Lexington Realty Trust Reports Third Quarter 2010 Results and Increases Common Share Dividend By 15%
NEW YORK, Nov. 4, 2010 /PRNewswire-FirstCall/ -- Lexington Realty Trust ("Lexington") (NYSE: LXP), a real estate investment trust focused on single-tenant real estate investments, today announced results for the third quarter ended September 30, 2010.
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Third Quarter 2010 Highlights
- Generated Company Funds From Operations ("Company FFO") of $39.1 million or $0.25 per diluted common share/unit, adjusted for certain items.
- Executed 11 new and renewal leases, totaling approximately 760,000 square feet.
- Increased portfolio occupancy by 1.4% to approximately 93% leased.
- Raised $69.7 million from dispositions and $11.3 million from financing activities.
- Reduced overall consolidated debt by $105.5 million; paid off $80.0 million term loan ahead of scheduled maturity.
- Increased the availability of secured credit line to $220.0 million, with $18.8 million outstanding at quarter end.
- Agreed to fund $23.4 million for the construction of a 672,000 square foot industrial facility and to purchase the facility, upon its completion and commencement of a 20-year net lease, at an initial cap rate of 8.9%.
Subsequent to Quarter End Highlights
- Increased quarterly common share dividend 15% to $0.115 per share.
- Sold one vacant property for $6.1 million.
- Retired $38.9 million in consolidated debt on three properties.
T. Wilson Eglin, President and Chief Executive Officer of Lexington, stated, "We are pleased to announce a 15% increase in our common share dividend that reflects our strong operating results, the success we have had this year in executing all aspects of our business plan and our confidence in our future prospects. We believe we will continue to have success selling our multi-tenant properties and utilizing sales proceeds to reduce debt and selectively fund accretive acquisition opportunities. With relatively few expiring leases and debt maturities next year, we believe our new dividend payout ratio will continue to be conservative in relation to our funds from operations."
FINANCIAL RESULTS
Revenues
For the quarter ended September 30, 2010, total gross revenues were $87.8 million, compared with total gross revenues of $92.0 million for the quarter ended September 30, 2009.
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 September 30, | Nine Months Ended September 30, | ||||||||||||||||
2010 | Per Diluted | 2009 | Per Diluted | 2010 | Per Diluted | 2009 | Per Diluted | ||||||||||
Reported Company FFO(A) | $ | 42.8 | $ | 0.27 | $ | 18.3 | $ | 0.15 | $ | 71.4 | $ | 0.46 | $ | (39.4) | $ | (0.34) | |
New accounting | 0.1 | 0.3 | 0.4 | 1.1 | |||||||||||||
Debt satisfaction, net | -- | (9.2) | (2.6) | (21.5) | |||||||||||||
Forward equity commitment | (4.9) | (7.0) | (5.4) | (2.6) | |||||||||||||
Impairment losses – real estate | 1.1 | 29.2 | 51.2 | 38.8 | |||||||||||||
Impairment losses – real estate noncontrolling interests | -- | -- | (9.5) | -- | |||||||||||||
Impairment losses – consolidated debt investments | -- | 0.5 | 3.9 | 1.6 | |||||||||||||
Impairment losses/reserves – Concord debt investments | -- | -- | -- | 71.4 | |||||||||||||
Impairment loss – Concord equity investment | -- | -- | -- | 68.2 | |||||||||||||
Impairment loss – JV | -- | 6.5 | -- | 6.5 | |||||||||||||
Lease termination/ | -- | (1.9) | -- | (3.2) | |||||||||||||
Land transaction income, net | -- | -- | -- | (1.3) | |||||||||||||
Company FFO, as adjusted | $ | 39.1 | $ | 0.25(B) | $ | 36.7 | $ | 0.31(B) | $ | 109.4 | $ | 0.72(B) | $ | 119.6 | $ | 1.05(B) | |
(A) A reconciliation of GAAP net income (loss) to Company FFO is provided later in this press release. (B) Per diluted share/unit reflects the impact of estimated net common shares retired upon the assumed settlement of the forward equity commitment of (3,305,015), (2,487,326), (3,312,724) and (2,139,550) for the three months ended September 30, 2010 and 2009 and the nine months ended September 30, 2010 and 2009, respectively. | |||||||||||||||||
Net Income (Loss) Attributable to Common Shareholders
For the quarter ended September 30, 2010, net income attributable to common shareholders was $58 thousand, or income of $0.00 per diluted share, compared with net loss attributable to common shareholders for the quarter ended September 30, 2009 of ($28.5) million, or a loss of ($0.25) per diluted share.
Financing Activities and Balance Sheet Update
Overall consolidated debt was reduced in the third quarter by $105.5 million. Lexington fully satisfied the $80.0 million term loan portion of the secured credit facility and retired $47.2 million in non-recourse mortgage balloon debt on four properties.
