Good morning and welcome to LXP Industrial Trust Third Quarter 2024 Earnings Call and Webcast. All participants are in a listen-only mode. After the speaker's presentation, we will conduct a question-and-answer session. As a reminder, this conference call is being recorded. I would now like to turn the call over to Heather Gentry, Investor Relations. Please go ahead.

Thank you, operator. Welcome to LXP Industrial Trust's third 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 third quarter results. I will now turn the call over to Will.

Thanks, Heather, and good morning, everyone. We had a great third quarter, characterized by strong leasing outcomes and same-store NOI growth of 5.4%. Second-generation leasing volume in the quarter of approximately 490,000 square feet resulted in attractive Base and Cash Base rental increases of approximately 38% and 22%, respectively, and we made progress on leasing our development portfolio with the lease-up of our 250,000 square foot development project in Columbus, Ohio. We continue to work closely with a full building user at our 1.1 million square foot Ocala, Florida development project and have interesting activity at our two remaining big-box facilities with the most promising prospects at our Greenville/Spartanburg facility. Our target market focus on the Sun Belt and Lower Midwest has contributed to our second-generation leasing success this year, as these markets have performed well relative to many others. We continue to favor markets that are supported by strong long-term demographic trends, including population and job growth, logistics infrastructure, and government spending programs designed to support advanced manufacturing initiatives. With the transaction market becoming more active, we have opportunistically sold several assets outside of our target markets for reinvestment into the Sun Belt markets where we have scale, market expertise, and strong tenant and service provider relationships. During the quarter, we sold an asset in the Cleveland market for $29 million and, subsequent to quarter-end, we sold three industrial facilities in Chicago which produced gross sales proceeds of $137 million. Further adding to our Sun Belt exposure, we acquired a $34 million industrial facility in Savannah in October and are in due diligence on three additional assets for purchase in Houston and Atlanta. In addition, we expect to receive approximately $83 million of sale proceeds, now that the tenant under our Phoenix ground lease has exercised their purchase option, which we plan to utilize for reinvestment and debt reduction. Moving to the balance sheet, during the third quarter, we capitalized on a favorable market window for short-term interest rates, swapping the interest rate on $250 million of our $300 million term loan and approximately $83 million of our trust preferred. These actions increased the percentage of our debt that is fixed or swapped to approximately 94% for 2025 and 2026 at a weighted average interest rate of 3.9%. We estimate the swaps were executed approximately 60 basis points below current levels. Consistent with our goal of increasing our dividend annually, we announced this morning that our Board of Trustees authorized an annualized dividend increase of $0.02 per common share. The newly declared common share dividend represents an increase of 3.8% over the prior dividend and will be paid in the first quarter of 2025. As we look ahead, our focus remains on enhancing our internal growth profile through the lease-up of 4 million square feet available for lease and capturing the mark-to-market opportunities in our portfolio with current rents that are estimated to be approximately 23% below market through 2029. Finally, we published our 2023 corporate responsibility report in October. The report emphasizes our continued focus on the resiliency of our portfolio and the enhancement of efficiencies and sustainability in our operations. This included the completion of our first solar project, the completion of a greenhouse gas emissions inventory, and further green building certifications across our portfolio. With that, I'll turn the call over to Brendan to discuss investment activity in more detail.

