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Section 1: 10-Q (10-Q)

lxp-20200331
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the quarterly period ended March 31, 2020.
or
Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the transition period from _________________ to ________________
Commission File Number 1-12386
 LEXINGTON REALTY TRUST
(Exact name of registrant as specified in its charter)
Maryland13-3717318
(State or other jurisdiction of
incorporation of organization)
(I.R.S. Employer
Identification No.)
One Penn Plaza, Suite 4015, New York, NY 10119-4015
(Address of principal executive offices) (zip code)
(212) 692-7200
(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Shares of beneficial interest, par value $0.0001 per share, classified as Common StockLXPNew York Stock Exchange
6.50% Series C Cumulative Convertible Preferred Stock, par value $0.0001 per share
LXPPRCNew York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filerAccelerated filerNon-accelerated filerSmaller reporting companyEmerging growth
company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No
Indicate the number of shares outstanding of each of the registrant's classes of common stock, as of the latest practicable date: 259,005,835 common shares of beneficial interest, par value $0.0001 per share, as of May 4, 2020.




TABLE OF CONTENTS

PART I. — FINANCIAL INFORMATION  
 
 
 
 
PART II — OTHER INFORMATION  
 
 
 
 
 
 
 

WHERE YOU CAN FIND MORE INFORMATION:
We file and furnish annual, quarterly and current reports, proxy statements and other information with the Securities and Exchange Commission, which we refer to as the SEC. You may read and copy any materials that we file or furnish with the SEC at the SEC's Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. You may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. We file and furnish information electronically with the SEC. The SEC maintains an Internet site that contains reports, proxy and information statements and other information regarding issuers that file or furnish electronically with the SEC. The address of the SEC's Internet site is http://www.sec.gov. We also maintain a web site at http://www.lxp.com through which you can obtain copies of documents that we file or furnish with the SEC. The contents of that web site are not incorporated by reference in or otherwise a part of this Quarterly Report on Form 10-Q or any other document that we file or furnish with the SEC.

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Table of Contents

PART I. - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
LEXINGTON REALTY TRUST AND CONSOLIDATED SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share data)
March 31, 2020December 31, 2019
 (unaudited)
Assets: 
Real estate, at cost$3,473,384  $3,320,574  
Real estate - intangible assets420,843  409,756  
Investments in real estate under construction18,298  13,313  
Real estate, gross3,912,525  3,743,643  
Less: accumulated depreciation and amortization914,600  887,629  
Real estate, net2,997,925  2,856,014  
Assets held for sale7,873    
Operating right-of-use assets, net37,201  38,133  
Cash and cash equivalents 83,525  122,666  
Restricted cash6,533  6,644  
Investments in non-consolidated entities57,210  57,168  
Deferred expenses, net19,749  18,404  
Rent receivable – current 3,646  3,229  
Rent receivable – deferred 67,205  66,294  
Other assets 12,585  11,708  
Total assets$3,293,452  $3,180,260  
Liabilities and Equity:  
Liabilities:  
Mortgages and notes payable, net $377,703  $390,272  
Revolving credit facility borrowings130,000    
Term loan payable, net297,565  297,439  
Senior notes payable, net497,079  496,870  
Trust preferred securities, net127,421  127,396  
Dividends payable31,720  32,432  
Liabilities held for sale18    
Operating lease liabilities38,293  39,442  
Accounts payable and other liabilities 42,479  29,925  
Accrued interest payable13,992  7,897  
Deferred revenue - including below-market leases, net19,446  20,350  
Prepaid rent15,066  13,518  
Total liabilities1,590,782  1,455,541  
Commitments and contingencies
Equity:  
Preferred shares, par value $0.0001 per share; authorized 100,000,000 shares:
  
Series C Cumulative Convertible Preferred, liquidation preference $96,770; 1,935,400 shares issued and outstanding
94,016  94,016  
Common shares, par value $0.0001 per share; authorized 400,000,000 shares, 255,232,130 and 254,770,719 shares issued and outstanding in 2020 and 2019, respectively
26  25  
Additional paid-in-capital2,982,363  2,976,670  
Accumulated distributions in excess of net income(1,374,286) (1,363,676) 
Accumulated other comprehensive loss(18,924) (1,928) 
Total shareholders’ equity1,683,195  1,705,107  
Noncontrolling interests19,475  19,612  
Total equity1,702,670  1,724,719  
Total liabilities and equity$3,293,452  $3,180,260  
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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Table of Contents

