LXP - Earnings call transcript Q3 2021

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Heather Gentry

Thank you, operator. Welcome to Lexington Realty Trust's Third Quarter 2021 Conference Call and Webcast. The earnings release was distributed this morning and, both the release and quarterly supplemental, are available on our website in the Investors section and will be furnished to the SEC on a Form 8-K. Certain statements made during this conference call regarding future events and expected results may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Lexington believes that these statements are based on reasonable assumptions, however, certain factors and risks including those included in today's earnings press release and those described in reports that Lexington files with the SEC from time to time could cause Lexington's actual results to differ materially from those expressed or implied by such statements. law, forward-looking not statements. by to a required any update as Lexington undertake does duty Except measures directly In supplemental has financial disclosure earnings package, the the press Lexington reconciled release all GAAP measure. comparable and quarterly to most non-GAAP company fully these funds adjusted diluted available all basis. adjusted operations unit and refer equity to Any references holders to holders FFO in to documents company from on a historical to or measures Operating financial measure individual be intended viewed an not numerical as of position performance of financial are Lexington's future performance, flows. or a presenting investment cash Boulerice, today's and a Eglin, On commentary Will Chairman call, update business Mullinix, and on provide CEO; will Beth quarter results. CFO; CIO, third and Brendan recent call. President, Dudley and James Lara during will Vice the Johnson of available Executive our be question-and-answer portion over I the Will. now turn call to will

Wilson Eglin

Good everyone. Heather. morning, Thanks,

were Our in third of all our results strong quarter business. areas

of have industrial adjusted the XX.X%. portfolio and and a increased We the strong tenant portfolio predominantly industrial, transformation completed company to our FFO XX% gross portfolio, revenue by underlying company's consensus, produced we have performance our single transformed dividend substantially REIT. assets now delivered above With

and addition, our executing on a management, including pursuing capital number disciplined In prudent external we active asset value enhancing allocation. growth, of are initiatives, continuing

is great industrial assets. to country. low is quality in supply outpacing desire to distribution a Class inventory. In Demand of from efficiency to leasing at in continues improve rates and space rental across company top vacancy our benefiting the the as fundamentals real still time continuing a velocity these by resulting industrial in growth. all space additional transportation rise, greater is all-time the with it chain including portfolio an trends. rental to Our warehouse benefit an to to from is need short, with Tenant strong be healthy estate supply costs target sector, markets leasing demand leading A for being house rise driven

we to strength stabilized raised the leased markets. X.X reflective leasing we is leases, XXth, XXX leases, based points With industrial and respectively. distribution cash considerably that X.X% our approximately of quarter cash portfolio rents continue and raised Our robust the base warehouse than foot nine markets we September ended X%, X% note rents have based of activity industrial million and Average X.X%, our our new square the target extensions Further, and lease escalations certainly our as of basis increased market, faster rents is which for on months quarter, grown XX.X% our to square third $X.XX, we space extensions to rents the rent on in and on new leases. feet last target per the and and in base market respectively. grow XX.X% as built portfolio average, X% year. below And into over X% view in

with Our five a yields for and escalations, the quarter as stabilize proving reached year successful lease produces who the half in Spartanburg evidenced The and we of includes industrial square the that initial strategy term lease by a property a of vacant to secured and tenant third vacancy to rental purchased property. acquisition. annual Greenville, as lease property yield an X.XX% part X.X% four market portfolio purchase XXX,XXX notable activity. is We produce leasing a occupy higher foot will some new stabilized the

