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NEW YORK CITY-Lexington Realty Trust’s board of directors has targeted an annualized dividend level for 2009, which the company says will allow it to retain around $63 million of capital. In a release, the locally based REIT says it expects to use the $63 million to accelerate its deleveraging strategy and further strengthen its balance sheet.

“The targeted dividend for 2009 will allow Lexington to retain a significant amount of cash flow, which we expect to use to continue to retire debt and/or preferred securities on advantageous terms,” says T. Wilson Eglin, Lexington CEO, in a statement. “The targeted dividend for 2009 equates to a yield of 18.0% based on the closing price of our common shares on Nov. 24, 2008 and reflects, what we believe, is a conservative payout ratio.” Since the beginning of ‘08, Lexington has retired a total of $307.5 million of senior debt and preferred securities at a discounted cost to Lexington of approximately $238.8 million, according to a release.

On Wednesday, Lexington declared a regular common share dividend/distribution for Q4 ’08 of $0.18 per share, payable on Jan. 15. The REIT also declared dividends of $0.503125 per Series B cumulative redeemable preferred share, $0.8125 per Series C share and $0.471875 per Series D share.

Additionally, Lexington announced that it intends to complete an inter-company merger with the Lexington Master Limited Partnership by year’s end. Eglin tells GlobeSt.com that the merger will save about $1 million annually “and simplify our corporate structure.” Each outstanding unit of limited partner interest of the MLP will be exchanged for one common share of Lexington, with the exception of MLP units already held by Lexington, according to a release. As of Wednesday, Lexington owned 91% of the MLP units.

Earlier this month, Lexington reported that its total gross revenues for Q3 were $105.5 million, compared with total gross revenues of $116.3 million for the comparable quarter in 2007. The REIT says the decrease was primarily due to the sale of certain assets to a co-investment program in ‘07 and ‘08 and the early lease termination in the second quarter of 2008 for the property located at 100 Light St. in Baltimore, MD. Net loss for the quarter was $10.3 million, compared to net income of $7.4 million for Q3 ’07. As of Sept. 30, Lexington had total assets of $4.3 billion, including approximately $135.5 million of cash and restricted cash, and $2.5 billion in outstanding debt.

“While transaction activity in all property types has slowed substantially, we believe that creditworthy net lease investments will continue to attract interest due to predictable revenue streams and generally defensive characteristics,” Eglin says in a statement. “Accordingly, we plan to continue marketing assets for sale and will use the proceeds to further reduce our indebtedness on terms that we believe are highly advantageous for our shareholders, as we have throughout the year.”

Last month, Vornado Realty Trust and Winthrop Realty Trust bought a combined 11.5 million shares of Lexington at $5.60 per share. Lexington bought back another 3.5 million shares; all were formerly held by an affiliate of Apollo Real Estate Advisors III.

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