Earnings Call Transcript
Rexford Industrial Realty, Inc. (REXR)
Earnings Call Transcript - REXR Q4 2020
David Lanzer, General Counsel
We thank you for joining us for Rexford Industrial’s fourth quarter 2020 earnings conference call. In addition to the press release distributed yesterday after market close, we posted a supplemental package in the Investor Relations section on our website at www.rexfordindustrial.com. On today’s call, management’s remarks and answers to your questions contain forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements address matters that are subject to risks and uncertainties that may cause actual results to differ from those discussed today. For more information about these risk factors, we encourage you to review our 10-K and our other SEC filings. Rexford Industrial assumes no obligation to update any forward-looking statements in the future. In addition, certain financial information presented on this call represents non-GAAP financial measures. Our earnings release and supplemental package present GAAP reconciliation and an explanation of why 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, Laura Clark; and myself, David Lanzer, our General Counsel. We will make some prepared remarks, and then we will open the call for your questions. Now, I will turn the call over to Michael.
Michael Frankel, Co-CEO
Thank you and welcome to Rexford Industrial’s fourth quarter 2020 earnings call. Most importantly, we hope you and your families are well and healthy. Today, I’ll begin with a brief introduction, Howard will then cover our transaction activity, and Laura will discuss our financial results and outlook for 2021. We will then open the call for your questions. Although last year brought significant hardship within our communities and across the globe, our team at Rexford Industrial completed one of our most outstanding years on record despite the pandemic. Our Rexford experience demonstrates the strength of our infill Southern California tenant base and of our entrepreneurial team. The team’s 2020 performance speaks for itself. We achieved record leasing volume of over 6.3 million square feet with exceptional re-leasing spreads, averaging about 20% cash and 30% on a GAAP basis. Our investment volume of over $1.2 billion of acquisitions also set a new high watermark for the company. And combined with our strong internal growth, drove a 22.1% increase in core FFO, which grew 7.3% on a per share basis. A range of growth sectors drove incremental tenant demand through 2020 from healthcare and consumer staples to aerospace and electric vehicles, among others, while a dramatic acceleration in e-commerce adoption pushed our infill tenant demand to unprecedented levels. When we consider these incremental demand drivers, combined with the fact that our infill Southern California industrial market serves the nation’s largest zone of consumption and benefits from an incurable supply-demand imbalance, it is easy to understand why our infill market is positioned to outperform. These factors, combined with our entrepreneurial business model, have enabled Rexford to generate sector-leading total shareholder return of about 330% since our 2013 initial public offering, substantially exceeding the total shareholder return of any other publicly traded logistics REIT in America. Looking forward, we see continued strength. By way of indication, CBRE recently projected greater Los Angeles County rental rate growth of 41% over the next five years, which equates to 7.1% average annual compounded rent growth for the next five years in Greater LA. Meanwhile, by way of comparison, the same CBRE study projects 2.9% compounded annual rent growth for the nation’s other major markets outside of Southern California over the same period. Rexford’s future is bright. We believe the company has never been better positioned with respect to the volume and quality of our internal and external growth opportunities. Although we have grown Rexford to become the third-largest logistics REIT in the United States by market capitalization, we see substantial opportunity to accretively expand well beyond our current 1.7% market share within the fragmented infill Southern California industrial market. We intend to continue to maintain our low leverage investment-grade balance sheet to fuel our growth as we capitalize upon our deep proprietary acquisition pipeline. The company is also well positioned to further enhance our financial performance as we scale our business, leveraging technology, data, and process improvement to drive increasing operating leverage and operating margins as we grow our portfolio into future years. Above all else, our extraordinary performance reflects our extraordinary team. We would like to express our deep thanks and gratitude to the entire Rexford team for your resilience, determination, and great spirit in the face of unprecedented pandemic-related challenges. And with that, I am very pleased to turn the call over to Howard.
