Greetings. Welcome to the Rexford Industrial Realty, Inc. second quarter 2022 earnings 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 second quarter 2022 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 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. 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 reconciliations and 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 thank you everyone for joining our Rexford Industrial second quarter 2022 earnings call. We hope you and your families are well. I'll provide some brief remarks followed by Howard, who will discuss our transaction activity, and then Laura will provide an update on our performance and guidance. As we head into the second half of the year, we continue to see strong levels of tenant demand and positive market rent growth within infill Southern California. Our portfolio continues to perform at essentially full occupancy with our same property pool average occupancy over 99%. Demand continues to exceed supply with overall market vacancy tracking at well below 1%. We expect the supply demand imbalance within our infill markets to persist into the foreseeable future due to an extreme lack of available space or developable land within infill Southern California. Rexford's performance continues to differentiate itself. Our team grew FFO per share by 26% compared to the prior year quarter. This brings our prior five-year FFO per share growth to over 15% on a CAGR basis, substantially exceeding the FFO per share growth of any other industrial REIT in the nation. Rexford's outperformance is a reflection of our entrepreneurial business model focused on creating value by increasing the quality and functionality of industrial property throughout infill Southern California, the nation's highest demand and lowest vacancy industrial market. With over 1 billion sq ft of industrial property built prior to 1980 within a nearly 2 billion sq ft regional infill market, we are favorably positioned with proprietary access to an exceptionally deep well of value creation opportunities. Our team is executing upon a substantial range of internal and external growth strategies to unlock tremendous value. Leasing spreads for the quarter were a full 83% on a GAAP basis and 62% on a cash basis, representing an acceleration over the first quarter. On the external growth front, year to date, our team acquired over $1.6 billion of irreplaceable assets with strong embedded value creation opportunities. Compared to the prior year quarter, we grew net operating income by 43% and grew Core FFO by a full 55%. As we look forward, Rexford remains well positioned to continue to grow our cash flow and value. From an internal growth perspective, the mark to market on rental rates for our entire portfolio is estimated at 60% on a cash basis and 70% on a net effective basis. Over the next 24 months, we project approximately $172 million equal to 43% of annualized cash NOI growth embedded within our current portfolio, assuming no further acquisitions and based upon today's market rents. The components of our internal NOI growth include $73 million of incremental NOI as we roll in place rents to higher market rates and as we ratchet up our annual contractual rent steps. $45 million of incremental NOI as our redevelopment and repositioning projects stabilize, and $54 million of incremental NOI contributed from recent acquisitions. Within our embedded NOI growth, we are projecting annual same property cash NOI growth of approximately 8%-10% over the next two years. In addition, with regard to external growth, we currently have over $500 million of new acquisitions under contract or accepted offer. To fuel this growth and to ensure we are well positioned to capitalize upon emerging opportunities in today's dynamic market, we continue to maintain an exceptionally strong low leverage balance sheet, closing the quarter at 13.5% net debt to enterprise value. With that, we'd like to thank our entire Rexford team for your extraordinary talent, dedication, and entrepreneurial approach to growing our great company. As demonstrated through prior cycles, we believe our unique team is the primary determinant of our success and our ability to differentiate Rexford's favorable performance through all phases of the economic cycle. Now, I'm very pleased to turn the call over to Howard. Thank you, Michael, and thank you everyone for joining us today. Rexford finished the first half of 2022 with yet another quarter of exceptional results, reflecting the high quality of our portfolio and the ongoing strength of the Southern California infill markets. Based on Rexford's internal portfolio metrics, market rents for comparable space continued to accelerate, increasing by 49% over the prior year, which continues to mitigate the impacts of higher construction costs. According to CBRE, quarter-end vacancy remains at near record low levels at 0.8% and was essentially flat compared to prior quarter across our infill markets, which are differentiated with essentially no land availability and therefore virtually no opportunity to increase net supply. As a result, with robust tenant demand, we see vacancy rates in our markets continuing at historical lows, positioning us well to capture strong rent spreads for this foreseeable future. The consolidated portfolio weighted average mark-to-market for our remaining 2.6 million sq ft of 2022 lease expirations is now estimated at 73% on a net effective basis and 60% on a cash basis. Regarding external growth, in the second quarter, we completed 18 acquisitions of prime infill properties totaling nearly $600 million, representing 1.4 million sq ft of buildings on 85 acres of land, including 15 acres for near term redevelopment. Approximately 72% of our acquisitions were value add investments. Over half of all our investments were either initially vacant or leased at substantially below market rents. In aggregate, our second quarter acquisitions generate an initial unlevered yield of 2.5%, growing to an estimated 5.1% unlevered stabilized yield on total costs. Subsequent to quarter end, we added an additional five properties totaling $587 million of investment. Year to date, we have acquired 40 properties containing 4.3 million sq ft, totaling over $1.6 billion with an initial yield of 2.9% and a projected stabilized yield of 4.6%. Over 80% of our acquisitions were acquired through off-market or lightly marketed transactions sourced through our proprietary research driven processes and deep market relationships. These acquisitions are projected to contribute $38 million of NOI in 2022, increasing to approximately $60 million in 2023 and expected to grow further over time. Looking towards the future, we currently have over $500 million of new investments under LOI or contract, which are subject to customary closing conditions. In addition, we have an extensive originations pipeline beyond these