Image source: The Motley Fool.
Rexford Industrial Realty Inc (REXR -1.70%)
Q1Â 2020 Earnings Call
May 5, 2020, 1:00 p.m. ET
Contents:
- Prepared Remarks
- Questions and Answers
- Call Participants
Prepared Remarks:
Operator
Greetings, and welcome to the Rexford Industrial Realty, Inc. First Quarter 2020 Earnings Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] It is now my pleasure to introduce your host, Steve Swett with ICR. Thank you. You may begin.
Stephen Swett -- Managing Director at ICR
We thank you for joining us for Rexford Industrial's first quarter 2020 earnings conference call. In addition to the press release distributed yesterday after market close, we posted a supplemental package in the Investor Relations section on our website at www.rexfordindustrial.com.
On today's call, management's remarks and answers to your questions contain forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements address matters that are subject to risks and uncertainties that may cause actual results to differ from those discussed today. For more information about these risk factors, we encourage you to review our 10-K and other SEC filings. Rexford Industrial assumes no obligation to update any forward-looking statements in the future.
In addition, certain financial information presented on this call represents non-GAAP financial measures. Our earnings release and supplemental package present GAAP reconciliations and an explanation of why such non-GAAP financial measures are useful to investors. Today's conference call is hosted by Rexford Industrial's Co-Chief Executive Officers, Michael Frankel and Howard Schwimmer; together with Chief Financial Officer, Adeel Khan; and our General Counsel, David Lanzer. They will make some prepared remarks and then, we'll open the call for your questions.
Now, I'll turn the call over to Michael.
Michael S. Frankel -- Co-Chief Executive Officer & Director
Thank you, and welcome to Rexford Industrial's first quarter 2020 earnings call. To begin with, on behalf of our entire Rexford team, we hope that everyone on this call, your colleagues, friends and families are healthy and coping well during these challenging times. I'll begin with a brief summary of our first quarter operating results, followed by some perspective on the impacts from COVID-19. Howard will then cover our transaction and repositioning activity, and the deal will follow with more details on our financial results, balance sheet and outlook. We will then open the call for your question.
Our first quarter performance continued the exceptional trends we saw in 2019. We increased Company share of core FFO by 28% to $37.5 million and generated a 10% increase in core FFO per share to $0.33. Our stabilized same-property NOI grew by 3.7% on a GAAP basis and by 7.5% on a cash basis. We also achieved 98% occupancy in our stabilized same-property portfolio. We signed 107 leases for 1.6 billion square feet. Our leasing spreads were 36.6% on a GAAP basis and 24.4% on a cash basis. We acquired a 10 property portfolio during the first quarter for $203 million, and year-to-date investment volume is approximately $219 million.
Although first quarter results were not materially impacted by COVID-19, I'll begin with a brief description of our market backdrop as we see it today. In recent years, our target infill Southern California industrial markets have been operating at historically high occupancy at about 98%, with limited and diminishing supply causing a persistent supply demand imbalance. Market rent growth has also been accelerating a sustained high-single-digit growth in infill Southern California.
While many businesses are facing challenges, we continue to see substantial incremental demand, driven by e-commerce and other distribution-oriented tenants such as Amazon, among others. In addition, businesses from other growing sectors of the economy continue to demand space in a market with the nation's lowest level of available supply. These sectors include the electric vehicle industry, space exploration, pharmaceutical, medical and healthcare products, food and consumer staples, as well as a wide range of industries feeling pressure to increase their last mile presence as they face the need to reconfigure their supply chain and inventory management.
As we try to understand the impacts from the COVID-19 crisis, it is essential to consider the underlying tenant demand fundamentals within infill Southern California. Historical data clearly shows and our experience through prior downturns also confirms that the tenant base within infill Southern California is about a strong, diverse and as a resilient and stable as it gets. While on a global scale, one might expect larger tenants to be more resilient than the smaller tenants, however, it has been demonstrated that our infill markets have outperformed the big box, large tenant base located in non-infill market. While this may seem counterintuitive, we believe the historical data paints a clear picture. It is very instructive to consider how our infill tenant base in Southern California performed during prior downturns as compared to large tenants located in non-infill market.
To begin with, during the Great Recession by way of example, vacancy within our infill markets increased by a mere 100 basis points to 150 basis points, while vacancy in the large tenant market in the Eastern Inland Empire doubled, tripled or worse. We believe the greater resilience of our infill SoCal tenants is due to two key factors. First, it is due to the extreme scarcity of available products, exceptionally high barriers, limiting supply and a persistent supply demand imbalance. Additionally, the resilient nature of these entrepreneurial tenants is driven by the fact that our spaces generally represent mission-critical locations required for their businesses and to support their livelihood. It is also helpful to consider how today's crisis may be similar or different from prior downturns such as the great financial crisis and how that may impact our recovery within infill Southern California.
To begin with an early 2009 at the onset of the Great Recession with business order flows essentially stopped, no sector was spared. We did not have the magnitude of growth in e-commerce and other growth drivers that we still have today within infill Southern California. In addition, our markets were not as highly occupied in 2008 and 2009 as they are today. In contrast, today, there is a potential risk for tenants that to the extent they give up space within infill Southern California. They may not be able to reenter the market with any comparable space, particularly as the post-COVID economy recovers.
