-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, DU+LsuECT8MdfQVOnv9J6OHnahVg42UmkU5PQBQX0pVgxFaKBKbivqCy5lJVv4CO 0QpKfB/9VTPPvMUvagnH8Q== 0000950123-00-002334.txt : 20000317 0000950123-00-002334.hdr.sgml : 20000317 ACCESSION NUMBER: 0000950123-00-002334 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19991231 FILED AS OF DATE: 20000316 FILER: COMPANY DATA: COMPANY CONFORMED NAME: LEXINGTON CORPORATE PROPERTIES TRUST CENTRAL INDEX KEY: 0000910108 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE INVESTMENT TRUSTS [6798] IRS NUMBER: 133717318 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: SEC FILE NUMBER: 001-12386 FILM NUMBER: 571432 BUSINESS ADDRESS: STREET 1: 355 LEXINGTON AVE CITY: NEW YORK STATE: NY ZIP: 10017 BUSINESS PHONE: 2126927260 MAIL ADDRESS: STREET 1: 355 LEXINGTON AVE STREET 2: 14TH FLOOR CITY: NEW YORK STATE: NY ZIP: 10017 FORMER COMPANY: FORMER CONFORMED NAME: LEXINGTON CORPORATE PROPERTIES INC DATE OF NAME CHANGE: 19930816 10-K405 1 LEXINGTON CORPORATE PROPERTIES TRUST 1 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 ------------------------ FORM 10-K (Mark One) [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED] FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED] FOR THE TRANSITION PERIOD FROM TO COMMISSION FILE NUMBER 1-12386 LEXINGTON CORPORATE PROPERTIES TRUST (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) MARYLAND 13-3717318 (STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.) 355 LEXINGTON AVENUE NEW YORK, NY 10017 (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE) REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (212) 692-7260 SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: TITLE OF EACH CLASS - ---------------------------------------------- NAME OF EACH EXCHANGE ON WHICH REGISTERED ---------------------------------------------- COMMON SHARES, PAR VALUE $.0001 NEW YORK STOCK EXCHANGE
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: NONE 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 [X] No [ ] Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (sec.229.405 of this chapter) is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X] The aggregate market value of the voting shares held by non-affiliates of the Registrant as of February 29, 1999 was $170,753,732. Number of common shares outstanding as of February 29, 2000 was 17,160,321. Number of preferred shares outstanding as of February 29, 2000 was 2,000,000. DOCUMENTS INCORPORATED BY REFERENCE: The Definitive Proxy Statement for Registrant's 2000 Annual Meeting of Shareholders is incorporated herein by reference into Part III. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 2 PART I. FORWARD-LOOKING STATEMENTS When used in this Form 10-K Annual Report, the words "believes," "expects," "estimates" and similar expressions are intended to identify forward-looking statements. Such statements are subject to certain risks and uncertainties, which could cause actual results to differ materially. In particular, among the factors that could cause actual results to differ materially are continued qualification as a real estate investment trust, general business and economic conditions, competition, increases in real estate construction costs, interest rates, accessibility of debt and equity capital markets and other risks inherent in the real estate business including tenant defaults or financial difficulties, potential liability relating to environmental matters and illiquidity of real estate investments. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. The Company undertakes no obligation to publicly release the results of any revisions to these forward-looking statements which may be made to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events. ITEM 1. BUSINESS GENERAL Lexington Corporate Properties Trust (the "Company"), is a self-managed and self-administered real estate investment trust that acquires, owns and manages a geographically diverse portfolio of net leased office, industrial and retail properties. The Company's predecessor was organized in October 1993 and merged into the Company on December 31, 1997. As of December 31, 1999, the Company's real property portfolio consisted of 66 properties (or interests therein) (the "Properties") located in twenty-eight states, including warehousing, distribution and manufacturing facilities, office buildings and retail properties containing an aggregate 11.4 million net rentable square feet of space. The Company's Properties are subject to triple net leases, which are generally characterized as leases in which the tenant bears all, or substantially all, of the costs and cost increases for real estate taxes, insurance and ordinary maintenance. The Company manages its real estate and credit risk through geographic, industry, tenant and lease maturity diversification. As of December 31, 1999 the five largest tenants/guarantors, which occupy twelve Properties, represented 38.1% of annualized revenues:
% OF RENTAL TENANT/GUARANTOR REVENUE PROPERTY TYPES ---------------- ------- --------------------- Kmart Corporation -- 1 property........................ 11.4% Industrial Northwest Pipeline Corp. -- 1 property................. 10.9% Office Exel Logistics, Inc. -- 4 properties................... 6.3% Industrial Honeywell, Inc. -- 3 properties........................ 5.1% Office Circuit City Stores, Inc. -- 3 properties.............. 4.4% Office (1) Retail (2) ---- 38.1% ====
As of December 31, 1998 and 1997 the five largest tenants/guarantors represented 39.3% and 48.1% of annualized revenues, respectively. Northwest Pipeline Corp. and Kmart Corporation are the only current tenants that represented greater than 10% of annualized revenues in 1998 and Northwest Pipeline Corp. was the only current tenant that represented greater than 10% of annualized revenue in 1997. 1 3 OBJECTIVES AND STRATEGY The Company's primary objectives are to increase Funds From Operations, cash available for distribution per share to its shareholders, and net asset value per share. In an effort to obtain these objectives management focuses on: - effectively managing assets through lease extensions, revenue enhancing property expansions, opportunistic property sales and redeployment of assets, when advisable; - acquiring portfolios and individual net lease properties from third parties, completing sale/leaseback transactions, acquiring build-to-suit properties and opportunistic use of our operating partnership units; - refinancing existing indebtedness at lower average interest rates and increasing the Company's access to capital to finance property acquisitions and expansions; - entering into strategic co-investment programs which generate higher equity returns than direct investments due to acquisition and asset management fees and in some cases increased leverage levels; and - strategic repurchase of common shares. Internal Growth; Effectively Managing Assets Tenant Relations and Lease Compliance. The Company maintains close contact with its tenants in order to understand their future real estate needs. The Company monitors the financial, property maintenance and other lease obligations of its tenants through a variety of means, including periodic reviews of financial statements and physical inspections of the Properties. The Company performs annual inspections of those Properties where it has an ongoing obligation with respect to the maintenance of the Property and for all Properties during each of the last three years immediately prior to a scheduled lease expiration. Biannual physical inspections are undertaken for all other Properties. Extending Lease Maturities. The Company seeks to extend its leases in advance of their expiration in order to maintain a balanced lease rollover schedule. Since February 1994, the Company has entered into lease extensions of three years or more on 13 of its Properties. As of December 31, 1999, the scheduled lease maturities for each of the next five years are as follows:
NUMBER CURRENT % OF OF SQUARE ANNUAL ANNUALIZED LEASES FOOTAGE RENT ($000'S) RENTS --------- --------- ------------- ---------- 2000.................................. 2 249,240 $ 654 0.83% 2001.................................. 3 522,224 2,663 3.40% 2002.................................. 4 653,386 2,833 3.62% 2003.................................. 1 179,280 1,900 2.43% 2004.................................. 2 175,000 789 0.99% -- --------- ------ ----- 12 1,779,130 $8,839 11.27% == ========= ====== =====
Revenue Enhancing Property Expansions. The Company undertakes expansions of its Properties based on tenant requirements. The Company believes that selective property expansions can provide it with attractive rates of return and actively seeks such opportunities. Property Sales and Redeployment of Assets. The Company may determine to sell a Property if it deems such disposition to be in the Company's best interest. During 1999, the Company sold seven Properties for $63.9 million, at an average capitalization rate of 8.6% on current rental income, resulting in $5.1 million in gains. 2 4 Acquisition Strategies The Company seeks to enhance its net lease property portfolio through acquisitions of general purpose, efficient, well-located properties in growing markets. Management has diversified the Company's portfolio by geographical location, tenant industry segment, lease term expiration and property type with the intention of providing steady internal growth with low volatility. Management believes that such diversification should help insulate the Company from regional recession, industry specific downturns and price fluctuations by property type. Prior to effecting any acquisitions, management analyzes the (i) property's design, construction quality, efficiency, functionality and location with respect to the immediate sub-market, city and region; (ii) lease integrity with respect to term, rental rate increases, corporate guarantees and property maintenance provisions; (iii) present and anticipated conditions in the local real estate market; and (iv) prospects for selling or releasing the property on favorable terms in the event of a vacancy. Management also evaluates each potential tenant's financial strength, growth prospects, competitive position within its respective industry and a property's strategic location and function within a tenant's operations or distribution systems. Management believes that its comprehensive underwriting process is critical to the assessment of long-term profitability of any investment by the Company. Operating Partnership Structure. The operating partnership structure enables the Company to acquire properties by issuing to a seller, as a form of consideration, interests in the Company's operating partnerships ("OP Units"). Management believes that this structure facilitates the Company's ability to raise capital and to acquire portfolio and individual properties by enabling the Company to structure transactions which may defer tax gains for a contributor of property while preserving the Company's available cash for other purposes, including the payment of dividends and distributions. The Company has used OP Units as a form of consideration in connection with the acquisition of 22 Properties. Acquisitions of Portfolio and Individual Net Lease Properties. The Company seeks to acquire portfolio and individual properties that are leased to creditworthy tenants under long-term net leases. Management believes there is significantly less competition for the acquisition of property portfolios containing a number of net leased properties located in more than one geographic region. Management also believes that the Company's geographical diversification, acquisition experience and access to capital will allow it to compete effectively for the acquisition of such net leased properties. Joint Venture Co-Investments. The Company entered into a joint venture agreement with The Comptroller of the State of New York as Trustee of the Common Retirement Fund ("NYSCRF"). The joint venture entity, Lexington Acquiport Company, LLC ("LAC"), will acquire high quality office and industrial real estate properties net leased to investment and non-investment grade single tenant users. The Company and NYSCRF will make equity contributions to LAC of up to $50 million and $100 million, respectively. Property acquisitions will be additionally funded through the use of up to $278 million in non-recourse mortgages. During 1999, LAC made one investment, an $11 million participating note, which was used to partially fund the purchase of a 327,325 square foot office property in Texas for $34.8 million. Subsequent to year-end, LAC purchased a 221,215 square foot office property in Ohio for $26.9 million. The purchase was partially financed through a 10 year, $17.8 million first mortgage note which bears interest at 8.17%. The Company's affiliate, Lexington Realty Advisors, Inc. ("LRA"), has entered into a management agreement with LAC whereby LRA will perform certain services for a fee relating to the acquisition (75 basis points of cost) and management (2% of rent collected annually) of the LAC investments. The Company also formed a joint venture to own a property net leased to Blue Cross/Blue Shield of South Carolina (see Build-to-suit Properties). The Company has a 40% interest in the joint venture and LRA entered into a management agreement with similar terms as the management agreement with LAC. Sale/Leaseback Transactions. The Company seeks to acquire portfolio and individual net lease properties in sale/leaseback transactions. The Company selectively pursues sale/leaseback transactions with creditworthy sellers/tenants with respect to properties that are integral to the sellers'/tenants' ongoing operations. 3 5 Build-to-suit Properties. The Company may also acquire, after construction has been completed, "build-to-suit" properties that are entirely pre-leased to their intended corporate users before construction. As a result, the Company does not assume the risk associated with the construction phase of a project. During 1999, the Company acquired a "build-to-suit" property, net leased to Blue Cross/Blue Shield of South Carolina, for $42.5 million at an average unleveraged yield of 11.5%. The purchase was partially funded with a 10 year, $25.3 million mortgage note which bears interest at 7.85%. On December 30, 1999, the Company sold a 60% joint venture interest in the subsidiary which owns the property for $10.8 million. The LCP Group, L.P. ("LCP"), an affiliate of E. Robert Roskind, Chairman of the Board of Trustees and Co-Chief Executive Officer of the Company, has granted the Company an option exercisable at any time, to acquire general partnership interests currently owned by LCP in two limited partnerships, Net 1, L.P. and Net 2, L.P. (together, the "Net Partnerships"), which own net leased office, industrial and retail properties. The Net Partnerships own a total of 22 single-tenant properties located in 14 states which contain approximately 2.2 million net rentable square feet. The tenants of such properties include Hollywood Video, Ameritech Services and Wal-Mart Stores, Inc. Under the terms of the option, the Company, subject to review of any such transaction by the independent members of its Board of Trustees, may acquire the general partnership interests at their fair market value based upon a formula relating to partnership cash flows, with the Company retaining the option of paying such fair market value in equity and/or debt securities of the Company, OP Units, cash or a combination thereof. Refinancing Existing Indebtedness and Increasing Access to Capital As a result of the Company's financing activities, the weighted average interest rate on the Company's outstanding indebtedness has been reduced from approximately 8.17% as of December 31, 1997 to approximately 7.79% as of December 31, 1999. In addition, management is constantly pursuing opportunities to increase the Company's access to public and private capital in order to achieve maximum operating flexibility. Scheduled balloon payments, excluding the $70.9 million outstanding on the variable rate unsecured credit facility, over the next five years are as follows ($000's):
WEIGHTED AVERAGE BALLOON AMOUNT INTEREST RATE -------------- ------------- 2000..................................................... $15,066 8.73% 2001..................................................... 1,000 9.50% 2002..................................................... 10,623 7.46% 2003..................................................... -- -- 2004..................................................... 25,260 8.00% ------- ---- $51,949 8.13% ======= ====
Subsequent to year end the Company refinanced a $13.1 million, 8.875% balloon payment due in 2000 with a $17 million, 8.1% mortgage that requires monthly principal and interest payments of $126,000 with a balloon payment of $15.2 million due in February, 2010. The Company's variable rate unsecured credit facility bears interest at 137.5 basis points over the Company's option of 1, 3 or 6 month LIBOR and is scheduled to mature in July 2001. As of December 31, 1999, the outstanding borrowings under this facility bore interest at a weighted average rate of 7.52%. Common Share Repurchase. The Company's Board of Trustees authorized the repurchase of up to 2 million common shares. As of December 31, 1999, the Company has repurchased 1,008,239 common shares at an average price of $10.71, all of which have been retired. Through February 29, 2000, the Company has repurchased 1,200,897 common shares at a weighted average price of $10.61. Competition. The real estate business is highly competitive and the Company competes with numerous established companies having significant resources and experience. 4 6 Environmental Matters. Under various federal, state and local environmental laws, statutes, ordinances, rules and regulations, an owner of real property may be liable for the costs of removal or redemption of certain hazardous or toxic substances at, on, in or under such property as well as certain other potential 60 costs relating to hazardous or toxic substances (including government fines and penalties and damages for injuries to persons and adjacent property). Such laws often impose liability without regard to whether the owner knew of, or was responsible for, the presence or disposal of such substances. Although the Company's tenants are primarily responsible for any environmental damage and claims related to the leased premises, in the event of the bankruptcy or inability of the tenant of such premises to satisfy any obligations with respect thereto, the Company may be required to satisfy such obligations. In addition, under certain environmental laws, the Company, as the owner of such properties, may be held directly liable for any such damages or claims irrespective of the provisions of any lease. From time to time, in connection with the conduct of the Company's business, and prior to the acquisition of any property from a third party or as required by the Company's financing sources, the Company authorizes the preparation of Phase I environmental reports with respect to its Properties. Based upon such environmental reports and management's ongoing review of its Properties, as of the date of this Annual Report, management was not aware of any environmental condition with respect to any of the Company's Properties which management believed would be reasonably likely to have a material adverse effect on the Company. There can be no assurance, however, that (i) the discovery of environmental conditions, the existence or severity of which were previously unknown, (ii) changes in law, (iii) the conduct of tenants or (iv) activities relating to properties in the vicinity of the Company's Properties, will not expose the Company to material liability in the future. Changes in laws increasing the potential liability for environmental conditions existing on properties or increasing the restrictions on discharges or other conditions may result in significant unanticipated expenditures or may otherwise adversely affect the operations of the Company's tenants, which would adversely affect the Company's financial condition and results of operations, including funds from operations. Employees. As of December 31, 1999, the Company had twenty-seven employees. Industry Segments. The Company operates in one industry segment, investment in single tenant, net leased real property. ITEM 2. PROPERTIES Real Estate Portfolio As of December 31, 1999, the Company owned or had interests in approximately 11.4 million square feet of rentable space in 66 office, industrial and retail properties. The Company's Properties are currently 100% leased. The number, and percentage of annualized revenues and square footage mix of the Company's portfolio is as follows:
SQUARE NUMBER REVENUE FOOTAGE ------ ------- ------- Office................................................... 21 53% 33% Industrial............................................... 24 34% 54% Retail................................................... 21 13% 13% -- --- --- 66 100% 100% == === ===
The Company's Properties are subject to triple net leases, however, in certain leases the Company is responsible for roof and structural repairs. In such situations the Company performs annual inspections of the Properties. The Company's Property in Palm Beach Gardens, Florida is subject to a lease in which the Company is responsible for a portion of the real estate taxes and utilities. The Company's tenants represent a variety of industries including banking, computer and software services, health and fitness, general purpose retailing, manufacturing, insurance and warehousing, and have a weighted average credit strength of investment grade quality. 5 7 A substantial portion of the Company's income consists of base rent under long-term leases. As of December 31, 1999, the average remaining term under the Company's leases is approximately 8.5 years. Of the 66 current leases as of December 31, 1999, 41 contain scheduled rent increases and 5 contain an increase based upon the Consumer Price Index. In addition, one lease contains a percentage rent clause. The Company has 12 Properties accounting for $16.1 million of annualized rental revenue that are subject to long term ground leases where a third party owns and has leased the underlying land to the Company. In each of these situations the rental payments made to the landowner are passed on to the Company's tenant. At the end of these long-term ground leases, unless extended, the land together with all improvements thereon revert to the landowner. These ground leases, including renewal options, expire at various dates through 2074. The Company has 17 Properties that are subject to lessee purchase options. As of December 31, 1999, only one purchase option can be exercised. In each case the Property can be purchased for no less than its current fair market value. TABLE REGARDING REAL ESTATE HOLDINGS The table on the following pages sets forth certain information relating to the Company's real property portfolio as of December 31, 1999 ($000 except per share data). 6 8
