Earnings call transcript Q1 2023

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Operator

Good morning. My name is Rob and I will be your conference operator today. At this time I would like to welcome everyone to the LXP Industrial Trust First Quarter 2023 Earnings Call and Webcast. [Operator Instructions] After the speakers’ remarks, there will be a question-and-answer session. [Operator Instructions] Thank you.

you your Relations, Investor Gentry, may conference. begin Heather

Heather Gentry

the LXP first webcast. Form available quarter you, and earnings operator. and earnings on a Trust’s be to Welcome both morning the this and Thank our XXXX website supplemental Investors on Industrial conference furnished was to distributed X-K. and SEC in release quarterly release section are The will call the

files call the Certain constitute LXP’s time regarding time, by of not during or as statements conference forward-looking with duty future the may press Litigation within law, results those actual in implied Except this to does update expected these statements Securities release XXXX. forward-looking and from Private and reasonable are SEC could statements of by based to and LXP factors described today’s those those LXP meaning cause required risks, differ LXP certain that that in events the materially included results Act to statements. earnings on expressed made statement. Reform however, a including such from assumptions, undertake any believes reports

to most Any cash all of an a are adjusted In flows. or LXP’s unit holders presenting and release financial LXP comparable or reconciled supplemental to of refer and to performance, non-GAAP investment holders on performance a individual FFO company equity references from historical measure. directly the financial measures basis. intended all viewed available financial measure funds diluted to fully not disclosure numerical the as be position future has Operating GAAP operations in these measures to package, quarterly press earnings documents company adjusted

update CFO, CIO; and commentary President, On and CEO; Executive Chairman business on provide will Beth Eglin, Vice today’s a quarter first Brendan recent call, results. Mullinix, Boulerice, James Dudley and Will

over I the turn will Will. now to call

Will Eglin

everyone. good And Heather. morning Thanks

significant and underscored year-to-date year a first leasing quarter is results positive by good projects. rental further our progress to with stabilizing increases operating excellent development Our off and outcomes start

Average feet raising quarter, XX% In the and we base cash and and respectively. leased approximately approximately cash and achieved base of base for or to adjusted continue rents of our when respectively we XX% to base Notably, exclude in annual our prospects. million the these the square increases and of leases two renewal. rental fixed X.X% for increases our XX% over X% improvement XX% fixed one highlight when upward growth trend internal adjusted escalators renewal

in lease view remains forward we leases for mark-to-market expiring of beyond as a the progresses. year rollover opportunity and favorable XXXX look more of to our and active Our period

Subsequent to to quarter development stabilized cash end an project was guidance excess which partner a square great original Columbus development foot X.X%, on yield. recently success we X.X million excluding tenant. We our achieved grade development in of promote, of well had investment our our a yield leasing completed

Our various all remaining this be development projects stages of completion with year. pipeline is in to completed expected

X% the million now in our We diligently X.X% represents achieve remaining and partner are we the of after which to promotes. X% roughly range development to cash to stabilized X.X square overall expect working feet, stabilize portfolio, yields

sold Moving our million remaining to asset in we the during dispositions, Detroit quarter. for $XX industrial

potential these non-core capital overall sources our of industrial target commit we our part to exit being may over markets to viewed in assets our plan industrial liquidity. markets, As business of with certain time markets as

our of soon to seeking to forward dispose remaining as assets this look actively and office plan possible. are We as finishing

of an Our million, estimated generates which we approximately office million approximately value believe portfolio has four fee $XX of NOI. assets, of $XX currently owned annualized

lease subject no that share year December per renewal to ground Palo which our facility, addition, of with a options. of Alto office is In in $X.XX expires generates FFO, this

at the quarter debt times. net sheet, balance EBITDA adjusted to was to Moving end X.X

would EBITDA project, the X.X adjusted Phoenix subsequently mentioned be I forma leased Columbus facility quarter earlier. Our the including net and of pro times, leased to the in stabilization debt

stabilize As to range times overall be six developments, EBITDA net five debt-to-adjusted we to of continue to EBITDA. we a improve decline expect to within an target over leverage time to

we to Alliance On Leader continue by the Green make recognition ESG important the for and front green of progress. we a In our lease Department Energy's named were the policies. and Transformation Institution Better Market April Gold with practices XXXX Lease Buildings U.S. for

footage this new pleased and recognition to leases. to green our and square receive look are We forward through increasing lease existing

to He support is like May. as our to has portfolio through Lead to appreciation transformation down provided since Annual Frary, express we'd served into forward valuable stepping value. benefiting the leadership insights and and and this look significant and Richard experience. Meeting May who in role Finally, welcoming shareholder with Handwerker following Trustee XXXX her enhancing has We commitment in our Independent to from a Jamie our industry

turn With I'll detail. that, Brendan discuss the our to more call to investments in over

