Rexford Industrial Realty Inc (REXR) 2017 Q1 法說會逐字稿

Greetings, and welcome to the Rexford Industrial Realty Inc. First Quarter 2017 Earnings Call. (Operator Instructions) As a reminder, this conference is being recorded.

I would now like to turn the conference over to your host, Steve Swett with ICR. Thank you. Please begin.

Good afternoon. We would like to thank you for joining us for Rexford Industrial's First Quarter 2017 Earnings Conference Call. In addition to the press release distributed today, we have posted a quarterly supplemental package with additional details on our results in the Investor Relations section, on our website at www.rexfordindustrial.com.

On today's call, management's remarks and answers your questions may contain forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements are usually identified by the use of words such as anticipates, believes, estimates, expects, intends, may, plans, projects, seeks, should, will, potential, predict and variations of such words or similar expressions. Forward-looking statements address matters that are subject to risks and uncertainties that may cause actual results to differ from those discussed today. Examples of forward-looking statements include those related to revenue, operating income or financial guidance. As a reminder, forward-looking statements represents management's current estimate. Rexford Industrial assumes no obligation to update any forward-looking statements in the future. We encourage listeners to review the more detailed discussions related to these forward-looking statements contained in the company's filings with the SEC.

In addition, certain of the financial information presented on this call represents non-GAAP financial measures. The company's earnings release and supplemental information package, which were released this afternoon and are available on the company's website, present reconciliations to the appropriate GAAP measures and an explanation of why the company believes such non-GAAP financial measures are useful to investors. This afternoon's conference call is hosted by Rexford Industrial's Co-Chief Executive Officers, Michael Frankel and Howard Schwimmer; together with Chief Financial Officer, Adeel Khan. They will make some prepared remarks, and then we will open the call for your questions.

Now I will turn the call over to Michael.

Thank you and welcome to Rexford Industrial's First Quarter 2017 Earnings Call. I will begin with a summary of our operating and financial results. Howard will then provide an overview of our markets and transaction activity. Adeel will follow with more details on our quarterly results, our balance sheet and our guidance for 2017.

Q1 was a strong quarter for the company, as we continued to fire on all cylinders. We achieved same property NOI growth of 6.9% on a GAAP basis, and of 10.1% on a cash basis, which was driven by a 360 basis point increase in occupancy in our stabilized same property portfolio, which now stands at 96% occupied.

On a consolidated basis, including repositioning space, occupancy was 88.9%, primarily driven by our strategy to capitalize upon planned move outs to execute on value-add repositioning opportunities. we signed 863,000 square feet of leases this quarter, and our exceptional re-leasing spreads are a testament to the ongoing strength of the infill Southern California industrial market.

On new leases, we achieved leasing spreads of 32.2% on a GAAP basis, and 20.4% on a cash basis. And for renewal leases, we captured spreads of 17.9% on a GAAP basis and 9.6% on a cash basis. Company share of core FFO for the first quarter was $15.1 million, a 26% increase over the prior year quarter, or $0.23 per share. Cash NOI increased by 32% and we increased operating cash flow by 34% compared to the prior year quarter, substantially exceeding our 24% increase in square footage over the same period, a reflection of the favorable operating leverage and embedded organic growth achieved within our value-add operating model and in-place portfolio.

Year-to-date, we have acquired $33.6 million of industrial property, and we have approximately $191 million of property under Accepted Purchase Agreements with a robust pipeline beyond these transactions. We disposed of one asset for approximately $6.9 million.

We are also pleased with the recent expansion of our unsecured credit facility, providing upwards of $1 billion of potential funding capacity.

As we look ahead, we believe that we are uniquely positioned for favorable growth. Fundamentals remain exceptionally strong and we see no signs of change on the horizon, given the unique strengths of our high barrier infill Southern California industrial markets.

Year-to-date, we have acquired $33.6 million of industrial property, and we have approximately $191 million of property under agreement, with a robust pipeline beyond these transactions. We disposed of 1 asset for approximately $6.9 million. We are also pleased with the recent expansion of our unsecured credit facility, providing upwards of $1 billion of potential funding capacity.