Further, our tenant demand recovery through the great financial crisis was constrained by a lack of bank financing needed to fuel growth. Today's crisis is health-related and driven by government mandated shutdown. The banking system remains intact and able to provide working capital as demand recovers. Consequently, there may be reason to believe that recovery within our tenant base could be faster and more robust this cycle as compared to the prior cycle.
Another key takeaway from the great financial crisis, which not only did our infill market outperform our neighboring large tenant, non-infill market, but Rexford also outperformed within our infill markets. We believe the reasons are twofold. Number one, our portfolio is higher quality on average than typical competing product within our submarket, which helps us outcompete for tenants. Number two, we are an entrepreneurial real estate team executing at a level of intensity that enables us to outcompete within our market, whereas the vast majority of product is otherwise controlled by passive owners.
Now, I would like to provide an update on the current status of our portfolio and tenants. Our in-place portfolio is exceptionally diverse, comprising over 27 million square feet with over 1,400 tenants from just about every industry and type of business imaginable. Our top 10 tenants comprised only 11.8% of our aggregate base rents or ABR. Our portfolio was a 100% located within prime infill markets in Southern California, the nation's largest, most highly valued, highest demand last mile logistics market. Approximately 30% of our leasing activity over the prior several years has been with tenants signing e-commerce as an integral part of their business. Our ABR also skews toward our larger tenants who tend to have extensive operating history. About 65% of ABR is driven by tenants occupying over 25,000 square feet and with almost half of ABR comprising tenants occupying greater than 50,000 square feet.
With regard to current leasing activity within our portfolio, we continue to be very busy with renewals and new leases. So far, we generally continue to hit or exceed our budgeted numbers in terms of rental rates, which continue to represent very favorable leasing spreads. In some cases, we are seeing a nominal increase in tenant concession. However, there is another facet of the crisis here in California that may be unique to our state and is also different from the Great Recession. While many states have put moratoriums on commercial eviction, our California municipalities have gone a significant step further by enabling tenants impacted by COVID-19 to unilaterally defer rents until the local order is lifted. Therefore, currently in our markets, tenants paying or not paying rents may not be a measure of their help for long-term prospects. Some tenants selecting to not pay rent are merely exercising their newfound government mandated ability to defer rents.
In light of these unique circumstances, we've taken a very proactive approach with our tenants, securing short-term deferment and repayment agreement as necessary. It also seems fair to say that the number of tenants that continue to pay rent on a current basis, despite these government mandate, is a strong testament to the strength of our market. So far, tenants representing 95.4% of ABR have either paid April rent or entered into a short-term rent relief agreement. On a cash basis, we have collected over 82% of April base rent. The balance of this group representing 13% of ABR who did not pay April rent have executed short-term relief agreements generally for one to two months of base rent to be repaid during 2020. Tenants representing about 4% of ABR have not paid April rent and have not entered into a repayment plan at this time. Many of these tenants may be taking advantage of their newfound government mandated ability to unilaterally defer rent.
As we move forward, we will continue to take an exceptionally proactive approach, working with our tenants to help them work through this challenging period, while mitigating the impacts of our local government mandate enabling tenants to defer rent. As a result, we may experience a greater volume of short-term rent deferral as compared to portfolios that are not solely located within Southern California. The good news is that we have reason to believe such deferrals will be repaid in the near term. And historical data and our experience informs us that underlying tenant demand fundamentals within infill Southern California remain the strongest of any industrial market in the nation, and rent deferral is currently not a strong indicator of tenant sustainability.
Despite these challenges, we feel very fortunate at Rexford. We believe we have the strategy, team, focus and low leverage balance sheet to manage through this cycle to capitalize on emerging opportunities and to emerge stronger than ever through the recovery. Our construction team remains very busy creating value through our value-add repositioning and renovation work. Our investment team is also exceptionally busy as we benefit from our low leverage balance sheet and proprietary originations platform to pursue accretive growth opportunities.
With regard to tenant demand, we also continue to see an acceleration in e-commerce adoption by consumers of all ages, as well as by businesses adjusting to new post-COVID dynamics. This acceleration is also forcing an expansion of the range and types of goods distributed through e-commerce, which is increasing the importance of our last mile distribution facility. Most importantly, we'd like to acknowledge our team for your exceptional level of execution and collaboration, demonstrating the strength of the Rexford platform. In return, we strive to differentiate ourselves in the way we proactively support our team as they work remotely. For example, as it quickly became apparent that families with children at home faced added challenges, we responded early on by providing cash subsidies to families with young children to help them cover child care expenses. We have also implemented a fully digital online learning environment providing the opportunity for rapid onboarding of new employees and the training and advancement of current staff.
Lastly, we believe our investment work, which largely occurs in underserved and under-resourced urban infill communities, delivered substantial social benefits by improving and repositioning industrial property into thriving centers of business and commerce that provide the longer-term opportunity for job and increased social welfare that are now more important than ever to those local communities.
And with that, I'm very pleased to turn the call over to Howard.
