Lexington Realty Trust Recaps Office Portfolio With $726M Sale
The buyer is a JV between Davidson Kempner Capital Management LP and Lexington.
NEW YORK CITY–Lexington Realty Trust, a REIT that focuses primarily on net-lease industrial investments, has recapitalized a 21-office portfolio via a $726 million sale to a JV between New York-based Davidson Kempner Capital Management LP and Lexington. The joint venture is 80% owned by affiliates of DKCM with Lexington retaining a 20% interest. The REIT will collect asset management fees to manage the properties.
Following the transaction, Lexington’s percentage of industrial assets based on consolidated revenue is expected to increase to 60% from 44% at year-end 2017.
The transaction is part of the REIT’s strategy to recycle capital out of its suburban office properties and to concentrate on single-tenant net-leased industrial properties, according to CEO T. Wilson. The REIT will use the proceeds to acquire industrial properties and repay its revolving credit facility and other debt, he also said.
Lexington received net cash proceeds of approximately $565 million at closing, with $38 million held in escrow for the Richmond, Va., asset pending lender confirmation that it is a permitted transfer and $264 million held by a qualified section 1031 intermediary.
The joint venture is expected to assume $57 million of non-recourse financing secured by the Richmond asset. The JV also assumed $46 million of non-recourse financing secured by the Charlotte, NC asset and obtained a $363 million non-recourse mortgage loan secured by the remaining 19 assets.
The properties are 98.6% leased and are comprised of approximately 3.8 million square feet with a weighted-average remaining lease term of approximately 9.5 years and a weighted-average age of 23 years.