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Rexford Industrial Realty Inc (NYSE:REXR)
Q1 2021 Earnings Call
Apr 22, 2021, 1:00 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Greetings, and welcome to Rexford Industrial Realty First Quarter 2021 Earnings Call. [Operator Instructions] A question-and-answer session will follow the formal presentation. [Operator Instructions].

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

Kosta Karmaniolas -- Senior Vice President of Corporate Finance and Investor Relations

Thank you for joining Rexford Industrial's First Quarter 2021 Earnings Conference Call. In addition to the press release distributed yesterday after market close, we posted a supplemental package in the Investor Relations section of our website, www.rexfordindustrial.com. Joining today's call are Rexford Industrial's Co-Chief Executive Officers, Michael Frankel and Howard Schwimmer, along with Chief Financial Officer, Laura Clark and General Counsel. David Lanzer.

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

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

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

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

With regard to the first quarter, we are pleased with our exceptional results. From an operational perspective, a robust 2 million square feet of leasing drove 98.3% occupancy in our stabilized portfolio. Releasing spreads continue at record levels, averaging 33% cash and 47% on a GAAP basis. Our extraordinary internal growth coupled with our strong investment volume resulted in year-over-year core FFO growth of 29% and 12.1% on a per share basis.

As we look forward, infill Southern California appears positioned to outperform. UCLA economists project California will grow faster than the rest of the United States, driven by a diverse range of growing business sectors, combined with lifting of some of the nation's most constraining pandemic restriction. Moreover, e-commerce continues to surge, representing more than $1 for every $5 spent on retail purchases. First quarter port volumes exceeded pre-pandemic levels with imports growing 25% compared with the first quarter of 2019. Moreover, with the unprecedented tenant demand Rexford's last mile portfolio is positioned to outperform within our markets due to our focus on the best locations delivered with superior functionality.

Within our infill markets a dearth of developable land and high barriers constrain new construction, resulting in essentially no ability to introduce any material volume of net new supply. In fact, our infill markets continue to lose supply on average year-over-year. Consequently CBRE projects Greater Los Angeles rental rates to grow at a rate that is 2.5 times greater than the remaining major markets outside of Southern California into the next four years. With an incurable supply demand imbalance the infill Southern California tenant base continues to prove itself as the strongest, most resilient and highest demand tenant base in the nation.

Looking forward, the company is positioned for favorable internal and external growth. Overall, we project approximately 18% of embedded NOI growth, equal to $54 million within our in-place portfolio assuming no further acquisitions over the next 18 to 24 months. Regarding external growth, the company has perhaps never been better positioned as our research and local relationship driven origination methods enable us to harvest a proprietary pipeline of investment opportunities. We are well positioned to grow accretively, significantly beyond our current 1.7% market share within infill Southern California. The nation's most highly valued industrial market.

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

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

Howard Schwimmer -- Co-Chief Executive Officer, Director.

Thank you, Michael. And thank you, everyone for joining us today.

Market fundamentals in infill Southern California continued with unprecedented strength in the first quarter, despite impacts associated with the pandemic. Vacancy tightening and demand accelerated as a diverse group of growing industries and e-commerce companies absorbed warehouse space at a torrid pace. Over the past 12 months according to CBRE, our infill markets experienced strong rental rate growth with asking rents up 4.9% on a weighted average basis. For further perspective based on our internal portfolio and analytics, we believe, market rents increased by an estimated 9.3% over the prior year for comparable product within our target infill Southern California markets.

Our target markets, which exclude the Inland Empire East ended the first quarter at 1.9% vacancy. By comparison, our same property portfolio ended the first quarter with 98.6% occupancy, outperforming the market by 50 basis points. A testament to the high quality of the Rexford portfolio, our strong tenant retention and elevated new leasing volume. Of our top 20 largest expiring leases this year approximately 80% of spaces representing 1.4 million square feet have already renewed, been retenanted or in lease negotiations. The remaining 675,000 square feet of top 20 spaces are headed for value add repositioning and future lease-up.

