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, 2016.

First Quarter 2016 Highlights

• Generated Company Funds From Operations (“Company FFO”) of $72.1 million, or $0.30 per diluted common share.
• Disposed of three properties and a non-consolidated investment in an office property for aggregate gross disposition proceeds of $64.9 million.
• Acquired an industrial property in Detroit, Michigan for $29.7 million.
• Invested $33.7 million in on-going build-to-suit projects.
• Completed 1.7 million square feet of new leases and lease extensions with overall portfolio 96.7% leased at quarter end.
• Obtained $57.5 million 15-year non-recourse financing, which bears interest at a 5.2% fixed rate and is secured by the Richmond, Virginia property.
• Retired $8.3 million of secured debt and $30.0 million of credit facility borrowings.
• Repurchased 1.2 million common shares at an average price of $7.56 per share.

Subsequent Events

• Entered into an agreement to fund the construction of an industrial facility in Opelika, Alabama for a maximum commitment of $37.0 million. Upon completion, the property will be net leased for a 25-year term.
• Disposed of 15 W. 45th Street land investment for gross proceeds of $37.5 million and an office property for gross proceeds of $19.0 million.

T. Wilson Eglin, President and Chief Executive Officer of Lexington, stated “We had an excellent first quarter with increased revenues and strong Company FFO of $0.30 per share. Our disposition program is fully underway, and during the quarter we sold approximately $58 million of consolidated properties at an average cap rate of 6.5% and we just announced the $37.5 million sale of our West 45th Street land investment at a 4.1% cap rate. Our overall portfolio was 96.7% leased with elevated leasing volume of 1.7 million square feet including some significant 2016 and 2017 lease renewals. Given a strong first quarter and our expectations for the remainder of the year, we are tightening our 2016 Company FFO guidance to an expected range of $1.03-$1.08 per share.”

Mr. Eglin added, “Looking ahead, we are making good progress with our sales program and the execution of our plan is expected to reduce leverage, generate strong cash flows in relation to our dividend and share price, and improve the overall quality of our portfolio.”

FINANCIAL RESULTS

Revenues

For the quarter ended March 31, 2016, total gross revenues were $111.6 million, a 3.0% increase compared with total gross revenues of $108.4 million for the quarter ended March 31, 2015. The increase is primarily attributable to revenue generated from property acquisitions and new leases signed, offset by 2015 and 2016 property sales and lease expirations.

Company FFO

For the quarter ended March 31, 2016, Lexington generated Company FFO of $72.1 million, or $0.30 per diluted share, compared to Company FFO for the quarter ended March 31, 2015 of $64.5 million, or $0.26 per diluted share. The calculation of Company FFO and a reconciliation to net income 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, 2016 of $0.17 per common share/unit, which was paid on April 15, 2016 to common shareholders/unitholders of record as of March 31, 2016. Lexington also declared a dividend of $0.8125 per share on its Series C Cumulative Convertible Preferred Stock (“Series C Preferred Shares”), which is payable on August 15, 2016 to Series C Preferred Shareholders of record as of July 29, 2016.

Net Income Attributable to Common Shareholders

For the quarter ended March 31, 2016, net income attributable to common shareholders was $48.1 million, or $0.21 per diluted share, compared with net income attributable to common shareholders for the quarter ended March 31, 2015 of $31.8 million, or $0.14 per diluted share.

OPERATING ACTIVITIES

During the quarter, Lexington acquired the following property:

ACQUISITIONS
Tenant		Location		Property Type		Initial Basis ($000)				Initial Annualized Cash Rent ($000)				InitialCashYield				EstimatedGAAPYield				ApproximateLeaseTerm (Yrs)
FCA US LLC (f/k/a Chrysler Group LLC)		Detroit, MI		Industrial		$	29,697			$	2,204				7.4	%			7.4	%		20

During the quarter, Lexington funded $33.7 million of the projected costs of the following projects:

ON-GOING BUILD-TO-SUIT PROJECTS
Location		Sq. Ft.			Property Type		Lease Term(Years)		Maximum Commitment/Estimated Completion Cost($000)				GAAP Investment Balance as of3/31/2016 ($000)				Estimated Acquisition/ Completion Date		Estimated Initial Cash Yield				Estimated GAAP Yield
Anderson, SC		1,325,000			Industrial		20		$	70,012			$	37,051			2Q 16			5.9	%			7.3	%
Lake Jackson, TX		664,000			Office		20		166,164				63,278				4Q 16			7.3	%			8.9	%
Charlotte, NC		201,000			Office		15		62,445				14,968				1Q 17			8.3	%			9.5	%
Houston, TX(1)		274,000			Retail/Specialty		20		86,491				53,536				3Q 16			7.5	%			7.5	%
		2,464,000							$	385,112			$	168,833
(1) Lexington has a 25% interest as of March 31, 2016. Lexington is providing construction financing up to $56.7 million to the joint venture of which $23.6 million has been funded as of March 31, 2016. Lease contains annual CPI increases.

