Rexford Industrial Realty(US:REXR)2021-10-21 23:41Financial Data and Key Metrics Changes - Rexford Industrial reported over $880 million in acquisitions during Q3 2021, bringing year-to-date investments to over $1.3 billion, with a projected stabilized unlevered yield about 50% higher than current marketed transactions for similar quality products [12][14]. - Consolidated NOI grew by 39% and core FFO increased by 47% compared to the prior year quarter, with FFO per share rising over 30% year-over-year [13][32]. - The company maintained a low leverage balance sheet with leverage at 12.7% of total enterprise value, and net debt to EBITDA was 3.8 times, below the target leverage of 4 to 4.5 times [13][33]. Business Line Data and Key Metrics Changes - Same-property cash NOI growth averaged 9.7% on a GAAP basis and 13.3% on a cash basis, driven by strong leasing spreads of 45% and 30% on GAAP and cash basis respectively [31]. - The company achieved record leasing performance with cash and GAAP rent spreads on new leases of about 28% and 42% respectively, and renewal leases of about 44% and 61% respectively [22][23]. Market Data and Key Metrics Changes - The target markets ended the quarter with a 1.2% vacancy rate, indicating historically high demand, while market rents within the portfolio increased by 24% over the prior year [22]. - The company’s same property cash NOI growth has averaged 9% over five years, with FFO per share growth averaging 13% and dividend growth averaging 12% over the same period, all exceeding the average of other industrial REITs [14]. Company Strategy and Development Direction - Rexford Industrial focuses on infill Southern California, the highest demand logistics market, benefiting from extreme scarcity of available product and a long-term supply/demand imbalance [16][19]. - The company projects approximately $94 million in embedded NOI growth from its in-place portfolio over the next 18 to 24 months, assuming no further acquisitions [18]. - The company has a mere 1.9% market share within its 2 billion square foot market, indicating substantial growth opportunities ahead [19]. Management's Comments on Operating Environment and Future Outlook - Management noted that the pandemic-driven expansion of e-commerce and shifts in supply chains are driving warehouse demand in prime locations [15]. - The company anticipates continued strength in market conditions, with demand and market rent growth at unprecedented levels [14]. - Management increased the full-year projected core FFO guidance range to $1.60 to $1.61 per share, representing a 22% year-over-year earnings growth per share [37]. Other Important Information - The company issued a $400 million 10-year unsecured Green Bond at a 2.15% coupon, marking its first Green Bond issuance [34]. - At quarter-end, liquidity was $1.1 billion, including $60 million in cash and full availability on a $700 million credit facility [36]. Q&A Session Summary Question: What is driving the rental rate growth in the portfolio? - Management attributed the rental rate growth to low vacancy rates and high demand for quality space, with the highest rent growth in the Inland Empire West at 52% year-over-year [42][44]. Question: How does the company evaluate alternate use value in its portfolio? - Management indicated that while there are opportunities for alternate uses, the focus remains on capturing rising industrial rents, as industrial land values have grown significantly [47][53]. Question: Can you provide more details on the projected NOI growth? - The projected $94 million NOI growth over the next 18 to 24 months is derived from existing acquisitions, leasing spreads, and ongoing repositioning projects [62]. Question: What is the company's strategy regarding financing and capital needs? - Management emphasized maintaining a low leverage balance sheet and being opportunistic in capital raises, with no debt maturities until 2023 [65]. Question: How does customer economics influence rent pricing? - Management explained that rent is a small percentage of overall costs for tenants, allowing them to absorb higher rents, especially in critical locations [66][72].