Lexington Realty Trust Stock

Hello, and welcome to the Annual Meeting of Shareholders of LXP Industrial Trust. Please note that today's meeting is being recorded. [Operator Instructions] It is now my pleasure to turn today's meeting over to Will Eglin, Chairman of LXP Industrial Trust. Mr. Eglin, the floor is yours.

Good afternoon, ladies and gentlemen. The meeting will please come to order. I'm Will Eglin, the Chairman, Chief Executive Officer and President of LXP Industrial Trust, and it is my pleasure to welcome all of you to the 2026 Annual Meeting of Shareholders. I will serve as the Chairman of today's meeting. Just after 2:00 p.m. and in accordance with the notice of the meeting, I call this meeting to order.

Before proceeding to the business of the meeting, I would like to note that we will conduct the business portion of the meeting first, and then after we adjourn the meeting, we will answer any questions related to our business. Only validated shareholders or proxy holders may ask questions. On the screen are the agenda and the rules of conduct and procedures for today's meeting. To conduct an orderly meeting, we ask that participants abide by these rules.

Here with me today are Joe Bonventre, who will act as Secretary of the meeting; and Heather Gentry, who will act as Inspector of elections. Our independent trustee nominees on the line with us are Lawrence Gray, Arun Gupta, Jamie Handwerker, Derrick Johnson, Claire Koeneman, Elizabeth Noe and Howard Roth. Also joining on the line is a representative of Deloitte & Touche LLP, our independent registered public accounting firm. The representative will be available during the discussion session after the meeting to respond to any appropriate questions.

I have been provided an affidavit by Computershare certifying as to the proper mailing of the notice of the annual meeting commencing April 6, 2026, which will be filed with the records of the meeting. I have been advised by the inspector of election that shareholders entitled to cast a majority of all of the votes entitled to be cast at this meeting are present in person or by proxy at this meeting. Based on the inspector's report, I declare that a quorum is present and that the meeting is duly constituted for the transaction of business.

The matter scheduled for formal action at this meeting are: first, the election of 8 trustees to serve until the 2027 Annual Meeting or until their earlier resignation or removal and until their respective successors, if any, are elected and qualified. Second, the vote upon an advisory nonbinding resolution to approve the compensation of the named executive officers as disclosed in the Trust's 2026 proxy statement. Third, to vote upon the ratification of the appointment of Deloitte & Touche LLP as the Trust's independent registered public accounting firm for the fiscal year ending December 31, 2026, and if necessary, transact such other business as may properly come before this meeting or any adjournment or postponement of this meeting.

Polls are now open for voting. So anyone attend this meeting who has not yet voted or wishes to change his or her vote, please do so at this time by clicking on the Cast Your Vote link on the left side of your screen and following the instructions there. We will now pause for a minute to respond to any questions on the proposals and to allow any shareholders that want to vote or change their votes to do so.

[Voting]

There have been no questions submitted pertaining to the proposals. Polls for voting on the matters before this meeting are hereby closed. This time, based on the voting results provided to made by the Inspector of Election, I am pleased to announce the preliminary voting results for the 3 proposals. More than a majority of the votes cast have been voted for the election of each trustee and for each other proposal.

I hereby declare that each nominee has been duly elected and qualified. The report of the Inspector of Elections, which will contain the final vote totals on the proposals will be filed with the minutes of this meeting. We will be reporting the final results on a Form 8-K by the applicable deadline. There being no other business to be brought before this meeting, this concludes the formal portion of business on today's agenda. The meeting is now adjourned.

We have now come to that part of the agenda providing for general questions and discussions. To ask a question, click on the message icon to submit your question or comment.

There being no questions, I want to thank everyone for attending this meeting.

This concludes the meeting. You may now disconnect.

Good morning, and thank you for standing by. My name is John, and I will be your conference operator today. At this time, I would like to welcome everyone to the LXP Industrial Trust First Quarter 2026 Earnings Call and Webcast.

[Operator Instructions] As a reminder, this call is being recorded. I would now like to turn the conference over to Heather Gentry, Investor Relations. Please go ahead.

Thank you, operator. Welcome to LXP Industrial Trust First Quarter 2026 Earnings Conference Call and Webcast. The earnings release was distributed this morning and both the release and quarterly supplemental are available on our website 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 measures. 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; and Nathan Brunner, CFO, will provide a recent business update and commentary on first quarter results.

Brendan Mullinix, CIO; and James Dudley, Executive Vice President and Director of Asset Management, will be available for the Q&A portion of this call. I will now turn the call over to Will.

Thank you, Heather, and good morning, everyone. Following the successful execution of our key strategic initiatives in 2025, including strengthening our balance sheet, increasing occupancy and resolving our big box vacancy. This year, we are focused primarily on creating value in our land bank and addressing our near-term expirations and existing vacancy.

We've executed 3.2 million square feet of new leases and lease renewals year-to-date, highlighted by the successful outcome at our 1.1 million square foot facility in the Greenville-Spartanburg market. Additionally, we leased over 300,000 square feet of vacancy and extended the lease on an 850,000 square foot facility in San Antonio for 10 years. Industrial fundamentals continue to trend in the right direction with first quarter U.S. net absorption of approximately 40 million square feet, representing the strongest first quarter in 3 years.

Our target markets made up approximately 29 million square feet or 72% of U.S. net absorption, demonstrating continued strength in our markets, particularly in Phoenix, Indianapolis, Houston, Dallas-Fort Worth, Atlanta and Columbus. These positive trends are reflected in our strong leasing momentum year-to-date as well as our forward pipeline in which we are in active discussions on 7.4 million square feet of development and redevelopment leasing vacancy and expirations through 2027.

Leasing activity continues to be the strongest for large-format facilities, especially for those of 1 million square feet or more. We are also seeing increased demand from data center-related tenancy and manufacturing suppliers and industries in our markets. Leasing volume of 1.8 million square feet during the quarter included the extension at our 1.1 million square foot facility in Greenville-Spartanburg, which added considerable value. We renewed this lease for an additional 4 years to 2031, following the initial 2-year lease signed in May 2025. This extension enhanced the 8% initial cash stabilized yield on the development project with the new cash rent representing a 5% increase over the prior rent and 3% annual rental bumps. On the remaining 700,000 square feet we leased during the quarter, we achieved base and cash-based rental increases of 34% and 24%, respectively.

Construction is underway at our 1.2 million square foot Phoenix development project that we announced on our last quarterly call. Since then, the remaining 2 million square feet in the West Valley has been leased, leaving no million square foot buildings currently available in the market. We are in discussions with a prospective tenant, and we are well positioned if they proceed with a lease in the West Valley market given the limited supply of million square foot buildings.

We are evaluating other development opportunities in our land bank, including in Columbus, where we have 69 acres at our Aetna land sites, which can support 3 facilities totaling roughly 1.25 million square feet. In the last 12 months, net absorption in the Columbus market was 10 million square feet, resulting in a decline in vacancy of over 300 basis points. Columbus continues to be a strong distribution market with increasing demand across product sizes, particularly in the large format space and has seen an influx of tenant activity that supports data center and advanced manufacturing facilities.

To the extent we move forward with future development projects, we intend to fund them through opportunistic asset sales in our nontarget markets. As we have noted previously, acquisition activity will be selective and will be funded via 1031 exchange transactions to defer gains on dispositions. I'll now turn the call over to Nathan, who will provide a more detailed overview of our financials, leasing activity and balance sheet.

