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Lexington Realty Trust Reports First Quarter 2013 Results

NEW YORK, May 2, 2013 (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 first quarter ended March 31, 2013.

First Quarter 2013 Highlights

  • Generated Company Funds From Operations, as adjusted ("Company FFO, as adjusted"), of $51.9 million, or $0.25 per diluted common share.
  • Executed 10 new and extended leases with overall portfolio occupancy of 97.4%.
  • Closed property acquisitions of $123.3 million, invested $11.2 million in current build-to-suit projects, entered into an agreement to fund a new build-to-suit project for $20.8 million and committed to purchase another property upon completion of construction for $39.1 million.
  • Refinanced secured credit facility with a new unsecured credit facility consisting of a four-year $300.0 million unsecured revolving loan and a five-year $250.0 million unsecured term loan.
  • Retired $168.6 million of secured debt, which had a weighted-average fixed interest rate of 5.5%.
  • Raised $294.0 million of common equity.
  • Converted $42.8 million original principal amount of 6.00% Convertible Guaranteed Notes into common equity.

Subsequent to Quarter End Highlights

  • Retired $176.6 million of secured debt, which had a weighted-average fixed interest rate of 6.0% and gave notice to prepay an additional $16.7 million of secured debt with a fixed interest rate of 6.3%.
  • Redeemed all outstanding shares of 7.55% Series D Cumulative Redeemable Preferred Stock, at par.
  • Swapped the LIBOR component on $64.0 million of five-year unsecured term loan borrowings at 0.73% for a current fixed interest rate of 2.43%.
  • Sold vacant Honolulu, Hawaii retail store and garage for $25.9 million.

T. Wilson Eglin, President and Chief Executive Officer of Lexington, stated, "Our operating results continue to be strong in all areas of our business. We have maintained high levels of occupancy, capitalized on opportunities to lower our cost of capital and added long-term net leases to our portfolio. Over the balance of the year, we expect to take advantage of opportunities to extend our debt maturities while interest rates are at attractive levels, add long-term net leases to our portfolio in order to extend our weighted-average lease term and make substantial progress addressing our 2014-2015 lease rollovers. We believe these steps will result in greater cash flow from a higher quality portfolio."

FINANCIAL RESULTS

Revenues

For the quarter ended March 31, 2013, total gross revenues were $97.1 million, compared with total gross revenues of $78.2 million for the quarter ended March 31, 2012. The increase is primarily due to property acquisitions.

Company FFO, As Adjusted

For the quarter ended March 31, 2013, Lexington generated Company FFO, as adjusted, of $51.9 million, or $0.25 per diluted share, compared to Company FFO, as adjusted, for the quarter ended March 31, 2012 of $42.7 million, or $0.24 per diluted share. The calculation of Company FFO, as adjusted, and a reconciliation to net income (loss) is included later in this press release.

Net Loss Attributable to Common Shareholders

For the quarter ended March 31, 2013, net loss attributable to common shareholders was $(7.3) million, or a loss of $(0.04) per diluted share, compared with net loss attributable to common shareholders for the quarter ended March 31, 2012 of $(2.2) million, or a loss of $(0.01) per diluted share.

Common Share/Unit Dividend/Distribution

Lexington declared a regular quarterly common share/unit dividend/distribution for the quarter ended March 31, 2013 of $0.15 per common share/unit, which was paid on April 15, 2013 to common shareholders/unitholders of record as of March 28, 2013.

OPERATING ACTIVITIES

Leasing

During the first quarter of 2013, Lexington executed 10 new and extended leases and ended the quarter with overall portfolio occupancy of 97.4%.

Capital Recycling

Dispositions

During the first quarter of 2013, Lexington disposed of its interest in one property to an unrelated third party for a gross sales price of $1.9 million and conveyed two vacant properties in foreclosure in satisfaction of the aggregate $23.3 million outstanding non-recourse mortgage loans.

Subsequent to March 31, 2013, Lexington sold its vacant Honolulu, Hawaii retail store formerly leased to Macy's West Stores, Inc. and adjoining parking garage for $25.9 million (5.3% cap rate).

