Rexford Industrial Realty's (REXR) Q2 2014 Results - Earnings Call Transcript

| About: Rexford Industrial (REXR)

Rexford Industrial Realty, Inc (NYSE:REXR)

Q2 2014 Results Earnings Conference Call

August 07, 2014

Executives

Steve Swett - ICR

Michael Frankel Co-Chief Executive Officers

Howard Schwimmer - Co-Chief Executive Officers

Adeel Khan - Chief Financial Officer

Analysts

Brendan Maiorana - Wells Fargo

Michael Mueller - JPMorgan

Weston Bloomer - FBR Capital Markets

Operator

Greetings and welcome to Rexford Industrial Realty Inc.’s Second Quarter 2014 Earnings Conference Call. At this time, all participants are in listen-only mode. A brief question and answer session will follow formal presentation. (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, Steve. You may now begin.

Steve Swett

Good afternoon. We would like to thank you for joining us for Rexford Industrial's second quarter 2014 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 to 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 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 represent management’s current estimates. 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 measure and 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 up the call for your questions.

Now I will turn the call over to Michael.

Michael Frankel

Thank you and welcome to Rexford Industrial’s second quarter 2014 earnings conference call. I will begin with a brief summary of our operating and financial results for the quarter; Howard will then provide an overview of our markets and recent investment activity; and Adeel will then follow with more details on our second quarter financial results, balance sheet and our outlook for the remainder of the year.

During the second quarter of 2014, Rexford truly fired on all cylinders, achieving significant results on all of our strategic growth initiatives. We’re extremely excited to continue to leverage the strength of our platform, deep market experience and balance sheet to drive growth and cash flow and to generate value for stakeholders.

Our second quarter achievements were substantial. Within our portfolio, we continued to record strong leasing activity, increasing the portfolio’s leased percentage and occupancy rate, driving strong re-leasing spreads and accelerating same store NOI growth. Also during the quarter, we continued to source and close acquisitions at a robust pace. In the second quarter, we acquired 14 industrial properties totaling approximately 1,375,000 square feet for an aggregate cost of about a $152 million. This increases our year-to-date 2014 acquisition volume to over $220 million including properties purchased after the end of the second quarter. As a result, we reported recurring FFO of $6.1 million and recurring FFO per share of $0.24.

In July, we marked our one year anniversary as a public company and I’d like to take a few moments to summarize all that we’ve accomplished.

We’ve acquired more than 3.1 million square feet of well located and value driven industrial property investments within our target markets, investing more than $300 million. By square footage, we’ve increased the size of our portfolio by approximately 50%. Over the prior year, we have leased nearly 2 million square feet of space and increased our lease portfolio from 89.8% to 91.1% leased. Our positive re-leasing spreads that exceeded market rent growth, a testament to the quality; dedication and focus of our leasing and asset management team. We’ve increased rental revenues by over 40%; cash NOI by over 35%; and FFO per share by 38%. Howard and I are very pleased about what we’ve been able to accomplish and are even more excited about the opportunity we have going forward as we continue to leverage our strengths to grow our platform.

Our accomplishments over the prior quarter and year demonstrate just how unique our business is. Rexford is the only pure play public traded industrial REIT focused solely on Southern California, the largest most diverse industrial market. Our deep market penetration, entrepreneurial approach to asset management and creative deal sourcing methods combined with our strong balance sheet to enable our accretive growth. In terms of our growth potential, our target Southern California market is economically larger than most nations and it’s measured by market value. We estimate that our Southern California target market is larger than the next three to five largest U.S. markets combined.

Consequently, our mandate is to grow the highest quality industrial property business in the nation as measured by quality markets of and quality growth and consistency of earnings.

Turning to our second quarter 2014 operations, our portfolio continues to perform well. Our total consolidated portfolio is 90.5% occupied and 91.1% leased at the end of the second quarter. Occupancy on a same property portfolio basis was 89.8% which was up a 140 basis points compared to the second quarter of 2013. On a consolidated basis, revenue was up 41% and cash NOI was up 36% year-over-year. On a same property basis, revenue was up 4.8% and NOI increased 8.3% year-over-year which was driven primarily by increased occupancy, positive re-leasing spreads and a 4.1% reduction in same property operating expenses.

With regard to leasing for the consolidated portfolio, we signed 116 leases accounting for approximately 573,000 square feet during the second quarter. We signed 44 new leases for about 209,000 square feet and we signed 72 lease renewals for about 364,000 square feet. Our tenant retention was 62% in the quarter.