our facility, Subsequent square an that foot distribution seven-year Mississippi square now cost and quarter-end quarter development during and the project included foot, to square shareholder rent annual The distribution of a of well spec cash facility. how escalations which new foot escalations $XXX highlight development Fairburn, We warehouse lease illustrates which warehouse value non-stabilized our leasing projects based purchase lease the stabilize the Georgia, distribution Branch, currently XX% delivering. X.XX% million during success Florida at market increase executing creation in three-year term the and square Other with lease building's North five-year XX,XXX our space in resulted to to have facility strategy spec process, development to escalations warehouse lease X.X%, focus over with a was $XXX XXX,XXX a third Olive with Lakeland, to with the distribution assumptions. X.X to platform, yield underwriting leased warehouse years, rent per X% at This fund. XX%. focus of $X.XX XXX,XXX the estimated of be had our and feet starting our left at our tenant principal properties facility presence and to our that of creating pipeline we X% foot, a Carolina an significant above and our occupancy value. escalations. increasing million total a for is X% five million annual investment we annual we added prior at with development is Speculative lease bringing Additionally, from promote, huge four two in the our square excluding Statesville, partner are available outcomes a quarter annual continue

during shortly. sizeable million have an $XXX subsequently. Brendan And will A a review. On discuss under in development activity with Class $XX pipeline front, of warehouse purchased detail quarter, additional product greater investment in pipeline the the purchase we million the currently we acquired distribution

million and dispositions, contract for to XXth volume totaled $XX and as after sold $XXX sell million. X.X% of Moving X.X%, of GAAP September two cap rates at million quarter-end under additional We have properties cash sales average respectively. and other to our an $XX

distribution capital acquiring cold on continue and modern potential facilities, we our and view strategy source manufacturing our focus to Class portfolio we a for A developing as As storage redeployment. warehouse of

cash declared non-industrial payout peers retaining flow increase on a substantially which dividend line increase will dividend, prior more representing dividend. share our of this complete, The in brings quarterly quarterly properties maintaining years be focusing capital during With the and common the per, payout the after paid be of will in Board XXXX with our sale quarter ratio over more of period low of our recycling. first an new that intensive ratio announced our several $X.XX XX.X%

to opportunity annually and Our dividend market rent raise our growth future rents. moving to our of in grow reflects direction forward the confidence the intent

priority you review On of assessment. strengthen are we the GRESB ESG closing, see recent predominantly a our front, a highlights the industrial to compelling I'd to XXXX I'll us, shareholder tenant our like In continue is that, returns. turn well how we to of U.S. initiatives. position place as earned and for ESG transforming first to valuable drive an Brendan most the in many to by pleased call performance have enhance our listed long-term opportunities highlight to our encourage We which and ranking With we companies over and REIT, we XXXX disclosures, enhanced first program. ongoing and much for ESG achievements activity. more to into discuss LXP continue to growth us ahead The ESG stronger, financial portfolio. single created have meaningful investment industrial

Brendan Mullinix

acquisitions. with Starting Will. Thanks

our property in X.X%, During at on located for stabilized million distribution rate standing X.X% cash four respectively. X.X the and briefly We GAAP million average Greenville, the assets, purchased quarter, quarter's third last Spartanburg portfolio cap discussed five and $XXX which square of feet lease-up warehouse we markets, the of well, our second requiring quarter call. we call. success shortly enhance to after We Echoing our purchased vacancy and vacant can yield. market we that the a property, in portfolio utilize knowledge where value strategy demonstrates with strong expertise

recent Ohio, escalations made in sit foot a a XXX,XXX a government, recently central of weighted including the lease warehouse its air and square also U.S. Subsequent Columbus, closed, Indianapolis. largest several years reach, quarter occupied to, and friendly Business build tenants to deep central i-XX and sub business the average in Whiteland facility the systems, commitment Exchange rental FedEx reasons, the is is two seven The stabilize to labor portfolio constructed X.X%. We location access Whiteland the the with in its world. pool, a Park. Indianapolis square highway in all along term and three-property facility we for distribution annual foot second market of three-property extensive the we've purchased hub population of rail market by average XXX,XXX distribution market acquired primary and the This