Brendan Mullinix

Thanks Will.

million approximately the promotes. pre-lease excited spending six our ongoing anticipate we as two projects property square on as of square XXX,XXX potential and $XX funded development additional X first We're million and projects. plus Ocala development We the development. the projects foot nearing completed facility well our the million $XX projects an Indianapolis Phoenix see foot over all final of quarter substantially year, in completion. these we In our any During excluding in to balance quarter, the our

lease has partner end completed Spartanburg. yield construction quarter property foot been placed cash stabilized X.X% and to our Phoenix into bumps service promote. of subject X.X%, in of X.X square a we to Greenville, The with annual Subsequent excluding million a facility XX-year

development including projects over Phoenix the We Greenville, complete our facilities to Shore projects next South final months. several expect remaining Spartanburg and our and in our the

newly an XX mentioned manufacturer. completed lease of terms entire $X.XX the starting Will years. better annual facility per with Ohio a foot X.X% tool bumps for over just warehouse significantly original X.X rent Additionally, square foot million we achieved We as than grade to our square distribution underwriting at investment and

continue interest for stabilize tenant and development and are all JD team diligently we sites. receive the working to his assets to our remaining

to suit We are market of [ph] and continue our keep handful built on opportunities. preference a dynamics current exploring to

over the to to James turn call With that, leasing. discuss I'll

James Dudley

had We an softness. of is in demand compared quarter specific tenant the time feet leasing see of leased. approximately X.X with XXXX. same Brendan. and to in despite million volume the remain certainly leasing square target some markets Thanks first market encouraging our It Rents in quarter strong active XX% grew to period

XXXX estimates. independent As to net escalations rent below or industrial we of approximately rents first of for XX% grow in-place on portfolios XX% our quarter through the market average be with expiring leases contractual forecasted in-place rents XX% to approximately broker based on estimate

leased end. was portfolio XX.X% at industrial quarter Our

during third-party remaining rate address expected their per The estimates. XXXX several in expirations of option to expiration annual to to with XXX,XXX foot XXXX continue the XXXX quarter. current year renew one the outcomes X% with have tenant and on term. fixed XX% for leasing years We strong five rent estimated in Indianapolis achieved negotiations and increase through our XXXX based We expiring broker XX% square to exercised facility increases extended January rents

our or the increasing we X%, rent per substantially years. fundamentals Atlanta previous In the market We the seven of rent demonstrating the securing original of And in a market. new Atlanta by foot our square the X.X% square $X.XX for starting to square foot facility foot exceeded a rent. strong XXX,XXX increase annual a underwriting XX% bumps renewed over tenant from

with on at a XXXX fantastic rent $X.XX year our a over with square existing is facility executed Tennessee XX% the square in bumps from property. Finally, We lease we seven March this for of a a starting rent expiration foot up XXX,XXX or X% X.X%. per at believe this industrial tenant outcome Cleveland, a foot annual

turn With that, the to call financial Beth to I'll results. over discuss

Beth Boulerice

Thanks James.

operating was revenue $XX reimbursement. roughly was million, common approximately or Adjusted attributable to quarter FFO diluted the was million expenses $$XX $X.XX which XX% with of share First approximately approximately company for million. of per $XX quarter property tenant

