Hello and welcome to the Lexington Realty Trust Fourth Quarter 2016 Earnings Call and Webcast. All participants will be in listen-only mode. [Operator Instructions] After today’s presentation there will be an opportunity to ask questions. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Ms. Heather Gentry, Investor Relations. Please go ahead.

Thank you, operator. Welcome to the Lexington Realty Trust fourth quarter 2016 conference call. The earnings release was distributed this morning and both the release and supplemental disclosure package that detail this quarter’s results are available on our website at www.lxp.com in the Investors section and will be furnished to the SEC on our Form 8-K. Certain statements made during this conference call regarding feature events and expected results may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Lexington believes that these statements are based on reasonable assumptions, however certain factors and risk including those included in today’s earnings press release and those described and report that Lexington’s filings with the SEC from time-to-time could cause Lexington’s actual results to different materially from those expressed or implied by such statement. Except as required by law, Lexington does not undertake a duty to update any forward-looking statements. In the earnings press release and supplemental disclosure package Lexington has reconciled all non-GAAP financial measures to the most directly comparable GAAP measure. Any references in these documents to adjusted company FFO refer to adjusted company FFO available to all equity holders and unit holders on a fully diluted basis. Operating performance measures of an individual investment are not intended to be viewed as presenting a numerical measure of Lexington’s historical or future financial performance, financial position or cash flows. Joining me on today’s call to discuss Lexington’s fourth quarter 2016 results are Will Eglin, Chief Executive Officer; Pat Carroll, Chief Financial Officer and other executive members of management. I will now turn the call over to Pat, who will discuss the detailed related to last week’s press release regarding the rescheduling of this earnings call.

Thanks, Heather, good morning everyone. As indicated in last Tuesday’s release, we postponed our fourth quarter and full year financial results and conference call from February 23rd to this morning as we were still revaluating the treatment of a $7.7 million lease termination payment we received in the quarter ended June 30, 2016. This payment related to our West Lake Texas facility and was initially amortized into revenue starting in the first quarter of 2016 through June 30, 2021, which is the term of the lease with the replacement tenant. Upon further evaluation we determined that the $7.7 million lease termination payment should have been fully taken into income in the quarter ended June 30, 2016. You will find in note 20 to our financial statements contained in our Form 10-K filed this morning, we have restated the total gross revenues and net income and loss for the quarters ended March 31, 2016, June 30, 2016 and September 30, 2016 to reflect this treatment. I will now turn the call over to Will.

Thanks, Pat and hello and good morning to everyone, welcome to our fourth quarter 2016 earnings call and webcast. Our fourth quarter results rounded out a year of continued progress and success for Lexington. Over the past 12 months we enhanced and simplified our portfolio through focusing our investment activities on industrial properties, and successfully completing our 2016 dispositions program. Our leasing activity was strong and renewals rents increased on both a GAAP and cash basis. We strengthened our balance sheet flexibility by reducing our leverage to its lowest level in recent years and our outstanding debt is currently all at fixed rates. We took advantage of our share buyback plan earlier in the year and our ATM later in the year at what we believe to be opportune times in the market. And finally, we raised our common share dividends for the first time since 2014. We are very proud of our team and their hard work and we continue to move towards what we believe is the best version of our company. So let's take a closer look at certain key areas of our business for the quarter and 2016 as well as our 2017 expectations. Dispositions for the quarter, which consisted of 9 office properties totaled $87.1 million. This brought 2016 consolidated asset dispositions to $663 million at GAAP and cash cap rates of 10.2% and 5.1% respectively. We approached the high end of our 2016 dispositions guidance of $600 million to $700 million with pricing coming in better than our initial estimated cash cap rate range of 5.75% to 6.5%. Subsequent to the end of the fourth quarter we have sold $89 million of assets at average GAAP and cash cap rates of 10% and 10.2%. These sales were a mix of non-core assets consisting of…

Thanks, Will. Gross revenues for the quarter ended December 31, 2016 were $95.3 million, compared with gross revenues of $106.6 million for the same time period in 2015. Gross revenues for the year ended December 31, 2016 total $429.5 million compared to $430.8 million for the same time period in 2015. The decreases in both periods are primarily attributable to the sale of properties, including the New York City land investments offset by acquisitions. Net income attributable to common shareholders for the quarter ended December 31, 2016 was $0.06 per diluted common share or $14.4 million compared to net income attributable to common shareholders of $0.14 per diluted common share or $33.2 million for the same time period in 2015. We recognized approximately $24 million of impairment charges during the fourth quarter of 2016, primarily related to a tenant lease termination in Rock Hill, South Carolina in connection with the liquidation. Net income attributable to common shareholders for the year ended December 31, 2016 was $0.37 per diluted common share or $89.1 million compared to net income attributable to common shareholders of $0.45 per diluted common share or $105.1 million for the same time period in 2015. Our 2017 guidance for net income attributable to common shareholders is expected to be within a range of $0.64 to $0.67 per fully diluted common share. Adjusted company FFO for the quarter was approximately $59.7 million or $0.24 per diluted common share compared to $69.6 million or $0.29 per diluted common share the same time period in 2015. The decrease was primarily attributable to the sale of the New York City land investment and other dispositions. For the year ended December 31, 2016, we generated adjusted company FFO of $277.7 million or $1.14 per diluted common share compared to $268 million or $1.10…

Thanks again Pat. 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.

