Rexford Industrial Realty, Inc. (REXR) stock intrinsic value fair value estimate & owner earnings analysis

Rexford Industrial Realty owns and operates industrial buildings (warehouse, distribution and light manufacturing) in infill Southern California: Los Angeles, Orange, San Diego and Ventura counties and the western Inland Empire. It earns rent, plus tenant reimbursements of property costs, and it buys, repositions and develops buildings. It is a REIT, so most of its cash goes out as dividends and growth is funded by new equity and debt. How we measured earnings. We start from cash from operations and remove working-capital swings (rent received in advance, deposits, payables), the cost of stock compensation, and maintenance capital spending. Rexford spends heavily on capital improvements ($333 million in 2025 on $1.0 billion of revenue). We only strip out growth spending in proportion to the revenue increase, so nearly all of it is treated as a cost of staying in business; this is deliberately conservative. Leasing commissions are left in as a real recurring cost. On this basis owner earnings were about $0.55 per share in 2025, $0.56 in 2024, $0.82 in 2023 and $1.18 in 2022 at the peak. The decline since 2022 reflects much larger capital spending and a share count that grew from 171 million to 233 million. One adjustment: 2025 stock compensation of $100 million includes about $60 million of accelerated expense tied to the CEO and executive transition. We treat that as one-time when setting the normal level, which gives roughly $0.80 per share for 2025. The normal level we use is about $0.80 per share, the median of 2023 to 2025 after adjusting 2025, chosen because that is the period with the current level of capital spending and the current share count. Growth. Actual owner earnings per share fell about 2% in 2025 as reported (up sharply after removing the one-time item). Our base case assumes about 2.5% in year one, then 2 to 5% in the next two years. The reason is specific: at year end the total portfolio was 90.2% occupied against 96.5% for the stable core, because 13 repositioning and development properties (1.35 million square feet) are in lease-up and the 107,000 square foot Bloomfield Avenue project is fully leased with rent starting in mid-2026. That capital is already spent. We credit only that lease-up and hold earnings flat afterward. We do not credit new acquisitions, new developments, or rising market rents. The company made no acquisitions in 2025 and buildings sold in 2025 brought $217.5 million. Base case, about $14.6 per share: owner earnings of roughly $0.82, $0.86 and $0.88 per share in years one to three, then flat at $0.88 indefinitely. The buildings are located in a land-constrained market and rents are contractually set with annual escalators, so we assume the earning power persists at that level, but we assign no growth beyond it. Bear case, about $6.9 per share: owner earnings start near $0.52 and shrink about 3% a year for ten years, then hold flat. Named pressures: the 10-K reports Los Angeles County asking rents down 14% and Inland Empire West taking rents down 6% in 2025, with vacancy up in both; second-quarter 2025 new leases signed at negative spreads (cash spread -22.9%); the largest tenants roll over (TIRECO, 1.1 million square feet, expires January 2027); $89.1 million of impairments were taken in 2025 on seven development properties, showing that capital has been lost on development; and the company carries $3.28 billion of debt, all fixed-rate today, with cash interest paid rising from $74 million to $95 million between 2024 and 2025, so refinancing at higher rates would cut cash flow further. Bull case, about $16.2 per share: owner earnings of $0.85, $0.92 and $0.98 per share in years one to three, then flat. This assumes the 13 lease-up properties and Bloomfield fill on the terms already visible and that rents on leases signed in 2025 (combined GAAP spread 23.4%, cash spread 10.7%) keep converting into cash. It stays below the 2022 peak of $1.18 because capital spending has stepped up. Margin-of-safety price. The shares are worth about $14.6 in our base case. The margin-of-safety price is $9.5, roughly a one-third discount, because the range between cases is wide, LA-area rents are softening, and the company is leveraged. What would make this wrong. A sharp fall in Southern California rents beyond our bear case, a rise in refinancing costs beyond our assumption, further write-downs of development projects, or lease-up taking materially longer than the year-end pipeline suggests. Conversely, if capital spending settles well below the $333 million annual level of 2023 to 2025, owner earnings on our definition would be higher than we show, since most of that spending is currently treated as maintenance. Note: the 2025 owner-earnings reconciliation ties to reported cash from operations exactly. Figures are from the FY2025 annual report filed February 2026; the most recent quarterly report (June 2026) was not reviewed.