Lexington Realty Trust Reports Third Quarter 2007 Results

NEW YORK, Nov. 8 /PRNewswire-FirstCall/ -- Lexington Realty Trust ("Lexington") , a real estate investment trust (REIT) focused on single-tenant real estate investments, today announced results for the third quarter ended September 30, 2007. All per share amounts are on a diluted basis.

(Logo: http://www.newscom.com/cgi-bin/prnh/20070205/LAM022LOGO) Third Quarter 2007 Highlights -- Total rental revenues of $114.0 million -- Company Funds From Operations of $50.4 million or $0.46 per share(1) -- 39 new and renewal leases executed, totaling 946,000 square feet -- $119.5 million in real estate dispositions -- 513,000 shares/units repurchased at an average price of $20.00 per share/unit -- $0.375 common share/unit dividend/distribution declared (1) See the last page of this press release for a reconciliation of GAAP net income to Company FFO. COMMENTS FROM MANAGEMENT

T. Wilson Eglin, President and Chief Executive Officer of Lexington stated, "We are pleased to report exceptionally strong third quarter operating results fueled by investment and capital market activities during the first half of the year and strong leasing activity. During the quarter, Lexington sold 23 properties for $119.5 million realizing gains of $27.0 million. In connection with the sales, we incurred debt prepayment penalties of $3.6 million, which reduced our reported funds from operations by $0.03 per share." Mr. Eglin continued, "We expect to remain active on the sale front in the fourth quarter and believe that fourth quarter disposition activity will total between $171.5 million to $258.3 million. These sales, combined with prior disposition activity and the anticipated closing of our previously announced co-investment program are expected to generate taxable gain to the shareholders for 2007 of approximately $4.75 to $5.50 per share. Accordingly, we expect to pay a corresponding special distribution to our shareholders in early 2008."

Michael L. Ashner, Executive Chairman of Lexington added, "We are pleased with our efforts to date with regards to our strategic restructuring plan. The slower pace of sales, compared with our previous expectations, reflect our view that our sales either be accretive or consist of non-core assets. Our slowed pace of acquisitions during the second half of this year reflects our view that investment opportunities are more likely to improve than diminish in the near to mid-term."

FINANCIAL RESULTS Revenue

For the quarter ended September 30, 2007, rental revenues increased 168.3% to $114.0 million, compared with rental revenues of $42.5 million for the quarter ended September 30, 2006. The increase was primarily a result of the December 31, 2006 merger with Newkirk Realty Trust, Inc. and the second quarter 2007 acquisition of 48 properties which Lexington had previously held in four co-investment programs.

Net Income Allocable to Common Shareholders

For the quarter ended September 30, 2007, net income allocable to common shareholders was $7.4 million, compared to the quarter ended September 30, 2006, which had a loss of $21.7 million. On a per share basis, net income allocable to common shareholders for the quarter ended September 30, 2007 was $0.12, compared with a loss of $0.42 for the comparable period last year. For the nine months ended September 30, 2007, net income allocable to common shareholders was $25.9 million, or $0.39 per share, as compared to $1.7 million, or $0.03 per share, for the same period in 2006.

Company Funds From Operations Applicable to Common Shareholders

For the quarter ended September 30, 2007, Company Funds From Operations ("Company FFO") was $50.4 million, compared with Company FFO for the quarter ended September 30, 2006 of $(0.3) million. On a per share basis, Company FFO was $0.46 for the quarter ended September 30, 2007, compared with $0.00 for the same period in 2006. For the nine months ended September 30, 2007, Company FFO was $158.9 million or $1.42 per share, as compared with $66.5 million or $1.05 per share for the same period in 2006.

Market Capitalization

At September 30, 2007, Lexington's total market capitalization was approximately $5.8 billion, based on the New York Stock Exchange closing price of Lexington's common shares on September 30, 2007, and assuming the conversion of all operating partnership units to common shares, the liquidation preference of preferred shares, and the principal balance of total debt outstanding.

Dividend

On September 14, 2007, Lexington declared a regular quarterly cash dividend/distribution of $0.375 per common share/unit (equal to $1.50 on an annualized basis), which was paid on October 15, 2007, to common shareholders/unit holders of record as of September 28, 2007.

