Good morning and welcome to the Lexington Realty Trust Fourth Quarter 2017 Earnings Conference Call and Webcast. All participants will be in listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note that this event is being recorded. I would now like to turn the conference over to Heather Gentry. Please go ahead.

Thank you, operator. Welcome to the Lexington Realty Trust fourth quarter 2017 conference call and webcast. The earnings release was distributed this morning and both the release and supplemental disclosure package that detail this quarter’s results 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 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 unitholders 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 conference call, Will Eglin, CEO; Pat Carroll, CFO; and Executive Vice Presidents, Brendan Mullinix, Lara Johnson, and James Dudley will provide commentary around fourth quarter and full-year results. I will now turn the call over to Will.

Thanks, Heather. Good morning and welcome to our fourth quarter 2017 earnings call and webcast. Our year finished on a positive note with strong fourth quarter results. We generated net income attributable to common shareholders of $0.12 per diluted common share for the quarter and $0.33 per diluted common share for the full-year 2017. Adjusted company FFO totaled $0.26 per diluted common share in the fourth quarter which brought our total full-year 2017 adjusted company FFO to $0.97 per diluted common share. This represents the high end of our revised 2017 adjusted company FFO guidance range. We provided initial 2018 guidance for net income and adjusted company FFO this morning with adjusted company FFO in the range of $0.95 to $0.98 per diluted common share. This indicates the 2018 results will be similar to 2017 despite lease rollover and concessions on early extensions, continued noncore asset dispositions, and higher average borrowing costs as we extend debt maturities. Pat will speak in more detail shortly on guidance assumptions. The past year was heavily focused on acquiring more high-quality industrial real estate, selling noncore assets as part of a multiyear disposition plan and managing our near-term lease expirations in an effort to improve the quality of our holdings and the value of our overall business. We were quite successful in all three areas and fully executed on the plan we put forth a year ago. Industrial revenues continued to increase and we expect more than half of our revenue to come from industrial properties by year-end 2018. Our investment efforts resulted in the addition of 9.5 million square feet of primarily industrial assets to the portfolio for $728 million, the highest investment volume we’ve seen in recent years. Our investment activities have been mostly concentrated in well-located industrial properties leads to strong…

Thanks, Will. We had another active investment quarter where we acquired approximately $140 million of industrial assets, bringing our total 2017 acquisition volume to $728 million at average GAAP and cash cap rates of 7.3% and 6.4%. Three properties we had committed to earlier in the year closed during the quarter. These consisted of a 260,000 square-foot cold storage facility in Warren, Michigan, leased to Lipari Foods for 15 years; a 500,000 square foot distribution center in Romulus, Michigan, leased to an automaker for 15 years; and a distribution center leased to Caterpillar for seven years in Lafayette, Indiana. We also purchased one distribution center located in Winchester, Virginia leased to the same automaker for 14 years. At the end of 2016, we had a number build-to-suits or forward commitments in our pipeline for delivery in 2017. As yields in the build-to-suit market compressed, there were fewer opportunities that we found compelling last year. And as a result, we were more active in the purchase of existing industrial properties. While we presently have no forward commitments in our 2018 pipeline, build-to-suits have started to become more active again, which we believe bodes well for us. While majority of our investments last year were purchases, our business strategy still focuses on working directly with builders, so we can generate more favorable yields. During the fourth quarter, we formed a joint venture with an affiliate of Cleco, developer with whom we have worked numerous times in the past to pursue industrial build-to-suit projects. The joint venture acquired a 151-acre parcel land in a submarket of Columbus, Ohio in which our initial investment totaled $5.8 million. The construction of site infrastructures is target to start this quarter in the first phase of development to make the site have ready is expected to be completed this summer. The site can accommodate up to 2.4 million square feet of warehouse distribution properties. The Columbus industrial market has been quick to absorb space and recent upgrades and completions to highway surrounding the park make it a great location for future industrial and distribution users. We will continue to keep you updated on the progress of the park and our other investment activities as the year progresses. I’ll now turn the call over to Lara to discuss dispositions.

