JV Closes on 30 Net-Leased Assets for $408M

Lexington Realty Trust and Inland American Real Estate Trust Inc. have closed on the sale of 30 primarily single-tenant, net-leased assets in their co-investment program for $408.5 million.

The aggregate purchase price includes the assumption of non-recourse mortgage financing secured by some of the assets. The REITs did not release details about the assets in this group other than to say they are located in 23 states and contain more than 3.5 million net rentable square feet. A press release from New York City-based Lexington stated more information would be contained in an 8K expected to be filed Dec. 28 with the U.S. Securities and Exchange Commission.

As reported Aug. 17 by CPN, the two REITS created a joint venture to acquire and manage net lease properties. Net Lease Strategic Assets Fund L.P., was to be initially seeded with 53 net leased properties contributed by Lexington Realty Trust from its existing portfolio, which at the time comprised 8.4 million square feet and was valued at $940 million. The properties to go into the joint venture are widely diversified by tenant, property type and geography. The co-investment program is contracted to acquire up to 23 more properties from Lexington and its subsidiaries. The Lexington release noted closings on the majority of the remaining properties should take place during the first quarter of 2008.

In a supplement filed Nov. 13 with the SEC, Inland American, which is based in Oak Brook, Ill., stated that the two parties had agreed to an amendment of their initial JV contract. Under the amended terms of the venture, Inland American will initially contribute approximately $250 million and Lexington Master L.P. will contribute about $3 million for capital expenditures, the SEC document stated. The document noted that if the venture does not complete at least 35 of the initial purchases by March 1, 2008, the joint venture will be dissolved.

When the REITs formed the JV in August, George Pandaleon, president of Inland Institutional Capital Partners Corp., which negotiated the deal, told CPN that no single lease was more than 5 percent of the entire portfolio. He said that strategy was expected to continue and added that the co-investment program expected to spend another $500 million in acquisitions over the next two years.

Lexington president & CEO T. Wilson Eglin previously told CPN the co-investment deal was part of the company’s new strategy. The REIT will hold a minority interest in specific use properties within the joint venture, in this case, 15 percent, while also focusing on wholly owned general office and industrial properties.

Lexington owns, invests in and manages net-leased office, industrial and retail real estate across the United States. Inland American also owns a diverse portfolio of wholly owned or joint ventures. Through a subsidiary it also owns 50 hotels.

source: commercialpropertynews.com