UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


☑			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~September 30, 2023~~March 31, 2024


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-36008

Rexford Industrial Realty, Inc.

(Exact name of registrant as specified in its charter)


Maryland			46-2024407
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)

11620 Wilshire Boulevard, Suite 1000	Los Angeles	California	90025
(Address of principal executive offices)			(Zip Code)

(310) 966-1680

(Registrant’s telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading symbols

Name of each exchange on which registered

Common Stock, $0.01 par value

REXR

New York Stock Exchange

5.875% Series B Cumulative Redeemable Preferred Stock

REXR-PB

New York Stock Exchange

5.625% Series C Cumulative Redeemable Preferred Stock

REXR-PC

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☑

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑

The number of shares of common stock outstanding at ~~October 19, 2023~~April 17, 2024 was ~~211,097,319.~~217,821,430.

REXFORD INDUSTRIAL REALTY, INC.

QUARTERLY REPORT FOR THE THREE ~~AND NINE~~ MONTHS ENDED ~~SEPTEMBER 30, 2023~~MARCH 31, 2024

TABLE OF CONTENTS


PART I	FINANCIAL INFORMATION
	Item 1.	Financial Statements
		Consolidated Balance Sheets as of ~~September~~March ~~30, 2023~~3 1 , 202 4 (unaudited) and December 31, ~~2022~~202 3	3
		Consolidated Statements of Operations for the Three ~~and~~ N ~~ine~~ Months Ended ~~September~~March ~~30, 2023~~3 1 , 202 4 and ~~2022~~202 3 (unaudited)	4
		Consolidated Statements of Comprehensive Income for the Three ~~and~~ N ~~ine~~Months Ended ~~September~~March ~~30, 2023~~3 1 , 202 4 and ~~2022~~202 3 (unaudited)	5
		Consolidated Statements of Changes in Equity for the Three ~~and~~ ~~Nine~~Months Ended ~~September~~Mar ch ~~30, 2023~~3 1 , 202 4 and ~~2022~~202 3 (unaudited)	6
		Consolidated Statements of Cash Flows for the Ni neThree Months Ended ~~September~~Mar ch ~~30, 2023~~3 1 , 202 4 and ~~2022~~202 3 (unaudited)	108
		Notes to the Consolidated Financial Statements	119
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	3836
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	7165
	Item 4.	Controls and Procedures	7266
PART II.	OTHER INFORMATION
	Item 1.	Legal Proceedings	7367
	Item 1A.	Risk Factors	7367
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	7367
	Item 3.	Defaults Upon Senior Securities	7467
	Item 4.	Mine Safety Disclosures	7467
	Item 5.	Other Information	7467
	Item 6.	Exhibits	7568
	Signatures		7669

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

REXFORD INDUSTRIAL REALTY, INC.

CONSOLIDATED BALANCE SHEETS

(Unaudited and in thousands – except share and per share data)


		September 30, 2023		December 31, 2022			March 31, 2024	December 31, 2023
ASSETS	ASSETS					ASSETS
Land	Land	$	6,606,022	$	5,841,195
Buildings and improvements	Buildings and improvements	3,869,303		3,370,494
Tenant improvements	Tenant improvements	160,108		147,632
Furniture, fixtures and equipment	Furniture, fixtures and equipment	132		132
Construction in progress	Construction in progress	188,079		110,934
Total real estate held for investment	Total real estate held for investment	10,823,644		9,470,387
Accumulated depreciation	Accumulated depreciation	(739,369)		(614,332)
Investments in real estate, net	Investments in real estate, net	10,084,275		8,856,055
Cash and cash equivalents	Cash and cash equivalents	83,268		36,786

Loan receivable, net
Loan receivable, net
Loan receivable, net
Rents and other receivables, net	Rents and other receivables, net	18,973		15,227
Deferred rent receivable, net	Deferred rent receivable, net	114,927		88,144
Deferred leasing costs, net	Deferred leasing costs, net	56,735		45,080
Deferred loan costs, net	Deferred loan costs, net	3,783		4,829
Acquired lease intangible assets, net	Acquired lease intangible assets, net	154,036		169,986
Acquired indefinite-lived intangible	Acquired indefinite-lived intangible	5,156		5,156
Interest rate swap asset	Interest rate swap asset	24,494		11,422
Other assets	Other assets	31,817		24,973
Acquisition related deposits	Acquisition related deposits	—		1,625

Total Assets	Total Assets	$	10,577,464	$	9,259,283

Total Assets

Total Assets
LIABILITIES & EQUITY	LIABILITIES & EQUITY					LIABILITIES & EQUITY
Liabilities	Liabilities					Liabilities
Notes payable	Notes payable	$	2,227,637	$	1,936,381

Accounts payable, accrued expenses and other liabilities	Accounts payable, accrued expenses and other liabilities	155,103		97,496
Accounts payable, accrued expenses and other liabilities
Accounts payable, accrued expenses and other liabilities
Dividends and distributions payable	Dividends and distributions payable	81,423		62,033
Acquired lease intangible liabilities, net	Acquired lease intangible liabilities, net	155,582		147,384
Tenant security deposits	Tenant security deposits	83,643		71,935
Prepaid rents		30,772		20,712
Tenant prepaid rents

Total Liabilities
Total Liabilities
Total Liabilities	Total Liabilities	2,734,160		2,335,941
Equity	Equity					Equity
Rexford Industrial Realty, Inc. stockholders’ equity	Rexford Industrial Realty, Inc. stockholders’ equity					Rexford Industrial Realty, Inc. stockholders’ equity
Preferred stock, $0.01 par value per share, 10,050,000 shares authorized:	Preferred stock, $0.01 par value per share, 10,050,000 shares authorized:

5.875% series B cumulative redeemable preferred stock, 3,000,000 shares outstanding at September 30, 2023 and December 31, 2022 ($75,000 liquidation preference)		72,443		72,443
5.625% series C cumulative redeemable preferred stock, 3,450,000 shares outstanding at September 30, 2023 and December 31, 2022 ($86,250 liquidation preference)		83,233		83,233
Common Stock, $0.01 par value per share, 489,950,000 authorized and 206,484,287 and 189,114,129 shares outstanding at September 30, 2023 and December 31, 2022, respectively		2,065		1,891
5.875% series B cumulative redeemable preferred stock, 3,000,000 shares outstanding at March 31, 2024 and December 31, 2023 ($75,000 liquidation preference)

5.875% series B cumulative redeemable preferred stock, 3,000,000 shares outstanding at March 31, 2024 and December 31, 2023 ($75,000 liquidation preference)

5.875% series B cumulative redeemable preferred stock, 3,000,000 shares outstanding at March 31, 2024 and December 31, 2023 ($75,000 liquidation preference)
5.625% series C cumulative redeemable preferred stock, 3,450,000 shares outstanding at March 31, 2024 and December 31, 2023 ($86,250 liquidation preference)
Common Stock, $0.01 par value per share, 489,950,000 authorized and 217,822,056 and 212,346,450 shares outstanding at March 31, 2024 and December 31, 2023, respectively
Additional paid-in capital	Additional paid-in capital	7,613,354		6,646,867
Cumulative distributions in excess of earnings	Cumulative distributions in excess of earnings	(320,180)		(255,743)
Accumulated other comprehensive income	Accumulated other comprehensive income	21,142		8,247
Total stockholders’ equity	Total stockholders’ equity	7,472,057		6,556,938
Noncontrolling interests	Noncontrolling interests	371,247		366,404
Total Equity	Total Equity	7,843,304		6,923,342
Total Liabilities and Equity	Total Liabilities and Equity	$	10,577,464	$	9,259,283

The accompanying notes are an integral part of these consolidated financial statements.

REXFORD INDUSTRIAL REALTY, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited and in thousands – except share and per share data)


		Three Months Ended September 30,				Nine Months Ended September 30,
		2023		2022		2023		2022




REVENUES
REVENUES
REVENUES	REVENUES

Rental income	Rental income	$	204,212	$	162,581	$	583,474	$	452,156

Rental income

Rental income
Management and leasing services
Management and leasing services
Management and leasing services	Management and leasing services	158		163		519		456
Interest income	Interest income	1,029		3		3,408		5
Interest income
Interest income
TOTAL REVENUES
TOTAL REVENUES
TOTAL REVENUES	TOTAL REVENUES	205,399		162,747		587,401		452,617
OPERATING EXPENSES	OPERATING EXPENSES
OPERATING EXPENSES
OPERATING EXPENSES
Property expenses
Property expenses
Property expenses	Property expenses	48,085		39,614		135,220		108,448
General and administrative	General and administrative	18,575		14,951		55,039		44,531
General and administrative
General and administrative
Depreciation and amortization
Depreciation and amortization
Depreciation and amortization	Depreciation and amortization	60,449		51,146		178,671		140,226
TOTAL OPERATING EXPENSES	TOTAL OPERATING EXPENSES	127,109		105,711		368,930		293,205
TOTAL OPERATING EXPENSES
TOTAL OPERATING EXPENSES
OTHER EXPENSES
OTHER EXPENSES
OTHER EXPENSES	OTHER EXPENSES
Other expenses	Other expenses	551		413		1,504		746
Other expenses
Other expenses
Interest expense
Interest expense
Interest expense	Interest expense	15,949		14,975		46,830		34,826

TOTAL EXPENSES	TOTAL EXPENSES	143,609		121,099		417,264		328,777

TOTAL EXPENSES

Loss on extinguishment of debt		—		—		—		(877)
TOTAL EXPENSES

Gains on sale of real estate

Gains on sale of real estate

Gains on sale of real estate	Gains on sale of real estate	—		—		12,133		8,486

NET INCOME	NET INCOME	61,790		41,648		182,270		131,449

NET INCOME

NET INCOME
Less: net income attributable to noncontrolling interests
Less: net income attributable to noncontrolling interests
Less: net income attributable to noncontrolling interests	Less: net income attributable to noncontrolling interests	(2,824)		(2,368)		(8,605)		(7,142)
NET INCOME ATTRIBUTABLE TO REXFORD INDUSTRIAL REALTY, INC.	NET INCOME ATTRIBUTABLE TO REXFORD INDUSTRIAL REALTY, INC.	58,966		39,280		173,665		124,307
NET INCOME ATTRIBUTABLE TO REXFORD INDUSTRIAL REALTY, INC.
NET INCOME ATTRIBUTABLE TO REXFORD INDUSTRIAL REALTY, INC.
Less: preferred stock dividends
Less: preferred stock dividends
Less: preferred stock dividends	Less: preferred stock dividends	(2,314)		(2,314)		(6,943)		(6,943)

Less: earnings allocated to participating securities	Less: earnings allocated to participating securities	(314)		(201)		(952)		(605)

Less: earnings allocated to participating securities

Less: earnings allocated to participating securities
NET INCOME ATTRIBUTABLE TO COMMON STOCKHOLDERS
NET INCOME ATTRIBUTABLE TO COMMON STOCKHOLDERS
NET INCOME ATTRIBUTABLE TO COMMON STOCKHOLDERS	NET INCOME ATTRIBUTABLE TO COMMON STOCKHOLDERS	$	56,338	$	36,765	$	165,770	$	116,759
Net income attributable to common stockholders per share - basic	Net income attributable to common stockholders per share - basic	$	0.27	$	0.21	$	0.83	$	0.70
Net income attributable to common stockholders per share - basic
Net income attributable to common stockholders per share - basic
Net income attributable to common stockholders per share - diluted
Net income attributable to common stockholders per share - diluted
Net income attributable to common stockholders per share - diluted	Net income attributable to common stockholders per share - diluted	$	0.27	$	0.21	$	0.83	$	0.70
Weighted average shares of common stock outstanding - basic	Weighted average shares of common stock outstanding - basic	205,279,681		171,908,895		200,455,490		165,852,466
Weighted average shares of common stock outstanding - basic
Weighted average shares of common stock outstanding - basic
Weighted average shares of common stock outstanding - diluted	Weighted average shares of common stock outstanding - diluted	205,447,532		172,831,173		200,667,573		166,401,434
Weighted average shares of common stock outstanding - diluted
Weighted average shares of common stock outstanding - diluted

The accompanying notes are an integral part of these consolidated financial statements.

REXFORD INDUSTRIAL REALTY, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited and in thousands)


		Three Months Ended March 31,
		Three Months Ended March 31,
		Three Months Ended March 31,

		Three Months Ended September 30,				Nine Months Ended September 30,
		2023		2022		2023		2022
Net income	Net income	$	61,790	$	41,648	$	182,270	$	131,449
Other comprehensive income: cash flow hedge adjustments		4,760		12,694		13,313		19,861
Net income
Net income
Other comprehensive income (loss): cash flow hedge adjustments
Other comprehensive income (loss): cash flow hedge adjustments
Other comprehensive income (loss): cash flow hedge adjustments
Comprehensive income
Comprehensive income
Comprehensive income	Comprehensive income	66,550		54,342		195,583		151,310
Comprehensive income attributable to noncontrolling interests	Comprehensive income attributable to noncontrolling interests	(2,967)		(2,865)		(9,023)		(7,906)
Comprehensive income attributable to noncontrolling interests
Comprehensive income attributable to noncontrolling interests
Comprehensive income attributable to Rexford Industrial Realty, Inc.	Comprehensive income attributable to Rexford Industrial Realty, Inc.	$	63,583	$	51,477	$	186,560	$	143,404
Comprehensive income attributable to Rexford Industrial Realty, Inc.
Comprehensive income attributable to Rexford Industrial Realty, Inc.

The accompanying notes are an integral part of these consolidated financial statements.

REXFORD INDUSTRIAL REALTY, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(Unaudited and in thousands – except share data)


		Preferred Stock		Number of Common Shares	Common Stock		Additional Paid-in Capital		Cumulative Distributions in Excess of Earnings		Accumulated Other Comprehensive Income		Total Stockholders’ Equity		Noncontrolling Interests		Total Equity
Balance at June 30, 2023		$	155,676	201,041,741	$	2,010	$	7,311,458	$	(298,367)	$	16,525	$	7,187,302	$	367,512	$	7,554,814
	Preferred Stock																		Preferred Stock	Number of Common Shares	Common Stock	Additional Paid-in Capital	Cumulative Distributions in Excess of Earnings	Accumulated Other Comprehensive Income	Total Stockholders’ Equity	Noncontrolling Interests	Total Equity
Balance at December 31, 2023
Issuance of common stock	Issuance of common stock	—		5,400,000	54		300,186		—		—		300,240		—		300,240
Offering costs	Offering costs	—		—	—		(2,103)		—		—		(2,103)		—		(2,103)

Share-based compensation

Share-based compensation

Share-based compensation	Share-based compensation	—		(5,946)	—		1,887		—		—		1,887		6,554		8,441
Shares acquired to satisfy employee tax withholding requirements on vesting restricted stock	Shares acquired to satisfy employee tax withholding requirements on vesting restricted stock	—		(2,016)	—		(103)		—		—		(103)		—		(103)
Conversion of OP Units to common stock	Conversion of OP Units to common stock	—		50,508	1		2,029		—		—		2,030		(2,030)		—

Net income	Net income	2,314		—	—		—		56,652		—		58,966		2,824		61,790
Net income
Net income
Other comprehensive income	Other comprehensive income	—		—	—		—		—		4,617		4,617		143		4,760

Preferred stock dividends ($0.367188 per series B preferred share and $0.351563 per series C preferred share)	Preferred stock dividends ($0.367188 per series B preferred share and $0.351563 per series C preferred share)	(2,314)		—	—		—		—		—		(2,314)		—		(2,314)
Preferred stock dividends ($0.367188 per series B preferred share and $0.351563 per series C preferred share)
Preferred stock dividends ($0.367188 per series B preferred share and $0.351563 per series C preferred share)
Preferred unit distributions	Preferred unit distributions	—		—	—		—		—		—		—		(802)		(802)
Common stock dividends ($0.38 per common share)		—		—	—		—		(78,465)		—		(78,465)		—		(78,465)
Common stock dividends ($0.4175 per common share)
Common unit distributions	Common unit distributions	—		—	—		—		—		—		—		(2,954)		(2,954)
Balance at September 30, 2023		$	155,676	206,484,287	$	2,065	$	7,613,354	$	(320,180)	$	21,142	$	7,472,057	$	371,247	$	7,843,304
Balance at March 31, 2024

The accompanying notes are an integral part of these consolidated financial statements.

REXFORD INDUSTRIAL REALTY, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (Continued)

(Unaudited and in thousands – except share data)


		Preferred Stock		Number of Common Shares	Common Stock		Additional Paid-in Capital		Cumulative Distributions in Excess of Earnings		Accumulated Other Comprehensive (Loss) Income		Total Stockholders’ Equity		Noncontrolling Interests		Total Equity		Preferred Stock	Number of Common Shares	Common Stock	Additional Paid-in Capital	Cumulative Distributions in Excess of Earnings	Accumulated Other Comprehensive (Loss) Income	Total Stockholders’ Equity	Noncontrolling Interests	Total Equity
Balance at June 30, 2022		$	155,676	171,064,419	$	1,711	$	5,556,819	$	(216,588)	$	(2,974)	$	5,494,644	$	357,054	$	5,851,698
Balance at December 31, 2022

Issuance of common stock
Issuance of common stock
Issuance of common stock	Issuance of common stock	—		11,515,553	115		705,587		—		—		705,702		—		705,702
Offering costs	Offering costs	—		—	—		(8,876)		—		—		(8,876)		—		(8,876)

Share-based compensation	Share-based compensation	—		(1,274)	—		1,436		—		—		1,436		5,047		6,483

Share-based compensation

Share-based compensation
Shares acquired to satisfy employee tax withholding requirements on vesting restricted stock	Shares acquired to satisfy employee tax withholding requirements on vesting restricted stock	—		(1,992)	—		(113)		—		—		(113)		—		(113)
Conversion of OP Units to common stock

Acquisition of private REIT - preferred units		—		—	—		—		—		—		—		122		122
Net income	Net income	2,314		—	—		—		36,966		—		39,280		2,368		41,648
Other comprehensive income		—		—	—		—		—		12,197		12,197		497		12,694
Net income
Net income
Other comprehensive loss

Preferred stock dividends ($0.367188 per series B preferred share and $0.351563 per series C preferred share)	Preferred stock dividends ($0.367188 per series B preferred share and $0.351563 per series C preferred share)	(2,314)		—	—		—		—		—		(2,314)		—		(2,314)
Preferred stock dividends ($0.367188 per series B preferred share and $0.351563 per series C preferred share)
Preferred stock dividends ($0.367188 per series B preferred share and $0.351563 per series C preferred share)
Preferred unit distributions	Preferred unit distributions	—		—	—		—		—		—		—		(798)		(798)
Common stock dividends ($0.315 per common share)		—		—	—		—		(57,513)		—		(57,513)		—		(57,513)
Common stock dividends ($0.38 per common share)
Common unit distributions	Common unit distributions	—		—	—		—		—		—		—		(2,413)		(2,413)
Balance at September 30, 2022		$	155,676	182,576,706	$	1,826	$	6,254,853	$	(237,135)	$	9,223	$	6,184,443	$	361,877	$	6,546,320
Balance at March 31, 2023

The accompanying notes are an integral part of these consolidated financial statements.

REXFORD INDUSTRIAL REALTY, INC.

CONSOLIDATED STATEMENTS OF ~~CHANGES IN EQUITY (Continued)~~

~~(Unaudited and in thousands – except share data)~~

Preferred Stock Number of Common
Shares Common
Stock Additional
Paid-in Capital Cumulative Distributions in Excess of Earnings Accumulated
Other
Comprehensive
Income Total
Stockholders’
Equity Noncontrolling
Interests Total Equity
Balance at December 31, 2022 $ 155,676 189,114,129 $ 1,891 $ 6,646,867 $ (255,743) $ 8,247 $ 6,556,938 $ 366,404 $ 6,923,342
Issuance of common stock — 16,904,656 169 956,730 — — 956,899 — 956,899
Offering costs — — — (6,165) — — (6,165) — (6,165)
Share-based compensation — 183,739 2 5,420 — — 5,422 19,618 25,040
Shares acquired to satisfy employee tax withholding requirements on vesting restricted stock — (32,028) — (1,891) — — (1,891) — (1,891)
Conversion of OP units to common stock — 313,791 3 12,393 — — 12,396 (12,396) —
Net income 6,943 — — — 166,722 — 173,665 8,605 182,270
Other comprehensive income — — — — — 12,895 12,895 418 13,313
Preferred stock dividends ($1.101564 per series B preferred share and $1.054689 per series C preferred share) (6,943) — — — — — (6,943) — (6,943)
Preferred unit distributions — — — — — — — (2,406) (2,406)
Common stock dividends ($1.14 per common share) — — — — (231,159) — (231,159) — (231,159)
Common unit distributions — — — — — — — (8,996) (8,996)
Balance at September 30, 2023 $ 155,676 206,484,287 $ 2,065 $ 7,613,354 $ (320,180) $ 21,142 $ 7,472,057 $ 371,247 $ 7,843,304

~~The accompanying notes are an integral part of these consolidated financial statements.~~

~~REXFORD INDUSTRIAL REALTY, INC.~~

~~CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (Continued)~~

~~(Unaudited and in thousands – except share data)~~

Preferred Stock Number of Common
Shares Common
Stock Additional
Paid-in Capital Cumulative Distributions in Excess of Earnings Accumulated
Other
Comprehensive
(Loss) Income Total
Stockholders’
Equity Noncontrolling
Interests Total Equity
Balance at December 31, 2021 $ 155,676 160,511,482 $ 1,605 $ 4,828,292 $ (191,120) $ (9,874) $ 4,784,579 $ 283,116 $ 5,067,695
Issuance of common stock — 21,885,446 219 1,441,506 — — 1,441,725 — 1,441,725
Offering costs — — — (20,122) — — (20,122) — (20,122)
Issuance of OP Units — — — — — — — 56,167 56,167
Issuance of 3.00% cumulative redeemable convertible preferred units — — — — — — — 12,000 12,000
Share-based compensation — 123,840 1 4,090 — — 4,091 15,073 19,164
Shares acquired to satisfy employee tax withholding requirements on vesting restricted stock — (31,230) — (2,138) — — (2,138) — (2,138)
Conversion of units to common stock — 87,168 1 3,225 — — 3,226 (3,226) —
Acquisition of
private REIT -
preferred units — — — — — — — 122 122
Net income 6,943 — — — 117,364 — 124,307 7,142 131,449
Other comprehensive income — — — — — 19,097 19,097 764 19,861
Preferred stock dividends ($1.101564 per series B preferred share and $1.054689 per series C preferred share) (6,943) — — — — — (6,943) — (6,943)
Preferred unit distributions — — — — — — — (2,319) (2,319)
Common stock dividends ($0.945 per share) — — — — (163,379) — (163,379) — (163,379)
Common unit distributions — — — — — — — (6,962) (6,962)
Balance at September 30, 2022 $ 155,676 182,576,706 $ 1,826 $ 6,254,853 $ (237,135) $ 9,223 $ 6,184,443 $ 361,877 $ 6,546,320

~~The accompanying notes are an integral part of these consolidated financial statements.~~

~~REXFORD INDUSTRIAL REALTY, INC.~~

~~CONSOLIDATED STATEMENTS OF~~ CASH FLOWS

(Unaudited and in thousands)


		Nine Months Ended September 30,					Three Months Ended March 31,
		2023		2022			2024	2023
CASH FLOWS FROM OPERATING ACTIVITIES:	CASH FLOWS FROM OPERATING ACTIVITIES:					CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	Net income	$	182,270	$	131,449
Adjustments to reconcile net income to net cash provided by operating activities:	Adjustments to reconcile net income to net cash provided by operating activities:					Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization	Depreciation and amortization	178,671		140,226
Amortization of (below) above market lease intangibles, net		(21,763)		(18,250)
Depreciation and amortization
Depreciation and amortization
Amortization of net (below) above market lease intangibles and other deferred rent on certain other below-market leases
Amortization of debt issuance costs	Amortization of debt issuance costs	2,856		1,849
Amortization of discount (premium) on notes payable, net	Amortization of discount (premium) on notes payable, net	474		186
Impairment of right-of-use asset	Impairment of right-of-use asset	188		—
Loss on extinguishment of debt		—		877
Accretion of net loan origination fees and costs
Gains on sale of real estate	Gains on sale of real estate	(12,133)		(8,486)
Equity based compensation expense	Equity based compensation expense	24,300		18,710
Straight-line rent	Straight-line rent	(28,073)		(23,753)
Payments for termination/settlement of interest rate derivatives	Payments for termination/settlement of interest rate derivatives	(161)		(589)
Amortization related to termination/settlement of interest rate derivatives	Amortization related to termination/settlement of interest rate derivatives	402		403
Change in working capital components:	Change in working capital components:					Change in working capital components:
Rents and other receivables	Rents and other receivables	(3,735)		(223)
Deferred leasing costs	Deferred leasing costs	(18,579)		(10,240)
Other assets	Other assets	(7,308)		(3,159)

Accounts payable, accrued expenses and other liabilities
Accounts payable, accrued expenses and other liabilities
Accounts payable, accrued expenses and other liabilities	Accounts payable, accrued expenses and other liabilities	32,263		25,047
Tenant security deposits	Tenant security deposits	2,122		6,354
Prepaid rents	Prepaid rents	(20,233)		542
Net cash provided by operating activities	Net cash provided by operating activities	311,561		260,943
CASH FLOWS FROM INVESTING ACTIVITIES:	CASH FLOWS FROM INVESTING ACTIVITIES:					CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of investments in real estate	Acquisition of investments in real estate	(1,121,774)		(1,973,307)
Capital expenditures	Capital expenditures	(167,245)		(90,260)
Payments for deposits on real estate acquisitions, net	Payments for deposits on real estate acquisitions, net	—		(7,575)

Proceeds from sale of real estate	Proceeds from sale of real estate	16,239		15,315

Proceeds from sale of real estate

Proceeds from sale of real estate

Net cash used in investing activities
Net cash used in investing activities
Net cash used in investing activities	Net cash used in investing activities	(1,272,780)		(2,055,827)
CASH FLOWS FROM FINANCING ACTIVITIES:	CASH FLOWS FROM FINANCING ACTIVITIES:					CASH FLOWS FROM FINANCING ACTIVITIES:

Issuance of common stock, net

Issuance of common stock, net

Issuance of common stock, net	Issuance of common stock, net	950,734		1,421,603
Proceeds from borrowings	Proceeds from borrowings	646,925		2,654,000
Repayment of borrowings	Repayment of borrowings	(354,911)		(2,118,731)
Debt issuance costs	Debt issuance costs	(3,042)		(6,887)

Dividends paid to preferred stockholders	Dividends paid to preferred stockholders	(6,943)		(6,943)
Dividends paid to preferred stockholders
Dividends paid to preferred stockholders
Dividends paid to common stockholders	Dividends paid to common stockholders	(212,265)		(144,389)
Distributions paid to common unitholders	Distributions paid to common unitholders	(8,504)		(6,169)
Distributions paid to preferred unitholders	Distributions paid to preferred unitholders	(2,402)		(2,319)
Repurchase of common shares to satisfy employee tax withholding requirements	Repurchase of common shares to satisfy employee tax withholding requirements	(1,891)		(2,138)
Net cash provided by financing activities	Net cash provided by financing activities	1,007,701		1,788,027
Increase (decrease) in cash, cash equivalents and restricted cash		46,482		(6,857)
Increase in cash, cash equivalents and restricted cash
Cash, cash equivalents and restricted cash, beginning of period	Cash, cash equivalents and restricted cash, beginning of period	36,786		43,998
Cash, cash equivalents and restricted cash, end of period	Cash, cash equivalents and restricted cash, end of period	$	83,268	$	37,141

Supplemental disclosure of cash flow information:	Supplemental disclosure of cash flow information:
Cash paid for interest (net of capitalized interest of $16,060 and $8,021 for the nine months ended September 30, 2023 and 2022, respectively)		$	39,826	$	33,330
Supplemental disclosure of cash flow information:
Supplemental disclosure of cash flow information:
Cash paid for interest (net of capitalized interest of $7,926 and $4,990 for the three months ended March 31, 2024 and 2023, respectively)
Supplemental disclosure of noncash transactions:	Supplemental disclosure of noncash transactions:					Supplemental disclosure of noncash transactions:

Operating lease right-of-use assets obtained in exchange for lease liabilities		$	—	$	6,363
Issuance of OP Units in connection with acquisition of real estate		$	—	$	56,167

Issuance of 3.00% cumulative redeemable convertible preferred units in connection with acquisition of real estate		$	—	$	12,000
Acquisition of private REIT - preferred units		$	—	$	122

Accrual for capital expenditures

Accrual for capital expenditures

Accrual for capital expenditures	Accrual for capital expenditures	$	53,249	$	26,059
Accrual of dividends and distributions	Accrual of dividends and distributions	$	81,423	$	59,926

The accompanying notes are an integral part of these consolidated financial statements.

108

REXFORD INDUSTRIAL REALTY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. Organization

Rexford Industrial Realty, Inc. is a self-administered and self-managed full-service real estate investment trust (“REIT”) focused on owning and operating industrial properties in Southern California infill markets. We were formed as a Maryland corporation on January 18, 2013, and Rexford Industrial Realty, L.P. (the “Operating Partnership”), of which we are the sole general partner, was formed as a Maryland limited partnership on January 18, 2013. Through our controlling interest in our Operating Partnership and its subsidiaries, we own, manage, lease, acquire, reposition and redevelop industrial real estate principally located in Southern California infill markets, and, from time to time, acquire or provide mortgage debt secured by industrial zoned property or property suitable for industrial development. As of ~~September 30, 2023,~~March 31, 2024, our consolidated portfolio consisted of ~~371~~422 properties with approximately ~~45.0~~49.2 million rentable square feet.

The terms “us,” “we,” “our,” and the “Company” as used in these financial statements refer to Rexford Industrial Realty, Inc. and, unless the context requires otherwise, its subsidiaries (including our Operating Partnership).

2. Summary of Significant Accounting Policies

Basis of Presentation and Principles of Consolidation

As of ~~September 30, 2023~~March 31, 2024 and December 31, ~~2022,~~2023, and for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2024 and 2023, ~~and 2022,~~ the financial statements presented are the consolidated financial statements of Rexford Industrial Realty, Inc. and its subsidiaries, including our Operating Partnership. All significant intercompany balances and transactions have been eliminated in the consolidated financial statements.

Under consolidation guidance, we have determined that our Operating Partnership is a variable interest entity because the holders of limited partnership interests do not have substantive kick-out rights or participating rights. Furthermore, we are the primary beneficiary of the Operating Partnership because we have the obligation to absorb losses and the right to receive benefits from the Operating Partnership and the exclusive power to direct the activities of the Operating Partnership. As of ~~September 30, 2023~~March 31, 2024 and December 31, ~~2022,~~2023, the assets and liabilities of the Company and the Operating Partnership are substantially the same, as the Company does not have any significant assets other than its investment in the Operating Partnership.

The accompanying unaudited interim consolidated financial statements have been prepared pursuant to the rules and regulations of the United States Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures normally included in the financial statements prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) may have been condensed or omitted pursuant to SEC rules and regulations, although we believe that the disclosures are adequate to make their presentation not misleading. The accompanying unaudited financial statements include, in our opinion, all adjustments, consisting of normal recurring adjustments, necessary to present fairly the financial information set forth therein. The results of operations for the interim periods are not necessarily indicative of the results that may be expected for the year ending December 31, ~~2023.~~2024. The interim financial statements should be read in conjunction with the consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, ~~2022~~2023 and the notes thereto.

Any references to the number of properties, buildings and square footage are unaudited and outside the scope of our independent registered public accounting firm’s review of our financial statements in accordance with the standards of the United States Public Company Accounting Oversight Board.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make certain estimates and assumptions that affect the reported amounts in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates.

Cash and Cash Equivalents

Cash and cash equivalents include all cash and liquid investments with an initial maturity of three months or less. The carrying amount approximates fair value due to the short-term maturity of these investments.

119

Restricted Cash

Restricted cash is comprised of escrow reserves that we are required to set aside for future costs as required by certain agreements with our lenders, and from time to time, includes cash proceeds from property sales that are being held by qualified intermediaries for purposes of facilitating tax-deferred like-kind exchanges under Section 1031 of the Internal Revenue Code of 1986, as amended (the “Code”).

Restricted cash balances are included with cash and cash equivalents balances as of the beginning and ending of each period presented in the consolidated statements of cash flows. The following table provides a reconciliation of our cash and cash equivalents and restricted cash at the beginning and end of the ~~nine~~three months ended ~~September 30,~~March 31, 2024 and 2023 ~~and 2022~~ (in thousands):


		Nine Months Ended September 30,
		2023		2022
	Three Months Ended March 31,						Three Months Ended March 31,
	2024					2024		2023
Cash and cash equivalents	Cash and cash equivalents	$	36,786	$	43,987
Restricted cash	Restricted cash	—		11
Cash, cash equivalents and restricted cash, beginning of period	Cash, cash equivalents and restricted cash, beginning of period	$	36,786	$	43,998

Cash and cash equivalents	Cash and cash equivalents	$	83,268	$	37,141
Cash and cash equivalents
Cash and cash equivalents
Restricted cash	Restricted cash	—		—
Cash, cash equivalents and restricted cash, end of period	Cash, cash equivalents and restricted cash, end of period	$	83,268	$	37,141

Investments in Real Estate

Acquisitions

We account for acquisitions of properties under Accounting Standards Update (“ASU”) 2017-01, Business Combinations - Clarifying the Definition of a Business, which provides a framework for determining whether transactions should be accounted for as acquisitions of assets or businesses and further revises the definition of a business. Our acquisitions of properties generally ~~no longer~~do not meet the revised definition of a business and accordingly are accounted for as asset acquisitions.

For asset acquisitions, we allocate the cost of the acquisition, which includes cash and non-cash consideration paid to the seller and associated acquisition transaction costs, to the individual assets acquired and liabilities assumed on a relative fair value basis. These individual assets and liabilities typically include land, building and improvements, tenant improvements, intangible assets and liabilities related to above- and below-market leases, intangible assets related to in-place leases, and from time to time, assumed mortgage debt. As there is no measurement period concept for an asset acquisition, the allocated cost of the acquired assets is finalized in the period in which the acquisition occurs.

We determine the fair value of the tangible assets of an acquired property by valuing the property as if it was vacant. This “as-if vacant” value is estimated using an income, or discounted cash flow, approach that relies upon Level 3 inputs, which are unobservable inputs based on the Company’s assumptions with respect to the assumptions a market participant would use. These Level 3 inputs include discount rates, exit capitalization rates, market rental rates, rental growth rates and comparable sales data, including land sales, for similar properties. Estimates of future cash flows are based on a number of factors including historical operating results, known and anticipated trends, and market and economic conditions. In determining the “as-if-vacant” value for the properties we acquired during the ~~nine~~three months ended ~~September 30, 2023,~~March 31, 2024, we used discount rates ranging from ~~6.00%~~5.50% to ~~9.50%~~8.25% and exit capitalization rates ranging from ~~4.75%~~4.50% to ~~7.75%~~6.50%.

In determining the fair value of intangible lease assets or liabilities, we also consider Level 3 inputs. Acquired above- and below-market leases are valued based on the present value of the difference between prevailing market rental rates and the in-place rental rates measured over a period equal to the remaining term of the lease for above-market leases and the initial term plus the term of any below-market fixed rate renewal options for below-market leases determined to be reasonably certain of exercise, if applicable. The estimated fair value of acquired in-place at-market tenant leases are the estimated costs that would have been incurred to lease the property to the occupancy level of the property at the date of acquisition. We consider estimated costs such as the value associated with leasing commissions, legal and other costs, as well as the estimated period of time necessary to lease such a property to its occupancy level at the time of its acquisition. In determining the fair value of acquisitions completed during the ~~nine~~three months ended ~~September 30, 2023,~~March 31, 2024, we used an estimated average lease-up period ranging from six months to ~~eighteen~~fifteen months.