As we look ahead, we believe that we are uniquely positioned for favorable growth. Fundamentals remain exceptionally strong and we see no signs of change on the horizon, given the unique strengths of our high barrier infill Southern California industrial markets.

We believe there is extremely limited potential for a new supply of for-lease product due to limited land availability and high development cost, as we move forward within infill Southern California.

In fact, we continue to see supply diminishing as more product is taken out of the market to be converted to alternative uses than can be delivered.

Meanwhile, demand is strong and showing sustained growth. Los Angeles has continued to outpace the nation in employment growth. Activity at the ports of LA and Long Beach, the 2 largest ports in the nation, linking the U.S. to the Pacific Rim, are as busy as they have ever been, with first quarter TEUs up 6.5% from last year. And we continue to benefit from explosive growth in e-commerce. As record numbers of retail stores continue to shutter operations, infill industrial product is cannibalizing bricks-and-mortar retail's place in the distribution channel. We believe our portfolio is ideally positioned within the largest first mile and the largest and most coveted last mile of distribution for e-commerce fulfillment in the nation.

Within our portfolio, we continue to work to capitalize on these market fundamentals, leveraging our value-add operating models to drive FFO per share growth. In fact, today we have embedded internal growth within our current in-place portfolio is expected to add approximately $25 million to our analyzed NOI for the next 18 to 24 months from several sources, including the over 2 million square feet of leases expiring in 2017 with opportunities to continue our strong re-leasing spreads, the expected occupancy gain within our portfolio, the 3% annualized rental rate bumps embedded in almost all of our leases and the over 1 million square feet of space currently in value-add repositioning or lease-up.

Finally, we'd like to acknowledge and thank the entire Rexford team, for their exceptional accomplishments, focus and hard work.

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

Thanks, Michael, and thank you, everyone, for joining us today.

As in the past, I will start with an update on our markets, utilizing data from CBRE, then discuss our recent acquisition, disposition and pipeline activity.

In the first quarter, overall market fundamentals continue to outperform in Rexford's Southern California infill markets. Excluding Inland Empire East, asking rents increased 9.4% on a weighted average basis versus 1 year ago, and occupancy ended at 98.3%.

Last mile e-commerce fulfillment is accelerating demand and decreasing vacancy for light industrial space, pushing rental rates up faster than big-box product. The 1 billion square foot Greater Los Angeles industrial market reported a 1.1% vacancy rate in Q1, a 10 basis point reduction from the prior quarter.

Asking lease rates increased 3.7% versus Q4, and CBRE expects rents to increase 6.6% for the year. The 250 million square foot Orange County industrial market reported a 2.4% asking rate increase, versus Q4, with the vacancy rate ending at 1.5%, a 10 basis point decrease from Q4.

CBRE predicts lease rates will grow by 10.1% for the year. The 280 million square foot Inland Empire West industrial market saw both asking rates and vacancy unchanged from the prior quarter, ending at 2.1% vacancy.

Inland Empire East and West combined asking rents in Q1 were up 16% versus 1 year ago, and CBRE projects 5.3% rent growth in 2017.

For Q1, the 177 million square foot San Diego industrial market reported an asking rate increase of 1% versus Q4, up 6.9% year-over-year, with warehouse rents increasing the most at 11.7%. Several large flex buildings vacated in Q1, increasing the overall vacancy rate by 40 basis points to 4.4%.

Now moving on to our recent acquisition activity. In February, we purchased Avenue Paine, a 111,000 square-foot 30-foot clear building located within the Los Angeles San Fernando Valley submarket, for $17.1 million or $104 per square foot, in an adjacent 5.75-acre land parcel for $22 per square foot. We will remove excess tenant improvements in the vacant single tenant property and reposition it into Class A industrial warehouse space, and concurrently construct a new 114,000 square foot core tenant industrial building on the land parcel. After completion, we expect to achieve an aggregate stabilized yield on cost of 6.3%.

Subsequent to quarter end, we purchased Ward Avenue, a 100% leased 139,000 square foot 2-tenant building in the Ventura County market for $16.5 million. At the end of the first quarter, we closed on the disposition of an 8 building office and industrial complex in the Inland Empire West for $6.9 million, which equated to a 4.5% cap rate.

