UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


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

For the quarterly period ended ~~September 30, 2022~~March 31, 2023


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

For the transition period from to

Commission File Number: 001-36008

Rexford Industrial Realty, Inc.

(Exact name of registrant as specified in its charter)


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

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

(310) 966-1680

(Registrant’s telephone number, including area code)

N/A

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

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

Title of each class

Trading symbols

Name of each exchange on which registered

Common Stock, $0.01 par value

REXR

New York Stock Exchange

5.875% Series B Cumulative Redeemable Preferred Stock

REXR-PB

New York Stock Exchange

5.625% Series C Cumulative Redeemable Preferred Stock

REXR-PC

New York Stock Exchange

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

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

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

Large accelerated filer

☑

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

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

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

The number of shares of common stock outstanding at ~~October 19, 2022~~April 20, 2023 was ~~183,492,816.~~200,916,612.

REXFORD INDUSTRIAL REALTY, INC.

QUARTERLY REPORT FOR THE THREE ~~AND NINE~~ MONTHS ENDED ~~SEPTEMBER 30, 2022~~MARCH 31, 2023

TABLE OF CONTENTS


PART I	FINANCIAL INFORMATION
	Item 1.	Financial Statements
		Consolidated Balance Sheets as of ~~September 30, 2022~~March 31, 2023 (unaudited) and December 31, ~~2021~~2022	3
		Consolidated Statements of Operations for the Three ~~and~~ ~~Nine~~Months Ended ~~September~~ ~~30,~~March 31, 2023 and 2022 ~~and 2021~~ (unaudited)	4
		Consolidated Statements of Comprehensive Income for the Three ~~and~~ ~~Nine~~Months Ended ~~September~~ ~~30,~~March 31, 2023 and 2022 ~~and 2021~~ (unaudited)	5
		Consolidated Statements of Changes in Equity for the Three ~~and~~ ~~Nine~~Months Ended ~~Septemb~~er ~~30,~~March 31, 2023 and 2022 ~~and 2021~~ (unaudited)	6
		Consolidated Statements of Cash Flows for the ~~Nine~~Three Months Ended ~~Septemb~~er ~~30,~~March 31, 2023 and 2022 ~~and 2021~~ (unaudited)	108
		Notes to the Consolidated Financial Statements	119
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	4135
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	7262
	Item 4.	Controls and Procedures	7363
PART II.	OTHER INFORMATION
	Item 1.	Legal Proceedings	7464
	Item 1A.	Risk Factors	7464
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	7564
	Item 3.	Defaults Upon Senior Securities	7565
	Item 4.	Mine Safety Disclosures	7665
	Item 5.	Other Information	7665
	Item 6.	Exhibits	7766
	Signatures		7868

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

REXFORD INDUSTRIAL REALTY, INC.

CONSOLIDATED BALANCE SHEETS

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


		September 30, 2022		December 31, 2021			March 31, 2023		December 31, 2022
ASSETS	ASSETS					ASSETS
Land	Land	$	5,559,795	$	4,143,021	Land	$	6,334,926	$	5,841,195
Buildings and improvements	Buildings and improvements	3,275,572		2,588,836		Buildings and improvements	3,671,384		3,370,494
Tenant improvements	Tenant improvements	141,413		127,708		Tenant improvements	153,019		147,632
Furniture, fixtures and equipment	Furniture, fixtures and equipment	132		132		Furniture, fixtures and equipment	132		132
Construction in progress	Construction in progress	88,545		71,375		Construction in progress	102,633		110,934
Total real estate held for investment	Total real estate held for investment	9,065,457		6,931,072		Total real estate held for investment	10,262,094		9,470,387
Accumulated depreciation	Accumulated depreciation	(576,004)		(473,382)		Accumulated depreciation	(652,722)		(614,332)
Investments in real estate, net	Investments in real estate, net	8,489,453		6,457,690		Investments in real estate, net	9,609,372		8,856,055
Cash and cash equivalents	Cash and cash equivalents	37,141		43,987		Cash and cash equivalents	253,618		36,786
Restricted cash	Restricted cash	—		11		Restricted cash	16,239		—

Rents and other receivables, net	Rents and other receivables, net	12,592		11,027		Rents and other receivables, net	13,845		15,227
Deferred rent receivable, net	Deferred rent receivable, net	81,867		61,511		Deferred rent receivable, net	94,980		88,144
Deferred leasing costs, net	Deferred leasing costs, net	42,758		32,940		Deferred leasing costs, net	47,739		45,080
Deferred loan costs, net	Deferred loan costs, net	5,184		1,961		Deferred loan costs, net	4,474		4,829
Acquired lease intangible assets, net	Acquired lease intangible assets, net	175,913		132,158		Acquired lease intangible assets, net	161,339		169,986
Acquired indefinite-lived intangible	Acquired indefinite-lived intangible	5,156		5,156		Acquired indefinite-lived intangible	5,156		5,156
Interest rate swap asset	Interest rate swap asset	12,565		—		Interest rate swap asset	6,947		11,422
Other assets	Other assets	27,868		19,066		Other assets	21,811		24,973
Acquisition related deposits	Acquisition related deposits	8,200		8,445		Acquisition related deposits	3,625		1,625

Assets associated with real estate held for sale		—		7,213

Total Assets	Total Assets	$	8,898,697	$	6,781,165	Total Assets	$	10,239,145	$	9,259,283
LIABILITIES & EQUITY	LIABILITIES & EQUITY					LIABILITIES & EQUITY
Liabilities	Liabilities					Liabilities
Notes payable	Notes payable	$	1,934,082	$	1,399,565	Notes payable	$	2,230,687	$	1,936,381
Interest rate swap liability	Interest rate swap liability	—		7,482		Interest rate swap liability	835		—
Accounts payable, accrued expenses and other liabilities	Accounts payable, accrued expenses and other liabilities	113,770		65,833		Accounts payable, accrued expenses and other liabilities	110,272		97,496
Dividends and distributions payable	Dividends and distributions payable	59,926		40,143		Dividends and distributions payable	79,370		62,033
Acquired lease intangible liabilities, net	Acquired lease intangible liabilities, net	154,851		127,017		Acquired lease intangible liabilities, net	138,339		147,384
Tenant security deposits	Tenant security deposits	69,756		57,370		Tenant security deposits	77,029		71,935
Prepaid rents	Prepaid rents	19,992		15,829		Prepaid rents	44,303		20,712
Liabilities associated with real estate held for sale		—		231

Total Liabilities	Total Liabilities	2,352,377		1,713,470		Total Liabilities	2,680,835		2,335,941
Equity	Equity					Equity
Rexford Industrial Realty, Inc. stockholders’ equity	Rexford Industrial Realty, Inc. stockholders’ equity					Rexford Industrial Realty, Inc. stockholders’ equity
Preferred stock, $0.01 par value per share, 10,050,000 shares authorized:	Preferred stock, $0.01 par value per share, 10,050,000 shares authorized:					Preferred stock, $0.01 par value per share, 10,050,000 shares authorized:

5.875% series B cumulative redeemable preferred stock, 3,000,000 shares outstanding at September 30, 2022 and December 31, 2021 ($75,000 liquidation preference)		72,443		72,443
5.625% series C cumulative redeemable preferred stock, 3,450,000 shares outstanding at September 30, 2022 and December 31, 2021 ($86,250 liquidation preference)		83,233		83,233
Common Stock, $0.01 par value per share, 489,950,000 authorized and 182,576,706 and 160,511,482 shares outstanding at September 30, 2022 and December 31, 2021, respectively		1,826		1,605
5.875% series B cumulative redeemable preferred stock, 3,000,000 shares outstanding at March 31, 2023 and December 31, 2022 ($75,000 liquidation preference)						5.875% series B cumulative redeemable preferred stock, 3,000,000 shares outstanding at March 31, 2023 and December 31, 2022 ($75,000 liquidation preference)	72,443		72,443
5.625% series C cumulative redeemable preferred stock, 3,450,000 shares outstanding at March 31, 2023 and December 31, 2022 ($86,250 liquidation preference)						5.625% series C cumulative redeemable preferred stock, 3,450,000 shares outstanding at March 31, 2023 and December 31, 2022 ($86,250 liquidation preference)	83,233		83,233
Common Stock, $0.01 par value per share, 489,950,000 authorized and 200,784,130 and 189,114,129 shares outstanding at March 31, 2023 and December 31, 2022, respectively						Common Stock, $0.01 par value per share, 489,950,000 authorized and 200,784,130 and 189,114,129 shares outstanding at March 31, 2023 and December 31, 2022, respectively	2,008		1,891
Additional paid-in capital	Additional paid-in capital	6,254,853		4,828,292		Additional paid-in capital	7,299,837		6,646,867
Cumulative distributions in excess of earnings	Cumulative distributions in excess of earnings	(237,135)		(191,120)		Cumulative distributions in excess of earnings	(273,849)		(255,743)
Accumulated other comprehensive loss		9,223		(9,874)
Accumulated other comprehensive income						Accumulated other comprehensive income	3,117		8,247
Total stockholders’ equity	Total stockholders’ equity	6,184,443		4,784,579		Total stockholders’ equity	7,186,789		6,556,938
Noncontrolling interests	Noncontrolling interests	361,877		283,116		Noncontrolling interests	371,521		366,404
Total Equity	Total Equity	6,546,320		5,067,695		Total Equity	7,558,310		6,923,342
Total Liabilities and Equity	Total Liabilities and Equity	$	8,898,697	$	6,781,165	Total Liabilities and Equity	$	10,239,145	$	9,259,283

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

REXFORD INDUSTRIAL REALTY, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

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


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
		2022		2021		2022		2021			2023		2022
REVENUES	REVENUES									REVENUES

Rental income	Rental income	$	162,581	$	115,260	$	452,156	$	319,140	Rental income	$	185,164	$	140,588
Management and leasing services	Management and leasing services	163		136		456		350		Management and leasing services	190		163
Interest income	Interest income	3		7		5		36		Interest income	882		1
TOTAL REVENUES	TOTAL REVENUES	162,747		115,403		452,617		319,526		TOTAL REVENUES	186,236		140,752
OPERATING EXPENSES	OPERATING EXPENSES									OPERATING EXPENSES
Property expenses	Property expenses	39,614		27,501		108,448		75,631		Property expenses	42,825		33,429
General and administrative	General and administrative	14,951		11,806		44,531		33,981		General and administrative	18,197		14,717
Depreciation and amortization	Depreciation and amortization	51,146		38,676		140,226		110,048		Depreciation and amortization	59,429		42,471
TOTAL OPERATING EXPENSES	TOTAL OPERATING EXPENSES	105,711		77,983		293,205		219,660		TOTAL OPERATING EXPENSES	120,451		90,617
OTHER EXPENSES	OTHER EXPENSES									OTHER EXPENSES
Other expenses	Other expenses	413		4		746		35		Other expenses	647		38
Interest expense	Interest expense	14,975		10,427		34,826		29,772		Interest expense	13,701		9,683

TOTAL EXPENSES	TOTAL EXPENSES	121,099		88,414		328,777		249,467		TOTAL EXPENSES	134,799		100,338

Loss on extinguishment of debt		—		(505)		(877)		(505)

Gains on sale of real estate	Gains on sale of real estate	—		13,702		8,486		27,312		Gains on sale of real estate	12,133		8,486

NET INCOME	NET INCOME	41,648		40,186		131,449		96,866		NET INCOME	63,570		48,900
Less: net income attributable to noncontrolling interests	Less: net income attributable to noncontrolling interests	(2,368)		(2,173)		(7,142)		(5,852)		Less: net income attributable to noncontrolling interests	(3,064)		(2,484)
NET INCOME ATTRIBUTABLE TO REXFORD INDUSTRIAL REALTY, INC.	NET INCOME ATTRIBUTABLE TO REXFORD INDUSTRIAL REALTY, INC.	39,280		38,013		124,307		91,014		NET INCOME ATTRIBUTABLE TO REXFORD INDUSTRIAL REALTY, INC.	60,506		46,416
Less: preferred stock dividends	Less: preferred stock dividends	(2,314)		(2,976)		(6,943)		(10,249)		Less: preferred stock dividends	(2,314)		(2,314)
Less: original issuance costs of redeemed preferred stock		—		(3,349)		—		(3,349)

Less: earnings allocated to participating securities	Less: earnings allocated to participating securities	(201)		(143)		(605)		(423)		Less: earnings allocated to participating securities	(320)		(201)
NET INCOME ATTRIBUTABLE TO COMMON STOCKHOLDERS	NET INCOME ATTRIBUTABLE TO COMMON STOCKHOLDERS	$	36,765	$	31,545	$	116,759	$	76,993	NET INCOME ATTRIBUTABLE TO COMMON STOCKHOLDERS	$	57,872	$	43,901
Net income attributable to common stockholders per share - basic	Net income attributable to common stockholders per share - basic	$	0.21	$	0.23	$	0.70	$	0.57	Net income attributable to common stockholders per share - basic	$	0.30	$	0.27
Net income attributable to common stockholders per share - diluted	Net income attributable to common stockholders per share - diluted	$	0.21	$	0.23	$	0.70	$	0.57	Net income attributable to common stockholders per share - diluted	$	0.30	$	0.27
Weighted average shares of common stock outstanding - basic	Weighted average shares of common stock outstanding - basic	171,908,895		138,762,384		165,852,466		134,922,168		Weighted average shares of common stock outstanding - basic	195,366,969		160,628,843
Weighted average shares of common stock outstanding - diluted	Weighted average shares of common stock outstanding - diluted	172,831,173		139,630,475		166,401,434		135,429,176		Weighted average shares of common stock outstanding - diluted	195,779,007		161,048,592

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

REXFORD INDUSTRIAL REALTY, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited and in thousands)


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
		2022		2021		2022		2021			2023		2022
Net income	Net income	$	41,648	$	40,186	$	131,449	$	96,866	Net income	$	63,570	$	48,900
Other comprehensive income (loss): cash flow hedge adjustments	Other comprehensive income (loss): cash flow hedge adjustments	12,694		(900)		19,861		4,806		Other comprehensive income (loss): cash flow hedge adjustments	(5,342)		6,451
Comprehensive income	Comprehensive income	54,342		39,286		151,310		101,672		Comprehensive income	58,228		55,351
Comprehensive income attributable to noncontrolling interests	Comprehensive income attributable to noncontrolling interests	(2,865)		(2,188)		(7,906)		(6,183)		Comprehensive income attributable to noncontrolling interests	(2,852)		(2,735)
Comprehensive income attributable to Rexford Industrial Realty, Inc.	Comprehensive income attributable to Rexford Industrial Realty, Inc.	$	51,477	$	37,098	$	143,404	$	95,489	Comprehensive income attributable to Rexford Industrial Realty, Inc.	$	55,376	$	52,616

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

REXFORD INDUSTRIAL REALTY, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(Unaudited and in thousands – except share data)


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

Balance at December 31, 2022																			Balance at December 31, 2022	$	155,676	189,114,129	$	1,891	$	6,646,867	$	(255,743)	$	8,247	$	6,556,938	$	366,404	$	6,923,342
Issuance of common stock	Issuance of common stock	—		11,515,553	115		705,587		—		—		705,702		—		705,702		Issuance of common stock	—		11,504,656	115		656,544		—		—		656,659		—		656,659
Offering costs	Offering costs	—		—	—		(8,876)		—		—		(8,876)		—		(8,876)		Offering costs	—		—	—		(4,062)		—		—		(4,062)		—		(4,062)

Share-based compensation	Share-based compensation	—		(1,274)	—		1,436		—		—		1,436		5,047		6,483		Share-based compensation	—		177,848	2		1,586		—		—		1,588		6,785		8,373
Shares acquired to satisfy employee tax withholding requirements on vesting restricted stock	Shares acquired to satisfy employee tax withholding requirements on vesting restricted stock	—		(1,992)	—		(113)		—		—		(113)		—		(113)		Shares acquired to satisfy employee tax withholding requirements on vesting restricted stock	—		(29,281)	—		(1,748)		—		—		(1,748)		—		(1,748)
Conversion of OP Units to common stock																			Conversion of OP Units to common stock	—		16,778	—		650		—		—		650		(650)		—

Acquisition of private REIT - preferred units		—		—	—		—		—		—		—		122		122
Net income	Net income	2,314		—	—		—		36,966		—		39,280		2,368		41,648		Net income	2,314		—	—		—		58,192		—		60,506		3,064		63,570
Other comprehensive income		—		—	—		—		—		12,197		12,197		497		12,694
Other comprehensive loss																			Other comprehensive loss	—		—	—		—		—		(5,130)		(5,130)		(212)		(5,342)

Preferred stock dividends ($0.367188 per series B preferred share and $0.351563 per series C preferred share)	Preferred stock dividends ($0.367188 per series B preferred share and $0.351563 per series C preferred share)	(2,314)		—	—		—		—		—		(2,314)		—		(2,314)		Preferred stock dividends ($0.367188 per series B preferred share and $0.351563 per series C preferred share)	(2,314)		—	—		—		—		—		(2,314)		—		(2,314)
Preferred unit distributions	Preferred unit distributions	—		—	—		—		—		—		—		(798)		(798)		Preferred unit distributions	—		—	—		—		—		—		—		(802)		(802)
Common stock dividends ($0.315 per common share)		—		—	—		—		(57,513)		—		(57,513)		—		(57,513)
Common stock dividends ($0.38 per common share)																			Common stock dividends ($0.38 per common share)	—		—	—		—		(76,298)		—		(76,298)		—		(76,298)
Common unit distributions	Common unit distributions	—		—	—		—		—		—		—		(2,413)		(2,413)		Common unit distributions	—		—	—		—		—		—		—		(3,068)		(3,068)
Balance at September 30, 2022		$	155,676	182,576,706	$	1,826	$	6,254,853	$	(237,135)	$	9,223	$	6,184,443	$	361,877	$	6,546,320
Balance at March 31, 2023																			Balance at March 31, 2023	$	155,676	200,784,130	$	2,008	$	7,299,837	$	(273,849)	$	3,117	$	7,186,789	$	371,521	$	7,558,310

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

REXFORD INDUSTRIAL REALTY, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (Continued)

(Unaudited and in thousands – except share data)


		Preferred Stock		Number of Common Shares	Common Stock		Additional Paid-in Capital		Cumulative Distributions in Excess of Earnings		Accumulated Other Comprehensive Loss		Total Stockholders’ Equity		Noncontrolling Interests		Total Equity			Preferred Stock		Number of Common Shares	Common Stock		Additional Paid-in Capital		Cumulative Distributions in Excess of Earnings		Accumulated Other Comprehensive Loss (Income)		Total Stockholders’ Equity		Noncontrolling Interests		Total Equity
Balance at June 30, 2021		$	242,327	137,727,998	$	1,377	$	3,499,623	$	(182,851)	$	(12,319)	$	3,548,157	$	284,615	$	3,832,772
Balance at December 31, 2021																			Balance at December 31, 2021	$	155,676	160,511,482	$	1,605	$	4,828,292	$	(191,120)	$	(9,874)	$	4,784,579	$	283,116	$	5,067,695

Issuance of common stock	Issuance of common stock	—		13,688,432	137		791,129		—		—		791,266		—		791,266		Issuance of common stock	—		4,402,110	44		310,569		—		—		310,613		—		310,613
Offering costs	Offering costs	—		—			(8,552)		—		—		(8,552)		—		(8,552)		Offering costs	—		—	—		(4,907)		—		—		(4,907)		—		(4,907)

Issuance of 3.00% cumulative redeemable convertible preferred units																			Issuance of 3.00% cumulative redeemable convertible preferred units	—		—	—		—		—		—		—		12,000		12,000
Share-based compensation	Share-based compensation	—		16,238	—		1,000		—		—		1,000		3,596		4,596		Share-based compensation	—		111,287	1		1,197		—		—		1,198		4,977		6,175
Shares acquired to satisfy employee tax withholding requirements on vesting restricted stock	Shares acquired to satisfy employee tax withholding requirements on vesting restricted stock	—		(609)	—		(38)		—		—		(38)		—		(38)		Shares acquired to satisfy employee tax withholding requirements on vesting restricted stock	—		(29,102)	—		(2,015)		—		—		(2,015)		—		(2,015)
Conversion of OP Units to common stock	Conversion of OP Units to common stock	—		12,849	—		438		—		—		438		(438)		—		Conversion of OP Units to common stock	—		21,810	—		739		—		—		739		(739)		—
Net income	Net income	2,976		—	—		—		35,037				38,013		2,173		40,186		Net income	2,314		—	—		—		44,102		—		46,416		2,484		48,900
Other comprehensive income	Other comprehensive income	—		—	—		—		—		(915)		(915)		15		(900)		Other comprehensive income	—		—	—		—		—		6,200		6,200		251		6,451
Redemption of 5.875% series A preferred stock		(86,651)		—	—		—		(3,349)		—		(90,000)		—		(90,000)
Preferred stock dividends ($0.183594 per series A preferred share, $0.367188 per series B preferred share and $0.351563 per series C preferred share)		(2,976)		—	—		—		—		—		(2,976)		—		(2,976)

Preferred stock dividends ($0.367188 per series B preferred share and $0.351563 per series C preferred share)																			Preferred stock dividends ($0.367188 per series B preferred share and $0.351563 per series C preferred share)	(2,314)		—	—		—		—		—		(2,314)		—		(2,314)
Preferred unit distributions	Preferred unit distributions	—		—	—		—		—		—		—		(708)		(708)		Preferred unit distributions	—		—	—		—		—		—		—		(723)		(723)
Common stock dividends ($0.24 per common share)		—		—	—		—		(36,347)		—		(36,347)		—		(36,347)
Common stock dividends ($0.315 per common share)																			Common stock dividends ($0.315 per common share)	—		—	—		—		(51,981)		—		(51,981)		—		(51,981)
Common unit distributions	Common unit distributions	—		—	—		—		—		—		—		(1,623)		(1,623)		Common unit distributions	—		—	—		—		—		—		—		(2,134)		(2,134)
Balance at September 30, 2021		$	155,676	151,444,908	$	1,514	$	4,283,600	$	(187,510)	$	(13,234)	$	4,240,046	$	287,630	$	4,527,676
Balance at March 31, 2022																			Balance at March 31, 2022	$	155,676	165,017,587	$	1,650	$	5,133,875	$	(198,999)	$	(3,674)	$	5,088,528	$	299,232	$	5,387,760

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

REXFORD INDUSTRIAL REALTY, INC.

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

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

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

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

~~REXFORD INDUSTRIAL REALTY, INC.~~

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

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

Preferred Stock Number of Common
Shares Common
Stock Additional
Paid-in Capital Cumulative Distributions in Excess of Earnings Accumulated
Other
Comprehensive
(Loss) Income Total
Stockholders’
Equity Noncontrolling
Interests Total Equity
Balance at December 31, 2020 $ 242,327 131,426,038 $ 1,313 $ 3,182,599 $ (163,389) $ (17,709) $ 3,245,141 $ 285,451 $ 3,530,592
Issuance of common stock — 19,711,131 198 1,104,244 — — 1,104,442 — 1,104,442
Offering costs — — — (12,284) — — (12,284) — (12,284)
Share-based compensation — 109,029 1 2,790 — — 2,791 10,703 13,494
Shares acquired to satisfy employee tax withholding requirements on vesting restricted stock — (28,943) — (1,403) — — (1,403) — (1,403)
Conversion of units to common stock — 227,653 2 7,654 — — 7,656 (7,656) —
Net income 10,249 — — — 80,765 — 91,014 5,852 96,866
Other comprehensive income — — — — — 4,475 4,475 331 4,806
Redemption of 5.875% series A preferred stock (86,651) — — — (3,349) — (90,000) — (90,000)
Preferred stock dividends ($0.917970 per series A preferred share, $1.101564 per series B preferred share and $1.054689 per series C preferred share) (10,249) — — — — — (10,249) — (10,249)
Preferred unit distributions — — — — — — — (2,124) (2,124)
Common stock dividends ($0.72 per share) — — — — (101,537) — (101,537) — (101,537)
Common unit distributions — — — — — — — (4,927) (4,927)
Balance at September 30, 2021 $ 155,676 151,444,908 $ 1,514 $ 4,283,600 $ (187,510) $ (13,234) $ 4,240,046 $ 287,630 $ 4,527,676

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

~~REXFORD INDUSTRIAL REALTY, INC.~~

~~CONSOLIDATED STATEMENTS OF~~ CASH FLOWS

(Unaudited and in thousands)


		Nine Months Ended September 30,					Three Months Ended March 31,
		2022		2021			2023		2022
CASH FLOWS FROM OPERATING ACTIVITIES:	CASH FLOWS FROM OPERATING ACTIVITIES:					CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	Net income	$	131,449	$	96,866	Net income	$	63,570	$	48,900
Adjustments to reconcile net income to net cash provided by operating activities:	Adjustments to reconcile net income to net cash provided by operating activities:					Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization	Depreciation and amortization	140,226		110,048		Depreciation and amortization	59,429		42,471
Amortization of (below) above market lease intangibles, net	Amortization of (below) above market lease intangibles, net	(18,250)		(9,289)		Amortization of (below) above market lease intangibles, net	(8,290)		(5,091)
Amortization of debt issuance costs	Amortization of debt issuance costs	1,849		1,402		Amortization of debt issuance costs	856		520
Amortization of discount (premium) on notes payable, net	Amortization of discount (premium) on notes payable, net	186		(34)		Amortization of discount (premium) on notes payable, net	66		61
Impairment of right-of-use asset						Impairment of right-of-use asset	188		—

Loss on extinguishment of debt		877		505
Gain on sale of real estate		(8,486)		(27,312)
Gains on sale of real estate						Gains on sale of real estate	(12,133)		(8,486)
Equity based compensation expense	Equity based compensation expense	18,710		13,230		Equity based compensation expense	8,178		6,052
Straight-line rent	Straight-line rent	(23,753)		(14,904)		Straight-line rent	(7,628)		(6,901)
Payments for termination/settlement of interest rate derivatives	Payments for termination/settlement of interest rate derivatives	(589)		(4,045)		Payments for termination/settlement of interest rate derivatives	(161)		—
Amortization related to termination/settlement of interest rate derivatives	Amortization related to termination/settlement of interest rate derivatives	403		1,476		Amortization related to termination/settlement of interest rate derivatives	129		181
Change in working capital components:	Change in working capital components:					Change in working capital components:
Rents and other receivables	Rents and other receivables	(223)		475		Rents and other receivables	1,393		1,239
Deferred leasing costs	Deferred leasing costs	(10,240)		(13,148)		Deferred leasing costs	(3,444)		(713)
Other assets	Other assets	(3,159)		(4,190)		Other assets	3,467		2,807

Accounts payable, accrued expenses and other liabilities	Accounts payable, accrued expenses and other liabilities	25,047		21,764		Accounts payable, accrued expenses and other liabilities	15,304		10,730
Tenant security deposits	Tenant security deposits	6,354		6,766		Tenant security deposits	1,201		1,948
Prepaid rents	Prepaid rents	542		333		Prepaid rents	(2,619)		(2,126)
Net cash provided by operating activities	Net cash provided by operating activities	260,943		179,943		Net cash provided by operating activities	119,506		91,592
CASH FLOWS FROM INVESTING ACTIVITIES:	CASH FLOWS FROM INVESTING ACTIVITIES:					CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of investments in real estate	Acquisition of investments in real estate	(1,973,307)		(1,316,905)		Acquisition of investments in real estate	(734,257)		(445,010)
Capital expenditures	Capital expenditures	(90,260)		(71,588)		Capital expenditures	(44,235)		(27,277)
Payments for deposits on real estate acquisitions, net	Payments for deposits on real estate acquisitions, net	(7,575)		(9,610)		Payments for deposits on real estate acquisitions, net	(3,625)		(14,650)

Proceeds from sale of real estate	Proceeds from sale of real estate	15,315		45,382		Proceeds from sale of real estate	16,239		15,315

Net cash used in investing activities	Net cash used in investing activities	(2,055,827)		(1,352,721)		Net cash used in investing activities	(765,878)		(471,622)
CASH FLOWS FROM FINANCING ACTIVITIES:	CASH FLOWS FROM FINANCING ACTIVITIES:					CASH FLOWS FROM FINANCING ACTIVITIES:

Redemption of preferred stock		—		(90,000)

Issuance of common stock, net	Issuance of common stock, net	1,421,603		1,092,158		Issuance of common stock, net	652,597		305,706
Proceeds from borrowings	Proceeds from borrowings	2,654,000		983,556		Proceeds from borrowings	646,925		392,000
Repayment of borrowings	Repayment of borrowings	(2,118,731)		(813,682)		Repayment of borrowings	(350,379)		(267,635)
Debt issuance costs	Debt issuance costs	(6,887)		(4,556)		Debt issuance costs	(2,807)		—

Dividends paid to preferred stockholders	Dividends paid to preferred stockholders	(6,943)		(10,249)		Dividends paid to preferred stockholders	(2,314)		(2,314)
Dividends paid to common stockholders	Dividends paid to common stockholders	(144,389)		(93,446)		Dividends paid to common stockholders	(59,570)		(38,523)
Distributions paid to common unitholders	Distributions paid to common unitholders	(6,169)		(4,795)		Distributions paid to common unitholders	(2,463)		(1,620)
Distributions paid to preferred unitholders	Distributions paid to preferred unitholders	(2,319)		(2,124)		Distributions paid to preferred unitholders	(798)		(723)
Repurchase of common shares to satisfy employee tax withholding requirements	Repurchase of common shares to satisfy employee tax withholding requirements	(2,138)		(1,403)		Repurchase of common shares to satisfy employee tax withholding requirements	(1,748)		(2,015)
Net cash provided by financing activities	Net cash provided by financing activities	1,788,027		1,055,459		Net cash provided by financing activities	879,443		384,876
Increase (decrease) in cash, cash equivalents and restricted cash	Increase (decrease) in cash, cash equivalents and restricted cash	(6,857)		(117,319)		Increase (decrease) in cash, cash equivalents and restricted cash	233,071		4,846
Cash, cash equivalents and restricted cash, beginning of period	Cash, cash equivalents and restricted cash, beginning of period	43,998		177,523		Cash, cash equivalents and restricted cash, beginning of period	36,786		43,998
Cash, cash equivalents and restricted cash, end of period	Cash, cash equivalents and restricted cash, end of period	$	37,141	$	60,204	Cash, cash equivalents and restricted cash, end of period	$	269,857	$	48,844

Supplemental disclosure of cash flow information:	Supplemental disclosure of cash flow information:					Supplemental disclosure of cash flow information:
Cash paid for interest (net of capitalized interest of $8,021 and $2,902 for the nine months ended September 30, 2022 and 2021, respectively)		$	33,330	$	26,152
Cash paid for interest (net of capitalized interest of $4,990 and $1,983 for the three months ended March 31, 2023 and 2022, respectively)						Cash paid for interest (net of capitalized interest of $4,990 and $1,983 for the three months ended March 31, 2023 and 2022, respectively)	$	13,307	$	11,558
Supplemental disclosure of noncash transactions:	Supplemental disclosure of noncash transactions:					Supplemental disclosure of noncash transactions:

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

Issuance of 3.00% cumulative redeemable convertible preferred units in connection with acquisition of real estate	Issuance of 3.00% cumulative redeemable convertible preferred units in connection with acquisition of real estate	$	12,000	$	—	Issuance of 3.00% cumulative redeemable convertible preferred units in connection with acquisition of real estate	$	—	$	12,000
Acquisition of private REIT - preferred units		$	122	$	—
Assumption of debt in connection with acquisition of real estate including loan premium		$	—	$	3,346

Accrual for capital expenditures	Accrual for capital expenditures	$	26,059	$	16,731	Accrual for capital expenditures	$	25,154	$	13,627
Accrual of dividends and distributions	Accrual of dividends and distributions	$	59,926	$	37,970	Accrual of dividends and distributions	$	79,370	$	54,115

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

108

REXFORD INDUSTRIAL REALTY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. Organization

Rexford Industrial Realty, Inc. is a self-administered and self-managed full-service real estate investment trust (“REIT”) focused on owning and operating industrial properties in Southern California infill markets. We were formed as a Maryland corporation on January 18, 2013, and Rexford Industrial Realty, L.P. (the “Operating Partnership”), of which we are the sole general partner, was formed as a Maryland limited partnership on January 18, 2013. Through our controlling interest in our Operating Partnership and its subsidiaries, we own, manage, lease, acquire and redevelop industrial real estate principally located in Southern California infill markets, and, from time to time, acquire or provide mortgage debt secured by industrial property. As of ~~September 30, 2022,~~March 31, 2023, our consolidated portfolio consisted of ~~345~~362 properties with approximately ~~41.7~~44.0 million rentable square feet.

