Earnings call transcript Q2 2023

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Operator

Hello and welcome to LXP Industrial Trust Second Quarter 2023 Earnings Call and Webcast. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. [Operator Instructions]

I will now turn the conference over to Heather Gentry, IR. ahead. go Please

Heather Gentry

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

the expected Private conference based results during Litigation these statements this call the regarding meaning events that within made of of constitute may on Act and Securities forward-looking Reform believes XXXX. statements Certain future reasonable LXP assumptions. are statements

cause However, release actual materially differ those including and not risks LXP by results those expressed press in from by duty such does statements. LXP or described required today's undertake could reports update as that earnings a SEC certain statements. to LXP's factors those forward-looking law, the Except files to included and with implied in time-to-time any from

earnings holders press measures to In adjusted from financial a to disclosure Any GAAP refer directly comparable company to has most diluted references on equity FFO operations non-GAAP release measure. LXP funds adjusted supplemental the all to these all the and documents reconciled and unitholders company quarterly in fully available package, basis.

of historical future financial or not Operating intended position a LXP's of cash to an flows. are measures individual investment presenting performance performance measure be viewed numerical as or financial

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

to over call the turn now will I Will.

Will Eglin

morning everyone. Heather. Good Thanks

business portfolio X.X%. with leasing make same-store NOI and progress results in in of our during second the quarter development to excellent growth We strong industrial our all areas continue of

in X.X%, partner our The leasing our facility in square Phoenix promotes, yield million of yields produced well average and portfolio volume guidance. X.X X.X of in square excluding in square included feet foot These an million estimated Columbus. leasing cash excess facility development foot XXX,XXX in outcomes our of resulting original

interest projects X.X at the tenant for more our X% $XXX we have lease We year. of progress our $XX is have and square gross feet the fund. projects asset million or remaining of approximately for cost remaining Total balance strong of value, of million these expect to left during make million available to which

development have ability development pipeline to our warehouse adding These our to highlight for to our a our And industrial results in market. facilities. initiating been vehicle superior since we and valuable facilities outcomes purchase deliver Our leased has positive portfolio. leasing warehouse development single-tenant relative seven success continued program, the

Moving on to sales.

We our at that by two Philadelphia subject assets our under and continue facilities anticipate XXXX be diligence for sold Wells year-end. to Jersey this contract office leased be due New asset property Whippany is to closing sale Buyer and Market conditions. are will Jersey is to well and Street Philadelphia Fargo to New year. remaining our in marketed The standard South later underway Carolina

that expires will Our this of generates and produce December a is result lease FFO year. in this share to $X.XX Alto per Palo asset subject which ground XXXX longer facility, after a as FFO office no

as additional Currently, non-target continue of to in view any but potential activity industrial we year, this liquidity. assets sales aren't expecting incremental markets certain sources

and EBITDA was to debt fully was our facility at million quarter to adjusted available. Turning balance credit sheet, our times revolving end $XXX net X.X

EBITDA to times, forma would adjusted development net including of Our debt pro leased our six stabilization projects. be

to pipeline continue our stabilize be realized, development to online. overall is as we leverage and as NOI will expected decline EBITDA Additional comes

to adjusted six to of EBITDA. times are a net range leverage We targeting five debt times

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

Brendan Mullinix

seven-year a a square XXX,XXX the in of rental program, $X.XX development we our X%. leasing averaging foot quarter Reviewing our Will. executed annual approximately and at starting foot bumps per square with attractive outcomes lease Phoenix rent second Thanks facility,

with a foot our a project of at in XX-year Columbus. $X.XX per square annual secured also starting We square rent lease X.X% million foot X.X and escalations

build-out when by require facilities November Phoenix expected asset are for additional The the for are January tenants. early some build-outs which take to the the be early tenants and requested Both facility. should Columbus complete, occupancy the

remaining million and the shell completed quarter and a foot which $X.X a we in our During XXX,XXX the buildings included core of project Greenville-Spartanburg square the facility.

