LOS ANGELES, Oct. 19, 2022 /PRNewswire/ -- Rexford Industrial Realty, Inc. (the "Company" or "Rexford Industrial") (NYSE: REXR), a real estate investment trust ("REIT") focused on creating value by investing in and operating industrial properties within Southern California infill markets, today announced financial and operating results for the third quarter of 2022.

Third Quarter 2022 Financial and Operational Highlights:

• Net income attributable to common stockholders of $36.8 million, or $0.21 per diluted share, as compared to $31.5 million, or $0.23 per diluted share, for the prior year quarter.
• Company share of Core FFO of $86.1 million, an increase of 44.5% as compared to the prior year quarter.
• Company share of Core FFO per diluted share of $0.50, an increase of 16.3% as compared to the prior year quarter.
• Consolidated Portfolio Net Operating Income (NOI) of $123.0 million, an increase of 40.1% as compared to the prior year quarter.
• Same Property Portfolio NOI increased 7.2% and Same Property Portfolio Cash NOI increased 9.7% as compared to the prior year quarter.
• 98.6% Average Same Property Portfolio occupancy.
• Comparable rental rates on 1.7 million rentable square feet of new and renewal leases increased by 88.6% compared to prior rents on a GAAP basis and by 62.9% on a cash basis.
• Acquired 15 properties for an aggregate purchase price of $977.5 million.
• Issued a total of 11.5 million shares of common stock for total net proceeds of $697.0 million.
• Ended the quarter with a low-leverage balance sheet measured by a net debt-to-enterprise value ratio of 15.9%.
• Received credit rating upgrades to BBB+ (S&P) and Baa2 (Moody's).

"Our team produced exceptional third quarter results, a testament to our entrepreneurial and differentiated business model focused on value creation within the infill Southern California industrial market. Despite growing macroeconomic uncertainty, our infill Southern California industrial markets continue to demonstrate healthy tenant demand, operating at 99% occupancy amidst a persistent, virtually incurable supply-demand imbalance," stated Michael Frankel and Howard Schwimmer, Co-Chief Executive Officers of the Company. "In the third quarter Rexford Industrial grew Core FFO on a per share basis by 16% compared to the prior year, driven by Core FFO growth of 45%. Our team executed 1.7 million square feet of leasing activity at re-leasing spreads of 89% and 63%, on a GAAP and cash basis, respectively. We completed $977 million of investments in the third quarter, plus an additional $22 million of acquisitions completed subsequent to quarter end, bringing our year-to-date total investments to $2.1 billion. The Company is well-positioned, with over $250 million of additional investments under contract or accepted offer, which are subject to customary closing conditions, that are projected to deliver an aggregate stabilized unlevered yield on total investment of approximately 5.5%, well in-excess of current market yields. Our highly selective approach to capital allocation combined with our investment grade, fortress-like balance sheet, positions the Company to capitalize on accretive internal and external growth strategies that drive long-term value creation for our shareholders through all phases of the economic cycle."

Financial Results:

The Company reported net income attributable to common stockholders for the third quarter of $36.8 million, or $0.21 per diluted share, compared to $31.5 million, or $0.23 per diluted share, for the prior year quarter. The net income in the prior year quarter includes $13.7 million of gains on sale of real estate. For the nine months ended September 30, 2022, net income attributable to common stockholders was $116.8 million, or $0.70 per diluted share, compared to $77.0 million, or $0.57 per diluted share for the prior year. The net income for the nine months ended September 30, 2022, includes $8.5 million of gains on sale of real estate, as compared to $27.3 million for the prior year.

The Company reported Core FFO for the third quarter of $86.1 million, representing a 44.5% increase compared to $59.6 million for the prior year quarter. The Company reported Core FFO of $0.50 per diluted share, representing an increase of 16.3% compared to $0.43 per diluted share for the prior year quarter. For the nine months ended September 30, 2022, Core FFO was $244.4 million, representing a 52.1% increase compared to $160.7 million for the prior year. For the nine months ended September 30, 2022, the Company reported Core FFO of $1.47 per diluted share, representing an increase of 23.5% compared to $1.19 per diluted share for the prior year.

