LXP Industrial Trust ((LXP)) has held its Q3 earnings call. Read on for the main highlights of the call.
Elevate Your Investing Strategy:
- Take advantage of TipRanks Premium at 50% off! Unlock powerful investing tools, advanced data, and expert analyst insights to help you invest with confidence.
The recent earnings call of LXP Industrial Trust painted a generally positive picture, highlighting significant achievements in reducing leverage and increasing occupancy through strategic sales and leasing. However, the narrowing of same-store NOI growth guidance and limited acquisition plans presented some challenges for the company.
Transformative Sale of Development Projects
The sale of two vacant development projects in Central Florida and Indianapolis for $175 million, representing a 20% premium to the gross book value, was a significant highlight of the earnings call. This strategic move reduced the company’s leverage to 5.2x net debt to adjusted EBITDA and increased portfolio occupancy by 370 basis points, showcasing a strong financial maneuver.
Strong Market Fundamentals
LXP Industrial Trust’s 12 target markets experienced robust net absorption, with Dallas, Houston, Phoenix, and Indianapolis showing 4-8 million square feet absorption each. Despite the positive demand and a decline in new completions, the portfolio’s vacancy held steady around 7%, indicating strong market fundamentals.
Dividend Increase
The Board of LXP Industrial Trust authorized an annualized dividend increase of $0.02 per share to an annualized rate of $0.56 per share, marking a 3.7% increase. This move reflects the company’s confidence in its financial health and commitment to returning value to shareholders.
Lease Renewal and Rent Increases
A notable lease renewal involved a 380,000 square foot facility in Indianapolis, which was leased to a new tenant with a 34% rent increase. Overall, average annual rent escalators increased to 2.9%, demonstrating the company’s ability to capitalize on market conditions.
Lower Same-Store NOI Growth
The company narrowed its same-store NOI growth guidance from 3-4% to 3-3.5%, reflecting slower-than-expected leasing conversions. This adjustment indicates some challenges in achieving anticipated growth in this area.
Limited Acquisition Plans
LXP Industrial Trust noted that acquisitions are currently not a focus, except for managing tax gains. This strategic decision may limit growth opportunities but aligns with the company’s current financial strategy.
Forward-Looking Guidance
The earnings call provided forward-looking guidance, highlighting the transformative sale of development projects that led to a 370 basis point increase in portfolio occupancy and a reduction in leverage. The sale is expected to generate a 6% accretion to adjusted company funds from operations per share. The company also increased its 2025 adjusted company FFO guidance to $0.63 to $0.64 per share and announced a dividend increase to an annualized rate of $0.56 per share. LXP continues to focus on its 12-market strategy with strong internal growth driven by contractual rent escalations and market rent marking opportunities.
In summary, LXP Industrial Trust’s earnings call conveyed a positive sentiment with strategic achievements in sales and leasing, although some challenges remain with narrowed growth guidance and limited acquisition plans. The company’s focus on financial flexibility and market fundamentals positions it well for future growth.