At this point in the cycle, we believe one of our key operating measures is re-leasing spreads. To that end for our new and renewal leases combined, our rental rates increased 17.1% on a GAAP basis and increased 5.2% on a cash basis. Our trend of positive re-leasing spreads demonstrates our ability to capture the benefits of strengthening fundamentals across our infill markets and the opportunity associated with driving continued lease up of our in price portfolio.

Overall, and on behalf of the entire Rexford team, we have never been more excited of the quality of our growth prospects and express our deep appreciation to the support of our stockholders. And with that I will turn the call over to Howard.

Howard Schwimmer

Thank you, Michael and thank you everyone for joining us today. As on past calls, I will update you on our markets and review our recent transactions which have been substantial. Let me start by providing some perspective on our markets, primarily utilizing market data according to CBRE. Fundamentals in Rexford's core Southern California infill industrial markets exhibited further improvement during the second quarter 2014 as leasing demand accelerated for our well located and functional industrial properties.

Vacancy rates in our Los Angeles County market have been below 3% for the last 18 months and ended this quarter at 2.3%.

CBRE expects rents to grow by approximately 5.7% over the next 12 months placing them near the levels reached in 2008. In Orange County, the vacancy rate dropped further to 2.5%, which is the lowest level since the fourth quarter of 2007. For the tight vacancy rates and increasing demand Orange County is well positioned for rental increases, which are expected to grow by 4.5% by the end of 2014.

In San Diego County, vacancies have declined for 13th consecutive quarters to 7.1% and has now exceeded pre-recession levels. Rents increased 1% in the market over the quarter with low-finish industrial product leading this improvement. We expect availability to continue to decline and landlord pricing power to strengthen. Rental rates are projected to grow by 5.2% over the next 12 months.

In Ventura County, vacancy declines the 5.4% and rental rates moved upwards, increasing 3.3% over the previous quarter. Rental rates are projected to increase in this market by 7.7% through the end of 2015. At the end of the second quarter, vacancy in the Inland Empire increased slightly from the first quarter 2014, the 4.3% due primarily to a significant amount of new construction in big box industrial which is not Rexford's primary focus. Asking rents in the Inland Empire increased 2.6% over the last quarter and 13% year-over-year. Demand for product size below 100,000 square feet, which his Rexford's focus increased rapidly over the quarter. As growth activity for that segment increased by 38% compared the last quarter.

Overall, rental rates are projected to increase 8.7% over the next 12 months. Based on these positive trends, we believe our portfolio is particularly well-positioned to capture the benefits for further strengthening market, enabling us to continue to drive occupancy and rent growth on a sustainable basis.

Now, moving on to our transaction activity. During the second quarter, we were extremely busy. We acquired 14 properties totaling approximately 1,357,000 square feet for aggregate cost of about $152 million and including transactions closed after June 30, the company has acquired 17 properties totaling approximately 1.77 million square feet for an aggregate cost of about $192 million.

Our earnings release has details of this transaction so I’ll only provide some quick highlights of the acquisitions which were all consistent of our value driven investment strategy. The majority are located in L.A. North County and with these acquisitions 70% of our portfolio is now in these two markets and are representative of the types of opportunities we are pursuing. The company acquired Saturn Way, 170,000 square foot Class A investor building for $21.1 million or $123 per square foot. The property is located in Seal Beach within the Orange County West sub-market and is 100% leased. We anticipate an initial yield of 6.3%.

In May, the company acquired 2980 San Fernando, a 131,000 square foot industrial property located in Burbank for $15.4 million or $118 per square foot. The property is located within the San Fernando Valley sub-market, a 100% leased by single tenant and we anticipate an additional yield of 6.9%.

Rexford also acquired Crescent Bay, a 46,000 square foot industrial building for $6.5 million or $140 per square foot. The building is located in South Orange County and is a 100% leased through 2016 at rents well below current market value. We anticipate initial yield of 5.3%.

In June we acquired Birch Street, a 98,000 square foot industrial building along with additional land which together totaled 7.9 acres located in Orange County, for $11 million, or $112 per square foot.

We intend to execute a value-add plan to renovate modernize and reposition the property as a single tenant or two tenant industrial project and anticipate a stabilized yield of 6.3% or more.

In June the company acquired DuPont Business Center, a two-building industrial complex totaling 111,000 square feet for $10.2 million or $91 per square foot. A 100% occupied project is located in the Ontario/Inland Empire of West submarket, and contains big box features for smaller dock high spaces. We anticipate an initial yield of 4.5% stabling at a 6.7% yield or more.

