Rexford Industrial Realty, Inc.

Greetings. Welcome to the Rexford Industrial Realty Inc. Third Quarter 2021 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note this conference is being recorded. I will now turn the conference over to your host, David Lanzer, General Counsel. You may begin.

We thank you for joining us for Rexford Industrial's third quarter 2021 earnings conference call. In addition to the press release distributed yesterday after market closed, we posted a supplemental package and an updated investor presentation 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 other SEC filings. Westford Industrial assumes no obligation to update any forward-looking statements in the future. In addition, certain financial information presented on the call represents non-GAAP financial measures. Our earnings release and supplemental package present GAAP reconciliations as 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. They will make some prepared remarks and then we will open the call for your questions. Now, I will turn the call over to Michael.

Thank you, David, and welcome, everyone, to Rexford Industrial's third quarter 2021 earnings call. I'll provide a few brief remarks, followed by Howard, who will discuss our transaction and market activity, and Laura will then provide an update on our balance sheet and related metrics. Rexford continues to perform at extraordinary levels, and as our team's quarterly results have raised the bar once again I'd like to begin this call by thanking our entire Rexford squad for your outsized performance. We are humbled by your dedication, your entrepreneurial approach to creating value, and by your market leading execution. You are truly excellent, and we are grateful to have the opportunity to work with every one of you. Our team's accomplishments include over $880 million of acquisitions during the quarter, bringing year-to-date investments to over $1.3 billion. Most importantly, these investments deliver substantial value creation with an aggregate projected stabilized unlevered yield that is about 50% higher than the stabilized yields associated with marketed transactions today for a similar quality product. Our team drove releasing spreads of 54% on a gap basis and 39% on a cash basis, The entrepreneurial efforts by our team are continuing to drive portfolio rent and cash flow growth that substantially exceed market rent growth. We grew consolidated NOI by 39% and core FFO by 47% compared to the prior year quarter. We also increased FFO per share by over 30% year over year. Our market-leading cash flow growth has been achieved while maintaining a best-in-class, low-leverage balance sheet. with leverage at 12.7% of total enterprise value. Rexford is the third largest and fastest-growing publicly traded industrial REIT in America and has delivered consistent outperformance. Our same property cash and OI growth, which has averaged 9% over five years, our FFO per share growth, which has averaged 13% over five years, and our dividend growth, which has averaged 12% over the prior five years, have all substantially exceeded the average of all other industrial REITs in the nation. Our team's performance continues to be supported by strong market conditions. Tenant demand and market rent growth continue at unprecedented levels, and all signs point towards continued strength. In fact, a range of market dynamics indicate that we are still in the early stages of several long-term trends driving market rent and value growth into the future. The pandemic-driven expansion in e-commerce, along with shifts in the supply chain driving warehouse demand in prime infill locations, is well documented. However, a range of additional factors are driving long-term demand growth in our markets. For example, some of the nation's largest legacy bricks-and-mortar retailers and manufacturers are fundamentally adjusting their business models to survive and thrive and an e-commerce omnichannel retail landscape, requiring a substantial increase in local last mile warehouse space. We're also seeing the emergence of substantial new businesses leveraging e-commerce and new technology, driving extensive new demand for warehouse space within infill Southern California. Further, we are seeing the benefits resulting from our exclusive focus on infill Southern California, the nation's highest demand and most highly valued first and last mile logistics market. Within our infill markets, the extreme scarcity of available product and the inability to increase supply to resolve the long-term supply-demand imbalance sets the stage for the current acceleration in market rent growth. We also continue to see substantial price elasticity in terms of our tenants' ability to pay increasing rent. particularly as RET typically represents a very small share of our customers' economics. As we look forward, we see an expansive opportunity to capitalize upon our internal and external growth strategies. From an internal growth perspective, we currently project approximately $94 million, equal to about 27% of embedded NOI growth from our in-place portfolio over the next 18 to 24 months, assuming no further acquisitions. In addition, our external growth opportunity continues to grow in quality and volume, driven by our year-over-year cumulative impacts of our ongoing research and investment lead generation as we deepen our market penetration and build upon our information advantage over time. With a mere 1.9% market share within our 2 billion square foot market, we have a substantial growth opportunity before us. Most importantly, with over 1 billion square feet of legacy product built prior to 1980, we benefit from a nearly limitless palette of value creation opportunities available to us by leveraging our proprietary access to the infill Southern California industrial market and by capitalizing upon our expertise to increase product functionality, quality, and cash flow. Consequently, we believe the company is very well positioned to continue to drive strong cash flow growth and value creation for shareholders. And with that, I'm very pleased to turn the call over to Howard.