Thanks, Will. Our adjusted company FFO in the first quarter was approximately $47 million or $0.80 per diluted common share, representing 2.6% growth over the first quarter 2025. Same-store NOI growth was 2% for the quarter, which was in line with our expectations. Our stabilized portfolio was 96.6% leased at quarter end and 97.1% leased proforma for new leases signed in April, in line with year-end 2025. We are maintaining both our 2026 adjusted company FFO guidance range of $3.22 to $3.37 per common share and 2026 same-store NOI growth guidance range of 1.5% to 2.5% with regard to the cadence of same-store growth for the remainder of the year, we anticipate that second quarter same-store NOI growth will be lower than the first quarter, reflecting the impact of first quarter move-outs and timing of lease commencement for new leases signed year-to-date.

These new leases are expected to contribute to higher same-store NOI growth in the second half of the year. G&A in the first quarter was approximately $10.3 million, with full year 2026 G&A expected to be within a range of $39 million to $41 million.

Turning to leasing. We continue to make good progress on 2026 expirations and have addressed approximately 3.7 million square feet or 57% of our total 2026 lease roll with an average cash rental increase of approximately 25%, excluding 2 fixed rate renewals. Will highlighted some of the larger leases that we executed year-to-date, and I'll touch on a handful of other notable leasing outcomes. During the quarter, we renewed 352,000 square feet at our 640,000 square foot facility in Charlotte, North Carolina for a 3-year term with 3.5% annual escalators, representing a 42% cash rental increase.

We are actively marketing the remaining 288,000 square feet of the property, which expires in October 2026. Subsequent to quarter end, we extended the lease with the tenant that occupies 270,000 square feet at our multi-tenant facility in the Savannah market, which was a July 30 expiration. The 10-year lease extension with 3% annual escalators represents a cash rental increase of 19% over the prior rent. With respect to 2027 expiration, post quarter, we extended the lease at our 850,000 square foot facility in San Antonio for a 10-year lease term with 2.75% annual escalators. The lease extension commences in May 2027 with a 25% cash rental increase.

We're encouraged by the active discussions underway on 4.6 million square feet of the 2026 and 2027 lease roll, including several of our larger facilities. We've leased 330,000 square feet of vacancy year-to-date. During the quarter, we leased 85,000 square feet in Indianapolis to a tenant involved in data center development, achieving a 34% cash rental increase.

Post quarter, we leased our 250,000 square foot facility in the Houston market for a 7-year term with 3.75% annual escalators. The new Houston lease commences in June and represents a 25% cash rental increase. LXP's balance sheet remains in great shape with net debt to annualized adjusted EBITDA of 5.1x at quarter end. We had $1.3 billion of cash on the balance sheet at quarter end, and our $600 million revolving credit facility was undrawn and fully available. As we highlighted on our last call, the recast of our $600 million revolving credit facility and $250 million term loan in January extended the company's debt maturity profile and reduced interest costs, further strengthening the balance sheet and providing financial flexibility. Finally, we repurchased 325,000 shares in the quarter at an average price of $48.70 per share. With that, I'll turn the call back over to Will.

Thanks, Nathan. In summary, we're pleased with first quarter results and our strong leasing outcomes year-to-date. As we move through the year, we will remain focused on executing our strategic priorities, including disciplined capital deployment, pursuing value-enhancing growth opportunities, leasing our Phoenix spec project and remaining vacancies and driving mark-to-market rent growth.

As the leasing market continues to improve, we're confident that our forward leasing pipeline of over 7 million square feet will result in numerous attractive leasing outcomes that produce strong mark-to-market results. With that, I'll turn the call back over to the operator.

[Operator Instructions] Our first question comes from the line of Todd Thomas with KeyBanc Capital Markets.

A couple of questions. One, on the -- you talked Will, about the lack of big box space in some of your major markets, including Phoenix, where you broke ground. Can you talk about how that's impacting the market? Are you seeing that translate into pricing power, better discussions around prospective rent growth or urgency from tenants? And then would you look to sort of derisk and pre-lease that development project? Or do you think it probably affords better return opportunities to hold off until it's closer to completion and delivery?

Yes, sure. Thanks, Todd. I think as we expected in Phoenix since our last call, the last 2 million-foot competitive buildings have leased. So we're essentially in a great position on that facility that we've started. We do have a prospect that we're working fairly closely with, but nothing to report today. I think we would prefer to pre-lease and derisk the investment and lock in a profit and then move on because there are other good opportunities in the land bank. You mentioned Columbus, that's another one that we think sets up pretty well for us. The big box demand is doing very well. And at the moment, we're quite optimistic about the outcome on Phoenix for sure.

Okay. And then, Nathan, you indicated 57% of the 26 expirations have been addressed. I think that included some of the activity that occurred in April. Can you just provide an update on the remaining 26 expirations in terms of your expectations there, if there's any known move-outs?

Todd, this is James. I'll take it. We've got really good activity on the remaining 2026 and the majority of which we're expecting to renew. We do have a few small known move-outs that are remaining. We've got a 97,000 square foot space in our multi-tenant building in Columbus, where we're expecting the tenant to move out. We're marking that to lease. We've got good activity on that one. And then I guess touching on a couple of the new vacancies that we had, too.

We had the Tampa move out, the 230 that we've got some decent activity on recently and also the 120 that just moved out in the first quarter as well in Greenville-Spartanburg that we've got really good activity on. And then we've also got a very small lease in Greenville-Spartanburg of 70,000 square feet that we expect the tenant to potentially move out of and another one for 163,000 square feet in Greenville-Spartanburg that move out. So small move-outs, good activity in a strong market and the Greenville-Spartanburg stuff is concentrated mostly around the park that we own. So we've got a lot of different things we can do there from a size perspective and moving tenants around, we're talking to the tenants that are in or around in that space in the park currently trying to figure out if some want to expand. So again, good activity on that upcoming vacancy and the vacancy that we had in the first quarter.

Okay. That's helpful. And just lastly, I guess, the 1.8 million square feet of vacancy, that opportunity in the portfolio, you estimate it to be about $0.32 a share. Is there anything embedded in guidance related to the lease-up of that vacant space that would hit or that's included in the guidance this year?

Yes. Todd, maybe the way I'd frame that is back to kind of the underlying drivers of the guidance. And they're pretty much unchanged versus our Q4 earnings call. That is average occupancy for the portfolio at the midpoint is about 96.5% which is essentially in line with where we finished Q1 or a little above that with some of the activity we had in April. At the high end of guidance, average occupancy be 97% and at the low end, average occupancy would be 96%.

Our next question comes from the line of Anthony Paolone with JPMorgan.

Given the comments on Columbus, what's the likelihood that you start a project or two this year?

It's Brendan. Nothing to announce today, but as has been noted, the fundamentals in Columbus are very positive today. We've been seeing a lot of demand from both data center-related uses and manufacturing as well as the demand drivers that have existed in that [indiscernible] market for some time. At the moment, we can -- we're -- in order to position ourselves with the most flexibility, we're doing predevelopment work, including design work on 3 different sized buildings there. We can build a total of 1.25 million. And that will just allow us the maximum flexibility to respond to where we see the most favorable supply and demand.

Okay. And is the pipeline outside of what you have on your balance sheet right now for things like build-to-suits and development? Has that changed much? Is there much activity there with any other developers that you might be working with right now?

