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Rexford Industrial Realty Inc (NYSE:REXR)
Q2 2020 Earnings Call
Jul 22, 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. Second Quarter 2020 Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host Kara Smith of Investor Relations. Thank you. You may begin.

Kara Smith -- Investor Relations

We thank you for joining us for Rexford Industrial's second 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 reconciliation 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 will open the call for your questions.

Now, I will turn the call over to Michael.

Michael S. Frankel -- Co-Chief Executive Officer and Director

Thank you, and welcome to Rexford Industrial's second quarter 2020 earnings call. First, we hope that everyone joining us today, as well as your colleagues, families and friends remain well during these very challenging times. Today, I'll begin with a brief summary of our second quarter operating results. Howard will then cover our transaction activity, and Adeel will follow with more details on our financial results, balance sheet and outlook. We will then open the call for your questions.

With regard to the second quarter, we are humbled by the exceptional work from our team that is driving Rexford's strong performance despite unprecedented challenges presented by the COVID-19 pandemic. We must also remark that the strength and resilience of the infill Southern California industrial property markets where the supply demand imbalance continues to differentiate this market has the highest demand, lowest supply industrial market in the nation. The extreme scarcity of developable land means there is no path to resolve our market's supply demand imbalance through new construction. One of the many reasons we choose to remain focused on creating value within infill Southern California.

Our team's quarterly performance speaks for itself, highlighted by the following. We increased company share of core FFO by 21% to $38.8 million and generated a 6.7% increase in core FFO per share to $0.32. Our stabilized same-property NOI grew by 3.1% on a GAAP basis. Our stabilized same-property cash NOI decreased by 2.3%, which was driven by short-term rent deferrals averaging one to two months. We achieved 97.6% occupancy in our stabilized same-property portfolio. We signed 123 leases for 1.4 million square feet during the second quarter. Our leasing spreads were 32.3% on a GAAP basis, and 18.2% on a cash basis. Our leasing performance reflects the fundamental strength of our infill market and our team's intense entrepreneurial focus.

During the quarter, pent-up demand reentered our Southern California infill markets as many government-mandated shutdown restrictions were lifted and as e-commerce continues its dramatic growth. We experienced a notable acceleration in tenant demand through the second half of the quarter. During the quarter, we also acquired seven properties for approximately $76 million. And subsequent to quarter end, completed three acquisitions to bring our year-to-date investment volume to more than $350 million. With regard to rent collections, we proactively worked with tenants. Some of them were impacted by COVID, and some of them simply took advantage of their government-mandated ability to unilaterally defer rents in California.

Overall, for the quarter, just over 98% of 10 billings were accounted for through cash collections and relief agreements. Cash collections represented about 87% of billings for the quarter. We were pleased to see the quarter end on a positive trend, with June cash collections at 91%. Of the tenants not covered under deferment or relief agreements, cash collections equaled 98.5% for the quarter.

Further, July is off to a very strong start, tracking very close to a typical non-COVID month at this point in the monthly collection cycle, with 92% of tenant billings collected in cash so far. July cash collection numbers are particularly impressive, given that most of our rent deferment, which on average was about one to two months has already burned off, leaving only 1.6% of tenant billing covered under relief agreements during July. In addition, for July, of the tenants not covered under deferment or relief agreements, cash collections are already at about 96%.

With regard to balance sheet activity, we completed a total of approximately $295 million of equity issuance during the quarter. We continue to maintain a low-leverage, fortress-like balance sheet, completing in the quarter with leverage of 2.9 times net debt-to-EBITDA, which equaled about 10.5% debt to total enterprise value. We also ended the quarter in a very favorable liquidity position, with access to upwards of $1 billion of liquidity as we move forward. We believe we are very well positioned both defensively to weather COVID-related uncertainty, as well as offensively to capitalize upon emerging internal and external growth opportunities to drive shareholder value.

Finally, I'd like to take a moment to fully acknowledge and thank each Rexford team member, each of whom has worked so diligently to drive our performance and to distinguish our company despite working remotely and despite a range of COVID-related personal and professional challenges. Tremendous thanks to all of our Rexford teammates, you continue to prove yourself as the best team in the business.

There is one special person who deserves additional mention. As you know, Adeel Khan, our CFO, had expressed a desire to pursue a new chapter in his professional career. On behalf of our entire team, I'd like to thank Adeel for his exceptional service and contributions to the Company and personally for his partnership and dedication. It's been a true privilege to work with Adeel. Although Adeel is a very hard act to follow, we are exceptionally pleased to have Laura Clark starting as our new CFO on September 1. For those of you who know Laura from her prior REIT experience, I'm sure you can appreciate how fortunate we are to have her join our team.

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

Howard Schwimmer -- Co-Chief Executive Officer and Director

Thank you, Michael. And thank you, everyone, for joining us today. While vacancy rates for the infill Southern California industrial market increased during the second quarter, Rexford's portfolio demonstrated resiliency. Our stabilized same-property portfolio ended the second quarter at 2.4% vacancy, which is lower than the infill markets' overall, a testament to the quality of the Rexford portfolio and our management team's focus. Low market vacancy and a pervasive supply demand imbalance continue to support strong market fundamentals. Despite the impact of COVID-19 and associated shutdowns, our markets achieved positive rental rate growth with asking rents up 2.2% on a weighted average basis over the past 12 months according to CBRE.

