LXP - Earnings call transcript Q1 2018

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Operator

Good morning, and welcome to the Lexington Realty Trust First Quarter Earnings Call and Webcast. All participants will be in listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Heather Gentry, Investor Relations. ahead. go Please

Heather Gentry

supplemental the Welcome results are section, furnished XXXX Operator. was Lexington Private Trust www.lxp.com and that Realty this the our available regarding Thank future site call during this will to the Web call to conference be and Act quarter at quarterly within release the Reform conference SEC Litigation these and the reasonable statements on release and package Securities Form may webcast. first expected of are morning, on Investors X-K. you, meaning in both the believes forward-looking disclosure and The distributed of Certain based statements made Lexington assumptions. constitute events XXXX. on statements earnings

call Executive and Presidents, Pat future required to included those with release, today's operations basis. implied from intended all However, will equity-holders differ today's statements. Will. Lexington's quarter in as cash to could not commentary or James those certain from financial factors described on documents Except to diluted Carroll, viewed a funds around In or as I the turn the Brendan not conference Mullinix, by most and performance, GAAP available investment references statements. disclosure release CFO; fully to quarterly call, Will and files all Lexington earnings financial Lexington's flow. any measures Johnson, and Operating performance and measure company presenting the or from FFO the press package, of that company of now these be SEC measures Eglin, will to measure. cause undertake refer holders to On materially financial expressed results. supplemental reports a time-to-time an those update first comparable non-GAAP historical over to provide Dudley law, adjusted numerical in the Lara a including results has earnings in such press to CEO; are forward-looking reconciled duty adjusted actual unit individual Vice directly by and risks, position Lexington Lexington Any does

Will Eglin

Heather, morning and Thanks, good everyone.

XXXX GAAP business rents leased quarter quarter. cash were we increased on Both renewals plan. first results continue solid our and during execute on to Our the as

lease portfolio same-store Our the the NOI slightly of total increased high, during end XX% our percentage Revenue industrial is was remains XX% quarter, office from exceeds and and up at to up. of from This significantly now percentage revenue revenue. properties XXXX.

exposure We $XX efficiently. the most highly million During motivated remain approximately to ways assets. to continue office of explore reduce office we disposed and this quarter, primarily accomplish of to our to various suburban

is portfolio debt, intend we as retire tradeoff share current to the demand industrial new when repurchases more use some of objective investor Our a flow, to that continue to add to for our best product having disposition strong. to of worth investments, is cash fund assets. We and fund value to and yield-producing office the proceeds dispose appropriate. dilution be non-core to industrial longer-term believe Despite we favorable more while risk-adjusted continues profile product maximize portfolio growth our

assets for quarter, the we XX, authorization. $XX of industrial During March X.X two submarket we of located million. have Memphis to the And shares. current an repurchase shares as million to the we approximately for Subsequent in XXX,XXX quarter, common took available approximately under opportunity acquired repurchase industrial our

strategy. consistent with industrial While investments our that currently remains the number assets, a for competitive reviewing investment are we are of environment

market as subject leases. A continue in favor highways to well properties main We markets and are to that industrial below to easily-repurposed located secondary hubs, facilities Class close transportation as

unencumbered, with over XX% bringing strong. adjusted our at the is now EBITDA to X.X the to times. X.X office leverage will investments. quarter, debt on the our Leverage now end Our I call but of that over debt some was to to turn to secured balance unsecured the net finance favor an I last our unsecured Brendan and NOI may of we sheet call mentioned portfolio remains just times we debt, discuss to of assets. as currently alternative properties encumbering dispositions

Brendan Mullinix

Thanks, Will.

we During the dollars first opportunities. are pursue currently and potential quarter, hundred continue industrial to several new of million investments, reviewing

in industrial have call, As reside more an we current industrial becoming approximately although which in of in weighted of to million. highlighted years. Mississippi, on predominantly the two are of build-to-suits purchases. we seven pipeline two-property Olive consists lease closed submarket different April, parks our Branch, on again, industrial quarter, last of active the average for in a Memphis The Subsequent properties beginning transaction approximately direct a $XX quarter's term

first is needed. added The XX parking employee completed a trailer was in which distribution for and early square land XXX,XXX to for by The square as property expandable is Class A leased Sephora. sufficient warehouse feet and foot property contain area XXXX years net XXX,XXX