Well, I should have also added too, just with respect to the existing land bank, we are additionally responding to build-to-suit interest at both our Columbus sites and our Phoenix sites. So there's that build-to-suit opportunity in the land bank as well as considering speculative development if the fundamentals are there and remain there. With respect to other opportunities, yes, we do have conversations with the merchant builder relationships that we have from time to time about build-to-suit opportunities outside of our land bank as well. But nothing imminent to report on today on that front.

Okay. And then just last one, the stock buyback, just you've done a little bit there. What's the appetite at current levels? And just how does it fit into the capital allocation right now?

Development is a better investment from our standpoint with respect to creating shareholder value. So we have some liquidity that we can use for buyback opportunistically. But what's happening in the development there, especially in Phoenix is a much larger driver of value creation.

Our next question comes from the line of Vince Tibone with Green Street.

A question for Nathan. I'm curious within guidance, how much new leasing is kind of baked into the low end, high end? Because it sounds like you have a pretty good pulse on known move-outs and retention rates. So just trying to get a sense of do you need to lease another 300,000 square feet of existing vacancies or move-outs to hit the midpoint? Or is it lower? Just trying to get a sense of the kind of different outcomes besides just move-outs on the new leasing side that could move the numbers within guidance, whether it be same-store or FFO.

Yes, Vince. So going back to James' answer a little earlier in the Q&A here. We have 3 known move-outs essentially in the second half, which is roughly 550,000 square feet. So in the context of our earnings guidance at the midpoint, we're essentially saying that on average during the year, including Q1, occupancy will be 96.5%, which is in line with Q1. So the guidance at the midpoint essentially assumes that we have new leasing activity with regard to all of that move-out activity. And then so if you look to the high end of guidance where average occupancy is 97%, there's obviously incremental new leasing beyond the 550 of move-outs.

No, that's helpful. And just a follow-up. It looks like just some quick math. It looks like the retention rate is going to be higher than we previously projected. Is that fair? I think on the last call, you indicated it would be about 70% and it looks like just given the first quarter move-outs and the 500 you mentioned there, it looks like retention will be yes, closer to 90%, if my math is right, in the 80s. Is that -- is my logic correct there?

We're building in some buffer for unknown situations that they come up. There's always something that comes up in the back half of the year that you're expecting. So there's some buffer. Our guidance is still based on 70% to 80% retention.

Got it. And then just last one from me. Just on the -- you mentioned if you're going to proceed with any new developments, you would likely fund it with dispositions -- is there any chance you look to sell out of the cold JV or the remaining net lease office JVs? Or kind of what's the strategic rationale to hold on to those joint venture assets that are now very different from the rest of the portfolio?

Well, yes, there's not much left in the office JV, Vince, and we have been sort of liquidating that as quickly as the market will bear. In the other industrial joint venture, we're a 20% partner there. So it's -- with the majority partners entirely up to us. We do have some opportunities to make some good sales in that portfolio. So we do expect that it will shrink modestly over time. But it's an investment that produces a pretty high return on equity for us, and it keeps us with a modest exposure to the manufacturing business, which gives us some insights into the logistics demand in some of those manufacturing hubs that we're invested in.

Our next question comes from the line of Jim Kammert with Evercore.

I think, Nathan, you mentioned 4.6 million square feet or so of lease renegotiations for new lease expirations. How much or does any of that encompass you guys two big Nissan deals in early '27 and then 1 million square footer in Jackson, Tennessee. Any color or updates on those would be appreciated. I didn't know if that was in your 4.6 million square feet.

Jim, it's James again. I guess I'll touch on the 2027. Yes, we've got a number of chunky leases in 2027, and we're in advanced negotiations in some cases and definitely talking to all the tenants for these large boxes and expect a very high rate, if not 100% renewal on the big boxes that we have that includes Nissan.

Our next question is from the line of Mitch Germain with Citizens Bank.

I think, Will, you mentioned any new development would be matched with -- or new potential development would be matched with asset sales. Is that -- are you going to sell ahead of the project commencement and kind of sit on those proceeds like you've done at the end of 4Q with Phoenix? Or how should we think about the cadence regarding how that process could play out?

No, I think it's preferable to match fund sales with stabilized outcomes for development. So we had some disposition activity last year that left us in a very strong cash position to fund the project in Phoenix. But I think we would prefer to hold on to the income from the assets that we might sell to fund development and try to match things better.

Got you. And then last one for me. Obviously, a significant amount of demand acceleration happening in the industrial sector. You mentioned a 7-plus million square foot pipeline. Any sort of themes, industries that you're seeing that are driving more demand versus others?

Brendan touched on it a little bit. We've seen a big uptick in data center adjacent demand in a number of our markets, and we're fortunate to be placed well for those potential tenants as well. You've seen a couple of big leases get done for Meta and for AWS in Phoenix that took down a couple of the big boxes there. There's been a lot of new activity in Columbus that's data center related as well. And then we've got our Richmond redevelopment where there's a big Google data center campus going in next door. So I think that's one of the things I would point out. There's also continue to be growth in supplier demand for advanced manufacturers that we're seeing continue to grow and develop their different opportunities. I'll bring Phoenix up again with TSMC moving along and some of the ancillary demand that's popped up there. So we're starting to see a pickup there. So manufacturing and data center adjacent, I think, has definitely been the recent theme and a big pickup in the demand.

[Operator Instructions]

Our next question comes from the line of Jon Petersen with Jefferies.

Just one quick question for me. The senior notes that are due in '28, the $160 million with a 6.75% interest rate. Can you remind us, are those callable early? Like should we think about you taking those all the way to maturity? Or should we assume you're able to refinance those early?

They have a make call structure. So they're technically callable, but it requires the payment of premium.

Thank you. And at this time, we have no further questions. I will now turn the call back over to Will Eglin for closing remarks.

We appreciate everyone joining our call this morning, and we look forward to updating you on our progress over the balance of the year. Thanks again for joining us today.

This concludes today's conference call. You may now disconnect your lines. Have a pleasant day.

Thank you for standing by. My name is Rebecca, and I will be your conference operator today. At this time, I would like to welcome everyone to the LXP Industrial Trust Fourth Quarter 2025 Earnings Call and Webcast. [Operator Instructions]

I would now like to turn the call over to Heather Gentry, Investor Relations. Please go ahead.

Thank you, operator. Welcome to LXP Industrial Trust Fourth Quarter 2025 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; and Nathan Brunner, CFO, will provide a recent business update and commentary on fourth quarter results. Brendan Mullinix, CIO; and James Dudley, Executive Vice President and Director of Asset Management, will be available for the Q&A portion of this call.

I will now turn the call over to Will.

Thank you, Heather. Good morning, everyone. Our fourth quarter marked the conclusion of a successful year, driven by meaningful achievements in leasing, healthy occupancy gains, strategic property sales and continued progress strengthening our balance sheet.

We delivered on our key operating objectives in 2025, notably reducing leverage from 5.9x to 4.9x net debt to adjusted EBITDA and increasing occupancy 350 basis points to 97.1%. Additionally, we leased nearly 5 million square feet in 2025 with attractive mark-to-market outcomes of approximately 28% on a cash basis, excluding fixed rate renewals. We were encouraged to see market fundamentals continue to improve during the fourth quarter with our target markets driving over 66% of the overall U.S. net absorption of about 54 million square feet. Larger users made up the bulk of the demand, favoring facilities exceeding 500,000 square feet that were built within the last 5 years.