Investment Activity

Acquisitions

Lexington closed on the acquisition of an industrial facility in Houston, Texas for a capitalized cost of $81.4 million (6.5% initial cap rate). The facility consists of a deep water intermodal industrial terminal with 2,055 feet of deep water berths and existing structures encompassing 132,000 square feet on over 90 acres on the Houston Ship Channel. The property is net leased for a 25-year term.

Build-to-Suit Projects

Lexington's joint venture completed the 143,000 square foot build-to-suit industrial facility in Long Island City, New York for capitalized hard costs of $41.9 million. In addition, Lexington ($5.0 million) and its developer/partner ($8.6 million) were credited with additional capital for an aggregate project cost of $55.5 million (8.5% initial cap rate). The property is net leased for a 15-year term.

Lexington entered into a $20.8 million build-to-suit lease commitment to construct a 124,000 square foot industrial property in Bingen, Washington, which is subject to a net lease that will have a 10-year (10.9% initial cap rate) to 20-year (7.5% initial cap rate) term at the tenant's option. The commitment may be terminated by the tenant prior to the commencement of construction, which construction is expected to commence in the second quarter of 2013.

In addition, Lexington continues to fund the construction of, and/or is under contract to acquire, the previously announced build-to-suit projects in (1) Denver, Colorado (8.6% initial cap rate), (2) Rantoul, Illinois (8.0% initial cap rate) and (3) Tuscaloosa, Alabama (9.3% initial cap rate).

The aggregate estimated cost of these four on-going build-to-suit projects is approximately $111.2 million of which $48.2 million was invested as of March 31, 2013.

Forward Commitment

Lexington entered into a forward commitment to purchase upon its completion a 128,000 square foot office property in Omaha, Nebraska for $39.1 million (7.1% initial cap rate), which is subject to a net lease that will have a 20-year term upon completion.

Lexington can give no assurance that any of the build-to-suit projects or other potential investments that are under commitment or contract or in process will be completed.

CAPITAL MARKETS

Capital Activities and Balance Sheet Update

During the first quarter of 2013, Lexington repaid $145.3 million in secured debt, which had a weighted-average interest rate of 5.6% and was scheduled to mature through 2019. Lexington also obtained a $40.0 million non-recourse mortgage secured by its property in Lenexa, Kansas. The loan bears interest at an initial blended fixed rate of 3.70% and matures in November 2027.

Lexington issued 6.2 million common shares upon conversion of an aggregate $42.8 million original principal amount of 6.00% Convertible Guaranteed Notes due 2030. In connection with the conversions, Lexington made an aggregate cash payment of approximately $2.7 million, plus accrued and unpaid interest on the notes.

In February 2013, Lexington refinanced its secured credit facility with an unsecured credit facility consisting of a four-year $300.0 million unsecured revolving loan and a five-year $250.0 million unsecured term loan. Lexington used borrowings on the revolving loan to retire $137.9 million of mortgage debt in March 2013. Lexington also amended its term loan due in 2019 to release the collateral as security for such loan. As a result, all of Lexington's corporate borrowings are now unsecured.

Lexington issued 23.0 million common shares in a public offering, raising net proceeds of approximately $258.1 million. In addition, Lexington implemented an At-The-Market offering program ("ATM") under which Lexington may issue up to $100.0 million in common shares over the term of the program. Lexington issued 3.4 million common shares under the program during the first quarter of 2013, raising net proceeds of $35.9 million.

The net proceeds from both the public offering and the ATM were primarily used to satisfy $137.9 million of outstanding debt on Lexington's unsecured revolving loan, to fund investments and retire secured mortgage debt subsequent to quarter end.

In total, Lexington's consolidated debt declined by $190.1 million in the first quarter of 2013.

Subsequent to March 31, 2013, Lexington borrowed $250.0 million on its unsecured revolving loan and $64.0 million on its five-year unsecured term loan and swapped the LIBOR component of the term loan for a current fixed interest rate of 2.43%.

