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Edited Transcript of REXR earnings conference call or presentation 13-Feb-19 6:00pm GMT

Q4 2018 Rexford Industrial Realty Inc Earnings Call

Los Angeles Feb 18, 2019 (Thomson StreetEvents) -- Edited Transcript of Rexford Industrial Realty Inc earnings conference call or presentation Wednesday, February 13, 2019 at 6:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Adeel Khan

Rexford Industrial Realty, Inc. - CFO

* Howard Schwimmer

Rexford Industrial Realty, Inc. - Co-CEO & Director

* Michael S. Frankel

Rexford Industrial Realty, Inc. - Co-CEO & Director

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Conference Call Participants

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* Blaine Matthew Heck

Wells Fargo Securities, LLC, Research Division - Senior Equity Analyst

* Christopher Ronald Lucas

Capital One Securities, Inc., Research Division - Senior VP & Lead Equity Research Analyst

* Emmanuel Korchman

Citigroup Inc, Research Division - VP and Senior Analyst

* James Colin Feldman

BofA Merrill Lynch, Research Division - Director and Senior US Office and Industrial REIT Analyst

* Michael William Mueller

JP Morgan Chase & Co, Research Division - Senior Analyst

* Stephen C. Swett

ICR, LLC - MD

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Presentation

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Operator [1]

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Greetings, and welcome to Rexford Industrial Realty, Inc. Fourth Quarter 2018 Earnings Conference Call. (Operator Instructions)

As a reminder, this conference is being recorded.

I would now like to turn the conference over to your host, Steve Swett with ICR.

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Stephen C. Swett, ICR, LLC - MD [2]

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We would like to thank you for joining us for Rexford Industrial's Fourth Quarter 2018 Earnings Conference Call.

In addition to the press release distributed yesterday after market close, we have posted a quarterly supplemental package with additional details on our results in the Investor Relations section on our website at www.rexfordindustrial.com. On today's call, management's remarks and answers to your questions may contain forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995.

Forward-looking statements are usually identified by the use of words such as anticipates, believes, estimates, expects, intends, may, plans, projects, seeks, should, will, potential, predicts and variations of such words or similar expressions. Forward-looking statements address matters that are subject to risks and uncertainties that may cause actual results to differ from those discussed today. Examples of forward-looking statements include those related to revenue, operating income and financial guidance. As a reminder, forward-looking statements represent management's current estimates. Rexford Industrial assumes no obligation to update any forward-looking statements in the future. We encourage listeners to review the more detailed discussions related to these forward-looking statements contained in the company's filings with the SEC.

In addition, certain of the financial information presented on this call represents non-GAAP financial measures. The company's earnings release and supplemental information package, which were released yesterday afternoon and are available on the company's website present reconciliations to the appropriate GAAP measure and an explanation of why the company believes such non-GAAP financial measures are useful to investors.

Today's conference call is hosted by Rexford Industrial's Co-Chief Executive Officers, Michael Frankel and Howard Schwimmer; together with Chief Financial Officer; Adeel Khan. We'll make some prepared remarks, and then we will open up the call for your questions.

Now I'll turn the call over to Michael.

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Michael S. Frankel, Rexford Industrial Realty, Inc. - Co-CEO & Director [3]

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Thank you, and welcome to Rexford Industrial's Fourth Quarter 2018 Earnings Call. I will start with a summary of our operating results and some perspective on our go-forward market opportunity. Howard will then cover our recent acquisition activity and investment pipeline. Adeel will follow with more details on our financial results and will introduce our guidance for 2019. We will then open the call for your questions.

We are very pleased with our exceptional fourth quarter and full year 2018 results as we continue to drive accretive growth and to create shareholder value through the successful execution of our highly focused business plan.

Beginning with our fourth quarter results. We achieved company share of core FFO of $27.2 million, which is a 35.9% increase over the prior year quarter. Core FFO per share was $0.29, which represents an 11.5% increase year-over-year.

On the same-property basis, NOI increased 9.6% on a GAAP basis and 12.4% on a cash basis. And after excluding the impact from the lease-up of properties and repositioning, same-property GAAP NOI increased by 5.1%, and cash NOI increased by 7.8%. During the quarter, we signed 90 leases for approximately 632,000 square feet. Our leasing spreads are 25.1% on a GAAP basis and 14.8% on a cash basis.

We achieved 98.2% occupancy in our stabilized same-property portfolio at year-end. We also completed 7 acquisitions during the quarter for an aggregate purchase price of approximately $132 million and completed $10.4 million of dispositions.

As we begin the new year, it is a great time to consider macro conditions that may impact our business and to reflect on key aspects of our longer-term strategy and results. Today, global uncertainty is relatively high, and many pundits project moderated growth going forward. With this in mind, I'll briefly focus on the key drivers of growth for Rexford.