LEXINGTON REALTY TRUST AND CONSOLIDATED SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited and in thousands, except share and per share data)
Three Months Ended March 31,
 20202019
Gross revenues:  
Rental revenue$78,735  $79,975  
Other revenue2,092  1,273  
Total gross revenues80,827  81,248  
Expense applicable to revenues:  
Depreciation and amortization(40,509) (37,595) 
Property operating(10,276) (10,567) 
General and administrative(7,825) (8,527) 
Non-operating income190  481  
Interest and amortization expense(14,795) (17,208) 
Debt satisfaction gains (charges), net1,393  (103) 
Impairment charges  (588) 
Gains on sales of properties9,805  20,957  
Income before provision for income taxes and equity in earnings of non-consolidated entities
18,810  28,098  
Provision for income taxes(653) (437) 
Equity in earnings of non-consolidated entities263  619  
Net income18,420  28,280  
Less net income attributable to noncontrolling interests
(266) (253) 
Net income attributable to Lexington Realty Trust shareholders
18,154  28,027  
Dividends attributable to preferred shares – Series C(1,572) (1,572) 
Allocation to participating securities(46) (50) 
Net income attributable to common shareholders$16,536  $26,405  
  
Net income attributable to common shareholders - per common share basic
$0.07  $0.11  
Weighted-average common shares outstanding – basic253,038,161  232,538,495  
Net income attributable to common shareholders - per common share diluted
$0.06  $0.11  
Weighted-average common shares outstanding – diluted
257,347,277  236,142,143  
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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LEXINGTON REALTY TRUST AND CONSOLIDATED SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Unaudited and in thousands)
Three Months Ended March 31,
 20202019
Net income$18,420  $28,280  
Other comprehensive income (loss):  
Change in unrealized loss on interest rate swaps, net
(16,996) (76) 
Other comprehensive loss(16,996) (76) 
Comprehensive income1,424  28,204  
Comprehensive income attributable to noncontrolling interests
(266) (253) 
Comprehensive income attributable to Lexington Realty Trust shareholders
$1,158  $27,951  
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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LEXINGTON REALTY TRUST AND CONSOLIDATED SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(Unaudited and in thousands)

Three Months Ended March 31, 2020Lexington Realty Trust Shareholders 
 TotalPreferred SharesCommon SharesAdditional Paid-in-CapitalAccumulated Distributions in Excess of Net IncomeAccumulated Other Comprehensive LossNoncontrolling Interests
Balance December 31, 2019$1,724,719  $94,016  $25  $2,976,670  $(1,363,676) $(1,928) $19,612  
Issuance of partnership interest in real estate421  —  —  —  —  —  421  
Redemption of noncontrolling OP units for common shares—  —  —  428  —  —  (428) 
Issuance of common shares and deferred compensation amortization, net18,931  —  1  18,930  —  —  —  
Repurchase of common shares(11,042) —  —  (11,042) —  —  —  
Repurchase of common shares to settle tax obligations(2,623) —  —  (2,623) —  —  —  
Forfeiture of employee common shares1  —  —    1  —  —  
Dividends/distributions(29,161) —  —  —  (28,765) —  (396) 
Net income18,420  —  —  —  18,154  —  266  
Other comprehensive loss(16,996) —  —  —  —  (16,996) —  
Balance March 31, 2020$1,702,670  $94,016  $26  $2,982,363  $(1,374,286) $(18,924) $19,475  


Three Months Ended March 2019Lexington Realty Trust Shareholders 
 TotalPreferred SharesCommon SharesAdditional Paid-in-CapitalAccumulated Distributions in Excess of Net IncomeAccumulated Other Comprehensive Income (Loss)Noncontrolling Interests
Balance December 31, 2018$1,346,678  $94,016  $24  $2,772,855  $(1,537,100) $76  $16,807  
Redemption of noncontrolling OP units for common shares—  —  —  156  —  —  (156) 
Issuance of common shares and deferred compensation amortization, net1,710  —  —  1,710  —  —  —  
Repurchase of common shares(958) —  —  (958) —  —  —  
Repurchase of common shares to settle tax obligations(3,942) —  (1) (3,941) —  —  —  
Forfeiture of employee common shares5  —  —  —  5  —  —  
Dividends/distributions(26,363) —  —  —  (25,471) —  (892) 
Net income28,280  —  —  —  28,027  —  253  
Other comprehensive loss(76) —  —  —  —  (76) —  
Balance March 31, 2019$1,345,334  $94,016  $23  $2,769,822  $(1,534,539) $  $16,012  