Howard Schwimmer, Co-CEO
Thanks, Michael, and thank you everyone for joining us today. Exceptional market fundamentals persisted throughout our infill Southern California industrial markets, though COVID-19 and its associated shutdowns continued through the fourth quarter. Vacancy decreased and demand remained strong, driven by a variety of sectors within our highly diversified economy and a dramatic increase in e-commerce activity. As a result, we continue to see strong rental rate growth and healthy net absorption. Our target markets, which exclude the Inland Empire East, ended 2020 at historically low vacancy of 2.2%, a 40 basis point reduction from the prior quarter. By way of indication of the strength of our Southern California markets, our same-property pool ended the year at an average rental rate of $10.48 per square foot, representing an increase of 8% year-over-year. During the fourth quarter, we completed over 1.8 million square feet of new and renewal leasing at spreads of about 30% on a GAAP basis and 18% on a cash basis. About half of these leases were early renewals for 2021 lease expirations. At year-end, we had approximately 4.8 million square feet of expirations remaining in 2021. The mark-to-market on these leases is approximately 17%, putting us in a strong position to grow net operating income as we continue to address these expirations throughout the year. Turning to external growth, during the fourth quarter, we completed 10 acquisitions totaling approximately $875 million, adding 17 properties and 3.4 million square feet to our portfolio. For the full year, we acquired $1.2 billion of properties, adding 5 million square feet to the portfolio. Seven of these acquisitions included low coverage, outdoor storage sites and land for redevelopment, totaling 36.7 acres with improvements equating to 14% site coverage. Our investment activity truly demonstrates the unique strength of our operating platform. To begin with, about 75% of our 2020 investments were acquired through off-market or lightly marketed transactions, originated through our proprietary research-driven sourcing methods and deep market relationships. Additionally, we are capitalizing on a historical generational shift in ownership as long-time owners increasingly age out of active management. Consequently, we have seen an increase in UPREIT transactions, which represented almost 30% of 2020 acquisitions. In these transactions, owners contribute their property to the company in exchange for ownership in Rexford, allowing a seller to achieve tremendous tax efficiency. Further, our value-add repositioning and asset management expertise continues to deliver substantially better than institutional yields. Recent repositioning stabilizations demonstrate the strength of our value-creation capability. For the full year 2020, we stabilized 600,000 square feet of repositioning projects at a weighted average un-levered yield on total cost of 5.6%, which represents an approximately 150 basis point or greater premium to comparative cap rates on marketed transactions. As we look ahead in 2021, we have approximately 700,000 square feet currently under repositioning or redevelopment and another approximately 2 million square feet to start over the next 18 months. Given the strength of demand for highly functional industrial space and strong rent growth potential in our markets, we are optimistic for superior value creation through timely lease-up of projects delivering this year. Turning to dispositions, in 2020, we sold $45.5 million of properties, and we expect to continue to sell assets on an opportunistic basis to unlock value and recycle capital. Finally, we are well positioned with respect to 2021 acquisition opportunities. Subsequent to year-end, we have closed on $95 million of investments, and we have approximately $280 million of new acquisitions under letter of intent or contract. This includes the recently announced $217 million transaction that we are targeting to close in the latter half of the year. Of course, this and all other acquisitions are subject to completion of due diligence and satisfaction of customary closing conditions, which are not guaranteed. We will provide more details as transactions are completed. I am pleased to now turn the call over to Laura.
