Greetings. And welcome to the Lexington Realty Trust Third Quarter 2014 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. (Operator Instructions) As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Ms. Gabby Reyes, Investor Relations for Lexington Realty Trust. Thank you. You may begin.

Hello. And welcome to the Lexington Reality Trust third quarter 2014 conference call. The earnings press release was distributed over the wire this morning and the release and supplemental disclosure package will be furnished on the Form 8-K. In the press release and supplemental disclosure package, Lexington has reconciled all historical non-GAAP financial measures to the most directly comparable GAAP measure in accordance with Reg G requirement. If you did not receive the copy, these documents are available on Lexington’s website at www.lxp.com in the Investor section. Additionally, we are hosting a live webcast of today’s call, which you can access in the same section. At this time, we’d like to inform you that certain statements made during this conference 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 expectations reflected in any forward-looking statements are based on reasonable assumptions, Lexington can give no assurance that its expectations will be attained. Factors and risks that could cause actual results to differ materially from 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 and include the successful confirmation of any lease, acquisition, build-to-suit, financing or other transactions or the final terms of any such transaction. Lexington does not undertake a duty to update any forward-looking statements. Joining me today from management are Will Eglin, Chief Executive Officer; Robert Roskind, Chairman; and Patrick Carroll, Chief Financial Officer. Now I will turn the call over to Will.

Thanks, Gabby, and welcome everyone. Thank you for the joining the call today. I would like to begin by discussing our operating results and accomplishments for the quarter. For the third quarter of 2014, our company funds from operations as adjusted were $0.28 per share, a 12% increase compared to the third quarter of 2013, primarily driven by investment activity over the past year and refinancing savings. In the quarter, we invested $51 million in on-going build-to-suit projects and loan investments, and sold five properties for $52.6 million consistent with our portfolio management and capital recycling objectives. Our strong and steady leasing work continued and we executed leases totaling approximately 510,000 square feet, ending the quarter with a more balanced rollover schedule and our overall portfolio 97.6% leased, down slightly compared to second quarter. These accomplishments furthered our objectives to continually improve our portfolio and strengthen our cash flows, while also reducing the risk associated with lease rollover. We remained active in the single tenant transaction market and our investment pipeline continues to be strong, especially looking ahead for 2015. In the third quarter, we continued funding multiple underway build-to-suit projects and placed $155 million forward purchase industrial investment under contract. This asset is located in Richland, Washington and will be a 456,000 square foot cold-storage warehouse and distribution facility for preferred freezer services, which will service a 20-year contract with ConAgra Foods at this location. Subsequent to quarter, we also acquired two properties for $49.5 million bring our total capital invested in 2014 to $248.2 million. These two investments were land parcel on West 45th Street in New York City subject to a 99-year ground lease to an operating hotel and a rehabilitation facility leased to HealthSouth rated BB minus for 28 years with annual CPI escalations with no…

Thanks Will. During the quarter, Lexington had gross revenues of $109.5 million, comprised primarily of lease rents and tenant reimbursements. The increase compared to the third quarter of 2013 of $16.5 million relates primarily to acquisitions and build-to-suit projects coming on line. For the quarter and nine months ended September 30, 2014, GAAP rents were in excess of cash rents by approximately $13 million and $29 million respectively. On page 18 of the supplement, we have included our estimates of both, cash and GAAP rents for the remainder of 2014, through and including 2018, for leases in place as of September 30, 2014. We have also included same-store NOI data and the weighted average lease term of our portfolio as of September 30, 2014 and 2013. Property operating expenses increased $1.8 million, primarily due to the increased use in occupancy in multi-tenanted properties with base year cost structures, the acquisitions of properties with full recovery of operating expenses and the net impact of management of certain properties being transferred between us and the tenant. Non-operating income increased $3.3 million relating primarily to interest earned on our loan portfolio. In the third quarter of 2014, we recorded $2.8 million in property impairments and $18.5 million on gains on sales of properties. Interest and amortization expense increased $2.9 million primarily due to the issuance of our 4.4% bonds and the $213.5 million mortgage on our New York City land deals. On page 41 of the supplement, we have disclosed selected income statement data for our consolidated but non-wholly owned properties in our joint venture investments. We also have included net non-cash interest recognized in the nine months ended September 30, 2014 on page 42 of the supplement. For the nine months ended September 30, 2014, our interest coverage was approximately 3.2 times…

Thanks, Pat. As we look ahead to 2015, we expect to continue to execute on our strategies to build an even better and stronger company, especially after dealing with the leasing challenges through the first half of 2015. The impact of our acquisition activity, combined with our capital recycling, is improving the composition of our portfolio and is driving long-term cash flows that are far more secure, given our extended weighted average lease term and the number of leases we have with annual or other escalations. We expect to continue to execute proactively on leasing opportunities in order to maintain high levels of occupancy and further address lease expirations, unlock values on non-core properties and certain fully valued properties with the bias toward reducing our suburban office and multi-tenant exposure, capitalize on refinancing opportunities, and finally continue to invest in build-to-suit properties and other investments to drive cash flow growth and value for all shareholders. We believe our company remains well-positioned with an attractive dividend yields, a conservative payout ratio and a strong cash position. We are encouraged by the opportunity to continue to execute on our strategies to improve cash flow, enhance our portfolio and provide ongoing value creation for our shareholders. Operator, I have no further comments at this time, so we are ready for you to conduct the question-and-answer portion of the call.

