LXP Industrial Trust Reports Fourth Quarter 2023 Results
LXP Industrial Trust reported strong financial results for the fourth quarter and full year 2023, with notable increases in net income, Adjusted Company FFO, and industrial same-store NOI. The company completed significant leasing activities, extended debt maturities, and made strategic investments in development projects. Despite a decline in net income compared to the previous year, LXP remains optimistic about future growth prospects driven by rental escalations and lease up of the development pipeline.
Positive
Strong financial performance in Q4 and full year 2023 with increased net income and Adjusted Company FFO.
Completed 2.2 million square feet of new leases and lease extensions, raising Base and Cash Base Rents significantly.
Extended $300.0 million term loan until 2027 and issued $300.0 million Senior Notes due 2028.
Invested in development activities, completed construction of warehouse facilities, and disposed of properties.
Net debt to Adjusted EBITDA at 6.0x, with total consolidated debt of $1.8 billion at quarter end.
2024 earnings guidance expects net income within a range of $(0.02) to $0.02 per diluted common share and Adjusted Company FFO of $0.61 to $0.65 per diluted common share.
Negative
Decline in net income compared to the previous year's fourth quarter.
Limited information on specific lease agreements and tenant details.
Guidance for 2024 indicates a potential decrease in net income compared to 2023.
The financial results released by LXP Industrial Trust indicate several key performance metrics that are of interest to investors and analysts. The reported net income of $13.0 million for Q4 2023 and $23.9 million for the full year, alongside Adjusted Company FFO of $51.4 million for Q4 and $206.2 million for the full year, suggest a stable profitability trajectory. Notably, the increase in industrial same-store NOI by 4.1% year-over-year is a positive sign of operational efficiency and could signal to investors a strong position within the industrial real estate market.
Another highlight is the significant increase in base and cash base rents, with increases of over 39% and 28% respectively for new leases and lease extensions. This is indicative of a robust demand for industrial spaces and LXP's ability to capitalize on market conditions. The extension of a $300 million term loan and the issuance of $300 million in senior notes at 6.75% due 2028 demonstrate active capital management which is crucial for maintaining liquidity and funding ongoing development projects.
However, the guidance for 2024 showing a net income range from a loss of $(0.02) to a gain of $0.02 per diluted common share, along with Adjusted Company FFO of $0.61 to $0.65 per diluted share, may raise questions about the expected performance for the upcoming year. This range suggests potential volatility and warrants careful observation of the company's operational strategy and market conditions.
The reported leasing activity, with 6.8 million square feet of new leases and lease extensions completed in 2023, reflects the strong demand for warehouse and distribution facilities. This is consistent with broader market trends, where e-commerce growth has driven demand for such spaces. The fact that LXP's stabilized industrial portfolio was fully leased at the year-end is a testament to the strength of their portfolio and their market positioning.
The sale of properties totaling $100.2 million at weighted-average capitalization rates of around 12% is in line with industry norms for such dispositions. However, the capitalization rates also reflect the quality and location of the assets and a deeper analysis would be required to assess the competitiveness of these rates. The investment of $122.1 million in development activities indicates a forward-looking growth strategy, aligning with the increasing demand for modern logistics facilities.
From a market perspective, the development of new facilities and the leasing up of LXP's development pipeline are strategic moves that could potentially increase future revenue streams. The commitment to constructing a new 250,000 square foot industrial facility in Columbus, Ohio and the completion of several others, position LXP well within key logistics markets, which is crucial for long-term growth.
The financial results and activities of LXP Industrial Trust must be contextualized within the broader economic environment. The industrial real estate sector has been buoyed by a shift towards e-commerce and supply chain reconfiguration, which has increased the need for distribution centers. LXP's ability to raise base and cash base rents significantly indicates a landlord-friendly market where industrial space is at a premium.
The extension of debt maturities to 2027 and the issuance of senior notes at a 6.75% interest rate reflect current credit market conditions and investor confidence in LXP's creditworthiness. These moves also suggest LXP is taking a proactive approach to managing interest rate risk and capital structure in a potentially rising rate environment.
However, the 2024 earnings guidance indicating a possible net loss on the lower end may suggest that LXP is anticipating some economic headwinds or specific challenges. This cautious outlook could be a reflection of uncertainties in global trade, potential shifts in consumer behavior, or expected increases in construction and borrowing costs that could impact profit margins.
02/15/2024 - 06:00 AM
NEW YORK, Feb. 15, 2024 (GLOBE NEWSWIRE) -- LXP Industrial Trust (“LXP”) (NYSE:LXP), a real estate investment trust focused on single-tenant warehouse/distribution real estate investments, today announced results for the fourth quarter and year ended December 31, 2023.
