Rexford Industrial Realty - Earnings Call - Q4 2024

Executive Summary

• Q4 2024 results were operationally solid with rental income of $239.7M and total revenues of $242.9M; Core FFO/share was $0.58 as leasing spreads remained strong, though occupancy and straight-line rent dynamics moderated same-store growth to 2.2% on GAAP and 5.3% on cash basis.
• Management initiated FY2025 guidance calling for Core FFO/share of $2.37–$2.41 (≈1–3% growth), cash same-property NOI growth of 2.25–2.75%, and average same-property occupancy of 95.5–96.0%, reflecting longer downtime, slightly higher concessions, and elevated bad debt assumptions.
• Strategic actions: Board approved a $300M share repurchase program and raised the quarterly dividend to $0.43, supported by a low-leverage balance sheet (net debt/EBITDAre 4.6x, net debt to enterprise value 26.5%) and no floating rate debt exposure.
• Call tone: management highlighted a pickup in early 2025 tenant activity, stable embedded rent steps (~3.7–3.9%), and an estimated $280M embedded NOI growth opportunity across mark-to-market and value-add projects; however, market rents in comparable product were down ~1.5% sequentially and ~8% Y/Y, and guidance embeds longer downtime and higher bad debt.
• Consensus context: S&P Global consensus EPS/revenue for Q4 2024 was not retrievable during this session due to data access limits; management stated results were in line with internal expectations. S&P Global estimate data unavailable at time of writing.

What Went Well and What Went Wrong

What Went Well

• Robust leasing economics: Q4 comparable leasing spreads were 55.4% (net effective) and 41.0% (cash), with annual rent steps averaging ~3.9%; full-year leasing totaled 8.1M SF with strong mark-to-market.
• Value-add execution: Three projects stabilized in Q4 (376K SF) at a 6.2% unlevered stabilized yield; ten projects stabilized in 2024 at a 7.5% yield, supporting embedded NOI growth.
• Balance sheet strength and capital return: No floating-rate exposure, $995M revolver availability, and authorization of a $300M buyback alongside a 3% dividend increase to $0.43 per share position the company for opportunistic capital allocation.

“Looking ahead, we remain focused on unlocking our substantial embedded NOI growth opportunities to support sustainable earnings growth over the near and long term.” – Co-CEOs Michael Frankel & Howard Schwimmer.

What Went Wrong

• Occupancy/SS growth headwinds: Same-property ending occupancy declined to 94.1% (−300 bps Y/Y), pressuring GAAP same-property NOI growth to 2.2% in Q4 despite cash growth of 5.3%.
• Macro-driven leasing friction: Management observed market rent declines for comparable Rexford-quality product of ~1.5% sequentially and ~8% Y/Y, and guided to longer average downtime (~6.5 months in 2025 vs ~5 months in 2024), implying slower lease-up velocity near-term.
• Higher bad debt and concessions: 2025 guidance embeds ~70 bps of revenues for bad debt and modestly higher concessions (≈3 months on average), tempering same-store growth and Core FFO/share outlook.

Transcript

Operator (participant)

Hello, and thank you for standing by. My name is Regina, and I will be your conference operator today. At this time, I would like to welcome everyone to the Rexford Industrial's fourth quarter 2024 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session. If you would like to ask a question during this time, simply press star, then the number one on your telephone keypad. To withdraw your question, press star one again. We kindly ask that you limit yourself to one question. You may rejoin the queue for any additional questions you may have. I would now like to turn the conference over to Mikayla Lynch, Director of Investor Relations and Capital Markets. Please go ahead.

Mikayla Lynch (Director of Investor Relations and Capital Markets)

Thank you, and welcome to Rexford Industrial's fourth quarter 2024 earnings conference call. In addition to yesterday's earnings release, we posted a supplemental package and earnings presentation in the Investor Relations section on our website to support today's remarks. As a reminder, management's remarks and responses to your questions may contain forward-looking statements as defined by federal securities laws, which are based on certain assumptions and subject to risks and uncertainties outlined in our 10-K and other SEC filings. As such, actual results may differ, and we assume no obligation to update any forward-looking statements in the future. We'll also discuss non-GAAP financial measures on today's call. Our earnings presentation and supplemental package provide GAAP reconciliations as well as an explanation of why these measures are useful to investors. Joining me today are Co-CEOs Michael Frankel and Howard Schwimmer, our COO, Laura Clark, and our CFO, Mike Fitzmaurice.