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LEXINGTON REALTY TRUST AND CONSOLIDATED SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited and in thousands)
Three Months Ended March 31,
 20202019
Net cash provided by operating activities:$45,665  $47,621  
Cash flows from investing activities:  
Acquisition of real estate, including intangible assets(195,560) (57,991) 
Investment in real estate under construction(4,820)   
Capital expenditures(2,383) (4,455) 
Net proceeds from sale of properties22,380  79,283  
Investments in non-consolidated entities(1,080) (418) 
Distributions from non-consolidated entities in excess of accumulated earnings1,293  4,705  
Increase in deferred leasing costs(3,774) (1,124) 
Change in real estate deposits, net727  (190) 
Net cash provided by (used in) investing activities(183,217) 19,810  
Cash flows from financing activities:  
Dividends to common and preferred shareholders(29,477) (45,329) 
Principal amortization payments(5,848) (7,389) 
Principal payments on debt, excluding normal amortization  (254) 
Revolving credit facility borrowings130,000    
Deferred financing costs  (3,678) 
Payment of early extinguishment of debt charges  (1) 
Cash contributions from noncontrolling interests421    
Cash distributions to noncontrolling interests(396) (892) 
Repurchases to settle tax obligations(2,623) (3,961) 
Issuance of common shares, net17,265    
Repurchase of common shares(11,042) (3,598) 
Net cash provided by (used in) financing activities98,300  (65,102) 
Change in cash, cash equivalents and restricted cash(39,252) 2,329  
Cash, cash equivalents and restricted cash, at beginning of period129,310  177,247  
Cash, cash equivalents and restricted cash, at end of period$90,058  $179,576  
Reconciliation of cash, cash equivalents and restricted cash:
Cash and cash equivalents at beginning of period$122,666  $168,750  
Restricted cash at beginning of period6,644  8,497  
Cash, cash equivalents and restricted cash at beginning of period$129,310  $177,247  
Cash and cash equivalents at end of period$83,525  $170,289  
Restricted cash at end of period6,533  9,287  
Cash, cash equivalents and restricted cash at end of period$90,058  $179,576  
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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LEXINGTON REALTY TRUST AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2020 and 2019
(Unaudited and dollars in thousands, except share/unit and per share/unit data)
(1)The Company and Financial Statement Presentation
Lexington Realty Trust (together with its consolidated subsidiaries, except when the context only applies to the parent entity, the “Company”) is a Maryland real estate investment trust (“REIT”) that owns a diversified portfolio of equity investments in single-tenant commercial properties.
As of March 31, 2020, the Company had ownership interests in approximately 135 consolidated real estate properties, located in 30 states. The properties in which the Company has an interest are primarily net leased to tenants in various industries.
The Company believes it has qualified as a REIT under the Internal Revenue Code of 1986, as amended (the “Code”). Accordingly, the Company will not be subject to federal income tax, provided that distributions to its shareholders equal at least the amount of its REIT taxable income as defined under the Code. The Company is permitted to participate in certain activities from which it was previously precluded in order to maintain its qualification as a REIT, so long as these activities are conducted in entities which elect to be treated as taxable REIT subsidiaries (“TRS”) under the Code. As such, the TRS are subject to federal income taxes on the income from these activities.
The Company conducts its operations either directly or indirectly through (1) property owner subsidiaries, which are single purpose entities, (2) an operating partnership, Lepercq Corporate Income Fund L.P. (“LCIF”), in which the Company is the sole unit holder of the general partner and the sole unit holder of the limited partner that holds a majority of the limited partner interests, (3) a wholly-owned TRS, Lexington Realty Advisors, Inc. (“LRA”), and (4) investments in joint ventures. References to “OP units” refer to units of limited partner interests in LCIF. Property owner subsidiaries are landlords under leases for properties in which the Company has an interest and/or borrowers under loan agreements secured by properties in which the Company has an interest. Each property owner subsidiary is a separate legal entity that maintains separate books and records. The assets and credit of each property owner subsidiary with a property subject to a mortgage loan are not available to creditors to satisfy the debt and other obligations of any other person, including any other property owner subsidiary or any other affiliate. Consolidated entities that are not property owner subsidiaries do not directly own any of the assets of a property owner subsidiary (or the general partner, member or managing member of such property owner subsidiary), but merely hold partnership, membership or beneficial interests therein, which interests are subordinate to the claims of such property owner subsidiary's (or its general partner's, member's or managing member's) creditors.
The financial statements contained in this Quarterly Report on Form 10-Q (this “Quarterly Report”) for the three months ended March 31, 2020 have been prepared by the Company in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and the applicable rules and regulations of the Securities and Exchange Commission (“SEC”). Accordingly, they do not include all information and footnotes required by GAAP for complete financial statements. However, in the opinion of management, the interim financial statements include all adjustments, consisting of normal recurring adjustments, necessary for a fair statement of the results of the periods presented. Interim results are not necessarily indicative of the results that may be expected for the full year. These unaudited condensed consolidated financial statements should be read in conjunction with the Company's audited consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2019 filed with the SEC on February 20, 2020 (“Annual Report”).
Basis of Presentation and Consolidation. The Company's unaudited condensed consolidated financial statements are prepared on the accrual basis of accounting in accordance with GAAP. The financial statements reflect the accounts of the Company and its consolidated subsidiaries. The Company consolidates the wholly-owned subsidiaries, partnerships and joint ventures which it controls (i) through voting rights or similar rights or (ii) by means other than voting rights if the Company is the primary beneficiary of a variable interest entity ("VIE"). Entities which the Company does not control and entities which are VIEs in which the Company is not a primary beneficiary are accounted for under appropriate GAAP.
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2020 and 2019
(Unaudited and dollars in thousands, except share/unit and per share/unit data)
The Company is the primary beneficiary of certain VIEs as it has a controlling financial interest in these entities. LCIF, which is consolidated and in which the Company has an approximate 97% interest, is a VIE. The Company has a 90% ownership interest in a joint venture with a developer, which acquired a parcel of land in the Atlanta, Georgia market and plans to develop an industrial property. The joint venture is consolidated and is a VIE.
The assets of each VIE are only available to satisfy such VIE's respective liabilities. As of March 31, 2020 and December 31, 2019, the VIEs' mortgages and notes payable were non-recourse to the Company. Below is a summary of selected financial data of consolidated VIEs for which the Company is the primary beneficiary included in the unaudited condensed consolidated balance sheets as of March 31, 2020 and December 31, 2019:
March 31, 2020December 31, 2019
Real estate, net$608,089  $592,372  
Total assets$663,811  $645,623  
Mortgages and notes payable, net$76,110  $82,978  
Total liabilities$97,601  $101,901  
In addition, the Company acquires, from time to time, properties using a reverse like-kind exchange structure pursuant to Section 1031 of the Internal Revenue Code (a "reverse 1031 exchange") and, as such, the properties are in the possession of an Exchange Accommodation Titleholder ("EAT") until the reverse 1031 exchange is completed. The EAT is classified as a VIE as it is a “thinly capitalized” entity. The Company consolidates the EAT because it is the primary beneficiary as it has the ability to control the activities that most significantly impact the EAT's economic performance and can collapse the 1031 exchange structure at any time. The assets of the EAT primarily consist of leased property (net real estate and intangibles).
