Good morning. My name is Dennis, and I will be your conference operator today. At this time, I would like to welcome everyone to the LXP Industrial Trust First Quarter 2024 Earnings Call and Webcast. Please follow the operator's instructions. I would now like to turn the conference over to Heather Gentry, Investor Relations. Please go ahead.

Thank you, operator. Welcome to LXP Industrial Trust's first quarter 2024 earnings conference call and webcast. The earnings release was distributed this morning, and both the release and quarterly supplemental are available on our website in the Investors section and will be furnished to the SEC on a Form 8-K. Certain statements made during this conference call regarding future events and expected results may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. LXP believes that these statements are based on reasonable assumptions. However, certain factors and risks, including those included in today's earnings press release and those described in reports that LXP files with the SEC from time to time could cause LXP's actual results to differ materially from those expressed or implied by such statements. Except as required by law, LXP does not undertake a duty to update any forward-looking statements. In the earnings press release and quarterly supplemental disclosure package, LXP has reconciled all non-GAAP financial measures to the most directly comparable GAAP measure. Any references in these documents to adjusted company FFO refer to adjusted company funds from operations available to all equity holders and unitholders on a fully diluted basis. Operating performance measures of an individual investment are not intended to be viewed as presenting a numerical measure of LXP's historical or future financial performance, financial position or cash flows. On today's call, Will Eglin, Chairman and CEO; Beth Boulerice, CFO; Brendan Mullinix, CIO; and Executive Vice President, James Dudley, will provide a recent business update and commentary on first quarter results. I will now turn the call over to Will.

Thanks, Heather, and good morning, everyone. First quarter results were consistent with our expectations, and we continue to focus our efforts on development leasing, marking rents to market and capitalizing on build-to-suit investment opportunities, while we manage towards lower leverage. After a slow start to the year, we leased approximately 1.6 million square feet after quarter end, and we anticipate continued strong second quarter volume with active lease renewal negotiations in process on approximately 1.4 million square feet. In addition, we are responding to RFPs or further negotiation on approximately 1.3 million square feet in our development pipeline. This activity is promising, although there is no guarantee that any leases will be executed. Renewals continue to take longer to negotiate, partly due to the continued uncertainty in the macroeconomic environment and the disconnect between market rents versus tenants' perspectives on their bargaining power. Overall, we believe that we are in a position of negotiating strength due to our high-quality Class A properties that feature modern specs, including high clear height, ample dock doors, auto and trailer parking spots, and easy access to highways, airports and ports, all of which make our assets among the most desirable in our target markets. As a result of second quarter leasing, we now expect our 2024 same-store NOI will be in the range of 4% to 5%, an increase from our previous range of 3.5% to 4.5%. On another positive note, our average annual escalators increased to 2.7% in the quarter, up from 2.6%. In addition to these contractual escalators, future earnings growth is supported by our estimates of below-market rents through 2029 in our portfolio and the stabilization of our remaining spec development pipeline. Based on our current estimates of below-market rents, as of quarter end, these mark-to-market outcomes are estimated to increase initial cash rent by $36 million or $0.12 per share through 2029, while stabilization of the development pipeline is estimated to produce initial cash rent of $20 million or $0.07 per share as the developments lease up. On the investment side, during the quarter, we committed to an approximately 625,000-square-foot build-to-suit project in Greenville/Spartanburg. This investment provides us the opportunity to recycle capital into newly constructed assets in one of our target markets on accretive terms. The build-to-suit market is our main area of focus, and we will continue to pursue and act on growth opportunities that fit our investment criteria. Moving to the balance sheet, we have good liquidity and have effectively extended our maturities out to 2027. We ended the quarter at 6.1x net debt to adjusted EBITDA, and we are focused on moving towards the low end of our target leverage range of 5x to 6x, which will be driven by occupancy gains in our development pipeline and rent growth. With that, I'll turn the call over to Brendan to discuss investment activity in more detail.

