Lexington Realty Trust Reports Second Quarter 2008 Results

NEW YORK, Aug 07, 2008 /PRNewswire-FirstCall via COMTEX/ -- LXP | Quote | Chart | News | PowerRating -- 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, 2008.

(Logo: http://www.newscom.com/cgi-bin/prnh/20070205/LAM022LOGO) Second Quarter 2008 Highlights -- Increased total gross revenues by 18.9% to $128.7 million. -- Generated Company Funds From Operations ("Company FFO") of $77.7 million or $0.73 per diluted share/unit.(1) -- Executed 37 new and renewal leases, totaling approximately 1.5 million square feet. -- Sold 5 properties for $46.1 million at a 7.4% cap rate. -- Repurchased $121.0 million face amount of senior securities at a 28.8% discount. -- Received $28.7 million in lease termination payments from two tenants. (1) See the last page of this press release for a reconciliation of GAAP net income to Company FFO.

T. Wilson Eglin, President and Chief Executive Officer of Lexington stated, "We are pleased with our accomplishments in the second quarter, especially in the leasing area where we executed 37 leases totaling 1.5 million square feet. In addition, we continued to strengthen our balance sheet as we reduced debt by $112.5 million through the repayment of mortgages and repurchase of senior securities at a substantial discount. Sales activity was $46.1 million at an average cap rate of 7.4% -- highly satisfactory in an environment where cap rates have increased significantly. Accordingly, the acquisition market has become attractive to buyers, and we look forward to selectively growing our portfolio and leveraging our investment capital through joint ventures."

FINANCIAL RESULTS

Revenues

For the quarter ended June 30, 2008, total gross revenues increased 18.9% to $128.7 million, compared with total gross revenues of $108.2 million for the quarter ended June 30, 2007. The increase is primarily due to the acquisition of certain assets from our co-investment programs in the second quarter of 2007 and $28.7 million of lease termination payments received, partially offset by $4.1 million in accelerated amortization of above and below market leases, in the second quarter of 2008.

Net Income (Loss) Allocable to Common Shareholders

For the quarter ended June 30, 2008, net loss allocable to common shareholders was ($3.8) million, or a loss of ($0.04) per diluted share, compared with net income allocable to common shareholders for the quarter ended June 30, 2007 of $21.9 million, or income of $0.34 per diluted share.

Company FFO Applicable to Common Shareholders/Unitholders

For the quarter ended June 30, 2008, Company FFO was $77.7 million, or $0.73 per diluted share/unit, compared with Company FFO for the quarter ended June 30, 2007 of $59.9 million, or $0.54 per diluted share/unit. Company FFO for the quarter ended June 30, 2008 was impacted by several unusual items, including the impact of lease terminations and the accelerated amortization of above and below market leases ($34.9 million) as well as debt satisfaction gains ($28.0 million), including Lexington's proportionate share through joint ventures, offset by impairment charges recorded at certain of Lexington's joint ventures ($27.3 million). For the quarter ended June 30, 2007, Company FFO was impacted by the recognition of incentive fees and lease termination payments ($13.6 million), severance costs ($4.5 million) and merger costs ($0.8 million).

Balance Sheet

Lexington's balance sheet continues to provide liquidity to deploy as investment opportunities become available. At June 30, 2008, Lexington had approximately $177.3 million of cash and restricted cash and $2.5 billion in debt outstanding, equating to a debt-to-total capitalization of approximately 58.8%. As of June 30, 2008, the weighted average interest rate on Lexington's debt was 5.65% with a weighted average maturity of 6.5 years. Approximately 92% of Lexington's debt is subject to fixed interest rates.

Common Share Dividend/Distribution

On June 13, 2008, Lexington's Board of Trustees declared a regular quarterly cash dividend/distribution of $0.33 per share/unit, which was paid on July 15, 2008, to common shareholders/unitholders of record as of June 30, 2008, and which equated to an annualized dividend of $1.32 per share.

OPERATING ACTIVITIES

Dispositions

During the quarter ended June 30, 2008, Lexington sold its interest in five properties to third parties for an aggregate sales price of $46.1 million, which generated gains on sale of $3.9 million.

Leasing Activity

At June 30, 2008, Lexington's consolidated portfolio was approximately 94.1% leased. For the quarter ended June 30, 2008, Lexington executed 37 leases (new and renewal) for approximately 1.5 million square feet. During the quarter, Lexington received an aggregate of $28.7 million in lease termination payments from two tenants.

