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Lexington Realty Boosts Industrial Portfolio With $180M Buyout


Lexington Realty Trust LXP recently announced the acquisition of a portfolio of e-commerce industrial properties spanning 2.4-million square feet of space. The portfolio was purchased from an Atlanta-based developer and manager, IDI Logistics, for roughly $180 million.

The portfolio consists of three Class A warehouse/distribution facilities situated within Park North at the well-established Monroe logistics park. The park was developed by IDI Logistics across Interstate 75 in the dynamic industrial submarket of Cincinnati, OH.

This strategic location has likely enabled all three properties to enjoy 100% leasing. In fact, these properties are net leased to well-known tenants, comprising Amazon, Hayneedle/Wal-Mart, and Blue Buffalo, a division of General Mills.

Additionally, the portfolio’s weighted average lease term stands at nearly 9.3 years, with average annualized rental escalators of around 2%. Understandably, long-lease terms and high-quality tenants will assure steady growth in cash flows for Lexington.

Moreover, since these properties were recently constructed, it will likely have limited near-term capex needs. Furthermore, this portfolio acquisition is in line with the company’s investment strategy of purchasing well-placed, high-quality industrial assets.

This comes as part of the company’s focus to transition to a 100% industrial-focused net-lease real estate investment trust (REIT). In fact, Lexington seeks to expand its industrial portfolio footprint on the back of build-to-suit, sale-leaseback and buyout transactions.

The company’s year-to-date investment activity aggregates around $440 million at estimated GAAP and cash cap rates of nearly 5.6% and 5.4%, respectively. At the time of acquisition, these investments carried a weighted-average remaining lease term of 6 years.

Also, the company has nearly $170 million of distribution/warehouse properties under an accepted offer or contract. Amid strong fundamentals of the industrial real estate market, such portfolio trades will position the company for long-term growth.

Shares of this Zacks Rank #2 (Buy) company have gained 5.6% over the past three months compared with the industry’s rally of 2.1%.

Other Key Picks

Investors can consider some other top-ranked stocks from the same space like Alexandria Real Estate Equities, Inc. ARE, EastGroup Properties, Inc. EGP and Prologis, Inc.PLD, each carrying a Zacks Rank of 2, at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Alexandria Real Estate’s Zacks Consensus Estimate for 2019 funds from operations (FFO) per share has remained unchanged at $6.98 in the past month.

EastGroup Properties’ Zacks Consensus Estimate for the ongoing year’s FFO per share remained unrevised at $4.92 in a month’s time.

Prologis’ FFO per share estimates for the current year remained unchanged at $3.28 over the past month.

Note: Anything related to earnings presented in this write-up represent funds from operations (FFO) — a widely used metric to gauge the performance of REITs.

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