Lexington Realty Trust Reports Second Quarter 2011 Results

Aug 02, 2011, 07:30 ET from Lexington Realty Trust

NEW YORK, Aug. 2, 2011 /PRNewswire/ -- Lexington Realty Trust ("Lexington") (NYSE: LXP), a real estate investment trust focused on single-tenant real estate investments, today announced results for the second quarter ended June 30, 2011.

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Second Quarter 2011 Highlights

  • Generated Company Funds From Operations ("Company FFO") of $41.1 million or $0.24 per diluted common share/unit, adjusted for certain items.
  • Closed property acquisitions of $108.8 million and loan investments of $15.8 million.
  • Increased portfolio occupancy 80 basis points to 96.1%; highest level since 2007.
  • Executed 19 new and renewal leases, totaling approximately 1.4 million square feet.
  • Raised $28.0 million of gross proceeds from dispositions and financing activities.
  • Contracted to (1) lend up to an aggregate $14.3 million to fund the construction of two single-tenant properties and (2) purchase the properties upon completion of construction and commencement of single-tenant leases for an additional $11.7 million.

T. Wilson Eglin, President and Chief Executive Officer of Lexington, stated, "We continue to be pleased with our operating results and the steady progress we have made in executing our business plan. In the first half of 2011, we signed 3.2 million square feet of leases, raised our leased portfolio from 93.4% to 96.1%, disposed of 11 properties for $121.9 million at a 6.6% weighted-average capitalization rate and lowered our debt by $64.2 million. The accretive investments we made in the second quarter fully deployed the proceeds of our May equity offering, which we believe have improved our prospects for dividend growth."

FINANCIAL RESULTS

Revenues

For the quarter ended June 30, 2011, total gross revenues were $82.7 million, compared with total gross revenues of $80.6 million for the quarter ended June 30, 2010. The increase is primarily due to property acquisitions and an increase in occupancy.

Company FFO Attributable to Common Shareholders/Unitholders

The following presents in tabular form the items excluded from Company FFO for the periods presented (in millions, except for per diluted share/unit data):

Three Months Ended June 30,

Six Months Ended June 30,

2011

Per Diluted Share/Unit

2010

Per Diluted Share/Unit

2011

Per Diluted

Share/Unit

2010

Per Diluted Share/Unit

Reported Company FFO(A)

$

(8.1)

$

(0.05)

$

14.6

$

0.09

$

6.9

$

0.04

$

28.6

$

0.19

Acquisition Costs

0.6

0.6

Debt satisfaction charges (gains), net

0.6

(2.6)

Forward equity commitment

0.5

1.6

(5.5)

(0.5)

Impairment losses – real estate

59.2

22.1

88.8

50.1

Impairment losses – consolidated debt investments

3.9

3.9

Impairment losses – real estate noncontrolling interests

(11.8)

(6.4)

(11.8)

(9.5)

Impairment loss – JV

1.6

Other

0.7

0.1

1.6

0.3

Company FFO, as adjusted

$

41.1

$

0.24 (B)

$

35.9

$

0.23 (B)

$

82.8

$

0.48 (B)

$

70.3

$

0.47 (B)

(A)   A reconciliation of GAAP net loss to Company FFO is provided later in this press release. Reported Company FFO excludes the assumed settlement of the forward equity commitment.

(B)   Per diluted share/unit reflects the impact of estimated net common shares retired upon the assumed settlement of the forward equity commitment of (3,544,219), (3,356,445), (3,468,421) and (3,312,724) for the three months ended June 30, 2011 and 2010 and six months ended June 30, 2011 and 2010, respectively.

Net Loss Attributable to Common Shareholders

For the quarter ended June 30, 2011, net loss attributable to common shareholders was $(50.5) million , or a loss of $(0.33) per diluted share, compared with net loss attributable to common shareholders for the quarter ended June 30, 2010 of $(30.4) million, or a loss of $(0.23) per diluted share.

Capital Activities

Lexington issued 10.0 million common shares, raising net proceeds of $90.6 million. The net proceeds were primarily used to fund investments.

Common Share Dividend/Distribution

During the quarter ended June 30, 2011, Lexington declared a regular quarterly dividend/distribution of $0.115 per common share/unit, which was paid on July 15, 2011 to common shareholders/unitholders of record as of June 30, 2011.