transactions. Further, the team is executing on a broad range of accretive internal growth initiatives. For our value add and redevelopment projects underway or expected to start over the next 18 months, we have approximately $450 million of projected incremental investment, bringing total investment to an estimated $1 billion. These projects are projected to deliver an aggregate return on total investment of about 6.7%, representing over $950 million in estimated incremental value creation. With that, I'm pleased to now turn the call over to Laura. Thank you, Howard. Before discussing our second quarter results, I would like to highlight our ESG report that was published during the quarter, which details our progress and commitment to further accelerating our value add ESG impact. At Rexford, creating economic, community, and environmental value is foundational to our business model as we reinvent legacy properties and reinvigorate communities. Now, turning to our performance. Same property NOI growth for the quarter was a strong 7% on a GAAP basis and 10.1% on a cash basis. Our results outperformed projections led by continued strength in the overall operating environment. Average same property occupancy was 99.1% in the quarter, up 100 basis points over prior year. Year to date, we have achieved record leasing spreads of 78% and 60% on a GAAP and cash basis, respectively. Additionally, annual embedded rent steps in our executed leases continue to increase, with second quarter average steps at 4.3%. Our high quality tenant base continues to perform exceptionally well, as demonstrated by zero bad debt recorded through the first half of the year. This robust performance, combined with our internal and external value creation, drove Core FFO per share growth of 26% over prior year to $0.49. Our fortress like balance sheet, strong liquidity position, and favorable access to capital continues to position Rexford to opportunistically execute on our strategy and drive substantial long-term value creation for our shareholders. At quarter end, net debt to EBITDA was a sector low 3.8 x and below our target range of 4x-4.5 x. We completed an active quarter in the capital markets. We sold 12 million shares of common stock through the ATM on a forward basis for $751 million. At the end of the quarter, we settled forward equity associated with ATM sales, which occurred in the first half of the year, issuing 6 million shares of common stock for net proceeds of $419 million. Also, we recast our unsecured revolving credit facility, increasing the size to $1 billion while obtaining more favorable terms, including reduced borrowing rates and sustainability-linked pricing targets. We also added a $300 million term loan expiring in 2027, with proceeds used to repay our $150 million term loan expiring in 2025 and to reduce borrowings under our revolving credit facility. Finally, subsequent to quarter end, we closed on a new $400 million term loan facility expiring in 2024 with two one-year extension options. Proceeds were used to fund acquisition activity and reduce borrowings under our revolver. After incorporating our transaction and financing activities closed subsequent to quarter end, we currently have $1.2 billion of liquidity, which includes $22 million of cash, $552 million of forward equity remaining for settlement, and $650 million available under our revolving credit facility. Now turning to our full year guidance. We are increasing our Core FFO guidance range to $1.87-$1.90 per share from our previous range of $1.84-$1.88. Our revised guidance range represents 15% year-over-year earnings growth at the midpoint. As a reminder, our guidance does not include acquisitions, dispositions, or related balance sheet activities that have not closed. We have provided a roll forward detailing the drivers of our revised guidance range in our supplemental package. A few highlights include same property NOI growth on a cash basis has been increased to 8.5%-9%, up 150 basis points at the midpoint. When normalized for COVID-related repayments, cash same-property NOI growth is projected to be 9%-9.5%. Same-property NOI growth on a GAAP basis is now projected to be 5.75%-6.25%, up 150 basis points at the midpoint. Assumptions driving same-property growth include average occupancy of 98.5%-98.75%, up 12.5 basis points at the midpoint. Cash leasing spreads of approximately 55% and GAAP leasing spreads of approximately 65%. Our projection for bad debt as a percent of revenue is now 10 basis points for the full year as compared to 25 basis points in the prior guidance, driven by the strength of our tenant base. Same-property expense growth is projected to be lower than prior expectations, which represents a 35 basis points contribution to our increasing property NOI guidance. Incremental NOI related to acquisitions closed in the second quarter and subsequent to quarter end is projected to be approximately $20 million in 2022. Finally, net interest expense is projected to be in the range of $51 million-$52 million, driven by an increase in debt related to acquisition funding. This completes our prepared remarks, and we now welcome your questions. Operator? At this time, we will be conducting a question-and-answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One more moment please while we poll for questions. Our first question comes from the line of Jamie Feldman with Bank of America. Please proceed with your question. Great. Thank you. Thanks for taking my call. I guess, kind of big picture here. You know, if you think about prior cycles and downturns with, you know, forecasts for a recession here, you know, where do you think the risks are to your occupancy or to your credit, the credit in the portfolio? As you put it, you have a nice acquisition pipeline still, I mean, what gives you comfort putting money to work at the prices today when we may see future changes in price discovery? Hey, Jamie. It's Michael. Thanks for joining us, Jamie. Laura, maybe I'll just give a brief context on kind of how we see the market and occupancy. You can dive into the tenant credit in the aggregate. Absolutely. We can then talk about the ability to put money to work in this environment. Jamie, obviously, great questions. I think the first part of the question was comparing today's environment with the potential and a lot of concern in the economy as compared to prior cycles. I think with the most recent downturn obviously would take us back to the great financial crisis. I think there's a lot of tremendous takeaways from that experience as they may or may not relate to what we see today or what the market may bring in the near term. Just briefly, you know, the market today. First of all, in the Great Financial Crisis, which was a true shock to demand, in the first quarter of 2009, order flows for many tenants actually stopped. We'd never seen that before. What was interesting in