completion Phoenix estimated is forecasted corporate to built staggered during is Greenville, deliveries the Spartanburg XXXX. premier Spartanburg in X.X half is the front, shields the own On which we've two specifically that modern increase the in quarter an master The facilities in X.X highly that acquired A project. warehouse total Smith in to half million in will where submarkets in of Spartanburg a in first tenant of two market, projected suit that buildings market. five we in development the Industrial Loop the sites and X% when Greenville, of feet. Currently, footprint XXX distribution Phoenix land where the site growing business $XXX expertise in million our we've Goodyear Upon the and Phoenix. to knowledge will in site users. most strong Farms first cash This the project, operating the park A completed other the Goodyear the deep a XXXX, Like we range. three a square feet XXX,XXX facilities, three stabilized facilities. sub XXX we site be significantly totaling is two The desirable the will of largely buildings, industrial estimated will in this there roughly project to will square built cost space for Hub. varying distribution comprise with Class feet. XX area as million in with square million, have more acre development years. X% Industrial completion, cash will planned The is includes of costs be with Park footage Valley low consist have project and PV complete of Phoenix estimated is in Greenville, already estimated the million very along in and recent warehouse approximately with of high two to our square occupying range. $XX approximately this and The Upon further feet market yields a the XXX stabilized Southwest also is is result, this in mid X the space. The project And been square acre Class development development be completion,

progress profile. return to population, to With very the risk and which by that, market's Las We believe Diego to and we to growing updates attractive major record discuss turn such financial Los Beth labor, to costs, regular results. a Phoenix's call these of projects, the fast driven proximity I'll markets strong We'll over provide continue low on Vegas. as have the activity provide fundamentals observed like and breaking its affordable moderate operating continue Angeles, San taxes,

Beth Boulerice

Thanks Brendan.

of During just $XX share. expect acquisitions of expenses we per of and the FFO to quarter and diluted low XXXX $XX third quarter, a revised million roughly quarter within and Today, million. $XX were for to XX% we approximately produced operating of guidance range both adjusted to which announced million dispositions and common a million, million, $XX leasing million The or $X.XX be range the increase outcomes. company considers we common attributable $X.X the of the reimbursement. FFO Revenues company G&A of the range new to over end an to tenant share. for $XX timing our to of $X.XX positive was diluted G&A range with top per was property adjusted $X.XX

would was Industrial portfolio vacancy. leases escalation tenant X.X%, leased of with X.X% which NOI with same-store approximately quarter-end, NOI have been our overall same-store portfolio excluding at industrial approximately and had single of excluding average have X.X%. rate X.X% increasing increased quarter-end, same-store tenant been At vacancy. XX.X% an X.X% single Our would XX%

to solid, X.X debt remains EBITDA quarter-end adjusted at of sheet balance at NOI times company's and Our with unencumbered XX.X%. net

of XXXX facility. outstanding in were billion and a $XXX $X.X During the hand was used our of as about of proceeds notes fully of our XXth due with X.X% eight-years. cash note the under The XXXX repaid revolving quarter, a X.XX weighted to Consolidated approximately September of we senior issued in an approximately debt average interest senior balance X.XXX%. net credit term and outstanding average rate million in redeem weighted on with rate due attractive

over I'll unsettled to the on contract basis majority quarter available Will. $XXX The common XX.X back settled sold call leaving at million of contracts previously of common XXXX. shares X.X at common these million that, during million the Finally, a shares or dates mature With forward we turn with various maturing contracts May, quarter-end. in a share

Wilson Eglin

Thanks Beth. I will over question-and-answer this back call. the to portion will the call now turn of who operator conduct

Operator

Please first Bank question Elvis. Instructions] of [Operator from from Elvis Rodriguez ahead, you. America. today comes Our Thank go

line Your open. is now

Elvis Rodriguez

us you you Hi, good question is letter on thank buildings, you call as letter. update had the And you've didn't you didn't with or first changes give can you're the taking an perhaps of and shareholders on morning. any on with comment that question. shared you but subsequent My result for the from a -- that Will, land any making strategic investor conversations Thanks.

