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Lexington Realty Trust Reports Fourth Quarter 2014 Results

NEW YORK, Feb. 19, 2015 (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, 2014.

Fourth Quarter 2014 Highlights

  • Generated Company Funds From Operations ("Company FFO") of $66.3 million, or $0.27 per diluted common share.
  • Acquired three properties for $70.4 million.
  • Invested $24.5 million in on-going build-to-suit projects and loan investments.
  • Generated gross disposition proceeds of $167.2 million from the sale of four office buildings.
  • Received $32.8 million from maturing loan investment.
  • Retired $59.0 million of debt.
  • Completed 1.9 million square feet of new leases and lease extensions, raising cash and GAAP renewal rents by 4.6%.

T. Wilson Eglin, President and Chief Executive Officer of Lexington, stated "The execution of our stated strategies in 2014 has resulted in a strong balance sheet with a large cash position, which we believe positions us to capitalize on growth opportunities in 2015. We are already committed to fund approximately $325 million in growth initiatives this year. We believe our pipeline remains strong with additional opportunities for growth as the year progresses. We also expect to continue to take advantage of refinancing opportunities in 2015, to reduce interest expense and extend our debt maturities."

FINANCIAL RESULTS

Revenues

For the quarter ended December 31, 2014, total gross revenues were $108.0 million, compared with total gross revenues of $100.5 million for the quarter ended December 31, 2013. The increase is primarily due to property acquisitions.

Company FFO

For the quarter ended December 31, 2014, Lexington generated Company FFO of $66.3 million, or $0.27 per diluted share, compared to Company FFO for the quarter ended December 31, 2013 of $65.7 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 December 31, 2014 of $0.17 per common share/unit, which was paid on January 15, 2015 to common shareholders/unitholders of record as of December 31, 2014, 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 17, 2015 to Series C Preferred Shareholders of record as of January 30, 2015.

Net Income (Loss) Attributable to Common Shareholders

For the quarter ended December 31, 2014, net income attributable to common shareholders was $35.7 million, or $0.15 per diluted share, compared with net loss attributable to common shareholders for the quarter ended December 31, 2013 of $(8.9) million, or $(0.04) per diluted share.

OPERATING ACTIVITIES

Investment Activity
Acquisitions
Tenant/Guarantor Location Property
Type
Initial
Basis
($000)

Initial
Annualized
Cash Rent
($000)
Initial
Cash
Yield
Estimated
GAAP
Yield
Lease
Term
(Yrs)
ZE-45 Ground Tenant LLC New York, NY Land $ 30,426 $ 1,500 4.9% 15.2% 99
HealthSouth Corp. Vineland, NJ Rehab Hospital 19,100 1,113 5.8% 5.8%(1) 28
International Automotive Components Group North America Anniston, AL Industrial 20,907 1,572 7.5% 8.3% 15
$ 70,433 $ 4,185 5.9% 10.6%
1. Lease contains annual CPI increases.
On-going Build-to-Suit Projects
Location Sq. Ft. Property
Type
Lease
Term
(Years)
Maximum
Commitment/Estimated
Completion Cost
($000)
GAAP
Investment
Balance as of
12/31/2014
($000)
Estimated
Completion
Date
Oak Creek, WI 164,000 Industrial 20 $ 22,609 $ 11,860 2Q 15
Thomson, GA 208,000 Industrial 15 10,245 3,428 2Q 15
Richmond, VA 330,000 Office 15 110,137 62,225 3Q 15
Lake Jackson, TX 664,000 Office/R&D 20 166,164 28,225 4Q 16
Houston, TX(1) 274,000 Private School 20 86,491 11,795 3Q 16
1,640,000 $ 395,646 $ 117,533
1. Lexington has a 25% interest as of December 31, 2014. Lexington may provide construction financing up to $56.7 million to the joint venture.
Forward Commitments
Location Property
Type
Estimated
Acquisition Cost
($000)
Estimated
Completion
Date
Estimated
Initial
Cash Yield
Estimated
GAAP
Yield
Lease
Term
(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 7.3% 8.7%
Capital Recycling
Property Dispositions
Tenant Location Property
Type
Gross Disposition
Price
($000)
Annualized
NOI
($000)
Month of
Disposition
Bank of America, National Association Brea, CA Office $ 110,000 $ 8,096 Nov-14
Vacant(1) Chicago, IL Office 34,150 Nov-14
Canal Insurance Company Greenville, SC Office 11,550 991 Dec-14
Vacant(2) Houston, TX Office 11,486 Dec-14
$ 167,186 $ 9,087
1. $29.9 million secured debt satisfied at closing.
2. Purchaser assumed an $11.5 million secured debt.