Today, Michael and Howard will provide an introduction, followed by Laura on market conditions and operations, and Mike on financial results and guidance. It is my pleasure to now introduce Co-CEO Michael Frankel. Michael.

Michael Frankel (Co-CEO)

Thanks, Mikayla, and thank you all for joining us today. I want to begin by acknowledging the devastating wildfires that continue to impact Los Angeles. While we are fortunate our portfolios sustain no damage, our priority continues to be supporting our Rexford team and our extended community. We're very pleased to welcome Mike Fitzmaurice as our new CFO. With Mike on board, we completed Laura's planned promotion from CFO to Chief Operating Officer. Both Mike and Laura will play key roles in unlocking the full potential of our portfolio and expanding our opportunities for future growth. Now I'll turn the call over to Howard.

Howard Schwimmer (Co-CEO)

Thanks, Michael, and thank you all for joining. I echo Michael's remarks. Welcoming Mike to the Rexford team and elevating Laura, the COO, is a key step forward for the company, and we're confident they will continue driving operational excellence across our platform. Before turning the call over to Laura, Michael and I want to take a moment to thank our entire Rexford team for your dedication and strong performance over the past quarter and as we move into 2025. I will now turn the call to Laura.

Laura Clark (COO)

Thank you, Howard, and thank you all for joining us today. Starting with market conditions, we continue to navigate choppiness following pandemic-era growth as well as recent macroeconomic, interest rate, and political uncertainty. While these factors are impacting our near-term projected 2025 growth, the long-term outlook for supply-demand fundamentals and robust levels of regional consumption within our infill Southern California market remain intact. Although market conditions have impacted overall occupancy and the lease-up timing of some repositioning and redevelopment projects, we remain confident we will realize the substantial growth and value creation embedded within our portfolio. Notably, since the start of the year, we have observed a pickup in tenant activity and lease negotiations across our vacant spaces that we are working to convert to executed leases.

Regarding market rents, we observed a decline in taking rents for quality products comparable to the Rexford portfolio of 1.5% sequentially and 8% year-over-year. This compares favorably to the broader infill markets, which are down 12.5% year-over-year, and even more favorably when compared to the larger box market in the Inland Empire East and West, where rents have declined approximately 25% year-over-year, according to CBRE. Consistent with historical trends, Rexford's superior and highly functional infill locations, averaging 26,000 sq ft, have continued to outperform. By way of example, the average executed lease rate on our 8 million sq ft of 2024 leasing activity was 19% higher than the executed lease rate across the overall infill markets. Turning to our fourth quarter performance, the Rexford team delivered solid results in line with our expectations.

We executed 1 million sq ft of leasing at net effective leasing spreads of 55% and cash leasing spreads of 41%, with annual embedded rent steps averaging 3.9%. Same property average occupancy declined by 120 basis points sequentially, driven by the expected move-outs communicated last quarter. Regarding investment activity, in the fourth quarter, we stabilized three repositioning projects, which met or exceeded our forecasted stabilization timing and yields. For the full year, we stabilized 10 repositioning and redevelopment projects across 825,000 sq ft, achieving an aggregate 7.5% unleveraged stabilized yield on total investment. During the quarter, we closed two acquisitions for $207 million, and for the full year, we completed $1.5 billion of acquisitions, projected to generate a 5.6% unleveraged stabilized yield. In addition, for the full year, we sold five properties for a total of $44 million, generating a 12.8% unleveraged IRR.

In light of current market conditions, our capital allocation strategy is focused on maximizing returns and accretion through capital recycling and repositioning and redevelopment opportunities. With regard to our acquisition pipeline, we currently have no acquisitions under contract or accepted offer. Separately, we have $105 million of dispositions under contract or accepted offer, subject to customary closing conditions. Regarding our repositionings and redevelopments, we have 3.5 million sq ft of projects under construction or in lease-up, which are projected to deliver a 6.1% unleveraged stabilized yield on total investment. Our value creation focus continues to differentiate the Rexford business model and generate substantial embedded NOI growth.

