Exhibit 99.2
LEXINGTON REALTY TRUST
Introduction to Unaudited Pro Forma Condensed Consolidated Financial Information
The following unaudited pro forma condensed consolidated balance sheet information as of June 30, 2012, reflects the financial position of Lexington Realty Trust (the “Trust”) as if the acquisition of the remaining common equity interest in Net Lease Strategic Assets Fund L.P. ("NLS") from Inland American (Net Lease) Sub, LLC ("Inland") that the Trust did not already own, which occurred and is valued as of September 1, 2012, had occurred on June 30, 2012. The unaudited pro forma condensed consolidated statements of operations information for the year ended December 31, 2011 and the six months ended June 30, 2012, present the results of operations of the Trust as if the acquisition of NLS had occurred on January 1, 2011.
As the Trust is accounting for the transaction as a business combination, the NLS assets acquired and liabilities assumed were valued at their estimated fair values. The determination of the fair value of the assets and liabilities and the allocation of those values in this unaudited pro forma condensed consolidated financial information have not been finalized and are based upon preliminary estimates which could differ from actual results.
This unaudited pro forma condensed consolidated financial information should be read in connection with the financial statements of the Trust for the year ended December 31, 2011, included in the Trust’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 28, 2012, as amended by the Trust's Current Report on Form 8-K filed on August 30, 2012.
This unaudited pro forma financial information is not necessarily indicative of the expected results of operations of the Trust for any future period. Differences could result from, among other considerations, future changes in the Trust’s portfolio of investments, changes in interest rates, changes in the capital structure of the Trust, changes in property level operating expenses and changes in property level revenues.
| LEXINGTON REALTY TRUST | ||||||||||||
| Unaudited Pro Forma Condensed Consolidated Balance Sheet Information | ||||||||||||
| As of June 30, 2012 | ||||||||||||
| (In thousands) | ||||||||||||
| Historical | NLS | |||||||||||
| (A) | (B) | Pro Forma | ||||||||||
| Assets: | ||||||||||||
| Real estate, at cost | $ | 3,160,236 | $ | 325,310 | $ | 3,485,546 | ||||||
| Investments in real estate and under construction | 57,250 | — | 57,250 | |||||||||
| Less: accumulated depreciation | 693,627 | — | 693,627 | |||||||||
| 2,523,859 | 325,310 | 2,849,169 | ||||||||||
| Properties held for sale – discontinued operations | — | 32,114 | 32,114 | |||||||||
| Intangible assets, net | 163,718 | 124,330 | 288,048 | |||||||||
| Cash and cash equivalents | 50,189 | (1,331 | ) | 48,858 | ||||||||
| Restricted cash | 30,497 | 1,775 | 32,272 | |||||||||
| Investment in and advances to non-consolidated entities | 96,826 | (87,729 | ) | 9,097 | ||||||||
| Deferred expenses, net | 47,454 | — | 47,454 | |||||||||
| Loans receivable, net | 71,439 | 381 | 71,820 | |||||||||
| Rent receivable | 6,972 | 556 | 7,528 | |||||||||
| Other assets, net | 26,992 | 8 | 27,000 | |||||||||
| Total assets | $ | 3,017,946 | $ | 395,414 | $ | 3,413,360 | ||||||
| Liabilities and Equity: | ||||||||||||
| Liabilities: | ||||||||||||
| Mortgages and notes payable | $ | 1,263,228 | $ | 252,517 | $ | 1,515,745 | ||||||
| Credit facility borrowings | 35,000 | — | 35,000 | |||||||||
| Term loan payable | 206,000 | — | 206,000 | |||||||||
| Convertible notes payable | 106,118 | — | 106,118 | |||||||||
| Trust preferred securities | 129,120 | — | 129,120 | |||||||||
| Liabilities – discontinued operations | — | 16,611 | 16,611 | |||||||||
| Dividends payable | 23,987 | — | 23,987 | |||||||||
| Accounts payable and other liabilities | 59,592 | 1,613 | 61,205 | |||||||||
| Accrued interest payable | 11,941 | 958 | 12,899 | |||||||||
| Deferred revenue - including below market leases, net | 85,645 | 1,529 | 87,174 | |||||||||
| Prepaid rent | 16,787 | 2,777 | 19,564 | |||||||||
| Total liabilities | 1,937,418 | 276,005 | 2,213,423 | |||||||||
| Shareholders' equity | 1,052,186 | 119,035 | 1,171,221 | |||||||||
| Noncontrolling interests | 28,342 | 374 | 28,716 | |||||||||
| Total equity | 1,080,528 | 119,409 | 1,199,937 | |||||||||
| Total liabilities and equity | $ | 3,017,946 | $ | 395,414 | $ | 3,413,360 | ||||||
See accompanying noted to unaudited pro forma condensed consolidated financial information.
