Rexford Industrial Realty, Inc. (REXR) Q2 2026 Earnings Call Transcript

Good morning. My name is Holly and I will be your conference operator today. At this time, I would like to welcome everyone to the Rexford Industrial Realty Inc second quarter 2026 earnings call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a Q&A session. If you would like to ask a question during this time, simply press star followed by the number 1 on your telephone keypad. If you would like to withdraw your question, press star 1 again. Thank you. I will now hand the call over to Mikayla Lynch, Senior Vice President, Investor Relations and Capital Markets at Rexford Industrial. Mikayla? Please go ahead.

Thank you, and welcome to Rexford Industrial's second quarter 2026 earnings conference call. In addition to yesterday's earnings release, we posted a supplemental package and earnings presentation in the Investor Relations section on our website to support today's remarks. As a reminder, management's remarks and responses to your questions may contain forward-looking statements as defined by the federal securities laws which are based on certain assumptions and subject to risks and uncertainties outlined in our 10-K and other SEC filings. As such, actual results may differ, and we assume no obligation to update any forward-looking statements in the future. We will also discuss non-GAAP financial measures on today's call. Our earnings presentation and supplemental package provide GAAP reconciliations as well as an explanation of why these measures are useful to investors. Joining me today are Rexford's CEO, Laura Elizabeth Clark, together with our COO, John Nahas, and our CFO, Mike Fitzmaurice. My pleasure to now introduce Laura Elizabeth Clark. Laura?

Thank you, Mikayla, and thank you all for joining us today. The Rexford team delivered another quarter of strong execution. Leasing volume is up 50% year to date compared to this time last year, and we are raising core FFO per share guidance for the second consecutive quarter. We are also encouraged by improving fundamentals across the broader infill Southern California industrial market with increasing tenant demand driving positive net absorption and lower market vacancy. Our second quarter results reflect continued progress against the strategic priorities we laid out earlier this year: opportunistic dispositions, accretive capital recycling, and operational rigor. We have moved with discipline, conviction, and speed, taking meaningful action to position Rexford to deliver durable growth and shareholder value. Today, we are building on that momentum by announcing a comprehensive portfolio realignment through the planned disposition of $2 billion of non-core assets. This is a pivotal and deliberate step to further strengthen Rexford's portfolio, enhance the quality and sustainability of our cash flows, and position the company to deliver outsized total shareholder returns. Over the first half of the year, we conducted a comprehensive asset-by-asset review of the portfolio, evaluating every property through the lens of future growth potential, cash flow durability, and the opportunity to create value. That review identified $2 billion of non-core assets, representing 8 million square feet, that do not align with our long-term strategy. These assets are generally characterized by more limited value-creation opportunity, elevated competitive supply, shorter remaining lease durations, and substantially above-market in-place rents. Just as importantly, this process reinforced our conviction in the quality, durability, and embedded growth potential of the 43 million square feet of core assets that will comprise our go-forward portfolio. These are assets we believe will drive outsized FFO and NAV per share growth and form the foundation of Rexford's next chapter. We have made significant progress executing this portfolio realignment. During the quarter, we launched a robust disposition process and we are now in advanced discussions on a substantial portion of the planned sales. Based on the depth of interest and progress to date, we are confident in our ability to execute this realignment and we expect the vast majority to be completed this year. The current valuation gap between private and public markets creates a compelling window to act now. Our disciplined capital recycling strategy gives us the ability to capitalize on this opportunity in a way that is accretive over the long term. As we redeploy capital, our priorities remain clear and unchanged. We will continue to allocate capital to the highest risk-adjusted return opportunities available. This includes strengthening our balance sheet and liquidity profile, opportunistically repurchasing shares at a meaningful discount to intrinsic value, and selectively investing in high-yielding repositioning and development opportunities across our portfolio. Taken together, this portfolio realignment enhances our financial flexibility, improves the quality and consistency of our cash flows, and positions Rexford for long-term growth and value creation. To be clear, these actions together reflect conviction around our long-term view of infill Southern California industrial real estate. This market is powered by a robust local economy larger than most countries. New supply remains limited, and barriers to future development are increasing. In fact, supply under construction today is at multi-decade lows, and recent regulatory changes have introduced additional development constraints that will make it increasingly difficult to bring new industrial supply to the market. These dynamics reinforce the scarcity and long-term value of the assets we are choosing to own and strengthen the competitive advantages of the Rexford business model. Operational rigor also remains a core priority and is reflected in our execution to date. Through an in-depth and ongoing review of our cost structure, we identified $3 million of G&A savings this quarter, bringing our total G&A savings since 2025 to $22 million. Our focus remains on driving greater operational effectiveness and efficiency across the business. In summary, our transformative strategic actions combined with the strength of our team, value-creation framework, dynamic market fundamentals, and commitment to operational rigor provide a powerful foundation for Rexford to deliver meaningful value for our shareholders in the years ahead. Before I turn it over, I want to thank the entire Rexford team for their extraordinary effort this quarter across the platform. I am energized by the focus, dedication, and execution our team continues to bring every day.

