Lexington Realty Trust Reports Third Quarter 2008 Results

NEW YORK, Nov. 6 /PRNewswire-FirstCall/ -- Lexington Realty Trust ("Lexington") (NYSE: LXP), a real estate investment trust focused on single-tenant real estate investments, today announced results for the third quarter ended September 30, 2008.

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    Third Quarter 2008 Highlights

    -- Generated Company Funds From Operations ("Company FFO") of $43.3
       million or $0.40 per diluted share/unit.(1)
    -- Executed 18 new and renewal leases, totaling approximately 777,000
       square feet.
    -- Sold 15 properties for $22.6 million at a 6.6% cap rate.
    -- Acquired 2 properties for $56.1 million at an 8.5% cap rate.
    -- Repurchased $25.5 million original principal amount of senior
       securities at a 10.7% discount.

    (1) See the last page of this press release for a reconciliation of GAAP
        net income (loss) to Company FFO.

T. Wilson Eglin, President and Chief Executive Officer of Lexington stated, "During the third quarter, we continued to reduce our financial leverage by repurchasing $25.5 million of our senior securities. Since beginning to reduce our leverage in the first quarter and including transactions completed in the current quarter, we have retired $278.5 million of senior securities for $219.5 million, a discount of 21.2%. The opportunity to reduce our leverage on such favorable terms represents a compelling use for our capital and is likely to remain so for the foreseeable future. While transaction activity in all property types has slowed substantially, we believe that creditworthy net lease investments will continue to attract interest due to predictable revenue streams and generally defensive characteristics. Accordingly, we plan to continue marketing assets for sale and will use the proceeds to further reduce our indebtedness on terms that we believe are highly advantageous for our shareholders, as we have throughout the year."

                              FINANCIAL RESULTS

Revenues

For the quarter ended September 30, 2008, total gross revenues were $105.5 million, compared with total gross revenues of $116.3 million for the quarter ended September 30, 2007. The decrease is primarily due to the sale of certain assets to a co-investment program in 2007 and 2008 and the early lease termination in the second quarter of 2008 for the property located at 100 Light Street in Baltimore, MD.

Net Income (Loss) Allocable to Common Shareholders

For the quarter ended September 30, 2008, net loss allocable to common shareholders was ($10.3) million, or a loss of ($0.16) per diluted share, compared with net income allocable to common shareholders for the quarter ended September 30, 2007 of $7.4 million, or income of $0.12 per diluted share.

Company FFO Applicable to Common Shareholders/Unitholders

For the quarter ended September 30, 2008, Company FFO was $43.3 million, or $0.40 per diluted share/unit, compared with Company FFO for the quarter ended September 30, 2007 of $50.4 million, or $0.46 per diluted share/unit. Company FFO for the quarter ended September 30, 2008 was impacted by debt satisfaction gains ($4.7 million), including Lexington's proportionate share through joint ventures, offset by impairment charges ($4.7 million), including Lexington's proportionate share through joint ventures. For the quarter ended September 30, 2007, Company FFO was impacted by debt satisfaction charges ($3.6 million). Other factors that impacted year over year FFO per diluted share/unit include the aforementioned early lease termination at the property located at 100 Light Street, Baltimore, MD, the $2.10 special distribution paid to shareholder/unitholders in January, 2008 and a decline in portfolio occupancy from 95.8% to 93.8%.

2009 Debt Maturities

Lexington has $266.7 million of consolidated debt maturing in 2009. On pages 26 - 31 of the Supplemental Disclosure Package, Lexington has provided information with respect to its unleveraged properties, properties securing its term loan maturing in December, 2009 (following exercise of an extension option), and properties with mortgages maturing in 2009. Together, these properties have an original gross book value of approximately $1.4 billion and currently generate annualized cash revenue of approximately $120.9 million. Management is currently working on extending the maturity date of the term loan beyond December, 2009.

