LXP - Earnings call transcript Q3 2018

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Operator

Good day, and welcome to the Lexington Realty Trust Third Quarter 2018 Earnings Conference Call and Webcast. All participants will be in listen-only mode. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Heather Gentry, Investor Relations. Please go ahead.

Heather Gentry

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

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

Wilson Eglin

Year-to-date most quarter $XXX dispositions, active financial $XXX and we've almost million. disposition to We far billion notably good with completed front had morning, of results. third Thanks initial a finished everyone. Heather, $X the operational guidance million on a and solid very our quarter the exceeding and of

As a most consist XX to industrial portfolio with transaction million result, a we the primarily disposition in to leased of progress net the made assets. sizeable transitioning venture. single tenant portfolio have significant office we meaningful The joint completed property $XXX

at the extremely our XX% objectives. pleased strategic are to revenues we year, advanced the the increased Industrial up of year. the down We with overall significantly which our of transaction while reducing of XX% of beginning believe the revenues beginning XX% from XX% office portfolio, several meaningfully key at from to

occupancy at debt In we end reduce addition, per X.X GAAP end quarter. XXx square years, older adjusted sale obtained high EBITDA The and of X.X% X.Xx second with the of long and the portfolio properties from cash age vintage quarter to X.X% the to and foot with average about cap to was our was this leverage of enhanced square-foot of mostly respectively. million utilized $XXX portfolio and proceeds XX for value net an consisted of at the leases. The by rates sold

continue of substantial an through The assets own of equity debt, repurchase annually. approximately from of points or to provided us shares. opportunity XX% joint approximately invest we $X.X in approximately capital assets Net XX million a for transaction on amount owns of fee partner and $XXX industrial repay to basis million and proceeds initial and of structure promote, XX% we the upside attractive million future or venture for the $XX Our the manage the equity. provides venture will

the of our quarter, to fully we our $X.XX and of We XXXX Also $X.XX during repay to subsequent revolving average X.X XXX,XXX to per an opportunity the term per price proceeds shares credit price price sales facility the at $X.XX the million shares X.X quarter, additional million and took bringing to entirety repurchase During loan. share an for of we at used shares after share average an at repurchased our an total average activity per share. repurchase of XXXX share. quarter end,

for We our to total view We of would continue shares to million to expect repurchase of approximately shareholder combination repurchase which net and share leased cash capital authorized industrial of properties from XX to be and to remaining available acquired and primarily Board industrial has investments repurchases approximately share allocation look the Trustees value to we additional as a today one XX an tenant tools brings available we our create as shares optimize We've continue repurchases million portfolio. some industrial our many $XXX transition transaction, proceeds to the proceeds with of single million. year. this and disposition to used future to announced

compression when rate cap the of assets does we it pricing buying purchasing leveled. to appear continue mindful assets We although of for has are types be that

exceed to approximately our at large our and we growth sale on Disposition activity revenues. including industrial easily XX% billion. remain concentration the will of look As portfolio distribution which year opportunities, centers for warehouse exposure repurposed expected primarily $X the our is increasing now to represent

on per to the office Financial gains primarily the near-term results from $X.XX XXXX. industrial, composition as share Looking higher goal work of move the strong ahead than Net expect portfolio diluted our due quarter. XX% portfolio. dispositions year-end usual common we by of to to was income XX% of sale XXXX, were an we towards actively for

now the company of share portfolio we dilution. a disposition announced We result company's $X.XX FFO per low to in FFO we also $X.XX range is with the adjusted near-term improvement portfolio what in $X.XX to compared per share expected guidance expect in company the within to industrial be connection generated share $X.XX per adjusted earnings guided The of mainly of leverage to acceleration September. to a transition to and

to a REIT primarily industrial capital and becoming with towards sustain a expenditure occupancy. sheet moving balance by believe we strong However, required less

have XXXX fourth-quarter our company our a attributes, growth earnings to intend better results. attractive positioning better and with risk/reward profile much long-term a guidance more to are valuation. We We provide

back venture expect to of bring joint effort in XXXX been announced with historically taxable the recurring range to has With first our adjust announcement, an the our of FFO. paid we which is adjusted within in dividend estimated for dividend April. line an XX% company in dividend being we be income, that done payment, quarter also to XX% and to This we expect XXXX

