We wanted to recap key points/thoughts from Long Bench REXR's 3Q21 results and earnings call this afternoon:
- REXR reported 3Q21 Core FFO of $0.43/share, +12% above Hedgeye and +9% above Consensus, so a resounding beat in on the quarter with SSNOI growth at +9.7% coming in +160bp above our model. REXR also executed on more acquisition activity than we had modeled, further driving the beat.
- Relative to our model +$0.08/share on rental income, offset by a penny each of higher opex, interest expense and a slightly higher weighted average share count. See Figure 1 below for variances.
- The +7.4% increase on Core FFO and +230bp increase on SSNOI guidance at the midpoints both still appear slightly conservative to us - we would expect final numbers to come in at or slightly above the high end of both ranges of $1.61/share and +8.75%, respectively.
- Key highlights from the call:
- Projected stabilized yields on recent and impending investments are more than ~50% higher than observed cap rates for stabilized assets trading in the market (buy to a ~5.5-6%, sell at a mid-3%), hence the refence in the title above. The earnings accretion and value creation driven by external deal activity is exceptional, so REXR should and likely will continue to flex its cost of capital.
- Currently projecting an incremental ~$94 million or +27% (~15% compounded) embedded NOI growth from the existing portfolio over the next 12 to 24 months, which obviously excludes any further accretion from additional acquisition activity. Accounting for leverage and common share issuance to fund growth, we estimate that this translates into an additional ~$0.60/share of FFO, or +40% Core FFO growth over FY21.
- Additional ~$300 million of new investments under LOI or contract, which if history is any guide will likely stabilize towards a ~6% unlevered yield if closed. REXR has just a ~1.9% share of its target markets, so the external growth opportunities are exceptional given the preponderance of older vintage logistics product.
- When excluding COVID-related rent deferrals, cash SSNOI would be +10% to +10.5% this year.
Figure 1: REXR 3Q21 Earnings Variances
Please e-mail with any questions.
Rob Simone, CFA
Managing Director
Twitter: @HedgeyeREITs