Laura Clark, CFO
Thank you, Howard. I will begin today with details around our strong operating and financial results. For the full year, same-property net operating income growth came in ahead of projections at 3.7%, driven by strong stabilized same-property occupancy, which ended the year at 98.2%. Consolidated net operating income grew by over 24%, leading to core funds from operations per share growth of 7.3% or $1.32 per share, exceeding our guidance range. The continued strength of our tenant base also contributed to our outperformance as bad debt reserves came in better than expectations at 150 basis points of revenue for the full year. In the fourth quarter, stabilized same-property net operating income was up 2.5% on a GAAP basis and up 7.1% on a cash basis, primarily driven by strong collections of COVID-related deferral billings. Overall collections continue to be near pre-COVID levels as we collected 97.7% of contractual billings in the quarter, which includes 96% collection of deferral billings. As a reminder, during the year, we executed $4.7 million of total deferrals or 1.4% of revenue, averaging 1.5 months' rent. $900,000 remains to be collected in 2021, and based on our experience to date, we feel good about the probability of collection. With this strong performance, we are very pleased to announce that the board declared a dividend of $0.24 per share, representing an increase of 12%, demonstrating Rexford’s continued commitment to delivering superior total shareholder returns. Turning now to our balance sheet and financing activities, maintaining a best-in-class low leverage balance sheet while driving superior growth remains a fundamental focus at Rexford. During the quarter, we demonstrated access to a diverse array of capital sources, funding our robust investment activity while maintaining our sector-leading low leverage. At year-end, net debt to EBITDA was 4x, coming in at the low end of our target leverage range of 4 to 4.5x. In the quarter, we were pleased to secure additional investment-grade ratings from both Moody’s and S&P, adding to our existing Fitch investment-grade rating. In November, we successfully completed our inaugural public bond offering, raising $400 million of 10-year senior notes with a coupon of 2.125%. Proceeds were used to fund our investment activity and the repayment of our $100 million term loan that was due in early 2022. Also in November, we renewed our ATM program, upsizing our total capacity to $750 million and included the ability to issue shares on a forward basis. During the quarter, we raised $35.6 million of equity through the ATM program at an average price of $50.13 per share. In December, we completed a secondary offering of 6.9 million shares of common stock, including the exercise of the underwriters’ option at a net price of $47.15 per share, representing proceeds of $325.3 million. As of December 31, we had approximately $176 million of cash on hand. We remain in a very strong liquidity position, with no debt maturities until 2023, full availability on our $500 million revolver, and approximately $721 million available under our ATM program. Before we turn the call over for your questions, I’ll provide an overview of our 2021 full-year guidance. Company share of core FFO is expected to be in the range of $1.40 to $1.43 per share. This represents earnings growth on a per-share basis of 6% to 8%. It is important to note that consistent with our prior practice, our guidance does not include acquisition, disposition, or balance sheet activities that have not yet closed to date. Our core FFO guidance range is supported by several key factors; first, stabilized same-property net operating income growth of 3% to 4% on a GAAP basis and 6% to 7% on a cash basis; next, average full year stabilized same-property occupancy is expected to be in the range of 97% to 97.5%. We expect general and administrative expense to be in the range of $44.5 to $45.5 million. Approximately $17 million is related to non-cash equity compensation, which includes time-based and performance-based units that are tied to the company’s overall performance. Finally, net interest expense guidance is $36 million to $36.5 million. Complete details of our 2021 guidance can be found in our supplemental financial package, where we have also included a roll forward of the components of earnings per share growth. We hope you will find this additional detail helpful. This completes our prepared remarks, and we now welcome your questions.
Operator, Operator
Thank you. [Operator Instructions] Our first question is from Jamie Feldman with Bank of America. Please proceed.
Jamie Feldman, Analyst
Thank you. I guess just starting out, going back to the guidance you outlined, can you talk about your bad debt assumption in the ‘21 same-store outlook and in FFO? And then – well, first, I’ll let you answer that and then I’ll ask the next question.
Laura Clark, CFO
Yes. Jamie, it’s great to hear from you today. So our 2021 guidance implies a bad debt expense in the 125 to 150 basis point range for the full year. Roughly in line to slightly better than our 2020, which was 150 basis points for the full year. As you know, there is much uncertainty that remains in this environment, particularly around the timing of the California moratorium being lifted. Those moratoriums, as a reminder, have given our tenants the unilateral right to defer rent, and this will – the timing of those moratoriums being lifted will have the most significant impact on the trajectory of bad debt levels in 2021 as about half of our watch list of bad debt is related to tenants that are following the moratoriums.
Jamie Feldman, Analyst
Okay, thanks. So you mean half is tied to tenants you think are healthy, but not paying because they don’t have to?
Laura Clark, CFO
Yes, absolutely. So I mean, it’s important to note that we are collecting the vast majority of our rents from our tenants. Collections this quarter were near 98%, and that’s really close to pre-COVID levels, but – so big picture, that the number of tenants who are not paying rent is really minimal. But as we talked about last quarter, we did anticipate this pickup in bad debt. And about half of our bad debt reserve is related to tenants that are following moratorium. We don’t have certainty, but we have a pretty high level of confidence that these tenants are in good financial health. They are open, they are operating, and we’ll begin paying rent and their outstanding accounts receivable when the moratoriums lift.
Jamie Feldman, Analyst
Okay. Do you have any latest thoughts on when moratoriums might lift across your submarkets?
Laura Clark, CFO
Yes. That’s a really...
