Lexington Realty Activist Wants Seats at the Table
barrons.com
There may be another shake-up in the world of real estate.
Jonathan Litt, the founder and chief investment officer of hedge fund Land & Buildings Investment Management, began to eye Lexington Realty Trust (ticker: LXP) this fall, believing that shares of the real estate investment trust were “materially undervalued.” Shares currently trade at 5% of its capitalization rate.
Lexington lags behind peers such as Monmouth Real Estate (MNR), which traded at 4% of its cap rate last month when that REIT announced its sale to Industrial Logistics Properties Trust (ILPT).
Litt has nominated himself and Donna Brandin, former chief financial officer of Equity Residential (EQR), to join Lexington’s board. Replacing Lexington’s long-serving CEO T. Wilson Eglin would also help, says Litt, who noted that funds from operations have fallen 60% while accumulating more than $800 million in impairments under Eglin’s tenure.
Lexington’s stock has already soared more than 40% year to date. But, Litt has argued, there may be opportunities to add to those gains by selling assets and returning capital to shareholders, or by an outright sale of the company. Just last month, Monmouth reportedly had several bidders before agreeing to Industrial Logistics’ $4 billion bid. Those companies might now be open to considering Lexington as an acquisition.
Lexington declined to comment, but in an October letter to shareholders, the company acknowledged the “short-term costs” involved in its transition into a pure-play, single-tenant industrial REIT.
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Follow the activist as they see value. Notice that ILPT was spun off by MNR to show the market it's real value.
FWIW I have a small position in LXP w/ two buys in (2020 and 2019). Div only 2.8%, selling 2.14x BV. Probably better to see what they spin off and look at that.
This was spun off from MNR:
Industrial Logistics Properties Trust (ILPT) - Price/BV 1.49x and pays a 5.8% dividend
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