Rexford saw a steady increase in leasing activity as we move through the second quarter, completing our largest volume of new leasing of the past four quarters. Due to COVID-19 social distancing requirements, market demand is most focused on vacant space and Rexford continues to deliver the most functional quality space to each of our submarkets. As a result of our team's hard work, we believe we outperformed the market, meeting or exceeding our pre-COVID budgeted rental rates, which resulted in strong blended leasing spreads, achieving GAAP and cash spreads of 32.3% and 18.2%, respectively.

We are now more than halfway through the year and have made strong progress on 2020 lease expirations, even with many tenants taking a wait-and-see approach. Of the total 2020 expiring square footage at the start of the year, not including three buildings moved to repositioning, we have renewed or released 57%. And for our top 20 expirations by size, we've renewed or leased 58% with an additional 15% currently in active negotiations.

Let me now turn to acquisitions. We acquired seven properties during the second quarter for an aggregate purchase price of $76.5 million, adding approximately 334,000 of rentable square feet of buildings and 6.8 acres of development land to our portfolio. Post quarter end, we completed three additional acquisitions totaling $68.7 million. In April, we acquired Vernon Avenue in the LA San Gabriel Valley submarket, for $15.5 million at land value, which consists of six acres, with 72,000 square feet of buildings. The fully occupied sale leaseback has an initial yield of 5.5%, which will grow through scheduled annual rent increases.

As a note, the yield I reference here and for subsequent transactions are on an unlevered basis. Also in April, we acquired a one-acre land parcel at Brady Way, expanding our Knott Street repositioning project in the Orange County, West submarket for $870,000. In May, we acquired Flotilla Street in the LA Central submarket, which consists of a single-tenant industrial building containing 120,000 square feet on 5.1 acres of land for $21 million. The property is fully leased at rents estimated to be approximately 40% below market for the near-term lease expiration. The property features high-image office, extensive dock-high loading and a large secured yard. After light improvements, we intend to renew or release the property at market rents at a projected stabilized yield of 4.7%.

Also in May, Rexford acquired Sandhill Avenue in the LA South Bay submarket, which consist of 158,000 square feet of vacant manufacturing buildings on 5.8 acres of land for $14.5 million. We intend to demolish the existing structures and construct a new 126,000 square foot single-tenant logistics domain with 20 dock-high loading positions and 32 foot clear height. The projected stabilized yield is 5.4%.

In June, we acquired Eastpark Drive, the final building of our Q1 portfolio purchase located in the North Orange County submarket for $6.8 million. The single-tenant building contains 35,000 square feet on 2.4 acres of land and is fully leased on a long-term basis at initial yield of 5%. Also in June, Rexford acquired Production Avenue in the Central San Diego submarket, which consists of two industrial buildings totaling 47,000 square feet on 2.9 acres of land for $7.9 million. The property is 65% leased at rents that are estimated to be 15% below market. After repositioning and lease-up, stabilized yield is projected to be 6.3%.

Finally, for the quarter, we acquired Slover Avenue in the Inland Empire West submarket, a newly constructed state-of-the-art 60,000 square feet building on 2.8 acres for $10 million. The projected stabilized yield is 4.7%. After quarter end in July, Rexford acquired South Avalon Boulevard, a two building industrial property located in the LA South Bay submarket for $28.1 million. The property contains 166,000 square feet on 7.2 acres of land. After a short-term leaseback, the Company intends to reposition the property and projects a stabilized yield of 5%.

Also in July, we acquired a portfolio of three industrial buildings, Penrose, Fleetwood and Tuxfort Street located in the LA located in the LA San Fernando Valley submarket for $35.1 million. The fully occupied buildings contain a total of 270,000 square feet on 8.4 acres of land and are leased at rents estimated to be over 33% below market. After repositioning, we expect to bring the initial yield of 3.1% to 5.3% upon stabilization.

Finally, in July, we acquired Greenstone Avenue in the LA Mid-Counties submarket for $5.5 million. The near-term value-add property consists of a single-tenant trucking and container facility, containing 12,600 square feet on 4.8 acres. The projected stabilized yield is 6.3%. With respect to our repositioning program, we continue to progress through our pipeline with some relatively nominal COVID-19 related delays in permitting and inspections. We currently have 922,000 square feet of projects under ground-up development, another 330,000 square feet expected to start in 2021 and 368,000 square feet under repositioning, including Q3 acquisitions.

Consistent with our mission, we believe these projects represent the best locations and will be the most modern, functional product within their submarkets. Due to very limited availability and continued strong demand with little to no competition from equally functional vacant space, we believe these projects are well positioned for strong lease-up. As we look ahead to the second half of 2020 and beyond, we have a deep pipeline of opportunities and currently, we have $52 million of new investments under LOI or contract. These acquisitions are subject to completion of due diligence and satisfaction of customary closing conditions. We will provide more detail as transactions are completed.

Finally, to echo Michael's comments, thank you, Adeel, for all your tireless work toward Rexford's growth. It's been a pleasure to working with you over the past years, and I wish you only the best on your future endeavors.

I'll now turn the call over to Adeel.

Adeel Khan -- Chief Financial Officer

Thank you, Howard. Beginning with our operating results, for the second quarter 2020, net income attributable to common stockholders was approximately $11.4 million, or $0.10 per fully diluted share. This compares to $12.8 million, or $0.12 per fully diluted share for the second quarter of 2019. For the three months ended June 30, 2020, Company share of core FFO was $38.8 million as compared to $32.1 million for the three months ended June 30, 2019. On a per share basis, company share of core FFO was $0.32 per fully diluted share, representing a 6.7% increase year-over-year.