Today, our embedded growth represents an estimated 40% increase in total incremental NOI equal to $280 million, which includes annual embedded rent steps averaging 3.7% for the total portfolio, the portfolio lease mark-to-market of 25% on a net effective basis, and projected incremental NOI of $75 million from our repositioning and redevelopment projects currently under construction or in lease-up. In closing, as I step into the COO role, I am excited to expand upon my work with the Rexford team to drive greater efficiency, effectiveness, and profitability. To that end, recognizing current market conditions, we are taking proactive actions internally to drive further efficiency across the organization. These initiatives resulted in no increase to year-over-year projected G&A, despite growing consolidated NOI by 17% in 2024, and demonstrates our commitment to driving shareholder value through all points in the cycle. With that, I'm happy to turn the call over to Mike.

We are excited to welcome Fitz to the team and for all he brings to Rexford. Mike.

Mike Fitzmaurice (CFO)

Thank you for the kind introduction, Laura. To you, Michael, and Howard, thank you for placing your trust in me as we work together to drive Rexford's next phase of growth. I'll now briefly comment on quarterly and full-year results, walk through our 2025 guidance, and then conclude with the balance sheet. Our fourth quarter 2024 earnings results were in line with our expectations. For the full year, we delivered 7% growth in both Core FFO per share and same property cash NOI, demonstrating the resilience of our earnings despite challenging market conditions. Moving on to our initial 2025 outlook. For clarity, as I walk through the components of guidance today, I will be referring to the midpoint of our assumption ranges as disclosed in yesterday's earnings release.

Consistent with historical practice, our outlook does not include any assumptions for additional acquisitions, dispositions, or related balance sheet activities that have not closed. We are establishing our Core FFO guidance range of $2.37-$2.41 per share. Let's begin with our key same property drivers. Same property net effective NOI growth is expected to be 1%, primarily driven by longer projected downtime, resulting in a decline of 100 basis points in average occupancy, bad debt equating to 70 basis points of revenues, cash leasing spreads of 20%, and contractual rent increases of 3.7%. As for our value-add construction projects, we estimate $35 million of incremental NOI from the lease-up of repositioning and redevelopment projects, of which $15 million is related to projects leased in 2024. This is partially offset by $20 million of NOI coming offline as we commence construction on new projects.

For the NOI coming online in 2025, we assume an average lease-up time of eight months, up two months compared to our prior quarter expectations. And as Laura highlighted, we are taking proactive measures to control costs. Though we scaled our platform by adding 4.6 million sq ft last year, we were able to keep G&A flat compared to 2024, reinforcing our commitment to increasing operating leverage. Regarding our balance sheet, we continue to maintain a low leverage profile and strong liquidity. At quarter end, net debt to EBITDA was 4.6 times. Today, liquidity totals $1.4 billion, including nearly full availability on our $1 billion revolver, and $400 million of forward equity requiring settlement by the end of the first quarter. As a reminder, the forward equity was raised in March 2024 at $48.95 per share.

As it relates to capital needs for 2025, we have $275 million allocated for repositioning and redevelopment, with no material debt maturities. Lastly, our board authorized a $300 million share repurchase program, further expanding our opportunities to allocate capital. Before I turn the call over to the operator, I want to thank the entire Rexford team for their warm welcome and support as my family and I settled into Southern California. I'm truly grateful to join a team that upholds such a high standard of excellence, dedication, and teamwork. Together, we're going to accomplish great things. Operator.

Operator (participant)

At this time, I'd like to remind everyone, in order to ask a question, press star followed by the number one on your telephone keypad. We kindly ask that you limit yourself to one question and rejoin the queue for any follow-ups. We'll take our first question from the line of Mike Mueller with JPMorgan. Please go ahead. Mike, your line might be on mute.

Mike Mueller (Equity Analyst)

Oh, there we go. Sorry about that. Yeah, I was wondering, you know, looking at the supplemental on page 20, where you have the leasing volumes going from 3.2 million sq ft in Q1, sequentially down to 1 million in Q4, can you talk a little bit about, you know, what's happening real-time and how you see that graph playing out based on what you're guiding to for 2025?