In the third quarter, the Company's consolidated portfolio NOI and Cash NOI increased 40.1% and 36.6%, respectively, compared to the prior year quarter. For the nine months ended September 30, 2022, the Company's consolidated portfolio NOI and Cash NOI increased 41.1% and 37.6%, respectively, compared to the prior year.

In the third quarter, the Company's Same Property Portfolio NOI and Cash NOI increased 7.2% and 9.7%, respectively, compared to the prior year quarter. For the nine months ended September 30, 2022, the Company's Same Property Portfolio NOI and Cash NOI increased 7.4% and 10.5%, respectively compared to the prior year.

Operating Results:

Third quarter 2022 leasing activity demonstrates strong tenant demand fundamentals within Rexford Industrial's target Southern California infill markets:

 

As of September 30, 2022, the Company's Same Property Portfolio occupancy was 98.4%. Average Same Property Portfolio occupancy for the third quarter 2022 was 98.6%. As of September 30, 2022, the Company's consolidated portfolio, excluding value-add repositioning assets, was 97.8% occupied and 98.0% leased, and the Company's consolidated portfolio, including value-add repositioning assets, was 94.5% occupied and 95.3% leased.

Transaction Activity:

During the third quarter of 2022, the Company completed 13 acquisitions with 2.2 million square feet of buildings on 105.1 acres of land, including 1.0 acres of land for near term redevelopment, for an aggregate purchase price of $977.5 million. This includes one transaction not previously disclosed that was acquired through an off-market transaction in mid-September:

• 13301 Main Street, Los Angeles, located within the LA – South Bay submarket, was acquired for $51.2 million, or $478 per square foot. The 106,969 square foot, single-tenant modern industrial building, situated on 4.5 acres, is leased and generates an initial 4.2% unlevered yield on investment, growing over time by 4.0% annual contractual rent increases.

Subsequent to the third quarter of 2022, the Company completed one acquisition through an off-market transaction in October:

• 20851 Currier Road, City of Industry, located within the LA – San Gabriel Valley submarket, was acquired for $21.8 million, or $367 per square foot. The 59,412 square foot, Class-A single tenant building, situated on 2.8 acres, is currently vacant and projected to generate a 5.0% unlevered stabilized yield on total investment following a light renovation and lease up at market rents.

Year-to-date, including the property acquired subsequent to quarter end, the Company has completed 46 acquisitions with 5.1 million square feet of buildings on 275.6 acres of land, including 31.4 acres of land for near term redevelopment, for an aggregate purchase price of $2.1 billion. In aggregate, these investments are projected to generate a weighted average unlevered initial yield of 3.0% and an estimated weighted average stabilized yield on total investment of 4.7%.

During the third quarter of 2022, the Company stabilized two repositioning projects with 230,353 square feet and $35.7 million of total investment at a weighted average 11.1% unlevered stabilized yield. Year to date, the Company has stabilized four repositioning/redevelopment projects with 404,220 square feet and $72.6 million of total investment at a weighted average 8.9% unlevered stabilized yield.

Balance Sheet:

The Company ended the third quarter with $1.2 billion in liquidity, including $37.1 million in cash on hand, $1.0 billion available under its unsecured revolving credit facility and an estimated $188.6 million of forward equity proceeds available for settlement to occur before the fourth quarter of 2023. As of September 30, 2022, the Company had $1.9 billion of outstanding debt, with an average interest rate of 3.2% and an average term-to-maturity of 5.8 years.

As previously disclosed, on July 19, 2022, the Company amended its senior unsecured credit agreement to add a $400 million unsecured term loan with a maturity date of July 19, 2024 (with two extension options of one year each). Proceeds from the $400 million term loan were used to fund acquisitions, reduce outstanding borrowings under the unsecured revolving credit facility and for general corporate purposes.

On July 21, 2022, the Company executed five interest rate swap agreements to manage its exposure to changes in 1-month term SOFR related to $300 million of its variable-rate debt. These swaps, which are effective July 27, 2022, and mature on May 26, 2027, fix 1-month term SOFR at a weighted average rate of 2.81725%. Including the impact of these interest rate swaps, the hedged effective interest rate on the $300 million unsecured term loan maturing in May 2027 is 3.717%.

