Hello, and thank you for joining us. My name is Regina, and I will be your operator for today's conference. I would like to welcome everyone to Rexford Industrial's Fourth Quarter 2024 Earnings Conference Call. I will now hand the conference over to Makela Lynch, Director of Investor Relations and Capital Markets. Please proceed.

Thank you, and welcome to Rexford Industrial's Fourth Quarter 2024 Earnings Conference Call. In addition to yesterday's earnings release, we have put together a supplemental package and earnings presentation in the Investor Relations section on our website to support today's remarks. As a reminder, management's remarks and responses to your questions may contain forward-looking statements as defined by federal securities laws, which are based on certain assumptions and subject to risks and uncertainties outlined in our 10-K and other SEC filings. As such, actual results may differ, and we assume no obligation to update any forward-looking statements in the future. We'll also discuss non-GAAP financial measures on today's call. Our earnings presentation and supplemental package provide GAAP reconciliations as well as an explanation of why these measures are useful to investors. Joining me today are Co-CEOs, Michael Frankel and Howard Schwimmer, our COO, Laura Clark; and our CFO, Mike Fitzmaurice. Today, Michael and Howard will provide an introduction, followed by Laura on market conditions and operations and Mike on financial results and guidance. It is my pleasure to now introduce Co-CEO, Michael Frankel. Michael?

Thanks, Makela, and thank you all for joining us today. I want to begin by acknowledging the devastating wildfires that continue to impact Los Angeles. While we are fortunate that our portfolio sustained no damage, our priority continues to be supporting our Rexford team and our extended community. We're very pleased to welcome Mike Fitzmaurice as our new CFO. With Mike on board, we completed Laura's planned promotion from CFO to Chief Operating Officer. Both Mike and Laura will play key roles in unlocking the full potential of our portfolio and expanding our opportunities for future growth. Now I'll turn the call over to Howard.

Thanks, Michael, and thank you all for joining. I echo Michael's remarks. Welcoming Mike to the Rexford team and elevating Laura to COO is a key step forward for the company, and we're confident they will continue driving operational excellence across our platform. Before turning the call over to Laura, Michael and I want to take a moment to thank our entire Rexford team for their dedication and strong performance over the past quarter as we move into 2025. I will now turn the call to Laura.

Thank you, Howard, and thank you all for joining us today. Starting with market conditions, we continue to navigate choppiness following pandemic-era growth, as well as recent macroeconomic, interest rates, and political uncertainty. While these factors are impacting our near-term projected 2025 growth, the long-term outlook for supply/demand fundamentals and robust levels of regional consumption within our infill Southern California market remains intact. Although market conditions have impacted overall occupancy and the lease-up timing of some repositioning and redevelopment projects, we remain confident we will realize the substantial growth and value creation embedded within our portfolio. Notably, since the start of the year, we have observed a pickup in tenant activity and lease negotiations across our vacant spaces that we are working to convert into executed leases. Regarding market rents, we observed a decline in taking rents for quality products comparable to the Rexford portfolio of 1.5% sequentially and 8% year-over-year. This compares favorably to the broader infill markets, which are down 12.5% year-over-year, and even more favorably when compared to the larger box market in the Allempire East and West, where rents have declined approximately 25% year-over-year according to CBRE. Consistent with historical trends, Rexford's superior and highly functional infill locations averaging 26,000 square feet have continued to outperform. By way of example, the average executed lease rate on our 8 million square feet of 2024 leasing activity was 19% higher than the executed lease rate across the overall infill markets. Turning to our fourth quarter performance, the Rexford team delivered solid results in line with our expectations. We executed 1 million square feet of leasing at net effective leasing spreads of 55% and cash leasing spreads of 41%, with annual embedded rent steps averaging 3.9%. Same-property average occupancy declined by 120 basis points sequentially driven by the expected move-outs communicated last quarter. Regarding investment activity, in the fourth quarter, we stabilized 3 repositioning projects, which met or exceeded our forecasted stabilization timing and yields. For the full year, we stabilized 10 repositioning and redevelopment projects across 825,000 square feet, achieving an aggregate 7.5% unlevered stabilized yield on total investment. During the quarter, we closed 2 acquisitions for $207 million, and for the full year, we completed $1.5 billion of acquisitions projected to generate a 5.6% unlevered stabilized yield. In addition, for the full year, we built 5 properties for a total of $44 million, generating a 12.8% unlevered IRR. In light of current market conditions, our capital allocation strategy is focused on maximizing returns and accretion through capital recycling and repositioning of redevelopment opportunities. With regard to our acquisition pipeline, we currently have no acquisitions under contract or accepted offers. Separately, we have $105 million of dispositions under contract or accepted offers subject to customary closing conditions. Regarding our repositionings and redevelopments, we have 3.5 million square feet of projects under construction or in lease-up, which are projected to deliver a 6.1% unlevered stabilized yield on total investments. Our value creation focus continues to differentiate the Rexford business model and generate substantial embedded NOI growth. Today, our embedded growth represents an estimated 40% increase in total incremental NOI equal to $280 million, which includes annual embedded rent steps averaging 3.7% for the total portfolio, the portfolio lease mark-to-market up 25% on a net effective basis and projected incremental NOI of $75 million from our repositioning and redevelopment projects currently under construction or in lease-up. In closing, as I step into the COO role, I am excited to expand upon my work with the Rexford team to drive greater efficiency, effectiveness, and profitability. To that end, recognizing current market conditions, we are taking proactive actions internally to drive further efficiency across the organization. These initiatives resulted in no increase to year-over-year projected G&A despite growing consolidated NOI by 17% in 2024 and demonstrate our commitment to driving shareholder value through all points in the cycle. With that, I'm happy to turn the call over to Mike. We are excited to welcome Fitz to the team and for all he brings to Rexford. Mike?