OPERATING ACTIVITIES

Investments

Property Acquisitions. During the second quarter of 2011, Lexington:

  • acquired an 80,000 square foot office facility in Rock Hill, South Carolina (Charlotte, NC - CBSA) for an original cost basis of $7.4 million (8.9% initial cap rate). The facility is net-leased for a remaining term of approximately 10 years.
  • purchased a 514,000 square foot industrial facility in Byhalia, Mississippi (Memphis, TN-CBSA) for an original cost basis of $27.5 million (9.3% initial cap rate). The facility is net-leased for a 15-year term. Subsequent to closing, Lexington financed the facility with a $15.0 million, 4.71% interest only non-recourse mortgage loan, which matures in 2016.
  • closed on the acquisition of a 673,000 square foot industrial property in Shelby, North Carolina for an original cost basis of $23.5 million (9.1% initial cap rate). The facility is net-leased for a 20-year term. Lexington funded the construction of the property beginning in 2010.
  • acquired a 292,700 square foot office property in Allen, Texas (Dallas, TX-CBSA) for an original cost basis of $36.3 million (8.5% initial cap rate). The property is net-leased through March 2018.
  • made a preferred equity investment in a joint venture formed to acquire a 210,000 square foot office property in Aurora, Illinois (Chicago, IL-CBSA). Lexington contributed $14.2 million to the joint venture for an 87% preferred equity interest in the property. The property was purchased by a subsidiary of the joint venture for an original cost basis of $15.9 million (14.0% initial cap rate). The property is net-leased through September 2017. Lexington is entitled to a 15% internal rate of return, including a 9.6% current annual preferred return on its investment.

In addition, subsequent to quarter end, Lexington acquired a 42,000 square foot office property in Columbus, Ohio for an original cost basis of $6.1 million (9.1% initial cap rate). At closing, the property was net-leased to the seller for a 16-year term.

Loan Investments. During the second quarter of 2011, Lexington:

  • closed on a $10.0 million mezzanine loan secured by a 100% pledge of all equity interests in the entities which own two to-be-constructed distribution facilities. The loan matures in 2013 and has an interest rate of 15.0% for the first year and 18.5% for the second year.
  • invested $5.8 million in an equally owned joint venture formed to acquire the economic interest in a mezzanine loan owned by Concord Debt Holdings, LLC.

New Build-to-Suit Transactions. During the second quarter of 2011, Lexington:

  • contracted to (1) lend up to $11.8 million to fund the construction of a 70,000 square foot office property in Huntington, West Virginia and (2) acquire the property for a maximum price of $13.0 million (9.4% initial cap rate) upon completion of construction and commencement of the tenant lease, which is expected to occur in the fourth quarter of 2011. The property will be net-leased for a term of 15 years.
  • agreed to (1) lend up to $2.5 million to fund a portion of the construction of a 257,000 square foot industrial property in Shreveport, Louisiana and (2) acquire the property for $13.1 million (9.5% initial cap rate) upon completion of construction and commencement of the tenant lease, which is expected to occur in the second quarter of 2012. The property will be net-leased for a term of 10 years.

In addition, Lexington continues to fund the construction of the previously announced $18.0 million build-to-suit property in Saint Joseph, Missouri (9.5% initial cap rate), which will be subject to a 15-year net-lease upon completion.  

No assurance can be provided that construction of these built-to-suit projects will be completed or the acquisitions will be consummated.

Information on these investments is provided in tabular form in Lexington's Supplemental Operating and Financial Data Disclosure Package available at www.lxp.com.

Capital Recycling

During the second quarter of 2011, Lexington disposed of five properties to unrelated parties for an aggregate gross sales price of $13.0 million, representing a weighted-average cap rate of 3.3%. Subsequent to quarter end, Lexington disposed of one property for $0.9 million at a cap rate of 9.5%. Total year-to-date disposition activity is $122.8 million at a weighted-average cap rate of 6.7%.

Leasing Activity

For the quarter ended June 30, 2011, 19 new and renewal leases for 1.4 million square feet were executed in Lexington's portfolio.  At June 30, 2011, Lexington's overall portfolio was 96.1% leased.

2011 EARNINGS GUIDANCE

Lexington's estimate of Company FFO remains unchanged at $0.90 to $0.93 per diluted share for the year ended December 31, 2011. This guidance is forward looking, excludes the impact of certain items and is based on current expectations.

SECOND QUARTER 2011 CONFERENCE CALL

Lexington will host a conference call today, Tuesday, August 2, 2011, at 11:00 a.m. Eastern Time, to discuss its results for the quarter ended June 30, 2011. Interested parties may participate in this conference call by dialing 800-357-9448 or 719-325-2261. A replay of the call will be available through August 16, 2011, at 877-870-5176 or 858-384-5517, pin: 2428086. A live webcast of the conference call will be available at www.lxp.com within the Investor Relations section.