Several of our target markets, including Phoenix, Indianapolis, Fort Worth and Houston led this demand. Reflective of an improving leasing market, in the fourth quarter, we leased over 2 million square feet at attractive base and cash-based rental increases of approximately 27% and 23%, respectively, excluding fixed rate renewals. We've also made good progress on our 2026 expirations.

To date, we have addressed roughly 3 million square feet or 41% of our total 2026 rollover, achieving an average cash rental increase of approximately 28%, excluding 2 fixed rate renewals. On the sales front, we exited 5 non-target markets in 2025 and continue to prioritize investing in our 12 target markets, which currently account for 87% of our gross book value. Total disposition volume for the year was $389 million, including $116 million from non-target market sales in the fourth quarter with an average cash capitalization rate of 5.7% on stabilized assets sold during 2025. This volume included the sale of our Indianapolis and Ocala development properties to a user buyer in September at an implied capitalization rate of approximately 5% and a 20% premium to our cost basis. The capital generated from asset sales was primarily deployed to strengthen our balance sheet by reducing high coupon debt.

Additionally, we acquired one property in Atlanta for a 1031 exchange requirement in September and repurchased approximately 277,000 shares at an average price of $49.47 in December 2025 and January 2026. At year-end, we held approximately $170 million in cash on our balance sheet. While cash balances are currently weighing on earnings, we believe liquidity is valuable as we head into a period where we can create significant value in our land bank.

Strengthening our balance sheet was one of our primary objectives in 2025. We successfully accomplished this goal and entered 2026 in a strong financial position. Our capital allocation priorities will now primarily focus on disciplined investment and external growth opportunities, mainly in our land bank and executing opportunistic share repurchases provided they don't impact the balance sheet progress we made in 2025.

Acquisition activity is expected to be limited to 1031 exchanges, which may happen from time to time as we exit nontarget markets. Through our development program, we have developed 15 facilities since 2019 at a 7.1% weighted average stabilized yield on first-generation leases and generated sale proceeds of $91 million in excess of our cost basis.

At year-end, our development program was 98% leased or sold. We have continued to closely monitor market fundamentals where we own development land, evaluating both build-to-suit and speculative development opportunities. In the West Valley of Phoenix, where we own a 315-acre land site, we have observed an acceleration in leasing activity for facilities over 1 million square feet. 18 months ago, there were 10 1 million square foot buildings available in the West Valley. Since then, 8 of these buildings have leased or sold to users and the remaining 2 are in advanced stages of negotiations.

Consequently, there will be no 1 million square foot facilities available in the West Valley and nothing is currently under construction. In addition, construction costs are roughly $20 per square foot lower than they were at the market peak. With this favorable backdrop, we will be breaking ground on a 1 million square foot spec project on our Phoenix land site. Project completion is anticipated for the first half of 2027 with an estimated budget of $120 million and a stabilized cash yield within a range of 7% to 7.5%.

In summary, we successfully executed our core strategic initiatives in 2025, including enhancing our balance sheet, addressing vacancy at our 3 big box development properties, increasing portfolio occupancy and achieving attractive leasing outcomes. In 2026, our priorities will center on strategic capital deployment, specifically pursuing disciplined growth opportunities and making opportunistic share repurchases, leasing our remaining vacancies and generating robust mark-to-market outcomes.

Our high-quality portfolio, consisting primarily of Class A assets in the Sunbelt and Lower Midwest is well positioned to benefit from improving market fundamentals and the positive momentum associated with advanced manufacturing investments.

I'll now turn the call over to Nathan, who will provide a more detailed overview of our financials, leasing activities and balance sheet.

Thanks, Will. Adjusted company FFO in the fourth quarter was $0.79 per diluted common share or approximately $47 million. For the full year, we produced adjusted company FFO of $3.15 per diluted common share or $187 million.

This morning, we announced our 2026 adjusted company FFO guidance range of $3.22 to $3.37 per common share, which represents 4.6% growth at the midpoint. This guidance assumes the proceeds from the properties sold in the fourth quarter will be redeployed into the development project in Phoenix. Although these asset sales and capital redeployment are a drag to 2026 FFO, that will be a source of earnings growth in future years.

Our guidance does not assume any other dispositions or investment activity. Our portfolio occupancy increased to 97.1% at year-end compared to 93.6% at year-end 2024, primarily reflecting the successful outcomes for the 3 big box development properties in 2025.

Turning to the same-store portfolio. Full year same-store NOI growth was 2.9% and flat in the fourth quarter when compared to the same time period in 2024. Consistent with our commentary on our last earnings call, our fourth quarter same-store NOI growth reflects lower occupancy in the same-store portfolio of 97.3% as of year-end 2025 versus 99.5% in 2024.

We are estimating 2026 same-store NOI growth to be within a range of 1.5% to 2.5%. At the midpoint of 2%, the components of same-store growth include a positive contribution of 3.25% from contractual rental escalators and lease renewals, offset by a 1.25% impact associated with lower occupancy and higher rent concessions in the form of free rent. Our 2026 guidance range assumes average occupancy for the same-store pool of 96% to 97% versus average occupancy for the same pool of properties of just over 97% in 2025.

The low end of our adjusted company FFO and same-store guidance assumes $500,000 of credit loss. G&A was approximately $11 million in the quarter, with full year 2025 G&A of $40 million within our expected range. We expect 2026 G&A to be within a range of $39 million to $41 million, broadly in line with 2025.

Turning to leasing. Our current mark-to-market on leases expiring through 2030 and second-generation vacancy is compelling with in-place rents approximately 16% below market based on brokers' estimates. As a reminder, this mark-to-market metric is inclusive of fixed rate renewals. With respect to 2025 expirations, during the fourth quarter, we secured a new 10-year lease with 3.5% annual rental bumps at our 380,000 square foot facility in the Indianapolis market. The lease expired in July, but the previous tenant held over through the end of September.

The new lease yielded a 34% increase in rent over the prior rent. The positive contribution of this new lease to same-store NOI growth will be recognized beginning in the second half of 2026, reflecting concessions associated with the 10-year lease term. At year-end, the tenant at our 160,000 square foot facility in Phoenix moved out. This is a modern building with highway frontage, and we expect the re-leasing of the building to produce a 40% to 50% rental increase.

Moving on to 2026 expirations. We signed 2 leases during the quarter, including our 650,000 square foot facility in Cleveland and 769,000 square foot facility in St. Louis. Both were subject to fixed rate renewals with 2.5% and 1.5% annual escalators, respectively. The extension of these leases is positive for occupancy and uninterrupted cash flow, particularly given the absence of leasing concessions.

Additionally, we renewed our 194,000 square foot facility in Cincinnati and a 70,000 square foot facility in the Greenville-Spartanburg market, generating cash rent spreads of approximately 15% and 7%, respectively. For the first half of 2026, we have 2 known move-outs, including 121,000 square feet at our multi-tenant facility in Greenville Spartanburg that expired at the end of January and a 230,000 square foot facility in Tampa scheduled to expire this month.

The Tampa facility is in an infill location within the sought-after Sable Business Park. There are no other properties of this size available in the market currently. Given the older vintage of the facility, we will be undertaking some renovations, including the addition of rail capabilities, which we expect to result in a rent increase of 10% to 20% over the existing rent. We have assumed in our same-store growth guidance that this property remains vacant for 2026.

Our 600,000 square feet of redevelopment projects in Orlando and Richmond are progressing well. Completion of the Richmond project is expected in the second quarter, while Orlando is now slated for the third quarter. Both properties are anticipated to produce yields on cost in the low teens.