During the third quarter of 2022, the Company executed on its ATM program, selling 5,127,587 shares of common stock subject to forward sale agreements at an average price of $65.43 per share for a gross value of $335.5 million. On September 22, 2022, the Company partially settled these forward equity sale agreements and all the outstanding forward equity sale agreements from prior quarter sales by issuing 11,515,553 shares of common stock for net proceeds of $697.0 million.

As of September 30, 2022, the $1.0 billion ATM program had approximately $201.0 million of remaining capacity.

In the third quarter of 2022, Rexford Industrial's investment grade issuer and senior unsecured ratings were upgraded by Moody's Investors Service ("Moody's") and S&P Global Ratings ("S&P"). Moody's upgraded the Company's ratings to Baa2 from Baa3 with a stable outlook. S&P upgraded the Company's ratings to BBB+ from BBB with a stable outlook.

Dividends:

On October 17, 2022, the Company's Board of Directors declared a dividend in the amount of $0.315 per share for the fourth quarter of 2022, payable in cash on January 17, 2023, to common stockholders and common unit holders of record as of December 30, 2022.

On October 17, 2022, the Company's Board of Directors declared a quarterly dividend of $0.367188 per share of its Series B Cumulative Redeemable Preferred Stock and a quarterly dividend of $0.351563 per share of its Series C Cumulative Redeemable Preferred Stock, payable in cash on December 30, 2022, to preferred stockholders of record as of December 15, 2022.

Guidance

The Company is revising its full year 2022 guidance as indicated below. The Core FFO guidance refers only to the Company's in-place portfolio as of October 19, 2022, and does not include any assumptions for other acquisitions, dispositions or related balance sheet activities that have not closed. Please refer to the Company's supplemental information package for a complete list of guidance and 2022 Guidance Rollforward.

 

A number of factors could impact the Company's ability to deliver results in line with its guidance, including, but not limited to, the impact of the ongoing COVID-19 pandemic, interest rates, inflation, the economy, the supply and demand of industrial real estate, the availability and terms of financing to the Company or to potential acquirers of real estate and the timing and yields for divestment and investment. There can be no assurance that the Company can achieve such results.

Supplemental Information and Investor Presentation:

The Company's supplemental financial reporting package as well as an updated investor presentation are available on the Company's investor relations website at www.ir.rexfordindustrial.com.

Earnings Release, Investor Conference Webcast and Conference Call:

A conference call with senior management will be held on Thursday, October 20, 2022, at 1:00 p.m. Eastern Time.

To participate in the live telephone conference call, please access the following dial-in numbers at least five minutes prior to the start time.

     1-877-407-0789 (for domestic callers)
     1-201-689-8562 (for international callers)

Conference call playback will be available through November 20, 2022 and can be accessed using the following numbers and pass code 13733021.

     1-844-512-2921 (for domestic callers)
     1-412-317-6671 (for international callers)

A live webcast and replay of the conference call will also be available at www.ir.rexfordindustrial.com.

About Rexford Industrial:

Rexford Industrial creates value by investing in, operating and redeveloping industrial properties throughout infill Southern California, the world's fourth largest industrial market and consistently the highest-demand, lowest supply market in the nation. The Company's highly differentiated strategy enables internal and external growth opportunities through its proprietary value creation and asset management capabilities. Rexford Industrial's high-quality, irreplaceable portfolio comprises 346 properties with approximately 41.8 million rentable square feet occupied by a stable and diverse tenant base. Structured as a real estate investment trust (REIT) listed on the New York Stock Exchange under the ticker "REXR," Rexford Industrial is an S&P MidCap 400 Index member. For more information, please visit www.rexfordindustrial.com.

