Lexington Realty Trust entered a definitive agreement to acquire Inland American Sub LLC’s interest in Net Lease Strategic Assets Fund L.P. (NLS), an existing joint venture between Inland and Lexington, in a transaction valued at approximately $480 million. The purchase price will include approximately $1.2 million in cash, net of the NLS cash balance of $8.1 million. In addition, NLS carries approximately $258 million in consolidated debt.
The existing joint venture was initially formed in 2007. The current deal expands Lexington’s asset base and consolidates Lexington’s ownership of the portfolio, which the firm has owned and/or managed before the NLS was formed. It is currently 98.7 percent leased and includes 26 office properties, 13 industrial properties and two specialty properties located throughout 23 states, plus a 40 percent tenant-in-common interest in an office property. The properties have an annual net operating income of approximately 49.6 million, representing a 10.3 percent cap rate on the transaction value.
Inland previously held an 85 percent common equity interest in NLS, while Lexington held a 15 percent common equity interest and a 100 percent preferred equity interest.
“This transaction is highly beneficial to Lexington,” said the company’s CEO T. Wilson Eglin in a statement. “This portfolio of 41 office, industrial and specialty assets in 23 states is leased to a high quality roster of tenants, including Northrop Grumman, Siemens, Owens Corning and Honeywell. These are assets we have owned and/or managed since before NLS was formed, we know very well and we are acquiring at what we believe is an attractive price. We believe we can create significant value for our shareholders by extending lease terms, recycling capital through asset sales and refinancing the underlying debt over time.”
The transaction is expected to take place on September 7, but will be effective as of September 1.