LXP Industrial Trust Q2 FY2025 earnings call

• Strong second quarter results including lease-up of 1.1 million square foot development facility in Greenville-Spartanburg, same-store NOI growth of 4.7%, and net debt to adjusted EBITDA of 5.8x at quarter end.
• U.S. net absorption in second quarter was ~30 million square feet, with 20 million square feet in 12 target markets; 5 of their markets had net absorption exceeding 2 million square feet.
• Year-to-date, leased ~2.4 million square feet with second-generation base and cash-based rent spreads of ~41% and 46% respectively; leased 1.1 million square foot development facility in Greenville-Spartanburg to a global logistics company subsidiary.
• Sold property in Chillicothe, Ohio to a user buyer for ~$40 million at 4.3% cash capitalization rate; repurchased ~$28 million of floating rate trust preferred securities at 5% discount to par.
• ~600,000 square feet of redevelopment projects underway, including 350,000 square foot redevelopment in Orlando and 250,000 square foot redevelopment in Richmond, both anticipated to complete in first quarter 2026 with yields on cost in low teens.

No specific product segment breakdown provided. Instead, highlighted portfolio performance: strong second quarter results with lease-up of 1.1 million square foot development facility in Greenville-Spartanburg, same-store NOI growth of 4.7%, net debt to adjusted EBITDA of 5.8x at quarter end. U.S. net absorption in second quarter was approximately 30 million square feet, with 20 million square feet in 12 target markets. Portfolio is 92% Class A facilities with an average age of just over 9 years. Year-to-date, leased approximately 2.4 million square feet with second-generation base and cash-based rent spreads of approximately 41% and 46% respectively.

• Adjusted company FFO guidance tightened to new range of $0.62 to $0.64 for 2025, with low end increased due to lease-up of Greenville-Spartanburg facility and high end revised to include ~$2 million of GAAP rent contribution from prospective leasing activity for second half of 2025.
• Same-store NOI growth guidance for full year 2025 remains unchanged at 3% to 4%, assuming year-end same-store occupancy of approximately 97% to 99%.

• Macro-economic uncertainty affecting the industrial real estate environment.
• Potential volatility in investment sales market post-Liberation Day.
• Tenant retention challenges with 2025 expirations representing just 1.2% of ABR with rents ~30% to 35% below market, and forecasting lower tenant retention for 2025.

Q: Can you talk about what drove the low cap rate on the sale of the property in Chillicothe, Ohio?

A: The situation involved finding a user that wanted to own that building, resulting in a better execution than selling into the investor marketplace.

Q: Can you give us a sense as to maybe order of magnitude that you have in the market to sell in the near term and broader comments on depth of market for your assets?

A: We would test the market with about $100 million of dispositions going forward; investment sales market has held up well after Liberation Day, and we'll be creating liquidity from our asset base outside of 12 target markets.

Q: What traffic has been like for leasing up some of the larger empty boxes?

A: Indy has picked up since fourth quarter of last year with big box activity, including signed deals and ongoing RFPs; Central Florida has had renewed interest recently with some smaller deals in the works.

Q: Can you provide an update on expirations including the 380,000 square footer in Indianapolis?

A: The 380,000 square footer in Indy is a no move-out with hopeful backfilling; the 2 small 80,000 square footers in Savannah and Indy are move-outs with activity in the market; the 160,000 square footer in Phoenix has potential retention with strong mark-to-market.

Q: Any sense how tenant retention may look like in 2026?

A: Most lease expirations in 2026 are back end of the year; started dialogue with 25% of tenants, with positive renewal prospects but some tenants contemplating supply chain and size fit; overall strong retention expected with some potential move-outs.

Q: Are there opportunities within the land bank for build-to-suit?

A: Continued response to build-to-suit interest at Phoenix and Columbus sites; Columbus site has more potential interest with tight market area; decision-making on build-to-suit is protracted with competition from existing spec product and RFP process deferrals.

Q: Could cold storage or office JV properties be candidates for sale?

A: For modeling purposes, those portfolios are pretty static with one potential office JV sale candidate; focus on reaching 5x net debt-to-EBITDA leverage point.

Q: Clarification on $2 million included in '25 guide from future leasing activity?

A: $2 million relates to total opportunity set of 2 big boxes and another development with 2 buildings in Central Florida, with $15 million annual run rate potential when leased, not including other second-generation vacancies.

Q: Curious about move-outs in the back part of the year and relation to macro and legislation issues?

A: 380,000 sq ft in Indy moved due to tax abatement at competitive building; other 2 moved into new space for consolidation, related to operating expense and size requirements.

Q: Any update on Phoenix and leasing opportunity there?

A: Continuing to see interest there but no further specific updates beyond initial comments.

Q: Refresh on redevelopment dollar volume and additional opportunities?

A: Orlando redevelopment budget $9.4 million, Richmond $3.7 million, both completing first quarter 2026 with low teens yields on cost; additional redevelopment opportunity in portfolio but not quantified today.

Q: Concern about competing landlords dropping rents in Indy and Florida?

A: Some landlords may drop rents due to building issues or undesirable locations; softness in market likely in free rent and tenant improvements, with rents holding for middle assets.