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1.	Organization

Rexford Industrial Realty, Inc. is a self-administered and self-managed full-service real estate investment trust (“REIT”) focused on owning and operating industrial properties in Southern California infill markets. We were formed as a Maryland corporation on January 18, 2013, and Rexford Industrial Realty, L.P. (the “Operating Partnership”), of which we are the sole general partner, was formed as a Maryland limited partnership on January 18, 2013. Through our controlling interest in our Operating Partnership and its subsidiaries, we own, manage, lease, acquire and develop industrial real estate principally located in Southern California infill markets, and, from time to time, acquire or provide mortgage debt secured by industrial property.  As of June 30, 2020, our consolidated portfolio consisted of 229 properties with approximately 27.6 million rentable square feet. In addition, we currently manage 20 properties with approximately 1.0 million rentable square feet.  

The terms “us,” “we,” “our,” and the “Company” as used in these financial statements refer to Rexford Industrial Realty, Inc. and its subsidiaries (including our Operating Partnership).

2.	Summary of Significant Accounting Policies

Basis of Presentation and Principles of Consolidation

As of June 30, 2020 and December 31, 2019, and for the three and six months ended June 30, 2020 and 2019, the financial statements presented are the consolidated financial statements of Rexford Industrial Realty, Inc. and its subsidiaries, including our Operating Partnership. All significant intercompany balances and transactions have been eliminated in the consolidated financial statements.

Under consolidation guidance, we have determined that our Operating Partnership is a variable interest entity because the holders of limited partnership interests do not have substantive kick-out rights or participating rights. Furthermore, we are the primary beneficiary of the Operating Partnership because we have the obligation to absorb losses and the right to receive benefits from the Operating Partnership and the exclusive power to direct the activities of the Operating Partnership. As of June 30, 2020 and December 31, 2019, the assets and liabilities of the Company and the Operating Partnership are substantially the same, as the Company does not have any significant assets other than its investment in the Operating Partnership.

The accompanying unaudited interim financial statements have been prepared pursuant to the rules and regulations of the United States Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures normally included in the financial statements prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) may have been condensed or omitted pursuant to SEC rules and regulations, although we believe that the disclosures are adequate to make their presentation not misleading. The accompanying unaudited financial statements include, in our opinion, all adjustments, consisting of normal recurring adjustments, necessary to present fairly the financial information set forth therein. The results of operations for the interim periods are not necessarily indicative of the results that may be expected for the year ending December 31, 2020. The interim financial statements should be read in conjunction with the consolidated financial statements in our 2019 Annual Report on Form 10-K and the notes thereto.

Any references to the number of properties and square footage are unaudited and outside the scope of our independent registered public accounting firm’s review of our financial statements in accordance with the standards of the United States Public Company Accounting Oversight Board.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make certain estimates and assumptions that affect the reported amounts in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates.  

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Cash and Cash Equivalents

Cash and cash equivalents include all cash and liquid investments with an initial maturity of three months or less. The carrying amount approximates fair value due to the short-term maturity of these investments.

Restricted Cash

Restricted cash is comprised of escrow reserves that we are required to set aside for future costs as required by certain agreements with our lenders, and from time to time, includes cash proceeds from property sales that are being held by qualified intermediaries for purposes of facilitating tax-deferred like-kind exchanges under Section 1031 of the Internal Revenue Code. As of June 30, 2020, the restricted cash balance of $0.1 million was being reserved for real estate taxes related to the property located at 960-970 Knox Street. As of June 30, 2019, the restricted cash balance of $11.1 million was comprised of cash proceeds from the sale of one of our properties. As of December 31, 2019 we did not have a balance in restricted cash.

Restricted cash balances are included with cash and cash equivalents balances as of the beginning and ending of each period presented in the consolidated statements of cash flows. The following table provides a reconciliation of our cash and cash equivalents and restricted cash at the beginning and end of the six months ended June 30, 2020 and 2019 (in thousands):

	Six Months Ended June 30,
	2020				2019
Cash and cash equivalents	$	78,857			$	180,601
Restricted cash	—				—
Cash, cash equivalents and restricted cash, beginning of period	$	78,857			$	180,601
Cash and cash equivalents	$	254,373			$	172,209
Restricted cash	67				11,055
Cash, cash equivalents and restricted cash, end of period	$	254,440			$	183,264

Investments in Real Estate

Acquisitions

We account for acquisitions of properties under Accounting Standards Update (“ASU”) 2017-01, Business Combinations - Clarifying the Definition of a Business (“ASU 2017-01”), which provides a framework for determining whether transactions should be accounted for as acquisitions of assets or businesses and further revises the definition of a business. Our acquisitions of properties generally no longer meet the revised definition of a business and accordingly are accounted for as asset acquisitions.

For asset acquisitions, we allocate the cost of the acquisition, which includes the purchase price and associated acquisition transaction costs, to the individual assets acquired and liabilities assumed on a relative fair value basis. These individual assets and liabilities typically include land, building and improvements, tenant improvements, intangible assets and liabilities related to above- and below-market leases, intangible assets related to in-place leases, and from time to time, assumed mortgage debt. As there is no measurement period concept for an asset acquisition, the allocated cost of the acquired assets is finalized in the period in which the acquisition occurs.

We determine the fair value of the tangible assets of an acquired property by valuing the property as if it were vacant.  This “as-if vacant” value is estimated using an income, or discounted cash flow, approach that relies upon Level 3 inputs, which are unobservable inputs based on the Company’s assumptions about the assumptions a market participant would use.  These Level 3 inputs include discount rates, capitalization rates, market rents and comparable sales data for similar properties.  Estimates of future cash flows are based on a number of factors including historical operating results, known and anticipated trends, and market and economic conditions.  In determining the “as-if-vacant” value for the properties we acquired during the six months ended June 30, 2020, we used discount rates ranging from 5.75% to 7.00% and exit capitalization rates ranging from 4.75% to 5.75%.

In determining the fair value of intangible lease assets or liabilities, we also consider Level 3 inputs.  Acquired above- and below-market leases are valued based on the present value of the difference between prevailing market rates and the in-place rates measured over a period equal to the remaining term of the lease for above-market leases and the initial term plus the

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term of any below-market fixed rate renewal options for below-market leases, if applicable.  The estimated fair value of acquired in-place at-market tenant leases are the estimated costs that would have been incurred to lease the property to the occupancy level of the property at the date of acquisition. We consider estimated costs such as the value associated with leasing commissions, legal and other costs, as well as the estimated period of time necessary to lease such a property to its occupancy level at the time of its acquisition. In determining the fair value of acquisitions completed during the six months ended June 30, 2020, we used an estimated average lease-up period ranging from six months to nine months.

The difference between the fair value and the face value of debt assumed, if any, in connection with an acquisition is recorded as a premium or discount and amortized to “interest expense” over the life of the debt assumed. The valuation of assumed liabilities are based on our estimate of the current market rates for similar liabilities in effect at the acquisition date. In determining the fair value of debt assumed during the six months ended June 30, 2020, we used estimated market interest rates ranging from 3.00% to 3.75%.

Capitalization of Costs

We capitalize direct costs incurred in developing, renovating, rehabilitating and improving real estate assets as part of the investment basis. This includes certain general and administrative costs, including payroll, bonus and non-cash equity compensation of the personnel performing development, renovations and rehabilitation if such costs are identifiable to a specific activity to get the real estate asset ready for its intended use. During the development and construction periods of a project, we also capitalize interest, real estate taxes and insurance costs. We cease capitalization of costs upon substantial completion of the project, but no later than one year from cessation of major construction activity. If some portions of a project are substantially complete and ready for use and other portions have not yet reached that stage, we cease capitalizing costs on the completed portion of the project but continue to capitalize for the incomplete portion of the project. Costs incurred in making repairs and maintaining real estate assets are expensed as incurred.

We capitalized interest costs of $1.1 million and $1.1 million during the three months ended June 30, 2020 and 2019, respectively, and $1.9 million and $1.7 million during the six months ended June 30, 2020 and 2019, respectively. We capitalized real estate taxes and insurance costs aggregating $0.3 million and $0.4 million during the three months ended June 30, 2020 and 2019, respectively, and $0.6 million and $0.6 million during the six months ended June 30, 2020 and 2019, respectively. We capitalized compensation costs for employees who provide construction services of $1.0 million and $0.6 million during the three months ended June 30, 2020 and 2019, respectively, and $2.0 million and $1.3 million during the six months ended June 30, 2020 and 2019, respectively.

Depreciation and Amortization

Real estate, including land, building and land improvements, tenant improvements, furniture, fixtures and equipment and intangible lease assets and liabilities are stated at historical cost less accumulated depreciation and amortization, unless circumstances indicate that the cost cannot be recovered, in which case, the carrying value of the property is reduced to estimated fair value as discussed below in our policy with regard to impairment of long-lived assets. We estimate the depreciable portion of our real estate assets and related useful lives in order to record depreciation expense.

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.

As discussed above in—Investments in Real Estate—Acquisitions, in connection with property acquisitions, we may acquire leases with rental rates above or below the market rental rates. Such differences are recorded as an acquired lease intangible asset or liability and amortized to “rental income” over the remaining term of the related leases.

Our estimate of the useful life of our assets is evaluated upon acquisition and when circumstances indicate that a change in the useful life has occurred, which requires significant judgment regarding the economic obsolescence of tangible and intangible assets.

Assets Held for Sale

We classify a property as held for sale when all of the criteria set forth in the Accounting Standards Codification (“ASC”) Topic 360: Property, Plant and Equipment (“ASC 360”) have been met. The criteria are as follows: (i) management, having the authority to approve the action, commits to a plan to sell the property; (ii) the property is available for immediate sale in its present condition, subject only to terms that are usual and customary; (iii) an active program to locate a buyer and

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other actions required to complete the plan to sell have been initiated; (iv) the sale of the property is probable and is expected to be completed within one year; (v) the property is being actively marketed for sale at a price that is reasonable in relation to its current fair value; and (vi) actions necessary to complete the plan of sale indicate that it is unlikely that significant changes to the plan will be made or that the plan will be withdrawn. At the time we classify a property as held for sale, we cease recording depreciation and amortization. A property classified as held for sale is measured and reported at the lower of its carrying amount or its estimated fair value less cost to sell. As of June 30, 2020, and December 31, 2019, we did not have any properties classified as held for sale.

Impairment of Long-Lived Assets

In accordance with the provisions of the Impairment or Disposal of Long-Lived Assets Subsections of ASC 360, we assess the carrying values of our respective long-lived assets, including goodwill, whenever events or changes in circumstances indicate that the carrying amounts of these assets may not be fully recoverable.

Recoverability of real estate assets is measured by comparison of the carrying amount of the asset to the estimated future undiscounted cash flows. To review real estate assets for recoverability, we consider current market conditions as well as our intent with respect to holding or disposing of the asset. The intent with regards to the underlying assets might change as market conditions and other factors change. Fair value is determined through various valuation techniques including discounted cash flow models, applying a capitalization rate to estimated net operating income of a property, quoted market values and third-party appraisals, where considered necessary. The use of projected future cash flows is based on assumptions that are consistent with estimates of future expectations and the strategic plan used to manage our underlying business. If our analysis indicates that the carrying value of the real estate asset is not recoverable on an undiscounted cash flow basis, we will recognize an impairment charge for the amount by which the carrying value exceeds the current estimated fair value of the real estate property.

Assumptions and estimates used in the recoverability analyses for future cash flows, discount rates and capitalization rates are complex and subjective. Changes in economic and operating conditions or our intent with respect to our investment that occur subsequent to our impairment analyses could impact these assumptions and result in future impairment of our real estate properties. There were no impairment charges recorded to the carrying value of our properties during the three and six months ended June 30, 2020 and 2019, respectively.

