Document/ExhibitDescriptionPagesSize 1: 10-Q Quarterly Report HTML 1.43M
2: EX-31 Ex-31.1 HTML 28K
3: EX-31 Ex-31.2 HTML 28K
4: EX-32 Ex-32.1 HTML 25K
5: EX-32 Ex-32.2 HTML 25K
11: R1 Cover HTML 81K
12: R2 Condensed Consolidated Balance Sheets HTML 160K
13: R3 Condensed Consolidated Balance Sheets HTML 50K
(Parenthetical)
14: R4 Condensed Consolidated Statements of Operations HTML 136K
15: R5 Condensed Consolidated Statements of Comprehensive HTML 60K
Income (Loss)
16: R6 Condensed Consolidated Statements of Changes in HTML 120K
Equity
17: R7 Condensed Consolidated Statements of Changes in HTML 27K
Equity (Parenthetical)
18: R8 Condensed Consolidated Statements of Cash Flows HTML 93K
19: R9 The Company and Financial Statement Presentation HTML 46K
20: R10 Earnings Per Share HTML 74K
21: R11 Investments in Real Estate HTML 89K
22: R12 Dispositions and Impairment HTML 43K
23: R13 Fair Value Measurements HTML 56K
24: R14 Investments in Non-Consolidated Entities HTML 49K
25: R15 Debt HTML 56K
26: R16 Derivatives and Hedging Activities HTML 52K
27: R17 Lease Accounting HTML 160K
28: R18 Allowance for Credit Loss HTML 38K
29: R19 Concentration of Risk HTML 27K
30: R20 Equity HTML 50K
31: R21 Related Party Transactions HTML 29K
32: R22 Commitments and Contingencies HTML 31K
33: R23 Supplemental Disclosure of Statement of Cash Flow HTML 27K
Information
34: R24 Subsequent Events HTML 27K
35: R25 Pay vs Performance Disclosure HTML 37K
36: R26 Insider Trading Arrangements HTML 31K
37: R27 The Company and Financial Statement Presentation HTML 52K
(Policies)
38: R28 The Company and Financial Statement Presentation HTML 35K
(Tables)
39: R29 Earnings Per Share (Tables) HTML 75K
40: R30 Investments in Real Estate (Tables) HTML 88K
41: R31 Dispositions and Impairment (Tables) HTML 44K
42: R32 Fair Value Measurements (Tables) HTML 55K
43: R33 Investments in Non-Consolidated Entities (Tables) HTML 47K
44: R34 Debt (Tables) HTML 60K
45: R35 Derivatives and Hedging Activities (Tables) HTML 54K
46: R36 Lease Accounting (Tables) HTML 88K
47: R37 Allowance for Credit Loss (Tables) HTML 37K
48: R38 Equity (Tables) HTML 44K
49: R39 The Company and Financial Statement Presentation - HTML 48K
Narrative (Details)
50: R40 The Company and Financial Statement Presentation - HTML 49K
Schedule of Variable Interest Entities (Details)
51: R41 Earnings Per Share (Details) HTML 66K
52: R42 Earnings Per Share - Potentially Dilutive Shares HTML 32K
(Details)
53: R43 Investments in Real Estate - Schedule of Real HTML 40K
Estate Acquisitions (Details)
54: R44 Investments in Real Estate - Schedule of Real HTML 92K
Estate Properties Under Construction (Details)
55: R45 Investments in Real Estate - Narrative (Details) HTML 39K
56: R46 Investments in Real Estate - Schedule of Land Held HTML 47K
for Development (Details)
57: R47 Dispositions and Impairment - Narrative (Details) HTML 37K
58: R48 Dispositions and Impairment - Schedule of HTML 52K
Properties Held for Sale (Details)
59: R49 Fair Value Measurements - Schedule Fair Value HTML 35K
Measurements Inputs (Details)
60: R50 Fair Value Measurements - Fair Value by Balance HTML 37K
Sheet Grouping (Details)
61: R51 Investments in Non-Consolidated Entities - HTML 68K
Schedule of Investment in Non-Consolidated
Entities (Details)
62: R52 Investments in Non-Consolidated Entities - HTML 53K
Narrative (Details)
63: R53 Debt - Schedule of Mortgages and Notes Payable HTML 41K
(Details)
64: R54 Debt - Narrative (Details) HTML 63K
65: R55 Debt - Schedule of Debt Instrument Redemption HTML 55K
(Details)
66: R56 Debt - Schedule of Credit Agreement Terms HTML 66K
(Details)
67: R57 Derivatives and Hedging Activities - Narrative HTML 41K
(Details)
68: R58 Derivatives and Hedging Activities - Schedule of HTML 34K
Derivative Instruments (Details)
69: R59 Derivatives and Hedging Activities - Fair Value of HTML 36K
the Company's Derivative Financial Instruments and
Classification on the Balance Sheets (Details)
70: R60 Derivatives and Hedging Activities - Effect of the HTML 41K
Company's Derivative Financial Instruments on the
Statements of Operation (Details)
71: R61 Lease Accounting - Narrative (Details) HTML 54K
72: R62 Lease Accounting - Lease Income (Details) HTML 34K
73: R63 Lease Accounting - Future Fixed Rental Receipts HTML 66K
(Details)
74: R64 Lease Accounting - Supplemental Balance Sheet HTML 29K
Information (Details)
75: R65 Lease Accounting - Components of Lease Expense HTML 37K
(Details)
76: R66 Lease Accounting - Operating Lease Liabilities HTML 49K
Maturity (Details)
77: R67 Allowance for Credit Loss - Narrative (Details) HTML 27K
78: R68 Allowance for Credit Loss - Allowance for HTML 32K
Sales-type Lease (Details)
79: R69 Allowance for Credit Loss - Detail of Investment HTML 34K
in Sales-Type Lease (Details)
80: R70 Equity - Narrative (Details) HTML 81K
81: R71 Equity - Changes in Other Comprehensive Income HTML 51K
(Details)
82: R72 Equity - Effects of Changes in Noncontrolling HTML 44K
Interests (Details)
83: R73 Commitments and Contingencies (Details) HTML 35K
84: R74 Supplemental Disclosure of Statement of Cash Flow HTML 31K
Information (Details)
85: R75 Subsequent Events - Narrative (Details) HTML 32K
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(Address of principal executive offices) (zip code)
(i212) i692-7200
(Registrant's
telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
iShares of beneficial interest, par value $0.0001 per share, classified as Common Stock
iLXP
iNew
York Stock Exchange
i6.50% Series C Cumulative Convertible Preferred Stock, par value $0.0001 per share
iLXPPRC
iNew
York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. iYes☒ No ☐
Indicate
by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). iYes☒ No
☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or emerging growth company. See the definitions of “large accelerated filer,”“accelerated filer,”“smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
iLarge
accelerated filer
☒
Accelerated filer
☐
Non-accelerated filer
☐
Smaller reporting company
i☐
Emerging growth company
i☐
If
an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes i☐ No
☒
Indicate the number of shares outstanding of each of the registrant's classes of common stock, as of the latest practicable date: i292,634,575 common shares of beneficial interest, par value $0.0001 per share, as of October 30, 2023.
We file and furnish annual, quarterly and current reports, proxy statements and other information with the Securities and Exchange Commission, which we refer to as the SEC. We file and furnish information electronically with the SEC. The SEC maintains an Internet site that contains reports, proxy and information statements and other information regarding issuers that file or furnish electronically with the SEC. The address of the SEC's Internet site is http://www.sec.gov. We also maintain a web site at http://www.lxp.com through which you can obtain copies of documents that we file or furnish with the SEC. The contents of that web
site are not incorporated by reference in or otherwise a part of this Quarterly Report on Form 10-Q or any other document that we file or furnish with the SEC.
Investment
in a sales-type lease, net (allowance for credit loss $i64 in 2023 and $i93 in 2022)
i62,887
i61,233
Rent
receivable – current
i6,636
i3,030
Rent
receivable – deferred
i78,665
i71,392
Other
assets
i32,584
i24,314
Total assets
$
i3,929,004
$
i4,053,847
Liabilities
and Equity:
Liabilities:
Mortgages and notes payable, net
$
i63,390
$
i72,103
Term
loan payable, net
i299,334
i298,959
Senior notes payable,
net
i990,318
i989,295
Trust preferred securities, net
i127,769
i127,694
Dividends
payable
i38,304
i38,416
Liabilities
held for sale
i1,083
i1,150
Operating
lease liabilities
i21,269
i25,118
Accounts
payable and other liabilities
i57,296
i74,261
Accrued
interest payable
i10,681
i9,181
Deferred
revenue - including below-market leases, net
i9,889
i11,452
Prepaid rent
i15,531
i15,215
Total
liabilities
i1,634,864
i1,662,844
Commitments
and contingencies
i
i
Equity:
Preferred
shares, par value $ii0.0001/ per share; authorized ii100,000,000/
shares:
Series C Cumulative Convertible Preferred, liquidation preference $ii96,770/;
iiii1,935,400///
shares issued and outstanding
i94,016
i94,016
Common
shares, par value $ii0.0001/ per share; authorized ii600,000,000/
shares, ii292,611,107/ and ii291,719,310/
shares issued and outstanding in 2023 and 2022, respectively
i29
i29
Additional paid-in-capital
i3,324,790
$
i3,320,087
Accumulated
distributions in excess of net income
(i1,177,212)
(i1,079,087)
Accumulated
other comprehensive income
i14,362
i17,689
Total
shareholders’ equity
i2,255,985
i2,352,734
Noncontrolling interests
i38,155
i38,269
Total
equity
i2,294,140
i2,391,003
Total
liabilities and equity
$
i3,929,004
$
i4,053,847
The
accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
(Unaudited
and dollars in thousands, except share/unit and per share/unit data)
(1)iThe Company and Financial Statement Presentation
LXP Industrial
Trust (together with its consolidated subsidiaries, except when the context only applies to the parent entity, the “Company”) is a Maryland real estate investment trust (“REIT”) that owns a portfolio of equity investments focused on single-tenant industrial properties.
