Lexington Realty Trust Reports Third Quarter 2011 Results and Increases Quarterly Common Share Dividend By 8.7%

Nov 03, 2011, 07:30 ET from Lexington Realty Trust

NEW YORK, Nov. 3, 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 third quarter ended September 30, 2011.

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Third Quarter 2011 Highlights

  • Generated Company Funds From Operations ("Company FFO") of $41.4 million or $0.23 per diluted common share/unit, adjusted for certain items.
  • Executed 11 new and renewal leases, totaling approximately 1.2 million square feet.
  • Raised $15.6 million of gross proceeds from dispositions.
  • Entered into three build-to-suit contracts for an aggregate total project cost of $72.6 million.
  • Acquired an office property in Columbus, Ohio for $6.1 million and invested $13.7 million in build-to-suit projects.

T. Wilson Eglin, President and Chief Executive Officer of Lexington, stated, "We have had success this year in executing our business plan by completing asset sales of $145.0 million at a weighted-average capitalization rate of 6.8%, reducing debt by $80.0 million, raising overall portfolio occupancy from 93.4% to 95.6% and funding $163.8 million of investments, which have a current weighted-average yield of 9.5%. The quarterly common share dividend increase announced today reflects our solid operating results and our confidence in our future prospects. Even with this increase, we believe our new dividend payout ratio will continue to be conservative in relation to our Company funds from operations."

FINANCIAL RESULTS

Revenues

For the quarter ended September 30, 2011, total gross revenues were $84.0 million, compared with total gross revenues of $82.4 million for the quarter ended September 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 Reported 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,

2011

Per Diluted Share/Unit

2010

Per Diluted Share/Unit

2011

Per Diluted Share/Unit

2010

Per Diluted Share/Unit

Reported Company FFO(A)

$

4.3

$

0.02

$

42.8

$

0.27

$

11.2

$

0.06

$

71.4

$

0.46

Acquisition Costs

0.1

0.7

Debt satisfaction charges (gains), net

0.6

(2.6)

Forward equity commitment

9.9

(4.9)

4.3

(5.4)

Impairment losses – real estate

26.1

1.1

114.8

51.2

Impairment losses – consolidated debt investments

3.9

Impairment losses – real estate noncontrolling interests

(1.0)

(12.8)

(9.5)

Impairment loss – JV

3.3

4.8

Gains on loan sales – JV

(1.9)

(1.9)

Other

0.6

0.1

2.4

0.4

Company FFO, as adjusted

$

41.4

$

0.23 (B)

$

39.1

$

0.25 (B)

$

124.1

$

0.71(B)

$

109.4

$

0.72(B)

(A)

A reconciliation of GAAP net income (loss) to Reported 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 (3,533,848), (3,305,015), (3,468,421) and (3,312,724) for the three months ended September 30, 2011 and 2010 and nine months ended September 30, 2011 and 2010, respectively.

Net Income (Loss) Attributable to Common Shareholders

For the quarter ended September 30, 2011, net loss attributable to common shareholders was $(37.0) million, or a loss of $(0.24) per diluted share, compared with net income attributable to common shareholders for the quarter ended September 30, 2010 of $58 thousand, or income of $0.00 per diluted share.

Common Share Dividend/Distribution

On November 1, 2011, Lexington declared a regular quarterly dividend/distribution for the quarter ended December 31, 2011 of $0.125 per common share/unit, which will be paid on or about January 17, 2012 to common shareholders/unitholders of record as of December 30, 2011. This quarterly dividend of $0.125 per common share/unit represents an 8.7% increase and, subject to the Board of Trustees' authorization, an expected annualized dividend of $0.50 per common share/unit.

Lexington also declared cash dividends of $0.503125 per Series B Cumulative Redeemable Preferred Share, $0.8125 per Series C Cumulative Convertible Preferred Share and $0.471875 per Series D Cumulative Redeemable Preferred Share. The Series B and Series C Preferred Share dividends are payable on or about February 15, 2012, to shareholders of record of the Series B and Series C Preferred Shares as of January 31, 2012. The Series D Preferred Share dividend is payable on or about January 17, 2012, to shareholders of record of the Series D Preferred Shares as of December 30, 2011.