To begin with, tenant demand within our infill Southern California industrial markets, as measured by market occupancy, leasing velocity and rental rate growth, continues at historic levels. The regional economy remains strong, and containerized imports through the nation's 2 largest ports of Los Angeles and Long Beach achieved new records in 2018, exceeding the prior year records set in 2017 by almost 4.5%.

Additionally, e-commerce continues to grow and evolve, with the need for shorter delivery timeframes further increasing the importance of last-mile locations where Rexford's infill portfolio is located. Consequently, the internal growth embedded within our in-place portfolio continues to be quite favorable, with about 16.5% in incremental NOI growth projected over the next 18 to 24 months without accounting for any future growth through acquisitions. This growth is driven by several factors. First, over the next 2 years, approximately 33% of our leases, representing about 7 million square feet, are scheduled to roll. These leases are estimated to be about 11% below market, and marketing these leases to market is expected to contribute about $8.3 million of incremental annualized NOI. Second, our value-add property repositioning and renovation work continues to drive substantial growth. Our major repositioning projects currently in process are expected to contribute $10.3 million of incremental annualized NOI over the next 18 to 24 months. With over $1 billion square feet in our prime infill Southern California markets, built prior to 1980, we see an exceptionally deep well of value-add opportunities in the foreseeable future. Third, the $266 million of acquisitions completed since the start of the fourth quarter are expected to contribute incremental annualized NOI, approaching $10 million over the next 18 to 24 months.

As our stabilized portfolio is operating at or near full structural occupancy, we expect NOI gains to be disproportionately driven by leasing spreads as compared to increases in occupancy. With respect to timing, about 70% of our 2019 incremental NOI generated from leasing spreads is expected to be contributed during the second half of the year with over 40% of 2019 incremental NOI generated from leasing spreads expected to be backloaded during the fourth quarter.

We're also still within a growth phase of our secular leasing cycle within infill Southern California. So from time to time, you may continue to see us trading occupancy or NOI or NAV growth by our choosing to not extend certain tenants in exchange for re-tenanting at higher rents.

Although this embedded growth within our current portfolio is substantial, it is worth noting that our active investment pipeline and prospects for external growth remained very strong. We expect to see continued accretive growth through acquisitions at meaningful levels with $134 million of investments already completed year-to-date.

I'd like to focus briefly on our full year 2018 and related historical performance as an illustration of our strategy in our go-forward plan.

Over the prior 12 and 24 months, we grew our portfolio by 15% and 42%, respectively. During 2018, we completed $493 million of acquisitions and opportunistically sold $48 million of assets. We continue to create value through our best-in-class repositioning program. During 2018, we delivered and leased over 410,000 square feet, which generated a weighted-average unlevered cash yield on total cost of 7.4%. Total rental revenue grew by 31.3% year-over-year, and our margins continued to expand, with NOI growing by 34.4% and company share of core FFO by 41.3%.

Finally, our full year 2018 FFO per share growth was 16.7%. This 16.7% FFO per share growth is achieved simultaneously with our deliberate delevering of the company from a debt-to-EBITDA ratio of 5.4x at the end of 2017 to a debt-to-EBITDA ratio of 3.6x at the end of 2018.

Our leverage level equates to about 16% debt to total enterprise value. We believe maintaining a strong and flexible balance sheet is good business, particularly at this stage of the real estate cycle and in light of today's global economic uncertainties. By adhering to an extremely focused and accretive business model at Rexford, we benefit from our ability to generate favorable cash flow growth while maintaining a fortress-like, low-leverage balance sheet. By doing so, we not only mitigate market risk that we cannot control or predict, but we also position the company to capitalize on emerging opportunities that may present themselves. As a result of the company's strong performance, we are very pleased to report that we are increasing our dividend by 15.6% to $0.185 per share. This is our fourth consecutive year with a dividend increase. As we look into 2019 and beyond, we couldn't be more excited about our near- and longer-term prospects and opportunities. We owe a tremendous debt of gratitude to the entire Rexford Industrial team, and we'd like to thank each of you for your outstanding contribution and dedication to help build this great company.

And with that, I'm very pleased to turn the call over to Howard.

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Howard Schwimmer, Rexford Industrial Realty, Inc. - Co-CEO & Director [4]

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Thanks, Michael, and thank you, everyone, for joining us today. We continue to benefit from our focused strategy of acquiring and adding value to assets in the infill Southern California industrial market, which continues to demonstrate superior supply and demand fundamentals. Our target markets, which exclude the Eastern Inland Empire, ended the fourth quarter at 98.1% occupancy, with asking rents up 7% on a weighted-average basis over the past 12 months. Supply continues to diminish due to the sustained conversion of industrial property to other uses and low levels of replacement deliveries due to scarcity and high cost of land. These dynamics pressure rental rate growth and high occupancy, resulting in continued growth in the value of our portfolio over time.