PROPERTY NET TENANT TYPE/YEAR LAND AREA RENTABLE PROPERTY LOCATION (GUARANTOR) CONSTRUCTED (ACRES) SQUARE FEET ----------------- ----------------------------- ------------------- --------- ----------- 904 Industrial Road Walker Manufacturing Company Industrial 20.00 195,640 Marshall, MI (Tenneco Automotive, Inc.) 1968 & 1972 1601 Pratt Avenue Walker Manufacturing Company Industrial 8.26 53,600 Marshall, MI (Tenneco Automotive, Inc.) 1979 19019 No. 59th Avenue Honeywell, Inc. Research/ 51.79 252,300 Glendale, AZ Development 1985 6950 Greenwood Parkway Allegiance Healthcare Corp. Industrial 10.15 123,924 Bessemer, AL (1) 1990 (Baxter International, Inc.) 567 South Riverside Drive Crown Cork & Seal Co., Inc. Warehouse/ 5.80 146,000 Modesto, CA Manufacturing 1970 & 1976 10419 North 30th Street Time Customer Service, Inc. Office 14.38 132,981 Tampa, FL (Time, Inc.) 1986 3102 Queen Palm Drive Time Customer Service, Inc. Office/Warehouse 15.02 229,605 Tampa, FL (Time, Inc.) 1986 109 Stevens Street Unisource Worldwide, Inc. Warehouse/ 6.97 168,800 Jacksonville, FL Industrial 1958 & 1969 4450 California Street Mervyn's Retail 11.00 122,000 Bakersfield, CA (Dayton Hudson Corp.) 1976 3615 North 27th Avenue Bank One, Arizona, N.A. Office 10.26 179,280 Phoenix, AZ 1960 & 1979 6475 Dobbin Road Hechinger Property Company Retail 2.50 60,000 Columbia, MD 1983 Amigoland Shopping Center Montgomery Ward & Co., Inc. Retail 7.61 115,000 Mexico St. & Palm Blvd. (1) 1973 Brownsville, TX 222 Tappan Drive North The Gerstenslager Company (2) Warehouse/ 26.57 296,720 Mansfield, OH (Worthington Industries) Distribution 1970 2000 2000(E) BASE LEASE TERM AND MINIMUM STRAIGHT-LINE ANNUAL RENTS PER NET RENEWAL CASH RENTAL PROPERTY LOCATION RENTABLE SQUARE FOOT OPTIONS RENT ($000) REVENUE ($000) ----------------- ---------------------------- ------------- ----------- -------------- 904 Industrial Road 08/18/87 - 08/17/00 None $ 487 $ 487 Marshall, MI 08/18/97 - 08/17/00: $2.49 1601 Pratt Avenue 08/18/87 - 08/17/00 None $ 167 $ 167 Marshall, MI 08/18/97 - 08/17/00: $3.11 19019 No. 59th Avenue 07/16/86 - 07/15/01 (3) 5 year $ 1,892 $ 1,892 Glendale, AZ 07/16/96 - 07/15/01: $7.50 6950 Greenwood Parkway 09/01/91 - 09/01/01 (2) 5 year $ 472 $ 472 Bessemer, AL 09/01/91 - 09/01/01: $3.81 567 South Riverside Drive 09/26/86 - 09/25/01 (1) 5 year $ 298 $ 298 Modesto, CA 09/26/96 - 09/25/01: $2.04 10419 North 30th Street 04/01/87 - 03/31/02 (4) 5 Year $ 1,313 $ 1,099 Tampa, FL 01/01/00 - 12/31/00: $9.87 01/01/01 - 12/31/01: $10.46 01/01/02 - 03/31/02: $11.09 3102 Queen Palm Drive 08/01/87 - 07/31/02 (1) 5 year $ 955 $ 957 Tampa, FL 08/01/98 - 07/31/01: $4.16 08/01/01 - 07/31/02: $4.39 109 Stevens Street 10/01/87 - 09/30/02 None $ 380 $ 380 Jacksonville, FL 10/01/97 - 09/30/02: $2.25 4450 California Street 02/23/77 - 12/31/02 (5) 5 year $ 407 $ 397 Bakersfield, CA 01/01/78 - 12/31/02: $3.34 3615 North 27th Avenue 11/30/88 - 11/30/03 (1) 5 year $ 1,900 $ 1,900 Phoenix, AZ 12/01/98 - 11/30/03: $10.60 6475 Dobbin Road 08/01/83 - 08/01/04 (5) 5 year $ 620 $ 637 Columbia, MD 01/20/99 - 01/19/00: $10.21 01/20/00 - 01/19/01: $10.34 01/20/01 - 01/19/02: $10.48 01/20/02 - 01/19/03: $10.79 01/20/03 - 01/19/04: $11.08 01/20/04 - 08/01/04: $8.53 Amigoland Shopping Center 11/01/74 - 10/31/04 (3) 5 year $ 153 $ 153 Mexico St. & Palm Blvd. 11/01/74 - 10/31/04: $1.33 Brownsville, TX 222 Tappan Drive North 10/01/99 - 05/31/05 (3) 5 year $ 674 $ 667 Mansfield, OH 10/01/99 - 05/31/05: $2.27
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PROPERTY NET TENANT TYPE/YEAR LAND AREA RENTABLE PROPERTY LOCATION (GUARANTOR) CONSTRUCTED (ACRES) SQUARE FEET ----------------- ----------------------------- ------------------- --------- ----------- 1301 California Circle Stevens-Arnold, Inc. Office/Research 6.34 100,026 Milpitas, CA (BICC Public Ltd. Co.) & Development 1985 200 Southington Hartford Fire Insurance Co. Office 12.40 153,364 Executive Park 1983 Southington, CT 24100 Laguna Hills Mall Federated Department Stores, Retail 11.00 160,000 Laguna Hills, CA Inc. (1) 1974 7111 Westlake Terrace The Home Depot USA, Inc. (1) Retail 7.61 95,000 Bethesda, MD 1980 6910 S. Memorial Highway Toys "R" Us, Inc. (1) Retail 4.44 43,123 Tulsa, OK 1981 12535 SE 82nd Avenue Toys "R" Us, Inc. (1) Retail 5.85 42,842 Clackamas, OR 1981 18601 Alderwood Mall Blvd. Toys "R" Us, Inc. (1) Retail 3.64 43,105 Lynnwood, WA 1981 4425 Purks Road Lear Technologies, LLC Industrial 12.00 183,717 Auburn Hills, MI (Lear Corporation) 1989 & 1998 (General Motors Corp.) West Wingfoot Road Toys "R" Us, Inc. (1) Industrial 7.56 123,293 Houston, TX 1981 245 Salem Church Road Exel Logistics Inc. Warehouse 12.52 252,000 Mechanicsburg, PA (NFC plc) 1985 6 Doughton Road Exel Logistics Inc. Warehouse 24.38 330,000 New Kingston, PA (NFC plc) 1989 34 East Main Street Exel Logistics Inc. Warehouse 9.66 179,200 New Kingston, PA (NFC plc) 1981 401 Elm Street Lockheed Martin Corp. Office/Research 36.94 126,000 Marlborough, MA (Honeywell, Inc.) & Development 1960 & 1988 2000 2000(E) BASE LEASE TERM AND MINIMUM STRAIGHT-LINE ANNUAL RENTS PER NET RENEWAL CASH RENTAL PROPERTY LOCATION RENTABLE SQUARE FOOT OPTIONS RENT ($000) REVENUE ($000) ----------------- ---------------------------- ------------- ----------- -------------- 1301 California Circle 12/10/85 - 12/10/05 (9) 5 year $ 2,291 $ 2,548 Milpitas, CA 06/01/98 - 11/30/00: $22.68 12/01/00 - 05/31/03: $25.56 06/01/03 - 12/10/05: $28.92 200 Southington 09/01/91 - 12/31/05 (1) 5 year $ 2,166 $ 2,158 Executive Park 01/01/95 - 12/31/05: $14.12 Southington, CT 24100 Laguna Hills Mall 02/01/76 - 01/31/06 (1) 8 year $ 677 $ 673 Laguna Hills, CA 02/01/80 - 01/31/06: $4.23 (2) 15 year (1) 6 year 7111 Westlake Terrace 05/01/81 - 04/30/06 (1) 10 year $ 772 $ 648 Bethesda, MD 05/01/96 - 04/30/06: $8.13 (3) 5 year 6910 S. Memorial Highway 06/01/81 - 05/31/06 (5) 5 year $ 356 $ 356 Tulsa, OK 02/01/98 - 05/31/01: $8.26 06/01/01 - 05/31/06: $8.40 12535 SE 82nd Avenue 06/01/81 - 05/31/06 (5) 5 year $ 417 $ 417 Clackamas, OR 02/01/98 - 05/31/01: $9.74 06/01/01 - 05/31/06: $9.91 18601 Alderwood Mall Blvd. 06/01/81 - 05/31/06 (5) 5 year $ 389 $ 389 Lynnwood, WA 02/01/98 - 05/31/01: $9.03 06/01/01 - 05/31/06: $9.18 4425 Purks Road 07/23/98 - 07/22/06 none $ 1,325 $ 1,365 Auburn Hills, MI 07/23/98 - 07/22/02: $7.21 07/23/02 - 07/22/06: $7.63 West Wingfoot Road 09/01/81 - 08/31/06 (5) 5 year $ 491 $ 478 Houston, TX 05/01/98 - 08/31/06: $3.98 245 Salem Church Road 11/15/91 - 11/30/06 (2) 5 year $ 932 $ 1,000 Mechanicsburg, PA 12/01/97 - 11/30/00: $3.67 12/01/00 - 11/30/03: $4.01 12/01/03 - 11/30/06: $4.38 6 Doughton Road 11/15/91 - 11/30/06 (2) 5 year $ 1,254 $ 1,349 New Kingston, PA 12/01/97 - 11/30/00: $3.77 12/01/00 - 11/30/03: $4.12 12/01/03 - 11/30/06: $4.51 34 East Main Street 11/15/91 - 11/30/06 (2) 5 year $ 609 $ 654 New Kingston, PA 12/01/97 - 11/30/00: $3.37 12/01/00 - 11/30/03: $3.68 12/01/03 - 11/30/06: $4.02 401 Elm Street 07/22/97 - 12/17/06 (6) 5 year $ 1,671 $ 1,671 Marlborough, MA 07/22/97 - 12/17/01: $13.26 12/18/01 - 12/17/06: 75% of cumulative increase in CPI
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PROPERTY NET TENANT TYPE/YEAR LAND AREA RENTABLE PROPERTY LOCATION (GUARANTOR) CONSTRUCTED (ACRES) SQUARE FEET ----------------- ----------------------------- ------------------- --------- ----------- 46600 Port Street Plymouth, Johnson Controls, Inc. Industrial 24.00 134,160 MI 1996 450 Stern Street Johnson Controls, Inc. Industrial 20.10 111,160 Oberlin, OH 1996 12000 Tech Center Drive Kelsey-Hayes (Tech I) Office 5.72 80,230 Livonia, MI 1987 & 1988 12025 Tech Center Drive Kelsey-Hayes (Tech II) Research/ 9.18 100,000 Livonia, MI Development 1987 & 1988 2300 Litton Lane Fidelity Corporate Office 24.00 81,744 Hebron, KY Real Estate, LLC (3) 1987 5917 S. La Grange Road Bally Total Fitness Corp. Retail/Health Club 2.73 25,250 Countryside, IL 1987 1160 White Horse Road Physical Fitness Centers of Retail/Health Club 2.87 31,750 Voorhees, NJ Philadelphia, Inc. 1987 (Bally Total Fitness Corp.) 5801 Bridge Street Champion Fitness IV, Inc. Retail/Health Club 3.66 24,990 DeWitt, NY (Bally Total Fitness Corp.) 1977 & 1987 One Spricer Drive Dana Corp. Industrial 20.95 148,000 Gordonsville, TN 1983 & 1985 541 Perkins Jones Road Kmart Corp. Warehouse/ 103.00 1,700,000 Warren, OH Distribution 1982 160 Clairemont Avenue Allied Holdings, Inc. Office 2.98 112,248 Decatur, GA 1983 2655 Shasta Way Fred Meyer, Inc. Retail 13.90 178,204 Klamath Falls, OR 1986 2000 2000(E) BASE LEASE TERM AND MINIMUM STRAIGHT-LINE ANNUAL RENTS PER NET RENEWAL CASH RENTAL PROPERTY LOCATION RENTABLE SQUARE FOOT OPTIONS RENT ($000) REVENUE ($000) ----------------- ---------------------------- ------------- ----------- -------------- 46600 Port Street Plymouth, 12/23/96 - 12/22/06 (2) 5 year $ 741 $ 741 MI 12/23/99 - 12/22/00: $5.52 12/23/00 - 12/22/06: Annual increase of 3x CPI, but not more than 4.5% 450 Stern Street 12/23/96 - 12/22/06 (2) 5 year $ 560 $ 560 Oberlin, OH 12/23/99 - 12/22/00: $5.04 12/23/00 - 12/22/06: Annual increase of 3x CPI, but not more than 4.5% 12000 Tech Center Drive 05/01/97 - 04/30/07 (2) 5 year $ 635 $ 679 Livonia, MI 05/01/99 - 04/30/02: $7.91 05/01/02 - 04/30/05: $8.75 05/01/05 - 04/30/07: $9.25 12025 Tech Center Drive 05/01/97 - 04/30/07 (2) 5 year $ 916 $ 958 Livonia, MI 05/01/99 - 04/30/02: $9.16 05/01/02 - 04/30/05: $9.75 05/01/05 - 04/30/07: $10.25 2300 Litton Lane 05/01/97 - 04/30/07 (2) 5 year $ 777 $ 817 Hebron, KY 05/01/97 - 04/30/02: $9.50 05/01/02 - 04/30/07: $11.00 5917 S. La Grange Road 07/13/87 - 07/12/07 (2) 5 year $ 574 $ 542 Countryside, IL 07/13/97 - 07/12/02: $22.73 07/13/02 - 07/12/07: $26.14 1160 White Horse Road 07/14/87 - 07/13/07 (2) 5 year $ 713 $ 673 Voorhees, NJ 07/14/97 - 07/13/02: $22.45 07/14/02 - 07/13/07: $25.82 5801 Bridge Street 08/19/87 - 08/18/07 (2) 5 year $ 444 $ 419 DeWitt, NY 08/19/97 - 08/18/02: $17.78 08/19/02 - 08/18/07: $20.45 One Spricer Drive 01/01/84 - 08/31/07 (2) 5 year $ 334 $ 341 Gordonsville, TN 08/01/99 - 07/31/02: $2.26 (1) 4 year, 08/01/02 - 07/31/05: $2.33 11 months 08/01/05 - 08/31/07: $2.40 541 Perkins Jones Road 10/01/82 - 09/30/07 (10) 5 year $ 8,409 $ 8,932 Warren, OH 10/01/98 - 09/30/02: $4.95 10/01/02 - 09/30/07: $5.51 160 Clairemont Avenue 01/01/98 - 12/31/07 (2) 5 year $ 1,425 $ 1,530 Decatur, GA 01/01/00 - 12/31/07: $12.70 Rent increases 2.75% annually 2655 Shasta Way 03/10/88 - 03/31/08 (3) 10 year $ 1,009 $ 1,009 Klamath Falls, OR 03/10/88 - 03/31/08: $5.66
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PROPERTY NET TENANT TYPE/YEAR LAND AREA RENTABLE PROPERTY LOCATION (GUARANTOR) CONSTRUCTED (ACRES) SQUARE FEET ----------------- ----------------------------- ------------------- --------- ----------- 13651 McLearen Road Boeing Services Corp. Office 10.39 159,664 Herndon, VA 1987 2210 Enterprise Drive Fleet Mortgage Group, Inc. Office 16.53 177,747 Florence, SC 1998 7272 55th Street Circuit City Stores, Inc. Retail 3.93 45,308 Sacramento, CA 1988 6405 South Viriginia St. Comp USA, Inc. Retail 2.72 31,400 Reno, NV 1988 5055 West Sahara Avenue Circuit City Stores, Inc. Retail 2.57 36,053 Las Vegas, NV 1988 4733 Hills & Dales Road Scandinavian Health Spa, Inc. Retail/Health Club 3.32 37,214 Canton, OH (Bally Total Fitness Holding 1987 Corp.) 14040 Park Center Road NEC America, Inc. Office 13.30 108,000 Herndon, VA 1987 295 Chipeta Way Northwest Pipeline Corp. (1) Office 19.79 295,000 Salt Lake City, UT 1982 Fort Street Mall Liberty House, Inc. (1) Retail 1.22 85,610 King St. 1980 Honolulu, HI 3350 Miac Cove Road Mimeo.com, Inc. (4) Office/Industrial 10.92 141,359 Memphis, TN 1987 2000 2000(E) BASE LEASE TERM AND MINIMUM STRAIGHT-LINE ANNUAL RENTS PER NET RENEWAL CASH RENTAL PROPERTY LOCATION RENTABLE SQUARE FOOT OPTIONS RENT ($000) REVENUE ($000) ----------------- ---------------------------- ------------- ----------- -------------- 13651 McLearen Road 05/31/99 - 05/30/08 (2) 5 year $ 2,171 $ 2,585 Herndon, VA 05/31/99 - 05/30/00: $13.40 05/31/00 - 05/30/01: $13.74 05/31/01 - 05/30/02: $15.50 05/31/02 - 05/30/03: $15.89 05/31/03 - 05/30/04: $16.28 05/31/04 - 05/30/05: $16.69 05/31/05 - 05/30/06: $17.11 05/31/06 - 05/30/07: $17.54 05/31/07 - 05/30/08: $17.98 2210 Enterprise Drive 06/10/98 - 06/30/08 (2) 5 year $ 1,520 $ 1,635 Florence, SC 06/10/98 - 06/30/03: $8.55 07/01/03 - 06/30/08: $9.84 7272 55th Street 10/28/88 - 10/27/08 (3) 10 year $ 387 $ 376 Sacramento, CA 10/28/98 - 10/27/03: $8.54 10/28/03 - 10/27/08: $9.30 6405 South Viriginia St. 12/16/88 - 12/15/08 (3) 10 year $ 334 $ 325 Reno, NV 12/16/98 - 12/15/03: $10.65 12/16/03 - 12/15/08: $11.60 5055 West Sahara Avenue 12/16/88 - 12/15/08 (3) 10 year $ 286 $ 278 Las Vegas, NV 12/16/98 - 12/15/03: $7.93 12/16/03 - 12/15/08: $8.64 4733 Hills & Dales Road 01/01/89 - 12/31/08 (2) 5 year $ 654 $ 685 Canton, OH 01/01/00 - 12/31/00: $17.58 01/01/01 - 12/31/08: Rent increases 2.2% annually 14040 Park Center Road 08/01/99 - 07/31/09 (2) 5 year $ 1,728 $ 2,006 Herndon, VA 08/01/99 - 07/31/00: $16.00 08/01/00 - 07/31/09: Rent increases 2.0% annually and by $216 in year six 295 Chipeta Way 10/01/82 - 09/30/09 (1) 9 year $ 8,571 $ 8,571 Salt Lake City, UT 10/01/97 - 09/30/09: $29.06 (1) 10 year subject to a CPI adjustment on a portion of the rent. Fort Street Mall 10/01/80 - 09/30/09 (1) 9 year, 7 $ 963 $ 971 King St. 10/01/95 - 09/30/05: $11.25 months (1) 2 Honolulu, HI 10/01/05 - 09/30/09: $11.56 year (3) 5 year 3350 Miac Cove Road 11/01/99 - 10/31/09 None $ 537 $ 686 Memphis, TN 11/01/99 - 10/31/02: $5.00 11/01/02 - 10/31/04: $5.00 11/01/04 - 10/31/09: $5.50
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PROPERTY NET TENANT TYPE/YEAR LAND AREA RENTABLE PROPERTY LOCATION (GUARANTOR) CONSTRUCTED (ACRES) SQUARE FEET ----------------- ----------------------------- ------------------- --------- ----------- 9950 Mayland Drive Circuit City Stores, Inc. (1) Office Headquarters 19.71 288,562 Richmond, VA 1990 7055 Highway 85 South Wal-Mart Stores, Inc. Retail 8.61 81,911 Riverdale, GA 1985 4200 RCA Boulevard The Wackenhut Corp. Office 7.70 127,855 Palm Beach Gardens, FL 1996 Highway 101 Fred Meyer, Inc. Retail 8.81 118,179 Newport, OR 1986 6345 Brackbill Boulevard Exel Logistics, Inc. Warehouse/ 29.01 507,000 Mechanicsburg, PA (NFC plc) Distribution 1985 & 1991 2280 Northeast Drive Ryder Integrated Logistics, Warehouse 25.70 276,480 Waterloo, IA Inc. 1996 & 1997 (Ryder Systems, Inc.) 1600 Viceroy Drive FirstPlus Financial Group, Office 8.17 247,968 Dallas, TX Inc. (5) 1986 250 Rittenhouse Circle Jones Apparel Group, Inc. (6) Office/ 15.63 255,019 Bristol, PA Warehouse 1982 3501 West Avenue H Michaels Stores, Inc. Warehouse/ 37.18 431,250 Lancaster, CA Distribution 1998 180 Rittenhouse Circle Jones Apparel Group, Inc. Office 4.73 96,000 Bristol, PA 1998 7150 Exchequer Drive Corporate Express Office Warehouse/ 5.23 65,043 Baton Rouge, LA Products, Inc. Distribution (CEX Holdings, Inc.) 1998 2000 2000(E) BASE LEASE TERM AND MINIMUM STRAIGHT-LINE ANNUAL RENTS PER NET RENEWAL CASH RENTAL PROPERTY LOCATION RENTABLE SQUARE FOOT OPTIONS RENT ($000) REVENUE ($000) ----------------- ---------------------------- ------------- ----------- -------------- 9950 Mayland Drive 02/28/90 - 02/28/10 (4) 10 year $ 2,796 $ 2,791 Richmond, VA 01/01/98 - 02/29/00: $8.59 (1) 5 year 03/01/00 - 02/28/10: $9.91 7055 Highway 85 South 12/04/85 - 01/31/11 (5) 5 year $ 270 $ 270 Riverdale, GA 12/04/85 - 01/31/11: $3.29 4200 RCA Boulevard 02/15/96 - 02/28/11 (3) 5 year $ 2,260 $ 2,259 Palm Beach Gardens, FL 12/01/97 - 02/28/11: $17.67 Highway 101 06/01/86 - 05/31/11 (3) 5 year $ 826 $ 826 Newport, OR 06/01/86 - 05/31/11: $6.99 plus .5% of gross sales over $20 million ($72 in 1999) 6345 Brackbill Boulevard 10/29/90 - 03/19/12 (2) 10 year $ 1,771 $ 1,852 Mechanicsburg, PA 3/20/97 - 03/19/02: $3.49 3/20/02 - 03/19/07: $4.02 3/20/07 - 03/19/12: greater of $4.62 or fair market rent as specified in lease 2280 Northeast Drive 08/01/97 - 07/31/12 (3) 5 year $ 891 $ 1,004 Waterloo, IA 08/01/97 - 07/31/02: $3.22 08/01/02 - 07/31/07: $3.61 08/01/07 - 07/31/12: $4.04 1600 Viceroy Drive 09/04/97 - 08/31/12 (4) 5 year $ 3,224 $ 3,224 Dallas, TX 09/04/97 - 08/31/02: $13.00 09/01/02 - 08/31/07: $14.30 09/01/07 - 08/31/12: $15.73 250 Rittenhouse Circle 03/26/98 - 03/25/13 (2) 5 year $ 1,150 $ 1,208 Bristol, PA 03/26/98 - 03/26/03: $4.51 03/27/03 - 03/26/08: $4.96 03/27/08 - 03/25/13: $5.46 3501 West Avenue H 06/19/98 - 06/18/13 (3) 5 year $ 1,398 $ 1,430 Lancaster, CA 06/19/98 - 06/18/03: $3.24 06/19/03 - 06/18/08: $3.31 06/19/08 - 06/18/13: $3.39 180 Rittenhouse Circle 08/01/98 - 07/31/13 (4) 5 year $ 801 $ 970 Bristol, PA 08/01/99 - 07/31/00: $8.24 08/01/00 - 07/31/01: $8.49 08/01/01 - 07/31/13: Rent increases 3% per year 7150 Exchequer Drive 11/01/98 - 10/31/13 (3) 5 year $ 327 $ 368 Baton Rouge, LA 11/01/98 - 10/31/01: $5.02 11/01/01 - 10/31/04: $5.32 11/01/04 - 10/31/07: $5.64 11/01/07 - 10/31/10: $5.98 11/01/10 - 10/31/13: $6.34
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PROPERTY NET TENANT TYPE/YEAR LAND AREA RENTABLE PROPERTY LOCATION (GUARANTOR) CONSTRUCTED (ACRES) SQUARE FEET ----------------- ----------------------------- ------------------- --------- ----------- 1133 Poplar Creek Road Corporate Express Office Warehouse/ 19.09 196,946 Henderson, NC Product, Inc. Office (CEX Holdings, Inc.) 1998 9580 Livingston Road GFS Realty, Inc. Retail 10.60 107,337 Oxon Hill, MD (Giant Food, Inc.) 1976 324 Industrial Park Road SKF USA, Inc. Manufacturing 21.13 72,868 Franklin, NC 1996 250 Turnpike Road Honeywell Consumer Products Office 9.83 57,698 Southborough, MA 1984 Rockshire Village Center GFS Realty, Inc. (1) Retail 7.32 51,682 West Ritchie Parkway (Giant Food, Inc.) 1977 Rockville, MD ------ ---------- 125.40 10,680,809 ====== ========== 2000 2000(E) BASE LEASE TERM AND MINIMUM STRAIGHT-LINE ANNUAL RENTS PER NET RENEWAL CASH RENTAL PROPERTY LOCATION RENTABLE SQUARE FOOT OPTIONS RENT ($000) REVENUE ($000) ----------------- ---------------------------- ------------- ----------- -------------- 1133 Poplar Creek Road 01/20/99 - 01/19/14 (3) 5 year $ 712 $ 761 Henderson, NC 01/20/99 - 01/19/02: $3.61 01/20/02 - 01/19/05: $3.83 01/20/05 - 01/19/08: $4.01 01/20/08 - 01/19/11: $4.19 01/20/11 - 01/19/14: $4.46 9580 Livingston Road 01/03/77 - 02/28/14 (4) 5 year $ 408 $ 274 Oxon Hill, MD 03/01/77 - 02/29/04: $3.80 03/01/04 - 02/28/14: $1.91 324 Industrial Park Road 12/23/96 - 12/31/14 (3) 10 year $ 340 $ 340 Franklin, NC 01/01/00 - 12/31/02: $4.67 01/01/03 - 12/31/14: CPI every 3 years 250 Turnpike Road 10/01/95 - 09/30/15 (4) 5 Year $ 417 $ 458 Southborough, MA 10/01/95 - 09/30/00: $7.14 10/01/00 - 09/30/05: $7.49 10/01/05 - 09/30/10: $7.94 10/01/10 - 09/30/15: $8.50 Rockshire Village Center 01/01/78 - 04/30/17 (2) 10 year $ 224 $ 152 West Ritchie Parkway 01/01/78 - 02/28/05: $4.33 Rockville, MD 03/01/05 - 04/30/17: $2.23 ------- ------- $74,571 $76,718 ======= =======
- --------------- (E) Estimated (1) The Company holds leasehold interest in the land. The leases, including renewal options, expire at various dates through 2074. (2) The tenant occupied 200,000 square feet through November 30, 1999 and fully occupied the property thereafter. (3) Tenant can cancel lease on April 30, 2004 with 270 days notice and a payment of $899. (4) The tenant occupies 107,399 square feet through October 31, 2002 and will fully occupy the property commencing November 1, 2002. (5) In January 2000 the property was leased to VarTec Inc. through September 2015. Average annual net rent is $3,485. (6) Tenant can cancel lease on March 26, 2008 with 12 months notice and a payment of $1,392. 12 14 LEXINGTON CORPORATE PROPERTIES TRUST JOINT VENTURE PROPERTY CHART
PROPERTY NET TENANT TYPE/YEAR LAND AREA RENTABLE PROPERTY LOCATION (GUARANTOR) CONSTRUCTED (ACRES) SQUARE FEET ----------------- ----------------------------- ------------------- --------- ----------- 15375 Memorial Drive Vastar Resources, Inc.(1) Office 21.77 327,325 Houston, TX 1985 17 Technology Circle Blue Cross/Blue Shield Office 42.46 348,410 Columbia, SC of South Carolina(2) 1999 ------ ---------- 64.23 675,735 ====== ========== 2000 2000(E) BASE LEASE TERM AND MINIMUM STRAIGHT-LINE ANNUAL RENTS PER NET RENEWAL CASH RENTAL PROPERTY LOCATION RENTABLE SQUARE FOOT OPTIONS RENT ($000) REVENUE ($000) ----------------- ---------------------------- ------------- ----------- -------------- 15375 Memorial Drive 09/16/99 - 09/16/09 None $ 3,273 $ 3,437 Houston, TX 09/16/99 - 09/15/02: $10.00 09/16/02 - 09/15/06: $10.50 09/16/06 - 09/16/09: $11.00 17 Technology Circle 10/01/09 - 09/30/09 None $ 4,564 $ 4,906 Columbia, SC 10/01/99 - 09/30/04: $13.10 10/01/04 - 09/30/09: $15.07 ------- ------- $ 7,837 $ 8,343 ======= =======
- --------------- (1) The Company has a 33% ownership interest in this property. (2) The Company has a 40% ownership interest in this property. 13 15 ITEM 3. LEGAL PROCEEDINGS The Company is not presently involved in any litigation nor to its knowledge is any litigation threatened against the Company or its subsidiaries that, in management's opinion, would result in any material adverse effect on the Company's ownership, financial condition, management or operation of its Properties. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None. ITEM 4A. EXECUTIVE OFFICERS AND TRUSTEES OF THE REGISTRANT The following sets forth certain information relating to the executive officers and Trustees of the Company:
NAME BUSINESS EXPERIENCE ---- ------------------- E. ROBERT ROSKIND.............. Mr. Roskind has served as the Chairman of the Board of Age 55 Trustees and Co-Chief Executive Officer of the Company since October 1993. He founded The LCP Group, L.P. in 1973 and has been its Chairman since 1976. LCP has acted as general partner in limited partnerships in which the Company has had prior dealings. Prior to founding LCP, Mr. Roskind headed the net-leasing financing area of Lehman Brothers Inc. He is also a general partner for a variety of entities which serve as the general partner of various partnerships that hold net leased real properties or interests therein. Mr. Roskind is a director of Berkshire Realty Company, Inc., Krupp Government Income Trust I and Krupp Government Income Trust II. Mr. Roskind received his B.S. in 1966 from the University of Pennsylvania and is a 1969 Harlan Fiske Stone Graduate of the Columbia Law School. He has been a member of the Bar of the State of New York since 1970. RICHARD J. ROUSE............... Mr. Rouse has served as Co-Chief Executive Officer and a Age 54 trustee of the Company since October 1993. He served as the President of the Company from October 1993 to April 1996, and since April 1996 has served as the Vice Chairman. Mr. Rouse was also a managing director of LCP. He had been associated with LCP since 1979 and had been engaged there in all aspects of net lease finance, acquisition and syndication and corporate financing transactions. Mr. Rouse graduated from Michigan State University in 1968 and received his M.B.A. in 1970 from the Wharton School of Finance and Commerce of the University of Pennsylvania. T. WILSON EGLIN................ Mr. Eglin has served as Chief Operating Officer of the Age 35 Company since October 1993 and a trustee since May 1994. He served as Executive Vice President from October 1993 to April 1, 1996, and since April 1996 has served as the President. Prior to his current position with the Company, Mr. Eglin had been associated with LCP from 1987 to 1993 and had been its Vice President -- Acquisitions from 1990 to 1993. In connection with his responsibilities with LCP, Mr. Eglin was an officer of affiliated companies that owned and managed over 400 net leased real estate properties and was involved in all aspects of real estate acquisition and finance, principally in net leased transactions. Mr. Eglin received his B.A. from Connecticut College in 1986.
