Upgrade to SI Premium - Free Trial

Lexington Realty Trust Reports Second Quarter 2019 Results

August 7, 2019 6:00 AM

NEW YORK, Aug. 07, 2019 (GLOBE NEWSWIRE) -- Lexington Realty Trust (“Lexington”) (NYSE: LXP), a real estate investment trust focused on single-tenant industrial real estate investments, today announced results for the second quarter ended June 30, 2019.

Second Quarter 2019 Highlights

Subsequent Events

Adjusted Company FFO is a non-GAAP financial measure. It and certain other non-GAAP financial measures are defined and reconciled later in this press release.

T. Wilson Eglin, Chairman and Chief Executive Officer of Lexington Realty Trust, commented, “We had a productive second quarter of investment, sale, and leasing activity that drove positive results. Our overall portfolio leased increased from about 95% to almost 98% and our industrial exposure continued to improve representing nearly 74% of our portfolio based on gross book value at quarter end. We have been successful thus far in the execution of our stated business plan, and we will continue to work diligently to reduce our remaining non-core asset exposure while we add more high-quality industrial warehouse/distribution centers to our portfolio. As a result of our accomplishments in the first half of the year and our expectations going forward, including cost savings associated with our recently extended term loan, we are increasing Adjusted Company FFO guidance to a range of $0.76-$0.80 per diluted common share.”

FINANCIAL RESULTS

Revenues

For the quarter ended June 30, 2019, total gross revenues were $80.1 million, compared with total gross revenues of $105.7 million for the quarter ended June 30, 2018. The decrease was primarily attributable to property sales and lease expirations, partially offset by revenue generated from property acquisitions and new leases.

Net Income (Loss) Attributable to Common Shareholders

For the quarter ended June 30, 2019, net income attributable to common shareholders was $21.7 million, or $0.09 per diluted share, compared with a net loss attributable to common shareholders for the quarter ended June 30, 2018 of $(3.3) million, or $(0.01) per diluted share.

Adjusted Company FFO

For the quarter ended June 30, 2019, Lexington generated Adjusted Company FFO of $48.3 million, or $0.20 per diluted share, compared to Adjusted Company FFO for the quarter ended June 30, 2018 of $62.4 million, or $0.25 per diluted share.

Dividends/Distributions

As previously announced, during the second quarter of 2019, Lexington declared a regular quarterly common share/unit dividend/distribution for the quarter ended June 30, 2019 of $0.1025 per common share/unit, which was paid on July 15, 2019 to common shareholders/unitholders of record as of June 28, 2019. Lexington also declared a cash dividend of $0.8125 per share on its Series C Cumulative Convertible Preferred Stock (“Series C Preferred”) for the quarter ended June 30, 2019, which is expected to be paid on August 15, 2019 to Series C Preferred Shareholders of record as of July 31, 2019.

TRANSACTION ACTIVITY

ACQUISITION TRANSACTIONS
Property Type Market Sq. Ft. Initial Basis($000) Approximate Lease Term (Yrs)
Industrial Dallas, TX 510,440 $28,201 4
Industrial Spartanburg, SC 408,000 33,253 5
Industrial Memphis, TN 927,742 49,395 5
Industrial Memphis, TN 269,902 18,316 4
Industrial Atlanta, GA 604,852 45,441 1
Industrial Atlanta, GA 370,000 27,353 5
3,090,936 $201,959

The above properties were acquired at aggregate weighted-average GAAP and cash capitalization rates of 5.8% and 5.9%, respectively.

PROPERTY DISPOSITIONS(1)
Primary Tenant Location Property Type Gross DispositionPrice($000) Annualized Net Income(2) ($000) AnnualizedNOI(2)($000) Month of Disposition % Leased
Honeywell Glendale, AZ Office $26,500 $1,319 $2,014 April 100.0%
Huntington Ingalls Pascagoula, MS Office 6,000 487 593 April 100.0%
Vacant Memphis, TN Industrial 75 (100) (80) April 0.0%
Safeway Lawton, OK Other 1,515 135 184 May 100.0%
Vacant Plymouth, IN Industrial 6,938 (1,087) (833) May 0.0%
$41,028 $754 $1,878
(1) In addition, a joint venture, in which Lexington has a 20% interest, disposed of an office property for $40.1 million and satisfied $30.0 million of non-recourse debt.
(2) Quarterly period prior to sale, annualized.

LEASING
LEASE EXTENSIONS
Location Primary Tenant(1)PriorTerm LeaseExpiration Date Sq. Ft.
Industrial
1 StreetsboroOH L'Oreal 10/2019 10/2026 649,250
2 LavoniaGA TI Automotive 05/2020 05/2030 133,221
2 Total industrial lease extensions 782,471
Office
1 WhippanyNJ CAE 11/2021 11/2031 123,734
1 Total office lease extensions 123,734
3 Total lease extensions 906,205

NEW LEASES
Location Lease Expiration Date Sq. Ft.
Industrial
1 DuncanSC Plastic Omnium 08/2022 221,833
1 Total industrial leases 221,833
4 TOTAL NEW AND EXTENDED LEASES 1,128,038
(1) Leases greater than 10,000 square feet.

As of June 30, 2019, Lexington's portfolio was 97.7% leased.

BALANCE SHEET/CAPITAL MARKETS

In the second quarter of 2019, Lexington satisfied $15.2 million of consolidated non-recourse debt. Subsequent to June 30, 2019, Lexington satisfied an aggregate of $21.4 million of consolidated non-recourse debt.

During the second quarter of 2019, Lexington borrowed $55.0 million on its unsecured revolving credit facility. As of the date of this earnings release $75.0 million is outstanding on its unsecured revolving credit facility.

2019 EARNINGS GUIDANCE

Lexington now estimates that its net income attributable to common shareholders per diluted common share for the year ended December 31, 2019 will be within an expected range of $1.28 to $1.32.

Additionally, Lexington is increasing its Adjusted Company FFO guidance range for the year ended December 31, 2019 from $0.75 to $0.79 to $0.76 to $0.80 per diluted common share. This guidance is forward looking, excludes the impact of certain items and is based on current expectations.

SECOND QUARTER 2019 CONFERENCE CALL

Lexington will host a conference call today, August 7, 2019, at 8:30 a.m. Eastern Time, to discuss its results for the quarter ended June 30, 2019. Interested parties may participate in this conference call by dialing 1-844-825-9783 (U.S.), 1-412-317-5163 (International) or 1-855-669-9657 (Canada). A replay of the call will be available through November 7, 2019, at 1-877-344-7529 (U.S.), 1-412-317-0088 (International) or 1-855-669-9658 (Canada), pin code for all replay numbers is 10132918. A link to a live webcast of the conference call is available at www.lxp.com within the Investors section.

ABOUT LEXINGTON REALTY TRUST

Lexington Realty Trust (NYSE: LXP) is a publicly traded real estate investment trust (REIT) that owns a diversified portfolio of real estate assets consisting primarily of equity investments in single-tenant net-leased commercial properties across the United States. Lexington seeks to expand its industrial portfolio through build-to-suit transactions, sale-leaseback transactions and other transactions, including acquisitions. For more information, including Lexington's Quarterly Supplemental Information package, or to follow Lexington on social media, visit www.lxp.com.

Contact:Investor or Media Inquiries for Lexington Realty Trust:Heather Gentry, Senior Vice President of Investor RelationsLexington Realty TrustPhone: (212) 692-7200 E-mail: [email protected]

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 estimates of net income attributable to common shareholders and Adjusted Company FFO for the year ending December 31, 2019, (3) the successful consummation of any lease, acquisition, build-to-suit, disposition, 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, and all property operating activities are conducted, through special purpose entities, which are separate and distinct legal entities that maintain separate books and records, but in some instances are consolidated for financial statement purposes and/or disregarded for income tax purposes. The assets and credit of each special purpose entity with a property subject to a mortgage loan are not available to creditors to satisfy the debt and other obligations of any other person, including any other special purpose entity or affiliate. Consolidated entities that are not property owner subsidiaries do not directly own any of the assets of a property owner subsidiary (or the general partner, member of managing member of such property owner subsidiary), but merely hold partnership, membership or beneficial interests therein which interests are subordinate to the claims of the property owner subsidiary's (or its general partner's, member's or managing member's) creditors.

Non-GAAP Financial Measures - Definitions

Lexington has used non-GAAP financial measures as defined by the Securities and Exchange Commission Regulation G in this Quarterly Earnings Release and in other public disclosures.