Thanks, Will. We invested approximately $25 million in the first quarter in development, with approximately $35 million left to fund in our remaining spec development projects, excluding any partner promotes, and $65 million in a build-to-suit project. We placed our approximately 488,000-square-foot previously leased Phoenix facility into service during the quarter. The facility was leased for 7 years with 4% average annual escalations at a starting rent of $9.60 per square foot and an estimated stabilized cash yield of 8.3%, excluding partner promote. We also completed the base building construction of our 250,000-square-foot Columbus development project in January. We are currently in negotiations on approximately 60,000 square feet at the facility and responding to tenant interest for the balance of the building. On the investment side, with build-to-suit projects as our primary focus, we are reviewing a number of projects in our target markets, including inquiries involving our Phoenix land bank. As Will mentioned, we've committed to a build-to-suit project for an international auto parts manufacturer during the quarter on 59 acres in the Greenville/Spartanburg market for an initial purchase price of approximately $74 million, with an estimated cash capitalization rate of 7.04%. The approximately 625,000-square-foot cross-dock warehouse distribution facility will be built to modern specifications, including a 40-foot clear height. The facility can also be expanded by 174,000 square feet. We expect the project to complete late in the fourth quarter or first quarter of 2025. The initial lease term of 12 years with 3% annual escalators will commence upon project completion. We expect capital needs for the project and any future build-to-suit projects to be funded with capital recycling proceeds, including our share of the $87 million of potential proceeds we are estimated to receive in the event the data center user that previously leased the 100-acre Phoenix land parcel exercises their option to purchase the land in the fourth quarter. With that, I'll turn the call over to James to discuss leasing.

Thanks, Brendan. Leasing volume was slow in the first quarter, given the market dynamics currently taking place across the country. Nationally, the average vacancy rate was up quarter-over-quarter with net absorption significantly down. Rents in our target markets continue to be higher than they were a year ago, but flat quarter-over-quarter. That said, the continuing decrease in new spec construction starts should help with the supply-demand imbalance over time. We are also encouraged by the commentary across our markets that activity is improving as inquiries and tours pick up. In the first quarter, we finalized a 3-year extension with 4% annual rental bumps for approximately 120,000 square feet at our 396,000-square-foot facility in the Atlanta market with a cash rental increase of approximately 28%. The remainder of the facility is currently leased through 2031. We had two notable leasing outcomes in the Memphis market after the quarter end. This included a 5-year extension with 3% annual bumps at an approximately 928,000-square-foot facility with a cash rental increase of approximately 30%. Additionally, we executed a 5-year renewal with 3.5% bumps at our 700,000-square-foot facility for an estimated cash rental increase of approximately 25%. A portion of our remaining 2024 expirations and several of our 2025 lease expirations are included in the additional 1.4 million square feet currently in negotiations. We still expect our remaining 2024 expirations to produce a 20% to 30% cash rental increase based on our current market conditions. Our industrial stabilized portfolio was 95.5% leased at quarter end. The change versus the previous quarter is primarily attributable to approximately 2.1 million square feet of non-leased industrial development entering the stabilized portfolio pool. With that, I'll turn the call over to Beth to discuss financial results.

Thanks, James. First quarter revenue was $86 million, with property operating expenses of about $15 million, of which 93% was attributable to tenant reimbursement. We produced adjusted company FFO of $0.16 per diluted common share or approximately $49 million in the first quarter. General and administrative expenses were $9.5 million in the first quarter. We have been focused on operating efficiencies, including shrinking our footprint in New York as we transition overhead costs to our Florida and Dallas offices. During the quarter, we subleased our approximately 20,000-square-foot Penn One office space through March 2026. We expect rent expense to decline initially by approximately $600,000 annually, and by roughly $1 million annually after March 2026. We now anticipate 2024 G&A will be within a range of $36.5 million to $38.5 million. Our same-store industrial portfolio was 99.2% leased at quarter end, and same-store industrial NOI increased 6.5% in the first quarter when compared to the same period in 2023. Approximately 98% of our industrial portfolio leases had escalations with an average annual rate of 2.7%. At quarter end, net debt to adjusted EBITDA was 6.1x, and our $600 million unsecured revolving credit facility was fully available. We're happy to report that Moody's removed their negative outlook from our credit rating, changing our outlook back to stable and reaffirming our Baa2 rating. Our consolidated debt outstanding was approximately $1.8 billion at quarter end with a weighted average interest rate of 3.87%, and a weighted average term to maturity of 5.5 years. Finally, our fixed rate debt percentage was approximately 93% at quarter end. With that, I'll turn the call back over to the operator, who will conduct the question-and-answer portion of this call.