As of September 30, 2023, the Company had ownership interests in approximately i115 consolidated
real estate properties, located in i19 states. The properties in which the Company has an interest are primarily net leased to tenants in various industries.
The Company believes it has qualified as a REIT under the Internal Revenue Code of 1986, as amended (the “Code”). Accordingly, the Company will not be subject to federal
income tax, provided that distributions to its shareholders equal at least the amount of its REIT taxable income as defined under the Code. The Company is permitted to participate in certain activities from which it was previously precluded in order to maintain its qualification as a REIT, so long as these activities are conducted in entities which elect to be treated as taxable REIT subsidiaries (“TRS”) under the Code. As such, the TRS are subject to federal income taxes on the income from these activities.
The Company conducts its operations indirectly through (1) property owner subsidiaries,
which are single purpose entities, (2) a wholly-owned TRS, Lexington Realty Advisors, Inc., and (3) joint ventures. Property owner subsidiaries are landlords under leases for properties in which the Company has an interest and/or borrowers under loan agreements secured by properties in which the Company has an interest and lender subsidiaries are lenders under loan agreements where the Company made an investment in a loan asset, but in all cases are separate and distinct legal entities. Each property owner subsidiary is a separate legal entity
that maintains separate books and records. The assets and credit of each property owner subsidiary with a property subject to a mortgage loan are not available to creditors to satisfy the debt and other obligations of any other person, including any other property owner subsidiary or any other affiliate. Consolidated entities that are not property owner subsidiaries do not directly own any of the assets of a property owner subsidiary (or the general partner, member or managing member of such property owner subsidiary), but merely hold partnership, membership or beneficial interests therein, which interests are subordinate to the claims of such property owner subsidiary's (or its general partner's, member's or managing member's) creditors.
The unaudited condensed consolidated financial statements contained in this Quarterly Report on Form
10-Q (this “Quarterly Report”) for the three and nine months ended September 30, 2023 have been prepared by the Company in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and the applicable rules and regulations of the Securities and Exchange Commission (“SEC”). Accordingly, they do not include all information and footnotes required by GAAP for complete financial statements. However, in the opinion of management, the interim financial statements include all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of the results of the periods presented. Interim results are not necessarily indicative of the results that may be expected for the full year. These unaudited condensed consolidated financial statements should be read
in conjunction with the Company's audited consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2022 filed with the SEC on February 16, 2023 (“Annual Report”).
iBasis of Presentation and Consolidation.The
Company's unaudited condensed consolidated financial statements are prepared on the accrual basis of accounting in accordance with GAAP. The financial statements reflect the accounts of the Company and its consolidated subsidiaries. iThe Company consolidates wholly-owned subsidiaries, partnerships and joint ventures which
it controls (i) through voting rights or similar rights or (ii) by means other than voting rights if the Company is the primary beneficiary of a variable interest entity ("VIE"). Entities which the Company does not control and entities which are VIEs in which the Company is not a primary beneficiary are accounted for under appropriate GAAP.
(Unaudited and dollars in thousands, except share/unit and per share/unit data)
As of September 30, 2023, the Company had interests in iseven
consolidated joint ventures with developers, consisting of ifive ongoing development projects and itwo land joint ventures with ownership interests ranging from i80%
to i95.5%. Each joint venture owns land parcels with the intention of developing industrial properties. The Company determined that the joint ventures are variable interest entities in accordance with the applicable accounting guidance. The Company concluded that it is the primary beneficiary in each of the joint ventures and as such, the joint ventures' operations are consolidated in the Company’s
unaudited condensed consolidated financial statements.
In addition, the Company is the primary beneficiary of certain other VIEs as it has a controlling financial interest in these entities. Lepercq Corporate Income Fund L.P. ("LCIF") is a consolidated VIE and the Company, as of September 30, 2023, had an approximate i99% ownership interest.
The
assets of each VIE are only available to satisfy such VIE's respective liabilities. iBelow is a summary of selected financial data of consolidated VIEs for which the Company is the primary beneficiary included in the unaudited condensed consolidated balance sheets as of September 30, 2023 and December 31, 2022:
In
addition, the Company acquires, from time to time, properties using a reverse like-kind exchange structure pursuant to Section 1031 of the Internal Revenue Code (a "reverse 1031 exchange") and, as such, the properties are in the possession of an Exchange Accommodation Titleholder ("EAT") until the reverse 1031 exchange is completed. The EAT is classified as a VIE as it is a “thinly capitalized” entity. The Company consolidates the EAT because it is the primary beneficiary as it has the ability to control the activities that most significantly impact the EAT's economic performance and can collapse the 1031 exchange structure at any time. The assets of the EAT primarily consist of leased property (net real estate and intangibles).
iUse
of Estimates. Management has made a number of significant estimates and assumptions relating to the reporting of assets and liabilities, the disclosure of contingent assets and liabilities and the reported amounts of revenues and expenses to prepare these unaudited condensed consolidated financial statements in conformity with GAAP. These estimates and assumptions are based on management's best estimates and judgment. Management evaluates its estimates and assumptions on an ongoing basis using historical experience and other factors, including the current economic environment. Management adjusts such estimates when facts and circumstances dictate. The most significant estimates made include the recoverability of current and deferred accounts receivable, allocation of property purchase price to tangible and intangible assets acquired and liabilities assumed, the determination of VIEs and which entities should be consolidated, the determination of
impairment of long-lived assets and equity method investments, valuation of derivative financial instruments, valuation of awards granted under compensation plans, the determination of the incremental borrowing rate for leases where the Company is the lessee, the determination of the term and fair value of sales-type leases, the estimated credit losses for investments in sales-type leases and the useful lives of long-lived assets. Actual results could differ materially from those estimates.
iRecently
Issued Accounting Guidance. In March 2020, the Financial Accounting Standards Board ("FASB") issued ASU 2020-04, Reference Rate Reform (Topic 848). ASU 2020-04 contains practical expedients for reference rate reform related activities that impact debt, leases, derivatives and other contracts that reference the London Interbank Offered Rate, or LIBOR, or another reference rate expected to be discontinued because of reference rate reform. The guidance in ASU 2020-04 is optional, and applies for a limited period of time to ease the potential burden in accounting for (or recognizing the effect of) reference rate reform on financial reporting, in response to concerns about structural risks of interbank offered rates, and, particularly, the risk of cessation of LIBOR and may be elected over time as reference rate reform activities occur. As of March
31, 2020, the Company has elected to apply the hedge accounting expedients related to probability and the assessments of effectiveness for future LIBOR-indexed cash flows to assume that the index upon which future hedged transactions will be based matches the index on the corresponding derivatives. Application of these expedients preserves the presentation of derivatives consistent with past presentation.
(Unaudited and dollars in thousands, except share/unit and per share/unit data)
On July 5, 2022, the Company transitioned its benchmark interest rate for its term loan from LIBOR to the Secured Overnight Financing Rate, or SOFR. The Company adopted ASU 2020-04 and the adoption of this standard did not have an impact on the Company's unaudited condensed consolidated
financial statements. During the quarter, the Company's Trust Preferred Securities transitioned from LIBOR to SOFR. The impact on the financial statements was immaterial as a result of the transition.
(2)iEarnings Per Share
A portion of the
Company's non-vested share-based payment awards are considered participating securities and as such, the Company is required to use the two-class method for the computation of basic and diluted earnings per share. Under the two-class computation method, net losses are not allocated to participating securities unless the holder of the security has a contractual obligation to share in the losses. The non-vested share-based payment awards are not allocated losses as the awards do not have a contractual obligation to share in losses of the Company.
i
The
following is a reconciliation of the numerators and denominators of the basic and diluted earnings per share computations for the three and nine months ended September 30, 2023 and 2022:
Weighted-average
number of common shares outstanding - basic
i290,291,609
i277,535,717
i290,187,124
i281,559,058
Net
income attributable to common shareholders - per common share basic
$
i0.04
$
i0.08
$
i0.04
$
i0.25
DILUTED
Net
income attributable to common shareholders - basic
$
i11,039
$
i21,776
$
i10,878
$
i70,441
Impact
of assumed conversions
i15
i11
(i63)
i147
Net
income attributable to common shareholders
$
i11,054
$
i21,787
$
i10,815
$
i70,588
Weighted-average
common shares outstanding - basic
i290,291,609
i277,535,717
i290,187,124
i281,559,058
Effect
of dilutive securities:
Shares issuable under forward sales agreements
i—
i—
i—
i1,699,789
Unvested
share-based payment awards
i136,054
i139,371
i133,032
i491,877
Operating
partnership units
i825,342
i846,858
i828,653
i859,226
Weighted-average
common shares outstanding - diluted
i291,253,005
i278,521,946
i291,148,809
i284,609,950
Net
income attributable to common shareholders - per common share diluted
$
i0.04
$
i0.08
$
i0.04
$
i0.25
/
For
per common share amounts, generally all incremental shares are considered anti-dilutive for periods that have a loss from continuing operations attributable to common shareholders. In addition, other common share equivalents may be anti-dilutive in certain periods.