Share Repurchase Authorization

During the quarter ended September 30, 2007, Lexington repurchased approximately 513,000 common shares/units at an average price of $20.00 per share/unit. During the nine months ended September 30, 2007, Lexington has repurchased approximately 7.1 million common shares/units at an average price of $20.61 per share/unit, reducing the number of shares/units outstanding to approximately 103.4 million. On March 5, 2007, Lexington's Board of Trustees authorized the repurchase from time to time of 10.0 million common shares/units, of which 3.4 million common shares/units remain available for repurchase.

2007 EARNINGS GUIDANCE

Lexington reaffirmed its previously disclosed 2007 full-year per diluted share Company FFO guidance range of $1.75 to $1.85. This guidance is based on current expectations and is forward-looking. In connection with projected property sales, Lexington expects to incur $0.05 to $0.06 per share of mortgage prepayment penalties in the fourth quarter.

INVESTMENT & DISPOSITION ACTIVITY Co-Investment Program

In August 2007, Lexington announced that The Lexington Master Limited Partnership formed a co-investment program with Inland American (Net Lease) Sub, LLC, a wholly owned subsidiary of Inland American Real Estate Trust, Inc., to invest in specialty single-tenant net leased assets in the United States.

The co-investment program entered into an agreement to acquire 53 primarily single-tenant net leased assets from Lexington and its subsidiaries for an aggregate purchase price of $940.0 million (including the assumption of non-recourse first mortgage financing secured by certain of the assets) and subordinated financing by The Lexington Master Limited Partnership subject to certain terms and conditions. The properties contain an aggregate of more than eight million net rentable square feet, and are located in 28 states. In addition to the 53 assets under contract, The Lexington Master Limited Partnership and Inland American (Net Lease) Sub, LLC, intend to invest $22.5 million and $127.5 million, respectively, in the co-investment program to acquire additional specialty single-tenant net leased assets. Assuming mortgage financing of 70% of acquisition cost, the joint venture will acquire up to $1.4 billion of property.

The sale of each of the 53 assets by Lexington and its subsidiaries, the purchase by the co-investment program, and the funding by Inland American (Net Lease) Sub, LLC are subject to satisfaction of conditions precedent to closing, including the assumption of existing financing, obtaining certain consents and waivers, the continuing solvency of the tenants and certain other customary conditions. Accordingly, Lexington can not provide assurances that the sales by it and its subsidiaries, the acquisition by the co-investment program and the funding by Inland American (Net Lease) Sub, LLC will be completed.

Dispositions

During the quarter ended September 30, 2007, Lexington sold 23 non-core properties under its previously announced disposition program for an aggregate price of $119.5 million.

LEASING ACTIVITY

At September 30, 2007, Lexington's portfolio was approximately 95.8% leased. For the quarter ended September 30, 2007, Lexington executed 39 leases for approximately 946,000 square feet. Sixteen new leases were executed, (13 office properties, two industrial properties, and one retail property) encompassing 300,000 square feet. Twenty-three lease renewals were executed (three office properties, one industrial property, and 19 retail properties) encompassing 646,000 square feet.

THIRD QUARTER 2007 CONFERENCE CALL

On Thursday, November 8, 2007, at 11:00 a.m. Eastern Time, Lexington will host a conference call to discuss its results for the quarter ended September 30, 2007. Lexington's remarks will be followed by a question and answer period. Interested parties may participate in this conference call by dialing (877) 407-0782 or (201) 689-8567. A taped replay of the call will be available through December 8, 2007 at (877) 660-6853, Account 286, Conference ID 256173.

A live web cast (listen-only mode) of the conference call will be available at http://www.lxp.com/ within the Investor Relations section. An online replay will also be available through December 8, 2007.

ABOUT LEXINGTON REALTY TRUST

Lexington Realty Trust is a real estate investment trust that owns, invests in, 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 shares are traded on the New York Stock Exchange under the symbol "LXP". Additional information about Lexington is available on-line at http://www.lxp.com/ or by contacting Lexington Realty Trust, Investor Relations, One Penn Plaza, Suite 4015, New York, New York 10119-4015.