We continue to review our portfolio for select dispositions to unlock value and provide opportunities to recycle capital. While first quarter transaction activity was relatively light, our pipeline remains healthy, and we have 4 transactions under our agreement for $191 million.

We expect to close these transactions in the second quarter, subject to completion of due diligence and the satisfaction of customary closing conditions. We'll provide more details as sales are completed.

I'll now turn the call over to Adeel.

Thank you, Howard. In my comments today, I'll review our operating results for the first quarter. Then I'll summarize our balance sheet. And finally, I'll affirm our guidance for 2017.

Beginning with our operating results. For the first quarter 2017, net income attributable to common stockholder was $4.2 million or $0.06 per fully diluted share. This compares to $1.3 million or $0.02 per fully diluted share in the first quarter of 2016.

For the 3 months ending March 31, 2017, company share of core FFO was $15.1 million or $0.23 per fully diluted share. This compares to $12 million or $0.22 per fully diluted share in the first quarter of 2016.

After excluding non-recurring acquisition expenses, company share of FFO was $0.22 per fully diluted share.

Net income and core FFO per share increased due to our strong acquisition activity we did in the past 12 months, and same property portfolio growth, which was partially offset by increased interest expense and higher diluted share count.

Our portfolio continues to generate strong income growth year-over-year. Our same property NOI was $20.6 million in the first quarter. This compares to $19.2 million in the same quarter of 2016, an increase of 6.9%.

Our same property NOI was driven by a 6.3% increase in total rental revenue and a 4.6% increase in property operating expenses. On a cash basis, same property NOI increased by 10.1% year-over-year.

Turning now to our balance sheet and financing activity. We remain extremely well positioned from a balance sheet perspective, with approximately $12 million of available cash, $330 million of availability on the recently expanded $350 million credit facility. We have no debt maturities in 2017, and just $5 million maturing in 2018. This, combined with our strong free cash flow, gives us even more flexibility, as we plan our future growth.

In February, we closed on a new $450 million senior unsecured credit facility, consisting of a $350 million revolving line of credit and a $100 million term loan. The facility, which has 5-year term, assuming all extensions are exercised, can be expanded up to $1 billion under certain circumstances and is at favorable spreads to the facility it replaced.

With regard to our dividend, on May 1, our Board of Directors declared a cash dividend of $0.145 per share for the second quarter of 2017, payable on July 17, 2017, to common stock and unitholders of record on June 30, 2017.

Finally, with regard to our outlook for 2017. We are maintaining our guidance for core FFO within a range of $0.91 to $0.94 per share. Please note that our guidance does not include the impact of any transaction or capital market activities that have not yet been announced, nor acquisition costs or other costs that we typically eliminate when calculating this metric.

That concludes our prepared remarks. With that, we'll open the line to take any questions. Operator?

(Operator Instructions) Our first question comes from the line of Manny Korchman with Citigroup.

Adeel, maybe you could help us sort of figure out what looks like a little bit of a challenge to your disclosure. If you look at your same-store property pool and the change in occupancy there quarter-over-quarter, if you look at different places within supplemental, you sort of get to different numbers. So if I'm just looking at your total same-store pool, how much did occupancy increase in that pool just since December 31?

Manny, Adeel. So let me answer that question and I'm going to state all the numerical facts. One of the key things that's missing in the supplemental is the Q4, '16 reset of the pool. So the same pool, as of Q1 '17, was 90.1% occupied and the comparative Q4, on a sequential basis, was 91.9% occupied.

And we had guided the Street on that metric to 93% to 95%. Q1 '17 same-store stabilized ended at 96%. That sequential number on a Q4 '16 was 96.9% and we had guided the Street to 96% to 98%. So again, the Q4 '16 numbers that were reset in Q1 '17 are not on the supplementals, which is what I just added.

But then that only impacts the non-stabilized pool. So stabilized pool is the same, is that the right read through on that?

The stabilized pool, as we -- our same pool has always used the definition of time. If a project has been owned for a full 12 consecutive period in both comparable periods it is in the same pool. The stabilized pool for us is ancillary piece of information that we add, so we can strip out the repositioning assets in whatever stage they're on. So it's an ancillary piece of data, but our guidance has always been based on the -- just the normalized same pool, which is just time-based.

