Q2 2025 LXP Industrial Trust Earnings Call

Audra: Good morning. My name is Audra, and I will be your conference operator today. At this time, I would like to welcome everyone to the LXP Industrial Trust's second quarter earnings call and webcast. Today's conference is being recorded. 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. If you would like to ask a question during this time, simply press the star key followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one again. At this time, I would like to turn the conference over to Heather Gentry, Investor Relations. Please go ahead.

Good morning. My name is Audrey and I will be your conference operator today.

At this time, I would like to welcome everyone to the lxp industrial trust second quarter earnings, call and webcast.

Today's conference is being recorded 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. If you would like to ask a question during this time, simply press the star key followed by the number 1 on your telephone keypad. If you would like to withdraw your question, press star 1 again,

Heather Gentry: Thank you, operator. Welcome to LXP Industrial Trust's second quarter 2025 earnings conference call and webcast. The earnings release was distributed this morning, and both the release and quarterly supplemental are available on our website at www.lxp.com in the investor 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.

at this time, I'd like to turn the conference over to Heather Gentry investor relations. Please go ahead.

Thank you, operator. Welcome to LXP Industrial Trust's second quarter 2025 earnings conference call and webcast.

The earnings release was distributed this morning and both the release and quarterly supplemental are available on our website at www.lxl.com.

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.

Heather Gentry: 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 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 position, or cash flows. On today's call, Will Eglin, Chairman and CEO, and Nathan Brunner, CFO, will provide a recent business update and commentary on second quarter results. Brendan Mullinix, CIO, and James Dudley, Executive Vice President and Director of asset management, will be available for the Q&A portion of this call.

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 is not undertake a duty to update any forward-looking statements.

In the earnings, press release and quarterly, supplemental disclosure package. Lxp is reconciled all 9 Gap, Financial measures to the most directly comparable, gaap measure.

Any references in these documents to adjust a company ffo, refer to adjust a company funds from operations, available to all Equity holders and unit holders on a fully diluted basis.

Operating performance measures of an individual investment.

Or not intended to be viewed as presenting a numerical measure of Lex's historical or future financial performance.

Financial position or cash flows.

On today's call Will Egan chairman and CEO and Nathan Brunner. CFL will provide a recent business update and commentary on second quarter results.

Heather Gentry: I will now turn the call over to Will.

Will Eglin: Thanks, Heather, and good morning, everyone. We produced strong second quarter results highlighted by the lease-up of our 1.1 million square foot development facility in Greenville, Spartanburg. Same-store NOI growth of 4.7% and continued progress reducing our leverage with net debt to adjusted EBITDA of 5.8 times at quarter end. Our performance reflects the resilience of our core business amid a continuing soft industrial real estate environment and uncertain macroeconomic backdrop. Overall, U.S. net absorption was approximately 30 million square feet in the second quarter. Of this absorption, 20 million square feet was in our 12 target markets, indicating our markets held up relatively well compared to the broader market, with net absorption in five of our markets exceeding 2 million square feet. Large corporate users and 3PLs were the primary drivers of overall absorption, favoring higher quality properties.

Brendan Mullinix, CIO, and James Dudley, Executive Vice President and Director of Asset Management, will be available for the Q&A portion of this call. I will now turn the call over to Will.

Thanks, Heather. Good morning everyone.

We produced strong second quarter results highlighted by the lease-up of our 1.1 million square foot development facility. In Greenville-Spartanburg, same-store NOI growth was 4.7% with continued progress in reducing our leverage, with net debt to adjusted EBITDA of 5.8 times at quarter end.

Our performance reflects the resilience of our core business, amid a continuing soft industrial real estate environment and an uncertain macroeconomic backdrop.

Overall us, net absorption was approximately 30 million square feet in the second quarter.

Of this absorption 20 million square feet was in our 12 Target markets, indicating our markets held up relatively well compared to the broader Market with net absorption and 5 of our markets. Exceeding 2 million square feet,

Will Eglin: This trend bodes well for our portfolio, which is 92% comprised of Class A facilities with an average age of just over nine years. New deliveries are at a five-year low and are expected to continue declining. The construction pipeline in our 12 target markets is approximately 90 million square feet, down nearly 75% from the 2022 peak of approximately 330 million square feet. On the leasing front, year to date, we've leased approximately 2.4 million square feet with second generation base and cash base rent spreads of approximately 41% and 46%, respectively. We reached a significant milestone this quarter with the lease of our 1.1 million square foot development facility in the Greenville, Spartanburg market to a U.S. subsidiary of a global logistics company. This was a great outcome that resulted in immediate occupancy and low TI with annual cash base rent of approximately $6 million.

Large corporate users and 3pls were the primary drivers of overall absorption. Favoring higher quality properties.

This trend bods well for our portfolio which is 92% comprised of Class A facilities with an average age of just over 9 years.

New deliveries are at a 5-year low and are expected to continue declining the construction pipeline in our 12. Target markets is approximately 90 million square feet.

Down nearly 75% from the 2022. Peak of approximately 330, million square feet.

On the leasing front, year-to-date, we've leased approximately 2.4 million square feet with second-generation base and cash base rent spreads.

Of approximately 41% and 46% respectively.

We reached a significant Milestone, this quarter with the lease of our 1.1 million square foot development facility in the Greenville, Spartanburg Market to a US subsidiary of a global logistics company.