million statutory the and business minimum improve retain our to forward, will we reinvest our For approximately distributing so allow revised capital to prospects XXXX, going growth time. into our us excess are dividend in $XX sales gains on over of excluding more

been single anytime taxable focused shift has more the see industrial and don't level Our for dividend durable portfolio XXXX. disproportionately range to excited our focused our has was believe expect income portfolio board between the to likely continued rewarding shift generally new It execution, $X.XX is to believe as per primarily office we as with for future net become $X.XX for and funded to tenant in recurring we REIT. income, approval, to our portfolio share slowdown to many we the things exceed we more estimates reset per the we and leased dividend to with subject our quarter and portfolio industrial $X.XX But dividend we is evolve we soon. busy this are from Analyst years, our the comfortable and appropriate. as been a are share are

the I'll results will turn more and leasing some call over discuss time to Mullinix financial reviewing now detail. in investments. We spend And investments, to Brendan dispositions,

Brendan Mullinix

Thanks Wil.

purchase of facilities Our industrial investment in the strategy high-quality on single focus secondary continues markets. primarily to tenant

evidenced our by well. in recent As are as activity, primary acquisition most active we markets

in distribution with User well lease demand larger interested terms national repurposed distribution centers. easily and calls super and regional, we regional warehouse bulk expect most warehouse located, centers still duration. varying We generic invest are to options for in acquiring in further

terms are locations and including have growth. Midwest including favorable on markets, reviewing In opportunities active to where access strong historically, population infrastructure the been significant many focusing offer the that in Southeast of we demographics of markets and we

act inclined in Ohio incremental also like generate on joint opportunities are development we where our ability to to yield. We have the Columbus, venture

a port were market top portfolio million provider XXX,XXX bay who is Two properties at Subsequent able and return Texas Container X.X% asset on constructed to park newly online its with South six in $XX eight The in Looking were Spartanburg of The process the of close of as and extend southeast a US minutes an of Spartanburg, facility centers term and of respectively. average assets in Houston. an all grade units three total square Houston. we rates a a at using Houston, the port situated one return is southeast major Carolina. as GAAP two facility sub through one industrial to our logistics leases within X.X% to the the the cash and feet. warehouse institutional industrial given quarter lease proximity in acquired Terminal bringing The the serves include to import cap the highways facility acquisitions third square purchased and Texas properties space XXX,XXX facility in quarter, were million of facility. of foot we property the is The three the for average within in every at Wal-Mart's these to as performing in one located are foot retail square distribution leased purchased end, of comprising centers weighted three years.

through after approximately of a to small XXX,XXX volume the and by Foods in itself in the X.X% December market rates facility investment expires sub and million occupied October tenant is lease property Shortly is of at $XXX at Teasdale average purchased second lease Northwest lease acquisition, X.X% also XXXX. visibility, an respectively. where year Teasdale we GAAP to the industrial on extended Dallas. The currently XXXX.Total facility We closing a cash lends the for tap whose primarily percentage easy square foot

fast to sub we expect distribution a A XXX,XXX $XX newly close market located foot which Arizona acquire We for facility million in constructed Phoenix, soon. will of industrial square growing anticipate Class

other On of volumes being year to over t average, before of XXXX roughly new $XXX the we investments purchased of outlier. opportunities, million to some million a $XXX year-end. investment have continue We the which close $XXX last could with years work three on million

in on consistent interested as pricing on stabilizing. be and that historical alternatives. largely The are acquisition mainly that volume future set will purchasing, As can types secondary assets seems well as are the average, suggests for pricing, allocation this maintain dependent wil earlier, we to we our be markets product mentioned opportunity capital we with A Class of focused the although

underway. build-out Our Etna, venture infrastructure Ohio is joint well

finalizing e-fulfillment X.X a negotiations of a the construction square-foot are for grade million retailer center. with We major investment distribution

the call discuss turn this to keep you as project opportunities Lara build-to-suit will to progress. over now updated other We and I'll dispositions.