Balance Sheet

At September 30, 2008, Lexington had total assets of $4.3 billion, including approximately $135.5 million of cash and restricted cash, and $2.5 billion in debt outstanding. As of September 30, 2008, the weighted-average interest rate on Lexington's debt was 5.65%, with a weighted-average maturity of 6.3 years. Approximately 92% of Lexington's debt is subject to fixed interest rates.

Common Share Dividend/Distribution

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

                             OPERATING ACTIVITIES

Leasing Activity

At September 30, 2008, Lexington's consolidated portfolio was approximately 93.8% leased. For the quarter ended September 30, 2008, Lexington executed 18 leases (new and renewal) for approximately 777,000 square feet.

Dispositions

During the quarter ended September 30, 2008, Lexington sold its interest in 15 properties to unrelated parties for an aggregate sales price of $22.6 million equating to a cap rate of 6.6% and generating gains on sale of $7.4 million.

Acquisitions

During the quarter ended September 30, 2008, Lexington purchased two properties for $56.1 million, at an initial current cap rate of 8.5%.

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 including gains on the discharge of indebtedness. This guidance is based on current expectations and is forward- looking.

3RD QUARTER 2008 CONFERENCE CALL

Lexington will host a conference call today, Thursday, November 6, 2008, at 11:00 a.m. Eastern Time, to discuss its results for the quarter ended September 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 December 7, 2008, at (877) 660-6853 or (201) 612-7415, Account #: 286, Conference ID #: 296757.

A live web cast of the conference call will be available at https://www.lxp.com within the Investor Relations section. An online replay will also be available through November 6, 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 https://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 current annual report on Form 8-K filed with the Securities and Exchange Commission (" SEC") on June 25, 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 https://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 Nine Months ended September 30, 2008 and 2007
        (Unaudited and in thousands, except share and per share data)

                               Three months ended     Nine months ended
                                 September 30,          September 30,
                                2008       2007         2008       2007
    Gross Revenues:
     Rental                   $94,146   $105,974     $308,382   $269,803
     Advisory and
      incentive fees              396        239        1,072     12,182
     Tenant reimbursements     10,927     10,057       31,178     22,114
      Total gross revenues    105,469    116,270      340,632    304,099

    Expense applicable to revenues:
     Depreciation and
      amortization            (51,197)   (63,843)    (191,596)  (164,785)
     Property operating       (21,733)   (17,921)     (60,804)   (41,982)
    General and administrative (7,117)    (7,530)     (25,468)   (28,673)
    Non-operating income        1,802      2,633       22,599      7,502
    Interest and amortization
     expense                  (37,279)   (48,129)    (120,519)  (114,747)
    Debt satisfaction gains,
     net                        2,309          -       39,020          -
    Gains on sale-affiliates        -          -       31,806          -

    Income (loss) before
     provision for income
     taxes, minority
     interests, equity in
     earnings (losses) of
     non-consolidated
     entities and discontinued
     operations                (7,746)   (18,520)      35,670    (38,586)
    Provision for income taxes   (662)      (369)      (2,636)    (2,547)
    Minority interests share
     of (income) loss           2,823      3,336        5,372     (3,546)
    Equity in earnings (losses)
     of non-consolidated
     entities                  (1,525)     4,054      (23,171)    45,951
    Income (loss) from
     continuing operations     (7,110)   (11,499)      15,235      1,272

    Discontinued operations:
     Income from discontinued
      operations                   26      8,441        1,628     25,720
     Provision for income taxes  (181)       (44)        (330)    (2,721)
     Debt satisfaction charges   (120)    (3,596)        (433)    (3,685)
     Gains on sales of
      properties                7,374     26,980       11,986     39,808
     Impairment charges        (1,063)         -       (3,757)         -
     Minority interests
      share of income          (2,643)    (5,819)      (4,509)   (14,777)
     Total discontinued
      operations                3,393     25,962        4,585     44,345
    Net income (loss)          (3,717)    14,463       19,820     45,617
    Dividends attributable to
     preferred shares
     - Series B                (1,590)    (1,590)      (4,770)    (4,770)
    Dividends attributable to
     preferred shares
     - Series C                (2,110)    (2,519)      (6,740)    (7,556)
    Dividends attributable to
     preferred shares
     - Series D                (2,926)    (2,925)      (8,777)    (7,372)
    Redemption discount
     - Series C                     -          -        5,678          -
    Net income (loss)
     allocable to common
     shareholders            $(10,343)    $7,429       $5,211    $25,919