David Lanzer, General Counsel
Jamie, this is David. And so the moratorium was extended by the governor through the end of March. And this is basically the statewide enabling action that allows each locality to have their own orders in place. And so we had 48 initially that we’re tracking. And of those, about 22 have been rescinded. So many have already been lifted; however, the most impactful are the orders for the city and county of LA, which are both still in effect. And so as long as the governor’s order is still allowing this, there’s the potential for the orders to remain in place. Our expectation is that it’s very likely that the governor, who has already extended the order several times before, would extend it again.
Jamie Feldman, Analyst
Okay. And then how does bad debt and deferred rent impact your same-store growth rate both I guess when you think about what you delivered in ‘20 and what you projected for ‘21?
Laura Clark, CFO
Yes. I mean, in terms of projection for 2020, I mean that – it impacts the growth rate. Certainly depends on where we come in, in terms of the 125 to 150 basis point range. In terms of the impact to same-property for 2020, that number is – for the full year, was about 210 basis points of growth in property adjusted total.
Jamie Feldman, Analyst
So is it a 200 basis point drag in ‘20?
Laura Clark, CFO
Yes, it was a 200 basis point drag to our growth, yes.
Jamie Feldman, Analyst
So just to be clear, like the 6% to 7% cash in ‘21, like what do you think that is normalized?
Laura Clark, CFO
Yes. So in terms of that cash versus the same-property cash versus GAAP spreads. So COVID deferrals and repayment account for about half of the 300 basis point variance. So our cash in property net operating income guidance is 6% to 7%. So about – and our GAAP is 3% to 4%. So that 300 basis points. So, say, excluding COVID and the deferral collections, it’s about 4.5% to 5.5% on a cash basis.
Jamie Feldman, Analyst
Okay, alright. And then finally for me, just as you think about the acquisition pipeline, can you talk about how big it looks overall today? And what percent might be OP unit deals?
Howard Schwimmer, Co-CEO
Hi, Jamie, it’s Howard. Nice to hear from you. Well, we announced we have $280 million under letter of intent or contract. We really don’t talk much about what that makes up until we announce the transaction. That said, we’re really optimistic about more upgrade transactions. And I can’t comment on what might be in play, but that audience or group, let’s call it, of owners, you’ve heard us talk about them for many years now. They continue to age. And really – they are really heading toward making their major life decisions. All of the UPREIT deals we did during the year were exactly that, people that are well into their 80s doing estate planning. There is tremendous tax efficiency around the OP transactions. So we are optimistic that we’ll be able to talk more about those. But otherwise, the pipeline is very strong. I think today, behind that $280 million in terms of sort of the top line of what we track, you’ve seen some of the heat maps of those properties between the one week, one month, six months in terms of the top of the list, there is probably $200 million square feet of product that we’re tracking. And I’ll give you an example of how deep the pipeline was. Last year, we made offers on $22 billion worth of product. That’s 544 letters of intent. The year before was about half that amount in terms of the valuation of those letters of intent. So the pipeline is growing. Year in and year out, we’re just getting better at what we do and the opportunity set for us is growing. We focus on catalyzing these off-market-type transactions, which is really the differentiator in our marketplace.
Michael Frankel, Co-CEO
Jamie, this is Michael. I just wanted to add some color to that. If you put yourself in the shoes of one of those long-time owners, they have owned infill Southern California in many cases for many decades, and they understand and appreciate this market. They know it is the strongest market in the country by far. When they look at Rexford, it’s a truly unique opportunity. There is no other industrial REIT in the country that’s solely focused on infill Southern California. What we hear repeatedly from these owners is they are very hesitant to consider an UPREIT with another REIT that’s diversified across the entire country because any other market would represent a dilution in quality relative to what they already own in terms of their market presence and long-term tenant demand fundamentals. Rexford really is a unique solution for them. The other factor that could play a role as we move forward is the potential for the 1031 exchange tax treatment to be removed from the tax code. If that happens, we think that will drive incremental demand towards the UPREIT. So as long as the UPREIT structure survives, and we haven’t heard otherwise because it will be virtually the only solution for folks to monetize the value of the property on a tax-deferred basis and continue the growth in a manner that they go with Rexford. So for a range of reasons, we’re pretty excited about the overall opportunity going forward.
