Industrial REIT Rexford Industrial Sells a Lousy Preferred
By: Tim McPartland,
Industrial REIT Rexford Industrial (NYSE:REXR) has sold a new preferred stock with a lousy coupon of 5.875%. This issue is now trading on the OTC Grey market under the ticker RXFFP and is trading in the area of $25.37. Honestly this is a ridiculous price for a very mediocre REIT.
With the hunt for yield investors have continually accepted lower rates (if they are buying issues like this one they are “accepting” the rate) that do not match the risk presented by issues such as this one. While REXR has performed reasonably well recently when the time arrives for interest rates to move higher (and it will arrive someday—when no one knows) issues like this one will be punished severely. If we fall into a recession of any magnitude mediocre companies like REXR will be spanked hard as there financials will be severely impacted.
Beside the above we note that all of the warehouses and manufacturing buildings that the REIT owns are in Southern California—not some of them–all of them. Being geographically concentrated is not desirable for the obvious reasons (if the local market in Southern California becomes overbuilt rents will be depressed and without diversity you will get hammered).
This issue has the normal terms–redeemable after 5 years at the issuers option and cumulative in respect to dividends. Being a REIT the dividends are NOT qualified for preferential tax treatment.
We have no intention of participating in this issue.