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Lexington Realty Trust (NYSE:LXP)

Q4 2007 Earnings Call

February 27, 2008 11:00 am ET

Executives

Lisa Soares – Investor Relations Corp

T. Wilson Eglin - President, Chief Executive Officer, Chief Operating Officer

Natasha Roberts - Executive Vice President, Director of Real Estate Operations

Analysts

John Guinee - Stifel Nicolaus

Anthony Paolone – J.P Morgan Chase.

Frank Greywitt - RREEF

Mark – Private Investor

Sheila McGrath - KBW

Sabina Bhatia - Basso Capital

William Segal - William Segal Incorporated

Operator

Greetings and welcome to the Lexington Realty Trust fourth quarter earnings conference call. (Operator Instructions) It is my now pleasure to introduce your host Ms Lisa Soares, Investor Relations and Corporate Development. Thank you Ms Soares, you may begin.

Lisa Soares

Thanks. Hello and welcome to the Lexington Realty Trust fourth quarter conference call. The earnings press release was distributed over the wire this morning, and the release and supplemental disclosure package will be furnished in the form 8-K. In the press release and supplemental disclosure package Lexington has reconciled all non-GAAP financial measures to the most directly comparable GAAP measure in accordance with Regulation G requirement. If you did not receive a copy, these documents are available on Lexington’s website at www.lxp.com in the investor relations section.

Additionally, we are hosting a live webcast of today’s call which you can access in the same section. At this time management would like me to inform you that certain statements made during this call which are not historical may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Although Lexington believes the expectations reflected in these forward-looking statements are based on reasonable assumptions, Lexington can give no assurance that expectations will be attained.

Factors and risks that could cause actual results to differ materially, some of those expressed or implied by forward-looking statements are detailed in today’s press release and from time to time in Lexington’s filings with the SEC. Lexington does not undertake a duty to update any forward-looking statement.

With us today our management are Will Eglin, CEO and President; Michael Ashner, Executive Chairman; Robert Roskind, the Co-Vice Chairman; Patrick Carroll, Chief Financial Officer; Natasha Roberts, Executive Vice President and Director of Real Estate Operations; and other members of management.

I will turn the call over to Will for his opening remarks.

T. Wilson Eglin

Thanks, Lisa and welcome to all of you. Thank you for attending our fourth quarter conference call. We are pleased to report our results for 2007 and the fourth quarter which was an exceptional quarter for the company and a year of great progress for Lexington during a time of tumultuous change in the capital markets. For the fourth quarter, the company’s funds from operations totalled $21.3 million or $0.20 per share, a bit misleading because FFO was reduced by about $0.23 per share due to $5.5 million of debt prepayment penalties on properties we sold; an impairment charge of $17.2 million relating to three properties formerly leased to tenants in the automotive sector; $5.5 million of impairment charges relating to several bond investments in Concord Debt Holdings; $2.3 million of formation cost relating to our joint venture with Inland, these were offset by lease termination and promoted interest receipts of about $5.9 million.

Absent these one-time items, FFO would have been $0.42 for the quarter and a $1.83 for the year and our guidance for 2007 was in a range of $1.75 to $1.85 per share.

From an investment standpoint it was a fairly quiet quarter with activity limited to share repurchases, a single property acquisition and modest increased in our investment in Concord Debt Holdings which continues to perform in line with our expectations.

As previously mentioned Concord recognized a $11 million impairment charge on its investments as a result of marking several investment grade rated bond investments to market levels even though all payments on these investments are current. Our share of this charge is $5.5 million. We believe that our investment in Concord will improve in 2008 to the extent we redeploy loan pay-off proceeds into new investments or make new loans at higher yields.

In the fourth quarter of 2007 we had our first closing with Inland on $408.5 million of specialty single tenant real estate into our co-investment program and have closing scheduled subject to standard closing conditions for $335 million of additional properties that we expect will bring the assets of the co-investment program to roughly $743.5 million. We are very optimistic about our opportunities to grow this program and we and Inland have committed an aggregate of $150 million of equity to make new investments, 15% of which will come from Lexington.

In addition, we continued to execute on our disposition program during the fourth quarter by completing 20 sales for $243.8 million at an average cap rate of 7.6% which generated gains of $53.1 million. Our total disposition volume for the year was $473 million and we are very pleased with the prices that we have obtained during the year when property valuations were for the most part very favorable for sellers and we presently have roughly a $156 million of properties under contract to sell.