Moving on to recent transaction activity. In the fourth quarter, we completed 7 acquisitions for $131.7 million. All but 2 of the fourth quarter acquisitions were off market, with projected stabilized returns within a range of 5.4% to 6.4%. For the full year, we completed 26 transactions totaling $493 million, adding just over 3 million square feet to our portfolio. Approximately 73% were off market or lightly marketed transactions accessed as a result of our research-driven platform and local market relationships. About half of 2018 acquisitions were in the Greater Los Angeles market, with the balance spread throughout our other target infill markets and about 25% were value-add.

In October, we acquired Rocky Point in the North San Diego County submarket for $10.2 million. The value-add modern property consists of 3 high-image buildings, totaling 74,000 square feet and is 31% occupied. We intend to implement modern functional and cosmetic improvements and upon near-term stabilization, project a 5.7% yield on cost.

In November, we acquired Innovation Way in the North San Diego County submarket for $24.2 million. The property consists of 2 state-of-the-art buildings totaling 115,000 square feet, roughly 72% occupied, and we project a 5.4% yield on cost upon stabilization in 2019.

Also in November, we acquired Gardena Boulevard in the LA South Bay submarket for $16.1 million. The 100% leased single-tenant logistics property has 23% site coverage with 55,000 square feet of buildings. We acquired the property in a sale leaseback, executing a 5-year lease at a rent approximately 18% below market, providing an initial 5% yield.

In December, we acquired a 4-building industrial complex at Mason Avenue and Oso Avenue in the LA San Fernando Valley submarket for $29.5 million. The property continues 256,000 square feet in 4 buildings and is 100% leased to 3 highly insurance tenants at rents estimated to be 16% below market. At lease roll, we intend to perform value-add upgrades and raise rents to market. Our initial yield is estimated to be 5.6% with a projected stabilized yield of 6%.

We also acquired Fresca Drive, located in the Orange County North submarket, for $14 million, 115,000 square-foot, 24-foot clear building is 100% leased to 2 tenants at rents approximately 28% below market. At lease roll, value-add functional and modernization improvements will be completed. The current yield is estimated at 5.4%.

We also acquired 6100 Sheila Street, located in the LA Central submarket, for $18.2 million. The 75,000 square-foot building is 100% leased to 7 tenants. The property is unique, offering small freezer cooler spaces, which is cost prohibitive to develop. The current yield is estimated at 6.8%.

Finally, in December, we acquired Bonelli Street, located in the LA San Gabriel Valley submarket, for $19.5 million. The 149,000 square-foot building is 22- to 27-foot clear, with 17 dock positions and is leased to a single tenant at about half of market rent. We expect to perform value-add, functional and cosmetic upgrades at lease roll in 3 years and increase rents to market. The initial yield is 3.1%, and we project to stabilize yield on cost of 5.5%.

Subsequent to quarter-end, in January, we completed 3 more off-market transactions. We acquired Knott Street in the Orange County West submarket for $19.8 million. We intend to modernize the currently vacant 121,000 square-foot, 24-foot clear building and add an estimated 45,000 square feet of new 30-foot clear warehouse space. At stabilization, our expected yield on total cost is estimated to be 5.6%.

We acquired Industry Drive, located in the LA San Fernando Valley submarket, for $7.8 million in a 1-year sale leaseback. The recently constructed 28-foot clear building contains 47,000 square feet. The projected stabilized yield is estimated to be 5.1%.

Finally, we completed the acquisition of Conejo Spectrum Business Park, located in the Ventura County submarket, for $106.3 million. The 9 industrial buildings are 72% leased to a range of credit tenants and consist of 531,000 square feet and 28 acres of land. We intend to demise a 98000 square-foot building into 2 units in order to increase volume.

These newly constructed industrial buildings are rare in this highly competitive submarket in which Class A industrial space is virtually unavailable. At stabilization, our expected yield on total cost is estimated to be about 5%.

Turning to our redevelopment activity. In addition to acquisitions, we continue to create value within our portfolio with the repositioning assets, which allows us to drive the cash flow-generating ability of our portfolio independent of market rent growth. We believe our expertise here is a true differentiator. We currently have over 900,000 square feet of space in repositioning, including one 2019 acquisition. In 2018, we delivered about 600,000 square feet of repositioned industrial product and stabilized about 410,000 square feet with an aggregate yield of 7.4%. This compares favorably to current market cap rates for fully valued marketed transactions that trade in the mid- to low 4% cap range. This demonstrates how our focused value-add strategy and execution generates returns meaningfully above market yields, driving growth in our NAV.