terms of the infill Southern California market was that it performed in a manner that was very counterintuitive. We never saw a supply problem in infill Southern California. You know, going into the great financial crisis, vacancy was 2%-4%. The worst it ever got was 3%-5.5% throughout infill Southern California. We just never had a supply problem. Even during the worst of times, we never had a supply problem. You didn't have to go far to see a substantial supply problem. In the big box markets, the situation was very different, even in the Eastern Inland Empire, where vacancy doubled, tripled, or worse during the great financial crisis. And then we ask ourselves, well, how is the market prepared today as compared to then? The market today is very different than the market was then. The market today is so much stronger in terms of preparedness or positioning, and by so many metrics. Number one, going into the great financial crisis, as I mentioned, market vacancy was around 2%-4%, call it an average 3%. Today, we're at 0.8% throughout infill Southern California, 0.8% vacancy. If you were to drill down into the vacancy and look at the things that are vacant to compete with Rexford, probably less than half of the stated market vacancy even begins to compete with Rexford's portfolio on a locational or functional basis. We're in an environment today where tenants literally have no options, and that is very different than a 3% vacant market. Although 3% is an extremely strong market. You know, tenants could find options in terms of other space. It might take a while, but they could find them. The other big difference today, as compared to going in the great financial crisis, is the deep and diversity of demand. We have segments of demand that did not even exist, going into the great financial crisis. Many of them driven by e-commerce, new business models, electric vehicle industry, you know, space exploration. We're looking at a transformation of the 3PL business that is embracing technology like never before and reinventing their businesses, driving substantial incremental demand. We have, you know, food delivery, you know, same-day delivery. You know, so many factors driving demand today that did not exist, going into the great financial crisis or even five years ago, frankly, to the degree they exist today. Very, very different market backdrop today. Laura, you want to talk a little bit about tenant credit? Yeah, absolutely. Hey, Jamie, thanks for joining us today. You know, the strength of our tenant base has been demonstrated through cycles and really, you know, through some pretty significant economic disruptions. Some things we could have never anticipated, such as when our tenants were given the unilateral right to not pay rent at the start of COVID in our markets. We saw essentially no impact to our collections as our tenants continued to pay rent. You know, these spaces are critical to their ongoing business needs. You know, couple that with the fact that, you know, we've been able to increase the credit quality of our tenant base, and I'd say the credit quality of our tenant base is stronger than ever. We've been able to do that in many ways. Clearly, given the strength of demand over the prior few years, coupled with the extreme lack of supply, we've had the opportunity to be very selective in the tenants that we're putting in our spaces. You know, for example, when you've got multiple competing offers on a space, we get to select the highest and best use for a tenant that's got growing business and strong credit. Also during COVID, we took the opportunity to further cull the portfolio of underperforming tenants. We replaced those tenants with higher quality tenants that were paying higher rent. I think finally, our low levels of bad debt are a great indication of the strength of our tenant base, the increased quality of our tenant base. If you look at bad debt as a percentage of revenue over the trailing twelve months, it's zero, and we're projecting 10 basis points for the full year 2022. That compares to 40-50 basis points pre-COVID. You know, in summary, our tenant base has proven resilient through disruption. Given the strong market dynamics today, you know, we feel we're really well positioned for what may be ahead. Jamie Jamie, I think- Go ahead, Howard. I was just gonna say, just on the other part of your question, whether we should buy today or wait. You know, I think you're asking, you know, what's happening with cap rates and demand for assets. You know, we've seen, you know, moderate adjustments in cap rates, but, you know, really it's the mark-to-market that's driving the opportunities out there for us in terms of being able to find opportunities that others in the market don't have access to and being able to stabilize those at very accretive yields. You know, we're finding more and more of those opportunities. We've reset some of the inbound yields that we're seeking. We're finding sellers that are happy to adjust some of their thinking as well in terms of what we're looking at and buying. You know, coincidentally, you know, Michael provided a reference to the last recession. You know, during that recession, everyone thought there was gonna be a lot of product for sale at incredibly discounted prices, and people waited, and that never really materialized. There were a few things here and there, but the industrial market really didn't turn into a wholesale buying opportunity. You know, there's still great opportunities in our market, and demand is strong. You know, I don't really expect to see much of a shift in terms of the values here unless we see a dramatic change in demand, vacancy, and rent growth. Jamie, maybe I'll just add a little bit of additional color. What's interesting is, 'cause that's a common question, you know. Cost of capital's gone up a little bit. There's uncertainty in the market. Threat of inflation and other things. The question is, you know, are we comfortable to continue investing in this environment? What's a bit ironic about the question is actually we're seeing, you know, marginally better yielding opportunities today, inclusive of a slightly marginally higher cost of capital. You know, there's always pressure on yields, right? Last year or six months ago, the question was, my goodness, the markets are so competitive. Cost of capital is so low for everybody. You know, cap rates are so low. How can you buy and create value? Arguably, we had more pressure on yields and margins last year, because of the intense competition and low cost of capital for just about any player than we do currently in the market, despite this marginally higher cost of capital. I think really it goes to the Rexford business model. You know, we do a tremendous amount of extra work, as you know, in our originations and research, and identify a tremendous volume of investment opportunities that allows us to be extremely