Income Taxes

We have elected to be taxed as a REIT under the Internal Revenue Code of 1986, as amended (the “Code”) commencing with our initial taxable year ended December 31, 2013. To qualify as a REIT, we are required (among other things) to distribute at least 90% of our REIT taxable income to our stockholders and meet the various other requirements imposed by the Code relating to matters such as operating results, asset holdings, distribution levels and diversity of stock ownership. Provided we qualify for taxation as a REIT, we are generally not subject to corporate-level income tax on the earnings distributed currently to our stockholders. If we fail to qualify as a REIT in any taxable year, and were unable to avail ourselves of certain savings provisions set forth in the Code, all of our taxable income would be subject to federal corporate income tax, including any applicable alternative minimum tax for taxable years prior to 2018.

In addition, we are subject to taxation by various state and local jurisdictions, including those in which we transact business or reside. Our non-taxable REIT subsidiaries, including our Operating Partnership, are either partnerships or disregarded entities for federal income tax purposes. Under applicable federal and state income tax rules, the allocated share of net income or loss from disregarded entities and flow-through entities such as partnerships is reportable in the income tax returns of the respective equity holders. Accordingly, no income tax provision is included in the accompanying consolidated financial statements for the six months ended June 30, 2020 and 2019.

We periodically evaluate our tax positions to determine whether it is more likely than not that such positions would be sustained upon examination by a tax authority for all open tax years, as defined by the statute of limitations, based on their technical merits. As of June 30, 2020, and December 31, 2019, we have not established a liability for uncertain tax positions.

Derivative Instruments and Hedging Activities

ASC Topic 815: Derivatives and Hedging (“ASC 815”), provides the disclosure requirements for derivatives and hedging activities with the intent to provide users of financial statements with an enhanced understanding of: (a) how and why an entity uses derivative instruments, (b) how the entity accounts for derivative instruments and related hedged items, and (c) how derivative instruments and related hedged items affect an entity’s financial position, financial performance, and cash flows.

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Further, qualitative disclosures are required that explain the Company’s objectives and strategies for using derivatives, as well as quantitative disclosures about the fair value of and gains and losses on derivative instruments, and disclosures about credit-risk-related contingent features in derivative instruments.

As required by ASC 815, we record all derivatives on the balance sheet at fair value.  The accounting for changes in the fair value of derivatives depends on the intended use of the derivative, and whether we have elected to designate a derivative in a hedging relationship and apply hedge accounting and whether the hedging relationship has satisfied the criteria necessary to apply hedge accounting. Derivatives designated and qualifying as a hedge of the exposure to changes in the fair value of an asset, liability, or firm commitment attributable to a particular risk, such as interest rate risk, are considered fair value hedges. Derivatives designated and qualifying as a hedge of the exposure to variability in expected future cash flows, or other types of forecasted transactions, are considered cash flow hedges. Hedge accounting generally provides for the matching of the timing of gain or loss recognition on the hedging instrument with the recognition of the changes in the fair value of the hedged asset or liability that are attributable to the hedged risk in a fair value hedge or the earnings effect of the hedged forecasted transactions in a cash flow hedge.  We may enter into derivative contracts that are intended to economically hedge certain risks, even though hedge accounting does not apply or we elect not to apply hedge accounting.  See Note 7.

Revenue Recognition

Our primary sources of revenue are rental income, management, leasing and development services and gains on sale of real estate.

Rental Income

We lease industrial space to tenants primarily under non-cancelable operating leases that generally contain provisions for minimum base rents plus reimbursement for certain operating expenses. Total minimum annual lease payments are recognized in rental income on a straight-line basis over the term of the related lease, regardless of when payments are contractually due. Rental revenue recognition commences when the tenant takes possession or controls the physical use of the leased space. Lease termination fees, which are included in rental income, are recognized when the related leases are canceled and we have no continuing obligation to provide services to such former tenants.

Our lease agreements with tenants generally contain provisions that require tenants to reimburse us for certain property expenses. Estimated reimbursements from tenants for these property expenses, which include real estate taxes, insurance, common area maintenance and other recoverable operating expenses, are recognized as revenues in the period that the expenses are incurred. Subsequent to year-end, we perform final reconciliations on a lease-by-lease basis and bill or credit each tenant for any cumulative annual adjustments. As the timing and pattern of revenue recognition is the same, rents and tenant reimbursements are treated as a combined lease component and presented as a single line item “Rental income” in our consolidated statements of operations.

We record revenues and expenses on a gross basis for lessor costs (which include real estate taxes) when these costs are reimbursed to us by our tenants. Conversely, we record revenues and expenses on a net basis for lessor costs when they are paid by our tenants directly to the taxing authorities on our behalf.

Management, leasing and development services

We provide property management services and leasing services to related party and third-party property owners, the customer, in exchange for fees and commissions. Property management services include performing property inspections, monitoring repairs and maintenance, negotiating vendor contracts, maintaining tenant relations and providing financial and accounting oversight. For these services, we earn monthly management fees, which are based on a fixed percentage of each managed property’s monthly tenant cash receipts. We have determined that control over the services is passed to the customer simultaneously as performance occurs. Accordingly, management fee revenue is earned as the services are provided to our customers.

Leasing commissions are earned when we provide leasing services that result in an executed lease with a tenant. We have determined that control over the services is transferred to the customer upon execution of each lease agreement. We earn leasing commissions based on a fixed percentage of rental income generated for each executed lease agreement and there is no variable income component.

Gain or Loss on Sale of Real Estate

We account for dispositions of real estate properties, which are considered nonfinancial assets, in accordance with

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ASC 610-20: Other Income—Gains and Losses from the Derecognition of Nonfinancial Assets and recognize a gain or loss on sale of real estate upon transferring control of the nonfinancial asset to the purchaser, which is generally satisfied at the time of sale. If we were to conduct a partial sale of real estate by transferring a controlling interest in a nonfinancial asset, while retaining a noncontrolling ownership interest, we would measure any noncontrolling interest received or retained at fair value, and recognize a full gain or loss. If we receive consideration before transferring control of a nonfinancial asset, we recognize a contract liability. If we transfer control of the asset before consideration is received, we recognize a contract asset.

Valuation of Receivables    

We may be subject to tenant defaults and bankruptcies that could affect the collection of outstanding receivables related to our operating leases. In order to mitigate these risks, we perform credit reviews and analyses on prospective tenants before significant leases are executed and on existing tenants before properties are acquired. On a quarterly basis, we perform an assessment of the collectability of operating lease receivables on a tenant-by-tenant basis, which includes reviewing the age and nature of our receivables, the payment history and financial condition of the tenant, our assessment of the tenant’s ability to meet its lease obligations and the status of negotiations of any disputes with the tenant. Any changes in the collectability assessment for an operating lease is recognized as an adjustment, which can be a reduction or increase, to rental income in the consolidated statements of operations. As a result of our quarterly collectability assessments, we recognized $1.1 million and $0.4 million for the three months ended June 30, 2020 and 2019, respectively, and $1.5 million and $0.5 million, for the six months ended June 30, 2020 and 2019, respectively, as a reduction of rental income in the consolidated statements of operations.

Deferred Leasing Costs

We capitalize the incremental direct costs of originating a lease that would not have been incurred had the lease not been executed. As a result, deferred leasing costs will generally only include third-party broker commissions.

Debt Issuance Costs

Debt issuance costs related to a recognized debt liability are presented in the balance sheet as a reduction from the carrying value of the debt liability. This offset against the debt liability is treated similarly to a debt discount, which effectively reduces the proceeds of a borrowing. For line of credit arrangements, we present debt issuance costs as an asset and amortize the cost over the term of the line of credit arrangement. See Note 5.

Equity Based Compensation

We account for equity-based compensation in accordance with ASC Topic 718: Compensation - Stock Compensation.  Total compensation cost for all share-based awards is based on the estimated fair market value on the grant date. For share-based awards that vest based solely on a service condition, we recognize compensation cost on a straight-line basis over the total requisite service period for the entire award.  For share-based awards that vest based on a market condition, we recognize compensation cost on a straight-line basis over the requisite service period of each separately vesting tranche.  For share-based awards that vest based on a performance condition, we recognize compensation cost based on the number of awards that are expected to vest based on the probable outcome of the performance condition. Compensation cost for these awards will be adjusted to reflect the number of awards that ultimately vest. Forfeitures are recognized in the period in which they occur. See Note 11.

Equity Offering Costs

Underwriting commissions and offering costs related to our common stock issuances have been reflected as a reduction of additional paid-in capital. Underwriting commissions and offering costs related to our preferred stock issuances have been reflected as a direct reduction of the preferred stock balance.

Earnings Per Share

We calculate earnings per share (“EPS”) in accordance with ASC 260 - Earnings Per Share (“ASC 260”). Under ASC 260, unvested share-based payment awards that contain non-forfeitable rights to dividends are participating securities and, therefore, are included in the computation of basic EPS pursuant to the two-class method. The two-class method determines EPS for each class of common stock and participating securities according to dividends declared (or accumulated) and their

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respective participation rights in undistributed earnings.

Basic EPS is calculated by dividing the net income (loss) attributable to common stockholders by the weighted average number of shares of common stock outstanding for the period.

Diluted EPS is calculated by dividing the net income (loss) attributable to common stockholders by the weighted average number of shares of common stock outstanding determined for the basic EPS computation plus the effect of any dilutive securities. We include unvested shares of restricted stock and unvested LTIP units in the computation of diluted EPS by using the more dilutive of the two-class method or treasury stock method. We include unvested performance units as contingently issuable shares in the computation of diluted EPS once the market criteria are met, assuming that the end of the reporting period is the end of the contingency period. Any anti-dilutive securities are excluded from the diluted EPS calculation. See Note 12.

Segment Reporting

Management views the Company as a single reportable segment based on its method of internal reporting in addition to its allocation of capital and resources.

ASC 842 - Cumulative-Effect Adjustment to Retained Earning

On January 1, 2019, we adopted the new lease accounting standard, ASU 2016-02, Leases (Topic 842), and the various lease-related ASUs that were subsequently issued by the Financial Accounting Standards Board (“FASB”) (collectively referred to as “ASC 842”), which together set out the principals for the recognition, measurement, presentation and disclosure of leases for both lessees and lessors.

    We adopted ASC 842 using the modified retrospective approach and applied the provisions as of the date of adoption on a prospective basis. Upon adoption of ASC 842, we recognized a cumulative-effect adjustment to retained earnings of $0.2 million to write off internal compensation costs that were capitalized in connection with leases that were executed but had not commenced prior to January 1, 2019, as these costs were capitalized in accordance with prior lease accounting guidance and did not qualify for capitalization under ASC 842.

Leases as a Lessee

We determine if an arrangement is a lease at inception. Operating lease right-of-use assets (“ROU assets”) are included in “Other assets” and lease liabilities are included in “Accounts payable, accrued expenses and other liabilities” in our consolidated balance sheets. ROU assets represent our right to use, or control the use of, a specified asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. Because our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. The operating lease ROU asset also includes any lease payments made and excludes lease incentives. Our lease terms may include options to extend the lease when it is reasonably certain that we will exercise that option. Lease expense for lease payments is recognized on a straight-line basis over the lease term. Additionally, for our operating leases, we do not separate non-lease components, such as common area maintenance, from associated lease components. See Note 6.

Adoption of New Accounting Pronouncements

Allowance for Credit Losses

On June 16, 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”), which amends the accounting for credit losses for certain financial instruments. ASU 2016-13 introduced the “current expected credit losses” (CECL) model, which requires companies to estimate credit losses immediately upon exposure. The guidance applies to financial assets measured at amortized cost including net investments in leases arising from sales-type and direct financing leases, financing receivables (loans) and trade receivables.  On November 26, 2018, the FASB issued ASU 2018-19, Codification Improvements to Topic 326, Financial Instrument - Credit Losses, which clarifies that operating lease receivables are outside the scope of ASC Topic 326 and instead should be accounted for under ASC 842. ASU 2016-13 is effective for interim and annual reporting periods beginning after December 15, 2019, with early adoption permitted. Effective January 1, 2020 we adopted ASU 2016-13. As we did not have any financial assets within the scope of ASU 2016-13, there was no impact to our consolidated financial statements. In the

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event that any of our leases were to be classified as sales-type or direct finance leases, or if we were to acquire or provide mortgage debt secured by industrial properties in the future, we would become subject to the provisions of ASU 2016-13.