During the quarter, Lexington increased the capacity under its secured revolving line of credit to $220.0 million from $175.0 million. As of September 30, 2010, $18.8 million was outstanding under this facility. In addition, Lexington obtained an $11.3 million fully amortizing, non-recourse mortgage loan on its North Berwick, Maine property leased to United Technologies Corporation with a term of approximately nine years and a fixed interest rate of 3.56%.
Common Share Dividend/Distribution
Lexington declared a regular quarterly dividend/distribution, for the quarter ended September 30, 2010, of $0.10 per common share/unit, which was paid on October 15, 2010 to common shareholders/unitholders of record as of September 30, 2010.
On November 3, 2010, Lexington declared a regular quarterly dividend/distribution for the quarter ended December 31, 2010 of $0.115 per common share/unit, which will be paid on or about January 14, 2011 to common shareholders/unitholders of record as of December 31, 2010. This quarterly dividend of $0.115 per common share/unit represents a 15% increase and, subject to Board of Trustees' authorization, an expected annualized dividend of $0.46 per common share/unit.
OPERATING ACTIVITIES
Capital Recycling
During the quarter ended September 30, 2010, Lexington raised $69.7 million from four property sales at a weighted-average cap rate of 0.6%. Subsequent to quarter end, Lexington sold one vacant industrial property for $6.1 million ($30.42 psf). Year to date, Lexington has monetized 11 properties for $155.1 million at a weighted-average cap rate of 4.1%.
Investments
During the third quarter, Lexington agreed to fund up to $23.4 million for the construction of a 672,000 square foot industrial facility in Shelby, North Carolina and to acquire the property for approximately $0.3 million in excess of the construction funding commitment. The facility will be leased to Clearwater Paper Corporation for a term of 20 years upon completion of construction, which is expected to occur in the second quarter of 2011, at an initial cap rate of 8.9%. No assurance can be provided that construction will be completed or the acquisition will be consummated.
Leasing Activity
For the quarter ended September 30, 2010, Lexington executed 11 new and renewal leases for 760,000 square feet. At September 30, 2010, Lexington's overall portfolio was approximately 93% leased.
2010 EARNINGS GUIDANCE
Lexington reaffirms its estimated Company FFO guidance of a range of $0.93 to $0.97 per diluted share for the year ended December 31, 2010. This guidance is forward looking, excludes the impact of certain items and is based on current expectations.
THIRD QUARTER 2010 CONFERENCE CALL
Lexington will host a conference call today, Thursday, November 4, 2010, at 11:00 a.m. Eastern Time, to discuss its results for the quarter ended September 30, 2010. Interested parties may participate in this conference call by dialing (877) 604-9668 or (719) 325-4899. A replay of the call will be available through November 18, 2010, at (877) 870-5176 or (858) 384-5517, pin: 7174391. 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) the failure to continue to qualify as a real estate investment trust, (3) changes in general business and economic conditions, including the impact of the current global financial and credit crisis, (4) competition, (5) increases in real estate construction costs, (6) changes in interest rates, or (7) 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.
LEXINGTON REALTY TRUST AND CONSOLIDATED SUBSIDIARIES | |||||||||||||||
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS | |||||||||||||||
Three and nine months ended September 30, 2010 and 2009 | |||||||||||||||
(Unaudited and in thousands, except share and per share data) | |||||||||||||||
Three months ended | Nine months ended | ||||||||||||||
2010 | 2009 | 2010 | 2009 | ||||||||||||
Gross revenues: | |||||||||||||||
Rental | $ | 79,484 | $ | 81,574 | $ | 233,986 | $ | 245,280 | |||||||
Advisory and incentive fees | 254 | 388 | 869 | 1,434 | |||||||||||
Tenant reimbursements | 8,077 | 9,989 | 25,676 | 29,317 | |||||||||||
Total gross revenues | 87,815 | 91,951 | 260,531 | 276,031 | |||||||||||
Expense applicable to revenues: | |||||||||||||||
