Thank you for standing by and welcome to the LXP Industrial Trust Fourth Quarter 2023 Earnings Conference Call and Webcast. [Operator Instructions]. As a reminder today’s call is being recorded. I will now like to hand today’s call over to Heather Gentry. Please go ahead.

Thank you, operator. Welcome to LXP Industrial Trust fourth quarter 2023 earnings conference call and webcast. The earnings release was distributed this morning and both the release and quarterly supplemental are available on our website at www.lxp.com in the Investors section and will be furnished to the SEC 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 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 flows. On today’s call, Will Eglin, Chairman and CEO; Beth Boulerice, CFO; Brendan Mullinix, CIO; and Executive Vice President, James Dudley, will provide a recent business update and commentary on fourth quarter results. I will now turn the call over to Will.

Thanks, Heather, and good morning, everyone. Our fourth quarter results were strong propelled by robust leasing volume and excellent leasing spreads. We also took advantage of refinancing opportunities that will effectively extend our debt maturities to 2027. Our fourth quarter leasing activity built on the strong momentum we maintained throughout the year in which we leased 6.8 million square feet at attractive base and cash based rental increases of approximately 52% and 37%, respectively, excluding fixed renewals. Over half of our 2024 industrial expirations were addressed in 2023, and we expect good results on the remaining 2.9 million square feet. We are in negotiations for the majority of these 2024 expirations and anticipate that renewals will result in a 20% to 30% cash rental increase based on current market conditions. Our two remaining office assets in Fort Mill, South Carolina are currently under contract for $16 million subject to certain closing conditions. We expect to collect approximately $1.8 million of rent for these assets in 2024 prior to their projected sale in the second quarter. On the capital markets side, we continue to strengthen our balance sheet position and maintain considerable financial flexibility. During the quarter, we extended the maturity of our $300 million term loan from 2025 to 2027 and raised $300 million in a bond offering with the proceeds currently earmarked for our remaining development funding needs and the repayment of our 2024 senior notes maturing in June of this year. With the expected payoff of the 2024 notes, we'll have no debt maturing until 2027 and a proforma weighted average interest rate of 3.8% and a weighted average term of 6.5 years. Approximately 7.2% of our debt is currently floating, which is expected to increase to 27% at the beginning of 2025. We may consider swapping some…

Thanks, Will. In 2023, we invested approximately $122 million on development projects, including $24 million in the fourth quarter. As of yearend, we have approximately $53 million left to fund in our remaining projects, excluding any partner promotes which we plan to fund with cash on hand. During the quarter, we began recognizing revenue for 1.4 million square feet of development projects that were placed into service. This included our approximately 1.1 million square foot development project in Columbus, in which we achieved a stabilized cash shield of 6.8% after partner promote. The leasing market for new construction continues to be challenged given the supply of big box product as prospective tenants have more choices, are taking longer to make decisions and are being more cautious in the current macro environment. However, we continue to see activity at our remaining development projects, and we will update you as we gain greater visibility. Subsequent to quarter end, we placed our approximately 488,000 square foot Phoenix facility into service and completed the core and shell build out of our 250,000 square foot development project in Columbus. With the completion of this build out, all of our spec development projects are core and shell complete. In thinking about near term capital plans, we currently believe the build-to-suit market will provide us with the best investment opportunities given the decline in new spec construction starts and the elimination of leasing growth. Our plan is to continue reviewing build to suit-to-suit projects that may be a good fit for our portfolio and respond to inquiries relating to our land bank, including our Phoenix land. The data center user that previously leased 100 Acres in Phoenix in late 2022 has an option to purchase the land at the end of this year for roughly $87 million which represents $63 million in excess of the original cost of the allocated $24.1 million for the 100 acres. Our cost basis on the remaining 320 acres in Phoenix is approximately $74 million. With that, I'll turn the call over to James to discuss leasing.

