annual rental rate increases, which help mitigate potential increases in property expenses over time[238] Taxable REIT Subsidiary - The Operating Partnership indirectly owns Rexford Industrial Realty and Management, Inc., a taxable REIT subsidiary (TRS), which provides non-customary services to tenants and engages in activities not permitted for a REIT[239] - The TRS is subject to federal and state income tax but has a cumulative unrecognized net operation loss carryforward, resulting in no income tax provision for the six months ended June 30, 2021 and 2020[239] Critical Accounting Policies - No material changes were made to the critical accounting policies identified in the Annual Report on Form 10-K for the year ended December 31, 2020[241] Results of Operations - Consolidated results are impacted by property acquisitions, dispositions, and repositioning/redevelopment activities, leading to separate presentation of 'Total Portfolio' and 'Stabilized Same Properties Portfolio' results for comparability[243] Stabilized Same Properties Portfolio Occupancy: | Period | Occupancy Rate | | :--- | :--- | | June 30, 2021 | 98.4% | | June 30, 2020 | 97.4% | | 3 Months Ended June 30, 2021 (weighted average) | 98.5% | | 3 Months Ended June 30, 2020 (weighted average) | 97.5% | | 6 Months Ended June 30, 2021 (weighted average) | 98.4% | | 6 Months Ended June 30, 2020 (weighted average) | 97.7% | Comparison of the Three Months Ended June 30, 2021 to the Three Months Ended June 30, 2020 Total Portfolio Financial Performance (Three Months Ended June 30, in thousands): | Indicator | 2021 | 2020 | Change (%) | | :--- | :--- | :--- | :--- | | Rental income | $104,236 | $79,770 | 30.7% | | Total Revenues | $104,360 | $79,950 | 30.5% | | Property expenses | $24,555 | $18,884 | 30.0% | | General and administrative | $10,695 | $8,972 | 19.2% | | Depreciation and amortization | $36,228 | $28,381 | 27.6% | | Interest expense | $9,593 | $7,428 | 29.1% | | Gains on sale of real estate | $2,750 | $— | N/A | | NET INCOME | $26,037 | $16,271 | 60.0% | Stabilized Same Properties Portfolio Financial Performance (Three Months Ended June 30, in thousands): | Indicator | 2021 | 2020 | Change (%) | | :--- | :--- | :--- | :--- | | Rental income | $79,376 | $72,682 | 9.2% | | NET INCOME | $37,107 | $30,315 | 22.4% | - Total Portfolio rental revenue increased by $19.5 million (28.9%) due to incremental revenues from 59 acquired properties, while Stabilized Same Properties Portfolio rental revenue increased by $5.1 million (8.3%) due to higher average rental rates, increased occupancy, and bad debt recoveries[250] - Total Portfolio property expenses increased by $5.7 million (30.0%) due to incremental expenses from acquired properties and increases in repairs, real estate taxes, allocated overhead, and insurance[255] - Total Portfolio interest expense increased by $2.2 million (29.1%), primarily due to the issuance of $400.0 million senior notes in November 2020[259] Comparison of the Six Months Ended June 30, 2021 to the Six Months Ended June 30, 2020 Total Portfolio Financial Performance (Six Months Ended June 30, in thousands): | Indicator | 2021 | 2020 | Change (%) | | :--- | :--- | :--- | :--- | | Rental income | $203,880 | $157,260 | 29.6% | | Total Revenues | $204,123 | $157,630 | 29.5% | | Property expenses | $48,130 | $36,998 | 30.1% | | General and administrative | $22,175 | $18,289 | 21.2% | | Depreciation and amortization | $71,372 | $55,904 | 27.7% | | Interest expense | $19,345 | $14,877 | 30.0% | | Gains on sale of real estate | $13,610 | $— | N/A | | NET INCOME | $56,680 | $31,543 | 79.7% | Stabilized Same Properties Portfolio Financial Performance (Six Months Ended June 30, in thousands): | Indicator | 2021 | 2020 | Change (%) | | :--- | :--- | :--- | :--- | | Rental income | $156,724 | $145,648 | 7.6% | | NET INCOME | $72,471 | $60,358 | 20.1% | - Total Portfolio rental revenue increased by $37.1 million (28.0%) due to incremental revenues from 59 acquired properties, while Stabilized Same Properties Portfolio rental revenue increased by $8.5 million (6.9%) due to higher average rental rates, increased occupancy, and bad debt recoveries[265] - Total Portfolio property expenses increased by $11.1 million (30.1%) due to incremental expenses from acquired properties and increases in real estate taxes, repairs, allocated overhead, insurance, and utilities[270] - Total Portfolio interest expense increased by $4.5 million (30.0%), primarily due to the issuance of $400.0 million senior notes in November 2020[274] Non-GAAP Supplemental Measure: Funds From Operations FFO Attributable to Common Stockholders (in thousands): | Period | 2021 | 2020 | Change (%) | | :--- | :--- | :--- | :--- | | Three Months Ended June 30 | $52,398 | $38,818 | 34.98% | | Six Months Ended June 30 | $100,346 | $76,332 | 31.47% | Non-GAAP Supplemental Measures: NOI and Cash NOI Net Operating Income (NOI) (in thousands): | Period | 2021 | 2020 | Change (%) | | :--- | :--- | :--- | :--- | | Three Months Ended June 30 | $79,681 | $60,886 | 30.87% | | Six Months Ended June 30 | $155,750 | $120,262 | 29.51% | Cash Net Operating Income (Cash NOI) (in thousands): | Period | 2021 | 2020 | Change (%) | | :--- | :--- | :--- | :--- | | Three Months Ended June 30 | $71,455 | $52,005 | 37.40% | | Six Months Ended June 30 | $140,613 | $107,307 | 31.04% | Non-GAAP Supplemental Measure: EBITDAre EBITDAre (in thousands): | Period | 2021 | 2020 | Change (%) | | :--- | :--- | :--- | :--- | | Three Months Ended June 30 | $69,108 | $52,080 | 32.69% | | Six Months Ended June 30 | $133,787 | $102,324 | 30.75% | Supplemental Guarantor Information - The company's $400.0 million of 2.125% senior notes due 2030, issued by the Operating Partnership, are fully and unconditionally guaranteed by the company[289] - Separate financial statements for the Operating Partnership are not presented as its assets, liabilities, and results of operations are not materially different from the consolidated financial statements of the company[290] Liquidity and Capital Resources Overview - Short-term liquidity needs are met through available cash, cash flow from operations, unsecured revolving credit facility, and equity issuances[291] - Long-term liquidity needs for acquisitions, capital expenditures, and debt maturities are satisfied through cash flow, long-term financings, revolving credit facility, and equity/debt issuances[292] - As of June 30, 2021, the company had $64.2 million in cash and cash equivalents and $700.0 million available under its unsecured revolving credit facility[293] Sources of Liquidity - Cash flow from operations is a key source, dependent on occupancy, lease rates, operating costs, and ability to pass through expenses, with potential impacts from the COVID-19 pandemic[294] - Under its $750 Million ATM Program, $508.1 million of common stock remains available for sale as of June 30, 2021[299] - The company expects to physically settle remaining 7,190,474 shares under Forward Sales Agreements for $395.5 million cash proceeds by November 23, 2022[303] - Capital recycling through property dispositions generated $27.7 million net cash proceeds in H1 2021, used to fund five acquisitions via 1031 Exchange transactions[305] - The company maintains investment grade ratings (Baa3 from Moody's, BBB from S&P, BBB from Fitch), which are crucial for obtaining financing[307] - The unsecured revolving credit facility was increased by $200.0 million to $700.0 million on June 30, 2021, with $638.0 million available for future borrowings as of the filing date[308][312] Uses of Liquidity - Acquisitions are a significant liquidity need; year-to-date, 24 properties were acquired for $493.9 million, with over $650 million of acquisitions under contract or letter of intent[313] - Estimated $201.0 million in capital is required over the next three years (2021-2023) to complete repositioning/redevelopment projects[314] Capital Expenditures (Six Months Ended June 30, 2021, in thousands): | Type | Cost | Square Feet | Per Square Foot | | :--- | :--- | :--- | :--- | | Non-Recurring Capital Expenditures | $38,552 | 18,826,541 | $2.05 | | Recurring Capital Expenditures | $4,594 | 32,065,289 | $0.14 | Contractual Obligations - No material changes to contractual obligations outside the ordinary course of business during the six months ended June 30, 2021[316] Notice of Redemption of Series A Preferred Stock - The company announced the redemption of all 3,600,000 shares of its 5.875% Series A Cumulative Redeemable Preferred Stock on August 16, 2021, for $90.7 million[317] Dividends and Distributions - To maintain REIT qualification, the company must distribute at least 90% of its REIT taxable income annually[318] Quarterly Cash Dividends/Distributions Declared (July 19, 2021): | Security | Amount per Share/Unit | | :--- | :--- | | Common stock | $0.24 | | OP Units | $0.24 | | 5.875% Series B Cumulative Redeemable Preferred Stock | $0.367188 | | 5.625% Series C Cumulative Redeemable Preferred Stock | $0.351563 | | 4.43937% Cumulative Redeemable Convertible Preferred Units | $0.505085 | | 4.00% Cumulative Redeemable Convertible Preferred Units | $0.45 | Consolidated Indebtedness Consolidated Indebtedness (as of June 30, 2021, in thousands): | Category | Principal Balance | | :--- | :--- | | Total Unsecured Debt | $1,100,000 | | Total Secured Debt | $126,083 | | Total Consolidated Debt | $1,226,083 | Debt Composition (as of June 30, 2021): | Category | Average Term Remaining (years) | Effective Interest Rate | Principal Balance (in thousands) | % of Total | | :--- | :--- | :--- | :--- | :--- | | Fixed Debt | 6.4 | 3.05% | $1,167,584 | 95% | | Variable Debt | 2.1 | 1.80% | $58,499 | 5% | | Secured Debt | 4.0 | 3.03% | $126,083 | 10% | | Unsecured Debt | 6.4 | 2.98% | $1,100,000 | 90% | - Total consolidated indebtedness was $1.2 billion, with a weighted average interest rate of 2.99% and an average term-to-maturity of 6.2 years as of June 30, 2021[324] - The company was in compliance with all quarterly debt covenants as of June 30, 2021[330] Cash Flows Changes in Net Cash Flows (Six Months Ended June 30, in thousands): | Activity | 2021 | 2020 | Change | | :--- | :--- | :--- | :--- | | Cash provided by operating activities | $101,677 | $71,179 | +$30,498 | | Cash used in investing activities | $(449,158) | $(210,317) | -$(238,841) | | Cash provided by financing activities | $234,203 | $314,721 | -$(80,518) | - The increase in cash used in investing activities was primarily due to a $250.3 million increase in cash paid for property acquisitions and related deposits[334] - The decrease in cash provided by financing activities was mainly due to a $64.9 million decrease in net cash proceeds from common stock issuance[335] Item 3. Quantitative and Qualitative Disclosures About Market Risk The company manages interest rate risk on its variable-rate debt, with 95% of its $1.23 billion debt fixed as of June 30, 2021 - The company's primary market risk is interest rate risk, arising from variable-rate debt (LIBOR-based), which is managed using interest rate swaps[337] - As of June 30, 2021, $1.17 billion (95%) of the total $1.23 billion consolidated indebtedness had an effectively fixed interest rate, with the remaining $58.5 million (5%) being variable-rate debt[340] - A hypothetical 50 basis point increase in LIBOR would decrease annual earnings and cash flows by approximately $0.3 million, while a 50 basis point decrease (assuming a 0% floor) would increase them by approximately $0.1 million annually[340] Item 4. Controls and Procedures Management confirmed effective disclosure controls and procedures as of June 30, 2021, with no material changes to internal control over financial reporting - The company's disclosure controls and procedures were evaluated and deemed effective at the reasonable assurance level as of June 30, 2021[346] - No changes in internal control over financial reporting were identified that materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting during the period[347] PART II. OTHER INFORMATION Item 1. Legal Proceedings No legal proceedings are expected to materially adversely affect the company's business, financial condition, or operations - The company is not currently a party to any legal proceedings that are reasonably expected to have a material adverse effect on its business, financial condition, or results of operations[349] Item 1A. Risk Factors No material changes to the risk factors previously disclosed in the Annual Report on Form 10-K for 2020 - No material changes to the risk factors as set forth in the Annual Report on Form 10-K for the year ended December 31, 2020[350] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds No unregistered equity sales or proceeds were reported; 188 common shares were repurchased for employee tax withholding - No unregistered sales of equity securities or use of proceeds were reported[351][352] - The company repurchased 188 shares of common stock at an average price of $55.31 per share in April and May 2021 to satisfy employee tax withholding requirements on vesting restricted stock[353] Item 3. Defaults Upon Senior Securities No defaults upon senior securities were reported during the period - No defaults upon senior securities were reported[354] Item 4. Mine Safety Disclosures No mine safety disclosures were applicable or reported - No mine safety disclosures were reported[354] Item 5. Other Information No other information was reported in this section - No other information was reported[355] Item 6. Exhibits Lists all exhibits filed with Form 10-Q, including organizational documents, agreements, and certifications - The exhibits include Articles of Amendment and Restatement, Bylaws, Articles Supplementary for preferred stock, partnership agreements, forms of stock certificates, forward transaction confirmations, credit agreement amendments, incentive award plans, and various certifications[356] Signatures The report was signed on July 26, 2021, by the Co-Chief Executive Officers and Chief Financial Officer - The report was signed by Michael S. Frankel (Co-Chief Executive Officer), Howard Schwimmer (Co-Chief Executive Officer), and Laura E. Clark (Chief Financial Officer) on July 26, 2021[359]