NEW YORK, May 8, 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 first quarter ended March 31, 2014.
First Quarter 2014 Highlights
- Company Funds From Operations, as adjusted ("Company FFO, as adjusted"), grew 12% to $0.28 per diluted common share.
- Closed property acquisitions of $79.6 million.
- Entered into an agreement for a four building build-to-suit project for $166.2 million.
- Invested $62.2 million in on-going build-to-suit projects and loan investments.
- Committed to acquire a newly built office property for $40.0 million.
- Executed 1.7 million square feet of new and extended leases with overall portfolio 97.2% leased.
- Repaid $19.5 million of secured debt with an interest rate of 6.2%.
Recent Highlights
- Sold four office properties for an aggregate price of $41.1 million, retiring $18.6 million of secured debt.
- Financed an office property for $27.8 million for five years at a fixed interest rate of 2.2%.
- Executed 0.7 million square feet of new and extended leases for vacant or 2014 lease expirations.
T. Wilson Eglin, President and Chief Executive Officer of Lexington, stated, "Our first quarter was characterized by strong leasing and investment activity and our per share company funds from operations, as adjusted, increased by 12% compared to the same period last year. Subsequent to quarter end, we continued to execute on our leasing opportunities and have made good progress on our capital recycling program with four office properties sold for $41.1 million."
FINANCIAL RESULTS
Revenues
For the quarter ended March 31, 2014, total gross revenues were $112.2 million, compared with total gross revenues of $92.7 million for the quarter ended March 31, 2013. The increase is primarily due to property acquisitions.
Company FFO, As Adjusted
For the quarter ended March 31, 2014, Lexington generated Company FFO, as adjusted, of $66.4 million, or $0.28 per diluted share, compared to Company FFO, as adjusted, for the quarter ended March 31, 2013 of $51.9 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 March 31, 2014 of $0.165 per common share/unit, which was paid on April 15, 2014 to common shareholders/unitholders of record as of March 31, 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 May 15, 2014 to Series C Preferred Shareholders of record as of April 30, 2014.
Net Loss Attributable to Common Shareholders
For the quarter ended March 31, 2014, net loss attributable to common shareholders was $(0.8) million, or $(–) per diluted share, compared with a net loss attributable to common shareholders for the quarter ended March 31, 2013 of $(7.3) million, or $(0.04) per diluted share.
OPERATING ACTIVITIES
Investment Activity
| Acquisitions and Completed Build-to-Suit Transactions | |||||||
| Initial Basis | Initial Annualized Cash Rent | ||||||
| Tenant | Location | Property Type | ($000) | ($000) | Initial Cash Yield | GAAP Yield | Lease Expiration |
| Easton-Bell Sports, Inc. | Rantoul, IL | Industrial | $ 41,277 | $ 3,407 | 8.3% | 10.0% | 10/2033 |
| Encana Oil and Gas (U.S.A.), Inc. | Parachute, CO | Office | 13,928 | 1,016 | 7.3% | 9.2% | 10/2032 |
| Physicians Choice Laboratory Services, LLC | Rock Hill, SC | Office | 24,350 | 1,726 | 7.1% | 9.0% | 03/2034 |
| $ 79,555 | $ 6,149 | 7.7% | 9.6% |
| On-going Build-to-Suit Projects | ||||||
| Maximum Commitment/Estimated | GAAP Investment | |||||
| Lease Term | Completion Cost | Balance as of 3/31/2014 | ||||
| Location | Sq. Ft | Property Type | (Years) | ($000) | ($000) | Estimated Completion Date |
| Bingen, WA | 124,000 | Industrial | 12 | $ 18,898 | $ 11,137 | 2Q 14 |
| Las Vegas, NV | 180,000 | Industrial | 20 | 29,585 | 24,265 | 3Q 14 |
| Richmond, VA | 279,000 | Office | 15 | 98,644 | 23,316 | 3Q 15 |
| Lake Jackson, TX | 664,000 | Office/R&D | 20 | 166,164 | 20,084 | 4Q 16 |
| 1,247,000 | $ 313,291 | $ 78,802 | ||||
| Forward Commitments | ||||||
| Estimated Acquisition Cost | ||||||
| Location | Property Type | ($000) | Estimated Completion Date | Estimated Initial Cash Yield | Estimated GAAP Yield | Lease Term (Years) |
| Lewisburg, TN | Industrial | $ 13,320 | 2Q 14 | 9.0% | 9.7% | 12 |
| Auburn Hills, MI | Office | 40,025 | 1Q 15 | 7.9% | 9.0% | 14 |
| $ 53,345 | 8.2% | 9.2% |
Capital Recycling
| Dispositions | |||||
| Gross Sale Price | Annualized NOI | ||||
| Tenant | Location | Property Type | ($000) | ($000) | Month of Disposition |
| Vacant | Moncks Corners, SC | Retail | $ 350 | $ -- | Mar-14 |
Leasing
During the first quarter of 2014, Lexington executed 28 new and extended leases for 1.7 million square feet and ended the quarter with its overall portfolio 97.2% leased.
