LXP Industrial Tr (NYSE:LXP) reported first-quarter financial results on Wednesday. The transcript from the company's first-quarter earnings call has been provided below.
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The full earnings call is available at https://events.q4inc.com/attendee/866286243
Summary
LXP Industrial Tr reported strong leasing activity in Q1 2026, executing 3.2 million square feet of new leases and renewals, with notable success in the Greenville-Spartanburg and San Antonio markets.
The company's adjusted funds from operations (FFO) for Q1 was approximately $47 million, representing a 2.6% increase year-over-year, with a stable portfolio occupancy rate of 96.6%.
LXP Industrial Tr is maintaining its 2026 guidance for adjusted FFO of $3.22 to $3.37 per share and same-store NOI growth of 1.5% to 2.5%, with expectations of higher growth in the second half of the year.
The company is actively developing projects, including a 1.2 million square foot facility in Phoenix, and is evaluating further opportunities in Columbus, while intending to fund future developments through asset sales.
Management highlighted strong market fundamentals, particularly in large-format facilities and data center-related tenancy, with proactive steps taken to address 2026 and 2027 lease expirations.
Full Transcript
OPERATOR
Good morning and thank you for standing by. My name is John and I will be your conference operator today. At this time I would like to welcome everyone to the LXP Industrial Trust First Quarter 2026 Earnings Call and webcast. All lines have been placed on mute to prevent any background noise. After the Speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press STAR followed by the number one on your telephone keypad and if you would like to withdraw your question, press Star one again. As a reminder, this call is being recorded. I would now like to turn the conference over to Heather Gentry, Investor Relations. Please go ahead.
Heather Gentry (Investor Relations)
Thank you. Welcome to LXP Industrial Trust First Quarter 2026 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 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 unitholders 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 flow. 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 Molyneux, CIO, and James Dudley, Executive Vice President and Director of Asset Management, will be available for the Q and A portion of this call. I will now turn the call over to Will.
Will Eglin (Chairman and CEO)
Thank you, Heather. Good morning everyone. Following the successful execution of our key strategic initiatives in 2025, including strengthening our balance sheet, increasing occupancy, and resolving our big box vacancy this year, we are focused primarily on creating value in our land bank and addressing our near term expirations and existing vacancy. We've executed 3.2 million square feet of new leases and lease renewals year to date, highlighted by the successful outcome at our 1.1 million square foot facility in the Greenville Spartanburg Market. Additionally, we leased over 300,000 square feet of vacancy and extended the lease on an 850,000 square foot facility in San Antonio for 10 years. Industrial fundamentals continue to trend in the right direction with first quarter US net absorption of approximately 40 million square feet representing the strongest first quarter. In three years our target markets made up approximately 29 million square feet or 72% of US net absorption demonstrating continued strength in our markets, particularly in Phoenix, Indianapolis, Houston, Dallas, Fort Worth, Atlanta and Columbus. These positive trends are reflected in our strong leasing momentum year to date as well as our forward pipeline in which we are in active discussions on 7.4 million square feet of development and redevelopment, leasing vacancy and expiration through 2027. Leasing activity continues to be the strongest for large format facilities, especially for those of 1 million square feet or more. They're also seeing increased demand from data center related tenancy and manufacturing suppliers and industries in our markets. Leasing volume of 1.8 million square feet during the quarter included the extension at our 1.1 million square foot facility in Greenville Spartanburg, which added considerable value. We renewed this lease for an additional four years to 2031 following the initial two year lease signed in May 2025. This extension enhanced the 8% initial cash stabilized yield on the development project with the new cash rent representing a 5% increase over the prior rent and 3% annual rental bumps on the remaining 700,000 square feet we leased during the quarter, we achieved base and cash based rental increases of 34% and 24% respectively. Construction is underway at our 1.2 million square foot Phoenix Development Project that we announced on our last quarterly call. Since then, the remaining 2 million square feet in the West Valley has been leased leaving no million square foot buildings currently available in the market. We are in discussions with a prospective tenant and we are well positioned if they proceed with a lease in the West Valley market given the limited supply of million square foot buildings. We are evaluating other development opportunities in our land bank including in Columbus where we have 69 acres at our Aetna land sites which can support three facilities totaling roughly 1.25 million square feet. In the last 12 months, net absorption in the Columbus market was 10 million square feet, resulting in a decline in vacancy of over 300 basis points. Columbus continues to be a strong distribution market with increasing demand across product sizes, particularly in the large format space, and has seen an influx of tenant activity that supports data center and advanced manufacturing facilities. To the extent we move forward with future development projects, we intend to fund them through opportunistic asset sales in our non target markets. As we've noted previously, acquisition activity will be selective and will be funded via 1031 exchange transactions to defer gains on disposition. I'll now turn the call over to Nathan who will provide a more detailed overview of our financials, leasing activity and balance sheet.
