Rexford Industrial Realty Q1 Earnings Call Highlights

Key Points

• Leasing momentum despite soft market: Rexford reported a record 4.1 million square feet of leasing (over 70% higher year‑over‑year) and vacancy interest rose to ~90%, but Southern California fundamentals remain pressured with negative net absorption and quarter‑over‑quarter rent declines.
• Capital recycling and buybacks central to strategy: Management closed $144 million of dispositions (with ~$170 million under contract), sold five assets in the quarter, and repurchased $200 million of shares in Q1 ( $450 million cumulative), using sale proceeds to buy back stock at a discount to intrinsic value.
• Outlook and balance‑sheet position improved: Core FFO was $0.61, the company raised its 2026 core FFO and same‑property NOI midpoints and boosted expected average occupancy to ~95.1–95.6%, while ending the quarter at 4.5x net debt/adjusted EBITDA with $1.3 billion of liquidity and no significant maturities until 2027.

Rexford Industrial Realty NYSE: REXR reported first-quarter 2026 results highlighted by record leasing volume, continued capital recycling through asset sales and share repurchases, and an increase to full-year guidance as the company emphasized a strategy focused on occupancy and balance sheet flexibility amid still-pressured Southern California industrial fundamentals.

Record leasing volume as the company prioritizes occupancy

CEO Laura Clark said the company “delivered a strong quarter,” pointing to a record 4.1 million square feet of leasing activity. Clark said leasing activity in the Rexford portfolio was “over 70% higher year-over-year,” and added that interest in the company’s vacant spaces increased to “approximately 90%” compared with 75% last quarter and a year ago. She noted that leasing momentum built through the quarter, with “the majority of our leases executed in the second half of the quarter.”

COO John Nahas said the 4.1 million square feet of leasing was comprised of 144 deals averaging 29,000 square feet, with approximately 70% from renewals. He highlighted the renewal of Tireco at a 1.1 million-square-foot building on Production Avenue in Inland Empire West.

Cash re-leasing spreads in the quarter were negative 15.4% including Tireco, and negative 1.8% excluding the Tireco renewal, which Nahas said was in line with expectations. He characterized the Tireco renewal as strategic, citing visibility into a nearby potential vacancy that could have provided a relocation option for the tenant, as well as the cost and downtime risk associated with a potential vacancy next year. Nahas also said Rexford limited the extension term to three years and converted the lease to gross, enabling the company to collect “a material reduction in property tax assessments anticipated to occur over the term.”

While the Tireco renewal produced an approximately 30% negative spread, Nahas said the impact was magnified by “the above market in-place rent” from the prior extension and “is not indicative of future leasing spreads in the portfolio.”

Management sees early signs of market improvement, but fundamentals remain pressured

Clark said the first quarter reflected “a shift across the market” with increased tenant activity and higher leasing volumes, while acknowledging that “demand in certain submarkets and product types remains soft and market fundamentals are still under pressure.” She said the company views the improvement as “a necessary precursor to broader stabilization,” with the potential for eventual tightening in availability and lower vacancy.

Nahas said demand continued to come from consumption-related sectors including construction-related uses, food and beverage, and automotive businesses. He added that the company has “not seen a negative impact on demand related to the current geopolitical conflict.”

He described a bifurcated demand environment by size and location:

• Demand for spaces under 50,000 square feet “remains healthy and well diversified,” according to Nahas.
• For spaces over 50,000 square feet, tenant activity is “more submarket dependent,” with tenants generally seeking functional space “that can be leased at value rates.”

Nahas said Class A product in certain submarkets—San Fernando Valley, Orange County, and San Gabriel Valley—continued to see slower activity, which has contributed to delayed rent commencement on development projects delivered in those markets. He cited increased activity from 3PLs in Inland Empire West and from advanced manufacturers in parts of the San Fernando Valley and South Bay, referencing the stabilization of a repositioning project at 1315 Storm Parkway, a 38,000-square-foot South Bay building leased to an advanced manufacturer.

Despite improved activity, Nahas said the overall infill Southern California market continued to experience negative net absorption, with vacancy up 20 basis points and rents declining approximately 70 basis points versus the prior quarter. He added that deal terms aside from rate remained stable, including concessions and annual escalations.

Dispositions and share repurchases remain central to capital allocation

Clark said Rexford’s programmatic disposition strategy is intended to strengthen future cash flows and reduce development exposure. She reported $144 million of dispositions closed to date and another $170 million under contract or accepted offer, which she said kept the company on track to meet its annual target. Clark said dispositions are intended to “de-risk cash flows,” capture premium valuations, and “avoid future dilutive capital spend,” while funding capital recycling.