| Lease Extensions | |||||
| Location | Prior Term | Lease Expiration Date | Sq. Ft. | ||
| Office | |||||
| 1-5 | Honolulu | HI | 2014 | 2015-2019 | 16,633 |
| 6 | Hampton | VA | 12/2014 | 12/2019 | 100,632 |
| 7 | Westlake | TX | 12/2016 | 11/2024 | 77,906 |
| 7 | Total office lease extensions | 195,171 | |||
| Industrial | |||||
| 1 | Jacksonville | FL | 01/2014 | 01/2017 | 168,800 |
| 2 | Crossville | TN | 09/2016 | 09/2026 | 222,200 |
| 3 | North Berwick | ME | 04/2019 | 04/2024 | 972,625 |
| 3 | Total industrial lease extensions | 1,363,625 | |||
| 10 | Total lease extensions | 1,558,796 | |||
| New Leases | |||||
| Location | Lease Expiration Date | Sq. Ft. | |||
| Office | |||||
| 1-11 | Honolulu | HI | 2014-2016 | 2,542 | |
| 12-14 | Palm Beach Gardens | FL | 2020-2023 | 54,147 | |
| 15 | Arlington | TX | 02/2025 | 13,590 | |
| 16 | Rockaway | NJ | 03/2026 | 60,258 | |
| 16 | Total office new leases | 130,537 | |||
| Industrial | |||||
| 1-2 | Antioch | TN | 2014-2015 | 15,220 | |
| 2 | Total industrial new leases | 15,220 | |||
| 18 | Total new leases | 145,757 | |||
| 28 | TOTAL NEW AND EXTENDED LEASES | 1,704,553 | |||
CAPITAL MARKETS
Capital Activities and Balance Sheet Update
During the first quarter of 2014, 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%.
Lexington also repaid $19.5 million of secured debt which had an interest rate of 6.2%.
Lexington also converted approximately $2.8 million original principal amount 6.00% Convertible Guaranteed Notes due 2030 for 414,637 common shares and a cash payment of $62 thousand, reducing the outstanding balance of this issuance to $26.2 million.
Subsequent to March 31, 2014, Lexington financed its office property in Columbus, Indiana with a $27.8 million non-recourse secured mortgage loan. The loan bears interest at a fixed rate of 2.2% and matures in 2019.
2014 EARNINGS GUIDANCE
Lexington affirms its estimate 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.
FIRST QUARTER 2014 CONFERENCE CALL
Lexington will host a conference call today, Thursday, May 8, 2014, at 11:00 a.m. Eastern Time, to discuss its results for the quarter ended March 31, 2014. Interested parties may participate in this conference call by dialing (888) 505-4378 or (719) 325-2291. A replay of the call will be available through May 22, 2014, at (877) 870-5176 or (858) 384-5517, pin: 9567050. 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 $0.66 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 March 31, | ||
| 2014 | 2013 | |
| Gross revenues: | ||
| Rental | $ 103,390 | $ 85,022 |
| Advisory and incentive fees | 122 | 174 |
| Tenant reimbursements | 8,687 | 7,483 |
| Total gross revenues | 112,199 | 92,679 |
| Expense applicable to revenues: | ||
| Depreciation and amortization | (41,330) | (42,337) |
| Property operating | (17,147) | (14,608) |
| General and administrative | (8,041) | (7,151) |
| Non-operating income | 2,951 | 1,860 |
| Interest and amortization expense | (24,722) | (23,223) |
| Debt satisfaction charges, net | (3,304) | (10,703) |
| Impairment charges | (16,400) | (2,413) |
| Income (loss) before provision for income taxes, equity in earnings of non-consolidated entities and discontinued operations | 4,206 | (5,896) |
| Provision for income taxes | (608) | (397) |
| Equity in earnings of non-consolidated entities | 281 | 135 |
| Income (loss) from continuing operations | 3,879 | (6,158) |
| Discontinued operations: | ||
| Income from discontinued operations | 244 | 1,133 |
| Provision for income taxes | — | (10) |
| Debt satisfaction gains, net | — | 10,256 |
| Impairment charges | (2,309) | (7,344) |
| Total discontinued operations | (2,065) | 4,035 |
| Net income (loss) | 1,814 | (2,123) |
| Less net income attributable to noncontrolling interests | (928) | (497) |