Will Eglin: Since 2019, we've developed 15 facilities, totaling 9.1 million square feet, of which 74% has been leased at an average estimated stabilized cash yield of 7.1%. We have had users touring our other big box facilities in Indianapolis and Central Florida, with the Indianapolis market much more active when compared to a year ago. Many of our 2025 expirations were addressed previously, and the remaining lease roll this year represents just 1.2% of our ABR, with rents that are approximately 30% to 35% below market. We're forecasting lower tenant retention for 2025, with year-end same-store occupancy of approximately 97% to 99%. Our current mark-to-market on leases expiring through 2030 remains attractive, with in-place rents 17% below market based on brokers' estimates. On the investment front, during the quarter, we sold a property in Chillicothe, Ohio, to a user buyer for approximately $40 million at a cash capitalization rate of 4.3%.

Of approximately $6 million.

Since 2019, we've developed 15 facilities, totaling 9.1 million square feet, of which 74% has been leased at an average estimated stabilized cash yield of 7.1%.

We have had users touring our other big box facilities in Indianapolis in Central Florida with the Indianapolis Market. Much more active when compared to a year ago

Many of our 2025 expirations were addressed previously. And the remaining lease role this year represents, just 1.2% of our ABR with rents that are approximately 30 to 35% below Market. We're forecasting, lower tenant retention for 2025 with year end. Same store, occupancy of approximately, 97% to 99% and our current Mark to Market on Lisa's expiring through 2030 remains attractive with in place rents, 17% below Market based on broker's estimates.

Will Eglin: This sale, along with another sale in the first quarter, bolstered our cash position. We had creatively redeployed a portion of the Chillicothe sales proceeds to fund the repurchase of approximately $28 million of our floating rate trust preferred securities at a 5% discount to par. Based on the discounted purchase price, the current yield on the repurchased securities was approximately 6.6%. The transaction market for individual properties and small portfolios has been resilient. Given the stability we are seeing in the investment sales market, we are evaluating some modest capital recycling opportunities outside of our target markets for reinvestment that we would expect to be largely earnings neutral. We continue to concentrate our investment strategy in 12 target markets in the Sun Belt and select lower Midwest states, which account for approximately 85% of our gross assets.

On the investment front, during the quarter, we sold the property in Chillati, Ohio, to a user buyer for approximately $40 million at a cash capitalization rate of 4.3%.

This sale, along with another sale in the first quarter, bolstered our cash position. We creatively redeployed a portion of the chili sales proceeds to fund the repurchase of approximately $28 million of our floating rate Trust Preferred Securities at a 5% discount to par.

based on the discounted purchase price. The current yield on the repurchase Securities was approximately 6.6%.

The transaction market for individual properties, in small portfolios has been resilient given the stability we are seeing in the investment sales Market. We are evaluating some modest Capital recycling opportunities outside of our Target markets. For reinvestment that we would expect to be largely earnings neutral.

Will Eglin: With a more focused geographic approach, we have the ability to scale and continue deepening our expertise and relationships within these markets, which provides both investment and operational advantages. Our target markets are experiencing positive demographic trends and are continuing to see investment in the onshoring of advanced manufacturing, reflecting business-friendly government policies and high-quality logistics infrastructure, among other attributes. In fact, in a recent CNBC report ranking the top states for business, 10 of our 12 target markets are in the top 10 states, and all 12 are in the top 20, further validating our investment thesis that our target markets stand to outperform. With that, Nathan Brunner will now discuss our financials, leasing, and balance sheet in more detail.

We continue to concentrate our investment strategy in 12 Targets in the Sun Belt and select lower midwest states, which account for approximately 85% of our gross assets.

With a more focused Geographic approach, we have the ability to scale and continue deepening. Our expertise in relationships Within These markets, which provides both investment and operational advantages. Our Target markets are experiencing positive demographic, Trends and our continuing to see investment in the on-shoring of advanced manufacturing reflecting business-friendly, government policies, and high Quality, Logistics infrastructure among other attributes. In fact, in a recent CNBC report, ranking the top.

States for Business: Ten of our twelve target markets are in the top ten states, and all twelve are in the top twenty, further validating our investment thesis that our target markets stand to outperform.

Nathan Brunner: Thanks, Will. Adjusted company FFO in the second quarter was $0.16 per diluted common share, or approximately $47 million. This morning, we tightened our 2025 adjusted company FFO guidance to a new range of $0.62 to $0.64. The low end was increased with the lease-up of our 1.1 million square foot facility in Greenville, Spartanburg, which is expected to contribute $3.7 million of base rent and operating expense reimbursement in 2025. The high end of the range has been revised given where we are in the year as timelines continue to be elongated regarding tenant decision-making processes. We are now including approximately $2 million of GAAP rent contribution from prospective leasing activity across the remaining development facilities for the second half of the year. During the quarter, we produced same-store NOI growth of 4.7%, with our same-store portfolio 98% leased at quarter end.

With that, Nathan will now discuss our financials, leasing, and balance sheet in more detail.

Thanks, we will adjust the company FFO in the second quarter with 16 cents per diluted common share, or approximately $47 million.

This morning, we tightened our 2025 adjusted company. Ffo guidance to a new range of 62 to 64 cents. The low end was increased with the lease up of our 1.1 million square foot facility in Greenville Spartanburg, which is expected to contribute 3.7 million of Base rent, and operating expense reimbursement, in 2025,

The high end of the range has been revised given where we are in the year as timelines, continue to be elongated regarding tenant decision-making processes.

We are now including approximately 2 million dollars of Gap. Rent contribution, from prospective leasing activity across the remaining development facilities for the second half of the year.

