LXP LXP Industrial Trust

Lexington Realty Trust (“Lexington”) (NYSE:LXP), a real estate investment trust focused on single-tenant real estate investments, today announced results for the first quarter ended March 31, 2015.

First Quarter 2015 Highlights

• Generated Company Funds From Operations (“Company FFO”) of $64.5 million, or $0.26 per diluted common share.
• Raised low end of 2015 FFO guidance by $0.01 per share to new range of $1.01 - $1.05 per share.
• Acquired five properties for $197.3 million.
• Invested $21.5 million in on-going build-to-suit projects and agreed to acquire an industrial property for $29.7 million.
• Disposed of three office buildings for gross disposition proceeds of $35.2 million.
• Retired $113.6 million of secured debt and closed $80.8 million of long-term financing with a weighted-average fixed interest rate of 3.7% and a weighted-average term of approximately 12 years.
• Completed 0.9 million square feet of new leases and lease extensions with overall portfolio 96.7% leased.
• Leased Lakewood, CO office property subsequent to quarter end.

T. Wilson Eglin, President and Chief Executive Officer of Lexington, stated, “We believe both our investment activity and leasing results were outstanding in the first quarter. We ended the quarter with our portfolio 96.7% leased, a 30 basis point improvement compared to the prior quarter. As we look ahead, we have just one office lease expiring over the balance of the year and are in renewal discussions with most of our tenants with office leases expiring next year.”

Mr. Eglin continued, “We made meaningful progress on our portfolio repositioning effort, disposing of three office properties and acquiring five properties for $197.3 million, the majority of which were industrial properties subject to long-term net leases. These efforts continue the diversification of our portfolio to include more properties with long-term net leases, typically with lower capital expenditure requirements. The steps that we have taken in the last year have extended the weighted-average lease term in our portfolio from 11.1 years to 12.4 years. In addition, we have taken further advantage of market conditions to enhance our capital structure by unencumbering assets, retiring short-term secured debt, lowering our borrowing costs and extending our debt maturities.”

FINANCIAL RESULTS

Revenues

For the quarter ended March 31, 2015, total gross revenues were $108.6 million, compared with total gross revenues of $104.1 million for the quarter ended March 31, 2014. The increase is primarily due to property acquisitions.

Company FFO

For the quarter ended March 31, 2015, Lexington generated Company FFO of $64.5 million, or $0.26 per diluted share, compared to Company FFO for the quarter ended March 31, 2014 of $66.5 million, or $0.28 per diluted share. The calculation of Company FFO and a reconciliation to net income (loss) attributable to common shareholders is included later in this press release.

Dividends/Distributions

Lexington declared a regular quarterly common share/unit dividend/distribution for the quarter ended March 31, 2015 of $0.17 per common share/unit, which was paid on April 15, 2015 to common shareholders/unitholders of record as of March 31, 2015, and a dividend of $0.8125 per share on its Series C Cumulative Convertible Preferred Stock (“Series C Preferred Shares”), which will be paid on May 15, 2015 to Series C Preferred Shareholders of record as of April 30, 2015.

Net Income (Loss) Attributable to Common Shareholders

For the quarter ended March 31, 2015, net income attributable to common shareholders was $31.8 million, or $0.14 per diluted share, compared with a net loss attributable to common shareholders for the quarter ended March 31, 2014 of $(0.8) million, or $(–) per diluted share.

OPERATING ACTIVITIES

Investment Activity

During the quarter, the Company acquired five properties, each of which is subject to a lease having a term in excess of ten years (an “LTL”).

Acquisitions
Tenant/Guarantor		Location		Property Type		InitialBasis($000)				InitialAnnualizedCash Rent($000)				InitialCashYield				EstimatedGAAPYield				LeaseTerm (Yrs)
Faurecia USA Holdings, Inc.		Auburn Hills, MI		LTL - Office		$	40,025			$	3,105				7.8	%			8.9	%		14
Spitzer Industries, Inc.(1)		Houston and Brookshire, TX		LTL - Industrial		51,100				3,577					7.0	%			8.5	%		20
Nissan North America, Inc.		Canton, MS		LTL - Industrial		89,300				5,702					6.4	%			6.9	%		12
Littlestone Brotherhood LLC		Venice, FL		LTL - Land/Infrastructure		16,850				1,264					7.5	%			11.3	%		40
						$	197,275			$	13,648				6.9	%			8.1	%
1. Spitzer Industries, Inc. is the guarantor of two individual leases. Curtis Kelly, Inc. (Houston, TX) and Orizon Industries, Inc. (Brookshire, TX) are the tenants.

