Lxp Industrial Trust · NYSE:LXP
Lxp Industrial Trust — Lexington Corporate Properties Trust — Investor Day (March 2006)
69 slides from Lxp Industrial Trust's investor day presentation, Mar 27, 2006
Slide 1: Investor-Analyst Day Presentation
Investor-Analyst Day Presentation The New York Stock Exchange March 21, 2006
Slide 2: Safe Harbor
Safe Harbor This presentation, together with other statements and information publicly disseminated by Lexington, contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act, as amended. Lexin
Slide 3: Agenda
Agenda I. Company History E. Robert Roskind, Chairman II. Lexington Corporate Properties Trust T. Wilson Eglin, Chief Executive Officer III. Acquisitions Richard J. Rouse, Vice Chairman & CIO Natasha Roberts, Director of Acquisitions IV. Lexington Strategic Asset Corp. Brendan P. Mullinix, Chief Ope
Slide 4: Company History
Company History E. ROBERT ROSKIND, CHAIRMAN
Slide 5: Evolution
Evolution - Acquisition volume of $1.0 billion - Sale/leaseback and Build-to-Suit Multiple property types: office, industrial, retail, health clubs, hotels, convenience stores, gas stations, bus terminals and restaurants - Major sponsor of income- oriented partnerships 1985 - 1992 - Private partners
Slide 6: Keys to Long-Term Success
Keys to Long-Term Success People & Corporate Culture Investment Strategy Business Philosophy
Slide 7: 1993 IPO
1993 IPO Believed that REITs would emerge as best way for public to invest in real estate Assets under management have grown from $200 million to $4.5 billion Track record of smart growth 17.7% annual compound return to shareholders 13 consecutive years of per share dividend increases
Slide 8: Stellar Market Performance
Stellar Market Performance 577.7% S & P 500 NAREIT LXP Total returns 10/22/93 – 12/31/05 Russell 163.2% Source: Bloomberg
Slide 9: Lexington Corporate Properties Trust
Lexington Corporate Properties Trust T. WILSON EGLIN, CHIEF EXECUTIVE OFFICER
Slide 10: Who We Are
Who We Are – NYSE: LXP Largest REIT focused on single-tenant office and industrial properties Nationwide investment platform - 40.2 million square feet in 39 states - Diversification and competitive advantage Growth segments - Corporate sale/leaseback transactions - Build-to-suit - Properties subjec
Slide 11: Why Net Lease?
Why Net Lease? Tenant is responsible for operating expenses Insulates property owner from rising costs Long-term leases reduce short-term market risk Provides predictable, growing cash flow with lower risk and retenanting costs than multi-tenanted assets Vacancy risk mitigated due to: (i) Strategic
Slide 12: Nationwide Investment Platform
WV Nationwide Investment Platform Corporate Offices Property Locations
Slide 13: Portfolio Composition
Industrial 29.7% Office 65.6% Portfolio Composition Current Allocation Strategy Reduced emphasis on retail Allocation weighted toward office * Revenue for the twelve months ended December 31, 2005. Retail 4.7%
Slide 14: Lease Rollover Schedule
Lease Rollover Schedule % of Revenue at 12/31/05
Slide 15: LXP Tenant Credit Profile
Investment Grade 40.6% Unrated 30.8% Investment Grade 48.3% Unrated 43.0% LXP Tenant Credit Profile Non- investment Grade 20.9% Non- Investment Grade 16.4% \ Number of Percentage of Rent Top 15 Tenants (Guarantors) Properties Property Type 12/31/2005 12/31/2004 Baker Hughes, Inc. Office (3)/ Industr
Slide 16: Exposure To Dana Corporation
Exposure To Dana Corporation (1) These assets are owned in joint ventures. Lexington’s economic interest is shown. ($000's) Book Non-recourse Location Type Rent Value Debt Balance Status Farmington Hills, MI Office 2,331 $ 29,263 $ 20,550 $ Leased but underutilized Elizabethtown, KY Industrial 2,838
Slide 17: Growth Segments
Long-term hold Expansion capacity Financially strong landlord Sale/leasebacks Corporate Users Portfolio benefit Liquid security Estate planning Tax deferred exit strategies UPREIT Structure Nationwide owner Not a “1031” investor Reliable closer Purchases Existing Leases Facilitates construction fina
Slide 18: Joint Ventures Enhance Diversification & Returns