Howard Schwimmer -- Co-Chief Executive Officer & Director
Thanks, Michael. And thank you everyone for joining us today. The infill Southern California industrial market remained very strong in first quarter. The low vacancy and a supply demand imbalance have so far continued to support rental growth during March and April. Our target markets, which exclude the Eastern Inland Empire, ended the first quarter at 2.3% [Phonetic] vacancy with asking rents up 6.3% on a weighted average basis over the past 12 months according to CBRE. We've made good progress addressing Rexford 2020 lease expirations and continue to generate strong leasing spreads into the second quarter. Nearly half of our expiring square footage is in our top 20 leases by size, and of this, 70% available for renewal or releasing with 92% already renewed released or in active negotiation. And the remaining 30% is scheduled for value-add repositioning. As we adapt to the current and post-COVID environment, we are making adjustments to further enable leasing activity by deploying virtual touring and access to electronic lock boxes.
Turning to acquisitions. Year-to-date through April, we have acquired $219 million of property, adding 935,000 square feet to the portfolio. In March, we acquired a 10 building industrial portfolio totaling 863,000 square feet located within four of the Company's core infill Southern California markets for approximately $203 million, including assumed debt. The portfolio consists of three single-tenant buildings and seven multi-tenant industrial projects and is 88% leased to 56 tenants at rents estimated to be 16% below market in aggregate. Approximately 75% of the portfolio's value is in the region's lowest vacancy market, LA South Bay, which ended Q1 at 0.8% vacancy, with the remainder in prime infill locations within LA-Mid Counties, Orange County and Inland Empire West. The acquisition was creatively structured through a combination of cash and operating units. We expect to grow the initial unlevered yield of 4.2% through a combination of completing the value-add enhancements, leasing vacant space and increasing below-market rents. Projected unlevered stabilized yield on total cost is about 5%.
In April, we acquired Vernon Avenue, which consists of 6 acres of land, with 72,000 square feet of building for $15.5 million. The low coverage property is purchased as a long-term sale leaseback at land value. The triple-net lease provides favorable cash flow with the future opportunity to develop a new distribution facility. The initial unlevered yield is 5.5% growing through annual rent increases.
With respect to our value-add repositioning program, construction is considered an essential business in the State of California, and we continue to progress on our current pipeline. We currently have 1.1 million square feet in repositioning or development with another 330,000 square feet plan to start development in later 2020 and into 2021. However, there may be an impact on timing of project completion or commencement as many municipalities are utilizing online construction permitting and inspection, sometimes experienced delays. Yet, as we deliver these projects to highly occupied infill markets, current market activity provides comfort to our ability to consummate attractive leasing for these low vacancy infill locations.
During the quarter, we stabilized two projects at our newly constructed 530,000 square foot, the Conejo [Phonetic] Spectrum Business Park. We completed demising and lease-up of a 98,000 square foot building and leased two other 50,000 square foot spaces, bringing the full project to 100% occupancy and achieving an aggregate unlevered return of 5.1%. We also completed demising and leasing of a 72,000 square foot building at our San Fernando Business Center. We executed two leases with tenants that are using the space for e-commerce and omnichannel replenishment and achieved an unlevered 5% return on total cost.
With regard to acquisition, we currently have $175 million of new investments under LOI or contract. These acquisitions are subject to completion of due diligence and satisfaction customary closing conditions. We will provide more details as transactions are completed. In the current environment, our proven ability to transact on new attractive investment opportunities differentiates us from many other buyers that are out of the market for a variety of reasons. Our local sharpshooter focus with entire team on the ground, including our trusted due diligence consulting, is an advantage facilitating our ability to continue to execute our growth strategy.
We have maintained a very low leverage balance sheet that puts us in a strong position to capitalize on opportunities as they may arise. Rexford pipeline of acquisitions remains strong, and the current market may provide a catalyst for certain sellers looking to unlock liquidity from their industrial real estate assets. Still given continued uncertainty, we will remain prudent with our capital allocation, ensuring that we remain ready to navigate a rapidly evolving environment.
I'll now turn the call over to Adeel.
Adeel Khan -- Chief Financial Officer
Thank you, Howard. Beginning with our operating results, for the first quarter of 2020, net income attributable to common stockholders was approximately $10.8 million or $0.09 per fully diluted share. This compares to $8 million or $0.08 per fully diluted share for the first quarter of 2019. For the three months ended March 31, 2020, Company share of core FFO was $37.5 million as compared to $29.4 million for the three months ended March 31, 2019. On a per share basis, Company share of core FFO was $0.33 per fully diluted share, representing a 10% increase year-over-year.
Stabilized same-property NOI was $44.6 million in the first quarter. This compares to $43.1 million for the same quarter in 2019, an increase of 3.7%. Our stabilized same-property NOI was driven by 8.7% increase in same property rental revenue, while same property operating expenses increased by 4%. On a cash basis, stabilized same property NOI increased by 7.5% year-over-year.
Turning now to our balance sheet and financing activity. As a management team, we have been through many cycles. Our long-standing belief is that a flexible low leverage balance sheet is an advantage in all market conditions, especially now. During the first quarter, we issued approximately 2.1 million shares of common stock for ATM at a weighted average price of $36 per share. This resulted in net proceeds to Rexford of approximately $73.1 million. We also recast our credit facility in February. We were able to expand total capacity of $350 million to $500 million and added [Indecipherable], bringing our maturity date to February 2024.