(Unaudited
and dollars in thousands, except share/unit and per share/unit data)
Calculation of dilutive earnings requires certain potentially dilutive shares to be excluded when the inclusion of such shares would be anti-dilutive. iThe following table summarizes the potentially dilutive shares excluded from the dilutive earnings per share calculation as the inclusion of such shares would be anti-dilutive:
The Company acquired or completed and placed in service the following warehouse/distribution facilities during the nine months ended September 30, 2023:
Market
Acquired/Placed
in Service Date
Initial Cost Basis
Lease Expiration Date
Land
Building and Improvements
Phoenix, Arizona(1)
March 2023
$
i37,173
08/2033
$
i7,552
$
i29,621
Dallas,
Texas
July 2023
i15,018
N/A
i2,100
i12,918
$
i52,191
$
i9,652
$
i42,539
(1) Initial
cost basis excludes certain remaining costs, including developer partner promote, if any.
/
In 2022, the Company purchased the remaining i13% of equity owned by a noncontrolling interest in the Fairburn, Georgia warehouse/distribution facility for $i27,958.
As the Company previously consolidated its interest in the joint venture which owned the property, the acquisition of the noncontrolling ownership interest was recorded as an equity transaction with the difference between the purchase price and carrying balance of $i25,058 recorded as a reduction in additional paid-in-capital.
(5) Subsequent to September 30, 2023, i57,690 square feet
was leased for a ifive-year term.
/
As of September 30, 2023, the Company's aggregate investment in development arrangements was $i380,446,
which included capitalized interest of $i8,170 for the nine months ended September 30, 2023 and is presented as investments in real estate under construction in the accompanying unaudited condensed consolidated balance sheet. For the nine months ended September 30, 2022, capitalized interest for development arrangements was $i4,888.
As
of September 30, 2023, the details of the land held for industrial development are as follows (in $000's, except acres):
(Unaudited
and dollars in thousands, except share/unit and per share/unit data)
(4)iDispositions and Impairment
During the nine months ended September 30, 2023 and 2022, the Company disposed of its interests in various properties for an aggregate gross disposition price of $i75,980
and $i147,345, respectively, and recognized aggregate gains on sales of properties of $i15,033 and $i52,951,
respectively.
The
Company assesses on a regular basis whether there are any indicators that the carrying value of its real estate assets may be impaired. Potential indicators may include an increase in vacancy at a property, tenant financial instability, change in the estimated holding period of the asset, the potential sale or transfer of the property in the near future and changes in economic conditions. An asset is determined to be impaired if the asset's carrying value is in excess of its estimated fair value and the Company estimates that its cost will not be recovered.
During the nine months ended September 30, 2023, the Company recognized aggregate impairment charges of $i16,490
due to potential property sales. The Company recognized an impairment charge on real estate of $i2,457 during the nine months ended September 30, 2022 due to vacancy at the property.
(Unaudited and dollars in thousands, except share/unit and per share/unit data)
(5)iFair
Value Measurements
i
The following tables present the Company's assets and liabilities measured at fair value on a recurring and non-recurring basis as of September 30, 2023 and December 31, 2022, aggregated by the level in the fair value hierarchy within which those measurements fall:
The
majority of the inputs used to value the Company's interest rate swaps fall within Level 2 of the fair value hierarchy, such as observable market interest rate curves; however, the credit valuation associated with the interest rate swaps utilizes Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by the Company and its counterparties. As of September 30, 2023 and December 31, 2022, the Company determined that the credit valuation adjustment relative to the overall interest rate swaps was not significant. As a result, all interest rate swaps have been classified in Level 2
of the fair value hierarchy.
The
fair value of the Company's investment in a sales-type lease, net is primarily estimated utilizing Level 3 inputs by using a discounted cash flow analysis and an estimate of the unguaranteed residual value.
The fair value of the Company's debt is primarily estimated utilizing Level 3 inputs by using a discounted cash flow analysis, based upon estimates of market interest rates. The Company determines the fair value of its Senior Notes payable using market prices. The inputs used in determining the fair value of these notes are categorized as Level 1 due to the fact that the Company uses quoted
market rates to value these instruments. However, the inputs used in determining the fair value could be categorized as Level 2 if trading volumes are low.
Fair values cannot be determined with precision, may not be substantiated by comparison to quoted prices in active markets and may not be realized upon sale. Additionally, there are inherent uncertainties in any fair value measurement technique, and changes in the underlying assumptions used, including discount rates, liquidity risks and estimates of future cash flows, could significantly affect the fair value measurement amounts.
Cash Equivalents, Restricted Cash, Accounts Receivable and Accounts Payable. The Company estimates that the fair value of cash equivalents, restricted cash, accounts receivable and accounts payable
approximates carrying value due to the relatively short maturity of the instruments.
(1) MFG
Cold JV is a joint venture formed in 2021 that owns special purpose industrial properties formerly owned by the Company.
(2) NNN JV is a joint venture formed in 2018 that owns office properties formerly owned by the Company. During 2023 and 2022, NNN JV sold ione and ithree
assets, respectively, and the Company recognized its share of aggregate gains on sale of $i1,010 and $i22,896, respectively, within equity in earnings of non-consolidated
entities within its unaudited condensed consolidated statements of operations.
(3) Joint venture formed in 2017 with a developer entity to acquire a parcel of land. In the second quarter of 2023, the joint venture commenced development of a i250,020 square foot industrial speculative development project for an estimated cost of $i29,200.
In July 2023, the Company, through a wholly-owned subsidiary entered into an agreement to fund all of the construction costs to complete the project until a point at which the portion of the improved land can be sub-divided and sold to the Company. As of September 30, 2023, the Company paid approximately $i8,500
which is accounted for as a deposit on the anticipated purchase of the property. The deposit is included in other assets within the unaudited condensed consolidated balance sheet.
(4) Joint venture formed in 2019 with a developer entity to acquire a parcel of land.
(5) A joint venture investment which sold its sole single-tenant, net-leased asset in January 2023 and the Company recognized its share of the gain on sale of $i4,791
within equity in earnings of non-consolidated entities within its unaudited condensed consolidated statements of operations.
/
The Company earns advisory fees from certain of these non-consolidated entities for services related to acquisitions, asset management and debt placement. Advisory fees earned from these non-consolidated investments for the nine months ended September 30, 2023 and 2022 were $i3,328
and $i4,263, respectively.
Interest
rates, including imputed rates on mortgages and notes payable, ranged from ii3.5/% to ii4.3/%,
at September 30, 2023 and December 31, 2022, respectively, and all mortgages and notes payable mature between 2023 and 2031 as of September 30, 2023. The weighted-average interest rate at September 30, 2023 and December 31, 2022 was approximately ii4.0/%,
respectively.
Each
series of the senior notes is unsecured and requires payment of interest semi-annually in arrears. The Company may redeem the notes at its option at any time prior to maturity in whole or in part by paying the principal amount of the notes being redeemed plus any potential make-whole premium.
The Company has an unsecured credit agreement with KeyBank National Association, as agent. iThe maturity dates and interest rates as of
September 30, 2023, are as follows:
Maturity Date
Interest Rate
$i600,000
Revolving Credit Facility(1)
July 2026
SOFR + i0.85%
$i300,000
Term Loan(2)
January 2025
Term SOFR + i1.00%
(1) Maturity date of the revolving credit facility can be extended to July 2027, subject to certain conditions. The interest rate includes a i0.10%
adjustment. The interest rate spread ranges from i0.725% to i1.400%, and the revolving credit facility allows for further reductions upon the achievement of to-be-determined sustainability metrics. At September 30,
2023, the Company had ino borrowings outstanding and availability of $i600,000, subject to covenant compliance.
(2) The
Term SOFR portion of the interest rate was swapped to obtain a current fixed rate of i2.722% per annum. The aggregate unamortized debt issuance costs for the term loan was $i666 and $i1,041
as of September 30, 2023 and December 31, 2022, respectively.
The Company was compliant with all applicable financial covenants contained in its corporate-level debt agreements at September 30, 2023.
During 2007, the Company issued $i200,000
original principal amount of Trust Preferred Securities. The Trust Preferred Securities, which are classified as debt, are due in 2037, are open for redemption at the Company's option and bear interest at a variable rate of three-month SOFR plus a i0.26% adjustment plus a spread of i170 basis
points through maturity. The interest rate at September 30, 2023 was i7.331%. As of September 30, 2023 and December 31, 2022, there was $ii129,120/
original principal amount of Trust Preferred Securities outstanding and $i1,351 and $i1,426, respectively, of unamortized debt issuance costs. The variable rate transitioned from LIBOR to SOFR after June 30, 2023.
The Company capitalized $i8,447 and $i4,927 of interest expense for the nine months ended September 30,
2023 and 2022, respectively.
(Unaudited and dollars in thousands, except share/unit and per share/unit data)
(8) iDerivatives and Hedging Activities
Risk Management Objective of Using Derivatives. The Company is exposed to certain risks arising from both its business operations and economic conditions.
The Company principally manages its exposures to a wide variety of business and operational risks through management of its core business activities. The Company manages economic risks, including interest rate, liquidity, and credit risk primarily by managing the type, amount, sources, and duration of its debt funding and the use of derivative financial instruments. Specifically, the Company enters into derivative financial instruments to manage exposures that arise from business activities that result in the receipt or payment of future known and uncertain cash amounts, the value of which are determined by interest rates. The Company's
derivative financial instruments are used to manage differences in the amount, timing, and duration of the Company's known or expected cash receipts and its known or expected cash payments principally related to the Company's investments and borrowings.
Cash Flow Hedges of Interest Rate Risk. The Company's objectives in using interest rate derivatives are to add stability to interest expense, to manage its exposure to interest rate movements and therefore manage its cash outflows as it relates to the underlying debt instruments. To accomplish these objectives, the Company
primarily uses interest rate swaps as part of its interest rate risk management strategy relating to certain of its variable rate debt instruments. Interest rate swaps designated as cash flow hedges involve the receipt of variable-rate amounts from a counterparty in exchange for the Company making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount.
