Rexford Industrial Realty(REXR) - 2024 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - For the full year 2024, the company delivered 7% growth in both core FFO per share and same-property cash NOI, demonstrating resilience despite challenging market conditions [22][24] - The fourth quarter performance included executing 1 million square feet of leasing at net effective leasing spreads of 55% and cash leasing spreads of 41% [14][22] - Same-property average occupancies declined by 120 basis points sequentially, driven by expected move-outs [14][24] Business Line Data and Key Metrics Changes - The company stabilized 10 repositioning and redevelopment projects across 825,000 square feet, achieving an aggregate 7.5% unlevered stabilized yield on total investment [15] - The average executed lease rate on 8 million square feet of 2024 leasing activity was 19% higher than the executed lease rate across the overall infill markets [12] Market Data and Key Metrics Changes - Market rents for quality products comparable to the Rexford portfolio declined by 1.5% sequentially and 8% year-over-year, which is better than the broader infill markets down 12.5% year-over-year [12] - The company observed a pickup in tenant activity and lease negotiations across vacant spaces since the start of the year [11] Company Strategy and Development Direction - The capital allocation strategy is focused on maximizing returns through capital recycling and repositioning of redevelopment opportunities [16] - The company has no acquisitions under contract or accepted offers, but has $105 million of dispositions under contract [16] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the impact of macroeconomic factors and political uncertainty on near-term growth but remains confident in long-term supply/demand fundamentals [10][11] - The company expects same-property net effective NOI growth of 1$1.4 billion in liquidity, including nearly full availability on a $1 billion revolver [27] - A$300 million share repurchase program has been authorized by the Board, expanding capital allocation opportunities [28] Q&A Session Summary Question: Leasing volumes from 3.2 million square feet in 1Q to 1 million in 4Q - Management noted that the 1 million square feet of leasing in Q4 was in line with expectations, driven by minimal lease expirations and a slower demand environment [32] Question: Components of cash same-store NOI growth - Management explained that elevated downtime, increased concessions, and higher bad debt were major drivers affecting NOI growth [37] Question: Market rent growth forecast - Management indicated that while it's hard to call a bottom for market rents, the business fundamentals remain sound, with smaller tenants showing more resiliency [44] Question: Retention ratios on lease expirations - Management guided to a 100 basis point decline in average portfolio occupancy for 2025, primarily due to higher projected downtime [48] Question: GAAP same-store NOI growth lower than cash - The gap is primarily due to straight-line rent as below-market leases burn off, impacting the overall NOI [54] Question: Demand for industrial space post-wildfires - Management anticipates increased demand for industrial space to support rebuilding efforts, particularly in infrastructure and housing [81]