Our balance sheet is in terrific shape with net debt to adjusted EBITDA at 4.9x at year-end. Reflecting this strength, S&P Global Ratings revised LXP's outlook to positive in the fourth quarter. Over the course of the year, we repaid approximately $220 million of debt, which included $140 million of our 6.75% senior notes due 2028 pursuant to a cash tender offer in the fourth quarter.

Subsequent to quarter end, we recast our $600 million revolving credit facility and $250 million term loan, extending the initial maturities to January 2030 and January 2029, respectively. The new debt facilities extend our debt maturity profile and reduce interest costs, further advancing the progress we made on the balance sheet in 2025.

With that, I'll turn the call back over to Will.

Thanks, Nathan. In closing, we're pleased with the success we had in 2025 and are focused on building on our momentum in 2026. While it has been several years since we've seen attractive development opportunities that make sense for LXP, we're excited to capitalize on improving market dynamics by pursuing disciplined external growth opportunities. At the same time, we remain focused on leasing and producing favorable mark-to-market outcomes that drive enhanced value for shareholders.

With that, I'll turn the call back over to the operator.

[Operator Instructions] Your first question comes from the line of Jim Kammert with Evercore.

Will, interesting on your planned development here in Phoenix, the Reams and Olive. I'm just curious, obviously, it sounds like the market definitely improved. Do you have sort of a quiet list of prospects that you're talking to already? I mean this is a big project.

It is a large project, Jim, and the supply-demand equation there is really favorable for us as is the lower construction costs. So it wouldn't be surprising to me if there was interest in the facility before it's finished. And there are prospects hunting for that size space now, and there really aren't any choices.

So we think it's an extremely good setup for us and almost the best one that I've seen candidly.

Interesting. And you're using about 65 acres, if I interpret your presentation materials. So you're left with like net 240, so there could be more in the future development?

Yes.

Your next question comes from the line of Todd Thomas with KeyBanc Capital Markets.

Maybe for Nathan, I just wanted to ask about the full year same-store NOI growth, the 2.9%. It was unchanged in the quarter. For the full year, though, it came in a touch below your prior forecast, 3% to 3.5%, which was revised lower last quarter from 3% to 4%.

I'm just curious in terms of the trends later in the year, what drove that miss versus your budget, if you could talk about that a little bit.

Yes. Thanks, Todd. So actually, our year-end same-store occupancy of 97.3% was actually within the range of expectations that the 3% to 3.5% range was set on. The difference between the final result of the 2.9% and the low end of guidance of 3% was about $200,000. That variance was primarily driven by marginally higher property expense leakage across about half a dozen properties.

Some of them -- 2 or 3 of them are vacant properties where we're carrying the full OpEx burden and 2 or 3 of them are leased properties that have property expense caps in the leases where we had some unbudgeted expenses that ultimately went through the caps.

Okay. That's helpful. Is that expense leakage, is that -- you didn't mention that when you talked about the same-store forecast for '26. Is that expected to continue to weigh on '26 to some extent? And then you did mention that concessions are acting as a little bit of an offset to the base rent and escalators in '26. Are concessions a little bit greater than previously anticipated? And can you maybe speak to the environment for concessions more broadly?

Sure. I'll take the first piece, and then I'll hand it to James to talk about concessions and the environment. On the first piece, we certainly updated our budgeting for the property expenses that we experienced in Q4 and reflected that in the guidance that we put out this morning.

So on the concession piece, I would just say that the market is changing pretty rapidly. And if you look at what happened in anything that was done in kind of the first half of last year and really into the third quarter, there are some pretty high-level concessions just because the supply-demand outlook was a little bit softer than it is now.

Over the last 6 months, we've had a massive amount of space get taken down. We've had vacancy rates in most of our markets start to either flatten and in many cases, start to decline. So I do think the concessions will continue to be a part of the story, but I do think we're in an environment where some of the concessions that were given 12 months ago will start to recede and soften a bit, and we'll get into a situation that's a little bit more landlord favorable.

Okay. That's helpful. And then just lastly, I wanted to ask about transaction activity and capital allocation a little bit. It sounds like acquisitions going forward will be driven by dispositions. And just wanted to get your thoughts on what that might look like and the potential to exit more nontarget markets in '26. And maybe you can sort of speak to how that activity might stack up versus additional stock buybacks.

Sure. Well, as you can see, we've been methodically working our way through that portfolio of assets outside of our 12 target markets and taking our time and being sure that we're maximizing value and match funding those proceeds to enhance shareholder value.

So often, there's an asset management project involved as a gating item before maximizing value. And I would say there's a couple of hundred million of assets in that portfolio where there are negotiations underway that could lead to a very good outcome. So none of that is in our guidance, but it could create some great outcomes that would give us some capital to redeploy as the year progresses.

We have to be careful about managing tax gain as we do that. But we're in a good position of liquidity to begin with. So buyback has been appealing after we address the need to bring our leverage down. But in terms of new development, we think the shareholder value is more interesting from that perspective than buyback at the moment, but there has been room for some buyback activity.

Your next question comes from the line of Vince Tibone with Green Street.

I wanted to follow up a bit more on the cash same-store NOI guide. I believe you said, Nathan, it's going to be about 3.25% contribution from both contractual bumps and spreads. And I believe contractual bumps are just south of 3%. So it doesn't seem like spreads are going to be much of a contributor.

So maybe you can just talk about -- I'm guessing fixed rate renewals are going to drag that figure down you cited from the 28% spreads on '26 rollovers you already mentioned. But I guess how can we think about spreads with the fixed renewals or contribution to spreads in '26. Because it seems to be pretty minimal given that data point I just cited.

Yes, Vince, I'll go first and just -- I just want to clarify the 3.25%, and then I'll hand it to James to talk about the '26 spreads. But the 3.25% positive contribution is the contractual rent escalators, which you right are about 2.8% on average across the portfolio. And the second component is just the renewal rent spreads.

So that's the positive contribution. And then the 1.25% we talked about in prepared remarks reflects the lower average occupancy across the portfolio, which actually captures a combination of new leases on vacant spaces we have today or move-outs that we might experience offset by the drag from vacancy.

So it actually captures some of the rent spread activity around new leases. So it's a little bit of a bucketing as to whether it goes into the first category or the second category, but that first category is just the renewals.

James, do you want to talk about the '26 spreads?

Yes, I can. So yes, we had 2 really large fixed rate renewal options that did put a pretty good drag on it. So we've got the 28% cash for 2025, which included quite a bit of the 2026 that was done. And if you kind of put those back in, it's about a 14.5% mark-to-market. So that kind of shows you the delta between the 2 when you include the fixed rate renewal options. The good news is we're pretty much through those at this point for 2026. We have 2 small ones at the end of the year, which we expect to renew, but we've gotten past those now. So hopefully, we'll start to see some higher mark-to-market numbers holding with more ability to fully mark those rents to market.

That's really helpful color. And then just curious how you thought about the average occupancy guide in terms of retention you're assuming for some of the larger expirations in the back half of the year, but also just if you could touch on some of the activity on some of the vacancies that you've had for a bit longer that I think when we spoke at NAREIT, you were having some activity on.

So just curious kind of how you're budgeting those. And if you can just talk broadly or quickly on some of the activity in some of the existing vacancies in the portfolio.

Sure. For retention, I mean, we're feeling pretty good about it at this point. We've already chopped a lot of that wood and gotten through the big potential vacancies with renewals. I mean 2 of them were the fixed rate renewal options that I just mentioned.

