Greetings, and welcome to Rexford Industrial Realty, Inc. 2nd Quarter 2019 Earnings Call. A brief question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. I would now like to turn the conference over to Steve Flett of ICR.
Thank you. Please begin.
We thank you for joining us for Rexford Industrial's Q2 2019 earnings conference call. In addition to the press release distributed yesterday after market close, we posted a supplemental package in the Investor Relations section on our website at www.rexfordindustrial.com. Today's call, management's remarks and answers to your questions contain forward looking statements as defined in the Private Securities Litigation Reform Act of 1995. Forward looking statements address matters that are subject to risks and uncertainties that may cause actual results to differ from those discussed today. For more information about these risk factors, we encourage you to review our 10 ks and other SEC filings.
Rexford Industrial assumes no obligation to update any forward looking statements in the future. In addition, certain financial information presented on this call represents non GAAP financial measures. Our earnings release and supplemental package present GAAP reconciliations and an explanation of why such non GAAP financial measures are useful to investors. Today's conference call is hosted by Rexford Industrial's Co Chief Executive Officers, Michael Frankel and Howard Schwimmer together with Chief Financial Officer, Adeel Khan. He will make some prepared remarks and then we will open the call for your questions.
I will turn the call over now to Michael.
Thank you, and welcome to Rexford Industrial's 2nd quarter 2019 earnings call. I will begin with a summary of our operating and financial results. Howard will then cover our transaction activity. Adeel will follow with more details on our financial results, balance sheet and guidance. We will then open the call for your questions.
Our team just completed another exceptional quarter. Rexford's target infill Southern California markets remain strong and tenant demand continues at historic levels, driven by robust growth of regional consumption, business activity, e commerce and the continued push for shorter delivery timeframes. Despite this intensity of tenant demand and historically low vacancy within our infill markets, permanent barriers limit new construction even as the market continues to lose supply that is being converted to other uses. As a result of these superior fundamentals and the high barriers that can constrain supply growth, our target infill Southern California market is also the most highly valued industrial market in the nation by a a substantial margin. Scarcity of supply has driven rental rates to levels that have consistently been about 80% higher than the average of the next 10 largest U.
S. Markets. As a consequence, per square foot building values are about 3x higher than the average of the next 10 largest markets. What we find interesting is that in addition to the nation's highest rents, rental rate growth in our markets has increased by about 9.4% on average over the prior 5 years. Our market rent growth has been nearly double the national average according to CoStar, driven by the unique supply demand dynamics within our markets.
However, Rexford's performance reflects more than the unique dynamics of our markets. More importantly, it is a direct result of the strength of our team and the consistent execution of our value driven strategy. Our exclusive focus in the infill Southern California industrial market enables us to penetrate more deeply than other less focused investors, which translates into favorable cash flow growth, value creation and what we consider to be the attributes of what makes for a great business. First, these qualities include our ability to identify and source investments through off market or lightly marketed transactions, representing about 70% of transactions completed since our 2013 IPO, which translates into better economics and superior cash flow and NAV growth. 2nd, these include our creative capacity to increase cash flow and value through modernization and repositioning of underutilized industrial property.
And finally, our vertically integrated operating platform enables us to outcompete on leasing, asset management and customer service. We believe our operational excellence drives outperformance over time and through cycles. Now turning to our 2nd quarter results, we increased company share of core FFO by 40% and increased core FFO per share by 11% to $0.30 per share over the prior year quarter. Our same property NOI grew by 6.8% on a GAAP basis and by 11.1% on a cash basis. Excluding the impact of space under repositioning, our stabilized same store NOI growth was 3.9% on a GAAP basis and 7.9% on a cash basis.
Our stabilized same property portfolio closed the quarter at approximately 98% occupied. Our leasing performance reached record levels during the Q2. We signed 106 leases for 1,700,000 square feet. Our leasing spreads were an exceptional 39.4 percent on a GAAP basis and 22.3% on a cash basis. On new leases, our spreads were 45.6 percent on a GAAP basis and 28.4 percent on a cash basis.