Got it. And then if we look at the property that you have under LOI, are there any large portfolios in there? Or is that just a lot of one-offs that add up to that $191 million?

Manny, it's Howard. Yes, there is 1 project in there that's a little over $140 million. It's in 1 market, and it's 1 concentrated business park.

And when you say business park, that'll be a similar makeup to your other properties or will there be something different sort of characteristically or demographically versus your current portfolio?

No, it's really right in the sweet spot of what we own. It's low finish, stock high, mid-bay type industrial.

Our next question comes from the line of Tom Lesnick with Capital One Securities.

I guess, first, just wanted to ask about expense recoveries in the quarter. It looked like that was trending a good bit higher this quarter as compared to trend. Just wondering if there was any color you could add to that?

Tom, it's Adeel. So that is kind of typical in Q1 and Q2 where you have a little bit of uplift in context of a higher recovery. And that's mostly due to the fact that we reconcile the prior year CAM, the billings in the first quarter. So you typically have a little bit of a pickup. And if you look at last year, you probably see the last same result. So that's what you're seeing here for the large part. That normalizes itself in Q2 and beyond, because our recoveries typically, for the most part, get addressed in the first 4 months of the current year for the prior year, so that's what you're seeing there.

Got it. And then turning to Inland Empire. Obviously, same-store occupancy in San Bernadino County was down significantly year-over-year. But as you think about that market as a whole and slice it between East and West, can you talk a little bit about what softness, if any, you're seeing in the East? And even though you only have 2 assets there, what that submarket is for you long term?

Well, the East is primarily related to big-box construction. And that -- I'm talking over 0.5 million-square-foot type buildings. And that's not a focus for Rexford. We do target larger product in the Inland Empire West. Usually it's going to be multiple tenant. But in terms of the overall market, it's really -- it really has to do construction, right? We're seeing a lot more construction occurring East because that's where the bulk of the land is. I don't know if there's -- you could point to any trend. Sometimes, quarter by quarter, it just has to do with when new leases get inked versus what was delivered that quarter. But then I think it's a little too early to start trying to extrapolate any meaningful data in terms of any increases in that occupancy -- or rather, in that vacancy level.

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

So I guess, going back to the occupancy, the same-store occupancy question. So did I hear you right, that sequentially, same-store occupancy is down 180 basis points in the quarter and stabilized is down 90? And if so, can you just talk us through what moved? What changed? What hit?

Sure, Jamie. It's Howard. It really has to do with repositioning. And in the quarter, we had 2 larger properties that moved into repositioning. We had a 208,000 square foot building in Orange County, of which we have a short-term tenant we're working around that's in 100,000 feet of that building. And then there was another 100 -- about 107,000-foot building in the San Gabriel Valley, that moved into repositioning.

Those particular properties are the bulk of it. There was even another one in the Inland Empire West that was 72,000 feet, that we're doing some repositioning work on it. But it didn't meet our definition, in terms of the timeline to be out of service. So it's not in the actual repositioning pool. But that was one where the tenant couldn't pay the rent we needed. And so we rolled them out of there. In fact, we're even negotiating a deal on the space right now. And Inland Empire West, we've had some significant rent spreads. That market, we've seen 40% to 70% GAAP leasing spreads. So that -- it's really just following part of our strategy.

And Jamie, I was just going to -- it's Michael. Thanks for your question, Jamie. I just wanted to add a little bit and put the occupancy in perspective.

First of all, just about all of the occupancy change in Q1 was planned and expected. And much of it, as Howard mentioned, is going into repositioning. And a lot of that repositioning in terms of deliveries, coming out of repositioning and the lease up is towards the latter half of the year, and Q4 in particular. Similar to what we saw last year. And we're actually pretty excited about the repositioning process. And just to put that in perspective, if you look at just the repositioning on the repositioning page in the supplemental, it's about $92 million, a little over $92 million of incremental investment going forward. And the return on a dollar-for-dollar basis, in terms of incremental NOI generated as a result of those improvements and renovations and repositionings, is about an 18.7% return on that investment. And those properties, in the aggregate, on a stabilized basis, are projected to perform at about a 7.4% unlevered yield on total cost. So that's just an integral part of our business. We saw a similar cycle last year. And I think it's important for folks to see the occupancy play in Q1 in the context of our business plan.

