-----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, Wft926O3j1F1QslmKp4K2yxa088dR+mcS6NyURFBzWvW8lKR2UQHueH3emW2aCST hp8pXu3v4bolF1kTcTKD4Q== 0000950123-04-002376.txt : 20040226 0000950123-04-002376.hdr.sgml : 20040226 20040226112804 ACCESSION NUMBER: 0000950123-04-002376 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 19 CONFORMED PERIOD OF REPORT: 20031231 FILED AS OF DATE: 20040226 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-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-12386 FILM NUMBER: 04629526 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-K 1 y94559e10vk.txt LEXINGTON CORPORATE PROPERTIES TRUST - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 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, 2003 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.) ONE PENN PLAZA NEW YORK, NY 10119 (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE) REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (212) 692-7200 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 8.05 % SERIES B CUMULATIVE REDEEMABLE PREFERRED SHARES 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. [ ] Indicate by check mark whether the Registrant is an accelerated filer (as defined by Rule 12b-2 of the Act) Yes [X] No [ ] The aggregate market value of the voting shares held by non-affiliates of the Registrant as of June 30, 2003, which was the last business day of the Registrant's most recently completed second fiscal quarter was $593,745,987, based on the closing price of common shares as of that date, which was $17.70 per share. Number of common shares outstanding as of February 23, 2004 was 41,193,478. Number of preferred shares outstanding as of February 23, 2004 was 3,160,000. DOCUMENTS INCORPORATED BY REFERENCE: The Definitive Proxy Statement for Registrant's 2004 Annual Meeting of Shareholders, or the Proxy Statement, is incorporated herein by reference into Part III. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- PART I. CAUTIONARY STATEMENTS CONCERNING FORWARD-LOOKING STATEMENTS Certain information included or incorporated by reference in this Annual Report on Form 10-K may contain forward-looking statements within the meaning of Section 27A of the Securities Act, and as such may involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements to be materially different from future results, performance or achievements expressed or implied by these forward-looking statements. Forward-looking statements, which are based on certain assumptions and describe our future plans, strategies and expectations, are generally identifiable by use of the words "may," "will," "should," "expect," "anticipate," "estimate," "believe," "intend," "project," or the negative of these words or other similar words or terms. Factors which could have a material adverse effect on our operations and future prospects include, but are not limited to, changes in economic conditions generally and the real estate market specifically, adverse developments with respect to our tenants, legislative/regulatory changes including changes to laws governing the taxation of REITs, availability of debt and equity capital, interest rates, competition, supply and demand for properties in our current and proposed market areas and policies and guidelines applicable to REITs. These risks and uncertainties should be considered in evaluating any forward-looking statements contained or incorporated by reference in this Annual Report on Form 10-K. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. In light of these risks, uncertainties and assumptions, the forward-looking events discussed or incorporated by reference in this Annual Report on Form 10-K may not occur and our actual results could differ materially from those anticipated or implied in the forward-looking statements. 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 and provides investment advisory and asset management services to institutional investors in the net lease area. The Company's predecessor was organized in October 1993 and merged into the Company on December 31, 1997. The Company's Internet address is www.lxp.com. The Company makes available free of charge through its web site its annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to these reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after it electronically files such materials with the Securities and Exchange Commission. As of December 31, 2003, the Company's real property portfolio consisted of 118 properties or interests therein located in thirty-five states, including warehousing, distribution and manufacturing facilities, office buildings and retail properties containing an aggregate 23.0 million net rentable square feet of space. In addition, Lexington Realty Advisors, Inc. ("LRA"), a wholly owned subsidiary, manages 2 properties for a third party. The Company's properties are generally subject to triple net leases, which are 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. Of the Company's 118 properties, six provide for operating expense stops, two are subject to modified gross leases and one required the Company to be responsible for real estate taxes in 2003 and for the tenant to be responsible thereafter. As of December 31, 2003, 98.8% of net rentable square feet were subject to a lease. The Company manages its real estate and credit risk through geographic, industry, tenant and lease maturity diversification. As of December 31, 2003, the fifteen largest tenants/guarantors, which occupy 34 properties, represented 46.1% of trailing twelve month rent, including the Company's proportionate share of 1 non-consolidated entities and rental revenue from properties sold through date of sale. The fifteen tenants are as follows:
NUMBER OF TENANT (GUARANTOR) PROPERTIES PROPERTY TYPE - ------------------ ---------- --------------------- Kmart Corporation................................... 1 Industrial Northwest Pipeline Corp............................. 1 Office Exel Logistics, Inc. (NFC plc)...................... 4 Industrial Honeywell, Inc...................................... 4 Office Owens Corning....................................... 4 Industrial Circuit City Stores, Inc............................ 4 Office (1)/Retail (3) Vartec Telecom, Inc................................. 1 Office Michaels Stores, Inc................................ 1 Industrial Bally Total Fitness Corp............................ 5 Retail Aventis Pharmaceuticals, Inc.(1).................... 1 Office Blue Cross Blue Shield of South Carolina, Inc.(1)... 1 Office Quest Diagnostics, Inc.............................. 1 Office Artesyn North America, Inc. (Balfour Beatty PLC).... 1 Office Nextel Finance Company.............................. 4 Office Wells Fargo Home Mortgage, Inc...................... 1 Office --- 34 ===
- --------------- (1) These properties are owned by non-consolidated entities. As of December 31, 2002 and 2001 the fifteen largest tenants/guarantors represented 51.6% and 59.3% of trailing twelve month rent, respectively, including the Company's proportionate share of non-consolidated entities and rental revenue from properties sold through date of sale. In 2003 and 2002, no tenant represented greater than 10% of rental income and in 2001 Northwest Pipeline Corp. and Kmart Corporation each represented 11% of rental income. 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 achieve these objectives management focuses on: - acquiring portfolios and individual net lease properties from third parties, completing sale/leaseback transactions, acquiring build-to-suit properties and opportunistically using common shares and operating partnership units to effect acquisitions; - entering into strategic co-investment programs which generate higher equity returns than direct investments due to acquisition, asset management and debt placement fees and in some cases increased leverage levels; - entering into third party advisory contracts to generate advisory fee revenue; - effectively managing assets through lease extensions, revenue enhancing property expansions, opportunistic property sales and redeployment of assets, when advisable; - refinancing existing indebtedness at lower average interest rates and increasing the Company's access to capital to finance property acquisitions and expansions; and - repurchasing common shares and operating partnership units when they trade at a discount to net asset value. 2 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. 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 re-leasing 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 property owner, as a form of consideration in exchange for the property, 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 primary 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. In 1999, the Company entered into a joint venture agreement with The Comptroller of the State of New York as Trustee of the Common Retirement Fund ("CRF"). The joint venture entity, Lexington Acquiport Company, LLC ("LAC"), was created to acquire high quality office and industrial real estate properties net leased to investment and non-investment grade single tenant users. The Company and CRF committed to make equity contributions to LAC of up to $50 million and $100 million, respectively. As of December 31, 2003, LAC has completed its acquisition program and no more investments will be made by this entity. In addition, LAC financed a portion of acquisition costs through the use of non-recourse mortgages. During 2003, LAC made two acquisitions, for $49.5 million (including closing costs), of which $33.3 million was funded through non-recourse mortgages, maturing in 2012. As of December 31, 2003, LAC had ownership interest in 11 properties. The property leases, which expire at various dates ranging from 2009 to 2016, provide for current annual net cash rent of approximately $36.3 million. LAC also has an investment, an $11.0 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. As of December 31, 2003, LAC had made investments totaling $380.3 million. In 2003, the Company and CRF purchased a property for $22.7 million directly as partners and therefore it is not owned by LAC. The tenant has a lease, which is scheduled to expire in 2021 but can be canceled anytime after September 2011 with a payment which currently is $23.4 million. The purchase price was partially funded through a $19.2 million non-recourse mortgage maturing in 2021. LRA has a management agreement with LAC and the separate partnership whereby LRA will perform certain services for a fee relating to the acquisition (75 basis points of cost) and management (200 basis points of rent collected annually) of the investments. During 2003 and 2002, LRA earned asset management fees of 3 $0.5 million and $0.7 million relating to this management agreement, respectively. In 2003 and 2002, LRA earned $0.3 million and $0.2 million in acquisition fees, respectively. In December 2001, the Company and CRF announced the formation of Lexington Acquiport Company II, LLC ("LAC II"). The Company and CRF have committed to fund $50 million and $150 million, respectively, to purchase up to $560 million in single tenant net lease office and industrial properties. LRA, in addition to earning the same fees as discussed above, earns 50 basis points for all mortgage debt directly placed. LAC II has not made any investments as of December 31, 2003. The Company is required to first offer to LAC II all of the Company's opportunities to acquire office and industrial properties requiring a minimum investment of $10.0 million which are net leased primarily to investment grade tenants for a minimum term of ten years, are available for immediate delivery and satisfy other specified investment criteria. Only if CRF elects not to approve the joint venture's pursuit of an acquisition opportunity may the Company pursue the opportunity directly. In October 2003, the Company entered into a joint venture agreement with CLPF-LXP/Lion Venture GP, LLC ("Clarion"). The joint venture entity Lexington/Lion Venture LP ("LION"), was created to acquire high quality office, industrial and retail properties net leased to investment and non-investment grade single tenant users. The Company and Clarion committed to make equity contributions to LION of up to $30 million and $70 million, respectively, of which $52.0 million has been funded as of December 31, 2003. In addition, LION finances a portion of acquisition costs through the use of non-recourse mortgages. During 2003, LION made three acquisitions, all of which were contributed from its partners, for $74.6 million, of which $36.3 million was funded through non-recourse mortgages maturing in 2011 (currently $22.8 million) and 2014 (currently $13.4 million). The property leases, which expire at various dates ranging from 2009 to 2013, provide for current annual cash rent of approximately $7.5 million. LRA has a management agreement with LION whereby LRA will perform certain services for a fee relating to acquisition and management of the LION investments. During 2003, LRA earned $0.3 million in acquisition fees. The Company is required to first offer to LION all of the Company's opportunities to acquire office, industrial and retail properties requiring a minimum investment $15.0 million to $40.0 million which are net leased primarily to non-investment grade tenants for a minimum term of at least five years, are available for immediate delivery and satisfy other specified investment criteria. Only if Clarion elects not to approve the joint venture's pursuit of an acquisition opportunity may the Company pursue the opportunity directly. In 1999, the Company also formed a joint venture to own a property net leased to Blue Cross Blue Shield of South Carolina, Inc. 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. During each of 2003 and 2002, LRA earned fees of $0.1 million relating to this management contract. In January 2002, the Company sold a 77.3% interest in its Florence, South Carolina ("Florence") property net leased to Washington Mutual Home Loans, Inc., along with the proportionate share of mortgage debt for $4.6 million in proceeds. The third party purchasers have the right for six months commencing 24 months after the sale (January 2004 thru June 2004) to put their interest back to the Company for OP Units in LCIF, valued at $4.6 million. The number of OP Units issued will be based upon 95% of the average closing price of the Company's common shares for the 20 trading days preceding conversion date with a minimum conversion price of $13.92 and maximum conversion price of $15.82 per operating partnership unit. The OP Units will have the same distribution rate as the common shares. LRA provides management services to Florence for a fee, which is 3.5% of rents, earning $0.1 million in 2003 and 2002. Advisory Contracts. In 2000, LRA entered into an advisory and asset management agreement to invest and manage $50 million of equity on behalf of a private investment fund. The investment program could, depending on leverage utilized, acquire up to $140 million in single tenant, net leased office, industrial and 4 retail properties in the United States. LRA earns acquisition fees (90 basis points of total acquisition costs), annual asset management fees (30 basis points of gross asset value) and a promoted interest of 16% of the return in excess of an internal rate of return of 10% earned by the private investment fund. The fund made no purchases in 2003 or 2002 and LRA earned $0.1 million in asset management fees each year. 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. Build-to-Suit Properties. The Company also acquires, 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. Competition. Through our predecessor entities the Company has been in the net lease business for 30 years and has established close relationships with a large number of major corporate tenants and maintains a broad network of contacts including developers, brokers and lenders. In addition, management is associated with and/or participates in many industry organizations. Notwithstanding these relationships, there are numerous commercial developers, real estate companies, financial institutions and other investors with greater financial resources that compete with the Company in seeking properties for acquisition and tenants who will lease space in these properties. Due to the Company's focus on net lease properties located throughout the United States, the Company does not encounter the same competitors in each region of the United States since most competitors are locally and/or regionally focused. The Company's competitors include other REITs, pension funds, private companies and individuals. 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 costs relating to hazardous or toxic substances. These liabilities may include 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 to such environmental liability, the Company may be required to satisfy such obligations. In addition, 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 is not aware of any environmental condition with respect to any of the Company's properties which management believes 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. 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 5 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 and high occupancy levels. Since February 1994, the Company has entered into lease extensions of three years or more on 24 of its properties. During 2003, the Company entered into 1 lease extension for a lease scheduled to expire in 2004, for an additional 2 years and a 5.7% increase over the then average rental revenue. As of December 31, 2003, the scheduled lease maturities for each of the next five years are as follows:
NUMBER RENTABLE 2003 YEAR ENDED OF SQUARE REVENUE DECEMBER 31, LEASES FEET ($000'S) - ------------ ------ --------- -------- 2004.................................................. 2 109,104 $ 1,302 2005.................................................. 7 956,408 7,311 2006.................................................. 15 1,980,307 12,700 2007.................................................. 9 2,398,870 16,542 2008.................................................. 8 788,946 8,923 -- --------- ------- 41 6,233,635 $46,778 == ========= =======
Included in the 2008 amounts is a lease ($1,699 in revenue and 177,747 rentable square feet) for a property owned by a non-consolidated entity. 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. The Company will sell properties on an opportunistic basis when management believes that the return realized from selling a property will exceed the expected return from continuing to hold such property. ACCESS TO CAPITAL AND REFINANCING EXISTING INDEBTEDNESS During 2003, the Company completed common share offerings of 4.5 million shares at $16.44 per share and 5.3 million shares at $18.98 per share, raising aggregate net proceeds of $174.0 million. In addition, the Company issued 3.16 million preferred shares at $25 per share and a coupon of 8.05%, raising net proceeds of $76.3 million. During 2003, the Company, including its non-consolidated entities, repaid $131.9 million in mortgages ($78.1 million fixed rate and $53.8 million variable rate) at a weighted average interest rate of 6.47% (8.04% weighted average fixed rate and 4.18% weighted average variable rate), which resulted in debt satisfaction charges of $8.5 million. During 2003, the Company, including its non-consolidated entities, obtained $179.6 million in non-recourse mortgage financings on properties at a fixed weighted average interest rate of 5.76%. The proceeds of the financings were used to partially fund acquisitions. 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 6.95% as of December 31, 2002 to approximately 6.24% as of December 31, 2003. Scheduled balloon payments (excluding amounts owed under 6 the line of credit agreement which total $94.0 million at December 31, 2003 and is scheduled to expire in 2006) over the next five years are as follows ($000's):
WEIGHTED AVERAGE BALLOON AMOUNTS INTEREST RATE --------------- ------------- 2004..................................................... $14,456 4.14% 2005..................................................... -- -- 2006..................................................... -- -- 2007..................................................... -- -- 2008..................................................... 70,492 6.62% ------- ---- $84,948 6.20% ======= ====
The Company's variable rate unsecured credit facility bears interest at 150-250 basis points over the Company's option of 1, 3 or 6 month LIBOR, depending on the amount of properties the Company owns free and clear of mortgage debt, and is scheduled to mature in August 2006. The Company can extend the maturity date to August 2007 if no default exists for a fee of 25 basis points. As of December 31, 2003, $94.0 million outstanding under this facility bore interest at a rate of 2.64%. Common Share Repurchase. The Company's Board of Trustees authorized the repurchase of up to 2.0 million common shares and/or OP Units. As of December 31, 2003, the Company has repurchased approximately 1.4 million common shares/OP Units at an average price of $10.55 per share/OP Unit. The Company did not repurchase any common shares or OP Units under this plan in 2003 or 2002. OTHER Employees. As of December 31, 2003, the Company had thirty-three employees. Industry Segments. The Company operates in one industry segment, investment in single tenant, net leased real properties. ITEM 2. PROPERTIES REAL ESTATE PORTFOLIO As of December 31, 2003, the Company owned or had interests in approximately 23.0 million square feet of rentable space in 118 office, industrial and retail properties. As of December 31, 2003, the Company's properties were 98.8% leased based upon net rentable square feet. As of December 31, 2003, the number, percentage of trailing 12 month rental revenue (including rental revenue from properties sold through date of sale and the Company's proportionate share of non-consolidated entities) and square footage mix of the Company's portfolio is as follows:
SQUARE NUMBER RENT FOOTAGE ------ ----- ------- Office...................................................... 52 57.6% 36.3% Industrial.................................................. 39 31.9% 56.1% Retail...................................................... 27 10.5% 7.6% --- ----- ----- 118 100.0% 100.0% === ===== =====
The Company's properties are generally 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. Two of the Company's properties in Florida (Palm Beach Gardens and Lake Mary), one in Fishers, Indiana, one in Valley Forge, Pennsylvania, two in South Carolina (Fort Mill and Greenville), one in Columbia, Maryland and one in Novato, California are subject to leases in which the Company is responsible for a portion of the real estate taxes, utilities and general maintenance. In addition, the Company was responsible for real estate taxes for its property in Westmont, Illinois for 2003 and the tenant is responsible thereafter. The Lake Mary and Fishers properties are owned by LAC and the Novato property is 7 owned by LION. The Company is responsible for all operating expenses of any vacant properties. As of December 31, 2003, the Company has one vacant property (Phoenix, Arizona). The Company's tenants represent a variety of industries including general retailing, finance and insurance, energy, transportation and logistics, technology, telecommunications and defense. For the year ended December 31, 2003 revenues, including revenues earned by non-consolidated entities and rental revenue recognized on properties sold through date of sale, were earned from 86 tenants in 20 different industries. Tenant Leases. A substantial portion of the Company's income consists of base rent under long-term leases. As of December 31, 2003, the weighted average remaining term under the Company's leases is approximately 7.6 years. Of the 119 current leases, 77 contain scheduled rent increases, 8 contain an increase based upon the Consumer Price Index, 3 contain fixed step down provisions, 31 are flat throughout the remaining lease term and 3 retail leases (which also are flat throughout the remaining lease term) contain a percentage rent clause. Ground Leases. The Company has 9 properties accounting for $15.2 million of 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 from 2028 through 2072. The contractual rents due under these ground leases for each of the next five years and thereafter (excluding renewal options) is as follows:
RENTAL YEAR ENDING PAYMENTS DECEMBER 31, ($000'S) - ------------ -------- 2004........................................................ $ 898 2005........................................................ 898 2006........................................................ 898 2007........................................................ 898 2008........................................................ 898 Thereafter.................................................. 7,173 ------- $11,663 =======
TABLE REGARDING REAL ESTATE HOLDINGS The table on the following pages sets forth certain information relating to the Company's real property portfolio, including non-consolidated properties, as of December 31, 2003. All the properties listed have been fully leased by tenants for the last five years, or since the date of purchase by the Company or its non-consolidated entities if less than five years, with the exception of the Memphis, Tennessee, Columbia, Maryland and Phoenix, Arizona properties. During the last five years the Memphis property was not leased from February 1998 to October 1999, the Phoenix property has not been leased since December 1, 2003 and the Columbia property has not been leased from September 2001 to April 2003 when a lease for 17,100 square feet was executed and in September 2003 the remaining 46,724 square feet were leased. The Memphis property has a tenant lease for 35,000 square feet out of a total of 141,359 square feet and the tenant is responsible for all operating expenses. ($000's). 8 LEXINGTON CORPORATE PROPERTIES TRUST PROPERTY CHART
LAND NET TENANT YEAR CONSTRUCTED/ AREA RENTABLE PROPERTY LOCATION (GUARANTOR) REDEVELOPED (ACRES) SQUARE FEET - ----------------- ---------------------------------------- ----------------- -------- ----------- OFFICE 295 Chipeta Way Northwest Pipeline Corp.(1) 1982 19.79 295,000 Salt Lake City, UT 5200 Metcalf Avenue Employers Reinsurance Corporation 1980 & 2003 26.20 320,198 Overland Park, KS 1600 Viceroy Drive VarTec Telecom, Inc. 1986 8.17 249,452 Dallas, TX 9950 Mayland Drive Circuit City Stores, Inc.(1) 1990 19.71 288,562 Richmond, VA 2750 Monroe Boulevard Quest Diagnostics, Inc.(6) 1985 & 2001 10.50 109,281 Valley Forge, PA 1301 California Circle Artesyn North America, Inc. 1985 6.34 100,026 Milpitas, CA (Balfour Beatty plc.) 3476 Stateview Boulevard Wells Fargo Home Mortgage, Inc.(5) 2002 15.99 169,083 Fort Mill, SC 700 Oakmont Lane North American Van Lines(7) 1989 17.93 269,715 Westmont, IL (SIRVA, Inc.) 13651 McLearen Road Boeing North American Services, Inc. 1987 10.39 159,664 Herndon, VA 2211 South 47th Street Avnet, Inc. 1997 11.33 176,402 Phoenix, AZ 1401/1501 Nolan Ryan Parkway Seimens Dematic Postal Automation, 2003 14.14 233,783 Arlington, TX L.P. 5600 Broken Sound Boulevard Oce Printing Systems USA, Inc. 1983 & 2002 12.19 143,290 Boca Raton, FL 4200 RCA Boulevard The Wackenhut Corp.(4) 1996 7.70 114,518 Palm Beach Gardens, FL 701 Brookfield Parkway Verizon Wireless(9) 2000 & 2001 16.71 192,884 Greenville, SC 200 Executive Boulevard South Hartford Fire Insurance Co 1983 12.40 153,364 Southington, CT 19019 No. 59th Avenue Honeywell, Inc. 1985 51.79 252,300 Glendale, AZ 401 Elm Street Lockheed Martin Corporation 1960 & 1988 36.94 126,000 Marlborough, MA (Honeywell, Inc.) 9201 State Line Employers Reinsurance Corporation 1963 & 2003 7.17 166,641 Kansas City, MO 26210 and 26220 Enterprise Court Apria Healthcare, Inc. 2001 7.23 100,012 Lake Forest, CA 2004 2004 ESTIMATED ESTIMATED MINIMUM STRAIGHT-LINE ESTIMATED CASH RENTAL REAL ESTATE BASE REVENUE REVENUE TAXES PROPERTY LOCATION LEASE TERM ($000) ($000) ($000)(10) - ----------------- ------------------- ------------- ------------- --------------- OFFICE 295 Chipeta Way 10/01/82 - 09/30/09 $ 8,773 $ 8,773 $ 8 Salt Lake City, UT 5200 Metcalf Avenue 01/22/03 - 12/31/18 $ 3,842 $ 3,842 $ 449 Overland Park, KS 1600 Viceroy Drive 04/11/00 - 09/30/15 $ 3,445 $ 3,486 $ 490 Dallas, TX 9950 Mayland Drive 02/28/90 - 02/28/10 $ 2,859 $ 2,791 $ 159 Richmond, VA 2750 Monroe Boulevard 05/01/01 - 04/30/11 $ 2,360 $ 2,554 $ 172 Valley Forge, PA 1301 California Circle 12/10/85 - 12/09/05 $ 2,893 $ 2,548 $ 135 Milpitas, CA 3476 Stateview Boulevard 01/25/03 - 01/30/13 $ 2,539 $ 2,539 $ 110 Fort Mill, SC 700 Oakmont Lane 12/01/02 - 11/30/15 $ 2,298 $ 2,516 $ 348 Westmont, IL 13651 McLearen Road 05/31/99 - 05/30/08 $ 2,638 $ 2,477 $ 135 Herndon, VA 2211 South 47th Street 11/15/97 - 11/14/07 $ 2,553 $ 2,468 $ 9 Phoenix, AZ 1401/1501 Nolan Ryan Parkway 01/15/04 - 01/14/14 $ 2,287 $ 2,357 $ 382 Arlington, TX 5600 Broken Sound Boulevard 02/15/02 - 02/14/20 $ 2,012 $ 2,245 $ 87 Boca Raton, FL 4200 RCA Boulevard 02/15/96 - 02/28/11 $ 2,182 $ 2,149 $ 373 Palm Beach Gardens, FL 701 Brookfield Parkway 01/11/02 - 01/31/12 $ 1,933 $ 2,067 $ 182 Greenville, SC 200 Executive Boulevard South 09/01/91 - 12/31/05 $ 2,166 $ 2,009 $ 326 Southington, CT 19019 No. 59th Avenue 07/16/86 - 07/15/06 $ 2,002 $ 1,980 $ 405 Glendale, AZ 401 Elm Street 07/22/97 - 12/17/06 $ 1,870 $ 1,870 $ 147 Marlborough, MA 9201 State Line 01/22/03 - 05/30/19 $ 1,833 $ 1,833 $ 345 Kansas City, MO 26210 and 26220 Enterprise Court 02/01/01 - 01/31/12 $ 1,651 $ 1,792 $ 230 Lake Forest, CA
9
LEXINGTON CORPORATE PROPERTIES TRUST PROPERTY CHART LAND NET TENANT YEAR CONSTRUCTED/ AREA RENTABLE PROPERTY LOCATION (GUARANTOR) REDEVELOPED (ACRES) SQUARE FEET - ----------------- ---------------------------------------- ----------------- -------- ----------- 1600 Eberhardt Road Nextel Communications of Texas, Inc. 2001 14.26 108,800 Temple, TX 9275 SW Peyton Lane Hollywood Entertainment Corporation 1980 & 1998 8.72 122,853 Wilsonville, OR 160 Clairemont Avenue Allied Holdings, Inc. 1983 2.98 112,248 Decatur, GA 10419 North 30th Street Time Customer Service, Inc. 1986 14.38 132,981 Tampa, FL (Time, Inc.) 250 Rittenhouse Circle Jones Apparel Group USA, Inc.(3) 1982 15.63 255,019 Bristol, PA 400 Butler Farm Road Nextel Communications of the 1999 14.34 100,632 Hampton, VA Mid-Atlantic, Inc. (Nextel Finance Company) 6455 State Highway 303 NE Nextel West Corporation 2001 6.90 60,200 Bremerton, WA 13430 N. Black Canyon Freeway Bull HN Information Systems, Inc. 1985 & 1994 13.37 137,058 Phoenix, AZ 4455 American Way Bell South Mobility, Inc. 1997 5.73 70,100 Baton Rouge, LA 180 Rittenhouse Circle Jones Apparel Group USA, Inc. 1998 4.73 96,000 Bristol, PA 16275 Technology Drive Cymer, Inc. 1989 2.73 65,755 San Diego, CA (Hewlett Packard) 2401 Cherahala Boulevard Advance PCS, Inc. 2002 7.97 59,748 Knoxville, TN 421 Butler Farm Road Nextel Communications of the 2000 7.81 56,515 Hampton, VA Mid-Atlantic, Inc. (Nextel Finance Company) 12000 Tech Center Drive Kelsey-Hayes Company 1987 & 1988 5.72 80,230 Livonia, MI 100 Barnes Road Minnesota Mining and Manufacturing 1978 & 1985 39.80 44,400 Wallingford, CT Company 1440 East 15th Street Cox Communications, Inc. 1988 3.58 28,591 Tucson, AZ 250 Turnpike Road Honeywell Consumer Products 1984 9.83 57,698 Southborough, MA 183 Plains Road IKON Office Solutions, Inc. 1994 3.01 27,360 Milford, CT 2300 Litton Lane Fidelity Corporate 1987 24.00 81,744 Hebron, KY Real Estate, LLC LEXINGTON CORPORATE PROPERTIES TRUST PROPERTY CHART 2004 2004 ESTIMATED ESTIMATED MINIMUM STRAIGHT-LINE ESTIMATED CASH RENTAL REAL ESTATE BASE REVENUE REVENUE TAXES PROPERTY LOCATION LEASE TERM ($000) ($000) ($000)(10) - ----------------- ------------------- ------------- ------------- --------------- 1600 Eberhardt Road 02/01/01 - 01/31/16 $ 1,384 $ 1,559 $ 77 Temple, TX 9275 SW Peyton Lane 09/29/98 - 11/30/08 $ 1,468 $ 1,531 $ 87 Wilsonville, OR 160 Clairemont Avenue 01/01/98 - 12/31/07 $ 1,588 $ 1,530 $ 242 Decatur, GA 10419 North 30th Street 04/01/87 - 07/31/10 $ 1,411 $ 1,410 $ 194 Tampa, FL 250 Rittenhouse Circle 03/26/98 - 03/25/13 $ 1,265 $ 1,385 $ 190 Bristol, PA 400 Butler Farm Road 03/20/00 - 12/31/09 $ 1,264 $ 1,302 $ 37 Hampton, VA 6455 State Highway 303 NE 02/01/01 - 01/31/16 $ 969 $ 1,113 $ 66 Bremerton, WA 13430 N. Black Canyon Freeway 10/11/94 - 10/10/05 $ 1,144 $ 1,086 $ 283 Phoenix, AZ 4455 American Way 11/01/97 - 10/31/12 $ 992 $ 1,084 $ 162 Baton Rouge, LA 180 Rittenhouse Circle 08/01/98 - 07/31/13 $ 901 $ 970 $ 204 Bristol, PA 16275 Technology Drive 06/01/96 - 01/01/10 $ 882 $ 888 $ 91 San Diego, CA 2401 Cherahala Boulevard 06/01/02 - 05/31/13 $ 786 $ 822 $ 40 Knoxville, TN 421 Butler Farm Road 01/15/00 - 01/14/10 $ 709 $ 719 $ 81 Hampton, VA 12000 Tech Center Drive 05/01/97 - 04/30/07 $ 702 $ 679 $ 107 Livonia, MI 100 Barnes Road 01/01/04 - 07/01/10 $ 538 $ 606 $ 29 Wallingford, CT 1440 East 15th Street 10/01/90 - 09/30/16 $ 428 $ 457 $ 82 Tucson, AZ 250 Turnpike Road 10/01/95 - 09/30/15 $ 433 $ 433 $ 90 Southborough, MA 183 Plains Road 12/23/94 - 12/31/04 $ 337 $ 337 $ 44 Milford, CT 2300 Litton Lane 07/01/96 - 04/30/04 $ 332 $ 322 $ 80 Hebron, KY
10
LEXINGTON CORPORATE PROPERTIES TRUST PROPERTY CHART LAND NET TENANT YEAR CONSTRUCTED/ AREA RENTABLE PROPERTY LOCATION (GUARANTOR) REDEVELOPED (ACRES) SQUARE FEET - ----------------- ---------------------------------------- ----------------- -------- ----------- 3615 North 27th Avenue Vacant 1960 & 1979 10.26 179,280 Phoenix, AZ -------- ---------- Office Subtotal 528.37 5,497,387 -------- ---------- INDUSTRIAL 541 Perkins Jones Road Kmart Corp. 1982 103.00 1,700,000 Warren, OH 2425 Highway 77 North James Hardie Building Products, Inc. 1996 & 1997 45.29 425,816 Waxahachie, TX (James Hardie Industries NV) 3501 West Avenue H Michaels Stores, Inc. 1998 & 2002 37.18 762,775 Lancaster, CA 8305 SE 58th Avenue Associated Grocers of Florida, Inc. 1976 63.48 668,034 Ocala, FL 43955 Plymouth Oaks Boulevard Tower Automotive Products 1996 & 1998 18.40 290,133 Plymouth, MI Company (Tower Automotive, Inc.) 6345 Brackbill Boulevard Exel Logistics, Inc. 1985 & 1991 29.01 507,000 Mechanicsburg, PA (NFC plc) 224 Harbor Freight Road Harbor Freight Tools USA, Inc. 2001 74.95 474,473 Dillon, SC (Central Purchasing, Inc.) 590 Ecology Lane Owens Corning 2001 39.52 193,891 Chester, SC 4425 Purks Road Lear Technologies LLC 1989 & 1998 12.00 183,717 Auburn Hills, MI (Lear Corporation) (General Motors Corp.) 6 Doughten Road Exel Logistics Inc. 1989 24.38 330,000 New Kingston, PA (NFC plc) 6500 Adelaide Court Anda Pharmaceuticals 2002 22.67 354,676 Groveport, OH (Andrx Corporation) 7500 Chavenelle Road The McGraw Hill Companies, Inc. 2002 21.80 330,988 Dubuque, IA 3102 Queen Palm Drive Time Customer Service, Inc. 1986 15.02 229,605 Tampa, FL (Time, Inc.) 2280 Northeast Drive Ryder Integrated Logistics, Inc. 1996 & 1997 25.70 276,480 Waterloo, IA (Ryder Systems, Inc.) 245 Salem Church Road Exel Logistics Inc. 1985 12.52 252,000 Mechanicsburg, PA (NFC plc) 200 Arrowhead Drive Owens Corning 1999 21.62 400,522 Hebron, OH LEXINGTON CORPORATE PROPERTIES TRUST PROPERTY CHART 2004 2004 ESTIMATED ESTIMATED MINIMUM STRAIGHT-LINE ESTIMATED CASH RENTAL REAL ESTATE BASE REVENUE REVENUE TAXES PROPERTY LOCATION LEASE TERM ($000) ($000) ($000)(10) - ----------------- ------------------- ------------- ------------- --------------- 3615 North 27th Avenue -- -- -- $ 241 Phoenix, AZ -------- -------- ------- $ 69,669 $ 70,529 $ 6,919 -------- -------- ------- INDUSTRIAL 541 Perkins Jones Road 10/01/82 - 09/30/07 $ 9,359 $ 8,932 $ 389 Warren, OH 2425 Highway 77 North 10/07/00 - 03/31/20 $ 3,400 $ 3,400 $ 331 Waxahachie, TX 3501 West Avenue H 06/19/98 - 09/30/19 $ 3,234 $ 3,304 $ 191 Lancaster, CA 8305 SE 58th Avenue 01/08/99 - 12/31/18 $ 2,064 $ 2,238 $ 1,255 Ocala, FL 43955 Plymouth Oaks Boulevard 11/01/02 - 10/31/12 $ 1,886 $ 1,886 $ 11 Plymouth, MI 6345 Brackbill Boulevard 10/29/90 - 03/19/12 $ 2,037 $ 1,852 $ 94 Mechanicsburg, PA 224 Harbor Freight Road 12/05/01 - 12/04/16 $ 1,642 $ 1,812 $ 162 Dillon, SC 590 Ecology Lane 01/01/01 - 12/31/20 $ 1,619 $ 1,619 $ 4 Chester, SC 4425 Purks Road 07/23/88 - 07/22/06 $ 1,405 $ 1,365 $ 250 Auburn Hills, MI 6 Doughten Road 11/15/91 - 11/30/06 $ 1,488 $ 1,349 $ 108 New Kingston, PA 6500 Adelaide Court 04/01/02 - 03/31/12 $ 1,151 $ 1,206 $ 54 Groveport, OH 7500 Chavenelle Road 11/13/01 - 11/30/15 $ 1,031 $ 1,164 $ 84 Dubuque, IA 3102 Queen Palm Drive 08/01/87 - 07/31/10 $ 983 $ 1,010 $ 137 Tampa, FL 2280 Northeast Drive 08/01/97 - 07/31/12 $ 998 $ 1,004 $ 365 Waterloo, IA 245 Salem Church Road 11/15/91 - 11/30/06 $ 1,104 $ 1,000 $ 77 Mechanicsburg, PA 200 Arrowhead Drive 03/01/01 - 05/31/09 $ 974 $ 985 $ 17 Hebron, OH
11
LEXINGTON CORPORATE PROPERTIES TRUST PROPERTY CHART LAND NET TENANT YEAR CONSTRUCTED/ AREA RENTABLE PROPERTY LOCATION (GUARANTOR) REDEVELOPED (ACRES) SQUARE FEET - ----------------- ---------------------------------------- ----------------- -------- ----------- 12025 Tech Center Drive Kelsey-Hayes Company 1987 & 1988 9.18 100,000 Livonia, MI 3600 Southgate Drive Sygma Network, Inc. 2000 19.00 149,500 Danville, IL (Sysco Corporation) 46600 Port Street Johnson Controls, Inc. 1996 24.00 134,160 Plymouth, MI 1133 Poplar Creek Road Corporate Express Office 1998 19.09 196,946 Henderson, NC Products, Inc. (Buhrmann N.V.) 222 Tappan Drive North The Gerstenslager Company 1970 26.57 296,720 Mansfield, OH (Worthington Industries) 34 East Main Street Exel Logistics Inc. 1981 9.66 179,200 New Kingston, PA (NFC plc) 450 Stern Street Johnson Controls, Inc. 1996 20.10 111,160 Oberlin, OH 191 Arrowhead Drive Owens Corning 2000 13.62 250,410 Hebron, OH 1700 47th Avenue North Owens Corning 2003 8.90 18,620 Minneapolis, MN 109 Stevens Street Unisource Worldwide, Inc. 1958 & 1969 6.97 168,800 Jacksonville, FL 904 Industrial Road Tenneco Automotive 1968 & 1972 20.00 195,640 Marshall, MI Operating Company, Inc. (Tenneco Automotive, Inc.) 128 Crews Drive Stone Container Corporation 1968 & 1998 10.76 185,961 Columbia, SC 7150 Exchequer Drive Corporate Express Office 1998 5.23 65,043 Baton Rouge, LA Products, Inc. (Buhrmann N.V.) 324 Industrial Park Road SKF USA, Inc. 1996 21.13 72,868 Franklin, NC 187 Spicer Drive Dana Corp. 1983 & 1985 20.95 148,000 Gordonsville, TN 300 McCormick Boulevard Ameritech Services, Inc. 1990 10.12 20,000 Columbus, OH 1601 Pratt Avenue Tenneco Automotive 1979 8.26 53,600 Marshall, MI Operating Company, Inc. (Tenneco Automotive, Inc.) 3350 Miac Cove Road Mimeo.com, Inc.(2) 1987 10.92 141,359 Memphis, TN -------- ---------- LEXINGTON CORPORATE PROPERTIES TRUST PROPERTY CHART 2004 2004 ESTIMATED ESTIMATED MINIMUM STRAIGHT-LINE ESTIMATED CASH RENTAL REAL ESTATE BASE REVENUE REVENUE TAXES PROPERTY LOCATION LEASE TERM ($000) ($000) ($000)(10) - ----------------- ------------------- ------------- ------------- --------------- 12025 Tech Center Drive 05/01/97 - 04/30/07 $ 975 $ 958 $ 67 Livonia, MI 3600 Southgate Drive 10/15/00 - 10/31/15 $ 933 $ 933 $ 143 Danville, IL 46600 Port Street 05/19/00 -12/22/06 $ 847 $ 847 $ 62 Plymouth, MI 1133 Poplar Creek Road 01/20/99 - 01/31/14 $ 754 $ 810 $ 61 Henderson, NC 222 Tappan Drive North 10/01/99 - 05/31/05 $ 674 $ 667 $ 81 Mansfield, OH 34 East Main Street 11/15/91 - 11/30/06 $ 720 $ 654 $ 46 New Kingston, PA 450 Stern Street 12/23/96 - 12/22/06 $ 641 $ 641 $ 75 Oberlin, OH 191 Arrowhead Drive 06/01/01 - 02/28/10 $ 578 $ 605 $ 11 Hebron, OH 1700 47th Avenue North 07/01/03 - 06/30/15 $ 538 $ 596 $ 0 Minneapolis, MN 109 Stevens Street 10/01/87 - 09/30/09 $ 559 $ 588 $ 33 Jacksonville, FL 904 Industrial Road 08/18/87 - 08/17/05 $ 606 $ 583 $ 70 Marshall, MI 128 Crews Drive 12/16/82 - 08/31/12 $ 541 $ 571 $ 120 Columbia, SC 7150 Exchequer Drive 11/01/98 - 10/31/13 $ 349 $ 368 $ 48 Baton Rouge, LA 324 Industrial Park Road 12/23/96 - 12/31/14 $ 363 $ 363 $ 12 Franklin, NC 187 Spicer Drive 01/01/84 - 08/31/07 $ 345 $ 341 $ 49 Gordonsville, TN 300 McCormick Boulevard 09/14/90 - 05/31/05 $ 255 $ 255 $ 21 Columbus, OH 1601 Pratt Avenue 08/18/87 - 08/17/05 $ 166 $ 163 $ 34 Marshall, MI 3350 Miac Cove Road 11/01/99 - 10/31/09 $ 178 $ 154 $ 82 Memphis, TN -------- -------- -------
12
LEXINGTON CORPORATE PROPERTIES TRUST PROPERTY CHART LAND NET TENANT YEAR CONSTRUCTED/ AREA RENTABLE PROPERTY LOCATION (GUARANTOR) REDEVELOPED (ACRES) SQUARE FEET - ----------------- ---------------------------------------- ----------------- -------- ----------- Industrial Subtotal 831.00 9,868,097 -------- ---------- RETAIL 2655 Shasta Way Fred Meyer, Inc. 1986 13.90 178,204 Klamath Falls, OR Fort Street Mall Liberty House, Inc.(1) 1980 1.22 85,610 King Street Honolulu, HI 150 NE 20th Street Fred Meyer, Inc. 1986 8.81 118,179 Highway 101 Newport, OR 12235 N. Cave Creek Bally's Health & Tennis Corp. 1988 3.00 36,556 Phoenix, AZ 6475 Dobbin Road Offenbacher Aquatics 1983 2.50 17,100 Columbia, MD Haverty Furniture Companies, Inc. 46,724 35400 Cowan Road Sam's Real Estate Business Trust 1987 & 1997 9.70 102,826 Westland, MI 4733 Hills & Dales Road Scandinavian Health Spa, Inc. 1987 3.32 37,214 Canton, OH (Bally Total Fitness Holding Corp.) 7111 Westlake Terrace The Home Depot USA, Inc.(1)(8) 1980 & 2001 7.61 95,000 Bethesda, MD 24100 Laguna Hills Mall Federated Department Stores, Inc.(1) 1974 11.00 160,000 Laguna Hills, CA 1160 White Horse Road Physical Fitness Centers of 1987 2.87 31,750 Voorhees, NJ Philadelphia, Inc. (Bally Total Fitness Corp.) 5917 S. La Grange Road Bally Total Fitness Corp. 1987 2.73 25,250 Countryside, IL 4831 Whipple Avenue, N.W. Best Buy Co., Inc. 1995 6.59 46,350 Canton, OH 3711 Gateway Drive Kohl's Department Stores, Inc. 1994 6.24 76,164 Eau Claire, WI 12535 SE 82nd Avenue Toys "R" Us, Inc.(1) 1981 5.85 42,842 Clackamas, OR 5801 Bridge Street Champion Fitness IV, Inc. 1977 & 1987 3.66 24,990 DeWitt, NY (Bally Total Fitness Corp.) 399 Peachwood Centre Drive Best Buy Co., Inc. 1996 7.49 45,800 Spartanburg, SC 18601 Alderwood Mall Boulevard Toys "R" Us, Inc.(1) 1981 3.64 43,105 Lynnwood, WA LEXINGTON CORPORATE PROPERTIES TRUST PROPERTY CHART 2004 2004 ESTIMATED ESTIMATED MINIMUM STRAIGHT-LINE ESTIMATED CASH RENTAL REAL ESTATE BASE REVENUE REVENUE TAXES PROPERTY LOCATION LEASE TERM ($000) ($000) ($000)(10) - ----------------- ------------------- ------------- ------------- --------------- $ 44,397 $ 44,223 $ 4,544 -------- -------- ------- RETAIL 2655 Shasta Way 03/10/88 - 03/31/08 $ 1,009 $ 1,009 $ 158 Klamath Falls, OR Fort Street Mall 10/01/80 - 09/30/09 $ 963 $ 971 $ 194 King Street Honolulu, HI 150 NE 20th Street 06/01/86 - 05/31/11 $ 826 $ 826 $ 126 Highway 101 Newport, OR 12235 N. Cave Creek 07/01/88 - 06/30/08 $ 852 $ 821 $ 77 Phoenix, AZ 6475 Dobbin Road 04/01/03 - 03/31/13 $ 161 $ 186 $ 19 Columbia, MD 10/01/03 - 09/30/24 $ 140 $ 632 $ 55 35400 Cowan Road 06/06/97 - 01/31/09 $ 753 $ 753 $ 21 Westland, MI 4733 Hills & Dales Road 01/01/89 - 12/31/08 $ 713 $ 685 $ 23 Canton, OH 7111 Westlake Terrace 05/01/81 - 04/30/06 $ 772 $ 679 $ 304 Bethesda, MD 24100 Laguna Hills Mall 02/01/76 - 01/31/06 $ 677 $ 673 $ 13 Laguna Hills, CA 1160 White Horse Road 07/14/87 - 07/13/07 $ 820 $ 673 $ 105 Voorhees, NJ 5917 S. La Grange Road 07/13/87 - 07/12/07 $ 660 $ 542 $ 886 Countryside, IL 4831 Whipple Avenue, N.W. 02/27/98 - 02/26/18 $ 465 $ 465 $ 32 Canton, OH 3711 Gateway Drive 06/22/94 - 01/25/15 $ 460 $ 463 $ 49 Eau Claire, WI 12535 SE 82nd Avenue 06/01/81 - 05/31/06 $ 424 $ 424 $ 49 Clackamas, OR 5801 Bridge Street 08/19/87 - 08/18/07 $ 511 $ 419 $ 15 DeWitt, NY 399 Peachwood Centre Drive 02/27/98 - 02/26/18 $ 395 $ 395 $ 15 Spartanburg, SC 18601 Alderwood Mall Boulevard 06/01/81 - 05/31/06 $ 396 $ 391 $ 46 Lynnwood, WA
13
LEXINGTON CORPORATE PROPERTIES TRUST PROPERTY CHART LAND NET TENANT YEAR CONSTRUCTED/ AREA RENTABLE PROPERTY LOCATION (GUARANTOR) REDEVELOPED (ACRES) SQUARE FEET - ----------------- ---------------------------------------- ----------------- -------- ----------- 7272 55th Street Circuit City Stores, Inc. 1988 3.93 45,308 Sacramento, CA 6910 S. Memorial Highway Toys "R" Us, Inc.(1) 1981 4.44 43,123 Tulsa, OK 2275 Browns Bridge Road Wal-Mart Stores, Inc. 1984 8.10 89,199 Gainesville, GA 6405 South Viriginia St. Comp USA, Inc. 1988 2.72 31,400 Reno, NV 7055 Highway 85 South Wal-Mart Stores East, Inc. 1985 8.61 81,911 Riverdale, GA 9580 Livingston Road GFS Realty, Inc. 1976 10.60 107,337 Oxon Hill, MD (Giant Food, Inc.) 121 South Center Street Greyhound Lines, Inc. 1968 1.67 17,000 Stockton, CA Rockshire Village Center GFS Realty, Inc.(1) 1977 7.32 51,682 2401 Wootton Parkway (Giant Food, Inc.) Rockville, MD A1 21 South Wal-Mart Real Estate Business Trust 1983 5.21 56,132 Jacksonville, AL 2832 Candlers Mountain Road Circuit City Stores, Inc. 1986 0.84 9,300 Lynchburg, VA -------- ---------- Retail Subtotal 153.57 1,746,056 -------- ---------- Grand Total 1,512.94 17,111,540 ======== ========== LEXINGTON CORPORATE PROPERTIES TRUST PROPERTY CHART 2004 2004 ESTIMATED ESTIMATED MINIMUM STRAIGHT-LINE ESTIMATED CASH RENTAL REAL ESTATE BASE REVENUE REVENUE TAXES PROPERTY LOCATION LEASE TERM ($000) ($000) ($000)(10) - ----------------- ------------------- ------------- ------------- --------------- 7272 55th Street 10/28/88 - 10/27/08 $ 421 $ 376 $ 63 Sacramento, CA 6910 S. Memorial Highway 06/01/81 - 05/31/06 $ 362 $ 358 $ 35 Tulsa, OK 2275 Browns Bridge Road 12/29/83 - 01/31/09 $ 328 $ 328 $ 7 Gainesville, GA 6405 South Viriginia St. 12/16/88 - 12/15/08 $ 364 $ 325 $ 60 Reno, NV 7055 Highway 85 South 12/04/85 - 01/31/11 $ 270 $ 270 $ 4 Riverdale, GA 9580 Livingston Road 01/03/77 - 02/28/14 $ 239 $ 274 $ 28 Oxon Hill, MD 121 South Center Street 02/28/89 - 12/31/09 $ 201 $ 201 $ 15 Stockton, CA Rockshire Village Center 01/01/78 - 06/19/17 $ 224 $ 152 $ 90 2401 Wootton Parkway Rockville, MD A1 21 South 06/29/99 - 01/31/09 $ 146 $ 146 $ 20 Jacksonville, AL 2832 Candlers Mountain Road 11/21/86 - 11/20/06 $ 101 $ 101 $ 8 Lynchburg, VA -------- -------- ------- $ 13,653 $ 13,538 $ 2,517 -------- -------- ------- $127,719 $128,290 $13,980 ======== ======== =======
- --------------- (1) The Company holds a leasehold interest in the land. The leases, including renewal options, expire at various dates ranging from 2028 through 2072. (2) The tenant occupies 35,000 square feet, however is responsible for all operating expenses. (3) Tenant can cancel lease on March 26, 2008 with 12 months notice and a payment of $1,392. (4) The Property contains two buildings with one additional tenant that occupies 18,400 square feet out of the total of 114,518. (5) Base rent is escalated 3% each year after subtracting the first year operating expense amount from the rent. Expense stop to be determined effective on first anniversary (01/01/04). Tenant has the right to reduce leased space by 27,000 square feet (01/31/08) with 6 months notice and a payment estimated to be $696. The tenant can cancel lease on 01/31/10 with 12 months notice and a payment estimated to be $3,968. (6) Expense stop on this property is $393 per annum. (7) Tenant can cancel lease on November 30, 2013 with 12 months notice and a payment of $1,300. In addition, the Company was responsible for real estate taxes in 2003. (8) The Company has a 33.85% economic interest in the property. (9) Expense stop on this property is $112 per annum. (10) The Company recognized $1,042 in real estate taxes in 2003. 14 LEXINGTON CORPORATE PROPERTIES TRUST JOINT VENTURE PROPERTY CHART
LAND NET TENANT YEAR CONSTRUCTED/ AREA RENTABLE PROPERTY LOCATION (GUARANTOR) REDEVELOPED (ACRES) SQUARE FEET - ----------------- ----------------------------------------- ----------------- -------- ----------- OFFICE 389-399 Interpace Parkway Aventis, Inc 2000 14.00 340,240 Morris Coporate Center IV (Aventis Pharma Holding GmbH)(12) Parsippany, NJ 17 Technology Circle Blue Cross Blue Shield 1999 & 2001 46.82 456,304 Columbia, SC of South Carolina, Inc.(13) 100 Wood Hollow Drive Greenpoint Mortgage Funding, Inc.(14)(17) 2001 12.93 124,600 Novato, CA 6555 Sierra Drive True North Communications, Inc.(12) 1999 9.98 247,254 Irving, TX 15375 Memorial Drive Vastar Resources, Inc.(12) 1985 21.77 327,325 Houston, TX 10300 Kincaid Drive Bank One Indiana, N.A.(12)(15) 1999 13.30 193,000 Fishers, IN 600 Business Center Drive First USA Management 1997 13.30 125,155 Lake Mary, FL Services, Inc.(12)(16)(18) 550 International Parkway First USA Management 1999 12.80 125,920 Lake Mary, FL Services, Inc.(12)(16)(18) 2000 Eastman Drive Structural Dynamics Research Corp.(12) 1991 12.36 212,836 Milford, OH 3701 Corporate Drive Motorola, Inc.(12) 2001 23.70 119,829 Farmington Hills, MI 14040 Park Center Road NEC America, Inc.(12) 1987 13.30 108,000 Herndon, VA 70 Valley Stream Parkway IKON Office Solutions, Inc.(14) 1987 10.40 106,855 Malvern, PA 2210 Enterprise Drive Washington Mutual Home Loans, Inc.(11) 1998 16.53 177,747 Florence, SC 1110 Bayfield Drive Honeywell International, Inc.(12) 1980 & 2002 26.35 166,575 Colorado Springs, CO -------- ---------- Office Subtotal 247.54 2,831,640 -------- ---------- INDUSTRIAL 101 Michelin Drive TNT Logistics North America, Inc.(12) 1991 & 1992 118.14 1,164,000 Laurens, SC (TNT Logistics Holdings B.V.) & 1993 (TPG N.V.) 7111 Crabb Road TNT Logistics North America, Inc.(12) 1978 & 1993 51.41 752,000 Temperance, MI (TNT Logistics Holdings B.V.) (TPG N.V.) 2004 2004 ESTIMATED ESTIMATED ESTIMATED MINIMUM STRAIGHT-LINE REAL CASH RENTAL ESTATE BASE REVENUE REVENUE TAXES PROPERTY LOCATION LEASE TERM ($000) ($000) ($000)(20) - ----------------- ------------------- ------------- ------------- -------------- OFFICE 389-399 Interpace Parkway 06/01/00 - 01/31/10 $ 7,844 $ 8,487 $ 408 Morris Coporate Center IV Parsippany, NJ 17 Technology Circle 10/01/99 - 09/30/09 $ 6,655 $ 6,930 $ 4 Columbia, SC 100 Wood Hollow Drive 06/30/00 - 07/31/11 $ 4,300 $ 4,864 $ 291 Novato, CA 6555 Sierra Drive 02/01/00 - 01/31/10 $ 4,009 $ 4,250 $ 593 Irving, TX 15375 Memorial Drive 09/16/99 - 09/15/09 $ 3,437 $ 3,437 $ 312 Houston, TX 10300 Kincaid Drive 11/01/99 - 10/31/09 $ 3,217 $ 3,287 $ 98 Fishers, IN 600 Business Center Drive 10/01/99 - 09/30/09 $ 2,880 $ 2,921 $ 225 Lake Mary, FL 550 International Parkway 10/01/99 - 09/30/09 $ 2,778 $ 2,820 $ 213 Lake Mary, FL 2000 Eastman Drive 05/01/91 - 04/30/11 $ 2,713 $ 2,790 $ 424 Milford, OH 3701 Corporate Drive 12/28/01 - 12/31/16 $ 2,714 $ 2,714 $ 443 Farmington Hills, MI 14040 Park Center Road 08/13/99 - 08/12/09 $ 1,967 $ 2,025 $ 109 Herndon, VA 70 Valley Stream Parkway 09/22/03 - 09/30/13 $ 1,923 $ 1,995 $ 282 Malvern, PA 2210 Enterprise Drive 06/10/98 - 06/30/08 $ 1,750 $ 1,699 $ 5 Florence, SC 1110 Bayfield Drive 11/15/02 - 11/30/13 $ 1,535 $ 1,637 $ 137 Colorado Springs, CO ------- ------- ------ $47,722 $49,856 $3,544 ------- ------- ------ INDUSTRIAL 101 Michelin Drive 08/05/02 - 08/04/12 $ 3,103 $ 3,228 $ 383 Laurens, SC 7111 Crabb Road 08/05/02 - 08/04/12 $ 2,078 $ 2,162 $ 100 Temperance, MI
15
LEXINGTON CORPORATE PROPERTIES TRUST JOINT VENTURE PROPERTY CHART LAND NET TENANT YEAR CONSTRUCTED/ AREA RENTABLE PROPERTY LOCATION (GUARANTOR) REDEVELOPED (ACRES) SQUARE FEET - ----------------- ----------------------------------------- ----------------- -------- ----------- 291 Park Center Drive Kraft Foods North America, Inc. (12) 2001 25.50 344,700 Winchester, VA 121 Technology Drive Heidelberg Web Systems, Inc.(12)(19) 1986 & 2003 173.00 500,500 Durham, NH 1109 Commerce Boulevard Linens-N-Things, Inc.(14) 1998 14.40 262,644 Logan Township, NJ -------- ---------- Industrial Subtotal 382.45 3,023,844 -------- ---------- Total 629.99 5,855,484 ======== ========== LEXINGTON CORPORATE PROPERTIES TRUST JOINT VENTURE PROPERTY CHART 2004 2004 ESTIMATED ESTIMATED ESTIMATED MINIMUM STRAIGHT-LINE REAL CASH RENTAL ESTATE BASE REVENUE REVENUE TAXES PROPERTY LOCATION LEASE TERM ($000) ($000) ($000)(20) - ----------------- ------------------- ------------- ------------- -------------- 291 Park Center Drive 06/01/01 - 05/31/11 $ 1,420 $ 1,515 $ 73 Winchester, VA 121 Technology Drive 12/30/01 - 12/30/21 $ 1,503 $ 1,343 $ 691 Durham, NH 1109 Commerce Boulevard 12/21/98 - 01/31/09 $ 1,258 $ 1,251 $ 197 Logan Township, NJ ------- ------- ------ $ 9,362 $ 9,499 $1,444 ------- ------- ------ $57,084 $59,355 $4,988 ======= ======= ======
- --------------- (11) The Company has a 22.7% economic interest in the entity which owns this property. (12) The Company has a 33 1/3% economic interest in the entity which owns this property. (13) The Company has a 40% economic interest in the entity which owns this property. (14) The Company has a 30% economic interest in the entity which owns this property. (15) The joint venture has operating expense stops on this property of $768 per annum. (16) The joint venture operates these investments as a single property. (17) The joint venture has operating expense stops on this property of $917 per annum. (18) The joint venture has operating expense stops on this property of $1,264 per annum. (19) The tenant can cancel the lease anytime after 9/30/11 for a payment which on 9/30/11 is $23,433. (20) The non-consolidated entities recognized $738 in real estate taxes in 2003, gross of expense stops. 16 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 Executive Officers and Trustees 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 58 Trustees since October 1993 and was Co-Chief Executive Officer of the Company until January 2003. He founded The LCP Group, L.P., a real estate advisory firm, in 1973 and has been its Chairman since 1976. The LCP Group, L.P. has been the general partner of various limited partnerships with which the Company has had prior dealings. 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 is on the Board of Directors of Clarion CMBS Value Fund, Inc. RICHARD J. ROUSE..................... Mr. Rouse has served as Chief Investment Officer of the Age 58 Company since January 2003 and as a trustee of the Company since October 1993. He served as President of the Company from October 1993 to April 1996, was Co-Chief Executive Officer of the Company from October 1993 until January 2003, and since April 1996 has served as Vice Chairman of the Board of Trustees. 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 Executive Officer of the Age 39 Company since January 2003, Chief Operating Officer since October 1993, President since April 1996 and as a trustee since May 1994. He served as Executive Vice President from October 1993 to April 1996. Mr. Eglin received his B.A. from Connecticut College in 1986. PATRICK CARROLL...................... Mr. Carroll has served as Chief Financial Officer of the Age 40 Company since May 1998, Treasurer since January 1999 and Executive Vice President since January 2003. Prior to joining the Company, Mr. Carroll was, from 1993 to 1998, a Senior Manager in the real estate practice of Coopers & Lybrand L.L.P., a public accounting firm. Mr. Carroll received his B.B.A. from Hofstra University in 1986, his M.S. in Taxation from C.W. Post in 1995, and is a Certified Public Accountant.