In connection with these borrowings, Lexington repaid $176.6 million of secured debt incurring $11.8 million in yield maintenance costs, gave notice to repay $16.7 million of secured debt and redeemed all $155.0 million outstanding shares of its 7.55% Series D Cumulative Redeemable Preferred Stock, at par.

2013 EARNINGS GUIDANCE

Lexington confirms its estimate of Company FFO, as adjusted, to an expected range of $1.01 to $1.04 per diluted share for the year ended December 31, 2013. This guidance is forward looking, excludes the impact of certain items and is based on current expectations.

FIRST QUARTER 2013 CONFERENCE CALL

Lexington will host a conference call today, Thursday, May 2, 2013, at 11:00 a.m. Eastern Time, to discuss its results for the quarter ended March 31, 2013. Interested parties may participate in this conference call by dialing (888) 684-1259 or (913) 312-1502. A replay of the call will be available through May 16, 2013, at (877) 870- 5176 or (858) 384-5517, pin: 8440561. 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 self-managed and self-administered real estate investment trust that invests in, owns, finances and manages predominantly single-tenant office, industrial and retail properties leased to major corporations throughout the United States and 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, (2) Lexington's ability to achieve its estimate of Company FFO, as adjusted, for the year ended December 31, 2013, (3) the successful consummation of any lease, acquisition or build-to-suit 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" 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,
2013 2012
Gross revenues:
Rental $ 88,982 $ 70,543
Advisory and incentive fees 174 323
Tenant reimbursements 7,911 7,369
Total gross revenues 97,067 78,235
Expense applicable to revenues:
Depreciation and amortization (44,967) (37,174)
Property operating (16,200) (13,886)
General and administrative (7,162) (5,373)
Non-operating income 1,962 2,619
Interest and amortization expense (24,045) (24,171)
Debt satisfaction charges, net (10,996) (1,649)
Impairment charges (2,413)
Loss before provision for income taxes, equity in earnings of non-consolidated entities and discontinued operations (6,754) (1,399)
Provision for income taxes (407) (182)
Equity in earnings of non-consolidated entities 135 7,393
Income (loss) from continuing operations (7,026) 5,812
Discontinued operations:
Income from discontinued operations 1,698 504
Provision for income taxes (5)
Debt satisfaction gains, net 10,549 1,728
Impairment charges (7,344) (2,561)
Total discontinued operations 4,903 (334)
Net income (loss) (2,123) 5,478
Less net income attributable to noncontrolling interests (497) (1,867)
Net income (loss) attributable to Lexington Realty Trust shareholders (2,620) 3,611
Dividends attributable to preferred shares - Series B (1,379)
Dividends attributable to preferred shares - Series C (1,572) (1,572)
Dividends attributable to preferred shares - Series D (2,926) (2,926)
Allocation to participating securities (177) (150)
Redemption discount - Series C 229
Net loss attributable to common shareholders $ (7,295) $ (2,187)
Income (loss) per common share - basic and diluted:
Loss from continuing operations $ (0.07) $ —
Income (loss) from discontinued operations $ 0.03 $ (0.01)
Net loss attributable to common shareholders $ (0.04) $ (0.01)
Weighted-average common shares outstanding - basic and diluted: 189,232,274 154,149,034
Amounts attributable to common shareholders:
Loss from continuing operations $ (12,198) $ (726)
Income (loss) from discontinued operations 4,903 (1,461)
Net loss attributable to common shareholders $ (7,295) $ (2,187)
LEXINGTON REALTY TRUST AND CONSOLIDATED SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
March 31, 2013 (unaudited) and December 31, 2012
(In thousands, except share and per share data)
2013 2012
Assets:
Real estate, at cost $ 3,644,726 $ 3,564,466
Real estate - intangible assets 693,335 685,914
Investments in real estate under construction 47,041 65,122
4,385,102 4,315,502