Depreciation and amortization | (41,165) | (42,198) | (124,497) | (127,033) | |||||||||||
Property operating | (17,418) | (19,458) | (54,331) | (57,336) | |||||||||||
General and administrative | (4,886) | (5,051) | (15,810) | (17,822) | |||||||||||
Non-operating income | 2,934 | 1,304 | 7,982 | 6,877 | |||||||||||
Interest and amortization expense | (30,958) | (31,875) | (94,453) | (97,038) | |||||||||||
Debt satisfaction gains (charges), net | (11) | 3,152 | (773) | 16,868 | |||||||||||
Change in value of forward equity commitment | 4,940 | 7,031 | 5,400 | 2,596 | |||||||||||
Impairment charges and loan losses | -- | (491) | (16,354) | (1,576) | |||||||||||
Income (loss) before provision for income taxes, equity in earnings (losses) of non-consolidated entities and discontinued operations | 1,251 | 4,365 | (32,305) | 1,567 | |||||||||||
Provision for income taxes | (451) | (658) | (1,697) | (1,649) | |||||||||||
Equity in earnings (losses) of non-consolidated entities | 5,459 | (525) | 16,066 | (130,813) | |||||||||||
Income (loss) from continuing operations | 6,259 | 3,182 | (17,936) | (130,895) | |||||||||||
Discontinued operations: | |||||||||||||||
Income (loss) from discontinued operations | 147 | (2,083) | (932) | (3,479) | |||||||||||
Provision for income taxes | -- | (6) | (14) | (70) | |||||||||||
Debt satisfaction gains, net | -- | 6,006 | 3,385 | 4,607 | |||||||||||
Gains on sales of properties | 2,025 | -- | 2,523 | 6,280 | |||||||||||
Impairment charges | (1,091) | (29,230) | (38,713) | (38,787) | |||||||||||
Total discontinued operations | 1,081 | (25,313) | (33,751) | (31,449) | |||||||||||
Net income (loss) | 7,340 | (22,131) | (51,687) | (162,344) | |||||||||||
Less net loss (income) attributable to noncontrolling interests | (1,006) | 2 | 7,153 | (1,841) | |||||||||||
Net income (loss) attributable to Lexington Realty Trust shareholders | 6,334 | (22,129) | (44,534) | (164,185) | |||||||||||
Dividends attributable to preferred shares – Series B | (1,590) | (1,590) | (4,770) | (4,770) | |||||||||||
Dividends attributable to preferred shares – Series C | (1,702) | (1,702) | (5,107) | (5,516) | |||||||||||
Dividends attributable to preferred shares – Series D | (2,926) | (2,926) | (8,777) | (8,777) | |||||||||||
Dividends attributable to non-vested common shares | (58) | (127) | (181) | (385) | |||||||||||
Conversion dividend – Series C | -- | -- | -- | (6,994) | |||||||||||
Net income (loss) attributable to common shareholders | $ | 58 | $ | (28,474) | $ | (63,369) | $ | (190,627) | |||||||
Income (loss) per common share – basic and diluted: | |||||||||||||||
Loss from continuing operations | $ | (0.01) | $ | (0.03) | $ | (0.28) | $ | (1.51) | |||||||
Income (loss) from discontinued operations | 0.01 | (0.22) | (0.21) | (0.30) | |||||||||||
Net income (loss) attributable to common shareholders | $ | 0.00 | $ | (0.25) | $ | (0.49) | $ | (1.81) | |||||||
Weighted average common shares outstanding – basic and diluted | 133,713,505 | 112,217,415 | 129,487,281 | 105,490,039 | |||||||||||
Amounts attributable to common shareholders: | |||||||||||||||
Loss from continuing operations | $ | (1,290) | $ | (3,243) | $ | (36,244) | $ | (158,833) | |||||||
Income (loss) from discontinued operations | 1,348 | (25,231) | (27,125) | (31,794) | |||||||||||
Net income (loss) attributable to common shareholders | $ | 58 | $ | (28,474) | $ | (63,369) | $ | (190,627) | |||||||
LEXINGTON REALTY TRUST AND CONSOLIDATED SUBSIDIARIES | ||||||
CONDENSED CONSOLIDATED BALANCE SHEETS | ||||||
September 30, 2010 and December 31, 2009 | ||||||
(Unaudited and in thousands, except share and per share data) | ||||||
2010 | 2009 | |||||
Assets: | ||||||
Real estate, at cost | $ | 3,417,177 | $ | 3,552,806 | ||
Less: accumulated depreciation and amortization | 605,741 | 537,406 | ||||
2,811,436 | 3,015,400 | |||||
Intangible assets, net | 212,853 | 267,161 | ||||
Cash and cash equivalents | 59,277 | 53,865 | ||||
Restricted cash | 33,166 | 21,519 | ||||
Investment in and advances to non-consolidated entities | 70,353 | 55,985 | ||||
Deferred expenses, net | 38,978 | 38,245 | ||||
Loans receivable, net | 93,409 | 60,567 | ||||
Rent receivable – current | 7,831 | 11,463 | ||||
Rent receivable – deferred | 3,802 | 12,529 | ||||
Other assets | 54,024 | 43,111 | ||||
