LXP Industrial Trust ((LXP)) has held its Q4 earnings call. Read on for the main highlights of the call.
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The recent earnings call for LXP Industrial Trust exhibited a predominantly positive sentiment, highlighting notable achievements in leasing performance, asset divestment and redeployment, interest rate management, and maintaining high occupancy rates. Despite some challenges in leasing large development projects and managing increased interest expenses, the overall tone remained optimistic due to significant successes in leasing and revenue growth.
Strong Leasing Performance
The company reported a robust leasing volume of nearly 1 million square feet in the fourth quarter, with impressive base and cash-based rental increases of 66% and 43%, respectively. Over the year, LXP achieved a total of 4.5 million square feet in leasing volume, with base and cash-based rent increases of 46% and 40%, showcasing strong demand and effective leasing strategies.
Successful Divestment and Redeployment
LXP successfully sold off its remaining consolidated office assets and other properties, strategically redeploying the proceeds into a build-to-suit and four Class A properties located in the Sunbelt markets. This move is expected to enhance the company’s portfolio quality and focus on high-growth areas.
Interest Rate Management
The company effectively managed its interest rate exposure by executing forward interest rate swap agreements on $333 million of floating rate debt, securing fixed rates on 97% of its debt through the end of 2026. This strategic decision mitigates the risk of rising interest rates and provides financial stability.
High Occupancy and NOI Growth
LXP maintained a high occupancy rate, with its same-store portfolio 99.5% leased by the end of the quarter. The company also reported a same-store net operating income (NOI) growth of 5% for the year, reflecting strong operational performance and stable tenant demand.
Profitable Land Sale
The sale of a 100-acre Phoenix ground lease parcel for $83 million resulted in a substantial $60 million profit over the initial investment, demonstrating LXP’s ability to capitalize on favorable market conditions and enhance its financial position.
Big Box Development Leasing Challenges
Negotiations for a lease at a 1.1 million square foot facility in Ocala, Florida, faced challenges and did not result in a lease. This highlights the slower pace of big box development leasing in 2024, presenting a potential area of concern for the company.
Interest Expense Increase
LXP faced higher interest expenses on term loans, with the all-in rate increasing from approximately 2.7% to 4.3%. This increase reflects broader market trends and poses a challenge to the company’s cost management strategies.
Guidance for 2025
Looking forward to 2025, LXP provided guidance for adjusted company funds from operations (FFO) in the range of $0.61 to $0.65 per diluted share. This forecast considers the potential impact of big box leasing, with the lower end assuming no leases and the higher end assuming all three big box leases are completed in the second half of the year. The company remains optimistic about its growth prospects and strategic initiatives.
In summary, LXP Industrial Trust’s earnings call conveyed an overall positive sentiment, driven by strong leasing performance, strategic asset redeployment, and effective interest rate management. While challenges exist, particularly in big box development leasing and increased interest expenses, the company’s forward-looking guidance reflects a cautiously optimistic outlook for 2025.
