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EX-99.1 - LEXINGTON REALTY TRUST | v165055_ex99-1.htm |
Final
Transcript
Conference
Call Transcript
LXP
- Q3 2009 Lexington Realty Trust Earnings Conference Call
Event
Date/Time: Nov. 05. 2009 / 11:00AM ET
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Final
Transcript
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Nov. 05. 2009 / 11:00AM ET, LXP - Q3 2009
Lexington Realty Trust Earnings Conference
Call
|
CORPORATE
PARTICIPANTS
Lisa
Soares
Lexington
Realty Trust - IR
Will
Eglin
Lexington
Realty Trust - President, CEO, and COO
Pat
Carroll
Lexington
Realty Trust - EVP, CFO, and Treasurer
Natasha
Roberts
Lexington
Realty Trust - EVP & Director of Real Estate
CONFERENCE
CALL PARTICIPANTS
Sheila
McGrath
Keefe,
Bruyette & Woods - Analyst
John
Guinee
Stifel
Nicolaus - Analyst
Anthony
Paolone
JPMorgan
Chase & Co. - Analyst
PRESENTATION
Operator
Good
morning and welcome to the Lexington Realty Trust third-quarter 2009 earnings
conference call. Today's call is being recorded. 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 floor over to your host, Ms. Lisa Soares with Investor
Relations. Please go ahead, ma'am.
Lisa Soares - Lexington Realty Trust - IR
Thanks,
Christina. 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 Regulation G requirements. If you do 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, management would like me 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.
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Final
Transcript
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Nov. 05. 2009 / 11:00AM ET, LXP - Q3 2009
Lexington Realty Trust Earnings Conference
Call
|
With us
today from management are Will Eglin, CEO and President; Robert Roskind,
Chairman; Dick Rouse, Chief Investment Officer; Pat Carroll, Chief Financial
Officer; Natasha Roberts, Executive Vice President and Director of Real Estate
Operations; and other members of management.
I'd like
to turn the call over to Will for his opening remarks.
Will Eglin - Lexington Realty Trust - President, CEO, and COO
Thanks,
Lisa, and welcome to all of you and thank you for joining us today. We're
pleased to have delivered strong results in our real estate portfolio for the
third quarter of 2009, as we continued to execute well on our opportunities to
deleverage the balance sheet, manage our debt maturities, and maintain adequate
liquidity through asset sales and retain cash flow.
For the
quarter, our reported funds from operations were $0.30 per share after adjusting
for a variety of charges as detailed in the earnings release. This compares
favorably to our previous annual guidance range of $1.29 to $1.34 per share for
2009, which we lowered today to an expectation of $1.26 to $1.28 per share to
reflect the issuance of 7.2 million common shares in connection with our
third-quarter dividend and through our direct stock purchase plan and the fact
that we do not expect to be recognizing any FFO contribution from Concord Debt
Holdings for the remainder of the year.
We have
continued to make good progress with respect to our balance sheet. We
deleveraged our balance sheet by approximately $68.9 million during the quarter,
which included repurchasing $29.2 million face amount of our 5.45% exchangeable
notes at a 15% discount.
Subsequent
to quarter-end, we repurchased an additional $17.6 million face amount of our
exchangeable notes and reduced the amount of bonds currently outstanding to
$87.7 million. We believe that at this level, the refinancing risk when the
bonds mature in 2012 has been substantially mitigated.
Overall,
our balance sheet has been strengthened significantly this year, as we've issued
a total of 20.6 million common shares, 13.3 million of which were issued to
shareholders in lieu of a cash dividend, at an average price of $3.97 per
share.
Throughout
the year, we have executed well on property dispositions and related capital
recycling. And so far we have sold eight properties for $87.6 million at a
weighted-average cap rate of 8%.
