Rexford Industrial Realty, Inc. — Q1 2021 Form 10-Q
Reporting period: Three months ended March 31, 2021. Rexford is a REIT focused on industrial properties in Southern California infill markets. At quarter-end, its portfolio comprised 257 properties and approximately 32.1 million rentable square feet; it also managed 20 properties totaling approximately 1.0 million square feet. Financial amounts below are in U.S. dollars.
Financial performance and position
| Metric | Q1 2021 | Q1 2020 / prior date |
|---|---|---|
| Total revenue | $99.8 million | $77.7 million; up 28.4% |
| Net income | $30.6 million | $15.3 million |
| Net income attributable to common stockholders | $24.9 million; $0.19 per diluted share | $10.8 million; $0.09 per diluted share |
| FFO attributable to common stockholders | $47.9 million | $37.5 million |
| Net operating income (NOI) / Cash NOI | $76.1 million / $69.2 million | $59.4 million / $55.3 million |
| Cash from operating activities | $36.4 million | $46.5 million |
| Cash and cash equivalents | $123.9 million | $176.3 million at December 31, 2020 |
| Notes payable, carrying value | $1.219 billion | $1.216 billion at December 31, 2020 |
Rental income increased 28.6% to $99.6 million, reflecting acquisitions as well as 6.0% growth in stabilized same-property rental income. Total portfolio property expenses rose 30.1% to $23.6 million; general and administrative expense increased 23.2% to $11.5 million. Results included $10.9 million of gains from two property sales; there were no property-sale gains in Q1 2020.
Cash used in investing activities was $172.4 million, mainly for acquisitions and capital expenditures; cash provided by financing activities was $82.5 million, including $118.3 million of net proceeds from direct common-stock sales. Operating cash flow declined year over year primarily because property-tax installments were paid in March 2021 versus April 2020.
Gross debt was $1.226 billion, with a 3.06% weighted average effective interest rate and 6.4-year average term to maturity. Approximately 95% of debt was effectively fixed-rate; $58.5 million was variable-rate. The $500 million revolving facility was undrawn, and the company reported compliance with its debt covenants. Debt maturities included $289.8 million in 2023. The filing reports net debt at approximately 13% of total combined market capitalization.
Changes and operating indicators
- Total portfolio revenue and expenses reflect a larger portfolio, including 49 properties acquired between January 2020 and March 2021. Stabilized same-property rental income rose 6.0%; weighted average occupancy for that portfolio increased to 98.4% from 98.0%.
- At March 31, total portfolio occupancy was 95.8%, including repositioning space; stabilized portfolio occupancy excluding that space was 98.3%.
- New-lease GAAP and cash spreads were 43.8% and 26.7%; renewal-lease spreads were 48.5% and 35.4%. Retention was 79.2%.
- The company acquired 11 properties for a gross contractual purchase price of $163.5 million and sold two properties for $20.8 million gross. It issued 2.4 million common shares directly under its ATM program for $118.3 million net and entered a forward sale agreement covering 1.5 million shares.
Outlook, risks and unusual items
No quantified full-year earnings guidance is provided. Management described Southern California infill industrial demand and market fundamentals as strong, and expected positive renewal rates and leasing spreads for the remainder of 2021, while cautioning that market trends may not continue. It reported approximately $445 million of acquisitions under contract or letter of intent as of the filing date, without assurance they would close, and estimated approximately $210.6 million of capital over 2021–2023 for repositioning and redevelopment projects.
COVID-19-related local eviction restrictions and rent-deferral rights remained uncertain and could be extended. As of April 22, the company had collected 98.3% of Q1 contractual billings; outstanding rent deferrals at March 31 were $676,000, of which $535,000 was due during the remainder of 2021. It collected 97.9% of deferred payments due as of March 31 by April 22. The company recognized a $0.5 million net reduction in rental income from collectability assessments in Q1.
Key risks include the company’s concentration in Southern California, tenant defaults or nonrenewals, pandemic-related effects, acquisition and redevelopment execution, construction delays or cost increases, interest rates, refinancing and maintaining investment-grade ratings, and environmental liabilities. The company reported no material adverse legal proceedings, no property impairment charges, and no material changes to the risk factors in its 2020 Form 10-K. It had $42.6 million of tenant-improvement and construction commitments. A $0.6 million remaining loss from a terminated swap is expected to be amortized into interest expense through August 2021; management estimated another $6.8 million would be reclassified from accumulated other comprehensive loss to interest expense over the next 12 months.
The board declared a quarterly common dividend of $0.24 per share for payment July 15, 2021. This compares with $0.215 per share declared for Q1 2020. The company also declared preferred dividends at the stated series rates.
Important facts for investors to verify
- How much of reported earnings growth reflects recurring operations versus the $10.9 million property-sale gain, and how do FFO, NOI and cash flow trend?
- Whether leasing spreads, occupancy, collections and deferred-rent repayment remain strong as COVID-related protections change.
- Whether planned acquisitions close and redevelopment projects meet estimated cost, timing and lease-up expectations.
- How equity issuance and the unsettled forward sale affect share count, proceeds and per-share results.
- Debt maturities, covenant headroom, refinancing costs, and the effect of variable rates and swap-related expense.