The company also acquired a nine-property industrial portfolio. This property is located in infield Los Angeles, Orange and San Diego Counties, containing an aggregate of 817,000 square feet for $88.5 million or approximately $108 per square foot. The current occupancy is 87%. The initial portfolio yield is anticipated to be 5.2% and we’re excited about some of the value-add opportunities in the portfolio and project stabilized yields for these properties to range from 6% below 7% unlevered yield on cost.

Subsequent to the end of the quarter in July, the company acquired three additional properties all in the Greater San Fernando Valley submarket, which brings year-to-date acquisitions to over $220 million. The company acquired Avenue 32, a 100,000 square foot industrial building for $11 million, or $109 per square foot. We also acquired Chatsworth Industrial Park, a 153,000 square foot industrial complex for $16.8 million or $110 per square foot. And finally the company acquired Avenue Kearny, a 139,000 square foot industrial building for $11.5 million, or $83 per square foot.

As we look ahead, the opportunities in our markets remain substantial and we’re pleased to be able to leverage our comprehensive sourcing methodologies and deep market relationships to support our growth strategies. Based on our acquisition’s pace to-date we’re comfortable increasing our full year 2014 acquisition target to $275 million or more. Our pipeline remains robust however we remind you that volume in any given quarter may fluctuate.

I’ll now turn the call over to Adeel to discuss our second quarter results, balance sheet and financing activities.

Adeel Khan

Thank you, Howard. In my comments today, I will review our operating results, then I will summarize our balance sheet and recent financing transactions. And finally I will provide some updated comments on our outlook for 2014.

Starting with our operating results. For the three months ending June 30, 2014, Rexford Industrial reported company share of recurring FFO of $6.1 million or $0.24 per fully diluted share. Recurring FFO excluded the impact of approximately $652,000 of non-recurring acquisition expenses. Including these costs the FFO was $5.5 million for the quarter or $0.22 per fully diluted share.

For the six months ending June 30, 2014, Rexford Industrial reported company share of recurring FFO of $11.4 million or $0.45 per fully diluted share. Recurring FFO excluded the impact of approximately $1 million of non-recurring acquisition expenses, including these costs FFO was $10.5 million for the six months ending, or $0.41 per fully diluted share.

As a reminder, this was only our third full quarter as a public company and per share earnings and FFO comparisons to any period prior July 2013 include results of our predecessor entities and may not be comparable to the current quarter’s results.

On a same property basis we generated a 4.8% increase in second quarter rental revenue as compared to the prior year period. Same property operating expenses were down 4.1% primarily driven by lower non-recurring repairs and maintenance cost. Same property portfolio NOI was $6.9 million for the second quarter as compared to $6.3 million for the same quarter at 2013, representing an increase of 8.3%.

On a cash basis our same property portfolio NOI was up 3.3% year-over-year. On a year-to-date basis our same property revenue was 4.1% and our same property operating expenses increased 5.5%, resulting in a 3.6% increase in same property NOI. Cash NOI was up 2.1% during the first six months of the year compared to the same period in 2013.

Turning now to our balance sheet and financing activities. At June 30, Rexford Industrial had total consolidated debt outstanding of approximately $369.7 million. Our consolidated debt includes approximately $169.8 million of secured property debt.

During the second quarter we amended our unsecured credit facility increasing the availability by $100 million to $300 million which now consists of $100 million unsecured term loan and the $200 million revolver. Borrowings under the revolver bear interest at the rate equal to LIBOR plus 1.3% to 1.9% depending on our leverage ratio. The maturity date of revolver was expand by approximately two years to June 2018 with the one year extension option.

The unsecured term loan bears interest at a rate equal to LIBOR plus 1.25% to 1.85%, depending on our leverage ratio. The unsecured term loan has a five year term ending on June 11, 2019. The amended credit facility also includes an accordion feature, which would allow the facility to be increased by an additional $300 million under certain circumstances.

At June 30, 2014, our unsecured credit facility had a balance of $99.9 million, on a pro forma basis reflecting the impact of the acquisitions we completed in July; our credit facility balance is approximately $137.9 million. Amending our credit facility was a strategic goal for the company providing us with the lower cost of capital; enhance financial flexibility and additional capacity to support the ongoing pursuit of our growth executives. We have over $115 million of available capacity on our balance sheet.

