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Lexington Realty Trust Reports Third Quarter 2014 Results

NEW YORK, Nov. 7, 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 third quarter ended September 30, 2014.

Third Quarter 2014 Highlights

  • Generated Company Funds From Operations, as adjusted ("Company FFO, as adjusted"), of $68.7 million, or $0.28 per diluted common share.
  • Invested $51.0 million in on-going build-to-suit projects and loan investments and commenced funding a new $10.2 million industrial build-to-suit project.
  • Committed to acquire a to-be-built industrial property for $155.0 million.
  • Disposed of five properties for an aggregate disposition price of $52.6 million.
  • Executed 0.5 million square feet of new and extended leases with overall portfolio 97.6% leased.
  • Received $10.3 million for the payoff of the Homestead, Florida loan investment.
  • Revenue from leases of ten years or longer increased to 40.9% from 28.5% of revenue.

Subsequent to Quarter End Highlights

  • Acquired two properties for $49.5 million.

T. Wilson Eglin, President and Chief Executive Officer of Lexington, stated "We are pleased to report strong operating results for our third quarter, with active leasing throughout our portfolio. We continue to make progress with respect to executing our capital recycling strategy, by selling five non-core properties for $52.6 million, and building our investment pipeline, by committing to acquire a property for $155.0 million upon completion of construction next year. The addition of long-term net-leased properties to our portfolio continues to lengthen our weighted-average lease term and improve our prospects for growth in net operating income going forward."

FINANCIAL RESULTS

Revenues

For the quarter ended September 30, 2014, total gross revenues were $109.5 million, compared with total gross revenues of $93.1 million for the quarter ended September 30, 2013. The increase is primarily due to property acquisitions.

Company FFO, As Adjusted

For the quarter ended September 30, 2014, Lexington generated Company FFO, as adjusted, of $68.7 million, or $0.28 per diluted share, compared to Company FFO, as adjusted, for the quarter ended September 30, 2013 of $56.1 million, or $0.25 per diluted share. The calculation of Company FFO, as adjusted, and a reconciliation to net income 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 September 30, 2014 of $0.17 per common share/unit, which was paid on October 15, 2014 to common shareholders/unitholders of record as of September 30, 2014, 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 November 17, 2014 to Series C Preferred Shareholders of record as of October 31, 2014.

Net Income Attributable to Common Shareholders

For the quarter ended September 30, 2014, net income attributable to common shareholders was $38.7 million, or $0.17 per diluted share, compared with net income attributable to common shareholders for the quarter ended September 30, 2013 of $3.0 million, or $0.01 per diluted share.

OPERATING ACTIVITIES
Investment Activity
On-going Build-to-Suit Projects
GAAP
Maximum Investment
Lease Commitment/Estimated Balance as of Estimated
Property Term Completion Cost 9/30/2014 Completion
Location Sq. Ft. Type (Years) ($000) ($000) Date
Oak Creek, WI 164,000 Industrial 20 $ 22,609 $ 5,263 2Q 15
Richmond, VA 330,000 Office 15 110,137 52,792 3Q 15
Lake Jackson, TX 664,000 Office/R&D 20 166,164 27,498 4Q 16
Thomson, GA 208,000 Industrial 15 10,245 830 2Q 15
1,366,000 $ 309,155 $ 86,383
Forward Commitments
Estimated Estimated Estimated Estimated Lease
Property Acquisition Cost Completion Initial GAAP Term
Location Type ($000) Date Cash Yield Yield (Years)
Auburn Hills, MI Office $ 40,025 1Q 15 7.9% 9.0% 14
Richland, WA Industrial $ 155,000 4Q 15 7.1% 8.6% 20
$ 195,025
Loan Investments
Lexington collected $10.3 million in full satisfaction of the Homestead, Florida loan investment.
Subsequent to September 30, 2014 Acquisitions
Initial
Initial Annualized Initial Estimated
Basis Cash Rent Cash GAAP Lease
Tenant/Guarantor Location Property Type ($000) ($000) Yield Yield Term
ZE-45 Ground Tenant LLC New York, NY Land $ 30,426 $ 1,500 4.9% 15.2% 99 yrs
HealthSouth Corp. Vineland, NJ Rehab Hospital 19,100 1,113 5.8% 5.8%(1) 28 yrs
$ 49,526 $ 2,613
(1) Lease contains annual CPI increases.
Capital Recycling
Dispositions
Gross Disposition Annualized
Price NOI Month of
Tenant Location Property Type ($000) ($000) Disposition
Multi-tenant Johnson City, TN Office $ 4,000 $ 174 14-Jul
Elsevier STM Inc. San Antonio, TX Industrial 41,000 3,652 14-Jul
Malone's Food Stores, LTD Dallas, TX Retail 3,300 358 14-Aug
Safeway, Inc. Billings, MT Retail 1,475 185 14-Sep
Vacant Allentown, PA Office 2,800 14-Sep
$ 52,575 $ 4,369
Leasing
During the third quarter of 2014, Lexington executed 10 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
1 Lake Mary FL 09/2015 09/2020 125,155
2 Lake Mary FL 09/2015 09/2020 125,920
3 Louisville CO 04/2017 04/2027 86,877
3 Total office lease extensions 337,952
Industrial
1 Franklin NC 12/2014 06/2015 72,868
2 Minneapolis MN 06/2015 12/2025 18,620
2 Total industrial lease extensions 91,488
5 Total lease extensions 429,440
New Leases Lease
Location Expiration Date Sq. Ft.
Office
1-3 Various 2015-2025 2,504
4 Orlando FL 10/2025 44,752
5 Houston TX 10/2014 33,456
5 Total new leases 80,712
10 TOTAL NEW AND EXTENDED LEASES 510,152