     Income per common share-basic:

     Income (loss) from
      continuing operations,
      after preferred
      dividends                $(0.21)    $(0.29)      $ 0.01    $ (0.28)
     Income from discontinued
      operations                 0.05       0.41         0.07       0.67
     Net income (loss)
      allocable to common
      shareholders             $(0.16)     $0.12        $0.08      $0.39

     Weighted average common
      shares outstanding
      - basic              64,433,457 63,458,167   61,485,277 65,735,321

     Income (loss) per common
      share-diluted:
     Income (loss)from
      continuing operations,
      after preferred
      dividends                $(0.21)    $(0.29)      $(0.14)    $(0.28)
     Income from discontinued
      operations                 0.05       0.41         0.07       0.67
     Net income (loss)
      allocable to common
      shareholders             $(0.16)     $0.12       $(0.07)     $0.39

     Weighted average common
      shares outstanding-
      diluted              64,433,457 63,458,167  101,789,804 65,735,321



             LEXINGTON REALTY TRUST AND CONSOLIDATED SUBSIDIARIES
                    CONDENSED CONSOLIDATED BALANCE SHEETS
                   September 30, 2008 and December 31, 2007
        (Unaudited and in thousands, except share and per share data)

                                                 September 30,   December 31,
                                                     2008            2007
    Assets:
    Real estate, at cost                          $3,836,321     $4,109,097
    Less: accumulated depreciation and
     amortization                                    439,531        379,831
                                                   3,396,790      3,729,266
    Properties held for sale-discontinued
     operations                                        8,408        150,907
    Intangible assets, net                           375,212        516,698
    Cash and cash equivalents                        108,039        412,106
    Restricted cash                                   27,481         41,026
    Investment in and advances to non-consolidated
     entities                                        205,021        226,476
    Deferred expenses, net                            37,329         42,040
    Notes receivable                                  68,631         69,775
    Rent receivable-current                           16,630         25,289
    Rent receivable- deferred                         16,967         15,303
    Other assets                                      33,824         36,277
                                                  $4,294,332     $5,265,163

    Liabilities and Shareholders' Equity:
    Liabilities:
    Mortgage and notes payable                    $2,052,955     $2,312,422
    Exchangeable notes payable                       299,500        450,000
    Trust preferred securities                       129,120        200,000
    Contract rights payable                           14,435         13,444
    Dividends payable                                 28,297        158,168
    Liabilities-discontinued operations                  902        119,093
    Accounts payable and other liabilities            33,974         49,442
    Accrued interest payable                          10,822         23,507
    Deferred revenue-below market leases, net        155,134        217,389
    Prepaid rent                                      20,352         16,764
                                                   2,745,491      3,560,229
    Minority interests                               624,839        765,863
                                                   3,370,330      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, 65,666,569
     and 61,064,334 shares issued and outstanding
     in 2008 and 2007, respectively                        6              6
    Additional paid-in-capital                     1,097,176      1,033,332
    Accumulated distributions in excess of
     net income                                     (525,788)      (468,167)
    Accumulated other comprehensive income (loss)        302         (2,778)
      Total shareholders' equity                     924,002        939,071
                                                  $4,294,332     $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     Nine Months ended
                                 September 30,           September 30,
                                2008       2007         2008       2007
      EARNINGS PER SHARE:
    Basic:
    Income (loss)from
     continuing operations    $(7,110)  $(11,499)     $15,235     $1,272
    Less preferred dividends   (6,626)    (7,034)     (14,609)   (19,698)
    Income (loss) allocable
     to common shareholders
     from continuing
     operations               (13,736)   (18,533)         626    (18,426)
    Total income from
     discontinued operations    3,393     25,962        4,585     44,345
    Net income(loss) allocable
     to common shareholders  $(10,343)    $7,429       $5,211    $25,919

