Lexington Realty Trust Reports Fourth Quarter 2013 Results

NEW YORK, Feb. 20, 2014 (GLOBE NEWSWIRE) -- Lexington Realty Trust ("Lexington") (NYSE:LXP), a real estate investment trust focused on single-tenant real estate investments, today announced results for the fourth quarter ended December 31, 2013.

Fourth Quarter 2013 Highlights

  • 12% increase in Funds From Operations, as adjusted ("Company FFO, as adjusted"), to $0.28 per diluted common share.
  • Increased quarterly common share dividend by 10% to $0.165 per share.
  • Closed property acquisitions of $405.9 million.
  • Invested $19.9 million in current build-to-suit projects and entered into an agreement to acquire an industrial property upon completion for $12.8 million.
  • Agreed to lend $85.0 million for a build-to-suit construction project.
  • Executed 0.5 million square feet of new and extended leases with overall portfolio 97.6% leased.
  • Sold properties for an aggregate disposition price of $46.8 million.

T. Wilson Eglin, President and Chief Executive Officer of Lexington, stated, "The successful execution of our business plan in 2013 has positioned us for strong growth in funds from operations per share in 2014. This growth will be driven by the $717.6 million of investments made in 2013 and our ongoing commitment to lowering our cost of capital which resulted in the Company reducing its financing costs to 4.7% while extending its weighted-average debt maturity to 7.0 years. With a deep pipeline of additional investment opportunities, a flexible balance sheet with substantial credit line capacity and numerous capital recycling opportunities, we believe Lexington is well positioned to create additional shareholder value."

FINANCIAL RESULTS

Revenues

For the quarter ended December 31, 2013, total gross revenues were $109.6 million, compared with total gross revenues of $92.1 million for the quarter ended December 31, 2012. The increase is primarily due to property acquisitions.

Company FFO, As Adjusted

For the quarter ended December 31, 2013, Lexington generated Company FFO, as adjusted, of $65.7 million, or $0.28 per diluted share, compared to Company FFO, as adjusted, for the quarter ended December 31, 2012 of $48.2 million, or $0.25 per diluted share. The calculation of Company FFO, as adjusted, and a reconciliation to net income (loss) attributable to Lexington Realty Trust shareholders is included later in this press release.

Dividends/Distributions

Lexington declared a regular quarterly common share/unit dividend/distribution for the quarter ended December 31, 2013 of $0.165 per common share/unit, which was paid on January 15, 2014 to common shareholders/unitholders of record as of December 31, 2013, and a dividend of $0.8125 per share on its Series C Cumulative Convertible Preferred Stock ("Series C Preferred Shares"), which was paid on February 18, 2014 to Series C Preferred Shareholders of record as of January 31, 2014.

Net Loss Attributable to Common Shareholders

For the quarter ended December 31, 2013, net loss attributable to common shareholders was $(8.9) million, or $(0.04) per diluted share, compared with a net loss attributable to common shareholders for the quarter ended December 31, 2012 of $(7.0) million, or $(0.04) per diluted share.

OPERATING ACTIVITIES

Investment Activity

Acquisitions and Completed Build-to-Suit Transactions
Initial
Initial Annualized Initial Estimated
Property Basis Cash Rent Cash GAAP Lease
Tenant Location Type ($000) ($000) Yield Yield Expiration
Various - 3 properties New York, NY Land $ 302,000 $ 14,883 4.9% 15.2% 10/2112
Home Depot USA, Inc. Danville, VA Land 4,727 260 5.5% 4.6% 01/2029
BluePearl Holdings, LLC1 Various Office 39,456 2,716 6.9% 8.2% 10/2033
BluePearl Holdings, LLC2 Various Office 13,144 891 6.8% 6.8% 12/2033
Gander Mountain Company Albany, GA Retail 7,412 671 9.1% 10.0% 11/2028
The Gavilon Group, LLC Omaha, NE Office 39,125 2,770 7.1% 8.5% 11/2033
$ 405,864 $ 22,191 5.5% 13.4%
(1) Lexington has a 15% interest in these six properties.
(2) Lexington has a 100% interest in these four properties.

These acquisitions brought 2013 property acquisition volume to $590.4 million.