Basis. Our retention rate was 85% for the 2nd quarter and net absorption was about 431,000 square feet. With regard to external growth, we completed approximately $340,000,000 of acquisitions during the Q2, bringing our year to date investment volume to $489,000,000 with 77% of this year's investments completed through off market or lightly marketed transactions. To support this growth, we continue to maintain a fortress like low leverage balance sheet, providing us with maximum flexibility to capitalize upon emerging opportunities. Our net debt to EBITDA ratio was 3.2x atquarterend, which equates to approximately 11.1% debt to total enterprise value.
As a result of this outstanding execution by our Rexford team, we are pleased to announce that we are increasing our full year guidance and now expect company's share of core FFO in the range of $1.19 to $1.21 per share. As we reflect upon the company's performance and unique market position, we couldn't be more excited about our future growth opportunities. Although we've grown our portfolio over 4 fold to 24,000,000 square feet since our IPO 6 years ago, our portfolio only represents a 1 0.2% share of the infill Southern California industrial market. In addition, with about 1,000,000,000 square feet built prior to 1980, our value creation opportunity through renovation and repositioning of existing buildings is extensive. Consequently, we are exceptionally well positioned as a value driven consolidator of industrial property within infill Southern California, the nation's largest and most sought after industrial market.
Finally, our comments would not be complete without acknowledging and thanking our Rexford team for their tireless dedication, creativity, teamwork and excellence that have enabled our success and achievement. I'm now very pleased to turn
the call over to Howard. Thanks, Michael, and thank you, everyone, for joining us today. The infill Southern California industrial market remains exceptionally strong with a supply demand imbalance that continues to favor owners of well located industrial real estate, driving rents and occupancy levels. Our target markets, which exclude the Eastern Inland Empire, ended the 2nd quarter at 1.9% vacancy, with asking rents up 8.4% on a weighted average basis over the past 12 months. With regard investment activity, during the Q2, we completed 10 acquisitions totaling approximately $340,000,000 adding 1,800,000 square feet to our portfolio.
Approximately 70% of these transactions were off market or lightly marketed and sourced through our proprietary research and broker relationships. In April, we acquired East 15th Street, a 238,000 square foot industrial property located in the LA Central submarket in exchange for partnership units through an UPREIT transaction valued at $28,100,000 We completed a new 10 year lease with a quality tenant shortly after closing and stabilizing the asset at an approximately 6.1 percent yield. We also acquired a 3 building portfolio containing 456,000 square feet for $76,600,000 located in the San Gabriel Valley, Orange and San Diego Counties. The portfolio generates an initial yield of 4.3% with a projected stabilized return on total cost of just over 5%. We acquired Ranchiros Drive, a 49,000 square foot, 100 percent leased industrial property located in the North San Diego submarket for $7,900,000 The property generates an initial yield of 6.1%.
In our largest off market transaction this quarter, we acquired San Fernando Business Center, a 5 building, 88% leased industrial park containing 592,000 square feet located in the LA San Fernando Valley submarket for 118,100,000 The initial portfolio yield is 3.6 percent with in place leases estimated to be 20% below market on average. After lease roll and implementing certain value add enhancements, we project a year 3 return of approximately 4.7% and growing thereafter. In another off market transaction, we acquired Waples Court, a 106,000 square foot vacant high image industrial building located in the Central San Diego submarket for $21,300,000 We intend to demise the 31 foot clear building into 2 units to create higher rental value space, and our projected stabilized return on total cost is 5.3%. We also acquired Susana Road, facility located in the LA South Bay submarket for $13,500,000 The property is fully leased to a single tenant and generates an initial yield of about 5%. In May, we acquired Oxnard Street, a 71,000 Square Foot 405 Freeway Frontage Industrial Property Located in the LA San Fernando Valley submarket for $16,800,000 The property is fully leased to a single tenant at an initial yield of 5.3%.
