LEXINGTON REALTY TRUST - FORM 8-K/A - EX-99.2 - EXHIBIT - October 9, 2012

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8-K/A - 8-K/A - LEXINGTON REALTY TRUSTlxpform8-ka10912.htm
EX-10.2 - EXHIBIT - LEXINGTON REALTY TRUSTexhibit102-termloanamendme.htm
EX-99.1 - EXHIBIT - LEXINGTON REALTY TRUSTexhibit991-nlsfinancialsta.htm
EX-10.1 - EXHIBIT - LEXINGTON REALTY TRUSTexhibit101-creditagreement.htm

Exhibit 99.2

LEXINGTON REALTY TRUST
Introduction to Unaudited Pro Forma Condensed Consolidated Financial Information


The following unaudited pro forma condensed consolidated balance sheet information as of June 30, 2012, reflects the financial position of Lexington Realty Trust (the “Trust”) as if the acquisition of the remaining common equity interest in Net Lease Strategic Assets Fund L.P. ("NLS") from Inland American (Net Lease) Sub, LLC ("Inland") that the Trust did not already own, which occurred and is valued as of September 1, 2012, had occurred on June 30, 2012. The unaudited pro forma condensed consolidated statements of operations information for the year ended December 31, 2011 and the six months ended June 30, 2012, present the results of operations of the Trust as if the acquisition of NLS had occurred on January 1, 2011.

As the Trust is accounting for the transaction as a business combination, the NLS assets acquired and liabilities assumed were valued at their estimated fair values. The determination of the fair value of the assets and liabilities and the allocation of those values in this unaudited pro forma condensed consolidated financial information have not been finalized and are based upon preliminary estimates which could differ from actual results.

This unaudited pro forma condensed consolidated financial information should be read in connection with the financial statements of the Trust for the year ended December 31, 2011, included in the Trust’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 28, 2012, as amended by the Trust's Current Report on Form 8-K filed on August 30, 2012.

This unaudited pro forma financial information is not necessarily indicative of the expected results of operations of the Trust for any future period. Differences could result from, among other considerations, future changes in the Trust’s portfolio of investments, changes in interest rates, changes in the capital structure of the Trust, changes in property level operating expenses and changes in property level revenues.






LEXINGTON REALTY TRUST
Unaudited Pro Forma Condensed Consolidated Balance Sheet Information
As of June 30, 2012
(In thousands)
 
 
Historical
 
NLS
 
 
 
 
(A)
 
(B)
 
Pro Forma
Assets:
 
 
 
 
 
 
Real estate, at cost
 
$
3,160,236

 
$
325,310

 
$
3,485,546

Investments in real estate and under construction
 
57,250

 
—

 
57,250

Less: accumulated depreciation
 
693,627

 
—

 
693,627

 
 
2,523,859

 
325,310

 
2,849,169

Properties held for sale – discontinued operations
 
—

 
32,114

 
32,114

Intangible assets, net
 
163,718

 
124,330

 
288,048

Cash and cash equivalents
 
50,189

 
(1,331
)
 
48,858

Restricted cash
 
30,497

 
1,775

 
32,272

Investment in and advances to non-consolidated entities
 
96,826

 
(87,729
)
 
9,097

Deferred expenses, net
 
47,454

 
—

 
47,454

Loans receivable, net
 
71,439

 
381

 
71,820

Rent receivable
 
6,972

 
556

 
7,528

Other assets, net
 
26,992

 
8

 
27,000

Total assets
 
$
3,017,946

 
$
395,414

 
$
3,413,360

 
 
 
 
 
 
 
Liabilities and Equity:
 
 
 
 
 
 
Liabilities:
 
 
 
 
 
 
Mortgages and notes payable
 
$
1,263,228

 
$
252,517

 
$
1,515,745

Credit facility borrowings
 
35,000

 
—

 
35,000

Term loan payable
 
206,000

 
—

 
206,000

Convertible notes payable
 
106,118

 
—

 
106,118

Trust preferred securities
 
129,120

 
—

 
129,120

Liabilities – discontinued operations
 
—

 
16,611

 
16,611

Dividends payable
 
23,987

 
—

 
23,987

Accounts payable and other liabilities
 
59,592

 
1,613

 
61,205

Accrued interest payable
 
11,941

 
958

 
12,899

Deferred revenue - including below market leases, net
 
85,645

 
1,529

 
87,174

Prepaid rent
 
16,787

 
2,777

 
19,564

Total liabilities
 
1,937,418

 
276,005

 
2,213,423

Shareholders' equity
 
1,052,186

 
119,035

 
1,171,221

Noncontrolling interests
 
28,342

 
374

 
28,716

Total equity
 
1,080,528

 
119,409

 
1,199,937

Total liabilities and equity
 
$
3,017,946

 
$
395,414

 
$
3,413,360


See accompanying noted to unaudited pro forma condensed consolidated financial information.




LEXINGTON REALTY TRUST       
Unaudited Pro Forma Condensed Consolidated Statement of Operations Information
for the year ended December 31, 2011
(In thousands, except share and per share data)       
 
 
 
 
Historical  (AA)
 
Pro Forma Adjustments of NLS
 
Pro Forma as Adjusted 
Gross revenues:
 
 
 
 
 
 
 
 
Rental
 
 
 
$
284,808

 
$
44,246

 
(BB)
 
$
329,054

Advisory fees
 
2,012

 
(769
)
 
(BB)
 
1,243

Tenant reimbursements
 
31,404

 
966

 
(BB)
 
32,370

 
 
Total gross revenues
 
318,224

 
44,443

 
 
 
362,667

Expense applicable to revenues:
 
 
 
 
 
 
 
 
Depreciation and amortization
 
(158,344
)
 
(37,634
)
 
(CC)
 
(195,978
)
Property operating
 
(58,317
)
 
(1,819
)
 
(BB)
 
(60,136
)
General and administrative
 
(22,207
)
 
(310
)
 
(BB)
 
(22,517
)
Non-operating income
 
13,020

 
1

 
(BB)
 
13,021

Interest and amortization expense
 
(107,470
)
 
(14,148
)
 
(DD)
 
(121,618
)
Debt satisfaction gains, net
 
45

 
—

 
 
 
45

Change in value of forward equity commitment
 
2,030

 
—

 
 
 
2,030

Impairment charges
 
(41,301
)
 
—

 
 
 
(41,301
)
Loss before benefit for income taxes, equity in earnings (losses) of non-consolidated entities and discontinued operations
 
(54,320
)
 
(9,467
)
 
 
 
(63,787
)
Benefit for income taxes
 
826

 
310

 
(EE)
 
1,136

Equity in earnings (losses) of non-consolidated entities
 
30,334

 
(23,064
)
 
(GG)
 
7,270

Loss from continuing operations
 
$
(23,160
)
 
$
(32,221
)
 
 
 
$
(55,381
)
 
 
 
 
 
 
 
 
 
Basic and Diluted EPS - Loss from continuing operations
 
$
(0.32
)
 
 
 
 
 
$
(0.53
)
Basic and Diluted weighted average common shares outstanding
 
152,473,336

 
 
 
 
 
152,473,336


See accompanying notes to unaudited pro forma condensed consolidated financial information.




LEXINGTON REALTY TRUST      
Unaudited Pro Forma Condensed Consolidated Statement of Operations Information
For the Six Months Ended June 30, 2012
(In thousands, except share and per share data)      
 
 
 
 
 
 
 
 
 
 
 
 
 
Historical  (AA)
 
Pro Forma Adjustments
of NLS
 
Pro Forma as Adjusted 
Gross revenues:
 
 
 
 
 
 
 
 
Rental
 
 
 
$
148,500

 
$
22,100

 
(BB)
 
$
170,600

Advisory fees
 
1,088

 
(303
)
 
(BB)
 
785

Tenant reimbursements
 
14,936

 
525

 
(BB)
 
15,461

 
 
Total gross revenues
 
164,524

 
22,322

 
 
 
186,846

Expense applicable to revenues:
 
 
 
 
 
 
 
 
Depreciation and amortization
 
(80,258
)
 
(16,641
)
 
(CC)
 
(96,899
)
Property operating
 
(28,958
)
 
(1,289
)
 
(BB)
 
(30,247
)
General and administrative
 
(11,588
)
 
(395
)
 
(BB)
 
(11,983
)
Non-operating income
 
4,314

 
55

 
(BB)
 
4,369

Interest and amortization expense
 
(49,043
)
 
(6,497
)
 
(DD)
 
(55,540
)
Debt satisfaction charges, net
 
(1,651
)
 
—

 
 
 
(1,651
)
Litigation reserve
 
(2,800
)
 
—

 
 
 
(2,800
)
Impairment charges
 
(1,348
)
 
—

 
 
 
(1,348
)
Loss before benefit (provision) for income taxes, equity in earnings (losses) of non-consolidated entities and discontinued operations
 
(6,808
)
 
(2,445
)
 
 
 
(9,253
)
Benefit (provision) for income taxes
 
(515
)
 
120

 
(EE)
 
(395
)
Equity in earnings (losses) of non-consolidated entities
 
17,670

 
(9,838
)
 
(GG)
 
7,832

Income (loss) from continuing operations
 
$
10,347

 
$
(12,163
)
 
 
 
$
(1,816
)
 
 
 
 
 
 
 
 
 
Basic and Diluted EPS - Loss from continuing operations
 
$
(0.04
)
 
 
 
 
 
$
(0.11
)
Basic and Diluted weighted average common shares outstanding
 
154,353,707

 
 
 
 
 
154,353,707


See accompanying notes to unaudited pro forma condensed consolidated financial information.




LEXINGTON REALTY TRUST
Notes to Pro Forma Condensed Consolidated Financial Information (Unaudited)
(Dollars in thousands)

(1) Adjustments to Pro Forma Condensed Consolidated Balance Sheet Information

The adjustments to the pro forma condensed consolidated balance sheet as of June 30, 2012 are as follows:
(A)
Reflects the Trust’s historical condensed consolidated balance sheet as of December 31, 2011.
(B)
Reflects the pro forma acquisition of NLS as follows:
Asset acquired:
 
 
Real estate
$
325,310

 
Intangible assets
124,330

 
Cash
8,107

 
Restricted cash
1,775


Properties held for sale - discontinued operations
32,114

 
Loan receivable
381

 
Rent receivable
556

 
Other assets
206

 
Investment in non-consolidated entities
1,147

 
 
 
Less liabilities:
 
 
Mortgages assumed
252,517

 
Liabilities - discontinued operations
16,611

 
Accounts payable and other liabilities
1,811

 
Accrued interest payable
958

 
Deferred revenue
1,529

 
Prepaid rent
2,777

 
Net assets acquired
$
217,723

 
 
 
 
Cash paid
$
9,438

 
Less cash acquired
8,107

 
Cash adjustment, net
$
(1,331
)
 
 
 
 
Investment in non-consolidated entities acquired
$
1,147

 
Less, investment in non-consolidated entities - historical basis
88,876

 
Investment in non-consolidated entities, net adjustment
$
(87,729
)
 
 
 
 
Noncontrolling interest in net assets acquired
$
374

 
 
 
 
Other assets acquired
$
206

 
Less, other assets - historical basis eliminated
198

 
Other assets adjustment, net
$
8

 
 
 
 
Accounts payable and other liabilities acquired
$
1,811

 
Less, accounts payable and other liabilities - historical basis eliminated
198

 
Accounts payable and other liabilities, adjustment, net
$
1,613





In addition, the Trust recognized a $119,035 net non-cash gain on a pro forma basis due to the fair value valuation of the NLS assets acquired and liabilities assumed that it did not previously own and the revaluation of its investment in NLS immediately prior to the acquisition to fair value in accordance with ASC 805. This non-cash gain is subject to change when the final fair value valuation of NLS assets and liabilities is determined.

(2) Adjustments to Unaudited Pro Forma Condensed Consolidated Statements of Operations Information

The adjustments to the pro forma condensed consolidated statements of operations information for the year ended December 31, 2011 and six months ended June 30, 2012 are as follows:

(AA)
Reflects the Trust’s historical condensed consolidated statements of operations for the year ended December 31, 2011 and six months ended June 30, 2012.

(BB)    Reflects the pro forma acquisition of NLS as follows:
Change in rental revenues reflects (i) the recalculation of straight-line rents and (ii) the amortization of above and below market leases on a straight-line basis over the remaining term of in-place leases (8.7 weighted-average years).
Change in advisory fees reflects the elimination of asset management fees earned by the Trust related to NLS.
Change in tenant reimbursements, property operating expenses, general and administrative expenses and non-operating income reflect activities of NLS.

(CC)
Depreciation has been adjusted to reflect the total capitalized cost depreciated on a straight- line basis over the estimated economic useful life of the real estate (40 years for buildings, 8.5 years for site improvements and 6.6 weighted-average years for tenant improvements). Amortization includes the pro forma effect of amortization of intangibles on a straight-line basis over the remaining term of the respective leases (5.7 weighted-average years).

(DD)
The pro forma adjustment to interest expense reflects additional interest expense as a result of mortgages assumed in the transaction.

(EE)
Represents the tax impact related to state tax expense on NLS properties and the tax impact due to the reduction in advisory fees.

(GG)
The pro forma adjustment to equity in earnings (losses) of non-consolidated entities reflects the elimination of the equity in earnings related to NLS and the impact of a non-consolidated entity acquired in the transaction.
 
Twelve months
 
Six months
 
12/31/2011
 
6/30/2012
Equity in losses of new non-consolidated entity acquired
$
(523
)
 
$
(255
)
Less, equity in earnings of NLS
22,541

 
9,583

Equity in earnings (losses) of non-consolidated entities adjustment, net
$
(23,064
)
 
$
(9,838
)


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