Steve Swett - ICR Michael Frankel - Co-Chief Executive Officer Howard Schwimmer - Co-Chief Executive Officer Adeel Khan - Chief Financial Officer.

Jon Petersen - MLV & Company.

Greetings and welcome to the Rexford Industrial Realty Third Quarter 2014 Earnings Conference. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. (Operator Instructions) As a reminder, this conference is being recorded.

I would now like to turn the conference over to your host, Mr. Steve Swett. Thank you. You may now begin..

Good afternoon. We would like to thank you for joining us for Rexford Industrial’s third quarter 2014 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, may, 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 distributed this afternoon and are available on the company’s website present reconciliations to the appropriate GAAP measure and an explanation of 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 the call for your questions. Now, I will turn the call over to Michael..

Thank you and welcome to Rexford Industrial’s third quarter 2014 earnings conference call.

I will begin with a brief summary of our operating and financial results for the quarter; Howard will then provide an overview of our markets and recent investment activity; and Adeel will then follow with more details on our third quarter financial results and balance sheet.

During the third quarter of 2014, Rexford continued to make strong progress on all of our strategic growth initiatives. Our team captured a fourth consecutive quarter of double-digit re-leasing spreads. We acquired another 5 properties for $75 million and completed our first follow-on equity offering raising net proceeds of $222 million.

We achieved recurring FFO of $0.23 per share despite a substantially increased shared count and recognizing that our results only include a portion of the incremental revenue associated with our acquisitions and positive re-leasing spreads accomplished during the quarter.

Our quarterly results reflect our strategy to deliver accretive and value-add returns focused on the strongest, largest and most sought-after industrial market in the nation.

To put the quality of our market into perspective, not only as Southern California’s industrial market estimated to be larger by aggregate value than the next 4 or 5 largest markets combined, but average rental rates throughout Southern California are a full 50% higher than average rental rates for the next 10 largest markets.

But what makes Rexford truly unique is our focus and deep penetration on infill Southern California representing 80% or 1.6 billion square feet of the total 2 billion square foot industrial space in Southern California.

These infill markets demonstrate an ongoing supply demand imbalance characterized by both the lack of new supply, substantial barriers limiting the introduction of competing products, and increasing long-term tenant demand, which include a growing regional population and dramatic growth in e-commerce among other factors.

By way of example, despite exceptionally low vacancy, our Southern California infill markets have lost well over 30 million square feet of product that has been converted to other uses since 2001 alone. Further, there has been a dearth of new product builds per lease in our infill markets for about the last 20 years and this continues.

By contrast, the Inland Empire has almost 14 million square feet of new buildings in construction representing over 3% of the 400 million square foot Inland Empire market. The majority of this construction is taking place in the Eastern Inland Empire, which is not Rexford’s focus and includes an endless supply of land for ongoing new development.

In great contrast, if we look at our infill markets where there is essentially no more developable land construction of speculative industrial buildings totals an estimated 6 million square feet equal to a mere 0.40% of the 1.6 billion square foot infill market and only a portion of these buildings will be competitively offered for lease.

Turning to our third quarter 2014 operations, our portfolio continues to perform well. Our total consolidated portfolio was 91.8% occupied, an increase of 380 basis points from the prior year.

Occupancy on a stabilized same property portfolio basis adjusting for space taken out of service for repositioning was 91.7% representing a year-over-year increase of 340 basis points. On a consolidated basis revenues of $17.8 million, increased 55% year-over-year and 21% over the prior quarter.

Property net operating income of $12.7 million increased 60% year-over-year and increased 20% over our prior quarter. On a same property basis NOI increased 3.5% in the third quarter of 2014 compared to the third quarter of 2013 driven primarily by increased occupancy and positive re-leasing spreads.

Same property portfolio cash NOI increased 3.8% versus the prior quarter. With regard to leasing, for the consolidated portfolio we signed 126 leases accounting for approximately 692,000 square feet during the third quarter. We signed 50 new leases for about 253,000 square feet and we signed 76 lease renewals for about 438,000 square feet.