selective during all phases of the capital markets or economic cycle. I think you're seeing that really, really pay off, you know, well. We can talk more about that, but I wanted to add that little bit of color. Thanks for all the color. Very helpful. You know, how do you compare the change in your cost of capital from pre-pandemic to now versus where yields have moved? Just I guess maybe to take a step back, you know, how do you think about your required IRRs today versus where you were? Well, we can talk. Laura can talk a little bit about cost of capital in a minute, which we find to still be at attractive levels on a historical relative basis, frankly. Our IRRs today, on opportunities that we're looking at are probably actually slightly better than IRRs that we were looking at, call it 12 months ago. On a relative basis, we've seen an improvement there. You know, we don't disclose our cost of capital, but I can tell you that when we underwrite, you know, at every point in the cycle, we underwrite not based on spot cost of debt or equity, but we underwrite more on what we perceive to be our steady state cost of capital, and which would actually be higher than even what we see today on a steady state basis, historical basis. We also, the other piece of underwriting that drives IRRs is your market rental rate assumptions and your exit cap rates. Exit cap rate being the number one driver of performance, generally speaking, or biggest impact. Rexford's also may be different than some institutional buyers in that respect, in that our exit cap rates are typically anywhere from 75 to 150 basis points higher on the exit cap rate as compared to our inbound or market cap rates. Our market rent assumption is also very conservative, driving those ultimate IRRs. You know, we don't underwrite anything close to what the market has experienced. By the way, I have a really interesting example. You know, a very current example. You know, the Holt Boulevard property in the IE West that we bought just a couple months ago, we underwrote to a 3.9% yield with, you know, I think we were projecting $1.35 in rent. It looks like, and this is not a done deal yet, but we have, you know, a lot of interest, tenants circling. We expect that we hope that, you know, there's a strong potential. We think we'll lock in about $1.70 triple net rent, which will drive just under a 5% cap rate. You know that and that's a property we underwrote, you know, very recently. You can kind of see the conservatism that goes into the underwriting of the company. Yeah. I'll just- Okay, great. Jamie, I'll just add a little bit to that. You know, while our cost of capital has increased over the prior quarter, our cost of equity and debt continues to be very attractive. In fact, this morning we executed a five-year swap, fixing our $300 million term loan at a very attractive all-in rate of 3.7%. You know, we continue to source accretive acquisitions, that's demonstrated by the positive FFO contribution that we saw from acquisitions and our increased guidance range. We're gonna continue to be very selective, as we have in the past. We're gonna evaluate opportunities, that are gonna drive cash flow growth, through our value creation platform, that are gonna generate above market yields, which really, you know, ensure that we're gonna be able to grow FFO and NAV through all points in the cycle. Okay, great. Thank you. I'm sure we'll continue to have this conversation for a long time. Appreciate it. We hope so, Jamie. Thank you so much. Our next question comes from the line of Craig Mailman with Citi. Please proceed with your question. Hey, everyone. Maybe picking up a little bit on the cost of capital here. You know, you guys ran through your updated liquidity of about $1.2 billion, and I think if I look at what you guys have under contract plus the remaining spend on the ongoing redev and future redevs, you have about a $340 million gap there. I'm kind of curious with, you know, being able to swap debt at 3.7, you know, we have your implied cap rate sort of in the mid threes. What's your view on debt or equity as the best source of funds here? Yeah. Hey, Craig. Thanks for joining us today and welcome. When we think about, you know, debt versus equity, we're gonna continue to take a very opportunistic approach to capital raises as we have in the past. Our low leverage balance sheet allows us to do that and to be able to take advantage of attractive sources of both debt and equity. You know, we were able to, you know, close on $700 million of very attractive term loans over the past quarter and, subsequent to quarter end. Our focus continues to be on maintaining a low leverage investment grade balance sheet. We're targeting net debt to EBITDA in the 4x-4.5x area. That's the number one focus, is maintaining that low leverage balance sheet, which allows us to continue to be opportunistic. I'll just add to that, and thank you again for joining today. I'll just add to that. You know, another source of capital would be recycling capital through dispositions, which we continue to look at on an opportunistic basis. That having been said, though, when we have a 60% gap or 60% cash and 70% gap mark-to-market across the entire portfolio, you know, generally speaking, we're able to drive tremendous accretion by not selling an asset and re-tenanting it. And by the way, with these leasing spreads, you know, we are sourcing a tremendous amount of incremental capital literally every quarter, you know, through the leasing activity that in turn is funding an increasing percentage of a lot of our capital requirements. You know, we're seeing that as also another very favorable source of capital internally. No, I'm glad you brought up the spreads because that was my next question here. You guys kind of sequentially, you're up 500 basis points on the portfolio mark-to-market on a cash basis. I mean, as you guys look at what market rents are doing in your SoCal markets, I mean, where could that mark-to-market trend by the end of this year, do you think? We don't really prognosticate in that way, to be honest. You know, but I think we've probably seen, you know, Howard or Laura, feel free to comment, but we've probably seen upwards of 20% ± market rent growth year-to-date. I think we disclosed we saw about 48% or 49% year-over-year market rent growth. Maybe that gives you an indication where things are trending. Yeah. Craig, hi, this is Howard. You know, market rent growth is still strong out there. You know, we're conservatively projecting that it's not gonna obviously grow at the same pace it's been lately. You know, the brokerage community feels that there's still plenty of rent growth, but albeit at, you know, maybe a little bit slower pace. However, when you look at what's happening on the ground, as Michael described a minute ago in an example of one asset, you know, we're still outperforming the reforecast market rents