facility facility. corn second project the two our the South one we completed shell completed quarter We end end property at Shore also subsequent June, to in Florida and of the of and

Finally, South the approximately $XX square of million. for forward in purchase we our foot, XXX,XXX July, completed Dallas project

XX-foot project the venture, load we design. made a facility clear a joint of in Columbus progress the is already XX Market market XXX,XXX land we we've remains leasing strong. foot square rear Park ETNA which with including construction demand on specs in a to-date With for feature building height, the size modern commenced will this own. The

We be for the expect completed partner XXXX, cash $XX and promotes. projected the estimated of first a of shell quarter yield and to in million stabilized approximately of core cost excluding building an X%,

market. utilizing pipeline We a at as continue our portfolio, way our of yields in of intend to excess warehouses the development adding to single-tenant purchase

strategy smaller demand to to development include with risk. tenant which mitigate will deliveries facilities potential leasing help will be continue Our staggered to responsive

X% speculative our target to to gross of non-stabilized or pipeline is around be development value goal asset our less. Additionally,

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

James Dudley

our across XX% United compared certain tenant Overall continues to quarter, leasing grew demand in with be same target In to in softness period XXXX. submarket excess markets and despite markets second the Brendan. some supply. the the solid approximately States, in Thanks rents

view growth end, expiring of the rents, we our we mark-to-market in-place And rollover rents. approach market. of approximately our not more has rent industrial At XX% that current lease changed. in through period opportunity coming XXXX robust portfolios below quarter estimate expect we releases to years, still ample As a are our compared

on or rent on of based net XX% approximately We XX% expect average in-place escalations rents to estimates. brokers, grow contractual independent

foot vacancy Carolina, leased quarter with to increase Duncan end up XXXXXX annual in facility in from XX.X% cash lease industrial of remaining rental quarter bumps a renewal Our with tenant Subsequent X%. low. a we very XX% X.X% South was square with end approximately a five-year signed our portfolio at

tenant desire increase exercised renewal us allowing during secure terms three-year the final the the of had better the we its quarter, to anticipated. while lease the pushed originally length quarter also While second option the into third negotiations to than

cash-based million of rental Year-to-date, and fixed respectively. extensions When were approximately square we've feet completed and spreads of based rent XX% one at increases and XX% base cash-based approximately XX%, attractive X.X and excluding XX% lease renewal respectively.

quarters, in lease XXXX and we pickup windows fourth a approach for expect activity as We renewal the to third see leasing expirations and negotiations. in complete

our negotiations small of we're our of in approximately remaining activity meaningful Currently on have and expirations amount XX% XXXX, vacancy. on

XXXX and still Our to to be brokers' XX% based estimates expired-rents on current expected negotiations in-place estimates. XX% higher are than on rents

the activity significant portion of and spec to this on promising leasing have pipeline also a hope We additional remaining report later development year. progress

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

Beth Boulerice

James. the approximately $XX million, with $XX second was reimbursement. quarter was operating approximately to in Revenue million tenant of attributable XX% Thanks, property which expenses of

FFO diluted approximately $X.XX company million. adjusted per or quarter common share Second was $XX

to adjusted on today's $X.XX We items considers development of and of volume within FFO range company sales lease-up are our guidance call. the range current discussed $X.XX guidance share. per timing This amongst maintaining diluted common a other

the still $XX to a $X in quarter expect XXXX approximately end, XX.X% G&A second million, of quarter quarter same range be leased in XXXX. to At industrial $XX the we G&A and Second compared our NOI to portfolio within and X.X% same-store million same-store industrial was was million. increased period

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

mentioned, revolving of million XXXX. fully available credit $XXX Will our unsecured As was June XX facility as

rate average to with average of was billion consolidated Our and weighted quarter weighted years. end, maturity at debt outstanding $X.X a X.X% six term of a approximately interest

fixed debt mitigate rates. to remains interest which Our our to approximately higher percentage at exposure rate XX.X%, continued