65% leverage Forward commitments BB credit tenants URS 60% leverage Large transactions ($15 million+) Forward commitments BB credit tenants LION High leverage C-corp structure Special use properties B credit tenants LSAC 65% leverage Large transactions ($15 million) Major markets Investment Grade Cr
Slide 19: Disciplined Capital Allocator
Disciplined Capital Allocator No equity issued at discount to net asset value or prior issue price Disciplined and patient when evaluating acquisition opportunities Pruning of non-core assets and bottom 10% of portfolio: $100-$150 million of sales in 2006 Redeploy proceeds into joint ventures, espec
Slide 20: Capital Allocation: 2004 Acquisition Program
Acquisition Cost $935,052 Mortgage Debt $624,966 Joint Venture Equity $133,512 LXP Equity $176,574 Investments ($000’s) Revenues $52,936 Asset Management Fees $ 726 Interest Expense $23,266 Funds From Operations $30,396 FFO Yield 17.2% Funds From Operations ($000’s) Capital Allocation: 2004 Acquisit
Slide 21: Capital Allocation: 2005 Acquisition Program
Acquisition Cost $1,138,828 Mortgage Debt $ 794,482 Joint Venture Equity $ 141,337 LXP Equity $ 203,009 Investments ($000’s) Revenues, net $62,758 Asset Management Fees $ 1,022 Interest Expense $31,493 Funds From Operations $32,287 FFO Yield 15.9% Funds From Operations ($000’s) Capital Allocation: 2
Slide 22: Proven Management Team
Proven Management Team Industry Experience E. Robert Roskind 32 Chairman Richard J. Rouse 31 Vice Chairman & CIO T. Wilson Eglin 19 CEO, President & COO Patrick Carroll 20 CFO, Treasurer & EVP John B. Vander Zwaag 24 Executive Vice President Natasha Roberts 11 Director of Acquisitions Brendan P. Mul
Slide 23: Acquisitions
Acquisitions RICHARD J. ROUSE, VICE CHAIRMAN & CIO AND NATASHA ROBERTS, DIRECTOR OF ACQUISITIONS
Slide 24: Sourcing
Sourcing Unparalleled national network of corporate users, developers, brokers and owners 32 year track record $10 billion of transactions sourced in 2005 SIRVA, INC. WESTMONT, IL MOTOROLA, INC. FARMINGTON HILLS, MI
Slide 25: Acquisition Criteria
Acquisition Criteria Single-tenant, net leased commercial properties Minimum lease term of 7 years remaining Purchase price: $8 million and up Nationwide investor Selective off-shore investor WACKENHUT PALM BEACH GARDENS, FL ALSTOM POWER RICHMOND, VA
Slide 26: External Growth Track Record
External Growth Track Record
Slide 27: Acquisition Underwriting
Acquisition Underwriting The Building: Design, construction quality, efficiency, functionality, location, replacement cost, strategic value to tenant The Lease: Landlord exposure, term, rental increases, maintenance provisions The Market: Vacancy, absorption, employment and population trends, contra
Slide 28: Case Study: Dana Corp. Sale/Leaseback
Case Study: Dana Corp. Sale/Leaseback Five mission critical manufacturing facilities Direct relationship – transaction execution critical to tenant FFO yield: 33.6% $30 million of mortgage debt repurchased with $23 million investment – 23% discount to face amount Purchase Price: $78.9 million Lease
Slide 29: Case Study: Kelsey Seybold Build-to-Suit
Case Study: Kelsey Seybold Build-to-Suit Forward commitment generates yield premium 15 year lease to “A” credit tenant FFO yield: 14.8% Purchase Price: $14.5 million Lease Term: 15 years Avg. Cap Rate: 8.5% Mortgage: $10.0 million Term: 15 years Interest Rate: 5.6% KELSEY SEYBOLD SUGAR LAND, TX
Slide 30: Case Study: Wells Portfolio Acquisition
Case Study: Wells Portfolio Acquisition $796.4 million purchase price $296.0 million in joint ventures 7.7% initial cap rate 27 properties – seven year weighted average lease term Nationwide platform created negotiating leverage 5.2% mortgage debt Investment ($000’s) Acquisition Cost $796,409 Mortga
Slide 31: Case Study: Penn Center Acquisition
Case Study: 6 Penn Center Acquisition Purchase Price: $68.3 million Lease Term: 9 Years Avg. Cap Rate: 7.1% Mortgage: $49.0 million Term: 9 years Interest Rate: 5.1% Class “A” office property in CBD location Philadelphia office of Morgan Lewis FFO Yield of 12.3% Complex tax structure eliminated comp
Slide 32: Lexington Strategic Asset Corp.