Wilson Eglin

Well, generally about shareholder. individual we having don't speaking, talk that we're any discussions specifically with

And out matters some I the able speaks a they wonderful we the prospects the up form that of that company important was be transformation aware the company that with for to we to a what executing that And were benefits the the felt value think us story industrial how candidly like of and great a communicate itself. the brought find it from business. opportunity sort other in was us of much shareholder, make great fruitful. we of in that's thinking. was office to have to into matters and those and of to shareholders letter them unlocked, There and were were this for opportunity tell where the letter shareholders around highlight out

viewed corporate So, we standpoint, communication that we I a gift, a and took from advantage. full as think

forward we've at we're, shareholder good paths clear, to value. about lot and creating be shareholder going value. to aware unlocked have a of to create moment, there So, different them. And I We're a very of many think all shareholder prospects of we that well lot value that. doing the are We're open-minded

Elvis Rodriguez

GAAP see to over cash that industry the you the basis. a the for do is industrial Great. same-store on XQ, but same-store and Thanks with share in Will. for office NOI get And able the both portfolio, better you cash we on and you your it disclosure, portfolio share don't NOI Are should time?

Beth Boulerice

Beth. This is we're is Elvis. Hey, our disclosure on cash actually. a basis, showing What on

Elvis Rodriguez

but But GAAP see I basis, cash see then it No, same-store it side, are components, says NOI other those the a or on you cash? consolidated. on

Beth Boulerice

cash. are Those

Elvis Rodriguez

that single digit bit the Okay. NOI to little then share peers. posting anything in there, so -- there your industrial to in just your is your markets Great. dig Is And different a or X.X% your relative that portfolio below growth? from can well same-store peers are you mid cash

Beth Boulerice

result for Well, of had of was now the the time. one that X.X% really Statesville the fact property we a really is that in most vacant for

So X.X%. going if you property it was was take that to -- it out, about

the So, it's better a little than X.X%.

Wilson Eglin

Yeah. is average The weighted term have than would add that one longer do comment others. we I lease

our So, slower. mark-to-market

of that'll rollover where big yet. of We sort in lease in have cycle the change, window to we're but a of XXXX that part XXXX not

Elvis Rodriguez

the increasing escalators rent in additional appreciate Thank well the help given over future, And color. Yeah. you. I Great. should as those the time.

Wilson Eglin

Sure. Thank you.

Operator

ahead, Craig. Thank Please go you. Our KeyBanc from Craig from question Markets. Instructions] Capital comes [Operator Mailman next

is Your now line open.

Craig Mailman

to Hey, more have to Elvis's guys on question. advisor? hired pointedly, first guess good ask morning a up follow financial it everybody. Will, Maybe I you just

Wilson Eglin

in a commentary we that. of well-advised business, our We're but aspects further on wouldn't of have number any

Craig Mailman

inquiry to what of wait Okay. supportive a are push would guys kind in mean, and guys price any you you I the more of process? reverse just to shareholder going you full board to discovery? mean, a I of proposals, buildings of possibly getting commentary are kind get in, or land run until kind

Wilson Eglin

I'm of not reached in that. shareholder any that's of aware of out sort support

And think lot question. of answer of fair all we the number us shareholder available my I think create of candidly that's said have earlier, them. that, we're at as opportunity There's value. a to that open-minded options to is I about the moment, I view to a a

Craig Mailman

Okay. I agree. No,

in go, into it escalators the markets that cash would at separately, be out kind some mark-to-market window Just I to noted given you like but the that get that it XXXX. you do laid that could you expected where of X% mean, by until -- you do trajectory embedded in mark-to-market, the opens your that. the X% of around feel rents you may or eat can't often

Wilson Eglin

heavy in the little at rents or period that period I I Well, say grown forecast, XX But across to at a that window last the in the through let's time with in rollover XX% are, while. don't have the and X% are harder probably rollover in the to respect We leases, of I than in months rents we new of where to they the able a we that's our moment, rent company. do. growth. the position right, said but XX% think for others have our then mean, for pricing comments going go my are we're power strong, think equally gets same that an to market you're quite markets months. we're that next it And in bit XX improving And are transformative we're we a where if rollover, markets moment excellent rents. higher right? structures have -- escalation have push