Use of Estimates. Management has made a number of significant estimates and assumptions relating to the reporting of assets and liabilities, the disclosure of contingent assets and liabilities and the reported amounts of revenues and expenses to prepare these unaudited condensed consolidated financial statements in conformity with GAAP. These estimates and assumptions are based on management's best estimates and judgment. Management evaluates its estimates and assumptions on an ongoing basis using historical experience and other factors, including the economic downturn primarily caused by the recent outbreak of COVID-19. Management adjusts such estimates when facts and circumstances dictate. The most significant estimates made include the recoverability of accounts receivable and deferred rent receivable, the allocation of property purchase price to tangible and intangible assets acquired and liabilities assumed, the determination of VIEs and which entities should be consolidated, the determination of impairment of long-lived assets and equity method investments, valuation of derivative financial instruments, valuation of awards granted under compensation plans, the determination of the incremental borrowing rate for leases where the Company is the lessee and the useful lives of long-lived assets. Actual results could differ materially from those estimates.
Fair Value Measurements. The Company follows the guidance in the Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") Topic 820, Fair Value Measurements and Disclosures ("Topic 820"), to determine the fair value of financial and non-financial instruments. Topic 820 defines fair value, establishes a framework for measuring fair value in GAAP and expands disclosures about fair value measurements. Topic 820 establishes a fair value hierarchy that prioritizes observable and unobservable inputs used to measure fair value into three levels: Level 1 - quoted prices (unadjusted) in active markets that are accessible at the measurement date for assets or liabilities; Level 2 - observable prices that are based on inputs not quoted in active markets, but corroborated by market data; and Level 3 - unobservable inputs, which are used when little or no market data is available. The fair value hierarchy gives the highest priority to Level 1 inputs and the lowest priority to Level 3 inputs. In determining fair value, the Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible, as well as considering counterparty credit risk. The Company has formally elected to apply the portfolio exception within Topic 820 with respect to measuring counterparty risk for all of its derivative transactions subject to master netting arrangements.
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2020 and 2019
(Unaudited and dollars in thousands, except share/unit and per share/unit data)
The Company estimates the fair value of its real estate assets, including non-consolidated real estate assets, by using income and market valuation techniques. The Company may estimate fair values using market information such as recent sale contracts (Level 2 inputs) or recent sale offers or discounted cash flow models, which primarily rely on Level 3 inputs. The cash flow models include estimated cash inflows and outflows over a specified holding period. These cash flows may include contractual rental revenues, projected future rental revenues and expenses and forecasted tenant improvements and lease commissions based upon market conditions determined through discussion with local real estate professionals, experience the Company has with its other owned properties in such markets and expectations for growth. Capitalization rates and discount rates utilized in these models are estimated by management based upon rates that management believes to be within a reasonable range of current market rates for the respective properties based upon an analysis of factors such as property and tenant quality, geographical location and local supply and demand observations.
New Accounting Standards Adopted in 2020. In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which requires that entities use a new forward-looking “expected loss” model that generally will result in the earlier recognition of an allowance for credit losses. The measurement of expected credit losses is based upon historical experience, current conditions and reasonable and supportable forecasts that affect the collectability of the reported amount. ASU No. 2016-13 is effective for fiscal years beginning after December 15, 2019. The Company adopted this guidance on January 1, 2020 on a prospective basis. The Company analyzed its accounts receivable using an aging methodology and determined that there have been no historical credit losses related to its outstanding accounts receivable. As a result, the Company's adoption of this guidance did not have a material impact on the Company's consolidated financial statements.
In August 2018, the FASB issued ASU 2018-15, Intangibles-Goodwill and Other- Internal-Use Software (Subtopic 350-40). This ASU addresses customer’s accounting for implementation costs incurred in a cloud computing arrangement that is a service contract and also adds certain disclosure requirements related to implementation costs incurred for internal-use software and cloud computing arrangements. The amendment aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license). The standard is effective for fiscal years beginning after December 15, 2019. The Company adopted this guidance on January 1, 2020 on a prospective basis. The Company's adoption of this guidance on January 1, 2020 did not have a material impact on the Company's consolidated financial statements.
In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820), Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurements. This ASU includes additional disclosures requirements for recurring Level 3 fair value measurements including disclosure of changes in unrealized gains and losses for the period included in other comprehensive income, disclosure of the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements and a narrative description of measurement uncertainty related to Level 3 measurements. This standard is effective for fiscal years beginning after December 15, 2019. The Company adopted this guidance on January 1, 2020 on a prospective basis. The adoption of this guidance on January 1, 2020 did not have a material impact on the Company's consolidated financial statements.
Recently Issued Accounting Guidance. In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848). ASU 2020-04 contains practical expedients for reference rate reform related activities that impact debt, leases, derivatives and other contracts that reference the London Interbank Offered Rate, or LIBOR, or another reference rate expected to be discontinued because of reference rate reform. The guidance in ASU 2020-04 is optional, applies for a limited period of time to ease the potential burden in accounting for (or recognizing the effect of) reference rate reform on financial reporting, in response to concerns about structural risks of interbank offered rates, and, particularly, the risk of cessation of LIBOR and may be elected over time as reference rate reform activities occur. As of March 31, 2020, the Company has elected to apply the hedge accounting expedients related to probability and the assessments of effectiveness for future LIBOR-indexed cash flows to assume that the index upon which future hedged transactions will be based matches the index on the corresponding derivatives. Application of these expedients preserves the presentation of derivatives consistent with past presentation. The Company continues to evaluate the impact of the guidance and may apply other elections as applicable as additional changes in the market occur.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2020 and 2019
(Unaudited and dollars in thousands, except share/unit and per share/unit data)
While the lease modification guidance in ASC Topic 842 ("Topic 842") addresses routine changes to lease terms resulting from negotiations between the lessee and the lessor, this guidance did not contemplate concessions being so rapidly executed to address the sudden liquidity constraints of some lessees arising from the COVID-19 pandemic. In April 2020, the FASB staff issued a question and answer document (the "Lease Modification Q&A") focused on the application of lease accounting guidance to lease concessions provided as a result of the COVID-19 pandemic. Under existing lease guidance, the Company would have to determine, on a lease by lease basis, if a lease concession was the result of a new arrangement reached with the tenant (treated within the lease modification accounting framework) or if a lease concession was under the enforceable rights and obligations within the existing lease agreement (precluded from applying the lease modification accounting framework). The Lease Modification Q&A allows the Company, if certain criteria have been met, to bypass the lease by lease analysis, and instead elect to either apply the lease modification accounting framework or not, with such election applied consistently to leases with similar characteristics and similar circumstances.

