Rexford Industrial: A Great Bargain With Up To 6.4% Yield

Core Viewpoint - Rexford Industrial (REXR) presents a compelling investment opportunity due to its strong income yield of 3.3% and growth potential, despite recent stock price declines [1][12] Company Performance - REXR operates in the infill Southern California market with a low vacancy rate of 3.9% and high base rents averaging $17.11 per square foot [2] - The company has a portfolio of 422 properties with 49.7 million square feet of rentable space, achieving sector-leading NOI growth of 31% annualized over the past five years, compared to a 16% peer average [3] - REXR's net operating margin has increased by 50 basis points year-over-year to 77.7%, contributing to a consolidated NOI growth of 21% from the prior year [3][4] Financial Outlook - Management projects full-year FFO per share of $2.33, representing a 7% growth from 2023, driven by a 7.5% growth in same-property cash NOI [3][4] - REXR anticipates a 35% increase in cash NOI over the next three years through modernization and redevelopment initiatives [3][4] Market Dynamics - The long-term supply/demand imbalance in the Southern California market is expected to support continued rent growth, with tenants indicating a willingness to pay higher rents [4][5] - REXR has $1.4 billion in investments and a pipeline expected to contribute $0.48 net FFO per share by year five [6] Balance Sheet Strength - REXR maintains a strong balance sheet with a net debt to enterprise value of 24% and a low net debt to adjusted EBITDA ratio of 4.6x, along with $2.0 billion in liquidity [6][7] Dividend and Valuation - The current dividend yield is 3.3%, with a payout ratio of 71% and a five-year CAGR of 18% [7] - Although REXR has a forward P/FFO of 21.6, it is below its historical average of 28.3, making the current valuation attractive given expected FFO growth of 10-14% from 2025 to 2027 [8] Preferred Stock Option - The Preferred Series C Stock offers a yield of 6.4% and is cumulative, providing a safer dividend option for conservative investors [9][10]