Lexington Realty Trust

S&P Global Ratings' stable outlook on Lexington reflects our expectation for steady cash flow generation over the next two years. This is supported by longer-term, triple-net leases and an increased focus on industrial properties, which benefit from strong and steady demand. We expect Lexington will continue to refine its portfolio by selling office assets and acquiring industrial assets in a largely leverage-neutral manner. We also project debt to EBITDA to increase modestly to the mid-5x area in 2019 and the high-5x area in 2020, with fixed-charge coverage (FCC) remaining in the high-2x area over the next two years. We could lower our ratings on Lexington if it significantly underperforms peers, with occupancy declining and same-property net operating income (NOI) growth

...The majority of Lexington's assets are now industrial properties, and we expect the percentage allocated to that subsector to increase over the next two years. Lexington Realty Trust is undergoing a multiyear repositioning effort to transition into a higher-quality, single-tenant, net-leased industrial portfolio. In 2018, Lexington disposed of close to $1.1 billion of office and other noncore assets, including a 21-property office portfolio into a newly formed joint venture sold for approximately $726 million (Lexington retained a 20% interest and will manage the joint venture). By year-end 2019, we expect Lexington's industrial portfolio to compose 80%-85% of its gross book asset value, largely due to office assets sales coupled with selective industrial acquisitions....

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