Our tenant retention was 70% in the quarter. In addition we continue to see strong NOI growth. For our new and renewal leases combined our rental rates increased 10.3% on a GAAP basis and 3.6% on a cash basis.

While the actual spreads can vary a bit quarter-by-quarter, these results confirm our ability to capture the benefits as strengthening fundamentals across our infill markets and the opportunity associated with driving continued reset of our in price portfolio.

As we move into the closing months of 2014, our first full year as a public company we are extremely pleased with what we have been able to accomplish. Thanks to the dedication of our entire Rexford team which is the key to our success and in our view the best team in the business.

Our results and performance thus far demonstrate the tremendous opportunity before us and as Howard will discuss our pipeline remains robust as we look ahead to 2015 and beyond. And with that I will turn the call over to Howard..

Thank you, Michael and thank you everyone for joining us today. As on past calls I will update you on our markets and review our recent transactions which continue to be substantial. Let me start by providing some perspective on our markets primarily utilizing market data provided by CBRE.

Fundamentals in our Southern California infill investor markets exhibited further improvement during the third quarter of 2014, building off a slower start for the year the typically slow summer months for the most robust thus far.

In Los Angeles county leasing activity has further improved with positive net absorption of 3.1 million square feet versus 1.6 million square feet last quarter, 60% of gross absorption occurred in the 10,000 square foot to 100,000 square foot market which is Rexford’s primary focus.

Vacancies dropped further this quarter ending at 2.1% and placing continued upward pressure on rental rates with asking lease rates increasing 1.6% over the prior quarter. Further CBRE expects rents to grow by 6.6% over the next 12 months.

The recovery in Orange County continues to outpace that of Southern California as a whole with one of the lowest unemployment rates in California of 5.5%. The Orange County vacancy rate dropped further to 2.4% which is the lowest since the fourth quarter of 2007.

The North Orange County submarket where Rexford has large holdings ended with 1.8% vacancy rates, but is becoming challenging for tenants to find space in the market with very little industrial product available and continued market tightening.

The average re-lease rate has increased 1.5% over the prior quarter and CBRE expects rent to increase 8.7% for the third quarter of 2015. In San Diego County vacancy declined further to end at 6.7% closing in on the pre-recession low of 5.4% in 2006.

The average asking lease rates decreased by 1% versus the prior quarter impacted by a decline for higher finished products, which is not Rexford’s focus. Despite the minimal decrease, rates are unchanged year-over-year about 18.5% higher than three years ago. With the availability continuing to climb, we expect landlord pricing power to strengthen.

General market conditions improved – continued to improve in Ventura County posting its fourth consecutive positive absorption quarter. Vacancy rates declined for all the buildings over 100,000 square feet with limited available inventory in some cities or sizes. Vacancies declined by 60 basis points over the last quarter to end at 4.8%.

The average asking lease rate also improved increasing by 3.2% over the prior quarter. In the third quarter, the Inland Empire recorded a strong 3.9 million square feet of positive net absorption.

Still the market experienced a 30-basis point increase in the vacancy rate and a 2.6% decrease in average rents primarily due to a high volume of big box completions in the Eastern Inland Empire, which is not Rexford’s focus.

Further, demand for product less than 100,000 square feet, which is Rexford’s focus, continued to be a dominant force, representing 81% of the transaction volume in the quarter. Overall, CBRE expects that asking rents will increase in the region by 9.9% over the next 12 months.

Based on the positive trends, we see in all of Rexford’s markets, we believe we are well-positioned within our infill portfolio to capture benefits further strengthening and seek to drive occupancy and rent growth on a sustainable basis.

With a granular understanding of our submarkets, we are able to capitalize on market trends of our investment and management strategies. Now, moving on to our transaction activity. During the third quarter, we remained active acquiring five properties totaling approximately 768,000 square feet for an aggregate cost of about $75 million.