Jamie Feldman, Analyst
Okay, thank you for your thoughts.
Operator, Operator
Our next question is from Emmanuel Korchman with Citigroup. Please proceed.
Emmanuel Korchman, Analyst
Hey, everyone. Just over time, your average lease size, or I guess that can be translated to average tenant size has ticked up. Is that sort of by design or has it just happened based on the mix of assets you have been able to buy?
Howard Schwimmer, Co-CEO
Well, I think a lot has to do with the assets we’ve been buying, Manny. There was a time where we could buy multi-tenant industrial at a tremendous discount. Today, multi-tenant is fairly attractive to people and is selling at full value. So you don’t see us buying a lot of that type of product anymore. Because we’re buying assets that have bigger tenancies, obviously, the average tenant size is growing. We’ve also sold off several of those multi-tenant projects as well. So that’s had an impact, too. I think our average size in the portfolio now is about 20,000 square feet, and that’s moved up from previous. I think even today, if you look at the leasing we did, I think in the last quarter, the average size lease was about 17,000 feet.
Emmanuel Korchman, Analyst
Right. And then just looking at G&A into next year, it’s a pretty big ramp. Is that just based on where the equity is and just natural inflationary G&A growth or are there other investments that you guys are making as you’re growing as a company?
Laura Clark, CFO
Yes, Manny, it’s Laura. As you’ve all seen, we’ve experienced really robust growth in our overall asset base over the last few years. Over the prior two years alone, we’ve added $2 billion of assets to our portfolio. Last year, market capitalization grew nearly 30% in 2020 and the full year of 2020. At the same time, our G&A as a percent of revenue, which was about 11.2% in 2020, is certainly trending in the right direction, and we believe we’re closing the gap relative to the peer average. I’ll note that I think it’s important to think about kind of where we are in terms of nearing the completion of building out our platform. It certainly makes the G&A comparisons more difficult relative to our peers that may not be growing at the same pace. We do expect our G&A ratios will level out, and we’ll begin to see a decline in the near term as we built out the bulk of our platform. One other note in terms of our G&A is that about $17.1 million of our G&A is non-cash compensation – is related to non-cash compensation. Much of this as well as some of the cash performance compensation is tied to our overall company performance. Our guidance assumes a maximum level of payout related to us achieving maximum performance. We believe this is the most conservative way to provide guidance. But all that being said, if we don’t perform at these maximum levels, we won’t achieve these projected levels of G&A that we’ve guided to. Just as an example, if we achieve target performance versus maximum performance in 2021, that equates to a reduction in the cash G&A of nearly $2 million.
Michael Frankel, Co-CEO
And Manny, this is Michael. I think the other part of your question around are we making sort of interesting incremental investments that might be, in part, representative within that G&A. And I think that’s absolutely the case. Not only are we still very much a growing company, I think there’s no industrial REIT that grows anything close to the way Rexford is growing. But if you look at the incremental investments we do make, it drives a return on G&A that is also unique in our sector. I’ll just give you a couple of quick examples. You look at the investments we make in our originations capability. By that, I mean we have a dedicated research team, a dedicated marketing team, and an acquisitions team that in terms of size, quality, and depth of expertise is substantial. If you look at our process, it looks very different than probably any other industrial REIT in our sector. If you look at the return on that investment, we made about $1.2 billion of investments last year, and a full 75% of the transactions were through off-market and lightly marketed transactions, which were a direct result of that incremental investment. This drives substantially better economics and return on investment, return on equity as compared to just typical institutional yields. We’ve also created a similar system on the leasing side, so leasing at Rexford is 100% digital. We try to squeeze all the latency out of the system. That’s why you see us handling the growing volume of leasing activity while also driving sector-leading spreads and record volumes for Rexford year-over-year. This company is very focused on innovation and does drive some of the incremental G&A, but it has very substantial long-term ramifications, including the ability to hire fewer people proportionate to our growth going forward. As I mentioned in my prepared remarks, we see substantial operating leverage building through the company as we grow.
Emmanuel Korchman, Analyst
Thanks for that, Michael. And just a final question for me, on the occupancy guidance, it looks like that sort of midpoint decline is similar to the one going into 2020, those given with ‘19 results. Is there anything specific that you think may expire, or is that just using sort of that average absorption and turnover number and justifying it as if this was a more normal year?