Your first question is from Todd Thomas with KeyBanc.

This is AJ on for Todd. First off, maybe for James. So you placed the Florida and Indy leased 1 million footers into service during the quarter. I just wanted to see if you could provide a bit of color around the interest specifically regarding those buildings and what you're seeing on the ground regarding leasing?

Sure. So specific to those buildings, we've got some good activity in Florida right now. We'll see if it ultimately results in a deal, but we're hopeful that we're going to have something there soon, but you never know until you get something done. On Indy, we've had a couple of really close calls, and it's been really frustrating. There are a couple of tenants that have shown up in the market, one recently that decided to consolidate into Louisville instead of executing Indy. But there's been activity just unfortunately, nothing really of size has landed yet. And then I guess I would just note the commentary I put around leasing in general; we continue to renew tenants at a high cost. We continue to push rents on renewals. I think the slowness in the market on those renewals is really around the commentary about educating the tenants. Rent has really gone up, and everyone is hearing that there is all this new supply. But if the supply isn't in your particular submarket, then you still have a fairly happy mark-to-market that needs to happen, and it's just taking longer to convince the tenants that that's a reality and that they will have to pay higher rent. On the spec side, where we do have some exposure to some of the markets with a lot more supply right now, things are slow. I do think that we and other landlords are going to have to get a little more aggressive as the deals come along just because there aren't a lot of them in the hopper.

Okay. That's helpful. And then I guess a little bit more to that last point. So guidance last quarter that you guys had provided assumed, at the low end, that there was no lease-up while the high end assumed that there was some lease upcoming online in the fourth quarter. You maintained guidance, but you took up the same-store NOI growth forecast. So how should we be thinking about the development assumptions? Should they remain the same or could you just provide a little bit more color on those?

Yes. I think the development assumptions should remain the same. The same-store is mostly driven by just some uncertainty around the renewals that we executed post-quarter. There were a couple of really big ones that we weren't 100% sure that we were going to get renewed and we haven't renewed. It allows us to tighten up the guidance.

Your next question comes from the line of Jon Petersen with Jefferies LLC.

Great. Well, maybe I misunderstood, I just wanted to follow up on that. So you increased the same-store guidance overall. I guess why doesn't it flow through to an FFO increase? Is there an offset there, maybe higher interest expense with where rates are at?

Exactly, exactly, John. It's interest expense, and it's also the development deals that have been placed into service that have come online, they're not in the same-store pool yet.

Got it. Can you talk about the tenant types that you're seeing interest in some of the development lease-up and maybe even just more broadly in the portfolio? Is the type of tenants that are out in the market right now different than what you expected when these developments were started a year or so ago?

I don't know if it's different than what we expected. Certainly, there's a big e-commerce tenant that pops up in different markets and then there are some 3PLs that kind of follow along with them. I mean, Phoenix is a good example where that tenant took down some space and the 3PL is probably going to take out another big piece of space, continue to see food and beverage construction. So it's still pretty broad, also just major retailers. It continues to be a broad look. It's really about getting these deals across the finish line in some of these markets and hopefully creating some momentum.

Got it. And just curious on the leverage, maybe best, what will that pro forma leverage move to once these developments are leased up? And then where does that put you relative to your long-term targets?

Yes. Once they get leased up, we're projecting we'll be down into the mid-5 range. And it's right in the middle of our range of 5x to 6x where we're comfortable.

Got it. One other question for me. I noticed on the press release that the location of the company is now West Palm Beach, Florida. Is there any relocation costs that are going into G&A or anything we should think about from that?

No. In fact, there's going to be some savings with us subleasing our New York office space.

Your next question is from the line of Vince Tibone with Green Street. Please go ahead.

