Rexford Industrial Realty Delivers Strong Performance in 2024

Rexford Industrial Realty, Inc., a leading real estate investment trust (REIT) focused on owning and operating industrial properties in Southern California, has reported impressive financial results for the first nine months of 2024. The company’s net income attributable to common stockholders increased by 22.7% to $203.5 million, while core funds from operations (Core FFO) attributable to common stockholders grew by 17.5% to $383.1 million compared to the same period in the prior year.

Robust Leasing Activity and Occupancy

A key driver of Rexford’s strong performance has been its ability to maintain high occupancy levels and achieve favorable lease terms. As of September 30, 2024, the company’s total portfolio occupancy stood at 93.0%, with its Same Property Portfolio (properties owned for the entire period) achieving an average occupancy of 96.9% and an ending occupancy of 96.7%.

During the first nine months of 2024, Rexford executed a total of 351 new and renewal leases, covering 7.1 million rentable square feet. Leasing spreads, which measure the difference between new/renewal rents and expiring rents, were strong at 36.1% on a GAAP basis and 26.4% on a cash basis. Excluding a large lease extension, the leasing spreads were even more impressive at 55.3% on a GAAP basis and 38.2% on a cash basis.

Successful Acquisitions and Dispositions

Rexford has also been active in growing its portfolio through strategic acquisitions. In the first nine months of 2024, the company completed $1.3 billion in total investments, representing 54 properties with 4.0 million rentable square feet of buildings on 193 acres of land. These acquisitions have contributed to the company’s overall growth and performance.

Additionally, Rexford has selectively disposed of properties, completing the sale of five properties for a total gross sales price of $44.3 million and recognizing $18.0 million in gains on the sale of real estate during the first nine months of 2024. These dispositions have allowed the company to recycle capital and reinvest in more attractive opportunities.

Repositioning and Redevelopment Efforts

A key component of Rexford’s value-creation strategy is its focus on repositioning and redeveloping properties to enhance their functionality and appeal to tenants. During the first nine months of 2024, the company stabilized several repositioning projects, including properties located at 9755 Distribution Avenue, 8902-8940 Activity Road, 444 Quay Avenue, 263-321 Gardena Boulevard, 20851 Currier Road, 17311 Nichols Lane, and 12752-12822 Monarch.

As of September 30, 2024, Rexford had 24 properties under current repositioning or redevelopment, with an additional 15 properties in the pipeline for future repositioning and redevelopment. These projects are expected to contribute to the company’s long-term growth and value creation.

Favorable Market Conditions

Rexford’s performance has been supported by the strong fundamentals in the Southern California industrial real estate market. The infill Southern California markets in which the company operates are characterized by a relative scarcity of highly functional industrial space and limited ability to introduce new supply due to high land and redevelopment costs, as well as a lack of developable land.

Despite some recent moderation, tenant demand within Rexford’s target markets remains healthy, driven by a diverse range of sectors, including consumer products, healthcare, aerospace, food and beverage, and logistics. The company’s portfolio, strategically located in prime last-mile logistics distribution areas, is well-positioned to serve this growing demand.

Financing and Capital Structure

Rexford has a strong and flexible capital structure to support its growth initiatives. As of September 30, 2024, the company had $3.4 billion in consolidated indebtedness, with a net debt to total combined market capitalization of approximately 22.2%. The majority of the company’s debt is fixed-rate, with a weighted average term of 3.8 years and an effective interest rate of 3.835%.

In March 2024, Rexford completed the issuance of $1.15 billion in exchangeable senior notes, which provided additional liquidity to fund acquisitions and other growth opportunities. The company also has access to a $1.0 billion unsecured revolving credit facility, of which $995.0 million was available for future borrowings as of the filing date of this report.

Rexford’s investment-grade credit ratings of Baa2 (Moody’s) and BBB+ (S&P and Fitch) for its senior unsecured debt provide the company with favorable access to the capital markets and support its long-term growth strategy.

Outlook and Risks

Looking ahead, Rexford remains optimistic about the long-term fundamentals of the Southern California industrial real estate market. The company believes its focus on high-barrier infill markets, value-add repositioning and redevelopment, and diverse tenant base position it well to continue delivering strong results.

However, the company acknowledges that it faces certain risks and uncertainties, including general macroeconomic and political conditions, interest rate volatility, global geopolitical unrest, and potential changes in regulations, such as the recently enacted Assembly Bill 98 in California, which establishes new industrial development standards.

Rexford’s management team remains committed to actively managing its portfolio, identifying and executing on attractive investment opportunities, and maintaining a prudent capital structure to navigate any potential challenges and capitalize on the long-term growth prospects in its target markets.

Overall, Rexford Industrial Realty’s performance in the first nine months of 2024 demonstrates the strength of its business model and the company’s ability to create value for its shareholders. With its focus on high-quality industrial properties, successful leasing and repositioning efforts, and sound financial management, Rexford appears well-positioned to continue its growth trajectory and deliver attractive returns to its investors.