So we feel pretty good about our retention numbers for the balance of 2026. And then looking to 2027, we feel like we're going to have a nice retention there as well. We've got a number of big leases rolling, but we feel like we'll retain those tenants and should be back to more of a typical LXP clip at that high retention rate with 2025 kind of being an anomaly.

On the vacancy side, we continue to have activity across our vacancies. It's just -- it continues to be a real challenge to get deals done, lots of RFP traffic, lots of tenant tours, lots of interest, and it's really just getting them across the finish line. I think that we will make some good progress this year on the vacancy that we have. And as a reminder, there's a really good opportunity there to mark those rents up in the mid-30s if we can get those deals done.

Your next question comes from the line of Nikita Bely with JPMorgan.

Any comments -- I know you just did a bigger spec development, but anything on the build-to-suit front. Some of the companies in the net lease space, seemingly they're increasingly getting to the industrial BTS deals. Does that pose more competition for you guys down the line? And I don't know if that's something that you'd consider given this large expected spec deals going on right now?

Yes, sure. Why don't I take that? This is Brendan. Yes, I think the build-to-suit space remains interesting to us and it's probably looking -- the supply dynamic is making it look more encouraging, particularly in our land bank. So there may be more competition from some of those other players. But since we do have a land bank, that puts us in a more favorable position than many of those guys looking to finance build-to-suit.

So the dynamic you see is as supply comes out of the market of existing specfilled space that we remove that competition. So we've been pretty actively responding to build-to-suit over the last couple of years, in fact, in our land bank. But in many cases, some of those deals didn't make, but the ones that did proceed, we were competing against existing supply.

So that factor is encouraging for us, and we've been responding. And in particular, in Columbus, which has tightened significantly in Phoenix, we've been responding to build-to-suit inquiries as well. So we'll look at both. As those fundamentals have improved, we will consider spec, but we absolutely will continue responding to build-to-suit.

Was there an option to do a build-to-suit maybe for the land site in Phoenix and maybe wait a little bit longer? I mean was there any urgency to do a spec deal versus doing a build-to-suit maybe at some point down the line if you were able to get someone locked up?

Well, as we looked at it, the supply dynamics, the lack of competing supply made that very compelling. And then the other piece of it is that we're strategically taking advantage of what I think will probably turn out to be a particularly attractive construction pricing window here before competing supply starts starting.

So it's really twofold. It's not just supply/demand, but it's also very attractive construction pricing. And the combination of that was very compelling for us to start on a spec basis.

Like Will said, I would not be surprised if we could potentially have an early conversion and maybe it turns into sort of a [ build-to-suit ]. But both options continue to look good there, and we'll continue to respond to build-to-suit at that site. And to get back to Jim's comment earlier, actually, like this initial site is going to be approximately 75 acres. We've planned a little over 5 million square feet at our site in Phoenix. So there's a lot of runway beyond the building that we're starting.

Got it. Can I ask maybe more modeling question. What's your bad debt assumption for '26 that you guys have in guidance? And how does that compare to '25?

Nikita, so we continue to have a very good track record on credit loss. We didn't have any credit loss in 2025. In the guidance, we included $500,000 in the low end only. We looked at some of the stress that's happening in certain sectors and a matter of prudence and sort of bringing ourselves in line with some of the peers, we decided to make a little bit of credit loss in the low end.

[Operator Instructions] I will now turn the call back over to Will Eglin for closing remarks.

We appreciate everyone joining our call this morning, and we look forward to updating you on our progress over the balance of the year. Thanks again for joining us today.

Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.

Hello, and thank you for standing by. My name is Mark, and I will be your conference operator today. At this time, I would like to welcome everyone to the LXP Industrial Trust Third Quarter Earnings Call and Webcast. [Operator Instructions]

Now I would like to turn the call over to Heather Gentry, Investor Relations. Please go ahead.

Thank you, operator. Welcome to LXP Industrial Trust Third Quarter 2025 Earnings Conference Call and Webcast. The earnings release was distributed this morning and both the release and quarterly supplemental are available on our website 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; and Nathan Brunner, CFO, will provide a recent business update and commentary on third quarter results. Brendan Mullinix, CIO; and James Dudley, Executive Vice President and Director of Asset Management, will be available for the Q&A portion of this call.

I will now turn the call over to Will.

Thanks, Heather, and good morning, everyone. We had a great third quarter, highlighted by the transformative sale of our 2 vacant million square foot development projects in Central Florida and Indianapolis to a user buyer. This transaction was exceptionally impactful to our overall business, providing immediate earnings accretion while also materially reducing leverage, 2 positive outcomes rarely achieved in tandem. The aggregate gross sale price of $175 million represented a 20% premium to the gross book value of the properties and is a superior outcome compared to leasing the assets. The transaction drove portfolio occupancy up 370 basis points, significantly decreased leverage to 5.2x net debt to adjusted EBITDA from 5.8x and will generate an estimated 6% accretion to adjusted company FFO per share, reflecting the property operating cost savings and interest expense savings from debt reduction.

The net proceeds from the sale of $151 million were used to repay $140 million of our $300 million, 6.75% senior notes due in 2028, pursuant to a cash tender offer that closed subsequent to quarter end, considerably improving our balance sheet and financial flexibility. We have now successfully leased or sold 98% of our development program. Our program has contributed to LXP having the youngest industrial portfolio in the public market with 15 facilities developed since 2019, totaling 9.1 million square feet at a weighted average estimated stabilized cash yield of 7.1%.

Additionally, the 2 development property sales and a leased land sale completed late last year produced gains of $91 million or 54% over our cost of $170 million. Year-to-date sales volume totaled $273 million with an average cash capitalization rate of 5.1% on stabilized assets. The investment sales market remains healthy, and we are currently marketing approximately $115 million of assets for sale in our nontarget markets for opportunistic reinvestment, which may include opportunities in our land bank.

During the quarter, we further added to our target market exposure and acquired an approximately 157,000 square foot Class A industrial facility in the Atlanta market for $30 million to satisfy a 1031 exchange requirement. We continue to focus on our 12-market investment strategy in the Sunbelt and select lower Midwest states, which account for approximately 85% of our gross assets.

Market fundamentals improved during the third quarter with our 12 target markets outperforming the broader market. We continue to see robust net absorption in our target markets, which accounted for roughly 33 million square feet of the overall U.S. net absorption of approximately 45 million square feet in the third quarter. Dallas, Houston, Phoenix and Indianapolis were standouts with net absorption of between 4 million and 8 million square feet in each of these markets.

Furthermore, Atlanta, Greenville-Spartanburg, Columbus and Central Florida each experienced net absorption of over 2 million square feet. In addition to demand from large retailers and 3PLs, it's notable to highlight that manufacturing-related demand has been a meaningful contributor to demand in our markets, reflecting the significant onshoring investment across our geographic footprint.

During the quarter, flight to quality continued with large corporate users driving the absorption into newer facilities, and we saw an increase in demand for larger spaces. We stand to benefit from both of these trends, given our portfolio is the newest in the industrial REIT space and our focus is on bulk logistics. U.S. vacancy held relatively steady around 7%, primarily due to positive demand and a further decline in new completions. Construction starts remain below historical levels with the construction pipeline in our 12 markets of approximately 88 million square feet, down nearly 73% from the 2022 peak of approximately 330 million square feet.

