Rexford Industrial Realty, Inc. (REXR) FY 2021 MD&A

Results of Operations

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

Comparison of the Year Ended December 31, 2021 to the Year Ended December 31, 2020

For the comparison of the years ended December 31, 2021 and 2020, our Same Properties Portfolio includes all properties in our industrial portfolio that were wholly-owned by us for the period from January 1, 2020 through December 31, 2021, and that were stabilized prior to January 1, 2020, which consisted of 193 properties aggregating approximately 24.6 million rentable square feet. Results for our Same Properties Portfolio exclude any properties that were acquired or sold during the period from January 1, 2020 through December 31, 2021, properties classified as current or future repositioning, redevelopment or lease-up during 2020 or 2021, interest income, interest expense and corporate general and administrative expenses.

For the comparison of the years ended December 31, 2021 and 2020, our Total Portfolio includes the properties in our Same Properties Portfolio, the 91 properties aggregating approximately 10.6 million rentable square feet that were acquired during 2021 and 2020, and the nine properties aggregating approximately 0.5 million rentable square feet that were sold during 2021 and 2020.

As of December 31, 2021 and 2020, our Same Properties Portfolio occupancy was approximately 99.1% and 98.2%, respectively. For the years ended December 31, 2021 and 2020, our Same Properties Portfolio weighted average occupancy was approximately 98.6% and 97.9%, respectively.

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Rental Income

The following table reports the breakdown of 2021 and 2020 rental income, as reported prior to the adoption of Accounting Standards Codification Topic 842, Leases (“ASC 842”) (dollars in thousands). We believe that the below presentation of rental income is not, and is not intended to be, a presentation in accordance with GAAP. We are presenting this information because we believe it is frequently used by management, investors, securities analysts and other interested parties to evaluate the Company’s performance.

Our Same Properties Portfolio and Total Portfolio rental income increased by $24.3 million, or 8.3%, and $122.4 million, or 37.1%, respectively, during the year ended December 31, 2021, compared to the year ended December 31, 2020, for the reasons described below:

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(1) Rental Revenue

Our Same Properties Portfolio and Total Portfolio rental revenue increased by $19.6 million, or 7.9%, and $99.1 million, or 35.8%, respectively, for the year ended December 31, 2021, compared to the year ended December 31, 2020. The increase in our Same Properties Portfolio rental revenue is primarily due to an increase in average rental rates on new and renewal leases, an increase in the weighted average occupancy of the portfolio, and a net increase in rental revenue of $4.6 million due to the combination of bad debt recoveries and a decrease in reserves for tenant and deferred rent receivables deemed not probable of collection, partially offset by a decrease of $2.5 million of amortization of net below-market lease intangibles. Our Total Portfolio rental revenue was also positively impacted by the incremental revenues from the 91 properties we acquired during 2020 and 2021, partially offset by the decrease in revenues from the nine properties that were sold during 2020 and 2021.

(2) Tenant Reimbursements

Our Same Properties Portfolio and Total Portfolio tenant reimbursements revenue increased by $4.6 million, or 9.9%, and $22.8 million or 43.8%, respectively, for the year ended December 31, 2021, compared to the year ended December 31, 2020.  The increase in our Same Properties Portfolio tenant reimbursements revenue is primarily due to an increase in the weighted average occupancy of the portfolio and an increase in recoverable property expenses, including higher reimbursable property tax expenses relating to California Proposition 13 annual increases and higher reimbursable insurance expenses as a result of higher overall premiums and additional earthquake insurance coverage. Our Total Portfolio tenant reimbursements revenue was also impacted by the incremental reimbursements from the 91 properties we acquired during 2020 and 2021, partially offset by the decrease in reimbursements from the nine properties that were sold during 2020 and 2021.

(3) Other Income

Our Same Properties Portfolio and Total Portfolio other income increased by $0.2 million, or 41.8%, and $0.5 million, or 77.4%, respectively, for the year ended December 31, 2021, compared to the year ended December 31, 2020, primarily due to an increase in miscellaneous income, including $0.1 million proceeds received in 2021 related to a fire insurance claim.

Management, Leasing and Development Services

Our Total Portfolio management, leasing and development services revenue increased by $48 thousand, or 11.4%, for the year ended December 31, 2021, compared to the year ended December 31, 2020.

