Release Date: October 17, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Rexford Industrial Realty Inc (REXR, Financial) reported a 5.4% increase in FFO per share compared to the prior year quarter, with a 9.3% growth for the first nine months of the year.
- The company achieved a consolidated stabilized portfolio occupancy of 97.6% at quarter end, indicating strong tenant demand.
- Leasing spreads showed continued strength at 39% and 27% on a net effective and cash basis, respectively.
- Rexford completed $60 million of investments during the quarter and an additional $70 million investment post-quarter, with a projected unlevered stabilized yield of 5.9%.
- The company has a liquidity of approximately $1.7 billion, with no near-term debt maturities until mid-2026, providing financial stability.
Negative Points
- Increased levels of global unrest and economic uncertainty are causing tenants to take longer to make leasing decisions.
- Market rents for highly functional products comparable to Rexford's portfolio have decreased approximately 2.5% sequentially and 7.5% year-over-year.
- The company reduced its 2024 same-property NOI growth guidance midpoint by 25 basis points due to expected occupancy impacts.
- The vacate of LL Flooring, occupying 504,000 square feet, will impact portfolio occupancy, although the NOI impact is nominal.
- Rexford has decided to focus on annual guidance going forward, citing challenges in forecasting long-term market conditions.
Q & A Highlights
Q: What is causing the slow decision-making among tenants?
A: Michael Frankel, Co-CEO, explained that the slow decision-making is primarily due to macroeconomic concerns such as geopolitical unrest, uncertainty around the presidential election, and interest rates. These factors are causing tenants to delay decisions, although underlying business strength remains stable.
Q: How do the current rents signed in the third quarter compare to future expectations?
A: Laura Clark, CFO, noted that the rent levels reflect the mix of leases signed. The full-year guidance for net effective spreads remains unchanged, implying similar spreads for the fourth quarter. The smaller spaces have a more immediate mark-to-market impact.
Q: Is the excess space a reason for tenants' slower decision-making?
A: Michael Frankel clarified that while excess space is a factor, it is less significant for Rexford's smaller tenant base compared to the big box market. The company continues to see high utility and interest in more space from tenants.
Q: What is the impact of the LL Flooring move-out on same-store occupancy guidance?
A: Laura Clark stated that the LL Flooring move-out accounts for about 10 basis points of the reduction in same-store occupancy guidance. The timing of lease commencements on vacant units also contributed to the change.
Q: How does Rexford view the acquisition opportunities in the current market?
A: Michael Frankel emphasized that Rexford is focused on acquiring assets that are accretive to their cost of capital. The company remains cautious and scrutinizes investment opportunities, ensuring they deliver substantial value.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
