Why Wunderlich Now Loves Rexford Industrial

On April 2, Wunderlich Securities initiated coverage on Rexford Industrial Realty

with a Buy rating in a brief research note, "A SoCal Industrial Pure Play We Like." During the past 52-weeks, Rexford Industrial has traded in a range of $12.78 to $16.66 per share.

Rexford shares closed up modestly on the day Wunderlich published its recommendation. Tale Of The Tape - Past Year

Rexford Industrial has a market cap of $870 million, making it relatively easy for this REIT to move the needle by either accretive acquisitions or organic growth. There are three other small cap industrial REITs often viewed as Rexford's peers. They each have a highly focused strategy, or significant tenant concentration, which differentiates them from other industrial REIT business models.  Monmouth REIC

- $650 million cap; Monmouth continues to grow primarily by acquiring new single-tenant build-to-suit industrial properties. Approximately 50 percent of MNR's rental income comes from a single tenant, FedEx. Monmouth has no West Coast assets.  STAG Industrial

- $1.5 billion cap; STAG, or Single Tenant Acquisition Group, is uniquely focused on owning Class-B facilities leased to creditworthy tenants in secondary markets in the Midwest, Northeast and Southern U.S. markets.  Terreno Realty Corp.

- $980 million cap; Terreno is focused on six major port markets: LA/Long Beach, Northern New Jersey/New York City, Miami, Seattle, San Francisco Bay Area and Washington D.C./Baltimore.

Another differentiator for Rexford is that it has a mixture of both single-tenant and multi-tenant properties. Wunderlich - Rexford Industrial, Buy $19 PT Wunderlich feels its $19 price target is "in line with [its] NAV estimate of $19.02 (5.5% portfolio cap rate) vs. industrial REIT peers trading at 97%." Wunderlich cited the following factors to support its analysis:  An attractive relative valuation.  Significant lease rollover into a strong market.  An occupancy upside, "that at market levels would equate to an incremental $1.36 of NAV relative to [the Wunderlich] estimate.

Wunderlich believes Rexford's management "has targeted a niche wherein consistent shareholder value can be created due to a deep understanding of the market and significant research capacities, giving REXR the ability to persistently source accretive off-market deals." Investor Bottom Line The Wunderlich $19 price target represents ~17 percent upside from the REXR April 2, close of $15.73 per share. Wunderlich's projected investor total return, including Rexford's current 3 percent annual dividend yield, would be just north of 20 percent.