On-going Build-to-Suit Projects
Maximum GAAP Investment
Lease Commitment/Estimated Balance as of Estimated
Property Term Completion Cost 12/31/2013 Completion
Location Sq. Ft Type (Years) ($000) ($000) Date
Rantoul, IL1 813,000 Industrial 20 $ 42,587 $ 37,437 1Q 14
Bingen, WA 124,000 Industrial 12 18,898 6,186 2Q 14
Las Vegas, NV 180,000 Industrial 20 29,585 14,457 3Q 14
Richmond, VA 279,000 Office 15 98,644 15,632 3Q 15
1,396,000 $ 189,714 $ 73,712
(1) Completed and acquired in January 2014.
Loan Investment
Estimated Loan Funded as of
Property Amount 12/31/13 Interest Maturity
Tenant Location Type ($000) ($000) Rate Date
The Kennewick Public Hospital District Kennewick, WA Hospital $ 85,000 $ 35,376 9% May 2022
Acquisitions Subsequent to December 31, 2013
Estimated
Property Initial Basis Initial Cash GAAP Lease
Tenant Location Type ($000) Yield Yield Expiration
Encana Oil & Gas (USA), Inc. Parachute, CO Office $ 13,928 7.3% 9.2% 10/2032
$ 13,928 7.3% 9.2%
Forward Commitments
Estimated Estimated Estimated Estimated Lease
Property Acquisition Cost Completion Initial GAAP Term
Location Type ($000) Date Cash Yield Yield (Years)
Lewisburg, TN Industrial $ 12,767 2Q 14 8.6% 9.3% 12
Auburn Hills, MI1 Office 40,025 1Q 15 7.9% 9.0% 14
$ 52,792 8.1% 9.1%
(1) Forward commitment entered into subsequent to December 31, 2013.

Capital Recycling

Dispositions
Gross Sale Annualized
Price NOI Month of
Tenant Location Property Type ($000) ($000) Disposition
Moran Foods, Inc. Port Orchard, WA Retail $ 100 $ 52 Oct-13
Toys-R-Us, Inc. Lynnwood, WA Retail 1,436 140 Nov-13
Toys-R-Us, Inc. Clackamas, OR Retail 479 49 Nov-13
Various Hebron, KY Multi-office 4,400 228 Dec-13
Various - 2 properties Atlanta, GA Office 40,356 1,081 Dec-13
$ 46,771 $ 1,550

These dispositions brought total 2013 disposition volume to $167.3 million.

Leasing

During the fourth quarter of 2013, Lexington executed 14 new and extended leases for 0.5 million square feet and ended the quarter with its overall portfolio 97.6% leased.

LEASE EXTENSIONS
Prior Lease
Location Term Expiration Date Sq. Ft.
Office/ Multi-Tenant
1 Johnson City TN 11/2013 11/2014 5,618
2 Bridgeton MO 12/2013 12/2018 25,515
3 McDonough GA 06/2015 06/2025 111,911
4 Atlanta GA 12/2014 12/2019 6,260
5 Atlanta GA 12/2014 12/2019 3,900
6 Chamblee GA 12/2014 12/2019 4,565
7 Cummings GA 12/2014 12/2019 14,208
8 Forest Park GA 12/2014 12/2019 14,859
9 Jonesboro GA 12/2014 12/2019 4,894
10 Stone Mountain GA 12/2014 12/2019 5,704
11 Lisle IL 11/2014 02/2018 7,535
11 Total lease extensions 204,969
NEW LEASES Lease
Location Expiration Date Sq. Ft.
Office/ Multi-Tenant
1 Antioch TN 12/2014 60,000
2 Pascagoula MS 10/2018 94,841
3 Arlington TX 01/2025 111,409
3 Total new leases 266,250
14 TOTAL NEW AND EXTENDED LEASES 471,219

CAPITAL MARKETS

Capital Activities and Balance Sheet Update

During the fourth quarter of 2013, Lexington issued 11.5 million common shares raising gross proceeds of $126.3 million, after underwriting discounts and commissions.

In December 2013, Lexington obtained $213.5 million of non-recourse secured financing on the three New York, New York land parcels acquired in the fourth quarter of 2013. The debt bears interest at a fixed rate of 4.66% and matures in January 2027.

Lexington borrowed $87.0 million on its five-year unsecured term loan and swapped the LIBOR component of such borrowing for a current fixed interest rate of 2.64%. The proceeds from these 2013 financings were used to satisfy amounts outstanding on Lexington's $400.0 million unsecured revolving credit facility, resulting in $48.0 million of credit facility borrowings outstanding as of December 31, 2013.

Subsequent to December 31, 2013, Lexington borrowed the remaining $99.0 million available under its five-year unsecured term loan facility and swapped the LIBOR component of such borrowing for a current fixed interest rate of 2.51%.

2014 EARNINGS GUIDANCE

Lexington estimates that its Company FFO, as adjusted, guidance will be an expected range of $1.11 to $1.15 per diluted share for the year ended December 31, 2014. This guidance is forward looking, excludes the impact of certain items and is based on current expectations.

