Investments in Real Estate and Real Estate Under Construction

The Company's real estate, net, consists of the following at December 31, 2013 and 2012:



	2013			2012
Real estate, at cost:
Buildings and building improvements	$	3,008,709		$	2,969,050
Land, land estates and land improvements	793,418			581,199
Fixtures and equipment	5,861			7,705
Construction in progress	4,306			6,512
Real estate intangibles:
In-place lease values	486,743			401,503
Tenant relationships	172,640			179,655
Above-market leases	102,774			104,756
Investments in real estate under construction	74,350			65,122
	4,648,801			4,315,502
Accumulated depreciation and amortization⁽¹⁾	(1,223,381		)	(1,150,417		)
Real estate, net	$	3,425,420		$	3,165,085


(1)	Includes accumulated amortization of real estate intangible assets of $447,764 and $412,349 in 2013 and 2012, respectively. The estimated amortization of the above real estate intangible assets for the next five years is $44,003 in 2014, $34,932 in 2015, $28,640 in 2016, $25,239 in 2017 and $21,498 in 2018.

The Company had below-market leases, net of accumulated accretion, which are included in deferred revenue, of $59,781 and $71,513, respectively as of December 31, 2013 and 2012. The estimated accretion for the next five years is $5,176 in 2014, $4,489 in 2015, $3,380 in 2016, $2,935 in 2017 and $2,911 in 2018.

The Company, through property owner subsidiaries, completed the following acquisitions and build-to-suit transactions during 2013 and 2012:

2013:



										Real Estate Intangibles
Property Type	Location	Acquisition/Completion Date	Initial Cost Basis		Lease Expiration	Land and Land Estate		Building and Improvements		Above Market Lease Value		Lease in-place Value
Industrial	Long Island City, NY	February 2013	$	42,124	03/2028	$	—	$	42,124	$	—	$	—
Industrial	Houston, TX	March 2013	$	81,400	03/2038	$	15,055	$	57,949	$	—	$	8,396
Office ⁽¹⁾	Denver, CO	April 2013	$	34,547	04/2028	$	2,207	$	26,724	$	—	$	5,616
Retail⁽²⁾	Tuscaloosa, AL	May 2013	$	8,397	05/2028	$	2,793	$	5,604	$	—	$	—
Land⁽³⁾	New York, NY	October 2013	$	302,000	10/2112	$	224,935	$	—	$	—	$	77,065
Land	Danville, VA	October 2013	$	4,727	01/2029	$	3,454	$	—	$	673	$	600
Retail⁽⁴⁾	Albany, GA	November 2013	$	7,074	11/2028	$	1,468	$	5,606	$	—	$	—
Office⁽⁵⁾	Various	December 2013	$	13,144	12/2033	$	1,522	$	10,374	$	—	$	1,248
Office	Omaha, NE	December 2013	$	39,125	11/2033	$	2,058	$	32,343	$	—	$	4,724
			$	532,538		$	253,492	$	180,724	$	673	$	97,649

Weighted-average life of intangible assets (years)										15.3		82.5


(1)	The Company incurred additional tenant related costs of $3,825.


(2)	The Company incurred leasing costs of $323. The property was sold in September 2013.


(3)	Includes three properties.


(4)	The Company incurred leasing costs of $338.


(5)	Includes four properties. One property was under construction at December 31, 2013, $1,969 of construction in progress costs are included in building and improvements above.

In addition, during 2013, the Company deposited $638 toward the purchase of a to-be-built industrial property in Lewisburg, Tennessee for an estimated cost of $12,767. Substantial completion of the property is expected to occur in the second quarter of 2014 although there can be no assurance that the acquisition will be consummated.

2012:



										Real Estate Intangibles
Property Type	Location	Acquisition/Completion Date	Initial Cost Basis		Lease Expiration	Land and Land Estate		Building and Improvements		Lease in-place Value		Tenant Relationships Value
Office	Huntington, WV	January 2012	$	12,558	11/2026	$	1,368	$	9,527	$	1,405	$	258
Office	Florence, SC	February 2012	$	5,094	02/2024	$	774	$	3,629	$	505	$	186
Land/ Infrastructure	Missouri City, TX	April 2012	$	23,000	04/2032	$	14,555	$	5,895	$	2,135	$	415
Industrial	Shreveport, LA	June 2012	$	12,941	03/2022	$	1,078	$	10,134	$	1,590	$	139
Retail	Valdosta, GA⁽¹⁾	August 2012	$	7,791	08/2027	$	2,128	$	5,663	$	—	$	—
Office	Jessup, PA	August 2012	$	24,917	08/2027	$	2,520	$	17,656	$	3,336	$	1,405
Office	Saint Joseph, MO	September 2012	$	17,571	06/2027	$	607	$	14,004	$	2,528	$	432
Retail	Opelika, AL⁽¹⁾	November 2012	$	7,978	11/2027	$	1,446	$	6,532	$	—	$	—
Office	Phoenix, AZ	December 2012	$	53,200	12/2029	$	5,585	$	36,099	$	8,956	$	2,560
Office	Eugene, OR	December 2012	$	17,558	11/2027	$	1,541	$	13,099	$	2,414	$	504
			$	182,608		$	31,602	$	122,238	$	22,869	$	5,899

Weighted-average life of intangible assets (years)										15.7		16.0

(1) Incurred leasing costs of $488 for Valdosta and $355 for Opelika. Properties were sold in 2013.