Okay. That's helpful. I guess sticking with that repositioning page, I mean, you had some moves in terms of percent occupied. It looks like Anderson's up. Then you had a couple that, either you think you'll finish sooner or you pushed out the completions. Can you just talk about some of the moves during the quarter in terms of leasing progress and how you're feeling on some of these assets with 0 lease-up, and then also the assets that changed in terms of timing?

Sure. It's Howard again. So first with Anderson, you mentioned, did have some leasing pickup. And in fact, we've finished leasing that building now, so we'll be reporting 100% occupancy on that for second quarter. The 150,000 square-foot building, De Soto, where we've been in negotiation on that one. We're pretty close to a deal. Although, we wouldn't want you to count on the deal, but that's been going on for about 4 months with 1 tenant in particular.

The [Bolton] property, we leased 3 spaces there, all but 1 space that we're still finishing some construction on. So we're making great strides on it. And just looking overall at some of the other assets in repositioning. Obviously, one of the them is a property we just bought on Avenue Paine that we're expecting to get the existing building back into service towards the end of the year. May not lease by then, but we'll be done by -- with our work in that building. The larger building, the Western building that we mentioned earlier, the 208,000-foot building, we expect to finish construction on that sometime in June or perhaps early July. And we've had some leasing activity. I don't think we actually projected getting that one leased until the latter part of this year. And we're still working with an existing 100,000-foot occupant to maintain some occupancy in that building as well. And the 108,000 building on Valley Boulevard, that construction we expect to be done probably end of the quarter or beginning of third quarter. And creating a very unique product there. It'll be a cross-dock facility with excess container storage. And so we're optimistic that we'll have some leasing on that somewhere around the third or fourth quarter as well.

And then, yes, the other product is really just some blocking and tackling at this Figueroa property. We have 4 vacant units there right now, that we're doing the repositioning on. We just started that. And then as those lease-up, we're going to move some other tenants out, so we can get in the space and do our work as well.

And then the final one I'll comment on that we'll start construction on in the near term is Nelson. We're in plan check, we've had plan check comments back and forth. So we're hoping to have our final bids in , in the next probably 2 weeks. And look to starting that probably within 2 or 3 weeks as well. And anticipate we'll be able to generate some income on that before the end of the year also.

So I think we're making great progress with most of the repositioning that we've been working very hard on.

Okay. If I could just ask one related follow-up, which is this 18118 South Broadway, occupancy went from 100% last quarter to 77% this quarter. Is that because you took space out of service or did you move backwards on the leasing?

No, it was a space that we had earmarked to make some changes to. We had a tenant in there, I think it's about an 18,000 or 19,000-foot space. So obviously, on a park that size, it makes a bigger impact in the overall occupancy. But we're adding dock-high loading to it and renovating the offices. And I think we already have a lease that's out for signature on that one as well. So the markets are really strong. And to be honest with you, if you really think about our base of product available for lease, think we have about -- what is it, about 650,000 square feet that's actually available for lease today. So for us, as quick as we can get these repositioning projects done, we're finding that we can generally lease them up.

(Operator Instructions) Our next question comes from the line of John Guinee with Stifel.

John Guinee. I wasn't going to ask this question, but you just sort of opened my eyes to it. If you look at the repositioning dollars on Page 20 and 21, Nelson, $1.50 a square foot; South Bay, $4.36 a foot; Valley Road -- Valley Boulevard, $5.60 a foot; Western Avenue, $4.70 a foot; South Broadway, $1.66 a foot; Mission Oaks, $1.71 a foot. Why even bother to move those into repositioning for relatively modest changes or repositioning? These are not big dollars, this isn't adding a wing to it or something.