(Operator Instructions) Our first question is coming from the line of Sheila McGrath with Evercore ISI. Please proceed with your question.

Yes, good morning. Will, I was wondering if you could talk about the ground lease transaction in the quarter and remind us how you underwrite those transactions and where is the property in Manhattan?

Sure, Sheila. It’s essentially a mirror transaction to the one that we did a year ago on the three ground parcels in Manhattan and it’s the same party involved. So it’s a 99-year ground lease, the going in cap rate is about 4.93%, and the annual escalations are 2%, but every 10 years, there is a CPI adjustment up to 3%. So there is a little bit more inflation protection than you typically see in a build-to-suit. And every 25 years, there is an option to purchase the ground at a value that would give us the 7.5% free and clear internal rate of return. We find that very attractive compared to a free and clear IRR and many of the build-to-suit office buildings that we look at. And there is great financing available on transactions like this. If you recall last year on Manhattan ground transaction, we financed our purchase with 70% loan-to-value financing at an interest rate of about 4%, I think 4.66% on a fixed rate basis. We haven’t decided how we are going to finance this purchase, but if we were to use secured financing, leverage of greater than 80% is available and the 10-year interest rate would be about 4.25. So we are very pleased with that investment. And it’s ground on West 45th Street between 5th and 6th Avenue.

Should we expect more of these ground lease transactions from Lexington?

We would like there to be more. There is nothing of significance that’s in the pipeline, but we continue to be interested in building our portfolio of ground investments or other assets where most of the value is in the land and less is in the improvements.

Okay. And then could you comment on the turmoil at ARCP and related entities? It makes most people think they will probably be less active buyer. And I am just wondering your view might this free up more acquisition opportunities for Lexington?

Well, time will time. There have been a couple of transactions that have come back to the market this week, whether that’s related specifically to the ARCP situation or not. It’s not clear. But market participants are well aware that ARCP has been veracious acquirer of net lease properties for several years. And to the extent that their growth ambitious are curtailed that should mean that our investment opportunities for the rest of us sure engaged in this business.

Okay. Thank you.

Thank you. Our next question is coming from the line of John Guinee with Stifel. Please proceed with your question.

Great. Okay. Thanks. Let me just kind of go through page-by-page. First on Richland, Washington industrial $155 million, that’s an awfully big, industrial building, how big is that thing?

256,000 square feet, John. And two-thirds of it is freezer space.

So what’s that on a price per pound?

That’s about $350 a foot.

Okay. So this is really a CBD office building disguised as a freezer warehouse?

Well, no, it’s just highly mechanized and obviously, it has very expensive improvements in it.

Great. Okay. Then the next page on dispositions, interesting, the primary sale was San Antonio industrial sort of 9-ish cap, can you talk through why you decided to sell that for a $41 million?

While it was a shorter term lease, John, and actually that building had a high component of office space as well. I mean, on a square footage basis, it was more industrial than office but it did have a very high component of office space. The tenant was leaving that building and so it made sense for us even though with a high -- fairly high cap rate we thought on a per foot basis it was an attractive exit price for us.

Great. Okay. And then Lake Mary, you did a five-year extension with J.P. Morgan like Marriott which is north of Orlando? Looks like about the 15% net rent roll down? What kind of a TI leasing commission package went with that, if anything?

Hold on John. There were no TIs, John.

Okay.

And there was some leasing commissions but no TIs and about $170,000 of leasing commissions on each property.

Okay. And then -- but you had mentioned, Pat, about $300 -- I think you had mentioned $10 million of TI and leasing commission spend in the fourth quarter?

That’s right.

What’s that growth relate to?

It’s on deal that we’ve done. It’s on various deals, but about half of it is on deals that we’ve signed up already this year, with the actual payout on commissions that we’ve -- actually we have TIs that we’ve given to other leases that we signed, but…

Okay. Is it $10 million for TIs or $10 million for TIs and leasing commissions?

Both.

Okay. And all right, and then, if I’m going through page, I guess 11, you provide, you have a company reported FFO and then you have a company FFO as adjusted? Do you report a NAREIT defined FFO anywhere?