1210

From time to time, we may engage in a sale-leaseback transaction whereby we execute a lease with the seller/tenant simultaneously with the acquisition of a property. Sale-leaseback transactions entered into at off-market terms are adjusted so that the transaction is recorded at fair value. If the purchase price is less than the fair value of the acquired property, or the present value of contractual leaseback payments is less than the present value of market rental payments, the difference is recognized as “Tenant prepaid rent” in the consolidated balance sheets and is recognized as rental income on a straight-line basis over the term of the lease.

The difference between the fair value and the face value of debt assumed, if any, in connection with an acquisition is recorded as a premium or discount and amortized to “interest expense” over the life of the debt assumed. The valuation of assumed liabilities is based on our estimate of the current market rates for similar liabilities in effect at the acquisition date.

Demolition costs incurred in conjunction with the acquisition of real estate are capitalized as part of the cost of the acquisition if the demolition (i) is contemplated as part of the acquisition and (ii) occurs within a reasonable period of time after the acquisition. If demolition was not contemplated as part of the acquisition or the demolition does not occur within a reasonable period of time after the acquisition, the costs of the demolition are expensed as incurred.

Capitalization of Costs

We capitalize direct costs incurred in developing, renovating, rehabilitating and improving real estate assets as part of the investment basis. This includes certain general and administrative costs, including payroll, bonus and non-cash equity compensation of the personnel performing redevelopment, renovations and rehabilitation if such costs are identifiable to a specific activity to get the real estate asset ready for its intended use. During the redevelopment and construction periods of a project, we also capitalize interest, real estate taxes and insurance costs. We cease capitalization of costs upon substantial completion of the project, but no later than one year from cessation of major construction activity. If some portions of a project are substantially complete and ready for use and other portions have not yet reached that stage, we cease capitalizing costs on the completed portion of the project but continue to capitalize for the incomplete portion of the project. Costs incurred in making repairs and maintaining real estate assets are expensed as incurred.

We capitalized interest costs of ~~$6.2~~$7.9 million and ~~$3.6~~$5.0 million during the three months ended ~~September 30,~~March 31, 2024 and 2023, ~~and 2022, respectively, and $16.1 million and $8.0 million during the nine months ended September 30, 2023 and 2022,~~ respectively. We capitalized real estate taxes and insurance costs aggregating ~~$1.9~~$2.4 million and ~~$1.5~~$1.6 million during the three months ended ~~September 30,~~March 31, 2024 and 2023, ~~and 2022, respectively, and $5.0 million and $3.9 million during the nine months ended September 30, 2023 and 2022,~~ respectively. We capitalized compensation costs for employees who provide construction services of ~~$2.8~~$3.2 million and ~~$2.3~~$2.5 million during the three months ended ~~September 30,~~March 31, 2024 and 2023, ~~and 2022, respectively, and $8.0 million and $6.4 million during the nine months ended September 30, 2023 and 2022,~~ respectively.

Depreciation and Amortization

Real estate, including land, building and land improvements, tenant improvements, furniture, fixtures and equipment and intangible lease assets and liabilities are stated at historical cost less accumulated depreciation and amortization, unless circumstances indicate that the cost cannot be recovered, in which case, the carrying value of the property is reduced to estimated fair value as discussed below in our policy with regard to impairment of long-lived assets. We estimate the depreciable portion of our real estate assets and related useful lives in order to record depreciation expense.

The values allocated to buildings, site improvements, in-place lease intangibles and tenant improvements are depreciated on a straight-line basis using an estimated useful life that typically ranges from 10-30 years for buildings, 5-25 years for site improvements, and the shorter of the estimated useful life or respective lease term for in-place lease intangibles and tenant improvements.

As discussed above in—Investments in Real Estate—Acquisitions, in connection with property acquisitions, we may acquire leases with rental rates above or below the market rental rates. Such differences are recorded as an acquired lease intangible asset or liability and amortized to “rental income” over the remaining term of the related leases.

Our estimate of the useful life of our assets is evaluated upon acquisition and when circumstances indicate that a change in the useful life has occurred, which requires significant judgment regarding the economic obsolescence of tangible and intangible assets.

Assets Held for Sale

We classify a property as held for sale when all of the criteria set forth in the Accounting Standards Codification (“ASC”) Topic 360: Property, Plant and Equipment (“ASC 360”) have been met. The criteria are as follows: (i) management, having the authority to approve the action, commits to a plan to sell the property; (ii) the property is available for immediate sale in its present condition, subject only to terms that are usual and customary; (iii) an active program to locate a buyer and other actions required to complete the plan to sell have been initiated; (iv) the sale of the property is probable and is expected to be completed within one year; (v) the property is being actively marketed for sale at a price that is reasonable in relation to its

current fair value; and (vi) actions necessary to complete the plan of sale indicate that it is unlikely that significant changes to the plan will be made or that the plan will be withdrawn. At the time we classify a property as held for sale, we cease recording depreciation and amortization. A property classified as held for sale is measured and reported at the lower of its carrying

amount or its estimated fair value less cost to sell. As of ~~September 30, 2023~~March 31, 2024 and December 31, ~~2022,~~2023, we did not have any properties classified as held for sale.

Impairment of Long-Lived Assets

In accordance with the provisions of the Impairment or Disposal of Long-Lived Assets Subsections of ASC 360, we assess the carrying values of our respective long-lived assets, including operating lease right-of-use assets (“ROU assets”), whenever events or changes in circumstances indicate that the carrying amounts of these assets may not be fully recoverable. Recoverability of real estate assets and other long-lived assets is measured by comparison of the carrying amount of the asset to the estimated future undiscounted cash flows.

To review real estate assets for recoverability, we consider current market conditions as well as our intent with respect to holding or disposing of the asset. The intent with regards to the underlying assets might change as market conditions and other factors change. For office space ROU assets, the execution of a sublease where the remaining lease payments of the original office space lease exceed the sublease receipts reflects an indication of impairment which suggests the carrying value of the ROU asset may not be recoverable. Fair value is determined through various valuation techniques, including discounted cash flow models, applying a capitalization rate to estimated net operating income of a property, quoted market values and third-party appraisals, where considered necessary. The use of projected future cash flows is based on assumptions that are consistent with estimates of future expectations and the strategic plan used to manage our underlying business.

If our analysis indicates that the carrying value of the real estate asset and other long-lived assets is not recoverable on an undiscounted cash flow basis, we will recognize an impairment charge for the amount by which the carrying value exceeds the current estimated fair value of the real estate property.

Assumptions and estimates used in the recoverability analyses for future cash flows, discount rates and capitalization rates are complex and subjective. Changes in economic and operating conditions or our intent with respect to our investment that occur subsequent to our impairment analyses could impact these assumptions and result in future impairment of our real estate properties. During the three ~~and nine~~ months ended ~~September 30,~~March 31, 2024 and 2023, ~~and 2022,~~ there were no impairment charges recorded to the carrying value of our properties. In

During the three months ended March 31, 2023, in connection with the early termination of a sublease for one of our office space leases, ~~in February 2023,~~ we recorded a $0.2 million impairment charge ~~during the first quarter of 2023~~ to reduce the carrying value of the related ROU asset. No such impairment charge was recorded during the three months ended March 31, 2024. The impairment charge is presented in “Other expenses” in the consolidated statements of operations. See also “Note 67 – Leases” for details.

Accounting for Leases

Leases as Lessor

We evaluate new leases originated or leases assumed as part of an acquisition transaction under ASC Topic 842: Leases to determine lease classification. Generally, all of our leases have historically been classified as operating leases. A lease is classified by a lessor as a sales-type lease if the significant risks and rewards of ownership reside with the tenant. This situation is met if, among other things, there is an automatic transfer of title during the lease, there is a purchase option that the tenant is reasonably certain to exercise, the lease term, including extension options that the tenant is reasonably certain to exercise, is for more than a major part of the remaining economic useful life of the asset (e.g., equal to or greater than 75%), if the present value of the minimum lease payments represents substantially all (e.g., equal to or greater than 90%) of the leased property’s fair value at lease inception, or if the asset is so specialized in nature that it provides no alternative use to the lessor (and therefore would not provide any future value to the lessor) after the lease term. Further, such new leases would be evaluated to consider whether they would be failed sale-leaseback transactions and accounted for as financing transactions by the lessor, if applicable. As of March 31, 2024 and December 31, 2023, we did not have any leases that were classified as sales-type or financing leases under sale-leaseback rules.

Leases as a Lessee

commencement date based on the present value of lease payments over the lease term. Because our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. The operating lease ROU asset also includes any lease payments made and excludes lease incentives. Our lease terms may include options to extend the lease when it is reasonably certain that we will exercise that option. Lease expense for lease payments is generally recognized on a straight-line basis over the term of the lease through the amortization of the ROU assets and lease liabilities. Additionally, for our operating leases, we do not separate non-lease components, such as common area maintenance, from associated lease components. See “Note 7 – Leases” for additional lessee disclosures required under lease accounting standards.

Income Taxes

We have elected to be taxed as a REIT under the Code commencing with our initial taxable year ended December 31, 2013. To qualify as a REIT, we are required (among other things) to distribute at least 90% of our REIT taxable income to our stockholders and meet the various other requirements imposed by the Code relating to matters such as operating results, asset holdings, distribution levels and diversity of stock ownership. Provided we qualify for taxation as a REIT, we are generally not subject to corporate-level income tax on the earnings distributed currently to our stockholders that we derive from our activities. If we fail to qualify as a REIT in any taxable year and were unable to avail ourselves of certain savings provisions set forth in the Code, all of our taxable income would be subject to regular federal corporate income tax, including any applicable alternative minimum tax on our taxable income.

We own and may acquire direct or indirect interests in one or more entities that have elected or will elect to be taxed as REITs under the Code (each, a “Subsidiary REIT”). A Subsidiary REIT is subject to the various REIT qualification requirements and other limitations described herein that are applicable to us. If a Subsidiary REIT were to fail to qualify as a REIT, then (i) that Subsidiary REIT would become subject to regular federal corporate income tax, (ii) shares in such Subsidiary REIT would cease to be qualifying assets for purposes of the asset tests applicable to REITs, and (iii) it is possible that we would fail certain of the asset tests applicable to REITs, in which event we would fail to qualify as a REIT unless we could avail ourselves of certain relief provisions.

We are subject to taxation by various state and local jurisdictions, including those in which we transact business or reside. Other than our Subsidiary REIT (a private REIT acquired on July 18, 2022), our non-taxable subsidiaries, including our Operating Partnership, are either partnerships or disregarded entities for federal income tax purposes. Under applicable federal and state income tax rules, the allocated share of net income or loss from disregarded entities and flow-through entities such as partnerships is reportable in the income tax returns of the respective equity holders. Our taxable REIT subsidiary is a C-corporation subject to federal and state income tax. However, it has a cumulative unrecognized net operating loss carryforward. Accordingly, no income tax provision is included in the accompanying consolidated financial statements for the three ~~and nine~~ months ended ~~September 30, 2023~~March 31, 2024 and ~~2022.~~

2023.

We periodically evaluate our tax positions to determine whether it is more likely than not that such positions would be sustained upon examination by a tax authority for all open tax years, as defined by the statute of limitations, based on their technical merits. As of ~~September 30, 2023,~~March 31, 2024, and December 31, ~~2022,~~2023, we have not established a liability for uncertain tax positions.

Derivative Instruments and Hedging Activities

We are exposed to certain risks arising from both our business operations and economic conditions. We principally manage our exposures to a wide variety of business and operational risks through management of our core business activities. We manage economic risks, including interest rate, liquidity, and credit risk primarily by managing the amount, sources and duration of our debt funding and through the use of derivative financial instruments. Specifically, we enter into derivative financial instruments to manage exposures that arise from business activities that result in the payment of future known and uncertain cash amounts, the value of which are determined by interest rates. Our derivative financial instruments are used to manage differences in the amount, timing and duration of our known or expected cash payments principally related to our borrowings.

In accordance with ASC Topic 815: Derivatives and Hedging, we record all derivatives on the balance sheet at fair value. The accounting for changes in the fair value of derivatives depends on the intended use of the derivative, and whether we have elected to designate a derivative in a hedging relationship and apply hedge accounting and whether the hedging relationship has satisfied the criteria necessary to apply hedge accounting. Derivatives designated and qualifying as a hedge of the exposure to changes in the fair value of an asset, liability, or firm commitment attributable to a particular risk, such as interest rate risk, are considered fair value hedges. Derivatives designated and qualifying as a hedge of the exposure to variability in expected future cash flows, or other types of forecasted transactions, are considered cash flow hedges. Hedge accounting generally provides for the matching of the timing of gain or loss recognition on the hedging instrument with the

recognition of the changes in the fair value of the hedged asset or liability that are attributable to the hedged risk in a fair value hedge or the earnings effect of the hedged forecasted transactions in a cash flow hedge. We may enter into derivative contracts that are intended to economically hedge certain risks, even though hedge accounting does not apply or we elect not to apply hedge accounting.

Our objectives in using interest rate derivatives are to add stability to interest expense and to manage exposure to interest rate movements. To accomplish this objective, we primarily use interest rate swaps as part of our interest rate risk management strategy. Interest rate swaps designated as cash flow hedges involve the receipt of variable amounts from a counterparty in exchange for us making fixed-rate payments over the life of the agreements without exchange of the underlying notional value. From time to time, we also utilize cash flow hedges to lock U.S. Treasury rates in anticipation of future fixed-rate debt issuances (“treasury rate lock agreements”). The gains or losses resulting from changes in fair value of derivatives that qualify as cash flow hedges are recognized in accumulated other comprehensive income/(loss) (“AOCI”). Upon the termination of a derivative for which cash flow hedging was being applied, the balance, which was recorded in AOCI, is amortized to interest expense over the remaining contractual term of the derivative as long as the hedged forecasted transactions continue to be probable of occurring. Upon the settlement of treasury rate lock agreements, amounts remaining in AOCI are amortized through earnings over the underlying term of the hedged transaction. Cash payments made to terminate or settle interest rate derivatives are presented in cash flows provided by operating activities in the accompanying consolidated statements of cash flows, given the nature of the underlying cash flows that the derivative was hedging. See “Note 78 – Interest Rate Derivatives” for details.

Revenue Recognition

Our primary sources of income are rental income, management and leasing services, ~~and~~ gains on sale of real ~~estate.~~estate and interest income.

Rental Income

We lease industrial space to tenants primarily under non-cancelable operating leases that generally contain provisions for minimum base rents plus reimbursement for certain operating expenses. Total minimum annual lease payments are recognized in rental income on a straight-line basis over the term of the related lease, regardless of when payments are contractually due, when collectability is probable. Rental revenue recognition commences when the tenant takes possession of or controls the physical use of the leased space. Lease termination fees, which are included in rental income, are recognized when the related leases are canceled and we have no continuing obligation to provide services to such former tenants.

Our lease agreements with tenants generally contain provisions that require tenants to reimburse us for certain property expenses. Estimated reimbursements from tenants for these property expenses, which include real estate taxes, insurance, common area maintenance and other recoverable operating expenses, are recognized as revenues in the period that the expenses are incurred. Subsequent to year-end, we perform final reconciliations on a lease-by-lease basis and bill or credit each tenant for any cumulative annual adjustments. As the timing and pattern of revenue recognition is the same and as the lease component would be classified as an operating lease if it were accounted for separately, rents and tenant reimbursements are treated as a combined lease component and presented as a single line item “Rental income” in our consolidated statements of operations.

We record revenues and expenses on a gross basis for lessor costs (which include real estate taxes) when these costs are reimbursed to us by our tenants. Conversely, we record revenues and expenses on a net basis for lessor costs when they are paid by our tenants directly to the taxing authorities on our behalf.

Management and leasing services

We provide property management services and leasing services to related party and third-party property owners, the customer, in exchange for fees and commissions. Property management services include performing property inspections, monitoring repairs and maintenance, negotiating vendor contracts, maintaining tenant relations and providing financial and accounting oversight. For these services, we earn monthly management fees, which are based on a fixed percentage of each managed property’s monthly tenant cash receipts. We have determined that control over the services is passed to the customer simultaneously as performance occurs. Accordingly, management fee revenue is earned as the services are provided to our customers.

Leasing commissions are earned when we provide leasing services that result in an executed lease with a tenant. We have determined that control over the services is transferred to the customer upon execution of each lease agreement. We earn leasing commissions based on a fixed percentage of rental income generated for each executed lease agreement and there is no variable income component.

Gain or Loss on Sale of Real Estate

We account for dispositions of real estate properties, which are considered nonfinancial assets, in accordance with ASC 610-20: Other Income—Gains and Losses from the Derecognition of Nonfinancial Assets and recognize a gain or loss on sale of real estate upon transferring control of the nonfinancial asset to the purchaser, which is generally satisfied at the time of sale. If we were to conduct a partial sale of real estate by transferring a controlling interest in a nonfinancial asset, while retaining a noncontrolling ownership interest, we would measure any noncontrolling interest received or retained at fair value, and recognize a full gain or loss. If we receive consideration before transferring control of a nonfinancial asset, we recognize a contract liability. If we transfer control of the asset before consideration is received, we recognize a contract asset.

When leases contain purchase options, we assess the probability that the tenant will execute the purchase option both at lease commencement and at the time the tenant communicates its intent to exercise the purchase option. If we determine the exercise of the purchase option is reasonably certain, we will account for the lease as a sales-type lease and derecognize the associated real estate assets on our balance sheet and record a gain or loss on sale of real estate.

Interest Income

Interest income on our loan receivable is recognized on an accrual basis over the life of the loan using the interest method. Loan origination fees, net of origination costs, are accreted or amortized over the term of the loan as an adjustment to interest income using the effective interest method. Generally, a loan is placed on nonaccrual status when delinquent for more than 90 days or when determined not to be probable of full collection. Interest income recognition is suspended when loans are placed on nonaccrual status. Interest accrued, but not collected, at the date loans are placed on nonaccrual status is reversed and subsequently recognized only to the extent it is received in cash or until it qualifies for return to accrual status. However, when there is doubt regarding the ultimate collectability of loan principal, all cash received is applied to reduce the carrying value of such loans. Loans are restored to accrual status only when contractually current or the collection of future payments is reasonably assured.

Valuation of Operating Lease Receivables

We may be subject to tenant defaults and bankruptcies that could affect the collection of outstanding receivables, ~~related to our operating leases,~~ including deferred rent receivables arising from the straight-line recognition of rental ~~income.~~income, related to our operating leases. In order to mitigate these risks, we perform credit reviews and analyses on prospective tenants before significant leases are executed and on existing tenants before properties are acquired. On a quarterly basis, we perform an assessment of the collectability of operating lease receivables on a tenant-by-tenant basis, which includes reviewing the age and nature of our receivables, the payment history and financial condition of the tenant, our assessment of the tenant’s ability to meet its lease obligations and the status of negotiations of any disputes with the tenant. Any changes in the collectability assessment for an operating lease is recognized as an adjustment, which can be a reduction or increase, to rental income in the consolidated statements of operations. As a result of our quarterly collectability assessments, we recognized ~~$1.0~~$1.7 million and $0.3 million as a net reduction ~~adjustment and $0.1 million as a net increase~~ adjustment to rental income for the three months ended ~~September 30,~~March 31, 2024 and 2023, and 2022, respectively, and $2.6 million as a net reduction adjustment and $0.3 million as a net increase adjustment to rental income for the nine months ended September 30, 2023 and 2022, respectively,respectively.

Loan Receivable

Our loan receivable is reflected at amortized cost in the consolidated ~~statements~~balance sheets. The amortized cost of ~~operations.~~our loan receivable is the outstanding unpaid principal balance, net of unamortized costs and fees directly associated with the origination of the loan.

Accrued interest receivable related to our loan receivable is recorded at the net amount expected to be collected within “Rents and other receivables, net” in the consolidated balance sheets.

The current expected credit losses approach under ASC Topic 326: Financial Instruments-Credit Losses requires an estimate of the credit losses expected over the life of a loan. We assess the need for an allowance for credit losses related to our loan receivable and the related interest receivable by evaluating the following: (i) asset-specific risks, which include the nature of the collateral, current loan-to-value ratio and the potential future changes in the collateral’s fair value, (ii) other relevant available information, from internal and external sources, relating to current conditions that may affect the borrower’s ability to repay the loan upon maturity, such as the borrower’s current financial condition and credit rating, and (iii) historical losses (adjusted for current conditions and reasonable and supportable forecasts) for financial assets secured with similar collateral (all taken together, the “credit loss evaluation criteria”). See “Note 5 – Loan Receivable” for details.

1615

Deferred Leasing Costs

We capitalize the incremental direct costs of originating a lease that would not have been incurred had the lease not been executed. As a result, deferred leasing costs will generally only include third-party broker commissions.

Debt Issuance Costs

Debt issuance costs related to a recognized debt liability are presented in the balance sheet as a reduction from the carrying value of the debt liability. This offset against the debt liability is treated similarly to a debt discount, which effectively reduces the proceeds of a borrowing. For line of credit arrangements, we present debt issuance costs as an asset and amortize the cost over the term of the line of credit arrangement. See “Note 56 – Notes Payable” for details.

Equity Based Compensation

We account for equity-based compensation in accordance with ASC Topic 718: Compensation - Stock Compensation. Total compensation cost for all share-based awards is based on the estimated fair market value of the equity instrument issued on the grant date. For share-based awards that vest based solely on a service condition, we recognize compensation cost on a straight-line basis over the total requisite service period for the entire award. For share-based awards that vest based on a market condition, we recognize compensation cost on a straight-line basis over the requisite service period of each separately vesting tranche. For share-based awards that vest based on a performance condition, we recognize compensation cost based on the number of awards that are expected to vest based on the probable outcome of the performance condition. Compensation cost for these awards will be adjusted to reflect the number of awards that ultimately vest. Forfeitures are recognized in the period in which they occur. See “Note 1213 – Incentive Award Plan” for details.

Equity Offerings

Underwriting commissions and offering costs incurred in connection with common stock offerings and our at-the-market equity offering programs have been reflected as a reduction of additional paid-in capital. Underwriting commissions and offering costs related to our preferred stock issuances have been reflected as a direct reduction of the preferred stock balance.

Under relevant accounting guidance, sales of our common stock under forward equity sale agreements (as discussed in “Note 1112 – Equity”) are not deemed to be liabilities, and furthermore, meet the derivatives and hedging guidance scope exception to be accounted for as equity instruments based on the following assessment: (i) none of the agreements’ exercise contingencies were based on observable markets or indices besides those related to the market for our own stock price and operations; and (ii) none of the settlement provisions precluded the agreements from being indexed to our own stock.

Earnings Per Share

We calculate earnings per share (“EPS”) in accordance with ASC 260: Earnings Per Share (“ASC 260”). Under ASC 260, unvested share-based payment awards that contain non-forfeitable rights to dividends are participating securities and, therefore, are included in the computation of basic EPS pursuant to the two-class method. The two-class method determines EPS for each class of common stock and participating securities according to dividends declared (or accumulated) and their respective participation rights in undistributed earnings.

Basic EPS is calculated by dividing the net income (loss) attributable to common stockholders by the weighted average number of shares of common stock outstanding for the period.

Diluted EPS is calculated by dividing the net income (loss) attributable to common stockholders by the weighted average number of shares of common stock outstanding determined for the basic EPS computation plus the potential effect of any dilutive securities including shares issuable under forward equity sale agreements and unvested share-based awards under the treasury stock method. We include unvested shares of restricted stock and unvested LTIP units in the computation of diluted EPS by using the more dilutive of the two-class method or treasury stock method. We include unvested performance units as contingently issuable shares in the computation of diluted EPS once the market criteria are met, assuming that the end of the reporting period is the end of the contingency period. In addition, we include the exchangeable notes in the computation of diluted earnings per share if the effect is dilutive. Any anti-dilutive securities are excluded from the diluted EPS calculation. See “Note 1314 – Earnings Per Share” for details.

Segment Reporting

Management views the Company as a single reportable segment based on its method of internal reporting in addition to its allocation of capital and resources.

1716

~~Leases as a Lessee~~

We determine if an arrangement is a lease at inception. Operating lease ROU assets are included in “Other assets” and lease liabilities are included in “Accounts payable, accrued expenses and other liabilities” in our consolidated balance sheets. ROU assets represent our right to use, or control the useAdoption of a specified asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. Because our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. The operating lease ROU asset also includes any lease payments made and excludes lease incentives. Our lease terms may include options to extend the lease when it is reasonably certain that we will exercise that option. Lease expense for lease payments is generally recognized on a straight-line basis over the term of the lease through the amortization of the ROU asset and lease liabilities. Additionally, for our operating leases, we do not separate non-lease components, such as common area maintenance, from associated lease components. See “Note 6 – Leases” for additional lessee disclosures required under lease accounting standards.

~~Recent~~New Accounting Pronouncements ~~(Issued and Not Yet Adopted)~~

In June 2022, the FASB issued ASU 2022-03, Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions (“ASU 2022-03”). ASU 2022-03 clarifies that contractual sale restrictions are not considered in measuring the fair value of equity securities, and requires specific disclosures for all entities with equity securities subject to a contractual sale restriction including (1) the fair value of such equity securities reflected in the balance sheet, (2) the nature and remaining duration of the corresponding restrictions, and (3) any circumstances that could cause a lapse in the restrictions. In addition, ASU 2022-03 prohibits an entity from recognizing a contractual sale as a separate unit of account. ASU 2022-03 is effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years, with early adoption permitted. The adoption of ASU 2022-03 did not have a material impact on our consolidated financial statements.

Recent Accounting Pronouncements (Issued and Not Yet Adopted)

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures (“ASU 2023-07”). The amendments in ASU 2023-07 improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. We are currently evaluating the potential impact of adopting ASU ~~2022-03.~~2023-07 on our consolidated financial statements and disclosures.

3. Investments in Real Estate

Acquisitions

The following table summarizes the wholly-owned properties we acquired during the ~~nine~~three months ended ~~September 30, 2023:~~March 31, 2024:

Property Submarket Date of Acquisition Rentable Square Feet Number of Buildings
Contractual Purchase Price(1)
(in thousands)
16752 Armstrong Avenue Orange County - Airport 1/6/2023 81,600 1 $ 40,000
10545 Production Avenue San Bernardino - Inland Empire West 1/30/2023 1,101,840 1 365,000
3520 Challenger Street Los Angeles - South Bay 2/28/2023 49,336 1 14,200
9000 Airport Boulevard(2)
Los Angeles - South Bay 3/28/2023 38,680 1 143,000
9223-33 & 9323 Balboa Avenue and 4285 Ponderosa Avenue(3)
San Diego - Central 3/30/2023 515,382 5 200,000
13925 Benson Avenue San Bernardino - Inland Empire West 4/7/2023 38,143 1 27,500
19301 Santa Fe Avenue Los Angeles - South Bay 4/14/2023 41,638 3 14,600
2395-2399 Bateman Avenue Los Angeles - San Gabriel Valley 4/21/2023 134,952 3 41,203
27712 & 27756 Avenue Mentry Los Angeles - San Fernando Valley 7/13/2023 220,752 2 38,010
5630 Cerritos Avenue Orange County - West 7/14/2023 76,032 1 21,350
9400-9500 Santa Fe Springs Road Los Angeles - Mid-Counties 7/20/2023 595,304 2 210,000
422 Rosecrans Avenue(4)
Los Angeles - South Bay 7/26/2023 9,350 1 2,850
14650 Hoover Street Orange County - West 7/27/2023 59,679 1 22,300
2500 Thompson Street Los Angeles - South Bay 8/18/2023 174,691 1 20,250
Total 2023 Property Acquisitions 3,137,379 24 $ 1,160,263


Property	Submarket	Date of Acquisition	Rentable Square Feet	Number of Buildings	Contractual Purchase Price(1) (in thousands)
5000 & 5010 Azusa Canyon Rd	San Gabriel Valley	1/31/2024	233,984	2	$	84,000
Blackstone Industrial Assets(2)	Various	3/28/2024	3,008,578	48	996,800
Total 2024 Property Acquisitions			3,242,562	50	$	1,080,800

(1)Represents the gross contractual purchase price before certain credits, prorations, closing costs and other acquisition related costs. ~~Including $2.3 million of~~Total capitalized closing costs and acquisition related costs, net of certain credits, not included in the ~~total aggregate initial investment was $1.163 billion.~~gross contractual purchase price in the above table is approximately $0.4 million. Each acquisition was funded with available cash on hand unless otherwise noted.

(2)Represents the acquisition of ~~18.4 acres of industrial zoned land.~~

~~(3)Represents the acquisition of~~48 properties pursuant to three ~~properties in one consolidated transaction.~~

~~(4)Represents acquisition of a current or near-term (within 24 months) redevelopment site.~~separate transactions with three Blackstone Real Estate entities.

1917

The following table summarizes ~~the fair value of~~ amounts allocated to each major class of asset and liability on a relative fair value basis for the acquisitions noted in the table above, as of the date of each acquisition (in thousands):


	~~2023~~2024 Acquisitions
Assets:
Land	$	~~770,448~~753,097
Buildings and improvements	~~401,183~~276,565
Tenant improvements	~~4,105~~3,169
Acquired lease intangible assets(1)	~~19,830~~79,950

Other acquired assets(2)	~~915~~1,800
Total assets acquired	$	~~1,196,481~~1,114,581

Liabilities:
Acquired lease intangible liabilities(3)	$	~~32,984~~31,581



Other assumed liabilities(4)	~~40,098~~14,969
Total liabilities assumed	$	~~73,082~~46,550
Net assets acquired	$	~~1,123,399~~1,068,031

(1)Acquired lease intangible assets is comprised of (i) ~~$19.7~~$57.6 million of in-place lease intangibles with a weighted average amortization period of ~~9.2~~4.4 years and (ii) ~~$0.1~~$22.4 million of above-market lease intangibles with a weighted average amortization period of ~~5.2~~4.0 years.

(2)Includes other working capital assets acquired at the time of acquisition.

(3)Represents below-market lease intangibles with a weighted average amortization period of ~~20.8~~11.9 years.

(4)Includes ~~$29.7 million of prepaid rent paid by seller/tenants in sale-leaseback transactions and~~ other liabilities assumed at the time of acquisition.

~~Dispositions~~

~~The following table summarizes information related to the property that was sold during the nine months ended September 30, 2023.~~
Property Submarket Date of Disposition Rentable Square Feet
Contractual Sales Price(1)
(in thousands)
Gain Recorded
(in thousands)
8101-8117 Orion Ave. Los Angeles - San Fernando Valley 3/28/2023 48,394 $ 17,000 $ 12,133

~~(1)Represents the gross contractual sales price before commissions, prorations, credits and other closing costs.~~

2018

4. Acquired Lease Intangibles

The following table summarizes our ~~acquired lease~~acquisition related intangible assets, including the value of in-place tenant leases, above-market tenant leases and a below-market ground lease, and our ~~acquired lease~~acquisition related intangible liabilities, ~~which includes~~including below-market tenant leases (in thousands):


		September 30, 2023		December 31, 2022			March 31, 2024	December 31, 2023
Acquired Lease Intangible Assets:	Acquired Lease Intangible Assets:					Acquired Lease Intangible Assets:
In-place lease intangibles	In-place lease intangibles	$	328,763	$	315,842
Accumulated amortization	Accumulated amortization	(198,853)		(172,883)
In-place lease intangibles, net	In-place lease intangibles, net	$	129,910	$	142,959

Above-market tenant leases	Above-market tenant leases	$	25,598	$	26,851
Above-market tenant leases
Above-market tenant leases
Accumulated amortization	Accumulated amortization	(14,196)		(12,671)
Above-market tenant leases, net	Above-market tenant leases, net	$	11,402	$	14,180

Below-market ground lease
Below-market ground lease
Below-market ground lease	Below-market ground lease	$	12,977	$	12,977
Accumulated amortization	Accumulated amortization	(253)		(130)
Below-market ground lease, net	Below-market ground lease, net	$	12,724	$	12,847
Acquired lease intangible assets, net	Acquired lease intangible assets, net	$	154,036	$	169,986

Acquired Lease Intangible Liabilities:	Acquired Lease Intangible Liabilities:
Acquired Lease Intangible Liabilities:
Acquired Lease Intangible Liabilities:
Below-market tenant leases	Below-market tenant leases	$	(250,292)	$	(220,646)
Accumulated accretion		94,710		73,262
Accumulated amortization
Below-market tenant leases, net	Below-market tenant leases, net	$	(155,582)	$	(147,384)

Acquired lease intangible liabilities, net	Acquired lease intangible liabilities, net	$	(155,582)	$	(147,384)

Acquired lease intangible liabilities, net

Acquired lease intangible liabilities, net

The following table summarizes the amortization related to our acquired lease intangible assets and liabilities for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2024 and 2023 ~~and 2022~~ (in thousands):






		Three Months Ended September 30,				Nine Months Ended September 30,
		2023		2022		2023		2022
In-place lease intangibles(1)	In-place lease intangibles(1)	$	10,024	$	10,855	$	32,757	$	29,154
In-place lease intangibles(1)
In-place lease intangibles(1)
Net below-market tenant leases(2)
Net below-market tenant leases(2)
Net below-market tenant leases(2)	Net below-market tenant leases(2)	$	(7,282)	$	(7,074)	$	(21,886)	$	(18,339)
Below-market ground leases(3)	Below-market ground leases(3)	$	41	$	41	$	123	$	89
Below-market ground leases(3)
Below-market ground leases(3)

(1)The amortization of in-place lease intangibles is recorded to depreciation and amortization expense in the consolidated statements of operations for the periods presented.

(2)The amortization of net below-market tenant leases is recorded as an increase to rental income in the consolidated statements of operations for the periods presented.

(3)The amortization of net below-market ground lease is recorded as an increase to property expenses in the consolidated statements of operations for the periods presented.

2119

5. Loan Receivable

On October 26, 2023, in conjunction with the acquisition of the property located at 15801 West 1st Street, we issued a $125.0 million loan to the seller that is securitized by an adjacent 150-acre industrial development site as well as two escrow reserve accounts that were funded with loan proceeds at closing (the “loan collateral”). At issuance, the loan receivable had a loan to value ratio of less than 60% based on the estimated fair value of the loan collateral. The loan bears interest at 7.50% per annum, requires monthly interest-only payments with a balloon payment at maturity, and has an effective interest rate of 8.00% including loan origination costs and fees. The loan has a maturity date of October 26, 2028, with one 1-year extension available at the borrower’s option, subject to certain conditions plus the payment of a 0.25% extension fee. The loan allows for prepayment, in part or whole, with penalties ranging from 1.00% to 2.00% of the amount prepaid, depending on the timing of the prepayment. The loan also includes a right of first offer for us to acquire the underlying industrial development site in the future.

As of March 31, 2024, the carrying value of the loan receivable was $122.9 million, which reflects $2.1 million of unamortized origination fees/costs. As of December 31, 2023, the carrying value of the loan receivable was $122.8 million, which reflects $2.2 million of unamortized origination fees/costs. Based on our current assessment of the credit loss evaluation criteria, we determined that the allowance for potential credit losses on our loan receivable is immaterial as of March 31, 2024 and December 31, 2023.