Thanks Brendan. We had strong leasing volume in the quarter of 2.2 million square feet at base and cash based rental spreads of approximately 56% 41% respectively, excluding fixed renewals. Lease escalators continue to trend upward with the average escalator on leases signed in 2023 at 3.7% excluding fixed renewals. Our considerable mark-to-market opportunities continue to reflect the quality of our portfolio and underscore the value of our investment strategy. Notable leasing outcomes in the fourth quarter include a 5-year extension with 4% annual bumps at our 370,000 square foot facility in the Atlanta market, resulting in excellent base and cash based rental increases of 79% and 62%, respectively, over the prior rent. Additionally, we executed a 10-year extension with 4% annual bumps at our 500,000 square foot facility in the Dallas market, achieving base and cash based rental increases of 58% and 32% respectively when compared to the previous rent. Our industrial stabilized portfolio was 100% leased at year end as we addressed our remaining vacancy during the fourth quarter. This included a 12-year lease with 3.5% bumps for the remaining 180,000 square feet at our Plant City, Florida facility and a 5-year lease with 3.75% bumps our approximately 258,000 square foot Houston facility. With that, I'll turn the call over to Beth to discuss financial results.

Thanks, James. Revenue in the fourth quarter was $83 million with property operating expenses of about $13 million of which 91% was attributable to tenant reimbursements. Our overall 2023 tenant reimbursement rate was approximately 94%. Fourth quarter adjusted company FFO was $0.17 per diluted common share or approximately $51 million. Fourth quarter G&A was $9.5 million bringing full year 2023 G&A to an approximately $36 million. We anticipate 2024 G&A to be within a range of $37 million to $39 million. Our same-store industrial portfolio was 100% leased at quarter end and same store industrial NOI increased 4.1% in the fourth quarter when compared to the same period in 2022. Full year industrial same-store NOI growth was also 4.1% when compared to full year 2022. At year end, approximately 98% of our industrial portfolio leases had escalations with an average annual rate of 2.6%. With respect to 2024, we are expecting same store industrial NOI growth to be within a range of 3.5% to 4.5%, which considers a range of leasing assumptions. At quarter end, net debt to adjusted EBITDA was 6 times and our $600 million unsecured revolving credit facility was fully available. Our consolidated debt outstanding as approximately $1.8 billion at quarter end with a weighted average interest rate of 3.9% and a weighted average term to maturity of 5.8 years. Finally, our fixed rate debt percentage was approximately 93% at quarter end. With that, I'll turn the call back over to the operator, who will conduct the question-and-answer portion of this call.

Thank you. [Operator Instructions]. Your first question is from the line of Todd Thomas with KeyBanc Capital Markets.

Hi, thanks. Good morning. First question, just around the guidance, Beth. It sounds like the low end of the guidance assumes no commencements related to the development leasing during the year. How much leasing is assumed that at the high end of the range? And then maybe for Brendan Mullinix, can you talk or expand a little bit on the leasing pipeline and just discuss demand for some of the larger spaces and the development projects in general.

Good morning, Todd. Yes, so the low end has the three big boxes not being leased all year. The high end has them coming in, in some form in the fourth quarter.

Hey, Todd. This is James. So just kind of elaborate on our leasing pipeline right now. All three of the big box facilities have activity. Look, there's a lot of new supply that we're dealing with in those markets. It's very competitive, but we do have, some hopeful activity on all three buildings. So it's difficult to say when that's going to equate to a new lease, but hopefully sometime this year we're going to have some good news.

Okay. Any updated thoughts on the stabilized yield expectations across the development portfolio and just given some of the increase in supplier competition, are you seeing any change at all in market rents?

I'll take that. This is Brendan. In terms of the targeted returns that we're looking at for the balance of the unleased development pipeline. We're not changing our guidance from the 6 to 6.5 post promote that we previously guided to.

And I guess I would just add, this is James again, on the market rents. Thus far market rents are holding. I mean we are Likely to see that there's going to be a little bit of a change in concessions or for rent more TI on the first-generation space, but as of right now, as we're reviewing opportunities, market rents seem to be holding.

Your next question is from the line of Camille Bonnel with Bank of America.

Good morning. As we look across vacancy rates by size band, it's clear the concentration of supply risk is in the larger industrial buildings. Can you remind us how much of the moderating rental spreads you disclosed for 2024 going from 42% to 20% to 30% is driven by where in place rents are for those expiring leases versus the outlook for market rent growth.

This is Brendan. A lot of it just has to do with mix. I don't know that it's necessarily forecast for our entire portfolio or the pipeline.

Got it. And just expanding on your earlier comments about market rents, to clarify, that's on a gross basis, right?