we have in the portfolio every day. We may surprise ourselves to the upside. It's Michael Bilerman. Just a quick question, and we're also very happy that Craig's on the call. Maybe just stepping back, just thinking about issuing equity. You know, obviously there's the current cost on your current earnings. Given the significant mark-to-market in your portfolio, how do you think about it more of a sort of longer term, like a five-year basis of issuing that equity today and diluting investors buying something that, yes, has upside in it. However, your current portfolio has got such robustness. How do you balance issuing that equity today knowing that you're giving up some of the future growth by selling that equity, which has that 60% mark-to-market in it? I think you said the right word, you know, and Michael, thanks so much for joining us today. You said the right word, I think, in balance. We do try to strike that balance. Because don't forget, it's all the acquisition activity in the recent years that has provided this incredible internal growth opportunity that we see and are capitalizing today. You know, we're frankly not buying assets that don't position the company to deliver that kind of accretion going forward. You know, we just try to strike that balance. I think it's an important question. I just-- Would you think about- Michael, if you- Yeah, go ahead. I was just gonna add one comment on top of Michael's. If you look at $1.6 billion of product we bought so far this year, the mark-to-market in terms of the below-market rents in place there for those assets was about 25%. Right. That's much less than the 60 on the current, right? Buying assets with 20% mark-to-market, and arguably you're banking on market rents continuing to grow given the low vacancy in your markets. Arguably, you're selling equity in the portfolio that's up 60. That trade, obviously, if we look out year 5 or year 10 in our model, I don't know if it goes out that far, but you know, arguably you're diluting that more than today. That's all. I just didn't know how you- That might be the case. You've been very, very heavy on the equity, and so I just wanna better understand that balance that you're going for so that you continue to produce shareholder returns. I think those are important questions, and I think that statement is probably, you know, partially indicative of our business. If we were only relying on mark-to-market to run our business, maybe that analysis could hold some water. We have so many other things that drive accretion. You know, we have the value-add repositioning that drive yields that are substantially in excess of what just rolling to market might yield, you know? It's really a combination of these things. You know, again, we try to balance it. Yeah You know, in terms of near-term impacts and longer-term impact. By the way, not that this is a driving metric, but on a GAAP basis, you know, the activity is accretive earlier than you might expect, frankly. Again, not that that's a driving indicator. Yep. All right. Thanks for taking all the questions. Our next question comes from the line of Blaine Heck with Wells Fargo. Please proceed with your question. Great, thanks. Good morning out there. Laura, starting with you. You guys are out to a great start on same-store NOI this year, cash at 10.9% year to date. To hit your midpoint on guidance for the year, there continues to be a meaningful slowdown implied in the remainder of the year as I think occupancy comps get a little bit tougher. Can you just talk about how we should think about the cadence of occupancy from here and whether there are any large chunky known move-outs that you guys have visibility on in the second half? Yeah. Hey, Blaine. Thanks so much, and thanks for joining us today. Yeah, as you mentioned, you know, our occupancy is projected to decelerate in the second half. I think important to note, though, that today we are sitting at very full occupancy levels. At the end of the second quarter, we were at 98.9% occupancy, and market fundamentals continue to be very strong. In fact, we increased our occupancy guidance this quarter. It's up 12.5 basis points on average for the full year. When you think about the second half of the year, there's a few factors that are driving that. One is we do have visibility into about half of the decline. It's driven by four units that we had previously projected to vacate. This isn't, you know, this is not outside of our expectations that we had at the beginning of the year. Importantly, though, those projected leasing spreads on those four units is about 80%. Obviously presents a significant opportunity for us to drive value creation, but it comes with some downtime and some near term occupancy impact. I'd say the second impact driving occupancy for the second half of the year is that 40% of our expirations are in December alone. As we have more certainty as to, you know, the renewals on those units, we'll update our forecast accordingly. I think lastly, you know, embedded into our guidance is the fact that there does continue to be uncertainty in the overall economic environment. You know, we feel we've embedded a prudent assumption for occupancy in the second half of the year. Great. That's very helpful color. Switching over to Michael or Howard. You know, you guys have consistently highlighted how fragmented the ownership of warehouses is in your markets and the low level of institutional ownership. Do you think anything has changed during the pandemic or coming out of it with the volatility in the market that we're seeing this year that would make the private owners more or less willing to sell their industrial buildings or even other properties that could be converted into industrial? Well, we've certainly had great success in convincing private owners to sell their real estate, you know, in the past year, couple years. You know, that I'd say the largest catalyst in some of our transactions has been just that aging ownership and generational shift that the next generation, you know, at the kind of prices we've seen and growth has been, you know, very interested in selling. You know, as far as any changes, you know, I think, you know, a lot of people we're talking to today are even more interested in selling, it seems. It seems that most people enjoyed the ride up in industrial values and thought those value increases would never slow down. Now that they are seeing a bit of a change of heart in terms of the future growth in those values moderating a bit, we're getting more and more calls from exactly those type of sellers that continue to have interest. We have a lot of discussions still about OP unit-type transactions. You know, the market seems to still be feeding into our business model in terms of the hard work we do in establishing those relationships and cultivating you know, the data that we track in the markets. Blaine, just to add, it's