Our recent leasing example in our San Gabriel Valley portfolio demonstrates the strength of our market. During the quarter, a tenant occupying about 150,000 square feet was this made with a higher renewal rate and spent months searching for alternative less expensive space. Unable to find any similar functional space the tenants finally renewed with us, but at a rent that was a full 21% higher than our original proposal had they not weighted. In the end, we generated a cash releasing spread of 95%. This is representative of the unprecedented pace of rent growth within our infill markets and set another record for all-time high rent for the submarket.

In addition, we obtained three in a quarter percent contractual annual rent increases through the term of the lease, which exceeds the 3% historical standard for our markets. As a general note, we are increasingly pushing our annual rent bumps above 3% and in some cases as high as 4%. Year-to-date, we completed 11 acquisitions, which included 807,000 square feet of buildings, including 29 acres of low coverage outdoor storage sites and land for future redevelopment for an aggregate purchase price of $191 million. 82% of these transactions were off market or lightly marketed, enabled through our proprietary research driven sourcing methods. These investments are projected to generate an aggregate 5.2% or greater stabilized yield on total investment and provide strong value add cash flow growth over time. Initially contributing about $0.02 of FFO per share through the remainder of 2021 and growing to about $0.09 per share after repositioning or redevelopment.

We currently have over $450 million of acquisitions under LOI or contract. These acquisitions are subject to customary due diligence with no guarantee of closing. We will keep you apprised as transactions are consummated. On the disposition front, we sold two properties totaling $21 million in the San Fernando Valley and Inland Empire East submarkets. The proceeds were used to tax efficiently fund a portion of our acquisition activity. Moving forward, we expect to continue to sell assets opportunistically to unlock value and recycle capital.

Turning to repositioning and redevelopment activities, we have over 3 million square feet of current and planned value add projects throughout our portfolio. Of these, 1.3 million square feet of current projects in repositioning, redevelopment or lease up, which are detailed in our supplemental are estimated to deliver an aggregate return on total investment of 6%. These projects are expected to deliver a substantial value creation as our stabilized yield represents more than 200 basis point premium compared to the sub 4% market cap rates that they would be valued at in today's market.

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

Laura E Clark -- Chief Financial Officer

Thank you, Howard. I'll begin today with details around our operating and financial results. In the first quarter, stabilized same property NOI came in ahead of our forecast with 6.8% growth on a GAAP basis and 8.2% on a cash basis, driven by a 40 basis point pickup in average occupancy and strong releasing spreads.

Rent collections were over 98% of contractual billings in the first quarter, essentially at pre-pandemic levels. Since the pandemic began, we have provided tenants a relatively nominal amount of rent deferrals totaling $4.8 million, representing about 1.5% of ADR. And we have collected over 96% of deferrals billed to date. We currently have only $535,000 remaining to collect in 2021.

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

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

During the quarter, we raised $197 million of equity through the ATM program at an average price of $50.10 per share. $77 million of the total was issues on a forward basis with settlement to occur within the next 12 months. Proceeds from this quarter's ATM activity were used to fund first quarter acquisition, as well as those identified to close later this year. As of March 31, we had approximately $124 million of cash on hand. We remain in a strong liquidity position with no debt maturities until 2023, full availability on our $500 million credit facility and approximately $524 million available under our ATM program.

Turning to guidance. We are increasing our full-year projected core FFO per share range to $1.41 to $1.44. Our revised midpoint represents 8% year-over-year growth. As a reminder, and consistent with our prior practice, our guidance does not include acquisition, disposition or balance sheet activities that have not yet closed to date. Other notable components of guidance include: an increase to our stabilized same-property NOI growth by 75 basis points at the midpoint, to 3.75% to 4.75% on a GAAP basis and 6.75% to 7.75% on a cash basis, driven by our strong first quarter performance.

Updated guidance includes the assumption of bad debt expense as a percent of revenue of 110 basis points for the full year, a reduction of 15 basis points from our previous year. We are increasing our expectation for average occupancy in the stabilized same property pool to a range between 97.25% to 97.75%, up 25 basis points at the midpoint, driven by our robust first quarter leasing activity. We included a guidance roll forward in the supplemental package that further details the components of our 2021 core FFO per share guidance.

Before turning the call over for your questions we are excited to announce that we will be publishing our annual ESG report at the end of the month. At Rexford, we are committed to optimizing positive impacts to the environment, our communities, our tenants, employees and shareholders. This concludes our prepared remarks. We now welcome your questions.

