LXP(US:LXP)2021-08-05 18:52Financial Data and Key Metrics Changes - In Q2 2021, the company generated adjusted company FFO of approximately $52 million or $0.18 per diluted common share, with revenues of $81.5 million and property operating expenses of approximately $12 million [27][30] - The same-store portfolio was 97.4% leased at quarter-end, with overall same-store NOI increasing by 0.9%, which would have been approximately 2.1% excluding single-tenant vacancy [27] - Industrial same-store NOI increased by 1.7% and would have been 3% excluding single-tenant vacancy [27] Business Line Data and Key Metrics Changes - The company leased roughly 1.1 million square feet in the quarter, with industrial base and cash base rents increasing approximately 13% and 7% respectively on four lease extensions [9][10] - Leasing activity in July was strong, with over 2 million square feet leased [10] - The company sold three properties for approximately $125 million during the quarter, with total consolidated sales volume at $183 million at GAAP and cash cap rates of 7.3% and 7.9% respectively [14] Market Data and Key Metrics Changes - The company’s industrial portfolio now represents 94% of gross real estate assets, excluding held-for-sale assets [16] - The acquisition pipeline is substantial, with a dollar value in the $1 billion area, and most opportunities are in the 3.5% to 4.5% cap rate range [34] Company Strategy and Development Direction - The company is focused on development projects and the purchase of vacancy to capture attractive stabilized yields in target markets [15] - The company is transitioning its portfolio to modern high-quality Class-A warehouse distribution products [16] - Development projects in progress are expected to require funding of approximately $271 million, with strong leasing prospects [15][24] Management's Comments on Operating Environment and Future Outlook - Management expressed a cautious posture in the acquisition market due to low cap rates but remains optimistic about total return math [34] - The company views 2022 as a potential earnings trough, with conservative expectations until visibility around development lease-up outcomes improves [44] Other Important Information - The company expects G&A for 2021 to be within a range of $32 million to $34 million [27] - The balance sheet remains strong with leverage at 4.9 times net debt to adjusted EBITDA at quarter-end [30] Q&A Session Summary Question: Acquisition pipeline details and yield updates - The acquisition pipeline is substantial, with a dollar value in the $1 billion area, and most opportunities are in the 3.5% to 4.5% cap rate range [34] Question: Underwriting exit yields and lease-up expectations - The company focuses on long-term rental bases and does IRR analysis, with current underwriting exit yields being more conservative than in the past [36][37] Question: Clarification on lease termination income payment - The lease termination income payment of $2.6 million was received in Q1 and will be recognized over the year [38] Question: Expectations for leasing commission spend - The company still expects leasing commission spend to fall within the $15 million to $25 million range for the year, depending on project timing [78] Question: Update on cap rates for remaining office properties - The midpoint from a cap rate standpoint for remaining office properties is around 9%, which is less than the previously discussed 11% area [64] Question: Legacy portfolio categorization - Approximately 25% to 30% of the industrial portfolio is categorized as legacy assets, primarily cold storage and light manufacturing [89] Question: Plans for deploying forward equity - The company plans to fund development projects with forward equity, with the first tranche of approximately 3.6 million shares coming due in August [92][95]