| Net income (loss) attributable to Lexington Realty Trust shareholders | 886 | (2,620) |
| Dividends attributable to preferred shares – Series C | (1,572) | (1,572) |
| Dividends attributable to preferred shares – Series D | — | (2,926) |
| Allocation to participating securities | (153) | (177) |
| Net loss attributable to common shareholders | $ (839) | $ (7,295) |
| Income (loss) per common share – basic: | ||
| Income (loss) from continuing operations | $ 0.01 | $ (0.06) |
| Income (loss) from discontinued operations | (0.01) | 0.02 |
| Net loss attributable to common shareholders | $ — | $ (0.04) |
| Weighted-average common shares outstanding – basic | 227,156,690 | 189,232,274 |
| Income (loss) per common share – diluted: | ||
| Income (loss) from continuing operations | $ 0.01 | $ (0.06) |
| Income (loss) from discontinued operations | (0.01) | 0.02 |
| Net loss attributable to common shareholders | $ — | $ (0.04) |
| Weighted-average common shares outstanding – diluted | 227,691,281 | 189,232,274 |
| Amounts attributable to common shareholders: | ||
| Income (loss) from continuing operations | $ 1,226 | $ (11,340) |
| Income (loss) from discontinued operations | (2,065) | 4,045 |
| Net loss attributable to common shareholders | $ (839) | $ (7,295) |
| LEXINGTON REALTY TRUST AND CONSOLIDATED SUBSIDIARIES | ||
| CONDENSED CONSOLIDATED BALANCE SHEETS | ||
| (Unaudited and in thousands, except share and per share data) | ||
| March 31, 2014 | December 31, 2013 | |
| Assets: | ||
| Real estate, at cost | $ 3,805,066 | $ 3,812,294 |
| Real estate - intangible assets | 760,590 | 762,157 |
| Investments in real estate under construction | 79,940 | 74,350 |
| 4,645,596 | 4,648,801 | |
| Less: accumulated depreciation and amortization | 1,229,777 | 1,223,381 |
| Real estate, net | 3,415,819 | 3,425,420 |
| Assets held for sale | 36,878 | — |
| Cash and cash equivalents | 46,050 | 77,261 |
| Restricted cash | 20,754 | 19,953 |
| Investment in and advances to non-consolidated entities | 17,896 | 18,442 |
| Deferred expenses, net | 67,515 | 66,827 |
| Loans receivable, net | 120,798 | 99,443 |
| Rent receivable – current | 9,169 | 10,087 |
| Rent receivable – deferred | 28,578 | 19,473 |
| Other assets | 37,718 | 35,375 |
| Total assets | $ 3,801,175 | $ 3,772,281 |
| Liabilities and Equity: | ||
| Liabilities: | ||
| Mortgages and notes payable | $ 1,145,212 | $ 1,197,489 |
| Credit facility borrowings | 42,000 | 48,000 |
| Term loans payable | 505,000 | 406,000 |
| Senior notes payable | 247,768 | 247,707 |
| Convertible notes payable | 24,942 | 27,491 |
| Trust preferred securities | 129,120 | 129,120 |
| Dividends payable | 40,397 | 40,018 |
| Liabilities held for sale | 19,204 | — |
| Accounts payable and other liabilities | 33,423 | 39,642 |
| Accrued interest payable | 10,747 | 9,627 |
| Deferred revenue - including below market leases, net | 67,899 | 69,667 |
| Prepaid rent | 27,212 | 18,037 |
| Total liabilities | 2,292,924 | 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, 229,727,737 and 228,663,022 shares issued and outstanding in 2014 and 2013, respectively | 23 | 23 |
| Additional paid-in-capital | 2,726,637 | 2,717,787 |
| Accumulated distributions in excess of net income | (1,339,118) | (1,300,527) |
| Accumulated other comprehensive income | 3,927 | 4,439 |
| Total shareholders' equity | 1,485,485 | 1,515,738 |
| Noncontrolling interests | 22,766 | 23,745 |
| Total equity | 1,508,251 | 1,539,483 |
| Total liabilities and equity | $ 3,801,175 | $ 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 | ||
| March 31, | ||
| 2014 | 2013 | |
| EARNINGS PER SHARE: | ||
| Basic: | ||
| Income (loss) from continuing operations attributable to common shareholders | $ 1,226 | $ (11,340) |
| Income (loss) from discontinued operations attributable to common shareholders | (2,065) | 4,045 |