We also acquired 9,750 San Fernando Road, a 2.7 acre paved industrial land site located in the LA San Fernando Valley submarket for 7,400,000 dollars The property is fully leased to a single tenant at an initial yield of 6% and offers the potential for future development of a new distribution building. We also acquired Turnbull Canyon Road, a 191,000 Square Foot, 30 Foot Clear Industrial Building with 44 Dock Doors located in the LA San Gabriel Valley submarket for $27,100,000 The property is fully leased to a single tenant at an initial yield of 4% with in place rents estimated to be approximately 30% below market. Finally, in June, we acquired a 15.5 acre fully entitled development site in the Inland Empire West submarket for $18,200,000 plus an additional $5,000,000 holdback to be released to the seller upon meeting certain development milestones. The seller will serve as the fee developer for construction of a 334,000 square foot, 6 building industrial complex comprising state of the art warehouse space. The project is scheduled to be completed in the Q2 of 2020 for a total all in cost of $56,700,000 and is expected to yield about 5% at stabilization.
Turning to our repositioning activity. During the Q2, we stabilized West Carson Street in the Los Angeles South Bay submarket with a 10 year, 44 1,000 square foot lease to a credit tenant, achieving a stabilized return on total cost of 6.3%. At midyear, we have 1,500,000 square feet of space under repositioning or future development with several completions targeted for the second half of this year. With regard to dispositions, in June, we sold a 62,000 square foot 2 building industrial complex in Orange County for $6,800,000 achieving a 13% IRR. We will continue to pursue asset sales opportunistically to unlock value and recycle capital.
Finally, we continue to leverage our deep industry relationships and our proprietary research and technology as we add to our pipeline of acquisitions. After a strong first half of the year, we have another $324,000,000 of new investments under LOI or contract subject to completion of due diligence and satisfaction of customary closing
Beginning with our operating results. For the Q2 2019, net income attributable to common stockholders was approximately $12,800,000 or $0.12 per fully diluted share. This compares to $5,200,000 or $0.06 per fully diluted share for the Q2 of 2018. For the 3 months ended June 30, 2019, company share of core FFO was $32,100,000 as compared to $22,900,000 for the 3 months ended June 30, 2018. On a per share basis, company share of core FFO was $0.30 per fully diluted share, representing an 11% increase year over year.
Same property NOI was $38,800,000 in the 2nd quarter, which compares with $36,300,000 for the same quarter in 20 18, an increase of 6.8%. Our same property NOI was driven by a 5.2% increase revenue and same property operating expenses were essentially flat, increasing by just 0.4%. On a cash basis, same property NOI increased by 11.1 percent year over year. Turning now to our balance sheet and financing sheet capacity to allow us maximum flexibility and access to well priced capital. During the Q2, we issued approximately 5,700,000 shares of common stock through our APM at a weighted average price of $38.21 per share, which resulted in net proceeds to Rexford of approximately 213,000,000 dollars At the end of the second quarter, we had approximately $183,000,000 of cash and full availability on our $350,000,000 credit facility.
We also ended the quarter with $535,000,000 of availability on our ATM program. At June 30, we had no debt maturities until 2022 and our liquidity position is strong with a net debt to EBITDA ratio of 3.2x. In July, we closed on a $100,000,000 private placement, including $25,000,000 of 10 year unsecured notes with a rate of 3.88 percent and $75,000,000 of 15 year notes with a rate of 4.03%. The proceeds will be used to fund near term acquisitions and repositioning activity. With regard to our dividend, on July 29, 2019, our Board of Directors declared a cash dividend of 0.185 dollars per share for the Q3 of 2019, payable on October 15, 2019, to common stock and unitholders of record on September 30, 2019.
Additionally, our Board of Directors declared a preferred stock cash dividend of approximately $0.37 per share for the Q3 of 2019 payable on September 30, 2019 to our preferred stockholders as of September 13, 2019. Finally, we're increasing our full year 2019 guidance for company's share of core FFO to a range of $1.19 to $1.21 per share from our previous range of $1.18 to $1.20 per share. Our new guidance range is supported by following updated assumptions. Same property NOI growth to range from 5% to 6.5%, up from our previous range of 4.5% to 6 percent year end same property portfolio occupancy of 96% to 97%, up from 95.5 percent to 96.5 percent and year end stabilized same property portfolio occupancy of 97% to 97.5%, up from 96.5 percent to 97.5%. The rest of our guidance assumptions are unchanged and detailed on Page 23 of our 2Q 2019 supplemental information package.
