LXP Industrial Trust

Good morning and welcome to the Lexington Realty Trust second quarter 2021 conference call-in 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 touchtone phone. To withdraw from the question queue, 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 second 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 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 Bulleris, CFO, and Brendan Mullenix, CIO, will provide a recent business update and commentary on second quarter results. Executive Vice President James Dudley will be available during the Q&A portion of our call. I will now turn the call over to Will.

Thanks, Heather. Good morning, everyone. We had a terrific second quarter with excellent results in all areas of our business. Our business continues to produce funds for operations well in excess of our dividend. and our net asset value per share is steadily growing as strong rent growth, increasing construction costs, and attractive debt financing drive property values higher. Leasing continues to be a particularly bright spot for us and is further evidence of the quality of our industrial portfolio and strong fundamentals in the industrial sector. We leased roughly 1.1 million square feet in the quarter, with industrial base and cash base rents increasing approximately 13% and 7% respectively on four lease extensions. July proved to be another exceptionally strong month of leasing with over 2 million square feet of activity. We have secured a five-year lease with a new tenant at our previously vacant 640,000 square foot warehouse distribution facility in Statesville, North Carolina, with a 3.4% cash base rent increase over the prior lease and 3% annual escalations. We also secured a three-year lease term with a new tenant at our 1.2 million square foot industrial facility in Olive Branch, Mississippi. The new cash base rent represents a 1.7% increase over the prior rent with 2.25% annual bumps. With little downtime to lease a lot of square footage in a competitive market, this transaction is a big win and a testament to our asset management capabilities. We continue to proactively create leasing opportunities as we address forward lease rollover. With one of our 2023 expirations, we just signed a 10 and a half year lease with a new tenant at one of our warehouse distribution facilities in the Cincinnati market. This was a great outcome as we replaced a tenant that was a move-out risk, increased the cash-based rent approximately 27%, and extended the overall lease term. In addition, we had a great outcome with respect to our first quarter industrial purchase in Lakeland, Florida. The property was acquired with 105,000 square feet of vacancy as part of our strategy to take advantage of industrial demand and rising rents and provide more attractive stabilized yields compared to investing in fully leased buildings. In July, we leased roughly 68,000 square feet of the vacant space for a five-year term to a new tenant with a starting rent of $5.70 a foot with 3% annual bumps, representing an occupancy increase from 53% to 84%. Our strong leasing outcomes are a primary driver behind increasing both the low and high end of our 2021 adjusted company FFO guidance range by a penny to a new range of 74 cents to 77 cents per diluted common share. Moving to dispositions, during the quarter we sold three properties for approximately $125 million. These dispositions included two office sales and our Lawrence, South Carolina legacy industrial asset. At June 30th, total consolidated sales volume totaled $183 million at gap and cash cap rates of 7.3% and 7.9% respectively. Subsequent to quarter end, we disposed of three non-industrial properties valued at $35 million. leaving just 11 office and other properties remaining, excluding our ground lease Palo Alto property. These 11 assets generated net operating income of approximately $8 million during the first six months of 2021, and we currently value these assets within a range of $150 million to $190 million. Investment activity has been robust to date, with $275 million closed as of June 30 at GAAP and cash estimated stabilized cap rates of 5.1% and 5% respectively. The start of the third quarter has also been active with $106 million closed in July and another $106 million currently under contract that is expected to close later in the quarter. In a competitive industrial market, we continue to view development projects and the purchase of vacancy as compelling opportunities to capture attractive, stabilized yields for quality product in our target markets. Construction is fully underway at our development projects in submarkets of Indianapolis and Central Florida, and our Atlanta project achieved substantial completion of the base building during the second quarter. We have strong leasing prospects at this facility and are currently responding to RFPs. Subsequent to the quarter, we committed to a development opportunity in Greenville Spartanburg. Our development projects in progress are expected to require funding of approximately $271 million, and our forward equity sales match up well for the funding of these projects. We've nearly completed our portfolio transition with our industrial portfolio now representing 94% of our gross real estate assets, excluding held-for-sale assets. The work we have done on the portfolio has paid off, and we're extremely pleased with how the portfolio continues to perform and be shaped through the purchase and development of modern, high-quality Class A warehouse distribution product in our target markets. With that, I'll turn the call over to Brendan to discuss recent investments in our development pipeline.