Interest Income

Our Total Portfolio interest income decreased by $0.3 million, or 89.1%, during the year ended December 31, 2021, compared to the year ended December 31, 2020, due to a decrease in both the average interest rate earned and the average cash balance invested in money market accounts.

Property Expenses

Our Same Properties Portfolio and Total Portfolio property expenses increased by $3.8 million, or 5.5%, and $28.0 million, or 35.1%, respectively, during the year ended December 31, 2021, compared to the year ended December 31, 2020. The increase in our Same Properties Portfolio property expenses is primarily due to increases in insurance expense resulting from higher overall premiums and additional earthquake insurance coverage, allocated overhead costs reflecting a higher employee headcount and labor costs, and real estate tax expense relating to California Proposition 13 annual increases. Our Total Portfolio property expenses were also impacted by incremental expenses from the 91 properties we acquired during 2020 and 2021, partially offset by the decrease in property expenses from the nine properties that were sold during 2020 and 2021.

General and Administrative

Our Total Portfolio general and administrative expenses increased by $12.2 million, or 33.1% for the year ended December 31, 2021, compared to the year ended December 31, 2020.  The increase is primarily due to increases in non-cash equity compensation expense primarily related to performance unit equity grants made in 2020, accrued bonus expense and payroll related costs due to a higher employee headcount and rising labor costs.

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Depreciation and Amortization

Our Same Properties Portfolio depreciation and amortization expense decreased by $4.1 million, or 4.0%, for the year ended December 31, 2021, compared to the year ended December 31, 2020, primarily due to acquisition-related in-place lease intangibles and tenant improvements becoming fully depreciated at certain properties during 2020 and 2021, partially offset by an increase in depreciation expense related to capital improvements placed into service during 2020 and 2021 and an increase in amortization of deferred leasing costs. Our Total Portfolio depreciation and amortization expense increased by $36.0 million, or 31.2%, for the year ended December 31, 2021, compared to the year ended December 31, 2020, primarily due to incremental expense from the 91 properties we acquired during 2020 and 2021, partially offset by the decrease in our Same Properties Portfolio depreciation and amortization expense noted above.

Other Expenses

Our Total Portfolio other expenses increased by $1.2 million, or 946.0%, for the year ended December 31, 2021, compared to the year ended December 31, 2020. Other expenses for the year ended December 31, 2021, include (i) a $1.0 million impairment charge to reduce the carrying value of the right-of-use asset related to one of our leased office spaces that we decided to sublease as a result of the implementation of a work from home flexibility program in 2021, (ii) $0.2 million of construction costs related to cancelled projects and (iii) $0.1 million of acquisition expenses. Other expenses of $0.1 million for the year ended December 31, 2020, consist only of acquisition expenses. This prior year amount was reclassified from acquisition expenses to other expenses to conform to the current year’s presentation.

Interest Expense

Our Total Portfolio interest expense increased by $9.3 million, or 30.1%, during the year ended December 31, 2021, compared to the year ended December 31, 2020. The increase in interest expense is primarily comprised of the following: (i) a $8.0 million increase due to the issuance of $400.0 million of 2.125% senior notes in November 2020, (ii) a $3.8 million increase due to the issuance of $400.0 million of 2.15% senior notes in August 2021, (iii) a $1.2 million increase due to an increase in borrowings under our unsecured revolving credit facility and higher facility fees due to an increase in our borrowing capacity and (iv) a $1.0 million increase due to the assumption of $79.6 million of debt as part of the consideration for the acquisition of 11 properties during 2020 and two additional properties during 2021. These increases were partially offset by the following decreases: (i) a $1.8 million net decrease related to the repayment of our $100.0 million term loan facility and termination of the related interest rate swap in November 2020, (ii) a $1.5 million net decrease related to the repayment of the $225 Million Term Loan Facility and termination of the related interest rate swaps in August 2021 and (iii) a $0.6 million increase in capitalized interest related to redevelopment and repositioning activity. See “Note 7 – Notes Payable” to the consolidated financial statements for additional details related to our interest rate swaps.

Loss on Extinguishment of Debt

The loss on extinguishment of debt of $0.5 million for the year ended December 31, 2021 represents the write-off of unamortized debt issuance costs related to the $225 million term loan facility we repaid in August 2021 in advance of the January 2023 maturity date. The loss on extinguishment of debt of $0.1 million for the year ended December 31, 2020 represents the write-off of unamortized debt issuance costs related to the $100 million term loan facility we repaid in November 2020 in advance of the February 2022 maturity date.