The Company recognized aggregate acquisition expenses of $812 and $947 in 2013 and 2012, respectively, which are included in property operating expenses within the Company's Consolidated Statements of Operations.

The Company is engaged in various forms of build-to-suit development activities. The Company, through lender subsidiaries and property owner subsidiaries, may enter into the following acquisition, development and construction arrangements: (1) lend funds to construct build-to-suit projects subject to a single-tenant lease and agree to purchase the properties upon completion of construction and commencement of a single-tenant lease, (2) hire developers to construct built-to-suit projects on owned properties leased to single tenants, (3) fund the construction of build-to-suit projects on owned properties pursuant to the terms in single-tenant lease agreements or (4) enter into purchase and sale agreements with developers to acquire single-tenant build-to-suit properties upon completion. As of December 31, 2013, the Company had the following development arrangements outstanding:



Location	Property Type	Square Feet	Expected Maximum Commitment/Contribution ($ millions)		Lease Term (Years)	Estimated Completion Date
Rantoul, IL	Industrial	813,000	$	42.6	20	1Q 14
Bingen, WA	Industrial	124,000	$	18.9	12	2Q 14
Las Vegas, NV	Industrial	180,000	$	29.6	20	3Q 14
Richmond, VA	Office	279,000	$	98.6	15	3Q 15
		1,396,000	$	189.7

The Company has variable interests in certain developer entities constructing the facilities but is not the primary beneficiary of the entities as the Company does not have a controlling financial interest. As of December 31, 2013 and 2012, the Company's aggregate investment in development arrangements was $74,350 and $65,122, respectively, which includes $1,472 and $1,291 of interest capitalized during 2013 and 2012, respectively, and is presented as investments in real estate under construction in the accompanying Consolidated Balance Sheets.

On September 1, 2012, the Company, together with an operating partnership subsidiary, acquired the remaining common equity interest in Net Lease Strategic Assets Fund L.P. (“NLS”) from Inland American (Net Lease) Sub, LLC (“Inland”) that the Company did not already own for a cash payment of $9,438 and the assumption of all outstanding liabilities. Immediately prior to the acquisition, the Company owned 15% of NLS's common equity and 100% of NLS's preferred equity and its investment balance in NLS was $40,047. At the date of acquisition, NLS owned 41 properties totaling 5.8 million square feet in 23 states, plus a 40% tenant-in-common interest in an office property. The Company's investment in NLS had previously been accounted for under the equity method and is now consolidated. The acquisition resulted in a remeasurement of the net assets acquired to fair value. The Company engaged an independent third party to determine the fair value of the assets acquired and liabilities assumed.

The following table summarizes the allocation of the fair value of amounts recognized for each major class of assets and liabilities:



Real estate assets	$	325,310
Lease related intangible assets	124,330
Cash	8,107
Other assets	36,179

Total acquired assets	493,926

Secured debt	252,517
Other liabilities, including below-market leases	23,686

Total assumed liabilities	276,203

Fair value of acquired net assets (represents 100% interest)	$	217,723

The Company recognized a gain on the transaction in the Consolidated Statement of Operations of $167,864 primarily related to the revaluation of the Company's equity interest in NLS for the difference between its carrying value in NLS and the fair value of its ownership interest at acquisition. The noncontrolling interest share of the fair value of the net assets acquired was $373.

Intangible assets and liabilities recorded in connection with the above acquisition are set forth as follows:



			Weighted Average Amortization Period (in Years)
In-place leases	$	59,819	6.2
Tenant relations	24,828		4.6
Above-market leases	39,683		8.4
Total intangible assets acquired	$	124,330
Below-market leases	$	1,529	2.7

The Company recognized gross revenues from continuing operations of $42,576 and $14,504 and net losses of $4,419 and $1,667 from NLS properties in 2013 and 2012, respectively.

The following unaudited condensed consolidated pro forma information is presented as if the Company acquired the remaining equity in NLS on January 1, 2011. The information excludes activity that is non-recurring and not representative of future activity, primarily the gain on acquisition of $167,864 and acquisition costs of $230 for 2012. The information presented below is not necessarily indicative of what the actual results of operations would have been had the transaction been completed on January 1, 2011, nor does it purport to represent the Company's future operations:



	2012			2011
Gross revenues	$	372,603		$	356,918
Net income (loss) attributable to Lexington Realty Trust shareholders	$	8		$	(111,787	)
Net loss attributable to common shareholders	$	(22,985	)	$	(135,924	)
Net loss per common share - basic and diluted	$	(0.14	)	$	(0.89	)