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NAME BUSINESS EXPERIENCE ---- ------------------- PATRICK CARROLL................ Mr. Carroll has served as the Chief Financial Officer of the Age 36 Company since May 1998 and Treasurer since January 1999. Prior to joining the Company, Mr. Carroll was, from 1993 to 1998, a Senior Manager in the real estate unit of Coopers & Lybrand L.L.P. serving both publicly and privately held real estate entities with a focus on due diligence and public equity/debt offerings. Mr. Carroll received his B.B.A. from Hofstra University in 1986, a M.S. in Taxation from C.W. Post in 1991 and is a Certified Public Accountant. PAUL R. WOOD................... Mr. Wood has served as the Vice President, Chief Accounting Age 39 Officer and Secretary of the Company since October 1993. He had been associated with LCP from 1988 to 1993 and from 1990 to 1993 had been responsible for all accounting activities relating to the net leased properties managed by LCP and its affiliates. Prior to joining LCP, Mr. Wood was, from 1987 to 1988, associated with E. F. Hutton & Company Inc. as a senior accountant. Mr. Wood received his B.B.A. from Adelphi University in 1982 and is a Certified Public Accountant. STEPHEN C. HAGEN............... Mr. Hagen has served as Senior Vice President of the Company Age 57 since October 1996. Mr. Hagen had been associated with LCP from 1995 to 1996. Prior to joining LCP, Mr. Hagen was a principal of Pharus Realty Investments, a money manager focused on real estate stocks, and also served as Chief Operating Officer of HRE Properties, a New York Stock Exchange listed REIT. Mr. Hagen received his B.S. from the University of Kansas in 1965 and his M.B.A. in 1968 from the Wharton School of Finance and Commerce of the University of Pennsylvania. JANET M. KAZ................... Ms. Kaz has served as Vice President of the Company since Age 36 May 1995 and as Asset Manager since October 1993. Prior to that, Ms. Kaz was a member of LCP's property acquisition team from 1986 to 1990 and a member of LCP's asset management team from 1991 to 1993. Ms. Kaz received her B.A. from Muhlenberg College in 1985. PHILIP L. KIANKA............... Mr. Kianka has served as Vice President of Asset Management Age 43 of the Company since 1997. Prior to joining the Company, from 1985 through 1997, Mr. Kianka served as a Vice President and Senior Asset Manager at Merrill Lynch Hubbard, Inc., a real estate division of Merrill Lynch & Co., Inc. Mr. Kianka was involved in real estate acquisitions, development and asset management for a national portfolio of diversified properties. Mr. Kianka received his B.A. from Clemson University in 1978 and his M.A. from Clemson University in 1981. NATASHA ROBERTS................ Ms. Roberts has served as Vice President of Acquisitions of Age 33 the Company since 1997. Prior to joining the Company Ms. Roberts worked for Net Lease Partners Realty Advisors (an affiliate of Mr. Roskind) from January 1995 to January 1997 and as a licensed real estate broker from February 1992 to January 1995. BRENDAN MULLINIX............... Mr. Mullinix has served as a Vice President of the Company Age 25 since February 2000 and as a member of the acquisitions department since October 1996. He received his B.A. from Columbia University in 1996.
15 17
NAME BUSINESS EXPERIENCE ---- ------------------- CARL D. GLICKMAN............... Mr. Glickman has served as a trustee and a member of the Age 73 Audit Committee and the Chairman of the Executive Committee of the Board of Trustees of the Company since May 1994 and as a member of the Compensation Committee of the Board of Trustees until May 1998. He has been President of The Glickman Organization since 1953. He is on the Board of Directors of Alliance Tire & Rubber Co., Ltd., Bear Stearns Companies, Inc., Jerusalem Economic Corporation Ltd. and OfficeMax Inc., as well as numerous private companies. KEVIN W. LYNCH................. Mr. Lynch has served as a trustee of the Company and a Age 47 member of the Audit Committee since May 1996 and is a founder and principal of The Townsend Group, an institutional real estate consulting firm founded in 1983. Prior to forming The Townsend Group, Mr. Lynch was a Vice President for Stonehenge Capital Corporation. Mr. Lynch has been involved in the commercial real estate industry since 1974, and is a director of First Industrial Realty Trust. JOHN D. MCGURK................. Mr. McGurk became a member of the Board in January 1997 as Age 56 the designee of Five Arrows Realty Securities, L.L.C. ("Five Arrows") to the Board of Trustees. He is the founder and President of Rothschild Realty, Inc., the advisor to Five Arrows. Prior to starting Rothschild Realty, Inc. in 1981, Mr. McGurk served as a Regional Vice President for The Prudential Insurance Company of America where he oversaw its New York City real estate loan portfolio, equity holdings, joint ventures and projects under development. Mr. McGurk is a member of the Urban Land Institute, Pension Real Estate Association, Real Estate Board of New York and the National Real Estate Association, and is a member of the Trustee Committee of the Caedmon School. SETH M. ZACHARY................ Mr. Zachary has served as a trustee and a member of the Age 47 Compensation Committee of the Board of Trustees of the Company since November 1993 and as a member of the Audit Committee until February 1999. Since 1987, he has been a partner in the law firm of Paul, Hastings, Janofsky & Walker LLP, counsel to the Company.
PART II. ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS The common shares of the Company are listed for trading on the New York Stock Exchange ("NYSE") under the symbol "LXP." The following table sets forth the high and low sales prices as reported by the NYSE for the common shares of the Company for each of the periods indicated below:
FOR THE QUARTERS ENDED: HIGH LOW CASH DIVIDEND ----------------------- -------- -------- ------------- December 31, 1999................................ $11.2500 $ 8.8125 $0.30 September 30, 1999............................... 12.8750 10.8750 $0.30 June 30, 1999.................................... 12.0000 10.5000 $0.30 March 31, 1999................................... 12.8750 9.8750 $0.30 December 31, 1998................................ $13.2500 $11.0000 $0.30 September 30, 1998............................... 14.6250 10.8125 $0.30 June 30, 1998.................................... 15.2500 13.7500 $0.29 March 31, 1998................................... 16.3750 14.2500 $0.29
16 18 The closing price of the common shares of the Company was $10.375 on February 29, 2000. As of February 29, 2000, the Company had 2,197 common shareholders of record. Dividends. The Company has made quarterly distributions since October, 1986 without interruption. The Company paid a dividend of $.27 per share to shareholders in respect of each of the calendar quarters of 1994, 1995 and the first quarter of 1996; $.28 per share in respect of the second and third quarters of 1996; and $.29 per share in respect of the fourth quarter of 1996, each of the calendar quarters of 1997 and the first and second quarters of 1998; and $.30 per share in respect of the third and fourth quarters of 1998 and each of the calendar quarters of 1999. The Company declared the dividend in respect of the fourth quarter of 1999, in the amount of $.30 per share to shareholders of record as of January 31, 2000 which was paid on February 14, 2000. The Company's annualized dividend rate is currently $1.20 per share. Following is a summary of the average taxable nature of the Company's dividends for the three years ended December 31:
1999 1998 1997 ------ ------ ------ Total dividends per share................................ $ 1.20 $ 1.17 $ 1.16 ====== ====== ====== Ordinary income........................................ 83.73% 88.06% 68.91% 20% rate gain.......................................... 10.21% -- -- 25% rate gain.......................................... 6.06% 2.30% -- Percent non-taxable as return of capital............... -- 9.64% 31.09% ------ ------ ------ 100.00% 100.00% 100.00% ====== ====== ======
While the Company intends to continue paying regular quarterly dividends, future dividend declarations will be at the discretion of the Board of Trustees and will depend on the actual cash flow of the Company, its financial condition, capital requirements, the annual distribution requirements under the REIT provisions of the Code and such other factors as the Board of Trustees deems relevant. The actual cash flow available to pay dividends will be affected by a number of factors, including the revenues received from rental properties, the operating expenses of the Company, the interest and principal payments required under various borrowing agreements, the ability of lessees to meet their obligations to the Company and any unanticipated capital expenditures. In addition to its common and preferred share offerings, the Company has capitalized the growth in its business through the issuance of secured and unsecured fixed and floating-rate debt. Borrowings under the Company's unsecured revolving credit facility have been a source of funds to both finance the purchase of properties and meet any short-term working capital requirements. The various instruments governing the Company's issuance of its unsecured bank debt impose certain restrictions on the Company with regard to dividends and incurring additional debt obligations. See "Management's Discussion and Analysis of Financial Condition and Results of Operations" and Notes 6 and 7 of the Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K. The Company does not believe that the financial covenants contained in its unsecured revolving credit agreement and secured indebtedness will have any adverse impact on the Company's ability to pay dividends in the normal course to its common shareholders or to distribute amounts necessary to maintain its qualifications as a REIT. The Company maintains a dividend reinvestment program pursuant to which common shareholders may elect to automatically reinvest their dividends to purchase common shares of the Company at a 5% discount to the market price and free of commissions and other charges. The Company may, from time to time, either repurchase common shares in the open market, or issue new common shares, for the purpose of fulfilling its obligations under the dividend reinvestment program. 17 19 ITEM 6. SELECTED FINANCIAL DATA The following sets forth selected consolidated financial data for the Company as of and for each of the years in the five-year period ended December 31, 1999. The selected consolidated financial data for the Company should be read in conjunction with the Consolidated Financial Statements and the related notes appearing elsewhere in this Annual Report on Form 10-K. ($000's, except per share data)
1999 1998 1997 1996 1995 -------- --------- --------- -------- -------- Total revenue........................... $ 77,300 $ 65,117 $ 43,569 $ 31,675 $ 25,002 Operating expenses, including minority interest.............................. (61,080) (48,433) (35,304) (26,209) (19,983) Transactional expenses.................. -- (559) -- -- -- Gain (loss) on sale of properties....... 5,127 (388) 3,517 -- 1,514 Proceeds from lease termination......... -- -- -- -- 1,600 Loss on extinguishment of debt.......... -- -- (3,189) -- (4,849) -------- --------- --------- -------- -------- Net income.............................. 21,347 15,737 8,593 5,466 3,284 ======== ========= ========= ======== ======== Net income per common share -- basic.... 1.11 0.79 0.33 0.58 0.35 ======== ========= ========= ======== ======== Net income per common share --diluted... 1.08 0.78 0.32 0.56 0.35 ======== ========= ========= ======== ======== Cash dividends declared per common share................................. 1.20 1.17 1.16 1.10 1.08 ======== ========= ========= ======== ======== Net cash provided by operating activities............................ 40,119 32,008 23,823 14,975 7,216 ======== ========= ========= ======== ======== Net cash (used in) provided by investing activities............................ (64,942) (111,080) (110,767) (16,955) 7,887 ======== ========= ========= ======== ======== Net cash provided by (used in) financing activities............................ 22,576 86,516 88,116 1,859 (15,610) ======== ========= ========= ======== ======== Real estate assets, net................. 606,592 609,717 416,613 289,326 200,507 ======== ========= ========= ======== ======== Total assets............................ 656,481 647,007 468,373 310,384 221,216 ======== ========= ========= ======== ======== Mortgages and notes payable............. 372,254 354,281 220,934 187,740 123,223 ======== ========= ========= ======== ======== Funds from operations(1)................ 40,652 35,141 21,315 13,783 13,207 ======== ========= ========= ======== ======== Rent received above (below) straight line rent............................. (2,054) (2,411) (924) (105) 400 ======== ========= ========= ======== ========
- --------------- (1) The Company believes that Funds From Operations ("FFO") enhances an investor's understanding of the Company's financial condition, results of operations and cash flows. The Company believes that FFO is an appropriate measure of the performance of an equity REIT, and that it can be one measure of a REIT's ability to make cash distributions. FFO is defined in the October 1999 "White Paper", issued by the National Association of Real Estate Investment Trusts, Inc. ("NAREIT") as "net income (or loss) (computed in accordance with generally accepted accounting principles ("GAAP"), excluding gains (or losses) from sales of property, plus real estate depreciation and amortization and after adjustments for unconsolidated partnerships and joint ventures." The Company elected to early adopt the clarification contained in the White Paper and has restated all prior years FFO. The impact of such early adoption was to reduce FFO in 1998, 1997, 1996 and 1995 by $559, $168, $588 and $442, respectively. FFO should not be considered an alternative to net income as an indicator of operating performance or to cash flows from operating activities as determined in accordance with GAAP, or as a measure of liquidity to other consolidated income or cash flow statement data as determined in accordance with GAAP. 18 20 The Company believes that the book value of its real estate assets, which reflects the historical costs of such real estate assets less accumulated depreciation, is not indicative of the current market value of its Properties. Historical operating results are not necessarily indicative of future operating results. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS GENERAL The Company, which has elected to qualify as a real estate investment trust under the Internal Revenue Code of 1986, acquires and manages net-leased commercial properties. The Company has operated as a REIT since October 1993 when it initially issued 9.3 million common shares, approximately 169,000 special limited partnership units (which are exchangeable for an equivalent number common shares) and approximately $1.9 million in 7.75% subordinated notes due in October 2000. As of December 31, 1999, the Company owned (or had interests in) 66 real estate properties. During 1999, the Company purchased seven properties, including joint venture investments, for $142.7 million. During 1999, the Company sold four properties to the Net Partnerships for $26.9 million, which resulted in a gain of approximately $2.5 million. Also, the Company purchased two properties from the Net Partnerships for $13.5 million. LIQUIDITY AND CAPITAL RESOURCES Since becoming a public company, the Company's principal source of capital for growth has been the public and private equity markets, selective secured indebtedness, its unsecured credit facility and issuance of OP Units. The Company's current $100 million unsecured credit facility, which is scheduled to expire in July 2001, has made available funds to finance acquisitions and meet any short-term working capital requirements. As of December 31, 1999, the weighted average interest rate on outstanding borrowing was 7.52%. Since its formation in 1993, the Company has raised, through the issuance of common shares, preferred shares and OP Units, aggregate capital of approximately $130.2 million for the purposes of retiring indebtedness and acquiring properties. In addition, the Company has purchased $77.6 million in real estate through the direct issuance of its common shares and OP Units. Dividends. In connection with its intention to continue to qualify as a REIT for Federal income tax purposes, the Company expects to continue paying regular dividends to its shareholders. These dividends are expected to be paid from operating cash flows which are expected to increase due to property acquisitions and growth in rental revenues in the existing portfolio and from other sources. Since cash used to pay dividends reduces amounts available for capital investments, the Company generally intends to maintain a conservative dividend payout ratio, reserving such amounts as it considers necessary for the expansion of Properties in its portfolio, debt reduction, the acquisition of interests in new properties as suitable opportunities arise, and such other factors as the Board of Trustees considers appropriate. Cash dividends paid to common shareholders increased to $20.5 million in 1999, compared to $19.6 million in 1998 and $12.8 million in 1997. The Company's dividend and distribution FFO payout ratio for 1999, 1998, and 1997 was approximately 72.6%, 74.8%, and 74.1% respectively. Although the Company receives most of its rental payments on a monthly basis, it intends to continue paying dividends quarterly. Amounts accumulated in advance of each quarterly distribution are invested by the Company in short-term money market or other suitable instruments. The Company anticipates that cash flows from operations will continue to provide adequate capital to fund its operating and administrative expenses, regular debt service obligations and all dividend payments in accordance with REIT requirements in both the short-term and long-term. In addition, the Company anticipates that cash on hand, borrowings under its unsecured credit facility, issuance of equity and debt, as well as other debt and equity alternatives, will provide the necessary capital required by the Company. Cash 19 21 flows from operations as reported in the Consolidated Statements of Cash Flows increased to $40.1 million for 1999 from $32.0 million for 1998 and $23.8 million for 1997. UPREIT Structure. The Company's UPREIT structure permits the Company to effect acquisitions by issuing to a seller of real estate, as a form of consideration, interests in partnerships controlled by the Company. All of such interests are redeemable at certain times for common shares on a one-for-one basis and all of such interests require the Company to pay certain distributions to the holders of such interests. The Company accounts for these interests in a manner similar to a minority interest holder. The number of common shares that will be outstanding in the future should be expected to increase, and minority interest expense should be expected to decrease, from time to time, as such partnership interests are redeemed for common shares. The following table provides certain information with respect to such partnership interests as of December 31, 1999 (assuming the Company's annual dividend rate remains at $1.20 per share).