Gain on Sale of Real Estate

During the year ended December 31, 2021, we recognized a total gain on sale of real estate of $33.9 million from the disposition of five properties that were sold for an aggregate gross sales price of $59.3 million. During the year ended December 31, 2020, we recognized a total gain on sale of real estate of $13.6 million which is comprised of (i) a total gain of $14.5 million from the disposition of four properties that were sold for an aggregate gross sales price of $45.5 million, and (ii) a $0.9 million loss on disposition of personal property that was originally acquired as part of the acquisition of 1055 Sandhill Avenue and valued at $2.8 million.

Comparison of the Year Ended December 31, 2020 to the Year Ended December 31, 2019

Refer to “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Results of Operations” in our Form 10-K for the year ended December 31, 2020, filed with the SEC on February 19, 2021, for a discussion of the year ended December 31, 2020 compared to the year ended December 31, 2019.

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

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

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

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

We calculate “Core FFO” by adjusting FFO to exclude the impact of certain items that we do not consider reflective of our on-going operating performance. Core FFO adjustments consist of (i) acquisition expenses, (ii) loss on extinguishment of debt, (iii) the amortization of the loss on termination of interest rate swaps, (iv) impairments of right-of-use assets and (v) other amounts as they may occur. We believe that Core FFO is a useful supplemental measure as it provides a more meaningful and consistent comparison of operating performance and allows investors to more easily compare the Company's operating results. Because these adjustments have a real economic impact on our financial condition and results from operations, the utility of Core FFO as a measure of our performance is limited. Other REITs may not calculate Core FFO in a consistent manner. Accordingly, our Core FFO may not be comparable to other REITs' core FFO. Core FFO should be considered only as a supplement to net income computed in accordance with GAAP as a measure of our performance. “Company share of Core FFO” in the table below reflects Core FFO attributable to common stockholders, which excludes amounts allocable to noncontrolling interests, participating securities and preferred stockholders (which consists of preferred stock dividends, but excludes non-recurring preferred stock redemption charges related to the write-off of original issuance costs which we do not consider reflective of our on-going performance).

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

(1)Gain on sale of real estate for the year ended December 31, 2020, includes a total gain of $14.5 million from the sale of depreciable operating properties and a loss of $0.9 million from the sale of assets incidental to our business. For additional details, see “Note 3 – Investments in Real Estate” to our consolidated financial statements included in Item 15 of this Report on Form 10-K.

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

(3)Participating securities include unvested shares of restricted stock, unvested LTIP units of partnership interest in our Operating Partnership and unvested performance units in our Operating Partnership.

Non-GAAP Supplemental Measures: NOI and Cash NOI

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

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

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

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

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

Non-GAAP Supplemental Measure: EBITDAre

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

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

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

Supplemental Guarantor Information

In March 2020, the SEC adopted amendments to Rule 3-10 of Regulation S-X and created Rule 13-01 to simplify disclosure requirements related to certain registered securities. The rule became effective January 4, 2021. The Company and the Operating Partnership have filed a registration statement on Form S-3 with the SEC registering, among other securities, debt securities of the Operating Partnership, which will be fully and unconditionally guaranteed by the Company. At December 31, 2021, the Operating Partnership had issued and outstanding $400.0 million of 2.125% Senior Notes due 2030 (the “$400 Million Notes due 2030”) and the $400 Million Notes due 2031. The obligations of the Operating Partnership to pay principal, premiums, if any, and interest on the $400 Million Notes due 2030 and $400 Million Notes due 2031 are guaranteed on a senior basis by the Company. The guarantee is full and unconditional, and the Operating Partnership is a consolidated subsidiary of the Company.