FFO We a range are within adjusted per $.XX current company to share. of $X.XX diluted maintaining common our guidance

sales discussed amongst As other a lease this today's reminder, development timing on the considers and volume up items call. guidance of

first approximately million. the for was G&A quarter $X

$XX be of We G&A a million range to million. expect to XXXX $XX within

was industrial store NOI time store at same XX.X% and leased same end, X% increased quarter to portfolio the period Our XXXX. quarter-to-date compared industrial same in

same our approximately leases X% had XX% of to industrial X.X%. escalations end At We portfolio industrial annual store an with a our continued quarter be of range to X%. growth of anticipate within rate NOI to XXXX average

on full availability March of revolving We $XXX million our credit as had facility XXXX. unsecured XX,

term outstanding fixed rates. which interest a Additionally the weighted is at debt end, higher of XX.X% X.X% weighted consolidated maturity to exposure a X.X and beneficial to with was quarter years. approximately in our is average rate mitigating interest debt $X.X of billion of average Approximately

XX% Lastly, our NOI exceptionally at NOI. our unencumbered over of remains strong total

to over back call the turn I'll Will. that With

Will Eglin

Thanks Beth.

portion question-and-answer call will I'll to over of call. who the the the conduct this operator now turn

Operator

Capital Instructions] Thomas Markets. the And line question your first of KeyBanc from Todd [Operator comes from

Your open. line is

Todd Thomas

Thanks. Hi. morning. Good

that commencement in second development any ongoing Just on the demand question first is you commencements other year? developments this anticipated lease year leasing, for embedded full the the other there guidance? the about and quarter are then is talk can And for of whether Columbus

Will Eglin

Sure.

a second commencement commencement. the quarter So won't be

November Columbus demand then pre-rent as out little and period. others demand having bit a on rent as imminent have the However, so And nothing varying far but mean, got where of of we got that on won't degrees We've on. have to goes or start I RFP some close the completed. the that we've under construction the others, just on activity until lease, assets are pretty all a the deal, are there's a we

across properties. good the it's So all across but demand the board,

Todd Thomas

broadly? to Okay. you development that from And Columbus the mid-X% upward range do that primarily yields the stabilized yields related more the the was to I in across lease increase pressure on pipeline cash X.X%, the to X% or previously. the see think Is

Will Eglin

No, that's really Todd. forward looking,

favor, the a So the partner begin prefer us I little of cap to market air of having worked the conservative growth with we'd a to context the of combination cost buying time development side has And then rates things. it's upon our of helped mean, us and come our has bit, of with stabilization passage sort in within also out so up guidance. being rent on of

Todd Thomas

around describe you think updates Okay. office Market more. comments assets And million value any I a the And Can XXXX little those can Street which assets? $XX And are also bit you mentioned Charlotte office to including you for that and value? two the that then then is right? the that speak And in adjacent portfolio specifically? you Will

Will Eglin

valuations Those those are from of potential Sure. buyers assets.

our of actually XXXX the it's and it under it's – not is estimate not in included moment, like contract at and broker's with a a lot not interest. but number it's contingencies. it's based that then inbound is on estimate, So Market

XXXX properties. the two and buildings, Jersey in four the Fargo the includes that Market, Wells New simulator facility So flood

at buildings So moment. with respect that the those Wells relatively need occupancy we don't facilitate know assets. the there ongoing expect either have an we'll in short-term monetizing those that'll forward update that the on moving But we outcome to and of and in

Todd Thomas

additional on thinking or Okay. timeline should contingencies And there related we to the XXXX any Market, there, either are be the what details potential about?

Will Eglin

lengthy add a don't optimistic would I it there's like closing to think process, before a being is to expires but other able January. bring we more next in the that than lease about be

Todd Thomas

Thank All Okay. right. you.

Will Eglin

Thanks, Todd.

Operator

from next Kemmer question Jim Your comes of from line a Evercore.

is line Your open.

Jim Kemmer

morning. you. Good Thank

in trying at that what's the ambition to escalators? terms is a for raise term assets just X.X-year or kind of releasing? sense WALT, what the operating operating goal Looking now a says about it's thinking to strategy of the about Just your portfolio, a trading curious that I'm versus get

Will Eglin

Jim. Thanks, Sure.

average Most a of user. three to first weighted development leases, are shorter with term the unusual XX-year lease it's the but context in think not pipeline five-year end-up will I the with the discussions and time. lease over renewal for migrate

outcomes a as little probably of be period starting shorter of our year. would approach get it'll we So mark-to-market mix bit next heavy a

Jim Kemmer

to you're fair. horizon the you to market to of some in it's five of you need and control. think if of out continue cycle the this advantage to you your I'm at that's point But But don't your are focus duration? curious, take seven-year extensions, sort you extend No, obviously of feel is know, growth preference that comfortable, on

Will Eglin

it on the think the we building. a where duration asset. who's the project, if depends lease Well, lock term by that's with today's in good making can often some is we a think negotiated longer really in the outcome. for term escalators, on development tenant big investment a I There's really the some Often

to So optimize a mix in position. for it's each outcomes trying We're simply of it's think best – just I our what's asset.