Fourth Quarter 2023 Highlights
Recorded Net Income attributable to common shareholders of $13.0 million, or $0.04 per diluted common share. Generated Adjusted Company Funds From Operations available to all equityholders and unitholders - diluted (“Adjusted Company FFO”) of $51.4 million, or $0.17 per diluted common share. Increased Industrial Same-Store NOI 4.1% in 2023 compared to the same period in 2022. Completed 2.2 million square feet of new leases and lease extensions, raising Industrial Base and Cash Base Rents by 39.4% and 28.4% , respectively ( 56.1% and 40.6% , respectively excluding fixed-rate renewals). Extended the $300.0 million term loan until January 31, 2027. Issued $300.0 million aggregate principal amount of 6.75% Senior Notes due 2028. Invested an aggregate of $23.9 million in development activities, including $20.7 million in ongoing development projects. Placed into service warehouse/distribution facilities containing an aggregate of 1.4 million square feet in three target markets. Sold one property for a gross sales price of $18.0 million. Full Year 2023 Highlights
Recorded Net Income attributable to common shareholders of $23.9 million, or $0.08 per diluted common share. Generated Adjusted Company FFO of $206.2 million, or $0.70 per diluted common share. Completed 6.8 million square feet of new leases and lease extensions, raising industrial Base and Cash Base Rents by 40.1% and 27.0% , respectively ( 52.3% and 37.3% , respectively excluding fixed-rate renewals). Industrial Same-Store NOI increased 4.1% in 2023 compared to 2022. Acquired one warehouse/distribution facility for $15.0 million . Committed to the construction of a 250,000 square foot industrial facility in the Columbus, Ohio market. Completed construction of seven warehouse/distribution facilities containing an aggregate of 4.2 million square feet in four target markets. Leased four development projects consisting of 1.9 million square feet in four target markets. Invested an aggregate of $122.1 million in development activities, including $85.8 million in ongoing development projects. Disposed of four properties and a land parcel for an aggregate gross disposition price of $100.2 million. T. Wilson Eglin, Chairman and Chief Executive Officer of LXP, commented “We had an excellent fourth quarter, highlighted by robust leasing volume. Leasing momentum was strong throughout the year, with 6.8 million square feet leased in 2023 at attractive Base and Cash Base rental increases of approximately 52% and 37% , respectively, excluding fixed-rate renewals, same-store industrial NOI growth of more than 4% and our stabilized industrial portfolio was 100% leased at year-end. We also strengthened our balance sheet, effectively extending debt maturities to 2027. Our last two office properties are under contract for sale, and as we look ahead, we believe we are well positioned for growth driven by average annual fixed rental escalations of 2.6% , rents for leases expiring through 2029 that are currently 23% below market and the lease up of our development pipeline.”
FINANCIAL RESULTS
Revenues
For the quarter ended December 31, 2023, total gross revenues were $83.0 million , compared with total gross revenues of $81.1 million for the quarter ended December 31, 2022. The increase is primarily attributable to revenue from acquisitions, market rent increases and stabilized development projects, which was partially offset by sales.
Net Income Attributable to Common Shareholders
For the quarter ended December 31, 2023, net income attributable to common shareholders was $13.0 million , or $0.04 per diluted share, compared with net income attributable to common shareholders for the quarter ended December 31, 2022 of $36.9 million , or $0.13 per diluted share.
Adjusted Company FFO
For the quarter ended December 31, 2023, LXP generated Adjusted Company FFO of $51.4 million , or $0.17 per diluted share, compared to Adjusted Company FFO for the quarter ended December 31, 2022 of $47.9 million , or $0.17 per diluted share.
Dividends/Distributions
As previously announced, during the fourth quarter of 2023, LXP declared its quarterly common share/unit dividend/distribution for the quarter ended December 31, 2023 of $0.13 per common share/unit, which was paid on January 16, 2024 to common shareholders/unitholders of record as of December 29, 2023. LXP previously declared a dividend of $0.81 25 per share on its Series C Cumulative Convertible Preferred Stock (“Series C Preferred”) for the quarter ended December 31, 2023, which will be paid on February 15, 2024, to Series C Preferred shareholders of record as of January 31, 2024.
TRANSACTION ACTIVITY
PROPERTY DISPOSITIONS Location Property Type Gross Price ($000) Annualized Net (1) ($000) Annualized NOI (1) ($000) Month of % Leased Owensboro, KY( 2 ) Other $ 18,000 $ 1,768 $ 1,898 November 100%
During the fourth quarter, the Palo Alto, CA office property's ground lease expired by its terms and the property was turned over to the ground owner.
1. Generally, quarterly period prior to sale, annualized. 2. LXP owned 71.1% .
The above property was sold at GAAP and Cash capitalization rates of 10.3% and 10.5% , respectively. As of December 31, 2023, total consolidated 2023 property disposition volume was $100.2 million at aggregate weighted-average GAAP and Cash capitalization rates of 12.3% and 12.0% , respectively.
Placed in Service Development Property Type (% owned) Market Sq. Ft. Initial Cost ($000) (1) Approximate % Leased Warehouse/Distribution (95% ) (2) Columbus, OH 1,074,840 $ 64,524 10.0 100% Warehouse/Distribution (90)% Greenville/Spartanburg, SC 304,884 21,676 5.0 100% Warehouse/Distribution(100% ) Central Florida 57,690 7,985 5.0 (3) 1,437,414 $ 94,185
1. Initial cost basis excludes certain costs, including lease commissions and developer fee or partner promote, if any. 2. Subsequent to 12/31/2023, acquired the remaining 5% from our joint venture partner. 3. Partial completion of the South Shore development project, representing 23% of the total project square footage.