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

2. Summary of Significant Accounting Policies

Basis of Presentation and Principles of Consolidation

As of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, and for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021,~~ the financial statements presented are the consolidated financial statements of Rexford Industrial Realty, Inc. and its subsidiaries, including our Operating Partnership. All significant intercompany balances and transactions have been eliminated in the consolidated financial statements.

Under consolidation guidance, we have determined that our Operating Partnership is a variable interest entity because the holders of limited partnership interests do not have substantive kick-out rights or participating rights. Furthermore, we are the primary beneficiary of the Operating Partnership because we have the obligation to absorb losses and the right to receive benefits from the Operating Partnership and the exclusive power to direct the activities of the Operating Partnership. As of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, the assets and liabilities of the Company and the Operating Partnership are substantially the same, as the Company does not have any significant assets other than its investment in the Operating Partnership.

The accompanying unaudited interim financial statements have been prepared pursuant to the rules and regulations of the United States Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures normally included in the financial statements prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) may have been condensed or omitted pursuant to SEC rules and regulations, although we believe that the disclosures are adequate to make their presentation not misleading. The accompanying unaudited financial statements include, in our opinion, all adjustments, consisting of normal recurring adjustments, necessary to present fairly the financial information set forth therein. The results of operations for the interim periods are not necessarily indicative of the results that may be expected for the year ending December 31, ~~2022.~~2023. The interim financial statements should be read in conjunction with the consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, ~~2021~~2022 and the notes thereto.

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

~~Reclassifications~~

Certain prior year amounts in the consolidated financial statements have been reclassified to conform to the current year presentation. These reclassifications relate to acquisition expenses for the prior period presented that have been reclassified to “Other expenses” to conform to the current period’s presentation and they have no effect on net income or stockholders’ equity as previously reported.

Use of Estimates

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

Cash and Cash Equivalents

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

Restricted Cash

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

Restricted cash balances are included with cash and cash equivalents balances as of the beginning and ending of each period presented in the consolidated statements of cash flows. The following table provides a reconciliation of our cash and cash equivalents and restricted cash at the beginning and end of the ~~nine~~three months ended ~~September 30,~~March 31, 2023 and 2022 ~~and 2021~~ (in thousands):


		Nine Months Ended September 30,					Three Months Ended March 31,
		2022		2021			2023		2022
Cash and cash equivalents	Cash and cash equivalents	$	43,987	$	176,293	Cash and cash equivalents	$	36,786	$	43,987
Restricted cash	Restricted cash	11		1,230		Restricted cash	—		11
Cash, cash equivalents and restricted cash, beginning of period	Cash, cash equivalents and restricted cash, beginning of period	$	43,998	$	177,523	Cash, cash equivalents and restricted cash, beginning of period	$	36,786	$	43,998

Cash and cash equivalents	Cash and cash equivalents	$	37,141	$	60,154	Cash and cash equivalents	$	253,618	$	48,844
Restricted cash	Restricted cash	—		50		Restricted cash	16,239		—
Cash, cash equivalents and restricted cash, end of period	Cash, cash equivalents and restricted cash, end of period	$	37,141	$	60,204	Cash, cash equivalents and restricted cash, end of period	$	269,857	$	48,844

Investments in Real Estate

Acquisitions

We account for acquisitions of properties under Accounting Standards Update (“ASU”) 2017-01, Business Combinations - Clarifying the Definition of a Business, which provides a framework for determining whether transactions should be accounted for as acquisitions of assets or businesses and further revises the definition of a business. Our acquisitions of properties generally no longer meet the revised definition of a business and accordingly are accounted for as asset acquisitions.

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

We determine the fair value of the tangible assets of an acquired property by valuing the property as if it were vacant. This “as-if vacant” value is estimated using an income, or discounted cash flow, approach that relies upon Level 3 inputs, which are unobservable inputs based on the Company’s assumptions with respect to the assumptions a market participant would use. These Level 3 inputs include discount rates, capitalization rates, market ~~rents~~rental rates, rental growth rates and comparable sales data, including land sales, for similar properties. Estimates of future cash flows are based on a number of factors including historical operating results, known and anticipated trends, and market and economic conditions. In determining the “as-if-vacant” value for the properties we acquired during the ~~nine~~three months ended ~~September 30, 2022,~~March 31, 2023, we used discount rates ranging from ~~4.75%~~6.00% to ~~7.50%~~9.50% and exit capitalization rates ranging from ~~3.75%~~4.75% to ~~6.25%~~7.75%.

In determining the fair value of intangible lease assets or liabilities, we also consider Level 3 inputs. Acquired above- and below-market leases are valued based on the present value of the difference between prevailing market rental rates and the in-place rental rates measured over a period equal to the remaining term of the lease for above-market leases and the initial term plus the term of any below-market fixed rate renewal options for below-market leases, if applicable. The estimated fair value of acquired in-place at-market tenant leases are the estimated costs that would have been incurred to lease the property to the occupancy level of the property at the date of acquisition. We consider estimated costs such as the value associated with leasing commissions, legal and other costs, as well as the estimated period of time necessary to lease such a property to its occupancy level at the time of its acquisition. In determining the fair value of acquisitions completed during the ~~nine~~three months ended ~~September 30, 2022,~~March 31, 2023, we used an estimated average lease-up period ranging from six months to ~~twelve~~eighteen months.

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

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

Capitalization of Costs

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

We capitalized interest costs of ~~$3.6~~$5.0 million and ~~$1.3~~$2.0 million during the three months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021, respectively, and $8.0 million and $2.9 million during the nine months ended September 30, 2022 and 2021~~ respectively. We capitalized real estate taxes and insurance costs aggregating ~~$1.5~~$1.6 million and ~~$0.7~~$1.1 million during the three months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021, respectively, and $3.9 million and $1.5 million during the nine months ended September 30, 2022 and 2021,~~ respectively. We capitalized compensation costs for employees who provide construction services of ~~$2.3~~$2.5 million and ~~$1.5~~$1.9 million during the three months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021, respectively, and $6.4 million and $4.2 million during the nine months ended September 30, 2022 and 2021,~~ respectively.

Depreciation and Amortization

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

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

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

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

Assets Held for Sale

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

be completed within one year; (v) the property is being actively marketed for sale at a price that is reasonable in relation to its current fair value; and (vi) actions necessary to complete the plan of sale indicate that it is unlikely that significant changes to the plan will be made or that the plan will be withdrawn. At the time we classify a property as held for sale, we cease recording depreciation and amortization. A property classified as held for sale is measured and reported at the lower of its carrying amount or its estimated fair value less cost to sell. As of ~~September 30,~~March 31, 2023 and December 31, 2022, we did not have any properties classified as held for sale. ~~As of December 31, 2021, our property located at 28159 Avenue Stanford was classified as held for sale. See “Note 3 – Investments in Real Estate” for details.~~

Impairment of Long-Lived Assets

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

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

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

Assumptions and estimates used in the recoverability analyses for future cash flows, discount rates and capitalization rates are complex and subjective. Changes in economic and operating conditions or our intent with respect to our investment that occur subsequent to our impairment analyses could impact these assumptions and result in future impairment of our real estate properties. During the three ~~and nine~~ months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021,~~ there were no impairment charges recorded to the carrying value of our properties. During the three months ended March 31, 2023, in connection with the early termination of a sublease for one of our office space leases, we recorded a $0.2 million impairment charge to reduce the carrying value of the related ROU asset. The impairment charge is presented in “Other expenses” in the consolidated statements of operations. See also “Note 6 – Leases” for details.

Income Taxes

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

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

~~In addition, we~~We are subject to taxation by various state and local jurisdictions, including those in which we transact business or reside. Other than ~~the~~our Subsidiary REIT (a private REIT ~~which is taxable as a REIT,~~acquired on July 18, 2022), our non-taxable ~~REIT~~ subsidiaries, including our Operating Partnership, are either partnerships or disregarded entities for federal income tax purposes. Under applicable federal and state income tax rules, the allocated share of net income or loss from disregarded entities and flow-through entities such as partnerships is reportable in the income tax returns of the respective equity holders. Our taxable REIT subsidiary is a C-corporation subject to federal and state income tax. However, it has a cumulative unrecognized net operating loss carryforward. Accordingly, no income tax provision is included in the accompanying consolidated financial statements for the three ~~and nine~~ months ended ~~September 30, 2022~~March 31, 2023 and ~~2021.~~2022.

We periodically evaluate our tax positions to determine whether it is more likely than not that such positions would be sustained upon examination by a tax authority for all open tax years, as defined by the statute of limitations, based on their technical merits. As of ~~September 30, 2022,~~March 31, 2023, and December 31, ~~2021,~~2022, we have not established a liability for uncertain tax positions.

1412

Derivative Instruments and Hedging Activities

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

In accordance with ASC Topic 815: Derivatives and Hedging, we record all derivatives on the balance sheet at fair value. The accounting for changes in the fair value of derivatives depends on the intended use of the derivative, and whether we have elected to designate a derivative in a hedging relationship and apply hedge accounting and whether the hedging relationship has satisfied the criteria necessary to apply hedge accounting. Derivatives designated and qualifying as a hedge of the exposure to changes in the fair value of an asset, liability, or firm commitment attributable to a particular risk, such as interest rate risk, are considered fair value hedges. Derivatives designated and qualifying as a hedge of the exposure to variability in expected future cash flows, or other types of forecasted transactions, are considered cash flow hedges. Hedge accounting generally provides for the matching of the timing of gain or loss recognition on the hedging instrument with the recognition of the changes in the fair value of the hedged asset or liability that are attributable to the hedged risk in a fair value hedge or the earnings effect of the hedged forecasted transactions in a cash flow hedge. We may enter into derivative contracts that are intended to economically hedge certain risks, even though hedge accounting does not apply or we elect not to apply hedge accounting.

Our objectives in using interest rate derivatives are to add stability to interest expense and to manage exposure to interest rate movements. To accomplish this objective, we primarily use interest rate swaps as part of our interest rate risk management strategy. Interest rate swaps designated as cash flow hedges involve the receipt of variable amounts from a counterparty in exchange for us making fixed-rate payments over the life of the agreements without exchange of the underlying notional value. From time to time, we also utilize cash flow hedges to lock U.S. Treasury rates in anticipation of future fixed-rate debt issuances (“treasury rate lock agreements”). The gains or losses resulting from changes in fair value of derivatives that qualify as cash flow hedges are recognized in accumulated other comprehensive income/(loss) (“AOCI”). Upon the termination of a derivative for which cash flow hedging was being applied, the balance, which was recorded in AOCI, is amortized to interest expense over the remaining contractual term of the derivative as long as the hedged forecasted transactions continue to be probable of occurring. Upon the settlement of treasury rate lock agreements, amounts remaining in AOCI are amortized through earnings over the underlying term of the hedged transaction. Cash payments made to terminate or settle interest rate derivatives are presented in cash flows provided by operating activities in the accompanying consolidated statements of cash flows, given the nature of the underlying cash flows that the derivative was hedging. See “Note 7 – Interest Rate Derivatives” for details.

Revenue Recognition

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

Rental Income

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

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

1513

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

Management and leasing services

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

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

Gain or Loss on Sale of Real Estate

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

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

Valuation of Operating Lease Receivables

We may be subject to tenant defaults and bankruptcies that could affect the collection of outstanding receivables related to our operating leases, including deferred rent receivables arising from straight-line recognition of rental income. In order to mitigate these risks, we perform credit reviews and analyses on prospective tenants before significant leases are executed and on existing tenants before properties are acquired. On a quarterly basis, we perform an assessment of the collectability of operating lease receivables on a tenant-by-tenant basis, which includes reviewing the age and nature of our receivables, the payment history and financial condition of the tenant, our assessment of the tenant’s ability to meet its lease obligations and the status of negotiations of any disputes with the tenant. Any changes in the collectability assessment for an operating lease is recognized as an adjustment, which can be a reduction or increase, to rental income in the consolidated statements of operations. As a result of our quarterly collectability assessments, we recognized ~~$0.1~~$0.3 million as a net reduction adjustment to rental income and ~~$0.1 million~~$40 thousand as a net increase adjustment to rental income for the three months ended ~~September 30,~~March 31, 2023 and 2022, and 2021, respectively, and $0.3 million as a net increase adjustment and $0.5 million as a net reduction adjustment to rental income for the nine months ended September 30, 2022 and 2021, respectively, in the consolidated statements of operations.respectively.

Deferred Leasing Costs

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

Debt Issuance Costs

Debt issuance costs related to a recognized debt liability are presented in the balance sheet as a reduction from the carrying value of the debt liability. This offset against the debt liability is treated similarly to a debt discount, which effectively reduces the proceeds of a borrowing. For line of credit arrangements, we present debt issuance costs as an asset and amortize the cost over the term of the line of credit arrangement. See “Note 5 – Notes Payable” for details.

1614

Equity Based Compensation

We account for equity-based compensation in accordance with ASC Topic 718: Compensation - Stock Compensation. Total compensation cost for all share-based awards is based on the estimated fair market value of the equity instrument issued on the grant date. For share-based awards that vest based solely on a service condition, we recognize compensation cost on a straight-line basis over the total requisite service period for the entire award. For share-based awards that vest based on a market condition, we recognize compensation cost on a straight-line basis over the requisite service period of each separately vesting tranche. For share-based awards that vest based on a performance condition, we recognize compensation cost based on the number of awards that are expected to vest based on the probable outcome of the performance condition. Compensation cost for these awards will be adjusted to reflect the number of awards that ultimately vest. Forfeitures are recognized in the period in which they occur. See “Note 12 – Incentive Award Plan” for details.

Equity Offerings

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

Under relevant accounting guidance, sales of our common stock under forward equity sale agreements (as discussed in “Note 11 – Equity”) are not deemed to be liabilities, and furthermore, meet the derivatives and hedging guidance scope exception to be accounted for as equity instruments based on the following assessment: (i) none of the agreements’ exercise contingencies were based on observable markets or indices besides those related to the market for our own stock price and operations; and (ii) none of the settlement provisions precluded the agreements from being indexed to our own stock.

Earnings Per Share

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

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

Diluted EPS is calculated by dividing the net income (loss) attributable to common stockholders by the weighted average number of shares of common stock outstanding determined for the basic EPS computation plus the potential effect of any dilutive securities including shares issuable under forward equity sale agreements and unvested share-based awards under the treasury stock method. We include unvested shares of restricted stock and unvested LTIP units in the computation of diluted EPS by using the more dilutive of the two-class method or treasury stock method. We include unvested performance units as contingently issuable shares in the computation of diluted EPS once the market criteria are met, assuming that the end of the reporting period is the end of the contingency period. Any anti-dilutive securities are excluded from the diluted EPS calculation. See “Note 13 – Earnings Per Share” for details.

Segment Reporting

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

1715

Leases as a Lessee

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

~~Reference Rate Reform~~Recent Accounting Pronouncements (Issued and Not Yet Adopted)

~~On March 12, 2020,~~In June 2022, the FASB issued ASU ~~2020-04,~~2022-03, ~~Reference Rate Reform~~Fair Value Measurement (Topic ~~848)~~820): ~~Facilitation~~Fair Value Measurement of ~~the Effects of Reference Rate Reform on Financial Reporting~~Equity Securities Subject to Contractual Sale Restrictions (“ASU ~~2020-04”~~2022-03”). ASU ~~2020-04 contains practical expedients~~2022-03 clarifies that contractual sale restrictions are not considered in measuring the fair value of equity securities, and requires specific disclosures for ~~reference rate reform related activities that impact debt, leases, derivatives~~all entities with equity securities subject to a contractual sale restriction including (1) the fair value of such equity securities reflected in the balance sheet, (2) the nature and ~~other contracts. The guidance in ASU 2020-04 is optional and may be elected over time as reference rate reform activities occur. During the first quarter~~remaining duration of 2020, we elected to apply the hedge accounting expedients related to probability and the assessments of effectiveness for future London Interbank Offered Rate (“LIBOR”) indexed cash flows to assume that the index upon which future hedged transactions will be based matches the index on the corresponding ~~derivatives. As~~restrictions, and (3) any circumstances that could cause a lapse in the restrictions. In addition, ASU 2022-03 prohibits an entity from recognizing a contractual sale as a separate unit of ~~September 30, 2022, all our derivatives impacted by this guidance have been terminated.~~

~~Adoption of New Accounting Pronouncements~~

~~In August 2020, the FASB issued~~account. ASU ~~2020-06,~~ ~~Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40)~~ (“ASU 2020-06”). ASU 2020-06 eliminates two of the three accounting models that require separate accounting for embedded conversion features in convertible instruments, simplifies the contract assessment for equity classification, requires the use of the if-converted method for all convertible instruments in diluted EPS calculations and expands disclosure requirements. ASU 2020-062022-03 is effective for fiscal ~~periods~~years beginning after December 15, ~~2021,~~2023, including interim periods within those fiscal ~~years. On January 1, 2022, we adopted~~years, with early adoption permitted. We are currently evaluating the potential impact of adopting ASU 2020-06. The adoption of ASU 2020-06 did not have any impact on our consolidated financial statements or overall EPS calculation. We continue to account for each of our various convertible instruments as a single equity instrument measured at historical cost as they do not have embedded features requiring bifurcation and separate accounting. See “Note 11 – Equity” for additional information related to convertible instruments.2022-03.

3. Investments in Real Estate

Acquisitions

The following table summarizes the wholly-owned properties we acquired during the ~~nine~~three months ended ~~September 30, 2022:~~March 31, 2023:

Property Submarket Date of Acquisition Rentable Square Feet Number of Buildings
Contractual Purchase Price(1)
(in thousands)
444 Quay Avenue(2)
Los Angeles - South Bay 1/14/2022 29,760 1 $ 10,760
18455 Figueroa Street Los Angeles - South Bay 1/31/2022 146,765 2 64,250
24903 Avenue Kearny Los Angeles - San Fernando Valley 2/1/2022 214,436 1 58,463
19475 Gramercy Place Los Angeles - South Bay 2/2/2022 47,712 1 11,300
14005 Live Oak Avenue Los Angeles - San Gabriel Valley 2/8/2022 56,510 1 25,000
13700-13738 Slover Ave(2)
San Bernardino - Inland Empire West 2/10/2022 17,862 1 13,209
Meggitt Simi Valley Ventura 2/24/2022 285,750 3 57,000
21415-21605 Plummer Street Los Angeles - San Fernando Valley 2/25/2022 231,769 2 42,000
1501-1545 Rio Vista Avenue Los Angeles - Central 3/1/2022 54,777 2 28,000
17011-17027 Central Avenue Los Angeles - South Bay 3/9/2022 52,561 3 27,363
2843 Benet Road San Diego - North County 3/9/2022 35,000 1 12,968
14243 Bessemer Street Los Angeles - San Fernando Valley 3/9/2022 14,299 1 6,594
2970 East 50th Street Los Angeles - Central 3/9/2022 48,876 1 18,074
19900 Plummer Street Los Angeles - San Fernando Valley 3/11/2022 43,472 1 15,000
Long Beach Business Park Los Angeles - South Bay 3/17/2022 123,532 4 24,000 (3)
13711 Freeway Drive(4)
Los Angeles - Mid-Counties 3/18/2022 82,092 1 34,000
6245 Providence Way San Bernardino - Inland Empire West 3/22/2022 27,636 1 9,672
7815 Van Nuys Blvd Los Angeles - San Fernando Valley 4/19/2022 43,101 1 25,000
13535 Larwin Circle Los Angeles - Mid-Counties 4/21/2022 56,011 1 15,500
1154 Holt Blvd San Bernardino - Inland Empire West 4/29/2022 35,033 1 14,158
900-920 Allen Avenue Los Angeles - San Fernando Valley 5/3/2022 68,630 2 25,000
1550-1600 Champagne Avenue San Bernardino - Inland Empire West 5/6/2022 124,243 2 46,850
10131 Banana Avenue(2)
San Bernardino - Inland Empire West 5/6/2022 — — 26,166
2020 Central Avenue Los Angeles - South Bay 5/20/2022 30,233 1 10,800
14200-14220 Arminta Street(5)
Los Angeles - San Fernando Valley 5/25/2022 200,003 1 80,653
1172 Holt Blvd San Bernardino - Inland Empire West 5/25/2022 44,004 1 17,783
1500 Raymond Avenue(4)
Orange County - North 6/1/2022 — — 45,000
2400 Marine Avenue Los Angeles - South Bay 6/2/2022 50,000 2 30,000
14434-14527 San Pedro Street Los Angeles - South Bay 6/3/2022 118,923 1 49,105
20900 Normandie Avenue Los Angeles - South Bay 6/3/2022 74,038 1 39,980
15771 Red Hill Avenue Orange County - Airport 6/9/2022 100,653 1 46,000
14350 Arminta Street Los Angeles - San Fernando Valley 6/10/2022 18,147 1 8,400
29125 Avenue Paine Los Angeles - San Fernando Valley 6/14/2022 175,897 1 45,000
3935-3949 Heritage Oak Court Ventura 6/22/2022 186,726 1 56,400
620 Anaheim Street Los Angeles - South Bay 6/23/2022 34,555 1 17,100
400 Rosecrans Avenue Los Angeles - South Bay 7/6/2022 28,006 1 8,500

Property Submarket Date of Acquisition Rentable Square Feet Number of Buildings
Contractual Purchase Price(1)
(in thousands)
3547-3555 Voyager Street Los Angeles - South Bay 7/12/2022 60,248 3 20,900
6996-7044 Bandini Blvd Los Angeles - Central 7/13/2022 111,515 2 40,500
4325 Etiwanda Avenue Riverside / San Bernardino - Inland Empire West 7/15/2022 124,258 1 47,500
Merge-West Riverside / San Bernardino - Inland Empire West 7/18/2022 1,057,419 6 470,000
6000-6052 & 6027-6029 Bandini Blvd Los Angeles - Central 7/22/2022 182,782 2 91,500
3901 Via Oro Avenue Los Angeles - South Bay 8/12/2022 53,817 1 20,000
15650 Don Julian Road Los Angeles - San Gabriel Valley 8/12/2022 43,392 1 16,226
15700 Don Julian Road Los Angeles - San Gabriel Valley 8/12/2022 40,453 1 15,127
17000 Gale Avenue Los Angeles - San Gabriel Valley 8/12/2022 29,888 1 11,176
17909 & 17929 Susana Road Los Angeles - South Bay 8/17/2022 57,376 2 26,100
2880 Ana Street Los Angeles - South Bay 8/25/2022 80,850 1 34,600
920 Pacific Coast Highway Los Angeles - South Bay 9/1/2022 148,186 1 100,000
21022 & 21034 Figueroa Street Los Angeles - South Bay 9/7/2022 51,185 1 24,200
13301 Main Street Los Angeles - South Bay 9/14/2022 106,969 1 51,150
Total 2022 Property Acquisitions 5,049,350 71 $ 2,034,027


Property	Submarket	Date of Acquisition	Rentable Square Feet	Number of Buildings	Contractual Purchase Price(1) (in thousands)
16752 Armstrong Avenue	Orange County - Airport	1/6/2023	81,600	1	$	40,000
10545 Production Avenue	San Bernardino - Inland Empire West	1/30/2023	1,101,840	1	365,000
3520 Challenger Street	Los Angeles - South Bay	2/28/2023	49,336	1	14,200
9000 Airport Blvd(2)	Los Angeles - South Bay	3/28/2023	38,680	1	143,000
9223-33 & 9323 Balboa Avenue and 4285 Ponderosa Avenue(3)	San Diego - Central	3/30/2023	515,382	5	200,000
Total 2023 Property Acquisitions			1,786,838	9	$	762,200

(1)Represents the gross contractual purchase price before certain credits, prorations, closing costs and other acquisition related costs. Including ~~$25.0~~$3.1 million of capitalized closing costs and acquisition related costs, the total aggregate initial investment was ~~$2.06 billion.~~$765.3 million. Each acquisition was funded with available cash on hand unless otherwise noted.

(2)Represents the acquisition of an18.4 acres of industrial ~~outdoor storage site.~~zoned land.

(3)~~The~~Represents the acquisition of ~~the Long Beach Business Park was funded through a combination of cash on hand and the issuance of 164,998 3.00% Cumulative Redeemable Convertible Preferred Units of partnership interest~~three properties in ~~the Operating Partnership. See “Note 11 – Equity – Noncontrolling Interests – Issuance of Series 3 CPOP Units” for additional details.~~

~~(4)Represents acquisition of a current or near-term redevelopment site.~~

~~(5)~~On May 25, 2022, we acquired the property located at 14200-14220 Arminta Street for a purchase price of $80.7 million, exclusive of closing costs. The acquisition was funded through a combination of cash on hand and the issuance of 954,000 common units of limited partnership interests in the Operating Partnership valued at $56.2 million.

one consolidated transaction.

2016

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


	~~2022~~2023 Acquisitions
Assets:
Land	$	~~1,416,773~~495,120
Buildings and improvements	~~611,418~~264,033
Tenant improvements	~~8,309~~3,025
Acquired lease intangible assets(1)	~~74,685~~3,088
~~Right of use asset - ground lease(2)~~	~~4,787~~
Other acquired assets~~(3)~~(2)	~~496~~862
Total assets acquired	$	~~2,116,468~~766,128

Liabilities:
~~Acquired lease intangible liabilities(4)~~	$	~~47,860~~

~~Deferred rent liabilities(5)~~	~~4,339~~
~~Lease liability - ground lease(2)~~	~~4,787~~
Other assumed liabilities(3)	~~10,066~~$	30,245
Total liabilities assumed	$	~~67,052~~30,245
Net assets acquired	$	~~2,049,416~~735,883

(1)Acquired lease intangible assets is comprised of (i) ~~$56.3~~$3.0 million of in-place lease intangibles with a weighted average amortization period of ~~5.8~~5.2 years and (ii) ~~$5.4~~$0.1 million of above-market lease intangibles with a weighted average amortization period of ~~7.1 years and (iii) $13.0 million of below-market ground lease intangibles with a weighted average amortization period of 78.9~~5.2 years.

(2)~~The ROU asset and lease liability relate to a ground lease that we assumed in March 2022 in connection with the acquisition of 2970 East 50th Street.~~

~~(3)~~Includes other working capital assets acquired at the time of acquisition.

(3)Includes $26.0 million of prepaid rent paid by seller/tenants in sale-leaseback transactions and other liabilities assumed at the time of acquisition.

~~(4)Represents below-market lease intangibles with a weighted average amortization period of 9.2 years.~~Dispositions

~~(5)~~In connection with four of our acquisition transactions, we entered into short-term leaseback agreements with each seller/tenant where the seller/tenant does not pay any base rent for the lease term. The amounts allocated to “Deferred rent liabilities” in the table above represent the present value of lease payments using prevailing market rental rates, which will be amortized into rental income over the term of each respective lease.

~~Dispositions~~

The following table summarizes information related to the property that was sold during the ~~nine~~three months ended ~~September 30, 2022.~~

Property Submarket Date of Disposition Rentable Square Feet
Contractual Sales Price(1)
(in thousands)
Gain Recorded
(in thousands)
28159 Avenue Stanford Los Angeles - San Fernando Valley 1/13/2022 79,247 $ 16,500 $ 8,486
March 31, 2023.

Property

Submarket

Date of Disposition

Rentable Square Feet

Contractual Sales Price(1)

(in thousands)

Gain Recorded
(in thousands)

8101-8117 Orion Ave.

Los Angeles - San Fernando Valley

3/28/2023

48,394

17,000

12,133

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

~~Real Estate Held for Sale~~

As of September 30, 2022, we did not have any properties classified as held for sale. As of December 31, 2021, the property located at 28159 Avenue Stanford in Valencia, California was classified as held for sale.

