LXP(US:LXP)2021-11-04 15:40Financial Data and Key Metrics Changes - The company reported adjusted company FFO of approximately $54 million or $0.19 per diluted common share for Q3 2021, with an increase in the guidance range for adjusted company FFO to $0.75 to $0.78 per diluted common share [34] - Revenues for the quarter were approximately $83 million, with property operating expenses just over $11 million, and G&A expenses of $8.4 million [35] - The company's balance sheet remains solid, with net debt to adjusted EBITDA of 5.4 times at quarter-end and unencumbered NOI at 91.5% [37] Business Line Data and Key Metrics Changes - The company has transformed its portfolio to 95% industrial assets, significantly increasing its focus on single-tenant industrial REITs [9] - The stabilized lease portfolio increased by 110 basis points to 98.9%, with base and cash base industrial rents on extensions and new leases increasing by 6.5% and 4.7%, respectively [12] - Average rent per square foot in the warehouse distribution portfolio is $3.97, which is viewed as 6% to 8% below market [13] Market Data and Key Metrics Changes - The industrial sector is experiencing strong leasing demand and rental growth, with vacancy rates at an all-time low and rental rates continuing to rise [11] - Rents in target markets have grown on average approximately 8% over the last year, indicating a robust market environment [13] Company Strategy and Development Direction - The company is focused on speculative development and the purchase of non-stabilized properties as a principal investment strategy [18] - The Board announced an 11.6% increase in the quarterly common share dividend, reflecting confidence in market rent growth and future rent increases [21] - The company aims to fully exit its office portfolio by 2022, with ongoing sales of non-industrial properties [82] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the transformation of the company into a predominantly single-tenant industrial REIT, which has created a stronger portfolio and enhanced shareholder value [23] - The company anticipates continued strong rent growth in its markets, with a significant window of lease rollover expected between 2024 and 2027 [58] Other Important Information - The company earned first place ranking for U.S. industrial listed companies in the 2021 GRESB assessment, highlighting its commitment to ESG initiatives [22] - The company has a sizeable pipeline under review for acquisitions, with $135 million of Class A warehouse distribution product acquired during the quarter [19] Q&A Session Summary Question: Update on shareholder letter from Land and Buildings - Management indicated that discussions with shareholders were fruitful and highlighted the value created through the company's transformation [44] Question: Cash same-store NOI for the industrial portfolio - Management clarified that the reported same-store NOI is on a cash basis, with a 1.2% increase attributed to a vacant property affecting the overall figure [49] Question: Financial advisor engagement - Management stated they are well-advised in various aspects of the business but did not provide further commentary on hiring a financial advisor [55] Question: Market monitoring for excess supply - Management noted that while there are high supply markets, demand continues to absorb new construction, indicating a balanced supply-demand dynamic [67] Question: Yield benefits from development structure - Management indicated that the spread between stabilized post-promote development yields and purchases is in the 100 to 150 basis point range, providing a good opportunity for value capture [68] Question: Update on office portfolio and 1701 Market Street - Management expects to launch a full marketing effort for 1701 Market Street in early 2022, aiming for a successful outcome as the market improves [82]