Rexford Plans Up to $2B in Sales After Posting $507M Loss in Q2

Rexford Industrial Realty is dramatically accelerating its shift from being the most aggressive industrial buyer in Southern California into perhaps the region’s biggest seller.

The Los Angeles-based real estate investment trust (REIT) has identified about $2 billion of “noncore assets” for disposition as it continues to prioritize keeping tenants in Rexford buildings. That property sales forecast is sharply up from the previous range of $400 million to $500 million.

During the REIT’s earnings call Friday, CEO Laura Clark said the disposition pool encompasses about 8 million square feet with limited value-creation potential, shorter lease terms, and rents substantially above market — generally by more than 20 percent. Chief Financial Officer Michael Fitzmaurice said about $1 billion will repay debt maturing in 2027, rather than refinance into a higher rate environment. The remaining proceeds will be guided by market conditions.

“We’re not de-levering to sit idle; we’re de-levering to redeploy,” Fitzmaurice said.

The vast majority of Rexford’s property sales are expected to close before the end of the year.

“We expect that pricing will be achieved at levels that allow us to redeploy proceeds on a neutral to accretive basis through our 2027 FFO per share, and this is not a dilutive exercise,” Clark said.

Rexford said it sold seven properties totaling approximately 572,000 square feet for $137.9 million during the second quarter, after disposing of five properties for $127.4 million in the first quarter. The company previously known for 10-figure buying sprees has completed no acquisitions this year.

Rexford plans to use property sales proceeds to repay debt, repurchase shares and pursue higher-yielding investments. It bought back $100 million of stock during the quarter, bringing its 2026 repurchases to $300 million, and its board subsequently authorized a new $1 billion repurchase program.

The ramped-up disposition strategy also came with a $506.9 million net loss attributable to shareholders, compared with net income of $87.9 million in the first quarter and $113.4 million during the second quarter of 2025. The latest result included $624.8 million in noncash impairment charges tied to properties where expected holding periods were shortened after being set for sale.

Core funds from operations (FFO), a key cash-flow measure, rose to $141.4 million, up from $139.8 million in the previous quarter and $139.7 million a year ago. Total rental income reached $243 million, edging up from $242.1 million in the previous quarter.

Rexford executed 117 new and renewal leases covering 2.1 million square feet, down from a record 4.1 million square feet in the first quarter. The total included 840,344 square feet of new leases and 1.26 million square feet of renewals.

Rexford’s leasing activity continues to be driven by a diverse mix of industries, including advanced manufacturing and consumption-related uses such as logistics, food and beverage, automotive and construction.

“We are seeing healthy demand across our portfolio for spaces under 50,000 square feet, and activity is picking up in spaces over 100,000 square feet,” said Chief Operating Officer John Nahas, adding that activity is picking up in spaces over 100,000 square feet.

Rent spreads — comparing prior lease rates after renewals — were negative in both quarters this year. Comparable rents in the second quarter declined 2.8 percent on a net-effective basis, and 11.3 percent on a cash basis. Rexford said it expects continued pressure in 2027 but not as severe.

“It’s a shrinking headwind,” Fitzmaurice said. “We only have 15 percent of our rent roll expiring in any given year, which is a great natural hedge against market-rate fluctuations.”

Average same-property occupancy was 95.7 percent, down slightly from 96.3 percent in the first quarter but above the 2026 year-to-date guidance benchmark. The decline was largely attributed to two move-outs of slightly more than 200,000 square feet each in the Inland Empire. One resulted from a bankruptcy, but Rexford said it already re-leased the space, with the tenant moving in by September.

The company maintained plans to start 1.2 million square feet of projects this year at an estimated cost of $160 million to $170 million. Rexford started a new City of Industry development in the second quarter at 16425 Gale Avenue, and expects it to be complete by late 2027.

“Supply today under construction and what is going to be delivered to the market is at multi-decade lows,” Clark said.

Despite the dispositions’ near-term dilution, Rexford raised its full-year core FFO guidance to between $2.38 and $2.43 per share, up a penny from $2.37 to $2.42. It also improved its same-property NOI outlook to a decline of 0.25 percent to 1.25 percent, from a previous forecast calling for a 1 percent to 2 percent drop.

Gregory Cornfield can be reached at gcornfield@commercialobserver.com.