Washington, D.C. 20549
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes x No o.¨
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o¨No x.
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o.¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o.¨
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K10-K. x.¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company” and “smaller reporting“emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer x Accelerated filer o Non-accelerated filer o (Do not check if a smaller reporting company) Smaller reporting company o |
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Large accelerated filer x | Accelerated filer ¨ | Non-accelerated filer ¨ | Smaller reporting company ¨ |
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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o¨No x.
The aggregate market value of the shares of beneficial interest, par value $0.0001 per share, classified as common stock (“common shares”) of the registrantLexington Realty Trust held by non-affiliates as of June 30, 2015,29, 2018, which was the last business day of the registrant's most recently completed second fiscal quarter, was $1,960,967,318$2,044,256,426 based on the closing price of the common shares on the New York Stock Exchange as of that date, which was $8.48$8.73 per share.
Number of common shares outstanding as of February 23, 2016March 8, 2019 was 235,226,539.235,282,784.
DOCUMENTS INCORPORATED BY REFERENCE
Certain information contained in the Definitive Proxy Statement for registrant'sLexington Realty Trust's Annual Meeting of Shareholders, to be held on May 17, 2016,21, 2019, is incorporated by reference in this Annual Report on Form 10-K in response to Part III, Items 10, 11, 12, 13 and 14, which will be filed with the Securities and Exchange Commission not later than 120 days after the end of the fiscal year covered by this Annual Report on Form 10-K.
TABLE OF CONTENTS
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| | PART III | | |
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PART I.
Introduction
When we useUnless stated otherwise or the terms “Lexington,”context otherwise requires, the “Company,” the “Trust,” “Lexington,” “we,” “us” and “our,” we meanand “us” refer collectively to Lexington Realty Trust and all entities owned by us, including non-consolidated entities, except where it is clear thatits consolidated subsidiaries. All of the term means only the parent company or only the parent company and consolidated entities. AllCompany's interests in properties are held, and all property operating activities are conducted, through special purpose entities, which we refer to as property owner subsidiaries or lender subsidiaries, which are separate and distinct legal entities, but in some instances are consolidated for financial statement purposes and/or disregarded for income tax purposes. Assets and credit of a property owner subsidiary or lender subsidiary are not available to satisfy the debt and other obligations of any other person, including any other property owner subsidiary or lender subsidiary or any other affiliate.
References herein to this Annual Report are to this Annual Report on Form 10-K for the fiscal year ended December 31, 2015. When we use the term “REIT”“REIT,” we mean real estate investment trust. All references to 2015, 20142018, 2017 and 20132016 refer to our fiscal years ended, or the dates, as the context requires, December 31, 2015, 2018, December 31, 20142017 and December 31, 2013,2016, respectively.
When we use the term “GAAP”“GAAP,” we mean United States generally accepted accounting principles.principles in effect from time to time.
Cautionary Statements Concerning Forward-Looking Statements
This Annual Report, together with other statements and information publicly disseminated by us, contain certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. We intend such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995 and include this statement for purposes of complying with these safe harbor provisions. Forward-looking statements, which are based on certain assumptions and describe our future plans, strategies and expectations, are generally identifiable by use of the words “believes,” “expects,” “intends,” “anticipates,” “estimates,” “projects,” “may,” “plans,” “predicts,” “will,” “will likely result” or similar expressions. Readers should not rely on forward-looking statements since they involve known and unknown risks, uncertainties and other factors which are, in some cases, beyond our control and which could materially affect actual results, performances or achievements. In particular, among the factors that could cause actual results, performances or achievements to differ materially from current expectations, strategies or plans include, among others, those risks discussed below under “Risk Factors” in Part I, Item 1A of this Annual Report and under “Management's Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of this Annual Report. Except as required by law, we undertake no obligation to publicly release the results of any revisions to these forward-looking statements which may be made to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events. Accordingly, there is no assurance that our expectations will be realized.
PART I.
Item 1. Business
General
We are a Maryland real estate investment trust, qualified as a REIT for federal income tax purposes, that owns a diversified portfolio of equity and debt investments in single-tenant commercial properties, and land.with a focus on industrial properties. A majority of these properties and all land interests are subject to net or similar leases, where the tenant bears all or substantially all of the costs, including cost increases, for real estate taxes, utilities, insurance and ordinary repairs. We alsoHowever, certain leases provide investment advisory and asset management services to investors inthat the single-tenant area.landlord is responsible for certain operating expenses.
As of December 31, 20152018, we had equity ownership interests in approximately 215135 consolidated real estate properties, located in 4034 states and containing an aggregate of approximately 42.347.6 million square feet of space, approximately 96.8%95.1% of which was leased, excluding a property subject to a mortgage in default.leased. In 2015, 20142018, 2017 and 2013,2016, no tenant/guarantor represented greater than 10% of our annual base rental revenue.
In addition to our shares of beneficial interest, par value $0.0001 per share, classified as common stock, which we refer to as common shares, as of December 31, 20152018, we had one outstanding class of beneficial interest classified as preferred stock, or preferred shares, our 6.50% Series C Cumulative Convertible Preferred Stock, par value $0.0001 per share, or our Series C Preferred Shares. Our common shares and Series C Preferred Shares are traded on the New York Stock Exchange, or NYSE, under the symbols “LXP” and “LXPPRC”, respectively.
We elected to be taxed as a REIT under Sections 856 through 860 of the Internal Revenue Code of 1986, as amended, which we refer to as the Code, commencing with our taxable year ended December 31, 1993. We intend to continue to qualify as a REIT. If we qualify for taxation as a REIT, we generally will not be subject to federal corporate income taxes on our net taxable income that is currently distributed to our common shareholders. We conduct certain taxable activities through our taxable REIT subsidiary, Lexington Realty Advisors, Inc.
History
Our predecessor, Lexington Corporate Properties, Inc., was organized in the state of Delaware in October 1993 upon the combination of two investment programs, Lepercq Corporate Income Fund L.P., which we refer to as LCIF, and Lepercq Corporate Income Fund II L.P., which we refer to as LCIF II, which were formed to acquire net-lease real estate assets providing current income. Our predecessor was merged into Lexington Corporate Properties Trust, a Maryland statutory REIT, on December 31, 1997. On December 31, 2006, Lexington Corporate Properties Trust changed its name to Lexington Realty Trust and was the successor in a merger with Newkirk Realty Trust, or Newkirk, which we refer to as the Newkirk Merger. All of Newkirk's operations were conducted, and all of its assets were held, through its master limited partnership, subsequently named The Lexington Master Limited Partnership, which we refer to as the MLP. As of December 31, 2008, the MLP was merged with and into us.
We areis structured as an umbrella partnership REIT, or UPREIT, as a portion of ourits business has beenis conducted through ourits operating partnership subsidiaries: (1) LCIF and (2) LCIF II. Wesubsidiary, Lepercq Corporate Income Fund L.P., which we refer to these subsidiaries as our operating partnerships and to limited partner interests in these operating partnerships as OP units. On December 30, 2013, LCIF II was merged with and into LCIF, with LCIF as the surviving entity. We areLCIF. Lexington is party to a funding agreement with LCIF under which weLexington may be required to fund distributions made on account of partner interests in LCIF, which we refer to as OP units. The UPREIT structure enables us to acquire properties through an operating partnership by issuing OP units to a seller of property, as a form of consideration in exchange for the property. However, our credit agreement requires that we own at least 95.5% of LCIF. The outstanding OP units not held by usLexington are generally redeemable for our common shares on a one OP unit for approximately 1.13 common shares basis, or, at our election in certain instances, cash. We believe that this structure facilitates our ability to raise capital and to acquire portfolio and individual properties by enabling us to structure transactions which may defer taxable gains for a contributor of property. As of December 31, 2015,2018, there were approximately 3.43.2 million OP units outstanding, other than OP units held by us,Lexington, which were convertible into approximately 3.83.6 million common shares, assuming weredemptions are satisfied redemptions entirely with common shares.
Investment and Strategy
General. Our current business strategy is focused on enhancing our cash flow stability, growing our portfolio ofwith attractive long-term leased industrial investments, reducing lease rollover risk and maintaining a strong and flexible balance sheet to allow us to act on opportunities as they arise. GenerallyTo that end, during 2018, we seekcontinued to acquire general purpose, single-tenant net-leasedbe an active seller of non-core assets such as office properties, retail properties and vacant properties. In addition, we continued and will continue our efforts to increase the percentage of rents from industrial assets. Our disposition of 21 office assets to a newly-formed joint venture, NNN Office JV L.P. (“NNN JV”), and other disposition and acquisition activities during 2018, have resulted in an increase in our percentage of GAAP rent from industrial assets subject to long-term leases, in well-located and growing markets or which are critical to the tenant's business, but may also include other asset types subject to long-term net-leases, such65.4% as land, retail facilities, schools and medical facilities. We attempt to manage residual value risk associated with such other asset types by acquiring such assets primarily through joint ventures or disposing of such assets when there is sufficient remaining lease term to generate favorable sale prices or by making loan investments secured by such assets at a loan-to-value ratio where we would be comfortable holding an equity interest. We believe our strategyDecember 31, 2018 from 44.3% as of investing in core assets will ultimately provide shareholders with dividend growth and capital appreciation.December 31, 2017.
We implement our strategy by (1) recycling capital in compliance with regulatory and contractual requirements, (2) refinancing or repurchasing outstanding indebtedness when advisable, (3) using fixed-rate non-recourse secured indebtedness to partially finance certain asset acquisitions, (4) effecting strategic transactions, portfolio and individual property acquisitions and dispositions, (5) expanding existing properties, (6) executing new leases with tenants, (7) extending lease maturities in advance of or at expiration and (8) exploring new business lines and operating platforms. Additionally, we may continue to enter into joint ventures and co-investment programs with third-party investors as a means of mitigating risk, creating additional growth and expanding the revenue realized from advisory and asset management activities as situations warrant.
Portfolio diversification is central to our investment strategy as we seek to create and maintain an asset base that provides steady, predictable and growing cash flows while being insulated against rising property operating expenses, regional recessions, industry-specific downturns and fluctuations in property values and market rent levels. Regardless of capital market and economic conditions, we intend to stay focused on (1) enhancing operating results, (2) improving portfolio quality through acquisitions of industrial assets and reducing risks associated with lease rollover, especially with respect to non-core assets, (3) mitigating risks relating to interest rates and real estate cycles and (4) implementing strategies where our management skills and real estate expertise can add value. We attempt to maintain a portfolio of properties that provide for income and capital appreciation. The proportion of total return generated from rental income versus capital appreciation will vary by asset type, lease term, contractual rental escalations and market location. We believe that our business strategy will continue to improve our liquidity and strengthen our overall balance sheet while creating meaningful shareholder value.
We intend to maintain a strong balance sheet primarily by (1) financing property acquisitions with non-recourse mortgage debt or unsecured corporate level borrowings at what we believe are favorable rates, (2) issuing equity when market conditions are favorable, (3) selling non-core and underperforming assets and (4) extending debt maturities and refinancing debt at lower rates.
Investments. When opportunities arise, we intend to continue to make investments inacquire single-tenant net-leased industrial assets that we believe will generate favorable returns. We focus on general purpose, well located, industrial assets that, we believe, will provide us with greater long-term overall risk-adjusted returns then we would realize from making new acquisitions of office or other properties. We believe industrial assets, as compared with office assets, provide for greater rental growth potential and less retenanting costs, We seek to grow our portfolio primarily by (1) engaging in, or providing funds to, or partnering with, developers who are engaged in, build-to-suit projects for single-tenant corporate users, (2) providing capital to corporations by buying properties and leasing them back to the sellers under net or similar leases and (3) acquiring properties already subject to net or similar leases, including through strategic transactions such as portfolio acquisitions and (4) making mortgage and mezzanine loans generally secured by single-tenant properties subject to net or similar leases.mergers with other real estate companies.
Our management has established a broad network of contacts to source investments, including brokers, developers and major corporate tenants, developers and brokers.tenants. We believe that our geographical diversification, and acquisition experience and balance sheet strength will allow us to continue to compete effectively for such investments. In addition, we seek to partner with developers on land parcels suitable for development of industrial assets.
Prior to effecting any investment, our underwriting includes analyzing the (1) property's design, construction quality, efficiency, functionality and location with respect to the immediate sub-market, city and region, (2) lease integrity with respect to term, rental rate increases, tenant credit, corporate guarantees and property maintenance provisions, (3) present and anticipated conditions in the local real estate market and (4) prospects for selling or re-leasing the property on favorable terms in the event of a vacancy. To the extent of information publicly available or made available to us, we also evaluate each potential tenant's financial strength, growth prospects and competitive position within its respective industry and aeach property's strategic location and function within a tenant's operations or distribution systems. We believe that our comprehensive underwriting process is critical to the assessment of long-term profitability of any investment by us.
Strategic Transactions with Other Real Estate Investment Companies. We seek to capitalize on the unique investment experience of our management team as well as their network of relationships in the industry to achieve appropriate risk-adjusted yields through strategic transactions. Accordingly, we occasionally pursue the (1) acquisition of portfolios of assets and equity interests in companies with a significant number of single-tenant assets, including through mergers and acquisitions activity, and (2) participation in strategic partnerships, co-investment programs and joint ventures.
We believe that entering into co-investment programs and joint ventures with institutional investors and other real estate investment companies may mitigate our risk in certain assets and increase our return on equity to the extent we earn management or other fees. However, investments in co-investment programs and joint ventures limit our ability to make unilateral investment decisions relating to the assets and limit our ability to deploy capital.
Competition
There are numerous commercial developers, real estate companies, financial institutions, such as banks and insurance companies, and other investors with greater financial or other resources that compete with us in seeking properties for acquisition and tenants who will lease space in these properties. Furthermore, competition for industrial assets has increased in recent years. Our competitors include other REITs, pension funds, banks, private companies and individuals.
Internal Growth and Effectively Managing Assets
Tenant Relations and Lease Compliance. We endeavor to maintain close contact with the tenants in the properties in which we have an interest in order to understand their financial strength, operations and future real estate needs. We monitor the financial, property maintenance and other lease obligations of the tenants in properties in which we have an interest, through a variety of means, including periodic reviews of financial statements that we have access to and physical inspections of the properties.
Extending Lease Maturities. Our property owner subsidiaries seek to extend tenant leases in advance of the lease expiration in order for us to maintain a balanced lease rollover schedule and high occupancy levels.
Revenue Enhancing Property Expansions. Our property owner subsidiaries undertake expansions of properties based on lease requirements, tenant requirements or marketing opportunities. We believe that selective property expansions can provide attractive rates of return.
Capital Recycling. Subject to regulatory and contractual requirements, we generally sell our interests in properties when we believe that the return realized from selling a property will exceed the expected return from continuing to hold such property and/or there is a better use of the capital to be received upon sale. We also focus our disposition efforts primarily on non-core assets such as office, vacant, multi-tenant, certain land investments, retail and short-term leased assets.assets and assets that are the only asset we own in a geographic location.
Occasionally, we provide seller financing as a means of efficiently disposing of an asset. As a result, if a buyer defaults under the seller financing, we will once again be the owner of the underlying asset.
Conversion to Multi-Tenant. If one of our property owner subsidiaries is unable to renew a single-tenant lease or if it is unable to find a replacement single tenant, we either attempt to sell our interest in the property or the property owner subsidiary may seek to market the property for multi-tenant use. When appropriate, we seek to sell our interests in these multi-tenant properties.
Property Management. From time to time, our property owner subsidiaries use property managers to manage certain properties. Our property management joint venture with an unaffiliated third party manages substantially allthe majority of these properties. We believe this joint venture provides us with (1) better management of our assets, (2) better tenant relationships, (3) revenue-enhancing opportunities and (4) cost efficiencies.
Financing Strategy
General. Since becoming a public company, our principal sources of financing have been the public and private equity and debt markets, property specificincluding property-specific debt, revolving loans, corporate level term loans, corporate bonds, issuance of common and preferred equity, issuance of OP units and undistributed cash flows.
Property SpecificProperty-Specific Debt. Our property owner subsidiaries seek non-recourse secured debt on a limited basis includingto mitigate tenant credit risk and when credit tenant lease financing is available. Credit tenant lease financing allows us to significantly or fully leverage the rental stream from an investment at, what we believe are, attractive rates.
Corporate Level Borrowings. We also use corporate level borrowings, such as revolving loans, term loans, and debt offerings. We expect to continue to finance more of our operations with such corporate level borrowings as (1) non-recourse secured debt matures and (2) such corporate level borrowings are available on favorable terms.
Balance Sheet Management. In recent years, we have reduced our weighted-average interest rate through the retirement of higher rateretired non-recourse mortgage debt with proceeds from recourse corporate level borrowings.borrowings and sales. Our objective is to continually strengthen ourmaintain a strong balance sheet to provide financial flexibility.
Common Share Issuances
From time to time, we raise capital by issuing common shares through (1) at-the-market offering programs, (2) underwritten public offerings, (3) block trades and (4) our direct share purchase plan. The proceeds from our common share offerings are generally used for working capital, including to fund investments and to retire indebtedness. In recent years, our common share issuances have been limited due to the market price of our common shares. However, when market conditions are favorable, we intend to issue common shares.
Share Repurchases
We have made, and may continue to make, repurchases of our common and preferred shares in individual transactions when we believe it is advantageous to do so, including when the discount to our net asset value or the liquidation preference, as the case may be, is attractive. DuringOur share repurchase program authorized in 2015 our Board of Trustees authorized a 10.0had approximately 10.7 million common shareshares available for repurchase program.as of December 31, 2018. We repurchased and retired 5.9 million common shares in 2018.
Advisory Contracts
Certain members of our managementWe provide, and have been in the business of investing in single-tenant net-lease properties since 1973. This experience has enabled us to provideprovided, advisory services to various net-lease investors, including institutional investors and high net-worth individuals.
Environmental Matters
Under various federal, state and local environmental laws, statutes, ordinances, rules and regulations, an owner of real property may be liable for the costs of removal or remediation of certain hazardous or toxic substances at, on, in or under such property as well as certain other potential costs relating to hazardous or toxic substances. These liabilities may include government fines and penalties and damages for injuries to persons and adjacent property. Such laws often impose liability without regard to whether the owner knew of, or was responsible for, the presence or disposal of such substances. Although generally the tenants of the properties in which we have an interest are primarily responsible for any environmental damage and claims related to the leased premises, in the event of the bankruptcy or inability of a tenant of such premises to satisfy any obligations with respect to such environmental liability, a property owner subsidiary may be required to satisfy such obligations. In addition, as the owner of such properties, a property owner subsidiary may be held directly liable for any such damages or claims irrespective of the provisions of any lease.
From time to time, in connection with the conduct of our business and generally upon acquisition of a property and prior to surrender by a tenant, the property owner subsidiary authorizes the preparation of a Phase I and, when recommended, a Phase II environmental report with respect to its properties. Based upon such environmental reports and our ongoing review of the properties in which we have an interest, as of the date of this Annual Report, we are not aware of any environmental condition with respect to any of the properties in which we have an interest that we believe would be reasonably likely to have a material adverse effect on our financial condition and/or results of operations. There can be no assurance, however, that (1) the discovery of environmental conditions, the existence or severity of which were previously unknown, (2) changes in law, (3) the conduct of tenants or (4) activities relating to properties in the vicinity of the properties in which we have an interest, will not expose us to material liability in the future. Changes in laws increasing the potential liability for environmental conditions existing on properties or increasing the restrictions on discharges or other conditions may result in significant unanticipated expenditures or may otherwise adversely affect the operations of the tenants of properties in which we have an interest, which would adversely affect our financial condition and/or results of operations.
Summary of 20152018 Transactions and Recent Developments
The following summarizes certain of our transactions during 2015,2018, including transactions disclosed elsewhere and in our other periodic reports.
Acquisitions/Investments.Investments/Capital Recycling. With respect to acquisitions/investments, we:
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| – | purchased propertieseight industrial assets for an aggregate cost of $349.3 million;$315.6 million. |
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| – | completed build-to-suit transactionsdisposed of 21 office assets to NNN JV for an aggregate capitalizedprice of $725.8 million and acquired a 20% equity interest in NNN JV for an aggregate cost of $141.8 million;$53.7 million. |
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– | continue to fund ongoing build-to-suit transactions, including non-consolidated entity projects, not yet completed at December 31, 2015 with an aggregate estimated total cost of $385.1 million of which $133.8 million was invested as of December 31, 2015; |
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– | entered into a forward commitment to acquire a build-to-suit industrial property in Detroit, Michigan for approximately $29.7 million, which is subject to a 20-year net lease; and |
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– | foreclosed on two properties underlying loan investments of $12.3 million, acquiring the vacant properties and corresponding escrow deposits. |
Capital Recycling. With respect to capital recycling activity, we:
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| – | disposed of our interests in 25 additional consolidated properties to unaffiliated third parties for an aggregate gross disposition price of $217.7 million; |
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– | conveyed in foreclosure or via deed-in-lieu of foreclosure certain properties for full satisfaction of the related aggregate $47.5 million in non-recourse mortgages; and$335.3 million. |
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| – | received an aggregate $3.5$4.3 million forin connection with the payoffsale of the Austin, Texas loan investment, including yield maintenance.a non-consolidated investment. |
Leasing. We entered into 4529 new leases and lease extensions including a non-consolidated entity, encompassing an aggregate 4.01.9 million square feet, ending the year with our overallfeet. Our portfolio was 95.1% leased at 96.8% as of December 31, 2015, excluding a property subject to a mortgage in default.2018.
Financing.Financing/Equity. With respect to financing activities, we:
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| – | entered into a new $905.0repaid $160.0 million, net under the unsecured revolving credit agreement with KeyBank National Association, as agent, to replace our previous credit facility and term loans;facility. |
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| – | converted $3.8repaid the $300.0 million aggregate original principal amount of 6.00% Convertible Guaranteed Notes due 2030, or 6.00% Convertible Notes, for approximately 0.5 million common shares and aggregate cash payments of $0.5 million plus accrued and unpaid interest;term loan that was scheduled to mature in 2020. |
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| – | retired $216.0an aggregate of $118.0 million in property non-recourse mortgage debt, with a weighted-average interest rate of 5.3%;including debt encumbering assets sold to NNN JV. |
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| – | obtained an aggregate$25.9 million of $190.8 million in non-recourse mortgage financing with a weighted-average fixed interest rate of 3.9%;5.4%, which matures in November 2032 and is secured by an industrial property in Warren, MI. |
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| – | borrowed $177.0repurchased and retired approximately 5.9 million net undercommon shares at an average price of $8.05 per common share. |
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| – | amended our revolving lineunsecured credit facility to remove LCIF as a borrower, which resulted in their automatic release as a guarantor of credit.our outstanding debt securities, |
Capital. With respect to capital activities, we announced a 10.0 million common share repurchase program and repurchased an aggregate 2,216,799 common shares at an average price of $8.29 per share under the share repurchase program.
See “Management's Discussion and Analysis of Financial Condition and Results of Operations” in Part I, Item 7 of this Annual Report for more detail regarding our 2015the Company's 2018 transaction activity.
Subsequent to December 31, 2015,2018, we:
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| – | acquired the $29.7 million build-to-suitsold a consolidated industrial property in Detroit, Michigan pursuant to the forward commitment disclosed above;for $79.3 million. |
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| – | acquired two industrial assets for an aggregate purchase price of approximately $58.0 million. |
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| – | repurchased 951,792and retired 441,581 common shares at an average price of $7.48$8.13 per share under the share repurchase program announced in 2015;common share. |
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| – | received $6.7 million in connectionreplaced our revolving credit facility and 2021 term loan with a new revolving credit facility and the salecontinuation of a non-consolidated property in Russellville, Arkansas;the 2021 term loan, which extended the maturity of the revolving credit facility to February 2023 and reduced the applicable margin rates on the revolving credit facility and 2021 term loan. |
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| – | obtained $57.5 million 15-year non-recourse financing, which bears interest atentered into an agreement to purchase upon completion the expansion of our property in Richland, Washington for $67.0 million. |
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| – | declared a 5.2% fixed interest rate and is secured by the Richmond, Virginia property completed in 2015.quarterly common share dividend of $0.1025 per common share. |
Other
Employees. As of December 31, 20152018, we had 5460 full-time employees. Lexington Realty Trust is a master employer and employee costs are allocated to subsidiaries as applicable.
Industry Segments. We primarily operate in one industry segment, primarily single-tenant real estate assets.
Web Site. Our Internet address is www.lxp.com. We make available, free of charge, on or through the Investors section of our web site or by contacting our Investor Relations Department, our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act, as well as proxy statements, as soon as reasonably practicable after we electronically file such material with, or furnish it to, the Securities and Exchange Commission, or SEC. Also posted on our web site, and available in print upon request of any shareholder to our Investor Relations Department, are our declaration of trust and amended and restated by-laws, charters for the Audit Committee, Compensation Committee and Nominating and Corporate Governance Committee of our Board of Trustees, our Corporate Governance Guidelines, and our Code of Business Conduct and Ethics governing our trustees, officers and employees (which contains our whistle blower procedures). Within the time period required by the SEC and the NYSE, we will post on our web site any amendment to the Code of Business Conduct and Ethics and any waiver applicable to any of our trustees or executive officers. In addition, our web site includes information concerning purchases and sales of our equity securities by our executive officers and trustees as well as disclosure relating to certain non-GAAP financial measures (as defined in the SEC's Regulation G) that we may make public orally, telephonically, by webcast, by broadcast or by similar means from time to time. The SEC maintains an internet site that contains reports, proxy and information statements and other information regarding LXP at http://www.sec.gov. Information contained on our web site or the web site of any other person is not incorporated by reference into this Annual Report or any of our other filings with or furnishings withdocuments furnished to the SEC.
Our Investor Relations Department can be contacted at Lexington Realty Trust, One Penn Plaza, Suite 4015, New York, New York 10119-4015, Attn: Investor Relations, by telephone: (212) 692-7200, or by e-mail: ir@lxp.com.
Principal Executive Offices. Our principal executive offices are located at One Penn Plaza, Suite 4015, New York, New York 10119-4015; our telephone number is (212) 692-7200.
NYSE CEO Certification. Our Chief Executive Officer made an unqualified certification to the NYSE with respect to our compliance with the NYSE corporate governance listing standards in 2015.2018.
Item 1A. Risk Factors
Set forth below are material factors that may adversely affect our business and operations.
Risks Related to Our Business
We are subject to risks involved in single-tenant leases.involving our leases and tenants.
We focus our acquisition activities on real estate properties that are net leased to single tenants.tenants, and certain of our tenants and/or their guarantors constitute a significant percentage of our base rental revenues. Therefore, the financial failure of, or other default by, a single tenant under its lease is likely to cause a significant or complete reduction in the operating cash flow generated by the property leased to that tenant and might decrease the value of that property and result in a non-cash impairment charge. In addition,If the tenant represents a significant portion of our base rental revenues, the impact on our financial position may be material. Further, in any such event, our property owner subsidiary will be responsible for 100% of the operating costs following a vacancy at a single-tenant building.
We rely on revenues derived from major tenants.
Revenues from several tenants and/or their guarantors constitute a significant percentage of our base rental revenues. The default, financial distress or bankruptcy of any of the tenants and/or guarantors of these properties could cause interruptions in the receipt of lease revenues and/or result in vacancies, which would reduce the property owner subsidiary's revenues and increase operating costs until the affected property is re-let, and could decrease the ultimate sale value of that property. Upon the expiration or other termination of the leases that are currently in place, with respect to these properties, the property owner subsidiary may not be able to re-lease the vacant property at all or at a comparable lease rate at all, or without incurring additional expenditures in connection with the re-leasing. re-leasing, which may be material in amount.
Under current bankruptcy law, a tenant can generally assume or reject a lease within a certain number of days of filing its bankruptcy petition. If a tenant rejects the lease, a landlord's damages, subject to availability of funds from the bankruptcy estate, are generally limited to the greater of (1) one year's rent and (2) the rent for 15% of the remaining term of the lease, not to exceed three years rent.
In addition, industry-specific or geographic downturns may result in a decline in the value of our assets related to such industries or those assets located in such geographic areas.years.
Certain of our leases may permit tenants to terminate the leases to which they are a party.
Certain of our leases contain tenant termination options, including economic discontinuance options, that permit the tenants to terminate their leases. While these termination options generally require a termination payment by the tenants, in most cases, the termination payments are less than the total remaining expected rental revenue. The termination of a lease by a tenant may impair the value of the property. In addition, we will be responsible for 100% of the operating costs following the termination by any such tenant and subsequent vacating of the property, and we will incur releasingre-leasing costs.
Our ability to fully control the maintenance of our net-leased properties may be limited.
The tenants of our net-leased properties are responsible for maintenance and other day-to-day management of the properties. If a property is not adequately maintained in accordance with the terms of the applicable lease, we may incur expenses for deferred maintenance or other liabilities once the property is no longer leased. We generally visit our properties on an annual basis, but these visits are not comprehensive inspections and deferred maintenance items may go unnoticed. While our leases generally provide for recourse against the tenant in these instances, a bankrupt or financially-troubled tenant may be more likely to defer maintenance, and it may be more difficult to enforce remedies against such a tenant.
Our tenants' ability to successfully operate their businessbusinesses may affect their ability to pay rent and maintain their leased property.
To the extent that tenants are unable to operate the property on a financially successful basis, their ability to pay rent to us may be adversely affected. Although we endeavor to monitor, on an ongoing basis, compliance by tenants with their lease obligations and other factors thatwhich could affect the financial performance of our properties, such monitoring may not always ascertain or forestall deterioration, either in the condition or value of a property or in the financial circumstances of a tenant.
You should not rely on the credit ratings of our tenants.
Some of our tenants, guarantors and/or their parent or sponsor entities are rated by certain rating agencies. In certain instances, we may disclose the credit ratings of our tenants or their parent or sponsor entities even though those parent or sponsor entities are not liable for the obligations of the tenant or guarantor under the lease. Any such credit ratings are subject to ongoing evaluation by these credit rating agencies and we cannot assure you that any such ratings will not be changed or withdrawn by these rating agencies in the future if, in their judgment, circumstances warrant. If these rating agencies assign a lower-than-expected rating or reduce or withdraw, or indicate that they may reduce or withdraw, the credit rating of a tenant, guarantor or its parent entity, the value of our investment in any properties leased by such tenant could significantly decline.
Our assets may be subject to impairment charges.
We periodically evaluate our real estate investments and other assets for impairment indicators. The judgment regarding the existence of impairment indicators is based on GAAP, which include a variety of factors such as market conditions, the status of significant leases, the financial condition of major tenants and other factors that could affect the cash flow or value of an investment. Based on this evaluation, we may from time to time take non-cash impairment charges, which could affect the implementation of our current business strategy. These impairments could have a material adverse effect on our financial condition and results of operations.
Furthermore, we may take an impairment charge on a property subject to a non-recourse secured mortgage which reduces the book value of such property to its fair value, which may be below the balance of the mortgage on our balance sheet. Upon foreclosure or other disposition, we may be required to recognize a gain on debt satisfaction equal to the difference between the fair value of the property and the balance of the mortgage.
IfOur real estate development activities are subject to additional risks.
In 2017, we entered into a sale-leaseback transactionjoint venture that acquired a developable parcel of land. Development activities generally require various government and other approvals, which the joint venture may not receive. In addition, the joint venture is re-characterized insubject to the following risks associated with development activities:
Unsuccessful development opportunities could cause us to incur direct expenses;
Construction costs of a project may exceed original estimates, possibly making the project less profitable than originally estimated or unprofitable;
Time required to complete the construction of a project or to lease up the completed project may be greater than originally anticipated, thereby adversely affecting our cash flow and liquidity;
Occupancy rates and rents of a completed project may not be sufficient to make the project profitable; and
Favorable financing sources to fund the joint venture's development activities may not be available.
A tenant’s bankruptcy proceeding may result in the re-characterization of related sale-leaseback transactions or in the restructuring of the tenant's payment obligations to us, either of which could adversely affect our financial condition could be adversely affected.condition.
We have entered and may continue to enter into sale-leaseback transactions, whereby we would purchase a property and then lease the same property back to the person from whom we purchased it. In the event of the bankruptcy of a tenant, a transaction structured as a sale-leaseback may be re-characterized as either a financing or a joint venture, eitherventure. As a result of which outcomesthe foregoing, the re-characterization of a sale-leaseback transaction could adversely affect our financial condition, cash flow and the amount available for distributions to our shareholders.
If the sale-leaseback were re-characterized as a financing, we might not be considered the owner of the property, and as a result would have the status of a creditor in relation to the tenant. In that event, we would no longer have the right to sell or encumber our ownership interest in the property. Instead, we would have a claim against the tenant for the amounts owed under the lease, with the claim arguably secured by the property. The tenant/debtor might have the ability to propose a plan restructuring the term, interest rate and amortization schedule of its outstanding balance. If confirmed by the bankruptcy court, we could be bound by the new terms and prevented from foreclosing our lien on the property. If the sale-leaseback were re-characterized as a joint venture, our tenant and we could be treated as co-venturers with regard to the property. As a result, we could be held liable, under some circumstances, for debts incurred by the tenant relating to the property.
Certain
A significant portion of our leases mayare long-term and do not result inhave fair market lease rates over time,rental rate adjustments, which could negatively impact our income and reduce the amount of funds available to make distributions to shareholders.
A significant portion of our rental income comes from long-term net leases, which generally provide the tenant greater discretion in using the leased property than ordinary property leases, such as the right to freely sublease the property, to make alterations in the leased premises and to terminate the lease prior to its expiration under specified circumstances. Furthermore, net leases typically have longer lease terms and, thus, there is an increased risk that contractual rental increases in future years will fail to result in fair market rental rates during those years. If we do not accurately judge the potential for increases in market rental rates when negotiating these long-term leases or if we are unable to obtain any increases in rental rates over the terms of our leases, significant increases in future property operating costs, to the extent not covered under the net leases could result in us receiving less than fair value from these leases. As a result, our income and distributions to our shareholders could be lower than they would otherwise be if we did not engage in long-term net leases.
In addition, increases in interest rates may also negatively impact the value of our properties that are subject to long-term leases. While a significant number of our net leases provide for annual escalations in the rental rate, the increase in interest rates may outpace the annual escalations.
Our interests in loans receivable, if any, are subject to delinquency, foreclosure and loss.
Our interests in loans receivable, if any, are generally non-recourse and secured by real estate properties owned by borrowers that were unable to obtain similar financing from a commercial bank. These loans are subject to many risks including delinquency. The ability of a borrower to repay a loan secured by a real estate property is typically and primarily dependent upon the successful operation of such property rather than upon the existence of independent income or assets of the borrower. If a borrower were to default on a loan, it is possible that we would not recover the full value of the loan as the collateral may be non-performing.
In 2015, we foreclosed on vacant office properties in Westmont, Illinois and Southfield, Michigan that were collateral for certain loans we held.
We face uncertainties relating to lease renewals and re-letting of space.
Upon the expiration of current leases for space located in properties in which we have an interest, our property owner subsidiaries may not be able to re-let all or a portion of such space, or the terms of re-letting (including the cost of concessions to tenants and leasing commissions) may be less favorable than current lease terms or market rates. If our property owner subsidiaries are unable to promptly re-let all or a substantial portion of the space located in their respective properties, or if the rental rates a property owner subsidiary receives upon re-letting are significantly lower than current rates, our earnings and ability to satisfy our debt service obligations and to make expected distributions to our shareholders may be adversely affected due to the resulting reduction in rent receipts and increase in property operating costs. There can be no assurance that our property owner subsidiaries will be able to retain tenants in any of our properties upon the expiration of leases.
We may not be able to generate sufficient cash flow to meet our debt service obligations and to pay distributions on our common and preferred shares.
Our ability to make payments on and to refinance our indebtedness, to make distributions on our common and preferred shares and to fund our operations, working capital and capital expenditures, depends on our ability to generate cash in the future. To a certain extent, our cash flow is subject to general economic, industry, financial, competitive, operating, legislative, regulatory and other factors, many of which are beyond our control. We cannot assure you that our business will generate sufficient cash flow from operations or that future sources of cash will be available to us in an amount sufficient to enable us to pay amounts due on our indebtedness or to make distributions on our common and preferred shares and fund our other liquidity needs. Additionally, if we incur additional indebtedness in connection with future acquisitions or development projects or for any other purpose, our debt service obligations could increase.
We may need to refinance all or a portion of our indebtedness on or before maturity. Our ability to refinance our indebtedness or obtain additional financing will depend on, among other things:
things, our financial condition and market conditions at the time;time and
restrictions in the agreements governing our indebtedness.
As a result, we may not be able to refinance any of our indebtedness on commercially reasonable terms, or at all. If we do not generate sufficient cash flow from operations, and additional borrowings or refinancings or proceeds of asset sales or other sources of cash are not available to us, we may not have sufficient cash to enable us to meet all of our obligations. Accordingly, if we cannot service our indebtedness, we may have to take actions such as seeking additional equity, or delaying strategic acquisitions and alliances or capital expenditures, any of which could have a material adverse effect on our operations. We cannot assure you that we will be able to effect any of these actions on commercially reasonable terms, or at all.
Our inability to carry out our growth strategy could adversely affect our financial condition and results of operations.
Our growth strategy is based on the acquisition and development of additional properties and related assets. In the context of our business plan, “development” generally means an expansion or renovation of an existing property or the financing and/or acquisition of a newly constructed build-to-suit property. For newly constructed build-to-suit properties, we may (1) provide a developer with either a combination of financing for construction of a build-to-suit property or a commitment to acquire a property upon completion of construction of a build-to-suit property and commencement of rent from the tenant, or (2) acquire a property subject to a lease and engage a developer to complete construction of a build-to-suit property as required by the lease.lease, or (3) partner with a developer to acquire an undeveloped parcel of land and pursue build-to-suit opportunities.
Our plan to grow through the acquisition and development of new properties could be adversely affected by trends in the real estate and financing businesses. The consummation of any future acquisitions will be subject to satisfactory completion of an extensive valuation analysis and due diligence review and to the negotiation of definitive documentation. Our ability to implement our strategy may be impeded because we may have difficulty finding new properties and investments at attractive prices that meet our investment criteria, negotiating with new or existing tenants or securing acceptable financing. If we are unable to carry out our strategy, our financial condition and results of operations could be adversely affected. Acquisitions of additional properties entail the risk that investments will fail to perform in accordance with expectations, including operating and leasing expectations.
Some of our acquisitions and developments may be financed using the proceeds of periodic equity or debt offerings, lines of credit or other forms of secured or unsecured financing that may result in a risk that permanent financing for newly acquired projects might not be available or would be available only on disadvantageous terms. If permanent debt or equity financing is not available on acceptable terms to refinance acquisitions undertaken without permanent financing, further acquisitions may be curtailed, or cash available to satisfy our debt service obligations and distributions to shareholders may be adversely affected.
Our acquisition and disposition activity may lead to dilution.
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From time to time, we announce potential lease, financing, disposition or investment commitments or transactions, which may not be consummated on the terms we announce or at all.
We publicly communicate potential lease, financing, disposition and investment commitments or transactions in our public documents filed with or furnished to the SEC and press releases and on conference calls with analysts and investors. We can give no assurances that any of these commitments or transactions will be consummated to our expectations or at all.
Acquisition activities may not produce expected results and may be affected by outside factors.
Acquisitions of commercial properties entail certain risks, such as (1) underwriting assumptions, including occupancy, rental rates and expenses, may differ from estimates, (2) the properties may become subject to environmental liabilities that we were unaware of at the time we acquired the property despite any environmental testing, (3) we may have difficulty obtaining financing on acceptable terms or paying the operating expenses and debt service associated with acquired properties prior to sufficient occupancy and (4) projected exit strategies may not come to fruition due to a variety of factors such as market conditions and/or tenant credit conditions at the time of dispositions.
We may not be successful in identifying suitable real estate properties or other assets that meet our acquisition criteria. We may also fail to complete acquisitions or investments on satisfactory terms. Failure to identify or complete acquisitions could slow our growth, which could, in turn, have a material adverse effect on our financial condition and results of operations.
We face certain risks associated with our build-to-suit activities.
From time to time, we engage in, or provide capital to developers who are engaged in, build-to-suit activities. We face uncertainties associated with a developer's performance and timely completion of a project, including the performance or timely completion by contractors and subcontractors. A developer's performance may be affected or delayed by their own actions or conditions beyond the developer's control. If a developer, contractor or subcontractor fails to perform, we may resort to legal action to compel performance, remove the developer or rescind the purchase or construction contract. Legal action may cause further delays and our costs may not be reimbursed.
We may incur additional risks when we make periodic progress payments or other advances to developers before completion of construction. These and other factors can result in increased costs of a project or loss of our investment. We also rely on third-party construction managers and/or engineers to monitor the construction activities.
Upon completion of construction, we are generally responsible to the tenant for any warranty claims. While we generally have a warranty from the developer or general contractor that was responsible for construction backstopping our warranty obligations to the tenant, we are subject to the risk of enforcement of such developer or general contractor warranty.
We rely on rental income and expense projections and estimates of the fair market value of a property upon completion of construction when agreeing upon a purchase price at the time we acquire the property, which may be up to two years prior to the estimated date of completion.property. If our projections are inaccurate or markets change, we may pay more than the fair value of a property.
In addition, the rental rates for a new build-to-suit project are generally derived from the cost to construct the project and may not equal a fair market lease rate for older existing properties in the same market.
Our multi-tenant properties expose us to additional risks.
Our multi-tenant properties involve risks not typically encountered in real estate properties which are operated by or for a single tenant. The ownership of multi-tenant properties could expose us to the risk that a sufficient number of suitable tenants may not be found to enable the property to operate profitably and provide a return to us. This risk may be compounded by the failure of existing tenants to satisfy their obligations due to various factors. These risks, in turn, could cause a material adverse impact to our results of operations and business.
Multi-tenant properties are also subject to tenant turnover and fluctuation in occupancy rates, which could affect our operating results. Furthermore, multi-tenant properties expose us to the risk of potential "CAM slippage," which may occur when the actual cost of taxes, insurance and maintenance at the property exceeds the operating expenses paid by tenants and/or the amounts budgeted.
We face possible liability relating to environmental matters.
Under various federal, state and local environmental laws, statutes, ordinances, rules and regulations, as an owner of real property, our property owner subsidiaries may be liable for the costs of removal or remediation of certain hazardous or toxic substances at, on, in or under the properties in which we have an interest as well as certain other potential costs relating to hazardous or toxic substances. These liabilities may include government fines and penalties and damages for injuries to persons and adjacent property. These laws may impose liability without regard to whether we knew of, or were responsible for, the presence or disposal of those substances. This liability may be imposed on our property owner subsidiaries in connection with the activities of an operator of, or tenant at, the property. The cost of any required remediation, removal, fines or personal or property damages, and our liability therefore, could be significant and could exceed the value of the property and/or our aggregate assets. In addition, the presence of those substances, or the failure to properly dispose of or remove those substances, may adversely affect a property owner subsidiary's ability to sell or rent that property or to borrow using that property as collateral, which, in turn, would reduce our revenues and ability to satisfy our debt service obligations and to make distributions.
A property can also be adversely affected either through physical contamination or by virtue of an adverse effect upon value attributable to the migration of hazardous or toxic substances, or other contaminants that have or may have emanated from other properties. Although the tenants of the properties in which we have an interest are primarily responsible for any environmental damages and claims related to the leased premises, in the event of the bankruptcy or inability of any of the tenants of the properties in which we have an interest to satisfy any obligations with respect to the property leased to that tenant, our property owner subsidiary may be required to satisfy such obligations. In addition, we may be held directly liable for any such damages or claims irrespective of the provisions of any lease.
From time to time, in connection with the conduct of our business, our property owner subsidiaries authorize the preparation of Phase I environmental reports and, when recommended, Phase II environmental reports, with respect to their properties. There can be no assurance that these environmental reports will reveal all environmental conditions at the properties in which we have an interest or that the following will not expose us to material liability in the future:
•the discovery of previously unknown environmental conditions;
•changes in law;
•activities of tenants; or
•activities relating to properties in the vicinity of the properties in which we have an interest.
Changes in laws increasing the potential liability for environmental conditions existing on properties or increasing the restrictions on discharges or other conditions may result in significant unanticipated expenditures or may otherwise adversely affect the operations of the tenants of the properties in which we have an interest, which could adversely affect our financial condition or results of operations.
From time to time we are involved in legal proceedings arising in the ordinary course of our business.
Legal proceedings arising in the ordinary course of our business require time and effort. The outcomes of legal proceedings are subject to significant uncertainty. In the event that we are unsuccessful defending or prosecuting these proceedings, as applicable, we may incur a judgment or fail to realize an award of damages that could have an adverse effect on our financial condition.
Uninsured losses or a loss in excess of insured limits could adversely affect our financial condition.
We carry comprehensive liability, fire, extended coverage and rent loss insurance on certain of the properties in which we have an interest, with policy specifications and insured limits that we believe are customary for similar properties. However, with respect to those properties where the leases do not provide for abatement of rent under any circumstances, we generally do not maintain rent loss insurance. In addition, certain of our leases require the tenant to maintain all insurance on the property, and the failure of the tenant to maintain the proper insurance could adversely impact our investment in a property in the event of a loss. Furthermore, there are certain types of losses, such as losses resulting from wars, terrorism or certain acts of God, that generally are not insured because they are either uninsurable or not economically insurable. Should an uninsured loss or a loss in excess of insured limits occur, we could lose capital invested in a property as well as the anticipated future revenues from a property, while remaining obligated for any mortgage indebtedness or other financial obligations related to the property. Any loss of these types could adversely affect our financial condition and results of operations.
Future terrorist attacks, military conflicts and unrest in various parts of the Middle Eastworld could have a material adverse effect on general economic conditions, consumer confidence and market liquidity.
The types of terroristTerrorist attacks, since 2001, ongoing and future military conflicts and the continued unrest in various parts of the Middle East and other regionsworld may affect commodity prices and interest rates, among other things. An increase in interest rates may increase our costs of borrowing, leading to a reduction in our earnings. Instability in the price of oil will also cause fluctuations in our operating costs, which may not be reimbursed by our tenants. Also, terrorist acts could result in significant damages to, or loss of, our properties or the value thereof.
We and the tenants of the properties in which we have an interest may be unable to obtain adequate insurance coverage on acceptable economic terms for losses resulting from acts of terrorism. Our lenders may require that we carry terrorism insurance even if we do not believe this insurance is necessary or cost effective. We may also be prohibited under the applicable lease from passing all or a portion of the cost of such insurance through to the tenant. Should an act of terrorism result in an uninsured loss or a loss in excess of insured limits, we could lose capital invested in a property as well as the anticipated future revenues from a property, while remainingour property owner subsidiary remains obligated for any mortgage indebtedness or other financial obligations related to the property. Any loss of these types could adversely affect our financial condition.
Cybersecurity risks and cyber incidents may adversely affect our business by causing a disruption to our operations, a compromise or corruption of our confidential information, misappropriation of assets and/or damage to our business relationships, all of which could negatively impact our financial results.
A cyber incident is considered to be any adverse event that threatens the confidentiality, integrity or availability of our information resources. These incidents may be an intentional attack or an unintentional event and could involve gaining unauthorized access to our information systems for purposes of misappropriating assets, stealing confidential information, corrupting data or causing operational disruption. The result of these incidents may include disrupted operations, misstated or unreliable financial data, liability for stolen assets or information, increased cybersecurity protection and insurance costs, litigation and damage to our tenant, and investor and/or vendor relationships. As our reliance on technology has increased, so have the risks posed to our information systems, both internal and those we have outsourced. Any processes, procedures and internal controls that we implement, as well as our increased awareness of the nature and extent of a risk of a cyber incident, do not guarantee that our financial results, operations, business relationships or confidential information will not be negatively impacted by such an incident.
Networks and information technology throughout the world and in companies of all sizes are threatened by cybersecurity risks on a regular basis. We must continuously monitor and develop our networks and information technology to prevent, detect, address and mitigate the risk of unauthorized access, misuse, computer viruses and other events that could have a security impact. Insider or employee cyber and security threats are increasingly a concern for all companies, including ours. In addition, social engineering and phishing are a particular concern for companies with employees. We are continuously working to install new, and to upgrade our existing, network and information technology systems and to provide employee awareness training around phishing, malware and other cyber risks to ensure that we are protected, to the greatest extent possible, against cyber risks and security breaches. However, such upgrades, new technology and training may not be sufficient to protect us from all risks.
As a smaller company, we use third-party vendors to assist us with our network and information technology requirements. While we carefully select these third-party vendors, we cannot control their actions. Any problems caused by these third parties, including those resulting from breakdowns or other disruptions in communication services provided by a vendor, failure of a vendor to handle current or higher volumes, cyber attacks and security breaches at a vendor could adversely affect our operations.
Competition may adversely affect our ability to purchase properties.
There are numerous commercial developers, real estate companies, such as other REITs, financial institutions, such as banks and insurance companies, and other investors, such as pension funds, private companies and individuals, with greater financial and other resources than we have that compete with us in seeking investments and tenants. Due to our focus on single-tenant properties located throughout the United States, and because mostsome competitors are often locally and/or regionally focused, we do not always encounter the same competitors in each market. Our competitors include other REITs, financial institutions, insurance companies, pension funds, private companies and individuals. This competition may result in a higher cost for properties and lower returns and impact our ability to grow.
Our failure to maintain effective internal control over financial reporting could have a material adverse effect on our business, operating results and share price.
Section 404 of the Sarbanes-Oxley Act of 2002 requires annual management assessments of the effectiveness of our internal control over financial reporting. Our management previously identified and disclosed a material weakness in the effectiveness of our internal control over financial reporting as of December 31, 2016. We have determined that our remediation plan eliminated this weakness, but we cannot assure you that our controls will prevent this or other weaknesses from arising in the future. If we fail to maintain the adequacy of our internal control over financial reporting in the future, as such standards may be modified, supplemented or amended from time to time, we will be required to disclose such failure, and our financial reporting may not be relied on by most investors. Moreover, effective internal control particularly related to revenue recognition, is necessary for us to produce reliable financial reports and to maintain our qualification as a REIT and is important in helping prevent financial fraud. If we cannot provide reliable financial reports or prevent fraud, our business and operating results could be harmed, our REIT qualification could be jeopardized, investors could lose confidence in our reported financial information, and the trading price of our debt and equity securities could drop significantly.
We may have limited control over our joint venture investments.
Our joint venture investments involve risks not otherwise present for investments made solely by us, including the possibility that our partner might, at any time, become bankrupt, have different interests or goals than we do, or take action contrary to our expectations, its previous instructions or our instructions, requests, policies or objectives, including our policy with respect to maintaining our qualification as a REIT. Other risks of joint venture investments include impasses on decisions, such as a sale, because neither we nor our partner has full control over the joint venture. Also, there is no limitation under our organizational documents as to the amount of funds that may be invested in joint ventures.
Our ability to change our portfolio is limited because real estate investments are illiquid.
Investments in real estate are relatively illiquid and, therefore, our ability to change our portfolio promptly in response to changed conditions is limited. Our Board of Trustees may establish investment criteria or limitations as it deems appropriate, but currently does not limit the number or type of properties in which we may seek to invest or on the concentration of investments in any one geographic region.
Our reported financial results may be adversely affected by changes in accounting principles applicable to us and the tenants of properties in which we have an interest.
GAAP is subject to interpretation by various bodies formed to promulgate and interpret appropriate accounting principles such as the Financial Accounting Standards Board. A change in these principles or interpretations could have a significant effect on our reported financial results, could affect the reporting of transactions completed before the announcement of a change and could affect the business practices and decisions of the tenants of properties in which we have an interest.
We have engaged and may engage in hedging transactions that may limit gains or result in losses.
We have used derivatives to hedge certain of our liabilities and we currently have interest rate swap agreements in place.variable-rate liabilities. As of December 31, 2015,2018, we havehad aggregate interest rate swap agreements on $505.0$255.0 million of borrowings. The counterparties of these arrangements are major financial institutions; however, we are exposed to credit risk in the event of non-performance or default by the counterparties. This has certainFurther, additional risks, including losses on a hedge position, which may reduce the return on our investments. Such losses may exceed the amount invested in such instruments. In addition, counterparties to a hedging arrangement could default on their obligations. We may also have to pay certain costs, such as transaction fees or breakage costs, related to hedging transactions.
Our Board of Trustees may change our investment policy without shareholders' approval.
Subject to our fundamental investment policy to maintain our qualification as a REIT and invest in core assets, our Board of Trustees will determine our investment and financing policies, growth strategy and our debt, capitalization, distribution, acquisition, disposition and operating policies.
Our Board of Trustees may revise or amend these strategies and policies at any time without a vote by shareholders. Changes made by our Board of Trustees may not serve the interests of debt or equity security holders and could adversely affect our financial condition or results of operations, including our ability to satisfy our debt service obligations, distribute cash to shareholders and qualify as a REIT. Accordingly, shareholders' control over changes in our strategies and policies is limited to the election of trustees.
We are dependent upon our key personnel.
We are dependent upon key personnel whose continued service is not guaranteed. We are dependent on certain of our executive officers for business direction. We haveThe employment agreements which expire in January 2018, with each of T. Wilson Eglin, our Chief Executive Officer and President, E. Robert Roskind, our Chairman, Richard J. Rouse, our Vice Chairman and Chief Investment Officer, and Patrick Carroll, our Executive Vice President, Chief Financial Officer and Treasurer. However,Treasurer, expired in January 2018.
As part of our succession planning, we entered into a retirement agreement with Mr. Roskind which provided for his retirement as an employment agreement does not itself prevent anexecutive officer and employee from resigning.on January 15, 2019. Messrs. Eglin and Carroll will continue in their current positions with us subject to certain severance payout rights upon certain termination events.
Our inability to retain the services of any of our key personnel, or ouran unplanned loss of any of their services or our inability to replace them upon termination as needed, could adversely impact our operations. We do not have key man life insurance coverage on our executive officers.
There may be conflicts of interest between E. Robert Roskind and us.
E. Robert Roskind, our Chairman, beneficially owns a significant number of OP units, and as a result, may face different and more adverse tax consequences than our other shareholders will if we sell our interests in certain properties or reduce mortgage indebtedness on certain properties. Our Chairman may, therefore, have different objectives than us and our debt and equity security holders regarding the appropriate pricing and timing of any sale of such properties or reduction of mortgage debt. In addition, an affiliate of Mr. Roskind arranges real estate asset financings using funds raised from immigrant investors in accordance with the fifth preference employment-based immigration program administered by the U.S. Citizenship and Immigration Services. We are exploring two financings withDuring 2017, we obtained a mezzanine loan from Mr. Roskind's affiliate onand during 2018, one of our non-consolidated joint ventures obtained a non-binding basis.mezzanine loan from Mr. Roskind's affiliate. In the event of an appearance of a conflict of interest and in accordance with our policy regarding related party transactions, Mr. Roskind is required to recuse himself from any decision making or seek a waiver of our Code of Business Conduct and Ethics, which will be reviewed by the non-conflicted members of our Board of Trustees or the Audit Committee of the Board of Trustees.
In addition, Mr. Roskind's employment agreement with us permits Mr. Roskind to spend approximately one third of his business time on the affairs of The LCP Group L.P. and its affiliates. While Mr. Roskind is required to prioritize his business time to address our needs ahead of The LCP Group L.P., Mr. Roskind and The LCP Group L.P. may engage in a wide variety of activities in the real estate business which may result in conflicts of interest with respect to matters affecting us.
Costs of complying with changes in governmental laws and regulations may adversely affect our results of operations.
We cannot predict what laws or regulations may be enacted, repealed or modified in the future, how future laws or regulations will be administered or interpreted, or how future laws or regulations will affect our properties. Compliance with new or modified laws or regulations, or stricter interpretation of existing laws, may require us or our tenants to incur significant expenditures, impose significant liability, restrict or prohibit business activities and could cause a material adverse effect on our results of operations.
We disclose Funds From Operations available to common shareholders and unitholders (“FFO”) and, Adjusted Company Funds from Operations available to all equityholders and unitholders (“Adjusted Company FFO”), which areNet Operating Income (“NOI”) and other non-GAAP financial measures in documents filed and/or furnished with the SEC; however, neither FFO, norAdjusted Company FFO, isNOI nor the other non-GAAP financial measures we disclose are equivalent to our net income or loss as determined under GAAP or other applicable comparable GAAP measures, and you should consider GAAP measures to be more relevant to our operating performance.
We use and disclose to investors FFO, andAdjusted Company FFO, which areNOI and other non-GAAP financial measures. See “Management's DiscussionFFO, Adjusted Company FFO, NOI and Analysis of Financial Condition and Results of Operations - Funds from Operations” in Part II, Item 7 of this Annual Report. FFO and Company FFOthe other non-GAAP financial measures are not equivalent to our net income or loss as determined in accordance with GAAP, and investors should consider GAAP measures to be more relevant to evaluating our operating performance. FFO, andAdjusted Company FFO and NOI, and GAAP net income (loss) differ because FFO, andAdjusted Company FFO and NOI exclude many items that are factored into GAAP net income.income or loss.
Because of the differences between FFO, andAdjusted Company FFO, NOI and GAAP net income or loss, FFO, andAdjusted Company FFO and NOI may not be accurate indicators of our operating performance, especially during periods in which we are acquiring and selling properties. In addition, FFO, andAdjusted Company FFO and NOI are not necessarily indicative of cash flow available to fund cash needs and investors should not consider FFO, andAdjusted Company FFO or NOI as alternatives to cash flows from operations, as an indication of our liquidity or as indicative of funds available to fund our cash needs, including our ability to make distributions to our shareholders.
Neither the SEC nor any other regulatory body has passed judgment on the acceptability of the adjustments that we use to calculate FFO, Adjusted Company FFO and Company FFO.NOI. Also, because not all companies calculate FFO, andAdjusted Company FFO and NOI the same way, comparisons with other companies measures with similar titles may not be meaningful.
Risks Related to Our Indebtedness
Our substantial indebtedness could adversely affect our financial condition and our ability to fulfill our obligations under the documents governing our unsecured indebtedness and otherwise adversely impact our business and growth prospects.
We have a substantial amount of debt. We are more leveraged than certain of our competitors. We have incurred, and may continue to incur, direct and indirect indebtedness in furtherance of our activities. Neither our declaration of trust nor any policy statement formerly adopted by our Board of Trustees limits the total amount of indebtedness that we may incur, and accordingly, we could become even more highly leveraged. As of December 31, 2015,2018, our total consolidated indebtedness was approximately $2.2$1.5 billion and we had approximately $223.0$505.0 million available for borrowing under our principal credit agreement, subject to covenant compliance.
Our substantial indebtedness could adversely affect our financial condition and results of operations and have important consequences to us and our debt and equity security holders. For example, it could:
make it more difficult for us to satisfy our indebtedness and debt service obligations and adversely affect our ability to pay distributions;
increase our vulnerability to adverse economic and industry conditions;
require us to dedicate a substantial portion of our cash flow from operations to the payment of interest on and principal of our indebtedness, thereby reducing the availability of cash to fund working capital, capital expenditures and other general corporate purposes;
limit our ability to borrow money or sell stock to fund our development projects, working capital, capital expenditures, general corporate purposes or acquisitions;
restrict us from making strategic acquisitions or exploiting business opportunities;
place us at a disadvantage compared to competitors that have less debt; and
limit our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate.
In addition, the agreements that govern our current indebtedness contain, and the agreements that may govern any future indebtedness that we may incur may contain, financial and other restrictive covenants, that willwhich may limit our ability to engage in activities that may be in our long-term best interests. Our failure to comply with those covenants could result in an event of default that, if not cured or waived, could result in the acceleration of our debt.
Market interest rates could have an adverse effect on our borrowing costs, profitability and the value of our fixed ratefixed-rate debt securities.
We have exposure to market risks relating to increases in interest rates due to our variable-rate debt. An increase in interest rates may increase our costs of borrowing on existing variable-rate indebtedness, leading to a reduction in our earnings. As of December 31, 2015, we had $177.0 million of outstanding consolidated variable-rate indebtedness that was not subject to an interest rate swap. In addition,2018, we have a $250.0 million unsecured term loan which matures August 2020 and a $255.0$300.0 million unsecured term loan which matures January 2021 that areis LIBOR indexed. The unsecured term loans are subject to interest rate swap agreements through February 2018 and January 2019, respectively.In addition, we have $129.1 million of debt that matures in April 2037 which is LIBOR indexed. The level of our variable-rate indebtedness, along with the interest rate associated with such variable-rate indebtedness, may change in the future and materially affect our interest costs and earnings. In addition, our interest costs on our fixed-rate indebtedness may increase if we are required to refinance our fixed-rate indebtedness upon maturity at higher interest rates. Also, fixed rate debt securities generally decline in value as market rates rise because the premium, if any, over market interest rates will decline.
The LIBOR index rate may not be available in the future.
In July 2017, the Financial Conduct Authority (the authority that regulates LIBOR) announced it intends to stop compelling banks to submit rates for the calculation of LIBOR after 2021. The Alternative Reference Rates Committee (“ARRC”) has proposed that the Secured Overnight Financing Rate (“SOFR”) is the rate that represents best practice as the alternative to USD-LIBOR for use in derivatives and other financial contracts that are currently indexed to USD-LIBOR. ARRC has proposed a paced market transition plan to SOFR from USD-LIBOR and organizations are currently working on industry wide and company specific transition plans as it relates to derivatives and cash markets exposed to USD-LIBOR. We have material contracts that are indexed to USD-LIBOR and we are monitoring this activity and evaluating the related risks.
Potential disruptions in the financial markets could affect our ability to obtain debt financing on reasonable terms and have other adverse effects on us.
Historically, theThe United States credit markets have periodically experienced significant dislocations and liquidity disruptions which have caused the spreads on prospective debt financings to widen considerably. These circumstances may materially impactedimpact liquidity in the debt markets, making financing terms for borrowers less attractive, and in certain cases may result in the unavailability of certain types of debt financing. Continued uncertaintyUncertainty in the credit markets may negatively impact our ability to access additional debt financing on reasonable terms, which may negatively affect our ability to make acquisitions. A prolonged downturn in the credit markets may cause us to seek alternative sources of potentially less attractive financing and may require us to adjust our business plan accordingly. In addition, these factors may make it more difficult for us to sell properties or may adversely affect the price we receive for properties that we do sell, as prospective buyers may experience increased costs of capital or difficulties in obtaining capital. These events in the credit markets may have an adverse effect on other financial markets in the United States, which may make it more difficult or costly for us to raise capital through the issuance of our common shares or preferred shares. These disruptions in the financial markets may have other adverse effects on us, our tenants or the economy in general.
Covenants in certain of the agreements governing our debt could adversely affect our financial condition, and our investment activities and/or operating activities.
Our unsecured revolving credit facility, unsecured term loansloan and indentures governing our 4.40% and 4.25% Senior Notes and 6.00% Convertible Notes contain certain cross-default and cross-acceleration provisions as well as customary restrictions, requirements and other limitations on our ability to incur indebtedness and consummate mergers, consolidations or sales of all or substantially all of our assets. Our ability to borrow under our unsecured revolving credit facility is also subject to compliance with certain other covenants. In addition, failure to comply with our covenants could cause a default under the applicable debt instrument and we may then be required to repay such debt with capital from other sources. Under those circumstances other sources of capital may not be available to us or be available only on unattractive terms. Additionally, our ability to satisfy current or prospective lenders' insurance requirements may be adversely affected if lenders generally insist upon greater insurance coverage against acts of terrorism than is available to us in the marketplace or on commercially reasonable terms.
We rely on debt financing, including borrowings under our unsecured revolving credit facility, unsecured term loan, debt securities, and debt secured by individual properties, for working capital, including to finance our investment activities. If we are unable to obtain financing from these or other sources, or to refinance existing indebtedness upon maturity, our financial condition and results of operations could be adversely affected.
A downgrade in our credit ratings could materially adversely affecthave a material adverse effect on our business and financial condition.
The credit ratings assigned to us and our debt could change based upon, among other things, our results of operations and financial condition or the real estate industry generally. These ratings are subject to ongoing evaluation by credit rating agencies, and we cannot assure you that any rating will not be changed or withdrawn by a rating agency in the future if, in itsthe applicable rating agency's judgment, circumstances warrant. Moreover, these credit ratings do not apply to our common and preferred shares and are not recommendations to buy, sell or hold any other securities. Any downgrade of us or our debt could materially adversely affecthave a material adverse effect on the market price of our debt securities and our common and preferred shares. If any of the credit rating agenciesagency that havehas rated us or our debt downgrades or lowers its credit rating, or if any credit rating agency indicates that it has placed any such rating on a so-called “watch list” for a possible downgrading or lowering or otherwise indicates that its outlook for that rating is negative, it could also have a material adverse effect on our costs and availability of capital, which could in turn have a material adverse effect on our financial condition, results of operations, cash flows and our ability to satisfy our debt service obligations and to make dividends and distributions on our common shares and preferred shares.
We face risks associated with refinancings.
A significant number of the properties in which we have an interest are subject to mortgage or other secured notes with balloon payments due at maturity. In addition, our corporate level borrowings require interest only payments with all principal due at maturity.
