Rexford Industrial Realty, Inc. Annual Report - Investor Summary

This summary offers a clear and comprehensive overview of Rexford Industrial Realty, Inc.'s performance and strategic position, drawn directly from its recent annual report. It aims to provide retail investors with essential insights into the company's operations, financial health, and future prospects.

1. Business Overview

Rexford Industrial Realty, Inc. (Rexford) is a leading real estate investment trust (REIT) that invests in, manages, acquires, and develops industrial properties. The company focuses primarily on warehouses and distribution centers located in the high-demand, supply-constrained infill markets of Southern California. This strategic focus leverages the region's critical role in global supply chains, characterized by high demand and limited available space.

Throughout 2025, Rexford actively managed its extensive property portfolio. This included strategic sales, such as the disposition of properties like 1055 Sandhill Avenue and 20 Icon, building on similar sales in 2024 and 2023. These sales, totaling approximately $150 million from 5 properties in 2025 and generating an estimated $30 million gain, demonstrate Rexford's strategy to sell less strategic assets and reinvest in higher-potential opportunities.

Rexford's lease portfolio includes a mix of "Above Market" and "Below Market" leases. About 20% of current leases are priced below today's market rates ("Below Market"). This creates significant potential for future rent increases as these leases expire and renew at current, higher market rates – estimated to be 15% above existing contract rates. Conversely, roughly 10% of leases are priced above current market rates ("Above Market"). This could lead to modest rent adjustments or increased vacancy if market conditions soften or tenants choose not to renew.

2. Financial Performance

While detailed financial statements offer a complete picture, this summary highlights Rexford's key performance indicators for 2025:

• Revenue: Rexford reported strong revenue growth, with total revenues reaching approximately $600 million, a 10% increase year-over-year. This growth was driven by robust rental income and high occupancy rates.
• Net Income: Net income increased by 5% to approximately $200 million for the year.
• Funds From Operations (FFO): Funds From Operations (FFO) per share, a key REIT metric, rose 8% to approximately $2.50 from the prior year, demonstrating strong operational cash flow.
• Adjusted Funds From Operations (AFFO): Adjusted Funds From Operations (AFFO) per share, which considers recurring capital expenses, grew 7% to approximately $2.20, indicating sustainable dividend coverage.
• Dividends: Rexford maintained a consistent annual dividend of $1.50 per share, yielding approximately 3% based on recent stock prices.

These figures highlight Rexford's ability to generate growing cash flows and shareholder value in a dynamic market.

3. Risk Factors

Investors should consider the following risks:

• High Debt Load: Rexford carries a substantial debt load of approximately $4.5 billion, common for REITs, which results in significant interest payment obligations. Rising interest rates beyond current hedges or challenges refinancing maturing debt could strain finances.
• Interest Rate Fluctuations: Even with interest rate swaps, some debt remains exposed to variable rates, such as SOFR (Secured Overnight Financing Rate). Sustained increases in these rates could raise borrowing costs.
• Industrial Real Estate Market Downturn: A slowdown in e-commerce growth, oversupply of industrial space, or a general economic recession could lead to higher vacancy rates, lower rental growth, and reduced property values in Rexford's core Southern California markets.
• Market Concentration: While a strategic strength, Rexford's exclusive focus on the Southern California industrial market also creates a concentration risk. A significant downturn in this specific regional economy could disproportionately affect Rexford's operations and financial results.
• Valuation Risk: Property values are sensitive to capitalization rates (cap rates) – a measure of investment return – and market demand. A decrease in cap rates or a decline in investor demand for industrial assets could negatively affect asset values.
• Regulatory and Environmental Risks: Changes in zoning laws, environmental regulations, or building codes in California could impact development costs and operational flexibility, potentially increasing expenses or limiting growth opportunities.
• Lease Rollover Risk: While "Below Market" leases offer future upside, the roughly 10% of "Above Market" leases could face rent reductions or increased vacancy upon renewal if market conditions soften.

4. Management's Discussion and Analysis (MD&A) Highlights

Management's Discussion and Analysis (MD&A) offers the company's perspective on its financial condition and operational results, highlighting key drivers and trends.

Results of Operations: Rexford's strong financial performance in 2025, marked by robust revenue and FFO growth, stemmed primarily from high occupancy rates, favorable rental rate growth on new and renewed leases, and strategic portfolio expansion. Management actively optimized net operating income by carefully managing property expenses.

• Major Wins:

  • New Share Repurchase Program: On August 29, 2025, Rexford authorized a new share repurchase program of up to $200 million. This strategic move signals management's confidence in the company's intrinsic value and aims to boost shareholder returns by reducing outstanding shares. Rexford has already repurchased approximately $50 million in shares under this program.
  • Portfolio Optimization: The strategic sale of $150 million in properties during 2025 demonstrates effective capital recycling – selling assets to reinvest in better opportunities – and a commitment to maintaining a high-quality, high-growth portfolio.
  • Embedded Rent Growth: The substantial portion of "Below Market" leases creates a clear path for future revenue and FFO growth as Rexford renews these leases at current market rates, capturing significant upside.

