Sign in

You're signed outSign in or to get full access.

LI

LXP Industrial Trust (LXP)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 2024 delivered a sharp revenue step-up to $100.9M (vs. $85.6M in Q3 and $83.0M yoy), aided by $15.0M non-cash purchase-option income from a sales-type lease; diluted EPS rose to $0.11, while Adjusted Company FFO/share held at $0.16 .
  • Leasing outcomes remained strong: 983,863 sf of new/extended deals with Base and Cash Base Rent increases of 66.3% and 42.6% respectively (ex-fixed renewal), and average annual escalators at 2.8% by year-end .
  • Balance sheet quality improved: net debt to Adjusted EBITDA fell to 5.9x; subsequent events included a $50M term loan repayment and a 540,000 sf renewal at +59% cash rent spread, reinforcing internal growth visibility .
  • 2025 guidance introduced: Adjusted Company FFO/share $0.61–$0.65; net income/share $0.01–$0.05; same-store NOI growth 3–4%; 2025 G&A $39–$41M; interest expense headwind as term loan swaps step to ~4.31% (vs. ~2.7%) .
  • Near-term stock catalysts hinge on big-box lease-ups (3.7M sf outstanding) and continued high mark-to-market spreads; management’s tone was cautiously optimistic as industrial fundamentals show signs of improvement and Sunbelt exposure deepens .

What Went Well and What Went Wrong

What Went Well

  • Leasing spreads remained exceptional: Q4 Base and Cash Base Rent increases of 66.3% and 42.6% (ex-fixed rate renewal), sustaining full-year rent escalators at 2.8% and same-store NOI growth of 4.1% in Q4 (5.0% for the year) .
  • Strategic capital recycling and Sunbelt rotation: four Class A acquisitions ($157.6M) and disposals ($223.2M including Phoenix ground lease sale), at attractive cap rates, strengthening market positioning and returns .
  • CEO on positioning: “We believe we are well-positioned to continue benefiting from long-term demographic and advanced manufacturing trends in our markets” .

What Went Wrong

  • Adjusted Company FFO/share of $0.16 was flat sequentially and down vs. $0.17 yoy, reflecting the non-recurring sales-type lease income and higher interest expenses; full-year Adjusted Company FFO/share fell to $0.64 from $0.70 .
  • Big-box vacancies persisted; while activity improved, leasing decisions remain slow; management flagged potential lower tenant retention and downtime in 2025, despite strong mark-to-market potential .
  • 2025 headwinds include higher net interest expense (term loan step-up to ~4.31% from ~2.7%) and less capitalized interest post development completion; CFO quantified ~$0.02/share headwind items (interest and capitalization effects) .

Financial Results

MetricQ2 2024Q3 2024Q4 2024
Total Gross Revenues ($USD Millions)$85.8 $85.6 $100.9
Net Income Attributable to Common Shareholders ($USD Millions)$3.8 $4.7 $31.4
Diluted EPS ($USD)$0.01 $0.02 $0.11
Adjusted Company FFO ($USD Millions)$46.9 $46.7 $47.0
Adjusted Company FFO per Diluted Share ($USD)$0.16 $0.16 $0.16
Same-Store NOI Growth (%)5.0% 5.4% 4.1%
Stabilized Portfolio % Leased93.6% 93.2% 93.6%
Net Debt / Adjusted EBITDA (x)6.2x 6.1x 5.9x

Leasing KPIs by quarter:

KPIQ2 2024Q3 2024Q4 2024
New + Extended Leases (sf)2,708,702 487,567 983,863
Base Rent Increase (%)44.5% (ex-TI adj.) 38.3% 66.3% (ex-fixed renewal)
Cash Base Rent Increase (%)44.0% (ex-TI adj.) 22.5% 42.6% (ex-fixed renewal)
Avg Annual Rent Escalators (%)2.7–3.6% (leases signed) 2.7% (portfolio avg) 2.8% (portfolio avg at year-end)

Acquisitions and placed-in-service (Q4):

MarketSq. Ft.Initial Cost ($000)Lease Term (yrs)% Leased
Savannah, GA204,824$34,267 9.3100%
Atlanta, GA447,753$47,897 2.8100%
Atlanta, GA273,576$30,238 4.6100%
Houston, TX248,240$45,202 9.3100%
Greenville/Spartanburg, SC (Build-to-suit)625,238$66,324 12.0100%

Dispositions (Q4):

LocationGross Price ($000)Month% LeasedNote
Minooka, IL$36,250 Oct100%Non-target market
Minooka, IL$50,000 Oct100%Non-target market
Minooka, IL$50,450 Oct100%Non-target market
Phoenix, AZ$86,522 Dec100%Tenant exercised purchase option; +$15.0M add’l rental revenue

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Adjusted Company FFO per diluted shareFY 2025N/A$0.61–$0.65 New initial
Net income per diluted shareFY 2025N/A$0.01–$0.05 New initial
Same-store NOI growthFY 20254.75%–5.25% for FY 2024 (tightened in Q3) 3%–4% Lower vs prior year run-rate
G&A expenseFY 2025$39M–$41M (FY 2024 actual ~$40M) $39M–$41M Maintained range
Term loan all-in rate2025–2026~2.7% (pre-swap) ~4.31% (forward swaps), 97% fixed/swapped debt through YE 2026 Higher interest expense (step-up)
Dividend (common)Q4 2024 / Q1 2025Raised to $0.135 (Q4 paid Jan 15, 2025) $0.135 declared for Q1 2025 Maintained