Laura Clark (COO)

Hey, Mike, thanks for joining us today. Just, well, let's touch on fourth quarter, and then we'll look at and into what we're seeing in the market today. So in terms of fourth quarter activity, it was the one million sq ft of leasing was in line with our expectations that we discussed on the call last quarter, really driven by minimum level of lease expirations, as well as, you know, our expectations around the slower demand environment we were experiencing in the back half of the year. As we look forward to what we're seeing today, importantly, in January, we did see a pickup in overall activity in the market and around our leasing negotiations on our vacant spaces. Year to date, we've actually executed one million sq ft of leasing through today, through yesterday, which represents the same level of activity in all of Q4.

That also includes lease-up of three of our repositioning and redevelopment projects, about 200,000 sq ft. So we're seeing good activity in the market, I'd say on about 90% of our vacant spaces. We have some level of activity. And so, you know, we're really focused on converting that activity into executed leases.

Operator (participant)

Our next question comes from the line of Blaine Heck with Wells Fargo. Please go ahead.

Mike Mueller (Equity Analyst)

Great, thanks and certainly want to pass along our sympathies to everyone affected by the wildfires. I guess with my one question, I just want to dig in a little bit more into the components of cash, same store NOI growth if possible. You know, obviously, there are some headwinds to occupancy, but maybe you can talk about the puts and takes related to rent spreads, rent bumps, bad debt, and even margins, and kind of the bridge or how that all builds up to get us closer to the midpoint of guidance.

Mike Fitzmaurice (CFO)

Sure. Blaine, good morning. This is Mike. You know, I'll start with the major drivers. First, it's, you know, elevated downtime, increased concessions, higher bad debt. And the components, you know, of those items are as follows. You know, with 270 basis points from cash leasing spreads, which, again, are about 20% for the year. We have 320 basis points from rent steps, which are driven by the 3.6% in-place rent steps we have in the portfolio. So those are the two positive drivers, Blaine, offset by about 130 basis points of concessions. And then we're experiencing about three months of concessions, which is about up one month from last year. Then we have the 100 basis points of average occupancy decline that we noted in our press release last night. And then there's just a tiny bit of erosion from net expenses of about 30 basis points.

And then the higher bad debt is causing the profile to drag about another 80 basis points. That gets it down to the 2.5% that we posted last night.

Operator (participant)

Our next question comes from the line of Andrew Berger with Bank of America. Please go ahead.

Mike Mueller (Equity Analyst)

Hey, how's it going? I know you guys stopped providing commentary on market rent growth forecasts, but, you know, I saw obviously in the presentation you highlighted that rents for the comparable portfolio declined minus 1.5% during the quarter, and just curious if you have any high-level thoughts as to how close to the bottom we are and, you know, whether or not you think we'll see that stabilize this year.

Michael Frankel (Co-CEO)

Yeah, it's Michael. Thanks so much for dialing in today. Great to hear from you. You know, it's always hard to call a bottom with respect to market rents. A lot of drivers, both on the demand and the supply side. And I think really what we can tell you is what we're seeing in the markets today. And I think Laura did a great job of describing current conditions. And, you know, look, the business is fundamentally sound. And I think a lot of the data out there tends to disproportionately cover the big box, larger box markets, frankly. And I think what you're also seeing with regard to market conditions is that our smaller medium-sized tenant base is showing more resiliency in terms of market rents, at least in Southern California, as compared to the larger box tenants.

You know, your larger box tenants are down about 25% year-over-year, whereas our portfolio tenant, on average, you know, similar qualities down about 8%. So, you know, the backdrop and the foundation is there ultimately for market rent growth. It's just hard to say, you know, it's hard to call when we start to see that inflection point.

Operator (participant)

Our next question comes from the line of Steve Sakwa with Evercore ISI. Please go ahead.

Mike Mueller (Equity Analyst)

Yeah, thanks. As you look at your 25 lease expirations, you've got, I guess, a little over 7 million feet. How would you sort of think about retention ratios on that? And are there any large known move-outs that you have, you know, in the portfolio this year?

