The Brownsville, TX property, a 115,000-sf space at the Amigoland Shopping Center, was formerly net-leased to Montgomery Ward & Co. on a 30-year term. Ward was forced to disaffirm the lease as part of its bankruptcy proceedings.
Lexington acquired the property in 1995 for $1,242,000. It was built for Ward in 1973 on a 7.6-acre site and had an annual rent of $153,000. The REIT has discontinued debt-service payments on the property's $616,000 non-recourse mortgage. Lexington has a 62% stake in the vacant Brownsville space. Its share of the property's annual net rent came to $95,000, all of which went to debt service.
The Columbia, MD property is a 60,000-sf retail space located at 6475 Dobbin Road, formerly the site of the Dobbin's Shopping Center. Built in 1983 and remodeled in 1994, Lexington acquired the 2.5-acre property in 1998 for $5,018,000. The REIT has entered into an agreement with former tenant MOR Dobbin LLC, terminating its lease and forgiving $272,000 in back rent. The lease, which would have rolled over in 2004, had five renewal options through 2029. This year's rent revenue from the property would have been $647,000.
Lexington president and CEO T. Wilson Eglin released a statement downplaying the role of the properties in the overall growth strategy of the REIT. "We do not believe that these lease events are material to the company or its ability to continue to grow dividends as contemplated in our business plan," he says.
Eglin says terminating the Maryland lease will prove a profitable move in the long run. "Terminating the Columbia, MD property lease will ultimately result in higher rental revenue since the property will no longer be subject to below market renewal options and our earnings guidance for this year and next has taken this vacancy into account."
The combined income from the two properties provided less than 1% of Lexington's revenues. The REIT owns and manages office, industrial and retail properties net-leased to major corporations nationwide.
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