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EX-23.1 - EXHIBIT 23.1 - Rexford Industrial Realty, Inc.ex231.htm

 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549  
 
FORM 8-K/A  
 
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
April 11, 2016
 
REXFORD INDUSTRIAL REALTY, INC.
(Exact name of registrant as specified in its charter) 
 
 
Maryland
 
001-36008
 
46-2024407
(State or other jurisdiction of
incorporation)
 
(Commission File Number)
 
(IRS Employer Identification No.)
 
 

11620 Wilshire Boulevard, Suite 1000, Los Angeles, California
 
90025
(Address of principal executive offices)
 
(Zip Code)
Registrant’s telephone number, including area code: (310) 966-1680

N/A
(Former name or former address, if changed since last report.)
 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instructions A.2.):
 
o
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
 
 
o
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
 
 
o
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
 
 
o
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
 
 
 

 









This Form 8-K/A amends and supplements the registrant’s Form 8-K, filed on April 11, 2016 reporting the acquisition of an industrial portfolio (“REIT Portfolio”) consisting of nine properties acquired from a single-seller (the “Original Filing”), to include the historical financial statements and pro forma information required by Item 9.01(a) and (b) of Form 8-K. This Form 8-K/A should be read in conjunction with the Original Filing.
ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS

(a)
 
Financial Statements of the Portfolio Under Rule 3-14 of Regulation S-X
 
 
 
 
Report of Independent Auditors
 
 
 
Statements of Revenues and Certain Expenses for the three months ended March 31, 2016 (unaudited) and the year ended December 31, 2015
 
 
 
Notes to the Statements of Revenues and Certain Expenses
 
 
 
 
 
 
(b)
 
Unaudited Pro Forma Condensed Consolidated Information
 
 
 
 
Unaudited Pro Forma Condensed Consolidated Balance Sheet as of March 31, 2016
 
 
 
Unaudited Pro Forma Condensed Consolidated Statement of Operations for the three months ended March 31, 2016
 
 
 
 
 
 
 
 
Notes to the Unaudited Pro Forma Condensed Consolidated Financial Statements
 
 
 
 
 
 
(c)
 
Exhibits
 
 
 
 
 
 
 
23.1*
 
Consent of Ernst & Young LLP
 
 
 
 
* Filed herewith
 
 





Report of Independent Auditors
The Board of Directors and Stockholders of Rexford Industrial Realty, Inc.
We have audited the accompanying statement of revenues and certain expenses (“the financial statement”) of the Rexford Industrial Portfolio (“the REIT Portfolio”) for the year ended December 31, 2015, and the related notes to the financial statement.
Management’s Responsibility for the Financial Statement
Management is responsible for the preparation and fair presentation of the financial statement in conformity with U.S. generally accepted accounting principles; this includes the design, implementation and maintenance of internal control relevant to the preparation and fair presentation of the financial statement that are free of material misstatement, whether due to fraud or error.
Auditor’s Responsibility
Our responsibility is to express an opinion on the financial statement based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statement is free of material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statement. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statement, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statement in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates, made by management, as well as evaluating the overall presentation of the financial statement.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the statement of revenues and certain expenses referred to above presents fairly, in all material respects, the revenues and certain expenses as described in Note 1 of the REIT Portfolio’s financial statement for the year ended December 31, 2015, in conformity with U.S. generally accepted accounting principles.
Basis of Accounting
As described in Note 1 to the financial statement, the statement of revenues and certain expenses was prepared for the purpose of complying with the rules and regulations of the Securities and Exchange Commission, and is not intended to be a complete presentation of the REIT Portfolio’s revenues and expenses. Our opinion is not modified with respect to this matter.
/S/ Ernst & Young LLP
Los Angeles, California
April 11, 2016




REIT PORTFOLIO
STATEMENTS OF REVENUES AND CERTAIN EXPENSES
THREE MONTHS ENDED MARCH 31, 2016 (UNAUDITED) AND THE YEAR ENDED DECEMBER 31, 2015
(in thousands)

 
 
Three Months Ended March 31, 2016
 
Year Ended December 31, 2015
 
RENTAL REVENUES
 
 
 
 
 
Rental revenues
 
$
2,206

 
$
6,933

 
Tenant reimbursements
 
713

 
2,761

 
TOTAL RENTAL REVENUES
 
2,919

 
9,694

 
CERTAIN OPERATING EXPENSES
 
 
 