With that being said, the market is much different now compared to six months ago when we expect disposition levels to return to a normal annual rate of about 2% to 5% of the portfolio going forward.

On the leasing front, we had very strong activity with 19 leases executed or extended in the quarter and this led to an occupancy level of approximately 96% at quarter end and we believe that leasing activity remains strong throughout our portfolio.

Adjusted for the $2.10 special distribution, we acquired 2.6 million of our own common shares at an average net effective price of $15.62 per share which brought our total for the year to 9.8 million shares repurchased at an average net effective price of $17.73 per share and we presently have 4.8 million shares eligible for purchase under our current authorization.

Assuming a successful second closing with Inland, we expect to have repositioned about $1.2 billion of assets out of our portfolio at a cap rate of 7.6% under our strategic restructuring plan. This is a significant accomplishment for us, which led to the payment of a special dividend of $2.10 per share and as a result of returning so much capital to shareholders we’ve reset our dividend to $1.32 per share in an announcement last week.

Overall, through the special dividend and share repurchases, we have returned over $400 million to our shareholders since the beginning of last year and our decision to monetize these assets and return capital to shareholders reflected our view that we have been in an extremely favorable valuation environment. These conditions have now passed and we believe that 2008 will be a year characterized by more attractive investment opportunities and it’s been several years since we thought that that was the case.

As a result of closing a smaller transaction with Inland in 2007 and deferring a portion of the transaction to 2008, the taxable gain relating to the transaction was reduced significantly and this has created an opportunity for Lexington to retain capital and reinvest its joint venture proceeds in properties at a time that we believe prices and yields are becoming more attractive. As a result, we do not currently believe that there will be any further special distributions at this time and we are very pleased to have financial flexibility in an environment that for the first time in several years looks to be very attractive to us.

Now I will turn the call over to Pat who will take you through our results in more detail.

Patrick Carroll

Thanks Will. Results of operations in the fourth quarter of ’07 include the impact of the Newkirk merger which occurred on December 31, 2006 and the acquisitions of our four co-investment programs in the second quarter of ’07 and these are the primary drivers of all fluctuations between the periods.

During the quarter, Lexington had gross revenues of $122.3 million. Advisory and incentive fee income was approximately $1.4 million compared to $1.1 million in the same quarter last year. The increase relates to $1.1 million fee earned on the sale of a property in our advisory business offset by a reduction in fees due to the acquisition of the four co-investment programs. We provided in our supplement on page 31 the details of the components of advisory and incentive fees and equity in earnings for the year ended December 31, ’07.

Under GAAP, we are required to recognize revenue on a straight-line basis over the non-cancelable lease terms plus any periods covered by bargain renewal options. In addition, the amortization of above and below market leases are included directly into rental revenue. In the quarter cash rents were in excess of GAAP rents by about $6.7 million including the effect of above and below market leases. We have also included on page 39 our estimates of both cash and GAAP rents for 2008 through 2012.

Quarterly G&A was down of a $9 million compared to the same quarter last year and this relates primarily to the acceleration of vesting of common shares in the fourth quarter of ’06 of about $10.8 million offset by the incurrence of a $2.2 million fee in the fourth quarter of ’07 related to our Inland joint venture formation.

Now looking at the balance sheet we believe we continue to be in good shape. At quarter end we had about $3 billion debt outstanding including debt on properties held for sale which had a weighted average interest rate of about 5.9%. We have poured in $12 million cash at quarter end and cash balance are primarily due to the capital transactions we completed late in the fourth quarter.

Included in intangibles is the allocation of the purchase price of properties related to in-place and above market leases and customer relationships in occurrence with FAS 141. Also we have approximately $217 million in below market lease liability. Included in profits held for sale are three properties that meet the definition as held for sale under GAAP and the liability in discontinued operations are mortgages of $85.3 million and the remainder is primarily below market leases related to one of the properties. The significant components of other assets and liabilities are included on page 30 of our supplement.

Now I would like for Natasha Roberts, Executive Vice President and Director of Real Estate Operations to discuss our leasing and expansion activity. Natasha.

Natasha Roberts

Thanks Pat. As of December 31, 2007 after selling 20 properties for $244 million and acquiring one property to $13.7 million during the fourth quarter and including the 34 properties that are held in joint ventures, our portfolio totaled approximately 51 million square feet at year end, 96% leased and we except to remain at or above 94% leased through 2008.

