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Based in Los Angeles, Rexford Industrial Realty (NYSE:REXR) scheduled a $224 million IPO with a market capitalization of $406 million at a price range mid-point of $14, for Friday, July 19, 2013.

Six other IPOs were scheduled for the week of July 15. The full IPO calendar can be found at IPOpremium.

  • S-1 filed July 9, 2013
  • Manager, Joint Managers: BofA Merrill; Wells Fargo; FBR; J.P. Morgan
  • Co Managers: PNC Capital Markets; RBS

Summary

REXR is a REIT that focuses on light industrial properties in Southern California.

Valuation Ratios

IPO Mrkt

Price /

Price /

Price /

Price /

% offered

annualizing Q1 '13

Cap (mm)

Sls

Erngs

BkVlue

TanBV

in IPO

Rexford Industrial Realty (REXR)

$406

9.0

-50.8

1.3

1.4

55%

       

COMPARE

Mrkt

Price /

Price /

Price /

Price /

Dividnd

 

Cap (mm)

Sls

Erngs

BkVlue

TanBV

Yield

Rexford Industrial Realty (REXR)

$406

9.0

-50.8

1.3

1.4

3.5%

First Industrial Realty Trust (NYSE:FR)

$1,730

5.3

-1310.6

1.6

1.6

2.2%

DCT Industrial Trust (NYSE:DCT)

$2,200

8.5

-146.7

1.7

1.7

3.7%

Glossary

Valuation

REXR appears to be priced in range when compared against other industrial REITS.

Conclusion

Because REXR is priced in range the rating is neutral to negative at the price range mid-point of $14. To put the above conclusions and observations in context, the following is reorganized, edited, and summarized from the full S-1 referenced earlier:

Business

Rexford Industrial Realty, Inc. is a newly organized Maryland corporation formed to operate as a self-administered and self-managed REIT focused on owning and operating industrial properties in Southern California infill markets.

REXR was formed to succeed a predecessor business, which is controlled and operated by the principals, Richard Ziman, Howard Schwimmer and Michael Frankel, who collectively have decades of experience acquiring, owning and operating industrial properties in Southern California infill* markets.

* infill focuses on the reuse and repositioning of obsolete or underutilized buildings and sites. Infill markets are considered high-barrier to-entry markets and have characteristics that tend to limit new construction.

Initial portfolio

Upon completion of the formation transactions, REXR's initial portfolio will consist of 61 properties with approximately 6.7 million rentable square feet, including two properties that REXR currently has under contract to purchase, and REXR will manage an additional 20 properties with approximately 1.2 million rentable square feet.

Southern California strategy

REXR's investment strategy focuses on the 1.73 billion square foot infill market comprised of Los Angeles County, Orange County, West Inland Empire, San Diego County and Ventura County. In 2012, over $5.9 billion of industrial property was sold in Southern California.

Southern California is generally considered to be nearly fully developed and is characterized by a scarcity of vacant or developable land. Further, lease rates typically do not justify development of new industrial properties for lease in infill markets, which presents an economic barrier for those seeking to develop new industrial properties.

Consequently, there has been a dearth of new multi-tenant industrial properties built for lease since 1999, with infill development generally limited to relatively few owner-user and build-to-suit developments.

The Southern California infill industrial market has consistently out-performed other national markets on the basis of occupancy and asking rents. As of March 31, 2013, occupancy was 95.0% and 94.7% for Los Angeles and Orange Counties, respectively, versus the national average of 91.3%.

Since 2001, average Los Angeles and Orange County asking rents were 65% higher than the average of the next nine largest markets in the nation over the same twelve-year period.

Large and Growing Regional Population

Southern California represents the largest regional population in the U.S., with over 21 million residents, comprising over 57% of California residents. The population has increased by approximately 2 million since 2000 and is projected to increase to over 25 million residents by 2030.

REXR's infill tenant base tends to disproportionately serve the direct consumption needs of this growing regional Southern California population.

Distribution policy

REXR intends to pay a pro rata initial distribution based on a distribution of $0.123 per share for a full quarter, after the IPO. On an annualized basis, this would be $0.49 per share, or an annual distribution rate of approximately 3.5% based on the mid-point of the price range of $14

REXR estimates this initial annual distribution rate will represent 82.0% of estimated cash available for distribution to common stockholders for the 12 months ending March 31, 2014.

Employees

As of March 31, 2013 the predecessor company had 31 employees.

Use of proceeds

REXR expects to net $233 million from its IPO.

REXR will contribute the net proceeds the IPO and the concurrent private placement to the operating partnership in exchange for common units in the operating partnership.

The operating partnership will use the net proceeds from this offering and the concurrent private placement, together with the proceeds from a new approximately $60 million term loan, borrowings under a proposed revolving credit facility and contributions to the operating partnership of approximately $2.0 million of cash working capital in connection with the formation transactions to repay debt and fees.

Any remaining amounts will be used to acquire and manage industrial properties and for general corporate purposes.

Disclaimer: This REXR IPO report is based on a reading and analysis of REXR's S-1A filing, which can be found here, and a separate, independent analysis by IPOdesktop.com. There are no unattributed direct quotes in this article.

Disclosure: I 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. I have no business relationship with any company whose stock is mentioned in this article.

Source: IPO Preview: Rexford Industrial Realty