6. Notes Payable

The following table summarizes the components and significant terms of our indebtedness as of ~~September 30, 2023~~March 31, 2024 and December 31, ~~2022~~2023 (dollars in thousands):


		September 30, 2023		December 31, 2022		Margin Above SOFR			Interest Rate(1)			Contractual Maturity Date				March 31, 2024						December 31, 2023					Margin Above SOFR							Interest Rate(1)				Contractual Maturity Date
Unsecured and Secured Debt	Unsecured and Secured Debt
Unsecured Debt:	Unsecured Debt:
Unsecured Debt:
Unsecured Debt:
Revolving Credit Facility
Revolving Credit Facility
Revolving Credit Facility	Revolving Credit Facility	$	—	$	—	S+0.685	%	(2)	6.095	%	(3)	5/26/2026	(4)	$	—			$		$	—			S+0.685		S+0.685		%	(2)		6.125	%	(3)			5/26/2026	(4)
$400M Term Loan	$400M Term Loan	400,000		400,000		S+0.760	%	(2)	4.832	%	(5)	7/19/2024	(4)	$400M Term Loan		400,000			400,000				400,000		S+0.760				S+0.760	%	(2)		4.832		%	(5)	7/19/2024		(4)
$100M Senior Notes	$100M Senior Notes	100,000		100,000		n/a			4.290	%		8/6/2025
$575M Exchangeable Senior Notes due 2027
$575M Exchangeable Senior Notes due 2027
$575M Exchangeable Senior Notes due 2027
$300M Term Loan
$300M Term Loan
$300M Term Loan	$300M Term Loan	300,000		300,000		S+0.760	%	(2)	3.677	%	(6)	5/26/2027
$125M Senior Notes	$125M Senior Notes	125,000		125,000		n/a			3.930	%		7/13/2027
$125M Senior Notes
$125M Senior Notes
$300M Senior Notes due 2028	$300M Senior Notes due 2028	300,000		—		n/a			5.000	%		6/15/2028
$300M Senior Notes due 2028
$300M Senior Notes due 2028
$575M Exchangeable Senior Notes due 2029
$575M Exchangeable Senior Notes due 2029
$575M Exchangeable Senior Notes due 2029
$25M Series 2019A Senior Notes
$25M Series 2019A Senior Notes
$25M Series 2019A Senior Notes	$25M Series 2019A Senior Notes	25,000		25,000		n/a			3.880	%		7/16/2029
$400M Senior Notes due 2030	$400M Senior Notes due 2030	400,000		400,000		n/a			2.125	%		12/1/2030
$400M Senior Notes due 2030
$400M Senior Notes due 2030
$400M Senior Notes due 2031
$400M Senior Notes due 2031
$400M Senior Notes due 2031	$400M Senior Notes due 2031	400,000		400,000		n/a			2.150	%		9/1/2031
$75M Series 2019B Senior Notes	$75M Series 2019B Senior Notes	75,000		75,000		n/a			4.030	%		7/16/2034
$75M Series 2019B Senior Notes
$75M Series 2019B Senior Notes
Total Unsecured Debt
Total Unsecured Debt
Total Unsecured Debt	Total Unsecured Debt	$	2,125,000	$	1,825,000

Secured Debt:	Secured Debt:
2601-2641 Manhattan Beach Boulevard(7)		$	—	$	3,832	n/a			4.080	%		4/5/2023
960-970 Knox Street(7)		2,234		2,307		n/a			5.000	%		11/1/2023
7612-7642 Woodwind Drive(7)		3,638		3,712		n/a			5.240	%		1/5/2024

Secured Debt:

Secured Debt:
7612-7642 Woodwind Drive
11600 Los Nietos Road(7)
11600 Los Nietos Road(7)
11600 Los Nietos Road(7)	11600 Los Nietos Road(7)	2,333		2,462		n/a			4.190	%		5/1/2024
$60M Term Loan(8)	$60M Term Loan(8)	60,000		60,000		S+1.250	%		5.060	%	(8)	10/27/2024
$60M Term Loan(8)
$60M Term Loan(8)
5160 Richton Street(7)
5160 Richton Street(7)
5160 Richton Street(7)	5160 Richton Street(7)	4,060		4,153		n/a			3.790	%		11/15/2024
22895 Eastpark Drive(7)	22895 Eastpark Drive(7)	2,558		2,612		n/a			4.330	%		11/15/2024
22895 Eastpark Drive(7)
22895 Eastpark Drive(7)
701-751 Kingshill Place(7)
701-751 Kingshill Place(7)
701-751 Kingshill Place(7)	701-751 Kingshill Place(7)	7,016		7,100		n/a			3.900	%		1/5/2026
13943-13955 Balboa Boulevard(7)	13943-13955 Balboa Boulevard(7)	14,690		14,965		n/a			3.930	%		7/1/2027
13943-13955 Balboa Boulevard(7)
13943-13955 Balboa Boulevard(7)
2205 126th Street(9)
2205 126th Street(9)
2205 126th Street(9)	2205 126th Street(9)	5,200		5,200		n/a			3.910	%		12/1/2027
2410-2420 Santa Fe Avenue(9)	2410-2420 Santa Fe Avenue(9)	10,300		10,300		n/a			3.700	%		1/1/2028
2410-2420 Santa Fe Avenue(9)
2410-2420 Santa Fe Avenue(9)
11832-11954 La Cienega Boulevard(7)
11832-11954 La Cienega Boulevard(7)
11832-11954 La Cienega Boulevard(7)	11832-11954 La Cienega Boulevard(7)	3,871		3,928		n/a			4.260	%		7/1/2028
Gilbert/La Palma(7)	Gilbert/La Palma(7)	1,791		1,935		n/a			5.125	%		3/1/2031
Gilbert/La Palma(7)
Gilbert/La Palma(7)
7817 Woodley Avenue(7)
7817 Woodley Avenue(7)
7817 Woodley Avenue(7)	7817 Woodley Avenue(7)	2,914		3,009		n/a			4.140	%		8/1/2039
Total Secured Debt	Total Secured Debt	$	120,605	$	125,515
Total Secured Debt
Total Secured Debt
Total Unsecured and Secured Debt
Total Unsecured and Secured Debt
Total Unsecured and Secured Debt	Total Unsecured and Secured Debt	$	2,245,605	$	1,950,515
Less: Unamortized premium/discount and debt issuance costs(10)	Less: Unamortized premium/discount and debt issuance costs(10)	(17,968)		(14,134)
Less: Unamortized premium/discount and debt issuance costs(10)
Less: Unamortized premium/discount and debt issuance costs(10)
Total	Total	$	2,227,637	$	1,936,381
Total
Total																$	3,349,120					$	2,225,914

(1)Reflects the contractual interest rate under the terms of each loan as of ~~September 30, 2023,~~March 31, 2024, and includes the effect of interest rate swaps that were effective as of ~~September 30, 2023.~~March 31, 2024. The interest rate is not adjusted to include the amortization of debt issuance costs or unamortized fair market value premiums and discounts.

(2)As of ~~September 30, 2023,~~March 31, 2024, the interest rates on these loans are comprised of daily Secured Overnight Financing Rate (“SOFR”) for both the unsecured revolving credit facility and $400.0 million unsecured term loan, and 1-month term SOFR (“Term SOFR”) for the $300.0 million unsecured term loan (in each case increased by a 0.10% SOFR adjustment), plus an applicable margin of 0.725% per annum for the unsecured revolving credit facility and 0.80% per annum for the $300.0 million and $400.0 million unsecured term loans, based on our leverage ratio and investment grade ratings, minus a sustainability-related interest rate adjustment of 0.04%. These loans are also subject to a 0% SOFR floor.

(3)The unsecured revolving credit facility is subject to an applicable facility fee which is calculated as a percentage of the total lenders’ commitment amount, regardless of usage. As of ~~September 30, 2023,~~March 31, 2024, the applicable facility fee is 0.125%, per annum, less a sustainability-related interest rate adjustment of 0.01%. per annum.

(4)The unsecured revolving credit facility has two six-month extensions, and the $400.0 million unsecured term loan has two one-year extensions available at the borrower’s option, subject to certain terms and conditions. In March 2024, we submitted our notice to the lender to extend the maturity date of the $400.0 million unsecured term loan by one year to July 18, 2025.

(5)Effective April 3, 2023, daily SOFR for our $400.0 million unsecured term loan has been swapped to a fixed rate of 3.97231%, resulting in an all-in fixed rate of 4.83231% after adding the SOFR adjustment and applicable margin and subtracting the sustainability-related interest rate adjustment.

(6)~~As of September 30, 2023,~~Effective July 27, 2022, Term SOFR for our $300.0 million unsecured term loan has been swapped to a fixed rate of 2.81725%, resulting in an all-in fixed rate of 3.67725% after adding the SOFR adjustment and applicable margin and subtracting the sustainability-related interest rate adjustment.

(7)Fixed monthly payments of interest and principal until maturity as follows: ~~2601-2641 Manhattan Beach Boulevard ($23,138), 960-970 Knox Street ($17,538), 7612-7642 Woodwind Drive ($24,270),~~ 11600 Los Nietos ($22,637), 5160 Richton Street ($23,270), 22895 Eastpark Drive ($15,396), 701-751 Kingshill Place ($33,488), 13943-13955 Balboa Boulevard ($79,198), 11832-11954 La Cienega Boulevard ($20,194), Gilbert/La Palma ($24,008) and 7817 Woodley Avenue ($20,855).

(8)The loan is secured by six properties and has three one-year extensions available at the borrower’s option, subject to certain terms and conditions. Loan has interest-only payment terms bearing interest at Term SOFR increased by a 0.10% SOFR adjustment plus an applicable margin of 1.25% per annum. Effective April 3, 2023, Term SOFR for this loan has been swapped to a fixed rate of 3.710%, resulting in an all-in fixed rate of 5.060% after adding the SOFR adjustment and applicable margin.

(9)Fixed monthly payments of interest only.

(10)Excludes unamortized debt issuance costs related to our unsecured revolving credit facility, which are presented in the line item “Deferred loan costs, net” in the consolidated balance sheets.

Contractual Debt Maturities

The following table summarizes the contractual debt maturities and scheduled amortization payments, excluding debt premiums/discounts and debt issuance costs, as of ~~September 30, 2023,~~March 31, 2024, and does not consider extension options available to us as noted in the table above (in thousands):

October 1, 2023 - December 31, 2023 $ 2,580
2024 473,403
2025 100,973
2026 7,587
2027 444,078
Thereafter 1,216,984
Total $ 2,245,605

~~Issuance of $300 Million Notes Due 2028~~

On March 28, 2023, we completed an underwritten public offering of $300.0 million of 5.000% Senior Notes due 2028 (the “$300 Million Notes”). The $300 Million Notes were priced at 98.975% of the principal amount, with a coupon rate of 5.000%. Interest on the $300 Million Notes is payable semiannually on June 15 and December 15 in each year, beginning on June 15, 2023, until the maturity date of June 15, 2028.


April 1, 2024 - December 31, 2024	$	469,466
2025	100,973
2026	7,587
2027	1,019,078
2028	314,218
Thereafter	1,477,766
Total	$	3,389,088

2322

WeIssuance of Exchangeable Senior Notes

In March 2024, we issued $575.0 million in aggregate principal amount of 4.375% exchangeable senior unsecured notes due 2027 (the “2027 Exchangeable Notes”) and $575.0 million in aggregate principal amount of 4.125% exchangeable senior unsecured notes due 2029 (the “2029 Exchangeable Notes” and together with the 2027 Exchangeable Notes, the “Exchangeable Notes”). The net proceeds from the issuance, after deducting the initial purchasers’ discounts, underwriting commissions and other offering expenses, were approximately $563.1 million for the 2027 Exchangeable Notes and $563.1 million for the 2029 Exchangeable Notes. Interest on the Exchangeable Notes is payable semiannually on March 15 and September 15 of each year beginning on September 15, 2024. The 2027 Exchangeable Notes will mature on March 15, 2027 and the 2029 Exchangeable Notes will mature on March 15, 2029, in each case unless earlier repurchased, exchanged or (in the case of 2029 Exchangeable Notes) redeemed.

Before December 15, 2026 (in the case of the 2027 Exchangeable Notes) or December 15, 2028 (in the case of the 2029 Exchangeable Notes), noteholders will have the right to exchange their notes only upon the occurrence of certain events. From and after December 15, 2026 (in the case of the 2027 Exchangeable Notes) or December 15, 2028 (in the case of the 2029 Exchangeable Notes), noteholders may ~~redeem the $300 Million Notes at our option and sole discretion, in whole~~exchange their notes at any time ~~or in part from time to time prior to May 15, 2028 (one month prior to~~at their election until the close of business on the second scheduled trading day immediately before the maturity date of the ~~$300 Million Notes) (the “Par Call Date”), at a redemption price equal~~applicable series of Exchangeable Notes. Exchanges will be settled by delivering cash up to the greater of (i) the sum of the present values of the remaining scheduled payments of principal and interest on the $300 Million Notes discounted to the redemption date (assuming the notes matured on the Par Call Date) on a semi-annual basis (assuming a 360-day year consisting of twelve 30-day months) at the Treasury Rate (as defined in the Third Supplemental Indenture) plus 25 basis points, less (b) interest accrued to the date of redemption, and (ii) 100% of the principal amount of the ~~$300 Million~~Exchangeable Notes ~~being redeemed. Notwithstanding~~exchanged, and in respect of the ~~foregoing,~~remainder of the exchanged value, if any, in excess thereof, in cash or in a combination of cash and shares of our common stock, at our option. The initial exchange rate is 15.7146 shares of our common stock per $1,000 principal amount of the Exchangeable Notes, which represents an initial exchange price of approximately $63.64 per share of our common stock. The initial exchange price represents a premium of approximately 30.0% over the last reported sale price of $48.95 per share of our common stock on March 26, 2024.

We may not redeem the 2027 Exchangeable Notes at our option prior to their maturity. The 2029 Exchangeable Notes will be redeemable, in whole or in part (subject to certain limitations), for cash at our option at any time, and from time to time, on or after May 20, 2027 and on or before the ~~Par Call Date,~~41st scheduled trading day immediately before the maturity date of the 2029 Exchangeable Notes, but only if the last reported sale price per share of our common stock exceeds 130% of the exchange price of the 2029 Exchangeable Notes for a specified period of time and certain other conditions are satisfied. The redemption price will be equal to ~~100% of~~ the principal amount of the ~~$300 Million~~2029 Exchangeable Notes ~~being~~to be redeemed, plus accrued and unpaid interest, if any.

If a fundamental change (e.g. change in control, delisting of our common stock or shareholders’ approval of liquidation or dissolution plan) occurs, then, subject to limited exception, noteholders may require us to repurchase their notes for cash at a repurchase price equal to the principal amount plus any accrued and unpaid interest. In addition, if a specific make-whole fundamental change occurs prior to the maturity date or if we issue a notice of redemption with respect to the 2029 Exchangeable Notes, the exchange rate will be increased, in certain circumstances by pre-defined amounts.

In connection with the offering for each series of Exchangeable Notes, we entered into a registration rights agreement pursuant to which we agreed to register the resale of the shares of our common stock, if any, deliverable upon exchange of the Exchangeable Notes. If certain conditions relating to our obligations under the registration rights agreement are not satisfied, then we will pay additional interest on the applicable series of Exchangeable Notes, in certain circumstances, at a rate per annum not exceeding 0.5%. In addition, if those conditions are not satisfied after the regular record date immediately preceding the maturity date of Exchangeable Notes, then we will pay an additional interest payment at maturity for an amount equal to 3% of principal for the applicable series of Exchangeable Notes. We account for such additional interest amounts as contingent obligations in accordance with ASC Subtopic 825-20: Financial Instrument - Registration Payment Arrangements, which are measured separately in accordance with ASC Subtopic 450-20: Loss Contingencies. Because payment of such additional interest amounts is not probable as of March 31, 2024, they have not been recognized or included in the allocation of the proceeds from Exchangeable Notes as of March 31, 2024.

Credit Agreement

As of ~~September 30, 2023,~~March 31, 2024, under the Fourth Amended and Restated Credit Agreement (the “Credit Agreement”), we have a $1.0 billion unsecured revolving credit facility (the “Revolver”), a $300.0 million unsecured term loan facility (the “$300 Million Term Loan”) and a $400.0 million unsecured term loan facility (the “$400 Million Term Loan” and together with the $300 Million Term Loan, the “Term Facility”). Subject to certain terms and conditions set forth in the Credit Agreement, we may request additional lender commitments and increase the size of the Credit Agreement by an additional $800.0 million, which may be comprised of additional revolving commitments under the Revolver, an increase to the Term Facility, additional term loan tranches or any combination of the foregoing.

we submitted our notice to the lender to extend the maturity date of the $400.0 million unsecured term loan by one year to July 18, 2025. The $300 Million Term Loan matures on May 26, 2027.

Interest on the Credit Agreement is generally to be paid based upon, at our option, either (i) Term SOFR plus the applicable margin; (ii) daily SOFR plus the applicable margin or (iii) the applicable base rate (which is defined as the highest of (a) the federal funds rate plus 0.50%, (b) the administrative agent’s prime rate, (c) Term SOFR plus 1.00%, and (d) one percent (1.00%)) plus the applicable margin. Additionally, Term SOFR and daily SOFR will be increased by a 0.10% SOFR adjustment. The applicable margin for the Term Facility ranges from 0.80% to 1.60% per annum for SOFR-based loans and 0.00% to 0.60% per annum for base rate loans, depending on our leverage ratio and investment grade ratings. The applicable margin for the Revolver ranges from 0.725% to 1.400% per annum for SOFR-based loans and 0.00% to 0.40% per annum for base rate loans, depending on our leverage ratio and investment grade ratings. In addition to the interest payable on amounts outstanding under the Revolver, we are required to pay an applicable credit facility fee, on each lender's commitment amount under the Revolver, regardless of usage. The applicable credit facility fee ranges from 0.125% to 0.300% per annum, depending on our leverage ratio and investment grade rating.

In addition, the Credit Agreement also features a sustainability-linked pricing component whereby the applicable margin and applicable credit facility fee can decrease by 0.04% and 0.01%, respectively, or increase by 0.04% and 0.01%, respectively, if we meet, or do not meet, certain sustainability performance targets, as applicable. In February 2023, after certifying that our sustainability performance target was met for 2022, the applicable margin decreased by 0.040% to 0.685% and 0.760% for the Revolver and Term Facility, respectively, and the credit facility fee decreased by 0.010% to 0.115%.

The Revolver and the Term Facility may be voluntarily prepaid in whole or in part at any time without premium or penalty. Amounts borrowed under the Term Facility and repaid or prepaid may not be reborrowed.

The Credit Agreement contains usual and customary events of default including defaults in the payment of principal, interest or fees, defaults in compliance with the covenants set forth in the Credit Agreement and other loan documentation, cross-defaults to certain other indebtedness, and bankruptcy and other insolvency defaults. If an event of default occurs and is continuing under the Credit Agreement, the unpaid principal amount of all outstanding loans, together with all accrued unpaid interest and other amounts owing in respect thereof, may be declared immediately due and payable.

On ~~September 30, 2023,~~March 31, 2024, we did not have any borrowings outstanding under the Revolver, leaving $1.0 billion available for future borrowings.

Debt Covenants

The Credit Agreement, $60.0 million term loan facility (“$60 Million Term Loan”), $100.0 million unsecured guaranteed senior notes (the “$100 Million Notes”), $125.0 million unsecured guaranteed senior notes (the “$125 Million Notes”) and $25.0 million unsecured guaranteed senior notes and $75.0 million unsecured guaranteed senior notes (together the “Series 2019A and 2019B Notes”) all include a series of financial and other covenants that we must comply with, including the following covenants which are tested on a quarterly basis:

•Maintaining a ratio of total indebtedness to total asset value of not more than 60%;

•For the Credit Agreement and $60 Million Term Loan, maintaining a ratio of secured debt to total asset value of not more than 45%;

•For the $100 Million Notes, $125 Million Notes and Series 2019A and 2019B Notes (together the “Senior Notes”), maintaining a ratio of secured debt to total asset value of not more than 40%;

•For the Senior Notes, maintaining a ratio of total secured recourse debt to total asset value of not more than 15%;

•For the Senior Notes, maintaining a minimum tangible net worth of at least the sum of (i) $760,740,750, and (ii) an amount equal to at least 75% of the net equity proceeds received by the Company after September 30, 2016;

•Maintaining a ratio of adjusted EBITDA (as defined in each of the loan agreements) to fixed charges of at least 1.5 to 1.0;

•For the Credit Agreement and Senior Notes, maintaining a ratio of total unsecured debt to total unencumbered asset value of not more than 60%; and

•For the Credit Agreement and Senior Notes, ~~Maintaining~~maintaining a ratio of unencumbered NOI (as defined in each of the loan agreements) to unsecured interest expense of at least 1.75 to 1.00.

The ~~$300 Million~~$300.0 million of 5.000% Senior Notes due 2028, $400.0 million of 2.125% Senior Notes due 2030 and $400.0 million of 2.150% Senior Notes due 2031 (together the “Registered Notes”) contain the following covenants (as defined in the indentures) that we must comply with:

•Maintaining a ratio of total indebtedness to total asset value of not more than 60%;

•Maintaining a ratio of secured debt to total asset value of not more than 40%;

•Maintaining a Debt Service Coverage Ratio of at least 1.5 to 1.0; and

•Maintaining a ratio of unencumbered assets to unsecured debt of at least 1.5 to 1.0.

The Credit Agreement and Senior Notes also provide that our distributions may not exceed the greater of (i) 95.0% of our funds from operations or (ii) the amount required for us to qualify and maintain our status as a REIT and avoid the payment of federal or state income or excise tax in any 12-month period.

Subject to the terms of the Credit Agreement, $60 Million Term Loan, Senior Notes and Registered Notes, upon certain events of default, including, but not limited to, (i) a default in the payment of any principal or interest, (ii) a default in the payment of certain of our other indebtedness and (iii) a default in compliance with the covenants set forth in the debt agreement, the principal and accrued and unpaid interest on the outstanding debt may be declared immediately due and payable at the option of the administrative agent, lenders, trustee and/or noteholders, as applicable, and in the event of bankruptcy and other insolvency defaults, the principal and accrued and unpaid interest on the outstanding debt will become immediately due and payable. In addition, we are required to maintain at all times a credit rating on the Senior Notes from either Standard and Poor’s Ratings Services (“S&P), Moody’s Investors Services (“Moody’s”) or Fitch Ratings. Our credit ratings as of ~~September 30, 2023,~~March 31, 2024, were BBB+ from S&P, BBB+ from Fitch Ratings and Baa2 from Moody’s.

We were in compliance with all of our required quarterly debt covenants as of ~~September 30, 2023.~~March 31, 2024.

6.7. Leases

Lessor

We lease industrial space to tenants primarily under non-cancelable operating leases that generally contain provisions for minimum base rents plus reimbursement for certain operating expenses. Total minimum lease payments are recognized in rental income on a straight-line basis over the term of the related lease and estimated reimbursements from tenants for real estate taxes, insurance, common area maintenance and other recoverable operating expenses are recognized in rental income in the period that the expenses are incurred.

For the three ~~and nine~~ months ended ~~September 30, 2023,~~March 31, 2024, we recognized ~~$196.9 million and $561.6~~$204.3 million of rental income related to operating lease payments, of which ~~$161.5 million and $461.3~~$167.8 million are for fixed lease payments and ~~$35.4 million and $100.3~~$36.5 million are for variable lease payments, respectively. For the comparable three ~~and nine~~ month-period ended ~~September 30, 2022,~~March 31, 2023, we recognized ~~$155.5 million and $433.8~~$176.8 million of rental income related to operating lease payments, of which ~~$127.3 million and $354.7~~$144.8 million were for fixed lease payments and ~~$28.2 million and $79.1~~$32.0 million were for variable lease payments, respectively.

The following table sets forth the undiscounted cash flows for future minimum base rents to be received under operating leases as of ~~September 30, 2023~~March 31, 2024 (in thousands):


Twelve Months Ended September 30,
2024		$	605,099
Twelve Months Ended March 31,				Twelve Months Ended March 31,
2025	2025	534,771
2026	2026	442,600
2027	2027	339,798
2028	2028	267,098
2029
Thereafter	Thereafter	981,101
Total	Total	$	3,170,467

The future minimum base rents in the table above excludes tenant reimbursements of operating expenses, amortization of adjustments for deferred rent receivables and the amortization of above/below-market lease intangibles.

Lessee

We lease office space as part of conducting our day-to-day business. As of ~~September 30, 2023,~~March 31, 2024, our office space leases have current remaining lease terms ranging from approximately one year to four years with options to renew for an additional term of five years each. As of ~~September 30, 2023,~~March 31, 2024, we also have a ground lease which we assumed in the acquisition of 2970 East 50th Street in March 2022 that has a current remaining lease term of approximately ~~37.3 years~~36.8 and four additional ten-year options to renew.

In November 2021, we executed a sublease agreement for one of our leased office spaces as a result of the implementation of a work from home flexibility program in 2021. In February 2023, the sublease was terminated prior to its September 2025 expiration. As a result, we recorded a $0.2 million impairment charge for the write down of the ROU asset associated with the original office space lease during the ~~nine~~three months ended ~~September 30,~~March 31, 2023, which is included in “Other expenses” in the accompanying consolidated statements of operations, with a corresponding adjustment to “Other assets” in the consolidated balance sheets.

As of ~~September 30,~~March 31, 2024, total ROU assets and lease liabilities were approximately $6.7 million and $8.4 million, respectively. As of December 31, 2023, total ROU assets and lease liabilities were approximately ~~$7.3~~$7.0 million and ~~$9.4~~$8.9 million, respectively. ~~As of December 31, 2022, total ROU assets and lease liabilities were approximately $8.5 million and $10.9 million, respectively.~~

The tables below present financial and supplemental information associated with our leases.


		Three Months Ended September 30,				Nine Months Ended September 30,
		Three Months Ended March 31,
		Three Months Ended March 31,
		Three Months Ended March 31,
Lease Cost(1) (in thousands)
Lease Cost(1) (in thousands)
Lease Cost(1) (in thousands)	Lease Cost(1) (in thousands)	2023		2022		2023		2022
Operating lease cost	Operating lease cost	$	425	$	455	$	1,351	$	1,387
Operating lease cost
Operating lease cost
Variable lease cost	Variable lease cost	44		27		112		87
Sublease income		—		(67)		—		(201)
Variable lease cost
Variable lease cost

Total lease cost	Total lease cost	$	469	$	415	$	1,463	$	1,273

Total lease cost

Total lease cost

(1)Amounts are included in “General and administrative” and “Property expenses” in the accompanying consolidated statements of operations.


		Three Months Ended September 30,				Nine Months Ended September 30,
		Three Months Ended March 31,
		Three Months Ended March 31,
		Three Months Ended March 31,
Other Information (in thousands)
Other Information (in thousands)
Other Information (in thousands)	Other Information (in thousands)	2023		2022		2023		2022
Cash paid for amounts included in the measurement of operating lease liabilities	Cash paid for amounts included in the measurement of operating lease liabilities	$	573	$	547	$	1,741	$	1,450
Right-of-use assets obtained in exchange for new operating lease liabilities		$	—	$	—	$	—	$	6,363
Cash paid for amounts included in the measurement of operating lease liabilities
Cash paid for amounts included in the measurement of operating lease liabilities

Lease Term and Discount Rate

September 30, 2023

December 31, 2022

Lease Term and Discount Rate

March 31, 2024

December 31, 2023

Weighted-average remaining lease term(1)

41.3 years

36.5 years

Weighted-average remaining lease term(1)

45.7 years

43.4 years

Weighted-average discount rate(2)

3.82

3.77

Weighted-average discount rate(2)

3.85

3.84

(1)Includes the impact of extension options that we are reasonably certain to exercise.

(2)Because the rate implicit in each of our leases was not readily determinable, we used our incremental borrowing rate. In determining our incremental borrowing rate for each lease, we considered recent rates on secured borrowings, observable risk-free interest rates and credit spreads correlating to our creditworthiness, the impact of collateralization and the term of each of our lease agreements.

The following table summarizes the maturity of operating of lease liabilities under our corporate office leases and ground leases as of ~~September 30, 2023~~March 31, 2024 (in thousands):


			September 30, 2023
October 1, 2023 - December 31, 2023			$	567
2024			2,297
		March 31, 2024			March 31, 2024
April 1, 2024 - December 31, 2024
2025	2025		1,122
2026	2026		681
2027	2027		696
2028
Thereafter	Thereafter		20,051
Total undiscounted lease payments	Total undiscounted lease payments		$	25,414
Less imputed interest	Less imputed interest		(16,006)
Total lease liabilities	Total lease liabilities		$	9,408

2726

7.8. Interest Rate Derivatives

The following table sets forth a summary of the terms and fair value of our interest rate swaps at ~~September 30, 2023~~March 31, 2024 and December 31, ~~2022~~2023 (dollars in thousands):


						Notional Value				Fair Value of Interest Rate Derivative Assets/ (Liabilities)(1)								Notional Value		Fair Value of Interest Rate Derivative Assets/ (Liabilities)(1)
Derivative Instrument	Derivative Instrument	Effective Date	Maturity Date	Interest Strike Rate		September 30, 2023		December 31, 2022		September 30, 2023		December 31, 2022		Derivative Instrument	Effective Date	Maturity Date	Interest Strike Rate		March 31, 2024	December 31, 2023	March 31, 2024	December 31, 2023
Interest Rate Swaps	Interest Rate Swaps	7/27/2022	5/26/2027	2.81700	%	$	150,000	$	150,000	$	8,143	$	5,720
Interest Rate Swaps	Interest Rate Swaps	7/27/2022	5/26/2027	2.81750	%	$	150,000	$	150,000	$	8,126	$	5,702

Interest Rate Swaps	Interest Rate Swaps	4/3/2023	6/30/2025	3.98500	%	$	200,000	$	—	$	3,368	$	—

Interest Rate Swaps

Interest Rate Swaps
Interest Rate Swap	Interest Rate Swap	4/3/2023	6/30/2025	3.96625	%	$	100,000	$	—	$	1,715	$	—
Interest Rate Swap	Interest Rate Swap	4/3/2023	6/30/2025	3.95300	%	$	100,000	$	—	$	1,737	$	—
Interest Rate Swap	Interest Rate Swap	4/3/2023	7/30/2026	3.71000	%	$	60,000	$	—	$	1,405	$	—

(1)The fair value of derivative assets is included in the line item “Interest rate swap asset” in the accompanying consolidated balance sheets.

~~Transactions~~

On March 21, 2023, we executed four forward starting interest rate swap transactions with an aggregate notional value of $400.0 million to manage our exposure to changes in daily SOFR related to a portion of our variable-rate debt. These swaps, which became effective on April 3, 2023 and mature on June 30, 2025, fix daily SOFR at a weighted average rate of 3.97231%. In addition, we also executed an interest rate swap transaction with a notional value of $60.0 million to manage our exposure to changes in Term SOFR related to a portion of our variable-rate debt. This swap, which became effective on April 3, 2023 and matures on July 30, 2026, fixes Term SOFR at a rate of 3.71%. We have designated these interest rate swaps as cash flow hedges.

On March 28, 2023, in connection with the issuance of the $300 Million Notes, we executed three treasury rate lock agreements with a combined notional amount of $250.0 million to lock the interest rate of the five-year treasury at 3.64313% (the “T-Locks”). On March 29, 2023, we paid $0.2 million to settle the T-Locks, which were designated as a cash flow hedges. The settlement value is included in the balance of AOCI and will be amortized into interest expense on a straight-line basis over the 5-year term of the $300 Million Notes.

Our interest rate swaps and T-Locks are designated and qualify as cash flow hedges. We do not use derivatives for trading or speculative purposes. The change in fair value of derivatives designated and qualifying as cash flow hedges is initially recorded in AOCI and is subsequently reclassified from AOCI into earnings in the period that the hedged forecasted transactions affect earnings. The following table sets forth the impact of our interest rate derivatives on our financial statements for the periods presented (in thousands):






		Three Months Ended September 30,				Nine Months Ended September 30,
		2023		2022		2023		2022
Interest Rate Swaps in Cash Flow Hedging Relationships:	Interest Rate Swaps in Cash Flow Hedging Relationships:
Interest Rate Swaps in Cash Flow Hedging Relationships:
Interest Rate Swaps in Cash Flow Hedging Relationships:
Amount of gain (loss) recognized in AOCI on derivatives	Amount of gain (loss) recognized in AOCI on derivatives	$	7,997	$	12,326	$	20,354	$	17,743
Amount of gain (loss) reclassified from AOCI into earnings under “Interest expense”(1)		$	3,237	$	(368)	$	7,041	$	(2,118)
Amount of gain (loss) recognized in AOCI on derivatives
Amount of gain (loss) recognized in AOCI on derivatives
Amount of gain reclassified from AOCI into earnings under “Interest expense”(1)
Amount of gain reclassified from AOCI into earnings under “Interest expense”(1)
Amount of gain reclassified from AOCI into earnings under “Interest expense”(1)
Total interest expense presented in the Consolidated Statement of Operations in which the effects of cash flow hedges are recorded (line item “Interest expense”)	Total interest expense presented in the Consolidated Statement of Operations in which the effects of cash flow hedges are recorded (line item “Interest expense”)	$	15,949	$	14,975	$	46,830	$	34,826
Total interest expense presented in the Consolidated Statement of Operations in which the effects of cash flow hedges are recorded (line item “Interest expense”)
Total interest expense presented in the Consolidated Statement of Operations in which the effects of cash flow hedges are recorded (line item “Interest expense”)

(1)Includes losses that have been reclassified from AOCI into interest expense related to (i) the ~~T-Locks described above, (ii) the~~ treasury rate lock agreements that were settled in August 2021 and March 2023 and for which amounts will continue to be reclassified over the ten-year ~~term~~and five-year terms of the hedged ~~transaction, (iii) the interest rate swaps that were terminated in August 2021~~transactions, and ~~for which amounts have been fully reclassified into interest expense through their original maturity date (January 2022), and (iv)~~(ii) the interest rate swap that was terminated in May 2022 and for which amounts will continue to be reclassified into interest expense through its original maturity date (November 2024).

As of ~~September 30, 2023,~~March 31, 2024, we estimate that approximately ~~$13.0~~$10.2 million of net unrealized gains will be reclassified from AOCI into earnings as a net decrease to interest expense over the next 12 months.

Credit-risk-related Contingent Features

Certain of our agreements with our derivative counterparties contain a provision where if we default on any of our indebtedness, including default where repayment of the indebtedness has not been accelerated by the lender within a specified time period, then we could also be declared in default on its derivative obligations.

Certain of our agreements with our derivative counterparties contain provisions where if a merger or acquisition occurs that materially changes our creditworthiness in an adverse manner, we may be required to fully collateralize our obligations under the derivative instrument.

9. Fair Value Measurements

ASC Topic 820: Fair Value Measurement (“ASC 820”) defines fair value and establishes a framework for measuring fair value. ASC 820 emphasizes that fair value is a market-based measurement, not an entity-specific measurement. Therefore, a fair value measurement should be determined based on the assumptions that market participants would use in pricing the asset or liability. As a basis for considering market participant assumptions in fair value measurements, ASC 820 establishes a fair value hierarchy that distinguishes between market participant assumptions based on market data obtained from sources independent of the reporting entity (observable inputs that are classified within Levels 1 and 2 of the hierarchy) and the reporting entity’s own assumptions about market participant assumptions (unobservable inputs classified within Level 3 of the hierarchy).

Level 1 inputs utilize quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company has the ability to access. Level 2 inputs are inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 inputs may include quoted prices for similar assets and liabilities in active markets, as well as inputs that are observable for the asset or liability (other than quoted prices), such as interest rates and yield curves that are observable at commonly quoted intervals. Level 3 inputs are unobservable inputs for the asset or liability, which are typically based on an entity’s own assumptions, as there is little, if any, related market activity. In instances where the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level input that is significant to the fair value measurement in its entirety. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability.

Recurring Measurements – Interest Rate Swaps

We use interest rate swap agreements to manage our interest rate risk. The valuation of these instruments is determined using widely accepted valuation techniques including discounted cash flow analysis on the expected cash flows of each derivative. This analysis reflects the contractual terms of the derivatives, including the period to maturity, and uses observable market-based inputs, including interest rate curves.

To comply with the provisions of ASC 820, we incorporate credit valuation adjustments to appropriately reflect both our own nonperformance risk and the respective counterparty’s nonperformance risk in the fair value measurements. In adjusting the fair value of our derivative contracts for the effect of nonperformance risk, we have considered the impact of netting and any applicable credit enhancements, such as collateral postings, thresholds, mutual puts, and guarantees.