ONGOING DEVELOPMENT PROJECTS Project (% owned) # of Market Estimated Sq. Ft. Estimated Cost (1) ($000) GAAP as of 12/31/23 ($000) (2) LXP as of 12/31/23 ($000) ( 3 ) Building % Leased Placed in Consolidated: Development Projects Leased: Cotton 303 (93% )( 4 ) 1 Phoenix, AZ 488,400 $ 55,300 $ 50,716 $ 44,523 1Q 2024 100 % 1Q 2024 1 488,400 $ 55,300 $ 50,716 $ 44,523 Development Projects Available for Lease: Ocala (80% ) 1 Central Florida 1,085,280 $ 85,200 $ 80,184 $ 70,605 1Q 2023 — % — Mt. Comfort (80% ) 1 Indianapolis, IN 1,053,360 66,400 64,489 58,736 1Q 2023 — % — Smith Farms (90% ) 1 Greenville/Spartanburg, SC 1,091,888 76,500 72,411 69,244 2Q 2023 — % — South Shore (100% )(5) 2 Central Florida 213,195 33,500 29,739 29,771 2Q 2023 - 3Q 2023 — % — ETNA Building D (100% )( 6 ) 1 Columbus, OH 250,020 30,200 21,816 15,928 1Q 2024 — % — 6 3,693,743 $ 291,800 $ 268,639 $ 244,284 7 4,182,143 $ 347,100 $ 319,355 $ 288,807
1. Estimated project cost includes estimated tenant improvements and leasing costs and excludes potential developer fee or partner promote, if any. 2. Excludes leasing costs. 3. Excludes noncontrolling interests' share. 4. Subsequent to December 31, 2023, the property was placed in service. 5. During the fourth quarter of 2023, a 57,690 square foot portion of the project, representing 23% of the total project, was occupied by the tenant and placed in service. 6. During the fourth quarter of 2023, a wholly-owned subsidiary of LXP purchased approximately 14 acres of land and the partially completed leasehold improvements from ETNA Park 70.
LAND HELD FOR INDUSTRIAL DEVELOPMENT Project (% owned) Market Approximate GAAP Investment as of 12/31/23 ($000) LXP Amount Funded as of 12/31/23 ($000) (1) Consolidated: Reems & Olive (95.5% )(2) Phoenix, AZ 320 $ 73,683 $ 74,308 Mt. Comfort Phase II (80% ) Indianapolis, IN 116 5,328 4,283 ATL Fairburn (100% ) Atlanta, GA 14 1,732 1,751 450 $ 80,743 $ 80,342
Project (% owned) Market Approximate GAAP Investment as of 12/31/23 ($000) LXP Amount Funded as of 12/31/23 ($000) (1) Non-consolidated: ETNA Park 70 (90% ) Columbus, OH 52 $ 10,320 $ 13,778 ETNA Park 70 East (90% ) Columbus, OH 21 2,245 2,674 73 $ 12,565 $ 16,452
1. Excludes noncontrolling interests' share. 2. During the fourth quarter of 2023, a perpetual utility easement was granted in exchange for $6.2 million .
LEASING During the fourth quarter of 2023, LXP executed the following new leases and extensions: NEW LEASES - FIRST GENERATION (1) Location Lease Sq. Ft. Industrial 1 Ruskin(2) FL 01/2029 57,690 2 Plant City FL 07/2035 180,308 2 TOTAL NEW LEASES - FIRST GENERATION 237,998
NEW LEASES - SECOND GENERATION (3) Location Lease Sq. Ft. Industrial 1 Pasadena(3) TX 04/2029 257,835 1 TOTAL NEW LEASES - SECOND GENERATION 257,835
LEASE EXTENSIONS - SECOND GENERATION Location Prior Term Lease Expiration Date Sq. Ft. Industrial 1 Monroe OH 06/2024 06/2026 194,936 2 Cartersville (4) GA 08/2024 09/2027 119,295 3 Rockford IL 12/2024 12/2027 93,000 4 Whitestown IN 03/2024 03/2029 53,240 5 Union City GA 05/2024 05/2029 370,000 6 Spartanburg SC 07/2024 07/2029 341,660 7 Northlake TX 10/2024 10/2034 500,556 7 TOTAL EXTENDED LEASES - SECOND GENERATION 1,672,687 8 TOTAL NEW AND EXTENDED LEASES - SECOND GENERATION 1,930,522
1. No prior leases. 2. Partial completion of the South Shore development project. 3. Vacant property leased. 4. During the fourth quarter of 2023, the tenant exercised its renewal option to extend its lease term for three years but the fair market value rent could not be determined by December 31, 2023.
As of December 31, 2023, LXP's stabilized industrial portfolio was 100% leased. A total of 6.8 million square feet of new and extended industrial leases were entered into in 2023, with Base and Cash Base Rents increasing by 40.1% and 27.0% , respectively, including fixed renewals.