17
NAME BUSINESS EXPERIENCE ---- ------------------- JOHN B. VANDER ZWAAG................. Mr. Vander Zwaag has been employed by the Company since May Age 46 2003 and currently is Executive Vice President. From 1982 to 1992, he was employed by The LCP Group serving as Director of Acquisitions from 1987 to 1992. Between his employment by The LCP Group and the Company, Mr. Vander Zwaag was managing director of Chesterton Binswanger Capital Advisors (1992 - 1997) and Managing Director with Cohen Financial (1997 - 2003). He received his B.A. from Amherst University in 1979 and his M.B.A. from Columbia University in 1982. WILLIAM N. CINNAMOND, JR. ........... Mr. Cinnamond has served as Senior Vice President since Age 55 September 2001. Prior to joining the Company, Mr. Cinnamond served as Vice President and Office/Industrial Real Estate Asset Management Sector Head for J.P. Morgan Fleming Asset Management, Inc. from 1989 to 2001. Mr. Cinnamond graduated from Boston University in 1970 and received his M.B.A. from Syracuse University in 1972. PAUL R. WOOD......................... Mr. Wood has served as Vice President, Chief Accounting Age 43 Officer and Secretary of the Company since October 1993. Mr. Wood received his B.B.A. from Adelphi University in 1982 and is a Certified Public Accountant. GEOFFREY DOHRMANN.................... Mr. Dohrmann has served as a trustee since August 2000. Mr. Age 53 Dorhmann co-founded Institutional Real Estate, Inc., a real estate-oriented publishing and consulting company in 1987 and is currently its Chairman and Chief Executive Officer. Mr. Dohrmann also belongs to the advisory boards for the National Real Estate Index, The Journal of Real Estate Portfolio Management and Center for Real Estate Enterprise Management. He is also a fellow of the Homer Hoyt Institute and holds the Counselors of Real Estate (CRE) designation. CARL D. GLICKMAN..................... Mr. Glickman has served as a trustee since May 1994. He has Age 77 been President of The Glickman Organization, a real estate development and management firm, since 1953. He is on the Board of Directors of Alliance Tire & Rubber Co., Ltd., Bear Stearns Companies, Inc., and Jerusalem Economic Corporation Ltd. JAMES GROSFELD....................... Mr. Grosfeld has served as a trustee since November 2003. He Age 66 also serves as a Director of Copart, Inc., Ramco-Gershenson Properties Trust and BlackRock, Inc. He has served on the Advisory Board of the Federal National Mortgage Association and as Director of Interstate Bakeries Corporation and Addington Resources. He was Chairman and Chief Executive Officer of Pulte Home Corporation from 1974 to 1990. He received his B.A. from Amherst College in 1959 and L.L.B. from Columbia Law School in 1962.
18
NAME BUSINESS EXPERIENCE ---- ------------------- KEVIN W. LYNCH....................... Mr. Lynch has served as a trustee from May 1996 to May 2000 Age 51 and again from May 2003 to the present. Mr. Lynch co-founded and has been a Principal of The Townsend Group since 1983. The Townsend Group is the largest real estate consulting firm to institutional investors in the United States. Mr. Lynch is a frequent industry speaker and member of the Pension Real Estate Association and the National Council of Real Estate Investment Fiduciaries. He currently sits on the Real Estate Advisory Board for New York University and is a Director for First Industrial Realty Trust. STANLEY R. PERLA..................... Mr. Perla has served as a trustee since April 2003. Mr. Age 60 Perla, a licensed Certified Public Accountant, was a partner for Ernst & Young LLP, a public accounting firm. He served as Ernst & Young's National Director of Real Estate Accounting as well as Ernst & Young's National Accounting and Auditing Committee. He is an active member of the National Association of Real Estate Investment Trusts and the National Association of Real Estate Companies. Mr. Perla also served on the real estate committees of the New York State Society of Certified Public Accounts and the American Institute of Certified Public Accountants. Mr. Perla is also a director of American Mortgage Acceptance Company. SETH M. ZACHARY...................... Mr. Zachary has served as a trustee since November 1993. Age 51 Since 1987, he has been a partner, and is currently the Chairman, of the law firm Paul, Hastings, Janofsky & Walker LLP, counsel to the Company.
19 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 closing 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 - ----------------------- ------ ------ December 31, 2003........................................... $20.85 $19.06 September 30, 2003.......................................... 19.94 17.49 June 30, 2003............................................... 18.23 17.12 March 31, 2003.............................................. 17.20 15.63 December 31, 2002........................................... $16.25 $15.01 September 30, 2002.......................................... 16.75 15.35 June 30, 2002............................................... 16.50 15.26 March 31, 2002.............................................. 15.99 14.25
The closing price of the common shares of the Company was $21.66 on February 23, 2004. As of February 23, 2004, the Company had 3,058 common shareholders of record. Dividends. The Company has made quarterly distributions since October 1986 without interruption. The common share dividends paid in each quarter for the last five years are as follows:
QUARTERS ENDED 2003 2002 2001 2000 1999 - -------------- ------ ------ ------ ------ ------ March 31,................................. $0.335 $0.330 $0.310 $0.300 $0.300 June 30,.................................. $0.335 $0.330 $0.320 $0.300 $0.300 September 30,............................. $0.335 $0.330 $0.320 $0.310 $0.300 December 31,.............................. $0.335 $0.330 $0.320 $0.310 $0.300
The Company's current quarterly common share dividend rate is $0.35 per share, or $1.40 per common share on an annualized basis. Following is a summary of the average taxable nature of the Company's common share dividends for the three years ended December 31:
2003 2002 2001 ------- ------- ------- Total dividends per share............................... $ 1.34 $ 1.32 $ 1.27 ======= ======= ======= Ordinary income......................................... 68.94% 77.89% 95.46% Short-term capital gain................................. -- 2.27 -- 15% rate gain........................................... 3.10 -- -- 20% rate gain........................................... -- 4.12 -- 25% rate gain........................................... 0.70 5.65 -- Return of capital....................................... 27.26 10.07 4.54 ------- ------- ------- 100.00% 100.00% 100.00% ======= ======= =======
The Company's per share dividend on its Series B Cumulative Redeemable Preferred Shares is $2.0125 per annum. 20 Following is a summary of the average taxable nature of the Company's dividend on its Series B Cumulative Redeemable Preferred Shares for the year ended December 31, 2003: Ordinary income............................................. 89.20% 15% rate gain............................................... 8.05 25% rate gain............................................... 2.75 ------ 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 Note 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 of business to its common and preferred 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 and operating partnership limited partners may elect to automatically reinvest their dividends and distributions 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. Under this program none of the common shares issued were purchased on the open market. As of December 31, 2003, approximately 8.1 million common shares and OP Units are enrolled in the dividend reinvestment program. Equity Compensation Plan Information. The following table sets forth certain information, as of December 31, 2003, with respect to compensation plans (including individual compensation arrangements) under which equity securities of the Company are authorized for issuance.
NUMBER OF SECURITIES REMAINING AVAILABLE FOR NUMBER OF SECURITIES FUTURE ISSUANCE UNDER TO BE ISSUED UPON WEIGHTED-AVERAGE EQUITY COMPENSATION EXERCISE OF EXERCISE PRICE OF PLANS (EXCLUDING OUTSTANDING OPTIONS, OUTSTANDING OPTIONS, SECURITIES REFLECTED IN WARRANTS AND RIGHTS WARRANTS AND RIGHTS COLUMN (A)) -------------------- -------------------- ----------------------- PLAN CATEGORY (A) (B) (C) - ------------- -------------------- -------------------- ----------------------- Equity compensation plans approved by security holders...................... 521,530 $13.94 1,449,252 Equity compensation plans not approved by security holders.......... -- -- -- ------- ------ --------- Total................................... 521,530 $13.94 1,449,252 ======= ====== =========
21 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, 2003. 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)
2003 2002 2001 2000 1999 ---------- --------- -------- -------- -------- Total revenues........................... $ 120,520 $ 98,332 $ 80,556 $ 77,764 $ 74,955 Operating expenses, including minority interest............................... (89,673) (69,828) (63,270) (59,395) (59,400) Gain on sale of properties............... -- -- -- 2,959 5,127 Income from continuing items............. 30,847 28,504 17,286 21,328 20,682 Total income from discontinued items..... 2,802 2,091 776 624 665 Net income............................... 33,649 30,595 18,062 21,952 21,347 Net income allocable to common shareholders........................... 30,257 29,902 15,353 19,390 18,827 Income from continuing operations per common share-basic..................... 0.81 1.03 0.75 1.11 1.07 Income from continuing operations per common share-diluted................... 0.80 1.02 0.73 1.07 1.05 Income from discontinued operations-basic....................... 0.08 0.08 0.04 0.04 0.04 Income from discontinued operations-diluted..................... 0.08 0.07 0.04 0.03 0.03 Net income per common share-basic........ 0.89 1.11 0.79 1.15 1.11 Net income per common share-diluted...... 0.88 1.09 0.77 1.10 1.08 Cash dividends declared per common share.................................. 1.355 1.325 1.290 1.230 1.200 Net cash provided by operating activities............................. 71,815 57,732 41,277 41,175 39,783 Net cash used in investing activities.... (298,883) (106,030) (64,321) (38,549) (64,942) Net cash provided by (used in) financing activities............................. 229,316 46,532 32,115 (6,671) 22,912 Ratio of earnings to combined fixed charges and preferred dividends........ 1.63 1.82 1.40 1.55 1.57 Real estate assets, net.................. 1,001,772 779,150 714,047 584,198 606,592 Investments in non-consolidated entities............................... 69,225 54,261 48,764 40,836 11,523 Total assets............................. 1,207,411 902,471 822,153 668,377 656,481 Mortgages, notes payable and credit facility, including discontinued operations............................. 551,385 491,517 455,771 387,326 372,254 Funds from operations(1)................. 64,502 61,818 47,126 46,316 40,652 Rent received below straight-line rent... 3,790 2,426 2,755 2,804 2,054
- --------------- (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, but limited, measure of the performance of an equity REIT. FFO is defined in the April 2002 "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 included in the calculation of FFO the dilutive effect of the deemed conversion of its outstanding exchangeable notes which were redeemed by the Company in 2001. FFO should not be 22 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. The Company believes that the book value of its real estate assets, which reflects the historical cost 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 throughout the United States. The Company has operated as a REIT since October 1993. As of December 31, 2003, the Company owned or had interests in 118 real estate properties encompassing 23 million rentable square feet. During 2003, the Company purchased 19 properties, including non-consolidated investments, for $414.0 million. During 2003, the Company sold four properties for net proceeds of $11.1 million, which resulted in an aggregate gain of $2.2 million. In addition, the Company contributed 2 properties to the LION joint venture; Clarion paid the Company directly $23.8 million for their proportionate ownership interest. As of December 31, 2003, the Company leased properties to 86 tenants in 20 different industries and the weighted average lease term based upon annualized rental revenue is 7.6 years. The Company's revenues and cash flows are generated predominantly from property rent receipts. Growth in revenue and cash flows is directly correlated to the Company's ability to (i) acquire income producing properties and (ii) to release properties that are vacant, or may become vacant, at favorable rental rates. The challenge the Company faces in purchasing properties is finding investments that will provide an attractive return without compromising the Company's real estate underwriting criteria. The Company believes it has access to acquisition opportunities due to its relationship with developers, brokers, corporate users and sellers. In the past three years, the Company has experienced minimal lease turnover, and accordingly minimal capital expenditures. There can be no assurance that this will continue. Through 2008 the Company has 41 leases expiring which generate approximately $46.8 million in rental revenue. Releasing these properties at favorable effective rates is the primary focus of the Company. The primary risks associated with re-tenanting properties are (i) the period of time required to find a new tenant (ii) whether rental rates will be lower than previously received (iii) the significant leasing costs such as commissions and tenant improvement allowances and (iv) the payment of operating costs such as real estate taxes and insurance while there is no offsetting revenue. The Company addresses these risks by contacting tenants well in advance of lease maturity to get an understanding of their occupancy needs, contacting local brokers to determine the depth of the rental market and, if required, retaining local expertise to assist in the re-tenanting of a property. As part of the acquisition underwriting process, the Company focuses on buying general purpose real estate which can be leased to other tenants without significant modification to the properties. No assurance can be given that once a property becomes vacant it will subsequently be re-let. During 2002, the Company sold 5 properties (including a 77.3% interest in a property) and one building in the Palm Beach Gardens, Florida property for $20.8 million, which resulted in an aggregate gain of approximately $1.1 million. During 2001, the Company sold one property for $4.1 million which approximated book value. CRITICAL ACCOUNTING POLICIES The Company's accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which require management to make estimates that affect the amounts of revenues, expenses, assets and liabilities reported. The following are 23 critical accounting policies which are important to the portrayal of the Company's financial condition and results of operations and which require some of management's most difficult, subjective and complex judgments. The accounting for these matters involves the making of estimates based on current facts, circumstances and assumptions which could change in a manner that would materially affect management's future estimate with respect to such matters. Accordingly, future reported financial conditions and results could differ materially from financial conditions and results reported based on management's current estimates. Revenue Recognition. The Company recognizes revenue in accordance with Statement of Financial Accounting Standards No. 13 "Accounting for Leases" (SFAS No. 13). SFAS No. 13 requires that revenue be recognized on a straight-line basis over the term of the lease unless another systematic and rational basis is more representative of the time pattern in which the use benefit is derived from the leased property. Gains on sales of real estate are recognized pursuant to the provisions of SFAS No. 66 "Accounting for Sales of Real Estate." The specific timing of the sale is measured against various criteria in SFAS No. 66 related to the terms of the transactions and any continuing involvement in the form of management or financial assistance associated with the properties. If the sales criteria are not met, the gain is deferred and the finance, installment or cost recovery method, as appropriate, is applied until the sales criteria are met. Accounts Receivable. The Company continuously monitors collections from its tenants and would make a provision for estimated losses based upon historical experience and any specific tenant collection issues that the Company has identified. Purchase Accounting for Acquisition of Real Estate. The fair value of the real estate acquired is allocated to the acquired tangible assets, consisting of land, building and improvements, and identified intangible assets and liabilities, consisting of the value of above-market and below-market leases, other value of in-place leases and value of tenant relationships, based in each case on their fair values. The fair value of the tangible assets of an acquired property (which includes land, building and improvements) is determined by valuing the property as if it were vacant, and the "as-if-vacant" value is then allocated to land, building and improvements based on management's determination of relative fair values of these assets. Factors considered by management in performing these analyses include an estimate of carrying costs during the expected lease-up periods considering current market conditions and costs to execute similar leases. In estimating carrying costs, management includes real estate taxes, insurance and other operating expenses and estimates of lost rental revenue during the expected lease-up periods based on current market demand. Management also estimates costs to execute similar leases including leasing commissions. In allocating the fair value of the identified intangible assets and liabilities of an acquired property, above-market and below-market in-place lease values are recorded based on the difference between the current in-place lease rent and a management estimate of current market rents. The aggregate value of other acquired intangible assets, consisting of in-place leases and tenant relationships, is measured by the excess of (i) the purchase price paid for a property over (ii) the estimated fair value of the property as if vacant, determined as set forth above. This aggregate value is allocated between in-place lease values and tenant relationships based on management's evaluation of the specific characteristics of each tenant's lease. The value of in-place leases and customer relationships are amortized to expense over the remaining non-cancelable periods of the respective leases. Impairment of Real Estate. The Company evaluates the carrying value of all real estate held to determine if an impairment has occurred which would require the recognition of a loss. The evaluation includes reviewing anticipated cash flows of the property, based on current leases in place, coupled with an estimate of proceeds to be realized upon sale. However, estimating future sale proceeds is highly subjective and such estimates could differ materially from actual results. 24 LIQUIDITY AND CAPITAL RESOURCES Since becoming a public company, the Company's principal sources of capital for growth has been the public and private equity markets, selective secured indebtedness, its unsecured credit facility, issuance of OP Units and undistributed funds from operations. The Company expects to continue to have access to and use these sources in the future; however, there are factors that may have a material adverse effect on the Company's access to capital sources. The Company's ability to incur additional debt to fund acquisitions is dependent upon its existing leverage, the value of the assets the Company is attempting to leverage and general economic conditions which may be outside of management's influence. The Company's current $100.0 million variable rate unsecured revolving credit facility, which is scheduled to expire in August 2006, has made available funds to finance acquisitions and meet any short-term working capital requirements. As of December 31, 2003, $94.0 million was outstanding at an interest rate of 2.64%. Subsequent to year end, the Company repaid $30.0 million of its outstanding line balance. The Company pays an unused facility fee equal to 25 basis points if 50% or less of the facility is utilized and 15 basis points if greater than 50% of the facility is utilized. The Company has the option to extend the maturity to August 2007, if no defaults exist, for a payment of $0.3 million. Since its formation in 1993, the Company has raised, through the issuance of common shares, preferred shares and OP Units, aggregate capital of approximately $484.8 million for the purposes of making acquisitions and retiring indebtedness. In addition, the Company has purchased $109.8 million in real estate through the direct issuance of its common shares and OP Units. During 2003, the Company completed a 4.5 million common share offering at $16.44 per share and a 5.3 million common share offering at $18.98 per share raising an aggregate of $174.0 million of net proceeds. The Company completed a 3.16 million preferred share offering at $25.00 per share with a 8.05% coupon raising net proceeds of $76.3 million. The proceeds of these offerings were used to repay debt and fund acquisitions. 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 and/or 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 as a percentage of FFO, reserving such amounts as it considers necessary for the maintenance or 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. Dividends paid to common shareholders increased to $45.8 million in 2003, compared to $35.8 million in 2002 and $25.0 million in 2001. Although the Company receives the majority of its rental payments on a monthly basis, it intends to continue paying dividends quarterly. The Company's second largest tenant, as a percentage of revenue, pays its rent quarterly (Northwest Pipeline Corp.). Amounts accumulated in advance of each quarterly distribution are invested by the Company in short-term money market or other suitable instruments. The Company believes 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 alternatives, will provide the necessary capital required by the Company. Cash flows from operations as reported in the Consolidated Statements of Cash flows increased to $71.8 million for 2003 from $57.7 million for 2002 and $41.3 million for 2001. Cash flows from operations was negatively impacted in 2003, 2002 and 2001 by the payment of $7.2 million, $0.3 million and $3.6 million, respectively in prepayment penalties on debt satisfactions. Net cash used in investing activities totaled $298.9 million in 2003, $106.0 million in 2002 and $64.3 million in 2001. Cash used in investing activities related primarily to investments in real estate properties 25 and joint ventures. Therefore, the fluctuation in investing activities relates primarily to the timing of investments and dispositions. In connection with the acquisition of the Net Partnerships, the Company acquired $3.8 million of cash in 2001. Net cash provided by financing activities totaled $229.3 million in 2003, $46.5 million in 2002 and $32.1 million in 2001. Cash provided by (used in) financing activities during each year was primarily attributable to proceeds from equity offerings, non-recourse mortgages and advances/repayments under the Company's credit facility coupled with dividend and distribution payments and debt service payments. UPREIT Structure. The Company's UPREIT structure permits the Company to effect acquisitions by issuing to a property owner, as a form of consideration in exchange for the property, OP Units in partnerships controlled by the Company. All of such OP Units are redeemable at certain times for common shares on a one-for-one basis and all of such OP Units require the Company to pay certain distributions to the holders of such OP Units. The Company accounts for these OP Units 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, as such OP Units are redeemed for common shares. The following table provides certain information with respect to such OP units as of December 31, 2003 (assuming the Company's annualized dividend rate remains at the current $1.40 per share).
CURRENT TOTAL ANNUALIZED CURRENT TOTAL PER OP ANNUALIZED REDEEMABLE FOR NUMBER AFFILIATE UNIT DISTRIBUTION COMMON SHARES: OF OP UNITS OP UNITS DISTRIBUTION ($000) - -------------- ----------- --------- ------------ ------------ At any time.................................... 3,446,783 1,401,159 $1.40 $4,825 At any time.................................... 1,254,152 120,374 1.08 1,354 At any time.................................... 114,059 52,144 1.12 128 March 2004..................................... 43,734 -- 0.27 12 March 2004..................................... 19,510 -- -- -- November 2004.................................. 24,552 2,856 -- -- March 2005..................................... 29,384 -- -- -- March 2005..................................... 12,893 -- 1.40 18 January 2006................................... 171,168 416 -- -- January 2006................................... 231,763 120,662 1.40 324 February 2006.................................. 28,230 1,743 -- -- May 2006....................................... 9,368 -- 0.29 3 November 2006.................................. 44,858 44,858 1.40 63 --------- --------- ----- ------ 5,430,454 1,744,212 $1.24 $6,727 ========= ========= ===== ======
Affiliate OP Units, which are included in total OP Units, represent OP Units held by two executive officers (including their affiliates) of the Company. FINANCING Revolving Credit Facility. The Company's $100.0 million unsecured credit facility, which expires August 2006 and can be extended by the Company for one year with a payment of $0.3 million, bears interest at 150-250 basis points over LIBOR depending on the amount of properties the Company owns free and clear of mortgage debt, 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. As of December 31, 2003, $94.0 million was outstanding and $1.8 million was available to be drawn. The Company had six outstanding letters of credit aggregating $4.2 million which expire in 2004 ($0.9 million), 2005 ($2.5 million), 2007 ($0.4 million) and 2010 ($0.4 million). This credit facility replaced 26 the Company's previous $60.0 million credit facility which was scheduled to expire in March 2004. The previous facility contained similar covenants. Debt Service Requirements. The Company's principal liquidity needs are the payment of interest and principal on outstanding indebtedness. As of December 31, 2003, a total of 55 of the Company's 100 consolidated properties, including one property held for sale, were subject to outstanding mortgages which had an aggregate principal amount of $457.4 million. As of December 31, 2003 the weighted average interest rate on the Company's outstanding debt, including line of credit borrowings, was approximately 6.24%. The scheduled principal amortization payments for the next five years are as follows: $15.4 million in 2004; $15.5 million in 2005; $16.3 million in 2006, $17.2 million in 2007 and $11.5 million in 2008. Approximate balloon payment amounts, having a weighted average interest rate of 6.20%, excluding line of credit borrowings, due the next five years are as follows: $14.5 million in 2004; $0 million in 2005, $0 in 2006; $0 in 2007 and $70.5 million in 2008. 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 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. The Company expects to continue to use property specific, non-recourse mortgages as it believes that by properly matching a debt obligation, including the balloon maturity risk, with a lease expiration the Company's cash-on-cash returns increase and the exposure to residual valuation risk is reduced. Lease Obligations. Since the Company's tenants bear all or substantially all of the cost of property operations, maintenance and repairs, the Company does not anticipate significant needs for cash for these costs. For eight of the properties, the Company has a level of property operating expense responsibility and a ninth obligated the Company to pay real estate taxes in 2003 and for the tenant to be responsible thereafter. 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. To the extent there is a vacancy in a property, the Company would be obligated for all operating expenses, including real estate taxes and insurance. The Company's tenants pay the rental obligations on ground leases either directly to the fee holder or to the Company as increased rent. The annual ground lease rental payment obligations for each of the next five years is $0.9 million. Step Down Renewals The leases on the following properties contain renewal options, exercisable by the tenant, with rents per square foot less than that paid in 2003:
ANNUAL RENT PER NET RENTABLE TENANT RENTABLE SQUARE FOOT -- RENEWAL OPTION TERM AND RENEWAL PROPERTY LOCATION (GUARANTOR) SQUARE FEET 2003 NET RENT PER SQUARE FOOT - ----------------- -------------------- ----------- -------------- ------------------------------- 295 Chipeta Way Northwest Pipeline 295,000 $29.06 10/01/09 - 09/15/18: $11.73 Salt Lake City, UT Corp. plus base cost component ($.06) adjusted by CPI, plus ($.03) 450 Stern Street Johnson Controls, 111,160 $ 5.75 12/23/06 - 12/22/11: $3.65 Oberlin, OH Inc. 12/23/11 - 12/22/16: $4.20 46600 Port Street Johnson Controls, 134,160 $ 6.29 12/23/06 - 12/22/11: $4.00 Plymouth, MI Inc. 12/23/11 - 12/22/16: $4.60
27
ANNUAL RENT PER NET RENTABLE TENANT RENTABLE SQUARE FOOT -- RENEWAL OPTION TERM AND RENEWAL PROPERTY LOCATION (GUARANTOR) SQUARE FEET 2003 NET RENT PER SQUARE FOOT - ----------------- -------------------- ----------- -------------- ------------------------------- 541 Perkins Jones Kmart Corp. 1,700,000 $ 5.51 10/01/07 - 09/30/12: $2.67 Road 10/01/12 - 09/30/17: $2.67 Warren, OH 10/01/17 - 09/30/22: $2.67 10/01/22 - 09/30/27: $2.67 10/01/27 - 09/30/32: $2.67 10/01/32 - 09/30/37: $2.67 10/01/37 - 09/30/42: FMV 10/01/42 - 09/30/47: FMV 10/01/47 - 09/30/52: FMV 10/01/52 - 09/30/57: FMV 24100 Laguna Hills Federated Department 160,000 $ 4.23 02/01/06 - 04/16/14: $1.81 Mall Stores, Inc. 04/17/14 - 04/16/29: $1.81 Laguna Hills, CA 04/17/29 - 04/16/44: $1.81 04/17/44 - 04/16/50: $1.81 7111 Westlake Terrace The Home Depot USA, 95,000 $ 8.13 05/01/06 - 04/30/16: $3.96 Bethesda, MD Inc. 05/01/16 - 04/30/21: $3.96 05/01/21 - 04/30/26: $3.96 05/01/26 - 04/30/31: $3.17 6910 S. Memorial Toys "R" Us, Inc. 43,123 $ 8.40 06/01/06 - 05/31/11: $5.92 Highway 06/01/11 - 05/31/16: $5.92 Tulsa, OK 06/01/16 - 05/31/21: $5.92 06/01/21 - 05/31/26: $5.92 06/01/26 - 05/31/31: $5.92 12535 SE 82nd Avenue Toys "R" Us, Inc. 42,842 $ 9.91 06/01/06 - 05/31/11: $6.96 Clackamas, OR 06/01/11 - 05/31/16: $6.96 06/01/16 - 05/31/21: $6.96 06/01/21 - 05/31/26: $6.96 06/01/26 - 05/31/31: $6.96 18601 Alderwood Mall Toys "R" Us, Inc. 43,105 $ 9.18 06/01/06 - 05/31/11: $6.48 Blvd. 06/01/11 - 05/31/16: $6.48 Lynnwood, WA 06/01/16 - 05/31/21: $6.48 06/01/21 - 05/31/26: $6.48 06/01/26 - 05/31/31: $6.48 A1 21 South Wal-Mart Real Estate 56,132 $ 2.60 02/01/09 - 01/31/14: $2.42 Jacksonville, AL Business Trust plus 1% of gross sales 02/01/14 - 01/31/19: $2.42 plus 1% of gross sales 02/01/19 - 01/31/24: $2.42 plus 1% of gross sales 02/01/24 - 01/31/29: $2.42 plus 1% of gross sales 02/01/29 - 01/31/34: $2.42 plus 1% of gross sales 9580 Livingston Road GFS Realty, Inc. 107,337 $ 3.80 03/01/14 - 02/29/19: $1.53 Oxon Hill, MD (Giant Food, Inc.) 03/01/19 - 02/29/24: $1.53 03/01/24 - 02/29/29: $1.15 03/01/29 - 02/29/34: $1.15
28
ANNUAL RENT PER NET RENTABLE TENANT RENTABLE SQUARE FOOT -- RENEWAL OPTION TERM AND RENEWAL PROPERTY LOCATION (GUARANTOR) SQUARE FEET 2003 NET RENT PER SQUARE FOOT - ----------------- -------------------- ----------- -------------- ------------------------------- Rockshire Village GFS Realty, Inc. 51,682 $ 4.33 06/20/17 - 05/31/27: $1.78 Center (Giant Food, Inc.) 06/01/27 - 05/31/37: $1.33 2401 Wootton Parkway Rockville, MD 590 Ecology Lane Owens Corning 193,891 $ 8.35 01/01/21 - 12/31/25: $6.41 Chester, SC 01/01/26 - 12/31/30: $7.08
Origination Fees Payable. In connection with certain acquisitions, the Company assumed obligations ($2.2 million in principal plus accrued interest) which bore interest on the outstanding principal balances only at rates ranging from 12.3% to 19.0%. During 2003, the Company satisfied $5.6 million in origination fees payable including accrued interest by issuing 231,763 OP Units which resulted in a gain of $0.9 million. The scheduled annual payments for each of the next five years for the remaining origination fees payable is $0.1 per annum. As of December 31, 2003, $0.8 million is outstanding of which $0.4 million is due to two executive officers of the Company. The following summarizes the Company's principal contractual obligations as of December 31, 2003 ($000's):
2009 AND 2004 2005 2006 2007 2008 THEREAFTER TOTAL ------- ------- ------- ------- ------- -------------- -------- Mortgages payable -- normal amortization................... $15,429 $15,521 $16,303 $17,238 $11,469 $ 34,944 $110,904 Mortgages payable -- balloon maturities..................... 14,456(2) -- -- -- 70,492 261,533 346,481 Credit facility.................. -- -- 94,000 -- -- -- 94,000 Operating lease obligation(1).... 1,395 1,395 1,395 1,395 1,395 7,173 14,148 Deferred installment obligation..................... 37 37 85 110 110 429 808 ------- ------- ------- ------- ------- -------- -------- $31,317 $16,953 111,783 $18,743 $83,466 $304,079 $566,341 ======= ======= ======= ======= ======= ======== ========
- --------------- (1) Amounts include rent for the Company's corporate office which is fixed through 2008 and adjusted to fair market value as determined at January 2009. (2) The Company has the ability to extend the maturity of this mortgage note to 2005 and 2006. The Company currently expects to exercise its right to extend maturity of the note until 2005. Capital Expenditures. Due to the net lease structure the Company does not incur significant expenditures in the ordinary course of business to maintain its properties. However, in the future, as leases expire the Company expects to incur costs in extending the existing tenant lease or re-tenanting the properties. The amounts of these expenditures can vary significantly depending on tenant negotiations, market conditions and rental rates. These expenditures are expected to be funded from operating cash flows or borrowings on the credit facility. Shares Repurchase. The Company's Board of Trustees has authorized the Company to repurchase, from time to time, up to 2.0 million common shares and OP Units depending on market conditions and other factors. As of December 31, 2003, the Company had repurchased approximately 1.4 million common shares and OP Units, at an average price of approximately $10.55 per common share/OP Unit. No common shares or OP Units were repurchased in 2003 and 2002. 29 RESULTS OF OPERATIONS ($000)
INCREASE (DECREASE) --------------------- SELECTED INCOME STATEMENT DATA 2003 2002 2001 2003-2002 2002-2001 - ------------------------------ -------- ------- ------- --------- --------- Total revenues............................. $120,520 $98,332 $80,556 $22,188 $17,776 Total expenses............................. 85,708 64,442 59,057 21,266 5,385 Interest................................. 34,881 33,161 29,331 1,720 3,830 Depreciation and amortization of real estate................................ 27,110 21,049 17,534 6,061 3,515 General & administrative................. 10,043 5,728 4,947 4,315 781 Property operating....................... 3,882 2,347 1,624 1,535 723 Debt satisfaction charges................ 7,566 345 3,993 7,221 (3,648) Income from continuing operations.......... 30,847 28,504 17,286 2,343 11,218 Total income from discontinued operations............................... 2,802 2,091 776 711 1,315 Net income................................. 33,649 30,595 18,062 3,054 12,533 Net income allocable to common shareholders............................. 30,257 29,902 15,353 355 14,549
COMPARISON OF 2003 TO 2002 Of the increase in total revenues in 2003 of $22.2 million, $20.1 million is primarily attributable to increased rental revenues from properties purchased in 2003 and those purchased in 2002 and held for the entire period in 2003 ($14.3 million); the consolidation of LRA ($4.4 million) and the expansion of a single property ($1.4 million). The increase in advisory fees of $1.4 million relates to the consolidation of LRA. The increase in equity in earnings of non-consolidated entities relates to the increase in the net income of the non- consolidated entities due to the acquisition of properties and the formation of a new joint venture in 2003. The increase in interest expense due to the growth of the Company's portfolio and related increase in mortgages and borrowings outstanding of $59.9 million has been partially offset by a reduction in the weighted average interest rate from 6.95% at December 31, 2002 to 6.24% at December 31, 2003 due to debt refinancings, repayments, lower variable interest rates and lower interest rates on new debt incurred by the Company. The Company's general and administrative expenses have increased in 2003 by $4.3 million primarily due to the consolidation of LRA ($1.9 million); increased personnel costs ($1.7 million); occupancy costs ($0.2 million) and professional service costs ($0.2 million). The increase in property operating expenses in 2003 relates to the acquisition of properties in 2003 and 2002 in which the Company has a level of operating expense responsibility. Net income increased in 2003 due to the impact of items discussed above, plus an increase of $1.1 million in gains on sales of properties offset by an increase of $7.2 million in debt satisfaction charges relating to the timing of the prepayment of indebtedness. Net income allocable to common shareholders increased due to the items discussed above offset by an increase in preferred dividends of $2.7 million on the preferred shares issued in 2003. The Company's non-consolidated entities had aggregate net income of $16.5 million in 2003 compared to $13.6 million in 2002. The increase in net income is primarily attributable to an increase in rental income of $6.8 million in 2003 attributable to acquisition of properties and the formation of a new joint venture. This revenue source was partly offset by an increase in (i) interest expense of $2.1 million in 2003 due to increased acquisition leverage and (ii) depreciation expense of $1.6 million in 2003 due to more depreciable assets owned. The financial information for non-consolidated entities does not include information for LRA. Any increase in net income in future periods will be closely tied to the level of acquisitions made by the Company. Without acquisitions, which in addition to generating rental revenue, generate acquisition, debt placement and asset management fees when such properties are acquired by joint venture or advisory programs, growth in net income is dependent on index adjusted rents (8 leases), percentage rents (3 leases), reduced interest expense on amortizing mortgages and by controlling variable overhead costs. However, there are many factors beyond management's control that could offset these items including, without limitation, 30 increased interest rates of variable debt ($109.7 million as of December 31, 2003 at a weighted average interest rate of 2.85%) and tenant monetary defaults. COMPARISON OF 2002 TO 2001 Changes in the results of operations for the Company are primarily due to the growth of its portfolio and costs associated with such growth. Of the increase in total revenues in 2002 of $17.8 million, $15.5 million is primarily attributable to rental revenue from properties purchased in 2001 (primarily the purchase of properties from Net 1 L.P. and Net 2 L.P. in November 2001) and owned for the entire period in 2002 and properties purchased in 2002 ($17.3 million) offset by a reduction in rental revenue from a decrease in overall portfolio occupancy from 99.7% to 99.2% ($0.3 million) and the joint venturing of a single property in 2002 ($1.5 million). Of the remaining $2.3 million in revenue growth in 2002, $1.8 million was attributable to an increase in earnings from non-consolidated entities and $0.5 million was attributable primarily to higher interest earned due to greater cash balances carried. The $3.8 million increase in interest expense is due to the growth of the Company's portfolio has been partially offset by a reduction in the weighted average interest rate from 7.28% for the year ended December 31, 2001 to 6.95% for the year ended December 31, 2002 due to debt refinancings, scheduled principal amortization payments, lower variable interest rates and lower interest rates on new debt incurred by the Company. The Company's general and administrative expenses increased due to the acquisition of properties from Net 1 L.P. and Net 2 L.P. Property operating expenses increased due to the vacancy of one property in the third quarter of 2001, which resulted in the Company incurring property level operating expenses which normally are the responsibility of the tenant, two properties in which the Company has a level of operating expense responsibility and an estimate of expenses for the Kmart property. Net income increased in 2002 due to the impact of items discussed above plus $1.0 million in gains on sale of properties and a net reduction of $3.6 million in charges relating to the timing of the prepayment of indebtedness. Net income allocable to common shareholders increased due to the items discussed above plus a net reduction in preferred dividends of $2.0 million resulting from the conversion of 2 million preferred shares to 2 million common shares in 2002. The Company's non-consolidated entities had aggregate net income of $13.6 million in 2002 compared with $10.4 million in 2001. The increase in net income is primarily attributable to an increase in rental revenue of $5.8 million in 2002 attributable to the acquisition of properties, the expansion of an existing property and the joint venturing of a single property in 2002. These revenue sources was partly offset by an increase in (i) interest expense of $1.5 million in 2002 due to partially funding of acquisitions with the use of non-recourse mortgage debt and the joint venturing of a single property in 2002, and (ii) depreciation expense of $1.1 million in 2002 due to more depreciable assets owned. The financial information for non-consolidated entities does not include information for LRA. Inflation. The Company's long term leases contain provisions to mitigate the adverse impact of inflation on its operating results. Such provisions include clauses entitling the Company to receive (i) scheduled fixed base rent increases and (ii) base rent increases based upon the consumer price index. In addition, the majority of the Company's leases require tenants to pay operating expenses, including maintenance, real estate taxes, insurance and utilities, thereby reducing the Company's exposure to increases in costs and operating expenses resulting from inflation. Environmental Matters. Based upon management's ongoing review of its properties, management is not aware of any environmental condition with respect to any of the Company's properties, which 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, 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. 31 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, but limited, measure of the performance of an equity REIT. FFO is defined in the April 2002 "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 included in the calculation of FFO the dilutive effect of the deemed conversion of its outstanding exchangeable notes, which were fully satisfied in 2001. 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. 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, 2003 ($000):
2003 2002 2001 --------- --------- -------- Net income allocable to common shareholders................ $ 30,257 $ 29,902 $ 15,353 Depreciation and amortization of real estate............. 27,634 21,480 18,312 Minority interests' share of net income.................. 4,039 5,510 5,215 Gain on sale of properties............................... (2,191) (1,055) -- Amortization of leasing commissions...................... 812 677 769 Deemed conversion of notes payable....................... -- -- 1,000 Joint venture adjustment-depreciation.................... 3,951 4,611 3,768 Preferred shares-Series A................................ -- 693 2,709 --------- --------- -------- Funds From Operations................................. $ 64,502 $ 61,818 $ 47,126 ========= ========= ======== Cash flows from operating activities....................... $ 71,815 $ 57,732 $ 41,277 Cash flows used in investing activities.................... (298,883) (106,030) (64,321) Cash flows from financing activities....................... 229,316 46,532 32,115
RECENTLY ISSUED ACCOUNTING STANDARDS In December 2003, the FASB issued FASB Interpretation No. 46 (revised December 2003), Consolidation of Variable Interest Entities ("VIEs"), which addresses how a business enterprise should evaluate whether it has a controlling financial interest in an entity through means other than voting rights and accordingly should consolidate the entity. FIN 46R replaces FASB Interpretation No. 46, Consolidation of Variable Interest Entities, which was issued in January 2003. The Company will be required to adopt FIN 46R in the first fiscal period beginning after March 15, 2004. Upon adoption of FIN 46R, the assets, liabilities and noncontrolling interests of the VIE initially would be measured at their carrying amounts with any difference between the net amount added to the balance sheet and any previously recognized interest being recognized as the cumulative effect of an accounting change. If determining the carrying amounts is not practicable, fair value at the date FIN 46R first applies may be used to measure the assets, liabilities and noncontrolling interest of the VIE. It is not anticipated that the effect on the Company's Consolidated Financial Statements would be material. FASB Statement No. 150, Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity ("SFAS 150"), was issued in May 2003. SFAS 150 establishes standards for the classification and measurement of certain financial instruments with characteristics of both liabilities and equity. SFAS 150 also includes required disclosures for financial instruments within its scope. For the 32 Company, SFAS 150 was effective for instruments entered into or modified after May 31, 2003 and otherwise will be effective as of January 1, 2004, except for mandatorily redeemable financial instruments. For certain mandatorily redeemable financial instruments, SFAS 150 will be effective for the Company on January 1, 2005. The effective date has been deferred indefinitely for certain other types of mandatorily redeemable financial instruments. The Company currently does not have any financial instruments that are within the scope of SFAS 150. In April 2002, FASB Statement No. 145, Rescission of FASB Statements No. 4, 44 and 64, Amendment of FASB Statement No. 13, and Technical Corrections ("SFAS 145"), was issued. SFAS 145 amends existing guidance on reporting gains and losses on the extinguishment of debt to prohibit the classification of the gain or loss as extraordinary, as the use of such extinguishments have become part of the risk management strategy of many companies. SFAS 145 also amends FASB Statement No. 13, Accounting for Leases, to require sale-leaseback accounting for certain lease modifications that have economic effects similar to sale- leaseback transactions. The provisions of SFAS 145 related to the rescission of FASB Statement No. 4, Reporting Gains and Losses from Extinguishment of Debt, were applied in fiscal years beginning after May 15, 2002. The provisions of SFAS 145 related to Statement 13 were effective for transactions occurring after May 15, 2002. The adoption of SFAS 145 required the Company to record as debt satisfaction charges, as a component of continuing operations, costs incurred in the early retirement of debt instead of as an extraordinary item. In June 2002, FASB Statement No. 146, Accounting for Costs Associated with Exit or Disposal Activities ("SFAS 146"), was issued. SFAS 146 addresses financial accounting and reporting or costs associated with exit or disposal activities and nullifies EITF Issue No. 94-3, Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity. The provisions of SFAS 146 were effective for exit or disposal activities initiated after December 31, 2002, with early application encouraged. The adoption of SFAS 146 had no impact on the Company. In November 2002, FASB Interpretation No. 45, Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness to Others, an interpretation of FASB Statements No. 5, 57 and 107 and a rescission of FASB Interpretation No. 34 ("FIN 45"), was issued. FIN 45 enhances the disclosures to be made by a guarantor in its interim and annual financial statements about its obligations under guarantees issued. FIN 45 also clarifies that a guarantor is required to recognized, at inception of a guarantee, a liability for the fair value of the obligation undertaken. The initial recognition and measurement provisions of FIN 45 were applicable to guarantees issued or modified after December 31, 2002 and the disclosure requirements were effective for financial statements of interim or annual periods ending after December 15, 2002. The adoption of FIN 45 had no impact on the Company. In December 2002, FASB Statement No. 148, Accounting for Stock-Based Compensation -- Transition and Disclosure, an amendment of FASB Statement No. 123 ("SFAS 148"), was issued. SFAS 148 amends FASB Statement No. 123, Accounting for Stock-Based Compensation, to provide alternative methods of transition for a voluntary change to the fair value method of accounting for stock-based employee compensation. In addition, SFAS 148 amends the disclosure requirements of SFAS 123 to require prominent disclosures in both annual and interim financial statements. Disclosures required by this standard are included in the notes to these consolidated financial statements. OFF-BALANCE SHEET ARRANGEMENTS The Company does not have any off-balance sheet arrangements. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK The Company's exposure to market risk relates to its variable rate debt. As of December 31, 2003 and 2002 the Company's variable rate indebtedness represented 19.9% and 15.9%, respectively, of total mortgages and notes payable. During 2003 and 2002, this variable rate indebtedness had a weighted average interest rate of 3.98% and 4.12%, respectively. Had the weighted average interest rate been 100 basis points higher the Company's net income would have been reduced by $0.6 million and $0.8 million in 2003 and 2002, respectively. 33 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA LEXINGTON CORPORATE PROPERTIES TRUST AND CONSOLIDATED SUBSIDIARIES INDEX
PAGE ----- Independent Auditors' Report................................ 35 Consolidated Balance Sheets as of December 31, 2003 and 2002...................................................... 36 Consolidated Statements of Income for the years ended December 31, 2003, 2002 and 2001.......................... 37 Consolidated Statements of Changes in Shareholders' Equity for the years ended December 31, 2003, 2002 and 2001...... 38 Consolidated Statements of Cash Flows for the years ended December 31, 2003, 2002 and 2001.......................... 39 Notes to Consolidated Financial Statements.................. 40-65 Financial Statement Schedule Schedule III -- Real Estate and Accumulated Depreciation.... 66-68
34 INDEPENDENT AUDITORS' REPORT The Shareholders Lexington Corporate Properties Trust: We have audited the consolidated financial statements of Lexington Corporate Properties Trust and 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 auditing standards generally accepted in the United States of America. 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 subsidiaries as of December 31, 2003 and 2002, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2003 in conformity with accounting principles generally accepted in the United States of America. 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. /s/ KPMG LLP New York, New York February 24, 2004 35 LEXINGTON CORPORATE PROPERTIES TRUST AND CONSOLIDATED SUBSIDIARIES CONSOLIDATED BALANCE SHEETS ($000 EXCEPT PER SHARE AMOUNTS) DECEMBER 31,