Looking ahead, our pipeline of acquisitions under contingent LOI or contract totals approximately $312 million as we continue to mine opportunities in the nation's largest, highly fragmented industrial market in infill Southern California. The contracts for these acquisitions are subject to completion as well as satisfaction of due diligence and customary closing conditions, and we will provide more details as transactions are completed.

I'll now turn the call over to Adeel.

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Adeel Khan, Rexford Industrial Realty, Inc. - CFO [5]

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Thank you, Howard. Beginning with our operating results. For the fourth quarter 2018, net income attributable to common stockholders was approximately $12.4 million or $0.13 per fully diluted share. This compares to $11.8 million or $0.15 per fully diluted share for the fourth quarter of 2017.

For the 3 months ended December 31, 2018, company share of core FFO was $27.2 million as compared to $20 million for the 3 months ended December 31, 2017. On a per share basis, company share of core FFO was $0.29 per fully diluted share, representing an 11.5% increase year-over-year.

For the full year 2018, Rexford reported net income attributable to common stockholders of approximately $36.1 million or $0.41 per fully diluted share as compared to net income attributable to common stockholders of $34.4 million or $0.48 per fully diluted share for 2017.

For the full year 2018, Rexford reported company share of core FFO of $97.6 million compared to $69.1 million for the year ended December 31, 2017. On a per share basis, company share of core FFO was $1.12 per fully diluted share for 2018, a 16.7% increase compared to $0.96 per fully diluted share reported in 2017.

Same-property NOI was $28.8 million in the fourth quarter, which compares with $26.3 million for the same quarter in 2017, an increase of 9.6%.

Our same-property NOI was driven by an 8% increase in total rental revenue and a 3.2% increase in property operating expenses. On a cash basis, same-property NOI increased by 12.4% year-over-year. Stabilized same-property NOI growth, net of the impact of repositioning, was 5.1% in the fourth quarter on a GAAP basis and 7.8% on a cash basis.

For the full year 2018, same-property NOI increased 10.6%, driven by an 8.9% increase in revenue and a 4% increase in property operating expenses. On a cash basis, same-property NOI increased by 11.5% compared to 2017.

Net of the contribution from properties and repositioning, 2018 same-property NOI increased 7.4% on a GAAP basis and 9.4% on a cash basis.

Turning now to our balance sheet and financing activity. We continue to diversify our capital sources, optimize our cost of capital and maintain balance sheet flexibility as we grow our business over the long term.

During fourth quarter, we issued approximately 4 million shares of common stock per ATM at a weighted-average price of $32.58 per share, which resulted in net proceed to Rexford of approximately $128.8 million. We utilized this fund to fund our acquisitions for working capital and other corporate purposes. At the end of the fourth quarter, we had $180.6 million of cash, full availability on our $350 million credit facility and approximately $63.4 million available under the $400 million ATM program.

We have no debt maturities through 2021, with our net maturity being our $100 million term loan in 2022. And with regard to our dividend, on February 11, our Board of Directors declared a cash dividend of $0.185 per share for the first quarter of 2019, payable on April 15, 2019, to common stock and unitholders of record on March 29, 2019. Additionally, our Board of Directors declared a preferred stock cash dividend of approximately $0.37 per share for the first quarter of 2019, payable on March 29, 2019, to our preferred stockholders as of March 15, 2019.

Finally, I'd like to introduce our outlook for 2019. Our guidance refers only for in-place portfolio as of today and does not include any assumptions for acquisitions, dispositions or capital transactions, which have not yet been announced.

For 2019, we expect to achieve company share of core FFO within a range of $1.16 to $1.20 per share. Please note that our guidance for core FFO does not include acquisition cost or other costs that we typically exclude in calculating this metric. Our guidance is supported by several factors. We expect year-end same-property occupancy within a range of 95.5% to 96.5% and year-end stabilized same-property occupancy within a range of 96.5% to 97.5%. We expect to achieve same-property NOI growth for the year of 3.5% to 5.5% and stabilized same-property NOI growth for the year of 3% to 3.5%.

Please note that our 2019 same-property pool comprises of 147 properties with an aggregate of 118.3 million square feet, representing approximately 86% of our consolidated portfolio square footage. This portfolio was 96% occupied at December 31, 2018.

For G&A, we anticipate a full year range of $29 million to $30 million, including about $10.2 million of noncash equity compensation.

That completes our prepared remarks.

With that, we'll open the line to take any questions. Operator?

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Questions and Answers

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Operator [1]

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(Operator Instructions) Our first question is from Jamie Feldman with Bank of America Merrill Lynch.