X.X leased square a distribution is to center property second Hamilton net million years. three for Beach The foot

turn we investment I'll to will the like exception where discuss lease have if a that square We over find of in value this Lara asset a a While a believe foot make We a favor the years, property industrial properties under part the functional for strategy, of we well-located we overall larger is dispositions. not very an lease price submarket. a per high is still likelihood as call our generic that the Hamilton for good we rent that property portfolio, case Beach believe our and acquired terms with good the is but market with be five is distribution the bellow there to to longer use. properties will historically renews. now be and warehouse fit in fungible

Lara Johnson

at store X.X% million We small and included Brendan. cash and average of retail vacated during Thanks, quarter industrial rates office leases asset. GAAP This assets disposed and with XX X.X% under the a years, recently cap buildings a first respectively. of four $XX

includes and other office way. of Our current with a non-core million disposition a mix under to asset is sales office emphasis program on $XXX of $XXX heavy which million well

us for that of later guidance would would we the but active will dispositions potentially We the the year. close are our sales vary, Timing with the or discussions majority currently allow year. to for expect of part marketing sales of in in exceed buyers dispositions the an

As we to intensify our long efforts to our sales assets. short both focus office include and office reduce our we expanded have of term leased exposure,

buyer turn I call will from the the details James on progresses. an endeavor best providing office as to committed profiles of sources more portfolio. our by provide forward capital are to to value portfolio the to suited who accessing various We this over within property the look extracting We will updates With that, portion leasing.

James Dudley

Thanks, Lara.

X% we of square square and lease approximately quarter, leased and the extensions. X% feet GAAP respectively feet increasing both XXX,XXX on During of cash XXX,XXX rent space

XXXX have made We X.X% just leases year-to-date. progress the of in and in we expiring XXXX after

average the lease to was XX.X% with the weighted term the years. as the became property vacancy square XX,XXX again. term which Nissan last tenant quarter-end, decrease they building. in square the weighted a single property compared Tennessee for Memphis, property at the didn't signed our warehouse. Our to occupy of a net asset Texas lease foot it any leased X.X positive portfolio office outcome lease XXX% driven XXX,XXX in quarter-end require now This mostly The by Subsequent quarter a space is our Sears lease in increased feet was and of average and downtime, portfolio a Irving, our of for rent

expirations, for extension. a office final XXXX Ingalls five-year Regarding in we are with negotiations Huntington in Pascagoula, Mississippi

office leased to of outcome our to and property the market lease for a expect and sale currently still property lease expires XXXX sale Swiss June this of XM whose Park, to mostly FedEx. likely remain or Kansas end for FedEx Re continue XXXX. with asset Overland leased We end the in will We June the to in through XXXX through now negotiations be our

for time for On industrial in our remain optimistic or discuss year. side, the over or and will outcomes properties. sale to latter who Carolina and on the Pat, of turn to will for and the part favorable the Carolina, demand we I industrial leases strong call long Plymouth, financial market leasing these now given whose lead properties all sales Duncan, results. South expire We continue Henderson, in Indiana, North this facilities lease

Pat Carroll

Gross per timing the period charges $XX primarily delta first of diluted net James. million net common revenue of shareholders attributable primarily quarter XXXX in $XXX gross and the from share per range on generated guidance sales for for a common per to common million a for between between quarters to shareholders revenue to change on income property million were result properties. in was the is acquisitions new We Currently, million $X.XX to or time $XX for share loss of share. compared leases. quarter taken diluted The had shareholders same compared range is The diluted to additional revenues relate attributable common increase year. subject throughout common the common of with the to Thanks, same $X.XX gains This revenues or impairment of attributable in XXXX. net the income the $XX XXXX. and for to $X.XX period time $X.XX the

asset impairment We During down Memphis, million our million its to were charge sales. primarily of office in on property estimated $XX took value recognized to to $XX facility million two and impairment of and a we million. gains The wrote approximately properties. charges related the attributable $XX charges the Tennessee, quarter, fair impairment of $XX FedEx

common Kansas, impairment fair in the May company new Additionally, diluted we estimated office to property share quarter of relates $X.XX well XXXX. a XXXX. on Re primarily coming December, non-recourse million. XXXX. matures $XX as time Park, share its $X.XX per $XX Swiss FFO by which as for common is The new million the leased or the in $XX increase was encumbered we to to mortgage Overland through approximately million took $XX our same asset per for The Adjusted leases. compared down $XX period million million property to or value online And in acquisitions wrote diluted

million X.X% is of expenses the the percentage same company lower approximately of was for result our the XX.X%, period quarter vacancy XXXX. million, first $XX.X current Same-store was tenant leased XX%. to improvements slightly Same-store time costs Leasing payout in was quarter FFO compared NOI decrease Property for than of was at Sears. same the to time previously Our the quarter during to $XX the XXXX. million leased operating period approximately for were warehouse $X.X the quarter. adjusted The ratio in end the which the and primarily up XXXX. XX.X% in when were Memphis compared

changers change address approximately were in expenses annual for future $X for We are severance the could always in budgeting G&A expense these quarter as the approximately which although for dispositions. fees $XX first million leasing XXXX, costs quarter. entirely G&A we board quarter. this and in included million we amount first expirations modest the