FOURTH QUARTER 2013 CONFERENCE CALL

Lexington will host a conference call today, Thursday, February 20, 2014, at 11:00 a.m. Eastern Time, to discuss its results for the quarter ended December 31, 2013. Interested parties may participate in this conference call by dialing (888) 312-9852 or (719) 325-2478. A replay of the call will be available through March 6, 2014, at (877) 870-5176 or (858) 384-5517, pin: 8305525. 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 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 $0.66 per common share/unit, (2) Lexington's ability to achieve its estimate of Company FFO, as adjusted, for the year ending December 31, 2014, (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 SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited and in thousands, except share and per share data)
Three Months Ended Twelve Months Ended
December 31, December 31,
2013 2012 2013 2012
Gross revenues:
Rental $ 101,100 $ 84,196 $ 366,591 $ 299,956
Advisory and incentive fees 429 421 855 1,806
Tenant reimbursements 8,077 7,442 30,994 28,418
Total gross revenues 109,606 92,059 398,440 330,180
Expense applicable to revenues:
Depreciation and amortization (44,231) (43,614) (174,272) (152,296)
Property operating (16,166) (15,185) (62,195) (56,043)
General and administrative (8,861) (6,569) (28,973) (23,933)
Non-operating income 3,029 1,224 8,515 6,825
Interest and amortization expense (23,247) (23,951) (91,271) (93,677)
Debt satisfaction charges, net (7,841) (25,397) (9,480)
Gain on acquisition 167,864
Litigation reserve (2,775)
Impairment charges and loan loss (33,166) (35,579) (4,262)
Income (loss) before provision for income taxes, equity in earnings (losses) of non-consolidated entities and discontinued operations (13,036) (3,877) (10,732) 162,403
Provision for income taxes (254) (141) (3,259) (940)
Equity in earnings (losses) of non-consolidated entities 240 62 (157) 21,531
Income (loss) from continuing operations (13,050) (3,956) (14,148) 182,994
Discontinued operations:
Loss from discontinued operations (315) (1,313) (761) (5,599)
Benefit (provision) for income taxes 210 (97) (1,735) (163)
Debt satisfaction gains (charges), net (717) 8,955 (178)
Gains on sales of properties 9,537 4,345 24,472 13,291
Impairment charges (3,383) (17) (12,920) (5,707)
Total discontinued operations 6,049 2,201 18,011 1,644
Net income (loss) (7,001) (1,755) 3,863 184,638
Less net income attributable to noncontrolling interests (176) (592) (2,233) (4,322)
Net income (loss) attributable to Lexington Realty Trust shareholders (7,177) (2,347) 1,630 180,316
Dividends attributable to preferred shares - Series B (2,298)
Dividends attributable to preferred shares - Series C (1,572) (1,572) (6,290) (6,290)
Dividends attributable to preferred shares - Series D (2,926) (3,543) (11,703)
Allocation to participating securities (174) (194) (656) (1,087)
Deemed dividend - Series B (2,346)
Redemption discount - Series C 229
Deemed dividend - Series D (5,230)
Net income (loss) attributable to common shareholders $ (8,923) $ (7,039) $ (14,089) $ 156,821
Income (loss) per common share - basic:
Income (loss) from continuing operations $ (0.07) $ (0.05) $ (0.15) $ 0.99
Income from discontinued operations 0.03 0.01 0.08
Net income (loss) attributable to common shareholders $ (0.04) $ (0.04) $ (0.07) $ 0.99
Weighted-average common shares outstanding - basic: 224,260,756 172,646,759 209,797,238 159,109,424
Income (loss) per common share - diluted:
Income (loss) from continuing operations $ (0.07) $ (0.05) $ (0.15) $ 0.93
Income (loss) from discontinued operations 0.03 0.01 0.08
Net income (loss) attributable to common shareholders $ (0.04) $ (0.04) $ (0.07) $ 0.93
Weighted-average common shares outstanding - diluted 224,260,756 172,646,759 209,797,238 179,659,826
Amounts attributable to common shareholders:
Income (loss) from continuing operations $ (15,093) $ (9,248) $ (31,777) $ 156,709
Income from discontinued operations 6,170 2,209 17,688 112
Net income (loss) attributable to common shareholders $ (8,923) $ (7,039) $ (14,089) $ 156,821
LEXINGTON REALTY TRUST AND CONSOLIDATED SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
As of December 31,