Some of it is -- or actually, most of it is quite substantial. And we try to stay pure to our definition. It's simply if we take something out of service for more than 6 months, we don't have the ability to actually lease the space. So for instance, Nelson Avenue is quite a substantive project. Right now, there's 147,000 feet of existing buildings. We're spending, probably, what are spending there, Adeel? Upwards of $3 million, $4 million just on those buildings (inaudible) them into 7,000 to 20,000-foot dock-high units. And then we're adding 54,000 feet of new construction. So it's quite a substantial project. Figueroa as well, we're taking those units and doing full renovations to them. And those -- I don't have the cost off the top of my head on those, but they're phasing in. So in other words, we'd love to have done the whole project at one time, but we're attacking 4 to 6 units at a time on that one. And I'll give you one other example, John, Valley Boulevard, that 108,000-foot building, we're spending a little north of $3 million on that. We're adding probably, I think about 16 dock-high loading positions, a whole new ESFR sprinkler system, a complete redo of the offices and the exterior of the building. So these are quite substantive projects. And some of them don't differ much from what it would cost to build a new building almost, to be honest with you.

And I stand corrected. You don't have a column here that says total expected costs. And I had misspoke, because your repositioning dollar is just cost incurred. It's not total cost. So I stand corrected there. Sorry. Second question is, if you look at your development deal, it looks like you bought about 6 acres at $22 per land foot. What's the total per-square-foot development for that kind of product and to get your 6 30 yield on cost?

I don't have an exact number in front of me, but I'm going to tell you that it's probably somewhere in the $130 a square foot range, all in. It's an interesting market. It's really one of the few markets, when you can find some land, and you can actually put a deal together where you can underwrite it to a reasonable return in terms of your cap rate -- your stabilized cap rate. So we're pretty excited about this development. There's a few other things being built in the market. And so our project is targeting a piece of the market that there's no new supply being delivered for, being that this is divisible into 4 units. And there's extreme demand for it in the market for that sized product we are delivering is much lower in vacancy than even that overall market.

Our next question comes from the line of Michael Mueller with JPMorgan.

A few questions. A couple questions here. What was the same-store NOI growth, if you exclude all of the repositioning properties where you're putting significant capital into them?

Mike, it's Adeel. If you take that 6.9% year-over-year comparison that we have in the supplemental, strip out everything that's under repositioning now or was in repositioning last year, that 6.9% becomes 5.5%. So that's the comparative, if you were to strip that noise out. And just to comment on that, just based on the trajectory that we've seen in Q1, that is just slightly ahead from where we projected. So that's a great sign as to where we're heading for the rest of the year.

Okay. And then I guess on the prior comments about the sequential occupancy going from, was it 91.9 -- 91.09% to 90.1% and 96.9% to 96.0%. It was mentioned that a couple of buildings were moved into repositioning. Now is that a general comment about both of those metrics were impacted or just one?

Well, before Howard speaks, let me just -- it's not a -- it doesn't apply to both of those, Mike. It obviously applies to the basic 91.9% to 90.1%, certainly applies to that because that's including all the projects that are in there repositioning or not. However, the 96.9% versus the 96%, the repositionings would have been taken out, so that is a comparable stabilized pool. So and that's where Howard added some color earlier, was that just talking about the stabilized 96.9% versus the 96%, you did have some lease roll that took place in Q1, which we have already factored into our guidance in terms of when that's going to get leased up. We have a couple of projects going out in the Inland Empire and 1 out in Ventura County. About 111,000, 112,000 square feet, which we have already essentially put into our guidance and that will get leased up later on this year, hopefully Q3 and beyond. So that would be the dip.

Okay. And maybe just one last general comment. I appreciate all the detail that you put out here and a lot of numbers. But to me, when I take a step back and listen to this call, it seems like just about every question is about occupancy, what's in the pool, what's not in the pool. And I think's it comes across as being kind of confusing. And I don't know, maybe there's a different way to kind of think about this or communicate this because I do think it detracts from the business. Because people are just trying to figure out the nuts and bolts of what the numbers are doing here. So for whatever it's worth.

Well, John -- Mike. One thing that we will do, on a go forward basis to kind -- to reset the base. So every year when we have a same pool that resets, so essentially the first quarter, we're going to go ahead and restate the prior comparable quarters, at least on the same pool. I think that is one confusing fact that people were struggling with. So we will definitely do that starting in Q2. So when you take a look at the highlights page, that's Page 4 of the supplemental, the prior same pool occupancy statistics will be comparable, using the same pool. So you'll be able to quickly compare and contrast this in the latest quarter and what it looked like for the comparable quarter year-over-year, or sequentially for that matter. So we'll definitely make that improvement and we do apologize for not having that data this time around.