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James Colin Feldman, BofA Merrill Lynch, Research Division - Director and Senior US Office and Industrial REIT Analyst [2]

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I just want to start with the deal. Can you talk about where your same-store guidance would be on a cash basis rather than GAAP?

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Adeel Khan, Rexford Industrial Realty, Inc. - CFO [3]

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(inaudible) So the same-property, we guide on a GAAP basis, which was 3.5% to 5.5%. On a cash basis, that would be 5.5% to 7.5%, [so] 2 percentage points higher, which is also very much equivalent to what actually happened in 2018, if you take a look at the supplemental. The stabilized same-property NOI growth, we are guiding to 3% to 3.5% on a GAAP basis. On a cash basis, it'll also be 5% on a low end and 5.5% on the high end so also about 2 percentage points higher.

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James Colin Feldman, BofA Merrill Lynch, Research Division - Director and Senior US Office and Industrial REIT Analyst [4]

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Okay. And I know you talked about the leasing spreads contributing most kind of back half of the year, even fourth quarter. Any thoughts on how same-store should trend throughout the year by quarter?

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Adeel Khan, Rexford Industrial Realty, Inc. - CFO [5]

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Sure, Jamie, it's Adeel again. So as Michael pointed out, about 70% of the growth is backloaded, and we talk backload in Q3 and Q4. And that's actually pretty typical to what we have seen in the past years as well, and about 40% of that growth is actually coming in Q4. So it's typical to what we have seen. We have about 2.7 million square feet expiration at the end of 2018, and our same-store pool changed to about 83% of our consolidated portfolio. This is not a blocking and tackling throughout the year. So nothing -- no major leases, but we expect the ramp to pick up during the year. And thus, like I said, very consistent with prior years.

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James Colin Feldman, BofA Merrill Lynch, Research Division - Director and Senior US Office and Industrial REIT Analyst [6]

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Okay. And then Howard, I know you mentioned the pipeline you're working on today. But as you just think about this year and even farther out, I mean, in the composition of potential acquisitions or value-add investments, what's the -- how much of it is more portfolio based versus single asset?

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Howard Schwimmer, Rexford Industrial Realty, Inc. - Co-CEO & Director [7]

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Well, if you think about the -- I mentioned we had $312 million worth of transactions in progress. That's 13 separate transactions. So occasionally, you've seen us buy a larger portfolio, but predominantly, our growth has come from a lot of the blocking and tackling we do every day on the [one-off] transactions. And looking forward, there are some 1Z -- or rather 2Z, 3Z kind of buildings portfolios for sale. We chased a couple of things last year that were larger that had some assets out of our markets, and we weren't able to capture those. But for the most part, I think it's business as usual going forward this year.

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James Colin Feldman, BofA Merrill Lynch, Research Division - Director and Senior US Office and Industrial REIT Analyst [8]

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Okay. And what are you seeing on pricing? Has it been pretty firm? Are cap rates still going lower?

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Howard Schwimmer, Rexford Industrial Realty, Inc. - Co-CEO & Director [9]

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I think for the most part, you see marketed transactions that are trading in the 4% to 4.5% cap range, which really compares favorably to the repositioning results we had mentioned on the call, where we're achieving 100 to 200 basis points higher than our spreads. Prices move really in line with what's happening with rental rates. So rents have been growing significantly. Our leasing spreads have been very strong. And the market itself at about 7% rent growth for the year in the infill markets also as pricing moves a little bit further ahead based on just that same rent growth.

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James Colin Feldman, BofA Merrill Lynch, Research Division - Director and Senior US Office and Industrial REIT Analyst [10]

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Okay. And then a question for Michael. You had mentioned port volumes being at all-time highs. I mean, it sounds like some of the port volumes have been a pull-forward ahead of tariff activity or be no concerns over tariff activity. Just if you think if there was to be a pullback in port volumes. I know you guys have talked about being more of an infill portfolio. I mean, what do you think the implications would be for Rexford if port volumes did actually decline in a meaningful way?

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Michael S. Frankel, Rexford Industrial Realty, Inc. - Co-CEO & Director [11]

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Jamie, great question. We actually have seen a great real-world case studies where port volumes did decline and that was during the Great Recession. And the short story is that our product and our tenants are really consumption-driven. And we've really never had a supply problem in Southern California, even when port volumes decreased dramatically during the Great Recession. And we've seen port shutdowns due to labor both in 2014 and earlier, I think, in 2002. And we didn't see a -- we didn't even hear anything from our tenants during those. We had a port slowdown during labor unrest and due to lack of chassis for the trucks about 2.5 years ago. Again, we didn't hear anything from our tenants. And what we found during periods where the ports might have an issue is our tenants get creative, they figure out how to get the product in, and they still strive to service the consumption-driven demand in the region. Don't forget, Southern California is the largest zone of consumption in the nation. And it's very, very diversified. And if you look at our tenant base, if you look at the portfolio of tenants that we have crafted, the construction of that portfolio has been very deliberate and diversified. So the sources of our cash flow from a tenant-industry or type-of-business perspective are about as diversified as they can get. And so we don't -- we haven't really seen any issue from the tariffs so far. And in prior periods, we haven't seen an issue when the ports have an issue.