Thanks Brendan. In the fourth quarter, we sold another $48 million of noncore assets, bringing our total disposition activity for 2017 to $242 million at average GAAP and cash cap rates of 7.5% and 7.7%, respectively. We made progress reshaping the portfolio during the year, disposing 34 consolidated assets including vacant, multi-tenanted, short-term single tenant office and retail properties. The portfolio of sold properties was 49% leased at the time of sale and 2.2 million square feet of vacancy left the portfolio as a result of disposition activity in 2017. At the beginning of last year, our multi-year disposition plan had anticipated the sale of an additional $250 million to $300 million of properties in 2017 at an average cash cap rate range of 8.4% to 8.9%. So, pricing came in much better than we had projected. Additionally, we collected $138 million from winding down our loan portfolio, which generated greater proceeds than we had forecast when the year began. In an effort to further reposition our portfolio, we anticipated selling up to $250 million to $300 million in 2018 at estimated average GAAP and cash rate ranges of 8.25% to 9% and 7.5% to 8.25%, respectively. About 80% of the plan is anticipated to be the sale of office property with the balance in other noncore assets. Importantly, we expect the meaningful part of the 2018 disposition program to be focused on our expanded efforts to sell certain single-tenant office properties with remaining intermediate lease firms of 7 to 10 years some of which are build-to-suits originated in 2011 or 2012 where we expect net gains. We believe that these dispositions along with the sale of vacancy, multi-tenant office and other noncore assets will further simplify and enhance the quality of our portfolio. With that, I’ll turn the call over to James who will provide an update on leasing.

Thanks, Lara. We leased an additional 1 million plus square feet of space in the fourth quarter to end the year with strong leasing volume of roughly 4 million square feet. Our portfolio was 98.9% leased at year-end with a weighted average lease term of 9.1 years. At year-end, our industrial portfolio was approximately 100% leased with a weighted average lease term of 10.6 years compared to 10.4 years at the end of 2016 while our office portfolio was just over 99% leased with a weighted average lease term of 7.7 years compared to 7.2 years at the end of 2016. Our three-year lease extension with Geodis Logistics in Statesville, North Carolina for 640,000 square feet was the main driver of our GAAP and cash rental increases at 22% and 11%, respectively for the quarter. Also during the quarter, we signed approximately 100,000 square feet of new leases at our Farmers Branch, Texas multi-tenant office property. Our team has done an excellent job by creating value at this property by taking this formerly single tenant asset and securing new tenants to raise occupancy from 37% in second quarter of 2016 to almost 100% at year end 2017. The property will now be marketed for sale. At the end of 2017, we had one non-renewal from a tenant that has been leasing approximately 43,000 square feet at an office property Richmond, Virginia. We are in the process of marketing the space for lease. Subsequent to quarter-end, we signed a three-year lease with Theseus [ph] at our 62,000 square foot office property in McDonough, Georgia, which has been leased to Litton Loan Servicing. There will be an annual cash rental decline of approximately $500,000 for this property. We continue to proactively pursue tenant renewals through our tenant relationships and when we have…

Thanks, James. Gross revenues for the quarter were $102 million, compared with gross revenues of $95 million for the same time period in 2016. The increase for the quarter was primarily related to revenue generated from property acquisitions and new leases. Gross revenues for the full-year 2017 totaled $392 million, compared to gross revenues of $429 million for calendar year 2016. This decrease was largely attributable to heavy disposition volume, most notably the New York City land investments in 2016. Despite a decrease in full-year revenue, we believe our portfolio repositioning has improved overall portfolio quality and positioned the company more favorably over the long term. Net income attributable to common shareholders for the quarter was $29 million or $0.12 per diluted common share, compared to $14 million or $0.06 per diluted common share for the same time period in 2016. Full-year 2017 net income attributable to common shareholders totaled $79 million or $0.33 per diluted common share, compared to $89 million or $0.37 per diluted common share. We provided an expected net income attributable to common shareholders guidance range this morning of $0.76 to $0.79 per diluted common share. This range is subject to change throughout the year. Adjusted company FFO for the quarter was $63 million or $0.26 per diluted common share compared to $60 million or $0.24 per diluted common share for the same time period in 2016. The increase relates to acquisitions coming on line and the sale of vacant properties in 2017. Full-year 2017 adjusted company FFO totaled $0.97 per diluted common share compared to $1.14 per diluted common share for the full-year 2016. As we have discussed on previous earnings call, the primary change in our adjusted company FFO resulted from high disposition volume in 2016, particularly the sale of the New York City…

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] The first question comes from Sheila McGrath of Evercore ISI. Please go ahead.

Yes. Good morning. Will, you did have a goal over time to lower the cap expenditure profile of the company, partly by mix shift to industrial and partly by moving office to longer weighted average lease term. I just wonder if you could give us an update of how the CapEx kind of profile for the company looks in ‘18 and ‘19 versus the past couple of years.

Hey, Sheila, it’s Pat. Yes. The transformation to more industrial has reduced that our budgeted CapEx expense; in ‘18 we’re estimated to be about $17 million, which is really a part because of the extensions of the leases we’ve already done and the reduced exposure we have to office roll in the next couple of years compared to what we had prior.

Yes. Over five or six years it’s probably been roughly cut in half as office has shrunk and weighted average term has been extended from about 5.5 years in that portfolio to about 7.7 years today.