Although we have determined that the majority of the inputs used to value our derivatives fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with our derivatives utilize Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by ourselves and our counterparties. However, we have assessed the significance of the impact of the credit valuation adjustments on the overall valuation of our derivative positions and have determined that the credit valuation adjustments are not significant to the overall valuation of its derivatives. As a result, we have determined that its derivative valuations in their entirety are classified in Level 2 of the fair value hierarchy.

The table below sets forth the estimated fair value of our interest rate swaps as of ~~September 30, 2023~~March 31, 2024 and December 31, ~~2022,~~2023, which we measured on a recurring basis by level within the fair value hierarchy (in thousands).

Fair Value Measurement Using
Total Fair Value Quoted Price in Active Markets for Identical Assets and Liabilities
(Level 1) Significant Other
Observable Inputs
(Level 2) Significant
Unobservable Inputs
(Level 3)
September 30, 2023
Interest Rate Swap Asset $ 24,494 $ — $ 24,494 $ —
December 31, 2022
Interest Rate Swap Asset $ 11,422 $ — $ 11,422 $ —


	Fair Value Measurement Using
	Total Fair Value		Quoted Price in Active Markets for Identical Assets and Liabilities (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
March 31, 2024
Interest rate swap asset	$	16,737	$	—	$	16,737	$	—

December 31, 2023
Interest rate swap asset	$	9,896	$	—	$	9,896	$	—

Financial Instruments Disclosed at Fair Value

The carrying amounts of cash and cash equivalents, rents and other receivables, other assets, accounts payable, accrued expenses and other liabilities, and tenant security deposits approximate fair value because of their short-term nature.

The fair value of our notes payable was estimated by calculating the present value of principal and interest payments, using discount rates that best reflect current market rates for financings with similar characteristics and credit quality, and assuming each loan is outstanding through its respective contractual maturity date.

The fair value of our loan receivable was estimated by calculating the present value of principal and interest payments, using discount rates that best reflect current market rates for financings with similar characteristics and credit quality, and based on certain assumptions regarding the collection of principal and interest.

The table below sets forth the carrying value and the estimated fair value of our loan receivable and notes payable as of ~~September 30, 2023~~March 31, 2024 and December 31, ~~2022~~2023 (in thousands):

Fair Value Measurement Using
Liabilities Total Fair Value Quoted Price in Active Markets for Identical Assets and Liabilities
(Level 1) Significant Other
Observable Inputs
(Level 2) Significant
Unobservable Inputs
(Level 3) Carrying Value
Notes Payable at:
September 30, 2023 $ 2,012,830 $ — $ — $ 2,012,830 $ 2,227,637
December 31, 2022 $ 1,740,745 $ — $ — $ 1,740,745 $ 1,936,381


	Fair Value Measurement Using
	Total Fair Value		Quoted Price in Active Markets for Identical Assets and Liabilities (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Carrying Value
Loan Receivable at:
March 31, 2024	$	127,841	$	—	$	—	$	127,841	$	122,899
December 31, 2023	$	129,908	$	—	$	—	$	129,908	$	122,784

Notes Payable at:
March 31, 2024	$	3,225,672	$	—	$	—	$	3,225,672	$	3,349,120
December 31, 2023	$	2,077,169	$	—	$	—	$	2,077,169	$	2,225,914

9.10. Related Party Transactions

Howard Schwimmer

We engage in transactions with Howard Schwimmer, our Co-Chief Executive Officer, earning management fees and leasing commissions from entities controlled individually by Mr. Schwimmer. Fees and commissions earned from these entities are included in “Management and leasing services” in the consolidated statements of operations. We recorded ~~$0.2~~$0.1 million and $0.2 million for the three months ended ~~September 30,~~March 31, 2024 and 2023, ~~and 2022, respectively, and $0.5 million and $0.4 million for the nine months ended September 30, 2023 and 2022,~~ respectively, in management and leasing services revenue.

~~10.~~11. Commitments and Contingencies

Legal

From time to time, we are party to various lawsuits, claims and legal proceedings that arise in the ordinary course of business. We are not currently a party to any legal proceedings that we believe would reasonably be expected to have a material adverse effect on our business, financial condition or results of operations.

Environmental

We will generally perform environmental site assessments at properties we are considering acquiring. After the acquisition of such properties, we continue to monitor the properties for the presence of hazardous or toxic substances. From time to time, we acquire properties with known adverse environmental conditions. If at the time of acquisition, losses associated with environmental remediation obligations are probable and can be reasonably estimated, we record a liability.

As of ~~September 30, 2023,~~March 31, 2024, we are not aware of any environmental liabilities that would have a material impact on our consolidated financial condition, results of operations or cash flows. However, we cannot be sure that we have identified all environmental liabilities at our properties, that all necessary remediation actions have been or will be undertaken at our properties or that we will be indemnified, in full or at all, in the event that such environmental liabilities arise. Furthermore, we

cannot assure you that future changes to environmental laws or regulations and their application will not give rise to loss contingencies for future environmental remediation.

Tenant and Construction Related Commitments

As of ~~September 30, 2023,~~March 31, 2024, we had commitments of approximately ~~$223.4~~$232.8 million for tenant improvement and construction work under the terms of leases with certain of our tenants and contractual agreements with our construction vendors.

Concentrations of Credit Risk

We have deposited cash with financial institutions that are insured by the Federal Deposit Insurance Corporation up to $250,000 per institution. Although from time to time we have deposits at institutions in excess of federally insured limits, ~~as of December 31, 2022,~~ we do not believe we are exposed to significant credit risk due to the financial position and high credit quality of the institutions in which those deposits are held.

Concentration of Properties in Southern California

As of ~~September 30, 2023,~~March 31, 2024, all of our properties are located in the Southern California infill markets. The ability of the tenants to honor the terms of their respective leases is dependent upon the economic, regulatory and social factors affecting the markets in which the tenants operate and other conditions.

Tenant Concentration

During the ~~nine~~three months ended ~~September 30, 2023,~~March 31, 2024, no single tenant accounted for more than 5% of our total consolidated rental income.

~~11.~~12. Equity

Preferred Stock

At ~~September 30, 2023~~March 31, 2024 and December 31, ~~2022,~~2023, we had the following series of Cumulative Preferred Shares outstanding (dollars in thousands):


						September 30, 2023			December 31, 2022
					March 31, 2024													March 31, 2024	December 31, 2023
Series	Series	Earliest Redemption Date	Dividend Rate			Shares Outstanding	Liquidation Preference		Shares Outstanding	Liquidation Preference		Series	Earliest Redemption Date	Dividend Rate	Shares Outstanding	Liquidation Preference	Shares Outstanding	Liquidation Preference
Series B	Series B	November 13, 2022	5.875	%		3,000,000	$	75,000	3,000,000	$	75,000
Series C	Series C	September 20, 2024	5.625	%		3,450,000	86,250		3,450,000	86,250
Total Preferred Shares	Total Preferred Shares					6,450,000	$	161,250	6,450,000	$	161,250

Common Stock

ATM Program

On February 17, 2023, we established an at-the-market equity offering program (“ATM program”) pursuant to which we are able to sell from time to time shares of our common stock having an aggregate sales price of up to $1.25 billion (the “2023 ATM Program”). The 2023 ATM Program replaces our previous $1.0 billion ATM ~~Program,~~program, which was established on May 27, ~~2022, under which we had sold shares of our common stock having an aggregate gross sales price of $834.6 million through February 17, 2023.~~2022.

In connection with our ATM programs, we may sell shares of our common stock directly through sales agents or we may enter into forward equity sale agreements with certain financial institutions acting as forward purchasers whereby, at our discretion, the forward purchasers may borrow and sell shares of our common stock under our ATM programs. The use of a forward equity sale agreement allows us to lock in a share price on the sale of shares of our common stock at the time the agreement is executed but defer settling the forward equity sale agreements and receiving the proceeds from the sale of shares until a later date. Additionally, the forward price that we expect to receive upon physical settlement of an agreement will be subject to adjustment for (i) a floating interest rate factor equal to a specified daily rate less a spread, (ii) the forward purchaser’s stock borrowing costs and (iii) scheduled dividends during the term of the agreement.

During the three months ended ~~September 30, 2023,~~March 31, 2024, we did not sell any shares of common stock directly through sales agents under the 2023 ATM Program. During the nine months ended September 30, 2023, we sold 449,227 shares of common stock directly through sales agents under the 2023 ATM Program at a weighted average price of $60.84 per share, for gross proceeds of $27.3 million, and net proceeds of $27.0 million after deducting the sales agents’ fees.

~~During the three months ended September 30, 2023, we did not~~or enter into ~~any~~ forward equity sale agreements under the 2023 ATM Program. ~~During the nine months ended September~~

30 2023, we entered into forward equity sale agreements with certain financial institutions acting as forward purchasers under the 2023 ATM Program with respect to 2,126,824 shares of common stock at a weighted average initial forward sale price of $60.09 per share. We did not receive any proceeds from the sale of common shares by the forward purchasers at the time we entered into forward equity sale agreements.

During the ~~nine~~three months ended ~~September 30, 2023,~~March 31, 2024, we physically settled the forward equity sale ~~agreement~~agreements that ~~was~~were outstanding as of December 31, ~~2022 under our previous ATM Program and all of the forward equity sale agreements~~2023 under the 2023 ATM Program by issuing ~~2,763,708~~3,010,568 shares of our common stock for net proceeds of ~~$163.2~~$164.5 million, based on a weighted average forward price of ~~$59.04~~$54.65 per share at settlement.

As of ~~September 30, 2023,~~March 31, 2024, approximately ~~$1.1 billion~~$927.4 million of common stock remains available to be sold under the 2023 ATM Program. Future sales, if any, will depend on a variety of factors, including among others, market conditions, the trading price of our common stock, determinations by us of the appropriate sources of funding for us and potential uses of funding available to us.

Settlement of May 2023 Forward Equity Offering

OnIn May ~~10,~~ 2023, we entered into forward equity sale agreements with certain financial institutions acting as forward purchasers in connection with an underwritten public offering of 13,500,000 shares of common stock at an initial forward price of $55.24 per share (the “May 2023 Forward Sale Agreements”), pursuant to which the forward purchasers borrowed and sold an aggregate of 13,500,000 shares of common stock in the offering. In 2023, we partially settled the May 2023 Forward Sale Agreements by issuing 11,246,966 shares of common stock, leaving a remaining 2,253,034 shares of common stock for settlement as of December 31, 2023.

During the three months ended March 31, 2024, we settled the outstanding May 2023 Forward Sale Agreements by issuing 2,253,034 shares of common stock for net proceeds of $125.7 million, based on a weighted average forward price of $55.79 per share at settlement.

March 2024 Forward Equity Offering

In March 2024, we entered into a forward equity sale agreement with a financial institution acting as forward purchaser in connection with an underwritten public offering of 17,179,318 shares of common stock (the “March 2024 Forward Sale Agreement”), pursuant to which, the forward purchaser borrowed and sold an aggregate of 17,179,318 shares of common stock in the offering. We did not receive any proceeds from the sale of common shares by the forward ~~purchasers~~purchaser at the time of the offering. The net forward sale price that we will receive upon physical settlement of the agreements, which was initially ~~$55.24~~$48.61 per share, will be subject to adjustment for (i) a floating interest rate factor equal to a specified daily rate less a spread, (ii) the forward ~~purchasers’~~purchaser’s stock borrowing costs and (iii) scheduled dividends during the term of the forward sale ~~agreements.~~agreement.

~~During~~As of March 31, 2024, we had not settled any portion of the ~~third quarter of 2023, we partially settled the May 2023~~March 2024 Forward Sale ~~Agreements by issuing 5,400,000 shares of common stock for net proceeds of $298.4 million, based on a weighted average forward price of $55.26 per share at settlement. We~~Agreement and currently expect to physically settle the ~~remaining 8,100,000~~17,179,318 shares under the March 2024 Forward Sales Agreement by issuing shares of our common stock in exchange for cash proceeds upon one or more settlement dates, at our discretion, prior to the scheduled maturity date of ~~October 11, 2024.~~March 27, 2025. As of ~~September 30, 2023,~~March 31, 2024, the net forward sale price was ~~$55.41~~$48.63 and would result in ~~$448.8~~$835.4 million in cash proceeds upon physical settlement of the shares under the ~~May 2023~~March 2024 Forward Sales ~~Agreements. See “Note 14 – Subsequent Events” for details related to the partial settlement of the May 2023 Forward Sales Agreements subsequent to September 30, 2023.~~

~~Settlement of 2022 Forward Equity Offering Sale Agreements~~

On November 10, 2022, we entered into forward equity sale agreements with certain financial institutions acting as forward purchasers in connection with an underwritten public offering of 11,846,425 shares of common stock at an initial forward price of $55.74 per share (the “2022 Forward Sale Agreements”), pursuant to which the forward purchasers borrowed and sold an aggregate of 11,846,425 shares of common stock in the offering. In December 2022, we partially settled the 2022 Forward Sale Agreements by issuing 3,554,704 shares of common stock, leaving a remaining 8,291,721 shares of common stock for settlement as of December 31, 2022.

During the first quarter of 2023, we settled the outstanding 2022 Forward Sale Agreements by issuing 8,291,721 shares of common stock for net proceeds of $462.8 million, based on a weighted average forward price of $55.81 per share at settlement.Agreement.

Changes in Accumulated Other Comprehensive Income

The following table summarizes the changes in our AOCI balance for the three and ~~nine~~three months ended ~~September 30,~~March 31, 2024 and 2023, ~~and 2022,~~ which consists solely of adjustments related to our cash flow hedges (in thousands):

Three Months Ended September 30, 2023 Nine Months Ended September 30,
2023 2022 2023 2022
Accumulated other comprehensive income (loss) - beginning balance $ 16,525 $ (2,974) $ 8,247 $ (9,874)
Other comprehensive income before reclassifications 7,997 12,326 20,354 17,743
Amounts reclassified from accumulated other comprehensive (income) loss to interest expense (3,237) 368 (7,041) 2,118
Net current period other comprehensive income 4,760 12,694 13,313 19,861
Less: other comprehensive income attributable to noncontrolling interests (143) (497) (418) (764)
Other comprehensive income attributable to common stockholders 4,617 12,197 12,895 19,097
Accumulated other comprehensive income (loss) - ending balance $ 21,142 $ 9,223 $ 21,142 $ 9,223


	Three Months Ended March 31,
		2024		2023
Accumulated other comprehensive income - beginning balance		$	7,172	$	8,247
Other comprehensive income (loss) before reclassifications		10,361		(4,206)
Amounts reclassified from accumulated other comprehensive income to interest expense		(3,382)		(1,136)
Net current period other comprehensive income (loss)		6,979		(5,342)
Less: other comprehensive (income) loss attributable to noncontrolling interests		(229)		212
Other comprehensive income (loss) attributable to common stockholders		6,750		(5,130)
Accumulated other comprehensive income - ending balance		$	13,922	$	3,117

Noncontrolling Interests

Noncontrolling interests relate to interests in the Operating Partnership, represented by common units of partnership interests in the Operating Partnership (“OP Units”), fully-vested LTIP units, fully-vested performance units, our three series of preferred units of partnership interest in the Operating Partnership (comprised of 4.43937%, 4.00% and 3.00% ~~Cumulative Redeemable Convertible Preferred Units~~cumulative

redeemable convertible preferred units of partnership interest in the Operating Partnership (the “CPOP Units”)), and the preferred units of the private REIT that we acquired on July 18, 2022, that are not owned by us.

Operating Partnership Units

As of ~~September 30, 2023,~~March 31, 2024, noncontrolling interests included ~~5,567,048~~5,517,108 OP Units, ~~792,646~~945,164 fully-vested LTIP units and ~~940,847~~1,146,943 fully-vested performance units, and represented approximately 3.4% of our Operating Partnership (excluding CPOP Units). OP Units and shares of our common stock have essentially the same economic characteristics, as they share equally in the total net income or loss and distributions of our Operating Partnership. Investors who own OP Units have the right to cause our Operating Partnership to redeem any or all of their units in our Operating Partnership for an amount of cash per unit equal to the then current market value of one share of common stock, or, at our election, shares of our common stock on a one-for-one basis. See “Note 1213 – Incentive Award Plan” for a description of LTIP units and Performance Units.

During the ~~nine~~three months ended ~~September 30, 2023, 313,791~~March 31, 2024, 53,949 OP Units were converted into an equivalent number of shares of common stock, resulting in the reclassification of ~~$12.4~~$2.1 million of noncontrolling interest to Rexford Industrial Realty, Inc.’s stockholders’ equity.

~~12.~~13. Incentive Award Plan

Second Amended and Restated 2013 Incentive Award Plan

We maintain one share-based incentive plan, the Second Amended and Restated Rexford Industrial Realty, Inc. and Rexford Industrial Realty, L.P. 2013 Incentive Award Plan (the “Plan”), pursuant to which, we may make grants of restricted stock, LTIP units of partnership interest in our Operating Partnership (“LTIP Units”), performance units in our Operating Partnership (“Performance Units”), dividend equivalents and other stock based and cash awards to our non-employee directors, employees and consultants.

As of ~~September 30, 2023,~~March 31, 2024, a total of ~~1,413,165~~552,791 shares of common stock, LTIP Units, Performance Units and other stock based awards remain available for issuance under the Plan. Shares and units granted under the Plan may be authorized but unissued shares or units, or, if authorized by the board of directors, shares purchased in the open market. If an award under the Plan is forfeited, expires, or is settled for cash, any shares or units subject to such award will generally be available for future awards.

LTIP Units and Performance Units

LTIP Units and Performance Units are each a class of limited partnership units in the Operating Partnership. Initially, LTIP Units and Performance Units do not have full parity with OP Units with respect to liquidating distributions. However, upon the occurrence of certain events described in the Operating Partnership’s partnership agreement, the LTIP Units and Performance Units can over time achieve full parity with the OP Units for all purposes. If such parity is reached, vested LTIP Units and vested Performance Units may be converted into an equal number of OP Units, and upon conversion, enjoy all rights of OP Units. Vested Performance Units and LTIP Units, whether vested or not, receive the same quarterly per-unit distributions as OP Units, which equal the per-share distributions on shares of our common stock. Performance Units that have not vested receive a quarterly per-unit distribution equal to 10% of the distributions paid on OP Units.

Share-Based Award Activity

The following table sets forth our unvested restricted stock activity and unvested LTIP Unit activity for the ~~nine~~three months ended ~~September 30, 2023:~~March 31, 2024:


		Unvested Awards
		Unvested Awards
		Unvested Awards
	Restricted Common Stock

		Unvested Awards
		Restricted Common Stock			LTIP Units
		Number of Shares	Weighted-Average Grant Date Fair Value per Share		Number of Units	Weighted-Average Grant Date Fair Value per Unit
Balance at January 1, 2023		274,416	$	56.92	313,051	$	54.84
Balance at January 1, 2024
Balance at January 1, 2024
Balance at January 1, 2024
Granted
Granted
Granted	Granted	204,147	$	59.01	64,705	$	57.24
Forfeited	Forfeited	(20,408)	$	62.92	—	$	—
Forfeited
Forfeited
Vested(1)	Vested(1)	(108,598)	$	52.68	(53,072)	$	55.81
Balance at September 30, 2023		349,557	$	59.10	324,684	$	55.16
Vested(1)
Vested(1)
Balance at March 31, 2024
Balance at March 31, 2024
Balance at March 31, 2024

(1)During the ~~nine~~three months ended ~~September 30, 2023, 32,028~~March 31, 2024, 38,164 shares of the Company’s common stock were tendered in accordance with the terms of the Plan to satisfy minimum statutory tax withholding requirements associated with the vesting of restricted shares of common stock.

The following table sets forth the vesting schedule of all unvested share-based awards outstanding as of ~~September 30, 2023:~~March 31, 2024:


	Unvested Awards						Unvested Awards
		Unvested Awards			Restricted Common Stock	LTIP Units		Performance Units(1)
		Restricted Common Stock	LTIP Units	Performance Units(1)
October 1, 2023 - December 31, 2023		1,403	127,120	476,915
2024		136,375	105,022	366,004
April 1, 2024 - December 31, 2024
2025	2025	97,127	74,010	673,188
2026	2026	71,030	12,040	—
2027	2027	43,622	6,492	—
2028
Total	Total	349,557	324,684	1,516,107

(1)Represents the maximum number of Performance Units that would become earned and vested in December of ~~2023, December of~~ 2024, ~~and~~ November/December of 2025, and December of 2026, in the event that the specified maximum total shareholder return (“TSR”) and FFO per share growth hurdles are achieved at the end of the three-year performance period for awards that were initially granted in December of ~~2020,~~2021, November of 2022, and December of ~~2021, and November of 2022,~~2023, respectively.

Compensation Expense

The following table sets forth the amounts expensed and capitalized for all share-based awards for the reported periods presented below (in thousands):


		Three Months Ended September 30,				Nine Months Ended September 30,
		2023		2022		2023		2022

		2024
		2024
		2024
Expensed share-based compensation(1)
Expensed share-based compensation(1)
Expensed share-based compensation(1)	Expensed share-based compensation(1)	$	8,166	$	6,316	$	24,300	$	18,710
Capitalized share-based compensation(2)	Capitalized share-based compensation(2)	275		167		740		454
Capitalized share-based compensation(2)
Capitalized share-based compensation(2)
Total share-based compensation	Total share-based compensation	$	8,441	$	6,483	$	25,040	$	19,164
Total share-based compensation
Total share-based compensation

(1)Amounts expensed are included in “General and administrative” and “Property expenses” in the accompanying consolidated statements of operations.

(2)For the three ~~and nine~~ months ended ~~September 30,~~March 31, 2024 and 2023, ~~and 2022,~~ amounts capitalized relate to employees who provide construction services, and are included in “Building and improvements” in the consolidated balance sheets.

As of ~~September 30, 2023,~~March 31, 2024, total unrecognized compensation cost related to all unvested share-based awards was ~~$42.8~~$65.3 million and is expected to be recognized over a weighted average remaining period of 2528 months.

3533

~~13.~~14. Earnings Per Share

The following table sets forth the computation of basic and diluted earnings per share (in thousands, except share and per share amounts):






		Three Months Ended September 30,				Nine Months Ended September 30,
		2023		2022		2023		2022
Numerator:	Numerator:
Numerator:
Numerator:
Net income	Net income	$	61,790	$	41,648	$	182,270	$	131,449
Net income
Net income
Less: Preferred stock dividends
Less: Preferred stock dividends
Less: Preferred stock dividends	Less: Preferred stock dividends	(2,314)		(2,314)		(6,943)		(6,943)

Less: Net income attributable to noncontrolling interests	Less: Net income attributable to noncontrolling interests	(2,824)		(2,368)		(8,605)		(7,142)

Less: Net income attributable to noncontrolling interests

Less: Net income attributable to noncontrolling interests
Less: Net income attributable to participating securities	Less: Net income attributable to participating securities	(314)		(201)		(952)		(605)
Less: Net income attributable to participating securities
Less: Net income attributable to participating securities
Net income attributable to common stockholders – basic and diluted
Net income attributable to common stockholders – basic and diluted
Net income attributable to common stockholders – basic and diluted	Net income attributable to common stockholders – basic and diluted	$	56,338	$	36,765	$	165,770	$	116,759

Denominator:	Denominator:

Denominator:

Denominator:
Weighted average shares of common stock outstanding – basic	Weighted average shares of common stock outstanding – basic	205,279,681		171,908,895		200,455,490		165,852,466
Weighted average shares of common stock outstanding – basic
Weighted average shares of common stock outstanding – basic
Effect of dilutive securities
Effect of dilutive securities
Effect of dilutive securities	Effect of dilutive securities	167,851		922,278		212,083		548,968

Weighted average shares of common stock outstanding – diluted	Weighted average shares of common stock outstanding – diluted	205,447,532		172,831,173		200,667,573		166,401,434

Weighted average shares of common stock outstanding – diluted

Weighted average shares of common stock outstanding – diluted

Earnings per share — Basic

Earnings per share — Basic

Earnings per share — Basic	Earnings per share — Basic
Net income attributable to common stockholders	Net income attributable to common stockholders	$	0.27	$	0.21	$	0.83	$	0.70
Net income attributable to common stockholders
Net income attributable to common stockholders
Earnings per share — Diluted
Earnings per share — Diluted
Earnings per share — Diluted	Earnings per share — Diluted
Net income attributable to common stockholders	Net income attributable to common stockholders	$	0.27	$	0.21	$	0.83	$	0.70
Net income attributable to common stockholders
Net income attributable to common stockholders

Unvested share-based payment awards that contain non-forfeitable rights to dividends, whether paid or unpaid, are accounted for as participating securities. As such, unvested shares of restricted stock, unvested LTIP Units and unvested Performance Units are considered participating securities. Participating securities are included in the computation of basic EPS pursuant to the two-class method. The two-class method determines EPS for each class of common stock and each participating security according to dividends declared (or accumulated) and their respective participation rights in undistributed earnings. Participating securities are also included in the computation of diluted EPS using the more dilutive of the two-class method or treasury stock method for unvested shares of restricted stock and LTIP Units, and by determining if certain market conditions have been met at the reporting date for unvested Performance Units.

The effect of including unvested shares of restricted stock and unvested LTIP Units using the treasury stock method was excluded from our calculation of weighted average shares of common stock outstanding – diluted, as their inclusion would have been anti-dilutive.

Performance Units, which are subject to vesting based on the Company achieving certain TSR levels and FFO per share growth over a three-year performance period, are included as contingently issuable shares in the calculation of diluted EPS when TSR and/or FFO per share growth has been achieved at or above the threshold levels specified in the award agreements, assuming the reporting period is the end of the performance period, and the effect is dilutive.

Shares issuable under forward equity sale agreements during the period prior to settlement are reflected in our calculation of weighted average shares of common stock outstanding – diluted using the treasury stock method as the impact was dilutive for the periods presented above.

We also consider the effect of other potentially dilutive securities, including the CPOP Units and OP Units, which may be redeemed for shares of our common stock under certain circumstances, and include them in our computation of diluted EPS under the if-converted method when their inclusion is dilutive. These units were not dilutive for the periods presented above. Additionally, as of March 31, 2024, the Exchangeable Notes were not included in the computation of diluted earnings per share as they were anti-dilutive for the three months ended March 31, 2024.

3634

~~14.~~15. Subsequent Events

Acquisitions

The following table summarizes the properties we acquired subsequent to March 31, 2024:

Property

Submarket

Date of Acquisition

Rentable Square Feet

Number of Buildings

Contractual Purchase Price

(in thousands)(1)

4422 Airport Drive

Inland Empire West

4/5/2024

88,283

26,725

(1)Represents the gross contractual purchase price before credits, prorations, closing costs and other acquisition related costs.

Dispositions

On April 16, 2024, we completed the sale of the property located at 2360-2364 East Sturgis Road in Oxnard, California for a contract price of $10.0 million.

Dividends and Distributions Declared

On ~~October 16, 2023,~~April 15, 2024, our board of directors declared the following quarterly cash dividends/distributions, record dates and payment dates.

Security

Amount per Share/Unit

Record Date

Payment Date

Common stock

~~0.38~~0.4175

~~December 29, 2023~~June 28, 2024

~~January 16,~~July 15, 2024

OP Units

~~0.38~~0.4175

~~December 29, 2023~~June 28, 2024

~~January 16,~~July 15, 2024

5.875% Series B Cumulative Redeemable Preferred Stock

0.367188

~~December 15, 2023~~June 14, 2024

~~December 29, 2023~~June 28, 2024

5.625% Series C Cumulative Redeemable Preferred Stock

0.351563

~~December 15, 2023~~June 14, 2024

~~December 29, 2023~~June 28, 2024

~~4.43937% Cumulative Redeemable Convertible Preferred Units~~

~~0.505085~~

~~December 15, 2023~~

~~December 29, 2023~~

4.00% Cumulative Redeemable Convertible Preferred Units

0.45

~~December 15, 2023~~June 14, 2024

~~December 29, 2023~~June 28, 2024

3.00% Cumulative Redeemable Convertible Preferred Units

0.545462

~~December 15, 2023~~June 14, 2024

~~December 29, 2023~~June 28, 2024

~~Partial Settlement~~Conversion of ~~May 2023 Forward Sale Agreements~~Series 1 CPOP Units to OP Units

On April 10, 2024, we exercised our conversion right to convert all 593,960 4.43937% Cumulative Redeemable Convertible Preferred Units (the “Series 1 CPOP Units”) of partnership interest in the Operating Partnership into 593,960 OP Units. In ~~October 2023,~~connection with the conversion of the Series 1 CPOP Units, we ~~partially settled~~paid the ~~May 2023 Forward Sale Agreements by issuing 4,611,653 shares~~holder a prorated cash distribution of ~~common stock in exchange~~$30 thousand for ~~net proceeds of $256.1 million, based on a weighted average forward price of $55.54 per share at settlement.~~the period from April 1, 2024 through April 9, 2024.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion should be read in conjunction with the consolidated financial statements and the related notes thereto that appear in Part I, Item 1 “Financial Statements” of this Quarterly Report on Form 10-Q. The terms “Company,” “we,” “us,” and “our” refer to Rexford Industrial Realty, Inc. and its consolidated subsidiaries except where the context otherwise requires.

Forward-Looking Statements

We make statements in this quarterly report that are forward-looking statements, which are usually identified by the use of words such as “anticipates,” “believes,” “expects,” “intends,” “may,” “might,” “plans,” “estimates,” “projects,” “seeks,” “should,” “will,” “result” and variations of such words or similar expressions. Our forward-looking statements reflect our current views about our plans, intentions, expectations, strategies and prospects, which are based on the information currently available to us and on assumptions we have made. Although we believe that our plans, intentions, expectations, strategies and prospects as reflected in or suggested by our forward-looking statements are reasonable, we can give no assurance that our plans, intentions, expectations, strategies or prospects will be attained or achieved and you should not place undue reliance on these forward-looking statements. Furthermore, actual results may differ materially from those described in the forward-looking statements and may be affected by a variety of risks and factors including, without limitation:

•the competitive environment in which we operate;

•real estate risks, including fluctuations in real estate values and the general economic climate in local markets and competition for tenants in such markets;

•decreased rental rates or increasing vacancy rates;

•potential defaults on or non-renewal of leases by tenants;

•potential bankruptcy or insolvency of ~~tenants;~~tenants or our borrower;

•acquisition risks, including failure of such acquisitions to perform in accordance with expectations;

•the timing of acquisitions and dispositions;

•risks associated with redevelopment and repositioning activities, including the possibility that costs may exceed original estimates, the time to complete a project or to lease up the completed project may be greater than originally anticipated or changes in entitlements or laws may impact or prevent execution of intended projects;

•potential natural disasters such as earthquakes, wildfires or floods;

•the consequence of any future security alerts and/or terrorist attacks;

•national, international, regional and local economic conditions, including impacts and uncertainty from trade disputes and tariffs on goods imported to the United States and goods exported to other countries;

•the general level of interest rates;

•potential impacts of inflation;

•potential changes in the law or governmental regulations that affect us and interpretations of those laws and regulations, including changes in real estate and zoning or REIT tax laws, and potential increases in real property tax rates;

•financing risks, including the risks that our cash flows from operations may be insufficient to meet required payments of principal and interest and we may be unable to refinance our existing debt upon maturity or obtain new financing on attractive terms or at all;

•lack of or insufficient amounts of insurance;

•our failure to complete acquisitions;

•our failure to successfully integrate acquired properties;

•our ability to qualify and maintain our qualification as a REIT;

•our ability to maintain our current investment grade rating by Fitch Ratings (“Fitch”), Moody’s Investors Services (“Moody’s”) or from Standard and Poor’s Ratings Services (“S&P”);

•litigation, including costs associated with prosecuting or defending pending or threatened claims and any adverse outcomes;

•possible environmental liabilities, including costs, fines or penalties that may be incurred due to necessary remediation of contamination of properties presently owned or previously owned by us;

•an epidemic or pandemic, and the measures that international, federal, state and local governments, agencies, law enforcement and/or health authorities may implement to address it, which may precipitate or exacerbate one or more

3836

of the above-mentioned factors and/or other risks, and significantly disrupt or prevent us from operating our business in the ordinary course for an extended period; and

•other events outside of our control.

Accordingly, there is no assurance that our expectations will be realized. Except as otherwise required by the federal securities laws, we disclaim any obligations or undertaking to publicly release any updates or revisions to any forward-looking statement contained herein (or elsewhere) to reflect any change in our expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based. The reader should carefully review our financial statements and the notes thereto, as well as the section entitled “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, ~~2022.~~2023.

Company Overview

Rexford Industrial Realty, Inc. is a self-administered and self-managed full-service REIT focused on owning and operating industrial properties in Southern California infill markets. We were formed as a Maryland corporation on January 18, 2013, and Rexford Industrial Realty, L.P. (the “Operating Partnership”), of which we are the sole general partner, was formed as a Maryland limited partnership on January 18, 2013. Through our controlling interest in our Operating Partnership and its subsidiaries, we acquire, own, improve, reposition, redevelop, lease and manage industrial real estate principally located in Southern California infill markets, and, from time to time, acquire or provide mortgage debt secured by industrial zoned property or property suitable for industrial development. We are organized and conduct our operations to qualify as a REIT under the Code ~~as amended,~~ and generally are not subject to federal taxes on our income to the extent we distribute our income to our shareholders and maintain our qualification as a REIT.

As of ~~September 30, 2023,~~March 31, 2024, our consolidated portfolio consisted of ~~371~~422 properties with approximately ~~45.0~~49.2 million rentable square feet.

Our goal is to generate attractive risk-adjusted returns for our stockholders by providing superior access to industrial property investments in high-barrier Southern California infill markets. Periodically we also engage in mortgage debt investments secured by industrial zoned property or property suitable for industrial development within these markets. Our target markets provide us with opportunities to acquire both stabilized properties generating favorable cash flow, as well as properties or land parcels where we can enhance returns through value-add repositioning and redevelopments. Scarcity of available space and high barriers limiting new construction of for-lease product all contribute to create superior long-term supply/demand fundamentals within our target infill Southern California industrial property markets. With our vertically integrated operating platform and extensive value-add investment and management capabilities, we believe we are positioned to capitalize upon the opportunities in our markets to achieve our objectives.

~~2023~~2024 Year to Date Highlights

Financial and Operational Highlights

•Net income attributable to common stockholders increased by ~~42.0%~~1.3% to ~~$165.8~~$58.6 million for the ~~nine~~three months ended ~~September 30, 2023,~~March 31, 2024, compared to the prior year.

•Core funds from operations (Core FFO)(1) attributable to common stockholders increased by ~~33.4%~~20.3% to ~~$326.0~~$123.5 million for the ~~nine~~three months ended ~~September 30, 2023,~~March 31, 2024, compared to the prior year.

•Net operating income (NOI)(1) increased by ~~30.4%~~14.9% to ~~$448.3~~$163.5 million for the ~~nine~~three months ended ~~September 30, 2023,~~March 31, 2024, compared to the prior year.

•Total portfolio occupancy at ~~September 30, 2023~~March 31, 2024 was ~~94.1%~~92.8%.

•Same Property Portfolio(2) average occupancy for the ~~nine~~three months ended ~~September 30, 2023~~March 31, 2024 was ~~97.9%~~96.8% and ending occupancy at ~~September 30, 2023~~March 31, 2024 was ~~97.9%~~96.4%.

•Executed a total of ~~355~~114 new and renewal leases with a combined ~~5.4~~3.2 million rentable square feet, with leasing spreads of ~~81.6%~~17.3% on a GAAP basis and ~~62.5%~~13.2% on a cash basis. Excluding one lease extension on a 1.1 million rentable square foot lease, leasing spreads were 53.0% on a GAAP basis and 33.6% on a cash basis.

__________________________

(1) See “Non-GAAP Supplemental Measures: Funds From Operations” and “Non-GAAP Supplemental Measures: NOI and Cash NOI” included under Item 2 of this Form 10-Q for a definition and reconciliation of Core FFO and NOI from net income and a discussion of why we believe Core FFO and NOI are useful supplemental measures of operating performance.

(2) For a definition of “Same Property Portfolio,” see “Results of Operations” included under Item 2 of this Form 10-Q.

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Acquisitions

•During the first quarter of ~~2023,~~2024, we completed ~~five acquisitions~~$1.1 billion in total investments representing ~~seven~~49 properties with ~~1.8~~3.2 million rentable square feet of buildings on 99158 acres of ~~land for an aggregate purchase price of $762.2 million.~~

•During the second quarter of 2023, we completed the acquisition of three properties with 0.2 million rentable square feet of buildings on 15 acres of land for an aggregate purchase price of $83.3 million.

•During the third quarter of 2023, we completed the acquisition of six properties with 1.1 million rentable square feet of buildings on 44 acres of land for an aggregate purchase price of $314.8 million.

~~Dispositions~~

•~~During the first quarter of 2023, we sold one property with 48,394 rentable square feet for a gross sales price of $17.0 million and recognized $12.1 million in gains on sale of real estate.~~land.

Repositioning & Redevelopment

•During the ~~second~~first quarter of ~~2023,~~2024, we stabilized ~~four~~two of our ~~repositioning/redevelopment properties~~repositioning projects located at ~~12821 Knott Street, 14100 Vine Place~~9755 Distribution Avenue and ~~15601 Avalon Boulevard, which have a combined 374,564 rentable~~8902-8940 Activity Road, with two spaces totaling 38,021 square ~~feet, and 12133 Greenstone Avenue, a single-tenant container storage facility on 4.8 acres of land.~~feet.

•During the ~~second~~first quarter of ~~2023,~~2024, we leased our repositioning property located at 444 Quay Avenue. The lease commenced in April 2024. We also pre-leased our repositioning property located at 17311 Nichols Lane. The lease is expected to commence in the third quarter of 2024 following the completion of construction.

•During the first quarter of 2024, we also completed construction of four other repositioning/redevelopment properties located at 500 Dupont Avenue, 11308-11350 Penrose Street, 4039 Calle Platino and 3071 Coronado Street. As of March 31, 2024 these four properties and two ~~of our repositioning/redevelopment~~other properties located at 20851 Currier Road and 12752-12822 Monarch ~~Street. As of September 30, 2023, these two properties and our property located at 8210-8240 Haskell Avenue,~~Street, were in the lease-up stage.

Equity

•During the first quarter of ~~2023,~~2024, we issued ~~11,504,656~~5,263,602 shares of common stock for total net proceeds of ~~$653.0~~$290.2 million through ~~a range of~~the following equity ~~transactions, as follows:~~transactions:

◦We ~~sold 449,227 shares~~settled the forward equity sale agreement that was outstanding as of ~~common stock directly through sales agents~~December 31, 2023 under our 2023 at-the-market equity offering program ~~at a weighted average price of $60.84 per share, for gross proceeds of $27.3 million, and net proceeds of $27.0 million after deducting the sales agents’ fee.~~

◦~~We entered into forward equity sales agreements under our at-the-market equity offering program with respect to 2,126,824~~by issuing 3,010,568 shares of our common stock at a weighted average initial forward sale price of $60.09 per share. We settled these forward equity sale agreements and the outstanding forward sale agreement under our at-the-market equity offering program from 2022 by issuing 2,763,708 shares of common stock in exchange for net proceeds of ~~$163.2~~$164.5 million, based on a weighted average forward price of ~~$59.04~~$54.65 per share at settlement.

◦We settled the ~~outstanding~~remaining forward equity ~~sales~~sale agreements ~~from~~related to our ~~November 2022~~May 2023 underwritten public offering by issuing ~~8,291,721~~2,253,034 shares of common stock for net proceeds of ~~$462.8~~$125.7 million, based on a weighted average forward price of ~~$55.81~~$55.79 per share at settlement.

•~~During the second quarter of 2023,~~In March 2024, we ~~entered into forward equity sale agreements with certain financial institutions acting as forward purchasers in connection with an underwritten~~completed a public offering of ~~13,500,000 shares of our common stock at an initial forward sale price $55.24 per share, or $745.7 million.~~

•~~During the third quarter of 2023, we partially settled the outstanding forward equity sale agreements related to the public offering by issuing 5,400,000~~17,179,318 shares of common stock ~~in exchange for net proceeds of $298.4 million.~~

•~~Subsequent~~ to ~~September 30, 2023, in October 2023, we partially settled~~an existing long-only investor based on the ~~outstanding~~West Coast, subject to a forward equity sale ~~agreements related to the public~~agreement, at a price of $48.95 per share for a gross offering ~~by issuing 4,611,653 shares~~value of ~~common stock in exchange for net proceeds of $256.1~~$840.9 million.

•As of the date of this filing, we had ~~3,488,347 shares of common stock, or~~ approximately ~~$193.8~~$837.3 million of forward net proceeds remaining for settlement prior to ~~October 11, 2024,~~March 27, 2025, based on a weighted average forward sale price of ~~$55.55~~$48.74 per share.

Financing

•In February 2023, we certified that the sustainability performance target associated with our senior unsecured credit agreement was met for 2022, resulting in the reduction of the applicable margin and applicable credit facility fee by 0.04% and 0.01%, respectively.

•In March ~~2023,~~2024, we completed ~~an underwritten public offering~~the issuance of ~~$300.0~~three-year $575.0 million ~~of 5.000% Senior Notes due 2028 (the “$300 Million Notes”). The $300 Million Notes were issued to the public at 98.975% of the principal amount,~~exchangeable senior notes with a 4.375% coupon and ~~net~~a 30% conversion premium and five-year $575.0 million exchangeable senior notes with a 4.125% coupon and a 30% conversion premium. Net proceeds were ~~$295.1 million~~approximately $1.126 billion after deducting the ~~underwriting discount.~~

•In March 2023, we executed four forward starting interest rate swaps with an aggregate notional value of $400.0 million to fix daily SOFR related to our $400.0 million term loan at a rate of 3.97231% commencing on April 3, 2023initial purchasers' discounts and ~~maturing on June 30, 2025, resulting in an all-in fixed rate of 4.83231%.~~

•In March 2023, we executed one forward starting interest rate swap with a notional value of $60.0 million to fix 1-month term SOFR related to our $60.0 million term loan at a rate of 3.71% commencing on April 3, 2023commissions and ~~maturing on July 30, 2026, resulting in an all-in fixed rate of 5.06%.~~offering expenses.

Factors That May Influence Future Results of Operations

Market and Portfolio Fundamentals

Our operating results depend upon the infill Southern California industrial real estate market.

The infill Southern California industrial real estate sector continues to exhibit strong long-term fundamentals. These high-barrier infill markets are characterized by a relative scarcity of highly functional product, coupled with the limited ability to introduce new supply due to high land and redevelopment costs and a dearth of developable land in markets experiencing a net reduction in supply as, over time, more industrial property is converted to non-industrial uses than can be delivered. Meanwhile, despite the post-pandemic normalization of demand, underlying tenant demand within our infill target markets continues to be healthy, which is illustrated ~~or driven~~ by strong ~~re-leasing spreads and~~ renewal leasing activity, a dynamic regional economy, ~~growth in~~continued ecommerce ~~transaction~~activity and delivery volumes, as well as further compression of delivery time-frames to consumers and to businesses, increasing the significance of last-mile facilities for timely fulfillment. That said, economic uncertainties as a result of inflation and higher interest rates along with fluctuations of west coast port activity, port labor relations and the normalization of market vacancy and rent growth could impact future demand, rental rates and vacancy withinWhile we believe that our infill Southern California ~~market.~~industrial property markets have demonstrated a high degree of resiliency related to occupancy and rental rates in the context of key market drivers over the last several years, we expect some ongoing volatility within our markets through the near term, principally driven by continued inflation and heightened uncertainty in the interest rate environment exacerbated by the

current global geopolitical unrest. Market rent growth has normalized and decreased in the quarter in our infill Southern California markets, after increasing by approximately 80%, on average, through the pandemic.

Tenant demand remains healthy within our portfolio, which is strategically located within prime infill Southern California industrial markets. The quality and intensity of tenant demand through the ~~third~~first quarter of ~~2023~~2024 is demonstrated through the Company’s strong leasing spreads and volume ~~achieving rental rates~~ and ~~related terms from new and renewing tenants that have generally exceeded those from historical years~~retention rate (see “—Leasing Activity and Rental Rates” below). This tenant demand has been driven by a wide range of sectors, from consumer products, healthcare and medical products to aerospace, food, construction and logistics, as well as by an emerging electric vehicle industry, among other sectors. We also continue to observe a notable volume of ecommerce-oriented tenants securing space within our ~~portfolio, which accelerated the growth~~infill property locations driven in ~~the range and volume of goods and customers transacting through ecommerce. In addition, ecommerce-related~~part by delivery demand associated with last-mile distribution and local omnichannel retail fulfillment which are driving discernible shifts in inventory-handling strategies among retailers and ~~distributors, which we believe is driving incremental demand for our infill property locations.~~distributors. Our portfolio, which we believe represents prime locations with superior functionality within the largest last-mile logistics distribution market in the nation, is well-positioned to continue to serve our existing diverse tenant base and attract incremental ecommerce-oriented and traditional distribution ~~demand.~~demand over the long-term.

We believe our portfolio’s leasing performance during the ~~third~~first quarter of ~~2023~~2024 has generally outpaced that of the infill markets within which we operate, and, as discussed in more detail below, our target infill markets continue to operate at high levels of occupancy. We believe this performance has been driven by our highly entrepreneurial business model focused on acquiring and improving industrial property in superior locations so that our portfolio reflects a higher level of quality and functionality, on average, as compared to typical available product within the markets within which we operate. We believe that our portfolio, with last-mile infill locations and a smaller average tenant size versus other non-infill competitors, is well positioned to serve regional consumption and less susceptible to changes in global trade flows. We also believe the quality and entrepreneurial approach demonstrated by our team of real estate professionals actively managing our properties and our tenants enables the potential to outcompete within our markets that we believe are generally otherwise owned by more passive, less-focused real estate owners.

General Market Conditions

The following general market conditions have been sourced from third-party market data and do not necessarily reflect the results of our portfolio. For our portfolio specific results see “—Rental Revenues” and “—Results of Operations” below.

In Los Angeles County, vacancy increased quarter-over-quarter and average asking lease rates decreased slightly ~~quarter-over-quarter after reaching a record~~quarter-over-quarter. Occupancy generally remains at high ~~in the first half of 2023. Occupancy has returned to 2019 pre-COVID~~ levels ~~which represented a healthy industrial market at that time,~~ and new development is limited by a lack of land availability and an increase in land and development costs.

In Orange County, ~~market fundamentals remained strong during the third quarter of 2023. Average~~average asking lease rates ~~increased marginally~~decreased quarter-over-quarter and vacancy increased ~~slightly~~ quarter-over-quarter while still remaining at ~~near-record~~ low vacancy levels. ~~Current market~~Market conditions are expected to ~~remain solid~~be favorable over the long-term due to ~~consistent~~steady demand and the continued low availability of industrial product in this region.

In the Inland Empire West, which contains infill markets in which we operate, vacancy increased slightly quarter-over-quarter, ~~in part~~primarily due to the number of units over 100,000 square feet that were available. In contrast, vacancy in the Company’s Same Property Portfolio was flat for units over 100,000 square feet and decreased by 60 basis points overall compared to the prior quarter driven by the Company’s limited exposure to unit sizes that are experiencing an increase inexcess new construction supply in ~~the Inland Empire West market. Average~~larger unit size ranges, and average taking lease rates in the market decreased quarter-over-quarter. We generally do not focus on properties located within the non-infill Inland Empire East sub-market where available land and the development and construction pipeline for new supply is substantial.

In San Diego, vacancy ~~was unchanged quarter-over-quarter remaining below pre-COVID levels and average asking lease rates decreased slightly quarter-over-quarter.~~

~~In Ventura County, vacancy~~ increased ~~slightly~~ quarter-over-quarter and average asking lease rates ~~decreased~~increased quarter-over-quarter.

In Ventura County, vacancy was flat quarter-over-quarter and average asking lease rates increased quarter-over-quarter.

Acquisitions and Value-Add Repositioning and Redevelopment of Properties

The Company’s growth strategy comprises acquiring leased, stabilized properties as well as properties with value-add opportunities to improve functionality and to deploy our value-driven asset management programs in order to increase cash flow and value. Additionally, from time to time, we may acquire industrial outdoor storage sites, land parcels or properties with excess land for ground-up redevelopment projects. Acquisitions may comprise single property investments as well as the purchase of portfolios of properties, with transaction values ranging from approximately $10 million single property investments to portfolios potentially valued in the billions of dollars. The Company’s geographic focus remains infill Southern California. However, from time-to-time, portfolios could be acquired comprising a critical mass of infill Southern California industrial property that could include some assets located in markets outside of infill Southern California. In general, to the extent non-infill-Southern California assets were to be acquired as part of a larger portfolio, the Company may underwrite such investments with the potential to dispose such assets over a certain period of time in order to maximize its core focus on infill Southern California, while endeavoring to take appropriate steps to satisfy REIT safe harbor requirements to avoid prohibited transactions under REIT tax laws. Similarly, while our focus is owning and operating industrial properties in Southern California infill markets, occasionally an acquisition may include non-industrial properties, such as office and other uses, with the intent to reposition or redevelop the properties into industrial use or to dispose of the non-industrial assets in a manner intended to satisfy REIT safe harbor requirements to avoid prohibited transactions under REIT tax laws.

A key component of our growth strategy is to acquire properties through off-market and lightly marketed transactions that are often operating at below-market occupancy or below-market rent at the time of acquisition or that have near-term lease roll-over or that provide opportunities to add value through functional or physical repositioning and improvements. Through various repositioning, redevelopment, and professional leasing and marketing strategies, we seek to increase the properties’ functionality and attractiveness to prospective tenants and, over time, to stabilize the properties at occupancy rates that meet or exceed market rates.

A repositioning can provide a range of property improvements. This may include a complete structural renovation of a property whereby we convert large underutilized spaces into a series of smaller and more functional spaces, or it may include the creation of additional square footage, the modernization of the property site, the elimination of functional obsolescence, the addition or enhancement of loading areas and truck access, the enhancement of fire-life-safety systems or other accretive improvements, in each case designed to improve the cash flow and value of the property.

We have a number of significant repositioning properties, which are individually presented in the tables below. A repositioning property that is considered significant is typically defined as a property where a significant amount of space is held vacant in order to implement capital improvements, the cost to complete repositioning work and lease-up is estimated to be greater than $1 million and the repositioning and lease-up time frame is estimated to be greater than six months. We also have a range of other spaces in repositioning, that due to their smaller size, relative scope, projected repositioning costs or relatively nominal amount of down-time, are not presented below, however, in the aggregate, may be substantial (and which we refer to as “other repositioning projects”).

A repositioning is generally considered complete once the investment is fully or nearly fully deployed and the property is available for occupancy. Because each repositioning effort is unique and determined based on the property, targeted tenants and overall trends in the general market and specific submarket, the timing and effect of the repositioning on our rental revenue and occupancy levels will vary, and, as a result, will affect the comparison of our results of operations from period to period with limited predictability.

A redevelopment property is defined as a property where we plan to fully or partially demolish an existing building(s) due to building obsolescence and/or a property with excess or vacant land where we plan to construct a ground-up building.

As of ~~September 30, 2023, 26~~March 31, 2024, 28 of our properties were under current repositioning or redevelopment and ~~three~~seven of our properties were in the lease-up stage. In addition, we have a pipeline of ~~ten~~nine additional properties for which we anticipate beginning repositioning/redevelopment construction work between the ~~fourth~~second quarter of ~~2023~~2024 and the second quarter of 2025. The tables below set forth a summary of these properties, as well as the properties that were most recently stabilized in ~~2022~~2023 and ~~2023,~~2024, as the timing of these stabilizations have a direct impact on our current and comparative results of operations. Furthermore, we estimate that over the next four years we have up to approximately ~~6.0~~5.0 million rentable square feet of additional repositioning/redevelopment projects embedded in our portfolio that are not currently listed in the tables below. We consider a repositioning/redevelopment property to be stabilized upon the earlier of (i) reaching 90% occupancy or (ii) one year from the date construction work is completed.

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Estimated Construction Period(1)

Property (Submarket)

Market

Total Property Rentable Square Feet(2)

Repositioning/ Lease-up Rentable Square Feet(2)

Start

Completion

Total Property Leased % at 9/30/2023

Market

Total Property Rentable Square Feet(2)

Repositioning/ Lease-up Rentable Square Feet(2)

Start

Completion

Total Property Leased % at 3/31/2024

Current Repositioning:

19431 Santa Fe Avenue (South Bay)

LAND

1Q-2022

4Q-2023

100%(3)

2800 Casitas Avenue (SF Valley)

116,158

1Q-2023

4Q-2023

—%

2880 Ana Street (South Bay)

LAND

3Q-2023

2Q-2024

—%

14434-14527 San Pedro Street (South Bay)

58,094

3Q-2023

2Q-2025

—%

29120 Commerce Center Drive (SF Valley)

135,258

3Q-2023

4Q-2025

100%(3)

263-321 Gardena Blvd (South Bay)

55,238

4Q-2023

3Q-2024

—%

17311 Nichols Lane (OC West)

104,182

1Q-2024

2Q-2024

100%(4)

East 27th Street (Central LA)

300,389

126,563

1Q-2024

4Q-2024

58%

122-125 N. Vinedo Avenue (SF Valley)

48,381

1Q-2024

4Q-2024

—%

1020 Bixby Drive (SG Valley)

56,915

1Q-2024

4Q-2024

—%

12907 Imperial Highway (Mid-Counties)

101,080

1Q-2024

4Q-2024

—%

17000 Kingsview (South Bay)

100,121

1Q-2024

1Q-2025

77%(5)

29125 Avenue Paine (SF Valley)

175,897

1Q-2024

3Q-2025

100%(6)

Total Current Repositioning

Lease-up (Repositioning):

20851 Currier Road (SG Valley)

59,412

1Q-2023

2Q-2023

100%(7)

444 Quay Avenue (South Bay)

26,700

1Q-2023

4Q-2023

—%

444 Quay Avenue (South Bay)

26,700

1Q-2023

1Q-2024

100%(8)

500 Dupont Avenue (IE - West)

274,852

1Q-2023

1Q-2024

—%

500 Dupont Avenue (IE - West)

274,898

1Q-2023

1Q-2024

—%

11308-11350 Penrose Street (SF Valley)

151,011

71,547

1Q-2023

1Q-2024

53%

11308-11350 Penrose Street (SF Valley)

151,011

71,547

1Q-2023

1Q-2024

53%

9755 Distribution Avenue (Central SD)

47,666

23,726

2Q-2023

4Q-2023

50%

4039 Calle Platino (North County SD)

143,552

73,696

2Q-2023

1Q-2024

70%

4039 Calle Platino (North County SD)

143,663

73,807

2Q-2023

1Q-2024

79%

8902-8940 Activity Road (Central SD)

112,876

13,950

3Q-2023

1Q-2024

87%

2880 Ana Street (South Bay)

LAND

3Q-2023

1Q-2024

—%

29120 Commerce Center Drive (SF Valley)

135,258

3Q-2023

3Q-2024

100%(4)

14434-14527 San Pedro Street (South Bay)

58,094

3Q-2023

2Q-2025

—%

Total Current Repositioning

1,066,167

793,981

Lease-up (Repositioning):

8210-8240 Haskell Avenue (SF Valley)

52,934

1Q-2022

1Q-2023

28%

20851 Currier Road (SG Valley)

59,412

1Q-2023

2Q-2023

—%

Total Lease-up (Repositioning)

112,346

Future Repositioning:

263-321 Gardena Blvd (South Bay)

55,238

4Q-2023

3Q-2024

100%

East 27th Street (Central LA)

300,389

126,563

4Q-2023

3Q-2024

100%

29125 Avenue Paine (SF Valley)

176,107

4Q-2023

4Q-2024

100%

17311 Nichols Lane (OC West)

104,182

1Q-2024

4Q-2024

100%

Future Repositioning:

19301 Santa Fe Avenue (South Bay)

LAND

1Q-2024

4Q-2024

76%

19301 Santa Fe Avenue (South Bay)

LAND

2Q-2024

1Q-2025

—%

East 46th Street (Central LA)

190,663

78,928

2Q-2024

2Q-2025

75%

3131 Harcourt Street (South Bay)

34,000

3Q-2024

3Q-2025

56%

14400 Figueroa Street (South Bay)

56,700

3Q-2024

4Q-2025

—%

8985 Crestmar Point (Central SD)

53,395

4Q-2024

3Q-2025

87%

Total Future Repositioning

635,916

462,090

– See footnotes starting on page 46 –

– See footnotes on page 43 –

4441

Estimated Construction Period(1)

Property (Submarket)

Market

Estimated Redevelopment Rentable Square Feet(5)

Start

Completion

Total Property Leased % at 9/30/2023

Current Redevelopment:

1055 Sandhill Avenue (South Bay)

127,857

3Q-2021

1Q-2024

—%

9615 Norwalk Boulevard (Mid-Counties)

201,571

3Q-2021

4Q-2024

—%

9920-10020 Pioneer Boulevard (Mid-Counties)

162,231

4Q-2021

1Q-2024

—%

9615 Norwalk Boulevard (Mid-Counties)

9920-10020 Pioneer Blvd (Mid-Counties)

1901 Via Burton (North OC)

139,449

1Q-2022

2Q-2024

—%

3233 Mission Oaks Boulevard (Ventura)(6)

117,358

2Q-2022

2Q-2024

—%

8888-8892 Balboa Avenue (Central SD)

123,488

3Q-2022

3Q-2024

—%

1901 Via Burton (North OC)

3233 Mission Oaks Blvd. (Ventura)(10)

6027 Eastern Avenue (Central LA)

93,498

3Q-2022

3Q-2024

—%

6027 Eastern Avenue (Central LA)

8888-8992 Balboa Avenue (Central SD)

2390-2444 American Way (North OC)

100,483

4Q-2022

1Q-2024

—%

12118 Bloomfield Avenue (Mid-Counties)

109,447

4Q-2022

3Q-2024

—%

12118 Bloomfield Avenue (Mid-Counties)

4416 Azusa Canyon Road (SG Valley)

130,063

4Q-2022

4Q-2024

—%

3071 Coronado Street (North OC)

105,173

1Q-2023

1Q-2024

—%

4416 Azusa Canyon Road (SG Valley)

15010 Don Julian Road (SG Valley)

219,242

1Q-2023

4Q-2024

—%

21515 Western Avenue (South Bay)

84,100

2Q-2023

4Q-2024

—%

21515 Western Avenue (South Bay)

12772 San Fernando Road (SF Valley)

143,421

3Q-2023

3Q-2024

—%

19900 Plummer Street (SF Valley)

79,900

3Q-2023

4Q-2024

—%

19900 Plummer Street (SF Valley)

Rancho Pacifica - Bldg 5 (South Bay)(11)

1500 Raymond Avenue (North OC)

17907-18001 Figueroa Street (South Bay)

Total Current Redevelopment

1,937,281

Lease-up (Redevelopment):

12752-12822 Monarch St. (West OC)(7)

163,864

1Q-2022

2Q-2023

See note (7)

Lease-up (Redevelopment):

12752-12822 Monarch St. (West OC)(12)

3071 Coronado Street (North OC)

Total Lease-up (Redevelopment)

163,864

Future Redevelopment:

17907-18001 Figueroa Street (South Bay)

76,722

4Q-2023

4Q-2024

73%

Rancho Pacifica - Building 5 (South Bay)

76,500

4Q-2023

4Q-2024

100%

1500 Raymond Avenue (North OC)

138,497

4Q-2023

1Q-2025

—%

Future Redevelopment:

13711 Freeway Drive (Mid-Counties)

104,500

2Q-2024

3Q-2025

100%

13711 Freeway Drive (Mid-Counties)

14940 Proctor Road (SG Valley)

7815 Van Nuys Blvd (SF Valley)

404-430 Berry Way (North OC)

147,000

2Q-2025

2Q-2026

16%

Total Future Redevelopment

543,219

Total Future Redevelopment

– See footnotes starting on page 46 –

– See footnotes on page 43 –

4542

Stabilized(8)
Market Stabilized Rentable Square Feet Period Stabilized Total Property Leased % at 9/30/2023
12821 Knott Street (West OC)(9)
OC 165,171 2Q-2023 100%
12133 Greenstone Avenue (Mid-Counties) LA LAND 2Q-2023 100%
14100 Vine Place (Mid-Counties) LA 122,514 2Q-2023 100%
15601 Avalon Boulevard (South Bay) LA 86,879 2Q-2023 100%
Total 2023 Stabilized 374,564
29025-29055 Avenue Paine (San Fernando Valley) LA 111,260 1Q-2022 100%
900 East Ball Road (North OC) OC 62,607 2Q-2022 100%
11600 Los Nietos Road (Mid-Counties) LA 106,251 3Q-2022 100%
3441 MacArthur Blvd. (OC Airport) OC 124,102 3Q-2022 100%
415-435 Motor Avenue (SG Valley) LA 94,321 4Q-2022 100%
15650-15700 Avalon Blvd. (South Bay) LA 98,259 4Q-2022 100%
19475 Gramercy Place (South Bay) LA 47,712 4Q-2022 100%
Total 2022 Stabilized 644,512

Property Stabilized:(13)

Market

Stabilized Rentable Square Feet

Period Stabilized

Total Property Leased % at 3/31/2024

8210-8240 Haskell Avenue (SF Valley)(14)

52,934

1Q-2024

50%

9755 Distribution Avenue (Central SD)

24,071

1Q-2024

100%

8902-8940 Activity Road (Central SD)

13,950

1Q-2024

98%

Total 2024 Stabilized

90,955

12821 Knott Street (West OC)

165,171

2Q-2023

100%

12133 Greenstone Avenue (Mid-Counties)

LAND

2Q-2023

100%

14100 Vine Place (Mid-Counties)

122,514

2Q-2023

100%

15601 Avalon Boulevard (South Bay)

86,879

2Q-2023

100%

19431 Santa Fe Avenue (South Bay)

LAND

4Q-2023

100%

2800 Casitas Avenue (SF Valley)

116,158

4Q-2023

100%

Total 2023 Stabilized

490,722

(1)The estimated construction start period is the period we anticipate starting physical construction on a project. Prior to physical construction, we engage in pre-construction activities, which include design work, securing permits or entitlements, site work, and other necessary activities preceding construction. The estimated completion period is our current estimate of the period in which we will have substantially completed a project and the project is made available for occupancy. We expect to update our timing estimates on a quarterly basis. The estimated construction period is subject to change as a result of a number of factors including but not limited to permit requirements, delays in construction (including delays related to supply chain backlogs), changes in scope, and other unforeseen circumstances.

(2)“Total Property Rentable Square Feet” is the total rentable square footage of the entire property or particular building(s) (footnoted if applicable) under repositioning/lease-up. “Repositioning/Lease-up Rentable Square Feet” is the actual rentable square footage that is subject to repositioning at the property/~~building,~~buildings and may be less than Total Property Rentable Square Feet.

(3)As of September 30, 2023, 19431 Santa Fe Avenue has been leased and the tenant is occupying a portion of the property. The tenant is expected to take full occupancy in the fourth quarter of 2023, subject to completion of repositioning work.

~~(4)As of September 30, 2023,~~March 31, 2024, 29120 Commerce Center Drive has been leased on a short-term basis through June 30, 2025. We are currently performing repositioning work around the short-term tenant.

(4)As of March 31, 2024, 17311 Nichols Lane has been leased and the tenant is expected to take occupancy in the third quarter of 2024 upon completion of the repositioning.

(5)As of March 31, 2024, 17000 Kingsview Avenue has been partially leased on a short-term basis through July 31, 2024. We are currently performing repositioning work around the short-term tenant.

~~(5)~~(6)As of March 31, 2024, 29125 Avenue Paine has been leased on a short-term basis through June 30, 2025. We are currently performing repositioning work around the short-term tenant.

(7)As of March 31, 2024, 20851 Currier Road has been leased on a short-term basis through June 9, 2024.

(8)As of March 31, 2024, 444 Quay has been leased and the tenant is expected to take occupancy in the second quarter of 2024.

(9)Represents the estimated rentable square footage of the project upon completion of redevelopment.

~~(6)~~(10)As of ~~September 30, 2023,~~March 31, 2024, 3233 Mission Oaks Boulevard comprises 409,217 rentable square feet that are currently occupied and not being redeveloped. We ~~plan to construct~~are constructing one new building comprising 117,358 rentable square feet. We are also performing site work across the entire project. At completion, the total project will contain 526,575 rentable square feet.

~~(7)~~(11)Rancho Pacifica Building 5 is located at 2370-2398 Pacifica Place and comprises one building totaling 51,594 rentable square feet, out of six buildings at our Rancho Pacifica Park property, which has a total of 1,111,885 rentable square feet. We demolished the existing building and are constructing a new building comprising approximately 76,500 rentable square feet in its place.

(12)As of ~~September 30, 2023,~~March 31, 2024, 12752-12822 Monarch Street comprises 275,189 rentable square feet. The project includes 111,325 rentable square feet with tenants in-place that were not redeveloped. We repositioned 65,968 rentable square feet, ~~and~~ demolished 99,925 rentable square feet and constructed a new 97,896 rentable square ~~feet~~foot building in its place.

~~(8)~~(13)We consider a repositioning property to be stabilized upon the earlier of (i) reaching 90% occupancy or (ii) one year from the date construction work is completed.

~~(9)~~(14)~~At 12821 Knott Street, we repositioned~~As of March 31, 2024, 8210-8240 Haskell Avenue reached one year from the ~~existing 120,800 rentable square foot building and constructed 45,171 rentable square feet~~date of ~~new warehouse space.~~completion of repositioning work.

Capitalized Costs

Properties that are nonoperational as a result of repositioning or redevelopment activity may qualify for varying levels of interest, insurance and real estate tax capitalization during the redevelopment and construction period. An increase in our repositioning and redevelopment activities resulting from value-add acquisitions could cause an increase in the asset balances qualifying for interest, insurance and tax capitalization in future periods. We capitalized ~~$6.2 million and $16.1~~$7.9 million of interest expense and ~~$1.9 million and $5.0~~$2.4 million of insurance and real estate tax expenses during the three ~~and nine~~ months

ended ~~September 30, 2023,~~March 31, 2024, respectively, related to our repositioning and redevelopment projects.

Construction Costs and Timing

~~Recent~~Continued inflationary and supply chain pressures have led to increased construction materials and labor costs, which when combined with longer lead times for governmental approvals and entitlements, have led to an overall increase in budgeted and actual construction costs as well as delays in starting and completing certain of our redevelopment projects. While low vacancy in our markets and continued rent growth (see “—Leasing Activity and Rental Rates” below) over the last several years has helped to mitigate some of the impact of rising construction costs and project delays, additional increases in costs, ~~and~~ further delays or declining market rents could result in a lower expected yield on our redevelopment projects, which could negatively impact our future earnings.

Rental Revenues

Our operating results depend primarily upon generating rental revenue from the properties in our portfolio. The amount of rental revenue generated by these properties is affected by our ability to maintain or increase occupancy levels and rental rates at our properties, which will depend upon our ability to lease vacant space and re-lease expiring space at favorable rates.

Occupancy Rates

As of ~~September 30, 2023,~~March 31, 2024, our consolidated portfolio, inclusive of space in repositioning as described in the subsequent paragraph, was approximately ~~94.1%~~92.8% occupied, while our stabilized consolidated portfolio exclusive of such space was approximately ~~97.9%~~96.9% occupied. We believe the opportunity to increase occupancy at our properties will be an important driver of future revenue growth. An opportunity to drive this growth will derive from the completion and lease-up of repositioning and redevelopment projects that are currently under construction.

As summarized in the tables under “—Acquisitions and Value-Add Repositioning and Redevelopment of Properties” above, as of ~~September 30, 2023, 26~~March 31, 2024, 28 of our properties with a combined ~~2.7~~3.1 million of estimated rentable square feet at completion are under current repositioning or redevelopment, ~~three~~seven properties with a combined ~~0.3~~0.8 million of rentable square feet are in lease-up, and we have a near-term pipeline of ~~ten~~nine repositioning and redevelopment projects with a combined ~~1.0~~0.7 million of estimated rentable square feet at completion. Additionally, we have ~~0.3~~0.5 million rentable square feet of other repositioning projects. Vacant space at these properties is concentrated in our Los Angeles, Orange County and San Bernardino markets and represents ~~3.8%~~4.3% of our total consolidated portfolio square footage as of ~~September 30, 2023.~~March 31, 2024. Including vacant space at these properties, our weighted average occupancy rate as of ~~September 30, 2023~~March 31, 2024 in our Los Angeles, Orange County and San Bernardino markets was ~~94.8%~~93.8%, ~~92.0%~~89.4% and ~~92.9%~~90.9%, respectively. Excluding vacant space at these properties, our weighted average occupancy rate as of ~~September 30, 2023,~~March 31, 2024, in these markets was ~~98.1%~~97.8%, ~~99.8%~~96.8% and ~~97.0%~~95.5%, respectively. We believe that an important portion of our long-term future growth will come from the completion of these projects currently under or scheduled for repositioning/redevelopment, as well as through the identification or acquisition of new opportunities for repositioning and redevelopment, whether in our existing portfolio or through new investments, which may vary from period to period subject to market conditions.

The occupancy rate of properties not undergoing repositioning is affected by regional and local economic conditions in our Southern California infill markets. InAlthough there has been a post-COVID normalization of market vacancy over the ~~last several years,~~past year, the Los Angeles, Orange County, San Bernardino and San Diego markets ~~have continued to show historically low vacancy and positive absorption, resulting from the combination of sustained high~~are generally experiencing healthy tenant demand and low product availability. Accordingly, our properties in these markets have generally exhibited a similar trend. WeAlthough we cannot predict how our markets may perform in future periods, we believe that general market conditions will remain healthy through the remainder of ~~2023,~~2024, and the long-term opportunity to increase occupancy and rental rates at our properties will be an important driver of future revenue growth.

4744

Leasing Activity and Rental Rates

The following tables set forth our leasing activity for new and renewal leases for the three ~~and nine~~ months ended ~~September 30, 2023:~~March 31, 2024:

New Leases
Quarter Number
of Leases Rentable Square Feet Weighted Average Lease Term
(in years)
Effective Rent Per Square Foot(1)
GAAP Leasing Spreads(2)(4)
Cash Leasing Spreads(3)(4)
Q1-2023 54 522,288 3.6 $ 21.41 108.8 % 87.6 %
Q2-2023 53 961,235 5.8 $ 21.67 83.8 % 66.9 %
Q3-2023 57 862,420 4.5 $ 18.82 74.0 % 56.0 %
Total/Weighted Average 164 2,345,943 4.8 $ 20.57 87.6 % 69.1 %


	New Leases
Quarter	Number of Leases	Rentable Square Feet	Weighted Average Lease Term (in years)	Effective Rent Per Square Foot(1)		GAAP Leasing Spreads(2)(4)		Cash Leasing Spreads(3)(4)
Q1-2024	50	830,941	4.2	$	15.88	41.3	%	31.2	%

Renewal Leases Expired Leases
Retention %(7)
Quarter Number
of Leases Rentable Square Feet Weighted Average Lease Term
(in years)
Effective Rent Per Square Foot(1)
GAAP Leasing Spreads(2)(5)
Cash Leasing Spreads(3)(5)
Number
of Leases
Rentable Square Feet(6)
Rentable Square Feet
Q1-2023 68 1,254,005 4.1 $ 22.02 74.9 % 54.5 % 136 2,461,943 83.3 %
Q2-2023 76 1,165,452 4.3 $ 20.72 100.2 % 76.8 % 144 2,065,869 70.9 %
Q3-2023 47 667,179 2.1 $ 21.54 60.5 % 49.1 % 110 1,653,111 61.7 %
Total/Weighted Average 191 3,086,636 3.8 $ 21.43 79.9 % 60.7 % 390 6,180,923 73.0 %


	Renewal Leases									Expired Leases		Retention %(7)
Quarter	Number of Leases	Rentable Square Feet	Weighted Average Lease Term (in years)	Effective Rent Per Square Foot(1)		GAAP Leasing Spreads(2)(5)		Cash Leasing Spreads(3)(5)		Number of Leases	Rentable Square Feet(6)	Rentable Square Feet
Q1-2024	64	2,398,076	3.1	$	14.62	14.8	%	11.3	%	152	3,819,253	82.2	%
Excluding One Lease Extension:(8)
Q1-2024	63	1,296,236	4.1	$	13.18	56.8	%	34.4	%

(1)Effective rent per square foot is the average base rent calculated in accordance with GAAP, over the term of the lease, expressed in dollars per square foot per year. Includes all new and renewal leases that were executed during the quarter.