Forward Looking Statements:

This press release may contain forward-looking statements within the meaning of the federal securities laws, which are based on current expectations, forecasts and assumptions that involve risks and uncertainties that could cause actual outcomes and results to differ materially. Forward-looking statements relate to expectations, beliefs, projections, future plans and strategies, anticipated events or trends and similar expressions concerning matters that are not historical facts. In some cases, you can identify forward-looking statements by the use of forward-looking terminology such as "may," "will," "should," "expects," "intends," "plans," "anticipates," "believes," "estimates," "predicts," or "potential" or the negative of these words and phrases or similar words or phrases which are predictions of or indicate future events or trends and which do not relate solely to historical matters. While forward-looking statements reflect the Company's good faith beliefs, assumptions and expectations, they are not guarantees of future performance. For a further discussion of these and other factors that could cause the Company's future results to differ materially from any forward-looking statements, see the reports and other filings by the Company with the U.S. Securities and Exchange Commission, including the Company's Annual Report on Form 10-K for the year ended December 31, 2021, and other filings with the Securities and Exchange Commission. The Company disclaims any obligation to publicly update or revise any forward-looking statement to reflect changes in underlying assumptions or factors, of new information, data or methods, future events or other changes.

Definitions / Discussion of Non-GAAP Financial Measures:

Funds from Operations (FFO): We calculate FFO in accordance with the standards established by the National Association of Real Estate Investment Trusts ("NAREIT"). FFO represents net income (loss) (computed in accordance with GAAP), excluding gains (or losses) from sales of depreciable operating property, gains (or losses) from sales of assets incidental to our business, impairment losses of depreciable operating property or assets incidental to our business, real estate related depreciation and amortization (excluding amortization of deferred financing costs and amortization of above/below-market lease intangibles) and after adjustments for unconsolidated joint ventures. Management uses FFO as a supplemental performance measure because, in excluding real estate related depreciation and amortization, gains and losses from property dispositions, other than temporary impairments of unconsolidated real estate entities, and impairment on our investment in real estate, it provides a performance measure that, when compared year over year, captures trends in occupancy rates, rental rates and operating costs. We also believe that, as a widely recognized measure of performance used by other REITs, FFO may be used by investors as a basis to compare our operating performance with that of other REITs. However, because FFO excludes depreciation and amortization and captures neither the changes in the value of our properties that result from use or market conditions nor the level of capital expenditures and leasing commissions necessary to maintain the operating performance of our properties, all of which have real economic effects and could materially impact our results from operations, the utility of FFO as a measure of our performance is limited. Other equity REITs may not calculate or interpret FFO in accordance with the NAREIT definition as we do, and, accordingly, our FFO may not be comparable to such other REITs' FFO. FFO should not be used as a measure of our liquidity and is not indicative of funds available for our cash needs, including our ability to pay dividends. FFO should be considered only as a supplement to net income computed in accordance with GAAP as a measure of our performance. A reconciliation of net income, the nearest GAAP equivalent, to FFO is set forth below. "Company Share of FFO" reflects FFO attributable to common stockholders, which excludes amounts allocable to noncontrolling interests, participating securities and preferred stockholders.

Core Funds from Operations (Core FFO): We calculate Core FFO by adjusting FFO to exclude the impact of certain items that we do not consider reflective of our core revenue or expense streams. These adjustments consist of (i) acquisition expenses, (ii) loss on extinguishment of debt, (iii) the amortization of the loss on termination of interest rate swaps, (iv) preferred stock redemption charges and (v) other amounts as they may occur. Management believes that Core FFO is a useful supplemental measure as it provides a more meaningful and consistent comparison of operating performance and allows investors to more easily compare the Company's operating results. Because certain of these adjustments have a real economic impact on our financial condition and results from operations, the utility of Core FFO as a measure of our performance is limited. Other REITs may not calculate Core FFO in a consistent manner. Accordingly, our Core FFO may not be comparable to other REITs' Core FFO. Core FFO should be considered only as a supplement to net income computed in accordance with GAAP as a measure of our performance. A reconciliation of FFO to Core FFO is set forth below. "Company Share of Core FFO" reflects Core FFO attributable to common stockholders, which excludes amounts allocable to noncontrolling interests, participating securities and preferred stockholders.

Reconciliation of Net Income Attributable to Common Stockholders per Diluted Share Guidance to Company Share of Core FFO per Diluted Share Guidance:

The following is a reconciliation of the Company's 2022 guidance range of net income attributable to common stockholders per diluted share, the most directly comparable forward-looking GAAP financial measure, to Company share of Core FFO per diluted share.