Nathan Brunner: Our same-store NOI growth guidance for full year 2025 remains unchanged at 3% to 4%. This guidance assumes year-end occupancy for the same-store pool of approximately 97% to 99%. We reported second quarter G&A of approximately $9.6 million, and our expectations for 2025 G&A are unchanged at $39 to $41 million. On the leasing front, we increased our portfolio occupancy in the second quarter to 94.1%, up from 93.3% as of first quarter. As Will mentioned, we leased our 1.1 million square foot development facility in the Greenville, Spartanburg market during the quarter for an initial lease term of two years with two five-year renewal options. The initial base rent is $5.50 per square foot with 3.25% annual rent bumps. The tenant took occupancy of the facility in late May, and cash rent commences August 1st. The estimated stabilized cash yield on our cost basis is approximately 8%.

During the quarter, we produce, same store in Hawaii growth of 4.7% with our same store portfolio. 98% leased at quarter end. Our same store. Noi growth guidance for full year, 2025 remains unchanged at 3 to 4%.

this guidance assumes year-end occupancy for the same store pool, approximately 97 to 99%

We reported second quarter GNA of approximately 9.6 million in our expectations, for 2025 GNA are unchanged at 39 to 41 million.

On the leasing front, we increased our portfolio occupancy in the second quarter to 94.1% up from 93.3% as of the first quarter.

in the Greenville spot and blue market during the quarter for initial lease term of 2 years, with 2 5 year, renewal options

The initial base rent is $5.50 per square foot with 3.25% annual, rent bumps.

The tenant took occupancy of the facility in late May and cash rent commences August 1st.

Nathan Brunner: We also renewed our approximately 101,000 square foot lease in the Atlanta market and an outdoor storage facility in Minneapolis, both of which were 2025 expirations. We increased both the base and cash base rents at the Atlanta facility approximately 38% and extended the lease for five years with 3.5% rental bumps. The Minneapolis outdoor storage facility was encumbered by a five-year fixed-rate renewal option. We successfully negotiated a 10-year renewal with the tenant at the current in-place rent to enhance the marketability of this property as it is a near-term disposition candidate. We had two tenant move-outs at quarter end, which included our 248,000 square foot facility in Houston and our 355,000 square foot facility in Savannah. We collected two months of holdover rent at the Houston facility during the quarter and have prospective activity at both buildings. We currently have approximately 600,000 square feet of redevelopment projects underway.

The estimated stabilized cash, shield on our cost basis is approximately 8%. We also renewed our approximately 101,000 square foot lease in the Atlanta market and an outdoor storage facility in Minneapolis both of which were 2025 expirations.

We increased both the base and cash base rents at the Atlanta facility, approximately 38% and extended the lease for 5 years. With 3.5% rental, bumps,

The Minneapolis outdoor storage facility was encumbered by a 5-year fixed rate. Renewal option. We successfully negotiated a 10-year renewal with the tenant at the current in place rent to enhance the marketability of this property, as it is the near-term disposition candidate, we had 2 tenants move out to quarter end, which included our 248,000 square foot facility in Houston and our 355,000 square foot facility in Savannah.

We collected 2 months of holdover, rent at the Houston facility during the quarter and have prospective activity at both buildings.

Nathan Brunner: This includes a 350,000 square foot redevelopment in Orlando, which commenced in the quarter, and a 250,000 square foot redevelopment in Richmond. Both facilities are anticipated to complete in the first quarter of 2026 and produce yields on cost in the low teens. Moving to balance sheet, we continue to execute on our plans to reduce leverage and increase the proportion of hedged and fixed-rate debt. As a reminder, in September 2024, we capitalized on a favorable market window and executed interest rate swaps to lock in fixed rates on $250 million of floating rate bank term loan and $83 million of our trust preferred securities, leaving approximately $47 million of trust preferred securities unhedged in anticipation of potential opportunities to repurchase the securities. During the quarter, we repurchased approximately $28 million of trust preferred securities at a 5% discount to par.

We currently have approximately 600,000 square feet of Redevelopment projects underway. This includes a 350,000 square foot Redevelopment in Orlando, which commenced in the quarter and a 250,000 square foot. Redevelopment enrichment. Both facilities are anticipated to complete in the first quarter of 2026 and produce yields on cost in the low teens moving to balance sheet. We continue to execute on our plans to reduce leverage and increase the proportion of hedged and fixed rate debt.

As a reminder, in September 2024, we capitalized on a favorable Market window and executed interest rate swaps to lock in fixed rates and 250 million dollars of floating rate bank termine and 83 million of our trust Preferred Securities leaving approximately 47 million of trust Preferred Securities unhedged in anticipation of potential opportunities to repurchase the securities.

Nathan Brunner: This transaction, along with the $50 million term loan repayment in January, increased our hedged and fixed-rate debt to 99% of debt outstanding in 2025 and 2026, with a weighted average interest rate of 3.9%. Net debt to adjusted EBITDA was 5.8 times at quarter end, down 0.4 turns over the last 12 months. Reducing leverage remains a key focus for the company as we pursue our business plan and grow EBITDA. At quarter end, we had approximately $71 million of cash on balance sheet. With that, I'll turn the call back over to Will.

During the quarter, we repurchased approximately 28 million of trust Preferred Securities at a 5% discount to power this transaction along with the 50 million dollar turbine repayment in January increased, our hedged and fixed rate, debt to 99% of debt outstanding in 2025 and 2026.