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James Colin Feldman, BofA Merrill Lynch, Research Division - Director and Senior US Office and Industrial REIT Analyst [12]

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And then what about just in terms of the impact on the regional economy and consumer spending? So less about your tenants and more just about consumer spending in the region?

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Michael S. Frankel, Rexford Industrial Realty, Inc. - Co-CEO & Director [13]

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Absolutely. To the extent that consumers and businesses are spending less in the region, we're going to be impacted, and you'll probably see an impact to rental rates, less of an impact to supply but more of an impact to rental rates.

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Operator [14]

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Our next question is from Blaine Heck with Wells Fargo.

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Blaine Matthew Heck, Wells Fargo Securities, LLC, Research Division - Senior Equity Analyst [15]

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So just follow-up on same-store guidance. A few of your peers came out with a little more conservative guidance given some uncertainty in the market. So I guess I wanted to see whether there was any of that sort of consideration as you guys formulated your numbers for the year? Or in other words, how much of a consideration for external factors is built into your guidance versus kind of the current view of the portfolio performance, assuming not much really changes with the economy?

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Michael S. Frankel, Rexford Industrial Realty, Inc. - Co-CEO & Director [16]

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Blaine, thanks for the question. It's Michael. And it's a great question. We really -- we try to give it to you as we see it. We can't really predict. We're not economists. So we don't pretend to be. And frankly, we believe that we're paid to be more pessimist. That having been said, if we look forward at our portfolio as the deal laid out, and as I mentioned in my prepared remarks, we've got a lot of blocking and tackling. We have our -- most of our re-leasing contribution backloaded into the second half and a predominance of that in the fourth quarter. And a lot of our tenants are small-, medium-sized tenants. So we don't get visibility oftentimes to their intentions until a month or 2 or 3 before their expiration date. So we don't pretend to deliver assumptions that we just can't know, and we try to tell it as we see it.

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Blaine Matthew Heck, Wells Fargo Securities, LLC, Research Division - Senior Equity Analyst [17]

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Okay. That's helpful. And I guess, not to back you in a corner, but the follow-up on that, looking at your top tenants' page, you guys, as you said, don't really usually have too much in the way of chunky leases, but you do have Dendreon at the end of the year, which is 171,000 square feet. And then much smaller but still 40,000 square feet. November is Triscenic. Hopefully, I'm getting those names right. Do you guys have any sense of the probability of renewal at each of those?

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Howard Schwimmer, Rexford Industrial Realty, Inc. - Co-CEO & Director [18]

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Blaine, it's Howard. We do, actually. We look at those larger leases pretty carefully. The top 20 tenants in the portfolio actually are about 1.22 million square feet in terms of those top 20 that have expirations during 2019. And really just going down the list, from the conversations we're having or even some of the renewals that are about to happen right now, we see about 64% of those tenants, about 780,000 square feet in terms of a high probability on a renewal.

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Blaine Matthew Heck, Wells Fargo Securities, LLC, Research Division - Senior Equity Analyst [19]

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Okay. That's helpful. Last one for me. Adeel, you reported net debt to adjusted EBITDA has continued to come down over the year and at 3.6x, I think, is either the lowest it's ever been or close to it. How should we think about the target there? Have you guys look at this as a good level of leverage on an ongoing basis? Or maybe is there room to move that up during 2019 and get some more FFO growth without dilution from sales or ATM issuance?

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Adeel Khan, Rexford Industrial Realty, Inc. - CFO [20]

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Blaine, thanks for the question. So yes, that is the lowest we've seen. And that's all by design. I think we've always stated that the balance sheet is certainly one of our competitive strengths, and we've always tried really, really hard to manage that. So it [strays] as a strength for us, and it's a strategic decision by the company. Certainly, whenever we are looking at the balance sheet, and we're looking at the horizon in terms of the acquisition pipeline, some of that is because of the fact [they're] going to be raising -- issue money on the ATM and so on, so forth. So there could be some timing differences from that perspective. But we certainly like to -- we like where we are. We like to continue to operate in that zone. We did -- in the last call, we did say that we like to maintain our leverage profile under 5, and our long-term leverage guidance hasn't been changed. But I think, from our perspective, keeping this strength from a balance sheet perspective is -- kind of continue to be a focal point for the company for the long term. And I think the final point that I'll add is that at the end of the year, we did end the quarter just from a cash perspective [almost] available. So it is just you can have the full picture. We had $180.6 million of the cash, $350 million on the facility and still a little bit left on the ATM program. Obviously, the ATM program is market-driven and how we execute that but at least there's a lot of capacity. So we'll see what's ahead of us in terms of the pipeline and how we best deploy that capital from an accretive way.