Thanks, Will. During the quarter, we continued to make progress on leasing our development portfolio with the lease-up of our 250,000 square foot facility in the Columbus market. The full building was leased to a logistics provider servicing the data center space for five years with 3.5% annual escalations, with the lease commencing on August 15. We estimate the stabilized cash yield to be 8.5%. This is a great outcome given the recent completion of the project in the first quarter of 2024. The investment activity during the quarter included a value-add opportunity within our portfolio at a 205,000 square foot industrial facility that we own in Portlando that was encumbered by a below-market building lease and a ground lease. We acquired the fee interest in 11.6 acres of land under the facility, along with a 146,000 square foot tenant constructed expansion on approximately 5.9 acres, for $7.6 million. Following the transaction, we now own the fee interest in the entire 351,000 square foot expanded warehouse, subject to a short-term lease to the tenant that expires in May, providing us with the flexibility to pursue a repositioning of the property. On the sales side, we sold our 458,000 square foot industrial facility in the Cleveland market for approximately $29 million during the quarter and the 2.2 million square foot 3-property portfolio in the Chicago market that we'll reference earlier for $137 million subsequent to quarter-end. These assets were sold in part due to a lack of scale and demographic and other considerations relating to these markets. The average cap rate on these sales is approximately 6%. Also, following quarter-end, we closed on an asset in Savannah and we anticipate closing on the acquisition of two buildings in Atlanta and a building in Houston shortly, further expanding our presence in these target markets. Our aggregate investment in the four buildings is expected to be approximately $158 million at an average initial cash cap rate of 6% with average annual escalations of 3.6% and a weighted average lease term of 6.3 years. All of the facilities are Class A buildings with an average building size and age of approximately 294,000 square feet and 2 years, respectively. We are still very interested in build-to-suit opportunities with our best prospects remaining on our current land bank in Phoenix and acquisitions that are additive in the context of opportunistic capital recycling to add to our holdings in our target markets in the Sun Belt and Lower Midwest. Finally, the tenant that leases approximately 100 acres of our Phoenix land parcel has exercised their purchase option. We expect this transaction to close before year-end and our share of the sale proceeds will be approximately $83 million or $60 million more than our original cost in just under a three-year hold period. With that, I'll turn the call over to James to discuss leasing.

Thanks, Brendan. The national industrial market continues to see vacancy rise with Cushman & Wakefield reporting a third quarter national vacancy rate of 6.4%, up from 6.1% in the second quarter. Once the remaining development pipeline delivers, there is very little left behind it, which we believe indicates the market is approaching the top end in terms of vacancy rate. Rent growth across our markets is currently in the low single digits. We continue to have significant embedded mark-to-market opportunities within the portfolio and have been able to successfully push rates on tenant renewals and second-generation leasing. U.S. net absorption for the third quarter was 29.4 million square feet, down from over 46.3 million square feet in the second quarter. Downward pressure on the absorption number came predominantly from significant negative absorption from the California and Northeastern U.S. markets. In contrast, our Top 10 markets reported a little over 25 million square feet of positive absorption in the third quarter, down slightly from 32 million square feet of net absorption in the second quarter, demonstrating the relative strength of our markets compared to the broader market. While deals remain slow-moving, tenant activity in our markets continues to increase, with tours and RFP traffic up significantly from the back end of 2023 and the first quarter of 2024. We've continued to produce strong second-generation leasing outcomes, further highlighting the quality of our assets as tenants use the softness of the market to look for newer Class A facilities with modern specifications consistent with our portfolio attributes. During the quarter, we addressed two 2024 lease expirations. This included a 10-year renewal at 3.25% rental bumps at our 325,000 square foot property in the Baltimore, D.C. market and a three-year lease renewal with 3.5% rental bumps at our 96,000 square foot facility in Indianapolis. Cash flow increases of approximately 15% and 35%, respectively, were achieved in these transactions. To date, we've marked 2024 expirations of approximately 28%, excluding fixed-rate renewals, bringing tenant retention to approximately 94%. We expect to produce cash flow increases of approximately 40% on the remaining 208,000 square feet in 2024. Additionally, during the third quarter, we replaced one of the tenants for 67,000 square feet in our 675,000 square foot multi-tenanted facility in the Nashville market. The new tenant signed a five-year lease with 3.5% annual rental bumps, which resulted in a 43% rental increase over the prior rent and a 50 basis point increase on the annual bumps. We extended the lease term for 2029, which was originally a 2026 expiration. The facility was 93% leased at quarter-end and 99.3% leased, excluding first-generation vacancy. With that, I'll turn the call over to Beth to discuss financial results.