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

Financial Condition, Liquidity and Capital Resources

Overview

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

Our long-term liquidity needs consist primarily of funds necessary to pay for acquisitions, recurring and non-recurring capital expenditures and scheduled debt maturities. As of December 31, 2021, we had outstanding fixed-rate and variable-rate debt with varying maturities for an aggregate principal amount of $1.4 billion, with $2.6 million due within 12 months. Future interest payments associated with our debt and interest rate swaps total $293.7 million, with $40.7 million due within 12 months. We have $52.0 million of commitments for tenant improvements under certain tenant leases and construction work related to obligations under contractual agreements with our construction vendors. We also have operating lease commitments for an aggregate lease payment of $5.3 million, with $1.6 million due within 12 months. We intend to satisfy our long-term liquidity needs through net cash flow from operations, proceeds from long-term secured and unsecured financings, borrowings available under our unsecured revolving credit facility, the issuance of equity securities, including preferred stock, and proceeds from selective real estate dispositions as we identify capital recycling opportunities. See “Note 5 – Notes Payable” to the consolidated financial statements included in Item 15 of this Report on Form 10-K for further details regarding the scheduled principal payments. Also see “Note 6 – Leases” to the consolidated financial statements for further details regarding the scheduled operating lease payments.

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As of December 31, 2021, our cash and cash equivalents were $44.0 million, and we did not have any borrowings outstanding under our unsecured revolving credit facility, leaving $700.0 million available for future borrowings.

Sources of Liquidity

Cash Flow from Operations

Cash flow from operations is one of our key sources of liquidity and is primarily dependent upon: (i) the occupancy levels and lease rates at our properties, (ii) our ability to collect rent, (iii) the level of operating costs we incur and (iv) our ability to pass through operating expenses to our tenants. Our ability to use cash from operations to continue to meet our liquidity needs could be affected by various risks and uncertainties, including, but not limited to, the effects of the COVID-19 pandemic. We are subject to a number of risks, which have been heightened as the result of the COVID-19 pandemic, related to general economic conditions, including reduced occupancy levels, tenant defaults and bankruptcies and potential reductions in rental rates on new and renewal leases, which have the potential to affect our overall performance and resulting cash flows from operations.

ATM Program

On November 9, 2020, we established an at-the-market equity offering program pursuant to which we were able to sell from time to time shares of our common stock having an aggregate sales price of up to $750.0 million (the “2020 ATM Program”) through sales agents or by entering into forward equity sale agreements with certain financial institutions acting as forward purchasers.

During the year ended December 31, 2021, we directly sold a total of 3,201,560 shares of our common stock under the 2020 ATM Program at a weighted average price of $52.27 per share, for gross proceeds of $167.3 million, and net proceeds of $165.2 million, after deducting the sales agents’ fee.

During the year ended December 31, 2021, we also entered into forward equity sale agreements with certain financial institutions acting as forward purchasers under the 2020 ATM Program with respect to 8,589,572 shares of our common stock at a weighted average initial forward sale price of $62.87 per share. We did not receive any proceeds from the sale of common shares by the forward purchasers at the time of sale.

During the year ended December 31, 2021, we physically settled a portion of the forward equity sale agreements related to the 2020 ATM Program by issuing 6,683,216 shares of common stock in exchange for net proceeds of $405.3 million. The net proceeds were calculated based on a weighted average net forward sale price at the time of settlement of $60.65 per share. As of December 31, 2021, we had 1,906,356 shares of common stock, or approximately $134.0 million of forward net proceeds remaining for settlement to occur by November 15, 2022, based on net forward sales price of $70.27 per share.

On January 13, 2022, we established a new at-the-market equity offering program pursuant to which we are able to sell from time to time shares of our common stock having an aggregate sales price of up to $750.0 million (the “2022 ATM Program”) directly through sales agents or by entering into forward equity sale agreements with certain financial institutions acting as forward purchasers. In connection with the establishment of the 2022 ATM Program, we terminated the 2020 ATM Program, under which we had offered and sold shares of our common stock having an aggregate gross sales price of $743.9 million through January 13, 2022. As of the filing date of this Annual Report on Form 10-K, we have not sold any share of our common stock under the 2022 ATM Program. Future sales, if any, under the 2022 ATM Program will depend on a variety of factors to be determined by us from time to time, including among others, market conditions, the trading price of our common stock and capital needs. We intend to use the net proceeds from the offering of shares under the 2022 ATM Program, if any, to fund potential acquisition opportunities, repay amounts outstanding from time to time under our unsecured revolving credit facility or other debt financing obligations, to fund our repositioning or redevelopment activities and/or for general corporate purposes.

Securities Offerings

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

Issuance of $400 Million Notes Due 2031 — On August 4, 2021, we completed the underwritten public offering of the $400 Million Notes due 2031. The $400 Million Notes due 2031 were issued to the public at 99.014% of the principal amount,

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with a coupon rate of 2.150%. Interest on the $400 Million Notes due 2031 is payable semiannually on the first day of March and September in each year, beginning on March 1, 2022, until maturity on September 1, 2031.

