Shares of Lexington Realty Trust (LXP - Snapshot Report) gained 1.03% since the company announced its decision to offer common shares on Oct 11. The company is issuing 10 million common shares at $11.17 each to enhance its liquidity.
Moreover, Lexington Realty decided to grant the underwriters a 30-day option to purchase up to an additional 1.5 million shares. The offering is expected to close on Oct 17, upon fulfillment of customary closing conditions.
Lexington Realty expects to garner gross proceeds of $111.7 million (before underwriting discounts and commissions and projected offering expenses) from this offering. This hybrid real estate investment trust (REIT) intends to utilize the net proceeds, in full, to repay debt outstanding on its unsecured revolving credit facility.
As a matter of fact, the company used a fraction of this unsecured revolving credit facility to finance the recent buyout of New York-based portfolio of three land parcels. Notably, on Oct 9, 2013, Lexington Realty acquired the three land parcels, spanning 0.6 acres, for $302 million. The portfolio is net leased to tenants under non-cancellable 99-year leases.
Wells Fargo Securities LLC – an operational arm of Wells Fargo & Company (WFC - Analyst Report) – and Barclays PLC (BCS - Analyst Report) are assisting Lexington Realty in this equity offering as underwriters. Though this public offering will result in share dilution for Lexington Realty, the payment of debt is encouraging as it will reduce interest expenses. Moreover, strategic acquisitions will help the company enhance its portfolio quality, which will consequently be accretive to its earnings going forward.
As of Jun 30, 2013, Lexington Realty’s cash and cash equivalents stood at $74.3 million. Moreover, the company, exercising an accordion feature, increased the availability of unsecured revolving credit facility from $300 million to $400 million. Notably, Lexington Realty had no outstanding amounts under the facility as of Jun 30, 2013.
Currently, Lexington Realty carries a Zacks Rank #3 (Hold). Parkway Properties Inc. (PKY - Snapshot Report) is one of the better performing REITs with a Zacks Rank #1 (Strong Buy).