With a weighted average interest rate of 3.9%. Net debt to adjusted ebida was 5.8 times a quarter end down 0.4. Turns over the last 12 months, reducing leverage remains a key Focus for the company as we pursue our business plan and grow ibida.

Quarter end, we had approximately 71 million of cash on balance sheet.

Will Eglin: Thanks, Nathan. In closing, we're pleased with our Q2 results. We believe our portfolio of modern logistics facilities with strong tenant credit and a geographic footprint aligned with advanced manufacturing investment is highly desirable in the current market environment. We will continue to focus on creating value for our shareholders by increasing occupancy, marking rents to market, raising rents through annual escalators, and concentrating on our 12 market investment strategy. With that, I'll turn the call back over to the operator.

With that, I'll turn the call back over to Will.

Thanks, Nathan in closing, we're pleased with our second quarter results. We believe our portfolio of modern Logistics facilities with strong tenant credit and a geographic footprint aligned with Advanced. Manufacturing investment is highly desirable in the current market environment. We will continue to focus on creating value for our shareholders by increasing occupancy, marking rents to Market, raising rents through annual escalators and concentrating on our 12 markets investment strategy with that. I'll turn the call back over to the operator.

Brendan Mullinix: Thank you. We will now begin the question and answer session. If you have dialed in and would like to ask a question, please press star one on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star one again. We will take our first question from Anthony Tallone at J.P. Morgan.

Thank you. We will now begin the question and answer session. If you have dialed in, I would like to ask a question. Please press star 1 on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your questions, simply press star 1 again.

We'll take our first question from Anthony Pelon at JP Morgan.

Anthony Tallone: Great, thanks. Good morning. First question on disposition. Can you talk about what drove the low cap rate on the sale?

Uh great thanks, good morning. Um just first question on disposition. Uh, can you talk about just what drove the the low cap rate on on the sale?

Will Eglin: Yeah, the situation there really involved finding a user that wanted to own that building. So the execution was much better than if we had sold that into the investor marketplace.

Really involved, um, finding a user that wanted to own that building. So the execution was much better than if we'd sold that into the um

Anthony Tallone: Okay. Also on capital markets, can you you mentioned still potentially selectively selling some things. Can you give us a sense as to maybe order of magnitude that you have in the market to sell in the nearer term? Also just some broader comments on depth of market for your assets, maybe where cap rates are, what types of buyers and what types of product do folks want right now?

You know, in investor Marketplace.

Operates our uh, you know what types of buyers and what types of product do you folks want right now?

Will Eglin: I think we would test the market with about $100 million of dispositions going forward. I would say that, you know, after Liberation Day, we were a little bit concerned that there would be volatility in the investment sales market, and it has really held up very well. We will be back in the business of creating some liquidity from our asset base that is outside of our 12 target markets. I think we are optimistic that we will do very well.

Yeah, I I I think we would, um, test the market with about 100 million of of dispositions going forward. And, uh, I would say that, um,

You know, after Liberation day we were a little bit concerned that there would be volatility in the investment sales market, and it's really held up very well. So um, we'll be back in uh, the business of creating some liquidity. From our asset base that's outside of our 12 Target markets. And and I think we're optimistic that we'll do uh, very well.

Anthony Tallone: Okay. And then just last one, can you talk about what traffic has been like for leasing up some of the larger empty boxes?

Okay, and then just last 1. Um can you talk about just what uh traffic has been like for leasing up some of the the larger empty boxes?

James Dudley: Sure, Tony, this is James. How are you this morning? I will start with Indy. Indy has been, has really picked up since Q4 of last year. There has been a lot of big box activity. There were two really good deals that got signed, not in our particular submarket, but in one of the major submarkets in Indy. Subsequent to quarter end, there are a couple of 800s that have gotten done. There is a 1.2 that is in process of getting done. So we have had some competition get taken off, and we have had a number of RFPs, a number of tours, and we are feeling confident that we are going to land one. It really has not been a building issue. It has been a size issue. We have just been kind of in the middle of the size of the sizes that have been leased.

Sure time. This is James. Um how are you this morning? Um, so I'll start with Andy. So Andy has been uh has really picked up really since fourth quarter of last year, there's been a lot of big box activity. There were 2. Really good deals that got signed and, uh, not in a particular submarket. But in 1 of the, the major sub markets in Indy subsequent to quarter end, um, there are a couple 8 hundreds that have gotten done, there's a 1.2 that's in process of getting done. So we've had some competition get taken off. Um and we've had a number of rfps a number of Tours and we're feeling confident that we're going to land 1, it really hasn't been a you know, a building issue. It's been a size issue. We've just been kind of in the middle of

James Dudley: So optimistic on Indy. Central Florida generally has just been a little bit slower on the big box. We have had some renewed interest recently. We have got some interest from a full building user that just kind of came across. And there are some deals that are in the works in the smaller, kind of half a million size. So things seem to be picking up there, but promising activity for sure in Indy and then hopeful activity in Central Florida.

The size of the sizes that have been least. Um, so optimistic on Indie, uh, Central Florida. Generally, it's just been a little bit slower on the, on the big box. We have had some renewed interest recently. Um,

We've got some interest from a full building user that that just kind of came across. And and there's some deals that are in the works, in the smaller, you know, kind of half a million size. So things seem to be picking up there, but um, you know, promising activity for sure in Indie and then hopeful activity in Central Florida.

Anthony Tallone: Okay, great. Thank you.

Will Eglin: Thanks, Tony.

Okay, great. Thank you.

Brendan Mullinix: will move next to Todd Thomas at KeyBanc Capital Markets.

Thanks Tony.

