Rexford Industrial Realty, Inc. (REXR)

REXR 
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Rexford Industrial Realty, Inc. (REXR)

Q2 2013 Earnings Conference Call

September 3, 2013 17:00 pm ET

Executives

Brad Cohen - Senior Managing Director, ICR

Michael Frankel - Co-Chief Executive Officer

Howard Schwimmer - Co-Chief Executive Officer

Adeel Khan - Chief Financial Officer

Analysts

Blaine Heck - Wells Fargo

Michael Mueller - JPMorgan

Presentation

Operator

Greetings and welcome to the Rexford Realty Trust Second Quarter 2013 Earnings Conference Call. At this time all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. (Operator Instructions) As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host Mr. Brad Cohen of ICR. Thank you, Mr. Cohen. You may begin.

Brad Cohen

Good morning. We would like to thank you for joining us today for Rexford Industrial second quarter 2013 earnings conference call. In addition to the Press Release distributed this afternoon, we filed a Form 10-Q with the SEC and posted a quarterly supplemental package with additional details and the company’s results in the Investor Relations section of the website at www.rexfordindustrial.com.

On today’s call, management remarks and answers to your questions may contain forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements are usually identified by the use of such words as anticipates, believes, estimates, expects, intends, made, plans, project, seek, should, will and variations of such words with similar expressions.

Forward-looking statements address matters that are subject to risk and uncertainties that may cause actual results to differ from those discussed today. Examples of forward-looking statements include those related to revenue, operating income or financial guidance. As a reminder, forward-looking statements represent management’s current estimates and expectations.

Rexford Industrial assumes no obligation to update any forward-looking statements in the future. We encourage listeners to review the more detailed discussions related to these forward-looking statements contained in the company’s filings with the SEC. In addition, certain of the financial information presented on this call represent non-GAAP financial measures.

The company’s earnings release and supplemental information package which were released this afternoon and are available on the company’s website present reconciliations to the appropriate GAAP measure and explanation why the company believes such non-GAAP financial measures are useful to investors.

This call is hosted by Rexford Industrial’s Co-Chief Executive Officers, Mr. Michael Frankel and Mr. Howard Schwimmer together with Chief Financial Officer, Adeel Khan. They will make some prepared remarks and then we will open the call for your questions.

With that I would turn the call over to Michael.

Michael Frankel

Thank you and welcome to Rexford Industrial’s first earnings conference call as a publicly traded company. I will begin with a brief overview of our company and our operating strategy and Howard will then provide an overview of our acquisitions and recent investment activity. Adeel will then follow with a review of our second quarter financial results and an update on our balance sheet.

Our predecessor was formed 12 years ago to focus exclusively on value driven investment in management of industrial properties in infill Southern California. Today we are the only pure play public industrial REIT solely focused on Southern California, which we believe is one of the nation’s most significant and most attractive industrial real estate markets.

Rexford Industrial’s target market comprises the Southern California infill market, which generally includes Los Angeles and Orange County as well as parts of San Diego County, Ventura County and West Inland Empire for its total infill market is over 1.6 billion square feet within the total 2 billion square foot Southern California industrial market. This is the largest most diverse industrial market in the nation. In fact, the Southern California industrial market is about 78% larger than the next largest regional market surrounding Chicago.

Despite its tremendous size, the Southern California infill market also demonstrates the highest occupancy and highest rental rates of any industrial market in the nation with many of primary target submarkets performing at 95% to 98% occupancy today.

Southern California is home to the largest base of manufacturing, distribution and infill take businesses in the nation. Southern California is also the most populous region in the United States. With population growth projected at 20% over the next generation. In addition to these underlying growth drivers, Southern California benefits directly from some of the most significant economic transitions currently underway.

For example, the ongoing trend of offshoring manufacturing to Asia continues much of this product must then be shipped back to the nation’s two largest ports of Los Angeles and Long Beach. Also infill Southern California is a hub for the nation’s eCommerce business and captures a disproportionate share of the expansion in Internet retailing, which in turn is driving significant growth in the distribution of goods and services in the region. A significant portion of this product is imported through the ports of L.A. and Long Beach and is then delivered regionally direct to consumer or to local retail stores requiring local replenishments from locations in close proximity to the distribution end points.

We believe our focus on high barrier, high supply submarket is a significant advantage. Our infill markets are surrounded by permanent natural barriers such as mountains, ocean and growing population centers that limit the introduction of competing product. In addition, the construction of new industrial product per lease is limited by lease rates that do not justify the exceptionally high cost of land and development in infill Southern California.

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