Earnings Call: LXP Industrial Trust Reports Strong Growth in Q3 2024

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Earnings Call: LXP Industrial Trust Reports Strong Growth in Q3 2024

LXP Industrial Trust (NYSE: LXP), a real estate investment trust, reported its earnings for the third quarter of 2024, showcasing solid performance and strategic growth. The company noted a 5.4% increase in same-store Net Operating Income (NOI) and significant leasing successes, including a 250,000-square-foot development in Columbus, Ohio. LXP also completed major asset sales in Cleveland and Chicago, reinvesting the proceeds into the Sun Belt region. The firm improved its balance sheet by locking in interest rates on a significant portion of its debt and announced a dividend increase. For the quarter, diluted Funds from Operations (FFO) per share was $0.16, and annual guidance was narrowed to a range of $0.63 to $0.64.

Key Highlights

LXP Industrial Trust reported a 5.4% increase in same-store NOI. The company reached 490,000 square feet in second-generation leasing with significant rental increases. A 250,000-square-foot development was leased in Columbus, Ohio, and progress was made on a 1.1 million-square-foot project in Ocala, Florida. LXP sold assets in Cleveland and Chicago for a total of $166 million and reinvested in the Sun Belt, including a $34 million facility in Savannah. The board approved a 3.8% dividend increase, and for the third quarter, diluted adjusted FFO was $0.16 per share. The company’s portfolio is 99.2% leased, and adjusted full-year FFO guidance was narrowed to between $0.63 and $0.64 per diluted share.

Outlook

LXP Industrial Trust expects same-store NOI growth to be between 4.75% and 5.25%. The company aims to reduce its net debt/adjusted EBITDA ratio to the lower end of the 5x to 6x range over time.

Negative Indicators

The company has approximately $1.6 billion in consolidated debt with a weighted average interest rate of 3.8%.

Positive Indicators

A new 5-year lease was signed for 67,000 square feet in Nashville, resulting in a 43% rent increase, with the lease term extended to 2029. More than 70% of LXP’s portfolio is now invested in Sun Belt markets, indicating a strategic focus on high-growth areas.

Shortcomings

There were no specific shortcomings noted in the earnings call summary.

Q&A Highlights

Brendan Mullinix discussed the strategy regarding preferred securities and emphasized their long-term maturities and lightly committed nature. Will Eglin highlighted the reallocation of capital from asset sales to Sun Belt markets and the evaluation of opportunities in the Lower Midwest. James Dudley noted a significant increase in leasing activity, particularly in Indianapolis, with more deals expected in the fourth quarter.

The third-quarter performance of LXP Industrial Trust reflects a company successfully navigating market conditions and strategically positioning itself for future growth. The firm’s focus on leasing, asset sales, and prudent financial management has laid the groundwork for continued success in the competitive real estate investment market.

InvestingPro Insights

The solid third-quarter performance of LXP Industrial Trust is further illuminated by significant metrics from InvestingPro. The company's market capitalization stands at $2.84 billion, reflecting its substantial presence in the industrial REIT sector.

One of the most striking InvestingPro insights is that LXP has maintained uninterrupted dividend payments for 31 years, consistent with the recently announced 3.8% dividend increase. This long-term commitment to shareholder returns is particularly appealing in the REIT sector, which income-seeking investors frequently focus on.

The company's 5.6% dividend yield is notably attractive, especially considering the current market environment. This yield, along with the company's 4.0% dividend growth over the last twelve months, underscores LXP's ability to provide stable and increasing income to its investors.

Another relevant InvestingPro insight highlights that LXP's liquid assets exceed its short-term liabilities, supporting the company's strong financial position as noted in the earnings report. This liquidity provides the company with the flexibility to pursue strategic investments and effectively manage its debt.

It is worth noting that InvestingPro has offered 8 additional insights on LXP Industrial Trust, providing investors with a more comprehensive analysis of the company's financial health and market position.