Questions and Answers:

Operator

Thank you. We will now be conducting a question-and-answer session. [Operator Instructions] Our first question comes from the line of Emmanuel Korchman with Citi. Please proceed with your question.

Emmanuel Korchman -- Citigroup -- Analyst

Hey, everyone. Good afternoon and good morning. Maybe just one for Howard or Michael. You've had a little bit of success doing some unit deals to get transactions unlocked among the pipeline you talked about, are their unit deals included that or are those all going to be sort of straight cash deals?

Howard Schwimmer -- Co-Chief Executive Officer, Director.

Hi, Manny, it's Howard. Nice to hear your voice. Yeah, the $450 million pipeline, there are some discussions within that, but it's funny. A lot of times they just turn into cash deals. So it's hard to comment really specifics right now on it, but the UPREIT transaction pipeline has been growing. There is a lot we consummated last year and we're optimistic of being able to talk more about the future UPREIT transactions as well.

Emmanuel Korchman -- Citigroup -- Analyst

And then, you guys talked about 18% embedded NOI growth, that's exclusive of sort of just rental rate mark-to-market, right? That's just -- if all the developments come in the way that you expect and annualizing sort of the growth from closed acquisitions, that gets into the 18%, right?

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

Hey, Manny, it's Michael. Great to hear from you and thanks for joining today. So that -- yes, it includes more than just the mark to market, so it includes also the repositionings contributing about $32 million, $33 million of the $54 million. In fact, leasing spreads are only contributing about $17.5 million of that 54 million.

Emmanuel Korchman -- Citigroup -- Analyst

Great. Thank you.

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 we continue to hear about the word capital chasing industrial product. Can you just talk a little bit more about the overall competitive environment in Southern California and in your markets in particular? And have you seen any change in interest as cap rates have compressed to really historic lows here?

Howard Schwimmer -- Co-Chief Executive Officer, Director.

Hi, Blaine, it's Howard. I guess, looking back over many cycles, we've always had quite a bit of capital interested in penetrating into the Southern California marketplace. It's difficult because there's not a lot of transactions that are out there on the actively marketed basis. So people do have the difficulty penetrating. So at this point in the cycle, it is no different than the past. Some of the names have changed, some of the capital sources, obviously, are shifting over. And -- really it's -- it's really testament to our unique access to the market, where we focus on off market and lightly marketed transactions, as well as occasionally buying on market product. Last quarter, I think, over 80% of our transactions were off market or lightly marketed. And so it's interesting that most of the capital out there really never even had a chance to compete with what we're buying. So really nothing new, there is no secret. Southern California is the best industrial market in the country. So there's plenty of capital that's always look to place in our market.

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

And Blaine, this is Mike. I'll just add a little more perspective. We have seen a rotation from certain investors that might have targeted other asset classes, retail, etc, who have increasingly gotten come into approach industrial. And so there is certainly more competition as Howard indicated. But what's really interesting about our business is, if you look at the trend line for Rexford over the prior eight, nine years, our percentage of transactions through off market and lightly marketed transactions has actually increase despite there being more competition in the market. And so five years, six years ago, we are probably hovering around 70% off-market or lightly marketed deals. And today -- this year we're over 80%, last year we're close to 80%. Despite increased volume of activity as well at Rexford. So I think that really tells the story.

We are just digging deeper into the markets. We're better at what we do. We're leveraging better technology. Our team has further developed and we're just penetrating deeper and deeper into the marketplace.

Blaine Heck -- Wells Fargo -- Analyst

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

Howard Schwimmer -- Co-Chief Executive Officer, Director.

Well, we're always looking through the portfolio. Most of our sales tend to be more opportunistic. And if you look at the overall portfolio, the mark-to-market is about 11% in terms of where we sit below market in lease rate. So there is always plenty of upside in our assets. And yeah, it's funny, we look back at a couple of things even today that we've been considering selling even just a year ago and the rent growth that we experienced in those assets is astounding. And so that value creation is very strong. So we really tend to really more focus -- have more focus on just the opportunistic sale that may tend to outperform cap rate type sale or maybe another reason or two, sometimes some things a little bit more management intensive or we don't see rents growing as quickly and it's something we might consider selling.

