Lexington Realty Sells Office Portfolio for $726M

The 3.8 million-square-foot collection of properties went to a joint venture in which the REIT owns a 20 percent interest.
8900 Freeport Parkway
8900 Freeport Parkway

Lexington Realty Trust recently shed 21 office properties in a $726 million transaction. The REIT sold the 3.8 million-square-foot portfolio to a joint venture consisting of Davidson Kempner Capital Management LP and Lexington, leaving the latter with a 20 percent ownership interest in the assets and $565 million in cash at closing.

“We are working on transitioning the portfolio toward being close to a pure play on single-tenant industrial net lease real estate,” T. Wilson Eglin, CEO of Lexington Realty Trust, said during the company’s second quarter 2018 earnings conference call on August 8.

The group of office properties, which is 98.6 percent leased, spans the U.S., with five assets each in the eastern and western regions; six buildings in the South; and four in the Midwest. Tenants in the 98.6 percent leased portfolio include such names as Amazon, Experian Holdings, Motel 6 and Nissan, which, along with Pacific Union Financial, occupies the 268,400-square-foot building at 8900 Freeport Parkway in Irving, Texas.

Terms of the transaction called for the joint venture to assume a total of $103 million of non-recourse financing secured separately by two assets. The 19 remaining properties served as collateral for the $363 million non-recourse mortgage loan the partners used to help finance the acquisition. For Lexington’s part, in addition to holding onto a stake in the portfolio, the REIT will provide management services for the properties.

Portfolio metamorphosis

In its bid to focus its portfolio on net leased industrial assets, Lexington has already closed a total of approximately $966 million in sales year-to-date 2018. Dispositions over the last several months include CopperPorint Tower, a 252,400-square-foot Phoenix office property sold to Oak Street Real Estate Capital for approximately $64.6 million. The company also sold the 132,981-square-foot office building at 10419 N. 30th St. in Tampa, Fla., to TCS Investor LLC. And Lexington plans to pick up the pace.

“We are working very hard on accelerating the volume of office dispositions,” Eglin said during Lexington’s earnings conference call. “But transitioning more quickly is not just a function of wanting to transition all the way to one asset class, but it also recognizes that, right now, it happens to be a very good sellers’ market.” 

Image via Yardi Matrix