2003 2002 ---------- -------- ASSETS Real estate, at cost Buildings and building improvements....................... $ 973,475 $770,375 Land and land estates..................................... 178,077 131,496 Land improvements......................................... 2,666 3,154 Fixtures and equipment.................................... 8,177 8,345 ---------- -------- 1,162,395 913,370 Less: accumulated depreciation............................ 160,623 134,220 ---------- -------- 1,001,772 779,150 Properties held for sale -- discontinued operations......... 36,478 -- Intangible assets, net of accumulated amortization of $299...................................................... 14,736 -- Investment in and advances to non-consolidated entities..... 69,225 54,261 Cash and cash equivalents................................... 15,923 12,097 Deferred expenses (net of accumulated amortization of $4,891 in 2003 and $6,269 in 2002)............................... 10,013 8,168 Rent receivable............................................. 24,069 23,650 Other assets, net........................................... 35,195 25,145 ---------- -------- $1,207,411 $902,471 ========== ======== LIABILITIES AND SHAREHOLDERS' EQUITY Mortgages and notes payable................................. $ 455,940 $460,517 Credit facility borrowings.................................. 94,000 31,000 Mortgage note payable -- discontinued operations............ 1,445 -- Origination fees payable, including accrued interest........ 808 6,565 Accounts payable and other liabilities...................... 8,283 8,003 Accrued interest payable.................................... 1,576 2,755 Prepaid rent................................................ 2,482 -- ---------- -------- 564,534 508,840 Minority interests.......................................... 59,220 56,846 ---------- -------- 623,754 565,686 ---------- -------- Commitments and contingencies (notes 7, 9 and 13) Common shares, par value $0.0001 per share; 287,888 shares issued and outstanding, liquidation preference $3,886..... 3,809 3,809 ---------- -------- Shareholders' equity: Preferred shares, par value $0.0001 per share; authorized 10,000,000 shares. Series B Cumulative Redeemable Preferred, liquidation preference $79,000, 3,160,000 shares issued and outstanding in 2003.................. 76,315 -- Common shares, par value $0.0001 per share, authorized 80,000,000 shares, 40,394,113 and 29,742,160 shares issued and outstanding in 2003 and 2002, respectively........................................... 4 3 Additional paid-in-capital................................ 601,501 414,989 Deferred compensation, net................................ (6,265) (1,766) Accumulated distributions in excess of net income......... (91,707) (77,777) ---------- -------- 579,848 335,449 Less: notes receivable from officers/shareholders......... -- (2,473) ---------- -------- Total shareholders' equity............................. 579,848 332,976 ---------- -------- $1,207,411 $902,471 ========== ========
The accompanying notes are an integral part of these consolidated financial statements. 36 LEXINGTON CORPORATE PROPERTIES TRUST AND CONSOLIDATED SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME ($000 EXCEPT PER SHARE AMOUNTS) YEARS ENDED DECEMBER 31,
2003 2002 2001 ----------- ----------- ----------- Revenues: Rental.............................................. $ 111,658 $ 91,606 $ 76,096 Equity in earnings of non-consolidated entities..... 5,734 5,079 3,328 Advisory fees....................................... 1,401 -- -- Interest and other.................................. 1,727 1,647 1,132 ----------- ----------- ----------- 120,520 98,332 80,556 ----------- ----------- ----------- Expenses: Interest expense.................................... 34,881 33,161 29,331 Debt satisfaction charges........................... 7,566 345 3,993 Depreciation and amortization of real estate........ 27,110 21,049 17,534 Amortization of deferred expenses................... 2,226 1,812 1,628 General and administrative expenses................. 10,043 5,728 4,947 Property operating expenses......................... 3,882 2,347 1,624 ----------- ----------- ----------- 85,708 64,442 59,057 ----------- ----------- ----------- Income from continuing operations before minority interests........................................... 34,812 33,890 21,499 Minority interests.................................... 3,965 5,386 4,213 ----------- ----------- ----------- Income from continuing operations..................... 30,847 28,504 17,286 ----------- ----------- ----------- Discontinued operations: Income from discontinued operations................. 611 1,036 776 Gains on sales of properties........................ 2,191 1,055 -- ----------- ----------- ----------- Total income from discontinued operations........... 2,802 2,091 776 ----------- ----------- ----------- Net income............................................ $ 33,649 $ 30,595 $ 18,062 Dividends attributable to preferred shares -- Series A................................................... -- (693) (2,709) Dividends attributable to preferred shares -- Series B................................................... (3,392) -- -- ----------- ----------- ----------- Net income allocable to common shareholders........... $ 30,257 $ 29,902 $ 15,353 =========== =========== =========== Income per common share -- basic: Income from continuing operations..................... $ 0.81 $ 1.03 $ 0.75 Income from discontinued operations................... 0.08 0.08 0.04 ----------- ----------- ----------- Net income............................................ $ 0.89 $ 1.11 $ 0.79 =========== =========== =========== Weighted average common shares outstanding............ 34,074,935 27,026,789 19,522,323 =========== =========== =========== Income per common share -- diluted: Income from continuing operations..................... $ 0.80 $ 1.02 $ 0.73 Income from discontinued operations................... 0.08 0.07 0.04 ----------- ----------- ----------- Net income............................................ $ 0.88 $ 1.09 $ 0.77 =========== =========== =========== Weighted average diluted common shares outstanding.... 39,493,872 27,326,891 19,862,880 =========== =========== ===========
The accompanying notes are an integral part of these consolidated financial statements. 37 LEXINGTON CORPORATE PROPERTIES TRUST AND CONSOLIDATED SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY ($000 EXCEPT PER SHARE AMOUNTS) YEARS ENDED DECEMBER 31,
ACCUMULATED NUMBER OF NUMBER OF ADDITIONAL DEFERRED DISTRIBUTIONS PREFERRED COMMON PAID-IN COMPENSATION, IN EXCESS OF SHARES AMOUNT SHARES AMOUNT CAPITAL NET NET INCOME ---------- ------- ---------- ------ ---------- ------------- ------------- Balance at December 31, 2000....... 16,863,394 $2 $240,112 $(1,019) $(62,227) Net income......................... -- -- -- -- -- -- 18,062 Dividends paid to common shareholders ($1.27 per share)... -- -- -- -- -- -- (25,004) Dividends paid to preferred shareholders ($1.3335 per share)........................... -- -- -- -- -- -- (2,667) Common shares issued, net.......... -- -- 7,368,015 -- 102,206 (1,181) -- Amortization of deferred compensation..................... -- -- -- -- -- 559 -- Common shares repurchased and retired.......................... -- -- (12,000) -- (157) -- -- Repayments on notes................ -- -- -- -- -- -- -- ---------- ------- ---------- -- -------- ------- -------- Balance at December 31, 2001....... 24,219,409 2 342,161 (1,641) (71,836) Net income......................... -- -- -- -- -- -- 30,595 Dividends paid to common shareholders ($1.32 per share)... -- -- -- -- -- -- (35,843) Dividends paid to preferred shareholders ($0.3465 per share)........................... -- -- -- -- -- -- (693) Conversion of preferred shares..... -- -- 2,000,000 -- 24,369 -- -- Common shares issued, net.......... -- -- 3,522,751 1 48,459 (860) -- Amortization of deferred compensation..................... -- -- -- -- -- 735 -- ---------- ------- ---------- -- -------- ------- -------- Balance at December 31, 2002....... -- -- 29,742,160 3 414,989 (1,766) (77,777) Net income......................... -- -- -- -- -- -- 33,649 Dividends paid to common shareholders ($1.34 per share)... -- -- -- -- -- -- (45,777) Dividends paid to preferred shareholders ($0.5702 per share)........................... -- -- -- -- -- -- (1,802) Common shares issued, net.......... -- -- 10,810,177 1 188,985 (5,887) -- Issuance of preferred shares, net.............................. 3,160,000 76,315 -- -- -- -- -- Amortization of deferred compensation..................... -- -- -- -- -- 1,388 -- Repayments on notes................ -- -- (158,224) (2,473) -- -- ---------- ------- ---------- -- -------- ------- -------- Balance at December 31, 2003....... 3,160,000 $76,315 40,394,113 $4 $601,501 $(6,265) $(91,707) ========== ======= ========== == ======== ======= ======== NOTES RECEIVABLE TOTAL OFFICERS/ SHAREHOLDERS' SHAREHOLDERS EQUITY ------------ ------------- Balance at December 31, 2000....... $(1,983) $174,885 Net income......................... -- 18,062 Dividends paid to common shareholders ($1.27 per share)... -- (25,004) Dividends paid to preferred shareholders ($1.3335 per share)........................... -- (2,667) Common shares issued, net.......... -- 101,025 Amortization of deferred compensation..................... -- 559 Common shares repurchased and retired.......................... -- (157) Repayments on notes................ 10 10 ------- -------- Balance at December 31, 2001....... (1,973) 266,713 Net income......................... -- 30,595 Dividends paid to common shareholders ($1.32 per share)... -- (35,843) Dividends paid to preferred shareholders ($0.3465 per share)........................... -- (693) Conversion of preferred shares..... -- 24,369 Common shares issued, net.......... (500) 47,100 Amortization of deferred compensation..................... -- 735 ------- -------- Balance at December 31, 2002....... (2,473) 332,976 Net income......................... -- 33,649 Dividends paid to common shareholders ($1.34 per share)... -- (45,777) Dividends paid to preferred shareholders ($0.5702 per share)........................... -- (1,802) Common shares issued, net.......... -- 183,099 Issuance of preferred shares, net.............................. -- 76,315 Amortization of deferred compensation..................... -- 1,388 Repayments on notes................ 2,473 -- ------- -------- Balance at December 31, 2003....... $ -- $579,848 ======= ========
The accompanying notes are an integral part of these consolidated financial statements. 38 LEXINGTON CORPORATE PROPERTIES TRUST AND CONSOLIDATED SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS ($000) YEARS ENDED DECEMBER 31,
2003 2002 2001 --------- --------- -------- Cash flows from operating activities: Net income............................................... $ 33,649 $ 30,595 $ 18,062 Adjustments to reconcile net income to net cash provided by operating activities, net of effects from acquisitions: Depreciation and amortization......................... 29,572 23,375 19,952 Minority interests.................................... 4,276 5,707 4,534 Gain on sale of properties............................ (2,191) (1,055) -- Straight-line rents................................... (3,790) (2,426) (2,755) Other non-cash charges................................ 2,026 1,016 1,508 Equity in earnings of non-consolidated entities....... (5,734) (5,079) (3,328) Distributions from non-consolidated entities.......... 8,495 5,704 4,593 Increase (decrease) in accounts payable and other liabilities......................................... 1,708 539 (2,140) Other adjustments, net................................ 3,804 (644) 851 --------- --------- -------- Net cash provided by operating activities........... 71,815 57,732 41,277 --------- --------- -------- Cash flows from investing activities: Net proceeds from sale/transfer of properties............ 34,943 20,756 4,107 Acquisition of the Net Partnerships, net of debt assumed and $3,777 in cash.................................... -- -- (27,835) Investments in properties................................ (327,435) (114,272) (19,363) Investments in non-consolidated entities................. (6,824) (5,539) (5,620) Advances to non-consolidated entities.................... (2,331) (2,158) (4,195) Investment in and advances to the Net Partnerships....... -- -- (10,979) Real estate deposits..................................... (23,101) (4,817) (436) Distribution of loan proceeds from non-consolidated entities.............................................. 26,899 -- -- Increase in deferred leasing costs....................... (1,034) -- -- --------- --------- -------- Net cash used in investing activities............... (298,883) (106,030) (64,321) --------- --------- -------- Cash flows from financing activities: Proceeds of mortgages and notes payable.................. 90,882 49,165 100,194 Change in credit facility borrowing, net................. 63,000 21,000 (31,821) Dividends to common and preferred shareholders........... (47,579) (36,536) (27,671) Dividend reinvestment plan proceeds...................... 7,095 4,870 2,507 Principal payments on debt, excluding normal amortization.......................................... (107,942) (10,049) (48,611) Principal amortization payments.......................... (16,121) (14,091) (12,354) Origination fee amortization payments.................... (406) (372) (372) Common shares issued, net of offering costs.............. 174,152 41,595 61,021 Preferred shares issued, net of offering costs........... 76,315 -- -- Cash distributions to minority interests................. (6,618) (6,304) (6,236) Change in escrow deposits and restricted cash............ 451 (1,396) (1,002) Increase in deferred expenses............................ (3,913) (1,350) (3,203) Common shares/partnership units repurchased.............. -- -- (348) Other.................................................... -- -- 11 --------- --------- -------- Net cash provided by financing activities........... 229,316 46,532 32,115 --------- --------- -------- Cash attributable to newly consolidated entity............. 1,578 -- -- --------- --------- -------- Change in cash and cash equivalents........................ 3,826 (1,766) 9,071 Cash and cash equivalents, beginning of year............... 12,097 13,863 4,792 --------- --------- -------- Cash and cash equivalents, end of year..................... $ 15,923 $ 12,097 $ 13,863 ========= ========= ========
The accompanying notes are an integral part of these consolidated financial statements. 39 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 self-managed and self-administered Maryland statutory real estate investment trust ("REIT") that acquires, owns, and manages a geographically diversified portfolio of net leased office, industrial and retail properties and provides investment advisory and asset management services to institutional investors in the net lease area. As of December 31, 2003, the Company owned or had interests in 118 properties in 35 states. The real properties owned by the Company are generally subject to triple net leases to corporate tenants, however six provide for operating expense stops, two are subject to modified gross leases and one required the Company to be responsible for real estate taxes in 2003 and for the tenant to be responsible thereafter. The Company's Board of Trustees authorized the Company to repurchase, from time to time, up to 2.0 million common shares and/or operating partnership units ("OP Units") in it's three controlled operating partnership subsidiaries, depending on market conditions and other factors. As of December 31, 2003, the Company repurchased approximately 1.4 million common shares/OP Units at an average price of approximately $10.55 per common share/OP Unit. No shares or OP Units were repurchased in 2003 or 2002. (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"), Lepercq Corporate Income Fund II L.P. ("LCIF II"), Net 3 Acquisition L.P. ("Net 3"), Lexington Realty Advisors, Inc. ("LRA") and Lexington Contributions, Inc. ("LCI"), a wholly owned subsidiary. The Company is the sole equity owner of each of the general partner and majority limited partner of LCIF, LCIF II and Net 3. Effective January 1, 2003, the Company converted its non-voting interest in LRA to a 100% voting interest and accordingly has consolidated LRA in 2003 while it was accounted for under the equity method in 2002 and 2001. Earnings Per Share. Basic net income per share is computed by dividing net income reduced by preferred dividends, if applicable, 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 OP Units. Recently Issued Accounting Standards. In December 2003, the FASB issued FASB Interpretation No. 46 (revised December 2003), Consolidation of Variable Interest Entities ("VIEs"), which addresses how a business enterprise should evaluate whether it has a controlling financial interest in an entity through means other than voting rights and accordingly should consolidate the entity. FIN 46R replaces FASB Interpretation No. 46, Consolidation of Variable Interest Entities, which was issued in January 2003. The Company will be required to adopt FIN 46R in the first fiscal period beginning after March 15, 2004. Upon adoption of FIN 46R, the assets, liabilities and noncontrolling interests of the VIE initially would be measured at their carrying amounts with any difference between the net amount added to the balance sheet and any previously recognized interest being recognized as the cumulative effect of an accounting change. If determining the carrying amounts is not practicable, fair value at the date FIN 46R first applies may be used to measure the assets, liabilities and noncontrolling interest of the VIE. It is not anticipated that the effect on the Company's Consolidated Financial Statements would be material. 40 LEXINGTON CORPORATE PROPERTIES TRUST AND CONSOLIDATED SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) ($000'S EXCEPT PER SHARE DATA) FASB Statement No. 150, Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity ("SFAS 150"), was issued in May 2003. SFAS 150 establishes standards for the classification and measurement of certain financial instruments with characteristics of both liabilities and equity. SFAS 150 also includes required disclosures for financial instruments within its scope. For the Company, SFAS 150 was effective for instruments entered into or modified after May 31, 2003 and otherwise will be effective as of January 1, 2004, except for mandatorily redeemable financial instruments. For certain mandatorily redeemable financial instruments, SFAS 150 will be effective for the Company on January 1, 2005. The effective date of this pronouncement has been deferred indefinitely for certain other types of mandatorily redeemable financial instruments. The Company currently does not have any financial instruments that are within the scope of SFAS 150. In April 2002, FASB Statement No. 145, Rescission of FASB Statements No. 4, 44 and 64, Amendment of FASB Statement No. 13, and Technical Corrections ("SFAS 145"), was issued. SFAS 145 amends existing guidance on reporting gains and losses on the extinguishment of debt to prohibit the classification of the gain or loss as extraordinary, as the use of such extinguishments have become part of the risk management strategy of many companies. SFAS 145 also amends FASB Statement No. 13, Accounting for Leases, to require sale-leaseback accounting for certain lease modifications that have economic effects similar to sale-leaseback transactions. The provisions of Statement 145 related to the rescission of FASB Statement No. 4, Reporting Gains and Losses from Extinguishment of Debt, were applied in fiscal years beginning after May 15, 2002. The provisions of SFAS 145 related to SFAS 13 were effective for transactions occurring after May 15, 2002. The adoption of SFAS 145 required the Company to record as debt satisfaction charges, as a component of continuing operations, costs incurred in the early retirement of debt instead of as an extraordinary item. In June 2002, FASB Statement No. 146, Accounting for Costs Associated with Exit or Disposal Activities ("SFAS 146"), was issued. SFAS 146 addresses financial accounting and reporting or costs associated with exit or disposal activities and nullifies EITF Issue No. 94-3, Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity. The provisions of SFAS 146 were effective for exit or disposal activities initiated after December 31, 2002, with early application encouraged. The adoption of SFAS 146 had no impact on the Company. In November 2002, FASB Interpretation No. 45, Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness to Others, an interpretation of FASB Statements No. 5, 57 and 107 and a rescission of FASB Interpretation No. 34 ("FIN 45"), was issued. FIN 45 enhances the disclosures to be made by a guarantor in its interim and annual financial statements about its obligations under guarantees issued. FIN 45 also clarifies that a guarantor is required to recognized, at inception of a guarantee, a liability for the fair value of the obligation undertaken. The initial recognition and measurement provisions of the FIN 45 were applicable to guarantees issued or modified after December 31, 2002 and the disclosure requirements were effective for financial statements of interim or annual periods ending after December 15, 2002. The adoption of FIN 45 had no impact on the Company. In December 2002, FASB Statement No. 148, Accounting for Stock-Based Compensation -- Transition and Disclosure, an amendment of FASB Statement No. 123 ("SFAS 148"), was issued. SFAS 148 amends FASB SFAS No. 123, Accounting for Stock-Based Compensation, to provide alternative methods of transition for a voluntary change to the fair value method of accounting for stock-based employee compensation. In addition, SFAS 148 amends the disclosure requirements of Statement 123 to require prominent disclosures in both annual and interim financial statements. Disclosures required by this standard are included in the notes to these consolidated financial statements. 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 41 LEXINGTON CORPORATE PROPERTIES TRUST AND CONSOLIDATED SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) ($000'S EXCEPT PER SHARE DATA) revenues and expenses to prepare these consolidated financial statements in conformity with generally accepted accounting principles. The most significant estimates made include the recoverability of accounts receivable (primarily related to straight-line rents) and the useful lives of assets. Actual results could differ from those estimates. Purchase Accounting for Acquisition of Real Estate. The fair value of the real estate acquired is allocated to the acquired tangible assets, consisting of land, building and improvements, and identified intangible assets and liabilities, consisting of the value of above-market and below-market leases, other value of in-place leases and value of tenant relationships, based in each case on their fair values. The fair value of the tangible assets of an acquired property (which includes land, building and improvements) is determined by valuing the property as if it were vacant, and the "as-if-vacant" value is then allocated to land, building and improvements based on management's determination of relative fair values of these assets. Factors considered by management in performing these analyses include an estimate of carrying costs during the expected lease-up periods considering current market conditions and costs to execute similar leases. In estimating carrying costs, management includes real estate taxes, insurance and other operating expenses and estimates of lost rental revenue during the expected lease-up periods based on current market demand. Management also estimates costs to execute similar leases including leasing commissions. In allocating the fair value of the identified intangible assets and liabilities of an acquired property, above-market and below-market in-place lease values are recorded based on the difference between the current in-place lease rent and a management estimate of current market rents. The aggregate value of other acquired intangible assets, consisting of in-place leases and tenant relationships, is measured by the excess of (i) the purchase price paid for a property over (ii) the estimated fair value of the property as if vacant, determined as set forth above. This aggregate value is allocated between in-place lease values and tenant relationships based on management's evaluation of the specific characteristics of each tenant's lease. The value of in-place leases and customer relationships are amortized to expense over the remaining non-cancelable periods of the respective leases. Revenue Recognition. The Company recognizes revenue in accordance with Statement of Financial Accounting Standards No. 13 Accounting for Leases ("SFAS 13"). SFAS 13 requires that revenue be recognized on a straight line basis over the term of the lease unless another systematic and rational basis is more representative of the time pattern in which the use benefit is derived from the leased property. Gains on sales of real estate are recognized pursuant to the provisions of Statement of Financial Accounting Standards No. 66 Accounting for Sales of Real Estate ("SFAS 66"). The specific timing of the sale is measured against various criteria in SFAS 66 related to the terms of the transactions and any continuing involvement in the form of management or financial assistance associated with the properties. If the sales criteria are not met, the gain is deferred and the finance, installment or cost recovery method, as appropriate, is applied until the sales criteria are met. Accounts Receivable. The Company continuously monitors collections from its tenants and would make a provision for estimated losses based upon historical experience and any specific tenant collection issues that the Company has identified. Real Estate. The Company evaluates the carrying value of all real estate held to determine if an impairment has occurred which would require the recognition of a loss. The evaluation includes reviewing anticipated cash flows of the property, based on current leases in place, coupled with an estimate of proceeds to be realized upon sale. However, estimating future sale proceeds is highly subjective and such estimates could differ materially from actual results. 42 LEXINGTON CORPORATE PROPERTIES TRUST AND CONSOLIDATED SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) ($000'S EXCEPT PER SHARE DATA) 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 periods not exceeding 40 years, land improvements over a 20-year period, and fixtures and equipment over a 12-year period. Only costs incurred to third parties in acquiring properties are capitalized. No internal costs (rents, salaries, overhead) 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 non-consolidated entities. The Company accounts for its investments in less than 50% owned entities under the equity method unless pursuant to FIN 46R consolidation is required. Deferred Expenses. Deferred expenses consist primarily of debt placement costs and are amortized using the straight-line method, which approximates the interest method, over the terms of the debt instruments and leasing costs which are amortized over the life of the lease. Deferred Compensation. Deferred compensation consists of the value of non-vested common shares issued by the Company to employees and trustees. The deferred compensation is amortized ratably over the vesting period which generally is five years. Tax Status. The Company has made an election to qualify, and believes it is operating so as to qualify, as a REIT under the Internal Revenue Code. A REIT is generally not subject to Federal income tax on that portion of its REIT taxable income which is distributed to its shareholders, provided that at least 90% of taxable income is distributed. As distributions have equaled or exceeded taxable income, no provision for Federal income taxes has been made. State and local income taxes, which are not significant, have been provided for those states and localities in which the Company operates and is subject to an income tax. LRA and LCI have elected to be treated as taxable REIT subsidiaries. A summary of the average taxable nature of the Company's common dividends for each of the years in the three year period ended December 31, 2003 is as follows:
2003 2002 2001 ------ ------ ------ Total common dividends per share............................ $ 1.34 $ 1.32 $ 1.27 ====== ====== ====== Ordinary income............................................. 68.94% 77.89% 95.46% Short-term capital gain..................................... -- 2.27 -- 15% rate gain............................................... 3.10 -- -- 20% rate gain............................................... -- 4.12 -- 25% rate gain............................................... 0.70 5.65 -- Return of capital........................................... 27.26 10.07 4.54 ------ ------ ------ 100.00% 100.00% 100.00% ====== ====== ======
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. Common Share Options. The Company has elected to continue to account for its option plan under the recognition provisions of Accounting Principles Board Opinion No. 25 "Accounting for Stock Issued to Employees." Accordingly, no compensation cost has been recognized with regard to options granted in the Consolidated Statements of Income. 43 LEXINGTON CORPORATE PROPERTIES TRUST AND CONSOLIDATED SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) ($000'S EXCEPT PER SHARE DATA) Common share options granted generally vest ratably over a four-year term and expire five years from the date of grant. The following table illustrates the effect on net income and earnings per share if the fair value based method had been applied to all outstanding common share option awards in each period:
2003 2002 2001 ------- ------- ------- Net income allocable to common shareholders, as reported -- basic.................................. $30,257 $29,902 $15,353 Add: Stock based employee compensation expense include in reported net income.................. -- -- -- Deduct: Total stock based employee compensation expense determined under fair value based method for all awards.................................. 509 975 1,409 ------- ------- ------- Pro forma net income -- basic........................ $29,748 $28,927 $13,944 ======= ======= ======= Net income per share -- basic Basic -- as reported............................... $ 0.89 $ 1.11 $ 0.79 ======= ======= ======= Basic -- pro forma................................. $ 0.87 $ 1.07 $ 0.71 ======= ======= ======= Net income allocable to common shareholders, as reported -- diluted................................ $34,740 $29,902 $15,353 Add: Stock based employee compensation expense include in reported net income.................. -- -- -- Deduct: Total stock based employee compensation expense determined under fair value based method for all awards.................................. 509 975 1,409 ------- ------- ------- Pro forma net income -- diluted...................... $34,231 $28,927 $13,944 ======= ======= ======= Net income per share -- diluted Diluted -- as reported............................. $ 0.88 $ 1.09 $ 0.77 ======= ======= ======= Diluted -- pro forma............................... $ 0.87 $ 1.06 $ 0.70 ======= ======= =======
The per share weighted average fair value of options granted during 2002 and 2001 were estimated to be $2.42 and $2.00, 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 3.32% in 2002 and 3.35% in 2001; (ii) an expected life of five years; (iii) volatility factors of 15.11% and 15.79% for 2002 and 2001, respectively; and (iv) actual dividends paid. The value of common share options issued in 2003 were estimated to be $2.42. Reclassifications. Certain amounts included in prior years' financial statements have been reclassified to conform with the current year presentation. 44 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, 2003:
2003 2002 2001 ----------- ----------- ----------- BASIC Income from continuing operations..................... $ 30,847 $ 28,504 $ 17,286 Less -- dividends attributable to preferred shares.... (3,392) (693) (2,709) ----------- ----------- ----------- Income attributed to common shareholders from continuing operations............................... 27,455 27,811 14,577 Total income from discontinued operations............. 2,802 2,091 776 ----------- ----------- ----------- Net income attributed to common shareholders.......... $ 30,257 $ 29,902 $ 15,353 =========== =========== =========== Weighted average number of common shares outstanding......................................... 34,074,935 27,026,789 19,522,323 =========== =========== =========== Income per common share -- basic: Income from continuing operations..................... $ 0.81 $ 1.03 $ 0.75 Income from discontinued operations................... 0.08 0.08 0.04 ----------- ----------- ----------- Net income............................................ $ 0.89 $ 1.11 $ 0.79 =========== =========== =========== DILUTED Income attributed to common shareholders from continuing operations............................... $ 27,455 $ 27,811 $ 14,577 Add -- incremental income attributed to assumed conversion of dilutive securities................... 3,965 -- -- ----------- ----------- ----------- Income attributed to common shareholders from continuing operations............................... 31,420 27,811 14,577 Income from discontinued operations................... 3,320 2,091 776 ----------- ----------- ----------- Net income attributed to common shareholders.......... $ 34,740 $ 29,902 $ 15,353 =========== =========== =========== Weighted average number of shares used in calculation of basic earnings per share......................... 34,074,935 27,026,789 19,522,323 Add -- incremental shares representing: Shares issuable upon exercise of employee share options............................................. 202,504 300,102 340,557 Shares issuable upon conversion of dilutive securities.......................................... 5,216,433 -- -- ----------- ----------- ----------- Weighted average number of shares used in calculation of diluted earnings per common share................ 39,493,872 27,326,891 19,862,880 =========== =========== =========== Income per common share -- diluted: Income from continuing operations..................... $ 0.80 $ 1.02 $ 0.73 Income from discontinued operations................... 0.08 0.07 0.04 ----------- ----------- ----------- Net income............................................ $ 0.88 $ 1.09 $ 0.77 =========== =========== ===========
45 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 2003 and 2002, the Company made the following acquisitions, excluding acquisitions made by non-consolidated entities:
NET RENTABLE DATE OF ACQUISITION LEASE SQUARE ACQUISITION TENANT LOCATION COST EXPIRES FEET ----------- -------------------------------------- --------------- ----------- ------- --------- 2003 - --------------------- February Oce Printing Systems USA, Inc Boca Raton, FL $ 23,551 2020 143,290 June Owens Corning Minneapolis, MN 4,610 2015 18,620 July The McGraw-Hill Companies, Inc Dubuque, IA 11,424 2015 330,988 August Verizon Wireless Greenville, SC 21,745 2012 192,884 September Tower Automotive Products Company Plymouth, MI 20,710 2012 290,133 October Nextel Communications of Texas, Inc Temple, TX 15,301 2016 108,800 October Nextel West Corporation Bremerton, WA 11,301 2016 60,200 December Employers Reinsurance Corporation Overland Park, KS 53,779 2018 320,198 December Employers Reinsurance Corporation Kansas City, MO 25,676 2019 166,641 December Bell South Mobility, Inc Baton Rouge, LA 10,742 2012 70,100 December Minnesota Mining and Manufacturing Wallingford, CT 5,525 2010 44,400 December Siemens Dematic Postal Automation L.P. Arlington, TX 30,286 2014 233,783 December James Hardie Building Products, Inc Waxahachie, TX 32,568 2020 425,816 -------- --------- $267,218 2,405,853 ======== ========= 2002 - --------------------- March Apria Healthcare Group, Inc Lake Forest, CA $ 16,970 2012 100,012 August Quest Diagnostics, Inc Valley Forge, 19,500 2011 109,281 PA August AdvancePCS, Inc Knoxville, TN 8,100 2013 59,748 September Anda Pharmaceuticals, Inc Groveport, OH 11,800 2012 354,676 December North American Van Lines Westmont, IL 24,825 2015 269,715 December Wells Fargo Home Mortgage Fort Mill, SC 17,933 2013 169,083 -------- --------- $ 99,128 1,062,515 ======== =========
The 2003 acquisitions do not include the purchases of a property in Novato, California and Malvern, Pennsylvania which were acquired by the Company and subsequently transferred to a joint venture during 2003. The Company received $23,849 in cash resulting from these transfers. The Company sold four properties, to unrelated parties, in 2003, four properties and one building in the Palm Beach Gardens, Florida property in 2002 and one property in 2001 for aggregate net proceeds of $11,094, $16,342 and $4,107, respectively, which resulted in gains in 2003, 2002 and 2001 of $2,191, $1,055 and $0, respectively. In addition, the Company sold in 2002 a 77.3% interest in a property (along with the related non-recourse mortgage) in Florence, South Carolina for net proceeds of $4,414 and deferred a $671 gain on sale since the purchasers can put their interests in the property to the Company for a six month period commencing January 2004 for $4,581. 46 LEXINGTON CORPORATE PROPERTIES TRUST AND CONSOLIDATED SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) ($000'S EXCEPT PER SHARE DATA) During 2002, the Company expanded its property in Lancaster, California net leased to Michaels Stores, Inc. The expansion, which cost $15,200, is leased to the tenant through September 2019 for an annual rent of $1,808. In connection with the expansion, the initial lease term was also extended to September 2019. The following unaudited pro forma operating information for the years ended December 31, 2003 and 2002 has been prepared as if all Company acquisitions and dispositions (including non-consolidated entities) in 2003 and 2002 had been consummated as of January 1, 2002. 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, 2002. Unaudited pro forma amounts are as follows:
DECEMBER 31, DECEMBER 31, 2003 2002 ------------ ------------ Revenues.................................................... $137,757 $129,268 Net income.................................................. $ 42,296 $ 43,765 Net income per common share: Basic..................................................... $ 1.14 $ 1.59 Diluted................................................... $ 1.09 $ 1.52
(5) DISCONTINUED OPERATIONS AND ASSETS HELD FOR SALE In August 2001, the Financial Accounting Standards Board issued Statement of Financial Accounting Standard No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets ("SFAS 144"). SFAS 144 established criteria beyond that previously specified in Statement of Financial Accounting Standard No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of ("SFAS 121"), to determine when a long-lived assets is classified as held for sale, and it provides a single accounting model for the disposal of long-lived assets. SFAS 144 was effective beginning January 1, 2002. In accordance with SFAS 144, the Company now reports as discontinued operations assets held for sale (as defined by SFAS 144) as of the end of the current period and assets sold subsequent to January 1, 2002. All results of these discontinued operations are included in a separate component of income on the Consolidated Statements of Income under discontinued operations. At December 31, 2003, the Company has three properties held for sale with an aggregate carrying value of $36,478 which management anticipates will be sold in 2004. One of these properties is encumbered by a non-recourse mortgage payable of $1,445. The following presents the operating results for the properties sold and held for sale in 2003 and 2002 for the applicable periods:
YEAR ENDED DECEMBER 31, ------------------------ 2003 2002 2001 ------ ------ ------ Revenues................................................... $1,422 $2,287 $2,306 Pre-tax income, including gains on sales................... $2,963 $2,091 $ 776
(6) INVESTMENT IN NON-CONSOLIDATED ENTITIES The Company has investments in various real estate joint ventures. The business of each joint venture is to acquire, finance, hold for investment or sell single tenant net leased real estate. Lexington Acquiport Company, LLC Lexington Acquiport Company, LLC ("LAC"), is a joint venture with the Comptroller of the State of New York as Trustee for the Common Retirement Fund ("CRF"). The joint venture agreement expires in 47 LEXINGTON CORPORATE PROPERTIES TRUST AND CONSOLIDATED SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) ($000'S EXCEPT PER SHARE DATA) December 2011. The Company and CRF originally committed to contribute up to $50,000 and $100,000, respectively, to invest in high quality office and industrial net leased real estate. Through December 31, 2003 total contributions to LAC were $144,332. In 2003, the Company and CRF purchased a property outside the LAC joint venture which required an aggregate capital contribution of $3,751. The partners agreed that the aggregate of these contributions would close the funding obligations to LAC. LRA earns annual management fees of 2% of rent collected and acquisition fees equaling 75 basis points of purchase price of each property investment. All allocations of profit, loss and cash flows are made one-third to the Company and two-thirds to CRF. During 2001, the Company and CRF announced the formation of Lexington Acquiport Company II, LLC ("LAC II"). The Company and CRF have committed $50,000 and $150,000, respectively. In addition to the fees LRA currently earns for acquisitions and asset management in LAC, LRA will also earn 50 basis points on all mortgage debt directly placed in LAC II. All allocations of profit, loss and cash flows from all properties acquired by this joint venture will be allocated 25% to the Company and 75% to CRF. As of December 31, 2003, LAC II has not made any investments. CRF can presently elect to put their equity position in LAC to the Company. The Company has the option of issuing common shares for the fair market value of CRF's equity position (as defined) or cash for 110% of the fair market value of CRF's equity position. The per common share value of shares issued for CRF's equity position will be the greater of (i) the price of the Company's common shares on the closing date (ii) the Company's funds from operations per share (as defined) multiplied by 8.5 or (iii) $13.40 for LAC properties (all properties that are currently owned) and $15.20 for LAC II properties. The Company has the right not to accept any property (thereby reducing the fair market value of CRF's equity position) that does not meet certain underwriting criteria (e.g. lease term and tenant credit). In addition, the operating agreement contains a mutual buy-sell provision in which either partner can force the sale of any property. During 2003 and 2002, LAC made the following investments:
NET RENTABLE DATE OF ACQUISITION LEASE SQUARE ACQUISITION TENANT LOCATION COST EXPIRES FEET - ----------- --------------------------------- -------------------- ----------- ------- --------- 2003 March Motorola, Inc. Farmington Hills, MI $32,650 2016 119,829 December Honeywell, International, Inc. Colorado Springs, CO 16,800 2013 166,575 ------- --------- $49,450 286,404 ======= ========= 2002 August TNT Logistics North America, Inc. Laurens, SC $27,100 2012 1,164,000 August TNT Logistics North America, Inc. Temperance, MI 18,186 2012 752,000 ------- --------- $45,286 1,916,000 ======= =========
48 LEXINGTON CORPORATE PROPERTIES TRUST AND CONSOLIDATED SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) ($000'S EXCEPT PER SHARE DATA) Summarized balance sheet data as of December 31, 2003 and 2002 and income statement data for the years ended December 31, 2003, 2002 and 2001 is as follows:
2003 2002 -------- -------- Real estate, net............................................ $328,525 $286,311 Note receivable............................................. 11,009 11,009 Cash and cash equivalents................................... 2,309 3,989 Other assets................................................ 11,712 6,580 -------- -------- $353,555 $307,889 ======== ======== Mortgages payable........................................... $211,071 $180,223 Other liabilities........................................... 6,617 1,934 Equity...................................................... 135,867 125,732 -------- -------- $353,555 $307,889 ======== ========
2003 2002 2001 -------- -------- -------- Revenues.................................................... $ 36,696 $ 31,228 $ 28,661 Interest expense............................................ (14,453) (12,628) (11,910) Depreciation of real estate................................. (6,786) (5,408) (4,932) Other....................................................... (3,147) (2,925) (3,147) -------- -------- -------- Net income................................................ $ 12,310 $ 10,267 $ 8,672 ======== ======== ========
As of December 31, 2003, the LAC properties are 100% leased and have scheduled lease expiration dates ranging from 2009 to 2016. Minimum future rental receipts under the non-cancelable portion of the tenant leases, assuming no new or negotiated leases, for the next five years and thereafter are as follows:
YEAR ENDING DECEMBER 31, - ------------ 2004........................................................ $ 36,259 2005........................................................ 38,262 2006........................................................ 38,842 2007........................................................ 39,468 2008........................................................ 39,912 Thereafter.................................................. 67,275 -------- $260,018 ========
49 LEXINGTON CORPORATE PROPERTIES TRUST AND CONSOLIDATED SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) ($000'S EXCEPT PER SHARE DATA) The mortgages payable bear interest at rates ranging from 5.42% to 8.19% and mature at various dates ranging from 2010 to 2012. Scheduled principal amortization and balloon payments for the mortgages for the next five years and thereafter are as follows:
YEAR ENDING SCHEDULED BALLOON DECEMBER 31, AMORTIZATION PAYMENTS TOTAL - ------------ ------------ -------- -------- 2004.............................................. $ 2,881 $ -- $ 2,881 2005.............................................. 3,160 -- 3,160 2006.............................................. 3,410 -- 3,410 2007.............................................. 3,705 -- 3,705 2008.............................................. 3,969 -- 3,969 Thereafter........................................ 11,738 182,208 193,946 ------- -------- -------- $28,863 $182,208 $211,071 ======= ======== ========
In 2003, the Company and CRF purchased a property outside the LAC partnership for $22,700. The property is subject to a lease through 2021, but can be canceled by the tenant in September 2011 with a payment of $23,433. If cancelled after September 2011 the termination payment is determined based upon a scheduled amount. In all situations the termination payment exceeds the estimated balance outstanding on the non-recourse mortgage encumbering the property. The property acquisition was partially funded through the assumption of a $19,182 non-recourse mortgage that bears interest at 6.73% and matures in 2021. There are no principal amortization payments required under this note from 2004 through 2008. During 2003, LRA earned an acquisition fee of $114. All allocations of profit, loss and cash flows are made one-third to the Company and two-third to CRF. In addition, LRA earns fees under the same structure as the LAC agreement. Minimum future rental receipts under the non-cancelable portion of the tenant lease, assuming no new or negotiated lease, for the next five years and thereafter are as follows:
YEAR ENDING DECEMBER 31, - ------------ 2004........................................................ $ 1,833 2005........................................................ 1,833 2006........................................................ 1,665 2007........................................................ 1,665 2008........................................................ 1,315 Thereafter.................................................. 3,884 ------- $12,195 =======
Lexington Columbia LLC Lexington Columbia LLC ("Columbia") is a joint venture established December 30, 1999 with a private investor. Its sole purpose is to own a property in Columbia, South Carolina net leased to Blue Cross Blue Shield of South Carolina, Inc. through September 2009. The purchase price of the property was approximately $42,500 and was partially funded through a 10 year, $25,300 non-recourse mortgage note bearing 50 LEXINGTON CORPORATE PROPERTIES TRUST AND CONSOLIDATED SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) ($000'S EXCEPT PER SHARE DATA) interest at 7.85%. In accordance with the operating 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 40% to the partner. During 2001, Columbia expanded the property by 107,894 square feet bringing the total square feet of the property to 456,304. The $10,900 expansion was funded 40% by the Company and 60% by the partner. The tenant has leased the expansion through September 2009 for an average annual rent of $2,000. Cash flows from the expansion will be distributed 40% to the Company and 60% to the partner. LRA earns annual asset management fees of 2% of rents collected. Summarized financial information for the underlying property investment as of December 31, 2003 and 2002 and for the years ended December 31, 2003, 2002 and 2001 is as follows:
2003 2002 ------- ------- Real estate, net............................................ $46,465 $48,454 Other assets................................................ 2,727 2,438 ------- ------- $49,192 $50,892 ======= ======= Mortgage payable............................................ $24,410 $24,653 Accrued interest............................................ 165 167 Equity...................................................... 24,617 26,072 ------- ------- $49,192 $50,892 ======= =======
2003 2002 2001 ------- ------- ------- Rental income......................................... $ 6,930 $ 6,930 $ 5,412 Interest expense...................................... (1,952) (1,970) (1,851) Depreciation.......................................... (1,988) (1,988) (1,664) Other................................................. (184) (196) (133) ------- ------- ------- Net income.......................................... $ 2,806 $ 2,776 $ 1,764 ======= ======= =======
51 LEXINGTON CORPORATE PROPERTIES TRUST AND CONSOLIDATED SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) ($000'S EXCEPT PER SHARE DATA) Minimum future rental receipts under the non-cancelable operating lease, assuming no new or renegotiated lease, for the next five years and thereafter is as follows:
YEAR ENDING DECEMBER 31, - ------------ 2004........................................................ $ 6,655 2005........................................................ 7,377 2006........................................................ 7,377 2007........................................................ 7,377 2008........................................................ 7,377 Thereafter.................................................. 5,531 ------- $41,694 =======
Scheduled principal amortization and balloon payment for the mortgage payable for the next five years and thereafter is as follows:
YEAR ENDING SCHEDULED BALLOON DECEMBER 31, AMORTIZATION PAYMENT TOTAL - ------------ ------------ ------- ------- 2004................................................ $ 257 $ -- $ 257 2005................................................ 284 -- 284 2006................................................ 307 -- 307 2007................................................ 332 -- 332 2008................................................ 355 -- 355 Thereafter.......................................... 289 22,586 22,875 ------ ------- ------- $1,824 $22,586 $24,410 ====== ======= =======
Lexington/Lion Venture L.P. Lexington/Lion Venture LP (LION) was formed on October 1, 2003 by the Company and CLPF-LXP/ Lion Venture GP, LLC (Clarion), to invest in high quality single tenant net leased retail, office and industrial real estate. The limited partnership agreement provides for a ten-year term unless terminated sooner pursuant to the terms of the partnership agreement. The limited partnership agreement provides for the Company and Clarion to invest up to $30,000 and $70,000, respectively, and to leverage these investments up to a maximum of 60%. LRA earns acquisition and asset management fees as defined in the operating agreement. All allocation of profit, loss and cash flows are made 30% to the Company and 70% to Clarion until each partner receives a 12% internal rate of return. The Company is eligible to receive a promoted interest of 15% of the internal rate of return in excess of 12%. No promoted interest was earned in 2003. Clarion can elect to put their equity position in LION to the Company commencing when $100,000 in capital is contributed to the venture or January 2, 2006, whichever occurs first. The Company has the option of issuing common shares for the fair market value of Clarion's equity position (as defined) or cash for 100% of the fair market value of Clarion's equity position. The per common share value of shares issued for Clarion's equity position will be the greater of (i) the price of the Company's common shares on the closing date (ii) the Company's funds from operations per share (as defined) multiplied by 9.0 or (iii) $19.00. The Company has the right not to accept any property (thereby reducing the fair market value of Clarion's equity 52 LEXINGTON CORPORATE PROPERTIES TRUST AND CONSOLIDATED SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) ($000'S EXCEPT PER SHARE DATA) position) that does not meet certain underwriting criteria (e.g. lease term and tenant credit). In addition, the operating agreement contains a mutual buy-sell provision in which either partner can force the sale of any property. Summarized balance sheet data as of December 31, 2003 and income statement data for the period October 1, 2003 (date of inception) to December 31, 2003 is as follows: Real estate, net............................................ $70,648 Cash........................................................ 1,006 Other assets................................................ 4,331 ------- $75,985 ======= Mortgages payable........................................... $36,206 Other liabilities........................................... 791 Equity...................................................... 38,988 ------- $75,985 ======= Rental income............................................... $ 1,334 ------- Interest expense............................................ (268) Operating expenses.......................................... (321) Depreciation and amortization expenses...................... (313) ------- (902) ------- Net income.................................................. $ 432 =======
