LXP Industrial Trust

by the number one in your telephone keypad. If at any point you would like to withdraw your question, simply press star followed by the number one again. With that, I'm pleased to turn our call over to Heather Gentry, Executive Vice President of Investor Relations. Heather, you may begin.

Thank you, Operator. Welcome to LXP Industrial Trust first quarter 2025 earnings conference call and webcast. The earnings release was distributed this morning in both the release and quarterly supplemental are available on our website in the Investor section and will be furnished to the FCC 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 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 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, and Nathan Brunner, CFO, will provide a recent business update and commentary on first quarter results. Brendan Mullenix, CIO, and James Dudley, Executive Vice President and Director of Asset Management, will be available for the Q&A portion of this call. I will now turn the call over to Will.

Thanks, Heather, and good morning, everyone. Our 2025 is off to a good start as we produce solid same-store NOI growth backed by strong leasing outcomes in the first quarter. We remain focused on increasing occupancy, enhancing returns in our portfolio, and executing on our 12-market investment strategy in the Sun Belt and Lower Midwest. In the first quarter, industrial fundamentals held relatively steady despite tariff uncertainty. While it is too early to know the full impact of the tariff announcements, our markets have continued to experience healthier industrial fundamentals when compared to select coastal markets, and we believe strong long-term demand trends remain in place. Overall U.S. net absorption was 23 million square feet in the first quarter, 19 million square feet of which was in our 12 target markets. On the supply side, new starts remain low, and the construction pipeline in our 12 target markets is approximately 87 million square feet, down almost 75% from the 2022 peak of approximately 330 million square feet. In terms of product mix, new Class A facilities continued to be favored by many users, evidenced by higher net occupancy gains for new product compared to older facilities, which saw an increase in move outs during the quarter. We believe our portfolio, which is comprised of 91% Class A industrial facilities with an average age of nine and a half years, stands to outperform in a market environment where quality matters. There has been a slower cadence in leasing transactions this year, primarily as a result of our limited 2025 lease roll, which represents less than 3.5% of our ABR, and secondarily, due to longer decision-making times by many tenants. We remain cautious in the near term as the current market environment, particularly as it relates to trade policy, has created further uncertainty for tenants making spacious decisions. That said, leasing outcomes have been favorable so far this year, and our current mark-to-market on leases expiring through 2030 is estimated to be approximately 18% based on broker's estimates, which will contribute to our FFO growth. As we discussed in last quarter's call, we expect there could be lower tenant retention this year compared to 2024. In-place rents on the remaining 2025 lease expirations are approximately 30 to 35% below market. We believe any space we may get back in 2025 will be attractive to other users. With respect to other vacancy, we have activity at all three of our big box facilities. Leasing these facilities is an important component to FFO growth and continues to be our top priority. Our investment strategy is concentrated on 12 target markets situated along the Sun Belt in select lower Midwest states. These markets, where approximately 85% of our gross assets are located, have favorable demographics with employment and population growth exceeding the national average business-friendly government policies, and logistics infrastructure. These markets are also benefiting from significant investment in the onshoring of advanced manufacturing. Some of the current projects in our target markets include Taiwan Semiconductor in Phoenix, Hyundai's Metaplant in Savannah, Apple's Server Manufacturing Plant in Houston, Eli Lilly's investment in Indianapolis, and Androil's drone manufacturing facility in Columbus. Our focused geographic strategy provides us with both investment and operational benefits, including deeper relationships with brokers, developers, and tenants, as well as enhanced market knowledge resulting in better investment and asset management decision making. With that in mind, year to date, we've opportunistically sold two industrial assets for approximately $75 million at an average cash capitalization rate of 4.1%. We were able to maximize the value of both assets One was sold to a user buyer, and the second was sold after securing a long-term lease extension that raised the rent considerably. As a result, we have a strong cash position as we manage through an uncertain market backdrop. Going forward, and as market conditions permit, we continue to look for good uses of capital in our target markets as we selectively recycle capital from our assets in non-target markets. With that, Nathan will now discuss our financials, leasing, and balance sheet in more detail.