The changes in the fair value of derivatives designated and that qualify as cash flow hedges is recorded in accumulated other comprehensive income (loss) and is subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings. The Company did not incur any ineffectiveness during the nine months ended September 30,
2023 and 2022.
During July 2022, the Company transitioned its ifour interest rate swap agreements with its counterparties to a benchmark rate of Term SOFR. The swaps were designated as cash flow hedges of the risk in variability attributable to changes in the Term SOFR swap rates on its $i300,000
SOFR-indexed variable rate unsecured term loan. Accordingly, changes in fair value of the swaps are recorded in other comprehensive income (loss) and reclassified to earnings as interest becomes receivable or payable. The swaps expire coterminous with the maturity of the term loan in January 2025. During the next 12 months, the Company estimates that an additional $i10,871 will be reclassified as a decrease in interest expense
if the swaps remain outstanding.
i
As of September 30, 2023, the Company had the following outstanding interest rate derivatives that were designated as cash flow hedges of interest rate risk:
Interest Rate Derivative
Number
of Instruments
Notional
Interest Rate Swaps
i4
$i300,000
/i
The
table below presents the fair value of the Company's derivative financial instruments as well as their classification on the unaudited condensed consolidated balance sheets:
(Unaudited and dollars in thousands, except share/unit and per share/unit data)
i
The
table below presents the effect of the Company's derivative financial instruments on the unaudited condensed consolidated statements of operations for the nine months ended September 30, 2023 and 2022:
Derivatives
in Cash Flow
Amount of Gain Recognized in OCI on Derivatives September 30,
Amount of (Income) Loss Reclassified from Accumulated OCI into Income(1) September 30,
Hedging Relationships
2023
2022
2023
2022
Interest Rate Swaps
$
i5,029
$
i21,316
$
(i7,503)
$
i1,528
The
Company's share of non-consolidated entity's interest rate cap
i235
i—
(i1,088)
i—
Total
$
i5,264
$
i21,316
$
(i8,591)
$
i1,528
(1) Amounts
reclassified from accumulated other comprehensive income (loss) to interest expense within the unaudited condensed consolidated statements of operations.
/
Total interest expense presented in the unaudited condensed consolidated statements of operations, in which the effects of cash flow hedges are recorded was $i32,502 and $i32,758
for the nine months ended September 30, 2023 and 2022, respectively.
The Company's agreements with the swap derivative counterparties contain provisions whereby if the Company defaults on the underlying indebtedness, including default where repayment of the indebtedness has not been accelerated by the lender, then the Company could also be declared in default of the swap derivative obligation. As of September 30, 2023, the Company had not posted
any collateral related to the agreements.
(9) iiLease Accounting/
i
Lessor
Operating
Leases.The Company’s lease portfolio as a lessor primarily includes general purpose, single-tenant net-leased real estate assets. Most of the Company’s leases require tenants to pay fixed annual rental payments that escalate on an annual basis and variable payments for other operating expenses, such as real estate taxes, insurance, common area maintenance ("CAM"), and utilities, that are based on the actual expenses incurred.
Certain leases allow for the tenant to renew the lease term upon expiration or earlier. Periods covered by a renewal option are included within the lease term only when renewals are deemed to be reasonably certain. Certain leases allow for the tenant to terminate the lease before the expiration of the lease
term and certain leases provide the tenant with the right to purchase the leased property at fair market value or a stipulated price upon expiration of the lease term or before.
Accounting guidance under ASC 842 requires the Company to make certain assumptions and judgments in applying the guidance, including determining whether an arrangement includes a lease and determining the lease term when the contract has renewal, purchase or early termination provisions.
The Company analyzes its accounts receivable, customer creditworthiness and current economic trends when evaluating the adequacy of the collectability of the lessee's
total accounts receivable balance on a lease by lease basis. In addition, tenants in bankruptcy are analyzed and considerations are made in connection with the expected pre-petition and post-petition claims. If a lessee's accounts receivable balance is considered uncollectible, the Company will write-off the receivable balances associated with the lease to rental revenue and cease to recognize lease income, including straight-line rent, unless cash is received. If the Company subsequently determines that it is probable it will collect substantially all of the lessee's remaining lease payments under the lease term; the Company will reinstate the straight-line balance adjusting for the amount related to the period when
the lease was accounted for on a cash basis.
(Unaudited and dollars in thousands, except share/unit and per share/unit data)
The
Company elected that the lease and non-lease components in its leases are a single lease component, which is, therefore, being recognized as rental revenue in its unaudited condensed consolidated statements of operations. The primary non-lease service included within rental revenue is CAM services provided as part of the Company’s real estate leases. ASC 842 requires that the Company capitalize, as initial direct costs, only those costs that are incurred due to the execution of a lease. For the nine months ended September 30, 2023, the Company incurred a nominal amount of costs that were not incremental to the execution of leases. For the nine months ended September 30,
2022, the Company incurred $i30 of costs that were not incremental to the execution of leases.
The Company manages the risk associated with the residual value of its leased properties by including contract clauses that make tenants responsible for surrendering the space in good condition upon lease termination,
holding a diversified portfolio, and other activities. The Company does not have residual value guarantees on specific properties.
The
Company has ione ground lease for a i100-acre industrial development land parcel located in the Phoenix, Arizona market that is classified as a sales-type lease. At the commencement date of the lease, the
Company evaluated the lease classification and classified the lease as a sales-type lease. The lease contains a purchase option in the amount of $i20.00 per land square foot starting on the second anniversary date of the lease and ending on the third anniversary date. The Company determined that the purchase option is not reasonably certain of being exercised. The lease met the sales-type lease criteria because the present value of the lease payments was equal to substantially all of the fair value of the underlying asset on the lease commencement date.
For the nine months ended September 30, 2023, the interest income earned from sales-type leases of $i5,546 is included in rental revenue in the unaudited condensed consolidated statements of operations.
In 2022, the Company had ione
tenant that exercised the purchase option within their lease for an aggregate purchase option price of $i28,000. The purchase option was not reasonably certain to be exercised at the commencement date of the lease, resulting in a modification of the operating lease. As a result of this modification to the lease, the Company re-evaluated the lease classification and classified the lease as a sales-type lease. The
Company recognized an aggregate of $i9,314 in selling profit from sales-type leases in its unaudited condensed consolidated statements of operations related to this transaction for the nine months ended September 30, 2022. The Company also earned $i639
in interest income from this sales-type lease in 2022.
Rental Revenue Classification. iThe following table presents the Company’s classification of rental revenue for its operating leases and sales-type lease for the three and nine months ended September 30, 2023 and 2022:
(Unaudited and dollars in thousands, except share/unit and per share/unit data)
i
Future
fixed rental receipts for operating and sales-type leases, assuming no new or re-negotiated leases as of September 30, 2023 were as follows:
Operating
Sales-Type
2023 - remainder
$
i66,047
$
i1,307
2024
i253,391
i5,263
2025
i235,340
i5,473
2026
i216,334
i5,692
2027
i180,019
i5,920
2028
i149,755
i6,156
Thereafter
i500,883
i733,006
Total
$
i1,601,769
$
i762,817
Difference
between undiscounted cash flow and present value
(i699,866)
Investment in a sales-type lease
$
i62,951
/
The
above minimum lease payments do not include reimbursements to be received from tenants for certain operating expenses and real estate taxes and do not include early termination payments provided for in certain leases, unless such payments are reasonably certain to be received.
Certain leases allow for the tenant to terminate the lease if the property is deemed obsolete, as defined, and upon payment of a termination fee to the landlord, as stipulated in the lease. In addition, certain leases provide the tenant with the right to purchase the leased property at fair market value or a stipulated price.
i
Lessee
The
Company, as lessee, has ground leases, corporate leases for office space, and office equipment leases. All leases were classified as operating leases as of September 30, 2023. The leases have remaining lease terms of up to i37 years. Renewal periods are included in the lease term only when renewal is deemed to be reasonably certain. The lease term also includes periods covered by an option to terminate the lease if the Company is reasonably certain not to exercise the termination option. The
Company measures its lease payments by including fixed rental payments and variable rental payments that tie to an index or a rate, such as CPI. The Company recognizes lease expense for its operating leases on a straight-line basis over the lease term and variable lease expense not included in the lease payment measurement as incurred.
The accounting guidance under ASC 842 requires the Company to make certain assumptions and judgments in applying the guidance, including determining whether an arrangement includes a lease, determining the term of a lease when the contract has renewal or termination provisions and determining the discount rate.
The
Company determines whether an arrangement is or includes a lease at contract inception by evaluating whether the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. If the Company has the right to obtain substantially all of the economic benefits from and can direct the use of, the identified asset for a period of time, the Company accounts for the contract as a lease.
The
Company uses the information available at the lease commencement date to determine the discount rate for any new leases. The Company used a portfolio approach to determine its incremental borrowing rate. Lease contracts were grouped based on similar lease terms and economic environments in a manner in which the Company reasonably expects that the outcome from applying a portfolio approach does not differ materially from an individual lease approach. The Company estimated a collateralized discount rate for each portfolio of leases.
(Unaudited and dollars in thousands, except share/unit and per share/unit data)
(10)iAllowance
for Credit Loss
As of September 30, 2023, the Company had a $i64 credit loss allowance resulting from an investment in a sales-type lease. There were ino
allowances for credit losses in 2022. iThe activity for the credit loss allowance related to the sales-type lease is as follows:
As
of September 30, 2023, the lessee in the sales-type lease remains current on their obligations to the Company and, therefore, the investment is not on non-accrual status.