Today, we also announced that the Board of Trustees authorized an annualized dividend increase of $0.02 per share to an annualized rate of $0.56 per share on a pre-split basis. The newly declared common share dividend represents an increase of 3.7% over the prior dividend and will be paid in the first quarter of 2026.

In summary, our company is in a great position. The sale of the development projects accelerated and derisked several of our most critical operating objectives, resulting in meaningfully higher occupancy, lower leverage and earnings accretion. We believe this outcome, combined with our high-quality young portfolio of primarily Class A assets in markets that are outperforming, consistent contractual rent growth, inexpensive rents in relation to market, above-average tenant credit with an investment-grade balance sheet, moderate payout ratio and a land bank to be utilized for accretive growth opportunities, positions us well for success going forward.

With that, Nathan will now discuss our financials, leasing and balance sheet in more detail.

Thanks, Will. We produced adjusted company FFO in the third quarter of $0.16 per diluted common share for approximately $47 million. This morning, we increased the midpoint and tightened the range of our 2025 adjusted company FFO guidance to $0.63 to $0.64 per share. The revised guidance reflects the accretive impact from the sale of the development projects and debt repayment.

As Bill discussed, the Central Florida and Indianapolis development properties were sold for an aggregate gross sale price of $175 million, which represented a 20% premium to the cost basis or $29 million over the gross book value of the properties. Based on our underwriting of market rents, TI, leasing and holding period costs and free rent, we estimated the yield implied by the sale price to be approximately 5%, which demonstrates the attractive valuation achieved in the sale. Our share of net proceeds of approximately $151 million was used to tender for the 6.75% senior notes due 2028. The tender resulted in the repayment of bonds with a principal amount of $140 million and will produce savings in interest expense and amortization of deferred financing costs of approximately $10 million per year.

We will also save roughly $1.8 million of property operating costs per year at these 2 properties, which were previously expensed in the income statement. In aggregate, these interest and property operating costs totaled approximately $12 million per year or $0.04 per share, which represents 6% accretion versus our adjusted company FFO in the third quarter. This significant earnings accretion is paired with a 0.6 turn reduction in leverage, making this transaction even more compelling.

Turning to the same-store portfolio. We produced same-store NOI growth of 4% year-to-date and 2% for the third quarter with our same-store portfolio 96.9% leased at quarter end. We narrowed our full year 2025 same-store NOI growth guidance to 3% to 3.5%. As a reminder, our same-store pool does not include the 1 million square foot development property in Greenville that we leased in May and the benefit of this lease is not included in the same-store growth metrics.

Our portfolio occupancy increased to 96.8% during the quarter, up from 94.1% in the previous quarter, primarily driven by the successful execution of the sale transaction.

We also continue to see our rent escalators trend higher with an increase in the average annual escalator to 2.9%. As market fundamentals trend upward, tenant sentiment appears to be improving with increased activity, although decision-making time lines continue to be extended. Our current mark-to-market on leases expiring through 2030 remains attractive with in-place rents 17% below market based on brokers' estimates.

Regarding 2025 expiration, subsequent to quarter end, we leased a 380,000 square foot facility in the Indianapolis market to a new tenant for 10 years with 3.5% annual rent bumps. This was a July 2025 expiration in which the previous tenant held over through the end of September. This was a great outcome with the new rent representing a 34% increase over the prior rent. We continue to see promising activity where we have experienced tenant move-outs with lease rents approximately 30% below market.

We've made good progress on our 2026 lease expirations, addressing approximately 1.8 million square feet or 27% of total 2026 expirations at an average base cash rental increase of approximately 31%, excluding one fixed rate renewal. Our remaining 2026 lease roll represents roughly 8.5% of our ABR with good prospects for attractive mark-to-market outcomes.

During the third quarter, this leasing included a 3-year renewal with 3.25% annual bumps on a September 2026 expiring lease at our approximately 500,000 square foot facility in the Dallas market. The new rent represents an 8% increase over the prior rent.

Subsequent to quarter end, we extended a June 2026 expiring lease at our 70,000 square foot facility in the Greenville-Spartanburg market for 5 years with 3.5% annual bumps, representing an increase in rent of approximately 7% over the prior rent. Additionally, the tenant at our approximately 650,000 square foot facility in Cleveland with an October 2026 expiration, exercised their 5-year fixed rate renewal option with 2.5% annual escalators.

Our 600,000 square feet of redevelopment projects continue to progress. As a reminder, this includes a 350,000 square foot redevelopment in Orlando and a 250,000 square foot redevelopment in Richmond. Both facilities are expected to be completed in the first quarter of 2026 and producing yields on cost in the low teens.

Moving to balance sheet. At quarter end, our net debt to adjusted EBITDA was 5.2x. We had $230 million of cash on the balance sheet at quarter end and approximately $80 million pro forma for the bond tender. As we noted in our earnings release, the Board approved a 1-for-5 reverse stock split, which is scheduled to take effect on November 10 for trading on a post-split basis beginning on November 11. The earnings press release includes further details. The dividend for first quarter 2026, reflecting the dividend increase announced today, will be adjusted for the reverse stock split on a pro rata basis.

With that, I'll turn the call back over to Will.

Thanks, Nathan. In closing, we're pleased with our third quarter results and our outlook moving forward. The accretive sale of the vacant development projects addressed our most important operating objectives in 2025 and positions LXP for a strong 2026 and beyond. We remain focused on creating value for our shareholders by marking rents to market, raising rents through annual escalators, capitalizing on our lease-up opportunities and concentrating on our 12-market investment strategy.

With that, I'll turn the call back over to the operator.

And our first question comes from the line of Jon Petersen with Jefferies.

Congrats on the property sales. Your debt is now down to 5.2x debt to EBITDA. So I wonder if you could just talk about the decision-making on deploying capital in the future for external growth, whether it's acquisitions or development. Or are you guys more focused on, I guess, internal growth at the moment?

Well, we have a very good internal growth profile, Jon, beginning with contractual rent escalations and expensive rents and hopefully some occupancy gains that we're working on. Our orientation on the external growth side would still be focused on build-to-suit. And there are a handful of places in the land bank where some modest spec development could be in the cards next year if tenant demand continues to stay strong, but those would be smaller boxes and the overall scale would be pretty small in relation to our overall liquidity. Acquisitions are really not something that we're looking at from time to time. As we've discussed, if we have a property sale and we're trying to manage tax gain, we may purchase something like we did with the Atlanta asset.

Got it. All right. That's helpful. And then in your presentation, there's a lot of focus on your 12 target markets. So it kind of raises the question, what about the other markets? I think it's about 15% of your revenue comes from outside of those 12 markets. Is that something we should think about as a medium-term disposition target?

Yes. We've been selling assets out of those markets and creating liquidity for redeployment, and we have a handful of things in the market that meet that criteria. So we do view that portfolio as a source of liquidity for other initiatives, but we're committed to taking -- it will be a process where we realize as much value as we can in each case. And there are some assets that require a lease extension would be supportive of the best sale outcome, that sort of thing. So I think slow and steady. But we're looking at that portfolio as a source of liquidity for reinvestment.

And your next question comes from the line of Todd Thomas with KeyBanc Capital Markets.

Will, I just wanted to go back to your comments. You mentioned the company is marketing on the non-target market side, about $115 million of assets. Can you just elaborate on that a little bit, what the time line might be for some additional dispositions to materialize and what the disposition cap rate might sort of look like for those assets? Perhaps you can sort of book...