Recently Issued Accounting Pronouncements

Changes to GAAP are established by the FASB in the form of ASUs to the FASB’s Accounting Standards Codification. We consider the applicability and impact of all ASUs. Other than the ASUs discussed below, the FASB has not recently issued any other ASUs that we expect to be applicable and have a material impact on our consolidated financial statements.

Reference Rate Reform

On March 12, 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting (“ASU 2020-04”). ASU 2020-04 contains practical expedients for reference rate reform related activities that impact debt, leases, derivatives and other contracts. The guidance in ASU 2020-04 is optional and may be elected over time as reference rate reform activities occur. During the first quarter of 2020, we elected to apply the hedge accounting expedients related to probability and the assessments of effectiveness for future LIBOR-indexed cash flows to assume that the index upon which future hedged transactions will be based matches the index on the corresponding derivatives. Application of these expedients preserves the presentation of derivatives consistent with past presentation. We continue to evaluate the impact of the guidance and may apply other elections as applicable as additional changes in the market occur.

COVID-19 Lease Concessions

On April 10, 2020, the FASB issued a staff question-and-answer document (the “Q&A”) to address some frequently asked questions about accounting for concessions related to the effects of the COVID-19 pandemic. Consequently, the Q&A permits an entity to elect to forgo the evaluation of the enforceable rights and obligations of a lease contract, which is required by ASC 842, as long as the total rent payments after the lease concessions are substantially the same, or less than, the total rent payments in the existing lease. An entity may then elect to account for COVID-19 related lease concessions either (i) as if they were part of the enforceable rights and obligations of the parties under the existing lease contract, or (ii) as a lease modification under ASC 842.

During the three months ended June 30, 2020, we received rent relief requests from a number of tenants claiming impacts from COVID-19, many of whom may be making such rent relief requests in response to local California governmental moratoriums on commercial tenant evictions and provisions enabling commercial tenants to defer rent. In response to these requests, for the three months ended June 30, 2020, we granted rent relief to certain tenants providing the following : (i) the application of $4.2 million of security deposits to base rents, (ii) the acceleration of $0.8 million of future rent concessions to cover base rent and (iii) the deferral of $3.6 million of base rent, with a typical deferral period of approximately one to two months and repayment generally scheduled to begin in the third or fourth quarter of 2020.    

In accordance with the Q&A, we have elected to forgo the evaluation of the enforceable rights and obligations of our lease contracts and have elected to account for COVID-19 related lease concessions (which include the acceleration of future rent concessions in the original lease contract and the deferral of base rent) as lease modifications under ASC 842. As the COVID-19 related lease concessions that we provided to tenants did not substantially change the amount of consideration in the original lease contract (only the timing of rent payments has changed) and we believe that deferred rent payments remain collectible based on our tenant-by-tenant collectability assessment as of June 30, 2020, rental income recognized in each period over the term of the lease will not substantially change. Therefore, the impact of the COVID-19 related lease concessions granted above did not have a material impact on our results of operations during the three and six months ended June 30, 2020.

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3.	Investments in Real Estate

Acquisitions

The following table summarizes the wholly-owned industrial properties we acquired during the six months ended June 30, 2020: 

Property		Submarket		Date of Acquisition		Rentable Square Feet			Number of Buildings			Contractual Purchase Price(1) (in thousands)
701-751 Kingshill Place(2)		Los Angeles - South Bay		3/5/2020		169,069			6			$	33,251
2601-2641 Manhattan Beach Boulevard(2)		Los Angeles - South Bay		3/5/2020		126,726			6			39,481
2410-2420 Santa Fe Avenue(2)		Los Angeles - South Bay		3/5/2020		112,000			1			35,737
11600 Los Nietos Road(2)		Los Angeles - Mid-Counties		3/5/2020		103,982			1			16,626
5160 Richton Street(2)		San Bernardino - Inland Empire West		3/5/2020		94,976			1			15,653
2205 126th Street(2)		Los Angeles - South Bay		3/5/2020		63,532			1			17,712
11832-11954 La Cienega Boulevard(2)		Los Angeles - South Bay		3/5/2020		63,462			4			19,664
7612-7642 Woodwind Drive(2)		Orange County - West		3/5/2020		62,377			3			13,780
960-970 Knox Street(2)		Los Angeles - South Bay		3/5/2020		39,400			1			9,939
25781 Atlantic Ocean Drive(2)		Orange County - South		3/5/2020		27,960			1			5,516
Brady Way(3)		Orange County - West		4/1/2020		—			—			874
720-750 Vernon Avenue		Los Angeles - San Gabriel Valley		4/3/2020		71,692			3			15,515
6687 Flotilla Street		Los Angeles - Central		5/5/2020		120,000			1			21,000
1055 Sandhill Avenue		Los Angeles - South Bay		5/28/2020		—			—			14,453
22895 Eastpark Drive(2)		Orange County - North		6/19/2020		34,950			1			6,844
8745-8775 Production Avenue		San Diego - Central		6/19/2020		46,820			2			7,850
15580 Slover Avenue		San Bernardino - Inland Empire West		6/26/2020		60,127			1			9,958
Total 2020 Wholly-Owned Property Acquisitions						1,197,073			33			283,853

(1)	Represents the gross contractual purchase price before prorations, closing costs and other acquisition related costs.

(2)

On March 5, 2020, we acquired ten properties and on June 19, 2020, we acquired one additional property, from a group of sellers that were not affiliated with the Company (the “Properties”) for an aggregate purchase price of $214.2 million, exclusive of closing costs, including assumed debt of approximately $47.5 million. In consideration for the Properties we (i) paid $60.4 million in cash, including a $10.0 million deposit paid in 2019, (ii) issued 1,406,170 common units of limited partnership interests in the Operating Partnership and (iii) issued 906,374 4.00% Cumulative Redeemable Convertible Preferred Units of partnership interest in the Operating Partnership (the “Series 2 CPOP Units”).  See Note 5 and Note 11 for further details regarding the assumption of debt and Series 2 CPOP Units, respectively.

(3)	Brady Way is a one-acre parcel of land adjacent to our property located at 12821 Knott Street.

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The following table summarizes the fair value of amounts allocated to each major class of asset and liability for the acquisitions noted in the table above, as of the date of each acquisition (in thousands):

		2020 Acquisitions
Assets:
Land		$	201,145
Buildings and improvements		79,948
Tenant improvements		1,789
Acquired lease intangible assets(1)		10,645
Other acquired assets(2)		3,082
Total assets acquired		296,609
Liabilities:
Acquired lease intangible liabilities(3)		7,487
Notes payable(4)		48,759
Other assumed liabilities(2)		1,352
Total liabilities assumed		57,598
Net assets acquired		$	239,011

(1)	Acquired lease intangible assets is comprised of $10.4 million of in-place lease intangibles with a weighted average amortization period of 4.5 years and $0.2 million of above-market lease intangibles with a weighted average amortization period of 7.9 years.

(2)	Includes other working capital assets acquired and liabilities assumed at the time of acquisition. In addition, it also includes personal property that we acquired as part of the acquisition of 1055 Sandhill Avenue that we are currently in the process of selling.

(3)	Represents below-market lease intangibles with a weighted average amortization period of 5.8 years.

(4)	In connection with the acquisition of the Properties, we assumed ten mortgage loans from the sellers. At the date of acquisition, the loans had an aggregate fair value of $48.8 million and an aggregate principal balance of $47.5 million.

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4.	Intangible Assets

The following table summarizes our acquired lease intangible assets, including the value of in-place leases and above-market tenant leases, and our acquired lease intangible liabilities which includes below-market tenant leases (in thousands): 

	June 30, 2020				December 31, 2019
Acquired Lease Intangible Assets:
In-place lease intangibles	$	164,572			$	154,370
Accumulated amortization	(99,289		)		(87,955		)
In-place lease intangibles, net	$	65,283			$	66,415
Above-market tenant leases	$	14,500			$	14,296
Accumulated amortization	(8,270		)		(7,621		)
Above-market tenant leases, net	$	6,230			$	6,675
Acquired lease intangible assets, net	$	71,513			$	73,090
Acquired Lease Intangible Liabilities:
Below-market tenant leases	$	(89,140	)		$	(81,718	)
Accumulated accretion	28,032				22,378
Below-market tenant leases, net	$	(61,108	)		$	(59,340	)
Acquired lease intangible liabilities, net	$	(61,108	)		$	(59,340	)

 

The following table summarizes the amortization related to our acquired lease intangible assets and liabilities for the three and six months ended June 30, 2020 and 2019 (in thousands):

	Three Months Ended June 30,								Six Months Ended June 30,
	2020				2019				2020				2019
In-place lease intangibles(1)	$	5,752			$	5,313			$	11,574			$	9,652
Net below-market tenant leases(2)	$	(2,670	)		$	(1,900	)		$	(5,071	)		$	(3,651	)

(1)	The amortization of in-place lease intangibles is recorded to depreciation and amortization expense in the consolidated statements of operations for the periods presented.

(2)	The amortization of net below-market tenant leases is recorded as an increase to rental income in the consolidated statements of operations for the periods presented.

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5.	Notes Payable

The following table summarizes the components and significant terms of our indebtedness as of June 30, 2020 and December 31, 2019 (dollars in thousands):

	June 30, 2020				December 31, 2019				Margin Above LIBOR			Interest Rate(1)			Contractual Maturity Date
Unsecured and Secured Debt
Unsecured Debt:
Revolving Credit Facility	$	—			$	—			1.050	%	(2)	1.212	%	(3)	2/13/2024	(4)
$100M Term Loan Facility	100,000				100,000				1.200	%	(2)	2.964	%	(5)	2/14/2022
$225M Term Loan Facility	225,000				225,000				1.200	%	(2)	2.574	%	(5)	1/14/2023
$150M Term Loan Facility	150,000				150,000				1.500	%	(2)	4.263	%	(5)	5/22/2025
$100M Notes	100,000				100,000				n/a			4.290	%		8/6/2025
$125M Notes	125,000				125,000				n/a			3.930	%		7/13/2027
$25M Series 2019A Notes	25,000				25,000				n/a			3.880	%		7/16/2029
$75M Series 2019B Notes	75,000				75,000				n/a			4.030	%		7/16/2034
Total Unsecured Debt	$	800,000			$	800,000
Secured Debt:
$60M Term Loan(6)	$	58,499			$	58,499			1.700	%		1.862	%		8/1/2023	(6)
Gilbert/La Palma(7)	2,377				2,459				n/a			5.125	%		3/1/2031
701-751 Kingshill Place(8)	7,100				—				n/a			3.900	%		1/5/2026
2601-2641 Manhattan Beach Boulevard(7)	4,120				—				n/a			4.080	%		4/5/2023
2410-2420 Santa Fe Avenue(7)	10,300				—				n/a			3.700	%		1/1/2028
11600 Los Nietos Road(7)	2,861				—				n/a			4.190	%		5/1/2024
5160 Richton Street(7)	4,443				—				n/a			3.790	%		11/15/2024
2205 126th Street(9)	5,200				—				n/a			3.910	%		12/1/2027
11832-11954 La Cienega Boulevard(8)	4,100				—				n/a			4.260	%		7/1/2028
7612-7642 Woodwind Drive(7)	3,938				—				n/a			5.240	%		1/5/2024
960-970 Knox Street(7)(10)	2,530				—				n/a			5.000	%		11/1/2023
22895 Eastpark Drive(7)	2,782				—				n/a			4.330	%		11/15/2024
Total Secured Debt	$	108,250			$	60,958
Total Unsecured and Secured Debt	$	908,250			$	860,958
Less: Unamortized premium/discount and debt issuance costs(11)	(1,563		)		(3,116		)
Total	$	906,687			$	857,842

(1)	Reflects the contractual interest rate under the terms of each loan as of June 30, 2020 and includes the effect of interest rate swaps that were effective as of June 30, 2020. See footnote (5) below. Excludes the effect of unamortized debt issuance costs and unamortized fair market value premiums and discounts.