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 2024)Previous Mentions (Q3 2024)Current Period (Q4 2024)Trend
Big-box development leasingPipeline activity; Ocala/Columbus nearer-term prospects; yields 6–6.5% Cautious optimism; activity rising; Ocala negotiations ongoing Activity improved across all 3 large vacancies; yields ~6% on remaining larger buildings; full/partial users in play Improving interest; timing still uncertain
Interest rate managementExploring swaps/fixed-rate options; expected 2025 interest headwind ~$0.02/share Executed forward swaps; fixed ~94% of debt in 2025–2026; mitigated headwind to ~$0.01/share 97% fixed/swapped through YE 2026; term loan step to ~4.31%; trust preferred swap at ~5.2% Further de-risked rate profile
Leverage and capital recyclingTarget 5–6x; disposals to deleverage or fund build-to-suit Disposed non-core (Chicago/Cleveland) and acquired Savannah; proceeds expected from Phoenix sale Net debt/EBITDA 5.9x; $50M term loan repayment subsequent; continued Sunbelt acquisitions Downward leverage trajectory
Same-store NOI growthRaised to 4.5%–5.5% 5.4% in Q3; FY 2024 4.75%–5.25% 4.1% in Q4; FY 2024 5.0%; FY 2025 outlook 3%–4% Normalizing after strong 2024
Tenant retention / 2025 rollSpecific 2024 move-outs addressed; minimal downtime expected Known 2025 move-outs (124k sf; contraction in Richmond) and ~34% mark-to-market for 2026 Lower retention possible in 2025; expected downtime; strong mark-to-market on Houston/Richmond Conservative stance on roll

Management Commentary

  • CEO: “We finished 2024 with another strong quarter driven by excellent leasing outcomes and solid same-store growth... ending the year at 5.9x net debt to Adjusted EBITDA… well-positioned to continue benefiting from long-term demographic and advanced manufacturing trends” .
  • CFO: “Adjusted company FFO in the fourth quarter was $0.16… 2025 includes higher interest expense on our term loans (2.7% to ~4.3%), lower interest income on cash, and less benefit from capitalization of interest… 2025 G&A $39–$41M; same-store NOI 3%–4%” .
  • CIO (Investments): Four industrial assets acquired (~$158M) at ~6% initial yield; 625k sf build-to-suit in Greenville-Spartanburg at a little over 7% cash cap rate, 12-year lease with 3% escalators; realized ~$83M proceeds on Phoenix land sale .
  • EVP (Leasing): “Excellent leasing outcomes… after quarter end, renewed 540k sf in Phoenix for 5 years at +59% cash final increase; current mark-to-market ~20% through 2030; 2025 expirations ~30%–35% below market” .

Q&A Highlights

  • Big-box competitive landscape and yields: Limited true competitors per submarket (Greenville, Indy, Central FL) for 1M sf users; stabilized yields ~6% for remaining large buildings .
  • Tenant retention outlook: Known 2025 move-outs include 248k sf Houston 3PL and Richmond contraction; management expects strong mark-to-market on backfills but is conservative on downtime and retention in 2025 .
  • Capital allocation and leverage: Focused on Sunbelt adds and working leverage down to ~5x; selective non-core monetization continues .
  • Guidance calibration: Low end assumes no big-box leasing in 2025; high end assumes all three leased in H2 2025 .
  • Phoenix land bank: Build-to-suit is the focus; most activity among land holdings is in Phoenix .

Estimates Context

  • Wall Street consensus via S&P Global (analyst estimates for FFO/share, EPS, and revenue) could not be retrieved due to S&P Global daily request limits at time of analysis; consequently, direct comparisons to consensus are unavailable for this recap. We default to S&P Global for estimates when accessible; here, results are anchored solely to company-reported actuals and guidance [Values retrieved from S&P Global were unavailable due to rate limits].
  • Implications: Given Q4 prints (EPS $0.11, Adjusted Company FFO/share $0.16) and 2025 guidance ($0.61–$0.65 Adjusted Company FFO/share), estimate revisions will likely track big-box leasing outcomes, interest expense step-up, and same-store NOI normalization .

Key Takeaways for Investors

  • Leasing spreads remain a core driver; continued mark-to-market opportunity (~20% through 2030) and escalators (2.8% avg) support internal growth even with potential 2025 downtime; monitor quarterly leasing pace and 2025 roll resolution .
  • The swing factor for 2025 is big-box lease-up timing; the guidance range explicitly brackets zero lease-ups at the low end and all three boxes leased in H2 at the high end—key catalyst path for multiple expansion .
  • Rate risk largely mitigated near term: ~97% fixed/swapped through YE 2026; near-term headwind is the step-up to ~4.31% on the term loan, pressuring 2025 run-rate vs. Q4 exit .
  • Balance sheet trajectory is improving: net debt/EBITDA down to 5.9x; $50M term loan repayment post quarter and ongoing capital recycling enhance flexibility .
  • Sunbelt/Lower Midwest concentration continues to benefit from resilient fundamentals and advanced manufacturing tailwinds; acquisitions at ~6% cap rates and build-to-suit at >7% cash caps bolster returns .
  • Dividend maintained at $0.135/share quarterly, supported by FAD and rent growth; watch 2025 FFO payout ratio vs. leasing milestones and interest cost trajectory .
  • Trading lens: positive narrative shifts should coincide with announced big-box leases and visible roll-up of 2025 expirations at strong spreads; any incremental deleveraging or trust-preferred retirement at discount could add upside optionality .