Yes, thank you. We will now begin question-and-answer session. [Operator Instructions] And the first question comes from Sheila McGrath with Evercore.

Yes, good morning. Will, if you look at the assets that you are selling in 2017 and the under contract to acquisitions, any idea of roughly what your weighted average lease term would look like towards the year-end or just assuming those you are at 8.6 years now?

I think our expectation is that it will migrate over nine years as we move through the process of selling the assets in the plan this year and acting on new opportunity.

And then your leverage level is lower than it has been and I guess with the recent ATM issuance even lower. I don’t think in your guidance you included any acquisitions over and above what’s under contract. How much dry powder do you kind of pursue you have and what level net debt-to-EBITDA range do you want to operate under?

It looks to me that as we go through the year, we would be sort of in the mid 5s that would be our expectation as we go through the years as our business plan is currently contemplated. We've raised at the beginning of the year obviously a lot of disposition activity has been accomplished including the sale the Kennewick loan that we accomplished recently with - I think that bring our total capital raise from dispositions to about $184 million. So obviously our acquisitions closed we’re $51 million plus in build-to-suit fundings, so far in the quarter. So we have a very strong position from a liquidity standpoint, our credit lines are fully available. So the balance sheet is in great shape.

Okay. And last question, Pat if you can just remind us, I know there is a piece of debt in your capital stack that interest rate resets, can you just remind us how that's going to impact 2017?

Sure. It's roughly $129 million of debt that has maturity through 2037; it's currently at roughly 6.8%. Starting in May of this year, it converts to a 90-day LIBOR plus 170. So I think right now from this last night, 90-day LIBOR like 105. So plus 170, 275 interest rate compared to 680 on $129 million of debt, it starts in May of this year.

Okay, great. Thank you.

Thanks, Sheila.

Thank you. And the next question comes from Anthony Paolone with JPMorgan.

Yes. Thanks good morning. On the South Carolina bankruptcy, is that expected or how do that unfold?

Well, no, I would say it wasn’t expected, the company just ran into cash problems with reimbursements from the government and they liquidated.

Okay. Anything else…

It was about $1.4 million of GAAP income last year, Tony.

Okay, got it. And what is the watch list look like going into 2017?

It's actually pretty good; I mean we do have two Gander Mountains, which they're current in their rent to us. We have a couple other small retailers, very small retailers that are on our watch list. They are like $19,000 a month in rent other than that everybody is current. So…

Candidly Tony, we felt like our biggest credit risk in the portfolio was on the mortgage loan on the hospital in Kennewick, Washington. So the fact that we were able to sell that loan, we felt like it was very important from a credit standpoint.

Okay, got it. And then on - you guys have done a couple of Amazon things I think at this point, is there a pipeline there, is there a relationship, or it’s just happen that you got a couple of Amazon deals just part of the regular way mix?

I think for now I view it as more normal course of business. Although we would be interested in - we now have three buildings leased to Amazon in the portfolio. So we'll be trying to work those relationships to create more opportunity.

Okay. And then in terms of as you look out to the deal flow where you're forcing or seeing the most opportunities to find deals these days?

I would say it's a balance between build-to-suit and purchases principally in the warehouse and distribution area. And the purchase opportunity seemed to be sort of clustered in 6 to 6.5 cap area, going in. And most of that is 10 year product, but there is some attractive seven year opportunities that we're looking at as well.

Okay, that's all I had. Thanks.

Thank you. And the next question comes from Craig Mailman with KeyBanc Capital Markets.

Hey everyone, this is Laura Dickson here with Craig. Just want to follow-up on the capital question, earlier. How are you thinking about sources and uses in 2017 specifically like using the ATM versus leverage given you’re little under levered currently?

Yes, and we don't have any meaningful debt to pay off this year. So the opportunity to shrink our leverage really isn’t there. We have run the ATM a little bit, recall that we have repurchased 3.4 million shares when we were buying back stock. And we’ve sold some shares. But I think the message this morning should be that we are relying predominantly on internally generated funds to execute the business plans this year as we have demonstrated with what we’ve sold so far. So it’s nice that the share price has done well and rebounded from its lows about a year ago, but we would still be I think expect to be stingy with respect to issuing equity.

