LXP Industrial Trust

Good morning and welcome to the Lexington Realty Trust second quarter 2020 earnings call-in webcast. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your touchtone phone. To withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Heather Gentry, Investor Relations. Please go ahead.

Thank you, Operator. Welcome to Lexington Realty Trust's second quarter 2020 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 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. Lexington 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 Lexington files with the SEC from time to time could cause Lexington's actual results to differ materially from those expressed or implied by such statements. Except as required by law, Lexington does not undertake a duty to update any forward-looking statements. In the earnings press release and quarterly supplemental disclosure package, Lexington 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 Lexington's historical or future financial performance, financial position, or cash flows. On today's call, Will Eglin, Chairman and CEO, Beth Boulerice, CFO, and Brendan Mullinix, Chief Investment Officer, will provide a recent business update and commentary on second quarter results. Executive Vice Presidents Lara Johnson and James Dudley will be available during the question and answer portion of our call. I will now turn the call over to Will.

Thanks, Heather, and good morning, everyone. We had a strong second quarter and have performed very well despite the challenges created for many by COVID-19. Our focus remains on completing our transition to an industrial REIT, working to mitigate any potential impacts of the pandemic on our business, and taking advantage of external growth opportunities. The safety and health of our employees continues to be a top priority, and we have continued to successfully execute our business plan in a virtual working environment. Our portfolio operations have fared well with monthly rent collections very strong from the start of the pandemic. Second quarter cash base rent collections are over 99.5% and approximately 99.4% of July collections have been received to date. We leased over 3 million square feet during the quarter, raising industrial renewal cash base rents nearly 22%. Our overall portfolio leased was 97.3% at quarter end, up slightly compared to last quarter. We have continued to stay active on the acquisition front and act as a capital provider to our merchant builder partners during a time of market uncertainty. As a result, we were able to capitalize on a narrow window of favorable pricing during the quarter. In the second quarter, we closed on $164 million of new warehouse distribution purchases in select target markets of Savannah and Dallas, among others, at average gap and cash cap rates, of 5.6% and 5.3% respectively. These acquisitions brought first half of the year volume to $360 million and increased our overall average gap and cash cap rates to 5.4% and 5% respectively. More recently, cap rates for quality industrial assets have compressed and appear to be back to pre-pandemic pricing in most cases. That said, there continues to be ample opportunity on the investment front, and we are currently reviewing a considerable amount of existing and build-to-suit transactions in the marketplace, with one property under contract for approximately $29 million. To support our growth initiatives, during the quarter we raised over $201 million through an equity offering and strategic use of our ATM program. Additionally, we disposed of approximately $45 million of assets. This capital was used to mainly fund acquisition activity, with the remainder used to pay down most of our revolving credit facility, reducing leverage from 5.5 times to 5.2 times net debt to adjusted EBITDA. We expect to continue to access capital markets when appropriate while augmenting our investment initiatives with retained cash flow Our disposition plan was somewhat impacted by COVID-19 over the past several months, primarily as a result of uncertainty in the debt markets, which has caused a slowdown in the transactions market. We are making good progress under the circumstances and have disposed of $141 million of consolidated properties year-to-date, which includes $67 million in July. These assets generated a combined annualized NOI of $5.4 million. Additionally, we have disposed of approximately $50 million in joint venture assets year to date. We remain optimistic that we will make meaningful progress through the remainder of the year. Our 2020 disposition plan continues to consider disposing of or marketing for sale up to $500 million of primarily office properties, but some closings are likely to push into 2021. The most significant sale would involve our Dow Chemical office property in Lake Jackson, Texas. In addition to office sales, we expect to opportunistically harvest value in our industrial portfolio from time to time, similar to the two industrial assets we sold during and subsequent to the quarter in Oak Creek, Wisconsin and Moody, Alabama and redeploy capital into more modern warehouse distribution product. Our second quarter activities improved our portfolio mix, increasing our industrial exposure to almost 85% of our gross real estate assets. We continue to be well positioned in the current environment with our strong balance sheet, favorable liquidity position, robust investment pipeline, healthy weighted average lease term and conservative payout ratio. While market factors could affect certain aspects of our 2020 initiatives, we have made exceptional progress on our long-term business plan and remain focused on completing our transition to an industrial REIT. As announced this morning, we are tightening our 2020 adjusted company FFO guidance to a range of 74 to 76 cents per common share, mainly due to the deleveraging of our balance sheet. This is subject to change depending on portfolio performance over the balance of the year. With that, I'll turn the call over to Brendan, who will provide detailed commentary on our acquisition activity.