Laura Clark (COO)

Hey, Steve, thanks for joining us today. In terms of our occupancy guidance, we are guiding to about 100 basis points of occupancy decline in the portfolio on average, average portfolio occupancy for 2025. The largest driver of that is really higher projected downtime. So that's, you know, longer time between a move-out of a tenant and a new rent commencing. So we're projecting about six and a half months of projected downtime on average for 2025. And that compares to about five months that we experienced in 2024. And it's really associated with longer tenant decision-making and the factors around demand that we've talked about. Just drilling into your question around specific tenants, about the 100 basis point decline, about 70% of it is impacted by four tenants.

Two of those four spaces actually were vacancies in the fourth quarter, and then the other two are expected vacancies in 2025.

Mike Fitzmaurice (CFO)

Yeah, and then one thing I would add there, Steve, as I mentioned in my prepared remarks, we've got about $20 million or so coming offline of NOI coming offline in 2025 related to preparing projects for our repositioning and redevelopment. Most of those on a weighted average basis come off in the first quarter. So from a shape of our occupancy relative to the start of this year, it's going to decelerate in the first quarter and reaccelerate in the back nine months of the year.

Operator (participant)

Our next question comes from the line of John Kim with BMO Capital Markets. Please go ahead.

Mike Mueller (Equity Analyst)

Thank you and good morning. Congrats to you, Mike. Can you just walk us through, again, the GAAP same-store NOI growth? I'm a little bit unclear as to why that would be lower than your cash same-store guidance. The GAAP spreads would likely be higher than cash. You don't have a free rent impacting GAAP that would with cash. I know you went through the flat occupancy and the bad debt, but what else would be driving that GAAP same-store lower than cash?

Mike Fitzmaurice (CFO)

Yeah, so the delta between our midpoint on cash of 2.5% and 1% on the net effective is really a straight-line rent as we burn off below-market leases, which are, you know, generally in our portfolio where we're at in the evolution of our leases. We're in the back half of leases, so that's the drag there.

Operator (participant)

Our next question comes from the line of Greg McGinniss with Scotiabank. Please go ahead.

Mike Mueller (Equity Analyst)

Hey, good morning. I was just wondering if you could talk about, you know, your view on trying to understand the lease-up, sorry, the leasing has improved or the view on leasing activity has somewhat improved into the beginning of this year, but then, you know, offset by that as commentary on pushing out the development leasing. So is that just reflective of the development leasing is what's happened recently versus what's, you know, kind of going on more recently on leasing, or if you can just kind of reconcile those two comments for us. Appreciate it.

Mike Fitzmaurice (CFO)

Yeah, I'll just, from a guidance perspective in the range we set out there last night, it's, you know, it's based on today's realities with the most up-to-date information as of early this week, some of the commentary that Laura just shared with you on the, you know, nice momentum we're experiencing here over the last week with leasing activity. We take a very bottom-up approach with budgeting every lease, every asset. We look at every specific assumption and align that with the risk of the market. And so we feel very good about where we're at with the range today, and it takes into account all the information up until just a few days ago.

Laura Clark (COO)

Yeah, I mean, and I think what I'll add is, you know, what we're seeing around demand and, you know, what's, you know, there's a number of factors, I believe, that are impacting kind of this increase in demand. I think number one, we're seeing some clarity, you know, the tenants are seeing some clarity around the interest rate environment, political environment. And I do believe that's unlocking some pent-up demand that's been in the market. We're seeing that tenants are valuing higher quality functional space in the market. They're really focused on space that allows them to drive higher revenue, how can they gain efficiencies, and that's the Rexford product. We're delivering the highest quality, highest functional space into the market. And I think that's driving some of our incremental demand as well.

But we are continuing to see tenants, you know, being very thoughtful about their decisions they're making around expansion and their space needs. And it is, you know, continuing to take some time, you know, for those decisions to happen in the lease-up space. And so as those opportunities convert into executed leases, you'll see that flow through our results.

Operator (participant)

Our next question comes from the line of Nick Thillman with Baird. Please go ahead.

Nick Thillman (Senior Research Analyst)

Hey, good morning, Mike. Appreciate the commentary on redevelopment. So just, and taking some of the NOI offline, so just to drill down a little bit, you guys identified 3.3 million sq ft of redevelopment and repositioning. Like, what percentage of that, I guess, is from the 2025 expirations of the 7.5 million sq ft? And what's the expected spend of that amount this year?

