$31.58
$80.71
bear $31.58
base $56.73
bull $80.71
margin of safety $30.00
LXP Industrial Trust owns about 108 warehouse and distribution buildings totalling roughly 52.7 million square feet in 14 states, concentrated in 12 target markets in the Sunbelt and lower Midwest. At the end of 2025 the portfolio was 97.1% leased, almost entirely to single tenants on net leases under which the tenant pays most property taxes, insurance and ordinary repairs. The largest tenants are Amazon (6.5% of annual base rent, leases running 2030-2033), Nissan (4.8%, two leases expiring in 2027), Black and Decker (3.6%), Wal-Mart (3.3%), GXO Logistics (2.7%, expiring 2026 and 2028), FedEx (2.3%, 2028) and DHL Supply Chain (2.2%, 2027). The weighted-average remaining lease term is 4.8 years, 99.3% of leases carry scheduled rent increases averaging 2.8% at the next step, and about 73.8% of rent comes from leases expiring between 2026 and 2031. How we measure earnings. We start from cash generated by operations, remove working-capital swings and share-based pay, and subtract the recurring capital spending and leasing commissions needed to keep the existing buildings leased. Spending on acquisitions and new construction is treated as investment in growth rather than a cost of the existing business. Because we value the buildings first and then subtract what the company owes, we add back cash interest to get the cash the property portfolio produces before its lenders are paid. On that basis the portfolio produced $230 million in 2021, $201 million in 2022, $229 million in 2023, $241 million in 2024 and $220 million in 2025. We use 2021 onward because that is when the company finished converting from a mixed office-and-industrial landlord (formerly Lexington Realty Trust) into a pure warehouse owner; earlier years describe a different business. The median of that window is about $229 million. We do not use that median unchanged. During 2025 the company sold its interests in 11 warehouse facilities for $389.1 million and used the money mainly to repay debt: $50 million of the term loan, $28.1 million of trust preferred securities and $140 million of its 6.75% notes due 2028. That shrank both the rent base and the debt. The debt reduction is already reflected in the lower debt figure below, so the earnings from the buildings that were sold must come out too. Operating cash flow plus interest paid in the first half of 2026 was $111.0 million against $114.2 million a year earlier, about 2.8% lower, and two quarters of revenue tell the same story ($174.1 million versus $176.6 million). We therefore start the cases from about $214 million a year (about $3.68 per share), in line with the current, smaller portfolio. For comparison, the portfolio's cash flow fell 8.9% in 2025, largely because of those sales; our base case assumes a further 2.5% decline in the first year and no change in the second, not a recovery. What the company owes. At June 30, 2026 the company had roughly $1.37 billion of borrowings at face value, including a $250 million term loan due January 2027 (swapped to a fixed 4.31% until then), $160 million of 6.75% notes due November 2028, $400 million of 2.70% notes due September 2030, $400 million of 2.375% notes due October 2031, about $101 million of trust preferred securities due 2037, about $47 million of mortgages and $15 million drawn on its revolving credit line. To that we add $94 million of preferred stock that ranks ahead of the common shares and $12.6 million of outside partners' interests, and we deduct $18 million of cash. The 2030 and 2031 notes carry fixed coupons far below what new long-term borrowing costs, which is a genuine benefit to shareholders; we credit it at about $109 million. The result is net debt of about $1.35 billion. The company reported compliance with its debt covenants at the end of 2025. Base case (median outcome), worth about $56.73 per share. Rent grows with the escalators already written into the leases. We give no credit for lease-up of the 1.5 million square feet of vacancy or for renewing expiring leases at higher rents, because the 2025 annual report also notes that trade-policy uncertainty has led some tenants to consolidate or move to cheaper space. Year one is about $214 million, year two stays flat while the Nissan, DHL and GXO leases roll over, and growth then runs at 2.5% a year, a little below the 2.8% average escalator, to allow for downtime and re-leasing costs as about three-quarters of the rent