Lexington Realty Trust Reports Second Quarter 2011 Results

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):

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.

(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