Finally, as part of our portfolio acquisition, we issued approximately 1.4 million OP units, issued approximately 900,000 4% cumulative redeemable convertible preferred OP units and assumed $44.7 million of secured mortgage loans. At the end of the first quarter, we had approximately $112 million of cash, full availability on our newly expanded $500 million credit facility and approximately $270 million available under the $550 million ATM program. We have no debt maturities until 2022, and we remain in a very strong liquidity position, with a net debt to EBITDA ratio of 3.6 times.
With regard to our dividends, on May 4, 2020, our Board of Directors declared a cash dividend of $0.215 per share for the second quarter of 2020 payable on July 15, 2020 to common stock and unit holders of record on June 30, 2020.
Finally, I'll turn to our guidance. Given the impact of COVID-19 on our tenants and its impact on general market conditions, as well as local regulation allowing our tenants to defer rents, we're updating our guidance as follows. Please note that this guidance is based on [Indecipherable]. We now expect to achieve Company share of core FFO within a range of $1.26 to $1.29 per share. Our guidance is supported by several factors. We expect year-end stabilized same-property occupancy within a range of 95% to 96%. We expect to achieve stabilized same-property NOI growth for the year at 1.3% to 1.8%. Please note our 2020 stabilized same-property pool comprises 161 properties with an aggregate of 19.8 million square feet, representing approximately 72% of our consolidated portfolio square footage.
For G&A, we anticipate a full-year range from $36.5 million to $37 million, including about $14 million in non-cash equity compensation. As in the past, our guidance does not include any assumptions for other acquisitions, dispositions or capital transactions, which have not just been announced. Also, our guidance for core FFO does not include acquisition costs or the costs that we typically exclude in calculating this metric.
That completes our prepared remarks. With that, we'll open the line to take any questions. Operator?
Questions and Answers:
Operator
Thank you. Ladies and gentlemen, at this time, we will be conducting a question-and-answer session. [Operator Instructions] Our first question comes from the line of Jamie Feldman with Bank of America. Please proceed with your question.
Jamie Feldman -- Bank of America Merrill Lynch -- Analyst
Great. Thank you. I guess just to start out, can you talk more about the tenants who have asked for rent abatement and maybe kind of tie that in with how you're thinking about tenant credit risk, just so we can kind of understand what here seems to be real concern over whether you're going to get rent paid and what is more people being opportunistic?
Adeel Khan -- Chief Financial Officer
Hey, Jamie. It's Adeel. Thanks for the question. I think one thing that is very important for us to note before we address the credit risk is to take a look at our March numbers. And if you compare our March numbers and compare that to the historical quarters of reporting in terms of AR collections and what they are balanced we typically carry, I think that's a very important fact point for us to focus on, because we haven't really had any credit risk from these tenant base. So there is a tenants that we've curated in our portfolio in the course of the last few years, right, they have been performing very well. So there has really been no issue from that perspective.
So yeah, going into this pandemic, right, I think we do -- really do need to take stock of what the Company was doing prior to this and how these tenants were performing. So there really isn't a concern from my perspective in terms of on a go-forward basis once the world starts to operate normally, so I'm not sure if that answered the question in terms of the credit risk, happy to explain further.
Jamie Feldman -- Bank of America Merrill Lynch -- Analyst
It is a good point. But -- so I guess in your mind, there is no tenants whose outlook changes with COVID-19 and kind of won't be able to make it through, is that the right way to think about it in your view, everyone [Phonetic] kind of springs back to normal?
Adeel Khan -- Chief Financial Officer
I think it all depends, right? I think we are dealing with the facts that are currently present and available to us right now. I think certainly, when we received a request that have been outlined in our 10-Q in our earnings release, we're focusing with these tenants in terms of what exactly do we need to put and work with them in terms of time horizon. Obviously, we're trying to really focus on what's ahead of us in terms of Q2 and further evaluating as the ramp-up takes place over the course of the latter part of the year or the month, right? So we're testing all of that in, but in my opinion right now, there isn't really -- there really isn't any need for me to rethink their go-forward going to certain issues in terms of how these tenants behave.
Now one thing that we have done in the context of looking at that analysis on the tenants that we just talked about and we did a bottoms-up analysis in terms of the tenants that reached out to us and look to see what our exposures could be for Q2 and beyond. And we put a level of conservatism in terms of what we could potentially see from any of these tenants that could potentially go sideways in terms of their ability to come back. These are not tenant-specific reserves. These are just general reserves because no tenant has really stated anything otherwise in terms of variability to go forward in the business. So we've taken that approach and created an estimate that you're seeing in our guidance, right? So you saw us effectively change our FFO guidance. And by virtue of the FFO guidance, the same-store guidance has also changed. In the prior initial guidance at the beginning of the year, we had about a 50 basis point general reserve, not tenant-specific, just general reserve. That has been now increased to 170 basis points for the full year. So there's a 120 basis point uptick. So we're certainly thinking through this a little bit, but again, the calculus is where we have truly done the waterfall analysis in terms of the tenants that are paying appropriately, the tenants that have requested. What deferral or relief agreements have been granted to these tenants and what we have collateral and looking at the net exposure to build this analysis using the reserves, that we can't just talked about.
