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Text: Lexington believes that these statements are based on reasonable assumptions.
Any references in these documents to adjusted company FFO refers to adjusted company funds from operations available to all equity holders and unitholders on a fully diluted basis.
Operating performance measures of an individual investment are not intended to be viewed as presenting a numerical measure of Lexington's historical or future financial performance, financial position or cash flows.
Executive Vice Presidents Lara Johnson & James Dudley will be available during the question-and-answer portion of our call.
Our third quarter results were strong in all areas of our business.
We have transformed the company's portfolio, delivered revenue and adjusted company FFO above consensus, produced strong underlying portfolio performance and increased the dividend by 11.6%.
With 95% of our gross assets now industrial, we have substantially completed our portfolio transformation to a predominantly single-tenant industrial REIT.
In addition, we are executing on a number of value-enhancing initiatives, including pursuing prudent external growth, active asset management, and continuing our disciplined capital allocation.
Our portfolio continues to benefit from healthy fundamentals in the industrial sector, including strong leasing demand and rental growth.
Tenant leasing velocity is being driven by the need to improve supply chain efficiency as transportation costs rise, resulting in a greater desire for additional space to house inventory.
Demand is still outpacing supply, with vacancy at an all-time low, leading to rental rates continuing to rise across the country.
Class A warehouse distribution space in our target markets is benefiting from all of these trends.
In short, it is a great time to be an industrial real estate company with top-quality assets.
Our robust third quarter leasing activity is certainly reflective of the strength of our target markets.
With 2.6 million square feet of space leased in the quarter, we raised our stabilized lease portfolio 110 basis points to 98.9% and increased base and cash base industrial rents on extensions and new leases 6.5% and 4.7%, respectively.
Further, for the nine months ended September 30, we raised base and cash-based industrial rents on extensions and new leases 10.3% and 7%, respectively.
Average rent per square foot in our warehouse distribution portfolio is $3.97, which we view as 6% to 8% below market, as market rents continue to grow considerably faster than the escalations built into our leases.
And we note that rents in our target markets have grown on average approximately 8% over the last year.
Our strategy to purchase vacancy to produce higher stabilized yields is proving successful as evidenced by some notable third quarter leasing activity.
We secured a 5.5-year lease with a new tenant who will occupy the 195,000 square foot vacant property that we recently purchased in the Greenville-Spartanburg market as part of a four-property industrial portfolio acquisition.
The lease term includes 2.75% annual rental escalations, and the lease produces an initial stabilized yield of 5.3% for the property.
Additionally, we leased 68,000 square feet of available space to a new tenant at our Lakeland, Florida warehouse distribution facility for five years, increasing the building's occupancy from 53% to 84%.
The starting rent is $5.70 per square foot with 3% annual escalations.
Other significant leasing outcomes during the quarter that resulted in an increase to cash base rent over the prior lease term included a five-year lease with 3% annual escalations at our 640,000 square foot Statesville, North Carolina warehouse distribution facility and a three-year lease with 2.25% annual escalations at our 1.2 million square foot Olive Branch, Mississippi warehouse distribution facility.
Subsequent to quarter end, we had a huge success at our 908,000 square foot spec development facility in Fairburn, Georgia, executing a seven-year lease with 3% annual escalations and bringing the stabilized yield to 7.2%, excluding our partner promote, which was well above our underwriting assumptions.
This lease illustrates the value creation that our development pipeline is now delivering.
We currently have four spec development projects in process, two of which we added during the third quarter, with an estimated total project cost of $358 million and $270 million left to fund.
Speculative development and the purchase of non-stabilized properties continued to be a principal focus of our investment strategy and highlight how our platform, market presence and warehouse distribution focus are creating shareholder value.
On the purchase front, we acquired $135 million of Class A warehouse distribution product during the quarter, with an additional $76 million purchased subsequently, and we currently have a sizable pipeline under review.
Brendan will discuss investment activity and the development pipeline in greater detail shortly.
Our sales volume as of September 30 totaled $219 million at average GAAP and cash cap rates of 7.6% and 7.9%, respectively.
We sold an additional $25 million after quarter-end and have two other properties under contract to sell for $29 million.
As we focus our strategy on acquiring and developing modern Class A warehouse distribution facilities, we continue to view our manufacturing and cold storage portfolio as a potential source of capital for redeployment.
With the sale of our nonindustrial properties substantially complete, our board announced a dividend increase that brings our payout ratio more in line with our peers after several years of focusing more on retaining cash flow and maintaining a low payout ratio during this period of intensive capital recycling.
The new declared quarterly common share dividend, which will be paid in the first quarter of 2022, will be $0.12 per share, representing an 11.6% increase over the prior quarterly dividend.
Our intent to grow the dividend annually, moving forward, reflects our confidence in the direction of market rent growth and our opportunity to raise future rents.
On the ESG front, I'd like to highlight how pleased we are to have earned the first place ranking for U.S. industrial listed companies in our first 2021 G-res assessment.
ESG is an ongoing priority for us, and we continue to enhance and strengthen our program.
We encourage you to review our most recent ESG disclosures, which highlights many of our 2021 ESG achievements and initiatives.