We'll move next to Todd Thomas at KeyBank.

Anthony Tallone: Hi, thanks. First question, with, I wanted to ask about the comments you made around the year-end lease rate target for the same-store pool in the 97% to 99% range. The portfolio is 98% leased today. You have four remaining expirations that represent a little over 100 bps of occupancy. Can you provide an update on some of those expirations, the 380,000 square footer in Indianapolis that is scheduled to expire tomorrow? I am curious if you have an update on the remaining three as well.

James Dudley: Sure. The three that you just mentioned is a no move-out. We expect that we are going to get a little bit of holdover rent from them. Going back to the Indy market, there has been a significant amount of activity on that asset. We are hopeful that we are going to be able to backfill that space relatively quickly. We will see, but like I said, good activity there. Then we have got the two small, 80,000 square footers. Those are both also move-outs, one in Savannah and then one across the street or across the highway in Indianapolis. We have those out in the market. The last one is still unknown. It is 160,000 square feet in Phoenix. If the tenant stays, great. There is the potential they may. It is across the street from one of their manufacturing plants.

Hi thanks. Um first question um with you know I wanted to ask about the um comments you made around the year end least rate target for the same store poll in the 97 to 99% range. The portfolio is 98% at least today you have 4 remaining expirations that represent a little over 100 basis points of occupancy. Um, can you can you provide an update on um, some of those expirations the 380,000 square footer in Indianapolis, that's scheduled to expire tomorrow and curious if you have an update on the uh, remaining 3 as well,

Sure, so, um, the 380 you just mentioned is a know, move out. We expect that. We're going to get a little bit of holdover rent from them, uh, going back to the Indie Market. There's been, uh, significant amount of activity on that on that asset. So we're hopeful that we're going to be able to backfill that space relatively quickly. We'll see, but, like I said, good activity there. Uh, then we've got the 2 small, uh, 80,000 Square Footers. Um, those are both also move outs 1 in Savannah. And then 1 across the street or across the highway in Indianapolis, um, we have those out in the market and then the last 1 is still unknown. Um, it's 160,000 square feet in Phoenix.

James Dudley: If we get the building back, that is a pretty tight market with a really strong mark-to-market of around 50%. It has got 40-foot clear and right on the 303.

You know, if the tenants stay is great. There's, there's the potential they may, it's across the street from 1 of their manufacturing plants. Um, but if we get the building back, that's a pretty tight Market with a really strong Mark to Market of around 50%. Uh, it's got 40 foot clear and right on the 303.

Anthony Tallone: Okay. For 2026, any sense how, I mean, you commented that tenant retention was going to be a little bit lower in 2025. Any sense what tenant retention may look like in 2026 at this point? Are there any known move-outs that are worth discussing right now?

Okay.

Um,

and then,

For 2026 and any sense. How? Um, I mean you commented that tenant retention was, was going to be a little bit lower in 2025. Um, any sense, what tenant retention may look like, um, in 26 at this point and and are there any known move outs, um, that that you know, are worth uh, discussing right now.

James Dudley: Most of our lease expirations are kind of back here and back into 2026. We have started some dialogue with probably 25% of the tenants. I would say for the most part, it is really positive on renewal. There are a couple of situations where tenants are contemplating their supply chain and whether or not the market that they are in is what fits for them. We have one situation with a small 3PL in Memphis that is not sure the size still fits. I think we are going to have strong retention, but we may have a few tenants here or there that move out. Overall, 19% mark-to-market next year, and we think we are going to have a successful overall outcome.

So most of our lease expirations are kind of back here, back into the year in 26, we have started some dialogue with uh, probably 25% of the tenants and I would say, for the most part, it's really positive on renewal. There are a couple of situations where tenants are contemplating their supply chain and whether or not the market that they're in is is what fits for them. And then we have 1 situation with a small 3pl in Memphis that isn't sure the size still fits. So I think we're going to have strong retention, but um, we we may have a few tenants here or there that move out. But overall uh, 19% Mark to Market next year and we think we're going to have a successful you know, overall outcome.

Anthony Tallone: Okay. I wanted to shift to the land bank. It sounds like the build-to-suit markets are stronger than they have been, or getting stronger, I should say. Curious if you are seeing that.

Audra: If there are opportunities within the land bank that could materialize.

Um, or getting stronger. I should say, you know, I’m curious if you're seeing that and if there are opportunities within the land bank that could materialize.

Brendan Mullinix: Hi, this is Brendan Mullinix. Yeah, we've continued to respond to builders' interest at both our Phoenix site and our Columbus site. I don't have anything further to report on that today, but I will comment that we've seen more potential interest of late at our Columbus site, where we have about 69 acres remaining. The immediate market area around our site there has tightened significantly. We recently had a 1.2 million square foot building there in the market lease. So there's good activity there. Columbus is looking strong. Decision making on builders' is a little bit like what we've seen with other and commented on other large space decisions. So it's been kind of protracted. In some cases, in Phoenix, we've had cases where we've competed against existing spec product, where there may be motivated landlords who can be competitive on pricing.

Brendan Mullinix: In some other cases, we've had situations where RFP processes that we've responded to where the tenants defer decision and then schedule constraints may favor existing buildings versus taking completion risk on a new build. But there certainly is builders' interest out there. So we're optimistic that we'll land something in that space.