Thank you for the kind introduction, Laura. To you, Michael, and Howard, thank you for placing your trust in me as we work together to drive Rexford's next phase of growth. I'll now briefly comment on quarterly and full-year results, walk through our 2025 guidance, and then conclude with the balance sheet. Our fourth quarter 2024 earnings results were in line with our expectations. For the full year, we delivered 7% growth in both core FFO per share and same-property cash NOI, demonstrating the resilience of our earnings despite challenging market conditions. Moving on to our initial 2025 outlook. For clarity, as I walk through the components of guidance today, I will be referring to the midpoint of our assumption ranges as disclosed in yesterday's earnings release. Consistent with historical practice, our outlook does not include any assumptions for additional acquisitions, dispositions, or related balance sheet activities that have not closed. We are establishing our core FFO guidance range of $2.37 to $2.41 per share. Let's begin with our key same-property drivers. Same-property net effective NOI growth is expected to be 1%, primarily driven by longer projected downtime, resulting in a decline of 100 basis points in average occupancy, bad debt equating to 70 basis points of revenues, cash re-leasing spreads of 20%, and contractual increases of 3.7%. As for our value-add construction projects, we estimate $35 million of incremental NOI in the lease-up of repositioning and redevelopment projects, of which $15 million is related to projects leased in 2024. This is partially offset by $20 million of NOI coming off-line as we commence construction on new projects. For the NOI coming online in 2025, we assume an average lease-up time of 8 months, which is up 2 months compared to our prior quarter expectations. As Laura highlighted, we are taking proactive measures to control costs. So, we scaled our platform by adding 4.6 million square feet last year; we were able to keep G&A flat compared to 2024, reinforcing our commitment to increasing operating leverage. Regarding our balance sheet, we continue to maintain a low leverage profile and strong liquidity. At quarter end, net debt-to-EBITDA was 4.6x. Today, liquidity totaled $1.4 billion, including nearly full availability on our $1 billion revolver and $400 million of forward equity requiring settlement by the end of the first quarter. As a reminder, the forward equity was raised in March 2024 at $48.95 per share. As it relates to capital needs for 2025, we have $275 million allocated for repositioning and redevelopment. With no material debt maturities, lastly, our Board authorized a $300 million share repurchase program, further expanding our opportunities to allocate capital. Before I turn the call over to the operator, I want to thank the entire Rexford team for their warm welcome and support as my family and I settled into Southern California. I'm truly grateful to join a team that upholds such a high standard of excellence, dedication, and teamwork. Together, we're going to accomplish great things.

We'll take our first question from Mike Mueller with JPMorgan.

Yes, I was wondering, looking at the supplemental on Page 20, where you have the leasing volumes going from 3.2 million square feet in 1Q sequentially down to 1 million in 4Q. Can you talk a little bit about what's happening real-time and how you see that graph playing out based on what you're guiding to for 2025?