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

And maybe I'll just add. Again, it's Michael to that. We're getting to a point where Rexford scale in the marketplace, it's supporting different levels of opportunity for both Rexford and our customers. And I'll give an example of that. For instance, we recently, I might have mentioned on the prior call, that we established a new customer solutions function at Rexford and we're able to look at the market and offer our customers and prospective tenants a much more strategic opportunity throughout Southern California. And so today we're talking to tenants, not just about one space, but we're take to them maybe about their needs for 20 spaces or 30 spaces throughout the region.

And also as a company the scale is really beneficial in terms of achieving greater operating leverage within the portfolio. So I think you're going to start to see Rexford's operating margins really start to accelerate over the next, call it, 12 to 36 months as the platform is fully built out and you're not going to see a lot of heavy expenditure incrementally in the platform as we move forward.

So I think that's a really exciting time for the company. And by the way, Howard mentioned the mark to market. But if you look at expiring leases, this is through the end of the year, the mark-to-markets around 20%. And that's typically found given the rate of market rent growth, as we approach next year that mark to market will probably be higher than the 11% that we might be projecting out in the portfolio as a whole as well. I think currently, we are looking at about 14% for next year. So a lot of ground to grow.

Blaine Heck -- Wells Fargo -- Analyst

Yeah. Thanks guys.

Operator

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

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

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

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

Jimmy, I just wanted to understand the first part of your question. Change in tenant demand. Maybe I missed the question by business type, are you saying what is the nature of that demand.

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

Yeah, just the types of industries and the types of businesses that are leasing space today or have become more active over the last three, four, five months as things have start...

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

Yeah. Maybe I will touch on the first part, and Laura, you can touch on bad debt. And I heard you mentioned also -- now that we're coming off the bottom and what's really interesting in infill Southern California was, it starting in June of last year, still early stages in the pandemic. Leasing activity really started to accelerate very dramatically after a very brief pause of say March, April, May. And so we really started coming off whether if there was a bottom much earlier in the cycle in infill Southern California and we've -- and tend to manage as Howard described, is really continue to accelerate beyond levels that we've ever seen in our 30 year, 40 year career here.

And truly driven by a pretty broad range of industries, everything from food, consumer products and staples, healthcare, healthcare products, pharmaceuticals as you'd expect, but also aerospace and space technology, mobility and electric vehicles and all these sectors probably they represent ecosystem. So it's not just electric vehicles, but it's the suppliers of all the components, the batteries, etc, it's the service centers that supply those sectors for instance. And so it's been an extraordinarily broad-based set of demand drivers from an industry perspective. And then you have e-commerce of course layered in which we all know what's happened with e-commerce.

But I think based on what we're seeing in the market there is reasonably that we're still in the early stages of the impact from e-commerce as it's going to impact our markets in a very positive way. And just a couple of indicative examples, people talk a lot about Walmart -- Amazon and how they're penetrating these infill markets, but they're using the spaces differently. They bought Uber like company not too long ago and they're using these vehicles and vans to distribute locally. It's much more efficient than trucks. And now you've seen Walmart do the same, and now there is an announcement last week that Target is doing the same. And they're establishing these sortation centers that are going to be in our warehouses is very local, and close to the end points of distribution.

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

Laura E Clark -- Chief Financial Officer

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

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

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

A little color around those cash collections. They really came from tenants that are in categories that have been slower to reopen, entertainment being one, travel related industries been another. And we're certainly optimistic that these tenants are going to be able to fulfill their rent obligations once they are operating. It's challenging to forecast the ability of these tenants to pay rent consistently in the near term, especially given the fact that we're still -- moratoriums are still in place. They give tenants that unilateral right to defer rents. So -- and as more trains are set to West and the -- at the end of June. But as we all know there's some push back several times. So, with three quarters remaining, moratoriums in place we're being cautious and prudent with our bad debt forecast as we look -- as we look through the next three quarters.