The following table details the investment in a sales-type lease as of September 30, 2023:
The Company seeks to reduce its operating and leasing risks through the geographic diversification of its properties in target markets, tenant industry diversification, avoidance of dependency on a single asset and the creditworthiness of its tenants. For the nine months ended September 30, 2023 and 2022, no single tenant represented greater than 10% of rental revenues.
Cash and cash equivalent balances at certain institutions may exceed insurable amounts. The Company believes it mitigates this risk by investing in or through major financial institutions.
(12)iEquity
Shareholders'
Equity:
At-The-Market Offering Program. The Company maintains an At-The-Market offering program ("ATM program") under which the Company can issue common shares, including through forward sales contracts.
During the nine months ended September 30, 2022, the Company issued i3,649,023 common shares previously sold on a forward basis in the first quarter of 2021 on the maturity date of the contracts and received $i38,492
of net proceeds. iNo shares were sold on a forward basis during the nine months ended September 30, 2023.
During 2021, the Company amended the terms of its ATM program, under which the Company may, from time to time, sell up to $i350,000
of common shares over the term of the program. As of September 30, 2023, common shares with an aggregate value of $i294,985 remain available for issuance under the ATM program.
(Unaudited and dollars in thousands, except share/unit and per share/unit data)
Stock Based Compensation. During the nine months ended September 30, 2023 and 2022, the Company issued i70,072
and i47,505, respectively, of fully vested common shares to non-management members of the Company's Board of Trustees with a fair value of $i714
and $i616, respectively.
Share Repurchase Program. In August 2022, the Company's Board of Trustees authorized the repurchase of up to an additional i10,000,000
common shares under the Company's share repurchase program, which does not have an expiration date. There were ino common shares repurchased during the nine months ended September 30, 2023. During the nine months ended September 30, 2022, i11,702,074
common shares were repurchased and retired for an average price of $i10.84 per share. As of September 30, 2023, i6,874,241
common shares remain available for repurchase under this authorization. The Company records a liability for repurchases that have not yet been settled as of the period end. There were ino unsettled repurchases as of September 30, 2023.
Series C Preferred Stock. The Company had i1,935,400 shares
of Series C Cumulative Convertible Preferred Stock (“Series C Preferred”) outstanding at September 30, 2023. The shares have a dividend of $i3.25 per share per annum, have a liquidation preference of $i96,770,
and the Company, if certain common share prices are achieved, can force conversion into common shares of the Company. As of September 30, 2023, each share was convertible into i2.4339 common shares. This conversion ratio may increase over time if the Company's common share dividend exceeds certain
quarterly thresholds.
If certain fundamental changes occur, holders may require the Company, in certain circumstances, to repurchase all or part of their shares of Series C Preferred. In addition, upon the occurrence of certain fundamental changes, the Company will, under certain circumstances, increase the conversion rate by a number of additional common shares or, in lieu thereof, may in certain circumstances elect to adjust the conversion rate upon the shares of Series C Preferred becoming convertible into shares of the public acquiring or surviving company.
The Company may, at the
Company's option, cause shares of Series C Preferred to be automatically converted into that number of common shares that are issuable at the then prevailing conversion rate. The Company may exercise its conversion right only if, at certain times, the closing price of the Company's common shares equals or exceeds i125% of the then prevailing conversion price of the Series C Preferred.
Holders
of shares of Series C Preferred generally have no voting rights, but will have limited voting rights if the Company fails to pay dividends for six or more quarters and under certain other circumstances. Upon conversion, the Company may choose to deliver the conversion value to investors in cash, common shares, or a combination of cash and common shares.
i
A summary of the changes in accumulated other comprehensive
income (loss) related to the Company's cash flow hedges is as follows:
Other
comprehensive income before reclassifications
i5,264
i22,469
Amounts
of (income) loss reclassified from accumulated other comprehensive income (loss) to interest expense
(i8,591)
i1,557
Balance
at end of period
$
i14,362
$
i17,768
/
Noncontrolling
Interests. In conjunction with several of the Company's acquisitions in prior years, sellers were issued limited partner interests in LCIF (“OP units”) as a form of consideration. All OP units, other than OP units owned by the Company, are redeemable for common shares at certain times, at the option of the holders, and are generally not otherwise mandatorily redeemable by the Company. The OP units are classified as a component of permanent equity as the Company has determined that the OP units are not redeemable securities as defined by GAAP. Each OP unit is currently redeemable for approximately i1.13
common shares, subject to future adjustments.
During the nine months ended September 30, 2023 and 2022, i9,944 and i33,378
common shares, respectively, were issued by the Company, in connection with OP unit redemptions, for an aggregate value of $i49 and $i177, respectively.
(Unaudited and dollars in thousands, except share/unit and per share/unit data)
As of September 30, 2023, there were approximately i731,000
OP units outstanding other than OP units owned by the Company. All OP units receive distributions in accordance with the LCIF partnership agreement. To the extent that the Company's dividend per common share is less than the stated distribution per OP unit per the LCIF partnership agreement, the distributions per OP unit are reduced by the percentage reduction in the Company's dividend per common share. No OP units have a liquidation preference.
i
The
following discloses the effects of changes in the Company's ownership interests in its noncontrolling interests:
Net Income Attributable to Shareholders and Transfers from Noncontrolling Interests
Net
income attributable to LXP Industrial Trust shareholders
$
i15,782
$
i75,310
Transfers
from noncontrolling interests:
Increase in additional paid-in-capital for redemption of noncontrolling OP units
i49
i177
Change
from net income attributable to shareholders and transfers from noncontrolling interests
$
i15,831
$
i75,487
/
(13)iRelated
Party Transactions
There were no related party transactions other than those disclosed elsewhere in these unaudited condensed consolidated financial statements.
(14)iCommitments and Contingencies
In addition to the commitments and contingencies disclosed elsewhere, the
Company has the following commitments and contingencies.
The Company is obligated under certain tenant leases, including its proportionate share for leases for non-consolidated entities, to fund the expansion of the underlying leased properties. The Company, under certain circumstances, may guarantee to tenants the completion of base building improvements and the payment of tenant improvement allowances and lease commissions on behalf of its subsidiaries.
As of September 30, 2023, the Company
had isix ongoing consolidated development projects and expects to incur approximately $i23,500 and $i29,100
of costs during the remainder of 2023 and 2024, respectively, excluding noncontrolling interests' share, to substantially complete the construction and estimated tenant improvements and leasing costs of such projects. Etna Park 70, LLC, a joint venture in which the Company has a i90% ownership interest, commenced construction of an industrial facility estimated to cost $i29,200.
During the third quarter, the Company, through a wholly-owned subsidiary entered into an agreement to fund construction of the property until the land is subdivided. As of September 30, 2023, the Company expects to incur approximately $ii9,500/
during the remainder of 2023 and 2024, respectively, to complete the development of the facility. As of September 30, 2023, the Company has interests in various industrial land parcels held for development. The Company is unable to estimate the timing of any required funding for the potential development projects on these parcels.
The Company and LCIF are parties to a funding agreement under which the Company may be required to fund distributions made on account of LCIF's OP units. Pursuant to the funding agreement, the parties agreed that,
if LCIF does not have sufficient cash available to make a quarterly distribution to its limited partners in an amount in accordance with the partnership agreement, LXP Industrial Trust will fund the shortfall. Payments under the agreement will be made in the form of loans to LCIF and will bear interest at prevailing rates as determined by the Company in its discretion but, no less than the applicable federal rate. LCIF's right to receive these loans will expire if no OP units remain outstanding and all such loans are repaid. No amounts have been advanced under this agreement.
(Unaudited and dollars in thousands, except share/unit and per share/unit data)
From time to time, the Company is directly or indirectly involved in legal proceedings arising in the ordinary course of business. Management believes, based on currently available information, and after consultation with legal counsel, that although the outcomes of those normal course proceedings are uncertain, the
results of such proceedings, in the aggregate, will not have a material adverse effect on the Company's business, financial condition and results of operations.
(15)iSupplemental Disclosure of Statement of Cash Flow Information
In addition to disclosures discussed elsewhere, during the
nine months ended September 30, 2023 and 2022, the Company paid $i36,990 and $i33,430, respectively, for interest and $i975
and $i1,218, respectively, for income taxes.
During the nine months ended September 30, 2023 and 2022, the Company accrued additions for capital projects of $i20,866
and $i52,049, respectively.
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Introduction
Unless stated otherwise or the context otherwise requires, when we use the terms the “Company,” the “Trust,”“LXP,”“we,”“our,” and “us,” we refer collectively to LXP Industrial Trust and its consolidated subsidiaries. All of the Company's interests are held, and all of the property operating activities are
conducted through special purposes entities, which we refer to as property owner subsidiaries or lender subsidiaries and are separate and distinct legal entities, but in some instances are consolidated for financial statement purposes and/or disregarded for income tax purposes. References herein to ‘‘this Quarterly Report” are to this Quarterly Report on Form 10-Q for the three and nine months ended September 30, 2023. The results of operations contained herein for the three and nine months ended September 30, 2023 and 2022 are not necessarily indicative of the results that may be expected for a full year.
When
we use the term “REIT,” we mean real estate investment trust. All references to 2023 and 2022, refer to the periods ending September 30, 2023 and 2022, respectively and our fiscal year ended December 31, 2022.
When we use the term “GAAP,” we mean United States generally accepted accounting principles in effect from time to time.
When we use the term “common shares,” we mean our shares of beneficial interest par value $0.0001, classified as common stock. When we use the term “Series C Preferred Shares,” we mean our beneficial interest classified as 6.50% Series C Cumulative Convertible Preferred Stock.
When we use the term “base rent,” we mean GAAP rental revenue
and ancillary income, excluding billed tenant reimbursements and lease termination income.