We may redeem the $400 Million Notes due 2031 at our option and sole discretion, in whole at any time or in part from time to time prior to June 1, 2031 (three months prior to the maturity date of the $400 Million Notes due 2031), at a redemption price equal to the greater of (i) 100% of the principal amount of the $400 Million Notes due 2031 being redeemed; and (ii) a make-whole premium calculated in accordance with the indenture. Notwithstanding the foregoing, on or after June 1, 2031 (three months prior to the maturity date of the $400 Million Notes due 2031), the redemption price will be equal to 100% of the principal amount of the $400 Million Notes due 2031 being redeemed.

The proceeds from the $400 Million Notes due 2031 are expected to be allocated to investments in recently completed or future green building, energy and resource efficiency and renewable energy projects, including the development and redevelopment of such projects. Pending the allocation to eligible green projects, proceeds were initially used to repay the $225 Million Term Loan Facility, to fund the redemption of all shares of the Series A Preferred Stock, and acquisition activities.

May 2021 Equity Offering — On May 24, 2021, we entered into forward equity sale agreements with certain financial institutions acting as forward purchasers in connection with an underwritten public offering of 9,000,000 shares of common stock at an initial forward sale price of $55.29 per share (the “May 2021 Forward Sale Agreements”), pursuant to which, the forward purchasers borrowed and sold an aggregate of 9,000,000 shares of common stock in the offering. We did not receive any proceeds from the sale of common shares by the forward purchasers at the time of the offering.

In June 2021, we partially settled the May 2021 Forward Sale Agreements by issuing 1,809,526 shares of common stock in exchange for net proceeds of $100.0 million. The net proceeds were calculated based on the net forward sale price on the settlement date of $55.26 per share.

In September 2021, we settled the remaining shares under the May 2021 Forward Sale Agreements by issuing 7,190,474 shares of our common stock in exchange for net proceeds of $395.0 million. The net proceeds were calculated based on the net forward sale price on the settlement date of $54.93.

September 2021 Equity Offering — On September 27, 2021, we completed an underwritten public offering of 9,600,000 shares of common stock in which we (i) issued an aggregate of 3,100,000 shares of common stock to the underwriters at a purchase price of $58.65 per share for proceeds of $181.8 million, and (ii) entered into forward equity sale agreements with certain financial institutions acting as forward purchasers for 6,500,000 shares of common stock at an initial forward sale price of $58.65 per share (the “September 2021 Forward Sale Agreements”), pursuant to which the forward purchasers borrowed and sold an aggregate of 6,500,000 shares of common stock in the offering. In December 2021, we fully settled the 6,500,000 shares outstanding under the September 2021 Forward Sale Agreements for net proceeds of $379.1 million.

Capital Recycling

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

During the year ended December 31, 2021, we completed the sale of five properties for a total gross sales price of $59.3 million and total net cash proceeds of $56.6 million. The net cash proceeds were used to partially fund the acquisition of seven properties during the year ended December 31, 2021, through 1031 Exchange transactions.

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

Investment Grade Rating

Our credit ratings at December 31, 2021, were Baa3 (Stable outlook) from Moody’s, BBB (Positive outlook) from S&P and BBB (Positive outlook) from Fitch with respect to our Credit Agreement (described below), $150 million unsecured term loan facility (the “$150 Million Term Loan Facility”), $100 million unsecured guaranteed senior notes (the “$100 Million Notes”), $25 million unsecured guaranteed senior notes and $75 million unsecured guaranteed senior notes (together the “Series 2019A and 2019B Notes”), $400 Million Notes due 2030 and $400 Million Notes due 2031. Our credit rating at December 31, 2021, was BB+ from both Fitch and S&P with respect to our 5.875% Series B Cumulative Redeemable Preferred Stock and our 5.625%

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Series C Cumulative Redeemable Preferred Stock. Our credit ratings are based on our operating performance, liquidity and leverage ratios, overall financial position and other factors employed by the credit rating agencies in their rating analysis of us, and, although it is our intent to maintain our investment grade credit rating, there can be no assurance that we will be able to maintain our current credit ratings. In the event our current credit ratings are downgraded, it may become difficult or more expensive to obtain additional financing or refinance existing indebtedness as maturities become due.

