REIT Pair Analysis: REXR vs. EGP
Valuation
2025
Overview
Comparative analysis of industrial REITs with 10-year DCF modeling, market research, and quantitative valuation.
- FBE 467 - Spring 2025 · completed before the Rexford internship
- Lincoln Nguyen, Kyle Tran, Oscar Yan
- 10-Year DCF Model
Executive Summary
This analysis compares Rexford Industrial Realty (REXR) with EastGroup Properties (EGP), two industrial REITs running different portfolio strategies. A 10-year DCF for each, sensitivity testing, and market research support a pair trade recommendation.
The model uses T12 financial data, entry and exit cap rate scenarios, and downside stress cases. The recommendation weighs geographic concentration, tenant diversification, balance sheet strength, and exposure to e-commerce growth and manufacturing reshoring.
Investment Thesis
Overweight EGP, underweight REXR: The recommendation reflects EGP's Sunbelt portfolio and conservative leverage, compared with REXR's concentration in Southern California, where vacancy was rising and trade policy remained uncertain.
Investment Recommendation
| EastGroup Properties | Rexford Industrial Realty | |
|---|---|---|
| Recommendation | Overweight | Underweight |
| Listing | NYSE: EGP | $156.60 | NYSE: REXR | $32.50 |
| Projected IRR | 12.4% | 8.8% |
| Occupancy | 97.1% | 95.0% |
| Debt/EBITDA | 2.9x | 5.1x |
| States | 12 | 1 (CA) |
EGP: Overweight
- Diversified Sunbelt exposure reduces concentration risk
- Benefits from $234B CHIPS Act manufacturing reshoring
- Conservative leverage provides financial flexibility
- 82.3% tenant retention rate
- Development pipeline in high-growth markets
REXR: Underweight
- 100% SoCal concentration creates geographic risk
- Rising LA vacancy: 3.8% vs. 2.1% in 2023
- Slowing rent growth: 5.2% YoY vs. 8.7% prior
- Higher leverage limits acquisition flexibility
- Port-dependent tenants face tariff exposure
10-Year DCF Model Preview
| EGP Pro Forma | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | Year 10 |
|---|---|---|---|---|---|---|
| Gross Rental Income | $892,456 | $928,154 | $965,280 | $1,003,891 | $1,044,047 | $1,298,567 |
| (-) Vacancy & Credit Loss | ($26,774) | ($27,845) | ($28,958) | ($30,117) | ($31,321) | ($38,957) |
| Effective Gross Income | $865,682 | $900,309 | $936,322 | $973,774 | $1,012,725 | $1,259,610 |
| (-) Operating Expenses | ($237,036) | ($244,147) | ($251,471) | ($259,015) | ($266,786) | ($316,489) |
| Net Operating Income | $628,646 | $656,162 | $684,851 | $714,759 | $745,939 | $943,121 |
| (-) Debt Service | ($412,500) | ($412,500) | ($412,500) | ($412,500) | ($412,500) | ($412,500) |
| Levered Cash Flow | $216,146 | $243,662 | $272,351 | $302,259 | $333,439 | $530,621 |
Assumptions: 3% rent growth, 3% expense growth, 5.25% exit cap rate
Source: company filings and author’s 10-year DCF. Academic underwriting. Not audited, realized, or sponsor-endorsed results. Completed Spring 2025 as USC coursework, before Kyle’s Rexford Industrial internship (Jun to Aug 2026).
Financial Performance Analysis
Geographic Diversification
Valuation Metrics Comparison
Project Deliverables
- Investment Presentation30 slides • 4.2 MB
- EGP DCF ModelExcel • 1.8 MB
- REXR DCF ModelExcel • 1.6 MB
- Investment Memo20 pages • 890 KB
- Market AnalysisPDF • 2.1 MB
- Python AnalysisJupyter • 450 KB
Project Team
USC Marshall School of Business • FBE 467
- Lincoln NguyenMarket Research Lead
- Kyle TranFinancial Modeling
- Oscar YanValuation Analysis