Jim Kemmer

have options the looked a you guess lot second Great. and And leases TIs a finally, generation that so can extensions are but really this sees two CapEx just pretty that's anomalously and like were I of of really low the function low, quarter? CapEx

Beth Boulerice

it's far so online just and any do Yes. timing if come of of timing. roof as maybe kind or of going when matter regarding It's to it's a as CapEx we're something really that, projects just, a like matter a

Jim Kemmer

you. Thank

Will Eglin

But that's right.

extensions One extensions. able came of to one – other the $X extension to then TI that opportunities was of the a rate and two the with we the the TI, keep fixed on down were no a

Jim Kemmer

you. Thank Terrific.

Will Eglin

Jim. Thanks

Operator

question next of Mitch Your Germain JMP comes Securities. the from from line

is Your line open.

Mitch Germain

Thanks my by curious for about leasing specific it it going to be taking point? just I'm or Is future question. is development. at driven market this really

Will Eglin

more forward. look compared it's might committing We're a not focused we're look I projects of willing to where doesn't mean at very stabilize what what new on think going rule think driven trying we've leasing. principally to we got. but by to I thumb projects, to at we're stabilizing It

thematically see for I but valuable. think good us happy. there about very starting we we're new, like think we little also. be our think land before could I'd is Phoenix, In Columbus to a looks something that's some stabilization to and opportunity There bank more example,

Mitch Germain

industrial Detroit, I'm Great. learned in and take what That's property pool bidding with process? demand an that from you regards to pricing, sold you process what that do from helpful. away you Obviously asset curious

Will Eglin

long-term deep was the flat lease was that but rent. a pretty on it Well, bidding pool one, with

a rate foot. shortage lack there. sale $XXX It of a it didn't reflected the was capitalization was and the So, it growth. because reflect term the We high thought really was bidders. of a That good

out more is no, become sell leverage. capital and there IRR So leases into require But duration have a longer function to for of really leveraged sure. there positive

Mitch Germain

for can some it's last was there? higher the helpful. And rate, I provide That's Indi fixed or a you rate know market then the one was me, it the or renewal, perspective just

Will Eglin

we And mean, was I the that it's escalation something years, that negotiated original that so acquired. market. five escalation. into below the X% was It's over a annual lease

Mitch Germain

guys. you Thank Excellent.

Will Eglin

Okay, thanks Mitch.

Operator

question Vince comes [Operator Instructions] Green next from line Street. Your Tibone of from the

open. Your is line

Vince Tibone

Hi, good morning.

Will Eglin

Good morning.

Vince Tibone

development, Given change on Phoenix the strong achieve? that to And in LXP of do X% if excess your will how you and so, to that payment expect the would yield Columbus yields partner? the promote

Will Eglin

or moment, payment, it above hasn't should a maybe will think, in the determined little promote Columbus Yes, of there area a of be been X.X as I bit probably there. but, landing think of sort you the

XXX guidance outcome basis our a still promote. that So good beating very for us points and by about a

Vince Tibone

point step us Phoenix, it doesn't Got like of a sound and it. you low the now just given are just And walk increased expecting development then there Can you on that promoter. back maybe yields through you especially take kind a bit Xs a your think rest at little there get could helpful. us mid Hopefully Like the potentially paid help be of upside and the that is for if a just to what does about pipeline? would that there. you promote

Brendan Mullinix

development Phoenix Yes, development. This is two-building Brendan. actually is the Sure. a

the So upon in building. the leasing determined be promote will second

of I we gave Phoenix to guidance in the of terms think, end above to range yet X.X, for that in the of the be X that stabilize, the that's upper at probably mid that's that the to Xs think pipeline that. I will remaining portion

different fair a joint ventures being in paid. promote say it's guidance But is The the all stabilize there to the given, different with to projects promote that structures. that have we've are of that's yet that

