6.8% Passive Income

Preferred shares of Rexford backed by 50 million sqft of warehouses in Southern California with large margin of safety

I recently wrote an e-mail to a small group of friends and family about a solid 6.8% passive income idea. Over the year, some of them have mentioned that their parents could use income ideas now that they are older. I think 6.8% is sufficiently high enough and the coverage ratio is spectacular at 5.9% for interest expense and preferred dividends combined. I am motivated to write this e-mail because there are too many products that are sold as passive income (vending machine routes, single family rentals, operating businesses) but either have very poor risk/rewards or actually involves significantly more active management. I have also purposely written with less technical terms and easier to understand for the lay person.

For those of you who prefer to read about actionable/complex ideas with higher upside, this idea may not be for you. But it could be a good fit for a friend or family who value income over appreciation.

Dear Friends,

I hope you are all doing well. I have been meaning to reach out to a small group of close friends and family for a while now. Some of you have mentioned that your parents could use some income ideas. Some of you have expressed interest yourselves. Either way, I wanted to share something I think could be genuinely useful. This is not meant to replace any other strategies you may have. This is a decent solution if you want passive income with good current yield.

For those I haven’t spoken to in a while, a quick reminder: my day job involves investing in publicly traded real estate companies, known as REITs. I have been focused on this sector since 2013 and have invested through some difficult periods, including the GFC, Covid, and the 2022 interest rate hike. That experience has given me a decent feel for what is safe and what is not.

For much of our adult lives, interest rates were low and finding good income yields was hard. That changed in 2022 when the Fed raised rates. We now have good income ideas. This email is the first of what I hope will be a series where I share what I think are high quality income ideas.

6.8% Passive Income Idea

The income idea is the Series B Preferred of Rexford Industrial (REXR-PB or REXR PRB). Rexford owns roughly 50 million sq ft of warehouses in the SoCal area: Los Angeles, Orange County, San Diego, and the Inland Empire. These are tough areas to develop warehouses in, and there is a limited amount of land. As they say in real estate, location, location, location.