As of December 31, 2015,2018, the consolidated scheduled balloon payments for the next five calendar years are as follows ($ in millions):
| | | Year | | Property-Specific Balloon Payments(1) | | Corporate Recourse Balloon Payments | | | Property-Specific Balloon Payments | | Corporate Recourse Balloon Payments |
| 2016 | | $ | 113.4 |
| | $ | — |
| | |
| 2017 | | $ | 68.7 |
| | $ | 12.4 |
| (2) | |
| 2018 | | $ | 18.2 |
| | $ | — |
| | |
| 2019 | | $ | 83.8 |
| | $ | 177.0 |
| | | $ | 76.1 |
| | $ | — |
|
| 2020 | | $ | 32.0 |
| | $ | 250.0 |
| | | $ | 32.0 |
| | $ | — |
|
| 2021 | | | $ | 17.0 |
| | $ | 300.0 |
|
| 2022 | | | $ | — |
| | $ | — |
|
| 2023 | | | $ | — |
| | $ | 250.0 |
|
(1) All payment obligations are non-recourse except a $15.0 million payment obligation in 2016.
(2) Assumes 6.00% Convertible Notes due in January 2030 are putOur ability to us in 2017.
make the scheduled balloon payments on any corporate recourse note will depend on our access to the capital markets, including our ability to refinance the maturing note. Our ability to make the scheduled balloon payment on any non-recourse mortgage note will depend upon (1) in the event we determine to contribute capital, our cash balances and the amount available under our unsecured credit facility, and (2) the property owner subsidiary's ability either to refinance the related mortgage debt or to sell the related property. If the property owner subsidiary is unable to refinance or sell the related property, the property may be conveyed to the lender through foreclosure or other means or the property owner subsidiary may declare bankruptcy.
We face risks associated with returning properties to lenders.
A significant number of the properties in which we have an interest are subject to non-recourse mortgages, which generally provide that a lender's only recourse upon an event of default is to foreclose on the property. In the event these properties are conveyed via foreclosure to the lenders thereof, we would lose all of our interest in these properties and any future opportunities to re-tenant these properties. The loss of a significant number of properties to foreclosure or through bankruptcy of a property owner subsidiary could adversely affect our financial condition and results of operations, relationships with lenders and ability to obtain additional financing in the future.
In addition, a lender may attempt to trigger a carve out to the non-recourse nature of a mortgage loan. To the extent a lender is successful, the ability of our property owner subsidiary to return the property to the lender may be inhibited andand/or we may be liable for all or a portion of such loan.
Certain of our properties are cross-collateralized, and certain of our indebtedness is subject to cross-default and cross-acceleration provisions.
As of December 31, 2015, the mortgages on certain of our properties were cross-collateralized. To the extent that any of the properties in which we have an interest are cross-collateralized, any default by the property owner subsidiary under the mortgage note relating to one property will result in a default under the financing arrangements relating to any other property that also provides security for that mortgage note or is cross-collateralized with such mortgage note.
In addition, substantiallySubstantially all of our corporate level borrowings and, in the future, certain of our secured indebtedness may, contain cross-default and/or cross-acceleration provisions, which may be triggered if we default on certain indebtedness in excess of certain thresholds. In the event of such a default, the resulting cross defaults and/or cross-accelerations may adversely impact our financial condition.
Risks Related to Our Outstanding Debt Securities
The effective subordination of our unsecured indebtedness and any related guaranty may reduce amounts available for payment on our unsecured indebtedness and any related guaranty.
The holders of our secured debt may foreclose on the assets securing such debt, reducing the cash flow from the foreclosed property available for payment of unsecured debt and any related guaranty. The holders of any of our secured debt also would have priority over unsecured creditors in the event of a bankruptcy, liquidation or similar proceeding.
Not allNone of our subsidiaries are guarantors of our unsecured debt,debt; therefore assets of non-guarantorour subsidiaries may not be available to make payments on our unsecured indebtedness and any related guarantees may be released in the future if certain events occur.indebtedness.
As of December 31, 2015, only2018, we and/or LCIF are borrowers or a guarantorwere the sole borrower of our unsecured indebtedness and none of our subsidiaries were guarantors of our unsecured indebtedness. In the event of a bankruptcy, liquidation or reorganization of any of our non-guarantor subsidiaries, holders of non-guarantor subsidiary debt, including trade creditors, will generally be entitled to payment of their claims from the assets of non-guarantorour subsidiaries before any assets are made available for distribution to us or any of the subsidiary guarantors.us.
In addition, any subsidiary guarantor, including LCIF, will be deemed released if such subsidiary guarantor’s obligations as a borrower or guarantor under our principal credit agreement terminates pursuant to the terms of our principal credit agreement or if our principal credit agreement is amended to remove certain or all of the subsidiary guarantors as borrowers or guarantors. To the extent any of our unsecured indebtedness is no longer guaranteed by any of our subsidiaries in the future, such debt will be our obligations exclusively. All of our assets are held through our operating partnership and our other subsidiaries. Consequently, our cash flow and our ability to meet our debt service obligations depends in large part upon the cash flow of our subsidiaries and the payment of funds by our subsidiaries to us in the form of distributions or otherwise.
Federal and state statutes allow courts, under specific circumstances, to void guarantees and require holders of certain of our unsecured indebtedness to return payments received from us or any related guarantor.
Under the federal bankruptcy law and comparable provisions of state fraudulent transfer laws, a guarantee could be voided, or claims in respect of a guarantee could be subordinated to all other debts of that guarantor if, among other things, the guarantor, at the time it incurred the debt evidenced by its guarantee:
issued the guarantee to delay, hinder or defraud present or future creditors; or
received less than reasonably equivalent value or fair consideration for the incurrence of such guarantee, and:
was insolvent or rendered insolvent by reason of such incurrence;
was engaged or about to engage in a business or transaction for which the guarantor’s remaining unencumbered assets constituted unreasonably small capital to carry on its business; or
intended to incur, or believed that it would incur, debts beyond its ability to pay the debts as they mature.
In addition, any payment by that guarantor pursuant to its guarantee could be voided and required to be returned to the guarantor, or to a fund for the benefit of the creditors of the guarantor.
The measures of insolvency for purposes of these fraudulent transfer laws will vary depending upon the law applied in any proceeding to determine whether a fraudulent transfer has occurred. Generally, however, a guarantor would be considered insolvent if, at the time it incurred the debt:
the sum of its debts, including contingent liabilities, was greater than the fair saleable value of all of its assets;
the present fair saleable value of its assets was less than the amount that would be required to pay its probable liability on its existing debts, including contingent liabilities, as they become absolute and mature; or
it could not pay its debts as they become due.
We cannot be sure as to the standards that a court would use to determine whether or not any guarantor was solvent at the relevant time, or, regardless of the standard that the court uses, that the issuance of such guaranty would not be voided or any such guaranty would not be subordinated to that of such guarantor’s other debt. If a case were to occur, any such guaranty could also be subject to the claim that, since the guaranty was incurred for our benefit, and only indirectly for the benefit of such guarantor, the obligations of such guarantor were incurred for less than fair consideration. A court could thus void the obligations under the guarantees or subordinate the guarantees to such guarantor’s other debt or take other action detrimental to holders of our unsecured indebtedness.
Risks Related to OurLexington's REIT Status
There can be no assurance that weLexington will remain qualified as a REIT for federal income tax purposes.
We believe that we haveLexington has met the requirements for qualification as a REIT for federal income tax purposes beginning with ourits taxable year ended December 31, 1993, and we intend for Lexington to continue to meet these requirements in the future. However, qualification as a REIT involves the application of highly technical and complex provisions of the Code, for which there are only limited judicial or administrative interpretations. The Code provisions and income tax regulations applicable to REITs are more complex than those applicable to corporations. The determination of various factual matters and circumstances not entirely within our control may affect ourLexington's ability to continue to qualify as a REIT. No assurance can be given that we haveLexington has qualified or will remain qualified as a REIT. In addition, no assurance can be given that legislation, regulations, administrative interpretations or court decisions will not significantly change the requirements for qualification as a REIT or the federal income tax consequences of such qualification. If we doLexington does not qualify as a REIT, weLexington would not be allowed a deduction for distributions to shareholders in computing ourits net taxable income. In addition, ourLexington's income would be subject to tax at the regular corporate rates. WeLexington also could be disqualified from treatment as a REIT for the four taxable years following the year during which qualification was lost. Cash available to satisfy ourLexington's debt service obligations and distributions to ourits shareholders would be significantly reduced or suspended for each year in which we doLexington does not qualify as a REIT. In that event, weLexington would not be required to continue to make distributions. Although we currently intend for Lexington to continue to qualify as a REIT, it is possible that future economic, market, legal, tax or other considerations may cause us,Lexington, without the consent of the shareholders, to revoke the REIT election or to otherwise take action that would result in disqualification.
We may be subject to the REIT prohibited transactions tax, which could result in significant U.S. federal income tax liability to us.
A REIT will incur a 100% tax on the net income from a prohibited transaction. Generally, a prohibited transaction includes a sale or disposition of property held primarily for sale to customers in the ordinary course of a trade or business. While we believe that the dispositions of our assets pursuant to our investment strategy should not be treated as prohibited transactions, whether a particular sale will be treated as a prohibited transaction depends on the underlying facts and circumstances. We have not sought and do not intend to seek a ruling from the Internal Revenue Service regarding any dispositions. Accordingly, there can be no assurance that our dispositions of such assets will not be subject to the prohibited transactions tax. If all or a significant portion of those dispositions were treated as prohibited transactions, we would incur a significant U.S. federal income tax liability, which could have a material adverse effect on our financial position, results of operations and cash flows.
Distribution requirements imposed by law limit our flexibility.
To maintain ourLexington's status as a REIT for federal income tax purposes, we areLexington is generally required to distribute to ourits shareholders at least 90% of ourits taxable income for that calendar year. OurLexington's taxable income is determined without regard to any deduction for dividends paid and by excluding net capital gains. To the extent that we satisfyLexington satisfies the distribution requirement but distributedistributes less than 100% of ourits taxable income, weLexington will be subject to federal corporate income tax on ourits undistributed income. In addition, weLexington will incur a 4% nondeductible excise tax on the amount, if any, by which ourits distributions in any year are less than the sum of (i) 85% of ourits ordinary income for that year, (ii) 95% of ourits capital gain net income for that year and (iii) 100% of ourits undistributed taxable income from prior years. We intend for Lexington to continue to make distributions to ourits shareholders to comply with the distribution requirements of the Code and to reduce exposure to federal income and nondeductible excise taxes. Differences in timing between the receipt of income and the payment of expenses in determining ourits taxable income and the effect of required debt amortization payments could require usLexington to borrow funds on a short-term basis in order to meet the distribution requirements that are necessary to achieve the tax benefits associated with qualifying as a REIT.
Legislative or regulatory tax changes could have an adverse effect on us.
At any time, the federal income tax laws governing REITs or the administrative interpretations of those laws may be amended. Any of those new laws or interpretations may take effect retroactively and could adversely affect us or you as a debt and/or equity security holder. REIT dividends generally are not eligible for the reduced rates currently applicable to certain corporate dividends (unless attributable to dividends from taxable REIT subsidiaries and otherwise eligible for such rates). As a result, investment in non-REIT corporations may be relatively more attractive than investment in REITs. This could adversely affect the market price of our shares.
SeveralTax legislation signed into law on December 22, 2017, makes numerous changes to the tax rules that do not affect the REIT qualification rules directly, but may otherwise affect us or our shareholders. For example, the top federal income tax rate for individuals was reduced to 37%, there is a new deduction available for certain Qualified Business Income that reduces the top effective tax rate applicable to ordinary dividends from REITs to 29.6% (through a 20% deduction for ordinary REIT dividends received) and various deductions are eliminated or limited. Most of the changes applicable to individuals are temporary. There are only minor changes to the REIT rules were recently amended under(other than the Protecting Americans from Tax Hikes Act of 2015,20% deduction applicable to individuals for ordinary REIT dividends received). To date, the PATH Act, which was enactedInternal Revenue Service has issued only limited guidance on December 18, 2015. These rules were enacted with varying effective dates. Shareholders should consult with their tax advisors regarding the effect ofchanges made by the PATH Act in their particular circumstances.new legislation. It is unclear at this time whether Congress will address these issues or when the Internal Revenue Service will issue additional administrative guidance on the changes made by the 2017 legislation.
Risks Related to Our Shares
We may change the dividend policy for our common shares in the future.
The decision to declare and pay dividends on our common shares in the future, as well as the timing, amount and composition of any such future dividends, will be at the sole discretion of our Board of Trustees in light of conditions then existing, including our earnings, financial condition, capital requirements, debt maturities, the availability of debt and equity capital, applicable REIT and legal restrictions and the general overall economic conditions and other factors. The actual dividend payable will be determined by our Board of Trustees based upon the circumstances at the time of declaration and the actual dividend payable may vary from such expected amount. In 2018, we announced that we expect a change in our dividend policy for our common shares to reduce the quarterly dividend amount as a result of our strategy of investing primarily in industrial assets. Any change in our dividend policy could have a material adverse effect on the market price of our common shares.
We may in the future choose to pay dividends in shares, in which case you may be required to pay income taxes in excess of the cash dividends you receive.
We may in the future distribute taxable dividends that are payable in shares. Taxable shareholders receiving such dividends will be required to include the full amount of the dividend as ordinary income to the extent of our current and accumulated earnings and profits for United States federal income tax purposes. As a result, a U.S. shareholder may be required to pay income taxes with respect to such dividends even though no cash dividends were received. If a U.S. shareholder sells the shares it receives as a dividend in order to pay this tax, the sales proceeds may be less than the amount included in income with respect to the dividend, depending on the market price of the shares at the time of the sale. Furthermore, with respect to non-U.S. shareholders, we may be required to withhold U.S. tax with respect to such dividends. In addition, if a significant number of our shareholders determine to sell such shares received in a dividend in order to pay taxes owed on such dividend, it may put downward pressure on the trading price of our common shares.
Securities eligible for future sale may have adverse effects on our share price.
We have an unallocated universal shelf registration statement and we also maintain a direct share purchase plan, pursuant to which we may issue additional common shares. In addition, asThere is no restriction on our issuing additional common or preferred shares, including any securities that are convertible into or exchangeable for, or that represent the right to receive, common or preferred shares or any substantially similar securities. As of December 31, 2015,2018, an aggregate of approximately 5.23.7 million of our common shares were issuable upon the exercise of employee share options and upon the exchange of OP units. There were also approximately 1.9 million common shares underlying our 6.00% Convertible Notes as of December 31, 2015, which is subject to increase upon certain events, including if we pay a quarterly common share dividend in excess of $0.10 per common share. Depending upon the number of such securities issued, exercised or exchanged at one time, an issuance, exercise or exchange of such securities could be dilutive to or otherwise adversely affect the interests of holders or the market price of our common shares.
There are certain limitations on a third party's ability to acquire us or effectuate a change in our control.
Limitations imposed to protect our REIT status. In order to protect against the loss of our REIT status, among other purposes, our declaration of trust limits any shareholder from owning more than 9.8% in value of our outstanding equity shares, defined as common shares or preferred shares, subject to certain exceptions. These ownership limits may have the effect of precluding acquisition of control of us. Our Board of Trustees has granted a limited waiver of the ownership limits to BlackRock, Inc. with respect to BlackRock, Inc.'s mutual funds.
Severance payments under employment agreementsour executive severance policy. Substantial termination payments may be required to be paid under the provisions of employmentour executive severance policy applicable to and related agreements with certain of our executives upon a change of control and the subsequent termination of thean executive. We have entered into employment agreements with four of our executive officers which provide that, upon the occurrence of a change in control of us (including a change in ownership of more than 50% of the total combined voting power of our outstanding securities, the sale of all or substantially all of our assets, dissolution, the acquisition, except from us, of 20% or more of our voting shares or a change in the majority of our Board of Trustees), ifIf those executive officers are terminated without cause, as defined, or resign for good reason, as defined, those executive officers may be entitled to severance benefits based on their current annual base salaries and trailing average of recent annual cash bonuses as defined in the employmentour executive severance policy and related agreements and the acceleration of certain non-vested equity awards. Accordingly, these payments may discourage a third party from acquiring us.
Our ability to issue additional shares. Our declaration of trust authorizes 1,000,000,000 shares of beneficial interest (par value $0.0001 per share) consisting of 400,000,000 common shares, 100,000,000 preferred shares and 500,000,000 shares of beneficial interest classified as excess stock, or excess shares. Our Board of Trustees is authorized to cause us to issue these shares without shareholder approval. Our Board of Trustees may establish the preferences and rights of any such class or series of additional shares, which could have the effect of delaying or preventing someone from taking control of us, even if a change in control were in shareholders' best interests. At December 31, 2015,2018, in addition to common shares, we had outstanding 1,935,400 Series C Preferred Shares. Our Series C Preferred Shares include provisions, such as increases in dividend rates or adjustments to conversion rates, that may deter a change of control. The establishment and issuance of shares of our existing series of preferred shares or a future class or series of shares could make a change of control of us more difficult.
Maryland Business Combination Act. The Maryland General Corporation Law, as applicable to Maryland REITs, establishes special restrictions against “business combinations” between a Maryland REIT and “interested shareholders” or their affiliates unless an exemption is applicable. An interested shareholder includes a person who beneficially owns, and an affiliate or associate of the trust who, at any time within the two-year period prior to the date in question was the beneficial owner of, 10% or more of the voting power of our then-outstanding voting shares, but a person is not an interested shareholder if the Board of Trustees approved in advance the transaction by which hesuch person otherwise would have become an interested shareholder, which approval may be conditioned by the Board of Trustees. Among other things, Maryland law prohibits (for a period of five years) a merger and certain other transactions between a Maryland REIT and an interested shareholder, or an affiliate of an interested shareholder. The five-year period runs from the most recent date on which the interested shareholder became an interested shareholder. Thereafter, any such business combination must be recommended by the Board of Trustees and approved by two super-majority shareholder votes unless, among other conditions, the common shareholders receive a minimum price (as defined in the Maryland General Corporation Law) for their shares and the consideration is received in cash or in the same form as previously paid by the interested shareholder for its shares. The statute permits various exemptions from its provisions, including business combinations that are exempted by the Board of Trustees prior to the time that the interested shareholder becomes an interested shareholder. The business combination statute could have the effect of discouraging offers to acquire us and of increasing the difficulty of consummating any such offers, even if such acquisition would be in shareholders' best interests. In connection with the Newkirk Merger, Vornado Realty Trust, which we refer to as Vornado, was granted a limited exemption from the definition of “interested shareholder.”
Maryland Control Share Acquisition Act. Maryland law provides that a holder of “control shares” of a Maryland REIT acquired in a “control share acquisition” has no voting rights with respect to such shares except to the extent approved by a vote of two-thirds of the votes entitled to be cast on the matter under the Maryland Control Share Acquisition Act. Shares owned by the acquirer, by our officers or by employees who are our trustees are excluded from shares entitled to vote on the matter. “Control Shares” are voting shares that, if aggregated with all other shares previously acquired by the acquirer or in respect of which the acquirer is able to exercise or direct the exercise of voting power (except solely by virtue of a revocable proxy), would entitle the acquirer to exercise voting power in electing trustees within one of the following ranges of voting power: one-tenth or more but less than one-third, one-third or more but less than a majority or a majority or more of all voting power. Control shares do not include shares the acquiring person is then entitled to vote as a result of having previously obtained shareholder approval. A “control share acquisition” means the acquisition of issued and outstanding control shares, subject to certain exceptions. If voting rights of control shares acquired in a control share acquisition are not approved at a shareholders meeting or if the acquiring person does not deliver an acquiring person statement as required under the statute, then, subject to certain conditions and limitations, the issuer may redeem any or all of the control shares for fair value, except those for which voting rights have been previously approved. If voting rights of such control shares are approved at a shareholders meeting and the acquirer becomes entitled to vote a majority of the shares entitled to vote, all other shareholders may exercise appraisal rights. Any control shares acquired in a control share acquisition which are not exempt under our by-laws will be subject to the Maryland Control Share Acquisition Act. The Maryland Control Share Acquisition Act does not apply to shares acquired in a merger, consolidation or statutory share exchange if the Maryland REIT is a party to the transaction, or to acquisitions approved or exempted by the declaration of trust or by-laws of the Maryland REIT. Our amended and restated by-laws contain a provision exempting from the Maryland Control Share Acquisition Act any and all acquisitions by any person of our shares. We cannot assure you that this provision will not be amended or eliminated at any time in the future.
Limits on ownership of our capital shares may have the effect of delaying, deferring or preventing someone from taking control of us.
For us to qualify as a REIT for federal income tax purposes, among other requirements, not more than 50% of the value of our outstanding capital shares may be owned, directly or indirectly, by five or fewer individuals (as defined for federal income tax purposes to include certain entities) during the last half of each taxable year, and these capital shares must be beneficially owned by 100 or more persons during at least 335 days of a taxable year of 12 months or during a proportionate part of a shorter taxable year (in each case, other than the first such year for which a REIT election is made). Our declaration of trust includes certain restrictions regarding transfers of our capital shares and ownership limits.
Actual or constructive ownership of our capital shares in violation of the restrictions or in excess of the share ownership limits contained in our declaration of trust would cause the violative transfer or ownership to be void or cause the shares to be transferred to a charitable trust and then sold to a person or entity who can own the shares without violating these limits. As a result, if a violative transfer were made, the recipient of the shares would not acquire any economic or voting rights attributable to the transferred shares. Additionally, the constructive ownership rules for these limits are complex, and groups of related individuals or entities may be deemed a single owner and consequently in violation of the share ownership limits.
However, these restrictions and limits may not be adequate in all cases to prevent the transfer of our capital shares in violation of the ownership limitations. The ownership limits discussed above may have the effect of delaying, deferring or preventing someone from taking control of us, even though a change of control could involve a premium price for the common shares or otherwise be in shareholders' best interests.
The trading price of our common shares has been, and may continue to be, subject to significant fluctuations.
From January 1, 2011 through the date of this Annual Report, the closing sale price of our common shares on the NYSE (composite) has ranged from $13.64 to $5.96 per share. The market price of our common shares may fluctuate in response to company-specific and general market events and developments, including those described in this Annual Report. In addition, our leverage may impact investor demand for our common shares, which could have a material effect on the market price of our common shares.
Furthermore, the public valuation of our common shares is related primarily to the earnings that we derive from rental income with respect to the properties in which we have an interest and not from the underlying appraised value of the properties themselves. As a result, interest rate fluctuations and capital market conditions can affect the market value of our common shares. For instance, if interest rates rise, the market price of our common shares may decrease because potential investors seeking a higher yield than they would receive from our common shares may sell our common shares in favor of higher yielding securities.
Item 1B. Unresolved Staff Comments
There are no unresolved written comments that were received from the SEC staff relating to our periodic or current reports under the Securities Exchange Act of 1934.
Item 2. Properties
Real Estate Portfolio
General. As of December 31, 20152018, we had equity ownership interests in approximately 215135 consolidated real estate properties containing approximately 42.347.6 million square feet of rentable space, which were approximately 96.8%95.1% leased based upon net rentable square feet, excluding a property subject to a mortgage in default.feet. Generally, all properties in which we have an interest are held through at least one property owner subsidiary.
The properties in which we have an interest are generally subject to net or similar leases; however, in certain leases, the property owner subsidiaries are responsible for roof, structural and other repairs. In addition, certain of the properties in which we have an interest are subject to leases in which the landlord is responsible for a portion of the real estate taxes, utilities and general maintenance. Furthermore, the property owner subsidiaries are or will be responsible for all operating expenses of any vacant properties, and the property owner subsidiaries may be responsible for a significant amount of operating expenses of multi-tenant properties.
Ground Leases. Certain of the properties in which we have an interest are subject to long-term ground leases where either the tenant of the building on the property or a third party owns and leases the underlying land to the property owner subsidiary. Certain of these properties are economically owned through the holding of industrial revenue bonds primarily for real estate tax abatement purposes and as such, neither ground lease payments nor bond interest payments are made or received, respectively. For certain of the properties held under a ground lease, the ground lessee has a purchase option. At the end of these long-term ground leases, unless extended or the purchase option is exercised, the land together with all improvements thereon reverts to the landowner.
Leverage. As of December 31, 20152018, we had outstanding mortgages and notes payable of approximately $0.9 billion$575.5 million with a weighted-average interest rate of approximately 4.9%4.5% and a weighted-average maturity of 6.99.5 years.
Property Charts. The following tables list our properties by type, their locations, the primary tenant/guarantor, the net rentable square feet, the expiration of the primary lease term and percent leased, as applicable, as of December 31, 2015.2018.
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| | | | | | | | |
LEXINGTON CONSOLIDATED PORTFOLIO PROPERTY CHART OFFICE |
| As of December 31, 2015 |
| Property Location | City | State | Primary Tenant (Guarantor) | Net Rentable Square Feet | Current Lease Term Expiration | Percent Leased |
| 12209 W. Markham St. | Little Rock | AR | Entergy Arkansas, Inc. | 36,311 |
| 10/31/2020 | 100 | % |
| 5201 W. Barraque St. | Pine Bluff | AR | Entergy Services, Inc. | 27,189 |
| 10/31/2017 | 100 | % |
| 2211 South 47th St. | Phoenix | AZ | Avnet, Inc. | 176,402 |
| 2/28/2023 | 100 | % |
| 3030 North 3rd St. | Phoenix | AZ | CopperPoint Mutual Insurance Company | 252,400 |
| 12/31/2032 | 100 | % |
| 19019 North 59th Ave. | Glendale | AZ | Honeywell International Inc. | 252,300 |
| 7/15/2019 | 100 | % |
| 2005 E. Technology Cir. | Tempe | AZ | Infocrossing, Inc. | 60,000 |
| 12/31/2025 | 100 | % |
| 8555 South River Pkwy. | Tempe | AZ | DA Nanomaterials L.L.C. / Air Products and Chemicals, Inc. | 95,133 |
| 6/30/2022 | 100 | % |
| 1440 East 15th St. | Tucson | AZ | CoxCom, LLC | 28,591 |
| 7/31/2022 | 100 | % |
| 26210 and 26220 Enterprise Court | Lake Forest | CA | Apria Healthcare, Inc. (Apria Healthcare Group, Inc.) | 100,012 |
| 1/31/2022 | 100 | % |
| 2706 Media Center Dr. | Los Angeles | CA | Bank of America, National Association | 82,526 |
| 3/31/2025 | 100 | % |
| 3333 Coyote Hill Rd. | Palo Alto | CA | Xerox Corporation | 202,000 |
| 12/14/2023 | 100 | % |
| 9201 E. Dry Creek Rd. | Centennial | CO | Arrow Electronics, Inc. | 128,500 |
| 9/30/2017 | 100 | % |
| 9655 Maroon Cir. | Englewood | CO | TriZetto Corporation | 166,912 |
| 4/30/2028 | 100 | % |
| 3940 South Teller St. | Lakewood | CO | Addenbrooke Classical Academy | 68,165 |
| 7/31/2030 | 100 | % |
| 1315 West Century Dr. | Louisville | CO | Global Healthcare Exchange, Inc. (Global Healthcare Exchange, LLC) | 106,877 |
| 4/30/2027 | 100 | % |
| 143 Diamond Ave. | Parachute | CO | Encana Oil and Gas (USA) Inc. (Alenco Inc.) | 49,024 |
| 10/31/2032 | 100 | % |
| 100 Barnes Rd. | Wallingford | CT | 3M Company | 44,400 |
| 6/30/2018 | 100 | % |
| 5600 Broken Sound Blvd. | Boca Raton | FL | Canon Solutions America, Inc. (Océ -USA Holding, Inc.) | 143,290 |
| 2/14/2020 | 100 | % |
| 550 International Parkway | Lake Mary | FL | JPMorgan Chase Bank, National Association | 125,920 |
| 9/30/2020 | 100 | % |
| 600 Business Center Dr. | Lake Mary | FL | JPMorgan Chase Bank, National Association | 125,155 |
| 9/30/2020 | 100 | % |
| 9200 South Park Center Loop | Orlando | FL | Zenith Education Group, Inc. (ECMC Group, Inc.) | 59,927 |
| 9/30/2020 | 100 | % |
| 4400 Northcorp Pkwy. | Palm Beach Gardens | FL | The Weiss Group, LLC | 18,500 |
| 4/30/2022 | 100 | % |
| 2910 Busch Lake Blvd. | Tampa | FL | BluePearl Holdings, LLC | 2,500 |
| 12/31/2033 | 100 | % |
| 2950 Busch Lake Blvd. | Tampa | FL | BluePearl Holdings, LLC | 8,000 |
| 12/31/2033 | 100 | % |
| 3000 Busch Lake Blvd. | Tampa | FL | BluePearl Holdings, LLC | 17,000 |
| 12/31/2033 | 100 | % |
| 10419 North 30th St. | Tampa | FL | Time Customer Service, Inc. (Time Incorporated) | 132,981 |
| 6/30/2017 | 100 | % |
| 2500 Patrick Henry Pkwy. | McDonough | GA | Georgia Power Company | 111,911 |
| 6/30/2025 | 100 | % |
|
| | | | | | | | | |
| | LEXINGTON CONSOLIDATED PORTFOLIO PROPERTY CHART INDUSTRIAL |
| | As of December 31, 2018 |
| | Property Location | City | State | Primary Tenant (Guarantor) | Net Rentable Square Feet | Current Lease Term Expiration | Percent Leased |
| Single-tenant properties: |
| | 318 Pappy Dunn Blvd. | Anniston | AL | International Automotive Components Group North America, Inc. | 276,782 |
| 11/24/2029 | 100 | % |
| | 2415 U.S. Hwy 78 East | Moody | AL | Michelin North America, Inc. | 595,346 |
| 12/31/2019 | 100 | % |
| | 4801 North Park Dr. | Opelika | AL | Golden State Foods Corp. (Golden State Enterprises, Inc.) | 165,493 |
| 5/31/2042 | 100 | % |
| | 16811 W. Commerce Dr. | Goodyear | AZ | Blue Buffalo Company, LTD (Blue Buffalo Pet Products, Inc.) | 540,349 |
| 4/30/2026 | 100 | % |
| | 2455 Premier Row | Orlando | FL | Walgreen Co. / Walgreen Eastern Co. | 205,016 |
| 3/31/2021 | 100 | % |
| | 3102 Queen Palm Dr. | Tampa | FL | Time Mailing Services, LLC (Time Inc.) | 229,605 |
| 6/30/2020 | 100 | % |
| | 359 Gateway Dr. | Lavonia | GA | TI Group Automotive Systems, LLC (TI Automotive Ltd.) | 133,221 |
| 5/31/2020 | 100 | % |
| | 490 Westridge Pkwy. | McDonough | GA | Georgia-Pacific Consumer Products LP (Georgia-Pacific LLC) | 1,121,120 |
| 1/31/2028 | 100 | % |
| | 1420 Greenwood Rd. | McDonough | GA | United States Cold Storage, Inc. | 296,972 |
| 8/31/2028 | 100 | % |
| | 3301 Stagecoach Rd. NE | Thomson | GA | Hollander Sleep Products, LLC (Hollander Home Fashions Holdings) | 208,000 |
| 5/31/2030 | 100 | % |
| | 3931 Lakeview Corporate Dr. | Edwardsville | IL | AMAZON.COM.DEDC, LLC (Amazon.com, Inc.) | 769,500 |
| 9/30/2026 | 100 | % |
| | 4015 Lakeview Corporate Dr. | Edwardsville | IL | Spectrum Brands Pet Group, Inc. | 1,017,780 |
| 5/31/2030 | 100 | % |
| | 1001 Innovation Rd. | Rantoul | IL | Bell Sports, Inc. (Vista Outdoor Inc.) | 813,126 |
| 10/31/2034 | 100 | % |
| | 3686 S. Central Ave. | Rockford | IL | Pierce Packaging Co. | 93,000 |
| 12/31/2021 | 100 | % |
| | 749 Southrock Dr. | Rockford | IL | Jacobson Warehouse Company, Inc. (Jacobson Distribution Company and Jacobson Transportation Company, Inc.) | 150,000 |
| MTM | 100 | % |
| | 1020 W. Airport Rd. | Romeoville | IL | ARYZTA LLC (ARYZTA AG) | 188,166 |
| 10/31/2031 | 100 | % |
| | 1621 Veterans Memorial Pkwy E | Lafayette | IN | Caterpillar, Inc. | 309,400 |
| 9/30/2024 | 100 | % |
| | 1285 W. State Road 32 | Lebanon | IN | Continental Tire the Americas, LLC | 741,880 |
| 1/31/2024 | 100 | % |
| | 27200 West 157th St. | New Century | KS | Amazon.com.ksdc, LLC (Amazon.com, Inc.) | 446,500 |
| 1/31/2027 | 100 | % |
| | 10000 Business Blvd. | Dry Ridge | KY | Dana Light Axle Products, LLC (Dana Holding Corporation and Dana Limited) | 336,350 |
| 6/30/2025 | 100 | % |
| | 730 North Black Branch Rd. | Elizabethtown | KY | Metalsa Structural Products, Inc. / Dana Structural Products, LLC (Dana Holding Corporation and Dana Limited) | 167,770 |
| 6/30/2025 | 100 | % |
| | 750 North Black Branch Rd. | Elizabethtown | KY | Metalsa Structural Products, Inc. / Dana Structural Products, LLC (Dana Holding Corporation and Dana Limited) | 539,592 |
| 6/30/2025 | 100 | % |
| | 301 Bill Bryan Blvd. | Hopkinsville | KY | Metalsa Structural Products, Inc. / Dana Structural Products, LLC (Dana Holding Corporation and Dana Limited) | 424,904 |
| 6/30/2025 | 100 | % |
|
| | | | | | | | |
LEXINGTON CONSOLIDATED PORTFOLIO PROPERTY CHART OFFICE |
| As of December 31, 2015 |
| Property Location | City | State | Primary Tenant (Guarantor) | Net Rentable Square Feet | Current Lease Term Expiration | Percent Leased |
| 3500 N. Loop Rd. | McDonough | GA | Litton Loan Servicing LP | 62,218 |
| 8/31/2018 | 100 | % |
| 3265 E. Goldstone Dr. | Meridian | ID | VoiceStream PCS Holding, LLC / T-Mobile PCS Holdings, LLC (T-Mobile USA, Inc.) | 77,484 |
| 6/30/2019 | 100 | % |
| 850 & 950 Warrenville Rd. | Lisle | IL | National-Louis University | 99,414 |
| 12/31/2019 | 100 | % |
| 231 N. Martingale Rd. | Schaumburg | IL | CEC Educational Services, LLC (Career Education Corporation) | 317,198 |
| 12/31/2022 | 100 | % |
| 500 Jackson St. | Columbus | IN | Cummins, Inc. | 390,100 |
| 7/31/2019 | 100 | % |
| 10300 Kincaid Dr. | Fishers | IN | Roche Diagnostics Operations, Inc. | 193,000 |
| 1/31/2017 | 100 | % |
| 10475 Crosspoint Blvd. | Indianapolis | IN | John Wiley & Sons, Inc. | 141,416 |
| 10/31/2019 | 97 | % |
| 9601 Renner Blvd. | Lenexa | KS | VoiceStream PCS II Corporation (T-Mobile USA, Inc.) | 77,484 |
| 10/31/2019 | 100 | % |
| 11201 Renner Blvd. | Lenexa | KS | United States of America | 169,585 |
| 10/31/2027 | 100 | % |
| 5200 Metcalf Ave. | Overland Park | KS | Swiss Re America Holding Corporation / Westport Insurance Corporation | 320,198 |
| 12/22/2018 | 100 | % |
| 4455 American Way | Baton Rouge | LA | New Cingular Wireless PCS, LLC | 70,100 |
| 10/31/2017 | 100 | % |
| 147 Milk St. | Boston | MA | Atrius Health, Inc. | 52,337 |
| 12/31/2022 | 100 | % |
| 133 First Park Dr. | Oakland | ME | Omnipoint Holdings, Inc. (T-Mobile USA, Inc.) | 78,610 |
| 8/31/2020 | 100 | % |
| 2800 High Meadow Cir. | Auburn Hills | MI | Faurecia USA Holdings, Inc. | 278,000 |
| 3/31/2029 | 100 | % |
| 12000 & 12025 Tech Center Dr. | Livonia | MI | Kelsey-Hayes Company (TRW Automotive Inc.) | 180,230 |
| 12/31/2024 | 100 | % |
| 9201 Stateline Rd. | Kansas City | MO | Swiss Re America Holding Corporation / Westport Insurance Corporation | 155,925 |
| 4/1/2019 | 100 | % |
| 3902 Gene Field Rd. | St. Joseph | MO | Boehringer Ingelheim Vetmedica, Inc. (Boehringer Ingelheim USA Corporation) | 98,849 |
| 6/30/2027 | 100 | % |
| 3943 Denny Ave. | Pascagoula | MS | Huntington Ingalls Incorporated | 94,841 |
| 10/31/2018 | 100 | % |
| 11707 Miracle Hills Dr. | Omaha | NE | Infocrossing, Inc. | 85,200 |
| 11/30/2025 | 100 | % |
| 1331 Capitol Ave. | Omaha | NE | The Gavilon Group, LLC | 127,810 |
| 11/30/2033 | 100 | % |
| 333 Mount Hope Ave. | Rockaway | NJ | Atlantic Health System, Inc. | 92,326 |
| 12/31/2027 | 100 | % |
| 1415 Wyckoff Rd. | Wall | NJ | New Jersey Natural Gas Company | 157,511 |
| 6/30/2021 | 100 | % |
| 29 S. Jefferson Rd. | Whippany | NJ | CAE SimuFlite, Inc. (CAE Inc.) | 123,734 |
| 11/30/2021 | 100 | % |
| 6226 West Sahara Ave. | Las Vegas | NV | Nevada Power Company | 282,000 |
| 1/31/2029 | 100 | % |
| 5500 New Albany Rd. | Columbus | OH | Evans, Mechwart, Hambleton & Tilton, Inc. | 104,807 |
| 12/29/2026 | 100 | % |
| 2221 Schrock Rd. | Columbus | OH | MS Consultants, Inc. | 42,290 |
| 7/6/2027 | 100 | % |
|
| | | | | | | | | |
| | LEXINGTON CONSOLIDATED PORTFOLIO PROPERTY CHART INDUSTRIAL |
| | As of December 31, 2018 |
| | Property Location | City | State | Primary Tenant (Guarantor) | Net Rentable Square Feet | Current Lease Term Expiration | Percent Leased |
| | 4010 Airpark Dr. | Owensboro | KY | Metalsa Structural Products, Inc. / Dana Structural Products, LLC (Dana Holding Corporation and Dana Limited) | 211,598 |
| 6/30/2025 | 100 | % |
| | 1901 Ragu Dr. | Owensboro | KY | Unilever Supply Chain, Inc. (Unilever United States, Inc.) | 443,380 |
| 12/19/2020 | 100 | % |
| | 5001 Greenwood Rd. | Shreveport | LA | Libbey Glass Inc. (Libbey Inc.) | 646,000 |
| 10/31/2026 | 100 | % |
| | 5417 Campus Dr. | Shreveport | LA | The Tire Rack, Inc. | 257,849 |
| 3/31/2022 | 100 | % |
| | 113 Wells St. | North Berwick | ME | United Technologies Corporation | 993,685 |
| 4/30/2024 | 100 | % |
| | 2860 Clark St. | Detroit | MI | Undisclosed(1) | 189,960 |
| 10/22/2035 | 100 | % |
| | 6938 Elm Valley Dr. | Kalamazoo | MI | Dana Commercial Vehicle Products, LLC (Dana Holding Corporation and Dana Limited) | 150,945 |
| 10/25/2021 | 100 | % |
| | 904 Industrial Rd. | Marshall | MI | Tenneco Automotive Operating Company, Inc. (Tenneco, Inc.) | 246,508 |
| 9/30/2028 | 100 | % |
| | 43955 Plymouth Oaks Blvd. | Plymouth | MI | Tower Automotive Operations USA I, LLC / Tower Automotive Products Inc. (Tower Automotive, Inc.) | 311,612 |
| 10/31/2024 | 100 | % |
| | 16950 Pine Dr. | Romulus | MI | Undisclosed(1) | 500,023 |
| 8/24/2032 | 100 | % |
| | 26700 Bunert Rd. | Warren | MI | Lipari Foods Operating Company, LLC | 260,243 |
| 10/31/2032 | 100 | % |
| | 1700 47th Ave North | Minneapolis | MN | Owens Corning Roofing and Asphalt, LLC | 18,620 |
| 12/31/2025 | 100 | % |
| | 549 Wingo Rd. | Byhalia | MS | Asics America Corporation (Asics Corporation) | 855,878 |
| 3/31/2030 | 100 | % |
| | 1550 Hwy 302 | Byhalia | MS | McCormick & Company, Inc. | 615,600 |
| 9/30/2027 | 100 | % |
| | 554 Nissan Pkwy. | Canton | MS | Nissan North America, Inc. | 1,466,000 |
| 2/28/2027 | 100 | % |
| | 11624 S. Distribution Cv. | Olive Branch | MS | Hamilton Beach Brands, Inc. | 1,170,218 |
| 6/30/2021 | 100 | % |
| | 7670 Hacks Cross Rd. | Olive Branch | MS | MAHLE Aftermarket Inc. (MAHLE Industries, Incorporated) | 268,104 |
| 2/28/2023 | 100 | % |
| | 8500 Nail Rd. | Olive Branch | MS | Sephora USA, Inc. | 716,080 |
| 7/31/2029 | 100 | % |
| | 2880 Kenny Biggs Rd. | Lumberton | NC | Quickie Manufacturing Corporation | 423,280 |
| 11/30/2021 | 100 | % |
| | 671 Washburn Switch Rd. | Shelby | NC | Clearwater Paper Corporation | 673,425 |
| 5/31/2036 | 100 | % |
| | 2203 Sherrill Dr. | Statesville | NC | Geodis Logistics, LLC (OHH Acquisition Corporation) | 639,800 |
| 12/31/2020 | 100 | % |
| | 121 Technology Dr. | Durham | NH | Heidelberg Americas, Inc. (Heidelberg Druckmaschinen AG) (2021) / Goss International Americas, Inc. (Goss International Corporation) (2026) | 500,500 |
| 3/30/2026 | 100 | % |
|
| | | | | | | | |
LEXINGTON CONSOLIDATED PORTFOLIO PROPERTY CHART OFFICE |
| As of December 31, 2015 |
| Property Location | City | State | Primary Tenant (Guarantor) | Net Rentable Square Feet | Current Lease Term Expiration | Percent Leased |
| 2000 Eastman Dr. | Milford | OH | Siemens Corporation | 221,215 |
| 9/30/2016 | 100 | % |
| 500 Olde Worthington Rd. | Westerville | OH | InVentiv Communications, Inc. | 97,000 |
| 3/31/2026 | 100 | % |
| 1700 Millrace Dr. | Eugene | OR | Oregon Research Institute / Educational Policy Improvement Center | 80,011 |
| 11/30/2027 | 100 | % |
| 2999 Southwest 6th St. | Redmond | OR | VoiceStream PCS I, LLC / T-Mobile West Corporation (T-Mobile USA, Inc.) | 77,484 |
| 1/31/2019 | 100 | % |
| 2550 Interstate Dr. | Harrisburg | PA | AT&T Services, Inc. | 87,718 |
| 12/31/2018 | 100 | % |
| 25 Lakeview Dr. | Jessup | PA | TMG Health, Inc. | 150,000 |
| 8/7/2027 | 100 | % |
| 1701 Market St. | Philadelphia | PA | Morgan, Lewis & Bockius LLP | 304,037 |
| 1/31/2021 | 99 | % |
| 1460 Tobias Gadsen Blvd. | Charleston | SC | Hagemeyer North America, Inc. | 50,076 |
| 7/8/2016 | 100 | % |
| 1362 Celebration Blvd. | Florence | SC | MED3000, Inc. | 32,000 |
| 2/14/2024 | 100 | % |
| 3476 Stateview Blvd. | Fort Mill | SC | Wells Fargo Bank, N.A. | 169,083 |
| 5/31/2024 | 100 | % |
| 3480 Stateview Blvd. | Fort Mill | SC | Wells Fargo Bank, N.A. | 169,218 |
| 5/31/2024 | 100 | % |
| 333 Three D Systems Circle | Rock Hill | SC | 3D Systems Corporation | 80,028 |
| 8/31/2021 | 100 | % |
| 854 Paragon Way | Rock Hill | SC | Physicians Choice Laboratory Services, LLC | 104,497 |
| 3/31/2039 | 100 | % |
| 420 Riverport Rd. | Kingsport | TN | Kingsport Power Company | 42,770 |
| 6/30/2018 | 100 | % |
| 1409 Centerpoint Blvd. | Knoxville | TN | Alstom Power, Inc. | 84,404 |
| 10/31/2024 | 100 | % |
| 2401 Cherahala Blvd. | Knoxville | TN | AdvancePCS, Inc. / CaremarkPCS, L.L.C. | 59,748 |
| 5/31/2020 | 100 | % |
| 104 & 110 S. Front St. | Memphis | TN | Hnedak Bobo Group, Inc. | 37,229 |
| 10/31/2016 | 100 | % |
| 3965 Airways Blvd. | Memphis | TN | Federal Express Corporation | 521,286 |
| 6/19/2019 | 100 | % |
| 601 & 701 Experian Pkwy. | Allen | TX | Experian Information Solutions, Inc. / TRW, Inc. (Experian Holdings, Inc.) | 292,700 |
| 3/14/2025 | 100 | % |
| 1401 Nolan Ryan Expy. | Arlington | TX | Triumph Aerostructures, LLC (Triumph Group, Inc.) | 161,808 |
| 1/31/2025 | 77 | % |
| 4201 Marsh Ln. | Carrollton | TX | Carlson Restaurants Inc. (Carlson, Inc.) | 130,000 |
| 11/30/2022 | 100 | % |
| 4001 International Pkwy. | Carrollton | TX | Motel 6 Operating, LP | 138,443 |
| 12/31/2025 | 100 | % |
| 11511 Luna Rd. | Farmers Branch | TX | Haggar Clothing Co. (Texas Holding Clothing Corporation and Haggar Corp.) (2016) / International Business Machines Corporation (66,018 sf, 2021) | 180,507 |
| 4/30/2016 | 100 | % |
| 1200 Jupiter Rd. | Garland | TX | Raytheon Company | 278,759 |
| 5/31/2016 | 100 | % |
| 810 Gears Rd. | Houston | TX | United States of America | 78,895 |
| 9/30/2030 | 87 | % |
| 820 Gears Rd. | Houston | TX | Ricoh Americas Corporation | 78,895 |
| 1/31/2018 | 100 | % |
|
| | | | | | | | | |
| | LEXINGTON CONSOLIDATED PORTFOLIO PROPERTY CHART INDUSTRIAL |
| | As of December 31, 2018 |
| | Property Location | City | State | Primary Tenant (Guarantor) | Net Rentable Square Feet | Current Lease Term Expiration | Percent Leased |
| | 5625 North Sloan Ln. | North Las Vegas | NV | Nicholas and Co., Inc. | 180,235 |
| 9/30/2034 | 100 | % |
| | 736 Addison Rd. | Erwin | NY | Corning Property Management Corporation | 408,000 |
| 11/30/2026 | 100 | % |
| | 29-01 Borden Ave. / 29-10 Hunters Point Ave. | Long Island City | NY | FedEx Ground Package System, Inc. (FedEx Corporation) | 140,330 |
| 3/31/2028 | 100 | % |
| | 351 Chamber Dr. | Chillicothe | OH | The Kitchen Collection, Inc. | 475,218 |
| 6/30/2026 | 100 | % |
| | 10590 Hamilton Ave. | Cincinnati | OH | The Hillman Group, Inc. | 264,598 |
| 12/31/2027 | 100 | % |
| | 1650 - 1654 Williams Rd. | Columbus | OH | ODW Logistics, Inc. (Nessent Ltd. And Dist-Trans Co, LLC) | 772,450 |
| 6/30/2020 | 100 | % |
| | 7005 Cochran Rd. | Glenwillow | OH | Royal Appliance Mfg. Co. | 458,000 |
| 7/31/2025 | 100 | % |
| | 191 Arrowhead Dr. | Hebron | OH | Owens Corning Insulating Systems, LLC | 250,410 |
| 12/31/2019 | 100 | % |
| | 200 Arrowhead Dr. | Hebron | OH | Owens Corning Insulating Systems, LLC | 400,522 |
| 12/31/2019 | 100 | % |
| | 10345 Philipp Pkwy. | Streetsboro | OH | L'Oreal USA S/D, Inc. (L'Oreal USA, Inc.) | 649,250 |
| 10/17/2019 | 100 | % |
| | 27255 SW 95th Ave. | Wilsonville | OR | Pacific Foods of Oregon Inc. d/b/a Pacific Natural Foods | 508,277 |
| 10/31/2032 | 100 | % |
| | 250 Rittenhouse Cir. | Bristol | PA | Northtec LLC (The Estée Lauder Companies Inc.) | 241,977 |
| 11/30/2026 | 100 | % |
| | 100 Ryobi Dr. | Anderson | SC | One World Technologies, Inc. (Techtronic Industries Co. Ltd.) | 1,327,022 |
| 6/30/2036 | 100 | % |
| | 590 Ecology Ln. | Chester | SC | Boral Stone Products LLC (Boral Limited) | 420,597 |
| 7/14/2025 | 100 | % |
| | 101 Michelin Dr. | Laurens | SC | Michelin North America, Inc. | 1,164,000 |
| 1/31/2020 | 100 | % |
| | 5795 North Blackstock Rd. | Spartanburg | SC | Wal-Mart Stores East, L.P. (Wal-Mart, Inc.) | 341,660 |
| 7/31/2024 | 100 | % |
| | 1520 Lauderdale Memorial Hwy. | Cleveland | TN | General Electric Company | 851,370 |
| 3/31/2024 | 100 | % |
| | 900 Industrial Blvd. | Crossville | TN | Dana Commercial Vehicle Products, LLC | 222,200 |
| 9/30/2026 | 100 | % |
| | 120 Southeast Pkwy Dr. | Franklin | TN | Essex Group, Inc. (United Technologies Corporation) | 289,330 |
| 12/31/2023 | 100 | % |
| | 201 James Lawrence Rd. | Jackson | TN | Kellogg Sales Company (Kellogg Company) | 1,062,055 |
| 10/31/2027 | 100 | % |
| | 633 Garrett Pkwy. | Lewisburg | TN | Calsonic Kansei North America, Inc. | 310,000 |
| 3/31/2026 | 100 | % |
| | 3350 Miac Cove Rd. | Memphis | TN | Mimeo.com, Inc. | 140,079 |
| 9/30/2020 | 77 | % |
| | 3820 Micro Dr. | Millington | TN | Ingram Micro L.P. (Ingram Micro Inc.) | 701,819 |
| 9/30/2021 | 100 | % |
| | 200 Sam Griffin Rd. | Smyrna | TN | Nissan North America, Inc. | 1,505,000 |
| 4/30/2027 | 100 | % |
| | 1501 Nolan Ryan Expy. | Arlington | TX | Arrow Electronics, Inc. | 74,739 |
| 6/30/2027 | 100 | % |
| | 7007 F.M. 362 Rd. | Brookshire | TX | Orizon Industries, Inc. (Spitzer Industries, Inc.) | 262,095 |
| 3/31/2035 | 100 | % |
|
| | | | | | | | |
LEXINGTON CONSOLIDATED PORTFOLIO PROPERTY CHART OFFICE |
| As of December 31, 2015 |
| Property Location | City | State | Primary Tenant (Guarantor) | Net Rentable Square Feet | Current Lease Term Expiration | Percent Leased |
| 10001 Richmond Ave. | Houston | TX | Schlumberger Holdings Corp. | 554,385 |
| 9/30/2025 | 100 | % |
| 1311 Broadfield Blvd. | Houston | TX | Transocean Offshore Deepwater Drilling, Inc. (Transocean Sedco Forex, Inc.) | 155,040 |
| 1/31/2017 | 100 | % |
| 19311 SH 249 | Houston | TX | BluePearl Holdings, LLC | 12,622 |
| 12/31/2033 | 100 | % |
| 6555 Sierra Dr. | Irving | TX | TXU Energy Retail Company, LLC (Texas Competitive Electric Holdings Company, LLC) | 247,254 |
| 2/28/2025 | 100 | % |
| 8900 Freeport Pkwy. | Irving | TX | Nissan Motor Acceptance Corporation (Nissan North America, Inc.) | 268,445 |
| 3/31/2023 | 100 | % |
| 3711 San Gabriel | Mission | TX | VoiceStream PCS II Corporation / T-Mobile West Corporation | 75,016 |
| 6/30/2020 | 100 | % |
| 6200 Northwest Pkwy. | San Antonio | TX | United HealthCare Services, Inc. / PacifiCare Healthsystems, LLC | 142,500 |
| 11/30/2017 | 100 | % |
| 1600 Eberhardt Rd. | Temple | TX | Nextel of Texas, Inc. (Nextel Finance Company) | 108,800 |
| 1/31/2016 & 1/31/2021 | 100 | % |
| 2050 Roanoke Rd. | Westlake | TX | TD Auto Finance LLC (2016) / Charles Schwab & Co., Inc. (2021) | 130,199 |
| 9/30/2021 | 100 | % |
| 400 Butler Farm Rd. | Hampton | VA | Nextel Communications of the Mid-Atlantic, Inc. (Nextel Finance Company) | 100,632 |
| 12/31/2019 | 100 | % |
| 13651 McLearen Rd. | Herndon | VA | United States of America | 159,644 |
| 5/30/2018 | 100 | % |
| 13775 McLearen Rd. | Herndon | VA | Orange Business Services U.S., Inc. (Equant N.V.) | 132,677 |
| 7/31/2020 | 100 | % |
| 2800 Waterford Lake Dr. | Midlothian | VA | Alstom Power, Inc. | 99,057 |
| 12/31/2021 | 100 | % |
| 800 East Canal St. | Richmond | VA | McGuireWoods LLP | 330,309 |
| 8/31/2030 | 100 | % |
| 1400 Northeast McWilliams Rd. | Bremerton | WA | Nextel West Corporation (Nextel Finance Company) | 60,200 |
| 7/14/2016 | 100 | % |
| 500 Kinetic Dr. | Huntington | WV | AMZN WVCS LLC (Amazon.com, Inc.) | 68,693 |
| 11/30/2026 | 100 | % |
| | | | Office Total | 12,847,877 |
| | 99.6 | % |
|
| | | | | | | | | |
| | LEXINGTON CONSOLIDATED PORTFOLIO PROPERTY CHART INDUSTRIAL |
| | As of December 31, 2018 |
| | Property Location | City | State | Primary Tenant (Guarantor) | Net Rentable Square Feet | Current Lease Term Expiration | Percent Leased |
| | 2115 East Belt Line Rd. | Carrollton | TX | Teasdale Foods, Inc. | 356,855 |
| 12/31/2033 | 100 | % |
| | 4005 E I-30 | Grand Prairie | TX | O'Neal Metals (Texas) L.P. (O'Neal Industries, Inc.) | 215,000 |
| 3/31/2037 | 100 | % |
| | 13863 Industrial Rd. | Houston | TX | Curtis Kelly, Inc. (Spitzer Industries, Inc.) | 187,800 |
| 3/31/2035 | 100 | % |
| | 13901/14035 Industrial Rd. | Houston | TX | Watco Dock & Rail III, L.L.C. (Watco Companies, L.L.C.) | 132,449 |
| 3/31/2038 | 100 | % |
| | 13930 Pike Rd. | Missouri City | TX | Vulcan Construction Materials, LP (Vulcan Materials Company) | N/A |
| 4/30/2032 | 100 | % |
| | 10535 Red Bluff Rd. | Pasadena | TX | Unis, LLC | 257,835 |
| 8/31/2023 | 100 | % |
| | 16407 Applewhite Rd. | San Antonio | TX | International Heating, Air-Conditioning and Refrigeration Solutions Company | 849,275 |
| 4/30/2027 | 100 | % |
| | 2601 Bermuda Hundred Rd. | Chester | VA | Philip Morris USA Inc. | 1,034,470 |
| 6/30/2030 | 100 | % |
| | 80 Tyson Dr. | Winchester | VA | Undisclosed(1) | 400,400 |
| 12/18/2031 | 100 | % |
| | 291 Park Center Dr. | Winchester | VA | Kraft Heinz Foods Company | 344,700 |
| 5/31/2021 | 100 | % |
| | 901 East Bingen Point Way | Bingen | WA | The Boeing Company | 124,539 |
| 5/31/2024 | 100 | % |
| | 2800 Polar Way | Richland | WA | Preferred Freezer Services of Richland, LLC (Preferred Freezer Services, LLC & Preferred Freezer Services Operating, LLC) | 456,412 |
| 8/31/2035 | 100 | % |
| | 111 West Oakview Pkwy. | Oak Creek | WI | Stella & Chewy's LLC | 164,007 |
| 6/30/2035 | 100 | % |
| Multi-tenant/vacant properties: |
| | 2935 Van Vactor Dr. | Plymouth | IN | (Available for lease) | 300,500 |
| N/A | 0 | % |
| | 1133 Poplar Creek Rd. | Henderson | NC | (Available for lease) | 196,946 |
| N/A | 0 | % |
| | 50 Tyger River Dr. | Duncan | SC | (Available for lease) | 221,833 |
| N/A | 0 | % |
| | 6050 Dana Way | Antioch | TN | Multi-tenanted | 674,528 |
| Various | 97 | % |
| | 3456 Meyers Ave. | Memphis | TN | (Available for lease) | 780,000 |
| N/A | 0 | % |
| | | | | Industrial Total | 41,447,962 |
| | 96.3 | % |
(1) Tenant is a domestic subsidiary of an international automaker.
The 20152018 net effective annual base cash rent for the industrial portfolio as of December 31, 2018 was $4.41 per square foot and the weighted-average remaining lease term was 9.6 years.
|
| | | | | | | | | |
| | LEXINGTON CONSOLIDATED PORTFOLIO PROPERTY CHART OFFICE |
| | As of December 31, 2018 |
| | Property Location | City | State | Primary Tenant (Guarantor) | Net Rentable Square Feet | Current Lease Term Expiration | Percent Leased |
| Single-tenant properties: |
| | 19019 North 59th Ave. | Glendale | AZ | Honeywell International Inc. | 252,300 |
| 7/15/2024 | 100 | % |
| | 8555 South River Pkwy. | Tempe | AZ | Versum Materials US, LLC | 95,133 |
| 12/31/2033 | 100 | % |
| | 1440 East 15th St. | Tucson | AZ | CoxCom, LLC | 28,591 |
| 7/31/2022 | 100 | % |
| | 3333 Coyote Hill Rd. | Palo Alto | CA | Xerox Corporation | 202,000 |
| 12/14/2023 | 100 | % |
| | 5600 Broken Sound Blvd. | Boca Raton | FL | Canon Solutions America, Inc. (Océ -USA Holding, Inc.) | 143,290 |
| 2/14/2020 | 100 | % |
| | 9200 South Park Center Loop | Orlando | FL | CardWorks Servicing, LLC (CardWorks, Inc.) | 59,927 |
| 9/30/2029 | 100 | % |
| | 3500 N. Loop Rd. | McDonough | GA | Total Systems Services, Inc. | 62,218 |
| 8/31/2021 | 100 | % |
| | 3265 E. Goldstone Dr. | Meridian | ID | VoiceStream PCS Holding, LLC / T-Mobile PCS Holdings, LLC (T-Mobile USA, Inc.) | 77,484 |
| 6/30/2026 | 100 | % |
| | 500 Jackson St. | Columbus | IN | Cummins Inc. | 390,100 |
| 7/31/2024 | 100 | % |
| | 10475 Crosspoint Blvd. | Indianapolis | IN | John Wiley & Sons, Inc. | 141,047 |
| 10/31/2019 | 100 | % |
| | 9601 Renner Blvd. | Lenexa | KS | VoiceStream PCS II Corporation (T-Mobile USA, Inc.) | 77,484 |
| 10/31/2019 | 100 | % |
| | 11201 Renner Blvd. | Lenexa | KS | United States of America | 169,585 |
| 10/31/2027 | 100 | % |
| | 4455 American Way | Baton Rouge | LA | New Cingular Wireless PCS, LLC | 70,100 |
| 10/31/2022 | 100 | % |
| | 133 First Park Dr. | Oakland | ME | Omnipoint Holdings, Inc. (T-Mobile USA, Inc.) | 78,610 |
| 8/31/2020 | 100 | % |
| | 2800 High Meadow Cir. | Auburn Hills | MI | Faurecia USA Holdings, Inc. | 278,000 |
| 3/31/2029 | 100 | % |
| | 9201 Stateline Rd. | Kansas City | MO | Swiss Re America Holding Corporation / Westport Insurance Corporation / Swiss RE Management (US) Corporation | 155,925 |
| 4/1/2019 | 100 | % |
| | 3943 Denny Ave. | Pascagoula | MS | Huntington Ingalls Incorporated | 94,841 |
| 10/31/2023 | 100 | % |
| | 1415 Wyckoff Rd. | Wall | NJ | New Jersey Natural Gas Company | 157,511 |
| 6/30/2021 | 100 | % |
| | 29 S. Jefferson Rd. | Whippany | NJ | CAE SimuFlite, Inc. (CAE INC.) | 123,734 |
| 11/30/2021 | 100 | % |
| | 2999 Southwest 6th St. | Redmond | OR | VoiceStream PCS I, LLC / T-Mobile West Corporation (T-Mobile USA, Inc.) | 77,260 |
| 7/31/2029 | 100 | % |
| | 1701 Market St. | Philadelphia | PA | Morgan, Lewis & Bockius LLP | 304,037 |
| 1/31/2021 | 99 | % |
| | 1362 Celebration Blvd. | Florence | SC | MED3000, Inc. | 32,000 |
| 2/14/2024 | 100 | % |
| | 3476 Stateview Blvd. | Fort Mill | SC | Wells Fargo Bank, N.A. | 169,083 |
| 5/31/2024 | 100 | % |
| | 3480 Stateview Blvd. | Fort Mill | SC | Wells Fargo Bank, N.A. | 169,218 |
| 5/31/2024 | 100 | % |
| | 2401 Cherahala Blvd. | Knoxville | TN | AdvancePCS, Inc. / CaremarkPCS, L.L.C. | 59,748 |
| 5/31/2027 | 100 | % |
|
| | | | | | | | | |
| | LEXINGTON CONSOLIDATED PORTFOLIO PROPERTY CHART OFFICE |
| | As of December 31, 2018 |
| | Property Location | City | State | Primary Tenant (Guarantor) | Net Rentable Square Feet | Current Lease Term Expiration | Percent Leased |
| | 1401 Nolan Ryan Expy. | Arlington | TX | Triumph Aerostructures, LLC (Triumph Group, Inc.) | 161,808 |
| 1/31/2025 | 80 | % |
| | 820 Gears Rd. | Houston | TX | Ricoh, USA, Inc. | 78,895 |
| 1/31/2019 | 100 | % |
| | 270 Abner Jackson Pkwy. | Lake Jackson | TX | The Dow Chemical Company | 664,100 |
| 10/31/2036 | 100 | % |
| | 3711 San Gabriel | Mission | TX | VoiceStream PCS II Corporation / T-Mobile West Corporation | 75,016 |
| 6/30/2020 | 100 | % |
| | 2050 Roanoke Rd. | Westlake | TX | Charles Schwab & Co., Inc. | 130,199 |
| 6/30/2021 | 100 | % |
| | 13651 McLearen Rd. | Herndon | VA | United States of America | 159,644 |
| 5/30/2022 | 100 | % |
| | 2800 Waterford Lake Dr. | Midlothian | VA | Alstom Power, Inc. | 99,057 |
| 12/31/2019 | 100 | % |
| Multi-tenant/vacant properties: |
| | 13430 North Black Canyon Fwy | Phoenix | AZ | Multi-tenanted | 138,940 |
| Various | 85 | % |
| | 5200 Metcalf Ave. | Overland Park | KS | (Available for lease) | 320,198 |
| N/A | 0 | % |
| | 1460 Tobias Gadson Blvd. | Charleston | SC | Vallen Distribution, Inc. | 50,246 |
| 6/30/2019 | 64 | % |
| | 11511 Luna Rd. | Farmers Branch | TX | International Business Machines Corporation | 181,072 |
| 4/30/2021 | 92 | % |
| | 1311 Broadfield Blvd. | Houston | TX | Saipem America, Inc. (Saipem S.p.A.) | 155,407 |
| 3/31/2028 | 49 | % |
| | | | | Office Total | 5,683,808 |
| | 91.4 | % |
The 2018 net effective annual base cash rent for the office portfolio as of December 31, 20152018 was $14.57$15.18 per square foot and the weighted-average remaining lease term was 7.26.5 years.
|
| | | | | | | | |
LEXINGTON CONSOLIDATED PORTFOLIO PROPERTY CHART INDUSTRIAL |
| As of December 31, 2015 |
| Property Location | City | State | Primary Tenant (Guarantor) | Net Rentable Square Feet | Current Lease Term Expiration | Percent Leased |
| 2415 U.S. Hwy 78 East | Moody | AL | Michelin North America, Inc. | 595,346 |
| 12/31/2019 | 100 | % |
| 318 Pappy Dunn Blvd. | Anniston | AL | International Automotive Components Group North America, Inc. | 276,782 |
| 11/24/2029 | 100 | % |
| 2455 Premier Dr. | Orlando | FL | Walgreen Co. / Walgreen Eastern Co. | 205,016 |
| 3/31/2021 | 100 | % |
| 3102 Queen Palm Dr. | Tampa | FL | Time Customer Service, Inc. (Time Incorporated) | 229,605 |
| 6/30/2020 | 100 | % |
| 359 Gateway Dr. | Lavonia | GA | TI Group Automotive Systems, LLC (TI Automotive Ltd.) | 133,221 |
| 5/31/2020 | 100 | % |
| 1420 Greenwood Rd. | McDonough | GA | Americold Logistics, LLC (2016) / United States Cold Storage, Inc. (2028) | 296,972 |
| 8/31/2028 | 100 | % |
| 3301 Stagecoach Rd. NE | Thomson | GA | Hollander Sleep Products, LLC (Hollander Home Fashions Holdings) | 208,000 |
| 5/31/2030 | 100 | % |
| 3600 Army Post Rd. | Des Moines | IA | HP Enterprise Services, LLC | 405,000 |
| 4/30/2017 | 100 | % |
| 7500 Chavenelle Rd. | Dubuque | IA | The McGraw-Hill Companies, Inc. | 330,988 |
| 6/30/2017 | 100 | % |
| 2935 Van Vactor Dr. | Plymouth | IN | Bay Valley Foods, LLC | 300,500 |
| 12/31/2016 | 100 | % |
| 1001 Innovation Rd. | Rantoul | IL | Easton-Bell Sports, Inc. | 813,126 |
| 10/31/2033 | 100 | % |
| 3686 S. Central Ave. | Rockford | IL | Pierce Packaging Co. | 93,000 |
| 12/31/2016 | 100 | % |
| 749 Southrock Dr. | Rockford | IL | Jacobson Warehouse Company, Inc. (Jacobson Distribution Company, Inc. and Jacobson Transportation Company, Inc.) | 150,000 |
| 12/31/2018 | 100 | % |
| 10000 Business Blvd. | Dry Ridge | KY | Dana Light Axle Products, LLC (Dana Holding Corporation and Dana Limited) | 336,350 |
| 6/30/2025 | 100 | % |
| 730 North Black Branch Rd. | Elizabethtown | KY | Metalsa Structural Products, Inc. / Dana Structural Products, LLC (Dana Holding Corporation and Dana Limited) | 167,770 |
| 6/30/2025 | 100 | % |
| 750 North Black Branch Rd. | Elizabethtown | KY | Metalsa Structural Products, Inc. / Dana Structural Products, LLC (Dana Holding Corporation and Dana Limited) | 539,592 |
| 6/30/2025 | 100 | % |
| 301 Bill Bryan Rd. | Hopkinsville | KY | Metalsa Structural Products, Inc. / Dana Structural Products, LLC (Dana Holding Corporation and Dana Limited) | 424,904 |
| 6/30/2025 | 100 | % |
| 4010 Airpark Dr. | Owensboro | KY | Metalsa Structural Products, Inc. / Dana Structural Products, LLC (Dana Holding Corporation and Dana Limited) | 211,598 |
| 6/30/2025 | 100 | % |
| 1901 Ragu Dr. | Owensboro | KY | Unilever Supply Chain, Inc. (Unilever United States, Inc.) | 443,380 |
| 12/19/2020 | 100 | % |
| 5001 Greenwood Rd. | Shreveport | LA | Libbey Glass Inc. (Libbey Inc.) | 646,000 |
| 10/31/2026 | 100 | % |
| 5417 Campus Dr. | Shreveport | LA | The Tire Rack, Inc. | 257,849 |
| 3/31/2022 | 100 | % |
| 113 Wells St. | North Berwick | ME | United Technologies Corporation | 993,685 |
| 4/30/2024 | 100 | % |
| 6938 Elm Valley Dr. | Kalamazoo | MI | Dana Commercial Vehicle Products, LLC (Dana Holding Corporation and Dana Limited) | 150,945 |
| 10/25/2021 | 100 | % |
| 904 Industrial Rd. | Marshall | MI | Tenneco Automotive Operating Company, Inc. (Tenneco, Inc.) | 246,508 |
| 9/30/2018 | 100 | % |
|
| | | | | | | | |
LEXINGTON CONSOLIDATED PORTFOLIO PROPERTY CHART INDUSTRIAL |
| As of December 31, 2015 |
| Property Location | City | State | Primary Tenant (Guarantor) | Net Rentable Square Feet | Current Lease Term Expiration | Percent Leased |
| 1601 Pratt Ave. | Marshall | MI | Autocam Corporation | 58,707 |
| 12/31/2023 | 100 | % |
| 43955 Plymouth Oaks Blvd. | Plymouth | MI | Tower Automotive Operations USA I, LLC / Tower Automotive Products Inc. (Tower Automotive, Inc.) | 290,133 |
| 10/31/2017 | 100 | % |
| 7111 Crabb Rd. | Temperance | MI | Michelin North America, Inc. | 744,570 |
| 7/31/2016 | 100 | % |
| 1700 47th Ave North | Minneapolis | MN | Owens Corning Roofing and Asphalt, LLC | 18,620 |
| 12/31/2025 | 100 | % |
| 549 Wingo Rd. | Byhalia | MS | Asics America Corporation (Asics Corporation) | 855,878 |
| 3/31/2030 | 100 | % |
| 554 Nissan Pkwy. | Canton | MS | Nissan North America, Inc. | 1,466,000 |
| 2/28/2027 | 100 | % |
| 7670 Hacks Cross Rd. | Olive Branch | MS | MAHLE Aftermarket Inc. (MAHLE Industries, Incorporated) | 268,104 |
| 2/28/2023 | 100 | % |
| 324 Industrial Park Rd. | Franklin | NC | (Available for Lease) | 72,868 |
| N/A | 0 | % |
| 1133 Poplar Creek Rd. | Henderson | NC | Staples, Inc. | 196,946 |
| 6/30/2018 | 100 | % |
| 250 Swathmore Ave. | High Point | NC | Steelcase Inc. | 244,851 |
| 9/30/2017 | 100 | % |
| 2880 Kenny Biggs Rd. | Lumberton | NC | Quickie Manufacturing Corporation | 423,280 |
| 11/30/2021 | 100 | % |
| 671 Washburn Switch Rd. | Shelby | NC | Clearwater Paper Corporation | 673,518 |
| 5/31/2031 | 100 | % |
| 2203 Sherrill Dr. | Statesville | NC | Ozburn-Hessey Logistics, LLC (OHH Acquisition Corporation) | 639,800 |
| 12/31/2017 | 100 | % |
| 121 Technology Dr. | Durham | NH | Heidelberg Americas, Inc. (Heidelberg Drackmaschinen AG) (2021) / Goss International Americas, Inc. (Goss International Corporation) (2026) | 500,500 |
| 3/30/2026 | 100 | % |
| 5625 North Sloan Ln. | North Las Vegas | NV | Nicholas and Co., Inc. | 180,235 |
| 9/30/2034 | 100 | % |
| 29-01 Borden Ave. / 29-10 Hunters Point Ave. | Long Island City | NY | FedEx Ground Package System, Inc. (FedEx Corporation) | 140,330 |
| 3/31/2028 | 100 | % |
| 736 Addison Rd. | Erwin | NY | Corning Property Management Corporation | 408,000 |
| 11/30/2026 | 100 | % |
| 250 Rittenhouse Cir. | Bristol | PA | Northtec LLC (The Estée Lauder Companies Inc.) | 241,977 |
| 11/30/2026 | 100 | % |
| 351 Chamber Dr. | Chillicothe | OH | The Kitchen Collection, Inc. | 475,218 |
| 6/30/2026 | 100 | % |
| 10590 Hamilton Ave. | Cincinnati | OH | The Hillman Group, Inc. | 264,598 |
| 12/31/2027 | 100 | % |
| 1650 - 1654 Williams Rd. | Columbus | OH | ODW Logistics, Inc. | 772,450 |
| 6/30/2018 | 100 | % |
| 7005 Cochran Rd. | Glenwillow | OH | Royal Appliance Mfg. Co. | 458,000 |
| 7/31/2025 | 100 | % |
| 191 Arrowhead Dr. | Hebron | OH | Owens Corning Insulating Systems, LLC | 250,410 |
| 5/31/2017 | 100 | % |
| 200 Arrowhead Dr. | Hebron | OH | Owens Corning Insulating Systems, LLC | 400,522 |
| 5/31/2017 | 100 | % |
| 10345 Philipp Pkwy. | Streetsboro | OH | L'Oreal USA S/D, Inc. (L'Oreal USA, Inc.) | 649,250 |
| 10/17/2019 | 100 | % |
|
| | | | | | | | |
LEXINGTON CONSOLIDATED PORTFOLIO PROPERTY CHART INDUSTRIAL |
| As of December 31, 2015 |
| Property Location | City | State | Primary Tenant (Guarantor) | Net Rentable Square Feet | Current Lease Term Expiration | Percent Leased |
| 590 Ecology Ln. | Chester | SC | Boral Stone Products LLC (Boral Limited) | 420,597 |
| 7/14/2025 | 100 | % |
| 50 Tyger River Dr. | Duncan | SC | Plastic Omnium Auto Exteriors, LLC | 221,833 |
| 9/30/2018 | 100 | % |
| 101 Michelin Dr. | Laurens | SC | Michelin North America, Inc. | 1,164,000 |
| 1/31/2020 | 100 | % |
| 900 Industrial Blvd. | Crossville | TN | Dana Commercial Vehicle Products, LLC | 222,200 |
| 9/30/2026 | 100 | % |
| 633 Garrett Pkwy. | Lewisburg | TN | Calsonic Kansei North America, Inc. | 310,000 |
| 3/31/2026 | 100 | % |
| 477 Distribution Pkwy. | Collierville | TN | Federal Express Corporation / FedEx Techconnect, Inc. | 126,213 |
| 5/31/2021 | 100 | % |
| 120 Southeast Pkwy Dr. | Franklin | TN | Essex Group, Inc. (United Technologies Corporation) | 289,330 |
| 12/31/2018 | 100 | % |
| 3350 Miac Cove Rd. | Memphis | TN | Mimeo.com, Inc. | 140,079 |
| 9/30/2020 | 77 | % |
| 3456 Meyers Ave. | Memphis | TN | Sears, Roebuck and Co. / Sears Logistics Services | 780,000 |
| 2/28/2017 | 100 | % |
| 3820 Micro Dr. | Millington | TN | Ingram Micro L.P. (Ingram Micro Inc.) | 701,819 |
| 9/30/2021 | 100 | % |
| 7007 F.M. 362 | Brookshire | TX | Orizon Industries, Inc. (Spitzer Industries, Inc.) | 262,095 |
| 3/31/2035 | 100 | % |
| 13863 Industrial Rd. | Houston | TX | Curtis Kelly, Inc. (Spitzer Industries, Inc.) | 187,800 |
| 3/31/2035 | 100 | % |
| 2425 Hwy. 77 North | Waxahachie | TX | James Hardie Building Products, Inc. (James Hardie NV & James Hardie Industries NV) | 335,610 |
| 3/31/2020 | 100 | % |
| 291 Park Center Dr. | Winchester | VA | Kraft Foods Group, Inc. | 344,700 |
| 5/31/2016 | 100 | % |
| 901 East Bingen Point Way | Bingen | WA | The Boeing Company | 124,539 |
| 5/31/2024 | 100 | % |
| 2800 Polar Way | Richland | WA | Preferred Freezer Services of Richland LLC (Preferred Freezer Services, LLC & Preferred Freezer Services Operating, LLC) | 456,412 |
| 8/31/2035 | 100 | % |
| 2424 Alpine Rd. | Eau Claire | WI | Silver Spring Foods, Inc. (Huntsinger Farms, Inc.) | 159,000 |
| 4/30/2027 | 100 | % |
| 111 West Oakview Pkwy. | Oak Creek | WI | Stella & Chewy's, LLC | 164,007 |
| 6/30/2035 | 100 | % |
| | | | Industrial Total | 25,561,136 |
| | 99.6 | % |
|
| | | | | | | | | | |
| | LEXINGTON CONSOLIDATED PORTFOLIO PROPERTY CHART OTHER |
| | As of December 31, 2018 |
| | Property Location | City | State | Primary Tenant (Guarantor) | Property Type | Net Rentable Square Feet | Current Lease Term Expiration | Percent Leased |
| Single-tenant properties: | | | | | | | |
| | 499 Derbyshire Dr. | Venice | FL | Littlestone Brotherhood LLC (Ralph Little) | Specialty | 31,180 |
| 1/31/2055 | 100 | % |
| | 30 Light St. | Baltimore | MD | 30 Charm City, LLC | Specialty | N/A |
| 12/31/2048 | 100 | % |
| | 201-215 N. Charles St. | Baltimore | MD | 201 NC Leasehold LLC | Specialty | N/A |
| 8/31/2112 | 100 | % |
| | 10201 Schuster Way | Pataskala | OH | Kohl's Department Stores, Inc. (Kohl's Corporation) | Specialty | N/A |
| 12/31/2067 | 100 | % |
| | B.E.C. 45th St/Lee Blvd. | Lawton | OK | Associated Wholesale Grocers, Inc. / Safeway, Inc. | Retail | 30,757 |
| 3/31/2024 | 100 | % |
| | 1053 Mineral Springs Rd. | Paris | TN | The Kroger Co. | Retail | 31,170 |
| 7/1/2023 | 100 | % |
| | 175 Holt Garrison Pkwy. | Danville | VA | Home Depot USA, Inc. | Specialty | N/A |
| 1/31/2029 | 100 | % |
| Multi-tenant/vacant properties: | | | | | | |
| | 832 N. Westover Blvd. | Albany | GA | (Available for lease) | Retail | 45,554 |
| N/A | 0 | % |
| | King St./1042 Fort St. Mall | Honolulu | HI | Multi-tenanted | Retail/Office | 77,459 |
| Various | 46 | % |
| | 21082 Pioneer Plaza Dr. | Watertown | NY | (Available for lease) | Retail | 120,727 |
| N/A | 0 | % |
| | 97 Seneca Trail | Fairlea | WV | (Available for lease) | Retail | 90,933 |
| N/A | 0 | % |
| | | | | Other Total | | 427,780 |
| | 30.0 | % |
| | | | | Consolidated Portfolio Grand Total | | 47,559,550 |
| | 95.1 | % |
The 20152018 net effective annual base cash rent for the industrialother portfolio as of December 31, 20152018 was $4.60$2.49 per square foot, excluding Specialty investments, and the weighted-average remaining lease term was 9.5 years.
|
| | | | | | | | |
LEXINGTON CONSOLIDATED PORTFOLIO PROPERTY CHART LAND/INFRASTRUCTURE |
| As of December 31, 2015 |
| Property Location | City | State | Primary Tenant (Guarantor) | Net Rentable Square Feet | Current Lease Term Expiration | Percent Leased |
| 499 Derbyshire Dr. | Venice | FL | Littlestone Brotherhood LLC | 31,180 |
| 1/31/2055 | 100 | % |
| 30 Light St. | Baltimore | MD | 30 Charm City, LLC | N/A |
| 12/31/2048 | 100 | % |
| 201-215 N. Charles St. | Baltimore | MD | 201 NC Leasehold LLC | N/A |
| 8/31/2112 | 100 | % |
| 15 West 45th St. | New York | NY | ZE-45 Ground Tenant LLC | N/A |
| 10/31/2113 | 100 | % |
| 8-12 Stone St. | New York | NY | AL-Stone Ground Tenant LLC | N/A |
| 10/31/2112 | 100 | % |
| 350 and 370-272 Canal St. | New York | NY | FC-Canal Ground Tenant LLC | N/A |
| 10/31/2112 | 100 | % |
| 309-313 West 39th St. | New York | NY | SM Ascott LLC | N/A |
| 10/31/2112 | 100 | % |
| 13901/14035 Industrial Rd. | Houston | TX | Industrial Terminals Management, L.L.C. (Maritime Holdings (Delaware) LLC) | 132,449 |
| 3/31/2038 | 100 | % |
| 13930 Pike Rd. | Missouri City | TX | Vulcan Construction Materials, LP (Vulcan Materials Company) | N/A |
| 4/30/2032 | 100 | % |
| 175 Holt Garrison Pkwy. | Danville | VA | Home Depot USA, Inc. | N/A |
| 1/31/2029 | 100 | % |
| | | | Land/Infrastructure Total | 163,629 |
| | 100 | % |
As of December 31, 2015, the weighted-average remaining lease term for our land/infrastructure portfolio was 70.3 years or 22.8 years when adjusted to reflect the term of New York, NY land leases to the first purchase option date.
|
| | | | | | | | | |
LEXINGTON CONSOLIDATED PORTFOLIO PROPERTY CHART MULTI-TENANTED |
| As of December 31, 2015 |
| Property Location | City | State | Primary Tenant (Guarantor) | Property Type | Net Rentable Square Feet | Current Lease Term Expiration | Percent Leased |
| 13430 North Black Canyon Fwy. | Phoenix | AZ | Multi-tenanted | Office | 138,940 |
| Various | 92 | % |
| 4200 Northcorp Pkwy. | Palm Beach Gardens | FL | Multi-tenanted | Office | 95,065 |
| Various | 100 | % |
| King St./1042 Fort St. Mall | Honolulu | HI | Multi-tenanted | Office | 77,459 |
| Various | 63 | % |
| 700 Oakmont Ln. | Westmont | IL | (Available for lease) | Office | 269,715 |
| N/A | 0 | % |
| 33 Commercial St. | Foxborough | MA | Kennedy-Donovan Center, Inc. | Office | 160,719 |
| 2/28/2017 | 5 | % |
| 26555 Northwestern Hwy. | Southfield | MI | (Available for lease) | Office | 359,645 |
| N/A | 0 | % |
| 3165 McKelvey Rd. | Bridgeton | MO | BJC Health System | Office | 51,067 |
| 12/31/2018 | 50 | % |
| 700 US Hwy. Route 202-206 | Bridgewater | NJ | (Available for lease) | Office | 115,558 |
| N/A | 0 | % |
| 275 Technology Dr. | Canonsburg | PA | (Available for lease) | Office | 107,872 |
| N/A | 0 | % |
| 2210 Enterprise Dr. | Florence | SC | Caliber Funding, LLC | Office | 176,557 |
| 6/30/2018 | 28 | % |
| 6050 Dana Way | Antioch | TN | Multi-tenanted | Industrial | 674,528 |
| Various | 98 | % |
| 1501 Nolan Ryan Expy. | Arlington | TX | (Available for lease) | Industrial | 74,739 |
| N/A | 0 | % |
| | | | Multi-Tenanted Total | | 2,301,864 |
| | 44.1 | % |
The 2015 net effective annual base cash rent for the multi-tenant portfolio as of December 31, 2015 was $3.29 per square foot and the weighted-average remaining lease term was 3.4 years.
|
| | | | | | | | | |
LEXINGTON CONSOLIDATED PORTFOLIO PROPERTY CHART RETAIL/SPECIALTY | |
| As of December 31, 2015 |
| Property Location | City | State | Primary Tenant (Guarantor) | Net Rentable Square Feet | Current Lease Term Expiration | Percent Leased | |
| 255 Northgate Dr. | Manteca | CA | Kmart Corporation / Project Bay Exchange LLC (Sears, Roebuck and Co.) | 107,489 |
| 12/31/2018 | 100 | % | |
| 12080 Carmel Mountain Rd. | San Diego | CA | Kmart Corporation / Project Bay Exchange LLC (Sears, Roebuck and Co.) | 107,210 |
| 12/31/2018 | 100 | % | |
| 832 N. Westover Blvd. | Albany | GA | Gander Mountain Company | 45,554 |
| 11/30/2028 | 100 | % | |
| 2223 N. Druid Hills Rd. | Atlanta | GA | Bank of America, N.A. (Bank of America Corporation) | 6,260 |
| 12/31/2019 | 100 | % | |
| 956 Ponce de Leon Ave. | Atlanta | GA | Bank of America, N.A. (Bank of America Corporation) | 3,900 |
| 12/31/2019 | 100 | % | |
| 201 W. Main St. | Cumming | GA | Bank of America, N.A. (Bank of America Corporation) | 14,208 |
| 12/31/2019 | 100 | % | |
| 4545 Chamblee-Dunwoody Rd. | Dunwoody | GA | Bank of America, N.A. (Bank of America Corporation) | 4,565 |
| 12/31/2019 | 100 | % | |
| 1066 Main St. | Forest Park | GA | Bank of America, N.A. (Bank of America Corporation) | 14,859 |
| 12/31/2019 | 100 | % | |
| 825 Southway Dr. | Jonesboro | GA | Bank of America, N.A. (Bank of America Corporation) | 4,894 |
| 12/31/2019 | 100 | % | |
| 1698 Mountain Industrial Blvd. | Stone Mountain | GA | Bank of America, N.A. (Bank of America Corporation) | 5,704 |
| 12/31/2019 | 100 | % | |
| 1150 W. Carl Sandburg Dr. | Galesburg | IL | Kmart Corporation / Project Bay Exchange LLC (Sears, Roebuck and Co.) | 94,970 |
| 12/31/2018 | 100 | % | |
| 5104 North Franklin Rd. | Lawrence | IN | Marsh Supermarkets, Inc. / Marsh Supermarkets, LLC | 28,721 |
| 10/31/2018 | 100 | % | |
| 733 East Main St. | Jefferson | NC | Food Lion, LLC / Delhaize America, Inc. | 34,555 |
| 2/28/2023 | 100 | % | |
| 291 Talbert Blvd. | Lexington | NC | Food Lion, LLC / Delhaize America, Inc. | 23,000 |
| 2/28/2018 | 100 | % | |
| 835 Julian Ave. | Thomasville | NC | Mighty Dollar, LLC | 23,767 |
| 9/30/2018 | 100 | % | |
| 1237 W. Sherman Ave. | Vineland | NJ | HealthSouth Rehabilitation Hospital of South Jersey, LLC (HealthSouth Corporation) | 39,287 |
| 2/28/2043 | 100 | % | |
| 130 Midland Ave. | Port Chester | NY | St. Anthony Supermarket Corp. (Anthony Pena, Marina Pena, Anthony Corona, Robert Corona) | 59,613 |
| 10/31/2018 | 100 | % | |
| 21082 Pioneer Plaza Dr. | Watertown | NY | Kmart Corporation / Project Bay Exchange LLC (Sears, Roebuck and Co.) | 120,727 |
| 12/31/2018 | 100 | % | |
| 4831 Whipple Avenue N.W. | Canton | OH | Best Buy Co., Inc. | 46,350 |
| 2/26/2018 | 100 | % | |
| 1084 East Second St. | Franklin | OH | (Available for lease) | 29,119 |
| N/A | 0 | % | |
| 5350 Leavitt Rd. | Lorain | OH | Kmart Corporation / Project Bay Exchange LLC (Sears, Roebuck and Co.) | 193,193 |
| 12/31/2018 | 100 | % | |
| B.E.C. 45th St/Lee Blvd. | Lawton | OK | Associated Wholesale Grocers, Inc. / Safeway, Inc. | 30,757 |
| 3/31/2019 | 100 | % | |
| 11411 N. Kelly Ave. | Oklahoma City | OK | American Golf Corporation | 13,924 |
| 12/31/2017 | 100 | % | |
| 6910 S. Memorial Hwy. | Tulsa | OK | Toys "R" Us, Inc. / Toys “R” Us-Delaware, Inc. | 43,123 |
| 5/31/2026 | 100 | % | |
| 1600 E. 23rd St. | Chattanooga | TN | BI- LO, LLC / K-VA-T Food Stores, Inc. | 42,130 |
| 6/30/2017 | 100 | % | |
| 25500 State Hwy. 249 | Tomball | TX | Parkway Chevrolet, Inc. (Jean W. Durdin) | 77,076 |
| 8/31/2026 | 100 | % | |
| 1053 Mineral Springs Rd. | Paris | TN | The Kroger Co. | 31,170 |
| 7/1/2018 | 100 | % | |
| 2411 W. Beverly St. | Staunton | VA | Food Lion, LLC / Delhaize America, Inc. | 23,000 |
| 2/28/2018 | 100 | % | |
| 9803 Edmonds Way | Edmonds | WA | Pudget Consumers Co-op d/b/a PCC Natural Markets | 35,459 |
| 8/31/2028 | 100 | % | |
|
| | | | | | | | | |
LEXINGTON CONSOLIDATED PORTFOLIO PROPERTY CHART RETAIL/SPECIALTY | |
| As of December 31, 2015 |
| Property Location | City | State | Primary Tenant (Guarantor) | Net Rentable Square Feet | Current Lease Term Expiration | Percent Leased | |
| 97 Seneca Trail | Fairlea | WV | Kmart Corporation / Project Bay Exchange LLC (Sears, Roebuck and Co.) | 90,933 |
| 12/31/2018 | 100 | % | |
| | | | | | | | |
| | | | Retail/Specialty Total | 1,395,517 |
| | 97.9 | % | |
| | | | Consolidated Portfolio Grand Total | 42,270,023 |
| | 96.5 | % | |
The 2015 net effective annual base cash rent for the retail/specialty portfolio as of December 31, 2015 was $6.85 per square foot and the weighted-average remaining lease term was 8.430.5 years.
The 20152018 net effective annual base cash rent for the consolidated portfolio as of December 31, 20152018 was $7.65$5.68 per square foot, excluding land/infrastructureSpecialty investments, and the weighted-average remaining lease term was 12.6 years or 9.1 years when adjusted to reflect the term of New York, NY land leases to the first purchase option date.8.9 years.
|
| | | | | | | | | |
LEXINGTON NON-CONSOLIDATED PORTFOLIO PROPERTY CHART |
| As of December 31, 2015 |
| Property Location | City | State | Primary Tenant (Guarantor) | Property Type | Net Rentable Square Feet | Current Lease Term Expiration | Percent Leased |
| Route 64 & Junction 333 | Russellville | AR | Entergy Arkansas, Inc. / Entergy Services, Inc. | Office | 191,950 |
| 5/9/2016 | 100 | % |
| 607 & 611 Lumsden Professional Ct. | Brandon | FL | BluePearl Holdings, LLC | Office | 8,500 |
| 10/31/2033 | 100 | % |
| 4525 Ulmerton Rd. | Clearwater | FL | BluePearl Holdings, LLC | Office | 3,000 |
| 10/31/2033 | 100 | % |
| 100 Gander Way | Palm Beach Gardens | FL | Gander Mountain Company | Retail | 120,000 |
| 3/31/2028 | 100 | % |
| 455 Abernathy Rd. | Atlanta | GA | BluePearl Holdings, LLC | Office | 32,000 |
| 10/31/2033 | 100 | % |
| 820 Frontage Rd. | Northfield | IL | BluePearl Holdings, LLC | Office | 14,000 |
| 10/31/2033 | 100 | % |
| 29080 Inkster Rd. | Southfield | MI | BluePearl Holdings, LLC | Office | 38,000 |
| 10/31/2033 | 100 | % |
| 4126 Parkcard Rd. | Ann Arbor | MI | BluePearl Holdings, LLC | Office | 3,500 |
| 10/31/2033 | 100 | % |
| 3201 Quail Springs Pkwy. | Oklahoma City | OK | AT&T Corp. / AT&T Services, Inc. / New Cingular Wireless Services, Inc. | Office | 128,500 |
| 11/30/2020 | 100 | % |
| 18839 McKay Blvd. | Humble | TX | Triumph Rehabilitation Hospital of Northeast Houston, LLC (RehabCare Group, Inc.) | Specialty | 55,646 |
| 1/31/2029 | 100 | % |
| | | | Total | | 595,096 |
| | 100 | % |
|
| | | | | | | | | |
LEXINGTON NON-CONSOLIDATED PORTFOLIO PROPERTY CHART |
| As of December 31, 2018 |
| Property Location | City | State | Primary Tenant (Guarantor) | Property Type | Net Rentable Square Feet | Current Lease Term Expiration | Percent Leased |
| 9201 E. Dry Creek Rd. | Centennial | CO | Arrow Electronics, Inc. | Office | 128,500 |
| 3/31/2033 | 100 | % |
| 9655 Maroon Cir. | Englewood | CO | TriZetto Corporation (Cognizant Technology Solutions Corporation) | Office | 166,912 |
| 4/30/2028 | 100 | % |
| 1315 West Century Dr. | Louisville | CO | Global Healthcare Exchange, Inc. (GHX Ultimate Partner Corporation) | Office | 106,877 |
| 4/30/2027 | 100 | % |
| 143 Diamond Ave. | Parachute | CO | Encana Oil and Gas (USA) Inc./Caerus Piceanco LLC (Alenco Inc.) | Office | 49,024 |
| 10/31/2032 | 100 | % |
| 2500 Patrick Henry Pkwy. | McDonough | GA | Georgia Power Company | Office | 111,911 |
| 6/30/2025 | 100 | % |
| 231 N. Martingale Rd. | Schaumburg | IL | CEC Educational Services, LLC (Career Education Corporation) | Office | 317,198 |
| 12/31/2022 | 100 | % |
| 3902 Gene Field Rd. | St. Joseph | MO | Boehringer Ingelheim Vetmedica, Inc. (Boehringer Ingelheim USA Corporation) | Office | 98,849 |
| 6/30/2027 | 100 | % |
| 1210 AvidXchange Ln. | Charlotte | NC | AvidXchange, Inc. | Office | 201,450 |
| 4/30/2032 | 100 | % |
| 333 Mount Hope Ave. | Rockaway | NJ | Atlantic Health System, Inc. | Office | 92,326 |
| 12/31/2031 | 100 | % |
| 6226 West Sahara Ave. | Las Vegas | NV | Nevada Power Company | Office | 282,000 |
| 1/31/2029 | 100 | % |
| 2221 Schrock Rd. | Columbus | OH | MS Consultants, Inc. | Office | 42,290 |
| 7/6/2027 | 100 | % |
| 500 Olde Worthington Rd. | Westerville | OH | InVentiv Health, Inc. (Syneos Health, Inc.) | Office | 97,000 |
| 3/31/2026 | 100 | % |
| 25 Lakeview Dr. | Jessup | PA | TMG Health, Inc. (Cognizant Technology Solutions Corporation) | Office | 150,000 |
| 8/7/2027 | 100 | % |
| 601 & 701 Experian Pkwy. | Allen | TX | Experian Information Solutions, Inc. / TRW, Inc. (Experian Holdings, Inc.) | Office | 292,700 |
| 3/14/2025 | 100 | % |
| 4001 International Pkwy. | Carrollton | TX | Motel 6 Operating, LP | Office | 138,443 |
| 12/31/2025 | 100 | % |
| 10001 Richmond Ave. | Houston | TX | Schlumberger Holdings Corp. | Office | 554,385 |
| 9/30/2025 | 100 | % |
| 810 Gears Rd. | Houston | TX | United States of America | Office | 78,895 |
| 1/10/2031 | 87 | % |
| 18839 McKay Blvd. | Humble | TX | Triumph Rehabilitation Hospital of Northeast Houston, LLC (RehabCare Group, Inc.) | Other | 55,646 |
| 1/31/2029 | 100 | % |
| 6555 Sierra Dr. | Irving | TX | TXU Energy Retail Company, LLC (Texas Competitive Electric Holding Company, LLC) | Office | 247,254 |
| 2/28/2025 | 100 | % |
| 8900 Freeport Pkwy. | Irving | TX | Nissan Motor Acceptance Corporation (Nissan North America, Inc.) | Office | 268,445 |
| 3/31/2023 | 100 | % |
| 2203 North Westgreen Blvd. | Katy | TX | British Schools of America, LLC | Other | 274,000 |
| 8/31/2036 | 100 | % |
| 800 East Canal St. | Richmond | VA | McGuireWoods LLP | Office | 330,309 |
| 8/31/2030 | 87 | % |
| 500 Kinetic Dr. | Huntington | WV | AMZN WVCS LLC (Amazon.com, Inc.) | Office | 68,693 |
| 11/30/2026 | 100 | % |
| | | | Total | | 4,153,107 |
| | 98.7 | % |
In addition, we have a non-consolidated joint venture with a developer, which owns a developable parcel of land in Etna, Ohio.
The 20152018 net effective annual base cash rent for our proportionate share of the non-consolidated portfolio as of December 31, 20152018 was $18.41$16.83 per square foot and the weighted-average remaining lease term was 7.710.3 years.
The following chart sets forth certain information regarding lease expirations for the next ten years in our consolidated portfolio:
| | | Year | Number of Lease Expirations | Square Feet | Annual Rent ($000) | Percentage of Annual Rent | Number of Lease Expirations | Square Feet | GAAP Base Rent ($000) | Percentage of Annual Rent |
| 2016 | 45 | 2,487,703 |
| | $ | 15,240 |
| | 4.0 | % | | |
| 2017 | 30 | 4,332,774 |
| | 26,566 |
| | 7.0 | % | | |
| 2018 | 37 | 3,889,934 |
| | 27,092 |
| | 7.2 | % | | |
| 2019 | 26 | 3,269,559 |
| | 30,889 |
| | 8.2 | % | | 47 | 2,706,226 |
| | $ | 16,498 |
| | 6.0 | % | |
| 2020 | 18 | 3,314,980 |
| | 23,092 |
| | 6.1 | % | | 17 | 3,840,817 |
| | 15,934 |
| | 5.8 | % | |
| 2021 | 16 | 2,984,066 |
| | 24,551 |
| | 6.5 | % | | 20 | 4,371,717 |
| | 26,792 |
| | 9.7 | % | |
| 2022 | 9 | 1,018,268 |
| | 12,916 |
| | 3.4 | % | | 4 | 516,184 |
| | 6,204 |
| | 2.3 | % | |
| 2023 | 8 | 1,012,775 |
| | 14,385 |
| | 3.8 | % | | 8 | 1,163,086 |
| | 9,766 |
| | 3.5 | % | |
| 2024 | 8 | 1,767,395 |
| | 12,243 |
| | 3.2 | % | | 19 | 4,851,851 |
| | 24,787 |
| | 9.0 | % | |
| 2025 | 21 | 4,398,422 |
| | 33,605 |
| | 8.9 | % | | 14 | 2,916,169 |
| | 15,819 |
| | 5.7 | % | |
| 2026 | | 10 | 4,191,228 |
| | 14,357 |
| | 5.2 | % | |
| 2027 | | 12 | 6,536,053 |
| | 30,489 |
| | 11.1 | % | |
| 2028 | | 6 | 1,892,384 |
| | 12,942 |
| | 4.7 | % | |
The following chart sets forth the 20152018 annual GAAP base rent ($000) based on the credit rating of our consolidated tenants at December 31, 20152018(1):
| | | | GAAP Base Rent | | Percentage | GAAP Base Rent | | Percentage |
| Investment Grade | $ | 132,787 |
| | 34.5 | % | $ | 112,242 |
| | 39.1 | % |
| Non-investment Grade | 57,419 |
| | 14.9 | % | 54,716 |
| | 19.0 | % |
| Unrated | 194,783 |
| | 50.6 | % | 120,369 |
| | 41.9 | % |
| | $ | 384,989 |
| | 100.0 | % | $ | 287,327 |
| | 100.0 | % |
(1) Credit ratings are based upon either tenant, guarantor or parent/sponsor. Generally, all multi-tenant assets are included in unrated. See Item 1A “Risk Factors”, above.
Item 3. Legal Proceedings
From time to time we are directly and indirectly involved in legal proceedings arising in the ordinary course of our business. We believe, based on currently available information, and after consultation with legal counsel, that although the outcomes of those normal course proceedings are uncertain, the results of such proceedings, in the aggregate, will not have a material adverse effect on our business, financial condition and results of operations.
GSMSC II 2006-GG6 Bridgewater Hills Corporate Center, LLCCummins Inc. v. Lexington Realty Trust (Supreme Court of the Columbus (Jackson Street) L.P. and Wells Fargo Bank, N.A. (State of New York,Indiana, County of New York-Index No. 653117/2015)
Bartholomew, in the Bartholomew Superior Court). On September 16, 2015, GSMSC II 2006-GG6 Bridgewater Hills Corporate Center, LLC commenced an action as lenderOctober 25, 2018, Cummins Inc., the tenant in our Columbus, Indiana office building, filed a complaint for declaratory relief against us based on a limited guaranty of recourse obligations executed by a predecessor entity of the Company in connection with a mortgage loan secured by a property owner subsidiary's commercial property in Bridgewater, New Jersey. TheLexington Columbus (Jackson Street) L.P., our property owner subsidiary, defaultedand Wells Fargo Bank, N.A., the trustee for the noteholders with a security interest in the office building. Under the subject lease, Cummins Inc.’s tenancy extends through July 31, 2024, with options to further extend for additional time periods. Despite failing to timely exercise a purchase option for the office building that was expressly due by July 15, 2018, where time was of the essence, Cummins Inc. has asked the court for a declaration that it is entitled to non-payment afterpurchase the sole tenant vacatedbuilding at the endoption price and to terminate the lease effective July 31, 2019. Cummins Inc. does not dispute that it failed to comply with the requirements of the lease term. The lender seeks approximately $15.5 million in order to satisfy the outstanding amount of the loan, plus reasonable attorney’s fees and other costs and disbursements related thereto.
The lender claims that our limited guaranty was triggered due to the merger of Newkirk Realty Trust, Inc. and Lexington Corporate Properties Trust on December 31, 2006, arguingpurchase option, but alleges that it constituted an event of default because it was a transfer that was not permitted by the loan agreement. We intendis entitled to vigorously defend the lender’s claim.relief under several equitable theories. We filed a motion to dismiss the complaint on October 19, 2015January 8, 2019. We believe that Indiana law supports our right to retain ownership of the building, and a hearing is scheduled for March 16, 2016.we intend to vigorously defend this claim.
Item 4. Mine Safety Disclosures
Not applicable.
Executive Officers of Lexington
The following sets forth certain information relating to our executive officers:
|
| |
| Name | Business Experience |
T. Wilson Eglin Age 54 | Mr. Eglin has served as our Chief Executive Officer since January 2003, our President since April 1996 and as a trustee since May 1994. He served as one of our Executive Vice Presidents from October 1993 to April 1996 and our Chief Operating Officer from October 1993 to December 2010. |
Patrick Carroll Age 55 | Mr. Carroll has served as our Chief Financial Officer since May 1998, our Treasurer since January 1999 and one of our Executive Vice Presidents since January 2003. Prior to joining us, Mr. Carroll was, from 1986 to 1998, in the real estate practice of Coopers & Lybrand L.L.P., a public accounting firm that was one of the predecessors of PricewaterhouseCoopers LLP. Mr. Carroll is a Certified Public Accountant. |
Joseph S. Bonventre Age 43 | Mr. Bonventre has served as our General Counsel since 2004, one of our Executive Vice Presidents since 2008 and our Secretary since 2014. Prior to joining us in September 2004, Mr. Bonventre was an associate in the corporate department of the law firm now known as Paul Hastings LLP. Mr. Bonventre is admitted to practice law in the State of New York. |
Beth Boulerice Age 54 | Ms. Boulerice has served as our Chief Accounting Officer since January 2011 and one of our Executive Vice Presidents since January 2013. Prior to joining us in January 2007, Ms. Boulerice was employed by First Winthrop Corporation and was the Chief Accounting Officer of Newkirk Realty Trust. Ms. Boulerice is a Certified Public Accountant. |
Brendan P. Mullinix Age 44 | Mr. Mullinix was appointed an executive officer in February 2018 and has served as one of our Executive Vice Presidents focusing on debt capital markets. Mr. Mullinix joined us in 1996 and has previously served as a Senior Vice President and a Vice President. |
Lara Johnson
Age 46 | Ms. Johnson was appointed an executive officer in February 2018 and has served as one of our Executive Vice Presidents focusing on dispositions and strategic transactions. Prior to joining us in 2007, Ms. Johnson was an executive vice president of Newkirk Realty Trust and a member of its board of directors. Ms. Johnson previously served as senior vice president of Winthrop Financial Associates, as a vice president of Shelbourne I, Shelbourne II and Shelbourne III, three publicly-traded REITs, and as Director of Investor Relations for National Property Investors, Inc. |
James Dudley
Age 38 | Mr. Dudley was appointed an executive officer in February 2018 and has served as an Executive Vice President and Director of Asset Management. He has been with the company since 2006 and has held various roles within the Asset Management Department. Prior to joining the firm, Mr. Dudley was employed by ORIX Capital Markets. |
PART II.
Item 5. Market For Registrant's Common Equity, Related Stockholder Matters And Issuer Purchases of Equity Securities
Market Information. Our common shares are listed for trading on the NYSE under the symbol “LXP”. The following table sets forth the high and low sales prices as reported by the NYSE (composite) for our common shares for each of the periods indicated below:
|
| | | | | | | | |
| For the Quarters Ended: | | High | | Low |
| December 31, 2015 | | $ | 9.17 |
| | $ | 7.97 |
|
| September 30, 2015 | | 9.01 |
| | 7.77 |
|
| June 30, 2015 | | 10.19 |
| | 8.42 |
|
| March 31, 2015 | | 11.75 |
| | 9.52 |
|
| December 31, 2014 | | 11.42 |
| | 9.74 |
|
| September 30, 2014 | | 11.37 |
| | 9.78 |
|
| June 30, 2014 | | 11.69 |
| | 10.39 |
|
| March 31, 2014 | | 11.81 |
| | 9.94 |
|
The per common share closing price on the NYSE (composite) was $7.49 on February 23, 2016.
Holders. As of February 23, 2016,March 8, 2019, we had approximately 3,2332,688 common shareholders of record.
Dividends. Since our predecessor's formation in 1993, we have made quarterly distributions without interruption.
The common share dividends paid in each quarter for the last two years are as follows:
|
| | | | | | | | |
| Quarters Ended | | 2015 | | 2014 |
| March 31, | | $ | 0.17 |
| | $ | 0.165 |
|
| June 30, | | $ | 0.17 |
| | $ | 0.165 |
|
| September 30, | | $ | 0.17 |
| | $ | 0.170 |
|
| December 31, | | $ | 0.17 |
| | $ | 0.170 |
|
While we intend to continue paying regular quarterly dividends to holders of our common shares, the authorization of future dividend declarations will be at the discretion of our Board of Trustees and will depend on our actual cash flow, our financial condition, capital requirements, the annual distribution requirements under the REIT provisions of the Code and such other factors as our Board of Trustees deems relevant. The actual cash flow available to pay dividends will be affected by a number of factors, including, among others, the risks discussed under “Risk Factors” in Part I, Item 1A and “Management's Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of this Annual Report.
We do not believe that the financial covenants contained in our debt instruments will have any adverse impact on our ability to pay dividends in the normal course of business to our common and preferred shareholders or to distribute amounts necessary to maintain our qualification as a REIT.
Direct Share Purchase Plan. We maintain a direct share purchase plan, which has two components, (i) a dividend reinvestment component and (ii) a direct share purchase component. Under the dividend reinvestment component, common shareholders and holders of OP units may elect to automatically reinvest their dividends and distributions to purchase our common shares. Under the direct share purchase component, our current investors and new investors can make optional cash purchases of our common shares. The administrator of the plan, Computershare Trust Company, N.A., purchases common shares for the accounts of the participants under the plan, at our discretion, either directly from us, on the open market or through a combination of those two options. In 2015, 2014 and 2013,2016, we issued approximately 2.3 million, 2.6 million and 1.50.6 million common shares respectively, under the plan, raising net proceeds of $20.8 million, $25.8 million$4.1 million. We did not issue any shares under the plan in 2018 and $16.5 million, respectively.2017.
Equity Compensation Plan Information. The following table sets forth certain information, as of December 31, 2015,2018, with respect to our Amended and Restated 2011 Equity-Based Award Plan under which our equity securities are authorized for issuance as compensation.
| | | | | Number of securities to be issued upon exercise of outstanding options, warrants and rights | | Weighted-average exercise price of outstanding options, warrants and rights | | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) | | Number of securities to be issued upon exercise of outstanding options, warrants and rights | | Weighted-average exercise price of outstanding options, warrants and rights | | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) |
| Plan Category | | (a) | | (b) | | (c) | | (a) | | (b) | | (c) |
| Equity compensation plans approved by security holders | | 1,350,410 |
| | $ | 7.05 |
| | 3,320,961 |
| | 118,400 |
| | $ | 7.44 |
| | 4,012,870 |
|
| Equity compensation plans not approved by security holders | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
| Total | | 1,350,410 |
| | $ | 7.05 |
| | 3,320,961 |
| | 118,400 |
| | $ | 7.44 |
| | 4,012,870 |
|
Recent Sales of Unregistered Securities.
As previously disclosed, we issued an aggregate 0.5 millionWe did not issue any common shares upon conversionduring 2018 on an unregistered basis.
Share Repurchase Program.
The following table summarizes common shares/OP units that were repurchased during the fourth quarter of 20152018 pursuant to publicly announced repurchase plans(1):
|
| | | | | | | | | | | | | |
| Period | |
Total number of shares/units purchased | |
Average price paid per share/unit ($) | | Total number of shares/units purchased as part of publicly announced plans or programs | | Maximum number of shares/units that may yet be purchased under the plans or programs |
| October 1-31, 2015 | | 288,344 |
| | $ | 8.03 |
| | 288,344 |
| | 8,405,356 |
|
| November 1-30, 2015 | | 96,600 |
| | 8.40 |
| | 96,600 |
| | 8,308,756 |
|
| December 1-31, 2015 | | 525,555 |
| | 8.12 |
| | 525,555 |
| | 7,783,201 |
|
| Fourth Quarter 2015 | | 910,499 |
| | $ | 8.12 |
| | 910,499 |
| | 7,783,201 |
|
_________________________ |
| | | | | | | | | | | | |
| Period | | Total number of shares/units purchased | | Average price paid per share/unit ($) | | Total number of shares/units purchased as part of publicly announced plans or programs | | Maximum number of shares/units that may yet be purchased under the plans or programs |
| October 1-31, 2018 | | 2,681,215 |
| | 8.06 |
| | 2,681,215 |
| | 2,046,218 |
|
November 1-30, 2018(2) | | — |
| | — |
| | — |
| | 12,046,218 |
|
December 1-31, 2018(3) | | 1,298,382 |
| | 8.08 |
| | 1,298,382 |
| | 10,747,836 |
|
| Total | | 3,979,597 |
| | 8.07 |
| | 3,979,597 |
| | 10,747,836 |
|
(1) Share10,000,000 share repurchase authorization initially announced on July 2, 2015, which has no expiration date.
(2) On November 2, 2018, the Board of Trustees authorized an additional 10,000,000 common share repurchase authorization.
(3) Excludes 323,521 common shares that were repurchased in December 2018 that were settled in January 2019.
Item 6. Selected Financial Data
The following sets forth our selected consolidated financial data as of and for each of the years in the five-year period ended December 31, 20152018. The selected consolidated financial data should be read in conjunction with Item 7 “Management's Discussion and Analysis of Financial Condition and Results of Operations” below, and the Consolidated Financial Statements and the related notes set forth in Item 8 “Financial Statements and Supplementary Data”, below. ($000's, except per share data):
|
| | | | | | | | | | | | | | | | | | | |
| | 2015 | | 2014 | | 2013 | | 2012 | | 2011 |
| Total gross revenues | $ | 430,839 |
| | $ | 423,818 |
| | $ | 361,055 |
| | $ | 295,202 |
| | $ | 258,022 |
|
| Expenses applicable to revenues | (222,853 | ) | | (218,510 | ) | | (212,658 | ) | | (183,672 | ) | | (172,770 | ) |
| Interest and amortization expense | (89,739 | ) | | (97,303 | ) | | (85,892 | ) | | (84,250 | ) | | (90,591 | ) |
| Income (loss) from continuing operations | 113,209 |
| | 47,842 |
| | (21,021 | ) | | 184,173 |
| | 7,942 |
|
| Total discontinued operations | 1,682 |
| | 49,621 |
| | 24,884 |
| | 465 |
| | (97,720 | ) |
| Net income (loss) | 114,891 |
| | 97,463 |
| | 3,863 |
| | 184,638 |
| | (89,778 | ) |
| Net income (loss) attributable to Lexington Realty Trust shareholders | 111,703 |
| | 93,104 |
| | 1,630 |
| | 180,316 |
| | (79,584 | ) |
| Net income (loss) attributable to common shareholders | 105,100 |
| | 86,324 |
| | (14,089 | ) | | 156,811 |
| | (103,721 | ) |
| Income (loss) from continuing operations per common share - basic | 0.44 |
| | 0.17 |
| | (0.18 | ) | | 0.99 |
| | (0.13 | ) |
| Income (loss) from discontinued operations - basic | 0.01 |
| | 0.21 |
| | 0.11 |
| | — |
| | (0.55 | ) |
| Net income (loss) per common share - basic | 0.45 |
| | 0.38 |
| | (0.07 | ) | | 0.99 |
| | (0.68 | ) |
| Income (loss) from continuing operations per common share - diluted | 0.44 |
| | 0.17 |
| | (0.18 | ) | | 0.94 |
| | (0.13 | ) |
| Income (loss) from discontinued operations per common share - diluted | 0.01 |
| | 0.21 |
| | 0.11 |
| | (0.01 | ) | | (0.55 | ) |
| Net income (loss) per common share - diluted | 0.45 |
| | 0.38 |
| | (0.07 | ) | | 0.93 |
| | (0.68 | ) |
| Cash dividends declared per common share | 0.68 |
| | 0.675 |
| | 0.615 |
| | 0.55 |
| | 0.47 |
|
| Net cash provided by operating activities | 244,930 |
| | 214,672 |
| | 206,304 |
| | 163,810 |
| | 180,137 |
|
| Net cash used in investing activities | (388,271 | ) | | (43,068 | ) | | (597,583 | ) | | (134,103 | ) | | (24,813 | ) |
| Net cash provided by (used in) financing activities | 45,513 |
| | (57,788 | ) | | 434,516 |
| | (59,394 | ) | | (144,257 | ) |
| Ratio of earnings to combined fixed charges and preferred dividends | 2.00 |
| | 1.37 |
| | N/A |
| | N/A |
| | N/A |
|
| Real estate assets, net, including real estate - intangible assets | 3,397,922 |
| | 3,287,250 |
| | 3,425,420 |
| | 3,165,085 |
| | 2,746,976 |
|
| Total assets | 3,830,235 |
| | 3,777,894 |
| | 3,772,281 |
| | 3,418,203 |
| | 3,026,820 |
|
| Mortgages, notes payable, credit facility and term loans, including discontinued operations | 2,212,572 |
| | 2,095,453 |
| | 2,055,807 |
| | 1,878,208 |
| | 1,662,375 |
|
| Shareholders' equity | 1,440,029 |
| | 1,485,766 |
| | 1,515,738 |
| | 1,306,730 |
| | 1,111,846 |
|
| Total equity | 1,462,531 |
| | 1,508,920 |
| | 1,539,483 |
| | 1,333,165 |
| | 1,170,203 |
|
| Preferred share liquidation preference | 96,770 |
| | 96,770 |
| | 96,770 |
| | 251,770 |
| | 322,032 |
|
_________ |
|
N/A - Ratio is below 1.0, deficit of $28,929, $20,065 and $37,928 exists at December 31, 2013, 2012 and 2011, respectively. |
|
| | | | | | | | | | | | | | | | | | | |
| | 2018 | | 2017 | | 2016 | | 2015 | | 2014 |
| Total gross revenues | $ | 395,339 |
| | $ | 391,641 |
| | $ | 429,496 |
| | $ | 430,839 |
| | $ | 423,818 |
|
| Expenses applicable to revenues | (210,866 | ) | | (223,162 | ) | | (213,403 | ) | | (222,853 | ) | | (218,510 | ) |
| Interest and amortization expense | (79,880 | ) | | (77,883 | ) | | (88,032 | ) | | (89,739 | ) | | (97,303 | ) |
| Income from continuing operations | 230,906 |
| | 86,629 |
| | 96,450 |
| | 113,209 |
| | 47,842 |
|
| Total discontinued operations | — |
| | — |
| | — |
| | 1,682 |
| | 49,621 |
|
| Net income | 230,906 |
| | 86,629 |
| | 96,450 |
| | 114,891 |
| | 97,463 |
|
| Net income attributable to Lexington Realty Trust shareholders | 227,415 |
| | 85,583 |
| | 95,624 |
| | 111,703 |
| | 93,104 |
|
| Net income attributable to common shareholders | 220,838 |
| | 79,067 |
| | 89,109 |
| | 105,100 |
| | 86,324 |
|
| Income from continuing operations per common share - basic | 0.93 |
| | 0.33 |
| | 0.38 |
| | 0.44 |
| | 0.17 |
|
| Income from discontinued operations - basic | — |
| | — |
| | — |
| | 0.01 |
| | 0.21 |
|
| Net income per common share - basic | 0.93 |
| | 0.33 |
| | 0.38 |
| | 0.45 |
| | 0.38 |
|
| Income from continuing operations per common share - diluted | 0.93 |
| | 0.33 |
| | 0.37 |
| | 0.44 |
| | 0.17 |
|
| Income from discontinued operations per common share - diluted | — |
| | — |
| | — |
| | 0.01 |
| | 0.21 |
|
| Net income per common share - diluted | 0.93 |
| | 0.33 |
| | 0.37 |
| | 0.45 |
| | 0.38 |
|
| Cash dividends declared per common share | 0.71 |
| | 0.7025 |
| | 0.69 |
| | 0.68 |
| | 0.675 |
|
Net cash provided by operating activities(1) | 217,811 |
| | 227,870 |
| | 239,810 |
| | 245,020 |
| | 221,577 |
|
Net cash provided by (used in) investing activities(1) | 554,891 |
| | (283,074 | ) | | 11,384 |
| | (391,016 | ) | | (43,984 | ) |
Net cash provided by (used in) financing activities(1) | (707,611 | ) | | 49,581 |
| | (237,301 | ) | | 41,426 |
| | (66,351 | ) |
| Real estate assets, net, including real estate - intangible assets | 2,555,659 |
| | 3,309,900 |
| | 3,028,326 |
| | 3,397,922 |
| | 3,287,250 |
|
| Total assets | 2,953,840 |
| | 3,553,020 |
| | 3,441,467 |
| | 3,808,403 |
| | 3,758,483 |
|
| Mortgages, notes payable, credit facility and term loans, including discontinued operations | 1,492,483 |
| | 2,068,867 |
| | 1,860,598 |
| | 2,190,740 |
| | 2,076,042 |
|
| Shareholders' equity | 1,329,871 |
| | 1,323,901 |
| | 1,392,777 |
| | 1,440,029 |
| | 1,485,766 |
|
| Total equity | 1,346,678 |
| | 1,340,835 |
| | 1,412,491 |
| | 1,462,531 |
| | 1,508,920 |
|
| Preferred share liquidation preference | 96,770 |
| | 96,770 |
| | 96,770 |
| | 96,770 |
| | 96,770 |
|
(1) 2017 to 2014 amounts adjusted for the retrospective application of ASU 2016-15 and ASU 2016-18.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
In this discussion, we have included statements that may constitute “forward-looking statements” within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are not historical facts but instead represent only our beliefs regarding future events, many of which, by their nature, are inherently uncertain and outside our control. These statements may relate to our future plans and objectives, among other things. By identifying these statements for you in this manner, we are alerting you to the possibility that our actual results may differ, possibly materially, from the anticipated results indicated in these forward-looking statements. Important factors that could cause our results to differ, possibly materially, from those indicated in the forward-looking statements include, among others, those discussed above in “Risk Factors” in Part I, Item 1A of this Annual Report and “Cautionary Statements Concerning Forward-Looking Statements” in Part I,the beginning of this Annual Report.
|
| |
Table of Contents | Page |
Overview | |
Liquidity | |
Capital Resources | |
Results of Operations | |
Off-Balance Sheet Arrangements | |
Contractual Obligations | |
Introduction
The following is a discussion and analysis of the consolidated financial condition and results of operations of Lexington Realty Trust for the years ended December 31, 2018, 2017 and 2016, and significant factors that could affect its prospective financial condition and results of operations. This discussion should be read together with the accompanying consolidated financial statements of the Company included herein and notes thereto.
Overview
General. We are a Maryland REIT that owns a diversified portfolio of equity and debt investments in primarily single-tenant commercial properties, and land. A majority of these properties and all land interests are subject to net or similar leases, where the tenant bears all or substantially all of the costs, including cost increases, for real estate taxes, utilities, insurance and ordinary repairs.with a focus on industrial properties.
As of December 31, 2015,2018, we had equity ownership interests in approximately 215135 consolidated real estate properties, located in 4034 states and encompassing approximately 42.347.6 million square feet, approximately 96.8%95.1% of which was leased, excluding a property subject to a mortgage in default.leased.
Our revenues and cash flows are generated predominantly from property rent receipts. As a result, growth in revenues and cash flows is directly correlated to our ability to (1) acquire income producing real estate assets and (2) re-lease properties that are vacant, or may become vacant, at favorable rental rates.
In an effort to diversify our risk, we invest across the United States in properties leased to tenants in various industries, including service, automotive, technology, transportation/logistics and finance/insurance. However, industry and regional declines, to the extent we have concentration, and general economic declines could negatively impact our results of operations and cash flows.
Portfolio Management. For leases in place at December 31, 2015, we generated approximately 40.8% of our 2015 rental revenue from leases ten years or longer, compared to approximately 41.2% of our 2014 rental revenue for leases in place at December 31, 2014. Our objective is to generate at least half of our rental revenue from leases ten years or longer, which we expect to achieve primarily through capital recycling of assets with shorter-term leases and acquiring new investments with leases longer than ten years.
At December 31, 2015, our rental revenue from single-tenant leases scheduled to expire through 2020 has been reduced to approximately 31.9% compared to approximately 33.9% at December 31, 2014. We believe we no longer have concentrated risk of lease rollover in any one year and we believe our cash flows are stable. In addition, we extended our weighted-average lease term on a cash basis to approximately 12.6 years at December 31, 2015 compared to approximately 12.1 years at December 31, 2014. This was primarily due to an increase in acquisition of long-term leased assets and the disposition of shorter term leased assets. However, certain of the long-term leases have tenant purchase options.
In recent years, demand for space in the suburban office market has not been as strong as demand for space in the industrial market. We believe this is due to a continuing trend of downsizing of corporate office employment. In addition, industrial assets generally require less capital to maintain and re-lease than office assets. In recent years, we have focused on balancing our rental revenue between office and industrial properties. As of December 31, 2015, the ratio of rental revenue from office assets to the rental revenue from industrial assets was approximately 1.8:1, which is lower than the previous year. We expect that our office portfolio will be concentrated in fewer, but larger, markets over the next several years, which we expect to accomplish primarily through sales of office assets and growing our portfolio through disciplined investments. Our capital recycling strategy may have a near-term dilutive impact on earnings due to sales of revenue producing properties, but we believe in the long-term this strategy will benefit shareholder value.
Business Strategy. Our current business strategy is focused on growing our portfolio of industrial properties, enhancing our cash flow stability, growing our portfolio of attractive long-term leased investmentsreducing lease rollover risk and maintaining a strong and flexible balance sheet to allow us to act on opportunities as they arise. See “Business” in Part I, Item 1 of this Annual Report for a detailed description of our current business strategy.
In 2015, we generated gross disposition proceeds of approximately $265.2 million as a result of our capital recycling efforts, including $47.5 million in non-recourse mortgage conveyances to lenders. These proceeds were primarily used to fund property investments subject to long-term leases, reduce secured debt and expand properties. In 2015, we completed real estate acquisitions/build-to-suit transactions for an aggregate capitalized cost of approximately $491.1 million and reduced our weighted-average interest rate on outstanding consolidated indebtedness by approximately 50 basis points primarily by refinancing higher interest rate debt. Our secured debt, including secured debt classified as held for sale, decreased to approximately $891.3 million at December 31, 2015 compared to $948.0 million at December 31, 2014, which was 17.7% and 19.0% of total gross assets, respectively. We now have fewer near-term debt maturities compared to recent years. We also expect to continue to use property specific, non-recourse mortgages in certain situations as we believe that by properly matching a debt obligation, including the balloon maturity risk, with the terms of a lease, our cash-on-cash returns increase and the exposure to residual valuation risk is reduced. In addition, we may procure credit tenant lease financing in certain situations where we are able to monetize all or a significant portion of the rental revenues of a property at an attractive rate. We believe our financing strategy will also allow us to further lower our financing costs and improve our cash flow, financial flexibility and certain credit metrics.
We expect our business strategy will enable us to continue to improve our liquidity and strengthen our overall balance sheet. We believe liquidity and a strong balance sheet will allow us to take advantage of attractive investment opportunities as they arise.
Investment Trends. Making investments in income producing single-tenant net-leased industrial real estate assets is one of our primary focuses.focus. The challenge we face is finding investments that will provide an attractive return without compromising our real estate or tenant credit underwriting criteria. We believe we have access to acquisition opportunities due to our relationships with developers, brokers, corporate users and sellers. However, competition for income producing single-tenant net-leased industrial real estate assets is strong.has increased. When we acquire real estate assets, we generally look for commercialindustrial real estate assets or land interests subject to a long-term net-lease which have one or more of the following characteristics (1) a credit-worthy tenant, (2) adaptability to a variety of users, including multi-tenant use, (3) an attractive geographic location, and (4) the potential for capital appreciation.
Our acquisition volume consists primarilyIn recent years, demand for space in the suburban office market has not been as strong as demand for space in the industrial market. We believe this is due to a continuing trend of purchases from third parties, sale-leaseback transactionsdownsizing of corporate office requirements and build-to-suit transactions whereby we (1) providean increase in the demand for regionalized distribution and e-commerce facilities. In addition, industrial assets generally require less capital to developers who are engaged in build-to-suit transactions and/or commit to purchase the property from developers upon completion or (2) acquire a property subject to a single-tenant net-leasemaintain and engage a developer to complete construction of a build-to-suit property asre-lease than required by office assets. As of December 31, 2018, our percentage of GAAP rent attributable to industrial assets to total GAAP rent was 65.4% compared to 44.3% as of December 31, 2017. We expect to continue the lease. However, nonerepositioning of these transactions are donethe portfolio to be more industrial asset based. Our capital recycling strategy may have a near-term dilutive impact on a speculative basis without a committed tenant subjectearnings due to a long-term lease. sales of revenue-producing properties, but we believe in the long term this strategy will benefit shareholder value.
We believe these arrangements offer developers and/or tenants accesscontinue to capital while simultaneously providing us with attractive risk-adjusted projected yields.
During 2015, we saw continuedsee capitalization rate compression in the acquisition market for existing industrial product. We believeexpect that build-to-suit transactions continue to have stabilized yields above those in the existing product market and we are seeing aas interest rates rise, in capitalization rates for takingwill rise. However, with the forward risksignificant amount of competition in the current acquisition market for industrial assets, capitalization rates have continued to compress or hold steady even as interest rates rise.
The recent demand for industrial assets has allowed developers to obtain construction financing from traditional banks and build on a speculative basis, which has limited our opportunities in the industrial build-to-suit market. Build-to-suit transactions, as compared with immediate deliverable acquisitions, resultIn an effort to gain more exposure to the build-to-suit industrial market, in December 2017, we acquired a 90% interest in a delayjoint venture with a developer that acquired a developable parcel of land. The joint venture intends to source industrial build-to-suit projects for the land and in December 2018, Kohl's Corporation committed to the first build-to-suit project for a 1.2 million square foot warehouse/distribution facility, which is expected to be completed in 2020 and is subject to a ground lease with us.
Some of our industrial investments are, and we expect in the receipt of cash flow and the recognition of funds from operations during the construction period, but provide us with modern buildingsfuture some will be, subject to long-term leases.leases with shorter terms than historically held in our portfolio because we believe renewal and retenanting risks are mitigated because of the fungibility of certain industrial assets.
We generally mitigate our cost exposure for build-to-suit properties and forward commitments by requiring purchase agreements, development agreements and/or loan agreements to specify a maximum price and/or loan commitment amount prior to our investment. Cost overruns are generally the responsibility of the developer or, in some cases, the prospective tenant. To further mitigate risk, we believe we perform stringent underwriting procedures such as, among other items, (1) requiring payment and performance bonds and/or completion guarantees from developers and/or contractors; (2) engaging third-party construction consultants and/or engineers to monitor construction progress and quality; (3) only hiring developers with a proven history of performance; (4) requiring developers to provide financial statements and in some cases personal guarantees from principals; (5) obtaining and reviewing detailed plans and construction budgets; (6) requiring a long-term tenant lease to be executed prior to funding; and (7) securing liens on the property to the extent of construction funding.
We believe that, despite the addition of some shorter-term industrial leases, the long-term leases with escalating rents we have been adding toin our portfolio are strengthening our future cash flows by providing a hedge against rising interest rates, extending our weighted-average lease term, balancing our lease expiration schedule, reducing the average age of our portfolio and supporting our dividend growth objectives.
The following is a summary of our investment activity for the year ended December 31, 2018:
Property Acquisitions(1)
|
| | | | | | | | | | | | | | |
| Location | | Property Type | | Square Feet (000's) | | Capitalized Cost (millions) | | Approximate Lease Term (Years) | | Date Acquired |
| Olive Branch, MS | | Industrial | | 716 |
| | $ | 44.1 |
| | 11 |
| | 2Q 2018 |
| Olive Branch, MS | | Industrial | | 1,170 |
| | 48.5 |
| | 3 |
| | 2Q 2018 |
| Edwardsville, IL | | Industrial | | 1,018 |
| | 44.2 |
| | 12 |
| | 2Q 2018 |
| Spartanburg, SC | | Industrial | | 342 |
| | 27.6 |
| | 6 |
| | 3Q 2018 |
| Pasadena, TX | | Industrial | | 258 |
| | 23.9 |
| | 5 |
| | 3Q 2018 |
| Carrollton, TX | | Industrial | | 357 |
| | 19.6 |
| | 14 |
| | 3Q 2018 |
| Goodyear, AZ | | Industrial | | 540 |
| | 41.4 |
| | 7 |
| | 4Q 2018 |
| Chester, VA | | Industrial | | 1,034 |
| | 66.3 |
| | 12 |
| | 4Q 2018 |
| | | | | 5,435 |
| | $ | 315.6 |
| | | | |
| |
| (1) | We acquired a 57-acre parcel of land from a non-consolidated joint venture and leased the parcel to a tenant to develop an industrial property. |
The following is a summary of our property acquisitions and build-to-suit transactionsinvestment activity for the year ended December 31, 2015:2017:
Property Acquisitions
|
| | | | | | | | | | | | | |
| Location | | Property Type | | Square Feet (000's) | | Capitalized Cost (millions) | | Approximate Lease Term (Years) | | Date Acquired |
| Auburn Hills, MI | | Office | | 278 |
| | $ | 40.0 |
| | 14 | | 1Q 2015 |
| Houston, TX | | Industrial | | 188 |
| | 28.7 |
| | 20 | | 1Q 2015 |
| Brookshire, TX | | Industrial | | 262 |
| | 22.4 |
| | 20 | | 1Q 2015 |
| Canton, MS | | Industrial | | 1,466 |
| | 89.3 |
| | 12 | | 1Q 2015 |
| Venice, FL | | Land/Infrastructure | | 31 |
| | 16.9 |
| | 40 | | 1Q 2015 |
| Richland, WA | | Industrial | | 456 |
| | 152.0 |
| | 20 | | 4Q 2015 |
| | | | | 2,681 |
| | $ | 349.3 |
| | | | |
|
| | | | | | | | | | | | | |
| Location | | Property Type | | Square Feet (000's) | | Capitalized Cost (millions) | | Approximate Lease Term (Years) | | Date Acquired |
| New Century, KS | | Industrial | | 447 |
| | $ | 12.1 |
| | 10 | | 1Q 2017 |
| Lebanon, IN | | Industrial | | 742 |
| | 36.2 |
| | 7 | | 1Q 2017 |
| Cleveland, TN | | Industrial | | 851 |
| | 34.4 |
| | 7 | | 2Q 2017 |
| Grand Prairie, TX | | Industrial | | 215 |
| | 24.3 |
| | 20 | | 2Q 2017 |
| San Antonio, TX | | Industrial | | 849 |
| | 45.5 |
| | 10 | | 2Q 2017 |
McDonough, GA(1) | | Industrial | | 1,121 |
| | 66.7 |
| | 10 | | 3Q 2017 |
| Byhalia, MS | | Industrial | | 616 |
| | 36.6 |
| | 10 | | 3Q 2017 |
| Jackson, TN | | Industrial | | 1,062 |
| | 57.9 |
| | 10 | | 3Q 2017 |
| Smyrna, TN | | Industrial | | 1,505 |
| | 104.9 |
| | 10 | | 3Q 2017 |
| Lafayette, IN | | Industrial | | 309 |
| | 17.4 |
| | 7 | | 4Q 2017 |
| Romulus, MI | | Industrial | | 500 |
| | 38.9 |
| | 15 | | 4Q 2017 |
| Warren, MI | | Industrial | | 260 |
| | 47.0 |
| | 15 | | 4Q 2017 |
| Winchester, VA | | Industrial | | 400 |
| | 36.7 |
| | 14 | | 4Q 2017 |
| | | | | 8,877 |
| | $ | 558.6 |
| | | | |
Completed Build-to-Suit Transactions
|
| | | | | | | | | | | | | | | | | |
| Location | | Property Type | | Square Feet (000's) | | Initial Capitalized Cost(millions) | | Lease Term (Years) | | Date Acquired/Completed | | Capitalized Cost Per Square Foot |
| Thomson, GA | | Industrial | | 208 |
| | $ | 10.1 |
| | 15 | | Q2 2015 | | $ | 48.77 |
|
| Oak Creek, WI | | Industrial | | 164 |
| | 22.1 |
| | 20 | | Q3 2015 | | $ | 134.99 |
|
Richmond, VA(1) | | Office | | 330 |
| | 101.5 |
| | 15 | | Q4 2015 | | $ | 307.26 |
|
| | | | | 702 |
| | $ | 133.7 |
| | | | | | |
(1) Initial basis does not include $8.1 million for estimated earnout lease payments for developer leased space.
Ongoing Build-to-Suit Transactions
The following is a summary of our ongoing build-to-suit transactions as of December 31, 2015:
|
| | | | | | | | | | | | | | | |
| Location | | Property Type | | Square Feet (000's) | Expected Maximum Commitment/Estimated Completion Cost (millions) | | Estimated Acquisition/ Completion Date | | GAAP Investment Balance as of 12/31/15 (millions) |
| Anderson, SC | | Industrial | | 1,325 |
| | $ | 70.0 |
| | 2Q 2016 | | $ | 23.8 |
|
| Lake Jackson, TX | | Office | | 664 |
| | 166.2 |
| | 4Q 2016 | | 62.4 |
|
| Charlotte, NC | | Office | | 201 |
| | 62.4 |
| | 1Q 2017 | | 9.2 |
|
| | | | | 2,190 |
| | $ | 298.6 |
| | | | $ | 95.4 |
|
In addition, we committed to acquire the following property:
|
| | | | | | | | | | |
| Location | | Property Type | | Acquisition Cost (millions) | | Acquisition Date | | Lease Term (Years) |
Detroit, MI(1) | | Industrial | | $ | 29.7 |
| | 1Q 16 | | 20 |
1.Acquired in January 2016.
In addition, as of December 31, 2015, a joint venture in which we currently have a 25% interest has an ongoing build-to-suit transaction as follows:
|
| | | | | | | | | | | | | | | |
| Location | | Property Type | | Square Feet (000's) | Expected Maximum Commitment/Estimated Completion Cost (millions) | | Estimated Completion Date | | GAAP Investment Balance as of 12/31/15 (millions) |
| Houston, TX | | Private School | | 274 |
| | $ | 86.5 |
| | 3Q 2016 | | $ | 38.4 |
|
We are providing up to $56.7 million in construction financing to the joint venture, of which $8.5 million has been funded.
We can provide no assurance with respect to the completion, acquisition, cost or timing of these ongoing build-to-suit and forward purchase transactions.
The following is a summary of our property acquisitions and completed build-to-suit transactions for the year ended December 31, 2014:
Property Acquisitions
|
| | | | | | | | | | | | | |
| Location | | Property Type | | Square Feet (000's) | | Capitalized Cost (millions) | | Approximate Lease Term (Years) | | Date Acquired |
| Parachute, CO | | Office | | 49 |
| | $ | 13.9 |
| | 19 | | 1Q 2014 |
| Rock Hill, SC | | Office | | 104 |
| | 24.7 |
| | 20 | | 1Q 2014 |
| Lewisburg, TN | | Industrial | | 310 |
| | 13.3 |
| | 12 | | 2Q 2014 |
| New York, NY | | Land | | — |
| | 30.4 |
| | 99 | | 4Q 2014 |
| Vineland, NJ | | Rehab Hospital | | 39 |
| | 19.1 |
| | 28 | | 4Q 2014 |
| Anniston, AL | | Industrial | | 267 |
| | 20.9 |
| | 15 | | 4Q 2014 |
| | | | | 769 |
| | $ | 122.3 |
| | | | |
Completed Build-to-Suit Transactions
|
| | | | | | | | | | | | | | | | | |
| Location | | Property Type | | Square Feet (000's) | | Capitalized Cost(millions) | | Lease Term (Years) | | Date Acquired/Completed | | Capitalized Cost Per Square Foot |
| Rantoul, IL | | Industrial | | 813 |
| | $ | 41.3 |
| | 20 | | 1Q 2014 | | $ | 50.76 |
|
| North Las Vegas, NV | | Industrial | | 180 |
| | 28.3 |
| | 20 | | 2Q 2014 | | $ | 156.74 |
|
| Bingen, WA | | Industrial | | 125 |
| | 20.4 |
| | 10 | | 2Q 2014 | | $ | 163.73 |
|
| | | | | 1,118 |
| | $ | 90.0 |
| | | | | | |
Loan Investments. We invest in loan assets secured by single-tenant real estate assets, which (1) we feel comfortable owning for our investment should the borrower default for reasons other than an underlying tenant default or (2) are necessary for an efficient disposition of our equity interest in the property. The following is a summary of our outstanding loan investments at December 31, 2015:
|
| | | | | | | | |
| | | Loan carrying value(1) (millions) | | | | |
| Loan | | 12/31/2015 | | Interest Rate | | Maturity Date |
| Kennewick, WA | | $ | 85.5 |
| | 9.00% | | 05/2022 |
| Oklahoma City, OK | | 8.5 |
| | 11.50% | | 03/2016 |
| Other | | 1.9 |
| | 8.00% | | 2021-2022 |
| | | $ | 95.9 |
| | | | |
|
| | | | | | | | | | | | | | | | | |
| Location | | Property Type | | Square Feet (000's) | | Initial Capitalized Cost (millions) | | Lease Term (Years) | | Date Acquired/Completed | | Capitalized Cost Per Square Foot |
Lake Jackson, TX(2) | | Office | | 275 |
| | $ | 70.4 |
| | 20 | | 1Q 2017 | | $ | 256.09 |
|
| Charlotte, NC | | Office | | 201 |
| | 61.3 |
| | 15 | | 2Q 2017 | | $ | 304.49 |
|
| Opelika, AL | | Industrial | | 165 |
| | 37.3 |
| | 25 | | 3Q 2017 | | $ | 225.20 |
|
| | | | | 641 |
| | $ | 169.0 |
| | | | | | |
| |
| (1) | Loan carrying valueSquare footage includes accrued interest and is neta 220-thousand-square-foot expansion which was completed in 2018. |
| |
| (2) | Completed the construction on the final building of origination costs, if any.a four-building project. Initial cost basis excludes developer partner payout of $8.0 million. |
In 2015, we foreclosed against the borrowers of a loan secured by a property in Westmont, Illinois. In addition to acquiring the office property collateral, we acquired $2.5 million of cash collateral and received $1.4 million in full settlement of our claim against the borrower. Also in 2015, we foreclosed on a loan secured by an office property in Southfield, Michigan. In 2014, we recognized a $2.5 million loan loss, as the borrower had indicated that it would not satisfy the loan at maturity.
Leasing Trends. Re-leasing properties that are currently vacant or as leases expire at favorable effective rates is one of our primary asset management focuses. The primary risks associated with re-tenanting properties are (1) the period of time required to find a new tenant, (2) whether rental rates will be lower than previously received,under previous leases, (3) the significance of leasing costs such as commissions and tenant improvement allowances and (4) the payment of capital expenditures and operating costs such as real estate taxes, insurance and maintenance with no offsetting revenue.
Our property owner subsidiaries seek to mitigate these risks by (1) staying in close contact with our tenants during the lease term in order to assess the tenant's current and future occupancy needs, (2) maintaining relationships with local brokers to determine the depth of the rental market and (3) retaining local expertise to assist in the re-tenanting of a property. However, no assurance can be given that once a property becomes vacant it will subsequently be re-let. Generally, a tenant in a single-tenant office property commences lease extension discussions well in advance of lease expiration. If the lease has a year or less remaining until expiration, generally, there is a high likelihood that the tenant will not extend the lease for the entire property.property or at all. Industrial renewals are generally not as time sensitive due to the minimal capital expenditures upon renewal as compared with office property renewals.
If a property cannot be re-let to a single user and the property can be adapted to multi-tenant use, we determine whether the costs of adapting the property to multi-tenant use outweigh the benefit of funding operating costs while searching for a single-tenant.single-tenant and whether selling a vacant property, which limits operating costs and allows us to redeploy capital, is in the best interest of our shareholders.
Certain of the long-term leases on properties in which we have an ownership interest contain provisions that may mitigate the adverse impact of inflation on our operating results. Such provisions include clauses entitling us to receive (1) scheduled fixed base rent increases and (2) base rent increases based upon the consumer price index. In addition, a majority of the leases on the single-tenant properties in which we have an ownership interest require tenants to pay operating expenses, including maintenance, real estate taxes, insurance and utilities, thereby reducing our exposure to increases in costs and operating expenses. In addition, the leases on single-tenant properties in which we have an ownership interest are generally structured in a way that minimizes our responsibility for capital improvements. However, certain of our leases provide for some level of landlord responsibility for capital repairs and replacements, the cost of which is generally factored into the rental rate.
Our motivation to release vacant space requires us to meet market demands with respect to rental rates, tenant concessions and landlord responsibilities. As a result, the obligations of our property owner subsidiaries on new leases and newly renewed or extended leases generally increase to include, among other items, some form of responsibility for capital repairs and replacements.
During 2015,2018, we entered into 4429 consolidated new leases and lease extensions encompassing approximately 3.91.9 million square feet. The average GAAP base rent on these extended leases was approximately $7.71$10.11 per square foot compared to the average GAAP base rent on these leases before extension of $7.50$9.36 per square foot. The weighted-average cost of tenant improvements and lease commissions during 20152018 was approximately $18.68$20.08 per square foot for new leases and $2.46$2.07 per square foot for extended leases. Due to the nature of the expected lease rollovers in coming years, particularly office assets, renewal rents may be lower than expiring rents and aggregate tenant improvement allowances and leasing costs may decrease from their current levels in such years. The impact of any such lower renewal rent may be mitigated by our capital recycling strategy and our long-term leases with annual or periodic rent increases.
We continue to monitor the credit of tenants of properties in which we have an interest by (1) subscribing to rating agency information, so that we can monitor changes in the ratings of our rated tenants, (2) reviewing financial statements that are publicly available or that are required to be delivered to us under the applicable lease, (3) monitoring news reports regarding our tenants and their respective businesses and (4) monitoring the timeliness of rent collections.
During 2015, 20142017 and 2013,2016, we conveyed in foreclosure or via a deed-in-lieu of foreclosure certain properties in which we had an interest as we deemed the balance of the non-recourse mortgagesmortgage loans encumbering the properties were in excess of the value of the property collateral. Our property owner subsidiaries may convey properties to lenders or the property owner subsidiary may declare bankruptcy in the future if there is no or limited recourse to us and a property owner subsidiary is unable to refinance, re-let or sell its vacated property or if a tenant renews at a lower rent or a new tenant pays a lower rent that does not justify a value of the property in excess of the mortgage loan balance.
Impairment charges. During 2015, 20142018, 2017 and 2013,2016, we incurred impairment charges on certain of our assets, excluding loan receivables, of $36.8$95.8 million, $48.6$39.7 million and $34.6$100.2 million, respectively, including amounts classifieddue to each asset's carrying value being below its estimated fair value. Most of the impairment charges in discontinued operations,2018 and 2017 were incurred on non-core assets due to anticipated shortened holding periods. In 2016, we incurred impairment charges primarily due to the assets beingwrite-off of the deferred rent receivable for the sold below their carrying value and a deterioration in economic conditions since the acquisition of such assets. TheseNew York, New York land investments. The real estate assets we sold that resulted in impairment charges were primarily non-core assets including land investments, retail properties and under performing and multi-tenant properties. In addition, in 2014 and 2013, we recognized loan losses of $2.5 million and $13.9 million, respectively, relating to loans receivable secured by vacant or soon-to-be vacant suburban office properties. We cannot estimate if we will incur, or the amount of, future impairment charges on our assets. See Part I, Item 1A “Risk Factors”, of this Annual Report.
Critical Accounting Policies. Our accompanying consolidated financial statements have been prepared in accordance with GAAP, which require our management to make estimates that affect the amounts of revenues, expenses, assets and liabilities reported and related disclosures of contingent assets and liabilities. A summary of our significant accounting policies which are important to the portrayal of our financial condition and results of operations is set forth in note 2 to the Consolidated Financial Statements, which are included in “Financial Statements and Supplementary Data” in Part II, Item 8 of this Annual Report.
The following is a summary of our critical accounting policies, which require some of management's most difficult, subjective and complex judgments.
Basis of Presentation and Consolidation. Our consolidated financial statements are prepared on the accrual basis of accounting. The financial statements reflect our accounts and the accounts of our consolidated subsidiaries. We consolidate our wholly-owned subsidiaries, partnerships and joint ventures which we control through (1) voting rights or similar rights or (2) by means other than voting rights if we are the primary beneficiary of a variable interest entity, which we refer to as a VIE. Entities which we do not control and entities which are VIEs in which we are not the primary beneficiary are generally accounted for by the equity method. Significant judgments and assumptions are made by us to determine whether an entity is a VIE such as those regarding an entity's equity at risk, the entity's equity holders' obligations to absorb anticipated losses and other factors. In addition, the determination of the primary beneficiary of a VIE requires judgment to determine the party that has (1) power over the significant activities of the VIE and (2) an obligation to absorb losses or the right to receive benefits that could be potentially significant to the VIE.
Judgments and Estimates. Our management has made a number of estimates and assumptions relating to the reporting of assets and liabilities, the disclosure of contingent assets and liabilities and the reported amounts of revenues and expenses to prepare our consolidated financial statements in conformity with GAAP. These estimates and assumptions are based on our management's best estimates and judgment. Our management evaluates its estimates and assumptions on an ongoing basis using historical experience and other factors, including the current economic environment. The current economic environment has increased the degree of uncertainty inherent in these estimates and assumptions. Our management adjusts such estimates when facts and circumstances dictate. The most significant estimates made include the recoverability of accounts receivable, allocation of property purchase price to tangible and intangible assets acquired and liabilities assumed, the determination of VIEs and entities that should be consolidated, the determination of impairment of long-lived assets, loans receivable and equity method investments, valuation and impairment of assets held by equity method investees, valuation of derivative financial instruments, valuation of compensation plans and the useful lives of long-lived assets.
Purchase Accounting and Acquisition of Real Estate. The fair value of the real estate acquired, which includes the impact of fair value adjustments for assumed mortgage debt related to property acquisitions, is allocated to the acquired tangible assets, consisting of land, building and improvements and identified intangible assets and liabilities, consisting of the value of above-market and below-market leases, other value of in-place leases and value of tenant relationships, based in each case on their fair values.
The fair value of the tangible assets of an acquired property (which includes land, building and improvements and fixtures and equipment) is determined by valuing the property as if it were vacant. The “as-if-vacant” value is then allocated to land and building and improvements based on our management's determination of relative fair values of these assets. Factors considered by our management in performing these analyses include an estimate of carrying costs during the expected lease-up periods considering current market conditions and costs to execute similar leases. In estimating carrying costs, our management includes real estate taxes, insurance and other operating expenses and estimates of lost rental revenue during the expected lease-up periods based on current market demand. Our management also estimates costs to execute similar leases including leasing commissions. Our management generally retains a third party to assist in the allocations.
In allocating the fair value of the identified intangible assets and liabilities of an acquired property, above-market and below-market lease values are recorded based on the difference between the current in-place lease rent and management's estimate of current market rents. Below-market lease intangibles are recorded as part of deferred revenue and amortized into rental revenue over the non-cancelable periods and bargain renewal periods of the respective leases. Above-market leases are recorded as part of intangible assets and amortized as a direct charge against rental revenue over the non-cancelable portion of the respective leases.
The aggregate value of other acquired intangible assets, consistingwhich may consist of in-place leases andand/or tenant relationship values, is measured by the excess of (1) the purchase price paid for a property over (2) the estimated fair value of the property as if vacant, determined as set forth above. This aggregate value is allocated between in-place lease values and tenant relationship values based on management's evaluation of the specific characteristics of each tenant's lease. The value of in-place leases is amortized to expense over the remaining non-cancelable periods and any bargain renewal periods of the respective leases. The value of tenant relationships is amortized to expense over the applicable lease term plus expected renewal periods.
Revenue Recognition. We recognize lease revenue on a straight-line basis over the term of the lease unless another systematic and rational basis is more representative of the time pattern in which the use benefit is derived from the leased property. Revenue is recognized on a contractual basis for leases with escalations tied to a consumer price index with no floor. Renewal options in leases with rental terms that are lower than those in the primary term are excluded from the calculation of straight line rent if the renewals are not reasonably assured. In those instances in which we fund tenant improvements and the improvements are deemed to be owned by us, revenue recognition will commence when the improvements are substantially completed and possession or control of the space is turned over to the tenant. When we determine that the tenant allowances are lease incentives, we commence revenue recognition when possession or control of the space is turned over to the tenant for tenant work to begin. The lease incentive is recorded as a deferred expense and amortized as a reduction of revenue on a straight-line basis over the respective lease term. Determining if a tenant allowance is a lease incentive requires significant judgment. We recognize lease termination paymentsfees as a component of rental revenue in the period received and write off unamortized leases related intangibles and other lease related account balances, provided that there are no further obligations under the lease; otherwise the lease termination payment is amortizedlease. Otherwise, such fees and balances are recognized on a straight-line basis over the remaining obligation period. All above-market lease assets, below-market lease liabilities and deferred rent assets or liabilities for terminated leases are charged against or credited to rental revenue in the period the lease is terminated. All other capitalized lease costs and lease intangibles are accelerated via amortization expense to the date of termination.
Gains on sales of real estate are recognized based on the specific timing of the sale as measured against various criteria related to the terms of the transactions and any continuing involvement associated with the properties. If the sales criteria are not met, the gain is deferred and the finance, installment or cost recovery method, as appropriate, is applied until the sales criteria are met. To the extent we sell a property and retain a partial ownership interest in the property, we recognize gain to the extent of the third-party ownership interest.
Impairment of Real Estate. We evaluate the carrying value of all tangible and intangible real estate assets for possible impairment when an event or change in circumstance has occurred that indicates its carrying value may not be recoverable. The evaluation includes estimating and reviewing anticipated future undiscounted cash flows to be derived from the asset. If such cash flows are less than the asset's carrying value, an impairment charge is recognized to the extent by which the asset's carrying value exceeds the estimated fair value. Estimating future cash flows is highly subjective and such estimates could differ materially from actual results.
Impairment of Equity Method InvestmentsCybersecurity.. We assess whether there are indicators While we have yet to experience a cyber attack that disrupted our operations in any material respect, all companies, including ours, need to allocate funds to address and protect against cybersecurity threats. Due to the valuesmall size of our equity method investments may be impaired. An investment's value is impaired iforganization, we determine that a decline in the value of the investment below its carrying value is other-than-temporary. The assessment of impairment is highly subjectiverely on third-parties to provide advice and involves the application of significant assumptions and judgments about our intent and ability to recover our investment given the nature and operations of the underlying investment, including the level of our involvement therein, among other factors. To the extent impairment has occurred, the loss is measured as the excess of the carrying amount of the investment over the estimated value of the investment.
Loans Receivable. We evaluate the collectability of both interest and principal of each of our loans, if circumstances warrant, to determine whether the loan is impaired. A loan is considered to be impaired, when based on current information and events, it is probable that we will be unable to collect all amounts due according to the existing contractual terms. Significant judgments are required in determining whether impairment has occurred. When a loan is considered to be impaired, the amount of the loss accrual is calculated by comparing the recorded investment to the value determined by discounting the expected future cash flows at the loan's effective interest rate, the loan's observable current market price or the fair value of the underlying collateral. Interest on impaired loans is recognized on a cash basis.
Acquisition, Development and Construction Arrangements. Weevaluate loans receivable where we participate in residual profits through loan provisions or other contracts to ascertain whether we have the same risks and rewards as an owner or a joint venture partner. Where we conclude that such arrangements are more appropriately treated as an investment in real estate, we reflect such loan receivable as an equity investment in real estate under construction in the Consolidated Balance Sheets. In these cases, no interest income is recorded on the loan receivable and we record capitalized interest during the construction period. In arrangements where we engage a developer to construct a property or provide funds to a tenant to develop a property, we will capitalize the funds provided to the developer/tenant and internal costs of interest and real estate taxes, if applicable, during the construction period.
The accounting for these critical accounting policies and implementation of accounting guidance issued in the future involves the making of estimates based on current facts, circumstances and assumptions which could change in a manner that would materially affect management's future estimatesservices with respect to such matters. Accordingly, future reported financial conditions and resultscybersecurity, which is not currently, but could differ materially from financial conditions and results reported based on management's current estimates.become, a material cost.
Liquidity
General. Since becoming a public company, our principal sources of liquidity have been (1) undistributed cash flows generated from our investments, (2) the public and private equity and debt markets, including issuances of OP units, (3) property specific debt, (4) corporate level borrowings, (5) commitments from co-investment partners and (6) proceeds from the sales of our investments.
Our ability to incur additional debt to fund acquisitions is dependent upon our existing leverage, the value of the assets we are attempting to leverage and general economic and credit market conditions, which may be outside of management's control or influence.
Cash Flows. We believe that cash flows from operations will continue to provide adequate capital to fund our operating and administrative expenses, regular debt service obligations and all dividend payments in accordance with REIT requirements in both the short-term and long-term. In addition, we anticipate that cash on hand, corporate level borrowings, capital recycling proceeds, issuances of equity and debt, mortgage proceeds and our other principal sources of liquidity will be available to provide the necessary capital required to fund our operations and allow us to grow.
Cash flows from operations as reported in the Consolidated Statements of Cash Flows totaled $244.9$217.8 million for 2015, $214.72018, $227.9 million for 20142017 and $206.3$239.8 million for 2013.2016. Cash flows from operations increased in 2015 and 2014have been decreasing primarily due to the impactdispositions as we reshape our portfolio to have a higher concentration of acquisitions, offset by dispositions and yield maintenance payments made on debt satisfactions.industrial assets versus other asset types. Industrial assets, as compared with office assets, generally provide for less rental revenue due to lower capitalization rates than can be obtained from office assets. The underlying drivers that impact working capital and therefore cash flows from operations are the timing of (1) the collection of rents and tenant reimbursements and loan interest payments from borrowers, and (2) the payment of interest on mortgage debt and operating and general and administrative costs. We believe the net-lease structure of the leases encumbering a majority of the properties in which we have an interest mitigates the risks of the timing of cash flows from operations since the payment and timing of operating costs related to the properties are generally borne directly by the tenant. Collection and timing of tenant rents is closely monitored by management as part of our cash management program.
Net cash used inprovided by (used in) investing activities totaled $388.3$554.9 million in 2015, $43.12018, $(283.1) million in 20142017 and $597.6$11.4 million in 2013.2016. Cash provided by investing activities related primarily to proceeds from the sale of properties, and marketable equity securities, collection of loans receivable, distributions from non-consolidated entities in excess of accumulated earnings and changes in deposits and restricted cash.deposits. Cash used in investing activities related primarily to investments in real estate properties, co-investment programs, marketable equity securities and loans receivable and an increase inpayments of deferred leasing costs deposits and restricted cash.changes in deposits. Therefore, the fluctuation in investing activities relates primarily to the timing of investments and dispositions.
Net cash provided by (used in) financing activities totaled $45.5$(707.6) million in 2015, $(57.8)2018, $49.6 million in 20142017 and $434.5$(237.3) million in 2013.2016. Cash provided by financing activities was primarily attributable to net proceeds from the issuance of common shares, and non-recourse mortgage and corporate borrowings. Cash used in financing activities related primarily to dividend and distribution payments, repurchases or redemptions of common and preferred shares, purchaseredemption of a noncontrolling interest, an increase inpayments of deferred financing costs, payment of developer liabilities and debt payments and repurchases.
Public and Private Equity and Debt Markets. We access the public and private equity and debt markets when we (1) believe conditions are favorable and (2) have a compelling use of proceeds. During 2015, 2014 and 2013, we raised net proceeds of approximately $19.4 million, $23.6 million and $434.9 million, respectively, through the issuance of common shares, including option exercises. Due to our borrowing capacity under our unsecured revolving credit facility and proceeds from dispositions and mortgage financings, we did not access the market price of our common shares, we limited the issuance of our common sharespublic debt markets in 2015 and 2014. During 2014 and 2013, we raised net proceeds of approximately $249.7 million and $247.6 million, respectively, through the issuance of investment-grade rated 4.40% and 4.25% Senior Notes. We primarily used these proceeds to fund investments and retire indebtedness.2018, 2017 or 2016.
During 2010, we issued $115.0 million aggregate principal amount of 6.00% Convertible Notes. The notes pay interest semi-annually in arrears and mature in January 2030. The holders of the notes may require us to repurchase their notes in January 2017, January 2020 and January 2025 for cash equal to 100% of the principal of the notes to be repurchased, plus any accrued and unpaid interest. We may not redeem any notes prior to January 2017, except to preserve our REIT status. Thereafter, we may redeem the notes for cash equal to 100% of the principal of the notes to be redeemed, plus any accrued and unpaid interest. As of the date of filing this Annual Report, the notes have a conversion rate of 156.5514 common shares per $1,000 principal amount of the notes, representing a conversion price of approximately $6.39 per common share. The conversion rate is subject to adjustment under certain circumstances, including increases in our dividend rate above a certain threshold and the issuance of stock dividends. The notes are convertible by the holders under certain circumstances for cash, common shares or a combination of cash and common shares at our election. During 2015, 2014 and 2013, holders of the notes converted an aggregate of $3.8 million, $12.8 million and $54.9 million, respectively, of notes for 0.5 million, 1.9 million and 7.9 million common shares, respectively, and an aggregate cash payment by us of $0.5 million, $0.2 million and $3.3 million, respectively, plus accrued and unpaid interest. As of December 31, 2015, $12.4 million in aggregate principal amount of these notes were outstanding.
During 2015, our Board of Trustees authorized a 10.0 million common share repurchase program. The share repurchase program does not expire. As of December 31, 2015,During 2018, we had repurchased 2,216,799and retired approximately 5.9 million common shares for an aggregate $47.2 million, which was at an average price of $8.29$8.05 per share. During 2018, our Board of Trustees increased the authorization by an additional 10.0 million shares and approximately 10.7 million common shares remain available for repurchase at December 31, 2018. We have continued to, and in the future may, repurchase our common shares in the context of our overall capital plan, and to the extent we believe market volatility offers prudent investment opportunities based on our common share price versus net asset value per share.
During 2013, we repurchased and retired all outstanding Series D Preferred Shares (approximately 6.2 million shares) for an aggregate purchase price, including accrued and unpaid dividends, of $155.6 million, which was at a $5 thousand premiumWe expect to the liquidation preferences of the preferred shares.
We maycontinue to access debt and equity markets and other markets in the future to implement our business strategy and to fund future growth. However, the continued general economic uncertainty and the volatility in these markets makescan make accessing these markets challenging.more difficult at times.
UPREIT Structure. Our UPREIT structure permits us to effect acquisitions by issuing OP units to a property owner as a form of consideration in exchange for the property. Substantially all outstanding OP units are redeemable by the holder at certain times on a one OP unit for approximately 1.13 common shares basis or, at our election, with respect to certain OP units, cash. Substantially all outstanding OP units require us to pay quarterly distributions to the holders of such OP units equal to the dividends paid to our common shareholders on an as redeemed basis and the remaining OP units have stated distributions in accordance with their applicable partnership agreement. To the extent that our dividend per share is less than a stated distribution per unit per the applicable partnership agreement, the stated distributions per unit are reduced by the percentage reduction in our dividend. We are party to a funding agreement with our operating partnership under which we may be required to fund distributions made on account of OP units. No OP units have a liquidation preference. The numberIn recent years there has not been a great demand for OP units and, as a result, we expect the percentage of common shares that will be outstanding in the future should be expectedrelative to OP units will increase, and income attributable to noncontrolling interests should be expected to decrease, as such OP units are redeemed for our common shares. Furthermore, our credit agreement requires us to own at least 95.5% of Lepercq Corporate Income Fund L.P., or LCIF.
As of December 31, 20152018, there were 3.43.2 million OP units outstanding which were convertible into 3.83.6 million common shares assuming we satisfied redemptions entirely with common shares. In recent years, few sellers of real estate have been seeking OP units as a form of consideration.
Property Specific Debt. As of December 31, 20152018, our consolidated property owner subsidiaries had relatedaggregate balloon payments of $113.4$76.1 million and $68.7$32.0 million maturing in 20162019 and 2017,2020, respectively. With respect to mortgages encumbering properties where the expected lease rental revenues are sufficient to provide an estimated property value in excess of the mortgage balance, we believe our property owner subsidiaries have sufficient sources of liquidity to meet these obligations through future cash flows from operations, the credit markets and, if determined appropriate by us, a capital contribution from us from either cash on hand ($93.2168.8 million at December 31, 20152018), property sale proceeds or borrowing capacity on our primary credit facility ($223.0505.0 million as of December 31, 20152018, subject to covenant compliance). Our objective is to continue to lower our secured debt by retiring mortgages as they mature and unencumber assets so that approximately 65% to 70% of our assets will be unencumbered.
In the event that the estimated property value is less than the mortgage balance, as the mortgages encumbering the properties in which we have an interest are generally non-recourse to us and the property owner subsidiaries, a property owner subsidiary may, if appropriate, satisfy a mortgage obligation by transferring title of the property to the lender or permitting a lender to foreclose. There are significant risks associated with conveying properties to lenders through foreclosure which are described in "Risk Factors" in Part I, Item 1A of this Annual Report.
In 2015, 20142018, 2017 and 2013,2016, we obtained, through our consolidated property owner subsidiaries, $190.8$26.4 million, $27.8$45.4 million and $253.5$254.7 million, respectively, in non-recourse mortgage loans with interest rates ranging from 2.2%4.0% to 4.7%5.4% and maturity dates ranging from 20192022 to 2028.2036. Our secured debt decreased to approximately $575.5 million at December 31, 2018 compared to $697.1 million at December 31, 2017. We expect to continue to use property specific, non-recourse mortgages in certain situations as we believe that by properly matching a debt obligation, including the balloon maturity risk, with the terms of a lease, our cash-on-cash returns increase and the exposure to residual valuation risk is reduced. In addition, we may procure credit tenant lease financing in certain situations where we are able to monetize all or a significant portion of the rental revenues of a property at an attractive rate. We believe our financing strategy will also allow us to further lower our financing costs and improve our cash flow, financial flexibility and certain credit metrics.
Corporate Borrowings. The following Senior Notes were outstanding as of December 31, 2015:2018:
|
| | | | | | | | | | | | |
| Issue Date | | Face Amount (millions) | | Interest Rate | | Maturity Date | | Issue Price |
| May 2014 | | $ | 250.0 |
| | 4.40 | % | | June 2024 | | 99.883 | % |
| June 2013 | | 250.0 |
| | 4.25 | % | | June 2023 | | 99.026 | % |
| | | $ | 500.0 |
| | | | | | |
The Senior Notes are unsecured and pay interest semi-annually in arrears. We may redeem the Senior Notes at our option at any time prior to maturity in whole or in part by paying the principal amount of the Senior Notes being redeemed plus a premium.
In September 2015, we entered into a new $905.0 millionDuring 2018, our unsecured credit agreement with KeyBank National Association, as agent, which replaced our existing revolving credit facilitywas amended to release LCIF as a borrower and term loans. With lender approval, we can increase the size of the new facility to an aggregate $1.8 billion.make other related changes. A summary of the significant terms of our unsecured credit agreement, as of December 31, 2018, are as follows:
|
| | | | | | | |
| | Prior
| Maturity Date | | New
Maturity Date | | Prior
Interest Rate | | Current
Interest Rate |
$400.0505.0 Million Revolving Credit Facility(1) | 02/2017 | | 08/2019 | | LIBOR + 1.15% | | LIBOR + 1.00% |
$250.0300.0 Million Term Loan(2) | 02/2018 | | 08/2020 | | LIBOR + 1.35% | | LIBOR + 1.10% |
$255.0 Million Term Loan(3)
| 01/2019 | | 01/2021 | | LIBOR + 1.75% | | LIBOR + 1.10% |
| |
| (1) | Maturity date can be extended to August 2020 at our option. The interest rate ranges from LIBOR plus 0.85% to 1.55% (previously 0.95% to 1.725%). At December 31, 2015,2018, the unsecured revolving credit facility had $177.0 millionno borrowing outstanding and availability of $223.0$505.0 million subject to covenant compliance. |
| |
| (2) | The interest rate ranges from LIBOR plus 0.90% to 1.75% (previously 1.10% to 2.10%). We previously entered into aggregate interest-rate swap agreements to fix the LIBOR component at a weighted-average rate of 1.09% through February 2018 on the $250.0 million of outstanding LIBOR-based borrowings. |
| |
(3) | The interest rate ranges from LIBOR plus 0.90% to 1.75% (previously 1.50% to 2.25%). We previously entered intohad aggregate interest-rate swap agreements to fix the LIBOR component at a weighted-average rate of 1.42% through January 2019 on the $255.0 million of the $300.0 million outstanding LIBOR-based borrowings. During 2018, we satisfied in full the $300 million term loan due in 2020. |
As of December 31, 20152018, we were in compliance with the financial covenants contained in our corporate level debt agreements.
During 2007, we issued $200.0 million in Trust Preferred Securities, which bearbore interest at a fixed rate of 6.804% through April 2017 and, thereafter, bears interest at a variable rate of three month LIBOR plus 170 basis points through maturity.points. These securities are (1) classified as debt, (2) due in 2037 and (3) currently redeemable by us. As of December 31, 20152018 and 2014,2017, there were $129.1 million of these securities outstanding.
While property specific mortgages with favorable terms have become harder to obtain on certain properties, corporate level borrowings have generally been available and we expect this to continue to be the case in the near future.
Co-investment Programs and Joint Ventures. We believe that enteringhave entered into co-investment programs and joint ventures with institutional investors and other real estate companies is a good way to access private capital while mitigatingmitigate our risk in certain assets and increasingincrease our return on equity to the extent we earn management or other fees. However, investments in co-investment programs and joint ventures limit our ability to make investment decisions unilaterally relating to the assets and limit our ability to deploy capital. IfDue to our size, we continue to grow, wedo not expect to enter into co-investment programs and joint ventures primarilyseeking future investments, except with respectdevelopers for industrial assets. In 2018, we sold 21 office assets to assets thata newly-formed joint venture in which we ordinarily would not have invested in such as non-core assets.acquired a 20% interest. We believe this mitigatesjoint venture complemented our current business strategy by partially reducing our exposure to the risks inherent in non-coreoffice assets. In 2014, we entered into a joint venture to construct a private school in Houston, Texas, which will be net leased for a 20-year term upon completion.
Capital Recycling. Part of our strategy to effectively manage our balance sheet involves pursuing and executing well on property dispositions and recycling of capital. During 2015,2018, we disposed of our interests in certain consolidated properties for aan aggregate gross price of $217.7 million.$1.1 billion, which included the sale of a 21-office asset portfolio to the newly-formed joint venture. These proceeds were used to retire indebtedness encumbering properties in which we have an interest and corporate debt obligations and make investments. In addition, in 2015 we disposed of our interest in properties via foreclosure or deed-in-lieu of foreclosure in full satisfaction of an aggregate $47.5 million of related non-recourse mortgages.
As asset valuescapitalization rates have continued to rise,compressed in recent years, we have continued to look at opportunities to recycle capital with a focus on capturing the value of our multi-tenant and retail properties and reducing our exposure to the suburban office sector. The increase in asset values may result in our selling more properties than we acquire in any given year. We will continue to look at capital recycling opportunities as part of the ongoing effort to further transform our portfolio, with a greater emphasis on suburban office dispositions and non-core asset dispositions, including our land investments in New York City and vacant properties, in individual or portfolio transactions. We believe capital recycling (1) provides cost effective and timely capital support for our investment activities and (2) allows us to maintain line capacity and cash in advance of what we expect to be a growing investment pipeline.
Liquidity Needs. Our principal liquidity needs are the contractual obligations set forth under the heading “Contractual Obligations,” below, and the payment of dividends to our shareholders and distributions to the holders of OP units.
As of December 31, 20152018, we had approximately $2.2$1.5 billion of indebtedness, consisting of mortgages and notes payable outstanding, a term loans,loan, 4.40% and 4.25% Senior Notes, 6.00% Convertible Notes and Trust Preferred Securities, with a weighted-average interest rate of approximately 4.0%. The ability of a property owner subsidiary to make debt service payments depends upon the rental revenues of its property and its ability to refinance the mortgage related thereto, sell the related property, or access capital from us or other sources. A property owner subsidiary's ability to accomplish such goals will be affected by numerous economic factors affecting the real estate industry, including the risks described under "Risk Factors" in Part I, Item 1A of this Annual Report.
If we are unable to satisfy our contractual obligations and other operating costs with our cash flow from operations, we intend to use borrowings and proceeds from issuances of equity or debt securities. If a property owner subsidiary is unable to satisfy its contractual obligations and other operating costs, it may default on its obligations and lose its assets in foreclosure or through bankruptcy proceedings.
We elected to be taxed as a REIT under Sections 856 through 860 of the Code, commencing with our taxable year ended December 31, 1993. If we qualify for taxation as a REIT, we generally will not be subject to federal corporate income taxes on our net taxable income that is currently distributed to shareholders.
In connection with our intention to continue to qualify as a REIT for federal income tax purposes, we expect to continue paying regular dividends to our shareholders. These dividends are expected to be paid from operating cash flows and/or from other sources. Since cash used to pay dividends reduces amounts available for capital investments, we generally intend to maintain a conservative dividend payout ratio, reserving such amounts as we consider necessary for the maintenance or expansion of properties in our portfolio, debt reduction, the acquisition of interests in new properties as suitable opportunities arise, and such other factors as our Board of Trustees considers appropriate.
We paid approximately $164.7$175.5 million in cash dividends to our common and preferred shareholders in 2015.2018. Although our property owner subsidiaries receive the majority of our base rental payments on a monthly basis, we intend to continue paying dividends quarterly. Amounts accumulated in advance of each quarterly distribution are invested by us in short-term money market or other suitable instruments.
Capital Resources
General. Due to the net-lease structure of a majority of our investments, our property owner subsidiaries historically have not incurred significant expenditures in the ordinary course of business to maintain the properties in which we have an interest. As leases expire, we expect our property owner subsidiaries to incur costs in extending the existing tenant leases, re-tenanting the properties with a single-tenant, or converting the property to multi-tenant use. The amounts of these expenditures can vary significantly depending on tenant negotiations, market conditions and rental rates.
Single-Tenant Properties. We do not anticipate significant capital expenditures at the single-tenant properties in which we have an interest that are subject to net or similar leases since the tenants at these properties generally bear all or substantially all of the cost of property operations, maintenance and repairs. However, at certain properties subject to net leases, our property owner subsidiaries are responsible for replacement and/or repair of certain capital items, which may or may not be reimbursed. In addition, at certain single-tenant properties that are not subject to a net lease, our property owner subsidiaries have a level of property operating expense responsibility, which may or may not be reimbursed.
Multi-Tenant Properties. Primarily as a result of non-renewals at single-tenant net-lease properties, we have interests in multi-tenant properties in our consolidated portfolio. While tenants are generally responsible for increases over base year expenses, our property owner subsidiaries are generally responsible for the base-year expenses and capital expenditures, and are responsible for all expenses related to vacant space, at these properties.
Vacant Properties. To the extent there is a vacancy in a property, our property owner subsidiary would be obligated for all operating expenses, including capital expenditures, real estate taxes and insurance. IfWhen a property is vacant, for an extended period of time, our property owner subsidiary may incur substantial capital expenditure and releasing costs to re-tenant the property. However, we believe that, over the long term, our focus on industrial assets will result in significant savings compared to investing in office assets due to the lower operating and retenanting costs of industrial assets compared to office assets.
Property Expansions. Under certain leases, tenants have the right to expand the facility located on a property in which we have an interest. In the past, our property owner subsidiary has generally funded, and in the future our property owner subsidiary may fund, these property expansions with either additional secured borrowings, the repayment of which was, and will be, funded out of rental increases under the leases covering the expanded properties, or capital contributions from us.
Ground Leases. The tenants of properties in which we have an interest generally pay the rental obligations on ground leases either directly to the fee holder or to our property owner subsidiary as increased rent. However, our property owner subsidiaries are responsible for these payments (1) under certain leases without reimbursement and (2) at vacant properties.
Environmental Matters. Based upon management's ongoing review of the properties in which we have an interest, management is not aware of any environmental condition with respect to any of these properties that would be reasonably likely to have a material adverse effect on us. There can be no assurance, however, that (1) the discovery of environmental conditions, which were previously unknown, (2) changes in law, (3) the conduct of tenants or (4) activities relating to properties in the vicinity of the properties in which we have an interest, will not expose us to material liability in the future. Changes in laws increasing the potential liability for environmental conditions existing on properties or increasing the restrictions on discharges or other conditions may result in significant unanticipated expenditures or may otherwise adversely affect the operations of the tenants of properties in which we have an interest.
Results of Operations
Year ended December 31, 20152018 compared with December 31, 2014.2017. The increase in total gross revenues in 20152018 of $7.0$3.7 million was primarily attributable to an increase in rental revenue of $7.0$4.9 million, offset by a decrease in tenant reimbursements of $1.2 million. The increase in rental revenue was primarily due to 2015 and 2014 revenue from properties acquired/expandedacquired in 2018 and 2017 of $27.7$34.9 million and the acceleration of below-market lease intangible accretion on three retail assets of $10.4 million, partially offset in part by a reduction of $18.4$39.9 million of rental revenue due to property sales and a $0.3 million decrease in revenue recognized from lease terminations.
Depreciation and amortization decreased by $5.8 million primarily due to the sale of real estate properties in 2018 and 2017.
The decrease in property operating expense of $6.5 million was primarily due to reduced operating costs associated with sold properties, soldincluding vacant properties and a reduction in 2015.transaction costs, partially offset by 2018 and 2017 property acquisitions with operating expense responsibilities and an increase in operating costs at certain properties due to tax abatements expiring.
The decrease in general and administrative expense of $2.5 million was primarily due to a decrease in professional fees, primarily legal costs incurred in a litigation.
The $2.05 million litigation settlement recognized in 2017 represented the settlement amount related to a lender claim regarding an office property that we owned in Bridgewater, New Jersey.
Non-operating income decreased by $6.9 million primarily due to the collection of loans receivable in 2017 and $3.9 million of earnings recognized in 2017 due to the write-off of unearned contingent acquisition consideration relating to a prior build-to-suit project.
The increase in interest and amortization expense of $2.0 million was primarily due to an increase in our overall borrowing rate and amount of debt outstanding during the period, coupled with a reduction in capitalized interest.
The change in debt satisfaction charges, net, of $8.8 million was primarily due to the timing of debt retirements, including the repayment of the 2020 term loan.
The increase in impairment charges of $50.8 million related to the timing of impairment charges recognized on certain properties, primarily due to potential sales, vacancies and lack of leasing prospects. The increase was also due to our intention to dispose of non-industrial assets, thus shortening the holding period of certain assets.
The increase in gains on sales of properties of $189.5 million related primarily to the timing of sales of our properties, and was principally comprised of $174.6 million relating to the sale/contribution of 21 office assets to NNN JV.
The change in equity in earnings (losses) of non-consolidated entities of $2.6 million was primarily due to the timing of gains recognized on the sale of non-consolidated investments and an impairment charge recognized in 2017 on our investment in Palm Beach Gardens, Florida where the sole tenant filed for bankruptcy.
The increase in net income attributable to noncontrolling interests of $2.4 million was primarily due to an increase in net income of LCIF in 2018 compared to 2017.
The increase in net income attributable to common shareholders of $141.8 million was primarily due to the items discussed above.
Year ended December 31, 2017 compared with December 31, 2016. The decrease in total gross revenues in 2017 of $37.9 million was primarily attributable to a decrease in rental revenue of $38.2 million. The decrease in rental revenue was primarily due to a reduction of $66.1 million of rental revenue due to property sales, and a $14.1 million decrease in revenue recognized from lease terminations, partially offset by revenue from property acquisitions in 2017 and 2016 of $42.9 million.
Depreciation and amortization increased by $8.4$7.9 million primarily due to the acquisition of real estate properties in 20152017 and 2014.2016.
The decreaseincrease in property operating expense of $4.0$1.8 million was primarily due to thecosts incurred on properties acquired in 2017 and 2016, costs incurred on vacant properties prior to sale and an increase in transaction costs, offset by reduced operating costs associated with sold properties.
The increase in general and administrative expense of $1.0$3.1 million was primarily due to an increase in personnel costs, professional fees, and information technology costs.primarily legal costs incurred in a litigation.
The $2.05 million litigation settlement recognized in 2017 represented the settlement amount related to a lender claim regarding an office property that we owned in Bridgewater, New Jersey.
Non-operating income decreased by $3.1$2.7 million primarily due to a decreasethe collection of loans receivable in interest2017, partially offset by $3.9 million of earnings recognized on loan investmentsin 2017 due to borrower defaults and loan repayments, coupled with the salewrite-off of a property in 2014 subjectunearned contingent acquisition consideration relating to a capital lease.prior build-to-suit project.
The decrease in interest and amortization expense of $7.6$10.1 million was primarily due to the satisfaction of mortgage debt in connection with property sales and a reductiondecrease in the weighted-average interest rate on outstanding indebtedness and an increase in capitalized interest, offset by an increase in outstanding indebtedness.our $129.1 million of trust preferred securities.
The gains on sales of financial assets, net, of $0.9 million in 2014 was primarily due to the gain recognized on the sale of an office property classified as a capital lease.
The increasechange in debt satisfaction gains, net, of $34.6$7.2 million was primarily due to the timing of debt retirements, including foreclosures.
The decrease in impairment charges of $55.2 million related primarily to the impairment recognized on the sale of three land investments in New York, New York due to the write-off of the deferred rent receivable in 2016.
The decrease in gains on sales of properties in 2015 of $23.3$18.1 million related primarily to gains recognized on the saletiming of sales of our office properties in Fort Myers and Orlando, Florida.properties.
The increase in the provision for income taxes of $0.5 million related primarily to state taxes.
The change in equity in earnings (losses) of non-consolidated entities of $1.1 million was primarily due to a $0.5 million gain recognized on the sale of properties by a non-consolidated joint venture investment.
Discontinued operations represent properties sold during 2014 or held for sale as of December 31, 2014. The decrease in net income from discontinued operations of $47.9$8.4 million was primarily due to the adoptiontiming of ASU 2014-08, which was effective January 1, 2015 and resultedgains recognized on the sale of non-consolidated investments, partially offset by an impairment charge recognized in no longer including property sales2017 on our investment in discontinued operations after December 31, 2014, exceptPalm Beach Gardens, Florida where the sole tenant filed for properties held for sale as of December 31, 2014 or sold properties that represented a strategic shift in operations.
The decrease in net income attributable to noncontrolling interests of $1.2 million was primarily due to a decrease in earnings of consolidated, non-wholly owned entities.bankruptcy.
The increasedecrease in net income attributable to common shareholders of $18.8$10.0 million was primarily due to the items discussed above.
Year ended December 31, 2014 compared with December 31, 2013. The increase in total gross revenues in 2014 of $62.8 million was primarily attributable to an increase in rental revenue of $56.8 million and an increase in tenant reimbursements of $6.0 million, due to property acquisitions.
New property acquisition revenue of $59.5 million was offset in part by the net impact of lease extensions entered into at rents below previous rental amounts, new leases entered into at rates lower than under previous leases and the increase in vacancy at certain properties.
Depreciation and amortization decreased by $3.1 million primarily due to certain assets becoming fully amortized, offset by the acquisition of real estate properties in 2014 and 2013.
The increase in property operating expense of $8.9 million was primarily due to an increase in occupancy and use at certain multi-tenant properties, the acquisition of properties with operating expense obligations, the net impact of management of certain properties being transferred between the tenant and our property owner subsidiary and an increase in acquisition and pursuit costs.
Non-operating income increased by $5.3 million primarily due to interest earned on new loans receivable investments.
The increase in interest and amortization expense of $11.4 million was primarily due to an increase in the amount of debt outstanding, offset by a reduction in the weighted-average interest rate on outstanding indebtedness.
The gains on sales of financial assets, net of $0.9 million in 2014 was primarily due to the gain recognized on the sale of an office property classified as a capital lease.
The decrease in debt satisfaction charges, net, of $15.9 million was primarily due to the timing of conversions of our 6.00% Convertible Notes and the timing of mortgage payoffs and related yield maintenance charges.
Impairment charges and loan losses increased by $1.8 million due to an increase of $13.2 million in impairment charges on properties due to the timing of triggering events on properties held and used in operations, principally offset by a decrease in loan losses of $11.4 million. We recognized a loan loss of $2.5 million in 2014 on our loan receivable collateralized by an office property in Southfield, Michigan and a $13.9 million loan loss in 2013 on our loan receivable collateralized by an office building in Westmont, Illinois.
The decrease in the provision for income taxes of $2.1 million primarily relates to the tax incurred on the internal transfer of an industrial property from our taxable REIT subsidiary to the REIT in 2013.
The increase in equity in earnings (losses) of non-consolidated entities of $0.8 million was primarily due to an increase in earnings from various joint ventures.
Discontinued operations represent properties sold or held for sale. The increase in net income from discontinued operations of $24.7 million was primarily due to an increase in gains on sales of properties of $33.0 million and a $1.8 million decrease in provision for income taxes, offset in part by an increase in impairment charges of $0.8 million and an increase in debt satisfaction charges, net of $9.2 million.
The increase in net income attributable to noncontrolling interests of $2.1 million was primarily due to an increase in earnings of consolidated, non-wholly owned entities.
The increase in net income attributable to common shareholders of $100.4 million was primarily due to the items discussed above and a reduction in preferred dividends of $8.8 million due to the repurchase of preferred shares in 2013.
The increase in net income or decrease in net loss in future periods will be closely tied to the level of acquisitions made by us. Without acquisitions, the sources of growth in net income are limited to fixed rent adjustments and index adjusted rentsadjustments (such as the consumer price index), reduced interest expense on amortizing mortgages and variable rate indebtedness and by controlling other variable overhead costs. However, there are many factors beyond management's control that could offset these items including, without limitation, increased interest rates and tenant monetary defaults and the other risks described in this Annual Report.
Same-Store Results
Same-store results include allnet operating income, or NOI, which is a non-GAAP measure, represents the NOI for consolidated properties except properties acquired/expandedthat were owned and soldincluded in 2015 and 2014. In addition, the results of one property subject to a secured mortgage loan currently in defaultour portfolio for three comparable reporting periods. We define NOI as operating revenues (rental income (less GAAP rent adjustments and lease termination paymentsincome), tenant reimbursements and other property income) less property operating expenses. As same-store NOI excludes the change in NOI from acquired and disposed of properties, it highlights operating trends such as occupancy levels, rental rates and operating costs on properties. Other REITs may use different methodologies for calculating same-store NOI, and accordingly same-store NOI may not be comparable to other REITs. Management believes that same-store NOI is a useful supplemental measure to be used by Management and investors to assess the Company's operating performance. However, same-store NOI should not be viewed as an alternative measure of the Company's financial performance since it does not reflect the operations of the Company's entire portfolio, nor does it reflect the impact of general and administrative expenses, acquisition-related expenses, interest expense, depreciation and amortization costs, other nonproperty income and losses, the level of capital expenditures and leasing costs necessary to maintain the operating performance of the Company's properties, or trends in development and construction activities which are also excluded. Our historicalsignificant economic costs and activities that could materially impact the Company's results of operations. Lexington believes that net income is the most directly comparable GAAP measure to same-store occupancy was 97.6% at December 31, 2015 compared to 98.0% at December 31, 2014. NOI.
The following presents our consolidated same-store net operating income, or NOI, for the years ended December 31, 20152018, 2017 and 20142016 ($000's)000):
|
| | | | | | | |
| | 2015 | | 2014 |
| Total base rent | $ | 302,827 |
| | $ | 303,495 |
|
| Tenant reimbursements and other | 28,637 |
| | 28,109 |
|
| Property operating expenses | (47,578 | ) | | (47,416 | ) |
| Same-store NOI - Cash basis | $ | 283,886 |
| | $ | 284,188 |
|
|
| | | | | | | | | | | |
| | 2018 | | 2017 | | 2016 |
| Total cash base rent | $ | 202,233 |
| | $ | 202,690 |
| | $ | 201,862 |
|
| Tenant reimbursements | 12,993 |
| | 11,233 |
| | 11,740 |
|
| Property operating expenses | (23,729 | ) | | (22,137 | ) | | (20,730 | ) |
| Same-store NOI | $ | 191,497 |
| | $ | 191,786 |
| | $ | 192,872 |
|
Our reported same-store NOI decreased from 2017 to 2018 by 0.2% and decreased by 0.6% from 2016 to 2017. The primary reason for the decrease in same-store NOI between periods primarily related to vacancy. As of December 31, 2018, 2017 and 2016, our historical same-store square footage leased was 92.1%, 98.9% and 99.1%, respectively.
Below is a reconciliation of net income to same-store NOI from 2014 to 2015 was a decrease of 0.1%. This was primarily due to a decrease in base rent due to vacancies and lower renewal rents at certain properties.for periods presented:
|
| | | | | | | | | | | |
| | Twelve Months ended December 31, |
| | 2018 | | 2017 | | 2016 |
| Net income | $ | 230,906 |
| | $ | 86,629 |
| | $ | 96,450 |
|
| | | | | | |
| Interest and amortization expense | 79,880 |
| | 77,883 |
| | 88,032 |
|
| Provision for income taxes | 1,728 |
| | 1,917 |
| | 1,439 |
|
| Depreciation and amortization | 168,191 |
| | 173,968 |
| | 166,048 |
|
| General and administrative | 31,662 |
| | 34,158 |
| | 31,104 |
|
| Litigation settlement | — |
| | 2,050 |
| | — |
|
| Transaction costs | 260 |
| | 2,171 |
| | 836 |
|
| Non-operating income | (3,491 | ) | | (10,378 | ) | | (13,043 | ) |
| Gains on sales of properties | (252,913 | ) | | (63,428 | ) | | (81,510 | ) |
| Impairment charges and loan losses | 95,813 |
| | 44,996 |
| | 100,236 |
|
| Debt satisfaction (gains) charges, net | 2,596 |
| | (6,196 | ) | | 975 |
|
| Equity in (earnings) losses of non-consolidated entities | (1,708 | ) | | 848 |
| | (7,590 | ) |
| Lease termination income | (2,755 | ) | | (3,242 | ) | | (17,363 | ) |
| Straight-line adjustments | (20,968 | ) | | (19,784 | ) | | (37,748 | ) |
| Lease incentives | 1,686 |
| | 1,969 |
| | 1,673 |
|
| Amortization of above/below market leases | (10,132 | ) | | 1,544 |
| | 2,057 |
|
| | | | | | |
| NOI | 320,755 |
| | 325,105 |
| | 331,596 |
|
| | | | | | |
| Less NOI: | | | | | |
| Acquisitions and dispositions | (129,258 | ) | | (133,319 | ) | | (138,724 | ) |
| Same-Store NOI | $ | 191,497 |
| | $ | 191,786 |
| | $ | 192,872 |
|
Funds From Operations
We believe that Funds from Operations, or FFO, which is a non-GAAP measure, is a widely recognized and appropriate measure of the performance of an equity REIT. We believe 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 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.
The National Association of Real Estate Investment Trusts, or NAREIT, defines FFO as “net income (or loss) computed(calculated in accordance with GAAP,GAAP), excluding gains (or losses) from sales of property, plus real estate depreciation and amortization related to real estate, gains and after adjustments for unconsolidated partnershipslosses from the sales of certain real estate assets, gains and joint ventures.” NAREIT clarified its computationlosses from change in control and impairment write-downs of FFOcertain real estate assets and investments in entities when the impairment is directly attributable to exclude impairment charges ondecreases in the value of depreciable real estate owned directly or indirectly.held by the entity. The reconciling items include amounts to adjust earnings from consolidated partially-owned entities and equity in earnings of unconsolidated affiliates to FFO.” FFO does not represent cash generated from operating activities in accordance with GAAP and is not indicative of cash available to fund cash needs.
We present FFO available to common shareholders and unitholders - basic. Webasic and also present FFO available to common shareholdersall equityholders and unitholders - diluted on a company-wide basis as if all securities that are convertible, at the holder's option, into our common shares, are converted.converted at the beginning of the period. We also present Adjusted Company FFO available to all equityholders and unitholders - diluted, which adjusts FFO available to common shareholdersall equityholders and unitholders - diluted for certain items which we believe are not indicative of the operating results of our real estate portfolio. We believe this is an appropriate presentation as it is frequently requested by securitysecurities analysts, investors and other interested parties. Since others do not calculate funds from operationsthese measures in a similar fashion, FFO available to common shareholders and unitholders - diluted and Company FFOthese measures may not be comparable to similarly titled measures as reported by others. FFO available to common shareholders and unitholders - diluted and Company FFOThese measures 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.
The following presents a reconciliation of net income (loss) attributable to common shareholders to FFO available to common shareholders and unitholders and Adjusted Company FFO available to all equityholders and unitholders for each of the years in the three year period ended December 31, 2015 (unaudited and dollars2018 (dollars in thousands, except share and per share amounts):
| | | | | | 2015 | | 2014 | | 2013 | | | 2018 | | 2017 | | 2016 |
| FUNDS FROM OPERATIONS: | FUNDS FROM OPERATIONS: | | | | | | FUNDS FROM OPERATIONS: | | | | | |
| Basic and Diluted: | Basic and Diluted: | | | | | | Basic and Diluted: | | | | | |
| Net income (loss) attributable to common shareholders | $ | 105,100 |
| | $ | 86,324 |
| | $ | (14,089 | ) | |
| Net income attributable to common shareholders | | Net income attributable to common shareholders | $ | 220,838 |
| | $ | 79,067 |
| | $ | 89,109 |
|
| Adjustments: | Adjustments: | | | | | | Adjustments: | | | | | |
| | Depreciation and amortization | 157,644 |
| | 157,537 |
| | 175,023 |
| Depreciation and amortization | 164,261 |
| | 168,683 |
| | 159,363 |
|
| | Impairment charges - real estate, including non-consolidated entities | 36,832 |
| | 49,529 |
| | 35,485 |
| Impairment charges - real estate, including non-consolidated entities | 95,813 |
| | 43,214 |
| | 100,236 |
|
| | Noncontrolling interests - OP units | 1,999 |
| | 2,990 |
| | 1,157 |
| Noncontrolling interests - OP units | 2,528 |
| | 147 |
| | (159 | ) |
| | Amortization of leasing commissions | 5,554 |
| | 5,932 |
| | 5,562 |
| Amortization of leasing commissions | 3,930 |
| | 5,285 |
| | 6,684 |
|
| | Joint venture and noncontrolling interest adjustment | 1,788 |
| | 2,068 |
| | 2,264 |
| Joint venture and noncontrolling interest adjustment | 4,063 |
| | 1,121 |
| | 1,111 |
|
| | Gains on sales of properties, including non-consolidated entities | (25,371 | ) | | (58,426 | ) | | (21,755 | ) | Gains on sales of properties, including non-consolidated entities and net of tax | (254,269 | ) | | (64,880 | ) | | (87,468 | ) |
| FFO available to common shareholders and unitholders - basic | FFO available to common shareholders and unitholders - basic | 283,546 |
| | 245,954 |
| | 183,647 |
| FFO available to common shareholders and unitholders - basic | 237,164 |
| | 232,637 |
| | 268,876 |
|
| | Preferred dividends | 6,290 |
| | 6,290 |
| | 11,520 |
| Preferred dividends | 6,290 |
| | 6,290 |
| | 6,290 |
|
| | Interest and amortization on 6.00% Convertible Notes | 1,048 |
| | 2,090 |
| | 3,113 |
| Interest and amortization on 6.00% Convertible Guaranteed Notes | — |
| | — |
| | 532 |
|
| | Amount allocated to participating securities | 313 |
| | 490 |
| | 656 |
| Amount allocated to participating securities | 287 |
| | 226 |
| | 225 |
|
| FFO available to common shareholders and unitholders - diluted | 291,197 |
| | 254,824 |
| | 198,936 |
| |
| FFO available to all equityholders and unitholders - diluted | | FFO available to all equityholders and unitholders - diluted | 243,741 |
| | 239,153 |
| | 275,923 |
|
| | Debt satisfaction (gains) charges, net, including non-consolidated entities | (25,086 | ) | | 9,764 |
| | 16,442 |
| Litigation settlement | — |
| | 2,050 |
| | — |
|
| | Impairment loss - loan receivable | — |
| | 2,500 |
| | 13,939 |
| Debt satisfaction (gains) charges, net, including non-consolidated entities | 2,596 |
| | (6,174 | ) | | 975 |
|
| | Other/Transaction costs | 1,864 |
| | 1,882 |
| | 795 |
| Impairment loss - loan receivable | — |
| | 5,294 |
| | — |
|
| Company FFO available to common shareholders and unitholders - diluted | $ | 267,975 |
| | $ | 268,970 |
| | $ | 230,112 |
| |
| | | Unearned contingent acquisition consideration | — |
| | (3,922 | ) | | — |
|
| | | Other(1) | (10,038 | ) | | 2,171 |
| | 837 |
|
| Adjusted Company FFO available to all equityholders and unitholders - diluted | | Adjusted Company FFO available to all equityholders and unitholders - diluted | $ | 236,299 |
| | $ | 238,572 |
| | $ | 277,735 |
|
| | | Per Common Share and Unit Amounts | | | | | | | | | | |
| Basic: | | | | | | | | | | |
| FFO | $ | 1.19 |
| | $ | 1.06 |
| | $ | 0.86 |
| $ | 0.99 |
| | $ | 0.96 |
| | $ | 1.13 |
|
| | | | | | | | | | | |
| Diluted: | | | | | | | | | | |
| FFO | $ | 1.19 |
| | $ | 1.05 |
| | $ | 0.88 |
| $ | 0.99 |
| | $ | 0.97 |
| | $ | 1.13 |
|
| Company FFO | $ | 1.10 |
| | $ | 1.11 |
| | $ | 1.02 |
| |
| Adjusted Company FFO | | $ | 0.96 |
| | $ | 0.97 |
| | $ | 1.14 |
|
|
| | | | | | | | |
| Weighted-Average Common Shares | | | | | |
Basic(1) | 237,303,490 |
| | 232,838,280 |
| | 213,944,169 |
|
| Diluted | 244,355,734 |
| | 241,967,017 |
| | 225,444,512 |
|
|
| | | | | | | | |
| Weighted-Average Common Shares: | | | | | |
| Basic: | | | | | |
| Weighted-average common shares outstanding - basic EPS | 236,666,375 |
| | 237,758,408 |
| | 233,633,058 |
|
Operating partnership units(2) | 3,616,120 |
| | 3,693,144 |
| | 3,815,621 |
|
| Weighted-average common shares outstanding - basic FFO | 240,282,495 |
| | 241,451,552 |
| | 237,448,679 |
|
| | | | | | |
| Diluted: | | | | | |
| Weighted-average common shares outstanding - diluted EPS | 240,810,990 |
| | 241,537,837 |
| | 237,679,031 |
|
| Unvested share-based payment awards | — |
| | 666,127 |
| | 549,049 |
|
| 6.00% Convertible Guaranteed Notes | — |
| | — |
| | 1,077,626 |
|
| Preferred shares - Series C | 4,710,570 |
| | 4,710,570 |
| | 4,710,570 |
|
| Weighted-average common shares outstanding - diluted FFO | 245,521,560 |
| | 246,914,534 |
| | 244,016,276 |
|
(1) "Other" primarily consisted of the acceleration of below-market lease intangible accretion in 2018 and transaction related costs in 2017 and 2016.
(2) Includes OP units other than OP units held by us.
Off-Balance Sheet Arrangements
As of December 31, 20152018, we had investments in various real estate entities with varying structures. The real estate investments owned by these entities are generally financed with non-recourse debt. Non-recourse debt is generally defined as debt whereby the lenders' sole recourse with respect to borrower defaults is limited to the value of the assets collateralized by the debt. The lender generally does not have recourse against any other assets owned by the borrower or any of the members or partners of the borrower, except for certain specified exceptions listed in the particular loan documents. These exceptions generally relate to "bad boy" acts, including fraud, prohibited transfers and breaches of material representations. We have guaranteed such obligations for certain of our non-consolidated entities.
Contractual Obligations
The following summarizes our principal contractual obligations as of December 31, 20152018 ($000's):
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | 2016 | | 2017 | | 2018 | | 2019 | | 2020 | | 2021 and Thereafter | | Total |
Mortgages and notes payable(1) | | $ | 139,861 |
| | $ | 95,505 |
| | $ | 44,664 |
| | $ | 106,347 |
| | $ | 50,756 |
| | $ | 454,192 |
| | $ | 891,325 |
|
| Revolving credit facility | | — |
| | — |
| | — |
| | 177,000 |
| | — |
| | — |
| | 177,000 |
|
| Term loans payable | | — |
| | — |
| | — |
| | — |
| | 250,000 |
| | 255,000 |
| | 505,000 |
|
Senior notes payable(2) | | — |
| | — |
| | — |
| | — |
| | — |
| | 500,000 |
| | 500,000 |
|
Convertible notes payable(3) | | — |
| | 12,400 |
| | — |
| | — |
| | — |
| | — |
| | 12,400 |
|
| Trust preferred securities | | — |
| | — |
| | — |
| | — |
| | — |
| | 129,120 |
| | 129,120 |
|
Interest payable - fixed rate(4) | | 83,713 |
| | 69,679 |
| | 58,462 |
| | 47,596 |
| | 42,976 |
| | 161,289 |
| | 463,715 |
|
Operating lease obligations(5) | | 5,499 |
| | 6,230 |
| | 6,043 |
| | 5,537 |
| | 5,530 |
| | 41,141 |
| | 69,980 |
|
| | | $ | 229,073 |
| | $ | 183,814 |
| | $ | 109,169 |
| | $ | 336,480 |
| | $ | 349,262 |
| | $ | 1,540,742 |
| | $ | 2,748,540 |
|
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | 2019 | | 2020 | | 2021 | | 2022 | | 2023 | | 2024 and Thereafter | | Total |
Mortgages and notes payable(1) | | $ | 101,887 |
| | $ | 55,143 |
| | $ | 40,465 |
| | $ | 22,120 |
| | $ | 23,998 |
| | $ | 331,901 |
| | $ | 575,514 |
|
| Term loans payable | | — |
| | — |
| | 300,000 |
| | — |
| | — |
| | — |
| | 300,000 |
|
| Senior notes payable | | — |
| | — |
| | — |
| | — |
| | 250,000 |
| | 250,000 |
| | 500,000 |
|
| Trust preferred securities | | — |
| | — |
| | — |
| | — |
| | — |
| | 129,120 |
| | 129,120 |
|
Interest payable(2) | | 60,716 |
| | 56,650 |
| | 44,081 |
| | 42,173 |
| | 35,527 |
| | 152,607 |
| | 391,754 |
|
Operating lease obligations(3) | | 5,121 |
| | 5,123 |
| | 5,094 |
| | 5,169 |
| | 5,312 |
| | 31,261 |
| | 57,080 |
|
| | | $ | 167,724 |
| | $ | 116,916 |
| | $ | 389,640 |
| | $ | 69,462 |
| | $ | 314,837 |
| | $ | 894,889 |
| | $ | 1,953,468 |
|
| |
| 1. | Includes balloon payments and mortgages secured by properties held for sale. $15.0 million due in 2016 is recourse to us.payments. |
| |
| 2. | Amounts exclude aggregateIncludes variable-rate debt discountsat the rate in effect at December 31, 2018. Variable-rate debt as of $2.1 million.December 31, 2018 is comprised of $129.1 million Trust Preferred Securities (90-day LIBOR plus 1.7% and matures 2037) and $45.0 million term loan (LIBOR plus 1.1% and matures 2021). Also a $255.0 million term loan, which was subject to interest rate swap agreements that expired in in January 2019, bears interest at LIBOR plus 1.1% after expiration of the interest rate swap agreements. |
| |
| 3. | Matures in 2030, however holders have the right to redeem the notes on 01/15/17, 01/15/20 and 01/15/25. Amounts exclude debt discount of $0.2 million. |
| |
4. | Includes variable-rate debt subject to interest rate swap agreements through swap expiration date. |
| |
5. | Includes ground lease payments and office rents. Amounts disclosed do not include rents that adjust to fair market value. In addition, certain ground lease payments due under bond leases allow for a right of offset between the lease obligation and the debt service and accordingly are not included. |
In addition, from time to time we may guarantee certain tenant improvement allowances and lease commissions on behalf of certain property owner subsidiaries when required by the related tenant or lender. However, we do not believe these guarantees are material to us as the obligations under and risks associated with such guarantees are priced into the rent under the lease or the value of the property.
New Accounting Pronouncements
For a discussion of new accounting pronouncements, see note 2 "Summary of Significant Accounting Policies" to our consolidated financial statements included in this report.
Item 7A. Quantitative and Qualitative Disclosure about Market-Risk
Our exposure to market risk relates primarily to our variable-rate debt and fixed-rate debt. As of December 31, 2015, we had $177.0 million consolidated variable-rate indebtedness not subject to an outstanding interest rate swap agreement,swaps and our fixed-rate debt. Our consolidated aggregate principal variable-rate indebtedness was $174.1 million and $384.1 million at December 31, 2018 and 2017, respectively, which represented 8.0%11.6% and 18.4%, respectively, of total long termour aggregate principal consolidated indebtedness. As of December 31, 2014, we had no consolidated variable-rate indebtedness not subject to an outstanding interest rate swap agreement. During 20152018 and 2014,2017, our variable-rate indebtedness had a weighted-average interest ratesrate of 1.5%3.2% and 1.4%2.7%, respectively. Had the weighted-average interest rate been 100 basis points higher, our interest expense for 20152018 and 20142017 would have been increased by approximately $889 thousand$4.9 million and $154 thousand,$1.7 million, respectively. As of December 31, 20152018 and 2014,2017, our aggregate principal consolidated fixed-rate debt was approximately $2.0$1.3 billion and $2.1$1.7 billion, respectively, which represented 92.0%88.4% and 100.0%81.6%, respectively, of total long-term indebtedness in each year.our aggregate principal indebtedness.
For certain of our financial instruments, fair values are not readily available since there are no active trading markets as characterized by current exchanges between willing parties. Accordingly, we derive or estimate fair values using various valuation techniques, such as computing the present value of estimated future cash flows using discount rates commensurate with the risks involved. However, the determination of estimated cash flows may be subjective and imprecise. Changes in assumptions or estimation methodologies can have a material effect on these estimated fair values. The following fair values werevalue was determined using the interest rates that we believe our outstanding fixed-rate debt would warrant as of December 31, 20152018 and is indicative of the interest rate environment as of December 31, 20152018, and does not take into consideration the effects of subsequent interest rate fluctuations. Accordingly, we estimate that the fair value of our fixed-rate debt is $2.0was $1.3 billion as of December 31, 20152018.
Our interest rate risk objectives are to limit the impact of interest rate fluctuations on earnings and cash flows and to lower our overall borrowing costs. To achieve these objectives, we manage our exposure to fluctuations in market interest rates through the use of fixed-rate debt instruments to the extent that reasonably favorable rates are obtainable with such arrangements. We generally enterhave historically entered into derivative financial instruments such as interest rate swaps or caps to mitigate our interest rate risk on a related financial instrument or to effectively lock the interest rate on a portion of our variable-rate debt. As of December 31, 20152018, we have tenhad five interest rate swap agreements in our consolidated portfolio.portfolio, all of which expired in January 2019.
Item 8. Financial Statements and Supplementary Data
LEXINGTON REALTY TRUST
AND CONSOLIDATED SUBSIDIARIES
INDEX
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Financial Statement Schedule | |
Schedule III - Real Estate and Accumulated Depreciation and Amortization | |
Report of Independent Registered Public Accounting Firm
TheTo the shareholders and Trustees and Shareholders
of Lexington Realty Trust:Trust
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Lexington Realty Trust and subsidiaries (the “Company”"Company") as of December 31, 20152018 and 2014, and2017, the related consolidated statements of operations, comprehensive income (loss), changes in equity and cash flows, for each of the two years in the three-year period ended December 31, 2015.2018, and the related notes and the schedule listed in the Index at Item 15 for the year ended December 31, 2018 (collectively referred to as the "financial statements"). In connection with our auditsopinion, the financial statements present fairly, in all material respects, the financial position of the consolidated financial statements, we also have auditedCompany as of December 31, 2018 and 2017, and the accompanying financial statement schedule III. These consolidated financial statementsresults of its operations and financial statement schedule are the responsibilityits cash flows for each of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements and financial statement schedule based on our audits.two years in the period ended December 31, 2018, in conformity with accounting principles generally accepted in the United States of America.
We conducted our auditshave also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States). (PCAOB), the Company's internal control over financial reporting as of December 31, 2018, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated March 12, 2019, expressed an unqualified opinion on the Company's internal control over financial reporting.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includesmisstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence supportingregarding the amounts and disclosures in the financial statements. An auditOur audits also includes assessingincluded evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statement presentation.statements. We believe that our audits provide a reasonable basis for our opinion.
In our opinion,
/s/ Deloitte & Touche LLP
New York, New York
March 12, 2019
We have served as the consolidatedCompany's auditor since 2017.
Report of Independent Registered Public Accounting Firm
To the shareholders and Trustees of Lexington Realty Trust
Opinion on Internal Control over Financial Reporting
We have audited the internal control over financial statements referred to above present fairly, in all material respects, the financial positionreporting of Lexington Realty Trust and subsidiaries (the “Company”) as of December 31, 2015 and 2014, and2018, based on criteria established in Internal Control - Integrated Framework (2013) issued by the resultsCommittee of their operations and their cash flows for eachSponsoring Organizations of the years in the three-year period ended December 31, 2015, in conformity with U.S. generally accepted accounting principles. Also inTreadway Commission (COSO). In our opinion, the related financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly,Company maintained, in all material respects, the information set forth therein.effective internal control over financial reporting as of December 31, 2018, based on criteria established in Internal Control - Integrated Framework (2013) issued by COSO.
We have also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), Lexington Realty Trust’s internal control overthe consolidated financial reportingstatements as of and for the year ended December 31, 2015, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations2018, of the Treadway Commission (COSO),Company and our report dated February 25, 2016March 12, 2019, expressed an unqualified opinion on the effectiveness of the Company’s internal control overthose financial reporting.statements.
Basis for Opinion
/s/ KPMG LLP
New York, New York
February 25, 2016
Report of Independent Registered Public Accounting Firm
The Trustees and Shareholders
Lexington Realty Trust:
We have audited Lexington Realty Trust’s (the “Company’s”) internal control over financial reporting as of December 31, 2015, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s AnnualManagement's Report on Internal Control over Financial Reporting.Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States).PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also includedrisk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and trusteesdirectors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as
/s/ Deloitte & Touche LLP
New York, New York
March 12, 2019
Report of Sponsoring Organizations of the Treadway Commission.Independent Registered Public Accounting Firm
The Trustees and Shareholders
Lexington Realty Trust:
We also have audited in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Lexington Realty Trust and subsidiaries as of December 31, 2015 and 2014, and the relatedaccompanying consolidated statements of operations, comprehensive income (loss), changes in equity, and cash flows for each ofLexington Realty Trust and subsidiaries (the Company) for the years in the three-year periodyear ended December 31, 2015, and2016. In connection with our audit, we also have audited the relatedaccompanying financial statement schedule III and our report dated February 25,for the year ended December 31, 2016. The 2016 expressed an unqualified opinion on those consolidated financial statements and financial statement schedule.schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements and financial statement schedule based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements present fairly, in all material respects, the results of Lexington Realty Trust and subsidiaries’ operations and their cash flows for the year ended December 31, 2016 in conformity with U.S. generally accepted accounting principles. Also in our opinion, the related financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein for the year ended December 31, 2016.
/s/As discussed in Note 2 to the consolidated financial statements, the Company has changed its method of accounting for how certain cash receipts and cash payments, as well as restricted cash, are presented and classified in the consolidated statement of cash flows in 2016 due to the adoption of ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments,and ASU 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash, respectively.
(signed) KPMG LLP
New York, New York
February 25, 201628, 2017, except for the first paragraph
of New Accounting Standards Adopted in 2018 in
Note 2, as to which the date is March 12, 2019
LEXINGTON REALTY TRUST AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
($000, except share and per share data)
As of December 31,
| | | | 2015 | | 2014 | 2018 | | 2017 |
| Assets: | | | | | | |
| Real estate, at cost | $ | 3,789,711 |
| | $ | 3,671,560 |
| $ | 3,090,134 |
| | $ | 3,936,459 |
|
| Real estate - intangible assets | 692,778 |
| | 705,566 |
| 419,612 |
| | 599,091 |
|
| Investments in real estate under construction | 95,402 |
| | 106,238 |
| |
| | 4,577,891 |
| | 4,483,364 |
| 3,509,746 |
| | 4,535,550 |
|
| Less: accumulated depreciation and amortization | 1,179,969 |
| | 1,196,114 |
| 954,087 |
| | 1,225,650 |
|
| Real estate, net | 3,397,922 |
| | 3,287,250 |
| 2,555,659 |
| | 3,309,900 |
|
| Assets held for sale | 24,425 |
| | 3,379 |
| 63,868 |
| | 2,827 |
|
| Cash and cash equivalents | 93,249 |
| | 191,077 |
| 168,750 |
| | 107,762 |
|
| Restricted cash | 10,637 |
| | 17,379 |
| 8,497 |
| | 4,394 |
|
| Investment in and advances to non-consolidated entities | 31,054 |
| | 19,402 |
| 66,183 |
| | 17,476 |
|
| Deferred expenses (net of accumulated amortization of $38,547 in 2015 and $34,087 in 2014) | 63,832 |
| | 65,860 |
| |
| Loans receivable, net | 95,871 |
| | 105,635 |
| |
| Deferred expenses (net of accumulated amortization of $27,397 in 2018 and $35,072 in 2017) | | 15,937 |
| | 31,693 |
|
| Rent receivable - current | 7,193 |
| | 6,311 |
| 3,475 |
| | 5,450 |
|
| Rent receivable – deferred | 87,547 |
| | 61,372 |
| 58,692 |
| | 52,769 |
|
| Other assets | 18,505 |
| | 20,229 |
| 12,779 |
| | 20,749 |
|
| Total assets | $ | 3,830,235 |
| | $ | 3,777,894 |
| $ | 2,953,840 |
| | $ | 3,553,020 |
|
| | | | | | | |
| Liabilities and Equity: | |
| | |
| |
| | |
|
| Liabilities: | |
| | |
| |
| | |
|
| Mortgages and notes payable | $ | 882,952 |
| | $ | 945,216 |
| |
| Credit facility borrowings | 177,000 |
| | — |
| |
| Term loans payable | 505,000 |
| | 505,000 |
| |
| Senior notes payable | 497,947 |
| | 497,675 |
| |
| Convertible notes payable | 12,180 |
| | 15,664 |
| |
| Trust preferred securities | 129,120 |
| | 129,120 |
| |
| Mortgages and notes payable, net | | $ | 570,420 |
| | $ | 689,810 |
|
| Revolving credit facility borrowings | | — |
| | 160,000 |
|
| Term loans payable, net | | 298,733 |
| | 596,663 |
|
| Senior notes payable, net | | 496,034 |
| | 495,198 |
|
| Trust preferred securities, net | | 127,296 |
| | 127,196 |
|
| Dividends payable | 45,440 |
| | 42,864 |
| 48,774 |
| | 49,504 |
|
| Liabilities held for sale | 8,405 |
| | 2,843 |
| 386 |
| | — |
|
| Accounts payable and other liabilities | 41,479 |
| | 37,740 |
| 30,790 |
| | 38,644 |
|
| Accrued interest payable | 8,851 |
| | 8,301 |
| 4,523 |
| | 5,378 |
|
| Deferred revenue - including below market leases (net of accumulated accretion of $30,548 in 2015 and $35,239 in 2014) | 42,524 |
| | 68,215 |
| |
| Deferred revenue - including below market leases (net of accumulated accretion of $17,606 in 2018 and $26,081 in 2017) | | 20,531 |
| | 33,182 |
|
| Prepaid rent | 16,806 |
| | 16,336 |
| 9,675 |
| | 16,610 |
|
| Total liabilities | 2,367,704 |
| | 2,268,974 |
| 1,607,162 |
| | 2,212,185 |
|
| | | | | | | |
| Commitments and contingencies |
|
| |
|
|
|
| |
|
|
| Equity: | |
| | |
| |
| | |
|
| Preferred shares, par value $0.0001 per share; authorized 100,000,000 shares, | |
| | |
| |
| | |
|
| Series C Cumulative Convertible Preferred, liquidation preference $96,770 and 1,935,400 shares issued and outstanding | 94,016 |
| | 94,016 |
| 94,016 |
| | 94,016 |
|
| Common shares, par value $0.0001 per share; authorized 400,000,000 shares, 234,575,225 and 233,278,037 shares issued and outstanding in 2015 and 2014, respectively | 23 |
| | 23 |
| |
| Common shares, par value $0.0001 per share; authorized 400,000,000 shares, 235,008,554 and 240,689,081 shares issued and outstanding in 2018 and 2017, respectively | | 24 |
| | 24 |
|
| Additional paid-in-capital | 2,776,837 |
| | 2,763,374 |
| 2,772,855 |
| | 2,818,520 |
|
| Accumulated distributions in excess of net income | (1,428,908 | ) | | (1,372,051 | ) | (1,537,100 | ) | | (1,589,724 | ) |
| Accumulated other comprehensive income (loss) | (1,939 | ) | | 404 |
| |
| Accumulated other comprehensive income | | 76 |
| | 1,065 |
|
| Total shareholders’ equity | 1,440,029 |
| | 1,485,766 |
| 1,329,871 |
| | 1,323,901 |
|
| Noncontrolling interests | 22,502 |
| | 23,154 |
| 16,807 |
| | 16,934 |
|
| Total equity | 1,462,531 |
| | 1,508,920 |
| 1,346,678 |
| | 1,340,835 |
|
| Total liabilities and equity | $ | 3,830,235 |
| | $ | 3,777,894 |
| $ | 2,953,840 |
| | $ | 3,553,020 |
|
The accompanying notes are an integral part of these consolidated financial statements.
LEXINGTON REALTY TRUST AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
($000, except share and per share data)
Years ended December 31,
| | | | 2015 | | 2014 | | 2013 | 2018 | | 2017 | | 2016 |
| Gross revenues: | | | | | | | | | | |
| Rental | $ | 399,485 |
| | $ | 392,480 |
| | $ | 335,721 |
| $ | 364,731 |
| | $ | 359,832 |
| | $ | 398,065 |
|
| Tenant reimbursements | 31,354 |
| | 31,338 |
| | 25,334 |
| 30,608 |
| | 31,809 |
| | 31,431 |
|
| Total gross revenues | 430,839 |
| | 423,818 |
| | 361,055 |
| 395,339 |
| | 391,641 |
| | 429,496 |
|
| Expense applicable to revenues: | | | | | | | | | | |
| Depreciation and amortization | (163,198 | ) | | (154,837 | ) | | (157,901 | ) | (168,191 | ) | | (173,968 | ) | | (166,048 | ) |
| Property operating | (59,655 | ) | | (63,673 | ) | | (54,757 | ) | (42,675 | ) | | (49,194 | ) | | (47,355 | ) |
| General and administrative | (29,276 | ) | | (28,255 | ) | | (28,426 | ) | (31,662 | ) | | (34,158 | ) | | (31,104 | ) |
| Litigation settlement | | — |
| | (2,050 | ) | | — |
|
| Non-operating income | 11,429 |
| | 14,505 |
| | 9,160 |
| 3,491 |
| | 10,378 |
| | 13,043 |
|
| Interest and amortization expense | (89,739 | ) | | (97,303 | ) | | (85,892 | ) | (79,880 | ) | | (77,883 | ) | | (88,032 | ) |
| Gains on sales of financial assets, net | — |
| | 855 |
| | — |
| |
| Debt satisfaction gains (charges), net | 25,150 |
| | (9,452 | ) | | (25,347 | ) | (2,596 | ) | | 6,196 |
| | (975 | ) |
| Impairment charges and loan losses | (36,832 | ) | | (37,333 | ) | | (35,579 | ) | (95,813 | ) | | (44,996 | ) | | (100,236 | ) |
| Gains on sales of properties | 23,307 |
| | — |
| | — |
| 252,913 |
| | 63,428 |
| | 81,510 |
|
| Income (loss) before provision for income taxes, equity in earnings (losses) of non-consolidated entities and discontinued operations | 112,025 |
| | 48,325 |
| | (17,687 | ) | |
| Income before provision for income taxes, equity in earnings (losses) of non-consolidated entities and discontinued operations | | 230,926 |
| | 89,394 |
| | 90,299 |
|
| Provision for income taxes | (568 | ) | | (1,109 | ) | | (3,177 | ) | (1,728 | ) | | (1,917 | ) | | (1,439 | ) |
| Equity in earnings (losses) of non-consolidated entities | 1,752 |
| | 626 |
| | (157 | ) | 1,708 |
| | (848 | ) | | 7,590 |
|
| Income (loss) from continuing operations | 113,209 |
| | 47,842 |
| | (21,021 | ) | |
| Discontinued operations: | | | | | | |
| Income from discontinued operations | 109 |
| | 6,252 |
| | 6,244 |
| |
| Provision for income taxes | (4 | ) | | (59 | ) | | (1,817 | ) | |
| Debt satisfaction gains (charges), net | — |
| | (312 | ) | | 8,905 |
| |
| Gains on sales of properties | 1,577 |
| | 57,507 |
| | 24,472 |
| |
| Impairment charges | — |
| | (13,767 | ) | | (12,920 | ) | |
| Total discontinued operations | 1,682 |
| | 49,621 |
| | 24,884 |
| |
| Net income | 114,891 |
| | 97,463 |
| | 3,863 |
| 230,906 |
| | 86,629 |
| | 96,450 |
|
| Less net income attributable to noncontrolling interests | (3,188 | ) | | (4,359 | ) | | (2,233 | ) | (3,491 | ) | | (1,046 | ) | | (826 | ) |
| Net income attributable to Lexington Realty Trust shareholders | 111,703 |
| | 93,104 |
| | 1,630 |
| 227,415 |
| | 85,583 |
| | 95,624 |
|
| Dividends attributable to preferred shares – Series C – 6.50% rate | (6,290 | ) | | (6,290 | ) | | (6,290 | ) | (6,290 | ) | | (6,290 | ) | | (6,290 | ) |
| Dividends attributable to preferred shares – Series D – 7.55% rate | — |
| | — |
| | (3,543 | ) | |
| Allocation to participating securities | (313 | ) | | (490 | ) | | (656 | ) | (287 | ) | | (226 | ) | | (225 | ) |
| Deemed dividend – Series D | — |
| | — |
| | (5,230 | ) | |
| Net income (loss) attributable to common shareholders | $ | 105,100 |
| | $ | 86,324 |
| | $ | (14,089 | ) | |
| Income (loss) per common share – basic: | | | | | | |
| Income (loss) from continuing operations | $ | 0.44 |
| | $ | 0.17 |
| | $ | (0.18 | ) | |
| Income from discontinued operations | 0.01 |
| | 0.21 |
| | 0.11 |
| |
| Net income (loss) attributable to common shareholders | $ | 0.45 |
| | $ | 0.38 |
| | $ | (0.07 | ) | |
| Net income attributable to common shareholders | | $ | 220,838 |
| | $ | 79,067 |
| | $ | 89,109 |
|
| Net income attributable to common shareholders - per common share basic | | $ | 0.93 |
| | $ | 0.33 |
| | $ | 0.38 |
|
| Weighted-average common shares outstanding – basic | 233,455,056 |
| | 228,966,253 |
| | 209,797,238 |
| 236,666,375 |
| | 237,758,408 |
| | 233,633,058 |
|
| Income (loss) per common share – diluted: | | | | | | |
| Income (loss) from continuing operations | $ | 0.44 |
| | $ | 0.17 |
| | $ | (0.18 | ) | |
| Income from discontinued operations | 0.01 |
| | 0.21 |
| | 0.11 |
| |
| Net income (loss) attributable to common shareholders | $ | 0.45 |
| | $ | 0.38 |
| | $ | (0.07 | ) | |
| Net income attributable to common shareholders - per common share diluted | | $ | 0.93 |
| | $ | 0.33 |
| | $ | 0.37 |
|
| Weighted-average common shares outstanding – diluted | 233,751,775 |
| | 229,436,708 |
| | 209,797,238 |
| 240,810,990 |
| | 241,537,837 |
| | 237,679,031 |
|
| Amounts attributable to common shareholders: | | | | | | |
| Income (loss) from continuing operations | $ | 103,418 |
| | $ | 37,652 |
| | $ | (38,506 | ) | |
| Income from discontinued operations | 1,682 |
| | 48,672 |
| | 24,417 |
| |
| Net income (loss) attributable to common shareholders | $ | 105,100 |
| | $ | 86,324 |
| | $ | (14,089 | ) | |
The accompanying notes are an integral part of these consolidated financial statements.
LEXINGTON REALTY TRUST AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
($000)
Years ended December 31,
| | | | 2015 | | 2014 | | 2013 | 2018 | | 2017 | | 2016 |
| Net income | $ | 114,891 |
| | $ | 97,463 |
| | $ | 3,863 |
| $ | 230,906 |
| | $ | 86,629 |
| | $ | 96,450 |
|
| Other comprehensive income (loss): | |
| | | | | |
| | | | |
| Change in unrealized gain (loss) on interest rate swaps, net | (2,343 | ) | | (4,035 | ) | | 10,663 |
| (989 | ) | | 2,098 |
| | 906 |
|
| Other comprehensive income (loss) | (2,343 | ) | | (4,035 | ) | | 10,663 |
| (989 | ) | | 2,098 |
| | 906 |
|
| Comprehensive income | 112,548 |
| | 93,428 |
| | 14,526 |
| 229,917 |
| | 88,727 |
| | 97,356 |
|
| Comprehensive income attributable to noncontrolling interests | (3,188 | ) | | (4,359 | ) | | (2,233 | ) | (3,491 | ) | | (1,046 | ) | | (826 | ) |
| Comprehensive income attributable to Lexington Realty Trust shareholders | $ | 109,360 |
| | $ | 89,069 |
| | $ | 12,293 |
| $ | 226,426 |
| | $ | 87,681 |
| | $ | 96,530 |
|
The accompanying notes are an integral part of these consolidated financial statements.
LEXINGTON REALTY TRUST AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
($000 except share amounts)
Year ended December 31, 20152018
| | | | | | Lexington Realty Trust Shareholders | | | | | Lexington Realty Trust Shareholders | | |
| | Total | | Number of Preferred Shares | | Preferred Shares | | Number of Common Shares | | Common Shares | | Additional Paid-in-Capital | | Accumulated Distributions in Excess of Net Income | | Accumulated Other Comprehensive Income (Loss) | | Noncontrolling Interests | Total | | Number of Preferred Shares | | Preferred Shares | | Number of Common Shares | | Common Shares | | Additional Paid-in-Capital | | Accumulated Distributions in Excess of Net Income | | Accumulated Other Comprehensive Income | | Noncontrolling Interests |
| Balance December 31, 2014 | $ | 1,508,920 |
| | 1,935,400 |
| | $ | 94,016 |
| | 233,278,037 |
| | $ | 23 |
| | $ | 2,763,374 |
| | $ | (1,372,051 | ) | | $ | 404 |
| | $ | 23,154 |
| |
| Balance December 31, 2017 | | $ | 1,340,835 |
| | 1,935,400 |
| | $ | 94,016 |
| | 240,689,081 |
| | $ | 24 |
| | $ | 2,818,520 |
| | $ | (1,589,724 | ) | | $ | 1,065 |
| | $ | 16,934 |
|
| Redemption of noncontrolling OP units for common shares | — |
| | — |
| | — |
| | 32,780 |
| | — |
| | 165 |
| | — |
| | — |
| | (165 | ) | — |
| | — |
| | — |
| | 53,388 |
| | — |
| | 189 |
| | — |
| | — |
| | (189 | ) |
| Repurchase of common shares | (18,431 | ) | | — |
| | — |
| | (2,216,799 | ) | | — |
| | (18,431 | ) | | — |
| | — |
| | — |
| (49,858 | ) | | — |
| | — |
| | (5,851,252 | ) | | — |
| | (49,858 | ) | | — |
| | — |
| | — |
|
| Issuance of common shares upon conversion of convertible notes | 3,630 |
| | — |
| | — |
| | 519,664 |
| | — |
| | 3,630 |
| | — |
| | — |
| | — |
| |
| Exercise of employee common share options | | 115 |
| | — |
| | — |
| | 16,390 |
| | — |
| | 115 |
| | — |
| | — |
| | — |
|
| Issuance of common shares and deferred compensation amortization, net | 28,099 |
| | — |
| | — |
| | 2,961,543 |
| | — |
| | 28,099 |
| | — |
| | — |
| | — |
| 6,520 |
| | — |
| | — |
| | 966,791 |
| | — |
| | 6,520 |
| | — |
| | — |
| | — |
|
| Acquisition of consolidated joint venture partner's equity interest | (1,234 | ) | | — |
| | — |
| | — |
| | — |
| | — |
| | (1,247 | ) | | — |
| | 13 |
| |
| Repurchase of common shares to settle tax obligations | | (2,544 | ) | | — |
| | — |
| | (271,792 | ) | | — |
| | (2,544 | ) | | — |
| | — |
| | — |
|
| Forfeiture of employee common shares | | (71 | ) | | — |
| | — |
| | (594,052 | ) | | — |
| | (87 | ) | | 16 |
| | — |
| | — |
|
| Dividends/distributions | (171,001 | ) | | — |
| | — |
| | — |
| | — |
| | — |
| | (167,313 | ) | | — |
| | (3,688 | ) | (178,236 | ) | | — |
| | — |
| | — |
| | — |
| | — |
| | (174,807 | ) | | — |
| | (3,429 | ) |
| Net income | 114,891 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 111,703 |
| | — |
| | 3,188 |
| 230,906 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 227,415 |
| | — |
| | 3,491 |
|
| Other comprehensive loss | (2,343 | ) | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | (2,343 | ) | | — |
| (989 | ) | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | (989 | ) | | — |
|
| Balance December 31, 2015 | $ | 1,462,531 |
| | 1,935,400 |
| | $ | 94,016 |
| | 234,575,225 |
| | $ | 23 |
| | $ | 2,776,837 |
| | $ | (1,428,908 | ) | | $ | (1,939 | ) | | $ | 22,502 |
| |
| Balance December 31, 2018 | | $ | 1,346,678 |
| | 1,935,400 |
| | $ | 94,016 |
| | 235,008,554 |
| | $ | 24 |
| | $ | 2,772,855 |
| | $ | (1,537,100 | ) | | $ | 76 |
| | $ | 16,807 |
|
The accompanying notes are an integral part of the consolidated financial statements.
LEXINGTON REALTY TRUST AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
($000 except share amounts)
Year ended December 31, 20142017
| | | | | | Lexington Realty Trust Shareholders | | | | | Lexington Realty Trust Shareholders | | |
| | Total | | Number of Preferred Shares | | Preferred Shares | | Number of Common Shares | | Common Shares | | Additional Paid-in-Capital | | Accumulated Distributions in Excess of Net Income | | Accumulated Other Comprehensive Income (Loss) | | Noncontrolling Interests | Total | | Number of Preferred Shares | | Preferred Shares | | Number of Common Shares | | Common Shares | | Additional Paid-in-Capital | | Accumulated Distributions in Excess of Net Income | | Accumulated Other Comprehensive Income (Loss) | | Noncontrolling Interests |
| Balance December 31, 2013 | $ | 1,539,483 |
| | 1,935,400 |
| | $ | 94,016 |
| | 228,663,022 |
| | $ | 23 |
| | $ | 2,717,787 |
| | $ | (1,300,527 | ) | | $ | 4,439 |
| | $ | 23,745 |
| |
| Balance December 31, 2016 | | $ | 1,412,491 |
| | 1,935,400 |
| | $ | 94,016 |
| | 238,037,177 |
| | $ | 24 |
| | $ | 2,800,736 |
| | $ | (1,500,966 | ) | | $ | (1,033 | ) | | $ | 19,714 |
|
| Redemption of noncontrolling OP units for common shares | (1,962 | ) | | — |
| | — |
| | 29,086 |
| | — |
| | (858 | ) | | — |
| | — |
| | (1,104 | ) | — |
| | — |
| | — |
| | 140,746 |
| | — |
| | 584 |
| | — |
| | — |
| | (584 | ) |
| Issuance of common shares upon conversion of convertible notes | 14,347 |
| | — |
| | — |
| | 1,904,542 |
| | — |
| | 14,347 |
| | — |
| | — |
| | — |
| |
| Exercise of employee common share options | | 478 |
| | — |
| | — |
| | 151,106 |
| | — |
| | 478 |
| | — |
| | — |
| | — |
|
| Issuance of common shares and deferred compensation amortization, net | | 24,673 |
| | — |
| | — |
| | 2,360,052 |
| | — |
| | 24,673 |
| | — |
| | — |
| | — |
|
| Acquisition of consolidated joint venture partner's equity interest | (2,100 | ) | | — |
| | — |
| | — |
| | — |
| | — |
| | (2,262 | ) | | — |
| | 162 |
| (7,951 | ) | | — |
| | — |
| | — |
| | — |
| | (7,951 | ) | | — |
| | — |
| | — |
|
| Exercise of employee common share options | 597 |
| | — |
| | — |
| | 303,852 |
| | — |
| | 597 |
| | — |
| | — |
| | — |
| |
| Forfeiture of employee common shares | (57 | ) | | — |
| | — |
| | (13,658 | ) | | — |
| | (57 | ) | | — |
| | — |
| | — |
| |
| Issuance of common shares and deferred compensation amortization, net | 31,558 |
| | — |
| | — |
| | 2,391,193 |
| | — |
| | 31,558 |
| | — |
| | — |
| | — |
| |
| Dividends/distributions | (166,374 | ) | | — |
| | — |
| | — |
| | — |
| | — |
| | (162,366 | ) | | — |
| | (4,008 | ) | (177,583 | ) | | — |
| | — |
| | — |
| | — |
| | — |
| | (174,341 | ) | | — |
| | (3,242 | ) |
| Net income | 97,463 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 93,104 |
| | — |
| | 4,359 |
| 86,629 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 85,583 |
| | — |
| | 1,046 |
|
| Other comprehensive loss | (4,035 | ) | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | (4,035 | ) | | — |
| |
| Balance December 31, 2014 | $ | 1,508,920 |
| | 1,935,400 |
| | $ | 94,016 |
| | 233,278,037 |
| | $ | 23 |
| | $ | 2,763,374 |
| | $ | (1,372,051 | ) | | $ | 404 |
| | $ | 23,154 |
| |
| Other comprehensive income | | 2,098 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 2,098 |
| | — |
|
| Balance December 31, 2017 | | $ | 1,340,835 |
| | 1,935,400 |
| | $ | 94,016 |
| | 240,689,081 |
| | $ | 24 |
| | $ | 2,818,520 |
| | $ | (1,589,724 | ) | | $ | 1,065 |
| | $ | 16,934 |
|
The accompanying notes are an integral part of the consolidated financial statements.
LEXINGTON REALTY TRUST AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
($000 except share amounts)
Year ended December 31, 20132016
| | | | | | Lexington Realty Trust Shareholders | | | | | Lexington Realty Trust Shareholders | | |
| | Total | | Number of Preferred Shares | | Preferred Shares | | Number of Common Shares | | Common Shares | | Additional Paid-in-Capital | | Accumulated Distributions in Excess of Net Income | | Accumulated Other Comprehensive Income (Loss) | | Noncontrolling Interests | Total | | Number of Preferred Shares | | Preferred Shares | | Number of Common Shares | | Common Shares | | Additional Paid-in-Capital | | Accumulated Distributions in Excess of Net Income | | Accumulated Other Comprehensive Loss | | Noncontrolling Interests |
| Balance December 31, 2012 | $ | 1,333,165 |
| | 8,135,400 |
| | $ | 243,790 |
| | 178,616,664 |
| | $ | 18 |
| | $ | 2,212,949 |
| | $ | (1,143,803 | ) | | $ | (6,224 | ) | | $ | 26,435 |
| |
| Balance December 31, 2015 | | $ | 1,462,531 |
| | 1,935,400 |
| | $ | 94,016 |
| | 234,575,225 |
| | $ | 23 |
| | $ | 2,776,837 |
| | $ | (1,428,908 | ) | | $ | (1,939 | ) | | $ | 22,502 |
|
| Redemption of noncontrolling OP units for common shares | — |
| | — |
| | — |
| | 202,241 |
| | — |
| | 1,053 |
| | — |
| | — |
| | (1,053 | ) | — |
| | — |
| | — |
| | 48,549 |
| | — |
| | 210 |
| | — |
| | — |
| | (210 | ) |
| Repurchase of preferred shares | (155,004 | ) | | (6,200,000 | ) | | (149,774 | ) | | — |
| | — |
| | — |
| | (5,230 | ) | | — |
| | — |
| |
| Acquisition of consolidated joint venture partner's equity interest | (8,918 | ) | | — |
| | — |
| | — |
| | — |
| | — |
| | (8,918 | ) | | — |
| | — |
| |
| Repurchase of common shares | | (8,973 | ) | | — |
| | — |
| | (1,184,113 | ) | | — |
| | (8,973 | ) | | — |
| | — |
| | — |
|
| Issuance of common shares upon conversion of convertible notes | 60,686 |
| | — |
| | — |
| | 7,944,673 |
| | 1 |
| | 60,685 |
| | — |
| | — |
| | — |
| 12,027 |
| | — |
| | — |
| | 1,892,269 |
| | — |
| | 12,027 |
| | — |
| | — |
| | — |
|
| Forfeiture of employee common shares | (20 | ) | | — |
| | — |
| | (3,571 | ) | | — |
| | (20 | ) | | — |
| | — |
| | — |
| |
| Exercise of employee common share options | 2,289 |
| | — |
| | — |
| | 955,478 |
| | — |
| | 2,289 |
| | — |
| | — |
| | — |
| (1,101 | ) | | — |
| | — |
| | 170,412 |
| | — |
| | (1,101 | ) | | — |
| | — |
| | — |
|
| Issuance of common shares and deferred compensation amortization, net | 440,835 |
| | — |
| | — |
| | 40,947,537 |
| | 4 |
| | 440,831 |
| | — |
| | — |
| | — |
| 21,737 |
| | — |
| | — |
| | 2,534,835 |
| | 1 |
| | 21,736 |
| | — |
| | — |
| | — |
|
| Dividends/distributions | (148,076 | ) | | — |
| | — |
| | — |
| | — |
| | — |
| | (144,206 | ) | | — |
| | (3,870 | ) | (171,086 | ) | | — |
| | — |
| | — |
| | — |
| | — |
| | (167,682 | ) | | — |
| | (3,404 | ) |
| Net income | 3,863 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 1,630 |
| | — |
| | 2,233 |
| 96,450 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 95,624 |
| | — |
| | 826 |
|
| Other comprehensive income | 10,663 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 10,663 |
| | — |
| 906 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 906 |
| | — |
|
| Balance December 31, 2013 | $ | 1,539,483 |
| | 1,935,400 |
| | $ | 94,016 |
| | 228,663,022 |
| | $ | 23 |
| | $ | 2,717,787 |
| | $ | (1,300,527 | ) | | $ | 4,439 |
| | $ | 23,745 |
| |
| Balance December 31, 2016 | | $ | 1,412,491 |
| | 1,935,400 |
| | $ | 94,016 |
| | 238,037,177 |
| | $ | 24 |
| | $ | 2,800,736 |
| | $ | (1,500,966 | ) | | $ | (1,033 | ) | | $ | 19,714 |
|
The accompanying notes are an integral part of the consolidated financial statements.
LEXINGTON REALTY TRUST AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
($000)
Years ended December 31,
| | | | 2015 | | 2014 | | 2013 | 2018 | | 2017 | | 2016 |
| Cash flows from operating activities: | | | | | | | | | | |
| Net income | $ | 114,891 |
| | $ | 97,463 |
| | $ | 3,863 |
| $ | 230,906 |
| | $ | 86,629 |
| | $ | 96,450 |
|
| Adjustments to reconcile net income to net cash provided by operating activities: | | | | | | | | | | |
| Depreciation and amortization | 167,186 |
| | 167,289 |
| | 183,833 |
| 172,088 |
| | 177,561 |
| | 170,038 |
|
| Gains on sales of properties | (24,884 | ) | | (57,507 | ) | | (24,472 | ) | (252,913 | ) | | (63,428 | ) | | (81,510 | ) |
| Gains on sales of financial assets, net | — |
| | (855 | ) | | — |
| |
| Debt satisfaction (gains) charges, net | (25,240 | ) | | 2,859 |
| | 3,989 |
| 2,596 |
| | (6,196 | ) | | 975 |
|
| Impairment charges and loan losses | 36,832 |
| | 51,100 |
| | 48,499 |
| 95,813 |
| | 44,996 |
| | 100,236 |
|
| Straight-line rents | (46,432 | ) | | (46,254 | ) | | (23,538 | ) | (20,207 | ) | | (19,568 | ) | | (37,445 | ) |
| Other non-cash (income) expense, net | 3,695 |
| | (390 | ) | | 5,248 |
| (3,060 | ) | | 8,093 |
| | 1,656 |
|
| Equity in (earnings) losses of non-consolidated entities | (1,752 | ) | | (626 | ) | | 157 |
| (1,708 | ) | | 848 |
| | (7,590 | ) |
| Distributions of accumulated earnings from non-consolidated entities, net | 2,056 |
| | 1,381 |
| | 918 |
| |
| Distributions of accumulated earnings from non-consolidated entities | | 2,083 |
| | 403 |
| | 815 |
|
| Unearned contingent acquisition consideration | | — |
| | (3,922 | ) | | — |
|
| Deferred taxes, net | (77 | ) | | 124 |
| | 752 |
| — |
| | — |
| | 59 |
|
| Increase (decrease) in accounts payable and other liabilities | 4,314 |
| | (3,716 | ) | | 6,223 |
| |
| Change in accounts payable and other liabilities | | (129 | ) | | (1,141 | ) | | (1,657 | ) |
| Change in rent receivable and prepaid rent, net | 1,967 |
| | (617 | ) | | 4,420 |
| (3,942 | ) | | 2,922 |
| | (1,825 | ) |
| Increase (decrease) in accrued interest payable | 2,438 |
| | (963 | ) | | (1,058 | ) | |
| Change in accrued interest payable | | (891 | ) | | 16 |
| | 808 |
|
| Other adjustments, net | 9,936 |
| | 5,384 |
| | (2,530 | ) | (2,825 | ) | | 657 |
| | (1,200 | ) |
| Net cash provided by operating activities: | 244,930 |
| | 214,672 |
| | 206,304 |
| 217,811 |
| | 227,870 |
| | 239,810 |
|
| Cash flows from investing activities: | | | |
| | | | | |
| | |
| Investment in real estate, including intangible assets | (349,926 | ) | | (122,395 | ) | | (447,571 | ) | (315,959 | ) | | (558,571 | ) | | (167,797 | ) |
| Investment in real estate under construction | (137,158 | ) | | (131,153 | ) | | (106,009 | ) | — |
| | (83,274 | ) | | (132,192 | ) |
| Capital expenditures | (29,110 | ) | | (17,681 | ) | | (48,822 | ) | (15,506 | ) | | (15,184 | ) | | (4,408 | ) |
| Net proceeds from sale of properties | 156,461 |
| | 237,866 |
| | 75,519 |
| 898,514 |
| | 223,853 |
| | 370,038 |
|
| Net proceeds from sale of non-consolidated investment | | — |
| | 6,127 |
| | — |
|
| Principal payments received on loans receivable | 4,746 |
| | 44,661 |
| | 2,056 |
| — |
| | 139,042 |
| | 2,214 |
|
| Investment in loans receivable | (10,274 | ) | | (43,555 | ) | | (60,727 | ) | |
| Investments in and advances to non-consolidated entities, net | (18,900 | ) | | (2,948 | ) | | (8,193 | ) | (10,206 | ) | | (9,898 | ) | | (37,240 | ) |
| Distributions from non-consolidated entities in excess of accumulated earnings | 1,728 |
| | 1,314 |
| | 15,603 |
| 3,330 |
| | 531 |
| | 8,175 |
|
| Increase in deferred leasing costs | (6,681 | ) | | (10,484 | ) | | (12,060 | ) | |
| Proceeds from the sale of marketable equity securities | — |
| | 725 |
| | — |
| |
| Investment in marketable equity securities | — |
| | (689 | ) | | — |
| |
| Change in escrow deposits and restricted cash | 2,745 |
| | 916 |
| | (7,141 | ) | |
| Payments of deferred leasing costs | | (4,522 | ) | | (6,526 | ) | | (6,558 | ) |
| Change in real estate deposits | (1,902 | ) | | 355 |
| | (238 | ) | (760 | ) | | 20,826 |
| | (20,848 | ) |
| Net cash used in investing activities | (388,271 | ) | | (43,068 | ) | | (597,583 | ) | |
| Net cash provided by (used in) investing activities | | 554,891 |
| | (283,074 | ) | | 11,384 |
|
| Cash flows from financing activities: | | | |
| | | | | |
| | |
| Dividends to common and preferred shareholders | (164,737 | ) | | (159,520 | ) | | (135,539 | ) | (175,537 | ) | | (172,101 | ) | | (165,858 | ) |
| Proceeds from senior notes | — |
| | 249,708 |
| | 247,565 |
| |
| Conversion of convertible notes | (529 | ) | | (233 | ) | | (3,270 | ) | — |
| | — |
| | (672 | ) |
| Principal amortization payments | (32,440 | ) | | (35,206 | ) | | (34,446 | ) | (29,666 | ) | | (30,082 | ) | | (26,796 | ) |
| Principal payments on debt, excluding normal amortization | (106,956 | ) | | (202,262 | ) | | (347,122 | ) | (14,599 | ) | | (50,797 | ) | | (109,973 | ) |
| Change in revolving credit facility borrowing, net | 177,000 |
| | (48,000 | ) | | 48,000 |
| |
| Increase in deferred financing costs | (9,336 | ) | | (4,558 | ) | | (12,307 | ) | |
| Proceeds of mortgages and notes payable | 190,843 |
| | 27,790 |
| | 253,500 |
| 26,350 |
| | 45,400 |
| | 254,650 |
|
| Term loan payments | | (300,000 | ) | | — |
| | — |
|
| Proceeds from term loans | — |
| | 99,000 |
| | 151,000 |
| — |
| | 95,000 |
| | — |
|
| Change in restricted cash | (1,573 | ) | | — |
| | — |
| |
| Revolving credit facility borrowings | | 150,000 |
| | 270,000 |
| | 95,000 |
|
| Revolving credit facility payments | | (310,000 | ) | | (110,000 | ) | | (272,000 | ) |
| Payment of early extinguishment of debt charges | | (5 | ) | | (1,326 | ) | | (5,603 | ) |
| Payment of developer liabilities | | — |
| | — |
| | (4,016 | ) |
| Payments of deferred financing costs | | (690 | ) | | (2,124 | ) | | (1,842 | ) |
| Cash distributions to noncontrolling interests | (3,688 | ) | | (4,008 | ) | | (3,870 | ) | (3,429 | ) | | (3,242 | ) | | (3,404 | ) |
| Purchase of a noncontrolling interest | (4,022 | ) | | (2,100 | ) | | (8,918 | ) | |
| Repurchase of common and preferred shares | (18,431 | ) | | — |
| | (155,004 | ) | |
| Redemption of noncontrolling interests | — |
| | (1,962 | ) | | — |
| |
| Issuance of common shares, net | 19,382 |
| | 23,563 |
| | 434,927 |
| |
| Redemption of a noncontrolling interest | | — |
| | (7,951 | ) | | — |
|
| Repurchase of common shares | | (47,217 | ) | | — |
| | (8,973 | ) |
| Issuance of common shares, net of costs and repurchases to settle tax obligations | | (2,818 | ) | | 16,804 |
| | 12,186 |
|
| Net cash provided by (used in) financing activities | 45,513 |
| | (57,788 | ) | | 434,516 |
| (707,611 | ) | | 49,581 |
| | (237,301 | ) |
| Change in cash and cash equivalents | (97,828 | ) | | 113,816 |
| | 43,237 |
| |
| Cash and cash equivalents, at beginning of year | 191,077 |
| | 77,261 |
| | 34,024 |
| |
| Cash and cash equivalents, at end of year | $ | 93,249 |
| | $ | 191,077 |
| | $ | 77,261 |
| |
| Change in cash, cash equivalents and restricted cash | | 65,091 |
| | (5,623 | ) | | 13,893 |
|
| Cash, cash equivalents and restricted cash, at beginning of year | | 112,156 |
| | 117,779 |
| | 103,886 |
|
| Cash, cash equivalents and restricted cash, at end of year | | $ | 177,247 |
| | $ | 112,156 |
| | $ | 117,779 |
|
The accompanying notes are an integral part of these consolidated financial statements.
LEXINGTON REALTY TRUST AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
($000, except share/unit data)
(1) The Company
Lexington Realty Trust (together with its consolidated subsidiaries, except when the context only applies to the parent entity, the “Company”) is a self-managed and self-administered Maryland statutory real estate investment trust (“REIT”) that owns a diversified portfolio of equity and debt investments in single-tenant properties and land. A majority of the real properties in which the Company has an interest and all land interests are generally subject to net leases or similar leases where the tenant pays all or substantially all of the cost, including cost increases, for real estate taxes, insurance, utilities and ordinary maintenance of the property. However, certain leases provide that the landlord is responsible for certain operating expenses.commercial properties.
As of December 31, 20152018, the Company had equity ownership interests in approximately 215135 consolidated properties located in 4034 states. The properties in which the Company has an interest are leasedprimarily net-leased to tenants in various industries including service, automotive, technology, transportation/logistics and finance/insurance.industries.
The Company believes it has qualified as a REIT under the Internal Revenue Code of 1986, as amended (the “Code”). Accordingly, the Company will not be subject to federal income tax, provided that distributions to its shareholders equal at least the amount of its REIT taxable income as defined under the Code. The Company is permitted to participate in certain activities from which it was previously precluded in order to maintain its qualification as a REIT, so long as these activities are conducted in entities which elect to be treated as taxable REIT subsidiaries (“TRS”) under the Code. As such, the TRS are subject to federal income taxes on the income from these activities.
The Company conducts its operations either directly or indirectly through (1) property owner subsidiaries and lender subsidiaries, which are single purpose entities, (2) an operating partnership, Lepercq Corporate Income Fund L.P. (“LCIF”), in which the Company is the sole unit holder of the general partner and the sole unit holder of the limited partner that holds a majority of the limited partner interests, (3) a wholly-owned TRS, Lexington Realty Advisors, Inc. (“LRA”), a wholly-owned TRS, and (4) investments in joint ventures. On December 30, 2013, another operating partnership, Lepercq Corporate Income Fund II L.P. (“LCIF II”) , was merged with and into LCIF, with LCIF as the surviving entity. References to “OP Units” refer to units of limited partner interests in LCIF or LCIF II, as applicable.LCIF. Property owner subsidiaries are landlords under leases for properties in which the Company has an interest and/or borrowers under loan agreements secured by properties in which the Company has an interest and lender subsidiaries are lenders under loan agreements where the Company made an investment in a loan asset, but in all cases are separate and distinct legal entities. Each property owner subsidiary is a separate legal entity that maintains separate books and records. The assets and credit of aeach property owner subsidiary orwith a lender subsidiaryproperty subject to a mortgage loan are not available to creditors to satisfy the debt and other obligations of any other person, including any other property owner subsidiary or lender subsidiary or any other affiliate. Consolidated entities that are not property owner subsidiaries do not directly own any of the assets of a property owner subsidiary (or the general partner, member or managing member of such property owner subsidiary), but merely hold partnership, membership or beneficial interest therein, which interests are subordinate to the claims of such property owner subsidiary's (or its general partner's, member's or managing member's) creditors.
| |
| (2) | Summary of Significant Accounting Policies |
Basis of Presentation and Consolidation. The Company's consolidated financial statements are prepared on the accrual basis of accounting in accordance with U.S. generally accepted accounting principles (“GAAP”). The financial statements reflect the accounts of the Company and its consolidated subsidiaries. The Company consolidates its wholly-owned subsidiaries, partnerships and joint ventures which it controls (i) through voting rights or similar rights or (ii) by means other than voting rights if the Company is the primary beneficiary of a variable interest entity ("VIE"). Entities which the Company does not control and entities which are VIEs in which the Company is not the primary beneficiary are accounted for under appropriate GAAP.
If an investment is determined to be a VIE, the Company performs an analysis to determine if theThe Company is the primary beneficiary of the VIE. GAAP requires a VIE to be consolidated by its primary beneficiary. The primary beneficiary is the party thatcertain VIEs as it has a controlling financial interest in these entities. LCIF, which is consolidated and in which the Company has an entity. A controlling financialapproximate 96% interest, in an entity represents both (1) the power to direct the activities ofis a VIE that most significantly impact the entity's economic performance and (2) the obligation to absorb losses or the right to receive benefits of an entity that could potentially be significant to the VIE.
At December 31, 2015 and 2014,The Company had a joint venture limited partnership that owned the Lake Jackson, Texas property, with a developer which was a consolidated VIE. In 2017, upon the closeout of the build-to-suit project, the developer earned notional capital of $7,951, which was simultaneously redeemed by the limited partnership for $7,951. The Company treated the payment as a reduction in shareholders equity in accordance with ASC 810-10-45-23. As a result, the limited partnership, which is still consolidated, is wholly-owned by the Company held variable interests in certain non-consolidated VIEs; however, the Company was not the primary beneficiary of these VIEs as the Company does not haveand no longer a controlling financial interest in the entities. The Company has certain acquisition commitments and/or acquisition, development and construction arrangements with VIEs, for which it is obligated to fund certain amounts as discussed in note 4.VIE.
LEXINGTON REALTY TRUST AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
($000, except share/unit data)
The assets of each VIE are only available to satisfy such VIE's respective liabilities. As of December 31, 2018 and 2017, the VIEs' mortgages and notes payable were non-recourse to the Company. Below is a summary of selected financial data of consolidated VIEs for which the Company is the primary beneficiary included in the Consolidated Balance Sheets as of December 31, 2018 and 2017:
|
| | | | | | | |
| | December 31, 2018 | | December 31, 2017 |
| Real estate, net | $ | 509,916 |
| | $ | 682,587 |
|
| Total assets | $ | 607,963 |
| | $ | 766,025 |
|
| Mortgages and notes payable, net | $ | 192,791 |
| | $ | 212,792 |
|
| Total liabilities | $ | 203,322 |
| | $ | 226,331 |
|
In addition, the Company acquires, from time to time, properties using a reverse like-kind exchange structure pursuant to Section 1031 of the Internal Revenue Code (a "reverse 1031 exchange") and, as such, the properties are in the possession of an Exchange Accommodation Titleholder ("EAT") until the reverse 1031 exchange is completed. The EAT is classified as a VIE as it is a “thinly capitalized” entity. The Company consolidates the EAT because it is the primary beneficiary as it has the ability to control the activities that most significantly impact the EAT's economic performance and can collapse the reverse 1031 exchange structure at any time. The assets of the EAT primarily consist of leased property (net real estate and intangibles).
Earnings Per Share. Basic net income (loss) per share is computed by dividing net income (loss) reduced by preferred dividends and amounts allocated to certain non-vested share-based payment awards, if applicable, by the weighted-average number of common shares outstanding during the period. Diluted net income (loss) per share amounts are similarly computed but include the effect, when dilutive, of in-the-money common share options and non-vested common shares, OP units and put options of certain convertible securities.
Use of Estimates. Management has made a number of significant estimates and assumptions relating to the reporting of assets and liabilities, the disclosure of contingent assets and liabilities and the reported amounts of revenues and expenses to prepare these consolidated financial statements in conformity with GAAP. These estimates and assumptions are based on management's best estimates and judgment. Management evaluates its estimates and assumptions on an ongoing basis using historical experience and other factors, including the current economic environment. The current economic environment has increased the degree of uncertainty inherent in these estimates and assumptions. Management adjusts such estimates when facts and circumstances dictate. The most significant estimates made include the recoverability of accounts receivable, allocation of property purchase price to tangible and intangible assets acquired and liabilities assumed, the determination of VIEs and which entities should be consolidated, the determination of impairment of long-lived assets loans receivable and equity method investments, valuation of derivative financial instruments, valuation of awards granted under compensation plans and the useful lives of long-lived assets. Actual results could differ materially from those estimates.
Fair Value Measurements. The Company follows the guidance in the Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") Topic 820, Fair Value Measurements and Disclosures ("Topic 820"), to determine the fair value of financial and non-financial instruments. Topic 820 defines fair value, establishes a framework for measuring fair value in GAAP and expands disclosures about fair value measurements. Topic 820 establishes a fair value hierarchy that prioritizes observable and unobservable inputs used to measure fair value into three levels: Level 1 - quoted prices (unadjusted) in active markets that are accessible at the measurement date for assets or liabilities; Level 2 - observable prices that are based on inputs not quoted in active markets, but corroborated by market data; and Level 3 - unobservable inputs, which are used when little or no market data is available. The fair value hierarchy gives the highest priority to Level 1 inputs and the lowest priority to Level 3 inputs. In determining fair value, the Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible, as well as considering counterparty credit risk. The Company has formally elected to apply the portfolio exception within Topic 820 with respect to measuring counterparty risk for all of its derivative transactions subject to master netting arrangements.
LEXINGTON REALTY TRUST AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
($000, except share/unit data)
Revenue Recognition. The Company recognizes lease revenue on a straight-line basis over the term of the lease unless another systematic and rational basis is more representative of the time pattern in which the use benefit is derived from the leased property. Revenue is recognized on a contractual basis for leases with escalations tied to a consumer price index with no floor. Renewal options in leases with rental terms that are lower than those in the primary term are excluded from the calculation of straight-line rent if the renewals are not reasonably assured. If the Company funds tenant improvements and the improvements are deemed to be owned by the Company, revenue recognition will commence when the improvements are substantially completed and possession or control of the space is turned over to the tenant. If the Company determines that the tenant allowances are lease incentives, the Company commences revenue recognition when possession or control of the space is turned over to the tenant for tenant work to begin. The lease incentive is recorded as a deferred expense and amortized as a reduction of revenue on a straight-line basis over the respective lease term. The Company recognizes lease termination fees as rental revenue in the period received and writes off unamortized lease-related intangible and other lease-related account balances, provided there are no further Company obligations under the lease. Otherwise, such fees and balances are recognized on a straight-line basis over the remaining obligation period with the termination payments being recorded as a component of rent receivable-deferred on the Consolidated Balance Sheets.
Gains on sales of real estate are recognized based upon the specific timing of the sale as measured against various criteria related to the terms of the transactions and any continuing involvement associated with the properties. If the sales criteria are not met, the gain is deferred and the finance, installment or cost recovery method, as appropriate, is applied until the sales criteria are met. To the extent the Company sells a property and retains a partial ownership interest in the property, the Company recognizes gain to the extent of the third-party ownership interest.
LEXINGTON REALTY TRUST AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
($000, except share/unit data)
Purchase Accounting and Acquisition of Real Estate. The fair value of the real estate acquired, which includes the impact of fair value adjustments for assumed mortgage debt related to property acquisitions, is allocated to the acquired tangible assets, consisting of land, building and improvements and identified intangible assets and liabilities, consisting of the value of above-market and below-market leases, other value of in-place leases and value of tenant relationships, based in each case on their fair values. AcquisitionPrior to January 1, 2018, acquisition and pursuit costs arewere expensed as incurred and arewere included in property operating expense in the accompanying Consolidated Statement of Operations.Operations, which were $2,171 and $836 for 2017 and 2016, respectively. Effective January 1, 2018, the Company's acquisitions are primarily considered asset acquisitions and acquisition costs are now capitalized.
The fair value of the tangible assets of an acquired property (which includes land, building and improvements and fixtures and equipment) is determined by valuing the property as if it were vacant. The “as-if-vacant” value is then allocated to land and building and improvements based on management's determination of relative fair values of these assets. Factors considered by management in performing these analyses include an estimate of carrying costs during the expected lease-up periods considering current market conditions and costs to execute similar leases. In estimating carrying costs, management includes real estate taxes, insurance and other operating expenses and estimates of lost rental revenue during the expected lease-up periods based on current market demand. Management also estimates costs to execute similar leases including leasing commissions. Management generally retains a third party to assist in the allocations.
In allocating the fair value of the identified intangible assets and liabilities of an acquired property, above-market and below-market lease values are recorded based on the difference between the current in-place lease rent and management's estimate of current market rents. Below-market lease intangibles are recorded as part of deferred revenue and amortized into rental revenue over the non-cancelable periods and bargain renewal periods of the respective leases. Above-market leases are recorded as part of intangible assets and amortized as a direct charge against rental revenue over the non-cancelable portion of the respective leases.
The aggregate value of other acquired intangible assets, consisting of in-place leases and tenant relationship values, is measured by the excess of (1) the purchase price paid for a property over (2) the estimated fair value of the property as if vacant, determined as set forth above. This aggregate value is allocated between in-place lease values and tenant relationship values based on management's evaluation of the specific characteristics of each tenant's lease. The value of in-place leases is amortized to expense over the remaining non-cancelable periods and any bargain renewal periods of the respective leases. The value of tenant relationships is amortized to expense over the applicable lease term plus expected renewal periods.
Depreciation is determined by the straight-line method over the remaining estimated economic useful lives of the properties. The Company generally depreciates its real estate assets over periods ranging up to 40 years.
Impairment of Real Estate. The Company evaluates the carrying value of all tangible and intangible real estate assets held for investment for possible impairment when an event or change in circumstance has occurred that indicates its carrying value may not be recoverable. The evaluation includes estimating and reviewing anticipated future undiscounted cash flows to be derived from the asset. If such cash flows are less than the asset's carrying value, an impairment charge is recognized to the extent by which the asset's carrying value exceeds its estimated fair value, which may be below the balance of any non-recourse financing. Estimating future cash flows and fair values is highly subjective and such estimates could differ materially from actual results.
LEXINGTON REALTY TRUST AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
($000, except share/unit data)
Investments in Non-Consolidated Entities. The Company accounts for its investments in 50% or less owned entities under the equity method, unless consolidation is required. If the Company's investment in the entity is insignificant and the Company has no influence over the control of the entity then the entity is accounted for under the cost method.
Impairment of Equity Method Investments. The Company assesses whether there are indicators that the value of its equity method investments may be impaired. An impairment charge is recognized only if the Company determines that a decline in the value of the investment below its carrying value is other-than-temporary. The assessment of impairment is highly subjective and involves the application of significant assumptions and judgments about the Company's intent and ability to recover its investment given the nature and operations of the underlying investment, including the level of the Company's involvement therein, among other factors. To the extent an impairment is deemed to be other-than-temporary, the loss is measured as the excess of the carrying amount of the investment over the estimated fair value of the investment.
Loans Receivable. Loans held for investment are intended to be held to maturity and, accordingly, are carried at cost, net of unamortized loan origination costs and fees, loan purchase discounts, and net of an allowance for loan losses when such loan is deemed to be impaired. Loan origination costs and fees and loan purchase discounts are amortized over the term of the loan. The Company considers a loan impaired when, based upon current information and events, it is probable that it will be unable to collect all amounts due for both principal and interest according to the contractual terms of the loan
LEXINGTON REALTY TRUST AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
($000, except share/unit data)
agreement. Significant judgments are required in determining whether impairment has occurred. The Company performs an impairment analysis by comparing either the present value of expected future cash flows discounted at the loan's effective interest rate, the loan's observable current market price or the fair value of the underlying collateral to the net carrying value of the loan, which may result in an allowance and corresponding loan loss charge. Interest income is recorded on a cash basis for impaired loans.
Acquisition, Development and Construction Arrangements. The Company evaluates loans receivable where the Company participates in residual profits through loan provisions or other contracts to ascertain whether the Company has the same risks and rewards as an owner or a joint venture partner. Where the Company concludes that such arrangements are more appropriately treated as an investment in real estate, the Company reflects such loan receivable as an equity investment in real estate under construction in the Consolidated Balance Sheets. In these cases, no interest income is recorded on the loan receivable and the Company records capitalized interest during the construction period. In arrangements where the Company engages a developer to construct a property or provide funds to a tenant to develop a property, the Company will capitalize the funds provided to the developer/tenant and internal costs of interest and real estate taxes, if applicable, during the construction period.
Properties Held For Sale. Assets and liabilities of properties that meet various held for sale criteria, including whether it is probable that a sale will occur within 12 months, are presented separately in the Consolidated Balance Sheets. As of January 1, 2015, theThe operating results of these properties are reflected as discontinued operations in the Consolidated Statements of Operations only if the sale of these assets represents a strategic shift in operations,operations; if not, the operating results are included in continuing operations. Properties classified as held for sale are carried at the lower of net carrying value or estimated fair value less costs to sell and depreciation and amortization are no longer recognized. Properties that do not meet the held for sale criteria are accounted for as operating properties.
Deferred Expenses. Deferred expenses consist primarily of revolving line of credit debt and leasing costs. Debt costs are amortized using the straight-line method, which approximates the interest method, over the terms of the debt instruments and leasing costs are amortized over the term of the related lease.
Derivative Financial Instruments. The Company accounts for its interest rate swap agreements in accordance with FASB ASC Topic 815, Derivatives and Hedging ("Topic 815"). In accordance with Topic 815, these agreements are carried on the balance sheet at their respective fair values, as an asset if fair value is positive, or as a liability if fair value is negative. If the interest rate swap is designated as a cash flow hedge, the effective portion of the interest rate swap's change in fair value is reported as a component of other comprehensive income (loss); the ineffective portion, if any, is recognized in earnings as an increase or decrease to interest expense.
Upon entering into hedging transactions, the Company documents the relationship between the interest rate swap agreement and the hedged item. The Company also documents its risk-management policies, including objectives and strategies, as they relate to its hedging activities. The Company assesses, both at inception of a hedge and on an ongoing basis, whether or not the hedge is highly effective. The Company will discontinue hedge accounting on a prospective basis with changes in the estimated fair value reflected in earnings when (1) it is determined that the derivative is no longer effective in offsetting cash flows of a hedged item (including forecasted transactions), (2) it is no longer probable that the forecasted transaction will occur or (3) it is determined that designating the derivative as an interest rate swap is no longer appropriate. The Company does and may continue to utilize interest rate swap and cap agreements to manage interest rate risk, but does not anticipate entering into derivative transactions for speculative trading purposes.
Stock Compensation. The Company maintains an equity participation plan. Non-vested share grants generally vest either based upon (1) time, (2) performance and/or (3) market conditions. Options granted under the plan in 2010 vested over a five-year period and expire ten years from the date of grant. Options granted under the plan in 2008 vested upon attainment of certain market performance measures and expireexpired ten years from the date of grant. All share-based payments to employees, including grants of employee stock options, are recognized in the Consolidated Statements of Operations based on their fair values. The Company has made an accounting policy election to account for share-based award forfeitures in compensation costs when they occur.
LEXINGTON REALTY TRUST AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
($000, except share/unit data)
Tax Status. The Company has made an election to qualify, and believes it is operating so as to qualify, as a REIT for federal income tax purposes. Accordingly, the Company generally will not be subject to federal income tax, provided that distributions to its shareholders equal at least the amount of its REIT taxable income as defined under Sections 856 through 860 of the Code.
LEXINGTON REALTY TRUST AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
($000, except share/unit data)
The Company is permitted to participate in certain activities from which it was previously precluded in order to maintain its qualification as a REIT, so long as these activities are conducted in entities which elect to be treated as taxable REIT subsidiaries under the Code. As such, the Company is subject to federal and state income taxes on the income from these activities.
Income taxes, primarily related to the Company's taxable REIT subsidiaries, are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis and operating loss and tax credit carry-forwards. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled.
Cash and Cash Equivalents. The Company considers all highly liquid instruments with maturities of three months or less from the date of purchase to be cash equivalents.
Restricted Cash. Restricted cash is comprised primarily of cash balances held in escrow withby lenders.
Environmental Matters. Under various federal, state and local environmental laws, statutes, ordinances, rules and regulations, an owner of real property may be liable for the costs of removal or remediation of certain hazardous or toxic substances at, on, in or under such property as well as certain other potential costs relating to hazardous or toxic substances. These liabilities may include government fines, penalties and damages for injuries to persons and adjacent property. Such laws often impose liability without regard to whether the owner knew of, or was responsible for, the presence or disposal of such substances. Although most of the tenants of properties in which the Company has an interest are primarily responsible for any environmental damage and claims related to the leased premises, in the event of the bankruptcy or inability of the tenant of such premises to satisfy any obligations with respect to such environmental liability, or if the tenant is not responsible, the Company's property owner subsidiary may be required to satisfy any such obligations, should they exist. In addition, the property owner subsidiary, as the owner of such a property, may be held directly liable for any such damages or claims irrespective of the provisions of any lease. As of December 31, 20152018, the Company was not aware of any environmental matter relating to any of its investments that would have a material impact on the consolidated financial statements.
Segment Reporting. The Company operates generally in one industry segment, single-tenant real estate assets.
Reclassifications. Certain amounts included in prior years' financial statements have been reclassified to conform to the current years presentation, including certain statement of operations captions.year's presentation.
Recently IssuedNew Accounting Guidance.Standards Adopted in 2018. In April 2014,August 2016, the FASB issued Accounting Standards Update (“ASU”) 2014-08, PresentationASU 2016-15, Statement of Financial StatementsCash Flows (Topic 205)230): Classification of Certain Cash Receipts and Property, PlantCash Payments, which addresses how certain cash receipts and Equipmentcash payments are presented and classified in the statement of cash flows. In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows (Topic 360)230): Reporting Discontinued OperationsRestricted Cash, which clarifies guidance on the classification and Disclosurespresentation of Disposalschanges in restricted cash. Restricted cash balances are now included along with cash and cash equivalents as of Componentsthe end of an Entity,the period and beginning of period, respectively, in the Company's consolidated statement of cash flows for all periods presented. In addition, separate line items showing changes in restricted cash balances are now eliminated from the Company's consolidated statement of cash flows. These ASUs were effective for fiscal years beginning after December 15, 2017, including interim periods within those years. Entities must apply the guidance retrospectively to all periods presented but may apply it prospectively if retrospective application would be impracticable. The Company adopted these ASUs effective January 1, 2018 on a retrospective basis. The effect of the adoption resulted in (1) a $109 and $4,537 change in cash flows from operating activities for 2017 and 2016, respectively, (2) a $(23,958) and $21,571 change in cash flows from investing activities for 2017 and 2016, respectively, and (3) a $(2,899) and $(5,603) change in cash flows from financing activities for 2017 and 2016, respectively.
LEXINGTON REALTY TRUST AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
($000, except share/unit data)
In January 2017, the FASB issued ASU 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business, which changesclarifies the criteriadefinition of a business when evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The ASU was effective for reporting discontinued operationsperiods beginning after December 15, 2017. The Company expects that acquisitions of real estate or in-substance real estate will not meet the revised definition of a business and improves financial statement disclosures. Under this guidance, only disposals representing a strategic shift in operationsthus will be treated as asset acquisitions. Acquisition costs for those acquisitions that have a major effect on an organization's operations and financial results shouldare not businesses will be presented as discontinued operations.capitalized rather than expensed. The Company adopted this guidance effective January 1, 2015.2018 on a prospective basis. The guidance requires the Company to continue to classify anyCompany's property disposal or property classifiedacquisitions in 2018 were accounted for as held for sale as of December 31, 2014 as discontinued operations prospectively. Therefore, the revenues and expenses related to these properties are presented as discontinued operations as of December 31, 2015.asset acquisitions. The Company did not classify any additional properties as discontinued operations subsequent to December 31, 2014 as the dispositions did not represent a strategic shift in operations. The implementationCompany's adoption of this guidance did not have a material impact on the Company'sits consolidated financial position, results of operations or cash flows.statements.
In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606), as subsequently amended, which amends the guidance for revenue recognition to eliminate the industry-specific revenue recognition guidance and replace it with a principle based approach for determining revenue recognition. The effective date of the new guidance was updated by ASU 2015-14 and is effective for reporting periods beginning after December 15, 2017. The Company’s revenue-producing contracts are primarily leases that are not within the scope of this standard as leases are excluded from ASU 2014-09. Under ASU 2014-09, revenue recognition for real estate sales is largely based on the transfer of control and the buyer having the ability to direct the use of, or obtain substantially all of the remaining benefit from, the asset (which generally will occur on the closing date); the factor of continuing involvement is no longer a specific consideration for the timing of recognition. The Company adopted ASU 2014-09 effective January 1, 2018 using the modified retrospective approach. As the majority of the Company’s revenue is currently evaluating the impact offrom rental income related to leases, the adoption of the new guidanceASU did not have a material impact on its consolidated financial statements.
In February 2017, the FASB issued ASU 2017-05, Other Income - Gains and Losses from the Derecognition of Nonfinancial Assets (Topic 610-20), which requires that all entities account for the derecognition of a business in accordance with ASC 810, including instances in which the business is considered in-substance real estate. The ASU requires the Company to measure at fair value any retained interest in a partial sale of real estate. The Company adopted ASU 2017-05 effective January 1, 2018 using the modified retrospective approach, however there was no impact to prior balances as there were no open contracts at the date of adoption. During 2018, the Company entered into a transaction in which it contributed consolidated properties to a newly-formed joint venture and acquired a 20% interest in the joint venture. See note 7.
Recently Issued Accounting Guidance. In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which requires lessees to recognize a right of use asset and related lease liability for those leases classified as operating leases at the commencement date that have lease terms of more than 12 months and amends certain lessor guidance. The Company expects the ASU to result in the recognition of a right-of-use asset and related liability to primarily account for the Company's future obligations under its ground lease arrangements for which the Company is the lessee. The Company estimates that its initial right-of-use asset and lease liability will be within a range of $35,000 to $45,000 at adoption.
From a lessor perspective, the Company expects that lease components will primarily be recognized on a straight-line basis over the lease term. ASU 2016-02 originally stated that companies would be required to bifurcate certain lease revenues between lease and non-lease components; however, the FASB issued ASU 2018-11, Leases (Topic 842): Targeted Improvements in July 2018, which allows lessors a practical expedient by class of underlying assets to account for lease and non-lease components as a single lease component if certain criteria are met. Additionally, ASU 2016-02 requires that the Company capitalize, as initial direct costs, only those costs that are incurred due to the execution of a lease. Historically, the Company has capitalized lease commissions and "other" lease related costs, primarily legal expenses. Effective January 1, 2019, the Company will not capitalize these "other" costs, however, the Company does not believe these will be material.
ASU 2016-02 is effective for fiscal years beginning after December 15, 2018, and interim periods within those years. ASU 2016-02 originally required a modified retrospective method of adoption; however, under ASU 2018-11 companies may elect to recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. The Company will adopt this new guidance on January 1, 2019 utilizing the cumulative-effect adjustment outlined in ASU 2018-11. In addition, the Company will elect several practical expedients afforded to it at implementation.
In August 2017, the FASB issued ASU-2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities, which amends the hedge accounting recognition and presentation requirements in Topic 815. The adoption of this guidance on January 1, 2019 did not have a material impact on the Company's consolidated financial statements.
LEXINGTON REALTY TRUST AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
($000, except share/unit data)
In February 2015, the FASB issued ASU 2015-02, Consolidation (Topic 810) - Amendments to the Consolidation Analysis, which provides guidance on the consolidation evaluation for reporting organizations that are required to evaluate whether they should consolidate certain legal entities. In accordance with the guidance, all legal entities are subject to reevaluation under the revised consolidation model. The guidance is effective in the first quarter of 2016. The Company does not believe this guidance will have a material impact on its consolidated financial statements.
In April 2015, the FASB issued ASU 2015-03, Simplifying the Presentation of Debt Issuance Costs, which requires that debt issuance costs be presented on the balance sheet as a direct deduction from the carrying amount of the related debt liability. In August 2015, the FASB issued additional guidance to clarify ASU 2015-03, which states that an entity may defer and present debt issuance costs as an asset and amortize the costs ratably over the term of a line of credit arrangement, regardless of whether there are any outstanding borrowings on the line of credit. The guidance is effective in the first quarter of 2016 and requires retrospective application. The Company does not believe this guidance will have a material impact on its consolidated financial statements.
A significant portion of the Company's non-vested share-based payment awards are considered participating securities and as such, the Company is required to use the two-class method for the computation of basic and diluted earnings per share. Under the two-class computation method, net losses are not allocated to participating securities unless the holder of the security has a contractual obligation to share in the losses. The non-vested share-based payment awards are not allocated losses as the awards do not have a contractual obligation to share in losses of the Company.
The following is a reconciliation of the numerators and denominators of the basic and diluted earnings per share computations for each of the years in the three-year period ended December 31, 20152018:
|
| | | | | | | | | | | |
| | 2015 | | 2014 | | 2013 |
| BASIC | | | | | |
| Income (loss) from continuing operations attributable to common shareholders | $ | 103,418 |
| | $ | 37,652 |
| | $ | (38,506 | ) |
| Income from discontinued operations attributable to common shareholders | 1,682 |
| | 48,672 |
| | 24,417 |
|
| Net income (loss) attributable to common shareholders | $ | 105,100 |
| | $ | 86,324 |
| | $ | (14,089 | ) |
| Weighted-average number of common shares outstanding | 233,455,056 |
| | 228,966,253 |
| | 209,797,238 |
|
| Income (loss) per common share: | |
| | | | |
|
| Income (loss) from continuing operations | $ | 0.44 |
| | $ | 0.17 |
| | $ | (0.18 | ) |
| Income from discontinued operations | 0.01 |
| | 0.21 |
| | 0.11 |
|
| Net income (loss) attributable to common shareholders | $ | 0.45 |
| | $ | 0.38 |
| | $ | (0.07 | ) |
|
| | | | | | | | | | | |
| | 2018 | | 2017 | | 2016 |
| BASIC | | | | | |
| Net income attributable to common shareholders | $ | 220,838 |
| | $ | 79,067 |
| | $ | 89,109 |
|
| Weighted-average number of common shares outstanding | 236,666,375 |
| | 237,758,408 |
| | 233,633,058 |
|
| Net income attributable to common shareholders - per common share basic | $ | 0.93 |
| | $ | 0.33 |
| | $ | 0.38 |
|
LEXINGTON REALTY TRUST AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
($000, except share/unit data)
|
| | | | | | | | | | | |
| | 2015 | | 2014 | | 2013 |
| DILUTED: | | | | | |
| Income (loss) from continuing operations attributable to common shareholders | $ | 103,418 |
| | $ | 37,652 |
| | $ | (38,506 | ) |
| Impact of assumed conversions | — |
| | — |
| | — |
|
| Income (loss) from continuing operations attributable to common shareholders | 103,418 |
| | 37,652 |
| | (38,506 | ) |
| Income from discontinued operations attributable to common shareholders | 1,682 |
| | 48,672 |
| | 24,417 |
|
| Impact of assumed conversions: | — |
| | — |
| | — |
|
| Income from discontinued operations attributable to common shareholders | 1,682 |
| | 48,672 |
| | 24,417 |
|
| Net income (loss) attributable to common shareholders | $ | 105,100 |
| | $ | 86,324 |
| | $ | (14,089 | ) |
| | | | | | |
| Weighted-average common shares outstanding - basic | 233,455,056 |
| | 228,966,253 |
| | 209,797,238 |
|
| Effect of dilutive securities: | | | | | |
| Share options | 296,719 |
| | 470,455 |
| | — |
|
| Weighted-average common shares outstanding | 233,751,775 |
| | 229,436,708 |
| | 209,797,238 |
|
| | | | | | |
| Income (loss) per common share: | | | | | |
| Income (loss) from continuing operations | $ | 0.44 |
| | $ | 0.17 |
| | $ | (0.18 | ) |
| Income from discontinued operations | 0.01 |
| | 0.21 |
| | 0.11 |
|
| Net income (loss) attributable to common shareholders | $ | 0.45 |
| | $ | 0.38 |
| | $ | (0.07 | ) |
|
| | | | | | | | | | | |
| DILUTED: | | | | | |
| Net income attributable to common shareholders - basic | $ | 220,838 |
| | $ | 79,067 |
| | $ | 89,109 |
|
| Impact of assumed conversions | 2,528 |
| | 147 |
| | (159 | ) |
| Net income attributable to common shareholders | $ | 223,366 |
| | $ | 79,214 |
| | $ | 88,950 |
|
| | | | | | |
| Weighted-average common shares outstanding - basic | 236,666,375 |
| | 237,758,408 |
| | 233,633,058 |
|
| Effect of dilutive securities: | | | | | |
| Unvested share-based payment awards and options | 528,495 |
| | 86,285 |
| | 230,352 |
|
| Operating Partnership Units | 3,616,120 |
| | 3,693,144 |
| | 3,815,621 |
|
| Weighted-average common shares outstanding - diluted | 240,810,990 |
| | 241,537,837 |
| | 237,679,031 |
|
| | | | | | |
| Net income attributable to common shareholders - per common share diluted | $ | 0.93 |
| | $ | 0.33 |
| | $ | 0.37 |
|
For per common share amounts, all incremental shares are considered anti-dilutive for periods that have a loss from continuing operations attributable to common shareholders. In addition, other common share equivalents may be anti-dilutive in certain periods.
LEXINGTON REALTY TRUST AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
($000, except share/unit data)
| |
| (4) | Investments in Real Estate and Real Estate Under Construction |
The Company's real estate, net, consists of the following at December 31, 20152018 and 20142017:
| | | | | 2015 | | 2014 | | 2018 | | 2017 |
| Real estate, at cost: | | | | | | | | |
| Buildings and building improvements | | $ | 3,032,457 |
| | $ | 2,895,585 |
| | $ | 2,746,446 |
| | $ | 3,476,022 |
|
| Land, land estates and land improvements | | 743,125 |
| | 755,168 |
| | 341,848 |
| | 456,134 |
|
| Fixtures and equipment | | 5,577 |
| | 5,861 |
| | — |
| | 84 |
|
| Construction in progress | | 8,552 |
| | 14,946 |
| | 1,840 |
| | 4,219 |
|
| Real estate intangibles: | | | | | | | | |
| In-place lease values | | 513,564 |
| | 473,377 |
| | 331,607 |
| | 461,624 |
|
| Tenant relationships | | 123,796 |
| | 133,796 |
| | 54,662 |
| | 97,223 |
|
| Above-market leases | | 55,418 |
| | 98,393 |
| | 33,343 |
| | 40,244 |
|
| Investments in real estate under construction | | 95,402 |
| | 106,238 |
| |
| | | 4,577,891 |
| | 4,483,364 |
| | 3,509,746 |
| | 4,535,550 |
|
Accumulated depreciation and amortization(1) | | (1,179,969 | ) | | (1,196,114 | ) | | (954,087 | ) | | (1,225,650 | ) |
| Real estate, net | | $ | 3,397,922 |
| | $ | 3,287,250 |
| | $ | 2,555,659 |
| | $ | 3,309,900 |
|
| |
| (1) | Includes accumulated amortization of real estate intangible assets of $367,762231,443 and $400,628334,681 in 20152018 and 20142017, respectively. The estimated amortization of the above real estate intangible assets for the next five years is $34,418 in 2016, $30,561 in 2017, $26,215 in 2018, $20,94324,021 in 2019 and, $16,72221,442 in 2020, $19,501 in 2021, $17,448 in 2022 and $17,065 in 2023. |
The Company had below-market leases, net of accumulated accretion, which are included in deferred revenue, of $17,923 and $23,308, respectively, as of December 31, 2018 and 2017. The estimated accretion for the next five years is $2,144 in 2019, $2,118 in 2020, $1,778 in 2021, $1,499 in 2022 and $1,499 in 2023.
The Company completed the following acquisitions and build-to-suit transactions during 2018 and 2017:
2018:
|
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | Real Estate Intangibles |
| Property Type | Location | Acquisition Date | Initial Cost Basis | Lease Expiration | Land and Land Estate | | Building and Improvements | | Lease in-place Value Intangible | | Below Market Lease Intangible |
| Industrial | Olive Branch, MS | April 2018 | $ | 44,090 |
| 07/2029 | $ | 1,958 |
| | $ | 38,687 |
| | $ | 3,445 |
| | $ | — |
|
| Industrial | Olive Branch, MS | April 2018 | 48,575 |
| 06/2021 | 2,500 |
| | 42,538 |
| | 5,151 |
| | (1,614 | ) |
| Industrial | Edwardsville, IL | June 2018 | 44,178 |
| 05/2030 | 3,649 |
| | 41,292 |
| | 3,467 |
| | (4,230 | ) |
| Industrial | Spartanburg, SC | August 2018 | 27,632 |
| 07/2024 | 1,447 |
| | 23,744 |
| | 2,441 |
| | — |
|
| Industrial | Pasadena, TX | August 2018 | 23,868 |
| 08/2023 | 4,057 |
| | 17,810 |
| | 2,001 |
| | — |
|
| Industrial | Carrollton, TX | September 2018 | 19,564 |
| 12/2033 | 3,228 |
| | 15,766 |
| | 1,247 |
| | (677 | ) |
| Industrial | Goodyear, AZ | November 2018 | 41,372 |
| 04/2026 | 5,247 |
| | 36,115 |
| | 2,014 |
| | (2,004 | ) |
| Industrial | Chester, VA | December 2018 | 66,311 |
| 06/2030 | 8,544 |
| | 53,067 |
| | 6,832 |
| | (2,132 | ) |
| | | | $ | 315,590 |
| | $ | 30,630 |
| | $ | 269,019 |
| | $ | 26,598 |
| | $ | (10,657 | ) |
| | | | | | | | | | | | |
| Weighted-average life of intangible assets (years) | | | | | | | 8.4 |
| | 9.4 |
|
In addition, the Company acquired a 57-acre parcel of land from a non-consolidated joint venture and leased the parcel to a tenant to develop an industrial property.
LEXINGTON REALTY TRUST AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
($000, except share/unit data)
2017:
|
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | Real Estate Intangibles |
| Property Type | Location | Acquisition Date | Initial
Cost
Basis | Lease Expiration | Land and Land Estate | | Building and Improvements | | Lease in-place Value Intangible | | Below Market Lease Intangible |
| Office | Lake Jackson, TX(1) | January 2017 | $ | 70,401 |
| 10/2036 | $ | 3,078 |
| | $ | 67,323 |
| | $ | — |
| | $ | — |
|
| Industrial | New Century, KS | February 2017 | 12,056 |
| 01/2027 | — |
| | 13,198 |
| | 1,648 |
| | (2,790 | ) |
| Industrial | Lebanon, IN | February 2017 | 36,194 |
| 01/2024 | 2,100 |
| | 29,443 |
| | 4,651 |
| | — |
|
| Office | Charlotte, NC(2) | April 2017 | 61,339 |
| 04/2032 | 3,771 |
| | 47,064 |
| | 10,504 |
| | — |
|
| Industrial | Cleveland, TN | May 2017 | 34,400 |
| 03/2024 | 1,871 |
| | 29,743 |
| | 2,786 |
| | — |
|
| Industrial | Grand Prairie, TX | June 2017 | 24,317 |
| 03/2037 | 3,166 |
| | 17,985 |
| | 3,166 |
| | — |
|
| Industrial | San Antonio, TX | June 2017 | 45,507 |
| 04/2027 | 1,311 |
| | 36,644 |
| | 7,552 |
| | — |
|
| Industrial | Opelika, AL | July 2017 | 37,269 |
| 05/2042 | 134 |
| | 33,183 |
| | 3,952 |
| | — |
|
| Industrial | McDonough, GA | August 2017 | 66,700 |
| 01/2028 | 5,441 |
| | 52,762 |
| | 8,497 |
| | — |
|
| Industrial | Byhalia, MS | September 2017 | 36,590 |
| 09/2027 | 1,751 |
| | 31,236 |
| | 3,603 |
| | — |
|
| Industrial | Jackson, TN | September 2017 | 57,920 |
| 10/2027 | 1,454 |
| | 49,026 |
| | 7,440 |
| | — |
|
| Industrial | Smyrna, TN | September 2017 | 104,890 |
| 04/2027 | 1,793 |
| | 93,940 |
| | 9,157 |
| | — |
|
| Industrial | Lafayette, IN | October 2017 | 17,450 |
| 09/2024 | 662 |
| | 15,578 |
| | 1,210 |
| | — |
|
| Industrial | Romulus, MI | November 2017 | 38,893 |
| 08/2032 | 2,438 |
| | 33,786 |
| | 2,669 |
| | — |
|
| Industrial | Warren, MI | November 2017 | 46,955 |
| 10/2032 | 972 |
| | 42,521 |
| | 3,462 |
| | — |
|
| Industrial | Winchester, VA | December 2017 | 36,700 |
| 12/2031 | 1,988 |
| | 32,501 |
| | 2,211 |
| | — |
|
| | | | $ | 727,581 |
| | $ | 31,930 |
| | $ | 625,933 |
| | $ | 72,508 |
| | $ | (2,790 | ) |
| | | | | | | | | | | | |
| Weighted-average life of intangible assets (years) | | | | | | | 12.2 |
| | 14.9 |
|
| |
| (1) | Completed the construction of the final building of a four-building project. Initial cost basis excludes developer partner payout of $7,951. |
| |
| (2) | Sold to newly-formed joint venture in 2018. See note 7. |
From time to time, the Company is engaged in various forms of build-to-suit development activities. As of December 31, 2018 and 2017, the Company had no development arrangements outstanding. During 2017, the Company recognized $3,922 in non-operating income on the Company's Consolidated Statement of Operations due to the write-off of contingent consideration relating to a 2015 build-to-suit project that was not required to be paid by the Company.
| |
| (5) | Dispositions and Impairment |
For the years ended December 31, 2018, 2017 and 2016, the Company disposed of its interests in certain properties generating aggregate net proceeds of $898,514, $223,853 and $370,038, respectively, which resulted in gains on sales of $252,913, $63,428 and $81,510, respectively, including, in 2018, the disposition of 21 office assets to a newly-formed joint venture, NNN Office JV L.P. (“NNN JV”), with an unaffiliated third-party. See note 7. For the years ended December 31, 2018, 2017 and 2016, the Company recognized net debt satisfaction gains (charges) relating to properties sold of $(1,698), $5,938 and $(532), respectively. The Company had two properties classified as held for sale at December 31, 2018 and one property classified as held for sale at December 31, 2017.
LEXINGTON REALTY TRUST AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
($000, except share/unit data)
The Company had below-market leases, net of accumulated accretion, which are included in deferred revenue, of $28,967 and $54,414, respectively as of December 31, 2015 and 2014. The estimated accretion for the next five years is $2,327 in 2016, $1,978 in 2017, $1,970 in 2018, $1,663 in 2019 and $1,494 in 2020.
The Company completed the following acquisitions and build-to-suit transactions during 2015 and 2014:
2015:
|
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | Real Estate Intangible |
| Property Type | Location | Acquisition/Completion Date | Initial Cost Basis | Lease Expiration | Land and Land Estate | | Building and Improvements | | Lease in-place Value |
| Land/Infrastructure | Venice, FL | January 2015 | $ | 16,850 |
| 01/2055 | $ | 4,696 |
| | $ | 11,753 |
| | $ | 401 |
|
| Office | Auburn Hills, MI | March 2015 | 40,025 |
| 03/2029 | 4,416 |
| | 30,012 |
| | 5,597 |
|
| Industrial | Houston, TX | March 2015 | 28,650 |
| 03/2035 | 4,674 |
| | 19,540 |
| | 4,436 |
|
| Industrial | Brookshire, TX | March 2015 | 22,450 |
| 03/2035 | 2,388 |
| | 16,614 |
| | 3,448 |
|
| Industrial | Canton, MS | March 2015 | 89,300 |
| 02/2027 | 5,077 |
| | 71,289 |
| | 12,934 |
|
| Industrial | Thomson, GA | May 2015 | 10,144 |
| 05/2030 | 909 |
| | 7,746 |
| | 1,489 |
|
| Industrial | Oak Creek, WI | July 2015 | 22,139 |
| 06/2035 | 3,015 |
| | 15,300 |
| | 3,824 |
|
| Industrial | Richland, WA | November 2015 | 152,000 |
| 08/2035 | 1,293 |
| | 126,947 |
| | 23,760 |
|
| Office | Richmond, VA | December 2015 | 109,544 |
| 08/2030 | 7,331 |
| | 88,021 |
| | 14,192 |
|
| | | | $ | 491,102 |
| | $ | 33,799 |
| | $ | 387,222 |
| | $ | 70,081 |
|
| | | | | | | | | | |
| Weighted-average life of intangible assets (years) | | | | | | 16.8 |
|
2014:
|
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | Real Estate Intangible |
| Property Type | Location | Acquisition/Completion Date | Initial Cost Basis | Lease Expiration | Land and Land Estate | | Building and Improvements | | Lease in-place Value |
| Industrial | Rantoul, IL | January 2014 | $ | 41,277 |
| 10/2033 | $ | 1,304 |
| | $ | 32,562 |
| | $ | 7,411 |
|
| Office | Parachute, CO | January 2014 | 13,928 |
| 10/2032 | 1,400 |
| | 10,751 |
| | 1,777 |
|
| Office | Rock Hill, SC | March 2014 | 24,715 |
| 03/2034 | 1,601 |
| | 18,989 |
| | 4,125 |
|
| Industrial | Lewisburg, TN | May 2014 | 13,320 |
| 03/2026 | 173 |
| | 10,865 |
| | 2,282 |
|
| Industrial | North Las Vegas, NV | May 2014 | 28,249 |
| 09/2034 | 3,244 |
| | 21,444 |
| | 3,561 |
|
| Industrial | Bingen, WA | May 2014 | 20,391 |
| 05/2024 | — |
| | 18,075 |
| | 2,316 |
|
| Land | New York, NY | October 2014 | 30,426 |
| 10/2113 | 22,000 |
| | — |
| | 8,426 |
|
| Rehab Hospital | Vineland, NJ | October 2014 | 19,100 |
| 02/2043 | 2,698 |
| | 12,790 |
| | 3,612 |
|
| Industrial | Anniston, AL | December 2014 | 20,907 |
| 11/2029 | 1,201 |
| | 16,771 |
| | 2,935 |
|
| | | | $ | 212,313 |
| | $ | 33,621 |
| | $ | 142,247 |
| | $ | 36,445 |
|
| | | | | | | | | | |
| Weighted-average life of intangible assets (years) | | | | | | 37.5 |
|
The Company recognized aggregate acquisition and pursuit expenses of $2,404 and $1,901 in 2015 and 2014, respectively, which are included in property operating expenses within the Company's Consolidated Statements of Operations.
The Company is engaged in various forms of build-to-suit development activities. The Company may enter into the following acquisition, development and construction arrangements: (1) lend funds to construct build-to-suit projects subject to a single-tenant lease and agree to purchase the properties upon completion of construction and commencement of a single-tenant lease, (2) hire developers to construct built-to-suit projects on owned properties leased to single tenants, (3) fund the construction of build-to-suit projects on owned properties pursuant to the terms in single-tenant lease agreements or (4) enter into purchase and sale agreements with developers to acquire single-tenant build-to-suit properties upon completion.
LEXINGTON REALTY TRUST AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
($000, except share/unit data)
As of December 31, 2015, the Company had the following development arrangements outstanding:
|
| | | | | | | | | | | | | | | |
| Location | Property Type | Square Feet | | Expected Maximum Commitment/Contribution | | Lease Term (Years) | | Estimated Acquisition/ Completion Date | | GAAP Investment Balance as of 12/31/15 |
| Anderson, SC | Industrial | 1,325,000 |
| | $ | 70,012 |
| | 20 | | 2Q 16 | | $ | 23,826 |
|
| Lake Jackson, TX | Office | 664,000 |
| | 166,164 |
| | 20 | | 4Q 16 | | 62,353 |
|
| Charlotte, NC | Office | 201,000 |
| | 62,445 |
| | 15 | | 1Q 17 | | 9,223 |
|
| | | 2,190,000 |
| | $ | 298,621 |
| | | | | | $ | 95,402 |
|
The Company has variable interests in certain developer entities constructing the facilities but is not the primary beneficiary of the entities as the Company does not have a controlling financial interest. As of December 31, 2015 and 2014, the Company's aggregate investment in development arrangements was $95,402 and $106,238, respectively, which includes $2,726 and $2,828 of interest capitalized, respectively, and is presented as investments in real estate under construction in the accompanying Consolidated Balance Sheets.
| |
(5) | Property Dispositions and Discontinued Operations |
For the years ended December 31, 2015, 2014 and 2013, the Company disposed of its interests in certain properties (excluding Greenville, South Carolina in 2014, see note 7) generating aggregate net proceeds of $156,461, $226,375 and $75,519, respectively, which resulted in gains on sales of $24,884, $57,507 and $24,472, respectively. For the years ended December 31, 2015, 2014 and 2013, the Company recognized net debt satisfaction gains (charges) relating to these properties of $21,504, $(312) and $8,905, respectively. The results of operations for properties disposed of in 2015, that were not classified as held for sale as of December 31, 2014, are included within continuing operations in the consolidated financial statements in accordance with recent guidance issued by the FASB.
At December 31, 2015, the Company had two properties classified as held for sale.
Assets and liabilities of held for sale properties as of December 31, 20152018 and 2017 consisted of the following:
|
| | | |
| Assets: | |
| Real estate, at cost | $ | 16,590 |
|
| Real estate, intangible assets | 10,786 |
|
| Accumulated depreciation and amortization | (4,069 | ) |
| Deferred rent receivable | 1,118 |
|
| | $ | 24,425 |
|
| Liabilities: | |
| Other | $ | 32 |
|
| Mortgage payable | 8,373 |
|
| | $ | 8,405 |
|
| |
(6) | Impairment of Real Estate Investments |
|
| | | | | | | |
| | December 31, 2018 | | December 31, 2017 |
| Assets: | | | |
| Real estate, at cost | $ | 63,639 |
| | $ | 2,827 |
|
| Real estate, intangible assets | 14,498 |
| | — |
|
| Accumulated depreciation and amortization | (16,873 | ) | | — |
|
| Rent receivable - deferred | 2,439 |
| | — |
|
| Other | 165 |
| | — |
|
| | $ | 63,868 |
| | $ | 2,827 |
|
| Liabilities: | | | |
| Other | $ | 386 |
| | $ | — |
|
| | $ | 386 |
| | $ | — |
|
The Company assesses on a regular basis whether there are any indicators that the carrying value of real estate assets may be impaired. Potential indicators may include an increase in vacancy at a property, tenant financial instability, change in the estimated holding period of an asset and the potential sale of the property in the near future. An asset is determined to be impaired if the asset's carrying value is in excess of its estimated fair value.value and the Company estimates that its cost will not be recovered. During 2018, 2017 and 2016, the Company recognized aggregate impairment charges on real estate properties of $95,813, $39,702 and $100,195, respectively. During 2018, $36,620 of the impairment charges of $95,813 were recognized on properties owned at December 31, 2018. The Company's office assets in Overland Park, Kansas and Kansas City, Missouri incurred an aggregate $23,496 of impairment charges due to a reduction in the anticipated holding period and leasing prospects. During 2017, $18,023 of the impairment charges of $39,702 were recognized on properties held at December 31, 2017. The Company's office asset in Florence, South Carolina and industrial asset in Memphis, Tennessee incurred an aggregate $15,008 of the impairment charges due to a reduction in anticipating holding period. The 2016 impairment charges include an aggregate impairment charge of $65,500 recognized on the sale of three land investments in New York, New York.
In February 2017, the Company recognized a $5,294 loan loss on the assignment of a loan receivable secured by a hospital in Kennewick, Washington.
| |
| (6) | Fair Value Measurements |
The following tables present the Company's assets and liabilities measured at fair value on a recurring and non-recurring basis as of December 31, 2018 and 2017, aggregated by the level in the fair value hierarchy within which those measurements fall:
|
| | | | | | | | | | | | | | | |
| | | | Fair Value Measurements Using |
| Description | 2018 | | (Level 1) | | (Level 2) | | (Level 3) |
| Interest rate swap assets | $ | 76 |
| | $ | — |
| | $ | 76 |
| | $ | — |
|
| Impaired real estate assets* | $ | 35,036 |
| | $ | — |
| | $ | — |
| | $ | 35,036 |
|
|
| | | | | | | | | | | | | | | |
| | | | Fair Value Measurements Using |
| Description | 2017 | | (Level 1) | | (Level 2) | | (Level 3) |
| Interest rate swap assets | $ | 1,065 |
| | $ | — |
| | $ | 1,065 |
| | $ | — |
|
| Impaired real estate assets* | $ | 7,829 |
| | $ | — |
| | $ | — |
| | $ | 7,829 |
|
*Represents a non-recurring fair value measurement. Fair value as of the date of impairment.
LEXINGTON REALTY TRUST AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
($000, except share/unit data)
During 2015, 2014 and 2013, the Company recognized aggregate impairment charges of $36,832, $34,833 and $21,640, respectively, on real estate assets classified in continuing operations. The Company determined that the expected undiscounted cash flows based upon revised estimated holding periods of certain assets were below the current carrying values.
During 2014The table below sets forth the carrying amounts and 2013, the Company recognized $13,767 and $12,920, respectively,estimated fair values of impairment charges in discontinued operations, relating to real estate assets that were ultimately disposed of below their carrying value.
As of December 31, 2015 and 2014, the Company's loans receivable were comprised primarily of first and second mortgage loans and mezzanine loans on real estate.
The following is a summary of our loans receivablefinancial instruments as of December 31, 20152018 and 20142017:
|
| | | | | | | | | | | | | |
| | | Loan carrying value(1) | | | | |
| Loan | | 12/31/2015 | | 12/31/2014 | | Interest Rate | | Maturity Date |
Westmont, IL(2) | | $ | — |
| | $ | 12,152 |
| | 6.45 | % | | 10/2015 |
Southfield, MI(3) | | — |
| | 3,296 |
| | 4.55 | % | | 02/2015 |
Oklahoma City, OK(4) | | 8,501 |
| | — |
| | 11.50 | % | | 03/2016 |
| Austin, TX | | — |
| | 2,800 |
| | 16.00 | % | | 10/2018 |
| Kennewick, WA | | 85,505 |
| | 85,254 |
| | 9.00 | % | | 05/2022 |
| Other | | 1,865 |
| | 2,133 |
| | 8.00 | % | | 2021-2022 |
| | | $ | 95,871 |
| | $ | 105,635 |
| | | | |
| |
(1) | Loan carrying value includes accrued interest and is net of origination costs and loan losses, if any. |
| |
(2) | In 2015, the Company acquired the office property collateral and $2,521 of cash collateral and received $1,400 in full settlement of its claim against the borrower. The Company recognized a loan loss of $13,939 during 2013. During 2014 and 2013, the Company recognized $1,284 and $1,737, respectively, of interest income relating to the impaired loan.
|
| |
(3) | In 2015, the Company acquired the office property collateral from the borrower. The Company recorded a $2,500 loan loss in 2014 as the Company determined it was probable that it would not collect the amount owed at maturity. During 2015 and 2014, the Company recognized $14 and $468, respectively, of interest income relating to the impaired loan. |
| |
(4) | In 2015, the Company loaned a tenant-in-common $8,420. The loan is secured by the tenant-in-common's interest in an office property in which the Company has a 40% interest. |
Prior to December 31, 2014, the Company had two types of financing receivables: loans receivable and a capitalized financing lease. The Company determined that its financing receivables operated within one portfolio segment as they were both within the same industry and use the same impairment methodology. The capitalized financing lease, for a commercial office property located in Greenville, South Carolina, was sold in December 2014 for net proceeds of $11,491. In addition, the Company assesses all financing receivables for impairment, when warranted, based on an individual analysis of each receivable.
The Company's financing receivables operate within one class of financing receivables as these assets (1) are collateralized by commercial real estate and (2) similar metrics are used to monitor the risk and performance of these assets. The Company's management uses credit quality indicators to monitor financing receivables such as quality of collateral, the underlying tenant's credit rating and collection experience. As of December 31, 2015, the financing receivables were performing as anticipated and there were no significant delinquent amounts outstanding.
LEXINGTON REALTY TRUST AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
($000, except share/unit data)
| |
(8) | Fair Value Measurements |
The following tables present the Company's assets and liabilities measured at fair value on a recurring basis as of December 31, 2015 and 2014 and non-recurring basis during the year ended December 31, 2015 and 2014, aggregated by the level in the fair value hierarchy within which those measurements fall:
|
| | | | | | | | | | | | | | | |
| | | | Fair Value Measurements Using |
| Description | 2015 | | (Level 1) | | (Level 2) | | (Level 3) |
| Interest rate swap assets | $ | 4 |
| | $ | — |
| | $ | 4 |
| | $ | — |
|
| Impaired real estate assets* | $ | 3,015 |
| | $ | — |
| | $ | — |
| | $ | 3,015 |
|
| Interest rate swap liabilities | $ | (1,943 | ) | | $ | — |
| | $ | (1,943 | ) | | $ | — |
|
*Represents a non-recurring fair value measurement.
|
| | | | | | | | | | | | | | | |
| | | | Fair Value Measurements Using |
| Description | 2014 | | (Level 1) | | (Level 2) | | (Level 3) |
| Interest rate swap assets | $ | 1,153 |
| | $ | — |
| | $ | 1,153 |
| | $ | — |
|
| Impaired real estate assets* | $ | 25,679 |
| | $ | — |
| | $ | — |
| | $ | 25,679 |
|
| Impaired loan receivable* | $ | 3,296 |
| | $ | — |
| | $ | — |
| | $ | 3,296 |
|
| Interest rate swap liabilities | $ | (749 | ) | | $ | — |
| | $ | (749 | ) | | $ | — |
|
*Represents a non-recurring fair value measurement.
|
| | | | | | | | | | | | | | | |
| | As of December 31, 2018 | | As of December 31, 2017 |
| | Carrying Amount | | Fair Value | | Carrying Amount | | Fair Value |
| Liabilities | |
| | |
| | |
| | |
|
| Debt | $ | 1,492,483 |
| | $ | 1,409,773 |
| | $ | 2,068,867 |
| | $ | 2,013,226 |
|
The majority of the inputs used to value the Company's interest rate swap asset (liability)swaps fall within Level 2 of the fair value hierarchy, such as observable market interest rate curves; however, the credit valuation associated with the interest rate swap liabilityswaps utilizes Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by the Company and its counterparties. As of December 31, 20152018 and 2014,2017, the Company determined that the credit valuation adjustment relative to the overall interest rate swap asset (liability) isswaps was not significant. As a result, the entireall interest rate swap asset (liability) hasswaps have been classified in Level 2 of the fair value hierarchy.
The Company estimates the fair value of its real estate assets, including non-consolidated real estate assets, by using income and market valuation techniques. The Company may estimate fair values using market information such as broker opinions of value, recent sales data for similar assetssale offers or discounted cash flow models, which primarily rely on Level 3 inputs. The cash flow models include estimated cash inflows and outflows over a specified holding period. These cash flows may include contractual rental revenues, projected future rental revenues and expenses and forecasted tenant improvements and lease commissions based upon market conditions determined through discussion with local real estate professionals, experience the Company has with its other owned properties in such markets and expectations for growth. Capitalization rates and discount rates utilized in these models are estimated by management based upon rates that management believes to be within a reasonable range of current market rates for the respective properties based upon an analysis of factors such as property and tenant quality, geographical location and local supply and demand observations. To the extent the Company under estimatesunder-estimates forecasted cash outflows (tenant improvements, lease commissions and operating costs) or over estimatesover-estimates forecasted cash inflows (rental revenue rates), the estimated fair value of its real estate assets could be overstated.
The table below sets forth the carrying amounts and estimated fair values of the Company's financial instruments as of December 31, 2015 and 2014:
|
| | | | | | | | | | | | | | | |
| | As of December 31, 2015 | | As of December 31, 2014 |
| | Carrying Amount | | Fair Value | | Carrying Amount | | Fair Value |
| Assets | | | | | | | |
| Loans Receivable | $ | 95,871 |
| | $ | 103,014 |
| | $ | 105,635 |
| | $ | 105,061 |
|
| | | | | | | | |
| Liabilities | |
| | |
| | |
| | |
|
| Debt | $ | 2,204,199 |
| | $ | 2,164,571 |
| | $ | 2,092,675 |
| | $ | 2,091,364 |
|
LEXINGTON REALTY TRUST AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
($000, except share/unit data)
The Company estimates the fair values of its loans receivable utilizing Level 3 inputs by using an estimated discounted cash flow analysis consisting of scheduled cash flows and discount rate estimates to approximate those that a willing buyer and seller might use and/or the estimated value of the underlying collateral.
The fair value of the Company's debt is primarily estimated utilizing Level 3 inputs by using a discounted cash flow analysis, based upon estimates of market interest rates. The Company determines the fair value of its Senior Notes and 6.00% Convertible Guaranteed Notes using market prices. The inputs used in determining the fair value of these notes are categorized as Level 1 due to the fact that the Company uses quoted market rates to value these instruments. However, the inputs used in determining the fair value could be categorized as Level 2 if trading volumes are low.
Fair values cannot be determined with precision, may not be substantiated by comparison to quoted prices in active markets and may not be realized upon sale. Additionally, there are inherent uncertainties in any fair value measurement technique, and changes in the underlying assumptions used, including discount rates, liquidity risks and estimates of future cash flows, could significantly affect the fair value measurement amounts.
Cash Equivalents, Restricted Cash, Accounts Receivable and Accounts Payable. The Company estimates that the fair value of cash equivalents, restricted cash, accounts receivable and accounts payable approximates carrying value due to the relatively short maturity of the instruments.
LEXINGTON REALTY TRUST AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
($000, except share/unit data)
| |
(9)(7) | Investment in and Advances to Non-Consolidated Entities |
AsBelow is a schedule of the Company's investments in and advances to non-consolidated entities:
|
| | | | | | | | | | |
| | | Percentage Ownership at | | Investment Balance as of |
| Investment | | December 31, 2018 | | December 31, 2018 | | December 31, 2017 |
| NNN JV | (1) | 20% | | $ | 53,144 |
| | $ | — |
|
| Etna Park 70 LLC | (2) | 90% | | 4,774 |
| | 5,831 |
|
| Other | (3) | 15% to 25% | | 8,265 |
| | 11,645 |
|
| | | | | $ | 66,183 |
| | $ | 17,476 |
|
| |
| (1) | During 2018, the Company disposed of 21 office assets to NNN JV for an aggregate gross disposition price of $725,800 and acquired a 20% interest in NNN JV. Two of the 21 properties, with a combined estimated fair value of $45,653, were contributed to NNN JV along with cash of $8,053. The Company recognized a gain of $14,645 in connection with the contribution of the two office assets to NNN JV, and in addition, NNN JV assumed an aggregate of $103,400 of non-recourse mortgage debt in the transaction. NNN JV obtained an aggregate of $362,800 of non-recourse mortgage financing which bears interest at LIBOR plus 200 basis points and has an initial term of three years but can be extended for two additional terms of one-year each. There is a rate increase of 15 basis points upon each extension. NNN JV entered into interest rate agreements which cap the LIBOR component of the $362,800 mortgage financing at 4.0% for two years. As of December 31, 2018, NNN JV had total assets of $757,811 and total liabilities of $492,091. The properties are encumbered by an aggregate of $466,200 of non-recourse mortgage debt. |
| |
| (2) | Joint venture formed in 2017 with a developer entity to acquire a 151-acre parcel of developable land and pursue industrial build-to-suit opportunities. The developer entity has substantive participation rights. In December 2018, the parcel was subdivided and the Company received a distribution of an ownership interest in a 57-acre parcel with a historical cost of $3,008. The Company acquired control of the parcel via the purchase of the Company's joint venture partners' interest. |
| |
| (3) | At December 31, 2018, represents two joint venture investments, which own single-tenant, net-leased assets. During 2017, the Company received $49,085 in full satisfaction of a construction financing arrangement that the Company previously provided to one of the joint ventures. |
In December 31, 2015,2018, the Company had ownership interests rangingreceived $4,312 from 15% to 40%a non-consolidated investment in certain non-consolidated entities, which primarily own single-tenant net-leased assets. The acquisitionsconnection with its sale of these assets by the non-consolidated entities were partially funded through non-recourse mortgage debt with an aggregate balance of $47,621 at December 31, 2015 (the Company's proportionate share was $8,591) with rates ranging from 3.7% to 4.7%.a six-property office portfolio. In 2015,February 2017, the Company invested $5,613sold its 40% tenant-in-common interest in theits Oklahoma City, tenant-in-common. The Company's contribution, togetherOklahoma office property for $6,198. In January 2016, the Company received $6,681 in connection with the other tenant-in-common's contribution, was used to satisfy the related maturing mortgage loan.
In November 2014, the Company formedsale of a joint venture to construct a private schoolnon-consolidated office property in Houston, Texas. As of December 31, 2015, the Company had a 25% interest in the joint venture. The anticipated total construction cost is $86,491.Russellville, Arkansas. The Company is providing construction financing to the joint venture up to $56,686recognized gains of which $8,519 has been funded as of December 31, 2015. Upon completion, the property will be net leased for a 20-year term.
In August 2013, the Company invested $5,000 in a joint venture, which acquired the fee interest$1,777, $1,452 and the related office building improvements of a property in Baltimore, Maryland. In November 2015, the Company's interest in the joint venture was redeemed in exchange for a distribution to the Company of the fee interest, which is subject to a long-term ground lease with the leaseholder.
During 2014 and 2013, the Company recognized other-than-temporary impairment charges on a non-consolidated joint venture due to changes in the Company's estimate of net proceeds to be received upon liquidation of the joint venture. Accordingly, the Company recognized $930 and $925,$5,378, respectively, in impairment chargesconnection with these sales, which are included in equity in earnings (losses) of non-consolidated entities. The underlying
During 2017, the Company recognized an impairment charge of $3,512 on its investment in a retail property in Palm Beach Gardens, Florida due to the bankruptcy of its tenant. This impairment charge reduced the Company's investment balance to zero. During 2018, the property was sold in October 2014 and the Company recognized a gain of $87 in equity in earnings (losses) of non-consolidated entities.foreclosure sale.
LRA earns advisory fees from certain of these non-consolidated entities for services related to acquisitions, asset management and debt placement. Advisory fees earned from these non-consolidated investments were $223, $348$1,443, $807 and $512$693 for the years ended December 31, 2018, 2017 and 2016.
| |
| (8) | Mortgages and Notes Payable |
The Company had the following mortgages and notes payable outstanding as of December 31, 2018 and 2017:
|
| | | | | | | |
| | December 31, 2018 | | December 31, 2017 |
| Mortgages and notes payable | $ | 575,514 |
| | $ | 697,068 |
|
| Unamortized debt issuance costs | (5,094 | ) | | (7,258 | ) |
| | $ | 570,420 |
| | $ | 689,810 |
|
Interest rates, including imputed rates on mortgages and notes payable, ranged from 2.2% to 6.5% at December 31, 20152018, and the mortgages and notes payable mature between 20142019 and 20132036. Interest rates, including imputed rates, ranged from 2.2% to 7.8% at December 31, 2017. The weighted-average interest rate at December 31, 2018 and 2017 was approximately 4.5% and 4.6%, respectively.
LEXINGTON REALTY TRUST AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
($000, except share/unit data)
| |
(10) | Mortgages and Notes Payable |
The Company through property owner subsidiaries, had outstanding mortgages and notes payable of $882,952 and $945,216 as of December 31, 2015 and 2014, respectively. Interest rates, including imputed rates on mortgages and notes payable, ranged from 2.2% to 7.8% at December 31, 2015 and the mortgages and notes payable mature between 2016 and 2028. Interest rates, including imputed rates, ranged from 2.2% to 8.5% at December 31, 2014. The weighted-average interest rate at December 31, 2015 and 2014 was approximately 4.9% and 5.2%, respectively.
In September 2015, the Company entered into a new $905,000has an unsecured credit agreement with KeyBank National Association, as agent, which replaced the Company's existing revolving credit facility and term loans. With lender approval, the Company can increase the size of the new facility to an aggregate $1,810,000.agent. A summary of the significant terms, as of December 31, 2018, are as follows:
|
| | | | | | | |
| | Prior
Maturity Date | | New
Maturity Date | | Prior
Interest Rate | | Current
Interest Rate |
$400,000505,000 Revolving Credit Facility(1) | 02/2017 | | 08/August 2019 | | LIBOR + 1.15% | | LIBOR + 1.00% |
$250,000300,000 Term Loan(2) | 02/2018 | | 08/2020 | | LIBOR + 1.35% | | LIBOR + 1.10% |
$255,000 Term Loan(3)
| 01/2019 | | 01/January 2021 | | LIBOR + 1.75% | | LIBOR + 1.10% |
| |
| (1) | Maturity date can be extended to August 2020 at the Company's option. The interest rate ranges from LIBOR plus 0.85% to 1.55% (previously 0.95% to 1.725%). At December 31, 2015,2018, the unsecured revolving credit facility had $177,000no borrowings outstanding and availability of $223,000,$505,000, subject to covenant compliance. See note 20. |
| |
| (2) | The interest rate ranges from LIBOR plus 0.90% to 1.75% (previously 1.10% to 2.10%). The Company previously entered into aggregate interest-rate swap agreements to fix the LIBOR component at a weighted-average rate of 1.09% through February 2018 on the $250,000 of outstanding LIBOR-based borrowings. |
| |
(3) | The interest rate ranges from LIBOR plus 0.90% to 1.75% (previously 1.50% to 2.25%). The Company previously entered intohad aggregate interest-rate swap agreements to fix the LIBOR component at a weighted-average rate of 1.42% through January 2019 on the $255,000 of the $300,000 outstanding LIBOR-based borrowings. During 2018, the Company satisfied in full the $300,000 term loan due in 2020. |
| |
| (3) | The aggregate unamortized debt issuance costs for the term loan was $1,267 and $1,804 as of December 31, 2018 and 2017, respectively. |
The unsecured revolving credit facility and the unsecured term loansloan are subject to financial covenants, which the Company was in compliance with at December 31, 20152018.
Mortgages payable and secured loans are generally collateralized by real estate and the related leases. Certain mortgages payable have yield maintenance or defeasance requirements relating to any prepayments. In addition, certain mortgages are cross-collateralized and cross-defaulted.
Scheduled principal and balloon payments for mortgages, including a held for sale property, notes payable credit facility borrowings and term loansloan for the next five years and thereafter are as follows:
| | Year ending December 31, | | Total | | Total |
| 2016 | | $ | 139,861 |
| |
| 2017 | | 95,505 |
| |
| 2018 | | 44,664 |
| |
| 2019 | | 283,347 |
| | $ | 101,887 |
|
| 2020 | | 300,756 |
| | 55,143 |
|
| 2021 | | | 340,465 |
|
| 2022 | | | 22,120 |
|
| 2023 | | | 23,998 |
|
| Thereafter | | 709,192 |
| | 331,901 |
|
| | | $ | 1,573,325 |
| | 875,514 |
|
| Unamortized debt issuance costs | | Unamortized debt issuance costs | (6,361 | ) |
| | | | $ | 869,153 |
|
Included in the Consolidated Statements of Operations, the Company recognized debt satisfaction gains (charges), net, excluding discontinued operations, of $4,122, $(7,016)$(898), $258 and $(11,811)$(7) for the years ended December 31, 2015, 20142018, 2017 and 2013,2016, respectively, due to the satisfaction of mortgages and notes payable other than those disclosed elsewhere in these financial statements. In addition, the Company capitalized $6,062, $3,441$15, $1,174 and $2,397$4,933 in interest including discontinued operations, for the years ended 2015, 20142018, 2017 and 2013,2016, respectively.
LEXINGTON REALTY TRUST AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
($000, except share/unit data)
| |
(11)(9) | Senior Notes, Convertible Notes and Trust Preferred Securities |
The Company had the following Senior Notes outstanding as of December 31, 2015:2018 and 2017:
| | | Issue Date | | Face Amount | | Interest Rate | | Maturity Date | | Issue Price | | December 31, 2018 | | December 31, 2017 | | Interest Rate | | Maturity Date | | Issue Price |
| May 2014 | | $ | 250,000 |
| | 4.40 | % | | June 2024 | | 99.883 | % | | $ | 250,000 |
| | $ | 250,000 |
| | 4.40 | % | | June 2024 | | 99.883 | % |
| June 2013 | | 250,000 |
| | 4.25 | % | | June 2023 | | 99.026 | % | | 250,000 |
| | 250,000 |
| | 4.25 | % | | June 2023 | | 99.026 | % |
| | | $ | 500,000 |
| | | | | | 500,000 |
| | 500,000 |
| | | | |
| Unamortized debt discount | | | (1,235 | ) | | (1,507 | ) | | | | |
| Unamortized debt issuance cost | | | (2,731 | ) | | (3,295 | ) | | | | |
| | | | $ | 496,034 |
| | $ | 495,198 |
| | | | |
Each series of the Senior Notes is unsecured and pays interest semi-annually in arrears. The Company may redeem the notes at its option at any time prior to maturity in whole or in part by paying the principal amount of the notes being redeemed plus a premium.
During 2010, the Company issued $115,000$115,000 aggregate principal amount of 6.00% Convertible Guaranteed Notes. The notes paypaid interest semi-annually in arrears and were scheduled to mature in January 2030. The holders of the notes may require the Company to repurchase their notes in January 2017, January 2020 and January 2025 for cash equal to 100% of the notes to be repurchased, plus any accrued and unpaid interest. The Company may not redeem any notes prior to January 2017, except to preserve its REIT status. As of the date of filing this Annual Report, the notes have a conversion rate of 156.5514 common shares per one thousand principal amount of the notes, representing a conversion price of approximately $6.39 per common share. The conversion rate is subject to adjustment under certain circumstances, including increases in the Company's dividend rate above a certain threshold and the issuance of stock dividends.2030. The notes are convertible by the holders under certain circumstances for cash, common shares or a combination of cash and common shares at the Company's election. The notes are convertible prior to the close of business on the second business day immediately preceding the stated maturity date, at any time beginningwere fully satisfied/converted in January 2029 and also upon the occurrence of specified events.2016. During 2015, 2014 and 2013, $3,828, $12,763 and $54,9052016, $12,400 aggregate principal amount of the notes were converted for 519,664, 1,904,542 and 7,944,6731,892,269 common shares and an aggregate cash payment of $529, $233 and $3,270$672 plus accrued and unpaid interest, respectively.interest. The Company recognized aggregate debt satisfaction charges of $476, $2,436 and $13,536,$436 during 2015, 2014 and 2013, respectively,2016 relating to the conversions.
During 2007, the Company issued $200,000 original principal amount of Trust Preferred Securities. The Trust Preferred Securities, which are classified as debt, are due in 2037, are open for redemption at the Company's option, bore interest at a fixed rate of 6.804% through April 2017 and thereafter bear interest at a variable rate of three month LIBOR plus 170 basis points through maturity. The interest rate at December 31, 2018 was 4.220%. As of December 31, 2018 and 2017, there was $129,120 original principal amount of Trust Preferred Securities outstanding and $1,824 and $1,924, respectively, of unamortized debt issuance costs.
Below is a summary of additional disclosures related toScheduled principal payments for these debt instruments for the next 6.00%five Convertible Guaranteed Notes.years and thereafter are as follows:
|
| | | | | | | |
| | 6.00% Convertible Guaranteed Notes |
| Balance Sheets: | December 31, 2015 | | December 31, 2014 |
| Principal amount of debt component | $ | 12,400 |
| | $ | 16,228 |
|
| Unamortized discount | (220 | ) | | (564 | ) |
| Carrying amount of debt component | $ | 12,180 |
| | $ | 15,664 |
|
| Carrying amount of equity component | $ | (34,784 | ) | | $ | (33,160 | ) |
| Effective interest rate | 7.8 | % | | 8.1 | % |
| Period through which discount is being amortized, put date | 01/2017 |
| | 01/2017 |
|
| Aggregate if-converted value in excess of aggregate principal amount | $ | 2,863 |
| | $ | 10,432 |
|
|
| | | | | | | | | | | | |
| Statements of Operations: | | 2015 | | 2014 | | 2013 |
| 6.00% Convertible Guaranteed Notes | | | | | | |
| Coupon interest | | $ | 765 |
| | $ | 1,545 |
| | $ | 2,296 |
|
| Discount amortization | | 228 |
| | 438 |
| | 658 |
|
| | | $ | 993 |
| | $ | 1,983 |
| | $ | 2,954 |
|
|
| | | | |
| Year ending December 31, | | Total |
| 2019 | | $ | — |
|
| 2020 | | — |
|
| 2021 | | — |
|
| 2022 | | — |
|
| 2023 | | 250,000 |
|
| Thereafter | | 379,120 |
|
| | | 629,120 |
|
| Unamortized debt discounts | | (1,235 | ) |
| Unamortized debt issuance costs | | (4,555 | ) |
| | | $ | 623,330 |
|
LCIF guarantees the obligations of the Company under the Senior Notes and the 6.00% Convertible Guaranteed Notes.
LEXINGTON REALTY TRUST AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
($000, except share/unit data)
During 2007, the Company issued $200,000 original principal amount of Trust Preferred Securities. The Trust Preferred Securities, which are classified as debt, are due in 2037, were open for redemption at the Company's option commencing April 2012 and bear interest at a fixed rate of 6.804% through April 2017 and thereafter, at a variable rate of three month LIBOR plus 170 basis points through maturity. As of December 31, 2015 and 2014, there was $129,120 original principal amount of Trust Preferred Securities outstanding.
Scheduled principal payments for these debt instruments for the next five years and thereafter are as follows:
|
| | | | |
| Year ending December 31, | | Total |
| 2016 | | $ | — |
|
2017(1) | | 12,400 |
|
| 2018 | | — |
|
| 2019 | | — |
|
| 2020 | | — |
|
| Thereafter | | 629,120 |
|
| | | 641,520 |
|
| Debt discounts | | (2,273 | ) |
| | | $ | 639,247 |
|
| |
(1) | Although the 6.00% Convertible Guaranteed Notes mature in 2030, the notes can be put to the Company in 2017. |
| |
(12)(10) | Derivatives and Hedging Activities |
Risk Management Objective of Using Derivatives. The Company is exposed to certain risks arising from both its business operations and economic conditions. The Company principally manages its exposures to a wide variety of business and operational risks through management of its core business activities. The Company manages economic risks, including interest rate, liquidity, and credit risk primarily by managing the type, amount, sources, and duration of its debt funding and the use of derivative financial instruments. Specifically, the Company enters into derivative financial instruments to manage exposures that arise from business activities that result in the receipt or payment of future known and uncertain cash amounts, the value of which are determined by interest rates. The Company's derivative financial instruments are used to manage differences in the amount, timing, and duration of the Company's known or expected cash receipts and its known or expected cash payments principally related to the Company's investments and borrowings.
Cash Flow Hedges of Interest Rate Risk. The Company's objectives in using interest rate derivatives are to add stability to interest expense, to manage its exposure to interest rate movements and therefore manage its cash outflows as it relates to the underlying debt instruments. To accomplish these objectives the Company primarily uses interest rate swaps as part of its interest rate risk management strategy relating to certain of its variable rate debt instruments. Interest rate swaps designated as cash flow hedges involve the receipt of variable-rate amounts from a counterparty in exchange for the Company making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount.
The effective portion of changes in the fair value of derivatives designated and that qualify as cash flow hedges is recorded in accumulated other comprehensive income (loss) and is subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings. The ineffective portion of the change in fair value of the derivatives is recognized directly in earnings. The Company did not incur any ineffectiveness during 2018, 2017 and 2016.
The Company has designated the interest rate swap agreements with its counterparties as cash flow hedges of the risk of variability attributable to changes in the LIBOR swap rates on $505,000$255,000 of LIBOR-indexed variable-rate unsecured term loans. Accordingly, changes in the fair value of the swaps are recorded in other comprehensive income (loss) and reclassified to earnings as interest becomes receivable or payable. During 2015, the Company extended the maturity date of the $505,000 of LIBOR-indexed variable-rate unsecured term loans to August 2020 ($250,000) and January 2021 ($255,000). The extension of these term loans had no impact on the effectiveness of the corresponding cash flow hedges. In 2012, the Company settled the 2008 interest rate swap agreement with KeyBank for $3,539. The Company had a credit balance of $1,837 in accumulated other comprehensive income at the settlement date which was amortized into earnings on a straight-line basis through February 2013.
LEXINGTON REALTY TRUST AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
($000, except share/unit data)
Amounts reported in accumulated other comprehensive income (loss) related to derivatives will be reclassified to interest expense as interest payments are made on the aggregate $505,000$255,000 term loans. During the next 12 months, the Company estimates that an additional $2,92876 will be reclassified as an increasea decrease to interest expense if the swaps remain outstanding.
As of December 31, 20152018, the Company had the following outstanding interest rate derivatives that were designated as cash flow hedges of interest rate risk:
| | | Interest Rate Derivative | Number of Instruments | Notional | Number of Instruments | Notional |
| Interest Rate Swaps | 10 | $505,000 | 5 | $255,000 |
The table below presents the fair value of the Company's derivative financial instruments as well as their classification on the Consolidated Balance Sheets as of December 31, 20152018 and 20142017.
| | | | As of December 31, 2015 | | As of December 31, 2014 | As of December 31, 2018 | | As of December 31, 2017 |
| | Balance Sheet Location | | Fair Value | | Balance Sheet Location | | Fair Value | Balance Sheet Location | | Fair Value | | Balance Sheet Location | | Fair Value |
| Derivatives designated as hedging instruments: | | | | | | | |
| | | | | | | |
|
| Interest Rate Swap Asset | Other Assets | | $ | 4 |
| | Other Assets | | $ | 1,153 |
| Other Assets | | $ | 76 |
| | Other Assets | | $ | 1,065 |
|
| Interest Rate Swap Liability | Accounts Payable and Other Liabilities | | $ | (1,943 | ) | | Accounts Payable and Other Liabilities | | $ | (749 | ) | |
LEXINGTON REALTY TRUST AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
($000, except share/unit data)
The tables below present the effect of the Company's derivative financial instruments on the Consolidated Statements of Operations for 20152018 and 2014:
2017:
| | | Derivatives in Cash Flow | | Amount of Loss Recognized
in OCI on Derivative
(Effective Portion)
December 31, | | Location of Loss Reclassified from Accumulated OCI into Income (Effective Portion) | | Amount of Loss Reclassified
from Accumulated OCI into
Income (Effective Portion)
December 31, | | Amount of Income Recognized
in OCI on Derivative
(Effective Portion)
December 31, | | Location of Income (Loss) Reclassified from Accumulated OCI into Income (Effective Portion) | | Amount of (Income) Loss Reclassified
from Accumulated OCI into
Income (Effective Portion)
December 31, |
| Hedging Relationships | | | 2015 | | 2014 | | 2015 | | 2014 | | | 2018 | | 2017 | | 2018 | | 2017 |
| Interest Rate Swap | | $ | (7,809 | ) | | $ | (9,560 | ) | | Interest expense | | $ | 5,466 |
| | $ | 5,525 |
| | $ | 597 |
| | $ | 1,168 |
| | Interest expense | | $ | (1,586 | ) | | $ | 930 |
|
The Company's agreements with the swap derivative counterparties contain provisions whereby if the Company defaults on the underlying indebtedness, including default where repayment of the indebtedness has not been accelerated by the lender, then the Company could also be declared in default of the swap derivative obligation. As of December 31, 20152018, the Company had not posted any collateral related to the agreements.
LEXINGTON REALTY TRUST AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
($000, except share/unit data)
(13)(11) Leases
Lessor:
Minimum future rental receipts under the non-cancelable portion of tenant leases, assuming no new or re-negotiated leases, for the next five years and thereafter are as follows:
| | Year ending December 31, | | Total | | Total |
| 2016 | | $ | 347,551 |
| |
| 2017 | | 328,659 |
| |
| 2018 | | 310,051 |
| |
| 2019 | | 282,296 |
| | $ | 270,557 |
|
| 2020 | | 249,528 |
| | 253,660 |
|
| 2021 | | | 233,192 |
|
| 2022 | | | 212,893 |
|
| 2023 | | | 211,387 |
|
| Thereafter | | 6,654,870 |
| | 1,619,848 |
|
| | | $ | 8,172,955 |
| | $ | 2,801,537 |
|
The above minimum lease payments do not include reimbursements to be received from tenants for certain operating expenses and real estate taxes and do not include early termination payments provided for in certain leases.
Certain leases allow for the tenant to terminate the lease if the property is deemed obsolete, as defined, and upon payment of a termination fee to the landlord, as stipulated in the lease. In addition, certain leases provide the tenant with the right to purchase the leased property at fair market value or a stipulated price.
Lessee:
The Company holds, through property owner subsidiaries, leasehold interests in various properties. Generally, the ground rents on these properties are either paid directly by the tenants to the fee holder or reimbursed to the Company as additional rent. Certain properties are economically owned through the holding of industrial revenue bonds and as such neither ground lease payments nor bond debt service payments are made or received, respectively. For certain of these properties, the Company has an option to purchase the fee interest.
LEXINGTON REALTY TRUST AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
($000, except share/unit data)
Minimum future rental payments under non-cancelable leasehold interests, excluding leases held through industrial revenue bonds and lease payments in the future that are based upon fair market value, for the next five years and thereafter are as follows:
| | Year ending December 31, | | Total | | Total |
| 2016 | | $ | 5,032 |
| |
| 2017 | | 4,987 |
| |
| 2018 | | 4,819 |
| |
| 2019 | | 4,313 |
| | $ | 3,826 |
|
| 2020 | | 4,306 |
| | 3,827 |
|
| 2021 | | | 3,769 |
|
| 2022 | | | 3,834 |
|
| 2023 | | | 4,008 |
|
| Thereafter | | 34,346 |
| | 28,326 |
|
| | | $ | 57,803 |
| | $ | 47,590 |
|
Rent expense for the leasehold interests including discontinued operations, was $868597, $919690 and $1,284987 in 2015, 20142018, 2017 and 2013,2016, respectively.
The Company leases its corporate headquarters. The lease expires March 2026. The Company is responsible for its proportionate share of operating expenses and real estate taxes above a base year. In addition, the Company leases office space for its regional offices. The minimum lease payments for the Company's offices are $467$1,295 for 2016,2019, $1,2431,296 for 2017,2020, $1,2241,325 for 2018, $1,2242021, $1,335 for 20192022 and $1,224$1,304 for 20202023 and $6,795$2,935 thereafter. Rent expense for 2015, 20142018, 2017 and 20132016 was $1,4351,274, $1,3561,256 and $1,3381,242, respectively.
LEXINGTON REALTY TRUST AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
($000, except share/unit data)
| |
(14)(12) | Concentration of Risk |
The Company seeks to reduce its operating and leasing risks through the geographic diversification of its properties, tenant industry diversification, avoidance of dependency on a single asset and the creditworthiness of its tenants. For the years ended December 31, 2015, 20142018, 2017 and 2013,2016, no single tenant represented greater than 10% of rental revenues.
Cash and cash equivalent balances at certain institutions may exceed insurable amounts. The Company believes it mitigates this risk by investing in or through major financial institutions.
Shareholders' Equity:
During 2015, 2014 and 20132016, the Company issued 2,266,191, 2,600,795 and 36,012,313577,823 common shares respectively, through public offerings (only in 2013) and under its direct share purchase plan, which includes a dividend reinvestment component, raising net proceeds of approximately $20,7974,115, $25,813. In 2018 and $399,566 respectively.2017, no shares were issued under this plan. During 2013, the Company implemented, anand in 2016, the Company updated, its At-The-Market offering program under which the Company may issue up to $100,000$125,000 in common shares over the term of this program. TheDuring 2017 and 2016, the Company issued 3,409,9271,593,603 and 976,109 common shares, respectively, under this program during 2013 and generated aggregate gross proceeds of $36,884.$17,362 and $10,498, respectively. No shares were sold under this program in 2015 or 2014.2018. The proceeds from these issuances were primarily used for general working capital, to fund investments and retire indebtedness.
The Company had 1,935,400 shares of Series C Cumulative Convertible Preferred Stock (“Series C Preferred”), outstanding at December 31, 20152018. The shares have a dividend of $3.25 per share per annum, have a liquidation preference of $96,770, and the Company, if certain common share prices are achieved, can force conversion into common shares of the Company. As of December 31, 2015,2018, each share is currentlywas convertible into 2.4339 common shares. This conversion ratio may increase over time if the Company's common share dividend exceeds certain quarterly thresholds.
If certain fundamental changes occur, holders may require the Company, in certain circumstances, to repurchase all or part of their shares of Series C Preferred. In addition, upon the occurrence of certain fundamental changes, the Company will, under certain circumstances, increase the conversion rate by a number of additional common shares or, in lieu thereof, may in certain circumstances elect to adjust the conversion rate upon the shares of Series C Preferred becoming convertible into shares of the public acquiring or surviving company.
LEXINGTON REALTY TRUST AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
($000, except share/unit data)
The Company may, at the Company's option, cause shares of Series C Preferred to be automatically converted into that number of common shares that are issuable at the then prevailing conversion rate. The Company may exercise its conversion right only if, at certain times, the closing price of the Company's common shares equals or exceeds 125% of the then prevailing conversion price of the Series C Preferred.
Investors in shares of Series C Preferred generally have no voting rights, but will have limited voting rights if the Company fails to pay dividends for six or more quarters and under certain other circumstances. Upon conversion, the Company may choose to deliver the conversion value to investors in cash, common shares, or a combination of cash and common shares.
During 20152018, 20142017 and 20132016, the Company issued 860,730965,932, 37,678835,234 and 1,893,4091,084,835 of its common shares, respectively, to certain employees and trustees. Typically, trustee share grants vest immediately. Employee share grants generally vest ratably, on anniversaries of the grant date, however, in certain situations vesting is cliff-based after a specific number of years and/or subject to meeting certain performance criteria (see note 16)14).
In July 2015, the Company's Board of Trustees authorized the repurchase of up to 10,000,000 common shares.shares and increased this authorization by 10,000,000 common shares in 2018. This share repurchase program has no expiration date. During 2015,2018 and 2016, the Company repurchased 2,216,799and retired 5,851,252 and 1,184,113, respectively, common shares at an average price of $8.29$8.05 and $7.56, respectively, per common share under this share repurchase program.
LEXINGTON REALTY TRUST AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
($000, except share/unit data)
During 2013,A summary of the Company redeemed and retired the following shares of its preferred stock:
|
| | | | |
| | | 2013 |
| 7.55% Series D Cumulative Redeemable Preferred Stock: | | |
| Shares redeemed and retired | | 6,200,000 |
|
Redemption cost(1) | | $ | 155,621 |
|
Deemed dividend(2) | | $ | 5,230 |
|
| |
(1) | Includes accrued and unpaid dividends. |
| |
(2) | Represents the difference between the redemption cost and historical GAAP cost. Accordingly, net income was adjusted for the deemed dividends to arrive at net income (loss) attributable to common shareholders. |
Accumulatedchanges in accumulated other comprehensive income (loss) related to the Company's cash flow hedges is as of December 31, 2015 and 2014 represented $(1,939) and $404, respectively, of unrealized gain on interest rate swaps, net.
Changes in Accumulated Other Comprehensive Income (Loss)follows:
|
| | | | |
| | | Gains and Losses on Cash Flow Hedges |
| Balance December 31, 2014 | | $ | 404 |
|
| Other comprehensive loss before reclassifications | | (7,809 | ) |
| Amounts of loss reclassified from accumulated other comprehensive income to interest expense | | 5,466 |
|
| Balance December 31, 2015 | | $ | (1,939 | ) |
|
| | | | | | | | |
| | | Twelve months ended December 31, |
| | | 2018 | | 2017 |
| Balance at beginning of period | | $ | 1,065 |
| | $ | (1,033 | ) |
| Other comprehensive income before reclassifications | | 597 |
| | 1,168 |
|
| Amounts of (income) loss reclassified from accumulated other comprehensive income (loss) to interest expense | | (1,586 | ) | | 930 |
|
| Balance at end of period | | $ | 76 |
| | $ | 1,065 |
|
Noncontrolling Interests:
In conjunction with several of the Company's acquisitions in prior years, sellers were issued OP units as a form of consideration. All OP units, other than OP units owned by the Company, are redeemable for common shares at certain times, at the option of the holders, and are generally not otherwise mandatorily redeemable by the Company. The OP units are classified as a component of permanent equity as the Company has determined that the OP units are not redeemable securities as defined by GAAP. Each OP unit is currently redeemable for approximately 1.13 common shares, subject to future adjustments.
During 2014, in connection with the merger of LCIF II with and into LCIF, former LCIF II partners representing 170,193 OP units elected or were deemed to elect to receive $1,962 in aggregate cash for such OP units.
During 20152018, 20142017 and 20132016, 32,78053,388, 29,086140,746 and 202,24148,549 common shares, respectively, were issued by the Company, in connection with OP unit redemptions, for an aggregate value of $165189, $148584 and $1,053210, respectively.
As of December 31, 20152018, there were approximately 3,393,0003,177,000 OP units outstanding other than OP units owned by the Company. All OP units receive distributions in accordance with their respectivethe LCIF partnership agreements.agreement. To the extent that the Company's dividend per common share is less than the stated distribution per OP unit per the applicableLCIF partnership agreement, the distributions per OP unit are reduced by the percentage reduction in the Company's dividend per common share. No OP units have a liquidation preference.
LEXINGTON REALTY TRUST AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
($000, except share/unit data)
The following discloses the effects of changes in the Company's ownership interests in its noncontrolling interests:
| | | | Net Income Attributable to Shareholders and Transfers from Noncontrolling Interests | Net Income Attributable to Shareholders and Transfers from Noncontrolling Interests |
| | 2015 | | 2014 | | 2013 | 2018 | | 2017 | | 2016 |
| Net income attributable to Lexington Realty Trust shareholders | $ | 111,703 |
| | $ | 93,104 |
| | $ | 1,630 |
| $ | 227,415 |
| | $ | 85,583 |
| | $ | 95,624 |
|
| Transfers from noncontrolling interests: | | | | | | | | | | |
| Increase (decrease) in additional paid-in-capital for redemption of noncontrolling OP units | 165 |
| | (858 | ) | | 1,053 |
| |
| Increase in additional paid-in-capital for redemption of noncontrolling OP units | | 189 |
| | 584 |
| | 210 |
|
| Change from net income attributable to shareholders and transfers from noncontrolling interests | $ | 111,868 |
| | $ | 92,246 |
| | $ | 2,683 |
| $ | 227,604 |
| | $ | 86,167 |
| | $ | 95,834 |
|
In July 2015 and 2014, the Company acquired a consolidated joint venture partner's interest in an office property in Philadelphia, Pennsylvania for $4,022 and $2,100, respectively, raising the Company's equity ownership in the office property to 100.0%. In July 2013, the Company acquired its consolidated joint venture partners' interest in an industrial facility in Long Island City, New York for a payment of $8,918, which was recorded as a distribution to the partner in accordance with GAAP.
The Company maintains an equity award plan pursuant to which qualified and non-qualified options may be issued. No common share options were issued in 20152018, 20142017 and 2013.2016. The Company granted 1,248,501, 1,265,500 and 2,000,000 common share options on December 31, 2010 (“2010 options”), January 8, 2010 (“2009 options”) and December 31, 2008 (“2008 options”), respectively, at an exercise price of $7.95, $6.39 and $5.60, respectively. The 2010 options (1) vested 20% annually on each December 31, 2011 through 2015 and (2) terminate on the earlier of (x) six months of termination of service with the Company and (y) December 31, 2020. The 2009 options (1) vested 20% annually on each December 31, 2010 through 2014 and (2) terminate on the earlier of (x) six months of termination of service with the Company and (y) December 31, 2019. The 2008 options (1) vested 50% following a 20-day trading period where the average closing price of a common share of the Company on the New York Stock Exchange (“NYSE”) was $8.00 or higher and vested 50% following a 20-day trading period where the average closing price of a common share of the Company on the NYSE was $10.00 or higher, and (2) terminateterminated on the earlier of (x) termination of service with the Company or (y) December 31, 2018. As a result of the share dividends paid in 2009, each of the 2008 options iswere exchangeable for approximately 1.13 common shares at an exercise price of $4.97 per common share.
The Company engaged third parties to value the options as of each option's respective grant date. The third parties determined the value to be $2,422 and $2,771 for the 2010 options and 2009 options, respectively, using the Black-Scholes model and $2,480 for the 2008 options using the Monte Carlo model. The options are considered equity awards as they are settled through the issuance of common shares. As such, the options were valued as of the grant date and do not require subsequent remeasurement. There were several assumptions used to fair value the options including the expected volatility in the Company's common share price based upon the fluctuation in the Company's historical common share price. The more significant assumptions underlying the determination of fair value for options granted were as follows:
|
| | | | | | | | | | | | |
| | | 2010 Options | | 2009 Options | | 2008 Options |
| Weighted-average fair value of options granted | | $ | 1.94 |
| | $ | 2.19 |
| | $ | 1.24 |
|
| Weighted-average risk-free interest rate | | 2.54 | % | | 3.29 | % | | 1.33 | % |
| Weighted-average expected option lives (in years) | | 6.50 |
| | 6.70 |
| | 3.60 |
|
| Weighted-average expected volatility | | 49.00 | % | | 59.08 | % | | 59.94 | % |
| Weighted-average expected dividend yield | | 7.40 | % | | 6.26 | % | | 14.40 | % |
LEXINGTON REALTY TRUST AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
($000, except share/unit data)
The Company recognized compensation expense relating to these options over an average of 5.0 years for the 2010 options and 2009 options and 3.6 years for the 2008 options. The Company recognized $480, $1,038 and $1,037 in compensation expense in 2015, 2014 and 2013 respectively. The Company does not have any unrecognizedAll deferred compensation costs relating to the outstanding options as of were fully amortized by December 31, 2015.2015. The intrinsic value of an option is the amount by which the market value of the underlying common share at the date the option is exercised exceeds the exercise price of the option. No options were exercised in 2015 and theThe total intrinsic value of options exercised for the years ended December 31, 20142018 and 20132017 were $2,780$26 and $8,607,$1,064, respectively.
LEXINGTON REALTY TRUST AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
($000, except share/unit data)
Share option activity during the years indicated is as follows:
|
| | | | | | |
| | Number of Shares | | Weighted-Average Exercise Price Per Share |
| Balance at December 31, 2012 | 3,480,080 |
| | $ | 6.44 |
|
| Exercised | (1,519,179 | ) | | 5.77 |
|
| Forfeited | (5,200 | ) | | 7.47 |
|
| Balance at December 31, 2013 | 1,955,701 |
| | 6.95 |
|
| Exercised | (594,791 | ) | | 6.71 |
|
| Forfeited | (10,500 | ) | | 7.46 |
|
| Balance at December 31, 2014 and 2015 | 1,350,410 |
| | $ | 7.05 |
|
|
| | | | | | |
| | Number of Shares | | Weighted-Average Exercise Price Per Share |
| Balance at December 31, 2016 | 406,241 |
| | $ | 6.78 |
|
| Exercised | (271,451 | ) | | 6.48 |
|
| Balance at December 31, 2017 | 134,790 |
| | 7.39 |
|
| Exercised | (16,390 | ) | | 6.99 |
|
| Balance at December 31, 2018 | 118,400 |
| | $ | 7.44 |
|
As of December 31, 20152018, the aggregate intrinsic value of options that were outstanding and exercisable was $1,27791.
Non-vested share activity for the years ended December 31, 20152018 and 20142017, is as follows:
| | | | Number of Shares | | Weighted-Average Value Per Share | Number of Shares | | Weighted-Average Grant-Date Fair Value Per Share |
| Balance at December 31, 2013 | 2,521,046 |
| | $ | 10.46 |
| |
| Balance at December 31, 2016 | | 3,151,310 |
| | $ | 8.09 |
|
| Granted | | 777,900 |
| | 6.83 |
|
| Vested | | (161,912 | ) | | 8.90 |
|
| Balance at December 31, 2017 | | 3,767,298 |
| | 7.79 |
|
| Granted | | 899,614 |
| | 6.55 |
|
| Vested | (537,003 | ) | | 9.16 |
| (618,383 | ) | | 9.70 |
|
| Forfeited | (13,658 | ) | | 9.96 |
| (593,452 | ) | | 6.59 |
|
| Balance at December 31, 2014 | 1,970,385 |
| | 10.82 |
| |
| Granted | 812,679 |
| | 7.70 |
| |
| Vested | (413,714 | ) | | 11.95 |
| |
| Balance at December 31, 2015 | 2,369,350 |
| | $ | 9.55 |
| |
| Balance at December 31, 2018 | | 3,455,077 |
| | $ | 7.34 |
|
During 2015,2018 and 2017, the Company granted to certain executive officers performance-based shares, which vest based on the Company’s total shareholder return growth after a three-year measurement period relative to an index (321,018 shares) and its peers (321,011 shares). Dividends will not be paid on these grants until earned. Once the performance criteria are met and the actual number of shares earned is determined, such shares vest immediately. The fair value of the grants was determined at the grant date using a multifactor Monte Carlo simulation model. In addition, during 2015, the Company granted 170,650 non-vested common shares to certain employees whichand trustees as follows:
|
| | | |
| | 2018 | | 2017 |
Performance Shares(1) | | | |
| Shares issued: | | | |
| Index - 1Q | 331,025 | | 106,706 |
| Peer - 1Q | 331,019 | | 106,705 |
| Index - 2Q |
| | 163,466 |
| Peer - 2Q |
| | 163,463 |
| | | | |
Grant date fair value per share:(2) | | | |
| Index - 1Q | $5.81 | | $6.82 |
| Peer - 1Q | $5.37 | | $6.34 |
| Index - 2Q | | | $4.05 |
| Peer - 2Q | | | $4.27 |
| | | | |
Non-Vested Common Shares:(3) | | | |
| Shares issued | 237,570 | | 237,560 |
| Grant date fair value | $2,190 | | $2,551 |
| |
| (1) | The shares vest based on the Company's total shareholder return growth after a three-year measurement period relative to an index and a group of Company peers. Dividends will not be paid on these grants until earned. Once the performance criteria are met and the actual number of shares earned is determined, such shares vest immediately. During 2018, 116,926 of the 642,029 performance shares issued in 2015 vested. |
| |
| (2) | The fair value of grants was determined at the grant date using a Monte Carlo simulation model. |
| |
| (3) | The shares vest ratably over a three-year service period. |
LEXINGTON REALTY TRUST AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
($000, except share/unit data)
In addition, during 2018, 2017 and 2016, the Company issued 66,318, 57,334, and 50,816, respectively, of fully vested common shares to non-management members of the Company's Board of Trustees with a three-year service period. Compensation expense is recognized over the requisite service period for all grants.fair value of $599, $596, and $427, respectively.
As of December 31, 20152018, of the remaining 2,369,3503,455,077 non-vested shares, 1,720,8241,495,608 are subject to time-based vesting and 648,5261,959,469 are subject to performance-based vesting. At December 31, 20152018, there are 3,320,9614,012,870 awards available for grant. The Company has $13,7077,915 in unrecognized compensation costs relating to the non-vested shares that will be charged to compensation expense over an average of approximately 3.32.1 years.
The Company has established a trust for certain officers in which vested common shares granted for the benefit of the officers are deposited. The officers exert no control over the common shares in the trust and the common shares are available to the general creditors of the Company. As of December 31, 20152018 and 20142017, there were 427,531 common shares in the trust.
LEXINGTON REALTY TRUST AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
($000, except share/unit data)
The Company sponsors a 401(k) retirement savings plan covering all eligible employees. The Company makes a discretionary matching contribution on a portion of employee participant salaries and, based on its profitability, may make an additional discretionary contribution at each fiscal year end to all eligible employees. These discretionary contributions are subject to vesting under a schedule providing for 25% annual vesting starting with the first year of employment and 100% vesting after four years of employment. Approximately $333397, $299439 and $298357 of contributions are applicable to 20152018, 20142017 and 20132016, respectively.
During 20152018, 20142017 and 20132016, the Company recognized $6,901, $8,201, $7,5508,333 and $7,1458,415, respectively, in expense relating to scheduled vesting and issuance of common share grants.
| |
(17)(15) | Related Party Transactions |
The Company has an indemnity obligation to Vornado Realty Trust ("VNO"), one of its significant shareholders, with respect to actions by the Company that affect Vornado Realty Trust's status as a REIT.
All related party acquisitions, sales and loans weretransactions are approved by the independent members of the Company's Board of Trustees or the Audit Committee.Committee as provided for in the Company's Code of Business Conduct and Ethics.
The Company leases certain propertiesleased a property to entitiesan entity in which Vornado Realty Trust,VNO, a significant shareholder, has an interest. During 2015, 20142017 and 2013,2016, the Company recognized $255, $255$234 and $744,$236, respectively, in rental revenue including discontinued operations, from these properties.this property. This property was sold in 2017. The Company leases its corporate office from an affiliate of Vornado Realty Trust. Rent expense for this property was $1,323, $1,252$1,192, $1,179 and $1,225$1,176 in 2015, 20142018, 2017 and 2013,2016, respectively.
In connection with efforts, on a non-binding basis, to procure non-recourse mezzanine financing from an affiliate of the Company's Chairman, pursuant to the terms of the EB-5 visa program administered by the United States Citizenship and Immigration Services (“USCIS”), for a joint venture investment in Houston, Texas, in which the Company has an investment, the Company executed a guaranty in favor of an affiliate of its Chairman. The guaranty providesprovided that the Company will reimburse investors providing the funds for such financing if the following occurs: (1) the joint venture receives such funds, (2) the USCIS denies the financing solely because the project is not permitted under the EB-5 visa program, and (3) the joint venture fails to return such funds. As of December 31, 2015,During 2017, USCIS approved the project, and the guaranty terminated by its terms. In 2018, the joint venture has not received any such funds andobtained $8,500 of EB-5 mezzanine financing from an affiliate of the Company has not recorded any liability as it relatesCompany's Chairman. The joint venture reimbursed the Chairman's affiliate $150 for its expenses. Under an indemnity agreement, the joint venture is required to this guaranty. The maximumpay an affiliate of the Company's Chairman 0.625% of the outstanding principal amount of funds that would be subject to the guaranty obligation is $18,000.EB-5 mezzanine financing per annum.
In addition, in connection with efforts, on a non-binding basis, to procureduring 2017, the Company obtained non-recourse mezzanine financing in the initial amount of $8,000 from an affiliate of the Company's Chairman, pursuant to the terms of the EB-5 visa program administered by the USCIS, for an investment in Charlotte, North Carolina,Carolina. In January 2018, the Company agreed to reimburseobtained an additional $500 of financing proceeds. The Company reimbursed the Chairman's affiliate up to approximately $7$105 for its expenses.expenses and paid a $128 structuring fee to the Chairman's affiliate. The property was subsequently contributed to, and the financing assumed by, NNN JV.
LEXINGTON REALTY TRUST AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
($000, except share/unit data)
The provision for income taxes relates primarily to the taxable income of the Company's taxable REIT subsidiaries. The earnings, other than in taxable REIT subsidiaries, of the Company are not generally subject to federal income taxes at the Company level due to the REIT election made by the Company.
Income taxes have been provided for on the asset and liability method. Under the asset and liability method, deferred income taxes are recognized for the temporary differences between the financial reporting basis and the tax basis of assets and liabilities.
LEXINGTON REALTY TRUST AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
($000, except share/unit data)
The Company's provision for income taxes for the years ended December 31, 20152018, 20142017 and 20132016 is summarized as follows:
|
| | | | | | | | | | | |
| | 2015 | | 2014 | | 2013 |
| Current: | | | | | |
| Federal | $ | — |
| | $ | 145 |
| | $ | (1,445 | ) |
| State and local | (645 | ) | | (1,130 | ) | | (1,593 | ) |
| NOL utilized | — |
| | — |
| | 586 |
|
| Deferred: | | | | | |
| Federal | 59 |
| | (91 | ) | | (595 | ) |
| State and local | 18 |
| | (33 | ) | | (130 | ) |
| | $ | (568 | ) | | $ | (1,109 | ) | | $ | (3,177 | ) |
Net deferred tax assets (liabilities) of $59 and $(19) are included in other assets (liabilities) on the accompanying Consolidated Balance Sheets at December 31, 2015 and 2014, respectively. These net deferred tax assets (liabilities) relate primarily to differences in the timing of the recognition of income (loss) between GAAP and tax and net operating loss carry forwards. |
| | | | | | | | | | | |
| | 2018 | | 2017 | | 2016 |
| Current: | | | | | |
| Federal | $ | (60 | ) | | $ | (107 | ) | | $ | (140 | ) |
| State and local | (1,668 | ) | | (1,810 | ) | | (1,299 | ) |
| NOL utilized | — |
| | — |
| | 59 |
|
| Deferred: | | | | | |
| Federal | — |
| | — |
| | (44 | ) |
| State and local | — |
| | — |
| | (15 | ) |
| | $ | (1,728 | ) | | $ | (1,917 | ) | | $ | (1,439 | ) |
The income tax provision differs from the amount computed by applying the statutory federal income tax rate to pre-tax operating income as follows:
| | | | 2015 | | 2014 | | 2013 | 2018 | | 2017 | | 2016 |
| Federal provision at statutory tax rate (34%) | $ | 65 |
| | $ | (43 | ) | | $ | 164 |
| |
| Federal provision at statutory tax rate (21% for 2018 and 34% for 2017 and 2016) | | $ | (65 | ) | | $ | (182 | ) | | $ | (154 | ) |
| State and local taxes, net of federal benefit | 12 |
| | (9 | ) | | 22 |
| (11 | ) | | (40 | ) | | (30 | ) |
| Other | (645 | ) | | (1,057 | ) | | (3,363 | ) | (1,652 | ) | | (1,695 | ) | | (1,255 | ) |
| | $ | (568 | ) | | $ | (1,109 | ) | | $ | (3,177 | ) | $ | (1,728 | ) | | $ | (1,917 | ) | | $ | (1,439 | ) |
For the years ended December 31, 20152018, 20142017 and 20132016, the “other” amount is comprised primarily of state franchise taxes of $6791,679, $1,1831,598 and $1,2801,252, respectively, the write-off of deferred tax liabilities (asset) of $0, $0 and $(150), respectively, and permanent differences of $0, $0, and $1,936, respectively, relating to the transfer of certain assets of the Company's taxable subsidiaries.
As of December 31, 2015 and 2014, the Company had estimated net operating loss carry forwards for income tax reporting purposes of $146 and $0, respectively, which will begin to expire in tax year 2035.respectively.
A summary of the average taxable nature of the Company's common dividends for each of the years in the three-year period ended December 31, 20152018, is as follows:
| | | | 2015 | | 2014 | | 2013 | 2018 | | 2017 | | 2016 |
| Total dividends per share | $ | 0.68 |
| | $ | 0.67 |
| | $ | 0.60 |
| $ | 0.710 |
| | $ | 0.700 |
| | $ | 0.685 |
|
| Ordinary income | 63.07 | % | | 49.44 | % | | 35.53 | % | 87.89 | % | | 59.93 | % | | 96.73 | % |
| Qualifying dividend | — |
| | 0.05 | % | | 4.11 | % | 0.14 | % | | 0.15 | % | | 0.22 | % |
| Capital gain | — |
| | — |
| | 2.09 | % | — |
| | — |
| | — |
|
| Return of capital | 36.93 | % | | 50.51 | % | | 58.27 | % | 11.97 | % | | 39.92 | % | | 3.05 | % |
| | 100.00 | % | | 100.00 | % | | 100.00 | % | 100.00 | % | | 100.00 | % | | 100.00 | % |
LEXINGTON REALTY TRUST AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
($000, except share/unit data)
A summary of the average taxable nature of the Company's dividend on shares of its Series C Preferred for each of the years in the three-year period ended December 31, 20152018, is as follows:
| | | | 2015 | | 2014 | | 2013 | 2018 | | 2017 | | 2016 |
| Total dividends per share | $ | 3.25 |
| | $ | 3.25 |
| | $ | 3.25 |
| $ | 3.25 |
| | $ | 3.25 |
| | $ | 3.25 |
|
| Ordinary income | 100.00 | % | | 99.90 | % | | 85.14 | % | 99.84 | % | | 99.75 | % | | 99.78 | % |
| Qualifying dividend | — |
| | 0.10 | % | | 9.85 | % | 0.16 | % | | 0.25 | % | | 0.22 |
|
| Capital gain | — |
| | — |
| | 5.01 | % | — |
| | — |
| | — |
|
| Return of capital | — |
| | — |
| | — | % | — |
| | — |
| | — |
|
| | 100.00 | % | | 100.00 | % | | 100.00 | % | 100.00 | % | | 100.00 | % | | 100.00 | % |
LEXINGTON REALTY TRUST AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
($000, except share/unit data)
A summary of the average taxable nature of the Company's dividend on shares of its Series D Cumulative Redeemable Preferred Stock for the years in the three-year period ended December 31, 2015, is as follows:
|
| | | | | | | | | | | |
| | 2015 | | 2014 | | 2013 |
| Total dividends per share | $ | — |
| | $ | — |
| | $ | 1.043368 |
|
| Ordinary income | — |
| | — |
| | 85.14 | % |
| Qualifying dividend | — |
| | — |
| | 9.85 | % |
| Capital gain | — |
| | — |
| | 5.01 | % |
| Return of capital | — |
| | — |
| | — | % |
| | — |
| | — |
| | 100.00 | % |
| |
(19)(17) | Commitments and Contingencies |
In addition to the commitments and contingencies disclosed elsewhere, the Company has the following commitments and contingencies.
The Company is obligated under certain tenant leases, including its proportionate share for leases for non-consolidated entities, to fund the expansion of the underlying leased properties. The Company, under certain circumstances, may guarantee to tenants the completion of base building improvements and the payment of tenant improvement allowances and lease commissions on behalf of its subsidiaries.
The Company and LCIF are parties to a funding agreement under which the Company may be required to fund distributions made on account of LCIF's OP units. Pursuant to the funding agreement, the parties agreed that, if LCIF does not have sufficient cash available to make a quarterly distribution to its limited partners in an amount in accordance with the partnership agreement, Lexington will fund the shortfall. Payments under the agreement will be made in the form of loans to LCIF and will bear interest at prevailing rates as determined by the Company in its discretion but, no less than the applicable federal rate. LCIF's right to receive these loans will expire if no OP units remain outstanding and all such loans are repaid. No amounts have been advanced under this agreement.
From time to time, the Company is directly or indirectly involved in legal proceedings arising in the ordinary course of business. Management believes, based on currently available information, and after consultation with legal counsel, that although the outcomes of those normal course proceedings are uncertain, the results of such proceedings, in the aggregate, will not have a material adverse effect on the Company's business, financial condition and results of operations.
GSMSC II 2006-GG6 Bridgewater Hills Corporate Center, LLCCummins Inc. v. Lexington Realty Trust (Supreme CourtColumbus (Jackson Street) L.P. and Wells Fargo Bank, N.A. (State of the State of New York,Indiana, County of New York-Index No. 653117/2015)
Bartholomew, in the Bartholomew Superior Court). On September 16, 2015, GSMSC II 2006-GG6 Bridgewater Hills Corporate Center, LLC commenced an action as lenderOctober 25, 2018, Cummins Inc., the tenant in the Company's Columbus, Indiana office building, filed a complaint for declaratory relief against Lexington Columbus (Jackson Street) L.P., the Company based on a limited guaranty of recourse obligations executed by a predecessor entity of the Company in connection with a mortgage loan secured by a property owner subsidiary's commercial property in Bridgewater, New Jersey. TheCompany's property owner subsidiary, defaultedand Wells Fargo Bank, N.A., the trustee for the noteholders with a security interest in the office building. Under the subject lease, Cummins Inc.’s tenancy extends through July 31, 2024, with options to further extend for additional time periods. Despite failing to timely exercise a purchase option for the office building that was expressly due by July 15, 2018, where time was of the essence, Cummins Inc. has asked the court for a declaration that it is entitled to non-payment afterpurchase the sole tenant vacatedbuilding at the endoption price and to terminate the lease effective July 31, 2019. Cummins Inc. does not dispute that it failed to comply with the requirements of the lease term.purchase option, but alleges that it is entitled to relief under several equitable theories. Lexington Columbus (Jackson Street) L.P. filed a motion to dismiss the complaint on January 8, 2019. The lender seeks approximately $15,500 in orderCompany believes that Indiana law supports the Company's right to satisfy the outstanding amountretain ownership of the loan, plus reasonable attorney’s feesbuilding, and other costs and disbursements related thereto.
The lender claims that the Company's limited guaranty was triggered due to the merger of Newkirk Realty Trust, Inc. and Lexington Corporate Properties Trust on December 31, 2006, arguing that it constituted an event of default because it was a transfer that was not permitted by the loan agreement. The Company intends to vigorously defend this claim.
As of December 31, 2018, the lender’s claim. The Company filed a motion to dismiss on October 19, 2015maintained an executive severance policy and a hearing is scheduled for March 16, 2016.
Other. Fourentered into related agreements with certain of ourits executive officers have employment contracts andwhereby the Company's executives are entitled to severance benefits upon terminationcertain events. In January 2018, the Company entered into retirement agreements with two of its then executive officers. One of the retirement agreements provides for contingent payments, not to exceed $795, in 2020 following the receipt of certain incentive fees by the Company, without cause or termination by the executive officer with good reason, in each case, as defined in the employment contract.
| |
(20) | Supplemental Disclosure of Statement of Cash Flow Information |
In addition to disclosures discussed elsewhere, during 2015, 2014 and 2013, the Company paid $88,725, $100,080 and $92,788, respectively, for interest and $741, $859 and $4,666, respectively, for income taxes.if any. As of December 31, 2018, $89 of these contingent payments was earned.
During 2015, 2014 and 2013, the Company sold its interests in certain properties, which included the assumption of the related non-recourse mortgage debt in the aggregate amount of $55,000, $30,140 and $40,356, respectively. In addition, during 2015, 2014 and 2013, the Company conveyed its interests in certain properties to its lenders in full satisfaction of the $47,528, $9,900 and $49,510, respectively, non-recourse mortgage notes payable.
LEXINGTON REALTY TRUST AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
($000, except share/unit data)
| |
| (18) | Supplemental Disclosure of Statement of Cash Flow Information |
|
| | | | | | | | | | | |
| | 2018 | | 2017 | | 2016 |
| Reconciliation of cash, cash equivalents and restricted cash: | | | | | |
| Cash and cash equivalents at beginning of period | $ | 107,762 |
| | $ | 86,637 |
| | $ | 93,249 |
|
| Restricted cash at beginning of period | 4,394 |
| | 31,142 |
| | 10,637 |
|
| Cash, cash equivalents and restricted cash at beginning of period | $ | 112,156 |
| | $ | 117,779 |
| | $ | 103,886 |
|
| | | | | | |
| Cash and cash equivalents at end of period | $ | 168,750 |
| | $ | 107,762 |
| | $ | 86,637 |
|
| Restricted cash at end of period | 8,497 |
| | 4,394 |
| | 31,142 |
|
| Cash, cash equivalents and restricted cash at end of period | $ | 177,247 |
| | $ | 112,156 |
| | $ | 117,779 |
|
In addition to disclosures discussed elsewhere, during 2018, 2017 and 2016, the Company paid $76,562, $75,069 and $87,692, respectively, for interest and $2,025, $2,340 and $1,240, respectively, for income taxes.
During 2017 and 2016, the Company conveyed its interests in certain properties to its lenders in full satisfaction of the $12,616 and $21,582, respectively, non-recourse mortgage notes payable. In addition, during 2016, the Company sold its interests in certain properties, which included the assumption by the buyers of the related non-recourse mortgage debt in the aggregate amount of $242,269.
(21)(19) Unaudited Quarterly Financial Data
|
| | | | | | | | | | | | | | | |
| | 3/31/2018 | | 6/30/2018 | | 9/30/2018 | | 12/31/2018 |
| Total gross revenues | $ | 102,637 |
| | $ | 105,493 |
| | $ | 99,958 |
| | $ | 87,251 |
|
| Net income (loss) | $ | (14,823 | ) | | $ | (795 | ) | | $ | 220,850 |
| | $ | 25,674 |
|
| Net income (loss) attributable to common shareholders | $ | (15,957 | ) | | $ | (3,327 | ) | | $ | 216,190 |
| | $ | 23,796 |
|
| Net income (loss) attributable to common shareholders - basic per share | $ | (0.07 | ) | | $ | (0.01 | ) | | $ | 0.91 |
| | $ | 0.10 |
|
| Net income (loss) attributable to common shareholders - diluted per share | $ | (0.07 | ) | | $ | (0.01 | ) | | $ | 0.90 |
| | $ | 0.10 |
|
|
| | | | | | | | | | | | | | | |
| | 2015 |
| | 3/31/2015 | | 6/30/2015 | | 9/30/2015 | | 12/31/2015 |
| Total gross revenues | $ | 108,442 |
| | $ | 110,333 |
| | $ | 105,438 |
| | $ | 106,626 |
|
| Net income (loss) | $ | 34,371 |
| | $ | 50,207 |
| | $ | (5,200 | ) | | $ | 35,513 |
|
| Net income (loss) attributable to common shareholders | $ | 31,829 |
| | $ | 47,654 |
| | $ | (7,629 | ) | | $ | 33,229 |
|
| Net income (loss) attributable to common shareholders - basic per share | $ | 0.14 |
| | $ | 0.20 |
| | $ | (0.03 | ) | | $ | 0.14 |
|
| Net income (loss) attributable to common shareholders - diluted per share | $ | 0.14 |
| | $ | 0.20 |
| | $ | (0.03 | ) | | $ | 0.14 |
|
|
| | | | | | | | | | | | | | | |
| | 2014 |
| | 3/31/2014 | | 6/30/2014 | | 9/30/2014 | | 12/31/2014 |
| Total gross revenues(1) | $ | 104,016 |
| | $ | 105,447 |
| | $ | 106,572 |
| | $ | 107,783 |
|
| Net income | $ | 1,814 |
| | $ | 15,287 |
| | $ | 42,177 |
| | $ | 38,185 |
|
| Net income (loss) attributable to common shareholders | $ | (839 | ) | | $ | 12,743 |
| | $ | 38,720 |
| | $ | 35,700 |
|
| Net income (loss) attributable to common shareholders - basic per share | $ | — |
| | $ | 0.05 |
| | $ | 0.17 |
| | $ | 0.15 |
|
| Net income (loss) attributable to common shareholders - diluted per share | $ | — |
| | $ | 0.05 |
| | $ | 0.17 |
| | $ | 0.15 |
|
_____________(1) All periods have been adjusted to reflect the impact of properties sold during the years ended December 31, 2014, and properties classified as held for sale as of December 31, 2014, which are reflected in discontinued operations in the Consolidated Statements of Operations.
|
| | | | | | | | | | | | | | | |
| | 3/31/2017 | | 6/30/2017 | | 9/30/2017 | | 12/31/2017 |
| Total gross revenues | $ | 96,099 |
| | $ | 95,684 |
| | $ | 97,689 |
| | $ | 102,169 |
|
| Net income | $ | 42,220 |
| | $ | 7,365 |
| | $ | 5,596 |
| | $ | 31,448 |
|
| Net income attributable to common shareholders | $ | 40,397 |
| | $ | 5,519 |
| | $ | 3,916 |
| | $ | 29,235 |
|
| Net income attributable to common shareholders - basic per share | $ | 0.17 |
| | $ | 0.02 |
| | $ | 0.02 |
| | $ | 0.12 |
|
| Net income attributable to common shareholders - diluted per share | $ | 0.17 |
| | $ | 0.02 |
| | $ | 0.02 |
| | $ | 0.12 |
|
The sum of the quarterly income (loss) attributable to common shareholders and per common share amounts may not equal the full year amounts primarily because the computations of amounts allocated to participating securities and the weighted-average number of common shares of the Company outstanding for each quarter and the full year are made independently.
LEXINGTON REALTY TRUST AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
($000, except share/unit data)
| |
(22)(20) | Subsequent Events |
Subsequent to December 31, 20152018 and in addition to disclosures elsewhere in the financial statements, the Company:
| |
| – | sold a consolidated property for $79,300; |
| |
| – | acquired two industrial properties for an aggregate purchase price of approximately $58,000; |
| |
| – | repurchased and retired 441,581 common shares at an average price of $8.13 per common share; |
| |
| – | replaced the Company's revolving credit facility and the 2021 term loan with a new revolving credit facility and the continuation of the 2021 term loan, which extended the maturity of the revolving credit facility to February 2023 and reduced the applicable margin rates on the revolving credit facility and 2021 term loan; |
| |
| – | entered into an agreement to purchase upon completion the expansion of the Company's property in Richland, Washington for $67,000; and |
| |
| – | declared a quarterly common share dividend of $0.1025 per common share. |
acquired an industrial property in Detroit, Michigan for $29,680. The property is net leased for a 20-year term;
repurchased 951,792 common shares at an average price of $7.48 per share;
received $6,681 in connection with the sale of a non-consolidated office property in Russellville, Arkansas; and
obtained $57,50015-year non-recourse financing, which bears interest at a 5.2% fixed interest rate and is secured by the Richmond, Virginia property.
LEXINGTON REALTY TRUST AND CONSOLIDATED SUBSIDIARIES
Real Estate and Accumulated Depreciation and Amortization
Schedule III ($000)
|
| | | | | | | | | | | | | | | | | | | | |
| Description | Location | | Encumbrances |
| Land and Land Estates | Buildings and Improvements | Total | Accumulated Depreciation and Amortization | Date Acquired | Date Constructed | Useful life computing depreciation in latest income statement (years) |
| Office | Little Rock, AR | | $ | — |
| $ | 1,353 |
| $ | 2,260 |
| $ | 3,613 |
| $ | 545 |
| Dec-06 | 1980 | 40 |
| Office | Pine Bluff, AR | | — |
| 271 |
| 603 |
| 874 |
| 228 |
| Sep-12 | 1964/1972/ 1988 | 3, 4 & 13 |
| Office | Glendale, AZ | | — |
| 9,418 |
| 8,394 |
| 17,812 |
| 2,202 |
| Sep-12 | 1986/1997/ 2000 | 7, 10, 20 & 24 |
| Office | Phoenix, AZ | | — |
| 5,585 |
| 36,923 |
| 42,508 |
| 3,278 |
| Dec-12 | 1986/2007 | 10, 15, 17, & 40 |
| Office | Phoenix, AZ | | — |
| 4,666 |
| 24,856 |
| 29,522 |
| 9,515 |
| May-00 | 1997 | 6, 9 & 40 |
| Office | Tempe, AZ | | — |
| — |
| 13,086 |
| 13,086 |
| 1,505 |
| Sep-12 | 1998 | 5, 7, 10, 11, 15 & 36 |
| Office | Tempe, AZ | | 7,185 |
| — |
| 9,442 |
| 9,442 |
| 2,884 |
| Dec-05 | 1998 | 30 & 40 |
| Office | Tucson, AZ | | — |
| 681 |
| 4,037 |
| 4,718 |
| 580 |
| Sep-12 | 1988 | 7, 10 & 30 |
| Office | Lake Forest, CA | | — |
| 3,442 |
| 13,769 |
| 17,211 |
| 4,747 |
| Mar-02 | 2001 | 40 |
| Office | Los Angeles, CA | | — |
| 5,110 |
| 12,158 |
| 17,268 |
| 7,250 |
| Dec-04 | 2000 | 10, 13 & 40 |
| Office | Palo Alto, CA | | 48,512 |
| 12,398 |
| 16,977 |
| 29,375 |
| 19,420 |
| Dec-06 | 1973/1982 | 40 |
| Office | Centenial, CO | | — |
| 4,851 |
| 15,239 |
| 20,090 |
| 5,889 |
| May-07 | 2001 | 10 & 40 |
| Office | Englewood, CO | | — |
| 2,207 |
| 27,851 |
| 30,058 |
| 2,857 |
| Apr-13 | 2013 | 15, 19 & 40 |
| Office | Lakewood, CO | | — |
| 1,569 |
| 10,286 |
| 11,855 |
| 6,102 |
| Apr-05 | 2002 | 2, 3, 12, 15 & 40 |
| Office | Louisville, CO | | — |
| 3,657 |
| 11,217 |
| 14,874 |
| 3,069 |
| Sep-08 | 1987/2007 | 8, 9, 12 & 40 |
| Office | Parachute, CO | | — |
| 1,400 |
| 10,751 |
| 12,151 |
| 581 |
| Jan-14 | 2012 | 19, 24 & 40 |
| Office | Wallingford, CT | | — |
| 1,049 |
| 4,773 |
| 5,822 |
| 1,652 |
| Dec-03 | 1977/1993 | 8 & 40 |
| Office | Boca Raton, FL | | 19,624 |
| 4,290 |
| 17,160 |
| 21,450 |
| 5,524 |
| Feb-03 | 1983/2002 | 40 |
| Office | Lake Mary, FL | | — |
| 4,438 |
| 15,271 |
| 19,709 |
| 5,302 |
| Jun-07 | 1999 | 3, 4, 7, 10, 15 & 40 |
| Office | Lake Mary, FL | | — |
| 4,535 |
| 14,939 |
| 19,474 |
| 5,298 |
| Jun-07 | 1996 | 3, 4, 7, 10, 18 & 40 |
| Office | Orlando, FL | | 9,471 |
| 3,538 |
| 9,844 |
| 13,382 |
| 5,361 |
| Jan-07 | 2003 | 5, 6, 12, 15 & 40 |
| Office | Palm Beach Gardens, FL | | — |
| 787 |
| 3,732 |
| 4,519 |
| 1,502 |
| May-98 | 1996 | 5 - 40 |
| Office | Tampa, FL | | — |
| 146 |
| 559 |
| 705 |
| 36 |
| Dec-13 | 1999 | 20 & 35 |
| Office | Tampa, FL | | — |
| 895 |
| 5,496 |
| 6,391 |
| 322 |
| Dec-13 | 1999 | 20 & 38 |
| Office | Tampa, FL | | — |
| 2,018 |
| 7,993 |
| 10,011 |
| 1,327 |
| Sep-12 | 1986 | 8, 25 & 27 |
| Office | Tampa, FL | | — |
| 398 |
| 1,571 |
| 1,969 |
| 100 |
| Dec-13 | 2014 | 14, 20 & 40 |
| Office | McDonough, GA | | — |
| 1,443 |
| 11,433 |
| 12,876 |
| 1,443 |
| Sep-12 | 1999 | 3, 10, 11 & 38 |
| Office | McDonough, GA | | — |
| 693 |
| 6,405 |
| 7,098 |
| 858 |
| Sep-12 | 2007 | 6, 11 & 40 |
| Office | Meridian, ID | | 9,322 |
| 2,255 |
| 7,797 |
| 10,052 |
| 1,339 |
| Sep-12 | 2004 | 7 & 37 |
| Office | Lisle, IL | | 9,449 |
| 3,236 |
| 13,854 |
| 17,090 |
| 4,124 |
| Dec-06 | 1984 | 2, 3, 5, 20 & 40 |
| Office | Schaumburg, IL | | — |
| 5,007 |
| 22,340 |
| 27,347 |
| 3,247 |
| Oct-13 | 1979/1989/ 2010 | 7, 9, 20 & 30 |
| Office | Columbus, IN | | 20,986 |
| 235 |
| 45,729 |
| 45,964 |
| 17,497 |
| Dec-06 | 1980/2006 | 40 |
| Office | Fishers, IN | | — |
| 2,808 |
| 19,373 |
| 22,181 |
| 5,831 |
| Jun-07 | 1999 | 3 - 40 |
| Office | Indianapolis, IN | | — |
| 1,700 |
| 18,491 |
| 20,191 |
| 12,977 |
| Apr-05 | 1999 | 5, 6 - 40 |
| Office | Lenexa, KS | | 9,463 |
| 2,828 |
| 6,075 |
| 8,903 |
| 961 |
| Sep-12 | 2004 | 7, 12 & 37 |
| Office | Lenexa, KS | | 36,666 |
| 6,909 |
| 41,684 |
| 48,593 |
| 11,083 |
| Jul-08 | 2007 | 5, 12, 13,14, 15 & 40 |
| Office | Overland Park, KS | | 34,134 |
| 4,769 |
| 41,956 |
| 46,725 |
| 12,979 |
| Jun-07 | 1980/2005 | 12 & 40 |
| Office | Baton Rouge, LA | | — |
| 1,252 |
| 11,085 |
| 12,337 |
| 3,889 |
| May-07 | 1997 | 3, 4, 6 & 40 |
| Office | Boston, MA | | 12,302 |
| 3,814 |
| 16,040 |
| 19,854 |
| 3,653 |
| Mar-07 | 1910 | 10 & 40 |
| Office | Oakland, ME | | 8,850 |
| 551 |
| 8,774 |
| 9,325 |
| 1,201 |
| Sep-12 | 2005 | 8, 12 & 40 |
| Office | Auburn Hills, MI | | — |
| 4,416 |
| 30,012 |
| 34,428 |
| 1,211 |
| Mar-15 | 2014 | 6, 14 & 25 |
| Office | Livonia, MI | | — |
| 935 |
| 13,714 |
| 14,649 |
| 2,256 |
| Sep-12 | 1987/1988/ 1990 | 2 - 34 |
| Office | Kansas City, MO | | 16,271 |
| 2,433 |
| 20,154 |
| 22,587 |
| 6,215 |
| Jun-07 | 1963/2003 | 12 & 40 |
| Office | St Joseph, MO | | — |
| 607 |
| 14,004 |
| 14,611 |
| 1,472 |
| Sep-12 | 2012 | 15 & 40 |
| Office | Pascagoula, MS | | — |
| 618 |
| 3,677 |
| 4,295 |
| 587 |
| Sep-12 | 1995 | 1, 9 & 31 |
| Office | Omaha, NE | | 7,608 |
| 2,566 |
| 8,324 |
| 10,890 |
| 2,564 |
| Nov-05 | 1995 | 30 & 40 |
| Office | Omaha, NE | | — |
| 2,058 |
| 32,343 |
| 34,401 |
| 1,928 |
| Dec-13 | 2013 | 20 & 40 |
| Office | Rockaway, NJ | | — |
| 4,646 |
| 23,143 |
| 27,789 |
| 5,695 |
| Dec-06 | 2002/2004/ 2015 | 12, 20 & 40 |
| Office | Wall, NJ | | 17,536 |
| 8,985 |
| 26,961 |
| 35,946 |
| 12,569 |
| Jan-04 | 1983 | 22 & 40 |
|
| | | | | | | | | | | | | | | | | | | |
| Description | Location | | Encumbrances |
| Land and Land Estates | Buildings and Improvements | Total | Accumulated Depreciation and Amortization(1) | Date Acquired | Date Constructed |
| Single-tenant properties | | | | | | | | |
| Industrial | Anniston, AL | | $ | — |
| $ | 1,201 |
| $ | 16,771 |
| $ | 17,972 |
| $ | 3,159 |
| Dec-14 | — |
| Industrial | Moody, AL | | — |
| 654 |
| 9,943 |
| 10,597 |
| 7,757 |
| Feb-04 | — |
| Industrial | Opelika, AL | | — |
| 134 |
| 31,734 |
| 31,868 |
| 1,952 |
| Jul-17 | 2017 |
| Industrial | Goodyear, AZ | | — |
| 5,247 |
| 36,115 |
| 41,362 |
| 138 |
| Nov-18 | — |
| Industrial | Orlando, FL | | — |
| 1,030 |
| 10,869 |
| 11,899 |
| 3,678 |
| Dec-06 | — |
| Industrial | Tampa, FL | | — |
| 2,160 |
| 8,526 |
| 10,686 |
| 6,723 |
| Jul-88 | — |
| Industrial | Lavonia, GA | | 6,647 |
| 171 |
| 7,657 |
| 7,828 |
| 1,371 |
| Sep-12 | — |
| Industrial | McDonough, GA | | — |
| 5,441 |
| 52,762 |
| 58,203 |
| 3,101 |
| Aug-17 | — |
| Industrial | McDonough, GA | | — |
| 2,463 |
| 24,811 |
| 27,274 |
| 7,820 |
| Dec-06 | — |
| Industrial | Thomson, GA | | — |
| 909 |
| 7,746 |
| 8,655 |
| 1,368 |
| May-15 | 2015 |
| Industrial | Edwardsville, IL | | — |
| 4,593 |
| 34,362 |
| 38,955 |
| 2,838 |
| Dec-16 | — |
| Industrial | Edwardsville, IL | | — |
| 3,649 |
| 41,310 |
| 44,959 |
| 932 |
| Jun-18 | — |
| Industrial | Rantoul, IL | | — |
| 1,304 |
| 32,562 |
| 33,866 |
| 4,473 |
| Jan-14 | 2014 |
| Industrial | Rockford, IL | | — |
| 371 |
| 2,619 |
| 2,990 |
| 861 |
| Dec-06 | — |
| Industrial | Rockford, IL | | — |
| 509 |
| 5,289 |
| 5,798 |
| 1,740 |
| Dec-06 | — |
| Industrial | Romeoville, IL | | — |
| 7,524 |
| 40,167 |
| 47,691 |
| 3,458 |
| Dec-16 | — |
| Industrial | Lafayette, IN | | — |
| 662 |
| 15,578 |
| 16,240 |
| 1,000 |
| Oct-17 | — |
| Industrial | Lebanon, IN | | — |
| 2,100 |
| 29,443 |
| 31,543 |
| 2,317 |
| Feb-17 | — |
| Industrial | New Century, KS | | — |
| — |
| 13,198 |
| 13,198 |
| 1,079 |
| Feb-17 | — |
| Industrial | Dry Ridge, KY | | — |
| 560 |
| 12,553 |
| 13,113 |
| 5,889 |
| Jun-05 | — |
| Industrial | Elizabethtown, KY | | — |
| 352 |
| 4,862 |
| 5,214 |
| 2,281 |
| Jun-05 | — |
| Industrial | Elizabethtown, KY | | — |
| 890 |
| 26,868 |
| 27,758 |
| 12,605 |
| Jun-05 | — |
| Industrial | Hopkinsville, KY | | — |
| 631 |
| 16,154 |
| 16,785 |
| 8,063 |
| Jun-05 | — |
| Industrial | Owensboro, KY | | — |
| 393 |
| 11,956 |
| 12,349 |
| 6,474 |
| Jun-05 | — |
| Industrial | Owensboro, KY | | — |
| 819 |
| 2,439 |
| 3,258 |
| 1,092 |
| Dec-06 | — |
| Industrial | Shreveport, LA | | — |
| 860 |
| 21,840 |
| 22,700 |
| 6,438 |
| Mar-07 | — |
| Industrial | Shreveport, LA | | — |
| 1,078 |
| 10,134 |
| 11,212 |
| 2,423 |
| Jun-12 | 2012 |
| Industrial | North Berwick, ME | | 381 |
| 1,383 |
| 35,659 |
| 37,042 |
| 10,660 |
| Dec-06 | — |
| Industrial | Detroit, MI | | — |
| 1,133 |
| 25,009 |
| 26,142 |
| 3,903 |
| Jan-16 | — |
| Industrial | Kalamazoo, MI | | — |
| 1,942 |
| 14,169 |
| 16,111 |
| 3,606 |
| Sep-12 | — |
| Industrial | Marshall, MI | | — |
| 143 |
| 4,302 |
| 4,445 |
| 2,884 |
| Sep-12 | — |
| Industrial | Plymouth, MI | | — |
| 2,296 |
| 15,795 |
| 18,091 |
| 6,497 |
| Jun-07 | — |
| Industrial | Romulus, MI | | — |
| 2,438 |
| 33,786 |
| 36,224 |
| 2,069 |
| Nov-17 | — |
| Industrial | Warren, MI | | 25,850 |
| 972 |
| 42,521 |
| 43,493 |
| 2,073 |
| Nov-17 | — |
| Industrial | Minneapolis, MN | | — |
| 1,886 |
| 1,922 |
| 3,808 |
| 381 |
| Sep-12 | — |
| Industrial | Byhalia, MS | | — |
| 1,006 |
| 35,795 |
| 36,801 |
| 6,241 |
| May-11 | 2011 |
| Industrial | Byhalia, MS | | — |
| 1,751 |
| 31,236 |
| 32,987 |
| 2,274 |
| Sep-17 | — |
| Industrial | Canton, MS | | — |
| 5,077 |
| 71,289 |
| 76,366 |
| 12,950 |
| Mar-15 | — |
| Industrial | Olive Branch, MS | | — |
| 2,500 |
| 42,538 |
| 45,038 |
| 1,471 |
| Apr-18 | — |
| Industrial | Olive Branch, MS | | — |
| 198 |
| 10,276 |
| 10,474 |
| 7,539 |
| Dec-04 | — |
| Industrial | Olive Branch, MS | | — |
| 1,958 |
| 38,687 |
| 40,645 |
| 1,342 |
| Apr-18 | — |
| Industrial | Lumberton, NC | | — |
| 405 |
| 12,049 |
| 12,454 |
| 4,651 |
| Dec-06 | — |
| Industrial | Shelby, NC | | — |
| 1,421 |
| 18,862 |
| 20,283 |
| 5,300 |
| Jun-11 | 2011 |
| Industrial | Statesville, NC | | — |
| 891 |
| 16,771 |
| 17,662 |
| 5,751 |
| Dec-06 | — |
| Industrial | Durham, NH | | — |
| 3,464 |
| 18,094 |
| 21,558 |
| 7,002 |
| Jun-07 | — |
| Industrial | North Las Vegas, NV | | — |
| 3,244 |
| 21,732 |
| 24,976 |
| 2,949 |
| Jul-13 | 2014 |
| Industrial | Erwin, NY | | — |
| 1,648 |
| 12,514 |
| 14,162 |
| 2,977 |
| Sep-12 | — |
| Industrial | Long Island City, NY | | 39,994 |
| — |
| 42,759 |
| 42,759 |
| 16,584 |
| Mar-13 | 2013 |
| Industrial | Chillicothe, OH | | — |
| 735 |
| 9,021 |
| 9,756 |
| 3,076 |
| Oct-11 | — |
| Industrial | Cincinnati, OH | | — |
| 1,049 |
| 8,784 |
| 9,833 |
| 3,075 |
| Dec-06 | — |
| Industrial | Columbus, OH | | — |
| 1,990 |
| 10,767 |
| 12,757 |
| 4,194 |
| Dec-06 | — |
| Industrial | Glenwillow, OH | | — |
| 2,228 |
| 24,530 |
| 26,758 |
| 7,774 |
| Dec-06 | — |
| Industrial | Hebron, OH | | — |
| 1,063 |
| 4,947 |
| 6,010 |
| 2,013 |
| Dec-97 | — |
| Industrial | Hebron, OH | | — |
| 1,681 |
| 8,179 |
| 9,860 |
| 3,606 |
| Dec-01 | — |
| Industrial | Streetsboro, OH | | 16,565 |
| 2,441 |
| 25,282 |
| 27,723 |
| 9,629 |
| Jun-07 | — |
| Industrial | Wilsonville, OR | | — |
| 6,815 |
| 32,380 |
| 39,195 |
| 3,188 |
| Sep-16 | — |
| Industrial | Bristol, PA | | — |
| 2,508 |
| 15,863 |
| 18,371 |
| 7,694 |
| Mar-98 | — |
LEXINGTON REALTY TRUST AND CONSOLIDATED SUBSIDIARIES
Real Estate and Accumulated Depreciation and Amortization
Schedule III ($000) - continued
| | | Description | Location | | Encumbrances | Land and Land Estates | Buildings and Improvements | Total | Accumulated Depreciation and Amortization | Date Acquired | Date Constructed | Useful life computing depreciation in latest income statement (years) | Location | | Encumbrances |
| Land and Land Estates | Buildings and Improvements | Total | Accumulated Depreciation and Amortization(1) | Date Acquired | Date Constructed |
| Industrial | | Chester, SC | | 6,569 |
| 1,629 |
| 8,470 |
| 10,099 |
| 1,959 |
| Sep-12 | — |
| Industrial | | Laurens, SC | | — |
| 5,552 |
| 21,908 |
| 27,460 |
| 7,834 |
| Jun-07 | — |
| Industrial | | Spartanburg,SC | | — |
| 1,447 |
| 23,744 |
| 25,191 |
| 426 |
| Aug-18 | — |
| Industrial | | Cleveland, TN | | — |
| 1,871 |
| 29,743 |
| 31,614 |
| 2,163 |
| May-17 | — |
| Industrial | | Crossville, TN | | — |
| 545 |
| 6,999 |
| 7,544 |
| 4,571 |
| Jan-06 | — |
| Industrial | | Franklin, TN | | — |
| — |
| 5,673 |
| 5,673 |
| 3,057 |
| Sep-12 | — |
| Industrial | | Jackson, TN | | — |
| 1,454 |
| 49,026 |
| 50,480 |
| 2,624 |
| Sep-17 | — |
| Industrial | | Lewisburg, TN | | — |
| 173 |
| 10,865 |
| 11,038 |
| 1,583 |
| May-14 | — |
| Industrial | | Memphis, TN | | — |
| 1,054 |
| 11,538 |
| 12,592 |
| 11,487 |
| Feb-88 | — |
| Industrial | | Millington, TN | | — |
| 723 |
| 19,383 |
| 20,106 |
| 12,951 |
| Apr-05 | — |
| Industrial | | Smyrna, TN | | — |
| 1,793 |
| 93,940 |
| 95,733 |
| 5,154 |
| Sep-17 | — |
| Industrial | | Arlington, TX | | — |
| 589 |
| 7,739 |
| 8,328 |
| 1,604 |
| Sep-12 | — |
| Industrial | | Brookshire, TX | | — |
| 2,388 |
| 16,614 |
| 19,002 |
| 2,915 |
| Mar-15 | — |
| Industrial | | Carrollton, TX | | — |
| 3,228 |
| 15,769 |
| 18,997 |
| 330 |
| Sep-18 | — |
| Industrial | | Grand Prairie, TX | | — |
| 3,166 |
| 17,985 |
| 21,151 |
| 1,170 |
| Jun-17 | — |
| Industrial | | Houston, TX | | — |
| 4,674 |
| 19,540 |
| 24,214 |
| 8,016 |
| Mar-15 | — |
| Industrial | | Houston, TX | | — |
| 15,055 |
| 57,949 |
| 73,004 |
| 10,371 |
| Mar-13 | — |
| Industrial | | Missouri City, TX | | — |
| 14,555 |
| 5,895 |
| 20,450 |
| 5,615 |
| Apr-12 | — |
| Industrial | | Pasadena, TX | | — |
| 4,057 |
| 17,810 |
| 21,867 |
| 271 |
| Aug-18 | — |
| Industrial | | San Antonio, TX | | — |
| 1,311 |
| 36,644 |
| 37,955 |
| 2,364 |
| Jun-17 | — |
| Industrial | | Chester, VA | | — |
| 8,544 |
| 53,067 |
| 61,611 |
| 220 |
| Dec-18 | — |
| Industrial | | Winchester, VA | | — |
| 1,988 |
| 32,536 |
| 34,524 |
| 1,392 |
| Dec-17 | — |
| Industrial | | Winchester, VA | | — |
| 3,823 |
| 12,276 |
| 16,099 |
| 4,311 |
| Jun-07 | — |
| Industrial | | Bingen, WA | | — |
| — |
| 18,075 |
| 18,075 |
| 4,269 |
| May-14 | 2014 |
| Industrial | | Richland, WA | | 110,000 |
| 1,293 |
| 126,947 |
| 128,240 |
| 16,632 |
| Nov-15 | — |
| Industrial | | Oak Creek, WI | | — |
| 3,015 |
| 15,300 |
| 18,315 |
| 2,352 |
| Jul-15 | 2015 |
| Multi-tenant/vacant properties | | Multi-tenant/vacant properties | | | |
| Industrial | | Plymouth, IN | | — |
| 254 |
| 8,101 |
| 8,355 |
| 1,816 |
| Sep-12 | — |
| Industrial | | Henderson, NC | | — |
| 1,488 |
| 5,953 |
| 7,441 |
| 2,549 |
| Nov-01 | — |
| Industrial | | Duncan, SC | | — |
| 884 |
| 8,626 |
| 9,510 |
| 2,604 |
| Jun-07 | — |
| Industrial | | Antioch, TN | | — |
| 3,847 |
| 12,659 |
| 16,506 |
| 3,479 |
| May-07 | — |
| Industrial | | Memphis, TN | | — |
| — |
| — |
| — |
| — |
| Dec-06 | — |
| Single-tenant properties | | Single-tenant properties | | | |
| Office | Whippany, NJ | | 13,700 |
| 4,063 |
| 19,711 |
| 23,774 |
| 7,397 |
| Nov-06 | 2006/2008 | 20 & 40 | Glendale, AZ | | — |
| 9,418 |
| 8,394 |
| 17,812 |
| 4,229 |
| Sep-12 | — |
| Office | Las Vegas, NV | | — |
| 12,099 |
| 53,164 |
| 65,263 |
| 12,229 |
| Dec-06 | 1983/1994 | 40 | Tempe, AZ | | — |
| — |
| 13,086 |
| 13,086 |
| 3,035 |
| Sep-12 | — |
| Office | Columbus, OH | | — |
| 1,594 |
| 10,481 |
| 12,075 |
| 1,310 |
| Dec-10 | 2005 | 40 | Tucson, AZ | | — |
| 681 |
| 4,037 |
| 4,718 |
| 1,103 |
| Sep-12 | — |
| Office | Columbus, OH | | — |
| 432 |
| 2,773 |
| 3,205 |
| 312 |
| Jul-11 | 1999/2006 | 40 | Palo Alto, CA | | 32,188 |
| 12,398 |
| 16,977 |
| 29,375 |
| 23,153 |
| Dec-06 | — |
| Office | Milford, OH | | — |
| 3,124 |
| 16,140 |
| 19,264 |
| 5,755 |
| Jun-07 | 1991 | 5 - 40 | Boca Raton, FL | | 18,785 |
| 4,290 |
| 17,160 |
| 21,450 |
| 6,811 |
| Feb-03 | — |
| Office | Westerville, OH | | — |
| 2,085 |
| 9,411 |
| 11,496 |
| 2,853 |
| May-07 | 2000 | 5 & 40 | Orlando, FL | | — |
| 3,538 |
| 9,353 |
| 12,891 |
| 6,908 |
| Jan-07 | — |
| Office | Eugene, OR | | — |
| 1,541 |
| 13,098 |
| 14,639 |
| 1,374 |
| Dec-12 | 2012 | 7, 12, 15, 25 & 40 | McDonough, GA | | — |
| 693 |
| 6,405 |
| 7,098 |
| 1,601 |
| Sep-12 | — |
| Office | Redmond, OR | | — |
| 2,064 |
| 8,316 |
| 10,380 |
| 1,196 |
| Sep-12 | 2004 | 6, 13 & 40 | Meridian, ID | | — |
| 2,255 |
| 8,144 |
| 10,399 |
| 2,555 |
| Sep-12 | — |
| Office | Harrisburg, PA | | — |
| 900 |
| 11,310 |
| 12,210 |
| 7,924 |
| Apr-05 | 1998 | 2, 5, 9,10, 15, 20 & 40 | Columbus, IN | | 7,301 |
| 235 |
| 45,729 |
| 45,964 |
| 37,145 |
| Dec-06 | — |
| Office | Jessup, PA | | — |
| 2,520 |
| 17,678 |
| 20,198 |
| 2,391 |
| Aug-12 | 2012 | 13, 15 & 40 | Indianapolis, IN | | — |
| 1,700 |
| 18,719 |
| 20,419 |
| 14,193 |
| Apr-05 | — |
| Office | Philadelphia, PA | | — |
| 13,209 |
| 56,520 |
| 69,729 |
| 32,966 |
| Jun-05 | 1957/1997 | 4 - 40 | Lenexa, KS | | 8,153 |
| 2,828 |
| 6,075 |
| 8,903 |
| 1,827 |
| Sep-12 | — |
| Office | Charleston, SC | | 7,185 |
| 1,189 |
| 8,724 |
| 9,913 |
| 3,467 |
| Nov-06 | 2006 | 40 | Lenexa, KS | | 31,698 |
| 6,909 |
| 41,966 |
| 48,875 |
| 15,556 |
| Jul-08 | — |
| Office | Florence, SC | | — |
| 774 |
| 3,629 |
| 4,403 |
| 412 |
| Feb-12 | 2012 | 12 & 40 | Baton Rouge, LA | | — |
| 1,252 |
| 11,926 |
| 13,178 |
| 5,187 |
| May-07 | — |
| Office | Fort Mill, SC | | — |
| 3,601 |
| 15,340 |
| 18,941 |
| 4,953 |
| Dec-02 | 2002 | 5, 11, 20 & 40 | Oakland, ME | | 8,138 |
| 551 |
| 8,774 |
| 9,325 |
| 2,282 |
| Sep-12 | — |
| Office | Fort Mill, SC | | — |
| 1,798 |
| 26,038 |
| 27,836 |
| 15,322 |
| Nov-04 | 2004 | 11, 15 & 40 | Auburn Hills, MI | | — |
| 4,416 |
| 30,012 |
| 34,428 |
| 5,573 |
| Mar-15 | — |
| Office | Rock Hill, SC | | — |
| 551 |
| 4,313 |
| 4,864 |
| 503 |
| May-11 | 2006 | 40 | Kansas City, MO | | 15,272 |
| 1,525 |
| 7,691 |
| 9,216 |
| 209 |
| Jun-07 | — |
| Office | Rock Hill, SC | | — |
| 1,601 |
| 21,000 |
| 22,601 |
| 1,053 |
| Mar-14 | 2013/2015 | 18, 20 & 40 | Pascagoula, MS | | — |
| 618 |
| 3,677 |
| 4,295 |
| 1,009 |
| Sep-12 | — |
| Office | Kingsport, TN | | — |
| 513 |
| 403 |
| 916 |
| 155 |
| Sep-12 | 1981 | 5, 6 & 14 | Wall, NJ | | 8,847 |
| 8,985 |
| 26,961 |
| 35,946 |
| 15,722 |
| Jan-04 | — |
| Office | Knoxville, TN | | — |
| 1,079 |
| 11,351 |
| 12,430 |
| 6,248 |
| Mar-05 | 1997 | 9, 10, 11, 14 & 40 | Whippany, NJ | | 12,156 |
| 4,063 |
| 19,711 |
| 23,774 |
| 9,828 |
| Nov-06 | — |
| Office | Knoxville, TN | | — |
| 621 |
| 6,282 |
| 6,903 |
| 925 |
| Sep-12 | 2002 | 1, 5, 7 & 40 | Redmond, OR | | — |
| 2,064 |
| 8,316 |
| 10,380 |
| 2,272 |
| Sep-12 | — |
| Office | Memphis, TN | | 3,555 |
| 467 |
| 4,467 |
| 4,934 |
| 1,681 |
| Nov-06 | 1871/1999 | 20 & 40 | Philadelphia, PA | | — |
| 13,209 |
| 61,011 |
| 74,220 |
| 43,083 |
| Jun-05 | — |
| Office | Memphis, TN | | — |
| 5,291 |
| 97,032 |
| 102,323 |
| 22,742 |
| Dec-06 | 1985/2007 | 13 & 40 | Florence, SC | | — |
| 774 |
| 3,629 |
| 4,403 |
| 727 |
| Feb-12 | 2012 |
| Office | Allen, TX | | — |
| 5,591 |
| 25,421 |
| 31,012 |
| 7,195 |
| May-11 | 1981/1983 | 6, 7, 11 & 25 | Fort Mill, SC | | — |
| 3,601 |
| 16,306 |
| 19,907 |
| 6,290 |
| Dec-02 | — |
| Office | Arlington, TX | | — |
| 1,274 |
| 15,309 |
| 16,583 |
| 1,961 |
| Sep-12 | 2003 | 1, 10, 12 & 40 | Fort Mill, SC | | — |
| 1,798 |
| 26,947 |
| 28,745 |
| 19,565 |
| Nov-04 | — |
| Office | Carrollton, TX | | — |
| 1,789 |
| 18,157 |
| 19,946 |
| 8,645 |
| Jun-04 | 2003 | 19 & 40 | Knoxville, TN | | — |
| 621 |
| 6,487 |
| 7,108 |
| 1,643 |
| Sep-12 | — |
| Office | Carrollton, TX | | — |
| 2,599 |
| 22,050 |
| 24,649 |
| 7,893 |
| Jun-07 | 2003 | 8 & 40 | |
| Office | Carrollton, TX | | — |
| 828 |
| — |
| 828 |
| — |
| Jun-07 | N/A | |
| Office | Farmers Branch, TX | | 18,380 |
| 3,984 |
| 27,308 |
| 31,292 |
| 10,137 |
| Jun-07 | 2000 | 40 | |
| Office | Garland, TX | | — |
| 1,161 |
| 833 |
| 1,994 |
| — |
| Sep-12 | 1980 | 1 | |
| Office | Houston, TX | | — |
| 1,875 |
| 10,675 |
| 12,550 |
| 6,745 |
| Apr-05 | 2000 | 5, 10, 13 & 40 | |
| Office | Houston, TX | | — |
| 1,875 |
| 10,959 |
| 12,834 |
| 6,824 |
| Apr-05 | 2000 | 4, 13, 20 & 40 | |
| Office | Houston, TX | | — |
| 16,613 |
| 63,770 |
| 80,383 |
| 15,753 |
| Mar-04 | 1976/1984 | 10 & 40 | |
| Office | Houston, TX | | — |
| 800 |
| 26,962 |
| 27,762 |
| 18,618 |
| Apr-05 | 2000 | 1, 10, 11 & 40 | |
| Office | Houston, TX | | — |
| 481 |
| 2,352 |
| 2,833 |
| 187 |
| Dec-13 | 2002 | 11, 20 & 31 | |
| Office | Irving, TX | | — |
| 4,889 |
| 29,738 |
| 34,627 |
| 10,532 |
| Jun-07 | 1999 | 10, 12 & 40 | |
| Office | Irving, TX | | — |
| 7,476 |
| 45,985 |
| 53,461 |
| 17,532 |
| May-07 | 2003 | 6 - 40 | |
| Office | Mission, TX | | — |
| 2,556 |
| 2,911 |
| 5,467 |
| 635 |
| Sep-12 | 2003 | 3, 8 & 35 | |
| Office | San Antonio, TX | | — |
| 2,800 |
| 15,619 |
| 18,419 |
| 11,534 |
| Apr-05 | 2000 | 6, 10, 11 & 40 | |
| Office | Temple, TX | | 7,463 |
| 227 |
| 8,181 |
| 8,408 |
| 1,462 |
| Sep-12 | 2001 | 3, 10, 12 & 40 | |
| Office | Westlake, TX | | — |
| 2,361 |
| 23,572 |
| 25,933 |
| 9,510 |
| May-07 | 2001 | 4 - 40 | |
| Office | Hampton, VA | | — |
| 2,333 |
| 11,354 |
| 13,687 |
| 4,463 |
| Mar-00 | 1999 | 2, 5, 10, 15 & 40 | |
| Office | Herndon, VA | | — |
| 5,127 |
| 24,640 |
| 29,767 |
| 9,215 |
| Dec-99 | 1987 | 9 - 40 | |
| Office | Herndon, VA | | — |
| 9,409 |
| 14,477 |
| 23,886 |
| 5,056 |
| Jun-07 | 1985/1999 | 10, 25 & 40 | |
| Office | Midlothian, VA | | — |
| 1,100 |
| 12,685 |
| 13,785 |
| 7,073 |
| Apr-05 | 2000 | 6, 7, 15 & 40 | |
| Office | Richmond, VA | | — |
| 7,331 |
| 88,021 |
| 95,352 |
| 345 |
| Dec-15 | 2015 | 10, 13 & 25 | |
| Office | Bremerton, WA | | 5,534 |
| 1,655 |
| 5,445 |
| 7,100 |
| 917 |
| Sep-12 | 2002 | 4, 13 & 40 | |
| Office | Huntington, WV | | 6,500 |
| 1,368 |
| 9,527 |
| 10,895 |
| 1,270 |
| Jan-12 | 2011 | 14 & 40 | |
| Industrial | Anniston, AL | | — |
| 1,201 |
| 16,771 |
| 17,972 |
| 790 |
| Dec-14 | 2,014 | 8, 15 & 24 | |
| Industrial | Moody, AL | | — |
| 654 |
| 9,943 |
| 10,597 |
| 6,205 |
| Feb-04 | 2004 | 15 & 40 | |
| Industrial | Orlando, FL | | — |
| 1,030 |
| 10,869 |
| 11,899 |
| 2,758 |
| Dec-06 | 1980 | 40 | |
| Industrial | Tampa, FL | | — |
| 2,160 |
| 8,431 |
| 10,591 |
| 5,905 |
| Jul-88 | 1986 | 9 - 40 | |
| Industrial | Lavonia, GA | | 7,676 |
| 171 |
| 7,657 |
| 7,828 |
| 722 |
| Sep-12 | 2005 | 8, 12 & 40 | |
| Industrial | McDonough, GA | | 22,224 |
| 2,463 |
| 24,291 |
| 26,754 |
| 5,859 |
| Dec-06 | 2000/2007 | 40 | |
| Industrial | Thomson, GA | | — |
| 909 |
| 7,746 |
| 8,655 |
| 249 |
| May-15 | 2015 | 8, 15 & 25 | |
LEXINGTON REALTY TRUST AND CONSOLIDATED SUBSIDIARIES
Real Estate and Accumulated Depreciation and Amortization
Schedule III ($000) - continued
|
| | | | | | | | | | | | | | | | | | | | |
| Description | Location | | Encumbrances | Land and Land Estates | Buildings and Improvements | Total | Accumulated Depreciation and Amortization | Date Acquired | Date Constructed | Useful life computing depreciation in latest income statement (years) |
| Industrial | Des Moines, IA | | — |
| 1,528 |
| 14,247 |
| 15,775 |
| 1,953 |
| Sep-12 | 2000 | 5, 11 & 34 |
| Industrial | Dubuque, IA | | 9,055 |
| 2,052 |
| 8,443 |
| 10,495 |
| 2,755 |
| Jul-03 | 2001 | 11, 12 & 40 |
| Industrial | Rantoul, IL | | — |
| 1,304 |
| 32,562 |
| 33,866 |
| 1,789 |
| Jan-14 | 2013 | 20, 21 & 40 |
| Industrial | Rockford, IL | | — |
| 371 |
| 2,573 |
| 2,944 |
| 666 |
| Dec-06 | 1998 | 40 |
| Industrial | Rockford, IL | | — |
| 509 |
| 5,289 |
| 5,798 |
| 1,305 |
| Dec-06 | 1992 | 40 |
| Industrial | Plymouth, IN | | 5,807 |
| 254 |
| 8,110 |
| 8,364 |
| 971 |
| Sep-12 | 2000/2003 | 3, 6, 12, 15 & 34 |
| Industrial | Dry Ridge, KY | | — |
| 560 |
| 12,553 |
| 13,113 |
| 4,580 |
| Jun-05 | 1988/1992 | 22 & 40 |
| Industrial | Elizabethtown, KY | | — |
| 352 |
| 4,862 |
| 5,214 |
| 1,774 |
| Jun-05 | 2001 | 25 & 40 |
| Industrial | Elizabethtown, KY | | — |
| 890 |
| 26,868 |
| 27,758 |
| 9,804 |
| Jun-05 | 1995/2001 | 25 & 40 |
| Industrial | Hopkinsville, KY | | — |
| 631 |
| 16,154 |
| 16,785 |
| 6,234 |
| Jun-05 | Various | 25 & 40 |
| Industrial | Owensboro, KY | | — |
| 393 |
| 11,956 |
| 12,349 |
| 4,984 |
| Jun-05 | 1998/2000 | 25 & 40 |
| Industrial | Owensboro, KY | | — |
| 819 |
| 2,439 |
| 3,258 |
| 860 |
| Dec-06 | 1975/1995 | 40 |
| Industrial | Shreveport, LA | | 19,000 |
| 860 |
| 21,840 |
| 22,700 |
| 4,800 |
| Mar-07 | 2006 | 40 |
| Industrial | Shreveport, LA | | — |
| 1,078 |
| 10,134 |
| 11,212 |
| 1,305 |
| Jun-12 | 2012 | 8,10 & 40 |
| Industrial | North Berwick, ME | | 4,810 |
| 1,383 |
| 35,659 |
| 37,042 |
| 7,713 |
| Dec-06 | 1965/1980/ 2015 | 10, 25 & 40 |
| Industrial | Kalamazoo, MI | | — |
| 1,942 |
| 14,169 |
| 16,111 |
| 1,898 |
| Sep-12 | 1999/2004 | 8, 9 & 40 |
| Industrial | Marshall, MI | | — |
| 40 |
| 2,236 |
| 2,276 |
| 854 |
| Aug-87 | 1979 | 9, 10, 12, 15, 20 & 40 |
| Industrial | Marshall, MI | | — |
| 143 |
| 4,302 |
| 4,445 |
| 1,575 |
| Sep-12 | 1968/1972/ 2008 | 4, 6 & 10 |
| Industrial | Plymouth, MI | | — |
| 2,296 |
| 13,608 |
| 15,904 |
| 5,124 |
| Jun-07 | 1996/1998 | 30 & 40 |
| Industrial | Temperance, MI | | — |
| 3,040 |
| 14,924 |
| 17,964 |
| 4,139 |
| Jun-07 | 1978/1993 | 2, 5, & 40 |
| Industrial | Minneapolis, MN | | — |
| 1,886 |
| 1,922 |
| 3,808 |
| 204 |
| Sep-12 | 2003 | 3, 29 & 40 |
| Industrial | Byhalia, MS | | 15,000 |
| 1,006 |
| 35,825 |
| 36,831 |
| 2,912 |
| May-11 | 2011/2015 | 25 & 40 |
| Industrial | Canton, MS | | — |
| 5,077 |
| 71,289 |
| 76,366 |
| 2,590 |
| Mar-15 | 2015 | 8, 12, 25 & 51 |
| Industrial | Olive Branch, MS | | — |
| 198 |
| 10,276 |
| 10,474 |
| 6,771 |
| Dec-04 | 1989 | 8, 15 & 40 |
| Industrial | Franklin, NC | | — |
| 296 |
| 1,320 |
| 1,616 |
| 211 |
| Sep-12 | 1996 | 2, 8 & 29 |
| Industrial | Henderson, NC | | — |
| 1,488 |
| 5,953 |
| 7,441 |
| 2,102 |
| Nov-01 | 1998/2006 | 40 |
| Industrial | High Point, NC | | — |
| 1,330 |
| 11,183 |
| 12,513 |
| 5,688 |
| Jul-04 | 2002 | 18 & 40 |
| Industrial | Lumberton, NC | | — |
| 405 |
| 12,049 |
| 12,454 |
| 3,488 |
| Dec-06 | 1998/2006 | 40 |
| Industrial | Shelby, NC | | — |
| 1,421 |
| 18,862 |
| 20,283 |
| 3,180 |
| Jun-11 | 2011 | 11, 20 & 40 |
| Industrial | Statesville, NC | | — |
| 891 |
| 16,771 |
| 17,662 |
| 4,561 |
| Dec-06 | 1999/2002 | 3, 15 & 40 |
| Industrial | Durham, NH | | — |
| 3,464 |
| 18,094 |
| 21,558 |
| 5,320 |
| Jun-07 | 1986/2003 | 40 |
| Industrial | Erwin, NY | | 7,887 |
| 1,648 |
| 12,355 |
| 14,003 |
| 1,371 |
| Sep-12 | 2006 | 4, 8, 10 & 34 |
| Industrial | Long Island City, NY | | 49,144 |
| — |
| 42,624 |
| 42,624 |
| 8,042 |
| Mar-13 | 2013 | 15 |
| Industrial | North Las Vegas, NV | | — |
| 3,244 |
| 21,732 |
| 24,976 |
| 1,053 |
| Jul-13 | 2014 | 19, 20 & 40 |
| Industrial | Chillicothe, OH | | — |
| 735 |
| 9,021 |
| 9,756 |
| 1,886 |
| Oct-11 | 1995/1998 | 6, 15 & 26 |
| Industrial | Cincinnati, OH | | — |
| 1,049 |
| 8,784 |
| 9,833 |
| 2,174 |
| Dec-06 | 1991 | 10, 14 & 40 |
| Industrial | Columbus, OH | | — |
| 1,990 |
| 10,580 |
| 12,570 |
| 3,131 |
| Dec-06 | 1973 | 40 |
| Industrial | Glenwillow, OH | | 15,326 |
| 2,228 |
| 24,530 |
| 26,758 |
| 5,979 |
| Dec-06 | 1996 | 40 |
| Industrial | Hebron, OH | | — |
| 1,063 |
| 4,581 |
| 5,644 |
| 1,516 |
| Dec-97 | 1999 | 10, 15 & 40 |
| Industrial | Hebron, OH | | — |
| 1,681 |
| 7,854 |
| 9,535 |
| 2,857 |
| Dec-01 | 2000 | 1, 2, 3, 5, 10,15 & 40 |
| Industrial | Streetsboro, OH | | 17,626 |
| 2,441 |
| 25,092 |
| 27,533 |
| 7,238 |
| Jun-07 | 2004 | 12, 20, 25 & 40 |
| Industrial | Bristol, PA | | — |
| 2,508 |
| 15,863 |
| 18,371 |
| 6,020 |
| Mar-98 | 1982/1997 | 10, 16, 30 & 40 |
| Industrial | Chester, SC | | 8,738 |
| 1,629 |
| 8,470 |
| 10,099 |
| 1,031 |
| Sep-12 | 2001/2005 | 9, 13 & 34 |
| Industrial | Duncan, SC | | — |
| 884 |
| 8,626 |
| 9,510 |
| 1,945 |
| Jun-07 | 2005/2008 | 40 |
| Industrial | Laurens, SC | | — |
| 5,552 |
| 21,559 |
| 27,111 |
| 5,980 |
| Jun-07 | 1991/1993 | 2, 4, 5, 20 & 40 |
| Industrial | Collierville, TN | | — |
| 714 |
| 4,783 |
| 5,497 |
| 1,951 |
| Dec-05 | 2005/2012 | 9, 14, 21 & 40 |
| Industrial | Crossville, TN | | — |
| 545 |
| 6,999 |
| 7,544 |
| 3,512 |
| Jan-06 | 1989/2006 | 17 & 40 |
| Industrial | Franklin, TN | | — |
| — |
| 5,673 |
| 5,673 |
| 1,659 |
| Sep-12 | 1970/1983 | 1, 4 & 12 |
| Industrial | Lewisburg, TN | | — |
| 173 |
| 10,865 |
| 11,038 |
| 565 |
| May-14 | 2014 | 12, 18 & 34 |
| Industrial | Memphis, TN | | — |
| 1,054 |
| 11,538 |
| 12,592 |
| 11,414 |
| Feb-88 | 1987 | 8 &15 |
| Industrial | Memphis, TN | | — |
| 1,553 |
| 12,326 |
| 13,879 |
| 3,412 |
| Dec-06 | 1973 | 40 |
| Industrial | Millington, TN | | — |
| 723 |
| 19,383 |
| 20,106 |
| 10,163 |
| Apr-05 | 1997 | 9, 10, 16 & 40 |
| Industrial | Brookshire, TX | | — |
| 2,388 |
| 16,614 |
| 19,002 |
| 583 |
| Mar-15 | 1999/2001 | 5, 20 & 25 |
|
| | | | | | | | | | | | | | | | | | | |
| Description | Location | | Encumbrances |
| Land and Land Estates | Buildings and Improvements | Total | Accumulated Depreciation and Amortization(1) | Date Acquired | Date Constructed |
| Office | Arlington, TX | | — |
| 1,274 |
| 15,309 |
| 16,583 |
| 3,489 |
| Sep-12 | — |
| Office | Houston, TX | | — |
| 1,875 |
| 10,959 |
| 12,834 |
| 8,345 |
| Apr-05 | — |
| Office | Lake Jackson, TX | | 187,980 |
| 7,435 |
| 141,436 |
| 148,871 |
| 12,105 |
| Nov-16 | 2016/2017 |
| Office | Mission, TX | | — |
| 2,556 |
| 2,911 |
| 5,467 |
| 1,038 |
| Sep-12 | — |
| Office | Westlake, TX | | — |
| 2,361 |
| 26,631 |
| 28,992 |
| 13,421 |
| May-07 | — |
| Office | Herndon, VA | | — |
| 5,127 |
| 25,293 |
| 30,420 |
| 11,353 |
| Dec-99 | — |
| Multi-tenant/vacant properties | | | | | | | | |
| Office | Phoenix, AZ | | — |
| 1,096 |
| 6,193 |
| 7,289 |
| 229 |
| Nov-01 | — |
| Office | Overland Park, KS | | 32,112 |
| 2,025 |
| 10,976 |
| 13,001 |
| 4,242 |
| Jun-07 | — |
| Office | Charleston, SC | | 6,878 |
| 1,189 |
| 9,419 |
| 10,608 |
| 4,651 |
| Nov-06 | — |
| Office | Farmers Branch, TX | | — |
| 3,984 |
| 32,842 |
| 36,826 |
| 14,111 |
| Jun-07 | — |
| Office | Houston, TX | | — |
| 800 |
| 27,667 |
| 28,467 |
| 21,686 |
| Apr-05 | — |
| Single-tenant properties | | | | | | | | — |
| Other | Venice, FL | | — |
| 4,696 |
| 11,753 |
| 16,449 |
| 9,071 |
| Jan-15 | — |
| Other | Baltimore, MD | | — |
| 4,605 |
| — |
| 4,605 |
| — |
| Dec-06 | — |
| Other | Baltimore, MD | | — |
| 5,000 |
| — |
| 5,000 |
| — |
| Dec-15 | — |
| Other | Pataskala, OH | | — |
| 3,605 |
| — |
| 3,605 |
| — |
| Dec-18 | — |
| Other | Lawton, OK | | — |
| 663 |
| 1,288 |
| 1,951 |
| 587 |
| Dec-06 | — |
| Other | Paris, TN | | — |
| 247 |
| 547 |
| 794 |
| 240 |
| Dec-06 | — |
| Other | Danville, VA | | — |
| 3,454 |
| — |
| 3,454 |
| — |
| Oct-13 | — |
| Multi-tenant/vacant properties | | | | | | | | |
| Other | Albany, GA | | — |
| 455 |
| 1,206 |
| 1,661 |
| 17 |
| Oct-13 | 2013 |
| Other | Honolulu, HI | | — |
| 8,259 |
| 7,414 |
| 15,673 |
| 6,025 |
| Dec-06 | — |
| Other | Watertown, NY | | — |
| 270 |
| 2,333 |
| 2,603 |
| 52 |
| May-07 | — |
| Other | Fairlea, WV | | — |
| 79 |
| 216 |
| 295 |
| 4 |
| May-07 | — |
| Construction in progress | | | — |
| — |
| — |
| 1,840 |
| — |
| — | — |
| Deferred loan costs, net | | | (5,094 | ) | | | | | | |
| | | | $ | 570,420 |
| $ | 341,848 |
| $ | 2,746,446 |
| $ | 3,090,134 |
| $ | 722,644 |
| | |
(1) Depreciation and amortization expense is calculated on a straight-line basis over the following lives:
|
| |
| Building and improvements | Up to 40 years |
| Land estates | Up to 51 years |
| Tenant improvements | Shorter of useful life or term of related lease |
LEXINGTON REALTY TRUST AND CONSOLIDATED SUBSIDIARIES
Real Estate and Accumulated Depreciation and Amortization
Schedule III ($000) - continued
|
| | | | | | | | | | | | | | | | | | | | |
| Description | Location | | Encumbrances | Land and Land Estates | Buildings and Improvements | Total | Accumulated Depreciation and Amortization | Date Acquired | Date Constructed | Useful life computing depreciation in latest income statement (years) |
| Industrial | Houston, TX | | — |
| 4,674 |
| 19,540 |
| 24,214 |
| 1,603 |
| Mar-15 | 1962 | 5, 10 & 20 |
| Industrial | Waxahachie, TX | | — |
| 652 |
| 13,045 |
| 13,697 |
| 9,926 |
| Dec-03 | 1996/2001 | 10, 16 & 40 |
| Industrial | Winchester, VA | | — |
| 3,823 |
| 12,276 |
| 16,099 |
| 3,396 |
| Jun-07 | 2001 | 4 & 40 |
| Industrial | Bingen, WA | | — |
| — |
| 18,075 |
| 18,075 |
| 1,475 |
| May-14 | 2014 | 10, 13 & 40 |
| Industrial | Richland, WA | | 110,000 |
| 1,293 |
| 126,947 |
| 128,240 |
| 876 |
| Nov-15 | 2015 | 10, 20 & 25 |
| Industrial | Oak Creek, WI | | — |
| 3,015 |
| 15,300 |
| 18,315 |
| 287 |
| Jul-15 | 2015 | 10,20, & 25 |
| Land/Infrastructure | Venice, FL | | — |
| 4,696 |
| 11,753 |
| 16,449 |
| 2,123 |
| Jan-15 | 1995 | 5 & 12 |
| Land/Infrastructure | Clive, IA | | — |
| 371 |
| — |
| 371 |
| — |
| Jun-04 | N/A | N/A |
| Land/Infrastructure | Baltimore, MD | | — |
| 4,605 |
| — |
| 4,605 |
| — |
| Dec-06 | N/A | N/A |
| Land/Infrastructure | Baltimore, MD | | — |
| 5,000 |
| — |
| 5,000 |
| — |
| Dec-15 | N/A | N/A |
| Land/Infrastructure | New York, NY | (1) | — |
| 65,218 |
| — |
| 65,218 |
| — |
| Oct-13 | N/A | N/A |
| Land/Infrastructure | New York, NY | (1) | 213,301 |
| 73,148 |
| — |
| 73,148 |
| — |
| Oct-13 | N/A | N/A |
| Land/Infrastructure | New York, NY | (1) | — |
| 86,569 |
| — |
| 86,569 |
| — |
| Oct-13 | N/A | N/A |
| Land/Infrastructure | New York, NY | | 29,193 |
| 22,000 |
| — |
| 22,000 |
| — |
| Oct-14 | N/A | N/A |
| Land/Infrastructure | Houston, TX | | — |
| 15,055 |
| 57,949 |
| 73,004 |
| 4,960 |
| Mar-13 | Various | 11, 12, 16 & 35 |
| Land/Infrastructure | Missouri City, TX | | — |
| 14,555 |
| 5,895 |
| 20,450 |
| 3,088 |
| Apr-12 | N/A | 7 |
| Land/Infrastructure | Danville, VA | | — |
| 3,454 |
| — |
| 3,454 |
| — |
| Oct-13 | N/A | N/A |
| Multi-tenanted | Phoenix, AZ | | — |
| 1,831 |
| 15,211 |
| 17,042 |
| 3,502 |
| Nov-01 | 1981/2009 | 5 - 40 |
| Multi-tenanted | Palm Beach Gardens, FL | | — |
| 4,066 |
| 21,638 |
| 25,704 |
| 7,527 |
| May-98 | 1996 | 5 - 40 |
| Multi-tenanted | Honolulu, HI | | — |
| 8,259 |
| 7,363 |
| 15,622 |
| 1,759 |
| Dec-06 | 1979/2002 | 2, 5 & 40 |
| Multi-tenanted | Westmont, IL | | — |
| 7,812 |
| 1,178 |
| 8,990 |
| 24 |
| Jul-15 | 1988 | 25 |
| Multi-tenanted | Foxboro, MA | | — |
| 2,231 |
| 25,662 |
| 27,893 |
| 14,355 |
| Dec-04 | 1982/1987 | 1, 16 & 40 |
| Multi-tenanted | Southfield, MI | | — |
| — |
| 15,434 |
| 15,434 |
| 7,840 |
| Jul-04 | 1966/1982 | 7, 16, 25 & 40 |
| Multi-tenanted | Bridgeton, MO | | — |
| 603 |
| 1,271 |
| 1,874 |
| 51 |
| Dec-06 | 1981 | 3 & 32 |
| Multi-tenanted | Bridgewater, NJ | (2) | 14,118 |
| 1,415 |
| 6,802 |
| 8,217 |
| 438 |
| Dec-06 | 1985/2004 | 8, 15 & 40 |
| Multi-tenanted | Canonsburg, PA | | — |
| 1,705 |
| 10,910 |
| 12,615 |
| 4,189 |
| May-07 | 1996 | 8 & 40 |
| Multi-tenanted | Florence, SC | | — |
| 3,235 |
| 13,141 |
| 16,376 |
| 4,540 |
| May-04 | 1998 | 10, 15, 20 & 40 |
| Multi-tenanted | Antioch, TN | | — |
| 3,847 |
| 12,569 |
| 16,416 |
| 1,840 |
| May-07 | 1999 | 5 - 40 |
| Multi-tenanted | Arlington, TX | | — |
| 589 |
| 6,382 |
| 6,971 |
| 830 |
| Sep-12 | 2003 | 1, 12 & 40 |
| Retail/Specialty | Manteca, CA | | 834 |
| 2,082 |
| 6,464 |
| 8,546 |
| 1,680 |
| May-07 | 1993 | 23 & 40 |
| Retail/Specialty | San Diego, CA | | 532 |
| — |
| 13,310 |
| 13,310 |
| 2,961 |
| May-07 | 1993 | 23 & 40 |
| Retail/Specialty | Albany, GA | | — |
| 1,468 |
| 5,137 |
| 6,605 |
| 344 |
| Oct-13 | 2013 | 15 & 40 |
| Retail/Specialty | Atlanta, GA | | — |
| 1,014 |
| 269 |
| 1,283 |
| 297 |
| Dec-06 | 1972 | 40 |
| Retail/Specialty | Atlanta, GA | | — |
| 870 |
| 187 |
| 1,057 |
| 242 |
| Dec-06 | 1975 | 40 |
| Retail/Specialty | Chamblee, GA | | — |
| 770 |
| 186 |
| 956 |
| 237 |
| Dec-06 | 1972 | 40 |
| Retail/Specialty | Cumming, GA | | — |
| 1,558 |
| 1,368 |
| 2,926 |
| 666 |
| Dec-06 | 1968/1982 | 40 |
| Retail/Specialty | Forest Park, GA | | — |
| 668 |
| 1,242 |
| 1,910 |
| 446 |
| Dec-06 | 1969 | 40 |
| Retail/Specialty | Jonesboro, GA | | — |
| 778 |
| 146 |
| 924 |
| 213 |
| Dec-06 | 1971 | 40 |
| Retail/Specialty | Stone Mountain, GA | | — |
| 672 |
| 276 |
| 948 |
| 219 |
| Dec-06 | 1973 | 40 |
| Retail/Specialty | Galesburg, IL | | 468 |
| 560 |
| 2,366 |
| 2,926 |
| 714 |
| May-07 | 1992 | 12 & 40 |
| Retail/Specialty | Lawrence, IN | | — |
| 404 |
| 1,737 |
| 2,141 |
| 399 |
| Dec-06 | 1983 | 40 |
| Retail/Specialty | Jefferson, NC | | — |
| 71 |
| 884 |
| 955 |
| 230 |
| Dec-06 | 1981 | 40 |
| Retail/Specialty | Lexington, NC | | — |
| 832 |
| 1,429 |
| 2,261 |
| 322 |
| Dec-06 | 1981 | 40 |
| Retail/Specialty | Thomasville, NC | | — |
| 208 |
| 561 |
| 769 |
| 73 |
| Dec-06 | 1993 | 40 |
| Retail/Specialty | Vineland, NJ | | — |
| 2,698 |
| 12,790 |
| 15,488 |
| 505 |
| Oct-14 | 2003 | 3, 28 & 40 |
| Retail/Specialty | Portchester, NY | | — |
| 3,841 |
| 5,246 |
| 9,087 |
| 869 |
| Dec-06 | 1982 | 40 |
| Retail/Specialty | Watertown, NY | | 785 |
| 386 |
| 5,162 |
| 5,548 |
| 1,414 |
| May-07 | 1993 | 23 & 40 |
| Retail/Specialty | Canton, OH | | — |
| 884 |
| 3,534 |
| 4,418 |
| 1,248 |
| Nov-01 | 1995 | 40 |
| Retail/Specialty | Franklin, OH | | — |
| 213 |
| 262 |
| 475 |
| 6 |
| Dec-06 | 1961/1978 | 24 & 32 |
| Retail/Specialty | Lorain, OH | | 1,181 |
| 1,893 |
| 7,024 |
| 8,917 |
| 1,827 |
| May-07 | 1993 | 23 & 40 |
| Retail/Specialty | Lawton, OK | | — |
| 663 |
| 1,288 |
| 1,951 |
| 441 |
| Dec-06 | 1984 | 40 |
| Retail/Specialty | Oklahoma City, OK | | — |
| 1,782 |
| 912 |
| 2,694 |
| 448 |
| Sep-12 | 1991/1996 | 5 & 13 |
| Retail/Specialty | Tulsa, OK | | — |
| 445 |
| 2,433 |
| 2,878 |
| 2,405 |
| Dec-96 | 1981 | 14 & 24 |
| Retail/Specialty | Chattanooga, TN | | — |
| 487 |
| 956 |
| 1,443 |
| 121 |
| Dec-06 | 1983/1995 | 40 |
| Retail/Specialty | Paris, TN | | — |
| 247 |
| 547 |
| 794 |
| 180 |
| Dec-06 | 1982 | 40 |
| Retail/Specialty | Staunton, VA | | — |
| 1,028 |
| 326 |
| 1,354 |
| 97 |
| Dec-06 | 1971 | 40 |
LEXINGTON REALTY TRUST AND CONSOLIDATED SUBSIDIARIES
Real Estate and Accumulated Depreciation and Amortization
Schedule III ($000) - continued
|
| | | | | | | | | | | | | | | | | | | | |
| Description | Location | | Encumbrances | Land and Land Estates | Buildings and Improvements | Total | Accumulated Depreciation and Amortization | Date Acquired | Date Constructed | Useful life computing depreciation in latest income statement (years) |
| Retail/Specialty | Edmonds, WA | | — |
| — |
| 3,947 |
| 3,947 |
| 1,079 |
| Dec-06 | 1981 | 40 |
| Retail/Specialty | Fairlea, WV | | 551 |
| 501 |
| 1,985 |
| 2,486 |
| 490 |
| May-07 | 1993/1999 | 12 & 40 |
| Construction in progress | | | — |
| — |
| — |
| 8,552 |
| — |
| | | |
| | | | | | | | | | | |
| | | | $ | 882,952 |
| $ | 743,125 |
| $ | 3,038,034 |
| $ | 3,789,711 |
| $ | 812,207 |
| | | |
| |
(1) | Properties are cross-collateralized. |
| |
(2) | Loan is in default as of December 31, 2015. |
LEXINGTON REALTY TRUST AND CONSOLIDATED SUBSIDIARIES
Real Estate and Accumulated Depreciation and Amortization
Schedule III ($000) - continued
(A) The initial cost includes the purchase price paid directly or indirectly by the Company. The total cost basis of the Company's properties at December 31, 20152018 for federal income tax purposes was approximately $4.6$3.8 billion.
| | | | 2015 | | 2014 | | 2013 | 2018 | | 2017 | | 2016 |
| Reconciliation of real estate, at cost: | | | | | | | | | | |
| Balance at the beginning of year | $ | 3,671,560 |
| | $ | 3,812,294 |
| | $ | 3,564,466 |
| $ | 3,936,459 |
| | $ | 3,533,172 |
| | $ | 3,789,711 |
|
| Additions during year | 478,717 |
| | 210,143 |
| | 492,437 |
| 310,207 |
| | 676,355 |
| | 291,004 |
|
| Properties sold during year | (332,670 | ) | | (282,143 | ) | | (212,771 | ) | |
| Properties impaired during the year | (11,306 | ) | | (65,426 | ) | | (31,741 | ) | |
| Properties sold and impaired during the year | | (1,091,956 | ) | | (270,241 | ) | | (527,597 | ) |
| Other reclassifications | (16,590 | ) | | (3,308 | ) | | (97 | ) | (64,576 | ) | | (2,827 | ) | | (19,946 | ) |
| Balance at end of year | $ | 3,789,711 |
| | $ | 3,671,560 |
| | $ | 3,812,294 |
| $ | 3,090,134 |
| | $ | 3,936,459 |
| | $ | 3,533,172 |
|
| | | | | | | | | | | |
| Reconciliation of accumulated depreciation and amortization: | | | | | | | | | | |
| Balance at the beginning of year | $ | 795,486 |
| | $ | 775,617 |
| | $ | 738,068 |
| $ | 890,969 |
| | $ | 844,931 |
| | $ | 812,207 |
|
| Depreciation and amortization expense | 124,618 |
| | 119,156 |
| | 122,057 |
| 136,571 |
| | 139,493 |
| | 128,384 |
|
| Accumulated depreciation and amortization of properties sold and impaired during year | (106,268 | ) | | (98,698 | ) | | (84,508 | ) | (290,938 | ) | | (93,455 | ) | | (86,428 | ) |
| Other reclassifications | (1,629 | ) | | (589 | ) | | — |
| (13,958 | ) | | — |
| | (9,232 | ) |
| Balance at end of year | $ | 812,207 |
| | $ | 795,486 |
| | $ | 775,617 |
| $ | 722,644 |
| | $ | 890,969 |
| | $ | 844,931 |
|
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Not applicable.
Item 9A. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
An evaluation of the effectiveness of the design and operation of our “disclosure controls and procedures” (as defined in Rule 13a-15(e) or 15d-15(e) under the Exchange Act), as of the end of the period covered by this Annual Report, was made under the supervision and with the participation of our management, including our Chief Executive Officer and our Chief Financial Officer who are our Principal Executive Officer and our Principal Financial Officer, respectively. Based upon this evaluation, our Chief Executive Officer and our Chief Financial Officer have concluded that our disclosure controls and procedures (a) are effective to ensure that information required to be disclosed by us in reports filed or submitted under the Exchange Act is timely recorded, processed, summarized and reported and (b) include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in reports filed or submitted under the Exchange Act is accumulated and communicated to our management,Management, including our Chief Executive Officer and our Chief Financial Officer, has concluded that our disclosure controls and procedures were effective as appropriate to allow timely decisions regarding required disclosure.of December 31, 2018.
Management's Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting and for performing an assessment of the effectiveness of internal control over financial reporting as of December 31, 2015.2018. Our system of internal control over financial reporting wasis designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation and fair presentation of published financial statements in accordance with U.S. generally accepted accounting principles. Our system of internal control over financial reporting includes policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. generally accepted accounting principles and that receipts and expenditures are being made only in accordance with authorizations of our management and the members of our Board of Trustees; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on our financial statements.
All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance that financial statements are fairly presented in accordance with U.S. generally accepted accounting principles.
Our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2015.2018. In assessing the effectiveness of our internal control over financial reporting, management used as guidance the criteria established in Internal Control -Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based upon the assessment performed, management has concluded that our internal control over financial reporting iswas effective as of December 31, 2015.
Attestation Report of our Independent Registered Public Accounting Firm2018.
Our independent registered public accounting firm, KPMGDeloitte & Touche LLP, which audited the financial statements included in this Annual Report on Form 10-K that contain the disclosure required by this Item, independently assessed the effectiveness of ourthe Company's internal control over financial reporting. KPMGDeloitte & Touche LLP has issued an attestationunqualified report on ourthe Company's internal control over financial reporting, which is included in “Financial Statements and Supplementary Data” in Part II, Item 8 of this Annual Report.
Changes in Internal Control Over Financial Reporting
Management's assessmentDuring the fourth quarter ended December 31, 2018, we operated and tested the previously reported remediation plan resulting from the material weakness reported as of December 31, 2016. Other than the overall effectivenessoperation and testing of our internal controls over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) has historically been based on the framework set forth in the Internal Control-Integrated Framework (1992) issued by the Committee of Sponsoring Organizations of the Treadway Commission. In May 2013 an updated framework was issued. We have integrated the changes prescribed by the Internal Control-Integrated Framework (2013) into our internal controls over financial reporting during fiscal year 2014. Theresuch remediation plan, there were no other changes to our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) during the fourth quarter ended December 31, 20152018 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Item 9B. Other Information
Not applicable.
PART III.
Item 10. Directors, Executive Officers and Corporate Governance
Executive Officers of the Registrant
The following sets forth certain information relating to our executive officers:
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Name | Business Experience |
E. Robert Roskind
Age 70
| Mr. Roskind has served as our Chairman since March 2008 and previously served as Co-Vice Chairman from December 2006 to March 2008, Chairman from October 1993 to December 2006 and Co-Chief Executive Officer from October 1993 to January 2003. He founded The LCP Group, L.P., a real estate advisory firm, in 1973 and has been its Chairman since 1976. Mr. Roskind also serves as Chairman of Crescent Hotels and Resorts and Live In America Financial Services LLC. |
Richard J. Rouse
Age 70
| Mr. Rouse has served as our Vice Chairman since March 2008 and as our Chief Investment Officer since January 2003, and he previously served as one of our trustees from October 1993 to May 2010, our Co-Vice Chairman from December 2006 to March 2008, our President from October 1993 to April 1996 and our Co-Chief Executive Officer from October 1993 to January 2003. |
T. Wilson Eglin
Age 51
| Mr. Eglin has served as our Chief Executive Officer since January 2003, our President since April 1996 and as a trustee since May 1994. He served as one of our Executive Vice Presidents from October 1993 to April 1996 and our Chief Operating Officer from October 1993 to December 2010. |
Patrick Carroll
Age 52
| Mr. Carroll has served as our Chief Financial Officer since May 1998, our Treasurer since January 1999 and one of our Executive Vice Presidents since January 2003. Prior to joining us, Mr. Carroll was, from 1986 to 1998, in the real estate practice of Coopers & Lybrand L.L.P., a public accounting firm that was one of the predecessors of PricewaterhouseCoopers LLP. |
Joseph S. Bonventre
Age 40
| Mr. Bonventre has served as our General Counsel since 2004, one of our Executive Vice Presidents since 2008 and our Secretary since 2014. Prior to joining us in September 2004, Mr. Bonventre was an associate in the corporate department of the law firm now known as Paul Hastings LLP. Mr. Bonventre is admitted to practice law in the State of New York. |
Beth Boulerice
Age 51
| Ms. Boulerice has served as our Chief Accounting Officer since January 2011 and one of our Executive Vice Presidents since January 2013. Prior to joining us in January 2007, Ms. Boulerice was employed by First Winthrop Corporation and was the Chief Accounting Officer of Newkirk Realty Trust. Ms. Boulerice is a Certified Public Accountant. |
The information relating to our Code of Business Conduct and Ethics, is included in Part I, Item 1 of this Annual Report. The information relating to our trustees, including the audit committee of our Board of Trustees and our Audit Committee financial expert, and certain information relating to our executive officers, trustees and trustee independence will be in our Definitive Proxy Statement for our 20162019 Annual Meeting of Shareholders, which we refer to as our Proxy Statement, and is incorporated herein by reference.
Item 11. Executive Compensation
The information required to be furnished pursuant to this item will be set forth under the appropriate captions in the Proxy Statement, and is incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The information required to be furnished pursuant to this item will be set forth under the appropriate captions in the Proxy Statement, and is incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions, and Director Independence
The information required to be furnished pursuant to this item will be set forth under the appropriate captions in the Proxy Statement, and is incorporated herein by reference. In addition, certain information regarding related party transactions is set forth in note 1716 to the Company's Consolidated Financial Statements in “Financial Statements and Supplementary Data” in Part II, Item 8 of this Annual Report.
Item 14. Principal Accounting Fees and Services
The information required to be furnished pursuant to this item will be set forth under the appropriate captions in the Proxy Statement, and is incorporated herein by reference.
PART IV.
Item 15. Exhibits, Financial Statement Schedules
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| (a)(1) Financial Statements | |
(2) Financial Statement ScheduleSchedules | |
| (3) Exhibits | |
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| Exhibit No. | | | | Description |
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| | — | | Agreement |
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| | — | | Indenture, dated as of January 29, 2007, among the Company (as successor by merger), the other guarantors named therein and U.S. Bank National Association, as trustee (“U.S. Bank”) (filed as Exhibit 4.1 to the Company’s Current Report on Form 8-K filed January 29, 2007)(1) |
4.4 | | — | | |
4.5 | | — | | |
4.6 | | — | | Fourth Supplemental Indenture, dated as of December 31, 2008, among the Company, the other guarantors named therein and U.S. Bank, as trustee (filed as Exhibit 4.1 to the Company’s Current Report on Form 8-K filed on January 2, 2009 (the “01/02/09 8-K”))(1) |
4.7 | | — | | Fifth Supplemental |
4.8 | | — | | Sixth Supplemental Indenture, dated as of January 26, 2010 among the Company, the guarantors named therein and U.S. Bank, as trustee, including the Form of 6.00% Convertible Guaranteed Notes due 2030 (filed as Exhibit 4.1 to the Company’s Current Report on Form 8-K filed January 26, 2010)(1) |
4.9 | | — | | Seventh Supplemental Indenture, dated as of September 28, 2012, among the Company, certain subsidiaries of the Company signatories thereto, and U.S. Bank National Association, as trustee (filed as Exhibit 4.1 to the Company's Current Report on Form 8-K filed on October 3, 2012)(1) |
4.10 | | — | | Eight Supplemental Indenture, dated as of February 13,10, 2013, among the Company, certain subsidiaries of the Company signatories thereto, and U.S. Bank, as trustee (filed as Exhibit 4.1 to the Company's Current Report on Form 8-K filed on FebruaryJune 13, 2013 (the “02/13/13 8-K”))2013)(1) |
4.11 | | — | | Ninth Supplemental Indenture, dated as of May 6, 2013, among the Company, certain subsidiaries of the Company signatories thereto, and U.S. Bank, as trustee (filed as Exhibit 4.1 to the Company's Current Report on Form 8-K filed on May 8, 2013)(1) |
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4.12 | | — | | Tenth Supplemental Indenture, dated as of June 10, 2013, among the Company, certain subsidiaries of the Company signatories thereto, and U.S. Bank, as trustee (filed as Exhibit 4.3 to the Company's Current Report on Form 8-K filed on June 13, 2013 (the “06/13/13 8-K”))(1) |
4.13 | | — | | Tenth Supplemental Indenture, dated as of September 30, 2013, among the Company, certain subsidiaries of the Company signatories thereto, and U.S. Bank, as trustee (filed as Exhibit 4.1 to the Company's Current Report on Form 8-K filed on October 3, 2013)(the “10/3/13 8-K”))(1) |
4.14 | | — | | Indenture, dated as of June 10, 2013, among the Company, certain subsidiaries of the Company signatories thereto, and U.S. Bank, as trustee (filed as Exhibit 4.1 to the 06/13/13 8-K)(1) |
4.15 | | — | | First Supplemental Indenture, dated as of September 30, 2013, among the Company, certain subsidiaries of the Company signatories thereto, and U.S. Bank, as trustee (filed as Exhibit 4.2 to the 10/3/13 8-K)Company's Current Report on Form 8-K filed on October 3, 2013)(1) |
4.16 | | — | | |
4.17 | | — | | |
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10.9 | | — | | Form of 2011 Nonvested Share Agreement (filed as Exhibit 10.1 to the Company's Current Report on Form 8-K filed on January 6, 2012)2, 2009)(1, 4) |
10.10 | | — | | Form of Nonvested Share Agreement (filed as Exhibit 10.1 to the Company's Current Report on Form 8-K filed on December 26, 2012)(1, 4) |
10.11 | | — | | Employment Agreement, dated as of January 15, 2012, between the Company and E. Robert Roskind (filed as Exhibit 10.10 to the Company's Annual Report on Form 10-K for the year ended December 31, 2011 (the “2011 10-K”))(1, 4) |
10.12 | | — | | Employment Agreement, dated as of January 15, 2012, between the Company and T. Wilson Eglin (filed as Exhibit 10.11 to the 2011 10-K)(1, 4) |
10.13 | | — | | Employment Agreement, dated as of January 15, 2012, between the Company and Richard J. Rouse (filed as Exhibit 10.12 to the 2011 10-K)(1, 4) |
10.14 | | — | | Employment Agreement, dated as of January 15, 2012, between the Company and Patrick Carroll (filed as Exhibit 10.13 to the 2011 10-K)(1, 4) |
10.15 | | — | | |
10.16 | | — | | |
10.17 | | — | | |
10.18 | | — | | |
10.19 | | — | | Long-Term Nonvested Share |
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10.20 | | — | | |
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10.21 | | — | | |
10.22 | | — | | |
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10.23 | | — | | Second Amended and Restated Credit Agreement, dated as of February 12, 2013 among the Company and LCIF as borrowers, KeyBank National Association (“Key”), as agent, and each of the financial institutions initially a signatory thereto (filed as Exhibit 10.1 to the 02/13/13 8-K)(1) |
10.24 | | — | | Amended and Restated Term Loan Agreement, dated as of February 13, 2013 among the Company and LCIF, as borrowers, Wells Fargo Bank, National Association (“Wells”), as agent, and each of the financial institutions initially a signatory thereto (filed as Exhibit 10.2 to the 02/13/13 8-K)(1) |
10.25 | | — | | |
10.26 | | — | | |
10.27 | | — | | |
10.28 | | — | | |
10.29 | | — | | First Amendment to Second Amended and Restated Credit Agreement, dated as of September 30, 2013, among the Company and LCIF, as borrowers, Key, as agent, and each of the financial institutions signatory thereto (filed as Exhibit 10.1 to the 10/3/13 8-K)(1) |
10.30 | | — | | First Amendment to Amended and Restated Term Loan Agreement, dated as of September 30, 2013, among the Company and LCIF, as borrowers, Wells, as agent, and each of the financial institutions signatory thereto (filed as Exhibit 10.2 to the 10/3/13 8-K)(1) |
10.31 | | — | | Second Amendment to Second Amended and Restated Credit Agreement, dated as of December 30, 2013, among the Company and LCIF, as borrowers, Key, as agent, and each of the financial institutions signatory thereto (filed as Exhibit 10.1 to the Company's Current Report on Form 8-K filed January 6, 2014 (the “01/06/14” 8-K))(1) |
10.32 | | — | | Second Amendment to Amended and Restated Term Loan Agreement, dated as of December 30, 2013, among the Company and LCIF, as borrowers, Wells, as agent, and each of the financial institutions signatory thereto (filed as Exhibit 10.2 to the 01/06/14 8-K)(1) |
10.33 | | — | | Third Amendment to Second Amended and Restated Credit Agreement, dated as of March 28, 2014, among the Company and LCIF, as borrowers, Key, as agent, and each of the financial institutions signatory thereto (filed as Exhibit 10.1 to the Company's Current Report on Form 8-K filed March 28, 2014 (the “03/28/14 8-K”))(1) |
10.34 | | — | | Third Amendment to Amended and Restated Term Loan Agreement, dated as of March 28, 2014, among the Company and LCIF, as borrowers, Wells, as agent, and each of the financial institutions signatory thereto (filed as Exhibit 10.2 to the 03/28/14 8-K)(1) |
10.35 | | — | | Fourth Amendment to Second Amended and Restated Credit Agreement, dated as of July 2, 2015, among the Company and LCIF, as borrowers, Key, as agent, and each of the financial institutions signatory thereto (filed as Exhibit 10.1 to the Company's Current Report on Form 8-K filed July 2, 2015 (the “07/02/15 8-K”))(1) |
10.36 | | — | | Fourth Amendment to Amended and Restated Term Loan Agreement, dated as of July 2, 2015, among the Company and LCIF, as borrowers, Wells, as agent, and each of the financial institutions signatory thereto (filed as Exhibit 10.2 to the 07/02/15 8-K)(1) |
10.37 | | — | | |
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10.38 | | — | | Ownership Limitation Waiver |
10.39 | | — | | First Amendment to Ownership Limitation Waiver Agreement (BlackRock), dated April 25, 2014borrowers, and KeyBank National Association, as agent (filed as Exhibit 10.1 to the Company's Current Report on Form 8-K filed on April 29, 2014)October 2, 2017)(1) |
10.40 | | — | | Ownership Limitation Waiver Agreement (Cohen & Steers), dated as of November 18, 2010 (filed as Exhibit 10.2 to the 11/24/10 8-K)(1) |
10.41 | | — | | First |
10.42 | | — | | Amended and Restated Registration RightsCredit Agreement, dated as of November 3, 2008, betweenDecember 21, 2018, among the Company, as borrower, KeyBank National Association, as agent, and Vornado Realty, L.P. and Vornado LXP LLCeach of the lenders signatory thereto (filed as Exhibit 10.3 to the Company's Current Report of Form 8-K filed on November 6, 2008)(1) |
10.43 | | — | | Equity Distribution Agreement, dated as of January 11, 2013, among the Company and LCIF, on the one hand, and Jefferies & Company, Inc., on the other hand (filed as Exhibit 1.1 to the Company's Current Report on Form 8-K filed on January 14, 2013 (the “01/14/13 8-K”))(1) |
10.44 | | — | | Equity Distribution Agreement, dated as of January 11, 2013, among the Company and LCIF, on the one hand, and KeyBanc Capital Markets Inc., on the other hand (filed as Exhibit 1.2 to the 01/14/13 8-K)(1) |
12 | | — | | Statement of Computation of Ratio of Earnings to Combined Fixed Charges and Preferred Dividends (2) |
14 | | — | | Amended and Restated Code of Business Conduct and Ethics (filed as Exhibit 14.110.1 to the Company's Current Report on Form 8-K filed on December 8, 2010)28, 2018)(1) |
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21 | | | | |
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23 | | — | | Consent |
24 | | — | | |
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| 101.INS | | — | | XBRL Instance Document (2, 5) |
| 101.SCH | | — | | XBRL Taxonomy Extension Schema (2, 5) |
| 101.CAL | | — | | XBRL Taxonomy Extension Calculation Linkbase (2, 5) |
| 101.DEF | | — | | XBRL Taxonomy Extension Definition Linkbase Document (2, 5) |
| 101.LAB | | — | | XBRL Taxonomy Extension Label Linkbase Document (2, 5) |
| 101.PRE | | — | | XBRL Taxonomy Extension Presentation Linkbase Document (2, 5) |
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| (1) | Incorporated by reference. |
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| (3) | This exhibit shall not be deemed “filed” for purposes of Section 11 or 12 of the Securities Act of 1933, as amended (the “Securities Act”), or Section 18 of the Securities Exchanges Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of those sections, and shall not be part of any registration statement to which it may relate, and shall not be incorporated by reference into any registration statement or other document filed under the Securities Act or the Exchange Act, except as set forth by specific reference in such filing or document. |
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| (4) | Management contract or compensatory plan or arrangement. |
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| (5) | Attached as Exhibit 101 to this Annual Report on Form 10-K are the following materials, formatted in XBRL (Extensible Business Reporting Language): (i) the Consolidated Balance Sheets at December 31, 20152018 and 2014;2017; (ii) the Consolidated Statements of Operations for the years ended December 31, 2015, 20142018, 2017 and 2013;2016; (iii) the Consolidated Statements of Comprehensive Income (Loss) for the years ended December 31, 2015, 20142018, 2017 and 2013;2016; (iv) the Consolidated Statements of Changes in Equity for the years ended December 31, 2015, 20142018, 2017 and 2013;2016; (v) the Consolidated Statements of Cash Flows for the years ended December 31, 2015, 20142018, 2017 and 2013;2016; and (vi) Notes to Consolidated Financial Statements, detailed tagged. |
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
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| | | Lexington Realty Trust |
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| Dated: | February 25, 2016March 12, 2019 | By: | /s/ T. Wilson Eglin |
| | | | T. Wilson Eglin |
| | | | Chief Executive Officer |
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POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints T. Wilson Eglin and Patrick Carroll, and each of them severally, his true and lawful attorney-in-fact with power of substitution and resubstitution to sign in his name, place and stead, in any and all capacities, to do any and all things and execute any and all instruments that such attorney may deem necessary or advisable under the Securities Exchange Act of 1934 and any rules, regulations and requirements of the U.S. Securities and Exchange Commission in connection with this Annual Report on Form 10-K and any and all amendments hereto, as fully for all intents and purposes as he might or could do in person, and hereby ratifies and confirms all said attorneys-in-fact and agents, each acting alone, and his substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the date indicated.
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| Signature | Title |
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/s/ E. Robert Roskind E. Robert Roskind | Chairman |
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/s/ Richard J. Rouse
Richard J. Rouse
| Vice Chairman,
Chief Investment Officer and Trustee
of the Board of Trustees of the Trust |
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/s/ T. Wilson Eglin T. Wilson Eglin | Chief Executive Officer, President and Trustee of the Trust (principal executive officer) |
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/s/ Patrick Carroll Patrick Carroll | Chief Financial Officer, Executive Vice President and Treasurer of the Trust (principal financial officer) |
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/s/ Beth Boulerice Beth Boulerice | Executive Vice President and Chief Accounting Officer of the Trust (principal accounting officer) |
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/s/ Harold First
Harold First
| Trustee |
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/s/ Richard S. Frary Richard S. Frary | Trustee of the Trust |
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/s/ Lawrence L. Gray Lawrence L. Gray | Trustee of the Trust |
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/s/ Jamie Handwerker Jamie Handwerker | Trustee of the Trust |
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/s/ Claire A. Koeneman Claire A. Koeneman | Trustee of the Trust |
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/s/ Kevin W. LynchHoward Roth Kevin W. LynchHoward Roth
| Trustee of the Trust |
Each dated: February 25, 2016March 12, 2019