The Company is evaluating the election to apply such relief to avoid performing a lease by lease analysis for the lease concessions that may be (1) granted as relief due to the COVID-19 pandemic and (2) result in the cash flows remaining substantially the same or less. The Lease Modification Q&A has no material impact on the Company's consolidated financial statements as of and for the three months ended March 31, 2020. However, its future impact to the Company is dependent upon the extent of lease concessions granted to tenants as a result of the COVID-19 pandemic in future periods and the elections made by the Company at the time of entering such concessions.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2020 and 2019
(Unaudited and dollars in thousands, except share/unit and per share/unit data)

(2)Earnings Per Share
A portion of the Company's non-vested share-based payment awards are considered participating securities and as such, the Company is required to use the two-class method for the computation of basic and diluted earnings per share. Under the two-class computation method, net losses are not allocated to participating securities unless the holder of the security has a contractual obligation to share in the losses. The non-vested share-based payment awards are not allocated losses as the awards do not have a contractual obligation to share in losses of the Company.
The following is a reconciliation of the numerators and denominators of the basic and diluted earnings per share computations for the three months ended March 31, 2020 and 2019:
 Three Months Ended March 31,
 20202019
BASIC  
Net income attributable to common shareholders
$16,536  $26,405  
Weighted-average number of common shares outstanding - basic
253,038,161  232,538,495  
 
