Q2 2024 LXP Industrial Trust Earnings Call
Krista: Thank you for standing by. My name is Krista, and I will be your conference operator today. At this time, I would like to welcome everyone to the LXP Industrial Trust second quarter 2024 earnings conference call and webcast. All lines have been placed on mute to prevent any background noise.
Operator: Thank you for standing by.
Christa: My name is Christa, and I will be your conference operator today.
Christa: At this time, I would like to welcome everyone to the LXP Industrial Trust second quarter 2024 earnings conference call and webcast. All lines have been placed on mute to prevent any background noise.
Krista: Thank you for standing by. My name is Krista and I will be your conference operator today.
Speaker Change: At this time, I would like to welcome everyone to the LXP Industrial Trust Second Quarter 2024 Earnings Conference Call-In Webcast.
Christa: After the speaker's remarks, there will be a question-and-answer session. If you would like to ask a question, please press star, followed by the number one on your telephone keypad. And if you would like to withdraw your question, again, press star one. Thank you.
Speaker Change: All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session.
Krista: After the speaker's remarks, there will be a question and answer session. If you would like to ask a question, please press star followed by the number one on your telephone keypad. And if you would like to withdraw your question, again, press star one. Thank you. I will now turn the conference over to Heather Gentry, Investor Relations. Please go ahead.
Speaker Change: If you would like to ask a question, please press star followed by the number 1 on your telephone keypad. And if you would like to withdraw your question, again press star 1. Thank you. I will now turn the conference over to Heather Gentry, Investor Relations. Please go ahead.
Heather Gentry: I will now turn the conference over to Heather Gentry, Investor Relations. Please go ahead.
Heather Gentry: Thank you, operator. Welcome to LXP Industrial Trust Second 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 investor section and will be furnished to the SEC on a Form 8-K.
Heather T. Gentry: Thank you, Operator. Welcome to LXP Industrial Trust's second quarter 2024 earnings conference call and webcast. The earnings release was distributed this morning, and both the release and the quarterly supplemental are available on our website in the investor section and will be furnished to the SEC on a Form 8K. 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, including those included in today's earnings press release and those described in reports that LXC files with the FEC from time to time, could cause LXC's actual results to differ materially from those expressed or implied by such statements.
Heather T. Gentry: Thank you, Operator. Welcome to LXP Industrial Trust's second quarter 2020 FAR Earnings Conference Call and Webcast.
Heather T. Gentry: The earnings release was distributed this morning, and both the release and quarterly supplemental are available on our website in the investor section and will be furnished to the SEC on a Form 8-K.
Heather Gentry: 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.
Speaker Change: 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.
Speaker Change: LXP believes that these statements are based on reasonable assumptions. However, certain factors and risks...
Speaker Change: 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.
Heather Gentry: Accepted is required by law; LXP does not undertake a duty to update any forward-looking statements.
Heather T. Gentry: Except as required by law, LXP does not undertake a duty to update any forward-looking statement. 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 FFL refer to adjusted company funds from operations available to all equity holders and unit holders 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 positions, or cash flow.
Speaker Change: Except as required by law, LXP does not undertake a duty to update any forward-looking statements.
Heather Gentry: 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 a justice company FFL refer to a justice company funds from operations available to all equity holders and unit holders on a fully diluted basis.
Speaker Change: 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.
Speaker Change: Any references in these documents to adjusted company FFL refer to adjusted company funds from operations available to all equity holders and unit holders on a fully diluted basis.
Heather Gentry: 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 positions, or cash flows.
Speaker Change: 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 positions, or cash flows.
Heather Gentry: On today's call, will Eglyn Chairman and CEO, Beth Fuller, is CFO, Brendan Mullinix, is CIO, and Executive Vice President James Dudley will provide a recent business update and commentary on second quarter results.
Heather T. Gentry: 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 second quarter results. I will now turn the call over to Will.
Speaker Change: 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 second quarter results. I will now turn the call over to Will.
Will Eglinton: I will now turn the call over to Will. Thanks, Heather, and good morning, everyone. We had excellent second quarter results highlighted by robust leasing activity with continued success in raising rents and strong same-store NOI growth of 5 percent. Based on the leasing outcomes we've achieved today, we're raising same-store NOI growth expectations to a new range of 4.5 percent to 5.5 percent.
Will Eglin: Thanks, Heather, and good morning, everyone. Based on the leasing outcomes we've achieved to date, we're raising our same-store NOI growth expectations to a new range of 4.5% to 5.5%. Leasing activity picked up considerably in the second quarter with 2.7 million square feet leased at base and cash base rental increases of 44.5% and 44%, respectively, excluding tenant improvement reimbursements on one expiring lease. Post-quarter end, we leased an additional 96,000 square feet at attractive base and cash base rent spreads of 28% and 35%, respectively. Strong leasing activity continues, and we are in advanced negotiations on an additional 1.7 million square feet. Moving to the balance sheet, we ended the quarter at 6.2 times net debt to adjusted EBITDA.
Will Eglin: Thanks, Heather, and good morning, everyone.
Will Eglin: We had excellent second quarter results, highlighted by robust leasing activity with continued success in raising rents and strong same-store NOI growth of 5%.
Will Eglin: Based on the leasing outcomes we've achieved to date, we're raising same-store NOI growth expectations to a new range of 4.5% to 5.5%.
Will Eglinton: We're also pleased to report we successfully completed our portfolio transformation with the sale of our two remaining consolidated office assets during the quarter, positioning LXP as a pure-play industrial REIT. Leasing activity picked up considerably in the second quarter, with 2.7 million square feet leased at base and cash base rental increases of 44.5% and 44%, respectively, excluding tenant improvement reimbursements on one expiring lease. We continue to achieve strong market outcomes on expiring leases, which speak to the high quality of our portfolio; 88% of which are class A facilities. Market conditions support annual rental increases in the 3% to 4% range, and on average we obtain rental escalations of 3.6% on leases signed in the second quarter.
Will Eglin: Leasing activity picked up considerably in the second quarter with 2.7 million square feet leased at base and cash base rental increases of 44.5 percent and 44 percent respectively, excluding tenant improvement reimbursements on one expiring lease.
Will Eglin: We continue to achieve strong mark-to-market outcomes on expiring leases, which speaks to the high quality of our portfolio, 88% of which are Class A facilities.
Will Eglinton: Post quarter end, we leased an additional 96,000 square feet at attractive base and cash base rent spreads of 28% and 35%, respectively. Strong leasing activity continues, and we are in advance negotiations on an additional 1.7 million square feet.
Will Eglin: Post-quarter end we leased an additional 96,000 square feet at attractive base and cash base rent spreads of 28% and 35% respectively.
