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No. of Recommendations: 6
I own a substantial amount of this convertible preferred stock in my Fidelity account. Historically Fidelity has given me much grief each time I tried to purchase more.

In reviewing the Jan 31 2019 semiannual report of the Fidelity Real Estate Income Fund I found this fund owns a substantial amount of the common stock of LXP and the series C convertible preferred stock. This should give you good leverage if Fidelity is still going to make a fuss about owning this preferred stock.

If you are looking for locking in a yield of about 6% for the LONG TERM, LXP-C deserves your consideration in a diversified portfolio of REIT preferred stocks

Martin


by the way this fund owns a small amount of MNR-C
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No. of Recommendations: 11
I sold LXP in February after holding it for its income since mid 2015, with a tiny capital gain. Their cash flows were flat or declining and I sensed at a consistent 27% to 30%, on rolling 4Q, the interest to CFFO + Interest ratio was not improving and almost universally means little or no dividend growth....and in the case of LXP resulted in a 42.4% dividend cut in 2Q.

But mediocre REITs like LXP tend to have the ideal preferreds, as the company is making enough in REIT taxable income to require a dividend be paid, and the preferreds get paid first, and so the preferred dividends tend to be very reliable even though the common dividends are anything but reliable. But the market tends to treat preferreds of such REITs harshly, which is good for those looking for reliable high income.

However, for some reason, LXP's preferred is trading at an 8.5% premium to its redemption price and is almost 10 years past its 5 year post issue date, making it redeemable at any time. And 6% for such a preferred, unless I'm missing something, is waaaay too low...this should be yielding in the 7.5% to 8% range...at least based on the behavior of other such mediocre REITs.

Just one view.

BruceM
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No. of Recommendations: 7
You are missing something - This is a convertible and is not callable. According to Quantom:

"The preferred shares are convertible any time at the holder's option into 1.8643 common shares of Lexington Corporate Properties Trust (NYSE: LXP), an initial conversion price of $26.82 per common share. On or after 11/16/2009, if the price of the common stock exceeds 125% of the conversion price for 20 of any 30 consecutive trading days, the company may, at their option, force the preferred shares to be converted into common shares at the then prevailing conversion price."

At the current price of LXP at $ 9.49, conversion is not going to happen anytime soon. This issue has been discussed here before. I learned about through some posts by Jim Luckett.
:>) Norm
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No. of Recommendations: 1
This is a convertible and is not callable

Quantumonline shows the "Call Date" as 11/16/2009, which is almost 5 years post issue.

But a look in the prospectus does show this....


Redemption.................... The Series C Preferred Shares will not be
redeemable by us except as necessary to
preserve our status as a REIT. However, on or
after November 16, 2009, we have the right to
require the holder to convert its Series C
Preferred Shares. See "-- Company Conversion
Option" below.

So they are redeemable, but unlikely unless things really go South, which I'd doubt.

BruceM
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No. of Recommendations: 7
LXP-C is a unique preferred, and many an investor looks at LXP-C and passes without really understanding it.

LXP-C is for most intents and purposes, a perpetual, uncallable preferred stock. So sort of like a 99 year bond, paying 6%.

Is LXP durable? Actually the REIT's conversion to industrial focus is good for the preferred. Of course it could always fail in some way, in some market, in the future, but it looks pretty solid now. LXP has market cap of $2.2B. LXP-C has market cap of $104m. So the preferred is a sliver of the investment pie, which is good, unlike other REITs where the preferred shares are worth as much as the equity, and there is less cushion in front of them.

Now LXP-C can be converted to common, but it is way out of the money. If it ever gets into the range to convert, and common trades 25% over the conversion price for 30 days, a conversion can be forced, but that circumstance, if it ever happens, is many years off, and there you would be getting stock worth $60+ in compensation.

The most significant risk to LXP-C is rising inflation. It will not look so good if inflation hits 4-5%.

If one is interested in LXP-C, another similar one is RPT-D. Always do research on Quantumonline before buying a preferred issue.
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No. of Recommendations: 5
To me LXP is another example of a REIT that has changed course by selling considerable assets in a fairly short time with the normal reduction in FFO/share.

First LXP sold off its non-office/non-industrial properties including a golf course, a private school, a handful of vet clinics, etc.,. Then it sold the majority of its office properties with the intent of selling all of its office properties to become a pure industrial REIT.

Such course changes typically hurt FFO/share in the short term. Whether it will be beneficial in the longer term is to be seen.

Examples include:

SHO sold a lot of hotels back in 2012 to 2015, pays the minimum dividend and issued stock as a part of its dividends in building up what is the best REIT balance sheet that I can recall seeing. Super strong balance sheets are great during recessions, but has been a major drag on cash flows during all the good years since the Great Recession. If early is the same thing as wrong, then SHO has been VERY wrong as it has been very early.

VTR sold off its nursing homes at high cap rates and re-invested in new properties at lower cap rates and in the process hurt its cash flows per share. Of course SNFs finally hit the wall in late 2017, but OHI has outperformed VTR over 1 & 3 years, but not 5 years.

Back to LXP. Its property sales over the last few years has hurt cash flows, especially recently as the industrial properties that it has been acquiring has lower cap rates than the office properties are being sold at. Whether converting to a pure industrial REIT will payoff in the long-term is to be seen.

At least LXP's recent cut on its common dividend should make the preferred's dividend safer.