Mike, thank you for joining us today. Let’s discuss the fourth quarter and what we're currently observing in the market. For the fourth quarter, we achieved 1 million square feet of leasing, which aligns with our previous expectations from last quarter. This performance was mainly influenced by a low number of lease expirations and our anticipation of the slower demand environment we faced in the latter half of the year. Looking ahead, we have noticed an increase in overall market activity in January, particularly regarding our leasing negotiations for vacant spaces. So far this year, we have successfully leased 1 million square feet, which mirrors the activity level we had before and includes the lease-up of three of our repositioning and redevelopment projects, totaling around 200,000 square feet. We are seeing significant market activity, with approximately 90% of our vacant spaces engaged in some level of activity, and we are focused on turning that activity into signed leases.

Our next question comes from the line of Blaine Heck with Wells Fargo.

Great. And certainly, I want to pass along our sympathies to everyone affected by the wildfires. I guess with my 1 question, I just want to dig in a little bit more into the components of cash same-store NOI growth as possible. Obviously, there are some headwinds to occupancy, but maybe you can talk about the puts and takes related to rent spreads, rent bumps, bad debt, even margins and kind of the bridge or how that all builds up to get us closer to the midpoint of guidance.

Sure, Blaine. This is Mike. I'll start with the major drivers. First, it's elevated downtime, increased concessions, and higher bad debt, and the components of those items are as follows: 270 basis points from cash re-leasing spreads, which again are about 20% for the year. We have 320 basis points from rent steps, which are driven by the 3.6% in place, for instance, we have in the portfolio. So those are the 2 positive drivers, offset by about 130 basis points of concessions. And then we're experiencing about 3 months of concessions, which is about up 1 month from last year. Then we had a 100 basis points decline in average occupancy that we noted in our press release last night. And then there's just a tiny bit of erosion from net expenses of about 30 basis points. The higher bad debt is causing the profile drag of about another 80 basis points. That gets us down to the 2.5% that we posted last night.

Our next question comes from the line of Andrew Berger with Bank of America.

I know you guys stopped providing commentary on market rent growth forecast. But I saw obviously in the presentation, you highlighted that rents for the comparable portfolio declined minus 1.5% during the quarter. And just curious if you have any high-level thoughts as to how close to the bottom we are and whether or not you think we'll see that stabilize this year.

Yes, it's Michael. Thanks so much for dialing in today. Great to hear from you. It's always hard to call a bottom with respect to market rents, as there are a lot of drivers, both on the demand and the supply side. What we can tell you is what we're seeing in the markets today. Laura did a great job of describing current conditions, and look, the business is fundamentally sound. A lot of the data out there tends to disproportionately cover the big box, larger box markets, and what you're also seeing with regard to market conditions is that our small or medium-sized tenant base is showing more resiliency in terms of market rents, at least in Southern California, compared to the larger box tenants. Larger box tenants are down about 25% year-over-year, whereas our portfolio tenant, on average, similar quality, is down about 8%. The backdrop and the foundation are there ultimately for market rent growth; it's just hard to say when we will start to see that inflection point.

Our next question comes from the line of Steve Becker with Evercore ISI.

Yes. As you look at your 25 lease expirations, you've got, I guess, a little over 7 million feet. How would you sort of think about retention ratios on that? And are there any large known move-outs that you have in the portfolio this year?

Steve, thanks for joining us today. In terms of our occupancy guidance, we are guiding to about a 100 basis points of occupancy decline in the portfolio on average for 2025. The largest driver of that is really higher projected downtime, so that's a longer time between a move-out of a tenant and a new rent commencing. We're projecting about 6.5 months of projected downtime on average for 2025, compared to about 5 months that we experienced in 2024, and it's really associated with longer tenant decision-making and the factors around demand that we've talked about. Just drilling into your question around specific tenants, the 100 basis point decline is impacted by 4 tenants. Two of those 4 spaces actually were vacated in the fourth quarter, and the other 2 are expected to vacate in 2025.

And then the one thing I would add there, Steve, as I mentioned in my prepared remarks, we've got about $20 million coming offline of NOI in 2025 related to preparing projects for our repositioned redevelopment. Most of those are weighted to come off in the first quarter. So from a shape of our occupancy relative to the start of this year, it's going to decelerate in the first quarter and reaccelerate in the back 9 months of the year.