So would there be any assumption for unsecured debt in the year?

No we have no plans for secured debt during the year, although it’s possible that we might fund one or two opportunities. But there is nothing secured in the model at this point.

Okay. And then curious what you are seeing in the acquisition market, is there any movement in cap rate?

On the shorter lease side, right in the industrial area, we really haven’t seen much of a move. On the longer lease assets we would argue that there should be a pricing adjustments to reflect the move in the bond market in the last four or five months. Especially for forwards that might be long-term, so like right 18 to 18 months to two year forwards, where there might be an expectation that interest rates may rise. So there hasn’t been a whole lot of built-to-suite opportunity, but we think that yield opportunities have moved in, in our favor on that stuff with much less so on the warehouse and distribution purchases.

Yes, I guess in terms of the built-to-suite market are you seeing anything, any changes in expectations from developers and have your return expectations changed?

I would say, no.

Okay. And then last one, just wanted to know what you consider to be value of your non-core portfolio now? Or how much to non-core is in your portfolio now?

Well, it continues to shrink, I think that what we have identified for sale this year would put us much closer to being thrilled with this process. So I would expect disposition activity in 2018 to be less than it is this year. We always want to be recycling capital and trying to upgrade the quality of the portfolio. Last year obviously we did a very heavy lift with respect to dispositions and portfolio repositioning. This year the theme is the same, but the dollar volume is less. And I would expect that that trend would continue next year. A continue to focus on dispositions to upgrade the quality of the portfolio, but less of a need from a volume standpoint to get to where we want to be.

Okay, great. Thank you.

Thank you. And the next question comes from John Guinee with Stifel.

Great. I get - hi Will and team nice quarter, nice guidance. Obviously you guys want to change the optics you want to be perceived more as an industrial REIT, while still having some lease duration. A year ago $11 a share was a pipe dream and now it’s you have been pretty stable on the $11 line not just raise the issue another 30 million or 40 million shares and hit the market hard in terms of acquiring industrial and changing the strides?

Well we are changing the strides slowly and steadily John and we have accomplished a lot. I think the picture that we have of our company in our mind is still one that where we would argue there is several turns of multiple expansion ahead of us. So right now we have a very, very strong cash position and I don’t see the value in issuing a whole lot of equity and putting cash in the bank and then running out into the market to chase transactions in a competitive acquisition environment. So I mean you are right, our cost of capital is good and our currency is good. And we'll take advantages of opportunities to use it. But having a massive equity raise is not part of the plan.

Got it, okay. Next wearing shareholder fiduciary hat looks to me like your G&A is up $8 million or $10 million in the last five years, what's happened?

John we - management has compensated a lot through the issuance of…

Lot?

No, issuance through common shares, and as the share value has increased the compensation along with that has too. And the governance committee and the comp committee get benchmarking against other REITs and they're extremely diligent in making sure that management is fairly compensated and within the peer group.

Got you. Nice job, thanks.

Thank you.

Thank you. [Operator Instructions]. And the next question comes from Jon Petersen with Jefferies.

Great. I just want to make sure of understanding the $7.7 million lease termination payment correctly. With your strategy focusing on long-term lease type tenants, our termination fees are fairly common. So what’s kind of different about this one that caused you guys to report it differently?

Well it was a termination that we received to get a new tenant in. The previous tenant occupied the property about 60% and the new tenant wanted the property all about 100%. So it was an opportunity to get somebody in there for 100%. And the calculation of the $7.7 million was the difference between the rental streams between the two leases plus to reimburse this for the cost that we were going to incur in getting the new tenant in whether it's TIs and leasing commissions. So from a standpoint of an accounting that's how we tied it in to the new lease. But during the fourth quarter close, we revaluated that $3 million and felt that it was appropriate not to tie it to the new lease, but to taking into income immediately in the quarter.

Okay, alright. That makes sense.

And lease terminations are not a big part of our business, as a single tenant on our property that's not the world we live in.

Yes, I was just asking because I know Pat you're a little bit of a GAAP accounting nerd. So there's no way to kind of screw this up. So I just want to make sure there is something kind a unique about this. Alright, that's all I got.

I respect the nerve comment actually. But we looked at it as tied to the new one, but we realized that was not the appropriate way of treating it and in our footnotes we restated the impact it had each quarter.

Okay thank you. Appreciate it.

Thank you. And as there are no more questions at the present time, I'd like to return to Will Eglin for any closing comments.

Great, well thanks again everybody for joining us this morning. We appreciate your continued participation and support. If you would like to receive our quarterly supplemental package please contact Heather Gentry or you can find additional information on the company on our website at 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. The conference is now concluded, thank you for attending today's presentation. You may now disconnect.