This release contains certain forward-looking statements which involve known and unknown risks, uncertainties or other factors not under Lexington's control which may cause actual results, performance or achievements of Lexington to be materially different from the results, performance, or other expectations implied by these forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed under the headings "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Risk Factors" in Lexington's most recent annual report on Form 10-K filed with the SEC on March 1, 2007 (the "Form 10-K") and other periodic reports filed with the SEC, including risks related to: (i) the failure to successfully complete the strategic restructuring plan, (ii) the failure to complete the sale of the 53 assets to the newly formed co-investment program described above, (iii) the failure to complete the expected fourth quarter disposition activity described above, (iv) the failure to obtain board approval of any special distribution described above, (v) the failure to integrate our operations and properties with those of Newkirk Realty Trust, (vi) the failure to continue to qualify as a real estate investment trust, (vii) changes in general business and economic conditions, (viii) competition, (ix) increases in real estate construction costs, (x) changes in interest rates, or (xi) changes in accessibility of debt and equity capital markets. Copies of the Form 10-K and the other periodic reports Lexington files with the SEC are available on Lexington's website at http://www.lxp.com/. Forward-looking statements, which are based on certain assumptions and describe the Company's future plans, strategies and expectations, are generally identifiable by use of the words "believes," "expects," "intends," "anticipates," "estimates," "projects" or similar expressions. Lexington undertakes no obligation to publicly release the results of any revisions to those forward-looking statements which may be made to reflect events or circumstances after the occurrence of unanticipated events. Accordingly, there is no assurance that Lexington's expectations will be realized.