2014 EARNINGS GUIDANCE

Lexington is revising its expectations for Company FFO, as adjusted, to an expected range of $1.09 to $1.11 per diluted share for the year ended December 31, 2014, as compared to prior guidance of $1.08 to $1.11 per diluted share. This guidance is forward looking, excludes the impact of certain items and is based on current expectations.

THIRD QUARTER 2014 CONFERENCE CALL

Lexington will host a conference call today, Friday, November 7, 2014, at 11:00 a.m. Eastern Time, to discuss its results for the quarter ended September 30, 2014. 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 November 21, 2014, at 877-870-5176 or 858-384-5517, pin: 13593658. 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, 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 September 30, Nine months ended September 30,
2014 2013 2014 2013
Gross revenues:
Rental $ 101,680 $ 85,643 $ 302,314 $ 254,317
Advisory and incentive fees 135 98 383 426
Tenant reimbursements 7,698 7,311 24,535 22,315
Total gross revenues 109,513 93,052 327,232 277,058
Expense applicable to revenues:
Depreciation and amortization (40,387) (41,136) (119,538) (123,407)
Property operating (16,383) (14,629) (49,651) (43,609)
General and administrative (6,394) (6,355) (21,043) (20,105)
Non-operating income 5,438 2,147 11,692 5,478
Interest and amortization expense (24,967) (22,055) (75,382) (66,455)
Debt satisfaction charges, net (455) (2,967) (7,946) (25,396)
Impairment charges (2,464) (18,864) (2,413)
Income before provision for income taxes, equity in earnings (losses) of non-consolidated entities and discontinued operations 23,901 8,057 46,500 1,151
Provision for income taxes (80) (2,433) (964) (2,963)
Equity in earnings (losses) of non-consolidated entities 173 (737) 246 (397)
Income (loss) from continuing operations 23,994 4,887 45,782 (2,209)
Discontinued operations:
Income (loss) from discontinued operations 19 (264) 2,839 708
Provision for income taxes (7) (792) (34) (1,987)
Debt satisfaction gains (charges), net (3) (299) 8,954
Gains on sales of properties 18,542 2,129 22,052 14,935
Impairment charges (371) (802) (11,062) (9,537)
Total discontinued operations 18,183 268 13,496 13,073
Net income 42,177 5,155 59,278 10,864
Less net income attributable to noncontrolling interests (1,772) (460) (3,537) (2,057)
Net income attributable to Lexington Realty Trust shareholders 40,405 4,695 55,741 8,807
Dividends attributable to preferred shares – Series C (1,573) (1,573) (4,718) (4,718)
Dividends attributable to preferred shares – Series D (3,543)
Allocation to participating securities (112) (144) (399) (482)
Deemed dividend – Series D (5,230)
Net income (loss) attributable to common shareholders $ 38,720 $ 2,978 $ 50,624 (5,166)
Income (loss) per common share – basic:
Income (loss) from continuing operations $ 0.09 $ 0.01 $ 0.17 $ (0.09)
Income from discontinued operations 0.08 0.05 0.06
Net income (loss) attributable to common shareholders $ 0.17 $ 0.01 $ 0.22 $ (0.03)
Weighted-average common shares outstanding – basic 229,463,522 213,649,374 228,337,871 204,923,085
Income (loss) per common share – diluted:
Income (loss) from continuing operations $ 0.09 $ 0.01 $ 0.17 $ (0.09)
Income from discontinued operations 0.08 0.05 0.06
Net income (loss) attributable to common shareholders $ 0.17 $ 0.01 $ 0.22 $ (0.03)
Weighted-average common shares outstanding – diluted 229,922,110 214,406,065 228,830,020 204,923,085