Thanks, James. Total gross revenues in the third quarter were approximately $86 million, with property operating expenses of about $15 million, of which 1% was attributable to tenant reimbursement. Third quarter adjusted company FFO was $0.16 per diluted common share or approximately $47 million. We announced this morning that we are tightening our 2024 adjusted company FFO to a new range of $0.63 to $0.64 per diluted common share. D&A was approximately $11 million in the third quarter. As discussed on last quarter's call, we will have one-time charges in 2024 for employee severance costs. We estimate these charges to be approximately $1.8 million, of which we recognized roughly $1.5 million in the third quarter. We anticipate that these personnel reductions will result in annual cost savings of approximately $1.2 million moving forward. Our 2024 G&A is still expected to be within a range of $39 million to $41 million. Our same-store portfolio was 99.2% leased at quarter-end and same-store NOI increased 5.4% in the third quarter when compared to the same period in 2023. At quarter-end, approximately 98.5% of our portfolio leases had escalations with an average annual rate of 2.7%. We are tightening our 2024 same-store NOI growth expectations to now be within a range of 4.75% to 5.25%. During the quarter, we entered into forward interest rate swap agreements. As a reminder, our current interest rate swap agreements on our $300 million term loan expire at the end of January 2025. These new forward interest rate swaps are effective January 31, 2025, and fix the average interest rate at 4.31% on $250 million for two years, leaving $50 million of the $300 million term loan available for deleveraging. Additionally, we swapped $82.5 million of our $129.1 million trust preferred securities to fix the average interest rate at 5.2% from October 30, 2024, to October 30, 2027. The combination of these transactions increased our fixed-rate debt percentage for 2025 and 2026 from about 73% to approximately 94%, as well as reducing our future projected interest expense. On last quarter's call, we estimated that the additional interest expense on the term loan would impact 2025 adjusted company FFO by approximately $0.02 per share. The swap transactions during the quarter have mitigated this impact and we now expect the increase in aggregate interest expense for the term loan and trust preferred securities to be approximately $0.01 per share based on the latest SOFR curve. We ended the quarter with net debt to adjusted EBITDA of 6.1x. Our focus remains on progressing to the low end of our target leverage range of 5x to 6x and we expect we can reach this target over time through a combination of leasing vacancy and increasing rents. At quarter-end, our total consolidated debt outstanding was approximately $1.6 billion with a weighted average interest rate of 3.8% and a weighted average term to maturity of 5.7 years. There was approximately $55 million of cash on the balance sheet at quarter-end and our $600 million unsecured revolving credit facility was fully available. With that, I'll turn the call back over to the operator, who will conduct the question-and-answer portion of this call.

Our first question comes from Todd Thomas from KeyBanc.

This is A.J. on for Todd. First off, just going back to Will's opening comments. Would you just be able to provide a little bit more information regarding the Ocala full building user that you're in talks with? Are you still marketing that building elsewhere? And then any additional comments specifically around Greenville/Spartanburg and the Indie properties, perhaps quantifying the interest levels? And any updates around timing would be helpful.

Sure. No, we're still working with a tenant in Ocala and it's not unusual in this market for large leases to take a long time. So we are making progress. We feel like we're closer on that transaction than we were when we reported last time. The building is available for lease, but we're continuing to work with the same tenant there. And I think in Greenville, compared to when we reported last time, we're closer to having that building leased. It's hard to say exactly what the timing would be. And in Indie, which was quite slow a few months ago, there's more activity now. So I think we're cautiously optimistic in each instance that we're making progress.

Okay. That's helpful. And then real quick, just around the purchase option for the Phoenix land. If I'm not mistaken, that was for the 100-acre deal you did about 2 years ago with the data center operator. I think it was $5.2 million with 4% escalators. So I think that equates to about a 6.5% cap. Is that correct? And then any update on the remaining 320 acres?

It's about a 6 cap cash cap rate on the in-place rent on that ground lease. And then in terms of the balance of the site, as I said in my prepared remarks, we've been focused on build-to-suit inquiries at the site and we've looked at a number of them. Unfortunately, build-to-suit is a little bit like other tenant decisions these days and it's just taking a little bit longer, but there's been some good activity there.

Okay. I appreciate that. And then lastly, just real quick, the subsequent to quarter-end dispositions, what were the cap rates on those?

The four assets that were sold, the selling cap rate was 6%.

Our next question comes from Jon Peterson from Jefferies.

So if we look at the lease expiration schedule in '25 and '26, can you give us any maybe guidepost to think about in terms of leasing spread expectations on renewals and if there's any move-outs that we should be aware of?

