Yahoo Finanza Rexford Industrial Realty Inc (REXR) Q1 2024 Earnings Call Transcript Highlights: Strong ...
Core FFO per Share: Increased 12% year-over-year to $0.58.
Same-Property NOI Growth: 8.5% on a cash basis and 5.5% net effective basis.
Leasing Activity: 3.2 million square feet completed, with leasing spreads of 71% net effective and 52% cash basis.
Acquisitions: Over $1 billion, expected to contribute $0.04 of FFO per share.
Investment Yield: Initial yield of 5%, growing to 5-7% on a stabilized basis.
Debt to EBITDA Ratio: 4.6x, with a target range of 4 to 4.5x.
Capital Markets: Issued $1.15 billion in exchangeable notes and completed a public offering of 17.1 million shares.
2024 Core FFO Guidance: Increased to $2.31 to $2.34 per share.
2024 Same-Property NOI Guidance: Cash NOI growth of 7-8%, net effective NOI growth of 4.25-5.25%.
Release Date: April 18, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Q & A Highlights
Q: One of your peers gave an incrementally negative view on the timing of a rebound in activity in Southern California, but it seems as though your outlook is pretty consistent with your initial views. Can you talk a little bit more about what might be driving that disparity? A: Michael S. Frankel, Co-CEO & Director of Rexford Industrial Realty, Inc., explained that the disparity largely stems from the fundamental differences in market dynamics between Rexford's focus on infill markets with smaller tenant sizes and the larger space markets like the Inland Empire. He emphasized that Rexford's infill markets, serving regional consumption, tend to be more stable and less affected by global trade flows that impact larger markets.
Q: Last quarter, you talked about an expectation for 40% cash rent spreads in 2024. Your spreads this quarter were 33.6%, excluding Tireco. Can you comment on what might be giving you confidence in higher spreads in the upcoming quarters? A: Laura Elizabeth Clark, CFO of Rexford Industrial Realty, Inc., clarified that their full-year guidance for cash same property is 50%, aligning with previous expectations. She noted that leasing spreads can vary quarterly based on the leases executed, and current trading on new and renewals gives them confidence in achieving their full-year expectations.
Q: While the cost of capital you raised allows you to transact accretively, how do you balance deploying this capital in a market when rents continue to decline and there's risk to underwriting? A: Michael S. Frankel responded that Rexford's investment strategy focuses on value creation that overcomes the cost of capital hurdle, regardless of the market rent conditions. He highlighted their unique approach to increasing the inherent cash flow capabilities of assets through renovations and modernizations, which can drive value even in a declining rent environment.
Q: Are you starting to see any distressed acquisition opportunities from spec developers in Inland Empire West, and would you be willing to actually grow your footprint in IE and take on some leasing risk if the price is right? A: Howard Schwimmer, Co-CEO & Director of Rexford Industrial Realty, Inc., indicated that they have not seen significant distressed opportunities in IE West and that their focus remains on acquiring assets that align with their high-quality, functional industrial criteria without taking on large vacancy risks.
Q: What do you think the stabilized cap rate spread is today between IE West and infill LA adjusted for a similar lease mark-to-market? A: Howard Schwimmer estimated that the cap rate spread between IE West and infill LA is around 50 basis points, reflecting the premium for Rexford's targeted high-quality, well-located assets in infill markets.
Q: With the Tireco extension and the deal with Blackstone, what does that do to your 3-year outlook kind of to get to the 14% to 17% for the next 2 years that you outlined last quarter? A: Laura Elizabeth Clark confirmed that there is no change in their outlook as a result of these transactions, and they anticipate higher growth in '25 and '26 driven by repositioning and redevelopments in their pipeline.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.