Lexington believes that the measures defined below are helpful to investors in measuring our performance or that of an individual investment. Since these measures exclude certain items which are included in their respective most comparable measures under generally accepted accounting principles (“GAAP”), reliance on the measures has limitations; management compensates for these limitations by using the measures simply as supplemental measures that are weighed in balance with other GAAP measures. These measures are not necessarily indications of our cash flow available to fund cash needs. Additionally, they should not be used as an alternative to the respective most comparable GAAP measures when evaluating Lexington's financial performance or cash flow from operating, investing or financing activities or liquidity.

Company Funds Available for Distribution (“FAD”): FAD is calculated by making adjustments to Adjusted Company FFO (see below) for (1) straight-line adjustments, (2) lease incentive amortization, (3) amortization of above/below market leases, (4) lease termination payments, net, (5) non-cash interest, net, (6) non-cash charges, net, (7) cash paid for tenant improvements, and (8) cash paid for lease costs. Although FAD may not be comparable to that of other real estate investment trusts (“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.

Funds from Operations (“FFO”) and Adjusted Company FFO: Lexington believes that Funds from Operations, or FFO, which is a non-GAAP measure, 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, or NAREIT, defines FFO as “net income (calculated in accordance with GAAP), excluding depreciation and amortization related to real estate, gains and losses from the sales of certain real estate assets, gains and losses from change in control and impairment write-downs of certain real estate assets and investments in entities when the impairment is directly attributable to decreases in value of depreciable real estate held by the entity. The reconciling items include amounts to adjust earnings from consolidated partially-owned entities and equity in earnings of unconsolidated affiliates to FFO.” 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 and also presents FFO available to all equityholders 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 Adjusted Company FFO available to all equityholders and unitholders - diluted which adjusts FFO available to all equityholders and unitholders - diluted for certain items which we believe are not indicative of the operating results of Lexington's real estate portfolio. Lexington believes this is an appropriate presentation as it is frequently requested by security analysts, investors and other interested parties. Since others do not calculate these measures in a similar fashion, these measures may not be comparable to similarly titled measures as reported by others. These measures should not be considered as an alternative to net income as an indicator of Lexington’s operating performance or as an alternative to cash flow as a measure of liquidity.

GAAP and Cash Yield or Capitalization Rate: GAAP and cash yields or capitalization rates are measures of operating performance used to evaluate the individual performance of an investment. These measures are estimates and are not presented or intended to be viewed as a liquidity or performance measure that present a numerical measure of Lexington's historical or future financial performance, financial position or cash flows. The yield or capitalization rate is calculated by dividing the annualized NOI (as defined below, except GAAP rent adjustments are added back to rental income to calculate GAAP yield or capitalization rate) the investment is expected to generate (or has generated) divided by the acquisition/completion cost (or sale) price.

Net Operating Income (“NOI”): NOI is a measure of operating performance used to evaluate the individual performance of an investment. This measure is not presented or intended to be viewed as a liquidity or performance measure that presents a numerical measure of Lexington's historical or future financial performance, financial position or cash flows. Lexington defines NOI as operating revenues (rental income (less GAAP rent adjustments and lease termination income), and other property income) less property operating expenses. Other REITs may use different methodologies for calculating NOI, and accordingly, Lexington's NOI may not be comparable to other companies. Because NOI excludes general and administrative expenses, interest expense, depreciation and amortization, acquisition-related expenses, other nonproperty income and losses, and gains and losses from property dispositions, it provides a performance measure that, when compared year over year, reflects the revenues and expenses directly associated with owning and operating commercial real estate and the impact to operations from trends in occupancy rates, rental rates, and operating costs, providing a perspective on operations not immediately apparent from net income. Lexington believes that net income is the most directly comparable GAAP measure to NOI.

LEXINGTON REALTY TRUST AND CONSOLIDATED SUBSIDIARIESCONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS(Unaudited and in thousands, except share and per share data)