No. The mark-to-market are you referring to?

No. In the previous response, you mentioned like market rents are relatively flat. Is that just on a gross basis?

I mean, I was referring to the net rent.

Okay. Thanks for clarifying that. And finally, how are you thinking about your capital allocation strategy when it comes to driving earnings growth. Just given stabilized development yields are tracking slightly below to in line with the implied cap rate of LXP. Recognize you do have a lot of embedded growth within the portfolio to unlock, but that's sort of limited by how many leases are falling each year. So just how -- can you talk to how you're thinking about how income growth evolves in today's funding environment?

This is Brennan again. I mean, yes -- both would point you to the building blocks of growth that Will outlined in his prepared comments. In addition, in the investment market, we're currently seeing build-to-suit as potentially being a very interesting line of business for us, which would be -- we think in the range of 6.5 to 7 for initial going in yields kind of depending on what the escalation structure and Lease duration is.

Your next question is from the line of Jim Kammert with Evercore.

Good morning. Thank you. I apologize. My notes, so it's my fault. Regarding the data center land or potential sale in Phoenix, can you just review the history of that? Again, my notes are messed up. It's my fault. And I'm trying to think about if you were able to sell it in the latter part of this year, a very nice embedded gain. Can you effectively shelter that by reinvesting in other assets? Thank you.

This is Bredan. In terms of the history, so we acquired a roughly 420 Acres site in late 2021 for about $101 million in the fourth quarter of 2022, so about a year later, we're just inside a year, we entered into a ground lease with the data center user for about 100 acres of that 420 with options, the ground lease is 50 years. The initial cash rent on that ground lease is $5.2 million. So that was a great transaction for us. It provided relatively immediate cash flow to the project and added a whole lot of value before any vertical construction began. That ground lease does include a purchase option on the second anniversary which will be in the fourth quarter of this year and it's open for one year. And the tenant has the opportunity, as explained in the prepared remarks to purchase for roughly $87 million. I'm sure there are a lot of factors that user will consider and whether or not to exercise the option. I can add that they have begun their development of the site. So they're already investing there. They'll have a substantial investment. So whether or not they exercise that option, if they choose not to, we still have a very valuable ground lease there.

Got it. Very helpful. Thank you.

Your next question is from the line of Mitch Germain with JMP Securities.

Hi. This is Jody on for Mitch. I just wanted to ask about the lease negotiations. Is it just the dynamic right now? Is it taking longer to get the finish line or is it same kind of dynamic as before?

I would say that the -- this is James. I would say that the duration from start to finish is definitely lengthened from identifying the property, identifying the market from the tenant perspective to getting through the LOI process and ultimately signing a lease is definitely significantly longer than it was a couple of years ago.

Got it. And do you have any large moveouts expected in the coming quarters?

Nothing that's significant. We do have three known move outs for 2024, one of which just happened, which is 118,000 square foot deal in Memphis. The tenant moved out at the end of January. We have another 320,000 square foot building in Columbus that the tenant is moving out at the end of March and then we have a 58,000 square foot tenant in the Dallas market that's moving out in October. That's our list of known move outs.

Okay. Got it. Thank you. That's all for me.

Your next question is from the line of Jessica Zheng with Green Street.

Good morning. Could you please expand on to what extent have concessions and TIs expanded in your markets, versus pre COVID or versus the past couple of years?

It's really hard to generalize because every situation is different. But whereas you might have been -- we use a big box, for example, where you might have been in the mid-single digits on a TI. TIs are creeping into low double digits. But again, it's difficult to generalize. Every situation is different depending on the competition in that particular market and situation.

We do have a follow-up question from the line of Camille Bonnel with Bank of America.

Hi. Just one quick Follow-up, could you expand on, what your occupancy and bad debt assumptions are baked into to your same store NOI guidance?

So on our same store guidance, it's really leasing outcome. There's no bad debt baked in there at this point.

Okay. Thanks for clarifying. That's it for me.

At this time, there are no further audio questions.

Once again, we appreciate everyone joining our call this morning and thank you for your interest in our company. Please visit our website or contact Heather Gentry if you would like to receive our quarterly materials. And in addition, as always, you may contact me or the other members of senior management with any questions. Thanks again for joining us today.

Thank you. [Operator Closing Remarks].