Thank you, Laura. Good morning, everyone. The infill Southern California market experienced positive net absorption in the second quarter with overall vacancy declining by 30 basis points. Performance continues to vary by submarket, size range, and product type, reflecting diverse demand drivers and varying levels of competitive supply, but we are optimistic about the signals we are seeing. Net absorption turned positive in the IE West and San Diego markets this quarter, and Greater Los Angeles posted its second consecutive positive quarter. Orange County continued to experience negative net absorption, though we are encouraged by a recent pickup in tour activity there. As the market works through elevated supply and landlords compete for deals, market rents remain under pressure, declining just over 1% sequentially in the quarter. We are pleased by the overall trajectory and are closely monitoring the market for successive quarters of positive net absorption, which we believe is a precursor to market inflection. Leasing activity in our portfolio gained momentum throughout the second quarter. We executed 2.1 million square feet, which brings our year-to-date total to 6.2 million square feet, a 2 million square foot improvement compared to the first half of last year. Cash releasing spreads for the quarter were -11.3%, driven primarily by rent roll downs from leases signed at the peak of the market. Rexford's leasing activity continues to be driven by a diverse mix of industries, including advanced manufacturing and consumption-related uses such as logistics, food and beverage, automotive, and construction. We are seeing healthy demand across our portfolio for spaces under 50,000 square feet, and activity is picking up in spaces over 100,000 square feet, partially driven by incremental corporate demand for Class A product. Tenants continue to evaluate the efficiency of their operations, and Rexford has directly benefited from the resulting flight to more functional space, which supports our leasing pipeline and builds our confidence in our leasing expectations for the remainder of 2026. As we have done throughout the year, we will continue to aggressively prioritize occupancy to capture demand. Shifting to capital allocation, our planned portfolio realignment will further concentrate ownership in the assets best aligned with our long-term strategy, focusing on the opportunities where we see the greatest long-term value-creation potential. Through this process, we are targeting non-core disposition candidates generally having lease durations shorter than our portfolio average and in-place rents that are more than 20% above market while having characteristics that do not align with our value-creation strategy and operational focus on uniquely competitive assets. We believe that executing upon this $2 billion rebalancing will enhance the portfolio's long-term growth profile and value. Our decision to execute this strategy now is supported by the increasing depth and activity of institutional capital focused on infill Southern California as investors continue to be drawn to these markets because of their unique supply constraint characteristics and long-term fundamentals. This investor activity is in part why we are confident in our ability to execute this planned realignment at scale. With respect to repositioning and development, we continue to focus on creating value by executing on opportunities within our portfolio that are best suited to deliver appropriate risk-adjusted returns. We started one new development project, a 16.4 thousand-square-foot project in Gale, which exceeds our return thresholds and will deliver a highly differentiated property to the City of Industry submarket, featuring best-in-class specifications and a demisable cross-dock layout that is unique to the market. The project is expected to be complete in late 2027.