Mike, it's Michael. We appreciate this comment and also Manny's similar comment. And the fact is Rexford is very much a growth company and it does present certain challenges in terms of communicating -- and a value-add company, so we're creating a tremendous amount of value in the assets. So you're right, it creates a bit of a compounding challenge in terms of reporting. But the key story here is that Rexford's -- we grew our portfolio, I think by over 24%. We grew NOI by about, I think 26.5%. And despite the dip in occupancy, we grew NOI by 6.9%, and 5.5% if you strip out the repositioning. So I think another interesting fact to help give some continuity from last year, is if you look at last year's 2016 pool, it's more of a stabilized pool today. If you just carve out that pool of properties, it's about 2 million square feet fewer than the 2017 same property pool. That 2016 same property pool NOI growth was full 9.2% in the first quarter. So the underlying business and portfolio strategy are incredibly healthy and the business is performing really well. So we're going to work to help strip away some of the noise to make sure that it comes out more clearly.

Our next question comes from the line of Jon Petersen with Jefferies.

One thing just kind of on the sequential occupancy I haven't heard you guys talk too much about is, in the first quarter for industrial REITs, it's fairly common to see dips in occupancy sequentially. I think last year, you were down 100 basis points from 1Q '16 versus 4Q '15. So I mean how much -- I guess, there's stories behind all of the sequential changes, but it's not wrong to say that some of this is seasonal, right?

Absolutely. You're right, because we're -- obviously, we're trying to make out our numbers at the end of each year. And occupancy is one of the things we guide to. So there's definitely more leases that expire at the end of the year than typically the first quarter of the year. It's a good observation.

Okay. Yes, just wanted to throw that out there. And one more just a kind of cleanup item. I think on the acquisition you guys did subsequent to the end of the quarter, the 2390 Ward Avenue, $16.5 million, did you guys give a cap rate or an expected stabilized yield there? I know in the press release you talked about how it's below market rates. What were kind of the yields on that?

Right. Now we haven't disclosed anything on that. We'll talk more about that when we report on the second quarter transactions.

Is it fair to assume, though, just because you made the comment in the press release that it was below market rents that we're talking about a fairly low cap rate relative to what you guys usually do?

No, I think it's actually a pretty healthy cap rate. Yes, we're very pleased with the deal. We bought it off market, which as you know, is part of our strategy. And many times, allows us to outperform what you'd expect in terms of widely marketed transactions.

Our next question comes from the line of Blaine Heck with Wells Fargo Advisors.

Not to pile on, but Adeel, following up on same-store. If you were to take the repositioning projects out, what would the same-store NOI growth guidance be?

That number is -- I think, last quarter, I disclosed that it's about 40% or so. And we have not changed the guidance this quarter. So that is still rounding up to about 5% or so, 4.8%, 5% or so. And as I mentioned earlier, is that the trajectory that we've seen in Q1 is very, very positive. And so far what we are seeing in Q2 is continuing with that trend. So hopefully, we'll be in a position to tighten our guidance later on, but that remains to be seen. However, that -- if you were to strip that out, just based on the 6% to 8% that we guided and if you strip the noise out, it's a solid 5% or so.

Okay, that's helpful. And then last question. Can you talk about the 3% difference between GAAP and cash same-store NOI? Looks like that's due mostly to maybe the burn off of free rent. Is that free rent mainly coming from lease-up of repositioned properties?

It's across-the-board. I think that, that trend has been continuing and in fact the market is really tight. And that's one of the big things. And if you take a look at the cash re-leasing spread versus the gap, and that is the biggest delta, right, that's one of the key portions of the delta, I should say, right? So that is something that we've been communicating and you've seen quarter in and quarter out, in terms of how the re-leasing trends have looked. So I think that's a byproduct of that. So that was to be expected.

Okay. So how do you think that trends? Does the gap between the 2 get larger before it contracts or should we see that come in?