Less: accumulated depreciation and amortization 1,175,812 1,150,417
3,209,290 3,165,085
Cash and cash equivalents 111,404 34,024
Restricted cash 23,007 26,741
Investment in and advances to non-consolidated entities 11,825 27,129
Deferred expenses, net 59,520 57,549
Loans receivable, net 82,660 72,540
Rent receivable 8,499 7,355
Other assets 28,721 27,780
Total assets $ 3,534,926 $ 3,418,203
Liabilities and Equity:
Liabilities:
Mortgages and notes payable $ 1,268,654 $ 1,415,961
Term loan payable 255,000 255,000
Convertible notes payable 38,491 78,127
Trust preferred securities 129,120 129,120
Dividends payable 36,612 31,351
Accounts payable and other liabilities 59,004 70,367
Accrued interest payable 7,330 11,980
Deferred revenue - including below market leases, net 74,353 79,908
Prepaid rent 24,808 13,224
Total liabilities 1,893,372 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 149,774 149,774
Common shares, par value $0.0001 per share; authorized 400,000,000 shares, 213,653,183 and 178,616,664 shares issued and outstanding in 2013 and 2012, respectively 21 18
Additional paid-in-capital 2,560,662 2,212,949
Accumulated distributions in excess of net income (1,182,969) (1,143,803)
Accumulated other comprehensive loss (5,522) (6,224)
Total shareholders' equity 1,615,982 1,306,730
Noncontrolling interests 25,572 26,435
Total equity 1,641,554 1,333,165
Total liabilities and equity $ 3,534,926 $ 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
March 31,
2013 2012
EARNINGS PER SHARE:
Basic and Diluted:
Loss from continuing operations attributable to common shareholders $ (12,198) $ (726)
Income (loss) from discontinued operations attributable to common shareholders 4,903 (1,461)
Net loss attributable to common shareholders $ (7,295) $ (2,187)
Weighted-average number of common shares outstanding 189,232,274 154,149,034
Income (loss) per common share:
Loss from continuing operations $ (0.07) $ —
Income (loss) from discontinued operations 0.03 (0.01)
Net loss attributable to common shareholders $ (0.04) $ (0.01)
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
March 31,
2013 2012
FUNDS FROM OPERATIONS: (1)
Basic and Diluted:
Net income (loss) attributable to Lexington Realty Trust shareholders $ (2,620) $ 3,611
Adjustments:
Depreciation and amortization 43,956 38,301
Impairment charges - real estate 9,757 2,561
Noncontrolling interests - OP units 247 360
Amortization of leasing commissions 1,328 1,087
Joint venture and noncontrolling interest adjustment 576 (1,121)
Preferred dividends - Series B & D (2,926) (4,305)
Interest and amortization on 6.00% Convertible Guaranteed Notes 1,064 2,327
Reported Company FFO 51,382 42,821
Debt satisfaction charges (gains), net 447 (79)
Other 119 (10)
Company FFO, as adjusted 51,948 42,732
FUNDS AVAILABLE FOR DISTRIBUTION: (2)
Adjustments:
Straight-line rents 6,223 9,477
Lease incentives 256 537
Amortization of below/above market leases 48 (1,301)
Non-cash interest, net (315) (674)
Non-cash charges, net 1,581 1,181
Tenant improvements (14,674) (2,145)
Lease costs (2,794) (2,644)
Reported Company Funds Available for Distribution $ 42,273 $ 47,163
Per Share Amounts
Basic:
Reported Company FFO $ 0.25 $ 0.24
Company FFO, as adjusted $ 0.25 $ 0.24
Company FAD $ 0.21 $ 0.26
Diluted:
Reported Company FFO $ 0.25 $ 0.24
Company FFO, as adjusted $ 0.25 $ 0.24
Company FAD $ 0.20 $ 0.26
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
March 31,
Basic: 2013 2012
Weighted-average common shares outstanding - EPS basic 189,232,274 154,149,034
6.00% Convertible Guaranteed Notes 7,496,530 16,409,546
Non-vested share-based payment awards 412,914 203,007
Operating Partnership Units 4,218,813 4,533,375
Preferred Shares - Series C 4,710,570 4,718,016
Weighted-average common shares outstanding - basic 206,071,101 180,012,978
Diluted:
Weighted-average common shares outstanding - basic 206,071,101 180,012,978
Options - Incremental shares 1,040,240 248,216
Weighted-average common shares outstanding - diluted 207,111,341 180,261,194

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