LXP(US:LXP)2023-10-31 14:48Financial Data and Key Metrics Changes - Third quarter revenue was approximately $85 million, with property operating expenses of $15 million, primarily tenant reimbursement [6] - Adjusted company FFO for the quarter was $0.18 per diluted common share, totaling approximately $52 million [6] - Net debt to adjusted EBITDA at quarter end was 6.2 times, down from 7.1 times in the third quarter of 2022 [54] Business Line Data and Key Metrics Changes - The company leased 5.8 million square feet through the end of October, with a total of 1.9 million square feet leased in spec development at an average stabilized cash yield of 7.5% [56] - Same-store industrial NOI growth was 5% in the third quarter, with year-to-date same-store NOI growth at 4.5% [57][107] - Average annual escalations for industrial leases signed in 2023 were 3.5% [57] Market Data and Key Metrics Changes - Rents in target markets grew approximately 15% in the third quarter compared to the same period in 2022 [77] - The stabilized industrial portfolio was 99.2% leased at quarter end, slightly down due to a move-out in Houston [63] - The company anticipates cash-based rental increases of 20% to 30% from 3.7 million square feet of lease expirations in 2024 [63] Company Strategy and Development Direction - The company is focusing on build-to-suit opportunities, leveraging its strong developer relationships and land bank [61][118] - The company plans to utilize proceeds from office sales to reduce leverage and capitalize on new investment opportunities [55] - The company is reviewing refinancing options for upcoming debt maturities, anticipating increased interest expenses [108] Management's Comments on Operating Environment and Future Outlook - Management noted a moderate softening in tenant leasing demand across U.S. logistics markets, with decisions taking longer due to oversupply in certain areas [62] - The company remains optimistic about its leasing pipeline, with strong activity in smaller spaces despite challenges in the big box sector [102] - Management expects to continue executing strategic initiatives and is well-positioned for future growth [38] Other Important Information - The Board of Trustees authorized an annualized dividend increase of $0.02 per share, representing a 4% increase over the prior dividend [58] - The company completed the forward purchase of a newly constructed facility in Dallas for $15 million, with strong leasing interest [3] - The company has nearly completed its office sales, with remaining assets in Fort Mill, South Carolina, currently being marketed for sale [70] Q&A Session Summary Question: What is the outlook for leasing demand in the big box space? - Management acknowledged a slowdown in demand for larger box spaces but noted ongoing activity in their portfolio [10] Question: Can you provide an update on the leasing pipeline and tenant demand? - Management indicated that while there is activity, it is difficult to predict exact timelines for leasing due to varying tenant interest [15] Question: What are the expectations for rental increases on upcoming lease expirations? - Management expects strong mark-to-market renewals and cash-based rental increases of 20% to 30% based on current negotiations [63] Question: How is the company addressing the oversupply in the big box sector? - Management believes the oversupply will dissipate over time as fewer new starts put pressure on supply [103] Question: What is the company's strategy regarding build-to-suit opportunities? - Management is actively pursuing build-to-suit projects and sees increased activity in this area [118]