Going forward, we intend to maintain a strong balance sheet with sufficient capacity to support our growth objectives. We have a variety of potential available liquidity sources at our disposal and we'll continue to consider other options to finance our growth and retain our financial flexibility.

Finally, I’d like to provide an update on the metrics we have communicated that support our outlook for 2014. We continue to project year-end 2014 same-store property occupancy of about 93%, which is unchanged from our initial target. As Howard discussed, based on our acquisition pace to-date, we’re comfortable increasing our full year 2014 acquisition target to $275 million or more.

The pipeline remains robust. However, we remind you that our volume may reflect some variability on a short-term basis. For G&A, we anticipate a full year expense about $11 million.

As we move through the balance of the year, we will continue to update our expectation and look to providing additional disclosure over time.

With that we’ll open the call to your questions. Operator?

Question-and-Answer Session

Operator

Thank you. We’ll now be conducting question and answer session. (Operator Instructions). Thank you. And the first question comes from the line of Brendan Maiorana with Wells Fargo. Please proceed.

Brendan Maiorana - Wells Fargo

Thanks. Good afternoon. So, guys, you’ve written very successful with the acquisitions that have been out there and you moved up your acquisition volume target. Just thinking about how do you think about the financing longer term? We saw you filed (inaudible) earlier this week. Do you think that an equity issuance is something that’s likely given that leverage has moved up, I would say sort of towards the end of your target range? I think you guys provided your goal and you came out with the idea?

Adeel Khan

Brendan, hi, it's Adeel. So, keeping the strategic goal in mind which is the growth opportunities that we continue to pursue here and also keeping in mind that we have about $115 million capacity on the balance sheet unused, used in certain debt covenants, so, we are measuring ourselves again. But we have some capacity on the balance sheet continue to pursue that strategy. With that in mind, we continue to identify capital opportunities that will allow us to maintain the strong and flexibility on the balance sheet that we currently experienced while maintaining the leverage ratio at a reasonable level, so that essentially it’s.

Brendan Maiorana - Wells Fargo

Yes. So, I mean I guess it’s -- maybe I am being a little bit tense about it, but if I just -- if I think about your options are probably -- if you’re going to continue to acquire, which it sounds like you feel confident about that given that acquisition guidance was raised, your options are raise -- and you want to keep leverage at a reasonable level, which I think you probably do. Your options are probably thinking about raising some form of equity capital or selling assets. And I know you’ve sold a little bit of assets but is that something that you think about as a source of capital or is that less likely, given that you still want to grow the company and have done a nice job acquiring thus far?

Michael Frankel

Hey Brendan, this is Michael. Yes, as Adeel said, we still like we have a lot -- we still have a reasonable amount of capacity as is today and you’ll see us looking at the capital markets with respect to our acquisition activity as we move forward which again is going to be -- it’s changed, it’s not necessarily consistent from quarter-to-quarter. And I think and one of the great things about our business is that we are de-leveraging every single quarter. And if you look at our revenue growth and NOI growth on a consolidated basis, we grew revenue 9.8% quarter-over-quarter Q1 to Q2; we grew NOI by 16.9% on a consolidated basis.

So, we feel like we’re doing all the right things to grow the company selectively, accretively in a smart fashion. And I think the growth metrics from a financial perspective are reflecting that. And but ultimately we’re going to be careful about how we move forward. We’re going to adhere to the leverage goals that we set forth earlier last year. And we’re very excited about the options we have moving forward.

Brendan Maiorana - Wells Fargo

Yes. And then just -- maybe last one, just as we would think about -- as you guys think about the opportunity set that's out there, there is -- if you did decide to think about issuing capital, how do you kind of think about where your share price is, and maybe the internal growth that you have in your existing portfolio today versus the opportunity set that's out there and the value that you see in the acquisition opportunities that are out there? I mean, is there a lot of value creation in the acquisition opportunities that are out there still today or is the market so competitive that maybe you can get a reasonable deal, but it's tough to create a lot of value?

Michael Frankel

Yes, we’re very careful on acquisitions, we’ve had a great activity, but I’ll tell you we turned down far more deals and we have acquired and the deals that we choose to close on are deals that we feel are very accretive to the company with respect to how we are trading with our stock price, with respect to our internal growth with respect to our cost of equity and cost of debt, with our weighted average cost per capital overall. So yes, we’re very comfortable with respect to where we are in the acquisitions we’ve made and on the acquisitions in our pipeline with respect to their contribution and cash flow to the company.

