LXP Industrial Trust (Lexington Realty Trust) — Q1 2021 Form 10-Q
Reporting period: Three months ended March 31, 2021. The filing reports results against the three months ended March 31, 2020. Unless otherwise stated, dollar amounts below are in millions.
Business context
The REIT owned interests in approximately 130 consolidated properties across 28 states, with a focus on single-tenant industrial properties, primarily net leased. Management cited warehouse and distribution exposure and tenant and geographic diversification as mitigants to pandemic-related risks.
Financial performance and liquidity
| Metric | Q1 2021 | Q1 2020 |
|---|---|---|
| Gross revenue | $92.6 | $80.8 |
| Rental revenue | $91.6 | $78.7 |
| Net income | $41.5 | $18.4 |
| Net income attributable to common shareholders | $39.4 | $16.5 |
| Diluted earnings per common share | $0.14 | $0.06 |
| Operating cash flow | $57.4 | $45.7 |
| Same-store NOI | $59.5 | $59.2 |
| FFO per diluted share and unit | $0.22 | $0.19 |
Common-shareholder net income increased by $22.9 million year over year. The increase included higher property-sale gains ($21.9 million versus $9.8 million) and $10.9 million of lease termination income (versus $0.1 million); therefore, reported earnings included significant transaction-related items. Same-store NOI increased 0.6%, while same-store leased area declined to 97.5% from 99.4%. FFO and NOI are non-GAAP measures as described in the filing.
Cash and cash equivalents were $142.1 million at quarter-end, with an additional $28.1 million of restricted cash. The $600 million revolving facility had no borrowings and was fully available, subject to covenant compliance. Net cash used in investing activities was $24.9 million, versus $183.2 million in Q1 2020; net cash used in financing was $41.7 million, compared with $98.3 million provided in the prior-year quarter. Dividends paid to common and preferred shareholders were $33.5 million.
Debt carrying value, net of issuance costs and discounts, totaled approximately $1.337 billion: mortgages and notes $131.8 million, term loan $298.1 million, senior notes $779.6 million, and trust preferred securities $127.5 million. The $300 million term loan had a fixed effective rate of 2.732% through swaps. Management reported compliance with corporate debt covenants. A $10.4 million property-level balloon mortgage matures in 2021; the next stated property-level balloon maturities are in 2025.
Material changes and operating activity
- Revenue rose by $11.7 million, mainly from acquisitions and lease termination income; other revenue declined by $1.1 million.
- Interest and amortization expense declined by $3.3 million, primarily due to lower mortgage debt and borrowing rates. Depreciation and amortization rose by $1.7 million, primarily due to acquisitions.
- The company acquired or completed four industrial assets for an aggregate initial cost of $69.2 million, invested in development, and began developing a 1.1 million-square-foot Central Florida warehouse through an 80%-owned joint venture.
- It sold interests in four consolidated properties for gross proceeds of $58.1 million. Subsequent to quarter-end, it disposed of one property for approximately $40.1 million and entered a joint venture to develop an industrial property in Indianapolis.
- First-quarter new leases and extensions covered 1.5 million square feet. Average fixed rent on extended leases was $3.59 per square foot, compared with $3.13 before extension.
Outlook, risks and contingencies
The filing provides no numerical earnings or FFO guidance. Management said operating cash flows should fund operating costs, regular debt service and dividends, with cash, the revolving facility, property-sale proceeds, equity and other financing as additional potential sources. It expected to spend approximately $93.5 million in 2021 and $27.9 million in 2022 to substantially complete three consolidated development projects.
Management reported limited rent-relief requests and did not expect them to materially affect rental revenue as of March 31, 2021, but noted continuing pandemic impacts on some retail and aviation-related tenants and uncertainty about longer-term effects. It also cited increased competition for industrial investments and possible limits on capital-market access. Tenant defaults, rent relief, interest rates and acquisition execution remain risks. The company had written off or reserved $0.2 million of tenant receivables in Q1 2021. Management said ordinary-course legal proceedings were not expected, in aggregate, to have a material adverse effect; no material risk-factor changes from the prior annual report were reported.
Important facts for investors to verify
- How much of Q1 earnings growth reflects recurring rent and operations versus the $10.9 million lease termination fee and $21.9 million property-sale gains.
- Whether occupancy and rent collection stabilize, given same-store leased area fell to 97.5% from 99.4%.
- Development project costs, completion timing, leasing status, and the expected funding requirements disclosed for 2021–2022.
- Debt maturities, covenant compliance, availability under the revolver, and exposure to variable interest rates and LIBOR transition.
- Settlement and dilution implications of outstanding forward-sale contracts covering 8.6 million shares, with an aggregate stated settlement price of $94.5 million, subject to adjustment.