As of December 31, 2003, LION owns the following properties:
NET RENTABLE DATE OF ACQUISITION LEASE SQUARE ACQUISITION TENANT LOCATION COST EXPIRES FEET - ----------- --------------------------------- ------------------ ----------- ------- -------- October Greenpoint Mortgage Funding, Inc. Novato, CA $39,574 2011 124,600 October Linens 'n Things, Inc. Logan Township, NJ 12,586 2009 262,644 December Ikon Office Solutions, Inc. Malvern, PA 22,399 2013 106,855 ------- ------- $74,559 494,099 ======= =======
The Novato, California and Malvern, Pennsylvania properties were contributed by the Company and the Logan Township, New Jersey property was contributed by Clarion. In addition, Clarion paid the Company $23,849 for its net equity position in the properties. 53 LEXINGTON CORPORATE PROPERTIES TRUST AND CONSOLIDATED SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) ($000'S EXCEPT PER SHARE DATA) Minimum future rental receipts under non-cancelable tenant operating leases, assuming no new or negotiated leases, for the next five years and thereafter are as follows:
YEAR ENDING DECEMBER 31, - ------------ 2004........................................................ $ 7,481 2005........................................................ 7,646 2006........................................................ 7,831 2007........................................................ 8,052 2008........................................................ 8,237 Thereafter.................................................. 23,609 ------- $62,856 =======
Scheduled principal amortization and balloon payments for the mortgages payable for the next five years and thereafter are as follows:
YEAR ENDING SCHEDULED BALLOON DECEMBER 31, AMORTIZATION PAYMENTS TOTAL - ------------ ------------ -------- ------- 2004................................................ $ 441 $ -- $ 441 2005................................................ 473 -- 473 2006................................................ 501 -- 501 2007................................................ 531 -- 531 2008................................................ 557 -- 557 Thereafter.......................................... 2,160 31,543 33,703 ------ ------- ------- $4,663 $31,543 $36,206 ====== ======= =======
Lexington Florence LLC Lexington Florence LLC ("Florence") is a joint venture established in January 2002 with unaffiliated investors. Its sole purpose is to own a property in Florence, South Carolina net leased to Washington Mutual Home Loans, Inc. through June 2008. The property is encumbered by a non-recourse mortgage bearing interest at 7.50% per annum which matures February 2009. The Company sold a 77.3% interest in Florence to the unaffiliated investors for $4,581. The investors have the right to put their interests in Florence to the Company for OP Units in LCIF (valued at $4,581). The number of OP Units issued will have a minimum price of $13.92 and a maximum price of $15.82. The put is effective beginning in January 2004 and expires in June 2004. LRA earns annual asset management fees of 3.5% of rents collected. 54 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 December 31, 2003 and 2002 and for the year ended December 31, 2003 and for the period January 25, 2002 (date of inception) to December 31, 2002 is as follows:
2003 2002 ------- ------- Real estate, net............................................ $15,227 $15,544 Other assets................................................ 876 656 ------- ------- $16,103 $16,200 ======= ======= Mortgage payable............................................ $ 9,395 $ 9,544 Other liabilities........................................... 164 163 Equity...................................................... 6,544 6,493 ------- ------- $16,103 $16,200 ======= ======= Rental income............................................... $ 1,699 $ 1,576 Interest expense............................................ (720) (676) Depreciation................................................ (317) (304) Other....................................................... (56) (46) ------- ------- Net income................................................ $ 606 $ 550 ======= =======
Minimum future rental receipts under the non-cancelable operating lease, assuming no new or renegotiated lease, for the next five years and thereafter is as follows:
YEAR ENDING DECEMBER 31, - ------------ 2004........................................................ $1,750 2005........................................................ 1,750 2006........................................................ 1,750 2007........................................................ 1,750 2008........................................................ 875 ------ $7,875 ======
55 LEXINGTON CORPORATE PROPERTIES TRUST AND CONSOLIDATED SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) ($000'S EXCEPT PER SHARE DATA) Scheduled principal amortization and balloon payment for the mortgage payable for the next five years and thereafter is as follows:
YEAR ENDING SCHEDULED BALLOON DECEMBER 31, AMORTIZATION PAYMENT TOTAL - ------------ ------------ ------- ------ 2004.................................................. $158 $ -- $ 158 2005.................................................. 173 -- 173 2006.................................................. 186 -- 186 2007.................................................. 201 -- 201 2008.................................................. 216 -- 216 Thereafter............................................ 18 8,443 8,461 ---- ------ ------ $952 $8,443 $9,395 ==== ====== ======
(7) MORTGAGES AND NOTES PAYABLE The following table sets forth certain information regarding the Company's mortgage and notes payable as of December 31, 2003 and 2002:
2004 ESTIMATED ANNUAL DEBT BALLOON PROPERTY LEVEL DEBT -- FIXED RATE 2003 2002 INTEREST RATE MATURITY SERVICE (G) PAYMENT - --------------------------------- -------- -------- ------------- -------- -------------- -------- Gainesville, GA (first)......... $ 18 $ 219 13.000% 01-01-04 $ 18 $ -- Oxon Hill, MD................... 94 457 6.250% 03-01-04 95 -- Bethesda, MD.................... -- 1,955 9.250% 05-01-06 -- -- Warren, OH...................... 21,172 25,615 7.000% 10-01-07 6,160 -- Bristol, PA..................... 9,729 9,833 7.400% 02-01-08 831 9,262 Boca Raton, FL (f).............. 15,275 -- 5.250% 03-01-08 802 15,275 Decatur, GA..................... 6,695 6,830 6.720% 06-01-08 579 6,049 Phoenix, AZ..................... 14,231 14,553 7.890% 06-05-08 1,434 12,591 Palm Beach Gardens, FL.......... 11,341 11,509 7.010% 06-15-08 970 10,418 Dubuque, IA..................... 7,351 -- 4.890% 08-01-08 513 6,588 Canton, OH...................... 3,325 3,395 7.150% 08-11-08 313 2,936 Spartanburg, SC................. 2,762 2,819 7.150% 08-11-08 260 2,438 Hebron, KY...................... 5,340 5,414 7.000% 10-23-08 451 4,935 Gainesville, GA (e) (second).... 902 837 7.500% 01-01-09 200 -- Ocala, FL....................... 13,059 13,429 7.250% 02-01-09 1,332 10,700 Canton, OH...................... 1,578 1,823 9.490% 02-28-09 388 -- Baton Rouge, LA................. 1,898 1,969 7.375% 03-01-09 208 1,478 Bristol, PA..................... 6,053 6,190 7.250% 04-01-09 571 5,228 Livonia, MI (2 properties)...... 11,026 11,133 7.800% 04-01-09 992 10,236 Henderson, NC................... 4,414 4,497 7.390% 05-01-09 417 3,854 Westland, MI.................... 2,938 3,320 10.500% 09-01-09 683 -- Salt Lake City, UT.............. 13,409 15,204 7.610% 10-01-09 2,901 -- Richmond, VA.................... 16,472 16,633 8.100% 02-01-10 1,511 15,257 Hampton, VA..................... 4,473 4,512 8.260% 04-01-10 415 4,144 Hampton, VA..................... 7,294 7,357 8.270% 04-01-10 677 6,758 Tampa, FL (Queen Palm Dr.)...... 6,034 6,096 6.880% 08-01-10 485 5,495
56 LEXINGTON CORPORATE PROPERTIES TRUST AND CONSOLIDATED SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) ($000'S EXCEPT PER SHARE DATA)
2004 ESTIMATED ANNUAL DEBT BALLOON PROPERTY LEVEL DEBT -- FIXED RATE 2003 2002 INTEREST RATE MATURITY SERVICE (G) PAYMENT - --------------------------------- -------- -------- ------------- -------- -------------- -------- Tampa, FL (North 30th).......... 8,342 8,427 6.930% 08-01-10 674 7,603 Herndon, VA..................... 18,807 18,964 8.180% 12-05-10 1,723 17,301 San Diego, CA................... 4,252 4,347 7.500% 01-01-11 411 3,420 Tuscon, AZ...................... 2,444 2,483 7.500% 01-01-11 226 2,076 Columbia, SC.................... 3,419 3,472 7.540% 01-01-11 317 2,905 Valley Forge, PA................ 13,080 13,306 7.120% 02-10-11 1,166 10,927 Glendale, AZ.................... 14,777 14,930 7.400% 04-01-11 1,258 13,365 Auburn Hills, MI................ 7,198 7,325 7.010% 06-01-11 637 5,918 Plymouth, MI.................... 4,787 4,866 7.960% 07-01-11 463 3,949 Greenville, SC.................. 13,886 -- 4.415% 01-01-12 841 11,806 New Kingston, PA................ 7,265 7,364 7.790% 01-01-12 678 6,101 Mechanicsburg, PA............... 5,363 5,437 7.780% 01-01-12 500 4,503 New Kingston, PA................ 3,462 3,509 7.780% 01-01-12 323 2,906 Lake Forest, CA................. 10,832 10,939 7.260% 02-01-12 901 9,708 Groveport, OH (c)............... 7,800 7,800 6.030% 10-01-12 535 6,860 Plymouth, MI.................... 12,776 -- 6.220% 12-10-12 1,026 10,026 Dallas, TX...................... 21,348 21,785 7.490% 12-31-12 2,020 16,030 Fort Mill, SC................... 11,523 11,657 6.000% 01-01-13 839 9,904 Lancaster, CA (first)........... 10,611 10,761 7.020% 09-01-13 900 8,637 Lancaster, CA (second).......... 8,903 -- 5.920% 09-01-13 642 7,518 Knoxville, TN (d)............... 5,295 5,330 5.950% 09-01-13 381 4,496 Eau Claire, WI.................. 2,220 2,360 8.000% 07-01-14 313 -- Franklin, NC.................... 1,965 2,053 8.500% 04-01-15 263 -- Southborough, MA................ 2,132 2,251 7.500% 09-01-15 275 -- Danville, IL.................... 6,623 -- 9.000% 01-01-16 692 4,578 Temple, TX...................... 9,200 -- 6.090% 01-01-16 668 7,446 Bremerton, WA................... 6,800 -- 6.090% 04-01-16 494 5,465 Dillon, SC...................... 12,111 -- 7.900% 12-01-16 1,263 5,273 Westmont, IL.................... 16,170 -- 6.210% 03-01-18 1,292 9,662 REMIC Financing (i)............. -- 63,054 -- -- -- -- Salt Lake City, UT (i).......... -- 5,145 -- -- -- -- -------- -------- ------ ------- -------- 440,274 413,164 7.073% 44,927 332,025 -------- -------- ------ ------- -------- PROPERTY LEVEL DEBT -- VARIABLE RATE Milpitas, CA (a) (b)............ 15,666 17,100 4.140% 07-01-04 2,253 14,456 Marlborough, MA (i)............. -- 8,102 -- -- -- -- Hebron, OH (i).................. -- 9,651 -- -- -- -- -------- -------- ------ ------- -------- 15,666 34,853 4.140% 2,253 14,456 -------- -------- ------ ------- -------- CORPORATE LEVEL DEBT Credit Facility (h)............. 94,000 31,000 2.640% 08-01-06 2,516 94,000 Warren, OH (i).................. -- 12,500 -- -- -- -- -------- -------- ------ ------- -------- 94,000 43,500 2.640% 2,516 94,000 -------- -------- ------ ------- -------- Total........................... $549,940 $491,517 6.232% $49,696 $440,481 ======== ======== ====== ======= ========
57 LEXINGTON CORPORATE PROPERTIES TRUST AND CONSOLIDATED SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) ($000'S EXCEPT PER SHARE DATA) (a) Floating rate debt, 30 day LIBOR plus 297 basis points. The Company has the ability to extend maturity date to July 1, 2005 (spread increases to 350 basis points) and to July 1, 2006 (spread increases to 400 basis points). (b) All property cash flows net of interest expense are used for principal amortization. (c) Interest only through April 2004, and $563 in annual debt service thereafter. (d) Interest only through May 2003, and $381 in annual debt service thereafter. (e) Mortgage is accrual only through 01/31/04. Commencing 02/01/04 annual debt service of $218 is due. (f) Interest only through maturity. (g) For mortgages with less than twelve months to maturity, amounts represent remaining payments. (h) In 2003, the Company obtained a $100,000 unsecured revolving credit facility, which expires August 2006, bears interest at 150-250 basis points over LIBOR depending on the amount of properties the Company owns free and clear of mortgage debt and has an interest rate period of one, three or six months, at the option of the Company, which rate at December 31, 2003 was 2.64%. The credit facility is provided by Fleet National Bank, as Administrative Agent and Wachovia Bank, National Association, as Syndication Agent. The credit facility contains various leverage, debt service coverage, net worth maintenance and other customary covenants with which the Company is in compliance as of December 31, 2003. Approximately $1,836 was available to the Company at December 31, 2003. The Company has six outstanding letters of credit aggregating $4,164 which mature between 2004 and 2010. The Company pays an unused facility fee equal to 25 basis points if 50% or less of the facility is utilized and 15 basis points if greater than 50% of the facility is utilized. This facility replaced a $60,000 facility which bore interest at the same spread to LIBOR. (i) The Company satisfied these mortgages in 2003, along with a mortgage on a previously non-consolidated property, which resulted in debt satisfaction charges of $8,462. Scheduled principal amortization and balloon payments for mortgages and notes payable, including mortgages payable related to discontinued operations and the credit facility for the next five years and thereafter are as follows:
YEARS ENDING SCHEDULED BALLOON DECEMBER 31, AMORTIZATION PAYMENTS TOTAL - ------------ ------------ -------- -------- 2004.............................................. $ 15,429 $ 14,456 $ 29,885 2005.............................................. 15,521 -- 15,521 2006.............................................. 16,303 94,000 110,303 2007.............................................. 17,238 -- 17,238 2008.............................................. 11,469 70,492 81,961 Thereafter........................................ 34,944 261,533 296,477 -------- -------- -------- $110,904 $440,481 $551,385 ======== ======== ========
(8) ORIGINATION FEES PAYABLE In connection with certain acquisitions the Company assumed obligations which currently bears interest, on the outstanding principal balances only of 12.5%. During 2003, the Company satisfied $5,641 of these obligations by issuing 231,763 OP Units. The difference between the carrying value of the obligations and the fair value of the OP Units on the date of issuance resulted in a gain of $896 that is netted in debt satisfaction charges on the Consolidated Statements of Income. As of December 31, 2003, $414 in origination fees payable are owed to two executive officers of the Company. 58 LEXINGTON CORPORATE PROPERTIES TRUST AND CONSOLIDATED SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) ($000'S EXCEPT PER SHARE DATA) The scheduled payments of this obligation for the next five years and thereafter is as follows:
YEARS ENDING DECEMBER 31, - ------------ 2004........................................................ $ 37 2005........................................................ 37 2006........................................................ 85 2007........................................................ 110 2008........................................................ 110 Thereafter.................................................. 429 ---- $808 ====
(9) LEASES Minimum future rental receipts under noncancellable tenant operating leases, assuming no new or negotiated leases, for the next five years and thereafter are as follows:
YEAR ENDING DECEMBER 31, - ------------ 2004........................................................ $ 128,545 2005........................................................ 126,408 2006........................................................ 114,579 2007........................................................ 102,665 2008........................................................ 87,595 Thereafter.................................................. 456,700 ---------- $1,016,492 ==========
The Company holds various leasehold interests in properties. The ground rent on these properties are either directly paid by the tenants or reimbursed to the Company as additional rent. Minimum future rental payments under all noncancellable leasehold interests for the next five years and thereafter are as follows:
YEAR ENDING DECEMBER 31, - ------------ 2004........................................................ $ 898 2005........................................................ 898 2006........................................................ 898 2007........................................................ 898 2008........................................................ 898 Thereafter.................................................. 7,173 ------- $11,663 =======
During 2003 the Company entered into a new lease for its corporate office. The lease expires December 2015, with rent fixed at $497 per annum through December 2008 and will be adjusted to fair market value, as defined, thereafter. The Company is also responsible for its proportionate share of operating expenses and real 59 LEXINGTON CORPORATE PROPERTIES TRUST AND CONSOLIDATED SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) ($000'S EXCEPT PER SHARE DATA) estate taxes. As an incentive to enter the lease the Company received a payment of $845 which it is amortizing as a reduction of rent expense through December 2008. Rent expense for 2003, 2002 and 2001 was $546, $243 and $237, respectively. (10) MINORITY INTERESTS In conjunction with several of the Company's acquisitions, property owners were issued OP Units as a form of consideration in exchange for the property. All of such interests are redeemable at certain times for common shares on a one-for-one basis. As of December 31, 2003, there were 5,430,454 OP Units outstanding of which 4,814,994 were currently redeemable for common shares. Of the total OP Units outstanding, 1,744,212 are held by two executive officers of the Company. As of December 31, 2003 these OP Units, subject to certain adjustments through the date of conversion, had annual distributions per OP Unit in varying amounts from $0 to $1.40 per unit with a weighted average distribution of $1.24 per OP Unit. (11) PREFERRED AND COMMON SHARES During 2003 and 2002, the Company issued 9,800,000 and 2,690,000 common shares raising $174,023 and $40,508 in proceeds, respectively, which was used to retire mortgage debt and fund acquisitions. During 2003, the Company issued 3,160,000 Series B Cumulative Redeemable Preferred Shares raising net proceeds of $76,315. These shares have a fixed dividend of $2.0125 per share per annum, have a liquidation preference of $79,000, have no voting rights, and are redeemable by the Company at $25.00 per share ($79,000) commencing June 2008. During 2003 and 2002, holders of an aggregate of 71,567 and 50,997 OP Units redeemed such OP Units for common shares of the Company. These redemptions resulted in an increase in shareholders' equity and corresponding decrease in minority interest of $915 and $619, respectively. During 2003, three officers repaid recourse notes to the Company including accrued interest thereon, of $2,522 by delivering to the Company 158,724 common shares. During 2003 and 2002, the Company issued 336,992 and 64,249 common shares, respectively, to certain employees and trustees resulting in $5,887 and $996 of deferred compensation, respectively. These common shares generally vest ratably, primarily over a 5 year period, however in certain situations the vesting is cliff based after 5 years and in other cases vesting only occurs if certain performance criteria are met. During 2002, the Company issued 34,483 common shares in respect of a 15 year, 8% interest only recourse note to an officer for $500. This note was satisfied in 2003. During 2002, the holders of the Company's outstanding 2,000,000 Series A preferred shares converted these shares into 2,000,000 common shares. (12) BENEFIT PLANS The Company maintains a common share option plan pursuant to which qualified and non-qualified options may be issued. Options granted under the plan generally vest over a period of one to four years and expire five years from date of grant. No compensation cost is reflected in net income as all options granted under the plan had an exercise price equal to the market value of the underlying common shares on the date of grant. 60 LEXINGTON CORPORATE PROPERTIES TRUST AND CONSOLIDATED SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) ($000'S EXCEPT PER SHARE DATA) Share option activity during the years indicated is as follows:
WEIGHTED-AVERAGE NUMBER OF EXERCISE PRICE SHARES PER SHARE ---------- ---------------- Balance at December 31, 2000............................ 1,978,023 $11.63 Granted............................................... 568,000 11.99 Exercised............................................. (603,142) 11.02 Forfeited............................................. (9,308) 12.17 Expired............................................... (5,000) 11.25 ---------- ------ Balance at December 31, 2001............................ 1,928,573 11.93 Granted............................................... 411,500 15.50 Exercised............................................. (1,050,866) 11.59 Forfeited............................................. (53,650) 11.98 Expired............................................... (2,500) 14.25 ---------- ------ Balance at December 31, 2002............................ 1,233,057 13.39 Granted............................................... 30,000 16.15 Exercised............................................. (687,527) 12.94 Forfeited............................................. (10,500) 15.97 Expired............................................... (43,500) 15.25 ---------- ------ Balance at December 31, 2003............................ 521,530 $13.94 ========== ======
The following is additional disclosures for common share options outstanding at December 31, 2003:
OPTIONS OUTSTANDING EXERCISABLE OPTIONS -------------------------------- -------------------- WEIGHTED WEIGHTED RANGE OF AVERAGE REMAINING AVERAGE EXERCISE EXERCISE LIFE EXERCISE PRICES NUMBER PRICE (YEARS) NUMBER PRICE - ------------------- --------- -------- --------- -------- --------- $9.00-$10.875...... 12,857 $ 9.55 0.8 12,857 $ 9.55 $11.8125-$12.5625.. 191,475 11.89 1.6 156,967 11.91 $13.1875-$15.50.... 317,198 15.36 3.0 176,677 15.22 --------- ------ ---- ------- ------ 521,530 $13.94 2.4 346,501 $13.51 ========= ====== ==== ======= ======
There are 1,449,252 options available for grant at December 31, 2003. 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 $127, $124 and $112 were contributed in 2003, 2002 and 2001, respectively. The Company has established a trust for certain officers in which non-vested common shares, which vest ratably over five years, granted for the benefit of the officers are deposited. The officers exert no control over the common shares in the trust and the common shares are available to the general creditors of the Company. As of December 31, 2003 and 2002, there were 405,110 and 265,385 common shares, respectively, in the trust. In addition, certain officers can delay, to a specified date, the receipt of common shares that would be received 61 LEXINGTON CORPORATE PROPERTIES TRUST AND CONSOLIDATED SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) ($000'S EXCEPT PER SHARE DATA) upon exercise of common share options. These common shares are deposited in the trust. As of December 31, 2003 and 2002 there were 295,076 and 222,615 common shares, respectively deposited in the trust. (13) COMMITMENTS AND CONTINGENCIES 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. The Company, including its non-consolidated entities, are obligated under certain tenant leases to fund the expansion of the underlying leased properties. The Company has entered into a binding letter of intent to purchase, upon completion and rent commencement from the tenant, an office facility in Meridian, Idaho for an estimated obligation of $14,722. The facility is expected to be completed in mid-2004. (14) RELATED PARTY TRANSACTIONS During 2003, the Company issued 231,763 OP Units to satisfy outstanding obligations that resulted in a gain of $896. Of the OP Units issued, the Chairman and the Vice Chairman of the Board of Trustees of the Company received 120,662 units. During 2003, three executive officers repaid recourse notes to the Company including accrued interest thereon, of $2,522 by delivering to the Company 158,724 common shares. As of December 31, 2003 the Company is obligated for $808 resulting from the acquisition of certain properties in 1996. Of the $808, the Chairman and the Vice Chairman of the Board of Trustees are owed $414. In 2002, the Company issued 34,483 common shares in respect of a 15-year, 8% interest only recourse note to the Chief Financial Officer of the Company for $500. This note was satisfied in 2003. On November 28, 2001, the Company acquired Net 1 L.P. and Net 2 L.P. (collectively, the "Net Partnerships"), in a merger transaction valued at approximately $136,300, which owned twenty-three properties in fourteen states. The Company issued 2,143,840 common shares (valued at $31,622), 44,858 OP Units (valued at $661), $31,612 in cash and assumed approximately $61,389 of third party mortgage debt (excluding $11,114 in Net Partnership obligations to the Company). The Company's Chairman was the controlling shareholder of the general partners of the Net Partnerships. The general partners received 44,858 OP Units valued on the same basis as the limited partners for their 1% ownership interest in the Net Partnerships. The OP Units, which receive distributions equal to the dividends on common shares, are convertible into the Company's common shares on a one-for-one basis beginning November 2006. During 2001, the Company issued 24,620 common shares to acquire a company controlled by the Chairman of the Company, whose sole asset was a mortgage note receivable from a 64% owned partnership of the Company. During 2001, the Company renegotiated $1,973 in notes receivable from the current Chief Executive Officer and the Vice-Chairman of the Board of Trustees of the Company. The notes were issued in connection with the officers' purchases of 131,000 common shares at $15.25 per common share. The new notes had a 15- year maturity, were 8% interest only, and recourse to the officers. These notes were satisfied in 2003. 62 LEXINGTON CORPORATE PROPERTIES TRUST AND CONSOLIDATED SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) ($000'S EXCEPT PER SHARE DATA) All related party acquisitions, sales and loans were approved by the independent members of the Board of Trustees. In addition, the Company earns fees from it's joint venture investments (See note 6). (15) FAIR MARKET VALUE OF FINANCIAL INSTRUMENTS Cash Equivalents, Restricted Cash, Accounts Receivable and Accounts Payable The Company estimates that the fair value approximates carrying value due to the relatively short maturity of the instruments. Mortgages and Notes Payable 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. (16) 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 the years ended December 31, 2003 and 2002, no tenant represented 10% or more of rental income. For the year ended December 31, 2001 the following tenants represented 10% or greater of rental income: Northwest Pipeline Corporation.............................. 11% Kmart Corporation........................................... 11%
Both of these tenants are publicly registered companies subject to the Securities Exchange Act of 1934, as amended and accordingly file financial information with the Securities and Exchange Commission. (17) SUPPLEMENTAL DISCLOSURE OF STATEMENT OF CASH FLOW INFORMATION During 2003, the Company issued 231,763 OP Units to satisfy $5,641 in outstanding obligations which resulted in a gain of $896. During 2003, 2002 and 2001, the Company paid $36,467, $32,255 and $30,624, respectively, for interest and $282, $262 and $204, respectively, for taxes. During 2003, three executive officers repaid recourse notes to the Company including accrued interest thereon, of $2,522 by delivering to the Company 158,724 common shares. During 2003, 2002 and 2001, holders of an aggregate of 71,567, 50,997, and 418,411 OP Units, respectively, redeemed such units for common shares of the Company. These redemptions resulted in increases in shareholders' equity and corresponding decreases in minority interests of $915, $619 and $5,713, respectively. During 2003, 2002 and 2001, the Company issued 336,992, 64,249 and 100,000 common shares to certain employees and trustees resulting in $5,887, $996 and $1,181 of deferred compensation. During 2002, the holder of the Company's 2,000,000 Series A preferred shares converted them into 2,000,000 common shares. 63 LEXINGTON CORPORATE PROPERTIES TRUST AND CONSOLIDATED SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) ($000'S EXCEPT PER SHARE DATA) In 2003, 2002 and 2001, the Company contributed properties (along with non-recourse mortgage notes) to joint venture entities for capital contributions of $11,649, $643 and $1,168, respectively. During 2001, the Company purchased the Net Partnerships by issuing, in addition to $31,612 in cash, 2,143,840 common shares (valued at $31,622), 44,858 OP Units (valued at $661), assumed $61,389 in third party debt and $11,114 in Net Partnership debt obligations to the Company. During 2003, LRA became a consolidated subsidiary of the Company. The assets and liabilities of LRA as of January 1, 2003 were as follows: Real estate, net............................................ $41,613 Cash........................................................ 1,579 Other assets................................................ 1,221 Mortgage payable............................................ 30,028 Other liabilities........................................... 1,468
(18) UNAUDITED QUARTERLY FINANCIAL DATA
2003 -------------------------------------- 3/31/03 6/30/03 9/30/03 12/31/03 ------- ------- ------- -------- Revenues(1)............................................ $28,555 $28,908 $30,881 $32,176 Net income............................................. $ 8,763 $ 2,483 $ 9,962 $12,441 Net income allocable to common shareholders............ $ 8,763 $ 2,271 $ 8,372 $10,851 Net income allocable to common shareholders - per share: Basic................................................ $ 0.29 $ 0.07 $ 0.24 $ 0.28 Diluted.............................................. $ 0.29 $ 0.06 $ 0.24 $ 0.28
2002 -------------------------------------- 3/31/02 6/30/02 9/30/02 12/31/02 ------- ------- ------- -------- Revenues(1)............................................ $24,027 $23,960 $24,609 $25,736 Net income............................................. $ 7,961 $ 7,879 $ 7,646 $ 7,109 Net income allocable to common shareholders............ $ 7,268 $ 7,879 $ 7,646 $ 7,109 Net income allocable to common shareholders - per share: Basic................................................ $ 0.30 $ 0.30 $ 0.28 $ 0.24 Diluted.............................................. $ 0.29 $ 0.29 $ 0.28 $ 0.24
- --------------- (1) All periods have been adjusted to reflect the impact of properties sold during the years ended December 31, 2003 and 2002, and properties classified as held for sale which are reflected in discontinued operations in the Consolidated Statements of Income. The sum of the quarterly income 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. 64 LEXINGTON CORPORATE PROPERTIES TRUST AND CONSOLIDATED SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) ($000'S EXCEPT PER SHARE DATA) (19) SUBSEQUENT EVENTS Subsequent to year end the following transactions have occurred: The Company The Company closed on the following non-recourse mortgages:
ESTIMATED ANNUAL INTEREST ESTIMATED PROPERTY AMOUNT DEBT SERVICE RATE MATURITY BALLOON - -------- ------- ------------ -------- ------------- --------- Mechanicsburg, PA...................... $13,870 $1,044 5.73% March 2014 $10,501 Newport, OR............................ 7,000 470 5.03% August 2011 5,980 Waterloo, IA........................... 6,800 672 5.61% February 2013 3,505 Mission, TX............................ 6,570 462 5.78% June 2015 5,371
The Company also purchased a property in Mission, Texas (leased to T-Mobile), Wall, New Jersey (leased to New Jersey Natural Gas) and Redmond, Oregon (leased to T-Mobile) for $10,100, $33,688 and $16,381, respectively. The Company assumed a $27,500 mortgage on the Wall, New Jersey property with a stated interest rate of 7.22%. In addition, the Company contributed its property in Plymouth, Michigan leased to Tower Automotive to LION at its carrying cost of $20,519. The Company also contributed its property in Arlington, Texas leased to Siemens Dematic Postal Automation L.P. to LAC II at its carrying cost of $30,286. LAC II LAC II closed on the following non-recourse mortgage:
ESTIMATED ANNUAL INTEREST ESTIMATED PROPERTY AMOUNT DEBT SERVICE RATE MATURITY BALLOON - -------- ------- ------------ -------- ------------- --------- Arlington, TX.......................... $22,000 $1,551 5.81% February 2014 $18,605
LION LION purchased a property in New Lenox, Illinois (leased to Michaels Stores Procurement Company) for $28,585. LION closed on the following non-recourse mortgage:
ESTIMATED ANNUAL INTEREST ESTIMATED PROPERTY AMOUNT DEBT SERVICE RATE MATURITY BALLOON - -------- ------- ------------ -------- ------------- --------- New Lenox, IL.......................... $17,400 $959 5.51% February 2014 $17,400
65 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)
ACCUMULATED LAND AND BUILDINGS DEPRECIATION LAND AND AND DESCRIPTION LOCATION ENCUMBRANCES ESTATES IMPROVEMENTS TOTAL AMORTIZATION - ----------- ---------------------- ------------ -------- ------------ ---------- ------------- Office......................... Southington, CT $ -- $ 3,240 $ 20,440 $ 23,680 $ 9,809 Research & Development......... Glendale, AZ 14,777 4,996 24,392 29,388 12,473 Retail/Health Club............. Countryside, IL -- 628 3,722 4,350 1,880 Retail/Health Club............. Voorhees, NJ -- 577 4,820 5,397 2,342 Retail/Health Club............. DeWitt, NY -- 445 3,043 3,488 1,479 Warehouse & Distribution....... Mansfield, OH -- 120 5,965 6,085 2,289 Industrial..................... Marshall, MI -- 33 3,378 3,411 1,601 Industrial..................... Marshall, MI -- 14 926 940 440 Retail......................... Newport, OR -- 1,400 7,270 8,670 3,489 Office & Warehouse............. Memphis, TN -- 1,053 11,174 12,227 5,912 Warehouse & Distribution....... Mechanicsburg, PA -- 1,439 13,987 15,426 4,309 Office & Warehouse............. Tampa, FL 6,034 1,389 7,763 9,152 3,348 Retail......................... Klamath Falls, OR -- 727 9,160 9,887 3,616 Office......................... Tampa, FL 8,342 1,900 9,854 11,754 3,767 Warehouse & Industrial......... Jacksonville, FL -- 240 3,637 3,877 1,237 Retail......................... Sacramento, CA -- 885 2,705 3,590 1,309 Office......................... Phoenix, AZ 14,231 2,804 13,921 16,725 7,035 Retail......................... Reno, NV -- 1,200 1,904 3,104 897 Retail......................... Rockville, MD -- -- 1,784 1,784 744 Retail......................... Oxon Hill, MD 94 403 2,765 3,168 1,098 Retail......................... Laguna Hills, CA -- 255 5,035 5,290 2,021 Retail......................... Riverdale, GA -- 333 2,233 2,566 446 Retail/Health Club............. Canton, OH 1,578 602 3,820 4,422 764 Office......................... Salt Lake City, UT 13,409 -- 55,404 55,404 16,284 Manufacturing.................. Franklin, NC 1,965 386 3,062 3,448 536 Industrial..................... Oberlin, OH -- 276 4,515 4,791 790 Retail......................... Tulsa, OK -- 447 2,432 2,879 947 Retail......................... Clackamas, OR -- 523 2,847 3,370 1,109 Retail......................... Lynwood, WA -- 488 2,658 3,146 1,035 Retail......................... Honolulu, HI -- -- 11,147 11,147 3,218 Warehouse...................... New Kingston, PA 3,462 674 5,360 6,034 910 (Silver Springs) Warehouse...................... New Kingston, PA 7,265 1,380 10,963 12,343 1,861 (Cumberland) Warehouse...................... Mechanicsburg, PA 5,363 1,012 8,039 9,051 1,365 (Hampden IV) Office/Research & Marlborough, MA -- 2,013 13,834 15,847 2,233 Development................... Office......................... Dallas, TX 21,348 3,582 30,598 34,180 4,692 Warehouse...................... Waterloo, IA -- 1,025 8,296 9,321 1,288 Office/Research & Milpitas, CA 15,666 3,542 18,603 22,145 2,790 Development................... Industrial..................... Gordonsville, TN -- 52 3,325 3,377 574 Office......................... Decatur, GA 6,695 975 13,677 14,652 2,052 Office......................... Richmond, VA 16,472 -- 27,282 27,282 5,076 Office/Warehouse............... Bristol, PA 9,729 2,508 10,031 12,539 1,442 Office......................... Hebron, KY 5,340 1,615 6,462 8,077 929 Office......................... Livonia, MI 5,430 1,554 6,859 8,413 895 Office......................... Valley Forge, PA 13,080 3,960 15,880 19,840 546 Research & Development......... Livonia, MI 5,596 1,733 6,936 8,669 997 Office......................... Palm Beach Gardens, FL 11,341 3,578 14,249 17,827 2,004 Warehouse/Distribution......... Lancaster, CA 19,514 2,028 28,183 30,211 2,296 Industrial..................... Auburn Hills, MI 7,198 2,788 11,151 13,939 1,515 Warehouse/Distribution......... Warren, OH 21,172 10,231 51,110 61,341 11,445 Warehouse/Distribution......... Baton Rouge, LA 1,898 685 2,742 3,427 356 Retail......................... Columbia, MD -- 1,002 4,872 5,874 567 Office......................... Bristol, PA 6,053 1,073 7,709 8,782 779 Office......................... Southborough, MA 2,132 456 4,291 4,747 434 Office......................... Herndon, VA 18,807 5,127 20,553 25,680 2,061 USEFUL LIFE COMPUTING DEPRECIATION IN LATEST DATE DATE INCOME STATEMENTS DESCRIPTION ACQUIRED CONSTRUCTED (YEARS) - ----------- ---------- ----------- ----------------------- 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 & 3 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 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 Retail......................... Dec. 1996 1981 23.583 & 13.583 Retail......................... Dec. 1996 1981 23.583 & 13.583 Retail......................... Dec. 1996 1981 23.583 & 13.583 Retail......................... Dec. 1996 1980 24.33 Warehouse...................... Mar. 1997 1981 40 Warehouse...................... Mar. 1997 1989 40 Warehouse...................... Mar. 1997 1985 40 Office/Research & Jul. 1997 1960 & 1988 40 Development................... Office......................... Sept. 1997 1986 40 Warehouse...................... Oct. 1997 1996 & 1997 40 Office/Research & Dec. 1997 1985 40 Development................... Industrial..................... Dec. 1997 1983 & 1985 34.75 Office......................... Dec. 1997 1983 40 Office......................... Dec. 1997 1990 32.25 Office/Warehouse............... Mar. 1998 1982 40 Office......................... Mar. 1998 1987 40 Office......................... Mar. 1998 1987 & 1988 40 Office......................... Aug. 2002 1985 & 2001 40 Research & Development......... Mar. 1998 1987 & 1988 40 Office......................... May 1998 1996 40 Warehouse/Distribution......... Jun. 1998 1998 40 Industrial..................... Jul. 1998 1989 & 1998 40 Warehouse/Distribution......... Aug. 1998 1982 10 & 40 Warehouse/Distribution......... Oct. 1998 1998 40 Retail......................... Dec. 1998 1983 40 Office......................... Dec. 1999 1998 40 Office......................... Dec. 1999 1984 40 Office......................... Dec. 1999 1987 40
66 LEXINGTON CORPORATE PROPERTIES TRUST AND CONSOLIDATED SUBSIDIARIES REAL ESTATE AND ACCUMULATED DEPRECIATION AND AMORTIZATION SCHEDULE III ($000) -- (CONTINUED)
ACCUMULATED LAND AND BUILDINGS DEPRECIATION LAND AND AND DESCRIPTION LOCATION ENCUMBRANCES ESTATES IMPROVEMENTS TOTAL AMORTIZATION - ----------- ---------------------- ------------ -------- ------------ ---------- ------------- Office......................... Hampton, VA 4,473 1,353 5,441 6,794 516 Office......................... Phoenix, AZ -- 4,666 18,664 23,330 1,691 Industrial..................... Hebron, OH -- 1,063 4,271 5,334 218 Industrial..................... Hebron, OH -- 1,681 6,754 8,435 345 Retail......................... Phoenix, AZ -- 1,126 4,501 5,627 239 Retail......................... Stockton, CA -- 259 1,037 1,296 55 Retail......................... Lynchburg, VA -- 159 638 797 34 Office......................... San Diego, CA 4,252 1,740 6,960 8,700 370 Office......................... Phoenix, AZ -- 2,287 9,149 11,436 486 Industrial..................... Henderson, NC 4,414 1,488 5,954 7,442 316 Industrial..................... Columbus, OH -- 319 1,275 1,594 68 Office......................... Tucson, AZ 2,444 657 2,627 3,284 140 Retail......................... Eau Claire, WI 2,220 860 3,442 4,302 183 Office......................... Milford, CT -- 567 2,265 2,832 120 Retail......................... Westland, MI 2,938 1,444 5,777 7,221 307 Retail......................... Canton, OH 3,325 883 3,534 4,417 188 Retail......................... Spartanburg, SC 2,762 833 3,334 4,167 177 Office......................... Wilsonville, OR -- 2,666 10,662 13,328 566 Industrial..................... Ocala, FL 13,059 3,803 15,210 19,013 808 Industrial..................... Columbia, SC 3,419 928 3,710 4,638 197 Office......................... Hampton, VA 7,294 2,333 9,351 11,684 496 Industrial..................... Plymouth, MI 4,787 1,533 6,130 7,663 326 Retail......................... Gainesville, GA 920 526 2,105 2,631 112 Office......................... Lake Forest, CA 10,832 3,442 13,769 17,211 617 Office......................... Knoxville, TN 5,295 1,624 6,496 8,120 223 Industrial..................... Groveport, OH 7,800 2,386 9,546 11,932 308 Office......................... Westmont, IL 16,170 4,978 19,894 24,872 519 Office......................... Fort Mill, SC 11,523 3,601 14,404 18,005 375 Industrial..................... Chester, SC -- 535 14,875 15,410 3,095 Industrial..................... Dubuque, IA 7,351 2,052 8,207 10,259 94 Office......................... Boca Raton, FL 15,275 4,290 17,161 21,451 375 Office......................... Greenville, SC 13,886 4,059 16,236 20,295 186 Office......................... Temple, TX 9,200 2,890 11,561 14,451 60 Office......................... Bremerton, WA 6,800 2,144 8,577 10,721 45 Industrial..................... Dillon, SC 12,111 3,223 12,900 16,123 658 Industrial..................... Plymouth, MI 12,776 3,932 15,728 19,660 115 Industrial..................... Danville, IL 6,623 1,796 7,182 8,978 548 Industrial..................... Minneapolis, MN -- 922 3,688 4,610 42 Office......................... Wallingford, CT -- 1,049 4,198 5,247 4 Office......................... Baton Rouge, LA -- 2,023 8,094 10,117 8 Office......................... Overland Park, KS -- 10,008 40,031 50,039 42 Office......................... Kansas City, MO -- 4,758 19,031 23,789 20 Office......................... Arlington, TX -- 5,795 23,181 28,976 -- -------- -------- -------- ---------- -------- Total $455,940 $178,077 $984,318 $1,162,395 $160,623 ======== ======== ======== ========== ======== USEFUL LIFE COMPUTING DEPRECIATION IN LATEST DATE DATE INCOME STATEMENTS DESCRIPTION ACQUIRED CONSTRUCTED (YEARS) - ----------- ---------- ----------- ----------------------- Office......................... Mar. 2000 2000 40 Office......................... May 2000 1997 40 Industrial..................... Dec. 2001 2000 40 Industrial..................... Dec. 2001 1999 40 Retail......................... Nov. 2001 1988 40 Retail......................... Nov. 2001 1968 40 Retail......................... Nov. 2001 1986 40 Office......................... Nov. 2001 1989 40 Office......................... Nov. 2001 1985 & 1994 40 Industrial..................... Nov. 2001 1998 40 Industrial..................... Nov. 2001 1990 40 Office......................... Nov. 2001 1988 40 Retail......................... Nov. 2001 1994 40 Office......................... Nov. 2001 1994 40 Retail......................... Nov. 2001 1987 & 1997 40 Retail......................... Nov. 2001 1995 40 Retail......................... Nov. 2001 1996 40 Office......................... Nov. 2001 1980 & 1998 40 Industrial..................... Nov. 2001 1976 40 Industrial..................... Nov. 2001 1968 & 1998 40 Office......................... Nov. 2001 1999 40 Industrial..................... Nov. 2001 1996 40 Retail......................... Nov. 2001 1984 40 Office......................... Mar. 2002 2001 40 Office......................... Aug. 2002 2002 40 Industrial..................... Sep. 2002 2002 40 Office......................... Dec. 2002 1989 40 Office......................... Dec. 2002 2002 40 Industrial..................... Jan. 2001 2001 40 Industrial..................... Jul. 2003 2002 40 Office......................... Feb. 2003 1983 & 2002 40 Office......................... Jul. 2003 2000 & 2001 40 Office......................... Oct. 2003 2001 40 Office......................... Oct. 2003 2001 40 Industrial..................... Dec. 2001 2001 40 Industrial..................... Sep. 2003 1996 & 1998 40 Industrial..................... Dec. 2000 2000 40 Industrial..................... Jul. 2003 2003 40 Office......................... Dec. 2003 1978 & 1985 40 Office......................... Dec. 2003 1997 40 Office......................... Dec. 2003 1980 & 2003 40 Office......................... Dec. 2003 1963 & 2003 40 Office......................... Dec. 2003 2003 40
- --------------- (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, 2003 for Company's properties at December 31, 2003 for Federal income tax purposes was approximately $895 million. 67 LEXINGTON CORPORATE PROPERTIES TRUST AND CONSOLIDATED SUBSIDIARIES REAL ESTATE AND ACCUMULATED DEPRECIATION AND AMORTIZATION SCHEDULE III ($000) -- (CONTINUED) Reconciliation of real estate owned:
2003 2002 2001 ---------- -------- -------- Balance at the beginning of year................ $ 913,370 $830,788 $682,627 Additions during year........................... 312,209 116,264 166,668 Properties sold during year..................... (9,978) (18,621) (4,107) Property contributed to joint venture during year......................................... (58,837) (15,061) (14,400) Properties consolidated effective 1/1/2003...... 43,499 -- -- Reclassify held for sale properties............. (37,868) -- -- ---------- -------- -------- Balance at end of year.......................... $1,162,395 $913,370 $830,788 ========== ======== ======== Balance of beginning of year.................... $ 134,220 $116,741 $ 98,429 Depreciation and amortization expense........... 27,335 21,480 18,312 Accumulated depreciation and amortization of properties sold during year.................. (1,428) (2,934) -- Accumulated depreciation of property contributed to joint venture............................. -- (1,067) -- Accumulated depreciation of properties consolidated effective 1/1/2003.............. 1,886 -- -- Accumulated depreciation reclassify as held for sale......................................... (1,390) -- -- ---------- -------- -------- Balance at end of year.......................... $ 160,623 $134,220 $116,741 ========== ======== ========
68 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. ITEM 9A. CONTROLS AND PROCEDURES. Evaluation of Disclosure Controls and Procedures. An evaluation of the effectiveness of the design and operation of the Company's "disclosure controls and procedures" (as defined in rule 13a-14(c) under the Securities Exchange Act of 1934, as amended (the "Exchange Act")) was carried out within 90 days prior to the filing of this annual report. This evaluation was made under the supervision and with the participation of the Company's management, including its Chief Executive Officer and its Chief Financial Officer. Based upon this evaluation, the Company's Chief Executive Officer and its Chief Financial Officer have concluded that the Company's disclosure controls and procedures (a) are effective to ensure that information required to be disclosed by the Company in reports filed or submitted under the Exchange Act is timely recorded, processed, summarized and reported and (b) include, without limitation, controls and procedures designed to ensure that information required to be disclosed by the Company in reports filed or submitted under the Exchange Act is accumulated and communicated to the Company's management, including its Chief Executive Officer and its Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. Changes in Internal Controls. There have been no significant changes in the Company's internal controls or in other factors that could significantly affect these controls subsequent to the date of the Company's evaluation. 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. All other information required to be furnished pursuant to this item will be set forth under the appropriate captions in the Proxy Statement, and is incorporated herein by reference. 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 During 2003, the Company issued 231,763 OP Units to satisfy outstanding obligations that resulted in a gain of $896. Of the OP Units issued, the Chairman and the Vice Chairman of the Board of Trustees of the Company received 120,662 units. During 2003, three executive officers repaid recourse notes to the Company including accrued interest thereon, of $2,522 by delivering to the Company 158,724 common shares. As of December 31, 2003 the Company is obligated for $808 resulting from the acquisition of certain properties in 1996. Of the $808, the Chairman and the Vice Chairman of the Board of Trustees are owed $414. In 2002, the Company issued 34,483 common shares in respect of a 15-year, 8% interest only recourse note to the Chief Financial Officer for $500. This note was satisfied in 2003. 69 On November 28, 2001, the Company acquired Net 1 L.P. and Net 2 L.P. (collectively, the "Net Partnerships"), in a merger transaction valued at approximately $136,300, which owned twenty-three properties in fourteen states. The Company issued 2,143,840 common shares (valued at $31,622), 44,858 OP Units (valued at $661), $31,612 in cash and assumed approximately $61,389 of third party mortgage debt (excluding $11,114 in Net Partnership obligations to the Company). The Company's Chairman was the controlling shareholder of the general partners of the Net Partnerships. The general partners received 44,858 OP Units valued on the same basis as the limited partners for their 1% ownership interest in the Net Partnerships. The OP Units, which receive distributions equal to the dividends on common shares, are convertible into the Company's common shares on a one-for-one basis beginning November 2006. During 2001, the Company issued 24,620 common shares to acquire a company controlled by the Chairman, whose sole asset was a mortgage note receivable from a 64% owned partnership of the Company. During 2001, the Company renegotiated $1,973 in notes receivable from the current Chief Executive Officer and the Vice Chairman of the Board of Trustees of the Company. The notes were issued in connection with the officers' purchases of 131,000 common shares at $15.25 per common share. The new notes had a 15- year maturity, were 8% interest only and were recourse to the officers. These notes were satisfied in 2003. All related party acquisitions, sales and loans were approved by the independent members of the Board of Trustees. In addition, the Company earns fees from it's joint venture investments (See note 6 of the Consolidated Financial Statements). PART IV. ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES. The information required to be furnished pursuant to this item will be set forth under the appropriate captions in the Proxy Statements, and is incorporated herein by reference. ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
PAGE ----- (a)(1) Financial Statements........................................ 34-65 (2) Financial Statement Schedule................................ 66-68 (3) Exhibits....................................................