Lara Johnson

Brendan. in assets Thanks disposition play industrial continue of primary will to non business strategy. a The overall role our

$XXX at in discussed leased effort longer older, of we office accelerate price a favorable sold Wil a of an a a million foot. to As $XXX suburban portfolio properties dispositions

four quarter sales sold during office properties more totaling $XXX volume also million. to and the third We three million bringing $XXX properties quarter other approximately

of rates of Disposition X.X% and quarter, With at of XXXX one volume and billion the GAAP and year exceed to million completed office the cash estimated respectively. average X.X% cash after GAAP X.X% $XXX at respectively. cap our for the rates sale totals volume and is addition X.X% expected $X disposition cap

flow focus As predictability we singular to committed to industrial evidenced volume, order by properties efficiently simplify cash in our properties. sell remain non industrial and operations through on a XXXX enhance sales

as XXXX properties aggressively We are a or For of of better can the XX% remaining disposition or portfolio revenue intend market of generates we half marketing year its or at optimistic are we than activity anticipate we remainder XXXX, from end XXXX rate continued properties by pricing levels. XXXX robust more that to craft or and the industrial cap office and for sale achieve more

higher nine million Although, intend ultimately mix NOI and generated we execution the are sold. assets on approximately office marketing a dependent properties $XXX mix debts. and ended include other for well shorter XXth assets months located, mortgage to of we're leases quality is properties market encumbered term $XX this of and of the facilities sale or The of These with for long- by leases. September million of will

pricing leasing for when property, sales the buyers optimizing portfolio office asset on executing marketing pursuing as keenly market market Subsequent best well focused remaining focused primed for to on through are the that are James we by strategy expect leasing. I'll the and continue for the strategies are over sourcing turn aggressive shrink management XXXX, to update each assets With to the market on leasing in We and as on asset who call office the through remaining to as the prepared program. sales an portfolio our disposition will management assets provide efforts.

James Dudley

Lara. of quarter office strong square with approximately space was XXX,XXX Leasing activity leased. the Thanks for feet

average XX.X% at end term portfolio Our lease X.X leased was a weighted of quarter with years.

large by X% XX% As slightly respectively GAAP cash a these Honeywell result extensions extensions increased to impacted of compared to numbers portfolio last in both office a were rents and Cummins. primarily quarter. due sale, and just our under on with

signed its TI XXX,XXX not Glendale, a no its foot quarter, TIs Indiana, X% years leasing Arizona. Honeywell lease occupies which costs. and other in square with pursuant we a an in included XXX,XXX who to option transaction is The last in without exercise five-year X% increase our property believe a extension in we for rent discussed costs. claim with in extension our we the Cummins, This As rents other has did no in office extension will Cummins or a cash lease cash leasing to or option purchase in their lease purchase extended with effort exercise result increase filed merit. was terms. lease five Columbus, automatically

will on keep this continue We you to updated matter.

Idaho extension lease rental in seven-year our square property resulted term in The Meridian, longer a about a rental XX,XXX T-mobile. in cash with signed also XX% We decrease. rate foot

Regarding multi buildings. tenants had lease both at approximately new approximately property. property in office Phoenix, XX% Phoenix and Texas Houston Arizona tenanted the our to and leases, in new This space our to buildings occupancy at brought XX% Houston, our

bring would property full to sell Phoenix to buildings, additional full will in we close In have stabilization property. both executed Houston at space marketing if our stabilization in and that our We the to event, which looking prospects begin both process buildings.

reduced servicing negotiated and buyout XX,XXX property's Orlando, The a and sale. office tenant work the be end, XX-year term. in for quarter long-term buyout for to the will property Florida the value. car space released a costs our marketed lease The lease leasing foot significantly building we with Following the now new square enhanced in

the As percentage for we had rental and rolling a remainder X% of overall of currently XXXX. in XXXX income, of leases X.X%

working expirations been their majority XXXX the visibility remaining the on and fairly have We good of and on diligently outcomes. had XXXX

likely properties stated we maturities whose at sales foreclosure side office in we expire the following both this in of have a most tenant On quarters, leases as are the previous the cannot year if of and three end April buyer. with XXXX find or

that for XXXX. seen their will have Ricoh, We tenant we lease term square-foot recent Although, both. previously our the XX,XXX January in announced some office in activity had Houston property when move ends out

or We continue property lease to market for sale.

to diligently working is XXXX. This our to in properties now four are Tennessee expect in expiring which We property Memphis, FedEx includes other office sell we FedEx. on with lease

space Indianapolis Wiley are is for portion expected to in we remaining the marketing and In in stay the of space lease. addition, a John