During the quarter ended September 30, 2011, Lexington declared a regular quarterly dividend/distribution of $0.115 per common share/unit, which was paid on October 17, 2011 to common shareholders/unitholders of record as of September 30, 2011.

OPERATING ACTIVITIES

Investments

Property Acquisitions. During the third quarter of 2011, Lexington completed the following acquisition:

  • acquired a 42,000 square foot office property in Columbus, Ohio for $6.1 million (9.1% initial cap rate, 2.0% annual increases commencing in year three). At closing, the property was net-leased to the seller for a 16-year term.

In addition, subsequent to quarter end, Lexington acquired a 475,000 square foot distribution facility in Chillicothe, Ohio for $12.1 million (8.2% initial cap rate, 2% annual increases). The facility is net-leased for approximately 15 years.

New Build-to-Suit Transactions. During the third quarter of 2011, Lexington entered into the following build-to-suit transactions:

  • acquired 5.8 acres in Florence, South Carolina and contracted to develop a 32,000 square foot office property for a total project cost of $5.1 million (10.0% initial cap rate, 2% annual increases). Completion is expected to occur in March 2012 and the property will be net-leased for a term of 12 years.
  • formed a joint venture to construct a 143,000 square foot distribution facility in Long Island City, New York. A Lexington subsidiary is expected to contribute $46.7 million to fund the construction of the facility (8.5% initial cap rate, 7.5% increases every five years). Completion is expected to occur in February 2013 and the property will be net-leased for a term of 15 years.
  • contracted to develop a 150,000 square foot office building in Jessup, Pennsylvania (Scranton-Wilkes-Barre, PA-CBSA) for a total project cost of $20.8 million (9.2% initial cap rate, 2% annual increases).  Completion is expected to occur in May 2012 and the property will be subject to a 15 year net-lease commencing in August 2012.

In addition, Lexington continues to fund the construction of the previously announced build-to-suit projects in (1) Saint Joseph, Missouri (9.5% initial cap rate), (2) Huntington, West Virginia (9.4% initial cap rate) and (3) Shreveport, Louisiana (9.5% initial cap rate). These three projects aggregate $44.1 million of which $15.4 million had been funded as of September 30, 2011.

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 third quarter of 2011, Lexington disposed of three properties to unrelated parties for an aggregate gross sales price of $15.6 million, representing a weighted-average cap rate of 5.6%. Total year-to-date disposition activity is $145.0 million at a weighted-average cap rate of 6.8%.

Leasing Activity

For the quarter ended September 30, 2011, 11 new and renewal leases for 1.2 million square feet were executed in Lexington's portfolio. This brings total year-to-date leases signed through September 30, 2011 to 44  encompassing 4.4 million square feet. At September 30, 2011, Lexington's overall portfolio was 95.6% leased.

2011 EARNINGS GUIDANCE

Lexington's estimate of Company FFO is now $0.91 to $0.93 per diluted share for the year ended December 31, 2011 compared to prior guidance of $0.90 of $0.93 per diluted share. This guidance is forward looking, excludes the impact of certain items and is based on current expectations.

THIRD QUARTER 2011 CONFERENCE CALL

Lexington will host a conference call today, Thursday, November 3, 2011, at 11:00 a.m. Eastern Time, to discuss its results for the quarter ended September 30, 2011. Interested parties may participate in this conference call by dialing 866-431-5320 or 719-457-2706. A replay of the call will be available through November 17, 2011, at 877-870-5176 or 858-384-5517, pin: 1336545. 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 expected annualized dividend paid in 2012 of $0.50 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, (9) changes in accessibility of debt and equity capital markets, including with respect to financings that Lexington is working on, or (10) future impairment charges. 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 nine months ended September 30, 2011 and 2010

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

Three Months Ended

September 30,

Nine Months Ended

September 30,

2011

2010

2011

2010

Gross revenues:

Rental

$

74,937

$

74,210

$

221,645

$

218,312

Advisory and incentive fees

303

254

1,750

869

Tenant reimbursements

8,808

7,920

25,164

24,735

Total gross revenues

84,048

82,384

248,559

243,916

Expense applicable to revenues:

Depreciation and amortization

(42,247)

(38,767)

(122,841)

(117,010)

Property operating

(17,196)

(15,701)

(50,020)

(48,714)