Will Eglinton: Moving to the balance sheet, we end of the quarter at 6.2 times net debt to adjusted EBITDA. We remain focused on moving towards the low end of our target leverage range of 5 to 6 times, and we're confident we can reach this target through a combination of leasing vacancy and raising rents. In addition, we are exploring several asset sales in non-target markets that could accelerate leverage reduction or create liquidity for redeployment into new investments.
Will Eglin: Moving to the balance sheet, we ended the quarter at 6.2 times net debt to adjusted EBITDA. We remain focused on moving towards the low end of our target leverage range of five to six times and are confident we can reach this target through a combination of leasing vacancy and raising rents.
Will Eglin: We remain focused on moving towards the low end of our target leverage range of 5-6 times and are confident we can reach this target through a combination of leasing vacancy and raising rent. Looking ahead, our focus is principally on taking advantage of the internal growth opportunities in our portfolio. We estimate that our current rents are approximately 24% below market through 2029, and we have a total of 4.1 million square feet available for lease.
Will Eglin: In addition, we are exploring several asset sales in non-target markets that could accelerate leverage reduction or create liquidity for redeployment into new investments.
Will Eglinton: Looking ahead, our focus is principally on taking advantage of the internal growth opportunities in our portfolio. We estimate that our current rents are approximately 24% below market through 2029, and we have a total of 4.1 million square feet available for lease. We also continue to explore external growth opportunities, including build-to-suit projects to the extent they fit within our target market strategy.
Will Eglin: Looking ahead, our focus is principally on taking advantage of the internal growth opportunities in our portfolio. We estimate that our current rents are approximately 24% below market through 2029, and we have a total of 4.1 million square feet available for lease.
Will Eglin: We also continue to explore external growth opportunities, including build-to-sue projects, to the extent they fit within our target market strategy.
Will Eglinton: Finally, we announced earlier this year that Nathan Brunner will be joining LXP as Executive Vice President of Capital Markets in September. He will transition into the CFO role effective March 1st, 2025, when Beth shifts to an advisory role at LXP. Nathan's background speaks for itself, with many successful years in investment banking, particularly in the industrial and net lease sectors, and he has deep corporate finance and M&A experience. We are very excited to have him join us and look forward to his contributions.
Will Eglin: Finally, we announced earlier this year that Nathan Brunner will be joining LXP as Executive Vice President of Capital Markets in September. He will transition into the CFO role effective March 1, 2025, when Beth shifts to an advisory role at LXP. Nathan's background speaks for itself, with many successful years in investment banking, particularly in the industrial and net lease sectors, and he has deep corporate finance and M&A experience. We're very excited to have him join us and look forward to his contribution. With that, I'll turn the call over to Brendan to discuss investment activity in more detail.
Speaker Change: Finally, we announced earlier this year that Nathan Brunner will be joining LXP as Executive Vice President of Capital Markets in September . He will transition into the CFO role effective March 1st, 2025, when Beth shifts to an advisory role at LXP.
Speaker Change: Nathan's background speaks for itself, with many successful years in investment banking, particularly in the industrial and net lease sectors, and he has deep corporate finance and M&A experience. We're very excited to have him join us and look forward to his contributions.
Brendan Mullinix: With that, I'll turn the call over to Brendan to discuss investment activity in more detail. Thanks, Will. During the quarter, we invested $35 million in our spec and build-to-suit projects. We have approximately $29 million left to fund in our remaining spec development projects, excluding any partner pronouns, and $36 million in our build-to-suit project. Turning to our development portfolio, we've leased approximately 60% of the square footage we've developed since adding this important growth avenue in 2019. On the remaining 3.7 million square feet left to lease, we continue to see activity, with 1.3 million square feet currently in final negotiations.
Speaker Change: With that, I'll turn the call over to Brendan to discuss investment activity in more detail.
Brendan: Thanks, Will. During the quarter, we invested $35 million in our spec and build-to-sue projects. We have approximately $29 million left to fund in our remaining spec development projects, excluding any partner promotes, and $36 million in our build-to-sue project.
Brendan P. Mullinix: We have approximately $29 million left to fund in our remaining spec development projects, excluding any partner promotion, and $36 million in our Build to Sue project. On the remaining 3.7 million square feet left to lease, we continue to see activity, with 1.3 million square feet currently in final negotiation. Our Build-A-Suite project in Greenville-Spartanburg is well underway, and we expect that project to be completed near the end of the year. We continue to explore other opportunities with the best prospects currently in our land bank. To Will's earlier point, we are valuing several non-core market dispositions as a source of liquidity, particularly as prices for these types of assets have become more attractive.
Speaker Change: Turning to our development portfolio, we've leased approximately 60% of the square footage we've developed since adding this important growth avenue in 2019.
Speaker Change: On the remaining 3.7 million square feet left to lease, we continue to see activity with 1.3 million square feet currently in final negotiations.
Brendan Mullinix: Our build the suit project in Greenville, Spartanburg is well underway, and we expect that project to complete near the end of the year. We continue to explore other opportunities with the best prospects currently at our landbank and Phoenix. To Will's earlier point, we are valuing several non-core market dispositions as a source of liquidity, particularly as prices for these types of assets have become more attractive. The potential proceeds from these asset sales could be used for de-leveraging or build a suit opportunities depending on what is the most creative at the time.
Speaker Change: Our Build-A-Suite project in Greenville Spartanburg is well underway and we expect that project to complete near the end of the year.
Speaker Change: We continue to explore other opportunities with the best prospects currently at our land bank in Phoenix.
Speaker Change: To Will's earlier point, we are valuing several non-core market dispositions as a source of liquidity, particularly as prices for these types of assets has become more attractive.
Will Eglin: Potential proceeds from these asset sales could be used for deleveraging or build-to-suit opportunities depending on what is the most creative at the time.
James Dudley: With that, I'll turn the call over to James to discuss leasing. Thanks, Brendan. The industrial leasing market should signs of improvement in the second quarter, with net absorption up as demand accelerated and construction starts continued to decelerate. This was evident in our portfolio as well as we saw pickup and leasing activity across our markets in the second quarter. Leasing was stronger in the quarter, and included lease extensions for four 2024 explorations, one 2025 expiration, one 2026 expiration, and a vacancy. To date, we marked 2024 explorations at 29%, excluding fixed rate renewals. We anticipate raising rents on the 600,000 square feet of remaining 2024 explorations, on average, 20 to 30%.
James Dudley: Thanks Brendan. The industrial leasing market showed signs of improvement in the second quarter, with net absorption up as demand accelerated and construction starts continued to decelerate. This was evident in our portfolio as well, as we saw a pickup in leasing activity across our markets in the second quarter. Leasing was strong during the quarter and included lease extensions for four 2024 expirations, one 2025 expiration, one 2026 expiration, and a vacancy. To date, we've marked 2024 expirations at 29%, excluding fixed rate renewals.