Stabilized same-property NOI was $44.3 million in the second quarter, which compares with $43 million for the same quarter in 2019, an increase of 3.1%. Our stabilized same-property NOI was driven by a 3% increase in same-property rental revenue, while same-property operating expenses increased by 2.6%. On a cash basis, stabilized same-property NOI decreased by 2.3% year-over-year, mainly due to rent deferrals related to COVID-19.

Turning now to our balance sheet and financing activities. We continue to believe that maintaining a low-levered balance sheet with ample available liquidity and a diverse array of capital sources is a competitive advantage for Rexford. In May, we completed an underwritten secondary offering of 7.2 million shares of common stock at $39.85 per share. We raised net proceeds of $285.1 million. After deducting the underwriting discount, these proceeds will be used for future acquisitions to fund our development and redevelopment program and general corporate purposes.

Also during the second quarter, we issued approximately 249,000 shares of common stock through our ATM at a weighted average price of $40.59 per share, which resulted in net proceeds to Rexford of approximately $9.9 million. At the end of the second quarter, we had approximately $254 million of cash, full availability on our $500 million credit facility and approximately $260 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 2.9 times.

With regard to our dividend, on July 20, 2020, our Board of Directors declared a cash dividend of $0.215 per share for the third quarter of 2020, payable on October 15, 2020 to common stock and unitholders of record on September 30, 2020.

Finally, I'll turn to guidance. Given the impact of COVID-19 on our tenants and its impact to general market conditions, as well as local regulations along our tenants deferred rent, we're maintaining our guidance as follows. Please note, this guidance is based on our knowledge as of today. We 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 of 1.3% to 1.8%. Please note that 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 as of June 30, 2020.

For G&A, we anticipate a full-year range from $36.5 million to $37 million, including about $14 million of 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 other costs that we typically exclude in calculating this metric.

Before we start Q&A, I'd just like to thank the entire Rexford team for the past eight years. In that time, the portfolio has grown by over 400%, which is truly exceptional. I am truly grateful to Mike and Howard for their support, as I take these next steps. Finally, to our investors and analysts, it has been a pleasure getting to know all of you as well.

With that, we'll open the lines to take any questions. Operator?

Questions and Answers:

Operator

Thank you. At this time, we will now be conducting a question-and-answer session. [Operator Instructions]

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

Jamie Feldman -- Bank of America Merrill Lynch -- Analyst

Great. Thank you. And Adeel, it's been a pleasure working with you also. We wish you the best. So, I guess, it seems like there is a lot of confusion already on same-store NOI and how companies are going to report it on a cash basis. So, you guys reported minus 2.3%, but can you talk about -- and I think, Prologis yesterday, reported a much higher number, but they did not treat their deferred rent. They kind of included in that same quarter. So if you had done that same analysis, can you tell us what your same-store NOI would have been if you hadn't pushed it out and also maybe talk about why you use this methodology?

Adeel Khan -- Chief Financial Officer

And Jamie, thanks for the question. And, yeah, it has been a pleasure working with you guys. And you guys have been here with us since the IPO. It has been absolutely fantastic. The question in terms of the same-store and the cash NOI, which was reported a negative 2.3, if you look at our table that was presented in the earnings release table, the acceleration of concessions of $825,000, plus a $3.6 million in deferrals. The same-store component of that, it's about $2.7 million or about roughly 61% or so, which would equate to 4.4% positive cash NOI growth year-over-year.

And to the second part of your question, which is the reporting, these are arrangements and agreements and short-term amendments to leases. And I think that was the most prudent thing to do, which was to document these as such within the construct of the lease amendment and the deferrals are reported as just exactly is asked, just like a concession, but we reported in a normal contract. And so that's what you're seeing in the reporting.

Naturally, as these deferred concessions are build back in the latter half of the year, September, October and mostly, which are going to be due back in 2020, we anticipate to see the cash NOI go higher because they are going to be build back. So from our perspective, the accounting of it was straightforward and simple. And that's what you're seeing on the numbers.

Jamie Feldman -- Bank of America Merrill Lynch -- Analyst

Okay. Thank you. That's helpful. And then as we think about deferrals and rent collection, you guys gave some numbers in the release of about 23.7% of your -- of the tenants that you have, are they -- tenants contributing 23.7% of ABR, having some relief agreements. But can you talk about what the actual agreements are in terms of your annual base rent?

Adeel Khan -- Chief Financial Officer

Yeah. Jamie, good question. And when we presented that data, that was simply to give the investor community and the analyst community just a -- the number of requests in terms of magnitude. That magnitude could have been compared with three different variables, which is square feet on the lease count and of course, ABR. That's what you're seeing there. But the data that we presented again in the table, if you take a look to see what in terms of the total relief that shows about $9.1 million, that's only 3.5% -- 3.4% of the ABR as of June 30, 2019, which includes security deposit application. If you further take that back and only focus on the concessions and the deferrals, that's only 1.8% of the ABR as of 06/30 [Phonetic]. So, yeah, so the number is very small from that perspective, but the number that was presented in the release was just to give a cross-section of the relief requests and just a comparison in terms of the total portfolio in terms of size.