TOTAL CURRENT CURRENT TOTAL ANNUALIZED ANNUALIZED REDEEMABLE FOR NUMBER AFFILIATE PER UNIT DISTRIBUTION COMMON SHARES : OF UNITS UNITS DISTRIBUTION ($000) - --------------- --------- --------- ------------ ------------ At any time........................................ 3,975,395 1,317,759 $1.20 $4,770 At any time........................................ 1,273,196 120,374 1.08 1,375 At any time........................................ 133,332 52,144 1.12 149 January 2003....................................... 17,901 -- -- -- March 2004......................................... 43,734 -- 0.27 12 March 2004......................................... 27,314 -- -- -- November 2004...................................... 29,976 2,856 -- -- March 2005......................................... 29,384 -- -- -- January 2006....................................... 187,163 416 -- -- February 2006...................................... 33,197 1,743 -- -- May 2006........................................... 9,368 -- 0.29 3 --------- --------- ----- ------ Total.................................... 5,759,960 1,495,292 $1.10 $6,309 ========= ========= ===== ======
Affiliate units, which are included in total units, represent OP Units held by two executive officers (including their affiliates) of the Company. FINANCING Revolving Credit Facility. The Company's $100 million unsecured credit facility bears interest at 137.5 basis points over LIBOR and has an interest rate period of one, three, or six months, at the option of the Company. The credit facility contains various leverage, debt service coverage, net worth maintenance and other customary covenants. Approximately $11.5 million was available to the Company at December 31, 1999. The amount of available borrowings can increase by identifying additional unencumbered properties as eligible for the computation of the borrowing base which supports the credit facility. As of December 31, 1999 approximately $70.9 million was outstanding. Debt Service Requirements. The Company's principal liquidity needs are the payment of interest and principal on outstanding indebtedness. As of December 31, 1999, a total of forty-eight properties were subject to outstanding mortgages which had an aggregate principal amount of $299.4 million. The weighted average interest rate on the Company's debt, including line of credit borrowings, on such date was approximately 7.79%. Approximate balloon payment amounts, including subordinated notes and excluding line of credit borrowings, having a weighted average interest rate of 8.13% due the next five calendar years are as follows: $15.1 million in 2000; $1.0 million in 2001; $10.6 million in 2002; $0 in 2003 and $25.3 million in 2004. The ability of the Company to make such balloon payments will depend upon its ability to refinance the mortgage related thereto, sell the related property, have available amounts under its unsecured credit facility or access 20 22 other capital. The ability of the Company to accomplish such goals will be affected by numerous economic factors affecting the real estate industry, including the availability and cost of mortgage debt at the time, the Company's equity in the mortgaged properties, the financial condition of the Company, the operating history of the mortgaged properties, the then current tax laws and the general national, regional and local economic conditions. Subsequent to year end the Company refinanced a $13.1 million, 8.875% balloon payment due in 2000 with a $17 million, 8.1% mortgage that requires monthly principal and interest payments of $126,000 with a balloon payment of $15.2 million due in February, 2010. Lease Obligations. Since the Company's tenants bear all or substantially all of the cost of property maintenance and capital improvements, the Company does not anticipate significant needs for cash for property maintenance or repairs. The Company generally funds property expansions with additional secured borrowings, the repayment of which is funded out of rental increases under the leases covering the expanded properties. Shares Repurchase. The Company's Board of Trustees has authorized the Company to repurchase, from time to time, up to 2,000,000 common shares depending on market conditions and other factors. As of December 31, 1999, the Company had repurchased and retired 1,008,239 common shares, at an average price of approximately $10.71 per common share. Through February 29, 2000, the Company has repurchased 1,200,897 common shares at a weighted average price of $10.61. IMPACT OF YEAR 2000 The Year 2000 compliance issue concerns the inability of computer systems to accurately calculate, store or use a date after 1999. This could result in a system failure or miscalculations causing disruptions of operations. The Year 2000 issue affects virtually all companies and organizations. The Company took the necessary steps to understand the nature and extent of the work required to make its core information computer systems and non-information embedded systems Year 2000 compliant. The Company determined that it will not be necessary to significantly modify, update or replace its computer hardware and software applications. The vendor that provides the Company's existing general ledger software has released a Year 2000 compliant version of its product which the Company is currently using. The cost of the general ledger system did not have a material effect on the Company's financial condition or results of operations. The Company's Properties, which have no scheduled lease expirations prior to August 17, 2000, are subject to net leases and accordingly the Year 2000 compliance of embedded systems (e.g., security, HVAC, fire and elevator systems) are the responsibility of the tenants. The Company has contacted each of its tenants asking them to identify and evaluate the changes and modifications necessary to make these systems compliant for Year 2000 processing. The costs associated with the effort to make the embedded systems Year 2000 compliant are the tenant's responsibility. However, no assurances can be given that the Properties embedded systems would be Year 2000 compliant and compliance costs, if any, incurred by the Company would not be significant. The Company contacted significant third-party service providers and vendors with which it does business to determine the efforts being made on their part for compliance. The Company attempted to receive compliance certificates from all third parties that have a material impact on the Company's operations, but no assurance can be given with respect to the cost or timing of such efforts or the potential effects of any failure to comply. To date there have been no situations, that the Company is aware of, where the Year 2000 issues caused a computer system that affects the Company or any of the Properties to function improperly. Management will continue to monitor the Company's entire Year 2000 compliance function. 21 23 RESULTS OF OPERATIONS ($000)
INCREASE (DECREASE) ---------------------- SELECTED INCOME STATEMENT DATA 1999 1998 1997 1999-1998 1998-1997 ------------------------------ ------- ------ ------ --------- --------- Total revenues............................ $77,300 65,117 43,569 $12,183 $21,548 Total expenses............................ 54,642 45,059 32,862 9,583 12,197 Interest................................ 29,099 23,055 16,644 6,044 6,411 Depreciation & amortization............. 18,000 15,083 10,608 2,917 4,475 General & administrative................ 4,687 4,518 3,644 169 874 Property operating...................... 1,865 857 922 1,008 (65) Transactional expenses.................. -- 559 -- (559) 559 Net Income................................ $21,347 15,737 8,593 $ 5,610 $ 7,144
Changes in the results of operations for the Company are primarily due to the growth of its portfolio and costs associated with such growth. The increase in interest expense due to the growth of the Company's portfolio has been offset by a reduction in the weighted average interest rate from 8.17% as of December 31, 1997 to 7.79% at December 31, 1999 due to debt refinancings, repayments, lower variable interest rates negotiated on the credit facility and lower interest rates on new debt incurred by the Company. The Company's general and administrative expenses have decreased as a percentage of total revenue to 6.1% in 1999 from 6.9% in 1998 and 8.4% in 1997 due to the growth of the Company's portfolio relative to these expenses. The increase in property operating expense in 1999 relates to costs incurred relating to a property that was vacant through October 1999 and a second property in which the Company has a level of operating expense responsibility. Transactional expenses in 1998 relate to costs incurred in an abandoned private equity placement. Net income increased in 1999 due to the impact of items discussed above plus $5,127 in gains on sales of real estate. The increase in 1998 net income relates to the impact of items discussed above. FUNDS FROM OPERATIONS The Company believes that Funds From Operations ("FFO") enhances an investor's understanding of the Company's financial condition, results of operations and cash flows. The Company believes that FFO is an appropriate measure of the performance of an equity REIT, and that it can be one measure of a REIT's ability to make cash distributions. FFO is defined in the October 1999 "White Paper", issued by the National Association of Real Estate Investment Trusts, Inc. ("NAREIT") as "net income (or loss) (computed in accordance with generally accepted accounting principles ("GAAP"), excluding gains (or losses) from sales of property, plus real estate depreciation and amortization and after adjustments for unconsolidated partnerships and joint ventures." The Company elected to early adopt the clarification contained in the White Paper and has restated all prior years FFO. The impact of such early adoption was to reduce FFO in 1998 and 1997 by $559 and $168, respectively. FFO should not be considered an alternative to net income as an indicator of operating performance or to cash flows from operating activities as determined in accordance with GAAP, or as a measure of liquidity to other consolidated income or cash flow statement data as determined in accordance with GAAP. 22 24 The following table reflects the calculation of the Company's FFO and cash flow activities for each of the years in the three year period ended December 31, 1999 ($000):
1999 1998 1997 --------- --------- --------- Net income.............................................. $ 21,347 $ 15,737 $ 8,593 Depreciation and amortization of real estate.......... 18,000 15,083 10,608 Minority interest's share of net income............... 6,226 3,933 2,442 Loss from debt restructuring.......................... -- -- 3,189 (Gain) loss on sale of property....................... (5,127) 388 (3,517) Joint venture adjustment.............................. 206 -- -- --------- --------- --------- Funds From Operations.............................. $ 40,652 $ 35,141 $ 21,315 ========= ========= ========= Cash flows from operating activities.................... $ 40,119 $ 32,008 $ 23,823 Cash flows from investing activities.................... (64,942) (111,080) (110,767) Cash flows from financing activities.................... 22,576 86,516 88,116
The Company's dividend and distribution FFO payout ratio was 72.6%, 74.8% and 74.1% for the years ended December 31, 1999, 1998 and 1997 respectively. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK The Company's exposure to market risk relates to its variable rate unsecured credit facility. As of December 31, 1999 and 1998 the Company's variable rate indebtedness represented 19.1% and 14.9% of total long-term indebtedness, respectively. During 1999 and 1998, this variable rate indebtedness had a weighted average interest rate of 7.52% and 7.50%, respectively. Had the weighted average interest rate been 100 basis points higher the Company's net income would have been reduced by $514,000 and $350,000 in 1999 and 1998, respectively. 23 25 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA LEXINGTON CORPORATE PROPERTIES TRUST AND CONSOLIDATED SUBSIDIARIES INDEX
PAGE ----- Independent Auditors' Report................................ 25 Consolidated Balance Sheets as of December 31, 1999 and 1998...................................................... 26 Consolidated Statements of Income for the years ended December 31, 1999, 1998 and 1997.......................... 27 Consolidated Statements of Changes in Shareholders' Equity for the years ended December 31, 1999, 1998 and 1997...... 28 Consolidated Statements of Cash Flows for the years ended December 31, 1999, 1998 and 1997.......................... 29 Notes to Consolidated Financial Statements.................. 30-43 Financial Statement Schedule Schedule III -- Real Estate and Accumulated Depreciation.... 44-45
24 26 INDEPENDENT AUDITORS' REPORT The Shareholders Lexington Corporate Properties Trust: We have audited the consolidated financial statements of Lexington Corporate Properties Trust and consolidated subsidiaries as listed in the accompanying index. In connection with our audits of the consolidated financial statements, we also have audited the financial statement schedule as listed in the accompanying index. These consolidated financial statements and the financial statement schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements and the financial statement schedule based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Lexington Corporate Properties Trust and consolidated subsidiaries as of December 31, 1999 and 1998, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 1999 in conformity with generally accepted accounting principles. Also in our opinion, the related financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein. KPMG LLP New York, New York January 21, 2000 25 27 LEXINGTON CORPORATE PROPERTIES TRUST AND CONSOLIDATED SUBSIDIARIES CONSOLIDATED BALANCE SHEETS ($000 EXCEPT PER SHARE AMOUNTS) DECEMBER 31,
1999 1998 -------- -------- ASSETS Real estate, at cost: Buildings and building improvements....................... $588,866 $578,836 Land and land estates..................................... 88,561 85,781 Land improvements......................................... 3,154 2,831 Fixtures and equipment.................................... 8,345 8,345 -------- -------- 688,926 675,793 Less: accumulated depreciation............................ 82,334 66,076 -------- -------- 606,592 609,717 Cash and cash equivalents................................... 8,837 11,084 Restricted cash............................................. 2,470 3,545 Deferred expenses (net of accumulated amortization of $4,513 in 1999 and $3,515 in 1998)............................... 5,508 4,942 Rent receivable............................................. 14,108 12,436 Escrow deposits............................................. -- 104 Investment in joint ventures................................ 11,523 -- Other assets, net........................................... 7,443 5,179 -------- -------- $656,481 $647,007 ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY Mortgages payable........................................... $299,360 $299,687 Credit facility borrowings.................................. 70,921 52,621 Subordinated notes payable, including accrued interest...... 1,973 1,973 Origination fees payable, including accrued interest........ 6,781 5,849 Accounts payable and other liabilities...................... 3,917 5,180 Accrued interest payable.................................... 2,251 2,172 -------- -------- 385,203 367,482 Minority interests.......................................... 66,303 74,381 -------- -------- 451,506 441,863 -------- -------- Commitments and Contingencies (note 8) Preferred shares, par value $0.0001 per share; authorized 10,000,000 shares. Class A Senior Cumulative Convertible Preferred, liquidation preference $25,000, 2,000,000 shares issued and outstanding............................. 24,369 24,369 -------- -------- Common shares, par value $0.0001 per share; 287,888 shares issued and outstanding, liquidation preference $3,886..... 3,809 -- -------- -------- Shareholders' equity: Common shares, par value $0.0001 per share, authorized 40,000,000 shares, 16,905,285 and 17,103,532 shares issued and outstanding in 1999 and 1998, respectively... 2 2 Additional paid-in-capital................................ 240,339 241,924 Deferred compensation, net................................ (701) -- Accumulated distributions in excess of net income......... (60,852) (59,155) -------- -------- 178,788 182,771 Less: notes receivable from officers/shareholders......... (1,991) (1,996) -------- -------- Total shareholders' equity......................... 176,797 180,775 -------- -------- $656,481 $647,007 ======== ========
See accompanying notes to consolidated financial statements. 26 28 LEXINGTON CORPORATE PROPERTIES TRUST AND CONSOLIDATED SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME ($000 EXCEPT PER SHARE AMOUNTS) YEARS ENDED DECEMBER 31,
1999 1998 1997 ---------- ---------- ---------- Revenues: Rental............................................... $ 75,760 $ 62,846 $ 42,493 Interest and other................................... 1,540 2,271 1,076 ---------- ---------- ---------- 77,300 65,117 43,569 ---------- ---------- ---------- Expenses: Interest expense..................................... 29,099 23,055 16,644 Depreciation and amortization of real estate......... 18,000 15,083 10,608 Amortization of deferred expenses.................... 991 987 876 General and administrative expenses.................. 4,687 4,518 3,644 Property operating expenses.......................... 1,865 857 922 Transactional expenses............................... -- 559 -- Property arbitration litigation expense.............. -- -- 168 ---------- ---------- ---------- 54,642 45,059 32,862 ---------- ---------- ---------- Income before gain (loss) on sale of properties, minority interests and extraordinary item............ 22,658 20,058 10,707 Gain (loss) on sale of properties...................... 5,127 (388) 3,517 ---------- ---------- ---------- Income before minority interests and extraordinary item................................................. 27,785 19,670 14,224 Minority interests..................................... 6,438 3,933 2,442 ---------- ---------- ---------- Income before extraordinary item....................... 21,347 15,737 11,782 Extraordinary item..................................... -- -- 3,189 ---------- ---------- ---------- Net income................................... $ 21,347 $ 15,737 $ 8,593 ========== ========== ========== Income per common share -- basic: Income before extraordinary item....................... $ 1.11 $ 0.79 $ 0.61 Extraordinary item..................................... -- -- (0.28) ---------- ---------- ---------- Net income............................................. $ 1.11 $ 0.79 $ 0.33 ========== ========== ========== Weighted average common shares outstanding............. 16,979,925 16,835,414 11,444,589 ========== ========== ========== Income per common share -- diluted: Income before extraordinary item....................... $ 1.08 $ 0.78 $ 0.59 Extraordinary item..................................... -- -- (0.27) ---------- ---------- ---------- Net income............................................. $ 1.08 $ 0.78 $ 0.32 ========== ========== ========== Weighted average common shares outstanding............. 24,945,267 21,983,876 11,639,683 ========== ========== ==========
See accompanying notes to consolidated financial statements. 27 29 LEXINGTON CORPORATE PROPERTIES TRUST AND CONSOLIDATED SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY ($000 EXCEPT PER SHARE AMOUNTS) YEARS ENDED DECEMBER 31,
ACCUMULATED NOTES ADDITIONAL DEFERRED DISTRIBUTIONS RECEIVABLE NUMBER PAID-IN COMPENSATION, IN EXCESS OF OFFICERS/ TOTAL OF SHARES AMOUNT CAPITAL NET NET INCOME SHAREHOLDERS EQUITY ---------- ------ ---------- ------------- ------------- ------------ -------- Balance at December 31, 1996.... 9,426,900 $1 $136,956 $ -- $(44,298) $ -- $ 92,659 Net income...................... -- -- -- 8,593 -- 8,593 Dividends paid to common share- holders ($1.16 per share)..... -- -- -- -- (12,836) -- (12,836) Dividends paid to preferred share-holders ($0.91 per share)........................ -- -- -- -- (916) -- (916) Deemed dividend related to issuance of preferred shares........................ -- -- 3,548 -- (3,548) -- -- Common shares issued, net....... 7,082,710 1 94,965 -- -- -- 94,966 ---------- -- -------- -------- -------- ------- -------- Balance at December 31, 1997.... 16,509,610 2 235,469 -- (53,005) -- 182,466 Net income...................... -- -- -- 15,737 15,737 Dividends paid to common share- holders ($1.17 per share)..... -- -- -- -- (19,633) -- (19,633) Dividends paid to preferred share-holders ($1.2285 per share)........................ -- -- -- -- (2,254) -- (2,254) Common shares issued, net....... 723,797 -- 8,013 -- -- (1,996) 6,017 Common shares repurchased and retired....................... (129,875) -- (1,558) -- -- -- (1,558) ---------- -- -------- -------- -------- ------- -------- Balance at December 31, 1998.... 17,103,532 2 241,924 -- (59,155) (1,996) 180,775 Net income...................... -- -- -- 21,347 -- 21,347 Dividends paid to common share- holders ($1.20 per share)..... -- -- -- (20,524) -- (20,524) Dividends paid to preferred share-holders ($1.26 per share)........................ -- -- -- (2,520) -- (2,520) Common shares issued, net....... 673,262 -- 8,343 (701) -- 7,642 Common shares repurchased and retired....................... (871,509) -- (9,928) -- -- -- (9,928) Repayments on notes............. -- -- -- -- -- 5 5 ---------- -- -------- -------- -------- ------- -------- Balance at December 31, 1999.... 16,905,285 $2 $240,339 $ (701) $(60,852) $(1,991) $176,797 ========== == ======== ======== ======== ======= ========
See accompanying notes to consolidated financial statements. 28 30 LEXINGTON CORPORATE PROPERTIES TRUST AND CONSOLIDATED SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS ($000'S) YEARS ENDED DECEMBER 31,
1999 1998 1997 --------- --------- --------- Cash flows from operating activities: Net income................................................ $ 21,347 $ 15,737 $ 8,593 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization.......................... 18,991 16,070 11,484 Minority interests..................................... 6,438 3,933 2,442 Loss (gain) on sale of properties...................... (5,127) 388 (3,517) Other non-cash charges................................. 244 75 83 Extraordinary item..................................... -- -- 3,189 Equity in earnings of joint ventures................... (25) -- -- Increase (decrease) in accounts payable and other liabilities.......................................... (305) (292) 3,280 Other adjustments, net................................. (1,444) (3,903) (1,731) --------- --------- --------- Net cash provided by operating activities......... 40,119 32,008 23,823 --------- --------- --------- Cash flows from investing activities: Net proceeds from sale of properties...................... 31,548 24,113 21,362 Proceeds from sale of joint venture interest.............. 10,781 -- -- Investment in real estate................................. (102,987) (135,193) (132,129) Investments in joint ventures............................. (4,284) -- -- --------- --------- --------- Net cash used in investing activities............. (64,942) (111,080) (110,767) --------- --------- --------- Cash flows from financing activities: Proceeds of mortgages and notes payable................... 74,375 160,483 130,942 Dividends to common and preferred shareholders............ (23,044) (21,887) (13,752) Principal payments on debt, excluding normal amortization........................................... (5,513) (64,412) (112,451) Principal amortization payments........................... (10,468) (6,939) (5,950) Proceeds from the issuance of limited partnership units... -- 23,449 -- Common shares issued, net of offering costs............... 4,676 293 75,133 Preferred shares issued, net of offering costs............ -- -- 24,369 Prepayment premium on early retirement of debt............ -- -- (3,560) Cash distributions to minority interests.................. (6,533) (4,381) (2,034) Decrease (increase) in escrow deposits.................... 104 1,145 (1,145) Increase in deferred expenses............................. (1,718) (1,631) (1,687) Decrease (increase) in restricted cash.................... 745 1,954 (1,749) Common shares repurchased................................. (9,928) (1,558) -- Other..................................................... (120) -- -- --------- --------- --------- Net cash provided by financing activities......... 22,576 86,516 88,116 --------- --------- --------- Change in cash and cash equivalents......................... (2,247) 7,444 1,172 Cash and cash equivalents, beginning of year................ 11,084 3,640 2,468 --------- --------- --------- Cash and cash equivalents, end of year...................... $ 8,837 $ 11,084 $ 3,640 ========= ========= ========= Supplemental disclosure of cash flow information: Cash paid during the year for interest.................... $ 29,157 $ 21,916 $ 15,801 ========= ========= ========= Cash paid during the year for taxes....................... $ 115 $ 261 $ 106 ========= ========= =========