Michael S. Frankel -- Co-Chief Executive Officer & Director
Jamie, it's Michael. And thank you for the question. I just wanted to elaborate a little bit. And I think as Adeel said, timing obviously is going to have a lot to do with this. And the length of time that businesses remain closed is going to have a lot to do with this. And there's a lot of uncertainty there. What's interesting is that the California Governor has already started opening up some of the economy that was previously restricted, including some retail businesses and others. So maybe there's some cause for optimism there. And I think what's really interesting is, and this might be contrary to some popular assumptions out there with regard to smaller tenants, we have well over 1,400 tenants. We've had zero bankruptcies. Yet, every week, I'm reading about numerous bankruptcies in the country, and almost all of those bankruptcies are national companies with a national or even global footprint. They're biased toward retail, which is a trend that started years ago. And so, the data again is telling us that at least with regard to our portfolio, we're not seeing that level of tenant distress. And yet, the tenant distress is coming from larger companies actually.
Jamie Feldman -- Bank of America Merrill Lynch -- Analyst
Okay, that's helpful. And then, I guess, as you think about the 170 basis points, is that kind of a grounds-up tenant by tenant? Or is that more of a blanket assumption of what it could end up?
Adeel Khan -- Chief Financial Officer
Yeah. So the 170 basis points, Jamie, is the -- so, as I kind of walk through the math, we took into consideration the entire pool of tenants. And the tenants that didn't requests clearly have a great pattern of behavior even in April in terms of payment. So really, they were out of the mix. And then, we took a look at the remaining 306 requests that we received, and all the tenants that have effectively received some sort of relief agreement. We factored that in because factoring the relief is important because not only their AR should be coming down in those upfront months, but then you have a deferral period that starts in the Q4. So we factor all of that into this analysis to see what our true exposure are. And what's really left from there is the remaining tenants, the 114 tenants that effectively don't have an executed agreement as of yet. So that's where you're coming up with the exposure. And then we applied a percentage to those general pool of tenants in terms of what reserve we should put. And once that reserve is calculated, that reserve has looked in conjunction with the entire totality of the company revenue stream to come up with a blended rate. But the specific percentages that are applied to that pool is currently higher, right? What you're seeing is 170 basis point of cost to the entire company revenue stream for the year.
Michael S. Frankel -- Co-Chief Executive Officer & Director
And Jamie, it kind of makes sense because we also did a bottoms-up analysis of our tenants to try to figure out how much of our tenant base would be considered essential or would be allowed to stay in business. And by the way, this is before the Governor just made his latest loosening announcement. And we found that just under 80% of our tenants, plus or minus -- it's not precise, but just under 80% of our tenants would be would be able to still be in business, based on the guidelines, as they were before yesterday. Now that the Governor has loosened up restrictions, we'll have a greater percentage of our tenants that will be able to operate. So these numbers sort of correlate and do make some sense.
Jamie Feldman -- Bank of America Merrill Lynch -- Analyst
Okay. I appreciate all the detail.
Operator
Our next question comes from the line of Blaine Heck with Wells Fargo. Please proceed with your question.
Blaine Heck -- Wells Fargo -- Analyst
Great, thanks. Good morning out there. So, I guess, I want to change the direction to maybe the transaction side of things. Have you guys seen any notable change in the profile of potential seller looking to dispose of properties in your target markets? Have you seen any more foreselling [Phonetic] or even highly motivated selling as a result of the crisis yet?
Howard Schwimmer -- Co-Chief Executive Officer & Director
Hi, Blaine. It's Howard. At this point, we haven't seen any dramatic increase in sellers although our team has been very busy in terms of writing LOIs. It's not too difficult for us and our research group to go ahead and look toward those businesses that we might expect to have some amount of pain. We put a lot of focus on making sale leaseback offers, and we're dialoguing with many companies in that respect. And what we really expect is that once people get back to business, they will be able to better evaluate what the business looks like, what the revenue streams are. And at that point, we think things will pick up a little more in terms of willingness to sell. Yeah, this has only been going on for a short period of times. So many people still have reserves in respect to hanging onto their real estate. But as we've seen in past recessions, timing is such that it generally takes months, not years. So probably three to six months down the road, we expect that aspect of selling to start picking up a little bit.
Michael S. Frankel -- Co-Chief Executive Officer & Director
And Blaine, it's Michael. The deal we closed in Vernon a few weeks ago, a $15.5 million deal, was kind of an example where we provided the seller an ability to monetize the value of real estate through a sale leaseback. And in addition to the sale leasebacks, the predominance of ownership in our markets is private mom and pop type non-real estate professionals, and their mantra is, God forbid, I should ever have to write a check and just let the cash flow keep coming with low rents. And today, some of their tenants might be having more issues in a lot of these properties. There's over 1 billion square feet here built before 1980s [Indecipherable] levels of dysfunction and require capital investment. So we are seeing also an increase in potential decision points for a lot of these private owners. And I would say that the volume of otherwise we're putting out today is substantial and greatly exceeds any period we've ever seen before.