During the fourth quarter we signed 19 leases covering approximately $1.9 million square feet. Out of the 19 leases, 12 were new and accounted for about 700,000 square feet and seven were renewal exceptions which accounted for about 1.2 million square feet. Seven leases totaling approximately 300,000 square feet expired during the quarter and were not renewed.

As of year end we had 35 leases in our consolidated portfolio scheduled to expire in 2008. This represents $25.6 million in GAAP revenues and 55 leases schedule to expire in 2009 representing $48.4 million in GAAP revenues. These amounts represent 6.2% and 11.8% respectively of our consolidated portfolio GAAP revenues as of December 31, 2007.

Leasing activity has been and continues to be strong. Year to date we have executed eight leases, one new lease for 2000 square feet and seven lease extensions totaling approximately 855,000 square feet. Fixed leases are scheduled to expire in the first quarter 2008 that will total approximately 690,000 square feet. We have been generating strong interest from alternative users and are optimistic that we will be able to lease these properties. We are currently expanding approximately 155,000 square feet with our existing tenants at four locations and we are in discussions for two other potential expansion projects that will total an additional 110,000 square feet.

100 Light Street. As many of you know, this property is our most significant asset and in subject to our largest lease. I would like to give you an update on the current developments of the building. During the fourth quarter of 2007 we began construction of a ten-storey parking garage adjacent to the building at a cost of approximately $20 million. The garage is slated for completion by the end of the year and it will add approximately 530 parking spaces plus 10,000 square feet of ground floor retail. This will bring the parking ratio of the building to 1.6 per thousand. The additional parking spaces will bring the parking ratio in line with the other Class A office properties in the market and this will ensure our asset’s competitiveness.

We signed an agreement with Legg that gives us the right to take that space as needed on the lower part of the building for the purpose of backfilling the office tower prior to lease expiration in October 2009. Our present expectation is that Legg will need to extend their occupancy through the end of 2009. Upon the Legg lease expiration the property is expected to be 23% leased assuming no additional leasing prior to expiration. However, with the 20 month headstart and with leasing the lower floors, we are optimistic that we can get the building to 50% leased. If successful our vacancy in 2010 will be limited to the desirable upper 18 floors of the building.

In conclusion, we are pleased with our leasing success in the fourth quarter and the early part of 2008. It is over this time period that we have signed a total of 13 new leases on approximately 670,000 square feet and we have extended 14 leases covering approximately 2.7 million square feet. Leasing prospects remain strong and we continue to see good activity on much of our remaining available space.

Now I would like to turn the call back over to Will.

T. Wilson Eglin

Thanks Natasha. Overall, we are very pleased with 2007 and believe that our strategic restructuring plans including our disposition program and repositioning of assets was the right strategy for us in view of where property valuations were when we started the year.

That being said, since last summer, the pace at which capital market conditions have changed from a time of extreme excess liquidity to the polar opposite has been breathtaking and in our view, that means that we think there will be very good growth opportunities for Lexington as we continue through 2008. So we are very pleased to have cash and financial flexibility as we begin the year.

We believe that our balance sheet continues to be in good shape with manageable leverage, limited near-term refinancing exposure and sufficient liquidity and in fact, we now only have $22.5 million of debt maturing in 2008. In this quarter, we’ve paid down about $89.5 million of our exchangeable notes for a total cost of $78.2 million. So in that debt repayment transaction we increased our net asset value by $11.3 million and we will earn a return to maturity of about 9% as a result of paying off the debt at a discount to its face amount.

We believe that we have strong financial capacity to act on investment opportunities as they arise and this consists of first, our cash; second, our $200 million untapped credit facility; third, our joint venture equity commitment from Inland, proceeds from property sales under contract and continuing proceeds expected in the retail area during the balance of the year.

In addition, over the next five years, we have about $260 million of mortgage amortization on our debt. So as we are burning off our debt so quickly, we are going to be building up equity in our real estates that we can tap over time via refinancing and use that capital to continue to grow.

With respect to guidance, we do expect disposition volume for 2008 to be less than last year. As for closing what is under contract, we are going to stay focused on opportunistic property sales; we are quite price sensitive in this environment and there will be a particular focus on our retail property sales.

In the fourth quarter of 2007, we sold nine retail properties. We presently have 94 properties in the portfolio and 13 of them are presently under contract. So the slower pace of sales means that we have time to reinvest our sale proceeds in other income producing assets and as we look at the year overall, we have a wide variety of alternatives with respect to how we deploy cash, sale proceeds and joint venture proceeds and these include joint venture and direct acquisitions in the net lease area, debt investments, securities repurchases and debt reduction. So our guidance that we announced last year for the year is for funds from operations per share of $1.56 to $1.64.

