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 was 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.

Acquisitions and Value-Add Investments

Rexford’s growth strategy focuses on acquiring both stabilized properties and those with value-add opportunities. During 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.

The company also made progress on its repositioning and redevelopment projects, stabilizing several properties during the year. As of September 30, 2024, Rexford had 24 properties under current repositioning or redevelopment and an additional 15 properties in the pipeline for future work. These value-add initiatives are expected to drive further growth in the company’s portfolio and cash flows.

Disciplined Capital Management

Rexford has maintained a strong balance sheet, with a net debt to total combined market capitalization of 22.2% as of September 30, 2024. The company’s credit ratings from Moody’s, S&P, and Fitch remain investment grade, providing access to diverse sources of capital.

During the first quarter of 2024, Rexford issued $1.15 billion of exchangeable senior notes, which will help fund future growth. The company also completed a $840.9 million public offering of common stock, further strengthening its financial position. Subsequent to the quarter, Rexford has partially settled the forward equity sale agreement related to the March 2024 offering, generating $220.0 million in net proceeds.

Market Conditions and Outlook

The Southern California industrial real estate market, where Rexford’s portfolio is concentrated, continues to exhibit strong fundamentals. While the company has observed some moderation in market rent growth and occupancy levels in recent quarters, the long-term outlook remains favorable due to the limited supply of new industrial space and steady tenant demand.

Rexford’s focus on infill Southern California markets, which are characterized by high barriers to entry and limited developable land, positions the company well to capitalize on these favorable market dynamics. The company’s entrepreneurial approach to property management and value-add investments has enabled it to outperform the broader market.

Looking ahead, Rexford remains optimistic about its growth prospects. The company’s pipeline of acquisitions, repositioning, and redevelopment projects, combined with its strong balance sheet and access to capital, should support continued growth in the coming years.

Strengths

• Dominant position in high-barrier-to-entry Southern California industrial markets
• Consistent track record of strong leasing activity and occupancy levels
• Successful value-add investment strategy through repositioning and redevelopment
• Disciplined capital management and investment-grade credit ratings

Weaknesses

• Exposure to potential volatility in the Southern California industrial market
• Reliance on continued strong tenant demand and limited new supply
• Execution risk associated with repositioning and redevelopment projects

Opportunities

• Continued acquisition of stabilized and value-add properties in target markets
• Successful completion and lease-up of current and future repositioning/redevelopment projects
• Potential to expand into adjacent or complementary real estate sectors

Threats

• Macroeconomic and geopolitical uncertainties, including interest rate environment
• Increased construction costs and supply chain disruptions impacting redevelopment projects
• Potential changes in local zoning or development regulations

Overall, Rexford Industrial Realty has delivered impressive results in 2024, demonstrating the strength of its business model and the resilience of the Southern California industrial real estate market. The company’s focus on high-quality, well-located properties, combined with its value-add investment approach and disciplined capital management, positions it well for continued growth and success in the years ahead.