When we use “Stabilized Portfolio,” we mean all real estate properties other than acquired or developed properties that have not achieved 90% occupancy within one-year of acquisition or substantial completion. Non-stabilized, substantially completed development projects are classified within investments in real estate under construction.
The following is a discussion and analysis of the unaudited condensed consolidated financial condition and results of operations of LXP Industrial Trust for the three and nine months ended September 30, 2023 and 2022, and significant factors that could affect its prospective financial condition and results of operations. This discussion should be read
together with the accompanying unaudited condensed consolidated financial statements of the Company included herein and notes thereto and with the consolidated financial statements and notes thereto included in the Company's most recent Annual Report on Form 10-K, which was filed with the Securities and Exchange Commission, or SEC, on February 16, 2023, which we refer to as the Annual Report. Historical results may not be indicative of future performance.
Forward-Looking Statements. This Quarterly Report, together with other statements and information publicly disseminated by us, contains certain forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. We intend such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995 and include this statement for purposes of complying with these safe harbor provisions. Forward-looking statements, which are based on certain assumptions and describe our future plans, strategies and expectations, are generally identifiable by use of the words “believes,”“expects,”“intends,”“anticipates,”“estimates,”“projects,”“may,”“plans,”“predicts,”“will,”“will likely result” or similar expressions. Readers should not rely on forward-looking statements since they involve known and unknown risks, uncertainties and other factors which are, in some cases,
beyond our control and which could materially affect actual results, performances or achievements. In particular, among the factors that could cause actual results, performances or achievements to differ materially from current expectations, strategies or plans include, among others, those risks discussed below in “Management's Discussion and Analysis of Financial Condition and Results of Operations,” and under the headings “Risk Factors” in this Quarterly Report and under “Risk Factors” in Part I, Item A and “Management's Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of the Annual Report and other periodic reports filed by the Company with the SEC. Except as required by law, we undertake no obligation to publicly release any revisions to these forward-looking statements which may be made to reflect events or
circumstances after the date hereof or to reflect the occurrence of unanticipated events. Accordingly, there is no assurance that our expectations will be realized.
As of September 30, 2023, we had equity ownership interests in approximately 115 consolidated real estate properties, located in 19 states and containing an aggregate of approximately 53.9 million square feet
of space, approximately 99.0% of which was leased.
As of September 30, 2023, our portfolio consisted of 110 warehouse/distribution facilities and five other properties. Our warehouse/distribution portfolio is primarily focused in our target markets within the Sunbelt and Midwest. We expect to grow these markets by executing on our development pipeline and opportunistically acquiring facilities in these markets.
Third Quarter 2023 Transaction Summary.
The following summarizes our significant transactions during the three months ended September 30, 2023.
Leasing Activity:
•Entered into new and extended leases
encompassing 0.8 million square feet, including leasing one speculative development project containing 0.3 million square feet, located in the Greenville-Spartanburg, South Carolina market. The average fixed rent on the extended lease was $6.19 per square foot compared to the average fixed rent on this lease before extension of $4.90 per square foot. The weighted-average tenant improvements and lease commissions was $1.61 per square foot for new leases.
Investments:
•Completed construction of the core and shell for one warehouse/distribution facility containing 0.1 million square feet in the Central Florida market.
•Invested an aggregate of $36.5 million in development activities, including $23.8 million in six ongoing consolidated development projects.
Capital
recycling:
•Disposed of two office properties for an aggregate gross sale price of $48.1 million.
Acquisition/Development Activity:
During the nine months ended September 30, 2023, we acquired or completed and placed in service the following warehouse/distribution assets:
Market
Square
Feet
Initial Capitalized Cost (millions)
Acquired/Placed in Service Date
Approximate Lease Term (years)
% Leased
Phoenix, Arizona
392,278
$
37.2
March 2023
10.0
100%
Dallas, Texas
124,450
15.0
July
2023
N/A
—%
516,728
$
52.2
Increased financing costs have slowed transaction activity and development starts in our target markets and the markets where we own properties. Proceeds from our dispositions are expected to be used to fund our development obligations and reduce leverage.
As of September 30, 2023, we had six consolidated development projects in process with an aggregate estimated total cost of $426.0 million. We anticipate
our remaining funding obligation to substantially complete the construction and estimated tenant improvements and leasing costs of these six projects, exclusive of our joint venture partners' share, to be approximately $52.6 million. However, the risks associated with development, including supply chain issues, could adversely impact our estimates.
Critical Accounting Estimates
Our critical accounting estimates are included in Part II, “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” of the Company's Annual Report on Form 10-K for the year ended December 31, 2022. There have been
no material changes to these estimates during the nine months ended September 30, 2023.
Cash Flows. We believe that cash flows from operations will continue to provide adequate capital to fund our operating and administrative expenses, regular debt service obligations and all dividend payments in accordance
with applicable REIT requirements in both the short-term and long-term, however, our cash flow from operations may be negatively affected in the near term if we experience tenant defaults as a result of the effects of the current economic conditions. In addition, we anticipate that cash on hand, borrowings under our unsecured revolving credit facility, capital recycling proceeds, issuances of equity, mortgage proceeds and other debt, as well as other available alternatives, will provide the necessary capital required by our business.
At September 30, 2023, our property owner subsidiaries do not have mortgage maturities with balloon payments due until 2031. In addition, certain of our subsidiaries
are obligated to fund the construction of our development projects and we sometimes guaranty these obligations. We believe our property owner subsidiaries have sufficient sources of liquidity to meet these obligations through future cash flows from operations, the credit markets and, if determined appropriate by us, a capital contribution from us from either cash on hand ($35.4 million at September 30, 2023), property sale proceeds and borrowing capacity under our unsecured revolving credit facility ($600.0 million at September 30, 2023, subject to covenant compliance).
Cash flows from operations were $153.5 million for the nine months ended September 30, 2023 as compared to $154.1 million
for the nine months ended September 30, 2022. The decrease was primarily related to property sales, partially offset by the impact of cash flow generated from acquiring properties and stabilizing development assets. The underlying drivers that impact our working capital, and therefore cash flows from operations, are the timing of collection of rents, including reimbursements from tenants, payment of interest on debt and payment of operating and general and administrative costs. We believe the net-lease structure of the leases encumbering a majority of the properties in which we have an interest mitigates the risks of the timing of cash flows from operations since the payment and timing of operating costs related to the properties are generally borne directly by the tenant. The collection and timing of tenant rents are closely monitored by management as part of our cash management program.
Net
cash used in investing activities totaled $46.5 million and $208.2 million during the nine months ended September 30, 2023 and 2022, respectively. Cash used in investing activities in 2023 related primarily to an acquisition, investments in real estate under construction, capital expenditures, lease costs, investments in non-consolidated entities and changes in real estate deposits, net. Cash used in investing activities primarily related to acquisitions and investments in real estate under construction offset by net proceeds received from the disposition of real estate and distributions from non-consolidated entities. During the nine months ended September 30, 2022, cash used in investing activities included additional acquisition and development activity when compared to 2023. Additional property sales in 2022 compared
to 2023 generated more proceeds from sales than in 2023.
Net cash used in financing activities totaled $125.9 million and $107.5 million during the nine months ended September 30, 2023 and 2022, respectively. Cash used in financing activities in 2023 was primarily related to dividend and debt service payments, offset by revolving credit facility borrowings. Cash used in financing activities in 2022 was primarily related to the repurchase of common stock, the purchase of a noncontrolling interest and dividend and debt service payments, offset by common stock issuances and revolving credit facility borrowings.
At-The-Market Offering Program. We maintain an At-The-Market offering program ("ATM program") under
which we can issue common shares, including through forward sales contracts.
During the nine months ended September 30, 2022, we settled 3.6 million common shares previously sold on a forward basis on the maturity date of the contract and received $38.5 million of net proceeds. No shares were sold on a forward basis during the nine months ended
September 30, 2023.
In February 2021, we amended the terms of our ATM program, under which we may, from time to time, sell up to $350.0 million common shares over the term of the program. As of September 30, 2023, common shares with an aggregate value of $295.0 million remain available for issuance under the ATM program.
The volatility in the capital markets primarily resulting from the effects of the current economic conditions may negatively affect our ability to access the capital markets through our ATM program and other offerings.
Share Repurchase Program. During 2022, our Board of Trustees authorized the repurchase of an additional 10.0 million common shares under our share repurchase program with no expiration date. We did not repurchase any common shares during the nine months ended September 30, 2023. During the nine months ended September 30, 2022, we repurchased and retired approximately 11.7 million common shares at an average price of $10.84 per share. Approximately 6.9 million common shares remained available for repurchase under the current authorization as of September 30, 2023. We, in the future, may repurchase our common shares in the context of our overall capital plan and to the extent we believe market volatility
offers prudent investment opportunities based on our common share price versus net asset value per share.
Dividends. Dividends paid to our common and preferred shareholders were $114.0 million and $107.9 million in the nine months ended September 30, 2023 and 2022, respectively.
We declared a quarterly dividend of $0.125 per common share during the three months ended September 30, 2023, which is an increase of $0.005 per common share from the $0.12 per common share quarterly dividend declared during the three months ended September 30, 2022.
Operating Partnership. As
of September 30, 2023, 0.7 million units of limited partner interests, or OP units, in our operating partnership, LCIF, were outstanding not including OP units held by us. Assuming all outstanding OP units not held by us were redeemed on such date, the estimated fair value of such OP units was $7.3 million based on our closing price of $8.90 per common share as of September 30, 2023 and a redemption factor of approximately 1.13 common shares per OP unit. We expect that LCIF will be merged with and into us as of December 31, 2023 and each outstanding OP unit, not including OP units held by us, will be converted into the right to receive our common shares on a 1 for 1.126 basis.