 

The Company also funded $21.5 million of the projected costs of the following projects:

On-going Build-to-Suit Projects
Location		Sq. Ft.			Property Type		Lease Term(Years)		MaximumCommitment/EstimatedCompletion Cost($000)				GAAP InvestmentBalance as of3/31/2015($000)				Estimated Completion Date
Oak Creek, WI		164,000			LTL - Industrial		20		$	22,609			$	16,362			2Q 15
Thomson, GA		208,000			LTL - Industrial		15		10,245				6,574				2Q 15
Richmond, VA		330,000			LTL - Office		15		110,137				73,617				3Q 15
Lake Jackson, TX		664,000			LTL - Office		20		166,164				29,018				4Q 16
Houston, TX(1)		274,000			LTL - Retail/Specialty		20		86,491				17,292				3Q 16
		1,640,000							$	395,646			$	142,863
1. Lexington has a 25% interest as of March 31, 2015. Lexington may provide construction financing up to $56.7 million to the joint venture.

 

In addition, the Company has committed to acquire the following properties upon completion of construction.

Forward Commitments
Location		PropertyType		Estimated Acquisition Cost($000)				Lease Term (Years)		Estimated InitialCash Yield				Estimated GAAPYield				Estimated Completion Date
Richland, WA		LTL - Industrial		$	155,000			20			7.1	%			8.6	%		4Q 15
Detroit, MI		LTL - Industrial		29,680				20			7.4	%			7.4	%		1Q 16
				$	184,680						7.2	%			8.4	%

Capital Recycling

Property Dispositions

Tenant

Location

Property Type

Gross DispositionPrice($000)

AnnualizedNOI($000)

Month of Disposition

Baker Hughes, Inc.(1)

Houston, TX

Office

$

4,950

$

925

March

Vacant(2)

Issaquah, WA

Office

30,293

—

March

$

35,243

$

925

1. $2.2 million secured debt satisfied at closing. Tenant lease expires 09/2015.

2. Two properties. Deed-in-lieu of foreclosure to satisfy $30.3 million of non-recourse mortgage debt.

 

Balance Sheet

During the first quarter of 2015, Lexington satisfied $113.6 million of secured debt with a weighted-average interest rate of 5.6%, unencumbering six properties with estimated 2015 annual net operating income of approximately $13.9 million.

During the first quarter of 2015, Lexington obtained the following secured loans:

Tenant/Guarantor		Location		Property Type		Amount($000)				Fixed Rate			Maturity Date
ZE-45 Ground Tenant LLC		New York, NY		LTL - Land/Infrastructure		$	29,193			4.1	%		01/2025
FedEx Corporation		Long Island City, NY		LTL - Industrial		51,650				3.5	%		03/2028
						$	80,843			3.7	%

The properties generate annual net operating income of approximately $6.3 million.

Leasing

During the first quarter of 2015, Lexington executed the following new and extended leases:

		LEASE EXTENSIONS
		Location			Prior Term		Lease Expiration Date		Sq. Ft.
		Office/Multi-Tenant Office
1		Los Angeles, CA			08/2015		08/2018		20,203
2		Westerville, OH			09/2015		03/2026		97,000
3		Rock Hill, SC			03/2034		03/2039		104,497
4		Irving, TX			03/2023		02/2025		247,254
5		Mission, TX			06/2015		06/2020		75,016
6-8		Various			2015		2016-2017		1,328
8		Total office lease extensions							545,298
		Industrial
1		Plymouth, IN			06/2015		12/2016		300,500
1		Total industrial lease extensions							300,500
9		Total lease extensions							845,798
		NEW LEASES
		Location					Lease Expiration Date		Sq. Ft.
		Office/Multi-Tenant Office
1		Louisville, CO					05/2023		20,000
2		Baltimore, MD					03/2028		15,338
3		Harrisburg, PA					10/2025		23,535
3		Total new leases							58,873
12		TOTAL NEW AND EXTENDED LEASES							904,671

2015 EARNINGS GUIDANCE

Lexington raised the low end of its Company FFO guidance by $0.01 per share to an expected range of $1.01 to $1.05 per diluted share for the year ended December 31, 2015. This guidance is forward looking, excludes the impact of certain items and is based on current expectations.