LEXINGTON REALTY TRUST | ||||||||||||||||
| Unaudited Pro Forma Condensed Consolidated Statement of Operations Information | ||||||||||||||||
| for the year ended December 31, 2011 | ||||||||||||||||
| (In thousands, except share and per share data) | ||||||||||||||||
| Historical (AA) | Pro Forma Adjustments of NLS | Pro Forma as Adjusted | ||||||||||||||
| Gross revenues: | ||||||||||||||||
| Rental | $ | 284,808 | $ | 44,246 | (BB) | $ | 329,054 | |||||||||
| Advisory fees | 2,012 | (769 | ) | (BB) | 1,243 | |||||||||||
| Tenant reimbursements | 31,404 | 966 | (BB) | 32,370 | ||||||||||||
| Total gross revenues | 318,224 | 44,443 | 362,667 | |||||||||||||
| Expense applicable to revenues: | ||||||||||||||||
| Depreciation and amortization | (158,344 | ) | (37,634 | ) | (CC) | (195,978 | ) | |||||||||
| Property operating | (58,317 | ) | (1,819 | ) | (BB) | (60,136 | ) | |||||||||
| General and administrative | (22,207 | ) | (310 | ) | (BB) | (22,517 | ) | |||||||||
| Non-operating income | 13,020 | 1 | (BB) | 13,021 | ||||||||||||
| Interest and amortization expense | (107,470 | ) | (14,148 | ) | (DD) | (121,618 | ) | |||||||||
| Debt satisfaction gains, net | 45 | — | 45 | |||||||||||||
| Change in value of forward equity commitment | 2,030 | — | 2,030 | |||||||||||||
| Impairment charges | (41,301 | ) | — | (41,301 | ) | |||||||||||
| Loss before benefit for income taxes, equity in earnings (losses) of non-consolidated entities and discontinued operations | (54,320 | ) | (9,467 | ) | (63,787 | ) | ||||||||||
| Benefit for income taxes | 826 | 310 | (EE) | 1,136 | ||||||||||||
| Equity in earnings (losses) of non-consolidated entities | 30,334 | (23,064 | ) | (GG) | 7,270 | |||||||||||
| Loss from continuing operations | $ | (23,160 | ) | $ | (32,221 | ) | $ | (55,381 | ) | |||||||
| Basic and Diluted EPS - Loss from continuing operations | $ | (0.32 | ) | $ | (0.53 | ) | ||||||||||
| Basic and Diluted weighted average common shares outstanding | 152,473,336 | 152,473,336 | ||||||||||||||
See accompanying notes to unaudited pro forma condensed consolidated financial information.
LEXINGTON REALTY TRUST | ||||||||||||||||
| Unaudited Pro Forma Condensed Consolidated Statement of Operations Information | ||||||||||||||||
| For the Six Months Ended June 30, 2012 | ||||||||||||||||
| (In thousands, except share and per share data) | ||||||||||||||||
| Historical (AA) | Pro Forma Adjustments of NLS | Pro Forma as Adjusted | ||||||||||||||
| Gross revenues: | ||||||||||||||||
| Rental | $ | 148,500 | $ | 22,100 | (BB) | $ | 170,600 | |||||||||
| Advisory fees | 1,088 | (303 | ) | (BB) | 785 | |||||||||||
| Tenant reimbursements | 14,936 | 525 | (BB) | 15,461 | ||||||||||||
| Total gross revenues | 164,524 | 22,322 | 186,846 | |||||||||||||
| Expense applicable to revenues: | ||||||||||||||||
| Depreciation and amortization | (80,258 | ) | (16,641 | ) | (CC) | (96,899 | ) | |||||||||
| Property operating | (28,958 | ) | (1,289 | ) | (BB) | (30,247 | ) | |||||||||
| General and administrative | (11,588 | ) | (395 | ) | (BB) | (11,983 | ) | |||||||||
| Non-operating income | 4,314 | 55 | (BB) | 4,369 | ||||||||||||
| Interest and amortization expense | (49,043 | ) | (6,497 | ) | (DD) | (55,540 | ) | |||||||||
| Debt satisfaction charges, net | (1,651 | ) | — | (1,651 | ) | |||||||||||
| Litigation reserve | (2,800 | ) | — | (2,800 | ) | |||||||||||
| Impairment charges | (1,348 | ) | — | (1,348 | ) | |||||||||||
| Loss before benefit (provision) for income taxes, equity in earnings (losses) of non-consolidated entities and discontinued operations | (6,808 | ) | (2,445 | ) | (9,253 | ) | ||||||||||
| Benefit (provision) for income taxes | (515 | ) | 120 | (EE) | (395 | ) | ||||||||||
| Equity in earnings (losses) of non-consolidated entities | 17,670 | (9,838 | ) | (GG) | 7,832 | |||||||||||
| Income (loss) from continuing operations | $ | 10,347 | $ | (12,163 | ) | $ | (1,816 | ) | ||||||||
| Basic and Diluted EPS - Loss from continuing operations | $ | (0.04 | ) | $ | (0.11 | ) | ||||||||||
| Basic and Diluted weighted average common shares outstanding | 154,353,707 | 154,353,707 | ||||||||||||||
See accompanying notes to unaudited pro forma condensed consolidated financial information.
