LXP Industrial Trust (filing registrant: Lexington Realty Trust) — Q1 2011 Form 10-Q
Reporting period: Three months ended March 31, 2011; financial statements are unaudited. Unless otherwise noted, amounts below are in millions of dollars. The filing describes a diversified net-lease REIT with approximately 190 consolidated properties in 39 states, totaling 34.9 million square feet.
Key financial results and position
| Metric | Q1 2011 / March 31, 2011 | Comparable period / December 31, 2010 |
|---|---|---|
| Gross revenue | $83.3 | $82.2 in Q1 2010 |
| Rental revenue | $74.4 | $72.7 in Q1 2010 |
| Income from continuing operations | $8.6 | Loss of $3.3 in Q1 2010 |
| Net loss attributable to common shareholders | $23.6; basic loss per share $0.16 and diluted loss per share $0.21 | $33.0; loss per share $0.27 |
| Operating cash flow | $39.4 | $39.7 in Q1 2010 |
| Cash and cash equivalents | $76.9 | $52.6 at December 31, 2010 |
| Total assets | $3,222.6 | $3,335.0 at December 31, 2010 |
| Debt carrying amount | $1,707.9 | $1,775.0 at December 31, 2010 |
| Total equity | $1,318.3 | $1,356.1 at December 31, 2010 |
Net loss included $29.6 million of real-estate impairment charges in discontinued operations. Q1 discontinued operations totaled a $24.6 million loss, compared with a $26.1 million loss in Q1 2010. The filing does not provide a headline operating margin or FFO/AFFO measure in the supplied text.
Changes versus Q1 2010
- Gross revenue rose $1.1 million, mainly from $1.7 million higher rental revenue, partly offset by lower tenant reimbursements.
- Interest and amortization expense fell $3.2 million, which management attributed to deleveraging. General and administrative expense declined $0.5 million.
- Income from continuing operations improved to $8.6 million from a $3.3 million loss. The change included a $6.0 million gain in the value of the forward equity commitment, versus $2.1 million in Q1 2010, and a $1.5 million tax benefit.
- Net loss attributable to common shareholders narrowed by $9.4 million. The year-over-year comparison also reflects changes in discontinued-property impairments, sales gains, debt-satisfaction items, and noncontrolling interests.
- Operating cash flow was nearly unchanged. Investing cash flow swung to $53.7 million provided, from $41.2 million used, largely because property-sale proceeds increased to $74.5 million. Financing used $68.8 million, versus $17.3 million provided in Q1 2010.
Capital, liquidity, transactions and outlook
- The company sold six properties for an aggregate gross disposition price of approximately $108.9 million and retired $56.0 million of non-recourse balloon mortgages on five properties. It entered 14 new leases or extensions covering approximately 1.7 million square feet.
- In January, it refinanced its revolving facility with a $300 million secured facility maturing in January 2014, extendable at the company’s option to January 2015. At quarter-end, no amount was drawn; approximately $295.9 million was available after letters of credit. An additional $225 million accordion requires lender consent. The company reported compliance with facility covenants.
- Management cited $194.9 million of property-specific non-recourse mortgage debt due during the remainder of 2011 and 2012, and said cash, revolver availability and operating cash flow were expected to provide sufficient liquidity. Cash dividends to common and preferred holders were $23.1 million; the quarterly common dividend increased to $0.115 per share from $0.10.
- Management’s strategy emphasized balance-sheet strengthening, asset sales and redeployment into core single-tenant office and industrial properties. It said future earnings growth would depend substantially on acquisitions; without them, growth sources were limited to rent escalations, debt amortization and cost controls. No specific earnings or revenue guidance was provided.
- After quarter-end, the company reported a $22.0 million revolver borrowing, acquisition of a 514,000-square-foot Mississippi industrial facility for $27.5 million under a 15-year net lease, and other investments, commitments and property sales.
Risks, contingencies and unusual items
- Management identified economic conditions, competition, construction-cost increases, interest-rate changes, asset impairments and access to debt and equity markets as risks; it cautioned that actual results may differ materially from forward-looking statements.
- Q1 impairment charges were $29.6 million in discontinued operations. The company also recorded a $1.6 million impairment of a non-consolidated joint-venture investment.
- A New York claim dispute remained unresolved, with damages, if any, to be determined; the company stated it intended to appeal if damages were found. Separately, a Texas tenant-improvement dispute was settled after quarter-end for $6.875 million, paid by a subsidiary on May 5, 2011.
- The company had commitments to fund or acquire build-to-suit properties, including projects in Missouri, Mississippi and North Carolina. Certain financing and property valuations rely on estimates and assumptions; management noted that fair values may not be realized on sale.
- The filing reported no material change in previously disclosed risk factors, no material environmental matter known to the company, and effective disclosure controls as of quarter-end.
Important facts for investors to verify
- Confirm the issuer identity: this 10-Q names Lexington Realty Trust, while the request metadata names LXP Industrial Trust.
- Review the scale and prospects of the $29.6 million discontinued-operations impairment and its effect on reported losses; distinguish GAAP earnings from any FFO/AFFO measures reported elsewhere.
- Check the schedule, refinancing needs and collateral coverage for the $194.9 million of mortgage maturities cited for the remainder of 2011 and 2012, as well as subsequent revolver usage.
- Assess the sustainability of the common dividend against operating cash flow, debt service and property-sale proceeds.
- Track the outcome and financial effects of the remaining litigation, build-to-suit commitments, and the post-quarter $6.875 million settlement payment.