~~The following table summarizes the major classes of assets and liabilities associated with real estate property classified as held for sale as of December 31, 2021 (dollars in thousands).~~


	~~December 31, 2021~~
~~Land~~	$	~~1,849~~
~~Building and improvements~~	~~10,753~~
~~Tenant improvements~~	~~1,059~~

~~Real estate held for sale~~	~~13,661~~
~~Accumulated depreciation~~	~~(6,657)~~
~~Real estate held for sale, net~~	~~7,004~~
~~Other assets associated with real estate held for sale~~	~~209~~
~~Total assets associated with real estate held for sale, net~~	$	~~7,213~~

~~Tenant security deposits~~	$	~~177~~
~~Other liabilities associated with real estate held for sale~~	54
~~Total liabilities associated with real estate held for sale~~	$	~~231~~

2217

4. Acquired Lease Intangibles

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

September 30, 2022 December 31, 2021
Acquired Lease Intangible Assets:
In-place lease intangibles $ 311,382 $ 256,902
Accumulated amortization (162,791) (135,415)
In-place lease intangibles, net $ 148,591 $ 121,487
Above-market tenant leases $ 26,412 $ 21,065
Accumulated amortization (11,978) (10,394)
Above-market tenant leases, net $ 14,434 $ 10,671
Below-market ground lease(1)
$ 12,977 $ —
Accumulated amortization(1)
(89) —
Below-market ground lease, net $ 12,888 $ —
Acquired lease intangible assets, net $ 175,913 $ 132,158
Acquired Lease Intangible Liabilities:
Below-market tenant leases $ (221,758) $ (174,686)
Accumulated accretion 66,907 47,669
Below-market tenant leases, net $ (154,851) $ (127,017)
Acquired lease intangible liabilities, net $ (154,851) $ (127,017)

~~(1)The below-market lease intangible relates to a ground lease that we assumed in March 2022 in connection with the acquisition of 2970 East 50th Street.~~


	March 31, 2023		December 31, 2022
Acquired Lease Intangible Assets:
In-place lease intangibles	$	316,772	$	315,842
Accumulated amortization	(181,826)		(172,883)
In-place lease intangibles, net	$	134,946	$	142,959

Above-market tenant leases	$	26,877	$	26,851
Accumulated amortization	(13,290)		(12,671)
Above-market tenant leases, net	$	13,587	$	14,180

Below-market ground lease	$	12,977	$	12,977
Accumulated amortization	(171)		(130)
Below-market ground lease, net	$	12,806	$	12,847
Acquired lease intangible assets, net	$	161,339	$	169,986

Acquired Lease Intangible Liabilities:
Below-market tenant leases	$	(217,907)	$	(220,646)
Accumulated accretion	79,568		73,262
Below-market tenant leases, net	$	(138,339)	$	(147,384)




Acquired lease intangible liabilities, net	$	(138,339)	$	(147,384)

The following table summarizes the amortization related to our acquired lease intangible assets and liabilities for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2023 and 2022 ~~and 2021~~ (in thousands):


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
		2022		2021		2022		2021			2023		2022
In-place lease intangibles(1)	In-place lease intangibles(1)	$	10,855	$	7,159	$	29,154	$	21,856	In-place lease intangibles(1)	$	10,979	$	8,137
Net below-market tenant leases(2)	Net below-market tenant leases(2)	$	(7,074)	$	(3,191)	$	(18,339)	$	(9,289)	Net below-market tenant leases(2)	$	(8,331)	$	(5,097)
Below-market ground leases(3)	Below-market ground leases(3)	$	41	$	—	$	89	$	—	Below-market ground leases(3)	$	41	$	7

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

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

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

2318

5. Notes Payable

The following table summarizes the components and significant terms of our indebtedness as of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021~~2022 (dollars in thousands):


		September 30, 2022		December 31, 2021		Margin Above LIBOR/SOFR			Interest Rate(1)			Contractual Maturity Date			March 31, 2023		December 31, 2022		Margin Above SOFR			Interest Rate(1)			Contractual Maturity Date
Unsecured and Secured Debt	Unsecured and Secured Debt													Unsecured and Secured Debt
Unsecured Debt:	Unsecured Debt:													Unsecured Debt:
Revolving Credit Facility	Revolving Credit Facility	$	—	$	—	S+0.725	%	(2)	3.805	%	(3)	5/26/2026	(4)	Revolving Credit Facility	$	—	$	—	S+0.685	%	(2)	5.655	%	(3)	5/26/2026	(4)
$400M Term Loan	$400M Term Loan	400,000		—		S+0.800	%	(2)	3.942	%		7/19/2024	(4)	$400M Term Loan	400,000		400,000		S+0.760	%	(2)	5.730	%	(5)	7/19/2024	(4)
$150M Term Loan Facility(5)		—		150,000		n/a			n/a			5/22/2025
$100M Notes	$100M Notes	100,000		100,000		n/a			4.290	%		8/6/2025		$100M Notes	100,000		100,000		n/a			4.290	%		8/6/2025
$300M Term Loan	$300M Term Loan	300,000		—		S+0.800	%	(2)	3.717	%	(6)	5/26/2027		$300M Term Loan	300,000		300,000		S+0.760	%	(2)	3.677	%	(6)	5/26/2027
$125M Notes	$125M Notes	125,000		125,000		n/a			3.930	%		7/13/2027		$125M Notes	125,000		125,000		n/a			3.930	%		7/13/2027
$300M Senior Notes due 2028														$300M Senior Notes due 2028	300,000		—		n/a			5.000	%		6/15/2028
$25M Series 2019A Notes	$25M Series 2019A Notes	25,000		25,000		n/a			3.880	%		7/16/2029		$25M Series 2019A Notes	25,000		25,000		n/a			3.880	%		7/16/2029
$400M Senior Notes due 2030	$400M Senior Notes due 2030	400,000		400,000		n/a			2.125	%		12/1/2030		$400M Senior Notes due 2030	400,000		400,000		n/a			2.125	%		12/1/2030
$400M Senior Notes due 2031	$400M Senior Notes due 2031	400,000		400,000		n/a			2.150	%		9/1/2031		$400M Senior Notes due 2031	400,000		400,000		n/a			2.150	%		9/1/2031
$75M Series 2019B Notes	$75M Series 2019B Notes	75,000		75,000		n/a			4.030	%		7/16/2034		$75M Series 2019B Notes	75,000		75,000		n/a			4.030	%		7/16/2034
Total Unsecured Debt	Total Unsecured Debt	$	1,825,000	$	1,275,000									Total Unsecured Debt	$	2,125,000	$	1,825,000

Secured Debt:	Secured Debt:													Secured Debt:
2601-2641 Manhattan Beach Boulevard(7)	2601-2641 Manhattan Beach Boulevard(7)	$	3,862	$	3,951	n/a			4.080	%		4/5/2023		2601-2641 Manhattan Beach Boulevard(7)	$	3,802	$	3,832	n/a			4.080	%		4/5/2023
$60M Term Loan(8)		57,521		58,108		L+1.700	%		4.843	%		8/1/2023	(8)
960-970 Knox Street(7)	960-970 Knox Street(7)	2,330		2,399		n/a			5.000	%		11/1/2023		960-970 Knox Street(7)	2,283		2,307		n/a			5.000	%		11/1/2023
7612-7642 Woodwind Drive(7)	7612-7642 Woodwind Drive(7)	3,736		3,806		n/a			5.240	%		1/5/2024		7612-7642 Woodwind Drive(7)	3,688		3,712		n/a			5.240	%		1/5/2024
11600 Los Nietos Road(7)	11600 Los Nietos Road(7)	2,503		2,626		n/a			4.190	%		5/1/2024		11600 Los Nietos Road(7)	2,419		2,462		n/a			4.190	%		5/1/2024
$60M Term Loan(8)														$60M Term Loan(8)	60,000		60,000		S+1.250	%		6.152	%	(8)	10/27/2024
5160 Richton Street(7)	5160 Richton Street(7)	4,183		4,272		n/a			3.790	%		11/15/2024		5160 Richton Street(7)	4,122		4,153		n/a			3.790	%		11/15/2024
22895 Eastpark Drive(7)	22895 Eastpark Drive(7)	2,630		2,682		n/a			4.330	%		11/15/2024		22895 Eastpark Drive(7)	2,594		2,612		n/a			4.330	%		11/15/2024
701-751 Kingshill Place~~(9)~~(7)	701-751 Kingshill Place~~(9)~~(7)	7,100		7,100		n/a			3.900	%		1/5/2026		701-751 Kingshill Place~~(9)~~(7)	7,079		7,100		n/a			3.900	%		1/5/2026
13943-13955 Balboa Boulevard(7)	13943-13955 Balboa Boulevard(7)	15,055		15,320		n/a			3.930	%		7/1/2027		13943-13955 Balboa Boulevard(7)	14,874		14,965		n/a			3.930	%		7/1/2027
2205 126th Street(10)		5,200		5,200		n/a			3.910	%		12/1/2027
2410-2420 Santa Fe Avenue(10)		10,300		10,300		n/a			3.700	%		1/1/2028
2205 126th Street(9)														2205 126th Street(9)	5,200		5,200		n/a			3.910	%		12/1/2027
2410-2420 Santa Fe Avenue(9)														2410-2420 Santa Fe Avenue(9)	10,300		10,300		n/a			3.700	%		1/1/2028
11832-11954 La Cienega Boulevard(7)	11832-11954 La Cienega Boulevard(7)	3,947		4,002		n/a			4.260	%		7/1/2028		11832-11954 La Cienega Boulevard(7)	3,909		3,928		n/a			4.260	%		7/1/2028
Gilbert/La Palma(7)	Gilbert/La Palma(7)	1,982		2,119		n/a			5.125	%		3/1/2031		Gilbert/La Palma(7)	1,888		1,935		n/a			5.125	%		3/1/2031
7817 Woodley Avenue(7)	7817 Woodley Avenue(7)	3,041		3,132		n/a			4.140	%		8/1/2039		7817 Woodley Avenue(7)	2,978		3,009		n/a			4.140	%		8/1/2039
2515 Western Avenue(11)		—		13,104		n/a			4.500	%		9/1/2042
Total Secured Debt	Total Secured Debt	$	123,390	$	138,121									Total Secured Debt	$	125,136	$	125,515
Total Unsecured and Secured Debt	Total Unsecured and Secured Debt	$	1,948,390	$	1,413,121									Total Unsecured and Secured Debt	$	2,250,136	$	1,950,515
Less: Unamortized premium/discount and debt issuance costs(12)		(14,308)		(13,556)
Less: Unamortized premium/discount and debt issuance costs(10)														Less: Unamortized premium/discount and debt issuance costs(10)	(19,449)		(14,134)
Total	Total	$	1,934,082	$	1,399,565									Total	$	2,230,687	$	1,936,381

(1)Reflects the contractual interest rate under the terms of each loan as of ~~September 30, 2022,~~March 31, 2023, and includes the effect of interest rate swaps that were effective as of ~~September 30, 2022. See footnote (4) below. Excludes~~March 31, 2023. The interest rate is not adjusted to include the ~~effect~~amortization of ~~unamortized~~ debt issuance costs ~~and~~or unamortized fair market value premiums and ~~discounts.~~discounts, or the impact of swaps that will be effective subsequent to March 31, 2023.

(2)~~The~~As of March 31, 2023, the interest rates on these loans are comprised of daily Secured Overnight Financing Rate (“SOFR”) for both the unsecured revolving credit facility and $400.0 million unsecured term loan, and 1-month term SOFR (“Term SOFR”) for the $300.0 million ~~and $400.0 million~~ unsecured term ~~loans~~loan (in each case increased by a 0.10% SOFR adjustment), plus an applicable margin ~~ranging from~~of 0.725% to

~~1.400%~~ per annum for the unsecured revolving credit facility and 0.80% ~~to 1.60%~~ per

annum for the $300.0 million and $400.0 million unsecured term loans, ~~depending~~based on our leverage ratio and investment grade ratings, ~~leverage ratio and sustainability performance metrics, which may change from time to time.~~minus a sustainability-related interest rate adjustment of 0.04%. These loans are also subject to a 0% SOFR floor. During the three months ended September 30, 2022, our credit ratings were upgraded by two credit rating agencies and as a result, the applicable margin on the unsecured revolving credit facility was lowered to 0.725% from 0.775% and the applicable margin on the $300.0 million and $400.0 million unsecured term loans was lowered to 0.80% from 0.85%.

(3)The unsecured revolving credit facility is subject to an applicable facility fee which is calculated as a percentage of the total lenders’ commitment amount, regardless of usage. ~~The~~As of March 31, 2023, the applicable facility fee ~~ranges from~~is 0.125% ~~to 0.300% per annum depending upon our investment grade rating, leverage ratio and sustainability performance metrics.~~, less a sustainability-related interest rate adjustment of 0.01%.

(4)The unsecured revolving credit facility has two six-month extensions, and the $400.0 million unsecured term loan has two one-year extensions available at the borrower’s option, subject to certain terms and conditions.

(5)~~In May 2022, we paid~~Effective April 3, 2023, daily SOFR for our $400.0 million unsecured term loan will be swapped to a fixed rate of 3.97231%, resulting in ~~full~~an all-in fixed rate of 4.83231% after adding the ~~outstanding principal balance on this unsecured debt.~~SOFR adjustment and applicable margin and subtracting the sustainability-related interest rate adjustment.

(6)As of ~~September 30, 2022,~~March 31, 2023, Term SOFR ~~related to $300.0 million of~~for our variable rate debt has been effectively fixed through the use of interest rate swaps. See Note 7 for details related to our interest rate swaps. Including the impact of these interest rate swaps, the hedged effective interest rate on the $300.0 million unsecured term loan ~~is 3.717%.~~has been swapped to a fixed rate of 2.81725%, resulting in an all-in fixed rate of 3.67725% after adding the SOFR adjustment and applicable margin and subtracting the sustainability-related interest rate adjustment.

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

(8)~~Loan~~The loan is secured by six ~~properties. One 24-month extension is~~properties and has three one-year extensions available at the borrower’s option, subject to certain terms and conditions. ~~Monthly payments~~Loan has interest-only payment terms bearing interest at Term SOFR increased by a 0.10% SOFR adjustment plus an applicable margin of ~~interest only through June 2021, followed by equal monthly payments~~1.25% per annum. Effective April 3, 2023, Term SOFR for this loan will be swapped to a fixed rate of ~~principal ($65,250)~~3.710%, ~~plus accrued interest until maturity.~~resulting in an all-in fixed rate of 5.060% after adding the SOFR adjustment and applicable margin.

(9)~~For 701-751 Kingshill Place, fixed monthly payments of interest only through January 2023, followed by fixed monthly payments of interest and principal ($33,488) until maturity.~~

~~(10)~~Fixed monthly payments of interest only.

~~(11)In June 2022, we paid in full the outstanding principal balance on this secured debt and incurred no penalty for the prepayment in advance of its maturity date of September 1, 2042.~~

~~(12)~~(10)Excludes unamortized debt issuance costs related to our unsecured revolving credit facility, which are presented in the line item “Deferred loan costs, net” in the consolidated balance sheets.

Contractual Debt Maturities

The following table summarizes the contractual debt maturities and scheduled amortization payments, excluding debt premiums/discounts and debt issuance costs, as of ~~September 30, 2022,~~March 31, 2023, and does not consider extension options available to us as noted in the table above (in thousands):


October 1, 2022 - December 31, 2022		$	550
2023		64,815
April 1, 2023 - December 31, 2023				April 1, 2023 - December 31, 2023	$	7,111
2024	2024	413,403		2024	473,403
2025	2025	100,973		2025	100,973
2026	2026	7,587		2026	7,587
2027				2027	444,078
Thereafter	Thereafter	1,361,062		Thereafter	1,216,984
Total	Total	$	1,948,390	Total	$	2,250,136

Issuance of $300 Million Notes Due 2028

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

We may redeem the $300 Million Notes at our option and sole discretion, in whole at any time or in part from time to time prior to May 15, 2028 (one month prior to the maturity date of the $300 Million Notes) (the “Par Call Date”), at a redemption price equal to the greater of (i) the sum of the present values of the remaining scheduled payments of principal and interest on the $300 Million Notes discounted to the redemption date (assuming the notes matured on the Par Call Date) on a semi-annual basis (assuming a 360-day year consisting of twelve 30-day months) at the Treasury Rate (as defined in the Third Supplemental Indenture) plus 25 basis points, less (b) interest accrued to the date of redemption, and (ii) 100% of the principal

2520

amount of the $300 Million Notes being redeemed. Notwithstanding the foregoing, on or after the Par Call Date, the redemption price will be equal to 100% of the principal amount of the $300 Million Notes being redeemed, plus accrued and unpaid interest.

~~Fourth Amended and Restated~~ Credit Agreement

~~On May 26, 2022, we amended our credit agreement, which was comprised~~As of ~~a $700.0 million unsecured revolving credit facility that was scheduled to mature on February 13, 2024, by entering into a~~March 31, 2023, under the Fourth Amended and Restated Credit Agreement (the “Credit Agreement”)~~. The Credit Agreement initially provided for (i)~~, we have a ~~senior unsecured term loan facility that permits aggregate borrowings of up to $300.0 million (the “$300M Term Loan”), all of which was borrowed at closing on May 26, 2022, and (ii) a senior~~$1.0 billion unsecured revolving credit facility (the “Revolver”) ~~in the aggregate principal amount of $1.0 billion. On July 19, 2022, we exercised the accordion option under the Credit Agreement to add~~, a $300.0 million unsecured term loan facility (the “$300 Million Term Loan”) and a $400.0 million unsecured term loan facility (the “$~~400M~~400 Million Term Loan” and together with the ~~$300M~~$300 Million Term Loan, the “Term Facility”). Subject to certain terms and conditions set forth in the Credit Agreement, we may request additional lender commitments and increase the size of the Credit Agreement by an additional $800.0 million, which may be comprised of additional revolving commitments under the Revolver, an increase to the Term Facility, additional term loan tranches or any combination of the foregoing.

The Revolver is scheduled to mature on May 26, 2026 and has two six-month extension options available. The ~~$400M~~$400 Million Term Loan is scheduled to mature on July 19, 2024 and has two one-year extension options available. The ~~$300M~~$300 Million Term Loan matures on May 26, 2027.

Interest on the Credit Agreement is generally to be paid based upon, at our option, either (i) Term SOFR plus the applicable margin; (ii) daily SOFR ~~(“Daily Simple SOFR”)~~ plus the applicable margin or (iii) the applicable base rate (which is defined as the highest of (a) the federal funds rate plus 0.50%, (b) the administrative agent’s prime rate, (c) Term SOFR plus 1.00%, and (d) one percent (1.00%)) plus the applicable margin. Additionally, Term SOFR and ~~Daily Simple~~daily SOFR will be increased by a 0.10% SOFR adjustment. The applicable margin for the Term Facility ranges from 0.80% to 1.60% per annum for SOFR-based loans and 0.00% to 0.60% per annum for base rate loans, depending on our leverage ratio and investment grade ratings. The applicable margin for the Revolver ranges from 0.725% to 1.400% per annum for SOFR-based loans and 0.00% to 0.40% per annum for base rate loans, depending on our leverage ratio and investment grade ratings. In addition to the interest payable on amounts outstanding under the Revolver, we are required to pay an applicable credit facility fee, on each lender's commitment amount under the Revolver, regardless of usage. The applicable credit facility fee ranges from 0.125% to 0.300% per annum, depending on our leverage ratio and investment grade ~~ratings. The interest rate under the Credit Agreement is also subject to a favorable leverage-based adjustment if our ratio of total indebtedness to total asset value is less than 35.0%.~~rating.

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

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

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

In connection with the amendment of our credit agreement, during the second quarter of 2022 we wrote off $0.2 million of unamortized debt issuance costs attributable to one of the creditors departing the unsecured revolving credit facility. This write-off is included in “Loss on extinguishment of debt” in the accompanying consolidated statements of operations.

On ~~September 30, 2022,~~March 31, 2023, we did not have any borrowings outstanding under the Revolver, leaving $1.0 billion available for future borrowings.

~~Repayment of $150 Million Term Loan Facility~~

On May 26, 2022, we used a portion of the borrowing proceeds from the $300M Term Loan to repay our $150.0 million unsecured term loan facility in full. We did not incur any prepayment penalties for repaying the $150.0 million unsecured term loan facility in advance of the maturity date of May 22, 2025. In connection with the repayment of the $150.0 million unsecured term loan facility, during the second quarter of 2022 we wrote off $0.7 million of unamortized debt issuance costs, which is included in “Loss on extinguishment of debt” in the accompanying consolidated statements of operations.

Debt Covenants

The Credit Agreement, ~~our~~$60.0 million term loan facility (“$60 Million Term Loan”), $100.0 million unsecured guaranteed senior notes (the “$100 Million Notes”), ~~our $125~~$125.0 million unsecured guaranteed senior notes (the “$125 Million Notes”) and ~~our $25~~$25.0 million unsecured guaranteed senior notes and ~~$75~~$75.0 million unsecured guaranteed senior notes (together the “Series 2019A and 2019B Notes”) all include a series of financial and other covenants that we must comply with, including the following covenants which are tested on a quarterly basis:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Our ~~$60.0 million term loan contains a financial covenant that is tested on a quarterly basis, which requires us to maintain a minimum Debt Service Coverage Ratio (as defined in the term loan agreement)~~credit ratings as of ~~at least 1.10 to 1.0.~~March 31, 2023, were BBB+ from S&P, BBB+ from Fitch Ratings and Baa2 from Moody’s.

We were in compliance with all of our required quarterly debt covenants as of ~~September 30, 2022.~~March 31, 2023.

6. Leases

Lessor

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

For the three ~~and nine~~ months ended ~~September 30, 2022,~~March 31, 2023, we recognized ~~$155.5 million and $433.8~~$176.8 million of rental income related to operating lease payments, of which ~~$127.3 million and $354.7~~$144.8 million are for fixed lease payments and ~~$28.2 million and $79.1~~$32.0 million are for variable lease payments, respectively. For the comparable three ~~and nine~~ month-period ended ~~September 30, 2021,~~March 31, 2022, we recognized ~~$112.1 million and $309.9~~$135.5 million of rental income related to operating lease payments, of which ~~$92.8 million and $256.4~~$110.5 million were for fixed lease payments and ~~$19.3 million and $53.5~~$25.0 million were for variable lease payments, respectively.

The following table sets forth the undiscounted cash flows for future minimum base rents to be received under operating leases as of ~~September 30, 2022~~March 31, 2023 (in thousands):


Twelve Months Ended September 30,
2023		$	493,849
Twelve Months Ended March 31,				Twelve Months Ended March 31,
2024	2024	433,245		2024	$	565,347
2025	2025	368,109		2025	499,867
2026	2026	298,556		2026	416,892
2027	2027	220,361		2027	324,170
2028				2028	243,816
Thereafter	Thereafter	787,015		Thereafter	933,905
Total	Total	$	2,601,135	Total	$	2,983,997

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

Lessee

We lease office space as part of conducting our day-to-day business. As of ~~September 30, 2022,~~March 31, 2023, our office space leases have current remaining lease terms ranging from approximately two years to five years with options to renew for an additional term of five years each. As of ~~September 30, 2022,~~March 31, 2023, we also have two ground leases, one of which is a lease we assumed in the acquisition of 2970 East 50th Street in March 2022 which has a current remaining lease term of approximately 38 years and four additional ten-year options to renew. The second ground lease is for a parcel of land that is adjacent to one of our properties and is used as a parking lot. This ground lease has a current remaining term of ~~approximately~~less than one year and two additional ten-year options to renew.

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

As of ~~September 30,~~March 31, 2023, total ROU assets and lease liabilities were approximately $8.0 million and $10.4 million, respectively. As of December 31, 2022, total ROU assets and lease liabilities were approximately ~~$8.8~~$8.5 million and ~~$11.4 million, respectively. As of December 31, 2021, total ROU assets and lease liabilities were approximately $3.5 million and $5.0~~$10.9 million, respectively.

2823

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


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
Lease Cost(1) (in thousands)	Lease Cost(1) (in thousands)	2022		2021		2022		2021		Lease Cost(1) (in thousands)	2023		2022
Operating lease cost	Operating lease cost	$	455	$	404	$	1,387	$	1,208	Operating lease cost	$	484	$	449
Variable lease cost	Variable lease cost	27		15		87		46		Variable lease cost	33		23
Sublease income	Sublease income	(67)		—		(201)		—		Sublease income	—		(67)
Total lease cost	Total lease cost	$	415	$	419	$	1,273	$	1,254	Total lease cost	$	517	$	405

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


	Three Months Ended March 31,
Other Information (in thousands)	2023		2022
Cash paid for amounts included in the measurement of operating lease liabilities	$	583	$	409
Right-of-use assets obtained in exchange for new operating lease liabilities	$	—	$	6,363

Three Months Ended September 30, Nine Months Ended September 30,
Other Information (in thousands) 2022 2021 2022 2021
Cash paid for amounts included in the measurement of operating lease liabilities $ 547 $ 370 $ 1,450 $ 1,051
Right-of-use assets obtained in exchange for new operating lease liabilities $ — $ — $ 6,363 $ —

Lease Term and Discount Rate

September 30, 2022

December 31, 2021

Lease Term and Discount Rate

March 31, 2023

December 31, 2022

Weighted-average remaining lease term(1)

35.2 years

3.3 years

Weighted-average remaining lease term(1)

37.9 years

36.5 years

Weighted-average discount rate(2)

3.75

2.95

Weighted-average discount rate(2)

3.78

3.77

(1)Includes the impact of extension options that we are reasonably certain to exercise. The weighted average remaining lease term as of September 30, 2022 includes the ground lease we assumed in the acquisition of 2970 East 50th Street in March 2022, which has a remaining lease term of approximately 78 years (including the four additional ten-year renewal options). Excluding this ground lease, the weighted average remaining lease term as of September 30, 2022, is 3.5 years.

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

The following table summarizes the maturity of operating of lease liabilities under our corporate office leases and ground leases as of ~~September 30, 2022~~March 31, 2023 (in thousands):


		September 30, 2022			March 31, 2023
October 1, 2022 - December 31, 2022		$	566
2023		2,308
April 1, 2023 - December 31, 2023				April 1, 2023 - December 31, 2023	$	1,725
2024	2024	2,297		2024	2,297
2025	2025	1,122		2025	1,122
2026	2026	681		2026	681
2027				2027	696
Thereafter	Thereafter	20,748		Thereafter	20,051
Total undiscounted lease payments	Total undiscounted lease payments	$	27,722	Total undiscounted lease payments	$	26,572
Less imputed interest	Less imputed interest	(16,361)		Less imputed interest	(16,176)
Total lease liabilities	Total lease liabilities	$	11,361	Total lease liabilities	$	10,396

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7. Interest Rate Derivatives

The following table sets forth a summary of the terms and fair value of our interest rate swaps at ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021~~2022 (dollars in thousands):


						Notional Value(2)				Fair Value of Interest Rate Derivative Assets/ (Liabilities)(3)									Notional Value				Fair Value of Interest Rate Derivative Assets/ (Liabilities)(1)
Derivative Instrument	Derivative Instrument	Effective Date	Maturity Date	Interest Strike Rate(1)		September 30, 2022		December 31, 2021		September 30, 2022		December 31, 2021		Derivative Instrument	Effective Date	Maturity Date	Interest Strike Rate		March 31, 2023		December 31, 2022		March 31, 2023		December 31, 2022
Interest Rate Swaps	Interest Rate Swaps	7/27/2022	5/26/2027	2.8170	%	$	150,000	$	—	$	6,296	$	—	Interest Rate Swaps	7/27/2022	5/26/2027	2.81700	%	$	150,000	$	150,000	$	3,481	$	5,720
Interest Rate Swaps	Interest Rate Swaps	7/27/2022	5/26/2027	2.8175	%	$	150,000	$	—	$	6,269	$	—	Interest Rate Swaps	7/27/2022	5/26/2027	2.81750	%	$	150,000	$	150,000	$	3,466	$	5,702

Interest Rate Swaps														Interest Rate Swaps	4/3/2023	6/30/2025	3.98500	%	$	200,000	$	—	$	(337)	$	—
Interest Rate Swap	Interest Rate Swap	7/22/2019	11/22/2024	2.7625	%	$	—	$	150,000	$	—	$	(7,482)	Interest Rate Swap	4/3/2023	6/30/2025	3.96625	%	$	100,000	$	—	$	(129)	$	—
Interest Rate Swap														Interest Rate Swap	4/3/2023	6/30/2025	3.95300	%	$	100,000	$	—	$	(100)	$	—
Interest Rate Swap														Interest Rate Swap	4/3/2023	7/30/2026	3.71000	%	$	60,000	$	—	$	(269)	$	—

(1)~~As of September 30, 2022, our interest rate swaps were indexed to 1-month SOFR. As of December 31, 2021, our interest rate swap was indexed to 1-month LIBOR.~~

~~(2)Represents the notional value of swaps that are effective as of the balance sheet date presented.~~

~~(3)~~The fair value of derivative assets is included in the line item “Interest rate swap asset” in the accompanying consolidated balance sheets and the fair value of (derivative liabilities) are included in the line item “Interest rate swap liability” in the accompanying consolidated balance sheets.

Derivative instruments that are subject to master netting arrangements and qualify for net presentation in the consolidated balance sheets are presented on a gross basis in the consolidated balance sheets as of March 31, 2023 and December 31, 2022. As of March 31, 2023, if we had recognized these derivative instruments on a net basis, we would have reported an interest rate swap asset of $6.4 million and an interest rate swap liability of $0.3 million, which represent the net balances after the effect of offsetting with counterparties where we had both derivative assets and derivative liabilities.

Transactions

On ~~July~~March 21, ~~2022,~~2023, we executed ~~five~~four forward starting interest rate swap transactions with an aggregate notional value of ~~$300.0~~$400.0 million to manage our exposure to changes in daily SOFR related to a portion of our variable-rate debt. These swaps, which became effective on April 3, 2023 and mature on June 30, 2025, fix daily SOFR at a weighted average rate of 3.97231%. In addition, we also executed an interest rate swap transaction with a notional value of $60.0 million to manage our exposure to changes in Term SOFR related to a portion of our variable-rate debt. ~~These swaps,~~This swap, which became effective ~~commencing~~on April 3, 2023 and matures on July ~~27, 2022 and mature on May 26, 2027, currently~~30, 2026, fix Term SOFR at a ~~weighted average~~ rate of ~~2.81725%~~3.71%. We have designated these interest rate swaps as cash flow hedges.

On ~~May 26, 2022,~~March 28, 2023, in ~~conjunction~~connection with the ~~repayment~~issuance of the ~~$150 million term loan facility,~~$300 Million Notes, we ~~paid $0.6~~executed three treasury rate lock agreements with a combined notional amount of $250.0 million to ~~terminate~~lock the interest rate ~~swap that was used~~of the five-year treasury at 3.64313% (the “T-Locks”). On March 29, 2023, we paid $0.2 million to ~~hedge~~settle the ~~monthly~~T-Locks, which were designated as a cash ~~flows associated with $150.0 million of LIBOR-based variable-rate debt, and which had an unrealized loss~~flow hedges. The settlement value is included in the balance of ~~$0.6 million in~~ AOCI ~~at the time of termination. We are amortizing the loss on this transaction from AOCI~~and will be amortized into interest expense on a straight-line basis over the ~~period beginning from the termination date~~5-year term of the ~~interest rate swap (May 26, 2022) through the original maturity date of the interest rate swap (November 22, 2024).~~$300 Million Notes.

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

Three Months Ended September 30, Nine Months Ended September 30,
2022 2021 2022 2021
Interest Rate Swaps in Cash Flow Hedging Relationships:
Amount of gain (loss) recognized in AOCI on derivatives $ 12,326 $ (2,893) $ 17,743 $ (1,435)
Amount of loss reclassified from AOCI into earnings under “Interest expense”(1)
$ (368) $ (1,993) $ (2,118) $ (6,241)
Total interest expense presented in the Consolidated Statement of Operations in which the effects of cash flow hedges are recorded (line item “Interest expense”) $ 14,975 $ 10,427 $ 34,826 $ 29,772

3025


	Three Months Ended March 31,
	2023		2022
Interest Rate Swaps in Cash Flow Hedging Relationships:
Amount of gain (loss) recognized in AOCI on derivatives	$	(4,206)	$	5,294
Amount of gain (loss) reclassified from AOCI into earnings under “Interest expense”(1)	$	1,136	$	(1,157)
Total interest expense presented in the Consolidated Statement of Operations in which the effects of cash flow hedges are recorded (line item “Interest expense”)	$	13,701	$	9,683

(1)Includes losses that have been reclassified from AOCI into interest expense related to (i) the T-Locks described above, (ii) the treasury rate lock agreements that were settled in August 2021 and for which amounts will continue to be reclassified over the ten-year term of the hedged transaction, ~~(ii)~~(iii) the interest rate swaps that were terminated in ~~November 2020 and~~ August 2021 and for which amounts have been fully reclassified into interest expense ~~as of the~~through their original maturity date ~~of each interest rate swap, which was in August 2021~~(January 2022), and ~~January 2022, respectively, and (iii)~~(iv) the interest rate swap that was terminated in May 2022 ~~as discussed above.~~and for which amount will continue to be reclassified into interest expense through its original maturity date (November 2024).

As of ~~September 30, 2022,~~March 31, 2023, we estimate that approximately ~~$3.5~~$7.8 million of net unrealized gains will be reclassified from AOCI into earnings as a net decrease to interest expense over the next 12 months.