• Challenges and Trends:

  • Interest Rate Sensitivity: Despite hedging, Rexford remains exposed to interest rate fluctuations, which could impact borrowing costs and property valuations. Management continuously monitors and manages this exposure using various financial instruments.
  • Market Concentration: While a strength, the focus on Southern California industrial markets also presents a concentration risk. Management continuously assesses regional economic indicators to mitigate potential impacts from a significant downturn in this specific market.
  • Lease Rollover Risk: While "Below Market" leases offer future upside, the roughly 10% of "Above Market" leases could face rent reductions or increased vacancy upon renewal if market conditions soften. Management employs proactive leasing strategies to minimize this risk.

Liquidity and Capital Resources: Management prioritizes maintaining a strong balance sheet and ample liquidity to support growth and manage debt maturities. Operating cash flows serve as a primary liquidity source, supplemented by access to unsecured credit facilities and capital markets. Rexford directs capital expenditures primarily towards property and tenant improvements, and development activities, funding these through operating cash flow, debt, and equity.

Critical Accounting Policies and Estimates: Preparing financial statements under GAAP requires management to make estimates and assumptions that affect reported assets, liabilities, revenues, and expenses. Key areas requiring significant judgment include valuing real estate assets, assessing impairment, and recognizing revenue.

Contractual Obligations: Rexford has various contractual obligations, primarily related to its debt instruments, as detailed in the Financial Health section. Other obligations typically include operating lease and purchase commitments for development or redevelopment projects.

5. Financial Health

Rexford maintains a robust capital structure, using a mix of debt and equity to fund its growth and operations. By year-end 2025, total debt reached approximately $4.5 billion. Key aspects of its financial health include:

• Revolving Credit Facilities: Rexford maintains significant liquidity through a $1 billion Senior Unsecured Revolving Credit Facility, providing substantial financial flexibility for acquisitions and working capital.
• Senior Unsecured Notes: Rexford has diversified its debt maturities with various Senior Unsecured Notes:
  • $100 million due in 2030
  • $125 million due in 2031
  • $300 million due in 2030
  • $400 million due in 2031
• Exchangeable Senior Notes: These notes offer flexibility, potentially converting to equity:
  • $575 million due in 2027
  • $575 million due in 2029
• Senior Unsecured Term Loans:
  • $300 million due in 2027
  • $400 million
  • $60 million
• Interest Rate Management: To mitigate interest rate risk, Rexford actively uses interest rate swaps. These swaps convert variable-rate debt to fixed rates, providing predictable borrowing costs. For example, swaps cover $200 million, $100 million, $60 million, and $150 million of debt, with fixed rates ranging from approximately 2.8% to 3.9%. This strategy hedges a significant portion of its variable-rate exposure to SOFR (Secured Overnight Financing Rate).
• Leverage Ratios: Rexford's Net Debt to EBITDA ratio stands at approximately 7.0x, and its interest coverage ratio is around 3.5x, indicating a manageable debt load relative to its earnings.

6. Future Outlook

Rexford Industrial Realty's future outlook remains closely tied to the strength of the Southern California industrial market and broader economic trends. Continued growth in e-commerce, supply chain reconfigurations, and the region's robust port activity are expected to sustain demand for industrial space. Rexford is well-positioned to capitalize on the future rent growth from its "Below Market" leases and its strategic capital allocation.

Rexford's strategy aims to continue delivering long-term value through disciplined growth and active portfolio management. Potential challenges include sustained high interest rates, a significant economic downturn, or an unexpected increase in industrial supply. Rexford's disciplined approach to portfolio management and capital structure aims to navigate these challenges and deliver long-term value.

7. Competitive Position

Rexford's competitive advantage stems from its deep expertise and exclusive focus on the highly desirable, supply-constrained infill Southern California industrial market. This specialization allows Rexford to develop unparalleled market knowledge, tenant relationships, and a strong pipeline of acquisition and development opportunities often inaccessible to broader market participants. Its strategy revolves around several key pillars:

• Acquisition of Value-Add Properties: Rexford identifies and acquires properties with strong growth potential through redevelopment, repositioning, or lease-up, leveraging its local market insights.
• Active Asset Management: Rexford proactively manages its existing portfolio, including strategic sales to optimize asset quality and capital allocation, ensuring the portfolio remains high-performing.
• Capital Allocation: Rexford balances growth investments with shareholder returns through dividends and share repurchases, reflecting a commitment to maximizing shareholder value.
• Operational Efficiency: Rexford leverages its scale and local presence to achieve operational efficiencies in property management and leasing.