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Lexington Realty Issues Business Update Amid Coronavirus Crisis

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In response to the market volatility associated with the coronavirus pandemic, Lexington Realty Trust (LXP - Free Report) has issued a business update.

This REIT focused on single-tenant industrial real estate investments has informed about its March 2020 and April 2020 consolidated cash base rent collections as of Apr 13, 2020. It noted that all cash base rent required to be paid in March has been collected, while roughly 85% of the April cash base rent has been paid and collected. Around 6% of the April cash base rent is either due later this month or is paid semi-annually, and therefore is not due in April.

However, approximately 4% of April 2020 cash base rent is accounted for by tenants who have not yet paid their April cash base rent and have request relief from the company. The rest 5% non-collection is mainly due to logistical issues resulting from the New York and Dallas offices closure and the corresponding delay in forwarding mail.

The company has already received rent relief requests from certain tenants so far and expects to receive more such requests in the near term. Among such tenants there are those whose operations have been impacted and the company believes, will require some form of relief to continue. As of April 13, 2020, this represents roughly 1%, or about $3 million of the 2019 actual cash base rent. However, the company noted that large and/or creditworthy tenants have also made relief requests, which appeared to be opportunistic ones.

Apart from these, Lexington noted that since Jan 1, 2020, the company has acquired four warehouse/distribution properties for a total of $195 million. Also, it disposed two office properties for an aggregate amount of $30 million.

The coronavirus outbreak has affected supply chains across the globe. However, with Lexington’s focus on warehouse and distribution industrial properties, coupled with the diversity of its tenant base, both geographically and by industry exposure, the company remains well poised to beat the market blues.

Per a recent update issued by Prologis Inc. (PLD - Free Report) , logistic real estate is likely to benefit because following the coronavirus crisis, businesses will likely operate with increased level of inventories. Apart from the projected increase in inventory levels, demand is also likely to grow on fast adoption of e-commerce.

However, the overall impact from the coronavirus pandemic is yet to be seen and the adverse impact on the economy might lead to demand moderation for this real estate category in the near term. Nevertheless, with the e-commerce boom and supply-chain strategy, demand for industrial real estate is likely to remain healthy over the long term. This will help other industrial REITs like Prologis, Terreno Realty Corporation (TRNO - Free Report) and Duke Realty Corp. excel.

Currently, Lexington carries a Zacks Rank #2 (Buy). Shares of the company have gained 16.6% over the past year as against the industry’s decline of 5.8%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.



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