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Rexford Industrial Realty(REXR) - 2025 Q1 - Earnings Call Transcript
REXRRexford Industrial Realty(REXR)2025-04-17 17:00
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Financial Data and Key Metrics Changes - Core FFO was 62 cents per share, representing 7% growth both sequentially and year-over-year [21] - The company maintains its full year 2025 core outlook of 2.37to2.37 to 2.41 per share [21] - Net debt to EBITDA reduced to 3.9 times due to the settlement of 400millionofforwardequityraisedat400 million of forward equity raised at 49 per share [25] Business Line Data and Key Metrics Changes - Executed 2.4 million square feet of leases with net effective and cash rent spreads of 24% and 15% respectively [9] - Overall absorption in the quarter was a positive 125,000 square feet with an 82% tenant retention rate, the highest level over the past year [9] - Market rents across the portfolio declined 2.8% sequentially and 9.4% year-over-year, while the overall market experienced a decline of 4.7% sequentially and 12.1% year-over-year [10] Market Data and Key Metrics Changes - Market rents for smaller format spaces under 50,000 square feet showed resilience, supported by limited supply [10] - Leasing activity at the start of the year had picked up, with activity on approximately 80% of vacant spaces [12] Company Strategy and Development Direction - The capital allocation strategy focuses on stabilizing assets at above-market yields and selling properties at low cap rates to drive cash flow growth [13] - The company expects 70millionofincrementalNOIfrom3.2millionsquarefeetofprojectsunderconstructionorinlease−up[14]−Theportfolioiswell−positionedforlong−termvaluecreation,particularlyinSouthernCalifornia,wheresupply−demanddynamicsfavorthecompany[15][16]Management′sCommentsonOperatingEnvironmentandFutureOutlook−Managementacknowledgesheighteneduncertaintyduetonewtariffsbutbelievestheportfolioiswell−positionedforthemediumtolongterm[15]−Thetenantbaseisdiverse,servingvariousindustries,whichhelpsmitigaterisksassociatedwitheconomicfluctuations[17]−Managementremainsoptimisticabouttheunderlyingbusinesshealthoftenantsdespiteconcernsoverconsumerdemand[36]OtherImportantInformation−Thecompanyhasapproximately70 million of incremental NOI from 3.2 million square feet of projects under construction or in lease-up [14] - The portfolio is well-positioned for long-term value creation, particularly in Southern California, where supply-demand dynamics favor the company [15][16] Management's Comments on Operating Environment and Future Outlook - Management acknowledges heightened uncertainty due to new tariffs but believes the portfolio is well-positioned for the medium to long term [15] - The tenant base is diverse, serving various industries, which helps mitigate risks associated with economic fluctuations [17] - Management remains optimistic about the underlying business health of tenants despite concerns over consumer demand [36] Other Important Information - The company has approximately 1.6 billion of liquidity, including 608 million in cash [24] - The company has no acquisitions under contract or accepted offers, focusing instead on dispositions [14] Q&A Session Summary Question: Future rent decline expectations - Management noted nominal pressure on market rents but emphasized that they are not giving away space and have strong leasing activity [29] Question: Guidance stress test details - Management conducted a stress test based on historical downturns and feels confident about the bottom end of their guidance [43] Question: Cash leasing spreads going negative - The negative cash leasing spread was attributed to a unique lease circumstance and a small sample size of comparable leases [48] Question: Pace of redevelopment and repositioning - Management expects a more ratable pace of redevelopment throughout the year, with a net NOI contribution of 15 million expected [54] Question: Lease terminations and watch list - Termination revenue was tied to two tenants, primarily from an office property acquired for redevelopment [58] Question: Resilience of infill locations - Management highlighted the scarcity of space in Southern California, which contributes to the resilience of their tenant base during downturns [72]