Activist investor Elliott Investment Management has disclosed a top five position in Rexford Industrial Realty, indicating a minimum of 5% economic exposure, likely totaling at least $1 billion of its $76.1 billion in assets. This move positions Elliott as a significant shareholder with potential influence over the company's strategic direction.
Elliott's rationale for taking the stake includes concerns about Rexford's corporate governance, citing its Maryland domicile which is known for management-friendly regulations, and a board with a majority of members serving over 10 years. They also highlighted executive compensation, noting two co-CEOs earning $13 million each.
The activist firm pointed to Rexford's capital allocation strategy since its 2013 IPO, which saw share count increase over 9x and debt from $193 million to $3.5 billion. While this strategy initially worked when the stock traded at a premium, Elliott noted the stock now trades at a 20% discount to Net Asset Value (NAV) and a 5-6 turn Adjusted Funds From Operations (AFFO) discount to peers.
Elliott is expected to advocate for better corporate governance, improved capital allocation, and a renewed strategic focus on creating shareholder value. Given Elliott's history of catalyzing strategic outcomes in REITs, such as the merger of Healthcare Trust of America, this involvement could lead to a strategic review or even a potential acquisition of Rexford Industrial, possibly at a premium to its current valuation.
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