LXP - Earnings call 3 2023 | LXP Industrial Trust

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Operator

Good morning, and welcome to the LXP Industrial Trust Third Quarter 2023 Earnings Conference Call and Webcast. Please note that this call is being recorded. [Operator Instructions] I will now turn the call over to Heather Gentry, Investor Relations.

You may begin your conference.

Heather Gentry

Thank you, operator. Trust XXXX Industrial and Conference LXP Webcast. to Third Earnings Quarter Call Welcome was and in this and earnings X-K. to distributed The release a on morning and be are Form on the SEC section quarterly available both our Investors website the will furnished supplemental release the Certain Reform within events of the expected statements the conference Act may results Private future during regarding this Litigation of meaning XXXX. constitute made Securities call and forward-looking statements

statements LXP based are believes assumptions. reasonable these that on

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

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

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

T. Wilson Eglin

proceeds rental will and ground expire marketed were X.X% Jersey approximately assets representing XX. and proceeds completed office $XXX progress nearly $XX Mill, The our Both September just of in office our in quarter fully Palo everyone. further the driven previously, balances, Fort gross Heather. in leverage our as million. of sale. Carolina of Alto, sold quarter successful as New with meaningful increases a reduction. portfolio, South December. leaving leasing additional morning, office properties lease third for the assets sale Good discussed Thanks, development sales, remaining And during book office on We the had are Philadelphia Mill currently retire available revolver we've sales million We've to gross for being California Fort line our X used by were value. Office

XXXX. to EBITDA X.Xx, adjusted Our debt X.Xx a in quarter X.Xx net been forma stabilization have with debt was our pro adjusted development from to net XXXX of leased projects. substantial the end Leverage at the of third reduction would quarter EBITDA

our expected As spec to lease rents grow and up, development further. decline is pipeline continues to leverage

particularly proceeds opportunities, industrial our from keep outside investment office markets and revolver may of capitalize build-to-suit in utilized area. leverage on remaining the assets and new be available, sales to reduce target further our Disposition

leasing front, X.X On square we've the feet the million through leased October. end of

leasing estimated we XXX,XXX Promote. excluding progress brings yield the Spartanburg further leasing square an Partner development in development X.X%, to spec an cash our During spec Partner yield stabilized by made of Greenville in X.X excluding year-to-date total square at quarter, foot at of stabilized million cash feet X.X%, This building Promote. spec average estimated pipeline our

million respectively. second-generation year-to-date and of leases of base renewal to volume approximately cash-based leasing at new increases on raise continue XX% industrial rental X.X attractive XX%, We rents with feet and square and

respectively. increases and and approximately were When XX%, XX% renewals excluding cash-based rental fixed base

which profile, the over improved represents was authorized internal with Board $X.XX annual declared per at the approximately quarter. share growth of share. will X.X%. The dividend, prior our X% third average that an which X% dividend escalations are announced NOI combined escalator paid XXXX. in we common of Our industrial in rents annual average trending annualized the same-store to signed in market industrial marking to This with quarter new the continue first leases for drive XXXX increase increase higher morning, of This Trustees dividend be of an growth,

pleased report. and program our made including reporting and to report SASB, enhancements responsibility XXXX The Finally, to established we're our and ESG have corporate highlights our TCFD frameworks, and demonstrated to transparency utilizing published R commitment disclosure, GRI.

Brendan improved that, also an among disclosure. our in and Real our the more I'll our We group place detail. to public turn XXXX GRESB with score overall Estate investments over With and ranking peer call first A maintained Assessment to discuss our

Brendan Mullinix

Thanks, and now largely development Will. build-out are remaining Starting projects The portfolio. core our development with complete. shell of our

facility pre-lease and square complete this quarter to foot of first the later expected into Our service approximately in in Phoenix quarter is XXX,XXX placed be XXXX.

foot and third Additionally, invested approximately completed $XXX new square to quarter. cost $XX the quarter in million of project of be approximately for build-out an we've core expected million. is shell on the estimated XXX,XXX $XX.X in XXXX our which Year-to-date, of included in first development, Columbus the million

these million in excluding investing projects, approximately anticipate more promotes. We $XX partner

of represents development non-lease currently below we we value, to Our expect X% our our gross as decline continue of X% target number lease to asset this and pipeline this portfolio.

leasing. development to Moving

term the XXX,XXX take with the with facility Spartanburg includes X in approximately over leased a to for we December. square a rent annual bumps. occupancy tenant X-month quarter, years rental Greenville expected period foot The X.X% little free During our in lease

year project quarter foot that leased in placed was million subsequent was square end. this earlier X.X service our into Additionally, to Columbus