Laura Clark, CFO
Hey, Manny. First, I want to note a change in our occupancy guidance this year. Previously, we have guided on year-end occupancy, and our guidance number now is our average occupancy for the full year. This metric more directly is reflective in net operating income and is hopefully helpful for you all. For 2021, the comparable 2021 pool, the average occupancy was 97.8% in 2020. The midpoint of our 97% to 97.5% guidance implies around a 50 basis point decline in occupancy. We have about 4.5 million square feet of total leases expiring in 2021. While we’re seeing great activity and strong demand, there’s still a lot of blocking and tackling that remains. As the pandemic continues, uncertainty does as well. So yes, at this point, we feel that our guidance is prudent.
Emmanuel Korchman, Analyst
Thanks, everyone.
Operator, Operator
Our next question is from Dave Rodgers with Baird. Please proceed.
Dave Rodgers, Analyst
Yes. Hi, everyone. Michael, you talked about leasing spreads again this quarter. Can you talk about the underlying market rent growth trend now looking back over the last three or four quarters, kind of what developments or any changes overall that you’re seeing kind of underlying in the market?
Michael Frankel, Co-CEO
Hi, David, I’m sorry, I don’t know if the others could hear, but if you wouldn’t mind repeating and maybe take yourself a little closer to your mic, it was just really – you were breaking up there.
Dave Rodgers, Analyst
My apologies. Is this better?
Michael Frankel, Co-CEO
Much better.
Dave Rodgers, Analyst
Alright. I guess it really came back to your leasing spreads were strong. You mentioned that just a moment ago, but I wanted to get at more of the underlying market rent growth trends and the overall economics of the markets, now that you can kind of look back three or four quarters from pre-pandemic through the worst of it and now what seems to be much more normalization. Can you give us an update on the market trends?
Howard Schwimmer, Co-CEO
Hi, Dave, it’s Howard. I think just boots on the ground today I’ll tell you that there is nothing short of astounding what we see in terms of rents. We typically reforecast our rents each quarter. The team seems to be doing it now weekly. I mean, it’s unbelievable. There’s such demand for space and rents are growing so quickly. I’ll give you a great example. We just finished construction on a 335,000 square foot park in the Inland Empire West. There are 10 buildings. We have 10 spaces in six buildings. That was about 18% leased at the end of the year. I think we’re just about now 48% leased with some of the leases signed and a couple about to be signed, and rents are up 20% above what our market rent assumptions were. Rents literally changed $0.05 or $0.10 within the past month. It’s pretty hard to look back on prior quarters right now and garner some trends just from that. There are just so many different industries coming into the market in terms of existing uses that are growing and businesses that are doing well. You’ve got the e-commerce impacts. A tremendous amount of leasing that we’re doing now for companies that are trying to separate a bit from selling through Amazon or even just having Amazon carry their products in their warehouses versus distributing themselves. So it’s a lot of blocking and tackling on the ground right now. It’s really exciting. It’s going to be interesting to see where things go this year. When you talk to a lot of the brokers and look at projections, it seems like high single-digit rent growth is where things are headed for 2021 in most of the markets.
Michael Frankel, Co-CEO
Howard, do you want to also give a sense for where the annual bumps. One thing that’s really unique to our market is that our leases for the most part, predominantly have annual rental rate increases in them. Howard, do you want to chat about where we see that going in terms of year-to-date activity on that respect?
Howard Schwimmer, Co-CEO
Yes. We’ve really kicked up the push in terms of growing rents faster than 3% per annum in leases. We’re starting to have some real traction on it. The park I just mentioned, we just delivered. All the leases we’re selling there have 3.5% increases in them. There’s a 1.1 million square foot industrial park we have in the Inland Empire West, a premier complex with Midway dock high type space, and we are now doing 4% increases across the board on all the renewals and new leasing over there. We are making a concerted effort to roll this out to all of our product. I think we implemented that at the beginning of the year, this push for stronger growth ahead.
Dave Rodgers, Analyst
That’s great. And then just one follow-up on the acquisitions. Obviously, a big increase in acquisition volume in the last two years. How much of 2020 may have been driven just by early fear that might have tipped some people’s hands in wanting to get out? And maybe then at the same time, took some of your competitors out of the business just for a couple of quarters. What’s going to stop acquisitions from being at or above last year’s levels, or is there anything really outside of economics that will do that?
Howard Schwimmer, Co-CEO
Well, year-to-year, we really – we don’t offer guidance on acquisitions because we just can’t predict what’s going to happen. Earlier in the year, yes, you’re right; we did have a slowdown and a pause. A lot of people were on the sidelines. We were still active a bit, certainly thinking differently at the start of the pandemic. Most of our acquisitions occurred in the fourth quarter. We had $875 million worth of acquisitions. That said, again, I mentioned earlier, the pipeline is deep. We certainly have high hopes for where we might go, but we can’t predict. It’s hard to predict what ultimately happens throughout the year.
Dave Rodgers, Analyst
Alright. Thank you.
Operator, Operator
Our next question is from Sarah Tan with JPMorgan. Please proceed.
Sarah Tan, Analyst
Hi, this is Sarah on for Mike Mueller. Just two questions for me. The first one is on the competitive landscape. Could you tell me a bit about the capital that’s chasing the same assets you’re going for, and also prevailing cap rates that you are seeing? The second one is could you comment on increased productivity and its impact on your tenant?
Howard Schwimmer, Co-CEO
I’ll take the first one and then Michael, maybe you want to address the ports. As far as competition in the marketplace, we’re certainly seeing a lot of capital shifting out of some of the other sectors and deciding industrial is a great place to be, but they have limited access to our market. They’re really going to be focusing on more marketed transactions, as Michael described earlier, the size and breadth of our acquisitions team. Our business model is to focus on lightly marketed and truly off-marketed transactions where we do not really compete against anyone or very few people. I gave some numbers earlier about the amount of letters of intent we write in a year. I think we’re our own greatest competition. We could be buying a lot more product. It really just gets down to some of the underwriting criteria that we apply in whether we inbound or pass on different opportunities or whether they’re not right to buy. There’s always been a lot of capital in Southern California. There’s no secret. It hasn’t changed for years that we’re really the best market in the country to own industrial product. The difficulty is just accessing the market. We’ve created a differentiated business that provides us a unique access to the market.
Michael Frankel, Co-CEO
And I will just comment maybe briefly on the ports. We have seen record port volumes for the year, up just under 3% for the year compared to 2019. We saw a substantial surge in the second half of the year, in part due to pent-up demand being reentering the market, but also reflecting really strong underlying consumer consumption and demand. We continue to see that. There’s a backlog at the ports of Southern California; the number one and number two largest ports in the country, LA and Long Beach, have a substantial backlog of ships anchored offshore, which is not uncommon. We’ve seen that in prior periods, during peak distribution periods. They are working through that, partially caused by some pandemic-related labor shortages and longshoremen offloading the containers at port, which is being resolved. Net-net, we see extremely healthy volumes through the ports. One of the important elements of the Rexford position and portfolio in infill Southern California is that we are predominantly driven by consumption. In prior periods, when we’ve seen disruptions in the ports, we have not seen this disruption in tenant demand—they figure out how to get the goods. They can’t get it through the ports. Depending upon which research one would like to believe, upwards of 50% or more goods imported through those two ports are actually consumed locally and regionally. It’s regional consumption that’s a key driver for our demand within our tenant base, as opposed to some of the big box tenants in non-infill locations; they are going to be disproportionately driven by changes in port volumes or global logistics and shipping trends.
Sarah Tan, Analyst
Thank you.
Operator, Operator
[Operator Instructions] Our next question is from Vince Tibone with Green Street Advisors. Please proceed.
Vince Tibone, Analyst
Hi, good morning. Given the success of your recent bond offering, how are you thinking about potentially repaying some of your existing debt early, ahead of maturity in order to lower borrowing costs and extend the overall maturity profile?
Laura Clark, CFO
Hey, Vince, it’s Laura. Thank you for joining us today and welcome to the industrial sector coverage. We are constantly evaluating our debt maturity profile and especially the rates in the market today are certainly very attractive. At the end of the day, we are really focused on maintaining a very strong investment-grade profile. We ended the year with low net debt-to-EBITDA at 4x, at the low end of our current range. We are constantly evaluating what's possible as rates continue to be very attractive.
Vince Tibone, Analyst
No, thank you for that. But just maybe to clarify or follow-up, like the term loan facilities that are the next two unsecured debt that’s coming due, could you pay those without a penalty, or is there something if you are going to prepay the swaps, there would be some kind of real cash outflow there?
Laura Clark, CFO
Yes. They are pre-payable, but there is a swap termination charge that we would incur.
Vince Tibone, Analyst
Got it. Thanks. One more for me. I know in the past, you’ve described some of your acquisitions, the different deals as core, core plus, value-add. I’m just curious how you think about the different return threshold for each? And just if you were going to categorize your 2020 acquisitions in total, how would you—what would be the rough mix between those buckets?
Howard Schwimmer, Co-CEO
Hi, Vince, it’s Howard. Well, first of all, we can’t really predict year-to-year what that bucket will look like in terms of the mix between value-add or core or even core plus. When you look at 2020 acquisitions, it turned out to be a year that we were able to buy more core than we’ve been able to land in many years, which we’re real pleased with, frankly. The value-add was a bit lower in terms of component acquisitions for 2020. Interestingly though, we announced some transactions for 2021; we’ve closed about $95 million. Half of those transactions are value-add. In terms of yields, I’d point you to our repositioning page, where if you look at both the repositioning and some of the redevelopment projects, the yields that we’re projecting are very similar, achieving just below 6% return on total cost for both types of projects. Clearly, there’s a huge value we’re creating in a marketplace that you see today, assets that are stabilized and marketed trading at sub-4 yields to the growing number of investors clamoring to get their hands on the product here in our market.
Michael Frankel, Co-CEO
Probably, just to add a little color to that – just to add a little more color to that, that activity that we generated last year and in recent years. If you look on a go-forward basis; in terms of the embedded net operating income growth embedded in our current portfolio, assuming we didn’t buy another asset, we’re looking at a potential full 23 – almost 23.5% net operating income growth embedded in the current portfolio over the next 18 to 24 months. Roughly, over $62 million of incremental net operating income projected, and roughly a third of that is coming from Q4 acquisitions alone. But even more interesting to me is a third of that; well over $20 million is expected to be derived from repositioning assets as we stabilize and lease them up. Those are some of the more value-add core plus type yields that you also were asking about. The company is well-positioned but it’s driven by the balance of investment activity that you are sort of asking about. It’s really interesting if you look forward at the incredible impacts that these investments are scheduled to have.
Vince Tibone, Analyst
That’s great color. Thank you. Maybe just one more quick follow-up, if I could. Just – is there any caps in terms of how much future repositioning or value-add you want in your portfolio before it’s stabilized or do you think it’s a good deal in the market this hot? You’ll kind of take the deals that you think will deliver good returns?
Michael Frankel, Co-CEO
We don’t really look at deals in terms of the heat of the market. Number one, I’ll let Howard address that. But whether the market is hot or cold, our investing discipline, whether the stock is trading at a perceived high or perceived low value, are not the primary drivers of our investment criteria activity. I’ll let Howard address it otherwise.
Howard Schwimmer, Co-CEO
Yes, no, I was just going to say, we’ve spent the past 18 months rebuilding our teams in terms of design and construction growth at the company to grow our capacity. We have some very seasoned members on this team. We literally have a licensed architect now that came from a highly prolific industrial architectural firm. We’re gearing up. We can handle quite a bit more in terms of the projects that we’re doing right now. It’s an exciting aspect of the business. I already pointed out the yields that we’re able to achieve through that type of work. It’s an essential component of what we do, and we hope to be able to grow and do even more than you’re seeing currently on our repositioning page.
Vince Tibone, Analyst
Great. Thanks for the time.
Operator, Operator
Thank you. This does conclude our question-and-answer session. I would like to turn the call back over to management for closing remarks.
Howard Schwimmer, Co-CEO
On behalf of the entire Rexford Industrial team, we want to thank everybody for tuning in today. I want to thank you for your interest and support of Rexford. We wish you and your families well and healthy, and we hope for vaccination soon for all. Thank you again, and we look forward to connecting in about three months.
Operator, Operator
Thank you. This does conclude today’s conference. You may disconnect your lines at this time and thank you for your participation.