8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

Current Report Pursuant

to Section 13 OR 15(d) of The

Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): February 18, 2021

LEXINGTON REALTY TRUST

(Exact name of registrant as specified in its charter)

Maryland	1-12386	13-3717318
(State or other jurisdiction of incorporation)	(Commission File Number)	(IRS Employer Identification No.)

One Penn Plaza, Suite 4015, New York, New York 10119-4015

(Address of principal executive offices) (Zip Code)

(212) 692-7200

(Registrant’s telephone number, including area code)

N/A

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2.):

☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Shares of beneficial interest, par value $0.0001 per share, classified as Common Stock	LXP	New York Stock Exchange
6.50% Series C Cumulative Convertible Preferred Stock, par value $0.0001 per share	LXPPRC	New York Stock Exchange

Item 2.02. Results of Operations and Financial Condition.

On February 18, 2021, we issued a press release announcing our financial results for the quarter ended December 31, 2020. A copy of the press release is furnished herewith as Exhibit 99.1.

The information furnished pursuant to this “Item 2.02 - Results of Operations and Financial Condition”, including Exhibit 99.1, shall not be deemed to be “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, which we refer to as the Exchange Act, or otherwise subject to the liabilities of that section, and shall not be deemed to be incorporated by reference into any filing made by us under the Exchange Act or Securities Act of 1933, as amended, which we refer to as the Securities Act, regardless of any general incorporation language in any such filing, except as shall be expressly set forth by specific reference in such a filing.

Item 7.01. Regulation FD Disclosure.

On February 18, 2021, we made available supplemental information, which we refer to as the “Quarterly Supplemental Information, Fourth Quarter 2020,” a copy of which is available in the “Investors” section of our web site at www.LXP.com. Information contained on our web site is not incorporated by reference into this Current Report on From 8-K.

On February 18, 2021, our management discussed our financial results and certain aspects of our business plan on a conference call with analysts and investors. A transcript of the conference call is furnished herewith as Exhibit 99.2.

The information furnished pursuant to this “Item 7.01 - Regulation FD Disclosure”, including Exhibit 99.2 and, shall not be deemed to be “filed” for the purposes of Section 18 of the Exchange Act or otherwise subject to the liabilities of that section, and shall not be deemed to be incorporated by reference into any filing made by us under the Exchange Act or the Securities Act, regardless of any general incorporation language in any such filing, except as shall be expressly set forth by specific reference in such a filing. Information contained on our web site is not incorporated by reference into this Current Report on Form 8-K.

Item 9.01. Financial Statements and Exhibits.

(d)       Exhibits

99.1	Press Release dated February 18, 2021
99.2	February 18, 2021 Conference Call Transcript.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Date: February 19, 2021	Lexington Realty Trust
	By:	/s/ Beth Boulerice
		Beth Boulerice
		Chief Financial Officer

EX-99.1

Exhibit 99.1

LEXINGTON REALTY TRUST

TRADED: NYSE: LXP

ONE PENN PLAZA, SUITE 4015

NEW YORK, NY 10119-4015

FOR IMMEDIATE RELEASE

LEXINGTON REALTY TRUST REPORTS FOURTH QUARTER 2020 RESULTS

New York, NY - February 18, 2021 - Lexington Realty Trust (“Lexington”) (NYSE:LXP), a real estate investment trust focused on single-tenant industrial real estate investments, today announced results for the fourth quarter and year ended December 31, 2020.

Fourth Quarter 2020 Highlights

• Generated Net Income attributable to common shareholders of $102.7 million, or $0.37 per diluted common share.

• Generated Adjusted Company Funds From Operations available to all equityholders and unitholders - diluted (“Adjusted Company FFO”) of $55.0 million, or $0.19 per diluted common share.

• Collected 99.8% of Cash Base Rents due during the fourth quarter.

• Disposed of eight properties for an aggregate gross disposition price of $292.3 million.

• Acquired four warehouse/distribution properties for an aggregate cost of $182.0 million.

• Invested an aggregate of $33.8 million in development projects.

• Increased industrial portfolio to 90.8% of gross real estate assets, excluding held for sale assets.

• Completed 1.7 million square feet of lease extensions.

• Fully leased the 320,190 square foot warehouse/distribution speculative development project located in Rickenbacker, Ohio.

• Declared a quarterly common share/unit dividend/distribution of $0.1075 per share/unit, an increase of 2.4%.

• Satisfied $197.1 million of secured debt with a weighted-average interest rate of 4.3%.

Full Year 2020 Highlights

• Generated Net Income attributable to common shareholders of $176.8 million, or $0.66 per diluted common share.

• Generated Adjusted Company FFO of $209.5 million, or $0.76 per diluted common share.

• Collected 99.8% of Cash Base Rents.

• Disposed of 16 properties for an aggregate gross disposition price of $432.8 million.

• Acquired 16 warehouse/distribution properties for an aggregate cost of $611.8 million.

• Invested an aggregate of $60.2 million in development projects.

• Completed 5.2 million square feet of new leases and lease extensions, raising industrial renewal Cash Base Rents by 17.5%.

• Raised net proceeds of approximately $225.0 million through an underwritten equity offering and the ATM program.

• Repurchased 1.3 million common shares at an average price of $8.28 per share.

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• Issued $400.0 million aggregate principal amount of 2.70% Senior Notes due 2030 at an issuance price of 99.233% of the principal amount.

• Satisfied $236.0 million of secured debt with a weighted-average interest rate of 4.5%.

• Repurchased $61.2 million and $51.1 million aggregate principal amount of outstanding 4.25% Senior Notes due 2023 and 4.40% Senior Notes due 2024, respectively.

Subsequent Events

• Acquired three warehouse/distribution properties for an aggregate gross cost of approximately $50.8 million.

• Disposed of two office properties for an aggregate gross disposition price of $20.2 million.

Adjusted Company FFO is a non-GAAP financial measure. It and certain other non-GAAP financial measures are defined and reconciled later in this press release.

T. Wilson Eglin, Chairman, Chief Executive Officer and President of Lexington, commented “Our fourth quarter results were strong, and we are pleased with 2020 execution in all areas of our business. We remained active on both the acquisition and disposition front during the quarter and our industrial exposure reached 91% of our overall gross real estate assets at year-end. In 2020, we added 6.6 million square feet of high-quality warehouse/distribution product to our industrial portfolio and made progress adding to our development pipeline. Consistent rental collections of over 99% were achieved throughout the year, and industrial renewal rents grew over 3% in the fourth quarter and 17.5% overall in 2020. We are well-positioned heading into 2021 with leverage low at 4.8x Net Debt to Adjusted EBITDA, ample cash on the balance sheet, and a healthy investment pipeline.”

FINANCIAL RESULTS

Revenues

For the quarter ended December 31, 2020, total gross revenues were $83.3 million, compared with total gross revenues of $83.0 million for the quarter ended December 31, 2019. The increase was primarily attributable to an increase in rental revenue due to property acquisitions, partially offset by a decrease in rental revenue due to property sales.

Net Income Attributable to Common Shareholders

For the quarter ended December 31, 2020, net income attributable to common shareholders was $102.7 million, or $0.37 per diluted share, compared with net income attributable to common shareholders for the quarter ended December 31, 2019 of $83.6 million, or $0.33 per diluted share.

Adjusted Company FFO

For the quarter ended December 31, 2020, Lexington generated Adjusted Company FFO of $55.0 million, or $0.19 per diluted share, compared to Adjusted Company FFO for the quarter ended December 31, 2019 of $52.4 million, or $0.20 per diluted share.

Dividends/Distributions

As previously announced, during the fourth quarter of 2020, Lexington declared its quarterly common share/unit dividend/distribution for the quarter ended December 31, 2020 of $0.1075 per common share/unit which was paid on January 15, 2021 to common shareholders/unitholders of record as of December 31, 2020. Lexington previously declared a dividend of $0.8125 per share on its Series C

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Cumulative Convertible Preferred Stock (“Series C Preferred”) for the quarter ended December 31, 2020, which was paid February 16, 2021 to Series C Preferred shareholders of record as of January 31, 2021.