Jamie Feldman -- Bank of America Merrill Lynch -- Analyst

Okay. That's helpful. And then just last for me. I guess, as you take a step back, California is actually seeing cases increase and maybe even more closures, but you've actually seen rent payments increase, the percentage of rent increase. Can you just talk us through your thought process or what you think is ahead in terms of, A, why things are improving in terms of your rent collections? And B, maybe how do you think about when PPP burns off? How do you think about the risk that maybe you do see rents maybe pulled back -- or the percentage of rent collections pulled back and -- when rent deferral period end as well?

Michael S. Frankel -- Co-Chief Executive Officer and Director

Hey, Jamie, it's Michael. Thanks again for your question. And great to connect with you today. So, I agree it is really truly a testament to the strength of the infill tenant base, given the two factors today, obviously many companies are hurt by COVID indeed. The local municipalities have given so many of them the ability to unilaterally to further [Phonetic] rent. And what we're seeing on the ground and frankly, we've seen this through prior cycles, including the Great Financial Crisis is that these spaces are truly replacable related to the -- in terms of the businesses that operate in them. They are truly mission-critical locations for these businesses. These are not like big-box tenants looking at the global logistics supply chain and rationalizing logistics by getting rid of a location. These businesses on average can't afford to not have these locations.

And so although some of them may be hurting, they do believe they have a business post-COVID. They do believe that COVID is not permanent, and they also generally are reflecting the view that, to the extent they give up their space today, there is a real likelihood they may not be able to reenter the market with anything comparable to the space they currently have. That's how tight the markets are in our markets. And frankly, those are some of the many reasons that we have chosen to focus exclusively on infill Southern California. And so these are similar patterns from the tenant base perspective as we've seen through prior cycles, might seem counterintuitive but it's consistent with our historical observations over decades.

And with regard to the PPP component of it, frankly, we've taken a pretty deep dive on the PPP consumption in our tenant base. You can track tenants that have received PPP loans by name, who have received loans of greater than $150,000. And we map that against our tenant base. And it's pretty interesting. What we found was that 80% -- about 80% of the PPP money that went into our tenant base was to tenants who didn't even request rent relief. And so just by the amount of PPP loans coming into our tenant base, it does not seem to be reflective of the difficulty that the tenants are having in paying rent. The aggregate PPP amount equals about 2% of their monthly based rent in terms of the tenants that took those PPP loans. So again, not an impactful number.

And so we think that, look, if the governments are offering free loans, that -- companies are rational in taking advantage of that. But it clearly has not been an indicator in our market of the tenants' ability to pay or not pay rent. And so as lease expire and/or as they are renewed, we expect to see similar trends with respect to those PPP loans impacts on our businesses and our tenants. In that, things have improved dramatically through the second half of the quarter and certainly through July.

And then having been said, we can't really predict to the extent their ongoing full-on commercial shutdowns. To the extent, COVID hospitalization rates continue to increase. Naturally, we can't predict the impacts in our business over the medium and long term. But I think what we're seeing here is a true level of resilience of the tenant base here in infill Southern California.

Jamie Feldman -- Bank of America Merrill Lynch -- Analyst

Okay. Thank you, Michael. That's helpful.

Operator

Thank you. Our next question comes from the line of Emmanuel Korchman of Citi. Please proceed with your question.

Emmanuel Korchman -- Citi -- Analyst

Hey, everyone. Thanks for that. Maybe first a follow-up on Jamie's PPP question. I think, Michael, unless I misheard you, you did an analysis of who received loans and did ask for relief. I guess if you think about the constructs of PPP, you actually get to, I guess, forgiveness on the part that you used to pay rent. So if PPP goes away, are you worried that there will be more tenants that won't be able to pay rent because they were using some of that PPP money? To me, it's kind of counterintuitive to say the guys that asked for a relief got PPP because the PPP was meant to be used for salaries and rent.

Michael S. Frankel -- Co-Chief Executive Officer and Director

Yeah, that's a good question. Thanks, Manny, and thanks for connecting with us today. So number one, a business can receive X dollars in PPP money and they are not required to spend any of that on rent. In other words, they can have other, payroll and things that they can spend that money on and still get the full amount of their PPP loan. So, they are not required to use it on rent. And furthermore, what we are seeing is rent, generally speaking, for these tenants is a small portion of their expense structure in their business. And number two, it's an exceedingly small portion of the PPP money that was received in aggregate from these tenants. So again, we don't really think that it's materially impactful to our tenant so far, based on the data that we've seen today. Again, that could change, but based on the data we've seen today.

Emmanuel Korchman -- Citi -- Analyst

Thanks for that. And then a clarification on the deferral agreements. Earlier in the call, I think you said those, on average, were one to two months. But then in one of Adeel's answers, you talked about getting most of that back, I guess, by the end of '20 or into '21. So, what am I missing in terms of what do you mean when you say one to two months of deferral agreements?

David E. Lanzer -- General Counsel and Secretary

Manny, hi. This is David Lanzer with Rexford. And basically, what we're describing is those agreements, we've worked out a deal or an arrangement essentially an lease amendment where this tenant is differing one or two months worth of rent on average and when we look at all of the deferral agreements in whole. And then they also have a component that lays out their repayment period. And so, as was noted before, most of those repayment periods are going to be paid or repaid during the third quarter and fourth quarter of this calendar year. Does that answer your question?

Emmanuel Korchman -- Citi -- Analyst

It does, David. So I guess, when we are on the phone with you guys in October and we're looking at the July, August and September collections, those should naturally be higher because you're no longer -- again, on an average basis, talking to those tenants about deferrals, it was really just April, May and June that were deferred because that's when the conversations were happening. Is that the right way to think about it?