BALANCE SHEET/CAPITAL MARKETS
In November, LXP amended the agreement governing its $300.0 million term loan. The amendment, among other things, extended the maturity of the term loan from January 31, 2025 to January 31, 2027. The Term SOFR portion of the interest rate continues to be swapped to obtain a current fixed rate of 2.722% per annum until January 31, 2025. Subsequent to January 31, 2025, the term loan will bear variable interest at Adjusted Term SOFR plus a spread, currently 100 basis points.
LXP also issued $300.0 million aggregate principal amount of 6.75% Senior Notes due 2028 at an issuance price of 99.423% of the principal amount in November. LXP used the net proceeds and cash on hand to repay amounts outstanding on its unsecured revolving credit facility. The remaining proceeds were invested and will be used to repay the Senior Notes due 2024 before or at maturity, fund development and for general corporate purposes.
As of December 31, 2023, LXP ended the quarter with net debt to Adjusted EBITDA at 6.0x. LXP's total consolidated debt was $1.8 billion at quarter end with 92.8% at fixed rates. The total consolidated debt had a weighted-average term to maturity of 5.8 years and a weighted-average interest rate of 3.9% as of December 31, 2023.
2024 EARNINGS GUIDANCE
LXP estimates that its net income attributable to common shareholders for the year ended December 31, 2024 will be within an expected range of $(0.02) t o $0.02 per diluted common share. LXP estimates its Adjusted Company FFO for the year ended December 31, 2024, will be within an expected range of $0.61 t o $0.65 per diluted common share. This guidance is forward looking, excludes the impact of certain items and is based on current expectations.
FOURTH QUARTER 2023 CONFERENCE CALL
LXP will host a conference call today February 15, 2024, at 8:30 a.m. Eastern Time, to discuss its results for the quarter ended December 31, 2023. Interested parties may participate in this conference call by dialing 1-888-660-6082 (U.S.) or 1-929-201-6604 (All other locations). Access code is 1576583. A replay of the call will be available through May 15, 2024, at 1-800-770-2030 (U.S.) or 1-647-362-9199 (All other locations); pin code for all replay numbers is 1576583. A link to a live webcast of the conference call is available at www.lxp.com within the Investors section.
LXP Industrial Trust (NYSE: LXP) is a publicly traded real estate investment trust (REIT) focused on single-tenant industrial real estate investments across the United States. LXP seeks to expand its industrial portfolio through acquisitions, build-to-suit transactions, sale-leaseback transactions, development projects and other transactions. For more information, including LXP's Quarterly Supplemental Information package, or to follow LXP on social media, visit www.lxp.com .
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This release contains certain forward-looking statements which involve known and unknown risks, uncertainties or other factors not under LXP's control which may cause actual results, performance or achievements of LXP to be materially different from the results, performance, or other expectations implied by these forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed under the headings “Management's Discussion and Analysis of Financial Condition and Results of Operations” and “Risk Factors” in LXP's periodic reports filed with the Securities and Exchange Commission, including risks related to: (1) national, regional and local economic and political climates, (2) the outbreak of highly infectious or contagious diseases, (3) the authorization by LXP's Board of Trustees of future dividend declarations, (4) LXP's ability to achieve its estimates of net income attributable to common shareholders and Adjusted Company FFO for the year ending December 31, 2024, (5) the successful consummation of any lease, acquisition, build-to-suit, disposition, financing or other transaction, (6) the failure to continue to qualify as a real estate investment trust, (7) changes in general business and economic conditions, including the impact of any legislation, (8) competition, (9) inflation, increases in real estate construction costs and construction schedule delays, (10) changes in financial markets and interest rates, (11) changes in accessibility of debt and equity capital markets, (12) future impairment charges, and (13) risks related to our investments in our non-consolidated joint ventures. Copies of the periodic reports LXP files with the Securities and Exchange Commission are available on LXP's web site at www.lxp.com . Forward-looking statements, which are based on certain assumptions and describe LXP's future plans, strategies and expectations, are generally identifiable by use of the words “believes,” “expects,” “intends,” “anticipates,” “estimates,” “projects”, “may,” “plans,” “predicts,” “will,” “will likely result,” “is optimistic,” “goal,” “objective” or similar expressions. Except as required by law, LXP undertakes no obligation to publicly release the results of any revisions to those forward-looking statements which may be made to reflect events or circumstances after the occurrence of unanticipated events. Accordingly, there is no assurance that LXP's expectations will be realized.
References to LXP refer to LXP Industrial Trust and its consolidated subsidiaries. All interests in properties and loans are held, and all property operating activities are conducted, through special purpose entities, which are separate and distinct legal entities that maintain separate books and records, but in some instances are consolidated for financial statement purposes and/or disregarded for income tax purposes. The assets and credit of each special purpose entity with a property subject to a mortgage loan are not available to creditors to satisfy the debt and other obligations of any other person, including any other special purpose entity or affiliate. Consolidated entities that are not property owner subsidiaries do not directly own any of the assets of a property owner subsidiary (or the general partner, member of managing member of such property owner subsidiary), but merely hold partnership, membership or beneficial interests therein which interests are subordinate to the claims of the property owner subsidiary's (or its general partner's, member's or managing member's) creditors.