TRANSACTION ACTIVITY

ACQUISITION TRANSACTIONS
Property Type	Market	Sq. Ft.	Initial Basis ($000)		Approximate Lease Term (Yrs)
Industrial - warehouse/distribution	Phoenix, AZ	201,784	$	87,820	12
Industrial - warehouse/distribution	Dallas, TX	500,556	44,030		4
Industrial - warehouse/distribution	Greenville/Spartanburg, SC	213,200	18,595		10
Industrial - warehouse/distribution	Dallas, TX	468,300	31,556		9
		1,383,840	$	182,001

Including fourth quarter acquisition activity, consolidated 2020 acquisition activity totaled $611.8 million at aggregate weighted-average GAAP and Cash capitalization rates of 5.4% and 5.0%, respectively.

DEVELOPMENT PROJECTS
Project (% owned)	Market	Estimated Sq. Ft.	Estimated Project Cost ($000)		GAAP Investment Balance as of 12/31/2020 ($000)(1)		Lexington Amount Funded as of 12/31/2020 ($000)		Estimated Completion Date	Approximate Lease Term (Yrs)	% Leased as of 12/31/2020
Consolidated:
KeHE Distributors BTS (100%)	Phoenix, AZ	468,182	$	72,000	$	19,609	$	17,766	3Q 21	15	100%
Fairburn (90%)(2)	Atlanta, GA	910,000	53,812		39,824		33,195		1Q 21	TBD	0%
Rickenbacker (100%)	Columbus, OH	320,190	20,300		16,473		12,225		2Q 21	3	100%
			$	146,112	$	75,906	$	63,186
Non-consolidated:
ETNA Park 70 (90%)(3)	Columbus, OH	TBD	TBD		$	12,514	$	12,909	TBD	TBD	0%
ETNA Park 70 East (90%)(3)	Columbus, OH	TBD	TBD		7,484		7,614		TBD	TBD	0%
					$	19,998	$	20,523

1. GAAP investment balance is in real estate under construction for consolidated projects and in investments in non-consolidated entities for non-consolidated projects.

2. Estimated project cost excludes potential developer partner promote.

3. Plans and specifications for completion have not been completed and the square footage, project cost and completion date cannot be estimated.

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PROPERTY DISPOSITIONS
Primary Tenant	Location	Property Type	Gross Disposition Price ($000)		Annualized Net Income (Loss)(1) ($000)		Annualized NOI(1) ($000)		Month of Disposition	% Leased
Vacant	Thomson, GA	Industrial	$	6,971	$	—	$	(278)	October	0%
Vacant (2)	Boca Raton, FL	Office	18,413		(3,160)		(749)		October	0%
CardWorks	Orlando, FL	Office	14,250		763		1,019		October	100%
Dow	Lake Jackson, TX	Office	191,992		3,544		12,858		November	100%
TI Automotive	Lavonia, GA	Industrial	13,000		789		870		November	100%
Versum	Tempe, AZ	Office	22,000		593		1,347		December	100%
Kohl's (3)	Pataskala, OH	Industrial	10,645		956		444		December	100%
MAHLE Industries	Olive Branch, MS	Industrial	15,000		650		914		December	100%
			$	292,271	$	4,135	$	16,425

1.Generally, quarterly period prior to sale annualized, excluding impairment charges.

2.Sold in a foreclosure sale. Disposition price reflects non-recourse debt balance.

3.Property acquired from ETNA Park 70 in 2018 for a cost basis of $3.6 million and ground leased to user. Tenant exercised purchase option in accordance with the lease.

Including fourth quarter disposition activity, consolidated 2020 property disposition volume totaled $432.8 million at aggregate weighted-average GAAP and Cash capitalization rates of 5.8% and 5.0%, respectively.

LEASING

During the fourth quarter of 2020, Lexington executed the following extensions:

	LEASE EXTENSIONS
	Location		Primary Tenant(1)	Prior Term	Lease Expiration Date	Sq. Ft.
	Industrial
1	Laurens	SC	Michelin	05/2021	11/2021	1,164,000
2	Dry Ridge	KY	Dana	06/2025	06/2031	336,350
2	Total industrial lease extensions					1,500,350
	Office / Multi-tenant Office
1	Phoenix	AZ	ATOS IT Solutions	03/2021	03/2026	28,576
2	Herndon	VA	United States of America	05/2022	05/2027	159,644
2	Total office lease extensions					188,220
4	TOTAL EXTENDED LEASES					1,688,570

1. Leases greater than 10,000 square feet.

As of December 31, 2020, Lexington's portfolio was 98.3% leased.

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BALANCE SHEET/CAPITAL MARKETS

In the fourth quarter of 2020, Lexington satisfied an aggregate of $197.1 million of non-recourse debt with a weighted-average interest rate of 4.3%.

In the fourth quarter of 2020, Lexington entered into forward sales contracts for 1.1 million common shares under its At-the-Market offering program. As of December 31, 2020, the Company had forward sales contracts for 5.0 million common shares with a then settlement price of $55.1 million.

Lexington ended 2020 at 4.8x Net Debt to Adjusted EBITDA. Lexington's $600.0 million unsecured revolving credit facility remains fully available.

2021 EARNINGS GUIDANCE

Lexington estimates that its net income attributable to common shareholders per diluted common share for the year ended December 31, 2021 will be within a range of $0.58 to $0.62. Lexington estimates that its Adjusted Company FFO for the year ended December 31, 2021 will be within an expected range of $0.72 to $0.76 per diluted common share. This guidance is forward looking, excludes the impact of certain items and is based on current expectations.

FOURTH QUARTER 2020 CONFERENCE CALL

Lexington will host a conference call today February 18, 2021, at 8:30 a.m. Eastern Time, to discuss its results for the quarter ended December 31, 2020. Interested parties may participate in this conference call by dialing 1-844-825-9783 (U.S.), 1-412-317-5163 (International) or 1-855-669-9657 (Canada). A replay of the call will be available through May 18, 2021, at 1-877-344-7529 (U.S.), 1-412-317-0088 (International) or 1-855-669-9658 (Canada); pin code for all replay numbers is 10151943. A link to a live webcast of the conference call is available at www.lxp.com within the Investors section.

Lexington Realty Trust (NYSE: LXP) is a publicly traded real estate investment trust (REIT) focused on single-tenant industrial real estate investments across the United States. Lexington seeks to expand its industrial portfolio through acquisitions, build-to-suit transactions, sale-leaseback transactions, development projects and other transactions. For more information, including Lexington's Quarterly Supplemental Information package, or to follow Lexington on social media, visit www.lxp.com.

Contact:

Investor or Media Inquiries for Lexington Realty Trust:

Heather Gentry, Senior Vice President of Investor Relations

Lexington Realty Trust

Phone: (212) 692-7200 E-mail: hgentry@lxp.com

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 estimates of net income attributable to common shareholders and Adjusted Company FFO for the year ending December 31, 2021, (3) the successful consummation of any lease, acquisition, build-to-suit, development project, disposition, financing or other transaction, (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 any legislation, (6) competition, (7) increases in real estate construction costs, (8) changes in interest rates, (9) changes in accessibility of debt and equity capital markets, and (10) future impairment charges. Copies of the

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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”, “may,” “plans,” “predicts,” “will,” “will likely result,” “is optimistic,” “goal,” “objective” or similar expressions. Except as required by law, 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, and all property operating activities are conducted, through special purpose entities, which are separate and distinct legal entities that maintain separate books and records, but in some instances are consolidated for financial statement purposes and/or disregarded for income tax purposes. The assets and credit of each special purpose entity with a property subject to a mortgage loan are not available to creditors to satisfy the debt and other obligations of any other person, including any other special purpose entity or 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 of managing member of such property owner subsidiary), but merely hold partnership, membership or beneficial interests therein which interests are subordinate to the claims of the property owner subsidiary's (or its general partner's, member's or managing member's) creditors.

Non-GAAP Financial Measures - Definitions

Lexington has used non-GAAP financial measures as defined by the Securities and Exchange Commission Regulation G in this Quarterly Earnings Release and in other public disclosures.

