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Rexford (REXR) Enhances Portfolio, Buyouts Reach $1.3B in '21

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  • REXR-PC
  • PLD

Rexford Industrial Realty, Inc. REXR recently announced shelling out $285.6 million for the acquisition of three leased investments in the prime in-fill Southern California submarkets. With these buyouts, the company’s 2021 acquisition activity has reached $1.3 billion so far. Moreover, there are more than $250 million of new investments under contract or accepted offer.

The above-mentioned properties, which were acquired in September and October, comprised a total of 421,824 square feet and one 80.2-acre industrial storage site. Funded by using a combination of 1031 disposition proceeds, cash on hand, and proceeds from its previously-executed equity offerings, the acquisitions are a strategic fit for Rexford. Southern California is considered the United States’ highly-valued industrial property market with supply constraints.

According to Howard Schwimmer and Michael Frankel, co-chief executive officers of the company, "Acquired through off-market and lightly-marketed transactions, these investments contribute favorable current cash flow plus future value-add opportunity to drive superior, long term value creation.”

The company has acquired 5772 Jurupa Street, in Ontario, within the Inland Empire — West submarket for $54 million. The initial unlevered 4.3% cash yield is projected to increase to a stabilized yield on a total investment of 8.2% for this 360,000-square-foot, 30-foot clear building on 16.8 acres of land.

In Rancho Dominguez, within the LA — South Bay submarket, the company has acquired 2500 E. Victoria Street for $217.1 million. This 80.2-acre infill industrial storage site is positioned between the Los Angeles-Long Beach port complex and LAX.

In Ontario, CA, within the Inland Empire — West submarket, the company has purchased 1010 E. Belmont Street for $14.5 million. For this 61,824-square-foot, single-tenant building on 2.8 acres of land, the initial unlevered 3% cash yield is expected to grow to a stabilized yield on total investment of 5.5%.

Per CBRE Group CBRE, at the end of second-quarter 2021, the vacancy rate was 1% in the 316-million-square-foot Inland Empire — West submarket. In addition, the vacancy rate was 0.6% in the 218-million-square-foot LA — South Bay submarket, reflecting solid demand for the industrial properties in these markets.

Apart from the acquisitions, the company also announced the disposition of a 71,602-square-foot property in Carlsbad, within the North County San Diego submarket for $18.6 million. This transaction’s unlevered IRR is 16.6% and the company reinvested the sale proceeds into the acquisition of 2500 E. Victoria Street.

Demand for the industrial real estate space has been shooting up amid an e-commerce boom, growth in industries and companies making efforts to improve supply-chain efficiencies. Apart from the fast adoption of e-commerce, the logistics real estate is anticipated to benefit from the likely rise in inventory levels over the long haul. This is opening up prospects for Rexford, and other industrial REITs like Duke Realty Corp. DRE and Prologis PLD.

Specifically, Rexford is well poised to gain traction from its robust market fundamentals, equipped with a low-leverage, fortress-like balance sheet and an impressive acquisition track record.

Shares of this Zacks Rank #2 (Buy) company have gained 8.9% over the past six months, outperforming its industry’s rally of 6.5%.

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