General and administrative

(5,080)

(4,882)

(16,066)

(15,794)

Non-operating income

3,369

2,918

9,103

7,963

Interest and amortization expense

(27,230)

(29,739)

(81,197)

(90,246)

Debt satisfaction gains (charges), net

(6)

(11)

3

(773)

Change in value of forward equity commitment

(9,866)

4,940

(4,318)

5,400

Impairment charges and loan losses

(23,916)

(80,407)

(6,879)

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

(38,124)

1,142

(97,184)

(22,137)

Benefit (provision) for income taxes

(277)

(450)

1,014

(1,692)

Equity in earnings of non-consolidated entities

9,047

5,459

20,646

16,066

Income (loss) from continuing operations

(29,354)

6,151

(75,524)

(7,763)

Discontinued operations:

Income (loss) from discontinued operations

473

257

1,512

(1,625)

Provision for income taxes

(1)

(2)

(8)

(19)

Debt satisfaction gains (charges), net

(603)

3,385

Gains on sales of properties

182

2,025

5,251

2,523

Impairment charges

(2,144)

(1,091)

(34,422)

(48,188)

Total discontinued operations

(1,490)

1,189

(28,270)

(43,924)

Net income (loss)

(30,844)

7,340

(103,794)

(51,687)

Less net (income) loss attributable to noncontrolling interests

(70)

(1,006)

11,183

7,153

Net income (loss) attributable to Lexington Realty Trust shareholders

(30,914)

6,334

(92,611)

(44,534)

Dividends attributable to preferred shares - Series B

(1,590)

(1,590)

(4,770)

(4,770)

Dividends attributable to preferred shares - Series C

(1,675)

(1,702)

(5,055)

(5,107)

Dividends attributable to preferred shares - Series D

(2,926)

(2,926)

(8,777)

(8,777)

Dividends attributable to non-vested common shares

(72)

(58)

(227)

(181)

Redemption discount - Series C

129

215

Net income (loss) attributable to common shareholders

$

(37,048)

$

58

$

(111,225)

$

(63,369)

Income (loss) per common share - basic and diluted:

Loss from continuing operations

$

(0.23)

$

(0.01)

$

(0.55)

$

(0.23)

Income (loss) from discontinued operations

(0.01)

0.01

(0.18)

(0.26)

Net income (loss) attributable to common shareholders

$

(0.24)

$

0.00

$

(0.73)

$

(0.49)

Weighted-average common shares outstanding - basic and diluted

157,205,530

133,713,505

151,676,401

129,487,281

Amounts attributable to common shareholders:

Loss from continuing operations

$

(35,709)

$

(1,430)

$

(83,569)

$

(29,477)

Income (loss) from discontinued operations

(1,339)

1,488

(27,656)

(33,892)

Net income (loss) attributable to common shareholders

$

(37,048)

$

58

$

(111,225)

$

(63,369)

 LEXINGTON REALTY TRUST AND CONSOLIDATED SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

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

(In thousands, except share and per share data)

2011

2010

Assets:

Real estate, at cost

$

3,163,209

$

3,363,586

Investments in real estate under construction

22,403

11,258

Less: accumulated depreciation and amortization

614,176

601,239

2,571,436

2,773,605

Property held for sale - discontinued operations

7,025

7,316

Intangible assets, net

182,068

203,495

Cash and cash equivalents

71,499

52,644

Restricted cash

27,594

26,644

Investment in and advances to non-consolidated entities

106,637

72,480

Deferred expenses, net

46,267

39,912

Loans receivable, net

86,445

88,937

Rent receivable - current

7,399

7,498

Rent receivable - deferred

4,863

6,293

Other assets

52,546

56,172

Total assets

$

3,163,779

$

3,334,996

Liabilities and Equity:

Liabilities:

Mortgages and notes payable

$

1,400,486

$

1,481,216

Exchangeable notes payable

61,936

61,438

Convertible notes payable

104,664

103,211

Trust preferred securities

129,120

129,120

Dividends payable

24,348

23,071

Liabilities - discontinued operations

4,579

3,876

Accounts payable and other liabilities

55,801

51,292

Accrued interest payable

8,760

13,989

Deferred revenue - below market leases, net

82,104

96,490

Prepaid rent

15,993

15,164

1,887,791

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 $103,065 and $104,760; 2,061,304 and 2,095,200 shares issued and outstanding in 2011 and 2010, respectively