Michael. Thank you so much for joining today. You know, it is a very interesting time for us with respect to that fragmented ownership base that you described because, you know, they're not getting younger and they're increasingly aging out at this point in time. That group is sort of marching increasingly, you know, into the Rexford, you know, fold. I can recall a conversation with a seller on a very recent purchase, and we've been pursuing the property, I think, for over a decade. I said, I asked him, I said, "You know, we've known these people for a long time. You know, why now? Why did you finally decide to sell?" The answer was, "Well, we have a lot of different needs among our family who are now all partners in this thing." I think they had, like, you know, 15 different owners now and just through family and deaths in the family and heirs stepping up. He said, "At this valuation, we could actually replace the investment into income generating investments and securities that generate adequate level of cash flow to support the family, you know, several generations of the family." To Howard's point, you know, the valuation has played a great role in catalyzing some more of these opportunities in combination with this aging, increasingly aging out, you know, owner population. There's a palpable fear in the market now that they're gonna miss out. Brokers are capitalizing on that as well. It's a very interesting time for us with respect to that ownership base. Not to mention, by the way, you know. Very helpful. Yeah, go ahead. As I mentioned in my prepared remarks, you know, that ownership base is among that 1 billion sq ft in industrial Southern California that was built before 1980 that is just replete with value creation opportunities. That's really the sweet spot in terms of value creation opportunity in the market for us. Thanks. That's great color. Last one from me. Can you guys talk a little bit about the project construction delays that you refer to in the guidance roll-forwards? Are those delays mostly attributable to supply chain disruption and delays in procuring the raw materials, or are there other bottlenecks related to, you know, zoning, entitlement, labor, other reasons? I think it's a little of all. You know, you look at what's happening out there, you know, cities are taking substantially longer to process entitlement and permits. You know, that extra time adds to construction cost escalation because contractors are escalating their costs. Now it seems like holding prices for five days, and then they keep moving them up. It really just adds up. You know, you've got unions that are showing up to a lot of the planning commission meetings all of a sudden. You've got a lot of moratoriums that you're working through occasionally in some of these markets. It's really coming from a lot of different directions. We're, you know, doing a really good job of mitigating some of those risks. We've built in a lot of that escalation into our go-forward projections. I think we've taken a very conservative approach in terms of those escalations will continue. We've adjusted some of our timing as well in terms of, you know, what we see as some of the obstacles going forward. Our team is doing a great job in terms of buying out some of those long lead time materials and building components on the new construction. Interestingly, though, on our repositioning projects, we're not experiencing any degree of those type of cost increases or delays. A lot of those projects are more simple. It doesn't take planning commission approvals. Frankly, that's the bigger opportunity in the marketplace here, as we've described there being, you know, really literally no land available. There's limited opportunity to develop. As Michael just pointed out, there's a huge opportunity in that base of product that has repositioning and mark-to-market type opportunities in the existing supply. Yeah. Blaine, one thing I'll add to that. Great. Thank you all. Hey, Blaine, one thing I'll add to that. Well, first of all, a shout-out to our development and construction team. I think they're just doing an amazing job really working diligently to reduce, you know, risk of delays wherever possible. We've got a phenomenal team in place there. But in terms of the $0.01 of erosion that we saw in our guidance, I think it's important to point out that that's related to delays and timing, not related at all to lease rates. We continue to see, you know, market rent growth within our portfolio and growth within our rental rates. That's, you know, at this point, helping us overcome some of these construction cost increases, and we're seeing yields continue to be at, you know, around 6.7%, consistent with prior quarters, on our repositioning and redevelopments. Great. Thanks, everyone. Our next question comes from the line of Connor Siversky with Berenberg. Please proceed with your question. Hi there. Thanks for having me on the call. Two quick ones from me, and apologies if this was missed in your answers previously. On the retention rate down sequentially from last quarter and then seeing the footnote on page 22 of the supplemental, I'm wondering how much of that delta is attributable to adding the other repositioning segment to the calculation, and then how much of it was just background, maybe an unforeseen move-out or something of that nature? Hey, Connor. Thanks so much for joining us today. Actually, our retention calculation excludes all repositioning. That wasn't a driver. Really, the driver of lower retention than over the prior quarter was due to expected move-outs. No unexpected move-outs in there, as we continue to drive leasing spreads. I think one really good example, we had a 76,000 sq ft tenant vacate. We executed a new lease with a new tenant at a 143% GAAP leasing spread and an 88% cash leasing spread. That impacted our retention rate, but we only had two weeks of downtime. Really no impact on occupancy, but impacted that retention rate as reported. Just if you excluded that one deal from our 66% retention, that would get you to about 73% retention for the quarter, which is in line with what we've been seeing over the prior several quarters. Got it. Okay. just kinda one more follow-up from an earlier question. You know, understanding that the supply dynamics are exceedingly favorable in your market, but we haven't seen much abatement in terms of fuel or labor costs as it pertains to a logistics provider, for example. Is there any sense that at some point these budgets get squeezed such that they wouldn't be able to afford a 70% re-leasing spread, or is that still trending very much in the right direction from your point of view? Well, Connor, don't forget that, you know, things like drayage cost and, fuel cost, transportation cost, you know, two things. One, those are a much bigger percentage of the typical economics for a distribution-oriented tenant than their rent