Why Rexford Industrial Is Down 50% - And How To Trade It

Core Viewpoint - Rexford Industrial Realty, Inc. (REXR) has seen its stock price drop over 50% from its 2022 peak, reflecting market corrections rather than company failures [1][19]. Company Overview - Rexford owns a concentrated portfolio of premium warehouses in the Inland Empire, charging an annual rent of $16.71 per square foot, which is among the highest in the market [3]. - The company has a market capitalization of $9 billion and is recognized for its efficient scale and strong management [4]. Recent Performance - In Q4 2024, Rexford reported year-over-year growth rates of 8%-18% in key financial metrics such as FFO, AFFO, EBITDA, and NOI [5]. - Much of this growth was attributed to mark-to-market adjustments, as vintage leases were still based on lower rates from a decade ago, allowing for significant rent spreads on re-leasing [6]. Market Conditions - Market rental rates in Rexford's submarkets have shown weakness, with a decline of 1.5% sequentially and 8% year-over-year, although this is less severe compared to broader infill markets, which are down 12.5% year-over-year [8]. - The Inland Empire industrial market is currently facing challenges, as indicated by East Group Properties' strong performance in other regions [9]. Competitive Landscape - Rexford's stock decline is attributed to market mispricing rather than operational issues, as the market previously treated the boom in the Inland Empire as sustainable growth [12]. - The company has effectively capitalized on its asset selection during boom periods, doubling its earnings over the past six years [10]. Valuation Insights - Rexford's current trading multiple of 19.8X AFFO is closer to fair value, reflecting a correction from previous overvaluation [19]. - Despite a decline in leasing rates from 2023, they remain above 2014 levels, suggesting continued growth in NOI as leases roll [19]. Overall Assessment - Rexford Industrial Realty is considered a solid company with good assets and management, currently trading at a fair price, making it less attractive for immediate investment but worth monitoring for future opportunities [21][22].