 
 
Property expenses
 
812

 
3,461

 
TOTAL OPERATING EXPENSES
 
812

 
3,461

 
REVENUES IN EXCESS OF CERTAIN OPERATING EXPENSES
 
$
2,107

 
$
6,233

 





REIT PORTFOLIO
NOTES TO THE STATEMENTS OF REVENUES AND CERTAIN EXPENSES


        

1.
BACKGROUND AND BASIS OF PRESENTATION
The accompanying statements of revenues and certain expenses present the results of operations of an industrial portfolio consisting of nine properties (the “REIT Portfolio”) for the three months ended March 31, 2016 (unaudited) and the year ended December 31, 2015. The REIT Portfolio was acquired by Rexford Industrial Realty, Inc., through its operating partnership, Rexford Industrial Realty, L.P. from a third-party seller on April 15, 2016 for approximately $191 million. The table below sets forth relevant information with respect to the properties in the REIT Portfolio at the time of acquisition (unaudited).
   
Property Address
 
City
 
Number of
Buildings
 
Asset Type
 
Year Built/ Renovated
 
Rentable
Square
Feet
 
Number of
Leases
 
Occupancy
 
12131 Western Avenue
 
Garden Grove
 
1
 
Warehouse / Distribution / Manufacturing
 
1987/2007
 
207,953

(1) 
1
 
100%
 
2811 S Harbor Boulevard
 
Santa Ana
 
1
 
Manufacturing
 
1977/2015
 
126,796

 
1
 
100%
 
2700-2722 S Fairview Street
 
Santa Ana
 
1
 
Manufacturing / Office
 
1964/1984
 
116,575

 
2
 
100%
 
9 Holland
 
Irvine
 
1
 
Manufacturing / Distribution
 
1980/2013
 
180,981

 
2
 
100%
 
20 Icon
 
Lake Forest
 
1
 
Distribution
 
1999/2015
 
102,299

 
1
 
100%
 
11127 Catawba Avenue
 
Fontana
 
1
 
Distribution
 
2015
 
145,750

 
1
 
100%
 
15996 Jurupa Avenue
 
Fontana
 
1
 
Warehouse / Distribution
 
2015
 
212,660

 
1
 
—%
(2) 
16425 Gale Avenue
 
City of Industry
 
1
 
Warehouse / Distribution
 
1976
 
325,800

 
2
 
100%
 
13550 Stowe Drive
 
Poway
 
1
 
Warehouse
 
1991
 
112,000

 
1
 
100%
 
 
 
 
 
9
 
 
 
 
 
1,530,814

 
12
 
86.1%
 

(1)
The total rentable square feet for this building is 207,953. However, as of March 31, 2016 the current tenant is occupying 192,609 square feet.
(2)
The lease was executed as of March 31, 2016 but tenant did not take possession until April 1, 2016.
The accompanying statement of revenues and certain expenses has been prepared for the purpose of complying with Rule 3-14 of Regulation S-X promulgated under the Securities Act of 1933, as amended. Accordingly, the statement is not representative of the actual operations for the period presented as revenues and certain operating expenses, which may not be directly attributable to the revenues and expenses expected to be incurred through the future operations of the REIT Portfolio, have been excluded. Such items include depreciation, amortization, interest expense, interest income, and amortization of above and below market leases. References to year built/renovated, square footage and occupancy rates are unaudited and excluded from the auditors’ opinion.
2.     SIGNIFICANT ACCOUNTING POLICES

Revenue Recognition
The REIT Portfolio recognizes rental revenue from tenants on a straight-line basis over the lease term when collectability is reasonably assured and the tenant has taken possession or controls the physical use of the leased asset.



REIT PORTFOLIO
NOTES TO THE STATEMENTS OF REVENUES AND CERTAIN EXPENSES


Tenant reimbursements related to reimbursement of real estate taxes, insurance, repairs and maintenance, and other operating expenses are recognized as revenue in the period the applicable expenses are incurred. The reimbursements are recognized and presented gross, as the REIT Portfolio is generally the primary obligor with respect to purchasing goods and services from third-party suppliers, has discretion in selecting the supplier and bears the associated credit risk.
Use of Estimates
A number of estimates and assumptions have been made relating to the reporting and disclosure of revenues and certain expenses during the reporting period to prepare the statement of revenues and certain expenses in conformity with U.S. generally accepted accounting principles. Actual results could differ from those estimates.
3.    MINIMUM FUTURE LEASE RENTALS
There are various lease agreements in place with tenants to lease space in the REIT Portfolio. As of March 31, 2016, the minimum future cash rents receivable under non-cancelable operating leases in each of the next five years and thereafter are as follows (unaudited and in thousands):
    
