Rexford Industrial Realty Inc

NYSE:REXR

Earnings Call Transcript 2021-Q1

[Operator]

Greetings and welcome to Rexford Industrial Realty First Quarter 2021 Earnings Call. [Operator Instructions]. As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, Kosta Karmaniolas, Senior Vice President of Corporate Finance and Investor Relations. Thank you. You may begin.

[Kosta Karmaniolas, SVP of Corporate Finance and IR]

Thank you for joining Rexford Industrial’s first quarter 2021 earnings conference call. In addition to the press release distributed yesterday after market close, we posted a supplemental package in the Investor Relations section of our website, www.rexfordindustrial.com.

Joining today's call, are Rexford Industrial’s Co-Chief Executive Officer, Michael Frankel; and Howard Schwimmer; along with Chief Financial Officer Laura Clark; and General Counsel David Lanzer.

Before we begin our prepared remarks, I would like to remind everyone on today's call that Management's remarks and answers to your questions contain forward-looking statements as defined in 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.

With that it is my pleasure to hand the call over to Michael.

[Michael Frankel, Co-CEO]

Thank you and welcome to Rexford Industrial’s first quarter 2021 earnings call. We hope you and your families are well. Today I'll begin with a brief overview, Howard will then cover our transaction activity, and Laura will discuss our financial results. We will then open the call for your question.

With regard to the first quarter, we are pleased with our exceptional results. From an operational perspective, a robust two million square feet of leasing drove 98.3% occupancy in our stabilized portfolio. Releasing spreads continue at record levels averaging 33% cash and 47% on a GAAP basis. Our extraordinary internal growth, coupled with our strong investment volume resulted in year-over-year core FFO growth 29% and 12.1% on a per share basis.

As we look forward in infill Southern California appears positioned to outperform. UCLA economists, project California will grow faster than the rest of the United States, driven by a diverse range of growing business sectors, combined with lifting of some of the nation's most constraining pandemic restriction. Moreover, ecommerce continues to surge, representing more than $1 for every $5 spent on retail purchases.

First quarter port volumes exceeded pre pandemic levels, with imports growing 25% compared with the first quarter of 2019. Moreover, with unprecedented tenant demand Rexford’s the last mile portfolio is positioned to outperform within our markets, due to our focus on the best locations delivered with superior functionality.

Within our infill markets, a dearth of developable land and high barriers constrained new construction, resulting in essentially no ability to introduce any material volume of net new supply. In fact, our infill markets continue to lose supply on average year-over-year. Consequently, CBRE projects Greater Los Angeles rental rates to grow at a rate that is 2.5 times greater than the remaining major markets outside of Southern California into the next four years.

With an incurable supply demand imbalance, the infill Southern California tenant base continues to prove itself as the strongest most resilient and highest demand tenant base in the nation.

Looking forward, the Company is positioned for favorable internal and external growth. Overall, we project approximately 18% of embedded NOI growth equal to $54 million within our in-place portfolio assuming no further acquisitions over the next 18 to 24 months.

Regarding external growth, the Company has perhaps never been better positioned. As our research and local relationship driven origination methods enable us to harvest a proprietary pipeline of investment opportunities. We are well positioned to grow accretively, significantly beyond our current 1.7% market share within the infill Southern California, the nation's most highly valued industrial market.

Regarding our Rexford team, this past March marked one year since we began working remotely. We are truly humbled by the extraordinary manner with which our Rexford team rose to the task, despite many hardships to perform at the highest levels within the entire real estate industry. We'd like to acknowledge and thank the Rexford team for your tremendous dedication, entrepreneurial spirit and market leading performance.

And with that, I'm very pleased to turn the call over to Howard.

[Howard Schwimmer, Co-CEO]

Thank you, Michael. And thank you everyone for joining us today. Market fundamentals in infill Southern California continued with unprecedented strength in the first quarter, despite impacts associated with the pandemic. Vacancy tightened and demand accelerated as a diverse group of growing industries and ecommerce companies absorbed warehouse space at a torrid pace.

Over the past 12 months according to CBRE our infill markets experienced strong rental rate growth, with asking rents up 4.9% on a weighted average basis. For further perspective, based on our internal portfolio and analytics, we believe market rents increased by an estimated 9.3% over the prior year for comparable product within our target infill Southern California markets.

Our target markets which exclude the Inland Empire East, ended the first quarter at 1.9% vacancy. By comparison, our same-property portfolio ended the first quarter with 98.6% occupancy outperforming the market by 50 basis points, a testament to the high quality of the Rexford portfolio, our strong tenant retention and elevated new leasing volume.

Of our top 20 largest expiring leases this year, approximately 80% of spaces representing 1.4 million square feet have already renewed, been retentate [ph] or are in lease negotiations. The remaining 675,000 square feet a top 20 spaces are headed for value add repositioning and future lease up.

A recent leasing example in our San Gabriel Valley portfolio demonstrates the strength of our market. During the quarter, a tenant occupying about 150,000 square feet, was dismayed with a higher renewal rate, and spent months searching for alternative less expensive space. Unable to find any similar functional space, the tenant finally renewed with us. But at a rent that was a full 21% higher than our original proposal had they not weighted. In the end, we generated a cash releasing spread of 95%.

This was representative of the unprecedented pace of rent growth within our infill markets, and set another record for all time high rent for the sub market. In addition, we obtained 3.25% contractual annual rent increases through the term of the lease, which exceeds the 3% historical standard for our markets. As a journal note, we are increasingly pushing our annual rent boats above 3% and in some cases as high as 4%.

Year-to-date, we completed 11 acquisitions, which included 807,000 square feet of buildings, including 26.9 acres of low coverage, outdoor storage sites, and land for future redevelopment. For an aggregate purchase price of $191 million. 82% of these transactions were off market or lightly marketed, enabled through our proprietary research driven sourcing methods. These investments are projected to generate an aggregate 5.2% or greater stabilized yield on total investment and provide strong value add cash flow growth over time, initially contributing about $0.02 of FFO per share through the remainder of 2021 and growing to about $0.09 per share after repositioning or redevelopment.

We currently have over $450 million of acquisitions under LOI, or contract. These acquisitions are subject to customary due diligence with no guarantee of closing. We will keep you apprised as transactions are consummated.

On the disposition front, we sold two properties totaling $21 million, in the San Fernando Valley and Inland Empire East sub-markets. The proceeds were used to tax efficiently fund, a portion of our acquisition activity. Moving forward, we expect to continue to sell assets opportunistically to unlock value and recycle capital.

Turning to repositioning and redevelopment activities. We have over 3 million square feet of current and planned value add projects throughout our portfolio. Of these, 1.3 million square feet of current projects in repositioning redevelopment or lease-up which are detailed in our supplemental are estimated to deliver an aggregate return on total investment of 6%.

These projects are expected to deliver a substantial value creation, as our stabilized yield represents more than a 200 basis point premium compared to the sub 4% market cap rates that they would be valued at in today's market.

And with that, I'm pleased to now turn the call over to Laura.

[Laura Clark, CFO]

Thank you, Howard. I'll begin today with details around our operating and financial results.

In the first quarter stabilized same-property NOI came in ahead of our forecast, with 6.8% growth on a GAAP basis, and 8.2% on a cash basis, driven by a 40 basis point pickup and average occupancy and strongly leasing spread. Rent collections were over 98% of contractual billings in the first quarter, essentially at pre pandemic levels.

Since the pandemic began, we have provided tenants a relatively nominal amount of rent deferrals, totaling $4.8 million, representing about 1.5% of ADR and we have collected over 96% of deferrals built-to-date, we currently have only $535,000 remaining to collect in 2021.

In addition, bad debt came in better than expected at 50 basis points in revenue. This quarter’s lower bad debt levels are reflective of the health of our tenant base, as well as the proactive efforts of the Rexford team. As we discussed last quarter, our team has successfully recapturing below market rent spaces and returning at substantially higher risk. The combination of strong results generated core FFO per share growth of over 12% or $0.37 per share in the first quarter.

Turning now to our balance sheet and financing activities. We are maintaining a best-in-class low leverage balance sheet, which allows us to be opportunistic during all phases of the capital cycle. At quarter net debt to EBITDA was four time, coming in at the low end of our target range of 4 to 4.5 time, with net debt to enterprise value up 13%.

During the quarter, we raised $197 million of equity through the ATM program, at an average price of $50.10 per share. $77 million of the total was issued on a forward basis with settlement to occur within the next 12 months. Proceeds from this quarters ATM activity were used to fund first quarter acquisitions, as well as those identified to close later this year.

As of March 31, we had approximately $124 million of cash on hand. We remain in a strong liquidity position with no debt maturities until 2023 for full availability on our $500 million credit facility, and approximately $524 million available under our ATM program.

Turning to guidance, we are increasing our full year projected core FFO per share range to $1.41 to $1.44. A revised midpoint represents 8% year-over-year growth.

As a reminder and consistent with our prior practice, our guidance does not include acquisition, disposition, or balance sheet activities that have not yet closed to date.

Other notable components of guidance include an increase to our stabilized same property NOI growth by 75 basis points at the midpoint to 3.75% - 4.75% on a GAAP basis, and 6.75 to 7.75% on a cash basis, driven by our strong first quarter performance. Updated guidance includes the assumption of bad debt expense as a percent of revenue of 110 basis points for the full year, a reduction of 15 basis points from our previous view.

We are increasing our expectation for average occupancy and a stabilizing property pool to a range between 97.25% to 97.75%, up 25 basis points at the midpoint, driven by our robust first quarter leasing activity. We included a guidance roll forward and a supplemental package that further details the components of our 2021 core FFO per share guidance.

Before turning the call over for your question, we are excited to announce that we will be publishing our annual ESU report at the end of the month. At Rexford, we are committed to optimizing positive impacts to the environment, our communities, our tenants, employees and shareholders.

This completes our prepared remarks. We now welcome your questions.

[Operator]

[Operator Instructions]. Our first question comes from the line of Emmanuel Korchman, with Citi. Please proceed with your question.

[Emmanuel Korchman, Citigroup]

Hey, everyone. Good afternoon, and good morning.

Maybe this is one for Howard or Michael, you've had a little bit of success with doing some unit deals to get transactions unlocked. Amongst that the pipeline, you talked about, are there unit deals included in that are those all going to be sort of straight cash sales?

[Howard Schwimmer, Co-CEO]

Hi, Manny. It's Howard. Nice to hear your voice.

Yes the $450 million pipeline, there are some discussions within that. But it’s funny, a lot of times they just turn into cash deals. So, it's hard to comment really specifics right now on the UPREIT transaction pipeline is has been growing. There's a lot we consummated last year. And we're optimistic of being able to talk more about future upgrade transactions as well.

[Emmanuel Korchman, Citigroup]

And then you guys talked about 80% embedded NOI growth. That's exclusive of sort of just rental rate mark-to-market. That's just if all the developments come in the way that we expect annualizing sort of the growth from close acquisitions that gets you to 18%.

[Michael Frankel, Co-CEO]

Hey Manny, it's Michael. Great to hear from you. And thanks for joining today.

Yes, it includes more than just the mark-to-market. So it includes also the repositioning contributing about $32 million $33 million of the $54 million. In fact, leasing spreads are only contributing about $70.5 million of that $54 million.

[Emmanuel Korchman, Citigroup]

Great. Thank you.

[Operator]

Our next question comes from the line of Blaine Heck with Wells Fargo. Pleased proceed with your question.

[Blaine Heck, Wells Fargo]

Great, thanks. Good morning up there. So we continue to hear about the level of capital chasing industrial product. Can you just talk a little bit more about the overall competitive environment in Southern California in your markets in particular? And have you seen any change in interest as cap rates have compressed to really historic lows here?

[Howard Schwimmer, Co-CEO]

Hi, Blaine. It’s Howard. I guess, looking back over many cycles, we've always had quite a bit of capital interested in penetrating into the Southern California marketplace. It's difficult, because there's not a lot of transactions that are out there on an actively marketed basis. So people do have a difficulty penetrating, so this point in the cycle is no different than the past. Some of the names have changed, some of the different capital sources, obviously are shifting over.

And really, it's really testament to our unique access to the market, where we focus on off market and lightly marketed transactions, as well as occasionally buying bang on market product.

Last quarter, over 80% of our transactions were up market or lightly marketed. And so it's interesting that most of the capital out there really never even have a chance to compete with what we're buying. So really nothing new and it's no secret, Southern California is the best industrial market in the country. So there's plenty of capital, that's always what the place in our markets.

[Michael Frankel, Co-CEO]

And Blaine, this is Michael. I’ll just add a little more perspective. We have seen a rotation from certain investors that might have targeted other asset classes, retail, et cetera, who have increasingly come into approach industrial, and so there's certainly more competition as Howard indicated, but what's really interesting about our business is if you look at the trend line for Rexford about the prior eight, nine years, our percentage of transactions through up market and lightly marketed transactions has actually increased, despite there being more competition in the market.

And so five years, six years ago, we were probably around hovering around 70%, off market lightly marketed deals. And today this year, we're over 80%. Last year, we're close to 80% despite increased volume of activity as well at Rexford. So I think that that really tells the story, we are just digging deeper into the markets, we're better at what we do, we're leveraging better technology, our team is further developed and we are just penetrating deeper and deeper into the marketplace.

[Blaine Heck, Wells Fargo]

Yes, that's really helpful. And I guess it just related to that, and given how cap rates have continued to compress. You guys certainly have your pick of capital sources. But are you thinking anymore about opportunistic dispositions? Would you guys consider selling a small portfolio of assets given where valuation is?

[Howard Schwimmer, Co-CEO]

We're always looking through the portfolio, most of our sales tend to be more opportunistic. And if you look at the overall portfolio, the mark-to-market is about 11%, in terms of where we sit below market and lease rates, so there's always plenty of upside in our assets.

And it's funny, we look back at a couple of things, even today that we've been considering selling, even just a year ago, and the rent growth that we experienced in those assets is astounding, and so that value creation is very strong. So we really tend to really more focused, have more focus on this, the opportunistic sales that make they tend to outperform a cap rate type sale, or maybe another reason or two, sometimes something's a little bit more management intensive, or we don't see rents growing as quickly and something that might consider selling.

[Michael Frankel, Co-CEO]

And maybe I'll just add, again, its Michael to that. We're getting to a point where Rexford scale in the marketplace, is affording different levels of opportunities, both Rexford and our customers. And I'll give an example of that, for instance, we’ve recently -- I might have mentioned on a prior call, that we established a new customer solutions function at Rexford and we're able to look at the market and offer our customers and prospective tenants a much more strategic opportunity throughout Southern California.

And so today, we're talking to tenants, not just about one space, but we're talking to maybe about their needs for 20 spaces or 30 spaces throughout the region. And also, as a company, the scale is really beneficial in terms of achieving greater operating leverage within the portfolio. So I think you're going to start to see Rexford’s operating margins really start to accelerate over the next call it 12 to 36 months.

The platform is fully built out, and you're not going to see a lot of heavy expenditure incrementally in the platform, as we move forward. So, I think that's a really exciting time for the company. And by the way, Howard mentioned the mark-to-market. But if you look at expiring leases this through the end of the year, the mark-to-market is around 20%. And that's typically found, given the rate of market rent growth as we approach next year that mark-to-market will probably be higher than the 11% that we might be projecting out in the portfolio as a whole as well. I think currently, we're looking at about 14% for next year. So a lot a lot of rounded growth.

[Blaine Heck, Wells Fargo]

Yes. Thanks, guys.

[Operator]

Our next question comes from the line of Jamie Feldman with Bank of America Merrill Lynch. Please proceed with your question.

[Jamie Feldman, Bank of America Merrill Lynch]

Great, thank you. I was just hoping to get a little bit more color on how the type of tenants leasing spaces changed even into the first quarter, I assume there's been kind of a change in the type of tenant based on the fact that we're kind of coming off the bottom. And then also, if you can just address the bad debt expense, just kind of a lingering downside to that or kind of how your approach has changed there as well.

[Howard Schwimmer, Co-CEO]

Jamie, I try to understand the first part of question, change in tenant demand. Maybe I missed the question by business type, are you’re saying what the nature of that demand is.

[Jamie Feldman, Bank of America Merrill Lynch]

Yes, just the types of industries and the types of businesses that are leasing space today or have become more active over the last three, four or five months, things have started [multiple speakers].

[Howard Schwimmer, Co-CEO]

Maybe I’lltouch on the first part and then Laura you can touch on bad debt. And I've heard you mentioned also now that we're coming out the bottom and what's really interesting in infill Southern California, was it starting in June of last year, still early stages in the pandemic, leasing activity really started to accelerate very dramatically after a very brief pause of say March, April, May and so we really started coming up with, if there was a bottom much earlier in the cycle in infill Southern California.

And tend tremendous as Howard described as really continue to accelerate beyond levels that we've ever seen in our 30-40 year careers here. And truly driven by a pretty broad range of industries. Everything from food, consumer products and staples, healthcare, healthcare products, and pharmaceuticals, as you'd expect, but also aerospace and space technology, mobility and electric vehicles and all these sectors by there, they represent ecosystems. So it's not just electric vehicles, but it's the suppliers of all the components, the batteries, et cetera. It's the service centers that supply those sectors, for instance.

And so it's been an extraordinarily broad based set of demand drivers from the industry perspective. And then you have ecommerce, of course, layered in which we all know what's happening with e-commerce. But I think based on what we're seeing in the market, there's reasonably that we're still in the early stages of the impact from e-commerce as it's going to impact our markets in a very positive way.

And just a couple indicative examples, people talk a lot about Amazon, and how they're penetrating these infill markets, but they're using the spaces differently. They bought Uber like company not too long ago, and they're using these vehicles and vans to distribute locally, it's much more efficient than trucks. And now you've seen Walmart do the same. And now there's an announcement last week, that Target is doing the same. And they're establishing these sortation centers that are going to be in our warehouses, very local and close to the endpoints of distribution.

And so you're really seeing the initial stages of a wave of impacts into the ecommerce driven demand for our product. And it also is impacting the way they use it the way that these properties are configured. And frankly, it plays exceedingly well into what Rexford delivers to the market. So we couldn't be better position.

[Laura Clark, CFO]

Yes, and I'll also add, one other comment around demand from different industries. I think we also are starting to see demand come back in some of those sectors that have been slower to reopen in California, entertainment is one of those. We actually this quarter, we signed a lease with a tenant that's going to use space for studio production. And they're going to invest between $5 million and $10 million to convert the space. So it's good to see some of these industries that had been shut down, and that had been operating in limited capacity, starting to come back to market and seeing demand from those sectors as well.

In terms of your question around bad debt, and let me I'll speak a little bit about the drivers for Q1 and then talk about clear expectations. So bad debt through the quarter, as I mentioned in the call was 50 basis points of revenue, the decline in bad debt this quarter, as compared to the full year of 2020, which was around 150 basis points. The decline this quarter was primarily related to unanticipated payments by a handful of our watch list tenants. And this resulted in cash recovery or positive impact of bad debt for the quarter.

So, excluding these unforeseen cash recoveries or bad debt expense would have been about 125 basis points, which was in line with our prior full year guidance. So in terms of our revised that forecast of 110 basis points for the full year, it's really capturing that Q1 pickup in bad debt or better than expected that in Q1.

A little color around those cash collections. They really came from tenants that are in categories that have been slower to reopen, entertainment being one, travel related industries, being another. And we're certainly optimistic that these tenants are going to be able to fulfill their rent obligations once they're operating.

It's challenging to forecast the ability of these tenants to pay rent consistently in the near term, especially given the fact that we're still moratoriums are still in place. They give tenants the unilateral right to different rent. So in this moratoriums are set to list at the end of June. But as we all know, they've been pushed back several times. So with three quarters remaining, those moratorium is in place, we're being cautious and prudent with our bad debt forecasts as we look through the next three quarters.

[Jamie Feldman, Bank of America Merrill Lynch]

Okay, thank you. That's very helpful. And then going back to the cap rate, discussion, can you maybe talk about, what you think cap rates actually are in across your different sub markets? And then I guess even more importantly, what assumptions you think people are underwriting to get to those numbers?

[Howard Schwimmer, Co-CEO]

Yes, that's a great question. So we have obviously seen some cap rate compression on marketed transactions, especially when you have quality assets with tenants on longer term leases. And today those transactions not unusual to see sub 4%.

And I think when you say what some of the underwriting assumptions are, Rexford underwrite cap rate expansion in our acquisition, so we don't assume that we're going to exit anywhere close to where cap rates are in the marketplace today. But what we do here is that there's a lot of allocators capital allocators out there that underwrite very similar cap rates at exit. So really having strong expectations of continued performance in the marketplace.

But yes, and of course, as you know, Jamie, we're really not cap rate buyers, we're really more focused on where we're able to stabilize assets over the near term, short term periods of time. And we've also seen the results of that in terms of our repositioning pipeline, we mentioned on the prepared remarks. Those assets that we’re stabilizing over the near term, within about 6% stabilize yield on total costs, which is creating substantial value compared to where these assets would trade today in the marketplace.

[Jamie Feldman, Bank of America Merrill Lynch]

What do you think people are assuming for NOI growth or rent growth?

[Howard Schwimmer, Co-CEO]

I think if you talk to brokers out there. It's higher single digit growth over the first year here, something not too different maybe in the next year, and then dropping down into maybe a bit above 3% for the next year or two. We're not underwriting that aggressive of rent growth. In our acquisitions, we still would rather be pleasantly surprised as opposed to pricing to absolute perfection in how we buy our products.

[Jamie Feldman, Bank of America Merrill Lynch]

Okay, great. Thank you.

[Operator]

Our next question comes from the line of Connor Siversky with Berenberg. Please proceed with your question.

[Connor Siversky, Berenberg]

Hey everyone. Good morning over there. Thanks for having me on the call.

Thinking about one of the peer’s calls from earlier this week on the development repositioning pipeline. I'm wondering if you're expecting any disruption here from rising cost of inputs steel, specifically. And if you could add some color on how you're approaching procurement in the current environment?

[Howard Schwimmer, Co-CEO]

Sure, hi Connor. Nice to hear from you. What we're seeing out there is really some disruption on larger projects. There are there are shortages of steel and some of the other commodities used in constructing buildings.

But what's interesting is that, in the middle of this pandemic, we saw construction costs actually go down, we actually had some rebidding of some of the projects that we were doing and locked in and some real favorable pricing. And so what we are really looking at internally is we're seeing construction costs coming up off those lower numbers.

So not too far different than my where we might have been projecting maybe about a year ago. But now that said, we are projecting some higher cost increases in our underwriting today just to be safe. We kind of -- we view some of this disruption and something maybe over the next six months to a year.

Interestingly, though, on our smaller projects that are less than a million dollars, we're not seeing really any significant pricing fluctuations. And we attribute that perhaps to a lot of other contractors coming into the space having shifted out of other product categories. So they're being more competitive in order to win jobs from us. So hopefully, that helps you.

[Connor Siversky, Berenberg]

That's very helpful. Are you seeing any delays in schedules or not yet?

[Howard Schwimmer, Co-CEO]

Not necessarily. I mean, a little bit, we adjusted on our repositioning page, some of the projected completion dates, because of some of those projected delays, but at this point, nothing dramatic, that I can point to.

[Connor Siversky, Berenberg]

Okay, fair enough. And then one last one for me. Apology, if I missed this earlier. But on the remaining lease role for the year, I think it's 11% of ABR. Is there any sense of timing, whether this is back end waiting or spread throughout the next three quarters?

[Laura Clark, CFO]

Yes, Connor, I can take that. About 43% of our lease explorations are in the fourth quarter. And that's certainly impacting our occupancy assumptions as we have less visibility into those lease explorations. So as we move through the year and we get more visibility, we'll provide updates around our assumptions around lease up and timing for the year.

[Connor Siversky, Berenberg]

Okay, thanks. That's all for me.

[Operator]

Our next question comes from the line of Dave Rodgers with Robert W. Baird. Please proceed with your question.

[Dave Rodgers, Baird]

Yes, good morning out there. Howard and Michael, I heard in your prepared comments, I think you said 9% market rent growth for your targeted sub markets that, I guess I was wondering if you could book in that a little bit by geography for you guys, or maybe the sub markets that you think are performing well and aren't and how they compare to that overall average. And I guess with the rent growth that you're seeing, is there any push in the market for longer term leases, I guess mostly by the tenants, I would assume.

[Michael Frankel, Co-CEO]

I'll give you a little color on some of that rent growth that we're seeing. If you look at from a county standpoint, the largest rent growth that we saw was in the San Bernardino area, which covers the Inland Empire West. Internally that looked like it was in the mid-teens, followed or by Orange County has very strong rent growth.

In terms of interestingly, the size spaces that we're seeing the rent growth, it's pretty well dispersed. I think the largest rent growth we're seeing was below 11% in the 100,000 foot and greater category. And the next strongest was just in a smaller space five to 20,000 foot spaces a bit over 10%.

What's very interesting, Dave, is that we've seen an acceleration in rent growth, just over the last quarter, within our market on the portfolio, MLAs listing more like 4% growth, from the end of Q4 to through Q1. So that has every indication of continuing throughout this year as well, in terms of the strength of that growth.

I'm sorry, you had one other parts of your question, what was that?

[Dave Rodgers, Baird]

Just on the lease term, the length of the lease terms, any push for tenants to get that out longer given the rent growth you're seeing?

[Michael Frankel, Co-CEO]

Yes, well, this is certainly a time in the cycle for us to try and lock in some longer term leases based on these record selling lease rates that we're achieving. And as well as what lends further comfort to, for us to push those terms, is the larger rent increases that we're now able to capture in the leases I'd mentioned earlier that we were achieving, above 3%, and even pushing down to 4% in many projects. So we don't have as much of a concern about being a bit behind in growth on a longer term basis.

Also, tenants certainly recognize that we just have a shortage of space in the markets, and they're more interested in controlling space for a little bit longer period of time than they might have in the past. But overall, in terms of what you saw, for the lengthening of our term, a lot really could be attributed to just the average size lease that we completed in this past quarter, it was about 50% higher than the average sized space leasing in Q4. And so when you do the math, that sort of attributes as well to the increased term average.

[Dave Rodgers, Baird]

Great, that's helpful. Maybe one follow up for Laura if I could. In FFO roll forward that you provided, which was helpful. Thanks for doing that, Laura. I was curious on I think you bought the 160 plus million of assets had about a $0.02 that you sold 20 million and you had kind of a negative penny in there for that, anything in particular with those assets that maybe had an outsize, negative contribution again, realizing it's just depending but was just kind of curious on the delta and those numbers?

[Laura Clark, CFO]

Yes, I think it's more related to and more of a function of what we've acquired, today, which is $191 million, and that includes the subsequent to quarter end acquisitions. So, as you mentioned, we're estimating that those acquisitions will contribute $0.02 per share. As we discussed in our prepared remarks, our acquisition activity today is very heavily weighted towards value add and core plus properties, and with an expected yield a stabilized yield of 5.2%. So, that FFO per share contribution is expected to grow over time and grow to $0.09 cents per share and will certainly contribute to our long-term embedded NOI growth prospects.

[Dave Rodgers, Baird]

That's helpful. Thank you.

[Operator]

[Operator Instructions] Our next question comes from the line of Chris Lucas, with Capital One Security. Please proceed with your question.

[Chris Lucas, Capital One Security]

Hey, good morning out there. Couple of quick ones, and then a bigger picture question. So Laura I just wanted to go back to you on the bad debt for the first quarter. Was that he improvement over expectations related to prior period recoveries is that specifically what it was?

[Laura Clark, CFO]

It's related to cash collections that we received from tenants that are on the watch list. So prior reserves that we receive amounts owed by those tenants.

[Chris Lucas, Capital One Security]

And that is, so that's currently so that's cash tenant -- cash basis tenants paying for the current period.

[Laura Clark, CFO]

That's correct. Yes, that's correct.

[Chris Lucas, Capital One Security]

Okay, great. That's helpful. And then Howard, I guess, just thinking about the lease expiration schedule. Are there any major known move outs at this point?

[Howard Schwimmer, Co-CEO]

We've handled predominance of our larger explorations at this point. And we're sort of back to where we always want up where it's really just blocking and tackling on moderately sized spaces.