Total assets | $ | 3,385,129 | $ | 3,579,845 | ||
Liabilities and Equity: | ||||||
Liabilities: | ||||||
Mortgages and notes payable | $ | 1,619,027 | $ | 1,857,909 | ||
Exchangeable notes payable | 61,272 | 85,709 | ||||
Convertible notes payable | 102,726 | - | ||||
Trust preferred securities | 129,120 | 129,120 | ||||
Contract right payable | 14,397 | 15,252 | ||||
Dividends payable | 19,651 | 18,412 | ||||
Accounts payable and other liabilities | 44,840 | 43,629 | ||||
Accrued interest payable | 8,804 | 11,068 | ||||
Deferred revenue - below market leases, net | 98,880 | 107,535 | ||||
Prepaid rent | 15,918 | 13,975 | ||||
2,114,635 | 2,282,609 | |||||
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 $104,760, 2,095,200 shares issued and outstanding | 101,778 | 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, 134,330,111 and 121,943,258 shares issued and outstanding in 2010 and 2009, respectively | 13 | 12 | ||||
Additional paid-in-capital | 1,846,958 | 1,750,979 | ||||
Accumulated distributions in excess of net income | (974,236) | (870,862) | ||||
Accumulated other comprehensive income (loss) | (934) | 673 | ||||
Total shareholders' equity | 1,199,668 | 1,208,669 | ||||
Noncontrolling interests | 70,826 | 88,567 | ||||
Total equity | 1,270,494 | 1,297,236 | ||||
Total liabilities and equity | $ | 3,385,129 | $ | 3,579,845 | ||
LEXINGTON REALTY TRUST AND CONSOLIDATED SUBSIDIARIES EARNINGS PER SHARE AND COMPANY FUNDS FROM OPERATIONS PER SHARE (Unaudited and in thousands, except share and per share data) | ||||||||||
Three Months Ended | Nine Months Ended | |||||||||
2010 | 2009 | 2010 | 2009 | |||||||
EARNINGS PER SHARE: | ||||||||||
Basic and Diluted: | ||||||||||
Loss from continuing operations attributable to common shareholders | $ | (1,290) | $ | (3,243) | $ | (36,244) | $ | (158,833) | ||
Income (loss) from discontinued operations attributable to common shareholders | 1,348 | (25,231) | (27,125) | (31,794) | ||||||
Net income (loss) attributable to common shareholders | $ | 58 | $ | (28,474) | $ | (63,369) | $ | (190,627) | ||
Weighted average number of common shares outstanding | 133,713,505 | 112,217,415 | 129,487,281 | 105,490,039 | ||||||
Income (loss) per common share: | ||||||||||
Loss from continuing operations | $ | (0.01) | $ | (0.03) | $ | (0.28) | $ | (1.51) | ||
Income (loss) from discontinued operations | 0.01 | (0.22) | (0.21) | (0.30) | ||||||
Net income (loss) attributable to common shareholders | $ | 0.00 | $ | (0.25) | $ | (0.49) | $ | (1.81) | ||
Three Months Ended | Nine Months Ended | ||||||||||
2010 | 2009 | 2010 | 2009 | ||||||||
COMPANY FUNDS FROM OPERATIONS: (1) | |||||||||||
Basic and Diluted: | |||||||||||
Net income (loss) attributable to common shareholders | $ | 58 | $ | (28,474) | $ | (63,369) | $ | (190,627) | |||
Adjustments: | |||||||||||
Depreciation and amortization | 40,325 | 44,994 | 123,805 | 136,404 | |||||||
Noncontrolling interests - OP units | 687 | 221 | 1,443 | 933 | |||||||
Amortization of leasing commissions | 854 | 787 | 2,621 | 2,269 | |||||||
Joint venture and noncontrolling interest adjustment | (1,131) | (910) | (1,977) | 5,381 | |||||||
Preferred dividends - Series C | 1,702 | 1,702 | 5,107 | 12,510 | |||||||
Gains on sale of properties | (2,025) | -- | (2,523) | (6,280) | |||||||
Gain on sale of marketable securities | -- | (19) | -- | (19) | |||||||
Interest and amortization on 6.00% Convertible Notes | 2,325 | -- | 6,283 | -- | |||||||
Company FFO | $ | 42,795 | $ | 18,301 | $ | 71,390 | $ | (39,429) | |||
Basic and Diluted: | |||||||||||
Weighted average common shares outstanding - EPS | 133,713,505 | 112,217,415 | 129,487,281 | 105,490,039 | |||||||
6.00% Convertible Notes | 16,230,905 | -- | 14,698,029 | -- | |||||||
Non-vested share-based payment awards | 67,785 | -- | 57,080 | -- | |||||||
Operating Partnership Units | 5,037,207 | 5,599,397 | 5,267,260 | 5,449,726 | |||||||
Preferred Shares – Series C | 5,099,507 | 4,950,907 | 5,099,507 | 5,461,335 | |||||||
Weighted average common shares outstanding | 160,148,909 | 122,767,719 | 154,609,157 | 116,401,100 | |||||||
Company FFO per common share | $ | 0.27 | $ | 0.15 | $ | 0.46 | $ | (0.34) | |||
(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
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