Lexington Realty CEO Discusses Q3 2010 Results - Earnings Call Transcript
Lexington Realty Trust (
)
Q3 2010 Earnings Call Transcript
November 4, 2010 11:00 am ET
Executives
Ashley Fillmore – IR
Will Eglin – President, CEO and COO
Pat Carroll – EVP, CFO and Treasurer
Analysts
Sheila McGrath – Keefe, Bruyette & Woods
Anthony Paolone – JPMorgan
Todd Stender – Wells Fargo Securities
John Guinee – Stifel Nicolaus
Presentation
Operator
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Lexington Realty Trust. Q3 2008 Earnings Call Transcript
Good morning and welcome to the Lexington Realty Trust third quarter 2010 earnings conference call. At this time, all participants have been placed in a listen-only mode and the floor will be open for your questions following the presentation.
It is now my pleasure to turn the conference over to your host, Ms. Ashley Fillmore. Please go ahead, ma'am.
Ashley Fillmore
Hello. And welcome to the Lexington Realty Trust third quarter conference call. The earnings press release was distributed over the wire this morning and the release and supplemental disclosure package will be furnished on a Form 8-K.
In the press release and supplemental disclosure package, Lexington has reconciled all historical non-GAAP financial measures to the most directly comparable GAAP measure in accordance with Reg G requirements. If you did not receive a copy, these documents are available on Lexington's website at www.lxp.com in the Investor Relations section. Additionally, we are hosting a live webcast of today's call which you can access in the same section. At this time, we would like to inform you that certain statements made during this conference call which are not historical may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.
Although Lexington believes the expectations reflected in any forward-looking statements are based on reasonable assumptions, Lexington can give no assurance that its expectations will be attained. Factors and risks that could cause actual results to differ materially from those expressed or implied by forward-looking statements are detailed in today's press release and from time to time in Lexington's filings with the SEC. Lexington does not undertake a duty to update any forward-looking statements.
Joining me today from management are Will Eglin, Chief Executive Officer, Robert Roskind, Chairman, Patrick Carroll, Chief Financial Officer and other members of management.
Will Eglin
Thanks, Ashley. And welcome, everyone and thank you for joining the call today. I'd like to begin by discussing our operating results and Lexington generated very strong results in its real estate portfolio for the third quarter of 2010. We continue to execute well in all of our key areas including leasing, capital recycling through dispositions and refinancing, balance sheet management and operating efficiency.
For the quarter our reported funds from operations were $0.25 per share, an 8.7% improvement compared to last quarter, after deducting several items as detailed in the earnings release. These items added several million dollars to our funds from operations.
Based on our strong results, the execution of our business plan this year and our confidence in our future prospects, we announced this morning a 15% increase in our common share dividend. This is expected to be a most welcome development in an environment of low-dividend yields.
In the third quarter, we continued to monetize assets and execute on our capital recycling initiatives. Total disposition activity for the quarter was approximately $69.7 million at a weighted average cap rate of 0.6%.
Our strategy is to continue with our capital recycling effort by selling non-core properties, particularly our multi-tenant properties, in order to create additional liquidity and focus our portfolio strategy on our core single-tenant, office and industrial properties.
So far in the fourth quarter, we have sold one vacant 200,000 square foot industrial property for $6.1 million, bringing our total volume for the year to $155.1 million at a weighted average cap rate of 4.1%.
We are currently marketing approximately $165 million of properties for sale and would expect to market another $120 million for sale over the next year, as we seek to accelerate and substantially complete the sale of our multi-tenant properties.
In addition, we believe we will be able to create liquidity in our net leased strategic assets fund joint venture by beginning to sell properties and perhaps monetizing our entire preferred equity investment which is carried on our balance sheet for just $60.6 million. In the event of a complete liquidation, we would expect to receive proceeds of approximately $180 million. However these expectations are dependent on many factors beyond our control.
On the financing front during the third quarter, Lexington closed a nine year mortgage financing of $11.3 million at a fixed rate of 3.56% secured by our property in North Berwick, Maine leased to United Technologies. This continues our strategy of only encumbering our properties with mortgage debt when the terms are highly favorable, otherwise we have retired maturing mortgages with cash and sale proceeds, furthering our balance sheet objectives.
Overall in the third quarter, we retired $105.5 million of consolidated debt and subsequent to quarter end; we drew $13.5 million on our credit facility and retired $38.9 million of debt, bringing total net debt reduction to $130.9 million since June 30, 2010.
Overall, our financial flexibility has continue to increase and we have improved our liquidity significantly and after increasing our revolving credit line from $175 million to $220 million during the quarter, we currently have roughly $181 million of available credit line capacity.
On the leasing front, we had another very strong quarter with five new leases executed for 376,000 square feet during a quarter when we had no leases expire and we extended six leases for 384,000 square feet for a total of about 760,000 square feet. Of particular interest was the 140,000 square foot lease with Transamerica at the new Transamerica Tower in Baltimore, Maryland.
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