    Weighted average number
     of common shares
     outstanding           64,433,457 63,458,167   61,485,277 65,735,321

    Income (loss) per
     common share-basic:
    Income (loss)from
     continuing operations     $(0.21)    $(0.29)       $0.01     $(0.28)
    Income from discontinued
     operations                  0.05       0.41         0.07       0.67
    Net income (loss)          $(0.16)     $0.12        $0.08      $0.39

    Diluted:
    Income allocable to
     common shareholders
     from continuing
     operations- basic       $(13,736)  $(18,533)        $626   $(18,426)
    Incremental loss
     attributed to assumed
     conversion of
     dilutive securities            -          -      (14,728)         -
    Income (loss) allocable
     to common shareholders
     from continuing
     operations               (13,736)   (18,533)     (14,102)   (18,426)
    Total income from
     discontinued operations    3,393     25,962        7,002     44,345
    Net income (loss)
     allocable to common
     shareholders            $(10,343)    $7,429      $(7,100)   $25,919

    Weighted average number
     of common shares used
     in calculation of basic
     earnings per share    64,433,457 63,458,167   61,485,277 65,735,321
    Add incremental shares
     representing:
     Shares issuable upon
      exercise of employee
      share options/
      non-vested shares             -          -            -          -
     Shares issuable upon
      conversion of
      dilutive securities           -          -   40,304,527          -
    Weighted average number
     of shares used in
     calculation of
     diluted earnings per
     share                64,433,457 63,458,167   101,789,804 65,735,321

    Income (loss)per
     common share-diluted:
    Income(loss) from
     continuing operations    $(0.21)    $(0.29)       $(0.14)    $(0.28)
    Income from discontinued
     operations                 0.05       0.41          0.07       0.67
    Net income (loss)         $(0.16)     $0.12        $(0.07)     $0.39



             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     Nine Months ended
                                     September 30,          September 30,
                                   2008        2007        2008        2007
    COMPANY FUNDS FROM
     OPERATIONS:(1)
    Basic and Diluted:
    Net income (loss) allocable
     to common
     shareholders-basic         $(10,343)     $7,429      $5,211     $25,919
    Adjustments:
     Depreciation and
      amortization                50,895      67,439     191,636     180,224
     Minority interests- OP units (1,664)        952      (7,043)     14,867
     Amortization of leasing
      commissions                    481         346       1,493         882
     Joint venture and minority
      interest adjustment-
      depreciation                 7,874      (1,348)     15,312       1,698
     Preferred dividends-
      Series C                     2,110       2,519       1,062       7,556
     Gains on sale of properties  (7,374)    (26,980)    (43,792)    (39,808)
     Taxes and minority interest
      on sale of property          1,303           -       1,387       1,749
     Gains on sale of joint venture
      properties                       -           -           -     (34,164)
    Company FFO                  $43,282     $50,357    $165,266    $158,923

    Basic:
    Weighted average shares
     outstanding-basic EPS    64,433,457  63,458,167  61,485,277  65,735,321
    Operating partnership
     units                    39,435,581  39,636,305  39,532,762  40,192,868
    Preferred Shares-
     Series C                  5,633,894   5,779,330   6,249,276   5,779,330
    Weighted average shares
     outstanding-basic
     Company FFO             109,502,932 108,873,802 107,267,315 111,707,519
     Company FFO per share         $0.40       $0.46       $1.54       $1.42

    Diluted:
    Weighted average shares
     outstanding
     - diluted EPS            64,433,457  63,458,167 101,789,804  65,735,321
    Employee share option/
     non-vested shares             5,973         403       8,820         544
    Operating partnership
     units                    39,435,581  39,636,305           -  40,192,868
    Preferred Shares
     - Series C                5,633,894   5,779,330   5,477,511   5,779,330
    Weighted average shares
     outstanding - diluted
     Company FFO             109,508,905 108,874,205 107,276,135 111,708,063
     Company FFO per share         $0.40       $0.46       $1.54       $1.42

(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