ABOUT LEXINGTON REALTY TRUST

Lexington Realty Trust is a real estate investment trust that owns, invests in, and manages office, industrial and retail properties net-leased to major corporations throughout the United States and provides investment advisory and asset management services to investors in the net lease area. Lexington shares are traded on the New York Stock Exchange under the symbol "LXP". Additional information about Lexington is available on-line at www.lxp.com or by contacting Lexington Realty Trust, One Penn Plaza, Suite 4015, New York, New York 10119-4015, Attention: Investor Relations.

This release contains certain forward-looking statements which involve known and unknown risks, uncertainties or other factors not under Lexington's control which may cause actual results, performance or achievements of Lexington to be materially different from the results, performance, or other expectations implied by these forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed under the headings "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Risk Factors" in Lexington's periodic reports filed with the Securities and Exchange Commission, including risks related to: (1) the authorization by Lexington's Board of Trustees of future dividend declarations to achieve an annualized dividend paid in 2011 of $0.46 per common share, (2) Lexington's ability to achieve its estimate of Company FFO for the year ended December 31, 2011, (3) the consummation of the built-to-suit construction loans and subsequent acquisition of such properties, (4) the failure to continue to qualify as a real estate investment trust, (5) changes in general business and economic conditions, including the impact of the current global financial and credit crisis, (6) competition, (7) increases in real estate construction costs, (8) changes in interest rates, or (9) changes in accessibility of debt and equity capital markets. Copies of the periodic reports Lexington files with the Securities and Exchange Commission are available on Lexington's web site at www.lxp.com. Forward-looking statements, which are based on certain assumptions and describe Lexington's future plans, strategies and expectations, are generally identifiable by use of the words "believes," "expects," "intends," "anticipates," "estimates," "projects", "is optimistic" or similar expressions. Lexington undertakes no obligation to publicly release the results of any revisions to those forward-looking statements which may be made to reflect events or circumstances after the occurrence of unanticipated events. Accordingly, there is no assurance that Lexington's expectations will be realized.

References to Lexington refer to Lexington Realty Trust and its consolidated subsidiaries. All interests in properties and loans are held through special purpose entities, which are separate and distinct legal entities, but consolidated for financial statement purposes and/or disregarded for income tax purposes.

LEXINGTON REALTY TRUST AND CONSOLIDATED SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

Three and six months ended June 30, 2011 and 2010

(Unaudited and in thousands, except share and per share data)

Three Months Ended June 30,

Six Months Ended June 30,

2011

2010

2011

2010

Gross revenues:

Rental

$

73,749

$

72,567

$

147,505

$

144,650

Advisory and incentive fees

1,151

201

1,447

615

Tenant reimbursements

7,775

7,797

16,386

16,823

Total gross revenues

82,675

80,565

165,338

162,088

Expense applicable to revenues:

Depreciation and amortization

(41,880)

(38,839)

(81,127)

(78,574)

Property operating

(16,348)

(16,332)

(33,464)

(33,576)

General and administrative

(5,540)

(4,939)

(10,987)

(10,910)

Non-operating income

2,833

2,819

5,831

5,045

Interest and amortization expense

(26,953)

(30,280)

(53,967)

(60,507)

Debt satisfaction gains (charges), net

(10)

9

(762)

Change in value of forward equity commitment

(445)

(1,617)

5,548

460

Impairment charges and loan losses

(53,638)

(6,879)

(53,638)

(6,879)

Loss before benefit (provision) for income taxes, equity in earnings of non-consolidated entities and discontinued operations

(59,306)

(15,502)

(56,457)

(23,615)

Benefit (provision) for income taxes

(231)

(605)

1,293

(1,241)

Equity in earnings of non-consolidated entities

7,600

5,368

11,599

10,606

Loss from continuing operations

(51,937)

(10,739)

(43,565)

(14,250)

Discontinued operations:

Income (loss) from discontinued operations

381

101

1,289

(1,545)

Provision for income taxes

(6)

(13)

(9)

(18)

Debt satisfaction gains (charges), net

(603)

3,385

Gains on sales of properties

170

52

5,069

498

Impairment charges

(5,565)

(19,102)

(35,131)

(47,097)

Total discontinued operations

(5,020)

(18,962)

(29,385)

(44,777)

Net loss

(56,957)

(29,701)

(72,950)

(59,027)

Less net loss attributable to noncontrolling interests

12,699

5,600

11,253

8,159

Net loss attributable to Lexington Realty Trust shareholders

(44,258)