Credit-risk-related Contingent Features

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

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

8. Fair Value Measurements

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

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

Recurring Measurements – Interest Rate Swaps

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

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

Although we have determined that the majority of the inputs used to value our derivatives fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with our derivatives utilize Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by ourselves and our counterparties. However, we have assessed the significance of the impact of the credit valuation adjustments on the overall valuation of our derivative positions and have

determined that the credit valuation adjustments are not significant to the overall valuation of its derivatives. As a result, we have determined that its derivative valuations in their entirety are classified in Level 2 of the fair value hierarchy.

The table below sets forth the estimated fair value of our interest rate swaps as of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, which we measured on a recurring basis by level within the fair value hierarchy (in thousands).


		Fair Value Measurement Using									Fair Value Measurement Using
		Total Fair Value		Quoted Price in Active Markets for Identical Assets and Liabilities (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)			Total Fair Value		Quoted Price in Active Markets for Identical Assets and Liabilities (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
September 30, 2022
March 31, 2023										March 31, 2023
Interest Rate Swap Asset										Interest Rate Swap Asset	$	6,947	$	—	$	6,947	$	—
Interest Rate Swap Liability										Interest Rate Swap Liability	$	(835)	$	—	$	(835)	$	—
December 31, 2022										December 31, 2022
Interest Rate Swap Asset	Interest Rate Swap Asset	$	12,565	$	—	$	12,565	$	—	Interest Rate Swap Asset	$	11,422	$	—	$	11,422	$	—

December 31, 2021

Interest Rate Swap Liability		$	(7,482)	$	—	$	(7,482)	$	—

Financial Instruments Disclosed at Fair Value

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

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

The table below sets forth the carrying value and the estimated fair value of our notes payable as of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021~~2022 (in thousands):


		Fair Value Measurement Using											Fair Value Measurement Using
Liabilities	Liabilities	Total Fair Value		Quoted Price in Active Markets for Identical Assets and Liabilities (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Carrying Value		Liabilities	Total Fair Value		Quoted Price in Active Markets for Identical Assets and Liabilities (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Carrying Value
Notes Payable at:	Notes Payable at:											Notes Payable at:
September 30, 2022		$	1,717,084	$	—	$	—	$	1,717,084	$	1,934,082
December 31, 2021		$	1,404,680	$	—	$	—	$	1,404,680	$	1,399,565
March 31, 2023												March 31, 2023	$	2,062,741	$	—	$	—	$	2,062,741	$	2,230,687
December 31, 2022												December 31, 2022	$	1,740,745	$	—	$	—	$	1,740,745	$	1,936,381

9. Related Party Transactions

Howard Schwimmer

We engage in transactions with Howard Schwimmer, our Co-Chief Executive Officer, earning management fees and leasing commissions from ~~19 properties with approximately 1.0 million rentable square feet owned by~~ entities controlled individually by Mr. Schwimmer. Fees and commissions earned from these entities are included in “Management and leasing services” in the consolidated statements of operations. We recorded $0.2 million and ~~$0.1~~$0.2 million for the three months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021, respectively, and $0.4 million and $0.3 million for the nine months ended September 30, 2022 and 2021,~~ respectively, in management and leasing services revenue.

10. Commitments and Contingencies

Legal

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

Environmental

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

As of ~~September 30, 2022,~~March 31, 2023, we are not aware of any environmental liabilities that would have a material impact on our consolidated financial condition, results of operations or cash flows. However, we cannot be sure that we have identified all environmental liabilities at our properties, that all necessary remediation actions have been or will be undertaken at our properties or that we will be indemnified, in full or at all, in the event that such environmental liabilities arise. Furthermore, we cannot assure you that future changes to environmental laws or regulations and their application will not give rise to loss contingencies for future environmental remediation.

Tenant and Construction Related Commitments

As of ~~September 30, 2022,~~March 31, 2023, we had commitments of approximately ~~$108.8~~$179.7 million for tenant improvement and construction work under the terms of leases with certain of our tenants and contractual agreements with our construction vendors.

Concentrations of Credit Risk

We have deposited cash with financial institutions that are insured by the Federal Deposit Insurance Corporation up to $250,000 per institution. Although we have deposits at institutions in excess of federally insured limits as of ~~September 30,~~December 31, 2022, we do not believe we are exposed to significant credit risk due to the financial position and high credit quality of the institutions in which those deposits are held.

Concentration of Properties in Southern California

As of ~~September 30, 2022,~~March 31, 2023, all of our properties are located in the Southern California infill markets. The ability of the tenants to honor the terms of their respective leases is dependent upon the economic, regulatory and social factors affecting the markets in which the tenants operate and other conditions.

Tenant Concentration

During the ~~nine~~three months ended ~~September 30, 2022,~~March 31, 2023, no single tenant accounted for more than 5% of our total consolidated rental income.

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11. Equity

Preferred Stock

At ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, we had the following series of Cumulative Preferred Shares outstanding (dollars in thousands):

September 30, 2022 December 31, 2021
Series Earliest Redemption Date Dividend Rate Shares Outstanding Liquidation Preference Shares Outstanding Liquidation Preference
Series B November 13, 2022 5.875 % 3,000,000 $ 75,000 3,000,000 $ 75,000
Series C September 20, 2024 5.625 % 3,450,000 86,250 3,450,000 86,250
Total Preferred Shares 6,450,000 $ 161,250 6,450,000 $ 161,250

On August 16, 2021, we redeemed all 3,600,000 shares of our 5.875% Series A Cumulative Redeemable Preferred Stock at $25.00 per share, plus all accrued and unpaid dividends on such shares up to but not including the redemption date.


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

Common Stock

ATM Program

On ~~May 27, 2022,~~February 17, 2023, we established ~~a new~~an at-the-market equity offering program (“ATM program”) pursuant to which we are able to sell from time to time shares of our common stock having an aggregate sales price of up to ~~$1.0~~$1.25 billion (the ~~“Current 2022~~“2023 ATM Program”). The ~~Current 2022~~2023 ATM Program replaces our previous ~~$750.0 million at-the-market equity offering program,~~$1.0 billion ATM Program, which was established on ~~January 13,~~May 27, 2022, ~~(the “Prior 2022 ATM Program”),~~ under which we had sold shares of our common stock having an aggregate gross sales price of ~~$697.5~~$834.6 million through ~~May 27, 2022.~~ February 17, 2023.

In ~~addition,~~connection with our ATM programs, we previously established a $750.0 million at-the-market equity offering program on November 9, 2020 (the “2020 ATM Program”), under which we had sold shares of our common stock having an aggregate gross sales price of $743.9 million through January 13, 2022. We may sell shares of our common stock directly through sales agents or we may enter into forward equity sale agreements with certain financial institutions acting as forward purchasers whereby, at our discretion, the forward purchasers may borrow and sell shares of our common stock under ATM programs. The use of a forward equity sale agreement allows us to lock in a share price on the sale of shares of our common stock at the time the agreement is executed but defer settling the forward equity sale agreements and receiving the proceeds from the sale of shares until a later date. Additionally, the forward price that we expect to receive upon physical settlement of an agreement will be subject to adjustment for (i) a floating interest rate factor equal to a specified daily rate less a spread, (ii) the forward purchaser’s stock borrowing costs and (iii) scheduled dividends during the term of the agreement.

During the three ~~and nine~~ months ended ~~September 30, 2022,~~March 31, 2023, we sold 449,227 shares of common stock directly through sales agents under the 2023 ATM Program at a weighted average price of $60.84 per share, for gross proceeds of $27.3 million, and net proceeds of $27.0 million after deducting the sales agents’ fees.

During the three months ended March 31, 2023, we entered into forward equity sale agreements with certain financial institutions acting as forward purchasers under the ~~Current 2022 ATM Program and Prior 2022~~2023 ATM Program with respect to ~~5,127,587 and 22,882,335~~2,126,824 shares of common stock at a weighted average initial forward sale price of ~~$64.73 and $64.55~~$60.09 per ~~share, respectively.~~share. We did not receive any proceeds from the sale of common shares by the forward purchasers at the time we entered into forward equity sale agreements.

During the three months ended September 30, 2022, we physically settled a portion of the forward equity sale agreements under the Current 2022 ATM Program and Prior 2022 ATM Program by issuing 11,515,553 shares of our common stock for net proceeds of $697.0 million. During the nine months ended September 30, 2022,March 31, 2023, we physically settled the forward equity sale agreement that was outstanding as of December 31, ~~2021~~2022 under ~~the 2020 ATM Program, all the forward equity sale agreements under the Prior 2022~~our previous ATM Program and ~~a portion~~all of the forward equity sale agreements under the ~~Current 2022~~2023 ATM Program by issuing ~~21,885,446~~2,763,708 shares of our common stock for net proceeds of ~~$1.4 billion. The net proceeds for the three and nine months ended September 30, 2022 were calculated~~$163.2 million, based on a weighted average ~~net~~ forward ~~sale~~ price ~~at the time~~ of ~~settlement of $60.53 and $64.99~~$59.04 per share respectively. As of September 30, 2022, we had 2,903,245 shares of common stock, or approximately $188.6 million of forward net proceeds remaining for settlement to occur before the third quarter of 2023, based on net forward sales price of $64.96 per share.at settlement.

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Settlement of 2022 Forward Equity Offering Sale Agreements

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

During the three months ended March 31, 2023, we settled the outstanding 2022 Forward Offering Sale Agreements by issuing 8,291,721 shares of common stock for net proceeds of $462.8 million, based on a weighted average forward price of $55.81 per share at settlement.

Changes in Accumulated Other Comprehensive Income

The following table summarizes the changes in our AOCI balance for the ~~nine~~three months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021,~~ which consists solely of adjustments related to our cash flow hedges (in thousands):
Nine Months Ended September 30,
2022 2021
Accumulated other comprehensive loss - beginning balance $ (9,874) $ (17,709)
Other comprehensive income (loss) before reclassifications 17,743 (1,435)
Amounts reclassified from accumulated other comprehensive loss to interest expense 2,118 6,241
Net current period other comprehensive income 19,861 4,806
Less: other comprehensive income attributable to noncontrolling interests (764) (331)
Other comprehensive income attributable to common stockholders 19,097 4,475
Accumulated other comprehensive income (loss) - ending balance $ 9,223 $ (13,234)


	Three Months Ended March 31,
	2023		2022
Accumulated other comprehensive income (loss) - beginning balance	$	8,247	$	(9,874)
Other comprehensive income (loss) before reclassifications	(4,206)		5,294
Amounts reclassified from accumulated other comprehensive (income) loss to interest expense	(1,136)		1,157
Net current period other comprehensive income (loss)	(5,342)		6,451
Less: other comprehensive (income) loss attributable to noncontrolling interests	212		(251)
Other comprehensive income (loss) attributable to common stockholders	(5,130)		6,200
Accumulated other comprehensive income (loss) - ending balance	$	3,117	$	(3,674)

Noncontrolling Interests

Noncontrolling interests relate to interests in the Operating Partnership, represented by common units of partnership interests in the Operating Partnership (“OP Units”), fully-vested LTIP units, fully-vested performance units, ~~4.43937% Cumulative Redeemable Convertible Preferred Units~~our three series of preferred units of partnership interest in the Operating Partnership (comprised of 4.43937%, 4.00% ~~Cumulative Redeemable Convertible Preferred Units of partnership interest in the Operating Partnership,~~and 3.00% Cumulative Redeemable Convertible Preferred Units ~~of partnership interest in~~(the “CPOP Units”)), and the ~~Operating Partnership (the “Series 3 CPOP Units”) and~~preferred units of the private REIT ~~units, as more fully described below,~~that we acquired on July 18, 2022, that are not owned by us.

Operating Partnership Units

As of ~~September 30, 2022,~~March 31, 2023, noncontrolling interests included ~~5,901,264~~5,821,146 OP Units, ~~659,586~~800,056 fully-vested LTIP units and ~~744,899~~976,352 fully-vested performance units, and represented approximately ~~3.9%~~3.7% of our Operating Partnership. OP Units and shares of our common stock have essentially the same economic characteristics, as they share equally in the total net income or loss and distributions of our Operating Partnership. Investors who own OP Units have the right to cause our Operating Partnership to redeem any or all of their units in our Operating Partnership for an amount of cash per unit equal to the then current market value of one share of common stock, or, at our election, shares of our common stock on a one-for-one basis. See “Note 12 – Incentive Award Plan” for a description of LTIP units and Performance Units.

During the ~~nine~~three months ended ~~September 30, 2022, 87,168~~March 31, 2023, 16,778 OP Units were converted into an equivalent number of shares of common stock, resulting in the reclassification of ~~$3.2~~$0.6 million of noncontrolling interest to Rexford Industrial Realty, Inc.’s stockholders’ equity.

On May 25, 2022, we acquired the property located at 14200-14220 Arminta Street for a purchase price of $80.7 million. As partial consideration for the property, we issued the seller 954,000 OP Units valued at $56.2 million.

~~Issuance of Series 3 CPOP Units~~

On March 17, 2022, we acquired an industrial business park located in Long Beach, California for a contractual purchase price of approximately $24.0 million. In consideration for the property, we (i) paid approximately $12.0 million in cash and (ii) issued the seller 164,998 newly issued Series 3 CPOP Units, valued at $12.0 million.

Holders of Series 3 CPOP Units, when and as authorized by the Company as general partner of the Operating Partnership, are entitled to cumulative cash distributions at the rate of 3.00% per annum of the $72.73 per unit liquidation preference, payable quarterly in arrears on or about the last day of March, June, September and December of each year, beginning on March 31, 2022. The holders of Series 3 CPOP Units are entitled to receive the liquidation preference, which is $72.73 per unit and approximately $12.0 million in the aggregate for all of the Series 3 CPOP Units, before the holders of OP Units in the event of any voluntary or involuntary liquidation, dissolution or winding-up of the affairs of the Operating Partnership.

The Series 3 CPOP Units are convertible (i) at the option of the holder anytime from time to time (the “Holder Conversion Right”), or (ii) at the option of the Operating Partnership, at any time on or after March 17, 2027 (the “Company Conversion Right”), in each case, into OP Units on a one-for one basis, subject to adjustment to eliminate fractional units or to the extent that there are any accrued and unpaid distributions on the Series 3 CPOP Units. As noted above, investors who own

OP Units have the right to cause our Operating Partnership to redeem any or all of their units in our Operating Partnership for an amount of cash per unit equal to the then current market value of one share of our common stock, or, at our election, shares of our common stock on a one for-one basis (the “Subsequent Redemption Right”).

~~The Series 3 CPOP Units rank senior to the Operating Partnership’s OP Units, on parity with the Operating Partnership’s other currently outstanding preferred and CPOP units.~~

Pursuant to relevant accounting guidance, we analyzed the Series 3 CPOP Units for any embedded derivatives that should be bifurcated and accounted for separately and also considered the conditions that would require classification of the Series 3 CPOP Units in temporary equity versus permanent equity. In carrying out our analyses, we evaluated the key features of the Series 3 CPOP Units including the right to discretionary distributions, the Holder Conversion Right, the Company Conversion Right and the Subsequent Redemption Right to determine whether we control the actions or events necessary to issue the maximum number of shares that could be required to be delivered under the share settlement if the Series 3 CPOP Units are converted into shares of our common stock (subsequent to conversion into OP Units). Based on the results of our analyses, we concluded that (i) none of the embedded features of the Series 3 CPOP Units require bifurcation and separate accounting, and (ii) the Series 3 CPOP Units met the criteria to be classified within equity, and accordingly are presented as noncontrolling interests within permanent equity in the consolidated balance sheets.

~~Private REIT Preferred Units~~

On July 18, 2022, we acquired the Merge-West properties through the purchase of a private REIT. The private REIT has 122 units of 12% cumulative redeemable non-voting preferred units (the “private REIT units”) outstanding that are held by unaffiliated third parties. Pursuant to the REIT purchase agreement and corresponding tax indemnification agreement, we have the obligation to maintain the REIT through February 3, 2023, which would prevent us from redeeming the private REIT units until that time. Upon redemption, the private REIT units have a redemption price equal to $1,000 per unit, or an aggregate price of $122,000, plus any distributions thereon that have accrued but have not been paid at the time of such redemption (the “liquidation preference”), plus a redemption premium of $100 per unit if redeemed on or before December 31, 2024. The private REIT units have been classified as noncontrolling interests in our consolidated balance sheets and have a balance equal to the liquidation preference.

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12. Incentive Award Plan

Second Amended and Restated 2013 Incentive Award Plan

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

As of ~~September 30, 2022,~~March 31, 2023, a total of ~~2,479,273~~1,420,237 shares of common stock, LTIP Units, Performance Units and other stock based ~~award~~awards remain available for issuance under the Plan. Shares and units granted under the Plan may be authorized but unissued shares or units, or, if authorized by the board of directors, shares purchased in the open market. If an award under the Plan is forfeited, expires, or is settled for cash, any shares or units subject to such award will generally be available for future awards.

LTIP Units and Performance Units

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

Share-Based Award Activity

The following table sets forth our unvested restricted stock activity and unvested LTIP Unit activity for the ~~nine~~three months ended ~~September 30, 2022:~~March 31, 2023:


		Unvested Awards						Unvested Awards
		Restricted Common Stock			LTIP Units					Restricted Common Stock			LTIP Units
		Number of Shares	Weighted-Average Grant Date Fair Value per Share		Number of Units	Weighted-Average Grant Date Fair Value per Unit				Number of Shares	Weighted-Average Grant Date Fair Value per Share		Number of Units	Weighted-Average Grant Date Fair Value per Unit
Balance at January 1, 2022		249,179	$	45.62	239,709	$	54.99
Balance at January 1, 2023									Balance at January 1, 2023	274,416	$	56.92	313,051	$	54.84
Granted	Granted	133,476	68.15		47,837	68.79			Granted	182,621	$	59.75	64,705	$	57.24
Forfeited	Forfeited	(9,636)	55.28		—	—			Forfeited	(4,773)	$	65.57	—	$	—
Vested(1)	Vested(1)	(97,302)	43.45		(37,540)	61.34			Vested(1)	(86,848)	$	51.59	(53,072)	$	55.81
Balance at September 30, 2022		275,717	$	56.95	250,006	$	56.68
Balance at March 31, 2023									Balance at March 31, 2023	365,416	$	59.48	324,684	$	55.16

(1)During the ~~nine~~three months ended ~~September 30, 2022, 31,230~~March 31, 2023, 29,281 shares of the Company’s common stock were tendered in accordance with the terms of the Plan to satisfy minimum statutory tax withholding requirements associated with the vesting of restricted shares of common stock.

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The following table sets forth the vesting schedule of all unvested share-based awards outstanding as of ~~September 30, 2022:~~March 31, 2023:


		Unvested Awards				Unvested Awards
		Restricted Common Stock	LTIP Units	Performance Units(1)		Restricted Common Stock	LTIP Units	Performance Units(1)
October 1, 2022 - December 31, 2022		1,034	104,176	253,900
2023		111,593	85,717	476,915
April 1, 2023 - December 31, 2023					April 1, 2023 - December 31, 2023	23,727	127,120	476,915
2024	2024	78,231	42,788	366,004	2024	122,423	105,022	366,004
2025	2025	55,895	11,778	—	2025	100,220	74,010	673,188
2026	2026	28,964	5,547	—	2026	73,623	12,040	—
2027					2027	45,423	6,492	—
Total	Total	275,717	250,006	1,096,819	Total	365,416	324,684	1,516,107

(1)Represents the maximum number of Performance Units that would become earned and vested in December of ~~2022,~~ 2023, December of 2024, and ~~2024,~~November/December of 2025, in the event that the specified maximum total shareholder return (“TSR”) and FFO per share growth hurdles are achieved at the end of the three-year performance period for awards that were initially granted in December of ~~2019,~~ 2020, December of 2021, and ~~2021,~~November of 2022, respectively.

Compensation Expense

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


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
		2022		2021		2022		2021			2023		2022
Expensed share-based compensation(1)	Expensed share-based compensation(1)	$	6,316	$	4,506	$	18,710	$	13,230	Expensed share-based compensation(1)	$	8,178	$	6,052
Capitalized share-based compensation(2)	Capitalized share-based compensation(2)	167		90		454		264		Capitalized share-based compensation(2)	195		123
Total share-based compensation	Total share-based compensation	$	6,483	$	4,596	$	19,164	$	13,494	Total share-based compensation	$	8,373	$	6,175

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

(2)For the three ~~and nine~~ months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021,~~ amounts capitalized relate to employees who provide construction services, and are included in “Building and improvements” in the consolidated balance sheets.

As of ~~September 30, 2022,~~March 31, 2023, total unrecognized compensation cost related to all unvested share-based awards was ~~$33.9~~$58.7 million and is expected to be recognized over a weighted average remaining period of 2529 months.

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13. Earnings Per Share

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


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
		2022		2021		2022		2021			2023		2022
Numerator:	Numerator:									Numerator:
Net income	Net income	$	41,648	$	40,186	$	131,449	$	96,866	Net income	$	63,570	$	48,900
Less: Preferred stock dividends	Less: Preferred stock dividends	(2,314)		(2,976)		(6,943)		(10,249)		Less: Preferred stock dividends	(2,314)		(2,314)
Less: Original issuance costs of redeemed preferred stock		—		(3,349)		—		(3,349)

Less: Net income attributable to noncontrolling interests	Less: Net income attributable to noncontrolling interests	(2,368)		(2,173)		(7,142)		(5,852)		Less: Net income attributable to noncontrolling interests	(3,064)		(2,484)
Less: Net income attributable to participating securities	Less: Net income attributable to participating securities	(201)		(143)		(605)		(423)		Less: Net income attributable to participating securities	(320)		(201)
Net income attributable to common stockholders – basic and diluted	Net income attributable to common stockholders – basic and diluted	$	36,765	$	31,545	$	116,759	$	76,993	Net income attributable to common stockholders – basic and diluted	$	57,872	$	43,901

Denominator:	Denominator:									Denominator:
Weighted average shares of common stock outstanding – basic	Weighted average shares of common stock outstanding – basic	171,908,895		138,762,384		165,852,466		134,922,168		Weighted average shares of common stock outstanding – basic	195,366,969		160,628,843
Effect of dilutive securities	Effect of dilutive securities	922,278		868,091		548,968		507,008		Effect of dilutive securities	412,038		419,749

Weighted average shares of common stock outstanding – diluted	Weighted average shares of common stock outstanding – diluted	172,831,173		139,630,475		166,401,434		135,429,176		Weighted average shares of common stock outstanding – diluted	195,779,007		161,048,592

Earnings per share — Basic	Earnings per share — Basic									Earnings per share — Basic
Net income attributable to common stockholders	Net income attributable to common stockholders	$	0.21	$	0.23	$	0.70	$	0.57	Net income attributable to common stockholders	$	0.30	$	0.27
Earnings per share — Diluted	Earnings per share — Diluted									Earnings per share — Diluted
Net income attributable to common stockholders	Net income attributable to common stockholders	$	0.21	$	0.23	$	0.70	$	0.57	Net income attributable to common stockholders	$	0.30	$	0.27

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

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

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

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

We also consider the effect of other potentially dilutive securities, including the CPOP Units and OP Units, which may be redeemed for shares of our common stock under certain circumstances, and include them in our computation of diluted EPS under the if-converted method when their inclusion is dilutive. These units were not dilutive for the periods presented above.

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14. Subsequent Events

Acquisitions

The following table summarizes the ~~property~~properties we acquired subsequent to ~~September 30, 2022:~~March 31, 2023:

Property

Submarket

Date of Acquisition

Rentable Square Feet

Number of Buildings

Contractual Purchase Price
(in thousands)

Property

Submarket

Date of Acquisition

Rentable Square Feet

Number of Buildings

Contractual Purchase Price

(in thousands)(1)

20851 Currier Road

Los Angeles - San Gabriel Valley

10/05/2022

59,412

21,800

13925 Benson Avenue(2)

San Bernardino - Inland Empire West

4/07/2023

38,143

27,500

19301 Santa Fe Avenue

Los Angeles - South Bay

4/14/2023

41,638

14,600

2395-2399 Bateman Avenue

Los Angeles - San Gabriel Valley

4/21/2023

133,869

41,203

Total Subsequent Acquisitions

213,650

83,303

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

(2)Represents the acquisition of a 6.6 acre industrial redevelopment site.

Dividends and Distributions Declared

On ~~October 17, 2022,~~April 14, 2023, our board of directors declared the following quarterly cash dividends/distributions, record dates and payment dates.

Security

Amount per Share/Unit

Record Date

Payment Date

Common stock

~~0.315~~0.38

~~December~~June 30, ~~2022~~2023

~~January~~July 17, 2023

OP Units

~~0.315~~0.38

~~December~~June 30, ~~2022~~2023

~~January~~July 17, 2023

5.875% Series B Cumulative Redeemable Preferred Stock

0.367188

~~December~~June 15, ~~2022~~2023

~~December~~June 30, ~~2022~~2023

5.625% Series C Cumulative Redeemable Preferred Stock

0.351563

~~December~~June 15, ~~2022~~2023

~~December~~June 30, ~~2022~~2023

4.43937% Cumulative Redeemable Convertible Preferred Units

0.505085

~~December~~June 15, ~~2022~~2023

~~December~~June 30, ~~2022~~2023

4.00% Cumulative Redeemable Convertible Preferred Units

0.45

~~December~~June 15, ~~2022~~2023

~~December~~June 30, ~~2022~~2023

3.00% Cumulative Redeemable Convertible Preferred Units

0.545462

~~December~~June 15, ~~2022~~2023

~~December~~June 30, ~~2022~~2023

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

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

Forward-Looking Statements

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

•the competitive environment in which we operate;

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

•decreased rental rates or increasing vacancy rates;

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

•potential bankruptcy or insolvency of tenants;

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

•the timing of acquisitions and dispositions;

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

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

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

•the general level of interest rates;

•potential impacts of inflation;

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

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

•lack of or insufficient amounts of insurance;

•our failure to complete acquisitions;

•our failure to successfully integrate acquired properties;

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

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

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

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

•an epidemic or pandemic, ~~(such as the outbreak and worldwide spread of coronavirus (“COVID-19”), as well as new variants of the virus,~~ and the measures that international, federal, state and local governments, agencies, law enforcement and/or health authorities may implement to address it, which may ~~(as with COVID-19)~~ precipitate or exacerbate one or more

4135

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

•other events outside of our control.

Accordingly, there is no assurance that our expectations will be realized. Except as otherwise required by the federal securities laws, we disclaim any obligations or undertaking to publicly release any updates or revisions to any forward-looking statement contained herein (or elsewhere) to reflect any change in our expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based. The reader should carefully review our financial statements and the notes thereto, as well as the section entitled “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, ~~2021.~~2022.

Company Overview

Rexford Industrial Realty, Inc. is a self-administered and self-managed full-service REIT focused on owning and operating industrial properties in Southern California infill markets. We were formed as a Maryland corporation on January 18, 2013, and Rexford Industrial Realty, L.P. (the “Operating Partnership”), of which we are the sole general partner, was formed as a Maryland limited partnership on January 18, 2013. Through our controlling interest in our Operating Partnership and its subsidiaries, we acquire, own, improve, redevelop, lease and manage industrial real estate principally located in Southern California infill markets, and, from time to time, acquire or provide mortgage debt secured by industrial property. We are organized and conduct our operations to qualify as a REIT under the ~~Internal Revenue~~ Code, ~~of 1986 (the “Code”),~~ as amended, and generally are not subject to federal taxes on our income to the extent we distribute our income to our shareholders and maintain our qualification as a REIT.

As of ~~September 30, 2022,~~March 31, 2023, our consolidated portfolio consisted of ~~345~~362 properties with approximately ~~41.7~~44.0 million rentable square feet.

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

~~2022~~2023 Year to Date Highlights

Financial and Operational Highlights

•Net income attributable to common stockholders increased by ~~51.6%~~31.8% to ~~$116.8~~$57.9 million for the ~~nine~~three months ended ~~September 30, 2022,~~March 31, 2023, compared to the prior year.

•Core funds from operations (Core FFO)(1) attributable to common stockholders increased by ~~52.1%~~34.0% to ~~$244.4~~$102.7 million for the ~~nine~~three months ended ~~September 30, 2022,~~March 31, 2023, compared to the prior year.

•Net operating income (NOI)(1) increased by ~~41.1%~~32.8% to ~~$343.7~~$142.3 million for the ~~nine~~three months ended ~~September 30, 2022,~~March 31, 2023, compared to the prior year.

•Total portfolio occupancy at ~~September 30, 2022~~March 31, 2023 was ~~94.5%~~93.8%.

•Same Property Portfolio(2) average occupancy for the ~~nine~~three months ended ~~September 30, 2022~~March 31, 2023 was ~~98.9%~~98.0% and ending occupancy at ~~September 30, 2022~~March 31, 2023 was ~~98.4%~~98.0%.

•Executed a total of ~~325~~122 new and renewal leases with a combined ~~4.0~~1.8 million rentable square feet, with leasing spreads of ~~82.2%~~80.2% on a GAAP basis and ~~60.9%~~59.7% on a cash basis.

•~~Received credit rating upgrades to BBB+ from S&P and Baa2 from Moody’s.~~

__________________________

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

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

4236

Acquisitions

•During the first quarter of ~~2022,~~2023, we completed 14five acquisitions representing 17seven properties with ~~1.5~~1.8 million rentable square feet of buildings on 8299 acres of land ~~including 13 acres of land for near term redevelopment,~~ for an aggregate purchase price of ~~$457.7 million.~~

•During the second quarter of 2022, we completed the acquisition of 18 properties with 1.4 million rentable square feet of buildings on 85.5 acres of land, including 15 acres of land for near term redevelopment, for an aggregate purchase price of $598.9 million.

•During the third quarter of 2022, we completed the acquisition of 15 properties with 2.2 million rentable square feet of buildings on 105.1 acres of land, including 1 acre of land for near term redevelopment, for an aggregate purchase price of $977.5$762.2 million.

•Subsequent to ~~September 30, 2022,~~March 31, 2023, we completed the acquisition of ~~one property~~three properties with ~~a 59,412~~213,650 rentable square ~~foot~~feet of building on ~~2.8~~15.0 acres of land, for a purchase price of ~~$21.8~~$83.3 million.

Dispositions

•During the first quarter of ~~2022,~~2023, we sold one property with ~~79,247~~48,394 rentable square feet for a gross sales price of ~~$16.5~~$17.0 million and recognized ~~$8.5~~$12.1 million in gains on sale of real estate.

Repositioning & Redevelopment

•During the first quarter of ~~2022,~~2023, we ~~stabilized our 111,260 rentable square foot redevelopment property located at 29025-29055 Avenue Paine.~~

•~~During the second quarter~~completed construction of ~~2022, we stabilized our 62,607 rentable square foot repositioning property located at 900 East Ball Road.~~

•~~During the third quarter of 2022, we stabilized two of our repositioning properties located at 11600 Los Nietos Road and 3441 MacArthur Boulevard, which have a combined 230,353 rentable square feet.~~

•~~As of September 30, 2022, five~~four of our repositioning/redevelopment properties ~~which are~~ located at 12133 Greenstone Avenue, ~~15650-15700 Avalon Boulevard, 19475 Gramercy Place, 19431 Santa Fe~~12821 Knott Street, 8210-8240 Haskell Avenue and ~~415-435 Motor~~15601 Avalon Boulevard. As of March 31, 2023, these four properties and our property located at 14100 Vine Place, were in the lease-up stage. 12133 Greenstone Avenue, ~~have~~a single-tenant container storage facility, has been ~~pre-leased.~~pre-leased and expected to commence in the second quarter of 2023.

