Lexington Realty Trust Reports Second Quarter 2015 Results

NEW YORK, Aug. 04, 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 second quarter ended June 30, 2015.

Second Quarter 2015 Highlights

• Generated Company Funds From Operations (“Company FFO”) of $67.0 million, or $0.27 per diluted common share.
• Invested $28.2 million in on-going build-to-suit projects and commenced funding an industrial build-to-suit project for $70.0 million.
• Completed an industrial build-to-suit property for $10.1 million.
• Disposed of two office buildings for gross disposition proceeds of $77.1 million.
• Retired $30.1 million of secured debt.
• Completed 1.3 million square feet of new leases and lease extensions with overall portfolio 96.3% leased.
• Raised renewal rents by 1.3% on a cash basis and 6.6% on a GAAP basis.
• Announced a 10.0 million common share repurchase authorization subsequent to quarter end.

T. Wilson Eglin, President and Chief Executive Officer of Lexington, stated, “We continue to make substantive progress on our capital recycling and portfolio repositioning initiatives. During the quarter, we sold $77.1 million of office properties, bringing our total for the year to $112.3 million, with proceeds redeployed primarily into newer, longer-term investments at attractive returns through our build-to-suit projects. Given the strong investment sales market, we expect disposition activity to remain elevated throughout the balance of 2015. Within our portfolio, we completed 1.3 million of new leases and lease extensions during the quarter. We expect to make substantial progress over the balance of this year with respect to leases expiring in 2016 and beyond.”

Mr. Eglin added, “Of particular note is the cumulative impact that the execution of our capital recycling program has had on our office portfolio. The weighted-average lease term in this portfolio is over seven years and more than half of our office revenue is from investment-grade rated tenants. Most importantly, 72% of our office revenue is from long-term leases or leases which have been renewed since the beginning of 2009. Taken together, our exposure to expiring leases with above market rents has been considerably mitigated.”

FINANCIAL RESULTS

Revenues

For the quarter ended June 30, 2015, total gross revenues were $110.3 million, a 4.6% increase compared with total gross revenues of $105.4 million for the quarter ended June 30, 2014. The increase is primarily due to property acquisitions.

Company FFO

For the quarter ended June 30, 2015, Lexington generated Company FFO of $67.0 million, or $0.27 per diluted share, compared to Company FFO for the quarter ended June 30, 2014 of $67.6 million, or $0.28 per diluted share. The calculation of Company FFO and a reconciliation to net income 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 June 30, 2015 of $0.17 per common share/unit, which was paid on July 15, 2015 to common shareholders/unitholders of record as of June 30, 2015, 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 17, 2015 to Series C Preferred Shareholders of record as of July 31, 2015.

Net Income Attributable to Common Shareholders

For the quarter ended June 30, 2015, net income attributable to common shareholders was $47.7 million, or $0.20 per diluted share, compared with net income attributable to common shareholders for the quarter ended June 30, 2014 of $12.7 million, or $0.05 per diluted share.

OPERATING ACTIVITIES

Investment Activity

During the quarter, Lexington completed one build-to-suit project, which is subject to a lease having a term in excess of ten years (an “LTL”).

Lexington also funded $28.2 million of the projected costs of the following projects:

Lexington also invested $8.4 million in an 11.5% loan that matures in October 2015 to a tenant-in-common. The loan is secured by the tenant-in-common's interest in an office property in which Lexington has a 40% interest.

In addition, Lexington has committed to acquire the following properties upon completion of construction.

Capital Recycling

Lexington collected $3.5 million in full satisfaction of the Austin, Texas loan investment, including yield maintenance.

Balance Sheet

During the second quarter of 2015, Lexington satisfied $30.1 million of consolidated secured debt with a weighted-average interest rate of 5.1%, unencumbering six properties with estimated 2015 annual net operating income of approximately $8.6 million.

In April 2015, holders converted approximately $2.8 million original principal amount 6.00% Convertible Guaranteed Notes due 2030 (“6.00% Notes”) for 428,707 common shares, reducing the outstanding balance of this note issuance to $12.8 million. All common shares that are issuable upon conversion of the 6.00% Notes are treated as outstanding for diluted Company FFO calculations.

On July 2, 2015, Lexington announced a new 10.0 million common share repurchase authorization (inclusive of all outstanding prior authorizations). Under this authorization, 150,000 common shares have been purchased at an average price of $8.58 per share. In connection with the authorization, Lexington declared a cash dividend of $0.8125 per share on its Series C Preferred Shares, which will be paid on November 16, 2015 to Series C Preferred Shareholders of record as of October 30, 2015.

Leasing

During the second quarter of 2015, Lexington executed the following new and extended leases:

2015 EARNINGS GUIDANCE

Lexington is raising its Company FFO guidance by $0.01 per share to an expected range of $1.02 to $1.06 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.

SECOND QUARTER 2015 CONFERENCE CALL

Lexington will host a conference call today, Tuesday, August 4, 2015, at 11:00 a.m. Eastern Time, to discuss its results for the quarter ended June 30, 2015. 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 August 18, 2015, at 877-870-5176 or 858-384-5517, pin: 13614059. 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.

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 at the beginning of the period. 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.

³ Includes OP units.