David E. Lanzer -- General Counsel and Secretary

Well, based on what we have today in front of us and the deferral agreements that are in place, that is what our expectation would be. Obviously, different things can happen as far as orders been extended and other impacts related to COVID. But based on what we have in front of us today, that's what it looks like.

Adeel Khan -- Chief Financial Officer

Hey, Manny. This is Adeel. Just to expand on David's question -- answer, if you also look at the table, it kind of shows you the pattern, right, April and May, where they had just in terms of just a relief those granted. June was almost half and then July was very little if anything at all, right. So, this is exactly to the point that David was mentioning that is essentially being off. And these are the deferrals that David just talked about. They are going to be rebuilt back in the latter half of the year.

Emmanuel Korchman -- Citi -- Analyst

Adeel, my last question maybe just on that point then. If we're thinking about same-store NOI growth, I would assume that, that would mean a benefit then for 3Q and 4Q as you collect cash. They should have been collected in April and May in the latter months of the year. But your same-store NOI guidance doesn't imply that. Can you help me to take those two?

Adeel Khan -- Chief Financial Officer

Absolutely. Our guidance is based on GAAP, not cash, right? So GAAP is supposed to normalize all of that stuff. So the guidance is on GAAP. If you noticed, our Q2 same-store numbers, right, you didn't see the impact. And that's why when Jamie asked the question earlier, right, our cash is doing exactly what it's supposed to do because GAAP is supposed to normalize that behavior. So the GAAP is consistent. It's going to stay consistent even in Q3 and Q4 because it's supposed to normalize these deferrals. Q2 cash NOI was certainly impacted because you saw these deferrals factor through in. But to your point, as we go into Q3 and Q4, when those deferrals are build back, you expect to see a higher cash NOI number. So, yeah, absolutely from that perspective. But I wanted to make sure that it was clear for GAAP NOI versus cash NOI, the guidance is based on GAAP.

Emmanuel Korchman -- Citi -- Analyst

Thanks, everyone.

Operator

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

Blaine Heck -- Wells Fargo -- Analyst

Great. Thanks. Good morning out there. So just looking at the investment sales market, can you talk about how you're acquisition has -- pipeline has changed, if at all since the first quarter call? I mean, clearly, you guys have seen an uptick in activity thus far in July. Is that an indication you're starting to see any forced selling and have you seen any movement on in-place cap rates or valuation?

Howard Schwimmer -- Co-Chief Executive Officer and Director

Hi, Blaine. It's Howard. Let me address the question. So, the pipeline is very strong. We've obviously closed quite a few transactions subsequent to quarter end. We did over $70 million during the quarter and a little under $70 million post quarter already. We had -- we announced on the call earlier, we had 52 million square feet -- rather $53 million worth of product under LOI or contract. But I think your point being that, I don't think that really reflects how robust our pipeline is. And the amount of conversations we're having the amount of LOIs we're writing. We've written more LOIs through half of the year than we did all of last year. I think we've written little over 400 LOIs this year, where last year entirety, we did there about 327.

A lot of what we're doing now is we're really planting seeds that we're going to be able to harvest either later this year or into next year. Lot of that focus has been on some sale leaseback type transactions. You've seen us start closing some of those, some of the pipeline contains those. I wouldn't say there's really any forced selling occurring right now. The market is still very strong. What we didn't talk about really -- we talked about a lot of the PPP impacts. So, what we didn't talk about is the strength of the market. We had one of our strongest leasing quarters in terms of new space being leased. And even just thinking about the vacates we had during the quarter, the five largest vacates we had, we released four of them during the quarter.

So the industrial market is doing pretty darn well when you think about what's happening in the world. And we've even seen some of the, I'll call it, Class A or fully leased more modern-type buildings that come to market, are garnering more offers than we've ever seen. There is obviously some shifts between people that focused on other product categories now that are looking toward industrial. So, there is more capital coming over the industrial side. And in fact, we're seeing a bit of cap rate compression now starting to occur on some of those core type transactions, where -- probably isn't going to be unusual to see a lot of them starting to transact sub 4% with a bit more compression in there.

Blaine Heck -- Wells Fargo -- Analyst

Great. That's helpful. And then the second question, just following up on guidance. Both occupancy and same-store guidance seem to imply a pretty meaningful deceleration in the second half of the year as Manny just pointed out. I guess my question is, how should we think about the level of conservatism built into those forecasts? Or do they reflect actual known move-outs, or maybe tenant bankruptcies that you guys are aware of?

Adeel Khan -- Chief Financial Officer

Hey, Blaine. Thanks for the question. So yeah, we did reiterate the guidance, which was consistent with what we reported last quarter. And when we built our guidance last quarter, right, naturally, we were looking at the datasets, which was fairly limited, considering we were still early on into this pandemic in terms of what the world was experiencing. And was based on really what we were able to track at that particular point of time since their relief agreements that we have seen, which were reported. And we knew that Q2 and Q3 were going to be dealt with in terms of these relief agreements, in terms of the security deposit applications, some of the deferrals that you've seen. And I think that quarter has played out exactly how we planned.

And I think in some cases, it's been very -- I mean the optimism has been higher in terms of what you've seen in July rents and that number is going to get hopefully higher in the next few days. But I think the reserves that were put on the guidance, which required us to reduce the guidance in terms of the total FFO and obviously that has a relationship with the same pool as well, was really to deal with the back half and to deal with any disruption and dislocation that our tenants could potentially experience, right. And we were seeing certainly some of that in terms of what the world is experiencing in terms of the uptick in some of the cases. And that's what it was really designed to address in the back half of the year.