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Michael S. Frankel, Rexford Industrial Realty, Inc. - Co-CEO & Director [21]

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Blaine, it's Michael. I'd like just to add to that briefly because I think it's a very important question. And I think when we see a company like Rexford that is delevering from a 5.4x to 3.6x debt-to-EBITDA ratio over the year and at the same time generates 16.7% FFO per share growth, those are -- that's math that, I think, demonstrates a company that is performing exceptionally well and truly firing on all its cylinders. I mean, just to give you a sense of it, if we had just maintained the leverage throughout the year, you would've seen substantially higher FFO per share growth. And so to deliver that very high level of FFO per share growth while simultaneously delevering the company, I think that encapsulates so many things about the value creation capability of this business.

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Operator [22]

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Our next question is from Emmanuel Korchman with Citi.

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Emmanuel Korchman, Citigroup Inc, Research Division - VP and Senior Analyst [23]

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Just thinking about acquisitions for another minute. I think one of your recent deals was another new build or another new park. How do you think about sort of that new -- whether you call it merchant build or something else product and both pricing and competition for that product and upside versus the database that you've spoken about for a long time?

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Howard Schwimmer, Rexford Industrial Realty, Inc. - Co-CEO & Director [24]

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Manny, it's Howard. That's a great question, actually. We think about it really from a value perspective. And a lot of times, when a developer is able to deliver a new building, taken quite a few years to be able to entitle a site and build it. And a great example would be the property that we bought recently in Simi Valley on Surveyor that we stabilized, and it moved in actually in January. And when we look at the appreciation of the land, so if the developer bought it, and the fact that they locked in their construction costs early on, we actually considered that we were buying the property for about 3% higher than replacement cost today. So we thought we were getting a great deal on a newly delivered building. And on that particular asset, we were able to stabilize it at a 5.7% yield. So I think the yield actually proved out that theory. So from our perspective, if we have those type of opportunities in the future, we'll continue to take advantage of them.

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Emmanuel Korchman, Citigroup Inc, Research Division - VP and Senior Analyst [25]

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And Howard, have you seen any changes in the -- in competition out in your markets buying these properties?

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Howard Schwimmer, Rexford Industrial Realty, Inc. - Co-CEO & Director [26]

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Oh, we've always had a lot of competition here. I mean, it's no secret that Southern California is the top industrial market in the country. So everybody's here trying to fight their way into some acquisitions. What separates us, obviously, is our platform that puts a tremendous effort into our research and our ability to create off-market transactions. In the fourth quarter, actually 80% of the deals we bought were off market. And for the year, 73% were off market. And if you look at the LOIs we wrote during the year. We wrote LOIs on $7 billion worth of product. It was about -- I think it's 284 LOIs, which means we had a 9% hit rate. So if you really think about it, we're probably our own largest competitor in that we have the opportunity to buy many more assets than we bought due to our stringent underwriting. So we're very selective on what we bought. And the bottom line is most of our competitors didn't really even get a look at those deals, what I referenced 73% on being off market.

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Operator [27]

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(Operator Instructions) Our next question is from Michael Mueller with JP Morgan.

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Michael William Mueller, JP Morgan Chase & Co, Research Division - Senior Analyst [28]

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Question going back to same-store growth. So if I'm looking at the stabilized same-property pool, it's 3% to 3.5% this year, it was 7.5% last year. And I'm just trying to connect some dots here because it seems like your rent spreads have gotten better throughout the year, and it makes sense you're at 98% occupancy to assume a little bit of downdraft. but even last year, occupancy was pretty flat throughout the year. So I'm just trying to figure out what the headwinds are from a number standpoint in 2019 for that metric where it's less than half of what it was last year, considering occupancy was flat last year as well?