Vince Tibone

just rates mix into around And of market marketing you of little or one to should be targeted still guidance? side? industrial assets and the cap thing you. plans. disposition stuff to the guidance Are industrial incorporated disposition you the levels then Got That's then we helpful. that to bit non-core Thank asset on any XXXX cap that. And similar clarify versus sale expect a is higher gets on that was overall rate on for achieved industrial sales a the Detroit the

Brendan Mullinix

term No, rent was of Detroit growth. lack the very high of the because and

sheet the So, with the year-end sell we land we're to will have balance want clear. where things at market to in we revolver some our looking and really

So, be identified. sales volume number we that are have that determined. to there But will and the portfolio some be yet in

Vince Tibone

Got it.

rate would fair Is like [indiscernible] and or lower a on any don't that that life So other though going – got to range sales seems on lower? and that cap Detroit. be it I industrial say potential the to put number want you of to it's a it’s their fair be

Brendan Mullinix

for Yes, fair sure. assumption that's a

Vince Tibone

Thank right. Appreciate All you. Great. the time.

Will Eglin

you. Thank

Brendan Mullinix

Thanks Vince.

Operator

And a from your next question from comes Steven [ph] line Thalmann. Messakh of Ladenburg

Your line open, is

John Massocca

John Massocca, but good morning.

Will Eglin

Hey the John, for thanks clarification.

John Massocca

addressed out some impacted or been hurdles I I development part all? partners if that picture have apologies. dropped the is at what's of banking so Is call, just from your as rent But interest driving of proposals you a question of my have that's you of stress and of of just and an already sorry a seen from result rates? return bigger recently? has influx more increase the this, there regional about kind And kind that this the

Will Eglin

promotes, to question reducing raising have. leasing No rent and potentially quarters last first well, there we've guidance address exceed original increase the I the thought couple closer the that over today and I guidance, as good in rates with market was construction guess growth higher a our opportunity indicated during as cap as completion seen guidance. we between to we've of we're we gotten exit to about And that the

capital seeing terms in debt challenges of are us for I relationships. opportunities the to more are inbound finding capital. a market, We in expand function And present buildings think equity challenges for merchant it's developers will equity do also that there partners. but inquiries from our the looking of in markets that both

new seeing is more a rent will our as our everyone we which, that's the very and underway. in portfolio significant are relates in the portfolio to growth seeing, pipeline think, drive think, in existing market I slowdown it starts in Also ultimately I

that's So, encouraging.

John Massocca

the couple some a on were of of term. of in kind supply that there a tougher delivery will? near how concern mentioned if in I those supply you you of that then maybe submarkets markets, are little And guess the had long bit some maybe legs

Will Eglin

the Yes, million of nationally net you absorption look million so at kind if just you deliveries. you at horizon, had $XXX I in mean broad and $XX had

So imbalance, pretty a mean, don't with our what exposure is specific are a submarkets ton I one. there on, supply rising with we Indianapolis the of in tenant but some to the if is have mean demand got yes, and kind not markets, but just we've I demand. Indi of market, wave to still the being there mentioned softness another coming legs think, I short-lived. significant about Brendan vacancy

think increase you're an think strong sometime next to XXXX, I to going leasing see going I I then in term into year. of again. you're this see probably going the near And year get tight but see vacancy, it's to probably –

So short a I it's think window.

John Massocca

then of whether And like I in construction costs development cost on abate there messaging Okay. kind has surprising of mean, starting bit and go even seeing of kind been mixed the in areas. kind it kind a of bit construction certain of to little side, broadly a today? or backwards, there's a seems of increase about that's are if you what

Will Eglin

I think it in a direction I costs. we're reduction whether on mixed. to is a pretty going it's accurate, as as you construction think clear there described yet don't see

John Massocca

me. very much, for Thank it you That's Okay.

Will Eglin

Sure.

Operator

you And the over this remarks. questions closing for call final there no Eglin time. are further to Will back I'll Mr. at some turn

Will Eglin

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

Operator

call. Thank conference today's you your concludes for participation. This

now may You disconnect.

LXP Industrial Trust (LXP) 3 May 232023 Q1 Earnings call transcript