LXP(LXP) - 2022 Q2 - Quarterly Report

PART I — FINANCIAL INFORMATION Financial Statements (Unaudited) Unaudited H1 2022 financial statements show increased assets, decreased net income from lower property gains, and reduced operating cash flow Condensed Consolidated Balance Sheets As of June 30, 2022, total assets slightly increased to $4.05 billion, while liabilities rose and equity decreased Condensed Consolidated Balance Sheet Summary (in thousands) | Account | June 30, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Total Assets | $4,054,420 | $4,005,558 | | Real estate, net | $3,663,291 | $3,534,966 | | Cash and cash equivalents | $49,817 | $190,926 | | Total Liabilities | $1,794,770 | $1,682,330 | | Revolving credit facility borrowings | $120,000 | $0 | | Senior notes payable, net | $988,613 | $987,931 | | Total Equity | $2,259,650 | $2,323,228 | Condensed Consolidated Statements of Operations Q2 2022 operations show decreased gross revenues and net income, primarily due to lower gains on property sales Statement of Operations Summary (in thousands, except per share data) | Metric | Q2 2022 | Q2 2021 | YTD 2022 | YTD 2021 | | :--- | :--- | :--- | :--- | :--- | | Total gross revenues | $79,775 | $81,541 | $160,053 | $174,098 | | Gains on sales of properties | $27,855 | $66,726 | $28,110 | $88,645 | | Selling profit from sales-type lease | $9,314 | $0 | $9,314 | $0 | | Net income attributable to common shareholders | $39,667 | $71,000 | $48,665 | $110,397 | | Diluted EPS | $0.14 | $0.26 | $0.17 | $0.40 | Condensed Consolidated Statements of Cash Flows H1 2022 cash flows show decreased operating cash, increased investing outflows, and a shift to financing outflows Cash Flow Summary - Six Months Ended June 30 (in thousands) | Activity | 2022 | 2021 | | :--- | :--- | :--- | | Net cash provided by operating activities | $95,207 | $108,687 | | Net cash used in investing activities | ($217,112) | ($140,317) | | Net cash provided by (used in) financing activities | ($19,196) | $50,368 | | Change in cash, cash equivalents and restricted cash | ($141,101) | $18,738 | Notes to Condensed Consolidated Financial Statements Notes detail accounting policies, real estate investments, debt, equity activities, and subsequent events like credit facility amendments - The company is a REIT focused on single-tenant industrial properties, with interests in approximately 121 consolidated properties in 22 states as of June 30, 2022[25][26] - During the first six months of 2022, the company acquired three warehouse/distribution facilities for a total initial cost of $131.2 million[44] - The company disposed of various properties for an aggregate gross price of $55.4 million, recognizing gains of $28.1 million in the first six months of 2022. An impairment charge of $1.8 million was also recognized on a property due to vacancy[50][51] - Subsequent to June 30, 2022, the company amended its revolving credit facility, extending the maturity to July 2026 and transitioning from LIBOR to SOFR. It also repurchased 1.8 million common shares and disposed of three properties for $92.0 million[120] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the portfolio's transition to industrial assets, decreased net income, liquidity, capital recycling, and same-store NOI growth Overview and Transaction Summary LXP's portfolio is now 99% warehouse/distribution assets, with Q2 2022 activities including acquisitions, dispositions, and share repurchases - The company has transitioned its portfolio from approximately 16% warehouse/distribution assets at the end of 2015 to approximately 99% as of June 30, 2022[129] - In Q2 2022, the company repurchased and retired 6.1 million common shares at an average cost of $11.45 per share[134] - Disposed of interests in two industrial properties and one office property for an aggregate gross sales price of $55.1 million during Q2 2022[136] Liquidity and Capital Resources The company maintains adequate liquidity through cash, credit facility, and manages capital via share repurchases and senior notes - As of June 30, 2022, the company had $49.8 million in cash on hand and $480.0 million of availability under its unsecured revolving credit facility[145] - During the six months ended June 30, 2022, the company repurchased and retired approximately 6.1 million common shares at an average price of $11.45 per share[154] - As of June 30, 2022, the company had forward