Nathan Brunner (Chief Financial Officer)
Thanks Will Our adjusted company ffo in the first quarter was approximately $47 million or $0.80 per diluted common share representing 2.6% growth over first quarter. 2025 same store NOI growth was 2% for the quarter which was in line with our expectations. Our stabilized portfolio was 96.6% leased at quarter end and 97.1% leased pro forma for new leases signed in April in line with year end 2025. We are maintaining both our 2026 adjusted company FFO guidance range of $3.22 to $3.37 per conduct share and 2026 same store NOI growth guidance range of 1.5% to 2.5%. With regard to the cadence of same store growth for the remainder of the year, we anticipate that second quarter same store NOI growth will be lower than the first quarter, reflecting the impact of first quarter move outs and timing of lease commencement for new leases signed year to date. These new leases are expected to contribute to higher SEM story and high growth in the second half of the year. G&A in the first quarter was approximately $10.3 million. A full year 2026 G&A expected to be within a range of 39 to $41 million. Turning to leasing, we continue to make good progress on 2026 explorations and have addressed approximately 3.7 million square feet or 57% of our total 2026 lease roll with an average cash rental increase of approximately 25% excluding two fixed rate renewals. Will highlighted some of the larger leases that we executed year to date and I'll touch on a handful of other notable leasing outcomes. During the quarter we renewed 352,000 square feet at our 640,000 square foot facility in Charlotte, North Carolina for a three year term with 3.5% annual escalators representing a 42% cash rental increase. We are actively marketing the remaining 288,000 square feet of the property which expires in October 2026. Subsequent to quarter end, we extended the lease for the tenant that occupies 270,000 square feet at our multi tenant facility in the Savannah Market which was a July 30th expiration. The 10 year lease extension with 3% annual escalators represents a cash rental increase of 19% over the prior rent. With respect to 2027 expiration post quarter, we extended the lease at our 850,000 square foot facility in San Antonio for a 10 year lease term with 2.75% annual escalators. The lease extension commences in May 2027 with a 25% cash rental increase. We're encouraged by the active discussions underway on 4.6 million square feet of the 2026 and 2027 lease roll, including several of our larger facilities. We've leased 330,000 square feet of vacancy year to date. During the quarter, we leased 85,000 square feet in Indianapolis to a tenant involved in data center development, achieving a 34% cash rental increase post quarter. We leased our 250,000 square foot facility in the Houston market for a seven year term with 3.75% annual escalators. The new Houston lease commences in June and represents a 25% cash rental increase. LXP's balance sheet remains in great shape with net debt to annualized adjusted EBITDA of 5.1 times at quarter end. We had $130 million of cash on the balance sheet at quarter end and our $600 million revolving credit facility was undrawn and fully available. As we highlighted on our last call, the recast of our $600 million revolving credit facility and $250 million term loan in January extended the company's debt maturity profile and reduced interest costs, further strengthening the balance sheet and providing financial flexibility. Finally, we repurchased 325,000 shares in the quarter at an average price of $48.70 per share. With that, I'll turn the call back over to Will.
Will Eglin (Chairman and CEO)
Thanks Nathan. In summary, we're pleased with first quarter results and our strong leasing outcomes year to date. As we move through the year, we will remain focused on executing our strategic priorities including disciplined capital deployment, pursuing value enhancing growth opportunities, leasing our Phoenix Spec project and remaining vacancies, and driving mark to market rent growth. As the leasing market continues to improve, we're confident that our forward leasing pipeline of over 7 million square feet will result in numerous attractive leasing outcomes that produce strong mark to market results. With that I'll turn the call back over to the operator.