Lexington Strategic Asset Corp. BRENDAN P. MULLINIX, CHIEF OPERATING OFFICER
Slide 33: Private Offering: Growth Plan
Private Offering: Growth Plan Total Assets Acquired Since Formation: LXP Investment: Management Investment: Strategic Objective: Investment Focus: External Advisor: Corporate Structure: Formed: Lexington Strategic Asset Corp. Closed in October 2005, 6.7 million shares at $10.00 per share, net procee
Slide 34: Why Create LSAC?
Why Create LSAC? Created to capitalize on the expanded use of net lease structures into non-traditional sectors and property types Focus on higher yielding net lease investments - Private/Middle market tenants - Special purpose real estate - Specialized facilities - Integral equipment - Non-U.S. pro
Slide 35: Why a "C"-Corp?
Why a “C”-Corp? Reinvestment & leveraging of retained cash flow Dependent on accessing capital markets Earnings Growth Driver: 65%-75% of assets readily accepted Typically 50%-60% of assets Leverage: Very diverse Primarily REIT-dedicated funds Investor Base: 15% maximum tax rate (qualified individua
Slide 36: Case Study: Infocrossing, Inc. Sale/Leaseback
Case Study: Infocrossing, Inc. Sale/Leaseback Purchase Price: $25.0 million Lease Term: 20 years Cap Rate: 9.2% Mortgage: $17.5 million Term: 10 years Interest Rate: 5.6% Acquisition financing for Infocrossing, Inc.’s purchase of (i)Structure, LLC 20 year net leases on strategically important data p
Slide 37: Case Study: Dana Corp. Expansion
Case Study: Dana Corp. Expansion Purchase Price : (1) $7.4 million Lease Term: 10 years Cap Rate: 9.4% Square Feet : (1) 222,200 Expansion started on strategically important facility Significant imbedded capital gain upon lease affirmation “C”-Corp. structure permits quick re-sale Opportunity to sel
Slide 38: LSAC Current Portfolio
LSAC Current Portfolio (1) Amounts shown are post-expansion Net Average Amount Base Rentable Capitalized Annual Average of Lease Square Costs Rent, Net Annual Mortgage Interest Location Tenant Expiration Footage ($000's) ($000's) Yield ($000's) Rate Knoxville, TN Alstom Power Oct-2014 84,400 12,249
Slide 39: Portfolio Management
Portfolio Management JOHN B. VANDER ZWAAG, EXECUTIVE VICE PRESIDENT
Slide 40: Portfolio Management Objectives
Portfolio Management Objectives: High Occupancy & Income Growth High tenant retention - Recognize and manage occupancy risks - Invest at the asset level Maximize potential of existing portfolio - Asset repositioning - Building expansions - Excess land development Asset Sales - Continuous process foc
Slide 41: Leasing
Leasing Long-Term Leases Reduce Short-Term Market Risk, Provide Cash Flow Stability and Mitigate Turnover Risks LXP’s unique asset mix and emphasis on long-term leases mitigate vacancy risk Approximately 73% of the Company’s leases will expire post-2010 LXP has a proven history of extending leases o
Slide 42: Case Study: I-17 Center, Phoenix, AZ
Case Study: I-17 Center, Phoenix, AZ Formerly occupied by Bank One Value at 11/03 vacancy: $3.0 million Under contract for $7.6 million Purchase of adjacent land for $0.7 million adds significant value and permits partion and sale to two buyers Value Doubles After Adjacent Land Purchase I-17 CENTER
Slide 43: Case Study: 1600 Viceroy Drive, Dallas, TX