See accompanying notes to consolidated financial statements. 29 31 LEXINGTON CORPORATE PROPERTIES TRUST AND CONSOLIDATED SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ($000'S EXCEPT PER SHARE DATA) (1) THE COMPANY Lexington Corporate Properties Trust, (the "Company"), is a Maryland statutory real estate investment trust ("REIT") that acquires, owns, and manages a geographically diversified portfolio of net leased office, industrial and retail properties. As of December 31, 1999 the Company owned or had interests in 66 properties in 28 states. The real properties owned by the Company are subject to triple net leases to corporate tenants. The Company's Board of Trustees had authorized the Company to repurchase, from time to time, up to 2,000,000 common shares, depending on market conditions and other factors. As of December 31, 1999, the Company repurchased and retired 1,008,239 common shares at an average price of approximately $10.71 per common share. (2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis Of Presentation and Consolidation. The Company's consolidated financial statements are prepared on the accrual basis of accounting. The financial statements reflect the accounts of the Company and its controlled subsidiaries, including Lepercq Corporate Income Fund L.P. ("LCIF") and Lepercq Corporate Income Fund II L.P. ("LCIF II"). The Company is the sole general partner and majority limited partner of LCIF and LCIF II. Real Estate. Real estate assets are stated at cost, less accumulated depreciation and amortization. If there is an event or change in circumstance that indicates an impairment in the value of a property has occurred, the Company's policy is to assess any impairment in value by making a comparison of the current and projected operating cash flows of each such property over its remaining useful life, on an undiscounted basis, to the carrying amount of the property. If such carrying amounts are in excess of the estimated projected operating cash flows of the property, the Company would recognize an impairment loss equivalent to an amount required to adjust the carrying amount to its estimated fair market value. No such impairment loss has occurred. Depreciation is determined by the straight-line method over the remaining estimated economic useful lives of the properties. The Company generally depreciates buildings and building improvements over a 40-year period, land improvements over a 20-year period, and fixtures and equipment over a 12-year period. All direct costs associated with the acquisition of real estate are capitalized. Expenditures for maintenance and repairs are charged to operations as incurred. Significant renovations which extend the useful life of the properties are capitalized. Investments in joint ventures. The Company accounts for its investments in non-controlled entities under the equity method. Revenue. Rental revenue is recognized on a straight-line basis over the minimum lease terms. The Company's rent receivable primarily represents the amounts of the excess of rental revenues recognized on a straight-line basis over the annual rents collectible under the leases. Deferred Expenses. Deferred expenses are composed principally of debt placement, mortgage loan and other loan fees, and are amortized using the straight-line method, which approximates the interest method, over the terms of the debt instruments. Tax Status. The Company has made an election to qualify, and believes it is operating so as to qualify, as a real estate investment trust under the Internal Revenue Code. A real estate investment trust is generally not subject to Federal income tax on that portion of its real estate investment trust taxable income which is distributed to its shareholders, provided that at least 95% of taxable income is distributed. As distributions 30 32 LEXINGTON CORPORATE PROPERTIES TRUST AND CONSOLIDATED SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) ($000'S EXCEPT PER SHARE DATA) have exceeded taxable income, no provision for Federal income taxes has been made. State income taxes are not significant. A summary of the average taxable nature of the Company's dividends for the three years ended December 31 is as follows:
1999 1998 1997 ------ ------ ------ Total dividends per share................................ $ 1.20 $ 1.17 $ 1.16 ====== ====== ====== Ordinary income.......................................... 83.73% 88.06% 68.91% 20% rate gain............................................ 10.21% -- -- 25% rate gain............................................ 6.06% 2.30% -- Percent non-taxable as return of capital................. -- 9.64% 31.09% ------ ------ ------ 100.00% 100.00% 100.00% ====== ====== ======
Earnings Per Share. Basic net income per share is computed by dividing net income reduced by all preferred dividends by the weighted average number of common shares outstanding during the period. Diluted net income per share amounts are similarly computed but include the effect, when dilutive, of in-the-money common share options and the Company's other dilutive securities which can include operating partnership units, exchangeable notes and convertible preferred shares. In 1999 preferred shares were not dilutive; in 1998 the exchangeable notes and preferred shares were not dilutive; and in 1997 all the securities were not dilutive. Cash and Cash Equivalents. The Company considers all highly liquid instruments with maturities of three months or less from the date of purchase to be cash equivalents. Restricted Cash. Includes tenants security deposits and amounts for certain debt obligations including funding requirements. Use of Estimates. Management has made a number of 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 consolidated financial statements in conformity with generally accepted accounting principles. Actual results could differ from those estimates. Reclassifications. Certain amounts included in prior years' financial statements have been reclassified to conform with the current year presentation. 31 33 LEXINGTON CORPORATE PROPERTIES TRUST AND CONSOLIDATED SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) ($000'S EXCEPT PER SHARE DATA) (3) EARNINGS PER SHARE The following is a reconciliation of numerators and denominators of the basic and diluted earnings per share computations for each of the years in the three-year period ended December 31, 1999:
1999 1998 1997 ----------- ----------- ----------- BASIC Income before extraordinary item............ $ 21,347 $ 15,737 $ 11,782 Less cash and deemed dividends attributable to preferred shares....................... (2,520) (2,478) (4,871) ----------- ----------- ----------- Income attributed to common shareholders before extraordinary item................. 18,827 13,259 6,911 Extraordinary item.......................... -- -- (3,189) ----------- ----------- ----------- Net income attributed to common shareholders.............................. $ 18,827 $ 13,259 $ 3,722 =========== =========== =========== Weighted average number of common shares outstanding............................... 16,979,925 16,835,414 11,444,589 =========== =========== =========== Income per common share -- basic: Income before extraordinary item............ $ 1.11 $ 0.79 $ 0.61 Extraordinary item.......................... -- -- (0.28) ----------- ----------- ----------- Net income.................................. $ 1.11 $ 0.79 $ 0.33 =========== =========== =========== DILUTED Income attributed to common shareholders before extraordinary item................. $ 18,827 $ 13,259 $ 6,911 Add incremental income attributed to assumed conversion of dilutive securities......... 8,225 3,831 -- ----------- ----------- ----------- Income attributed to common shareholders before extraordinary item................. 27,052 17,090 6,911 Extraordinary item.......................... -- -- (3,189) ----------- ----------- ----------- Net income attributed to common shareholders.............................. $ 27,052 $ 17,090 $ 3,722 =========== =========== =========== Weighted average number of shares used in calculation of basic earnings per share... 16,979,925 16,835,414 11,444,589 Add incremental shares representing: Shares issuable upon exercise of employee stock options.......................... 4,194 156,391 195,094 Shares issuable upon conversion of dilutive securities.................... 7,961,148 4,992,071 -- ----------- ----------- ----------- Weighted average number of shares used in calculation of diluted earnings per common share..................................... 24,945,267 21,983,876 11,639,683 =========== =========== =========== Income per common share -- diluted: Income before extraordinary item............ $ 1.08 $ 0.78 $ 0.59 Extraordinary item.......................... -- -- (0.27) ----------- ----------- ----------- Net income.................................. $ 1.08 $ 0.78 $ 0.32 =========== =========== ===========
32 34 LEXINGTON CORPORATE PROPERTIES TRUST AND CONSOLIDATED SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) ($000'S EXCEPT PER SHARE DATA) (4) INVESTMENTS IN REAL ESTATE During 1999, 1998 and 1997 the Company made the following acquisitions, including joint venture acquisitions:
NET ANNUALIZED RENTABLE DATE OF ACQUISITION BASE RENT LEASE SQUARE ACQUISITION TENANT LOCATION COST DECEMBER 31, EXPIRES FEET - ----------- --------------------------------------- ---------------------- ----------- ------------ ------- --------- 1999 January 20 Corporate Express Office Products, Inc. Henderson, NC $ 7,416 $ 791 01-14 196,946 August 13 NEC America, Inc. Herndon, VA 19,000 2,006 08-09 108,000 September 15 Vastar Resources, Inc. Houston, TX(1) 34,770 3,436 09-09 327,325 October 1 Blue Cross/Blue Shield of South Columbia, SC(1) Carolina 42,500 4,900 09-09 348,410 December 22 Jones Apparel Group, Inc. Bristol, PA 8,782 970 07-13 96,000 December 28 Boeing Services Corp. Herndon, VA 25,636 2,585 05-08 159,664 December 29 Honeywell Consumer Products Southborough, MA 4,747 412 09-15 57,698 -------- ------- --------- $142,851 $15,100 1,294,043 ======== ======= ========= 1998 March 27 Jones Apparel Group, Inc. Bristol, PA $ 12,539 $ 1,224 03-13 255,019 March 27 Fidelity Corporate Real Estate, LLC Hebron, KY 8,077 817 04-07 81,744 March 27 Kelsey-Hayes (Tech I & II) Livonia, MI 16,442 1,637 04-07 180,230 May 11 Eagle Hardware & Garden, Inc. Federal Way, WA 13,751 1,233 08-17 133,861 May 11 Eagle Hardware & Garden, Inc. Anchorage, AK 17,690 1,588 10-17 157,525 May 15 Stone Container Corporation Columbia, SC 4,230 549 08-12 185,960 May 18 The Wackenhut Corporation Palm Beach Gardens, FL 19,817 2,241 02-11 127,855 June 19 Michaels Stores, Inc. Lancaster, CA 15,102 1,430 06-13 431,250 July 2 Fleet Mortgage Group, Inc. Florence, SC 15,061 1,635 06-08 177,747 July 24 Lear Technologies LLC Auburn Hills, MI 13,939 1,365 07-06 183,717 August 27 Kmart Corporation Warren, OH 63,877 8,932 09-07 1,700,000 October 26 Corporate Express Office Products, Inc. Baton Rouge, LA 3,425 368 10-13 65,043 December 31 Upton's, Inc. Columbia, MD 4,880 549 07-09 60,000 -------- ------- --------- TOTAL $208,830 $23,568 3,739,951 ======== ======= ========= 1997 February 20 Johnson Controls, Inc. Cottondale, AL $ 2,910 $ 313 02-07 58,800 March 19 Exel Logistics Inc. Various(2) 27,428 3,003 11-06 761,200 May 1 Cymer, Inc. San Diego, CA 7,707 860 12-09 65,755 July 9 Bull HN Info. Systems, Inc. Phoenix, AZ 10,990 1,032 10-05 137,058 July 22 Lockheed Martin Corporation Marlborough, MA 15,541 1,671 12-06 126,000 September 4 FirstPlus Financial Group, Inc. Dallas, TX 32,645 3,557 08-12 247,968 October 31 Ryder Integrated Logistics, Inc. Waterloo, IA 9,321 1,002 07-12 276,480 December 31 Stevens-Arnold, Inc. Milpitas, CA 22,138 2,667 12-05 100,026 December 31 Allied Holdings, Inc. Decatur, GA 14,633 1,530 12-07 112,248 December 31 Circuit City Stores, Inc. Richmond, VA 27,234 2,791 02-10 288,562 December 31 Dana Corp. Gordonsville, TN 3,377 341 08-07 148,000 December 31 Allegiance Healthcare Corp. Bessemer, AL 4,902 472 09-01 123,924 -------- ------- --------- TOTAL $178,826 $19,239 2,446,021 ======== ======= =========
- --------------- (1) Joint venture acquisitions (2) Consists of three properties; two located in New Kingston, PA, one in Mechanicsburg, PA. 33 35 LEXINGTON CORPORATE PROPERTIES TRUST AND CONSOLIDATED SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) ($000'S EXCEPT PER SHARE DATA) The Company sold seven properties in 1999 and one property in each of 1998 and 1997 for an aggregate net selling price of $63,900, $24,100 and $21,400, respectively, which resulted in a gain in 1999 of $5,127, a 1998 loss of $388 and a gain in 1997 of $3,517. The following unaudited pro forma operating information for the years ended December 31, 1999 and 1998 has been prepared as if the acquisitions and dispositions in 1999 and 1998 had been consummated as of January 1, 1998. The information does not purport to be indicative of what the operating results of the Company would have been had the acquisitions and dispositions been consummated on January 1, 1998. Unaudited pro forma amounts are as follows:
DECEMBER 31, 1999 DECEMBER 31, 1998 ----------------- ----------------- Revenues............................................. $78,355 $79,217 Net income........................................... $17,510 $18,904 Net income per common share: Basic.............................................. $ 0.88 $ 0.98 Diluted............................................ $ 0.88 $ 0.96
(5) INVESTMENT IN JOINT VENTURES The Company has investments in two real estate joint ventures. The business of each joint venture is to acquire, finance, hold for investment and sell single tenant net leased real estate. Lexington Acquiport Company, LLC The Company's first joint venture, Lexington Acquiport Company, LLC ("LAC"), is with the Comptroller of the State of New York as Trustee for the Common Retirement Fund ("CRF"). The Company and CRF will contribute up to $50,000 and $100,000, respectively, to invest in high quality office and industrial net leased real estate. The Company's affiliate, Lexington Realty Advisors, Inc. ("LRA") will earn annual management fees of 2% of rent collected and acquisition fees equaling 75 basis points of purchase price of each property investment. LAC's first investment was a 12-year, $11,009 participating note to partially fund the purchase of a real estate property. The participating note has a current annual interest rate of 6.9% and a 50% participation in operating cash flows of the property, as defined. The note is convertible, at LAC's option, into an equity position in the underlying property. The underlying property, which was purchased on September 15, 1999, is a 327,325 square foot office property located in Houston, Texas net leased to Vastar Resources, Inc. for annual rental payments of $3,400 through September 2009. The purchase price of $34,800 was funded through the participating note and a 10-year, $22,800 non-recourse mortgage note bearing interest at 7.58% which provides for annual principal and interest payments of $2,000 with a balloon payment of $18,200 at maturity. 34 36 LEXINGTON CORPORATE PROPERTIES TRUST AND CONSOLIDATED SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) ($000'S EXCEPT PER SHARE DATA) Summarized financial information for the underlying property investment as of and for the period ended December 31, 1999 is as follows:
1999 -------- Real estate, net............................................ $35,113 Other assets................................................ 479 ------- $35,592 ======= Mortgage payable............................................ $22,699 Convertible note payable -- affiliate....................... 11,009 Other liabilities........................................... 147 Equity...................................................... 1,737 ------- $35,592 ======= Rental revenue.............................................. $ 993 Interest expense............................................ (774) Depreciation of real estate................................. (206) Other....................................................... (53) ------- Net loss............................................... $ (40) =======
Lexington Columbia LLC The Company's second joint venture formed on December 30, 1999, Lexington Columbia LLC ("Columbia"), is with a private investor and its sole purpose is to own a property in Columbia, South Carolina net leased to Blue Cross/Blue Shield of South Carolina. The purchase price of the property was approximately $42,500 and partially funded through a 10-year $25,300 mortgage note bearing interest at 7.85%. The note provides for annual principal and interest payments of $2,196 with a balloon payment of $22,100 at maturity. The lease, which expires September 2009, provides for annual rental payment of $4,906. In accordance with the partnership agreement, net cash flows, as defined, will be allocated 40% to the Company and 60% to the partner until both parties have received a 12.5% return on capital. Thereafter cash flows will be distributed 60% to the Company and to 40% to the partner. LRA will earn annual asset management fees of 2% of rents collected. Summarized balanced sheet information for the underlying property investment as of December 31, 1999 is as follows:
1999 -------- Real estate, net............................................ $42,667 Other assets................................................ 650 ------- $43,317 ======= Mortgage payable............................................ $25,258 Equity...................................................... 18,059 ------- $43,317 =======
35 37 LEXINGTON CORPORATE PROPERTIES TRUST AND CONSOLIDATED SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) ($000'S EXCEPT PER SHARE DATA) Lexington Realty Advisors, Inc. The Company also has a 99% non-voting ownership interest in LRA, which provides management services to the above mentioned joint ventures. During 1999, LRA generated management and acquisition fees of approximately $575 and reimbursed the Company $543 for payroll costs. (6) MORTGAGES AND NOTES PAYABLE The following table sets forth-certain information regarding the Company's mortgage and notes payable as of December 31, 1999 and 1998:
2000 INTEREST ANNUAL BALLOON PROPERTY LOCATION 1999 1998 RATE MATURITY DEBT SERVICE PAYMENT ----------------- -------- -------- -------- -------- ------------ -------- Richmond, VA................ $ 13,093 $ 13,093 8.875% 03-01-00 $13,384 $ 13,093 Credit Facility (a)......... 70,921 52,621 7.520% 07-24-01 5,333 70,921 Bessemer, AL................ 1,000 1,000 9.500% 09-01-01 95 1,000 Tampa, FL (Queen Palm Dr.)(c)................... 4,223 4,290 7.050% 08-15-02 367 4,020 Tampa, FL (North 30th) (c).. 5,467 5,697 7.050% 08-15-02 624 4,768 Gordonsville, TN............ 1,070 1,158 9.500% 10-01-02 194 771 Bakersfield, CA............. 1,862 -- 9.350% 12-01-02 405 1,064 Columbia, MD................ 1,680 1,980 10.750% 07-20-03 521 -- Oxon Hill, MD............... 1,419 1,702 6.250% 03-01-04 381 -- Mechanicsburg, PA (3 Exel properties) (d)........... 25,000 25,000 8.000% 03-20-04 2,000 25,000 Brownsville, TX............. 770 852 8.375% 11-01-04 150 260 Rockville, MD............... 927 1,061 8.820% 03-01-05 221 -- REMIC Financing (b)......... 66,258 67,173 8.100% 05-25-05 6,353 60,001 Salt Lake City, UT.......... 9,633 10,911 7.870% 10-01-05 2,099 -- Laguna Hills, CA............ 3,779 4,113 8.375% 02-01-06 666 1,020 Bethesda, MD................ 3,230 -- 9.250% 05-01-06 669 -- Warren, OH.................. 37,250 40,624 7.000% 10-01-07 6,160 -- Palm Beach Gardens, FL...... 13,611 13,756 7.010% 06-15-08 1,105 11,866 Hebron, KY.................. 5,589 5,642 7.000% 10-23-08 451 4,935 Canton, OH.................. 2,368 2,523 9.490% 02-28-09 388 -- Baton Rouge, LA............. 2,134 -- 7.375% 03-01-09 208 1,470 Bristol, PA................. 6,518 -- 7.250% 04-01-09 571 5,228 Livonia, MI................. 11,427 -- 7.800% 04-01-09 992 10,236 Henderson, NC............... 4,710 -- 7.390% 05-01-09 417 3,854 Salt Lake City, UT.......... 19,843 21,170 7.610% 10-01-09 2,901 -- Herndon, VA................. 12,324 -- 7.600% 09-01-10 1,107 9,740 Honolulu, HI................ 5,536 5,901 10.250% 10-01-10 841 -- Dallas, TX.................. 22,774 22,800 7.490% 12-31-12 2,020 15,961 Lancaster, CA............... 11,112 11,224 7.020% 09-01-13 900 8,614 Franklin, NC................ 2,218 2,250 8.500% 04-01-15 236 -- Southborough, MA............ 2,535 -- 7.500% 09-01-15 275 -- Phoenix, AZ (Bank One) (e).. -- 5,538 10.750% -- --
36 38 LEXINGTON CORPORATE PROPERTIES TRUST AND CONSOLIDATED SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) ($000'S EXCEPT PER SHARE DATA)
2000 INTEREST ANNUAL BALLOON PROPERTY LOCATION 1999 1998 RATE MATURITY DEBT SERVICE PAYMENT ----------------- -------- -------- -------- -------- ------------ -------- San Diego, CA (f)........... -- 4,635 7.500% 01-01-11 -- -- Anchorage, AK (f)........... -- 11,267 7.480% 05-11-08 -- -- Federal Way, WA (f)......... -- 8,635 7.480% 05-11-08 -- -- Phoenix, AZ (Bull) (f)...... -- 5,692 8.120% 10-01-05 -- -- -------- -------- ------- ------- -------- Total....................... $370,281 $352,308 7.789% $52,034 $253,822 ======== ======== ======= ======= ========
- --------------- (a) The Company's $100,000 unsecured revolving credit facility, bears interest at 137.5 basis points over LIBOR and has an interest rate period of one, three or six months, at the option of the Company. The credit facility contains various leverage, debt service coverage, net worth maintenance and other customary covenants all of which the Company is in compliance. Due to these covenants, approximately $11,486 was available to the Company at December 31, 1999. The amount of available borrowings can increase by identifying additional encumbered properties as eligible for the computation of the borrowing base which supports the credit facility. (b) The REMIC Financing is secured by mortgages on 17 Properties. (c) The mortgages on the two Tampa, Florida Properties are cross-collateralized. (d) The Notes can be exchanged by the holders for the Company's common shares at $13 per share beginning on April 1, 2000, subject to adjustment. The Notes may be redeemed at the Company's option beginning March 2000 at a price of 103.2% of the principal amount, declining to par after March 2002. The Notes are subordinated to obligations under the Company's credit facility. (e) Mortgage satisfied in 1999. (f) Mortgage satisfied on sale of property in 1999. Scheduled principal paydowns of the mortgage notes payable, excluding borrowings under the credit facility, for the next five years and thereafter are as follows:
YEARS ENDING SCHEDULED DECEMBER 31, AMORTIZATION BALLOON TOTAL - ------------ ------------ -------- -------- 2000.............................................. $ 11,416 $ 13,093 $ 24,509 2001.............................................. 12,341 1,000 13,341 2002.............................................. 13,205 10,623 23,828 2003.............................................. 13,609 -- 13,609 2004.............................................. 13,812 25,260 39,072 Thereafter........................................ 52,076 132,925 185,001 -------- -------- -------- $116,459 $182,901 $299,360 ======== ======== ========
(7) SUBORDINATED NOTES PAYABLE The notes bear interest at 7.75% per annum, payable semi-annually on January 1 and July 1 of each year, and are due on October 12, 2000. The notes are redeemable at the Company's option, in whole or in part at a redemption price equal to 100% of the principal amount plus all accrued and unpaid interest through the date of redemption. 37 39 LEXINGTON CORPORATE PROPERTIES TRUST AND CONSOLIDATED SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) ($000'S EXCEPT PER SHARE DATA) (8) LEASES Minimum future rental receipts under noncancellable tenant leases assuming no new or negotiated leases for the next five years and thereafter are as follows:
YEAR ENDING DECEMBER 31, AMOUNT - ------------ -------- 2000........................................................ $ 74,007 2001........................................................ 73,754 2002........................................................ 71,571 2003........................................................ 71,910 2004........................................................ 69,954 Thereafter.................................................. 284,659 -------- $645,855 ========
The Company entered into a 15-year lease with VarTec, Inc. for its Dallas, Texas Property. The VarTec lease provides for average annual net rent of $3,485 and expires September 2015. The Company leases its corporate headquarters for approximately $263 per annum through June 30, 2004. (9) MINORITY INTERESTS In conjunction with several of the Company's acquisitions, sellers were given interests in Partnerships controlled by the Company as a form of consideration. All of such interests are redeemable at certain times for common shares on a one-for-one basis. As of December 31, 1999, there were 5,759,960 OP Units outstanding of which 5,381,923 are currently redeemable for common shares. These units, subject to certain adjustments through the date of conversion, have distributions per unit in varying amounts up to $1.20 per unit with a weighted average distribution of $1.10 per unit. (10) PREFERRED AND COMMON SHARES The preferred shares are cumulative and convertible at any time at the holder's option into common shares on a one-for-one basis and are entitled to quarterly dividends equal to the greater of $.295 per share or 105% of the quarterly common shares dividend. Currently the dividend is $.315 per share. During 1997, the Company sold 2,000,000 preferred shares to a single entity. Based on the market price of the Company's common shares on the dates of issuance, the Preferred Shares were deemed to have a beneficial conversion feature equal to the difference between the market price per share and $12.50 per share. This difference, which is non-cash and non-recurring, amounted to approximately $3.5 million for the year ended December 31, 1997 and has been recorded as a dividend, with an offset to additional paid-in capital, in the accompanying statements of changes in shareholders' equity. The preferred shares may be redeemed by the Company after December 31, 2001 at a premium of 6% over the liquidation preference of $12.50 per share, with such premium declining to zero on or after December 31, 2011. Each share is entitled to one vote. In certain instances, including a change of control of the Company (as defined in the agreement), the holder of the Preferred Shares may require the Company to redeem its shares at a price equal to $12.75 per share plus any accrued dividends. 38 40 LEXINGTON CORPORATE PROPERTIES TRUST AND CONSOLIDATED SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) ($000'S EXCEPT PER SHARE DATA) During 1999, the Company issued 287,888 common shares in a transaction which raised approximately $3,886. The holders of the common shares have agreed not to sell more than 20% of the common shares each year for a five year period. On the fifth anniversary of the transaction, the holders of the common shares have the right to put to the Company their shares, up to 287,888, at $13.50 per share. (11) LEGAL PROCEEDINGS The Company is involved in various legal actions arising in the ordinary course of business. In the opinion of management, the ultimate disposition of these matters will not have a material adverse effect on the Company's consolidated financial position, results of operations or liquidity. (12) BENEFIT PLANS The Company maintains a common share option plan pursuant to which qualified and non-qualified options may be issued. In 1998 the number of options that can be issued under the plan were increased by 800,000. Options granted under the plan generally vest over a period of one to four years, expire five years from date of grant and are exercisable at the market price of the date of grant. Share option activity during the periods indicated is as follows:
WEIGHTED-AVERAGE NUMBER OF EXERCISE PRICE PER SHARES SHARE --------- ------------------ Balance at December 31, 1996............................. 775,300 $11.30 Granted................................................ 276,397 12.50 Exercised.............................................. (10,000) 10.09 Forfeited.............................................. (2,500) 14.25 --------- ------ Balance at December 31, 1997............................. 1,039,197 11.62 Granted................................................ 386,600 15.11 Exercised.............................................. (8,230) 10.28 Forfeited.............................................. (7,370) 14.51 --------- ------ Balance at December 31, 1998............................. 1,410,197 12.58 Granted................................................ 286,625 12.06 Exercised.............................................. (5,000) 9.00 Forfeited.............................................. (188,174) 12.13 --------- ------ Balance at December 31, 1999............................. 1,503,648 $12.54 ========= ======
At December 31, 1999, the range of exercise prices and weighted-average remaining contractual life of outstanding options was $11.125 to $15.25 and 2.2 years, respectively. In addition, 941,122 options are still available for grant. At December 31, 1999, 1998 and 1997, the number of options exercisable was 1,066,917, 1,107,697 and 837,300, respectively, and the weighted-average exercise price of those options was $11.80, $11.88 and $11.45, respectively. The per share weighted average fair value of options granted during 1999, 1998 and 1997 were estimated to be $2.41, $3.46, and $3.75, respectively, using a Black-Scholes option pricing formula. The more significant assumptions underlying the determination of such fair values include: (i) a risk free interest rate of 5% in 1999 39 41 LEXINGTON CORPORATE PROPERTIES TRUST AND CONSOLIDATED SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) ($000'S EXCEPT PER SHARE DATA) and 1998 and 6.5% in 1997; (ii) an expected life of five years; (iii) volatility factors of 16.94%, 18.47% and 17.09% for 1999, 1998 and 1997, respectively; (iv) and actual dividends paid. The Company has elected to adopt the disclosure only provisions of SFAS No. 123. Accordingly no compensation cost has been recognized with regard to options granted in the accompanying consolidated statements of income. If stock based compensation cost had been recognized based upon the fair value at the date of grant for options awarded in 1999, 1998 and 1997 the Company's pro forma net income and pro forma net income per share would have been:
1999 1998 1997 ------- ------ ------ Pro forma net income.................................... $20,384 $14,737 $8,276 Pro forma net income per share Basic................................................. $ 1.05 $ 0.73 $ 0.30 Diluted............................................... $ 1.04 $ 0.73 $ 0.29
The Company has a 401(k) retirement savings plan covering all eligible employees. The Company will match 25% of the first 4% of employee contributions. In addition, based on its profitability, the Company may make a discretionary contribution at each fiscal year end to all eligible employees. The matching and discretionary contributions are subject to vesting under a schedule providing for 25% annual vesting starting with the first year of employment and 100% vesting after four years of employment. Approximately $98, $77 and $80 were contributed in 1999, 1998 and 1997, respectively. (13) RELATED PARTY TRANSACTIONS The Company has been granted an option by the LCP Group, L.P. ("LCP"), exercisable any time, to acquire the general partnership interests currently owned by LCP in two limited partnerships, Net 1 L.P. and Net 2 L.P. (collectively, the "Net Partnerships'), which own net leased office, industrial and retail properties. Under the terms of the option, the Company, subject to review of any such transaction by the independent members of its Board of Trustees, may acquire the general partnership interests in either or both of the Net Partnerships at their fair market value based upon a formula relating to partnership cash flows, with the Company retaining the option of paying such fair market value in securities of the Company, units representing interests in partnerships controlled by the Company or cash (or a combination thereof). The Chairman of the Company is a partner in LCP. The Company currently provides administrative and acquisition support to the Net Partnerships and is reimbursed for the costs of such services. The reimbursements amounted to $435, $393 and $279 for the years ended December 31, 1999, 1998 and 1997, respectively, and are shown net, in the Company's general and administrative expenses in the accompanying consolidated statements of income. The Company sold four properties to the Net Partnerships which are located in Jacksonville, Alabama (leased to Wal-Mart Stores, Inc.); Columbia, South Carolina (leased to Stone Container Corp.); San Diego, California (leased to Cymer, Inc.) and Phoenix, Arizona (leased to Bull HN Information Systems, Inc.) for an aggregate sales price, which included a $1,200, 8% interest only accruing 5 year note, of approximately $26,900 resulting in a gain of approximately $2,544. The Company purchased two properties for approximately $13,500 from the Net Partnerships. These purchases and sales were approved by the independent members of the Board of Trustees. The Company also received brokerage commissions relating to other purchase and sale of properties by the Net Partnerships totaling $175 and $376 in 1999 and 1998, which is included in interest and other income in the accompanying consolidated statements of income. 40 42 LEXINGTON CORPORATE PROPERTIES TRUST AND CONSOLIDATED SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) ($000'S EXCEPT PER SHARE DATA) In connection with the acquisition of certain properties in 1996, the Company assumed an obligation to pay LCP an aggregate principal amount of $1,778 for rendering services in connection with the original acquisition of the properties in 1980 and 1981. Simple interest is payable monthly from available net cash flow of the respective original properties on the various unpaid principal portions of the fees, at annual rates ranging from 12.25% to 19%. Monthly installment payments are to commence at various dates to satisfy principal and current interest payments as well as any unpaid accrued interest outstanding. During 1998, the Company issued 1,187,228 OP Units to the Co-Chief Executive Officers and an affiliate of one of the Co-Chief Executive Officers in exchange for their interests in certain partnerships and related contractual obligations. During 1998, the Company issued 131,000 common shares to two officers in exchange for notes aggregating $1,998 which mature on February 14, 2003, bear interest at 7.6% per annum and are secured by the common shares issued. (14) FAIR MARKET VALUE OF FINANCIAL INSTRUMENTS Cash Equivalents and Restricted Cash The Company estimates that the fair value approximates carrying value due to the relatively short maturity of the instruments. Mortgages, Notes and Subordinated Notes Payables The Company determines the fair value of these instruments based on a discounted cash flow analysis using a discount rate that approximates the current borrowing rates for instruments of similar maturities. Based on this, the Company has determined that the fair value of these instruments approximates carrying values. (15) CONCENTRATION OF RISK The Company seeks to reduce its operating and leasing risks through diversification achieved by the geographic distribution of its Properties, avoiding dependency on a single property and the creditworthiness of its tenants. For each of the years in the three year period ended December 31, 1999 the following tenants represented 10% or greater of rental revenue:
1999 1998 1997 ---- ---- ---- Northwest Pipeline Corp..................................... 11% 14% 20% Kmart Corporation........................................... 11% -- --
(16) SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES During 1999 and 1998, holders of an aggregate of 506,882 and 525,433 partnership units, respectively, redeemed such units for common shares of the Company. This redemption resulted in an increase in shareholders' equity and a corresponding decrease in minority interests of $6,532 and $5,650, respectively. During 1999, the Company issued 69,850 common shares to certain employees and trustees resulting in $877 of deferred compensation. These common shares vest ratably over a 2 to 5 year period. 41 43 LEXINGTON CORPORATE PROPERTIES TRUST AND CONSOLIDATED SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) ($000'S EXCEPT PER SHARE DATA) During 1999, the Net Partnerships purchased two of the Company's real estate properties assuming mortgage debt of approximately $10,156 and issuing a note payable to the Company for $1,200. During 1998, in connection with the acquisition of certain properties, the Company assumed $44,200 in mortgage indebtedness as partial satisfaction of the purchase price. During 1998, in connection with the acquisition of certain properties, the Company issued $28,800 in OP Units as partial satisfaction of the purchase price. The issuance of these OP Units have been recorded as minority interest in the accompanying consolidated balance sheets. During 1998, the Company issued 131,000 common shares, at the current market price, to two officers in exchange for notes aggregating $1,998 which mature on February 14, 2003, bear interest at 7.6% per annum and are secured by the common shares issued. During 1997, the Company issued 1,284,725 common shares in exchange for all the shares of another company. The Company acquired three properties valued at $35,100 less the $15,300 of mortgage indebtedness assumed. During 1997, in connection with a property acquisition, the Company assumed approximately $5,900 of first mortgage financing and issued a $600 note to the seller. During 1997, in connection with an acquisition of properties involving a partnership, the Company issued $6,000 in OP Units as partial satisfaction of the purchase price. The issuance of these OP Units have been recorded as minority interest in the accompanying consolidated financial statements. (17) UNAUDITED QUARTERLY FINANCIAL DATA
THREE MONTHS ENDED ------------------------------------- MARCH 31, JUNE 30, ----------------- ---------------- 1999 1998 1999 1998 ------- ------ ------ ------ Revenues....................................... $19,161 13,980 18,950 14,994 Net income..................................... $ 4,363 4,062 4,869 3,437 Net income per common share: Basic..................................... $ 0.22 0.21 0.25 0.17 Diluted................................... $ 0.22 0.20 0.24 0.17
THREE MONTHS ENDED ------------------------------------- SEPTEMBER 30, DECEMBER 31, ----------------- ---------------- 1999 1998 1999 1998 ------- ------ ------ ------ Revenues....................................... $19,208 17,155 19,981 18,988 Net income..................................... $ 6,350 4,131 5,765 4,107 Net income per common share: Basic..................................... $ 0.34 0.21 0.30 0.21 Diluted................................... $ 0.32 0.20 0.30 0.20
The sum of the quarterly income (loss) per common share amounts may not equal the full year amounts primarily because the computations of the weighted average number of common shares outstanding for each quarter and the full year are made independently. 42 44 LEXINGTON CORPORATE PROPERTIES TRUST AND CONSOLIDATED SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) ($000'S EXCEPT PER SHARE DATA) (18) SUBSEQUENT EVENTS (UNAUDITED) Lexington Acquiport Company, LLC purchased for $26,900 a 221,215 square foot office property in Ohio net leased to Structural Dynamics Research Corporation at a current annual net rent of $2,791 through April 30, 2011. The purchase price was partially funded with a $17,800 mortgage note bearing interest at 8.17%. The note requires an average monthly principal and interest payment of $145 with a balloon payment of $12,686 due in January 2012. The Company refinanced a $13,100, 8.875% balloon payment due in 2000 with a $17,000, 8.1% mortgage that requires monthly principal and interest payments of $126 with a balloon payment of $15,200 due in February, 2010. The Company repaid $2,000 on its unsecured credit facility. 43 45 LEXINGTON CORPORATE PROPERTIES TRUST AND CONSOLIDATED SUBSIDIARIES REAL ESTATE AND ACCUMULATED DEPRECIATION AND AMORTIZATION SCHEDULE III ($000) INITIAL COST TO COMPANY AND GROSS AMOUNT AT WHICH CARRIED AT END OF YEAR(A)
LAND ACCUMULATED AND BUILDINGS DEPRECIATION LAND AND AND DESCRIPTION LOCATION ENCUMBRANCES ESTATES IMPROVEMENTS TOTAL AMORTIZATION ----------- ------------------------ ------------ ------- ------------ -------- ------------- Warehouse & Manufacturing....... Modesto, CA $ 2,072 $ 257 $ 3,809 $ 4,066 $ 1,266 Office.......................... Southington, CT 8,532 3,240 20,440 23,680 7,948 Research & Development.......... Glendale, AZ -- 4,996 24,392 29,388 10,389 Retail/Health Club.............. Countryside, IL 2,349 628 3,722 4,350 1,567 Retail/Health Club.............. Voorhees NJ 2,970 577 4,820 5,397 1,921 Retail/Health Club.............. DeWitt, NY 1,796 445 3,043 3,488 1,214 Warehouse & Distribution........ Mansfield, OH 3,246 120 5,464 5,584 1,616 Industrial...................... Marshall, MI 2,176 33 3,378 3,411 1,284 Industrial...................... Marshall, MI 829 14 926 940 353 Retail.......................... Newport, OR 6,078 1,400 7,270 8,670 2,603 Office & Warehouse.............. Memphis, TN 6,562 1,053 11,168 12,221 3,238 Warehouse & Distribution........ Mechanicsburg, PA 10,016 1,439 13,987 15,426 2,910 Office & Warehouse.............. Tampa, FL 4,223 1,389 7,629 9,018 2,495 Retail.......................... Klamath Falls, OR 6,907 727 9,160 9,887 2,700 Office.......................... Tampa, FL 5,467 1,900 9,755 11,655 2,782 Warehouse & Industrial.......... Jacksonville, FL -- 157 3,034 3,191 890 Retail.......................... Sacramento, CA 2,314 885 2,705 3,590 1,013 Office.......................... Phoenix, AZ -- 2,804 13,921 16,725 3,857 Retail.......................... Reno, NV 2,003 1,200 1,904 3,104 693 Retail.......................... Las Vegas, NV 1,796 900 1,759 2,659 639 Retail.......................... Rockville, MD 927 -- 1,784 1,784 446 Retail.......................... Oxon Hill, MD 1,419 403 2,765 3,168 580 Retail.......................... Brownsville, TX 770 -- 1,242 1,242 296 Retail.......................... Laguna Hills, CA 3,779 255 5,035 5,290 992 Retail.......................... Riverdale, GA -- 333 2,233 2,566 223 Retail/Health Club.............. Canton, OH 2,368 602 3,819 4,421 382 Office.......................... Salt Lake City, UT 29,476 -- 55,404 55,404 7,747 Manufacturing................... Franklin, NC 2,218 386 3,062 3,448 230 Industrial...................... Plymouth, MI -- 1,461 4,868 6,329 365 Industrial...................... Oberlin, OH 2,205 276 4,515 4,791 339 Retail.......................... Tulsa, OK -- 447 2,432 2,879 402 Retail.......................... Clackamas, OR -- 523 2,847 3,370 470 Retail.......................... Lynwood, WA -- 488 2,658 3,146 439 Industrial...................... Houston, TX -- 217 3,745 3,962 497 Retail.......................... Honolulu, HI 5,536 -- 11,147 11,147 1,366 Warehouse....................... New Kingston, PA (Silver Springs) 5,498 674 5,360 6,034 374 Warehouse....................... New Kingston, PA (Cumberland) 11,250 1,380 10,963 12,343 765 Warehouse....................... Mechanicsburg, PA (Hampden IV) 8,252 1,012 8,039 9,051 561 Office/Research & Development... Marlborough, MA -- 1,707 13,834 15,541 850 Office.......................... Dallas, TX 22,774 3,582 29,063 32,645 1,664 Warehouse....................... Waterloo, IA 4,407 1,025 8,296 9,321 458 Office/Research & Development... Milipitas, CA -- 3,542 18,603 22,145 930 Industrial...................... Gordonsville, TN 1,070 52 3,325 3,377 191 Office.......................... Decatur, GA -- 975 13,677 14,652 684 Office.......................... Richmond, VA 13,093 -- 27,282 27,282 1,692 Industrial...................... Bessemer, AL 1,000 664 4,238 4,902 251 Office/Warehouse................ Bristol, PA -- 2,508 10,031 12,539 439 Office.......................... Hebron, KY 5,589 1,615 6,462 8,077 283 Office.......................... Livonia, MI 5,402 1,554 6,219 7,773 272 Research & Development.......... Livonia, MI 6,025 1,733 6,936 8,669 303 USEFUL LIFE COMPUTING DEPRECIATION IN LATEST INCOME DATE DATE STATEMENTS DESCRIPTION ACQUIRED CONSTRUCTED (YEARS) ----------- ---------- ----------- ----------------------- Warehouse & Manufacturing....... Sept. 1986 1970 & 1976 40 & 12 Office.......................... Oct. 1986 1983 40 & 12 Research & Development.......... Nov. 1986 1985 40 & 12 Retail/Health Club.............. Jul. 1987 1987 40 & 12 Retail/Health Club.............. Jul. 1987 1987 40 & 12 Retail/Health Club.............. Aug. 1987 1977 & 1987 40 & 12 Warehouse & Distribution........ Jul. 1987 1970 40, 20 & 12 Industrial...................... Aug. 1987 1968 & 1972 40, 20 & 12 Industrial...................... Aug. 1987 1979 40, 20 & 12 Retail.......................... Sept. 1987 1986 40, 20 & 12 Office & Warehouse.............. Feb. 1988 1987 40 Warehouse & Distribution........ Oct. 1990 1985 & 1991 40 Office & Warehouse.............. Nov. 1987 1986 40 & 20 Retail.......................... Mar. 1988 1986 40 Office.......................... Jul. 1988 1986 40 Warehouse & Industrial.......... Jul. 1988 1958 & 1969 40 & 20 Retail.......................... Oct. 1988 1988 40, 20 & 12 Office.......................... Nov. 1988 1960 & 1979 40 Retail.......................... Dec. 1988 1988 40, 20 & 12 Retail.......................... Dec. 1988 1988 40, 20 & 12 Retail.......................... Aug. 1995 1977 22.375, 16.583 & 15.583 Retail.......................... Aug. 1995 1976 21.292 Retail.......................... Aug. 1995 1973 18.542 Retail.......................... Aug. 1995 1974 20 & 20.5 Retail.......................... Dec. 1995 1985 40 Retail/Health Club.............. Dec. 1995 1987 40 Office.......................... May 1996 1982 25.958 Manufacturing................... Dec. 1996 1996 40 Industrial...................... Dec. 1996 1996 40 Industrial...................... Dec. 1996 1996 40 Retail.......................... Dec. 1996 1981 23.583 & 13.583 Retail.......................... Dec. 1996 1981 23.583 & 13.583 Retail.......................... Dec. 1996 1981 23.583 & 13.583 Industrial...................... Dec. 1996 1981 24.5 & 14.5 Retail.......................... Dec. 1996 1980 24.33 Warehouse....................... Mar. 1997 1981 40 Warehouse....................... Mar. 1997 1989 40 Warehouse....................... Mar. 1997 1985 40 Office/Research & Development... Jul. 1997 1960 & 1988 40 Office.......................... Sept. 1997 1986 40 Warehouse....................... Oct. 1997 1996 & 1997 40 Office/Research & Development... Dec. 1997 1985 40 Industrial...................... Dec. 1997 1983 & 1985 34.75 Office.......................... Dec. 1997 1983 40 Office.......................... Dec. 1997 1990 32.25 Industrial...................... Dec. 1997 1990 33.75 Office/Warehouse................ Mar. 1998 1982 40 Office.......................... Mar. 1998 1987 40 Office.......................... Mar. 1998 1987 & 1988 40 Research & Development.......... Mar. 1998 1987 & 1988 40
44 46 LEXINGTON CORPORATE PROPERTIES TRUST AND CONSOLIDATED SUBSIDIARIES REAL ESTATE AND ACCUMULATED DEPRECIATION AND AMORTIZATION SCHEDULE III ($000) -- (CONTINUED)
LAND ACCUMULATED AND BUILDINGS DEPRECIATION LAND AND AND DESCRIPTION LOCATION ENCUMBRANCES ESTATES IMPROVEMENTS TOTAL AMORTIZATION ----------- ------------------------ ------------ ------- ------------ -------- ------------- Office.......................... Palm Beach Gardens, 13,611 3,960 15,923 19,883 647 Warehouse/Distribution.......... Lancaster, CA 11,112 2,028 13,117 15,145 501 Office.......................... Florence, SC -- 3,012 12,067 15,079 452 Industrial...................... Auburn Hills, MI -- 2,788 11,169 13,957 400 Warehouse/Distribution.......... Warren, OH 37,250 10,231 51,280 61,511 2,885 Warehouse/Distribution.......... Baton Rouge, LA 2,134 685 2,748 3,433 82 Retail.......................... Columbia, MD 1,680 1,002 4,016 5,018 100 Retail.......................... Bakersfield, CA 1,862 400 1,619 2,019 362 Retail.......................... Bethesda, MD 3,230 926 2,415 3,341 732 Office.......................... Herndon, VA 12,324 3,820 15,355 19,175 144 Office.......................... Bristol, PA 6,518 1,073 7,709 8,782 8 Office.......................... Southborough, MA 2,535 456 4,291 4,747 4 Warehouse....................... Henderson, NC 4,710 1,475 5,961 7,436 142 Office.......................... Herndon, VA -- 5,127 20,525 25,652 6 -------- ------- -------- -------- ------- Total $299,360 $88,561 $600,365 $688,926 $82,334 ======== ======= ======== ======== ======= USEFUL LIFE COMPUTING DEPRECIATION IN LATEST INCOME DATE DATE STATEMENTS DESCRIPTION ACQUIRED CONSTRUCTED (YEARS) ----------- ---------- ----------- ----------------------- Office.......................... May 1998 1996 40 Warehouse/Distribution.......... Jun. 1998 1998 40 Office.......................... Jul. 1998 1998 40 Industrial...................... Jul. 1998 1989 & 1998 40 Warehouse/Distribution.......... Aug. 1998 1982 40 Warehouse/Distribution.......... Oct. 1998 1998 40 Retail.......................... Dec. 1998 1983 40 Retail.......................... Feb. 1977 1976 40 Retail.......................... Feb. 1980 1980 40 Office.......................... Aug. 1999 1987 40 Office.......................... Dec. 1999 1998 40 Office.......................... Dec. 1999 1984 40 Warehouse....................... Jan. 1999 1998 40 Office.......................... Dec. 1999 1987 40 Total
- --------------- (A) The initial cost includes the purchase price paid by the Company and acquisition fees and expenses. The total cost basis of the Company's Properties at December 31, 1999 for Federal income tax purposes was $458 million. Reconciliation of real estate owned:
1999 1998 1997 --------- -------- -------- Balance at the beginning of the year................... $ 675,793 $467,606 $340,669 Additions during year.................................. 115,006 208,187 179,257 Properties sold during year............................ (101,873) -- (21,476) Property reclassed to held for sale.................... -- -- (30,844) --------- -------- -------- Balance at end of year................................. $ 688,926 $675,793 $467,606 ========= ======== ========
(D) Reconciliation of accumulated depreciation and amortization: Balance at beginning of year............................ $ 66,076 $ 50,993 $ 51,343 Depreciation and amortization expense................... 18,000 15,083 10,608 Accumulated depreciation of properties sold during year................................................. (1,742) -- (3,631) Accumulated depreciation of property reclassed to held for sale............................................. -- -- (7,327) -------- -------- -------- Balance at end of year.................................. $ 82,334 $ 66,076 $ 50,993 ======== ======== ========
45 47 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. PART III. ITEM 10. TRUSTEES AND EXECUTIVE OFFICERS OF THE REGISTRANT The information regarding trustees and executive officers of the Company required to be furnished pursuant to this item is set forth in Item 4A of this report. ITEM 11. EXECUTIVE COMPENSATION The information required to be furnished pursuant to this item will be set forth under the caption "Compensation of Executive Officers" in the Proxy Statement, and is incorporated herein by reference. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The information required to be furnished pursuant to this item will be set forth under the captions "Principal Security Holders" and "Share Ownership of Trustees and Executive Officers" in the Proxy Statement, and is incorporated herein by reference. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The information required to be furnished pursuant to this item will be set forth under the caption "Election of Trustees -- Certain Relationships and Related Transactions" in the Proxy Statement, and is incorporated herein by reference. Note, the Definitive Proxy Statement will be filed with the Securities and Exchange Commission on or about April 14, 2000. PART IV. ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