Non-GAAP Financial Measures - Definitions
LXP has used non-GAAP financial measures as defined by the Securities and Exchange Commission Regulation G in this Quarterly Earnings Release and in other public disclosures.
LXP believes that the measures defined below are helpful to investors in measuring our performance or that of an individual investment. Since these measures exclude certain items which are included in their respective most comparable measures under generally accepted accounting principles (“GAAP”), reliance on the measures has limitations; management compensates for these limitations by using the measures simply as supplemental measures that are weighed in balance with other GAAP measures. These measures are not necessarily indications of our cash flow available to fund cash needs. Additionally, they should not be used as an alternative to the respective most comparable GAAP measures when evaluating LXP's financial performance or cash flow from operating, investing or financing activities or liquidity.
Adjusted EBITDA: Adjusted EBITDA represents EBITDA (earnings before interest, taxes, depreciation and amortization) modified to include other adjustments to GAAP net income for gains on sales of properties, impairment charges, debt satisfaction gains (losses), net, non-cash charges, net, straight-line adjustments, non-recurring charges, the non-cash impact of sales-type leases and adjustments for pro-rata share of non-wholly owned entities. LXP's calculation of Adjusted EBITDA may not be comparable to similarly titled measures used by other companies. LXP believes that net income is the most directly comparable GAAP measure to Adjusted EBITDA.
Base Rent: Base Rent is calculated by making adjustments to GAAP rental revenue to exclude billed tenant reimbursements and lease termination income and to include ancillary income. Base Rent excludes reserves/write-offs of deferred rent receivable, as applicable. LXP believes Base Rent provides a meaningful measure due to the net lease structure of leases in the portfolio.
Cash Base Rent: Cash Base Rent is calculated by making adjustments to GAAP rental revenue to remove the impact of GAAP required adjustments to rental income such as adjustments for straight-line rents related to free rent periods and contractual rent increases. Cash Base Rent excludes billed tenant reimbursements, non-cash sales-type lease income and lease termination income, and includes ancillary income. LXP believes Cash Base Rent provides a meaningful indication of an investments ability to fund cash needs.
Company Funds Available for Distribution (“FAD”): FAD is calculated by making adjustments to Adjusted Company FFO (see below) for (1) straight-line adjustments, (2) lease incentive amortization, (3) amortization of above/below market leases, (4) lease termination payments, net, (5) non-cash income related to sales-type leases, (6) non-cash interest, (7) non-cash charges, net, (8) capitalized interest and internal costs, (9) cash paid for second generation tenant improvements, and (10) cash paid for second generation lease costs. Although FAD may not be comparable to that of other real estate investment trusts (“REITs”), LXP believes it provides a meaningful indication of its ability to fund cash needs. FAD is a non-GAAP financial measure and should not be viewed as an alternative measurement of operating performance to net income, as an alternative to net cash flows from operating activities or as a measure of liquidity.
First Generation Costs: Represents cash spend for tenant improvements and leasing costs for in-service development projects and expenditures contemplated at acquisition for recently acquired properties. Because all companies do not calculate First Generation Costs the same way, LXP's presentation may not be comparable to similarly titled measures of other companies.
Funds from Operations (“FFO”) and Adjusted Company FFO: LXP believes that Funds from Operations, or FFO, which is a non-GAAP measure, is a widely recognized and appropriate measure of the performance of an equity REIT. LXP believes FFO is frequently used by securities analysts, investors and other interested parties in the evaluation of REITs, many of which present FFO when reporting their results. FFO is intended to exclude GAAP historical cost depreciation and amortization of real estate and related assets, which assumes that the value of real estate diminishes ratably over time. Historically, however, real estate values have risen or fallen with market conditions. As a result, FFO provides a performance measure that, when compared year over year, reflects the impact to operations from trends in occupancy rates, rental rates, operating costs, development activities, interest costs and other matters without the inclusion of depreciation and amortization, providing perspective that may not necessarily be apparent from net income.
The National Association of Real Estate Investment Trusts, or NAREIT, defines FFO as “net income (calculated in accordance with GAAP), excluding depreciation and amortization related to real estate, gains and losses from the sales of certain real estate assets, gains and losses from change in control and impairment write-downs of certain real estate assets and investments in entities when the impairment is directly attributable to decreases in value of depreciable real estate held by the entity. The reconciling items include amounts to adjust earnings from consolidated partially-owned entities and equity in earnings of unconsolidated affiliates to FFO.” FFO does not represent cash generated from operating activities in accordance with GAAP and is not indicative of cash available to fund cash needs.
LXP presents FFO available to common shareholders and unitholders - basic and also presents FFO available to all equityholders and unitholders - diluted on a company-wide basis as if all securities that are convertible, at the holder's option, into LXP’s common shares, are converted at the beginning of the period. LXP also presents Adjusted Company FFO available to all equityholders and unitholders - diluted which adjusts FFO available to all equityholders and unitholders - diluted for certain items which we believe are not indicative of the operating results of LXP's real estate portfolio. LXP believes this is an appropriate presentation as it is frequently requested by security analysts, investors and other interested parties. Since others do not calculate these measures in a similar fashion, these measures may not be comparable to similarly titled measures as reported by others. These measures should not be considered as an alternative to net income as an indicator of LXP’s operating performance or as an alternative to cash flow as a measure of liquidity.
GAAP and Cash Yield or Capitalization Rate: GAAP and cash yields or capitalization rates are measures of operating performance used to evaluate the individual performance of an investment. These measures are estimates and are not presented or intended to be viewed as a liquidity or performance measure that present a numerical measure of LXP's historical or future financial performance, financial position or cash flows. The yield or capitalization rate is calculated by dividing the annualized NOI (as defined below, except GAAP rent adjustments are added back to rental income to calculate GAAP yield or capitalization rate) the investment is expected to generate, (or has generated) divided by the acquisition/completion cost, (or sale price). Stabilized yields assume 100% occupancy and the payment of estimated costs to achieve 100% occupancy including partner promotes, if any.
Net Operating Income (“NOI”): NOI is a measure of operating performance used to evaluate the individual performance of an investment. This measure is not presented or intended to be viewed as a liquidity or performance measure that presents a numerical measure of LXP's historical or future financial performance, financial position or cash flows. LXP defines NOI as operating revenues (rental income (less GAAP rent adjustments, non-cash income related to sales-type leases and lease termination income, net), and other property income) less property operating expenses. Other REITs may use different methodologies for calculating NOI, and accordingly, LXP's NOI may not be comparable to other companies. Because NOI excludes general and administrative expenses, interest expense, depreciation and amortization, acquisition-related expenses, other nonproperty income and losses, and gains and losses from property dispositions, it provides a performance measure that, when compared year over year, reflects the revenues and expenses directly associated with owning and operating commercial real estate and the impact to operations from trends in occupancy rates, rental rates, and operating costs, providing a perspective on operations not immediately apparent from net income. LXP believes that net income is the most directly comparable GAAP measure to NOI.
Same-Store NOI: Same-Store NOI represents the NOI for consolidated properties that were owned, stabilized and included in our portfolio for two comparable reporting periods. As Same-Store NOI excludes the change in NOI from acquired and disposed of properties, it highlights operating trends such as occupancy levels, rental rates and operating costs on properties. Other REITs may use different methodologies for calculating Same-Store NOI, and accordingly, LXP's Same-Store NOI may not be comparable to other REITs. Management believes that Same-Store NOI is a useful supplemental measure of LXP's operating performance. However, Same-Store NOI should not be viewed as an alternative measure of LXP's financial performance since it does not reflect the operations of LXP's entire portfolio, nor does it reflect the impact of general and administrative expenses, acquisition-related expenses, interest expense, depreciation and amortization costs, other nonproperty income and losses, the level of capital expenditures and leasing costs necessary to maintain the operating performance of LXP's properties, or trends in development and construction activities which are significant economic costs and activities that could materially impact LXP's results from operations. LXP believes that net income is the most directly comparable GAAP measure to Same-Store NOI.
Second Generation Costs: Represents cash spend for tenant improvements and leasing costs to maintain revenues at existing properties and are a component of the FAD calculation. LXP believes that second generation building improvements represent an investment in existing stabilized properties.
Stabilized Portfolio: All real estate properties other than acquired or developed properties that have not achieved 90% occupancy within one-year of acquisition or substantial completion. Non-stabilized, substantially completed development projects are classified within investments in real estate under construction. If some portions of a development project are substantially complete and ready for use and other portions have not yet reached that stage, LXP ceases capitalizing costs on the completed portion of the project but continue to capitalize costs for the incomplete portion. When a portion of the development project is substantially complete and ready for its intended use, the project is placed in service and depreciation commences.