(2)

The interest rates on these loans are comprised of LIBOR plus a LIBOR margin. The LIBOR margins will range from 1.05% to 1.50% per annum for the unsecured revolving credit facility, 1.20% to 1.70% per annum for the $100.0 million term loan facility, 1.20% to 1.70% per annum for the $225.0 million term loan facility and 1.50% to 2.20% per annum for the $150 million term loan facility, depending on our leverage ratio, which is the ratio of our outstanding consolidated indebtedness to the value of our consolidated gross asset value, which is measured on a quarterly basis.

(3)	The unsecured revolving credit facility 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 0.15% to 0.30% per annum depending upon our leverage ratio.

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

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(5)	As of June 30, 2020, interest on the $100.0 million term loan facility, $225.0 million term loan facility and $150 million term loan facility have been effectively fixed through the use of interest rate swaps. See Note 7 for details.

(6)	Loan is secured by six properties. One 24-month extension is available at the borrower’s option, subject to certain terms and conditions. Monthly payments of interest only through June 2021, followed by equal monthly payments of principal ($65,250), plus accrued interest until maturity.

(7)	Fixed monthly payments of interest and principal until maturity as follows: Gilbert/La Palma ($24,008), 2601-2641 Manhattan Beach Boulevard ($23,138), 2410-2420 Santa Fe Avenue ($31,758), 11600 Los Nietos ($22,637), 5160 Richton Street ($23,270), 7612-7642 Woodwind Drive ($24,270), 960-970 Knox Street ($17,538), and 22895 Eastpark Drive ($15,396).

(8)	For 701-751 Kingshill Place, fixed monthly payments of interest only through January 2023, followed by fixed monthly payments of interest and principal ($33,488) until maturity. For 11832-11954 La Cienega Boulevard, fixed monthly payments of interest only through July 2020, followed by fixed monthly payments of interest and principal ($20,194) until maturity.

(9)	Fixed monthly payments of interest only.

(10)	Loan requires monthly escrow reserve payments for real estate taxes related to the property located at 960-970 Knox Street.

(11)	Excludes unamortized debt issuance costs related to our unsecured revolving credit facility, which are presented in the line item “Deferred loan costs, net” in the consolidated balance sheets.

Contractual Debt Maturities    

The following table summarizes the contractual debt maturities and scheduled amortization payments, excluding debt discounts and debt issuance costs, as of June 30, 2020, and does not consider extension options available to us as noted in the table above (in thousands):

July 1, 2020 - December 31, 2020	$	418
2021	1,267
2022	101,700
2023	289,318
2024	12,886
Thereafter	502,661
Total	$	908,250

Assumption of Mortgage Loans

In connection with the acquisition of the Properties, on March 5, 2020, we assumed nine mortgage loans and on June 19, 2020, we assumed one additional mortgage loan, each secured by one of the Properties we acquired. At the date of acquisition, the assumed loans had an aggregate principal balance of $47.5 million and an aggregate fair value of $48.8 million, resulting in an aggregate initial net debt premium of $1.2 million. The mortgage loans bear interest at fixed interest rates ranging from 3.70% to 5.24% and have maturities ranging from 3.0 years to 8.3 years from the date assumed.

Third Amended and Restated Credit Facility    

On February 13, 2020, we amended our $450 million credit agreement, that was scheduled to mature on February 14, 2021, by entering into a Third Amended and Restated Credit Agreement (the “Amended Credit Agreement”), which provides for a $600.0 million senior unsecured credit facility, comprised of a $500.0 million unsecured revolving credit facility (the "Amended Revolver") and a $100.0 million unsecured term loan facility (the "Amended Term Loan Facility"). The Amended Revolver is scheduled to mature on February 13, 2024, and has two six-month extension options available, and the Amended Term Loan Facility is scheduled to mature on February 14, 2022. Subject to certain terms and conditions set forth in the Amended Credit Agreement, we may request additional lender commitments up to an additional aggregate $900.0 million, which may be comprised of additional revolving commitments under the Amended Revolver, an increase to the Amended Term Loan Facility, additional term loan tranches or any combination of the foregoing.

     Interest on the Amended Credit Agreement is generally to be paid based upon, at our option, either (i) LIBOR plus an applicable margin that is based upon our leverage ratio or (ii) the Base Rate (which is defined as the highest of (a) the federal

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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 leverage ratio. The margins for the Amended Revolver range in amount from 1.05% to 1.50% per annum for LIBOR-based loans and 0.05% to 0.50% per annum for Base Rate-based loans, depending on our leverage ratio. The margins for the Amended Term Loan Facility range in amount from 1.20% to 1.70% per annum for LIBOR-based loans and 0.20% to 0.70% for Base Rate-based loans, depending on our leverage ratio.

     If we attain one additional investment grade rating by one or more of S&P or Moody’s to complement our current investment grade Fitch rating, we may elect to convert the pricing structure under the Amended Credit Agreement to be based on such rating. In that event, the margins for the Amended Revolver will range in amount from 0.725% to 1.40% for LIBOR-based loans and 0.00% to 0.45% for Base Rate-based loans, depending on such rating. The margins for the Amended Term Loan Facility will range in amount from 0.85% to 1.65% per annum for LIBOR-based loans and 0.00% to 0.65% per annum for Base Rate-based loans, depending on such rating.

     In addition to the interest payable on amounts outstanding under the Amended Revolver, we are required to pay an applicable facility fee, based upon our leverage ratio, on each lender's commitment amount under the Amended Revolver, regardless of usage. The applicable facility fee will range in amount from 0.15% to 0.30% per annum, depending on our leverage ratio. In the event that we convert the pricing structure to be based on an investment-grade rating, the applicable facility fee will range in amount from 0.125% to 0.30% per annum, depending on such rating.

The Amended Credit Agreement is guaranteed by the Company and by substantially all of the current and to-be-formed subsidiaries of the Operating Partnership that own an unencumbered property. The Amended Credit Agreement is not secured by the Company’s properties or by equity interests in the subsidiaries that hold such properties.

The Amended Revolver and the Amended Term Loan Facility may be voluntarily prepaid in whole or in part at any time without premium or penalty.  Amounts borrowed under the Amended Term Loan Facility and repaid or prepaid may not be reborrowed.

The Amended 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 Amended 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 Amended 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. 

On June 30, 2020, we did not have any borrowings outstanding under the Amended Revolver, leaving $500.0 million available for future borrowings.  

Debt Covenants

The Amended Credit Agreement, our $225 million unsecured term loan facility (the “$225 Million Term Loan Facility”), our $150 million unsecured term loan facility (the “$150 Million Term Loan Facility”), our $100 million unsecured guaranteed senior notes (the “$100 Million Notes”), our $125 million unsecured guaranteed senior notes (the “$125 Million Notes”) and our $25 million unsecured guaranteed senior notes and $75 million unsecured guaranteed senior notes (together the “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 Amended Credit Agreement, $225 Million Term Loan Facility 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 Amended Credit Agreement, $225 Million Term Loan Facility 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;

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•	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.

The Amended Credit Agreement, $225 Million Term Loan Facility, $150 Million Term Loan Facility and Senior Notes also provide that our distributions may not exceed the greater of (i) 95.0% of our funds from operations or (ii) the amount required for us to qualify and maintain our status as a REIT and avoid the payment of federal or state income or excise tax in any 12-month period.

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. In November 2019, Fitch affirmed the BBB investment grade rating of the Senior Notes with a stable outlook.

Our $60 million term loan contains a financial covenant that is tested on a quarterly basis, which requires us to maintain a minimum Debt Service Coverage Ratio (as defined in the term loan agreement) of at least 1.10 to 1.0.

6.	Operating Leases

Lessor

We lease industrial space to tenants primarily under non-cancelable operating leases that generally contain provisions for minimum base rents plus reimbursement for certain operating expenses. Total minimum lease payments are recognized in rental income on a straight-line basis over the term of the related lease and estimated reimbursements from tenants for real estate taxes, insurance, common area maintenance and other recoverable operating expenses are recognized in rental income in the period that the expenses are incurred.

For the three and six months ended June 30, 2020, we recognized $77.1 million and $152.2 million of rental income related to operating lease payments, of which $64.6 million and $127.5 million are for fixed lease payments and $12.5 million and $24.7 million are for variable lease payments, respectively. For the comparable three and six month-period ended June 30, 2019, we recognized $61.7 million and $119.6 million of rental income related to operating lease payments, of which $51.7 million and $100.3 million were for fixed lease payments and $10.0 million and $19.3 million were for variable lease payments, respectively.

The following table sets forth the undiscounted cash flows for future minimum base rents to be received under operating leases as of June 30, 2020 (in thousands):

Twelve Months Ended June 30,
2021	$	256,961
2022	216,923
2023	176,305
2024	134,294
2025	96,251
Thereafter	312,614
Total	$	1,193,348

The future minimum base rents in the table above excludes tenant reimbursements of operating expenses, amortization of adjustments for deferred rent receivables and the amortization of above/below-market lease intangibles.

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In June 2020, we executed a five-year lease for a 58,802 rentable square feet unit at our property located at 2722 Fairview Street. The lease contains an option whereby the tenant can purchase the entire 116,575 rentable square foot property at a purchase price of $20.4 million. The tenant must give us notice on or before December 10, 2020 in order to exercise its purchase option.

Lessee    

We lease office space as part of conducting our day-to-day business. As of June 30, 2020, our office space leases have remaining lease terms ranging from approximately one to five years and some include options to renew. These renewal terms can extend the lease term from three to five years and are included in the lease term when it is reasonably certain that we will exercise the option.

In connection with the acquisition of 1055 Sandhill Avenue, we assumed a ground lease from the seller for a parcel of land that is adjacent to our property and used as a parking lot. The ground lease, which expires on August 11, 2023, has a remaining lease term of approximately three years, with two additional ten-year options to renew, and monthly rent of $9,000 through expiration.

As of June 30, 2020, total ROU assets and lease liabilities were approximately $4.4 million and $5.1 million, respectively. As of December 31, 2019, total ROU assets and lease liabilities were approximately $3.5 million and $3.8 million, respectively. All operating lease expense is recognized on a straight-line basis over the lease term.

The tables below present financial information associated with our leases for the three and six months ended June 30, 2020 and 2019, and as of June 30, 2020 and December 31, 2019.

	Three Months Ended June 30,								Six Months Ended June 30,
Lease Cost (in thousands)	2020				2019				2020				2019
Operating lease cost(1)	$	316			$	285			$	621			$	545
Variable lease cost(1)	12				10				24				23
Sublease income(2)	—				(79		)		—				(158		)
Total lease cost	$	328			$	216			$	645			$	410

(1)	Amounts are included in “General and administrative” and “Property expenses” in the accompanying consolidated statements of operations.

(2)	Amount is included in “Rental income” in the accompanying consolidated statements of operations.

	Three Months Ended June 30,								Six Months Ended June 30,
Other Information (in thousands)	2020				2019				2020				2019
Cash paid for amounts included in the measurement of operating lease liabilities	$	262			$	283			$	442			$	522
Right-of-use assets obtained in exchange for new operating lease liabilities(1)	$	339			$	—			$	1,353			$	6,720

(1)	For the six months ended June 30, 2019, the reported amount includes $3.3 million for operating leases existing on January 1, 2019, the date we adopted ASC 842.

Lease Term and Discount Rate	June 30, 2020			December 31, 2019
Weighted-average remaining lease term	4.3 years			4.7 years
Weighted-average discount rate(1)	3.6	%		3.9	%

(1)	Because the rate implicit in each of our leases was not readily determinable, we used our incremental borrowing rate. In determining our incremental borrowing rate for each lease, we considered recent rates on secured borrowings, observable risk-free interest rates and credit spreads correlating to our creditworthiness, the impact of collateralization and the term of each of our lease agreements.