PAGE ---- (a)(1) Financial Statements........................................ 27-44 (2) Financial Statement Schedule................................ 45-46 (3) Exhibits
EXHIBIT NO. EXHIBIT - ----------- ------- 2.1 -- Form of Agreement and Plan of Merger by and among Lexington Corporate Properties, Inc. (the "Company"), Lepercq Corporate Income Fund L.P. ("LCIF I") and Lex M-1, L.P. (filed as Appendix C-I to the Company's Registration Statement of Form S-4 (File No. 33-66858) (the "Form S-4"))* 2.2 -- Form of Agreement and Plan of Merger by and among the Company, Lepercq Corporate Income Fund II L.P. ("LCIF II"), and Lex M-2, L.P. (filed as Appendix C-II to the Form S-4)* 2.3 -- Form of Agreement and Articles of Merger between the Company and Lexington Corporate Properties -- Maryland, Inc. (filed as Exhibit 2.3 to Report on 10-K for year ended December 31, 1993 (the "1993 10-K"))* 2.4 -- Agreement and Plan of Merger between the Company and Lexington Corporate Properties Trust (filed as Exhibit 2.1 to Form 8-K filed 1-16-98.)* 3.1 -- Declaration of Trust of the Company, dated December 31, 1997 (filed as Exhibit 3.1 to Form 8K filed 1-16-98)*
46 48
EXHIBIT NO. EXHIBIT - ----------- ------- 3.2 -- By-Laws of the Company (filed as Exhibit 3.2 to Form 10-K filed 3-31-98)* 4.1 -- Specimen of Common Shares Certificate of the Trust (filed as Exhibit 3.2 to Form 10-K filed 3-31-98)* 4.2 -- Form of Indenture between the Company and The Bank of New York, as Trustee, including the form of 7.75% Subordinated Note due 2000 (filed as Exhibit 4.2 to the Form S-4)* 10.8 -- Form of 1994 Outside Director Shares Plan of the Company (filed as Exhibit 10.8 to 1993 10-K)* 10.24 -- Class A Mortgage Note to Pacific Mutual Life Insurance Company and Lexington Mortgage Company dated May 19, 1995 in the amount of $34,000,000 (filed as Exhibit 10.24 to Report on 10-K for year ended December 31, 1995 (the "1995 10-K"))* 10.25 -- Class B Mortgage Note to Pacific Mutual Life Insurance Company and Lexington Mortgage Company dated May 19, 1995 in the amount of $18,500,000 (filed as Exhibit 10.25 to the 1995 10-K)* 10.26 -- Class C Mortgage Note to Pacific Mutual Life Insurance Company and Lexington Mortgage Company dated May 19, 1995 in the amount of $17,500,000 (filed as Exhibit 10.26 to the 1995 10-K)* 10.28 -- Indenture of Mortgage, Deed of Trust, Security Agreement, Financing Statement, Fixture Filing and Assignment of Leases, Rents and Security Deposits to First American Title Insurance Company and Pacific Mutual Life Insurance Company and Lexington Mortgage Company dated May 19, 1995 (filed as Exhibit 10.28 to the 1995 10-K)* 10.29 -- Assignment of Leases, Rents, and Security Deposits to Pacific Mutual Life Insurance Company and Lexington Mortgage Company dated May 19, 1995 (filed as Exhibit 10.29 to the 1995 10-K)* 10.30 -- Cash Collateral Account, Security, Pledge and Assignment Agreement with the Bank of New York, as agent and Pacific Mutual Life Insurance Company and Lexington Mortgage Company dated May 19, 1995 (filed as Exhibit 10.30 to the 1995 10-K)* 10.31 -- Trust and Servicing Agreement with Pacific Mutual Life Insurance Company, LaSalle National Bank and ABN AMRO Bank N.V. dated May 19, 1995 (filed as Exhibit 10.31 to the 1995 10-K)* 10.33 -- Investment Agreement dated as of December 31, 1996 with Five Arrows Realty Securities L.L.C. * 10.34 -- Operating Agreement dated as of January 21, 1997 with Five Arrows Realty Securities L.L.C. * 10.35 -- Articles Supplementary Classifying 2,000,000 shares of Preferred Shares as Class A Senior Cumulative Convertible Preferred Shares and 2,000,000 shares of Excess Shares as Excess Class A Preferred Shares of the Company* 10.37 -- Unsecured Revolving Credit Agreement with Fleet National Bank as administrative agent for itself and lenders dated July 22, 1998 in the amount of $100,000,000 (filed as Exhibit 10.37 to the 1998 10-K)* 10.38 -- Operating Agreement and Management Agreement between the Company and Lexington Acquiport Company, LLC (filed as Exhibit 2 to Form 8-K filed August 31, 1999.)* 10.39 -- Form of Employment Agreement between the Company and E. Robert Roskind dated September 20, 1999 12 -- Statement of Computation of Ratio of Earnings to Fixed Charges (filed as Exhibit 12 to the Form S-4)* 21 -- List of Subsidiaries of the Company (filed as Exhibit 21 to Form 10-K filed 3-31-98)* 23 -- Consent of KPMG LLP 27 -- Financial Data Schedule as of and for the year ended December 31, 1999
- --------------- * Incorporated by reference. (b) Reports on Form 8-K and Form 8-K/A None. 47 49 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. LEXINGTON CORPORATE PROPERTIES TRUST BY: /s/ E. ROBERT ROSKIND ------------------------------------ E. Robert Roskind Chairman Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Company and in the capacities and on the date indicated.
SIGNATURE TITLE --------- ----- /s/ E. ROBERT ROSKIND Chairman of the Board of Trustees and Co-Chief - --------------------------------------------------- Executive Officer E. Robert Roskind /s/ RICHARD J. ROUSE Vice Chairman of the Board of Trustees and - --------------------------------------------------- Co-Chief Executive Officer Richard J. Rouse /s/ T. WILSON EGLIN President and Chief Operating Officer and - --------------------------------------------------- Trustee T. Wilson Eglin /s/ PATRICK CARROLL Chief Financial Officer and Treasurer - --------------------------------------------------- Patrick Carroll /s/ PAUL R. WOOD Vice President, Chief Accounting Officer and - --------------------------------------------------- Secretary Paul R. Wood /s/ CARL D. GLICKMAN Trustee - --------------------------------------------------- Carl D. Glickman /s/ KEVIN W. LYNCH Trustee - --------------------------------------------------- Kevin W. Lynch /s/ JOHN D. MCGURK Trustee - --------------------------------------------------- John D. McGurk /s/ SETH M. ZACHARY Trustee - --------------------------------------------------- Seth M. Zachary
DATE: March 15, 2000 48 EX-10.39 2 FORM OF EMPLOYMENT AGREEMENT 1 Exhibit 10.39 EMPLOYMENT AGREEMENT AGREEMENT by and between Lexington Corporate Properties Trust, a Maryland real estate investment trust (the "Company") and E. Robert Roskind (the "Executive"), dated as of the 20th day of September, 1999. The Board of Trustees of the Company (the "Board"), has determined that it is in the best interests of the Company and its shareholders to assure that the Company will have the continued dedication of the Executive, notwithstanding the possibility, threat or occurrence of a Change of Control (as defined below) of the Company. The Board believes it is imperative to diminish the inevitable distraction of the Executive by virtue of the personal uncertainties and risks created by a pending or threatened Change of Control and to encourage the Executive's full attention and dedication to the Company currently and in the event of any threatened or pending Change of Control, and to provide the Executive with compensation and benefits arrangements upon a Change of Control which ensure that the compensation and benefits expectations of the Executive will be satisfied and which are competitive with those of other real estate investment trusts. Therefore, in order to accomplish these objectives, the Board has caused the Company to enter into this Agreement. NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS: 1. Certain Definitions. (a) The "Effective Date" shall mean the first date during the Change of Control Period (as defined in Section 1(b)) on which a Change of Control (as defined in Section 2) occurs. Anything in this Agreement to the contrary notwithstanding, if a Change of Control occurs and if the Executive's employment with the Company is terminated prior to the date on which the Change of Control occurs, and if it is reasonably demonstrated by the Executive that such termination of employment (i) was at the request of a third party who has taken steps reasonably calculated to effect a Change of Control or (ii) otherwise arose in connection with or anticipation of a Change of Control, then for all purposes of this Agreement the "Effective Date" shall mean the date immediately prior to the date of such termination of employment. (b) The "Change of Control Period" shall mean the period commencing on the date hereof and ending on the second anniversary of the date of a notice to the Executive from the Company terminating the Change of Control Period; provided, however, no such notice may be given following the occurrence of a Change of Control. 2 2. Change of Control. For the purpose of this Agreement, a "Change of Control" shall mean: (a) The acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) (a "Person") of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or more of either (i) the then outstanding common shares of beneficial interest of the Company (the "Outstanding Company Common Stock") or (ii) the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of trustees (the "Outstanding Company Voting Securities"); provided, however, that for purposes of this subsection (a), the following acquisitions shall not constitute a Change of Control: (A) any acquisition directly from the Company, (B) any acquisition by the Company, (C) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any entity controlled by the Company or (D) any acquisition by any entity pursuant to a transaction which complies with clauses (i), (ii) and (iii) of subsection (c) of this Section 2; or (b) Individuals who, as of the date hereof, constitute the Board (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a trustee subsequent to the date hereof whose election, or nomination for election by the Company's shareholders, was approved by a vote of at least a majority of the trustees then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board; or (c) Consummation of a reorganization, merger or consolidation or sale or other disposition of all or substantially all of the assets of the Company (a "Business Combination"), in each case, unless, following such Business Combination, (i) all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than 50% of, respectively, the then outstanding common shares of beneficial interest and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of trustees, as the case may be, of the entity resulting from such Business Combination (including, without limitation, an entity which as a result of such transaction owns the Company or all or substantially all of the Company's assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership, immediately prior to such Business Combination of the Outstanding Company Common Stock and Outstanding Company Voting Securities, as the case may be, (ii) no Person (excluding any entity resulting from 3 such Business Combination or any employee benefit plan (or related trust) of the Company or such entity resulting from such Business Combination) beneficially owns, directly or indirectly, 20% or more of, respectively, the then outstanding shares of common stock of the entity resulting from such Business Combination or the combined voting power of the then outstanding voting securities of such entity except to the extent that such ownership existed prior to the Business Combination and (iii) at least a majority of the members of the board of directors or board of trustees, as the case may be, of the entity resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement with the successor or purchasing entity in respect of such Business Combination, or of the action of the Board, providing for such Business Combination; or (d) Approval by the shareholders of the Company of a complete liquidation or dissolution of the Company. 3. Employment Period. The Company hereby agrees to continue the Executive in its employ, and the Executive hereby agrees to remain in the employ of the Company subject to the terms and conditions of this Agreement, for the period commencing on the Effective Date and ending on the third anniversary of such date (the "Employment Period"). 4. Terms of Employment. (a) Position and Duties. (i) During the Employment Period, (A) the Executive's position (including status, offices, titles and reporting requirements within the Company), authority, duties and responsibilities shall be at least commensurate in all material respects with the most significant of those held, exercised and assigned at any time during the 120-day period immediately preceding the Effective Date and (B) the Executive's services shall be performed at the location where the Executive was employed immediately preceding the Effective Date or any office or location less than 35 miles from such location. (ii) During the Employment Period, and excluding any periods of vacation and sick leave to which the Executive is entitled, the Executive agrees to devote reasonable attention and time during normal business hours to the business and affairs of the Company and, to the extent necessary to discharge the responsibilities assigned to the Executive hereunder, to use the Executive's reasonable best efforts to perform faithfully and efficiently such responsibilities. During the Employment Period it shall not be a violation of this Agreement for the Executive to (A) serve on corporate, civic or charitable boards or committees, (B) deliver lectures, fulfill speaking engagements or teach at educational institutions and (C) manage personal investments, so long as such activities do not significantly interfere with the performance of the Executive's responsibilities as an employee of the Company in accordance with this Agreement. It is expressly understood and agreed that to the extent that any such activities have been conducted by the Executive prior to the Effective Date, the continued conduct of such activities (or the conduct of activities similar in nature and scope thereto) 4 subsequent to the Effective Date shall not thereafter be deemed to interfere with the performance of the Executive's responsibilities to the Company. (b) Compensation. (i) Base Salary. During the Employment Period, the Executive shall receive an annual base salary ("Annual Base Salary"), which shall be paid at a monthly rate, at least equal to twelve times the highest monthly base salary paid or payable, including any base salary which has been earned but deferred, to the Executive by the Company and its affiliated companies in respect of the twelve-month period immediately preceding the month in which the Effective Date occurs. During the Employment Period, the Annual Base Salary shall be reviewed no more than 12 months after the last salary increase awarded to the Executive prior to the Effective Date and thereafter at least annually. Any increase in Annual Base Salary shall not serve to limit or reduce any other obligation to the Executive under this Agreement. Annual Base Salary shall not be reduced after any such increase and the term Annual Base Salary as utilized in this Agreement shall refer to Annual Base Salary as so increased. As used in this Agreement, the term "affiliated companies" shall include any company or other entity controlled by, controlling or under common control with the Company. (ii) Annual Bonus. In addition to Annual Base Salary, the Executive shall be awarded, for each fiscal year ending during the Employment Period, an annual bonus (the "Annual Bonus") in cash at least equal to the Executive's highest bonus under the Company's annual incentive plans (including, for these purposes, any grant of restricted stock or other similar transaction which is made instead of, or as a supplement to, any such bonus), for the last three full fiscal years prior to the Effective Date (annualized in the event that the Executive was not employed by the Company for the whole of such fiscal year) (the "Recent Annual Bonus"). Each such Annual Bonus shall be paid no later than the end of the third month of the fiscal year next following the fiscal year for which the Annual Bonus is awarded, unless the Executive shall elect to defer the receipt of such Annual Bonus. (iii) Incentive, Savings and Retirement Plans. During the Employment Period, the Executive shall be entitled to participate in all incentive, savings and retirement plans, practices, policies and programs applicable generally to other peer executives of the Company and its affiliated companies, but in no event shall such plans, practices, policies and programs provide the Executive with incentive opportunities (measured with respect to both regular and special incentive opportunities, to the extent, if any, that such distinction is applicable), savings opportunities and retirement benefit opportunities, in each case, less favorable, in the aggregate, than the most favorable of those provided by the Company and its affiliated companies for the Executive under such plans, practices, policies and programs as in effect at any time during the 120-day period immediately preceding the Effective Date or if more favorable to the Executive, those provided generally at any time after the Effective Date to other peer executives of the Company and its affiliated companies. 5 (iv) Welfare Benefit Plans. During the Employment Period, the Executive and/or the Executive's family, as the case may be, shall be eligible for participation in and shall receive all benefits under welfare benefit plans, practices, policies and programs provided by the Company and its affiliated companies (including, without limitation, medical, prescription, dental, disability, employee life, group life, accidental death and travel accident insurance plans and programs) to the extent applicable generally to other peer executives of the Company and its affiliated companies, but in no event shall such plans, practices, policies and programs provide the Executive with benefits which are less favorable, in the aggregate, than the most favorable of such plans, practices, policies and programs in effect for the Executive at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive, those provided generally at any time after the Effective Date to other peer executives of the Company and its affiliated companies. (v) Expenses. During the Employment Period, the Executive shall be entitled to receive prompt reimbursement for all reasonable expenses incurred by the Executive in accordance with the most favorable policies, practices and procedures of the Company and its affiliated companies in effect for the Executive at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive, as in effect generally at any time thereafter with respect to other peer executives of the Company and its affiliated companies. (vi) Fringe Benefits. During the Employment Period, the Executive shall be entitled to fringe benefits, including, without limitation, tax and financial planning services, payment of club dues, and, if applicable, use of an automobile and payment of related expenses, in accordance with the most favorable plans, practices, programs and policies of the Company and its affiliated companies in effect for the Executive at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive, as in effect generally at any time thereafter with respect to other peer executives of the Company and its affiliated companies. (vii) Office and Support Staff. During the Employment Period, the Executive shall be entitled to an office or offices of a size and with furnishings and other appointments, and to exclusive personal secretarial and other assistance, at least equal to the most favorable of the foregoing provided to the Executive by the Company and its affiliated companies at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive, as provided generally at any time thereafter with respect to other peer executives of the Company and its affiliated companies. (viii) Vacation. During the Employment Period, the Executive shall be entitled to paid vacation in accordance with the most favorable plans, policies, programs and practices of the Company and its affiliated companies as in effect for the 6 Executive at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive, as in effect generally at any time thereafter with respect to other peer executives of the Company and its affiliated companies. 5. Termination of Employment. (a) Death or Disability. The Executive's employment shall terminate automatically upon the Executive's death during the Employment Period. If the Company determines in good faith that the Disability of the Executive has occurred during the Employment Period (pursuant to the definition of Disability set forth below), it may give to the Executive written notice in accordance with Section 11(b) of this Agreement of its intention to terminate the Executive's employment. In such event, the Executive's employment with the Company shall terminate effective on the 30th day after receipt of such notice by the Executive (the "Disability Effective Date"), provided that, within the 30 days after such receipt, the Execute shall not have returned to full-time performance of the Executive's duties. For purposes of this Agreement, "Disability" shall mean the absence of the Executive from the Executive's duties with the Company on a full-time basis for 180 consecutive business days as a result of incapacity due to mental or physical illness which is determined to be total and permanent by a physician selected by the Company or its insurers and acceptable to the Executive or the Executive's legal representative. (b) Cause. The Company may terminate the Executive's employment during the Employment Period for Cause. For purposes of this Agreement, "Cause" shall mean: (i) the willful and continued failure of the Executive to perform substantially the Executive's duties with the Company or one of its affiliates (other than any such failure resulting from incapacity due to physical or mental illness), after a written demand for substantial performance is delivered to the Executive by the Board or the Chief Executive Officer of the Company which specifically identifies the manner in which the Board or Chief Executive Officer of the Company believes that the Executive has not substantially performed the Executive's duties, or (ii) the willful engaging by the Executive in illegal conduct or gross misconduct which is materially and demonstrably injurious to the Company. For purposes of this provision, no act or failure to act, on the part of the Executive, shall be considered "willful" unless it is done, or omitted to be done, by the Executive in bad faith or without reasonable belief that the Executive's action or omission was in the best interests of the Company. Any act, or failure to act, based upon authority given pursuant to a resolution duly adopted by the Board or upon the instructions of the Chief Executive Officer or a senior officer of the Company or based upon the advice of counsel for the Company shall be conclusively presumed to be done, or omitted to be done, by the Executive in good faith and in the best interests of the Company. The cessation of employment of the Executive shall not be deemed to be for Cause unless and until there 7 shall have been delivered to the Executive a copy of a resolution duly adopted by the affirmative vote of not less than three-quarters of the entire membership of the Board at a meeting of the Board called and held for such purpose (after reasonable notice is provided to the Executive and the Executive is given an opportunity, together with counsel, to be heard before the Board), finding that, in the good faith opinion of the Board, the Executive is guilty of the conduct described in subparagraph (i) or (ii) above, and specifying the particulars thereof in detail. (c) Good Reason. The Executive's employment may be terminated by the Executive for Good Reason. For purposes of this Agreement, "Good Reason" shall mean: (i) the assignment to the Executive of any duties inconsistent in any respect with the Executive's position (including status, offices, titles and reporting requirements within the Company (as opposed to any parent or acquiring Person)), authority, duties or responsibilities as contemplated by Section 4(a) of this Agreement, or any other action by the Company which results in a diminution in such position, authority, duties or responsibilities within the Company (as opposed to any parent or acquiring Person), excluding for this purpose an isolated, insubstantial and inadvertent action not taken in bad faith and which is remedied by the Company promptly after receipt of notice thereof given by the Executive; (ii) any failure by the Company to comply with any of the provisions of Section 4(b) of this Agreement, other than an isolated, insubstantial and inadvertent failure not occurring in bad faith and which is remedied by the Company promptly after receipt of notice thereof given by the Executive; (iii) the Company's requiring the Executive to be based at any office or location other than as provided in Section 4(a)(i)(B) hereof or the Company's requiring the Executive to travel on Company business to a substantially greater extent than required immediately prior to the Effective Date; (iv) any purported termination by the Company of the Executive's employment otherwise than as expressly permitted by this Agreement; or (v) any failure by the Company to comply with and satisfy Section 10(c) of this Agreement. For purposes of this Section 5(c), any good faith determination of "Good Reason" made by the Executive shall be conclusive and binding on all parties hereto. Anything in this Agreement to the contrary notwithstanding, a termination by the Executive for any reason during the 30-day period immediately following the first anniversary of the Effective Date shall be deemed to be a termination for Good Reason for all purposes of this Agreement. 