LXP Industrial Trust

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Thank you, Operator. Welcome to LXP Industrial Trust's fourth 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 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. 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 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, Beth Boulerice, CFO, and Brendan Mullinix, CIO, will provide a recent business update and commentary on fourth 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. Good morning, everyone. We finished 2021 exceptionally strong with excellent fourth quarter results across the board. We continue to realize the significant benefits of our portfolio repositioning and disciplined growth strategy. Transaction activity was robust and we made notable progress with respect to investments, dispositions, and new leases. Adjusted company FFO for the quarter of 18 cents per diluted common share brought our overall 2021 adjusted company FFO to the high end of our guidance at 78 cents per diluted common share. At the end of December, we recapitalized a 22 property special purpose industrial portfolio composed of primarily manufacturing assets through a newly formed joint venture valued at $550 million. This significant capital infusion has been used to fund new investments and fully satisfy credit line borrowings. Further, our 20% ownership interest in the joint venture builds on our institutional fund management capabilities allows us to generate recurring fee income to enhance our return on equity and provides an estimated $750 million of dry powder to invest in industrial real estate that falls outside of our warehouse distribution focus. With the JV transaction, we also substantially completed our multi-year strategy to transform our company from a diversified net lease REIT into an industrial pure play, and our wholly owned portfolio now consists of nearly 100% warehouse distribution assets. Through this transformation, we have built a significantly more valuable portfolio poised to benefit from strong tenant demand and underlying market rent growth in the industrial sector. We are well positioned to continue building on our momentum by acquiring and developing high quality warehouse distribution assets in strong markets and capturing opportunities to increase rents through our strong leasing and releasing capabilities. During the fourth quarter, we added to our development pipeline, commencing a project in Columbus for approximately 1.1 million square feet and acquiring an aggregate of 490 acres of developable land in the Phoenix and Indianapolis industrial markets. Exclusive of the land, we invested $47 million in our ongoing development projects during the quarter and completed our 468,000 square foot Phoenix built-to-suit. Brendan will discuss these transactions in more detail shortly. On the acquisition side, during the fourth quarter, we acquired eight warehouse distribution properties totaling 3.3 million square feet with overall occupancy of 86%. Our 2021 acquisition volume, including development projects placed in service, totaled $886 million. As discussed previously, acquisition volume has allowed us to complete 1031 exchanges, and in 2021, we deferred gains of $330 million on dispositions of $824 million. We achieved another healthy quarter of leasing activity with occupancy high at 99.4% for our stabilized portfolio at quarter end. We leased a total of 3.2 million square feet in our industrial portfolio, increasing base and cash base rents 12.8% and 5.3% respectively. This included two terrific leasing outcomes, totaling 1.7 million square feet in our recently completed development project in Atlanta and our ongoing Smith Farms Greenville Spartanburg development project. In Atlanta, we executed a seven-year lease with 3% annual escalations, and in Greenville Spartanburg, we pre-leased one of the three buildings under construction, totaling approximately 800,000 square feet, which was expanded 47% from the original plan to meet the tenant's requirements. The lease is for 12 years with 3% annual escalations. The building is now expected to be substantially complete in the fourth quarter of 2022. We estimate the market value of these two properties to be about $203 million, a gain of approximately $52 million over our estimated cost after purchasing the interest of our development partner. Our overall 2021 leasing volume in our industrial portfolio was nearly 8.4 million square feet and produced attractive industrial base and cash based rental increases of 10.9% and 6.7% respectively. Since our last earnings call, we have worked with one of the leading national brokerage firms to provide us an estimate of the mark to market opportunity in our warehouse distribution portfolio. based on their forecasted rent growth estimates through 2027. At quarter end, this portfolio's average rent per square foot was $4.35. Based on the brokerage's projections, we believe rents on leases expiring over the next six years, which comprise 50% of our industrial base rental revenue, would be on average approximately 30% below market at lease expiration. This analysis indicates that we have a significant opportunity to achieve strong leasing spreads going forward based on the market fundamentals associated with our properties, underscoring how valuable they are. With respect to near-term industrial expirations in 2022 and 2023, we expect expiring rents in 2022 to increase approximately 32% based on leases currently being negotiated and expiring rents in 2023 could increase up to approximately 45% based on third party broker estimates. Market rents in our target markets grew on average approximately 8% in 2021 and we expect another strong year in 2022. Separate from our transaction activity, I want to highlight two important achievements we made in the fourth quarter that emphasize our team's substantial progress on other aspects of our strategy. First, we published our first corporate responsibility report showcasing the significant steps we have made to build a best-in-class ESG program. This report can be found on our website, which I encourage you to review. We are extremely proud of our progress so far and look forward to continuing making strides with respect to our long-term ESG initiatives. Second, in December, we announced a corporate rebranding and changed our name to LXP Industrial Trust. We believe this new corporate branding better aligns with the nature of our business, our forward growth strategy, and our focus on high-quality, primarily single-tenant warehouse distribution properties. With over 98% of our overall gross book value in warehouse distribution properties, excluding our held-for-sale properties, our industrial portfolio exhibits the high-quality attributes that we believe will lead to attractive leasing outcomes and long-term growth. In summary, we believe our company is in a position of extraordinary strength with excellent prospects. At year end, our warehouse distribution portfolio consisted of 109 properties comprising 52.7 million square feet with 32.7 foot average clear height, 8.6 years of average age, and a 6.9 year weighted average lease term with average annual rent escalations of 2.8%. On the development side, our initiatives have produced great results. and we have five ongoing projects underway totaling 6.3 million square feet in an environment where tenant demand is robust, vacancy is low and market rent growth is strong. Additionally, we have a land bank of 577 acres that we believe will support roughly 9 million square feet of development. Finally, we have approximately $750 million of investment capacity in our special purpose With our transformation substantially complete, we believe we have a much more valuable portfolio and a strong pipeline for continued growth. The market has also recognized our achievements, with our company's total return to shareholders outperforming the RMS index for the 1, 3, 5, and 10-year time period as of December 31, 2021. In view of these accomplishments and against the backdrop of strong private market demand and a vibrant M&A market, our Board of Trustees determined that now is the right time to conduct a comprehensive process to review all strategic alternatives for the company in order to maximize value for our shareholders. The Board is taking a thoughtful approach to determine the best outcome for shareholders and we do not intend to provide further updates until the Board has decided on the best path forward. We are pleased that our carefully considered long-term plan to transform the portfolio and then maximize value at the most opportune time for our shareholders is now coming to fruition. With that, I'll turn the call over to Brendan to discuss investments in more detail.