Lexington Realty Trust Reports Second Quarter 2014 Results


NEW YORK, Aug. 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 second quarter ended June 30, 2014.

Second Quarter 2014 Highlights

  • Generated Company Funds From Operations, as adjusted ("Company FFO, as adjusted"), of $67.6 million, or $0.28 per diluted common share.
  • Raised the quarterly common share dividend by 3% to $0.17 per share.
  • Issued $250.0 million of 4.40% 10-year Senior Notes, which are unsecured and rated investment-grade and financed an office property for $27.8 million for five years at a fixed interest rate of 2.2%.
  • Retired $172.3 million of secured debt, which had a weighted-average fixed interest rate of 5.3%.
  • Completed property acquisitions of $62.0 million, invested $10.6 million in on-going build-to-suit projects and loan investments, and commenced funding a new $22.6 million industrial build-to-suit project.
  • Disposed of six office properties for an aggregate disposition price of $62.2 million.
  • Executed 0.9 million square feet of new and extended leases with overall portfolio 97.8% leased.
  • Increased revenue from leases of ten years or longer by 31%.
  • Updates 2014 guidance.

T. Wilson Eglin, President and Chief Executive Officer of Lexington, stated, "During the second quarter, we continued to execute on our capital recycling strategy, disposing of six office properties and acquiring several industrial properties, including the completion of two build-to-suit projects. Our leasing activity has continued to be strong and our portfolio was 97.8% leased at quarter-end – an improvement of 60 basis points during the quarter. The attractive interest rate environment provided an opportunity for us to lower our financing costs during the quarter as we obtained $277.8 million of new financing with a weighted-average fixed interest rate of 4.2% and term to maturity of 9.5 years, the proceeds of which were partially used to repay higher-rate financings with near term maturities."

FINANCIAL RESULTS

Revenues

For the quarter ended June 30, 2014, total gross revenues were $109.8 million, compared with total gross revenues of $94.7 million for the quarter ended June 30, 2013. The increase is primarily due to property acquisitions.

Company FFO, As Adjusted

For the quarter ended June 30, 2014, Lexington generated Company FFO, as adjusted, of $67.6 million, or $0.28 per diluted share, compared to Company FFO, as adjusted, for the quarter ended June 30, 2013 of $56.5 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 June 30, 2014 of $0.17 per common share/unit, which was paid on July 15, 2014 to common shareholders/unitholders of record as of June 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 August 15, 2014 to Series C Preferred Shareholders of record as of July 31, 2014.

Net Income (Loss) Attributable to Common Shareholders

For the quarter ended June 30, 2014, net income attributable to common shareholders was $12.7 million, or $0.05 per diluted share, compared with a net loss attributable to common shareholders for the quarter ended June 30, 2013 of $(0.8) million, or $(0.00) per diluted share.

OPERATING ACTIVITIES

Investment Activity              
Acquisitions and Completed Build-to-Suit Transactions
        Initial      
      Initial Annualized Initial    
    Property Basis Cash Rent Cash GAAP Lease
Tenant Location Type ($000) ($000) Yield Yield Expiration
Calsonic Kansei North              
America Inc. Lewisburg, TN Industrial  $ 13,320  $ 1,195 9.0% 9.7% 03/2026
Nicholas & Co., Inc. North Las Vegas, NV Industrial   28,249 2,118 7.5% 9.0% 09/2034
The Boeing Company Bingen, WA Industrial   20,391 2,499 12.3% 12.9% 05/2024
       $ 61,960  $ 5,812 9.4% 10.4%  
             
On-going Build-to-Suit Projects            
        Maximum GAAP   
        Commitment/ Investment  
      Lease  Estimated Balance as of Estimated 
    Property Term Completion Cost 6/30/2014 Completion 
Location Sq. Ft Type (Years) ($000) ($000) Date
Oak Creek, WI 164,000 Industrial 20  $ 22,609  $ 2,021 2Q 15
Richmond, VA 279,000 Office 15 98,644 30,577 3Q 15
Lake Jackson, TX 664,000 Office/R&D 20 166,164 21,488 4Q 16
  1,107,000      $ 287,417  $ 54,086  
             
Forward Commitment            
    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
           
Capital Recycling          
           
Dispositions          
      Gross Disposition Annualized  
    Property Price NOI Month of
Tenant Location Type ($000) ($000) Disposition
Vacant Cary, NC Office  $ 14,375 $ -- Apr-14
Multi-tenant (3 properties) Glen Allen, VA Office 26,700 2,769 Apr-14
Honeywell International, Inc. Colorado Springs, CO Office 9,900 1,707 May-14
Invensys Systems, Inc. (1) Foxboro, MA Office 11,180 1,968 Jun-14
       $ 62,155  $ 6,444  
(1) Tenant exercised purchase option. Absent such exercise, Lexington would have been required to fund $25.0 million for base building, tenant improvements and allowances.