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

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

Operator

comes first Paolone JPMorgan. line Your Instructions] of the [Operator you. go Please from Thank question ahead. of Anthony

Anthony Paolone

could you the Thanks, as just good what on development to And like XXXX? you the to wondering refill things? as you if just look next look was talk round of sort to pipeline morning. might about appetite start yields I your start

Will Eglin

we've on that Yes. working think shrinking overall, Tony, been I mean I exposure.

the So to where square see XXX,XXX land quarter, and of million given we feet we foot that project X.X tenant is facility we we think the in demand. that that this committed own did size lot relative the leasing sense of to Columbus makes a in and

makes where X% value sense sort of that you net So overall, and want I you to that sort us. see think comment these I of target it's deals on position Brendan, a of And days? think asset penciling to gross that do then to over time shrink

Brendan Mullinix

announced that gives of there anticipate plus Columbus an in Well we scenarios. project the added if the single relative that in But the just number we've you stabilized will a be X.X% multi-tenant be. the program, to where modeled we and of LXP yield range, to that to we idea would

Anthony Paolone

available just to then that projects And second on Okay. the lease. are question

Can that's just Anything You more you changed tenant depth to in how terms a as that's color activity little of and about there. give along? your talked us coming bit just demand?

James Dudley

it's Hey, James. Tony,

say we're would So yes, I stages. in varying

the all on activity have properties. We different

others. than along further are Some

But say in I would to that known I just demand think has I the longer taking commentary strong. mean, decisions think that. they're continued it's industrial would and well I we the to be echo across So companies is pretty that make

XX the was do have need So bit it than XX months just to activity. little process is ago a slower to but

Anthony Paolone

Okay. Great. you. Thank

Operator

Todd question Capital go of KeyBanc ahead. line Please comes from next the with Your Markets. Thomas

Todd Thomas

Hi, Good morning. thanks.

value Has more whether of then Market quarter, And under million provide executing that's can changed the agreement? that proceeds I a items foreign in around the some on Appreciate of question. you clarify, or XXXX contingencies first just around the of or Street last anything key update be commentary some discussed bit to you of those in Philadelphia, $X the may awaiting Just contract expected expect around the little generate? at assets. an assets before guess detail core approval you range. the the

Will Eglin

Sure.

think there's I the portfolio been the in value erosion overall. office of some

assets pegging have think, be of we I the under Wells we want contract a contract under and Fargo with Whippany deposits, XXXX while until as them about value we So little well. have cautious the to

So been comment the have we quantify with that to the I of XXXX I on market? assets. $XX million, diminution how do we there see just to wait to Do some value from Mill think want but has you to think, Fort

James Dudley

we've Yes, sure. In moved both along. the process circumstances,

closing in the done hard they're sale done hopefully and money We until anticipate from have current a earnest here, smooth deposits they're office not but environment.

Todd Thomas

Okay.

with do they're the any assets, vacate office been the renew On around, assets, both to what assets? notification they're whether two to or or has one of Wells decision there those or looking going

Will Eglin

No. They terms to expire respect options facility. period any let of the exercising in renewal renewal with either

during assets and process for the finish change or turn involved. ahead into and office move get that sale market we'll So, it's and their But them Wells mind sale we're to moving possible back cash could those process.

Todd Thomas

the then, deals are you quarter, Okay. And it. in initial for Got And opportunities? appetite company's rate cap you that surface? investment a and on seeing $XX can additional more the the million And yield provide begin on what's acquisition the like then transaction?