Credit Agreement

On June 30, 2021, we exercised our option under the Third Amended and Restated Credit Agreement (the “Credit Agreement”) to utilize the accordion feature to increase the authorized borrowing capacity of our unsecured revolving credit facility (the “Revolver”) by $200.0 million from $500.0 million to $700.0 million. Subject to certain terms and conditions set forth in the Credit Agreement, we may increase the size of the Credit Agreement by an additional $700.0 million, which may be comprised of additional revolving commitments under the Revolver, term loan tranches or any combination of the foregoing.

The Revolver is scheduled to mature on February 13, 2024 and has two six-month extension options available. The Revolver may be voluntarily prepaid in whole or in part at any time without premium or penalty. Interest on the Revolver is generally to be paid based upon, at our option, either (i) LIBOR plus an applicable margin that is based upon our investment grade ratings or (ii) the Base Rate (which is defined as the highest of (a) the federal funds rate plus 0.50%, (b) the administrative agent’s prime rate or (c) the Eurodollar Rate plus 1.00%) plus an applicable margin that is based on our investment grade ratings. As of December 31, 2021, the margins for the Revolver range from 0.725% to 1.40% per annum for LIBOR-based loans and 0.00% to 0.45% per annum for Base Rate-based loans, depending on our investment grade ratings.

In addition to the interest payable on amounts outstanding under the Revolver, we are required to pay an applicable facility fee on each lender's commitment amount under the Revolver, regardless of usage. The applicable facility fee ranges in amount from 0.125% to 0.300% per annum, depending on our investment grade ratings.

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

As of the filing date of this Annual Report on Form 10-K, we had $175.0 million outstanding under the Revolver, leaving $525.0 million available for future borrowings.

Uses of Liquidity

Acquisitions

One of our most significant liquidity needs has historically been for the acquisition of real estate properties. During the year ended December 31, 2021, we acquired 53 properties with 5.7 million rentable square feet of buildings and 176 acres of low coverage outdoor storage sites and land for near term redevelopment for an aggregate purchase price of $1.9 billion. Subsequent to December 31, 2021, through the filing date of this Form 10-K, we have acquired six properties with 0.5 million rentable square feet of buildings for an aggregate purchase price of $183.0 million, and we are actively monitoring a volume of properties in our markets that we believe represent attractive potential investment opportunities to continue to grow our business. As of the filing date of this Annual Report on Form 10-K, we have over $450.0 million of acquisitions under contract or letter of intent. There can be no assurance we will complete any such acquisitions. While the actual number of acquisitions that we complete will be dependent upon a number of factors, in the short term, we expect to fund our acquisitions through available cash on hand, cash flows from operations, borrowings available under the Revolver, recycling capital through property dispositions and, in the long term, through the issuance of equity securities or proceeds from long-term secured and unsecured financings. See “Note 3 – Investments in Real Estate” to the consolidated financial statements for a summary of the properties we acquired during the year ended December 31, 2021.

Recurring and Nonrecurring Capital Expenditures

Capital expenditures are considered part of both our short-term and long-term liquidity requirements. During the year ended December 31, 2021, we incurred $10.5 million of recurring capital expenditures, which was an increase of $3.5 million over the prior year. During the year ended December 31, 2021, we incurred $80.5 million of non-recurring capital expenditures, which was an increase of $14.0 million over the prior year. The increase was primarily due to the increase in non-recurring capital expenditures related to repositioning/redevelopment activity during 2021 compared to 2020. As discussed above under —Factors that May Influence Future Results —Acquisitions and Value-Add Repositioning and Redevelopment of Properties, as of

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December 31, 2021, 11 of our properties were under current repositioning, redevelopment, or lease-up, and we have a pipeline of 17 additional properties for which we anticipate beginning construction work over the next five quarters. We currently estimate that approximately $330.6 million of capital will be required over the next three years (2022-2024) to complete the repositioning/redevelopment of these properties. However, this estimate is based on our current construction plans and budgets, both of which are subject to change as a result of a number of factors, including as a result of the COVID-19 pandemic and restrictions intended to prevent its spread, which has and may continue to cause delays or which may increase costs associated with building materials or construction services. If we are unable to complete construction on schedule or within budget, we could incur increased construction costs and experience potential delays in leasing the properties. We expect to fund these projects through a combination of cash flow from operations, the issuance of common stock under the 2022 ATM Program and borrowings available under the Revolver.