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Adeel Khan, Rexford Industrial Realty, Inc. - CFO [29]

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Mike, it's Adeel. So the occupancy, I think, was slightly lower, so we did have some gains on the occupancy that are not necessarily there this year in that manner and then re-leasing spreads are currently something that Michael added in his script. We're assuming about an 11% blended on growth, cash on a cash basis in our numbers. But I think the key thing here again is that you do have the burning [of -- these are] GAAP numbers, as I stated earlier. These are being hampered by the fact that you have to burn off the straight line rent and the last tranche, and that vintage is kind of contributing to that little bit of headwind. So that's why the cash growth, which was asked earlier, is a 2 percentage point higher. So you're doing -- you are seeing that. And the last piece, which I think has been the case [here], is that how the roll takes place during the year, which is something that we talked about earlier as well. A lot of it's backloaded. So you are seeing the impact of a lot of that stuff. That being said, we've had great success in being able to do a good job in re-leasing over the course of that many quarters. So if the opportunity presents itself, hopefully, we can improve. But right now, this is what we see. And we do a really bottoms-up analysis, looking lease by lease, and that's what we feel most comfortable with right now.

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Michael William Mueller, JP Morgan Chase & Co, Research Division - Senior Analyst [30]

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Okay. And then for the 200 -- I think number was 266, $266 million of acquisitions since 9/30. What was the going-in yield on those? And then what was the anticipated stabilized yield?

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Howard Schwimmer, Rexford Industrial Realty, Inc. - Co-CEO & Director [31]

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The -- well, the fourth quarter acquisitions...

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Michael S. Frankel, Rexford Industrial Realty, Inc. - Co-CEO & Director [32]

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[Including].

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Howard Schwimmer, Rexford Industrial Realty, Inc. - Co-CEO & Director [33]

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Including -- what's that, Mike?

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Michael S. Frankel, Rexford Industrial Realty, Inc. - Co-CEO & Director [34]

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[Including the year].

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Howard Schwimmer, Rexford Industrial Realty, Inc. - Co-CEO & Director [35]

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I'm sorry, including this year. I can tell you, the fourth quarter ones, those transactions range from 5.4% to 6.4% as far as the stabilized yields. And I think the blended, including vacancy, initial yield was about 4.8% in terms of those fourth quarter transactions.

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Michael William Mueller, JP Morgan Chase & Co, Research Division - Senior Analyst [36]

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Got it. And should we assume something similar for the 1Q deals?

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Michael S. Frankel, Rexford Industrial Realty, Inc. - Co-CEO & Director [37]

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As Howard mentioned, I think, on the call earlier, the 1Q deals going in, is probably higher, with probably -- the average is a little over 5%.

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Michael William Mueller, JP Morgan Chase & Co, Research Division - Senior Analyst [38]

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On a cash side?

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Michael S. Frankel, Rexford Industrial Realty, Inc. - Co-CEO & Director [39]

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Not initially, I'm sorry. Initially, on a cash side, we did have some value-add in there. So it's probably just under 5%.

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Operator [40]

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Our next question is from Chris Lucas with Capital One Securities.

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Christopher Ronald Lucas, Capital One Securities, Inc., Research Division - Senior VP & Lead Equity Research Analyst [41]

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Just a quick one. On the G&A guidance, sort of implies sort of upper teens year-over-year growth. Just curious as to maybe if you could provide some color as to what's driving that? Is it headcount? Is it just comp? Is it investments in systems? What's sort of driving that? And is there a point in the scale of the business that we should start to see that growth diminish out?

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Adeel Khan, Rexford Industrial Realty, Inc. - CFO [42]

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Chris, it's Adeel. Thanks for the question. So our $30 million in the upper range, obviously, includes the impact of the leasing standard. So there's about $1.3 million coming and being added to that range. And if you compare that to last year reported G&A of $25.2 million, and if you add back the capitalization that took place last year, it's really a $26.2 million G&A number that you need to compare. So that's about a 14.5% delta, which is what you called out earlier, on a high end, and on the low end on $29 million is about a 9.7% increase. What we have stated in the past, that we are in the final year of the de-laddering effect of the equity grants that were starting back in '15 and '16. That's what you're seeing here. So this is the last leg of those grants. And all else being equal, essentially, things will start to be not added. They will be steady state. Obviously, you're assuming, all else being equal, from that perspective. That's a lion's share of the increase in '19. There were some incremental hires that we did during 2018. And you've seen the full impact in this year, like in HR and certain marketing personnel. But other than that, a lot it is just a noncash equity comp that's being added for the year.

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Operator [43]

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Ladies and gentlemen, we have reached the end of our question-and-answer session. I would like to turn the call back over to management for closing remarks.

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Michael S. Frankel, Rexford Industrial Realty, Inc. - Co-CEO & Director [44]

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Thank you. And on behalf of the entire Rexford team, we want to thank everybody for joining us today, and we wish you all a great Valentine's Day tomorrow. Thank you.

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Operator [45]

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Thank you. This concludes today's conference. You may disconnect your lines at this time, and thank you for your participation.