January rent one building in a with square our project in per also bumps. XXX,XXX leased at square foot October. foot square of $X.XX starting XX,XXX our XXXX in annual feet The development X% X-year expected buildings is of lease Florida at in commence X Ruskin, We approximately to

our of properties, XXX,XXX our in activity see to the continue under robust completed market. interest modest although spec more We for is the given remaining Big development currently foot product square spaces at Box oversupply

has million. strong quarter, constructed facility approximately for of interest been in newly this square market the the Leasing XXX,XXX facility. during forward Also completed Dallas purchase we our foot at the $XX

focus growth build-to-suit, on to be front, are additional and the about likely reviewing is think we area. in we this As opportunities prospects our investment on

uniquely pick that, Given our We to believe space, market this in up. track environment construction we leasing. developer capital to the turn starts, long given record activity constrained our well-located build-to-suit our on land bank. we few relationships over well With opportunities James are to strong capitalize the positioned these [indiscernible] I'll discuss and with anticipate to call

James Dudley

Thanks, Brendan. leasing Quarter-over-quarter, tenant moderate we are softening logistics in markets. across seeing some U.S. demand

albeit make markets at is slower to and present. to as However, tenants longer certain leasing take a and continues get oversupply decisions some in done pace submarkets

the of supply. Rents experienced starts pressure place rents are our new Brendan third time approximately to As mentioned, Big projects. to grew would begins oversupply market. an product, a on quarter currently more competitive quarter, expect this over put development the our when the third in impact particular, We environment of has for as dissipate XXXX. approximately creating to sector, larger Box market compared below estimate that portfolios We XX% XX% target in of markets our in in industrial fewer

XXXX, approach feet already extensions increase we lease cash million X.X XXXX at renewals. rental to XX.X% base we've of square of fixed a completed when or As excluding XX.X%

to XXXX X.X are a expirations, rental which feet of produce current XX% estimates. We XX% based negotiations almost brokers' in of square of and million cash-based on negotiations to expect all increase the remaining lease

the X%. signed at annual which in portfolio we a square a activity We've no at quarter with quarter, In had Duncan, XX.X% or compared move-out leased XXX,XXX to industrial Our up promising stabilized rent X-year due our at slightly in site. the third foot to end, quarter South the bumps Houston. down in was renewal cash increased lease X.X% current base tenant from Carolina, facility XX% we approximately last

experience leasing X% leases X.X with our lease end, square at X-year to million with [indiscernible] approximately building new extensions occupancy. to annual continue a feet to signed quarter full rent of bringing also volume new the October. signed facility, We in bumps and Subsequent we strong

our Notable rental with activity new represents XXX,XXX the the foot lease annual prior a in increase The a facility at Dallas extension X% market. rent square over approximately starting included rent. XX-year XX% bumps

a There forward, for foot in our X-year going market, fixed this a the fixed XXX,XXX no South when lease more renewals expires. and We rate convert with and to will lease also Carolina. tenant are the renewal square rate facility Spartanburg, signed

facility, approximately XX or call With over remaining years vacancy Finally, to City, the we turn Florida financial Beth to leased I'll addressed we existing that, in square for the feet where bumps. results. X.X% XXX,XXX Plant our discuss

Beth Boulerice

James. Thanks,

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

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

XXXX, Our Alto of the Fort sale These during in with per held FFO. and the the as ground X assets, to quarter of share sold office December. Palo mentioned, the revert annual for assets were in XX, contributed along office remaining as asset office owner assets X Mill $X.XX will September

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

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

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

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

percentage Our end. at was XX.X% debt fixed quarter rate

$XXX term upcoming XXXX. options reviewing June $XXX which expiring XXXX debt we specifically bond, loan Finally, our for and unsecured our are million refinancing maturities, in expires in our million January

new state of be current financing expect our given rates to the environment. excess of in We rates the

conduct turn expense as these will maturities. we the that, address this portion of we anticipate I'll call. that question-and-answer increase the will operator, So interest back call who over to the With

Operator

from Paolone [Operator question first Our comes Instructions] JPMorgan. Anthony with

Anthony Paolone

to just for out is fill an we on expirations, has talk Big in Big the Maybe just you more Can James. demand space. tenants? Box this space demand maybe bit about this you incremental particularly, Box impact curious, think first in reduction at point? do existing one look And as do changes for Or you 'XX the think just a to

James Dudley

Tony, competition at in Greenville-Spartanburg. larger I our just more in that so seen definitely they're the being that the we've pipeline, tenants large [indiscernible] and of number just are the on as additional at development it box our too. space. on portfolio, would But spec yes, And slowdown is least say, looking

go to tenants fewer are there around. So

in anticipate we done to some see those We've And is haven't others are new the tenants. renewals because properties number the just better We development more mark-to-market I well we're of have retain renewals we think just infill those are exposure that there a to And and we've our as trickle and large that going have that we a got more that isn't are as with that seen have on is, submarkets some strong to a spec it we're building to renewals. much coming that really little difference down bit and recently, locations the up. just product, performing going competition.