And that ends our formal remarks. Operator, we will turn it back to you for question-and-answer session.

Question-and–Answer Session

Operator

(Operator Instructions) Our first question comes from the line of John Guinee with Stifel Nicolaus. Please go ahead with your question.

John Guinee - Stifel Nicolaus

Thank you. Hey, Pat is it, if I look at FFO of a $1.60 plus or minus and then go to page 39 is your -- for lack of a better term -- unadjusted FFO before CapEx and leasing commissions because of your cash exceeding your GAAP rents, add another $0.10 per share to that?

Wilson Eglin

That’s about right John, yes.

John Guinee - Stifel Nicolaus

Okay and then second it looks to us as if 2008 and 2009 you are fairly flush with cash and could easily cover and grow the dividend but 2008 with a loss of about $27 million in rent from the burn off of the master lease at a 100 Light looks to us as if you are in a fairly precarious position. Can you comment on that?

Wilson Eglin

I mean look, our view when we reset the dividend to a $1.32 was that we chose a level that would be sustainable and global based on our current outlook with respect to the portfolio and how we hope to grow it over the next several years. So you are absolutely right, I mean over the balance of this year and next year is when we work our way through the step down renewal process on the portfolio, but thereafter we think we are in a position where we are going to have very good internal growth in the portfolio as we turn over leases, so you are absolutely right that we are continuing to be on the down slope as we excepted from revenue but our forecast after we get to that point is that we are going to have in a very good internal growth dynamic for the portfolio.

John Guinee - Stifel Nicolaus

So is it safe to say that when you reset your dividends Pat was using a five-year model as opposed to a two-year model?

Wilson Eglin

That’s correct.

John Guinee - Stifel Nicolaus

Alright thanks.

Operator

Our next question comes from the line of Anthony Paolone - J.P. Morgan. Please go ahead with your question.

Anthony Paolone – J.P. Morgan

Thanks good morning. Natasha you went through all the leasing activity and I am just trying to tie together because it seems like you have had a lot of activity in the fourth quarter and going into the first quarter here but you also mentioned the leases I think that actually expired in the fourth quarter are vacant at the moment. I’m trying to tie it together where this all maps out say from an occupancy and cash flow point of view for the next few quarters.

Natasha Roberts

From an occupancy standpoint we still expect to be at about 95% leased because we do have a number of our lease renewals that were signed and then from a cash standpoint I’ll let someone else comment on that.

Patrick Carroll

The properties that expired in fourth quarter although the square foot was high, they weren’t, they didn’t generate significant amounts cash rent Tony, so honestly the impact of those expirations really shouldn’t have any type of significant impact on us.

Anthony Paolone – J.P. Morgan

Okay so for instance like the 1.9 million square feet of leasing you did in 4Q, how much of that was say empty space that was already existing vacancy versus doing extensions or renewals for expirations that were further out in say 2008, 2009 etc…

Wilson Eglin

Let me look to the page, Tony.

Natasha Roberts

Seven of them were renewal extensions and that was 1.2 million square feet of the 19.

Anthony Paolone – J.P. Morgan

When were those originally set to expire?

Natasha Roberts

At the end of the fourth quarter.

Anthony Paolone – J.P. Morgan

Of ’07?

Natasha Roberts

Of ’07.

Anthony Paolone – J.P. Morgan

Okay and then looking out to ’08, it seems like the big leases are Raytheon, Boeing and Associates, First Capital are fairly large, what are the prospects for those either renewing or finding new tenants for the space?

Natasha Roberts

We started the marketing of those and with respect to the Raytheon building it’s substantially subleased so we believe that those sub tenants will stay in the building and we expect 70% occupancy upon the Raytheon expiration.

Wilson Eglin

With respect to Boeing we expect to have a renewal there.

Natasha Roberts

Again, with a subtenant.

Wilson Eglin

And your other one was Associates?

Anthony Paolone – J.P. Morgan

Yes.

Natasha Roberts

Again, there is mostly subtenants in that building, so we don’t expect that much vacancy.

Anthony Paolone – J.P. Morgan

What about capital costs relating to this leasing activity? CapEx, tenant improvements, leasing commissions. Is there a number or a level that we should be looking out for say ’08 and ’09?

Wilson Eglin

I guess what Tony is asking for is how much on the new lease, what square footage on the TI’s are we giving in general on a new lease compared to an extension.

Natasha Roberts

You know on a new lease, I would say we are probably in the $20 to $30 range and on an extension depending on the property, anywhere from $5 to $15 per square foot.

Wilson Eglin

Obviously that’s for office.

Natasha Roberts

There is almost always leasing commissions.

Anthony Paolone – J.P. Morgan

Switching gears on Concord. Do you plan on making additional contributions to Concord in 2008 in terms of this new equity put into it from LXP?

Wilson Eglin

We will take it as it comes; there is certainly opportunity in the debt space. It looks to me like if we could put capital out at yields that are many 400, 600 basis points wider than at this time last year. We do have some financing capacity there and we still have, we and Winthrop each have about $6 million committed that haven’t been funded yet. So I think our first focus is on utilizing that money and then we’ll figure out what our strategy is and that could include, for example, adding third-party capital to that platform. So we’ll just have to keep you posted as we make our way through the year.

Anthony Paolone – J.P. Morgan

With respect to the final tranche of assets getting contributed to the joint venture. In the press release you bolded sort of the hedge statement that there are a number of conditions to get this done, I think financial solvency of the tenants is one of those items cited, is there something we should be reading into there?

Wilson Eglin

It was written by an attorney.

Anthony Paolone – J.P. Morgan

Okay.

Wilson Eglin

So there is nothing you should be reading into that.

Anthony Paolone – J.P. Morgan

Okay, great. Thank you.

Operator

(Operator Instructions) Our next question comes from the line of Mark [Sivervetton] who is a private investor. Please go ahead with your questions.

Mark - Private Investor

Yes, folks, can you comment on the recent stock price and what the prospects are in the future, please?

Wilson Eglin

Sure. I mean the stock price certainly was under pressure. Towards the end of last year there was a huge trade-off in REITS in general I think since the top roughly a year ago, the REIT market is down about 27% and we are obviously not immune to that.

One thing I would just remind you about is that we did pay a huge special distribution of $2.10. So I actually looked at our performance over the last 12 months and we are in the top quartile of REITs which pleased me. I think there has been a little bit of confusion about the company’s strategy because of forming this joint venture and ending up having a special distribution that was smaller than we thought. So I think I'm optimistic that we are in a position to get rid of any confusion and lack of clarity that sort of has been hanging over the stock now that we’ve given guidance for this year and our strategic restructuring plans are for the most largely behind us. So we are looking forward to getting out on the road and hopefully introducing the company to new investors.

Mark – Private Investor

Thank you.

Operator

Our next question comes from the line of Sheila McGrath with KBW. Please go ahead with your questions.

Sheila McGrath - KBW

Yes, thanks. Will, I was wondering if you could repeat what you said about –- I missed some of it on the repurchasing of the debt securities?

Wilson Eglin

If you recall, about a year ago we did an exchangeable notes offering of $450 million and we effectively repurchased $89.5 million of that debt during the first quarter for a total of $78.2 million. So what we really did was we bought back those bonds at an average price of about 87.5% of par value so that’s roughly a discount of $11 million. When you factor that discount and we will be getting a return on our investments of a little bit over 9% between now and maturity.

So I guess the comment there is what’s happened in the debt capital markets has been problematic for some people but in this case we thought it created really a good opportunity for us to de-leverage the balance sheet and make a nice return at the same time.

Sheila McGrath – KBW

Can you give us again the timing of the next Inland closing and what that does to cash balances?

Wilson Eglin

I am expecting it will be between March 15th and March 31st and about $80 million of cash.

Sheila McGrath - KBW

Okay, alright thank you.

Operator

Our next question comes from the line of Frank Greywitt with RREEF. Please go ahead with your question.

Frank Greywitt - RREEF

Could you outline what your recurring CapEx budget is, the base building?

Wilson Eglin

I think that the right way to look at it, I mean it’s going to fluctuate during, depending on how much roll over in the Light that we have, but taking about $0.15 a foot on the portfolio is probably that is the right number.

Frank Greywitt - RREEF

For the quarter, what was the total CapEx amount, the TI plus LC plus recurring CapEx?

Patrick Carroll

In the lease costs, I don’t have it for the quarter. For the year we spent about $5.7 million in leasing commission and we spent I don’t know the exact amount, we spent a few million dollars on TI’s.

Frank Greywitt - RREEF

Going into ‘08 and ’09 with a higher role, you can do the math but with all the sub tenants in these portfolios with Raytheon ruled out, what do you expect the total TI and CapEx budget to be?

Patrick Carroll

In total we have roughly 6.8% of revenue rolling this year. I think it gets to what we expect with respect to retention of leases expiring and if we are at the 50% level I think we have got to take a magnitude $25 a foot on that square footage and turn on the balance.

Frank Greywitt - RREEF

Typically is that what you renew at, around 50%?

Patrick Carroll

No typically we renew at about 85%.But when you get to this point in the year and you still have these leases you have to expire, you are down well below that.

Frank Greywitt - RREEF

And then on the sub lease tenants is that considered a new or a renewal CapEx? I mean are you going to be providing dollars when Raytheon and others expire?

Natasha Roberts

If we need to provide dollars it would be renewal dollars.

Frank Greywitt - RREEF

Is there roll down in those rents? I’m assuming that there is.

Wilson Eglin

On sub lease rents? No.

Natasha Roberts

They are pretty much at market.

Wilson Eglin

And that I mean it generally gets better when there are direct leases.

Frank Greywitt - RREEF

Alright thanks.

Operator

Our next question comes from the line of [Sabina Bhatia] with Basso Capital. Please go ahead with your question.

Sabina Bhatia - Basso Capital

Hi and I apologize if I missed this. Can you please give some details on the impairment charges, the $22.7 million?

Wilson Eglin

$5.5 million of it related to the Concord loan portfolio where there was an impairment taken on several investment grade rated bonds, even though those bonds are all paying currently. The balance is attributable to three properties that were formally lease to tenants in the automotive sector. One of those properties in Overland Ohio was actually sold in the fourth quarter, but the two others are in the Detroit market and while we have gotten sort of past automotive from a credit standpoint, our vacancy in that market has been really tough.

Sabina Bhatia - Basso Capital

Where do you see the vacancy occupancy in the period of time, could you give us some color?

Wilson Eglin

I'm sorry, could you repeat the question?

Sabina Bhatia - Basso Capital

Where do you see the occupancy rates going as far as the automotive industry is concerned in 2009? Do you see it getting any better? Can you give us any color at all?

Wilson Eglin

We were down to those two significant vacancies and that’s really it. We have marked them down to what we think are quite conservative valuations. I'm hopeful that we’ll have a chance to sell one of those empty buildings this year.

So with any luck, hopefully by the end of this year, we will be at a minimum sold one of the buildings and have continued to reduce our exposure to Michigan.

Sabina Bhatia - Basso Capital

Okay great. Thank you so much.

Operator

Our next question comes from the line of William Segal with William Segal Incorporated. Please go ahead with your question.

William Segal - William Segal Incorporated

Thank you. You all are experienced landlords and as you look at your rent rolls, tenants, subtenants, what’s your feeling collectively about the creditworthiness and longevity, delinquencies, etcetera on your tenants across the board?

Wilson Eglin

You know it’s really good, about 56% of rents come from investment grade tenants. One of the things that we wanted to do last year was take advantage of the strong valuation market and reposition a bunch of our assets. So what we are left with actually is a much stronger portfolio from a credit standpoint and we have no delinquencies. So we are really pleased with our credit qualities in the portfolio.

William Segal - William Segal Incorporated

So 56% of credit tenants of the balance, pretty near credit tenants?

Wilson Eglin

There is a mix of unrated and non-investment grade tenants. Non-investment grade is roughly about 15% of revenue?

Patrick Carroll

About right.

Wilson Eglin

But the unrated tenants on average are probably in that BBB or BBB minus range, so a lot of people look at it and just saying, gosh, it’s unrated, that means it’s not a good company but the truth is a lot of them are either small but highly profitable companies or companies that don’t have debt to rate.

William Segal - William Segal Incorporated

But among those that are 60 days or so late on their rent would that be --?

Wilson Eglin

We have none.

William Segal - William Segal Incorporated

Terrific. Thank you.

Operator

There are no further questions in the queue. I would like to hand it back over to management.

Wilson Eglin

Once again, I would like to just say thank you for joining our call. We look forward to communicating to you our progress over the next few quarters this year. We are very excited about our prospects for 2008 and as always, we appreciate your interest in the company.

If you would like to receive our quarterly supplemental package, please contact Lisa Soares or you can find additional information on the company on our website www.lxp.com and in addition, you may contact me or any other members of senior management with any questions that you may have. Thank you and have a great day everyone.

Operator

Ladies and gentlemen, this does conclude today’s teleconference. Thank you for your participation. You may disconnect your lines at this time.

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Source: Lexington Realty Trust Q4 2007 Earnings Call Transcript
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