Blaine, it's Howard. I think that you're asking really more a question about market fundamentals, which is really what would impact a change. And we're not seeing anything on the horizon indicating that there's any softness in any of our markets. So we anticipate very limited concessions to continue to be given on all of our leases.

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

I guess, going back to the guidance. Just maybe talk about -- we've seen a wave of guidance bumps from industrial this quarter. Can you just talk about the kind of ins and outs that has you keeping your guidance? And are you trending towards the higher end, the lower end, maybe some color around why you kept guidance where you did?

Yes, Jamie, it's Adeel. So obviously we just finished Q1, and it would be premature for us to obviously read too much and we still have full 3 quarters. So Q2 is somewhat gone. But I think the key -- the other caveat that is unique to us is that we typically have a decent amount of roll. I think this year we started the year about 2.7 million square feet or so. So I think once we start to gather some momentum in terms of time, Q2 and a little bit into Q3, we have a really, really good idea in terms of where things are shaking out. I think that that's what essentially guides us in terms of when we decide to tighten the range or reiterate the range. So I think -- but I think the thing to focus on for this time around is that Q1, re-leasing spreads were solid. And we remain extremely confident in terms of what we have currently forecasted in terms of leasing that's going to come in Q3 and Q4 in terms of repositioning or just on some of the renewal spaces, or expiring spaces that are coming on, we're extremely confident in terms of just reiterating the guidance. But I think the trajectory that I've been talking about throughout this call remains extremely positive. So hopefully, we'll be in a good spot to guide you guys on an upward in the future quarters.

Okay. And then the $191 million of transactions under contract, can you just walk us through your capital plan? I know you said there's $12 million of cash and $330 million credit line availability. Just how do we think about your -- how much you would spend before you do actually want to go out and raise some more capital?

Right, right. So it's again, Adeel here. I will start with the basic facts. I think we ended the quarter extremely solid in terms of the balance sheet. Our debt-to-EBITDA was in a very good spot. And just some of the metrics that I already disclosed in the opening call, the $12 million in cash, like you said, $330 million available on the facility. We still have $112 million as of Q1, in terms of the ATM and that we could dribble out. And similar to the last year, we can have selected dispositions that could come through. So I think, we sit in a very, really good spot. We have a lot of options and the balance sheet being as healthy as it, we have a lot of -- again, from a liquidity perspective, we remain extremely optimistic and it's very healthy from our side. And I think, the last thing that I want to mention is that just maintaining that balance sheet and just the discipline and just keeping those ratios in check I think remains a key part of the strategy. So that is the underlying theme. So hopefully, we can triangulate among all of these little various factors that I talked about in terms of liquidity, and we have a good solution in front of us.

Jamie, it's Michael. And to just to reiterate, we're in a great position now, as compared to even a year or 2 ago, in terms of our ability to efficiently match fund acquisitions. Adeel mentioned we -- last year, you saw us dispose of some property. We have about $65 million worth of property that is under contract for possible sale. Obviously, a lot of closing conditions that we can't control, so there's no guarantee that those will close. But we feel like we're in a great position to be very efficient custodians of capital through the year and beyond.

Our next question comes from the line of Manny Korchman with Citigroup.

Just as you're open to taking suggestions on the call, on maybe changing some disclosure. The other thing that I just wanted to suggest that maybe is causing some of these issues is having the call half an hour, 45 minutes after putting out the numbers. And it doesn't probably allow the community enough time to the really parse through, especially one there's so many moving pieces. Was just wondering if you've thought about changing that?

Manny, of course we do. We think about it and we think about it a lot. And we're going to continue to. And we understand the issue it creates for your guys. There was just a little bit of reticence to create a situation where there could be trading the stock between the release and the call. But we continue to evaluate it. And sitting on the West Coast, maybe we'll have to start getting up real early to facilitate that change. But we do continue to consider it and we take your feedback very seriously.

We have reached the end of our Q&A portion. I would like to turn the call to management for closing remarks.

On behalf of the company, we'd like to thank everybody for tuning in and we look forward to reconnecting in about 3 months. Thanks so much everybody.

Thank you. This concludes today's teleconference. You may disconnect your lines at this time. And thank you for your participation.