Rexford Industrial Realty Q2 Earnings Call Highlights

Key Points

• Rexford plans a major portfolio reset, targeting the sale of about $1.5 billion to $2 billion of non-core industrial assets. The company says most of the proceeds will go toward debt reduction, share repurchases, and higher-return investments.
• Balance sheet improvement is a major priority: Rexford expects to use roughly $1 billion of sale proceeds to pay down 2027 debt, which should cut net debt to adjusted EBITDA to about 3.5x from 4.5x. The board also approved a new $1 billion buyback program after the company repurchased $100 million of stock in Q2.
• Second-quarter results were steady, with guidance moving higher. Core FFO came in at $0.63 per share, occupancy improved to 95.1%, and management lifted full-year Core FFO and same-property NOI outlooks while lowering G&A guidance.

Rexford Industrial Realty NYSE: REXR said it is pursuing a broad portfolio realignment, planning to sell approximately $2 billion of non-core industrial assets while using a substantial portion of the proceeds to reduce debt, repurchase shares and selectively fund higher-return investments.

Chief Executive Officer Laura Clark said the planned dispositions encompass roughly 8 million square feet of properties identified through a first-half asset-by-asset review. The assets generally have more limited value-creation potential, elevated competitive supply, shorter remaining lease terms and in-place rents substantially above current market levels, according to the company.

Rexford expects the vast majority of the sales to close this year and said it is already in advanced discussions involving a substantial portion of the planned dispositions. Clark said the company’s retained core portfolio will comprise approximately 43 million square feet of assets that it believes have stronger long-term growth, cash-flow durability and embedded value-creation potential.

Debt Reduction and Repurchase Capacity

Chief Financial Officer Michael Fitzmaurice said Rexford updated its full-year disposition outlook to $1.5 billion to $2 billion. The company expects to use about $1 billion of projected proceeds to repay debt maturing in 2027 rather than refinancing it at higher interest rates.

Rexford expects the debt repayment to reduce net debt to adjusted EBITDA to approximately 3.5 times from 4.5 times at the end of the second quarter. Fitzmaurice said the company intends to pay off all but $575 million of its 2027 maturities during 2026, with the remaining amount repaid when it matures in March 2027. The company reduced its 2026 interest-expense guidance to $105 million.

The board also authorized a new $1 billion share-repurchase program. During the second quarter, Rexford spent $100 million to repurchase approximately 3 million shares at a weighted average price of $36 per share. Over the past year, the company has bought back about 15 million shares for $550 million, representing approximately 6% of shares outstanding, Fitzmaurice said.

Management did not disclose expected cap rates or pricing for the asset sales while negotiations remain underway. Clark said the company expects proceeds to be redeployed in a manner that is neutral to accretive to 2027 funds from operations per share. Fitzmaurice said the company sees debt savings, share repurchases and the removal of future rent roll-down risk as contributors to that outcome.

Second-Quarter Results and Updated Outlook

Second-quarter Core FFO was $0.63 per share, up $0.02 from the first quarter. Fitzmaurice attributed the increase to accretive share repurchases, settlement income and lower general and administrative expense.

• Cash same-property net operating income growth was 1.5%.
• Net effective same-property NOI growth was negative 0.5%.
• Same-property ending occupancy was 95.1%, up 30 basis points from a year earlier.
• Total liquidity at quarter-end was approximately $1.3 billion.

Rexford raised the midpoint of its full-year Core FFO-per-share outlook by $0.01, citing better-than-expected same-property NOI growth, lower G&A expense and second-quarter settlement proceeds. The company said the increase is partly offset by projected dilution from the timing of capital recycling activity.

It also increased its same-property NOI growth outlook by 75 basis points at the midpoint on both a cash and net effective basis. Average same-property occupancy guidance was raised to a range of 95.3% to 95.7%, a 15-basis-point increase at the midpoint. Cash re-leasing spreads are now expected to range from negative 15% to negative 10% for the year.

Rexford lowered G&A guidance to $57 million from its original $60 million target. Clark said the company identified an additional $3 million in G&A savings during the quarter, bringing total identified savings since 2025 to $22 million.

The company recorded a $625 million impairment charge during the quarter related to its shortened holding period for non-core assets targeted for sale. Fitzmaurice said the non-cash charge is excluded from Core FFO and does not indicate impairment risk across the broader portfolio. He also said tax losses associated with the sales are expected to offset tax gains, eliminating the need for a special dividend.

Southern California Leasing Conditions

Chief Operating Officer John Nahas said the broader infill Southern California industrial market recorded positive net absorption in the second quarter, while overall vacancy declined 30 basis points. Market rents, however, declined by slightly more than 1% sequentially as landlords continued to compete for leases amid elevated supply in certain areas.

Positive absorption occurred in the Inland Empire West and San Diego markets, while Greater Los Angeles posted its second consecutive positive quarter. Orange County continued to record negative absorption, though Nahas said touring activity has recently increased there. He described demand for spaces below 50,000 square feet as healthy and said activity in spaces exceeding 100,000 square feet was also improving, partly due to corporate demand for Class A properties.

Rexford executed 2.1 million square feet of leases during the second quarter, bringing year-to-date leasing volume to 6.2 million square feet, up 2 million square feet from the first half of 2025. Quarterly cash re-leasing spreads were negative 11.3%, primarily reflecting rent roll-downs from leases signed at the peak of the market.

The company’s average occupancy declined about 60 basis points sequentially due largely to several larger move-outs in Inland Empire West, including one related to a tenant bankruptcy. Nahas said that space was re-leased after quarter-end, with occupancy scheduled to begin in September. Fitzmaurice said occupancy is expected to decline by 15 to 100 basis points in the third quarter before accelerating in the fourth quarter.

Development Pipeline

Rexford started one new development project during the quarter, 16425 Gale in the City of Industry. Nahas said the cross-dock project will feature a demisable layout and is expected to be completed in late 2027.

Management said no assets from its repositioning and development pipeline, which is expected to generate approximately $50 million of annualized NOI once fully leased, are included in the planned sales. The company said it remains focused on projects expected to produce returns above stabilized market cap rates.

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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