Financings. The following senior notes were outstanding as of September 30,
2023:
Issue Date
Face Amount (millions)
Interest Rate
Maturity Date
Issue
Price
August 2021
$
400.0
2.375
%
October 2031
99.758
%
August 2020
400.0
2.70
%
September
2030
99.233
%
May 2014
198.9
4.40
%
June 2024
99.883
%
Senior note payable
$
998.9
Each
series of senior notes is unsecured and requires payment of interest semi-annually in arrears. We may redeem the notes at our option at any time prior to maturity in whole or in part by paying the principal amount of the senior notes being redeemed plus any potential make-whole premium.
A summary of the maturity dates and interest rates of our unsecured credit agreement, as of September 30, 2023, are as follows:
Maturity Date
Current
Interest Rate
$600.0 Million Revolving Credit Facility(1)
July 2026
SOFR + 0.85%
$300.0 Million Term Loan(2)
January 2025
Term SOFR + 1.00%
(1) Maturity date of the revolving credit facility can be extended to July 2027 at our option, subject to certain conditions. The interest rate includes a 0.10% adjustment. The interest rate spread ranges from SOFR plus 0.725% to 1.40%. At September 30, 2023,
we had no borrowings outstanding and availability of $600.0 million, subject to covenant compliance.
(2) The Term SOFR portion of the interest rate was swapped to obtain a current fixed rate of 2.722%.
As of September 30, 2023, we were compliant with all applicable financial covenants contained in our corporate-level debt agreements.
We also have $129.1 million of outstanding Trust Preferred Securities that are due in 2037. The current interest rate is three-month SOFR plus a 0.26% adjustment plus a spread of 170 basis points.
Development Costs
As
of September 30, 2023, we had six ongoing consolidated development projects and expect to incur approximately $23.5 million and $29.1 million of costs during the remainder of 2023 and 2024, respectively, excluding noncontrolling interests' share, to substantially complete the construction of such projects. Etna Park 70, LLC, a joint venture that we have a i90%
ownership interest, commenced construction of an industrial facility estimated to cost $29.2 million. During the third quarter, through our wholly-owned subsidiary, we entered into an agreement to fund construction of the property until the land is subdivided and sold to us. As of September 30, 2023, we expect to incur approximately $9.5 million during the remainder of 2023 and 2024, respectively, to complete the development of the facility. As of September 30, 2023, we had three consolidated and two non-consolidated subsidiaries that owned land parcels held for industrial development. We are unable to estimate the timing of any required funding for potential development projects on these
parcels.
Results of Operations
Three months ended September 30, 2023 compared with three months ended September 30, 2022. The decrease in net income attributable to common shareholders of $10.7 million was primarily due to the items discussed below.
The increase in total gross revenues of $5.3 million was primarily due to an increase of $3.5 million in base rental revenue and a $2.0 million increase in tenant reimbursement income primarily due to acquisitions, properties placed in service and leasing, partially offset by a decrease in
rental revenue due to property sales.
The increase in depreciation and amortization expense of $0.6 million was primarily due to properties acquired and/or completed and placed in service subsequent to September 30, 2022.
The increase in property operating expense of $0.7 million was primarily due to an increase in operating expense responsibilities at certain properties.
The decrease in impairment charges of $0.6 million was primarily related to the timing of impairment charges recognized on certain properties during the third quarter of 2022. There were no impairment charges during the third quarter of 2023.
The decrease in gains on sales of properties of $17.7 million was related to the timing of property dispositions.
The
increase in equity in earnings (losses) of non-consolidated entities of $1.3 million was primarily due to recognizing our share of gains on sale of one property from the NNN Office JV L.P. in 2023 in the amount of $1.0 million. Additionally, in 2022, we recognized $0.7 million of losses due to property sales and impairment charges related to NNN Office JV L.P.
Nine months ended September 30, 2023 compared with nine months ended September 30, 2022. The decrease in net income attributable to common shareholders of $59.6 million was primarily due to the items discussed below.
The increase in total gross revenues of $17.4 million was primarily due to an increase of $10.4 million in base rental revenue and a $7.2 million increase in tenant
reimbursement income primarily due to acquisitions, properties placed in service and leasing, partially offset by property sales.
The increase in depreciation and amortization expense of $2.7 million was primarily due to properties acquired and/or completed and placed in service subsequent to January 1, 2022.
The increase in property operating expense of $3.4 million was primarily due to an increase in operating expense responsibilities at certain properties.
The decrease of $2.2 million in general and administrative expense is primarily related to a decrease of $2.6 million in costs incurred related to the Board of Trustees' strategic alternatives review and consulting costs related to shareholder activism in 2022. There were no consulting costs incurred related to shareholder activism
during the nine months ended September 30, 2023.
The increase in impairment charges of $14.0 million was primarily related to the timing of impairment charges recognized on certain properties. The impairments in 2023 were taken on office assets primarily due to potential sales.
The decrease in gains on sales of properties of $37.9 million was related to the timing of property dispositions.
The decrease in selling profit from sales-type lease of $9.3 million is due to a tenant exercising its purchase option resulting in a change in lease classification from an operating lease to a sales-type lease in 2022 with no comparable transaction in 2023.
The decrease in equity in earnings (losses) of non-consolidated entities of $13.0 million was primarily
due to the timing of property sales within our non-consolidated entities.
Same-store net operating income, or NOI, which is a non-GAAP measure, represents the NOI for consolidated properties that were owned, included for the entirety of two comparable reporting periods. We define NOI as operating revenues (rental income (less non-cash GAAP rent adjustments, non-cash income related to sales-type leases and lease termination income, net), and other property income) less property operating expenses. As same-store NOI excludes the change in NOI from acquired and disposed
of properties, it highlights operating trends such as occupancy levels, rental rates and operating costs on properties. Other REITs may use different methodologies for calculating same-store NOI, and accordingly same-store NOI may not be comparable to other REITs. Management believes that same-store NOI is a useful supplemental measure of our operating performance. However, same-store NOI should not be viewed as an alternative measure of our financial performance since it does not reflect the operations of our entire portfolio, nor does it reflect the impact of general and administrative expenses, acquisition-related expenses, interest expense, depreciation and amortization costs, other nonproperty income and losses, the level of capital expenditures and leasing costs necessary to maintain the operating performance of our properties, or trends in development and construction activities which are significant economic costs and activities that could materially impact our
results from operations. We believe that net income is the most directly comparable GAAP measure to same-store NOI.
The following presents our consolidated same-store NOI, for the three and nine months ended September 30, 2023 and 2022 ($000's):
Our same-store NOI increased for the three and nine months ended September 30, 2023 compared to three and nine months ended September 30, 2022 by 4.7% and 4.3%, respectively, primarily due to an increase in cash base rents. As of September 30,
2023 and 2022, our same-store properties were 99.2% and 99.3% leased, respectively, for the three months and 99.5% and 99.8% leased, respectively, for the nine months.
We believe that Funds from Operations, or FFO, which is a non-GAAP measure, is a widely recognized and appropriate measure of the performance of an equity REIT. We believe FFO is frequently used by securities analysts, investors and other interested parties in the evaluation of REITs, many of which present FFO when reporting their results. FFO is intended to exclude GAAP historical cost depreciation and amortization of real estate and related assets, which assumes that the value of real estate diminishes ratably over time. Historically, however, real estate values have risen or fallen with market conditions. As a result, FFO provides a performance measure that, when compared year over year, reflects the impact to operations from trends in occupancy rates, rental rates, operating costs, development activities,
interest costs and other matters without the inclusion of depreciation and amortization, providing perspective that may not necessarily be apparent from net income.
The National Association of Real Estate Investment Trusts, or NAREIT, defines FFO as “net income (calculated in accordance with GAAP), excluding depreciation and amortization related to real estate, gains and losses from the sales of certain real estate assets, gains and losses from change in control and impairment write-downs of certain real estate assets and investments in entities when the impairment is directly attributable to decreases in the value of depreciable real estate held by the entity. The reconciling items include amounts to adjust earnings from consolidated partially-owned entities and equity in earnings of unconsolidated affiliates to FFO.” FFO does not represent cash generated from operating activities in accordance with GAAP and is not
indicative of cash available to fund cash needs.
We present FFO available to common shareholders and unitholders - basic and also present FFO available to all equityholders and unitholders - diluted on a company-wide basis as if all securities that are convertible, at the holder's option, into our common shares, are converted at the beginning of the period. We also present Adjusted Company FFO available to all equityholders and unitholders - diluted which adjusts FFO available to all equityholders and unitholders - diluted for certain items which we believe are not indicative of the operating results of our real estate portfolio. We believe this is an appropriate presentation as it is frequently requested by security analysts, investors and other interested parties. Since others do not calculate these measures in a similar fashion, these measures may not be comparable to similarly titled measures as reported by others. These
measures should not be considered as an alternative to net income as an indicator of our operating performance or as an alternative to cash flow as a measure of liquidity.