LEXINGTON REALTY TRUST
Notes to Pro Forma Condensed Consolidated Financial Information (Unaudited)
(Dollars in thousands)
(1) Adjustments to Pro Forma Condensed Consolidated Balance Sheet Information
The adjustments to the pro forma condensed consolidated balance sheet as of June 30, 2012 are as follows:
| (A) | Reflects the Trust’s historical condensed consolidated balance sheet as of December 31, 2011. |
| (B) | Reflects the pro forma acquisition of NLS as follows: |
| Asset acquired: | ||||
| Real estate | $ | 325,310 | ||
| Intangible assets | 124,330 | |||
| Cash | 8,107 | |||
| Restricted cash | 1,775 | |||
| Properties held for sale - discontinued operations | 32,114 | |||
| Loan receivable | 381 | |||
| Rent receivable | 556 | |||
| Other assets | 206 | |||
| Investment in non-consolidated entities | 1,147 | |||
| Less liabilities: | ||||
| Mortgages assumed | 252,517 | |||
| Liabilities - discontinued operations | 16,611 | |||
| Accounts payable and other liabilities | 1,811 | |||
| Accrued interest payable | 958 | |||
| Deferred revenue | 1,529 | |||
| Prepaid rent | 2,777 | |||
| Net assets acquired | $ | 217,723 | ||
| Cash paid | $ | 9,438 | ||
| Less cash acquired | 8,107 | |||
| Cash adjustment, net | $ | (1,331 | ) | |
| Investment in non-consolidated entities acquired | $ | 1,147 | ||
| Less, investment in non-consolidated entities - historical basis | 88,876 | |||
| Investment in non-consolidated entities, net adjustment | $ | (87,729 | ) | |
| Noncontrolling interest in net assets acquired | $ | 374 | ||
| Other assets acquired | $ | 206 | ||
| Less, other assets - historical basis eliminated | 198 | |||
| Other assets adjustment, net | $ | 8 | ||
| Accounts payable and other liabilities acquired | $ | 1,811 | ||
| Less, accounts payable and other liabilities - historical basis eliminated | 198 | |||
| Accounts payable and other liabilities, adjustment, net | $ | 1,613 | ||
In addition, the Trust recognized a $119,035 net non-cash gain on a pro forma basis due to the fair value valuation of the NLS assets acquired and liabilities assumed that it did not previously own and the revaluation of its investment in NLS immediately prior to the acquisition to fair value in accordance with ASC 805. This non-cash gain is subject to change when the final fair value valuation of NLS assets and liabilities is determined.
(2) Adjustments to Unaudited Pro Forma Condensed Consolidated Statements of Operations Information
The adjustments to the pro forma condensed consolidated statements of operations information for the year ended December 31, 2011 and six months ended June 30, 2012 are as follows:
| (AA) | Reflects the Trust’s historical condensed consolidated statements of operations for the year ended December 31, 2011 and six months ended June 30, 2012. |
(BB) Reflects the pro forma acquisition of NLS as follows:
Change in rental revenues reflects (i) the recalculation of straight-line rents and (ii) the amortization of above and below market leases on a straight-line basis over the remaining term of in-place leases (8.7 weighted-average years).
Change in advisory fees reflects the elimination of asset management fees earned by the Trust related to NLS.
Change in tenant reimbursements, property operating expenses, general and administrative expenses and non-operating income reflect activities of NLS.
| (CC) | Depreciation has been adjusted to reflect the total capitalized cost depreciated on a straight- line basis over the estimated economic useful life of the real estate (40 years for buildings, 8.5 years for site improvements and 6.6 weighted-average years for tenant improvements). Amortization includes the pro forma effect of amortization of intangibles on a straight-line basis over the remaining term of the respective leases (5.7 weighted-average years). |
| (DD) | The pro forma adjustment to interest expense reflects additional interest expense as a result of mortgages assumed in the transaction. |
| (EE) | Represents the tax impact related to state tax expense on NLS properties and the tax impact due to the reduction in advisory fees. |
| (GG) | The pro forma adjustment to equity in earnings (losses) of non-consolidated entities reflects the elimination of the equity in earnings related to NLS and the impact of a non-consolidated entity acquired in the transaction. |
| Twelve months | Six months | ||||||
| 12/31/2011 | 6/30/2012 | ||||||
| Equity in losses of new non-consolidated entity acquired | $ | (523 | ) | $ | (255 | ) | |
| Less, equity in earnings of NLS | 22,541 | 9,583 | |||||
| Equity in earnings (losses) of non-consolidated entities adjustment, net | $ | (23,064 | ) | $ | (9,838 | ) | |