LXP INDUSTRIAL TRUST AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS Three months ended Twelve months ended 2023 2022 2023 2022 Gross revenues: Rental revenue $ 81,894 $ 79,243 $ 334,220 $ 313,992 Other revenue 1,062 1,861 6,283 7,253 Total gross revenues 82,956 81,104 340,503 321,245 Expense applicable to revenues: Depreciation and amortization (46,220 ) (45,922 ) (183,524 ) (180,567 ) Property operating (12,717 ) (12,647 ) (58,394 ) (54,870 ) General and administrative (9,468 ) (9,621 ) (36,334 ) (38,714 ) Transaction costs — (4,121 ) (4 ) (4,177 ) Non-operating income 2,251 582 2,982 935 Interest and amortization expense (13,887 ) (12,659 ) (46,389 ) (45,417 ) Debt satisfaction losses, net (132 ) — (132 ) (119 ) Impairment charges — (580 ) (16,490 ) (3,037 ) Change in allowance for credit loss 3 (93 ) 32 (93 ) Gains on sales of properties 17,977 6,143 33,010 59,094 Selling profit from sales-type leases — 37,745 — 47,059 Income before provision for income taxes and equity in earnings (losses) of non-consolidated entities 20,763 39,931 35,260 101,339 Provision for income taxes (57 ) (151 ) (703 ) (1,102 ) Equity in earnings (losses) of non-consolidated entities (1,219 ) 426 1,366 16,006 Net income 19,487 40,206 35,923 116,243 Less net income attributable to noncontrolling interests (4,886 ) (1,733 ) (5,540 ) (2,460 ) Net income attributable to LXP Industrial Trust shareholders 14,601 38,473 30,383 113,783 Dividends attributable to preferred shares – Series C (1,572 ) (1,572 ) (6,290 ) (6,290 ) Allocation to participating securities (44 ) (35 ) (230 ) (186 ) Net income attributable to common shareholders $ 12,985 $ 36,866 $ 23,863 $ 107,307 Income per common share – basic: Net income attributable to common shareholders – per common share basic $ 0.04 $ 0.13 $ 0.08 $ 0.38 Weighted-average common shares outstanding – basic 290,420,220 274,928,363 290,245,877 279,887,760 Income per common share – diluted: Net income attributable to common shareholders – per common share diluted $ 0.04 $ 0.13 $ 0.08 $ 0.38 Weighted-average common shares outstanding – diluted 291,325,979 276,118,668 291,193,514 282,473,458
LXP INDUSTRIAL TRUST AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS As of December 31, 2023 2022 Assets: Real estate, at cost $ 3,774,239 $ 3,691,066 Real estate - intangible assets 314,525 328,607 Land held for development 80,743 84,412 Investments in real estate under construction 319,355 361,924 Real estate, gross 4,488,862 4,466,009 Less: accumulated depreciation and amortization 904,709 800,470 Real estate, net 3,584,153 3,665,539 Assets held for sale 9,168 66,434 Right-of-use assets, net 19,342 23,986 Cash and cash equivalents 199,247 54,390 Restricted cash 216 116 Short-term investments 130,140 — Investment in non-consolidated entities 48,495 58,206 Deferred expenses, net 35,008 25,207 Investment in a sales-type lease, net 63,464 61,233 Rent receivable - current 5,327 3,030 Rent receivable - deferred 80,421 71,392 Other assets 17,794 24,314 Total assets $ 4,192,775 $ 4,053,847 Liabilities and Equity: Liabilities: Mortgages and notes payable, net $ 60,124 $ 72,103 Term loan payable, net 296,764 298,959 Senior notes payable, net 1,286,145 989,295 Trust preferred securities, net 127,794 127,694 Dividends payable 39,610 38,416 Liabilities held for sale 417 1,150 Operating lease liabilities 20,233 25,118 Accounts payable and other liabilities 57,981 74,261 Accrued interest payable 11,379 9,181 Deferred revenue - including below market leases, net 9,428 11,452 Prepaid rent 17,443 15,215 Total liabilities 1,927,318 1,662,844 Commitments and contingencies Equity: Preferred shares, par value $0.00 01 per share; authorized 100,000,000 shares, Series C Cumulative Convertible Preferred, liquidation preference $96,770 and 1,935,400 shares issued and outstanding 94,016 94,016 Common shares, par value $0.00 01 per share; authorized 600,000,000 shares 293,449,088 and 291,719,310 shares issued and outstanding in 2023 and 2022, respectively 29 29 Additional paid-in-capital 3,330,383 3,320,087 Accumulated distributions in excess of net income (1,201,824 ) (1,079,087 ) Accumulated other comprehensive income 9,483 17,689 Total shareholders’ equity 2,232,087 2,352,734 Noncontrolling interests 33,370 38,269 Total equity 2,265,457 2,391,003 Total liabilities and equity $ 4,192,775 $ 4,053,847