And naturally, this still being July, right, there is still a lot of periods left. So, we felt like that level of reserves still are accurate and just to maintain the guidance until we know a little bit more. So yeah, I think that's what you're essentially saying in terms of the guidance and just the reserves of our place on the books to deal with it. No specific tenant discussions within that reserves. They were more general in terms of looking at the trends of the collection pattern. So it was just a general reserve to address with any potential issues that could come down the pike, especially in the latter half of the year.

Blaine Heck -- Wells Fargo -- Analyst

Okay. Great. And Adeel, thanks for all your help. Great working with you over the years and good luck with everything in the future.

Adeel Khan -- Chief Financial Officer

Thanks, Blaine. Appreciate it.

Operator

Thank you. Our next question comes from the line of Mike Mueller of J.P. Morgan. Please proceed with your question.

Mike Mueller -- J.P. Morgan -- Analyst

Yeah, hi. And Adeel, same thing, it's been great working with you. In terms of the question, does the backdrop make you think differently about stabilized versus value-add acquisitions differently in anyway?

Howard Schwimmer -- Co-Chief Executive Officer and Director

Hey, Mike. It's Howard. I'll take that one. As I just alluded to, the market is exceptionally strong right now. There is a shortage, actually, it's a quality product out there. So while the vacancy rate went up in the market over the past quarter, if you really drill down and I'll give you a great example. In the infill Greater LA market, which is about half the market. The vacancy rate went up, I think it was about 100 basis point increase. But a good majority of that, about 60 basis points was due to one tenant vacating a very poor quality 1.5 million square foot building. And another development site that vacated and is temporarily on the market for lease, just in case anybody wants to rent some very poor quality buildings.

So, yeah, if you factor those throughout, the vacancy rate really only increased about 40 basis points in that market. So the market is exceptionally strong. And so we feel pretty comfortable about our activities in the market and really our ability to achieve and exceed the rents that we've been -- that we've been able to forecast. And you look at our leasing, we're hitting rents that are pre-COVID projected market rents. In fact, we are exceeding them in many cases right now. So really has a lot of comfort to us in terms of what's happening out there.

Michael S. Frankel -- Co-Chief Executive Officer and Director

And hey, Mike, it's Michael. And good to hear your voice today. I just will add to that as a reminder. It's hard to predict in any one period quarter or year, what the mix will be a value-add versus stabilized acquisitions, which I think is getting your question. But what we are seeing is an improving opportunity set for Rexford, because of all the research we do, the lead generation, the opportunities that we're able to look at and approach today is a substantially greater in volume and quality as compared to even a year or two years or three years ago.

I don't know if Howard mentioned the number of LOIs already dramatically exceeds the -- this year-to-date, number of LOIs dramatically exceeds what we did all of last year or the prior year. And I think what we really focus on is we've got over 1 billion square feet in infill Southern California alone that we've targeted, that's owned by these passive non-professional real estate owners. And by and large, those assets are in deep deferred maintenance. It's really about what degree of dysfunction are they, not what degree of function are they. And so we have this tremendous pallet of opportunity that we are mining. And so we couldn't be more excited about the opportunity to create value going forward. And to the degree to which the percentage of more value-add versus stabilized comes into play this year or next year, hard to predict.

Howard Schwimmer -- Co-Chief Executive Officer and Director

Yeah. And Mike, let me just add one more comment to what we're doing on these acquisitions and so forth. This year, 91% of our transactions have been off-market or lightly marketed, which is actually substantially higher than last year, which I think we are close to about 80%. And if you look at all the acquisitions we've done, the projected stabilized yields are very similar to what we've seen in prior years as well.

And then finally, those acquisitions so far this year, including post quarter, below market in-place rents on average were about 17.5%. So yeah, they're interesting, there is great upside in them, and there's probably a little less on the value-add side than we've seen in quarter-to-quarter and year-to-year. And to Michael's comment, yeah, we just can't predict when or what the quarters provides in terms of the value-add versus core plus or really just the core transactions.

Mike Mueller -- J.P. Morgan -- Analyst

Got it. Thanks for that. Thank you.

Michael S. Frankel -- Co-Chief Executive Officer and Director

Mike, what we are seeing in the market, too, is a lot of these passive owners who really haven't had to address their real estate needs for decades because the tenants just sort of stay put, where today some of those tenants are having issues, they want to defer their rents or this and that. So in general, the turmoil in the market works in our favor with regards to generating attractive investment opportunities, particularly sometimes on the value-add side.

Mike Mueller -- J.P. Morgan -- Analyst

Got it. Thank you.

Operator

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

Jamie Feldman -- Bank of America Merrill Lynch -- Analyst

You know, I am all set. Thank you.

Operator

Thank you. 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

Hey. Good morning, guys. Thanks for taking my question. I had two questions, both kind of follow-ups. Howard, I guess just kind of curious as to how, if at all, any of your conversations with sort of tax sensitive property owners are moving, given the increased probability that the future might include higher capital gains taxes and potentially negative changes to the 1031 tax-free exchange strategy? Any thoughts there?

Howard Schwimmer -- Co-Chief Executive Officer and Director

It's a little early. I think some of that information in terms of potential loss of 1031 is a little too fresh or I think people to have digested it. But that said, a lot of the people that we converse with in the markets, they are long-term real estate owners and they are extraordinarily focused on the tax consequences of selling. And so a lot of UPREIT conversations are starting to escalate. And so unclear whether the ability to do an upgrade could be changed in the same manner as a 1031. But if not, it certainly would create more opportunities for us to grow the portfolio through the UPREIT.

