LXP Industrial Trust

Good morning ladies and gentlemen and welcome to the LXP Industrial Trust fourth quarter 2022 earnings call and webcast. At this time all participants are in the listen only mode and please be advised that this call is being recorded. After the speaker's prepared remarks there will be a question and answer session. If you would like to ask a question during this time simply press star 1 on your telephone keypad. If you would like to withdraw your question press star 1 again. And now I'd like to turn the call over to Ms. Heather Gentry, Senior Vice President of Investor Relations. Ms. Gentry, please go ahead.

Thank you, Operator. Welcome to LXP Industrial Trust's fourth quarter 2022 earnings 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. 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 FCC from time to time, because LXP's actual results 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 FFLs 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 LSC's historical or future financial performance, financial position, or cash flows. On today's call, Will Edlund, Chairman and CEO, Beth Fuller, CFO, Brenda Mullenix, CIO, and Executive Vice President James Dudley will provide a recent business update and commentary on fourth quarter results. I will now turn the call over to Will.

Thanks, Heather. Good morning, everyone. Our fourth quarter operating performance was good across the board with notable accomplishments in leasing, dispositions, and balance sheet management. We continue to have tremendous success on the leasing front. raising industrial-based and cash-based rents on renewals approximately 38% and 43% in the fourth quarter, respectively. Industrial leasing volume was exceptionally strong in 2022, with 4 million square feet leased during the year at base and cash-based rental increases of approximately 31% and 26%, respectively. We are currently in discussions with many of our tenants whose leases expire through 2024, which we believe bodes well for strong tenant retention with the opportunity to raise rents as contract rents continue to be well below market. Moving forward, a slowdown in overall leasing that is more in line with pre-pandemic levels is expected, but we believe the prospects for continued industrial rent growth are good as overall vacancy remains low. We realized approximately $50 million of proceeds from dispositions in the fourth quarter, including the sale of two industrial properties. These industrial sales are consistent with our strategy to dispose of assets in non-core markets that do not fit our growth objectives. Further, we continued to shrink our office joint venture during the quarter, disposing of three assets valued at approximately $37 million. Subsequent to quarter end, we sold another joint venture asset in Houston for $82 million, which generated net proceeds of approximately $8 million for our 25% interest. Total 2022 consolidated disposition volume of approximately $197 million at attractive 5.6% gap and cash cap rates produced favorable pricing in a year where cap rates increased. Our 2023 disposition plan contemplates marketing for sale up to seven industrial assets in certain non-core markets, including St. Louis, Detroit, Cleveland, Kansas City, and Philadelphia. Continued challenges in the office sales market delayed the disposition of several consolidated office assets originally slated for sale in the fourth quarter. While we still intend to dispose of the remaining four office assets, excluding our Palo Alto property, as soon as practicable, this portfolio continues to produce strong cash flow with annualized NOI of approximately $11 million. Moving to the balance sheet, at year end, we settled our $16 million common share forward equity transaction using the proceeds to repay amounts outstanding on our $600 million revolver. which was fully available at year end. When adjusted for 2022 share repurchases, we issued a net 3.9 million common shares at $13.53 per common share in connection with that transaction. Leverage declined from 7.1 times at September 30 to 6.4 times net debt to adjusted EBITDA at year end, well within our current target leverage range of six to seven times. As we look ahead to 2023, we anticipate development spend of approximately $125 million to be funded with sale proceeds, cash on hand, and line draws. We may utilize any excess capital to reduce leverage further while maintaining some capacity to deploy capital into our land bank and other investments should attractive opportunities arise. Finally, we're excited to make further progress with our ESG program in 2023 as we prepare to submit to GRESB for the third time, enhance our framework transparency, expand our resiliency reporting, and implement a decarbonization program. We also look forward to sharing more details in our 2022 Corporate Responsibility Report, which we will publish later this year. With that, I'll turn the call over to Brendan to discuss investments in more detail.