Leasing

During the second quarter of 2014, Lexington executed 10 new and extended leases for 0.9 million square feet and ended the quarter with its overall portfolio 97.8% leased.

Lease Extensions          
      Prior Lease  
  Location Term Expiration Date Sq. Ft.
  Office        
1-4 Honolulu HI 2014 2016-2017 2,452
5 Carrollton TX 07/2015 12/2025 138,443
5 Total office lease extensions     140,895
  Industrial        
1 Hebron OH 05/2014 05/2017 250,410
2 Hebron OH 05/2014 05/2017 400,522
2 Total industrial lease extensions     650,932
7 Total lease extensions     791,827
           
New Leases          
        Lease  
  Location   Expiration Date Sq. Ft.
  Office        
1 Indianapolis IN   11/2017 3,764
2 Los Angeles CA   03/2025 62,323
3 Houston TX   04/2030 68,985
3 Total new leases     135,072
         
10 TOTAL NEW AND EXTENDED LEASES     926,899

CAPITAL MARKETS

Capital Activities and Balance Sheet Update

Lexington issued $250.0 million aggregate principal amount of 4.40% Senior Notes due in 2024 at 99.883% of the principal amount. The notes are unsecured and rated Baa2, BBB- and BBB by Moody's Investor Services, Inc., Standard & Poor's Rating Services and Fitch Ratings, Inc., respectively.

Lexington retired $172.3 million of secured debt, which had a weighted-average fixed interest rate of 5.3% and was scheduled to mature through 2015. Lexington incurred $3.7 million in aggregate yield maintenance.

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 is revising its expectations for Company FFO, as adjusted, to an expected range of $1.08 to $1.11 per diluted share for the year ended December 31, 2014, as compared to prior guidance of $1.11 to $1.15 per diluted share. The modification to 2014 guidance reflects the Company's decision not to pursue an investment transaction which, if completed, could have contributed approximately $0.04 per diluted share to Company FFO, as adjusted, in the second half of 2014. At the midpoint of the revised guidance range, company FFO per share, as adjusted, would grow by approximately 7% in 2014. This guidance is forward looking, excludes the impact of certain items and is based on current expectations.

SECOND QUARTER 2014 CONFERENCE CALL

Lexington will host a conference call today, Thursday, August 7, 2014, at 11:00 a.m. Eastern Time, to discuss its results for the quarter ended June 30, 2014. Interested parties may participate in this conference call by dialing (888) 438-5493 or (719) 325-4877. A replay of the call will be available through August 21, 2014, at (877) 870-5176 or (858) 384-5517, pin: 2920871. 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 June 30, Six months ended June 30,
  2014 2013 2014 2013
Gross revenues:        
Rental  $ 101,413  $ 86,962  $ 202,794  $ 170,806
Advisory and incentive fees 126 154 248 328
Tenant reimbursements 8,217 7,615 16,900 15,097
Total gross revenues 109,756 94,731 219,942 186,231
Expense applicable to revenues:        
Depreciation and amortization (39,861) (42,064) (80,455) (83,489)
Property operating (16,436) (14,821) (33,525) (29,570)
General and administrative (6,667) (6,509) (14,649) (13,402)
Non-operating income 3,302 1,470 6,253 3,331
Interest and amortization expense (25,955) (21,440) (50,415) (44,400)
Debt satisfaction charges, net (4,187) (11,726) (7,491) (22,429)
Impairment charges (16,400) (2,413)
Income (loss) before provision for income taxes, equity in earnings (losses) of non-consolidated entities and discontinued operations 19,952 (359) 23,260 (6,141)
Provision for income taxes (297) (152) (899) (544)
Equity in earnings (losses) of non-consolidated entities (209) 204 73 339
Income (loss) from continuing operations 19,446 (307) 22,434 (6,346)
Discontinued operations:        
Income (loss) from discontinued operations 1,018 (811) 2,159 208
Provision for income taxes (6) (1,166) (12) (1,181)
Debt satisfaction gains (charges), net (299) (1,299) (299) 8,957
Gains on sales of properties 3,510 12,806 3,510 12,806
Impairment charges (8,382) (1,391) (10,691) (8,735)
Total discontinued operations (4,159) 8,139 (5,333) 12,055
Net income 15,287 7,832 17,101 5,709
Less net income attributable to noncontrolling interests (837) (1,100) (1,765) (1,597)
Net income attributable to Lexington Realty Trust shareholders 14,450 6,732 15,336 4,112
Dividends attributable to preferred shares – Series C (1,573) (1,573) (3,145) (3,145)
Dividends attributable to preferred shares – Series D (617) (3,543)
Allocation to participating securities (135) (161) (287) (338)
Deemed dividend – Series D (5,230) (5,230)
Net income (loss) attributable to common shareholders  $ 12,742  $ (849)  $ 11,904  $ (8,144)
Income (loss) per common share – basic:        
Income (loss) from continuing operations  $ 0.07  $ (0.04)  $ 0.07  $ (0.10)
Income (loss) from discontinued operations (0.02) 0.04 (0.02) 0.06
Net income (loss) attributable to common shareholders  $ 0.05  $ —  $ 0.05  $ (0.04)
Weighted-average common shares outstanding – basic 228,368,053 211,619,288 227,765,718 200,487,623
Income (loss) per common share – diluted:        
Income (loss) from continuing operations  $ 0.07  $ (0.04)  $ 0.07  $ (0.10)
Income (loss) from discontinued operations (0.02) 0.04 (0.02) 0.06
Net income (loss) attributable to common shareholders  $ 0.05  $ —   $ 0.05  $ (0.04)
Weighted-average common shares outstanding – diluted 228,851,184 211,619,288 228,275,608 200,487,623
Amounts attributable to common shareholders:        
Income (loss) from continuing operations  $ 16,901  $ (8,477)  $ 17,237  $ (19,701)
Income (loss) from discontinued operations (4,159) 7,628 (5,333) 11,557
Net income (loss) attributable to common shareholders  $ 12,742  $ (849)  $ 11,904  $ (8,144)
 