(2)Calculated as the change between GAAP rents for new or renewal leases and the expiring GAAP rents (excluding the impact of amortization of intangible assets or liabilities) on the expiring leases for the same space.

(3)Calculated as the change between starting cash rents for new or renewal leases and the expiring cash rents on the expiring leases for the same space.

(4)The GAAP and cash re-leasing spreads for new leases executed during the ~~nine~~three months ended ~~September 30, 2023,~~March 31, 2024, exclude 5219 leases aggregating ~~1,451,641~~605,362 rentable square feet for which there was no comparable lease data. Of these 5219 excluded leases, 33nine leases for ~~828,564~~265,696 rentable square feet were recently repositioned/redeveloped space. Comparable leases generally exclude: (i) space that has never been occupied under our ownership, (ii) repositioned/redeveloped space, including space in pre-development/entitlement process, (iii) space that has been vacant for over one year or (iv) space with lease terms shorter than six months.

(5)The GAAP and cash re-leasing rent spreads for renewal leases executed during the ~~nine~~three months ended ~~September 30, 2023,~~March 31, 2024, exclude ~~seven~~four leases aggregating ~~120,730~~593,951 rentable square feet for which there was no comparable lease data. Comparable leases generally exclude space with lease terms shorter than six months or space in pre-development/entitlement process.

(6)Includes leases totaling ~~1,668,760~~732,083 rentable square feet that expired during the ~~nine~~three months ended ~~September 30, 2023,~~March 31, 2024, for which the space has been or will be placed into repositioning (including “other repositioning projects”) or redevelopment.

(7)Retention is calculated as renewal lease square footage plus relocation/expansion square footage, divided by the square footage of leases expiring during the period. Retention excludes square footage related to the following: (i) expiring leases associated with space that is placed into repositioning (including “other repositioning projects”) after the tenant vacates, (ii) early terminations with pre-negotiated replacement leases and (iii) move outs where space is directly leased by subtenants.

(8)Reflects our renewal leasing activity, weighted average lease term, effective rent per square foot and leasing spreads excluding a 1.1 million square foot lease extension with Tireco, Inc. at 10545 Production Avenue. The original Tireco, Inc. lease expiration date was January 2025 and included a fixed rate renewal option. During the three months ended March 31, 2024, the lease was extended through January 2027 at the current in-place rent at the time of execution and includes a 4% contractual rent increase in 2026 and two months of rent abatement. This lease extension was excluded for comparability purposes, in order to allow investors to make investment decisions based on our quarterly leasing statistics as compared to our prior periods.

Our leasing activity is impacted both by our repositioning and redevelopment efforts, as well as by market conditions. While we reposition a property, its space may become unavailable for leasing until completion of our repositioning efforts. As of ~~September 30, 2023,~~March 31, 2024, we have 2628 current repositioning/redevelopment projects with estimated construction completion periods ranging from the ~~fourth~~second quarter of ~~2023~~2024 through the ~~second~~fourth quarter of 2025, and an additional ~~ten~~nine repositioning and redevelopment projects in our pipeline with estimated construction completion dates through the ~~second~~third quarter of 2026. We expect these properties to have positive impacts on our leasing activity and revenue generation as we complete our value-add plans and place these properties in service.

Scheduled Lease Expirations

Our ability to re-lease space subject to expiring leases is affected by economic and competitive conditions in our markets and by the relative desirability of our individual properties, which may impact our results of operations. The following table sets forth a summary schedule of lease expirations for leases in place as of ~~September 30, 2023,~~March 31, 2024, for each of the 10 full and partial calendar years beginning with ~~2023~~2024 and thereafter, plus space that is available and under current repositioning.


Year of Lease Expiration	Year of Lease Expiration	Number of Leases Expiring	Total Rentable Square Feet(1)	Percentage of Total Owned Square Feet		Annualized Base Rent(2)		Percentage of Total Annualized Base Rent(3)		Annualized Base Rent per Square Foot(4)		Year of Lease Expiration	Number of Leases Expiring	Total Rentable Square Feet(1)	Percentage of Total Owned Square Feet	Annualized Base Rent(2)	Percentage of Total Annualized Base Rent(3)	Annualized Base Rent per Square Foot(4)
Vacant(5)	Vacant(5)	—	903,526	2.0	%	$	—	—	%	$	—
Repositioning/Redevelopment(6)	Repositioning/Redevelopment(6)	—	1,731,770	3.9	%	—		—	%	$	—
MTM Tenants	MTM Tenants	11	241,540	0.5	%	3,375		0.5	%	$	13.97
Remainder of 2023		89	1,249,197	2.8	%	16,809		2.6	%	$	13.46
2024		427	7,014,516	15.6	%	89,762		14.1	%	$	12.80
Remainder of 2024
2025	2025	393	7,362,873	16.4	%	104,844		16.5	%	$	14.24
2026	2026	345	7,996,757	17.8	%	111,379		17.5	%	$	13.93
2027	2027	143	4,956,329	11.0	%	79,352		12.5	%	$	16.01
2028	2028	117	3,884,505	8.6	%	65,806		10.3	%	$	16.94
2029	2029	34	2,185,305	4.8	%	33,305		5.2	%	$	15.24
2030	2030	23	1,928,432	4.3	%	29,030		4.6	%	$	15.05
2031	2031	19	2,006,502	4.5	%	33,100		5.2	%	$	16.50
2032	2032	16	1,086,587	2.4	%	20,951		3.3	%	$	19.28
2033
Thereafter	Thereafter	35	2,450,774	5.4	%	49,308		7.7	%	$	20.12
Total Consolidated Portfolio	Total Consolidated Portfolio	1,652	44,998,613	100.0	%	$	637,021	100.0	%	$	15.04

(1)Represents the contracted square footage upon expiration.

(2)Calculated as monthly contracted base rent (before rent abatements) per the terms of such lease, as of ~~September 30, 2023,~~March 31, 2024, multiplied by 12. Excludes tenant reimbursements. Amounts in thousands.

(3)Calculated as annualized base rent set forth in this table divided by annualized base rent for the total portfolio as of ~~September 30, 2023.~~March 31, 2024.

(4)Calculated as annualized base rent for such leases divided by the occupied square feet for such leases as of ~~September 30, 2023.~~March 31, 2024.

(5)Represents vacant space (not under repositioning/redevelopment) as of ~~September 30, 2023.~~March 31, 2024. Includes leases aggregating ~~54,008~~425,142 rentable square feet that had been signed but had not yet commenced as of ~~September 30, 2023.~~March 31, 2024.

(6)Represents vacant space at properties that were classified as repositioning (including “other repositioning projects”) or redevelopment properties as of ~~September 30, 2023.~~March 31, 2024.

As of ~~September 30, 2023,~~March 31, 2024, in addition to ~~0.9~~1.5 million rentable square feet of currently available space in our portfolio and approximately ~~1.7~~2.1 million rentable square feet of vacant space under current repositioning, leases representing ~~2.8%~~9.7% and ~~15.6%~~14.4% of the aggregate rentable square footage of our portfolio are scheduled to expire during the remainder of ~~2023~~2024 and ~~2024,~~2025, respectively. During the ~~nine~~three months ended ~~September 30, 2023,~~March 31, 2024, we renewed ~~191~~64 leases for ~~3.1~~2.4 million rentable square feet, resulting in a retention rate of ~~73.0%~~82.2%. Our retention rate during the period was impacted by the combination of low vacancy and ~~high~~healthy demand in many of our key markets. During the ~~nine~~three months ended ~~September 30, 2023,~~March 31, 2024, new and renewal leases had a

weighted average term of ~~4.8~~4.2 and ~~3.8~~4.1 years (excluding the 1.1 million square foot lease extension noted above under “—Leasing Activity and Rental Rates”), and we expect future new and renewal leases to have similar terms.

The leases scheduled to expire during the remainder of ~~2023~~2024 and ~~2024~~2025 represent approximately ~~2.6%~~9.4% and ~~14.1%~~14.0%, respectively, of the total annualized base rent for our portfolio as of ~~September 30, 2023.~~March 31, 2024. We estimate that, on a weighted average basis, in-place rents of leases scheduled to expire during the remainder of ~~2023~~2024 and ~~2024~~2025 are currently below current market asking rates, although individual units or properties within any particular submarket may currently be leased either above, below, or at the current market asking rates within that submarket.

As described under “—Market and Portfolio Fundamentals” above, while market indicators, including changes in vacancy rates and average asking lease rates, varied by market and showed signs of a post-pandemic normalizing of tenant demand, overall there was continued low market vacancy and pervasive supply and demand imbalance across our submarkets, which continues to support ~~strong~~favorable long-term market fundamentals including positive rental growth. Therefore, we expect market dynamics to remain healthy and that these positive trends will continue to provide a favorable environment for increases in lease renewal rates. Accordingly, we expect the remainder of 2023 will show positive renewal rates and leasing spreads.fundamentals.

Conditions in Our Markets

The properties in our portfolio are located primarily in Southern California infill markets. Positive or negative changes in economic or other conditions, high and persistent inflation and adverse weather conditions and natural disasters in this market may affect our overall performance.

Property Expenses

Our property expenses generally consist of utilities, real estate taxes, insurance, site repair and maintenance costs, and the allocation of overhead costs. For the majority of our properties, our property expenses are recovered, in part, by either the triple net provisions or modified gross expense reimbursements in tenant leases. The majority of our leases also comprise contractual three percent or greater annual rental rate increases meant, in part, to help mitigate potential increases in property expenses over time. However, the terms of our leases vary, and, in some instances, we may absorb property expenses. Our overall financial results will be impacted by the extent to which we are able to pass-through property expenses to our tenants.

Taxable REIT Subsidiary

As of ~~September 30, 2023,~~March 31, 2024, our Operating Partnership indirectly and wholly owns Rexford Industrial Realty and Management, Inc., which we refer to as our services company. We have elected, together with our services company, to treat our services company as a taxable REIT subsidiary for federal income tax purposes. A taxable REIT subsidiary generally may provide non-customary and other services to our tenants and engage in activities that we or our subsidiaries (other than a taxable REIT subsidiary) may not engage in directly without adversely affecting our qualification as a REIT, provided a taxable REIT subsidiary may not operate or manage a lodging facility or health care facility or provide rights to any brand name under which any lodging facility or health care facility is operated. We may form additional taxable REIT subsidiaries in the future, and our Operating Partnership may contribute some or all of its interests in certain wholly owned subsidiaries or their assets to our services company. Any income earned by our taxable REIT subsidiaries will not be included in our taxable income for purposes of the 75% or 95% gross income tests, except to the extent such income is distributed to us as a dividend, in which case such dividend income will qualify under the 95%, but not the 75%, gross income test. Because a taxable REIT subsidiary is subject to federal income tax, and state and local income tax (where applicable) as a regular corporation, the income earned by our taxable REIT subsidiaries generally will be subject to an additional level of tax as compared to the income earned by our other subsidiaries. Our taxable REIT subsidiary is a C-corporation subject to federal and state income tax. However, it has a cumulative unrecognized net operation loss carryforward and therefore there is no income tax provision for the ~~nine~~three months ended ~~September 30, 2023~~March 31, 2024 and ~~2022.~~2023. Additionally, the taxable REIT subsidiary had minimal activity during these periods.

Critical Accounting Policies and Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions in certain circumstances that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses for the reporting periods. Actual amounts may differ from these estimates and assumptions. Management evaluates these estimates on an ongoing basis, based upon information currently available and on various assumptions that it believes are reasonable as of the date hereof. In addition, other companies in similar businesses may use different estimation policies and methodologies, which may affect the comparability of our results of operations and financial condition to those of other companies.

5047

In our Annual Report on Form 10-K for the year ended December 31, ~~2022~~2023 and in “Note 2 - Summary of Significant Accounting Policies” to the consolidated financial statements under Item 1 of this report on Form 10-Q, we identified certain critical accounting policies that affect certain of our more significant estimates and assumptions used in preparing our consolidated financial statements. We have not made any material changes to our critical accounting policies and estimates during the period covered by this report.

Results of Operations

Our consolidated results of operations are often not comparable from period to period due to the effect of (i) property acquisitions, (ii) property dispositions and (iii) properties that are taken out of service for repositioning or redevelopment during the comparative reporting periods. Our “Total Portfolio” represents all of the properties owned during the reported periods. To eliminate the effect of changes in our Total Portfolio due to acquisitions, dispositions, and repositioning/redevelopment and to highlight the operating results of our on-going business, we have separately presented the results of our “Same Property Portfolio.”

For the three ~~and nine~~ months ended ~~September 30,~~March 31, 2024 and 2023, ~~and 2022,~~ our Same Property Portfolio includes all properties in our portfolio that were wholly-owned by us for the period from January 1, ~~2022~~2023 through ~~September 30, 2023,~~March 31, 2024, and that were stabilized prior to January 1, ~~2022,~~2023, which consisted of buildings aggregating approximately ~~32.5~~37.1 million rentable square feet at ~~256~~296 of our properties. Results for our Same Property Portfolio exclude properties that were acquired or sold during the period from January 1, ~~2022~~2023 through ~~September 30, 2023,~~March 31, 2024, properties or buildings classified as current or future repositioning (including select buildings in “other repositioning”), redevelopment or lease-up during ~~2022~~2023 or ~~2023,~~2024, interest income, interest expense and corporate general and administrative expenses.

In addition to the properties included in our Same Property Portfolio, our Total Portfolio includes the 7768 properties aggregating approximately ~~9.1~~7.5 million rentable square feet that were purchased between January 1, ~~2022~~2023 and ~~September 30, 2023,~~March 31, 2024, and the two properties aggregating approximately 0.1 million rentable square feet that were sold between January 1, ~~2022~~2023 and ~~September 30, 2023.~~March 31, 2024.

At ~~September 30,~~March 31, 2024 and 2023, ~~and 2022,~~ our Same Property Portfolio occupancy was approximately ~~97.9%~~96.4% and ~~98.1%~~97.0%, respectively. For the three months ended ~~September 30,~~March 31, 2024 and 2023, ~~and 2022,~~ our Same Property Portfolio weighted average occupancy was approximately ~~97.8%~~96.8% and ~~98.4%~~97.0%, respectively. ~~Comparatively, for the nine months ended September 30, 2023 and 2022, our Same Property Portfolio weighted average occupancy was approximately 97.9% and 98.8%.~~

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Comparison of the Three Months Ended ~~September 30, 2023~~March 31, 2024 to the Three Months Ended ~~September 30, 2022~~March 31, 2023

The following table summarizes the historical results of operations for our Same Property Portfolio and Total Portfolio for the three months ended ~~September 30,~~March 31, 2024 and 2023 ~~and 2022~~ (dollars in thousands):


		Same Property Portfolio										Total Portfolio														Same Property Portfolio																		Total Portfolio
		Three Months Ended September 30,				Increase/(Decrease)			%			Three Months Ended September 30,					Increase/(Decrease)			%						Three Months Ended March 31,											Increase/(Decrease)						%						Three Months Ended March 31,										Increase/(Decrease)								%
		2023		2022				Change			2023			2022					Change					2024						2023											Change						2024						2023											Change
REVENUES	REVENUES																						REVENUES

Rental income	Rental income	$	140,077	$	128,954	$	11,123		8.6	%		$	204,212		$	162,581	$	41,631		25.6	%

Rental income

Rental income																										$	171,557					$	162,571					$	8,986					5.5		%				$	210,990					$	185,164							$	25,826					13.9	%
Management and leasing services	Management and leasing services	—		—		—			—	%		158			163		(5)			(3.1)	%	Management and leasing services				—			—				—			—				—			—				—	%					132		190					190			(58)					(58)		(30.5)			(30.5)	%
Interest income	Interest income	—		—		—			—	%		1,029			3		1,026			34,200.0	%	Interest income				—			—				—			—				—			—				—	%					2,974		882					882			2,092					2,092		237.2			237.2	%
TOTAL REVENUES	TOTAL REVENUES	140,077		128,954		11,123			8.6	%		205,399			162,747		42,652			26.2	%	TOTAL REVENUES				171,557			162,571				162,571			8,986				8,986			5.5				5.5	%					214,096		186,236					186,236			27,860					27,860		15.0			15.0	%
OPERATING EXPENSES	OPERATING EXPENSES
Property expenses
Property expenses
Property expenses	Property expenses	32,353		29,999		2,354			7.8	%		48,085			39,614		8,471			21.4	%				38,928			36,840			36,840			2,088				2,088				5.7			5.7		%				47,482			42,825				42,825				4,657					4,657		10.9			10.9	%
General and administrative	General and administrative	—		—		—			—	%		18,575			14,951		3,624			24.2	%	General and administrative				—			—				—			—				—			—				—	%					19,980		18,197					18,197			1,783					1,783		9.8			9.8	%
Depreciation and amortization	Depreciation and amortization	37,188		37,138		50			0.1	%		60,449			51,146		9,303			18.2	%	Depreciation and amortization				52,047			48,367				48,367			3,680				3,680			7.6				7.6	%					66,278		59,429					59,429			6,849					6,849		11.5			11.5	%
TOTAL OPERATING EXPENSES	TOTAL OPERATING EXPENSES	69,541		67,137		2,404			3.6	%		127,109			105,711		21,398			20.2	%	TOTAL OPERATING EXPENSES				90,975			85,207				85,207			5,768				5,768			6.8				6.8	%					133,740		120,451					120,451			13,289					13,289		11.0			11.0	%
OTHER EXPENSES	OTHER EXPENSES
Other expenses	Other expenses	—		—		—			—	%		551			413		138			33.4	%
Other expenses
Other expenses																										—						—						—						—		%				1,408						647								761						117.6	%
Interest expense	Interest expense	—		—		—			—	%		15,949			14,975		974			6.5	%	Interest expense				—			—				—			—				—			—				—	%					14,671		13,701					13,701			970					970		7.1			7.1	%

TOTAL EXPENSES
TOTAL EXPENSES
TOTAL EXPENSES	TOTAL EXPENSES	69,541		67,137		2,404			3.6	%		143,609			121,099		22,510			18.6	%				90,975			85,207			85,207			5,768				5,768				6.8			6.8		%				149,819			134,799				134,799				15,020					15,020		11.1			11.1	%

Gains on sale of real estate

Gains on sale of real estate

Gains on sale of real estate																										—						—						—						—		%				—						12,133								(12,133)						(100.0)	%
NET INCOME	NET INCOME	$	70,536	$	61,817	$	8,719		14.1	%		$	61,790		$	41,648	$	20,142		48.4	%	NET INCOME				$	80,582		$			$	77,364		$			$	3,218			4.2			4.2		%				$	64,277		$			$	63,570			$				$	707		1.1			1.1	%

Rental Income

In the following table, we present the components of rental income for the three months ended ~~September 30,~~March 31, 2024 and March 31, 2023, ~~and September 30, 2022,~~ which includes rental revenue, tenant reimbursements and other income related to leases. The below presentation of rental income is not, and is not intended to be, a presentation in accordance with GAAP. We are presenting this information because we believe it is frequently used by management, investors, securities analysts and other interested parties to understand and evaluate the Company’s performance.


			Same Property Portfolio										Total Portfolio
			Three Months Ended September 30,				Increase/(Decrease)			%			Three Months Ended September 30,						Increase/(Decrease)				%
		Same Property Portfolio																																				Same Property Portfolio														Total Portfolio
		Three Months Ended March 31,																																Three Months Ended March 31,								Increase/(Decrease)				%						Three Months Ended March 31,												Increase/(Decrease)					%
Category	Category		2023		2022				Increase/(Decrease)			Change			2023			2022					Increase/(Decrease)			Change	Category				2024					2023								Change					2024						2023												Change
Rental revenue(1)	Rental revenue(1)		$	115,887	$	106,483				8.8	%		$	168,789		$	134,386				25.6	%			Rental revenue(1)			$	141,451	$		$	134,005	$			$	7,446		5.6			5.6		%			$	174,494		$			$	153,181		$				$	21,313		13.9			13.9	%
Tenant reimbursements(2)	Tenant reimbursements(2)		23,738		22,106		1,632			7.4	%		34,842			27,675			7,167				25.9	%	Tenant reimbursements(2)			29,403		28,071			28,071		1,332				1,332		4.7		4.7		%			35,650			31,419				31,419			4,231					4,231		13.5			13.5		%
Other income(3)	Other income(3)		452		365		87			23.8	%		581			520			61				11.7	%	Other income(3)			703		495			495		208				208		42.0		42.0		%			846			564				564			282					282		50.0			50.0		%
Rental income	Rental income		$	140,077	$	128,954	$	11,123		8.6	%		$	204,212		$	162,581		$	41,631			25.6	%	Rental income			$	171,557	$		$	162,571	$			$	8,986		5.5		5.5	%			$	210,990			$		$	185,164			$			$	25,826			13.9			13.9	%

Our Same Property Portfolio and Total Portfolio rental income increased by ~~$11.1~~$9.0 million, or ~~8.6%~~5.5%, and ~~$41.6~~$25.8 million, or ~~25.6%~~13.9%, respectively, during the three months ended ~~September 30, 2023,~~March 31, 2024, compared to the three months ended ~~September 30, 2022,~~March 31, 2023, for the reasons described below:

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(1) Rental Revenue

Our Same Property Portfolio and Total Portfolio rental revenue increased by ~~$9.4~~$7.4 million, or ~~8.8%~~5.6%, and ~~$34.4~~$21.3 million, or ~~25.6%~~13.9%, respectively, during the three months ended ~~September 30, 2023,~~March 31, 2024, compared to the three months ended ~~September 30, 2022.~~March 31, 2023. The increase in our Same Property Portfolio rental revenue is primarily due to an increase in average rental rates on new and renewal leases, partially offset by an increase of ~~$0.9~~$1.2 million in bad debt write-offs and reserves for tenant receivables not deemed probable of collection primarily related to a single tenant, a decrease in average occupancy rates, and a decrease of ~~$0.4~~$0.6 million in amortization of net below-market lease intangibles. Our Total Portfolio rental revenue was also positively impacted by the incremental revenues from the 7768 properties we acquired between January 1, ~~2022~~2023 and ~~September 30, 2023.~~March 31, 2024.

(2) Tenant Reimbursements

Our Same Property Portfolio tenant reimbursements revenue increased by ~~$1.6~~$1.3 million, or ~~7.4%~~4.7%, and our Total Portfolio tenant reimbursements revenue increased by ~~$7.2~~$4.2 million, or ~~25.9%~~13.5%, during the three months ended ~~September 30, 2023,~~March 31, 2024, compared to the three months ended ~~September 30, 2022.~~March 31, 2023. The increase in our Same Property Portfolio tenant reimbursements revenue is primarily due to higher reimbursable insurance expenses ~~as a result of~~due to higher overall premiums, higher reimbursable property tax expenses and ~~an increase in tenant reimbursements due to timing differences in completing prior year recoverable expense reconciliations~~higher billings for ~~comparable periods.~~other reimbursable expenses. Our Total Portfolio tenant reimbursements revenue was also impacted by the incremental tenant reimbursements from the 7768 properties we acquired between January 1, ~~2022 and September 30, 2023.~~

~~(3) Other Income~~

Our Same Property Portfolio and Total Portfolio other income increased by $0.1 million, or 23.8%, and $0.1 million, or 11.7%, respectively, during the three months ended September 30, 2023, compared to the three months ended September 30, 2022, primarily due to an increase in miscellaneous income and in increase in fees charged for late rental payments.

~~Management and Leasing Services~~

Our Total Portfolio management and leasing services revenue decreased by $5 thousand, or 3.1%, during the three months ended September 30, 2023, compared to the three months ended September 30, 2022.

~~Interest Income~~

Interest income increased from $3 thousand for the three months ended September 30, 2022 to $1.0 million for the three months ended September 30, 2023, due to an increase in the average cash balance invested in money market accounts and higher interest rates.

~~Property Expenses~~

Our Same Property Portfolio and Total Portfolio property expenses increased by $2.4 million, or 7.8%, and $8.5 million, or 21.4%, respectively, during the three months ended September 30, 2023, compared to the three months ended September 30, 2022. The increase in our Same Property Portfolio property expenses is primarily due to increases in insurance expenses as a result of higher premiums, property tax expenses, repairs and maintenance expenses and allocated overhead costs reflecting a higher employee headcount and labor costs. Our Total Portfolio property expenses were also impacted by incremental expenses from the 77 properties we acquired between January 1, 2022 and September 30, 2023.

~~General and Administrative~~

Our Total Portfolio general and administrative expenses increased by $3.6 million, or 24.2%, during the three months ended September 30, 2023, compared to the three months ended September 30, 2022, primarily due to an increase in non-cash equity compensation expense primarily related to performance unit equity grants made in 2021 and 2022, an increase in payroll related costs due to a higher employee headcount and rising labor costs and an increase in accrued bonus expense.

~~Depreciation and Amortization~~

Our Same Property Portfolio depreciation and amortization expense increased by $0.1 million, or 0.1%, during the three months ended September 30, 2023, compared to the three months ended September 30, 2022, primarily due to an increase in depreciation expense related to capital improvements placed into service subsequent to January 1, 2022, partially offset by acquisition-related in-place lease intangibles becoming fully depreciated at certain of our properties subsequent to January 1, 2022. Our Total Portfolio depreciation and amortization expense increased by $9.3 million, or 18.2%, during the three months ended September 30, 2023, compared to the three months ended September 30, 2022, primarily due to the incremental expense from the 77 properties we acquired between January 1, 2022 and September 30, 2023.

~~Other Expenses~~

Our Total Portfolio other expenses increased by $0.1 million from $0.4 million for the three months ended September 30, 2022 to $0.6 million for three months ended September 30, 2023, primarily due to $0.4 million of construction demolition costs incurred in the third quarter of 2023 and ~~a $0.1 million increase in write-offs of construction costs related to cancelled projects, partially offset by a $0.3 million decrease in acquisition costs.~~

~~Interest Expense~~

Our Total Portfolio interest expense increased by $1.0 million, or 6.5%, during the three months ended September 30, 2023, compared to the three months ended September 30, 2022. The increase in interest expense is primarily comprised of the following: (i) $4.0 million related to the $300 Million Notes offering we completed in March 2023, (ii) $2.3 million related to the $400.0 million term loan facility borrowing we completed in July 2022 and the related interest rate swaps, (iii) $0.2 million related to the $300.0 million term loan facility borrowing we completed in May 2022 and the related interest rate swaps, and (iv) a $0.2 million increase related to the current and prior $60.0 million term loans primarily due to the increase in interest rates. These increases were partially offset by the following decreases: (i) $3.2 million due to a decrease in borrowings under our unsecured revolving credit facility, and (ii) $2.6 million due to an increase in capitalized interest related to repositioning and redevelopment activity.

~~Comparison of the Nine Months Ended September 30, 2023 to the Nine Months Ended September 30, 2022~~

~~The following table summarizes the historical results of operations for our Same Property Portfolio and Total Portfolio for the nine months ended September 30, 2023 and 2022 (dollars in thousands):~~

Same Property Portfolio Total Portfolio
Nine Months Ended
September 30, Increase/(Decrease) % Nine Months Ended
September 30, Increase/(Decrease) %
2023 2022 Change 2023 2022 Change
REVENUES
Rental income $ 410,318 $ 383,024 $ 27,294 7.1 % $ 583,474 $ 452,156 $ 131,318 29.0 %
Management and leasing services — — — — % 519 456 63 13.8 %
Interest income — — — — % 3,408 5 3,403 68,060.0 %
TOTAL REVENUES 410,318 383,024 27,294 7.1 % 587,401 452,617 134,784 29.8 %
OPERATING EXPENSES
Property expenses 92,207 88,474 3,733 4.2 % 135,220 108,448 26,772 24.7 %
General and administrative — — — — % 55,039 44,531 10,508 23.6 %
Depreciation and amortization 111,853 113,226 (1,373) (1.2) % 178,671 140,226 38,445 27.4 %
TOTAL OPERATING EXPENSES 204,060 201,700 2,360 1.2 % 368,930 293,205 75,725 25.8 %
OTHER EXPENSES
Other expenses — — — — % 1,504 746 758 101.6 %
Interest expense — — — — % 46,830 34,826 12,004 34.5 %
TOTAL EXPENSES 204,060 201,700 2,360 1.2 % 417,264 328,777 88,487 26.9 %
Loss on extinguishment of debt — — — — % — (877) 877 (100.0) %
Gains on sale of real estate — — — — % 12,133 8,486 3,647 43.0 %
NET INCOME $ 206,258 $ 181,324 $ 24,934 13.8 % $ 182,270 $ 131,449 $ 50,821 38.7 %

~~Rental Income~~

In the following table, we present the components of rental income for the nine months ended September 30, 2023 and September 30, 2022, which includes rental revenue, tenant reimbursements and other income related to leases. The below presentation of rental income is not, and is not intended to be, a presentation in accordance with GAAP. We are presenting this information because we believe it is frequently used by management, investors, securities analysts and other interested parties to understand and evaluate the Company’s performance.

Same Property Portfolio Total Portfolio
Nine Months Ended
September 30, Increase/(Decrease) % Nine Months Ended
September 30, Increase/(Decrease) %
Category 2023 2022 Change 2023 2022 Change
Rental revenue(1)
$ 339,861 $ 315,485 $ 24,376 7.7 % $ 483,183 $ 373,053 $ 110,130 29.5 %
Tenant reimbursements (2)
69,137 66,428 2,709 4.1 % 98,497 77,641 20,856 26.9 %
Other income(3)
1,320 1,111 209 18.8 % 1,794 1,462 332 22.7 %
Rental income $ 410,318 $ 383,024 $ 27,294 7.1 % $ 583,474 $ 452,156 $ 131,318 29.0 %

Our Same Property Portfolio and Total Portfolio rental income increased by $27.3 million, or 7.1%, and $131.3 million, or 29.0%, respectively, during the nine months ended September 30, 2023, compared to the nine months ended September 30, 2022, for the reasons described below:

~~(1) Rental Revenue~~

Our Same Property Portfolio and Total Portfolio rental revenue increased by $24.4 million, or 7.7%, and $110.1 million, or 29.5%, respectively, during the nine months ended September 30, 2023, compared to the nine months ended September 30, 2022. The increase in our Same Property Portfolio rental revenue is primarily due to an increase in average rental rates on new and renewal leases, partially offset by a decrease in occupancy rates, an increase of $2.2 million in bad debt write-offs and reserves for tenant receivables not deemed probable of collection and a decrease of $1.8 million in amortization of net below-market lease intangibles. Our Total Portfolio rental revenue was also positively impacted by the incremental revenues from the 77 properties we acquired between January 1, 2022 and September 30, 2023.

~~(2) Tenant Reimbursements~~

Our Same Property Portfolio tenant reimbursements revenue increased by $2.7 million, or 4.1%, and our Total Portfolio tenant reimbursements revenue increased by $20.9 million, or 26.9% during the nine months ended September 30, 2023, compared to the nine months ended September 30, 2022. The increase in our Same Property Portfolio tenant reimbursements revenue is primarily due to higher reimbursable property tax expenses, a decrease in reimbursements to tenants from the completion of prior year recoverable expense reconciliations and higher insurance expenses as a result of higher premiums. Our Total Portfolio tenant reimbursements revenue was also impacted by the incremental tenant reimbursements from the 77 properties we acquired between January 1, 2022 and September 30, 2023.31, 2024.

(3) Other Income

Our Same Property Portfolio and Total Portfolio other income increased by $0.2 million, or ~~18.8%~~42.0%, and $0.3 million, or ~~22.7%~~50.0%, respectively, during the ~~nine~~three months ended ~~September 30, 2023,~~March 31, 2024, compared to the ~~nine~~three months ended ~~September 30, 2022,~~March 31, 2023, primarily due to an increase in fees charged for late rental payments and an increase in miscellaneous income.

Management and Leasing Services

Our Total Portfolio management and leasing services revenue ~~increased~~decreased by $0.1 million, or ~~13.8%~~30.5%, during the ~~nine~~three months ended ~~September 30, 2023,~~March 31, 2024, compared to the ~~nine~~three months ended ~~September 30, 2022.~~March 31, 2023.

Interest Income

Interest income increased from ~~$5 thousand for the nine months ended September 30, 2022 to $3.4~~$0.9 million for the ~~nine~~three months ended ~~September 30,~~March 31, 2023 to $3.0 million for the three months ended March 31, 2024, due to ana $2.5 million increase related to interest earned on the $125.0 million loan that we originated in October 2023, partially offset by a $0.4 million decrease in interest earned on our money market accounts primarily due to a decrease in the average cash balance ~~invested in money market accounts and higher interest rates.~~invested.

Property Expenses

Our Same Property Portfolio and Total Portfolio property expenses increased by ~~$3.7~~$2.1 million, or ~~4.2%~~5.7%, and ~~$26.8~~$4.7 million, or ~~24.7%~~10.9%, respectively, during the ~~nine~~three months ended ~~September 30, 2023,~~March 31, 2024, compared to the ~~nine~~three months ended ~~September 30, 2022.~~March 31, 2023. The increase in our Same Property Portfolio property expenses is primarily due to increases in ~~property tax~~insurance expenses as a result of higher premiums, repairs and maintenance expenses, allocated overhead costs ~~driven by~~reflecting a higher employee headcount and ~~rising~~ labor costs, and ~~insurance expenses as a result of higher premiums.~~property tax expenses. Our Total Portfolio property expenses were also impacted by incremental expenses from the 7768 properties we acquired between January 1, ~~2022~~2023 and ~~September 30, 2023.~~March 31, 2024.

General and Administrative

Our Total Portfolio general and administrative expenses increased by ~~$10.5~~$1.8 million, or ~~23.6%~~9.8%, during the ~~nine~~three months ended ~~September 30, 2023,~~March 31, 2024, compared to the ~~nine~~three months ended ~~September 30, 2022,~~March 31, 2023, primarily due to ~~an increase~~increases in non-cash equity compensation expense primarily related to performance unit equity grants made in ~~2021~~2023 and 2022, ~~an increase in~~ payroll related costs and accrued bonus expense due to a higher employee headcount and rising labor ~~costs and an increase in accrued bonus expense.~~costs.

5650

Depreciation and Amortization

Our Same Property Portfolio depreciation and amortization expense ~~decreased~~increased by ~~$1.4~~$3.7 million, or ~~1.2%~~7.6%, during the ~~nine~~three months ended ~~September 30, 2023,~~March 31, 2024, compared to the ~~nine~~three months ended ~~September 30, 2022,~~March 31, 2023, primarily due to an increase in depreciation expense related to capital improvements placed into service subsequent to January 1, 2023, partially offset by acquisition-related in-place lease intangibles becoming fully depreciated at certain of our properties subsequent to January 1, ~~2022, partially offset by an increase in depreciation expense related to capital improvements placed into service subsequent to January 1, 2022.~~2023. Our Total Portfolio depreciation and amortization expense increased by ~~$38.4~~$6.8 million, or ~~27.4%~~11.5%, during the ~~nine~~three months ended ~~September 30, 2023,~~March 31, 2024, compared to the ~~nine~~three months ended ~~September 30, 2022,~~March 31, 2023, primarily due to the incremental expense from the 7768 properties we acquired between January 1, ~~2022~~2023 and ~~September 30, 2023.~~March 31, 2024.