Loan Investments

Lexington collected $32.8 million in full satisfaction of the Norwalk, Connecticut loan investment.

Balance Sheet

During the fourth quarter of 2014, Lexington satisfied $50.5 million of secured debt, which had a weighted-average interest rate of 5.5%, including the $41.4 million of aggregate secured debt encumbering properties which were disposed.

In December 2014, holders converted approximately $8.6 million original principal amount 6.00% Convertible Guaranteed Notes due 2030 ("6.00% Notes") for 1,280,439 common shares and a cash payment of $171 thousand plus accrued interest, reducing the outstanding balance of this note issuance to $16.2 million at December 31, 2014. All common shares that are issuable upon conversion of the 6.00% Notes are treated as outstanding for diluted Company FFO calculations.

During the fourth quarter of 2014, Lexington locked rate on the following secured loans:

Tenant/Guarantor Location Property Type Amount
($000)
Fixed Rate Term
(approx.)
ZE-45 Ground Tenant LLC(1) New York, NY Land $ 29,193 4.1% 10 years
Federal Express Corporation(2) Long Island City, NY Industrial 51,650 3.5% 13 years
$ 80,843 3.7%
1. Loan closed in first quarter of 2015.
2. No assurances can be given that the loan will be funded on these terms or at all.
Leasing
During the fourth quarter of 2014, Lexington executed the following new and extended leases:
LEASE EXTENSIONS
Location Prior Term Lease Expiration Date Sq. Ft.
Office/Multi-Tenant
1 Little Rock AR 10/2015 10/2020 36,311
2 Pine Bluff AR 10/2015 10/2017 27,189
3 Phoenix AZ 11/2016 11/2021 6,982
3 Total office lease extensions 70,482
Industrial/Multi-Tenant
1 Moody AL 12/2017 12/2019 595,346
2 Laurens SC 01/2017 01/2020 1,164,000
3 Antioch TN 12/2014 12/2015 60,000
3 Total industrial lease extensions 1,819,346
6 Total lease extensions 1,889,828
NEW LEASES
Location Lease Expiration Date Sq. Ft.
2 Palm Beach Gardens FL 2016-2022 20,067
3 Various 2015-2025 5,067
5 Total new leases 25,134
11 TOTAL NEW AND EXTENDED LEASES 1,914,962

2015 EARNINGS GUIDANCE

Lexington estimates that its Company FFO guidance will be an expected range of $1.00 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.

