Rexford Industrial Realty, Inc. (REXR - Free Report) recently announced the acquisition of two industrial properties in prime infill Southern California markets for a deal value worth $14.7 million. With these buyouts, the company’s 2020 acquisition activity grossed $269.7 million.
Particularly, in Yorba Linda within the Orange County — North submarket, the company purchased 22895 Eastpark Drive for $6.8 million. With a sprawling 34,950 square feet on 2.35 acres of land, this single-tenant property is entirely leased on a long-term basis.
In San Diego and specifically within the San Diego — Central submarket, the company acquired 8745 and 8775 Production Avenue for $7.9 million. Comprising two industrial buildings with an aggregate area of 46,820 square feet on 2.85 acres of land, this property is 65% leased at rents, estimated to be 15% below the market rates. After value-add repositioning of this property, the company plans to re-lease at higher market rates.
These acquisitions, which were funded using cash on hand and the existing debt assumption on one of the properties, seem a strategic fit for Rexford. In fact, Southern California is considered the nation's highly-valued industrial property market with supply constraints. Per CBRE Group (CBRE - Free Report) , at the end of first-quarter 2020, the vacancy rate in the 115 million square foot Orange County North submarket was 1% while the same in the 80 million square foot San Diego Central submarket was 4.5%.
Amid the e-commerce boom and supply-chain strategy transformations, demand for industrial real estate has been strong. In light of the coronavirus pandemic, warehouse operations became more essential with increasing e-commerce customers. Over the long term, apart from the fast adoption of e-commerce, the logistics real estate is expected to benefit from the likely rise in inventory levels post the pandemic crisis. This will open up prospects for Rexford and other industrial REITs like Duke Realty Corp. (DRE - Free Report) , Prologis (PLD - Free Report) and others.
Notably, equipped with a well-capitalized balance sheet, an active investment pipeline and an inorganic growth story of roughly $270 million so far in the year, Rexford remains well-poised to gain traction from its favorable fundamentals.
However, the pandemic’s adverse impact on the economy will likely thwart demand for rental space in the near term. Rent relief and deferrals are added concerns.
Shares of this currently Zacks Rank #3 (Hold) company have depreciated 10.4% so far in the year compared with the 8.5% decline of its industry. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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