Keep in mind, we have really just a fragmented -- a completely fragmented market of owners. There is quite a bit of institutional ownership, but the majority of the ownership in our markets are mom-and-pops or smaller partnerships and so forth. And a lot of them are aged. And so one of our greatest sources of opportunity, frankly, is the transition through generation of those properties. Sometimes there is a step up in basis, but many times, the patriarchy trying to settle their estates before they get into the hands of the next generation because there's just not an understanding of how to operate industrial properties and so forth. So, we're having an increasing amount of those conversations right now. So but just too early to tell on the tax side related to some of the announcements you've seen in the news the past few days.

Chris Lucas -- Capital One Securities -- Analyst

Okay. Thanks for that, Howard. And then Adeel, just maybe one question here to tie up at least on my end, which is -- so you note there is 98 -- for the second quarter, 98.2% of the billings were either collected or there is an in-place relief agreement. So for that 1.8% of uncollected and no relief agreement in place, about $1.4 million roughly, how did you guys treat that revenue? Was that not collected and therefore, not flowing through the quarter's results? Or is that deemed collectable and therefore -- but just late? How are you guys seeing that $1.4 million?

Adeel Khan -- Chief Financial Officer

Yeah, and absolutely. So that is deemed collectible. It's just sitting on the balance sheet as an AR. And actually you bring up a good point from that perspective is that if you heard my math or my calculus earlier in terms of overall reserves, this is the dataset that we are using to help us kind of work backwards into what that potential reserve should look like, right, and as I talked about in the back half of the year, right. So, yeah, so it's very much within our numbers, the reported numbers. And that's just the way accounting should work, but it's more on the AR side and our collectability becomes more of a reserve. And that is what I talked about in terms of doubtful reserve. So, yeah, so the one -- so it's definitely in the reported GAAP NOIs and cash NOIs.

Chris Lucas -- Capital One Securities -- Analyst

Okay. Thank you for that. That's all I have.

Operator

Thank you. Our next question comes from the line of Eric Frankel of Green Street Advisors. Please proceed with your question.

Eric Frankel -- Green Street Advisors -- Analyst

Thank you very much. Adeel, great work over the years and best of luck on the future and Rexford is a much better place, thanks to your efforts. My first question is just related to -- obviously, e-commerce and local consumption has been a really big driver of industrial demand in Southern California over the last several years. But the ports obviously have been more subdued, and this year, they've struggled quite a bit with the reduction in trade. Have you seen any change in industrial demand related to port activity just based on the fact that, I think imports were down roughly 10% year-to-date versus last year?

Howard Schwimmer -- Co-Chief Executive Officer and Director

Michael, are you answering that one?

Michael S. Frankel -- Co-Chief Executive Officer and Director

Hey, Eric, it's Michael. Sorry. And thanks so much for joining us today. We don't really see a strong correlation frankly between the port traffic changes and our infill tenant demand. I think where you're going to see a greater correlation is with the big-box tenants that are more focused on transshipment and global distribution. So that would be in markets like the Eastern Inland Empire and other major transshipment market. And again in our market -- in these infill markets and again, one of the very many reasons we stay focused on infill Southern California is the demand drivers are more, as you mentioned, consumption driven and last-mile driven today. And probably, over 50 -- certainly today, over 50% of goods imported are actually consumed regionally. And that's that regional consumption that's the much stronger driver within our tenant base. And so where we see weakness, it's more correlated to micro industries that are having a greater difficulty getting restarted, for instance, in the entertainment industry supplying crops or related infrastructure for content, things like that, not so much to do with port traffic.

Eric Frankel -- Green Street Advisors -- Analyst

Okay. Understood. And then just kind of based on what the COVID cases arising in California over the past month or so, and with the government restricting business activity, are there any more businesses that had to close again in your portfolio or a percentage of them, just kind of based on the health and -- health guidelines?

Michael S. Frankel -- Co-Chief Executive Officer and Director

Yeah, it's interesting. We, back in, I think March or so when there was the complete shutdown, we did a deep dive on our tenant base and estimated that upwards of 80% of our tenants were still considered essential business even back then amid the total shutdown. And so we don't really see an impact today with these sort of lighter restrictions being put back in place in terms of creating the problems for tenants. It's really more about just the business realities, right, irrespective of the restrictions imposed by the government, it's really more about just the fundamental demand for goods and services that for some companies have declined or have not recovered. Even though technically, they are allowed to operate.

Eric Frankel -- Green Street Advisors -- Analyst

Okay. That makes sense. Just final question. Howard, I guess you touched upon this. You were talking about, let's say, the LA market and the cause of the rise in the vacancy rate. Just geographically, obviously, Southern California generally, it's more correlated to what's happening within the market and then with other markets. But is there any difference in leasing activity between the submarkets you guys classify?

Howard Schwimmer -- Co-Chief Executive Officer and Director

No, I would say no. If we look at what transpired during the quarter in terms of our leasing, it was fairly spread out throughout the different submarkets that we own in. And probably follows the percentages in terms of the concentrations where half the portfolio follows the size of the market being half of the greater LA area. So we had obviously had more transactions in each of the submarkets within greater LA than we would have in Ventura County, let's say, which is really the smallest of the submarket.