Brendan Mullinix

forward we're spring. We X% deal around last in Brendan. X% stabilized was there range. a acquired It's early looking agreement Hi. low a purchase shell. early The acquisition yield to in we the anticipated that and actually at year that negotiated That

contract terms year. that again, In additional under was last one put of acquisitions,

expand While that market, in as And very pipeline quarter our said I've purchase announced the transaction land Columbus the happens, as of we stabilizing focused we we're as development the may market. monitoring the we purchase may remain more and to alternatively we look pipeline. revisit this with the bank on

Todd Thomas

you I of question, Okay. can the remind to us last And sort of into place Beth, just service. policy just guess in transition development maybe

terms be executed they for might of that, time you complete with projects line the service? about guess, additional I that if of before Just lease service. then And along just or completed, spec leasing into that leasing, are placed are in once to wondering, have the either available the complete, not expect placed there's the are projects do leases some or today, a whether where for leased into

Beth Boulerice

Yes.

XX% base the So the of or one our from policy is if substantial asset is, completion building. year occupied

are So, of them service shell as but are of not and met. they mark core occupancy until when many assets is these complete into placed today, that

in to in service are So date. and going the We've some will later achieve that estimates be properties leased on some at time. of the our occupancy put that placed when supplemental

Todd Thomas

Okay, got it.

first they if of whether would leased Central not, in Mt. Comfort during the XXXX. would So I'm looking into at they're transitioned service be that…? or transitioned and those like Ocala be Is Florida quarter

Beth Boulerice

one year. Right, Exactly.

Todd Thomas

progress those otherwise? place you And they executed based the transitioned service then current leasing the when any about pipeline executed into have and be so continuing there for do leasing we of on or think projects, leases would anticipation on without is leases in and to expect before demand negotiations

Beth Boulerice

see. on and that. will We'll time tell We're on working now that

Todd Thomas

Thank right. all Okay, you.

Operator

from [Operator Your Instructions] Bonnel the Please of go with question next of America. comes line ahead. Bank Camille

Camille Bonnel

Good GAAP If the first on comment I cash remarks, this portfolio opening XX%. your around mark-to-market caught within I was morning. guess, correctly in is question a my basis? opportunity the or is

James Dudley

also the we ending rent by in this track compares rent is the number. rent and And it's that -- the it's cash basically And escalators The the in you place XX% And number to XX% compare the XX%. if today. escalated in-place James. the on then that is rent is the ending versus lease two. It's Camille the a basis.

So but three different market. as of we're XX% we below think today numbers,

Camille Bonnel

is it XX% been expectations that But expectations ahead spreads specifically Okay. to which just it your what And your be is South for year-to-date. lease the the you've thinking within expand the XX% tracking Because Duncan, XXXX? about Carolina leasing portfolio the this achieving of cash outcome. that on opportunity came well-below possible seems to asset,

there? So dots to the trying just connect

James Dudley

Sure. It's blended.

We have left. leases XX

high couple them fixed them some at So rate it's X% and options are -- of and of renewal a very digits have ones of we X%. the very, some double

those the average XX XX%. So that it's XX% over of outcomes us blend a gets to to

Camille Bonnel

Okay.

you're ones seeing excluding the So fixed still increases like double-digit spreads?

James Dudley

Yeah.

those the includes So the XX% to for average. XX%

is our in going expectation increase So, rent. XX we're those outcomes to yeah, over to XX% XX% that see

Camille Bonnel

secured Palo at I office of final due your asset on is year. the your Alto Okay. one end And the see for me. coming loan

Just get wanted on your to thoughts plans your here?

Will Eglin

will XX support Xerox and the to it so option amortizes, be tenant a XX-year And exercised fully zero the all balance. renewal used payments essentially it Yeah, a years credit ago we financing. lease rent

was years have We how so that XX lease maturity. economic a of out cashed ago after either. continued we that So have do expired, won't asset any ground we don't and interest the anything the

Camille Bonnel

you. Thank

Operator

Your with of comes ahead. from next Securities. the question Germain Mitch JMP line Please go

Mitch Germain

back of with about the do the of XXXX move-outs you're guess, morning. are expirations comprise discussion I'm just haven't talking I started or XX%? -- some weighted XX%, Good I'm tenants that The about XX% other and under is some -- known yet, that those curious they we have that

James Dudley

is Mitch this James.