    

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Maturities of lease liabilities as of June 30, 2020 were as follows (in thousands):

July 1, 2020 - December 31, 2020	$	674
2021	1,199
2022	1,201
2023	1,198
2024	1,161
Thereafter	97
Total undiscounted lease payments	$	5,530
Less imputed interest	(440		)
Total lease liabilities	$	5,090

We have one operating lease for office space of $1.9 million which has not commenced as June 30, 2020, and as such, has not been recognized on our consolidated balance sheets. This operating lease is expected to commence in 2020 and has a 5-year lease term.

7.	Interest Rate Swaps

Risk Management Objective of Using Derivatives

We are exposed to certain risks arising from both our business operations and economic conditions.  We principally manage our exposures to a wide variety of business and operational risks through management of our core business activities. We manage economic risks, including interest rate, liquidity, and credit risk primarily by managing the amount, sources and duration of our debt funding and through the use of derivative financial instruments.  Specifically, we enter into derivative financial instruments to manage exposures that arise from business activities that result in the payment of future known and uncertain cash amounts, the value of which are determined by interest rates.  Our derivative financial instruments are used to manage differences in the amount, timing and duration of our known or expected cash payments principally related to our borrowings.  

Derivative Instruments

Our objectives in using interest rate derivatives are to add stability to interest expense and to manage exposure to interest rate movements. To accomplish this objective, we primarily use interest rate swaps as part of our interest rate risk management strategy.  Interest rate swaps designated as cash flow hedges involve the receipt of variable amounts from a counterparty in exchange for us making fixed-rate payments over the life of the agreements without exchange of the underlying notional value. We do not use derivatives for trading or speculative purposes.  

The change in fair value of derivatives designated and qualifying as cash flow hedges is initially recorded in accumulated other comprehensive income/(loss) (“AOCI”) and is subsequently reclassified from AOCI into earnings in the period that the hedged forecasted transaction affects earnings.

The following table sets forth a summary of our interest rate swaps at June 30, 2020 and December 31, 2019 (dollars in thousands):

 

									Current Notional Value(1)								Fair Value of Interest Rate Derivative Assets /(Derivative Liabilities)(2)
Derivative Instrument		Effective Date		Maturity Date		LIBOR Interest Strike Rate			June 30, 2020				December 31, 2019				June 30, 2020				December 31, 2019
Interest Rate Swap		2/14/2018		1/14/2022		1.3490	%		$	125,000			$	125,000			$	(2,347	)		$	489
Interest Rate Swap		8/14/2018		1/14/2022		1.4060	%		$	100,000			$	100,000			$	(1,966	)		$	277
Interest Rate Swap		12/14/2018		8/14/2021		1.7640	%		$	100,000			$	100,000			$	(1,835	)		$	(332	)
Interest Rate Swap		7/22/2019		11/22/2024		2.7625	%		$	150,000			$	150,000			$	(16,768	)		$	(8,156	)

(1)	Represents the notional value of swaps that are effective as of the balance sheet date presented.

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(2)	The fair value of derivative assets are included in the line item “Interest rate swap asset” in the accompanying consolidated balance sheets and the fair value of (derivative liabilities) are included in the line item “Interest rate swap liability” in the accompanying consolidated balance sheets.

The following table sets forth the impact of our interest rate swaps on our consolidated statements of operations for the periods presented (in thousands): 

	Three Months Ended June 30,								Six Months Ended June 30,
	2020				2019				2020				2019
Interest Rate Swaps in Cash Flow Hedging Relationships:
Amount of loss recognized in AOCI on derivatives	$	(1,920	)		$	(7,761	)		$	(17,318	)		$	(12,036	)
Amount of (loss) gain reclassified from AOCI into earnings under “Interest expense”	$	(1,694	)		$	788			$	(2,124	)		$	1,640
Total interest expense presented in the Consolidated Statement of Operations in which the effects of cash flow hedges are recorded (line item “Interest expense”)	$	7,428			$	6,255			$	14,877			$	12,726

     During the next twelve months, we estimate that an additional $8.3 million will be reclassified from AOCI into earnings as an increase to interest expense.

Credit-risk-related Contingent Features

Certain of our agreements with our derivative counterparties contain a provision where if we default on any of our indebtedness, including default where repayment of the indebtedness has not been accelerated by the lender within a specified time period, then we could also be declared in default on its derivative obligations.

Certain of our agreements with our derivative counterparties contain provisions where if a merger or acquisition occurs that materially changes our creditworthiness in an adverse manner, we may be required to fully collateralize our obligations under the derivative instrument.

8.	Fair Value Measurements

We have adopted FASB Accounting Standards Codification Topic 820: Fair Value Measurements and Disclosure (“ASC 820”). ASC 820 defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements.  ASC 820 applies to reported balances that are required or permitted to be measured at fair value under existing accounting pronouncements; accordingly, the standard does not require any new fair value measurements of reported balances. 

ASC 820 emphasizes that fair value is a market-based measurement, not an entity-specific measurement.  Therefore, a fair value measurement should be determined based on the assumptions that market participants would use in pricing the asset or liability.  As a basis for considering market participant assumptions in fair value measurements, ASC 820 establishes a fair value hierarchy that distinguishes between market participant assumptions based on market data obtained from sources independent of the reporting entity (observable inputs that are classified within Levels 1 and 2 of the hierarchy) and the reporting entity’s own assumptions about market participant assumptions (unobservable inputs classified within Level 3 of the hierarchy).

Level 1 inputs utilize quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company has the ability to access. Level 2 inputs are inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 inputs may include quoted prices for similar assets and liabilities in active markets, as well as inputs that are observable for the asset or liability (other than quoted prices), such as interest rates and yield curves that are observable at commonly quoted intervals. Level 3 inputs are unobservable inputs for the asset or liability, which are typically based on an entity’s own assumptions, as there is little, if any, related market activity. In instances where the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level input that is significant to the fair value measurement in its entirety. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability.

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Recurring Measurements – Interest Rate Swaps

Currently, we use interest rate swap agreements to manage our interest rate risk. The valuation of these instruments is determined using widely accepted valuation techniques including discounted cash flow analysis on the expected cash flows of each derivative. This analysis reflects the contractual terms of the derivatives, including the period to maturity, and uses observable market-based inputs, including interest rate curves.

To comply with the provisions of ASC 820, we incorporate credit valuation adjustments to appropriately reflect both our own nonperformance risk and the respective counterparty’s nonperformance risk in the fair value measurements.  In adjusting the fair value of our derivative contracts for the effect of nonperformance risk, we have considered the impact of netting and any applicable credit enhancements, such as collateral postings, thresholds, mutual puts, and guarantees.

Although we have determined that the majority of the inputs used to value our derivatives fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with our derivatives utilize Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by ourselves and our counterparties.  However, as of June 30, 2020, we have assessed the significance of the impact of the credit valuation adjustments on the overall valuation of our derivative positions and have determined that the credit valuation adjustments are not significant to the overall valuation of its derivatives. As a result, we have determined that its derivative valuations in their entirety are classified in Level 2 of the fair value hierarchy.

The table below sets forth the estimated fair value of our interest rate swaps as of June 30, 2020 and December 31, 2019, which we measure on a recurring basis by level within the fair value hierarchy (in thousands).

 

		Fair Value Measurement Using
		Total Fair Value				Quoted Price in Active Markets for Identical Assets and Liabilities (Level 1)				Significant Other Observable Inputs (Level 2)				Significant Unobservable Inputs (Level 3)
June 30, 2020
Interest Rate Swap Asset		$	—			$	—			$	—			$	—
Interest Rate Swap Liability		$	(22,916	)		$	—			$	(22,916	)		$	—
December 31, 2019
Interest Rate Swap Asset		$	766			$	—			$	766			$	—
Interest Rate Swap Liability		$	(8,488	)		$	—			$	(8,488	)		$	—

     Financial Instruments Disclosed at Fair Value

The carrying amounts of cash and cash equivalents, rents and other receivables, other assets, accounts payable, accrued expenses and other liabilities, and tenant security deposits approximate fair value because of their short-term nature.

The fair value of our notes payable was estimated by calculating the present value of principal and interest payments, using discount rates that best reflect current market rates for financings with similar characteristics and credit quality, and assuming each loan is outstanding through its respective contractual maturity date.

The table below sets forth the carrying value and the estimated fair value of our notes payable as of June 30, 2020 and December 31, 2019 (in thousands):

 

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		Fair Value Measurement Using
Liabilities		Total Fair Value				Quoted Price in Active Markets for Identical Assets and Liabilities (Level 1)				Significant Other Observable Inputs (Level 2)				Significant Unobservable Inputs (Level 3)				Carrying Value
Notes Payable at:
June 30, 2020		$	952,946			$	—			$	—			$	952,946			$	906,687
December 31, 2019		$	882,813			$	—			$	—			$	882,813			$	857,842

9.	Related Party Transactions

Howard Schwimmer

We engage in transactions with Howard Schwimmer, our Co-Chief Executive Officer, earning management fees and leasing commissions from entities controlled individually by Mr. Schwimmer. Fees and commissions earned from these entities are included in “Management, leasing and development services” in the consolidated statements of operations.  We recorded $0.1 million and $0.1 million for the three months ended June 30, 2020 and 2019, respectively, and $0.2 million and $0.2 million for the six months ended June 30, 2020 and 2019, respectively, in management, leasing and development services revenue.

10.	Commitments and Contingencies

Legal

From time to time, we are party to various lawsuits, claims and legal proceedings that arise in the ordinary course of business. We are not currently a party to any legal proceedings that we believe would reasonably be expected to have a material adverse effect on our business, financial condition or results of operations.

Environmental

We will generally perform environmental site assessments at properties we are considering acquiring.  After the acquisition of such properties, we continue to monitor the properties for the presence of hazardous or toxic substances. From time to time, we acquire properties with known adverse environmental conditions.  If at the time of acquisition, losses associated with environmental remediation obligations are probable and can be reasonably estimated, we record a liability.

On February 25, 2014, we acquired the property located at West 228th Street.  Before purchasing the property during the due diligence phase, we engaged a third-party environmental consultant to perform various environmental site assessments to determine the presence of any environmental contaminants that might warrant remediation efforts. Based on their investigation, they determined that hazardous substances existed at the property and that additional assessment and remediation work would likely be required to satisfy regulatory requirements.  The total remediation costs were estimated to be $1.3 million, which includes remediation, processing and oversight costs.

To address the estimated costs associated with the environmental issues at the West 228th Street property, we entered into an Environmental Holdback Escrow Agreement (the “Holdback Agreement”) with the former owner, whereby $1.4 million was placed into an escrow account to be used to pay remediation costs.  To fund the $1.4 million, the escrow holder withheld $1.3 million of the purchase price, which would have otherwise been paid to the seller at closing, and the Company funded an additional $0.1 million. According to the Holdback Agreement, the seller has no liability or responsibility to pay for remediation costs in excess of $1.3 million.

As of June 30, 2020 and December 31, 2019, we had a $0.6 million and $0.6 million contingent liability recorded in our consolidated balance sheets included in the line item “Accounts payable and accrued expenses,” reflecting the estimated remaining cost to remediate environmental liabilities at West 228th Street that existed prior to the acquisition date.  As of June 30, 2020 and December 31, 2019, we also had a $0.6 million and $0.6 million corresponding indemnification asset

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recorded in our consolidated balance sheets included in the line item “Other assets,” reflecting the estimated costs we expect the former owner to cover pursuant to the Holdback Agreement.  

We expect that the resolution of the environmental matters relating to the above will not have a material impact on our consolidated financial condition, results of operations or cash flows.  However, we cannot assure you that we have identified all environmental liabilities at our properties, that all necessary remediation actions have been or will be undertaken at our properties or that we will be indemnified, in full or at all, in the event that such environmental liabilities arise.  Furthermore, we cannot assure you that future changes to environmental laws or regulations and their application will not give rise to loss contingencies for future environmental remediation.