EXHIBIT NO. EXHIBIT - ----------- ------- 3.1 -- Declaration of Trust of Lexington Corporate Properties Trust (the "Company"), dated December 31, 1997 (filed as Exhibit 3.1 to the Company's Current Report on Form 8-K filed January 16, 1998 (the "1998 8-K"))* 3.2 -- 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 (filed as Exhibit 5.3 to the Company's Current Report on Form 8-K filed February 10, 1997)* 3.3 -- By-Laws of the Company (filed as Exhibit 3.2 to the Company's Annual Report on 10-K for the year ended December 31, 1997 (the "1997 10-K"))* 3.4 -- Articles of Amendment of Declaration of Trust of the Company (filed as Exhibit 3.3 to the Company's Registration Statement on Form S-4 (File No. 333-70790) (the "2001 Form S-4"))* 3.5 -- Articles Supplementary Reclassifying 2,000,0000 Reacquired Class A Senior Cumulative Convertible Preferred Shares and 2,000,000 Unissued Excess Class A Preferred Stock.+ 3.6 -- Amendment No. 1 to Bylaws of the Registrant (filed as Exhibit 3.3 to the Company's Registration Statement of Form 8A filed June 17, 2003).* 3.7 -- Articles Supplementary Relating to the 8.05% Series B Cumulative Redeemable Preferred Stock, par value $.0001 per share (filed as Exhibit 3.3 to the Company's Registration Statement of Form 8A filed June 17, 2003).*
70
EXHIBIT NO. EXHIBIT - ----------- ------- 3.8 -- Fifth Amended and Restated Agreement of Limited Partnership of Lepercq Corporate Income Fund L.P., dated as of December 31, 1996, as supplemented (filed as Exhibit 3.3 to the Company's Registration Statement of Form 3/A filed September 10, 1999).* 3.9 -- Second Amended and Restated Agreement of Limited Partnership of Lepercq Corporate Income Fund II L.P., dated as of August 27, 1998 (filed as Exhibit 3.4 to the Company's Registration Statement of Form S-3/A filed September 10, 1999).* 3.10 -- Form of Amended and Restated Agreement of Limited Partnership of Net 3 Acquisition L.P. (filed as Exhibit 99.1 to the Company's Registration Statement of Form S-4 filed October 2, 2001).* 3.11 -- Amendment No. 1 to the Fifth Amended and Restated Agreement of Limited Partnership of Lepercq Corporate Income Fund L.P. dated as of December 31, 2000.+ 3.12 -- First Amendment to the Fifth Amended and Restated Agreement of Limited Partnership of Lepercq Corporate Income Fund L.P. effective as of June 19, 2003.+ 3.13 -- Second Amendment to the Fifth Amended and Restated Agreement of Limited Partnership of Lepercq Corporate Income Fund L.P. effective as of June 30, 2003.+ 3.14 -- First Amendment to the Second Amended and Restated Agreement of Limited Partnership of Lepercq Corporate Income Fund II L.P. effective as of June 19, 2003.+ 3.15 -- Second Amendment to the Second Amended and Restated Agreement of Limited Partnership of Lepercq Corporate Income Fund II L.P. effective as of June 30, 2003.+ 3.17 -- First Amendment to the Amended and Restated Agreement of Limited Partnership of Net 3 Acquisition L.P. effective as of November 29, 2001.+ 3.18 -- Second Amendment to the Amended and Restated Agreement of Limited Partnership of Net 3 Acquisition L.P. effective as of June 19, 2003.+ 3.19 -- Third Amendment to the Amended and Restated Agreement of Limited Partnership of Net 3 Acquisition L.P. effective as of June 30, 2003.+ 4.1 -- Specimen of Common Shares Certificate of the Company (filed as Exhibit 3.2 to the 1997 10-K)* 4.2 -- Form of 8.05% Series B Cumulative Redeemable Preferred Stock certificate (filed as Exhibit 3.3 to the Company's Registration Statement of Form 8A filed June 17, 2003).* 10.8 -- Form of 1994 Outside Director Shares Plan of the Company (filed as Exhibit 10.8 to the Company's Annual Report on 10-K for the year ended December 31, 1993)* 10.39 -- Form of Employment Agreement between the Company and E. Robert Roskind dated April 1, 2003+ 10.40 -- Investment Advisory and Asset Management Agreement by and between AGAR International Holdings Ltd. and Lexington Realty Advisors, Inc. ("LRA") (filed as Exhibit 10.40 to the Company's Annual Report on Form 10-K for the year ended December 31, 2000)* 10.42 -- Contribution Agreement between Net 3 Acquisition L.P. ("Net 3) and Lepercq Net 1 L.P., as amended (filed as Exhibit 10.42 to the 2001 Form S-4)* 10.43 -- Contribution Agreement between Net 3 and Lepercq Net 2 L.P., as amended (filed as Exhibit 10.43 to the 2001 Form S-4)* 10.44 -- Unsecured Revolving Credit Agreement with Fleet National Bank as Administrative Agent and Wachovia Bank, National Association, as Syndication Agent dated August 19, 2003 in the amount of $100,000,000 (filed as Exhibit 99.2 to the 8-K dated September 9, 2003)* 10.51 -- Agreement and Plan of Merger by and among the Company, Net 3 and Net 1 L.P., as amended (filed as Exhibit 2.5 to the Company's Registration Statement on Form S-4 (File No. 333-70790) (the "2001 Form S-4"))* 10.52 -- Agreement and Plan of Merger by and among the Company, Net 3 and Net 2 L.P. as amended (filed as Exhibit 2.6 to the 2001 Form S-4)*
71
EXHIBIT NO. EXHIBIT - ----------- ------- 10.53 -- Form of Indemnification Agreement between the Company and E. Robert Roskind dated June 6, 2002 (filed as Exhibit 10.3 to the Company's Annual Report on Form 10-K filed March 24, 2003)* 10.54 -- Amended and Restated 2002 Equity-Based Award Plan of the Company (filed as Exhibit 10.54 to the Company's Annual Report on Form 10-K filed March 24, 2003)* 12 -- Statement of Computation of Ratio of Earnings to Fixed Charges+ 14.1 -- Code of Ethics and Business Conduct.+ 21 -- List of Subsidiaries of the Trust+ 23 -- Consent of KPMG LLP+ 31.1 -- Certification of Chief Executive Officer pursuant to rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, 12 adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (furnished herewith). 31.2 -- Certification of Chief Financial Officer pursuant to rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, 12 adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (furnished herewith). 32.1 -- Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith). 32.2 -- Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith). 99.1 -- Operating Agreement and Management Agreement between the Company and Lexington Acquiport Company, LLC ("LAC I") (filed as Exhibit 2 to the Company's Current Report on Form 8-K filed August 31, 1999)* 99.2 -- Operating Agreement of Lexington Acquiport Company II, LLC ("LAC II"), dated as of December 5, 2001 (filed as Exhibit 99.4 to the 2001 8-K)* 99.3 -- Management Agreement, dated as of December 5, 2001, by and between LAC II and LRA (filed as Exhibit 99.5 to the 2001 8-K)* 99.4 -- First Amendment to Operating Agreement of LAC I, dated as of December 5, 2001 (filed as Exhibit 99.6 to the 2001 8-K)* 99.5 -- First Amendment to Management Agreement, dated as of December 5, 2001, by and between LAC I and LRA (filed as Exhibit 99.7 to the 2001 8-K)* 99.6 -- Operating Agreement and Management Agreement between the Company and Lexington/ Lion Joint Venture (filed as Exhibit 10.1 to the 8-K dated October 1, 2003)
- --------------- * Incorporated by reference. + Filed Herewith. (b) Reports on Form 8-K and Form 8-K/A Current Report on Form 8-K dated October 31, 2003 Current Report on Form 8-K dated October 24, 2003 Current Report on Form 8-K dated October 3, 2003 72 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/ T. WILSON EGLIN -------------------------------------- T. Wilson Eglin Chief Executive Officer 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 - --------------------------------------------- E. Robert Roskind /s/ RICHARD J. ROUSE Vice Chairman of the Board of Trustees and - --------------------------------------------- Chief Investment Officer Richard J. Rouse /s/ T. WILSON EGLIN Chief Executive Officer, President, Chief - --------------------------------------------- Operating Officer and Trustee T. Wilson Eglin /s/ PATRICK CARROLL Chief Financial Officer, Treasurer and - --------------------------------------------- Executive Vice President Patrick Carroll /s/ PAUL R. WOOD Vice President, Chief Accounting Officer and - --------------------------------------------- Secretary Paul R. Wood /s/ GEOFFREY DOHRMANN Trustee - --------------------------------------------- Geoffrey Dohrmann /s/ CARL D. GLICKMAN Trustee - --------------------------------------------- Carl D. Glickman /s/ JAMES GROSFELD Trustee - --------------------------------------------- James Grosfeld /s/ KEVIN W. LYNCH Trustee - --------------------------------------------- Kevin Lynch /s/ STANLEY R. PERLA Trustee - --------------------------------------------- Stan Perla /s/ SETH M. ZACHARY Trustee - --------------------------------------------- Seth M. Zachary
DATE: February 26, 2004 73 EX-3.5 3 y94559exv3w5.txt ARTICLES SUPPLEMENTARY Exhibit 3.5 LEXINGTON CORPORATE PROPERTIES TRUST ARTICLES SUPPLEMENTARY RECLASSIFYING REACQUIRED AND UNISSUED STOCK LEXINGTON CORPORATE PROPERTIES TRUST, a Maryland statutory real estate investment trust, having its principal office in Baltimore City, Maryland (the "Trust"), hereby certifies to the State Department of Assessments and Taxation of Maryland that: FIRST: Pursuant to the authority expressly vested in the Board of Trustees of the Trust by Article VI of the Declaration of Trust, as amended to date (the "Declaration"), and in accordance with Section 8-203 of the Maryland REIT Law, the Board of Trustees has adopted a resolution (i) duly reclassifying 2,000,000 authorized and previously issued (but now reacquired through conversion thereof) shares of Class A Senior Cumulative Convertible Preferred Stock, par value $.0001 per share, of the Trust (the "Class A Preferred Stock"), into 2,000,000 shares of Preferred Stock, par value $.0001 per share, of the Trust (the "Undesignated Preferred Stock"), subject to further classification or reclassification and issuance by the Board of Trustees and (ii) duly reclassifying 2,000,000 authorized and unissued shares of Excess Class A Preferred Stock, par value $.0001 per share, of the Trust (the "Excess Class A Stock"), into 2,000,000 shares of Excess Stock, par value $.0001 per share, of the Trust (the "Excess Stock"), subject to further classification or reclassification and issuance by the Board of Trustees. SECOND: The reclassification (i) increases the number of shares classified as Undesignated Preferred Stock from 8,000,000 shares immediately prior to the reclassification to 10,000,000 shares immediately after the reclassification; (ii) decreases the number of shares classified as Class A Preferred Stock from 2,000,000 shares immediately prior to the reclassification to no shares immediately after the reclassification; (iii) increases the number of shares classified as Excess Stock from 38,000,000 shares immediately prior to the reclassification to 40,000,000 shares immediately after the reclassification; and (iv) decreases the number of shares classified as Excess Class A Stock from 2,000,000 shares immediately prior to the reclassification to no shares immediately after the reclassification. THIRD: The terms of the Undesignated Preferred Stock and the Excess Stock (including preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends, qualifications, or terms or conditions of redemption) are set forth in the Declaration and are not changed by these Articles Supplementary. IN WITNESS WHEREOF, LEXINGTON CORPORATE PROPERTIES TRUST has caused these presents to be signed in its name and on its behalf by its President and witnessed by its Secretary on June 17, 2003. WITNESS: LEXINGTON CORPORATE PROPERTIES TRUST /s/ Paul R. Wood By: /s/ T. Wilson Eglin - --------------------------- ------------------------------- Paul R. Wood, Secretary T. Wilson Eglin, President THE UNDERSIGNED, President of LEXINGTON CORPORATE PROPERTIES TRUST, who executed on behalf of the Trust the foregoing Articles Supplementary of which this Certificate is made a part, hereby acknowledges in the name and on behalf of said Trust the foregoing Articles Supplementary to be the trust act of said Trust and hereby certifies that the matters and facts set forth herein with respect to the authorization and approval thereof are true in all material respects under the penalties of perjury. /s/ T. Wilson Eglin -------------------------------- T. Wilson Eglin, President - 2 - EX-3.11 4 y94559exv3w11.txt A#1 TO 5TH A/R AGREEMENT OF LIMITED PARTNERSHIP Exhibit 3.11 AMENDMENT NO. 1 TO THE FIFTH AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP OF LEPERCQ CORPORATE INCOME FUND L.P. This Amendment No. 1 ("Amendment No. 1") to the Fifth Amended and Restated Agreement of Limited Partnership (the "Agreement") of Lepercq Corporate Income Fund L.P. ("LCIF"), dated as of December 31, 2000 is made and Lex GP-1, Inc. ("GP"), a Delaware corporation, in its capacity as general partner of LCIF. WHEREAS, Section 14.1(B) of the Agreement provides that GP, without the consent of any other partner, may amend the Agreement to reflect a change to cure an ambiguity, correct or supplement any provision of the Agreement not inconsistent with law or other provisions; WHEREAS, GP and the Special Limited Partners had intended that LCIF would make cash distributions with respect to each Partnership Unit in the amount that LXP paid dividends to its shareholders and with respect to each share of LXP common stock and that LCIF would allocate taxable income in the amount of the cash distributions; WHEREAS, the Special Limited Partners have been receiving cash distributions in the amounts that LXP pays cash dividends but allocations of taxable income in accordance with their Percentage Interests; WHEREAS, the GP and Special Limited Partners wish to correct the existing ambiguity with respect to the Special Limited Partner's rights to distributions and allocations; NOW THEREFORE, pursuant to the authority granted to GP in the Agreement, GP hereby amends the Agreement as follows: 1. Section 5.1 of the Agreement shall be amended to add a new Section 5.1(E) as follows: E. Special Limited Partners. Notwithstanding Section 5.1.A, each Special Limited Partner shall be entitled to receive distributions with respect to each Partnership Unit equal to the cash dividend payable with respect to each share of LXP common stock, determined at the time of each quarterly distribution. 2. Sections 6.1(A) and (B) shall be amended to read in their entirety as follows: A. Net Income. After giving effect to the special allocations set forth in Section 1 of Exhibit C, and to the allocations of Net Income to Property Limited Partners, Special Limited Partners, Red Butte Limited Partners and Expansion Limited Partners set forth below and to the allocations with respect to Pacific Place Limited Partners, Phoenix Limited Partners, Savannah Limited Partners, Anchorage Limited Partners, Trademark Lancaster Limited Partners, and Columbia Limited Partners required pursuant to terms set forth in Exhibit A, Net Income shall be allocated to the Special Limited Partners only to the extent such Special Limited Partners have received cash distributions pursuant to Section 5.1.A and then to the General Partner and the Initial Limited Partner in accordance with their respective Percentage Interests (determined as a percentage of total Partnership Units held by the General Partner and the Initial Limited Partner); provided, that following (i) the Effective Date and (ii) the sale or other disposition (in which gain or loss is recognized) of real properties representing at least fifty (50%) percent of the Carrying Value of such properties as of the Effective Date, gains from the sale or other disposition of partnership assets shall be allocated to the Partners other than the Property Limited Partners, having negative Capital Accounts, to the extent and in accordance with such negative Capital Accounts and thereafter to all Partners in accordance with their Percentage Interests; provided further, that, a Property Limited Partner shall be specially allocated items of Partnership income and gain prior to such Property Limited Partner's applicable Redemption Exercise Date to the extent such Property Limited Partner receives a cash distribution pursuant to Section 5.1; provided, further, that a Red Butte Limited Partner and an Expansion Limited Partner will be allocated taxable income only in an amount equal to the cash distributions received; and provided, further, that for the taxable year ending December 31, 2000 the taxable income allocated to each Special Limited Partner shall be reduced to the extent of the excess, if any, of the difference between (x) the cumulative amount of taxable income previously allocated to such Special Limited Partner through the taxable year ending December 31, 1999 and (y) the cumulative amount of taxable income that would have been allocated to such Special Limited Partner through the taxable year ending December 31, 1999 had taxable income been allocated in an amount equal to the cash distributions received by such Special Limited Partner. B. Net Losses. After giving effect to the special allocations set forth in Exhibit C, 100% of the Net Losses shall be allocated to the General Partner and the Initial Limited Partner in accordance with their respective Percentage Interests (determined as a percentage of total Partnership Units held by the General Partner and the Initial Limited Partner). IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first written above. GENERAL PARTNER: Lex GP-1, Inc. By: /s/ Patrick Carroll -------------------------------- Name: Patrick Carroll Title: Vice President EX-3.12 5 y94559exv3w12.txt 1ST AMENDMENT TO 5TH A/R AGREEMENT OF LIMITED PART Exhibit 3.12 FIRST AMENDMENT TO FIFTH AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP OF LEPERCQ CORPORATE INCOME FUND L.P. This FIRST AMENDMENT TO FIFTH AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP OF LEPERCQ CORPORATE INCOME FUND L.P. (this "Amendment") is made and entered into effective as of June 19, 2003 by and among the entities and individuals signatory hereto. A. Lepercq Corporate Income Fund II L.P., a Delaware limited partnership (the "Partnership") is governed by that certain Fifth Amended and Restated Agreement of Limited Partnership, dated effective as of December 31, 1996 (the "Agreement"). Unless otherwise defined, all capitalized terms used herein shall have such meaning ascribed such terms in the Agreement. B. Lexington Corporate Properties Trust, a Maryland real estate investment trust ("LXP") is the sole unitholder of each of (i) Lex GP-1 Trust, a Delaware statutory trust ("Lex GP") and (ii) Lex LP-1 Trust, a Delaware statutory trust ("Lex LP"). Lex GP is the general partner of the Partnership, Lepercq Corporate Income Fund II L.P., a Delaware limited partnership, and Net 3 Acquisition L.P., a Delaware limited partnership (collectively, the "Operating Partnerships"). Lex LP is the Initial Limited Partner of each of the Operating Partnerships. C. As of the date hereof, LXP has completed the offer and sale (the "Offering") to the Underwriters (as defined in the Underwriting Agreement, dated as of June 10, 2003, by and among Bear, Stearns & Co. Inc., A.G. Edwards & Sons, Inc., Raymond James, Friedman Billings Ramsey, Advest, Inc., BB&T Capital Markets and Ferris, Baker Watts Incorporated, on the one hand, and LXP and the Operating Partnerships, on the other) of 3,160,000 preferred shares of beneficial interest, classified as 8.05% Series B Cumulative Redeemable Preferred Stock, par value $0.0001 per share, of LXP ("Preferred Shares"), pursuant to a prospectus supplement dated June 10, 2003 and the accompanying base prospectus dated April 10, 1998. D. The Preferred Shares carry a cumulative preferred dividend and liquidation preference further described in the Articles Supplementary of LXP, dated as of June 17, 2003. E. Pursuant to Section 4.2 of the Agreement, the Partnership may issue additional partnership interests to LXP and its affiliates in connection with the issuance of shares by LXP provided LXP makes a capital contribution to the Partnership of the proceeds raised in connection with such issuance. F. LXP has agreed to contribute a portion of the proceeds of the Offering to the Partnership in exchange for Series B Preferred Operating Partnership Units ("Preferred OP Units") in the Partnership to be issued to an affiliate of LXP, Lex LP. G. As required by Section 4.2 of the Agreement, the Preferred OP Units have designations, preferences and other rights such that the economic interests are substantially similar to the designations, preferences and other rights of the Preferred Shares, as further described and set forth in the Certificate of Designation for the Preferred OP Units attached hereto as Annex I (the "Certificate of Designation"). H. As of the date hereof, and pursuant to the terms of the Agreement, the parties hereto desire to amend the Agreement to reflect the issuance of 2,105,838 Preferred OP Units to Lex LP as well as all other changes in the ownership of Partnership Units since the date of the Agreement by amending and restating Exhibit A to the Agreement and (ii) the admission of Lex LP as a Limited Partner holding Preferred OP Units (a "Preferred Limited Partner"). NOW, THEREFORE, the undersigned, being desirous of effectuating the foregoing and amending the Agreement accordingly, hereby enter into this Amendment and amend the Agreement as follows: 1. Certificate of Designation; Preferred Limited Partner. The Agreement is hereby amended to the extent necessary to reflect that the rights, preferences and privileges of the Preferred OP Units and the Preferred Limited Partner, shall be as set forth in the Certificate of Designation which is hereby attached as Annex I to the Agreement and made a part hereof. To the extent there is a conflict between the terms of the Certificate of Designation and the terms of the Agreement, the terms of the Certificate of Designation shall control. 2. Exhibit A. Exhibit A to the Agreement is deleted in its entirety and replaced with Exhibit A hereto. 3. Miscellaneous. Except as amended hereby, the Agreement shall remain unchanged and in full force and effect. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] A-2 IN WITNESS WHEREOF, the parties hereto have executed this Amendment on behalf of the Partnership in accordance with the provisions of Section 14.1 of the Agreement as of the date first written above. GENERAL PARTNER: LEX GP-1 TRUST By: /s/ T. Wilson Eglin ------------------------------- Name: T. Wislon Eglin Title: Vice President EXHIBIT A PARTNERS' CONTRIBUTIONS AND PARTNERSHIP INTERESTS
Capital Partnership Percentage Redemption Name and Address of Partner Contribution Units Interest Exercise Date - ----------------------------------------------------------------------------------------------------------------------------------- GENERAL PARTNER Lex GP-1 Trust $ 100 217387 0.87% N/A LIMITED PARTNER Lex LP-1 Trust $ 100 21140878 84.28% N/A PREFERRED LIMITED PARTNER Lex LP 1 Trust $52,645,950 2105838 100% (of N/A Series B) SPECIAL LIMITED PARTNERS 0.43% Douglas S. Altabef -- 6556 N/A The LCP Group, L.P. -- 28057 N/A Ellen C. Monk -- 4066 N/A Terrell R. Peterson Trust dtd. 4/5/90 -- 2608 N/A E. Robert Roskind Family, L.P. -- 41813 N/A Richard J. Rouse -- 16063 N/A Edward C. Whiting -- 9001 N/A
PARTNERS' CONTRIBUTIONS AND PARTNERSHIP INTERESTS
Capital Partnership Percentage Redemption Name and Address of Partner Contribution Units Interest Exercise Date - ------------------------------------------------------------------------------------------------------------------------------- PROPERTY LIMITED PARTNERS 1) Barngiant Livingston(1) 0.25% March 1, 2004 Edward G. Gilbert 0.5 3902 John Heubel 0.25 1951 Leone Heubel 0.25 1951 Estate of Jacob M. Kirschner 1 7804 Kirschner Brothers Oil Co. 2.5 19510 Alvin E. Levine 1 7804 Estate of Antony E. Monk 0.001 406 Ellen C. Monk 0.001 406 Robert W. Pomerantz 0.5 3902 F/B/O Jeffrey W. Pomerantz (Harry Pomerantz Trust) 0.5 3902 F/B/O Michele P. Kolz (Harry Pomerantz Trust) 0.5 3902 Alex Silverman TTEE 0.5 3902 S. Swarzman 0.125 976 D. Swarzman 0.125 976 J. Swarzman 0.125 975 L. Swarzman 0.125 975 2) Barnhale Modesto 0.11% February 1, 2006 Roger Brooks 1655
- ---------- (1) For purposes of Section 5.1, Property Limited Partners that contributed interests in Barngiant Livingston (except for Kirschner Brothers Oil Co.) shall be entitled to cash distributions of $2,200 annually in 1996 through 2003, and $350 in 2004. A-2 PARTNERS' CONTRIBUTIONS AND PARTNERSHIP INTERESTS
Capital Partnership Percentage Redemption Name and Address of Partner Contribution Units Interest Exercise Date - ------------------------------------------------------------------------------------------------------------------------------- Jeffrey Caspe 115.5 4967 Richard Caspe 77 3311 Richard Jacobson 3311 Dwight L. Long Trust 1655 Albert J. Mintzer, Trustee Albert J. Mintzer Revocable Trust dtd 3/24/92 38.5 1656 Estate of Thomas S. Nurnberger 1655 Jack Pester 77 3311 Sheldon I. Rips 19.25 1655 Renee G. Rubinow Soskin Trust 1655 William A. Stauffer 19.25 1656 E. Robert Roskind (economic interest only) 20.2 872 Barnes Properties, Inc. (economic interest only) 20.2 871 3) Barnes Rockshire 0.12% March 1, 2005 Daniel R. Baty 1 3672 Charles W. Coker, Jr. 1 3672 Richard M. Durwood 1.5 5508 William Fromm 1 3672 The Residuary Trust U/W Isadore L. Krischner 0.5 1836 Estate of Antony E. Monk 0.001 4 Ellen C. Monk 0.001 4 Albert Silverman 1 3672 Alex Silverman TTEE 1 3672
A-3 PARTNERS' CONTRIBUTIONS AND PARTNERSHIP INTERESTS
Capital Partnership Percentage Redemption Name and Address of Partner Contribution Units Interest Exercise Date - ------------------------------------------------------------------------------------------------------------------------------- R. James Thornton 1 3672 4) Barnvyn Bakersfield 0.07% January 1, 2003 John P. Jennings 6257 Robert Miller 1.47 5485 (William D.) Kimpton Revocable Trust 0.26 978 Jack Brownstein 5181 5) Barnhech Montgomery(2) 0.04% May 1, 2006 Crestar Bank, Co-Ttee u/a dtd 1/31/86 James A. Linen IV Irrevocable Trust 1 1703 Charles R. Perko 1 1703 Rogers Living Trust, dtd 10/7/97 William A. Rogers III & Shirley Rogers 0.5 852 Herbert G. Roskind, Jr. 0.5 852 Gary Smith 1 1703 Hugh B. Wallis Trust 0.5 852 Jacqueline Gay Gaines 1703 6) Barnward Brownsville 0.10% November 2, 2004 Aaron David Bear 1 5424 Robert Bole 1 5424 Barry Pidgeon 1 5424 Gerald J. Riddle 1 5424
- ---------- (2) For purposes of Section 5.1, Property Limited Partners that contributed interests in Barnhech Montgomery shall be entitled to cash distributions of $490 annually in 1996 through 2005, and $163 in 2006. A-4 PARTNERS' CONTRIBUTIONS AND PARTNERSHIP INTERESTS
Capital Partnership Percentage Redemption Name and Address of Partner Contribution Units Interest Exercise Date - ------------------------------------------------------------------------------------------------------------------------------- E. Robert Roskind (economic interest only) 0.26 1428 Barnes Properties, Inc. (economic interest only) 0.26 1428 RED BUTTE LIMITED PARTNERS 5.0% May 22, 1998 Partners of Barnshore Associates -E. Robert Roskind Family L.P. 4245 -Ellen C. Monk 2122 -Richard J. Rouse 2123 -Edward C. Whiting 2123 -Steven Boughner 2123 -Peter Kinnunen 1061 -Terrell R. Peterson Trust dtd. 4/5/90 1061 Abbott, Mary I. Family Trust 16921 Babush, R.K. 1811 Baer, Verdilla 33842 Barry, Joanne 8461 Becker, Warren J. 16921 Sharon Bracken, Trustee, Sharon Bracken Marital Trust 33842 Calkins, Windsor & Judy 16921 Cherrington, James S. 16921 Dallas, Robert H. (Sr.) 16921 Danzig, Murray (Alan J. Rubens, escrow agent) 33842 Diversi, Henry L. (Jr.) 10861
A-5 PARTNERS' CONTRIBUTIONS AND PARTNERSHIP INTERESTS
Capital Partnership Percentage Redemption Name and Address of Partner Contribution Units Interest Exercise Date - ------------------------------------------------------------------------------------------------------------------------------- Dodds, W. Douglas 16921 Dye Investment Properties #1 33842 Ebrahimian (Moosa) Family, L.P. 33842 Falconer Family L.P. 33842 Flake, Rodney J. Trust 16921 The Bud and Mary Lou Flocchini Partnership 16921 The Armando J. and Lena Flocchini Family Partnership 16921 Gilbert, Peter G. 5431 Golia, Dominick T. 37236 Harrington, Thomas J. 20315 Healey, Thomas J. 3734 Irvin, Tinesley H. 10862 Jacobs, Randolph 33842 Jenkins, Edward Max Trust 16921 Jones, Billy Ray 5431 Jones, J. Curtis 2716 Kadish, Rosalyn S. 2716 Kenyon Trust 38594 Kornman, Jacob S. 1810 Kotkins, Henry L. (Jr.) 33842 Kotkins, Henry L. (Sr.) TTEE 33842 Kremers, Joseph A. 33842 Krone, Marilyn R. Living Trust 8147 Legum, Steven F. 5431 Manlowe, Donald & Virginia 33842
A-6 PARTNERS' CONTRIBUTIONS AND PARTNERSHIP INTERESTS
Capital Partnership Percentage Redemption Name and Address of Partner Contribution Units Interest Exercise Date - ------------------------------------------------------------------------------------------------------------------------------- Maronick, E. Phil 33842 Martin, Eff W. 3734 Mathews, Glenna C. 16921 Mazo, (Gerald)/Trust 5431 McGonacle, Linda & Jim 16921 Murphy II, Chester M. Trustee 8460 Murphy, Margaret Trustee 8460 Neiman, H.F. 1810 Obernauer, Marne (Jr.) 20315 Obie, Gordon T. 16921 Post, Allen W. (Jr.) 10862 Price, Gerald E. 16921 Rhoad, Estate of Guy C. 37236 Romney, Gloria Lynn & Clark TTEE 20315 Schaefer, Robert A. 5431 Schubach, Robert M. 33842 Schwartz, Richard J. 33842 Sherry, Henry I. 5431 Stephenson, Leroy 33842 Strimatter, Paul L. 8460 Todd, Geils 33842 Weaver, (The) Judith Family LLC 16921 Weaver, Terry M. 16921 Whitmore, George M. (Jr.) 5431 John C. Williams Trustee, Red Butte Creek Trust 2716
A-7 PARTNERS' CONTRIBUTIONS AND PARTNERSHIP INTERESTS
Capital Partnership Percentage Redemption Name and Address of Partner Contribution Units Interest Exercise Date - ------------------------------------------------------------------------------------------------------------------------------- Young, Raymond 5431 The LCP Group, L.P. 104704 Richard J. Rouse 9302 EXPANSION LIMITED PARTNERS 1) Toy Properties Associates II 0.27% January 15, 1999 Brooks, Bonnie Jo 854 Burnett, Pamela A. 569 Carolyn A. Butler 854 Lee C. Butler 854 Robert C. Dickson 1707 Patricia E. Dupree 1707 Robert L. Dupree 1707 Dr. John M. Gallus 1707 W.C. Gilbert 3414 Robert Hecht 1707 Lawrence N. Johnson 1707 Jennifer Kastelic 569 James R. Keller 1707 Oliver W. Lund 1707 David L. Mitchell 1707 Lawrence E. Mulkerin 1707 Wayne H. Nay 853 James E. Rottsolk 1707 Dr. Allen Ruth 1707 Earl L. Sherron, Jr. 1707
A-8 PARTNERS' CONTRIBUTIONS AND PARTNERSHIP INTERESTS
Capital Partnership Percentage Redemption Name and Address of Partner Contribution Units Interest Exercise Date - ------------------------------------------------------------------------------------------------------------------------------- John F. Steiner 1707 Joseph F. Sutter 1707 WAT Enterprises Limited Partnership ("Thielman") 1707 Mary Lou Tillay 1707 L. Suzan Watson 569 Zavrski, C . Realty , LLC 1707 O.K.O.W. Investors (Special LP) (Special LP) 3628 The LCP Group, L.P. 18065 Richard J. Rouse 4696 E. Robert Roskind Family, L.P. 327 Ellen C. Monk 163 Edward C. Whiting 196 Terrell R. Peterson Trust dtd. 4/5/90 131 Peter Kinnunen 131 2) Toy Properties Associates V 0.12% January 15, 1999 Leonard V. Ackermann, DDS 778 George L. and Donna L. Adams 778 9401 Allied L.P. 778 John R. Bedingfield, Jr., MD 778 Stephen P. Boger, DDS 778 James L. Bridge, Jr. 778 John Richard Burg, MD 778 Eva P. Csathy 778 Archie R. and Nancy H. Dykes 778
A-9 PARTNERS' CONTRIBUTIONS AND PARTNERSHIP INTERESTS
Capital Partnership Percentage Redemption Name and Address of Partner Contribution Units Interest Exercise Date - ------------------------------------------------------------------------------------------------------------------------------- George W. Flynn 778 Gordon G. Fowler 778 Burton J. Iverson 778 Douglas A. Jensen 778 James P. Larkin 778 W. Jack Lovern 778 Miles A. Nelson 778 Terry O. Noble 778 Michael D. O'Leary, DDS 778 Ruth P. Ruben 778 Thomas T. Schattenberg 778 Robert and Kathleen Schlangen 778 Thomas E. and Connie J. Taff 778 Luis W. and Pacita Tam 778 The LCP Group, L.P. 9601 Richard J. Rouse 1958 E. Robert Roskind Family, L.P. 238 Ellen C. Monk 119 Edward C. Whiting 146 Terrell R. Peterson Trust dtd. 4/5/90 97 Peter Kinnunen 97 Francois Letaconnoux 51 3) Fort Street Partners 0.75% January 15, 2006 Marilyn Anixter Allen 2262 Robert M. Arnold 6855
A-10 PARTNERS' CONTRIBUTIONS AND PARTNERSHIP INTERESTS
Capital Partnership Percentage Redemption Name and Address of Partner Contribution Units Interest Exercise Date - ------------------------------------------------------------------------------------------------------------------------------- Fred R. Backer 6855 Clifford C. Burton 6855 Carole Anixter Cohen 2331 Donald De Pinto, MD 6855 Averell Fisk 2285 Robert Fisk 9140 James Flood 27420 Yvonne Anixter Goddard 2262 John Gosselin 6855 Bruce A. Gregga 6855 David Haley 6855 Guenther P. Koenkow 6855 Leonard and Caroline S. Lorberbaum 13710 Averell H. Mortimer 6855 David Mortimer 6855 Gary W. Rollins 13710 R. Randall Rollins 13710 W. Dieter Tede 6855 C. Joseph Tyree 6855 Stephen P. Glennon 1662 E. Robert Roskind 208 Richard J. Rouse 4023 January 15, 1999 The LCP Group, L.P. 13444 January 15, 1999
A-11 As a result of the merger of the Partnership with Pacific Place Partners Ltd. ("Pacific Place") on March 10, 1997, the General Partner has authorized the issuance of Partnership Units to all former partners of Pacific Place (the "Pacific Place Limited Partners") in the amounts specified on Exhibit A-1 attached hereto and made a part hereof. For purposes of applying the terms and conditions of the Partnership Agreement, the Pacific Place Limited Partners shall be Partners of the Partnership with the rights and obligations of Additional Limited Partners. For purposes of Section 5.1 of the Partnership Agreement, each Pacific Place Limited Partners shall be entitled to receive distributions with respect to each Partnership Unit equal to the cash dividend payable with respect to each share of LXP common stock, determined at the time of each quarterly distribution. For purposes of Sections 6.1A and 6.1B of the Partnership Agreement, allocations of Net Income and Net Loss by the Partnership generally shall be made after giving effect to all allocations of taxable income to the Pacific Place Limited Partners. Taxable income shall be specially allocated to the Pacific Place Limited Partners in an amount equal to, but not in excess of, the cash distributed to the Pacific Place Limited Partners; provided, however, that the Pacific Place Limited Partners shall be allocated taxable income (i) as otherwise required in Exhibit B and C of the Partnership Agreement, and (ii) resulting from the transaction in which the Replacement Property (as defined below) was acquired. For purposes of Section 6.1C of the Partnership Agreement, Nonrecourse Liabilities of the Partnership shall be allocated to account for any income or gain to be allocated to the Pacific Place Limited Partners pursuant to Sections 2.B and 2.D of Exhibit C, in the same priority as Nonrecourse Liabilities are allocated to the Property Limited Partners, the Red Butte Limited Partners, the Expansion Limited Partners and any subsequent Additional Limited Partners that are admitted to the Partnership. The Partnership covenants to retain sufficient Nonrecourse Liabilities to permit the allocation of such Nonrecourse Liabilities to the Pacific Place Limited Partners in an amount sufficient to avoid recapture of tax liability with respect to the Pacific Place Limited Partners' negative capital accounts. For purposes of Section 8.4 of the Partnership Agreement, on April 15, 1999, and on each January 15, April 15, July 15 and October 15 thereafter (each a "Notice Date"), each Pacific Place Limited Partner shall have the right (the "Pacific Place Limited Partner Redemption Right") to require the Partnership to redeem on a Specified Redemption Date the Partnership Units held by a Pacific Place Limited Partner for the Redemption Amount to be delivered by the Partnership; provided, however, that a Pacific Place Limited Partner must convert a number of Partnership Units equal to at least the lesser of (i)1,000 Partnership Units, or (ii) all of the Partnership Units held by such Partner. The Pacific Place Limited Partner Redemption Right shall be exercised pursuant to a Notice of Redemption (substantially in the form of Exhibits D-1 through D-4 modified to reflect the Pacific Place Limited Partner) delivered to the General Partner and LXP on a Notice Date by the Pacific Place Limited Partner who is exercising the redemption right (the "Pacific Place Redeeming Partner"). The Pacific Place Redeeming Partner shall have no right, with respect to any Partnership Units so redeemed, to receive any distributions paid after the Specified Redemption Date. The Partnership covenants to A-12 cause the registration of any LXP Common Stock issued in connection with a redemption in such a manner as is required so that the shares of LXP Common Stock issued in connection with such redemption are freely transferable. The Assignee of any Pacific Place Limited Partner may exercise the redemption rights of such Pacific Place Limited Partner, and such Pacific Place Limited Partner shall be deemed to have assigned such rights to such Assignee and shall be bound by the exercise of such rights by such Assignee. In connection with any exercise of such rights by such Assignee on behalf of such Pacific Place Limited Partner, the Redemption Amount shall be delivered by the Partnership directly to such Assignee and not to such Pacific Place Limited Partner. The Partnership Units held by the Pacific Place Limited Partners shall be subject to redemption by the Partnership if otherwise required by the terms of the Partnership Agreement. The Partnership hereby covenants not to dispose of its interest in those certain properties located at 6 Doughton Rd., New Kingston, Pa., 34 E. Main St., New Kingston, Pa., and 245 Salem Church Rd., Mechanicsburg, Pa., (the "Replacement Property") prior to March 1, 2002 without the prior consent of the holders of fifty one percent (51%) of the Partnership Units held by Pacific Place Limited Partners, except in the event of a foreclosure or in the event the Partnership determines that such a disposition is necessary to ensure its continued qualification as a real estate investment trust. In any event in which the Partnership determines to dispose of the Replacement Property, the Partnership agrees to use its best efforts to structure such a disposition as an exchange that meets the requirements of Code Section 1031. Notwithstanding the foregoing, if the Partnership does dispose of its interest prior to April 15, 1999, then the General Partner shall provide prompt written notification to the Pacific Place Limited Partners of such disposition and each such Pacific Place Limited Partner may exercise its Pacific Place Limited Partner Redemption Right on the last Business Day of the calendar year in which such disposition occurs or, if later, ten (10) Business Days following the consummation of such transaction. LXP agrees to enter into a Guaranty Agreement with the Partnership on the date the Pacific Place Limited Partners are admitted to the Partnership, on terms reasonably satisfactory to LXP and the Partnership, pursuant to which LXP shall guaranty the obligations of the Partnership to pay the Redemption Amount on the Specified Redemption Date. Each of the Pacific Place Redeeming Partner, LXP, the Partnership and the General Partner shall treat the transaction between LXP and the Pacific Place Redeeming Partner as a sale of the Pacific Place Redeeming Partner's Partnership Units to LXP or the General Partner, as the case may be, for federal income tax purposes. Each Pacific Place Redeeming Partner agrees to execute such documents as the Partnership may reasonably require in connection with the issuance of REIT shares upon exercise of the Pacific Place Limited Partner Redemption Right. A-13 PARTNERS' CONTRIBUTIONS AND PARTNERSHIP INTERESTS
Capital Partnership Percentage Redemption Name and Address of Partner Contribution Units Interest Exercise Date - ------------------------------------------------------------------------------------------------------------------------------- PACIFIC PLACE LIMITED PARTNERS 1.57% April 15, 1999 Dr. Stuart D. Aaron 1543 Dr. Kenneth H. Adler 772 Dr. Norman I. Agin 1543 James J. Akers, Trustee u/a dated 12/28/90 771 Phyllis M. Akers, Trust 772 Douglas J. Backman 1543 C. Peter Beler 1543 William C. Butcher 386 Shoppers Village Associates c/o Steven H. Caller 1543 Steven H. Caller 1188 Chappy Partners 72000 Louis G. Chiodini 772 Harry S. Cohen 1543 Robert S. Cohen 1543 Dr. Robert L. Diaz 3085 Marvin J. Dolinka 772 William D. Evans 1543 Elizabeth A. Fendell 772 Dr. Gerald Finerman 1543 Ronald T. Fredette 2314 David Freishtat and Paul Sandler 1157
A-14 PARTNERS' CONTRIBUTIONS AND PARTNERSHIP INTERESTS
Capital Partnership Percentage Redemption Name and Address of Partner Contribution Units Interest Exercise Date - ------------------------------------------------------------------------------------------------------------------------------- Dr. & Mrs. Mithlesh Govil 1543 Marilyn R. Heller Trust 1543 Joe M. Henson 1543 Gloria Hillman 771 Dr. Phillip L. Horowitz 1543 Investment Capital Associates 1619 ICA Pacific Place, Inc. 3373 John C. Isaacs, III Ranch, Ltd. 1543 Sam S. Isaacs Ranch, Ltd. 1542 Marsha Caller Jaffee 1188 Dr. Bernard J. Judis 771 David A. Katz 772 Jay Latterman and Jack Goldsmith 385 Earl M. Latterman 772 Bernard B. Latterman 772 King Laughlin 1687 Stephen P. Lawrence 89300 Martin C. Leibowitz Revocable Trust 98906 Barry Z. Liber 3085 Ronald U. Lurie 772 John McCallum 1620 Richard G. McCauley 1543 Warren G. Moses 1543 Richard Mrad 5399 Dr. Vijayachandra S. Nair 1543
A-15 PARTNERS' CONTRIBUTIONS AND PARTNERSHIP INTERESTS
Capital Partnership Percentage Redemption Name and Address of Partner Contribution Units Interest Exercise Date - ------------------------------------------------------------------------------------------------------------------------------- Godfrey P. Padberg 1543 Pell Holdings 39100 Irving L. Peterson 1543 John Allen Pierce 1687 Dr. Sonja S. Pinsky 1543 Lawrence Raskin 1296 Ernest E. & Mary B. Renaud 1543 Irving Rosenstein 1188 Arthur R. Salomon 2314 David Sandler & Paul Freishtat 386 Dr. Sylvan Sarasohn 1543 Dr. Michael J. Schou 1543 Antonia Shusta 386 Dr. William R. Sloan 1543 Irving Spivak 772 Jeffrey P. Stern 1543 Dr. William Sternfeld 1543 Dr. Norman A. Stokes 771 Marilyn A. Teague Revocable Trust 1543 James M. Tushman 1543 Thomas E. Tushman 771 Dr. & Mrs. Irving Waldman 771 Mr. & Mrs. Neil Wolfson 1543 Andrew S. Wolfson 1543
A-16 As a result of the contribution of the interests in the Phoenix Hotel Associates Limited Partnership ("Phoenix") on January 29, 1998, the General Partner pursuant to Section 4.2.A and Sections 14.1.B(2) and 14.1.B(3) of this Agreement has authorized the issuance of Partnership Units to those former partners of Phoenix (the "Phoenix Limited Partners") electing to contribute all or a portion of their interests to the Partnership. Each Phoenix Limited Partner shall receive the number of Units specified below. For purposes of applying the terms and conditions of the Partnership Agreement, the Phoenix Limited Partners shall be Partners of the Partnership with the rights and obligations of Additional Limited Partners. For purposes of Section 5.1 of the Partnership Agreement, each Phoenix Limited Partner shall be entitled to receive distributions with respect to each Partnership Unit equal to the cash dividend payable with respect to each share of LXP common stock, determined at the time of each quarterly distribution beginning with the distribution payable to shareholders of record of LXP on January 30, 1998. For purposes of Sections 6.1A and 6.1B of the Partnership Agreement, allocations of Net Income and Net Loss by the Partnership generally shall be made after giving effect to all allocations of taxable income to the Phoenix Limited Partners. Pursuant to the General Partners' authority in Section 14.1.B(3), Partnership taxable income shall be specially allocated to the Phoenix Limited Partners in an amount equal to, but not in excess of, all cash distributions to the Phoenix Limited Partners; provided, however, that the Phoenix Limited Partners shall be allocated taxable income (i) as otherwise required in Exhibit B and C of the Partnership Agreement, and (ii) resulting from the transaction in which the Replacement Property (as defined below) was acquired. For purposes of Section 6.1C of the Partnership Agreement, Nonrecourse Liabilities of the Partnership shall be allocated to account for any income or gain to be allocated to the Phoenix Limited Partners pursuant to Sections 2.B and 2.D of Exhibit C, in the same priority as Nonrecourse Liabilities are allocated to the Property Limited Partners, the Red Butte Limited Partners, the Expansion Limited Partners, the Phoenix Limited Partners, the Savannah Limited Partners and any subsequent Additional Limited Partners that are admitted to the Partnership. The Partnership covenants to retain sufficient Nonrecourse Liabilities to permit the allocation of such Nonrecourse Liabilities to the Phoenix Limited Partners in an amount sufficient to avoid recapture of tax liability with respect to the Phoenix Limited Partners' negative capital accounts. For purposes of Section 8.4 of the Partnership Agreement, on January 15, 1999, and on each January 15, April 15, July 15 and October 15 thereafter (each a "Notice Date"), each Phoenix Limited Partner shall have the right (the "Phoenix Limited Partner Redemption Right") to require the Partnership to redeem on a Specified Redemption Date the Partnership Units held by a Phoenix Limited Partner for the Redemption Amount to be delivered by the Partnership; provided, however, that a Phoenix Limited Partner must convert a number of Partnership Units equal to at least the lesser of (i) 1,000 Partnership Units, or (ii) all of the Partnership Units held by such Partner. The Phoenix Limited Partner Redemption Right shall be exercised pursuant to a Notice of Redemption (substantially in the form of Exhibits D-1 through D-4 modified to reflect the Phoenix Limited Partner) delivered to the General Partner and LXP on a A-17 Notice Date by the Phoenix Limited Partner who is exercising the redemption right (the "Phoenix Redeeming Partner"). The Phoenix Redeeming Partner shall have no right, with respect to any Partnership Units so redeemed, to receive any distributions paid after the Specified Redemption Date. The Partnership covenants to cause the registration of any LXP Common Stock issued in connection with a redemption in such a manner as is required so that the shares of LXP Common Stock issued in connection with such redemption are freely transferable. The Assignee of any Phoenix Limited Partner may exercise the redemption rights of such Phoenix Limited Partner, and such Phoenix Limited Partner shall be deemed to have assigned such rights to such Assignee and shall be bound by the exercise of such rights by such Assignee. In connection with any exercise of such rights by such Assignee on behalf of such Phoenix Limited Partner, the Redemption Amount shall be delivered by the Partnership directly to such Assignee and not to such Phoenix Limited Partner. The Partnership Units held by the Phoenix Limited Partners shall be subject to redemption by the Partnership if otherwise required by the terms of the Partnership Agreement. The Partnership hereby covenants not to permit Phoenix to dispose of its interest in those certain properties acquired by Phoenix in connection with its rights under that certain Exchange Agreement dated December 29, 1997 between Phoenix and Security Trust Company (the property so acquired, the "Replacement Property") prior to January 1, 2003 without the prior consent of the holders of fifty-one percent (51%) of the Partnership Units held by Phoenix Limited Partners, except in the event of a foreclosure or in the event the Partnership determines that such a disposition is necessary to ensure its continued qualification as a real estate investment trust. In any event in which the Partnership determines to cause Phoenix to dispose of the Replacement Property, the Partnership agrees to use its best efforts to cause Phoenix to structure such a disposition as an exchange that meets the requirements of Code Section 1031. Notwithstanding the foregoing, if the Partnership does dispose of its interest prior to January 15, 1999, then the General Partner shall provide prompt written notification to the Phoenix Limited Partners of such disposition and each such Phoenix Limited Partner may exercise its Phoenix Limited Partner Redemption Right on the last Business Day of the calendar year in which such disposition occurs or, if later, ten (10) Business Days following the consummation of such transaction. In addition, if the Code Section 1031 exchange described in the Exchange Agreement does not take place, or if such exchange does not result in a deferral of all of the gain that would have been recognized upon the sale by Phoenix of the Relinquished Property (as defined in the Exchange Agreement), then the General Partner shall provide prompt written notification to the Phoenix Limited Partners and shall cause LCIF to distribute cash to the Phoenix Limited Partners in redemption of the portion of their LCIF Units corresponding to the portion of the value of the Relinquished Property which is treated as transferred in a taxable transaction. LXP agrees to enter into a Guaranty Agreement with the Partnership on the date the Phoenix Limited Partners are admitted to the Partnership, on terms reasonably satisfactory to LXP and the Partnership, pursuant to which LXP shall guaranty the obligations of the Partnership to pay the Redemption Amount on the A-18 Specified Redemption Date. Each of the Phoenix Redeeming Partner, LXP, the Partnership and the General Partner shall treat the transaction between LXP and the Phoenix Redeeming Partner as a sale of the Phoenix Redeeming Partner's Partnership Units to LXP or the General Partner, as the case may be, for federal income tax purposes. Each Phoenix Redeeming Partner agrees to execute such documents as the Partnership may reasonably require in connection with the issuance of REIT shares upon exercise of the Phoenix Limited Partner Redemption Right. A-19 PARTNERS' CONTRIBUTIONS AND PARTNERSHIP INTERESTS
Capital Partnership Percentage Redemption Name and Address of Partner Contribution Units Interest Exercise Date - --------------------------------------------------------------------------------------------------------------------------- PHOENIX LIMITED PARTNERS (Class A Units Contributed) 3.56% January 15, 1999 James Berdell 0.25 12272 Kemp Biddulph Revocable Trust dtd. 5/6/83 0.5 24546 Melissa Thaler Brody 1000 Blair E. Clarkson (Merrill Lynch) 250 Thomas B. Clarkson 250 John H. Clarkson 250 Robert W. Clarkson as custodian for John Robert Wittman 250 deWilde Family Trust dtd. 6/21/90 0.25 12273 Richard T. Flaute 0.5 24546 Frederick Frank 0.5 24546 Fremar Company 0.1425 6996 Paul Myron Haas Trust 0.5 24546 Jerome L. Heard, M.D. 0.5 24546 Benjamin Jagendorf, M.D. 1 49093 Edward J. Ledder, Trustee Edward J. Ledder Rev. Trust u/a/d 4/6/90 1 49093 Karl L. Matthies 0.25 12272 Ellen C. Monk 6136 E. Robert Roskind Family, L.P. 0.25 12272 Ann B. Schroeder TTEE 1 49093
A-20 PARTNERS' CONTRIBUTIONS AND PARTNERSHIP INTERESTS
Capital Partnership Percentage Redemption Name and Address of Partner Contribution Units Interest Exercise Date - --------------------------------------------------------------------------------------------------------------------------- Robert E. & Ann B. Schroder Marital Trust U/A dtd. 1/7/82 Stephanie Seed 8223 William T. Seed 3000 Benjamin N. Simon 0.5 24546 Terri Simon TTEE 0.5 24546 Ellen B. Soref TTEE 0.5 24546 Ellen Barbara Soref Intervivos Trust Lewis J. Thaler 0.5 22646 (Class B Units Contributed) E. Robert Roskind Family, L.P. 7.5 344663 Terrell R. Peterson Trust dtd. 4/5/90 1.6 73528 Third Lero Corp. 1% G.P. interest 33957