Lexington believes that the measures defined below are helpful to investors in measuring our performance or that of an individual investment. Since these measures exclude certain items which are included in their respective most comparable measures under generally accepted accounting principles (“GAAP”), reliance on the measures has limitations; management compensates for these limitations by using the measures simply as supplemental measures that are weighed in balance with other GAAP measures. These measures are not necessarily indications of our cash flow available to fund cash needs. Additionally, they should not be used as an alternative to the respective most comparable GAAP measures when evaluating Lexington's financial performance or cash flow from operating, investing or financing activities or liquidity.

Company Funds Available for Distribution (“FAD”): FAD is calculated by making adjustments to Adjusted Company FFO (see below) for (1) straight-line adjustments, (2) lease incentive amortization, (3) amortization of above/below market leases, (4) lease termination payments, net, (5) non-cash interest, net, (6) non-cash charges, net, (7) cash paid for tenant improvements, and (8) cash paid for lease costs. Although FAD may not be comparable to that of other real estate investment trusts (“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.

Funds from Operations (“FFO”) and Adjusted Company FFO: Lexington believes 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. 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 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 (calculated in accordance with GAAP), excluding depreciation and amortization related to real estate, gains and losses from the sales of certain real estate assets, gains and losses from change in control and impairment write-downs of certain real estate assets and investments in entities when the impairment is directly attributable to decreases in value of depreciable real estate 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.

Lexington presents FFO available to common shareholders and unitholders - basic and also presents FFO available to all equityholders and unitholders - diluted on a company-wide basis as if all securities that are convertible, at the holder's option, into Lexington’s common shares, are converted at the beginning of the period. Lexington also presents Adjusted Company FFO available to all equityholders and unitholders - diluted which adjusts FFO available to all equityholders and unitholders - diluted for certain items which we believe are not indicative of the operating results of Lexington's real estate portfolio. Lexington believes this is an appropriate presentation as it is frequently requested by security analysts, investors and other interested parties. Since others do not calculate these measures in a similar fashion, these measures may not be comparable to similarly titled measures as reported by others. These measures should not be considered as an alternative to net income as an indicator of Lexington’s operating performance or as an alternative to cash flow as a measure of liquidity.

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GAAP and Cash Yield or Capitalization Rate: GAAP and cash yields or capitalization rates are measures of operating performance used to evaluate the individual performance of an investment. These measures are estimates and are not presented or intended to be viewed as a liquidity or performance measure that present a numerical measure of Lexington's historical or future financial performance, financial position or cash flows. The yield or capitalization rate is calculated by dividing the annualized NOI (as defined below, except GAAP rent adjustments are added back to rental income to calculate GAAP yield or capitalization rate) the investment is expected to generate (or has generated) divided by the acquisition/completion cost (or sale) price.

Net Operating Income (“NOI”): NOI is a measure of operating performance used to evaluate the individual performance of an investment. This measure is not presented or intended to be viewed as a liquidity or performance measure that presents a numerical measure of Lexington's historical or future financial performance, financial position or cash flows. Lexington defines NOI as operating revenues (rental income (less GAAP rent adjustments and lease termination income), and other property income) less property operating expenses. Other REITs may use different methodologies for calculating NOI, and accordingly, Lexington's NOI may not be comparable to other companies. Because NOI excludes general and administrative expenses, interest expense, depreciation and amortization, acquisition-related expenses, other nonproperty income and losses, and gains and losses from property dispositions, it provides a performance measure that, when compared year over year, reflects the revenues and expenses directly associated with owning and operating commercial real estate and the impact to operations from trends in occupancy rates, rental rates, and operating costs, providing a perspective on operations not immediately apparent from net income. Lexington believes that net income is the most directly comparable GAAP measure to NOI.

# # #

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LEXINGTON REALTY TRUST AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited and in thousands, except share and per share data)

	Three months ended December 31,						Twelve months ended December 31,
	2020			2019			2020			2019
Gross revenues:
Rental revenue	$	82,390		$	81,564		$	325,811		$	320,622
Other revenue		925			1,472			4,637			5,347
Total gross revenues		83,315			83,036			330,448			325,969
Expense applicable to revenues:
Depreciation and amortization		(40,723	)		(35,977	)		(161,592	)		(147,594	)
Property operating		(10,019	)		(11,052	)		(41,914	)		(42,018	)
General and administrative		(7,759	)		(7,133	)		(30,371	)		(30,785	)
Non-operating income		429			335			743			2,262
Interest and amortization expense		(12,591	)		(14,380	)		(55,201	)		(65,095	)
Debt satisfaction gains (charges), net		2,502			10			21,452			(4,517	)
Impairment charges		(6,668	)		(2,974	)		(14,460	)		(5,329	)
Gains on sales of properties		97,163			74,227			139,039			250,889
Income before provision for income taxes and  equity in earnings (losses) of non-consolidated entities		105,649			86,092			188,144			283,782
Provision for income taxes		(223	)		(271	)		(1,584	)		(1,379	)
Equity in earnings (losses) of non-consolidated entities		(204	)		(398	)		(169	)		2,890
Net income		105,222			85,423			186,391			285,293
Less net income attributable to noncontrolling interests		(844	)		(192	)		(3,089	)		(5,383	)
Net income attributable to Lexington Realty Trust shareholders		104,378			85,231			183,302			279,910
Dividends attributable to preferred shares – Series C		(1,572	)		(1,572	)		(6,290	)		(6,290	)
Allocation to participating securities		(94	)		(85	)		(224	)		(395	)
Net income attributable to common shareholders	$	102,712		$	83,574		$	176,788		$	273,225
Net income attributable to common shareholders – per common share basic	$	0.37		$	0.34		$	0.66		$	1.15
Weighted-average common shares outstanding – basic		274,965,603			248,943,975			266,914,843			237,642,048
Net income attributable to common shareholders – per common share diluted	$	0.37		$	0.33		$	0.66		$	1.15
Weighted-average common shares outstanding – diluted		284,076,532			252,939,590			268,182,552			237,934,515

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LEXINGTON REALTY TRUST AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

As of December 31,

(In thousands, except share and per share data)

	2020		2019
Assets:	(unaudited)
Real estate, at cost	$	3,514,564	$	3,320,574
Real estate - intangible assets	409,293		409,756
Investments in real estate under construction	75,906		13,313
Real estate, gross	3,999,763		3,743,643
Less: accumulated depreciation and amortization	884,465		887,629
Real estate, net	3,115,298		2,856,014
Assets held for sale	16,530		—
Right-of-use assets, net	31,423		38,133
Cash and cash equivalents	178,795		122,666
Restricted cash	626		6,644
Investments in non-consolidated entities	56,464		57,168
Deferred expenses, net	15,901		18,404
Rent receivable - current	2,899		3,229
Rent receivable - deferred	66,959		66,294
Other assets	8,331		11,708
Total assets	$	3,493,226	$	3,180,260
Liabilities and Equity:
Liabilities:
Mortgages and notes payable, net	$	136,529	$	390,272
Term loan payable, net	297,943		297,439
Senior notes payable, net	779,275		496,870
Trust preferred securities, net	127,495		127,396
Dividends payable	35,401		32,432
Liabilities held for sale	790		—
Operating lease liabilities	32,515		39,442
Accounts payable and other liabilities	55,208		29,925
Accrued interest payable	6,334		7,897
Deferred revenue - including below market leases, net	17,264		20,350
Prepaid rent	13,335		13,518
Total liabilities	1,502,089		1,455,541
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
Common shares, par value $0.0001 per share; authorized 400,000,000 shares, 277,152,450 and 254,770,719  shares issued and outstanding in 2020 and 2019, respectively	28		25
Additional paid-in-capital	3,196,315		2,976,670
Accumulated distributions in excess of net income	(1,301,726)		(1,363,676)
Accumulated other comprehensive loss	(17,963)		(1,928)
Total shareholders’ equity	1,970,670		1,705,107
Noncontrolling interests	20,467		19,612
Total equity	1,991,137		1,724,719
Total liabilities and equity	$	3,493,226	$	3,180,260

Page 10 of 12

LEXINGTON REALTY TRUST AND SUBSIDIARIES

EARNINGS PER SHARE

(Unaudited and in thousands, except share and per share data)

	Three Months Ended December 31,					Twelve Months Ended December 31,
	2020		2019			2020		2019
EARNINGS PER SHARE:
Basic:
Net income attributable to common shareholders	$	102,712	$	83,574		$	176,788	$	273,225
Weighted-average common shares outstanding - basic		274,965,603		248,943,975			266,914,843		237,642,048
Net income attributable to common shareholders - per common share basic	$	0.37	$	0.34		$	0.66	$	1.15
Diluted:
Net income attributable to common shareholders - basic	$	102,712	$	83,574		$	176,788	$	273,225
Impact of assumed conversions		2,218		(34	)		—		—
Net income attributable to common shareholders	$	104,930	$	83,540		$	176,788	$	273,225
Weighted-average common shares outstanding - basic		274,965,603		248,943,975			266,914,843		237,642,048
Effect of dilutive securities:
Unvested share-based payment awards and options		1,367,634		639,178			1,267,709		292,467
Operating Partnership Units		3,032,725		3,356,437			—		—
Preferred shares - Series C		4,710,570		—			—		—
Weighted-average common shares outstanding - diluted		284,076,532		252,939,590			268,182,552		237,934,515
Net income attributable to common shareholders - per common share diluted	$	0.37	$	0.33		$	0.66	$	1.15

Page 11 of 12

LEXINGTON REALTY TRUST AND SUBSIDIARIES

ADJUSTED COMPANY FUNDS FROM OPERATIONS & FUNDS AVAILABLE FOR DISTRIBUTION

(Unaudited and in thousands, except share and per share data)

	Three Months Ended December 31,						Twelve Months Ended December 31,
	2020			2019			2020			2019
FUNDS FROM OPERATIONS:
Basic and Diluted:
Net income attributable to common shareholders	$	102,712		$	83,574		$	176,788		$	273,225
Adjustments:
Depreciation and amortization		40,050			35,323			158,655			144,792
Impairment charges - real estate		6,668			2,974			14,460			5,329
Noncontrolling interests - OP units		645			(34	)		2,347			4,376
Amortization of leasing commissions		673			654			2,937			2,802
Joint venture and noncontrolling interest adjustment		2,115			2,249			8,578			9,449
Gains on sales of properties, including non-consolidated entities and net of tax		(97,163	)		(74,211	)		(139,596	)		(255,048	)
FFO available to common shareholders and unitholders - basic		55,700			50,529			224,169			184,925
Preferred dividends		1,572			1,572			6,290			6,290
Amount allocated to participating securities		94			85			224			395
FFO available to all equityholders and unitholders - diluted		57,366			52,186			230,683			191,610
Debt satisfaction (gains) charges, net, including non-consolidated entities		(2,502	)		(9	)		(21,396	)		4,773
Transaction costs		174			202			255			202
Adjusted Company FFO available to all equityholders and unitholders - diluted		55,038			52,379			209,542			196,585
FUNDS AVAILABLE FOR DISTRIBUTION:
Adjustments:
Straight-line adjustments		(3,430	)		(3,656	)		(13,654	)		(14,502	)
Lease incentives		189			293			921			1,191
Amortization of above/below market leases		(470	)		(269	)		(1,580	)		(443	)
Lease termination payments, net		(70	)		25			—			(1,095	)
Non-cash interest, net		195			563			1,276			2,709
Non-cash charges, net		1,690			1,577			6,674			6,410
Tenant improvements		(291	)		(2,885	)		(9,744	)		(7,817	)
Lease costs		(50	)		(3,743	)		(5,019	)		(14,367	)
Joint venture and non-controlling interest adjustment		11			(63	)		(319	)		(3,794	)
Company Funds Available for Distribution	$	52,812		$	44,221		$	188,097		$	164,877
Per Common Share and Unit Amounts
Basic:
FFO	$	0.20		$	0.20		$	0.83		$	0.77
Diluted:
FFO	$	0.20		$	0.20		$	0.84		$	0.78
Adjusted Company FFO	$	0.19		$	0.20		$	0.76		$	0.80
Weighted-Average Common Shares
Basic:
Weighted-average common shares outstanding - basic EPS		274,965,603			248,943,975			266,914,843			237,642,048
Operating partnership units(1)		3,032,725			3,356,437			3,083,320			3,490,147
Weighted-average common shares outstanding - basic FFO		277,998,328			252,300,412			269,998,163			241,132,195
Diluted:
Weighted-average common shares outstanding - diluted EPS		284,076,532			252,939,590			268,182,552			237,934,515
Unvested share-based payment awards		9,384			36,516			17,180			22,813
Operating partnership units(1)		—			—			3,083,320			3,490,147
Preferred shares - Series C		—			4,710,570			4,710,570			4,710,570
Weighted-average common shares outstanding - diluted FFO		284,085,916			257,686,676			275,993,622			246,158,045

(1)       Includes OP units other than OP units held by Lexington.

Page 12 of 12

LEXINGTON REALTY TRUST AND SUBSIDIARIES
RECONCILIATION OF NON-GAAP MEASURES
(UNAUDITED)
2021 EARNINGS GUIDANCE
	Twelve Months Ended December 31, 2021
	Range
Estimated:
Net income attributable to common shareholders per diluted common share(1)	$	0.58	$	0.62
Depreciation and amortization	0.60		0.60
Impact of capital transactions	(0.46)		(0.46)
Estimated Adjusted Company FFO per diluted common share	$	0.72	$	0.76

(1)       Assumes all convertible securities are dilutive.

EX-99.2

Exhibit 99.2

Lexington Realty Trust – UNEDITED TRANSCRIPT

Q4 2020 Earnings Call

Company Participants:

T. Wilson Eglin, Chairman and Chief Executive Officer

Beth Boulerice, Executive Vice President, Chief Financial Officer and Treasurer

Brendan Mullinix, Executive Vice President and Chief Investment Officer

Lara Johnson, Executive Vice President

James Dudley, Executive Vice President and Director of Asset Management

Heather Gentry, Senior Vice President of Investor Relations

Operator:

Good day, and welcome to the Lexington Realty Trust Fourth Quarter 2020 Conference Call and Webcast. (Operator Instructions) Please note, this event is being recorded. I would now like to turn the call over to Heather Gentry of Investor Relations. Please go ahead.

Heather Gentry:

Thank you, operator. Welcome to Lexington Realty Trust’s Fourth Quarter 2020 conference call and webcast. The earnings release was distributed this morning, and both the release and quarterly supplemental are available on our website at www.lxp.com in the Investors section and will be furnished to the SEC on a Form 8-K.

Certain statements made during this conference call regarding future events and expected results may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Lexington believes that these statements are based on reasonable assumptions; however, certain factors and risks, including those included in today’s earnings press release and those described in reports that Lexington files with the SEC from time to time could cause Lexington’s actual results to differ materially from those expressed or implied by such statements. Except as required by law, Lexington does not undertake a duty to update any forward-looking statements.

In the earnings press release and quarterly supplemental disclosure package, Lexington has reconciled all non-GAAP financial measures to the most directly comparable GAAP measure. Any references in these documents to Adjusted Company FFO refer to Adjusted Company Funds from Operations available to all equityholders and unitholders on a fully diluted basis. Operating performance measures of an individual investment are not intended to be viewed as presenting a numerical measure of Lexington's historical or future financial performance, financial position or cash flows.

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On today’s call, Will Eglin, Chairman and CEO, Beth Boulerice, CFO, and Brendan Mullinix, CIO will provide a recent business update and commentary on fourth quarter results. Executive Vice Presidents Lara Johnson, and James Dudley will be available during the question and answer portion of our call. I will now turn the call over to Will.

T. Wilson Eglin:

Thanks, Heather. Good morning everyone. 2020 was an outstanding year for Lexington, and our fourth quarter results were excellent across all our business lines. In the fourth quarter, we generated Adjusted Company Funds from Operations of $0.19 per diluted common share to end the year at $0.76 per diluted common share, the high-end of our guidance range. Following a robust quarter of $182 million dollars of industrial purchases and $292 million dollars of sales, our industrial exposure increased to 91% of our gross real estate assets, excluding held-for-sale assets.

Portfolio operations have been very strong during the pandemic, with fourth quarter Cash Base rent collections averaging 99.8%. Also, during the quarter, leasing volume was healthy at 1.7 million square feet, consolidated same-store NOI was up 1.6%, and industrial cash renewal rents increased 3.4%, with overall fourth quarter cash renewal rents down roughly 2.5% due to office lease renewal rolldowns. We recently announced a dividend increase of 2.4%, supported by our positive results throughout the year, which equates to an annualized dividend of $0.43 per common share. Our plan is to continue growing our dividend annually.

Our company has evolved considerably over the last five years and we have mostly transitioned out of the office sector into the industrial sector, an asset class that we believe continues to have strong fundamentals and an expanding opportunity set. Along the way, we disposed of 127 consolidated non-industrial assets for two and a half billion dollars and purchased 60 industrial assets for approximately the same amount. Throughout this transition, our investment strategy has targeted purchases, build-to-suits, and select development opportunities in primarily warehouse and distribution assets in markets across the Sunbelt and lower Midwest.

We had an active year on the investments side, purchasing $612 million dollars of primarily Class A industrial assets and investing $60 million dollars into development projects. As we near completion of our portfolio transition, we will continue to focus on acquiring and developing primarily single-tenant, Class A warehouse and distribution properties in our target markets. While we expect to be active in the purchase market, we intend to allocate more capital to development opportunities in 2021 relative to 2020. In our view, this is the best way to achieve higher returns without compromising on quality when it comes to building characteristics, markets, and locations.

Just to highlight a couple of recent successes on the development side, during the 4th quarter, we had “value creation events” in our first two development projects located in the Columbus, Ohio market. These included selling a land position in one of our Etna parcels to Kohl’s Department Stores and executing a full building lease on our Rickenbacker project. These are two great outcomes for us, and we’re excited about the opportunities in our development pipeline going forward, which Brendan will discuss in more detail later in the call.

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Moving to sales, 2020 volume included $433 million dollars of predominately non-core assets at average GAAP and cash cap rates of 5.8% and 5.0%, respectively, an excellent result that was consistent with our prior disposition plan forecast. We were particularly pleased with the sale outcome of our Dow Chemical office building in the fourth quarter, as we retired a substantial amount of secured debt and deleveraged the balance sheet. Additionally, we sold two office properties in January for approximately $20 million dollars. While the office sales market continues to be impacted by the pandemic, we remain committed to selling our remaining office properties in an orderly manner and will continue to give regular updates on our progress and the forecasted sales results. The remaining office and other asset portfolio consists of 18 properties, which generated 2020 NOI of approximately $33.5 million dollars. We expect to market for sale most of this portfolio in 2021, which we currently value at around $300 million dollars.

Turning to leasing, we leased over 5.2 million feet square feet during 2020, and at year-end, our portfolio was 98.3% leased, representing a slight decline compared to the previous quarter primarily as a result of a year-end lease expiration in our Statesville, North Carolina industrial facility. We were very pleased with industrial Cash Base renewal rents in 2020, which increased 17.5%. At year-end, we had 3.7 million square feet of space expiring in our single-tenant industrial portfolio in 2021, of which we expect at least a third to be renewed, with expiring rents below market on average. Of the remaining leases, the two most significant expirations are our Olive Branch, Mississippi facility occupied by Hamilton Beach through June 2021 and our Laurens, South Carolina facility occupied by Michelin through November 2021. The Laurens location has multiple prospects interested in the property for either lease or sale, including the potential for a further extension with Michelin. Additionally, the Olive Branch location is experiencing significant leasing interest from full building users, which could result in minimal downtime.

Our balance sheet remains in excellent shape with leverage at 4.8 times Net Debt to Adjusted EBITDA at year-end. Our strong cash position, forward ATM contracts, retained cash flow, and proceeds from dispositions provide us considerable capacity to fund future growth initiatives.

In 2020 we began building out an ESG platform for our operations.  We understand the importance in doing so and have begun to establish a program that is appropriate for our portfolio given the limited control we have over many of our properties due to their net-lease, single-tenant nature. Our 10-K and website will contain a summary of our initiatives, goals, and performance, and we expect to report on ESG matters going forward as our platform evolves.

To conclude, we were very pleased with our fourth quarter and 2020 results. We have succeeded in monetizing much of our office portfolio, while constructing a high-quality industrial platform. Our focus remains on acquiring and developing well-located warehouse and distribution assets and disposing of our remaining non-core assets. While we will continue to experience some near-term dilution as we sell these assets, we believe that industrial property is demonstrably superior in terms of long-term cash flow growth.

With that, I’ll turn the call over to Brendan to discuss recent investments and our forward pipeline.

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Brendan Mullinix:

Thanks, Will. We had another active year on the investment front, acquiring 16 industrial properties totaling 6.6 million square feet for $612 million dollars at average GAAP and cash cap rates of 5.4% and 5.0%, respectively. These assets have an average age of two years and an attractive weighted-average lease term of 8.3 years, with average annual rental escalations of 2.3%. Our overall industrial portfolio continues to be shaped with a focus on building quality, age, and user versatility in targeted growing industrial logistics markets in the Sunbelt and lower Midwest.

Fourth quarter purchase activity was consistent with these attributes and markets and comprised of four warehouse/distribution properties, totaling 1.4 million square feet in two Dallas/Fort Worth logistics submarkets as well as submarkets in Phoenix and Greenville/Spartanburg. These properties all feature modern specs, good highway access, and ample trailer parking, with an average lease term of 9.4 years and annual rental escalations of 2% or higher. During the quarter, we also closed on and began funding a build-to-suit industrial project in Phoenix, which we expect to be completed in the third quarter of 2021.

Subsequent to year-end, we purchased three recently constructed, Class A warehouse/distribution facilities for approximately $51 million dollars totaling 520 thousand square feet, further adding to our holdings in the Indianapolis and Central Florida markets.

We are currently reviewing over $600 million dollars of existing deals in the market. Pricing continues to be very competitive, and as evidenced by our 2020 purchases, cap rates have compressed from a year ago. While the industrial market opportunity is vast, we are unlikely to compromise on asset quality in favor of current return. Our increased development focus with long-standing development partners will allow for potentially greater value creation compared to purchases and complement our existing industrial portfolio.

Will mentioned earlier that we had secured a full building lease at our 320,000 square foot Rickenbacker project in Columbus late in the fourth quarter with a subsidiary of PepsiCo, for 3 years. The base building was substantially completed this quarter. Our expected development cost basis in the fully completed project is estimated to be about $20 million dollars. We were pleased to have pre-leased the full building prior to completion at an attractive development yield, with anticipated stabilized GAAP and cash cap rates of 7.8% and 7.6%, respectively.

Also, in the fourth quarter, at our Etna West development site in Columbus, we sold the ground position under the 1.2 million square foot e-commerce distribution center leased to Kohl’s Department Stores, which exercised its two-year purchase option, for $10.6 million dollars. This transaction resulted in a gain on sale of $5.9 million.

Our Shugart Farms development project, a Class A, 910 thousand square foot distribution center in the I-85 South submarket of Atlanta, is slated for substantial completion around the end of the first quarter of 2021 and is currently available for lease. Market absorption in the Atlanta industrial market in 2020 exceeded total absorption in both 2018 and 2019 and remains a market with high user demand.

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Lastly, our future pipeline includes three development projects in which we are in late stage negotiations and due diligence. These projects are in Indianapolis, Central Florida, and Phoenix, target markets where we intend to continue building a larger presence.

With that, I’ll turn the call over to Beth to discuss financial results.

Beth Boulerice:

Thanks, Brendan. Adjusted Company FFO for the fourth quarter was approximately $55 million dollars, or $0.19 cents per diluted common share. We achieved the high-end range of our 2020 Adjusted Company FFO guidance at $0.76 cents per diluted common share. Our 2020 Adjusted Company FFO payout ratio was 55.6% and continues to provide us ample retained cash flow.

This morning, we announced 2021 Adjusted Company FFO guidance in the range of $0.72 cents to $0.76 cents per diluted common share. This range incorporates our commentary on dispositions, investments, and leasing we have made on this call.

We generated revenues of approximately $83.3 million dollars in the fourth quarter, which represented a slight increase compared to the same time period in 2019. Overall in 2020, gross revenues increased $4.5 million dollars year-over-year. This increase was primarily attributable to new acquisitions partially offset by sales.

Property operating expenses were relatively flat year-over-year, however, tenant reimbursements increased to 84% for 2020 compared to 72% for 2019. Our 2020 G&A of $30.4 million was in-line with our revised target range of $30 to $31 million dollars and we expect 2021 G&A to be within a range of $31 to 33 million dollars.

Same-store NOI increased 1.6% primarily as a result of a 2% increase in same-store industrial NOI. Year-over-year, our consolidated same-store leased portfolio decreased 140 basis points to 97.6% primarily due to the year-end lease expiration of our Statesville, North Carolina property. At year-end, approximately 86% of our industrial portfolio had escalations with an average rate of 2.1%.

Our 2020 rent collections were among the best in the REIT sector. We collected 99.8% of Cash Base rents throughout the year and as of the end of 2020, we had only granted two rent relief requests in our consolidated portfolio, which we have discussed on previous calls. Bad debt expense was minimal during the fourth quarter, with only $212 thousand dollars of bad debt expense incurred.

Capital markets activity during the quarter included the sale of an additional 1.1 million common shares under the forward delivery feature of our ATM program. These shares increased our forward sales contracts to 5.0 million common shares for the year with an aggregate settlement price of $55 million as of year-end 2020.

Our balance sheet remains exceptionally strong with leverage at a low 4.8 times net debt to adjusted EBITDA at year-end. We had substantial cash of $179 million dollars on the balance sheet at year-end and nothing outstanding on our unsecured revolving credit facility. In connection

5

with the sale of the Dow Chemical office building, we satisfied $178.7 million dollars of secured debt with an interest rate of 4.0%. This contributed to an increase to our Unencumbered NOI to over 89% at year-end.

At year-end, our consolidated debt outstanding was approximately $1.4 billion dollars with a weighted-average interest rate of approximately 3.3% and a weighted-average term of 6.9 years.

With that, I’ll turn the call back over to Will.

T. Wilson Eglin:

Thanks Beth. I will now turn the call over to the operator who will conduct the question and answer portion of this call.

Operator:

Thank you. We will now begin the question and answer session. (Operator Instructions)

Our first question comes from Anthony Paolone with JP Morgan.

Anthony Paolone:

First question is on the development activity that you expect for 2021. I think you had mentioned either in the release or in your comments about spending more on development versus acquisitions. Can you just maybe be a bit more specific on what you think the activity will amount to this year?

T. Wilson Eglin:

Sure, Tony. Brendan mentioned, there's a few projects that we're working on. And if those come to fruition, we could have roughly $200 million of funding for development activities in addition to whatever we're purchasing in the acquisition market.

Anthony Paolone:

Okay. And you'd mentioned, I think the yield on Columbus was up in the high sevens. What do you think the pipeline that you're teeing up now looks like?

T. Wilson Eglin:

Brendan, you want to share your thoughts on that?

Brendan P. Mullinix:

Yes, sure. The yields will vary depending on the project. But generally targeting development yields in the range of between 5.25% and 6%. And hopefully, there's some conservatism there. Our base underwriting includes 12 months of downtime, which can really enhance yields when you lease more quickly as we did in the Columbus development project, where we leased immediately.

Anthony Paolone:

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Okay. So I mean, if I step back, if you spend a couple of hundred million dollars on development, and it sounds like that might be a bit more than what you think you'll do on the acquisition side, but then you talked about these other assets that could be pretty high cap rate sales. I mean, how should we think about that as you look out over the next couple of years? Is that going to be a pressure point? Do you think there's enough on the development and acquisition side to offset sort of the remaining dilution to clean out the noncore stuff? Or what happens there?

T. Wilson Eglin:

Well, implied in our comments is that what's left to sell in the office and other asset portfolio is likely a low double-digit cap rate outcome. So we won't offset that entirely in a leverage-neutral context. But our leverage is low. We would be comfortable with it going up a little bit if there's good opportunity. In the acquisition market, from our perspective, we need to execute on the sale plan this year, but we're comfortable with a $500 million or $600 million investment plan. We can still keep our leverage sort of in the midpoint of what we've indicated as a comfortable range. So we do have a fair amount of balance sheet capacity to take advantage of opportunity, but it's, at the same time, it's a competitive marketplace. So, we want to be careful and pick our spots versus being predictive about acquisition volume.

Anthony Paolone:

Okay. And Brendan mentioned just the competitiveness in the market and cap rate compression. Is there any sort of premium to be gained going either shorter duration or anything like that at this point?

Brendan P. Mullinix:

Yes. I mean I would say that certainly, the most aggressive cap rates that you're seeing would be attributable to longer leases in the more primary markets, so a ten-year Amazon in a more primary market, for example. So being able to underwrite a range of lease durations, including some shorter lease durations is helpful to take advantage of the opportunity to get slightly more yield when you can appropriately underwrite the leasing outcomes.

Anthony Paolone:

Okay. And just one final detail item. I just want to make sure that I think the $50 million in forward equity, that's still out there that's not been brought in yet. Is that right?

Beth Boulerice:

Yes, that's right.

Operator:

Our next question comes from Sheila McGrath with Evercore.

Sheila McGrath:

On the Ohio Rickenbacker development, the yields are much higher than you're targeting on other projects. If you could just talk about what's driving that? Was that low land basis or doing better

7

on rent? And can you remind us if there -- I think there were other development opportunities at that site?

Brendan P. Mullinix:

It's Brendan again. Yes, there were a couple of aspects to the Rickenbacker leasing outcome. One is we did have an attractive basis in that property, for sure. And in addition, we were able to lease the property prior to completion or just around substantial completion. So we were able to take out a year of carry, which is built into our other forward underwriting. So there's a good yield benefit there.

In addition, and in this project, the PepsiCo lease is actually a little bit shorter. It's a three-year lease, but that was offset by having -- we had PepsiCo fund the bulk of the tenant improvement build-out, which also really enhanced our yields there. We have that Rickenbaker project was a single building project. We additionally have two land parcels across from each other in Etna and those are multi-building sites that we've been building out infrastructure at for the last couple of years.

That project at the outset, was set up to focus primarily on build-to-suit opportunities. As the market over the, particularly the last couple of years, has shifted away from build-to-suit and has really been dominated by spec development and when you're talking about generic bulk distribution product, we're evaluating potentially moving forward with the spec project on either our East or West sites there In Etna. We have already developed a pad on the West site for an 800,000 square foot building.

Sheila McGrath:

Okay. Great. And then I think either Will's remarks or yours, Brendan, I'm not sure who mentioned that you have a stable of development partners. Can you just explain to us how deals are structured with these development partners? Do they get a fee or just explain to us how it works?

Brendan P. Mullinix:

Yes. Well, first addressing the stable. We -- as you're aware, Lexington has been very active over its history in build-to-suit and frequently partner with merchant builders on build-to-suit investments. And as far as our purchase market activity of existing facilities, that's really, again, dominated. The sellers are very much to those part of merchant builder sellers. So we have a lot of great relationships with merchant builders all over the country, and many of them are very long- term relationships. And that's been the focus of looking at the partnerships moving forward to develop these speculative projects.

For competitive reasons, I'm not going to get into a lot of detail about the way that these branches are structured. But they are typically anywhere between -- they're typically around a 90/10 joint venture split between capital partners and operating partners. There's typically a base development fee that's around 4%. And then there's a promote structure based on success. And that's where I won't be too specific.

But these are structures that are very common in the merchant building world and it allows Lexington to get a little closer to the development yields or a lot closer, I should say, than what we're buying in the purchase market.

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Sheila McGrath:

Okay. And last question for me. Just on the part of the appeal, I think, going forward is lowering your capital expenditure outlook by shifting to industrial. If you could just give us some insight on how much capital expenditures you're budgeting this year and either how that compared to the recent past or going forward, how much you expect that to ramp lower?

Beth Boulerice:

Hi, Sheila, it's Beth. It's a function, of course, of the potential leasing outcomes for the year and the timing of the TI work that's being done, of course. We are going to be coming down as we transition away from the office product into the industrial product. So now, at the beginning of the year, I would say it's somewhere between $15 million and $25 million for 2021. We'll have a better handle on the exact amount as we go through the year. And in general, on the capex, we look at $0.10 to $0.11 per square foot on average. But if you look back in our history, you'll see that we were spending $50 million a year on TI's and capex and LC's. So we're looking forward to a new era of lower capex.

Operator:

Our next question comes from Craig Mailman with KeyBanc Capital Markets.

Craig Mailman:

Will, just on the 2021 expirations, the bigger ones in Mississippi and South Carolina, I mean, what are the potential mark- to-markets there?

T. Wilson Eglin:

James, why don't you jump in and give your perspective?

James Dudley:

Sure. So on the -- we're in a pretty competitive situation right now on the one in Memphis. I don't want to get into too much detail as to where we're at. But there should not be a negative mark-to-market there. Our expectation is depending on the outcome, that those should go up. And then the Lawrence facility is also kind of dependent on the outcome as well. We've got a couple of different opportunities there that we're pursuing, including a potential renewal with the incumbent tenant. If it's a renewal, it should be flat to a little bit of an increase. If it ends up being multi-tenant, it could be flat to a minor decrease. And if we replace them with a large single tenant, then it probably is a slight decrease to what they're currently paying.

Craig Mailman:

All right. That's helpful. And then maybe for Brendan, I mean, you're throwing out there 5.25% to 6% development yields. You guys are -- there could be upside depending on downtime and other things in your underwriting. But as you guys are expanding in markets that are seeing more construction overall. I mean, is that an appropriate risk-adjusted return when you guys are trading, your equity is slightly above the 6% cap, at least on my numbers. Is that -- do you feel like you're getting paid for any of that risk?

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T. Wilson Eglin:

We do, Craig. As an alternative to being in the purchase market, it's, in our mind, a much better capital allocation. So, we're allocating more capital to development than we did last year. But we're being very patient as we accumulate success in that space. Our first two projects worked out very well. We're very optimistic about the Atlanta project, and then there's a few more. Whether we commit more capital to development beyond that pipeline remains to be seen. But to us, it's an important part of our business. It's an opportunity to enhance our returns without chasing either weaker credits or older real estate with obsolescence risk.

Craig Mailman:

And then just maybe like a bigger picture question, maybe -- dovetails to my last one, but as I look at what you guys have done on the execution side, it's kind of -- you guys have hit what you said you were going to do, right, bringing industrial to 91%. The stock has clearly benefited here. And when I look at valuation, right, you guys, at least from a multiple perspective are in the ballpark of where kind of the more focused industrial guys are. But when you kind of take a step back, your AFFO growth, your same-store growth, kind of trades at a discount or it's not as a premium relative to peers.

So I'm just kind of curious, as you guys look forward, in order to continue to chip your equity cost down towards some of those peers, I mean, what are you guys planning, if anything, on the investment side to be able to boost that growth profile going forward to kind of justify continued multiple expansion to kind of better compete for capital with some of your peers?

T. Wilson Eglin:

Well, I think there's several things that we're focused on. We still view it as a priority to finish the transition to 100% industrial and trade out of what's left of the office portfolio. I think that's a key factor for us. We want to add selectively to our investment pipeline and the development because we think that there's a better chance for us to capture value there versus purchases in many cases. And then the other big thing is we have to prove the point about having the opportunity to mark our rents to market better than we have historically, and that will prove the shift in our underwriting over the last few years toward modern Class A warehouse and distribution properties in our target markets. We know we have to prove that. We've made good progress in terms of positioning the portfolio so that it has good organic growth as reflected by the amount of revenue that we have subject to lease escalations but we have to prove the point where our leasing spreads are positive when we come off lease. And I think we're very optimistic on how well we can do in 2021. We did very well last year. But we understand that given that a portion of our portfolio is older and is in manufacturing assets that some of our mark-to-market opportunities over the next few years won't be as robust as some of the peer companies.

Craig Mailman:

Right. And I guess going to your commentary about the rent spreads like the Hamilton Beach and Michelin, maybe you're going to get a slight uptick there, and that's 3% of your industrial rents in aggregate. I mean, is there any discussion about maybe going smaller from an asset perspective in terms of square footage or what have you going, mixing in a bucket of assets with much shorter lease duration than what you normally have, so that you guys can capture that rent upside with maybe a little bit of a less of a risk profile to having these million square foot plus binary outcomes

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in some instances and as a way to better compete with some of your peers and drive that internal growth higher?

T. Wilson Eglin:

Yes. Absolutely, Craig. We've been adding smaller facilities to the portfolio. And we would add assets with two or three tenants in them. So there is a multi-tenant opportunity in our target markets that we're aware of that could make sense for us. And we're not averse to buying buildings that aren't fully leased either. If there's an opportunity to capture greater yield from leasing and otherwise working an asset.

Operator:

Our next question comes from Jamie Feldman with Bank of America Merrill Lynch.

Jamie Feldman:

I was hoping to just get some more color around the guidance assumptions. So I apologize if I missed it. Did you say what your -- what acquisition and disposition volumes were included in your outlook?

T. Wilson Eglin:

We didn't. We try not to be predictive about acquisition volume. But I think on the disposition side, if you were modeling $200 million to $300 million of completed sales, that would be a number that we were comfortable with. And if we can execute on those sales, given the way our balance sheet is positioned, we certainly have the capacity to invest sort of $500 million to $600 million and still stay within a comfortable range from a leverage standpoint.

James Feldman:

Okay. And then the right way to think about the sales is, you said high single-digit -- or high -- sorry, low double-digit cap rates versus --

T. Wilson Eglin:

Yes, overall. The outcomes are lumpy, though, in that portfolio. So it won't be the same cap rate on everything, obviously.

James Feldman:

Okay. And then on the investment side, it sounds like kind of 6%-ish yields make sense?

T. Wilson Eglin:

That would be high on development initiatives that could be achievable. But in the purchase market, most of the things that we see that are of interest are more in the 4.5% to 5% percent area on a cash basis. And obviously, the GAAP cap rate would be higher.

James Feldman:

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How much higher?

T. Wilson Eglin:

It depends on term and escalations.

James Feldman:

So of the 5% to 6%, how much of that do you think could be development versus acquisitions?

T. Wilson Eglin:

Well, we could see, at the moment, committing as much as $200 million to development projects this year with the balance of activity in the purchase market.

James Feldman:

Okay. That's helpful. And then you had mentioned a third of the expirations you think will be renewals. And then you mentioned two big leases, but it looks like there's actually 43 expirations in 2021, if you add up the office and industrial. I mean how do we think about the rest of that group? Or are they so small that they're actually included in the one-third and the two you mentioned are two-thirds? I just want to make sure we kind of see the full picture here.

T. Wilson Eglin:

Okay. I think the majority of those are in Hawaii. Beth, do you want to take it, or I can?

Beth Boulerice:

Yes. I was just going to say the same. There's a small tenants in mainly our Hawaii property and then some smaller tenants in Antioch.

T. Wilson Eglin:

Right. So there are six primary industrial leases that are rolling in 2021. And then there's really only one of any size left on the office side. There are a couple of small ones, one retail tenant in the Philadelphia office building and then one small tenant in our Arlington office building. Or primarily it's six industrial leases.

James Feldman:

Okay. That's helpful. And then you had mentioned 2.4% distribution growth in 2020. It sounds like with the portfolio repositioning, maybe there's a little bit of a drag in 2021. How do you think about the potential for growth, especially given your comments before on capex, less capex, this year. Is 2.4% something that seems high or low when you think about kind of annual dividend growth going forward?

T. Wilson Eglin:

Yes. I mean, our thought is to increase the dividend $0.01 a year until taxable income gets to the point where it's pushing against that in favor of more growth. So we're very comfortable with

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continuing to grow the dividend at that rate for the foreseeable future. We think the dividend will be among the best covered in the space. And if you think about it, if the model is retaining $50 million or $60 million a year of free cash flow just from reinvesting that capital, that in and of itself drives dividend growth.

James Feldman:

Okay. That's helpful. And then finally, I guess, you mentioned Sunbelt lower Midwest states. I mean what's limiting you to that -- those regions? And as you think about those regions, are you seeing a pickup from re-shoring that seems to be a target area where maybe we'd see that?

T. Wilson Eglin:

Yes, I think generally speaking, we want to be more targeted in our market focus, so that we get more concentrated positions. We think that helps us both in terms of accessing and underwriting new investments and enhancing our opportunities in those places versus being much more broadly geographically diversified. And with respect to on-shoring, I'll see whether maybe Brendan or James, you have a perspective on that in terms of what you're seeing?

Brendan P. Mullinix:

This is Brendan, maybe I'll start. I mean I think one of the dynamics that has really been demonstrated across the market in 2020, and it was particularly seen in the fourth quarter is the dominance of bulk leasing. And there's -- clearly, much reported level of activity by Amazon and Amazon was a very significant piece of that. But if you look at the breakdown in tenancy in that bulk space, at the same time, it's really broadly distributed in a number of different other industries. And I think that, that really speaks to companies seeking to secure their supply chain resiliency.

On the on-shoring and near-shoring, that factor will lag, right, because that will require some more manufacturing to onshore into the U.S. So that has been less of a factor. But there are certainly arguments for that to happen. I think if you look at where you might expect that to happen in the U.S., I think that our geographies are very well suited for manufacturing in terms of affordable labor base, skilled labor base, whether that's in the Midwest or across the sunbelt, they're very favorable business climates. And so I think that in terms of our geographic focus, it's very well positioned to benefit from those increases in near-shoring onshore.

James, I don't know if you have anything to add to that?

James Dudley:

No, I think you covered it.

Operator:

Our next question comes from John Massocca Ladenburg Thalmann.

John Massocca:

So I know there's still some work to do on the office disposition side of things. But as we think longer-term about the next leg of the capital recycling strategy, is the view to sell assets out of the

13

heavy and light manufacturing bucket? And I guess if that's the case, how much premium is there to selling those assets with kind of sizable term left on the lease?

T. Wilson Eglin:

I think we would be opportunistic about harvesting value there. If we're shrinking that portfolio, I'm not saying that there wouldn't be some disposition activity. But those assets have long lease duration and they throw off a lot of free cash flow. And that's right, providing an opportunity for us to reinvest a lot of that cash flow to support our growth plan. So we're not interested in parting with them at anything that's not a very full valuation.

John Massocca:

But I guess, as you kind of talk about that being potentially the area where you have risk of a kind of mark-to-market down. And there is kind of this bid out there in the market for things that just kind of headlined industrial. I mean, is there any kind of incentives to kind of clear that out of the portfolio so that people have real confidence in kind of the run rate NOI in the portfolio today? Or is it -- we really want this cash flow to also kind of help support the dividend and other kind of positive things, leverage wise and stuff like that?

T. Wilson Eglin:

I think either way, it's fine for us. We understand that industrial as an asset class is extremely hot. And we're not averse to doing something more significant in that space if it's good for the company. So there's nothing imminent, but I do think the value there is probably underappreciated in the context of our current share price. Often, tenant retention is extremely high there for long periods of time. It's very difficult to move manufacturing facilities. And often, occupancy, as I said, is sticky for a long period of time and in a rent negotiation with a tenant that doesn't have great options; that's often a good outcome for landlords. So I don't want to sort of overemphasize the risk around leasing outcomes. It's been a very, very good business for us.

John Massocca:

Okay. And then maybe talking about the office itself. And understanding a lot of it kind of moves and interest rates have happened very recently. Have you seen any change in demand from potential office buyers, given some of the interest rate volatility? I mean is it boxing some people out of the market or maybe pulling them into the market as they get worried the window for attractive funding is potentially closing?

Lara Johnson:

This is Lara. I think the latter is certainly true. And when you have a high-quality tenancy, long duration lease and a fairly strong market. So the activity for assets with those characteristics has been intense and buyers seem as eager as ever to put capital out for assets like that. It continues to be kind of a tale of two worlds in that buyers continue to struggle to underwrite impending vacancy and rollover. So for assets that have that profile, the market is more challenging.

James Feldman:

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Okay. And then one last one. Maybe kind of repainting outlook for Statesville, sorry if I missed that earlier in the call. And then any changes in some of the other lease expirations that weren't talked about, some of the smaller ones like Kalamazoo and Millington, etc.?

James Dudley:

Sure. So on Statesville, we've had some activity, both from full building users and from multi-tenant prospects, but there's nothing imminent at this point. It's been off of expiration for less than two months. It's a functional building in Charlotte, and we expect to have a positive leasing outcome. It may just take a little bit of time.

So Kalamazoo, Dana is moving out. We're in the process of re-tenanting to get with the subtenants that they put in place. That's still kind of up in the air right now. We haven't solidified the terms on those yet because there's still quite a bit of term left with the Dana lease. Millington, we're right at the finish line to try to get a renewal done with them, which will be an increase in rent. Let's see. And then the other 2021 is a smaller building in Rockford, which is the suburb of Chicago. And it's too soon to tell there, but the tenant is fully utilizing the facility. And our expectation is they'll renew.

Operator:

[Operator Instructions.] Our next question comes from Todd Stender with Wells Fargo.

Todd Stender:

Just back to the PepsiCo lease at Rickenbacker project. Is there anything you can share about what they do with the facility, how they're utilizing it? Is it bottling or manufacturing? I know they put some TI dollars in, but just kind of maybe some color to hear why they only signed a three-year lease.

Brendan P. Mullinix:

It's a fairly generic distribution use for Gatorade. There's no specialized bottling or anything like that. I think that the shorter lease is just a -- I guess the strategy that PepsiCo is using across their markets where they're trying to match up lease expirations with other lease expirations they have in given markets, which gives them more flexibility.

From our perspective, in this case, we were comfortable mitigating that risk by having them fund the bulk of the TI package. And obviously, the development yields were very attractive as well.

Todd Stender:

That's helpful. And maybe just to stick with you. Just looking at the ten-year treasury yield moving higher as of late. Is that impacting -- or have you seen any impact on market pricing; both on acquisitions and also dispositions of office?

Brendan P. Mullinix:

So why don't I start with acquisitions and I think Lara sort of spoke to it on the disposition side a moment ago. But in terms of investments, typically, when you see moves in interest rates, rules on

15

the acquisition side, tend to lag, we haven't seen any noticeable change in cap rates yet corresponding to the moves in interest rates. I think that for those leverage buyers, they're -- I think they're also benefiting from some spread compression on the lending side, too, that's offsetting some of the base rate changes. That will remain to be seen how that may play out.

Todd Stender:

Got it. And then maybe for Beth. Just looking at -- from a modeling perspective, is it fair to assume that the forward equity contracts are settled in the back half of the year? You still have some disposition proceeds to redeploy, maybe just a timing comment on that.

T. Wilson Eglin:

Sure, Todd. Yes. We do have some cash now. So it will be later. We do have to settle the contracts between August and November. So it will be by then.

Operator:

[Operator instructions]. We will now pause the short moment to allow questioners to enter the queue.

There are no further questions at this time, this concludes our question-and-answer session. I would like to turn the conference back over to Mr. Eglin for any closing remarks.

T. Wilson Eglin:

We appreciate everyone joining us this morning. Please visit our website or contact Heather Gentry if you would like to receive our quarterly materials. In addition, you may contact me or the other members of senior management with any questions. Thank you and have a great day.

Operator:

The conference has now concluded.

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