Tenant and Construction Related Commitments

As of June 30, 2020, we had commitments of approximately $33.1 million for tenant improvement and construction work under the terms of leases with certain of our tenants and contractual agreements with our construction vendors.

Concentrations of Credit Risk

We have deposited cash with financial institutions that are insured by the Federal Deposit Insurance Corporation up to $250,000 per institution.  Although we have deposits at institutions in excess of federally insured limits as of June 30, 2020, we do not believe we are exposed to significant credit risk due to the financial position of the institutions in which those deposits are held.

Concentration of Properties in Southern California

As of June 30, 2020, all of our properties are located in the Southern California infill markets.  The ability of the tenants to honor the terms of their respective leases is dependent upon the economic, regulatory and social factors affecting the markets in which the tenants operate and other conditions, including the impact of the outbreak of COVID-19, which was declared a pandemic in March 2020 by the World Health Organization, and related state and local government reactions.

All of our properties are concentrated in Southern California, and the state of California and certain cities, including where we own properties, reacted to the COVID-19 pandemic early on by instituting quarantines, restrictions on travel, “shelter in place” rules, restrictions on types of business that may continue to operate and/or restrictions on types of construction projects that may continue as well as moratoriums on commercial tenant evictions and provisions enabling commercial tenants to defer rent. We cannot predict when restrictions currently in place will expire or if additional restrictions will be added. Additionally, in March 2020, the Governor of California issued Executive Order N-28-20, authorizing local municipalities to impose limitations on commercial evictions for nonpayment of rent for tenants impacted by COVID-19. In response to this Executive Order, most municipalities in Southern California have, in turn, mandated a moratorium on all commercial evictions and have given tenants impacted by COVID-19 the unilateral right to defer rent while the emergency orders are in effect, with repayment generally within three to six months after the end of the local emergency. In many of the local municipalities in which we operate, the eviction restrictions are set to expire by September 30, 2020, the date that Executive Order N-28-20 is currently scheduled to expire, and in other municipalities the restrictions expire when the local emergency is lifted, although we cannot currently predict whether or not these restrictions may be extended or for how long. Some of the orders, including Executive Order N-28-20, have been extended multiple times. A number of our tenants have taken advantage of the relief provided by the local government mandates authorizing deferral of rent, and we are currently unable to predict the impact that the COVID-19 pandemic will have on our tenants or the number of tenants that will take advantage of the relief provided by the local government mandates authorizing the deferral of rent.

See Note 2 “Summary of Significant Accounting Policies—COVID-19 Lease Concessions” for information related to rent relief requests received and rent relief agreements executed during the six months ended June 30, 2020.

Tenant Concentration

During the six months ended June 30, 2020, no single tenant accounted for more than 5% of our total consolidated rental income.

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11.	Equity

Common Stock Offering

During the second quarter of 2020, we completed an underwritten public offering of 7,187,500 shares of our common stock, including the underwriters exercise in full of its option to purchase 937,500 shares of our common stock, at an offering price per share of $39.85. The net proceeds of the offering were approximately $285.1 million after deducting the underwriting discount and offering costs totaling $1.4 million. We contributed the net proceeds of the offering to our Operating Partnership in exchange for 7,187,500 common units of partnership interests in the Operating Partnership.

ATM Program

On June 13, 2019, we established an at-the-market equity offering program (the “$550 Million ATM Program”) pursuant to which we may sell from time to time up to an aggregate of $550.0 million of our common stock through sales agents.

During the six months ended June 30, 2020, we sold a total of 2,455,770 shares of our common stock under the $550 Million ATM Program at a weighted average price of $37.02 per share, for gross proceeds of $90.9 million, and net proceeds of $89.6 million, after deducting the sales agents’ fee.

As of June 30, 2020, we had the capacity to issue up to an additional $259.8 million of common stock under the $550 Million ATM Program. Actual sales going forward, if any, will depend on a variety of factors, including among others, market conditions, the trading price of our common stock, determinations by us of the appropriate sources of funding for us and potential uses of funding available to us.

Noncontrolling Interests

Noncontrolling interests relate to interests in the Operating Partnership, represented by OP Units, fully-vested LTIP units, fully-vested performance units, 4.43937% cumulative redeemable convertible preferred units of partnership interest in the Operating Partnership (the “Series 1 CPOP Units”) and Series 2 CPOP Units, as more fully described below, that are not owned by us.

Operating Partnership Units

As of June 30, 2020, noncontrolling interests included 3,044,588 OP Units and 863,888 fully-vested LTIP units and performance units and represented approximately 3.1% of our Operating Partnership. OP Units and shares of our common stock have essentially the same economic characteristics, as they share equally in the total net income or loss and distributions of our Operating Partnership. Investors who own OP Units have the right to cause our Operating Partnership to redeem any or all of their units in our Operating Partnership for an amount of cash per unit equal to the then current market value of one share of common stock, or, at our election, shares of our common stock on a one-for-one basis.

During the six months ended June 30, 2020, 263,420 OP Units were converted into an equivalent number of shares of common stock, resulting in the reclassification of $6.6 million of noncontrolling interest to Rexford Industrial Realty, Inc.’s stockholders’ equity.

Issuance of OP Units and Series 2 CPOP Units in Connection with the Acquisition of the Properties

As previously described in Note 3, on March 5, 2020, we acquired ten industrial properties and on June 19, 2020, we acquired one additional property, from a group of sellers that were not affiliated with the Company for an aggregate purchase price of $214.2 million. As partial consideration for the Properties, we issued the Sellers 1,406,170 OP Units, valued at $67.5 million, and 906,374 newly issued 4.00% Cumulative Redeemable Convertible Preferred Units of partnership interest in the Operating Partnership (the “Series 2 CPOP Units”), valued at $40.8 million.

Holders of Series 2 CPOP Units, when and as authorized by the Company as general partner of the Operating Partnership, are entitled to cumulative cash distributions at the rate of 4.00% per annum of the $45.00 per unit liquidation preference, payable quarterly in arrears on or about the last day of March, June, September and December of each year, beginning on March 31, 2020. The holders of Series 2 CPOP Units are entitled to receive the liquidation preference, which is $45.00 per unit and approximately $40.8 million in the aggregate for all of the Series 2 CPOP Units, before the holders of OP Units are entitled to receive distributions in the event of any voluntary or involuntary liquidation, dissolution or winding-up of the affairs of the Operating Partnership.

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The Series 2 CPOP Units are convertible (i) at the option of the holder anytime from time to time (the “Holder Conversion Right”), or (ii) at the option of the Operating Partnership, at any time on or after March 5, 2025, (the “Company Conversion Right”), in each case, into 0.7722 OP Units per Series 2 CPOP Unit, subject to adjustment to eliminate fractional units or to the extent that there are any accrued and unpaid distributions on the Series 2 CPOP Units. As noted above, investors who own OP Units have the right to cause our Operating Partnership to redeem any or all of their units in our Operating Partnership for an amount of cash per unit equal to the then current market value of one share of common stock, or, at our election, shares of our common stock on a one-for-one basis (the “Subsequent Redemption Right”).

The Series 2 CPOP Units rank senior to the Operating Partnership’s OP Units, on parity with the Operating Partnership’s 5.875% series A and series B cumulative redeemable preferred units and 5.625% series C cumulative redeemable preferred units, the Series 1 CPOP Units, and with any future class or series of partnership interest of the Operating Partnership expressly designated as ranking on parity with the Series 2 CPOP Units, and junior to any other class or series of partnership interest of the Operating Partnership expressly designated as ranking senior to the Series 2 CPOP Units.

Pursuant to relevant accounting guidance, we analyzed the Series 2 CPOP Units for any embedded derivatives that should be bifurcated and accounted for separately and also considered the conditions that would require classification of the Series 2 CPOP Units in temporary equity versus permanent equity. In carrying out our analyses, we evaluated the key features of the Series 2 CPOP Units including the right to discretionary distributions, the Holder Conversion Right, the Company Conversion Right and the Subsequent Redemption Right to determine whether we control the actions or events necessary to issue the maximum number of shares that could be required to be delivered under the share settlement if the Series 2 CPOP Units are converted into shares of our common stock (subsequent to conversion into OP Units). Based on the results of our analyses, we concluded that (i) none of the embedded features of the Series 2 CPOP Units require bifurcation and separate accounting, and (ii) the Series 2 CPOP Units met the criteria to be classified within equity, and accordingly are presented as noncontrolling interests within permanent equity in the consolidated balance sheets.

Amended and Restated 2013 Incentive Award Plan

On June 11, 2018, our stockholders approved the Amended and Restated Rexford Industrial Realty, Inc. and Rexford Industrial Realty, L.P. 2013 Incentive Award Plan (the “Plan”), superseding and replacing the Rexford Industrial Realty, Inc. and Rexford Industrial Realty, L.P. 2013 Incentive Award Plan (the “Prior Plan”). Pursuant to the Plan, we may continue to make grants of stock options, restricted stock, dividend equivalents, stock payments, restricted stock units, performance shares, LTIP units of partnership interest in our Operating Partnership (“LTIP Units”), performance units in our Operating Partnership (“Performance Units”), and other stock based and cash awards to our non-employee directors, employees and consultants.

The aggregate number of shares of our common stock, LTIP Units and Performance Units that may be issued or transferred pursuant to the Plan is 1,770,000, plus any shares that have not been issued under the Prior Plan, including shares subject to outstanding awards under the Prior Plan that are not issued or delivered to a participant for any reason or that are forfeited by a participant prior to vesting. As of June 30, 2020, a total of 1,115,502 shares of common stock, LTIP Units and Performance Units remain available for issuance. Shares and units granted under the Plan may be authorized but unissued shares or units, or, if authorized by the board of directors, shares purchased in the open market. If an award under the Plan is forfeited, expires, or is settled for cash, any shares or units subject to such award will generally be available for future awards.

LTIP Units and Performance Units

LTIP Units and Performance Units are each a class of limited partnership units in the Operating Partnership. Initially, LTIP Units and Performance Units do not have full parity with OP Units with respect to liquidating distributions. However, upon the occurrence of certain events described in the Operating Partnership’s partnership agreement, the LTIP Units and Performance Units can over time achieve full parity with the OP Units for all purposes. If such parity is reached, vested LTIP Units and vested Performance Units may be converted into an equal number of OP Units, and, upon conversion, enjoy all rights of OP Units. LTIP Units, whether vested or not, receive the same quarterly per-unit distributions as OP Units, which equal the per-share distributions on shares of our common stock. Performance Units that have not vested receive a quarterly per-unit distribution equal to 10% of the distributions paid on OP Units.

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Share-Based Award Activity    

The following table sets forth our share-based award activity for the six months ended June 30, 2020: 

	Unvested Awards
	Restricted Common Stock			LTIP Units			Performance Units
Balance at January 1, 2020	212,545			298,412			687,761
Granted	120,639			36,292			—
Forfeited	(4,857	)		—			—
Vested(1)	(85,288	)		(41,953	)		—
Balance at June 30, 2020	243,039			292,751			687,761

(1)	During the six months ended June 30, 2020, 26,573 shares of the Company’s common stock were tendered in accordance with the terms of the Plan to satisfy minimum statutory tax withholding requirements associated with the vesting of restricted shares of common stock.

The following table sets forth the vesting schedule of all unvested share-based awards outstanding as of June 30, 2020:  

	Unvested Awards
	Restricted Common Stock			LTIP Units			Performance Units(1)
July 1, 2020 - December 31, 2020	2,640			154,422			188,250
2021	98,773			90,031			204,517
2022	67,586			45,740			294,994
2023	47,919			2,558			—
2024	26,121			—			—
Total	243,039			292,751			687,761

(1)

Represents the maximum number of Performance Units that would become earned and vested on December 14, 2020, in the event that the specified maximum total shareholder return (“TSR”) hurdles are achieved over the three-year performance period from December 15, 2017 through December 14, 2020, and the maximum number of Performance Units that would become earned and vested on December 31, 2021 and December 31, 2022, in the event that the specified maximum TSR and FFO per share growth hurdles are achieved over the three-year performance period from January 1, 2019 through December 31, 2021 and the three-year performance period from January 1, 2020 through December 31, 2022.