Please note that our guidance does not include the impact of any transactions 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 completes our prepared remarks. With that, we'll open the line to take any questions. Operator?
Thank you. We will now be conducting a question and answer Our first question comes from the line of Jamie Feldman with Bank of America Merrill Lynch. Please proceed.
You. I guess just to start, I want to talk about ask you about the San Fernando Business Park. Can you just talk about the potential occupancy upside, what you're seeing in terms of tenant demand? And then I think you said it was a stabilized fourseven return. So kind of what gives you comfort at that number after you've done all the work?
Hi, Jamie. It's Howard. Thanks for the question. So the San Fernando Business Center is really a Class A project in that market. It's been a bit mismanaged.
So there's some deferred maintenance and some really some modifications we can do to drive rental value there. It had a bit of vacancy. There's really one building and what we're doing on that building is we're actually demising it into 3 units. We've actually I think are pretty close to signing a deal on one of those units and I expect probably we'll wind up leasing the other 2 units pretty close to when construction is completed. But looking at that project, the in place rents were 20% below market, so there is some great upside.
The 4.7% yield is really just looking at the initial lease up and then some roll that's happening. So that's a project that will climb over 5% in the not too distant future after that 4.7% stabilization.
And Jamie, this is Michael. I'll just add that when you hear us project out future yields, typically we're not assuming anything close to the market rent growth as has been occurring. So there is room for outperformance, but frankly that's just how we like to next
year from next year from Cosmetic Labs and Command Logistics. Any early read on those leases?
Hi. Yes, it's Howard again. So we're making a lot of progress actually on those expirations. If you look at, I think, the top 14 expirations next year in terms of revenue, that represents about 35% of 2020 expirations. And we're already in discussions with, I think, 60% of those top 14.
And if you even look at what we've done this past quarter, 60% of our renewals were for expirations that occurred starting after January 2020. So we're well ahead of our efforts in terms of those expirations. And I think we're trending also some of the lease term as far as those renewals, those are terming up. I think our average lease term this past quarter was about 6 years, which is well above what you've seen in the past.
So those 2 are on your top tenant list. Is there anything specific about those 2 leases?
As far as cosmetics, we've been talking to them. They actually it's a 300,000 foot building. They've subleased out 100 of it. And from the earlier discussions we've had already, them and their sub tenants don't really intend to leave. Frankly, there's nowhere for them to go in that marketplace even if they wanted to leave.
So we're fairly comfortable at this point that we'll be able to renew them, but it's not 100% up.
And then command logistics services, that's a top tenant also?
Yes, same story there. The South Bay market, it has a 0.6% vacancy rate. So that's the largest market in the Southern California region, like 2 100 and close to 250,000,000 square feet. And again, nowhere to go. We had them in some temporary space for a short time.
They actually downsized earlier this year. They moved out of 100. And I think they're pretty comfortable in the building that's there. And the tenant we put into the 100 is actually interested in their space if they do leave. So we're pretty confident in our ability to maintain an income stream out of that space as well.
Okay. Thank you very much.
Thank you. Our next question comes from the line of Blaine Heck with Wells Fargo. Please proceed.
Hey guys, good morning. So clearly there have been some large transactions in the market recently and aggressive bidders on industrial properties. Does any of that deal flow change the way you guys think about your business or your capital recycling strategy?
Hey, Blaine, it's Michael. Thanks for the question. Good to hear from you. There have been some larger portfolio transactions. Really frankly, it doesn't impact how we see our business or our business model, how we're underwriting transactions.
I think if you see our transaction activity, it's indicative of the same strategy we've been executing ever since we went public about 6 years ago. And we find that every few years you get a little surge in the institutional portfolio trading. Folks need a mark to market in their portfolios. So it's not unusual. The activity we've seen this year is not unusual.
It's a little more than last year in terms of large portfolios, but certainly indicative of what we've seen many years prior.