Our next question comes from the line of John Kim with BMO Capital Markets.

Congrats to you, Mike. Can you just walk us through, again, the GAAP same-store NOI growth? I'm a little bit unclear as to why that would be lower than your cash same-store guidance. The gap spreads would likely be higher than cash. You don't have the free rent impacting GAAP with cash. I know you went through flat occupancy and the bad debt, but what else would be driving that gap same-store lower than cash?

Yes, so the delta between our midpoint on cash at 2.5% and 1% on the net effective is really a straight-line rent, as we burn off below-market leases, which are generally in our portfolio where we're at in our - the evolution of our leases in the back half. So that's the drag there.

Our next question comes from the line of Greg McGinniss with Scotiabank.

I was just wondering if you could talk about your view on trying to understand the lease-up... sorry, the leasing has improved or the view on leasing activity has somewhat improved into the beginning of this year, but then offset by that commentary on pushing out the development and leasing. So is that just selective of the development leasing is what's happened recently versus kind of going on more recently on leasing? Or if you can just kind of reconcile those 2 comments for us? Appreciate it.

Yes. I'll just from a guidance perspective in the range we set out there last night, it's based on today's realities with the most up-to-date information as of early this week. Some of the commentary Laura shared with you on the nice momentum we're experiencing over the last week with leasing activity. We take a very battle-focused approach with budgeting every lease, every asset. We look at every specific assumption and align that with the risk of the market. So we feel very good about where we're at with the range today, and it takes into account all the information up until just a few days ago.

Yes. I think what I'll add is that we are observing an increase in demand influenced by several factors. Firstly, there is greater clarity for tenants regarding the interest rate and political landscape. I believe this is releasing some pent-up demand in the market. Tenants are prioritizing higher quality and functional spaces that can help them increase revenue and improve efficiencies. Our offerings provide the highest quality and functional space, which I think is contributing to our increased demand. However, tenants remain cautious in their decisions about expansion and space requirements, which is causing some delays in their leasing decisions. As we convert these opportunities into signed leases, we will see positive impacts on our results.

Our next question comes from the line of Nick Thillman with Baird.

Mike, I appreciate the commentary on redevelopment. So just and taking some of the NOI offline. So just to drill down a little bit, you identified 3.3 million square feet of redevelopment and repositioning. But what percentage of that, I guess, is from the 2025 expirations of the 7.5 million square feet? And what's the expected spend of that amount this year?

The spend for this year that we have earmarked for repositioning and redevelopment is about $275 million.

Our next question comes from the line of Vikram Malhotra with Mizuho.

I guess I wanted to just touch on your slide. You've given some key messages. One of them is capital allocation; you referred to no acquisitions but dispositions. So perhaps maybe just stepping back to that. One, in this environment, given the superior quality you've outlined, if there is sort of a portfolio kind of once in a generation that presents itself, your peers are maybe hurting more. Do you act upon that? And then capital allocation-wise, what about buybacks?

Vikram, thanks so much for joining us today. Great questions all around capital allocation. Let's just take a step back and talk about our priorities. Our priorities have changed in light of today's market and our current cost of capital. To that end, our hurdle rates have increased, and we are focused on capital recycling and executing on our repositioning and redevelopment. As we think about capital recycling, we believe dispositions continue to be an attractive source of capital, obviously represented by the $105 million that we have under contract or accepted offer today. Those allow us to capture value and redeploy that into accretive opportunities. That certainly includes repositioning and redevelopment that drives substantial incremental yields, potentially our own stock share repurchases, and potentially acquisitions that would have to meet our very high hurdle rates in today's environment.

And Vikram, hi, it's Howard. You asked about a once-in-a-lifetime portfolio. We monitor plenty of opportunities in the market, but as I think we've made clear, our hurdle rates are up. If we were going to buy something larger, they certainly have to meet those hurdle rates. There's absolutely no reason for us to change those hurdle rates just because a portfolio comes up available for sale.

Our next question comes from the line of Craig Mailman with Citi.

Just a follow-up on the capital allocation topic. It seems that you are clearly avoiding acquisitions, at least in the near term. Could you provide some insight into the stock? It has been underperforming for a couple of months now. Why proceed with the December acquisition? Why not postpone that and allocate the capital for higher-yielding redevelopment instead, using some of the ATM issuance to maintain it on the balance sheet? It's not significantly dilutive to earnings, and you could still utilize it for buybacks. Why spend the money on the recent acquisition at that yield considering your stock's current trading position?