LXP INDUSTRIAL TRUST AND SUBSIDIARIES EARNINGS PER SHARE Three Months Ended Twelve Months Ended 2023 2022 2023 2022 EARNINGS PER SHARE: Basic: Net income attributable to common shareholders $ 12,985 $ 36,866 $ 23,863 $ 107,307 Weighted-average common shares outstanding - basic 290,420,220 274,928,363 290,245,877 279,887,760 Net income attributable to common shareholders - per common share basic $ 0.04 $ 0.13 $ 0.08 $ 0.38 Diluted: Net income attributable to common shareholders - basic $ 12,985 $ 36,866 $ 23,863 $ 107,307 Impact of assumed conversions 5 9 (58 ) 156 Net income attributable to common shareholders $ 12,990 $ 36,875 $ 23,805 $ 107,463 Weighted-average common shares outstanding - basic 290,420,220 274,928,363 290,245,877 279,887,760 Effect of dilutive securities: Unvested share-based payment awards 109,904 354,750 127,251 457,597 Shares issuable under forward sales agreements — — — 1,274,842 Operating Partnership Units 795,855 835,555 820,386 853,259 Weighted-average common shares outstanding - diluted 291,325,979 276,118,668 291,193,514 282,473,458 Net income attributable to common shareholders - per common share diluted $ 0.04 $ 0.13 $ 0.08 $ 0.38
LXP INDUSTRIAL TRUST AND SUBSIDIARIES ADJUSTED COMPANY FUNDS FROM OPERATIONS & FUNDS AVAILABLE FOR DISTRIBUTION (Unaudited and in thousands, except share and per share data) Three Months Ended Twelve Months Ended 2023 2022 2023 2022 FUNDS FROM OPERATIONS: Basic and Diluted: Net income attributable to common shareholders $ 12,985 $ 36,866 $ 23,863 $ 107,307 Adjustments: Depreciation and amortization of real estate 45,070 45,125 179,554 177,725 Impairment charges - real estate, including our share of non-consolidated entities 1,369 838 17,859 8,137 Noncontrolling interests - OP units 5 9 (58 ) 156 Amortization of leasing commissions 1,150 797 3,970 2,842 Joint venture and noncontrolling interest adjustment 7,000 2,527 13,168 11,112 Gains on sales of properties, including our share of non-consolidated entities (17,978 ) (7,759 ) (38,796 ) (83,562 ) FFO available to common shareholders and unitholders - basic 49,601 78,403 199,560 223,717 Preferred dividends 1,572 1,572 6,290 6,290 Amount allocated to participating securities 44 35 230 186 FFO available to all equityholders and unitholders - diluted 51,217 80,010 206,080 230,193 Selling profit from sales-type leases (1) — (37,745 ) — (47,059 ) Allowance for credit loss (3 ) 93 (32 ) 93 Transaction costs (2) — 4,121 4 4,177 Debt satisfaction losses, net, including our share of non-consolidated entities 138 1 138 1,615 Other non-recurring costs (3) — — — 2,573 Noncontrolling interest adjustments — 1,469 1 1,469 Adjusted Company FFO available to all equityholders and unitholders - diluted 51,352 47,949 206,191 193,061 FUNDS AVAILABLE FOR DISTRIBUTION: Adjustments: Straight-line adjustments (1,750 ) (2,519 ) (9,688 ) (11,412 ) Lease incentives 125 127 439 518 Amortization of above/below market leases (449 ) (449 ) (1,796 ) (1,865 ) Sales-type lease non-cash income (574 ) (342 ) (2,199 ) (342 ) Non-cash interest 1,028 819 3,487 3,278 Non-cash charges, net 2,195 1,846 8,934 7,483 Capitalized interest and internal costs (2,842 ) (2,549 ) (12,002 ) (8,014 ) Second generation tenant improvements (982 ) (78 ) (2,619 ) (5,094 ) Second generation lease costs (3,788 ) (475 ) (5,521 ) (2,613 ) Joint venture and non-controlling interests adjustment 102 (103 ) (569 ) (211 ) Company Funds Available for Distribution $ 44,417 $ 44,226 $ 184,657 $ 174,789 Per Common Share and Unit Amounts Basic: FFO $ 0.17 $ 0.28 $ 0.69 $ 0.80 Diluted: FFO $ 0.17 $ 0.28 $ 0.70 $ 0.80 Adjusted Company FFO $ 0.17 $ 0.17 $ 0.70 $ 0.67 Weighted-Average Common Shares Basic: Weighted-average common shares outstanding - basic EPS 290,420,220 274,928,363 290,245,877 279,887,760 Operating partnership units(4) 795,855 835,555 820,386 853,259 Weighted-average common shares outstanding - basic FFO 291,216,075 275,763,918 291,066,263 280,741,019 Diluted: Weighted-average common shares outstanding - diluted EPS 291,325,979 276,118,668 291,193,514 282,473,458 Unvested share-based payment awards — — — 17,381 Preferred shares - Series C 4,710,570 4,710,570 4,710,570 4,710,570 Weighted-average common shares outstanding - diluted FFO 296,036,549 280,829,238 295,904,084 287,201,409
(1) Aggregate gains recognized upon entering into a sales-type lease and exercises of tenants' purchase options in leases.
LXP INDUSTRIAL TRUST AND CONSOLIDATED SUBSIDIARIES RECONCILIATION OF NON-GAAP MEASURES 2024 EARNINGS GUIDANCE Twelve Months Ended Range Estimated: Net income attributable to common shareholders per diluted common share(1) $ (0.02 ) $ 0.02 Depreciation and amortization 0.66 0.66 Impact of capital transactions (0.03 ) (0.03 ) Estimated Adjusted Company FFO per diluted common share $ 0.61 $ 0.65
(1) Assumes all convertible securities are dilutive.
LXP reported a net income of $13.0 million for the fourth quarter of 2023.
LXP recorded net income of $23.9 million for the full year 2023 and generated Adjusted Company FFO of $206.2 million.
LXP completed the extension of a $300.0 million term loan until 2027 and issued $300.0 million Senior Notes due 2028.
LXP estimates its net income for 2024 to be within a range of $(0.02) to $0.02 per diluted common share and Adjusted Company FFO to be within a range of $0.61 to $0.65 per diluted common share.
