Annual Report 2012
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Annual Report 2012 Letter to Shareholders Dear Fellow Shareholders, For Lexington Realty Trust, 2012 proved to be another very successful year. We continued to meet or exceed business plan objectives by raising occupancy, recycling capital through dispositions, reducing and refinancing debt and funding new growth initiatives. These achievements led to an increase of 20% in our quarterly common share dividend paid on October 15, 2012. Our shares performed well as the economy slowly improved. Capital markets were favorable and investor interest in fixed income and equity investments with attractive dividends was exceptionally strong. Our total return (including reinvestment of dividends) on our common shares was 48% for the year, the highest of any net-lease REIT. This was a great result for our shareholders that reflected the numerous successes we achieved in the following areas: Leasing. We executed new and renewal leases totaling a record of approximately 7.4 million square feet and increased overall portfolio occupancy from 95.9% to 97.3%. Debt Reduction and Refinancing. We (1) reduced our debt and preferred stock from 49.7% to 46.8% of our gross assets and (2) obtained $376 million of new fixed-rate financing at a weighted-average rate of 3.8% and retired $472 million of debt and preferred stock with a weighted-average cost of 5.7%. Capital Recycling. We monetized properties for an aggregate price of approximately $181 million and a weighted-average capitalization rate of 7.2%. Sale proceeds were primarily used to fund new investments and retire debt. Investments. We invested $247 million in new investments, which helped extend our weighted- average lease term from 6.2 to 7.1 years. The weighted-average initial capitalization rate on these investments was approximately 8.4%. Dividend Growth. We increased our quarterly common share dividend rate by 20% from $0.125 per share to $0.15 per share beginning with the dividend paid on October 15, 2012, or $0.50 per share to $0.60 per share on an annualized basis. Our two, three and four year total returns (including reinvestment of dividends) were 48%, 105% and 197%, respectively. We believe that this strong period of outperformance reflects the actions we have taken to strengthen our balance sheet, refine and focus our investment and portfolio strategies and improve our long-term growth prospects. So far, we believe 2013 has been a good year. Through March 8, 2013, our common share price increased by 15%. We believe that we have viable strategies and opportunities to continue generating total returns that are attractive relative to other REITs, equity investments and fixed income alternatives. As we look ahead, we are excited by the opportunities we have to build an even better company. As part of our continuing efforts to create shareholder value in 2013, we expect to: Extend debt maturities and refinance on advantageous terms. We intend to continue extending our debt maturities by refinancing in the current attractive interest rate environment. In the first quarter of 2013, we refinanced our secured credit facility with a $550 million unsecured credit facility providing for term and revolving loans. We drew on this facility to retire $138 million of mortgage debt which had a weighted-average interest rate of 5.3%. With $641 million of debt maturing through 2015, we believe that substantial refinancing opportunities are still available. Dispose of non-core assets. We expect to continue to dispose of non-core and underperforming assets, including retail, multi-tenant and vacant properties. While we have disposed of a substantial portion of these non-core and underperforming assets since 2007, we are extremely sensitive to price. As a result, we continue to proceed methodically through this process to maximize value. Increase occupancy and extend our portfolio weighted-average lease term. Through March 8, 2013, we signed new and renewal leases for approximately 0.4 million square feet, which reduced our lease rollover in 2013 to just approximately 3.0% of our single-tenant revenue. We continue to have great success with respect to releasing our vacancies, maintaining high levels of occupancy and extending our portfolio weighted-average lease term. However, we expect a modest roll down in rental rates for lease renewals in 2013. Acquire new, long-term single-tenant investments. In addition to acquiring properties and structuring sale/leaseback transactions, we have continued to provide construction financing and take-out financing for build-to-suit transactions. We believe we are a market leader in the single-tenant area and, as of March 8, 2013, we had approximately $265 million of new potential investments under letter of intent or contract. We anticipate that our acquisition volume will increase over the course of the year. We expect the new acquisitions to improve the overall quality of our portfolio, extend our weighted-average lease term and add to the cash flow that supports our dividend. We recently raised approximately $258 million of growth capital and are well positioned to act on accretive investment opportunities. In the past year, we have made meaningful progress towards simplifying our structure, adding long-term net- lease assets to our portfolio, selling non-core properties, strengthening our balance sheet and lowering our cost of capital. We believe these steps have created substantial shareholder value and improved our valuation. As always, we intend to execute our business plan with the goal of steady and dependable dividend growth for our shareholders. We believe that dividend yield and growth will continue to be meaningful components of total return in what continues to be an environment of low investment yields. I would like to thank our shareholders for their continued support, our employees for another year of hard work and success and our tenants for the opportunity to meet their occupancy needs. Sincerely, T. WILSON EGLIN Chief Executive Officer, President and a Trustee March 25, 2013 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2012 or TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _________________ to ________________ Commission file number 1-12386 LEXINGTON REALTY TRUST (Exact name of registrant as specified in its charter) Maryland 13-3717318 (State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.) One Penn Plaza, Suite 4015 New York, NY 10119-4015 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (212) 692-7200 Securities registered pursuant to Section 12(b) of the Act: Title of each class Name of each exchange on which registered Shares of beneficial interest, par value $0.0001, classified as New York Stock Exchange Common Stock 6.50% Series C Cumulative Convertible Preferred Stock, New York Stock Exchange par value $0.0001 7.55% Series D Cumulative Redeemable Preferred Stock, New York Stock Exchange par value $0.0001 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 No . 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 No . 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 No . 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 No . 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-K . Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. Large accelerated filer Accelerated filer Non-accelerated filer (Do not check if a smaller reporting company) Smaller reporting company Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes No . The aggregate market value of the shares of beneficial interest, par value $0.0001 per share, classified as common stock (“common shares”) of the registrant held by non-affiliates as of June 29, 2012, which was the last business day of the registrant's most recently completed second fiscal quarter, was $1,293,326,650 based on the closing price of the common shares on the New York Stock Exchange as of that date, which was $8.47 per share. Number of common shares outstanding as of February 21, 2013 was 188,840,892. DOCUMENTS INCORPORATED BY REFERENCE Certain information contained in the Definitive Proxy Statement for registrant's Annual Meeting of Shareholders, to be held on May 21, 2013, 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.