| Net loss attributable to common shareholders | $ (839) | $ (7,295) |
| Weighted-average number of common shares outstanding | 227,156,690 | 189,232,274 |
| Income (loss) per common share: | ||
| Income (loss) from continuing operations | $ 0.01 | $ (0.06) |
| Income (loss) from discontinued operations | (0.01) | 0.02 |
| Net loss attributable to common shareholders | $ — | $ (0.04) |
| Diluted: | ||
| Income (loss) from continuing operations attributable to common shareholders - basic | $ 1,226 | $ (11,340) |
| Impact of assumed conversions: | ||
| Share options | — | — |
| Income (loss) from continuing operations attributable to common shareholders | 1,226 | (11,340) |
| Income (loss) from discontinued operations attributable to common shareholders - basic | (2,065) | 4,045 |
| Impact of assumed conversions: | ||
| Share options | — | — |
| Income (loss) from discontinued operations attributable to common shareholders | (2,065) | 4,045 |
| Net loss attributable to common shareholders | $ (839) | $ (7,295) |
| Weighted-average common shares outstanding - basic | 227,156,690 | 189,232,274 |
| Effect of dilutive securities: | ||
| Share options | 534,591 | — |
| Weighted-average common shares outstanding | 227,691,281 | 189,232,274 |
| Income (loss) per common share: | ||
| Income (loss) from continuing operations | $ 0.01 | $ (0.06) |
| Income (loss) from discontinued operations | (0.01) | 0.02 |
| Net loss attributable to common shareholders | $ — | $ (0.04) |
| 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, | ||
| 2014 | 2013 | |
| FUNDS FROM OPERATIONS: (1) | ||
| Basic and Diluted: | ||
| Net income (loss) attributable to Lexington Realty Trust shareholders | $ 886 | $ (2,620) |
| Adjustments: | ||
| Depreciation and amortization | 39,939 | 43,956 |
| Impairment charges - real estate | 18,709 | 9,757 |
| Noncontrolling interests - OP units | 581 | 247 |
| Amortization of leasing commissions | 1,454 | 1,328 |
| Joint venture and noncontrolling interest adjustment | 633 | 576 |
| Preferred dividends - Series D | — | (2,926) |
| Interest and amortization on 6.00% Convertible Guaranteed Notes | 579 | 1,064 |
| Reported Company FFO | 62,781 | 51,382 |
| Debt satisfaction charges, net | 3,304 | 447 |
| Other | 312 | 119 |
| Company FFO, as adjusted | 66,397 | 51,948 |
| FUNDS AVAILABLE FOR DISTRIBUTION: (2) | ||
| Adjustments: | ||
| Straight-line rents | (577) | 6,223 |
| Lease incentives | 437 | 256 |
| Amortization of below/above market leases | 264 | 48 |
| Non-cash interest, net | (1,152) | (315) |
| Non-cash charges, net | 2,301 | 1,581 |
| Tenant improvements | (2,419) | (14,674) |
| Lease costs | (3,985) | (2,794) |
| Reported Company Funds Available for Distribution | $ 61,266 | $ 42,273 |
| Per Share Amounts | ||
| Basic: | ||
| Reported Company FFO | $ 0.26 | $ 0.25 |
| Company FFO, as adjusted | $ 0.28 | $ 0.25 |
| Company FAD | $ 0.26 | $ 0.21 |
| Diluted: | ||
| Reported Company FFO | $ 0.26 | $ 0.25 |
| Company FFO, as adjusted | $ 0.28 | $ 0.25 |
| Company FAD | $ 0.25 | $ 0.20 |
| 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: | 2014 | 2013 |
| Weighted-average common shares outstanding - EPS basic | 227,156,690 | 189,232,274 |
| 6.00% Convertible Guaranteed Notes | 4,214,636 | 7,496,530 |
| Non-vested share-based payment awards | 122,143 | 412,914 |
| Operating Partnership Units | 3,880,905 | 4,218,813 |
| Preferred Shares - Series C | 4,710,570 | 4,710,570 |
| Weighted-average common shares outstanding - basic | 240,084,944 | 206,071,101 |
| Diluted: | ||
| Weighted-average common shares outstanding - basic | 240,084,944 | 206,071,101 |
| Options - Incremental shares | 534,591 | 1,040,240 |
| Weighted-average common shares outstanding - diluted | 240,619,535 | 207,111,341 |
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.