Other Expenses

Our Total Portfolio other expenses increased by $0.8 million from ~~$0.7~~$0.6 million for the ~~nine~~three months ended ~~September 30, 2022,~~March 31, 2023 to ~~$1.5~~$1.4 million for ~~the nine~~three months ended ~~September 30, 2023,~~March 31, 2024, primarily due to an increase of $0.7 million ofin construction demolition costs ~~incurred during 2023~~ and an increase of $0.3 million in write-offs of construction costs related to cancelled projects, partially offset by a $0.2 million impairment charge recorded in ~~February~~the first quarter of 2023 to reduce the carrying value of the right-of-use asset ~~in connection with the early termination of a sublease for~~related to one of our office space leases ~~partially offset by a $0.1 million decrease in acquisition costs.~~resulting from the early termination of our sublease tenant.

Interest Expense

Our Total Portfolio interest expense increased by ~~$12.0~~$1.0 million, or ~~34.5%~~7.1%, during the ~~nine~~three months ended ~~September 30, 2023,~~March 31, 2024, compared to the ~~nine~~three months ended ~~September 30, 2022.~~March 31, 2023. The increase in interest expense is primarily comprised of the following: (i) ~~$12.8~~a $4.0 million increase related to the ~~$400.0~~$300.0 million ~~term loan facility borrowing we completed in July 2022 and the related interest rate swaps, (ii) $8.1 million related to the $300 Million~~of 5.000% Senior Notes due 2028 offering we completed in March 2023, and ~~(iii) $5.3~~(ii) a $0.6 million increase related to the ~~$300.0 million term loan facility borrowing~~aggregate $1.15 billion of exchangeable notes offering we completed in ~~May 2022 and the related interest rate swaps.~~March 2024. These increases were partially offset by the following decreases: (i) ~~$8.0~~a $2.9 million decrease due to an increase in capitalized interest related to repositioning and redevelopment activity and (ii) ~~$4.8~~a $0.4 million ~~due to a~~ decrease ~~in borrowings under our unsecured revolving credit facility, and (iii) $2.2 million~~ related to the ~~repayment of the $150.0~~$400.0 million term loan facility which we started to hedge effective on April 3, 2023, and ~~termination of the related interest rate swap in May 2022.~~

~~Loss on Extinguishment of Debt~~

~~The loss on extinguishment of debt of $0.9~~(iii) a $0.1 million ~~for the nine months ended September 30, 2022, is comprised of the write-off of $0.7 million of unamortized debt issuance costs~~decrease related to the ~~$150~~$60.0 million ~~unsecured~~ term loan ~~facility~~which we ~~repaid in May 2022 in advance of the May 2025 maturity date and the write-off of $0.2 million of unamortized debt issuance costs attributable~~started to ~~one of the creditors departing the unsecured revolving credit facility when we amended our senior unsecured credit agreement in May 2022.~~hedge effective on April 3, 2023.

Gains on Sale of Real Estate

During the ~~nine~~three months ended ~~September 30,~~March 31, 2024, we did not complete any property dispositions. During the three months ended March 31, 2023, we recognized gains on sale of real estate of $12.1 million from the disposition of one property that was sold for a gross sales price of $17.0 million. During the nine months ended September 30, 2022, we recognized gains on sale of real estate of $8.5 million from the disposition of one property that was sold for a gross sales price of $16.5 million.

5751

Non-GAAP Supplemental Measure: Funds From Operations and Core Funds From Operations

We calculate funds from operations (“FFO”) attributable to common stockholder in accordance with the standards established by the National Association of Real Estate Investment Trusts (“NAREIT”). FFO represents net income (loss) (computed in accordance with accounting principles generally accepted in the United States (“GAAP”)), excluding gains (or losses) from sales of depreciable operating property or assets incidental to our business, impairment losses of depreciable operating property or assets incidental to our business, real estate related depreciation and amortization (excluding amortization of deferred financing costs) and after adjustments for unconsolidated joint ventures.

Management uses FFO as a supplemental performance measure because, in excluding real estate related depreciation and amortization, gains and losses from property dispositions, and asset impairments, it provides a performance measure that, when compared year over year, captures trends in occupancy rates, rental rates and operating costs. We also believe that, as a widely recognized measure of performance used by other REITs, FFO may be used by investors as a basis to compare our operating performance with that of other REITs.

However, because FFO excludes depreciation and amortization and captures neither the changes in the value of our properties that result from use or market conditions nor the level of capital expenditures and leasing commissions necessary to maintain the operating performance of our properties, all of which have real economic effects and could materially impact our results from operations, the utility of FFO as a measure of our performance is limited. Other equity REITs may not calculate or interpret FFO in accordance with the NAREIT definition as we do, and, accordingly, our FFO may not be comparable to such other REITs’ FFO. FFO should not be used as a measure of our liquidity and is not indicative of funds available for our cash needs, including our ability to pay dividends.

We calculate “Core FFO” by adjusting FFO for non-comparable items outlined in the reconciliation below. We believe that Core FFO is a useful supplemental measure and that by adjusting for items that are not considered by us to be part of our on-going operating performance, provides a more meaningful and consistent comparison of our operating and financial performance period-over-period. Because these adjustments have a real economic impact on our financial condition and results from operations, the utility of Core FFO as a measure of our performance is limited. Other REITs may not calculate Core FFO in a consistent manner. Accordingly, our Core FFO may not be comparable to other REITs' core FFO. Core FFO should be considered only as a supplement to net income computed in accordance with GAAP as a measure of our performance.

The following table sets forth a reconciliation of net income, the most directly comparable financial measure calculated and presented in accordance with GAAP, to FFO and Core FFO (in thousands):

Three Months Ended September 30, Nine Months Ended September 30,
2023 2022 2023 2022
Net income $ 61,790 $ 41,648 $ 182,270 $ 131,449
Adjustments:
Depreciation and amortization 60,449 51,146 178,671 140,226
Gains on sale of real estate — — (12,133) (8,486)
Funds From Operations (FFO) $ 122,239 $ 92,794 $ 348,808 $ 263,189
Adjustments:
Acquisition expenses 10 359 330 451
Impairment of right-of-use asset — — 188 —
Loss on extinguishment of debt — — — 877
Amortization of loss on termination of interest rate swaps 59 59 177 194
Non-capitalizable demolition costs 361 — 701 —
Write-offs of below-market lease intangibles related to terminations(1)
— — (1,318) —
Core FFO $ 122,669 $ 93,212 $ 348,886 $ 264,711
Less: preferred stock dividends (2,314) (2,314) (6,943) (6,943)
Less: Core FFO attributable to noncontrolling interests(2)
(4,924) (4,471) (14,556) (12,433)
Less: Core FFO attributable to participating securities(3)
(462) (307) (1,339) (914)
Core FFO attributable to common stockholders $ 114,969 $ 86,120 $ 326,048 $ 244,421


	Three Months Ended March 31,
	2024		2023
Net income	$	64,277	$	63,570
Adjustments:
Depreciation and amortization	66,278		59,429
Gains on sale of real estate	—		(12,133)
Funds From Operations (FFO)	$	130,555	$	110,866
Adjustments:
Acquisition expenses	50		73
Impairment of right-of-use asset	—		188

Amortization of loss on termination of interest rate swaps	59		59
Non-capitalizable demolition costs	998		340
Write-offs of below-market lease intangibles related to terminations(1)	—		(1,318)
Core FFO	$	131,662	$	110,208
Less: preferred stock dividends	(2,314)		(2,314)
Less: Core FFO attributable to noncontrolling interests(2)	(5,226)		(4,809)
Less: Core FFO attributable to participating securities(3)	(575)		(425)
Core FFO attributable to common stockholders	$	123,547	$	102,660

(1)Reflects the write-off of the portion of a below-market lease intangible attributable to below-market fixed rate renewal options that were not exercised due to the termination of the lease at the end of the initial lease term.

(2)Noncontrolling interests represent (i) holders of outstanding common units of the Company's Operating Partnership that are owned by unit holders other than the Company and (ii) holders of Series 1 CPOP Units, Series 2 CPOP Units and Series 3 CPOP Units.

(3)Participating securities include unvested shares of restricted stock, unvested LTIP units and unvested performance units.

Non-GAAP Supplemental Measures: NOI and Cash NOI

Net operating income (“NOI”) is a non-GAAP measure which includes the revenue and expense directly attributable to our real estate properties. NOI is calculated as rental income less property expenses (before interest expense, depreciation and amortization).

We use NOI as a supplemental performance measure because, in excluding real estate depreciation and amortization expense, general and administrative expenses, interest expense, gains (or losses) on sale of real estate and other non-operating items, it provides a performance measure that, when compared year over year, captures trends in occupancy rates, rental rates and operating costs. We also believe that NOI will be useful to investors as a basis to compare our operating performance with that of other REITs. However, because NOI excludes depreciation and amortization expense and captures neither the changes in the value of our properties that result from use or market conditions, nor the level of capital expenditures and leasing commissions necessary to maintain the operating performance of our properties (all of which have real economic effect and could materially impact our results from operations), the utility of NOI as a measure of our performance is limited. Other equity REITs may not calculate NOI in a similar manner and, accordingly, our NOI may not be comparable to such other REITs’ NOI. Accordingly, NOI should be considered only as a supplement to net income as a measure of our performance. NOI should not be used as a measure of our liquidity, nor is it indicative of funds available to fund our cash needs. NOI should not be used as a substitute for cash flow from operating activities in accordance with GAAP.

NOI on a cash-basis (“Cash NOI”) is a non-GAAP measure, which we calculate by adding or subtracting the following items from NOI: (i) ~~fair value~~amortization of above/(below) market lease ~~revenue~~intangibles and amortization of other deferred rent resulting from sale leaseback transactions with below market leaseback payments and (ii) straight-line rental revenue adjustments. We use Cash NOI, together with NOI, as a supplemental performance measure. Cash NOI should not be used as a measure of our liquidity, nor is it indicative of funds available to fund our cash needs. Cash NOI should not be used as a substitute for cash flow from operating activities computed in accordance with GAAP.

The following table sets forth the revenue and expense items comprising NOI and the adjustments to calculate Cash NOI (in thousands):






		Three Months Ended September 30,				Nine Months Ended September 30,
		2023		2022		2023		2022

Rental income	Rental income	$	204,212	$	162,581	$	583,474	$	452,156

Rental income

Rental income
Less: Property expenses
Less: Property expenses
Less: Property expenses	Less: Property expenses	48,085		39,614		135,220		108,448
Net Operating Income	Net Operating Income	$	156,127	$	122,967	$	448,254	$	343,708
Amortization of (below) above market lease intangibles, net		(7,241)		(7,033)		(21,763)		(18,250)
Net Operating Income
Net Operating Income
Above/(below) market lease revenue adjustments
Above/(below) market lease revenue adjustments
Above/(below) market lease revenue adjustments
Straight line rental revenue adjustment
Straight line rental revenue adjustment
Straight line rental revenue adjustment	Straight line rental revenue adjustment	(11,792)		(8,411)		(28,073)		(23,753)
Cash Net Operating Income	Cash Net Operating Income	$	137,094	$	107,523	$	398,418	$	301,705
Cash Net Operating Income
Cash Net Operating Income

5953

The following table sets forth a reconciliation of net income, the most directly comparable financial measure calculated and presented in accordance with GAAP, to NOI and Cash NOI (in thousands):


		Three Months Ended March 31,
		Three Months Ended March 31,
		Three Months Ended March 31,

		Three Months Ended September 30,				Nine Months Ended September 30,
		2023		2022		2023		2022
Net income	Net income	$	61,790	$	41,648	$	182,270	$	131,449
Net income
Net income
Adjustments:
Adjustments:
Adjustments:	Adjustments:
General and administrative	General and administrative	18,575		14,951		55,039		44,531
General and administrative
General and administrative
Depreciation and amortization
Depreciation and amortization
Depreciation and amortization	Depreciation and amortization	60,449		51,146		178,671		140,226
Other expenses	Other expenses	551		413		1,504		746
Other expenses
Other expenses
Interest expense	Interest expense	15,949		14,975		46,830		34,826
Loss on extinguishment of debt		—		—		—		877
Interest expense
Interest expense

Management and leasing services	Management and leasing services	(158)		(163)		(519)		(456)

Management and leasing services

Management and leasing services
Interest income
Interest income
Interest income	Interest income	(1,029)		(3)		(3,408)		(5)

Gains on sale of real estate	Gains on sale of real estate	—		—		(12,133)		(8,486)

Gains on sale of real estate

Gains on sale of real estate

Net Operating Income	Net Operating Income	$	156,127	$	122,967	$	448,254	$	343,708
Amortization of (below) above market lease intangibles, net		(7,241)		(7,033)		(21,763)		(18,250)

Net Operating Income

Net Operating Income
Above/(below) market lease revenue adjustments
Above/(below) market lease revenue adjustments
Above/(below) market lease revenue adjustments
Straight line rental revenue adjustment
Straight line rental revenue adjustment
Straight line rental revenue adjustment	Straight line rental revenue adjustment	(11,792)		(8,411)		(28,073)		(23,753)
Cash Net Operating Income	Cash Net Operating Income	$	137,094	$	107,523	$	398,418	$	301,705
Cash Net Operating Income
Cash Net Operating Income

Non-GAAP Supplemental Measure: EBITDAre

We calculate earnings before interest expense, income taxes, depreciation and amortization for real estate (“EBITDAre”) in accordance with the standards established by NAREIT. EBITDAre is calculated as net income (loss) (computed in accordance with GAAP), before interest expense, income tax expense, depreciation and amortization, gains (or losses) from sales of depreciable operating property or assets incidental to our business, impairment losses of depreciable operating property or assets incidental to our business and adjustments for unconsolidated joint ventures.

We believe that EBITDAre is helpful to investors as a supplemental measure of our operating performance as a real estate company because it is a direct measure of the actual operating results of our properties. We also use this measure in ratios to compare our performance to that of our industry peers. In addition, we believe EBITDAre is frequently used by securities analysts, investors and other interested parties in the evaluation of equity REITs. However, our industry peers may not calculate EBITDAre in accordance with the NAREIT definition as we do and, accordingly, our EBITDAre may not be comparable to our peers’ EBITDAre. Accordingly, EBITDAre should be considered only as a supplement to net income (loss) as a measure of our performance.

The following table sets forth a reconciliation of net income, the most directly comparable financial measure calculated and presented in accordance with GAAP, to EBITDAre (in thousands):






		Three Months Ended September 30,				Nine Months Ended September 30,
		2023		2022		2023		2022
Net income	Net income	$	61,790	$	41,648	$	182,270	$	131,449
Net income
Net income
Interest expense
Interest expense
Interest expense	Interest expense	15,949		14,975		46,830		34,826
Depreciation and amortization	Depreciation and amortization	60,449		51,146		178,671		140,226
Depreciation and amortization
Depreciation and amortization
Gains on sale of real estate
Gains on sale of real estate
Gains on sale of real estate	Gains on sale of real estate	—		—		(12,133)		(8,486)

EBITDAre	EBITDAre	$	138,188	$	107,769	$	395,638	$	298,015

EBITDAre

EBITDAre

6054

Supplemental Guarantor Information

Subsidiary issuers of obligations guaranteed by the parent are not required to provide separate financial statements, provided that the parent guarantee is “full and unconditional,” the subsidiary obligor is consolidated into the parent company’s consolidated financial statements and, subject to certain exceptions as set forth below, the alternative disclosure required by Rule 13-01 is provided, which includes narrative disclosure and summarized financial information. The Company and the Operating Partnership have filed a registration statement on Form S-3 with the SEC registering, among other securities, debt securities of the Operating Partnership, which will be fully and unconditionally guaranteed by the Company. At ~~September 30, 2023,~~March 31, 2024, the Operating Partnership had issued and outstanding $300.0 million of 5.000% Senior Notes due 2028 (the “$300 Million Notes due 2028”), $400.0 million of 2.125% Senior Notes due 2030 (the “$400 Million Notes due 2030”) ~~and~~, $400 million of ~~2.15%~~2.150% Senior Notes due 2031 (the “$400 Million Notes due 2031”), $575.0 million of 4.375% Exchangeable Senior Notes due 2027 (the “2027 Exchangeable Notes”) and $575.0 million of 4.125% Exchangeable Senior Notes due 2029 (the “2029 Exchangeable Notes” and together with the 2027 Exchangeable Notes, the “Exchangeable Notes”). The obligations of the Operating Partnership to pay principal, premiums, if any, and interest on the ~~$300.0 million of 5.000% Senior~~$300 Million Notes due 2028, $400 Million Notes due 2030, ~~and~~ $400 Million Notes due 2031 and Exchangeable Notes are guaranteed on a senior basis by the Company. The guarantee is full and unconditional, and the Operating Partnership is a consolidated subsidiary of the Company. Accordingly, separate consolidated financial statements of the Operating Partnership have not been presented.

Furthermore, as permitted under Rule 13-01(a)(4)(vi), the Company has excluded the summarized financial information for the Operating Partnership as the assets, liabilities and results of operations of the Company and the Operating Partnership are not materially different than the corresponding amounts presented in the consolidated financial statements of the Company, and management believes such summarized financial information would be repetitive and not provide incremental value to investors.

Liquidity and Capital Resources

Overview

Our short-term liquidity requirements consist primarily of funds to pay for operating expenses, interest expense, general and administrative expenses, capital expenditures, tenant improvements and leasing commissions, and distributions to our common and preferred stockholders and holders of common units of partnership interests in our Operating Partnership (“OP Units”). We expect to meet our short-term liquidity requirements through available cash on hand, cash flow from operations, by drawing on our unsecured revolving credit facility and by issuing shares of common stock pursuant to our at-the-market equity offering program or issuing other securities as described below.

Our long-term liquidity needs consist primarily of funds necessary to pay for acquisitions, recurring and non-recurring capital expenditures and scheduled debt maturities. We intend to satisfy our long-term liquidity needs through net cash flow from operations, proceeds from long-term unsecured and secured financings, borrowings available under our unsecured revolving credit facility, the issuance of debt and/or equity securities, including preferred stock, and proceeds from selective real estate dispositions as we identify capital recycling opportunities.

As of ~~September 30, 2023,~~March 31, 2024, we had:

•Outstanding fixed-rate and variable-rate debt with varying maturities ~~with~~for an aggregate principal amount of ~~$2.2~~$3.4 billion, ~~of which $409.0~~with $469.7 million is due within 12 months (including the $400.0 unsecured term loan facility maturing on July 19, 2024, which can be extended for two additional one-year terms at our option, the first of which we have requested to exercise by submitting our notice to the lender in March 2024, and the $60,000 secured term loan maturing on October 27, 2024, which can be extended for three one-year terms at our option);

•Total scheduled interest payments on our fixed rate debt and projected net interest payments on our variable rate debt and interest rate swaps of ~~$338.0~~$489.3 million, of which ~~$77.1~~$110.1 million is due within 12 months;

•Commitments of ~~$223.4~~$232.8 million for tenant improvements under certain tenant leases and construction work related to obligations under contractual agreements with our construction vendors; and

•Operating lease commitments with aggregate lease payments of ~~$25.4~~$24.3 million, of which ~~$2.3~~$2.1 million is due within 12 months.

See “Note 56 – Notes Payable” to the consolidated financial statements included in Item 1 of this Report on Form 10-Q for further details regarding the scheduled principal payments. Also see “Note 67 – Leases” to the consolidated financial statements for further details regarding the scheduled operating lease payments.

As of ~~September 30, 2023,~~March 31, 2024, our cash and cash equivalents were ~~$83.3~~$337.0 million, and we did not have borrowings outstanding under our unsecured revolving credit facility, leaving $1.0 billion available for future borrowings.

6155

Sources of Liquidity

Cash Flow from Operations

Cash flow from operations is one of our key sources of liquidity and is primarily dependent upon: (i) the occupancy levels and lease rates at our properties, (ii) our ability to collect rent, (iii) the level of operating costs we incur and (iv) our ability to pass through operating expenses to our tenants. We are subject to a number of risks related to general economic and other unpredictable conditions, which have the potential to affect our overall performance and resulting cash flows from operations. However, based on our current portfolio mix and business strategy, we anticipate that we will be able to generate positive cash flows from operations.

ATM Program

On February 17, 2023, we established an at-the-market equity offering program (“ATM program”) pursuant to which we are able to sell from time to time shares of our common stock having an aggregate sales price of up to $1.25 billion (the “2023 ATM Program”). The 2023 ATM Program replaces our previous $1.0 billion ATM Program, which was established on May 27, ~~2022, under which we had sold shares of our common stock having an aggregate gross sales price of $834.6 million through February 17, 2023.~~2022.

In connection with our ATM programs, we may sell shares of our common stock directly through sales agents or we may enter into forward equity sale agreements with certain financial institutions acting as forward purchasers whereby, at our discretion, the forward purchasers may borrow and sell shares of our common stock under ATM programs. The use of a forward equity sale agreement allows us to lock in a share price on the sale of shares of our common stock at the time the agreement is executed but defer settling the forward equity sale agreements and receiving the proceeds from the sale of shares until a later date. Additionally, the forward price that we expect to receive upon physical settlement of an agreement will be subject to adjustment for (i) a floating interest rate factor equal to a specified daily rate less a spread, (ii) the forward purchaser’s stock borrowing costs and (iii) scheduled dividends during the term of the agreement.

During the ~~nine~~three months ended ~~September 30, 2023,~~March 31, 2024, we ~~sold 449,227~~did not sell any shares of common stock directly through sales agents ~~under our 2023 ATM Program at a weighted average price of $60.84 per share, for gross proceeds of $27.3 million, and net proceeds of $27.0 million after deducting the sales agents’ fees.~~

~~During the nine months ended September 30, 2023, we entered~~or enter into forward equity sale agreements with certain financial institutions acting as forward purchasers under the 2023 ATM Program with respect to 2,126,824 shares of common stock at a weighted average initial forward sale price of $60.09 per share. We did not receive any ~~proceeds from the sale of common shares by the forward purchasers at the time we entered into forward equity sale agreements.~~

~~During the nine months ended September 30, 2023, we physically settled the forward equity sale agreement that was outstanding as of December 31, 2022 under our prior ATM Program and all of the~~ forward equity sale agreements under the 2023 ATM Program.

During the three months ended March 31, 2024, we physically settled the forward equity sale agreements that were outstanding as of December 31, 2023 under the 2023 ATM Program by issuing ~~2,763,708~~3,010,568 shares of our common stock for net proceeds of ~~$163.2~~$164.5 million, based on a weighted average forward price of ~~$59.04~~$54.65 per share at settlement.

Securities Offerings

We evaluate the capital markets on an ongoing basis for opportunities to raise capital, and as circumstances warrant, we may issue additional securities, from time to time, to fund acquisitions, for the repayment of long-term debt upon maturity and for other general corporate purposes. Such securities may include common equity, preferred equity and/or debt of us or our subsidiaries. Any future issuance, however, is dependent upon market conditions, available pricing and capital needs and there can be no assurance that we will be able to complete any such offerings of securities.

Issuance of ~~$300 Million~~Exchangeable Senior Notes ~~Due 2028~~ — OnIn March ~~28, 2023,~~2024, we ~~completed an underwritten public offering of $300.0~~issued $575.0 million ~~of 5.000% Senior Notes due 2028. The $300 Million Notes were priced at 98.975% of the~~in aggregate principal amount ~~with a coupon rate~~ of ~~5.000%.~~4.375% exchangeable senior unsecured notes due 2027 and $575.0 million in aggregate principal amount of 4.125% exchangeable senior unsecured notes due 2029. The net proceeds from the issuance, after deducting the initial purchasers’ discounts, underwriting commissions and other offering expenses, were approximately $563.1 million for the 2027 Exchangeable Notes and $563.1 million for the 2029 Exchangeable Notes. Interest on the ~~$300 Million~~Exchangeable Notes is payable semiannually on ~~June~~March 15 and ~~December~~September 15 inof each year beginning on ~~June~~September 15, ~~2023, until~~2024. The 2027 Exchangeable Notes will mature on March 15, 2027 and the ~~maturity date~~2029 Exchangeable Notes will mature on March 15, 2029, in each case unless earlier repurchased, exchanged or (in the case of ~~June 15, 2028.~~2029 Exchangeable Notes) redeemed.

~~The net proceeds from this offering were used for general management activities including funding acquisitions and funding our redevelopment and repositioning activities.~~

6256

WeBefore December 15, 2026 (in the case of the 2027 Exchangeable Notes) or December 15, 2028 (in the case of the 2029 Exchangeable Notes), noteholders will have the right to exchange their notes only upon the occurrence of certain events. From and after December 15, 2026 (in the case of the 2027 notes) or December 15, 2028 (in the case of the 2029 notes), noteholders may ~~redeem the $300 Million Notes at our option and sole discretion, in whole~~exchange their notes at any time ~~or in part from time to time prior to May 15, 2028 (one month prior to~~at their election until the close of business on the second scheduled trading day immediately before the maturity date of the ~~$300 Million Notes) (the “Par Call Date”), at a redemption price equal~~applicable series of Exchangeable Notes. Exchanges will be settled by delivering cash up to the greater of (i) the sum of the present values of the remaining scheduled payments of principal and interest on the $300 Million Notes discounted to the redemption date (assuming the notes matured on the Par Call Date) on a semi-annual basis (assuming a 360-day year consisting of twelve 30-day months) at the Treasury Rate (as defined in the Third Supplemental Indenture) plus 25 basis points, less (b) interest accrued to the date of redemption, and (ii) 100% of the principal amount of the ~~$300 Million~~Exchangeable Notes ~~being redeemed. Notwithstanding~~exchanged, and in respect of the ~~foregoing, on~~remainder of the exchanged value, if any, in excess thereof, in cash or ~~after the Par Call Date, the redemption price will be equal to 100%~~in a combination of ~~the~~cash and shares of our common stock, at our option. The initial exchange rate is 15.7146 shares of our common stock per $1,000 principal amount of the ~~$300 Million~~Exchangeable Notes, ~~being redeemed, plus accrued~~which represents an initial exchange price of approximately $63.64 per share of our common stock. The initial exchange price represents a premium of approximately 30.0% over the last reported sale price of $48.95 per share of our common stock on March 26, 2024.

March 2024 Forward Equity Offering — In March 2024, we entered into a forward equity sale agreement with a financial institution acting as forward purchaser in connection with an underwritten public offering of 17,179,318 shares of common stock (the “March 2024 Forward Sale Agreement”), pursuant to which, the forward purchaser borrowed and ~~unpaid interest.~~sold an aggregate of 17,179,318 shares of common stock in the offering. We did not receive any proceeds from the sale of common shares by the forward purchaser at the time of the offering. The net forward sale price that we will receive upon physical settlement of the agreement, which was initially $48.61 per share, will be subject to adjustment for (i) a floating interest rate factor equal to a specified daily rate less a spread, (ii) the forward purchaser’s stock borrowing costs and (iii) scheduled dividends during the term of the forward sale agreement.

As of March 31, 2024, we had not settled any portion of the March 2024 Forward Sale Agreement and currently expect to physically settle the 17,179,318 shares under the March 2024 Forward Sale Agreement by issuing shares of our common stock in exchange for cash proceeds upon one or more settlement dates, at our discretion, prior to the scheduled maturity date of March 27, 2025. As of April 19, 2024, the date of this Quarterly Report on Form 10-Q, the net forward sale price was $48.74 and would result in $837.3 million of cash proceeds upon physical settlement of the shares under the March 2024 Forward Sale Agreement.

Settlement of May 2023 Forward Equity Offering — On May 10, 2023, we entered into forward equity sale agreements with certain financial institutions acting as forward purchasers in connection with an underwritten public offering of 13,500,000 shares of common stock at an initial forward price of $55.24 per share (the “May 2023 Forward Sale Agreements”), pursuant to which, the forward purchasers borrowed and sold an aggregate of 13,500,000 shares of common stock in the offering. We did not receive any proceeds from the sale of common shares by the forward purchasers at the time of the offering. The net forward sale price that we will receive upon physical settlement of the agreements, which was initially $55.24 per share, will be subject to adjustment for (i) a floating interest rate factor equal to a specified daily rate less a spread, (ii) the forward purchasers’ stock borrowing costs and (iii) scheduled dividends during the term of the forward sale agreements.

During ~~the third quarter of~~ 2023, we partially settled the May 2023 Forward Sale Agreements by issuing ~~5,400,000~~11,246,966 shares of common stock, ~~in exchange~~leaving a remaining 2,253,034 shares of common stock for ~~net proceeds~~settlement as of ~~$298.4 million, based on a weighted average forward price~~December 31, 2023.

During the first quarter of ~~$55.26 per share at settlement.~~

~~Subsequent to September 30, 2023, in October 2023,~~2024, we ~~partially~~ settled the outstanding May 2023 Forward Sale Agreements by issuing ~~4,611,653~~2,253,034 shares of common stock ~~in exchange~~ for net proceeds of ~~$256.1~~$125.7 million, based on a weighted average forward price of ~~$55.54 per share at settlement.~~

We currently expect to physically settle the remaining 3,488,347 shares under the May 2023 Forward Sale Agreements by issuing shares of our common stock in exchange for cash proceeds upon one or more settlement dates, at our discretion, prior to the scheduled maturity date of October 11, 2024. As of October 20, 2023, the date of this Quarterly Report on Form 10-Q, the net forward sale price was $55.55 and would result in $193.8 million of cash proceeds upon physical settlement of the remaining shares under the May 2023 Forward Sale Agreements.

~~Settlement of 2022 Forward Equity Offering Sale Agreements —~~ On November 10, 2022, we entered into forward equity sale agreements with certain financial institutions acting as forward purchasers in connection with an underwritten public offering of 11,846,425 shares of common stock at an initial forward price of $55.74 per share (the “2022 Forward Sale Agreements”), pursuant to which the forward purchasers borrowed and sold an aggregate of 11,846,425 shares of common stock in the offering. In December 2022 we partially settled the 2022 Forward Sale Agreements by issuing 3,554,704 shares of common stock, leaving a remaining 8,291,721 shares of common stock for settlement as of December 31, 2022.

Capital Recycling

We continuously evaluate opportunities for the potential disposition of properties in our portfolio when we believe such disposition is appropriate in view of our business objectives. In evaluating these opportunities, we consider a variety of criteria including, but not limited to, local market conditions and lease rates, asset type and location, as well as potential uses of proceeds and tax considerations. Tax considerations include entering into tax-deferred like-kind exchanges under Section 1031 of the Code (“1031 Exchange”), when possible, to defer some or all of the taxable gains, if any, on dispositions.

During the ~~nine~~three months ended ~~September 30, 2023,~~March 31, 2024, we did not complete any property dispositions. Subsequent to March 31, 2024, we completed the disposition of one property for a ~~gross~~ sales price of ~~$17.0~~$10.0 million and ~~total~~ net cash proceeds of ~~$16.2~~$9.8 million. ~~The~~We intend to use the net cash proceeds ~~were used~~from this sale to partially fund ~~the acquisition of one property during the nine months ended September 30, 2023,~~future acquisitions through a 1031 Exchange transaction.

We anticipate continuing to selectively and opportunistically dispose of properties, however, the timing of any potential future dispositions will depend on market conditions, asset-specific circumstances or opportunities, and our capital needs. Our ability to dispose of selective properties on advantageous terms, or at all, is dependent upon a number of factors including the availability of credit to potential buyers to purchase properties at prices that we consider acceptable.

6357

Investment Grade Rating

Our credit ratings at ~~September 30, 2023,~~March 31, 2024, were Baa2 (Stable outlook) from Moody’s and BBB+ (Stable outlook) from both S&P and Fitch with respect to our Credit Agreement (described below), Exchangeable Notes, $100.0 million unsecured guaranteed senior notes (the “$100 Million Notes”), $25.0 million unsecured guaranteed senior notes and $75.0 million unsecured guaranteed senior notes (together the “Series 2019A and 2019B Notes”), $300 Million Notes, $400 Million Notes due 2030 and $400 Million Notes due 2031. Our credit ratings at ~~September 30, 2023,~~March 31, 2024, were BBB- from both S&P and Fitch with respect to our 5.875% Series B Cumulative Redeemable Preferred Stock and our 5.625% Series C Cumulative Redeemable Preferred Stock. Our credit ratings are based on our operating performance, liquidity and leverage ratios, overall financial position and other factors employed by the credit rating agencies in their rating analysis of us, and, although it is our intent to maintain our investment grade credit rating, there can be no assurance that we will be able to maintain our current credit ratings. In the event our current credit ratings are downgraded, it may become difficult or more expensive to obtain additional financing or refinance existing indebtedness as maturities become due.

Credit Agreement

As of ~~September 30, 2023,~~March 31, 2024, under the Fourth Amended and Restated Credit Agreement (the “Credit Agreement”), we have an unsecured revolving credit facility with a borrowing capacity of $1.0 billion (the “Revolver”), a $300.0 million unsecured term loan facility (the “$300 Million Term Loan”) and a $400.0 million unsecured term loan facility (the “$400 Million Term Loan” and together with the $300 Million Term Loan, the “Term Facility”). Subject to certain terms and conditions set forth in the Credit Agreement, we may request additional lender commitments and increase the size of the Credit Agreement by an additional $800.0 million, which may be comprised of additional revolving commitments under the Revolver, an increase to the Term Facility, additional term loan tranches or any combination of the foregoing.

The Revolver is scheduled to mature on May 26, 2026 and has two six-month extension options available. The $400 Million Term Loan is scheduled to mature on July 19, 2024 and has two one-year extension options available. In March 2024, we submitted our notice to the lender to extend the maturity date of the $400 Million Term Loan by one year to July 18, 2025. The $300 Million Term Loan matures on May 26, 2027.

Interest on the Credit Agreement is generally to be paid based upon, at our option, either (i) 1-month SOFR (“Term SOFR”) plus the applicable margin; (ii) daily Secured Overnight Financing Rate (“SOFR”) plus the applicable margin or (iii) the applicable base rate (which is defined as the highest of (a) the federal funds rate plus 0.50%, (b) the administrative agent’s prime rate, (c) Term SOFR plus 1.00%, and (d) one percent (1.00%)) plus the applicable margin. Additionally, Term SOFR and daily SOFR will be increased by a 0.10% SOFR adjustment. The applicable margin for the Term Facility ranges from 0.80% to 1.60% per annum for SOFR-based loans and 0.00% to 0.60% per annum for base rate loans, depending on our leverage ratio and investment grade ratings. The applicable margin for the Revolver ranges from 0.725% to 1.400% per annum for SOFR-based loans and 0.00% to 0.40% per annum for base rate loans, depending on our leverage ratio and investment grade ratings. In addition to the interest payable on amounts outstanding under the Revolver, we are required to pay an applicable credit facility fee, on each lender's commitment amount under the Revolver, regardless of usage. The applicable credit facility fee ranges from 0.125% to 0.300% per annum, depending on our leverage ratio and investment grade rating.

In addition, the Credit Agreement also features a sustainability-linked pricing component whereby the applicable margin and applicable credit facility fee can decrease by 0.04% and 0.01%, respectively, or increase by 0.04% and 0.01%, respectively, from year to year if we meet, or do not meet, certain annual sustainability performance targets, as applicable. In February 2023, after certifying that our sustainability performance target was met for 2022, the applicable margin decreased by 0.040% to 0.685% for the Revolver and 0.760% for the Term Facility and the credit facility fee decreased by 0.010% to 0.115%.

As of the filing date of this Quarterly Report on Form 10-Q, we did not have any borrowings outstanding under the Revolver, leaving $1.0 billion available for future borrowings.