Blaine Heck -- Wells Fargo -- Analyst
Yeah, that makes sense. That's very helpful. And then, just with respect to your redevelopment activity, I know, in a lot of instances in the past, you guys would pursue a strategy of not renewing certain tenants in order to gain access to the building for renovation purposes. Has that strategy changed for you guys at all, given the current circumstances? Are you guys looking to preserve occupancy maybe a little bit more?
Howard Schwimmer -- Co-Chief Executive Officer & Director
Well, we make those decisions on a case-by-case basis. In terms of the repositioning, we're not waiting to put anything into repositioning that had already been planned. Generally, there is a pretty big increase in in-place rent versus market when we do decide to put something into repositioning. And if you look at the market today, there has not been any change in rental rate. So if you look to the market in terms of asking rate, they have not gone down. They've in fact probably moved up a little more. If you look at our leasing spreads and transactions that we're completing late March and all through April, we're still achieving very strong leasing spreads. So there's really, at this point, no indication that we should be holding back on some of those typical decisions that we're talking about in terms of why we move something into repositioning. But yeah, that being said, we're not really looking to throw people on the street. And I think part of that decision today is going to involve our thoughts on go-forward basis for that tenant. So, if we see a tenant that we think is severely impacted and if we have an inclination that their business may not be able to support their rent or even pay us back rent if we deferred anything, that's going to make the decision a lot easier why we'll push something into repo versus continue to maintain occupancy and the revenue stream.
Blaine Heck -- Wells Fargo -- Analyst
Got it. Thanks guys.
Operator
Our next question comes from the line of John Guinee with Stifel. Please proceed with your question.
John Guinee -- Stifel -- Analyst
Great. Thank you. Adeel, I think you said that you're -- you accessed the ATM for -- at about $36 a share. You guys are trading I think right now around $39. How do those numbers compare to the third and the fourth quarter of last year? And is it safe, Howard or Michael, to assume that the model still works if you can access an ATM but sell shares at high-30s?
Howard Schwimmer -- Co-Chief Executive Officer & Director
Yeah. So, John, thanks for the question. I'll actually give you Q1 averages by quarter just since you asked the question. Q1 '19, for example, we issued shares at $34.75. So if you were to just look at year-over-year, Q1 '20 was $36. So there is a little bit of correlation there. Q2 '19, $38.21; Q3 $44.24 and Q4 '19 was $46.77. But I think the relevant point which is I think very important to note here is that we don't get overly focused on the spot value of the equity or the stock at any given point in time. Our stock was even trading as high as $53. We really try to focus on what is that capital going to do in terms of utilization, what are we buying there and how does that model in for the short to medium in terms of what kind of lift does that give to NAV and FFO. That's how we kind of focus and drive that decision. So when we issued equity in Q1 '19 at $34.75, we clearly saw the deal parameters that were ahead of us that was going to support that position. And that's no different than what we did in Q1. So, as long as the opportunities that are ahead of us, allow us to do what we've been doing, which is to create this accretive nature on the FFO side and the NAV side. We'll those decisions accordingly. But we try not to get too focused and fixated on the spot cost at any given point in time, for good or for bad. If the stock is trading high, we're not going to try to just take down a whole lot just for the sake of it. I don't know if that answer the question?
Adeel Khan -- Chief Financial Officer
And I'll add to that, John. Going forward -- we mentioned we had $175 million of products under LOI or contract. And more than half of those transactions are at some form of value-add and several of them will actually move immediately on to the repositioning page with some heavy value-add component to them. So there are many opportunities in the market for us still to create value.
John Guinee -- Stifel -- Analyst
And then -- thank you. A second question, any thoughts on split role 13 and that process between now and November and how that will shake out?
Adeel Khan -- Chief Financial Officer
Well, I don't know -- I will answer first part of the question. Then, maybe Howard and Mike would then opine just to feel like how it's going to shake. But I think what we did at the beginning of the year using the in-place portfolio that we had at 12/31/19, we did a deep dive in terms of what that could look like if this thing was to pass. And from our analysis, at that particular point in time, there was about $0.01 impact if this thing was to pass, and the numbers followed exactly [Phonetic]. There was a $9 million uptick in expenses and for real estate taxes, and then $8 million of that would be recovered. But one thing that was important that we also disclosed at that time, which was important to note, is that there would be two-year lag before this thing fully is deployed. So we would have the ability to correct some of those loss of recoveries in terms of lease structure, so that $0.01 also be mitigated. So I think at this juncture -- and I don't think the math has changed materially because, again, we're only three to four months out. But more importantly, I think our property base would generally benefit from the fact that so much of that has been accumulated over the last two to three years. So I don't think the calculus is going to be any different.
Michael S. Frankel -- Co-Chief Executive Officer & Director
And I'll agree with that. Our impact to the company is relatively insulated. And with respect to the political environment, we really can't speculate.
John Guinee -- Stifel -- Analyst
Okay, thank you.
Operator
Our next question comes from the line of Mike Mueller with J.P. Morgan. Please proceed with your question.
Mike Mueller -- J.P. Morgan -- Analyst
Yeah, hi. I guess, Adeel, your year-end occupancy target assumes you have about a 200 basis point to 300 basis point occupancy decline from March 31. And I guess, first, how much of that is just a blind assumption or where you actually see evidence and you think there's pretty conviction that you're going to end up down 250 basis points to 300 basis points?
