Rexford Industrial Realty, Inc. reported its quarterly results for the three and nine months ended September 30, 2024. The company’s net income for the quarter was $43.1 million, or $0.19 per diluted share, compared to $34.4 million, or $0.15 per diluted share, for the same period in 2023. For the nine months ended September 30, 2024, net income was $124.5 million, or $0.55 per diluted share, compared to $94.3 million, or $0.41 per diluted share, for the same period in 2023. The company’s total revenue for the quarter was $143.1 million, a 14.1% increase from the same period in 2023, driven by growth in same-store net operating income and the acquisition of new properties. The company’s funds from operations (FFO) for the quarter was $74.1 million, or $0.33 per diluted share, compared to $63.4 million, or $0.28 per diluted share, for the same period in 2023.
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 leasing spreads. 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. The company achieved impressive leasing spreads of 36.1% on a GAAP basis and 26.4% on a cash basis. Excluding a large lease extension, the leasing spreads were even stronger at 55.3% on a GAAP basis and 38.2% on a cash basis, demonstrating the strong demand for Rexford’s well-located and functional industrial properties.
Successful Acquisition and Repositioning Efforts
Rexford’s growth strategy involves 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.
In addition to its acquisition activity, Rexford has been actively repositioning and redeveloping properties to enhance their functionality and value. As of September 30, 2024, the company had 24 properties under current repositioning or redevelopment, with an additional 15 properties in the pipeline for future repositioning and redevelopment work. These efforts have already started to pay off, with the company stabilizing several repositioning projects during the first three quarters of 2024.
Favorable Market Conditions in Southern California
Rexford’s focus on Southern California infill markets has proven to be a significant advantage. These high-barrier markets are characterized by a relative scarcity of industrial product and limited ability to introduce new supply due to high land and redevelopment costs. 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, and logistics.
While the company has observed some volatility in its markets due to macroeconomic and political uncertainty, including an uncertain interest rate environment and global geopolitical unrest, Rexford’s portfolio, which is well-positioned to serve regional consumption and less susceptible to changes in global trade flows, has generally outperformed the broader market.
Disciplined Capital Management and Strong Balance Sheet
Rexford has maintained a strong balance sheet to support its growth initiatives. As of September 30, 2024, the company had $61.8 million in cash and cash equivalents and no borrowings outstanding under its $1.0 billion unsecured revolving credit facility, leaving $995.0 million available for future borrowings.
In March 2024, Rexford completed the issuance of $1.15 billion in exchangeable senior notes, further strengthening its liquidity position. The company also continues to utilize its at-the-market (ATM) equity offering program and forward equity sale agreements to raise additional capital, with approximately $927.4 million of common stock remaining available to be sold under the program as of September 30, 2024.
Rexford’s credit ratings of Baa2 (Moody’s) and BBB+ (S&P and Fitch) for its senior unsecured debt reflect its investment-grade status and provide the company with access to a variety of financing options to fund its growth initiatives.
Outlook and Risks
Looking ahead, Rexford remains optimistic about the long-term fundamentals of its target markets, which continue to exhibit strong demand and limited new supply. The company’s focus on acquiring and improving industrial properties in prime locations, coupled with its value-add repositioning and redevelopment capabilities, positions it well to capitalize on the opportunities in its markets.
However, the company acknowledges that it faces certain risks and uncertainties, including:
Rexford’s management team remains committed to navigating these challenges and continuing to deliver strong results for its shareholders. The company’s entrepreneurial business model, focus on high-quality industrial properties in prime locations, and vertically integrated operating platform position it well to capitalize on the opportunities in its target markets.
Conclusion
Rexford Industrial Realty has delivered impressive financial and operational performance in the first nine months of 2024, driven by its ability to maintain high occupancy levels, achieve favorable leasing spreads, and successfully execute its acquisition and repositioning strategies. The company’s focus on Southern California infill markets, strong balance sheet, and disciplined capital management provide a solid foundation for continued growth and value creation for its shareholders.
While the company faces some near-term challenges, such as macroeconomic uncertainty and increased construction costs, Rexford’s management team remains confident in the long-term fundamentals of its target markets and its ability to navigate these obstacles. Investors should closely monitor the company’s progress as it continues to capitalize on the opportunities in the dynamic Southern California industrial real estate market.