2008 EARNINGS GUIDANCE

Lexington reaffirmed its previously disclosed Company FFO guidance range of $1.56 to $1.64 per diluted share/unit for the year ended December 31, 2008. This guidance excludes the impact of the 100 Light Street lease termination transaction and other non-recurring items. This guidance is based on current expectations and is forward-looking.

2ND QUARTER 2008 CONFERENCE CALL

Lexington will host a conference call today, Thursday, August 7, 2008, at 11:00 a.m. Eastern Time, to discuss its results for the quarter ended June 30, 2008. Interested parties may participate in this conference call by dialing (877) 407-0778 or (201) 689-8565. A replay of the call will be available through September 7, 2008, at (877) 660-6853, Account #: 286, Conference ID #: 289670.

A live web cast of the conference call will be available at http://www.lxp.com within the Investor Relations section. An online replay will also be available through August 7, 2009.

ABOUT LEXINGTON REALTY TRUST

Lexington Realty Trust is a real estate investment trust that owns, invests in, and manages office, industrial and retail properties net-leased to major corporations throughout the United States and provides investment advisory and asset management services to investors in the net lease area. Lexington shares are traded on the New York Stock Exchange under the symbol "LXP". Additional information about Lexington is available on-line at http://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 most recent annual report on Form 10-K filed with the Securities and Exchange Commission (" SEC") on February 29, 2008 and other periodic reports filed with the SEC, including risks related to: (1) the failure to continue to qualify as a real estate investment trust, (2) changes in general business and economic conditions, (3) competition, (4) increases in real estate construction costs, (5) changes in interest rates, or (6) changes in accessibility of debt and equity capital markets. Copies of the periodic reports Lexington files with the SEC are available on Lexington's website at www.lxp.com. Forward-looking statements, which are based on certain assumptions and describe the Lexington's future plans, strategies and expectations, are generally identifiable by use of the words "believes," "expects," "intends," "anticipates," "estimates," "projects", "is optimistic" or similar expressions. 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.

LEXINGTON REALTY TRUST AND CONSOLIDATED SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS Three and Six Months ended June 30, 2008 and 2007 (Unaudited and in thousands, except share and per share data) Three months ended Six months ended June 30, June 30, 2008 2007 2008 2007 Gross Revenues: Rental $118,100 $90,345 $215,105 $164,719 Advisory and incentive fees 365 11,224 676 11,943 Tenant reimbursements 10,209 6,617 20,251 12,057 Total gross revenues 128,674 108,186 236,032 188,719 Expense applicable to revenues: Depreciation and amortization (85,173) (54,006) (141,370) (101,968) Property operating (20,045) (13,527) (39,505) (24,693) General and administrative (7,310) (12,339) (18,377) (21,156) Non-operating income 18,694 2,383 20,799 4,869 Interest and amortization expense (39,921) (36,668) (83,277) (66,741) Debt satisfaction gains, net 27,005 - 36,711 - Gains on sale-affiliates 8,637 - 31,806 - Income (loss) before provision for income taxes, minority interests, equity in earnings (losses) of non- consolidated entities and discontinued operations 30,561 (5,971) 42,819 (20,970) Provision for income taxes (721) (1,667) (2,055) (2,193) Minority interests share of (income) loss 10,967 (16,619) 2,587 (6,748) Equity in earnings (losses) of non-consolidated entities (27,194) 38,386 (21,647) 41,890 Income from continuing operations 13,613 14,129 21,704 11,979 Discontinued operations: Income from discontinued operations 378 10,622 2,202 18,190 Provision for income taxes (45) (2,646) (69) (2,663) Debt satisfaction charges (313) (89) (313) (89) Gains on sales of properties 3,925 12,828 4,612 12,828 Impairment charge - - (2,694) - Minority interests share of income (1,833) (5,905) (1,905) (9,091) Total discontinued operations 2,112 14,810 1,833 19,175 Net income 15,725 28,939 23,537 31,154 Dividends attributable to preferred shares- Series B (1,590) (1,590) (3,180) (3,180) Dividends attributable to preferred shares- Series C (2,111) (2,519) (4,630) (5,038) Dividends attributable to preferred shares- Series D (2,925) (2,925) (5,851) (4,447) Redemption discount - Series C 5,678 - 5,678 - Net income allocable to common shareholders $14,777 $21,905 $15,554 $18,489 Income per common share-basic: Income (loss) from continuing operations, after preferred dividends $0.21 $0.11 $0.23 $(0.01) Income from discontinued operations 0.04 0.23 0.03 0.29 Net income allocable to common shareholders $0.25 $0.34 $0.26 $0.28 Weighted average common shares outstanding - basic 60,163,396 65,265,217 59,994,988 66,892,769 Income (loss) per common share- diluted: Income (loss) from continuing operations, after preferred dividends $(0.08) $0.11 $0.02 $(0.01) Income from discontinued operations 0.04 0.23 0.03 0.29 Net income (loss) allocable to common shareholders $(0.04) $0.34 $0.05 $0.28 Weighted average common shares outstanding- diluted 100,554,903 65,265,828 100,567,119 66,892,769 LEXINGTON REALTY TRUST AND CONSOLIDATED SUBSIDIARIES CONDENSED BALANCE SHEETS June 30, 2008 and December 31, 2007 (Unaudited and in thousands, except share and per share data) June 30, December 31, 2008 2007 Assets: Real estate, at cost $3,805,177 $4,095,278 Less: accumulated depreciation and amortization 413,878 379,831 3,391,299 3,715,447 Properties held for sale-discontinued operations 4,558 150,907 Intangible assets, net 396,495 516,698 Cash and cash equivalents 157,849 412,106 Restricted cash 19,468 4,185 Investment in and advances to non-consolidated entities 227,466 226,476 Deferred expenses, net 37,448 42,040 Notes receivable 68,754 69,775 Rent receivable-current 21,347 25,289 Rent receivable- deferred 16,818 15,303 Other assets 69,349 86,937 $4,410,851 $5,265,163 Liabilities and Shareholders' Equity: Liabilities: Mortgage and notes payable $2,075,404 $2,312,422 Exchangeable notes payable 325,000 450,000 Trust preferred securities 129,120 200,000 Contract rights payable 14,094 13,444 Dividends payable 27,929 158,168 Liabilities-discontinued operations 7,132 119,093 Accounts payable and other liabilities 42,340 49,442 Accrued interest payable 18,011 23,507 Deferred revenue-below market leases, net 170,533 217,389 Prepaid rent 17,857 16,764 2,827,420 3,560,229 Minority interests 642,774 765,863 3,470,194 4,326,092 Commitments and contingencies Shareholders' equity Preferred shares, par value $0.0001 per share; authorized 100,000,000 shares, Series B Cumulative Redeemable Preferred, liquidation preference $79,000, 3,160,000 shares issued and outstanding 76,315 76,315 Series C Cumulative Convertible Preferred, liquidation preference $129,915 and $155,000, respectively, and 2,598,300 and 3,100,000 shares issued and outstanding in 2008 and 2007, respectively 126,217 150,589 Series D Cumulative Redeemable Preferred, liquidation preference $155,000, 6,200,000 shares issued and outstanding 149,774 149,774 Special Voting Preferred Share, par value $0.0001 per share; 1 share authorized, issued and outstanding - - Common shares, par value $0.0001 per share; authorized 400,000,000 shares, 64,552,304 and 61,064,334 shares issued and outstanding in 2008 and 2007, respectively 6 6 Additional paid-in-capital 1,080,697 1,033,332 Accumulated distributions in excess of net income (493,779) (468,167) Accumulated other comprehensive income (loss) 1,427 (2,778) Total shareholders' equity 940,657 939,071 $4,410,851 $5,265,163 LEXINGTON REALTY TRUST AND CONSOLIDATED SUBSIDIARIES EARNINGS PER SHARE AND COMPANY FUNDS FROM OPERATIONS PER SHARE (Unaudited and in thousands, except share and per share data) Three Months ended Six Months ended June 30, June 30, 2008 2007 2008 2007 EARNINGS PER SHARE: Basic: Income from continuing operations $13,613 $14,129 $21,704 $11,979 Less preferred dividends (948) (7,034) (7,983) (12,665) Income (loss) allocable to common shareholders from continuing operations 12,665 7,095 13,721 (686) Total income from discontinued operations 2,112 14,810 1,833 19,175 Net income allocable to common shareholders $14,777 $21,905 $15,554 $18,489 Weighted average number of common shares outstanding 60,163,396 65,265,217 59,994,988 66,892,769 Income (loss) per common share-basic: Income (loss) from continuing operations $0.21 $0.11 $0.23 $(0.01) Income from continuing operations 0.04 0.23 0.03 0.29 Net income $0.25 $0.34 $0.26 $0.28 Diluted: Income allocable to common shareholders from continuing operations- basic $12,665 $7,095 $13,721 $(686) Incremental loss attributed to assumed conversion of dilutive securities (20,450) - (11,775) - Income (loss) allocable to common shareholders from continuing operations (7,785) 7,095 1,946 (686) Total income from discontinued operations 3,970 14,810 2,957 19,175 Net income (loss) allocable to common shareholders $(3,815) $21,905 $4,903 $18,489 Weighted average number of common shares used in calculation of basic earnings per share 60,163,396 65,265,217 59,994,988 66,892,769 Add incremental shares representing: Shares issuable upon exercise of employee share options /non-vested shares - 611 10,373 - Shares issuable upon conversion of dilutive securities 40,391,507 - 40,561,758 - Weighted average number of shares used in calculation of diluted earnings per share 100,554,903 65,265,828 100,567,119 66,892,769 Income (loss) per common share- diluted: Income (loss) from continuing operations $(0.08) $0.11 $0.02 $(0.01) Income from discontinued operations 0.04 0.23 0.03 0.29 Net income (loss) $(0.04) $0.34 $0.05 $0.28 LEXINGTON REALTY TRUST AND CONSOLIDATED SUBSIDIARIES EARNINGS PER SHARE AND COMPANY FUNDS FROM OPERATIONS PER SHARE (Continued) (Unaudited and in thousands, except share and per share data) Three Months ended Six Months ended June 30, June 30, 2008 2007 2008 2007 COMPANY FUNDS FROM OPERATIONS: (1) Basic and Diluted: Net income allocable to common shareholders-basic $14,777 $21,905 $15,554 $18,489 Adjustments: Depreciation and amortization 84,785 58,153 140,741 112,785 Minority interests- OP units (12,913) 21,334 (5,379) 13,915 Amortization of leasing commissions 420 283 1,012 536 Joint venture adjustment- depreciation 6,733 932 7,438 3,046 Preferred dividends- Series C (3,567) 2,519 (1,048) 5,038 Gains on sale of properties (12,562) (12,828) (36,418) (12,828) Taxes and minority interest on sale of property - 1,749 84 1,749 Gains on sale of joint venture properties - (34,164) - (34,164) Company FFO $77,673 $59,883 $121,984 $108,566 Basic: Weighted average shares outstanding- basic EPS 60,163,396 65,265,217 59,994,988 66,892,769 Operating partnership units 39,519,599 40,133,160 39,581,887 40,339,893 Preferred Shares- Series C 6,398,965 5,779,330 6,560,348 5,779,330 Weighted average shares outstanding- basic Company FFO 106,081,960 111,177,707 106,137,223 113,011,992 Company FFO per share $0.73 $0.54 $1.15 $0.96 Diluted: Weighted average shares outstanding - diluted EPS 100,554,903 65,265,828 100,567,119 66,892,769 Employee share options/non- vested shares 10,197 - - 621 Operating partnership units - 40,133,160 - 40,339,893 Preferred Shares- Series C 5,527,057 5,779,330 5,580,477 5,779,330 Weighted average shares outstanding - diluted Company FFO 106,092,157 111,178,318 106,147,596 113,012,613 Company FFO per share $0.73 $0.54 $1.15 $0.96 (1) Lexington believes that Funds from Operations ("FFO") is a widely recognized and appropriate measure of the performance of an equity REIT. Lexington presents FFO because it considers FFO an important supplemental measure of Lexington's operating performance. 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 generally accepted accounting principles ("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. Lexington computes FFO in accordance with standards established by the National Association of Real Estate Investment Trusts, Inc. ("NAREIT"). FFO is defined by NAREIT 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." FFO does not represent cash generated from operating activities in accordance with GAAP and is not indicative of cash available to fund cash needs. 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. Lexington includes in its calculation of FFO, which Lexington refers to as the "Company's funds from operations" or "Company FFO," Lexington's operating partnership units and Lexington's Series C Cumulative Convertible Preferred Shares 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 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. Since others do not calculate FFO in a similar fashion, Company FFO may not be comparable to similarly titled measures as reported by others.

SOURCE Lexington Realty Trust

http://www.lxp.com

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