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Rexford Industrial Realty, Inc. REXR recently announced shelling $188.9 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 $420 million. Moreover, there are more than $600 million of additional investments under contract or LOI.
The above-mentioned buyouts, funded by using cash-on-hand and proceeds from its previously-executed forward equity offerings, 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, "Unprecedented tenant demand continues to intensify, driven by the post-pandemic economic resurgence and e-commerce related impacts that disproportionately benefit our last-mile, Southern California industrial market.”
This June, the company acquired 2425-2535 E. 12th Street in Los Angeles within the Los Angeles — Central submarket, for $93.6 million. The investment is estimated to generate an initial stabilized unlevered yield of 4.9% on total investment, with the prospect for favorable cash-flow growth subsequently.
In Torrance, the company has acquired 19951 Mariner Avenue within the Los Angeles — South Bay submarket, for $27.4 million. The initial stabilized unlevered yield on total investment is 5.3%, subsequently growing with 3% annual contractual rental rate hikes. In Rancho Dominguez, the company has acquired 2555 E. Del Amo Boulevard within the Los Angeles — South Bay submarket, for $13.5 million. The initial unlevered yield on total investment is 3.8%, which is estimated to grow to more than 6.3% following repositioning.
Moreover, in off-market transactions, within the Los Angeles — Greater San Fernando Valley submarket, the company has acquired an industrial property for $27.3 million. The investment produces an initial 4.4% stabilized unlevered yield on total investment, increasing over time with 3% contractual annual rent hikes. In Valencia, within the Los Angeles — Greater San Fernando Valley submarket, the company has acquired 29120 Commerce Center Drive for $27.1 million. The initial unlevered yield on total investment is 3.4% and is projected to increase to more than 4.7% with rolling over of in-place leases at below-market rental rates following expiry to higher market rates.
Per CBRE Group CBRE, at the end of first-quarter 2021, the vacancy rate was 1.8% in the 275-million-square-foot Los Angeles — Central submarket, and 0.8% in the 218-million-square-foot Los Angeles — South Bay submarket. Moreover, the vacancy rate was 2.4% in the 182-million-square-foot Los Angeles — Greater San Fernando Valley submarket, reflecting solid demand for industrial properties in these markets.
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. 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.
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 13.2% over the past three months, outperforming its industry’s rally of 11.9%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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