And also Blayne, I think what's interesting and very comforting is to see what kind of yields we're hearing those larger portfolios are trading for, which to us indicates that the Southern California pieces in them are trading at extraordinarily low yields, most likely below 4% or perhaps even well below a 4% yield.
Right. Okay. That's helpful. And then retention was very high this quarter at 85%, and you guys continue to see extremely strong rent spreads. But I guess how do you think about the desire to keep steadily high occupancy versus maybe pushing rents even harder on renewals?
Hey, Blayne, it's Michael. We've talked about this in the past and we're aggressive, we work hard, we have a tremendous leasing team that works with our listing brokers and often works directly with our tenants. And we think they're doing a great job at maximizing our rents and there's a balance. And I think in some quarters you've seen us roll more tenants and not renew tenants who wanted to stay because we could re tenant at much higher rates. And it's just hard to predict quarter to quarter how those percentages of those we keep who want stay and those we roll might fall in place.
But I think what we're seeing today, as Howard mentioned, is an exceptional level of occupancy in these markets, tenant demand that is truly at historic levels and tenants who have very few options in these markets. So you're seeing retention this quarter really performing for us.
Do you guys have any specific expectation for retention in 2019?
It's really tough to say. We have a lot of expirations through the end of the year still and tremendous amount activity. So it's hard to speculate. And I wouldn't and we don't believe that retention also is a primary metric for us because, and rolling to higher paying tenants. So it's just we have a tremendous number of small, medium sized leases rolling through the end of the year.
So in terms of your modeling, I wouldn't encourage you to necessarily model 85% retention, but I think we've been averaging probably closer to 70% plus or minus.
All right. That's helpful. Thanks.
Thank you. Thank you. Our next question comes from the line of Manny Korchman with Citi. Please proceed.
Hey, everyone. Just wondering if there were other ground up development opportunities out there that you're looking at either in the same structure where you've got the seller building it for you or where you do it yourself or hire someone to do it?
Hi, Manny, it's Howard. We've closed similar transactions with that in the past. We've closed something in the Ventura County market last year, it was a smaller building, it was 57,000 feet. And it was a fairly similar structure where the developer finished out the project and we were able to actually lease that one prior to completion. I think we stabilized that at about a 5.7% return.
We're talking to some of the developers out there, but I think a lot of them have the opinion right now that there shouldn't be any difference in pre selling a project, even with no leasing in place versus what a stabilized Class A project would sell for. And what I mean by that is, some of the conversations I've had, they seem to think they're worth 4% returns on a forward commitment on a vacant building. So that's not something that Rexford believes in. And obviously, when I transacted on at about a 5% return, that's very attractive compared to what other people feel these are worth. So for us, occasionally, we're going to come across something where a developer needs to close.
This particular developer did need to close. They have this thing tied up for quite a while. It's actually part of a large a little bit larger development. There's a retail component, which they intended to keep. So this actually helped them, and enabled us to achieve a much higher return on the stabilized basis.
But it's also interesting, I might point out to you, we decided to do a deep dive this past quarter and take a look at the amount of construction that's occurred in our markets. And you also have heard us mention how much product is being removed for the markets. And what I found really interesting was just looking at the Greater Los Angeles marketplace, which is about half of the market in Southern California, a little over 1,000,000,000 square feet is in that market. And over about 8.5 years, we had net new supply added of about 8,000,000 feet. And that's the difference between
I
think it was about 20,600,000 square feet added and the rest of the market removed. As you look at on the other side of that, the Inland Empire, today there's 28,000,000 square feet under construction and 140,000,000 square feet was added in that timeline. So it's rare to find any type of development in our infill markets that makes a lot of sense and especially for the type of product that Rexford focuses on, which is the sort of the mid bay or smaller bay for lease product. There hasn't been much of that built in the past 20 years. In fact, it's been mostly the bigger box product.
And by the
way, Manny, to put that in perspective, the 8,000,000 square feet or so that has been developed in Pennsylvania is dwarfed by the amount of product that has been taken out of the market and converted to other uses. So it's just a very unique marketplace.