Years Ending December 31
 
 
2016
 
7,530

2017
 
8,548

2018
 
8,799

2019
 
8,856

2020
 
7,503

Thereafter
 
10,045

Total
 
51,281

Leases generally require reimbursement of the tenant's proportional share of common area, real estate taxes and other operating expenses, which are excluded from the amounts above.
4.      TENANT CONCENTRATIONS
For the three months ended March 31, 2016 (unaudited), three tenants represented 52% of the REIT Portfolio’s rental revenue. For the year ended December 31, 2015, two tenants represented 49% of the Portfolio’s rental revenue.
5.    MANAGEMENT FEES
The REIT Portfolio incurred approximately $63,000 (unaudited) and $182,000 of management fees during the three months ended March 31, 2016 and the year ended December 31, 2015, respectively. The Seller had entered into a management agreement with a related party management company upon initial purchase of the properties. The management company performed management services including leasing, operating, supervising and maintaining the Seller’s real estate investments. Management fees are calculated as 2.5% on all rents collected each month.
The Company has no affiliation with the management company. The management agreements were terminated upon purchase of the REIT Portfolio.
6.    SUBSEQUENT EVENTS
Subsequent events were evaluated through April 11, 2016, the date the financial statements were available to be issued.
 




REXFORD INDUSTRIAL REALTY, INC.
UNAUDITED PRO FORMA FINANCIAL INFORMATION




The following unaudited pro forma condensed consolidated balance sheet as of March 31, 2016 is based on Rexford Industrial Realty, Inc.’s (the “Company”) historical consolidated balance sheet and reflects the subsequent completion of an underwritten public offering of 10,350,000 shares of common stock, the establishment of a new incremental term loan in an aggregate principal amount of $100 million and the acquisition of a nine property industrial portfolio from a single seller (the “REIT Portfolio”), as if such transactions had occurred on March 31, 2016. The unaudited pro forma condensed consolidated statements of operations for the three months ended March 31, 2016 and the year ended December 31, 2015 have been prepared to reflect the incremental effect of the REIT Portfolio by the Company as if such transaction had occurred on January 1, 2015.
The unaudited pro forma financial information is not necessarily indicative of what the Company’s results of operations or financial condition would have been assuming the acquisition of the REIT Portfolio had occurred at the beginning of the periods presented, nor is it indicative of the Company’s results of operations or financial condition for future periods. In management’s opinion, all adjustments necessary to reflect the effects of these transactions have been made. The unaudited pro forma financial information and accompanying notes should be read in conjunction with the Company’s consolidated financial statements included on Form 10-K for the year ended December 31, 2015 and Quarterly Report on Form 10-Q for the three months ended March 31, 2016.




REXFORD INDUSTRIAL REALTY, INC.
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
As of March 31, 2016
(in thousands - except share and per share data)
(Unaudited)


 
Rexford Industrial Realty, Inc. (A)
 
Equity Offering (B)
 
Acquisition of REIT Portfolio (C)
 
Pro Forma Rexford Industrial Realty, Inc.
ASSETS
 
 
 
 
 
 
 
Investments in real estate, net
$
1,106,635

 
$

 
$
180,871

 
$
1,287,506

Cash and cash equivalents
6,402

 
175,122

 
(148,324
)
 
33,200

Rents and other receivables, net
2,939

 

 

 
2,939

Deferred rent receivable, net
8,670

 

 

 
8,670

Deferred leasing costs, net
6,001

 

 

 
6,001

Deferred loan costs, net
1,296

 

 

 
1,296

Acquired lease intangible assets, net
28,802

 

 
12,357

 
41,159

Acquired indefinite-lived intangible
5,271

 

 

 
5,271

Other assets
5,580

 

 

 
5,580

Acquisition related deposit
400

 

 

 
400

Investment in unconsolidated real estate entities
4,144

 

 

 
4,144

Total Assets
1,176,140

 
175,122

 
44,904

 
1,396,166

LIABILITIES & EQUITY
 
 
 
