Business Context and Reporting Period
This Form 8-K Current Report, filed on July 19, 2017, covers events occurring on July 13, 2017, and July 18, 2017, for Rexford Industrial Realty, Inc. (the "Company"). The filing details the entry into a material definitive agreement for debt financing and the completion of a significant asset acquisition in the South Bay submarket of California.
Key Financial Metrics and Transactions
Debt Financing
- Instrument: $125.0 million of senior guaranteed notes.
- Interest Rate: Fixed annual rate of 3.93%.
- Maturity: July 13, 2027.
- Payment Terms: Quarterly interest payments commencing October 13, 2017.
- Prepayment: Permitted at any time with a Make-Whole Amount provision.
Asset Acquisition
- Asset: Rancho Pacifica Industrial Park (Rancho Dominguez, California).
- Size: Approximately 1.2 million rentable square feet across six multi-tenant buildings.
- Purchase Price: $210.5 million (exclusive of closing costs).
- Occupancy: Over 99% leased to 23 tenants at acquisition.
- Concentration: Three largest tenants occupy 53.6% of total rentable square feet.
Liquidity and Funding
- Acquisition Funding: $125.0 million from the new Notes issuance and $102.0 million drawn from the unsecured revolving credit facility.
- Revolving Credit Facility Status: Total borrowings outstanding reached $234.0 million following the drawdown.
Material Changes and Covenants
The Company entered into a Note Purchase Agreement containing specific financial covenants that must be maintained:
- Total indebtedness to total asset value: Not more than 60%.
- Total secured debt to total asset value: Not more than 40%.
- Total secured recourse debt to total asset value: Not more than 15%.
- Minimum tangible net worth: At least $760,740,750 plus 75% of net equity proceeds received after September 30, 2016.
- Adjusted EBITDA to fixed charges: At least 1.50 to 1.0.
- Total unsecured debt to total unencumbered asset value: Not more than 60%.
- Unencumbered NOI to unsecured interest expense: At least 1.75 to 1.0.
The filing does not provide comparative financial metrics (revenue, profit, cash flow) for the current period versus the prior period, as this is a transactional report rather than a periodic financial statement.
Outlook, Risks, and Contingencies
Lease Expiration Risks
The acquisition introduces specific lease concentration risks. The three largest tenants account for 53.6% of the property's rentable square feet. Significant lease expirations are scheduled for 2020 (44.4% of annualized base rent) and 2018 (18.7% of annualized base rent).
Default Provisions
Events of default include failure to pay principal or interest, default on other indebtedness, covenant breaches, or bankruptcy. Upon default, the principal, accrued interest, and Make-Whole Amount become due and payable at the option of the purchasers.
Regulatory Status
The Notes were issued privately under Section 4(a)(2) of the Securities Act of 1933 and are not registered. Audited financial statements and pro forma financial information for the acquired business are not included in this filing but will be submitted via Form 8-K/A within 71 days.
Investor Verification Checklist
- Verify the Company's compliance with the new debt covenants, specifically the 60% total indebtedness to asset value ratio and the 1.50x EBITDA to fixed charges ratio.
- Review the upcoming lease expiration schedule for Rancho Pacifica Industrial Park, particularly the 44.4% of rent expiring in 2020.
- Confirm the total outstanding balance on the revolving credit facility ($234.0 million) and its impact on liquidity.
- Monitor the filing of the Form 8-K/A amendment for audited financial statements and pro forma data regarding the acquisition.
- Assess the concentration risk associated with the three largest tenants occupying over half of the acquired square footage.