We show FFO on a fully diluted basis and everything that can convert, does convert and that’s how we feel -- that’s how we manage our business we feel the best way to monitor.

Okay. But so you do not provide a NAREIT defined number from which to then work off of to get to yours?

No. We show -- we start with net income available to common shareholders and we adjusted down for diluted securities or securities that can convert, I should say.

We never stop anywhere in the process to get a NAREIT defined FFO?

No.

Okay. Got you. All right. And going through the supplemental sort of page by page, let see here, we talked about Lake Mary? Can you roll through specifically what leases will or -- on page 31 and I guess, 33 are gone, Bridgewater, New Jersey, did they leave and then Issaquah, Rochester, Canonsburg?

Yeah. What we’ve said in our comments, John, was that our tenants for the fourth quarter lease expirations were leaving.

Okay. So this is all five of them. Okay.

Yes.

All five at the office are leaving, right?

Correct.

Okay. And then in ’15, which ones are leaving?

It’s Federal-Mogul, Southfield Michigan, Lakewood Colorado, and Foxboro Massachusetts.

Okay. And then none of the other ones in ’15 as of now, or you just don’t have clarity on it?

There maybe a vacancy or two later in the year but retention gets better. So we’re fairly optimistic about how rollover will be in the second half of the year.

Just out of curiosity, are most of these the inland portfolio that got put back or is it a mix?

No. It’s a mix.

Okay. And then if I go to page 33 on the industrial properties in ’15, any of those -- they’re kind of minor or any of those?

Yeah. We got a short-term extension from SKF USA but we don’t think we’ll be in that building long-term but that is very small. And the other two we have, we have discussions ongoing.

Okay. And then so when I get to page 36, thank god for assets specific debt imputed sales. I guess, Issaquah is back to the lender. What else on this list goes back to the lender? Houston, Texas?

Issaquah, Houston, Texas, Rochester and Bridgewater.

Okay. Okay. And then if I go back to, down to page 40, you’ve got about $133 million of notes receivable. It looks like Norwalk, $33 million. If I look at footnote three, interest rate increasing to 12.5% that implies a default going from 7.5 to 12.5. What we should we think about as a good value of that loan?

The borrower essentially asked for a six-week extension to refinance us and so we said great but we’ll take the default rate for such a short-term extension. So right now, we expect the loan to be fully repaid in 4Q.

On December 1st.

Good. Okay. You are going to drive up there and pick up the check. Okay. Westmont, Illinoi, the loan balance is $12.3. Balloon payment is $25.7 million. What exactly does that mean? And how should we look at that value of that mortgage loan receivable?

We previously wrote the loan balance down. We took about a $14 million impairment charge, give or take and we wrote it down is what we felt the underlying value of the property was, which is the $12.3 million.

Got you. Okay. And then Washington -- refresh our memory, why was the Kennewick, Washington structured as a loan? That s a hospital, I think right?

Yeah. That’s right.

Okay. Perfect. Perfect. Perfect. Okay. Great. Great. Great. Any chance -- last question, any chance given what’s happening to other names in the triple-net space that you guys would sort of comply with what NAREIT would like and start with a NAREIT defined FFO and working your way down the company to defined FFO?

We can do anything. John, that’s fine. I mean, I think the way we do it and we’ve been doing it this way since Lexington started is more indicative of our business. But you can do stop loss anywhere in the calculation of FFO. We think by showing it, as every thing coverts though and showing the denominator of our calculation show a fully diluted position. It’s honestly the best presentation. But that’s also we can address again in fourth quarter.

Right. Okay. And then I’ll ask one more question. I think, Sheila had mentioned this. Will, you clearly like the long-term ground lease position, 7.5% look back. Is that a business that could become 30%, 40%, 50% of your portfolio?

We really don’t have visibility on a large pipeline of acquisitions that would contemplate that it could get that big. But we continued to work on generating transactions, but I don’t see the volumes escalating to the point where it would become that big a piece of our business. But we’d like to have more of it, but that would be pretty ambitious to view it as being one third of the company.

I think your basic premise is land doesn’t depreciate hard asset do.

Yeah. Well, some hard assets do. Certainly in suburban office, there is risk of obsolescence more so than in other asset types. So having land positions as you point out is a good hedge against that risk in suburban office specifically.

Great. Wonderful disclosure. Thanks for everything. Have a good holiday.

Thank you, John.

Thank you. Our next question is coming from the line of Craig Mailman with KeyBanc Capital Markets. Please proceed with your question.

Hey guys. Just a follow-up on the land acquisition, just given the dilutive going in return and maybe you asked that bought down [$125] (ph) or 17-ish percent return kind of how do you view that versus really getting the delays economic outside from a build-to-suit but typically much better economics?