[Chris Lucas, Capital One Security]

Okay, thank you. And then just taking a step back, both our view and Michael have talked about. The last mile nature of your portfolio, I guess, I was curious as to whether you broken down your ABR exposure, between those sort of tenants that are servicing the local economy, however you want to define it, versus those that use your or in your portfolio that have a multi-regional or multi state sort of reach.

[Howard Schwimmer, Co-CEO]

The predominance of our tenant base is really regionally focused. And I think that's a function of many decades actually the evolution of the tenant base in infill Southern California. So it's not unique to the Rexford tenant base. And it's not just consumer distribution, but it's also business to business. This is the largest economic zone in the nation by a fairly substantial margin, largest regional population of a nation and the most diverse economy in the nation. So, its own country, I think it'd be one of the largest countries in the world.

So, it's really read more of a predominant regional focus. And by way of indication, we're not as port driven as your big box properties out in the eastern Empire or in Arizona. But it's estimated that upwards of 50% of the product in quarter to the two ports two largest ports in the country of La Long Beach are consumed or distributed regionally. So just gives you a sense, for the size of the regional economy. So the predominance is really regionally focused.

[Chris Lucas, Capital One Security]

Great, thank you. That's all I had this afternoon.

[Operator]

Our next question comes from the line of Mike Mueller with JP Morgan. Please proceed with your question.

[Mike Mueller, JP Morgan]

I guess Laura, on the bad debt recovery, how significant was that? And just ask them, because if you take the $0.37 in the quarter and realize that you're already well north of the range?

[Laura Clark, CFO]

Yes, absolutely. That's a really good question. So as I mentioned, those, those cash recoveries, offset, our bad debt expense. So had had we not have those cash recoveries or bad debt expense would have been closer to 125 basis points for the first quarter as a percent of revenue.

In terms of question around analyzing that $0.37 cents for the full year, first quarter included a few items versus the impact of that lower bad debt that I just talked about. The second is a pickup an average occupancy. And that's offset by some non-recurring G&A expense that are incurred in Q1 as well. These items together equate to about $0.015 per share. So if you use that as a run rate, and if you use that as a run rate, you can get to the midpoint of our full year guidance.

[Mike Mueller, JP Morgan]

Got it? Okay, that makes sense. And then, I guess, on the shadow, redevelopment repositioning pipeline, the 1.7 million square feet, it's not process. Can you give us a rough sense as to how soon that could go into process and what an incremental investment could look like? For?

[Howard Schwimmer, Co-CEO]

Sure, maybe I'll just mentioned a bit about the projects, or you might want to add some color on some of those costs. We will be starting quite a few projects before the end of the year. I don't think at this time, we're prepared to give you any specifics around the square footage of those microphones that we talked about more offline in detail if you'd like to drill down project by project. But, we're optimistic to have some further starts. And we'll update you more on the next quarterly call as we know more about timing locking in.

[Mike Mueller, JP Morgan]

By the way, the 1.7 million square feet, only about 570,000 square feet are really future repositioning. And the rest of it, you can kind of see the target completion dates, the majority of it in on our supplemental page.

[Howard Schwimmer, Co-CEO]

I would add also that what we expect, lease-up of some of the current repositioning work of about almost 1.2 million square feet through the end of the end of 2021.

[Mike Mueller, JP Morgan]

Okay,

[Laura Clark, CFO]

One more add there, Mike, is it on our reposition page, we do provide the projected repo cost on the repositioning and redevelopment. And so for our pipeline if you total those together, it's about $180 million.

[Mike Mueller, JP Morgan]

Got it. Okay.

[Michael Frankel, Co-CEO]

And I'd say that just looking over our notes to the 1.7 million square feet of future redevelopment, the majority of that starts and completes within the next one to two years.

[Operator]

There are no further questions in the queue. I'd like to hand the call back to management for closing remarks.

[Howard Schwimmer, Co-CEO]

We'd like to thank everybody for joining today. Appreciate your focus and time on Rexford and we look forward to reconnecting in about three months and hope every stays well. Happy Earth Day and look forward to reconnecting soon.

[Operator]

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