Thanks, Laura, John, and good morning, everyone. Through this phase of the cycle, we have remained focused on what we can control. Today, we are taking the next step in executing our strategic priorities, acting on our comprehensive asset review to realign the portfolio and meaningfully strengthen our balance sheet to unlock significant capital allocation flexibility. Our updated full-year disposition guidance of $1.5 billion to $2 billion gives us optimal flexibility to allocate capital where it creates the most value. We view balance sheet flexibility as an important strength, supporting both financial resilience and capital allocation optionality. We will use $1 billion of the projected proceeds to repay debt maturing in 2027 rather than refinance into a higher-rate environment, which will meaningfully strengthen our balance sheet. We estimate this will bring us to 3.5x on a net debt to adjusted EBITDA basis, down from 4.5x today, reflecting a deliberate, disciplined sequencing of our capital allocation. This improved leverage profile puts us in a position of strength. Combined with remaining disposition proceeds, it provides significant flexibility and liquidity to allocate capital toward the highest risk-adjusted return opportunities, including share buybacks. As a result, making this planned portfolio realignment accretive over the long term. The ultimate magnitude of that accretion will depend on how we deploy the remaining proceeds, which will be guided by market conditions and the most attractive opportunities available to us at that time. We are not delevering to sit idle. We are delevering to redeploy. And we are committed to being prudent and disciplined in deploying shareholders' capital. Turning to results, second quarter core FFO per share came in at $0.63, $0.02 above the first quarter, driven by accretive share buybacks, settlement income, and lower G&A. Same property NOI growth was 1.5% on a cash basis and -0.5% on a net effective basis, both ahead of expectations. Same-property ending occupancy was 95.1%, up 30 basis points year over year. We ended the quarter with net debt to adjusted EBITDA of 4.5x and total liquidity of $1.3 billion. During the quarter, we redeployed year-to-date disposition proceeds on $100 million of share buybacks, repurchasing approximately 3 million shares at a weighted average price of $36. Over the last year, that brings our buyback activity to approximately 15 million shares for $550 million, or approximately 6% of shares outstanding. Given the additional capacity created by our planned portfolio realignment, our board has authorized a new $1 billion share repurchase program. As for guidance, we are raising our full-year core FFO per share midpoint by $0.01, driven by better-than-expected same-property NOI growth, lower G&A, and second quarter settlement proceeds. This is partially offset by modestly dilutive projected capital recycling activity due to the timing of deployment, but it meaningfully lowers leverage while also avoiding future rent roll-down risk and eliminating the need to refinance our 2027 maturities at higher rates. To execute this, we plan to pay off all but $575 million of our 2027 maturities in 2026, with the remainder repaid at maturity in March 2027. As a result, we are reducing our 2026 interest expense guidance to $105 million. These prepayments carry little to no penalty, making this an efficient use of projected proceeds. We have also raised our same-property NOI growth outlook by 75 basis points at the midpoint on both a net effective and cash basis, primarily reflecting the removal of lower-growth assets tied to our 2026 expected dispositions along with continued leasing momentum. Consistent with that, we raised our average same-property occupancy guidance to a range of 95.3% to 95.7% for the year, up 15 basis points at the midpoint. Cash releasing spreads are now expected to be -15% to -10%. This incremental change from last quarter reflects a change in the mix of leases we expect to execute in 2026. Further, our total portfolio cash mark-to-market stands at approximately -4%, down from -3% last quarter. Lastly, G&A guidance now stands at $57 million, down from our original $60 million target, a tangible result of our continued cost discipline. I also want to provide context on the $625 million impairment charge we recognized this quarter, which has no impact on cash flow and is excluded from core FFO. As part of our increased disposition guidance, we shortened the holding period on non-core assets, which triggered the charge — a deliberate portfolio decision to drive long-term value. Before we turn to questions, here's the one thing I want you to walk away with: everything we are doing, including scaling our portfolio realignment, executing our plan to lower leverage, and authorizing a new $1 billion buyback plan, enhances our flexibility to act on the opportunities ahead. That is what will drive sustainable FFO and NAV per share growth over the long term. Finally, I want to thank the entire Rexford team; I see the work everyone puts in every day, and I do not take it for granted. I will now turn the call back to the operator to open the line for questions.