Speaker Change: With that, I'll turn the call over to James to discuss leasing.
James: Thanks, Brendan. The industrial leasing market showed signs of improvement in the second quarter, with net absorption up as demand accelerated and construction starts continued to decelerate.
James: This was evident in our portfolio as well, as we saw a pickup in leasing activity across our markets in the second quarter. Leasing was strong during the quarter and included lease extensions for four 2024 expirations, one 2025 expiration, one 2026 expiration, and a vacancy.
James: To date, we've marked 2024 expirations at 29%, excluding fixed-rate renewals.
James: We anticipate raising rents on the 600,000 square feet of remaining 2024 expirations on average 20 to 30 percent.
James Dudley: On last quarter's call, we discussed two leases in the Memphis market with 2024 explorations. Both were renewed in the second quarter, tolling approximately 1.6 million square feet. These are strong leasing outcomes, resulting in five year lease renewals, a cash rental spreads, a 29 and 25% with average lease bumps, a 3.25%. We executed an early lease renewal on our 2025 expiration with Mars in Atlanta during the quarter, signing a 32-month extension with 4% annual bumps. The expiring rent had $4.68 per square foot in tenant improvement amortization. When excluding this amount, the renewal rent reflects a 63% increase in rent, from $4.50 to $7.35 per square foot.
James Dudley: Both were renewed in the second quarter, totaling approximately 1.6 million square feet. These are strong leasing outcomes, resulting in five-year lease renewals at cash rental spreads of 29 and 25 percent, with average lease bumps of 3.25 percent. When excluding this amount, the renewal rent reflects a 63% increase in rent from $4.50 to $7.35 per square foot. Including the loss of these TI reimbursements in the second quarter leasing numbers, base and cash base rent still increased approximately 12 and 13 percent, respectively.
James: On last quarter's call, we discussed two leases in the Memphis market with 2024 expirations.
James: Both were renewed in the second quarter, totaling approximately 1.6 million square feet. These are strong leasing outcomes, resulting in five-year lease renewals at cash rental spreads of 29 and 25 percent, with average lease bumps of 3.25 percent.
James: We executed an early lease renewal on our 2025 expiration with Mars in Atlanta during the quarter, signing a 32-month extension with 4% annual bumps.
James: The expiring rent had $4.68 per square foot and tenant improvement amortization.
James: When excluding this amount, the renewal rent reflects a 63 percent increase in rent from $4.50 to $7.35 per square foot.
James Dudley: Including the loss of these T.I. reimbursements in the second quarter leasing numbers, base and cash-based rents still increase approximately 12% and 13%, respectively. The T.I. Reimbursement burn-off for this lease expiration has always been accounted for in our marked market estimates. We don't have any similar leases in the portfolio where T.I. Amortization has such a significant impact. Also, during the quarter, we signed a 10-year lease extension with 3% annual bumps at our 242,000 square foot industrial facility in the Philadelphia market. This was an early renewal on a 2026 expiration that resulted in an 85% cash rental increase over the prior rent.
James: Including the loss of these TI reimbursements in the second quarter leasing numbers, base and cash base rents still increased approximately 12 and 13 percent respectively.
James Dudley: The TI reimbursement burn-off for this lease expiration has always been accounted for in our mark-to-market estimates. We don't have any similar leases in the portfolio where TI amortization has such a significant impact. Also, during the quarter, we signed a 10-year lease extension with 3% annual bumps at our 242,000-square-foot industrial facility in the Philadelphia market. This was an early renewal on a 2026 expiration that resulted in an 85% cash rental increase over the prior rent.
James: The TI reimbursement burn-off for this lease expiration has always been accounted for in our mark-to-market estimates.
James: We don't have any similar leases in the portfolio where TI amortization has such a significant impact.
James: Also, during the quarter, we signed a 10-year lease extension with 3% annual bumps at our 242,000-square-foot industrial facility in the Philadelphia market. This was an early renewal on a 2026 expiration that resulted in an 85% cash rental increase over the prior rent.
James Dudley: Finally, we executed a new two-year lease with 3.75% annual bumps at our vacant 118,000 square foot facility in the Memphis market. There was minimal downtime in getting the property leased up, with a new rent per square foot representing a 22% rental increase over the prior rent.
James Dudley: Finally, we executed a new two-year lease with 3.75% annual bumps at our vacant 118,000 square foot facility in the Memphis market. There was minimal downtime in getting the property leased up, with the new rent per square foot representing a 22% rental increase over the prior rent. With that, I'll turn the call over to Beth to discuss financial results.
James: Finally, we executed a new 2-year lease with 3.75% annual bumps at our vacant 118,000 square foot facility in the Memphis market.
James: There was minimal downtime in getting the property leased up, with the new rent per square foot representing a 22% rental increase over the prior rent. With that, I'll turn the call over to Beth to discuss financial results.
Beth Boulerice: With that, I'll turn the call over to Beth to discuss financial results. Thanks, James. Revenue in the second quarter was approximately $86 million, with property operating expenses of about $15 million, of which 90% was attributable to tenant reimbursements. Adjusted company FFO in the second quarter was $0.16 per diluted common share, or approximately $47 million. GNA was $9.2 million in the second quarter.
Beth Boulerice: Thanks, James. Revenue in the second quarter was approximately $86 million, with property operating expenses of about $15 million, of which 90% was attributable to tenant reimbursement. Adjusted company FFO in the second quarter was $0.16 per diluted common share, or approximately $47 million. G&A was $9.2 million in the second quarter. As we mentioned on last quarter's call, we have been focused on operating efficiencies, which included shrinking our office footprint in New York as we transitioned some overhead costs to our Florida and Dallas offices. As a result, and made possible by the successful completion of our Portfolio Repositioning, 2024 G&A will now include one-time charges of approximately $1.7 million associated with employee severance costs.
Beth: Thanks James. Revenue in the second quarter was approximately $86 million, with property operating expenses of about $15 million, of which 90% was attributable to tenant reimbursements.
Beth: Adjusted company FFO in the second quarter with 16 cents per diluted common share or approximately 47 million dollars.
Beth Boulerice: As we mentioned on last quarter's call, we have been focused on operating efficiencies, which included shrinking our office print in New York as we transitioned some overhead costs to our Florida and Dallas offices. As part of our efforts to operate more efficiently and made possible by the successful completion of our portfolio repositioning, 2024 GNA will now include one-time charges of approximately $1.7 million associated with employee severance costs. These employee changes will result in annual cost savings of approximately $1.2 million moving forward. Further in 2024, we will have approximately $1 million in expenses related to the CFO transition.
Speaker Change: G&A was $9.2 million in the second quarter. As we mentioned on last quarter's call, we have been focused on operating efficiencies, which included shrinking our office footprint in New York as we transitioned some overhead costs to our Florida and Dallas offices.