Equity

•During the first quarter of ~~2022,~~2023, we issued 11,504,656 shares of common stock for total net proceeds of $653.0 million through a range of equity transactions, as follows:

◦We sold 449,227 shares of common stock directly through sales agents under our at-the-market equity offering program at a weighted average price of $60.84 per share, for gross proceeds of $27.3 million, and net proceeds of $27.0 million after deducting the sales agents’ fee.

◦We entered into forward equity sales agreements under our at-the-market equity offering program with respect to ~~5,752,268~~2,126,824 shares of our common stock at a weighted average initial forward sale price of ~~$70.32~~$60.09 per share. ~~In March 2022, we partially~~We settled these forward equity sale agreements and the outstanding forward ~~equity~~ sale agreement under our at-the-market equity offering program from ~~2021~~2022 by issuing ~~4,402,110~~2,763,708 shares of common stock in exchange for net proceeds of ~~$305.9 million.~~$163.2 million, based on a weighted average forward price of $59.04 per share at settlement.

•◦~~During~~We settled the ~~second quarter of 2022, we entered into~~outstanding forward equity sales agreements ~~under~~from our ~~at-the-market equity~~November 2022 underwritten public offering ~~program with respect to 12,002,480~~by issuing 8,291,721 shares of common stock at a weighted average initial forward sale price of $61.73 per share. In June 2022, we partially settled these forward equity sale agreements and part of the outstanding forward equity sale agreement from the first quarter of 2022 by issuing 5,967,783 shares of common stock in exchange for net proceeds of ~~$419.4 million.~~

•~~During the third quarter of 2022, we entered into forward equity sales agreements under our at-the-market equity offering program with respect to 5,127,587 shares of common stock at~~$462.8 million, based on a weighted average ~~initial~~ forward ~~sale~~ price of ~~64.73~~$55.81 per share. In September 2022, we partially settled these forward equity sale agreements and the outstanding forward equity sale agreements from the second quarter of 2022 by issuing 11,515,553 shares of common stock in exchange for net proceeds of $697.0 million.

•~~As of September 30, 2022, we had 2,903,245 shares of common stock, or approximately $188.6 million of forward net proceeds remaining for settlement to occur before the fourth quarter of 2023.~~share at settlement.

Financing

•In ~~May 2022,~~February 2023, we ~~amended~~certified that the sustainability performance target associated with our senior unsecured credit agreement ~~to, among other changes, increase~~was met for 2022, resulting in the ~~borrowing capacity~~reduction of ~~our unsecured revolving~~the applicable margin and applicable credit facility ~~to $1.0 billion from $700.0 million~~fee by 0.04% and ~~to add a $300.0 million unsecured term loan. The proceeds from the $300.0 million unsecured term loan were used to repay our $150.0 million~~

~~unsecured term loan facility due in 2025, terminate the associated swap, partially repay outstanding borrowings under the unsecured revolving credit facility and for general corporate purposes.~~

•On July 19, 2022, we amended our senior unsecured credit agreement to add a $400.0 million unsecured term loan with a maturity date of July 19, 2024 (with two extension options of one year each). Proceeds were used to fund acquisitions, reduce outstanding borrowings under the unsecured revolving credit facility and for general corporate purposes.0.01%, respectively.

•~~On July 21, 2022,~~In March 2023, we completed an underwritten public offering of $300.0 million of 5.000% Senior Notes due 2028 (the “$300 Million Notes”). The $300 Million Notes were issued to the public at 98.975% of the principal amount, and net proceeds were $295.1 million after deducting the underwriting discount.

•In March 2023, we executed ~~five~~four forward starting interest rate ~~swap transactions~~swaps with an aggregate notional value of ~~$300.0~~$400.0 million to ~~manage our exposure to changes in Term~~fix daily SOFR related to ~~a portion of~~ our ~~variable-rate debt. These swaps, which are effective July 27, 2022, and mature on May 26, 2027, currently fix Term SOFR~~$400.0 million term loan at a ~~weighted average~~ rate of ~~2.81725%~~3.97231% commencing on April 3, 2023 and maturing on June 30, 2025, resulting in an all-in fixed rate of 4.83231%.

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

Factors That May Influence Future Results of Operations

Market and Portfolio Fundamentals

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

The infill Southern California industrial real estate sector has continued to exhibit strong fundamentals. These high-barrier infill markets are characterized by a relative scarcity of ~~available~~highly functional product, generally operating at or above approximately 98% occupancy, coupled with the limited ability to introduce new supply due to high land and redevelopment costs and a dearth of developable land in markets experiencing a net reduction in supply as over time more industrial property is converted to non-industrial uses than can be delivered. ~~Consequently, available industrial supply has continued to decrease in many of our target infill submarkets and construction deliveries have fallen short of demand.~~ Meanwhile, underlying tenant demand within our infill target markets continues to demonstrate growth, illustrated or driven by strong re-leasing spreads and renewal activity, a dynamic regional economy, growth in ecommerce transaction and delivery volumes, as well as further compression of delivery time-frames to consumers and to businesses, increasing the significance of last-mile facilities for timely fulfillment. That said, economic uncertainties as a result of inflation and increasing interest rates along with fluctuations of west coast port activity and port labor negotiations could impact future demand, rental rates and vacancy within our infill Southern California market.

Tenant demand remains strong within our portfolio, which is strategically located within prime infill Southern California industrial markets. The quality and intensity of tenant demand through the ~~third~~first quarter of ~~2022~~2023 is demonstrated through the Company’s strong leasing spreads and volume, achieving rental rates and related terms from new and renewing tenants that have generally exceeded those from ~~prior periods~~historical years (see “—Leasing Activity and Rental Rates” below). This tenant demand has been driven by a wide range of sectors, from consumer products, healthcare and medical products to aerospace, food, construction and logistics, as well as by an emerging electric vehicle industry, among other sectors. ~~In the last several quarters, we have observed~~We continue to observe a notable ~~increase in~~volume of ecommerce-oriented tenants securing space within our portfolio, in part driven by the impacts of the COVID-19 pandemic, which ~~has~~ accelerated the growth in the range and volume of goods and customers transacting through ecommerce. In addition, ecommerce-related delivery demand associated with last-mile distribution isand local omnichannel retail fulfillment are driving discernible shifts in inventory-handling strategies among retailers and distributors, which we believe is driving incremental demand for our infill property locations. Our portfolio, which we believe represents prime locations with superior functionality within the largest last-mile logistics distribution market in the nation, is well-positioned to continue to serve our existing diverse tenant base and attract incremental ecommerce-oriented and traditional distribution demand.

We believe our portfolio’s leasing performance during the ~~third~~first quarter of ~~2022~~2023 has generally outpaced that of the infill markets within which we operate, although, as discussed in more detail below, our target infill markets continue to operate at or near historically high levels of occupancy. We believe this performance has been driven by our highly entrepreneurial business model focused on acquiring and improving industrial property in superior locations so that our portfolio reflects a higher level of quality and functionality, on average, as compared to typical available product within the markets within which we operate. We also believe the quality and entrepreneurial approach demonstrated by our team of real estate professionals actively managing our properties and our tenants enables the potential to outcompete within our markets that we believe are generally otherwise owned by more passive, less-focused real estate owners.

General Market Conditions

The following are general market conditions and do not necessarily reflect the results of our portfolio. For our portfolio specific results see “—Rental Revenues” and “—Results of Operations” below.

In Los Angeles County, market fundamentals ~~were very~~remained strong during the ~~third~~first quarter of ~~2022. Average~~2023. Vacancy increased quarter-over-quarter while still remaining at historically low levels, and average asking lease rates increased ~~significantly both~~moderately quarter-over-quarter ~~and year-over-year, reaching an all-time~~as demand remained high, ~~due to high levels of sustained demand and near-record low vacancy levels, with several submarkets retaining sub 1% vacancy rates.~~although below peaks in 2022. Current market conditions indicate rents are likely to continue to increase through the remainder of ~~2022~~2023, but at a more modest pace compared to recent years, as demand has been ~~consistently strong,~~

steady, occupancy still remains at near capacity levels and new development is limited by a lack of land availability and an increase in land and development costs.

In Orange County, market fundamentals ~~were very~~remained strong during the ~~third~~first quarter of ~~2022.~~2023. Average asking lease rates increased moderately quarter-over-quarter ~~reaching a record high, although rising at a decreasing rate these past two quarters,~~ and vacancy ~~decreased~~increased slightly quarter-over-quarter ~~to a new historic~~while still remaining at near-record low ~~achieving sub 1%~~ vacancy ~~for the first time ever. Current~~levels. While lease rate growth has slowed over recent quarters, current market conditions indicate rents are likely to increase through the remainder of ~~2022~~2023 due to high demand and the continued low availability of industrial product in this region.

In San Diego, vacancy increased quarter-over-quarter ~~from last quarter’s record~~while still remaining at historically low levels and average asking lease rates increased quarter-over-quarter.

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

Lastly, in the Inland Empire ~~new industrial product continues to be absorbed well in the market. In the Inland Empire~~ West, which contains infill markets in which we operate, vacancy increased quarter-over-quarter, ~~but remained near historic lows. While overall~~in part due to the volume of vacant construction deliveries, and average ~~taking~~asking lease rates increased significantly year-over-year, they decreased quarter-over-quarter, primarily driven by leasing activity at larger big-box properties with over 500,000 square feet. For smaller properties with less than 500,000 square feet, such as those that we own, taking lease rates increasedslightly quarter-over-quarter. Current market conditions indicate rents are likely to continue to increase ~~at smaller properties~~ through the remainder of 2023, though

at a moderated pace when compared to 2022 ~~due to limited availability and persistent high levels of demand.~~growth. We generally do not focus on properties located within the non-infill Inland Empire East sub-market where available land and the development and construction pipeline for new supply is substantial.

Acquisitions and Value-Add Repositioning and Redevelopment of Properties

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

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

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

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

A repositioning is generally considered complete once the investment is fully or nearly fully deployed and the property is available for occupancy. Because each repositioning effort is unique and determined based on the property, targeted tenants

and overall trends in the general market and specific submarket, the timing and effect of the repositioning on our rental revenue and occupancy levels will vary, and, as a result, will affect the comparison of our results of operations from period to period with limited predictability.

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

As of ~~September 30, 2022, 16~~March 31, 2023, 19 of our properties were under current repositioning or redevelopment and ~~one~~five of our properties ~~was~~were in the lease-up stage. In addition, we have a pipeline of 8eight additional properties for which we anticipate beginning repositioning/redevelopment construction work between the ~~fourth~~third quarter of ~~2022~~2023 and the first quarter of 2024. The tables below set forth a summary of these properties, as well as the properties that were most recently stabilized in ~~2021 and~~ 2022, as the timing of these stabilizations have a direct impact on our current and comparative results of operations. We consider a repositioning/redevelopment property to be stabilized upon the earlier of (i) reaching 90% occupancy or (ii) one year from the date construction work is completed.

Estimated Construction Period(1)
Property (Submarket) Market
Total Property Rentable Square Feet(2)
Repositioning/ Lease-up Rentable Square Feet(2)
Start Completion Total Property Leased % at 9/30/2022
Current Repositioning:
12821 Knott Street (West OC)(3)
OC 165,171 165,171 1Q-2019 1Q-2023 —%
12133 Greenstone Avenue (Mid-Counties)(4)
LA LAND LAND 1Q-2021 4Q-2022
100%(4)
15650-15700 Avalon Boulevard (South Bay) LA 98,259 98,259 3Q-2021 4Q-2022
100%(5)
8210-8240 Haskell Avenue (SF Valley) LA 52,934 52,934 1Q-2022 4Q-2022 —%
19431 Santa Fe Avenue (South Bay) LA LAND LAND 1Q-2022 1Q-2023
100%(6)
14100 Vine Place (Mid-Counties) LA 122,514 122,514 2Q-2022 4Q-2022 —%
19475 Gramercy Place (South Bay) LA 47,712 47,712 3Q-2022 4Q-2022
100%(7)
Total Current Repositioning 486,590 486,590

Estimated Construction Period(1)

Property (Submarket)

Market

Total Property Rentable Square Feet(2)

Repositioning/ Lease-up Rentable Square Feet(2)

Start

Completion

Total Property Leased % at 3/31/2023

Current Repositioning:

19431 Santa Fe Avenue (South Bay)

LAND

1Q-2022

2Q-2023

100%(3)

20851 Currier Road (SG Valley)

59,412

1Q-2023

2Q-2023

—%

2800 Casitas Avenue (SF Valley)

117,234

1Q-2023

3Q-2023

—%

444 Quay Avenue (South Bay)

26,700

1Q-2023

4Q-2023

—%

500 Dupont Avenue (IE - West)

274,898

1Q-2023

1Q-2024

—%

11308-11350 Penrose Street (SF Valley)

151,604

71,547

1Q-2023

2Q-2024

52%

Total Current Repositioning

629,848

549,791

Lease-up (Repositioning):

12821 Knott Street (West OC)(4)

165,171

1Q-2019

1Q-2023

—%

12133 Greenstone Avenue (Mid-Counties)(5)

LAND

1Q-2021

1Q-2023

100%

8210-8240 Haskell Avenue (SF Valley)

52,934

1Q-2022

1Q-2023

28%

14100 Vine Place (Mid-Counties)

122,514

2Q-2022

4Q-2022

—%

Total Lease-up (Repositioning)

340,619

Future Repositioning:

29120 Commerce Center Drive (SF Valley)

135,258

3Q-2023

1Q-2024

100%

1010 Belmont Street (IE - West)

61,824

3Q-2023

3Q-2024

100%

Total Future Repositioning

197,082

Estimated Construction Period(1)

Property (Submarket)

Market

Estimated Redevelopment Rentable Square Feet~~(8)~~(6)

Start

Completion

Total Property Leased % at ~~9/30/2022~~3/31/2023

Current Redevelopment:

~~15601 Avalon Boulevard (South Bay)~~

~~86,879~~

~~3Q-2021~~

~~4Q-2022~~

—%

1055 Sandhill Avenue (South Bay)

~~127,853~~127,857

3Q-2021

~~3Q-2023~~1Q-2024

—%

9615 Norwalk Boulevard (Mid-Counties)

201,571

3Q-2021

~~4Q-2023~~2Q-2024

—%

9920-10020 Pioneer Boulevard (Mid-Counties)

162,231

4Q-2021

1Q-2024

—%

12752-12822 Monarch Street (West OC)~~(9)~~(7)

161,711

1Q-2022

2Q-2023

See footnote ~~(9)~~(7)

1901 Via Burton (North OC)

139,449

1Q-2022

~~4Q-2023~~1Q-2024

—%

3233 Mission Oaks Boulevard (Ventura)~~(10)~~(8)

117,358

2Q-2022

~~4Q-2023~~2Q-2024

—%

6027 Eastern Avenue (Central LA)

~~92,781~~93,498

3Q-2022

~~4Q-2023~~1Q-2024

—%

8888-8892 Balboa Avenue (Central SD)

123,488

3Q-2022

2Q-2024

—%

2390-2444 American Way (North OC)

100,483

4Q-2022

1Q-2024

—%

12118 Bloomfield Avenue (Mid-Counties)

107,045

4Q-2022

2Q-2024

—%

4416 Azusa Canyon Road (SG Valley)

130,063

4Q-2022

2Q-2024

—%

3071 Coronado Street (North OC)

105,173

1Q-2023

1Q-2024

—%

15010 Don Julian Road (SG Valley)

219,242

1Q-2023

2Q-2024

—%

Total Current Redevelopment

~~1,213,321~~1,789,169

– See footnotes starting on the following page –

4640

Estimated Construction Period(1)

Property (Submarket)

Market

Estimated Redevelopment Rentable Square Feet(8)

Start

Completion

Total Property Leased % at 9/30/2022

Property (Submarket)

Market

Estimated Redevelopment Rentable Square Feet(6)

Start

Completion

Total Property Leased % at 3/31/2023

Lease-up (Redevelopment):

415-435 Motor Avenue (San Gabriel Valley)

94,321

2Q-2021

3Q-2022

100%(11)

15601 Avalon Boulevard (South Bay)

86,879

3Q-2021

1Q-2023

—%

Total Lease-up (Redevelopment)

94,321

Total Lease-up (Redevelopment)

86,879

Future Redevelopment:

12118 Bloomfield Avenue (Mid-Counties)

109,570

4Q-2022

1Q-2024

—%

4416 Azusa Canyon Road (San Gabriel Valley)

130,063

4Q-2022

1Q-2024

—%

2390-2444 American Way (North OC)

97,170

4Q-2022

1Q-2024

—%

15010 Don Julian Road (San Gabriel Valley)

219,242

4Q-2022

1Q-2024

—%

3071 Coronado Street (North OC)

107,000

1Q-2023

1Q-2024

100%

12772 San Fernando Road (San Fernando Valley)

143,421

3Q-2023

3Q-2024

52%

12772 San Fernando Road (SF Valley)

143,421

3Q-2023

3Q-2024

52%

19900 Plummer Street (SF Valley)

79,900

3Q-2023

4Q-2024

100%

17907-18001 Figueroa Street (South Bay)

75,392

4Q-2023

4Q-2024

100%

21515 Western Avenue (South Bay)

84,100

4Q-2023

4Q-2024

—%

21515 Western Avenue (South Bay)

84,100

4Q-2023

4Q-2024

—%

1500 Raymond Avenue (North OC)

138,497

4Q-2023

1Q-2025

—%

13711 Freeway Drive (Mid-Counties)

108,000

1Q-2024

2Q-2025

100%

13711 Freeway Drive (Mid-Counties)

104,500

1Q-2024

2Q-2025

100%

Total Future Redevelopment

998,566

Total Future Redevelopment

625,810

Stabilized(12)
Market Stabilized Rentable Square Feet Period Stabilized Total Property Leased % at 9/30/2022
29025-29055 Avenue Paine (San Fernando Valley) LA 111,260 1Q-2022 100%
900 East Ball Road (North OC) OC 62,607 2Q-2022 100%
11600 Los Nietos Road (Mid-Counties) LA 106,251 3Q-2022 100%
3441 MacArthur Boulevard (OC Airport) OC 124,102 3Q-2022 100%
Total 2022 Stabilized 404,220
The Merge (Inland Empire West) SB 333,544 2Q-2021 100%
16221 Arthur Street (Mid-Counties) LA 61,372 2Q-2021 100%
Rancho Pacifica Buildings 1 & 6 (South Bay)(13)
LA 488,114 3Q-2021 100%
8745-8775 Production Avenue (Central SD) SD 26,200 3Q-2021 100%
19007 Reyes Avenue (South Bay) LA LAND 3Q-2021 100%
851 Lawrence Drive (Ventura) VC 90,773 3Q-2021 100%
Total 2021 Stabilized 1,000,003

Stabilized(9)

Market

Stabilized Rentable Square Feet

Period Stabilized

Total Property Leased % at 3/31/2023

29025-29055 Avenue Paine (San Fernando Valley)

111,260

1Q-2022

100%

900 East Ball Road (North OC)

62,607

2Q-2022

100%

11600 Los Nietos Road (Mid-Counties)

106,251

3Q-2022

100%

3441 MacArthur Blvd. (OC Airport)

124,102

3Q-2022

100%

415-435 Motor Avenue (SG Valley)

94,321

4Q-2022

100%

15650-15700 Avalon Blvd. (South Bay)

98,259

4Q-2022

100%

19475 Gramercy Place (South Bay)

47,712

4Q-2022

100%

Total 2022 Stabilized

644,512

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

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

(3)~~At 12821 Knott Street, we are repositioning the existing 120,800 rentable square foot building and constructing~~

~~approximately 45,000 rentable square feet of new warehouse space.~~

~~(4)~~At 12133 Greenstone Avenue, a 4.8 acre industrial site, we demolished the existing 12,586 rentable square foot truck terminal building to provide greater functionality as a single tenant container storage facility. As of ~~September 30, 2022, the property has been pre-leased with the lease expected to commence in the fourth quarter of 2022, subject to completion of repositioning work.~~

~~(5)As of September 30, 2022, 15650-15700 Avalon Boulevard has been pre-leased with the lease expected to commence in the fourth quarter of 2022, subject to completion of redevelopment work.~~

~~(6)As of September 30, 2022,~~March 31, 2023, 19431 Santa Fe Avenue has been leased and the tenant is occupying a portion of the property. The tenant is expected to take full occupancy in the second quarter of 2023, subject to completion of repositioning work.

~~(7)~~(4)At 12821 Knott Street, we repositioned the existing 120,800 rentable square foot building and constructing approximately 45,000 rentable square feet of new warehouse space.

(5)As of ~~September 30, 2022, 19474 Gramercy Place~~March 31, 2023, 12133 Greenstone Avenue, a single-tenant container storage facility, has been pre-leased with the lease expected to commence in the ~~fourth~~second quarter of ~~2022, subject to completion of repositioning work.~~2023.

~~(8)~~(6)Represents the estimated rentable square footage of the project upon completion of redevelopment.

~~(9)~~

(7)As of ~~September 30, 2022,~~March 31, 2023, 12752-12822 Monarch Street comprises 271,268 rentable square feet. The project includes 111,325 rentable square feet with tenants in-place that are not being redeveloped. We are repositioning 63,815 rentable square feet, and have demolished 99,925 rentable square feet and have begun construction of a new 97,896 rentable square feet building in its place. At completion, the total project will contain 273,036 rentable square feet.

~~(10)~~(8)As of ~~September 30, 2022,~~March 31, 2023, 3233 Mission Oaks Boulevard comprises 409,217 rentable square feet that are currently occupied and not being redeveloped. We plan to construct one new building comprising 117,358 rentable square feet. We are also performing site work across the entire project. At completion, the total project will contain 526,575 rentable square feet.

~~(11)As of September 30, 2022, 415-435 Motor Avenue has been pre-leased with the lease expected to commence in the fourth quarter of 2022.~~

~~(12)~~(9)We consider a repositioning property to be stabilized upon the earlier of (i) reaching 90% occupancy or (ii) one year from the date construction work is completed.

~~(13)~~Rancho Pacifica Buildings 1 & 6 are located at 2301-2329 Pacifica Place and 2332-2366 Pacifica Place, and represent two buildings totaling 488,114 rentable square feet, out of six buildings at our Rancho Pacifica Park property, which have a total 1,152,883 rentable square feet. Property leased percentage reflects the two buildings.

Capitalized Costs

Properties that are nonoperational as a result of repositioning or redevelopment activity may qualify for varying levels of interest, insurance and real estate tax capitalization during the redevelopment and construction period. An increase in our repositioning and redevelopment activities resulting from value-add acquisitions could cause an increase in the asset balances qualifying for interest, insurance and tax capitalization in future periods. We capitalized ~~$3.6 million and $8.0~~$5.0 million of interest expense and ~~$1.5 million and $3.9~~$1.6 million of insurance and real estate tax expenses during the three ~~and nine~~ months ended ~~September 30, 2022, respectively,~~March 31, 2023, related to our repositioning and redevelopment projects.

Construction Costs and Timing

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

Rental Revenues

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

Occupancy Rates

As of ~~September 30, 2022,~~March 31, 2023, our consolidated portfolio, inclusive of space in repositioning as described in the subsequent paragraph, was approximately ~~94.5%~~93.8% occupied, while our stabilized consolidated portfolio exclusive of such space was approximately ~~97.8%~~97.4% occupied. We believe the opportunity to increase occupancy at our properties will be an important driver of future revenue growth. An opportunity to drive this growth will derive from the completion and lease-up of repositioning and redevelopment projects that are currently under construction.

As summarized in the tables under “—Acquisitions and Value-Add Repositioning and Redevelopment of Properties” above, as of ~~September 30, 2022, 16~~March 31, 2023, 19 of our properties with a combined ~~1.7~~2.3 million of estimated rentable square feet at completion are under current repositioning or redevelopment, ~~one property is~~five properties with a combined 0.4 million of rentable square feet are in lease-up, and we have a near-term pipeline of eight repositioning and redevelopment projects with a combined ~~1.0~~0.8 million of estimated rentable square feet at completion. Additionally, we have 0.3 million rentable square feet of other repositioning projects. Vacant space at these properties is concentrated in our Los Angeles, ~~and~~ Orange County and San Bernardino markets and represents ~~3.4%~~3.6% of our total consolidated portfolio square footage as of ~~September 30, 2022.~~March 31, 2023. Including vacant space at these properties, our weighted average occupancy rate as of ~~September 30, 2022~~March 31, 2023 in our Los Angeles, ~~and~~ Orange County and San Bernardino markets was ~~94.1%~~94.9%, 90.3% and ~~92.5%~~90.5%, respectively. Excluding vacant space at these properties, our weighted average occupancy rate as of ~~September 30, 2022,~~March 31, 2023, in these markets was ~~98.6%~~98.0%, 99.5% and ~~99.0%~~94.9%, respectively. We believe that an important portion of our long-term future growth will come from the completion of these projects currently under or scheduled for repositioning/redevelopment, as well as through the identification or acquisition of new opportunities for repositioning and redevelopment, whether in our existing portfolio or through new investments, which may vary from period to period subject to market conditions.

The occupancy rate of properties not undergoing repositioning is affected by regional and local economic conditions in our Southern California infill markets. In the last several years, the Los Angeles, Orange County, San Bernardino and San ~~Bernardino~~Diego markets have continued to show historically low vacancy and positive absorption, resulting from the combination of sustained high tenant demand and low product availability. Accordingly, our properties in these markets have generally exhibited a similar trend. We believe that general market conditions will remain positive through the remainder of ~~2022,~~2023, and the opportunity to increase occupancy and rental rates at our properties will be an important driver of future revenue growth; however, there can be no assurance that recent positive market trends will continue.

Leasing Activity and Rental Rates

The following tables set forth our leasing activity for new and renewal leases for the three ~~and nine~~ months ended ~~September 30, 2022:~~March 31, 2023:

New Leases
Quarter Number
of Leases Rentable Square Feet Weighted Average Lease Term
(in years)
Effective Rent Per Square Foot(1)
GAAP Leasing Spreads(2)(4)
Cash Leasing Spreads(3)(4)
Q1-2022 35 314,567 4.4 $ 23.19 66.3 % 49.1 %
Q2-2022 36 649,099 5.8 $ 22.98 107.6 % 76.6 %
Q3-2022 53 702,882 4.6 $ 25.29 70.5 % 53.6 %
Total/Weighted Average 124 1,666,548 5.0 $ 23.99 82.3 % 60.5 %


	New Leases
Quarter	Number of Leases	Rentable Square Feet	Weighted Average Lease Term (in years)	Effective Rent Per Square Foot(1)		GAAP Leasing Spreads(2)(4)		Cash Leasing Spreads(3)(4)



Q1-2023	54	522,288	3.6	$	21.41	108.8	%	87.6	%

Renewal Leases Expired Leases
Retention %(7)
Quarter Number
of Leases Rentable Square Feet Weighted Average Lease Term
(in years)
Effective Rent Per Square Foot(1)
GAAP Leasing Spreads(2)(5)
Cash Leasing Spreads(3)(5)
Number
of Leases
Rentable Square Feet(6)
Rentable Square Feet
Q1-2022 54 552,828 3.4 $ 21.13 72.8 % 59.9 % 94 1,153,547 83.9 %
Q2-2022 70 745,840 3.9 $ 19.48 73.0 % 55.3 % 130 1,625,064 66.0 %
Q3-2022 77 994,945 4.6 $ 21.50 95.3 % 66.3 % 125 1,736,079 72.3 %
Total/Weighted Average 201 2,293,613 4.1 $ 20.75 82.2 % 61.1 % 349 4,514,690 72.5 %


	Renewal Leases									Expired Leases		Retention %(7)
Quarter	Number of Leases	Rentable Square Feet	Weighted Average Lease Term (in years)	Effective Rent Per Square Foot(1)		GAAP Leasing Spreads(2)(5)		Cash Leasing Spreads(3)(5)		Number of Leases	Rentable Square Feet(6)	Rentable Square Feet



Q1-2023	68	1,254,005	4.1	$	22.02	74.9	%	54.5	%	136	2,461,943	83.3	%

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

(2)Calculated as the change between GAAP rents for new or renewal leases and the expiring GAAP rents on the expiring leases for the same space.

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

(4)The GAAP and cash re-leasing spreads for new leases executed during the ~~nine~~three months ended ~~September 30, 2022,~~March 31, 2023, exclude 2318 leases aggregating ~~771,264~~235,570 rentable square feet for which there was no comparable lease data. Of these 2318 excluded leases, ~~six~~12 leases for ~~472,500~~140,457 rentable square feet were recently repositioned/redeveloped space. Comparable leases generally exclude: (i) space that has never been occupied under our ownership, (ii) recently repositioned/redeveloped space, (iii) space that has been vacant for over one year or (iv) space with lease terms shorter than six months.

(5)The GAAP and cash re-leasing rent spreads ~~exclude five~~for renewal leases ~~(antenna/parking lot)~~ executed during the ~~nine~~three months ended ~~September 30, 2022.~~March 31, 2023, exclude one lease with 3,750 rentable square feet.

(6)Includes leases totaling ~~873,712~~716,193 rentable square feet that expired during the ~~nine~~three months ended ~~September 30, 2022,~~March 31, 2023, for which the space has been or will be placed into repositioning (including “other repositioning projects”) or redevelopment.

(7)Retention is calculated as renewal lease square footage plus relocation/expansion square footage, divided by the square footage of leases expiring during the period. Retention excludes square footage related to the following: (i) expiring leases associated with space that is placed into repositioning (including “other repositioning projects” ~~beginning in the second quarter of 2022)~~) after the tenant vacates, (ii) early terminations with pre-negotiated replacement leases and (iii) move outs where space is directly leased by subtenants. ~~Retention for the first quarter of 2022 has been adjusted to conform to the current definition.~~

5043

Our leasing activity is impacted both by our repositioning and redevelopment efforts, as well as by market conditions. While we reposition a property, its space may become unavailable for leasing until completion of our repositioning efforts. As of ~~September 30, 2022,~~March 31, 2023, we have 1619 current repositioning/redevelopment projects with estimated construction completion periods ranging from the ~~fourth~~second quarter of ~~2022~~2023 through the ~~first~~second quarter of 2024, and an additional 8 repositioning and redevelopment projects in our pipeline with estimated construction completion dates through the second quarter of 2025. We expect these properties to have positive impacts on our leasing activity and revenue generation as we complete our value-add plans and place these properties in service.

Scheduled Lease Expirations

Our ability to re-lease space subject to expiring leases is affected by economic and competitive conditions in our markets and by the relative desirability of our individual properties, which may impact our results of operations. The following table sets forth a summary schedule of lease expirations for leases in place as of ~~September 30, 2022,~~March 31, 2023, for each of the 10 full and partial calendar years beginning with ~~2022~~2023 and thereafter, plus space that is available and under current repositioning.