The following presents a reconciliation of net income attributable to common shareholders to FFO available to common shareholders and unitholders and Adjusted Company FFO available to all equityholders and unitholders for the three and nine months ended September 30, 2023 and 2022 (unaudited and dollars in thousands, except share and per share amounts):
Three
Months Ended September 30,
Nine Months Ended September 30,
FUNDS FROM OPERATIONS:
2023
2022
2023
2022
Basic and Diluted:
Net income attributable
to common shareholders
$
11,039
$
21,776
$
10,878
$
70,441
Adjustments:
Depreciation
and amortization - real estate
44,596
44,227
134,484
132,600
Impairment charges - real estate, including our share of non-consolidated entities
—
1,256
16,490
7,299
Noncontrolling
interests - OP units
15
11
(63)
147
Amortization of leasing commissions
974
719
2,820
2,045
Joint
venture and noncontrolling interest adjustment
1,839
2,612
6,168
8,585
Gains on sales of properties, including our share of non-consolidated entities
(8,164)
(24,842)
(20,818)
(75,803)
FFO
available to common shareholders and unitholders - basic
50,299
45,759
149,959
145,314
Preferred dividends
1,573
1,573
4,718
4,718
Amount
allocated to participating securities
52
41
186
151
FFO available to all equityholders and unitholders - diluted
51,924
47,373
154,863
150,183
Selling
profit from sales-type lease(1)
—
—
—
(9,314)
Allowance for credit losses
2
—
(29)
—
Debt
satisfaction losses, net, including our share of non-consolidated entities
—
119
—
1,614
Non-recurring costs(2)
—
640
4
2,629
Noncontrolling
interest adjustments
—
—
1
—
Adjusted Company FFO available to all equityholders and unitholders - diluted
$
51,926
$
48,132
$
154,839
$
145,112
Per
Common Share and Unit Amounts
Basic:
FFO
$
0.17
$
0.16
$
0.52
$
0.51
Diluted:
FFO
$
0.18
$
0.17
$
0.52
$
0.52
Adjusted
Company FFO
$
0.18
$
0.17
$
0.52
$
0.50
Weighted-Average
Common Shares:
Basic:
Weighted-average common shares outstanding - basic EPS
290,291,609
277,535,717
290,187,124
281,559,058
Operating
partnership units(3)
825,342
846,858
828,653
859,226
Weighted-average common shares outstanding - basic FFO
291,116,951
278,382,575
291,015,777
282,418,284
Diluted:
Weighted-average
common shares outstanding - diluted EPS
291,253,005
278,521,946
291,148,809
284,609,950
Unvested share-based payment awards
—
—
—
23,175
Preferred
shares - Series C
4,710,570
4,710,570
4,710,570
4,710,570
Weighted-average common shares outstanding - diluted FFO
295,963,575
283,232,516
295,859,379
289,343,695
(1) Gain
recognized upon exercise of the tenant's purchase option in the lease.
(2) Includes costs related to transactions, strategic alternatives and shareholder activism.
(3) Includes OP units other than OP units held by us.
As of September 30, 2023, we had investments in various real estate entities
with varying structures. The real estate investments owned by our institutional joint ventures are generally financed with non-recourse debt. Non-recourse debt is generally defined as debt whereby the lenders' sole recourse with respect to borrower defaults is limited to the value of the assets collateralized by the debt. The lender generally does not have recourse against any other assets owned by the borrower or any of the members or partners of the borrower, except for certain specified exceptions listed in the particular loan documents. These exceptions generally relate to "bad boy" acts, including fraud, prohibited transfers and breaches of material representations, and environmental matters. We have guaranteed such obligations for certain of our non-consolidated entities with respect to $469.0 million of such non-recourse debt. We believe the likelihood of making any payments under such guaranties is remote and we generally have an agreement from each partner
to reimburse us for its proportionate share of any liability related to a guarantee trigger unless such trigger is caused solely by us.
Our exposure to market risk relates primarily to our variable-rate indebtedness not subject to interest rate swaps and our fixed-rate debt. Our consolidated aggregate principal
variable-rate indebtedness not subject to interest rate swaps was $129.1 million and $259.1 million, respectively, at September 30, 2023 and 2022, which represented 8.7% and 15.9%, respectively, of our aggregate principal consolidated indebtedness. During the three months ended September 30, 2023 and 2022, our variable-rate indebtedness had a weighted-average interest rate of 7.0% and 3.5%, respectively, and had the weighted-average interest rate been 100 basis points higher, our interest expense for the three months ended September 30, 2023 and 2022 would have increased by $0.4 million and $0.6 million, respectively. During the nine months ended September 30,
2023 and 2022, our variable-rate indebtedness had a weighted-average interest rate of 6.7% and 2.7%, respectively, and had the weighted-average interest rate been 100 basis points higher, our interest expense for the nine months ended September 30, 2023 and 2022 would have increased $1.4 million and $1.5 million, respectively. At each of September 30, 2023 and 2022, our aggregate principal consolidated fixed-rate debt was $1.4 billion, respectively, which represented 91.3% and 84.1%, respectively, of our aggregate principal indebtedness.
For certain of our financial instruments, fair values are not readily available since there are no
active trading markets as characterized by current exchanges between willing parties. Accordingly, we derive or estimate fair values using various valuation techniques, such as computing the present value of estimated future cash flows using discount rates commensurate with the risks involved. However, the determination of estimated cash flows may be subjective and imprecise. Changes in assumptions or estimation methodologies can have a material effect on these estimated fair values, especially given the volatility of the current economic environment. The following fair value was determined using the interest rates that we believe our outstanding fixed-rate indebtedness would warrant as of September 30, 2023. We believe the fair value is indicative of the interest rate environment as of September 30, 2023, but this amount does not take into consideration the effects of
subsequent interest rate fluctuations. Accordingly, we estimate that the fair value of our fixed-rate indebtedness was $1.2 billion as of September 30, 2023.
Our interest rate risk objectives are to limit the impact of interest rate fluctuations on earnings and cash flows and to lower our overall borrowing costs. To achieve these objectives, we manage our exposure to fluctuations in market interest rates through the use of fixed-rate debt instruments to the extent that reasonably favorable rates are obtainable with such arrangements. We may enter into derivative financial instruments such as interest rate swaps or caps to mitigate our interest rate risk on a related financial instrument or to effectively lock the interest rate on a portion of our variable-rate debt. As of September 30, 2023,
we had four interest rate swap agreements (see Note 8 to our unaudited condensed consolidated financial statements contained in this Quarterly Report).
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures. Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures (as such terms are defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this Quarterly Report to determine if such controls and procedures were effective to ensure that information required to be disclosed by us in reports filed
or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms and that information required to be disclosed by us in reports filed or submitted under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. Management, including each of our Chief Executive Officer and Chief Financial Officer, has concluded that our disclosure controls and procedures were effective as of September 30, 2023.
Changes in Internal Control Over Financial Reporting. There were no changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fiscal quarter
to which this Quarterly Report relates that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Limitations on the Effectiveness of Controls. Internal control over financial reporting cannot provide absolute assurance of achieving financial reporting objectives because of its inherent limitations. Internal control over financial reporting is a process that involves human diligence and compliance and is subject to lapses in judgment and breakdowns resulting from human failures. Internal control over financial reporting also can be circumvented by collusion or improper management override. Because of such limitations, there is a risk that material misstatements may not be prevented or detected on a timely basis by
internal control over financial reporting. However, these inherent limitations are known features of the financial reporting process. Therefore, it is possible to design into the process safeguards to reduce, though not eliminate, this risk.
From time to time, we are directly and indirectly involved in legal proceedings arising in the ordinary course of our business, including claims by lenders under non-recourse carve-out guarantees. We believe, based on currently available information, and after consultation with legal counsel, that although the outcomes of those normal course proceedings are uncertain, the results of such proceedings, in the aggregate, will not have a material adverse effect on our business, financial condition and results of operations.
ITEM 1A.Risk Factors.
There have been no material changes in our risk factors from those disclosed
in the Annual Report.
ITEM 2.Unregistered Sales of Equity Securities and Use of Proceeds.
The following table summarizes repurchases of our common shares/OP units during the three months ended September 30, 2023 pursuant to publicly announced repurchase plans (1):
Period
(a) Total
Number of Shares/Units Purchased
(b) Average Price Paid for Share/Unit
(c)
Total Number of Shares/Units Purchased as Part of Publicly Announced Plans or Programs (1)
(d)
Maximum Number of Shares/Units That May Yet Be Purchased Under the Plans or Programs (1)
July 1 - 31, 2023
—
$
—
—
6,874,241
August
1 - 31, 2023
—
$
—
—
6,874,241
September 1 - 30, 2023
—
$
—
—
6,874,241
Third
quarter 2023
—
$
—
—
6,874,241
(1) Share repurchase authorization of an additional 10.0 million common shares announced on August 4, 2022, which has no expiration date.
ITEM 3.Defaults Upon
Senior Securities - not applicable.
ITEM 4.Mine Safety Disclosures - not applicable.
ITEM 5.Other Information
During the three months ended September 30, 2023, no trustee or officer of the Companyiiadopted/
or iiterminated/ a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408(a) of Regulation S-K.
XBRL
Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document (2, 5)
(3) Furnished
herewith. This exhibit shall not be deemed “filed” for purposes of Section 11 or 12 of the Securities Act of 1933, as amended (the “Securities Act”), or Section 18 of the Securities Exchanges Act of 1934, as amended (the "Exchange Act"), or otherwise subject to the liabilities of those sections, and shall not be part of any registration statement to which it may relate, and shall not be incorporated by reference into any registration statement or other document filed under the Securities Act or the Exchange Act, except as set forth by specific reference in such filing or document.
(4) Management contract or compensatory plan or arrangement.
(5) The following materials from this Quarterly Report on Form 10-Q for the
period ended September 30, 2023 are formatted in Inline XBRL (Extensible Business Reporting Language): (i) Unaudited Condensed Consolidated Balance Sheets of the Company; (ii) Unaudited Condensed Consolidated Statements of Operations of the Company; (iii) Unaudited Condensed Consolidated Statements of Comprehensive Income (Loss) of the Company; (iv) Unaudited Condensed Consolidated Statements of Changes in Equity of the Company; (v) Unaudited Condensed Consolidated Statements of Cash Flows of the Company;
and (vi) Notes to Unaudited Condensed Consolidated Financial Statements of the Company, detailed tagged.
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.