 

Net Operating Income (NOI): NOI is a non-GAAP measure, which includes the revenue and expense directly attributable to our real estate properties. NOI is calculated as rental income from real estate operations less property expenses (before interest expense, depreciation and amortization). We use NOI as a supplemental performance measure because, in excluding real estate depreciation and amortization expense and gains (or losses) from property dispositions, it provides a performance measure that, when compared year over year, captures trends in occupancy rates, rental rates and operating costs. We also believe that NOI will be useful to investors as a basis to compare our operating performance with that of other REITs. However, because NOI excludes depreciation and amortization expense and captures neither the changes in the value of our properties that result from use or market conditions, nor the level of capital expenditures and leasing commissions necessary to maintain the operating performance of our properties (all of which have a real economic effect and could materially impact our results from operations), the utility of NOI as a measure of our performance is limited. Other equity REITs may not calculate NOI in a similar manner and, accordingly, our NOI may not be comparable to such other REITs' NOI. Accordingly, NOI should be considered only as a supplement to net income as a measure of our performance. NOI should not be used as a measure of our liquidity, nor is it indicative of funds available to fund our cash needs.

NOI should not be used as a substitute for cash flow from operating activities in accordance with GAAP. We use NOI to help evaluate the performance of the Company as a whole, as well as the performance of our Same Property Portfolio. A calculation of NOI for our Same Property Portfolio, as well as a reconciliation of net income to NOI for our Same Property Portfolio, is set forth below.

Cash NOI: Cash NOI is a non-GAAP measure, which we calculate by adding or subtracting from NOI: (i) fair value lease revenue and (ii) straight-line rent adjustments. We use Cash NOI, together with NOI, as a supplemental performance measure. Cash NOI should not be used as a measure of our liquidity, nor is it indicative of funds available to fund our cash needs. Cash NOI should not be used as a substitute for cash flow from operating activities computed in accordance with GAAP. We use Cash NOI to help evaluate the performance of the Company as a whole, as well as the performance of our Same Property Portfolio. A calculation of Cash NOI for our Same Property Portfolio, as well as a reconciliation of net income to Cash NOI for our Same Property Portfolio, is set forth below.

Same Property Portfolio: Our 2022 Same Property Portfolio is a subset of our consolidated portfolio and includes properties that were wholly owned by us for the period from January 1, 2021 through September 30, 2022, and excludes properties that were acquired or sold during the period from January 1, 2021 through September 30, 2022, and properties acquired prior to January 1, 2021, that were classified as current or future repositioning, redevelopment or lease-up during 2021 or 2022 (unless otherwise noted), which we believe significantly affected the properties' results during the comparative periods. As of September 30, 2022, our 2022 Same Property Portfolio consists of 224 properties aggregating 28,581,460 rentable square feet.

Properties and Space Under Repositioning: Typically defined as properties or units where a significant amount of space is held vacant in order to implement capital improvements that improve the functionality (not including basic refurbishments, i.e., paint and carpet), cash flow and value of that space. A repositioning is generally considered complete once the investment is fully or nearly fully deployed and the property is available for occupancy. We consider a repositioning property to be stabilized at the earlier of the following: (i) upon reaching 90% occupancy or (ii) one year from the date of completion of repositioning construction work.

Net Debt to Enterprise Value: As of September 30, 2022, we had consolidated indebtedness of $1.9 billion, reflecting a net debt to enterprise value of approximately 15.9%. Our enterprise value is defined as the sum of the liquidation preference of our outstanding preferred stock and preferred units plus the market value of our common stock excluding shares of nonvested restricted stock, plus the aggregate value of common units not owned by us, plus the value of our net debt. Our net debt is defined as our consolidated indebtedness less cash and cash equivalents.

Contact:

Aric Chang
Senior Vice President, Investor Relations and Capital Markets
310.734.6952
achang@rexfordindustrial.com

 

 

 

 

 

 

 

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SOURCE Rexford Industrial Realty, Inc.