LEXINGTON REALTY TRUST AND CONSOLIDATED SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited and in thousands, except share and per share data)
     
  June 30, 2014 December 31, 2013
Assets:    
Real estate, at cost  $ 3,830,354  $ 3,812,294
Real estate - intangible assets 757,687 762,157
Investments in real estate under construction 54,586 74,350
  4,642,627 4,648,801
Less: accumulated depreciation and amortization 1,252,406 1,223,381
Real estate, net 3,390,221 3,425,420
Assets held for sale 3,866
Cash and cash equivalents 129,104 77,261
Restricted cash 21,763 19,953
Investment in and advances to non-consolidated entities 16,729 18,442
Deferred expenses, net 68,325 66,827
Loans receivable, net 122,409 99,443
Rent receivable – current 8,441 10,087
Rent receivable – deferred 40,671 19,473
Other assets 36,141 35,375
Total assets  $ 3,837,670  $ 3,772,281
     
Liabilities and Equity:    
Liabilities:    
Mortgages and notes payable  $ 1,012,537  $ 1,197,489
Credit facility borrowings 48,000
Term loans payable 505,000 406,000
Senior notes payable 497,539 247,707
Convertible notes payable 25,054 27,491
Trust preferred securities 129,120 129,120
Dividends payable 41,891 40,018
Liabilities held for sale 117
Accounts payable and other liabilities 36,356 39,642
Accrued interest payable 9,028 9,627
Deferred revenue - including below market leases, net 73,565 69,667
Prepaid rent 21,402 18,037
Total liabilities 2,351,609 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, 230,384,990 and 228,663,022 shares issued and outstanding in 2014 and 2013, respectively 23 23
Additional paid-in-capital 2,735,174 2,717,787
Accumulated distributions in excess of net income (1,365,407) (1,300,527)
Accumulated other comprehensive income (loss) (66) 4,439
Total shareholders' equity 1,463,740 1,515,738
Noncontrolling interests 22,321 23,745
Total equity 1,486,061 1,539,483
Total liabilities and equity  $ 3,837,670  $ 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 Six Months Ended
  June 30, June 30,
  2014 2013 2014 2013
EARNINGS PER SHARE:        
         
Basic:        
Income (loss) from continuing operations attributable to common shareholders  $ 16,901  $ (8,477)  $ 17,237  $ (19,701)
Income (loss) from discontinued operations attributable to common shareholders (4,159) 7,628 (5,333) 11,557
Net income (loss) attributable to common shareholders  $ 12,742  $ (849)  $ 11,904  $ (8,144)
         
Weighted-average number of common shares outstanding 228,368,053 211,619,288 227,765,718 200,487,623
         
Income (loss) per common share:        
Income (loss) from continuing operations  $ 0.07  $ (0.04)  $ 0.07  $ (0.10)
Income (loss) from discontinued operations (0.02) 0.04 (0.02) 0.06
Net income (loss) attributable to common shareholders  $ 0.05  $ —   $ 0.05  $ (0.04)
         