roll expires by 2031. That reaches about $261 million in year ten. After year ten we assume growth of 1% a year: the buildings keep earning rent, and the recurring capital spending already deducted is what keeps them leasable. On this path the buildings are worth about $4.65 billion. After $1.35 billion of net debt, about $3.30 billion is left for shareholders, or about $56.73 per share on 58.1 million diluted shares. Bear case (roughly the 10th percentile), worth about $31.58 per share. Warehouse demand has fallen before, as in the 2008-2010 credit cycle, and LXP's own cash flow fell about 13% between 2021 and 2022. In this case a downturn arrives while a cluster of named leases is up: Nissan and DHL in 2027, GXO in 2026 and 2028, and FedEx in 2028, together about 12% of base rent. Those buildings go dark and take a year or more to re-lease at flat rents. Cash flow falls from about $214 million to about $180 million by year four, a decline of about 16%, deeper than the company's own 2022 dip. It then recovers slowly to about $207 million by year ten and shrinks 0.5% a year after that as older buildings lose appeal. We also assume the $410 million due in 2027-2028 is refinanced at about 7.5% for five years, which adds about $26 million to the debt burden. The buildings are worth about $3.21 billion against about $1.38 billion owed, leaving about $1.83 billion. Even at the trough, cash flow covers interest by nearly three times, so this case does not require help from lenders. The dividend would probably be cut. Bull case (roughly the 90th percentile), worth about $80.71 per share. The company keeps renewing expiring leases at well above their old rents, as it did in 2025 when 4.9 million square feet of new and renewed leases raised cash base rents by 27.7%. Together with the 2.8% escalators and lease-up of the current vacancy, cash flow grows about 5.5% a year for six years while the 2026-2031 expirations roll to market. Growth then slows to the escalator rate, about 2.8%, and to 1.5% a year after year ten. The buildings are worth about $6.04 billion; after $1.35 billion of net debt, about $4.69 billion is left. We give no value in any case to the roughly 514 acres of development land or to future build-to-suit projects, because the company paused new investment in 2025 to reduce debt and no committed projects are under way that we can value. These figures are not comparable with our previous estimate, which used a different basis. In the business itself, the changes since then are mixed. The asset sales made the company smaller and its cash flow has edged down. Against that, reported debt fell from $1.57 billion to $1.35 billion during 2025, the 2028 notes were cut from $300 million to $160 million, and occupancy rose to 97.1%. Margin-of-safety price: $30. How sure are we of the earnings level? Fairly sure. Rents are contractual, the portfolio is 97% leased, and cash flow has stayed between $201 million and $241 million in each of the five years since the transformation. The main uncertainty is how much the smaller post-sale portfolio earns, and two quarters of 2026 results put it near $214 million. The worst plausible outcome is a deep warehouse recession that coincides with the 2027-2028 roll of several large single-tenant leases. A single-tenant building earns all or nothing, so a few move-outs can cut income quickly. Against that, the assets are hard and general-purpose, debt is moderate relative to the buildings' value, most borrowings are fixed-rate and not due until 2030-2031, and the largest tenant accounts for only 6.5% of rent. The structure would survive such a downturn, and the bear case still leaves shareholders about $31.58 per share. The things we are most likely to be wrong about are the rate at which expiring rents re-set and the cost of refinancing the 2027 term loan and 2028 notes. If renewals come in flat and refinancing is expensive, the shares look worth something between the bear and base cases, roughly $40-45. The price assumes a four-to-five-year holding period, during which the company has been paying about $2.70 per share a year in dividends (2025 declared). From $30, the base case implies roughly 21% a year over five years including that dividend, the bull case roughly 28%, and the bear case, with a reduced dividend, roughly 8% a year. Because the bear case still implies a gain from that price rather than a loss, $30 is the highest price at which we judge the 20% target to be reasonably attainable.