FIRST QUARTER 2015 CONFERENCE CALL

Lexington will host a conference call today, Thursday, May 7, 2015, at 11:00 a.m. Eastern Time, to discuss its results for the quarter ended March 31, 2015. Interested parties may participate in this conference call by dialing (877) 407-0789 or (201) 689-8562. A replay of the call will be available through May 21, 2015, at (877) 870-5176 or (858) 384-5517, pin: 13606775. A live webcast of the conference call will be available at www.lxp.com within the Investors section.

ABOUT LEXINGTON REALTY TRUST

Lexington Realty Trust is a real estate investment trust that owns a diversified portfolio of equity and debt interests in single-tenant commercial properties and land. Lexington seeks to expand its portfolio through acquisitions, sale-leaseback transactions, build-to-suit arrangements and other transactions. A majority of these properties and all land interests are subject to net or similar leases, where the tenant bears all or substantially all of the operating costs, including cost increases, for real estate taxes, utilities, insurance and ordinary repairs. Lexington also provides investment advisory and asset management services to investors in the single-tenant area. Lexington common 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, including those necessary to achieve an annualized dividend level of $0.68 per common share/unit, (2) Lexington's ability to achieve its estimate of Company FFO for the year ending December 31, 2015, (3) the successful consummation of any lease, acquisition, build-to-suit, financing or other transaction, (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 any legislation, (6) competition, (7) increases in real estate construction costs, (8) changes in interest rates, (9) changes in accessibility of debt and equity capital markets, and (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”, “may,” “plans,” “predicts,” “will,” “will likely result,” “is optimistic,” “goal,” “objective” or similar expressions. Except as required by law, 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, some of which are consolidated for financial statement purposes and/or disregarded for income tax purposes.

 

LEXINGTON REALTY TRUST AND CONSOLIDATED SUBSIDIARIESCONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS(Unaudited and in thousands, except share and per share data)

 

	Three months ended March 31,
	2015				2014
Gross revenues:
Rental	$	100,016			$	96,365
Advisory and incentive fees	146				122
Tenant reimbursements	8,426				7,651
Total gross revenues	108,588				104,138
Expense applicable to revenues:
Depreciation and amortization	(40,274		)		(37,947		)
Property operating	(16,582		)		(15,621		)
General and administrative	(7,822		)		(8,037		)
Non-operating income	2,468				2,951
Interest and amortization expense	(23,003		)		(23,816		)
Debt satisfaction gains (charges), net	10,375				(3,304		)
Impairment charges	(1,139		)		(16,400		)
Gain on sale of property	148				—
Income before provision for income taxes, equity in earnings of non-consolidated entities and discontinued operations	32,759				1,964
Provision for income taxes	(441		)		(591		)
Equity in earnings of non-consolidated entities	366				281
Income from continuing operations	32,684				1,654
Discontinued operations:
Income from discontinued operations	110				2,487
Provision for income taxes	—				(18		)
Gain on sale of property	1,577				—
Impairment charges	—				(2,309		)
Total discontinued operations	1,687				160
Net income	34,371				1,814
Less net income attributable to noncontrolling interests	(866		)		(928		)
Net income attributable to Lexington Realty Trust shareholders	33,505				886
Dividends attributable to preferred shares – Series C	(1,572		)		(1,572		)
Allocation to participating securities	(104		)		(153		)
Net income (loss) attributable to common shareholders	$	31,829			$	(839	)
Income (loss) per common share – basic:
Income (loss) from continuing operations	$	0.13			$	—
Income from discontinued operations	0.01				—
Net income (loss) attributable to common shareholders	$	0.14			$	—
Weighted-average common shares outstanding – basic	232,525,675				227,156,690
Income (loss) per common share – diluted:
Income (loss) from continuing operations	$	0.13			$	—
Income from discontinued operations	0.01				—
Net income (loss) attributable to common shareholders	$	0.14			$	—
Weighted-average common shares outstanding – diluted	232,957,265				227,156,690
Amounts attributable to common shareholders:
Income (loss) from continuing operations	$	30,142			$	(980	)
Income from discontinued operations	1,687				141
Net income (loss) attributable to common shareholders	$	31,829			$	(839	)