Year of Lease Expiration	Year of Lease Expiration	Number of Leases Expiring	Total Rentable Square Feet(1)	Percentage of Total Owned Square Feet		Annualized Base Rent(2)		Percentage of Total Annualized Base Rent(3)		Annualized Base Rent per Square Foot(4)		Year of Lease Expiration	Number of Leases Expiring	Total Rentable Square Feet(1)	Percentage of Total Owned Square Feet		Annualized Base Rent(2)		Percentage of Total Annualized Base Rent(3)		Annualized Base Rent per Square Foot(4)
Vacant(5)	Vacant(5)	—	894,587	2.1	%	$	—	—	%	$	—	Vacant(5)	—	1,111,325	2.5	%	$	—	—	%	$	—
Repositioning/Redevelopment(6)	Repositioning/Redevelopment(6)	—	1,400,166	3.4	%	—		—	%	$	—	Repositioning/Redevelopment(6)	—	1,593,442	3.6	%	—		—	%	$	—
MTM Tenants	MTM Tenants	17	56,672	0.1	%	715		0.1	%	$	12.62	MTM Tenants	11	148,175	0.3	%	2,157		0.4	%	$	14.56
Remainder of 2022		115	1,837,594	4.4	%	21,209		4.1	%	$	11.54
2023		415	5,897,083	14.1	%	76,965		15.0	%	$	13.05
Remainder of 2023												Remainder of 2023	294	4,288,343	9.8	%	60,324		10.2	%	$	14.07
2024	2024	402	6,631,172	15.9	%	77,053		15.1	%	$	11.62	2024	422	7,092,736	16.1	%	85,760		14.5	%	$	12.09
2025	2025	320	5,702,522	13.7	%	69,110		13.5	%	$	12.12	2025	362	6,978,646	15.9	%	95,224		16.1	%	$	13.65
2026	2026	178	6,270,384	15.0	%	72,966		14.3	%	$	11.64	2026	254	7,033,745	16.0	%	91,947		15.5	%	$	13.07
2027	2027	112	4,091,094	9.8	%	56,110		11.0	%	$	13.72	2027	129	4,854,362	11.1	%	76,411		12.9	%	$	15.74
2028	2028	26	1,298,057	3.1	%	16,143		3.2	%	$	12.44	2028	65	2,296,313	5.2	%	34,343		5.8	%	$	14.96
2029	2029	22	1,982,238	4.8	%	29,822		5.8	%	$	15.04	2029	23	1,992,318	4.5	%	30,226		5.1	%	$	15.17
2030	2030	16	1,531,783	3.7	%	18,909		3.7	%	$	12.34	2030	20	1,705,518	3.9	%	23,867		4.0	%	$	13.99
2031	2031	18	1,906,263	4.6	%	31,104		6.1	%	$	16.32	2031	18	1,906,263	4.3	%	31,559		5.3	%	$	16.56
2032												2032	14	895,643	2.1	%	18,054		3.1	%	$	20.16
Thereafter	Thereafter	33	2,216,567	5.3	%	41,357		8.1	%	$	18.66	Thereafter	31	2,057,443	4.7	%	41,868		7.1	%	$	20.35
Total Consolidated Portfolio	Total Consolidated Portfolio	1,674	41,716,182	100.0	%	$	511,463	100.0	%	$	12.97	Total Consolidated Portfolio	1,643	43,954,272	100.0	%	$	591,740	100.0	%	$	14.35

(1)Represents the contracted square footage upon expiration.

(2)Calculated as monthly contracted base rent (before rent abatements) per the terms of such lease, as of ~~September 30, 2022,~~March 31, 2023, multiplied by 12. Excludes ~~billboard and antenna revenue and~~ tenant reimbursements. Amounts in thousands.

(3)Calculated as annualized base rent set forth in this table divided by annualized base rent for the total portfolio as of ~~September 30, 2022.~~March 31, 2023.

(4)Calculated as annualized base rent for such leases divided by the occupied square feet for such leases as of ~~September 30, 2022.~~March 31, 2023.

(5)Represents vacant space (not under repositioning/redevelopment) as of ~~September 30, 2022.~~March 31, 2023. Includes leases aggregating ~~77,800~~99,464 rentable square feet that had been signed but had not yet commenced as of ~~September 30, 2022.~~March 31, 2023.

(6)Represents vacant space at properties that were classified as repositioning (including “other repositioning projects”) or redevelopment properties as of September 30, 2022. Includes 242,147 rentable square feet at five repositioning/redevelopment properties that have been pre-leased as of September 30, 2022. Refer to the table under “—Acquisitions and Value-Add Repositioning and Redevelopment of Properties” for additional details related to these properties.March 31, 2023.

As of ~~September 30, 2022,~~March 31, 2023, in addition to ~~0.9~~1.1 million rentable square feet of currently available space in our portfolio and approximately ~~1.4~~1.6 million rentable square feet of vacant space under current repositioning, leases representing ~~4.4%~~9.8% and ~~14.1%~~16.1% of the aggregate rentable square footage of our portfolio are scheduled to expire during the remainder of ~~2022~~2023 and ~~2023,~~2024, respectively. During the ~~nine~~three months ended ~~September 30, 2022,~~March 31, 2023, we renewed ~~201~~68 leases for ~~2.3~~1.3 million rentable square feet, resulting in ~~a 72.5%~~an 83.3% retention rate. Our retention rate during the period was impacted by the combination of low vacancy and

high demand in many of our key markets. During the ~~nine~~three months ended ~~September 30, 2022,~~March 31, 2023, new and renewal leases had a weighted average term of ~~5.0~~3.6 and 4.1 years, and we expect future new and renewal leases to have similar terms.

The leases scheduled to expire during the remainder of ~~2022~~2023 and ~~2023~~2024 represent approximately ~~4.1%~~10.2% and ~~15.0%~~14.5% respectively, of the total annualized base rent for our portfolio as of ~~September 30, 2022.~~March 31, 2023. We estimate that, on a weighted average basis, in-place rents of leases scheduled to expire during the remainder of ~~2022~~2023 and ~~2023~~2024 are currently below current market asking rates, although individual units or properties within any particular submarket may currently be leased either above, below, or at the current market asking rates within that submarket.

As described under “—Market and Portfolio Fundamentals” above, while market indicators, including changes in vacancy rates and average asking lease rates, varied by market, overall there was continued low market vacancy and pervasive supply and demand imbalance across our submarkets, which continues to support strong market fundamentals including positive rental growth. Therefore, we expect market dynamics to remain ~~strong~~healthy and that these positive trends will continue to provide a favorable environment for ~~additional~~ increases in lease renewal rates. Accordingly, we expect the remainder of ~~2022~~2023 will show positive renewal rates and leasing spreads.

Conditions in Our Markets

The properties in our portfolio are located primarily in Southern California infill markets. Positive or negative changes in economic or other conditions, including the impact of the ~~ongoing~~expiring local government emergency declarations related to the COVID-19 pandemic, ~~and related state and local government reactions,~~ high and persistent inflation and adverse weather conditions and natural disasters in this market may affect our overall performance.

Property Expenses

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

Taxable REIT Subsidiary

As of ~~September 30, 2022,~~March 31, 2023, our Operating Partnership indirectly and wholly owns Rexford Industrial Realty and Management, Inc., which we refer to as our services company. We have elected, together with our services company, to treat our services company as a taxable REIT subsidiary for federal income tax purposes. A taxable REIT subsidiary generally may provide non-customary and other services to our tenants and engage in activities that we or our subsidiaries (other than a taxable REIT subsidiary) may not engage in directly without adversely affecting our qualification as a REIT, provided a taxable REIT subsidiary may not operate or manage a lodging facility or health care facility or provide rights to any brand name under which any lodging facility or health care facility is operated. We may form additional taxable REIT subsidiaries in the future, and our Operating Partnership may contribute some or all of its interests in certain wholly owned subsidiaries or their assets to our services company. Any income earned by our taxable REIT subsidiaries will not be included in our taxable income for purposes of the 75% or 95% gross income tests, except to the extent such income is distributed to us as a dividend, in which case such dividend income will qualify under the 95%, but not the 75%, gross income test. Because a taxable REIT subsidiary is subject to federal income tax, and state and local income tax (where applicable) as a regular corporation, the income earned by our taxable REIT subsidiaries generally will be subject to an additional level of tax as compared to the income earned by our other subsidiaries. Our taxable REIT subsidiary is a C-corporation subject to federal and state income tax. However, it has a cumulative unrecognized net operation loss carryforward and therefore there is no income tax provision for the ~~nine~~three months ended ~~September 30, 2022~~March 31, 2023 and ~~2021.~~2022.

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Critical Accounting Policies and Estimates

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

In our Annual Report on Form 10-K for the year ended December 31, ~~2021~~2022 and in “Note 2 - Summary of Significant Accounting Policies” to the consolidated financial statements under Item 1 of this report on Form 10-Q, we identified certain critical accounting policies that affect certain of our more significant estimates and assumptions used in preparing our consolidated financial statements. We have not made any material changes to our critical accounting policies and estimates during the period covered by this report.

Results of Operations

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

For the three ~~and nine~~ months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021,~~ our Same Property Portfolio includes all properties in our portfolio that were wholly-owned by us for the period from January 1, ~~2021~~2022 through ~~September 30, 2022,~~March 31, 2023, and that were stabilized prior to January 1, ~~2021,~~2022, which consisted of ~~224 properties~~buildings aggregating approximately ~~28.6~~32.6 million rentable square ~~feet.~~feet at 257 of our properties. Results for our Same Property Portfolio exclude properties that were acquired or sold during the period from January 1, ~~2021~~2022 through ~~September 30, 2022,~~March 31, 2023, properties or buildings classified as current or future repositioning (including select buildings in “other repositioning”), redevelopment or lease-up during ~~2021~~2022 or ~~2022,~~2023, interest income, interest expense and corporate general and administrative expenses.

In addition to the properties included in our Same Property Portfolio, our Total Portfolio includes the ~~103~~68 properties aggregating approximately ~~10.7~~7.7 million rentable square feet that were purchased between January 1, ~~2021 and September 30,~~ 2022 and March 31, 2023, and the ~~six~~two properties aggregating approximately ~~0.3~~0.1 million rentable square feet that were sold between January 1, ~~2021~~2022 and ~~September 30, 2022.~~March 31, 2023.

At ~~September 30,~~March 31, 2023 and 2022, ~~and 2021,~~ our Same Property Portfolio occupancy was approximately ~~98.4%~~98.0% and ~~98.8%~~99.1%, respectively. For the three months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021,~~ our Same Property Portfolio weighted average occupancy was approximately ~~98.6%~~98.0% and ~~98.6%~~99.0%, respectively. ~~Comparatively, for the nine months ended September 30, 2022 and 2021, our Same Property Portfolio weighted average occupancy was approximately 98.9% and 98.1%.~~

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Comparison of the Three Months Ended ~~September 30, 2022~~March 31, 2023 to the Three Months Ended ~~September 30, 2021~~March 31, 2022

The following table summarizes the historical results of operations for our Same Property Portfolio and Total Portfolio for the three months ended ~~September 30,~~March 31, 2023 and 2022 ~~and 2021~~ (dollars in thousands):


		Same Property Portfolio										Total Portfolio													Same Property Portfolio											Total Portfolio
		Three Months Ended September 30,				Increase/(Decrease)			%			Three Months Ended September 30,					Increase/(Decrease)			%					Three Months Ended March 31,					Increase/(Decrease)			%			Three Months Ended March 31,					Increase/(Decrease)			%
		2022		2021				Change			2022			2021					Change				2023				2022					Change			2023			2022					Change
REVENUES	REVENUES																							REVENUES

Rental income	Rental income	$	103,463	$	96,156	$	7,307		7.6	%		$	162,581		$	115,260	$	47,321		41.1	%	Rental income			$	134,237		$	126,508	$	7,729		6.1	%		$	185,164		$	140,588	$	44,576		31.7	%
Management and leasing services	Management and leasing services	—		—		—			—	%		163			136		27			19.9	%	Management and leasing services			—			—		—			—	%		190			163		27			16.6	%
Interest income	Interest income	—		—		—			—	%		3			7		(4)			(57.1)	%	Interest income			—			—		—			—	%		882			1		881			88,100.0	%
TOTAL REVENUES	TOTAL REVENUES	103,463		96,156		7,307			7.6	%		162,747			115,403		47,344			41.0	%	TOTAL REVENUES			134,237			126,508		7,729			6.1	%		186,236			140,752		45,484			32.3	%
OPERATING EXPENSES	OPERATING EXPENSES																					OPERATING EXPENSES
Property expenses	Property expenses	24,286		22,320		1,966			8.8	%		39,614			27,501		12,113			44.0	%	Property expenses			29,885			29,215		670			2.3	%		42,825			33,429		9,396			28.1	%
General and administrative	General and administrative	—		—		—			—	%		14,951			11,806		3,145			26.6	%	General and administrative			—			—		—			—	%		18,197			14,717		3,480			23.6	%
Depreciation and amortization	Depreciation and amortization	29,684		30,527		(843)			(2.8)	%		51,146			38,676		12,470			32.2	%	Depreciation and amortization			37,255			37,475		(220)			(0.6)	%		59,429			42,471		16,958			39.9	%
TOTAL OPERATING EXPENSES	TOTAL OPERATING EXPENSES	53,970		52,847		1,123			2.1	%		105,711			77,983		27,728			35.6	%	TOTAL OPERATING EXPENSES			67,140			66,690		450			0.7	%		120,451			90,617		29,834			32.9	%
OTHER EXPENSES	OTHER EXPENSES																					OTHER EXPENSES
Other expenses	Other expenses	—		—		—			—	%		413			4		409			10,225.0	%	Other expenses			—			—		—			—	%		647			38		609			1,602.6	%
Interest expense	Interest expense	—		—		—			—	%		14,975			10,427		4,548			43.6	%	Interest expense			—			—		—			—	%		13,701			9,683		4,018			41.5	%

TOTAL EXPENSES	TOTAL EXPENSES	53,970		52,847		1,123			2.1	%		121,099			88,414		32,685			37.0	%	TOTAL EXPENSES			67,140			66,690		450			0.7	%		134,799			100,338		34,461			34.3	%

Loss on extinguishment of debt	Loss on extinguishment of debt	—		—		—			—	%		—			(505)		505			(100.0)	%	Loss on extinguishment of debt			—			—		—			—	%		—			—		—			—	%
Gains on sale of real estate	Gains on sale of real estate	—		—		—			—	%		—			13,702		(13,702)			(100.0)	%	Gains on sale of real estate			—			—		—			—	%		12,133			8,486		3,647			43.0	%
NET INCOME	NET INCOME	$	49,493	$	43,309	$	6,184		14.3	%		$	41,648		$	40,186	$	1,462		3.6	%	NET INCOME			$	67,097		$	59,818	$	7,279		12.2	%		$	63,570		$	48,900	$	14,670		30.0	%

Rental Income

In the following table, we present the components of rental income for the three months ended ~~September 30,~~March 31, 2023 and March 31, 2022, ~~and September 30, 2021,~~ which includes rental revenue, tenant reimbursements and other income related to leases. The below presentation of rental income is not, and is not intended to be, a presentation in accordance with GAAP. We are presenting this information because we believe it is frequently used by management, investors, securities analysts and other interested parties to understand and evaluate the Company’s performance.


		Same Property Portfolio												Total Portfolio																	Same Property Portfolio																Total Portfolio
		Three Months Ended September 30,				Increase/(Decrease)				%				Three Months Ended September 30,								Increase/(Decrease)				%					Three Months Ended March 31,								Increase/(Decrease)				%				Three Months Ended March 31,								Increase/(Decrease)				%
Category	Category	2022		2021				Change				2022				2021								Change		Category			2023				2022								Change				2023				2022								Change
Rental revenue(1)	Rental revenue(1)	$	85,605	$	79,983			$	5,622			7.0	%			$	134,386			$	96,004			$	38,382			40.0	%	Rental revenue(1)			$	110,937			$	103,898			$	7,039			6.8	%			$	153,181			$	115,572			$	37,609			32.5	%
Tenant reimbursements(2)	Tenant reimbursements(2)	17,587		16,008		1,579				9.9	%			27,675				19,024				8,651				45.5	%	Tenant reimbursements(2)			22,894				22,247				647				2.9	%			31,419				24,553				6,866				28.0	%
Other income(3)	Other income(3)	271		165		106				64.2	%			520				232				288				124.1	%	Other income(3)			406				363				43				11.8	%			564				463				101				21.8	%
Rental income	Rental income	$	103,463	$	96,156	$	7,307			7.6	%			$	162,581			$	115,260			$	47,321			41.1	%	Rental income			$	134,237			$	126,508			$	7,729			6.1	%			$	185,164			$	140,588			$	44,576			31.7	%

Our Same Property Portfolio and Total Portfolio rental income increased by ~~$7.3~~$7.7 million, or ~~7.6%~~6.1%, and ~~$47.3~~$44.6 million, or ~~41.1%~~31.7%, respectively, during the three months ended ~~September 30, 2022,~~March 31, 2023, compared to the three months ended ~~September 30, 2021,~~March 31, 2022, for the reasons described below:

5447

(1) Rental Revenue

Our Same Property Portfolio and Total Portfolio rental revenue increased by ~~$5.6~~$7.0 million, or ~~7.0%~~6.8%, and ~~$38.4~~$37.6 million, or ~~40.0%~~32.5%, respectively, during the three months ended ~~September 30, 2022,~~March 31, 2023, compared to the three months ended ~~September 30, 2021.~~March 31, 2022. The increase in our Same Property Portfolio rental revenue is primarily due to an increase in average rental rates on new and renewal leases, partially offset by a decrease of $0.5 million in amortization of net below-market lease ~~intangibles.~~intangibles and an increase of $0.4 million in bad debt write-offs and reserves for tenant receivables not deemed probable of collection. Our Total Portfolio rental revenue was also positively impacted by the incremental revenues from the ~~103~~68 properties we acquired between January 1, ~~2021~~2022 and ~~September 30, 2022.~~March 31, 2023.

(2) Tenant Reimbursements

Our Same Property Portfolio tenant reimbursements revenue increased by ~~$1.6~~$0.6 million, or ~~9.9%~~2.9%, and our Total Portfolio tenant reimbursements revenue increased by ~~$8.7~~$6.9 million, or ~~45.5%~~28.0%, during the three months ended ~~September 30, 2022,~~March 31, 2023, compared to the three months ended ~~September 30, 2021.~~March 31, 2022. The increase in our Same Property Portfolio tenant reimbursements revenue is primarily due to ~~higher reimbursable insurance~~an increase in tenant reimbursements due to timing differences in completing prior year recoverable expense ~~as a result of higher overall premiums and additional earthquake insurance coverage~~reconciliations for comparable periods and higher reimbursable utility expenses and property tax ~~expense and other various common area maintenance~~ expenses. Our Total Portfolio tenant reimbursements revenue was also impacted by the incremental tenant reimbursements from the ~~103~~68 properties we acquired between January 1, ~~2021~~2022 and ~~September 30, 2022.~~March 31, 2023.

(3) Other Income

Our Same Property Portfolio and Total Portfolio other income increased by $43 thousand, or 11.8%, and $0.1 million, or ~~64.2%, and $0.3 million, or 124.1%~~21.8%, respectively, during the three months ended ~~September 30, 2022,~~March 31, 2023, compared to the three months ended ~~September 30, 2021,~~March 31, 2022, primarily due to ~~the recommencement~~an increase in ~~2022 of charging~~ fees charged for late rental ~~payments, which until recently was prohibited due COVID-19 related governmental measures. Our Total Portfolio other income was also impacted by an increase in miscellaneous income.~~payments.

Management and Leasing Services

Our Total Portfolio management and leasing services revenue increased by $27 thousand, or ~~19.9%~~16.6%, during the three months ended ~~September 30, 2022,~~March 31, 2023, compared to the three months ended ~~September 30, 2021.~~March 31, 2022.

Interest Income

Interest income ~~decreased by $4~~increased from $1 thousand ~~or 57.1%, during~~for the three months ended ~~September 30,~~March 31, 2022 ~~compared~~ to $0.9 million for the three months ended ~~September 30, 2021.~~March 31, 2023, due to an increase in the average cash balance invested in money market accounts and higher interest rates.

Property Expenses

Our Same Property Portfolio and Total Portfolio property expenses increased by ~~$2.0~~$0.7 million, or ~~8.8%~~2.3%, and ~~$12.1~~$9.4 million, or ~~44.0%~~28.1%, respectively, during the three months ended ~~September 30, 2022,~~March 31, 2023, compared to the three months ended ~~September 30, 2021.~~March 31, 2022. The increase in our Same Property Portfolio property expenses is primarily due to ~~an increase~~increases in ~~insurance expense as a result of higher overall premiums and additional earthquake insurance coverage, an increase in repair and maintenance~~utility expenses, ~~and an increase in~~ allocated overhead costs driven by higher employee headcount and rising labor ~~costs.~~costs, property tax expenses and repair and maintenance expenses. Our Total Portfolio property expenses were also impacted by incremental expenses from the ~~103~~68 properties we acquired between January 1, ~~2021~~2022 and ~~September 30, 2022.~~March 31, 2023.

General and Administrative

Our Total Portfolio general and administrative expenses increased by ~~$3.1~~$3.5 million, or ~~26.6%~~23.6%, during the three months ended ~~September 30, 2022,~~March 31, 2023, compared to the three months ended ~~September 30, 2021,~~March 31, 2022, primarily due to increases in non-cash equity compensation expense primarily related to performance unit equity grants made in ~~2020~~2021 and ~~2021,~~2022, payroll related costs due to a higher employee headcount and rising labor costs and higher accrued bonus expense.

5548

Depreciation and Amortization

Our Same Property Portfolio depreciation and amortization expense decreased by ~~$0.8~~$0.2 million, or ~~2.8%~~0.6%, during the three months ended ~~September 30, 2022,~~March 31, 2023, compared to the three months ended ~~September 30, 2021,~~March 31, 2022, primarily due to acquisition-related in-place lease intangibles becoming fully depreciated at certain of our properties subsequent to January 1, ~~2021,~~2022, partially offset by an increase in depreciation expense related to capital improvements placed into service subsequent to January 1, ~~2021,~~2022, and an increase in amortization of deferred leasing costs. Our Total Portfolio depreciation and amortization expense increased by ~~$12.5~~$17.0 million, or ~~32.2%~~39.9%, during the three months ended ~~September 30, 2022,~~March 31, 2023, compared to the three months ended ~~September 30, 2021,~~March 31, 2022, primarily due to the incremental expense from the ~~103~~68 properties we acquired between January 1, ~~2021~~2022 and ~~September 30, 2022.~~March 31, 2023.

Other Expenses

Our Total Portfolio other expenses increased from $4$38 thousand for the three months ended ~~September 30, 2021~~March 31, 2022 to ~~$0.4~~$0.6 million for three months ended ~~September 30, 2022,~~March 31, 2023, primarily due to ~~higher acquisition expenses.~~$0.3 million of construction demolition costs incurred in 2023 and a $0.2 million impairment charge recorded in 2023 to reduce the carrying value of the right-of-use asset related to one of our office space leases resulting from the early termination of our sublease tenant.

Interest Expense

Our Total Portfolio interest expense increased by ~~$4.5~~$4.0 million, or ~~43.6%~~41.5%, during the three months ended ~~September 30, 2022,~~March 31, 2023, compared to the three months ended ~~September 30, 2021.~~March 31, 2022. The increase in interest expense is primarily comprised of the following: (i) a ~~$2.8~~$5.5 million increase related to the $400.0 million term loan facility borrowing we completed in July 2022, (ii) a $2.8 ~~million increase due to higher average outstanding borrowings under our unsecured revolving credit facility and an increase in LIBOR/SOFR, (iii) a $2.7~~ million increase related to the $300.0 million term loan facility borrowing we completed in May 2022 and the related interest rate swaps, and ~~(iv)~~(iii) a ~~$1.0~~$0.7 million increase related to the current and prior $60.0 million term loans primarily due to the ~~issuance of $400.0 million of 2.15% senior notes~~increase in ~~August 2021.~~interest rates. These increases were partially offset by the following decreases: (i) a ~~$2.3~~$3.0 million increase in capitalized interest related to repositioning and redevelopment activity, (ii) a $1.4 million decrease related to the repayment of the $150.0 million term loan facility and termination of the related interest rate swap in May 2022, and (iii) a ~~$1.1~~$0.4 million decrease ~~related~~due to ~~the repayment of the $225.0 million term loan facility and termination of the related interest rate swaps~~a decrease in ~~August 2021.~~

~~Loss on Extinguishment of Debt~~

~~The loss on extinguishment of debt of $0.5 million for the three months ended September 30, 2021 represents the write-off of unamortized debt issuance costs related to the $225.0 million~~borrowings under our unsecured ~~term loan facility that we repaid in September 2021 in advance of the January 2023 maturity date.~~revolving credit facility.

Gains on Sale of Real Estate

During the three months ended ~~September 30, 2022, we did not complete any property dispositions. During the three months ended September 30, 2021,~~March 31, 2023, we recognized gains on sale of real estate of ~~$13.7~~$12.1 million from the disposition of one property that was sold for a gross sales price of ~~$18.6~~$17.0 million.

~~Comparison of~~ During the ~~Nine Months Ended September 30, 2022 to the Nine Months Ended September 30, 2021~~

~~The following table summarizes the historical results of operations for our Same Property Portfolio and Total Portfolio for the nine~~three months ended ~~September 30, 2022 and 2021 (dollars in thousands):~~

Same Property Portfolio Total Portfolio
Nine Months Ended
September 30, Increase/(Decrease) % Nine Months Ended
September 30, Increase/(Decrease) %
2022 2021 Change 2022 2021 Change
REVENUES
Rental income $ 305,883 $ 282,791 $ 23,092 8.2 % $ 452,156 $ 319,140 $ 133,016 41.7 %
Management and leasing services — — — — % 456 350 106 30.3 %
Interest income — — — — % 5 36 (31) (86.1) %
TOTAL REVENUES 305,883 282,791 23,092 8.2 % 452,617 319,526 133,091 41.7 %
OPERATING EXPENSES
Property expenses 72,278 65,321 6,957 10.7 % 108,448 75,631 32,817 43.4 %
General and administrative — — — — % 44,531 33,981 10,550 31.0 %
Depreciation and amortization 89,226 93,663 (4,437) (4.7) % 140,226 110,048 30,178 27.4 %
TOTAL OPERATING EXPENSES 161,504 158,984 2,520 1.6 % 293,205 219,660 73,545 33.5 %
OTHER EXPENSES
Other expenses — — — — % 746 35 711 2,031.4 %
Interest expense — — — — % 34,826 29,772 5,054 17.0 %
TOTAL EXPENSES 161,504 158,984 2,520 1.6 % 328,777 249,467 79,310 31.8 %
Loss on extinguishment of debt — — — — % (877) (505) (372) 73.7 %
Gains on sale of real estate — — — — % 8,486 27,312 (18,826) (68.9) %
NET INCOME $ 144,379 $ 123,807 $ 20,572 16.6 % $ 131,449 $ 96,866 $ 34,583 35.7 %

~~Rental Income~~

In the following table, we present the components of rental income for the nine months ended September 30, 2022 and September 30, 2021, which includes rental revenue, tenant reimbursements and other income related to leases. The below presentation of rental income is not, and is not intended to be, a presentation in accordance with GAAP. We are presenting this information because we believe it is frequently used by management, investors, securities analysts and other interested parties to understand and evaluate the Company’s performance.

Same Property Portfolio Total Portfolio
Nine Months Ended
September 30, Increase/(Decrease) % Nine Months Ended
September 30, Increase/(Decrease) %
Category 2022 2021 Change 2022 2021 Change
Rental revenue(1)
$ 251,938 $ 234,992 $ 16,946 7.2 % $ 373,053 $ 265,671 $ 107,382 40.4 %
Tenant reimbursements (2)
53,123 47,291 5,832 12.3 % 77,641 52,787 24,854 47.1 %
Other income(3)
822 508 314 61.8 % 1,462 682 780 114.4 %
Rental income $ 305,883 $ 282,791 $ 23,092 8.2 % $ 452,156 $ 319,140 $ 133,016 41.7 %

Our Same Property Portfolio and Total Portfolio rental income increased by $23.1 million, or 8.2%, and $133.0 million, or 41.7%, respectively, during the nine months ended September 30, 2022, compared to the nine months ended September 30, 2021, for the reasons described below:

~~(1) Rental Revenue~~

Our Same Property Portfolio and Total Portfolio rental revenue increased by $16.9 million, or 7.2%, and $107.4 million, or 40.4%, respectively, during the nine months ended September 30, 2022, compared to the nine months ended September 30, 2021. The increase in our Same Property Portfolio rental revenue is primarily due to an increase in average rental rates on new and renewal leases and an increase in the weighted average occupancy of the portfolio, partially offset by a decrease of $2.2 million in amortization of net below-market lease intangibles. Our Total Portfolio rental revenue was also positively impacted by the incremental revenues from the 103 properties we acquired between January 1, 2021 and September 30, 2022.

~~(2) Tenant Reimbursements~~

Our Same Property Portfolio tenant reimbursements revenue increased by $5.8 million, or 12.3%, and our Total Portfolio tenant reimbursements revenue increased by $24.9 million, or 47.1% during the nine months ended September 30, 2022, compared to the nine months ended September 30, 2021. The increase in our Same Property Portfolio tenant reimbursements revenue is primarily due to higher reimbursable insurance expense as a result of higher overall premiums and additional earthquake insurance coverage, an increase in reimbursable property tax expense and an increase in the weighted average occupancy of the portfolio, partially offset by a decrease in tenant reimbursements related to the completion of prior year recoverable expense reconciliations for comparable periods. Our Total Portfolio tenant reimbursements revenue was also impacted by the incremental tenant reimbursements from the 103 properties we acquired between January 1, 2021 and September 30, 2022.

~~(3) Other Income~~

Our Same Property Portfolio and Total Portfolio other income increased by $0.3 million, or 61.8%, and $0.8 million, or 114.4%, respectively, during the nine months ended September 30, 2022, compared to the nine months ended September 30, 2021, primarily due to the recommencement in 2022 of charging fees for late rental payments, which until recently was prohibited due COVID-19 related governmental measures. Our Total Portfolio other income was also impacted by an increase in miscellaneous income.

~~Management and Leasing Services~~

Our Total Portfolio management and leasing services revenue increased by $0.1 million, or 30.3%, during the nine months ended September 30, 2022, compared to the nine months ended September 30, 2021.

~~Interest Income~~

~~Interest income decreased by $31 thousand, or 86.1%, during the nine months ended September 30, 2022, compared to the nine months ended September 30, 2021.~~

~~Property Expenses~~

Our Same Property Portfolio and Total Portfolio property expenses increased by $7.0 million, or 10.7%, and $32.8 million, or 43.4%, respectively, during the nine months ended September 30, 2022, compared to the nine months ended September 30, 2021. The increase in our Same Property Portfolio property expenses is primarily due to an increase in insurance expense as a result of higher overall premiums and additional earthquake insurance coverage, an increase in allocated overhead costs driven by higher employee headcount and rising labor costs and an increase in repair and maintenance expenses. Our Total Portfolio property expenses were also impacted by incremental expenses from the 103 properties we acquired between January 1, 2021 and September 30, 2022.

