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PROSPECTUS SUPPLEMENT                           FILED PURSUANT TO RULE 424(b)(2)
(TO PROSPECTUS DATED NOVEMBER 12, 1997)         REGISTRATION NO. 333-03688
 
                                 675,000 SHARES
 
                      LEXINGTON CORPORATE PROPERTIES, INC.
 
                                 CLASS A SENIOR
                             CUMULATIVE CONVERTIBLE
                                PREFERRED STOCK
 
                            ------------------------
 
     The 675,000 shares (the "Shares") of Preferred Stock of the Company, par
value $.0001, offered hereby (the "Offering") are being sold directly by the
Company. Prior to this Offering there has been no public market for the Shares.
Each Share is convertible into one (1) share of common stock, par value $.0001
per Share, of the Company, subject to adjustment, and is entitled to one (1)
vote for each share of common stock into which such Share is convertible. See
"Voting Rights." The Common Stock into which such Share is convertible is listed
on the New York Stock Exchange (the "NYSE") under the symbol "LXP."
 
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  THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
 EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
   AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS TO WHICH IT
       RELATES. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
 
                            ------------------------
 
          THE DATE OF THIS PROSPECTUS SUPPLEMENT IS DECEMBER 31, 1997
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                                  THE COMPANY
 
     Lexington Corporate Properties, Inc. is a self-managed and
self-administered real estate investment trust ("REIT") that acquires, owns and
manages a geographically diversified portfolio of net leased office, industrial
and retail properties. The Company's tenants, a majority of which (based on
annual net effective rent) have debt ratings of investment grade and many of
which are nationally recognized, include Bank One, Arizona, N.A., Circuit City
Stores, Inc., FirstPlus Financial Group, Inc., The Hartford Fire Insurance
Company, Honeywell, Inc., Lockheed Martin Corporation, Northwest Pipeline
Corporation, Ryder Integrated Logistics and Wal-Mart Stores, Inc. Substantially
all of the Company's leases are "net leases," under which the tenant is
responsible for all costs of real estate taxes, insurance, ordinary maintenance
and structural repairs. Management believes that owning, acquiring and managing
net leased properties results in lower operating expenses for the Company than
the Company otherwise would incur through investments in properties which were
not net leased.
 
     The Company's senior executive officers average 17 years of experience in
the real estate investment and net lease business. Management has diversified
the Company's portfolio by geographical location, tenant industry segment, lease
term expiration and property type with the intention of providing steady
internal growth with low volatility. Management believes that such
diversification should help insulate the Company from regional recession,
industry specific downturns and price fluctuations by property type. As part of
management's ongoing efforts, the Company expects to continue to effect
portfolio and individual property acquisitions and dispositions, expand existing
Properties, attract investment grade quality tenants, extend lease maturities in
advance of expiration and refinance outstanding indebtedness, when advisable.
 
     The Company was originally incorporated under the laws of the State of
Delaware, and was reincorporated in the State of Maryland in June 1994.
References herein to the Company include references to the Company's Delaware
predecessor and the predecessor companies referenced above, unless the context
otherwise requires. The principal executive offices of the Company are located
at 355 Lexington Avenue, New York, New York 10017, and its telephone number is
(212) 692-7260.
 
                                USE OF PROCEEDS
 
     The net proceeds to the Company from the Offering are estimated to be
approximately $8,287,500, after payment of expenses related to the Offering. The
Company intends to use such net proceeds for the acquisition of additional
properties and/or the repayment of a portion of the Company's revolving credit
facility.
 
                    DESCRIPTION OF CLASS A SENIOR CUMULATIVE
                          CONVERTIBLE PREFERRED STOCK
 
     The following description of certain terms of the Shares offered hereby
(which are included in the Preferred Stock referenced in the accompanying
Prospectus) supplements, and to the extent inconsistent therewith replaces, the
description and general terms and provisions of Preferred Stock set forth in the
accompanying Prospectus, to which reference is hereby made. The following
statements related to the Shares are summaries of the provisions contained in
the Articles Supplementary of Lexington Corporate Properties, Inc. (the
"Certificate of Designation") dated January 17, 1997 and do not purport to be
complete. As such, statements made herein are qualified in their entirety by
reference to the provisions of the Certificate of Designation. Capitalized terms
used herein but not otherwise defined shall have the meanings given to such
terms in the Prospectus or the Certificate of Designation.
 
GENERAL
 
     The Shares are being offered to Five Arrows Realty Securities L.L.C. (the
"Investor") at a per Share purchase price of $12.50. Pursuant to the terms of an
Investment Agreement between the Company and Investor, the Offering is limited
to an aggregate of up to 2,000,000 Shares for an aggregate purchase price of
 
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$25,000,000. On January 21, 1997, April 28, 1997 and December 31, 1997, the
Company exercised its right under the Investment Agreement to sell 700,000,
625,000 and 675,000 Shares, respectively, to the Investor.
 
DIVIDENDS
 
     The holders of the Shares are entitled to receive, when, as and if declared
by the Board of Directors, dividends on the Shares, out of funds legally
available therefor, under the Maryland General Corporation Law, cumulative
(commencing as of the date of issuance of the Shares) preferential cash
dividends at a quarterly rate equal to the greater of (i) $0.295 per Share, per
quarter and (ii) the product of 1.05 and the per Share quarterly dividend paid
in respect of the Common Stock, par value $.0001 per share of the Company
(subject to adjustment). Dividends shall be paid for each of the quarters ending
on March 30, June 30, September 30 and December 31 and shall be paid on each
February 15, May 15, August 15 and November 15, with respect to the prior
quarter, commencing May 15, 1997, provided that, if such date is not a business
day, on the next succeeding business day. Dividends will cease to accrue on the
first to occur of (i) the date on which the Liquidation Value of the Shares
(plus all accrued and unpaid dividends thereon whether or not declared) is paid
to the holders thereof in connection with the liquidation of the Company, (ii)
the last day of the quarter preceding the quarter in which the Shares are
converted into shares of Common Stock if such date is after the record date for
the Regular Quarterly Dividend (as herein defined) on the Common Stock for the
quarter in which such conversion takes place, (iii) the last day of the quarter
second preceding the quarter in which the Shares are converted into shares of
Common Stock if such date is prior to the record date for the Regular Quarterly
Dividend on the Common Stock for the quarter in which such conversion takes
place or (iv) the date on which the Shares are otherwise acquired and paid for
by the Company.
 
     Dividends are calculated and paid pro rata based on the number of actual
days in any partial quarter. In the event that the legally available funds,
under Maryland General Corporation Law, available for the payment of dividends
shall be insufficient for the payment of the entire amount of dividends payable
with respect to Shares on any date on which the Board has declared the payment
of a dividend or otherwise, the amount of any available surplus shall be
allocated for the payment of dividends with respect to the Shares and any other
shares of capital stock that are pari passu as to dividends pro rata based upon
the amount of accrued and unpaid dividends of such shares of capital stock.
 
     Dividends on the Shares shall accrue whether or not the Company has
earnings, whether or not there are funds legally available for the payment of
such dividends and whether or not such dividends are declared and shall
accumulate to the extent such dividends are not paid.
 
     Unless dividends have been paid to the holders of the Shares, the Company
and its subsidiaries shall be prohibited from paying dividends on, making any
other distributions on, or redeeming or purchasing or otherwise acquiring for
consideration any capital stock of the Company.
 