Mississippi. on You're facility square right in They're XXXX, Olive only out back-end Branch, just first known one move is the foot which part. in XX,XXX There's weighted.

Mitch Germain

out quarter. Okay, a were original suggested going of, or me maybe in of great. on I based discussion tap market negotiation some sales you or just one last then Detroit for the think I the No are, with intent. And under a -- assets little kind I that your sales. regards the what help more property to Will, than other that believe know of comments letter sold office to were. I you more And industrial under you

So from was anything there perspective? your that changed

Will Eglin

observing it's to is acquisition hard be seller given a not Just time favorable. it that great not is a how financing

the So I think just market. monitor we'll

sales about wouldn't think the But I on be months be test that keeping few our We the front. interest and our what that in in revolver balance we'll if we opportunities opportunistic assets on will of see find. But just think me surprise a It committing. next have low. I we handful an versus market approach

Mitch Germain

Thank you.

Operator

Evercore of ahead. go line comes question next of James from ISI. Please Your Kammert the

James Kammert

Good morning. Thank Hi. you.

clarification. Just a

and projects But quarter went development it pipe in tenant now up. leased additional mentioned. those think newly costs those costs and you you two the second rents like looked I full-in quoted that the requirements the are supplemental are the On presented the reflect build-out the

Beth Boulerice

Exactly. amounts Jim. That's now. We've is exactly what added TI in the it

James Kammert

Okay.

the cost expiration of, LXP say was the renewal to there What it when intentions cotton sure similar because their it what And sort make typical, lease to question Mitch's yield requirement the how notice or of off want have the . just just attractive. I tell tenants building the then are? a representative is do is pretty up to slot. quickly on Okay. particularly on to why sounding part seven-year went but actually prior

James Dudley

It's typically XX X months to months.

James Kammert

typically. It’s

Okay. Thank Helpful. you.

James Dudley

Thanks, Jim.

Operator

Your next of Jon question LLC. Please comes from line with the Petersen ahead. Jefferies go

Jon Petersen

kind for Curious tenant as they on next any year. to are of in escalators where any And you renewal, you seeing morning. Good and Hi. are of that now? and right is in have the renewals? as -- change or the years renewals on looking wait the just coming at able there guys they are negotiate change lease these last you does renewals? over behavior early stand the on couple they Like to Are see that to

James Dudley

again. varies. James It's It Sure.

until that the some that have proactive have circumstances We upper some are the and hand. minute. most still And we in last wait

the ones up that we're they'll who to window. So sure and wait. have to renew we potentially space to But ability the are savvy, make fine want the missing give by they their

it's conversations that renewal of discussed typically far we window. so as So kind around

see on some we're an X.X% push markets portfolio escalator on we And and the X%. would X% our we're though to escalators average then doing to we've gotten across escalators when continue mark-to-market, probably a I say towards on cases also in improving on from to perspective, average

Jon Petersen

Thanks. Okay. That’s helpful. me. That’s all from

Operator

no the further will call to this questions are turn Will at there Eglin. I And time.

Will Eglin

of our we in and to on joining produce all financial business. progress strategy and areas executing successfully everyone our appreciate We are strong call our And morning. operational continue performance, this in summary, with

or you to performance Gentry, excited members Please our continue addition contact believe, website going if may joining Heather outcomes for or to us. and me would like visit shareholders. producing senior receive with any to in management always, great for for are We questions. other quarterly strong And of materials. we our forward our again contact as the you poised are Thanks

Operator

concludes This joining. conference today's thank call. you for We

You may lines. disconnect your now

LXP Industrial Trust (LXP) 2 Aug 232023 Q2 Earnings call transcript