Three months ended June 30, Six months ended June 30,
2019 2018 2019 2018
Gross revenues:
Rental revenue$78,758 $105,493 $158,733 $208,130
Other revenue1,377 180 2,650 364
Total gross revenues80,135 105,673 161,383 208,494
Expense applicable to revenues:
Depreciation and amortization(36,811) (45,440) (74,406) (91,977)
Property operating(9,788) (10,906) (20,355) (22,383)
General and administrative(7,334) (7,421) (15,861) (16,417)
Non-operating income914 174 1,395 536
Interest and amortization expense(17,026) (21,734) (34,234) (42,065)
Debt satisfaction charges, net— — (103) —
Impairment charges(1,094) (35,269) (1,682) (88,318)
Gains on sales of properties15,244 14,432 36,201 37,206
Income (loss) before provision for income taxes and equity in earnings (losses) of non-consolidated entities24,240 (491) 52,338 (14,924)
Provision for income taxes(430) (379) (867) (882)
Equity in earnings (losses) of non-consolidated entities(41) 75 578 188
Net income (loss)23,769 (795) 52,049 (15,618)
Less net income attributable to noncontrolling interests(436) (899) (689) (391)
Net income (loss) attributable to Lexington Realty Trust shareholders23,333 (1,694) 51,360 (16,009)
Dividends attributable to preferred shares – Series C(1,573) (1,573) (3,145) (3,145)
Allocation to participating securities(39) (60) (85) (130)
Net income (loss) attributable to common shareholders$21,721 $(3,327) $48,130 $(19,284)
Net income (loss) attributable to common shareholders - per common share basic$0.09 $(0.01) $0.21 $(0.08)
Weighted-average common shares outstanding – basic232,635,137 237,312,726 232,587,083 237,690,306
Net income (loss) attributable to common shareholders - per common share diluted$0.09 $(0.01) $0.20 $(0.08)
Weighted-average common shares outstanding – diluted236,299,878 237,312,726 236,221,330 237,690,306

LEXINGTON REALTY TRUST AND CONSOLIDATED SUBSIDIARIESCONDENSED CONSOLIDATED BALANCE SHEETS(in thousands, except share and per share data)

June 30, 2019 December 31, 2018
(unaudited)
Assets:
Real estate, at cost$3,112,620 $3,090,134
Real estate - intangible assets405,656 419,612
3,518,276 3,509,746
Less: accumulated depreciation and amortization963,432 954,087
Real estate, net2,554,844 2,555,659
Assets held for sale181,152 63,868
Operating lease right-of-use assets, net39,981 —
Cash and cash equivalents43,789 168,750
Restricted cash17,167 8,497
Investment in non-consolidated entities59,866 66,183
Deferred expenses, net20,859 15,937
Rent receivable – current2,025 3,475
Rent receivable – deferred63,439 58,692
Other assets13,794 12,779
Total assets$2,996,916 $2,953,840
Liabilities and Equity:
Liabilities:
Mortgages and notes payable, net$432,354 $570,420
Revolving credit facility borrowings55,000 —
Term loan payable, net298,954 298,733
Senior notes payable, net496,452 496,034
Trust preferred securities, net127,346 127,296
Dividends payable29,069 48,774
Liabilities held for sale111,755 386
Operating lease liabilities41,077 —
Accounts payable and other liabilities23,816 30,790
Accrued interest payable6,135 4,523
Deferred revenue - including below market leases, net19,021 20,531
Prepaid rent11,763 9,675
Total liabilities1,652,742 1,607,162
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 outstanding94,016 94,016
Common shares, par value $0.0001 per share; authorized 400,000,000 shares, 234,870,168 and 235,008,554 shares issued and outstanding in 2019 and 2018, respectively23 24
Additional paid-in-capital2,771,213 2,772,855
Accumulated distributions in excess of net income(1,536,752) (1,537,100)
Accumulated other comprehensive income— 76
Total shareholders’ equity1,328,500 1,329,871
Noncontrolling interests15,674 16,807
Total equity1,344,174 1,346,678
Total liabilities and equity$2,996,916 $2,953,840

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,
2019 2018 2019 2018
EARNINGS PER SHARE:
Basic:
Net income (loss) attributable to common shareholders $21,721 $(3,327) $48,130 $(19,284)
Weighted-average number of common shares outstanding - basic 232,635,137 237,312,726 232,587,083 237,690,306
Net income (loss) attributable to common shareholders - per common share basic $0.09 $(0.01) $0.21 $(0.08)
Diluted:
Net income (loss) attributable to common shareholders - basic $21,721 $(3,327) $48,130 $(19,284)
Impact of assumed conversions 165 — 166 —
Net income (loss) attributable to common shareholders $21,886 $(3,327) $48,296 $(19,284)
Weighted-average common shares outstanding - basic 232,635,137 237,312,726 232,587,083 237,690,306
Effect of dilutive securities:
Unvested share-based payment awards and options 129,810 — 91,637 —
Operating partnership units 3,534,931 — 3,542,610 —
Weighted-average common shares outstanding - diluted 236,299,878 237,312,726 236,221,330 237,690,306
Net income (loss) attributable to common shareholders - per common share diluted $0.09 $(0.01) $0.20 $(0.08)