 
 
 
 
Liabilities
 
 
 
 
 
 

Notes payable
444,010

 

 
42,676

 
486,686

Interest rate swap liability
4,949

 

 

 
4,949

Accounts payable, accrued expenses and other liabilities
14,897

 

 
20

 
14,917

Dividends payable
7,814

 

 

 
7,814

Acquired lease intangible liabilities, net
3,307

 

 
2,103

 
5,410

Tenant security deposits
11,995

 

 

 
11,995

Prepaid rents
2,667

 

 

 
2,667

Total Liabilities
489,639

 

 
44,799

 
534,438

Equity

 
 
 

 

Rexford Industrial Realty, Inc. stockholders' equity

 
 
 
 
 

Common Stock, $0.01 par value 490,000,000 authorized and 55,657,428 outstanding and 66,007,428 outstanding on a pro forma basis as of March 31, 2016, respectively
554

 
104

 

 
658

Additional paid in capital
723,074

 
175,018

 

 
898,092

Cumulative distributions in excess of earnings
(54,192
)
 

 
(20
)
 
(54,212
)
Accumulated other comprehensive loss
(4,728
)
 

 

 
(4,728
)
Total stockholders' equity
664,708

 
175,122

 
(20
)
 
839,810

Noncontrolling interests
21,793

 

 
125

 
21,918

Total Equity
686,501

 
175,122

 
105

 
861,728

Total Liabilities and Equity
$
1,176,140

 
$
175,122

 
$
44,904

 
$
1,396,166





REXFORD INDUSTRIAL REALTY, INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
For the three months ended March 31, 2016
(in thousands - except share and per share data)
(Unaudited)


 
Rexford Industrial Realty, Inc. (AA)
 
Acquisition of REIT Portfolio (BB)
 
Pro Forma Rexford Industrial Realty, Inc.
RENTAL REVENUES
 
 
 
 
 
Rental income
$
23,499

 
$
2,284

 
$
25,783

Tenant reimbursements
3,558

 
713

 
4,271

Other income
313

 

 
313

TOTAL RENTAL REVENUES
27,370

 
2,997

 
30,367

Management, leasing and development services
134

 

 
134

TOTAL REVENUES
27,504

 
2,997

 
30,501

OPERATING EXPENSES
 
 
 
 
 
Property expenses
7,543

 
812

 
8,355

General and administrative
3,602

 

 
3,602

Depreciation and amortization
11,214

 
2,954

 
14,168

TOTAL OPERATING EXPENSES
22,359

 
3,766

 
26,125

OTHER EXPENSE
 
 
 
 
 
Acquisition expenses
475

 
(164
)
 
311

Interest expense
3,254

 
539

(EE)
3,793

TOTAL OTHER EXPENSE
3,729

 
375

 
4,104

TOTAL EXPENSES
26,088

 
4,141

 
30,229

Equity in income from unconsolidated real estate entities
61

 

 
61

NET INCOME (LOSS)
1,477

 
(1,144
)
 
333

 Less: net (income) loss attributable to noncontrolling interest
(52
)
 
42

 
(10
)
NET INCOME (LOSS) ATTRIBUTABLE TO REXFORD INDUSTRIAL REALTY, INC.
1,425

 
(1,102
)
 
323

 Less: earnings allocated to participating securities
(78
)
 

 
(78
)
NET INCOME (LOSS) ATTRIBUTABLE TO COMMON STOCKHOLDERS
$
1,347

 
$
(1,102
)
 
$
245

Net income available to common stockholders per share - basic and diluted
$
0.02

 


 
$

Weighted average shares of common stock outstanding - basic
55,269,598

 
 
 
65,619,598

Weighted average shares of common stock outstanding - diluted
55,416,947

 
 
 
65,766,947





REXFORD INDUSTRIAL REALTY, INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
For the year ended December 31, 2015
(in thousands - except share and per share data)
(Unaudited)


 
Pro Forma Rexford Industrial Realty, Inc. before Acquisition of Portfolio (CC)
 
Acquisition of Portfolio (DD)
 
Pro Forma Rexford Industrial Realty, Inc.
RENTAL REVENUES
 
 
 
 
 
Rental revenues
$
81,114

 
$
7,343

 
$
88,457

Tenant reimbursements
10,479

 
2,761

 
13,240

Other income
1,013

 