100,132

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, 157,895,816 and 146,552,589 shares issued and outstanding in 2011 and 2010, respectively

16

15

Additional paid-in-capital

2,039,254

1,937,942

Accumulated distributions in excess of net income

(1,149,747)

(985,562)

Accumulated other comprehensive income (loss)

1,236

(106)

Total shareholders' equity

1,216,980

1,280,156

Noncontrolling interests

59,008

75,973

Total equity

1,275,988

1,356,129

Total liabilities and equity

$

3,163,779

$

3,334,996

LEXINGTON REALTY TRUST AND CONSOLIDATED SUBSIDIARIES

REPORTED COMPANY FUNDS FROM OPERATIONS PER SHARE

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

Three Months Ended

September 30,

Nine Months Ended

September 30,

2011

2010

2011

2010

REPORTED COMPANY FUNDS FROM OPERATIONS: (1)

Basic and Diluted:

Net income (loss) attributable to common shareholders

$

(37,048)

$

58

$

(111,225)

$

(63,369)

Adjustments:

Depreciation and amortization

41,279

40,325

120,797

123,805

Noncontrolling interests - OP units

643

687

(315)

1,443

Amortization of leasing commissions

975

854

2,848

2,621

Joint venture and noncontrolling interest adjustment

(5,272)

(1,131)

(7,491)

(1,977)

Preferred dividends - Series C

1,546

1,702

4,840

5,107

Gains on sales of properties

(182)

(2,025)

(5,251)

(2,523)

Interest and amortization on 6.00% Convertible Notes

2,327

2,325

6,980

6,283

Reported Company FFO

$

4,268

$

42,795

$

11,183

$

71,390

Basic:

Weighted-average common shares outstanding - basic

157,205,530

133,713,505

151,676,401

129,487,281

6.00% Convertible Notes

16,230,905

16,230,905

16,230,905

14,698,029

Non-vested share-based payment awards

112,473

67,785

118,572

57,080

Operating Partnership Units

4,618,948

5,037,207

4,779,896

5,267,260

Preferred Shares - Series C

5,044,564

5,099,507

5,066,264

5,099,507

Weighted-average common shares outstanding

183,212,420

160,148,909

177,872,038

154,609,157

Reported Company FFO per common share - Basic

$

0.02

$

0.27

$

0.06

$

0.46

Diluted:

Weighted-average common shares outstanding - basic

157,205,530

133,713,505

151,676,401

129,487,281

6.00% Convertible Notes

16,230,905

16,230,905

16,230,905

14,698,029

Non-vested share-based payment awards

112,473

67,785

118,572

57,080

Operating Partnership Units

4,618,948

5,037,207

4,779,896

5,267,260

Preferred Shares - Series C

5,044,564

5,099,507

5,066,264

5,099,507

Options - Incremental shares

116,970

269,396

Weighted-average common shares outstanding

183,329,390

160,148,909

178,141,434

154,609,157

Reported Company FFO per common share - Diluted

$

0.02

$

0.27

$

0.06

$

0.46

LEXINGTON REALTY TRUST AND CONSOLIDATED SUBSIDIARIES

EARNINGS PER SHARE

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

Three Months Ended

September 30,

Nine Months Ended

September 30,

2011

2010

2011

2010

EARNINGS PER SHARE:

Basic and Diluted:

Loss from continuing operations attributable to common shareholders

$

(35,709)

$

(1,430)

$

(83,569)

$

(29,477)

Income (loss) from discontinued operations attributable to common shareholders

(1,339)

1,488

(27,656)

(33,892)

Net income (loss) attributable to common shareholders

$

(37,048)

$

58

$

(111,225)

$

(63,369)

Weighted-average number of common shares outstanding

157,205,530

133,713,505

151,676,401

129,487,281

Income (loss) per common share:

Loss from continuing operations

$

(0.23)

$

(0.01)

$

(0.55)

$

(0.23)

Income (loss) from discontinued operations

(0.01)

0.01

(0.18)

(0.26)

Net income (loss) attributable to common shareholders

$

(0.24)

$

0.00

$

(0.73)

$

(0.49)

(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