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

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

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

Yeah. That's a great question. So we've obviously seen some cap rate compression on marketed transactions, especially when you have quality assets with tenants on longer-term leases. And today those transactions, it's not unusual to see in sub 4%. And I think when you say, what are some of the underwriting assumptions, Rexford underwrite cap rate expansion in our acquisition. So we don't assume that we're going to exit anywhere close to where cap rates are in the marketplace today. But what we do here is that, there is a lot of allocators -- capital allocators out there that underwrite very similar cap rates at exit. So really having strong expectations of continued performance in the marketplace, but of course as you know, Jimmy, We're really not cap rate buyers, we're really more focused on where we are able to stabilized assets over the near term, short-term periods of time. And you've also seen the results of that in terms of our repositioning pipeline, as I mentioned on the prepared remarks, those assets that we're stabilizing over the near term. Looking about 6% stabilized yield on total cost, which creating substantial value compared to where these assets would trade today in the marketplace.

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

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

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

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

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

Okay, great. Thank you.

Operator

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

Connor Siversky -- Berenberg -- Analyst

Hi, everyone. Good morning over there. Thanks for having me on the call. Thinking about one of the peers calls from earlier this week on the development repositioning pipeline. I'm wondering if you're expecting any disruption here from rising cost of inputs steel specifically? And if you could add some color on how you're approaching procurement in the current environment?

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

Sure. Hi, Connor. [Indecipherable] What we're seeing out there is really some disruption on larger projects, there are shortages of steel and some of the other commodities used in constructing buildings. But what's interesting is that, in the middle of the pandemic we saw construction cost actually go down, we actually had some rebidding of some of the projects that we were doing and locked in some real favorable pricing. And so, what we are really looking at internally as we're seeing construction costs coming up off those lower numbers. So not too far different than what we might have been projecting maybe about a year ago. But that said, we are projecting some higher cost increases in our underwriting today just to be safe.

We kind of -- we view some of this disruption something maybe over the next six months to a year. Interestingly though, on our smaller projects that are less than $1 million, we're not seeing really any significant pricing fluctuations. And we attribute that perhaps to a lot of other contractors coming into the space, having shifted out of other product categories. So they're being more competitive in order to win jobs from us.

So hopefully that helps you.

Connor Siversky -- Berenberg -- Analyst

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

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

Not necessarily. I mean, a little bit. We've adjusted on the repositioning page some of the complete projected completion dates because of some of those projected delays. But at this point, nothing dramatic that I could point to.

Connor Siversky -- Berenberg -- Analyst

Okay, fair enough. And then one last one from me. Apologies if I missed this earlier. But on the remaining lease roll for the year. I think it's 11% of ADR, is there any sense of timing, whether this is back end weighting are spread throughout the next three quarters?

Laura E Clark -- Chief Financial Officer

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

Connor Siversky -- Berenberg -- Analyst

Okay, thanks. That's all from me.

Operator

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

David Rodgers -- Robert W Baird -- Analyst

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

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

I'll give you a little color on some of that rent growth that we're seeing. If you look it from a county standpoint, the largest rent growth that we saw within the San Bruno area, which covers the Inland Empire West, internally that look like it was in the mid teens followed by Orange County had very strong rent growth. In terms of interestingly the size spaces that were seeing the rent growth, it's pretty well dispersed. I think the largest rent growth we're seeing was in low -- a little over 11% in the 100 thousand-foot and greater category. And the next strongest was just the smaller spaces 5,000 foot to 20,000 foot spaces with over 10%.

What's very interesting now, Dave, is that, we've seen an acceleration in rent growth just over the last quarter within our mark-to-market on the portfolio MLAs. Looking more like 4% growth from the end of Q4 through Q1. So that -- it has every indication of continuing throughout this year as well in terms of the strength of that growth. I'm sorry, you had one other parts of your question, what was that.

David Rodgers -- Robert W Baird -- Analyst

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

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

Yeah. Well, this is certainly a time in the cycle for us to try and lock in some longer-term leases based on these record setting lease rates that we're achieving and as well as what's further comfort to for us to push those terms is the larger rent increases that we're now able to capture in the leases I had mentioned earlier that we were achieving above 3% and even pushing now to 4% in many projects. So we don't have as much of a concern about being a bit behind in growth on a longer term basis. Also tenants certainly recognize that we just have a shortage of space in the markets and they're more interested in controlling space for a little bit longer period of time than they might have in the past. But overall in terms of what you saw for the lengthening of our term, a lot really could be attributed to just the average size lease that we completed in this past quarter. It was about 50% higher than the average size space leasing in Q4. And so, when you do the math, that sort of attributes as well to the increased term -- average term.