 
1,013

TOTAL RENTAL REVENUES
92,606

 
10,104

 
102,710

Management, leasing and development services
584

 

 
584

Interest income
710

 

 
710

TOTAL REVENUES
93,900

 
10,104

 
104,004

OPERATING EXPENSES
 
 
 
 
 
Property expenses
25,000

 
3,461

 
28,461

General and administrative
15,016

 

 
15,016

Depreciation and amortization
41,837

 
7,778

 
49,615

TOTAL OPERATING EXPENSES
81,853

 
11,239

 
93,092

OTHER (INCOME) EXPENSE
 
 
 
 
 
Acquisition expenses
2,136

 

 
2,136

Interest expense
8,453

 
2,155

(EE)
10,608

TOTAL OTHER EXPENSE
10,589

 
2,155

 
12,744

TOTAL EXPENSES
92,442

 
13,394

 
105,836

Equity in income from unconsolidated real estate entities
93

 

 
93

Gain from early repayment of note receivable
581

 

 
581

Loss on extinguishment of debt
(182
)
 

 
(182
)
NET INCOME (LOSS)
1,950

 
(3,290
)
 
(1,340
)
Net (income) loss attributable to noncontrolling interests
(76
)
 
120

 
44

NET INCOME (LOSS) ATTRIBUTABLE TO REXFORD INDUSTRIAL REALTY, INC.
1,874

 
(3,170
)
 
(1,296
)
 Less: earnings allocated to participating securities
(223
)
 

 
(223
)
NET INCOME (LOSS) ATTRIBUTABLE TO COMMON STOCKHOLDERS
$
1,651

 
$
(3,170
)
 
$
(1,519
)
Net Income (loss) attributable to common stockholders per share - basic and diluted
$
0.03

 
 
 
$
(0.02
)
Weighted average shares of common stock outstanding - basic and diluted
54,024,923

 
 
 
64,374,923


1.
Balance sheet adjustments

(A)
Represents the unaudited historical balance sheet of Rexford Industrial Realty, Inc. (the “Company,” “we,” "our," or “us”) as of March 31, 2016. See the historical consolidated financial statements and notes thereto included in the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2016.
(B)
On April 15, 2016, we completed an underwritten public offering (the "Equity Offering") of 10,350,000 shares of our common stock, $0.01 par value per share (the “Common Stock”), for net proceeds of approximately $175.1 million, after



REXFORD INDUSTRIAL REALTY, INC.
UNAUDITED PRO FORMA FINANCIAL INFORMATION


deducting the underwriting discount and estimated expenses payable by us, which includes the proceeds from the underwriters exercise in full of their option to purchase an additional 1,350,000 shares of Common Stock.

(C)
Reflects the acquisition of the REIT Portfolio as if it had occurred on March 31, 2016 for approximately $191 million.

The Company has performed a preliminary valuation analysis of the fair market value of the REIT Portfolio’s assets to be acquired and liabilities to be assumed. Using the total consideration for the Acquisition, the Company has estimated the allocations to such assets and liabilities. The following table summarizes the allocation of the primary purchase price as of the transaction closing date, April 15, 2016 (in thousands), which is subject to change as we complete the purchase price allocation process.
Tangible
 
Total Assets
 
Total Liabilities
Land
 
$
90,437

 
$

Buildings
 
81,847

 

Site Improvements
 
6,977

 

Tenant Improvement Allowance (Origination Costs)
 
1,610

 

Total Tangible
 
$
180,871

 
$

 
 
 

 
 

Intangible
 
 

 
 

Leasing Commissions (Origination Costs)
 
$
2,953

 
$

Legal and Marketing Costs (Origination Costs)
 
87

 

Above/(Below) Market Lease Value
 
911

 
(2,103
)
Lease In Place Value
 
8,406

 

Total Intangible
 
$
12,357

 
$
(2,103
)
 
 
 
 
 
Fair Value
 
$
193,228

 
$
(2,103
)

The Company, through its operating partnership, Rexford Industrial Realty, L.P., entered into a $125 million credit agreement (the “Credit Agreement”) on January 14, 2016 with PNC Bank, National Association, as administrative agent, U.S. Bank, National Association, as syndication agent, PNC Capital Markets LLC and U.S. Bank, National Association, as joint lead arrangers and joint bookrunners, and the other lenders named therein. Under the terms of the Credit Agreement, the Company is permitted to add one or more incremental term loans in an aggregate amount not to exceed $100 million (the “Accordion”). The Company exercised the Accordion in full and established a new incremental term loan in an aggregate principal amount of $100 million (the “Incremental Term Loan”).
In connection with establishment of the Incremental Term Loan, the Company incurred approximately $824,000 of debt issuance costs which are presented as a reduction to Notes Payable.
The proceeds from the Equity Offering and the Incremental Term Loan were partially used to fund the acquisition of the REIT Portfolio and for the repayment of $56.5 million outstanding on our unsecured revolving credit facility.