Okay. So, that $17 million number for 2018 includes all TI and commissions for the year.

Yes, budget of TI and leased commissions for the whole portfolio. I mean, if you look at what we had in the ‘17-year, the vast majority of the expenditures are on the office portfolio and the multi-tenant portfolio and a very small amount is on the industrial portfolio. So, as we transform more to an industrial, you will see those numbers coming down.

Okay. That’s great. And as a follow-up on that, if you look at what you’re planning to sell this year and targeted acquisitions, how does the portfolio look in terms of mix of industrial office, shorter term leases versus like a couple of years ago, just so we could kind of look at the progress there?

Well, in the last five years, the amount of NOI that we’ve derived from industrial has about doubled. And if we can find a little more industrial to buy this year, we have a chance of having the portfolio mix be roughly 55% industrial, 45% as we get toward year-end. And the portfolio disposition plan this year is heavier than we would have thought as of last year and about 80% of it is in office. So, that shift is going to continue.

Okay. And last question, just on FedEx. Is that there no change to that situation that it’s still under negotiation, or I thought you said you might consider selling the asset is that new information?

Yes. The discussions with FedEx are ongoing and they have expressed an interest in the either or continuing to occupy the buildings subject to lease or perhaps purchasing it. So, that’s a discussion that’s continuing.

Our next question comes from Craig Mailman of KeyBanc Capital Markets. Please go ahead.

Hey, everyone. This is Laura Dickson here at Craig. Well, I know, it continues to be a tough investment environment but just was wondering if you could kind of elaborate on what you’re seeing right now in terms of like cap rates and competition on forward commitments. And then in regards to like the improvement in BTS -- in build-to-suite opportunities, is that primarily from the joint venture or if you could elaborate there too?

Yes. So far, even their treasury yields have gone up, we still see a lot of capital chasing industrial investments and no change in cap rates. Yes. So, there are some things we’re working on. We have no commitments presently. So, it’s certainly possible that airing on the of preserving balance sheet would work in our favor to the extent cap rates inch up a little bit as the year progresses. So, most of what we see is sort of in the middle of that 5.5 to 6.5 cap rate area. The one change that I would say this year is we are starting to see some built-to-suit opportunities for delivering next year, which we think may prove to be more -- maybe more lucrative to wait for those opportunities versus pursuing purchases this year. Last year, yields had compressed in build-to-suit and there was a lot of stack building and we didn’t see many opportunities as the year progressed. But this year, we are starting to see a little bit more opportunity in that space which -- that’s the best part of our business, and I think that bodes well for us.

Okay. And then, regarding the JV for the land parcel, is that primarily going to be stack or is such a bigger strength to market ahead of time?

No. This is Brendan. No, we are planning to pursue build-to-suit opportunities in that part.

Okay. And then, can you recap the downside from the move-outs in 2018? It sounded like there were a couple like Sears for example.

Well, I mean, Sears is as we said on the call is about $1.7 million in GAAP and we obviously are not agreeing with their interpretation of the lease. So, we will fight back. The rest of the move-outs from an industrial standpoint happen in the tail end of the year, so they don’t have as big an impact on ‘18 as if there were obviously in the forefront of the year.

Okay. So, it’s primarily the Sears move-out then. And then…

If it’s a true lease -- a true stop payment on the lease from the industrial.

Okay. And then, just quickly, what rate do you think you would be able to turn out the revolver at with mortgage debt? Just kind of curious like what kind of drag that could be on guidance?

That’s probably in the high 4s, right now. If we were selling bonds, we would at about 200 over the 10-year treasury. I think mortgage financing would comparable.

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

Great. Thank you. And welcome aboard to all of the new speakers. Did you talk about -- Will, about any sort of reorg or personnel changes?

I didn’t. Actually, I just think it’s appropriate given the passage of time that the next generation of leadership to have an opportunity to present themselves to shareholders and talk about the part of our business what that they are responsible for. So that’s the thinking behind it.

Great, okay. A couple of things. First is $2 billion worth of asset sales to completely eradicate yourself of that prototype at $250 million to $300 million a year is a seven, eight-year process. Any thoughts about just ripping the band-aid off sooner even though it will most likely be a couple of hundred basis points dilutive on each asset sale and repurchase into industrial? That’s one question. And then the next obvious question is, at $8.30 a share for the share price, I think you have a track record of being modest share re-purchasers at that level.

I’ll answer the second question first. We do believe that the share price is attractive and we have an existing share repurchase authorization. So, I think that at these levels, you should expect us to be active at stock out of circulation. And to the question of what the direction is with respect to the office portfolio, I think, the idea of transacting for all of it in size like that there is a very large cheque to write. I think, as we think of what we want to do with the portfolio not over eight years but over a few years is to continue to maximize value on a portion of it that tends to be the shorter lease stuff and in markets where maybe we only own one building. So, directionally, we may over a few-year period, shift the portfolio mix to 75% industrial or 25% office, if we choose to go down that path. But, I want to be clear and say that all options are on the table for how we continue to shrink the office portfolio and we do recognize that exposure weighs heavily on our cost of capital.

