LOS ANGELES-Rexford Industrial LLC has launched a $51-million fund called Rexford Industrial Fund IV, the industrial repositioning specialist's fourth fund, which will focus on improvement and re-tenanting of under utilized and mismanaged properties. Michael Frankel, Rexford partner and chief financial officer, points out that the fund was oversubscribed at $51 million, with participants who included "repeat individual and institutional investors."
The new fund, which has already closed on five properties totaling 300,000 sf, is positioned to acquire more than $250 million of industrial product with leverage. It is targeting what Frankel calls "difficult-to-access, yet highly sought-after" assets, principally in Southern California but also in other western states.
According to Howard Schwimmer, Rexford partner and managing member, the new fund will invest in class A, B and C properties in prime infill locations. The five properties that the new fund has already acquired include buildings of 78,689 sf in National City, 78,506 sf in Riverside, 71,536 sf in Carlsbad, 36,825 sf in Carson and 32,968 sf in Long Beach.
The new fund and its acquisitions are the latest in a series of strategic moves by Rexford, which recently executed a $68-million refinancing of its Rexford Industrial Fund I portfolio with GE Real Estate's Strategic Capital Group. Frankel explains that the loan "was custom crafted by Rexford and GE Real Estate to deliver financing in a flexible package" to achieve the locally based company's investment goals.
The new financing "maximizes the economic potential of each asset" in the portfolio through a structure that will allow for capital expenditures and earn-out draws through the seven-year life of the loan, according to Frankel. The highly flexible loan structure secures fixed-rate pricing for the initial $46 million and favorable variable-rate pricing for the remaining $22 million of the $68-million total.
Frankel worked with Chatham Financial in arranging the debt, with the entire loan to be held on GE Real Estate's balance sheet. The arrangement allows Rexford to move properties in and out of the financed pool without defeasance and with nominal friction or administrative costs.
Frankel comments that the structure of the deal "allows Rexford to return the vast majority of investors' invested equity without exceeding conservative levels of leverage on the portfolio." The company expects to be able to increase investors' quarterly distributions to "a level that could exceed 20% annualized return on invested capital," Frankel adds.
Since closing Rexford Industrial Fund I in October 2002 and acquiring nearly 1.5 million sf of value-added industrial properties for the fund, Rexford has subsequently raised three other funds, including the new $51-million fund, and increased its holdings to approximately five million sf valued at more than $600 million. The company was established by Schwimmer and Richard Ziman, the founder of Los Angeles-based Arden Realty, who served as Arden's chairman and CEO until GE acquired Arden last year.
© Arc, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to TMSalesOperations@arc-network.com. For more information visit Asset & Logo Licensing.