is. By securing these locations that are closer to both the endpoints of distribution and the ports, they're actually able to find efficiencies on the much larger expense base, which is the transportation-oriented expenses. To the answer, can they continue to absorb strong rental rate growth? We're not seeing any indications that they cannot. We continue to see very favorable price elasticity in terms of our ability to raise rent. I think also if you wanna delve into the, you know, sort of the 3PL market, you know, that market, as I mentioned earlier, is experiencing, you know, pretty interesting transformation, where you had a lot of old line 3PLs that historically maybe were in a very low margin business because they're basically arbitraging the cost of their rack space with what they can charge for that rack space, and it was sort of a commodity. Today, those businesses look very different. They're embracing technology, moving up the value chain, providing end-to-end solutions in some cases, ranging from raw materials to production to shipping, to delivery, whether it's one item to a consumer or a million items to a business. Providing unbelievable transparency throughout that supply chain. Because they're delivering such a level of value add services, they're becoming much more profitable businesses. That's increasing their ability to pay more rent, frankly. That transformation is very helpful to us, which is somewhat technology-driven. We're not really seeing any indication where we see a potential reduction in their ability to pay rent due to these increasing rents. Yeah. One thing I'll add to that is I think that rent steps and these annual embedded rent steps that tenants are signing are a good indication of how they're thinking about their future business growth and projections. We continue to see, you know, the ability to push those rent steps higher. Average annual rent steps signed for leases in the quarter were 4.3%. That's up from 4.2% in the prior quarter. I believe that number has continued to tick up every quarter for the last several quarters. You know, we're continuing to be able to push those escalations and increases, and I think it's a good indication of how tenants are viewing their longer term business opportunities. Laura, correct me if I'm wrong, but I think the June average rent steps, which would be at the end of the quarter, were a full 4.5% on average. Again, a pretty nice acceleration or even over the quarterly average. Got it. Okay, that's helpful color. I'll leave it there. Thank you. Thank you. Our next question comes from the line of Vince Tibone with Green Street. Please proceed with your question. Hi, good morning. Could you provide some additional color on the Merch West transaction, specifically around when the pricing was locked on that acquisition? Just curious to see if you think that pricing is reflective of the, you know, current market today for new construction in IE West. Sure. Hi, Vince. Nice to have you join us. That was an incredibly interesting transaction. You know, we actually looked at that going back several months, and initially when it was actively placed on the market, they were targeting about a 3% stabilized return. We didn't even hang around the hoop. We literally just said, "No, thank you. This does not work for us." We forgot about the deal. Later on, they, you know, had some buyers. I guess they had a buyer tied up and it fell apart. Things progressed. They had another seller at a bit of a higher yield, and the sellers apparently were having a little concern over other people's ability to get a transaction done at those returns. So the brokers, you know, literally I would call this in an off-market phone call, came to Rexford and said, you know, "We've done a lot of transactions with you. We know you can perform. We're really looking for performance as opposed to the highest price at this point." So, you know, we were able to step into a transaction that really the price was agreed on, you know, less than 45 days ago. You know, there were some moving pieces on it, though, which is, I think why we're able to achieve the 4% projected stabilized return. There was obviously a little bit of vacancy in the project, with it being 71% occupied. There was a few things the sellers still had to finish up in terms of some construction work and some offsite work. We established some holdbacks and with you know and a few other things. We were actually able to work with their needs and provide the solution that was needed. We believe we actually achieved a transaction that's gonna stabilize at a 4% return is probably a bit higher than that project would transact at still today in the marketplace if the last bit of that leasing was completed and that little bit of remaining construction work was done as well. You know, it's interesting. Literally, we closed that transaction, and just days before, there was another transaction in the Empire West on a 111,000 sq ft building. Not the same quality. This is a 30-foot clear building. You know, we bought it $445 a foot. This other deal I'm referring to closed at $525 a foot, which was, I think about a 2.85% cap rate, and it had a 5-year lease in place. You know, when you look at that data point compared to what we bought at, our transaction is still very, very attractive. Yeah, that's all really helpful color. Thank you for that. One more just for me, switching gears a little bit. You mentioned, you know, year to date, you think, you know, rent growth in your market has been, or portfolio rather has been ±20%. Has that been pretty consistent across your sub-markets, or are there any that, you know, jump out as being a little better or worse than that, you know, portfolio average? Yeah. Well, the Inland Empire West has really been performing incredibly well. In IE West, rates were up 16.5% quarter-over-quarter. Year over year, that's almost 110%. All you know all the markets are performing pretty well. I mean, Orange County has been up, you know, I think they're about 5% quarter-over-quarter. You know, really, I think the lowest increases we've seen, you know, probably been more around some of the the L.A. markets, but, you know, still strong rent growth. When you really dive into the stats, just in our own portfolio, you know, all these markets are performing very well in terms of their rent growth. The standout obviously was the Inland Empire West. Got it. Thank you. Our next question comes from the line of Dave Rodgers with Robert W. Baird. Please proceed with your question. Yeah, good morning out there, everybody. Thanks for all the details so far. Just one follow-up for me, and it's around that tenant credit issue that you guys started with early on, I think with Jamie. Great details from the global financial crisis, Michael, so thanks for all that. You guys have this really obviously sophisticated system that tracks all the acquisitions that you