Michael Frankel (Co-CEO)

Yeah, the spend for this year that we have earmarked for repositioning and redevelopment is about $275 million.

Operator (participant)

Our next question comes from the line of Vikram Malhotra with Mizuho. Please go ahead.

Vikram Malhotra (Senior Analyst and Co-Head of US REITs Equity Research)

Thanks for the question. I guess I wanted to just touch upon your slide. You know, you've given some key messages. One of them is capital allocation. You refer to, like, no acquisitions, but dispositions. So perhaps maybe just stepping back two parts to that. One, you know, in this environment, given the superior quality you've outlined, if there is sort of a portfolio kind of once in a generation that presents itself, your peers are maybe hurting more. Do you act upon that? And then capital allocation-wise, what about buybacks?

Laura Clark (COO)

Hey, Vikram, thanks so much for joining us today. Great questions all around capital allocation. Let's just take a step back and talk about our priorities. You know, our priorities have changed in light of today's market and our current cost of capital. To that end, our hurdle rates have increased, and we are focused on capital recycling and executing on our repositionings and redevelopments. As we think about capital recycling, you know, we believe dispositions continue to be an attractive source of capital, obviously represented by the $105 million that we have under contract or accepted offer today. Those allow us to capture value and redeploy that into creative opportunities.

You know, and that certainly includes our repositioning and redevelopments that drive, you know, substantial incremental yields, potentially our own stock through share repurchases and, you know, potentially acquisitions, but they'd have to meet our very high hurdle rates in today's environment.

Howard Schwimmer (Co-CEO)

And Vikram, hi, it's Howard. You asked about a once-in-a-lifetime portfolio. We monitor plenty of opportunities in the market, but as I think we've made clear, our hurdle rates are up. And if we were going to buy something larger, they'd certainly have to meet those hurdle rates. And there's absolutely no reason for us to change those hurdle rates just because a portfolio comes up available for sale.

Operator (participant)

Our next question comes from the line of Craig Mailman with Citi. Please go ahead.

Craig Mailman (Director of Equity Research Analyst)

Hey, everyone, just to follow up on the capital allocation piece. It seems like you guys are clearly shying away from acquisitions, at least in the near term here. But could you just give us a sense of, you know, the stock has been depressed here for a couple of months now. Why go through with the December acquisition? Why not punt on that, use that capital for higher yielding redevelopment, and then, you know, use some of the ATM issuance you have to pull down for? I mean, I guess you keep that in the balance sheet. It's not overly earnings diluted, and you can use some of it for buybacks. Why even spend the money on the recent acquisition at that yield, given where your stock is trading?

Howard Schwimmer (Co-CEO)

Hi, Craig. It's Howard. Well, first of all, the property we bought has fantastic functionality. It's an A-location. I'll just remind you that the capital we used in buying that asset was the forward equity that was raised at about $49 a share. If you look at the transaction, you know, the initial yield is about 4.8%. By year four, we're already at a 5.5% in place yield. That's churning away with 4% rent increases annually. There's about six and a half years currently left on the term of the lease. You know, obviously, the hurdle rates would be different. I think I just made that clear in my last comment if we start looking at new transactions. With that capital that we used, there was actually accretion.

Operator (participant)

Our next question is a follow-up from the line of Blaine Heck with Wells Fargo. Please go ahead.

Mike Mueller (Equity Analyst)

Yeah, great. Thanks. Clearly, we're still very early in the process of determining kind of the ultimate impact of the wildfires in the region. But can you share any early reads or anecdotes around potential demand that could arise for industrial space to support kind of the rebuilding effort and whether you think any specific sub-markets or building sizes might see the most incremental demand?

Michael Frankel (Co-CEO)

Hey, Blaine, thanks again for the questions, Michael. No, and look, it is early, and obviously, our hearts go out to everybody impacted by these tragic fires. But the fact matters, if you look at the backdrop before the fires, you know, we already had a significant mandate to increase housing in Southern California, you know, by about 2.5 million units of affordable housing. And we'd already started to see, you know, a marginal increase in demand from, you know, the building trades, et cetera. And I think that, you know, there's no question with the volume, the magnitude of impact derived from the fires that we're going to see demand. And I think it'll come in phases. And frankly, we have tenants that service all phases of rebuilding. You know, it's going to start with infrastructure, pipes, conduit, wire.