Brendan Maiorana - Wells Fargo

Okay. All right, thanks. I’ll get back in. Thanks.

Operator

Thank you. And our next question comes from the line of Michael Mueller with JPMorgan. Please proceed.

Michael Mueller - JPMorgan

Guidance of $11 million, is that on a recurring basis where you strip out the acquisition costs or is that how to folds in there?

Adeel Khan

The acquisition costs are in there. But the acquisition cost with the G&A had to be 11 million, it’s not -- I apologize, does not include the acquisition, just core G&A.

Michael Mueller - JPMorgan

Got it. Okay, that’s clean. And then for the leasing spreads, just wondering, when you take a look at what is expiring in the balance of the year and think about next year, where do you see that cash spreads trending, do you think it stays in that mid-single digits, do you think you kind of make it closer toward double-digits?

Howard Schwimmer

Hi Mike it’s Howard. We are pretty confident in the spreads that we have seen and turning through well into next year and possibly beyond that, don’t forget we are in a market that has very little space available and we are now starting to see multiple parties bidding on available spaces and sort of that pressure cooker effect that’s really driving rents. And I will give you a great example of one lease that really hammers home what’s happening, we had a project we recently brought on 628th Street in the Torrence market in the South Bay and we have planning substantial capital improvements to renovate and to be able to achieve market rents, we just leave the 17,000 space in a renewal where we moved our rent from an existing tenant up from $0.37 to $0.65 that was about 75% increase and we did that with no TI. So we see a lot of room in the markets to continue with these real positive spreads that we experienced.

Michael Mueller - JPMorgan

Got it, okay. That was it, thanks.

Operator

Thank you. (Operator Instructions). And the next question comes from the line of Brendan Maiorana with Wells Fargo. Please proceed.

Brendan Maiorana - Wells Fargo

Hey guys, with a couple of follow-ups. So Adeel, did I hear, you said your year-end was it occupancy or lease rate target was 93% that you were confirming, and what is that compared to the same-store number today or is that compared to the total number today? I'm just trying to see what we are kind of comparing current 630 number versus year-end.

Adeel Khan

Right. So it's an occupancy number the year-end target of 93 and it's on a same-store basis.

Brendan Maiorana - Wells Fargo

Okay. So that's going from 89.8 to 93, so you are looking at 300 basis points, give or take, of occupancy pickup by year-end?

Adeel Khan

That’s correct.

Brendan Maiorana - Wells Fargo

Okay. And just, I guess just kind of drilling into that a little bit more. If I go back over the past several quarters, I'm sort of interested in how you are picking up that 300 basis points or how you guys feel pretty confident because it looks like net absorption has been, it has certainly been reasonable over the past year, but it has slowed down from the first half of last year. And I guess maybe what sort of gives you confidence that you are going to be able to pick up that much occupancy? Because it does seem like that's a pretty big acceleration from where you've been in the first half of the year?

Howard Schwimmer

Hi, it's Howard. I think we really measure this on a quarterly basis. We run triage here in terms of expiring leases, no occupants, potential leasing and really that’s how we base our comments to you. And as we mentioned earlier, I mean we're sitting in some purely highly occupied market, so it's a little choice for tenants and we see demand increasing and no new supply being delivered to the market. So we're optimistic that there will be increasing demand as we get through the summer months.

Traditionally May, June, July, I think starts slowing down. They really come back like gangbusters in September. So we really, at this point are confident still confident on that and if we do change our outlook, we’ll certainly be talking about it in the third quarter call.

Michael Frankel

And Brendan, it's Michael. One, just comment to that to keep in mind that we’re focused on cash flow and maximizing cash flow. And we have a choice that say we have a tenant that’s expiring and we can continue that tenant at x rent or we can re-tenant that space at x plus something material in terms of rent. And we’re in a phase in the market cycle today where we’re increasingly making that choice to maybe forego some tenants very selectively who otherwise wish to renew because we believe that that sort of high demand space can be reasonably re-tenanted in a fairly reasonable time frame with a much higher paying tenant. So, I say that's probably going to be one of the key drivers, frankly as to whether or not we achieve a 93% occupancy goal at end of the year; it’s not going to be market driven, it's going to be Rexford driven, business model driven and pursuing our goals to maximize cash flow.

