Lexington Realty Trust (NYSE:LXP) Q1 2018 Earnings Conference Call - Preliminary Transcript

May 08, 2018 • 08:30 am ET

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Lexington Realty Trust (NYSE:LXP) Q1 2018 Earnings Conference Call - Preliminary Transcript

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Presentation
Executive
T. Wilson Eglin

of non-core assets. We intend to use disposition proceeds to fund new industrial investments, retire debt, and fund share repurchases when appropriate.

During the quarter, we took the opportunity to repurchase approximately 800,000 common shares. And as of March 31, we have approximately 5.8 million shares available for repurchase under our current authorization. Subsequent to the quarter, we acquired two industrial assets located in an industrial submarket of Memphis for $93 million. While the investment environment remains competitive for industrial assets, we are currently reviewing a number of investments that are consistent with our strategy. We continue to favor Class A easily-repurposed facilities in secondary industrial markets that are located close to highways and main transportation hubs, as well as properties subject to below market leases.

Our balance sheet remains strong. Leverage was 6.1 times net debt to adjusted EBITDA at the end of the quarter, and over 74% of the portfolio is now unencumbered, bringing our unsecured debt to unsecured NOI leverage to just 5.6 times. I mentioned on our last call that we may finance some of our office properties with secured debt, but we currently favor dispositions as an alternative to encumbering assets.

I will now turn the call over to Brendan to discuss investments.

Executive
Brendan P. Mullinix

Thanks, Will. During the first quarter, we continue to pursue industrial investments, and are currently reviewing several hundred million dollars of potential new opportunities.

As we highlighted on last quarter's call, build-to-suits are becoming more active again, although our current pipeline predominantly consists of direct purchases. Subsequent to the quarter, in the beginning of April, we closed on a two-property industrial transaction in an industrial submarket of Memphis for approximately $93 million. The properties which reside in two different industrial parks in Olive Branch, Mississippi, have a weighted average lease term of approximately seven years. The first property which was completed in early 2017 is a 716,000 square foot Class A distribution warehouse net leased for 11 years to Sephora. The property is expandable by 176,000 square feet and contain sufficient land area for added employee and trailer parking as needed.

The second property is a 1.2 million square foot distribution center net leased to Hamilton Beach for three years. While we have not historically acquired properties with lease of under five years, the asset is a very functional generic distribution warehouse in a well-located industrial submarket. We believe the rent to be bellow market and that there is a high likelihood that the Hamilton Beach renews. We still favor properties with longer lease terms as part of our larger overall investment strategy, but if we find a property that we believe will be a good fit for our portfolio, we will make an exception like in this case where the price per square foot is a good value and the property is fungible for use.

I'll now turn the call over to Lara to discuss dispositions.

Executive
Lara Sweeney Johnson

Thanks, Brendan. We disposed a $63 million of assets during the first quarter at average