All of our acquisitions during the quarter were in the greater San Fernando Valley, which is one of the strongest submarkets within our region, with an average vacancy rate of just 1.3%. This brings our year-to-date investment volume to 24 properties totaling approximately 2.5 million square feet for an aggregate cost of about $260 million.

Our earnings release has details of these transactions. So, I will only provide some quick highlights of the acquisitions, which were all consistent with our value-driven investment strategy. In July, the company acquired Avenue 32, a 100,000 square foot best-in-class industrial building for $11 million or $109 a square foot.

The property is 100% leased and we anticipate an initial yield of 5.9%. The company also acquired Chatsworth Industrial Park, a 153,000 square foot industrial complex for $16.8 million or $110 per square foot. This property is also 100% leased.

We anticipate an initial yield of 5% based on in-place rents with upside anticipated on lease renewal or re-leasing. In July, Rexford acquired Avenue Kearny, two industrial buildings totaling 139,000 square feet for $11.5 million or $83 a square foot. Buildings are 100% leased to a single tenant at below market rents.

We anticipate an initial yield of 5.5% and a stabilized yield of 6.6% on cost. Rexford also acquired 605 8th Street, a 56,000 square foot industrial building for $5.1 million, or $91 per square foot. After the seller vacates, we plan to make functional improvements to position this property to command market-leading rents.

On stabilization, we anticipate a yield of 6.3%. And finally in September, we acquired 9120 Mason Avenue, a 319,000 square foot industrial building in Chatsworth, for $30.5 million, or $96 per square foot. This building is 100% leased to two tenants through 2020 and we anticipate an initial yield of 5.8%.

As we look ahead, our pipeline of potential acquisition opportunities in our markets remain substantial, and our enhanced financial flexibility after our recent equity offering position us to continue to leverage our unique sourcing methodologies to grow.

Currently, we have more than $50 million of product in escrow and we will provide more details as we close these transactions in the fourth quarter and into 2015. I will now turn the call over to Adeel to discuss our third quarter results, balance sheet and financing activities..

Thank you, Howard. In my comments today, I will review our operating results, then I will summarize our balance sheet and recent financing transaction, and finally I will provide some updated comments on our outlook for 2014. Starting with our operating results.

For the three months ending September 30, 2014, Rexford Industrial reported its company share recurring FFO of $7.7 million or $0.23 per fully diluted share. Recurring FFO excluded the impact of approximately $426,000 of non-recurring acquisition expenses and $380,000 of legal fees.

Including these costs, FFO was $7 million for the quarter or $0.21 per fully diluted share. For the nine months ending September 30, 2014, Rexford Industrial reported its company share recurring FFO of $19.1 million or $0.68 per fully diluted share.

Recurring FFO excluded the impact of approximately $1.4 million of non-recurring acquisition expenses and $380,000 of legal fees. Including these costs, FFO was $17.5 million for the nine months ending September 30, 2014 or $0.62 per fully diluted share.

As a reminder, this was our fourth quarter as a public company and per share earnings in FFO comparison to any period prior to August 2013 includes results of our predecessor entities and may not be comparable to the current quarter’s results.

On a same property basis, we generated a 3.6% increase in third quarter rental revenue as compared to the prior year period. Same property portfolio NOI was $7.9 million for the third quarter as compared to $7.6 million for the same quarter in 2013, representing an increase of 3.5%.

On a cash basis, our same property portfolio NOI was up 3.8% year-over-year. On a year-to-date basis, our same property revenue was up 3.9% and our same property NOI was up 3.1%. Cash NOI was up 2.7% during the first nine months of the year compared to the same period in 2013. Turning now to our balance sheet and financing activities.

At September 30, 2014, Rexford Industrial had total consolidated debt outstanding of approximately $269.7 million. Our consolidated debt includes approximately $169.7 million of secured debt.