Um, hi. This is Brandon. Yeah, we've continued to respond to bill due interest at both our Phoenix site and our on the site. I don't have anything further to report on that today, but um, I will comment that we've seen more potential interests of late at our Columbus site where we have about 69 Acres remaining, um, that the immediate market area around our uh, site there has tightened significantly. We recently had a 1.2 million square foot building there in the Market at least. Um, so there's a, there's there's good activity there. Columbus is is looking strong, um, you know, decision-making on build. The suit, is, you know, a little bit like what we've seen with other uh, and commented on on other, large space decisions. So it's been kind of protracted. Some cases we, we, you know, in Phoenix, we've had cases where we've competed against, um, existing spec product, where there may be motivated, landlords, uh, who, who can be competitive on pricing and then in

Some other cases. Uh, we have situations where uh RP processes that we've responded to or the tenants deferred decision and then schedule, constraints, May favor, existing buildings versus taking, you know, completion risk on, on new builds. But, um, there, there there's certainly builds to the interest out there. Um, so we're optimistic that, uh, uh, that we'll land something in that space.

Audra: All right, thank you.

Brendan Mullinix: Thanks, Todd.

All right. Thank you.

Thanks Todd.

Nathan Brunner: will move next to Vince Tibone at Green Street.

We'll move next to Vince T-Bone at Green Street.

Heather Gentry: Hi, good morning. As you think about capital recycling, could either of the cold storage or office JV properties be potential candidates for sale, or should we consider those properties or businesses you will stay in for at least the foreseeable future?

Hi. Good morning. Um, as you think about capital recycling, could I have the cold storage or office J? JV Properties or, you know, potential candidates for sale? Or should we consider, you know, those, you know, properties, or businesses you'll stay in for at least the foreseeable future?

Brendan Mullinix: For modeling purposes, you should think of those portfolios as being pretty static. I think there is one opportunity in the office JV that may turn into a sale candidate. But for the most part, I would think of them as being static portfolios.

Heather Gentry: No, that makes sense. Then just continuing on the point of capital recycling, is there a point where you would potentially shift from selling to purchase properties to consider buying back shares here in some kind of leverage neutral fashion, just given where stock trades on a discounted NAV or minimum valuation metric? It seems like that could be an interesting avenue over further applications. Curious how you are thinking about that opportunity and trade-off.

I think for modeling purposes, you should think of those portfolios as as being pretty static. Uh, I think there is, you know, 1 opportunity in in the office JV that may may turn into a sales candidate. Um but uh for for the most part I would think of them as being static portfolios.

Brendan Mullinix: I think so. I think the number one priority for us that is going to improve our valuation the most is, you know, generating more EBITDA from our vacancy and reducing net debt to EBITDA. If we can drive that down to five times, we have visibility on that. It is, you know, varying timelines to get there, but I think that is the thing that will help the valuation the most. In the context of share repurchase, if we could do some of both, that would be fine. I do think it is an important longer-term priority to recycle the capital out of our non-target markets and really focus on the 12 that are our core strategy. There will be some, you know, tax implications where we want to complete some 1031 exchanges in order to protect our basis.

No, that makes sense. And then, just to continue on the point of capital recycling, I mean, is there a point where you would potentially, you know, shift from, you know, selling to purchasing properties to consider buying back shares here in some form of leverage neutral fashion? Just given, you know, where stock trades on a discount to NAV or, you know, many evaluation metrics, it seems like that could be an interesting avenue over, you know, further acquisitions. Curious how you're thinking about, you know, that opportunity and trade-off.

Brendan Mullinix: Share repurchase could be part of the mix, but I really want to stay committed to reaching that five times net debt to EBITDA leverage point.

Yeah, I I think so. I think the number 1 priority for us that's going to improve our evaluation. The most is, um, you know, generating more ebita from from our vacancy and reducing that debt to Evita. Um, you know, if we can drive that down to 5 times, we have, you know, visibility on that it's, um, you know, of varying, uh, timelines to get there. But I think that's, that's the thing that will help the valuation the most, um, in the, uh, in the context of share repurchase. If, if we could, if we could do some of both, that would that would be fine. Uh, I do think it's an important, um, you know, longer term priority to recycle the capital out of our non-target markets and really focus on on the 12 that are our core strategy. And there will be some, you know, tax implications where we want to complete some 1031 exchanges um, in order to protect our our basis.

Uh, but um, know share share. Repurchase could be part of the mix, but I really want to uh stay committed to reaching that um, 5 times. Net debt. Leverage point.

Heather Gentry: Got it. Thank you. Maybe just the last one for me. I just wanted to clarify a comment from Nathan Brunner earlier about, I believe it was $2 million included in the 2025 guide from future leasing activity. Is that solely, is that $2 million directly tied to either of the two vacant million square footers, or is that any vacant property right now? So that would be kind of $2 million from any existing vacancy that you are able to lease through year-end. Just kind of curious where you are, if you could elaborate on that, kind of just get a sense of where you are, how you are thinking about the new leasing opportunity through year-end.

Will Eglin: Yeah, I think the $2 million really relates to the total opportunity set of the two big boxes. We also have another development that's two buildings, one's halfway in Central Florida. It's really those three projects that that opportunity relates to. When you look at those three projects and you think about the annual run rate potential of those projects, it's something like $15 million of cash-based rent and OpEx reimbursement. I think that's important context. It's a $2 million of contribution out of a pipeline that has sort of $15 million of annual run rate when it's leased. Just to be crystal clear, it does not include any other second generation vacancies.