Beth Boulerice: These employee changes will result in annual cost savings of approximately $1.2 million moving forward. Additionally, in 2024, we will have approximately $1 million in expenses related to the CFO transition. Our same store portfolio was 99.4% leased at quarter end, and same store NOI increased 5% in the second quarter when compared to the same period in 2023. At quarter end, approximately 99% of our portfolio leases had escalations with an average annual rate of 2.7%.
Speaker Change: Further, in 2024, we will have approximately $1 million in expenses related to the CFO transition.
Beth Boulerice: As a result, our 2024 GNA is now expected to be within a range of $39 to $41 million.
Speaker Change: As a result, our 2024 GNA is now expected to be within a range of $39 to $41 million.
Beth Boulerice: Our same-store portfolio was 99.4% leased at quarter-end, and same-store NOI increased 5% in the second quarter when compared to the same period in 2023. At quarter-end, approximately 99% of our portfolio leases had escalations, with an average annual rate of 2.7%. During the quarter, we fully repaid the 198.9 million of 4.4% 2024 senior notes at maturity with proceeds from the issuance of the 6.75%, 2028 senior notes we completed last November. Our fixed rate debt percentage was approximately 92% at quarter-end.
Speaker Change: Our same-store portfolio was 99.4% leased at quarter end, and same-store NOI increased 5% in the second quarter when compared to the same period in 2023.
Speaker Change: At quarter end, approximately 99% of our portfolio leases had escalations with an average annual rate of 2.7%.
Beth Boulerice: During the quarter, we fully repaid the $198.9 million of 4.4% 2024 senior notes at maturity with proceeds from the issuance of the 6.75% 2028 senior notes we completed last November. Our fixed rate debt percentage was approximately 92% at quarter end. As we've indicated previously, we expect 2025 interest expense to increase when the swaps on the term loan expire in January. At quarter end, our total consolidated debt outstanding was approximately $1.6 billion, with a weighted average interest rate of 3.81% and a weighted average term to maturity of six years.
Speaker Change: During the quarter, we fully repaid the $198.9 million of 4.4% 2024 senior notes at maturity with proceeds from the issuance of the 6.75% 2028 senior notes we completed last November .
Beth Boulerice: As we've indicated previously, we expect 2025 interest expense to increase when the swaps on the term loan expire in January. We are considering other long-term fixed rate options or swapping some of this exposure later this year or early next year. We anticipate this additional interest expense to impact 2025 adjusted company FFO by approximately $2 per diluted common share based on the current so-for-forward curve. At quarter-end, our total consolidated debt outstanding was approximately $1.6 billion, with a weighted average interest rate of 3.81% and a weighted average term to maturity of 6 years.
Speaker Change: Our fixed rate debt percentage was approximately 92% at quarter end. As we've indicated previously, we expect 2025 interest expense to increase when the swaps on the term loan expire in January .
Speaker Change: We are considering other long-term fixed rate options or swapping some of this exposure later this year or early next year.
Speaker Change: We anticipate this additional interest expense to impact 2025 adjusted company FFO by approximately $0.02 per diluted common share based on the current SOFR forward curve.
Beth Boulerice: Finally, we ended the second quarter with our 600 million unsecured revolving credit facility fully available.
Speaker Change: Finally, we ended the second quarter with our 600 million unsecured revolving credit facility 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.
Operator: With that, I'll turn the call back over to the operator, who will conduct the question-and-answer portion of this call. Thank you. We will now begin the question-and-answer session.
Operator: If you would like to ask a question, please press star one on your telephone keypad to raise your hand and join the queue. And if you'd like to withdraw that question, again, press star one.
Speaker Change: Thank you!
Speaker Change: We will now begin the question-and-answer session. If you would like to ask a question, please press star 1 on your telephone keypad to raise your hand and join the queue. And if you'd like to withdraw that question, again, press star 1. Your first question comes from the line of Anthony Paolone with a JP Morgan. Please go ahead.
Anthony Paolone: Your first question comes from the line of Anthony Pellone with a JP Morgan. Please go ahead. Thank you. Good morning. First question.
Beth Boulerice: Thank you. Good morning.
James Dudley: I just wanted to get into the development leasing pipeline a bit more. I think you mentioned 1.7 million square feet of leasing in the pipeline. And just maybe can you go over again how much of that you think relates to some of the developments that have been delivered already and just prospect of leasing up some of these large million square footers.
Anthony Paolone: Thank you, good morning. First question, I just wanted to get into the development leasing pipeline a bit more. I think you mentioned
Tony: First question, I just wanted to get into the development leasing pipeline a bit more. I think you mentioned 1.7 million square feet of leasing in the pipeline. And just maybe, can you go over again how much of that you think relates to some of the developments that have been delivered already and just the prospect of leasing up some of these large million square footers?
Anthony Paolone: 1.7 million square feet of leasing in the pipeline and just maybe can you go over again how much of that you think relates to some of the developments that have been delivered already and just you know prospect of leasing up some of these large million square footers?
James Dudley: Hey Tony, it's James. So I'll just run through the portfolio and kind of where we stand. So I think we've talked about a call for a while. We continue to be close on a call with a prospective tenant that would take the entire facility. We also have another identified tenant for our 250 in Etna, and we think we're close on getting a good deal done there. We've responded to a couple of full-building RFPs on our Indianapolis facility, and then we have a partial building user that's looking at our South Shore Tampa facility, and then a couple of partial building users that have inquired about Greenville Spartanburg.
James Dudley: Hey Tony, it's James. So I'll just run through the portfolio and kind of where we stand. So I think we've talked about Ocala for a while. We continue to be close to Ocala with a prospective tenant that would take the entire facility. We also have another identified tenant for our 250 in Aetna, and we think we're close to getting a good deal done there. We've responded to a couple of full building RFPs on our Indianapolis facility.
Anthony Paolone: Hey Tony, it's James. So just I'll just run through the the portfolio and kind of where we stand. So I think we've talked about Ocala for a while. We continue to be close on Ocala with a prospective tenant that would take the entire facility.
Anthony Paolone: We also have another identified tenant for our 250 in Aetna, and we think we're close on getting a good deal done there.
James Dudley: And then we have a partial building user that's looking at our South Shore Tampa facility, and then a couple of partial building users that have inquired about Greenville Spartanburg. So I would say we're in a good spot in Ocala and Columbus right now and a little further away from having certainty on the other side.
Anthony Paolone: We've responded to a couple of full building RFPs on our Indianapolis facility and then we have a partial building user that's looking at our south shore Tampa facility.
James Dudley: So I would say we're in a good spot on Ocala and Columbus right now, and a little further away from having certainty on the others. Okay, and just any comments on just where you think yields will end up on those, given what you're seeing and where the rents being discussed are? Yeah, we're maintaining the prior guidance of six to six and a half percent that we've previously got it to.
Anthony Paolone: and then a couple of partial building users that have inquired about Greenville Spartanburg. So I would say we're in a good spot on Ocala and Columbus right now and a little further away from having certainty on the others.
Anthony Paolone: Okay and just any comments on just where you think yields will end up on those given what you're seeing and where the rents being discussed are?
Speaker Change: Yeah, we're maintaining the prior guidance of six to six-and-a-half percent that we've previously got it to.
Anthony Paolone: Okay, and then just one other question, maybe that I think your same-store NOI guidance was four to five percent previously. Just wondering if that's still kind of a number, if there's any changes there for the year?
Beth Boulerice: Okay, and then just one other question, maybe Beth, I think your same store NOI guidance was four to 5% previously, just wondering if that's still the number, if there's any changes there for the year.
Beth: Okay, and then just one other question, maybe Beth, I think your same store NOI guidance was four to five percent previously, just wondering if that's still kind of the number, if there's any changes there for the year?
Beth Boulerice: Yeah, we've upped the guidance, Tony, to 4 12 to 5 12.
Anthony Paolone: Yeah, we've upped the guidance, Tony, to four and a half to five and a half. Okay, great. Thank you.
Tony: Okay, great. Thank you.
Speaker Change: Yeah, we've upped the guidance, Tony, to 4 1?2 to 5 1?2.
Todd Thomas: Thanks, Tony. Your next question comes from the line of Todd Thomas with KeyBank Capital Markets. Please go ahead. Hi, thanks. First question, Beth. You mentioned the 39 to 41 million dollar GNA guidance for 24. That's higher by three million dollars, I believe, from the prior GNA guidance. I just wanted to clarify if is that all included in adjusted company FFO. It sounded like a portion was one time in nature. I just wasn't sure I heard the comments there. Can you clarify?
Todd Michael Thomas: Your next question comes from the line of Todd Thomas with KeyBank Capital Markets. Please go ahead.
Speaker Change: Okay, great. Thank you.
Tony: Thanks, Tony.
Speaker Change: Your next question comes from the line of Todd Thomas with KeyBank Capital Markets. Please go ahead.
Todd Michael Thomas: Hi, thanks. First question, Beth, you mentioned the 39 to 41 million dollar GNA guidance for 24. That's higher by 3 million dollars, I believe, from the prior GNA guidance. I just wanted to clarify, is that all included in adjusted company FFO? It sounded like a portion was one-time in nature, I just wasn't sure I heard the comments there. Can you clarify? Yeah, so
Todd Michael Thomas: Hi, thanks. First question, Beth, you mentioned the 39 to 41 million dollar GNA guidance for 24. That's higher by 3 million dollars, I believe, from the prior GNA guidance.
Todd Michael Thomas: I just wanted to clarify, is that all included in Adjusted Company FFO? It sounded like a portion was one-time in nature, I just wasn't sure I heard the comments there.
Beth Boulerice: Yeah, so the severance charges of 1.7 are going to be a one time, so they won't be in adjusted company FFO. Okay, but the balance of the range we said last time was 36.5 to 38.5. So now we're now we're saying 39 to 41. So it's not quite three million, but less than that. Okay, okay, but the offset then, so you took up the same store by 50 basis points. You know, what else sort of change? What other assumptions should we know think about, you know, as it pertains to the updated guidance and the low end coming coming up a penny.
Beth Boulerice: Yeah, so the severance charges of 1.7 are going to be a one-time thing, so they won't be an adjusted company.
Speaker Change: Yeah, so the severance charges of 1.7 are going to be a one-time.
Beth Boulerice: Okay, but the balance of the range we said last time was $36.5 to $38.5, so now we're saying $39 to $41, so it's not quite $3 million, but less than that. Okay, but the offset then, so you took up the same store by 50 basis points, you know, what else sort of changed? What other assumptions should we think about, you know, as it pertains to the updated guidance and the low end coming up a penny?
Speaker Change: So they won't be an adjusted company FFO
Speaker Change: Okay, but the balance of it. The range we said last time was 36.5 to 38.5, so now we're saying 39 to 41, so it's not quite 3 million, but less than that.
Speaker Change: Okay.
Speaker Change: Okay, but the offset then, so you took up the same store by 50 basis points, you know, what else sort of changed? What other assumptions should we, you know, think about, you know, as it pertains to the updated guidance and the low end coming up a penny?
Beth Boulerice: It's really due to all of the leasing that we've done and the great outcomes that we've had on our spreads and being able to capture that gap rent is really the motivator for that.
Todd Thomas: It's really due to all of our leasing that we've done and the great outcomes that we've had on our spreads and being able to capture that gap rent. Okay, and then I just wanted to ask also about there were a handful of I think known moveouts that were included in the guidance and the budget for the year and the in the balance of 24. I think there was also some discussion around 25. You talked about a 3PL in South Carolina around a 75,000 square foot warehouse, also a 58,000 square foot warehouse in Carrollton, Texas. Are those both still moveouts, and is there anything else in 24 or 25 that you're aware of at this time?
Speaker Change: It's really due to all of our leasing that we've done and the great outcomes that we've had in our spreads and being able to capture that gap rent.
Beth Boulerice: Okay. And then I just wanted to ask also about, there were a handful of known move-outs that were included in the guidance in the budget for the year in the balance of 24. I think there was also some discussion around 25. You talked about a 3PL in South Carolina, about a 75,000 square foot warehouse, and also a 58,000 square foot warehouse in Carrollton, Texas. Are those both still move-outs, and is there anything else in 24 or 25 that you're aware of at this time?
Speaker Change: motivator for that.
Speaker Change: Okay.
Speaker Change: And then I just wanted to ask also about, there were a handful of, I think, known move-outs that were included in the guidance in the budget for the year in the balance of 24. I think there was also some discussion around 25.
Speaker Change: You talked about a 3PL in South Carolina, around a 75,000 square foot warehouse, also a 58,000 square foot warehouse in Carrollton, Texas. Are those both still move-outs and is there anything else in 24 or 25 that you're aware of at this time?
Todd Thomas: So those are the two that are in 24, and we have promising activity on both of them.
Beth Boulerice: So those are the two that are in 24 and we have promising activity on both of them. So I'm hoping that they'll be short-lived vacancies if the 58 maybe doesn't even become one because we replaced the tenant. And then we have one other 124. That's, and it's a March 2025 lease expiration that we know the tenants are moving out. Fortunately, it's a multi-tenant building, and the tenant that's next door wants to expand. So I'm also hopeful that we can minimize downtime there.