OPERATOR
Thank you, ladies and gentlemen. We will now begin the question and answer session. At this time I would like to remind everyone, in order to ask a question, please press star followed by the number one on your telephone keypad. And if you would like to withdraw your questions, simply press Star one again. If you are called upon to ask your question and are listening via loudspeaker on your device, please pick up your handset and ensure that your phone is not on mute when asking your question. Our first question comes from the line of Todd Thomas with Keybanc Capital Markets. Please go ahead.
Todd Thomas (Equity Analyst)
Yeah, hi. Thanks. Good morning. A couple of questions. One on the, you talked well about the lack of big box space in some of your major markets including Phoenix where you broke ground. Can you talk about how that's impacting the market? Are you seeing that translate into pricing power, better discussions around prospective rent growth or urgency from tenants? And then would you look to de risk and pre lease that development project or do you think it probably affords better return opportunities to hold off until it's closer to completion and delivery?
Will Eglin (Chairman and CEO)
Yeah, sure. Thanks, Todd. I think that as we expected in Phoenix since our last call, the last 2 million foot competitive buildings at least, so we're essentially in a great position on that facility that, that we've started. We do have a prospect that we're working fairly closely with but nothing to report today. I think we would prefer to pre lease and , de risk the, the investment and lock in a profit and then move on. Other good opportunities in the land bank you mentioned Columbus, that's another one that we think sets up pretty well for us. So big box demand is doing very well and at the moment we're quite optimistic about the outcome on Phoenix for sure.
Todd Thomas (Equity Analyst)
Okay, and then Nathan, you indicated, , 57% of the 26 expirations have been addressed. I think that included some of the activity that, that occurred in April. Can you just provide an update on the remaining 26 expirations in terms of your expectations there if there's any known move outs?
James Dudley (Executive Vice President and Director of Asset Management)
Hey Todd, this is James. I'll take it. We've got really good activity on the remaining 2026s and the majority of which we're expecting to renew. We do have a few small known move outs that are remaining. We've got a 97,000 square foot space in our multi tenant building in Columbus where we're expecting the tenant to move out. We're marking that the lease we've got good activity on that one. And then I guess touching on a couple of the new vacancies that we had to. We had the, the Tampa move out, the 230 that we, we've got some decent activity on recently and also the 120 that just moved out in the first quarter as well. And Greenville Spartanburg that we've got really good activity on. And then we've also got a, a very small lease in Greenville Spartanburg of 70,000 square feet that we expect the tenant to potentially move out of. And another one for 163,000 square feet in Greenville Spartanburg. That's a no move out. So small, no move outs, , good activity and a strong market. And, and the Greenville Spartanburg stuff is, is concentrated mostly around the park that we own. So we've got a lot of, of different things we can do there from a size perspective and moving tenants around. We're talking to the tenants that are in our, in that space in the park currently trying to figure out if someone to expand. So again, good activity on that, on that upcoming vacancy and the vacancy that we had the first quarter.
Todd Thomas (Equity Analyst)
Okay, that, that's helpful. And just lastly, I guess the 1.8 million square feet of vacancy, that opportunity in the portfolio, you know, you estimate it to be about 32 cents a share. You know, is there anything embedded in guidance related to the lease up of that vacant space that would hit or that's included in the guidance this year?
Nathan Brunner (Chief Financial Officer)
Yeah, Todd, maybe the way I'd frame that is, you know, back to kind of the underlying drivers of the guidance and they're pretty much unchanged versus our Q4 earnings call. And that is average occupancy for the portfolio at the Midpoint is about 96.5%, which is essentially in line with where we finished Q1. We're a little above that with some of the activity we had in April. At the high end of guidance, average occupancy be 97% and at the low end, average occupancy would be 96%.
Todd Thomas (Equity Analyst)
Okay, got it. Thank you.
OPERATOR
Our next question comes from the line of Anthony Paulone with JP Morgan. Please go ahead.
Anthony Paulone (Equity Analyst)
Thanks. Good morning. You know, given the comments on Columbus, what's the likelihood that you start a project or two this year?
Brendan Molyneux (Chief Investment Officer)
Oh, hey, it's Brendan. Nothing to announce today, but as has been noted, the fundamentals in Columbus are very positive today. We've been seeing a lot of demand from both data center related uses and manufacturing as well as the demand drivers that have existed in that market for some time at the moment we can, we're in order to position ourselves most with the most flexibility. We're doing pre development work, including design work on three different size buildings there. We can build a total of 1.25 million and that'll just allow us the maximum flexibility to respond to where we see the most favorable supply and demand.
