Summary
LXP makes a significant portfolio sale.
I was wrong, the dividend is going to get cut.
The broader thesis is still valid and there is a lot of upside to LXP's share price.
In my previous article, I outlined Lexington Realty's (LXP) plan to convert to a primarily industrial REIT. I concluded,
As an industrial REIT, I do not see LXP as the strongest option. However, at their current price, they are priced below what even a poor quality industrial REIT should be trading for. The multiple expansion should happen, it is a question of when. I continue to believe that patience will be rewarded.
My expectation was that they would divest their office space in a series of transactions throughout the year and that it would be a rather slow process where dispositions of office and acquisitions of industrial space occurred at roughly the same time. I further concluded that the dividend would remain the same, though the payout ratio would rise.
Boy, I was wrong. The other day, LXP announced they were selling a portfolio of 21 office properties in a $726 million joint venture. LXP will receive $565 million in cash, retain 20% ownership of the JV and collect asset management fees with a promote structure.
