During the third quarter, Rexford Industrial Realty advanced its strategic shift from being a leading buyer to becoming a major seller of industrial real estate in Southern California. The Los Angeles-based real estate investment trust completed property sales totalling 1.3 billion US dollars during the reporting period. This comprised 25 assets covering a total of 5.5 million square feet, including the previously announced 1.2 billion US dollar portfolio transaction to EQT Real Estate.
With these latest completions, Rexford's disposals in the current year total 1.5 billion US dollars as part of a 2 billion US dollar portfolio repositioning programme. Chief Executive Laura Clark explained during the analyst conference call that the company expects to close the majority of the remaining 500 million US dollars by the end of the year. While higher US Treasury yields have increased the cost of capital for certain buyers and prompted hesitation, negotiations for the remaining sale assets continue to proceed constructively.
Selective capital allocation and leasing revival
According to Chief Operating Officer John Nahas, the portfolio sold to EQT had a weighted average unexpired lease term of just 2.7 years, while in-place rents stood almost 30 per cent above market levels. In addition, the company disposed of three properties totalling around 251,000 square feet for 86 million US dollars to owner-occupiers. Rexford made no acquisitions during the third quarter. Clark emphasised that while acquisitions remain part of the long-term strategy, other forms of capital deployment are currently simply more compelling.
On the leasing front, Rexford recorded a notable pickup in demand. In the third quarter, 116 lease agreements covering 3.74 million square feet were executed, compared with 2.1 million square feet in the previous quarter and 3.27 million square feet in the prior-year period. Same-property occupancy climbed from 94.9 per cent in the prior quarter to 96.9 per cent. Effective rental spreads on new signings also rose by 7.1 per cent, following a 2.8 per cent decline in the preceding quarter. However, Chief Financial Officer Michael Fitzmaurice noted that leases originating from the market peak in 2022 and 2023 could temporarily dampen rental growth.
Financial position and scaled-back development pipeline
Quarterly revenue stood at 239.1 million US dollars, down from 245.5 million US dollars in the preceding quarter and 253.2 million US dollars in the prior-year period. Core funds from operations amounted to 132.7 million US dollars. Regarding net profit, the company returned to profitability with 14.6 million US dollars following a prior-quarter loss of 506.9 million US dollars, with impairment charges of 71.8 million US dollars weighing on the result.
At the same time, Rexford reduced its planned development volume for 2026 from 1.2 million to 800,000 square feet. The current pipeline encompasses 2.12 million square feet of completed projects or developments under construction, with an estimated investment volume of 726.8 million US dollars. For November, Nahas announced the construction start of the 401,000 square foot Hearst project at 9000 Airport Boulevard in the South Bay submarket, a scheme targeted specifically at demand from high-tech manufacturing and logistics.