FOURTH QUARTER 2014 CONFERENCE CALL

Lexington will host a conference call today, Thursday, February 19, 2015, at 11:00 a.m. Eastern Time, to discuss its results for the quarter ended December 31, 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 March 5, 2015, at 877-870-5176 or 858-384-5517, pin: 13599968. 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 SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited and in thousands, except share and per share data)
Three months ended December 31, Twelve months ended December 31,
2014 2013 2014 2013
Gross revenues:
Rental $ 99,610 $ 93,403 $ 392,480 $ 335,721
Advisory and incentive fees 171 429 554 855
Tenant reimbursements 8,173 6,626 31,338 25,334
Total gross revenues 107,954 100,458 424,372 361,910
Expense applicable to revenues:
Depreciation and amortization (40,105) (40,138) (154,837) (157,901)
Property operating (17,039) (14,409) (63,673) (54,757)
General and administrative (7,221) (8,696) (28,255) (28,426)
Non-operating income 3,965 2,828 13,951 8,305
Interest and amortization expense (23,847) (22,068) (97,303) (85,892)
Gain on sales of financial assets 855 855
Debt satisfaction charges, net (1,505) (9,452) (25,347)
Impairment charges and loan loss (18,469) (33,166) (37,333) (35,579)
Income (loss) before provision for income taxes, equity in earnings (losses) of non-consolidated entities and discontinued operations 4,588 (15,191) 48,325 (17,687)
Provision for income taxes (162) (236) (1,109) (3,177)
Equity in earnings (losses) of non-consolidated entities 380 240 626 (157)
Income (loss) from continuing operations 4,806 (15,187) 47,842 (21,021)
Discontinued operations:
Income from discontinued operations 651 1,840 6,252 6,244
Benefit (provision) for income taxes (8) 192 (59) (1,817)
Debt satisfaction gains (charges), net (14) (312) 8,905
Gains on sales of properties 35,455 9,537 57,507 24,472
Impairment charges (2,705) (3,383) (13,767) (12,920)
Total discontinued operations 33,379 8,186 49,621 24,884
Net income (loss) 38,185 (7,001) 97,463 3,863
Less net income attributable to noncontrolling interests (822) (176) (4,359) (2,233)
Net income (loss) attributable to Lexington Realty Trust shareholders 37,363 (7,177) 93,104 1,630
Dividends attributable to preferred shares – Series C (1,572) (1,572) (6,290) (6,290)
Dividends attributable to preferred shares – Series D (3,543)
Allocation to participating securities (91) (174) (490) (656)
Deemed dividend – Series D (5,230)
Net income (loss) attributable to common shareholders $ 35,700 $ (8,923) $ 86,324 $ (14,089)
Income (loss) per common share – basic:
Income (loss) from continuing operations $ 0.01 $ (0.08) $ 0.17 $ (0.18)
Income from discontinued operations 0.14 0.04 0.21 0.11
Net income (loss) attributable to common shareholders $ 0.15 $ (0.04) $ 0.38 $ (0.07)
Weighted-average common shares outstanding – basic 230,830,905 224,260,756 228,966,253 209,797,238
Income (loss) per common share – diluted:
Income (loss) from continuing operations $ 0.01 $ (0.08) $ 0.17 $ (0.18)
Income from discontinued operations 0.14 0.04 0.21 0.11
Net income (loss) attributable to common shareholders $ 0.15 $ (0.04) $ 0.38 $ (0.07)
Weighted-average common shares outstanding – diluted 231,239,828 224,260,756 229,436,708 209,797,238
Amounts attributable to common shareholders:
Income (loss) from continuing operations $ 2,322 $ (17,198) $ 37,652 $ (38,506)
Income from discontinued operations 33,378 8,275 48,672 24,417
Net income (loss) attributable to common shareholders $ 35,700 $ (8,923) $ 86,324 $ (14,089)
LEXINGTON REALTY TRUST AND CONSOLIDATED SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
As of December 31,
(Unaudited and in thousands, except share and per share data)
2014 2013
Assets:
Real estate, at cost $ 3,671,560 $ 3,812,294
Real estate - intangible assets 705,566 762,157
Investments in real estate under construction 106,238 74,350
4,483,364 4,648,801
Less: accumulated depreciation and amortization 1,196,114 1,223,381
Real estate, net 3,287,250 3,425,420
Assets held for sale 3,379
Cash and cash equivalents 191,077 77,261
Restricted cash 17,379 19,953
Investment in and advances to non-consolidated entities 19,402 18,442
Deferred expenses, net 65,860 66,827
Loans receivable, net 105,635 99,443
Rent receivable – current 6,311 10,087
Rent receivable – deferred 61,372 19,473
Other assets 20,229 35,375
Total assets $ 3,777,894 $ 3,772,281
Liabilities and Equity:
Liabilities:
Mortgages and notes payable $ 945,216 $ 1,197,489
Credit facility borrowings 48,000
Term loans payable 505,000 406,000
Senior notes payable 497,675 247,707
Convertible notes payable 15,664 27,491
Trust preferred securities 129,120 129,120
Dividends payable 42,864 40,018
Liabilities held for sale 2,843
Accounts payable and other liabilities 37,740 39,642
Accrued interest payable 8,301 9,627
Deferred revenue - including below market leases, net 68,215 69,667
