LXP Industrial Trust

Good morning and welcome to the Lexington Realty Trust third quarter 2020 earnings call and webcast. All participants will be in 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 telephone keypad. To withdraw your question, please press star, then 2. Please note this event is being recorded. I would now like to turn the conference over to Ms. Heather Gentry, IR. Please go ahead.

Thank you, Operator. Welcome to Lexington Realty Trust's third 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 in the Investors section and will be furnished to the SEC on a Form 8-K. Certain statements made during this conference call regarding future events and expected results may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. 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, and Beth Boulerice, CFO, will provide a recent business update and commentary on third quarter results. CIO Brendan Mullinix and 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. Good morning, everyone. We posted strong third quarter results and we continue to have success within all areas of our business. Notably, our portfolio operations remain resilient with an average of 99.9% of cash base rents collected during the third quarter. And as of today, we have collected 99.8% of October cash base rents. Our asset management team continues to do an excellent job. maintaining high levels of occupancy and capitalizing on opportunities to preserve and enhance value. At quarter end, our overall portfolio was nearly 99% leased, representing an increase of 160 basis points compared to second quarter. We executed 1.3 million square feet of new leases and lease extensions during the quarter, with overall cash renewal rents increasing 7%. Strong fundamentals in the industrial sector and declining borrowing costs continue to put downward pressure on cap rates. For the most part, industrial asset values have increased overall during the pandemic, and while the landscape remains competitive, our acquisition team continues to source targeted growth opportunities that enhance our portfolio and complement our multifaceted investment strategy. Through quarter end, we have purchased $430 million of new industrial product, including $70 million that closed during the third quarter, at average gap and cash cap rates of 5.5% and 5.1%, respectively. Subsequent to quarter end, we closed on and began funding a build-to-suit located in a Phoenix logistics submarket, which is scheduled for completion in the third quarter of 2021. We have two properties under contract with an aggregate value of $106 million that are expected to close later this month, and we currently anticipate an additional $44 million of acquisitions could close before the end of the year. At the moment, our spec development pipeline includes two single building projects that are underway, one in Atlanta and the other in Columbus, with an estimated cost of $74 million of which $31 million has been funded. We have begun preliminary lease negotiations with a full building user for our 320,000 square foot Columbus project. Our two multi-building sites in Columbus are currently in their infrastructure phase. We are in early discussions with other developers for potential additional sites as we work towards growing this line of our business. At quarter end, our industrial portfolio represented 88.5% of our gross real estate assets, excluding held-for-sale assets. Credit quality continues to be strong, with investment-grade credits representing 51% of our industrial revenue at quarter end. We have maintained high levels of occupancy, a healthy weighted average lease term, and the average age of our industrial portfolio, currently about 12 years.