Todd Thomas: So I'm hoping that they'll be short-lived vacancies if in the 58 maybe doesn't even become one because we replaced the tenant and then we have one other 124 that's and it's a March 2025 lease expiration that we know the tenant's moving out. Fortunately, it's a multi-tenant building and the tenant that's next door wants to expand, so also hopeful that we can minimize the on time there.
Speaker Change: So those are the two that are in 24 and we we have promising activity on both of them so I'm hoping that they'll be short-lived vacancies if in the 58 maybe doesn't even become one because we replaced the tenant.
Speaker Change: And then we have one other, 124, that's a March 2025 lease expiration that we know the tenant's moving out. Fortunately, it's a multi-tenant building, and the tenant that's next door wants to expand, so also hopeful that we can minimize downtime there.
Todd Thomas: Okay, and just last one for me, the Cleveland asset that was sold subsequent to June 30. Can you just share some details on that sale, the disposition proceeds, or any other details on that asset sale? Sure, that was an asset that we had a known move out coming, and we ended up selling it to a user for what we thought was a really good price. It's a cap rate of a little bit above seven; it sounds high, but for a 1996 facility with 24 foot clear right, it was a really, you know, a very good sale for us.
Beth Boulerice: Okay. And just last one for me, the Cleveland asset that was sold subsequent to June 30, can you just share some details on that sale, the disposition proceeds, or any other details on that asset sale?
Speaker Change: Okay and just last one for me, the Cleveland asset that was sold subsequent to June 30, can you share some details on that sale, the disposition proceeds or any other details on that asset sale?
Speaker Change: Sure, that was an asset that we had a known move out coming and we ended up selling it to a user.
Speaker Change: for, you know, what we thought was a really good price. You know, it's a cap rate of a little bit above seven, which sounds high, but for a 1996 facility with 24-foot clear height, it was a really, you know, a very good sale for us.
Todd Thomas: Okay, all right, thank you.
Beth Boulerice: Okay. All right. Thank you.
Mitch Germain: Your next question comes from the line of Mitch Germain with Citizens JMP. Please go ahead. All right, thanks for taking my question. Can you provide me some perspective on the math between a build a suit versus what you're seeing in the acquisition markets today? Sure, build a suit. We're targeting a range of six and a half to seven, just depending upon what the escalation structure is in term. And, you know, I would say in the existing market, something with, you know, of term is going to be in the high vibes to six kind of range.
Mitchell Bradley Germain: Your next question comes from the line of Mitch Germain with Citizens JMP. Please go ahead.
Speaker Change: Okay, all right, thank you.
Speaker Change: Your next question comes from the line of Mitch Germain with Citizens JMP. Please go ahead.
Mitchell Bradley Germain: Thanks for taking my question. Can you provide me some perspective on the math between a build-to-suit versus what you're seeing in the acquisition markets today?
Mitchell Bradley Germain: Thanks for taking my question. Can you provide me some perspective on the math between a build-to-suit versus what you're seeing in the acquisition markets today?
Speaker Change: Sure. Build to suit, we're targeting a range of six and a half to seven just depending upon what the escalation structure is in term and you know I would I would say in the existing market
Brendan P. Mullinix: And, you know, I would say in the existing market that something with, you know, a term is going to be in the high fives to six hundred.
Speaker Change: something with you know of term is going to be in the high fives to six kind of range.
Brendan P. Mullinix: Okay, that's super helpful. And in thinking about dispositions, are they markets where you don't have as much scale, or are they assets where, if there's some capital or some no move out, what's kind of added to that bucket?
Mitch Germain: Okay, that's super helpful. And thinking about dispositions, is it markets where you don't have as much scale, or is it assets where either there's some capital or some no move out? What's kind of added in that bucket? It's really focused on markets where we don't have scale and don't plan to scale. And so we're being opportunistic about harvesting value where we can. We think the disposition markets probably improved in our favor about 50 basis points from the cap rate perspective since fourth quarter last year. So we're in the market doing some price discovery on a handful of buildings, and we're getting good response.
Speaker Change: Okay that's super helpful. And in thinking about dispositions, is it markets where you don't have as much scale or is it assets where
Brendan P. Mullinix: It's really focused on markets where we don't have scale and don't plan to scale, and so we're being opportunistic about harvesting value where we can. We think the disposition market's probably improved in our favor by about 50 basis points from a cap rate perspective since the fourth quarter last year. So we're in the market doing some price discovery on a handful of buildings, and we're getting good responses.
Speaker Change: Either there's some capital or some no move out. What's kind of added in that bucket?
Speaker Change: It's really focused on markets where we don't have scale and don't plan to scale.
Speaker Change: And so we're being opportunistic about harvesting value where we can. We think the disposition market's probably improved in our favor about 50 basis points from a cap rate perspective since fourth quarter last year.
Speaker Change: So we're in the market doing some price discovery on a handful of buildings, and we're getting good response.
Mitchell Bradley Germain: That's super helpful. And last one for me, Beth, I apologize; you're getting a lot of questions on G&A. I think you were just talking a little too quick for me. So just from your prepared remarks, can you just kind of, I recognize the severance and then you talked about some savings of 1.2 million, and then I missed it. I think there are some additional fees for the CFO change. Can you just kind of go over that one more time, please?
Mitch Germain: That's super helpful.
Beth Boulerice: And last one for me, Beth. I apologize. I get a lot of questions on GNA. I think you were just talking a little too quick for me. So just from your prepared remarks, can you just kind of recognize the severance, and then you talked about some savings of 1.2 million. And then I missed it. I think there's some additional fees for the CFO change. Can you just kind of go over that one more time, please? Yes, sir. No problem. Yes. So there's one time of 1.7 for severance costs that are one time, so they won't be impacting our FFO, a just a company FFO for 2024.
Speaker Change: That's super helpful.
Speaker Change: And last one for me, Beth, I apologize, you're getting a lot of questions on...
Speaker Change: GNA. I think you were just talking a little too quick for me, so just...
Speaker Change: From your prepared remarks, can you just kind of, I recognize the severance, and then you talked about some savings of 1.2 million, and then I missed it. I think there's some additional fees for the CFO change. Can you just kind of go over that one more time, please?
Beth Boulerice: Yeah, sure, Mitch. No problem. Yeah, so there's a one-time cost of $1.7 million for severance costs that are one-time only, so they won't be impacting our FFO, adjusted company FFO, for 2024. But going into 2025, we anticipate that we're going to be saving about $1.2 million based on those changes. But also, and also for 2024, we are anticipating about a million dollars for the CFO transition that will impact 2024.
Speaker Change: Yeah, sure Mitch, no problem. Yeah, so there's one time of 1.7 for severance costs that are one time, so they won't be impacting our FFO, adjusted company FFO for 2024. But going into 2025, we anticipate that we're going to be saving about 1.2 million based on those changes.
