LXP Industrial Trust's Q4 2024: Unpacking Contradictions in Leasing Activity, Asset Sales, and Yield Expectations

These are the key contradictions discussed in LXP Industrial Trust's latest 2024Q4 earnings call, specifically including: Leasing Activity and Tenant Interest, Non-Core Asset Sales, Stabilization Yield Expectations, Lease-up Assumptions, Lease-up Expectations and Tenant Interest, and Competitive Landscape Dynamics:



Leasing Activity and Rental Increases:
- LXP Industrial Trust reported 4.5 million square feet of leasing volume in 2024, with base and cash-based rental increases of approximately 46% and 40%, respectively, excluding TI amortization and fixed-rate renewals.
- The strong leasing outcomes were driven by favorable market conditions, high-quality assets, and significant mark-to-market opportunities.

Financial Health and Debt Management:
- The company reduced leverage to 5.9 times net debt to adjusted EBITDA at year-end, down from 6.1 times at the end of the third quarter.
- This improvement was achieved by capitalizing on a favorable market window to execute interest rate swap agreements and repaying floating rate debt, securing fixed rates on 97% of its debt through 2026.

Investment and Acquisition Strategy:
- LXP acquired four industrial assets in 2024 for approximately $158 million in Atlanta, Houston, and Savannah, with an average initial yield of 6%.
- The acquisitions were part of a strategic focus on modern, Class A properties in Sunbelt markets experiencing positive net absorption and onshoring trends.

Big Box Development Outlook:
- LXP's 2025 adjusted company FFO guidance range is $0.61 to $0.65 per diluted common share, with the low end assuming no big box leases and the high end assuming all three big box leases are executed in the second half of the year.
- The guidance reflects the disproportionate impact of big box leasing on funds from operations, and the company remains cautious about achieving these leases amidst uncertainty.

Operational Objectives and Market Conditions:
- LXP plans to lease up approximately 3.7 million square feet in 2025, with an average annual rental escalation of 2.8%.
- The company is positioning itself to benefit from stable leasing environments in 2026 and 2027, with a high percentage of leases expiring in those years, and expects to drive strong rental increases due to below-market rents and a predominantly Class A portfolio.