Rexford Industrial Realty, Inc. — Q3 2021 Form 10-Q
Reporting period: Three and nine months ended September 30, 2021. Rexford is a REIT focused on owning, operating, acquiring, and redeveloping industrial properties in Southern California infill markets. At quarter-end, its portfolio comprised 278 properties and approximately 34.9 million rentable square feet; it also managed 20 properties totaling about 1.0 million square feet.
Financial performance and position
| Metric | Q3 2021 | Q3 2020 | Nine months 2021 | Nine months 2020 |
|---|---|---|---|---|
| Total revenue | $115.4 million | $83.9 million | $319.5 million | $241.5 million |
| Net income | $40.2 million | $31.2 million | $96.9 million | $62.7 million |
| Net income attributable to common stockholders | $31.5 million | $25.9 million | $77.0 million | $48.1 million |
| Diluted EPS | $0.23 | $0.21 | $0.57 | $0.40 |
| FFO attributable to common stockholders | $55.3 million | $40.5 million | $155.7 million | $116.8 million |
| Operating cash flow | — | — | $179.9 million | $146.6 million |
Q3 rental income rose 37.8% year over year, while same-property rental income increased 7.7%. Nine-month total revenue rose 32.3%; same-property rental income also grew 7.7%. Growth in the total portfolio primarily reflects acquisitions, alongside stronger occupancy and rents. Net income includes gains on property sales of $13.7 million in Q3 and $27.3 million year to date. Q3 NOI was $87.8 million, or approximately 76% of revenue; cash NOI was $78.7 million. These are non-GAAP measures. The $3.3 million charge for original issuance costs from redeeming Series A preferred stock reduced income available to common stockholders, but not reported net income.
At September 30, total assets were $6.22 billion, notes payable were $1.40 billion gross ($1.39 billion carrying value), cash and cash equivalents were $60.2 million, and total equity was $4.53 billion. Management reported net debt to total combined market capitalization of approximately 12.7%. Debt had a weighted-average interest rate of 2.83% and average remaining term of 7.8 years; 96% was effectively fixed-rate. The company had no revolver borrowings at quarter-end and $700 million available. As of the filing date, it reported $12 million drawn and $688 million available. All quarterly debt covenants were met.
Operating cash flow was $179.9 million; investing used $1.35 billion, chiefly for real estate acquisitions; financing provided $1.06 billion, mainly from common-stock issuance and borrowing activity. Cash, cash equivalents, and restricted cash ended at $60.2 million, down from $177.5 million at the start of the year. The quarterly common dividend was $0.24 per share; the board declared the same amount for the next quarter.
Material changes versus comparable periods
- Q3 net income increased 28.8% and common-stockholder net income increased 21.8% year over year; diluted EPS rose from $0.21 to $0.23. Nine-month net income increased 54.4% and diluted EPS rose from $0.40 to $0.57.
- Same-property occupancy at September 30 was 98.8%, versus 98.3% a year earlier; weighted-average same-property occupancy was 98.6% in Q3 versus 97.8%.
- For the nine months, new leases achieved 41.3% GAAP and 26.7% cash leasing spreads; renewals achieved 46.8% and 32.7%, respectively. Retention was 75.0%.
- Acquisitions materially expanded the portfolio: 34 wholly owned properties were acquired year to date for a gross contractual purchase price of approximately $1.34 billion. Q3 acquisitions totaled 13 properties and $880.5 million. Four properties were sold year to date for $47.6 million gross, generating $27.3 million of gains.
- Gross debt increased from $1.22 billion at December 31, 2020, to $1.40 billion at September 30, 2021. The company issued $400 million of 2.150% senior notes due 2031, repaid its $225 million term loan, and redeemed all Series A preferred stock for approximately $90.7 million including accrued dividends.
- Common shares outstanding increased to 151.4 million from 131.4 million at year-end 2020, reflecting substantial equity issuance. A September offering included 6.5 million shares sold under forward equity agreements; expected net proceeds upon settlement were $379.6 million as of quarter-end.
Outlook, commentary, and risks
- Management described Southern California infill industrial markets as supply-constrained, with strong tenant demand, low vacancy, and rising asking rents. It expected favorable market conditions and potential rent increases to continue through the rest of 2021 and into 2022; the filing provides no formal earnings or FFO guidance.
- At quarter-end, the consolidated portfolio was 96.1% occupied, including repositioning space; stabilized portfolio occupancy excluding that space was 98.4%. Nine properties were under repositioning or redevelopment, with 12 additional projects in the pipeline. Management estimated approximately $241.6 million of capital would be required over 2021–2023 to complete these projects, subject to cost and timing changes.
- Management reported collection of 98.8% of Q3 contractual billings as of October 21. Of $4.6 million in COVID-related rent deferrals granted since the pandemic began, approximately $4.2 million, or 98.0% of amounts due, had been collected; $0.3 million remained outstanding at September 30. Local eviction restrictions and rent-deferral rights, particularly in Los Angeles County, remained a potential uncertainty.
- Tenant improvement and construction commitments were approximately $68.2 million. Risks include acquisition execution and integration, tenant defaults or non-renewals, rent and vacancy changes, construction delays or cost inflation, interest rates and refinancing, environmental matters, and the company’s concentration in Southern California. No material adverse legal proceedings or environmental liabilities were reported; no property impairment charges were recorded.
- The company stated that proceeds from its 2031 notes are intended for eligible green building, efficiency, and renewable-energy projects. Pending allocation, proceeds supported debt repayment, the preferred-stock redemption, and acquisitions. A $20.4 million loan prepayment fee was included in the reported acquisition price for 3100 Lomita Boulevard; separately, repayment of the $225 million term loan caused a $0.5 million write-off of unamortized debt issuance costs.
Most important facts for investors to verify
- Separate organic same-property growth from acquisition-driven growth and property-sale gains; review recurring cash earnings alongside GAAP net income and non-GAAP FFO/NOI.
- Confirm the status, timing, leasing, and total cost of repositioning and redevelopment projects, including the $241.6 million estimate and construction commitments.
- Track occupancy, tenant collections, lease expirations, and realized renewal spreads as COVID-related rent protections expire.
- Reconcile quarter-end liquidity with the filing-date revolver draw, and monitor debt maturities, covenant headroom, ratings, and interest-rate exposure.
- Assess the effect of equity issuance and unsettled forward sales on share count, per-share results, and future funding needs.