Land & Buildings Proposes $4.5B Deal for LXP

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Hedge fund Land & Buildings Investment Management LLC has announced its intention to acquire publicly traded industrial REIT LXP Industrial Trust. The proposal would bring the total price to approximately $4.5 billion, Reuters first reported. LXP owns almost 55 million square feet of industrial space across the U.S., according to a separate announcement made to its shareholders.

Activist investor Land & Buildings issued a letter on Friday, which details the proposed terms. The firm intends to acquire the REIT at a price equal to $16.00 per share in cash, representing an 11 percent premium over LXP’s most recent closing price at $14.41, and a 22 percent premium to the $13.12 price—which was the figure prior to LXP announcing the engagement to its Board of Trustees.

New strategy

LXP has been undergoing a transition over the past years, from a diversified net-lease REIT focused on office properties, into a primarily single-tenant industrial REIT, according to an announcement LXP made to its shareholders in October. To signify the milestone, the company also rebranded as LXP Industrial Trust, formerly known as Lexington Realty Trust.

Earlier this month, LXP recapitalized a 22-property portfolio for $550 million, through a sale to a joint venture. The deal is an example of its re-focused strategy, as 93 percent of the company’s gross book value rests in single-tenant industrial assets—as of June 2021, the company reported it owned 121 assets throughout top markets in the Sun Belt and Midwest.

In its non-binding offer, Land & Buildings stated that it discussed financing for the deal with various debt and equity entities, including financial institutions, suggesting that it has enough sources to see the deal through. According to Reuters, the sum could reach $6 billion, if adding LXP’s current debt of $1.5 billion.

Land & Buildings’ proposed acquisition would follow in the wake of several other massive deals completed in the industrial sector in recent months—a recent example being Blackstone’s $2.8 billion acquisition of an international portfolio from Cabot Properties.

Changes across the sector have opened new possibilities for investment. Despite ongoing challenges, industrial real estate continues to remain one of the most profitable sectors heading into the new year. The latest CommercialEdge report shows that nationwide rents continued to grow at a healthy pace, up by 5.1 percent year-over-year as of December and averaging $6.40 per square foot.