In closing, by transforming LXP into a predominantly single-tenant industrial REIT, we have created a much stronger, more valuable portfolio.
The compelling growth opportunities we see ahead of us position us well to continue to drive meaningful long-term financial performance and enhanced shareholder returns.
During the third quarter, we purchased five warehouse distribution assets spanning 1.3 million square feet for $135 million at average GAAP and cash stabilized cap rate of 4.9% and 4.6%, respectively.
We briefly discussed the four-property portfolio located in Greenville-Spartanburg on last quarter's call.
We purchased that portfolio with the vacant property, which we leased up shortly after our second quarter call.
Echoing Will, this success demonstrates the value of our strategy of acquiring vacancy in strong markets where we can utilize our market knowledge and expertise to enhance yield.
We also acquired a 293,000 square foot stabilized warehouse distribution facility in Columbus, Ohio, a primary distribution market in the central U.S.
This facility is a recent build occupied by two tenants with a weighted average lease term of seven years and average annual rental escalations of 2.5%.
Subsequent to quarter-close, we purchased a three-property, 878,000 square foot portfolio in the Whiteland submarket of Indianapolis.
Indianapolis is a market we've made a commitment to for several reasons, including its central location and population reach, extensive highway air and rail systems, deep labor pool, business-friendly government and its access to the second largest FedEx hub in the world.
The three properties, all recently constructed, sit along I-65 in the Whiteland Exchange Business Park.
On the development front, we acquired two land sites during the quarter that, when completed, will comprise five buildings, three in the Greenville-Spartanburg market and two in Phoenix.
The 234-acre site in Greenville-Spartanburg is in the Smith Farms Industrial Park, where we own two other warehouse distribution facilities.
Upon completion, which will be staggered in the first half of 2022, the three buildings will total roughly 1.9 million square feet.
The estimated development cost of this project is approximately $133 million, with estimated stabilized cash yields projected to be in the low to mid-5% range.
The Phoenix project is a 57-acre site in the Goodyear submarket along the Southwest Valley Loop 303 industrial hub.
Upon completion, the project will consist of two Class A warehouse distribution facilities totaling 880,000 square feet.
The site is in PV 303, the sub-market's premier master-planned business park that is highly desirable for corporate users.
Like the Greenville-Spartanburg project, the facilities will have varying deliveries in the first half of 2022.
The estimated development cost is approximately $84 million, with estimated stabilized cash yield forecasted to be in the high 4% range.
Phoenix is an area where we've been growing significantly in recent years.
And as a result, we've built a deep knowledge and expertise in this very strong market.
Currently, we have 2.4 million square feet of modern Class A industrial space in Phoenix; and, more specifically, two million square feet in Goodyear, and we'll further increase our footprint there with the completion of this development project.
This square footage also includes our build-to-suit that is largely complete, with the tenant already occupying and operating in most of the space.
We have observed record-breaking activity and continue to like the market's strong fundamentals, driven by Phoenix's fast-growing population, its moderate operating costs, low taxes, affordable labor and proximity to major markets such as Los Angeles, San Diego and Las Vegas.
We'll continue to provide regular updates on the progress of these projects, which we believe provide a very attractive risk return profile.
During the third quarter, we produced adjusted company FFO of roughly $54 million, or $0.19 per diluted common share.
Today, we announced an increase to both the low and top end of our adjusted company FFO guidance range to a new range of $0.75 to $0.78 per diluted common share.
The revised range considers the timing of acquisitions and dispositions and positive leasing outcomes.
Revenues for the quarter were approximately $83 million, with property operating expenses of just over $11 million, of which 84% was attributable to tenant reimbursement.
G&A for the quarter was $8.4 million, and we expect 2021 G&A to be within a range of $33 million to $36 million.
Our same-store portfolio was 98.7% leased at quarter end, with overall same-store NOI increasing 0.7%, which would have been approximately 1.9%, excluding single-tenant vacancy.
Industrial same-store NOI increased 1.2% and would have been 2.5%, excluding single-tenant vacancy.
At quarter-end, approximately 90% of our industrial portfolio leases had escalation, with an average rate of 2.6%.
Our company's balance sheet remains solid, with net debt to adjusted EBITDA of 5.4 times at quarter-end and unencumbered NOI at 91.5%.
During the quarter, we issued $400 million of senior notes due in 2031 with an attractive rate of 2.375%.
The net proceeds and cash on hand were used to fully redeem our 4.25 senior notes due in 2023 and repay the outstanding balance under our revolving credit facility.
Consolidated debt outstanding as of September 30 was approximately $1.5 billion with a weighted average interest rate of approximately 2.9% and a weighted average term of about eight years.
Finally, during the quarter, we settled 3.9 million common shares previously sold on a forward basis, leaving $240 million, or 20.8 million common shares, of unsettled common share contracts available at quarter-end.
The contracts mature at various states, with the majority of these contracts maturing in May 2022.

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lexington realty trust increased q4 of 2021 common share dividend by 11.6%.
lexington realty trust - increasing adjusted ffo per share guidance range for fy21 to $0.75 to $0.78.

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