Nahas said five assets were sold during the quarter: two development projects that no longer met return requirements and three operating assets sold to users at premium valuations. He added that the company closed on one additional property sale after quarter-end and still had $170 million of additional dispositions under contract or accepted offer, subject to customary conditions.

In response to an analyst question about buyers and cap rates, Nahas said development-site buyers tend to be merchant developers and those deals are generally underwritten on land basis, rather than cap rates. For the operating assets sold to users, Nahas said pricing reflected “pretty strong cap rates,” with a blended rate below 4% on the three user sales. He said users often evaluate purchases on a price-per-square-foot basis and may also consider depreciation-related benefits, including for equipment and fixturization.

On capital redeployment, Clark said share repurchases were compelling given “the dislocation between Rexford’s public market valuation and the intrinsic value of our platform.” She said Rexford executed $200 million of share repurchases in the first quarter.

CFO Michael Fitzmaurice said the company repurchased $200 million of shares at a weighted average price of $36, bringing cumulative repurchases since mid-2025 to $450 million. Fitzmaurice said selling assets and redeploying into shares at a discount to intrinsic value was “meaningfully accretive” and was a key factor supporting the guidance increase. He added the company had $500 million remaining under its repurchase program and said buybacks are tied to disposition activity and evaluated opportunistically, balancing share price with the company’s leverage and other capital needs.

Pipeline adjustments and development expectations

Nahas said Rexford continues to evaluate each asset in its repositioning and development pipeline to maximize risk-adjusted returns, resulting in two projects being removed from the prior near-term pipeline. At Green Drive in the City of Industry, the company pivoted to a sale to meet user interest at a premium valuation, and at Mulberry Avenue in Inland Empire West, Rexford is forgoing a previously planned repositioning and offering the property for sale and for lease as-is.

He also said Ruffin Road in San Diego was added to the future development pipeline and is forecast to achieve a 200-basis-point development spread.

Fitzmaurice said the company expects to stabilize and commence rent on approximately 1.1 million square feet of value-add projects, generating $17 million of annualized NOI, with most coming online in the second half of the year. He said this was “down slightly” from earlier expectations due to rent commencement delays. He also said approximately $12 million of annualized in-place NOI is expected to come offline tied to 2026 construction starts, with the weighted average timing late in the third quarter.

Financial results and raised 2026 guidance

Fitzmaurice reported first-quarter core FFO per share of $0.61, which he said was $0.01 above the company’s internal forecast and up $0.02 sequentially from the fourth quarter of last year. He attributed the beat largely to stronger NOI growth and accretive share buybacks, while the sequential increase was driven primarily by lower G&A along with buybacks and stronger NOI growth.

Same-property NOI growth was 90 basis points on a net effective basis and negative 40 basis points on cash. Fitzmaurice said the year-over-year comparison benefited from average occupancy gains, but the quarter also saw higher concessions. He added that bad debt expense was elevated as expected, concentrated in a few tenants and “not broad-based,” and said the company’s tenant watch list “continues to trend low.”

On the balance sheet, Fitzmaurice said Rexford ended the quarter with net debt to adjusted EBITDA of 4.5x and $1.3 billion of total liquidity, with no significant maturities until 2027. He also noted that based on approximately $300 million of remaining dispositions expected by year-end, the company expects continued liquidity to deploy across “share buybacks, repositionings, and select developments.”

For full-year 2026, Fitzmaurice said the company raised its core FFO per share midpoint by $0.02, driven primarily by first-quarter outperformance from strong leasing activity and capital recycling. Rexford also raised its same-property NOI growth outlook by 50 basis points at the midpoint on both net effective and cash bases, and increased expected average same-property occupancy to 95.1% to 95.6%, up 30 basis points at the midpoint. He said the company’s bad debt assumption of 75 basis points of revenue and its net effective re-leasing spread assumption of 5% to 10% remained unchanged, as did assumptions for G&A of approximately $60 million and interest expense of approximately $112 million.

Fitzmaurice acknowledged “near-term pressure from re-leasing spreads” given market rent declines over the past three years, while reiterating the company’s focus on “control the controllables,” including occupancy and a pipeline representing roughly $50 million of NOI expected to come online over the next two-plus years.

About Rexford Industrial Realty NYSE: REXR

Rexford Industrial Realty, Inc NYSE: REXR is a real estate investment trust (REIT) specializing in the acquisition, ownership and operation of industrial properties in Southern California. The company's portfolio is concentrated in infill locations across key supply-chain markets, where it targets modern distribution centers, logistics facilities and light manufacturing spaces. Rexford's strategy emphasizes buildings that offer proximity to major transportation routes and labor pools, catering to tenants in e-commerce, third-party logistics and manufacturing industries.

Since its founding in 2013, Rexford Industrial Realty has executed a disciplined growth plan driven by property acquisitions, selective development projects and strategic value-add initiatives.

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