2.
Income statement adjustments

(AA) Represents the unaudited historical consolidated operations of the Company for the three months ended March 31, 2016. See the historical consolidated financial statements and notes thereto included in the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2016.

(BB) The pro forma adjustments reflect the results of operations for the three months ended March 31, 2016 for the REIT Portfolio as if it had been acquired on January 1, 2015. Revenues and direct operating expenses are presented on the accrual basis of accounting. Rental revenues include adjustments for the amortization of the net amount of above- and below-market rents.



REXFORD INDUSTRIAL REALTY, INC.
UNAUDITED PRO FORMA FINANCIAL INFORMATION



Depreciation and amortization amounts were determined based on management’s evaluation of the estimated remaining useful lives of the properties in the REIT Portfolio and intangibles. The values allocated to buildings, site improvements, in-place lease intangibles and tenant improvements are depreciated on a straight-line basis using an estimated remaining life of 10-30 years for buildings, 5-20 years for site improvements, and the shorter of the estimated useful life or respective lease term for in-place lease intangibles and tenant improvements. In utilizing these useful lives for determining the pro forma adjustments, management considered the length of time the property had been in existence, the maintenance history as well as anticipated future maintenance, and any contractual stipulations that might limit the useful life.
Acquisition costs directly attributable to the transaction have been eliminated in a pro forma adjustment. These acquisition costs are nonrecurring charges directly attributable to the purchase business combination.

(CC) Represents the audited historical consolidated operations of the Company for the year ended December 31, 2015. See the historical consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2015.

(DD) The pro forma adjustments reflect the results of operations for the year ended December 31, 2015 for the REIT Portfolio as if it had been acquired on January 1, 2015. Revenues and direct operating expenses are presented on the accrual basis of accounting. Rental revenues include adjustments for the amortization of the net amount of above- and below-market rents.

Depreciation and amortization amounts were determined based on management’s evaluation of the estimated remaining useful lives of the properties in the REIT Portfolio and intangibles. The values allocated to buildings, site improvements, in-place lease intangibles and tenant improvements are depreciated on a straight-line basis using an estimated remaining life of 10-30 years for buildings, 5-20 years for site improvements, and the shorter of the estimated useful life or respective lease term for in-place lease intangibles and tenant improvements. In utilizing these useful lives for determining the pro forma adjustments, management considered the length of time the property had been in existence, the maintenance history as well as anticipated future maintenance, and any contractual stipulations that might limit the useful life.

(EE)
Reflects the adjustment to interest expense as if the Incremental Term Loan at an interest rate of one-month LIBOR, as of the transaction date, plus the applicable LIBOR margin of 1.60%, had occurred on January 1, 2015. On a pro forma basis, if LIBOR were to increase by 1/8%, interest expense would have increased by and net loss would have increased by $70,000 and $252,000 for the three months ended March 31, 2016 and the year ended December 31, 2015, respectively. Conversely, if LIBOR were to decrease by 1/8%, interest expense would have decreased by and net loss from continuing operations would have decreased by $70,000 and $252,000 for the three months ended March 31, 2016 and the year ended December 31, 2015, respectively. Additionally, the adjustment reflects the amortization of debt issuance costs incurred in connection with the Incremental Term Loan.





SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
 
Rexford Industrial Realty, Inc.
May 12, 2016
 
/s/ Michael S. Frankel
 
Michael S. Frankel
Co-Chief Executive Officer
(Principal Executive Officer)
 
 
 
Rexford Industrial Realty, Inc.
May 12, 2016
 
/s/ Howard Schwimmer
 
Howard Schwimmer
Co-Chief Executive Officer
(Principal Executive Officer)






EXHIBIT INDEX
 
Exhibit
Number
  
Description
23.1
  
Consent of Ernst & Young, LLP