Beth Boulerice: But going into 2025, we anticipate that we're going to be saving about 1.2 million based on those changes. But also for 2024, we are anticipating about a million dollars for the CFO transition that will impact 2024.
Speaker Change: but also for 2024 we are anticipating about a million dollars for the CFO transition that will impact 2024.
Mitchell Bradley Germain: Great! That's super helpful. Thank you so much, everyone.
Mitch Germain: Great. That's super helpful.
Mitch Germain: Thank you so much, everyone. Thanks.
Camille Bonnel: Your next question comes from the line of Camille Bonnell with Bank of America. Please go ahead. Hi. Good morning. So the team's done a lot to turn out and manage the floating rate exposure, but as best you highlighted in your opening remarks, interest expense will still be a drag to the bottom line earnings growth. And when you look at the pace of stabilizing your development asset, that seems like we're still a few quarters away, which implies further drag on 2025.
Camille Bonnel: Your next question comes from the line of Camille Bonnel with Bank of America. Please go ahead.
Speaker Change: Great. That's super helpful. Thank you so much, everyone.
Speaker Change: Thanks.
Speaker Change: Your next question comes from the line of Camille Bonnel with Bank of America. Please go ahead.
Camille Bonnel: Hi, good morning. So the team's done a lot to term out and manage the floating rate exposure, but as Beth highlighted in your opening remarks, interest expense will still be a drag on the bottom line earnings growth. And when you look at the pace of stabilizing your development asset, it seems like we're still a few quarters away, which implies further drag on 2025. So I'm wondering what your thoughts are on that and what you can do to improve this outlook while balancing potential dilution from asset sales. Thank you.
Camille Bonnell: Hi, good morning. So the team's done a lot to term out and manage the floating rate exposure, but as Beth, you highlighted in your opening remarks, interest expense
Camille Bonnell: will still be a drag to the bottom line earnings growth.
Speaker Change: And when you look at the pace of stabilizing your development assets, it seems like we're still a few quarters away, which...
Beth Boulerice: So I'm wondering about your thoughts on that and what you can do to improve this outlook while balancing potential dilution from your asset sales. Thank you. Well, we're exploring different opportunities for the term loan. Right now, it's at 2.72% with the swaps that are in place right now. We're looking at potentially some fixed rate, maybe a potential bond offering, or swapping today for some of that exposure. We're also potentially we may pay down a portion of it as well. So going forward, your right interest expense is going to be higher by about two cents, as I mentioned in our remarks.
Speaker Change: implies further drag on 2025.
Speaker Change: I'm wondering what your thoughts are on that and what you can do to improve this outlook while balancing potential dilution from your asset sales. Thank you.
Beth Boulerice: Well, we're exploring different opportunities for the term loan. Right now it's at 2.72% with the swaps that are in place right now. We're looking at potentially some fixed rate, maybe a potential bond offering, or swapping today for some of that exposure. We're also potentially, we may pay down a portion of it as well. So going forward, you're right, interest expense is going to be higher by about 2 cents, as I mentioned in our remarks.
Speaker Change: Well, we're exploring different opportunities for the term loan. You know, right now it's at 2.72% with the swaps that are in place right now. We're looking at potentially some fixed rate, maybe a potential bond offering, or swapping today for some of that exposure. You know, we're also...
Speaker Change: potentially we may pay down a portion of it as well and so you know going forward you're right interest expenses is going to be higher by about two cents as I mentioned in in our remarks
Beth Boulerice: And as you explore those considerations, in light of where your stock is trading today, which does seem much closer to NAV relative, appears, just wondering how you're thinking about potential equity raises as a source of capital, maybe to address capital requirement needs or investment opportunity? Well, we are very pleased that the shares have performed well recently, but we're focused on what things that we can achieve that can improve the share value even more. And obviously, making more progress on stabilizing the development pipeline would be top of the list. So things are certainly better from a cost of capital standpoint, but our focus is, as I said, working in the portfolio, producing better leasing outcomes and improving evaluation further.
Will Eglin: And as you explored...
Speaker Change: And as you explored those...
Will Eglin: Well, we are very pleased that the shares have performed, you know, well recently, but we're focused on what, you know, things that we can achieve that can improve, you know, improve the share value even more, and, obviously, making more progress on stabilizing the development pipeline would be, you know, top of the list. So things are certainly better from a cost-of-capital standpoint, but our focus is on, as I said, working the portfolio, producing better leasing outcomes, and improving our valuation further.
Speaker Change: Well, we are very pleased that the shares have performed, you know, well recently, but we're focused on what, you know,
Speaker Change: things that we can achieve that can improve, you know, improve the share value even more. And, you know, obviously making more progress on stabilizing the development pipeline would be, you know, top of the list.
Speaker Change: So things are certainly better from a cost of capital standpoint, but you know our focus is on, you know, as I said, working the portfolio, producing better leasing outcomes, and improving our valuation further.
Beth Boulerice: Okay, so it doesn't sound like it ranks very high at this point. And finally, I just wanted to pick up on your point about LXP being positioned as a peer play industrial company. I believe you still have a small stake in a few office properties, so are you planning to also wind that down, and are those assets included in the disposition strategy you outlined? Yeah, that office joint venture has been basically in a liquidating mode since it was formed. So it shrunk a lot and still has a handful of buildings in it, and we are winding that down as quickly as the market supports.
Will Eglin: Okay, so it doesn't sound like it ranks very high at this point. And finally, I just wanted to pick up on your point about LXP being positioned as a pure play industrial company. I believe you still have a small stake in a few office properties. So are you planning to also wind that down? And are those assets included in the disposition strategy you outlined? Um, yeah, that...
Speaker Change: Okay, so it doesn't sound like it ranks very high at this point. And finally, I just wanted to pick up on your point about LXP being positioned as a pure play industrial company. I believe you still have a small stake in a few office properties. So are you planning to also wind that down? And are those assets included in the disposition strategy you outlined?
Will Eglin: Yeah, that office joint venture has been basically in a liquidating mode since it was formed, so it's shrunk a lot, still has a handful of buildings in it, and we are winding that down as quickly as the market allows.
Speaker Change: Yeah, that office joint venture has been in basically in a liquidating mode since it was formed so it's shrunk a lot and still has a handful of buildings in it and We are winding that down as as quickly as the market supports
Camille Bonnel: Okay, thank you.
Jim Kammert: Again, if you would like to ask a question, please press star one on your telephone keypad. Your next question comes from the line of Jim Kemert with Evercore ISI. Please go ahead. Thank you, good morning. I know Will. Did I miss it?
James Hall Kammert: Again, if you would like to ask a question, please press star 1 on your telephone keypad. Your next question comes from the line of Jim Kammert with Evercore ISI. Please go ahead.