LEXINGTON REALTY TRUST AND CONSOLIDATED SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS Three and Nine months ended September 30, 2007 and 2006 (Unaudited and in thousands, except share and per share data) Three Months Ended Nine Months Ended September 30, September 30, 2007 2006 2007 2006 Gross revenues: Rental $113,988 $42,482 $293,377 $125,860 Advisory and incentive fees 239 1,127 12,182 3,527 Tenant reimbursements 10,128 4,185 22,300 12,229 Total gross revenues 124,355 47,794 327,859 141,616 Expense applicable to revenues: Depreciation and amortization (67,211) (19,143) (174,130) (56,843) Property operating (18,031) (7,858) (42,868) (22,325) General and administrative (7,547) (5,383) (28,707) (15,852) Non-operating income 2,673 963 7,644 7,669 Interest and amortization expense (50,347) (16,306) (120,390) (49,035) Debt satisfaction charges - (510) - (216) Impairment loss - - - (1,121) Income (loss) before provision for income taxes, minority interests, equity in earnings of non- consolidated entities and discontinued operations (16,108) (443) (30,592) 3,893 Provision for income taxes (410) (178) (2,646) (24) Minority interests share of (income) loss 1,966 3 (8,630) (704) Equity in earnings of non-consolidated entities 4,054 1,029 45,951 3,145 Income (loss) from continuing operations (10,498) 411 4,083 6,310 Discontinued operations: Income from discontinued operations 6,029 2,576 17,728 8,278 (Provision) benefit for income taxes (2) 1 (2,623) (73) Debt satisfaction (charges) gains (3,596) 15 (3,685) 5,779 Gains on sales of properties 26,980 1,920 39,808 18,836 Impairment charge - (28,209) - (28,209) Minority interests share of (income) loss (4,450) 5,691 (9,694) 3,081 Total discontinued operations 24,961 (18,006) 41,534 7,692 Net income (loss) 14,463 (17,595) 45,617 14,002 Dividends attributable to preferred shares - Series B (1,590) (1,590) (4,770) (4,770) Dividends attributable to preferred shares - Series C (2,519) (2,519) (7,556) (7,556) Dividends attributable to preferred shares - Series D (2,925) - (7,372) - Net income (loss) allocable to common shareholders $7,429 $(21,704) $25,919 $1,676 Income (loss) per common share - basic: Income (loss) from continuing operations, after preferred dividends $(0.27) $(0.07) $(0.24) $(0.12) Income (loss) from discontinued operations 0.39 (0.35) 0.63 0.15 Net income (loss) allocable to common shareholders $0.12 $(0.42) $0.39 $0.03 Weighted average common shares outstanding - basic 63,458,167 52,279,750 65,735,321 52,081,514 Income (loss) per common share - diluted: Income (loss) from continuing operations, after preferred dividends $(0.27) $(0.07) $(0.24) $(0.12) Income (loss) from discontinued operations 0.39 (0.35) 0.63 0.15 Net income (loss) allocable to common shareholders $0.12 $(0.42) $0.39 $0.03 Weighted average common shares outstanding - diluted 63,458,167 52,279,750 65,735,321 52,081,514 LEXINGTON REALTY TRUST AND CONSOLIDATED SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS September 30, 2007 (Unaudited) and December 31, 2006 (In thousands, except share and per share data) September 30, December 31, 2007 2006 Assets: Real estate, at cost $4,630,170 $3,747,156 Less: accumulated depreciation and amortization 387,237 276,129 4,242,933 3,471,027 Properties held for sale - discontinued operations 159,982 69,612 Intangible assets, net 609,000 468,244 Cash and cash equivalents 260,487 97,547 Investment in and advances to non- consolidated entities 173,742 247,045 Deferred expenses, net 39,600 16,084 Notes receivable 41,968 50,534 Rent receivable - current 27,525 53,744 Rent receivable - deferred 19,012 29,410 Investment in marketable equity securities 4,276 32,036 Other assets 88,966 89,574 $5,667,491 $4,624,857 Liabilities and Shareholders' Equity: Liabilities: Mortgages and notes payable $2,631,225 $2,126,810 Exchangeable notes payable 450,000 - Trust notes payable 200,000 - Contract rights payable 13,133 12,231 Dividends payable 30,884 44,948 Liabilities - discontinued operations 100,672 6,064 Accounts payable and other liabilities 41,037 25,877 Accrued interest payable 15,442 10,818 Deferred revenue - below market leases 263,801 362,815 Prepaid rent 21,171 10,109 3,767,365 2,599,672 Minority interests 789,519 902,741 4,556,884 3,502,413 Commitments and contingencies Shareholders' equity: Preferred shares, par value $0.0001 per share; authorized 100,000,000 shares, Series B Cumulative Redeemable Preferred, liquidation preference $79,000, 3,160,000 shares issued and outstanding 76,315 76,315 Series C Cumulative Convertible Preferred, liquidation preference $155,000, 3,100,000 shares issued and outstanding 150,589 150,589 Series D Cumulative Redeemable Preferred, liquidation preference $155,000, 6,200,000 shares issued and outstanding in 2007 149,774 - Special Voting Preferred Share, par value $0.0001 per share; authorized, issued and outstanding 1 share - - Common shares, par value $0.0001 per share; authorized 400,000,000 shares, 63,598,112 and 69,051,781 shares issued and outstanding in 2007 and 2006, respectively 6 7 Additional paid-in-capital 1,077,707 1,188,900 Accumulated distributions in excess of net income (341,243) (294,640) Accumulated other comprehensive income (loss) (2,541) 1,273 1,110,607 1,122,444 $5,667,491 $4,624,857 LEXINGTON REALTY TRUST AND CONSOLIDATED SUBSIDIARIES EARNINGS PER SHARE AND FUNDS FROM OPERATIONS PER SHARE (In thousands, except share data) Three Months Ended Nine Months Ended September 30, September 30, 2007 2006 2007 2006 EARNINGS PER SHARE: Basic: Income (loss) from continuing operations $(10,498) $411 $4,083 $6,310 Less preferred dividends (7,034) (4,109) (19,698) (12,326) Income (loss) allocable to common shareholders from continuing operations (17,532) (3,698) (15,615) (6,016) Total income (loss) from discontinued operations 24,961 (18,006) 41,534 7,692 Net income (loss) allocable to common shareholders $7,429 $(21,704) $25,919 $1,676 Weighted average number of common shares outstanding 63,458,167 52,279,750 65,735,321 52,081,514 Income (loss) per common share - basic: Income (loss) from continuing operations $(0.27) $(0.07) $(0.24) $(0.12) Income (loss) from discontinued operations 0.39 (0.35) 0.63 0.15 Net income (loss) $0.12 $(0.42) $0.39 $0.03 Diluted: Income (loss) allocable to common shareholders from continuing operations $(17,532) $(3,698) $(15,615) $(6,016) Incremental income attributed to assumed conversion of dilutive securities - - - - Income (loss) allocable to common shareholders from continuing operations (17,532) (3,698) (15,615) (6,016) Total income (loss) from discontinued operations 24,961 (18,006) 41,534 7,692 Net income (loss) allocable to common shareholders $7,429 $(21,704) $25,919 $1,676 Weighted average number of common shares used in calculation of basic earnings per share 63,458,167 52,279,750 65,735,321 52,081,514 Add incremental shares representing: Shares issuable upon exercise of employee share options - - - - Shares issuable upon conversion of dilutive securities - - - - Weighted average number of shares used in calculation of diluted earnings per common share 63,458,167 52,279,750 65,735,321 52,081,514 Income per common share - diluted: Income (loss) from continuing operations $(0.27) $(0.07) $(0.24) $(0.12) Income (loss) from discontinued operations 0.39 (0.35) 0.63 0.15 Net income (loss) $0.12 $(0.42) $0.39 $0.03 LEXINGTON REALTY TRUST AND CONSOLIDATED SUBSIDIARIES EARNINGS PER SHARE AND FUNDS FROM OPERATIONS PER SHARE (CONTINUED) (In thousands, except share data) Three Months Ended Nine Months Ended September 30, September 30, 2007 2006 2007 2006 The Company's Funds from Operations: (1) Basic and Diluted: Net income (loss) allocable to common shareholders - basic $7,429 $(21,704) $25,919 $1,676 Adjustments: Depreciation and amortization 67,439 20,419 180,224 60,726 Minority interests - OP units 952 (5,581) 14,867 (2,026) Amortization of leasing commissions 346 169 882 479 Joint venture and minority interest adjustment (1,348) 5,785 1,698 16,848 Preferred dividends - Series C 2,519 2,519 7,556 7,556 Gains on sale of properties (26,980) (1,920) (39,808) (18,836) Taxes incurred on sale of properties - - 1,749 74 Gains on sale of joint venture properties - - (34,164) - Company's funds from operations $50,357 $(313) $158,923 $66,497 Basic: Weighted average shares outstanding - basic EPS 63,458,167 52,279,750 65,735,321 52,081,514 Operating partnership units 39,636,305 5,621,824 40,192,868 5,632,598 Preferred shares - Series C 5,779,330 5,779,330 5,779,330 5,779,330 Weighted average shares outstanding - basic 108,873,802 63,680,904 111,707,519 63,493,442 Company's funds from operations per share $0.46 $- $1.42 $1.05 Diluted: Weighted average shares outstanding - diluted EPS 63,458,167 52,279,750 65,735,321 52,081,514 Operating partnership units 39,636,305 5,621,824 40,192,868 5,632,598 Preferred shares - Series C 5,779,330 5,779,330 5,779,330 5,779,330 Other 403 - 544 23,053 Adjusted weighted average shares outstanding - diluted 108,874,205 63,680,904 111,708,063 63,516,495 Company's funds from operations per share $0.46 $- $1.42 $1.05 (1) Lexington believes that Funds from Operations ("FFO") is a widely recognized and appropriate measure of the performance of an equity REIT. Lexington presents FFO because it considers FFO an important supplemental measure of Lexington's operating performance. Lexington believes FFO is frequently used by securities analysts, investors and other interested parties in the evaluation of REITs, many of which present FFO when reporting their results. FFO is intended to exclude historical cost depreciation and amortization of real estate and related assets, which assumes that the value of real estate diminishes ratably over time. Historically, however, real estate values have risen or fallen with market conditions. As a result, FFO provides a performance measure that, when compared year over year, reflects the impact to operations from trends in occupancy rates, rental rates, operating costs, development activities, interest costs and other matters without the inclusion of depreciation and amortization, providing perspective that may not necessarily be apparent from net income. Lexington computes FFO in accordance with standards established by the National Association of Real Estate Investment Trusts, Inc. ("NAREIT"). FFO is defined by NAREIT as "net income (or loss) computed in accordance with GAAP, excluding gains (or losses) from sales of property, plus real estate depreciation and amortization and after adjustments for unconsolidated partnerships and joint ventures." FFO does not represent cash generated from operating activities in accordance with GAAP and is not indicative of cash available to fund cash needs. FFO should not be considered as an alternative to net income as an indicator of our operating performance or as an alternative to cash flow as a measure of liquidity. Lexington includes in its calculation of FFO, which Lexington refers to as the "Company's funds from operations" or "Company FFO," Lexington's operating partnership units and Lexington's Series C Cumulative Convertible Preferred Shares because these securities are convertible, at the holder's option, into Lexington's common shares, and also incentive fees earned from joint ventures. Management believes this is appropriate and relevant to securities analysts, investors and other interested parties because Lexington presents Company FFO on a company-wide basis as if all securities that are convertible, at the holder's option, into Lexington's common shares, are converted. Since others do not calculate FFO in a similar fashion, Company FFO may not be comparable to similarly titled measures as reported by others.