Compensation Expense

The following table sets forth the amounts expensed and capitalized for all share-based awards for the reported periods presented below (in thousands):

	Three Months Ended June 30,								Six Months Ended June 30,
	2020				2019				2020				2019
Expensed share-based compensation(1)	$	3,709			$	2,709			$	7,279			$	5,288
Capitalized share-based compensation(2)	56				42				113				76
Total share-based compensation	$	3,765			$	2,751			$	7,392			$	5,364

(1)	Amounts expensed are included in “General and administrative” and “Property expenses” in the accompanying consolidated statements of operations.

(2)	For the three and six months ended June 30, 2020 and 2019, amounts capitalized relate to employees who provide construction services, and are included in “Building and improvements” in the consolidated balance sheets.

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As of June 30, 2020, total unrecognized compensation cost related to all unvested share-based awards was $20.5 million and is expected to be recognized over a weighted average remaining period of 27 months.

Changes in Accumulated Other Comprehensive Income

The following table summarizes the changes in our AOCI balance for the six months ended June 30, 2020 and 2019, which consists solely of adjustments related to our cash flow hedges (in thousands):

		Six Months Ended June 30,
		2020				2019
Accumulated other comprehensive (loss) income - beginning balance		$	(7,542	)		$	6,262
Other comprehensive loss before reclassifications		(17,318		)		(12,036		)
Amounts reclassified from accumulated other comprehensive loss (income) to interest expense		2,124				(1,640		)
Net current period other comprehensive loss		(15,194		)		(13,676		)
Less other comprehensive loss attributable to noncontrolling interests		522				313
Other comprehensive loss attributable to common stockholders		(14,672		)		(13,363		)
Accumulated other comprehensive (loss) income - ending balance		$	(22,214	)		$	(7,101	)

12.	Earnings Per Share

The following table sets forth the computation of basic and diluted earnings per share (in thousands, except share and per share amounts): 

	Three Months Ended June 30,								Six Months Ended June 30,
	2020				2019				2020				2019
Numerator:
Net income	$	16,271			$	15,954			$	31,543			$	26,671
Less: Preferred stock dividends	(3,637		)		(2,424		)		(7,273		)		(4,847		)
Less: Net income attributable to noncontrolling interests	(1,084		)		(569		)		(1,801		)		(770		)
Less: Net income attributable to participating securities	(129		)		(113		)		(260		)		(227		)
Net income attributable to common stockholders	$	11,421			$	12,848			$	22,209			$	20,827
Denominator:
Weighted average shares of common stock outstanding – basic	119,810,283				105,847,557				116,932,359				102,115,849
Effect of dilutive securities - performance units	257,893				388,752				258,895				326,931
Weighted average shares of common stock outstanding – diluted	120,068,176				106,236,309				117,191,254				102,442,780
Earnings per share — Basic
Net income attributable to common stockholders	$	0.10			$	0.12			$	0.19			$	0.20
Earnings per share — Diluted
Net income attributable to common stockholders	$	0.10			$	0.12			$	0.19			$	0.20

Unvested share-based payment awards that contain non-forfeitable rights to dividends, whether paid or unpaid, are accounted for as participating securities. As such, unvested shares of restricted stock, unvested LTIP Units and unvested Performance Units are considered participating securities. Participating securities are included in the computation of basic EPS pursuant to the two-class method. The two-class method determines EPS for each class of common stock and each participating security according to dividends declared (or accumulated) and their respective participation rights in undistributed earnings.

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Participating securities are also included in the computation of diluted EPS using the more dilutive of the two-class method or treasury stock method for unvested shares of restricted stock and LTIP Units, and by determining if certain market conditions have been met at the reporting date for unvested Performance Units.

The effect of including unvested shares of restricted stock and unvested LTIP Units using the treasury stock method was excluded from our calculation of weighted average shares of common stock outstanding – diluted, as their inclusion would have been anti-dilutive. 

Performance Units, which are subject to vesting based on the Company achieving certain TSR levels over a three-year performance period, are included as contingently issuable shares in the calculation of diluted EPS when TSR has been achieved at or above the threshold levels specified in the award agreements, assuming the reporting period is the end of the performance period, and the effect is dilutive.

We also consider the effect of other potentially dilutive securities, including the Series 1 CPOP Units, Series 2 CPOP Units and OP Units, which may be redeemed for shares of our common stock under certain circumstances, and include them in our computation of diluted EPS when their inclusion is dilutive.

13.	Subsequent Events

Acquisitions

On July 1, 2020, we acquired a three-property portfolio located at 11308-11350 Penrose Street, 11076-11078 Fleetwood Street and 11529-11547 Tuxford Street in Sun Valley, California for a contract price of $35.1 million. The portfolio consists of four multi-tenant buildings with a combined 207,374 rentable square feet.

On July 1, 2020, we acquired the property located at 15650-15700 South Avalon Boulevard in Los Angeles, California for a contract price of $28.1 million. The property consists of two buildings with a combined 166,088 rentable square feet.

On July 17, 2020, we acquired the property located at 12133 Greenstone Avenue in Santa Fe Springs, California for a contract price of $5.5 million. The property consists of one single-tenant building with 12,586 rentable square feet.

Dividends Declared

On July 20, 2020, our board of directors declared the following quarterly cash dividends/distributions:

Security		Amount per Share/Unit				Record Date		Payment Date
Common stock		$	0.215			September 30, 2020		October 15, 2020
OP Units		$	0.215			September 30, 2020		October 15, 2020
5.875% Series A Cumulative Redeemable Preferred Stock		$	0.367188			September 15, 2020		September 30, 2020
5.875% Series B Cumulative Redeemable Preferred Stock		$	0.367188			September 15, 2020		September 30, 2020
5.625% Series C Cumulative Redeemable Preferred Stock		$	0.351563			September 15, 2020		September 30, 2020
4.43937% Cumulative Redeemable Convertible Preferred Units		$	0.505085			September 15, 2020		September 30, 2020
4.00% Cumulative Redeemable Convertible Preferred Units		$	0.45			September 15, 2020		September 30, 2020

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•	the competitive environment in which we operate;

•	real estate risks, including fluctuations in real estate values and the general economic climate in local markets and competition for tenants in such markets;

•	decreased rental rates or increasing vacancy rates;

•	potential defaults on or non-renewal of leases by tenants;

•	potential bankruptcy or insolvency of tenants;

•	acquisition risks, including failure of such acquisitions to perform in accordance with expectations;

•	the timing of acquisitions and dispositions;

•	potential natural disasters such as earthquakes, wildfires or floods;

•	the consequence of any future security alerts and/or terrorist attacks;

•	national, international, regional and local economic conditions, including impacts and uncertainty from trade disputes and tariffs on goods imported to the United States and goods exported to other countries;

•	the general level of interest rates;

•	potential changes in the law or governmental regulations that affect us and interpretations of those laws and regulations, including changes in real estate and zoning or real estate investment trust (“REIT”) tax laws, and potential increases in real property tax rates;

•	financing risks, including the risks that our cash flows from operations may be insufficient to meet required payments of principal and interest and we may be unable to refinance our existing debt upon maturity or obtain new financing on attractive terms or at all;

•	lack of or insufficient amounts of insurance;

•	our failure to complete acquisitions;

•	our failure to successfully integrate acquired properties;

•	our ability to qualify and maintain our qualification as a REIT;

•	our ability to maintain our current investment grade rating by Fitch;

•	litigation, including costs associated with prosecuting or defending pending or threatened claims and any adverse outcomes;

•	possible environmental liabilities, including costs, fines or penalties that may be incurred due to necessary remediation of contamination of properties presently owned or previously owned by us;

•

an epidemic or pandemic (such as the outbreak and worldwide spread of novel coronavirus (“COVID-19”), and the measures that international, federal, state and local governments, agencies, law enforcement and/or health authorities may implement to address it, which may (as with COVID-19) precipitate or exacerbate one or more of the above-mentioned factors and/or other risks, and significantly disrupt or prevent us from operating our business in the ordinary course for an extended period; and

•	other events outside of our control.

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•	During the first quarter of 2020, we acquired from a group of sellers (the “Sellers”) 10 industrial properties (the “Properties”) with a combined 0.9 million rentable square feet, for an aggregate purchase price of $207.4 million.

•	During the second quarter of 2020, we completed the acquisition of one small land parcel and six properties with a combined 0.3 million rentable square feet, for an aggregate purchase price of $76.5 million.

•	During the first quarter of 2020, we stabilized two of our value-add repositioning properties located at 2455 Conejo Spectrum Street and 635 8th Street with a combined 0.2 million rentable square feet.

•	During the first quarter of 2020, we sold 2,206,957 shares of common stock under our at-the-market equity offering program for gross proceeds of $80.8 million, or approximately $36.62 per share.

•	During the second quarter of 2020, we sold 248,813 shares of common stock under our at-the-market equity offering program for gross proceeds of $10.1 million, or approximately $40.59 per share.

•	In March 2020, in connection with the acquisition of the Properties, we issued to the Sellers 1,406,170 common units of limited partnership interests in the Operating Partnership valued at $67.5 million and 906,374 newly issued 4.00% cumulative redeemable convertible preferred units of partnership interest in the Operating Partnership (the “Series 2 CPOP Units”) valued at $40.8 million.

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During the second quarter of 2020, we completed an underwritten public offering of 7,187,500 shares of our common stock, including the underwriters exercise in full of its option to purchase 937,500 shares of our common stock, at an offering price per share of $39.85. The net proceeds of the offering were approximately $285.1 million after deducting the underwriting discount and offering costs totaling $1.4 million.

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•	In February 2020, we amended our senior unsecured credit facility to, among other changes, increase the aggregate commitment for our unsecured revolving credit facility to $500 million from $350 million and to extend the maturity date of the unsecured revolving credit facility to February 2024 from February 2021.

•	In connection with the acquisition of the Properties and one additional property that we acquired from the Sellers in March 2020 and June 2020, respectively, we assumed total debt of $47.5 million. The $47.5 million is comprised of 10 secured fixed-rate mortgage loans with interest rates ranging from 3.70% to 5.24% and with maturities ranging from 3.0 years to 8.3 years from the date assumed.

•	In July 2020, we announced the appointment of Laura Clark as Chief Financial Officer of the Company effective as of September 1, 2020. Ms. Clark will replace Adeel Khan as Chief Financial Officer. Mr. Khan will continue to serve the Company in a transitional role to assist in the transition of his prior responsibilities to Ms. Clark.

•	We had 1,453 leases representing in-place annualized base rent (“ABR”) of $263.3 million. ABR is defined/calculated as the monthly contractual base rent per the leases, excluding any rent abatements, as of June 30, 2020, multiplied by 12.

•	We have received rent relief requests from 334 tenants, representing 26.7% or $70.3 million of ABR.

•	We have executed rent relief agreements with 259 tenants, representing 23.7% or $62.4 million of ABR. See the table below for a summary of rent relief provided to tenants for the second quarter of 2020 and July 2020.

•	We have executed rent relief agreements with four of our top ten tenants, pursuant to which we permitted the tenants to apply their security deposit to contractual base rent, permitted the acceleration of future existing contractual rent concessions and/or granted the deferral of contractual base rent for one to two months.

•	Based on loan-level data announced by the U.S. Small Business Administration, in consultation with the Treasury Department, regarding the loans made under the Paycheck Protection Program (“PPP”), we believe approximately 255 tenants (including five of our top ten tenants), representing 26.5% or $69.8 million of ABR, received PPP loans in

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•	We cannot be certain of the number of tenants not paying or deferring rent out of need versus those merely taking advantage of their local California government-mandated right to unilaterally defer rent without an agreement.