Amounts attributable to common shareholders:
Income (loss) from continuing operations $ 21,448 $ 2,691 $ 38,076 $ (17,682)
Income from discontinued operations 17,272 287 12,548 12,516
Net income (loss) attributable to common shareholders $ 38,720 $ 2,978 $ 50,624 $ (5,166)
LEXINGTON REALTY TRUST AND CONSOLIDATED SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited and in thousands, except share and per share data)
September 30, 2014 December 31, 2013
Assets:
Real estate, at cost $ 3,786,106 $ 3,812,294
Real estate - intangible assets 755,784 762,157
Investments in real estate under construction 86,883 74,350
4,628,773 4,648,801
Less: accumulated depreciation and amortization 1,271,228 1,223,381
Real estate, net 3,357,545 3,425,420
Cash and cash equivalents 109,337 77,261
Restricted cash 61,732 19,953
Investment in and advances to non-consolidated entities 16,619 18,442
Deferred expenses, net 67,820 66,827
Loans receivable, net 133,077 99,443
Rent receivable – current 7,301 10,087
Rent receivable – deferred 47,240 19,473
Other assets 38,955 35,375
Total assets $ 3,839,626 $ 3,772,281
Liabilities and Equity:
Liabilities:
Mortgages and notes payable 1,005,205 1,197,489
Credit facility borrowings 48,000
Term loans payable 505,000 406,000
Senior notes payable 497,607 247,707
Convertible notes payable 23,820 27,491
Trust preferred securities 129,120 129,120
Dividends payable 42,315 40,018
Accounts payable and other liabilities 34,233 39,642
Accrued interest payable 14,431 9,627
Deferred revenue - including below market leases, net 71,719 69,667
Prepaid rent 16,201 18,037
Total liabilities 2,339,651 2,232,798
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, 231,461,102 and 228,663,022 shares issued and outstanding in 2014 and 2013, respectively 23 23
Additional paid-in-capital 2,747,265 2,717,787
Accumulated distributions in excess of net income (1,368,185) (1,300,527)
Accumulated other comprehensive income 3,305 4,439
Total shareholders' equity 1,476,424 1,515,738
Noncontrolling interests 23,551 23,745
Total equity 1,499,975 1,539,483
Total liabilities and equity $ 3,839,626 $ 3,772,281
LEXINGTON REALTY TRUST AND CONSOLIDATED SUBSIDIARIES
EARNINGS PER SHARE
(Unaudited and in thousands, except share and per share data)
Three Months Ended Nine Months Ended
September 30, September 30,
2014 2013 2014 2013
EARNINGS PER SHARE:
Basic:
Income (loss) from continuing operations attributable to common shareholders $ 21,448 $ 2,691 $ 38,076 $ (17,682)
Income from discontinued operations attributable to common shareholders 17,272 287 12,548 12,516
Net income (loss) attributable to common shareholders $ 38,720 $ 2,978 $ 50,624 $ (5,166)
Weighted-average number of common shares outstanding 229,463,522 213,649,374 228,337,871 204,923,085
Income (loss) per common share:
Income (loss) from continuing operations $ 0.09 $ 0.01 $ 0.17 $ (0.09)
Income from discontinued operations 0.08 0.05 0.06
Net income (loss) attributable to common shareholders $ 0.17 $ 0.01 $ 0.22 (0.03)
Diluted:
Income (loss) from continuing operations attributable to common shareholders - basic $ 21,448 $ 2,691 $ 38,076 $ (17,682)
Impact of assumed conversions:
Share options
Income (loss) from continuing operations attributable to common shareholders 21,448 2,691 38,076 (17,682)
Income from discontinued operations attributable to common shareholders - basic 17,272 287 12,548 12,516
Impact of assumed conversions:
Share options