Dividends and Distributions

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

On February 7, 2022, our board of directors declared the following quarterly cash dividends/distributions:

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Consolidated Indebtedness

The following table sets forth certain information with respect to our consolidated indebtedness outstanding as of December 31, 2021:

(1)Includes the effect of interest rate swaps that were effective as of December 31, 2021.  Assumes a 1-month LIBOR rate of 0.1013% as of December 31, 2021, as applicable. Excludes the effect of amortization of debt issuance costs, discounts and the facility fee on the Revolver.

(2)Excludes unamortized debt issuance costs and discounts totaling $13.6 million as of December 31, 2021.

(3)The Revolver is subject to an applicable facility fee which is calculated as a percentage of the total lenders’ commitment amount, regardless of usage. The applicable facility fee will range from 0.125% to 0.30% per annum depending upon our investment grade rating.

(4)Two additional six-month extensions are available at the borrower’s option, subject to certain terms and conditions.

(5)The interest rates on these loans are comprised of LIBOR plus a LIBOR margin. The LIBOR margin will range from 0.725% to 1.400% per annum for the Revolver and 0.80% to 1.60% per annum for the $150 Million Term Loan Facility, depending on our investment grade rating, which may change from time to time.

(6)On June 30, 2021, we amended the $150 Million Term Loan to reduce the applicable LIBOR margin from a range of 1.40% to 2.35% per annum to a range of 0.80% to 1.60% per annum, based on our credit ratings.

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(7)As of December 31, 2021, the $150 Million Term Loan Facility has been effectively fixed at 2.7625% plus an applicable LIBOR margin through the use of an interest rate swap with a notional value of $150.0 million and an effective date of July 22, 2019.

(8)The $60 million term loan is secured by six properties. One 24-month extension is available at the borrower’s option, subject to certain terms and conditions.

The following table summarizes the composition of our consolidated debt between fixed-rate and variable-rate and secured and unsecured debt as of December 31, 2021:

(1)Includes the effect of interest rate swaps that were effective as of December 31, 2021. Excludes the effect of amortization of debt issuance costs, discounts and the facility fee on the Revolver. Assumes a one-month LIBOR rate of 0.1013% as of December 31, 2021, as applicable.

(2)Excludes unamortized debt issuance costs and debt discounts totaling $13.6 million as of December 31, 2021.

At December 31, 2021, we had total indebtedness of $1.4 billion, excluding unamortized debt issuance costs and debt discounts, with a weighted average interest rate of approximately 2.85% and an average term-to-maturity of 7.7 years. As of December 31, 2021, $1.4 billion, or 96%, of our outstanding indebtedness had an interest rate that was effectively fixed under either the terms of the loan ($1.2 billion) or an interest rate swap ($150.0 million).

At December 31, 2021, we had total indebtedness of $1.4 billion, reflecting a net debt to total combined market capitalization of approximately 9.1%. Our total market capitalization is defined as the sum of the liquidation preference of our outstanding preferred stock and preferred units plus the market value of our common stock excluding shares of nonvested restricted stock, plus the aggregate value of common units not owned by us, plus the value of our net debt.  Our net debt is defined as our consolidated indebtedness less cash and cash equivalents.

Debt Covenants

The Credit Agreement, $150 Million Term Loan Facility, $100 Million Notes, $125 Million Notes and Series 2019A and 2019B Notes all include a series of financial and other covenants that we must comply with, including the following covenants which are tested on a quarterly basis:

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

•For the Credit Agreement and $150 Million Term Loan Facility, maintaining a ratio of secured debt to total asset value of not more than 45%;

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

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

•For the Credit Agreement and $150 Million Term Loan Facility, maintaining a minimum tangible net worth of at least the sum of (i) $2,061,865,500, and (ii) an amount equal to at least 75% of the net equity proceeds received by the Company after September 30, 2019;

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

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

•Maintaining a ratio of total unsecured debt to total unencumbered asset value of not more than 60%; and

•Maintaining a ratio of unencumbered NOI (as defined in each of the loan agreements) to unsecured interest expense of at least 1.75 to 1.00.