So the markets came roaring back. I think what's very interesting is if you look at our activity for the quarter, over 70% of our new leasing occurred in June. And so two-thirds through the quarter, we didn't really know how the world was going to end up. And then all of a sudden just demand skyrocketed. And our team was exceptionally busy. And that activity has continued now into the third quarter as well. So, we're quite pleased with the activity and it's really occurring in all of the markets in terms of these infill markets that we're focused on.

Eric Frankel -- Green Street Advisors -- Analyst

Okay. Thanks, everyone. Best of luck to Adeel.

Operator

Our next question comes from the line of Elvis Rodriguez of Bank of America. Please proceed with your question.

Elvis Rodriguez -- Bank of America -- Analyst

Hey, guys. Just a couple of follow-up questions. More macro on the municipality level. How are those conversations coming along? Have the municipality sort of eased the way they are rhetoric with the tenants and allowing them to defer rent versus what you saw back in March and April? And any expectation that you can share on when do you think they'll start to push tenants to actually start paying rent?

David E. Lanzer -- General Counsel and Secretary

Hi, Elvis, this is David. Thanks for the question. The answer is that really, we haven't seen them lining up on the orders significantly. There have been a few important changes in Los Angeles County, as well as the City of Los Angeles. They did modify their order to where they no longer allow publicly traded companies to not pay rents. They no longer allow multinational companies. And with respect to the counties, if you have more than 100 employees, you can no longer defer rent. So, those have been some positive steps in the right direction, and a lot of other cities and counties then followed suit with those modifications.

However, as far as the timing of those orders going away in response to your question, the governor extended the statewide order until the end of September and then the City of LA, the County of LA both quickly followed suit. So, those orders are in place. But as we've noted in the past and as I think our rent collection reflects, we've been very proactive in working out and using our leverage to work out deferral agreements that are more beneficial to the Company than otherwise might have been afforded under the order.

And we really use our leverage points in terms of tenant and tenants, there would be lost by a tenant if they're not paying rent. They lose certain renewal option. Almost all of our leases have provisions that allow us to clawback any previous incentives that were initially granted when the lease was signed, which is kind of allowances and rent abatements. So, we've used that leverage to really come out better than what the orders would have otherwise allowed. So we're continuing to monitor the 45 orders that affect us in Southern California. But we've been able to exceed what those otherwise would have allowed.

Elvis Rodriguez -- Bank of America -- Analyst

Great. And then just one more. Maybe my final one for Adeel. And thank you Adeel for all the help over the years. So historically, you sort of have always guided in saying that cash same-store NOI is about 100 to -- 140 basis points to 150 basis points over the GAAP number. Do the deferral or the collections or anything that's going on change that this year or how should we be thinking about where cash -- where the cash number will come in at the end of the year?

Adeel Khan -- Chief Financial Officer

Yeah. Elvis, appreciate the kind words as well. And I think at beginning of the year, we had guided to about 150 basis points higher than the GAAP spreads on the cash. So at this junction, it's about 100 basis points. So once it's all said and done, if our guidance stays accurate right for the full year and if it comes on parts with what we're saying, it should be about 100 basis points higher. And I think it's just the other thing that's just worth mentioning is that even though Q2 showed what they showed and we disclosed the fact that if you had factored in the deferral, it would be 4.4, but later on in the year, it would normalize itself little bit, if not higher, right. So that -- it's still about 100 basis points higher for the full year.

Elvis Rodriguez -- Bank of America -- Analyst

Great. Is that because of some of the deferrals, the payments will happen in call it 1Q of '21?

Adeel Khan -- Chief Financial Officer

No, I don't think so. I think it's a partial product where the reserves is also right that we're putting on. So obviously, if you're putting the reserves as I talked about, that are going to potentially impact hopefully not in the latter half of the year. So that's why not only are you seeing some decrease in guidance on the GAAP NOI for our same-store, but you're also seeing some decrease on the cash side. So it's just -- it's a byproduct of that. I think very little, if any, of the deferrals are going to get paid back post 2020, but majority of them are coming back in 2020.

Elvis Rodriguez -- Bank of America -- Analyst

Great. Thank you so much, Adeel.

Operator

We have reached the end of the question-and-answer session. I will now turn the call back over to management for any closing remarks.

Michael S. Frankel -- Co-Chief Executive Officer and Director

Well, we'd just like to thank everybody for joining us today. And also a heartfelt thank you again to Adeel for the many years of service and partnership and we're going to miss you next quarter, Adeel. And with regard to everybody on the call, we hope you stay safe and healthy. And we look forward to reconnecting in about three months. Adeel out.

Adeel Khan -- Chief Financial Officer

Thanks, everybody.

Operator

[Operator Closing Remarks]

Duration: 60 minutes

Call participants:

Kara Smith -- Investor Relations

Michael S. Frankel -- Co-Chief Executive Officer and Director

Howard Schwimmer -- Co-Chief Executive Officer and Director

Adeel Khan -- Chief Financial Officer

David E. Lanzer -- General Counsel and Secretary

Jamie Feldman -- Bank of America Merrill Lynch -- Analyst

Emmanuel Korchman -- Citi -- Analyst

Blaine Heck -- Wells Fargo -- Analyst

Mike Mueller -- J.P. Morgan -- Analyst

Chris Lucas -- Capital One Securities -- Analyst

Eric Frankel -- Green Street Advisors -- Analyst

Elvis Rodriguez -- Bank of America -- Analyst

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