Release Date: April 17, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Rexford Industrial Realty Inc (REXR, Financial) executed 2.4 million square feet of leases with strong net effective and cash rent spreads of 24% and 15%, respectively.
- The company achieved an 82% tenant retention rate, the highest level over the past year.
- Rexford's portfolio outperformed the overall market in terms of rent declines, with smaller format spaces showing resilience.
- The company stabilized five repositioning projects totaling 560,000 square feet at a 7.6% unlevered yield.
- Rexford has over $230 million of projected incremental NOI embedded within its portfolio, positioning it for long-term growth.
Negative Points
- Market rents across Rexford's portfolio declined 2.8% sequentially and 9.4% year-over-year.
- The company is experiencing some excess supply in spaces above 100,000 square feet in certain submarkets.
- Leasing activity on vacant spaces decreased from 90% to 80% due to economic uncertainty and recent tariff announcements.
- Projected lease-up timing has increased to nine months from prior expectations of eight months due to tariff disruptions.
- Cash leasing spreads for the quarter were negatively impacted, primarily due to one lease with an above-market rent related to specialized improvements.
Q & A Highlights
Q: Market rents have declined. How much further do you expect rents to fall, and what impact could tariffs have on this trend?
A: Laura Clark, Chief Operating Officer, noted that while there is some pressure on market rents, demand remains strong with activity on 80% of vacant spaces. Michael Frankel, Co-CEO, added that the tenant base is relatively insulated from trade flow changes due to tariffs, as they primarily serve regional consumption. The infill Southern California market is expected to remain resilient due to its scarcity of space and strong demand drivers.
Q: Can you provide more details on the lease-up timing and the low end of guidance given the current uncertainty?
A: Michael Fitzmaurice, Chief Financial Officer, explained that the projected lease-up timing has increased to nine months due to tariff disruptions. The company has stress-tested its guidance against historical downturns and feels confident about the low end of the range at $2.37 per share. Key variables considered include lease-up timing, market rent decline, bad debt expense, and same-property occupancy.
Q: What caused the negative cash leasing spreads this quarter?
A: Laura Clark, Chief Operating Officer, clarified that the negative 5% cash leasing spread was primarily due to one lease with an above-market rent related to specialized improvements. The quarter included only 280,000 square feet of comparable leases, making it a small sample size.
Q: What is driving the uptick in disposition activity despite having significant cash reserves?
A: Howard Schwimmer, Co-CEO, stated that recent dispositions were unsolicited offers from owner-users who paid a premium. The sales were at a 4% cap rate, allowing Rexford to recycle capital accretively. The company remains opportunistic in its capital allocation strategy.
Q: How are you approaching redevelopment and repositioning in the current market environment?
A: Laura Clark, Chief Operating Officer, emphasized that the focus is on driving accretive cash flow growth and long-term value. Repositioning projects are achieving high incremental returns, and the company plans to continue leveraging these opportunities to enhance asset value and shareholder returns.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
