Rexford Industrial Realty, Inc. (REXR)

REXR 
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Rexford Industrial Realty, Inc. (REXR)

Q4 2013 Earnings Conference Call

March 13, 2014 5:00 PM ET

Executives

Steve Swett – IR

Michael Frankel – Co-CEO

Howard Schwimmer – Co-CEO

Adeel Khan – CFO

Analysts

Michael Mueller – JPMorgan

Blaine Heck – Wells Fargo Securities

Nikhil Bhalla – FBR

Presentation

Operator

Greetings and welcome to the Rexford Industrial Realty Inc. Fourth Quarter 2013 Earnings Conference Call. At this time all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. (Operator Instructions).

I’ll now like to turn the conference over to your host, Steve Swett of ICR. Thank you, you may now begin.

Steve Swett

Good afternoon. We would like to thank you for joining us for Rexford Industrial’s fourth quarter 2013 earnings conference call. In addition to the Press Release distributed today, we have posted a quarterly supplemental package with additional details on our results in the Investor Relations section on our website at www.rexfordindustrial.com.

On today’s call, management’s 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 words such as anticipates, believes, estimates, expects, intends, made, plans, projects, seeks, should, will and variations of such words or similar expressions.

Forward-looking statements address matters that are subject to risks 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.

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 represents non-GAAP financial measures.

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

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

Now I will turn the call over to Michael.

Michael Frankel

Thank you and welcome to Rexford Industrial’s fourth quarter 2013 earnings conference call. I will begin with a brief summary of our operating and financial results for the fourth quarter and full year 2013. Howard will then provide an overview of our markets and recent investment activity. And Adeel will then follow with more details on our fourth quarter financial results and an update on our balance sheet and some color on our outlook for 2014.

Let me begin by stating that 2013 was a very productive year for Rexford. We recorded strong results within our portfolio with substantial leasing volumes, significant gains in lease percentage and occupancy and double-digit growth in our same-store NOI.

We acquired approximately 1.7 million square feet of properties for $157.5 million representing a 37% increase in our portfolio by square footage. We also completed our IPO and formation transactions in July, which provides Rexford with an enhanced capital structure to support the execution of our growth initiative.

While we have spoken to many of you over the past year, it’s worthwhile to provide a quick overview of Rexford and what makes us so excited about our unique opportunities. Rexford Industrial is the only pure play publicly traded industrial REIT focused solely on Southern California, the largest most diverse industrial market in the nation.

In addition, Southern California combines a unique blend of strong underlying long-term drivers of increasing industrial tenant demand. These drivers include the nation’s largest and growing regional population and consumption base with the nation’s largest and most diverse base of distribution and manufacturing driven businesses, the nation’s two busiest ports of LA and Long Beach, and the increasing movement of goods locally driven by an increasing share of consumer and business transactions taking place via eCommerce.

Our target infill fed markets have historically demonstrated amongst the highest occupancy and highest rental rates in the nation, with significant land and economic constraints limiting the introduction of new industrial supplies for lease, we believe Rexford is uniquely positioned to capture strong and sustainable internal growth and cash flow and valuation over time.

Further, in a highly fragmented infill markets, our external growth prospects are substantial. With our decades of experience, our relationship, unique origination methods and exclusive Southern California focus, augmented now with our flexible public company capital structure, we expect to source and close attractive acquisitions on a steady pace.

Our recent activity is indicative, as we have increased the square footage of our underlying portfolio by 24% in only 8 months since our IPO, with the pace of acquisitions accelerating over the more recent four months.

Turning to our fourth quarter 2013 operations, our portfolio continues to perform well. As we reported in our operations update in late February, our total consolidated portfolio was 89.7% occupied at the end of the fourth quarter. Occupancy on the same property portfolio basis was 89.3% at year-end, an increase of 300 basis points compared to the fourth quarter of 2012.

On a same property basis, we generated a 10% increase in fourth quarter revenue as compared to the prior year period, which was driven primarily by a combination of increased occupancy and positive re-leasing spreads.

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