Anthony Paulone (Equity Analyst)
Okay, and is the pipeline outside of what you have on your balance sheet right now for things like build the suits and development, has that changed much? Is there much activity there with any other developers that you might be working with right now?
Brendan Molyneux (Chief Investment Officer)
Well, I should have also added too, just with respect to the existing land bank. We are additionally responding to build to suit interest at both our Columbus sites and our Phoenix sites. So there's that build to suit opportunity in the land bank as well as considering speculative development if the fundamentals are there and remain there with respect to other opportunities. Yes, we do have conversations with the merchant builder relationships that we have from time to time about build to suit opportunities outside of our land bank as well. But nothing imminent to report on today on that front.
Anthony Paulone (Equity Analyst)
Okay, and then just last one, the stock buyback, just you've done a little bit of here, a little bit here. What's just the appetite at current levels and just how does it fit into the capital allocation right now
Will Eglin (Chairman and CEO)
development is, you know, a better investment from our standpoint with respect to creating shareholder value. So you know, we have some liquidity that we can use for buyback opportunistically. But what's happening in the, in the development there, especially in Phoenix, is a much larger driver of value creation.
Anthony Paulone (Equity Analyst)
Okay, thank you.
OPERATOR
Thanks, Tony. Our next question comes from the line of Vince T Bone with Green Street. Please go ahead.
Vince T Bone (Equity Analyst)
Hi, good morning. Question for Nathan. I'm curious within guidance, how much new leasing is kind of baked into the low end, high end because it sounds like you have a pretty good pulse on move outs and retention rates. So just trying to get a sense of you need the lease, you know, another 300,000 square feet of, you know, existing vacancies or move outs to hit the midpoint or is it lower? Just trying to get a sense of the, you know, kind of different outcomes besides just move outs on the new leasing side that could move the numbers within guidance, whether it be same store or ffo.
Nathan Brunner (Chief Financial Officer)
Yeah, Vince, you know, so going back to James's answer a little earlier in the Q and A here, you know, we have, we have three known move outs essentially in the second half, which is roughly 550,000 square feet. So in the context of our earnings guidance at the midpoint, we're essentially saying that on average during the, during the year, including Q1, your occupancy will be 96.5%, which is in line with Q1. So the guidance at the midpoint essentially assumes that, you know, we, we have new leasing activity with regard to all of that move out activity. And then, so if you look to the high end of guidance where average occupancy is 97%, there's obviously incremental new leasing beyond the 550 of no new move outs.
Vince T Bone (Equity Analyst)
No, that's helpful. And just to follow up, it looks like just some quick math, it looks like the retention rate is going to be higher than, than we previously projected. Is that fair? I think on the last call you indicated be about 70% and it looks like just given the first quarter move outs and the, , 500 you mentioned there, it looks like retention will be. Yeah, closer to 90 if my math is right or in the, in the 80s. Is that, is my logic correct there?
Nathan Brunner (Chief Financial Officer)
We're, we're building in some buffer for this, you know, unknown situations that come up. There's always something that comes up in the back half of the year that you know, you're not expecting. So there's this buffer. Our guidance is still, you know, based on 70 to 80% retention.
Vince T Bone (Equity Analyst)
Got it. And then just last one for me, just on the, , you mentioned if you're going to proceed with any new developments, you would likely fund it with dispositions. Is there any chance you look to, , sell out of the cold, , cold JV or the, , the remaining net lease office JVs or kind of what's the strategic rationale to hold on to those joint venture assets that are now very different from the rest of the portfolio?
Will Eglin (Chairman and CEO)
Well, yeah, there's not much left in the office, jv Vince. And we have been sort of liquidating that as quickly as the market will bear in the other industrial joint venture. We're a 20% partner there, so we're the minority partners. Entirely up to us. We do have some opportunities to make some good sales in that, in that portfolio. So we do expect that it will shrink modestly over time. But you know, it's an investment that produces a pretty high return on equity for us and it keeps us with the, you know, modest exposure to the manufacturing business which, which gives us some, some insights into the logistics demand and some of those manufacturing hubs that we're invested in.
