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Press release from GlobeNewswire (a Nasdaq OMX company)

Lexington Realty Trust Reports Third Quarter 2012 Results

Tuesday, November 06, 2012

Lexington Realty Trust Reports Third Quarter 2012 Results04:30 EST Tuesday, November 06, 2012NEW YORK, Nov. 6, 2012 (GLOBE NEWSWIRE) -- Lexington Realty Trust ("Lexington") (NYSE:LXP), a real estate investment trust focused on single-tenant real estate investments, today announced results for the third quarter ended September 30, 2012.Third Quarter 2012 HighlightsGenerated Company Funds From Operations, as adjusted ("Company FFO, as adjusted"), of $45.5 million or $0.25 per diluted common share.Increased quarterly common share dividend by 20%.Executed 17 new and extended leases, totaling 1.4 million square feet and ended the quarter with overall portfolio occupancy of 97.6%. Raised $68.1 million of gross proceeds from dispositions.Closed property acquisitions of $51.2 million and invested $20.2 million in on-going build-to-suit projects.Acquired remaining interest in Net Lease Strategic Assets Fund ("NLS").Entered into agreements to fund the construction of two build-to-suit projects for approximately $51.0 million.Retired $75.1 million of secured debt which had a weighted-average fixed rate of 6.4%.Subsequent to Quarter End HighlightsIssued 17.25 million common shares in a public offering, raising net proceeds of approximately $156.3 million.Satisfied $93.0 million of credit facility borrowings and repaid $57.5 million of indebtedness assumed in the acquisition of NLS.Retired $15.9 million of secured debt, which had a weighted-average fixed rate of 5.8%.Converted approximately $20.4 million original principal amount of 6.00% Convertible Guaranteed Notes to approximately 2.9 million common shares.Expanded seven-year term loan facility by $40.0 million.Executed 0.4 million square feet of new and extended leases. T. Wilson Eglin, President and Chief Executive Officer of Lexington, stated, "We reported another quarter of strong operating results supported by successful leasing activity, favorable asset recycling, attractive external growth opportunities and refinancing maturing debts on advantageous terms. The execution of our business plan in each of these areas allowed us to increase our quarterly common share dividend by 20% ahead of schedule and tighten our guidance for Company FFO, as adjusted, for 2012 to an expected range of $0.96 - $0.98 per share. Subsequent to quarter end, we reduced our leverage by approximately $147.0 million, further strengthening our balance sheet and positioning the Company to continue to grow into next year."FINANCIAL RESULTSRevenues For the quarter ended September 30, 2012, total gross revenues were $87.7 million, compared with total gross revenues of $79.8 million for the quarter ended September 30, 2011. The increase is primarily due to property acquisitions and an increase in occupancy.Company FFO, As Adjusted For the quarter ended September 30, 2012, the Company generated Company FFO, as adjusted, of $45.5 million, or $0.25 per diluted share, compared to Company FFO, as adjusted, for the quarter ended September 30, 2011 of $41.4 million, or $0.23 per diluted share. The calculation of Company FFO, as adjusted, and a reconciliation to net income (loss) is included later in this press release.Net Income (Loss) Attributable to Common Shareholders For the quarter ended September 30, 2012, net income attributable to common shareholders was $169.0 million, or income of $0.96 per diluted share, compared with net loss attributable to common shareholders for the quarter ended September 30, 2011 of $(37.0) million, or a loss of $(0.24) per diluted share. The increase in net income is primarily due to a $167.9 million gain recognized in the acquisition of the remaining interest in NLS.Net Lease Strategic Assets Fund During the third quarter of 2012, Lexington acquired Inland American (Net Lease) Sub, LLC's interest in NLS. As a result, Lexington now controls 100% of NLS. At September 30, 2012, NLS had 40 properties totaling 5.5 million