Adeel Khan -- Chief Financial Officer
Yeah, I think the one thing about occupancy that I always caution people is that it's year ending occupancy. So sometimes that doesn't tell the whole story. We don't guide on an average occupancy, which is truly where you can have a disconnect in terms of the NOI versus what the occupancy is telling. So, they're not definitely translatable back to forth. So when we guide, it's what we think potentially what can happen to a tenant that is expiring on 12/31/20. So I think that's where I think there's some disconnect. But that's why there's sometimes a little bit of a disconnect from the NOI perspective. Is it a blind assumption? I think for the most part, I think we do have a lot more granularity when they get out to maybe six months, and I think we're certainly getting there. So some of this analyses are put together in early April. So I think that the granularity and the transparency improves as course -- as time progresses. And that's no different. I think we've been operating along those presumptions for quite some time, especially with our tenant base. I think that's just how it happens. But one thing that's important to note, which I think you've seen us do, is that you've certainly seen a pattern of behavior in terms of the larger tenants and leases. We did a lot of leases last year. In June, there were 2020 [Phonetic] expiring leases. We've taken care of those. I think you're certainly seeing certain pattern on those leases because they do come up sooner and you have a lot more visibility as opposed to some smaller, medium-size tenants. So I think that's where you have a little bit of unknown factor.
Mike Mueller -- J.P. Morgan -- Analyst
Got it. Okay. And then I guess, what are you hearing on the ground from the tenants about either the success they're having or the issues they are having with accessing the stimulus funds?
Howard Schwimmer -- Co-Chief Executive Officer & Director
Hey, Mike. It's Howard. We really don't know what is happening in terms of their access to stimulus funds. In terms of how we're handling discussions with tenants that have requested rent relief, we're really suggesting obviously that they do pursue those. We've gone the extra step in providing tenants with the information on where to access the banking system to obtain them. But it's difficult for us to really be able to track their success in obtaining the funds. And so, we have had some requests that came in and people later withdrew them stating that they had applied and were being approved, so they are going to be able to pay the rent. But in terms of what else is happening on the ground, we're seeing more activity as it relates to vacant buildings. We're renewing tenants that we thought were going to be moving out of buildings because anything they might have been looking at expecting another tenant to move out isn't really happening. So it's making -- it's pushing some of our renewals up. And so, there's a lot more activity on vacant space. We're seeing a reasonable amount of touring, although when you talk to brokers in the market, they'll tell you that touring is substantially down. But our approach, as you know, is whenever we do have vacant space, we proactively renovate, modernize it. So we generally have the best quality space available in each of the sub-markets. And typically in times like this, there is a flight to quality. And so, we're seeing that in terms of our own portfolio in a lot of the negotiation that's going on now in vacant space and even some of the leasing we've had success of doing in the past week.
Michael S. Frankel -- Co-Chief Executive Officer & Director
Hey, Michael. Good to hear from you and thanks for the question. I just want to add a little bit on this topic. As Howard mentioned, we have anecdotally seen a range of tenants who have accessed the funds that are available through these government sponsored loans that don't have to be repaid. But we haven't -- do we do have a very unique situation here in Southern -- in California in that these local municipalities, the local governments have given tenants the ability to unilaterally defer their rent. So all they have to do is claim. They don't have to prove it. They just have to indicate that they believe they have been impacted by COVID, and they can unilaterally defer rent. So, that became for many tenants the easiest first solution. And in fact, I don't know if it might be helpful. But maybe, our General Counsel, David Lanzer, if you wouldn't mind, maybe just give a little overview because it really is a differentiating factor here in California.
David Lanzer -- General Counsel and Corporate Secretary
Sure. Thanks Mike for the question. Yeah, the thing that makes it different here in California, as we've done a survey as to what other states and cities across the country are doing, California is a place where the governor basically had an order that each local municipality can come up with their own orders in terms of rent deferment and in terms of eviction moratorium. And so, we dialed in at a very granular level at what [Technical Issues] municipality is doing within our markets. And we've been tracking what the deferment time periods look like, what the repayment time periods look like. And so, that is unique to our business, but it's something that we've been very much on top of. And we've tried very hard to understand what leverage points [Technical Issues] even though that the tenants do have this unilateral right. So, some municipalities actually still allow for late fees or securities posits or an interest. And so, we use those leverage points. We also get very granular as we analyze each individual lease to understand what sort of leverage we have with that particular tenant in terms of might they lose some concession, they have future tenant or might they have a full option that if they haven't paid their rent, they're going lose. And so, that's what we've done in terms of how we handle this and dealt with how each local order has affected our tenant base.
Mike Mueller -- J.P. Morgan -- Analyst
Got it. Thanks for the color. Thanks.
Operator
Our next question comes from the line of Chris Lucas with Capital One Securities. Please proceed with your question.
Chris Lucas -- Capital One Securities -- Analyst
Hi, good afternoon, everybody. Howard, I just appreciate the color on the pipeline that you're working with. I guess I was just curious as to whether or not any of your underwriting assumptions have changed, given the environment we're in.