8 (d) Notice of Termination. Any termination by the Company for Cause, or by the Executive for Good Reason, shall be communicated by Notice of Termination to the other party hereto given in accordance with Section 11(b) of this Agreement. For purposes of this Agreement, a "Notice of Termination" means a written notice which (i) indicated the specific termination provision in the Agreement relied upon, (ii) to the extent applicable, sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive's employment under the provision so indicated and (iii) if the Date of Termination (as defined below) is other than the date of receipt of such notice, specifies the termination date (which date shall be not more than thirty days after the giving of such notice). The failure by the Executive or the Company to set forth in the Notice of Termination any fact or circumstance which contributes to a showing of Good Reason or Cause shall not waive any right of the Executive or the Company, respectively, hereunder or preclude the Executive or the Company, respectively, from asserting such fact or circumstance in enforcing the Executive's or the Company's rights hereunder. (e) Date of Termination. "Date of Termination" means (i) if the Executive's employment is terminated by the Company for Cause, or by the Executive for Good Reason, the date of receipt of the Notice of Termination or any later date specified therein, as the case may be, (ii) if the Executive's employment is terminated by the Company other than for Cause, death or Disability, the Date of Termination shall be the date on which the Company notifies the Executive of such termination and (iii) if the Executive's employment is terminated by reason of death or Disability, the Date of Termination shall be the date of death of the Executive or the Disability Effective Date, as the case may be. 6. Obligations of the Company upon Termination. (a) Good Reason; Other Than for Cause, Death or Disability. If, during the Employment Period, the Company shall terminate the Executive's employment other than for Cause or Disability or the Executive shall terminate employment for Good Reason: (i) the Company shall pay to the Executive in a lump sum in cash within 30 days after the Date of Termination the aggregate of the following amounts: A. (I) the sum of (1) the Executive's Annual Base Salary through the Date of Termination to the Extent not theretofore paid, (2) the product of (x) 3 multiplied by (y) the sum of (a) the Executive's Annual Base Salary and (b) if the termination of employment occurs (I) in 1999, the Annual Bonus for 1998, (II) in 2000, the average of the Annual Bonuses for 1999 and 1998, and (III) in 2001, the Recent Annual Bonus, including any bonus or portion thereof which has been earned but deferred (and annualized for any fiscal year consisting of less than twelve full months or during which the Executive was employed for less than twelve full months) (such amount 9 in this clause (b) being referred to as the "Average Annual Bonus") and (3) any compensation previously deferred by the Executive (together with any accrued interest or earnings thereon) and any accrued vacation pay, in each case to the extent not theretofore paid, less (II) any amount of base salary and bonus paid to the Executive following the Effective Date in respect of the amounts earned for such period (in the case of bonuses paid following the Effective Date, such bonus shall be deemed to have been earned during the fiscal period of the Company on a pro rata basis, based on the number of calendar days elapsed before and after the Effective Date); and B. an amount equal to the excess of (a) the actuarial equivalent of the benefit under the Company's qualified defined benefit retirement plan (the "Retirement Plan") (utilizing actuarial assumptions no less favorable to the Executive than those in effect under the Company's Retirement Plan immediately prior to the Effective Date), and any excess or supplemental retirement plan in which the Executive participates (together, the "SERP") which the Executive would receive if the Executive's employment continued for 3 years after the Date of Termination assuming for this purpose that all accrued benefits are fully vested, and, assuming that the Executive's compensation in each of the three years is that required by Section 4(b)(i) and Section 4(b)(ii), over (b) the actuarial equivalent of the Executive's actual benefit (paid or payable), if any, under the Retirement Plan and the SERP as of the Date of Termination; (ii) for three years after the effectiveness of a Change of Control, or such longer period as may be provided by the terms of the appropriate plan, program, practice or policy, the Company shall continue benefits to the Executive and/or the Executive's family at least equal to those which would have been provided to them in accordance with the plans, programs, practices and policies described in Section 4(b)(iv) of this Agreement if the Executive's employment had not been terminated or, if more favorable to the Executive, as in effect generally at any time thereafter with respect to other peer executives of the Company and its affiliated companies and their families, provided, however, that if the Executive becomes reemployed with another employer and is eligible to receive medical or other welfare benefits under another employer provided plan, the medical and other welfare benefits described herein shall be secondary to those provided under such other plan during such applicable period of eligibility. For purposes of determining eligibility (but not the time of commencement of benefits) of the Executive for retiree benefits pursuant to such plans, practices, programs and policies, the Executive shall be considered to have remained employed until three years after the Date of Termination and to have retired on the last day of such period; (iii) the Company shall, at its sole expense as incurred, provide the Executive with outplacement services the scope and provider of which shall be selected by the Executive in his sole discretion; and 10 (iv) to the extent not theretofore paid or provided, the Company shall timely pay or provide to the Executive any other amounts or benefits required to be paid or provided or which the Executive is eligible to receive under any plan, program, policy or practice or contract or agreement of the Company and its affiliated companies (such other amounts and benefits shall be hereinafter referred to as the "Other Benefits"). (b) Death. If the Executive's employment is terminated by reason of the Executive's death during the Employment Period, this Agreement shall terminate without further obligations to the Executive's legal representatives under this Agreement, other than for payment of Accrued Obligations and the timely payment or provision of Other Benefits. Accrued Obligations shall be paid to the Executive's estate or beneficiary, as applicable, in a lump sum in cash within 30 days of the Date of Termination. For purposes of the Agreement, "Accrued Obligations" shall mean the sum of (1) the product of (x) the Average Annual Bonus and (y) a fraction, the numerator of which is the number of days in the current fiscal year through the Date of Termination, and the denominator of which is 365 and (2) any compensation previously deferred by the Executive (together with any accrued interest or earnings thereon) and any accrued vacation pay, in each case to the extent not theretofore paid. With respect to the provisions of Other Benefits, the term Other Benefits as utilized in this Section 6(b) shall include, without limitation, and the Executive's estate and/or beneficiaries shall be entitled to receive, benefits at least equal to the most favorable benefits provided by the Company and affiliated companies to the estates and beneficiaries of peer executives of the Company and such affiliated companies under such plans, programs, practices and policies relating to death benefits, if any, as in effect with respect to other peer executives and their beneficiaries at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive's estate and/or the Executive's beneficiaries, as in effect on the date of the Executive's death with respect to other peer executives of the Company and its affiliated companies and their beneficiaries. (c) Disability. If the Executive's employment is terminated by reason of the Executive's Disability during the Employment Period, this Agreement shall terminate without further obligations to the Executive, other than for payment of Accrued Obligations and the timely payment or provision of Other Benefits. Accrued Obligations shall be paid to the Executive in a lump sum in cash within 30 days of the Date of Termination. With respect to the provision of Other Benefits, the term Other Benefits as utilized in this Section 6(c) shall include, and the Executive shall be entitled after the Disability Effective Date to receive, disability and other benefits at least equal to the most favorable of those generally provided by the Company and its affiliated companies to disabled executives and/or their families in accordance with such plans, programs, practices and policies relating to disability, if any, as in effect generally with respect to other peer executives and their families at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive and/or the Executive's family, as in effect at any time thereafter generally with respect to other peer executives of the Company and its affiliated companies and their families. 11 (d) Cause; Other than for Good Reason. If the Executive's employment shall be terminated for Cause during the Employment Period, this Agreement shall terminate without further obligations to the Executive other than the obligation to pay to the Executive (x) his Annual Base Salary through the Date of Termination, (y) the amount of any compensation previously deferred by the Executive, and (z) Other Benefits, in each case to the extent theretofore unpaid. If the Executive voluntarily terminates employment during the Employment Period, excluding a termination for Good Reason, the Agreement shall terminate without further obligations to the Executive, other than for Accrued Obligations and the timely payment or provision of Other Benefits. In such case, all Accrued Obligations shall be paid to the Executive in a lump sum in cash within 30 days of the Date of Termination. 7. Non-exclusivity of Rights. Nothing in this Agreement shall prevent or limit the Executive's continuing or future participation in any plan, program, policy or practice provided by the Company or any of its affiliated companies and for which the Executive may qualify, nor, subject to Section 11(f), shall anything herein limit or otherwise affect such rights as the Executive may have under any contract or agreement with the Company or any of its affiliated companies. Notwithstanding the foregoing, that compensation and other benefits described herein shall be "liquidated damages" and the sole and exclusive remedy for the termination of the Executive by the Company without Cause or by reason of death or Disability. Amounts which are vested benefits or which the Executive is otherwise entitled to receive under any plan, policy, practice or program of or any contract or agreement with the Company or any of its affiliated companies at or subsequent to the Date of Termination shall be payable in accordance with such plan, policy, practice or program or contract or agreement except, in the case of the calculation and payment of the Annual Base Salary and Annual Bonus, as expressly modified by this Agreement. 8. Full Settlement. The Company's obligation to make the payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by any set-off, counterclaim, recoupment, defense or other claim, right or action which the Company may have against the Executive or others. In no event shall the Executive be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to the Executive under any of the provisions of this Agreement and such amounts shall not be reduced whether or not the Executive obtains other employment. The Company agrees to pay as incurred, to the full extent permitted by law, all legal fees and expenses which the Executive may reasonably incur as a result of any contest by the Company, provided that the Executive prevails in at least one material issue, the Executive or others of the validly or enforceability of, or liability under, any provision of this Agreement or any guarantee of performance thereof (including as a result of any contest by the Executive about the amount of any payment pursuant to this Agreement), plus in each case interest on any delayed payment at the 12 applicable Federal rate provided for in Section 7872(f)(2)(A) of the Internal Revenue Code of 1986, as amended (the "Code"). 9. Certain Additional Payments by the Company. (a) Anything in this Agreement to the contrary notwithstanding and except as set forth below, in the event it shall be determined that any payment or distribution by the Company to or for the benefit of the Executive (whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise, but determined without regard to any additional payments required under this Section 9) (a "Payment") would be subject to the excise tax imposed by Section 4999 of the Code or any interest or penalties are incurred by the Executive with respect to such excise tax (such excise tax, together with any such interest and penalties, are hereinafter collectively referred to as the "Excise Tax"), then the Executive shall be entitled to receive an additional payment (a "Gross-Up Payment") in an amount such that after payment by the Executive of all taxes (including any interest or penalties imposed with respect to such taxes), including, without limitation, any income taxes (and any interest and penalties imposed with respect thereto) and Excise Tax imposed upon the Gross-Up Payment, the Executive retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payments. (b) Subject to the provisions of Section 9(c), all determinations required to be made under this Section 9, including whether and when a Gross-Up Payment is required and the amount of such Gross-Up Payment and the assumptions to be utilized in arriving at such determination, shall be made by KPMG LLP or such other certified public accounting firm as may be designated by the Executive (the "Accounting Firm") which shall provide detailed supporting calculations both to the Company and the Executive within 15 business days of the receipt of notice from the Executive that there has been a Payment, or such earlier time as is requested by the Company. In the event that the Accounting Firm is serving as accountant or auditor for the individual, entity or group effecting the Change of Control, the Executive shall appoint another nationally recognized accounting firm to make the determinations required hereunder (which accounting firm shall then be referred to as the Accounting Firm hereunder). All fees and expenses of the Accounting Firm shall be borne solely by the Company. Any Gross-Up Payment, as determined pursuant to this Section 9, shall be paid by the Company to the Executive within five days of the receipt of the Accounting Firm's determination. Any determination by the Accounting Firm shall be binding upon the Company and the Executive. As a result of the uncertainty in the application of Section 4999 of the Code at the time of the initial determination by the Accounting Firm hereunder, it is possible that Gross-Up Payments which will not have been made by the Company should have been made ("Underpayment"), consistent with the calculations required to be made hereunder. In the event that the Company exhausts its remedies pursuant to Section 9(c) and the Executive thereafter is required to make a payment of any Excise Tax, the Accounting Firm shall determine the amount of the Underpayment that has occurred and any such 13 Underpayment shall be promptly paid by the Company to or for the benefit of the Executive. (c) The Executive shall notify the Company in writing of any claim by the Internal Revenue Service that, if successful, would require the payment by the Company of the Gross-Up Payment. Such notification shall be given as soon as practicable but no later than ten business days after the Executive is informed in writing of such claim and shall apprise the Company of the nature of such claim and the date on which such claim is requested to be paid. The Executive shall not pay such claim prior to the expiration of the 30-day period following the date on which it gives such notice to the Company (or such shorter period ending on the date that any payment of taxes with respect to such claim is due). If the Company notifies the Executive in writing prior to the expiration of such period that it desires to contest such claim, the Executive shall: (i) give the Company any information reasonably requested by the Company relating to such claim, (ii) take such action in connection with contesting such claim as the Company shall reasonably request in writing from time to time, including, without limitation, accepting legal representation with respect to such claim by an attorney reasonably selected by the Company, (iii) cooperate with the Company in good faith in order effectively to contest such claim, and (iv) permit the Company to participate in any proceedings relating to such claim; provided, however, that the Company shall bear and pay directly all costs and expenses (including additional interest and penalties) incurred in connection with such contest and shall indemnify and hold the Executive harmless, on an after-tax basis, for any Excise Tax or income tax (including interest and penalties with respect thereto) imposed as a result of such representation and payment of costs and expenses. Without limitation on the foregoing provisions of this Section 9(c), the Company shall control all proceedings, taken in connection with such contest and, at its sole option, may pursue or forgo any and all administrative appeals, proceedings, hearings and conferences with the taxing authority in respect of such claim and may, at its sole option, either direct the Executive to pay the tax claimed and sue for a refund or contest the claim in any permissible manner, and the Executive agrees to prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as the Company shall determine; provided, however, that if the Company directs the Executive to pay such claim and sue for a refund, the Company shall advance the amount of such payment to the Executive, on an interest-free basis and shall indemnify and hold the Executive harmless, on an after-tax basis, from any Excise Tax or income 14 tax (including interest or penalties with respect thereto) imposed with respect to such advance or with respect to any imputed income with respect to such advance; and further provided that any extension of the statute of limitations relating to payment of taxes for the taxable year of the Executive with respect to which such contested amount is claimed to be due is limited solely to such contested amount. Furthermore, the Company's control of the contest shall be limited to issues with respect to which a Gross-Up Payment would be payable hereunder and the Executive shall be entitled to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or any other taxing authority. (d) If, after the receipt by the Executive of an amount advanced by the Company pursuant to Section 9(c), the Executive becomes entitled to receive any refund with respect to such claim, the Executive shall (subject to the Company's complying with the requirements of Section 9(c)) promptly pay to the Company the amount of such refund (together with any interest paid or credited thereon after taxes applicable thereto). If, after the receipt by the Executive of an amount advanced by the Company pursuant to Section 9(c), a determination is made that the Executive shall not be entitled to any refund with respect to such claim and the Company does not notify the Executive in writing of its intent to contest such denial of refund prior to the expiration of 30 days after such determination, then such advance shall be forgiven and shall not be required to be repaid and the amount of such advance shall offset, to the extent thereof, the amount of Gross-Up Payment required to be paid. 10. Successors. (a) This Agreement is personal to the Executive and without the prior written consent of the Company shall not be assignable by the Executive otherwise than by will or the laws of descent and distribution. This Agreement shall inure to the benefit of and be enforceable by the Executive's legal representatives. (b) This Agreement shall inure to the benefit of and be binding upon the Company and its successors and assigns. (c) The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to assume expressly and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. As used in this Agreement, "Company" shall mean the Company as hereinbefore defined and any successor to its business and/or assets as aforesaid which assumes and agrees to perform this Agreement by operation of law, or otherwise. 11. Miscellaneous. (a) This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware, without reference to principles of conflict of laws. The captions of this Agreement are not part of the provisions hereof and shall have no force or effect. This Agreement may not be amended 15 or modified otherwise than by a written agreement executed by the parties hereto or their respective successors and legal representatives. (b) All notices and other communications hereunder shall be in writing and shall be given by hand delivery to the other party or by registered or certified mail, return receipt requested, postage prepaid, addressed as follows: If to the Executive: E. Robert Roskind Barnes Lane Purchase, NY 10577 If to the Company: 355 Lexington Avenue New York, New York 10017 Attention: Company Secretary or to such other address as either party shall have furnished to the other in writing in accordance herewith. Notice and communications shall be effective when actually received by the addressee. (c) The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement. (d) The Company may withhold from any amounts payable under this Agreement such Federal, state, local or foreign taxes as shall be required to be withheld pursuant to any applicable law or regulation. (e) The Executive's or the Company's failure to insist upon strict compliance with any provision of this Agreement or the failure to assert any right the Executive or the Company may have hereunder, including, without limitation, the right of the Executive to terminate employment for Good Reason pursuant to Section 5(c)(i)-(v) of this Agreement, shall not be deemed to be a waiver of such provision or right or any other provision or right of this Agreement. (f) The Executive and the Company acknowledge that, except as may otherwise be provided under any other written agreement between the Executive and the Company, the employment of the Executive by the Company is "at will" and, subject to Section 1 hereof, prior to the Effective Date, the Executive's employment and/or this 16 Agreement may be terminated by either the Executive or the Company at any time prior to the Effective Date, in which case the Executive shall have no further rights under this Agreement. From and after the Effective Date this Agreement shall supersede any other agreement between the parties with respect to the subject matter hereof. IN WITNESS WHEREOF, the Executive has hereunto set the Executive's hand and, pursuant to the authorization from its Board of Directors, the Company has caused these presents to be executed in its name on its behalf, all as of the day and year first above written. /s/ E. Robert Roskind ----------------------------- E. Robert Roskind LEXINGTON CORPORATE PROPERTIES TRUST By:/s/ T. Wilson Eglin ----------------------------- T. Wilson Eglin President 17 Similar agreements were entered into with the following officers for the respective years: Richard Rouse 3 years T. Wilson Eglin 3 years Patrick Carroll 2 years Stephen Hagen 2 years Paul R. Wood 1 year EX-23 3 CONSENT OF KPMG LLP 1 Exhibit 23 Accounts' Consent The Shareholders Lexington Corporate Properties Trust: We consent to incorporation by reference in the registration statements on Form S-3 (Nos.333-49351,333-57853,333-70217,333-76709,333-85631, and 333-92609) and on Form S-8(No.333-85625) of Lexington Corporate Properties Trust of our report dated January 21, 2000, relating to the consolidated balance sheets of Lexington Corporate Properties Trust and subsidiaries as of December 31, 1999 and 1998, and the related consolidated statements of income, changes in shareholders' equity, and cash flows for each of the years in the three-year period ended December 31, 1999, and the related schedule, which report appears in the December 31, 1999 annual report on Form 10-K of Lexington Corporate Properties Trust. /s/ KPMG LLP New York, New York March 13, 2000 EX-27 4 FINANCIAL DATA SCHEDULE
5 This schedule contains summary financial information extracted from the condensed consolidated balance sheet and the condensed consolidated statement of income as of and for the year ended December 31, 1999 as contained in the Company's Form 10-K for such period and is qualified in its entirety by reference to such Form 10-K. Dollars are in thousands, except per share data. 1,000 YEAR DEC-31-1999 JAN-01-1999 DEC-31-1999 11,307 0 0 0 0 0 688,926 82,334 656,481 0 379,035 24,369 0 2 176,795 656,481 0 77,300 0 19,865 991 0 29,099 27,785 0 21,347 0 0 0 21,347 1.11 1.08
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