David Rodgers -- Robert W Baird -- Analyst

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

Laura E Clark -- Chief Financial Officer

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

David Rodgers -- Robert W Baird -- Analyst

That's helpful. Thank you.

Operator

[Operator Instructions] 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 out there. Couple of quick ones and then a bigger picture question. So, Laura, I just wanted to go back to you, on the bad debt for the first quarter, was that the improvement over expectations related to prior period recoveries? Is that specifically what it was?

Laura E Clark -- Chief Financial Officer

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

Chris Lucas -- Capital One Securities -- Analyst

And that is -- so that's cash basis tenants paying in the current year -- for the current period.

Laura E Clark -- Chief Financial Officer

That's correct. Yeah, that's correct.

Chris Lucas -- Capital One Securities -- Analyst

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

Howard Schwimmer -- Co-Chief Executive Officer, Director.

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

Chris Lucas -- Capital One Securities -- Analyst

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

Howard Schwimmer -- Co-Chief Executive Officer, Director.

The predominant -- the predominance of our tenant base is really regionally focused. And I think that's a function of many decades. Actually, the evolution of the tenant base in the Southern California, so it's not unique to the Rexford tenant base. And it's not just consumer distribution, but it's also a business to business. This is the largest economic zone in the nation by a fairly substantial margin, largest regional population in the nation. And the most diverse economy in the nation. So it's own country, I think it would be one of the largest countries in the world. So it's really -- more of them predominantly regional focus and -- by way of indication, we're not -- we're not as port driven as your big box properties out in the Eastern Inland Empire or in Arizona, but it's estimated that upwards of 50% of the product in quarter two, the two ports -- the two largest ports in the country the LA and Long Beach are consumed or distributed regionally.

So it just gives you a sense for the size of the regional economy. So the predominant is really a regionally focused.

David Rodgers -- Robert W Baird -- Analyst

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

Operator

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

Mike Mueller -- JP Morgan -- Analyst

Yeah. I guess, Laura, on the bad debt recovery. How significant was that and just asking, if you can take the $0.37 in the quarter annualize that you're already -- well north of the range.

Laura E Clark -- Chief Financial Officer

Yeah, absolutely. That's a really good question. So as I mentioned, those cash recoveries offset our bad debt expense. So,had we not have those cash recoveries or bad debt expense would have been closer to 125 basis points for the first quarter as a percent of revenue. In terms of your question around annualizing that $0.37 for the full year. First quarter included a few items versus the impact from that we're about that I just talked about. The second is, a pick up in average occupancy and that's offset by some non-recurring G&A expense that incurred in Q1 as well. So these items together equates to about $1.5 per share. So if you use that as a run rate -- if you use that as a run rate, you can get to the midpoint of our full year guidance.

Mike Mueller -- JP Morgan -- Analyst

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

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

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

Howard Schwimmer -- Co-Chief Executive Officer, Director.

By the way the 1.7 million square feet, only about 570,000 square feet are really future repositionings and the rest of it, you can kind of see the target completion dates. The majority of it are on supplemental stage.

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

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

Mike Mueller -- JP Morgan -- Analyst

Okay.

Laura E Clark -- Chief Financial Officer

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

Mike Mueller -- JP Morgan -- Analyst

Got it, OK. Thank you.

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

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

Operator

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

Kosta Karmaniolas -- Senior Vice President of Corporate Finance and Investor Relations

I would like to thank everybody for joining today. Appreciate your focus and time on Rexford. And we look forward to reconnecting in about three months. And I hope everybody stays well. Happy Earth day and look forward to reconnecting soon.

Operator

[Operator Closing Remarks]

Duration: 47 minutes

Call participants:

Kosta Karmaniolas -- Senior Vice President of Corporate Finance and Investor Relations

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

Howard Schwimmer -- Co-Chief Executive Officer, Director.

Laura E Clark -- Chief Financial Officer

Emmanuel Korchman -- Citigroup -- Analyst

Blaine Heck -- Wells Fargo -- Analyst

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

Connor Siversky -- Berenberg -- Analyst

David Rodgers -- Robert W Baird -- Analyst

Chris Lucas -- Capital One Securities -- Analyst

Mike Mueller -- JP Morgan -- Analyst

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