Rexford Industrial Realty, Inc.

Greetings and welcome to the Rexford Industrial Realty Inc. first quarter 2023 earnings call. At this time, all participants are in a listen-only mode. The 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. As a reminder, this conference is being recorded. I would now like to turn the call over to David Lanza, General Counsel. Thank you. You may begin.

We thank you for joining Rexford Industrial's first quarter 2023 earnings conference call. In addition to the press release distributed yesterday after market close, we posted a supplemental package and investor presentation in the investor relations section on our website at rexfordindustrial.com. On today's call, management's remarks and answers to your questions may contain forward-looking statements as defined by federal securities laws. Forward-looking statements address matters that are subject to risks and uncertainties that may cause actual results to differ. For more information about these risk factors, please review our 10-K and 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 and 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. I'd like to welcome everyone to Rexford Industrial's first quarter 2023 earnings call. I will begin with a brief introduction. Howard will discuss our operations, followed by Laura, who will discuss our financial results and guidance. Our strong first quarter results reflect our entrepreneurial approach to creating value and the strength of the infill Southern California industrial property market. For the first quarter, Rexford increased earnings, or FFO per share, by 8%, enabled by a full 34% increase in core FFO. And we grew consolidated NOI by 33% compared to the prior year quarter, driven by strong and accretive internal and external growth. We completed a robust 1.8 million square feet of lease activity during the quarter, achieving leasing spreads of 80% on a gap basis and 60% on a cash basis. Interestingly, if we exclude one legacy renewal on a lease with the County of Los Angeles, who exercised their 3% fixed option, our leasing spreads were 97% on a gap basis and 77% on a cash basis. The estimated mark-to-market for in-place leases throughout our entire portfolio is 66% on a net effective basis and 52% on a cash basis, which alone is projected to contribute an incremental $1.90 of core FFO per share, equal to a full 89% increase assuming today's market rents with a remaining weighted average lease term of just under four years. In addition, our team completed $762 million of investments for the quarter. Tenant demand and market occupancy remain at historically high levels within infill Southern California, the strongest industrial market in the nation with a virtually incurable supply demand imbalance continuing into the foreseeable future. From an operational perspective, We believe Rexford is favorably positioned to out-compete within our markets, driven by two key facets of our business. To begin with, our mandate is to own the best locations and the most functional product within our sub-markets. Our proactive value-add repositioning work positions our portfolio to outperform through economic cycles due to our superior quality and functionality. Based upon our experience and the relative performance of our portfolio today, Rexford's higher quality portfolio is expected to continue to outperform the lower quality product that makes up the vast majority of our infill markets, which includes over 1 billion square feet of product built prior to 1980. Secondarily, we continue to see substantial new tenant demand from a range of sectors that may not be as prevalent in other national markets, from the electric vehicle sector to food and aerospace, to name a few. We are also seeing strength and incremental demand from the 3PL and e-commerce market as Southern California, the nation's largest regional consumption base, continues to be underpenetrated in terms of short timeframe and omnichannel delivery capability. By way of indication, our customer solutions and leasing teams are proactively tracking over 40 million square feet of leasing requirements within infill Southern California. This includes our active engagement on over 3 million square feet of tenant requirements, that are proprietary to Rexford through our strategic customer outreach program. As we look forward, we have substantial embedded internal NOI growth, estimated at 35%, equal to an incremental $175 million of NOI contribution over the next 24 months, as we roll deeply below-market in-place leases to higher market rents, lease up our repositioning assets, and realize incremental NOI contribution from our recent acquisitions. With regard to our external growth and investment activity, our team is leveraging our deep sharpshooter advantage and proprietary access to the infill Southern California market. We are capitalizing upon current market dynamics and diminished levels of buyer competition to achieve superior investment yields that are the strongest we've seen in well over a decade. Our investing activity is positioning Rexford for very favorable cash flow and net asset value growth into future periods. Moving to our capital structure, we continue to maintain a fortress-like best-in-class balance sheet at about 13.6% net leverage to total enterprise value, affording the company the ability to protect against economic uncertainty while positioning us to capitalize upon highly accretive internal and external growth opportunities. Above all else, we thank our Rexford team for your tremendous work and dedication that continue to set our great business apart. And now, it is my pleasure to hand the call over to Howard.