Well, we met with the economics by our expected IRR Craig. So you are right, some investments have high current return and that s a component of their internal rate of return, others have more capital appreciation. So we looked at it as a long-term accretive investment. And if we financed it as well as we think we can, we’ll probably -- there is a chance we could generate above an 8%cash-on-cash return in year one. So for some thing that’s so safe that seems pretty appealing to me.

Okay. And then you had mentioned that the pipeline is looking good for ‘15. I know you have not given guidance yet but just for what you said today, do you think that investment activity could ramp relative to 2014 or it’s too early?

Well, right now based upon what we are contractually committed to, its comparable to this year, we’re a little bit more .So that’s a great position going into next year. Obviously we are working on lots of things. And we hope that our pipeline will continue to grow. And as discussed earlier, there has been some disruption in the market place recently, that might create additional transaction opportunity for us. So we’re very optimistic as we look at next year.

Okay. And just one last one, 100 Light Street has been talked about in the past about being a disposition candidate. Where are you guys in the process, when do you think potential timing could be?

We are working on marketing material for 100 Light Street. So our expectation is that we would test the market for that building, yes, probably early next year at this point. It is very highly occupied but there is a little bit of leasing opportunity that we like to see if we can capitalize on in the interim.

Perfect. Thank you, guys.

Thank you. Our next question is coming from the line of Anthony Paolone with J.P. Morgan. Please proceed with your question.

Thanks. I should I have a couple left. Will, you mentioned the magnitude of the roll downs on renewals in ‘15?

Consistent with what we’ve said before, Tony, we think that leasing spread in offices it has been but we are still on 15% to 20% down scenario on those renewals. The dynamic is that we have property funding off of 10-year lease, the rent is going up 2% a year for 10 years, and it’s got the deployment where it’s above markets. So we still have that dynamic inside the portfolio next year. Our view with respect to 2016 is that on renewals on an overall basis, we think we could be neutral to slightly ahead, but 2015 we still have some negative leasing spreads that continue to work through.

Okay. And then anyway to put some numbers around what percentage of the portfolio you really long-term would like to get rid of. I mean instead of light street and some other things, it sounds like you want on unload just if you could do it all at once, what would be the magnitude of that?

Well, as we look ahead, I think that in our minds we really, really like about 85% of our portfolio. So that means that we still have quite a few candidates for sale or capital recycling.

Okay. And then last question on page 25 of the packet where you have your financial covenants. The one thing I just want to clarify since we want to talk about the land. In the ground lease covenant, I think it’s E -- row E, is that buildings that you own that are subject to ground leases, or is that like the New York land where you actually own the fee?

No, that properties where we only -- we don’t own the land and we only own the improvements.

Okay. Got it.

So these new actually land deals are not in that number.

Right. Okay. That makes sense then. Thank you.

Thank you. Our next question is coming from the line of Tayo Okusanya with Jefferies. Please proceed with your question.

Yes. Good morning. Just two for me. First of all, the positive comments that you made about your investment outlook, would that pertain just to your acquisition outlook or does that also include BTS, the build-to-suit business?

Both yes.

So it is both, okay. That’s helpful. And then for the rehab hospital acquisition that was made. Just taking a look at that cash yield of 5-inch, I guess when I compare that against other rehab acquisitions of some of the health care recently, HealthTap somewhat new. Just kind of curious how that transaction transpire and how you felt comfortable with that pricing?

Yeah. What was interesting to us Tayo is that we have a 28-year lease there with HealthTap and there are annual escalations tied to CPI without any cap. So to be able to acquire a long-term lease with credit behind it, which essentially has unlimited inflation protection, I know that we are in an environment where no one is nervous about inflation but 28 years is a long time. So we thought that that was a rare opportunity to be able to like I said buy a long-term lease with credit with unlimited inflation protection.

Could you give me a sense of what the rent coverage is on that transaction?

From it’s direct with HealthTap, so we have -- that would be minus. Yeah, we have the corporate fair number for the guarantee on the lease.

For the guarantee, okay. That’s good enough. Okay. Thank you very much.

Thank you. Our next question is coming from the line of Geoff Dancey with Cutler Capital Management. Please proceed with your question.

Thanks. Actually my questions have been answered.

Thank you. It appears there are no further questions at this time. I would like to turn the floor back over to Mr. Eglin for any additional concluding comments.

Well, thanks all of you for joining us this morning. We are very excited about our prospects for the balance of this year and beyond. And as always, we appreciate your participation and support. If you would like to receive our quarterly supplemental package, please contact Gabriela Reyes or you can find additional information on the company at our website www.lxp.com. And in addition, as always, you may contact me or the other members of our senior management team with any questions. Thanks again.

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