At this time, I would like to remind everyone in order to ask a question, press the number 1 on your telephone keypad.

I will now hand the call back to Doug Bettsworth to begin the question and answer. Thanks. Our first question comes from Blaine Heck from Wells Fargo. Blaine, please go ahead.

Thanks, Mikayla, and thanks, everyone. So the disclosure on dilution in 2026 was very helpful. And obviously, I am not looking for guidance on 2027 yet, but I think it would be helpful to contextualize how much dilution from these specific transactions we should expect to impact 2027 earnings. I guess the question is, how should we think about cap rates on the dispositions? And how are you thinking about keeping cash on the balance sheet for eventual debt pay down at maturity in March 2027 versus maybe putting the cash to work immediately or at least earlier through the share repurchases?

Hey, Blaine. I will start, and Fitzmaurice will jump in with some more detail around 2027 and expectations. But what I will say around cap rates and valuation is that as I mentioned in my prepared remarks, we are well underway and in advanced negotiations on a substantial portion of the dispositions. But given that negotiations are ongoing, disclosing valuation at this point and cap rates could impact optimal execution. So as transactions close, we will provide cap rates and valuation at that time. But what I can tell you is this: we have confidence in our ability to execute the planned dispositions by the end of the year. We expect that pricing will be achieved at levels that allow us to redeploy proceeds on a neutral to accretive basis to our 2027 FFO per share and this is not a dilutive exercise.

We are going to redeploy pretty quickly. We estimate that the $1.5 billion to $2 billion will close in probably the mid fourth quarter. We have an opportunity, like I said in my prepared remarks, to bring forward some of the billion of debt maturities that are maturing next year. About $500 million or so we can pay off pretty quickly. The remaining $575 million, which is tied to our convertible, does not mature until March 2027, so I cannot get it that early. And then in between all that, we are going to be very opportunistic with share repurchases depending on where our share price is. We have been very active and very committed over the last 12 months. As I mentioned in my prepared remarks, we bought over $550 million. We are very grateful for the board to authorize a new program, and we are going to put it to work. And we do believe that this will be, at the minimum, neutral next year and potentially accretive depending on market conditions.

Thanks, Blaine. Our next question comes from Sameer Khanal of Bank of America. Sameer?

Yeah. Good morning, everybody. I guess, John, you talked about positive signs in the overall market there in Southern California. Just expand on those comments. I mean, where are you seeing those sort of improvements? Maybe some strength? And on the other side, I mean, where are things still under sort of pressure or weakness in terms of these submarkets?

Yeah. Hi, Samir. So overall, consistent with last quarter, sub-50,000 square feet continues to be a good vein of strength. We are seeing pricing stability and some growth in some submarkets below that threshold. And that is fairly consistent across all the submarkets. We obviously like to talk about the under-50 and then everything above that. When you get to the larger size spaces, which for us is 100,000 square feet or larger, it starts to vary a little bit. What we saw overall in the market is a good step — we saw positive net absorption and that has been growing. As you look into where that is occurring within each submarket, there is some important nuance. For example, in the Inland Empire, most of the positive net absorption was coming in much larger spaces, those over 500,000 square feet. We do not have a lot of exposure to that size range in that submarket; our average unit size there is around 30,000 square feet, which falls into the sub-50 where we have seen some continued strength. Conversely, in Greater Los Angeles, which had an additional quarter of positive net absorption, most of the gains there are sub-200,000, which fits right in the wheelhouse of the Rexford portfolio and has been a good trend for us. Pockets of weakness continue to be around Class A in certain submarkets. As I mentioned in the prepared remarks, Orange County is one of those — that is a market that received a lot of additional supply during the peak periods and it is going to take some time to work through that. We saw negative net absorption there again this quarter and rents probably moved the most in that specific size range within that submarket. So it continues to be varied. This is expected. As we have progressed toward recovery here, we do not expect it to be linear. We are going to see certain pockets of certain submarkets improve before others, and pricing stability will occur in tune. We continue to be very focused on the net absorption numbers by market and by size range, and we are optimistic that things will continue to improve.