LIQUIDATION RIGHTS
 
     In the event of the liquidation, dissolution or winding up of the Company,
before the distribution or payment to the holders of shares of capital stock of
the Company ranking junior to the Shares (as to dividends or upon liquidation,
dissolution or winding up), the holders of the Shares shall be entitled to be
paid $12.50 per share (the "Liquidation Value") plus any accrued and unpaid
dividends whether or not declared (or a pro rata portion thereof with respect to
fractional shares), provided, however, that if the liquidation, dissolution or
winding up of the Company occurs in connection with or subsequent to a Change of
Control, then the holders of the Shares shall be entitled to be paid an amount
equal to 102% of the Liquidation Value plus any accrued and unpaid dividends
whether or not declared. If, upon liquidation, dissolution or winding up of the
Company, there are insufficient assets to permit the full payment to the holders
of the Shares, the sums which such holders are entitled to receive in such case,
then all of the assets available for distribution to the holders of the Shares
shall be distributed among and paid to the holders of the Shares, ratably in
proportion to the respective amounts that would be payable to such holders if
such assets were sufficient to permit payment in full.
 
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VOTING RIGHTS
 
     The holders of the Shares will have one (1) vote for each share of Common
Stock into which each Share is convertible and will be entitled to vote or
consent on all matters submitted to the holders of Common Stock, together with
the holders of the Common Stock and the holders of any other classes or series
of stock which are entitled to vote on such matter, as a single class and not as
a separate class.
 
     In addition, subject to certain exceptions, so long as the Investor, an
affiliate thereof, a successor in which the current members of the Investor own
greater than a majority interest of such successor, or a member of the Investor,
is the holder of either (A) all of the outstanding Shares or (B) an amount of
the voting securities of the Company which, if converted into shares of Common
Stock, would exceed 7.5% of the outstanding Common Stock on a fully diluted
basis (determined on the basis of then convertible, exercisable or exchangeable
securities, warrants or options issued by the Company) (the "Minimum
Threshold"), then, in each such case, the holders of the Shares shall have the
special right, voting separately as a single class, to elect as soon as
practical, a director or directors, as the case may be, to the Board (the
"Preferred Directors"). Except to the extent that the Board may otherwise
determine hereafter, the Preferred Directors shall not be entitled to receive
any compensation, in cash or kind, in connection with their service as a
director of the Company; provided, that, the indemnification or insurance
provided by the Company to its directors shall not be deemed "compensation" for
these purposes.
 
     So long as the conditions set forth in either (A) or (B) above exist, then
in each such case, (i) the number of directors constituting the Board shall be
automatically increased by one (1) member and (ii) upon the occurrence of any of
(x) the payment of the Regular Quarterly Dividend on the Common Stock for any
quarter of less than $.28 per share (subject to adjustment to the Conversion
Ratio) (the "Dividend Reduction Default"), (y) the Company's ratio of its
Consolidated EBITDA to its reported interest expense (as described in clause (2)
under the definition of Consolidated EBITDA below) for each of three consecutive
fiscal quarters was less than 1.25 to 1.00 (the "Earnings Default"), or (z) the
Company fails to pay in full the quarterly dividend payable hereunder (whether
or not declared) at any time in respect of the Shares (the "Dividend Payment
Default"), then, in the case of any of the events described in clauses (x), (y),
or (z), the Board shall be automatically increased by an additional one (1)
member for an aggregate increase of two (2) directors pursuant to clauses (i)
and (ii) above. The position on the Board established pursuant to clause (i)
shall remain available until the Minimum Threshold is no longer satisfied and
shall not be available at any time thereafter. The position on the Board
established pursuant to clause (ii) shall remain available until the earlier of
(i) the date on which the Minimum Threshold fails to be satisfied and (ii) the
Dividend Reduction/Earnings Cure (as herein defined).
 
     The term "Regular Quarterly Dividend" means any cash dividend or dividends
paid in any calendar quarter that do not in the aggregate exceed the Company's
reported Funds From Operations (as defined by the National Association of Real
Estate Investment Trusts prior to 1996) for the quarter relating to such
dividend.
 
     The term "Consolidated EBITDA" means the consolidated net income of the
Company (before extraordinary income or gains) as reported in its Quarterly
Report on Form 10-Q under the Securities Exchange Act of 1934, as amended (the
"Exchange Act") or otherwise furnished to holders of Shares by the sum of the
following (without duplication):
 
          (1) all income and state franchise taxes paid or accrued according to
     Generally Accepted Accounting Principles ("GAAP") for such period (other
     than income taxes attributable to extraordinary, unusual or non-recurring
     gains or losses except to the extent that such gains were not included in
     Consolidated EBITDA),
 
          (2) all interest expense paid or accrued in accordance with GAAP for
     such period (including financing fees and amortization of deferred
     financing fees and amortization of original issue discount),
 
          (3) depreciation and depletion reflected in such reported net income,
 
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          (4) amortization reflected in such reported net income including,
     without limitation, amortization of capitalized debt issuance costs (only
     to the extent that such amounts have not been previously included in the
     amount of Consolidated EBITDA pursuant to clause (2) above), and
 
          (5) any other non-cash charges or discretionary prepayment penalties,
     to the extent deducted from consolidated net income (including, but not
     limited to, income allocated to minority interests).
 
     If, at any time, (i) the rights granted pursuant to the immediately
preceding paragraph shall no longer be available, (ii) any persons designated to
serve on the Board pursuant to such paragraph shall have resigned as required by
the terms of such paragraph and (iii) a Dividend Payment Default shall have
occurred for three consecutive quarters, the number of directors constituting
the Board shall be automatically increased by two (2) members. The position on
the Board created hereby shall continue to be available until the earlier of (i)
the date on which there are no Shares of the Company outstanding and (ii) the
date on which the Dividend Payment Cure (as herein defined) is effected.
 
     The term "Dividend Reduction/Earnings Cure" shall mean the time at which
(i) the Regular Quarterly Dividend paid in the immediately preceding quarter on
the Common Stock shall be greater than $.28 per share (subject to adjustment),
(ii) the Company reports for the prior three consecutive fiscal quarters that
the ratio of its Consolidated EBITDA to its reported interest expense (as
described in clause (2) under the definition of Consolidated EBITDA above) for
each such quarter was greater than 1.25 to 1.00, and (iii) all accrued and
unpaid dividends, whether or not declared, on the Shares have been paid or made
available for payment. Upon the occurrence of the Dividend Payment Default, the
same shall be deemed to continue and exist until (the "Dividend Payment Cure")
such time as the earlier to occur of (i) none of the Shares shall remain
outstanding and (ii) all accrued and unpaid dividends, whether or not declared,
on the Shares have been paid or made available for payment.
 
     Furthermore, so long as any Shares are outstanding, without the consent of
the holders of at least a majority of the Shares at the time outstanding, the
Company may not (i) effect or validate the amendment, alteration or repeal of
any provision of the Certificate of Designation, (ii) effect or validate the
amendment, alteration or repeal of any provision of the Charter of the Company
which would adversely effect the rights of the holders of the Shares, (iii)
other than as required to maintain the status of the Company as a real estate
investment trust (or to prevent the Company from becoming a Pension-held REIT)
as described in Section 856 of the Internal Revenue Code of 1986, as amended,
effect or validate the amendment, alteration or repeal of any provision of the
Charter of the Company which would increase in any respect the restrictions or
limitations on ownership applicable to the Shares pursuant thereto, (iv) effect
or validate the amendment, alteration or repeal of any provision of the Charter
of the Company or By-Laws of the Company in a manner which would make the right
to indemnification provided to any present or future director elected by the
holders of Shares materially different from that provided to other members of
the Board, (v) other than the Shares, issue a series of preferred stock that
would vote as a class with the Shares with respect to the election of any
Preferred Director) or shares of stock ranking senior or equal to the Shares (as
to dividends or upon liquidation, dissolution or winding up), or (vi) effect or
validate the amendment, alteration or repeal of any provision of the Charter of
the Company or By-Laws of the Company so as to increase the number of members of
the Board beyond twelve (12) members (not including any Preferred Directors).
 
     Any action required or permitted to be taken by holders of Shares at any
meeting of stockholders may be taken without a meeting, without prior notice and
without a vote, if a consent, in writing, setting forth the action so taken, is
signed by the holders of Shares who would have been sufficient to approve such
action at a meeting duly held and is executed and delivered to the Secretary of
the Company for placement among the minutes of proceedings of the stockholders
of the Company.
 
REDEMPTION
 
     Subject to certain exceptions, the Company may, at its option, to the
extent it shall have legally available funds therefor, under Maryland General
Corporation Law, redeem all (but not less than all) of the outstanding Shares,
at any time on or after the date which is the fifth (5th) anniversary of the
original date of issuance of the Shares. The option of the Company to redeem the
Shares shall be exercised by mailing of a
 
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written notice of election (the "Redemption Notice") by the Company to the
holders of the Shares at such holder's address appearing in the records of the
Company not less than thirty (30) days prior to the date specified therein for
the redemption of the Shares.
 
     On the redemption date specified in the Redemption Notice, the Company
shall be required, unless such holder of Shares has exercised its conversion
rights with respect to such Shares, to purchase from such holder of Shares, such
Shares, at a price equal to the product of (i) $12.50 per Share plus accrued and
unpaid dividends, plus a premium equal to the following percentage of $12.50:
 


                      REDEMPTION OCCURS
                         ON OR AFTER                      BUT PRIOR TO       % PREMIUM
        ---------------------------------------------  ------------------    ---------
                                                                       
        December 31, 2001............................  December 31, 2003        6.0
        December 31, 2003............................  December 31, 2005        5.0
        December 31, 2005............................  December 31, 2007        4.0
        December 31, 2007............................  December 31, 2009        3.0
        December 31, 2009............................  December 31, 2010        2.0
        December 31, 2010............................  December 31, 2011        1.0
        December 31, 2011............................                           0.0

 
and (ii) the number of Shares held by such holder to be redeemed (the
"Redemption Price").
 
     In addition, subject to the conversion rights of the holder of Shares, if a
Change of Control occurs on or before December 31, 2001, the Company may, at its
option, to the extent it shall have legally available funds therefor, under
Maryland General Corporation Law, redeem all (but not less than all) of the
outstanding Shares on the date of such Change of Control. On the date of the
Change of Control, the Company shall be required, unless such holder of Shares
has exercised its right to convert such Shares, to purchase from such holder
such Shares, at a price equal to the product of (i) $13.75 plus accrued and
unpaid dividends and (ii) the number of Shares held by such holder to be
redeemed. No Share is entitled to any dividends accruing after the date on which
the payment for such share is paid or made available for payment to the holder
thereof.
 
     If a Change of Control or Put Event occurs each holder of Shares will have
the right to require that the Company, to the extent the Company shall have
legally available funds therefor, under Maryland General Corporation Law, to
redeem such holder's Shares at a redemption price payable in cash in an amount
equal to 102% of the Liquidation Value thereof, plus accrued and unpaid
dividends whether or not declared, if any (the "Put Payment"), to the date of
redemption or the date payment is made available (the "Put Date").
 
     If a REIT-Put Event occurs each holder of Shares will have the right to
require that the Company, to the extent the Company shall have legally available
funds therefor, under Maryland General Corporation Law, to redeem such holder's
Shares at a redemption price payable in cash in an amount equal to the greater
of (i) 110% of the Liquidation Value thereof, plus accrued and unpaid dividends
whether or not declared, if any, (ii) 105% of the Current Market Price, plus
accrued and unpaid dividends whether or not declared, if any, and (iii) the
difference between the 52-Week Trading High and $12.50, plus accrued and unpaid
dividends whether or not declared, if any (any of (i), (ii) or (iii), the
"REIT-Put Payment"), to the date of redemption or the date payment is made
available (the "REIT-Put Date").
 
     "52-Week Trading High" means, for any date, the highest per share closing
price of the Common Stock for the 52-calendar week period immediately preceding
such date.
 
     "Change of Control" means each occurrence of any of the following: (i) the
acquisition, directly or indirectly, by any individual or entity or group (as
such term is used in Section 13(d)(3) of the Exchange Act) of beneficial
ownership (as defined in Rule 13d-3 under the Exchange Act, except that such
individual or entity shall be deemed to have beneficial ownership of all shares
that any such individual or entity has the right to acquire, whether such right
is exercisable immediately or only after passage of time) of more than 30% of
the aggregate outstanding voting power of capital stock of the Company; (ii)
other than with respect to the election, resignation or replacement of the
Preferred Directors, during any period of two consecutive years, individuals who
at the beginning of such period constituted the Board of Directors of the
Company (together
 
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with any new directors whose election by such Board of Directors or whose
nomination for election by the shareholders of the Company was approved by a
vote of 66 2/3% of the directors of the Company (excluding Preferred Directors)
then still in office who were either directors at the beginning of such period,
or whose election or nomination for election was previously so approved) cease
for any reason to constitute a majority of the Board of Directors of the Company
then in office; and (iii) (A) the Company consolidates with or merges into
another entity or conveys, transfers or leases all or substantially all of their
respective assets (including, but not limited to, real property investments) to
any individual or entity, or (B) any corporation consolidates with or merges
into the Company, which in either event (A) or (B) is pursuant to a transaction
in which the outstanding voting capital stock of the Company is reclassified or
changed into or exchanged for cash, securities (unless the holders of the
exchanged securities of the Company immediately prior to such transaction hold
immediately after such transaction at least a majority of the securities into
which such exchange was made) or other property; provided, however, that the
events described in clause (iii) shall not be deemed to be a Change of Control
if the sole purpose of such event is that the Company is seeking to change its
domicile or to change its form from a corporation to a statutory business trust.
 
     "Put Event" means each occurrence of the Company ceasing to be engaged
primarily in the business of owning and managing triple net leased properties
directly, or through subsidiaries, as carried on as of the date hereof and
described in the Company's Annual Report on Form 10-K as filed with the
Commission for the year ended December 31, 1995.
 
     "REIT-Put Event" means each occurrence of either of (i) the Company fails
to qualify as a real estate investment trust as described in Section 856 of the
Internal Revenue Code of 1986, as amended, other than as a result of any action,
or unreasonable failure to act, by the holders of Shares; (ii) the Company
becomes a "Pension-held REIT" as defined in Section 856(h)(3)(D) of the Internal
Revenue Code of 1986, as amended, other than as a result of any action, or
unreasonable failure to act, by holders of Shares.
 
OPTIONAL CONVERSION AT THE OPTION OF THE HOLDER
 
     A holder of Shares shall have the right, at such holder's option, at any
time to convert all or any portion of Shares held by such holder into the number
of fully paid and non-assessable shares of Common Stock obtained by dividing the
number of Shares being converted by the Conversion Ratio and by surrendering to
the Company such Shares to be converted. Such surrender shall be made in the
manner provided herein; provided, however, that the right to convert any Shares
called for redemption shall terminate at the close of business on the Final
Conversion Date, unless the Company shall default in making payment of any cash
payable upon such redemption. The "Conversion Ratio" with respect to any Shares
will initially be equal to 1, subject to adjustment.
 
     In order to exercise the conversion right, the holder of each Share to be
converted shall surrender to the Company the certificate representing such
Share, duly endorsed or assigned to the Company or in blank, accompanied by
written notice to the Company that the holder thereof elects to convert such
Shares. Unless the shares of Common Stock issuable on conversion are to be
issued in the same name as the name in which such Shares are registered, each
Share surrendered for conversion shall be accompanied by instruments of
transfer, in form satisfactory to the Company, duly executed by the holder or
such holder's duly authorized attorney.
 
     Holders of Shares shall be entitled on the date of conversion of any Shares
to receive all accumulated and unpaid dividends on such Shares.
 
CONVERSION ADJUSTMENT
 
     If the Company shall, while any Shares are outstanding, (A) pay a dividend
or make a distribution with respect to its capital stock in shares of its Common
Stock, (B) subdivide its outstanding Common Stock into a greater number of
shares, (C) combine its outstanding Common Stock into a smaller number of
shares, or (D) issue any shares of capital stock by reclassification of its
Common Stock, the Conversion Ratio in effect at the opening of business on the
day next following the date fixed for the determination of shareholders entitled
to receive such dividend or distribution or at the opening of business on the
day following the day on
 
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which such subdivision, combination or reclassification becomes effective, as
the case may be, shall be adjusted so that the holder of any Shares thereafter
surrendered for conversion shall be entitled to receive the number of shares of
Common Stock that such holder would have owned or have been entitled to receive
after the happening of any of the events described above had such Shares been
converted immediately prior to the record date in the case of a dividend or
distribution or the effective date in the case of a subdivision, combination or
reclassification.
 
     In addition, if the Company shall, while any Shares are outstanding, issue
rights, options or warrants to all holders of Common Stock entitling them (for a
period expiring within forty five (45) days after the record date mentioned
below) to subscribe for or purchase Common Stock at a price per share less than
the Current Market Price per share of Common Stock on the record date for the
determination of shareholders entitled to receive such rights or warrants, then
the Conversion Ratio in effect at the opening of business on the day next
following such record date shall be adjusted to equal the ratio determined by
multiplying (I) the Conversion Ratio in effect immediately prior to the opening
of business on the day next following the date fixed for such determination by
(II) a fraction, the numerator of which shall be the sum of (A) the number of
shares of Common Stock outstanding on the close of business on the date fixed
for such determination (without giving effect to such issuance) and (B) the
number of shares that the aggregate proceeds to the Company from the exercise of
such rights or warrants for Common Stock would purchase at such Current Market
Price, and the denominator of which shall be the sum of (A) the number of shares
of Common Stock outstanding on the close of business on the date fixed for such
determination (without giving effect to such issuance) and (B) the number of
additional shares of Common Stock offered for subscription or purchase pursuant
to such rights or warrants.
 
     If the Company shall distribute to all holders of its Common Stock any
shares of capital stock of the Company (other than Common Stock) or evidence of
its indebtedness or assets (excluding Regular Quarterly Dividends and certain
other distributions) or rights or warrants to subscribe for or purchase any of
its securities (excluding those rights and warrants issued to all holders of
Common Stock entitling them for a period expiring within forty five (45) days
after the record date referred to above to subscribe for or purchase Common
Stock, which rights and warrants are referred to above), then in each such case
each holder of Shares shall receive concurrently with the receipt by holders of
the Common Stock the kind and amount of such securities that such holder would
have owned or been entitled to receive had such Shares been converted
immediately prior to such distribution or related record date, as the case may
be.
 
     In case the Company shall pay or make a dividend or other distribution on
its Common Stock exclusively in cash (excluding Regular Quarterly Dividends),
each holder of Shares shall receive concurrently with the receipt by holders of
the Common Stock the kind and amount of any such distribution that it would have
owned or been entitled to receive had such Shares been converted immediately
prior to such distribution or related record date, as the case may be.
 
     The "Current Market Price" per share of Common Stock on any date in
question shall be deemed to be the average of the daily closing prices for the
five consecutive Trading Days immediately preceding such date in question;
provided, however, that if another event occurs that would require an adjustment
pursuant to subsection (f) through (j), inclusive, the Board may make such
adjustments to the closing prices during such five Trading Day period, in which
case any such determination by the Board shall be set forth in a resolution of
the Board and shall be conclusive.
 
     "Trading Day" shall mean a day on which Shares are traded on the national
securities exchange or quotation system used to determine the closing price.
 
     No adjustment in the Conversion Ratio shall be required unless such
adjustment would require a cumulative increase or decrease of at least .5%;
provided, however, that any adjustments that by reason of this paragraph are not
required to be made shall be carried forward and taken into account in any
subsequent adjustment until made.
 
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ADJUSTMENT FOR CERTAIN TRANSACTIONS
 
     If the Company becomes a party to any transaction (including, without
limitation, a merger, consolidation, statutory share exchange, self tender offer
for all or substantially all shares of Common Stock, sale of all or
substantially all of the Company's assets or recapitalization of the Common
Stock) (each of the foregoing being referred to herein as a "Transaction"), in
each case as a result of which shares of Common Stock shall be converted into
the right to receive stock, securities or other property (including cash or any
combination thereof) of another corporation, each Share that is not converted
into the right to receive stock, securities or other property in connection with
such Transaction shall thereafter be convertible into the kind and amount of
shares of stock, securities and other property (including cash or any
combination thereof) receivable upon the consummation of such Transaction by a
holder of that number of shares of Common Stock into which one Share was
convertible immediately prior to such Transaction, assuming such holder of
Common Stock (i) is not a person with which the Company consolidated or into
which the Company merged or which merged into the Company or to which such sale
or transfer was made, as the case may be ("Constituent Person"), or an affiliate
of a Constituent Person or (ii) failed to exercise his or her rights of
election, if any, as to the kind or amount of stock, securities and other
property (including cash) receivable upon such Transaction (provided that if the
kind or amount of stock, securities and other property (including cash)
receivable upon such Transaction is not the same for each share of Common Stock
of the Company held immediately prior to such Transaction by other than a
Constituent Person or an affiliate thereof and in respect of which such rights
of election shall not have been exercised ("Non-electing Share"), then for the
purpose of this paragraph the kind and amount of stock, securities and other
property (including cash) receivable upon such Transaction by each Non-electing
Share shall be deemed to be the kind and amount so receivable per share by a
plurality of the Non-electing Shares).
 
     In the event that: (i) the Company shall declare a dividend (or any other
distribution) on the Common Stock (other than the Regular Quarterly Dividend);
(ii) the Company shall authorize the granting to the holders of Common Stock of
rights or warrants to subscribe for or purchase any shares of any class or any
other rights or warrants; (iii) there shall be any reclassification of the
Common Stock or any consolidation or merger to which the Company is a party and
for which approval of any shareholders of the Company is required, or a
statutory share exchange, or self tender offer by the Company for all or
substantially all of its outstanding shares of Common Stock or the sale or
transfer of all or substantially all of the assets of the Company as an entity;
or (iv) there shall occur the involuntary liquidation, dissolution or winding up
of the Company, then, in each such case, the Company shall cause to be mailed to
the holders of Shares, at the address as shown on the stock records of the
Company, as promptly as possible, but at least 15 Business Days prior to the
applicable date hereinafter specified, a notice stating (A) the date on which a
record is to be taken for the purpose of such dividend, distribution or rights
or warrants, or, if a record is not to be taken, the date as of which the
holders of Common Stock of record to be entitled to such dividend, distribution
or rights or warrants are to be determined or (B) the date on which such
reclassification, consolidation, merger, statutory share exchange, sale,
transfer, liquidation, dissolution or winding up is expected to become
effective, and the date as of which it is expected that holders of Common Stock
shall be entitled to exchange their shares of Common Stock for securities or
other property, if any, deliverable upon such reclassification, consolidation,
merger, statutory share exchange, sale, transfer, liquidation, dissolution or
winding up.
 
OWNERSHIP LIMIT
 
     Except pursuant to an exemption granted by the Board, (A) prior to the
Restriction Termination Date, no Person shall Beneficially Own or Constructively
Own shares of the outstanding Equity Stock in excess of the Ownership Limit; (B)
prior to the Restriction Termination Date, any Transfer that, if effective,
would result in any Person Beneficially Owning or Constructively Owning Equity
Stock in excess of the Ownership Limit shall be void ab initio as to the
Transfer of that number of shares of Equity Stock which would be otherwise
Beneficially or Constructively Owned by such Person in excess of the Ownership
Limit; and the intended transferee shall acquire no rights in such excess shares
of Equity Stock; (C) prior to the Restriction Termination Date, any Transfer
that, if effective, would result in the Equity Stock's being Beneficially Owned
by fewer than 100 Persons (determined without reference to any rules of
attribution) shall be void ab initio as
 
                                       S-9
   10
 
to the Transfer of that number of shares which would be otherwise Beneficially
or Constructively Owned by the transferee; and the intended transferee shall
acquire no rights in such excess shares of Equity Stock; and (D) prior to the
Restriction Termination Date, any Transfer of shares of Equity Stock that, if
effective, would result in the Company's being "closely held" within the meaning
of Section 856(h) of the Code shall be void ab initio as to the Transfer of that
number of shares of Equity Stock which would cause the Company to be "closely
held" within the meaning of Section 856(h) of the Code; and the intended
transferee shall acquire no rights in such shares of Equity Stock.
 
     The Board has granted a conditional exemption to the Investor from the
Ownership Limit. However, if the Company fails to qualify as a REIT, then the
waiver of the Ownership Limit may be void ab initio or the Shares held by the
Investor may be converted to Excess Shares of the Company. Either event, under
certain circumstances, may cause a REIT Put Event.
 
     "Beneficial Ownership" shall mean ownership of Capital Stock by a Person
who would be treated as an owner of such shares of Capital Stock either directly
or indirectly through the application of Section 544 of the Code as modified by
Section 856(h)(1)(B) of the Code.
 
     "Capital Stock" shall mean stock that is Common Stock, Excess Stock or
Preferred Stock, if any.
 
     "Code" shall mean the Internal Revenue Code of 1986, as amended from time
to time.
 
     "Constructive Ownership" shall mean ownership of Capital Stock by a Person
who would be treated as an owner of such shares of Capital Stock either directly
or indirectly through the application of Section 318 of the Code, as modified by
Section 856(d)(5) of the Code. The terms "Constructive Owner," "Constructively
Owns" and "Constructively Owned" shall have correlative meanings.
 
     "Equity Stock" shall mean Common Stock and Preferred Stock in the
aggregate.
 
     "Ownership Limit" shall mean 9.8% of the value of the outstanding Equity
Stock of the Company.
 
     "Person" shall mean an individual, corporation, partnership, estate, trust
(including a trust qualified under Section 401(a) or 501(c)(17) of the Code), a
portion of a trust permanently set aside for or to be used exclusively for the
purposes described in Section 642(c) of the Code, association, private
foundation within the meaning of Section 509(a) of the Code, joint stock company
or other entity and also includes a group as that term is used for purposes of
Section 13(d)(3) of the Securities Exchange Act of 1934, as amended.
 
     "Restriction Termination Date" shall mean the first day on which the Board
of Directors of the Company determines that it is no longer in the best
interests of the Company to attempt to, or continue to, qualify as a REIT.
 
     "Transfer" shall mean any sale, transfer, gift, hypothecation, pledge,
assignment, devise or other disposition of Capital Stock (including (i) the
granting of any option or entering into any agreement for the sale, transfer or
the disposition of Equity Stock or (ii) the sale, transfer, assignment or other
disposition of any securities or rights convertible into or exchangeable for
Capital Stock), whether voluntary or involuntary, whether of record,
constructively or beneficially and whether by operation of law or otherwise.
 
MISCELLANEOUS
 
     Upon issuance, the Shares will be fully paid and nonassessable.
 
                                 LEGAL MATTERS
 
     Certain legal matters, including the validity of the Shares and certain tax
matters, will be passed upon for the Company by Paul, Hastings, Janofsky &
Walker LLP (a limited liability partnership including professional
corporations), New York, New York. Seth M. Zachary, a partner of Paul, Hastings,
Janofsky & Walker LLP, is presently serving as a director of the Company and
will continue to serve as a director at least until the 1998 Annual Meeting of
Stockholders. Mr. Zachary is the beneficial owner of 5,211 shares of Common
Stock and holds options to purchase an additional 12,500 shares of Common Stock.
In connection with certain matters related to the laws of the State of Maryland,
Paul, Hastings, Janofsky & Walker LLP will rely on the opinion of Piper &
Marbury L.L.P., Baltimore, Maryland.
 
                                      S-10
   11
 
PROSPECTUS
 
                                  $89,162,580
 
                      LEXINGTON CORPORATE PROPERTIES, INC.
 
                                DEBT SECURITIES
                                PREFERRED STOCK
                                  COMMON STOCK
 
     Lexington Corporate Properties, Inc. (the "Company") may offer from time to
time in one or more series (i) its debt securities ("Debt Securities"), which
may be senior or subordinated debt securities, (ii) shares of its preferred
stock, $.0001 par value per share ("Preferred Stock") and (iii) shares of its
common stock, $.0001 par value per share ("Common Stock"), with an aggregate
public offering price of up to $89,162,580 (or its equivalent based on the
exchange rate at the time of sale) in amounts, at prices and on terms to be
determined at the time of offering. The Debt Securities, Preferred Stock and
Common Stock (collectively, the "Securities") may be offered, separately or
together, in separate classes or series, in amounts, at prices and on terms to
be set forth in one or more supplements to this Prospectus (each, a "Prospectus
Supplement").
 
     The specific terms of the Securities for which this Prospectus is being
delivered will be set forth in the applicable Prospectus Supplement and will
include, where applicable: (i) in the case of Debt Securities, the specific
title, aggregate principal amount, ranking, currency, form (which may be
registered or bearer, or certificated or global), authorized denominations,
maturity, rate (or manner of calculation thereof) and time of payment of
interest, terms for redemption at the option of the Company or repayment at the
option of the holder thereof, terms for sinking fund payments, terms for
conversion into Common Stock or Preferred Stock, covenants and any initial
public offering price; (ii) in the case of Preferred Stock, the specific
designation and stated value per share, any dividend, liquidation, redemption,
conversion, voting and other rights, and any initial public offering price; and
(iii) in the case of Common Stock, any initial public offering price. In
addition, such specific terms may include limitations on direct or beneficial
ownership and restrictions on transfer of the Securities, in each case as may be
consistent with the Company's Articles of Amendment and Restatement of Articles
of Incorporation (the "Articles of Incorporation") or otherwise appropriate to
preserve the status of the Company as a real estate investment trust for federal
income tax purposes. See "Restrictions on Transfers of Capital Stock and
Anti-Takeover Provisions."
 
     The applicable Prospectus Supplement will also contain information, where
appropriate, about certain United States federal income tax considerations
relating to, and any listing on a securities exchange of, the Securities covered
by such Prospectus Supplement.
 
     The Securities may be offered by the Company directly, through agents
designated from time to time by the Company or to or through underwriters or
dealers. If any agents or underwriters are involved in the sale of any of the
securities, their names, and any applicable purchase price, fee, commission or
discount arrangement between or among them will be set forth or will be
calculable from the information set forth in the applicable Prospectus
Supplement. See "Plan of Distribution." No Securities may be sold without
delivery of a Prospectus Supplement describing the method and terms of the
offering of such Securities.
 
      PROSPECTIVE INVESTORS SHOULD CONSIDER CAREFULLY MATTERS DISCUSSED UNDER
THE CAPTION "RISK FACTORS" APPEARING ON PAGES 5 THROUGH 8 WHICH ARE RELEVANT TO
AN INVESTMENT IN THE SECURITIES.
 
  THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
 EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
   AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
                               CRIMINAL OFFENSE.
 
               The date of this Prospectus is November 12, 1997.
   12
 
                             AVAILABLE INFORMATION
 
     The Company is subject to the informational reporting requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith, is required to file reports, proxy statements and other
information with the Securities and Exchange Commission (the "Commission"). Such
reports, proxy statements and other information can be inspected and copied at
the public reference facilities maintained by the Commission at Room 1024, 450
Fifth Street, N.W., Washington, D.C., 20549, and at the Commission's Regional
offices located at 7 World Trade Center, 13th Floor, New York, New York 10048
and Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois
60661-2511. Copies of such material also can be obtained from the Public
Reference Section of the Commission, 450 Fifth Street, N.W., Washington, D.C.
20549 at prescribed rates. In addition, such material may be electronically
accessed at the Commission's site on the World Wide Web located at
http://www.sec.gov.
 
     The Company's Common Stock is listed on the New York Stock Exchange (the
"NYSE") and reports, proxy and information statements, and other information
concerning the Company can be inspected at the offices of the NYSE at 20 Broad
Street, New York, New York 10005.
 
     The Company has filed with the Commission a Registration Statement on Form
S-3, of which this Prospectus forms a part (together with any amendments
thereto, the "Registration Statement"), under the Securities Act of 1933, as
amended (the "Securities Act"). As permitted by the rules and regulations of the
Commission, this Prospectus omits certain information, exhibits and undertakings
contained in the Registration Statement. Such additional information, exhibits
and undertakings may be inspected and obtained from the Commission's principal
office in Washington, D.C., upon payment of the fees prescribed by the
Commission. The summaries or descriptions of documents in this Prospectus are
not necessarily complete. Reference is made to the copies of such documents
attached hereto or otherwise filed as a part of the Registration Statement for a
full and complete statement of their provisions, and such summaries and
descriptions are, in each case, qualified in their entirety by such reference.
 
                INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
 
     The following documents or information have been filed by the Company with
the Commission and are incorporated herein by reference:
 
     1. The Company's Quarterly Reports on Form 10-Q (Commission File No.
        1-12386) for the quarter ended March 31, 1997, filed on May 15, 1997,
        and Form 10-Q for the quarter ended June 30, 1997, filed on August 14,
        1997.
 
     2. The Company's Annual Report on Form 10-K (Commission File No. 1-12386)
        for the year ended December 31, 1996, filed on March 31, 1997.
 
     3. The Company's Current Reports on Forms 8-K (Commission File No.
        1-12386), filed on January 15, 1997; February 6, 1997; February 10,
        1997; April 25, 1997, June 2, 1997, June 20, 1997 and September 19,
        1997; and Forms 8-K/A filed on March 14, 1997, June 17, 1997, and August
        4, 1997 (Commission File No. 1-12386).
 
     4. The Company's 1997 Proxy Statement on Schedule 14-A, filed on May 6,
        1997 (Commission File No. 1-12386).
 
     5. The description of the Company's capital stock contained in the
        Company's Registration Statement on Form 8-B under the Exchange Act,
        filed on August 10, 1994 (Commission File No. 1-12386), including any
        amendment or report filed for the purpose of updating that description.
 
     All documents subsequently filed by the Company with the Commission
pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date
of this Prospectus and prior to the termination of the offering of all
Securities covered by this Prospectus will be deemed incorporated by reference
into this Prospectus and to be a part hereof from the date of filing of such
documents. Any statement contained in a document incorporated by reference
herein shall be deemed to be modified or superseded for purposes of this
 
                                        2
   13
 
Prospectus to the extent that a statement contained herein modifies or
supersedes such statement. Any statement so modified or superseded shall not be
deemed, except as so modified or superseded, to constitute a part of this
Prospectus.
 
     The Company hereby undertakes to provide without charge to each person to
whom a copy of this Prospectus has been delivered, upon the written or oral
request of such person to the Company at 355 Lexington Avenue, New York, New
York 10017, Attention: T. Wilson Eglin, President and Chief Operating Officer,
any or all of the documents referred to above (other than exhibits to such
documents) which have been incorporated by reference in this Prospectus.
 
                                        3
   14
 
                                  THE COMPANY
 
     Lexington Corporate Properties, Inc. is a self-managed and
self-administered real estate investment trust ("REIT") which acquires, owns and
manages a geographically diversified portfolio of high quality office,
industrial and retail properties that are net leased to corporations operating
in a variety of industries. The Company focuses on acquiring and owning
properties which the Company believes are important to the ongoing operations of
its tenants. Under a net lease ("Net Lease"), the tenant bears all, or
substantially all, of the costs and cost increases for real estate taxes,
insurance and ordinary maintenance.
 
     The Company currently owns controlling interests in 46 properties and
minority interests in two additional properties (collectively, the "Properties")
which are located in 24 states and have approximately 6.6 million net rentable
square feet. The Company's tenants include Bank One, Arizona, N.A., Circuit City
Stores, Inc., FirstPlus Financial Group, Inc., The Hartford Fire Insurance
Company, Honeywell, Inc., Lockheed Martin Corporation, Northwest Pipeline
Corporation, Ryder Integrated Logistics and Wal-Mart Stores, Inc. Substantially
all of the Company's leases are Net Leases with an average remaining term of
approximately nine years (excluding renewal options).
 
     The Company's senior executive officers average 17 years of experience in
the real estate investment and net lease business. Management has diversified
the Company's portfolio by geographical location, tenant industry segment, lease
term expiration and property type with the intention of providing steady
internal growth with low volatility. Management believes that such
diversification should help insulate the Company from regional recession,
industry specific downturns and price fluctuations by property type. Since
August 1, 1995, the Company has also enhanced the value of its portfolio by
acquiring $218.0 million of properties, aggregating approximately 3.5 million
net rentable square feet and accounting for approximately $26.5 million in
annual net effective rent. These properties include 100% interests in 21
Properties, controlling interests in four Properties and minority interests in
two additional Properties. See "-- Completed Acquisitions." As part of
management's ongoing efforts, the Company expects to continue to effect
portfolio and individual property acquisitions and dispositions, expand existing
Properties, attract investment grade quality tenants, extend lease maturities in
advance of expiration and refinance outstanding indebtedness when advisable.
 
     The Company commenced operations in 1993 as a REIT, with several operating
partnership subsidiaries. This operating partnership structure enables the
Company to acquire property by issuing to a seller, as a form of consideration,
interests ("OP Units") in the Company's subsidiary partnerships. 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 cash available for other purposes, including the
payment of distributions.
 
     The Company is currently organized under the laws of the State of Maryland,
but intends to reorganize as a Maryland real estate investment trust ("Maryland
REIT") in 1997. The reorganization would be effected by merging the Company with
and into a newly formed Maryland REIT. See "Restrictions on Transfers of Capital
Stock and Anti-Takeover Provisions -- Reorganization of the Company as a
Maryland Real Estate Investment Trust."
 
     The Company was originally incorporated under the laws of the State of
Delaware, and was reincorporated in the State of Maryland in June 1994.
References herein to the Company include references to the Company's Delaware
predecessor and the predecessor companies referenced above, unless the context
otherwise requires.
 
     The principal executive offices of the Company are located at 355 Lexington
Avenue, New York, New York 10017, and its telephone number is (212) 692-7260.
 
                                        4
   15
 
                                  RISK FACTORS
 
     Risks of Single Tenant Leases.  The Company focuses its acquisition
activities in Net Leased real properties or interests therein. Because the
Company's Net Leased real properties are leased to single tenants, the financial
failure of or other default by a tenant resulting in the termination of a lease
is likely to cause a significant reduction in the operating cash flow of the
lessor and might decrease the value of the property leased to such tenant.
 