T-mobile in lease We expect to subtenant of long-term a Quest obtain a Lenexa, extension Diagnostics, from Kansas.

down. there we fairly Although, expect significantly be roll lease to a

Virginia and previous Midlothian, to now end the set expiration. of their option expire at Finally, XXXX our XXXX their property at Alstom Power versus termination is their exercised lease

unsolicited the a We a offer for facility from we believe an promising be have outcome. could buyer user which received

expirations Moving vacancies. on to industrial XXXX and

to to facilities continue We Carolina, interest Carolina Plymouth, or Indiana. Duncan, purchase our North in lease see South and Anderson warehouse

We each hopeful positive demand cases for of given are the for continued space. in industrial these strong outcomes

terms. are our renew to expect Rockford, lease in negotiating Illinois Warehouse but with still Jacobson We

XXXX. building square our Industrial we Corning XXXX, of And expire who new is X whose lease Michelin to year for facility foot L'Oreal October consolidated Looking leases event end with plans we the remain the financial in at have leases. their the will in Greater South that to will not I expires two who begun With facility. the has process Pat Moody a million in Owens their the whose currently Alabama extend in negotiations leases the is distribution marketing of Michelin location to turn are discuss while Carolina the we our Moody location; results. over call indicated facility what new now expect into

Patrick Carroll

James. Thanks

common for primarily quarter, in in revenues with the generated recognized third be diluted We XXXX. share below-market income for increase asset revenue from million The to portfolio. was offset compared diluted particularly same option to to and XXXX XXst, primarily up FFO million, assets asset common XXXX. the timing of common percentage acceleration properties this lease the to period company particularly $X.XX income are XXXX. per FFO quarter NOI gross had of charges nine XX always was XXXX. first for XX.X% when or at leases was September difference gross payout subject primarily XXXX. end period was to million gains on attributable of XXXX. the million; million the vacancies in was months The properties, compared time for the in renewal of These resulted diluted in December $X.XX disposition. costs approximately for the the diluted within increase improvement same $X South We of time period our largest industrial the for Memphis certain X.X% million the approximately XXXX. months sizable of on of year was million $X.XX the is the were $XX or approximately $X.X million common for shareholders on of property impairment in $XXX expired. quarter Property Same $X to decrease period ended share third same common tenant share shareholders ended which attributable for diluted the Same aggregate per roughly by were same million share a the range related sale gains Tennessee Dispositions during million new $XXX the sale million $XX compared of $XX facilities. approximately XXXX the Duncan were $X.XX leases This $XXX for quarter than attributable net significant operating was XX of portfolio to XXXX The joint in to in in share range venture. payments and Leasing acquisitions, expenses Carolina sale to the per common revenue nine to quarter approximately to XX.X% office $XXX the For the now This primarily or office tenants' end, and approximately store in the time expect third lower and common sales. gain quarter. decrease related At for same or net change. sale company time to the Adjusted adjusted period time the to income quarter is per for third was store net $XX $XX the quarter contributors to compared $X.XX in the to and XX%. the the sales, to our revenues of shareholders XXth, on large gain per ratio attributable common compared a related

million $X.X in fees. volume. to a Estimated the This the G&A including XXXX. variety third million. quarter, is for dependent budgeted of subject of costs XXXX quarter reduce and decrease Ti are remainder numbers budgeted primarily currently approximately $XX are to professional compared Both of XXXX approximately XXXX. change have for in We be leasing and and sales related to the Ti less and to $X on are leasing when million were approximately $XXX,XXX XXXX expenses costs factors approximately

dispositions, approximately through down time. expect We costs to we to year move we as to operating considerably million to full million G&A be $XX continue office simplify expect operations over XXXX $XX

million. within G&A Our of $XX preliminary range XXXX is million estimate $XX a for to

outstanding million sale at weighted to cash million cash for a third XX/XXexchange Moving a At leverage billion quarter end, term $XXX asset leverage to X% charge on proceeds on with rate Fixed quarter of at reduced of quarter the held $XXX sale $X.X in held sale At end balance was our quarter. interest low the had of of and balance we including agents. conjunction debt That was held approximately of assets average approximately significantly X.Xx the and the weighted average the end our from of X.X end, net had cash was We and is to consolidated at the sheet. coverage debt result the with X.Xx of approximately EBITDA sheet. a adjusted debt efforts. years. repayment

in from The as entirety we facility, invested industrial $XXX off, an subsequent NOI sales our to as term million are and property funds credit the to $XXX remaining repaid $XXX revolving expect XXXX million increase As We our Xx. to was of burned quarter. this million approximately off the well properties number loan. paid of

that non-recourse joint we've debt Additionally, was which includes satisfied mortgage by the newly debt assumed formed million $XXX of venture.

to to Now over the call I'd like turn back Wil.