 

LEXINGTON REALTY TRUST AND CONSOLIDATED SUBSIDIARIESCONDENSED CONSOLIDATED BALANCE SHEETS(Unaudited and in thousands, except share and per share data)

 

	March 31, 2015				December 31, 2014
Assets:
Real estate, at cost	$	3,828,966			$	3,671,560
Real estate - intangible assets	732,080				705,566
Investments in real estate under construction	125,571				106,238
	4,686,617				4,483,364
Less: accumulated depreciation and amortization	1,235,733				1,196,114
Real estate, net	3,450,884				3,287,250
Assets held for sale	—				3,379
Cash and cash equivalents	54,821				191,077
Restricted cash	17,290				17,379
Investment in and advances to non-consolidated entities	21,836				19,402
Deferred expenses, net	67,827				65,860
Loans receivable, net	105,827				105,635
Rent receivable – current	9,692				6,311
Rent receivable – deferred	74,541				61,372
Other assets	24,240				20,229
Total assets	$	3,826,958			$	3,777,894
Liabilities and Equity:
Liabilities:
Mortgages and notes payable	$	901,328			$	945,216
Credit facility borrowings	93,000				—
Term loans payable	505,000				505,000
Senior notes payable	497,743				497,675
Convertible notes payable	15,152				15,664
Trust preferred securities	129,120				129,120
Dividends payable	43,202				42,864
Liabilities held for sale	—				2,843
Accounts payable and other liabilities	32,915				37,740
Accrued interest payable	13,112				8,301
Deferred revenue - including below market leases, net	66,162				68,215
Prepaid rent	23,745				16,336
Total liabilities	2,320,479				2,268,974
Commitments and contingencies
Equity:
Preferred shares, par value $0.0001 per share; authorized 100,000,000 shares:
Series C Cumulative Convertible Preferred, liquidation preference $96,770; 1,935,400 shares issued and outstanding	94,016				94,016
Common shares, par value $0.0001 per share; authorized 400,000,000 shares, 234,819,421 and 233,278,037 shares issued and outstanding in 2015 and 2014, respectively	23				23
Additional paid-in-capital	2,772,841				2,763,374
Accumulated distributions in excess of net income	(1,379,929		)		(1,372,051		)
Accumulated other comprehensive income (loss)	(3,692		)		404
Total shareholders’ equity	1,483,259				1,485,766
Noncontrolling interests	23,220				23,154
Total equity	1,506,479				1,508,920
Total liabilities and equity	$	3,826,958			$	3,777,894

 

LEXINGTON REALTY TRUST AND CONSOLIDATED SUBSIDIARIES
EARNINGS PER SHARE
(Unaudited and in thousands, except share and per share data)
			Three Months EndedMarch 31,
			2015				2014
EARNINGS PER SHARE:
Basic:
Income (loss) from continuing operations attributable to common shareholders			$	30,142			$	(980	)
Income from discontinued operations attributable to common shareholders			1,687				141
Net income (loss) attributable to common shareholders			$	31,829			$	(839	)
Weighted-average number of common shares outstanding			232,525,675				227,156,690
Income (loss) per common share:
Income (loss) from continuing operations			$	0.13			$	—
Income from discontinued operations			0.01				—
Net income (loss) attributable to common shareholders			$	0.14			$	—
Diluted:
Income (loss) from continuing operations attributable to common shareholders - basic			$	30,142			$	(980	)
Impact of assumed conversions:
Share options			—				—
Income (loss) from continuing operations attributable to common shareholders			30,142				(980		)
Income from discontinued operations attributable to common shareholders - basic			1,687				141
Impact of assumed conversions:
Share options			—				—
Income from discontinued operations attributable to common shareholders			1,687				141
Net income (loss) attributable to common shareholders			$	31,829			$	(839	)
Weighted-average common shares outstanding - basic			232,525,675				227,156,690
Effect of dilutive securities:
Share options			431,590				—
Weighted-average common shares outstanding			232,957,265				227,156,690
Income (loss) per common share:
Income (loss) from continuing operations			$	0.13			$	—
Income from discontinued operations			0.01				—
Net income (loss) attributable to common shareholders			$	0.14			$	—