~~General and Administrative~~

Our Total Portfolio general and administrative expenses increased by $10.6 million, or 31.0%, during the nine months ended September 30, 2022, compared to the nine months ended September 30, 2021, primarily due to increases in non-cash equity compensation expense primarily related to performance unit equity grants made in 2020 and 2021, payroll related costs due to a higher employee headcount and rising labor costs, and accrued bonus expense.

~~Depreciation and Amortization~~

Our Same Property Portfolio depreciation and amortization expense decreased by $4.4 million, or 4.7%, during the nine months ended September 30, 2022, compared to the nine months ended September 30, 2021, primarily due to acquisition-related in-place lease intangibles becoming fully depreciated at certain of our properties subsequent to January 1, 2021, partially offset by an increase in depreciation expense related to capital improvements placed into service subsequent to January 1, 2021, and an increase in amortization of deferred leasing costs. Our Total Portfolio depreciation and amortization expense increased by $30.2 million, or 27.4%, during the nine months ended September 30, 2022, compared to the nine months ended September 30, 2021, primarily due to the incremental expense from the 103 properties we acquired between January 1, 2021 and September 30, 2022.

~~Other Expenses~~

Our Total Portfolio other expenses increased from $35 thousand for the nine months ended September 30, 2021, to $0.7 million for the nine months ended September 30, 2022, primarily due to higher acquisition related expenses and the write-off of construction costs related to cancelled projects.

~~Interest Expense~~

Our Total Portfolio interest expense increased by $5.1 million, or 17.0%, during the nine months ended September 30, 2022, compared to the nine months ended September 30, 2021. The increase in interest expense is primarily comprised of the following: (i) a $5.8 million increase due to the issuance of $400.0 million of 2.15% senior notes in August 2021, (ii) a $4.9 million increase due to higher average outstanding borrowings under our unsecured revolving credit facility and an increase in LIBOR/SOFR, (iii) a $3.3 million increase related to the $300.0 million term loan facility borrowing we completed in May 2022 and the related interest rate swaps, (iv) a $2.8 million increase related to the $400.0 million term loan facility borrowing we completed in July 2022, and (v) a $0.5 million increase related to the $60.0 million term loan due to an increase in LIBOR. These increases were partially offset by the following decreases: (i) a $5.1 million increase in capitalized interest related to repositioning and redevelopment activity, (ii) a $3.9 million decrease related to the repayment of the $225.0 million term loan facility and termination of the related interest rate swaps in August 2021, (iii) a $2.4 million decrease related to the repayment of the $150.0 million term loan facility and termination of the related interest rate swap in May 2022, and (iv) a $1.0 million decrease related to the interest rate swap that was terminated in November 2020 which had a loss balance in accumulated other comprehensive income/(loss) that was amortized into interest expense through August 2021.

~~Loss on Extinguishment of Debt~~

The loss on extinguishment of debt of $0.9 million for the nine months ended September 30, 2022, is comprised of the write-off of $0.7 million of unamortized debt issuance costs related to the $150.0 million unsecured term loan facility we repaid in May 2022 in advance of the May 2025 maturity date and the write-off of $0.2 million of unamortized debt issuance costs attributable to one of the creditors departing the unsecured revolving credit facility when we amended our senior unsecured credit agreement in May 2022. The loss on extinguishment of debt of $0.5 million for the nine months ended September 30, 2021 represents the write-off of unamortized debt issuance costs related to the $225.0 million unsecured term loan facility that we repaid in September 2021 in advance of the January 2023 maturity date.

~~Gains on Sale of Real Estate~~

~~During the nine months ended September 30,~~March 31, 2022, we recognized gains on sale of real estate of $8.5 million from the disposition of one property that was sold for a gross sales price of $16.5 million. During the nine months ended September 30, 2021, we recognized gains on sale of real estate of $27.3 million from the disposition of four properties that were sold for an aggregate gross sales price of $47.6 million.

5949

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

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

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

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

We calculate “Core FFO” by adjusting FFO ~~to exclude~~for non-comparable items outlined in the impact of certain items that we do not consider reflective of our on-going operating performance. Core FFO adjustments consist of (i) acquisition expenses, (ii) loss on extinguishment of debt, (iii) the amortization of the loss on termination of interest rate swaps, (iv) impairments of right-of-use assets and (v) other amounts as they may occur.reconciliation below. We believe that Core FFO is a useful supplemental measure ~~as it~~and that by adjusting for items that are not considered by us to be part of our on-going operating performance, provides a more meaningful and consistent comparison of our operating and financial performance ~~and allows investors to more easily compare the Company's operating results.~~period-over-period. Because these adjustments have a real economic impact on our financial condition and results from operations, the utility of Core FFO as a measure of our performance is limited. Other REITs may not calculate Core FFO in a consistent manner. Accordingly, our Core FFO may not be comparable to other REITs' core FFO. Core FFO should be considered only as a supplement to net income computed in accordance with GAAP as a measure of our performance.

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


	Three Months Ended March 31,
	2023		2022
Net income	$	63,570	$	48,900
Adjustments:
Depreciation and amortization	59,429		42,471
Gains on sale of real estate	12,133		8,486
Funds From Operations (FFO)	$	110,866	$	82,885
Adjustments:
Acquisition expenses	73		36
Impairment of right-of-use asset	188		—

Amortization of loss on termination of interest rate swaps	59		112
Non-capitalizable demolition costs	340		—
Write-offs of below-market lease intangibles related to terminations(1)	(1,318)		—
Core FFO	110,208		83,033
Less: preferred stock dividends	(2,314)		(2,314)
Less: Core FFO attributable to noncontrolling interests(2)	(4,809)		(3,793)
Less: Core FFO attributable to participating securities(3)	(425)		(296)
Core FFO attributable to common stockholders	$	102,660	$	76,630

Three Months Ended September 30, Nine Months Ended September 30,
2022 2021 2022 2021
Net income $ 41,648 $ 40,186 $ 131,449 $ 96,866
Add:
Depreciation and amortization 51,146 38,676 140,226 110,048
Deduct:
Gains on sale of real estate — 13,702 8,486 27,312
Funds From Operations (FFO) $ 92,794 $ 65,160 $ 263,189 $ 179,602
Add:
Acquisition expenses 359 4 451 35
Loss on extinguishment of debt — 505 877 505
Amortization of loss on termination of interest rate swaps 59 615 194 1,435
Core FFO 93,212 66,284 264,711 181,577
Less: preferred stock dividends (2,314) (2,976) (6,943) (10,249)
Less: Core FFO attributable to noncontrolling interests(1)
(4,471) (3,475) (12,433) (9,905)
Less: Core FFO attributable to participating securities(2)
(307) (241) (914) (678)
Core FFO attributable to common stockholders $ 86,120 $ 59,592 $ 244,421 $ 160,745
(1)Reflects the write-off of the portion of a below-market lease intangible attributable to below-market fixed rate renewal options that were not exercised due to the termination of the lease at the end of the initial lease term.

6050

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

~~(2)~~(3)Participating securities include unvested shares of restricted stock, unvested LTIP units and unvested performance units.

Non-GAAP Supplemental Measures: NOI and Cash NOI

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

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

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

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


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
		2022		2021		2022		2021			2023		2022

Rental income	Rental income	$	162,581	$	115,260	$	452,156	$	319,140	Rental income	$	185,164	$	140,588
Less: Property expenses	Less: Property expenses	39,614		27,501		108,448		75,631		Less: Property expenses	42,825		33,429
Net Operating Income	Net Operating Income	$	122,967	$	87,759	$	343,708	$	243,509	Net Operating Income	$	142,339	$	107,159
Amortization of (below) above market lease intangibles, net	Amortization of (below) above market lease intangibles, net	(7,033)		(3,191)		(18,250)		(9,289)		Amortization of (below) above market lease intangibles, net	(8,290)		(5,091)
Straight line rental revenue adjustment	Straight line rental revenue adjustment	(8,411)		(5,865)		(23,753)		(14,904)		Straight line rental revenue adjustment	(7,628)		(6,901)
Cash Net Operating Income	Cash Net Operating Income	$	107,523	$	78,703	$	301,705	$	219,316	Cash Net Operating Income	$	126,421	$	95,167

6151

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

Three Months Ended September 30, Nine Months Ended September 30,
2022 2021 2022 2021
Net income $ 41,648 $ 40,186 $ 131,449 $ 96,866
Add:
General and administrative 14,951 11,806 44,531 33,981
Depreciation and amortization 51,146 38,676 140,226 110,048
Other expenses 413 4 746 35
Interest expense 14,975 10,427 34,826 29,772
Loss on extinguishment of debt — 505 877 505
Deduct:
Management and leasing services 163 136 456 350
Interest income 3 7 5 36
Gains on sale of real estate — 13,702 8,486 27,312
Net Operating Income $ 122,967 $ 87,759 $ 343,708 $ 243,509
Amortization of (below) above market lease intangibles, net (7,033) (3,191) (18,250) (9,289)
Straight line rental revenue adjustment (8,411) (5,865) (23,753) (14,904)
Cash Net Operating Income $ 107,523 $ 78,703 $ 301,705 $ 219,316


	Three Months Ended March 31,
	2023		2022
Net income	$	63,570	$	48,900
Adjustments:
General and administrative	18,197		14,717
Depreciation and amortization	59,429		42,471
Other expenses	647		38
Interest expense	13,701		9,683

Management and leasing services	(190)		(163)
Interest income	(882)		(1)

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

Net Operating Income	$	142,339	$	107,159
Amortization of (below) above market lease intangibles, net	(8,290)		(5,091)
Straight line rental revenue adjustment	(7,628)		(6,901)
Cash Net Operating Income	$	126,421	$	95,167

Non-GAAP Supplemental Measure: EBITDAre

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

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

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


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
		2022		2021		2022		2021			2023		2022
Net income	Net income	$	41,648	$	40,186	$	131,449	$	96,866	Net income	$	63,570	$	48,900
Interest expense	Interest expense	14,975		10,427		34,826		29,772		Interest expense	13,701		9,683
Depreciation and amortization	Depreciation and amortization	51,146		38,676		140,226		110,048		Depreciation and amortization	59,429		42,471
Gains on sale of real estate	Gains on sale of real estate	—		(13,702)		(8,486)		(27,312)		Gains on sale of real estate	(12,133)		(8,486)

EBITDAre	EBITDAre	$	107,769	$	75,587	$	298,015	$	209,374	EBITDAre	$	124,567	$	92,568

Supplemental Guarantor Information

In March 2020, the Securities and Exchange Commission (“SEC”) adopted amendments to Rule 3-10 of Regulation S-X and created Rule 13-01 to simplify disclosure requirements related to certain registered securities. The rule became effective January 4, 2021. The Company and the Operating Partnership have filed a registration statement on Form S-3 with the SEC registering, among other securities, debt securities of the Operating Partnership, which will be fully and unconditionally guaranteed by the Company. At ~~September 30, 2022,~~March 31, 2023, the Operating Partnership had issued and outstanding $300.0 million of 5.000% Senior Notes due 2028, $400.0 million of 2.125% Senior Notes due 2030 (the “$400 Million Notes due 2030”) and ~~$400~~

$400 million of 2.15% Senior Notes due 2031 (the “$400 Million Notes due 2031”). The obligations of the Operating Partnership to pay principal, premiums, if any, and interest on the $300.0 million of 5.000% Senior Notes due 2028, $400 Million Notes due 2030 and $400 Million Notes due 2031 are guaranteed on a senior basis by the Company. The guarantee is full and unconditional, and the Operating Partnership is a consolidated subsidiary of the Company.

As a result of the amendments to Rule 3-10 of Regulation S-X, subsidiary issuers of obligations guaranteed by the parent are not required to provide separate financial statements, provided that the subsidiary obligor is consolidated into the parent company’s consolidated financial statements, the parent guarantee is “full and unconditional” and, subject to certain exceptions as set forth below, the alternative disclosure required by Rule 13-01 is provided, which includes narrative disclosure and summarized financial information. Accordingly, separate consolidated financial statements of the Operating Partnership have not been presented. Furthermore, as permitted under Rule 13-01(a)(4)(vi), the Company has excluded the summarized financial information for the Operating Partnership as the assets, liabilities and results of operations of the Company and the Operating Partnership are not materially different than the corresponding amounts presented in the consolidated financial statements of the Company, and management believes such summarized financial information would be repetitive and not provide incremental value to investors.

Liquidity and Capital Resources

Overview

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

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

As of ~~September 30, 2022,~~March 31, 2023, we had:

•Outstanding ~~fixed-rate and variable-rate~~ debt with varying maturities with an aggregate principal amount of ~~$1.9~~$2.3 billion, of which ~~$62.8~~$11.0 million is due within 12 months;

•Total scheduled interest payments on our fixed rate debt and projected net interest payments on our variable rate debt and interest rate swaps of ~~$323.3~~$377.2 million, of which ~~$62.2~~$78.0 million is due within 12 months;

•Commitments of ~~$108.8~~$179.7 million for tenant improvements under certain tenant leases and construction work related to obligations under contractual agreements with our construction vendors; and

•Operating lease commitments with aggregate lease payments of ~~$27.7~~$26.6 million, of which $2.3 million is due within 12 months.

See “Note 5 – Notes Payable” to the consolidated financial statements included in Item 1 of this Report on Form 10-Q for further details regarding the scheduled principal payments. Also see “Note 6 – Leases” to the consolidated financial statements for further details regarding the scheduled operating lease payments.

As of ~~September 30, 2022,~~March 31, 2023, our cash and cash equivalents were ~~$37.1~~$253.6 million, and we did not have borrowings outstanding under our unsecured revolving credit facility, leaving $1.0 billion available for future borrowings.

Sources of Liquidity

Cash Flow from Operations

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

ATM Program

During the ~~nine~~three months ended ~~September 30, 2022,~~March 31, 2023, we sold 449,227 shares of common stock directly through sales agents under our 2023 ATM Program at a weighted average price of $60.84 per share, for gross proceeds of $27.3 million, and net proceeds of $27.0 million after deducting the sales agents’ fees.

During the three months ended March 31, 2023, we entered into forward equity sale agreements with certain financial institutions acting as forward purchasers under the ~~Current 2022 ATM Program and Prior 2022~~2023 ATM Program with respect to ~~22,882,335~~2,126,824 shares of common stock at a weighted average initial forward sale price of ~~$64.55~~$60.09 per share. We did not receive any proceeds from the sale of common shares by the forward purchasers at the time we entered into forward equity sale agreements.

During the ~~nine~~three months ended ~~September 30, 2022,~~March 31, 2023, we physically settled the forward equity sale agreement that was outstanding as of December 31, ~~2021~~2022 under ~~the 2020 ATM Program, all the forward equity sale agreements under the Prior 2022~~our prior ATM Program and ~~a portion~~all of the forward equity sale agreements under the ~~Current 2022~~2023 ATM Program by issuing ~~21,885,446~~2,763,708 shares of our common stock for net proceeds of ~~$1.4 billion. The net proceeds for the nine months ended September 30, 2022 were calculated~~$163.2 million, based on a weighted average ~~net~~ forward sale price at the time of settlement of $64.99 per share. As of September 30, 2022, we had 2,903,245 shares of common stock, or approximately $188.6 million of forward net proceeds remaining for settlement to occur before the fourth quarter of 2023, based on net forward sales price of ~~$64.96~~$59.04 per ~~share.~~share at settlement.

As of ~~September 30, 2022,~~March 31, 2023, approximately ~~$201.0 million~~$1.1 billion of common stock remains available to be sold under the ~~Current 2022~~2023 ATM Program. Future sales, if any, will depend on a variety of factors, including among others, market conditions, the trading price of our common stock, determinations by us of the appropriate sources of funding for us and potential uses of funding available to us. We intend to use the net proceeds from the offering of shares under the Current 2022 ATM Program, if any, to fund potential acquisition opportunities, repay amounts outstanding from time to time under our unsecured revolving credit facility or other debt financing obligations, to fund our repositioning or redevelopment activities and/or for general corporate purposes.

Securities Offerings

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

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

We intend to use the net proceeds from this offering for general management activities that may include funding future acquisitions, funding our redevelopment or repositioning activities or the repayment of outstanding indebtedness. Pending application of cash proceeds, we have invested the net proceeds from this offering in interest-bearing accounts and short-term, interest bearing securities in a manner that is consistent with our intention to qualify for taxation as a REIT.

price will be equal to 100% of the principal amount of the $300 Million Notes being redeemed, plus accrued and unpaid interest.

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

Capital Recycling

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

During the ~~nine~~three months ended ~~September 30, 2022,~~March 31, 2023, we completed the disposition of one property for a gross sales price of ~~$16.5~~$17.0 million and total net cash proceeds of ~~$15.3~~$16.2 million. The net cash proceeds were used to partially fund the acquisition of one property ~~during~~subsequent the ~~nine~~three months ended ~~September 30, 2022,~~March 31, 2023, through a 1031 Exchange transaction.

We anticipate continuing to selectively and opportunistically dispose of properties, however, the timing of any potential future dispositions will depend on market conditions, asset-specific circumstances or opportunities, and our capital needs. Our ability to dispose of selective properties on advantageous terms, or at all, is dependent upon a number of factors including the availability of credit to potential buyers to purchase properties at prices that we consider ~~acceptable, which may be impacted by the ongoing COVID-19 pandemic.~~acceptable.

Investment Grade Rating

~~During the three months ended September 30, 2022, our~~Our credit ~~rating from Moody’s was raised to~~ratings at March 31, 2023, were Baa2 (Stable outlook) from ~~Baa3 (Stable outlook)~~Moody’s and ~~our credit rating from S&P was raised to~~ BBB+ (Stable outlook) from ~~BBB (Positive outlook) while our credit rating from~~both S&P and Fitch ~~remains at BBB (Positive outlook)~~ with respect to our Credit Agreement (described below), $100.0 million unsecured guaranteed senior notes (the “$100 Million Notes”), $25.0 million unsecured guaranteed senior notes and $75.0 million unsecured guaranteed senior notes (together the “Series 2019A and 2019B Notes”), $300 Million Notes, $400 Million Notes due 2030 and $400 Million Notes due 2031. ~~During the three months ended September 30, 2022 our~~Our credit ~~rating from S&P was raised to~~ratings at March 31, 2023, were BBB- from ~~BB+ while our credit rating from~~both S&P and Fitch ~~remains at BB+~~ with respect to our 5.875% Series B Cumulative Redeemable Preferred Stock and our 5.625% Series C Cumulative Redeemable Preferred Stock. Our credit ratings are based on our operating performance, liquidity and leverage ratios, overall financial position and other factors employed by the credit rating agencies in their rating analysis of us, and, although it is our intent to maintain our investment grade credit rating, there can be no assurance that we will be able to maintain our current credit ratings. In the event our current credit ratings are downgraded, it may become difficult or more expensive to obtain additional financing or refinance existing indebtedness as maturities become due.

Credit Agreement

~~On May 26, 2022, we amended our credit agreement, which was comprised~~As of ~~a $700.0 million unsecured revolving credit facility that was scheduled to mature on February 13, 2024, by entering into a~~March 31, 2023, under the Fourth Amended and Restated Credit Agreement (the “Credit Agreement”)~~. The Credit Agreement initially provided for (i)~~, we have an unsecured revolving credit facility with a ~~senior~~borrowing capacity of $1.0 billion (the “Revolver”), a $300.0 million unsecured term loan facility ~~that permits aggregate borrowings of up to $300.0 million~~ (the “$~~300M~~300 Million Term Loan”)~~, all of which was borrowed at closing on May 26, 2022,~~ and (ii) a senior unsecured revolving credit facility (the “Revolver”) in the aggregate principal amount of $1.0 billion. On July 19, 2022, we exercised the accordion option under the Credit Agreement to add a $400.0 million unsecured term loan facility (the “$~~400M~~400 Million Term Loan” and together with the ~~$300M~~$300 Million Term Loan, the “Term Facility”). Subject to certain terms and conditions set forth in the Credit Agreement, we may request additional lender commitments and increase the size of the Credit Agreement by an additional $800.0 million, which may be comprised of additional revolving commitments under the Revolver, an increase to the Term Facility, additional term loan tranches or any combination of the foregoing.

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

grade ~~ratings. The interest rate under the Credit Agreement is also subject to a favorable leverage-based adjustment if our ratio of total indebtedness to total asset value is less than 35.0%.~~rating.

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

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

Uses of Liquidity

Acquisitions

One of our most significant liquidity needs has historically been for the acquisition of real estate properties. Year to date including properties acquired subsequent to quarter end, we ~~have acquired 51~~completed eight acquisitions representing ten properties with ~~5.1~~a combined 2.0 million rentable square feet of buildings on ~~276~~114 acres of land, for an aggregate purchase price of ~~$2.1 billion,~~$845.5 million, and we are actively monitoring a volume of properties in our markets that we believe represent attractive potential investment opportunities to continue to grow our business. As of the filing date of this Quarterly Report on Form 10-Q, we have ~~over $250.0~~approximately $75.0 million of acquisitions under contract or accepted offer. There can be no assurance we will complete any such acquisitions. While the actual number of acquisitions that we complete will be dependent upon a number of factors, in the short term, we expect to fund our acquisitions through available cash on hand, ~~and proceeds from forward equity settlements,~~ cash flows from operations, borrowings available under the Revolver, recycling capital through property dispositions and, in the long term, through the issuance of equity securities or proceeds from long-term secured and unsecured financings. See “Note 3 – Investments in Real Estate” to the consolidated financial statements for a summary of the properties we acquired during the ~~nine~~three months ended ~~September 30, 2022.~~March 31, 2023.

Recurring and Nonrecurring Capital Expenditures

Capital expenditures are considered part of both our short-term and long-term liquidity requirements. As discussed above under — Factors that May Influence Future Results —Acquisitions and Value-Add Repositioning and Redevelopment of Properties, as of ~~September 30, 2022, 16~~March 31, 2023, 19 of our properties were under current repositioning and redevelopment and we have a pipeline of 8eight additional properties for which we anticipate beginning construction work over the next ~~six~~four quarters. We currently estimate that approximately ~~$359.0~~$412.2 million of capital will be required over the next three years ~~(4Q-2022~~(2Q-2023 through 2Q-2025) to complete the repositioning/redevelopment of these properties. However, this estimate is based on our current construction plans and budgets, both of which are subject to change as a result of a number of factors, including increased costs of building materials or construction services and construction delays related to supply chain backlogs and increased lead time on building materials. If we are unable to complete construction on schedule or within budget, we could incur increased construction costs and experience potential delays in leasing the properties. We expect to fund these projects through a combination of available cash on hand, ~~and proceeds from forward equity settlements,~~the issuance of common stock under the 2023 ATM Program, cash flow from operations and borrowings available under the Revolver.

6656

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


		Nine Months Ended September 30, 2022						Three Months Ended March 31, 2023
		Total(1)		Square Feet(2)	Per Square Foot(3)			Total(1)		Square Feet(2)	Per Square Foot(3)
Non-Recurring Capital Expenditures(4)	Non-Recurring Capital Expenditures(4)	$	74,903	24,425,764	$	3.07	Non-Recurring Capital Expenditures(4)	$	28,937	17,793,940	$	1.63
Recurring Capital Expenditures(5)	Recurring Capital Expenditures(5)	5,972		39,027,630	$	0.15	Recurring Capital Expenditures(5)	2,194		43,068,798	$	0.05
Total Capital Expenditures	Total Capital Expenditures	$	80,875				Total Capital Expenditures	$	31,131

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

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

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

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

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

Dividends and Distributions

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

On ~~October 17, 2022,~~April 14, 2023, our board of directors declared the following quarterly cash dividends/distributions record dates and payment dates.

Security

Amount per Share/Unit

Record Date

Payment Date

Common stock

~~0.315~~0.38

~~December~~June 30, ~~2022~~2023

~~January~~July 17, 2023

OP Units

~~0.315~~0.38

~~December~~June 30, ~~2022~~2023

~~January~~July 17, 2023

5.875% Series B Cumulative Redeemable Preferred Stock

0.367188

~~December~~June 15, ~~2022~~2023

~~December~~June 30, ~~2022~~2023

5.625% Series C Cumulative Redeemable Preferred Stock

0.351563

~~December~~June 15, ~~2022~~2023

~~December~~June 30, ~~2022~~2023

4.43937% Cumulative Redeemable Convertible Preferred Units

0.505085

~~December~~June 15, ~~2022~~2023

~~December~~June 30, ~~2022~~2023

4.00% Cumulative Redeemable Convertible Preferred Units

0.45

~~December~~June 15, ~~2022~~2023

~~December~~June 30, ~~2022~~2023

3.00% Cumulative Redeemable Convertible Preferred Units

0.545462

~~December~~June 15, ~~2022~~2023

~~December~~June 30, ~~2022~~2023

6757

~~Consolidated~~ Indebtedness Outstanding

The following table sets forth certain information with respect to our consolidated indebtedness outstanding as of ~~September 30, 2022:~~March 31, 2023:


		Contractual Maturity Date		Margin Above SOFR/LIBOR			Effective Interest Rate(1)			Principal Balance (in thousands)(2)			Contractual Maturity Date		Margin Above SOFR			Effective Interest Rate(1)			Principal Balance (in thousands)(2)
Unsecured and Secured Debt:	Unsecured and Secured Debt:											Unsecured and Secured Debt:
Unsecured Debt:	Unsecured Debt:											Unsecured Debt:
Revolving Credit Facility(3)	Revolving Credit Facility(3)	5/26/2026	(4)	S+0.725	%	(5)	3.805	%		$	—	Revolving Credit Facility(3)	5/26/2026	(4)	S+0.685	%	(5)	5.655	%		$	—
$400M Term Loan	$400M Term Loan	7/19/2024	(4)	S+0.800	%	(5)	3.942	%		400,000		$400M Term Loan	7/19/2024	(4)	S+0.760	%	(5)	4.832	%	(6)	400,000
$100M Senior Notes	$100M Senior Notes	8/6/2025		n/a			4.290	%		100,000		$100M Senior Notes	8/6/2025		n/a			4.290	%		100,000
$300M Term Loan	$300M Term Loan	5/26/2027		S+0.800	%	(5)(6)	3.717	%	(6)	300,000		$300M Term Loan	5/26/2027		S+0.760	%	(5)	3.677	%	(7)	300,000
$125M Senior Notes	$125M Senior Notes	7/13/2027		n/a			3.930	%		125,000		$125M Senior Notes	7/13/2027		n/a			3.930	%		125,000
$300M Senior Notes due 2028												$300M Senior Notes due 2028	6/15/2028		n/a			5.000	%		300,000
$25M Series 2019A Senior Notes	$25M Series 2019A Senior Notes	7/16/2029		n/a			3.880	%		25,000		$25M Series 2019A Senior Notes	7/16/2029		n/a			3.880	%		25,000
$400M Senior Notes due 2030	$400M Senior Notes due 2030	12/1/2030		n/a			2.125	%		400,000		$400M Senior Notes due 2030	12/1/2030		n/a			2.125	%		400,000
$400M Senior Notes due 2031	$400M Senior Notes due 2031	9/1/2031		n/a			2.150	%		400,000		$400M Senior Notes due 2031	9/1/2031		n/a			2.150	%		400,000
$75M Series 2019B Senior Notes	$75M Series 2019B Senior Notes	7/16/2034		n/a			4.030	%		75,000		$75M Series 2019B Senior Notes	7/16/2034		n/a			4.030	%		75,000
Total Unsecured Debt	Total Unsecured Debt									$	1,825,000	Total Unsecured Debt									$	2,125,000

Secured Debt:	Secured Debt:											Secured Debt:
2601-2641 Manhattan Beach Boulevard	2601-2641 Manhattan Beach Boulevard	4/5/2023		n/a			4.080	%		$	3,862	2601-2641 Manhattan Beach Boulevard	4/5/2023		n/a			4.080	%		$	3,802
$60M Term Loan		8/1/2023	(7)	L+1.700	%		4.843	%		57,521
960-970 Knox Street	960-970 Knox Street	11/1/2023		n/a			5.000	%		2,330		960-970 Knox Street	11/1/2023		n/a			5.000	%		2,283
7612-7642 Woodwind Drive	7612-7642 Woodwind Drive	1/5/2024		n/a			5.240	%		3,736		7612-7642 Woodwind Drive	1/5/2024		n/a			5.240	%		3,688
11600 Los Nietos Road	11600 Los Nietos Road	5/1/2024		n/a			4.190	%		2,503		11600 Los Nietos Road	5/1/2024		n/a			4.190	%		2,419
$60M Term Loan												$60M Term Loan	10/27/2024	(8)	S+1.250	%	(8)	5.060	%	(8)	60,000
5160 Richton Street	5160 Richton Street	11/15/2024		n/a			3.790	%		4,183		5160 Richton Street	11/15/2024		n/a			3.790	%		4,122
22895 Eastpark Drive	22895 Eastpark Drive	11/15/2024		n/a			4.330	%		2,630		22895 Eastpark Drive	11/15/2024		n/a			4.330	%		2,594
701-751 Kingshill Place	701-751 Kingshill Place	1/5/2026		n/a			3.900	%		7,100		701-751 Kingshill Place	1/5/2026		n/a			3.900	%		7,079
13943-13955 Balboa Boulevard	13943-13955 Balboa Boulevard	7/1/2027		n/a			3.930	%		15,055		13943-13955 Balboa Boulevard	7/1/2027		n/a			3.930	%		14,874
2205 126th Street	2205 126th Street	12/1/2027		n/a			3.910	%		5,200		2205 126th Street	12/1/2027		n/a			3.910	%		5,200
2410-2420 Santa Fe Avenue	2410-2420 Santa Fe Avenue	1/1/2028		n/a			3.700	%		10,300		2410-2420 Santa Fe Avenue	1/1/2028		n/a			3.700	%		10,300
11832-11954 La Cienega Boulevard	11832-11954 La Cienega Boulevard	7/1/2028		n/a			4.260	%		3,947		11832-11954 La Cienega Boulevard	7/1/2028		n/a			4.260	%		3,909
Gilbert/La Palma	Gilbert/La Palma	3/1/2031		n/a			5.125	%		1,982		Gilbert/La Palma	3/1/2031		n/a			5.125	%		1,888
7817 Woodley Avenue	7817 Woodley Avenue	8/1/2039		n/a			4.140	%		3,041		7817 Woodley Avenue	8/1/2039		n/a			4.140	%		2,978
Total Secured Debt	Total Secured Debt									$	123,390	Total Secured Debt									$	125,136
Total Consolidated Debt	Total Consolidated Debt						3.218	%		$	1,948,390	Total Consolidated Debt						3.616	%		$	2,250,136

(1)Reflects the contractual interest rate under the terms of each loan as of ~~September 30, 2022~~March 31, 2023, and includes the effect of interest rate swaps that were effective as of ~~September 30, 2022. See footnote (6) below. Excludes~~March 31, 2023 and interest rate swaps executed in March 2023 with an effective date of April 3, 2023 (assuming they were effective as of March 31, 2023). The interest rate is not adjusted to include the ~~effect of~~ amortization of debt issuance costs or unamortized fair market value premiums/discounts ~~and~~or the facility fee on the Revolver. Assumes daily SOFR of 4.870% and Term SOFR of 4.802% as of March 31, 2023, as applicable.