A-21 As a result of the contribution of the interests in the Savannah Waterfront Hotel LLC ("Savannah") on January 29, 1998, the General Partner pursuant to Section 4.2.A and Sections 14.1.B(2) and 14.1.B(3) of this Agreement has authorized the issuance of Partnership Units to those former members of Savannah (the "Savannah Limited Partners") electing to contribute all or a portion of their interests to the Partnership. Each Savannah Limited Partner shall receive the number of Units specified below. For purposes of applying the terms and conditions of the Partnership Agreement, the Savannah Limited Partners shall be Partners of the Partnership with the rights and obligations of Additional Limited Partners. For purposes of Section 5.1 of the Partnership Agreement, each Savannah Limited Partner shall be entitled to receive distributions with respect to each Partnership Unit equal to the cash dividend payable with respect to each share of LXP common stock, determined at the time of each quarterly distribution beginning with the distribution payable to shareholders of record of LXP on January 30, 1998. For purposes of Sections 6.1A and 6.1B of the Partnership Agreement, allocations of Net Income and Net Loss by the Partnership generally shall be made after giving effect to all allocations of taxable income to the Savannah Limited Partners. Pursuant to the General Partners' authority in Section 14.1.B(3), Partnership taxable income shall be specially allocated to the Savannah Limited Partners in an amount equal to, but not in excess of, all cash distributions to the Savannah Limited Partners; provided, however, that the Savannah Limited Partners shall be allocated taxable income (i) as otherwise required in Exhibit B and C of the Partnership Agreement, and (ii) resulting from the transaction in which the Replacement Property (as defined below) was acquired. For purposes of Section 6.1C of the Partnership Agreement, Nonrecourse Liabilities of the Partnership shall be allocated to account for any income or gain to be allocated to the Savannah Limited Partners pursuant to Sections 2.B and 2.D of Exhibit C, in the same priority as Nonrecourse Liabilities are allocated to the Property Limited Partners, the Red Butte Limited Partners, the Expansion Limited Partners, the Savannah Limited Partners, the Phoenix Limited Partners and any subsequent Additional Limited Partners that are admitted to the Partnership. The Partnership covenants to retain sufficient Nonrecourse Liabilities to permit the allocation of such Nonrecourse Liabilities to the Savannah Limited Partners in an amount sufficient to avoid recapture of tax liability with respect to the Savannah Limited Partners' negative capital accounts. For purposes of Section 8.4 of the Partnership Agreement, on January 15, 1999, and on each January 15, April 15, July 15 and October 15 thereafter (each a "Notice Date"), each Savannah Limited Partner shall have the right (the "Savannah Limited Partner Redemption Right") to require the Partnership to redeem on a Specified Redemption Date the Partnership Units held by a Savannah Limited Partner for the Redemption Amount to be delivered by the Partnership; provided, however, that a Savannah Limited Partner must convert a number of Partnership Units equal to at least the lesser of (i) 1,000 Partnership Units, or (ii) all of the Partnership Units held by such Partner. The Savannah Limited Partner Redemption Right shall be exercised pursuant to a Notice of Redemption (substantially in the form of Exhibits D-1 through D-4 modified to reflect the Savannah Limited Partner) delivered to the General Partner and LXP on a A-22 Notice Date by the Savannah Limited Partner who is exercising the redemption right (the "Savannah Redeeming Partner"). The Savannah Redeeming Partner shall have no right, with respect to any Partnership Units so redeemed, to receive any distributions paid after the Specified Redemption Date. The Partnership covenants to cause the registration of any LXP Common Stock issued in connection with a redemption in such a manner as is required so that the shares of LXP Common Stock issued in connection with such redemption are freely transferable. The Assignee of any Savannah Limited Partner may exercise the redemption rights of such Savannah Limited Partner, and such Savannah Limited Partner shall be deemed to have assigned such rights to such Assignee and shall be bound by the exercise of such rights by such Assignee. In connection with any exercise of such rights by such Assignee on behalf of such Savannah Limited Partner, the Redemption Amount shall be delivered by the Partnership directly to such Assignee and not to such Savannah Limited Partner. The Partnership Units held by the Savannah Limited Partners shall be subject to redemption by the Partnership if otherwise required by the terms of the Partnership Agreement. The Partnership hereby covenants not to permit Savannah to dispose of its interest in those certain properties acquired by Savannah in connection with its rights under that certain Exchange Agreement dated December 29, 1997 between Savannah and Security Trust Company (the property so acquired, the "Replacement Property") prior to January 1, 2003 without the prior consent of the holders of fifty-one percent (51%) of the Partnership Units held by Savannah Limited Partners, except in the event of a foreclosure or in the event the Partnership determines that such a disposition is necessary to ensure its continued qualification as a real estate investment trust. In any event in which the Partnership determines to cause Savannah to dispose of the Replacement Property, the Partnership agrees to use its best efforts to cause Savannah to structure such a disposition as an exchange that meets the requirements of Code Section 1031. Notwithstanding the foregoing, if the Partnership does dispose of its interest prior to January 15, 1999, then the General Partner shall provide prompt written notification to the Savannah Limited Partners of such disposition and each such Savannah Limited Partner may exercise its Savannah Limited Partner Redemption Right on the last Business Day of the calendar year in which such disposition occurs or, if later, ten (10) Business Days following the consummation of such transaction. In addition, if the Code Section 1031 exchange described in the Exchange Agreement does not take place, or if such exchange does not result in a deferral of all of the gain that would have been recognized upon the sale by Savannah of the Relinquished Property (as defined in the Exchange Agreement), then the General Partner shall provide prompt written notification to the Savannah Limited Partners and shall cause LCIF to distribute cash to the Savannah Limited Partners in redemption of the portion of their LCIF Units corresponding to the portion of the value of the Relinquished Property which is treated as transferred in a taxable transaction. LXP agrees to enter into a Guaranty Agreement with the Partnership on the date the Savannah Limited Partners are admitted to the Partnership, on terms reasonably satisfactory to LXP and the Partnership, pursuant to which LXP shall guaranty the obligations of the Partnership to pay the Redemption Amount on the A-23 Specified Redemption Date. Each of the Savannah Redeeming Partner, LXP, the Partnership and the General Partner shall treat the transaction between LXP and the Savannah Redeeming Partner as a sale of the Savannah Redeeming Partner's Partnership Units to LXP or the General Partner, as the case may be, for federal income tax purposes. Each Savannah Redeeming Partner agrees to execute such documents as the Partnership may reasonably require in connection with the issuance of REIT shares upon exercise of the Savannah Limited Partner Redemption Right. A-24 PARTNERS' CONTRIBUTIONS AND PARTNERSHIP INTERESTS
Capital Partnership Percentage Redemption Name and Address of Partner Contribution Units Interest Exercise Date - ---------------------------------------------------------------------------------------------------------------------------- (Units Contributed) 0.99% SAVANNAH LIMITED PARTNERS January 15, 1999 H. Mitchell Dunn, Jr. 1,100 157447 Elizabeth Dunn Shiftan 125 17891 Eleanor M. Dunn 125 17891 Terrell R. Peterson Trust dtd. 4/5/90 125 17891 David Walsh 275 37361
A-25 As a result of the Partnership having entered into a Contribution Agreement with RBH Ventures, a Washington general partnership on May 8, 1998, pursuant to which the Partnership acquired 51.31% of the net equity value of certain real property located in the city of Anchorage, Alaska, on which is located a commercial building (the "Anchorage Property") from RBH, the General Partner pursuant to Section 4.2.A and Sections 14.1.B(2) and 14.1.B(3) of this Agreement has authorized the issuance of Partnership Units to RBH (the "Anchorage Limited Partner"). The Anchorage Limited Partner shall receive the number of Units specified below. For purposes of applying the terms and conditions of the Partnership Agreement, the Anchorage Limited Partner shall be a Partner of the Partnership with the rights and obligations of Additional Limited Partners. For purposes of Section 5.1 of the Partnership Agreement, the Anchorage Limited Partner shall be entitled to receive distributions with respect to each Partnership Unit equal to the cash dividend payable with respect to each share of LXP common stock, determined at the time of each quarterly distribution beginning with the distribution payable to shareholders of record of LXP on July 30, 1998. For purposes of Sections 6.1A and 6.1B of the Partnership Agreement, allocations of Net Income and Net Loss by the Partnership generally shall be made after giving effect to all allocations of taxable income to the Anchorage Limited Partner. Pursuant to the General Partner's authority in Section 14.1.B(3), Partnership taxable income shall be specially allocated to the Anchorage Limited Partner in an amount equal to, but not in excess of, all cash distributions to the Anchorage Limited Partner; provided, however, that the Anchorage Limited Partner shall be allocated taxable income as otherwise required in Exhibit B and C of the Partnership Agreement. For purposes of Section 6.1C of the Partnership Agreement, Nonrecourse Liabilities of the Partnership shall be allocated to account for any income or gain to be allocated to the Anchorage Limited Partner pursuant to Sections 2.B and 2.D of Exhibit C, in the same priority as Nonrecourse Liabilities are allocated to the Property Limited Partners, the Red Butte Limited Partners, the Expansion Limited Partners, the Savannah Limited Partners, the Phoenix Limited Partners and any subsequent Additional Limited Partners that are admitted to the Partnership. The Partnership covenants to retain sufficient Nonrecourse Liabilities to permit the allocation of such Nonrecourse Liabilities to the Anchorage Limited Partner in an amount sufficient to avoid recapture of tax liability with respect to the Anchorage Limited Partner's negative capital accounts. For purposes of Section 8.4 of the Partnership Agreement, on July 15, 1999, and on each July 15, October 15, January 15 and April 15 thereafter (each a "Notice Date"), the Anchorage Limited Partner shall have the right (the "Anchorage Limited Partner Redemption Right") to require the Partnership to redeem on a Specified Redemption Date the Partnership Units held by the Anchorage Limited Partner for the Redemption Amount to be delivered by the Partnership; provided, however, that the Anchorage Limited Partner must convert a number of Partnership Units equal to at least the lesser of (i) 1,000 Partnership Units, or (ii) all of the Partnership Units held by such Partner. The Anchorage Limited Partner Redemption Right shall be exercised pursuant to a Notice of Redemption (substantially in the form of Exhibits D-1 through D-4 modified A-26 to reflect the Anchorage Limited Partner) delivered to the General Partner and LXP on a Notice Date by the Anchorage Limited Partner who is exercising the redemption right (the "Anchorage Redeeming Partner"). The Anchorage Redeeming Partner shall have no right, with respect to any Partnership Units so redeemed, to receive any distributions paid after the Specified Redemption Date. The Partnership covenants to cause the registration of any LXP Common Stock issued in connection with a redemption in such a manner as is required so that the shares of LXP Common Stock issued in connection with such redemption are freely transferable. The Assignee of the Anchorage Limited Partner may exercise the redemption rights of the Anchorage Limited Partner, and the Anchorage Limited Partner shall be deemed to have assigned such rights to such Assignee and shall be bound by the exercise of such rights by such Assignee. In connection with any exercise of such rights by such Assignee on behalf of the Anchorage Limited Partner, such Redemption Amount shall be delivered by the Partnership directly to such Assignee and not to such Anchorage Limited Partner. The Partnership Units held by the Anchorage Limited Partner shall be subject to redemption by the Partnership if otherwise required by the terms of the Partnership Agreement. LXP agrees to enter into a Guaranty Agreement with the Partnership on the date the Anchorage Limited Partner is admitted to the Partnership, on terms reasonably satisfactory to LXP and the Partnership, pursuant to which LXP shall guaranty the obligations of the Partnership to pay the Redemption Amount on the Specified Redemption Date. Each of the Anchorage Redeeming Partner, LXP, the Partnership and the General Partner shall treat the transaction between LXP and the Anchorage Redeeming Partner as a sale of the Anchorage Redeeming Partner's Partnership Units to LXP or the General Partner, as the case may be, for federal income tax purposes. The Anchorage Redeeming Partner agrees to execute such documents as the Partnership may reasonably require in connection with the issuance of REIT shares upon exercise of the Anchorage Limited Partner Redemption Right. A-27 PARTNERS' CONTRIBUTIONS AND PARTNERSHIP INTERESTS
Redemption Capital Partnership Percentage Exercise Name and Address of Partner Contribution Units Interest Date - ------------------------------------------------------------------------------------------------------------------------ ANCHORAGE LIMITED PARTNER July 15, 1999 Ronald D. Crockett 97816 0.39%
A-28 As a result of the Partnership having entered into a Contribution Agreement with Trademark Lancaster L.P., a Texas limited partnership ("Trademark Lancaster") on June 19, 1998, pursuant to which the Partnership acquired from Trademark Lancaster the right, title and interest as a purchaser in the Contract of Sale and Joint Escrow Instructions dated December 16, 1997 between Michaels Stores, Inc. as seller and Trademark Acquisition and Development, Inc. as purchaser (the "Lancaster Contract"), which has as its subject matter all that certain plot, piece, or parcel of land comprising 36.95 acres, together with the buildings and improvements constructed thereon consisting of a one story distribution facility comprising approximately 432,000 square feet (collectively, the "Lancaster California Property"), the General Partner pursuant to Section 4.2.A and Sections 14.1.B(2) and 14.1.B(3) of this Agreement has authorized the issuance of Partnership Units to Trademark Lancaster (the "Trademark Lancaster Limited Partner"). The Trademark Lancaster Limited Partner shall receive the number of Units specified below. For purposes of applying the terms and conditions of the Partnership Agreement, the Trademark Lancaster Limited Partner shall be a Partner of the Partnership with the rights and obligations of Additional Limited Partners. For purposes of Section 5.1 of the Partnership Agreement, the Trademark Lancaster Limited Partner shall be entitled to receive distributions with respect to each Partnership Unit equal to the cash dividend payable with respect to each share of LXP common stock, determined at the time of each quarterly distribution beginning with the distribution payable to shareholders of record of LXP on July 30, 1998. For purposes of Sections 6.1A and 6.1B of the Partnership Agreement, allocations of Net Income and Net Loss by the Partnership generally shall be made after giving effect to all allocations of taxable income to the Trademark Lancaster Limited Partner. Pursuant to the General Partner's authority in Section 14.1.B(3), Partnership taxable income shall be specially allocated to the Trademark Lancaster Limited Partner in an amount equal to, but not in excess of, all cash distributions to the Trademark Lancaster Limited Partner; provided, however, that the Trademark Lancaster Limited Partner shall be allocated taxable income as otherwise required in Exhibit B and C of the Partnership Agreement. For purposes of Section 6.1C of the Partnership Agreement, Nonrecourse Liabilities of the Partnership shall be allocated to account for any income or gain to be allocated to the Trademark Lancaster Limited Partner pursuant to Sections 2.B and 2.D of Exhibit C, in the same priority as Nonrecourse Liabilities are allocated to the Property Limited Partners, the Red Butte Limited Partners, the Expansion Limited Partners, the Savannah Limited Partners, the Phoenix Limited Partners, the Anchorage Limited Partner and any subsequent Additional Limited Partners that are admitted to the Partnership. The Partnership covenants to retain sufficient Nonrecourse Liabilities to permit the allocation of such Nonrecourse Liabilities to the Trademark Lancaster Limited Partner in an amount sufficient to avoid recapture of tax liability with respect to the Trademark Lancaster Limited Partner's negative capital accounts. For purposes of Section 8.4 of the Partnership Agreement, on March 1, 1999, and on each March 1, June 1, September 1, and December 1 thereafter (each a "Notice Date"), the Trademark Lancaster Limited Partner shall have the right (the "Trademark Lancaster Limited Partner Redemption Right") to require the Partnership to A-29 redeem on a Specified Redemption Date the Partnership Units held by the Trademark Lancaster Limited Partner for the Redemption Amount to be delivered by the Partnership; provided, however, that the Trademark Lancaster Limited Partner must convert a number of Partnership Units equal to at least the lesser of (i) 1,000 Partnership Units, or (ii) all of the Partnership Units held by such Partner. The Trademark Lancaster Limited Partner Redemption Right shall be exercised pursuant to a Notice of Redemption (substantially in the form of Exhibits D-1 through D-4 modified to reflect the Trademark Lancaster Limited Partner) delivered to the General Partner and LXP on a Notice Date by the Trademark Lancaster Limited Partner who is exercising the redemption right (the "Trademark Lancaster Redeeming Partner"). The Trademark Lancaster Redeeming Partner shall have no right, with respect to any Partnership Units so redeemed, to receive any distributions paid after the Specified Redemption Date. The Partnership covenants to cause the registration of any LXP Common Stock issued in connection with a redemption in such a manner as is required so that the shares of LXP Common Stock issued in connection with such redemption are freely transferable. The Assignee of the Trademark Lancaster Limited Partner may exercise the redemption rights of the Trademark Lancaster Limited Partner, and the Trademark Lancaster Limited Partner shall be deemed to have assigned such rights to such Assignee and shall be bound by the exercise of such rights by such Assignee. In connection with any exercise of such rights by such Assignee on behalf of the Trademark Lancaster Limited Partner, such Redemption Amount shall be delivered by the Partnership directly to such Assignee and not to such Trademark Lancaster Limited Partner. The Partnership Units held by the Trademark Lancaster Limited Partner shall be subject to redemption by the Partnership if otherwise required by the terms of the Partnership Agreement. LXP agrees to enter into a Guaranty Agreement with the Partnership on the date the Trademark Lancaster Limited Partner is admitted to the Partnership, on terms reasonably satisfactory to LXP and the Partnership, pursuant to which LXP shall guaranty the obligations of the Partnership to pay the Redemption Amount on the Specified Redemption Date. Each of the Trademark Lancaster Redeeming Partner, LXP, the Partnership and the General Partner shall treat the transaction between LXP and the Trademark Lancaster Redeeming Partner as a sale of the Trademark Lancaster Redeeming Partner's Partnership Units to LXP or the General Partner, as the case may be, for federal income tax purposes. The Trademark Lancaster Redeeming Partner agrees to execute such documents as the Partnership may reasonably require in connection with the issuance of REIT shares upon exercise of the Trademark Lancaster Limited Partner Redemption Right. A-30 PARTNERS' CONTRIBUTIONS AND PARTNERSHIP INTERESTS
Redemption Capital Partnership Percentage Exercise Name and Address of Partner Contribution Units Interest Date - ---------------------------------------------------------------------------------------------------------- TRADEMARK LANCASTER LIMITED PARTNER March 1, 1999 None 0
A-31 COLUMBIA LIMITED PARTNERS SUPPLEMENT As a result of the Partnership having entered into (i) a Contribution Agreement with Columbia Property Associates, a Maryland limited partnership ("CPA") on December 31, 1998, pursuant to which the Partnership acquired an estate-for-years interest in a parcel of real property located in Columbia, Maryland (the "Columbia Property") from CPA, (ii) a Contribution Agreement with The E. Robert Roskind Irrevocable Trust on December 3, 1998 pursuant to which the Partnership acquired a remainder interest in the Columbia Property, (iii) a Contribution Agreement with The LCP Group, L.P. on December 3, 1998, (iv) a Contribution Agreement with The LCP Group, L.P. on December 3, 1998, and (v) a Contribution Agreement with The LCP Group, L.P., Hadley Page, Inc., Peter J. Kinnunen and Terrell R. Peterson Trust on December 3, 1998, the General Partner pursuant to Section 4.2.A and Sections 14.1.B(2) and 14.1.B(3) of this Agreement has authorized the issuance of Partnership Units to all former partners of CPA, The LCP Group, L.P., Hadley Page, Inc., Peter J. Kinnunen, Terrell R. Peterson Trust and The E. Robert Roskind Irrevocable Trust (the "Columbia Limited Partners"). The Columbia Limited Partners shall receive the number of Units specified below. For purposes of applying the terms and conditions of the Partnership Agreement, the Columbia Limited Partners shall be a Partner of the Partnership with the rights and obligations of Additional Limited Partners. For purposes of Section 5.1 of the Partnership Agreement, each Columbia Limited Partner shall be entitled to receive distributions with respect to each Partnership Unit equal to the cash dividend payable with respect to each share of LXP common stock, determined at the time of each quarterly distribution beginning with the distribution in respect to the first quarter of 1999. For purposes of Sections 6.1A and 6.1B of the Partnership Agreement, allocations of Net Income and Net Loss by the Partnership generally shall be made after giving effect to all allocations of taxable income to the Columbia Limited Partners. Pursuant to the General Partner's authority in Section 14.1.B(3), Partnership taxable income shall be specially allocated to the Columbia Limited Partners in an amount equal to, but not in excess of, all cash distributions to the Columbia Limited Partners; provided, however, that the Columbia Limited Partners shall be allocated taxable income as otherwise required in Exhibit B and C of the Partnership Agreement. For purposes of Section 6.1C of the Partnership Agreement, Nonrecourse Liabilities of the Partnership shall be allocated to account for any income or gain to be allocated to the Columbia Limited Partners pursuant to Sections 2.B and 2.D of Exhibit C, in the same priority as Nonrecourse Liabilities are allocated to the Property Limited Partners, the Red Butte Limited Partners, the Expansion Limited Partners, the Savannah Limited Partners, the Phoenix Limited Partners, the Anchorage Limited Partner, the Trademark Lancaster Limited Partner and any subsequent Additional Limited Partners that are admitted to the Partnership. The Partnership covenants to retain sufficient Nonrecourse Liabilities to permit the allocation of such Nonrecourse Liabilities to the Columbia Limited Partners in an amount sufficient to avoid recapture of tax liability with respect to the Columbia Limited Partners' negative capital accounts. A-32 For purposes of Section 8.4 of the Partnership Agreement, on December 1, 1999, and on each December 1, March 1, June 1 and September 1 thereafter (each a "Notice Date"), each Columbia Limited Partner shall have the right (the "Columbia Limited Partner Redemption Right") to require the Partnership to redeem on a Specified Redemption Date the Partnership Units held by a Columbia Limited Partner for the Redemption Amount to be delivered by the Partnership; provided, however, that a Columbia Limited Partner must convert a number of Partnership Units equal to at least the lesser of (i) 1,000 Partnership Units, or (ii) all of the Partnership Units held by such Partner. The Columbia Limited Partner Redemption Right shall be exercised pursuant to a Notice of Redemption (substantially in the form of Exhibits D-1 through D-4 modified to reflect the Columbia Limited Partner) delivered to the General Partner and LXP on a Notice Date by the Columbia Limited Partner who is exercising the redemption right (the "Columbia Redeeming Partner"). The Columbia Redeeming Partner shall have no right, with respect to any Partnership Units so redeemed, to receive any distributions paid after the Specified Redemption Date. The Partnership covenants to cause the registration of any LXP Common Stock issued in connection with a redemption in such a manner as is required so that the shares of LXP Common Stock issued in connection with such redemption are freely transferable. The Assignee of the Columbia Limited Partner may exercise the redemption rights of the Columbia Limited Partner, and the Columbia Limited Partner shall be deemed to have assigned such rights to such Assignee and shall be bound by the exercise of such rights by such Assignee. In connection with any exercise of such rights by such Assignee on behalf of such Columbia Limited Partner, such Redemption Amount shall be delivered by the Partnership directly to such Assignee and not to such Columbia Limited Partner. The Partnership Units held by the Columbia Limited Partners shall be subject to redemption by the Partnership if otherwise required by the terms of the Partnership Agreement. The Partnership hereby covenants not to dispose of its interest in the Columbia Property prior to January 1, 2004 except in the event of a foreclosure or in the event the Partnership determines that such a disposition is necessary to ensure its continued qualification as a real estate investment trust. LXP agrees to enter into a Guaranty Agreement with the Partnership on the date the Columbia Limited Partners are admitted to the Partnership, on terms reasonably satisfactory to LXP and the Partnership, pursuant to which LXP shall guaranty the obligations of the Partnership to pay the Redemption Amount on the Specified Redemption Date. Each of the Columbia Redeeming Partner, LXP, the Partnership and the General Partner shall treat the transaction between LXP and the Columbia Redeeming Partner as a sale of the Columbia Redeeming Partner's Partnership Units to LXP or the General Partner, as the case may be, for federal income tax purposes. The Columbia Redeeming Partner agrees to execute such documents as the Partnership may reasonably require in connection with the issuance of REIT shares upon exercise of the Columbia Limited Partner Redemption Right. A-33 PARTNERS' CONTRIBUTIONS AND PARTNERSHIP INTERESTS
Redemption Capital Partnership Percentage Exercise Name and Address of Partner Contribution Units Interest Date - ----------------------------------------------------------------------------------------------------------- (Units December 1, Contributed) 0.75% 1999 COLUMBIA LIMITED PARTNERS The LCP Group, L.P. 86014 James F. Dannhauser 393 E. Robert Roskind Irrevocable Trust 19231 Peter J. Kinnunen 7159 Terrell R. Peterson Trust 1349 Frank Bond 0.5 3866 Rudolph V. Cassani Family Trust 1 7731 Elizabeth Dancy 0.5 3866 David M. Dorsen 0.5 3866 David D. Eash 1 7731 Norma Garman 0.5 3866 Richard E. Gilbreath 1 7731 Lawrence M. Goldberg 1 7731 Kenneth Kolb 0.5 3866 Clyde Locker 0.5 3866 Kazuko Price 0.5 3866 Blaine Smith 1 7731 James R. Snyder 0.5 3866 John J. Stirk 0.5 3866
A-34 LPM LIMITED PARTNERS SUPPLEMENT As a result of the contribution of 9,900 Class B non-voting shares of common stock (the "Stock") in Leased Properties Management, Inc., a Delaware corporation ("LPM") on June 23, 2000, the General Partner pursuant to Section 4.2.A and Sections 14.1.B(2) and 14.1.B(3) of this Agreement has authorized the issuance of Partnership Units to the former holders of the Stock (the "LPM Limited Partner"). The LPM Limited Partner shall receive the number of Units specified below. For purposes of applying the terms and conditions of the Partnership Agreement, the LPM Limited Partner shall be a Partner of the Partnership with the rights and obligations of Additional Limited Partners. For purposes of Section 5.1 of the Partnership Agreement, the LPM Limited Partner shall be entitled to receive distributions with respect to each Partnership Unit equal to the cash dividend payable with respect to each share of LXP common stock, determined at the time of each quarterly distribution beginning with the distribution payable to shareholders of LXP in respect of the second quarter of 2000. For purposes of Sections 6.1A and 6.1B of the Partnership Agreement, allocations of Net Income and Net Loss by the Partnership generally shall be made after giving effect to all allocations of taxable income to the LPM Limited Partner. Pursuant to the General Partner's authority in Section 14.1.B(3), Partnership taxable income shall be specially allocated to the LPM Limited Partner in an amount equal to, but not in excess of, all cash distributions to the LPM Limited Partner; provided, however, that the LPM Limited Partner shall be allocated taxable income as otherwise required in Exhibit B and C of the Partnership Agreement. For purposes of Section 6.1C of the Partnership Agreement, Nonrecourse Liabilities of the Partnership shall be allocated to account for any income or gain to be allocated to the LPM Limited Partner pursuant to Sections 2.B and 2.D of Exhibit C, in the same priority as Nonrecourse Liabilities are allocated to the Property Limited Partners, the Red Butte Limited Partners, the Expansion Limited Partners, the Pacific Place Limited Partners, the Phoenix Limited Partners, the Savannah Limited Partners, the Anchorage Limited Partner, the Trademark Limited Partners, the Columbia Limited Partners and any subsequent Additional Limited Partners that are admitted to the Partnership. The Partnership covenants to use its best efforts during the five-year period ending June 22, 2005 to retain sufficient Nonrecourse Liabilities to permit the allocation of such Nonrecourse Liabilities to the LPM Limited Partner in an amount sufficient to avoid recapture of tax liability with respect to the LPM Limited Partner's negative capital accounts. For purposes of Section 8.4 of the Partnership Agreement, on June 23, 2002, and on each June 23, September 23, December 23 and March 23 thereafter (each a "Notice Date"), the LPM Limited Partner shall have the right (the "LPM Limited Partner Redemption Right") to require the Partnership to redeem on a Specified Redemption Date the Partnership Units held by the LPM Limited Partner for the Redemption Amount to be delivered by the Partnership; provided, however, that the LPM Limited Partner must convert a number of Partnership Units equal to at least the lesser of (i) 1,000 Partnership A-35 Units, or (ii) all of the Partnership Units held by such Partner. The LPM Limited Partner Redemption Right shall be exercised pursuant to a Notice of Redemption (substantially in the form of Exhibits D-1 through D-4 modified to reflect the LPM Limited Partner) delivered to the General Partner and LXP on a Notice Date by the LPM Limited Partner who is exercising the redemption right (the "LPM Redeeming Partner"). The LPM Redeeming Partner shall have no right, with respect to any Partnership Units so redeemed, to receive any distributions paid after the Specified Redemption Date. The Partnership covenants to cause the registration of any LXP Common Stock issued in connection with a redemption in such a manner as is required so that the shares of LXP Common Stock issued in connection with such redemption are freely transferable. The Assignee of the LPM Limited Partner may exercise the redemption rights of the LPM Limited Partner, and the LPM Limited Partner shall be deemed to have assigned such rights to such Assignee and shall be bound by the exercise of such rights by such Assignee. In connection with any exercise of such rights by such Assignee on behalf of the LPM Limited Partner, such Redemption Amount shall be delivered by the Partnership directly to such Assignee and not to such LPM Limited Partner. The Partnership Units held by the LPM Limited Partner shall be subject to redemption by the Partnership if otherwise required by the terms of the Partnership Agreement. LXP agrees to enter into a Guaranty Agreement with the Partnership on the date the LPM Limited Partner is admitted to the Partnership, on terms reasonably satisfactory to LXP and the Partnership, pursuant to which LXP shall guaranty the obligations of the Partnership to pay the Redemption Amount on the Specified Redemption Date. Each of the LPM Redeeming Partner, LXP, the Partnership and the General Partner shall treat the transaction between LXP and the LPM Redeeming Partner as a sale of the LPM Redeeming Partner's Partnership Units to LXP or the General Partner, as the case may be, for federal income tax purposes. The LPM Redeeming Partner agrees to execute such documents as the Partnership may reasonably require in connection with the issuance of REIT shares upon exercise of the LPM Limited Partner Redemption Right. A-36 PARTNERS' CONTRIBUTIONS AND PARTNERSHIP INTERESTS
Redemption Capital Partnership Percentage Exercise Name and Address of Partner Contribution Units Interest Date - ----------------------------------------------------------------------------------------------------------- LPM LIMITED PARTNER June 23, 2002 The LCP Group, L.P. 83400 0.33%
A-37 EX-3.13 6 y94559exv3w13.txt 2ND AMENDMENT TO 5TH A/R AGREEMENT OF LIMITED PART Exhibit 3.13 SECOND AMENDMENT TO FIFTH AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP OF LEPERCQ CORPORATE INCOME FUND L.P. This SECOND AMENDMENT TO FIFTH AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP OF LEPERCQ CORPORATE INCOME FUND L.P. (this "Amendment") is made and entered into on October 22, 2003, but effective as of June 30, 2003, by and among the entities and individuals signatory hereto. A. Lepercq Corporate Income Fund L.P., a Delaware limited partnership (the "Partnership"), is governed by that certain Fifth Amended and Restated Agreement of Limited Partnership, dated effective as of December 31, 1996, as amended by that certain First Amendment dated effective as of June 19, 2003 (the "Agreement"). Unless otherwise defined, all capitalized terms used herein shall have such meaning ascribed such terms in the Agreement. B. Lex GP-1 Trust, a Delaware statutory trust, is the General Partner of the Partnership, Lex LP-1 Trust, a Delaware statutory trust, is the Initial Limited Partner of the Partnership and E. Robert Roskind, Richard J. Rouse and The LCP Group, L.P. collectively hold a majority of the Partnership Units held by the Special Limited Partners of the Partnership. C. Pursuant to Section 14.1 of the Agreement, the Agreement may be amended with the consent of the General Partner, the Initial Limited Partner, and the Special Limited Partners representing a majority of Partnership Units held by such Special Limited Partners. D. As of the date hereof, and pursuant to Section 14.1 of the Agreement, the parties hereto desire to amend the Agreement to extend the term of the Agreement indefinitely, unless the Partnership is dissolved sooner pursuant to the provisions of Article 13 of the Agreement or as otherwise provided by law. NOW, THEREFORE, the undersigned, being desirous of effectuating the foregoing and amending the Agreement accordingly, hereby enter into this Amendment and amend the Agreement as follows: 1. Section 2.5. Section 2.5 of the Agreement is deleted in its entirety and replaced with the following: "Section 2.5 Term. The term of the Partnership commenced on October 5, 1993, the date the Certificate was filed in the office of the Secretary of State of the State of Delaware in accordance with the Act and shall continue indefinitely, unless the Partnership is dissolved sooner pursuant to the provisions of Article 13 or as otherwise provided by law." 2. Miscellaneous. Except as amended hereby, the Agreement shall remain unchanged and in full force and effect. IN WITNESS WHEREOF, the parties hereto have executed this Amendment on behalf of the Partnership in accordance with the provisions of Section 14.1 of the Agreement as of the date first written above. GENERAL PARTNER: LEX GP-1 TRUST By: /s/ Patrick Carroll ------------------------------------- Name: Patrick Carroll Title: Vice President INITIAL LIMITED PARTNER: LEX LP-1 TRUST By: /s/ Patrick Carroll ------------------------------------- Name: Patrick Carroll Title: Vice President SPECIAL LIMITED PARTNERS: /s/ E. Robert Roskind ----------------------------------------- E. Robert Roskind /s/ Richard J. Rouse ----------------------------------------- Richard J. Rouse THE LCP GROUP, L.P. By: Third Lero Corp., general partner By: /s/ E. Robert Roskind ------------------------------------- Name: E. Robert Roskind Title: President EX-3.14 7 y94559exv3w14.txt 1ST AMENDMENT TO 2ND A/R AGREEMENT OF LIMITED PART Exhibit 3.14 EXECUTION COPY FIRST AMENDMENT TO SECOND AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP OF LEPERCQ CORPORATE INCOME FUND II L.P. This FIRST AMENDMENT TO SECOND AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP OF LEPERCQ CORPORATE INCOME FUND II L.P. (this "Amendment") is made and entered into effective as of June 19, 2003 by and among the entities and individuals signatory hereto. A. Lepercq Corporate Income Fund II L.P., a Delaware limited partnership (the "Partnership") is governed by that certain Second Amended and Restated Agreement of Limited Partnership, dated effective as of August 27, 1998 (the "Agreement"). Unless otherwise defined, all capitalized terms used herein shall have such meaning ascribed such terms in the Agreement. B. Lexington Corporate Properties Trust, a Maryland real estate investment trust ("LXP") is the sole unitholder of each of (i) Lex GP-1 Trust, a Delaware statutory trust ("Lex GP") and (ii) Lex LP-1 Trust, a Delaware statutory trust ("Lex LP"). Lex GP is the general partner of the Partnership, Lepercq Corporate Income Fund L.P., a Delaware limited partnership, and Net 3 Acquisition L.P., a Delaware limited partnership (collectively, the "Operating Partnerships"). Lex LP is the Initial Limited Partner of each of the Operating Partnerships. C. As of the date hereof, LXP has completed the offer and sale (the "Offering") to the Underwriters (as defined in the Underwriting Agreement, dated as of June 10, 2003, by and among Bear, Stearns & Co. Inc., A.G. Edwards & Sons, Inc., Raymond James, Friedman Billings Ramsey, Advest, Inc., BB&T Capital Markets and Ferris, Baker Watts Incorporated, on the one hand, and LXP and the Operating Partnerships, on the other) of 3,160,000 preferred shares of beneficial interest, classified as 8.05% Series B Cumulative Redeemable Preferred Stock, par value $0.0001 per share, of LXP ("Preferred Shares"), pursuant to a prospectus supplement dated June 10, 2003 and the accompanying base prospectus dated April 10, 1998. D. The Preferred Shares carry a cumulative preferred dividend and liquidation preference further described in the Articles Supplementary of LXP, dated as of June 17, 2003. E. Pursuant to Section 4.2 of the Agreement, the Partnership may issue additional partnership interests to LXP and its affiliates in connection with the issuance of shares by LXP provided LXP makes a capital contribution to the Partnership of the proceeds raised in connection with such issuance. F. LXP has agreed to contribute a portion of the proceeds of the Offering to the Partnership in exchange for Series B Preferred Operating Partnership Units ("Preferred OP Units") in the Partnership to be issued to an affiliate of LXP, Lex LP. G. As required by Section 4.2 of the Agreement, the Preferred OP Units have designations, preferences and other rights such that the economic interests are substantially similar to the designations, preferences and other rights of the Preferred Shares, as further described and set forth in the Certificate of Designation for the Preferred OP Units attached hereto as Annex I (the "Certificate of Designation"). H. As of the date hereof, and pursuant to the terms of the Agreement, the parties hereto desire to amend the Agreement to reflect the issuance of 567,961 Preferred OP Units to Lex LP as well as all other changes in the ownership of Partnership Units since the date of the Agreement by amending and restating Exhibit A to the Agreement and (ii) the admission of Lex LP as a Limited Partner holding Preferred OP Units (a "Preferred Limited Partner"). NOW, THEREFORE, the undersigned, being desirous of effectuating the foregoing and amending the Agreement accordingly, hereby enter into this Amendment and amend the Agreement as follows: 1. Certificate of Designation; Preferred Limited Partner. The Agreement is hereby amended to the extent necessary to reflect that the rights, preferences and privileges of the Preferred OP Units and the Preferred Limited Partner, shall be as set forth in the Certificate of Designation which is hereby attached as Annex I to the Agreement and made a part hereof. To the extent there is a conflict between the terms of the Certificate of Designation and the terms of the Agreement, the terms of the Certificate of Designation shall control. 2. Exhibit A. Exhibit A to the Agreement is deleted in its entirety and replaced with Exhibit A hereto. 3. Miscellaneous. Except as amended hereby, the Agreement shall remain unchanged and in full force and effect. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] IN WITNESS WHEREOF, the parties hereto have executed this Amendment on behalf of the Partnership in accordance with the provisions of Section 14.1 of the Agreement as of the date first written above. GENERAL PARTNER: LEX GP-1 TRUST By: /s/ T. Wilson Eglin ------------------------------------- Name: T. Wilson Eglin Title: Vice President EXHIBIT A PARTNERS' CONTRIBUTIONS AND PARTNERSHIP INTERESTS
Capital Partnership Percentage Redemption Name of Partner Contribution Units Interest Exemption Date - -------------------------------------------------------------------------------------------------------------- GENERAL PARTNER Lex GP 1 Trust $ 100 35411 0.64561% N/A LIMITED PARTNER Lex LP 1 Trust $ 100 3443735 62.78539% N/A 100% (of Lex LP-1 Trust $ 14,199,025 567961 Series B) N/A SPECIAL LIMITED PARTNERS Douglas S. Altabef -- 3354 0.06115% N/A The LCP Group, L.P. -- 14914 0.27191% N/A Ellen C. Monk -- 2162 0.03941% N/A E. Robert Roskind -- 21443 0.39094% N/A Richard J. Rouse -- 8241 0.15025% N/A Edward C. Whiting -- 4605 0.08396% N/A PHOENIX LIMITED PARTNER 15-Jan-99 E. Robert Roskind G.P. interest 175306 3.19614% The E. Robert Roskind Family, L.P. 40000 0.72927% (Units WARREN LIMITED PARTNERS Contributed) 1-Sep-99 AGR Trust 2 6672 0.12164% Ambrose, Joseph D. 1 3336 0.06082% Ambrose, Joseph D. III 1 3336 0.06082% Angell, E. Joe 1 3336 0.06082% Baghramian, Michael M. & Carol 1 3336 0.06082% Bain, Frank L.(Jr.) & Linda C. 1 3336 0.06082% Bancroft, Toby O. Jr. 1 3336 0.06082% Barnett, Paul 0.5 1668 0.03041% Bartlett, June F. 1 3336 0.06082% Becker, Karl E. 0.5 1668 0.03041%
PARTNERS' CONTRIBUTIONS AND PARTNERSHIP INTERESTS
Capital Partnership Percentage Redemption Name of Partner Contribution Units Interest Exemption Date - -------------------------------------------------------------------------------------------------------------- Berg, Michael P. & Virginia I. 1 3336 0.06082% Berger, Milton 1 3336 0.06082% Berman, Michael L. 1 3336 0.06082% Bickett, Walter C. & Patricia B. 1 3336 0.06082% Birdsall, John H. Revocable Intervivos Trust 1 3336 0.06082% Bolliger, Theodore T. 0.5 1668 0.03041% Bond, John L. 1 3336 0.06082% Botsai, Elmer E. 0.5 1668 0.03041% Boyd, John & Sylvia 1 3336 0.06082% Breen, James J. 1 3336 0.06082% Brenner, William I. 1 3336 0.06082% Broback, John K. & Nancy 1 3336 0.06082% Burnett, Ed 1 3336 0.06082% Carpenter, David R. 0.5 1668 0.03041% Chambers, Richard O. 1 3336 0.06082% Chen, Howard H. 1 3336 0.06082% Chen, Wen Long & Chun Hwa 0.5 1668 0.03041% Cherin, Harris A. 0.5 1668 0.03041% Chinn, Aaron 1 3336 0.06082% Clark, William R. & Janice R. 1 3336 0.06082% Coberly (Joseph E. Jr.)Revocable Trust 1 3336 0.06082% Cooper, George M. 0.5 1668 0.03041% Croft (Nelda J.) Trust dtd 6/2/89 1 3336 0.06082% Crow, Frank (Jr.) & Gertrude 0.5 1668 0.03041% Cuneo, Joseph J. 1 3336 0.06082% Dafcik (William V.) Trust 1 3336 0.06082% Dash, Jay 1 3336 0.06082%
A-2 PARTNERS' CONTRIBUTIONS AND PARTNERSHIP INTERESTS
Capital Partnership Percentage Redemption Name of Partner Contribution Units Interest Exemption Date - -------------------------------------------------------------------------------------------------------------- Davis, Phyllis B. 1 3336 0.06082% DeLapp, Phyllis B. 1 3336 0.06082% Diles, Paul 3336 0.06082% DMK Trust 1 3336 0.06082% Dorman, Malcolm J. 0.5 1668 0.03041% Dunn, Lloyd F. 1 3336 0.06082% Eagleson, James S. & Elree F. 1 3336 0.06082% Edelman (Alan) Trust 1 3336 0.06082% Ehland, Elizabeth 0.333 1111 0.02026% Eleuterio, Herbert 1 3336 0.06082% Endsley, (Fred S. Jr.) Ins. Trust 1 3336 0.06082% Evans, Robert L. & Jewell V. 1 3336 0.06082% Everett, Billy T. & Betty J. 1 3336 0.06082% Fogarty, Patrick J. 1 3336 0.06082% Fogelson, Jeffery P. & Janet 1 3336 0.06082% Fout, James E. 0.5 1668 0.03041% Fouts, John B. & Susan 1 3336 0.06082% Fox, Jerrold & Miriam 1 3336 0.06082% Frandsen (James S.) Trust u/a/d 5/7/90 1 3336 0.06082% Gibbins, Peggie 1 3336 0.06082% Girod, Rene M. 1 3336 0.06082% Gold, Ronald A. 1 3336 0.06082% Goldfinger, David A. Trust 1 3336 0.06082% Gosseen, Robert I. & Francine A. 1 3336 0.06082% The LCP Group 1 3336 0.06082% Grimes, Daphne B. 1 3336 0.06082% Grossman, Kenneth S. 1 3336 0.06082%
A-3 PARTNERS' CONTRIBUTIONS AND PARTNERSHIP INTERESTS
Capital Partnership Percentage Redemption Name of Partner Contribution Units Interest Exemption Date - -------------------------------------------------------------------------------------------------------------- Habermann, James H. & Helen A. 1 3336 0.06082% Hallisey, Michael J. & Elizabeth 1 3336 0.06082% Hamada, Frank K. 0.5 1668 0.03041% Hanger, Robert T. 1 3336 0.06082% Hendler, Albert I. 1 3336 0.06082% Henry, Drexwell & Henry 4 13343 0.24327% Hilb, Justin M. 1 3336 0.06082% HMSP Realty Co. 1 3336 0.06082% Houston, Robert A. 1 3336 0.06082% Hundahl (John C.) Trust 1 3336 0.06082% Hyde, Dolores 0.5 1668 0.03041% Ingram, Charles B. 1 3336 0.06082% Irmscher, Carol M. 1 3336 0.06082% Ito, Thomas Yakata 0.5 1668 0.03041% Jameson, Jacqueline 0.333 1111 0.02026% Jenkins, Stephen L 1 3336 0.06082% Johnson, Russell L. & Mary C. 1 3336 0.06082% Jones (Edna M.) Rev. Trust uad 9/24/91 1 3336 0.06082% Joseph, Allen S. 1 3336 0.06082% Joseph, Gerald 1 3336 0.06082% Kaplansky, Arthur 1 3336 0.06082% Kaufman (Irving & Beatrice) Rev Trust 1 3336 0.06082% Keto, Robert E. 1 3336 0.06082% Korshun, Sanford L. 1 3336 0.06082% Kraines, Lawrence M. 3 10007 0.18245% Kraines, Maurice H. 8 26686 0.48653% Kraines, Steven 3 10007 0.18245%
A-4 PARTNERS' CONTRIBUTIONS AND PARTNERSHIP INTERESTS
Capital Partnership Percentage Redemption Name of Partner Contribution Units Interest Exemption Date - -------------------------------------------------------------------------------------------------------------- Kuhlmann, Bruce W. 1 3336 0.06082% Larson, Carol 1 3336 0.06082% Lee, Robert T. 0.5 1668 0.03041% Lee, Winfred Y. 1 3336 0.06082% Leibsohn, The Family Trust 1 3336 0.06082% Lesser, Melvin M. 1.5 5004 0.09123% Lesser, Norman B. 0.5 1668 0.03041% Levine (Howard & Irene) Trust 1 3336 0.06082% Levy, James A. & Paul G. 1 3336 0.06082% Levy, Marie 0.5 1668 0.03041% Lockton, John D. Jr. 1 3336 0.06082% Love, Elizabeth 1 3336 0.06082% Lynch, Francis Frederick 1 3336 0.06082% Mankodi, Rashmikant P. 1 3336 0.06082% Markstein Trust 1 3336 0.06082% Maruyama, Donald 0.5 1668 0.03041% Maruyama, Harriet H. 0.5 1668 0.03041% McCanna, Living Trust 0.5 1668 0.03041% McCowan, Robert T. 1 3336 0.06082% McDonald, Allen R. 0.5 1668 0.03041% McGarry, Frank P. 0.5 1668 0.03041% McKee, Susan D. 0.5 1668 0.03041% Monk, Edward H. 0.5 1668 0.03041% Moss, Joel 0.5 1668 0.03041% Naparst, Eugene A. 0.5 1668 0.03041% Oceans Unlimited Partnership 1 3336 0.06082% Oliver, Fred L. 1 3336 0.06082%
A-5 PARTNERS' CONTRIBUTIONS AND PARTNERSHIP INTERESTS
Capital Partnership Percentage Redemption Name of Partner Contribution Units Interest Exemption Date - -------------------------------------------------------------------------------------------------------------- O'Meallie, Lawrence P. 1 3336 0.06082% Osborn, Robert P. 0.5 1668 0.03041% Otsuka, Charles I. 1 3336 0.06082% Patel, Chupendra & Indira 1 3336 0.06082% Penn, Sanford R. Jr. 1 3336 0.06082% Petrohilos, Harry 3336 0.06082% Phillips, Merlin 0.5 1668 0.03041% Philpot, Donald 1 3336 0.06082% Pine Forrest Irrevocable Trust 3336 0.06082% Quigg, John D. & Tim D. 1 3336 0.06082% Quinn, David C. 0.5 1668 0.03041% Robinson, Martha Revocable Asset Management Trust 2 6672 0.12164% Rockstrom, Donald W. 0.5 1668 0.03041% Rosenberg, Seligman 1 3336 0.06082% Roth, Paul W. Sr. 2 6672 0.12164% Russell, Charles M. Jr. 0.5 1668 0.03041% Sanders Family Trust 1 3336 0.06082% Sandin (Richard L.) Trust 1 3336 0.06082% Sandin, R. Keith 1 3336 0.06082% Silberer, Eunice D. 3 10007 0.18245% Simmons, William M. 1 3336 0.06082% Sindler, Richard A.& Victoria M. 1 3336 0.06082% Smith, Edwin E. 1 3336 0.06082% Smith, Sandra 5 16679 0.30409% Specht, Alan 1 3336 0.06082% Spira, Melvin 1 3336 0.06082% St. Martin, M. Edward Jr. 1 3336 0.06082%
A-6 PARTNERS' CONTRIBUTIONS AND PARTNERSHIP INTERESTS
Capital Partnership Percentage Redemption Name of Partner Contribution Units Interest Exemption Date - -------------------------------------------------------------------------------------------------------------- Stein, Andrew 0.5 1668 0.03041% Stein, Gail Revocable Trust 0.5 1668 0.03041% Stone, Bohdan W. 0.5 1668 0.03041% Storaasli (Iris) Marital Trust... 1 3336 0.06082% Stritmatter, Paul L. 1 3336 0.06082% Sullivan, Pamalee Jean 0.333 1111 0.02026% Travis, Sonaia 1 3336 0.06082% UBATCO & CO. 0.5 1668 0.03041% Verlin, Murray 1 3336 0.06082% Voute, P. Michael 1 3336 0.06082% Weckerle, Joseph F. 1 3336 0.06082% Weinstock, Michael 1 3336 0.06082% Weinstock, George A. 1 3336 0.06082% Weyand, Fred C. 1 3336 0.06082% Wilcox, Allen 1 3336 0.06082% Williamson, Ronald K. 1 3336 0.06082% Worthington (Frances Fant) Special Trust 1 3336 0.06082% Wright, Robert R. 1 3336 0.06082% Wu, Yen Bin & Jean Eng 0.5 1668 0.03041% Yusim, Milton & Jo Anne 1 3336 0.06082% Zahr, Sameer & Muna 1 3336 0.06082% Zaslow, Stanley & Thelma 1 3336 0.06082% Roskind, E. Robert 0.302 22300 0.40657% Monk, Ellen C. 0.1125 1575 0.02872% Rouse, Richard J. 0.121 40296 0.73467% Whiting, Edward C. 0.095 53015 0.96656% Kinnunen, Peter J. 0.078 35394 0.64530%
A-7 PARTNERS' CONTRIBUTIONS AND PARTNERSHIP INTERESTS
Capital Partnership Percentage Redemption Name of Partner Contribution Units Interest Exemption Date - -------------------------------------------------------------------------------------------------------------- Dannhauser, James F. 0.01 33 0.00060% The LCP Group, L.P. 373116 6.80257% Peterson (Terrell) Trust dtd. 4/5/90 35214 0.64201% Roskind, E. Robert 2001 Trust 33333 0.60772% Third Lero Corp. 3404 0.06206%