Income from discontinued operations attributable to common shareholders 17,272 287 12,548 12,516
Net income (loss) attributable to common shareholders $ 38,720 $ 2,978 $ 50,624 $ (5,166)
Weighted-average common shares outstanding - basic 229,463,522 213,649,374 228,337,871 204,923,085
Effect of dilutive securities:
Share options 458,588 756,691 492,149
Weighted-average common shares outstanding 229,922,110 214,406,065 228,830,020 204,923,085
Income (loss) per common share:
Income (loss) from continuing operations $ 0.09 $ 0.01 $ 0.17 $ (0.09)
Income from discontinued operations 0.08 0.05 0.06
Net income (loss) attributable to common shareholders $ 0.17 $ 0.01 $ 0.22 $ (0.03)
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 Nine Months Ended
September 30, September 30,
2014 2013 2014 2013
FUNDS FROM OPERATIONS: (1)
Basic and Diluted:
Net income attributable to Lexington Realty Trust shareholders $ 40,405 $ 4,695 $ 55,741 $ 8,807
Adjustments:
Depreciation and amortization 39,030 43,227 117,991 131,343
Impairment charges - real estate, including nonconsolidated joint venture real estate 3,115 1,727 30,856 12,875
Noncontrolling interests - OP units 1,442 202 2,556 1,286
Amortization of leasing commissions 1,580 1,445 4,506 4,124
Joint venture and noncontrolling interest adjustment 495 554 1,733 1,675
Preferred dividends - Series D (3,543)
Gains on sales of properties, net of tax (18,542) 556 (22,052) (11,325)
Interest and amortization on 6.00% Convertible Guaranteed Notes 508 642 1,618 2,534
Reported Company FFO 68,033 53,048 192,949 147,776
Debt satisfaction charges, net 455 2,970 8,245 16,442
Other / Transaction costs 257 59 1,514 603
Company FFO, as adjusted 68,745 56,077 202,708 164,821
FUNDS AVAILABLE FOR DISTRIBUTION: (2)
Adjustments:
Straight-line rents (13,478) (6,361) (31,057) (9,281)
Lease incentives 250 402 1,104 1,032
Amortization of below/above market leases 184 34 903 (136)
Non-cash interest, net (1,824) (185) (4,186) (532)
Non-cash charges, net 2,114 2,009 6,563 5,601
Tenant improvements (1,961) (2,441) (5,960) (30,590)
Lease costs (1,895) (5,038) (8,414) (9,957)
Reported Company Funds Available for Distribution $ 52,135 $ 44,497 $ 161,661 $ 120,958
Per Share Amounts
Basic:
Reported Company FFO $ 0.28 $ 0.23 $ 0.80 $ 0.67
Company FFO, as adjusted $ 0.28 $ 0.25 $ 0.84 $ 0.75
Company FAD $ 0.22 $ 0.20 $ 0.67 $ 0.55
Diluted:
Reported Company FFO $ 0.28 $ 0.23 $ 0.80 $ 0.67
Company FFO, as adjusted $ 0.28 $ 0.25 $ 0.84 $ 0.75
Company FAD $ 0.22 $ 0.19 $ 0.67 $ 0.55
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 Nine Months Ended
September 30, September 30,
Basic: 2014 2013 2014 2013
Weighted-average common shares outstanding - EPS basic 229,463,522 213,649,374 228,337,871 204,923,085
6.00% Convertible Guaranteed Notes 3,758,546 4,684,069 3,946,334 6,029,067
Non-vested share-based payment awards 111,448 487,237 123,446 494,937
Operating Partnership Units 3,871,038 4,110,748 3,876,749 4,165,362
Preferred Shares - Series C 4,710,570 4,710,570 4,710,570 4,710,570
Weighted-average common shares outstanding - basic 241,915,124 227,641,998 240,994,970 220,323,021
Diluted:
Weighted-average common shares outstanding - basic 241,915,124 227,641,998 240,994,970 220,323,021
Options - Incremental shares 458,588 756,691 492,149 876,738
Weighted-average common shares outstanding - diluted 242,373,712 228,398,689 241,487,119 221,199,759

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