We have tenants that service that and store that and deliver that and install that, and then it's going to move on up to wood and framing and steel and everything that goes into a home, and these aren't just, you know, affordable houses and affordable housing units. These are homes that deploy extensive finishes and extensive appliance level of appliances, so I think there's no question it's going to drive incremental demand over time for the portfolio.

Operator (participant)

Our next question is a follow-up from the line of John Kim with BMO Capital Markets. Please go ahead.

Mike Mueller (Equity Analyst)

I do like the one-question rule, but I did want to follow up on my question on the leasing spreads you expect this year. You signed at 55% in the fourth quarter. I imagine a lot of that's going to commence in 2025. But what should we be modeling as far as leasing spreads?

Mike Fitzmaurice (CFO)

Yeah, GAAP spreads are expected to be about 30% in 2025.

Mike Mueller (Equity Analyst)

Okay. Thank you.

Mike Fitzmaurice (CFO)

You're welcome.

Operator (participant)

Our next question is a follow-up from the line of Vikram Malhotra with Mizuho. Please go ahead.

Vikram Malhotra (Senior Analyst and Co-Head of US REITs Equity Research)

Thanks for clarifying, thanks for the follow-ups too. So first on leasing, I think you said you've done a million sq ft year to date. I was wondering if you could kind of break that out into new and renewals and clarify the comment you had on taking rents. I think you said we're up 1.5% sequentially and 8% year-over-year. I'm just wondering, how does that compare to what you have in the deck in terms of comparable rent growth? Thanks.

Laura Clark (COO)

Yeah, in terms of the leasing activity today, it's about one-third new, two-thirds renewals, which is pretty consistent with what we typically see within a leasing quarter.

Operator (participant)

Our next question is a follow-up from the line.

Vikram Malhotra (Senior Analyst and Co-Head of US REITs Equity Research)

The second was just you mentioned something about 8% year-over-year rent growth in asking rents and 1.5% sequentially. I just want to understand how does that compare or like compare to what you put in the deck, which is year-over-year, your rent growth is down 8% and 1.5% sequentially.

Laura Clark (COO)

Yeah, that's the market rent growth that we've experienced within the Rexford portfolio, a comparable product to ours within the portfolio.

Mike Fitzmaurice (CFO)

Yeah, and just from a guide perspective, what we've baked in for 2025, we're assuming a flat growth throughout the year relative to last year on our market rate assumptions.

Michael Frankel (Co-CEO)

We'll give more details next quarter in terms of lease spreads, et cetera, in what we accomplish this quarter.

Operator (participant)

Our next question is a follow-up from the line of Steve Sakwa with Evercore ISI. Please go ahead.

Mike Mueller (Equity Analyst)

Yeah, thanks. I just wanted to clarify, Laura, when you talked about the, or Mike, when you talked about the 100 basis point decline, was that relating to the same store occupancy decline, which is part of guidance, or was that 100 basis point decline on kind of the overall portfolio, which has continued to drift down? I think it was a little over 91% at the end of the year. Thanks.

Mike Fitzmaurice (CFO)

Yeah, it's 100 basis points of average occupancy decline for same property.

Operator (participant)

That will conclude our question and answer session. I'll turn the call back over to Laura Clark for any closing remarks.

Laura Clark (COO)

Before we wrap up, I'd like to leave you all with two final thoughts. First is that our Inland Empire, Southern California market and portfolio are uniquely positioned for long-term value creation despite some near-term market challenges. Our projected embedded NOI internal growth opportunity remains substantial, equal to $280 million of incremental NOI, and that represents 40% growth. Second, we maintain a strong financial position and are taking a disciplined approach to capital allocation with a focus on maximizing returns and accretion while also proactively enhancing operational efficiencies to drive shareholder value. With that, we thank you all for joining us today.

Operator (participant)

That will conclude today's call. Thank you all for joining, and you may now disconnect.