LEXINGTON REALTY TRUST AND CONSOLIDATED SUBSIDIARIES
ADJUSTED COMPANY FUNDS FROM OPERATIONS & COMPANY FUNDS AVAILABLE FOR DISTRIBUTION
(Unaudited and in thousands, except share and per share data)
Three Months EndedJune 30, Six Months EndedJune 30,
2019 2018 2019 2018
FUNDS FROM OPERATIONS:
Basic and Diluted:
Net income (loss) attributable to common shareholders $21,721 $(3,327) $48,130 $(19,284)
Adjustments:
Depreciation and amortization 36,065 44,225 72,932 89,379
Impairment charges - real estate 1,094 35,269 1,682 88,318
Noncontrolling interests - OP units 165 649 166 (80)
Amortization of leasing commissions 746 1,215 1,474 2,598
Joint venture and noncontrolling interest adjustment 2,400 258 4,933 516
Gains on sales of properties, including non-consolidated entities (15,513) (14,432) (37,118) (37,206)
FFO available to common shareholders and unitholders - basic 46,678 63,857 92,199 124,241
Preferred dividends 1,573 1,573 3,145 3,145
Amount allocated to participating securities 39 60 85 130
FFO available to all equityholders and unitholders - diluted 48,290 65,490 95,429 127,516
Debt satisfaction charges, net — — 103 —
Other(1) — (3,120) — (3,120)
Adjusted Company FFO available to all equityholders and unitholders - diluted 48,290 62,370 95,532 124,396
FUNDS AVAILABLE FOR DISTRIBUTION:
Adjustments:
Straight-line adjustments (4,355) (6,013) (6,685) (10,879)
Lease incentives 307 519 580 1,055
Amortization of above/below market leases (26) 246 (32) 224
Lease termination payments, net (256) (309) (1,000) (617)
Non-cash interest, net 773 1,299 1,579 2,324
Non-cash charges, net 1,552 1,625 3,279 3,564
Tenant improvements (2,557) (662) (3,552) (6,594)
Lease costs (3,549) (1,192) (4,673) (1,801)
Joint venture and noncontrolling interest adjustment (460) — (636) —
Company Funds Available for Distribution $39,719 $57,883 $84,392 $111,672
Per Common Share and Unit Amounts
Basic:
FFO $0.20 $0.27 $0.39 $0.51
Diluted:
FFO $0.20 $0.27 $0.40 $0.52
Adjusted Company FFO $0.20 $0.25 $0.40 $0.50
Basic:
Weighted-average common shares outstanding - basic EPS 232,635,137 237,312,726 232,587,083 237,690,306
Operating partnership units(2) 3,534,931 3,619,315 3,542,610 3,624,228
Weighted-average common shares outstanding - basic FFO 236,170,068 240,932,041 236,129,693 241,314,534
Diluted:
Weighted-average common shares outstanding - diluted EPS 236,299,878 237,312,726 236,221,330 237,690,306
Operating partnership units(2) — 3,619,315 — 3,624,228
Unvested share-based payment awards and options 15,927 445,283 16,280 503,461
Preferred shares - Series C 4,710,570 4,710,570 4,710,570 4,710,570
Weighted-average common shares outstanding - diluted FFO 241,026,375 246,087,894 240,948,180 246,528,565
(1) "Other" primarily consisted of the acceleration of below-market lease intangible accretion in 2018.
(2) Includes OP units other than OP units held by Lexington.

LEXINGTON REALTY TRUST AND CONSOLIDATED SUBSIDIARIES
RECONCILIATION OF NON-GAAP MEASURES
2019 EARNINGS GUIDANCE
Twelve Months EndedDecember 31, 2019
Range
Estimated:
Net income attributable to common shareholders per diluted common share(1)$1.28 $1.32
Depreciation and amortization0.65 0.65
Impact of capital transactions(1.17) (1.17)
Estimated Adjusted Company FFO per diluted common share$0.76 $0.80
(1) Assumes all convertible securities are dilutive.

Source: Lexington Realty Trust

Categories

Globe Newswire Press Releases

Next Articles