Brendan Maiorana - Wells Fargo

Yes. No, I understand. So, that makes perfect sense and certainly we would trust you guys to make the right longer term decisions. But I would have to presume that the expirations that you have for the remainder of the year, you guys have probably already made some sense of decision about where those rents are relative to market and the tenants willingness to maybe they’re going to stay in that space to accept that higher rent or if that’s going to go vacant. So I guess I am just wondering, how far -- how much risk do you think there is in the lease up plan for the remainder of the year because your tenant size is a little bit smaller than many of your public peers that are out there. So I am just -- are far along in the lease process with a lot of these things where you’ve got that level of confidence or is this things don’t materialize in Q4, there is a fair bit of risk to picking up the occupancy?

Howard Schwimmer

You are correct on the tenant size and due to the size of these tenants they don’t tend to make their decisions as early as you like to see them. So, we have a list that goes -- it rolls on a yearly basis, lease expiring, we’re focused on them as early as eight months and start pushing it six. But a lot of times these tenants can make their decisions until very late in that timeframe. As an example, we have a lease that’s expiring in probably 30 days on a 50 some odd thousand foot space and we are finally getting the renewal signed by the tenant this week. So it’s hard to predict but we know there is nowhere for these tenants to go. This tenant that I’m referring to looked around the market, spent the time and concluded there are no other options for me, so I’ll stay here in. So, we do have a confidence level in our product because as you know, we try to deliver the best quality product in the marketplace, so tenants wanting to look for other options typically find it hard to replicate the spaces, they’re in our properties.

Brendan Maiorana - Wells Fargo

Yes. Okay that’s helpful. And just last one, I think last quarter we talked about the operating expenses which had moved higher following the IPO. It seemed like they actually moved back downward this quarter. So what should we sort of think about for OpEx as we go forward through the remainder of this year and then even as we look out longer term?

Adeel Khan

Yes, Brendan Adeel here. Good question on that. This quarter as I mentioned in my remarks earlier, it was one-time non-recurring repair and maintenance costs that were impacting a quarter. But I would look at a six month trend here on a same store basis and that will give you a good guideline as far as how you should model in for the rest of the year. We definitely are starting to compare ourselves from a same store perspective from prior year where we have reached some of the stabilization that I talked about in the prior quarters, so I think the six months numbers that have we presented in the supplementals for the same story, is a better measure.

Brendan Maiorana - Wells Fargo

Okay, okay great. Thank you.

Operator

Thank you. And the next question comes from the line of Nikhil Bhalla with FBR Capital Markets. Please proceed.

Weston Bloomer - FBR Capital Markets

Hi. This is Weston Bloomer asking a question on behalf of Nikhil. My first question regards the acquisition pipeline in the back half specifically how it relates to acquisitions per square foot. It looks like in the second quarter that number kind of edged to around 110 and increased from the first quarter. Given what you guys have in the pipeline at this point, do you expect that to go up or down or how should we think about that as a target going forward?

Howard Schwimmer

This is Howard by the way. It’s a great question and different markets have different pricing points in them, and it just so happened this quarter that some of assets we’ve bought were in higher rental value type markets which demand higher price per square foot pricing on the assets. So, it really depends on where we buy assets, the Southern Californian markets are far very large and expensive. And so it’s hard to tell you that on a blended basis, yes everything is going to be going up. Next quarter the average price could be down.

So, obviously in general terms prices have gone up somewhat from a year ago but again it’s really more reflective in terms of what we buy in the specific submarkets.

Weston Bloomer - FBR Capital Markets

Got you, that's helpful. And then I just have another question on the disposition side. If memory serves me correctly, you completed two small acquisitions in the first quarter. How should we think about kind of full year expectation for dispositions? Do you have any targets, I know you guys did the nine portfolio deals, is there anything there that we should be looking for? Thank you.

Howard Schwimmer

Really in terms of dispositions, there is not a large amount of properties that we would consider selling in terms of anything that’s under contract now, we do have an asset, that is the only asset we own that’s not in the Southern California it’s out of state, its under contract. But we are growing a portfolio we are not trying make a quick dollar here and there on any of the assets.

So there will be occasional sales here and there but it’s not an extensive strategy of the business right now.

Weston Bloomer - FBR Capital Markets

Okay, thank you. That’s all I had for now.

Operator

Thank you. We have no other questions in the queue at this time, I would now like to turn the floor over to management for any closing comments.

Michael Frankel

Thanks everybody and thank you operator for joining us today. We appreciate your interest in Rexford Industrial. And we look forward to speaking with you again after the next quarter. Thank you.

Operator

This does conclude today’s teleconference. We thank you all for your participation. And you can now disconnect your lines.

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