Craig, it's Howard. First of all, the property we bought has fantastic functionality. It's in an A location. I'll just remind you that the capital we used in buying that asset was the forward equity that was raised at about $49 a share. If you look at the transaction, the initial yield is about $48, and by year 4, we're already at a 5.5% in-place yield, so that's turning away with 4% rent increases annually, and there's about 6.5 years currently left on the term of the lease. The hurdle rates would be different. I think I just made that clear in my last comment; if we start looking at new transactions, but with that capital that we used, there was actually accretion.

Our next question is a follow-up from the line of Blaine Heck with Wells Fargo.

Yes. Great. Clearly, we're still very early in the process of determining the ultimate impact of the wildfires in the region. But can you share any early reads or anecdotes around potential demand that could arise for industrial space to support the rebuilding effort and whether you think any specific submarkets or building sizes might see the most incremental demand?

Blaine, thanks again for the question. It's Michael. No, look, it is early, and obviously, our hearts go out to everybody impacted by these tragic fires. But the fact of the matter is, if you look at the backdrop before the fires, we already had a significant mandate to increase housing in Southern California by about 2.5 million units of affordable housing. We had already started to see a marginal increase in demand from the building trades, etc. There's no question that with the volume and magnitude of impact derived from the fires, we're going to see demand. I think it will come in phases, and frankly, we have tenants that service all phases of rebuilding. It'll start with infrastructure, pipes, conduit, wire. We have tenants that service, store, deliver that, and then it's going to move on to wood, framing, and steel, and everything that goes into a home. These aren't just affordable houses and affordable housing units; these are homes that deploy extensive finishes and extensive levels of appliances. There's no question it's going to drive incremental demand over time for the portfolio.

Our next question is a follow-up from the line of John Kim with BMO Capital Markets.

I do like the one question rule, but I did want to follow up on my question on the cap spreads you expect this year? You signed at 55% in the fourth quarter. I imagine a lot of that is going to commence in 2025. But what should we be modeling as far as GAAP spreads?

Yes. GAAP spreads are expected to be about 30% in 2025.

Our next question is a follow-up from the line of Vikram Malhotra with Mizuho.

So first on leasing. I think you said you've done 1 million square feet year-to-date. I was wondering if you could break that out into new and renewal and clarify the comment you had on taking rents. I think you said were up 1.5% sequentially and 8% year-over-year. I'm just wondering how that compares to what you have in the deck in terms of comparable rent growth?

Yes. In terms of the leasing activity today, it's about 1/3 new, 2/3 renewals, which is pretty consistent with what we typically see within a leasing quarter.

You mentioned an 8% year-over-year rent growth and 1.5% sequentially. I would like to understand how that compares to what you have in the presentation, which indicates that year-over-year rent growth is down 8% and 1.5% sequentially.

Yes. That's the market rent growth that we've experienced within the Rexford portfolio and comparable product to ours within the portfolio.

Yes. And just from a guidance perspective, what we've baked in for 2025, we're assuming flat growth throughout the year relative to last year and our market rate assumptions. We'll give more details next quarter in terms of lease spreads, etc. in what we accomplished this quarter.

Our next question is a follow-up from the line of Steve Becker with Evercore ISI.

I just wanted to clarify, Laura, when you mentioned the 100 basis decline. Was that related to the same-store occupancy decline that's part of guidance, or was it about the overall portfolio, which has been drifting down? I believe it was just over 91% at the end of the year.

Yes, it's a 100 basis points of average occupancy decline for same properties.

And that will conclude our question-and-answer session. I'll turn the call back over to Laura Clark for any closing remarks.

Before we wrap up, I'd like to leave you all with 2 final thoughts. First is that our infill Southern California market and portfolio are uniquely positioned for long-term value creation despite some near-term market challenges. Our projected embedded internal growth opportunity remains substantial, equal to $280 million of incremental NOI, and that represents 40% growth. Second, we maintain a strong financial position and are taking a disciplined approach to capital allocation with a focus on maximizing returns and accretion while also proactively enhancing operational efficiencies to drive shareholder value. With that, we thank you all for joining us today.

That will conclude today's call. Thank you all for joining, and you may now disconnect.