LXP Industrial Trust — FY 2021 Form 10-K
Business context and reporting period. This annual report covers the year ended December 31, 2021, with comparisons to 2020. LXP is a REIT focused primarily on single-tenant warehouse and distribution properties. At year-end, it held interests in 121 consolidated properties across 23 states, totaling 54.8 million square feet and 97.4% leased. Industrial assets represented 98.1% of gross book value, excluding assets held for sale.
Financial and operating results
| Metric | 2021 | 2020 |
|---|---|---|
| Total gross revenue | $344.0 million | $330.4 million |
| Rental revenue | $339.9 million | $325.8 million |
| Net income | $385.1 million | $186.4 million |
| Net income attributable to common shareholders | $375.8 million | $176.8 million |
| Diluted earnings per common share | $1.34 | $0.66 |
| Cash flow from operations | $220.3 million | $201.8 million |
| Cash used in investing activities | $337.8 million | $494.4 million |
| Cash provided by financing activities | $129.1 million | $342.6 million |
| Same-store NOI | $177.4 million | $176.3 million |
| Adjusted Company FFO per diluted share | $0.78 | $0.76 |
Net income rose sharply, but was materially affected by property-sale gains: $367.3 million in 2021 versus $139.0 million in 2020. The 2021 figure included a $239.4 million gain from transferring 22 special-purpose industrial properties to a newly formed joint venture. Debt satisfaction was a $13.9 million loss in 2021, compared with a $21.5 million gain in 2020. FFO available to common shareholders and OP unitholders declined to $200.9 million from $224.2 million; FFO per share was $0.72 versus $0.83. Adjusted Company FFO increased to $223.2 million from $209.5 million.
Same-store NOI increased 0.6%; same-store occupancy was 99.1%, up from 98.1%. LXP acquired or completed and placed into service 26 warehouse/distribution properties for $885.6 million, invested $111.5 million in ongoing developments, and disposed of interests in 15 properties for $276.7 million. It also transferred 22 special-purpose assets to the joint venture at a gross valuation of $550.0 million. Leasing and extensions covered 8.5 million square feet; average rent on extended leases increased to $4.04 per square foot from $3.64.
Debt, liquidity and distributions
At December 31, 2021, consolidated debt was approximately $1.5 billion, with a weighted-average interest rate of approximately 2.8%. Cash and cash equivalents were $190.9 million, and the $600 million revolving facility was undrawn and available, subject to covenant compliance. LXP reported compliance with its corporate debt covenants. Consolidated mortgages and notes payable were $84.4 million, down from $138.4 million; their weighted-average rate was 4.0% and weighted-average maturity was 7.2 years.
LXP issued $400 million of 2.375% senior notes due 2031 and used part of the proceeds to redeem the remaining $188.8 million of 4.25% notes due 2023. The company paid $128.3 million in common and preferred dividends during 2021. Variable-rate exposure included $129.1 million of LIBOR-indexed trust preferred securities; $300 million of term-loan borrowings were hedged with swaps through 2025. The filing notes that the trust preferred securities lack a clear alternative reference rate to USD-LIBOR.
Outlook, commentary and risks
Management plans to continue growing warehouse/distribution investments, development and capital recycling. It expected to recycle remaining non-industrial assets into warehouse/distribution properties by the end of 2022 and said it expected to accelerate sales of most non-industrial assets during 2022. Management cautioned that selling income-producing properties and buying lower-yielding industrial assets may dilute near-term earnings, while believing the strategy may benefit long-term shareholder value. No specific earnings or FFO guidance is provided in the filing.
Five consolidated development projects were underway at year-end; LXP expected to incur approximately $312 million in 2022, excluding noncontrolling interests, to substantially complete them. Four projects were unleased at year-end; one Smith Farms facility was preleased. Subsequent to year-end, LXP acquired two industrial properties for approximately $71.8 million.
On February 8, 2022, the Board initiated a review of strategic alternatives. The filing also cites investor activism and related costs. Principal risks include tenant defaults or lease expirations, vacancy and re-leasing costs, development delays and cost inflation, competition for industrial assets, interest-rate and refinancing risk, LIBOR transition uncertainty, climate and environmental liabilities, and continued COVID-19-related economic disruption. The largest tenant, Amazon, represented 7.6% of base rental revenue; no tenant exceeded 10%. The auditor gave unqualified opinions on the financial statements and internal control over financial reporting.
Important facts for investors to verify
- How much of 2021 reported profit reflects recurring property operations versus the large property-sale gains, especially the MFG Cold JV transaction.
- Progress on the strategic-alternatives review and the timing, proceeds and operating impact of planned non-industrial dispositions.
- Funding, completion, leasing and eventual yields for the development pipeline, including the approximately $312 million expected 2022 spend.
- Upcoming lease expirations and tenant retention or re-leasing outcomes; about half of industrial base rent was scheduled to expire during 2022–2027.
- Settlement of outstanding forward equity sales, and management’s plans for debt maturities, variable-rate exposure and the LIBOR transition.