Thanks for that. Just it looks like the larger portfolio that you bought in the quarter came from an institutional fund. Are they more or less likely, those types of funds, especially if they hit their time lines and maturities, to go off market? Or do
you think that you could sort of
become their relationship buyer, if the product type management is what you're looking for?
We're pursuing a lot of product in the marketplace from those type of sellers. It's pretty unusual find one that is willing to actually do an off market deal, but we ask all the time. We have relationships with them. So occasionally you're going to see us be able to transact like that. But it's more typical with an institutional seller internally being required to expose the property to the market so that they run a process.
They were comfortable because of their broker relationship between ourselves and them. And we just happen to agree on a number that for us we were very comfortable with. We're very deep in the market. This transaction was in the Santa Fe and the Valley. We own over 3,000,000 feet there.
So we have the ability to see forward a little better than most buyers or frankly even most owners on the product. And so for us, it was just a unique opportunity.
Manny, it's Michael. It's a great question. And I think part of that if I'm hearing your question, I think part of the question is, are there portfolios out there in general that we can take off market and acquire without a fully marketed process. And I think it's important to step back and think about the overall market because the institutional ownership in our market is actually the smallest percentage of ownership, smallest market share. The largest market share by far is in private hands, individuals, non real estate professional owners and that represents probably upwards of a 1,000,000,000 square feet or so that we're tracking that are owned by non institutional private owners and we have a range of conversations ongoing with them that we believe will be productive.
And it's really interesting the commonality that you have with a lot of the private owners and some of these institutional owners is at the end of the day they're more or less passive owners. They're not striving to eke out every last dollar of value in their portfolios. They're not necessarily aggressively looking forward and investing in their portfolios to create value. And so there's a tremendous opportunity of embedded value creation opportunity for us both among the private ownership and the institutional ownership within our infill market. So again, that's just an integral part of our business model.
Thanks guys.
Thank you. Our next question comes from the line of Chris Lucas with Capital One. Please proceed.
Hey, good afternoon everybody. Actually, Howard, you did a great job of talking about the dynamics in the market as it relates to rents and the new supply. I guess, I'm just kind of curious as to sort of to rents and the new supply. I guess I'm just kind of curious as to sort of you've had a number of years now of really robust rent growth. And are we getting to a point where industrial displaces from a higher and better use opportunities for land?
Is there anything that changes that you see say in the next year or 2, the existing dynamics of strong rent growth and very meager supply changes?
Well, we're still going to lose industrial supply. There's just no more land in these markets. And to put a high rise residential project on a site, a hotel, retail, it's worth more to be converted than some of the industrial values even at these higher rents. We do need more supply and part of our strategy is sort of unlocking the value and really the additional capacity in some of the older buildings that we're able to buy. A great example is just by upgrading the fire sprinkler suppression systems, we're able to create 50% to 70% more capacity within the building on a cubic basis because of fire codes.
But back to your question on the rental rates, keep in mind, the land values have skyrocketed. So although rental rates have moved up, it just doesn't mean that everywhere you look, you might be able to do some development. You've seen land go from or right now, we saw it in the past year, year and a half, all of a sudden escalate up into the $70, dollars 80 a foot range in some of our tighter infill markets, which makes development all the more challenging. So the floodgates aren't going to be unlocked in the near future to create a lot more development, but we need it and you'll continue to see it sporadically. And we'll try and be a part of some of the development when we find some opportunities that make sense and we can stabilize them at more attractive yield.
So are you getting
I guess maybe then the follow on for me would be just on the on your existing portfolio on some of the assets you talked about value creation. I guess are you getting to a point where it's more than just systems upgrades, but actually a point where rents are getting to where you would take the building offline and either demolish and rebuild or expand in some way in order to sort of capture that value?
Yes. That's a good question. First of all, these infill markets function a lot differently than markets that are not land constrained. In non land constrained markets, you always have a risk of new development. Everybody is always looking for the best in quality and modern features.