square feet in 23 states, plus a 40% tenant-in-common interest in an office property.Capital Activities and Balance Sheet Update During the third quarter of 2012, Lexington (1) borrowed an additional $9.0 million on its seven-year term loan and swapped the LIBOR rate on such borrowings for a current fixed rate of 3.4% and (2) repaid $75.1 million in secured debt, with a weighted-average interest rate of 6.4%, scheduled to mature through 2015. Subsequent to September 30, 2012, Lexington issued 17.25 million common shares in a public offering, raising net proceeds of approximately $156.3 million. The net proceeds were primarily used to satisfy $93.0 million of outstanding debt on Lexington's secured credit facility and $57.5 million to satisfy a portion of the debt assumed in the NLS acquisition. In addition, Lexington exercised an accordion feature within its seven-year term loan facility increasing the total facility under the term loan to $255.0 million, all of which is currently outstanding. Also, subsequent to September 30, 2012, Lexington issued 2.9 million common shares upon conversion of $20.4 million original principal amount of 6.00% Convertible Guaranteed Notes due 2030. In connection with the conversion, Lexington made a cash payment of approximately $1.7 million plus accrued and unpaid interest on the notes.Common Share/Unit Dividend/Distribution Lexington declared a regular quarterly dividend/distribution for the quarter ended September 30, 2012 of $0.15 per common share/unit, which was paid on October 15, 2012 to common shareholders/unitholders of record as of September 28, 2012. This represents a 20% increase over the previous dividend/distribution.OPERATING ACTIVITIESLeasing During the third quarter of 2012, Lexington executed 17 new and extended leases for 1.4 million square feet and ended the quarter with overall portfolio occupancy of 97.6%. The extended leases increased annual cash rents from $11.0 million to $14.4 million. Subsequent to quarter end, Lexington executed 0.4 million square feet of new and extended leases.Capital Recycling Dispositions During the third quarter of 2012, Lexington disposed of its interests in four properties to unrelated parties for an aggregate gross sales price of $68.1 million.Investment Activity Build-to-Suit Projects Lexington closed on the acquisition of the 99,000 square foot build-to-suit office property in Saint Joseph, Missouri for a capitalized cost of $17.6 million (9.8% initial cap rate). The property is net-leased for a 15-year term. Lexington completed the 150,000 square foot build-to-suit office property in Jessup, Pennsylvania for a capitalized cost of $24.9 million (9.4% initial cap rate). The property is net-leased for a 15-year term. Lexington completed the 52,000 square foot build-to-suit retail property in Valdosta, Georgia for a project cost of approximately $8.7 million (9.3% initial cap rate). The property is net-leased for a 15-year term. Lexington entered into an $8.4 million build-to-suit commitment to construct a 52,000 square foot retail property in Opelika, Alabama, which will be net-leased upon completion for a 15-year term (9.3% initial cap rate). Lexington entered into a $42.6 million build-to-suit commitment to construct a 813,000 square foot industrial property in Rantoul, Illinois, which will be net-leased upon completion for a 20-year term (8.0% initial cap rate). In addition, Lexington continues to fund the construction of, or is under contract to acquire, the previously announced build-to-suit projects in (1) Denver, Colorado (8.6% initial cap rate), (2) Long Island City, New York (8.5% initial cap rate) and (3) Eugene, Oregon (9.0% initial cap rate). The aggregate estimated cost of these five on-going build-to-suit projects is approximately $152.9 million of which $45.0 million was invested as of September 30, 2012. Lexington can give no assurance that any of the build-to-suit projects that are under contract or in process will be completed. Joint Venture Investments During the quarter ended September 30, 2012, Lexington formed a joint venture in which it has a minority ownership interest. The joint venture entered into a contract to acquire a 120,000 square foot retail property in Palm Beach Gardens, Florida for $29.8 million, which will be net-leased at closing for an approximately 15-year term (9.6% cap rate). Lexington can give no assurances that this acquisition will be consummated.2012 EARNINGS GUIDANCE Lexington tightened its estimate of Company FFO, as adjusted, to an expected range of $0.96 to $0.98 per diluted share for the year ended December 31, 2012 from a range of $0.95 to $0.98 per diluted share. This guidance is forward looking, excludes the impact of certain items and is based on current expectations.THIRD QUARTER 2012 CONFERENCE CALL Lexington will host a conference call today, Tuesday, November 6, 2012, at 11:00 a.m. Eastern Time, to discuss its results for the quarter ended September 30, 2012. Interested parties may participate in this conference call by dialing 888-296-4174 or 719-325-2302. A replay of the call will be available through November 20, 2012, at 877-870-5176 or 858-384-5517, pin: 6614681. A live webcast of the conference call will be available at www.lxp.com within the Investor Relations section.ABOUT LEXINGTON REALTY TRUST Lexington Realty Trust is a real estate investment trust that owns, invests in, and manages office, industrial and retail properties net-leased to major corporations throughout the United States and provides investment advisory and asset management services to investors in the net-lease area. Lexington shares are traded on the New York Stock Exchange under the symbol "LXP". Additional information about Lexington is available on-line at www.lxp.com or by contacting Lexington Realty Trust, One Penn Plaza, Suite 4015, New York, New York 10119-4015, Attention: Investor Relations. This release contains certain forward-looking statements which involve known and unknown risks, uncertainties or other factors not under Lexington's control which may cause actual results, performance or achievements of Lexington to be materially different from the results, performance, or other expectations implied by these forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed under the headings "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Risk Factors" in Lexington's periodic reports filed with the Securities and Exchange Commission, including risks related to: (1) the authorization by Lexington's Board of Trustees of future dividend declarations, (2) Lexington's ability to achieve its estimate of Company FFO, as adjusted, for the year ended December 31, 2012, (3) the consummation of the built-to-suit transactions, (4) the failure to continue to qualify as a real estate investment trust, (5) changes in general business and economic conditions, including the impact of the current global financial and credit crisis, (6) competition, (7) increases in real estate construction costs, (8) changes in interest rates, (9) changes in accessibility of debt and equity capital markets, including with respect to financings that Lexington is working on, or (10) future impairment charges. Copies of the periodic reports Lexington files with the Securities and Exchange Commission are available on Lexington's web site at www.lxp.com. Forward-looking statements, which are based on certain assumptions and describe Lexington's future plans, strategies and expectations, are generally identifiable by use of the words "believes," "expects," "intends," "anticipates," "estimates," "projects", "is optimistic" or similar expressions. Lexington undertakes no obligation to publicly release the results of any revisions to those forward-looking statements which may be made to reflect events or circumstances after the occurrence of unanticipated events. Accordingly, there is no assurance that Lexington's expectations will be realized. References to Lexington refer to Lexington Realty Trust and its consolidated subsidiaries. All interests in properties and loans are held through special purpose entities, which are separate and distinct legal entities, but consolidated for financial statement purposes and/or disregarded for income tax purposes.LEXINGTON REALTY TRUST AND CONSOLIDATED SUBSIDIARIESCONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited and in thousands, except share and per share data)             Three Months Ended September 30, Nine Months Ended September 30,   2012 2011 2012 2011 Gross revenues:         Rental  $ 79,915  $ 71,314  $ 226,293  $ 209,898 Advisory and incentive fees 297 303 1,385 1,750 Tenant reimbursements 7,443 8,219 22,379 23,660 Total gross revenues 87,655 79,836 250,057 235,308           Expense applicable to revenues:         Depreciation and amortization (40,220) (40,380) (116,333) (118,035) Property operating (15,446) (15,215) (44,415) (44,554) General and administrative (5,810) (5,080) (17,381) (16,055) Non-operating income 1,383 3,369 5,688 9,108 Interest and amortization expense (24,932) (26,966) (73,658) (80,411) Debt satisfaction gains (charges), net 12 (6) (1,639) 3 Change in value of forward equity commitment — (9,866) — (4,318) Gain on acquisition 167,864 — 167,864 — Litigation reserve 25 — (2,775) — Impairment charges (4,262) (10,849) (4,262) (38,719) Income (loss) before benefit (provision) for income taxes, equity in earnings of non-consolidated entities and discontinued operations 166,269 (25,157) 163,146 (57,673) Benefit (provision) for income taxes (296) (263) (803) 1,059 Equity in earnings of non-consolidated entities 3,799 9,047 21,469 20,646 Income (loss) from continuing operations 169,772 (16,373) 183,812 (35,968)           Discontinued operations:         Income (loss) from discontinued operations 483 573 (1,152) 3,689 Provision for income taxes (53) (15) (62) (53) Debt satisfaction gains (charges), net (1,189) — 539 (603) Gains on sales of properties 6,276 182 8,946 5,251 Impairment charges — (15,211) (5,690) (76,110) Total discontinued operations 5,517 (14,471) 2,581 (67,826) Net income (loss) 175,289 (30,844) 186,393 (103,794) Less net (income) loss attributable to noncontrolling interests (748) (70) (3,730) 11,183 Net income (loss) attributable to Lexington Realty Trust shareholders 174,541 (30,914) 182,663 (92,611) Dividends attributable to preferred shares - Series B — (1,590) (2,298) (4,770) Dividends attributable to preferred shares - Series C (1,573) (1,675) (4,718) (5,055) Dividends attributable to preferred shares - Series D (2,926) (2,926) (8,777) (8,777) Allocation to participating securities (1,092) (72) (1,174) (227) Deemed dividend - Series B — — (2,346) — Redemption discount - Series C — 129 229 215 Net income (loss) attributable to common shareholders  $ 168,950  $ (37,048)  $ 163,579  $ (111,225) Income (loss) per common share - basic:         Income (loss) from continuing operations  $ 1.05  $ (0.14)  $ 1.05  $ (0.36) Income (loss) from discontinued operations 0.04 (0.10) 0.01 (0.37) Net income (loss) attributable to common shareholders  $ 1.09  $ (0.24)  $ 1.06  $ (0.73)           Weighted-average common shares outstanding - basic: 154,980,137 157,205,530 154,564,041 151,676,401           Income (loss) per common share - diluted:         Income (loss) from continuing operations  $ 0.93  $ (0.14)  $ 0.97  $ (0.36) Income (loss) from discontinued operations 0.03 (0.10) 0.01 (0.37) Net income (loss) attributable to common shareholders  $ 0.96  $ (0.24)  $ 0.98  $ (0.73)           Weighted-average common shares outstanding - diluted 180,855,164 157,205,530 180,449,070 151,676,401           Amounts attributable to common shareholders:         Income (loss) from continuing operations $ 163,417 $ (22,448) $ 162,893 $ (54,911) Income (loss) from discontinued operations 5,533 (14,600) 686 (56,314) Net income (loss) attributable to common shareholders  $ 168,950  $ (37,048)  $ 163,579  $ (111,225)    LEXINGTON REALTY TRUST AND CONSOLIDATED SUBSIDIARIESCONDENSED CONSOLIDATED BALANCE SHEETS September 30, 2012 (unaudited) and December 31, 2011 (In thousands, except share and per share data)         2012 2011Assets:     Real estate, at cost  $ 3,511,146  $ 3,172,246 Investments in real estate under construction 41,676 34,529 Less: accumulated depreciation and amortization 711,132 638,368   2,841,690 2,568,407 Property held for sale - discontinued operations 8 — Intangible assets, net 278,710 178,569 Cash and cash equivalents 72,424 63,711 Restricted cash 25,133 30,657 Investment in and advances to non-consolidated entities 8,698 39,330 Deferred expenses, net 51,587 43,966 Loans receivable, net 72,786 66,619 Rent receivable 7,661 7,271 Other assets 27,835 28,290 Total assets  $ 3,386,532  $ 3,026,820      Liabilities and Equity:     Liabilities:     Mortgages and notes payable  $ 1,450,457  $ 1,366,004 Credit facility borrowings 93,000 — Term loan payable 215,000 — Exchangeable notes payable — 62,102 Convertible notes payable 106,602 105,149 Trust preferred securities 129,120 129,120 Dividends payable 27,956 25,273 Liabilities - discontinued operations 397 — Accounts payable and other liabilities 74,003 53,058 Accrued interest payable 9,728 13,019 Deferred revenue - including below market leases, net 89,805 90,349 Prepaid rent 15,309 12,543 Total liabilities 2,211,377 1,856,617 Commitments and contingencies           Equity:     Preferred shares, par value $0.0001 per share; authorized 100,000,000 shares,     Series B Cumulative Redeemable Preferred, liquidation preference $68,522; 2,740,874 shares issued and outstanding in 2011 — 66,193 Series C Cumulative Convertible Preferred, liquidation preference $96,770 and $98,510; 1,935,400 and 1,970,200 shares issued and outstanding in 2012 and 2011, respectively 94,016 95,706 Series D Cumulative Redeemable Preferred, liquidation preference $155,000; 6,200,000 shares issued and outstanding 149,774 149,774 Common shares, par value $0.0001 per share; authorized 400,000,000 shares, 156,136,051 and 154,938,351 shares issued and outstanding in 2012 and 2011, respectively 16 15 Additional paid-in-capital 2,020,858 2,010,850 Accumulated distributions in excess of net income (1,110,166) (1,212,630) Accumulated other comprehensive income (loss) (6,393) 1,938 Total shareholders' equity 1,148,105 1,111,846 Noncontrolling interests 27,050 58,357 Total equity 1,175,155 1,170,203 Total liabilities and equity  $ 3,386,532  $ 3,026,820  LEXINGTON REALTY TRUST AND CONSOLIDATED SUBSIDIARIESEARNINGS PER SHARE (Unaudited and in thousands, except share and per share data)             Three Months Ended  September 30, Nine Months Ended September 30,   2012 2011 2012 2011EARNINGS PER SHARE:                  Basic:         Income (loss) from continuing operations attributable to common shareholders  $ 163,417  $ (22,448)  $ 162,893  $ (54,911) Income (loss) from discontinued operations attributable to common shareholders 5,533 (14,600) 686 (56,314) Net income (loss) attributable to common shareholders  $ 168,950  $ (37,048)  $ 163,579  $ (111,225)           Weighted-average number of common shares outstanding 154,980,137 157,205,530 154,564,041 151,676,401           Income (loss) per common share:         Income (loss) from continuing operations  $ 1.05  $ (0.14)  $ 1.05  $ (0.36) Income (loss) from discontinued operations 0.04 (0.10) 0.01 (0.37) Net income (loss) attributable to common shareholders  $ 1.09  $ (0.24)  $ 1.06  $ (0.73)          Diluted:         Income (loss) from continuing operations attributable to common shareholders  $ 163,417  $ (22,448)  $ 162,893  $ (54,911) Impact of assumed conversions:         Share options — — — — Operating Partnership Units 475 — 913 — 6.00% Convertible Guaranteed Notes 2,327 — 6,980 — Series C Preferred shares 1,573 — 4,489 — Income (loss) from continuing operations attributable to common shareholders 167,792 (22,448) 175,275 (54,911) Income (loss) from discontinued operations attributable to common shareholders 5,533 (14,600) 686 (56,314) Net income (loss) attributable to common shareholders  $ 173,325  $ (37,048)  $ 175,961  $ (111,225)           Weighted-average common shares outstanding - basic 154,980,137 157,205,530 154,564,041 151,676,401 Effect of dilutive securities:         Share options 344,721 — 279,699 — Operating Partnership Units 4,400,389 — 4,479,451 — 6.00% Convertible Guaranteed Notes 16,419,347 — 16,412,836 — Series C Preferred shares 4,710,570 — 4,713,043 — Weighted-average common shares outstanding 180,855,164 157,205,530 180,449,070 151,676,401           Income (loss) per common share:         Income (loss) from continuing operations  $ 0.93  $ (0.14)  $ 0.97  $ (0.36) Income (loss) from discontinued operations 0.03 (0.10) 0.01 (0.37) Net income (loss) attributable to common shareholders  $ 0.96  $ (0.24)  $ 0.98  $ (0.73)    LEXINGTON REALTY TRUST AND CONSOLIDATED SUBSIDIARIESREPORTED COMPANY FUNDS FROM OPERATIONS & FUNDS AVAILABLE FOR DISTRIBUTION (Unaudited and in thousands, except share and per share data)             Three Months Ended September 30, Nine Months Ended September 30,   2012 2011 2012 2011FUNDS FROM OPERATIONS: (1)        Basic and Diluted:         Net income (loss) attributable to Lexington Realty Trust shareholders  $ 174,541  $ (30,914)  $ 182,663  $ (92,611) Adjustments:         Depreciation and amortization 39,190 41,279 118,809 120,797 Impairment charges - real estate 4,262 26,060 9,952 114,829 Impairment charges - joint venture — 3,252 — 4,811 Noncontrolling interests - OP units 475 643 913 (315) Amortization of leasing commissions 1,212 975 3,509 2,848 Joint venture and noncontrolling interest adjustment (911) (6,289) 15 (20,270) Preferred dividends - Series B & D (2,926) (4,516) (11,075) (13,547) Gains on sales of properties (6,276) (182) (8,946) (5,251) Gain on sale - joint venture investment — — (7,000) — Gain on acquisition (167,864) — (167,864) — Interest and amortization on 6.00% Convertible Guaranteed Notes 2,327 2,327 6,980 6,980Reported Company FFO 44,030 32,635 127,956 118,271 Debt satisfaction charges, net 1,177 6 1,100 600 Forward equity commitment — 9,866 — 4,318 Litigation reserve (25) — 2,775 — Gains on loan sales - joint venture — (1,927) — (1,927) Other 276 860 598 3,110Company FFO, as adjusted 45,458 41,440 132,429 124,372          FUNDS AVAILABLE FOR DISTRIBUTION: (2)         Adjustments:         Straight-line rents (3,565) (320) 408 2,673 Lease incentives 313 521 1,143 1,568 Amortization of below/above market leases (913) (937) (3,608) (2,215) Non-cash interest, net (312) 239 (1,168) 590 Non-cash general and administrative expenses 1,104 1,012 3,462 2,963 Tenant improvements (11,120) (4,778) (16,920) (9,533) Lease costs (4,222) (1,753) (7,853) (10,999)Reported Company Funds Available for Distribution  $ 26,743  $ 35,424  $ 107,893  $ 109,419          Per Share Amounts         Basic:         Reported Company FFO  $ 0.24  $ 0.18  $ 0.71  $ 0.66 Company FFO, as adjusted  $ 0.25  $ 0.23  $ 0.73  $ 0.71 Company FAD  $ 0.15  $ 0.20  $ 0.60  $ 0.63           Diluted:         Reported Company FFO  $ 0.24  $ 0.18  $ 0.71  $ 0.66 Company FFO, as adjusted  $ 0.25  $ 0.23  $ 0.73  $ 0.71 Company FAD  $ 0.15  $ 0.20  $ 0.60  $ 0.63  LEXINGTON REALTY TRUST AND CONSOLIDATED SUBSIDIARIESREPORTED COMPANY FUNDS FROM OPERATIONS & FUNDS AVAILABLE FOR DISTRIBUTION (CONTINUED) (Unaudited and in thousands, except share and per share data)             Three Months Ended September 30, Nine Months Ended September 30,Basic: 2012 2011 2012 2011 Weighted-average common shares outstanding - EPS basic 154,980,137 157,205,530 154,564,041 151,676,401 6.00% Convertible Guaranteed Notes 16,419,347 16,230,905 16,412,836 16,230,905 Non-vested share-based payment awards 245,166 112,473 200,741 118,572 Operating Partnership Units 4,400,389 4,618,948 4,479,451 4,779,896 Preferred Shares - Series C 4,710,570 5,044,564 4,713,043 5,066,264 Weighted-average common shares outstanding - Reported Company FFO basic 180,755,609 183,212,420 180,370,112 177,872,038 Adjustments:         Forward equity commitment settlement — (3,533,848) — (3,468,421) Weighted-average common shares outstanding - Company FFO, as adjusted & FAD 180,755,609 179,678,572 180,370,112 174,403,617          Diluted:         Weighted-average common shares outstanding - Reported Company FFO basic 180,755,609 183,212,420 180,370,112 177,872,038 Options - Incremental shares 344,721 116,970 279,699 269,396 Weighted-average common shares outstanding - Reported Company FFO diluted 181,100,330 183,329,390 180,649,811 178,141,434 Adjustments:         Forward equity commitment settlement — (3,533,848) — (3,468,421) Weighted-average common shares outstanding - Company FFO, as adjusted & FAD 181,100,330 179,795,542 180,649,811 174,673,0131 Lexington believes that Funds from Operations ("FFO") is a widely recognized and appropriate measure of the performance of an equity REIT. Lexington believes FFO is frequently used by securities analysts, investors and other interested parties in the evaluation of REITs, many of which present FFO when reporting their results. FFO is intended to exclude generally accepted accounting principles ("GAAP") historical cost depreciation and amortization of real estate and related assets, which assumes that the value of real estate diminishes ratably over time. Historically, however, real estate values have risen or fallen with market conditions. As a result, FFO provides a performance measure that, when compared year over year, reflects the impact to operations from trends in occupancy rates, rental rates, operating costs, development activities, interest costs and other matters without the inclusion of depreciation and amortization, providing perspective that may not necessarily be apparent from net income. The National Association of Real Estate Investment Trusts, Inc. ("NAREIT") defines FFO as "net income (or loss) computed in accordance with GAAP, excluding gains (or losses) from sales of property, plus real estate depreciation and amortization and after adjustments for unconsolidated partnerships and joint ventures." NAREIT recently clarified its computation of FFO to exclude impairment charges on depreciable real estate owned directly or indirectly. FFO does not represent cash generated from operating activities in accordance with GAAP and is not indicative of cash available to fund cash needs. Lexington presents "Reported Company funds from operations" or "Reported Company FFO," which differs from FFO because it includes Lexington's operating partnership units, Lexington's 6.50% Series C Cumulative Convertible Preferred Shares, and Lexington's 6.00% Convertible Guaranteed Notes because these securities are convertible, at the holder's option, into Lexington's common shares. Management believes this is appropriate and relevant to securities analysts, investors and other interested parties because Lexington presents Reported Company FFO on a company-wide basis as if all securities that are convertible, at the holder's option, into Lexington's common shares, are converted. Lexington also presents "Company funds from operations, as adjusted" or "Company FFO, as adjusted," which adjusts Reported Company FFO for certain items which Management believes are not indicative of the operating results of its real estate portfolio. Management believes this is an appropriate presentation as it is frequently requested by security analysts, investors and other interested parties. Since others do not calculate funds from operations in a similar fashion, Reported Company FFO and Company FFO, as adjusted, may not be comparable to similarly titled measures as reported by others. Reported Company FFO and Company FFO, as adjusted, 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.2 Reported Company Funds Available for Distribution ("FAD") is calculated by making adjustments to Company FFO, as adjusted, for (1) straight-line rent revenue, (2) lease incentive amortization, (3) amortization of above/below market leases, (4) cash paid for tenant improvements, (5) cash paid for lease costs, (6) non-cash general and administrative expenses, and (7) non-cash interest, net. Although FAD may not be comparable to that of other REITs, Lexington believes it provides a meaningful indication of its ability to fund cash needs. FAD is a non-GAAP financial measure and should not be viewed as an alternative measurement of operating performance to net income, as an alternative to net cash flows from operating activities or as a measure of liquidity.CONTACT: Investor or Media Inquiries, T. Wilson Eglin, CEO Lexington Realty Trust Phone: (212) 692-7200 E-mail: tweglin@lxp.com