Our million. XXXX G&A budget $XX is expected approximately be to

costs. We to with work on operating towards continue focus operations simplifying a our lowering

had Moving million the quarter sheet, $XX cash at including on balance as end, restricted. to cash we classified of

rate was decreased to debt average weighted our a and quarter Additionally, times X.X at outstanding net approximately billion X.X quarter. debt debt coverage term of to compared Fixed end seven weighted approximately was with last EBITDA X.X adjusted of EBITDA years. net times consolidated times, of charge approximately X.X% a the adjusted under the to leverage average $X to interest just and

of had to we repaid total we and of interest $XX with available. million $XXX of weighted outstanding million, of outstanding credit term mortgage a $XXX slightly facility end revolving XX X.X%, quarter, weighted a quarter on quarter At million over average rate with debt years. the with a end average our During $XXX the million

$X.X of XX% the base of NOI asset at end XXXX. approximately as billion approximately the quarter, unencumbered represented Our of which March our XX, was

back Now, the over I'll Will. turn call to

Will Eglin

further Thanks, of so ready to comments portion I conduct you Pat. this we call. the have Operator, no for at question-and-answer are time, the

Operator

question-and-answer the ahead. comes Sheila The session. of question Evercore. first begin Instructions] McGrath now go Please [Operator will We from

Sheila McGrath

disposition in the Yes, volumes to moving and you portfolio year? and was Will, to cap on think good us we the rates more quickly give if for how shift should I accelerating could office morning. dispositions about industrial, wondering the your thoughts

Will Eglin

Sure.

year that when to to we in guidance think of million the million mainly gave in $XXX started dispositions office. we I $XXX

year. of have to we'll the considering basis that working that We'd some said, With sort the we'd be area, that. guidance thought visibility indicated will and be beyond So And range volume as transactions that in sort sure cap longer earlier a clarification guidance, in very overall transacted with I becoming to year sell but very exceed on and interest industrial. office we above can quarter have rate, have buildings second the shorter hopefully and X.X. hard dollar we to the some rate we our say lease tighten what beyond progresses. office a year sub are than us cash on context and our think speeding for assets, think And up are on to some be about progresses, of the of moving terms X.X would and just what at an anything we have X.XX and allow as transacted could cap may our we on well do said, of And same. some terms schedule. of that, lease more of of next in in transition whole were We we assets quarter since don't the trying going in first on good the in pure-play of that be towards quarter finishing on we I the as right we probably

Sheila McGrath

on as opportunity that thank I who seller, us little expansion little the was you. the detail and a the Okay, could And you in that? on was a more a cap purchased the industrials end you the more give quarter, detail if after the follow-up, rates bit describe wondering of

Pat Carroll

One of with or we seller not that identity disclose the the would the the sale the was the of rates. that seller cap we terms of agreed

lease we my on extension opportunity The potentially does those which the respond property the the to of can't include expansion Sephora So depending remarks lease, to an yield. unfortunately remaining directly an was also questions. noted of would the term that in the enhance prepared and have

Sheila McGrath

that describe little to could price was how so just you wanted maybe for it the bit was was, sell buildings together, Brendan, what a competition they the higher a and competition limited more the or it's because purchase? purchase

Brendan Mullinix

Yes, it marketed. to was be that say, fair would not broadly

Sheila McGrath

you. Thank Okay.

Operator

from Mailman of is question ahead. KeyBanc. go Craig next The Please

Laura Dickson

Hi, everyone. Dickson is This here Laura with Craig.

you like, industrial acquisition question, follow-up the can give us rents forma, annualized So the assets? pro following two these Sheila's on based percent of of

Will Eglin

pro in million. base, it From on I rents me, about, front a were don't about have annual forma of $X basis, the cash honestly an but

Laura Dickson

For given have with then the for this, you so missed them? activity both I not and activity but guidance? assumption sure -- acquisition XXXX an of and Okay, investment do

Will Eglin

range the acquisitions of would our end or and What depended in the disposition upper was difference on we range said utilizing of lower earlier guidance the simply between we be that basically for de-leveraging. end the the proceeds whether

that acquisition we're make, guidance. this on our acquisition visibility any I absorbs a activity. is So have of further right, of that piece $XX but at looking disposition There's think could one million that beyond about we don't transaction