A-8 As a result of Lepercq Corporate Income Fund II L.P. (the "Partnership") and Lexington OC LLC ("LOC") having entered into a Contribution Agreement with Scannell Properties #14 LLC, an Indiana limited liability company ("Scannell #14") and Scannell Properties #16 LLC, an Indiana limited liability company ("Scannell #16," collectively with Scannell #14, the "Scannell Entities" or individually a "Scannell Entity") on the date hereof, pursuant to which at the direction of the Partnership, LOC acquired fee title to certain real property commonly known as 191 and 200 Arrowhead Drive in Hebron Business Center in Hebron, Ohio and the building improvements thereon (the "Property") from the Scannell Entities, subject to Seller's Indebtedness (as defined in the Agreement for Purchase and Sale, dated September 20, 2001, between Scannell Entities and Lexington Corporate Properties Trust in respect of the Property (the "Purchase Agreement")), the General Partner pursuant to Section 4.2A and Section 14.1.B(2) of the Partnership Agreement (defined below) has authorized the issuance of Partnership Units to the Scannell Entities. The Scannell Entities shall receive the number of Partnership Units specified in the Schedule. For purposes of applying the terms and conditions of the Partnership Agreement, the Scannell Entities shall be Partners of the Partnership with the rights and obligations of Additional Limited Partners. For purposes of Section 5.1 of the Partnership Agreement, the Scannell Entities shall be entitled to receive cash distributions with respect to each Partnership Unit equal to the cash dividend payable with respect to each share of Lexington Corporate Properties Trust ("LXP") common stock, determined at the time of each quarterly distribution beginning with the distribution payable to shareholders of record from and after the date hereof. For purposes of Sections 6.1A and 6.1B of the Partnership Agreement, allocations of Net Income and Net Loss by the Partnership generally shall be made after giving effect to all allocations of taxable income to the Scannell Entities. Pursuant to the General Partner's authority in Section 14.1.B(2), Partnership taxable income shall be specially allocated to the Scannell Entities in an amount equal to, but not in excess of, all cash distributions to the Scannell Entities; provided, however, that the Scannell Entities shall be allocated taxable income as otherwise required in Exhibit B and C of the Partnership Agreement; provided further, that with respect to Exhibit C2.A.(1)(a) of the Partnership Agreement that in the case of the Property, such items attributable thereto shall be allocated among the Partners using the "traditional method" under Treasury Regulation Section 1.704-3(b)(1). For purposes of Section 8.4 of the Partnership Agreement, on the first anniversary of the Closing Date (as such term is defined in the Purchase Agreement) and on each December 1, March 1, June 1 and September 1 thereafter (each a "Specified Redemption Date"), the Scannell Entities shall have the right (the "Scannell Redemption Right") to require the Partnership to redeem on a Specified Redemption Date the Partnership Units held by the Scannell Entities for the Redemption Amount to be delivered by the Partnership; provided, however, that the Scannell Entities must convert a number of Partnership Units equal to at least the lesser of (i) 1,000 Partnership Units, or (ii) all of the Partnership Units held by such Partner. The Scannell Redemption Right shall be exercised pursuant to a Notice of Redemption (substantially in the form of A-9 Exhibits D-1 through D-3 modified to reflect the Scannell Entities giving notice) delivered to the General Partner and LXP on a Specified Redemption Date by the Scannell Entity who is exercising the redemption right (the "Scannell Redeeming Partner"). The Scannell Redeeming Partner shall have no right, with respect to any Partnership Units so redeemed, to receive any distributions paid after the Specified Redemption Date. The Partnership covenants to cause the registration of any LXP Common Stock issued in connection with a redemption in such a manner as is required so that the shares of LXP Common Stock issued in connection with such redemption are freely transferable. The Assignee of the Scannell Entities may exercise the redemption rights of the Scannell Entities, and the Scannell Entities shall be deemed to have assigned such rights to such Assignee and shall be bound by the exercise of such rights by such Assignee. In connection with any exercise of such rights by such Assignee on behalf of the Scannell Entities, such Redemption Amount shall be delivered by the Partnership directly to such Assignee and not to the Scannell Entities. The Partnership Units held by the Scannell Entities shall be subject to redemption by the Partnership if otherwise required by the terms of the Partnership Agreement. The Partnership hereby covenants not to dispose of its interest in the Property or repay any of the Seller's Indebtedness with respect to the Property (other than normal periodic payments of principal and other than a refinancing that does not result in a reduction of the Seller's Indebtedness) during the Tax Protection Period without the prior consent of the holders of fifty one (51%) percent of the Partnership Units held by the Scannell Entities, except that the foregoing covenant shall not apply and no such consent shall be required in the event of (a) a foreclosure of the Property and any subsequent sale thereof by any lender or such lender's designee or assignee; (b) sale of the Property by the Partnership after the disaffirmance or rejection of either of (i) the Net Lease Agreement dated October 2, 1998, as amended by First Amendment to Lease Agreement dated as of July 12, 1999, as amended by Second Amendment to Lease Agreement dated as of March 2, 2001, as amended by Third Amendment to Lease Agreement, dated as of October 16, 2001, between Scannell Properties #16, LLC and Owens Corning in respect of the Property or (ii) the Net Lease Agreement dated August 25, 1999, as amended by First Amendment to Net Lease Agreement dated as of March 2, 2001 as amended by Second Amendment to Lease Agreement, dated as of October 16, 2001, between Scannell Properties #14, LLC and Owens Corning in respect of the Property; (c) a sale of the Property by the Partnership if the Partnership determines that such disposition is necessary to ensure its continued qualification as a real estate investment trust, or (d) an exchange of the Property meeting the requirements of Section 1031 of the Internal Revenue Code of 1986, as amended (the "Code") (Items a, b, c, and d above are hereinafter referred to as the "Exempted Transactions"). In any event in which the Partnership determines to dispose of the Property, the Partnership agrees to use its best efforts to structure such a disposition as an exchange that meets the requirements of Section 1031 of the Code. LXP agrees to enter into a Guaranty Agreement with the Partnership on the date the Scannell Entities are admitted to the Partnership, on terms reasonably A-10 satisfactory to LXP and the Partnership, pursuant to which LXP shall guaranty the obligations of the Partnership to pay the Redemption Amount on the Specified Redemption Date. The Scannell Redeeming Partner, LXP, the Partnership and the General Partner shall treat the transaction between LXP and the Scannell Redeeming Partner as a sale of the Scannell Redeeming Partner's Partnership Units to LXP or the General Partner, as the case may be, for federal income tax purposes. The Scannell Redeeming Partner agrees to execute such documents as the Partnership may reasonably require in connection with the issuance of REIT shares upon exercise of the Scannell Redemption Right. "Non-Recourse Built-in Gain" shall mean gain recognized by the Scannell Entities under Section 731(a)(1) of the Code as a result of a deemed distribution under Section 752(b) of the Code. "Nonrecourse Debt" means the type of indebtedness which is described in Treasury Regulation Section 1.752-1(a)(2), provided that if under this Supplement such indebtedness of the Partnership is to be guaranteed by the Scannell Entities, then "Nonrecourse Debt" means the type of indebtedness which would be described in Treasury Regulation Section 1.752-1(a)(2) but for any such guarantee(s). "Qualified Debt" means Nonrecourse Debt which also constitutes "qualified nonrecourse financing" within the meaning of Section 465(b)(6) of the Code. "Required Debt Amount" means from time to time, as to the Scannell Entities, the amount of indebtedness of the Partnership which needs to be allocated to the Scannell Entities pursuant to Treasury Regulation Section 1.752 such that the Scannell Entities will not recognize any Non-Recourse Built-in Gain. The Required Debt Amount for the Scannell Entities as of the date of this Supplement is set forth on Exhibit A attached hereto. Such amount (including any modification thereof pursuant to the immediately following sentence) shall automatically change from time to time as a result of the operations, allocations of taxable income and loss, and distributions made by the Partnership. It is understood that the Required Debt Amount set forth on Exhibit A is believed by the Scannell Entities to be the requisite amount as of the date hereof but until tax returns are completed for the Scannell Entities such amounts are not final, and after the date hereof, until April 25, 2002, the Scannell Entities may provide to the Partnership a different, then current Required Debt Amount to reflect any such final determination, and thirty (30) days after receipt thereof by the Partnership, Exhibit A shall be deemed amended to reflect such other amount; provided that in no event shall such amount be five percent (5%) more or less than the Required Debt Amount set forth on Exhibit A. "Tax Protection Period" shall mean the earlier of (i) the span of time commencing on the date hereof and ending on the second (2nd) anniversary thereof, or (ii) the date on which all of the Partnership Units issued to the Scannell Entities have been redeemed, sold or otherwise disposed of in other than a non-taxable disposition. In the event the Partnership (or any entity which obtained the Property directly or indirectly from the Partnership in a fully or partially non-taxable transaction) A-11 intends to repay or refinance any indebtedness of the Partnership or any such other entity secured by the Property (or allocated to the Property as contemplated below) or which indebtedness has been guaranteed (in part) by the Scannell Entities (other than normal periodic payments of principal or a refinancing which does not result in a reduction of such indebtedness), the Partnership shall notify the Scannell Entities prior to engaging in any such repayment or refinancing, which notice shall include the Partnership's good faith estimate of the amount of the reduction in the Partnership's liabilities that will be allocated to the Scannell Entities for inclusion in its tax basis pursuant to Section 752 of the Code as a result of such repayment or refinancing. The Partnership shall include in its notice how it intends to provide for compliance with this Section. Any such notice shall be given as soon as reasonably possible before a proposed repayment or refinancing but in any event at least fifteen (15) days prior to any such repayment or refinancing. To the extent the amounts allocated or to be allocated pursuant to Treasury Regulation 1.752-3(a) are not sufficient to result in the Scannell Entities receiving an allocation of Qualified Debt at least equal to the Required Debt Amount, the Partnership shall be obliged to provide the Scannell Entities with the opportunity to make a so-called "bottom-up" guarantee of either (m) new secured Qualified Debt of the Partnership fulfilling the requirements set forth immediately below, (n) new unsecured, unsubordinated Qualified Debt of the Partnership or (o) if no debt of the Partnership under clauses (m) or (n) is either then being incurred or such debt does not meet the other requirements of this paragraph applicable to any such debt, existing secured or unsecured Qualified Debt of the Partnership, but only if the Scannell Entities are provided sufficient evidence of the validity under applicable law of a guarantee thereof made pursuant to this Supplement. In all events under this paragraph, the general partner(s) of the Partnership shall be exculpated under the applicable loan documents and no other partner of the Partnership, or any affiliate of any partner (general or limited), shall be liable for any portion of any indebtedness described in this paragraph to be guaranteed by the Scannell Entities. Any such debt of the Partnership so guaranteed by the Scannell Entities for which the Scannell Entities are allocated a share of the Partnership's indebtedness under Treasury Regulation Section 1.752-2 is herein referred to as "Guaranteed Debt". The requirements for Qualified Debt under subclause (m) of the preceding paragraph above shall be that the principal amount of such Qualified Debt at the time of the making of any proposed guarantee does not exceed a seventy percent (70%) loan to fair market value ratio and has a commercially reasonable debt service coverage ratio, and the portion of such Qualified Debt to be guaranteed by the Scannell Entities pursuant hereto does not exceed the lesser of (1) the bottom sixty percent (60%) of the stated principal amount of the Qualified Debt or (2) the bottom thirty-five percent (35%) of the fair market value of the encumbered property, the bottom portion being the amount such that if the encumbered property were foreclosed upon, the Scannell Entities would not be required to pay or perform under such guarantee unless the proceeds from the foreclosure sale were less than sixty percent (60%) (or such lesser percentage of the stated principal in the event a lower limit is set in the preceding paragraph) of the stated principal amount of the Qualified Debt. If any Guaranteed Debt is unsecured debt of the Partnership, the portion to be guaranteed shall be the bottom twenty-five percent (25%) of the stated principal amount of such unsecured debt. A-12 If and to the extent a Scannell Entity redeems, sells or otherwise disposes of all or any Partnership Units (but not including herein a conversion or redemption into other Partnership Units), then the provisions of this Supplement related to the allocation of indebtedness to the Scannell Entities as to any such Partnership Units so redeemed, sold or otherwise disposed of, shall end at the time of such redemption, sale or other disposition. This document may be executed in any number of counterparts, each of which shall be deemed an original, and all of which shall constitute one and the same agreement. IN WITNESS WHEREOF, the parties hereto have executed this Scannell Limited Partner Supplement on or as of December 6, 2001. SCANNELL PROPERTIES #14, LLC By: Name: Title: SCANNELL PROPERTIES #16, LLC By: Name: Title: LEPERCQ CORPORATE INCOME FUND II L.P. By: Lex GP-1, Inc., General Partner By: Name: Title: A-13
SCANNELL ENTITIES REQUIRED DEBT AMOUNT - ------------------ -------------------- Scannell Properties #14 LLC $ 1,382,641.59 Scannell Properties #16 LLC $ 2,807,181.41
A-14 PARTNERS' CONTRIBUTIONS AND PARTNERSHIP INTERESTS
Capital Partnership Percentage Redemption Name of Partner Contribution Units Interest Exemption Date - -------------------------------------------------------------------------------------------------------------- SCANNELL LIMITED PARTNERS Scannell Properties #14 LLC $ 6,305 443 0.00808% Scannell Properties #16 LLC $ 12,801.07 898 0.01637%
A-15 EX-3.15 8 y94559exv3w15.txt 2ND AMENDMENT TO 2ND A/R AGREEMENT OF LIMITED PART Exhibit 3.15 SECOND AMENDMENT TO SECOND AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP OF LEPERCQ CORPORATE INCOME FUND II L.P. This SECOND AMENDMENT TO SECOND AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP OF LEPERCQ CORPORATE INCOME FUND II L.P. (this "Amendment") is made and entered into on October 22, 2003, but effective as of June 30, 2003, by and among the entities and individuals signatory hereto. A. Lepercq Corporate Income Fund II L.P., a Delaware limited partnership (the "Partnership"), is governed by that certain Second Amended and Restated Agreement of Limited Partnership, dated effective as of August 27, 1998, as amended by that certain First Amendment dated effective as of June 19, 2003 (the "Agreement"). Unless otherwise defined, all capitalized terms used herein shall have such meaning ascribed such terms in the Agreement. B. Lex GP-1 Trust, a Delaware statutory trust, is the General Partner of the Partnership; Lex LP-1 Trust, a Delaware statutory trust, is the Initial Limited Partner of the Partnership; and E. Robert Roskind, Richard J. Rouse and The LCP Group, L.P. collectively hold a majority of the Partnership Units held by the Special Limited Partners of the Partnership. C. Pursuant to Section 14.1 of the Agreement, the Agreement may be amended with the consent of the General Partner, the Initial Limited Partner, and the Special Limited Partners representing a majority of Partnership Units held by such Special Limited Partners. D. As of the date hereof, and pursuant to Section 14.1 of the Agreement, the parties hereto desire to amend the Agreement to extend the term of the Agreement indefinitely, unless the Partnership is dissolved sooner pursuant to the provisions of Article 13 of the Agreement or as otherwise provided by law. NOW, THEREFORE, the undersigned, being desirous of effectuating the foregoing and amending the Agreement accordingly, hereby enter into this Amendment and amend the Agreement as follows: 1. Section 2.5. Section 2.5 of the Agreement is deleted in its entirety and replaced with the following: "Section 2.5 Term. The term of the Partnership commenced on October 5, 1993, the date the Certificate was filed in the office of the Secretary of State of the State of Delaware in accordance with the Act and shall continue indefinitely, unless the Partnership is dissolved sooner pursuant to the provisions of Article 13 or as otherwise provided by law." 2. Miscellaneous. Except as amended hereby, the Agreement shall remain unchanged and in full force and effect. IN WITNESS WHEREOF, the parties hereto have executed this Amendment on behalf of the Partnership in accordance with the provisions of Section 14.1 of the Agreement as of the date first written above. GENERAL PARTNER: LEX GP-1 TRUST By: /s/ Patrick Carroll --------------------------------- Name: Patrick Carroll Title: Vice President INITIAL LIMITED PARTNER: LEX LP-1 TRUST By: /s/ Patrick Carroll --------------------------------- Name: Patrick Carroll Title: Vice President SPECIAL LIMITED PARTNERS: /s/ E. Robert Roskind ------------------------------------- E. Robert Roskind /s/ Richard J. Rouse ------------------------------------- Richard J. Rouse THE LCP GROUP, L.P. By: Third Lero Corp., general partner By: /s/ E. Robert Roskind ------------------------------------- Name: E. Robert Roskind Title: President EX-3.17 9 y94559exv3w17.txt 1ST AMENDMENT TO A/R AGREEMENT OF LIMITED PARTNER Exhibit 3.17 FIRST AMENDMENT TO AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP OF NET 3 ACQUISITION L.P. This FIRST AMENDMENT TO AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP OF NET 3 ACQUISITION L.P. (this "Amendment") is made and entered into effective as of November 28, 2001 by and among the entities and individuals signatory hereto. A. Net 3 Acquisition L.P., a Delaware limited partnership (the "Partnership") is governed by that certain Amended and Restated Agreement of Limited Partnership, dated effective as of November 28, 2001 (the "Agreement") by and among Lex GP-1, Inc., a Delaware corporation, as the general partner, Lex LP-1, Inc., a Delaware corporation, as the initial limited partner, Lexington Corporate Properties Trust, a Maryland statutory real estate investment trust, as an additional signatory, Lepercq Net 1 L.P., a Delaware limited partnership ("Lepercq 1"), and Lepercq Net 2 L.P., a Delaware limited partnership ("Lepercq 2"). Unless otherwise defined, all capitalized terms used herein shall have such meaning ascribed such terms in the Agreement. B. On November 28, 2001, Lepercq 1 and Lepercq 2 were admitted to the Partnership as Special Limited Partners in connection with the Net 3 Merger. C. The LCP Group, L.P. ("LCP"), a Delaware limited partnership is (i) the sole stockholder of the general partner of each of Lepercq 1 and Lepercq 2, and (ii) the sole limited partner of each of Lepercq 1 and Lepercq 2. D. Subsequent to the admission of Lepercq 1 as a Special Limited Partner, Lepercq 1 was dissolved and its affairs wound-up, and the general partner of Lepercq 1 was dissolved and its affairs wound-up, and in connection therewith, Lepercq 1 distributed all of its Special Limited Partner Units to LCP. E. Subsequent to the admission of Lepercq 2 as a Special Limited Partner, Lepercq 2 was dissolved and its affairs wound-up, and the general partner of Lepercq 2 was dissolved and its affairs wound-up, and in connection therewith, Lepercq 2 distributed all of its Special Limited Partner Units to LCP. F. As of the date hereof, and pursuant to the terms of the Agreement, the parties hereto desire to amend the Agreement to reflect (i) the withdrawal of Lepercq 1 and Lepercq 2 as Special Limited Partners and (ii) the admission of LCP as a Special Limited Partner. NOW, THEREFORE, the undersigned, being desirous of effectuating the foregoing and amending the Agreement accordingly, hereby enter into this Amendment and amend the Agreement as follows: 1. Exhibit A to the Agreement is deleted in its entirety and replaced with Exhibit A hereto. 2. Except as amended hereby, the Agreement shall remain unchanged and in full force and effect. 3. This Amendment may be executed in one or more counterparts and by facsimile, which, when taken together, shall constitute one and the same instrument. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] IN WITNESS WHEREOF, the parties hereto have executed this Agreement under seal as of the date first written above. GENERAL PARTNER: LEX GP-1, INC. By: /s/ Patrick Carroll --------------------------------- Name: Patrick Carroll Title: Vice President INITIAL LIMITED PARTNER: LEX LP-1, INC. By: /s/ Patrick Carroll --------------------------------- Name: Patrick Carroll Title: Vice President NEWLY ADMITTED SPECIAL LIMITED PARTNER: THE LCP GROUP, L.P. By: THIRD LERO CORP., its general partner By: /s/ E. Robert Roskind ---------------------------------- Name: E. Robert Roskind Title: President WITHDRAWING SPECIAL LIMITED PARTNERS: LEPERCQ NET 1 L.P. By: LEPERCQ NET 1, INC., its general partner By: /s/ E. Robert Roskind ---------------------------------- Name: E. Robert Roskind Title: President LEPERCQ NET 2 L.P. By: LEPERCQ NET 1, INC., its general partner By: /s/ E. Robert Roskind ----------------------------------- Name: E. Robert Roskind Title: President Acknowledged and Accepted: LEXINGTON CORPORATE PROPERTIES TRUST By: /s/ T. Wilson Eglin ------------------------------ Name: T. Wilson Eglin Title: President EXHIBIT A PARTNERS
Number Of Special Number Of Common Limited Partner Capital Name And Address Units Units Contribution - ------------------------------------------------------------------------------------------------------------------ General Partner: Lex GP-1, Inc. 44,410 $ 643,500.90 c/o Lexington Corporate Properties Trust 355 Lexington Avenue New York, New York 10017 Initial Limited Partner: Lex LP-1, Inc. 4,396,584 $63,706,502.16 c/o Lexington Corporate Properties Trust 355 Lexington Avenue New York, New York 10017 Special Limited Partner: The LCP Group, L.P. 44,858 $ 649,992.42 711 westchester Avenue White Plains, New York 10604 --------- ------ -------------- 4,440,994 44,858 $64,999,995.48 ========= ====== ==============
EX-3.18 10 y94559exv3w18.txt 2ND AMENDMENT TO A/R AGREEMENT OF LIMITED PARTNER Exhibit 3.18 EXECUTION COPY SECOND AMENDMENT TO AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP OF NET 3 ACQUISITION L.P. This SECOND AMENDMENT TO AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP OF NET 3 ACQUISITION L.P. (this "Amendment") is made and entered into effective as of June 19, 2003 by and among the entities and individuals signatory hereto. A. Net 3 Acquisition L.P., a Delaware limited partnership (the "Partnership") is governed by that certain Amended and Restated Agreement of Limited Partnership, dated effective as of November 28, 2001, as amended by the First Amendment thereto (the "Agreement"). Unless otherwise defined, all capitalized terms used herein shall have such meaning ascribed such terms in the Agreement. B. Lexington Corporate Properties Trust, a Maryland real estate investment trust ("LXP") is the sole unitholder of each of (i) Lex GP-1 Trust, a Delaware statutory trust ("Lex GP") and (ii) Lex LP-1 Trust, a Delaware statutory trust ("Lex LP"). Lex GP is the general partner of the Partnership, Lepercq Corporate Income Fund L.P., a Delaware limited partnership, and Lepercq Corporate Income Fund II L.P., a Delaware limited partnership (collectively, the "Operating Partnerships"). Lex LP is the Initial Limited Partner of each of the Operating Partnerships. C. As of the date hereof, LXP has completed the offer and sale (the "Offering") to the Underwriters (as defined in the Underwriting Agreement, dated as of June 10, 2003, by and among Bear, Stearns & Co. Inc., A.G. Edwards & Sons, Inc., Raymond James, Friedman Billings Ramsey, Advest, Inc., BB&T Capital Markets and Ferris, Baker Watts Incorporated, on the one hand, and LXP and the Operating Partnerships, on the other) of 3,160,000 preferred shares of beneficial interest, classified as 8.05% Series B Cumulative Redeemable Preferred Stock, par value $0.0001 per share, of LXP ("Preferred Shares"), pursuant to a prospectus supplement dated June 10, 2003 and the accompanying base prospectus dated April 10, 1998. D. The Preferred Shares carry a cumulative preferred dividend and liquidation preference further described in the Articles Supplementary of LXP, dated as of June 17, 2003. E. Pursuant to Section 4.2 of the Agreement, the Partnership may issue additional partnership interests to LXP and its affiliates in connection with the issuance of shares by LXP provided LXP makes a capital contribution to the Partnership of the proceeds raised in connection with such issuance. F. LXP has agreed to contribute a portion of the proceeds of the Offering to the Partnership in exchange for Series B Preferred Operating Partnership Units ("Preferred OP Units") in the Partnership to be issued to an affiliate of LXP, Lex LP. G. As required by Section 4.2 of the Agreement, the Preferred OP Units have designations, preferences and other rights such that the economic interests are substantially similar to the designations, preferences and other rights of the Preferred Shares, as further described and set forth in the Certificate of Designation for the Preferred OP Units attached hereto as Annex I (the "Certificate of Designation"). H. As of the date hereof, and pursuant to the terms of the Agreement, the parties hereto desire to amend the Agreement to reflect the issuance of 486,201 Preferred OP Units to Lex LP by amending and restating Exhibit A to the Agreement and (ii) the admission of Lex LP as a Limited Partner holding Preferred OP Units (a "Preferred Limited Partner"). NOW, THEREFORE, the undersigned, being desirous of effectuating the foregoing and amending the Agreement accordingly, hereby enter into this Amendment and amend the Agreement as follows: 1. Certificate of Designation; Preferred Limited Partner. The Agreement is hereby amended to the extent necessary to reflect that the rights, preferences and privileges of the Preferred OP Units and the Preferred Limited Partner, shall be as set forth in the Certificate of Designation which is hereby attached as Annex I to the Agreement and made a part hereof. To the extent there is a conflict between the terms of the Certificate of Designation and the terms of the Agreement, the terms of the Certificate of Designation shall control. 2. Exhibit A. Exhibit A to the Agreement is deleted in its entirety and replaced with Exhibit A hereto. 3. Miscellaneous. Except as amended hereby, the Agreement shall remain unchanged and in full force and effect. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] IN WITNESS WHEREOF, the parties hereto have executed this Amendment on behalf of the Partnership in accordance with the provisions of Section 14.1 of the Agreement as of the date first written above. GENERAL PARTNER: LEX GP-1 TRUST By: /s/ T. Wilson Eglin ------------------- Name: T. Wilson Eglin Title: Vice President EXHIBIT A PARTNERS
Number Of Common Number Of Special Number Of Preferred Name And Address Units Limited Partner Units OP Units Capital Contribution - ---------------- ---------------- --------------------- ------------------- -------------------- General Partner: Lex GP-1 Trust. 44,410 $ 643,500.90 c/o Lexington Corporate Properties Trust 355 Lexington Avenue New York, New York 10017 Initial Limited Partner: Lex LP-1 Trust 4,396,584 $63,706,502.16 c/o Lexington Corporate Properties Trust 355 Lexington Avenue New York, New York 10017 Special Limited Partner: The LCP Group, L.P. 44,858 $ 649,992.42 711 Westchester Avenue White Plains, New York 10604 Preferred Limited Partner: Lex LP-1 Trust 486,201 $ 12,155,025 c/o Lexington Corporate Properties Trust 355 Lexington Avenue New York, New York 10017 --------- ------ ------- -------------- 4,440,994 44,858 486,201 $77,155,020.48 ========= ====== ======= ==============
EX-3.19 11 y94559exv3w19.txt 3RD AMENDMENT TO A/R AGREEMENT OF LIMITED PARTNER Exhibit 3.19 THIRD AMENDMENT TO AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP OF NET 3 ACQUISITION L.P. This THIRD AMENDMENT TO AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP OF NET 3 ACQUISITION L.P. (this "Amendment") is made and entered into on October 22, 2003, but effective as of June 30, 2003, by and among the entities and individuals signatory hereto. A. Net 3 Acquisition L.P., a Delaware limited partnership (the "Partnership"), is governed by that certain Amended and Restated Agreement of Limited Partnership, dated effective as of November 28, 2001, as amended by that certain First Amendment dated effective as of November 28, 2001 and that certain Second Amendment dated effective as of June 19, 2003 (the "Agreement"). Unless otherwise defined, all capitalized terms used herein shall have such meaning ascribed such terms in the Agreement. B. Lex GP-1 Trust, a Delaware statutory trust, is the General Partner of the Partnership; Lex LP-1 Trust, a Delaware statutory trust, is the Initial Limited Partner of the Partnership; and The LCP Group, L.P. is the sole Special Limited Partner. C. Pursuant to Section 14.1 of the Agreement, the Agreement may be amended with the consent of the General Partner, the Initial Limited Partner, and the Special Limited Partners representing all of Partnership Units held by such Special Limited Partners. D. As of the date hereof, and pursuant to Section 14.1 of the Agreement, the parties hereto desire to amend the Agreement to extend the term of the Agreement indefinitely, unless the Partnership is dissolved sooner pursuant to the provisions of Article 13 of the Agreement or as otherwise provided by law. NOW, THEREFORE, the undersigned, being desirous of effectuating the foregoing and amending the Agreement accordingly, hereby enter into this Amendment and amend the Agreement as follows: 1. Section 2.5. Section 2.5 of the Agreement is deleted in its entirety and replaced with the following: "Section 2.5 Term. The term of the Partnership commenced on November 3, 2000, the date the Certificate was filed in the office of the Secretary of State of the State of Delaware in accordance with the Act and shall continue indefinitely, unless the Partnership is dissolved sooner pursuant to the provisions of Article 13 or as otherwise provided by law." 2. Miscellaneous. Except as amended hereby, the Agreement shall remain unchanged and in full force and effect. IN WITNESS WHEREOF, the parties hereto have executed this Amendment on behalf of the Partnership in accordance with the provisions of Section 14.1 of the Agreement as of the date first written above. GENERAL PARTNER: LEX GP-1 TRUST By: /s/ Patrick Carroll ---------------------------------- Name: Patrick Carroll Title: Vice President INITIAL LIMITED PARTNER: LEX LP-1 TRUST By: /s/ Patrick Carroll ---------------------------------- Name: Patrick Carroll Title: Vice President SPECIAL LIMITED PARTNER: THE LCP GROUP, L.P. By: Third Lero Corp., general partner By: /s/ E. Robert Roskind ---------------------------------- Name: E. Robert Roskind Title: President EX-10.39 12 y94559exv10w39.txt FORM OF EMPLOYMENT AGREEMENT: ROSKIND Exhibit 10.39 EMPLOYMENT AGREEMENT EMPLOYMENT AGREEMENT (this "Agreement"), effective as of April 1, 2003, by and between Lexington Corporate Properties Trust, a Maryland real estate investment trust (the "Company") and E. Robert Roskind (the "Executive"). WITNESSETH: WHEREAS, 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 and to provide the Executive with compensation and benefits arrangements which are competitive with those of other real estate investment trusts; and WHEREAS, 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 (as defined below) 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; NOW, THEREFORE, in order to accomplish these objectives and in consideration of the mutual covenants and promises contained herein, the parties hereto, each intending to be legally bound hereby, agree as follows: 1. Employment. Subject to the terms and conditions set forth herein, the Company shall employ the Executive as [INSERT RELEVANT TITLE], and the Executive accepts such employment for the Employment Term (as defined below). During the Employment Term, the Executive shall perform [FOR ROSKIND, ROUSE, EGLIN AND CARROLL "the duties of the [INSERT RELEVANT TITLE] and such other duties as may from time to time be assigned to him by the Board"; FOR ALL OTHERS: "such duties as may from time to time be assigned to him by the Board,"], commensurate with the Executive's position. 2. Performance. Except as provided below, the Executive will serve the Company faithfully and to the best of his ability and will devote his full business time, energy, experience and talents to the business of the Company and its affiliates; provided, however, that it shall not be considered a violation of the foregoing for the Executive to serve on civic or charitable boards or committees, or, with the advance written approval of the Board, on industry boards or committees, so long as any of such activities do not interfere with the performance of the Executive's responsibilities as an employee of the Company in accordance with this Agreement. 3. Employment Term. Unless earlier terminated pursuant to Section 6 below (including, but not limited to, the Executive's termination of employment due to death, resignation, Disability (as defined in Section 6(b)(iii) below), the employment term shall begin upon February 1, 2003 (the "Effective Date"), and shall continue for a period of four years; from such date (the "Initial Term"); provided that such term shall be automatically extended for additional periods of one (1) year commencing on the fourth anniversary of the Effective Date and each anniversary thereof (such period the "Additional Term") unless either party shall have given notice to the other party that such party does not desire to extend the term of this Agreement, such notice to be given at least one hundred eighty (180) days prior to the end of Initial Term or Additional Terms (the Initial Term and the Additional Term or Terms, if applicable, collectively, the "Employment Term").] 4. Compensation and Benefits. (a) Base Salary. As compensation for services hereunder and in consideration of the Executive's other agreements hereunder, during the Employment Term, the Company shall pay the Executive a base salary, payable in equal installments in accordance with the Company's procedures, subject to withholding and other applicable taxes, at an annual rate of three hundred fifty thousand Dollars ($350,000), subject to review by the Company no less frequently than annually for increase (but not to be decreased) (such base salary, as increased from time to time being hereinafter referred to as "Base Salary"). (b) Bonuses and Incentive Compensation. During the Employment Term, the Executive shall have opportunities for bonuses and shall have opportunities for incentive compensation comparable to those provided to its senior executives of the Company and shall be eligible to participate in all bonus and incentive compensation plans made available by the Company, from time to time, for its senior executives. (c) Medical, Dental, Disability, Life Insurance, Pension and Other Benefits. During the Employment Term, the Executive shall, in accordance with the terms and conditions of the applicable plan documents and all applicable laws, be eligible to participate in the various medical, dental, disability, life insurance, pension and other employee benefit plans made available by the Company, from time to time, for its senior executives. (d) Vacation, Sick Leave. During the Employment Term, the Executive shall be entitled to vacation and sick leave in accordance with the Company's established practices with respect to its senior executives. (e) Expenses. The Executive shall be reimbursed by the Company for all reasonable expenses actually incurred by him in connection with the performance of his duties hereunder in accordance with policies established by the Company from time to time and upon receipt of appropriate documentation. 5. Termination. (a) The employment of the Executive hereunder shall terminate at the end of the Employment Term. The employment of the Executive hereunder may also be terminated at any time (i) by the Company with or without Cause (as defined in Section 5(b)(i) below), (ii) by the Executive with or without Good Reason (as defined in Section 5(b)(ii) below) by notice of resignation delivered to the Company; or (iii) by the Executive or the Company within two years following a Change in Control. 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 the -2- Executive shall be treated for purposes of this Agreement as if he had been terminated within two years following the Change in Control (such a termination shall be referred to in this Agreement as a "Pre-Change in Control Termination"). At any time after a Disability (as defined in Section 5(b)(iii) below) occurs, provided that the Board, upon advice of a medical doctor selected in accordance with Section 5(b)(iii) hereof, determines that the Executive remains incapable of performing his essential duties and responsibilities hereunder, subject to applicable legal requirements, the Company may terminate the Executive's employment effective forthwith after giving notice to the Executive of such termination. Further, if the Board, upon advice of a medical doctor selected in accordance with Section 5(b)(iii) hereof, shall reasonably determine that the Executive has become physically or mentally incapable of performing his essential duties and responsibilities as provided in this Agreement and such incapacity is likely to last for a period of at least one hundred eighty (180) days from the onset of such incapacity, the Company may, at its discretion at any time thereafter while the Executive remains incapable of performing his material duties hereunder, and subject to applicable legal requirements, remove the Executive from his then position with the Company; provided, further, that if he returns to full time employment, with the permission of the Board, prior to the time he is determined to have incurred a Disability, he shall be restored to his position or positions with the Company. (b) For purposes of this Agreement, (i) "Cause" shall mean: (A) the Executive's conviction of, plea of nolo contendere to, or written admission of the commission of, a felony, (B) any breach by the Executive of any material provision of this Agreement; (C) any act by the Executive involving moral turpitude, fraud or misrepresentation with respect to his duties for the Company or its affiliates; or (D) gross negligence or willful misconduct on the part of the Executive in the performance of his duties as an employee, officer or member of the Company or its affiliates; provided, however, that the Company may not terminate the Executive's employment under clauses (B), (C) or (D) unless the Company first gives the Executive notice of its intention to terminate and of the grounds for such termination within 90 days of such event, and in the case of a breach set forth in clause (B) above, the Executive either (X) has not, within 30 days following receipt of such notice, cured such Cause, or (Y) in the event such Cause cannot be cured within such 30-day period, has not taken all reasonable steps to cure such Cause. (ii) "Good Reason" shall mean the occurrence of the following events without the Executive's written consent, provided that such occurrence is not cured within thirty (30) days of the Executive giving the Company written notice thereof: (A) a reduction in the Executive's rate of Base Salary; (B) a breach by the Company of any material provision of this Agreement; or (C) the Company's requiring the Executive to be based at any office or location located more than eighty (80) miles from the New York metropolitan area. Notwithstanding anything herein to the contrary, any change of the Executive's position with the Company to which the Executive consents in writing shall not constitute Good Reason. (iii) "Disability" shall mean the mental or physical incapacity of the Executive such that (A) he qualifies for long-term disability benefits under a Company-sponsored long-term disability policy or (B) the Executive has been incapable as a result of illness, disease, mental or physical disability, disorder, infirmity, or impairment or similar cause -3- of performing his essential duties and responsibilities for any period of one hundred eighty (180) days (whether or not consecutive) in any consecutive three hundred sixty-five (365) day period. Disability shall be determined by an approved medical doctor selected by the Company and the Executive. If the Company and the Executive cannot agree on a medical doctor, each party shall select a medical doctor and the two doctors shall select a third who shall be the approved medical doctor for this purpose. (iv) "Change in 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: (1) any acquisition directly from the Company, (2) 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 (1), (2) and (3) of subsection (C) of this Section 5(b)(iv); 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, (1) 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 -4- Voting Securities, as the case may be, (2) no Person (excluding any entity resulting from 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 (3) 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. 6. Severance. (a) If, during the Employment Term, (1) the Executive terminates his employment with the Company for Good Reason; (2) the Executive's employment is terminated by the Company without Cause; (3) the Executive's employment is terminated for any reason by the Company or the Executive within two years following a Change in Control; or (4) the Executive's employment is terminated in a Pre-Change in Control Termination; then, the Company shall have no liability or further obligation to the Executive except as follows: the Executive shall be entitled to receive (i) within 30 days of such termination of employment, any earned but unpaid Base Salary for the period prior to termination and any earned but unpaid bonuses for prior periods which have ended at the time of such termination ("Entitlements"); (ii) at the time provided in such plan, any rights to which he is entitled in accordance with plan provisions under any employee benefit plan, program or arrangement, fringe benefit or incentive plan ("Rights"); (iii) within 30 days of such termination of employment, severance pay (the "Severance Pay") in the amount of three (3) times the sum of the Executive's Base Salary at termination and his regular target bonus assuming achievement of 100% of target under Company's executive bonus plan in effect for the fiscal year in which his termination occurs; and (iv) all long-term incentive awards to which the Executive is entitled, including but not limited to restricted stock subject to the [AS APPLICABLE: Lexington Corporate Properties Trust Executive Deferred Compensation Agreement- Option Replacement Shares- among the Company, the Executive and the 2003 Lexington Rabbi Trust- Option Replacement Shares-, OR Lexington Corporate Properties Trust Nonvested Share Agreement (Option Replacement Shares) among the Company and the Executive ] effective January 31, 2003 and [AS APPLICABLE: the Lexington Corporate Properties Trust Executive Deferred Compensation -5- Agreement- Loan Replacement Shares- among the Company, the Executive and the 2003 Lexington Rabbi Trust- Loan Replacement Shares- OR the Lexington Corporate Properties Trust Nonvested Share Agreement (Loan Replacement Shares) among the Company and the Executive] effective as of January 31, 2003, and stock options, shall vest. Additionally, medical, dental, disability, life insurance and other employee welfare benefits (the "Welfare Plans") then provided to senior executives of the Company shall be continued following the date of termination for a period of three (3) years and, if the Executive is precluded from participating in any Welfare Plan by its terms or applicable law during such period, the Company shall pay to the Executive in cash the premiums or other contributions that the Company would otherwise pay as of the date of the Executive's termination, or date of payment if later, to continue the Executive's participation in the Welfare Plans for three years. Except in the case of a termination within two years following a Change in Control or a Pre-Change in Control Termination, as a condition of receiving the Severance Pay under Section 6(a)(iii) and the vesting of awards under Section 6(a)(iv), the Executive agrees to execute a release releasing the Company and its affiliates from any and all obligations and liabilities to the Executive arising from or in connection with the Executive's employment or termination of employment with the Company and its affiliates and any disagreements with respect to such employment, except that such release shall not apply with respect to any rights of the Executive to indemnification under the Company's Certificate of Incorporation or By-Laws or to any rights of the Executive to indemnification or directors' and officers' liability insurance coverage of the Company and its affiliates. (b) If during the Employment Term, the Executive's employment is terminated on account of death or Disability, the Company shall have no liability or further obligation to the Executive except as follows: the Executive (and his estate or designated beneficiaries under any Company-sponsored employee benefit plan in the event of his death) shall be entitled to receive (i) any Entitlements within 30 days of such termination of employment or, if later, the date such Entitlement would otherwise be paid to active employees of the Company, and any Rights at the time provided in the relevant plans; (ii) at the time such bonuses or payments would otherwise have been paid, a pro rata portion of the bonuses he would have received under the Company's executive bonus plan in effect at the time of his termination had he remained employed by the Company for the full fiscal year in which his termination occurs, equal to the ratio of the number of days of his employment by the Company during such fiscal year to 365, and a pro rata portion of any payment he would have received under any performance-based restricted stock program of the Company had he remained employed by the Company for the full performance period or periods in which his termination occurs, equal to the ratio of the number of days of his employment by the Company during such period to the full number of days in such period (such amounts to be referred to herein as the "Pro Rata Bonus and Incentive Payments"); (iii) within 30 days of such termination of employment, Severance Pay in the amount of one (1) times the Executive's Base Salary at termination; and (iv) (x) in the case of death, all long-term incentive awards to which the Executive is entitled, including but not limited to restricted stock subject to the [AS APPLICABLE: Lexington Corporate Properties Trust Executive Deferred Compensation Agreement- Option Replacement Shares- among the Company, the Executive and the 2003 Lexington Rabbi Trust- Option Replacement Shares-, OR Lexington Corporate Properties Trust Nonvested Share Agreement (Option Replacement Shares) among the Company and the Executive ] effective January 31, 2003 and [AS APPLICABLE: the Lexington Corporate Properties Trust Executive Deferred Compensation Agreement- Loan Replacement Shares- among the Company, the Executive and the 2003 Lexington Rabbi Trust- Loan -6- Replacement Shares- OR the Lexington Corporate Properties Trust Nonvested Share Agreement (Loan Replacement Shares) among the Company and the Executive] effective as of January 31, 2003, and stock options, shall vest, or (y) in the case of Disability, any bonuses attributable to the fiscal year prior to the fiscal year in which the Executive's employment is terminated which is paid in Company stock shall be fully vested to the extent not vested at the date of the Executive's termination. Additionally, the group health plan then provided to senior executives of the Company shall be continued following the date of termination for a period of two (2) years and, during such period, if the Executive is precluded from participating in such group health plan by its terms or applicable law, the Company shall pay to the Executive in cash the premiums or other contributions that the Company would otherwise pay as of the date of the Executive's termination to continue the Executive's participation in the group health plan for two years. Notwithstanding the foregoing, the continuation period for group health benefits under Section 4980B of the Code by reason of the Executive's termination of employment with the Company shall be measured from his actual date of termination of employment. As a condition of receiving the Severance Pay under Section 6(b)(iii) and the bonus payments under Section 6(b)(ii) and (iv), the Executive, or the representative of his estate if he has died, agrees to execute a release releasing the Company and its affiliates from any and all obligations and liabilities to the Executive arising from or in connection with the Executive's employment or termination of employment with the Company and its affiliates and any disagreements with respect to such employment, except that such release shall not apply with respect to any rights of the Executive to indemnification under the Company's Certificate of Incorporation or By-Laws or to any rights of the Executive to indemnification or directors' and officers' liability insurance coverage of the Company and its affiliates. (c) If during the Employment Term, the Executive's employment is terminated by the Company for Cause or by the Executive without Good Reason and Section 6(a) (with respect to a Change in Control) does not apply, the Company shall have no liability or further obligation to the Executive except as follows: the Executive shall be entitled to receive any Entitlements within 30 days of such termination of employment or, if later, the date such Entitlement would otherwise be paid to active employees of the Company, and any Rights at the time provided in the relevant plans. (d) The payments made pursuant to this Section 6 shall be excluded from all pension and benefit calculations under the employee benefit plans of the Company and its affiliates, except as otherwise provided in the applicable employee benefit plan. 7. Covenants of the Executive. (a) During the Employment Term and for a period of two (2) years thereafter, (i) the Executive shall not, within any jurisdiction or marketing area in which the Company or any of its affiliates is doing business, directly or indirectly, own, manage, operate, control, consult with, be employed by or participate in the ownership, management, operation or control of any business of the type and character engaged in or competitive with that conducted by the Company or any of its affiliates; (ii) the Executive shall not, directly or indirectly, employ, solicit for employment or otherwise contract for the services of any employee of the Company or any of its affiliates at the time of this Agreement or who shall subsequently become an employee of the Company or any such affiliate; provided, however, this subparagraph (ii) shall not apply to the Executive's personal secretary at the time of termination; and (iii) the Executive will not solicit, in competition with the Company or its -7- affiliates, any person who is, or was at any time within the twelve months prior to his termination of employment, a customer of the business conducted by the Company or any of its affiliates. For purposes of determining whether to permanently withhold, or recover, payments from the Executive pursuant to Section 7(d) hereof, the Board shall determine what constitutes a competing business; provided that (x) the scope of businesses and the jurisdictions and marketing areas within which the Executive has agreed not to compete pursuant to clause (a)(i) of this Section 7 shall, for any challenged activity of the Executive, be determined as of the date of any such activity and (y) the Executive's ownership of securities of two percent (2%) or less of any publicly traded class of securities of a public company shall not be considered to be competition with the Company or any of its affiliates. Notwithstanding the foregoing, the provisions of this Section 7(a) shall not apply following the Executive's termination if the Executive is terminated without Cause or for Good Reason. (b) For the Employment Term and thereafter, (i) the Executive will not divulge, transmit or otherwise disclose (except as legally compelled by court order, and then only to the extent required, after