Case Study: 1600 Viceroy Drive, Dallas, TX Former headquarters of Vartec Telecom 250,000 square feet $21 million mortgage paid off at 25% discount 48,000 square foot lease signed Multi-tenant strategy 1600 VICEROY DRIVE DALLAS, TX Repurchase of Mortgage At 25% Discount Lowers Basis
Slide 44: Case Study: Black Canyon Center, Phoenix, AZ
Case Study: Black Canyon Center, Phoenix, AZ Refurbishment Creates Attractive Multi-Tenant Property Formerly 100% leased to Bull Information Systems Conversion to multi-tenant tenancy with Bull retained as main tenant Added rentable area by decking and renting atrium Modernized exterior with new win
Slide 45: Case Study: Owens Corning, Chester, SC
Case Study: Owens Corning, Chester, SC OWENS CORNING CHESTER, SC Expansion and Lease Affirmation for Strategically Essential Real Estate Initial Investment: $15.5 million Expansion: $6.4 million Total: $21.9 million Avg. Cap Rate: 10.0% Mortgage: $14.0 million Mortgage Rate: 5.4% Initial Lease Exp.:
Slide 46: Case Study: Harbor Freight Tools, Dillon, SC
Case Study: Harbor Freight Tools, Dillon, SC HARBOR FREIGHT TOOLS DILLON, SC Expansion & Refinancing Enhances ROE & Reduces Equity Investment Initial Investment: $16.1 million Expansion: $13.2 million Total: $29.3 million Avg. Cap Rate: 9.3% Mortgage: $23.8 million Mortgage Rate: 6.0% Expansion and
Slide 47: Case Study: Collierville, TN and Olive Branch, MS
Case Study: Collierville, TN and Olive Branch, MS Relocated Tenant to Facility We Expanded; Leased Vacant Building to FedEx for 15 Years Proactive tenant relationship creates dual investment opportunities Expanded Olive Branch facility by 100,000 square feet enhancing cash flows and long-term occupa
Slide 48: Case Study: McGraw Hill, Dubuque, IA
Case Study: McGraw Hill, Dubuque, IA Cash-out Refinancing Enhances Yield Purchase Price: $11.6 million Initial Mortgage: $7.4 million Initial Equity: $4.2 million Refinanced Amount: $10.9 million Interest Rate: 5.4% Year Acquired: 2003 Asset appreciation enables cash-out refinancing Enhanced returns
Slide 49: Case Study: Dobbin Road, Columbia, MD
Case Study: Dobbin Road, Columbia, MD Retail Vacancy Redeveloped and Sold for Huge Profit Date Acquired: December 1998 Total Investment: $6.6 million Date Sold: April, 2005 Sales Price: $12.0 million 76% capital appreciation on 6.5 year hold Former Hechinger store leased to Haverty Furniture and Off
Slide 50: Finance
Finance PATRICK CARROLL, CHIEF FINANCIAL OFFICER
Slide 51: Financial Track Record
Financial Track Record 3.5% FFO per share compound growth from 1994 to 2005 Grew overall dividend by 39% over same period while reducing FFO payout from 86% to 76% Dividend per share has increased for thirteen consecutive years • Payout Ratio • Dividend Per Share • FFO Per Share
Slide 52: Operating Results
Operating Results * Before non-recurring items ($ in millions, except per share data) Quarterly Quarters Ended Years Ended Percentage December 31, December 31, Change Gross Revenues 42.2% $53.9 $37.9 $197.1 $143.4 $106.0 Funds From Operations* 20.8% $30.2 $25.0 $114.6 $93.2 $72.1 FFO Per Share/Unit*
Slide 53: Balance Sheet Overview
Balance Sheet Overview ($ in millions, except per share data) Years Ended December 31, Mortgages and notes payable 1,170.6 $ 765.9 $ 551.4 $ 491.5 $ Preferred stock 234.0 $ 214.0 $ 79.0 $ - Market value of common equity 1,232.8 $ 1,220.0 $ 931.0 $ 561.1 $ Total market capitalization 2,637.4 $ 2,199.