Prepaid rent 16,336 18,037
Total liabilities 2,268,974 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, 233,278,037 and 228,663,022 shares issued and outstanding in 2014 and 2013, respectively 23 23
Additional paid-in-capital 2,763,374 2,717,787
Accumulated distributions in excess of net income (1,372,051) (1,300,527)
Accumulated other comprehensive income 404 4,439
Total shareholders' equity 1,485,766 1,515,738
Noncontrolling interests 23,154 23,745
Total equity 1,508,920 1,539,483
Total liabilities and equity $ 3,777,894 $ 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 Twelve Months Ended
December 31, December 31,
2014 2013 2014 2013
EARNINGS PER SHARE:
Basic:
Income (loss) from continuing operations attributable to common shareholders $ 2,322 $ (17,198) $ 37,652 $ (38,506)
Income from discontinued operations attributable to common shareholders 33,378 8,275 48,672 24,417
Net income (loss) attributable to common shareholders $ 35,700 $ (8,923) $ 86,324 $ (14,089)
Weighted-average number of common shares outstanding 230,830,905 224,260,756 228,966,253 209,797,238
Income (loss) per common share:
Income (loss) from continuing operations $ 0.01 $ (0.08) $ 0.17 $ (0.18)
Income from discontinued operations 0.14 0.04 0.21 0.11
Net income (loss) attributable to common shareholders $ 0.15 $ (0.04) $ 0.38 $ (0.07)
Diluted:
Income (loss) from continuing operations attributable to common shareholders - basic $ 2,322 $ (17,198) $ 37,652 $ (38,506)
Impact of assumed conversions:
Share options
Income (loss) from continuing operations attributable to common shareholders 2,322 (17,198) 37,652 (38,506)
Income from discontinued operations attributable to common shareholders - basic 33,378 8,275 48,672 24,417
Impact of assumed conversions:
Share options
Income from discontinued operations attributable to common shareholders 33,378 8,275 48,672 24,417
Net income (loss) attributable to common shareholders $ 35,700 $ (8,923) $ 86,324 $ (14,089)
Weighted-average common shares outstanding - basic 230,830,905 224,260,756 228,966,253 209,797,238
Effect of dilutive securities:
Share options 408,923 470,455
Weighted-average common shares outstanding 231,239,828 224,260,756 229,436,708 209,797,238
Income (loss) per common share:
Income (loss) from continuing operations $ 0.01 $ (0.08) $ 0.17 $ (0.18)
Income from discontinued operations 0.14 0.04 0.21 0.11
Net income (loss) attributable to common shareholders $ 0.15 $ (0.04) $ 0.38 $ (0.07)
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 Twelve Months Ended
December 31, December 31,
2014 2013 2014 2013
FUNDS FROM OPERATIONS: (1)
Basic and Diluted:
Net income (loss) attributable to common shareholders $ 35,700 $ (8,923) $ 86,324 $ (14,089)
Adjustments:
Depreciation and amortization 39,546 43,680 157,537 175,023
Impairment charges - real estate, including nonconsolidated joint venture real estate 18,673 22,610 49,529 35,485
Noncontrolling interests - OP units 434 (129) 2,990 1,157
Amortization of leasing commissions 1,426 1,438 5,932 5,562
Joint venture and noncontrolling interest adjustment 335 589 2,068 2,264
Gains on sales of properties, net of tax, including nonconsolidated joint venture real estate (36,374) (10,430) (58,426) (21,755)
FFO available to common shareholders and unitholders - basic 59,740 48,835 245,954 183,647
Preferred dividends 1,572 1,572 6,290 11,520
Interest and amortization on 6.00% Convertible Notes 472 579 2,090 3,113
Amount allocated to participating securities 91 174 490 656
FFO available to common shareholders and unitholders - diluted 61,875 51,160 254,824 198,936
Debt satisfaction charges, net 1,519 9,764 16,442
Impairment loss - loan receivable 2,500 13,939 2,500 13,939
Other / Transaction costs 368 565 1,882 795
Company FFO available to common shareholders and unitholders - diluted 66,262 65,664 268,970 230,112
FUNDS AVAILABLE FOR DISTRIBUTION: (2)
Adjustments:
Straight-line rents (16,170) (14,795) (47,227) (24,076)
Lease incentives 386 313 1,490 1,345
Amortization of below/above market leases 233 73 1,136 (63)
Non-cash interest, net 1,294 (1,019) (2,892) (1,551)
Non-cash charges, net 2,141 1,973 8,704 7,574
Tenant improvements (5,435) (8,654) (11,395) (39,244)
Lease costs (2,070) (2,103) (10,484) (12,060)
Company Funds Available for Distribution $ 46,641 $ 41,452 $ 208,302 $ 162,037
Per Common Share and Unit Amounts
Basic:
FFO $ 0.25 $ 0.21 $ 1.06 $ 0.86
Diluted:
FFO $ 0.25 $ 0.21 $ 1.05 $ 0.88
Company FFO $ 0.27 $ 0.28 $ 1.11 $ 1.02
Company FAD $ 0.19 $ 0.17 $ 0.86 $ 0.72
Weighted-Average Common Shares:
Basic(1) 234,688,921 228,352,995 232,838,280 213,944,169
Diluted 243,398,807 238,064,088 241,967,017 225,444,512
(1) Includes OP Units.

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. 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.

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