Thanks, Samir. Our next question comes from Craig Mailman from Citi. Craig?

Hey, good morning, everybody. Mike or Laura, I just want to go back to the commentary that you think that at the end of this, the transactions could be potentially a push or accretive to 2027. Maybe just help me walk through the math on that. I know you guys do not want to talk about cap rates today, but if you are selling a good amount of assets with 20% above-market rents, I cannot imagine you are getting super low cap rates on those because those would roll down even more. Right? So if you assume that I do not want to put a number out there, but if you assume 6% or higher on that and you are paying off a billion dollars of your 2027 roll, which is on average 4.1%, I am just trying to figure out how that can ultimately be accretive even if you then swap out and relever back up to 4.5 and buy back stock. Could you just try to help me bridge that math? And also just, I know you guys said this math could be accretive — does that just mean that the dividend is safe here? Is there any risk to that going forward?

Sure, Craig. Thanks for the question. Good morning. Look, directionally, the full-year interest savings from the $1 billion debt repayment — the in-place debt is about 4.1%. That is a highly certain, quantifiable benefit. Combine that with the redeployment of the remaining proceeds plus the option to lever up into buybacks, it is all designed to be accretive on a run-rate basis. If you look at the last 12 months on what we bought in terms of share buybacks, that yielded anywhere between 6% and 7%. So that is a toggle in terms of the range of possibility as we look at share buybacks going into next year. If you combine those two factors with how we are selling these assets and where we are selling them at in terms of pricing, we do believe it is going to be neutral to accretive next year. I would remind you that in our disclosure last night and in the prepared remarks, the roll-down risk is real here — that is what we are eliminating with the sale of these assets. It is more than 20%. That roll-down risk is expected to happen in 2027 and 2028, so that also allows this transaction to be accretive as well. And as far as the dividend, it is safe. This portfolio realignment plan, one, strengthens the balance sheet, and two, strengthens the durability of our cash flow. So we are very confident that we can continue to grow the dividend.

Thanks, Craig. Our next question comes from John Kim from BMO. John?

Thank you. On the impairment, I just wanted to clarify: was that on the full $2 billion that you have identified for sale? And can we assume that you have a good sense of where the market value is for these assets? And finally, can you confirm that these assets will be sold at a taxable loss and there is no need for a Section 1031 exchange?

Yeah. Good morning, John. Great question. The impairments — let's take a step back on that. The planned dispositions, the $1.5 billion to $2 billion that we expect to sell this year, were largely bought at the height of the market. To Laura's point, we are in advanced negotiations on a substantial amount of those planned dispositions; the intent to sell is very clear, which triggered the impairment charge. Further charges are possible if additional assets are added to the pool and there is an intent to sell, but this impairment charge is not indicative of any impairment risk within our broader portfolio. As far as any need to issue a special dividend, the answer is no. Similar to the impairment, there are tax losses which will offset any tax gains as part of these planned dispositions.

Thanks, John. Our next question comes from Vikram Malhotra from Mizuho. Vikram?

Good morning. Thanks and congrats — there is a lot of work done to get the step done or at least started, I should say. I just want to go back again. I know you have been asked on this sort of how to keep this accretive. And I am wondering in effect are you saying that there are certain buyers willing to pay, you know, a 5% cap even though there is a big roll down because they are assuming a lot of rent growth going forward? And then you mind just sort of clarifying on your presentation: you talked about 20% roll down for these assets, and then the portfolio at -4%. I just want to clarify: is the -4% roll down including these assets as it exists today, or is it ex these assets? The roll down is -4%. Thanks.

Yeah. So as far as the roll-down that we put in our disclosure last night, the -4% includes the entire portfolio that exists today. We do believe that -4% will get better after we get through the portfolio realignment. But that is just one part of our growth profile going forward. As we move through this portfolio realignment plan throughout the remaining part of this year, this puts us in a much better place given the roll-down and the vacancy risk associated with this portfolio, and the firepower that it gives us — $1.7 billion to reshape the business from a position of strength: paying down debt ahead of a maturity wall, buying back stock at a discount to intrinsic value, and preserving the optionality to invest where we see the best risk-adjusted returns as conditions change. We absolutely believe a stronger balance sheet plus real capital to deploy is what creates the most value for shareholders. You cannot forget the embedded opportunity that we have already underway within our repositioning and development pipeline. That represents $50 million of annualized NOI once it is fully leased. And the backdrop is getting better, as John noted. Fundamentals are improving — net absorption turned positive, vacancy is going down, and construction starts continue to remain at multi-decade lows. Now the releasing spreads that you are alluding to: releasing spreads on our retained portfolio will stay under pressure for a bit, as we do have leases signed that are rolling that were signed at the peak that are rolling over the next couple of years. That is real, and it is something that a portfolio this size does not fix overnight, but it is a known and shrinking headwind. I can tell you that. It is not an open-ended issue. It is why we prioritized selling the assets that face a steep reset. So overall, one thing that we wanted to continue to walk away with here: this is a cleaner, lower-risk portfolio, stronger balance sheet, and higher liquidity with strong embedded growth in place from our pipeline.

What we are seeing in the market broadly across Southern California is transactions that are focused on good product quality, good locations with good credit — a decent amount of wall. That is hitting about a 5.5% average. Cap rates fluctuate significantly from there, largely depending on the mark-to-market and how much duration there is on the lease and the quality of the real estate. We have seen some transactions in the market where there was a big positive mark-to-market opportunity and cap rates dipped well below 5% for that type. Conversely, it is well above 5.5% and can be into the 6s if you have lower-quality assets or significant negative mark-to-market. Generally, buyers in the market are going to underwrite to a restabilized yield that is congruent with today's market cap rates, adjusting for those factors I mentioned.

Thanks, Vikram. Our next question comes from Greg McGinniss from Scotiabank. Greg?

Good morning. Appreciate the commentary on the market and the improving backdrop. But the market also saw vacancy go down while Rexford's vacancy increased. This related to timing, so should we assume some occupancy growth in the back half of the year? Were there specific assets that were drivers? Any explanation on this disconnect would be appreciated.

Sure. Hi, Greg. So we saw quarter-over-quarter average occupancy decline about 60 basis points. This was largely driven by a few larger move-outs. The two most significant ones were located in the IE West market — a couple of spaces that were just north of 200,000 square feet apiece. One of those move-outs was unplanned and was related to a bankruptcy. The other one was expected and budgeted. A quick note on the one that was a result of a bankruptcy: we actually just released that unit this week with occupancy recommencing in September. So good results on that. Part of it is just some of these move-outs that are getting offset by move-ins that you will see in next quarter's data.

And Greg, in terms of the shape of occupancy as we move through the second half of the year, we do expect it to decelerate somewhat in the third quarter between 50 and 100 basis points due to planned move-outs and then reaccelerate in the fourth quarter of this year.

Thanks, Greg. Our next question comes from Richard Anderson from Cantor Fitzgerald. Richard?

Thanks. Good morning. So on the positive net absorption figure for the second quarter, that sort of came out of nowhere relative to historical patterns we've seen. It is not in disagreement with some of what your peers have said about the market, so good sign. But I am curious if you can make any comment about subsequent to second quarter what you are feeling about net absorption being somewhat repeatable as we go forward. Obviously, you call it a prerequisite for a continuation of a market inflection. Any signs post-second quarter that you can talk about in terms of the cadence of fundamentals? Thanks.