As
expected, our property disposition volume for the third quarter was less than in
prior quarters, as we shifted our focus from selling fully leased properties in
order to raise cash to buy back debt, when discounts were very substantial,
toward selling assets that aren't performing optimally. Going forward, we
believe this strategy will raise cash for additional debt reduction or property
acquisitions, reduce future capital expenditures and property operating costs,
enhance our cash flow, and support higher occupancy. Over the balance of the
year, we believe disposition volume will be $38 million to $54 million, and some
properties that we hope to sell this year are more likely to close next
year.
Furthermore,
it's important to note that the majority of third-quarter proceeds were raised
through note sales, as debt markets strengthened, and the Company is carrying
$61.4 million of notes receivable on its balance sheet. In 2010, our disposition
activities will continue and will be mainly targeted on underperforming
assets.
In
addition, we retained $18.9 million of capital and further improved our balance
sheet flexibility by paying 90% of our recent quarterly dividend in stock. That
being said, we continue to manage the Company under the assumption that we will
return to paying the dividend in cash for 2010, although any decision with
respect to next year's dividend will be made by the Board based upon our taxable
income and in the context of economic and capital market
conditions.
As
mentioned last quarter, we have been and continue to be very focused on managing
our debt maturities. As of September 30, 2009, our debts maturing through 2012,
including our proportionate share of joint venture debt, totaled $829.7 million
and consisted of $406.8 million of consolidated non-recourse mortgage debt, $195
million under our secured credit facility, $11.4 million of joint venture
obligations, $105.2 million of exchangeable notes, and $111.3 million at the
Concord level.
Subsequent
to quarter-end, these maturities were reduced by $21.6 million, when we
repurchased additional exchangeable notes and paid down our bank line by $4
million, and we believe they're comfortably manageable.
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Final
Transcript
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Nov. 05. 2009 / 11:00AM ET, LXP - Q3 2009
Lexington Realty Trust Earnings Conference
Call
|
Concord's
debt maturities of $111.3 million through 2012 are non-recourse to Lexington,
and Lexington has no direct obligation to satisfy such liabilities. We do not
intend to invest any additional capital in Concord, which only contributed
$500,000 to our funds from operations in the third quarter.
In
addition, in the current economic environment, we are unlikely to use any of our
financial resources to retire approximately $62.1 million of non-recourse
mortgage debt secured by four properties, which matures during this time
period.
In view
of these facts, as a practical matter we view our 2009 to 2012 total debt
maturities as $634.7 million, $191 million of which is our bank lines, which are
supported by a borrowing base consisting of 76 properties; $87.7 million are our
exchangeable notes; $11.4 million is real state joint venture debt; and $344.7
million is non-recourse mortgage debt.
From a
liquidity perspective, to satisfy our debt maturities, we had cash and
restricted cash of approximately $80 million at September 30, $95 million of
credit line capacity, $210 million in accordion capacity under our secured
credit facility, and the potential for property and note sales proceeds.
Further, we believe in the current environment that our 2010 mortgage
maturities, totaling $83.7 million, can be refinanced with new mortgages of
about $72 million, a modest shortfall compared to cash balances and credit line
capacity. Our only significant recourse liability not supported by property
collateral during this time period are our exchangeable notes, and at $87.7
million principal amount, we believe this refinancing risk has been largely
addressed. Further, through 2012, roughly $101.4 million of mortgage debt will
have amortized through regular debt service payment, so our leverage will
continue to decline over time.
From an
execution perspective, we remain highly focused on improving the efficiency of
all of our operations. And during the third quarter, general and administrative
costs decreased approximately 29% compared to last year, to $5.1 million,
relative to $7.1 million in the third quarter last year.
In
addition, we had another highly successful quarter with 23 leases executed for
358,000 square feet, and we have executed an additional 265,000 square feet of
leases subsequent to quarter-end. This is less than in the first two quarters of
the year, but we believe it's because we've done a good job managing our lease
rollovers. And we encourage you to review our rollover schedule in our
supplemental disclosure package, which now shows that we have about 3% of rental
revenue expiring in 2010 and 5% in 2011 in our single-tenant portfolio. We
haven't had any material lease defaults, and credit quality has held up very
well in spite of current economic conditions.