•	We may in the future amend or enter into additional rent relief agreements.

(1)	Contractual Billings include contractual base rent and tenant reimbursements (including prior year recoverable expense reconciliation adjustments) charged to tenants before the impact of consummated COVID-19 related rent relief agreements.

(2)	Represents the cash collection percentage of Contractual Billings.

(3)	Reflects collections through July 23, 2020 for all periods presented. Based on collection patterns over the last several months, we believe the collection percentage for July 2020 Contractual Billings may increase during the remainder of July 2020 and into August 2020.

(4)	The typical deferral period is approximately one to two months with repayment generally scheduled to begin in the third or fourth quarter of 2020.

(5)	Represents the cash collection percentage of Contractual Billings after adjusting for Rent Relief provided by rent relief agreements.

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(1)	The estimated construction period is subject to change as a result of a number of factors including but not limited to permit requirements, delays in construction (including delays related to the COVID-19 pandemic), changes in scope, and other unforeseen circumstances.

(2)	Represents the estimated rentable square footage of the project upon completion of development.

(3)

As of June 30, 2020, these projects have existing buildings aggregating 217,672 rentable square feet that are included in our total portfolio rentable square feet. Includes the following projects: 12821 Knott Street (120,800 rentable square feet), 9615 Norwalk Boulevard (26,362 rentable square feet) and 4416 Azusa Canyon Road (70,510 rentable square feet). For the last two projects we intend to fully or partially demolish the existing buildings prior to constructing new buildings.

(4)	The Merge is a fully entitled industrial development site on which we are under construction of six industrial buildings totaling 333,491 rentable square feet.

(5)	9615 Norwalk Boulevard is a 10.26 acre storage-yard with buildings totaling 26,362 rentable square feet. In January 2019, we converted the tenant’s month to month land lease to a term lease with an expiration date of March 31, 2021. We will demolish the existing buildings and construct a new 201,808 rentable square foot building upon termination of this land lease.

(6)	We acquired 701-727 Kingshill Place, a six-building property, on March 5, 2020. The information presented above is related to only one of the six buildings which is located at 727 Kingshill Place.

(7)	We consider a repositioning property to be stabilized upon the earlier of (i) reaching 90% occupancy or (ii) one year from the date construction work is completed.

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(1)	Effective rent per square foot is the average base rent calculated in accordance with GAAP, over the term of the lease, expressed in dollars per square foot per year. Includes all new and renewal leases that were executed during the quarter.

(2)	Calculated as the change between GAAP rents for new or renewal leases and the expiring GAAP rents on the expiring leases for the same space.

(3)	Calculated as the change between starting cash rents for new or renewal leases and the expiring cash rents on the expiring leases for the same space.

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(4)

The GAAP and cash re-leasing spreads for new leases executed during the six months ended June 30, 2020, exclude 28 leases aggregating 538,016 rentable square feet for which there was no comparable lease data. Of these 28 excluded leases, two leases aggregating 65,494 rentable square feet are leases of recently repositioned space. Comparable leases generally exclude: (i) space that has never been occupied under our ownership, (ii) recently repositioned/redeveloped space, (iii) space that has been vacant for over one year or (iv) space with lease terms shorter than six months.

(5)	The GAAP and cash re-leasing rent spreads for renewal leases executed during the six months ended June 30, 2020, excludes three leases totaling 59,121 rentable square feet for which there was no comparable lease data. Comparable leases generally exclude: (i) space with different lease structures or (ii) space with lease terms shorter than six months.

(6)	Includes three leases totaling 198,762 rentable square feet that expired during the six months ended June 30, 2020, for which the space was placed into repositioning after each tenant vacated.

(7)	Retention is calculated as renewal lease square footage plus relocation/expansion square footage, divided by the square footage of leases expiring during the period. Retention excludes expiring leases associated with space that is placed into repositioning after the tenant vacates.

(1)	Represents the contracted square footage upon expiration.

(2)	Calculated as monthly contracted base rent (before rent abatements) per the terms of such lease, as of June 30, 2020, multiplied by 12. Excludes billboard and antenna revenue and tenant reimbursements. Amounts in thousands.

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(3)	Calculated as annualized base rent set forth in this table divided by annualized base rent for the total portfolio as of June 30, 2020.

(4)	Calculated as annualized base rent for such leases divided by the occupied square feet for such leases as of June 30, 2020.

(5)	Represents vacant space (not under repositioning) as of June 30, 2020. Includes new leases aggregating 175,057 rentable square feet that have been signed but had not yet commenced as of June 30, 2020.

(6)

Represents 0.3 million rentable square feet of vacant space at our properties that were classified as current repositioning and 0.1 million rentable square feet at our development properties that we intend to demolish prior to constructing new buildings as of June 30, 2020. Refer to the table under “Acquisitions and Value-Add Repositioning and Development of Properties” for a summary of these properties. Excludes stabilized properties and properties in lease-up.

(7)	Represents tenants under month-to-month (“MTM”) leases or having holdover tenancy.  Of the 67 MTM leases, 56 MTM leases aggregating 59,390 rentable square feet are at our property located at 14723-14825 Oxnard Street, where due to number and the small size of spaces, we typically only enter into MTM leases.

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(1)	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.

(2)	Participating securities include unvested shares of restricted stock, unvested LTIP units and unvested performance units.

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(1)	Cost is reported in thousands. Excludes the following capitalized costs: (i) compensation costs of personnel directly responsible for and who spend their time on development, renovation and rehabilitation activity and (ii) interest, property taxes and insurance costs incurred during the development and construction periods of repositioning or development projects.

(2)	For non-recurring capital expenditures, reflects the aggregate square footage of the properties in which we incurred such capital expenditures. For recurring capital expenditures, reflects the weighted average square footage of our consolidated portfolio during the period.

(3)	Per square foot amounts are calculated by dividing the aggregate capital expenditure costs by the square footage as defined in (2) above.

(4)	Non-recurring capital expenditures are expenditures made with respect to improvements to the appearance of such property or any development or other major upgrade or renovation of such property, and further includes capital expenditures for seismic upgrades, or capital expenditures for deferred maintenance existing at the time such property was acquired.

(5)	Recurring capital expenditures are expenditures made with respect to the maintenance of such property and replacement of items due to ordinary wear and tear including, but not limited to, expenditures made for maintenance of parking lots, roofing materials, mechanical systems, HVAC systems and other structural systems.

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(1)	Reflects scheduled interest payments on our fixed rate debt, including the $100 Million Notes, $125 Million Notes, Series 2019A Notes, Series 2019B Notes and our various mortgage loans.

(2)

Reflects an estimate of interest payments due on variable rate debt, including the impact of interest rate swaps. For variable rate debt where interest is paid based on LIBOR plus an applicable LIBOR margin, we used the applicable LIBOR margin in effect as of June 30, 2020, and the one-month LIBOR rate of 0.16225%, as of June 30, 2020. Furthermore, it is assumed that any maturity extension options available are not exercised.

(3)	See Note 6 to our consolidated financial statements for further details regarding leases. As of June 30, 2020, we have one additional office lease for office space which has not commenced of $1.9 million which has been included above.

(4)

Includes total commitments for tenant improvements related to obligations under certain tenant leases and construction work related to obligations under contractual agreements with our construction vendors.  We anticipate these obligations to be paid as incurred through the remainder of 2020 and 2021, however, as the timing of these obligations is subject to a number of factors, for purposes of this table, we have included the full amount under “Remainder of 2020”.

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(1)	Includes the effect of interest rate swaps that were effective as of June 30, 2020. See footnotes (6), (7) and (8) below.  Assumes a 1-month LIBOR rate of 0.16225% as of June 30, 2020, as applicable. Excludes the effect of amortization of debt issuance costs, premiums/discounts and the facility fee on the Amended Revolver.

(2)	Excludes unamortized debt issuance costs and premiums/discounts totaling $1.6 million as of June 30, 2020.

(3)	The Amended 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 0.15% to 0.30% depending upon our leverage ratio.

(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 1.05% to 1.50% per annum for the Amended Revolver, 1.20% to 1.70% per annum for the $100 Million Term Loan Facility, 1.20% to 1.70% per annum for the $225 Million Term Loan Facility and 1.50% to 2.20% per annum for the $150 Million Term Loan Facility, depending on our leverage ratio, which is the ratio of our outstanding consolidated indebtedness to the value of our consolidated gross asset value. This leverage ratio is measured on a quarterly basis, and as a result, the effective interest rate will fluctuate from period to period.

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(6)	As of June 30, 2020, the $100 Million Term Loan Facility has been effectively fixed at 1.764% plus an applicable LIBOR margin through the use of an interest rate swap with a notional value of $100.0 million and an effective date of December 14, 2018.

(7)	As of June 30, 2020, the $225 Million Term Loan Facility has been effectively fixed at 1.374% plus the applicable LIBOR margin through the use of two interest rate swaps as follows: (i) $125 million with a strike rate of 1.349% and an effective date of February 14, 2018, and (ii) $100 million with a strike rate of 1.406% and an effective date of August 14, 2018, plus the applicable LIBOR margin.

(8)	As of June 30, 2020, 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.

(9)	Loan is secured by six properties. One 24-month extension is available at the borrower’s option, subject to certain terms and conditions.

(1)	Includes the effect of interest rate swaps that were effective as of June 30, 2020.  Excludes the effect of amortization of debt issuance costs, premiums/discounts and the facility fee on the Amended Revolver.  Assumes a 1-month LIBOR rate of 0.16225% as of June 30, 2020, as applicable.

(2)	Excludes unamortized debt issuance costs and discounts totaling $1.6 million as of June 30, 2020.

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

•	For the Amended Credit Agreement, $225 Million Term Loan Facility 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%;

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•	For the Amended Credit Agreement, $225 Million Term Loan Facility 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.

•	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.

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•	our tenants’ ability or willingness to pay rent in full on a timely basis;

•	state, local, federal and industry-initiated efforts that may adversely affect landlords, including us, and their ability to collect rent and/or enforce remedies for the failure to pay rent;

•	our need to restructure leases with our tenants and our ability to do so on favorable terms or at all;

•	our ability to renew leases or re-lease available space in our proprieties on favorable terms or at all, including as a result of a deterioration in the economic and market conditions in the markets in which where we own properties or due to restrictions intended to prevent the spread of COVID-19 that frustrate our leasing activities;

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a severe and prolonged disruption and instability in the global financial markets, including the debt and equity capital markets, all of which have already experienced and may continue to experience significant volatility, or deteriorations in credit and financing conditions may affect our or our tenants’ ability to access capital necessary to fund our respective business operations or replace or renew maturing liabilities on a timely basis, on attractive terms or at all and may adversely affect the valuation of financial assets and liabilities, any of which could affect our and our tenants’ ability to meet liquidity and capital expenditure requirements;

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complete or partial shutdowns of one or more of our tenants’ manufacturing facilities or distribution centers, temporary or long-term disruptions in our tenants’ supply chains from local, national and international suppliers or delays in the delivery of products, services or other materials necessary for our tenants’ operations, which could force our tenants’ to reduce, delay or eliminate offerings of their products and services, reduce or eliminate their revenues and liquidity and/or result in their bankruptcy or insolvency;

•	our ability to avoid delays or cost increases associated with building materials or construction services necessary for construction that could adversely impact our ability to continue or complete construction as planned, on budget or at all;

•	our and our tenants’ ability to manage our respective businesses to the extent our and their management or personnel are impacted in significant numbers by the COVID-19 pandemic and are not willing, available or allowed to conduct work; and

•	our and our tenants’ ability to ensure business continuity in the event our continuity of operations plan is not effective or improperly implemented or deployed during the COVID-19 pandemic.

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(1)	In April 2020, these shares were tendered by certain of our employees to satisfy minimum statutory tax withholding obligations related to the vesting of restricted shares.

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