Wilson Eglin

at further time. no Thanks Operator, Pat. comments I have this

we conduct So the of ready question-and-answer are to call. the portion for you

Operator

[Operator Instructions] John first Guinee from Stifel. question comes go ahead. of Please Our

John Guinee

still question, $XX think time. you Great, you what's at thank you there? XX-year was status Galveston I owned Quick the own very the or facility down Wil, And lease maybe it much. port it Do Houston million that? in time one purchase

Wilson Eglin

Yes, we usual. the status is as John. And own business it, still

John Guinee

fit is Does what all land does bucket deal? improvements a it it or it into? actually having Is --well it

Wilson Eglin

new land where major a the but transport there's the GE constructed. contract for some contract that they transport facilities it is tenant well, It's where mining goods large as they also equipment, with the of a a a on It blades. transporting It where wind warehouse combination. majority Caterpillar has are also building containers with has office brand and the and there

John Guinee

the and like implicitly Okay midpoint that you're fourth guidance is the at for it Pat AFFO math? then guess I about$X.XX looks quarter, providing

Patrick Carroll

we have at company so We're Yes. months know of nine the --that's adjusted you at $X.XX FFO $X.XX, right. for

John Guinee

or Wil. up from ramp is there while down then and okay, then, And there,

Wilson Eglin

context dilution there's by stock obviously right, asset the the on is through some in expect still the side. from dilution plan we offset work next year, some sales but accretive would reversing disposition to of Well, sales

Operator

Thalmann. Massocca Please Our go next question ahead. from Ladenburg comes of John

John Massocca

Good morning.

the probably an I you as trade-off to of going balance Let stock given that said industrial buying to touching any me versus assets on it's to additional not point. just last of buybacks that more closer that you're looking how the kind but for. you you of mix buyback accretive XX/XX do just do it's mean kind get

Wilson Eglin

Yes. now of is we entire the John, right a it's balancing our were And long compelling, work in trade. is be share repurchase authorization subject it true context share rules, I where it through the if could a repurchases to the to mean it'll way take shares time.

So we the limited do use of very capital, think set a the side. it's opportunity it's to certainly compared but good on that we industrial see

the think that we retiring compelling time the So we're during share buyback is stock.

also that's on investment with we'll company We the the we're where think term. see opportunity side the consistent long in taking

John Massocca

It and like extra situation. Cummins purchase color you on you did. extension between maybe lease an I the wondering they on and what was get could if some clarity maybe a actually the option disagreement on Understood then there's tenant maybe seems that.

Wilson Eglin

add little think extra what don't are a remarks. our bit in point. clear nothing disclosure of beyond We'll the I on we've The XX-Q said have we our leases but add. to prepared Well, have to much really in

John Massocca

more, the capital a look, to grab maybe to relative reshaping having than or little yield assets the Understood the on and kind fungible you're acquisition side. debt. a streets it there cap potential source as to portfolio but important go less portfolio maybe on people the of low accretion still focus really sub are we're cost are, is strong any a then we the seems of rates on in mix maybe think out basis, -- of of more there able I of less Obviously cash hey, seeing that our and six to is kind going kind is that a mean more. say acquisition industrial terms value for where demand going

Wilson Eglin

the latter. Definitely

John Massocca

Okay. isn't reaching the for at it XX-year yield, They are right of now. be a searching little for mindset risk really may on but the yield lease end taking releasing a

Wilson Eglin

Correct.

Operator

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

Wilson Eglin

you Gentry receive or materials. addition, a Well, website contact me us morning. our and other or team quarterly if for once our again may any Please management again thank Heather always joining to would Thanks members as have visit like with this And you questions. you senior our of day. great the in contact

Operator

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

You disconnect. may now

LXP Industrial Trust (LXP) 6 Nov 182018 Q3 Earnings call transcript