Good day, and welcome to the Lexington Realty Trust Third Quarter 2018 Earnings Conference Call and Webcast. All participants will be in listen-only mode. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Heather Gentry, Investor Relations. Please go ahead.

Thank you, operator. Welcome to the Lexington Realty Trust third quarter 2018 conference call and webcast. The earnings release was distributed this morning, and both the release and quarterly supplemental are available on our website at www.lxp.com in the Investors Section, and will be furnished to the SEC on Form 8-K. Certain statements made during this conference call regarding future 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 risks, including those included in today's earnings press release, and those described in the reports that Lexington files with the SEC from time-to-time could cause Lexington's actual results to differ materially from those expressed or implied by such statements. Except as required by law, Lexington does not undertake a duty to update any forward-looking statements. In the earnings press release and quarterly 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 funds from operations 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 flow. On today's call, Will Eglin, CEO; Pat Carroll, CFO; and Executive Vice Presidents, Brendan Mullinix, Lara Johnson, and James Dudley will provide commentary around our third quarter results. I will now turn the call over to Wil.

Thanks Heather, and good morning, everyone. We had a very active third quarter most notably on the disposition front and finished the quarter with solid financial and operational results. Year-to-date we've completed almost a $1 billion of dispositions, far exceeding our initial guidance of $250 million to $350 million. As a result, we have made meaningful progress in transitioning the portfolio to consist of primarily single tenant net leased industrial assets. The most significant transaction we completed with the sizeable $726 million 21 office property portfolio disposition to a joint venture. We are extremely pleased with the transaction which we believe advanced several of our key strategic objectives. Industrial revenues increased to 61% of our overall portfolio, up meaningfully from 44% at the beginning of the year, while significantly reducing office revenues to 34% down from 52% at the beginning of the year. In addition, we utilized sale proceeds to reduce our leverage from 6.2x net debt to adjusted EBITDA at the end of the second quarter to 43x at the end of this quarter. The 3.8 million square-foot portfolio was sold for $190 per square foot with GAAP and cash cap rates of 8.6% and 8.1% respectively. The portfolio consisted of mostly older vintage properties with an average age of about 23 years, and the value obtained was enhanced by high occupancy and long leases. Our partner owns 80% of the venture and we own 20% or approximately $54 million of initial equity. The joint venture structure provides the opportunity for future upside through promote, and we will continue to manage the assets for an attractive fee of 85 basis points on equity or approximately $1.8 million annually. Net proceeds from the transaction of approximately $565 million provided us a substantial amount of capital to repay debt, invest in…

Thanks Wil. Our investment strategy continues to focus on the purchase of high-quality single tenant industrial facilities in primarily secondary markets. As evidenced by our most recent acquisition activity, we are active in primary markets as well. We are most interested in acquiring well located, generic easily repurposed warehouse distribution centers with lease terms varying in duration. User demand still calls for larger bulk warehouse options and we expect to invest further in regional, super regional and national distribution centers. In terms of markets, we are reviewing opportunities in many of the markets where we have been active historically, including the Southeast and Midwest focusing on locations that offer strong infrastructure and access to favorable demographics including significant population growth. We are also inclined to act on opportunities like our development joint venture in Columbus, Ohio where we have the ability to generate incremental yield. Looking at the third quarter, we purchased three industrial properties for a total of $71 million at average GAAP in cash cap rates of 6.1% and 5.6% respectively. The three properties acquired were all warehouse distribution centers comprising one million square feet. Subsequent to quarter end, we were able to extend one of the leases bringing the weighted average lease term on the three acquisitions to eight years. Two of these assets were purchased as a portfolio and include a 258,000 square foot facility located in Houston, Texas and at 342,000 square foot facility in Spartanburg, South Carolina. The newly constructed Texas asset is situated in an institutional grade industrial park within a top performing sub market of southeast Houston. The facility is leased to logistics provider units who are using the space as an import facility given its close proximity to the bay port Container Terminal in the port of Houston. The Spartanburg property…

