Rexford Industrial Portfolio Rents Up 7.8%
The firm’s latest quarterly reporting shows strong portfolio performance as a supply-demand imbalance continues in Southern California.
“We are extremely pleased with our third quarter performance, which reflects both the ongoing strength of the Rexford Industrial operating platform, as well as our focus within the infill Southern California industrial market,” Michael S. Frankel, co-CEO and director of Rexford Industrial, said on the call. “ In terms of result, it’s been a tremendous quarter and an exceptional year so far.”
The supply-demand imbalance also drove strong leasing activity. During the quarter, the firm signed 91 leases totaling 1 million square feet. The leases had spreads at 31.2% on a GAAP basis and 19.4% on a cash basis, and on new leases, spreads were at 38.2% on a GAAP basis and 26.1% on a cash basis. “Key tenant demand fundamentals within our target infill markets are principally driven by this long-term supply demand imbalance, which is magnified by increasing urban land value,” said Frankel. “Our decades of experience have also demonstrated that this market tends to be more stable through economic cycle when compared to non-infill or secondary industrial market.”
Investment activity was equally as strong for the firm. During the quarter, Rexford acquired $227 million and a total of 943,000 square feet of industrial assets, bringing year-to-date investment volume to $773 million. To accomplish these impressive volumes, considering the tight and competitive market, Rexford leveraged industry relationships, buying 75% of the year’s investments through off-market or lightly marketed transactions. “In aggregate, in-place rents for these acquisitions are estimated to be 13.9% below market and all the one are in low coverage sites with excess paved land for container or vehicle parking, which is ideal for last mile e-commerce use,” said Howard Schwimmer, co-CEO and director at Rexford Industrial. “Seven of these transactions, about 78%, were off-market or lightly marketed and sourced through our proprietary research and broker relationships.”
The transactions include East Ana Street, a 106,000 square foot building on 6.1 acres of land located within the LA-South Bay submarket for $18.8 million; Avenida Del Oro, a 312,000 square foot fully leased last mile distribution facility on 38.6 acres within the North San Diego County submarket for $73.6 million; and Storm Parkway, an eight-building, 268,000 square foot modern industrial complex within the LA-South Bay submarket for $66.2 million.
Through its transactions, the company has also maintained a healthy balance sheet with a strong liquidity position so that it can continue to transact. “As we continue to seek opportunities to drive long-term growth, we intend to maintain a strong liquidity position and balance sheet capacity to allow us maximum flexibility and favorable access to capital,” said Adeel Khan, CFO at Rexford Industrial, on the call. “During the third quarter, we issued approximately 1.2 million shares of common stock through our ATM program at a weighted average price of $44.24 per share, which results at a net proceeds to Rexford of approximately $51.1 million. In September, we closed on an $86.3 million offering, a 5.625% Series C preferred stock. Net proceeds will be used to fund near-term acquisitions and repositioning activity.”
The company is also increasing its full-year 2019 guidance to company share of core FFO to a range of $1.20 to $1.22 per share from our previous range of $1.19 to $1.21 per share. “Our new guidance range is supported by the following updated assumption: Same property NOI growth to range from 5.5% to 6.5% from our previous range of 5% to 6.5%,” said Khan. “With G&A, we anticipate a full year range from $29.5 million to $30 million from a previous range of $29 million to $30 million. The rest of our guidance assumptions are unchanged and detailed on Page 24 of our 3Q 2019 supplemental information package.”