Anthony Paolone

Okay.

you as to good on bigger expirations 'XX, and those? of mark-to-market about we getting still staying your those So just the feel look pretty some in

James Dudley

activity expires got foot coming at mark-to-market and year. good that lease a feet on have that in suburb of Dallas then activity got renewals of a expect Carrollton, rolling. point. They're only We've do. We end is we XXX,XXX to we for great back square tenants We've strong both the XX,XXX are of move-outs of on. it. we next year And which we've in, That off the square Other a January Memphis. towards that, small in lease than the suburb that's this really known next got have X anticipating

Anthony Paolone

Okay. And then maybe Beth. for

finished have Like you Just those to P&L? with spec me through interest or when costs? the can flow carry in the does developments earlier remind the do other year, when

Beth Boulerice

capitalize will XX% the occupied. year Tony. -- it is we is -- and once the a or until substantially up to Yes, interest property complete, until

Anthony Paolone

Okay.

should for see bigger getting them guess. leased we So that those to a so, we of boxes, like let in flow couple the through, if next don't or start quarter I

Beth Boulerice

from Once this year they're beginning -- were once it at be Right. year, they the a completed not come they've substantially will if leased. of there, online

Operator

next with from Thomas comes Markets. Our question Capital Todd KeyBanc

Todd Thomas

with little sticking from and, bit get little the what looks today a follow-up complete, be just the and leased discussion demand to those wanted line that to just question. for might today? interest the are demand I spec I the demand leasing and leasing bit expected you the pipeline up substantially time tenant prior developments Can like what talk the about guess, a

James Dudley

Sure.

James this is again. So

ones that On the smaller we have.

just Shore, significant good XXX,XXX square the Dallas on we the South purchase the of in in the one there. Tampa. XXX really did got We've did So activity lease do We forward has lot activity. in Greenville foot a the

So activity. the strong smaller size has very

have buildings activity. as hard as it's just peg it. to timing larger Our goes, far the And really

have couple miss them we of out term of little something opportunities where could done and we we the on could a activity, near could a have on We downtime. bit or those potentially, have a prolonged in

just but as not much there was. isn't as it's no that again, hard activity. peg, very There to So there's just

John Massocca

any completed help capitalization if impact year terms just then we guess, with like ahead And assume were the as burning think policies, developments about Okay. in at us frame XXXX. throughout I interest 'XX leasing look sort company's, there Beth, of the in the up, cost to just that of no of is off. might what FFO the you we capitalized Can the

Beth Boulerice

Right.

So for if on we the base you dates have completion listed. interest look off them our based schedule, the Page of the will like XX supplement, yes, on capitalized building burn

like on will off It what are. insurance, along depend operating a building much be is that. up plan you expenses some from that do way. will capitalization up building so real picking the those year will burn those taxes, dates, estate So from end to And how the expensed can we'll then

leased. not which So leased ones or just are be incremental it to will

Todd Thomas

opportunistic just a on seeing Okay. investments. be then talked and detail I Can there All additional to last some you additional and a discuss And today, guess, maybe little build-to-suit what where is and little leverage bit of question, just about move you forward seeing bit you're the with sort provide more right. appetite with opportunities.

Brendan Mullinix

Yes.

front, what as of in investment attractive said see remarks, prepared I we most build-to-suit option. terms looking In the on is the my like

X% is space that cap pricing range solid think the rate anticipate in would X% I range. to of getting X%. a X.X% to that probably in in We escalations

have existing attractive So and we seen in of well. We've our in builder sites, straight-line And our relationships. opportunities. also yields reviewed Phoenix. then Aetna a built-to-suits land build-to-suit including from as merchant We've site couple opportunities

continue does it's more it going activity in on. work So area that like And we're to look space. to an there's that

Operator

Jim from Evercore. Our next question comes with Kammert

James Kammert

those of kind Just on building prior questions.

the any you'd to is those see that smaller could Just demand pivot not up inventory would of entitlements still or lesser you if and your Given to in that say, the the which land or could trying Big Box, use work? that? make requirements let's consume the you economics do like land about property. Or there you to pattern, make something

