Lexington Divests Asset

A joint venture subsidiary of Lexington Realty Trust (LXP - Snapshot Report), a real estate investment trust (REIT), recently announced the sale of an unleveraged multi-tenant building for $69.0 million.

The divested property is located at 1500 Hughes Way, Long Beach in California and bears a capitalization rate on disposition of around 6.8%. Lexington had a 55% stake in the property, which was 74% leased, while its joint venture partner held the remaining 45% stake.

The asset sale is part of the company’s long-term strategy to focus on improving the quality of its portfolio by divesting non-core assets and acquiring strategic assets. This portfolio management effort will free funds for effective acquisitions and rewarding shareholders.

Recently, another joint venture partner of Lexington acquired a 55,650 square feet in-patient rehabilitation hospital in Humble, Texas for $27.8 million. Further, one of the subsidiaries of Lexington also acquired a Texas-based 152 acres industrial property for $23.0 million.

New York City-based Lexington owns, invests and manages office, industrial and retail properties net-leased to major corporations throughout the United States and provides investment advisory and asset management services to investors in the net lease area.

Lexington reported first quarter 2012 adjusted funds from operations (FFO) of 24 cents, beating the Zacks Consensus Estimate by a penny. Fund from operations, a widely used metric to gauge the performance of REITs, is obtained after adding depreciation and other non-cash expenses to net income. The company raised its 2012 FFO guidance by 2 cents and now expects it in the range of 92 to 95 cents per share.

We currently have a Neutral recommendation on Lexington, which has a Zacks #3 Rank that translates into a short-term Hold rating. We also have a Neutral recommendation and a Zacks #3 Rank for Vornado Realty Trust (VNO - Analyst Report), one of the peers of Lexington.