sales contracts for 16,000,000 common shares that have not yet settled, with an aggregate settlement price of $183.4 million, maturing in December 2022[152] Results of Operations Net income decreased in Q2 and H1 2022, primarily due to lower gains on property sales and reduced lease termination income - The decrease in net income for Q2 2022 was primarily due to a $38.9 million decrease in gains on sales of properties compared to Q2 2021[162][168] - For the six months ended June 30, 2022, total gross revenues decreased by $14.0 million, largely due to an $11.8 million decrease in termination income compared to the prior year[171][172] - Equity in earnings of non-consolidated entities increased by $17.1 million for the six-month period, mainly due to the company's share of gains on sale of three properties from the NNN Office JV L.P.[177] Same-Store Results Same-store NOI increased by 3.2% for Q2 and 2.8% for H1 2022, driven by higher occupancy and cash base rents Consolidated Same-Store NOI (in thousands) | Period | 2022 | 2021 | % Change | | :--- | :--- | :--- | :--- | | Three Months Ended June 30 | $53,023 | $51,402 | 3.2% | | Six Months Ended June 30 | $104,329 | $101,513 | 2.8% | - The increase in same-store NOI was primarily due to an increase in occupancy and cash base rents[180] - Historical same-store square footage leased was 99.3% as of June 30, 2022, compared to 98.5% as of June 30, 2021[180] Funds From Operations Q2 2022 diluted FFO increased to $0.19 per share, while Adjusted Company FFO decreased to $0.17 per share FFO and Adjusted Company FFO per Diluted Share | Metric (per share) | Q2 2022 | Q2 2021 | YTD 2022 | YTD 2021 | | :--- | :--- | :--- | :--- | :--- | | FFO - diluted | $0.19 | $0.18 | $0.35 | $0.41 | | Adjusted Company FFO - diluted | $0.17 | $0.18 | $0.33 | $0.41 | - Adjusted Company FFO for Q2 2022 includes adjustments for a $9.3 million selling profit from a sales-type lease and $0.7 million in non-recurring costs[187] Quantitative and Qualitative Disclosures About Market Risk The company's primary market risk is interest rate fluctuations on its variable-rate debt, mitigated by swaps - As of June 30, 2022, 15.3% of the company's aggregate principal consolidated indebtedness ($249.1 million) was variable-rate and not subject to interest rate swaps[192] - A hypothetical 100 basis point increase in interest rates would have increased interest expense by $0.6 million for the three months ended June 30, 2022[192] - The company uses derivative financial instruments, including four interest rate swap agreements as of June 30, 2022, to mitigate interest rate risk[194] Controls and Procedures Management concluded that disclosure controls and procedures were effective, with no material changes in internal controls - Management concluded that the company's disclosure controls and procedures were effective as of June 30, 2022[196] - No changes in internal control over financial reporting occurred during the quarter that have materially affected, or are reasonably likely to materially affect, internal controls[197] PART II — OTHER INFORMATION Legal Proceedings The company is involved in ordinary course legal proceedings not expected to materially impact financial condition - The company states that legal proceedings it is involved in are not expected to have a material adverse effect on its business, financial condition, or results of operations[199] Risk Factors No material changes to previously disclosed risk factors were reported in this period - No material changes in risk factors were reported from those disclosed in the Annual Report[200] Unregistered Sales of Equity Securities and Use of Proceeds During Q2 2022, the company repurchased over 6 million common shares under its publicly announced program Share Repurchases - Q2 2022 | Period | Total Shares Purchased | Average Price Paid | Shares Remaining in Program | | :--- | :--- | :--- | :--- | | April 2022 | 1,238,427 | $13.41 | 7,737,888 | | May 2022 | 1,692,088 | $11.22 | 6,045,800 | | June 2022 | 3,167,511 | $10.82 | 2,878,289 | | Q2 2022 Total | 6,098,026 | $11.45 | 2,878,289 | Exhibits This section lists all exhibits filed with the Form 10-Q, including corporate documents and certifications - The report includes CEO and CFO certifications pursuant to Sarbanes-Oxley Sections 302 and 906[207] - Financial statements and notes are formatted in Inline XBRL for interactive data analysis[208]