Howard Schwimmer -- Co-Chief Executive Officer & Director
Hi, Chris. We certainly have adjusted our underwriting. And we are looking to be very conservative at this point. So we assumed longer lease-up time frames. We have assumed no rent growth initially in some of our leasing assumptions. And we've adjusted some of the exit cap rates a little bit. And of course, the returns we're looking for in terms of stabilized yields have gone up somewhat as well.
Chris Lucas -- Capital One Securities -- Analyst
Okay, great. Thanks. And then, just more just sort of an operational question. As it relates to sort of any tenant move-ins that you have scheduled either in March or April or what you're seeing sort of coming forward, are you seeing any impact from the current environment to your ability to get tenants in on time?
Howard Schwimmer -- Co-Chief Executive Officer & Director
Into their space on time?
Chris Lucas -- Capital One Securities -- Analyst
Yeah, into their space. Yeah, move into their space on time, to the degree you had -- that were scheduled.
Howard Schwimmer -- Co-Chief Executive Officer & Director
Yeah. Well, as I mentioned earlier, most of the leasing is occurring on vacant space for the exact reason you're referring to, a concern that people occupying the space have nowhere to go because there's just not a lot of movement. We just did a 40,000-foot lease in a building in Orange County. And it's a vacant and was something that we had a bit of renovation work to do. And that was exactly what the tenants' concern was, is that they wanted to make sure we can get that work done as fast as possible so they can get their business in there and up and running. And so, we had to get a little creative on how we got them comfortable. We literally told them that we'll give them some other space we had in the market temporarily if they had to move out of their existing building prior to us being able to deliver the space because they don't want to be pulled up for rent on the other space they're in. So that is actually a great question, and it is a concern of people who are looking in the market, they generally have a requirement that they need to fulfill right away. And that's why we put so much emphasis on those vacant spaces we have in terms of getting them move-in ready.
Adeel Khan -- Chief Financial Officer
And just while Howard was talking, I was given a note. We moved 70,000 square feet in April. So clearly, we're operating.
Chris Lucas -- Capital One Securities -- Analyst
Great. Thank you. Appreciate it. That's all I have.
Operator
Our next question comes from the line of Manny Korchman with Citi. Please proceed with your question.
Manny Korchman -- Citi -- Analyst
Hey, everyone. Mike, I appreciate your remarks on sort of the resiliency of the Southern California tenant. I guess the question is, if you think about tenants that are from outside the market that their space with you isn't their only space or isn't only one of a couple of spaces, but it is sort of a satellite location, are those types of spaces sort of more at risk or less at risk or do you see the resilience there different in any way than that single location small customer?
Michael S. Frankel -- Co-Chief Executive Officer & Director
Hi, Manny. Thanks for your question. Thanks for joining us today. Well, I can tell you from past history and the data really tells us that doesn't -- that's not a differentiating factor. Those are not less sustainable or less -- those aren't less resilient tenants. And in fact, I think what we've learned over the years is that they have a presence in our market because they have to. And I'll explain that in a sec. Our market is the most expensive operating environment by far, by any measure. Rental rates are over 80% higher. Operating cost, taxation, you name it, utilities, everything is higher and more expensive in our markets. So frankly, if you didn't have to be in our market, you probably left 25 years ago or decades ago. And the reason they have to be here is because they need to distribute product in an efficient manner into the largest regional population, the largest zone of consumption in the country by far. It would be one of the largest countries in the world, in fact, on a stand-alone basis. And so, what we've learned over time is that these are mission critical locations, whether the company is based here and it's their sole location or whether they are a company that has locations in other markets or could be even be based in another market. I think that's really what our experience and what the data has told us.
Manny Korchman -- Citi -- Analyst
Great. And then, just thinking about the rent referrals for a second, if they were to all sort of pay on the new timelines that you've agreed to, when would the cash payments start coming in, and so when would you be all caught up?
Adeel Khan -- Chief Financial Officer
Yeah, Manny, I would say 95% of the cash deferral payments will be caught up in 2020. We only have a handful of leases that's extended into early 2021, but majority of them start in September and finish off paying back within two to three effectively in 2020.
Manny Korchman -- Citi -- Analyst
Thanks Adeel.
Operator
This does conclude our question-and-answer session. I will now turn it back to management for closing remarks.
Michael S. Frankel -- Co-Chief Executive Officer & Director
On behalf of Rexford Industrial, again, we want to wish you all well and the best of health. And we're looking forward to reconnecting in about three months, and we hope that the operating environment and the health of our communities is solid. And I want to thank you for joining us today. And again, stay well, stay healthy. [Operating Closing Remarks]
Duration: 54 minutes
Call participants:
Stephen Swett -- Managing Director at ICR
Michael S. Frankel -- Co-Chief Executive Officer & Director
Howard Schwimmer -- Co-Chief Executive Officer & Director
Adeel Khan -- Chief Financial Officer
David Lanzer -- General Counsel and Corporate Secretary
Jamie Feldman -- Bank of America Merrill Lynch -- Analyst
Blaine Heck -- Wells Fargo -- Analyst
John Guinee -- Stifel -- Analyst
Mike Mueller -- J.P. Morgan -- Analyst
Chris Lucas -- Capital One Securities -- Analyst
Manny Korchman -- Citi -- Analyst