Laura Dickson

venture, Okay, wanted and update Cleco [ph] on an about just ask joint the that. to then,

Will Eglin

those interested about And sizes infrastructure, or are greater. we're On the continuing are is buildout to get of that with like opportunities the in build-to-suit in demand XXX,XXX nine looks venture, or the started the strong. of market still There's joint greater. the about XXX,XXX XX Cleco of users currently of

we're to responding RFPs. currently So

Laura Dickson

Okay, great. you. Thank

Operator

comes Stifel. Guinee go Please of The ahead. from John next question

John Guinee

Great.

dispositions go to reluctant Okay, you go that, related dividend, can if how about it? can cut could to go cutting do repurchases. acquisitions or the have share the just thought and obviously Obviously cut to dividend can first share question you far they a they to But de-lever, very asset on you've repurchases. question,

Will Eglin

dividend, income, in the right if but cutting we now We about to question. haven't our relation taxable thought over-distributing your are that's

John Guinee

and cut sure very down the it becoming you're minimum. retention of to the if and industrial I'm very, just would cash stock go being large it by because just little as the of try REIT Well, if dividend not morph to seems you restricted into you very payout a an

Will Eglin

price agree our we investing Yes, as cash has for obviously, the dividend that lot an although trading to our selling seem flow, And getting be flow paying. right we're much in value out of now, don't and comes I the the of cash diluted well. that industrial a CapEx is off

distribution in process. So now think shift, value in I be shareholders be the is continuing in might transitioning would which for still to think pretty that that a what dilution right the it's all the way context spite there to we industrial, the time-consuming to make premature of of but

John Guinee

-- essentially looks math the sell If you about I'm didn't who right, this, you've but $XX went net if and cap did then if then second million the the 'XX you income. 'XX to I $X.X at it the someone person sale? the essentially name FedEx rate question, on got could again FedEx and it catch highlight And of million, maturities, like that on what's doing of and through those also implied

Will Eglin

calculation, rate, short-term $XXX building its of that that in a cap sell able the high a building value us, it right, is to the so for is age given that's and Yes, foot, of think, we nature that to good a be but for age.

John Guinee

just I'm no, thinking Oh, modeling purposes. about this for

Okay.

a you 'XX that's mentioned the door you that a event? So or sell FedEx, to 'XX going is an it XX-cap when out

Will Eglin

event. contemplate an Right it now, 'XX we being

John Guinee

then Re million at at to of the the Swiss goes year? And back $XX lender this end

Will Eglin

likelihood, all yes. In

John Guinee

And how about building Kansas Re in other building? City, Swiss other the the

Will Eglin

believe is We likely it's the and a the outcome to there lender. conveyance similar that

John Guinee

mention And you Okay. Corning Ohio? then did in Owens

Will Eglin

we expect Corning like Owens they've short-term extend lease done that extensions again previously. they'll has and

John Guinee

you thank great, very Okay, much.

Operator

question go from Thalmann. next Massocca ahead. John Ladenburg of The Instructions] is [Operator Please,

John Massocca

Hi, guys, good morning.

Will Eglin

Good morning.

John Massocca

It situation? that seems Has Any update vacate. at the to lease that were on to them like of their the fight you going changed Sears allowed definition all?

Will Eglin

hasn't changed. The is it answer

moved impairment last property because took have are approach. the and charge vacant, year we We we they take the conservative did as an However, out. showing now

Pat Carroll

But we legal in pursuing a action. them are

John Massocca

going assets year where here industrial you end thought -- the versus And renew there the but on selling XXXX, bit tenants it's know trying the those then what's in a to process I in the release the know, assets? not are at the to office, Understood. of smaller

Pat Carroll

Well, us want our of have amount. overpay industrial has I or we buyers some and user been for experience property that very that along scenarios pay think in competitive a these to come us

in open assets, So also circumstances, those the to sell be leasing. but we're we'd to inclined

it's going I and of some So the see for the think We year. can outcomes sales. bag some that this be mixed leasing a to asset upcoming have vacancies

John Massocca

acquire where the today, be market industrial And be going to potentially able to a you is you're the to or would sell if wash, accretive relative in that kind of that assets?