     Dependence on Major Tenants.  Revenues from several of the Company's
Properties constitute a significant percentage of the Company's consolidated
rental revenues. On May 22, 1996, the Company consummated the acquisition of its
Salt Lake City, Utah property (the "Northwest Salt Lake City Property") which is
100% occupied by Northwest Pipeline Corporation pursuant to a Net Lease which
expires on September 30, 2009, subject to two renewal options for a total of 19
additional years. Revenue derived from the Northwest Salt Lake City Property
(net of ground lease payments) represents approximately 18.4% of the Company's
annualized rental revenue for as of October 1, 1997. In addition, the Company's
Newark, California Property (the "Ross Stores Newark Property") is 100% occupied
by Ross Stores, Inc. ("Ross Stores") pursuant to a Net Lease which expires on
August 31, 2002, subject to six five-year renewal options. See "Adverse Effects
of Possible Property Disposition" below. During 1996, the revenue derived by the
Company from the Ross Stores Newark Property represented approximately 10.0% of
the Company's consolidated rental revenue. The default, financial distress or
bankruptcy of either of the foregoing tenants could cause interruptions in the
receipt of lease revenues from such tenants and/or result in vacancies in the
respective properties, which would reduce the revenues of the Company until the
affected property is relet, and could decrease the ultimate sale value of each
such property. Upon the expiration of the leases that are currently in place
with respect to these properties, the Company may not be able to re-lease the
vacant property at a comparable lease rate or without incurring additional
expenditures in connection with such releasing.
 
     Adverse Effects of Ross Stores Litigation.  Ross Stores, Inc., the tenant
of the Company's Newark, California Property, exercised an option to purchase
the Ross Stores Newark Property for its fair market value, which was determined
by arbitration based on estimates of fair market value submitted by Ross Stores
and the Company. Under the terms of the arbitration, the arbitrator was required
to select the submission of either the Company or Ross Stores, whichever more
closely approximated the arbitrator's own opinion of fair market value, and was
not permitted any discretion to select another valuation. The opinion of value
selected by the arbitrator is deemed the purchase price. The estimate of the
fair market value of the Ross Stores Newark Property submitted by Ross Stores
more closely approximated the arbitrator's opinion of value and, accordingly was
selected by the arbitrator and confirmed by the Superior Court of the State of
California for San Francisco County (the "Superior Court"). The arbitrator's
opinion of value was based on numerous factors including current and future
market rental rates, the length of the Ross Stores Newark Property lease, the
credit worthiness of Ross Stores and rate of return required by investors who
acquire similar properties. The arbitration decision would have allowed Ross
Stores to purchase the Ross Stores Newark Property for $24.8 million on or about
September 1, 1997. The Company has appealed the Superior Court which has
resulted in a stay of Ross Stores' exercise of its purchase right; the outcome
of such appeal cannot be determined at this time. If the Company is successful
on its appeal, the parties will go back to the arbitration process and await a
new opinion of value. On August 26, 1997, the court ruled in favor of a motion
by Ross Stores to require the Company to post a bond equivalent to one year's
rent, in the amount of approximately $3.4 million securing the Company's
potential reimbursement of Ross Stores for rental payments made following
September 1, 1997 in the event that the sale was deemed to be consummated as of
such date. The Company has posted the bond. The net book value of the Ross
Stores Newark Property at September 30, 1997 was $25.0 million, which includes
approximately $1.5 million of deferred rent and deferred expenses related to the
Company's refinancing of certain properties, which were allocated to the Ross
Stores Newark Property. If the Company does not prevail on its appeal of the
Superior Court decision, the potential loss on the sale of the Ross Stores
Newark Property as of September 1, 1997 would have been approximately $400,000,
after the write-off of $515,000 of deferred financing expenses. Subject to the
approval of the trustee under the REMIC trust, the Company is permitted to
substitute another property into the REMIC Financing pool in place of the
 
                                        5
   16
 
Ross Stores Newark Property. In the event the Company is unable to complete such
substitution, the Company would be required to repay approximately $19.6 million
of the REMIC Financing and would incur a prepayment premium of approximately
$750,000. As of December 31, 1996, the net annual rent for the Ross Stores
Newark Property was approximately $3.3 million which increased to approximately
$3.4 million commencing September 1, 1997. Revenue derived from the Ross Stores
Newark Property accounted for approximately 10.0% and 7.8% of the Company's
consolidated rental revenue for 1996 and as of September 30, 1997, respectively.
Unless offset by other revenue sources, the loss of such annual rental revenue
from the Ross Stores Newark Property will adversely affect the Company's results
of operations.
 
     Leverage.  The Company has incurred, and may continue to incur,
indebtedness (secured and unsecured) in furtherance of its activities. The
Company's aggregate consolidated outstanding indebtedness as of September 30,
1997 was approximately $206 million. As of September 30, 1997, a total of
thirty-seven Properties were subject to mortgages which had an aggregate
outstanding principal balance of approximately $199 million. Neither the
Articles of Incorporation nor any policy statement formally adopted by the
Company's board of directors limits either the total amount of indebtedness or
the specified percentage of indebtedness (based upon the total market
capitalization of the Company) which may be incurred. Accordingly, the Company
could become more highly leveraged, resulting in increased risk of default on
obligations of the Company and in an increase in debt service requirements which
could adversely affect the financial condition and results of operations of the
Company and the Company's ability to pay distributions. The Company's secured
revolving credit facility with Fleet National Bank (the "Credit Facility")
limits the amount of indebtedness the Company may incur to 60% of the Company's
total market capitalization.
 
     Possible Inability to Refinance Balloon Payments on Mortgage Debt.  A
significant number of the Company's Properties are subject to mortgages with
balloon payments. Balloon payments, relating to three Properties, of
approximately $10.0 million and $5.6 million are due in 1998 and 1999,
respectively. The Credit Facility matures in 1999. Also, on May 19, 1995, the
Company, through its wholly owned subsidiary, LXP Funding Corp., completed a $70
million secured debt offering, secured by fifteen of the Company's Properties,
by issuing commercial mortgage pass-through certificates, which mature in 2005.
See Note 6 of the Company's Consolidated Financial Statements included in the
Company's 1996 Annual Report on Form 10-K. The ability of the Company to make
such balloon payments will depend upon its ability either to refinance the
mortgage related thereto or to sell the related property. The ability of the
Company to accomplish such goals will be affected by various factors existing at
the relevant time, such as the state of the national and regional economies,
local real estate conditions, available mortgage rates, the Company's equity in
the mortgaged properties, the financial condition of the Company, the operating
history of the mortgaged properties, and tax laws.
 
     Uncertainties Relating to Lease Renewals and Re-letting of Space.  The
Company will be subject to the risks that, upon expiration of leases for space
located in the Company's Properties, the premises may not be re-let or the terms
of re-letting (including the cost of concessions to tenants) may be less
favorable than current lease terms. If the Company were unable to re-let
promptly all or a substantial portion of its commercial units or if the rental
rates upon such re-letting were significantly lower than expected rates, the
Company's net income and ability to make expected distributions to stockholders
would be adversely affected. There can be no assurance that the Company will be
able to retain tenants in any of the Company's Properties upon the expiration of
their leases.
 
     Defaults on Cross-collateralized Properties.  Although the Company does not
generally cross-collateralize any of its properties, management may determine to
do so from time to time. As of the date of this Prospectus, two of the Company's
Properties in Florida were cross-collateralized (with outstanding mortgage
balances on such two Properties of approximately $10 million), and fifteen of
the Company's Properties were the subject of a segregated pool of assets with
respect to which commercial mortgage pass-through certificates (as discussed
above) were issued (with an outstanding principal balance thereon of
approximately $68 million). To the extent that any of the Company's Properties
are cross-collateralized, any default by the Company under the mortgage relating
to one such Property will result in a default under the financing arrangements
relating to any other Property which also provides security for such mortgage.
 