 

           

LEXINGTON REALTY TRUST AND CONSOLIDATED SUBSIDIARIES
COMPANY FUNDS FROM OPERATIONS & FUNDS AVAILABLE FOR DISTRIBUTION
(Unaudited and in thousands, except share and per share data)
				Three Months Ended March 31,
				2015				2014
FUNDS FROM OPERATIONS: (1)
Basic and Diluted:
Net income (loss) attributable to common shareholders				$	31,829			$	(839	)
Adjustments:
	Depreciation and amortization			38,922				39,939
	Impairment charges - real estate			1,139				18,709
	Noncontrolling interests - OP units			550				581
	Amortization of leasing commissions			1,352				1,454
	Joint venture and noncontrolling interest adjustment			321				633
	Gains on sales of properties, net of tax			(1,725		)		—
FFO available to common shareholders and unitholders - basic				72,388				60,477
	Preferred dividends			1,572				1,572
	Interest and amortization on 6.00% Convertible Guaranteed Notes			319				579
	Amount allocated to participating securities			104				153
FFO available to common shareholders and unitholders - diluted				74,383				62,781
	Debt satisfaction (gains) charges, net			(10,375		)		3,304
	Other / Transaction costs			468				372
Company FFO available to common shareholders and unitholders - diluted				64,476				66,457
FUNDS AVAILABLE FOR DISTRIBUTION: (2)
Adjustments:
	Straight-line rents			(5,309		)		(577		)
	Lease incentives			457				437
	Amortization of below/above market leases			(621		)		264
	Non-cash interest, net			(635		)		(1,152		)
	Non-cash charges, net			2,256				2,301
	Tenant improvements			(1,081		)		(2,419		)
	Lease costs			(1,420		)		(3,985		)
Company Funds Available for Distribution				$	58,123			$	61,326
Per Common Share and Unit Amounts
Basic:
	FFO			$	0.31			$	0.26
Diluted:
	FFO			$	0.30			$	0.26
	Company FFO			$	0.26			$	0.28
	Company FAD			$	0.24			$	0.25
Weighted-Average Common Shares:
	Basic(3)			236,378,649				231,037,595
	Diluted			244,045,197				240,619,535

 

1 Lexington believes that Funds from Operations (“FFO”), which is not a measure under generally accepted accounting principles (“GAAP”), is a widely recognized and appropriate measure of the performance of an equity REIT. 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 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.

The National Association of Real Estate Investment Trusts, Inc. (“NAREIT”) defines FFO 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.” NAREIT clarified its computation of FFO to exclude impairment charges on depreciable real estate owned directly or indirectly. FFO does not represent cash generated from operating activities in accordance with GAAP and is not indicative of cash available to fund cash needs.

Lexington presents FFO available to common shareholders and unitholders - basic. Lexington also presents FFO available to common shareholders and unitholders - diluted on a company-wide basis as if all securities that are convertible, at the holder's option, into Lexington's common shares, are converted at the beginning of the period. Lexington also presents Company FFO which adjusts FFO for certain items which Management believes are not indicative of the operating results of its real estate portfolio. Management believes this is an appropriate presentation as it is frequently requested by security analysts, investors and other interested parties. Since others do not calculate funds from operations in a similar fashion, Company FFO may not be comparable to similarly titled measures as reported by others. Company 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.

2 Company Funds Available for Distribution ("FAD") is calculated by making adjustments to Company FFO for (1) straight-line rent revenue, (2) lease incentive amortization, (3) amortization of above/below market leases, (4) cash paid for tenant improvements, (5) cash paid for lease costs, (6) non-cash interest, net and (7) non-cash charges, net. Although FAD may not be comparable to that of other REITs, Lexington believes it provides a meaningful indication of its ability to fund cash needs. FAD is a non-GAAP financial measure and should not be viewed as an alternative measurement of operating performance to net income, as an alternative to net cash flows from operating activities or as a measure of liquidity.

3 Includes OP units.

Investor or Media Inquiries, T. Wilson Eglin, CEO
Lexington Realty Trust
Phone: (212) 692-7200 E-mail: tweglin@lxp.com