Got it. Thank you. Let me just the last 1 for me. I just wanted to clarify a comment from Nathan earlier about. I believe it was 2 million dollars, including the 25 guide from future leasing activity is is that solely is that 2 million? You know, directly tied to either the 2 vaccines Square Footers or is that any vacant property right now? So that would be kind of 2 million from any existing vacancies that you're able to lease through your end, just kind of curious where you're, you know, if you'd elaborate on that. Um, kind of just get a sense of where your higher thinking about, you know, just the, the new leasing opportunity through your end.

Two buildings once housed half of least um in Central Florida. It's really um those three projects that that opportunity relates to. And when you look at those three projects,

And you think about the UN annual run rate potential of those projects, it's something like 15 million dollars.

Um, of uh, cash-based rent, and and Opex reimbursement. And so I think that's important context, so it's a million dollars.

of contribution out of

um, you know, a pipeline that has so 15 million dollars of annual run rate when it's least,

But it just to be crystal clear. It does not include any other second generation, vacancies,

Audra: Got it. Thank you.

Got it. Thank you.

Heather Gentry: Thanks, Vince.

Thanks Vince.

Nathan Brunner: Next, we'll take Mitch Germain at Citizens JMP Securities.

next, I'll take you, Mitch Germaine at Citizens Capital markets,

Anthony Tallone: Thank you. Sure. I am curious about the move-outs in the back part of this year. I think you referenced three with one that you were not sure about. I am curious how many of those three were always kind of known move-outs, or was any of that a result of some of the recent macro and legislation issues?

Uh, thank you. So I'm curious about the move-outs in the back part of this year.

And I think you referenced 3 with 1 that you weren't sure about. I'm curious, how many of those 3 were always kind of known move outs? Or was any of that, a result of some of the recent macro, uh, and legislation issues?

Brendan Mullinix: I guess I can run through them real quick. The 380 in Indie, they moved to a competitive building that had tax abatement. They were able to get tax abatement when we didn't have it. It was an operating expense issue. The other two moved into new space where they actually consolidated. The 80,000 square feet in Indianapolis moved one of their operations from Buffalo and moved into a 350,000 square foot building in Plainfield. The smaller one in Savannah moved from 88,000 square feet into 800. It was a size requirement and then a particular situation with tax abatement.

Um, so I guess I can run through them real quick so the the 380 and Indie. Um, they moved to a competitive building that had tax abatement. So they were able to get tax abatement when we didn't have it. So it was a an operating expense issue.

Um the other 2 uh moved into new space where they actually Consolidated. So the 80,000 square feet in Indianapolis. Moved 1 of their operations from Buffalo and moved into a 350,000 square foot building in Plainfield.

And the smaller 1 in uh in Savannah moved from 88,000 square feet into 800. So um it was, you know, it was a size, a size requirement, and then a particular situation uh with tax statement.

Anthony Tallone: Gotcha. That is super helpful. You previously had suggested sales were off the table, and it does seem like activities picked up more than you anticipated. I am curious if that same phenomenon that is happening in the investment sales market is also happening within the leasing markets where, you know, while you anticipated things would be a little bit slower, you are seeing a little bit more resiliency.

Got you. That's super helpful.

and you previously,

Catch adjusted, you know, sales were off the table and it does seem like activities picked up, uh, more than you anticipated. I'm curious if that same phenomenon that's happening in the Western Sales Market is also happening within the leasing markets where, you know, while you anticipated things would be a little bit slower and you're seeing a little bit more resiliency.

Brendan Mullinix: I would say activity has definitely picked up. You know, it is really about getting it from activity to across the finish line and getting signed. There seemed to be a whole lot of starts where you are having conversations with tenants or even getting through the RFP process. You feel like a tenant is ready to sign and then you get a pause. So I think there is a lot more tire kicking. I think there is still concern over macro uncertainty. And I think if tenants can put decisions off, they are. I think you have also seen a lot of 3PL activity. It has really driven the market. And I think that is also indicative of the fact that tenants are concerned about uncertainty and maybe looking to 3PLs both to cut costs and to give them flexibility.

I would say activity has definitely picked up. You know, it's really about getting it from activity to across the finish line and getting signed. There seemed to be a whole lot of, you know, starts where you're having conversations with tenants. You're even getting through the RFP process, you feel like a tenant's ready to sign, and then you get a pause.

So, I think there's a lot more Tire kicking. I think there's still concern over macro uncertainty, and I think if tenants can, you know, put decisions off, they are. I think you've also seen, uh, you know, a lot of 3pl activity. It's really driven the market. And I think that's also, um, indicative of the fact that tenants are concerned about uncertainty and maybe looking to 3 PLS, but both to cut costs and to give them flexibility.

Anthony Tallone: Great. That is helpful. Any last question for me? Any update on Phoenix and the opportunity there?

Great, that's helpful. Any last questions for me? Any update on Phoenix and the opportunity there?

Brendan Mullinix: No, not beyond what I commented on earlier in the conversation. So continuing to see interest there and be optimistic about the potential there.

Uh, now not—no, not beyond what a comment in it on early.

Anthony Tallone: Great. Thank you.

Or in the conversation. So continuing to to see interest there and be optimistic about the potential there.

Great. Thank you.

Heather Gentry: Thanks, Mitch.

Nathan Brunner: We'll move next to James Kammert at Evercore ISI.

Thanks Mitch.

And we'll move next to Jim Cameron at evercore isi.

Will Eglin: Good morning. Thank you. I guess, Nathan, you mentioned some pretty attractive returns on redevelopment activity. Could you refresh my memory? What kind of dollar volume of redevelopments could LXP Industrial Trust be looking at in the next 12 to 18 months?