Subsequent to March 31, 2016, Lexington entered into an agreement to fund the construction of a 165,000 square foot industrial facility in Opelika, Alabama for a maximum cost of $37.0 million (7.05% initial capitalization rate). Upon completion, estimated to be May 2017, the property will be net leased for a 25-year term and the lease provides for 2.0% annual escalations.

During the quarter, Lexington sold the following properties:

PROPERTY DISPOSITIONS
Primary Tenant		Location		Property Type		Gross SalePrice($000)							AnnualizedNOI(1)($000)				Month of Disposition
Parkway Chevrolet, Inc.		Tomball, TX		Specialty/ Retail		$	17,575			(2	)		$	1,459			February
Multi-Tenant / The Weiss Group, LLC		Palm Beach Gardens, FL		Multi-tenant/ Office		30,050							1,457				March
AT&T Services, Inc.		Harrisburg, PA		Office		10,600							887				March
						$	58,225						$	3,803
(1) Quarter prior to sale annualized.
(2) Mortgage of $8.3 million was satisfied at closing and the gross sale price excludes mortgage defeasance costs of $0.3 million reimbursed by purchaser.

In addition, Lexington disposed of its interest in a non-consolidated investment in an office property in Russellville, Arkansas, receiving $6.7 million in connection with the sale, and sold a vacant land parcel for $0.4 million.

In April 2016, Lexington sold its 15 West 45th Street land investment for gross proceeds of $37.5 million at a 4.1% capitalization rate. The buyer assumed the $29.2 million mortgage in connection with the sale. In May 2016, Lexington sold an office property in Lake Forest, California for gross proceeds of $19.0 million at a 7.9% capitalization rate.

LEASING

As of March 31, 2016, Lexington's portfolio was 96.7% leased, excluding properties subject to secured mortgage loans currently in default.

During the first quarter of 2016, Lexington executed the following new and extended leases:

		LEASE EXTENSIONS
							Prior		Lease
		Location			Primary Tenant(1)		Term		Expiration Date		Sq. Ft.
		Office
1		Phoenix	AZ		Avnet, Inc.		02/2023		08/2026		176,402
2		Milford	OH		Siemens Corporation		09/2016		04/2026		221,215
2		Total office lease extensions									397,617
		Industrial/Multi-Tenant
1		Rockford	IL		Pierce Packaging Co.		12/2016		12/2019		93,000
2		Antioch	TN		Wirtgen America, Inc.		MTM		12/2016		73,500
3		Memphis	TN		Sears, Roebuck and Co./Sears Logistic Services		02/2017		02/2027		780,000
4		Winchester	VA		Kraft Heinz Foods Company		05/2016		05/2021		344,700
4		Total industrial lease extensions									1,291,200
6		Total lease extensions									1,688,817
		NEW LEASES
									Lease
		Location							Expiration Date		Sq. Ft.
		Office/Multi-Tenant
1		Honolulu	HI		N/A				QTQ		1,900
2		Philadelphia	PA		N/A				01/2027		1,975
3		Charleston	SC		Hagemeyer North America, Inc.				06/2019		20,424
3		Total new office leases									24,299
9		TOTAL NEW AND EXTENDED LEASES									1,713,116
(1) Leases greater than 10,000 square feet.

BALANCE SHEET/CAPITAL MARKETS

In February 2016, Lexington financed its office property in Richmond, Virginia with a $57.5 million non-recourse secured mortgage. The loan bears interest at a fixed rate of 5.2% and matures in 2031.

During 2015, Lexington announced a 10.0 million common share repurchase authorization. In the first quarter of 2016, Lexington  repurchased 1,184,113 common shares at an average price of $7.56 per share, bringing the total common shares repurchased under this authorization to 3,400,912 common shares at an average price of $8.04 per share.

2016 EARNINGS GUIDANCE

Lexington is tightening its Company FFO guidance for the year ended March 31, 2016 to an expected range of $1.03 to $1.08 per diluted share from a range of $1.00 to $1.10 per diluted share. This guidance is forward looking, excludes the impact of certain items and is based on current expectations.