Now I'll
turn the call over to Pat Carroll, our Chief Financial Officer, who will take
you through our results in more detail.
Pat
Carroll - Lexington Realty
Trust - EVP, CFO, and Treasurer
Thanks,
Will. During the quarter, Lexington had gross revenues of $97.3 million,
comprised primarily of lease rents and tenant reimbursements. Included in rental
income in the third quarter of '09 is $1.9 million of deferred maintenance
payments we received.
Under
GAAP, we are required to recognize revenue in a straight-line basis over the
non-cancelable lease term, plus any periods covered by a bargain renewal option.
In addition, the amortization of above- and below-market leases are included
directly into rental revenue.
In the
quarter, cash rents were in excess of GAAP rents by approximately $1.5 million,
including the effect of above- and below-market leases. We have also included on
page 42 in the supplement our estimates of both cash and GAAP rents for the
remainder of 2009 through 2013.
Quarterly
G&A decreased approximately $2 million compared to the same quarter last
year. The primary drivers for this decrease is negotiated reduction in
professional fees and personnel costs.
We
recorded a $7 million non-cash gain related to our forward equity commitment
entered into in 2008, as a result of the increase in our share price from June
to September 2009.
During
the second quarter, we wrote off our investment in Concord to $0. So during the
third quarter of 2009, the only [T-note] that we recognize related to this
investment was the $500,000 cash distribution we received from
Concord.
We
recorded $23.7 million in impairment charges related primarily to one property
in Houston, Texas, that we expect to give back to the lender in the fourth
quarter of '09.
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Final
Transcript
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Nov. 05. 2009 / 11:00AM ET, LXP - Q3 2009
Lexington Realty Trust Earnings Conference
Call
|
In
discontinued operations, we recognized $6 million in debt satisfaction gains
related to the foreclosure of our property previously leased to Circuit City,
and $6.1 million in impairment charges relating to the sale or anticipated sale
of three assets for prices which are less than our GAAP basis.
On pages
39 and 40 of the supplement, we've disclosed selective income statement data for
consolidated but non-wholly owned properties and our joint venture
investments.
Turning
to the balance sheet, it continued to improve. We had $80.1 million of cash at
quarter-end, including cash classified as restricted. Restricted cash balances
relate primarily to money held with lenders as escrow deposits on
mortgages.
At
quarter-end, we had about $2.2 billion of debt outstanding, which had a
weighted-average interest rate of about 5.6%. Included in intangibles is the
allocation of the purchase price of properties related to in-place and
above-market leases in customer relationships in accordance with GAAP. Also, we
have approximately $108.9 million in below-market lease liabilities. The
significant components of other assets and liabilities are included on page 41
of the supplement.
During
the quarter ended September 30, '09, the Company capitalized $2.8 million in
lease costs, $1.7 million in TI costs, and $4.2 million in capital
improvements.
On pages
28 through 31 of the supplement, we disclose the details of all consolidated
mortgage maturities through 2012 including the underlying leases, which support
those properties.
Now I'd
like for Natasha Roberts to discuss our leasing and expansion activity.
Natasha?
Natasha
Roberts - Lexington Realty
Trust - EVP & Director of Real Estate
Thanks,
Pat. As of September 30, 2009, our portfolio totaled approximately 42 million
square feet, including our interest in the 47 properties that are held in joint
ventures. 23 leases were either executed or extended in the quarter, leading to
an occupancy level of approximately 92% at quarter-end, which includes our share
of the JV property.
Out of
the 23 leases that were signed during the quarter, 12 were new and accounted for
about 50,000 square feet, and 11 were renewals or extensions, which accounted
for about 310,000 square feet.
We lost
approximately 370,000 square feet of occupancy due to previously disclosed lease
expirations that were not renewed during the quarter.
Subsequent
to the close of the quarter on September 30, 2009, we have executed nine leases,
totaling 265,000 square feet, and are currently negotiating three new leases and
five lease extensions, totaling approximately 900,000 square feet.