Thanks Brendan. The disposition of non industrial assets will continue to play a primary role in our overall business strategy. As Wil discussed in an effort to accelerate dispositions we sold a $726 million portfolio of older, longer leased suburban office properties at a favorable price of a $190 a foot. We also sold four more office properties and three other properties totaling $114 million during the quarter bringing third quarter sales volume to approximately $840 million. With the addition of one office sale completed after the quarter, our 2018 disposition volume totals $984 million at average GAAP and cash cap rates of 8.5% and 8.1% respectively. Disposition volume for the year is expected to exceed $1 billion at estimated GAAP and cash cap rates of 8.8% and 8.4% respectively. As evidenced by our 2018 sales volume, we remain committed to efficiently sell non industrial properties in order to simplify operations and enhance cash flow predictability through a singular focus on industrial properties. For the remainder of 2018 and 2019, we anticipate continued robust disposition activity as we aggressively craft a portfolio that generates 85% or more of its revenue from industrial properties We are marketing or intend to market for sale half or more of the remaining office properties by year end 2019 and are optimistic we can achieve pricing at or better than 2018 cap rate levels. Although, this is ultimately dependent on execution and the mix of properties sold. The office assets we are marketing or intend to market for sale generated approximately $30 million of NOI for the nine months ended September 30th and we're encumbered by $238 million of mortgage debts. These assets will include a mix of well located, higher quality facilities with long- term leases and other properties of shorter leases. We are focused on optimizing pricing on the remaining office portfolio by pursuing marketing strategies keenly focused on sourcing the best buyers in the market for each property, as well as executing sales when assets are primed for market through aggressive asset management and leasing efforts. Subsequent to 2019, we expect to continue the disposition strategy to shrink the remaining office portfolio as assets are prepared for the sales market through our leasing and asset management program. With that I'll turn the call over to James who will provide an update on leasing.

Thanks Lara. Leasing activity for the quarter was strong with approximately 900,000 square feet of office space leased. Our portfolio was 96.8% leased at quarter end with a weighted average lease term of 8.5 years. As a result of a large portfolio sale, these numbers were both slightly impacted compared to last quarter. GAAP in cash rents on office extensions increased by 10% and just under 1% respectively due primarily to our extensions with Honeywell and Cummins. As we discussed last quarter, we signed a five-year lease extension with Honeywell in our 252,000 square foot office property in Glendale, Arizona. This extension included a 2% increase in cash rent with no TIs leasing or other transaction costs. Cummins, who occupies our 390,000 in Columbus, Indiana, did not exercise its purchase option and their lease was automatically extended for five years pursuant to the lease terms. The lease extension will result in a 3% increase in cash rents with no TI leasing or other costs. Cummins has filed a claim in an effort to exercise its purchase option which we believe is without merit. We will continue to keep you updated on this matter. We also signed a seven-year lease extension in our 78,000 square foot property in Meridian, Idaho with T-mobile. The longer rental term resulted in about a 10% cash rental rate decrease. Regarding new leases, our multi tenanted office buildings in Phoenix, Arizona and Houston, Texas both had new tenants lease space in the buildings. This brought occupancy to approximately 65% at our Phoenix property and to approximately 49% at our Houston property. We have additional prospects looking at space in both buildings, which if executed would bring our Phoenix property to full stabilization and close to full stabilization in our Houston property. In that event, we will…