Net income attributable to common shareholders - per common share basic
$0.07  $0.11  
DILUTED
Net income attributable to common shareholders - basic
$16,536  $26,405  
Impact of assumed conversions
107  1  
Net income attributable to common shareholders
$16,643  $26,406  
Weighted-average common shares outstanding - basic
253,038,161  232,538,495  
Effect of dilutive securities:
Unvested share-based payment awards and options
1,160,994  53,274  
OP Units
3,148,122  3,550,374  
Weighted-average common shares outstanding - diluted
257,347,277  236,142,143  
Net income attributable to common shareholders - per common share diluted
$0.06  $0.11  
For per common share amounts, all incremental shares are considered anti-dilutive for periods that have a loss from continuing operations attributable to common shareholders. In addition, other common share equivalents may be anti-dilutive in certain periods.
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2020 and 2019
(Unaudited and dollars in thousands, except share/unit and per share/unit data)
(3)Investments in Real Estate
The Company completed the following acquisition transactions during the three months ended March 31, 2020:
Property
Type
MarketAcquisition
Date
Initial
Cost
Basis
Primary
Lease
Expiration
LandBuilding and ImprovementsLease in-place Value Intangible
IndustrialChicago, ILJanuary 2020$53,642  11/2029$3,681  $45,817  $4,144  
IndustrialPhoenix, AZJanuary 202019,164  12/20251,614  16,222  1,328  
IndustrialChicago, ILJanuary 202039,153  12/20291,788  34,301  3,064  
IndustrialDallas, TXFebruary 202083,495  8/20294,500  71,635  7,360  
$195,454  $11,583  $167,975  $15,896  

