Rexford Industrial Realty: This 5.875% Preferred Stock Started Trading On The NYSE

In this article, we want to shed light on a new Preferred Stock issued by Rexford Industrial Realty (NYSE: REXR).

Our main goal is purely to inform you about the product while refraining from an investment recommendation. Even though the product may not be of interest to us and our financial objectives, it definitely is worth taking a look at.

The New Issue

Before we submerge into our brief analysis, here is a link to the 424B5 Filing by Rexford Industrial Realty.
Source: SEC.gov

For a total of 3M shares issued, the total gross proceeds to the company are $75M. You can find some relevant information about the new preferred stock in the table below:


Source: Author’s spreadsheet

Rexford Industrial Realty 5.875% Series B Cumulative Redeemable Preferred Stock (NYSE: REXR-B) pays a fixed dividend at a rate of 5.875%. The new issue bears no Standard & Poors rating and is callable as of 11/13/2022. Currently, the new issue trades at its par value and has a Current Yield and YTC of 5.88%. The dividends paid by this preferred stock are not eligible for the preferential 15-20% tax rate on dividends. They are also not eligible for the dividend received deduction for corporate holders. This means that the “qualified equivalent” Yield would be 4.90%.


Source: Author’s spreadsheet

The Company

Rexford Industrial Realty, Inc., incorporated on January 18, 2013, is a self-administered and self-managed full-service real estate investment trust (REIT). The Company is focused on owning, operating and acquiring industrial properties in Southern California infill markets. Rexford Industrial Realty, L.P. is the operating partnership of the Company. Through its controlling interest in Operating Partnership and its subsidiaries, the Company owns, manages, leases, acquires and develops industrial real estate located in Southern California infill markets, and from time to time, acquires or provides mortgage debt secured by an industrial property.

As of July 19, 2017, the Company’s consolidated portfolio consisted of 142 properties with approximately 17.7 million rentable square feet. In addition, the Company managed an additional 19 properties with approximately 1.2 million rentable square feet.

Source: Reuters.com – Rexford Industrial Realty

As per the market’s opinion:


Source: Barchart.com – REXR Weekly Chart (5 years)

The common stock has had a superb performance over the last two years and has almost tripled its market price. The yearly dividend paid by REXR has increased from $0.36 in 2014 to $0.58 in 2017. As an absolute value, this means that the company pays out $42.18M in yearly dividends. The same metric for the outstanding preferred stocks (including the new issue), for comparison, is around $9.69M.

In addition, REXR’s market capitalization is around $2.16B.

Capital Structure


Source: The company’s Balance Sheet

As of Q3 2017, Rexford Industrial Realty had a total debt of $664M ranking senior to the newly issued preferred stock. The new Series B preferred shares rank junior to all outstanding debt and pari passu to the other outstanding preferred stock, which worth $87M – Series A preferred stock (REXR-A).

The Rexford Industrial Realty Family

REXR has one more outstanding preferred stock: Rexford Industrial Realty 5.875% Series A Cumulative Redeemable Preferred Stock (NYSE: REXR-A).


Source: Author’s spreadsheet

REXR-A was issued a year ago and has almost the same characteristics as the newly issued preferred stock. The Series A preferred stock pays a non-qualified dividend at a rate of 5.875% similarly to the Series B and has no rating either. The major difference between the two products is the Call Date – the first possible date on which Rexford Industrial Realty can exercise the Call Option.

Sector Comparison

The chart below contains all preferred stocks in the REIT – Industrial sector (according to Finviz.com) that pay a fixed dividend. It is important to take note that none of these preferred stocks are eligible for the 15% federal tax rate.


Source: Author’s database

Below you can see a chart with all REIT preferred stocks with a par value of $25 that pay a fixed dividend rate, excluding the preferred stocks issued by RAS and CBL, as these companies are in turmoil currently.

On the Y-axis we have the products’ Current Yield, while on the X-axis we are looking at the % of par value:


Source: Author’s database

Special Considerations

Nothing out of the ordinary.

Use of Proceeds

Our operating partnership intends to subsequently use the net proceeds from this offering to fund future acquisitions, repay amounts outstanding from time to time under our revolving credit facility or other debt financing obligations, fund our development or redevelopment activities and for general corporate purposes.

Source: SEC.gov – Rexford Industrial Realty

Addition to the S&P preferred stock index

With the current market capitalization of around $75M, REXR-B cannot be an addition to the S&P preferred stock index (NASDAQ: PFF).

Conclusion

This is an informational article about the new preferred stock REXR-B. With these articles, we want to pay attention to all new preferred stocks and baby bonds, and they are a good guide of what to expect from your income portfolio.

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Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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