Thanks, Richard. In regards to the third quarter, and it is early, but what we can tell you is that when we look at what happened in the second quarter, our leasing pipeline built through the back half of the second quarter and that has continued early into the third quarter. Our pipeline is less than a month in, but I would say that it has been strong as we entered the third quarter. Those are positive indications. As you noted, it was a strong quarter of positive absorption, lowering vacancy and availability in the overall market. I think it is important to also consider tenant demand increasing — that is a positive indication — but also to look at supply. Supply under construction and what is going to be delivered to the market is at multi-decade lows. Those two things together — increasing tenant demand and limited new supply — mean incremental demand will continue to absorb available space, setting up the market for continued improvement and inflection in the future.

Thanks, Richard. Our next question comes from David Rogers from Raymond James. David?

Yes. Good morning, everybody. Fitzmaurice, all of your comments were really helpful earlier. I wanted to take one other shot at the portfolio realignment. Everything you have sold, I think, to date is like a zero cap rate, zero occupancy. If you look at the occupancy or where these assets of the portfolio realignment are coming from, can you give us a sense of what the occupancy might be or whether they are coming out of same-store versus the redevelopment? You had made the comment about $50 million of real upside in the position in the development pipeline, and I am trying to reconcile whether we are selling some of that upside off going forward. And then maybe just a follow-up to Laura: your last comment about leasing during the second quarter — it sounds like it ended stronger than it started. Was there anything in particular at the beginning of the quarter that kind of kept the second quarter leasing pace a little lower than where you saw in the first quarter?

Hey, David. Good morning. The vast majority of the assets that we plan to sell this year are operating properties and are coming out of the same-property portfolio.

Going back to the leasing, I can offer a little more color. This quarter's number was a little bit lower at 2.1 million square feet. Keep in mind in the first quarter, we did have a renewal of our largest unit portfolio that increased volumes there. When you adjust for that and you look at more than one quarter together, I think it is more indicative of the overall trend, which is incrementally positive. I wish everything lined up perfectly with quarter end, but subsequent to quarter end, we have seen continued touring activity, and we have actually made some good progress in certain areas of the market. A few examples: the South Bay continues to be particularly strong, driven by advanced manufacturing focused on the most coastal areas of the South Bay market. We have a project under construction in that market delivering two buildings, and we have just completed leases on both of those buildings ahead of the completion of construction. In the San Fernando Valley, we have been making progress on some of our repositioning buildings, most recently signing leases at Plummer, which completed as a new development, and more recently our Avenue Kearny project. Both of those were leased to tenants in the consumer products business. Overall, we are pleased with the levels of activity that we are seeing. It is a steady improvement, moderated in pace, and we are carefully watching each submarket, our properties, and what they are competing with in each case.

David, to answer your question about whether or not we are selling any of the $50 million of upside in our pipeline:

The answer is no.

Thanks, David. Our next question comes from Michael Griffin from Evercore ISI. Michael?

Thanks. Not to belabor the point on valuation for the portfolio realignment, but could we get a sense maybe — Laura, you started off the prepared remarks talking about $2 billion of asset sales on 8 million square feet. That would equate to $250 per square foot versus what you sold this year at about $300 per square foot. I guess is $250 per square foot a good sort of floor valuation we could look at? And then maybe just one more: buyer pool and interest types. Do you expect to sell these properties in one-off portfolio deals? And what kinds of capital is interested in buying them? Thank you.

Hi, Michael. As I mentioned earlier, we will provide cap rates and valuations as these transactions close; providing that today could impact execution, so it is important that we continue to be able to execute these at the highest level of pricing. In terms of the process we ran, we ran a competitive process on a substantial portion of the planned dispositions and had multiple institutional buyers involved. We received offers that we believe represented competitive pricing. Today, we are in advanced negotiations around a portfolio transaction. So while a substantial portion of the pool will be sold via a portfolio sale, we are also in various stages of our process to transact on the remaining assets, which will likely be sold via one-off or smaller portfolio transactions. Given our current visibility and the progress we have made to date, that is what gives us confidence in our ability to transact on the majority of these planned dispositions at attractive pricing by the end of the year.