But then you move into the infill markets where you can't supply that type of product. We coined a term really to help understand that we call it relative functionality. What we find is a user is looking for them the best building out of work to solve for their needs. In these markets, on the infill markets, Greater LA, for instance, had a 1.3% vacancy rate. So options are fairly limited.
So the value of the existing supply of buildings for the most part still is higher than the underlying land value. That's not to say that some of the buildings we own, we don't think about these acquisitions for long term covered land place. And down the road, you may see us replace a building or 2 here and there. But for the most part, it's not really changing dramatically.
Chris, this is the deal. The only thing I would add that Howard just added, if you take a look at our repositioning page on the supplemental, we not necessarily had to take a building completely offline, but we consistently look at our spaces and do reposition that doesn't meet the definition where it's down for 6 months or more, right. So we're constantly tweaking the buildings, existing buildings that are to unlock the value that just Howard just talked about. You can kind of see the activity that takes place.
And Chris, just not to belabor the subject, but a great example of what you're asking, we had just bought the property in Downtown LA, 235,000 feet. That was an UPREIT transaction. And we had grandiose plans to put that on our repositioning page and had an extensive program plan, but we leased the building within, I think, about 60 days after buying it and stabilized it at a 6.1% return. And that's, I think, a better example of really what's happening in the market space. It's just so rare that tenants are willing to pay up and it made more sense for us to capture that transaction.
We leased it for 10 years. And I think I mentioned it was 6.1% yield versus going ahead and taking it down for an extensive period of time.
Okay, great. That's really helpful. And Adeel, while you chimed in, it was maybe I want to ask you a question just about the balance sheet and the leverage ticked up a little bit. Obviously, you over equitized a lot in the Q1, more balanced in the second quarter. Just thinking about the back half of the year, given the robust activity level, should we be thinking about the leverage sort of flat here or trending back towards your sort of goals or how should we be thinking about leverage back half of the year?
Thanks Chris for the question. So just some basic facts, right. We ended the quarter with $183,000,000 of cash and post quarter as we discussed in the earnings opening remarks about $100,000,000 private placement. So we have effectively around $283,000,000 of cash plus full availability on their credit facility, right. And if you kind of put those two numbers that gives you with the $283,000,000 plus $350,000,000 by $6,000,000 of liquidity.
If you kind of put that against the $324,000,000 of stuff that's under LOI and escrow, right, it kind of gives us a very nice place to start. So the and the other point that I think we've talked about in the prior quarters, we like the balance sheet the way it is. I think that is a strength and we like to operate if we can at those levels. So we will just try to maximize the best source of capital that's out there when we saw an opportunity in the private placement we did that. But just keeping the strength of the balance sheet is very important for us, especially at this part of the cycle.
And I think that is something that we'll continue try to maintain in the grand scheme of making sure that all the other points of reference like the FFO accretion and the NAV is working along just fine. So I think that is as part of the strategy, we'll try to manage that to the best of our ability.
Okay. Thank you. That's all I had.
Thank you. Our next question comes from the line of Michael Mueller with JPMorgan. Please proceed.
Yes. Hi. Just curious, when tenants don't renew and they leave, what are the common reasons for it? I'm assuming it's probably not great considering occupancy and the market is so high. Is it just and the space doesn't work, functionally doesn't work anymore for them?
Hi, Mike. It's Howard. It's going to be a lot of reasons. At this point in the market cycle, people are still growing. So a lot of times, we can't accommodate their need in that building or even expand them in a larger project.
So sometimes they're taking more space. Sometimes their business model is changing. And a lot of times what you see happen is the rent that we feel a space is worth, a tenant really isn't able to pay in their business. Those are some of the lighter manufacturers and so forth that the rent is more sensitive to them than the typical logistics company today. But yes, no real trends that we're seeing in the market or whatnot, but a lot of that a lot of the vacancy is we pointed out in the past is really forced on our end just to be able to capture more value out of the real estate.
Got it.
For closing remarks.
We just want to thank everybody for joining us today and your continued support of Rexford and we look forward to connecting in about 3 months. Have a great summer everybody.
Thank you. This concludes today's conference. You may disconnect your lines at this time and thank you for your participation.