Speaker Change: Okay, thank you.
Speaker Change: Again, if you would like to ask a question, please press star 1 on your telephone keypad. Your next question comes from the line of Jim Kammert with Evercore ISI. Please go ahead.
James Hall Kammert: Thank you, good morning. I know, Will. Did I miss it?
Jim Kammert: Did you quantify maybe the potential sales that you would consider in terms of dollars, and maybe you don't want to tilt your hand about a range of cap rates? Does it have a nod for assets? I mean, I would think that what we have in the market right now is sort of more than 100 billion, but less than 150 million. Okay. And as Brendan was saying, cap rates for this sort of asset are arguably in the five and three quarters of the six area, that sort of space, which is better than it has been. And these cap rates are certainly lower than our floating rate borrowing costs right now, although over time it's certainly possible that so for we go down.
Will Eglin: Did you quantify maybe the potential sales that you would consider in terms of dollars and maybe, you don't want to tilt your hand, but a range of cap rates? [inaudible]
James Hall Kammert: Thank you, good morning. I know, Will, did I miss it? Did you quantify maybe the potential sales that you would consider in terms of dollars and maybe, you don't want to tilt your hand, but a range of cap rates?
Will Eglin: No, I mean, I would think that what we have in the market right now is, you know, sort of more than $100 million, but less than $150 million. You know, as Brendan was saying, you know, cap rates for this sort of asset are arguably in the five and three quarters to six area, that sort of space, which is, you know, better than it has been, and those cap rates are certainly lower than our floating rate borrowing costs right now, although, you know, over time it's certainly possible that so far we go down.
Speaker Change: I would think that what we have in the market right now is more than $100 million but less than $150 million.
Speaker Change: Okay.
Speaker Change: You know as Brendan was saying you know cap rates for this sort of sort of asset or you know arguably in in five and three quarters to six area That that sort of sort of space
Speaker Change: which is, you know, better than it has been and those cap rates are certainly lower than our floating rate borrowing costs right now, although, you know, over time it's certainly possible that so far we go down.
Jim Kammert: It's helpful, and it's a question I saw for accounting, but Beth, how much lease-up is assumed on the recently completed deals where I presume you're no longer capitalizing interest? But how much sort of drag is in the remaining 20-24 guidance for those assets that you're assuming any leasing? The low end assumes no leasing at all, and the high end assumes a little bit in the fourth quarter. Okay, so marginal.
Beth Boulerice: That's helpful. And the second question, I'm sorry for counting, but Beth, how much lease-up is assumed on the recently completed deals where I presume you're no longer capitalizing interest, but how much sort of drag is in the remaining 2024 guidance for those assets? Are you assuming any leasing?
Speaker Change: That's helpful. And the second question, I'm sorry for counting, but Beth, how much lease-up is assumed on the recently completed deals where I presume you're no longer capitalizing interest, but how much sort of drag is in the remaining 2024 guidance for those assets? Are you assuming any leasing?
Beth Boulerice: The low end assumes no leasing at all, and the high end assumes a little bit in the fourth quarter.
Speaker Change: The low end assumes no leasing at all and the high end assumes a little bit in the fourth quarter.
James Hall Kammert: Okay, thank you.
John Peterson: Okay, thank you. Your next question comes from the line of John Peterson with Jefferies. Please go ahead. Great. Good morning in Ocala and Columbus. Are you guys able to give us like the annual like run rate FFO upside from leasing those two properties? Like how should we think about quantifying that since that seems to be the most likely upside in the near term?
John James Massocca: Your next question comes from the line of John Petersen with Jeffreys. Please go ahead. Great. Good morning. In Ocala and
Speaker Change: Okay, so marginal. Okay, thank you.
John James Massocca: Great. Good morning.
Speaker Change: Your next question comes from the line of John Petersen with Jeffreys. Please go ahead.
John James Massocca: Great. Good morning. On Ocala and Columbus, can you give us the annual run rate FFO upside from leasing those two properties? How should we think about quantifying that since that seems to be the most likely upside in the near term?
John Peterson: It's about three cents. Okay, and then on Ocala, because I think that's the one we've been talking about the longest here, can you characterize how the negotiations have evolved there? Is it just waiting for the potential tenant to sign the dotted line, or is there a lot of back and forth on terms, and then that's what's holding it up? It's just waiting on the tenant at this point. Their internal process is incredibly long, and we're working through it, and we're trying to be patient, but hopefully we're going to have something done soon. I know we've been saying that for a couple of months now, but you know it continues to move in the right direction, just at a very slow pace.
John James Massocca: On Ocala and Columbus... Just about three cents. And then on Ocala, because I think that's the one we've been talking about the longest here, can you characterize how the negotiations have evolved there? Is it just waiting for the potential tenant to sign the dotted line? Or is there a lot of back and forth on terms and that's what's holding it up? It, it's.
Speaker Change: It's about three cents.
Speaker Change: And then on Ocala, because I think that's the one we've been talking about the longest here, can you characterize how the negotiations have evolved there? Is it just waiting for the potential tenant to sign the dotted line or is there a lot of back-and-forth on terms and that's what's holding it up?
Brendan P. Mullinix: It's just waiting on the tenant at this point. Their internal process is incredibly long, and we're working through it, and we're trying to be patient, but hopefully, we're going to have something done soon. I know we've been saying that for a couple months now, but you know it continues to move in the right direction just at a very slow pace.
Speaker Change: It's just waiting on the tenant at this point. Their internal process is incredibly long and we're working through it and we're trying to be patient but hopefully we're going to have something done soon. I know we've been saying that for a couple months now but you know it continues to move in the right direction just at a very slow pace.
John Peterson: All right, that's helpful.
John Peterson: Thank you.
Will Eglinton: And that concludes our question-and-answer session, and I will now turn the conference back over to Will Eglinton for closing comments. Well, thank you everyone for joining our call this morning. I hope you'll take the time to 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 senior management with any questions. Thanks again.
Will Eglin: And that concludes our question and answer session, and I will now turn the conference back over to Will Eglinton for closing comments.
Speaker Change: All right, that's helpful. Thank you.
Speaker Change: And that concludes our question and answer session and I will now turn the conference back over to Will Eglinton for closing comments.
Will Eglin: Well, thank you everyone for joining our call this morning. I hope you'll take the time to 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 senior management with any questions. Thanks again.
Will Eglinton: Well, thank you everyone for joining our call this morning. I hope you'll take the time to 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 senior management with any questions. Thanks again.
Operator: This concludes today's conference call. Thank you for your participation, and you may now disconnect.
Operator: This concludes today's conference call. Thank you for your participation, and you may now disconnect.
Speaker Change: This concludes today's conference call. Thank you for your participation and you may now disconnect.