Yes, Todd, it's 4 buildings. They're not under contract at the moment, but we think there's a good chance that they close this year in December. And in terms of cap rates, probably something in the low 6s, which is a little bit higher than where we may trade early in the year, but we're kind of looking at the plan in its entirety, which should land somewhere in the sort of 5.5% to 5.75% area, which we think is -- it's a good outcome and where we've redeployed capital this year, there's some accretion.

Okay. And then Nathan, you talked about the stronger in-place escalator that you've been sort of achieving here. You're close to 3%. You have about 10% of ABR expiring in '26. Sorry if I missed this, but can you talk about the expected mark-to-market in '26, what that might look like and whether there are any other meaningful considerations that we should be thinking about as it relates to same-store NOI growth?

James, do you want to address the mark-to-market first?

Yes, sure. So we're projecting about a 20% mark-to-market for 2026 remaining lease expirations, which is up slightly from last quarter because we did pull that Dallas deal out that had a slightly lower mark-to-market on it. I do want to talk about that one just for a second, though we marked it up 8%. But if you remember, that was a 3-year deal that we marked up 3% in the duration.

And then just layering on top of that, some other observations. You pointed out the contractual rent escalators, which are creeping up. We're almost at 3% now. On average, it's 2.9% across the portfolio. With regard to the expirations. At quarter end, we were around 10% in terms of expirations in '26. But with the subsequent events, we're -- it's around about 8.5%, and we've addressed 27% of the '26 expirations in totality.

And then the one other thing I would mention, Todd, with regard to the same-store metric next year is we will get the benefit of the income from the 1 million square foot Greenville property, which will move into the same-store pool for '26. It is not in the metrics for 2025.

Okay. And then it sounded like you see an opportunity for occupancy growth as well. What level of retention are you anticipating in '26? And what's that been trending like in '25, if you can just remind us?

So in '26, we're anticipating around 80% to kind of return to the norm on what we've had historically. And we've got a decent amount of visibility there. I mean it is back-end loaded. The majority of the lease expirations are in the back half of the year. But we just addressed 2 of the big ones in the Dallas asset and then in the Cleveland asset. So we're moving along and knocking that out as we kind of go along.

'25 was a unique year in the fact that we had some 3PL exposure. So I think it was -- we had quite a bit of vacancy. We're working through that vacancy now. We've got about 1 million square feet of second-generation leasing that needs to be done, and we've got really good activity across that portfolio right now. So hoping to have some good outcomes, and we're excited about the mark-to-market opportunity, which is a little above 30%.

And your next question comes from the line of Mitch Germain with Citizens Bank.

Congrats on the sale. How long were those discussions ongoing? I'm just trying to -- I'm curious to see kind of how the leasing versus the sale discussions kind of were transpiring.

Well, it was an unsolicited offer that we got on the buildings. And we were under access agreement dating back to sometime in May. So we were in possession of material nonpublic information for a long time, both in second quarter and third quarter. So it was -- it took a long time to get from May to the closing, but it was in the works for a pretty long time.

Great. That's helpful. And then how much of the portfolio is subject to these fixed renewals versus you able to kind of drive rents kind of within line with kind of what your expectations are for '26 and beyond?

Yes, it's probably about 15% of the portfolio. We do have some near-term large ones that kind of drive down that mark-to-market. Mitch, I would just remind you that our mark-to-market numbers always incorporate those fixed rate renewals. We have 3 more that are coming up this year, and then we have a couple of large ones with our Nissan leases in 2027. When we have the opportunity and it does present itself periodically, sometimes we can negotiate around them if the tenant is looking for capital dollars or something else kind of outside the base lease terms.

Okay. Great. And then I guess my last question. Same-store results this quarter, is a little bit of that driven by some of -- I think you had a couple of assets go vacant. Is that kind of what happened this quarter to drive that result a little bit lower versus where you were trending? Is there anything specific that you want to call out?

Yes, Mitch, on same-store, you're spot on, the delta between Q2 and Q3 is the impact of those move-outs at the end of Q2 and during the course of Q3. So simplistically, the building blocks of the outcome are top line contractual rent escalators and the benefit of renewals and new leasing outcomes is about 4.75% as a positive impact, and then the drag from lower occupancy was about 2.7%.

Mitch, just as a reminder, Greenville asset is not in the pool, but had it been in the pool for the quarter, we would have had a 1.8% positive impact and so the result for Q3 rather being 2%, would be 3.8%. As I said earlier, we'll obviously get the benefit of that next year.

[Operator Instructions] And your next question comes from the line of Vince Tibone with Green Street.

I just wanted to follow up on same-store NOI as well. If I heard correctly, it looks -- I think full year guidance was brought down at the high end from 4% to 3.5%. I thought all the move-outs in the third quarter were expected. So can you just talk about what drove kind of the lowering of the high end of expectations? Was it bad debt or just kind of taking out any new leasing that maybe would have got you to the high end? Because it looks like -- some rough math, looks like fourth quarter is expected to accelerate further on a same-store basis. So if you just talk about those few pieces, that would be helpful.

Yes. Thanks, Vince. So we did narrow the guidance range for same-store. It was 3% to 4% previously. It's 3% to 3.5%. As a reminder, that outcome will still be in the range of outcomes we expect in Q2, but also in the range of outcomes we expected at the beginning of the year when we initially released guidance. Clearly, the change on the high end is really a reflection of the passage of time since our last call. The high end on our last call really required a conversion of a lot of leasing prospects with very near-term needs. We have good activity across the move outs we've had in 2025, but the conversion of those spaces to tenancies is going to take a little bit more time and not going to result in us getting to high end of the Q2 guidance.

No, that's helpful. And then just to confirm, it doesn't sound like bad debt at all is an issue. Can you just confirm that's the case, spot on, bad debt?

So no bad debt in the quarter or year-to-date in these collective rents.

Great. And then maybe just one last one for me. And sorry if you already touched on this. But just on the press release, you mentioned 1.1 million square foot of leasing post quarter end. Are you able to split that between renewals and new leasing on a square footage basis?

Yes, they are renewals. Just to clarify, there were 2 renewals and there was one new lease, which is the 380 in Indianapolis that we described in the prepared remarks.

And your next question comes from the line of Jim Kammert with Evercore ISI.

With the apparent mania happening in data centers and AI, I'm just curious what your latest thoughts are on the Phoenix land. If there's any additional opportunity for Lexington there to monetize, sell to other developers or proceed on your own? Just curious.

Well, this is Brendan. It's an avenue that we're certainly very interested in. In Phoenix, most of the data center markets in the country, the limiting factor is power and access to power. So that's the focus there. I think that we'll continue to explore whether there are opportunities to power the site, which would allow for data center development. But in the meanwhile, we're incredibly encouraged by the tightening in that market, which will put us in a great position to compete on build-to-suit and in the future potentially consider spec there. So the market fundamentals there for just conventional warehouse distribution are improving really dramatically there.

Fair enough. And second question, I forgotten are the 2 large Nissan expirations, I realize not until Q1 '27, but are those fixed escalations, do they extend or not?

Yes, they have -- they certainly have no adoptions.

Okay. Can you say the percentage or you're not disclosing?

1.5%.

[Operator Instructions] There's no further questions at this time. I will now turn the call back over to Will Eglin for closing remarks. Will?

We appreciate everyone joining our call this morning, and we look forward to updating you on our progress over the balance of the year. Thanks again for joining us today.

This concludes today's call.