FIRST QUARTER 2016 CONFERENCE CALL

Lexington will host a conference call today, Thursday, May 5, 2016, at 8:30 a.m. Eastern Time, to discuss its results for the quarter ended March 31, 2016. 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 19, 2016, at 877-870-5176 or 858-384-5517, pin code for both numbers is 13635173. 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 (NYSE:LXP) is a publicly traded real estate investment trust (REIT) that owns a diversified portfolio of real estate assets consisting primarily of equity and debt investments in single-tenant net-leased commercial properties and land across the United States. Lexington seeks to expand its portfolio through build-to-suit transactions, sale-leaseback transactions and acquisitions. For more information or to follow Lexington on social media, visit www.lxp.com. 

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, (2) Lexington's ability to achieve its estimate of Company FFO for the year ending December 31, 2016, (3) the successful consummation of any lease, acquisition, build-to-suit, disposition, 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 SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited and in thousands, except share and per share data)
	Three months ended
	March 31,
	2016				2015
Gross revenues:
Rental	$	103,559			$	100,016
Tenant reimbursements	8,057				8,426
Total gross revenues	111,616				108,442
Expense applicable to revenues:
Depreciation and amortization	(43,127		)		(40,274		)
Property operating	(12,078		)		(16,582		)
General and administrative	(7,775		)		(7,822		)
Non-operating income	2,867				2,614
Interest and amortization expense	(22,893		)		(23,003		)
Debt satisfaction gains (charges), net	(162		)		10,375
Impairment charges	—				(1,139		)
Gains on sales of properties	17,015				148
Income before provision for income taxes, equity in earnings of non-consolidated entities and discontinued operations	45,463				32,759
Provision for income taxes	(413		)		(441		)
Equity in earnings of non-consolidated entities	5,742				366
Income from continuing operations	50,792				32,684
Discontinued operations:
Income from discontinued operations	—				110
Gain on sale of property	—				1,577
Total discontinued operations	—				1,687
Net income	50,792				34,371
Less net income attributable to noncontrolling interests	(1,023		)		(866		)
Net income attributable to Lexington Realty Trust shareholders	49,769				33,505
Dividends attributable to preferred shares – Series C	(1,572		)		(1,572		)
Allocation to participating securities	(90		)		(104		)
Net income attributable to common shareholders	$	48,107			$	31,829
Income per common share – basic:
Income from continuing operations	$	0.21			$	0.13
Income from discontinued operations	—				0.01
Net income attributable to common shareholders	$	0.21			$	0.14
Weighted-average common shares outstanding – basic	232,642,803				232,525,675
Income per common share – diluted:
Income from continuing operations	$	0.21			$	0.13
Income from discontinued operations	—				0.01
Net income attributable to common shareholders	$	0.21			$	0.14
Weighted-average common shares outstanding – diluted	238,885,171				232,957,265
Amounts attributable to common shareholders:
Income from continuing operations	$	48,107			$	30,142
Income from discontinued operations	—				1,687
Net income attributable to common shareholders	$	48,107			$	31,829

LEXINGTON REALTY TRUST AND CONSOLIDATED SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited and in thousands, except share and per share data)
	March 31, 2016				December 31, 2015
Assets:
Real estate, at cost	$	3,773,333			$	3,789,711
Real estate - intangible assets	692,654				692,778
Investments in real estate under construction	115,297				95,402
	4,581,284				4,577,891
Less: accumulated depreciation and amortization	1,201,220				1,179,969
Real estate, net	3,380,064				3,397,922
Assets held for sale	10,147				24,425
Cash and cash equivalents	80,894				93,249
Restricted cash	42,830				10,637
Investment in and advances to non-consolidated entities	44,926				31,054
Deferred expenses, net	39,839				42,000
Loans receivable, net	95,770				95,871
Rent receivable – current	20,094				7,193
Rent receivable – deferred	93,320				87,547
Other assets	18,176				18,505
Total assets	$	3,826,060			$	3,808,403
Liabilities and Equity:
Liabilities:
Mortgages and notes payable, net	$	922,320			$	872,643
Revolving credit facility borrowings	147,000				177,000
Term loans payable, net	500,330				500,076
Senior notes payable, net	493,735				493,526
Convertible guaranteed notes payable, net	12,192				12,126
Trust preferred securities, net	127,021				126,996
Dividends payable	45,673				45,440
Liabilities held for sale	—				8,405
Accounts payable and other liabilities	35,688				41,479
Accrued interest payable	14,746				8,851
Deferred revenue - including below market leases, net	44,026				42,524
Prepaid rent	19,783				16,806
Total liabilities	2,362,514				2,345,872
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, 235,009,739 and 234,575,225 shares issued and outstanding in 2016 and 2015, respectively	24				23
Additional paid-in-capital	2,773,788				2,776,837
Accumulated distributions in excess of net income	(1,420,554		)		(1,428,908		)
Accumulated other comprehensive loss	(6,564		)		(1,939		)
Total shareholders’ equity	1,440,710				1,440,029
Noncontrolling interests	22,836				22,502
Total equity	1,463,546				1,462,531
Total liabilities and equity	$	3,826,060			$	3,808,403