can do and all the people you wanna target. Do you have something similar on the credit side? Do you guys feel as kind of strong about your credit profiling? As a kind of investors, can you give us a sense of kind of how we should be thinking about the tenant credit profile, notwithstanding the historical information and obviously the government stimulus that kind of went out and supported the last 12 months? As you look forward, is there a detailed system that you guys are comfortable with that where you've been able to elevate credit or give us some kind of details around that? It's really vague, but any help would be great. We appreciate that. I'll add It's a little bit vague, but, go ahead. Go ahead, Howard. I'll finish up. Yeah. No, I was just gonna add a couple of comments and let you, Laura, jump in. You know, in this type of market environment where you have sub 1% vacancy, credit is an extreme focus, right? There's plenty of tenants that are willing to pay you whatever you want for a building. You know, for the past, you know, years, we've had an extreme focus on tenant credit quality. That's an overriding factor and has always been, when compared to outperformance on rental rates. You know, our team runs a very rigorous process in terms of credit. In fact, you know, I can think of many examples where literally we've had multiple offers on a space or a building, and they've gone back to interested parties and gotten the credit side of it out of the way before we would even tell somebody we're gonna consider them amongst one of the finalists competing on an individual space. That's really the level we take it to in terms of our seriousness about credit and continuing to improve the quality always of the credit in our portfolio. Dave, I'll just add a little bit, and it's great to hear your voice today. Thanks for joining us. Your question was, you know, how should investors think about our tenant credit? If I try to separate myself from Rexford, put myself in the investor's shoes and be objective and just look at the data, you know, over the last 20 years, I think that the Rexford tenant credit in the aggregate is the best credit you can find in the market, period, of any asset class, not just industrial, and far better than any other industrial REIT. I mean, just very different. If you look at the diversity of our cash flows by industry sector, by function, by type of tenant, more diverse than just about any other industrial REITs. If you look at the data that in terms of how they perform through cycles, you mentioned the pandemic and the fact that there was stimulus to consumers and that that's no longer in place. Well, don't forget that during the pandemic, the authorities told our tenants they didn't have to pay rent. What did they do? They all paid rent. I mean, for all practical purposes, they essentially all paid rent. Why? Because they have to hold on to the space. You know, we saw that during the great financial crisis. We saw that during the uncertain times of the pandemic. These locations, it's not just the most diverse source of cash flow by industry or function of these businesses, but these are... I don't like this phrase because it's overused in my view, but these are truly mission-critical locations for our tenants. They would have a hard time or literally could not operate their businesses if they didn't have these locations. For a whole range of factors, again, the market is substantially better positioned today than it was going into the great financial crisis. We believe that this is the best credit that you can have, period. Yeah, I appreciate the color on that. I mean, that's helpful. I mean, I think that's the one thing that people will continue to focus on Rexford Industrial, right? No new supply, great growth, great embedded mark to market. You know, if you're gonna focus on something, I think that's the big focus. Appreciate you guys giving some extra time and thought to it. No, it's an important question. I remember when the pandemic first started, there were some research papers out there that said, oh, small tenants are gonna get hit more than large tenants. There was really no data to back that up. In fact, if you looked at the data through prior downturns, it's quite the contrary. All these infill tenants perform substantially better than your big box tenants in the aggregate. Then we saw that during the pandemic. The infill Southern California performed just incredibly well. We have the strongest market in the country by far, and nobody can touch our leasing spreads, FFO growth, et cetera. So clearly the data has spoken and indicates that there is just nothing like this infill tenant base in the country. Appreciate it. Thank you. Thank you, Dave. Just as a reminder, if anyone has any questions, you may press star one on your telephone keypad to join the queue. Our next question comes from the line of Michael Mueller with JP Morgan. Please proceed with your question. Yeah. Hi. Just out of curiosity, on the next $500 million or so of acquisitions that are in the works. How are the stabilized yield expectations on those compared to what closed this past quarter? Hi, Mike. Well, we really typically don't disclose anything until we've closed transactions. You know, to some of, I think, Michael's earlier comments, he mentioned that we are finding some better opportunities right now with, I'd say, increasing stabilized yields, increasing in-place yields. You know, the market is certainly playing toward us in our ability to capture some of these opportunities. We are very selective, though, I'll say, at this point in what we buy. You know, I think we've written more LOIs. Well, I know we've written more LOIs at this point than we did same time last year. I think that a real testament to our team, you know, it's more about buying the right transactions and finding those opportunities going forward now that have those attractive yields in them. We're succeeding in doing so. Got it. Hey, Mike, it's Laura. Mike, it's Laura. Thanks for joining us today. I'll just add to that. I mean, I think we talked about earlier is the balance. We're really focused on the balance of what we buy. If you look at what we've bought year-to-date, over half of it is either vacant or really low yielding. When we look forward into you know into bringing a balance of you know accretive you know cash flowing acquisitions and investment opportunities into the portfolio, you know that's a focus for our team. Got it. Okay. Thank you. We have reached the end of the question and answer session, and I'll now turn the call back over to management for closing remarks. Thank you. On behalf of the entire Rexford team, we wanna thank everybody for joining us today, for your focus on Rexford. We wish everybody a great summer, and we look forward to reconnecting in about three months. This concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation.