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$700M recap hastens Lexington Realty’s push into industrial sector

Lexington Realty Trust is accelerating its push towards industrial properties with a recapitalized a portion of its suburban office assets into a joint venture.

Lexington, a REIT with property throughout the country, announced on Tuesday that it disposed of 21 of its suburban office properties for $726 million to a joint venture with Davidson Kempner Capital Management.

The joint venture is 80 percent owned by DKCM and Lexington will retain the remaining 20 percent.

The properties are spread throughout the US with several properties in Texas and Colorado. The entire 3.8 million s/f portfolio is currently 98.6 percent leased with a weighted average lease age of 23 years old and a weighted average lease duration of 9.5 years, according to Lexington.

WILSON EGLIN

The REIT received approximately $565 million of net cash proceeds from the transaction, and is expecting another $38 million from a Virginia asset that is waiting for lender confirmation and $264 million held by a qualified section 1031 intermediary. The cash will be used to further push into the industrial market and repay debt, according to the company’s CEO.

“This transaction marks a major step forward as we execute on our strategy to efficiently recycle capital out of suburban office properties and concentrate our portfolio on single-tenant net-leased industrial properties,”

Lexington’s CEO T. Wilson Eglin said. “We intend to use transaction proceeds to continue to acquire high-quality industrial properties and repay our revolving credit facility and other debt, which we believe is the best path to create meaningful long-term shareholder value.”

Lexington said they’re aiming for an 85 percent industrial and 15 percent office revenue split by the end of 2019. In 2017, their portfolio contained 52 percent office properties and 44 percent industrial and as of June,

Lexington now boasts a 60 percent industrial and 35 percent office portfolio split.

Davidson Kempner Capital Management could not be reached for comment.

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