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

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

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

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

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

The Credit Agreement, $150 Million Term Loan Facility and Senior Notes also contain limitations on our ability to pay distributions on our common stock. Specifically, our cash dividends may not exceed the greater of (i) 95% of our FFO (as defined in the credit agreement) and (ii) the amount required for us to qualify and maintain our REIT status. If an event of default exists, we may only make distributions sufficient to qualify and maintain our REIT status.

Additionally, subject to the terms of the Senior Notes, upon certain events of default, including, but not limited to, (i) a default in the payment of any principal, make-whole payment amount, or interest under the Senior Notes, (ii) a default in the payment of certain of our other indebtedness, (iii) a default in compliance with the covenants set forth in the Senior Notes agreement and (iv) bankruptcy and other insolvency defaults, the principal and accrued and unpaid interest and the make-whole payment amount on the outstanding Senior Notes will become due and payable at the option of the purchasers. In addition, we are required to maintain at all times a credit rating on the Senior Notes from either S&P, Moody’s or Fitch.

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

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

•Maintaining Unencumbered Liquid Assets (as defined in the term loan agreement) of not less than (i) $5 million, or (ii) $8 million if we elect to have Line of Credit Availability (as defined in the term loan agreement) included in the calculation, of which $2 million must be cash or cash equivalents, to be tested annually as of December 31 of each year;

•Maintaining a minimum Fair Market Net Worth (as defined in the term loan agreement) of at least $75 million, to be tested annually as of December 31 of each year.

We were in compliance with all of our quarterly and annual debt covenants as of December 31, 2021.

Cash Flows

Comparison of the Year Ended December 31, 2021 to the Year Ended December 31, 2020

The following table summarizes the changes in net cash flows associated with our operating, investing, and financing activities for the years ended December 31, 2021 and 2020 (in thousands):

Net cash provided by operating activities. Net cash provided by operating activities increased by $48.5 million to $231.5 million for the year ended December 31, 2021, compared to $183.0 million for the year ended December 31, 2020. The increase was primarily attributable to the incremental cash flows from property acquisitions completed subsequent to January 1, 2020, and the increase in Cash NOI from our Same Properties Portfolio and changes in working capital (excluding the change in sales-type lease receivable), partially offset by a decrease in net proceeds of $19.6 million from the sale of 2722 Fairview Street (“Fairview”), which was sold in September 2020 pursuant to the tenant exercising its option to purchase the property, and an increase in cash interest paid as compared to the prior year.

Net cash used in investing activities. Net cash used in investing activities increased by $925.2 million to $1.9 billion for the year ended December 31, 2021, compared to $987.5 million for the year ended December 31, 2020. The increase was primarily attributable to a $934.1 million increase in cash paid for property acquisitions and acquisition related deposits and a $23.7 million increase in cash paid for construction and repositioning/redevelopment projects, partially offset by a $32.6 million

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increase in net proceeds from the sale of received from the sale of properties (excluding the proceeds from the sale of Fairview noted above) for comparable periods.

Net cash provided by financing activities. Net cash provided by financing activities increased by $644.6 million to $1.5 billion for the year ended December 31, 2021, compared to $903.2 million for the year ended December 31, 2020. The increase was primarily attributable to the following: (i) an increase of $892.0 million in net cash proceeds from the issuance of shares of our common stock, (ii) an increase of $793.5 million in cash proceeds from borrowings under the Revolver, (iii) an increase of $392.4 million in net cash proceeds from the issuance of the $400 Million Notes due 2031 in August 2021 and (iv) an increase of $100.0 million from the repayment of the $100 Million Term Loan Facility in November 2020. These increases were partially offset by the following: (i) a decrease of $793.5 million from the repayment of the borrowings under the Revolver, (ii) a decrease of $393.0 million in net cash proceeds from the issuance of the $400 Million Noted due 2030 in November 2020, (iii) a decrease of $225.0 million from the repayment of the $225 Million Term Loan Facility in August 2021, (iv) a decrease of $90.0 million from the redemption of the Series A Preferred Stock and (v) an increase of $33.6 million in dividends paid to common stockholders and common unitholders primarily resulting from the increase in the number of common shares outstanding and the increase in our quarterly per share cash dividend.

Comparison of the Year Ended December 31, 2020 to the Year Ended December 31, 2019

Refer to “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Cash Flows” in our Form 10-K for the year ended December 31, 2020, filed with the SEC on February 19, 2021, for a discussion of the year ended December 31, 2020 compared to the year ended December 31, 2019.

Inflation

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