Lexington Realty Trust (LXP - Snapshot Report), a real estate investment trust (REIT) that focuses on single-tenant real estate properties, has recently priced its equity offering of 10.0 million common shares at $9.45 each. The company had earlier announced its offer of 8.0 million shares, but was forced to increase the secondary offering due to strong investor demand. The company will also grant the underwriters an option to purchase an additional 1.5 million shares to cover any over-allotments.
BofA Merrill Lynch, the investment banking and wealth management division of Bank of America Corporation (BAC - Analyst Report); and Wells Fargo Securities, the investment banking division of Wells Fargo & Company (WFC - Analyst Report) are acting as joint book-running managers for the offering.
Lexington anticipates raising approximately $22.0 million of net proceeds from the offering. The company intends to utilize the proceeds primarily to repay its debt under its revolving credit facility. In addition, the company also anticipates utilizing the remainder of the proceeds to fund its development activity and for acquisition of properties.
Lexington owns and manages commercial properties that are net -leased to major corporations throughout the U.S. Under a net-lease agreement, most of the property operating expenses, such as insurance, real estate taxes, utilities, maintenance and repairs are generally paid by the tenants. Consequently, the company has a steady revenue stream with stable cash flows from the leased properties during the lease term.
In addition, Lexington provides investment advisory and asset management services to investors in the net lease area. The portfolio of the company is well-diversified by property type, geographic location, lease term and tenant industry concentration. Lexington leases its properties to small, medium, and large companies operating in over 20 industries, including energy, finance, insurance, technology, automotive, healthcare, telecommunications, retail, media, consumer products, aerospace and defense.
We presently have a ‘Neutral’ rating on Lexington, which currently has a Zacks #3 Rank that translates into a short-term ‘Hold’ rating, indicating that the stock is expected to perform in line with the overall U.S. equity market for the next 1–3 months.