Slide 54: Debt Amortization
Debt Amortization $317 million of consolidated balance sheet debt amortizes over time Consolidated Properties in millions Joint Venture Properties (Pro Rata Share) in millions
Slide 55: Debt Structure
Debt Structure ($000’s) $1,096,973 $255,072 $841,901 Balloon Payment 100.0% $1,460,804 $121,112 6.01% Total 23.2% $302,114 $21,682 July 2014 6.00% Joint Venture 76.7% $1,158,690 $99,430 January 2013 6.01% Consolidated % of Total 12/31/05 Balance Debt Service Avg. Maturity Fixed Rate Flat yield curve
Slide 56: Capacity For Growth
Capacity For Growth Joint ventures - $700.0 million in acquisition capacity - Non-public market capital source Moderate balance sheet leverage - 44% of market capitalization at December 31, 2005 Internal capital generation - Amortizing debt - Dividend reinvestment plan
Slide 57: Conclusion
Conclusion T. WILSON EGLIN, CHIEF EXECUTIVE OFFICER
Slide 58: Components of Value: Leases and Real Estate
Components of Value: Leases and Real Estate REAL ESTATE 40.2 million square feet 3,683 acres 107 Office buildings 59 Industrial buildings 23 Retail buildings 39 States $87.49 psf at $21.00 per share LEASES 202 Leases 137 Tenants 2006 rental revenues of $242.0 million Balanced lease rollover Weighted
Slide 59: Key Strategies to Enhance Value
Key Strategies to Enhance Value Grow our joint venture programs - Fee income generates higher ROE with less risk and offsets corporate overhead - Diversify capital risk Continually evaluate portfolio - Prune non-core holdings - Exit slower growth markets - Mitigate vacancy risk - Reinvest or distrib
Slide 60: Proven Ability To Add Value
2006 2001-2005 1998-2000 1996-1997 1994-1995 1993 Proven Ability To Add Value Selective acquisitions, focus on joint ventures, asset improvement initiatives and capital recycling Significant equity issuance at premium, purchase of assets at “par”, three additional joint venture programs, locked in l
Slide 61: Above Average Dividend Yield
Above Average Dividend Yield As of February, 2006. Source: NAREIT
Slide 62: Focus on Long-Term Value Growth
Focus on Long-Term Value Growth High-quality diverse assets Compelling basis relative to replacement cost Unique focus on long-term value Experienced management in place to execute strategies Financial flexibility Disciplined capital allocation
Slide 63: Lexington Corporate Properties Trust
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Slide 65: Biographies of Senior Management
Biographies of Senior Management E. ROBERT ROSKIND Mr. Roskind has served as the Chairman of our Board of Trustees since October 1993 and was our Co-Chief Executive Officer from October 1993 to January 2003. Mr. Roskind founded The LCP Group, L.P. ("LCP"), a real estate advisory firm, in 1973 and ha
Slide 66: Biographies of Senior Management
Biographies of Senior Management PATRICK CARROLL Mr. Carroll has served as our Chief Financial Officer since May 1998, our Treasurer since January 1999 and one of our Executive Vice Presidents since January 2003. Prior to joining us, Mr. Carroll was, from 1993 to 1998, a Senior Manager in the real e
Slide 67: Biographies of Senior Management
Biographies of Senior Management BRENDAN P. MULLINIX Mr. Mullinix is one of our Senior Vice Presidents and an Executive Vice President, the Chief Operating Officer and the Secretary of Lexington Strategic Asset Corp. Mr. Mullinix has served as one of our Vice Presidents since February 2000 and as a
Slide 68: Biographies of Board of Trustees
Biographies of Board of Trustees GEOFFREY DOHRMANN Mr. Dohrmann has served as one of our trustees since August 2000. Mr. Dohrmann co- founded Institutional Real Estate, Inc., a real estate-oriented publishing and consulting company in 1987 and is currently its Chairman and Chief Executive Officer. M
Slide 69: Biographies of Board of Trustees
KEVIN W. LYNCH Mr. Lynch has served as one of our trustees from May 2003 to the present and from May 1996 to May 2000. Mr. Lynch co-founded and has been a Principal of The Townsend Group since 1983. The Townsend Group is a real estate consulting firm to institutional investors in the United States.
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