Rexford sold $1.3B of Southern California industrial

Rexford Industrial Realty sold $1.3 billion of Southern California industrial property in the third quarter, 25 buildings totaling 5.5 million square feet. Dispositions now total $1.5 billion this year toward a $2 billion portfolio realignment, moving the company from the region's biggest industrial buyer to one of its largest sellers, according to Commercial Observer.

The EQT portfolio carried a 2.7-year weighted average remaining lease term and rents nearly 30% above market, COO John Nahas said on the third-quarter earnings call. The quarter included the previously announced $1.2 billion sale to EQT Real Estate, Rexford's largest deal ever. Rexford also sold three properties totaling about 251,000 square feet to owner-users for $86 million, or roughly $343 a square foot.

For allocators, the EQT sale provides a pricing benchmark: rents nearly 30% above market with under three years of weighted lease term imply the bid rested on mark-to-market upside rather than in-place income. On the remaining $500 million, CEO Laura Clark said rising Treasury yields are "impacting the cost of capital for certain buyers, and bringing more selectivity to the transaction market," while engagement "remains constructive." Clark expects most of the remaining sales to close by the end of this year.

Rexford signed 116 leases covering 3.74 million square feet in the third quarter, up from 2.1 million square feet in the second quarter and 3.27 million a year earlier. Same-property occupancy rose to 96.9% from 94.9% in the second quarter, below 97.1% a year earlier. Net effective rent spreads turned to 7.1% growth after a 2.8% decline in the second quarter; Clark called it the company's second-highest leasing quarter ever.

CFO Michael Fitzmaurice warned that leases signed near the 2022 and 2023 market peak could weigh on rent growth. Revenue slipped to $239.1 million in the third quarter, down from $245.5 million in the second quarter and $253.2 million a year earlier.

Rexford bought nothing in the third quarter. Clark said acquisitions remain part of the company's long-term strategy, but "other uses of capital are more compelling. We can afford to be patient."