Rexford Industrial Realty: A Pure-Play on the SoCal Industrial Rebound

Rexford Industrial Realty is a REIT that specializes in industrial properties in Southern California. The company has experienced significant volatility in recent years due to the post-pandemic boom and bust in the industrial sector. Despite this, Rexford Industrial Realty remains a pure-play on the SoCal industrial real estate rebound, with a strong focus on high-quality properties and a diversified portfolio.

Rexford Industrial Realty (NYSE: REXR) is a Real Estate Investment Trust (REIT) that specializes in industrial properties in Southern California. The company has experienced significant volatility in recent years due to the post-pandemic boom and bust in the industrial sector. Despite this, Rexford Industrial Realty remains a pure-play on the SoCal industrial real estate rebound, with a strong focus on high-quality properties and a diversified portfolio.

Rexford Industrial Realty's stock has traded at 2019 levels, but the company has not let the recent downturn slow their expansion. They have made significant acquisitions even during challenging times, which is an advantage in this sector. The company's core funds from operations (Core FFO) have grown significantly, reaching $511.7 million in 2024 from $204 million in 2020. This growth is fueled by significant acquisitions, such as the $1 billion deal with Blackstone Industrial, where they acquired 48 properties. The company also expects a 28% growth in rent due to annual embedded rent steps, repositioning, and redevelopment.

Financially, Rexford Industrial Realty is in a strong position. The company has very low leverage, with $13.08 billion in total assets and $9.19 billion in equity as of Q2'25. They have also been growing their debt repayments, with several asset sales planned for 2025. The company's dividend yield is currently the highest it has been since it went public, at around 4.7%. However, the dividend growth rate has been significant, with annual increases, although the company has issued a significant amount of shares over the past decade.

The company's performance mirrors the US economy, which is both a risk and an opportunity. The main near-term catalyst for Rexford Industrial Realty is rate cuts, which would help reduce the cost of debt and boost industrial activity. The company's guidance sees little to no growth in Core FFO per diluted share this year, potentially signaling a weakening environment. However, the SoCal industrial property market is in a transition stage following the post-pandemic boom and correction, with rents falling by as much as 20% or even 30% in some areas. Today, we're looking at a potential rebound, although it remains a tenant's market.

Rexford Industrial Realty's management is shareholder-friendly, with 9-16% of their total remuneration coming from base salary and 84-91% from variable targets based on the company's goals. This incentivizes the management to have both the stock and the company in mind.

Rexford Industrial Realty's Hertz (HTZ) property, bought in 2023 for $143 million, is a significant driver in the redevelopment pipeline. This property is adjacent to the LA Airport and has the potential to bring more than the current $9 million annual net operating income.

References:
[1] https://seekingalpha.com/article/4813549-rexford-industrial-realty-pure-play-on-the-socal-industrial-real-estate-rebound