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Rexford Industrial Realty, Inc. REXR recently announced shelling $68.8 million for the acquisition of five industrial properties in prime in-fill Southern California markets. With these buyouts, the company’s 2021 acquisition activity has so far reached $163 million. Apart from the acquisitions, the company also announced the disposition of one industrial property for $1.5 million.
The above-mentioned buyouts, funded by using cash on hand and 1031 proceeds from the disposition, are a strategic fit for Rexford. Southern California is considered the nation's highly-valued industrial property market with supply constraints.
According to Howard Schwimmer and Michael Frankel, co-chief executive officers of the company, "We will leverage our value-add repositioning expertise at these properties to drive cash flow and NAV growth while generating superior stabilized yields. With over $350 million of acquisitions under contract or LOI, we see substantial opportunity to create long-term shareholder value."
Particularly, in Santa Fe Springs within the LA — Mid-Counties sub-market, the company acquired 9920-10020 Pioneer Boulevard for $23.3 million. It comprises seven buildings encompassing 157,699 square feet of space on 8.3 acres of land. Rexford has plans to reposition the mostly vacant buildings with capital improvements for modernization and functional improvement. The stabilized yield on total investment is projected at 5.2%.
In an off-market transaction, the company also collectively acquired 2253 Garfield Avenue and 6655 26th Street, City of Commerce within the Central Los Angeles submarket and 560 N. Main Street, Orange within the North Orange County submarket for $13 million. The three properties are fully leased and encompass 90,115 square feet on 4.8 acres with access to dense population centers. While the initial unlevered yield is 3.6%, with completions of value-add enhancements as well as below-market leases roll, yield on the total investment is estimated to stabilize at 6.9%, the company noted.
Further, in Jurupa Valley within the Inland Empire — West submarket, the company has acquired 4225 Etiwanda Avenue for $32.3 million. Comprising 134,500 square feet of space on 6.6 acres, the three-tenant industrial building is fully leased. While the initial unlevered yield on total investment is 3.5%, it is expected to stabilize at 4.7% following leases roll to higher market rents. The above-mentioned acquisitions were made during February and March.
Per CBRE Group CBRE, at the end of fourth-quarter 2020, the vacancy rate in the 112 million-square-foot Los Angeles — Mid-Counties submarket was 1.4%, the same in the 165 million-square-foot Central Los Angeles submarket was 1.3% and 1.1% in the 115 million-square-foot North Orange County submarket. Moreover, the vacancy rate in the 314 million-square-foot Inland Empire — West submarket was 1.9%%, reflecting the solid demand for industrial properties in these markets.
The latest acquisitions also come as part of the company’s efforts to bank on buyout opportunities in a period of unprecedented events, thanks to the pandemic. In addition to the latest ones, the company completed 20 acquisitions representing 38 properties and 5 million square feet for an aggregate price of $1.2 billion in 2020. Notably, seven of these acquisitions included low-coverage outdoor storage sites as well.
In fact, the industrial asset class has grabbed the limelight for showing resilience amid the pandemic with low vacancy rates, high asking rents and robust rent collections.Warehouse operations have become all the more essential with surging e-commerce customers in light of the coronavirus mayhem. 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, Prologis PLD and others.
Specifically, Rexford is well poised to gain traction from robust market fundamentals, equipped with a well-capitalized balance sheet and an impressive acquisition track record, though surplus supply of industrial real estate is a headwind in some markets.
Shares of this currently Zacks Rank #3 (Hold) company have gained 36.3% over the past year, outperforming its industry’s rally of 33.2%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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