The Company is engaged in two consolidated development projects. As of March 31, 2020, the Company's aggregate investment in the development arrangements was $18,298, which included capitalized interest of $188 and is presented as investments in real estate under construction in the accompanying consolidated balance sheets.
As of March 31, 2020, the details of the development arrangements outstanding (in $000's, except square feet):
Project (% owned)MarketProperty TypeEstimated Sq. Ft. Estimated Project Cost GAAP Investment Balance as of
3/31/2020
Amount Funded as of
3/31/2020
Estimated Completion Date
Fairburn (90%)
Atlanta, GAIndustrial910,000  $53,812  $14,641  $11,474  4Q 2020
Richenbacker (100%)
Columbus, OHIndustrial320,000  20,300  3,657  3,421  1Q 2021
$74,112  $18,298  $14,895  

(4)Dispositions and Impairment
During the three months ended March 31, 2020 and 2019, the Company disposed of its interests in various properties for an aggregate gross disposition price of $29,605 and $79,300, respectively, and recognized aggregate gains on sales of properties of $9,805 and $20,957, respectively. Included in the 2020 dispositions is an office property in Charleston, South Carolina which was conveyed to the lender in forgiveness of the mortgage loan encumbering the property. The balance of the non-recourse mortgage loan was in excess of the value of the property collateral, resulting in a debt satisfaction gain of $1,393.
As of March 31, 2020, the Company had one property classified as held for sale because it met the criteria included under the held for sale accounting guidance and a sale to a third party within the next 12 months was deemed probable. As of December 31, 2019, the Company had no properties met the held for sale criteria.


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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2020 and 2019
(Unaudited and dollars in thousands, except share/unit and per share/unit data)
Assets and liabilities of the held for sale property as of March 31, 2020 consisted of the following:
March 31, 2020
Assets:
Real estate, at cost$9,325  
Real estate, intangible assets3,975  
Accumulated depreciation and amortization(6,456) 
Rent receivable - deferred(131) 
Other1,160  
$7,873  
Liabilities:
Accounts payable and other liabilities$15  
Prepaid rent3  
$18  
The Company assesses on a regular basis whether there are any indicators that the carrying value of its real estate assets may be impaired. Potential indicators may include an increase in vacancy at a property, tenant financial instability, change in the estimated holding period of the asset, the potential sale or transfer of the property in the near future and changes in economic conditions such as the recent economic downturn primarily caused by the COVID-19 outbreak. An asset is determined to be impaired if the asset's carrying value is in excess of its estimated fair value and the Company estimates that its cost will not be recovered. During the three months ended March 31, 2020, the Company recorded no impairment charges. During the three months ended March 31, 2019, the Company recognized aggregate impairment charges on real estate properties of $588. Included in the impairment charges recognized during the three months ended March 31, 2019, are impairment charges of $339 and $249 on unencumbered and vacant retail properties in Watertown, New York and Albany, Georgia, respectively. Both of these properties were sold during 2019.

(5)Fair Value Measurements
The following tables present the Company's assets and liabilities measured at fair value on a recurring and non-recurring basis as of March 31, 2020 and December 31, 2019, aggregated by the level in the fair value hierarchy within which those measurements fall:
 BalanceFair Value Measurements Using
DescriptionMarch 31, 2020(Level 1)(Level 2)(Level 3)
Interest rate swap liabilities$(18,924) $  $(18,924) $  

 BalanceFair Value Measurements Using
DescriptionDecember 31, 2019(Level 1)(Level 2)(Level 3)
Interest rate swap liabilities$(1,928) $  $(1,928) $  
Impaired real estate assets(1)$4,846  $  $  $4,846  
(1) Represents a non-recurring fair value measurement. Fair value as of the date of the impairment.
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2020 and 2019
(Unaudited and dollars in thousands, except share/unit and per share/unit data)
The majority of the inputs used to value the Company's interest rate swaps fell within Level 2 of the fair value hierarchy, such as observable market interest rate curves; however, the credit valuation associated with the interest rate swaps utilized Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by the Company and its counterparties. As of March 31, 2020 and December 31, 2019, the Company determined that the credit valuation adjustment relative to the overall fair value of the interest rate swaps was not significant. As a result, the interest rate swaps were classified in Level 2 of the fair value hierarchy.
The table below sets forth the carrying amounts and estimated fair values of the Company's financial instruments as of March 31, 2020 and December 31, 2019:

 As of March 31, 2020As of December 31, 2019
 Carrying
Amount
Fair ValueCarrying
Amount
Fair Value
Liabilities    
Debt$1,429,768  $1,312,977  $1,311,977  $1,276,589  