(Unaudited and in thousands, except share and per share data)
2013 2012
Assets:
Real estate, at cost $ 3,812,294 $ 3,564,466
Real estate - intangible assets 762,157 685,914
Investments in real estate under construction 74,350 65,122
4,648,801 4,315,502
Less: accumulated depreciation and amortization 1,223,381 1,150,417
Real estate, net 3,425,420 3,165,085
Cash and cash equivalents 77,261 34,024
Restricted cash 19,953 26,741
Investment in and advances to non-consolidated entities 18,442 27,129
Deferred expenses, net 66,827 57,549
Loans receivable, net 99,443 72,540
Rent receivable - current 10,087 7,355
Rent receivable - deferred 19,473
Other assets 35,375 27,780
Total assets $ 3,772,281 $ 3,418,203
Liabilities and Equity:
Liabilities:
Mortgages and notes payable $ 1,197,489 $ 1,415,961
Credit facility borrowings 48,000
Term loans payable 406,000 255,000
Senior notes payable 247,707
Convertible notes payable 27,491 78,127
Trust preferred securities 129,120 129,120
Dividends payable 40,018 31,351
Accounts payable and other liabilities 39,642 70,367
Accrued interest payable 9,627 11,980
Deferred revenue - including below market leases, net 69,667 79,908
Prepaid rent 18,037 13,224
Total liabilities 2,232,798 2,085,038
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
Series D Cumulative Redeemable Preferred, liquidation preference $155,000; 6,200,000 shares issued and outstanding in 2012 149,774
Common shares, par value $0.0001 per share; authorized 400,000,000 shares, 228,663,022 and 178,616,664 shares issued and outstanding in 2013 and 2012, respectively 23 18
Additional paid-in-capital 2,717,787 2,212,949
Accumulated distributions in excess of net income (1,300,527) (1,143,803)
Accumulated other comprehensive income (loss) 4,439 (6,224)
Total shareholders' equity 1,515,738 1,306,730
Noncontrolling interests 23,745 26,435
Total equity 1,539,483 1,333,165
Total liabilities and equity $ 3,772,281 $ 3,418,203
LEXINGTON REALTY TRUST AND CONSOLIDATED SUBSIDIARIES
EARNINGS PER SHARE
(Unaudited and in thousands, except share and per share data)
Three Months Ended Twelve Months Ended
December 31, December 31,
2013 2012 2013 2012
EARNINGS PER SHARE:
Basic:
Income (loss) from continuing operations attributable to common shareholders $ (15,093) $ (9,248) $ (31,777) $ 156,709
Income from discontinued operations attributable to common shareholders 6,170 2,209 17,688 112
Net income (loss) attributable to common shareholders $ (8,923) $ (7,039) $ (14,089) $ 156,821
Weighted-average number of common shares outstanding 224,260,756 172,646,759 209,797,238 159,109,424
Income (loss) per common share:
Income (loss) from continuing operations $ (0.07) $ (0.05) $ (0.15) $ 0.99
Income from discontinued operations 0.03 0.01 0.08
Net income (loss) attributable to common shareholders $ (0.04) $ (0.04) $ (0.07) $ 0.99
Diluted:
Income (loss) from continuing operations attributable to common shareholders - basic $ (15,093) $ (9,248) $ (31,777) $ 156,709
Impact of assumed conversions:
Share options
Operating Partnership Units 1,585
6.00% Convertible Guaranteed Notes 8,953
Income (loss) from continuing operations attributable to common shareholders (15,093) (9,248) (31,777) 167,247
Income from discontinued operations attributable to common shareholders - basic 6,170 2,209 17,688 112
Impact of assumed conversions:
Operating Partnership Units (392)
Income (loss) from discontinued operations attributable to common shareholders 6,170 2,209 17,688 (280)
Net income (loss) attributable to common shareholders $ (8,923) $ (7,039) $ (14,089) $ 166,967
Weighted-average common shares outstanding - basic 224,260,756 172,646,759 209,797,238 159,109,424
Effect of dilutive securities:
Share options 306,449
Operating Partnership Units 4,438,708
6.00% Convertible Guaranteed Notes 15,805,245
Weighted-average common shares outstanding 224,260,756 172,646,759 209,797,238 179,659,826
Income (loss) per common share:
Income (loss) from continuing operations $ (0.07) $ (0.05) $ (0.15) $ 0.93
Income (loss) from discontinued operations 0.03 0.01 0.08
Net income (loss) attributable to common shareholders $ (0.04) $ (0.04) $ (0.07) $ 0.93
LEXINGTON REALTY TRUST AND CONSOLIDATED SUBSIDIARIES
