LXP Industrial Trust

Good morning and welcome to the Lexington Realty Trust first quarter 2021 earnings conference call. 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 two. Please note this event is being recorded. I would now like to turn the conference over to Heather Gentry of Investor Relations. Please go ahead.

Thank you, Operator. Welcome to Lexington Realty Trust's first quarter 2021 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 reference in these documents to adjusted company FFO refers to the 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 Fulleris, CFO, and Brendan Mullenix, CIO, will provide a recent business update and commentary on first quarter results. Executive Vice Presidents Laura Johnson and James Dudley will be available during the Q&A portion of our call. I will now turn the call over to Will.

Thanks, Heather, and good morning, everyone. We had a great first quarter overall and continue to make substantial progress on executing our business plan. Adjusted company FFO was 22 cents per diluted common share in the quarter, which included $10.9 million of lease termination income primarily associated with a legacy industrial asset in Durham, New Hampshire. During the quarter, we purchased three industrial assets for approximately $51 million and completed the fully leased development project in the Columbus market. Overall, these investments produced average estimated stabilized gap and cash cap rates of 6.1% and 5.9%, respectively. Market rents across our portfolio continue to grow, Occupancy is healthy, and our industrial exposure represented over 91% of gross real estate assets at quarter end, excluding held-for-sale assets. We continue to see the value of our industrial properties steadily increase during the quarter, and we believe the value of our office portfolio has also improved amid signs of the pandemic easing. There are several factors continuing to drive up the overall value of our holdings. Capitalization rates continue to be under pressure, replacement cost is increasing rapidly, and tenant demand is driving rents higher. Our industrial portfolio is benefiting from all these trends, with first quarter industrial base and cash base rent renewal increases of 14.6% and 5.4% respectively, representing the most visible signs. The factors driving valuations higher are also supporting a highly competitive investment landscape, and we continue to focus our time on finding the best risk-adjusted opportunities in our target markets in the Sun Belt and Lower Midwest. Industrial purchases in the quarter included two facilities in Indianapolis and one in Central Florida. Additionally, we have approximately $206 million of assets either under contract or with an accepted offer, which we expect to close later this quarter. After a slow start that is typical of the first quarter, current deal flow is robust with more than $1 billion of investments under review. We are mindful of pricing as there continues to be a lot of capital chasing opportunities in a competitive market. On the development front, we are finishing the construction of our Atlanta project in Fairburn, and we are committed to two other projects in our target markets of Indianapolis and Central Florida. Development and the purchase of vacancy continue to be attractive ways for us to produce stabilized yields in excess of what is available in the purchase market for fully leased buildings. Turning to leasing, we leased 1.5 million square feet during the quarter, and at quarter end our stabilized portfolio was 97.8% leased. Our asset management team has done a terrific job in securing both lease extensions and new leases with increasing rents. In addition to the three lease renewals in our single-tenant industrial portfolio, we raised occupancy at our multi-tenant industrial facility in Antioch, Tennessee to nearly 100% and simultaneously increased base rental rates by approximately 16% for the two new tenants within the facility. Subsequent to quarter end, we executed a five-year extension at our 423,000 square foot industrial facility in Lumberton, North Carolina and increased base and cash base rent by 23% and 8.6% respectively. Our balance sheet continues to be in great shape with net debt to adjusted EBITDA of 4.6 times at quarter end. Our cash balance at quarter end was $170 million, including restricted cash, and we had $94.5 million sold forward in our ATM. Liquidity was enhanced during the quarter by 58 million of sales at gap and cash cap rates of 6.3% and 6.5% respectively, and will be augmented by retained cash flow throughout the balance of the year. Subsequent to the quarter, we sold our industrial facility in Lawrence, South Carolina, for $40 million. Currently, we have assets under contract or with an accepted offer for an aggregate gross price of approximately $135 million. Our remaining non-core sale portfolio consists of 17 properties, which generated first quarter NOI of $8.2 million. We believe the current value of this portfolio is approximately $290 million. Finally, we continue to make progress with our ESG efforts and have disclosed long-term environmental targets. In addition, we distributed a tenant survey to collect data, gain feedback, and identify opportunities to partner with our tenants. We became a supporter of the task force on climate-related financial disclosures and a participant member of GRESB, and we are working on reporting to the GRESB real estate assessment for the first time this year. With that, I'll turn the call over to Brendan to discuss recent investments in our development pipeline.