Rexford Industrial Realty is accelerating its transformation from one of Southern California's most aggressive industrial buyers to potentially the region's largest seller. The Los Angeles-based Real Estate Investment Trust (REIT) has identified approximately USD 2 billion worth of “non-core assets” for disposal, as it continues to prioritise keeping tenants in Rexford buildings. This forecast for property sales is a significant increase from the previous range of USD 400 million to USD 500 million.
During the REIT's earnings call on Friday, CEO Laura Clark explained that the disposal pool comprises approximately 8 million square feet which have limited value-creation potential, shorter lease terms, and rents significantly above market rates – typically by more than 20 percent. Chief Financial Officer Michael Fitzmaurice added that approximately USD 1 billion will be used to repay debt maturing in 2027, rather than refinancing in a higher interest rate environment. The remaining proceeds will be influenced by market conditions. Fitzmaurice stressed that they are not divesting to remain idle, but to reinvest.
The vast majority of Rexford's property sales are expected to be completed before the end of the year. Ms Clark expressed optimism, saying they anticipate pricing will reach levels that allow for the redeployment of proceeds on a neutral to accretive basis through FFO per share by 2027, without dilution. Rexford stated it sold seven properties totalling approximately 572,000 square feet for USD 137.9 million in the second quarter, following the disposal of five properties for USD 127.4 million in the first quarter. The company, previously known for multi-billion dollar shopping sprees, has made no acquisitions this year.
Financial Results and Strategic Reorientation
Rexford plans to use the proceeds from property sales for debt repayment, share buybacks, and to pursue higher-yielding investments. The company bought back USD 100 million worth of shares during the quarter, bringing buybacks in 2026 to USD 300 million, and its board subsequently approved a new USD 1 billion buyback programme. The intensified disposal strategy was also accompanied by a net loss of USD 506.9 million attributable to shareholders, compared to a net profit of USD 87.9 million in the first quarter and USD 113.4 million in the second quarter of 2025. The most recent result included non-cash impairment charges of USD 624.8 million, which were attributable to properties whose expected holding periods were shortened following the intent to sell.
Core Funds from Operations (FFO), a key cash flow metric, rose to USD 141.4 million, up from USD 139.8 million in the previous quarter and USD 139.7 million a year ago. Total rental income reached USD 243 million, a slight increase from USD 242.1 million in the previous quarter. Rexford completed 117 new and renewed lease agreements covering 2.1 million square feet, a decrease from the record 4.1 million square feet in the first quarter. In total, this included 840,344 square feet of new leases and 1.26 million square feet of renewals. Rexford's leasing activities continue to be supported by a diverse mix of industries, including advanced manufacturing and consumer-related uses such as logistics, food and beverages, automotive, and construction.
Market Outlook and Current Developments
John Nahas, Chief Operating Officer, reported healthy demand across the portfolio for spaces under 50,000 square feet and increasing activity for spaces over 100,000 square feet. Lease mark-to-market – the comparison of previous rents after renewals – was negative in both quarters this year. Comparable rents fell by 2.8 percent on a net basis and 11.3 percent on a cash basis in the second quarter. Rexford expects continued pressure for 2027, but not to the same extent. Fitzmaurice described this as “dwindling headwinds” and emphasised that only 15 percent of the lease portfolio would expire in any given year, providing excellent natural protection against market interest rate fluctuations. Average occupancy for comparable properties was 95.7 percent, a slight decrease from 96.3 percent in the first quarter, but above the benchmark for the 2026 full-year forecast.
The decline in occupancy was largely attributed to two tenant departures, each of just over 200,000 square feet, in the Inland Empire. One resulted from a bankruptcy, but Rexford stated it had already re-leased the space, with the tenant expected to move in by September. The company adhered to plans to initiate 1.2 million square feet of projects this year, with an estimated cost of USD 160 million to USD 170 million. Rexford commenced a new development in the City of Industry at 16425 Gale Avenue in the second quarter and expects its completion by the end of 2027. Ms Clark noted that the supply currently under construction and coming to market is at a multi-decade low. Despite the short-term dilution from disposals, Rexford raised its full-year FFO per share guidance to USD 2.38 to USD 2.43, an increase of one cent from USD 2.37 to USD 2.42. The forecast for net operating income from comparable properties also improved to a decline of 0.25 percent to 1.25 percent compared to a previous forecast of 1 percent to 2 percent.