Pat Carroll

outcomes view different and there'd I Again, wash. wash. a be different as but assets, a That's it

John Massocca

then office putting assets away focus is towards your from and more of on still… and And disposition you're from that mortgage lenders you because market for Okay. terms any in or is debt that shifting mentioned pushback the front, seeing LTVs

Pat Carroll

is us. If anything financing activity the for good very the that might that it's good it other we values support think disposition so way at

John Massocca

because essentially So good at attractive such are LTVs sell think other you you can getting rates? people

Pat Carroll

that what Yes, thinking made was us our it. shift about

John Massocca

That's you very Okay. thank from much. me, it guys

Pat Carroll

Okay.

Operator

Jon Petersen from The of next Jefferies. question is

Jon Petersen

Great, thanks.

just I So was curious.

As obviously was industrial then cap was and we large It couple your looks you obviously and saw rate like valuing there's much low been of DCT a the than a recently, shift think towards ago. days couple there portfolio that. X% we a Gramercy, about transactions lower

So curious think your how quality about of kind you specifically I Gramercy, some your up of ones of industrial about you quality sold, think portfolio these comps? that do maybe versus is those stacks was versus the as thinking

Will Eglin

portfolio to we most Gramercy comparable Yes, ours. view as the industrial

data a was very good us the to that is underwrite I for valued and for for XX thought piece industrial. Gramercy's point parties was math transaction of about quick of sort our So interested at that NAV. trying Which

Jon Petersen

side to there as opportunity Do activity to to a industrial, moving see kind onetime M&A your to reduce over is larger shifting -- you portfolio exposure office? this about rise the think in of transaction an for office and you

Will Eglin

tell, that lot we if looking that's a Time there of the definitely market is capital sidelines for chance a the advantage invested. on that. this in think to be to potential I we'll something of but there's will be And have exploring. take opportunity,

Jon Petersen

color. the for you Thank Okay.

Operator

Guinee go Please is Stifel. next from follow-up a question of John ahead. The

John Guinee

on Great. Oh, industrial the you expect which move portfolio? just recite outs again

Will Eglin

certain Carolina, Sure. move thought Well, but with the of a property little we're change. back bit in there discussions out there's was for actually Duncan, our in tenant. South a a that been We

sure Plymouth, and then property, So the moving to it's we for out. moving know property, out. if unknown they're the Henderson Indiana out. going And they're they're move also we know Staples

John Guinee

the Okay. an is it And number? that envelope, like back annual Memphis paying was of then in looked $X foot, Sears only the a

Will Eglin

That's foot. $XXX a

John Guinee

the you functionally that for it what market or particular think And is challenged? asset is do

Will Eglin

just It's towards that functionally sure challenged and at started we're exactly what it leads not kind We've us of point. this process.

Pat Carroll

is the in basis asset million. Our $X.X

John Guinee

lease But it know would you don't for? what

Pat Carroll

-- is feel for of value asset the exactly for so out to it. market the trying we're what

John Guinee

Okay, thanks.

Operator

is [Operator Instructions] follow-up Sheila of from The Please a next ahead. Evercore. question McGrath go

Sheila McGrath

sales us current will acquisitions, of Will, wondering, if how might any portfolio or on distribution yearend, the mix could you was but you unforeseen give not look the I the what by think Yes. assuming plan like? be major just kind portfolio

Will Eglin

guidance more think that we I for industrial if shifts industrial, and laid out earlier we purchase just used the the office. the NOI execute and year to towards proceeds mid-XXs in the mid-XXs-ish from

on transforming we'd just eye we portfolio more think on participants have than But as visibility market that. have update that. I our We the

Sheila McGrath

second the you'll are that Okay. term? just portfolio maintain conservative, your the reasonably ratio And or looking what I'm -- shift increases your payout versus question dividend how in sector -- given if near on a is the -- wondering the is thoughts when thought just is, FFO

Will Eglin

it. given fact Yes, the increase the much in that we our dividend; I it level current we're value mind for to not of mean, have getting don't

focus in so going its composition sustaining occupancy the I office. to so there's we're think changing portfolio of not changing portfolio CapEx and much improving and on the quality the around

Sheila McGrath

Okay, you. thank

Operator

question-and-answer Will our I for over closing would This conference like concludes turn to to back Eglin the remarks. session.

Will Eglin

this us joining for you of morning. all to again thanks Well,

participation appreciate support. your we Now and continued

again, would with And site day. information great members you company on package, the can have on always a quarterly Thanks as www.lxp.com. supplemental of at management Heather you our or other like senior please addition, and additional receive Gentry Web team any contact or questions. our contact the you may to in If me our find

Operator

for now presentation. concluded. attending today's you conference The Thank has

may disconnect. now You

LXP Industrial Trust (LXP) 8 May 182018 Q1 Earnings call transcript