Vince T Bone (Equity Analyst)
Great, thank you.
OPERATOR
Our next question comes from the lightest Jim Cameron evercore. Please go ahead.
Jim Cameron (Equity Analyst)
Good morning. Thank you. I think Nathan, you mentioned, you know, 4.6 million square feet or so of lease negotiations for looming expirations. How much or does any of that encompass you guys? Two big Nissan deals in early 27 and then a million square footer in Jackson, Tennessee and any color updates on those would be appreciated. Didn't know if that was in your 4.6 million square feet.
James Dudley (Executive Vice President and Director of Asset Management)
Hey Jim, it's James again. I'll, I guess I'll touch on the2027. Yeah, we've got a number of chunky leases and in 2027 and you know we're in advanced negotiations in some cases and I'm definitely talking to all the tenants for these large boxes and expect a very high rate, if not 100 renewal on the, on the big boxes that we had that includes Nissan.
Jim Cameron (Equity Analyst)
Thank you James, appreciate it. Thanks.
OPERATOR
Our next question is from the line of Mitch Germain with Citizen Spec. Please go ahead.
Mitch Germain (Equity Analyst)
Good morning. I think Will you mentioned any new development would be matched with or new potential development would be matched with asset sales. Is that, you know, are you going to sell ahead of, you know, the project commencement and kind of sit on those proceeds like you've done at the end of 4Q with Phoenix or how should we think about the cadence regarding how that process could play out?
Will Eglin (Chairman and CEO)
No, I, I think it's preferable to match fund sales with stabilized outcomes for, for development. So we, we had some distribution activity last year that left us in a very strong cash position to fund the project in, in Phoenix. But I think we would, we would prefer to hold on to the income from the assets that we might sell to fund, fund development, try to match things better.
Mitch Germain (Equity Analyst)
Got you. And then you know, last one for me, obviously significant amount of demand acceleration happening in the industrial sector. You mentioned the seven plus million square foot pipeline. Any sort of themes, industries that you're seeing that are driving, you know, more demand versus others.
Will Eglin (Chairman and CEO)
You know, Brendan touched on it a little bit. We've seen a big uptick in data center, data center adjacent demand in a number of our markets and we're fortunate to be placed well for those potential tenants as well. You've seen a couple of big leases get done for Meta and for AWS and Phoenix that took down a couple of the big boxes there. There's been a lot of new activity in Columbus that's data center related as well. And then we've got our Richmond redevelopment where there's a big Google data center campus going in next door. So I think that's one of the things I would point out. There's also continued to be growth and, you know, supplier demand for advanced manufacturers that we're seeing continue to, to grow and develop their different opportunities. You know, I'll bring Phoenix up again with tsmc, you know, moving along, and some of the ancillary demand that's, that's popped up there. So we're starting to see a pickup there. So, you know, manufacturing and data center adjacent, I think, has definitely been the recent theme and a big pickup in the demand.
Mitch Germain (Equity Analyst)
Thank you.
OPERATOR
Once again, if you would like to ask a question, please press Star followed by the number one on your telephone keypad. Our next question comes from the line of John Peterson. Mitt Jeffries, please. Go ahead.
John Peterson (Equity Analyst)
Oh, great. Thanks. Just one quick question for me. So the senior notes that are due in 28,160 million with a 6¾ interest rate, can you remind us, are those callable early? Like, should we think about you taking those all the way to maturity or should we assume you're able to refinance those early?
Nathan Brunner (Chief Financial Officer)
They have a make call structure, so they're technically callable, but requires the payment of a premium.
John Peterson (Equity Analyst)
Okay. All right, that's all for me.
OPERATOR
Thank you.
Will Eglin (Chairman and CEO)
Thank you, John. And at this time, we have no further questions. I will now turn the call back over to Will Eglin for closing remarks.
OPERATOR
We appreciate everyone joining our call this morning, and we look forward to updating you on our progress over the balance of the year. Thanks again for joining us today.
Disclaimer: This transcript is provided for informational purposes only. While we strive for accuracy, there may be errors or omissions in this automated transcription. For official company statements and financial information, please refer to the company's SEC filings and official press releases. Corporate participants' and analysts' statements reflect their views as of the date of this call and are subject to change without notice.
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