Overall,
in addition to our current vacancy of 3.4 million square feet, we have
approximately 210,000 square feet expiring over the balance of the year. Vacancy
is expected to be reduced by the sale of vacant properties, totaling 130,000 to
600,000 square feet, and new and renewal leases, totaling 190,000 to 720,000
square feet.
Accordingly,
with these assumptions, we estimate our year-end portfolio square footage to be
41.4 million to 41.9 million square feet and occupancy to be 92% to 94%. 2.2
million square feet of space is scheduled to expire in 2010, and of that, we
expect to lease approximately 1.3 million square feet.
We
continuously monitor the credit quality of our tenants, and at this time we do
not have any material delinquencies in the portfolio. Our credit watch list
includes Bi-Lo, a 42,000-square-foot retail facility in Chattanooga, Tennessee;
Kmart; and our automotive tenants, including Tower Automotive in Plymouth,
Michigan; Dana; and Tenneco Automotive in Marshall, Michigan. All of the tenants
are current in their rental obligation to us.
There is
increased competition to obtain and retain tenants, and this is reflected in our
retenanting assumptions. Our tenant improvement allowances for office tenants
range from $0 to $30 per square foot for renewing tenants, and $25 to $40 per
square foot for a new tenant.
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Final
Transcript
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Nov. 05. 2009 / 11:00AM ET, LXP - Q3 2009
Lexington Realty Trust Earnings Conference
Call
|
Industrial
TIs range from $0 to $2 per square foot for a renewing tenant, and $1.50 to
$3.50 for a new tenant. Tenants continue to be focused on flexibility as it
relates to lease commencement dates, lease term, and contraction provisions. And
in many cases, they're being offered free rent and moving allowances. Leasing
commissions range from 0% to 4.5% for a renewing lease, and 4.5% to 6.75% for a
new lease, with additional incentives in the form of additional commission and
cash bonuses. We have budgeted $4.7 million in tenant improvement allowances and
leasing costs for the balance of 2009 and $33.6 million for 2010.
Our CapEx
budget for the balance of 2009 is $3.6 million, which includes $2 million for
100 Light Street, and $22 million for 2010, $13 million of which relates to 100
Light Street.
Overall,
we are pleased with our leasing success. Tenant retention has been high. Our
outlook for 2010 is cautiously optimistic, and we have not had to discount rents
significantly to maintain occupancy.
Now I'll
turn the call back over to Will.
Will Eglin - Lexington Realty Trust - President, CEO, and COO
Thanks,
Natasha. In summary, this was a very good quarter for Lexington. Occupancy held
up well. Our leasing continues to be consistent with our expectations. Our
balance sheet is vastly improved compared to a year ago, as is our liquidity and
financial flexibility and our debt maturity profile.
Operator,
I have no further comments at this time, so we're ready for you to conduct the
question-and-answer portion of the call.
QUESTION AND
ANSWER
Operator
Thank
you. Today's question-and-answer session will be conducted electronically.
(Operator Instructions). Our first question comes from Sheila McGrath with
KBW.
Good
morning. Will, I was wondering if you could talk about the acquisition market,
kind of pricing and changes in volume, and your thoughts on when LXP — when
you're comfortable with the balance sheet to be more on the
offensive.
Will
Eglin - Lexington Realty Trust
- President, CEO, and COO
Sure.
I think what's interesting to us about the acquisition market right now is that
we are seeing a greater flow of transaction opportunities. And they seem to be
in sort of a cap rate range of 9% to 9.5%, which is starting to be an attractive
spread relative to where acquisitions can be financed. And it's starting to look
to us more like the market that we enjoyed in 2003 and 2004, at least from a
spread standpoint and a quality of opportunity standpoint. And recall that in
mid-2005, when cap rates compressed, we stopped essentially trying to grow the
Company from an external standpoint.
The other
thing I would point out is that we've used a lot of our financial resources this
year to get our leverage down and our debt maturity profile comfortably
manageable, as we pointed out. Our exchangeable notes, for example, which has
been the maturity that everybody's been pretty concerned about this year, were
at the beginning of the year about $211 million, now at $88 million. It's not
such a big issue for us, and now they're trading at sort of 95% or 96% of par,
with yield-to-put of 7.5%.
So we'd
like to use some sale proceeds, going forward, to deleverage the balance sheet
further. But if we execute fully on our disposition program this year and with
what we want to do next year, we may free up close to $70 million, which would
allow us to pay our line down, maybe buy in some more bonds, but also create
some excess surplus cash to start looking at some acquisitions again. And we
think, with what we're seeing from a cap rate and spread standpoint, that the
market, like I said, is starting to look like it did last time that we were
active.
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Final
Transcript
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Nov. 05. 2009 / 11:00AM ET, LXP - Q3 2009
Lexington Realty Trust Earnings Conference
Call
|
We acknowledge that we still have some more balance sheet work to do, and we acknowledge that at our current share price, we have a pretty high implied cost of equity. So it may very well be that it's better for us, at least initially, to take advantage of some opportunities in joint venture format.
Sheila McGrath - Keefe, Bruyette & Woods - Analyst
And
then on the acquisitions in that 9% and 9.5% cap rate range, what would you say
kind of loan-to-value and cost of mortgages would be available right
now?
Will Eglin - Lexington Realty Trust - President, CEO, and COO
Probably
in the 7% to 7.5% range, and we would be for the most part looking at leverage
in the 50% to 60% range, which is slightly less than where Lexington's balance
sheet is leveraged currently.
Sheila McGrath - Keefe, Bruyette & Woods - Analyst
Okay,
and last question. Just on the dividend, we have assumed in our model that you
do revert back to an all-cash dividend next year, obviously at a lower rate. But
I was wondering if you could comment on your thoughts on when you might return
to an all-cash dividend.
Will Eglin - Lexington Realty Trust - President, CEO, and COO
Well,
we've been working hard all year trying to get the Company back to the point
where we can go back to paying the dividend in cash. We think it's important. We
think when we do so, it'll be a signal that the balance sheet has been
significantly strengthened, and the performance in our portfolio, just from a
leasing and rental standpoint, is also robust as well.
So that's
been our principal objective this year is to get the Company back to that point.
It's extremely important to me. If you look at the Company's history, for 15
years after we went public, we paid a dividend that grew every year. So, again,
it's a very important objective for me to get back to that point. And also, when
we do reestablish paying the dividend in cash, that it's at a conservative level
from a coverage standpoint, in relation to our funds from operations. And when
we do that, I think the debate will be about what the sustainable growth rate is
of the dividend, not whether the dividend is sustainable.
But
beyond that, our dividend is declared at the board level next month, and we look
forward to reporting to you whatever that dividend decision and declaration
is.
Sheila McGrath - Keefe, Bruyette & Woods - Analyst
Okay,
thank you.
Operator
And
our next question comes from John Guinee with Stifel. Your line is
open.
John Guinee - Stifel Nicolaus - Analyst
Hi.
John Guinee here. Just sort of building on that question, which I think is a
very good and important one, where do you see your taxable income in
2010?
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Final
Transcript
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Nov. 05. 2009 / 11:00AM ET, LXP - Q3 2009
Lexington Realty Trust Earnings Conference
Call
|
Will Eglin - Lexington Realty Trust - President, CEO, and COO
Well,
John, we haven't given guidance for 2010, but I believe that you have an
estimate in your model of about $0.40 per share.
John Guinee - Stifel Nicolaus - Analyst
I
think so.
Will Eglin - Lexington Realty Trust - President, CEO, and COO
And
I think that recognizing that if you began with a base taxable income number of
the Company for 2009, which we'd previously discussed, and work that down, since
we thought that 2010 would be a slightly weaker year operationally. And then the
other thing, obviously, is that the share count is increased this
year.