The fair value of the Company's debt is primarily estimated utilizing Level 3 inputs by using a discounted cash flow analysis, based upon estimates of market interest rates, except for the Company's senior notes payable. The Company determines the fair value of its senior notes payable using market prices. The inputs used in determining the fair value of these notes are categorized as Level 1 due to the fact that the Company uses quoted market rates to value these instruments. However, the inputs used in determining the fair value could be categorized as Level 2 if trading volumes are low.
Fair values cannot be determined with precision, may not be substantiated by comparison to quoted prices in active markets and may not be realized upon sale. Additionally, there are inherent uncertainties in any fair value measurement technique, and changes in the underlying assumptions used, including discount rates, liquidity risks and estimates of future cash flows, could significantly affect the fair value measurement amounts.
Cash Equivalents, Restricted Cash, Accounts Receivable and Accounts Payable. The Company estimates that the fair value of cash equivalents, restricted cash, accounts receivable and accounts payable approximates carrying value due to the relatively short maturity of the instruments.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2020 and 2019
(Unaudited and dollars in thousands, except share/unit and per share/unit data)
(6)Investments in Non-Consolidated Entities
Below is a schedule of the Company's investments in non-consolidated entities:
Percentage Ownership atInvestment Balance as of
InvestmentMarch 31, 2020March 31, 2020December 31, 2019
NNN Office JV LP ("NNN JV")(1)20%$38,413  $39,288  
Etna Park 70 LLC(2)90%8,670  8,352  
Etna Park East LLC (3)90%5,058  4,310  
Other(4)25%5,069  5,218  
$57,210  $57,168  
(1) NNN JV is a joint venture formed in 2018 and owns office properties formerly owned by the Company.
(2) Joint venture formed in 2017 with a developer entity to acquire a 151-acre parcel of developable land and pursue industrial build-to-suit opportunities. The Company determined that it is not the primary beneficiary. In December 2018, the parcel was subdivided and the Company received a distribution of an ownership interest in a 57-acre parcel with a historic cost of $3,008. The Company acquired control of the 57-acre parcel via the purchase of the Company's joint venture partners' interest.
(3) Joint venture formed in 2019 with a developer entity to acquire a 129.6-acre parcel of land and pursue industrial build-to-suit opportunities. The Company determined it is not the primary beneficiary.
(4) As of March 31, 2020, represents one joint venture investment, which owns a single-tenant, net-leased asset.
During the three months ended March 31, 2020, NNN JV sold one asset and the Company recognized a gain on the transaction of $550 within equity in earnings of non-consolidated entities within its consolidated statement of operations. In conjunction with this property sale, NNN JV received net proceeds of $3,419 after the satisfaction of $12,960 of its non-recourse mortgage indebtedness.
In February 2019, a non-consolidated real estate entity, in which the Company owned a 15% ownership interest, sold its only asset and the Company received $2,317 of proceeds. The Company recognized a gain on the transaction of $803, which is included in equity in earnings on non-consolidated entities within its consolidated statement of operations.

(7)Debt
The Company had the following mortgages and notes payable outstanding as of March 31, 2020 and December 31, 2019:
March 31, 2020December 31, 2019
Mortgages and notes payable$381,193  $393,872  
Unamortized debt issuance costs(3,490) (3,600) 
$377,703  $390,272  
Interest rates, including imputed rates on mortgages and notes payable, ranged from 3.5% to 6.5%, respectively, at March 31, 2020 and December 31, 2019, and all mortgages and notes payables mature between 2020 and 2036 as of March 31, 2020. The weighted-average interest rate was 4.5% at each of March 31, 2020 and December 31, 2019.
As of March 31, 2020, the Company had two non-recourse mortgage loans that were in default with an outstanding aggregate principal balance of $50,525. Each mortgage loan is secured by a vacant office property (Overland Park, Kansas and Boca Raton, Florida).
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2020 and 2019
(Unaudited and dollars in thousands, except share/unit and per share/unit data)
The Company had the following senior notes outstanding as of March 31, 2020 and December 31, 2019:
Issue DateMarch 31, 2020December 31, 2019Interest RateMaturity DateIssue Price
May 2014$250,000  $250,000  4.40 %June 202499.883 %
June 2013250,000  250,000  4.25 %June 202399.026 %