Trade Alert 2024-10-17

Trades placed:

• Purchased 255 shares of Rexford (REXR) at $46.212.

Notes:

Yesterday the industrial reit sector rallied on a solid report from Prologis (PLD). The report indicated weakness in market rents for the Southern California market. REXR reported after hours yesterday and will begin their earnings call soon (1:00 p.m. Eastern Time today). I’ll be listening to the call.

I provided a very brief note yesterday as we had the earnings data but not the earnings call.

Leasing spreads were clearly weaker, but REXR has still been driving value through their redevelopment projects. I see the recent weakness as being overdone. Southern California was hotter than the other industrial markets for a long time. When industrial real estate finally saw some weakness (from elevated new construction driven by low interest rates and high inflation around 2021), it hit Southern California (where 100% of REXR’s portfolio is located) harder than peers.

Those headwinds should peak within the next few quarters. As apartment REITs demonstrated, there can be a substantial rally as soon as the market looks beyond the near-term supply headwinds. I’m treating REXR as a significant long-term allocation within our equity REITs. Despite the near-term headwinds, Southern California still has enormous structural barriers to new industrial real estate. It just takes a bit of time to work through the current environment.

Total Size

I had 2,059 shares of REXR before this position, so this is about a 12.4% increase. It should take the position above 6% of the total portfolio. It will still be my fourth largest position within equity REITs.

My Execution

Source: Schwab

I wanted to put this in the taxable portfolio so I could save space in the tax-advantaged accounts for active trading. Consequently, despite having a large cash allocation presently, I added cash to the taxable account to fund the position.

Note: I’ve shortened the format for trade alerts. I can always follow up on the alerts with other articles as needed to provide further detail.