REPORTED COMPANY FUNDS FROM OPERATIONS & FUNDS AVAILABLE FOR DISTRIBUTION
(Unaudited and in thousands, except share and per share data)
Three Months Ended Twelve Months Ended
December 31, December 31,
2013 2012 2013 2012
FUNDS FROM OPERATIONS: (1)
Basic and Diluted:
Net income (loss) attributable to Lexington Realty Trust shareholders $ (7,177) $ (2,347) $ 1,630 $ 180,316
Adjustments:
Depreciation and amortization 43,680 45,081 175,023 163,890
Impairment charges - real estate, including nonconsolidated joint venture real estate 22,610 17 35,485 9,969
Noncontrolling interests - OP units (129) 279 1,157 1,192
Amortization of leasing commissions 1,438 1,329 5,562 4,838
Joint venture and noncontrolling interest adjustment 589 545 2,264 560
Preferred dividends - Series B & D (2,926) (3,543) (14,001)
Gains on sales of properties, net of tax (10,430) (4,345) (21,755) (13,291)
Gain on sale - joint venture investment (7,000)
Gain on acquisition (167,864)
Interest and amortization on 6.00% Convertible Guaranteed Notes 579 1,973 3,113 8,953
Reported Company FFO 51,160 39,606 198,936 167,562
Debt satisfaction charges, net 8,558 16,442 9,658
Impairment loss - loan receivable 13,939 13,939
Litigation reserve 2,775
Other 565 5 795 603
Company FFO, as adjusted 65,664 48,169 230,112 180,598
FUNDS AVAILABLE FOR DISTRIBUTION: (2)
Adjustments:
Straight-line rents (14,795) (7,900) (24,076) (7,491)
Lease incentives 313 323 1,345 1,466
Amortization of below/above market leases 73 57 (63) (3,551)
Non-cash interest, net (1,019) (132) (1,551) (1,300)
Non-cash charges, net 1,973 1,103 7,574 4,565
Tenant improvements (8,654) (8,856) (39,244) (25,776)
Lease costs (2,103) (5,185) (12,060) (13,038)
Reported Company Funds Available for Distribution $ 41,452 $ 27,579 $ 162,037 $ 135,473
Per Share Amounts
Basic:
Reported Company FFO $ 0.22 $ 0.20 $ 0.89 $ 0.91
Company FFO, as adjusted $ 0.28 $ 0.25 $ 1.02 $ 0.98
Company FAD $ 0.17 $ 0.14 $ 0.72 $ 0.74
Diluted:
Reported Company FFO $ 0.21 $ 0.20 $ 0.88 $ 0.91
Company FFO, as adjusted $ 0.28 $ 0.25 $ 1.02 $ 0.98
Company FAD $ 0.17 $ 0.14 $ 0.72 $ 0.73
LEXINGTON REALTY TRUST AND CONSOLIDATED SUBSIDIARIES
REPORTED COMPANY FUNDS FROM OPERATIONS & FUNDS AVAILABLE FOR DISTRIBUTION (CONTINUED)
(Unaudited and in thousands, except share and per share data)
Three Months Ended Twelve Months Ended
December 31, December 31,
Basic: 2013 2012 2013 2012
Weighted-average common shares outstanding - EPS basic 224,260,756 172,646,759 209,797,238 159,109,424
6.00% Convertible Guaranteed Notes 4,239,679 13,995,678 5,578,043 15,805,245
Non-vested share-based payment awards 154,792 308,854 404,768 244,366
Operating Partnership Units 4,092,239 4,317,367 4,146,931 4,438,708
Preferred Shares - Series C 4,710,570 4,710,570 4,710,570 4,712,421
Weighted-average common shares outstanding - basic 237,458,036 195,979,228 224,637,550 184,310,164
Diluted:
Weighted-average common shares outstanding - basic 237,458,036 195,979,228 224,637,550 184,310,164
Options - Incremental shares 606,852 432,356 806,962 306,449
Weighted-average common shares outstanding - diluted 238,064,888 196,411,584 225,444,512 184,616,613
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 "Reported Company funds from operations" or "Reported Company FFO," which differs from FFO because it includes Lexington's operating partnership units, Lexington's 6.50% Series C Cumulative Convertible Preferred Shares, and Lexington's 6.00% Convertible Guaranteed Notes due 2030 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 Reported 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. Lexington also presents "Company funds from operations, as adjusted" or "Company FFO, as adjusted," which adjusts Reported Company 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, Reported Company FFO and Company FFO, as adjusted, may not be comparable to similarly titled measures as reported by others. Reported Company FFO and Company FFO, as adjusted, 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 Reported Company Funds Available for Distribution ("FAD") is calculated by making adjustments to Company FFO, as adjusted, 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.

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