During the third quarter, we issued 17.25 million shares of common stock including the execution of the underwriter overallotment at 13.50 per share, raising net proceeds of $222 million. Proceeds were used to pay off the outstanding balance on our revolving credit facility, fund acquisitions and for general corporate purposes.

At September 30, 2014, our $200 million unsecured credit facility had a zero balance providing full capacity to support the ongoing pursuit of our growth objectives. Going forward as we have stated we intend to maintain a strong balance sheet with sufficient flexibility and capacity to support our growth objectives.

Finally, I’d like to provide an update on the metrics we’ve communicated that support our outlook for 2014. For the same store portfolio, we’ve adjusted our year-end occupancy rate target to 92% to 93%.

As we have said repeatedly, our infill portfolio often provides unique opportunities to forego lease renewals in order to renovate our re-tenant spaces of substantially higher rent. And we have approximately 70,000 square feet of space that we have taken out of service for repositioning.

We expect these opportunities will create significant value and we are comfortable in (indiscernible) trading near-term occupancy for medium and long-term cash flow growth and value creation. Our full year 2014 acquisition target remains $275 million or more.

For recurring G&A we anticipate a full year expense of about $11 million which were meant unchanged from last quarter. With that, we’ll open the call to your questions.

Operator?.

Thank you. At this time, we will be conducting a question-and-answer session. (Operator Instructions) Our first question is coming from the line of Mr. Jon Petersen with MLV & Company. Your line is now open. You may proceed with your question..

Great. Thank you. I guess high level in terms of the LA market. Can you comment a little bit on how you have seen cap rates trend in recent quarters.

Are we still seeing them move down, are we seeing them flat now?.

Sure. Hi, Jon, it’s Howard.

It’s actually been interesting, we haven’t seen a dramatic movement in the properties that we’re typically buying, when you think about 60% of our cap rates or rather 60% of our acquisition are off market or likely marketed properties where we’ve seen the most movement there, we’re on the larger transactions particularly in the Inland Empire where it’s not uncommon to see cap rates in the mid to low 4s.

But in terms of the general market I think the range we’re seeing is low 4s to upper 5s..

Okay. And then on the 70,000 square feet that you took of repositioning, I apologize if I missed it.

But did you guys say what yield you expect to get on your incremental cost?.

We did not mention that. But I’ll give you an example of one of the properties we had 35,000 foot tenants who was in the project in the Simi Valley since our acquisition and we’ve always planned to demise the space into five units.

This tenant was paying, so I think it was about $0.53 a square foot, whereas the balance of the project we’re achieving $0.85 rents. So, you’re looking at about 60% increase in the rent over that 35,000 feet. And I don’t have the cost on top of my head but from what I remember looking at it was fairly accretive so we’ll run up that dramatically..

Okay. It makes sense. And then, I don’t know I guess another high level question in terms of your occupancy. So, if you look at market vacancy in LA County, 2% to 3%, it seems like it’s where we’re at, you portfolio seems like it has a little bit to close the gap.

If you think about the portfolio you’re building and over the long-term where do you see the occupancy stabilizing for vacancy, do you get close to that 2% to 3% or is there something about your portfolio that would make it higher than that?.

I don’t think we’d ever project to get to 98% occupancy by virtue of having 70% multi-tenant spaces you typically do have rolls in that. I think really stabilized for especially LA Orange County for us, it’s probably a 95% zone..

Okay, it makes sense. Good quarter. Thanks for the question..

Thank you..

Thank you. Ladies and gentlemen, at this time there are no further questions. I would like to turn the floor back over to our management team for any closing remarks..

We just want to thank you operator and thank everybody for joining us today. We appreciate your interest in Rexford Industrial and we look forward to speaking with you again in 2015 when we report our fourth quarter and full-year 2014 results. Thanks everybody for tuning in..

Ladies and gentlemen, this does conclude today’s teleconference. You may disconnect your lines at this time. Thank you very much for you participation and have a wonderful afternoon..