And then, the last question is essentially $0.96 at the midpoint, about $0.24 a share. That’s probably going to beyond some pressure in the first half of ‘19, as you pointed out. Can you maintain $0.24 a share and $0.96 a year into ‘19, given the dilutive reinvestment strategy plus the known lease expirations?

It depends on what reinvestment yields are and how well we finance. Some events around 2019, particularly the Swiss Re buildings in the Kansas City market and resolving the Federal Express lease that would put pressure on FFO as we look into ‘19. I would say that the AFFO number doesn’t suffer as much because so much CapEx is coming out of our cash flow as we reposition the portfolio. And we have about 80% of our revenue now from lease with escalations in it. So, you are correct that there might be some additional weakness in FFO, but the underlying cash flow number still looks pretty good.

Pat, how much weakness?

Nice try, John.

Thanks, talk later.

Our next question comes from Jon Petersen of Jefferies. Please go ahead.

Hey, good morning. One of the follow-up you talked about swapping out some flow in rate fixed rate debt, I’m looking at your debt page here. You’ve got a couple of floating rate term loans that are already swapped, one through I guess that probably acquired this month and another through January of ‘19. So, should we be thinking about you guys putting new swaps on those term loans when the current swap expire through their maturity or are you guys going to be issuing new debt and getting rid of that or where you just talking about the $160 million on the credit facility that you swap down?

Hey, John. The answer is on that one swap, the 20 swap, those -- the 20 term loan, that swap did expire in February. When we talk about replacing it, we are talking about the financing of the office portfolio with mortgage debt and paying down the revolver. And to the extent that we want to we can pay down the term loan and then we’ll discuss whether swapping it for the remaining term after that.

Got it. Okay. All right. That makes sense. And then, when Lara was talking about dispositions on office properties, it sounded like there was a target towards those with five to seven years left on the lease. I was just kind of curious if you guys can may be stagger out for us like what kind of cap rates do you get on kind of a single tenant building with five to seven years left versus something with 10 plus years left versus something that has less than five years left. Just maybe give us an idea of ranges of cap rates when you are at those different durations on the lease?

Sure. This is Lara. Good morning. So, to some extent, obviously it depends on market, the tenant and the credit of the tenant. So, there is a fairly sizable range but we are seeing a reasonable amount of asset types from private investors for the yield of those [indiscernible] types of assets. So, if I had to generalize, I would say the 8. But again it’s clearly specific to the asset market and tenancy.

Okay. So, eight down to five to seven years. How does that compare for like a 10-year today, with the same types of properties…

Obviously, the longer the term, if you have a reasonably good credit, you are in a comparable market, we are going to see a better cap rate. Office buyers are more term sensitive than they have been in the past five years, so the 15-year term is the new 10-year, if you will. But meaningfully better over [ph] ten-year.

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

Good morning. I know, you kind of may not want to give the exact number on this, TI is coming down a little bit year-over-year this year but do you expect maybe bounce back up given the office piece roll and maybe some potential noise around FedEx in 2019 and 2020 or is this kind of going to be a steady run rate going forward?

It can fluctuate, John, from quarter-to-quarter. And there will be times where we think it’s advisable to spend meaningful capital supervision and asset to be sold where just it’s a sensible investment for us. So, sometimes, it will be low, sometimes it will be a little higher. But directionally, over a three to five-year period, it’s certainly going to be lower than it is today.

Okay. And then, I know it’s not a huge portion of your portfolio, but as you kind of look to the retail and the specialty side of the business, I mean, would that be something -- you look to exit and then in what kind of pricing do you think you can get on those assets, if you did try get out of that space?

Yes. We are trying to grind that sub portfolio down to zero and it’s less than 5% of our NOI at this point. Cap rates are all over the map and in some cases we are selling buildings that are under-occupied. So, it’s more of a per square foot question, not cap rate. But, the retail portfolio is so small now that the value is sort of de minimus and regardless of what the cap rates are wouldn’t have a meaningful impact on our results by selling that stuff and redeploying the capital.

Understood. That’s it for me. Thank you very much.

Thank you.

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

Thanks again everyone for joining us this morning. We appreciate your continued participation and support. If you would like to receive our quarterly supplemental package, please contact Heather Gentry or you can find additional information on the company, on our website at www.lxp.com. And as always, you may contact me or the other members of our senior management team, if you have any questions. Thanks again and have a great day.

The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect.