Rexford Industrial Realty Inc (REXR) Q2 2025 Earnings Call Highlights: Strong Leasing Activity ...
Leasing Spreads: Net effective leasing spreads at 21%, cash leasing spreads at 8%.
Embedded Rent Steps: Averaged 3.7%, up 10 basis points from last quarter.
Same Property Occupancy: 96.1%, an increase of 40 basis points sequentially.
Net Absorption: Positive 220,000 square feet.
Market Rent Decline: 3.5% sequentially, 12.8% year over year.
Repositioning and Redevelopment Lease Up: 520,000 square feet executed, total year-to-date over 900,000 square feet.
Annualized NOI from Repositioning: Over $16 million, with a 7.4% unlevered stabilized yield.
Dispositions: $82 million in the quarter, year-to-date $134 million at a low 4% cap rate.
Core FFO: $0.59 per share, $0.01 increase over the prior quarter.
Full Year 2025 Core FFO Outlook: $2.37 to $2.41 per share.
Incremental Cash NOI Opportunity: $195 million, representing growth of 28%.
Liquidity: Over $1.8 billion, including $560 million of cash.
Net Debt to EBITDA: 4 times.
Warning! GuruFocus has detected 5 Warning Signs with REXR.
Release Date: July 17, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
Rexford Industrial Realty Inc (NYSE:REXR) executed 1.7 million square feet of leases, including lease-up of four repositioning and redevelopment projects.
The company achieved a same property occupancy rate of 96.1%, an increase of 40 basis points sequentially.
Rexford Industrial Realty Inc (NYSE:REXR) reported de minimis levels of bad debt at only 6 basis points of revenue, indicating strong tenant health.
The company has a substantial embedded growth opportunity within its portfolio, totaling $195 million of incremental cash NOI, representing growth of 28%.
Rexford Industrial Realty Inc (NYSE:REXR) has over $1.8 billion of liquidity, including $560 million of cash, and a low leverage balance sheet with net debt to EBITDA of 4 times.
Negative Points
Market rents across Rexford's portfolio declined approximately 3.5% sequentially and 12.8% year over year.
Macroeconomic and tariff uncertainty are impacting tenant decision-making, putting pressure on overall demand, rent levels, and lease-up time frames.
The company has no acquisitions under contract or accepted offer currently, despite actively pursuing potential opportunities.
Rexford Industrial Realty Inc (NYSE:REXR) expects some deceleration in occupancy in the second half of the year due to planned move-outs within the same property portfolio.
The company experienced delays in rent commencements on repositioning and redevelopment projects, impacting financial projections.
Q & A Highlights
Q: Can you discuss the potential future repositioning and redevelopment starts and the variability in the timeline for these projects? A: Michael Fitzmaurice, CFO, explained that the pipeline is somewhat fluid and can change quarter to quarter. The biggest driver currently is the Hertz asset, which will have a significant impact when its lease expires in March 2026. Laura Clark, COO, added that the Hertz asset is an irreplaceable location adjacent to LAX, and they are ready to start development to deliver a 400,000 square foot building there.
Q: How do you view the 3% cash mark to market going forward, and what impact could it have on cash same-store growth? A: Laura Clark, COO, noted that the cash mark to market is currently at 3%, and its future trend will depend on market rent growth. Only about 15% of the portfolio rolls annually, so future leasing spreads will depend on the mix of units and properties rolling. Rexford's growth is not dependent on mark to market, as there is significant embedded growth within the portfolio from repositioning and redevelopment projects.
Q: Are you seeing opportunities to invest at higher cap rates, and is share buyback a consideration given the current cost of capital? A: Laura Clark, COO, stated that their capital allocation principles remain unchanged, focusing on cash flow accretion and net asset value. They continue to evaluate acquisition opportunities that meet stringent criteria and are looking to recycle disposition proceeds at higher yields. Share buybacks were not specifically addressed, but the focus remains on repositioning and redevelopment for attractive returns.
Q: Can you elaborate on the delays in rent commencements for repositioning and redevelopment projects? A: Laura Clark, COO, mentioned that they feel good about the progress, having leased about 900,000 square feet, with 1.5 million square feet remaining. Rent commencement assumptions are late in the year, with a slight delay of about one month on average due to market dynamics. They have activity on 80% of the remaining space and are comfortable with their projections.
Q: How has tenant behavior changed in terms of lease terms and renewal activity? A: Laura Clark, COO, noted that lease terms have remained steady at four to five years on average. Renewal activity has been strong, with tenants approaching earlier for renewals. Early renewals have doubled compared to the previous year, indicating tenants' need to secure space and their long-term strategic planning.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.
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