(24,101)

(61,697)

(50,868)

Dividends attributable to preferred shares - Series B

(1,590)

(1,590)

(3,180)

(3,180)

Dividends attributable to preferred shares - Series C

(1,690)

(1,703)

(3,380)

(3,405)

Dividends attributable to preferred shares - Series D

(2,925)

(2,925)

(5,851)

(5,851)

Dividends attributable to non-vested common shares

(76)

(60)

(155)

(123)

Redemption discount - Series C

86

Net loss attributable to common shareholders

$

(50,539)

$

(30,379)

$

(74,177)

$

(63,427)

Loss per common share - basic and diluted:

Loss from continuing operations

$

(0.30)

$

(0.14)

$

(0.31)

$

(0.22)

Loss from discontinued operations

(0.03)

(0.09)

(0.19)

(0.28)

Net loss attributable to common shareholders

$

(0.33)

$

(0.23)

$

(0.50)

$

(0.50)

Weighted-average common shares outstanding - basic and diluted

151,526,956

133,141,084

148,866,015

127,339,144

Amounts attributable to common shareholders:

Loss from continuing operations

$

(45,769)

$

(17,864)

$

(45,242)

$

(28,348)

Loss from discontinued operations

(4,770)

(12,515)

(28,935)

(35,079)

Net loss attributable to common shareholders

$

(50,539)

$

(30,379)

$

(74,177)

$

(63,427)

LEXINGTON REALTY TRUST AND CONSOLIDATED SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

June 30, 2011 (unaudited) and December 31, 2010

(In thousands, except share and per share data)

2011

2010

Assets:

Real estate, at cost

$

3,199,804

$

3,363,586

Investments in real estate under construction

7,251

11,258

Less: accumulated depreciation and amortization

602,004

601,239

2,605,051

2,773,605

Property held for sale - discontinued operations

12,143

7,316

Intangible assets, net

192,083

203,495

Cash and cash equivalents

64,149

52,644

Restricted cash

30,304

26,644

Investment in and advances to non-consolidated entities

100,700

72,480

Deferred expenses, net

46,072

39,912

Loans receivable, net

112,987

88,937

Rent receivable - current

7,255

7,498

Rent receivable - deferred

7,825

6,293

Other assets

61,057

56,172

Total assets

$

3,239,626

$

3,334,996

Liabilities and Equity:

Liabilities:

Mortgages and notes payable

$

1,415,968

$

1,481,216

Exchangeable notes payable

61,770

61,438

Convertible notes payable

104,180

103,211

Trust preferred securities

129,120

129,120

Dividends payable

24,320

23,071

Liabilities - discontinued operations

5,123

3,876

Accounts payable and other liabilities

54,412

51,292

Accrued interest payable

12,218

13,989

Deferred revenue - below market leases, net

84,827

96,490

Prepaid rent

18,358

15,164

1,910,296

1,978,867

Commitments and contingencies

Equity:

Preferred shares, par value $0.0001 per share; authorized 100,000,000 shares,

Series B Cumulative Redeemable Preferred, liquidation preference $79,000; 3,160,000 shares issued and outstanding

76,315

76,315

Series C Cumulative Convertible Preferred, liquidation preference $103,995 and $104,760; 2,079,904 and 2,095,200 shares issued and outstanding in 2011 and 2010, respectively

101,035

101,778

Series D Cumulative Redeemable Preferred, liquidation preference $155,000; 6,200,000 shares issued and outstanding

149,774

149,774

Common shares, par value $0.0001 per share; authorized 400,000,000 shares, 157,522,107 and 146,552,589 shares issued and outstanding in 2011 and 2010, respectively

16

15

Additional paid-in-capital

2,035,721

1,937,942

Accumulated distributions in excess of net income

(1,094,614)

(985,562)

Accumulated other comprehensive income (loss)

670

(106)

Total shareholders' equity

1,268,917

1,280,156

Noncontrolling interests

60,413

75,973

Total equity

1,329,330

1,356,129

Total liabilities and equity

$

3,239,626

$

3,334,996

LEXINGTON REALTY TRUST AND CONSOLIDATED SUBSIDIARIES

COMPANY FUNDS FROM OPERATIONS PER SHARE

(Unaudited and in thousands, except share and per share data)

Three Months Ended

June 30,

Six Months Ended

June 30,

2011

2010

2011

2010

COMPANY FUNDS FROM OPERATIONS: (1)

Basic and Diluted:

Net loss attributable to common shareholders

$

(50,539)

$

(30,379)

$

(74,177)

$

(63,427)

Adjustments:

    Depreciation and amortization

40,922

40,358

79,518

83,480

    Noncontrolling interests - OP units

(1,398)

447

(958)

756

    Amortization of leasing commissions

966

695

1,873

1,767

    Joint venture and noncontrolling interest adjustment

(1,924)

(526)

(2,219)

(846)

    Preferred dividends - Series C

1,690

1,703

3,294

3,405

    Gains on sales of properties

(170)

(52)

(5,069)

(498)

    Interest and amortization on 6.00% Convertible Notes

2,326

2,325

4,653

3,958

Company FFO

$

(8,127)

$

14,571

$

6,915

$

28,595

Basic:

Weighted-average common shares outstanding - basic

151,526,956

133,141,084

148,866,015

127,339,144

6.00% Convertible Notes

16,230,905

16,230,905

16,230,905

13,918,888

Non-vested share-based payment awards

138,457

58,512

130,662

51,664

Operating Partnership Units

4,824,501

5,379,186

4,861,704

5,384,193

Preferred Shares - Series C

5,062,278

5,099,507

5,077,293

5,099,507

Weighted-average common shares outstanding

177,783,097

159,909,194

175,166,579

151,793,396

    Company FFO per common share - Basic

$

(0.05)

$

0.09

$

0.04

$

0.19

Diluted:

Weighted-average common shares outstanding - basic

151,526,956

133,141,084

148,866,015

127,339,144

6.00% Convertible Notes

16,230,905

16,230,905

16,230,905

13,918,888

Non-vested share-based payment awards

138,457

58,512

130,662

51,664

Operating Partnership Units

4,824,501

5,379,186

4,861,704

5,384,193

Preferred Shares - Series C

5,062,278

5,099,507

5,077,293

5,099,507

Options - Incremental shares

328,985

361,866

Weighted-average common shares outstanding

178,112,082

159,909,194

175,528,445

151,793,396

    Company FFO per common share - Diluted

$

(0.05)

$

0.09

$

0.04

$

0.19

LEXINGTON REALTY TRUST AND CONSOLIDATED SUBSIDIARIES

EARNINGS PER SHARE

(Unaudited and in thousands, except share and per share data)

Three Months Ended

June 30,

Six Months Ended

June 30,

2011

2010

2011

2010

EARNINGS PER SHARE:

Basic and Diluted:

Loss from continuing operations attributable to common shareholders

$

(45,769)

$

(17,864)

$

(45,242)

$

(28,348)

Loss from discontinued operations attributable to common shareholders

(4,770)

(12,515)

(28,935)

(35,079)

Net loss attributable to common shareholders

$

(50,539)

$

(30,379)

$

(74,177)

$

(63,427)

Weighted-average number of common shares outstanding

151,526,956

133,141,084

148,866,015

127,339,144

Loss per common share:

Loss from continuing operations

$

(0.30)

$

(0.14)

$

(0.31)

$

(0.22)

Loss from discontinued operations

(0.03)

(0.09)

(0.19)

(0.28)

Net loss attributable to common shareholders

$

(0.33)

$

(0.23)

$

(0.50)

$

(0.50)

(1)  Lexington believes that Funds from Operations ("FFO") is a widely recognized and appropriate measure of the performance of an equity REIT. Lexington presents FFO because it considers FFO an important supplemental measure of Lexington's operating performance. Lexington believes 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 generally accepted accounting principles ("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.

FFO is determined in accordance with standards established by the National Association of Real Estate Investment Trusts, Inc. ("NAREIT"). FFO is defined by NAREIT as "net income (or loss) computed in accordance with GAAP, excluding gains (or losses) from sales of property, plus real estate depreciation and amortization and after adjustments for unconsolidated partnerships and joint ventures." FFO does not represent cash generated from operating activities in accordance with GAAP and is not indicative of cash available to fund cash needs. FFO 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.

Lexington includes in its calculation of FFO, which Lexington refers to as the "Company's funds from operations" or "Company FFO," Lexington's operating partnership units, Lexington's Series C Cumulative Convertible Preferred Shares, and Lexington's 6.00% Convertible Notes because these securities are convertible, at the holder's option, into Lexington's common shares. Management believes this is appropriate and relevant to securities analysts, investors and other interested parties because Lexington presents Company FFO on a company-wide basis as if all securities that are convertible, at the holder's option, into Lexington's common shares, are converted. Since others do not calculate FFO in a similar fashion, Company FFO may not be comparable to similarly titled measures as reported by others.

 

SOURCE Lexington Realty Trust



RELATED LINKS

http://www.lxp.com