Craig Mailman

And growth the to assets the of much storage. have those then, pair over last in cold XX? were there maybe differential of guys and you bucket XX the a mark-to-market you time? XX% some if of in versus talked if other is of that significant quarter portfolio, difference you you Like the How manufacturing the right, what's kind the warehouse about

Wilson Eglin

it's in asset more value that classes, industrial much, we're hard to more better focusing perspective. the quantify the growth risky least versus It's why at space residual our portfolio. activities that's distribution in warehouse but a much exactly, from And and yield

Craig Mailman

of of how back of lease-up the goes a How the some into these one form you in just guys give promote? the yield spec Like developer big the much for to noted to get promoter me, the then win last that bids, to developer a the assets. of one on X.X% And you development.

Wilson Eglin

walk you some one? do Brendan, to of that want on math through the

Brendan Mullinix

Yeah.

correct. So, you are

in We joint certain the venture, over tier includes which promotes are developing hurdles. IRR

the For not partner. little competitive don't a of early we to yet specifics It's as promote. our to those. It's is disclose With been recent. the reasons, with very development lease Fairburn, speculate negotiated

a So us gets run a it we'll do what between market value calculations. that through is and we'll establish hierarchy

to spread with don't assets. yield stabilized for -- those advance represent the yield -- I seeing The of market share pricing an today post completed. still attractive negotiations in while promote promote have So, we're promote posts going posts you acquisition being to where is

a of creation lot seeing we're there. So, value

Craig Mailman

you. Thank Great.

Operator

Our McGrath next Please question today comes from ahead, Sheila. Evercore. Sheila from go

is now line Your open.

Sheila McGrath

Yes. I have two questions.

First, for any of monitoring right second, you're getting structure these you Will, yield stabilized onboarding buying new merchant excess do markets supply And this have that with now? industrial differentiated your product much you're from builders, how assets? you versus think benefit way

Wilson Eglin

I'll commentary, if you James, feel we're like oversupply give it to anywhere. any Maybe you ask seeing

James Dudley

Sure.

XX Cushman conversation. had So, by XX there's and a hard debt square is latest DFW It's submarkets. at and more of Atlanta I piece market, & the think of square huge amounts have absorption of also generalize at oversupply the from are XX million. huge coming report million feet happening. because under submarket at that's high under supply supply construction, XX million on. markets construction, DFW DFW feet time, on Wakefield same but have almost Atlanta in to a there amount million really that tight The market Atlanta very

construction. keep to continue up with to So seems the the absorption

that going the be may the continues demand bit amount see you're for lag of of short demand dynamic submarkets to be a those whack time, within of an to little a period in However, supply incredible get periods space. there markets there out but of for specific

Wilson Eglin

point et sort to between posts of on transaction, yields purchases, basis with market And the depending the stabilize promote and area, respect cetera. development XXX spread in XXX that's to

good that yeah, in So that's opportunity to our and for part capture us of a -- business. spread a that's good a value

Sheila McGrath

other describe opportunity the Will, industrial as profit. profit. on in And to development though you a some could pursuing this the peers maybe the lose benefits Any developer follow-up, you just you on structure even focus development the of

Wilson Eglin

Yeah.

cost projects are benefits essentially think, overhead that the don't on come our ready. amount sheet. us or I a shovel balance of And to shovel, have the we huge are that right,

cetera. business not out going So, titling of we're in et the land the and purchasing at moment it, and raw

flexibility reducing of capital it's it the allocation of us changes activities acquisitions. terms straight cycle in this very in standpoint market So, meantime, a and good sort gives the compared from if to

Sheila McGrath

you. Thank Okay.

Operator

Our Rodriguez from from next question ahead, question America. Bank go is Elvis. Please follow-up a today of Elvis

Your line is now open.