My two cents worth.
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No. of Recommendations: 1
pays the minimum dividend

While SHO pays $0.05 dividend on 1,2 and 3rd quarter, it typically pays a much higher catch up dividend on the 4th quarter, for example last year it paid $0.54 in the 4th quarter and for the full year it comes to $0.69. The full year dividend is around this range.

what is the best REIT balance sheet
The company's leverage is 1.5x EBITDA. Wells Fargo upgraded the stock to outperform recently with an argument the strong balance sheet and lack of opportunity to buy assets with reasonable valuation, SHO may buyback stock, given the discount to the NAV. Management had indicated this as a route of deploying the financial flexibility, but not sure whether the management will follow this route. The management had deliberately build a strong (some may call it excessively strong) balance sheet, and will they loosen it for buyback is a question. But any downturn or distress opportunity, they will be able to jump on it. OTOH, a significant earning potential is lost for maintaining such a balance sheet.

I would like to see SHO acquire one or two properties that requires investment, sort of fix it and flip it.
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No. of Recommendations: 6
"So they are redeemable, but unlikely unless things really go South..."--BruceCM

I beg to differ. It is not redeemable except as necessary to maintain REIT status, which is neither south nor north, just remote.

They can force conversion, but only if things really go north. If you are a long-term holder of this preferred and they force conversion, it means you have a big capital gain and you will cry all the way to the bank.

When I originally set out to buy LXP-C I ran into Fidelity's nonsense and ended up going for the common instead. That worked out well -- higher yield (back then) and I got a small capital gain. Now that LXP common dividend has been reduced, I will probably switch to the convertible preferred for the higher yield and the greater dividend safety. Fidelity be damned.
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No. of Recommendations: 4
I am taking another run at Fidelity on LXP-C.

so far, they have said my prior approval to buy the security, a few years back, which I did not act on, is null and void. Nowadays they are much more reluctant to grant exceptions. They conducted a full recorded interview with me taking 20 minutes on my income, assets, net worth, goals, portfolio, knowledge of investing, risk tolerance, knowledge of this particular security, motives and more. This was prefaced by a speech by the rep saying that denial was the most likely outcome. The interview will be reviewed by a committee of higher ups who do not speak to the public. Ever.

I put into my responses that I believed that Fidelity had made a mistake putting LXP-C on the blacklist as "a contingent convertible debt instrument." I said I hoped the committee would review not just my suitability for an exception but also the classification of LXP-C as a more risky asset than the common and than other REIT convertible preferreds having the same features. I explained the contingent convertibility was a company option to force conversion if things go really well for the company and the investor and that the investor will be compensated in that event with a huge capital gain. Absent a capital gain, there is no convertibility option for the company because the contingency condition would not have been met. As to the holder's conversion option, that is not contingent.

We'll see.
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No. of Recommendations: 4
Fidelity denied my request to buy LCP-C. Too risky, they say.

So, I am opening a Vanguard IRA, transferring the stock position I want to sell to Vanguard, then will sell it and buy LXP-C there. Then transfer the LXP-C back to Fidelity, I guess. Last time I checked you can hold it in Fidelity and you can sell it on Fidelity if you have it.

There are two few REIT convertible preferreds and to pass one up, particularly with ARE-B probably riding off into the sunset some time in the next 1 to 2 years, probably. And the Welltower one gone.
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No. of Recommendations: 3
Jim

Most of my assets are in Fidelity and in general I am very happy with the service I get using their platform especially with some of the more obscure income securities.
LXP-C is an exception. I have a big position here since it is one of the best yielding REIT preferred out there that I view as relatively safe. I have a battle each time I want to add to my position but Fidelity each time has eventually backed down.
Someone at Fidelity has blundered as regards LXP-C.
If you check the Morningstar web site you will find that both the Fidelity Real Estate Income Fund and the Fidelity Real Estate Investment Port are among the top 20 Major holders of the common stock of LXP.
How can LXP-C possibly be more risky than LXP????
Go back to Fidelity with this information and see what happens?

Good Luck
Martin
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No. of Recommendations: 0
I thought I'd give it a run using the information you added. I also noted that M* shows Fido is the biggest mutual fund holder of the LXP-C and that I had plenty of experience with these "odd ducks", and nothing jumped out at Quantom Online... I was still denied:( They said it had recently been reviewed and still not suitable for individual investors. I believe he said it was in the category of "contingent convertibles" but could not point to any specifics about LXP-C.
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No. of Recommendations: 6
Gotta pick your battles in this life. I've done my 2 rounds with Fido on this.

Not too much trouble opening a Vanguard account. Now it's there if I ever need it again.

Just stumbled across RLJ-A. Very busted convertible yielding 7.3% from a well-diversified quality lodging REIT with strong balance sheet. Just need to not get distracted into the common, which is yielding 8.something.

http://www.quantumonline.com/search.cfm?tickersymbol=RLJ-A&a...
https://docs.google.com/spreadsheets/d/1M18jyMWV54AAcrks45Vg...
https://seekingalpha.com/article/4283487-rlj-lodging-trust-r...

Fundamental Analysis of RLJ
PROVIDED BY S&P GLOBAL MARKET INTELLIGENCE AS OF 08/13/2019
Analysis is driven by underlying factors specific to the Real Estate sector.
Valuation
current =
72
Overvalued = 0
Undervalued = 100

Quality
current =
60
Low = 0
High = 100

Growth Stability
current =
59
Low = 0
High = 100

Financial Health
current =
97
Less Healthy = 0
Healthy = 100
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