So I
think that your base estimate of taxable income is sensible. The only thing I
would point out is that, from transaction activity, that number could be moved
up or down. So we're going to — we can't — we won't be giving guidance to 2010
on today's call.
John Guinee - Stifel Nicolaus - Analyst
Sensible,
you said?
Will Eglin - Lexington Realty Trust - President, CEO, and COO
As
far as your model working?
John Guinee - Stifel Nicolaus - Analyst
Yes.
Will Eglin - Lexington Realty Trust - President, CEO, and COO
Yes.
John Guinee - Stifel Nicolaus - Analyst
All
right. Sensible. I like that. Okay, and Natasha, you've got 1.1 million square
feet of known rollouts in 2010. Can you walk us through those very
quickly?
Natasha Roberts - Lexington Realty Trust - EVP & Director of Real Estate
Well,
I had 2.2 million square feet scheduled to expire in 2010.
John Guinee - Stifel Nicolaus - Analyst
Oh,
I thought you —
Will Eglin - Lexington Realty Trust - President, CEO, and COO
(Inaudible
— multiple speakers)
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Final
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Nov. 05. 2009 / 11:00AM ET, LXP - Q3 2009
Lexington Realty Trust Earnings Conference
Call
|
John Guinee - Stifel Nicolaus - Analyst
—
you expected to renew 1.3 million of that, roughly?
Natasha Roberts - Lexington Realty Trust - EVP & Director of Real Estate
1.3
million of that. That's correct.
John Guinee - Stifel Nicolaus - Analyst
So
what do we not expect to renew?
Natasha Roberts - Lexington Realty Trust - EVP & Director of Real Estate
I
know that I'm not going to renew Atlas Cold — I'm sorry. I need to get my list.
In 2010, we are not renewing Nextel. I expect a renewal on Metris. In 2010, the
Cap One buildings, I'm going to have some vacancy, there because we're not
renewing with Cap One, but they're multi-tenant. In Beaumont, I expect vacancy.
Entergy has signed a renewal. UnitedHealthcare, we're working on a renewal. 3M,
we're working on a renewal. La-Z-Boy will not be renewing. Owens Corning — it's
up in the air, but I expect a renewal.
Will Eglin - Lexington Realty Trust - President, CEO, and COO
And
John, that La-Z-Boy facility is almost 640,000 feet, so that's a big percentage
of the square footage.
John Guinee - Stifel Nicolaus - Analyst
Okay.
Will Eglin - Lexington Realty Trust - President, CEO, and COO
But
the retention profile in office is pretty strong.
John Guinee - Stifel Nicolaus - Analyst
Okay.
Anything else, Natasha, or is that it?
Natasha Roberts - Lexington Realty Trust - EVP & Director of Real Estate
Duluth
in the retail, they will be vacating.
John Guinee - Stifel Nicolaus - Analyst
Okay.
All right. And then I guess last question — since Pat hasn't talked yet, he
could answer this — is are there any unlevered assets in your portfolio which
are not part of the borrowing base for the credit facility, so they're
completely unlevered in all way, shape, and form?
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Final
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Nov. 05. 2009 / 11:00AM ET, LXP - Q3 2009
Lexington Realty Trust Earnings Conference
Call
|
Pat Carroll - Lexington Realty Trust - EVP, CFO, and Treasurer
Yes,
John, there are a few of them. Majority of them don't have occupancy over 80%,
like, for instance, Light Street isn't in — has no loan. It's not on the
borrowing base. There are a couple of assets that are free and clear that we
will be sending over to the banks to get them to put into the borrowing base to
increase the availability. But there are a handful of assets that are free and
clear of direct mortgage debt as borrowing base collateral.
John Guinee - Stifel Nicolaus - Analyst
Okay.
And then the last question. Our friends at Franklin Street Partners acknowledged
that Ober Kaler will most likely leave 120 East Baltimore Street in Downtown
Baltimore, across the street from us, in 2011. And it seems that our friends in
the Legg Mason facilities department think that Ober Kaler may go to that new
building, while our friends at 100 Light Street think that Ober Kaler may go
there. Do you have any update on that?
Will Eglin - Lexington Realty Trust - President, CEO, and COO
No,
we don't. We are optimistic that we'll be able to land our first large tenant at
Light Street in the near future, over the next few months. But I can't comment
specifically about who that might be.
John Guinee - Stifel Nicolaus - Analyst
All
right. And then finally, how is the knee progressing in rehab?
Will Eglin - Lexington Realty Trust - President, CEO, and COO
It's
healing, John, but I believe the Lexington balance sheet has healed
faster.
John Guinee - Stifel Nicolaus - Analyst
Oh,
boy, that's brilliant. All right, thanks.
Operator
(Operator
Instructions). Our next question comes from the line of Anthony Paolone from
JPMorgan. Your line is open.
Anthony Paolone - JPMorgan Chase & Co. - Analyst
Hey,
thank you. I noticed — I think EBITDA in the JV portfolio dropped off
sequentially pretty notably. Can you tell us why that was?
Pat Carroll - Lexington Realty Trust - EVP, CFO, and Treasurer
Yes,
there's two things in that. One, we had — the main thing is we had a joint
venture that had a net lease hotel. That lease expired at the end of June. And
since it was an operating hotel now, we have written off our investment down to
zero. So we didn't recognize any of the earnings that we had in the second
quarter in the third quarter, because there was no longer a master lease. So
that's really the difference in the drop in the equity and
earnings.
Anthony Paolone - JPMorgan Chase & Co. - Analyst
Okay.
What happens to that asset?
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Final
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Nov. 05. 2009 / 11:00AM ET, LXP - Q3 2009
Lexington Realty Trust Earnings Conference
Call
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Pat Carroll - Lexington Realty Trust - EVP, CFO, and Treasurer
We're
going to sell it for a couple $100,000s. And it'll be done. It won't be in our
numbers going forward either.
Anthony Paolone - JPMorgan Chase & Co. - Analyst
Okay,
so kind of where EBITDA was in 3Q is kind of where it ought to be going forward
about —
Pat Carroll - Lexington Realty Trust - EVP, CFO, and Treasurer
For
the joint ventures, yes. If you look at the reconciliation of the FFO on page 4
— page 2 of the supplement, that $6.5 million impairment loss JV. That's that
joint venture.
Anthony Paolone - JPMorgan Chase & Co. - Analyst
Got
it. And then Will, I think, mentioned on the balance sheet there's about $61
million. I think it's in notes receivables. What's behind that? What's the
prospect of either selling some of that or getting repaid on those, near
term?
Will Eglin - Lexington Realty Trust - President, CEO, and COO
Yes,
I mean, they're mainly first mortgage loans, Tony, on properties that we've sold
over the years and taken back financing. There's nothing immediate that I think
would get paid off, but they are notes that we would collect on, and we could
certainly go to the borrowers and offer them early terms if we wanted
to.
But the
notes are good. I don't see from a liquidity standpoint that we need to try to
pull in that leverage to create cash. But I think that that has just been an
overlooked asset on the balance sheet that — into a strengthening debt market in
this past quarter, we turned some of it into cash.
Anthony Paolone - JPMorgan Chase & Co. - Analyst
Okay.
Pat Carroll - Lexington Realty Trust - EVP, CFO, and Treasurer
They're
all performing. There's no delinquency in those notes at all.
Anthony Paolone - JPMorgan Chase & Co. - Analyst
Okay,
what — do you have a sense as to what the yield is on that balance right
now?
Pat Carroll - Lexington Realty Trust - EVP, CFO, and Treasurer
Top
of my head, I don't. I think the rates on the mortgages were in the 6%s to 7%
rate — range.
Anthony Paolone - JPMorgan Chase & Co. - Analyst
Okay.
And then about the —
Will Eglin - Lexington Realty Trust - President, CEO, and COO
Tony,
next quarter we'll schedule it out in the supplemental.
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Final
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Nov. 05. 2009 / 11:00AM ET, LXP - Q3 2009
Lexington Realty Trust Earnings Conference
Call
|
Anthony Paolone - JPMorgan Chase & Co. - Analyst
That's
fine. Fair enough. And then you mentioned the taxable earnings and your taxable
income in 2009 you talked about before, but I just forget what that was. Can you
refresh us on that?
Will Eglin - Lexington Realty Trust - President, CEO, and COO
Well,
it was in a response to John's question, and based on his model, he thinks the
number's about $0.40, which is — you're talking about 2010, Tony?
Anthony Paolone - JPMorgan Chase & Co. - Analyst
No,
I was — you said — when you were talking about John's model, you were using 2009
as a starting point, and I was wondering what that starting point
was.
Will Eglin - Lexington Realty Trust - President, CEO, and COO
Sort
of between low $0.60s to mid-$0.60s on a per-share basis, which would be diluted
down by the increase in the share count and generally running the Company with
lower occupancy in 2010 than we would have in 2009.
Anthony Paolone - JPMorgan Chase & Co. - Analyst
Okay.
And then on the —
Will Eglin - Lexington Realty Trust - President, CEO, and COO
The
share count's increased by about 25% this year.
Anthony Paolone - JPMorgan Chase & Co. - Analyst
Got
it. And then on the direct equity program, how much is left on that, and how do
you think about using it?
Will Eglin - Lexington Realty Trust - President, CEO, and COO
In
the direct stock purchase plan, I think we have about 3.5 million shares, and
there's 9 million shares in our after-market program. We sold some stock over a
couple of month period ending sort of before Columbus Day when there was a
fairly strong market for REITs. So we haven't sold any stock in the last month
or so when it's been softer. So it's nice to have it there, but can't comment on
when or where we might raise capital again by using it.
Anthony Paolone - JPMorgan Chase & Co. - Analyst
Okay.
And then just last question, in your discussion about selling some
underperforming assets or some of the vacant stuff, I'm just curious, is there
much in the way of vacant assets that are encumbered by debt where you're just
operating a loss right now? Is there much of that in the portfolio?
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Final
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Nov. 05. 2009 / 11:00AM ET, LXP - Q3 2009
Lexington Realty Trust Earnings Conference
Call
|
Will Eglin - Lexington Realty Trust - President, CEO, and COO
There
is, Tony. There's three or four assets that fit that description right now, and
that would be in our — those assets would be in our sort of forward disposition
profile, either to go back to the lenders or to be sold for a nominal amount of
cash above the debt.
Anthony Paolone - JPMorgan Chase & Co. - Analyst
Okay,
and what was the decision to even have those at this point? Was the debt crossed
with some other operating asset, or why not have given those back
already?
Will Eglin - Lexington Realty Trust - President, CEO, and COO
Well,
what's driving it, Tony, is a couple of things. You don't want to be giving too
much property back at any one time. And there've been two assets there where we
thought we might get leases on, and we've just been unable to do so, and that's
changed our thinking about it.
Anthony Paolone - JPMorgan Chase & Co. - Analyst
Okay.
Thank you.
Operator
That
concludes today's question-and-answer session. At this time, I would like to
turn the call back over to Mr. Will Eglin for any additional or closing
remarks.
Will Eglin - Lexington Realty Trust - President, CEO, and COO
Once
again, thanks for joining us this morning. We continue to be very excited about
our prospects, and as always, we appreciate your participation and
support.
If you
would like to receive our quarterly supplemental package, please contact Lisa
Soares, or you can find additional information on the Company on our website at
www.lxp.com. In addition, you may contact me or the other members of senior
management with any questions. Thank you and have a good day,
everyone.
Operator
Thank
you. That concludes today's conference. Thank you for your
participation.
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Final
Transcript
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Nov. 05. 2009 / 11:00AM ET, LXP - Q3 2009
Lexington Realty Trust Earnings Conference
Call
|
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