Elvis Rodriguez

I portfolio. think Hi, Thank questions. percentage, missed just industrial you on and thank that. a On the sorry Or whole if I you escalators, for the commented X.X% that taking additional you. for Is your the portfolio? rent

Beth Boulerice

That's portfolio. for the industrial whole

Elvis Rodriguez

but you buying as you possibly then think capital assets and how do implied back investing think buying trading, think new cap rate, that about do And call in from on about it perspective? Phoenix, maybe your X%s about stock, versus how you allocation your in the developments, of for some capital the X%-plus you're you example, your about developments, low think stock allocation

Wilson Eglin

and real of purchasing sort best non-stabilized development estate The capital. use of the is

tax We basis to manage our we're have trying a XXXX via exchange. disposition reinvesting proceeds by where

and areas, would business estate, deals get right, and So, obviously, in stabilized where where an markets. both -- fully the our revalued And we in stabilized above that between non-stabilized produce yield producing buy that there's those real are can higher we that private assets real estate. the arbitrage could those development

us. aspect of well businesses for that working our So is

Elvis Rodriguez

where more Are cap assets think rates share it's Will, because of just portfolio able And market those just not for you on you storage in trade light clarity to cold today? your a one would manufacturing. lot and

Wilson Eglin

old. new between XX over difference over, manufacturing with the -- market years there, of is that are relatively market ours deep maybe older term weighted and rates and cold might especially think lease overall, you average manufacturing a relatively are. shorter light compared there's tricky It's portfolio the portfolios what But for those and storage because cap has manufacturing not and piece, right,

our rate cap would portfolio. as warehouse I to So, point it's and might think few that a be the peg distribution you to hundred premium basis

Elvis Rodriguez

you. Great. Thank

Operator

Please comes from Jefferies. Jon ahead, Jon. Petersen today question from go next Our

open. now is line Your

Jon Petersen

Great. Thanks. morning, guys. Good

Wilson Eglin

Jon. Hey,

Jon Petersen

hey. -- On

Market yet. office I XXXX think you don't Street about the anybody's guys On asked portfolio,

Just is, curious and we rate about And can the and disposition update if the get cadence XXXX? think the how Sure. Lara? we you timing through think just there. on what any the office should cap

Lara Johnson

Sure.

sales. under to the contract out our we two executed visibility on So, among one year. in to office will as remark, two primary In still prepared Market we Will be potentially and QX, have pointed next have XXXX more in XXXX. of focuses or properties out We additional do hope fully three year, be this

office when a are back that we expect have tenants We and Philadelphia is more there. will outcome lively successful

So, I launch and XXXX early or that we'll to on in space prepare a for full-blown sell, office effort that endeavor asset. there expect marketing the lease

Jon Petersen

have, it a we -- think of down then you as that the And curious have over partner years, next that that years. date, that the might how If should on portfolio? properties there just in venture as time. over ownership, some we you should guys XX% remember the expected sold where were like, remind the -- curious you of And Okay. we how just think I expiration your fund is kind over few us think you that few can office about that next to -- joint sell just a be about an have joint trending correctly, has

Beth Boulerice

Sure.

and we to opportunities those them continue sale. now. assets. The as we'll portfolio assets and are it. with for portfolio evaluate selling venture originally a the arise partner, assets $XX over the NOI markets There XX a had XX little be So, year-to-date into -- joint right putting for million And that together

Jon Petersen

like JV? where -- Any when valuations you on the where out on properties commentary that into they were you contributed the sale them have came where versus the sold, on

Beth Boulerice

sale So market contribution to when had on dynamics and relative we've favorable notes far will very provide upside timing the sales for we're outcomes value.

Jon Petersen

Got All right. That's helpful. it. you. Thank

Wilson Eglin

Jon. Thanks

Operator

Instructions] have questions. We no currently further [Operator

Eglin closing So, Will I'll back any call the hand remarks. for to

Wilson Eglin

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

Operator

now concludes today's call. This

now may lines. You disconnect your

LXP Industrial Trust (LXP) 4 Nov 212021 Q3 Earnings call transcript