Sign in
RI

Rexford Industrial Realty, Inc. (REXR)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 2025 delivered resilient operations amid softer market rents: GAAP EPS was $0.48 and net income rose to $113.4M; Same Property NOI grew 1.1% and Cash NOI grew 3.9% year over year, with ending same-property occupancy up 40bps sequentially to 96.1% .
  • Versus Wall Street consensus (S&P Global), REXR posted a clear EPS beat and a slight revenue miss: Primary EPS 0.293 vs 0.260 estimate; revenue $249.5M vs $250.6M estimate; EBITDA slightly below consensus*.
  • Guidance changes were constructive: FY25 GAAP net income per diluted share raised to $1.38–$1.42; Core FFO per share maintained at $2.37–$2.41; net interest expense lowered to ~$107M (from ~$109.5M) .
  • Key catalysts: stable occupancy and leasing execution, embedded growth highlighted on the call (~$195M incremental cash NOI, 28% growth potential), reduced interest expense via credit recast/hedging, and active capital recycling with low-4% disposition cap rates .

What Went Well and What Went Wrong

What Went Well

  • Same-property occupancy improved sequentially to 96.1% and average occupancy held at 95.9%, underscoring demand for infill SoCal portfolio .
  • Management emphasized embedded NOI growth of $195M (28% cash NOI growth potential), driven by 3.7% rent steps ($105M), repositioning/redevelopment ($70M), and 3% cash mark-to-market ($20M) .
  • Balance sheet strengthened: total liquidity ~$1.8B, revolver upsized to $1.25B and term loans extended; hedges fix SOFR at ~3.41% on $400M loan, reducing net interest expense outlook .

Quote: “The long-term, superior supply and demand drivers within infill Southern California… fortress-like balance sheet… best-in-class team continue to deliver growing value to our stakeholders.” — Co-CEOs Michael Frankel & Howard Schwimmer .

What Went Wrong

  • Market rents declined ~3.5% sequentially and ~12.8% YoY, pressuring releasing spreads for new leases (net effective −17.6%; cash −22.9%), though total comparable spreads remained positive (20.9% net effective, 8.1% cash) .
  • Core FFO per share dipped to $0.59 from $0.62 in Q1 and $0.60 in Q2 2024; management commentary stating an increase vs prior quarter conflicts with reported figures (see Discrepancy note below) .
  • Planned move‑outs and steady bad‑debt reserves imply occupancy deceleration in H2 within guided averages (95.5%–96.0%) despite Q2 improvements .

Financial Results

MetricQ2 2024Q1 2025Q2 2025
Total Revenues ($USD Millions)$237.6 $252.3 $249.5
Net Income Attributable to Common ($USD Millions)$79.8 $68.3 $113.4
Diluted EPS ($USD)$0.37 $0.30 $0.48
Company Share of Core FFO per Share – Diluted ($USD)$0.60 $0.62 $0.59
Total Portfolio NOI ($USD Millions)$181.1 $193.6 $186.3
Same Property NOI Growth (GAAP, YoY)—0.7% 1.1%
Same Property Cash NOI Growth (YoY)—5.0% 3.9%
Same Property Ending Occupancy (%)97.4% 95.7% 96.1%

Estimates vs Actuals (Q2 2025):

MetricConsensusActualSurprise
Primary EPS ($USD)0.2595*0.2929*+12.8%
Revenue ($USD Millions)250.6*249.5−0.4%
EBITDA ($USD Millions)170.0*168.6*−0.8%

Values marked with * retrieved from S&P Global.

KPIs and Leasing

KPIQ2 2024Q1 2025Q2 2025
Comparable Leasing Spreads – Net Effective67.7% 23.8% 20.9%
Comparable Leasing Spreads – Cash49.0% 14.7% 8.1%
Total Leasing Activity (RSF)2,261,911 2,394,349 1,698,993
Retention Rate (%)68% 68% 69%
Net Absorption (RSF)399,014 125,053 216,955
Avg Same-Property Occupancy (%)97.0% 95.9% 95.9%

Discrepancy note: The CFO stated Core FFO per share increased $0.01 versus prior quarter; reported Core FFO per share – diluted was $0.62 in Q1 2025 and $0.59 in Q2 2025, indicating a decline .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
GAAP Net Income per Diluted ShareFY 2025$1.31–$1.35 $1.38–$1.42 Raised
Company Share of Core FFO per Diluted ShareFY 2025$2.37–$2.41 $2.37–$2.41 Maintained
Same Property NOI Growth (GAAP)FY 20250.75%–1.25% 0.75%–1.25% Maintained
Same Property Cash NOI GrowthFY 20252.25%–2.75% 2.25%–2.75% Maintained
Avg Same-Property OccupancyFY 202595.5%–96.0% 95.5%–96.0% Maintained
G&A ExpenseFY 2025~ $82M ~ $82M Maintained
Net Interest ExpenseFY 2025~ $109.5M ~ $107M Lowered

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4’24 & Q1’25)Current Period (Q2’25)Trend
Market rents & tariffs/macroStrong spreads in Q4; Q1 spreads moderated; guidance acknowledged macro uncertainty Market rents −3.5% q/q and −12.8% y/y; tariff volatility delayed decisions; focus on occupancy over rate where needed Softening rents; pragmatic leasing approach
Embedded growth (rent steps, mark-to-market, pipeline)Q1 affirmed Core FFO and cash NOI growth with robust leasing; rent steps embedded $195M incremental cash NOI potential: rent steps 3.7% ($105M), repo/redev ($70M), 3% mark-to-market ($20M) Emphasis strengthening; pipeline visibility
Capital allocation & dispositionsQ1 dispositions $52.5M; low leverage; revolver capacity $81.6M Q2 sales; YTD $134M at low-4% cap rates; active recycling; evaluating acquisitions Recycling proceeds; selective acquisitions
Interest expense & hedgingQ1 avg interest rate ~3.8%; liquidity ample Revolver upsized; term loans extended; swaps fix SOFR ~3.41% on $400M; NII guidance lowered Funding costs improving
Redevelopment yields & Hertz/LAX assetQ4 stabilized projects ~6.2% yields; Q1 stabilized five projects at 7.6% yields Mixed yields; Turnbull 9.2%, Via Burton 6.0%; Hertz lease expiry (Mar 2026) precedes 400k sf redev, ~$9M NOI offline Mixed yields; large one-off NOI roll-off ahead
Tenant behavior & renewalsStrong renewal activity; guidance occupancy bands Early renewals doubled y/y; leases 4–5 yrs avg; healthy tenant health; de minimis bad debt Early renewals higher; tenant health solid

Management Commentary

  • Prepared remarks: “Resiliency of our business model… fortress-like balance sheet… best-in-class team” — Co-CEOs Michael Frankel & Howard Schwimmer .
  • COO on market dynamics: “Leasing activity remains steady… macroeconomic and tariff uncertainty… market rents declined ~3.5% sequentially and 12.8% YoY” .
  • CFO on embedded growth: “$195M of incremental cash NOI, representing growth of 28%… contractual rent steps ~3.7%… repositioning/redevelopment ~ $70M… mark-to-market ~3%” .
  • Co-CEO on cap rates: “User sales achieved ~3.5% equivalent cap; at-market leasing cap rates ~5%” .
  • ESG commitment: Expanded rooftop solar capacity to 29MW, 10 LEED certifications, and Platinum Green Lease Leader designation .

Q&A Highlights

  • Pipeline fluidity and 2026 roll-offs: Hertz/LAX asset expected to drive ~$9M NOI offline in 2026 before 400k sf redevelopment; future starts cadence remains flexible .
  • Estimates and occupancy trajectory: Same-property average occupancy guided at 95.5%–96.0% for FY25 with planned move-outs; bad debt reserve ~70bps in H2 .
  • Capital allocation: Preference for double-digit incremental returns from repositioning/redevelopment; evaluating acquisitions funded by low-4% cap dispositions .
  • Leasing conversions: Activity on ~80% of vacancy; conversion slower but majority converting; early renewals accelerated y/y .
  • Market rents and tariffs: Volatility cited; Rexford prioritizing occupancy capture, acknowledging occasional rate trade-offs .

Estimates Context

  • Q2 2025 vs consensus (S&P Global): EPS beat (Primary EPS 0.293 vs 0.260), revenue slight miss ($249.5M vs $250.6M), EBITDA slight miss (actual $168.6M vs $170.0M)*.
  • Implications: Lower net interest expense guidance and stable occupancy may support forward Core FFO stability; modest rent softness and timing of rent commencements could temper near-term revisions. Values retrieved from S&P Global.

Key Takeaways for Investors

  • Occupancy resilience: Same-property ending occupancy rose to 96.1% with positive net absorption, mitigating softer market rents .
  • Earnings quality and non-GAAP: Net income benefited from $44.4M gains on asset sales; Core FFO per share was $0.59 (down q/q), highlighting operating run-rate vs transactional gains .
  • Guidance constructive: GAAP EPS raised; net interest expense lowered; Core FFO maintained, signaling confidence despite market rent headwinds .
  • Embedded growth visibility: ~$195M incremental cash NOI potential from rent steps, redevelopment, and modest mark-to-market provides multi‑year earnings tailwind .
  • Capital recycling at premium values: YTD dispositions at low‑4% cap rates; user sales achieved ~3.5% equivalents, creating optionality for accretive redeployment .
  • Funding cost tailwinds: Facility recast and SOFR hedges reduce rate exposure, supporting the lowered net interest expense outlook .
  • Watch 2026 Hertz/LAX transition: 400k sf redevelopment opportunity with interim NOI roll-off ($9M) — a near-term headwind followed by a strategic value-creation catalyst .

Bolded beats/misses and surprises:

  • EPS beat vs consensus*
  • Revenue slight miss vs consensus*
  • EBITDA slight miss vs consensus*

Values marked with * retrieved from S&P Global.