Diluted:        
Income (loss) from continuing operations attributable to common shareholders - basic  $ 16,901  $ (8,477)  $ 17,237  $ (19,701)
Impact of assumed conversions:        
Share options
Income (loss) from continuing operations attributable to common shareholders 16,901 (8,477) 17,237 (19,701)
Income (loss) from discontinued operations attributable to common shareholders - basic (4,159) 7,628 (5,333) 11,557
Impact of assumed conversions:        
Share options
Income (loss) from discontinued operations attributable to common shareholders (4,159) 7,628 (5,333) 11,557
Net income (loss) attributable to common shareholders  $ 12,742  $ (849)  $ 11,904  $ (8,144)
         
Weighted-average common shares outstanding - basic 228,368,053 211,619,288 227,765,718 200,487,623
Effect of dilutive securities:        
Share options 483,131 509,890
Weighted-average common shares outstanding 228,851,184 211,619,288 228,275,608 200,487,623
         
Income (loss) per common share:        
Income (loss) from continuing operations  $ 0.07  $ (0.04)  $ 0.07  $ (0.10)
Income (loss) from discontinued operations (0.02) 0.04 (0.02) 0.06
Net income (loss) attributable to common shareholders  $ 0.05  $ —   $ 0.05  $ (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 Six Months Ended
  June 30, June 30,
  2014 2013 2014 2013
FUNDS FROM OPERATIONS: (1)        
Basic and Diluted:        
Net income attributable to Lexington Realty Trust shareholders  $ 14,450  $ 6,732  $ 15,336  $ 4,112
Adjustments:        
Depreciation and amortization 39,022 44,160 78,961 88,116
Impairment charges - real estate, including nonconsolidated joint venture real estate 9,032 1,391 27,741 11,148
Noncontrolling interests - OP units 533 837 1,114 1,084
Amortization of leasing commissions 1,472 1,351 2,926 2,679
Joint venture and noncontrolling interest adjustment 605 545 1,238 1,121
Preferred dividends - Series D (617) (3,543)
Gains on sales of properties, net of tax (3,510) (11,881) (3,510) (11,881)
Interest and amortization on 6.00% Convertible Guaranteed Notes 531 828 1,110 1,892
Reported Company FFO 62,135 43,346 124,916 94,728
Debt satisfaction charges, net 4,486 13,025 7,790 13,472
Other 945 157 1,257 544
Company FFO, as adjusted 67,566 56,528 133,963 108,744
         
FUNDS AVAILABLE FOR DISTRIBUTION: (2)        
Adjustments:        
Straight-line rents (17,002) (9,143) (17,579) (2,920)
Lease incentives 417 374 854 630
Amortization of below/above market leases 455 (218) 719 (170)
Non-cash interest, net (1,210) (32) (2,362) (347)
Non-cash charges, net 2,148 2,011 4,449 3,592
Tenant improvements (1,580) (13,475) (3,999) (28,149)
Lease costs (2,534) (2,125) (6,519) (4,919)
Reported Company Funds Available for Distribution  $ 48,260  $ 33,920  $ 109,526  $ 76,461
         
Per Share Amounts        
Basic:        
Reported Company FFO  $ 0.26  $ 0.19  $ 0.52  $ 0.44
Company FFO, as adjusted  $ 0.28  $ 0.25  $ 0.56  $ 0.50
Company FAD  $ 0.20  $ 0.15  $ 0.46  $ 0.35
         
Diluted:        
Reported Company FFO  $ 0.26  $ 0.19  $ 0.52  $ 0.44
Company FFO, as adjusted  $ 0.28  $ 0.25  $ 0.56  $ 0.50
Company FAD  $ 0.20  $ 0.15  $ 0.45  $ 0.35
         
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 Six Months Ended
  June 30, June 30,
Basic: 2014 2013 2014 2013
Weighted-average common shares outstanding - EPS basic 228,368,053 211,619,288 227,765,718 200,487,623
6.00% Convertible Guaranteed Notes 3,870,830 5,937,510 4,041,784 6,712,713
Non-vested share-based payment awards 136,644 564,540 130,110 496,692
Operating Partnership Units 3,878,412 4,167,712 3,879,652 4,193,121
Preferred Shares - Series C 4,710,570 4,710,570 4,710,570 4,710,570
Weighted-average common shares outstanding - basic 240,964,509 226,999,620 240,527,834 216,600,719
         
Diluted:        
Weighted-average common shares outstanding - basic 240,964,509 226,999,620 240,527,834 216,600,719
Options - Incremental shares 483,131 802,777 509,890 935,331
Weighted-average common shares outstanding - diluted 241,447,640 227,802,397 241,037,724 217,536,050
         
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.
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.


            

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