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Introduction & Market Context
Rexford Industrial Realty (NYSE:REXR) released its second quarter 2025 earnings presentation on July 17, highlighting the company’s performance amid challenging market conditions in Southern California’s industrial real estate sector. Despite facing accelerating market rent declines, Rexford maintained its full-year guidance and emphasized its strong balance sheet position.
The industrial REIT, which focuses exclusively on infill Southern California properties, saw its stock close at $36.32 on July 16, up 0.33% for the day and showing recovery from its 52-week low of $29.68, though still well below its 52-week high of $52.61.
Quarterly Performance Highlights
Rexford reported mixed financial results for the second quarter. Core FFO per share came in at $0.59, representing a 1.7% year-over-year decline. However, year-to-date Core FFO reached $1.21, reflecting a 3.4% increase compared to the same period last year. The company maintained its 2025 guidance of $2.37-$2.41 per share, projecting annual growth of 1-3%.
Same Property Cash NOI growth remained positive at 3.9% for Q2 and 4.5% year-to-date, demonstrating Rexford’s ability to generate consistent cash flow despite market headwinds.
On the operational front, Rexford executed 1.7 million square feet of leasing during Q2, bringing the year-to-date total to 4.1 million square feet. The company achieved impressive net effective leasing spreads of 20.9% in Q2 and 22.6% year-to-date, significantly outperforming the broader market. Same property occupancy remained strong at 96.1% at quarter-end.
Strategic Initiatives
Rexford continues to focus on value creation through its repositioning and redevelopment strategy. During Q2, the company stabilized two projects totaling 331,000 square feet with a total investment of $76 million, achieving an unlevered stabilized yield of 7.3%. Year-to-date, seven projects have been stabilized, representing 891,000 square feet and $221 million in total investment with a 7.4% yield.
The company also demonstrated disciplined capital recycling, completing two dispositions in Q2 for a total of $82 million with an unlevered IRR of 12.8%. Year-to-date, Rexford has sold three properties for $134 million, generating an 11.9% unlevered IRR.
Rexford highlighted its strong balance sheet with $1.8 billion in total liquidity and a conservative net debt to EBITDA ratio of 4.0x. The company maintains 100% fixed-rate debt with a weighted average maturity of 3.7 years and investment-grade credit ratings of BBB+ from S&P and Fitch, and Baa2 from Moody’s.
Market Challenges
Perhaps the most significant challenge facing Rexford is the accelerating decline in market rents across Southern California. The presentation revealed that market rents decreased by 3.5% quarter-over-quarter and 12.8% year-over-year across Rexford’s infill Southern California markets.
The decline was most pronounced in Greater Los Angeles (-4.1% QoQ, -13.8% YoY) and Orange County (-4.0% QoQ, -10.9% YoY), while San Diego showed more resilience (-0.9% QoQ, -5.7% YoY). These market rent declines have impacted Rexford’s mark-to-market potential, which decreased from 20% in Q1 2025 to 15% at the end of Q2.
This represents a significant acceleration from the 2.8% sequential decline reported in Q1, indicating worsening market conditions for industrial landlords in Southern California.
Forward-Looking Statements
Despite these challenges, Rexford remains optimistic about its long-term growth prospects. The company highlighted substantial embedded NOI growth potential of $195 million, representing a 28% increase over its annualized Q2 NOI of $694 million. This growth is expected to come from three main sources: $20 million from mark-to-market opportunities in the current portfolio, $70 million from repositioning and redevelopment projects in process or lease-up, and $105 million from annual embedded rent steps.
For 2025, Rexford maintained its Core FFO guidance of $2.37-$2.41 per share, despite a slight negative adjustment of $0.01 from repositioning/redevelopment NOI, offset by a $0.01 positive adjustment in net interest expense.
During the Q1 earnings call, executives had emphasized the company’s strategic advantage of operating in a fully built-out Southern California market. COO Laura Clark stated, "Our portfolio continues to be well positioned over the medium to longer term," while CFO Mike Fitzmaurice highlighted the company’s "offensive position" and opportunity to be patient in the current market.
As Rexford navigates the challenging market environment, its focus on infill Southern California, strong balance sheet, and substantial embedded growth potential position it to weather the current market rent declines while maintaining its long-term growth trajectory.
Full presentation:
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