Speaking at Nareit's REITWeek 2007, CEO T. Wilson Eglin said Lexington has identified 109 retail buildings--worth a total $350 million--and 31 other assets--worth $850 million--it intends to place on the selling block. The total disposition reaches $1.2 billion.Lexington acquired most of the 109 retail assets as a result of its $4.6-billion merger with Newkirk, which closed in the fourth quarter of 2006. Eglin explained he expects to sell most of the properties with cap rates in the 6s, with higher cap rates in smaller markets.
The REIT also earmarked several specialty assets, including call centers and distribution facilities, it wants to move off balance sheet in a joint venture, Eglin added. He expects the company to venture with a single investor as opposed to multiple investors, he added.
The disposition program will move Lexington to mainly an owner of office and industrial properties. "We are repositioning the company to have most of our capital deployed in [those property types]," he said.
He added that branding the company as an owner of office and industrial properties makes more sense than as an owner of any asset "based on yield."
Lexington's disposition plan comes at the same time the REIT aims to have a wholly owned portfolio of core office and warehouse/distribution assets. To that end, earlier this week Lexington acquired all the outstanding interests it did not own in Lexington Acquiport Co., LLC and Lexington Acquiport Co. II, LLC, its two largest joint venture investment programs, according to a company release.
The deal gives the REIT 26 primarily single tenant net leased office and warehouse/distribution properties, which it acquires for a cash payment of approximately $277.4 million and the assumption of approximately $515 million of non-recourse first mortgage financing, which bears interest at a weighted-average fixed rate of 6.2%. The transaction values the assets at approximately $895.2 million, the company adds. Lexington executives expect the assets to generate approximately $72.3 million of net cash revenue during 2007.
In move moves, Lexington has agreed with its partner in Lexington/Lion Venture LP to distribute the 17 properties owned by the joint venture between the partners and to terminate the joint venture investment program.
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