6458

Uses of Liquidity

Acquisitions

One of our most significant liquidity needs has historically been for the acquisition of real estate properties. Year to date, as of the filing date of this Quarterly Report on Form 10-Q, we completed 14five acquisitions representing 1650 properties with a combined ~~3.1~~3.3 million rentable square feet of buildings on ~~159~~163 acres of land, for an aggregate purchase price of ~~$1.2~~$1.1 billion, and we are actively monitoring a volume of properties in our markets that we believe represent attractive potential investment opportunities to continue to grow our business. As of the filing date of this Quarterly Report, ~~on Form 10-Q,~~ we have approximately ~~$400.0~~$275.0 million of investments under contract or accepted offer. There can be no assurance we will complete any such transactions. While the actual number of investments that we complete will be dependent upon a number of factors, in the short term, we expect to fund our investments through available cash on hand, cash flows from operations, borrowings available under the Revolver, recycling capital through property dispositions and, in the long term, through the issuance of equity securities or proceeds from long-term secured and unsecured financings. See “Note 3 – Investments in Real Estate” to the consolidated financial statements for a summary of the ~~properties~~investments we ~~acquired~~completed during the ~~nine~~three months ended ~~September 30, 2023.~~March 31, 2024.

Recurring and Nonrecurring Capital Expenditures

Capital expenditures are considered part of both our short-term and long-term liquidity requirements. As discussed above under — Factors that May Influence Future Results —Acquisitions and Value-Add Repositioning and Redevelopment of Properties, as of ~~September 30, 2023, 26~~March 31, 2024, 28 of our properties were under current repositioning and redevelopment and we have a pipeline of ~~ten~~nine additional properties for which we anticipate beginning construction work between the ~~fourth~~second quarter of ~~2023~~2024 and the second quarter of 2025. We currently estimate that approximately ~~$427.8~~$405.7 million of capital will be required over the next three years ~~(4Q-2023~~(2Q-2024 through ~~2Q-2026)~~3Q-2026) to complete the repositioning/redevelopment of these properties. However, this estimate is based on our current construction plans and budgets, both of which are subject to change as a result of a number of factors, including increased costs of building materials or construction services and construction delays related to supply chain backlogs and increased lead time on building materials. If we are unable to complete construction on schedule or within budget, we could incur increased construction costs and experience potential delays in leasing the properties. We expect to fund these projects through a combination of available cash on hand, the issuance of common stock under the 2023 ATM Program and settlement of the ~~May 2023~~March 2024 Forward Sale ~~Agreements,~~Agreement, cash flow from operations and borrowings available under the Revolver.

The following table sets forth certain information regarding non-recurring and recurring capital expenditures at the properties in our portfolio as follows:


		Nine Months Ended September 30, 2023						Three Months Ended March 31, 2024
		Total(1)		Square Feet(2)	Per Square Foot(3)			Total(1)		Square Feet(2)	Per Square Foot(3)
Non-Recurring Capital Expenditures(4)	Non-Recurring Capital Expenditures(4)	$	142,311	30,203,382	$	4.71
Recurring Capital Expenditures(5)	Recurring Capital Expenditures(5)	19,751		43,778,145	$	0.45
Total Capital Expenditures	Total Capital Expenditures	$	162,062				Total Capital Expenditures	$	65,027

(1)Cost is reported in thousands. Excludes the following capitalized costs: (i) compensation costs of personnel directly responsible for and who spend their time on redevelopment, renovation and rehabilitation activity and (ii) interest, property taxes and insurance costs incurred during the pre-construction and construction periods of repositioning or redevelopment projects.

(2)For non-recurring capital expenditures, reflects the aggregate square footage of the properties in which we incurred such capital expenditures. For recurring capital expenditures, reflects the weighted average square footage of our consolidated portfolio during the period.

(3)Per square foot amounts are calculated by dividing the aggregate capital expenditure costs by the square footage as defined in (2) above.

(4)Non-recurring capital expenditures are expenditures made in respect of a property for repositioning, redevelopment, or other major upgrade or renovation of such property, and further includes capital expenditures for seismic upgrades, roof or parking lot replacements or capital expenditures for deferred maintenance existing at the time such property was acquired.

(5)Recurring capital expenditures are expenditures made in respect of a property for maintenance of such property and replacement of items due to ordinary wear and tear including, but not limited to, expenditures made for maintenance of parking lot, roofing materials, mechanical systems, HVAC systems and other structural systems.

6559

Dividends and Distributions

In order to maintain our qualification as a REIT, we are required to distribute annually at least 90% of our REIT taxable income, determined without regard to the dividends paid deduction and excluding any net capital gains. To satisfy the requirements to qualify as a REIT and generally not be subject to U.S. federal income tax, we intend to distribute a percentage of our cash flow on a quarterly basis to holders of our common stock. In addition, we intend to make distribution payments to holders of OP Units and preferred units and dividend payments to holders of our preferred stock.

On ~~October 16, 2023,~~April 15, 2024, our board of directors declared the following quarterly cash dividends/distributions record dates and payment dates.

Security

Amount per Share/Unit

Record Date

Payment Date

Common stock

~~0.38~~0.4175

~~December 29, 2023~~June 28, 2024

~~January 16,~~July 15, 2024

OP Units

~~0.38~~0.4175

~~December 29, 2023~~June 28, 2024

~~January 16,~~July 15, 2024

5.875% Series B Cumulative Redeemable Preferred Stock

0.367188

~~December 15, 2023~~June 14, 2024

~~December 29, 2023~~June 28, 2024

5.625% Series C Cumulative Redeemable Preferred Stock

0.351563

~~December 15, 2023~~June 14, 2024

~~December 29, 2023~~June 28, 2024

~~4.43937% Cumulative Redeemable Convertible Preferred Units~~

~~0.505085~~

~~December 15, 2023~~

~~December 29, 2023~~

4.00% Cumulative Redeemable Convertible Preferred Units

0.45

~~December 15, 2023~~June 14, 2024

~~December 29, 2023~~June 28, 2024

3.00% Cumulative Redeemable Convertible Preferred Units

0.545462

~~December 15, 2023~~June 14, 2024

~~December 29, 2023~~June 28, 2024

6660

Indebtedness Outstanding

The following table sets forth certain information with respect to our consolidated indebtedness outstanding as of ~~September 30, 2023:~~March 31, 2024:

Contractual Maturity Date

Margin Above SOFR

Effective Interest Rate(1)

Principal Balance

(in thousands)(2)

Unsecured and Secured Debt:

Unsecured Debt:

Revolving Credit Facility(3)

5/26/2026

(4)

S+0.685

(5)

6.095

(3)

—

Unsecured Debt:

Revolving Credit Facility

$400M Term Loan

7/19/2024

(4)

S+0.760

(5)

4.832

(6)

400,000

$100M Senior Notes

8/6/2025

n/a

4.290

100,000

$100M Senior Notes

$575M Exchangeable Senior Notes due 2027(7)

$300M Term Loan

5/26/2027

S+0.760

(5)

3.677

(7)

300,000

$125M Senior Notes

7/13/2027

n/a

3.930

125,000

$125M Senior Notes

$300M Senior Notes due 2028

6/15/2028

n/a

5.000

300,000

$300M Senior Notes due 2028

$575M Exchangeable Senior Notes due 2029(7)

$25M Series 2019A Senior Notes

7/16/2029

n/a

3.880

25,000

$400M Senior Notes due 2030

12/1/2030

n/a

2.125

400,000

$400M Senior Notes due 2030

$400M Senior Notes due 2031

9/1/2031

n/a

2.150

400,000

$75M Series 2019B Senior Notes

7/16/2034

n/a

4.030

75,000

$75M Series 2019B Senior Notes

Total Unsecured Debt

2,125,000

Secured Debt:

960-970 Knox Street

11/1/2023

n/a

5.000

2,234

7612-7642 Woodwind Drive

1/5/2024

n/a

5.240

3,638

Secured Debt:

11600 Los Nietos Road

5/1/2024

n/a

4.190

2,333

$60M Term Loan

10/27/2024

(8)

S+1.250

(8)

5.060

(8)

60,000

11600 Los Nietos Road

$60M Term Loan(9)

5160 Richton Street

11/15/2024

n/a

3.790

4,060

22895 Eastpark Drive

11/15/2024

n/a

4.330

2,558

22895 Eastpark Drive

701-751 Kingshill Place

1/5/2026

n/a

3.900

7,016

13943-13955 Balboa Boulevard

7/1/2027

n/a

3.930

14,690

13943-13955 Balboa Boulevard

2205 126th Street

12/1/2027

n/a

3.910

5,200

2410-2420 Santa Fe Avenue

1/1/2028

n/a

3.700

10,300

2410-2420 Santa Fe Avenue

11832-11954 La Cienega Boulevard

7/1/2028

n/a

4.260

3,871

Gilbert/La Palma

3/1/2031

n/a

5.125

1,791

Gilbert/La Palma

7817 Woodley Avenue

8/1/2039

n/a

4.140

2,914

Total Secured Debt

120,605

Total Secured Debt

Total Consolidated Debt

3.615

2,245,605

Total Consolidated Debt

(2)Excludes unamortized debt issuance costs and premiums/discounts totaling ~~$18.0~~$40.0 million, which are presented as a reduction of the carrying value of our debt in our consolidated balance sheet as of ~~September 30, 2023.~~March 31, 2024.

(3)The Revolver is subject to an applicable facility fee which is calculated as a percentage of the total lenders’ commitment amount, regardless of usage. As of September 30, 2023, the applicable facility fee is 0.125%, less a sustainability-related interest rate adjustment of 0.01%. The effective rate assumes daily SOFR of 5.310% as of September 30, 2023.

~~(4)~~The Revolver has two six-month extensions and the $400 Million Term Loan has two one-year extensions available at the borrower’s option, subject to certain terms and conditions. In March 2024, we submitted our notice to the lender to extend the maturity date of the $400 Million Term Loan by one year to July 18, 2025.

~~(5)~~(4)As of ~~September 30, 2023,~~March 31, 2024, the interest rates on these loans are comprised of daily SOFR for both the Revolver and $400 Million Term Loan and Term SOFR for the $300 Million Term Loan (in each case increased by a 0.10% SOFR adjustment), plus an applicable margin of 0.725% per annum for the Revolver and 0.80% per annum for the Term Loans, depending on our leverage ratio and investment grade ratings, minus a sustainability-related interest rate adjustment of 0.04%. These loans are also subject to a 0% SOFR floor.

(5)The Revolver is subject to an applicable facility fee which is calculated as a percentage of the total lenders’ commitment amount, regardless of usage. As of March 31, 2024, the applicable facility fee is 0.125%, less a sustainability-related interest rate adjustment of 0.01%. The effective rate assumes daily SOFR of 5.340% as of March 31, 2024.

(6)Effective April 3, 2023, daily SOFR for the $400 Million Term Loan has been swapped to a fixed rate of 3.97231%, resulting in an all-in fixed rate of 4.83231% after adding the SOFR adjustment and applicable margin and subtracting the sustainability-related interest rate adjustment.

(7)Noteholders have the right to exchange their notes upon the occurrence of certain events. Exchanges will be settled by delivering cash up to the principal amount of the Exchangeable Notes exchanged, and in respect of the remainder of the exchanged value, if any, in excess thereof, in cash or in a combination of cash and shares of our common stock, at our option.

(8)As of ~~September 30, 2023,~~March 31, 2024, Term SOFR for the $300 Million Term ~~Lon~~Loan has been swapped to a fixed rate of 2.81725%, resulting in an all-in fixed rate of 3.67725% after adding the SOFR adjustment and applicable margin and subtracting the sustainability-related interest rate adjustment.

~~(8)~~(9)The $60.0 million term loan facility (the “$60 Million Term Loan”) has interest-only payment terms bearing interest at Term SOFR increased by a 0.10% SOFR adjustment plus an applicable margin of 1.25% per annum. Effective April 3, 2023, Term SOFR for this loan has been swapped to a fixed rate of 3.710%, resulting in an all-in fixed rate of 5.060% after adding the SOFR adjustment and applicable margin. The loan is secured by six properties and has three one-year extensions available at the borrower’s option, subject to certain terms and conditions.

The following table summarizes the composition of our consolidated debt between fixed-rate and variable-rate and secured and unsecured debt as of ~~September 30, 2023:~~March 31, 2024:




		Average Term Remaining (in years)	Effective Interest Rate(1)	Principal Balance (in thousands)(2)		% of Total		Average Term Remaining (in years)		Effective Interest Rate(1)		Principal Balance (in thousands)(2)				% of Total
Fixed vs. Variable:	Fixed vs. Variable:						Fixed vs. Variable:
Fixed		4.8	3.615%	$	2,245,605	100%
Fixed(3)							Fixed(3)		4.2		3.827%		$	3,389,088			100%
Variable	Variable	—	—%	$	—	—%	Variable		—		—%		$	—	—%			—%
Secured vs. Unsecured:	Secured vs. Unsecured:
Secured	Secured	2.4	4.571%	$	120,605	5%
Secured
Secured									2.0		4.544%		$	114,088			3%
Unsecured	Unsecured	4.9	3.560%	$	2,125,000	95%	Unsecured		4.3		3.802%		$	3,275,000	97%			97%

(1)Includes the effect of interest rate swaps that were effective as of ~~September 30, 2023.~~March 31, 2024. Interest rates are not adjusted to include the amortization of debt issuance costs or unamortized fair market value premiums/discounts or the facility fee on the Revolver.

(3)Fixed-rate debt includes our variable rate debts that have been effectively fixed through the use of interest rate swaps through maturity.

At ~~September 30, 2023,~~March 31, 2024, we had consolidated indebtedness of ~~$2.2~~$3.4 billion, reflecting a net debt to total combined market capitalization of approximately ~~16.7%~~20.9%. Our total market capitalization is defined as the sum of the liquidation preference of our outstanding preferred stock and preferred units plus the market value of our common stock excluding shares of nonvested restricted stock, plus the aggregate value of common units not owned by us, plus the value of our net debt. Our net debt is defined as our consolidated indebtedness less cash and cash equivalents.

Debt Covenants

The Credit Agreement, $60 Million Term Loan, $100 Million Notes, $125 Million Notes and Series 2019A and 2019B Notes all include a series of financial and other covenants that we must comply with, including the following covenants which are tested on a quarterly basis:

•Maintaining a ratio of total indebtedness to total asset value of not more than 60%;

•For the Credit Agreement and $60 Million Term Loan, maintaining a ratio of secured debt to total asset value of not more than 45%;

•For the $100 Million Notes, $125 Million Notes and Series 2019A and 2019B Notes (together the “Senior Notes”), maintaining a ratio of secured debt to total asset value of not more than 40%;

•For the Senior Notes, maintaining a ratio of total secured recourse debt to total asset value of not more than 15%;

•Maintaining a ratio of adjusted EBITDA (as defined in each of the loan agreements) to fixed charges of at least 1.5 to 1.0;

•For the Credit Agreement and Senior Notes, maintaining a ratio of total unsecured debt to total unencumbered asset value of not more than 60%; and

•For the Credit Agreement and Senior Notes, maintaining a ratio of unencumbered NOI (as defined in each of the loan agreements) to unsecured interest expense of at least 1.75 to 1.00.

The $300 Million Notes due 2028, $400 Million Notes due 2030 and $400 Million Notes due 2031 (together the “Registered Notes”) contain the following covenants (as defined in the indentures) that we must comply with:

•Maintaining a ratio of total indebtedness to total asset value of not more than 60%;

•Maintaining a ratio of secured debt to total asset value of not more than 40%;

•Maintaining a Debt Service Coverage Ratio of at least 1.5 to 1.0; and

•Maintaining a ratio of unencumbered assets to unsecured debt of at least 1.5 to 1.0.

The Credit Agreement and Senior Notes also contain limitations on our ability to pay distributions on our common stock. Specifically, our cash dividends may not exceed the greater of (i) 95% of our FFO (as defined in the credit agreement) and (ii) the amount required for us to qualify and maintain our REIT status. If an event of default exists, we may only make distributions sufficient to qualify and maintain our REIT status.

~~Additionally, subject~~Subject to the terms of the Credit Agreement, $60 Million Term Loan, Senior Notes and Registered Notes, upon certain events of default, including, but not limited to, (i) a default in the payment of any principal or interest, (ii) a default in the payment of certain of our other indebtedness and (iii) a default in compliance with the covenants set forth in the debt agreement, the principal and accrued and unpaid interest on the outstanding debt may be declared immediately due and payable at the option of the administrative agent, lenders, trustee and/or noteholders, as applicable, and in the event of bankruptcy and other insolvency defaults, the principal and accrued and unpaid interest on the outstanding debt will become immediately due and payable. In addition, we are required to maintain at all times a credit rating on the Senior Notes from either S&P, Moody’s or Fitch.

We were in compliance with all of our quarterly debt covenants as of ~~September 30, 2023.~~March 31, 2024.

Cash Flows

Comparison of the ~~Nine~~Three Months Ended ~~September 30, 2023~~March 31, 2024 to the ~~Nine~~Three Months Ended ~~September 30, 2022~~March 31, 2023

The following table summarizes the changes in net cash flows associated with our operating, investing, and financing activities for the ~~nine~~three months ended ~~September 30,~~March 31, 2024 and 2023 ~~and 2022~~ (in thousands):


		Nine Months Ended September 30,						Three Months Ended March 31,
		2023		2022		Change		2024	2023	Change
Cash provided by operating activities	Cash provided by operating activities	$	311,561	$	260,943	$	50,618
Cash used in investing activities	Cash used in investing activities	$	(1,272,780)	$	(2,055,827)	$	783,047
Cash provided by financing activities	Cash provided by financing activities	$	1,007,701	$	1,788,027	$	(780,326)

Net cash provided by operating activities. Net cash provided by operating activities increased by ~~$50.6~~$14.3 million to ~~$311.6~~$133.8 million for the ~~nine~~three months ended ~~September 30, 2023,~~March 31, 2024, compared to ~~$260.9~~$119.5 million for the ~~nine~~three months ended ~~September 30, 2022.~~March 31, 2023. The increase was primarily attributable to the incremental cash flows from property acquisitions completed subsequent to January 1, ~~2022,~~2023 and the increase in Cash NOI from our Same Property Portfolio, partially offset by changes in working ~~capital and an increase in cash interest paid.~~capital.

Net cash used in investing activities. Net cash used in investing activities ~~decreased~~increased by ~~$783.0~~$387.9 million to ~~$1.3~~$1.2 billion for the ~~nine~~three months ended ~~September 30, 2023,~~March 31, 2024, compared to ~~$2.1 billion~~$765.9 million for the ~~nine~~three months ended ~~September 30, 2022.~~March 31, 2023. The ~~decrease~~increase was primarily attributable to ~~an $851.5~~a $333.8 million ~~decrease~~increase in cash paid for property acquisitions, ~~and~~ a ~~$7.6 million decrease in cash paid for acquisition related deposits, partially offset by a $77.0~~$35.7 million increase in cash paid for construction costs, including costs related to repositioning/redevelopment ~~projects.~~projects, and a $16.2 million decrease in proceeds from the sale of real estate for comparable periods.

Net cash provided by financing activities. Net cash provided by financing activities ~~decreased~~increased by ~~$780.3~~$444.1 million to ~~$1.0~~$1.3 billion for the ~~nine~~three months ended ~~September 30, 2023,~~March 31, 2024, compared to ~~$1.8~~$0.9 billion for the ~~nine~~three months ended ~~September 30, 2022.~~March 31, 2023. The ~~decrease~~increase was primarily attributable to the following: (i) an increase of $1.1 billion in net cash proceeds from the issuance of the Exchangeable Notes in March 2024. This increase was partially offset by the following: (i) a decrease of ~~$1.6 billion due to lower cash proceeds from borrowings under the Revolver, (ii) a decrease of $470.9~~$362.5 million in net cash proceeds from the issuance of shares of our common stock, (ii) a decrease of $296.9 million in net cash proceeds from the issuance of the $300 Million Notes in March 2023 and (iii) a decrease of ~~$400.0 million from borrowings under the Term Facility in July 2022, (iv) a decrease of $300.0 million from borrowings under the Term Facility in May 2022 and (v) a decrease of $70.2~~$21.7 million due to higher dividends paid to common stockholders and common unitholders as a result of an increase in our quarterly per share/unit cash dividend and an increase in the number of common shares outstanding. These decreases were partially offset by the following: (i) an increase of $1.6 billion due to lower repayment of borrowings under the Revolver, (ii) an increase of $296.9 million in net cash proceeds from the issuance of the $300 Million Notes in March 2023 and (iii) an increase of $150.0 million due to repayment of the $150.0 million term loan facility in May 2022.

Inflation

In the last several years, we do not believe that inflation has had a material impact on the Company. However, recently inflation has significantly increased and a prolonged period of high and persistent inflation could cause an increase in our operating expenses, capital expenditures and cost of our variable-rate borrowings which could have a material impact on our financial position or results of operations. The majority of our leases are either triple net or provide for tenant reimbursement for costs related to real estate taxes and operating expenses. In addition, most of the leases provide for fixed rent increases. We believe that inflationary increases to real estate taxes, utility expenses and other operating expenses may be partially offset by the contractual rent increases and tenant payment of taxes and expenses described above.

7064

Item 3. Quantitative and Qualitative Disclosures about Market Risk

Market risk refers to the risk of loss from adverse changes in market prices and interest rates. A key market risk we face is interest rate risk. We are exposed to interest rate changes primarily as a result of using variable-rate debt to satisfy various short-term and long-term liquidity needs, which have interest rates based upon SOFR. We use interest rate swaps to manage, or hedge, interest rate risks related to our borrowings. Because actual interest rate movements over time are uncertain, our swaps pose potential interest rate risks, notably if interest rates fall. We also expose ourselves to credit risk, which we attempt to minimize by contracting with highly-rated banking financial counterparties. For a summary of our outstanding debt, see Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources. For a summary of our interest rate swaps and recent transactions, see “Note 78 – Interest Rate Derivatives” to our consolidated financial statements.

As of ~~September 30, 2023,~~March 31, 2024, we had total consolidated indebtedness, excluding unamortized debt issuance costs and premiums/discounts, of ~~$2.25~~$3.39 billion. As of ~~September 30, 2023,~~March 31, 2024, 100% of this consolidated indebtedness is fixed-rate debt under the terms of the loan or through the use of interest rate swaps. As such, as of ~~September 30, 2023,~~March 31, 2024, if SOFR were to increase or decrease, there would be no impact to interest expense or future earnings and cash flows.

Interest risk amounts are our management’s estimates and are determined by considering the effect of hypothetical interest rates on our financial instruments. We calculate interest sensitivity by multiplying the amount of variable rate debt outstanding by the respective change in rate. The sensitivity analysis does not take into consideration the possibility of future changes in the balances or fair value of our floating rate debt or the effect of any change in overall economic activity that could occur in that environment. Further, in the event of a change of that magnitude, we may take actions to further mitigate our exposure to the change. However, due to the uncertainty of the specific actions that would be taken and their possible effects, this analysis assumes no changes in our financial structure.

7165

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures (as defined in Rule 13a-15(e) or Rule 15d-15(e) under the Securities Exchange Act of 1934, as amended, (the “Exchange Act”)) that are designed to ensure that information required to be disclosed in our reports under the Exchange Act is processed, recorded, summarized, and reported within the time periods specified in the Security and Exchange Commission’s rules and forms and that such information is accumulated and communicated to management, including the Co-Chief Executive Officers and Chief Financial Officer, as appropriate, to allow for timely decisions regarding required disclosure.

In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

As required by SEC Rule 13a-15(b), we carried out an evaluation, under the supervision and with the participation of management, including our Co-Chief Executive Officers and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of ~~September 30, 2023,~~March 31, 2024, the end of the period covered by this report.

Based on the foregoing, our Co-Chief Executive Officers and Chief Financial Officer concluded that, as of ~~September 30, 2023,~~March 31, 2024, our disclosure controls and procedures were effective at the reasonable assurance level.

Changes in Internal Control Over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting. No changes to our internal control over financial reporting were identified that occurred during the period covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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Part II. OTHER INFORMATION

Item 1. Legal Proceedings

Item 1A. Risk Factors

~~Except~~Please refer to our Risk Factors as ~~described below, there have been no material changes to the risk factors disclosed~~set forth in Item 1A of our Annual Report on Form 10-K for the ~~fiscal~~ year ended December 31, ~~2022.~~

Adverse developments affecting the financial services industry, including events or concerns involving liquidity, defaults, or non-performance by financial institutions, could adversely affect our business, financial condition or results of operations.

The funds in our accounts are held in banks or other financial institutions, and our deposits at these institutions would exceed any applicable Federal Deposit Insurance Corporation (“FDIC”) insurance limits. Should events, including limited liquidity, defaults, non-performance or other adverse developments occur with respect2023. There have been no material changes to the ~~banks or other financial institutions~~risk factors as set forth in that hold our funds, or that affect financial institutions or the financial services industry generally, or concerns or rumors about any events of these kinds or other similar risks, our liquidity may be adversely affected. For example, on March 10, 2023, Silicon Valley Bank was closed by the California Department of Financial Protection and Innovation, which appointed the FDIC as receiver. Although we did not have any funds in Silicon Valley Bank or other institutions that have been closed, we cannot guarantee that the banks or other financial institutions that hold our funds will not experience similar issues. In addition, if any of our tenants or other parties with whom we conduct business are unable to access funds pursuant to instruments or lending arrangements with a financial institution, such parties’ ability to pay their obligations to us or to enter into new commercial arrangements requiring additional payments to us could be adversely affected.

In addition, investor concerns regarding the U.S. or international financial systems could result in less favorable commercial financing terms, including higher interest rates or costs and tighter financial and operating covenants, or systemic limitations on access to credit and liquidity sources, thereby making it more difficult for us to acquire financing on terms favorable to us in connection with a potential business combination, or at all, and could have material adverse impacts on our liquidity, our business, financial condition or results of operations.

In addition, any further deterioration in the macroeconomic economy or financial services industry could lead to losses or defaults by our tenants, which in turn, could have a material adverse effect on our current and/or projected business operations and results of operations and financial condition. For example, a tenant may fail to make payments when due, default under their agreements with us, or become insolvent or declare bankruptcy. In addition, a tenant could be adversely affected by any of the liquidity or other risks that are described above as factors that could result in material adverse impacts on us, including but not limited to delayed access or loss of access to uninsured deposits or loss of the ability to draw on existing credit facilities involving a troubled or failed financial institution. Any tenant bankruptcy or insolvency, or the failure of any tenant to make payments when due, could result in material losses to us and may have a material adverse impact on our business.document.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

(a) Unregistered Sales of Equity Securities

None.

(b) Use of Proceeds

None.

Period
Total Number of Shares
Purchased(1)
Average Price
Paid per Share Total Number of Shares Purchased as Part of
Publicly Announced Plans or Programs Maximum
Number (or approximate dollar value) of Shares that May Yet Be Purchased Under the Plans
or Programs
July 1, 2023 to July 31, 2023 184 $ 53.59 N/A N/A
August 1, 2023 to August 31, 2023 175 $ 52.87 N/A N/A
September 1, 2023 to September 30, 2023 1,657 $ 50.81 N/A N/A
2,016 $ 51.24 N/A N/A


Period	Total Number of Shares Purchased(1)	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Maximum Number (or approximate dollar value) of Shares that May Yet Be Purchased Under the Plans or Programs
January 1, 2024 to January 31, 2024	273	$	52.81	N/A	N/A
February 1, 2024 to February 29, 2024	183	$	52.67	N/A	N/A
March 1, 2024 to March 31, 2024	37,708	$	52.11	N/A	N/A
	38,164	$	52.12	N/A	N/A

(1)Reflects shares of common stock that were tendered by certain of our employees to satisfy tax withholding obligations related to the vesting of restricted shares of common stock.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

None.

Item 5. Other Information

(a). None

(b). None

(c). During the three months ended ~~September 30, 2023,~~March 31, 2024, no director or officer of the Company adopted or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each such term is defined in Item 408(a) of Regulation S-K.

7467

Item 6. Exhibits


Exhibit
3.1						Articles of Amendment and Restatement of Rexford Industrial Realty, Inc. (incorporated by reference to Exhibit 3.1 of Form S-11/A, filed by the registrant on July 15, ~~2013 (Registration No. 333-188806))~~2013).
3.2						Fifth Amended and Restated Bylaws of Rexford Industrial Realty, Inc. (incorporated by reference to Exhibit 3.1 of Form 8-K, filed by the registrant on April 7, 2023).
3.3						Articles Supplementary designating the Series B Preferred Stock of Rexford Industrial Realty, Inc. (incorporated by reference to Exhibit 3.3 of Form 8-A, filed by the registrant on November 9, 2017).
3.4						Articles Supplementary designating the Series C Preferred Stock of Rexford Industrial Realty, Inc. (incorporated by reference to Exhibit 3.3 of Form 8-A, filed by the registrant on September 19, 2019).
3.5						Eighth Amended and Restated Agreement of Limited Partnership of Rexford Industrial Realty, L.P. (incorporated by reference to Exhibit 10.1 of Form 8-K, filed by the registrant on March 21, 2022).
~~10.1~~4.1						~~First Amendment~~Indenture, dated ~~September 29, 2023,~~as of March 28, 2024, among Rexford Industrial Realty, L.P., as issuer, Rexford Industrial Realty, Inc., as guarantor, and U.S.Bank Trust Company, National Association, as trustee, relating to ~~Note Purchase~~4.375% Exchangeable Senior Notes due 2027 (incorporated by reference to Exhibit 4.1 of Form 8-K, filed by the registrant on March 28, 2024).
4.2						Form of note representing the 4.375% Exchangeable Senior Notes due 2027 (incorporated by reference to Exhibit 4.1 of Form 8-K, filed by the registrant on March 28, 2024).
4.3						Indenture, dated as of March 28, 2024, among Rexford Industrial Realty, L.P., as issuer, Rexford Industrial Realty, Inc., as guarantor, and ~~Guarantee~~U.S. Bank Trust Company, National Association, as trustee, relating to the 4.125% Exchangeable Senior Notes due 2029 (incorporated by reference to Exhibit 4.3 of Form 8-K, filed by the registrant on March 28, 2024).
4.4						Form of note representing the 4.125% Exchangeable Senior Notes due 2029 (incorporated by reference to Exhibit 4.3 of Form 8-K, filed by the registrant on March 28, 2024).
4.5						Registration Rights Agreement, dated ~~July 13, 2017~~, ~~by and~~as of March 28, 2024, among Rexford Industrial Realty, L.P., Rexford Industrial Realty, Inc. and the initial purchasers named ~~therein.~~therein, relating to the 4.375% Exchangeable Senior Notes due 2027 (incorporated by reference to Exhibit 4.5 of Form 8-K, filed by the registrant on March 28, 2024).
~~10.2~~4.6						~~First Amendment~~,Registration Rights Agreement, dated as of S ~~eptember 29,2023,~~ ~~to Note Purchase and Guarantee Agreement~~ ~~dated July 1~~6 ~~, 201~~9 , ~~by and~~March 28, 2024, among Rexford Industrial Realty, L.P., Rexford Industrial Realty, Inc. and the initial purchasers named ~~therein.~~therein, relating to the 4.125% Exchangeable Senior Notes due 2029 (incorporated by reference to Exhibit 4.6 of Form 8-K, filed by the registrant on March 28, 2024).
~~10.3~~10.1						~~Third Amendment~~,Confirmation of Registered Forward Transaction, dated ~~as of September 29, 2023,~~ ~~to Note Purchase and Guarantee Agreement~~ ~~dated July 16, 2015~~,March 26, 2024, by and ~~among Rexford Industrial Realty, L.P.,~~between Rexford Industrial Realty, Inc. and BofA Securities, Inc. (or its affiliate) (incorporated by reference to E xhibit 1.2 of Form 8-K, filed by the ~~purchasers named therein.~~regis trant on March 28, 2024 ).
22.1*						List of Issuers of Guaranteed Securities
31.1*						Certification of the Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2*						Certification of the Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.3*						Certification of the Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1*						Certification of Principal Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2*						Certification of Principal Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.3*						Certification of Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.1*						The registrant’s Quarterly Report on Form 10-Q for the quarter ended ~~September 30, 2023,~~March 31, 2024, formatted in inline XBRL (Extensible Business Reporting Language): (i) Consolidated Balance Sheets (unaudited), (ii) Consolidated Statements of Operations (unaudited), (iii) Consolidated Statements of Comprehensive Income, (iv) Consolidated Statements of Changes in Equity (unaudited), (v) Consolidated Statements of Cash Flows (unaudited) and (vi) the Notes to the Consolidated Financial Statements (unaudited) that have been detail tagged.
104.1*						Cover Page Interactive Data File - The cover page interactive data file does not appear in the interactive data file because its XBRL tags are embedded within the inline XBRL document.

* Filed herein

7568

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto authorized.


						Rexford Industrial Realty, Inc.

~~October 20, 2023~~April 19, 2024						/s/ Michael S. Frankel
						Michael S. Frankel
						Co-Chief Executive Officer (Principal Executive Officer)

~~October 20, 2023~~April 19, 2024						/s/ Howard Schwimmer
						Howard Schwimmer
						Co-Chief Executive Officer (Principal Executive Officer)

~~October 20, 2023~~April 19, 2024						/s/ Laura E. Clark
						Laura E. Clark
						Chief Financial Officer (Principal Financial and Accounting Officer)

7669


October 1, 2023 - December 31, 2023	$	2,580
2024	473,403
2025	100,973
2026	7,587
2027	444,078
Thereafter	1,216,984
Total	$	2,245,605


	Three Months Ended September 30, 2023				Nine Months Ended September 30,
	2023		2022		2023		2022
Accumulated other comprehensive income (loss) - beginning balance	$	16,525	$	(2,974)	$	8,247	$	(9,874)
Other comprehensive income before reclassifications	7,997		12,326		20,354		17,743
Amounts reclassified from accumulated other comprehensive (income) loss to interest expense	(3,237)		368		(7,041)		2,118
Net current period other comprehensive income	4,760		12,694		13,313		19,861
Less: other comprehensive income attributable to noncontrolling interests	(143)		(497)		(418)		(764)
Other comprehensive income attributable to common stockholders	4,617		12,197		12,895		19,097
Accumulated other comprehensive income (loss) - ending balance	$	21,142	$	9,223	$	21,142	$	9,223


	Same Property Portfolio								Total Portfolio
	Nine Months Ended September 30,				Increase/(Decrease)		%		Nine Months Ended September 30,				Increase/(Decrease)		%
	2023		2022				Change		2023		2022				Change
REVENUES



Rental income	$	410,318	$	383,024	$	27,294	7.1	%	$	583,474	$	452,156	$	131,318	29.0	%
Management and leasing services	—		—		—		—	%	519		456		63		13.8	%
Interest income	—		—		—		—	%	3,408		5		3,403		68,060.0	%
TOTAL REVENUES	410,318		383,024		27,294		7.1	%	587,401		452,617		134,784		29.8	%
OPERATING EXPENSES
Property expenses	92,207		88,474		3,733		4.2	%	135,220		108,448		26,772		24.7	%
General and administrative	—		—		—		—	%	55,039		44,531		10,508		23.6	%
Depreciation and amortization	111,853		113,226		(1,373)		(1.2)	%	178,671		140,226		38,445		27.4	%
TOTAL OPERATING EXPENSES	204,060		201,700		2,360		1.2	%	368,930		293,205		75,725		25.8	%
OTHER EXPENSES
Other expenses	—		—		—		—	%	1,504		746		758		101.6	%
Interest expense	—		—		—		—	%	46,830		34,826		12,004		34.5	%

TOTAL EXPENSES	204,060		201,700		2,360		1.2	%	417,264		328,777		88,487		26.9	%


Loss on extinguishment of debt	—		—		—		—	%	—		(877)		877		(100.0)	%
Gains on sale of real estate	—		—		—		—	%	12,133		8,486		3,647		43.0	%
NET INCOME	$	206,258	$	181,324	$	24,934	13.8	%	$	182,270	$	131,449	$	50,821	38.7	%