Brendan Mullinix

our bank can formats. land -- will we different support Yes, building

format would were spec we So be the in in consider be the current would would expanding if environment, smaller -- pipeline, in we to it buildings. it expect

James Kammert

by governed elective by the Okay. more driven taxable modestly. tactical payout? dividend that Great. or you And decision requirement the just minimum a raised issue. small Was Again, really

T. Wilson Eglin

by was Jim. consistent the just results by now. around supported That driven that view dividend same-store with wasn't the tax, our growth strong is portfolio it No, producing

Operator

with from next JMP comes Our question Mitch Securities. Germain

Mitch Germain

I'm the with curious about office profile. could the buyer you to that regards sale Anything share process, situation?

T. Wilson Eglin

out remaining Whippany we've that been and with of someone and because in very for it's working of the necessarily completely the use once of to for had say bed buyer facility the office Philadelphia safe type that investor fall And lease The time a Not a different was term. transaction in that the investor the respect before. of bid become long short. profile, have was to sheets with buyer

turn Fort into development. that industrial I site the be someone, Mill, buyer will who an think will likely in

buyers different what's So left X pool. in types of for completely that

James Kammert

any fixed there XXXX? of Are rent increases helpful. aware rent need That's -- other fixed we in be to

James Dudley

tied in There's that that XX%. on remains. put XXX,XXX a the one kind numbers into Cincinnati. is of outside Mitch. in square which small one remains, that And It's the increase is forth Monroe, the that X% a building, of That's relatively feet we've only

mark-to-market anything So that's includes our fixed. XX%

James Kammert

expectations of then waiting the too maybe bigger Is it some to That's that up. Great. too development projects that of for suggest yield early And -- some lease in helpful. you're it be is offset to the the you you strong delay feel will yield suggest leasing? in expectations economics early pretty initially that of leasing lower the Or are those still some like maybe planned? than to

Brendan Mullinix

pipeline given Brendan. is our This early overall to to previously We're the think will [indiscernible] those I would it's time say, we what I respect expectations. had tell. changing revisit from guidance not with

Operator

Our next America. Camille question comes Bank Bonnel of from with

Jing Xian Tan

update coming larger lease, you're an Helpful commentary whose is the next Xerox Can year. you conversations next expiries I provide on on the quarter? on also having up believe,

T. Wilson Eglin

where don't own one we That's -- the Yes. ground.

So of the year. that's expiring ground a at lease there's the end

XX-year a financing had So we Xerox XX lease close the a rent all with we monetized of credit essentially tenant to with lease and ago. years

all out of funds and rent but applied been flow. operations, the transaction that has no interest, to created of has many took from free we principal which So years our and all out ago, equity cash

FFO be cash to been going will no that flow from an forward, with us there's that to years. but XX So respect asset free for loss to close

Jing Xian Tan

some implied REITs moved just your We've at quarter looking assets. question Okay. to a imply quite large non-core pretty similar seems take to had this on disposals. yields valuations on And the impairments pricing significantly. seen and And around some that their office office starting have you

talk you're to other more this? you assets about a thinking read-throughs portfolio? how your any about can office So bit within And

Beth Boulerice

assets have in the We did past. that we just them Mill impair CamIlle the Fort and Hi, are left,

anticipate office have impairments point don't this at that we portfolio. the our remaining any we consolidated on So in additional

Jing Xian Tan

development you place a see leasing, if And these we on your multi-tenant of think the looks approach it core strategy, assets having portfolio about taking around in some a still your developments. your just term? long do And Okay. you're new finally, like

James Dudley

We way. were the our Tampa that strategy in smaller on that or multi-tenant buildings has really, Tampa building been smaller designed in

buildings be designed multi-tenanted. to All our are of

However, makes tenants is sense by to to try going our find and to it to situation as multi-tenant, lease preference where a If we what situation. just to do. them single continue then do well. It's that's what to we're that's we'll situation,

Operator

now time. for call Will questions remarks. back closing further any this turn will no I Eglin to at Seeing the

T. Wilson Eglin

results great areas with website considerable we on producing quarterly are we to build to if strong appreciate believe morning. And in addition, us excited Gentry, strategic summary, initiatives We any positioned joining in are progress contact joining you materials. all to again our everyone call we And Thanks successfully making as of performance, continue execute receive our to today. senior for other shareholders. contact or me our well management visit our our operating business. in this continue our always, and to We are of you may Please the members our for or questions. would Heather like and

Operator

conference today's call. concludes This

You may now disconnect.

LXP Industrial Trust (LXP) 31 Oct 232023 Q3 Earnings call transcript