LEXINGTON REALTY TRUST AND CONSOLIDATED SUBSIDIARIES
EARNINGS PER SHARE
(Unaudited and in thousands, except share and per share data)
			Three Months EndedMarch 31,
			2016			2015
EARNINGS PER SHARE:
Basic:
Income from continuing operations attributable to common shareholders		$	48,107		$	30,142
Income from discontinued operations attributable to common shareholders			—			1,687
Net income attributable to common shareholders		$	48,107		$	31,829
Weighted-average number of common shares outstanding			232,642,803			232,525,675
Income per common share:
Income from continuing operations		$	0.21		$	0.13
Income from discontinued operations			—			0.01
Net income attributable to common shareholders		$	0.21		$	0.14
Diluted:
Income from continuing operations attributable to common shareholders - basic		$	48,107		$	30,142
Impact of assumed conversions			1,058			—
Income from continuing operations attributable to common shareholders			49,165			30,142
Income from discontinued operations attributable to common shareholders - basic			—			1,687
Impact of assumed conversions			—			—
Income from discontinued operations attributable to common shareholders			—			1,687
Net income attributable to common shareholders		$	49,165		$	31,829
Weighted-average common shares outstanding - basic			232,642,803			232,525,675
Effect of dilutive securities:
Share options			132,191			431,590
6.00% Convertible Guaranteed Notes			1,941,237			—
Non-vested shares			348,748			—
Operating Partnership Units			3,820,192			—
Weighted-average common shares outstanding			238,885,171			232,957,265
Income per common share:
Income from continuing operations		$	0.21		$	0.13
Income from discontinued operations			—			0.01
Net income attributable to common shareholders		$	0.21		$	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,
				2016			2015
FUNDS FROM OPERATIONS: (1)
Basic and Diluted:
Net income attributable to common shareholders			$	48,107		$	31,829
Adjustments:
	Depreciation and amortization			41,193			38,922
	Impairment charges - real estate			—			1,139
	Noncontrolling interests - OP units			747			550
	Amortization of leasing commissions			1,934			1,352
	Joint venture and noncontrolling interest adjustment			236			321
	Gains on sales of properties, net of tax, including non-consolidated entities			(22,343	)		(1,725	)
FFO available to common shareholders and unitholders - basic				69,874			72,388
	Preferred dividends			1,572			1,572
	Interest and amortization on 6.00% Convertible Notes			252			319
	Amount allocated to participating securities			90			104
FFO available to common shareholders and unitholders - diluted				71,788			74,383
	Debt satisfaction (gains) charges, net			162			(10,375	)
	Transaction costs/other			146			468
Company FFO available to common shareholders and unitholders - diluted				72,096			64,476
FUNDS AVAILABLE FOR DISTRIBUTION: (2)
Adjustments:
	Straight-line rents			(11,139	)		(5,309	)
	Lease incentives			423			457
	Amortization of below/above market leases			456			(621	)
	Lease termination payments, net			(2,749	)		(806	)
	Non-cash interest, net			(382	)		(635	)
	Non-cash charges, net			2,207			2,256
	Tenant improvements			(720	)		(1,081	)
	Lease costs			(1,230	)		(1,420	)
Company Funds Available for Distribution			$	58,962		$	57,317
Per Common Share and Unit Amounts
Basic:
	FFO		$	0.30		$	0.31
Diluted:
	FFO		$	0.29		$	0.30
	Company FFO		$	0.30		$	0.26
	Company FAD		$	0.24		$	0.23
Weighted-Average Common Shares:
	Basic(3)			236,462,995			236,378,649
	Diluted			243,595,741			244,045,197

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) lease termination payments, net, (5) non-cash interest, net, (6) non-cash charges, net, (7) cash paid for tenant improvements, and (8) cash paid for lease costs. 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 other than OP units held by Lexington.

 

Contact:
Investor or Media Inquiries for Lexington Realty Trust:
Heather Gentry, Senior Vice President of Investor Relations
Lexington Realty Trust
Phone: (212) 692-7200 E-mail: hgentry@lxp.com