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Rexford Industrial Realty Spends $339 Mil on Two L.A. Area Industrial Buys

11/20/20

SoCal-based Rexford Industrial Realty Inc closed on two industrial acquisitions in deals totaling $339.2 mil. The purchases consisted of a four-building industrial complex in Whittier and a three-tenant industrial property in the northeastern San Fernando Valley community of Sylmar. They were funded using a combination of cash on hand, 1031 exchange proceeds from prior dispositions, assumption of existing debt and operating partnership units.

In the larger deal, Rexford acquired Gateway Pointe Industrial Campus, located at 3963, 3931, 3735, and 3629 Workman Mill Rd in Whittier, within the LA Mid-Counties submarket, for $296.6 mil, or $300 per square foot. The 45.12-acre project comprises four Class A industrial buildings containing 989.2k sf of space, leased at rents estimated to be approximately 21% below current market rates.

The 100% occupied property features 32' clear heights at first bay, extensive dock-high loading, excess container parking and favorable access to major transportation corridors. The company intends to drive cash flow growth by capitalizing upon below-market in-place rents to renew in-place tenants or re-tenant at higher market rates. Rexford funded the buy with a combination of cash on hand and 1031 proceeds from prior dispositions. The unlevered cash yield on total investment grows from 3.6% at initial stabilization to over 4% through steady cash flow growth from contractual annual rent escalators as well as with mark-to-market upside as leases roll over the next several years.

Darla Longo, Barbara Perrier, Rebecca Perlmutter, Brett Hartzell, Joe Cesta and Eric Cox of CBRE represented the seller, Seattle-based investment firm Washington Capital Management Inc on behalf of one of its account clients, in the transaction. According to CBRE, the vacancy rate in the 112 msf LA Mid-Counties submarket was 2.2% at the end of the third quarter 2020.

In the other purchase, Rexford paid $42.6 mil, or $212/sf, in an off-market buy of 13943-13955 Balboa Blvd in Sylmar, within the LA San Fernando Valley submarket. The 100% occupied, three-tenant Class A industrial building contains 200.6k sf of space on 10.5 acres of land. In-place rents are estimated to be approximately 19% below market with near-term expirations.

The company expects to drive cash flow growth by completing moderate capital improvements and renewing or releasing at higher market rental rates. The initial yield is 4.4% and the stabilized yield on total cost for the investment is projected to be 4.9%, with continued cash flow growth projected into future periods.

According to CBRE, the vacancy rate in the 175 msf LA San Fernando Valley submarket was 2.7% at the end of the third quarter 2020.

Rexford Industrial Realty was represented in the Gateway Pointe acquisition by Kenneth S. Fields, Patricia Hong and Amy E. Rice of Greenberg Glusker LLP.






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