Could you discuss your current yield expectations for the five unlet speculative projects? And how those have changed, if at all, since the beginning of the year?

Yes. With regard to those unleased development assets in the pipeline, we're not changing our guidance from the 6% to 6.5% after promote that we've guided to previously. While the recent lease outcomes have exceeded that in Columbus and in Phoenix, there's a little less visibility at the moment for a couple of the larger to-be-stabilized buildings. So we're going to keep that 6% to 6.5%.

Okay. Great. And then kind of a follow-up related to that. How are owners of competitive spec projects in the markets where you're developing behaving? Are you starting to see others reduce space rent or offer elevated concessions to try to lease up faster? Or can you just touch on some of the kind of competitive dynamics or even how many buildings you think you're competing with in certain markets would be interesting?

It varies from owner to owner. Yes, we certainly have seen some other owners get a bit more aggressive, specifically in Indy. As I mentioned before, with the tenants that were there, there was a process that was run that went from basically 13 options down to six before the tenant decided to go to Louisville. But yes, we saw some aggressive rents there. I would say more so, it's concessions right now. You're definitely seeing more free rent being offered. You're seeing higher TIs being offered. So yes, there is some compression on the rent. I would say that it's more concessions. And I think we're going to continue to see that because as this goes on longer and buildings sit vacant, people are going to want to become more aggressive to try to get their buildings leased.

No, that makes sense. I guess just last one is how do you guys respond in that environment? Do you think there's advantage to cutting rent as well? I mean, you mentioned your yield expectations are unchanged. Like how do you guys plan to approach this environment where others may be trying to just cut rents to get tenants on a net effective basis? How do you plan to respond or handle that situation?

We play to an extent, but we also feel that in all three of our large building markets, we have the best asset. We have some physical attributes in Indy that we think are superior to our competition. With a private driving truck court, we're the only ones that have all concrete truck courts because we're a long-term owner with our development partners. We do things a little differently than some of our competition. We do think that we have some advantages in that regard in Greenville. We've got the best location in what we believe to be the only Class A park and similarly in Ocala. So we don't feel we have to go as low as some of our competition because we have some attributes that prospective tenants want. But yes, if we want to play, we are going to have to get aggressive relative to what's going on in the market.

Your next question is from the line of Camille Bonnel with Bank of America.

Every week, something new on the geopolitical front pops up, adding to supply chain disruptions. So can you speak to what tenants are saying in terms of how they're thinking about dealing with this and managing inventory levels facing these risks?

I think there has been a change. Well, one, I think the supply chain is still resilient. You're right, there have been some disruptions that have slowed things and certainly caused tenants to take pause and think about their supply chain. But what we're hearing from tenants is that they're moving forward with taking down additional space, trying to get closer to the consumer, maybe moving away from the safety stock that we heard about through COVID. But that's really what the commentary is, continuing to move forward with shoring up the supply chain by getting closer to consumers.

Okay. And Amazon has been getting more active in the market. That's been pretty interesting. Have you had any recent conversations with them and have a sense of the type of space requirements they're looking at, whether that be size or type of distribution strategy that they're focusing on?

It ties into what I just said about the broader market. They seem to be pursuing more regional distribution centers to shore up their proximity to consumers, so they can do more of the same-day type delivery. But yes, they've been in the market with a couple of different requirements, some smaller and others of the larger variety.

That's helpful. And just finally, data centers are still quite a hot topic. Outside of Phoenix, do you see any other opportunities in your land bank?

This is Brendan. The best potential opportunity would be in Phoenix in terms of our holdings; I would note that of our target and core markets, Columbus is another market that's been very active for data centers as well.

And at this time, there are no further questions. I will now turn the call back over to Mr. Will Eglin for closing remarks.

Well, thanks to all of you for joining our call this morning. Please visit our website or contact Heather Gentry if you'd like to receive our quarterly materials. And in addition, as always, you may contact me or the other members of our senior management team with any questions. Thanks again, and have a great day.

This concludes the LXP Industrial Trust first quarter 2024 earnings call and webcast. Thank you for joining. You may now disconnect.