Thanks James. For the third quarter, gross revenues were approximately $100 million compared with gross revenues of $98 million for the same time period in 2017. The increase in revenue was related primarily to revenue generated from 2017 and 2018 property acquisitions, new leases and acceleration of below-market leases for certain properties in which the tenants' renewal option expired. These are offset by sales, particularly the sale of the 21 office assets to the joint venture. We had net income attributable to common shareholders for the third quarter of approximately $216 million or $0.90 per diluted common share compared to net income attributable to common shareholders of approximately $4 million or $0.02 per diluted common share for the same time period in 2017. The largest contributors to this significant increase was a difference in the timing of gains on sale and the impairment charges recognized on properties, particularly the gain on sale of the 21 office asset portfolio. We now expect net income attributable to common shareholders to be within a range of $0.90 to $92 per diluted common share for the year ended December 31st, 2018. This range is always subject to change. Adjusted company FFO for the third quarter was $58 million or $0.24 per diluted common share compared to $61 million or $0.25 per diluted common share for the same time period in 2017. The decrease was primarily related to asset sales. At quarter end, our adjusted company FFO payout ratio was 72%. Same store NOI for the nine months ended September 30th, 2018 was approximately $174 million, up 0.4% when compared to the first nine months of 2017. Same store percentage lease at the end of the quarter was 95.6% compared to 98.5% for the same time period in 2017. This decrease was primarily related to…

Thanks 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.

[Operator Instructions] Our first question comes from John Guinee of Stifel. Please go ahead.

Great, thank you very much. Quick question, Wil, I think you owned it one time port facility down in Houston or Galveston maybe it was $82 million purchase 25-year lease at the time. Do you still own that? And what's the status there?

Yes, we still own it, John. And the status is business as usual.

Does it --well what bucket does it fit into? Is it actually having improvements or is it all a land deal?

It's a combination. It has a brand new office building on that the tenant constructed. It has some warehouse facilities as well, but the majority of it is land where there are containers for transporting goods and there's also a major contract with Caterpillar where they transport the large mining equipment, and also a contract with GE where they transport the wind blades.

Okay and then I guess Pat it looks like you're implicitly providing about$0.20 AFFO guidance at the midpoint for fourth quarter, is that the math?

Yes. We're at $0.74, we have adjusted company of FFO at $0.74 for the nine months so you know --that's right.

And then, okay, and then while there is ramp up or down from there, Wil.

Well, in the context of the disposition plan next year, right, we would expect some dilution from asset sales offset by obviously reversing stock is accretive but there's still some dilution to work through on the sales side.

Our next question comes from John Massocca of Ladenburg Thalmann. Please go ahead.

Good morning. Let me just kind of touching on that last point. I mean how do you balance the stock buybacks versus buying an additional industrial assets just given as you said that trade-off of it's probably more accretive to do the buyback but it's not going to get you any closer to that kind of 85/15 mix you're looking for.

Yes. I mean it's true John, it is a balancing right now share repurchases is compelling, if we were to work our way through the entire authorization in the context of share repurchase rules, it could take a long time. And it'll be subject to where the shares trade. So we do think it's a very good use of capital, but it's certainly limited compared to the opportunity set that we see on the industrial side. So we think the share buyback is compelling during the time that we're retiring stock. We also think we'll see opportunity on the investment side that's consistent with where we're taking the company in the long term.

Understood and then maybe an extra color on the Cummins lease extension purchase option situation. It seems like there's maybe a disagreement between you and the tenant on what they actually did. I was wondering if you could maybe get some clarity on that.

Well, I don't think we have much to add. The leases are clear on the point. We'll have a little bit of extra disclosure in our 10-Q but really nothing to add beyond what we've said in our prepared remarks.

Understood and then maybe on the acquisition side. I mean is there -- it seems kind of a mix going on in terms of where people are able to kind of source industrial acquisition debt. Obviously still strong demand as you're seeing kind of low cap rates sub six on a cash basis, but is there any potential to maybe go out for assets that are, say less fungible and maybe grab a little more yield or is really the focus more, hey, look, we're reshaping the portfolio accretion relative to the cost of our capital less important than having a portfolio that we think the streets going to value more.

Definitely the latter.

Okay. They are reaching for yield but searching for yield, it may be taking a little risk on releasing at the end of a 10-year lease isn't really the mindset right now.

Correct.

This concludes our question-and-answer session. I would like to turn the conference over to Wil Eglin for any closing remarks.

Well, once again thank you for joining us this morning. Please visit our website or contact Heather Gentry if you would like to receive our quarterly materials. And in addition, as always you may contact me or the other members of our senior management team with any questions. Thanks again and have a great day.

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.