Thanks, Michael. Our next question comes from Brandon Lynch from Barclays. Brandon?

Thanks for taking my questions. It looks like you have lowered your development yield assumptions by 50 basis points quarter over quarter. Can you discuss the puts and takes there? And also maybe discuss the rent assumptions relative to where the market is in your currently expected yields?

Hi, Brandon. The yield is aggregated based on what goes in and out of the pipeline, so there is some impact there. We also adjust our returns based on what we are seeing in the market. Overall, we saw a slight decline, particularly for new buildings that are being developed, which tend to fall into the Class A segment and in certain submarkets we are seeing more movement around pricing based on competitive supply. We will say for what we have in the pipeline, we are pretty excited about those properties. They all represent assets that will be delivered with unique and differentiated functionality that we think will be completed at appropriate returns and will be great long-term additions to our portfolio.

We continue to be very disciplined around capital allocation relating to our repositioning and development, solving for returns 100 to 200 basis points above a stabilized cap rate, and the ones we have started to date have followed that framework. In fact, the Gale project we added to the pipeline this quarter is over 200 basis points in excess of the stabilized cap rate, and another asset we started under construction is 500 to 600 basis points above a stabilized cap rate. So we remain very disciplined on that front.

Thanks, Brandon. Our next question comes from Mike Mueller from JPMorgan. Mike?

Hi. Can you give us a sense as to how much 2027 rent spreads should improve with sales relative to what you previously messaged? I think you said that 2027 spreads were going to be worse than 2026 before.

Look, as I mentioned earlier, there is going to be continued pressure on rent spreads, but that is just one part of the P&L. We only have roughly 50% of our rent roll expiring in any given year, which is a great natural hedge against market fluctuations. The headwind is shrinking: it is a known commodity we are going to have to get through over the next couple of years. We have plenty of offsets with accretive capital recycling and occupancy upside across the portfolio, but again it will be continued pressure next year on releasing spreads.

Thanks, Mike. Our last question comes from Vince Tibone from Green Street. Vince?

Hi, good morning. You discuss how you think about intrinsic value for Rexford and at what share price levels you consider taking a pause from buybacks. John, you mentioned market cap rates are about 5.5% on average. On our numbers, after today's pop in the share price, the implied cap rate is also in the mid-fives. So I am trying to get a sense of how you think about the gap between public and private valuations in your portfolio and the stock.

By no means are we going to share our NAV on today's call, but the share price is the number one thing we look at when assessing whether or not to buy back shares. That is combined with where our balance sheet leverage is and other competing uses of capital. What we have proven over the last year is that buybacks have been very accretive to FFO per share and NAV per share. The FFO yield we have achieved from those buybacks has been between 6% and 7%, so very good use of capital for us. We are committed to that and look forward to taking advantage of it going forward.

Thanks, Mike. Samir Feldman from Wells Fargo will be our last call. Samir?

Thanks for taking the follow-up from our team. Your commentary certainly sounds like transaction markets are getting healthier quicker. I am just curious: we have seen several big announcements across multiple sectors and large portfolio sizes. Can you talk about how fast things are changing both on the buyer pool and also on the capital for buyers? It seems like there is a lot happening quickly.

Samir, we have seen an incremental change in institutional demand for product in the market. Improving near-term and long-term market conditions have driven more capital into the market. We view this as an incredibly unique opportunity in time where we can capitalize on the change in demand. We are not reacting — this is proactive. We believe we can achieve competitive pricing for the dispositions and redeploy proceeds in an accretive manner; this is not a dilutive exercise. We can do this while increasing the portfolio quality, future cash flow durability, and value-creation opportunities that align with our strategy. These factors rarely emerge together, and we are taking advantage of this unique opportunity that sets Rexford up for the future.

That concludes the Q&A portion of our earnings call. I would now like to turn the call over to Laura Elizabeth Clark for closing remarks.

Thank you all for joining us today, and we look forward to spending time with you over the next few months.

This concludes today's conference call. You may now disconnect.