prompt notice to the Company of any such order), directly or indirectly, other than in the regular and proper course of business of the Company, any confidential knowledge or information with respect to the operations, finances, organization or employees of the Company or with respect to confidential or secret processes, services, techniques, customers or plans with respect to the Company; and (ii) the Executive will not use, directly or indirectly, any confidential information for the benefit of anyone other than the Company; provided, however, that the Executive has no obligation, express or implied, to refrain from using or disclosing to others any such knowledge or information which is or hereafter shall become available to the public other than through disclosure by the Executive. All new processes, techniques, know-how, inventions, plans, products, patents and devices developed, made or invented by the Executive, alone or with others, while an employee of the Company which are related to the business of the Company shall be and become the sole property of the Company, unless released in writing by the Company, and the Executive hereby assigns any and all rights therein or thereto to the Company. (c) All files, records, correspondence, memoranda, notes or other documents (including, without limitation, those in computer-readable form) or property relating or belonging to the Company or its affiliates, whether prepared by the Executive or otherwise coming into his possession in the course of the performance of his services under this Agreement, shall be the exclusive property of Company and shall be delivered to Company and not retained by the Executive (including, without limitations, any copies thereof) upon termination of this Agreement for any reason whatsoever. (d) The Executive acknowledges that a breach of his covenants contained in this Section 7 may cause irreparable damage to the Company and its affiliates, the exact amount of which will be difficult to ascertain, that the remedies at law for any such breach will be inadequate and that the amounts payable to the Executive pursuant to the provisions of Section 6(a)(iii), (iv) and (v) and /or 6(b)(ii), (iii) and (iv) hereunder are additional consideration for the covenants contained in this Section 7. Accordingly, the Executive agrees that if he breaches any of the covenants contained in this Section 7, in addition to any other remedy which may be available at law or in equity, the Company shall be entitled to specific performance and injunctive relief. In addition, the breach of any of the covenants contained in this Section 7 shall -8- entitle the Company to permanently withhold, and to recover from the Executive any amounts paid to the Executive pursuant to the provisions of Section 6(a)(iii), (iv) and (v) and /or 6(b)(ii), (iii) and (iv) of this Agreement. The Company shall provide the Executive with at least five days prior written notice before withholding of any payment provided for in the immediately preceding sentence. (e) The Company and the Executive further acknowledge that the time, scope, geographic area and other provisions of this Section 7 have been specifically negotiated by sophisticated commercial parties and agree that all such provisions are reasonable under the circumstances of the activities contemplated by this Agreement. In the event that the agreements in this Section 7 shall be determined by any court of competent jurisdiction to be unenforceable by reason of their extending for too great a period of time or over too great a geographical area or by reason of their being too extensive in any other respect, they shall be interpreted to extend only over the maximum period of time for which they may be enforceable and/or over the maximum geographical area as to which they may be enforceable and/or to the maximum extent in all other respects as to which they may be enforceable, all as determined by such court in such action. (f) The Executive agrees to cooperate with the Company, during the Term of Employment and thereafter (including following the Executive's termination of employment for any reason), by making himself reasonably available to testify on behalf of the Company or any of its affiliates in any action, suit, or proceeding, whether civil, criminal, administrative, or investigative, and to assist the Company, or any affiliate, in any such action, suit, or proceeding, by providing information and meeting and consulting with the Company's Board or its representatives or counsel, or representatives or counsel to the Company, or any affiliate as reasonably requested; provided, however that the same does not materially interfere with his then current professional activities or important personal activities and is not contrary to the best interests of the Executive. The Company agrees to reimburse the Executive, on an after-tax basis, for all expenses actually incurred in connection with his provision of testimony or assistance, and, if during the period following the Employment Term, the Company requests the Executive's cooperation for a period of greater than 8 hours per month, the Company agrees to reimburse the Executive at a rate of $250.00 per hour. (g) The Executive agrees that, during the Term of Employment and thereafter (including following the Executive's termination of employment for any reason) he will not make statements or representations, or otherwise communicate, directly or indirectly, in writing, orally, or otherwise, or take any action which may, directly or indirectly, disparage the Company or any of its affiliates or their respective officers, directors, employees, advisors, businesses or reputations. The Company agrees that, during the Employment Term, and thereafter, (including following the Executive's termination of employment for any reason) it will not make statements or representations, or otherwise communicate, directly or indirectly, in writing, orally, or otherwise, or take any action which may, directly or indirectly, disparage the Executive's reputation. Notwithstanding the foregoing, nothing in this Agreement shall preclude the Executive or a representative of the Company from making truthful statements or disclosures that are required by applicable law, regulation or legal process. -9- 8. Special Tax Provision. (a) In the event it shall be determined that any amount or benefit paid with respect to the Executive, (whether pursuant to the terms of this Agreement or any other plan, arrangement or agreement with the Company, any person whose actions result in a change of ownership covered by Section 280G(b)(2) of the Internal Revenue Code of 1986, as amended (the "Code") or any person affiliated with the Company or such person), as a result of any change in ownership of the Company covered by Code Section 280G(b)(2) (collectively, the "Covered Payments") is subject to the excise tax imposed by Section 4999 of the Code and/or any interest or penalties with respect to such excise tax (such excise tax is hereinafter referred to as the "Excise Tax"), the Company shall pay to the Executive an additional payment (the "Tax Reimbursement Payment") in an amount such that after payment by the Executive of all taxes (including any Excise Tax) (including, without limitation, income taxes) imposed upon the Tax Reimbursement Payment, the Executive retains an amount of the Tax Reimbursement Payment equal to the Excise Tax imposed upon the Covered Payments. (b) For purposes of determining the amount of the Tax Reimbursement Payment, the Executive shall be deemed to (i) pay Federal income taxes at the highest applicable marginal rate of Federal income taxation for the calendar year in which the Tax Reimbursement Payment is to be made and (ii) pay any applicable state and local income taxes at the highest applicable marginal rate of income taxation for the calendar year in which the Tax Reimbursement Payment is to be made, net of the maximum reduction in Federal income taxes which could be obtained from deduction of such state and local taxes if paid in such year. (c) (i) (A) All determinations under this Section 8, including whether and when a Tax Reimbursement Payment is required and the amount of such Tax Reimbursement Payment and the assumptions to be utilized in arriving at such determination, shall be made by the Company's outside legal counsel (based on calculations made by a benefits consulting firm or by independent certified public accountants appointed by the Company) or by independent certified public accountants appointed by the Company (collectively the "Tax Advisor"). (B) In the event that the Tax Advisor determines, for any reason whatsoever, the correct amount of the Tax Reimbursement Payment to be less than the amount determined at the time the Tax Reimbursement Payment was made, the Executive shall repay to the Company, within thirty days after the time that the amount of such reduction in Tax Reimbursement Payment is determined by the Tax Advisor, the portion of the prior Tax Reimbursement Payment attributable to such reduction (including the portion of the Tax Reimbursement Payment attributable to the Excise Tax and federal, state and local income tax imposed on the portion of the Tax Reimbursement Payment being repaid by the Executive, using the assumptions and methodology utilized to calculate the Tax Reimbursement Payment (unless manifestly erroneous)), plus interest on the amount of such repayment at the rate provided in Section 6621(a)(1) of the Code. (ii) In the event that the determination set forth in (A) above is made by the Tax Advisor after the filing by the Executive of any of his tax returns for the calendar year in which the change in ownership event covered by Code Section 280G(b)(2) occurred but prior to the date the statute of limitations has expired for refund claims, the -10- Executive shall file at the request of the Company an amended tax return in accordance with the Tax Advisor's determination, but no portion of the Tax Reimbursement Payment shall be required to be refunded to the Company until actual refund or credit of such portion has been made to the Executive, and interest payable to the Company shall not exceed the interest received or credited to the Executive by such tax authority for the period it held such portion (less any tax the Executive must pay on such interest and which the Executive is unable to deduct as a result of payment of the refund). (iii) In the event that the Excise Tax is later determined by the Tax Advisor or the Internal Revenue Service to exceed the amount taken into account hereunder at the time the Tax Reimbursement Payment is made (including by reason of any payment the existence or amount of which cannot be determined at the time of the Tax Reimbursement Payment), the Company shall make an additional Tax Reimbursement Payment in respect of such excess (plus any interest or penalties payable with respect to such excess) once the amount of such excess is finally determined. (iv) In the event of any controversy with the Internal Revenue Service (or other taxing authority) under this Section 8, the Executive shall promptly notify the Company of such controversy and provide all documents provided by the Internal Revenue Service (or other taxing authority) to the Executive within 10 days of receipt of such documents. The Executive shall permit the Company to control issues related to this Section 8, provided that such issues do not potentially materially adversely affect the Executive; provided further, 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 thereon, including interest and penalties, which is payable to the Executive pursuant to the provisions of Section 8(a) hereof. In the event any issues do potentially materially adversely affect the Executive, the Executive and the Company shall in good faith cooperate so as not to jeopardize resolution of the issues, but if the parties cannot agree the Company shall make the final determination with regard to the issues; provided further, 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 thereon, including interest and penalties, which is payable to the Executive pursuant to the provisions of Section 8(a) hereof. In the event of any conference with any taxing authority as to the Excise Tax or associated income taxes, the Executive shall permit a representative of the Company to accompany the Executive, and the Executive and his representative shall cooperate with the Company and its representative. (v) With regard to any initial filing for a refund or any other action required pursuant to this Section 8 (other then by mutual agreement) or, if not required, agreed to by the Company and the Executive, the Executive shall cooperate fully with the Company. (d) The Company shall use its best efforts to cause the Tax Advisor to promptly deliver the initial determination required hereunder within forty-five (45) days after the change in ownership covered by Section 280G(b)(2) of the Code. The Tax Reimbursement Payment, or any portion thereof, payable by the Company shall be paid not later than the thirtieth -11- (30th) day following the determination by the Tax Advisor or as soon as practicable thereafter. The amount of such payment shall be subject to later adjustment in accordance with the determination of the Tax Advisor as provided herein. (e) The Company shall be responsible for all charges of the Tax Advisor. (f) The Executive and the Company shall mutually agree on and promulgate further guidelines in accordance with this Section 8 to the extent, if any, necessary to effect the reversal of excessive, or a shortfall in, Tax Reimbursement Payments. (g) The payments made pursuant to Section 8 hereof shall be excluded from all pension and benefit calculations under the employee benefit plans of the Company and its affiliates. 9. Notices. Any notices required or permitted hereunder shall be in writing and shall be deemed to have been given when personally delivered or when mailed, certified or registered mail, postage prepaid, to the following addresses: If to the Executive: If to the Company: Lexington Corporate Properties Trust 355 Lexington Avenue New York, NY 10017 Attention: 10. General. (a) Governing Law. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of New York applicable to contracts executed and to be performed entirely within said State. (b) Construction and Severability. If any provision of this Agreement shall be held invalid, illegal or unenforceable in any jurisdiction, the validity, legality and enforceability of the remaining provisions contained herein shall not in any way be affected or impaired, and the parties undertake to implement all efforts which are necessary, desirable and sufficient to amend, supplement or substitute all and any such invalid, illegal or unenforceable provisions with enforceable and valid provisions which would produce as nearly as may be possible the result previously intended by the parties without renegotiation of any material terms and conditions stipulated herein. -12- (c) Assignability. The Executive may not assign his interest in or delegate his duties under this Agreement. This Agreement is for the employment of the Executive, personally, and the services to be rendered by him under this Agreement must be rendered by him and no other person. The Executive represents and warrants to the Company that the Executive has no contracts or agreements of any nature that the Executive has entered into with any other person, firm or corporation that contain any restraints on the Executive's ability to perform his obligations under this Agreement. This Agreement shall be binding upon and inure to the benefit of the Company and its successors and assigns. Notwithstanding anything else in this Agreement to the contrary, the Company will assign this Agreement to and all rights hereunder shall inure to the benefit of any person, firm or corporation resulting from the reorganization of the Company or succeeding to the business or assets of the Company by purchase, merger or consolidation. (d) Enforcement Costs. If any contest or dispute shall arise under this Agreement involving the termination of the Executive's employment with the Company and its affiliates or involving the failure or refusal of the Company to perform fully in accordance with the terms hereof, the Company shall advance the Executive or pay directly on his behalf, all reasonable legal fees and expenses, if any, incurred or, in the case of fees and expenses for which payment is required before the services are rendered, to be incurred within the next 30 days, by the Executive in connection with such contest or dispute upon presentation of an itemized bill to the Company regarding any such fees and expenses along with proof reasonably satisfactory to the Company that such expenses have been incurred or will be incurred within the next 30 days by the Executive; provided, however, that in the event the resolution of any such contest or dispute includes a finding that the Executive's claims in such contest or dispute are frivolous or brought in bad faith, the Executive shall be required to reimburse the Company, for all sums advanced to the Executive pursuant to this Section 10(d) in connection with such contest or dispute, together with interest in an amount equal to the prime rate published by The Chase Manhattan Bank, N.A. in the Wall Street Journal from time to time in effect, but in no event higher than the maximum legal rate permissible under applicable law, such interest to accrue from the date the Company makes payment to the Executive hereunder through the date of the Executive's repayment thereof. (e) Compliance with Rules and Policies. The Executive shall perform all services in all material respects in accordance with the applicable policies, procedures and rules established by the Company, including, but not limited to, the By-Laws of the Company. In addition, the Executive, where applicable, shall comply in all material respects with all laws, rules and regulations that are generally applicable to the Company, its affiliates and their employees, directors and officers. (f) Withholding. The Company shall withhold from all amounts due hereunder any applicable withholding taxes payable to federal, state, local or foreign taxing authorities. (g) Entire Agreement; Modification. This Agreement constitutes the entire agreement of the parties hereto with respect to the subject matter hereof, supersedes all prior agreements and undertakings, both written and oral, including, but not limited to the Employment Agreement dated September 20, 1999 between the Company and the Executive. -13- (h) Duration. Notwithstanding the Employment Term hereunder, the applicable sections of this Agreement shall continue for so long as any obligations remain under this Agreement. (i) Survival. The covenants set forth in Section 7 of this Agreement shall survive and shall continue to be binding upon the Executive notwithstanding the termination of this Agreement for any reason whatsoever. It is expressly agreed that the remedy at law for the breach or threatened breach of any such covenant is inadequate and that the Company, in addition to any other remedies that may be available to it, in law or in equity, shall be entitled to injunctive relief to prevent the breach or any threatened breach thereof without bond or other security or a showing that monetary damages will not provide an adequate remedy. (j) Waiver. No waiver by either party hereto of any of the requirements imposed by this Agreement on, or any breach of any condition or provision of this Agreement to be performed by, the other party shall be deemed a waiver of a similar or dissimilar requirement, provision or condition of this Agreement at the same or any prior or subsequent time. Any such waiver shall be express and in writing, and there shall be no waiver by conduct. (k) Counterparts. This Agreement may be executed in two or more counterparts, all of which taken together shall constitute one instrument. [SIGNATURE PAGE FOLLOWS] -14- IN WITNESS WHEREOF, the parties hereto, intending to be legally bound, have hereunto executed this Agreement effective as of the day and year first written above. Date: April 1, 2003 LEXINGTON CORPORATE PROPERTIES TRUST /s/ T. Wilson Eglin ------------------------------- Name: T. Wilson Eglin Title: Chief Executive Officer EXECUTIVE Date: Aril 1, 2004 /s/ E. Robert Roskind ------------------------------- E. Robert Roskind Similar agreements have been entered into with the following officers: T. Wilson Eglin Richard J. Rouse Patrick Carroll John B. Vander Zwaag William N. Cinnamond Paul R. Wood -15- EX-12 13 y94559exv12.txt COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES EXHIBIT 12 LEXINGTON CORPORATE PROPERTIES TRUST RATIO OF EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED DIVIDENDS FOR THE YEAR ENDED DECEMBER 31, ($000'S)
2003 2002 2001 2000 1999 ------- ------- ------- ------- ------- Earnings Income from continuing operations............ $30,847 $28,504 $17,286 $21,328 $20,682 Interest expense............................. 42,084 33,506 32,906 28,936 28,390 Amortization expense - debt cost............. 1,594 1,210 1,394 1,054 958 Equity in earnings from joint ventures....... (5,391) (4,561) (3,502) (1,428) (61) Cash received from joint ventures............ 7,823 5,660 4,110 810 -- ------- ------- ------- ------- ------- Total........................................ $76,957 $64,319 $52,194 $50,700 $49,969 ======= ======= ======= ======= ======= Fixed Charges Interest expense............................. $42,084 $33,506 $32,906 $28,936 $28,390 Capitalized interest expense................. 142 24 168 241 -- Preferred stock dividend..................... 3,392 693 2,709 2,562 2,520 Amortization expense - debt cost............. 1,594 1,210 1,394 1,054 958 ------- ------- ------- ------- ------- Total........................................ $47,212 $35,433 $37,177 $32,793 $31,868 ======= ======= ======= ======= ======= Ratio........................................ 1.63 1.82 1.40 1.55 1.57 ======= ======= ======= ======= =======
EX-14.1 14 y94559exv14w1.txt CODE OF ETHICS AND BUSINESS CONDUCT Exhibit 14.1 CODE OF ETHICS AND BUSINESS CONDUCT LEXINGTON CORPORATE PROPERTIES TRUST DECEMBER 2002 CODE OF ETHICS AND BUSINESS CONDUCT A Message from the Chairman of the Board and Chief Executive Officer Dear Fellow Employee: Lexington Corporate Properties Trust ("Lexington") has been in business, through it predecessor entities, since 1973, and is proud of the reputation and trust we have earned. This is a reputation that we are determined to protect and enhance. Our Code of Ethics and Business Conduct contains the policies which must be followed by everyone who does business on behalf of Lexington. All employees have the responsibility to read, understand and abide by the principles and standards contained in this Code. It is difficult to make a policy that applies to every situation, and there will be times when the Code does not address a particular question. Applying common sense, good judgment, and integrity to every business issue will help to ensure that your decisions are consistent with Lexington values and this Code. If you have questions, please contact your supervisor or either of us. Lexington's success depends upon each of us. Acting with integrity and the highest ethical standards is not only good policy, it is also good business. Every Lexington employee and shareholder relies upon you to do the right thing. We know that our confidence in you is well placed. Sincerely, E. Robert Roskind, Chairman of the Board T. Wilson Eglin, Chief Executive Officer TABLE OF CONTENTS ETHICS AND COMPLIANCE................................................................. 1 CONFLICTS OF INTEREST................................................................. 2 CORPORATE OPPORTUNITIES............................................................... 3 COMPETITION AND FAIR DEALING.......................................................... 4 DISCRIMINATION AND HARASSMENT......................................................... 5 DRUG-FREE WORKPLACE................................................................... 6 ENVIRONMENT, HEALTH, AND SAFETY....................................................... 7 FRAUD, THEFT OR SIMILAR CONDUCT....................................................... 8 GIFTS AND GRATUITIES.................................................................. 9 INSIDER TRADING....................................................................... 10 MAINTAIN ACCURATE AND COMPLETE RECORDS................................................ 11 CONFIDENTIALITY....................................................................... 12 NON-RETALIATION....................................................................... 13 POLICY VIOLATION...................................................................... 14 POLITICAL CONTRIBUTIONS............................................................... 15 RESPONDING TO INQUIRES FROM THE PRESS AND OTHERS...................................... 16 SAFEGUARDING COMPANY ASSETS AND RECORDS............................................... 17 VOLUNTARY DISCLOSURE OF IRREGULARITIES................................................ 18 INFORMATION TECHNOLOGY................................................................ 19 WHEN IN DOUBT......................................................................... 20 SEEKING ADVICE........................................................................ 21 WAIVERS OF THE CODE OF ETHICS AND BUSINESS CONDUCT.................................... 22 RECEIPT AND ACKNOWLEDGEMENT - LEXINGTON EMPLOYEES..................................... 23
i OUR VISION To be recognized as the smartest investors in our asset class. OUR MISSION To provide our shareholders with quarterly dividend distributions that grow and become more secure over time. OUR PHILOSOPHY FOR EMPLOYMENT Always speak your mind. Be straight forward when dealing with others. Work hard, work smart and try to have fun while doing so. Strive for excellence in all your dealings. OUR VALUES INTEGRITY and the highest ethical standards MUTUAL RESPECt and trust in our working relationships COMMUNICATION that is open, consistent and two-way TEAMWORK and meeting our commitments to one another CONTINUOUS IMPROVEMENT, development and learning in all we do DIVERSITY of people, cultures and ideas PERFORMANCE with recognition for results ii ETHICS AND COMPLIANCE Lexington operates its business in accordance with the highest ethical standards and in compliance with all applicable laws. Lexington places the highest value on the integrity of each of its employees and representatives. Every employee must read and understand this Code, and must sign the acknowledgement card contained in this booklet, before undertaking any work on behalf of Lexington. 1 CONFLICTS OF INTEREST Employees and their family members must avoid doing anything that creates a conflict of interest, or the appearance of a conflict of interest, with their responsibilities to Lexington. Employees may not use Lexington's name, information or good will for personal gain or for the gain of others. The term "family member" means a spouse, son, daughter, parent, sibling or any relation not more remote than first cousin. The following are examples of prohibited conflicts of interest for employees: Serving as a proprietor, general partner, officer, or director of any corporation that conducts business with Lexington without first obtaining written consent from an executive officer. Using Lexington's name, tenant or employee lists for any purpose other than Lexington business or functions, without the prior approval of an executive officer. Being a consultant, employee or representative of another firm without the prior approval of an executive officer if: - the firm competes in any way with Lexington, - it would interfere with the employee's obligations to Lexington because of the demands of time or interest, - It would identify Lexington with an activity or cause with which it does not want to be identified. Even if there is no apparent conflict, employees must get the prior approval of an executive officer before becoming a consultant, employee or representative of another organization. QUESTION: Are there any restrictions on my owning stock of a supplier or competitor? ANSWER: Possibly. If the investment is significant enough to interfere or conflict with your obligations and responsibilities to Lexington, there could be a conflict of interest situation. Ask an executive officer. 2 CORPORATE OPPORTUNITIES Employees, officers and Trustees are prohibited from taking for themselves personally opportunities that are discovered through the use of corporate property, information or position without the consent of the Board. No employee, officer or Trustee may use corporate property, information or position for improper personal gain, and no employee may compete with Lexington directly or indirectly. Employees, officers and Trustees owe a duty to Lexington to advance its legitimate interest when the opportunity to do so arises. 3 COMPETITION AND FAIR DEALING We seek to outperform our competition fairly and honestly. We seek competitive advantages through superior performance, products and services, never through unethical or illegal business practices. Stealing proprietary information, possessing trade secret information that was obtained without the owner's consent, or inducing such disclosures by past or present employees of other companies is prohibited. Each employee, Trustee and officer should endeavor to respect the rights of and deal fairly with Lexington's customers, suppliers, competitors and employees. No employee, Trustee or officer should take unfair advantage of anyone through manipulation, concealment, abuse of privileged information, misrepresentation of material facts, or any other intentional unfair-dealing practice. 4 DISCRIMINATION AND HARASSMENT Lexington is committed to an all-inclusive work culture. We believe and recognize that all people are unique and valuable, and should be respected for their individual abilities. In support of our all-inclusive work culture and the value we place on diversity, Lexington has established a zero tolerance policy for discrimination or harassment on the basis or race, color, gender, age, sexual orientation, national or social origin, religion, or disability. QUESTION: I am being harassed at work. What should I do? ANSWER: If you are being harassed because of your race, color, gender, age, sexual orientation, national or social origin, religion, or disability, Lexington's policy on diversity and anti-harassment is being violated. Lexington needs to be told about this situation so that it can be investigated and appropriate action taken. Please tell you supervisor or an executive officer about the harassment. You will not be retaliated against for making a good faith complaint. Lexington has no tolerance for harassment that violates this policy, but we need your help to make sure our policy is a reality. Please make sure you report the harassment so that action can be taken. 5 DRUG-FREE WORKPLACE Illicit drugs, including inhalants, hallucinogens, LSD, cocaine, crack, heroin or other opiates, stimulants, amphetamines, barbiturates, methaqualone or tranquilizers, may not be brought onto any Lexington property. In addition, no one employed by or representing Lexington may come onto any Lexington property with any level of illicit drugs in their body system. Drugs prescribed by a medical professional are not the subject of this policy. 6 ENVIRONMENT, HEALTH AND SAFETY It is Lexington's policy to establish and manage a safe and healthy work environment and manage its business in ways that are sensitive to the environment and conserve natural resources. Lexington will comply with all environmental, health and safety laws and will internally establish and comply with our own stricter standards where we believe the applicable laws do not adequately protect health, safety or the environment. 7 FRAUD, THEFT OR SIMILAR CONDUCT Any act that involves theft, fraud, embezzlement, or misappropriation of any property, including that of Lexington or any of its employees or tenants, is prohibited. QUESTION: I think one my co-workers may have stolen a lap top computer. What do I do? ANSWER: Theft of any kind is a violation of Lexington's policy and many laws. Please promptly talk about this with your supervisor or an executive officer. 8 GIFTS AND GRATUITIES No employee or Lexington representative will directly or indirectly give, offer, ask for, or accept a gift or gratuity from an employee or other representative of any current or potential tenant or supplier in connection with a transaction or a proceeding between Lexington and the other organization. Gifts and gratuities that are not connected with a transaction or proceeding are acceptable if they meet the rule set forth in the paragraph below. Unsolicited gifts, gratuities, or business courtesies from or to a business associate, including meals and entertainment, are permissible if they are (1) customary in the trade or industry, (2) do not exceed a value considered prudent and ordinary by the organization's management, and (3) are given and accepted without an express or implied understanding that each recipient is in any way obligated. It is never acceptable to solicit gifts, gratuities, or business courtesies for the benefit of a Lexington employee, family member, or friend. 9 INSIDER TRADING Lexington has a long-standing commitment to comply with all securities laws and regulations. U.S. securities laws, which apply to Lexington, prohibit persons from trading in the securities of a company on the basis of material non-public information. Material non-public information is any information concerning a company's business, prospects, securities, or market which an investor might consider important in deciding whether to buy or sell the securities or which could affect their market price. Examples of material information include: possible mergers, acquisitions or divestitures; actual or estimated financial results or changes in dividends; purchases and sales of investments in companies; obtaining or losing significant tenants; threatened major litigation or developments in such matters; and major changes in business strategies. If you have access to material information, whether it pertains to Lexington or another company, do not buy or sell Lexington securities or those of the other company until at least two business days after the information has been disclosed to the public by press release or similar announcement. Two simple rules can help protect you in this area. (1) Don't use material non-public information for personal gain; (2) don't pass along such information to someone else who has no Lexington-related legitimate need to know. Each employee acknowledges that Lexington has a separate policy regarding the use of material non-public information and, with respect to certain executive officers, the timing of trades as it relates to quarterly reporting by the Company. Each employee confirms that he or she will comply with such policy. QUESTION: While working at my desk, I overheard my co-worker talking on the phone about how Lexington is going to announce higher than expected earnings for the quarter. I mentioned this to my brother, and we agreed that now would be an excellent time to buy Lexington stock. Can I buy the stock before the earnings announcement? ANSWER: No. Lexington is committed to complying with federal and state securities laws. It is against the law to trade securities on the basis of material non-public information. In addition, telling your brother about the information violates company policy and may violate securities laws if he trades on that information or passes the information on to others. 10 MAINTAIN ACCURATE AND COMPLETE RECORDS Every employee has the responsibility to maintain accurate and complete records. No false, misleading or artificial entries may be made on Lexington's books and records. No funds or assets may be maintained by Lexington for any illegal or improper purposes. All transactions must be fully and completely documented and recorded in Lexington's accounting records. 11 CONFIDENTIALITY Employees, officers and Trustees must maintain the confidentiality of confidential information entrusted to them by Lexington or its customers, except when disclosure is authorized by your supervisor or an executive officer or required by applicable laws, rules or regulations. Confidential information includes all non-public information that might be of use to competitors, or harmful to Lexington or its customers, if disclosed. It also includes information that suppliers and customers have entrusted to us. The obligation to preserve confidential information continues even after the employment or other relationship to Lexington ends. 12 NON-RETALIATION Anyone who in good faith raises an issue regarding a possible violation of law or company policy will be protected from retaliation by Lexington or any Lexington employee. It is a violation of this Code for anyone to be discriminated against or harassed for making a good faith report to Lexington of a suspected violation of law or policy. If you feel that you are being retaliated against in violation of this policy please follow the procedures for reporting suspected violations. 13 POLICY VIOLATION All Lexington employees must understand and comply with Lexington's Code of Ethics and Business Conduct. Violation of the Code of Business Conduct will not be tolerated and will result in discipline for employees, which may include, among other things, termination. If you have any questions about the Code, please see the policy on Seeking Advice. 14 POLITICAL CONTRIBUTIONS Lexington will not make any contribution, directly or indirectly, to any candidate for public office, political parties, or other political organizations. In addition, employees may not be given time off with pay for political activity, although time off without pay may be possible if consistent with local policies and laws. 15 RESPONDING TO INQUIRIES FROM THE PRESS AND OTHERS All inquires from the press or security analysts should be directed to the Chief Executive Officer, Chief Operating Officer or Chief Financial Officer. Inquiries from outside attorneys should be referred to the Chief Financial Officer. General inquires about Lexington should be handled by the Investor Relations assistant. 16 SAFEGUARDING LEXINGTON ASSETS AND RECORDS Safeguarding Lexington's assets and records is the responsibility of all employees and company representatives. Use and maintain such assets and records with care and respect, while guarding against waste and abuse. Look for opportunities to improve performance while reducing costs. The use of company time, materials, assets, or facilities for purposes not directly related to company business, or the removal or borrowing of company property without permission, is prohibited. Examples of Assets and Records to be safeguarded include cash, equipment and financial records. 17 VOLUNTARY AND DISCLOSURE OF IRREGULARITIES Lexington is committed to operating its business in accordance with the highest level of integrity and ethical standards. Should an improper practice or irregularity occur within Lexington, Lexington is committed to making all necessary corrections, taking remedial action to prevent recurrence, and making timely and appropriate disclosure of the improper practices or irregularities to the proper authorities. 18 INFORMATION TECHNOLOGY Lexington has a long standing commitment to comply with all licensing agreements regarding software. These licensing agreements prohibit the unauthorized copying of software applications in any manner. If there are any doubts about what you can or cannot do with licensed software ask the IT Director. In addition, work products generated by employees (e.g. spreadsheets, analyses) are the property of Lexington and must be kept confidential. Lexington provides internet access to all employees in order to assist employees in carrying out their assigned duties. The use of the internet for non-business purposes should be limited. Lexington expects each employee to use their discretion in the use of the internet for non-business purposes. All employees should understand that Lexington has the right to monitor each employee's use of the internet and their computer. Under no circumstance should an employee use the Lexington network to attempt any unauthorized access to any other computer system. All employees have particular passwords to access the computer system. Your password should not be shared with any other person. To protect against viruses, employees are not authorized to install or execute any programs (e.g. CD's, personal disks, zip drives) without approval of the IT Director. 19 WHEN IN DOUBT If you are in doubt about a business conduct situation, ask yourself the following questions: Is it legal? Does it violate Lexington's policy? Is it consistent with Lexington's values? Is it fair and just? How does it make me feel about myself? What would my family think about it? How would it look in a newspaper article? Will I sleep soundly tonight? What would I tell my child to do? If you are unsure about what to do, ask questions and keep asking until you are certain you are doing the right thing. 20 SEEKING ADVICE Lexington is committed to operating its business in accordance with the highest level of integrity and ethical standards. Lexington wants to make sure that everyone who does business on behalf of Lexington fully understands what the Code requires, and is able to ask questions if advice is needed. Should an improper practice or irregularity occur with the Lexington, we are committed to correcting the problem and taking appropriate steps to make sure it cannot happen again. If you are unsure of what a policy requires of you, are concerned that Lexington may be in violation of law, or feel that a company policy is being violated, you may seek advice from your supervisor or an executive officer. 21 WAIVERS OF THE CODE OF ETHICS AND BUSINESS CONDUCT Any waiver of this Code for executive officers or Trustees may be made only by the Board or a Board committee and will be promptly disclosed as required by applicable laws, rules or regulations. 22 RECEIPT AND ACKNOWLEDGEMENT - LEXINGTON EMPLOYEES All Lexington Corporate Properties Trust employees are responsible for reading, understanding and following the principles outlined in this Code. Please sign the attached card and return it to your supervisor I acknowledge that I have received and will comply with Lexington Corporate Properties Trust's Code of Ethics and Business Conduct dated December 2002, and any subsequent modifications of which I am informed. In understand such compliance is a term and condition of my employment by Lexington Corporate Properties Trust. I understand and agree that the 2002 Code of Ethics and Business Conduct is NOT an employment contract between Lexington Corporate Properties Trust and me. I understand that if I have questions related to the standards of conduct outlined in the Code, I am to discuss them promptly with my supervisor or an executive officer. Signature______________________________________Date:____________________ Print Name_____________________________________________________________ 23 EX-21 15 y94559exv21.txt SUBSIDIARIES Exhibit 21 SUBSIDIARIES OF LEXINGTON CORPORATE PROPERTIES TRUST (JURISDICTION OF ORGANIZATION) Barnhech Montgomery Associates Limited Partnership (Maryland) Lepercq Corporate Income Fund L.P. (Delaware) Lepercq Corporate Income Fund II L.P. (Delaware) Lex GP-1 Trust (Delaware) Lex LP-1 Trust (Delaware) Lexington American Way Manager, Inc. (Delaware) Lexington Arlington L.P. (Delaware) Lexington Arlington Manager LLC (Delaware) Lexington Auburn Hills, Inc. (Delaware) Lexington Auburn Hills L.L.C. (Delaware) Lexington Baton Rouge L.L.C. (Louisiana) Lexington BCBS L.L.C. (South Carolina) Lexington Boca L.L.C. (Florida) Lexington Boca Manager L.L.C. (Delaware) Lexington Bristol L.P. (Delaware) Lexington Bristol Manager, Inc. (Delaware) Lexington Chester Industrial, L.L.C. (South Carolina) Lexington Chester Manager, Inc. (South Carolina) Lexington Columbia Expansion Manager, Inc. (South Carolina) Lexington Columbia Expansion L.L.C. (South Carolina) Lexington Columbia Manager, Inc. (South Carolina) Lexington Columbia Master Manager, Inc. (Delaware) Lexington Columbia Master L.L.C. (Delaware) Lexington Contributions Inc. (Delaware) Lexington Danville L.L.C. (Delaware) Lexington Dubuque Manager Inc. (Delaware) Lexington Decatur L.L.C. (Delaware) Lexington Decatur Manager L.L.C. (Delaware) Lexington Dillon L.L.C. (South Carolina) Lexington Dillon Manager L.L.C. (Delaware) Lexington Dubuque L.L.C. (Delaware) Lexington Dulles L.L.C. (Delaware) Lexington Dulles Manager L.L.C. (Delaware) Lexington English Trust (Delaware) Lexington Florence L.L.C. (Delaware) Lexington Florence Manager L.L.C. (Delaware) Lexington Fort Mill L.L.C. (Delaware) Lexington Fort Mill Manager L.L.C. (Delaware) Lexington Glendale L.L.C. (Delaware) Lexington Glendale Manager L.L.C. (Delaware) Lexington Greenville Manager Inc. (Delaware) Lexington Groveport L.L.C. (Delaware) Lexington Groveport Manager L.L.C. (Delaware) Lexington Hampton L.L.C. (Delaware) Lexington Herndon, Inc. (Delaware) LXP Lexington Jackson Manager Inc. (Delaware) Lexington Kansas City LLC (Delaware) Lexington Kansas City Manager LLC (Delaware) Lexington Kingston Doughten Inc. (Delaware) Lexington Kingston Doughten L.P. (Delaware) Lexington Kingston Main Inc. (Delaware) Lexington Kingston Main L.P. (Delaware) Lexington Knoxville L.L.C. (Delaware) Lexington Knoxville Manager L.L.C. (Delaware) Lexington Lake Forest L.L.C. (Delaware) Lexington Lake Forest Manager L.L.C. (Delaware) Lexington Lancaster L.L.C. (Delaware) Lexington Lancaster II L.L.C. (Delaware) Lexington Lancaster Manager L.L.C. (Delaware) Lexington Livonia L.L.C. (Michigan) Lexington Mechanicsburg Inc. (Delaware) Lexington Mechanicsburg L.P. (Delaware) Lexington Memorial L.L.C. (Delaware) Lexington Milpitas L.L.C. (California) Lexington Milpitas Manager, Inc. (California) Lexington Milpitas Manager L.L.C. (Delaware) Lexington Minneapolis L.L.C. (Delaware) Lexington Mission L.P. (Delaware) Lexington Mission Manager LLC (Delaware) Lexington Moody L.P. (Delaware) Lexington Moody LLC (Delaware) Lexington OC L.L.C. (Delaware) Lexington Overland Park LLC (Delaware) Lexington Overland Park Manager LLC (Delaware) Lexington Plymouth Manager Inc. (Delaware) Lexington Realty Advisors, Inc. (Delaware) Lexington Richmond L.L.C. (Delaware) Lexington Richmond Manager, Inc. (Delaware) Lexington Sky Harbor L.L.C. (Delaware) Lexington Temple Manager Trust (Delaware) Lexington Valley Forge L.P. (Delaware) Lexington Valley Forge II L.P. (Delaware) Lexington Wall LLC (Delaware) Lexington Wall L.P. (Delaware) Lexington Wallingford LLC (Delaware) Lexington Wallingford Manager LLC (Delaware) Lexington Warren L.L.C. (Delaware) Lexington Waterloo LLC (Delaware) Lexington Waterloo Manager LLC (Delaware) Lexington Waxahachie LLC (Delaware) Lexington Waxahachie L.P. (Delaware) Lexington Westmont L.L.C. (Delaware) Lexmem, Inc. (Delaware) LXP Canton, Inc. (Delaware) LXP Funding Corp. (Delaware) LXP Memorial L.L.C. (Delaware) LXP I Trust (Delaware) LXP I, L.P. (Delaware) LXP II, Inc. (Delaware) LXP II, L.P. (Delaware) Net 1 Gainesville Inc., (Delaware) Net 1 Gainesville L.P. (Delaware) Net 1 Henderson L.L.C. (North Carolina) Net 1 Phoenix L.L.C. (Delaware) Net 2 Canton L.L.C. (Delaware) Net 2 Cox L.L.C. (Delaware) Net 2 Hampton L.L.C. (Delaware) Net 2 Ocala L.L.C. (Florida) Net 2 Plymouth Inc. (Delaware) Net 2 Plymouth L.L.C. (Delaware) Net 2 Stone L.L.C. (Delaware) Net 3 Acquisition L.P. (Delaware) North Tampa Associates (Florida) Phoenix Hotel Associates Limited Partnership (Arizona) Savannah Waterfront Hotel L.L.C. (Georgia) Union Hills Associates (Arizona) Union Hills Associates II (Arizona) EX-23 16 y94559exv23.txt CONSENT OF KPMG LLP Exhibit 23 Independent Auditors' Consent ----------------------------- The Shareholders Lexington Corporate Properties Trust: We consent to the incorporation by reference in the registration statements on Form S-3 (Nos. 333-109393, 333-103140, 333-102307, 333-90932, 333-71998, 333-92609, 333-85631, 333-76709, 333-57853, and 333-70217) and on Form S-8 (Nos. 333-102232 and 333-85625) of Lexington Corporate Properties Trust of our report dated February 24, 2004, with respect to the consolidated balance sheets of Lexington Corpoarte Properties Trust and subsidiaries as of December 31, 2003 and 2002, 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, 2003, and the related schedule, which report appears in the December 31, 2003 annual report on Form 10-K of Lexington Corporate Properties Trust. /s/ KPMG LLP New York, New York February 26, 2004 EX-31.1 17 y94559exv31w1.txt 302 CERTIFICATION: CEO EXHIBIT 31.1 CERTIFICATION I, T. Wilson Eglin, Chief Executive Officer of Lexington Corporate Properties Trust (the "Company"), certify that: 1. I have reviewed this annual report on Form 10-K of the Company; 2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report; 3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the Company as of, and for, the periods presented in this annual report; 4. The Company's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the Company and have: a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared; b) evaluated the effectiveness of the Company's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation; and c) disclosed in this report any change in the Company's internal control over financial reporting that occurred during the period covered by this report that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting; 5. The Company's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Company's auditors and the Audit Committee of Company's board of trustees (or persons performing the equivalent functions): a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Company's ability to record, process, summarize and report financial information; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the Company's internal control over financial reporting. /s/ T. WILSON EGLIN - -------------------------- T. Wilson Eglin Chief Executive Officer February 26, 2004 EX-31.2 18 y94559exv31w2.txt 302 CERTIFICATION: CFO EXHIBIT 31.2 CERTIFICATION I, Patrick Carroll, Chief Financial Officer of Lexington Corporate Properties Trust (the "Company"), certify that: 1. I have reviewed this annual report on Form 10-K of the Company; 2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report; 3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the Company as of, and for, the periods presented in this annual report; 4. The Company's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the Company and have: a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared; b) evaluated the effectiveness of the Company's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation; and c) disclosed in this report any change in the Company's internal control over financial reporting that occurred during the period covered by this report that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting; 5. The Company's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Company's auditors and the Audit Committee of Company's board of trustees (or persons performing the equivalent functions): a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Company's ability to record, process, summarize and report financial information; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the Company's internal control over financial reporting. /s/ PATRICK CARROLL - -------------------------- Patrick Carroll Chief Financial Officer February 26, 2004 EX-32.1 19 y94559exv32w1.txt 906 CERTIFICATION: CEO EXHIBIT 32.1 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Annual Report of Lexington Corporate Properties Trust (the "Company") on Form 10-K for the period ending December 31, 2003 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, T. Wilson Eglin, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. sec. 1350, as adopted pursuant to sec. 906 of the Sarbanes-Oxley Act of 2002, that: (1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company. /s/ T. WILSON EGLIN - --------------------------- T. Wilson Eglin Chief Executive Officer February 26, 2004 EX-32.2 20 y94559exv32w2.txt 906 CERTIFICATION: CFO EXHIBIT 32.2 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Annual Report of Lexington Corporate Properties Trust (the "Company") on Form 10-K for the period ending December 31, 2003 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Patrick Carroll, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. sec. 1350, as adopted pursuant to sec. 906 of the Sarbanes-Oxley Act of 2002, that: (1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company. /s/ PATRICK CARROLL - -------------------------- Patrick Carroll Chief Financial Officer February 26, 2004 -----END PRIVACY-ENHANCED MESSAGE-----