Jon, this is James. So looking at 2025, we have two known move-outs. We've got a tenant in the first quarter who will be moving out and then we had a tenant in the Richmond market that leases 1 million square feet from us that contracted. So they had a contractual option to contract one of the buildings and that will take effect July 1. So those are the two known move-outs. Now that we've gotten through the Mars lease, the remaining 2025 lease expirations are projected to be about 34% below market. Looking to 2026, we have a pretty sizable role there of about 7 million square feet, 24 leases. Our projection there is about 24% below market.

Okay. All right, that's great. And I'm sorry to do this to you, but you're the first REIT to report after the election results. So I guess, what are your thoughts? And I'm thinking specifically about the trend of onshoring of manufacturing which we've seen over the last couple of years which you guys seem pretty well positioned for. Any knee-jerk reactions on what the election results mean for that trend specifically?

I think it's a little too early to say. I would say that the history of governments undoing spending programs is not very strong, so it might be that some of those government plans are revisited and amended. It may require less regulatory scrutiny and things of that nature. But I still think that there's a focus in this country around supporting more manufacturing, and that's consistent inside both political parties.

Our next question comes from Jim Kammert from Evercore.

Given the sales here post the quarter end, could you remind us what remains kind of in that noncore bucket? I think it was always discussed as 6 to 7 assets. It looks like you've knocked out maybe 4 of them in totality. Is that what's the dollar range, what's left, please?

Yes. I think what we've said in previous calls is that in markets where we have a handful of assets with no plans to scale, from time to time, if we can get good value, we will. And those tend to be markets where we have a building in Kansas City. We've got one in Philadelphia, and a couple in St. Louis. So there's a handful of assets there that we may monetize over time, but we'll just take it as it comes rather than trying to hang a dollar value on it. It's really being driven by when we have a good alternate use of capital. So we've got a couple of assets that we expect to close shortly that will be a good fit with respect to using the capital that's coming out of that portfolio sale.

That makes sense. And then could you remind me what prevents you from retiring the trust preferred securities? Obviously, it's the most expensive sort of debt in the capital stack.

Well, one thing is that it's still a long-dated maturity with a pretty good spread associated with it, and it's extremely covenant-light, so it has value. We did take advantage of the opportunity to swap some of that and reduce the cost quite a bit. The reason we left the $47 million floating was that we've had some on-and-off discussions that might lead to us retiring that at a discount to par. So I think if we can find a way to buy it in at a discount, there's value in doing that. But otherwise, I think we'll just leave it alone for now.

Our next question comes from Mitch Germain from Citizens JMP.

Well, just a little bit more clarity on the plan. You mentioned, obviously, growing exposures in the Sun Belt. You've got about 20% of your rents outside. So is it Sun Belt, or is it market scale? How are you thinking about the way that you want to position the portfolio over time?

Well, we're redeploying the capital from these sales specifically into the Sun Belt, but we still like the lower Midwest markets that we're in and we would add to them. At the moment, we just have a better opportunity set in the Sun Belt. The portfolio is still skewed that way. We're over 70% in the Sun Belt today, and that's still going to get a disproportionate share of capital allocation.

Got you. James, any change in the sentiment toward the larger leases? Are you seeing any increasing activity? I know that you had suggested previously that those types of properties had a little bit of a slowdown in demand.

There's definitely been an increase in activity. So speaking to our markets, there have been large leases that have been signed recently in all the markets where we have big box exposure, which is good because we had a period of time, particularly in Indy, where there hasn't been anything signed. There's an expectation that several other deals right now in the Indy market are probably going to get signed, maybe in the fourth quarter, which will be good momentum. RFP traffic is up, and we have active prospects, as Will mentioned earlier, on all three properties. So cautiously optimistic, but things feel like they're moving in the right direction.

Could you please clarify the purchase price of the four assets, including Savannah and the other three planned acquisitions? I think I missed that information.

In the aggregate, it aggregates to $158 million.

And then you haven't talked about cap rate, though, have you?

In total, it's a 6 cap rate.

We have no further questions. I would like to turn the call back over to Will Eglin for closing remarks.

Thanks, operator, and thanks to all of you for joining us this morning. Please visit our website or contact Heather Gentry if you would like to receive our quarterly materials. Additionally, as always, you may contact me or the other members of senior management with any questions. Thanks again, and have a great day.

This concludes today's conference call. Thank you for your participation. You may now disconnect.