Good morning, thank you. Uh, I guess Nathan you mentioned some pretty attractive Returns on Redevelopment activity. Could you refresh my memory? You know what, kind of dollar volume of redevelopments uh could lxp be looking at in the next 12 to 18 months?

Brendan Mullinix: David, you want to take it? You take it. Yeah, sure, I can. The two redevelopments that were announced, just to summarize those. One, the larger project is a redevelopment project in Orlando that follows on an investment that we made last year where we acquired the interest in the land beneath the 205,000 square foot building that we own there that was also encumbered by a below-market building lease that was at $2.48 a square foot. In addition, we bought an expansion of that building that our tenant had owned. Today, we own a 351,000 square foot building very well located in Southwest Orange County submarket of Orlando, which is outperforming the rest of the market. The budget there is $9.4 million on the redevelopment. The second project that we've announced is in Richmond.

Oh you want to take it? You take it back. Yeah sure. I can I can the the 2 uh redevelopments that were announced just to summarize those 1. Um the the larger project is a Redevelopment project in Orlando that follows on an investment that we made last year where we acquired the

Brendan Mullinix: It's a 252,000 square foot building that was originally developed as part of a four-building campus for a single user. There, the tenant exercised an early termination rights that they had for this particular building. The benefit there to us is that that was encumbered by a below-market lease as well. So we removed that encumbrance there. The estimated cost of redevelopment is $3.7 million, which is principally just to separate the building systems and do some additional upgrades, expanding parking, and things like that for the building to operate more independently from the other buildings. As Nathan Brunner shared in his prepared remarks, both projects are anticipated to complete in the first quarter of next year and produce yields on costs in the low teens.

Um, the, the budget's, there is, uh, 9.4 million on the, the Redevelopment and then the second project that, uh, We've announced is enrichment. It's a 252,000 square foot building that, uh, was originally developed as part of afford building, uh, campus for a single user. Uh, their, the tenant exercised in early termination rights that they had for this particular building, um, and the benefits there to us, is it that was income or buy below Market lease as well. Um, so we removed that incumbents, um, their, uh, the estimated cost of Redevelopment is 3.7 million dollars, which is, uh, principally just to separate the building systems and do, uh, some additional upgrades expanding parking and, and things like that for the building to operate more independently from the other, uh, buildings. Um,

Will Eglin: Right. No, that's extremely helpful. I'm sorry, I probably didn't pose the question properly. I'm thinking beyond those you disclosed, what would you say, just in the portfolio, can you identify material amounts of redevelopment opportunities? That's a better way to phrase. I'm sorry. Beyond what you've already identified, is that a source of opportunity for LXP Industrial Trust?

As Nathan shared in his prepared remarks. Uh both projects are anticipated to complete in the first quarter of next year and produce yields on costs and the low teams.

Right? No, that's extremely helpful. I'm sorry, I probably impose the question. Probably, I'm thinking Beyond those, you disclose. What would you say?

Just in the portfolio. Can you identify material amounts of Redevelopment opportunities? It was a better way to phrase. I'm sorry. You know, beyond what you've already identified. Is that a source of opportunity for for Lexington.

Brendan Mullinix: There's additional opportunity in the portfolio. We're not quantifying it today.

Will Eglin: All right, fair enough. Finally, you know, you're very helpful to comments in Indianapolis still regarding lease up. It's more a question of, you know, just a large box. There haven't been too many users for that. In the Florida large lease up, are you seeing the competing landlords panic in any regard, you know, sort of dropping rents? It's not something that we should be concerned about, that, you know, sort of race to the bottom here. It's just a lack of demand, but no one's sort of blinking yet on rents.

You know, I think that there's additional opportunity in the portfolio, uh, we're not quantifying it today.

All right, fair enough. And then finally, you know, you're very helpful to comments in Indianapolis still regarding Lisa. It's more question of, you know, just a large box that haven't been too many users but for that, and uh, in the Florida, largely lease up, are you seeing the competing landlords panic in any regard, you know, sort of dropping rents or it? It, it's not something that we should be concerned about that, you know, sort of Race To The Bottom here. It's just a lack of demand and, but no 1's. Sort of blinking, yet.

Brendan Mullinix: You know, there are some landlords that are willing to do that. But typically, when they do that, and I can think of two in Indie right now, it's because they have something that's functionally wrong with their building or they're in a location that's not desirable. If you're down the middle with your asset, I think rents are going to continue to hold. I think where you'll see the softness in the market will be in free rent and tenant improvements rising.

On rents. You know, there there there are there are some landlords that are are willing to do that but typically when they do that and I can think of 2 and and uh and Andy right now it's because they have something that's functionally wrong with their building or they're in a location. That's not desirable.

If you're, if you're down the middle with your asset, I think rents are going to continue to hold. I think where where you'll see the softness in the market will be in free rent and and tenant improvements Rising.

Will Eglin: Very good. Thank you very much.

Heard, good. Thank you very much.

Brendan Mullinix: Thanks, Jim.

Thanks Jim.

Nathan Brunner: That concludes our Q&A session. I will now turn the conference back over to Will Eglin for closing remarks.

Audra: We appreciate everyone joining our call this morning, and we look forward to updating you on our progress over the balance of the year. Thanks again for joining us today.

And that concludes our Q&A session. I will now turn the conference back over to will heed for closing remarks.

Well, we appreciate everyone joining our call this morning and we look forward to updating you on our progress, over the balance of the year. Thanks again for joining us today.

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

Includes today's conference call. Thank you for your participation. You may now just connect.