This wide-moat REIT is one of my highest-conviction picks

There are wide moats, and then there are Wide Moats.

And Rexford Industrial Realty (REXR) is definitely the latter. If anything, I could capitalize the words entirely to accurately emphasize how secure it is against competition.

Anyone wanting to recreate Rexford's portfolio from scratch would have to build more than 400 industrial properties totaling about 50 million square feet in very strategic, space-constrained Southern Californian locations near major ports and transportation corridors.

Keep in mind that would involve navigating restrictive zoning laws… obtaining hard-to-get entitlements… and absorbing high construction costs. Everything considered, they’d be exceptionally lucky to succeed even after spending billions of dollars and years of their lives in that pursuit.

That’s the wide moat Rexford has.

When most people think of this company, they think of an industrial real estate investment trust (REIT). Which it is. But that description fails to capture how it controls a network of mission-critical warehouses in one of America’s largest and most supply-constrained distribution markets.

Rexford’s properties are crucial in the manufacturing, assembly, storage, and regional supply chains this nation relies on. In fact, many of its tenants have no other option but to utilize this REIT. It’s located exactly where they need to be, and there are really no other competitors around.

An honest, informed assessment of REXR has to include all that information. Yet the market seems solely focused instead on the company’s currently softer rents, uneven occupancy, and negative re-leasing spreads.

As such, it’s trading at $35.98, approximately 14.9x forward core funds from operations (FFO) – a far cry from its historical multiple of 26.5x.

If Mr. Market wants to treat what’s likely just a cyclical slowdown as if it’s permanent asset impairment? Well, that’s its choice – and one that creates a very attractive opening for individual investors…

And perhaps for a bigger company on the merger and acquisition (M&A) prowl as well.

Rexford is a true HALO company, with “heavy assets” and “low obsolescence.” Or, to put it in plain English, its business is based on physical necessities that can’t easily be replaced by artificial intelligence.

That’s one enormous reason to like it right there. And its second-quarter results easily provide another.

Core funds from operations (FFO) came in at $0.63 per share, up $0.02 year over year. Leasing volume rose 50% through the first half of 2026. And Rexford executed 2.1 million square feet of leases during the quarter, which helped vacancy decline 30 basis points (bps).

In addition, the REIT had $1.3 billion in liquidity as of last quarter’s end.

Management also feels optimistic about the rest of the year, raising its average same-property occupancy guidance to 95.3%–95.7%. And it now expects core FFO of $2.38–$2.43 instead of $2.35–$2.40.

That’s the second time it’s raised that figure this year.

This isn’t to say the naysayers are completely wrong. There were headwinds before, and those headwinds still showed in Rexford’s Q2 results.

For instance, management said Southern California market rents declined a little more than 1% sequentially. And the REIT’s executed leases produced cash re-leasing spreads of -11.3%, with full-year expectations for -15% to -10% as leases signed near the market peak reset to current rates.

However, Rexford isn’t sitting by idly in the midst of these difficulties. It plans to sell about 8 million square feet of non-core assets worth around $2 billion.

About half of that will be set aside to give it flexibility for new investments and potential share repurchases. The other billion will go right toward paying down 2027 debt maturities. And that should reduce its net debt to adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) from 4.5x to around 3.5x.

Now, this may cause some modest short-term dilution. And we don’t yet know what prices it can actually get in this market.

All the same, I do expect Rexford to have a more focused portfolio as a result of these actions, with less refinancing exposure and lower rent roll-down risk.

Here’s another thing Rexford could easily achieve by reducing its debt: make itself even more attractive as a takeover target.

I do believe the REIT has a lot going for it already in this regard. Along with its excellently placed mission-critical warehouses, it comes complete with investment-grade ratings of BBB+ from S&P and Fitch. And Moody’s gives it a comparable rating at Baa2.

Now, for the record, I haven’t heard anything through the REIT grapevine or otherwise about anyone wanting to purchase Rexford. Still, M&A activity is on the upswing, with 10 American public REITs getting bought up by bigger operations so far this year.

The latest was just announced earlier this week. Brookfield Corporation (BN) and CPP Investments will be buying warehouse and logistics owner LXP Industrial Trust (LXP) for about $5.2 billion in an all-cash transaction that includes net debt and preferred stock.

Stockholders will thereby receive $61.20 per share. That’s 19.8% more than LXP’s 90-day volume-weighted average price.

This is a great company, for the record. Its 108 warehouse and logistics properties total about 53 million square feet across mainly Sunbelt and Midwest markets.

But as profitable as those are, they’re much more replaceable than what Rexford has going for it.

As such, I could see it going next – perhaps to logistics giant Prologis (PLD). That REIT has bought up whole companies before, including KTR Capital Partners, DCT Industrial, Liberty Property Trust, Industrial Property Trust, and Duke Realty. And it’s in the process of trying to acquire England’s Segro, too.

Rexford would deepen Prologis’ Southern California presence in ways it can’t otherwise access. So it’s a logical possibility.

Another big buyer could be Blackstone (NYSE: BX), which I wrote about on Wednesday. It ended the second quarter with approximately $228 billion of dry powder, part of which could easily be used on Rexford.

After all, this giant asset manager is currently hyper-focused on resources with mission-critical tenant usage, high replacement barriers, and meaningful repositioning potential… all of which Rexford offers.

So why not?

But even if no big buyer materializes, I still see the value in Rexford.

I wouldn’t be writing about it so favorably today if I only thought it was worth something as an acquisition target. Here at Wide Moat Research, we buy quality dividend-paying companies at fair-market or discounted prices.

Every other consideration is secondary.

It just so happens that this particular quality, discounted dividend payer pays $0.435 per quarter, or $1.74 annualized. That means its shares are yielding approximately 4.8% right now with a core FFO payout ratio of around 72%.

As for potential price appreciation, I see a credible path back to mid- to high-single-digit annual core FFO-per-share growth in the foreseeable future. I base this opinion on factors like Rexford’s:

During the second quarter, Rexford repurchased approximately 2.8 million shares for $100 million at a weighted-average price of $35.70. That brought total repurchases during the first half of 2026 to $300 million.

And after the quarter’s end, the board authorized a new $1 billion repurchase program, replacing the prior authorization. Considering the discounts involved, this could easily create per-share growth even before the industrial market fully recovers.

Applying a 20x multiple – which is still well below Rexford's historical average – to the midpoint of its current guidance implies a value near $48 per share. That’s about 34% above the stock’s current price before dividends.

While nothing is guaranteed, of course, I am confident that this REIT is significantly underappreciated right now. And considering everything discussed above, I can’t see that lasting forever.

Rexford has too much going for it to stay this far down for good.

Happy SWAN investing!

Brad Thomas
Editor, The Wide Moat Daily

Big Tech earnings season is in full swing, with obvious short-term winners and losers.

Microsoft (MSFT) impressed, for example. Meta (META) did not, showing no proof to increasingly skeptical shareholders that its AI investments will pay off.

It’s easy to get reactionary when stocks are climbing 9% here or sliding 9% there in a single morning. But that’s why The Wide Moat Show is digging into the details on six particular forward-looking plays.

These stocks have intriguing profit potential backed by solid fundamentals – not just hope or hype. Click here to see what Brad and Nick uncovered this week, including a hyperscaler you may have overlooked.