(2)Excludes unamortized debt issuance costs and premiums/discounts totaling ~~$14.3~~$19.4 million, which are presented as a reduction of the carrying value of our debt in our consolidated balance sheet as of ~~September 30, 2022.~~March 31, 2023.

(3)The Revolver is subject to an applicable facility fee which is calculated as a percentage of the total lenders’ commitment amount, regardless of usage. ~~The~~As of March 31, 2023, the applicable facility fee ~~ranges from~~is 0.125% ~~to 0.300% per annum depending upon our investment grade ratings, leverage ratio and sustainability performance metrics, which may change from time to time.~~, less a sustainability-related interest rate adjustment of 0.01%.

(4)The Revolver has two six-month extensions and the ~~$400M~~$400 Million Term Loan has two one-year extensions available at the borrower’s option, subject to certain terms and conditions.

(5)~~The~~As of March 31, 2023, the interest rates on these loans are comprised of ~~Daily Simple~~daily SOFR for both the Revolver and $400 Million Term Loan and Term SOFR for the $300 Million Term ~~Facility~~Loan (in each case increased by a 0.10% SOFR adjustment), plus an applicable margin ~~ranging from~~of 0.725% to

~~1.400%~~ per annum for the Revolver and 0.80% ~~to 1.60%~~ per annum for the Term ~~Facility,~~Loans, depending on our leverage ratio and investment grade ratings, ~~leverage ratio and sustainability performance metrics, which may change from time~~minus a sustainability-related interest rate adjustment of 0.04%. These loans are also subject to ~~time. During the three months ended September 30, 2022, our credit ratings were upgraded by two credit rating agencies and as~~ a ~~result, the applicable margin on the unsecured revolving credit facility was lowered to 0.725% from 0.775% and the applicable margin on the Term Facility was lowered to 0.80% from 0.85%.~~0% SOFR floor.

(6)~~As of September 30, 2022, Term~~Effective April 3, 2023, daily SOFR ~~related to $300.0 million of our variable rate debt has been effectively fixed at 2.81725% through~~for the use of interest rate swaps. For details, see “Note 7 – Interest Rate Derivatives” to our consolidated financial statements. Including the impact of these interest rate swaps, the hedged effective interest rate on the $300M$400 Million Term Loan is ~~3.717%.~~swapped to a fixed rate of 3.97231%, resulting in an all-in fixed rate of 4.83231% after adding the SOFR adjustment and applicable margin and subtracting the sustainability-related interest rate adjustment.

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

(8)The $60.0 million term loan facility (the “$60 Million Term Loan”) has interest-only payment terms bearing interest at Term SOFR increased by a 0.10% SOFR adjustment plus an applicable margin of 1.25% per annum. Effective April 3, 2023, Term SOFR for this loan is swapped to a fixed rate of 3.710%, resulting in an all-in fixed rate of 5.060% after adding the SOFR adjustment and applicable margin. The loan is secured by six ~~properties. One 24-month extension is~~properties and has three one-year extensions available at the borrower’s option, subject to certain terms and conditions.

The following table summarizes the composition of our consolidated debt between fixed-rate and variable-rate and secured and unsecured debt as of ~~September 30, 2022:~~March 31, 2023:


		Average Term Remaining (in years)	Stated Interest Rate	Effective Interest Rate(1)	Principal Balance (in thousands)(2)		% of Total		Average Term Remaining (in years)	Effective Interest Rate(1)	Principal Balance (in thousands)(2)		% of Total
Fixed vs. Variable:	Fixed vs. Variable:							Fixed vs. Variable:
Fixed~~(3)~~	Fixed~~(3)~~	7.0	2.96%	2.96%	$	1,490,869	77%	Fixed~~(3)~~	5.3	3.616%	$	2,250,136	100%
Variable	Variable	1.7	SOFR/LIBOR + Margin (See Above)	4.06%	$	457,521	23%	Variable	—	—%	$	—	—%
Secured vs. Unsecured:	Secured vs. Unsecured:							Secured vs. Unsecured:
Secured	Secured	2.8		4.44%	$	123,390	6%	Secured	2.8	4.555%	$	125,136	6%
Unsecured	Unsecured	6.0		3.14%	$	1,825,000	94%	Unsecured	5.4	3.560%	$	2,125,000	94%

(1)Includes the effect of interest rate swaps that were effective as of ~~September 30, 2022. Excludes~~March 31, 2023 and interest rate swaps executed in March 2023 with an effective date of April 3, 2023 (assuming they were effective as of March 31, 2023). Interest rates are not adjusted to include the ~~effect of~~ amortization of debt issuance costs or unamortized fair market value premiums/discounts ~~and~~or the facility fee on the Revolver. ~~Assumes Daily Simple SOFR of 2.980%, Term SOFR of 3.042% and 1-month LIBOR of 3.143% as of September 30, 2022, as applicable.~~

~~(3)Fixed-rate debt includes our variable rate $300M Term Loan that has been effectively fixed through the use of interest rate swaps through maturity.~~March 31, 2023.

At September 30, 2022, we had total consolidated indebtedness of $1.9 billion, excluding unamortized debt issuance costs and premiums/discounts, with a weighted average interest rate of 3.22% and an average term-to-maturity of 5.8 years.

~~At September 30, 2022,~~March 31, 2023, we had consolidated indebtedness of ~~$1.9~~$2.3 billion, reflecting a net debt to total combined market capitalization of approximately ~~15.9%~~13.6%. Our total market capitalization is defined as the sum of the liquidation preference of our outstanding preferred stock and preferred units plus the market value of our common stock excluding shares of nonvested restricted stock, plus the aggregate value of common units not owned by us, plus the value of our net debt. Our net debt is defined as our consolidated indebtedness less cash and cash equivalents.

Debt Covenants

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

~~The $60 Million Term Loan contains the following financial covenants:~~

•~~Maintaining a Debt Service Coverage Ratio (as defined in the term loan agreement) of at least 1.10 to 1.00, to be tested quarterly;~~

•Maintaining Unencumbered Liquid Assets (as defined in the term loan agreement) of not less than (i) $5.0 million, or (ii) $8 million if we elect to have Line of Credit Availability (as defined in the term loan agreement) included in the calculation, of which $2.0 million must be cash or cash equivalents, to be tested annually as of December 31 of each year;

•~~Maintaining a minimum Fair Market Net Worth (as defined in the term loan agreement) of at least $75.0 million, to be tested annually as of December 31 of each year.~~

We were in compliance with all of our quarterly debt covenants as of ~~September 30, 2022.~~

March 31, 2023.

Cash Flows

Comparison of the ~~Nine~~Three Months Ended ~~September 30, 2022~~March 31, 2023 to the ~~Nine~~Three Months Ended ~~September 30, 2021~~March 31, 2022

The following table summarizes the changes in net cash flows associated with our operating, investing, and financing activities for the ~~nine~~three months ended ~~September 30,~~March 31, 2023 and 2022 ~~and 2021~~ (in thousands):

Nine Months Ended September 30,
2022 2021 Change
Cash provided by operating activities $ 260,943 $ 179,943 $ 81,000
Cash used in investing activities $ (2,055,827) $ (1,352,721) $ (703,106)
Cash provided by financing activities $ 1,788,027 $ 1,055,459 $ 732,568


	Three Months Ended March 31,
	2023		2022		Change
Cash provided by operating activities	$	119,506	$	91,592	$	27,914
Cash used in investing activities	$	(765,878)	$	(471,622)	$	(294,256)
Cash provided by financing activities	$	879,443	$	384,876	$	494,567

Net cash provided by operating activities. Net cash provided by operating activities increased by ~~$81.0~~$27.9 million to ~~$260.9~~$119.5 million for the ~~nine~~three months ended ~~September 30, 2022,~~March 31, 2023, compared to ~~$179.9~~$91.6 million for the ~~nine~~three months ended ~~September 30, 2021.~~March 31, 2022. The increase was primarily attributable to the incremental cash flows from property acquisitions completed subsequent to January 1, ~~2021,~~2022, and the increase in Cash NOI from our Same Property Portfolio, ~~and changes~~partially offset by an increase in ~~working capital.~~cash interest paid.

Net cash used in investing activities. Net cash used in investing activities increased by ~~$703.1~~$294.3 million to ~~$2.1 billion~~$765.9 million for the ~~nine~~three months ended ~~September 30, 2022,~~March 31, 2023, compared to ~~$1.4 billion~~$471.6 million for the ~~nine~~three months ended ~~September 30, 2021.~~March 31, 2022. The increase was primarily attributable to a ~~$654.4~~$289.2 million increase in cash paid for property acquisitions and ~~acquisition related deposits,~~ a ~~$30.1 million decrease in proceeds from the sale of real estate for comparable periods and a $18.7~~$17.0 million increase in cash paid for construction costs, including costs related to repositioning/redevelopment ~~projects.~~projects, partially offset by $11.0 million lower cash paid for acquisition related deposits.

Net cash provided by financing activities. Net cash provided by financing activities increased by ~~$732.6~~$494.6 million to ~~$1.8 billion~~$879.4 million for the ~~nine~~three months ended ~~September 30, 2022,~~March 31, 2023, compared to ~~$1.1 billion~~$384.9 million for the ~~nine~~three months ended ~~September 30, 2021.~~March 31, 2022. The increase was primarily attributable to the following: (i) an increase of $1.4 billion in cash proceeds from borrowings under the Revolver, (ii) an increase of $400.0 million in cash proceeds from borrowings under the $400M Term Loan in July 2022, (iii) an increase of $329.4$346.9 million in net cash proceeds from the issuance of shares of our common stock ~~(iv)~~and (ii) an increase of ~~$300.0~~$296.9 million in net cash proceeds from ~~borrowings under~~ the ~~$300M Term Loan in May 2022, (v) an increase of $225.0 million from the repayment~~issuance of the ~~$225.0 million Term Loan~~$300 Million Notes in ~~August 2021 and (vi) an increase of $90.0 million from the redemption of the Series A Preferred Stock in August 2021.~~March 2023. These increases were partially offset by the following: (i) a decrease of ~~$1.4 billion from the~~$83.0 million due to higher repayment of ~~the~~ borrowings under the Revolver, (ii) a decrease of ~~$392.4~~$42.0 million ~~in net~~due to lower cash proceeds from borrowings under the ~~issuance of the $400 Million Notes due 2031 in August 2021,~~Revolver and (iii) a decrease of ~~$150.0~~$21.9 million ~~from the repayment of the $150.0 Million Term Loan Facility in May 2022 and (iv) an increase of $52.3 million in~~due to higher dividends paid to common stockholders and common unitholders ~~primarily due to the~~as a result of an increase in our quarterly per share/unit cash dividend and an increase in the number of common shares ~~outstanding and the increase in our quarterly per share/unit cash dividend.~~

outstanding.

Inflation

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

7161

Item 3. Quantitative and Qualitative Disclosures about Market Risk

Market risk refers to the risk of loss from adverse changes in market prices and interest rates. A key market risk we face is interest rate risk. We are exposed to interest rate changes primarily as a result of using variable-rate debt to satisfy various short-term and long-term liquidity needs, which have interest rates based upon ~~LIBOR or~~ SOFR. We use interest rate swaps to manage, or hedge, interest rate risks related to our borrowings. Because actual interest rate movements over time are uncertain, our swaps pose potential interest rate risks, notably if interest rates fall. We also expose ourselves to credit risk, which we attempt to minimize by contracting with highly-rated banking financial counterparties. For a summary of our outstanding variable-rate debt, see Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources. For a summary of our interest rate swaps and recent transactions, see “Note 7 – Interest Rate Derivatives” to our consolidated financial statements.

As of ~~September 30, 2022,~~March 31, 2023, we had total consolidated indebtedness, excluding unamortized debt issuance costs and premiums/discounts, of $2.25 billion. Of this total amount, $1.79 billion, or 80%, comprises our fixed-rate debt, and the ~~$300M~~remaining $460.0 million, or 20%, comprises our variable-rate debt. As of March 31, 2023, the fixed-rate debt amount includes the $300 Million Term Loan, which is variable-rate debt that has been effectively fixed through the use of ~~interest rate swaps. The~~two interest rate swaps ~~have~~with a combined notional ~~value~~amount of $300.0 million, an effective date of July 27, 2022, a maturity date of May 26, 2027, and ~~currently fix~~which fixes Term SOFR at ~~a weighted average rate of~~ 2.81725%.

At September 30, 2022, we had total consolidated indebtedness, excluding unamortized debt issuance costs and premiums/discounts, of $1.95 billion. Of this total amount, $1.49 billion, or 77%, comprises our fixed-rate debt under the terms of the loan or an interest rate swap. The remaining $457.5 million, or 23%, comprises our variable-rate debt. Based upon the amount of variable-rate debt outstanding as of ~~September 30, 2022,~~March 31, 2023, if ~~LIBOR and~~ SOFR were to increase by 50 basis points, the increase in interest expense on our variable-rate debt would decrease our future earnings and cash flows by approximately $2.3 million annually. If ~~LIBOR and~~ SOFR were to decrease by 50 basis points, assuming an interest rate floor of 0%, the decrease in interest expense on our variable-rate debt would increase our future earnings and cash flows by approximately $2.3 million annually.

In March 2023, we executed five forward starting interest rate swaps with an aggregate notional amount of $460.0 million to effectively fix our remaining outstanding variable-rate debt. These interest rate swaps fix daily SOFR related to the $400 Million Term Loan at a weighted average rate of 3.97231%, commencing on April 3, 2023 through June 30, 2025, and fix Term SOFR related to the $60 Million Term Loan at 3.71000%, commencing on April 3, 2023 through June 30, 2026. As of April 3, 2023, 100% of our consolidated indebtedness is fixed-rate debt under the terms of the loan or through the use of interest rate swaps.

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

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

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

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

As required by SEC Rule 13a-15(b), we carried out an evaluation, under the supervision and with the participation of management, including our Co-Chief Executive Officers and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of ~~September 30, 2022,~~March 31, 2023, the end of the period covered by this report.

Based on the foregoing, our Co-Chief Executive Officers and Chief Financial Officer concluded that, as of ~~September 30, 2022,~~March 31, 2023, our disclosure controls and procedures were effective at the reasonable assurance level.

Changes in Internal Control Over Financial Reporting

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

7363

Part II. OTHER INFORMATION

Item 1. Legal Proceedings

Item 1A. Risk Factors

Except as described below, there have been no material changes to the risk factors disclosed in Item 1A of our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2021.~~2022.

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

The ~~potential impacts~~funds in our accounts are held in banks or other financial institutions, and our deposits at these institutions would exceed any applicable Federal Deposit Insurance Corporation (“FDIC”) insurance limits. Should events, including limited liquidity, defaults, non-performance or other adverse developments occur with respect to the banks or other financial institutions that hold our funds, or that affect financial institutions or the financial services industry generally, or concerns or rumors about any events of ~~future climate change~~these kinds or other similar risks, our liquidity may be adversely affected. For example, on March 10, 2023, Silicon Valley Bank was closed by the California Department of Financial Protection and ~~governmental initiatives remain uncertain at this time but~~Innovation, which appointed the FDIC as receiver. Although we did not have any funds in Silicon Valley Bank or other institutions that have been closed, we cannot guarantee that the banks or other financial institutions that hold our funds will not experience similar issues. In addition, if any of our tenants or other parties with whom we conduct business are unable to access funds pursuant to instruments or lending arrangements with a financial institution, such parties’ ability to pay their obligations to us or to enter into new commercial arrangements requiring additional payments to us could be adversely affected.

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

~~Our assets~~In addition, any further deterioration in the macroeconomic economy or financial services industry could lead to losses or defaults by our tenants, which in turn, could have a material adverse effect on our current and/or projected business operations and ~~tenants~~results of operations and financial condition. For example, a tenant may fail to make payments when due, default under their agreements with us, or become insolvent or declare bankruptcy. In addition, a tenant could be ~~exposed to potential~~adversely affected by any of the liquidity or other risks ~~from possible future climate change~~that are described above as factors that could result in ~~physical and regulatory~~material adverse impacts an increase in sea level, flooding, and catastrophic weather events and fires. The occurrence of sea level rise or one or more natural disasters, such as floods, wildfires and earthquakes (whether or not caused by climate change), could increase our operating costs, impair our tenants’ ability to lease property and pay rent and negatively affect our financial performance. Additional risks related to our business and operations as a result of climate change include both physical and transition risks such as:

•~~higher energy costs as a result of extreme weather events, extreme temperatures or increased demand for limited resources;~~

•~~higher maintenance and repair costs due to increasing temperatures and more frequent heatwaves;~~

•~~higher costs of materials due limited availability of raw materials and requirements that may limit types of material for construction;~~

•~~limited availability of water and higher costs due to droughts caused by low snowpack;~~

•~~reduced labor pool and lease rates as a result of increasing air pollution and related illnesses; and~~

•~~reduced tenant appeal and/or investor interest in the event that certain tenant priorities and/or investor expectations regarding sustainability and efficient building practices are not met.~~

In addition, laws and regulations targeting climate change could result in stricter energy efficiency standards and increased capital expenditures in order to comply with such regulations, as well as increased operating costs that we may not be able to effectively pass on to our tenants. Any such regulation could impose substantial costs on our tenants, thereby impacting the financial condition of our tenants and their ability to meet their lease obligations and to lease or re-lease our properties.

Many of our costs, such as operating expenses and general and administrative expenses, interest expense and real estate acquisition and construction costs, could be adversely impacted by periods of heightened inflation.

In recent months, the consumer price index has increased substantially. Federal policies and recent global events, such as the rising price of oil and the conflict between Russia and Ukraine, may have exacerbated, and may continue to exacerbate, increases in the consumer price index.

A sustained or further increase in inflation could have an adverse impact on our operating expenses incurred in connection with, among others, the property-related contracted services. Our operating expenses may be recoverable through our lease arrangements. In general, our properties are leased to tenants on a triple net or modified gross basis. During inflationary periods, we expect to recover some increases in operating expenses from our tenants through our existing lease structures. As a result, we do not believe that inflation would result in a significant adverse effect on our net operating income and operating cash flows at the property level. However, there can be no assurance that our tenants would be able to absorb these expense increases and be able to continue to pay us, ~~their portion of operating expenses, capital expenditures and rent.~~

In addition, most of our leases provide for fixed annual rent increases of three percent or greater. However, the impact of the current rate of inflation of 8.2% may not be adequately offset by some of our annual rent escalations, and it is possible that the resetting of rents from our renewal and re-leasing activities would not fully offset the impact of the current inflation rate. As a result, during inflationary periods in which the inflation rate exceeds the annual rent escalation percentages within our lease contracts, we may not adequately mitigate the impact of inflation, which may adversely affect to our business, financial condition, results of operations, and cash flows.

Our general and administrative expenses consist primarily of compensation costs and professional service fees. Rising inflation rates may require us to provide compensation increases beyond historical annual increases, which may unexpectedly or significantly increase our compensation costs. Similarly, professional service fees are also subject to the impact of inflation and expected to increase proportionately with increasing market prices for such services. Consequently, inflation may increase our general and administrative expenses over time and may adversely impact our results of operations and cash flows.

In March 2022, the Federal Reserve began, and it has continued and is expected to continue, to raise interest rates in an effort to curb inflation. Our exposure to increases in interest rates in the short term is limited to our variable-rate borrowings. As of September 30, 2022, we had $757.5 million of variable-rate debt, excluding the impact of interest rates swaps in effect. In addition, the effect of inflation on interest rates could increase our financing costs over time, either through near-term borrowings on our floating-rate line of credit or refinancing of our existing borrowings that may incur higher interest expenses related to the issuance of new debt. We have entered into interest rate swaps to effectively fix $300.0 million of our variable-rate indebtedness, and we may enter into other hedging transactions. The use of hedging transactions involves certain risks. For more information, see “Item 1A. Risk Factors—Risks Related to our Capital Structure—Failure to hedge effectively against interest rate changes may adversely affect us” in our Annual Report on Form 10-K for the year ended December 31, 2021.

~~Additionally, inflationary pricing may have a negative effect on the construction costs necessary to complete our repositioning and redevelopment projects,~~ including but not limited to ~~costs~~delayed access or loss of ~~construction materials, labor~~access to uninsured deposits or loss of the ability to draw on existing credit facilities involving a troubled or failed financial institution. Any tenant bankruptcy or insolvency, or the failure of any tenant to make payments when due, could result in material losses to us and services from third-party contractors and suppliers. Certain increases in the costs of construction materials can often be managed in our repositioning and redevelopment projects through either general budget contingencies built into our overall construction costs estimates for each of our projects or guaranteed maximum price construction contracts, which stipulatemay have a maximum price for certain construction costs and shift inflation risk to our construction general contractors. However, no assurance can be given that our budget contingencies would accurately account for potential construction cost increases given the current severity of inflation and variety of contributing factors or that our general contractors would be able to absorb such increases in costs and complete our construction projects timely, within budget, or at all. Higher construction costs could adverselymaterial adverse impact ~~our investments in real estate assets and expected yields~~ on our redevelopment projects, which may make otherwise lucrative investment opportunities less profitable to us. As a result, our business, financial condition, results of operations, cash flows, liquidity and ability to satisfy our debt service obligations and to pay dividends and distributions to security holders could be adversely affected over time.

business.

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

(a) Unregistered Sales of Equity Securities

None.

(b) Use of Proceeds

None.

Period
Total Number of Shares
Purchased(1)
Average Price
Paid per Share Total Number of Shares Purchased as Part of
Publicly Announced Plans or Programs Maximum
Number (or approximate dollar value) of Shares that May Yet Be Purchased Under the Plans
or Programs
July 1, 2022 to July 31, 2022 111 $ 61.60 N/A N/A
August 1, 2022 to August 31, 2022 176 $ 67.84 N/A N/A
September 1, 2022 to September 30, 2022 1,705 $ 55.19 N/A N/A
1,992 $ 56.66 N/A N/A


Period	Total Number of Shares Purchased(1)	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Maximum Number (or approximate dollar value) of Shares that May Yet Be Purchased Under the Plans or Programs
January 1, 2023 to January 31, 2023	272	$	63.27	N/A	N/A
February 1, 2023 to February 28, 2023	181	$	63.61	N/A	N/A
March 1, 2023 to March 31, 2023	28,828	$	59.66	N/A	N/A
	29,281	$	59.72	N/A	N/A

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

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

None.

Item 5. Other Information

None.

7665

Item 6. Exhibits


Exhibit
3.1						Articles of Amendment and Restatement of Rexford Industrial Realty, Inc. (incorporated by reference to Exhibit 3.1 of Form S-11/A, filed by the registrant on July 15, 2013 (Registration No. 333-188806))
3.2						~~Fourth~~Fifth Amended and Restated Bylaws of Rexford Industrial Realty, Inc. (incorporated by reference to Exhibit 3.1 of Form 8-K, filed by the registrant on ~~February 14, 2020)~~April 7, 2023)
3.3						Articles Supplementary designating the Series B Preferred Stock of Rexford Industrial Realty, Inc. (incorporated by reference to Exhibit 3.3 of Form 8-A, filed by the registrant on November 9, 2017)
3.4						Articles Supplementary designating the Series C Preferred Stock of Rexford Industrial Realty, Inc. (incorporated by reference to Exhibit 3.3 of Form 8-A, filed by the registrant on September 19, 2019)
3.5						Eighth Amended and Restated Agreement of Limited Partnership of Rexford Industrial Realty, L.P. (incorporated by reference to Exhibit 10.1 of Form 8-K, filed by the registrant on March 21, 2022)
4.1						Third Supplemental Indenture, dated as of March 30, 2023, among Rexford Industrial Realty, L.P., as issuer, Rexford Industrial Realty, Inc., as guarantor, and U.S. Bank Trust Company, National Association, as trustee, including the form of the Notes and the Guarantee (incorporated by reference to Exhibit 4.2 of Form 8-K, filed by the registrant on March 30 2023)
10.1						~~First~~Second Amendment to Fourth Amended and Restated Credit Agreement, dated as of ~~July 19, 2022~~January 13, 2023, among Rexford Industrial Realty, L.P., Rexford Industrial Realty, Inc., Bank of America, N.A., as administrative agent and a letter of credit issuer and the other lenders named therein (incorporated by reference to Exhibit 10.30 of Form 10 -K, filed by the registrant on February 13 , 2023).
10.2						Equity Distribution Agreement, dated February 17, 2023, by and among Rexford Industrial Realty, Inc., Rexford Industrial Realty, L.P., and BofA Securities, Inc. and its affiliate (incorporated by reference to Exhibit ~~10.1~~1.1 of Form 8-K, filed by the registrant on ~~July 20, 2022)~~February 17, 2023).
10.3						Equity Distribution Agreement, dated February 17, 2023, by and among Rexford Industrial Realty, Inc., Rexford Industrial Realty, L.P., and BTIG, LLC (incorporated by reference to Exhibit 1.2 of Form 8-K, filed by the registrant on February 17, 2023).
10.4						Equity Distribution Agreement, dated February 17, 2023, by and among Rexford Industrial Realty, Inc., Rexford Industrial Realty, L.P., and Capital One Securities, Inc. (incorporated by reference to Exhibit 1.3 of Form 8-K, filed by the registrant on February 17, 2023).
10.5						Equity Distribution Agreement, dated February 17, 2023, by and among Rexford Industrial Realty, Inc., Rexford Industrial Realty, L.P., and CIBC World Markets Corp. and its affiliate (incorporated by reference to Exhibit 1.4 of Form 8-K, filed by the registrant on February 17, 2023).
10.6						Equity Distribution Agreement, dated February 17, 2023, by and among Rexford Industrial Realty, Inc., Rexford Industrial Realty, L.P., and Goldman Sachs & Co. LLC (incorporated by reference to Exhibit 1.5 of Form 8-K, filed by the registrant on February 17, 2023).
10.7						Equity Distribution Agreement, dated February 17, 2023, by and among Rexford Industrial Realty, Inc., Rexford Industrial Realty, L.P., and Jefferies LLC (incorporated by reference to Exhibit 1.6 of Form 8-K, filed by the registrant on February 17, 2023).
10.8						Equity Distribution Agreement, dated February 17, 2023, by and among Rexford Industrial Realty, Inc., Rexford Industrial Realty, L.P., and JMP Securities LLC (incorporated by reference to Exhibit 1.7 of Form 8-K, filed by the registrant on February 17, 2023).
10.9						Equity Distribution Agreement, dated February 17, 2023, by and among Rexford Industrial Realty, Inc., Rexford Industrial Realty, L.P., and J.P. Morgan Securities LLC and its affiliate (incorporated by reference to Exhibit 1.8 of Form 8-K, filed by the registrant on February 17, 2023).
10.10						Equity Distribution Agreement, dated February 17, 2023, by and among Rexford Industrial Realty, Inc., Rexford Industrial Realty, L.P., and Mizuho Securities USA LLC and its affiliate (incorporated by reference to Exhibit 1.9 of Form 8-K, filed by the registrant on February 17, 2023).
10.11						Equity Distribution Agreement, dated February 17, 2023, by and among Rexford Industrial Realty, Inc., Rexford Industrial Realty, L.P., and Regions Securities LLC (incorporated by reference to Exhibit 1.10 of Form 8-K, filed by the registrant on February 17, 2023).
10.12						Equity Distribution Agreement, dated February 17, 2023, by and among Rexford Industrial Realty, Inc., Rexford Industrial Realty, L.P., and Scotia Capital (USA) Inc. and its affiliate (incorporated by reference to Exhibit 1.11 of Form 8-K, filed by the registrant on February 17, 2023).
10.13						Equity Distribution Agreement, dated February 17, 2023, by and among Rexford Industrial Realty, Inc., Rexford Industrial Realty, L.P., and Truist Securities, Inc. and its affiliate (incorporated by reference to Exhibit 1.12 of Form 8-K, filed by the registrant on February 17, 2023).


Exhibit
10.14						Equity Distribution Agreement, dated February 17, 2023, by and among Rexford Industrial Realty, Inc., Rexford Industrial Realty, L.P., and Wells Fargo Securities, LLC and its affiliate (incorporated by reference to Exhibit 1.13 of Form 8-K, filed by the registrant on February 17, 2023).
22.1*						List of Issuers of Guaranteed Securities
31.1*						Certification of the Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2*						Certification of the Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.3*						Certification of the Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1*						Certification of Principal Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2*						Certification of Principal Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.3*						Certification of Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.1*						The registrant’s Quarterly Report on Form 10-Q for the quarter ended ~~September 30, 2022,~~March 31, 2023, formatted in inline XBRL (Extensible Business Reporting Language): (i) Consolidated Balance Sheets (unaudited), (ii) Consolidated Statements of Operations (unaudited), (iii) Consolidated Statements of Comprehensive Income, (iv) Consolidated Statements of Changes in Equity (unaudited), (v) Consolidated Statements of Cash Flows (unaudited) and (vi) the Notes to the Consolidated Financial Statements (unaudited) that have been detail tagged.
104.1*						Cover Page Interactive Data File - The cover page interactive data file does not appear in the interactive data file because its XBRL tags are embedded within the inline XBRL document.

* Filed herein

~~† Compensatory plan or arrangement~~

7767

SIGNATURES

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


						Rexford Industrial Realty, Inc.

~~October 21, 2022~~April 24, 2023						/s/ Michael S. Frankel
						Michael S. Frankel
						Co-Chief Executive Officer (Principal Executive Officer)

~~October 21, 2022~~April 24, 2023						/s/ Howard Schwimmer
						Howard Schwimmer
						Co-Chief Executive Officer (Principal Executive Officer)

~~October 21, 2022~~April 24, 2023						/s/ Laura E. Clark
						Laura E. Clark
						Chief Financial Officer (Principal Financial and Accounting Officer)

7868


	Same Property Portfolio								Total Portfolio
	Nine Months Ended September 30,				Increase/(Decrease)		%		Nine Months Ended September 30,				Increase/(Decrease)		%
	2022		2021				Change		2022		2021				Change
REVENUES



Rental income	$	305,883	$	282,791	$	23,092	8.2	%	$	452,156	$	319,140	$	133,016	41.7	%
Management and leasing services	—		—		—		—	%	456		350		106		30.3	%
Interest income	—		—		—		—	%	5		36		(31)		(86.1)	%
TOTAL REVENUES	305,883		282,791		23,092		8.2	%	452,617		319,526		133,091		41.7	%
OPERATING EXPENSES
Property expenses	72,278		65,321		6,957		10.7	%	108,448		75,631		32,817		43.4	%
General and administrative	—		—		—		—	%	44,531		33,981		10,550		31.0	%
Depreciation and amortization	89,226		93,663		(4,437)		(4.7)	%	140,226		110,048		30,178		27.4	%
TOTAL OPERATING EXPENSES	161,504		158,984		2,520		1.6	%	293,205		219,660		73,545		33.5	%
OTHER EXPENSES
Other expenses	—		—		—		—	%	746		35		711		2,031.4	%
Interest expense	—		—		—		—	%	34,826		29,772		5,054		17.0	%

TOTAL EXPENSES	161,504		158,984		2,520		1.6	%	328,777		249,467		79,310		31.8	%


Loss on extinguishment of debt	—		—		—		—	%	(877)		(505)		(372)		73.7	%
Gains on sale of real estate	—		—		—		—	%	8,486		27,312		(18,826)		(68.9)	%
NET INCOME	$	144,379	$	123,807	$	20,572	16.6	%	$	131,449	$	96,866	$	34,583	35.7	%