                                        6
   17
 
     Possible Liability Relating to 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
remediation 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 (including government fines and penalties and damages for
injuries to persons and adjacent property). Such laws often impose liability
without regard to whether the owner knew of, or was responsible for, the
presence or disposal of such substances. Such liability may be imposed on the
owner in connection with the activities of an operator of, or tenant at, the
property. The cost of any required remediation, removal, fines or personal or
property damages and the owner's liability therefor could exceed the value of
the property and/or the aggregate assets of the owner. In addition, the presence
of such substances, or the failure to properly dispose of or remove such
substances, may adversely affect the owner's ability to sell or rent such
property or to borrow using such property as collateral, which, in turn, would
reduce the Company's revenues and ability to make distributions. A property can
also be adversely affected either through physical contamination or by virtue of
an adverse effect upon value attributable to the migration of hazardous or toxic
substances, or other contaminants that have or may have emanated from other
properties. Although the Company's tenants are primarily responsible for any
environmental damages and claims related to the leased premises, in the event of
the bankruptcy or inability of the tenant of such premises to satisfy any
obligations with respect thereto, the Company may be required to satisfy such
obligations. In addition, under certain environmental laws, the Company, as the
owner of such properties may be held directly liable for any such damages or
claims irrespective of the provisions of any lease.
 
     From time to time, in connection with the conduct of the Company's
business, and prior to the acquisition of any property from a third party or as
required by the Company's financing sources, the Company authorizes the
preparation of Phase I environmental reports and, when necessary, Phase II
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 Prospectus, management was not aware of any environmental
condition with respect to any of the Company's Properties which management
believed would be reasonably likely to have a material adverse effect on the
Company. There can be no assurance, however, that (i) the discovery of
environmental conditions, the existence or severity of which were previously
unknown, (ii) changes in law, (iii) the conduct of tenants or (iv) activities
relating to properties in the vicinity of the Company's Properties will not
expose the Company to material liability in the future. Changes in laws
increasing the potential liability for environmental conditions existing on
properties or increasing the restrictions on discharges or other conditions may
result in significant unanticipated expenditures or may otherwise adversely
affect the operations of the Company's tenants, which could adversely affect the
Company's financial condition or results of operations.
 
     Risks Relating to Acquisitions.  A significant element of the Company's
business strategy is the enhancement of its portfolio through acquisitions of
additional properties. The consummation of any future acquisition will be
subject to satisfactory completion of the Company's extensive valuation analysis
and due diligence review and to the negotiation of definitive documentation.
There can be no assurance that the Company will be able to identify and acquire
additional properties or that it will be able to finance acquisitions in the
future. In addition, there can be no assurance that any such acquisition, if
consummated, will be profitable for the Company. If the Company is unable to
consummate the acquisition of additional properties in the future, there can be
no assurance that the Company will be able to increase or maintain the cash
available for distribution to stockholders.
 
     Concentration of Ownership by Certain Investors.  In December 1996, the
Company entered into an investment agreement which contemplates the issuance by
the Company of up to 2,000,000 shares of Class A Senior Cumulative Convertible
Preferred Stock (the "Convertible Preferred Stock") to Five Arrows Realty,
L.L.C. ("Five Arrows"). As of the date of this Prospectus, 1,325,000 shares of
Convertible Preferred Stock had been issued to Five Arrows under such investment
agreement, which would currently represent approximately 9.44% of the issued and
outstanding voting stock of the Company if all such shares of Convertible
Preferred Stock were immediately converted into shares of Common Stock. In March
1997, the Company sold to an institutional investor in a private placement 8%
Exchangeable Redeemable Secured Notes (the "Exchangeable Notes") in the
aggregate principal amount of $25 million. The Exchangeable
 
                                        7
   18
 
Notes are exchangeable at $13 per share for shares of Common Stock beginning in
the year 2000, subject to adjustment. If, however, the Exchangeable Notes were
immediately converted into shares of Common Stock, such shares of Common Stock
would represent approximately 12.05% of the issued and outstanding voting stock
of the Company (assuming conversion of all outstanding shares of Convertible
Preferred Stock). Significant concentrations of ownership by certain investors
may allow such investors to exert a greater influence over the management and
affairs of the Company.
 
     Uninsured Loss.  The Company carries comprehensive liability, fire,
extended coverage and carries rent loss insurance on most of its Properties,
with policy specifications and insured limits customarily carried for similar
properties. However, with respect to certain of the Properties where the leases
do not provide for abatement of rent under any circumstances, the Company
generally does not maintain rent loss insurance. In addition, there are certain
types of losses (such as losses due to wars or acts of God) that generally are
not insured because they are either uninsurable or not economically insurable.
Should an uninsured loss or a loss in excess of insured limits occur, the
Company could lose capital invested in a Property, as well as the anticipated
future revenues from a Property, while remaining obligated for any mortgage
indebtedness or other financial obligations related to the Property. Any such
loss would adversely affect the financial condition of the Company. Management
believes that the Company's Properties are adequately insured in accordance with
industry standards.
 
     Adverse Effects of Changes in Market Interest Rates.  The trading prices of
equity securities issued by REITs have historically been affected by changes in
broader market interest rates, with increases in interest rates resulting in
decreases in trading prices, and decreases in interest rates resulting in
increases in such trading prices. An increase in market interest rates could
therefore adversely affect the trading prices of any equity Securities issued by
the Company.
 
     Competition.  The real estate industry is highly competitive. The Company's
principal competitors include national REITs many of which are substantially
larger and have substantially greater financial resources than the Company.
 
     Failure to Qualify as a REIT.  Management believes that the Company met the
requirements for qualification as a REIT for United States federal income tax
purposes beginning with its taxable year ended December 31, 1993 and the Company
intends to continue to meet such requirements in the future. However,
qualification as a REIT involves the application of highly technical and complex
provisions of the Internal Revenue Code of 1986, as amended (the "Code"), for
which there are only limited judicial or administrative interpretations. No
assurance can be given that the Company has qualified, or that the Company will
remain qualified, as a REIT. The Code provisions and income tax regulations
applicable to REITs are more complex than those applicable to corporations. The
determination of various factual matters and circumstances not entirely within
the Company's control may affect its ability to qualify as a REIT. In addition,
no assurance can be given that legislation, regulations, administrative
interpretations or court decisions will not significantly change the
requirements for qualification as a REIT or the United States federal income tax
consequences of such qualification. If the Company did not qualify as a REIT,
the Company would not be allowed a deduction for distributions to stockholders
in computing its income subject to United States federal income tax at the
regular corporate rates. The Company also could be disqualified from treatment
as a REIT for the four taxable years following the year during which
qualification was lost. Cash available for distribution to the Company's
stockholders would be significantly reduced for each year in which the Company
did not qualify as a REIT. Although the Company currently intends to continue to
qualify as a REIT, it is possible that future economic, market, legal, tax or
other considerations may cause the Company, without the consent of the
stockholders, to revoke the REIT election or to otherwise take action that would
result in disqualification.
 
                                USE OF PROCEEDS
 
     Unless otherwise described in the applicable Prospectus Supplement, the
Company intends to use the net proceeds from the sale of Securities for general
corporate purposes, which may include the acquisition of additional properties,
the repayment of outstanding indebtedness or the improvement of certain
properties already in the Company's portfolio.
 
                                        8
   19
 
                       RATIO OF EARNINGS TO FIXED CHARGES
 
     The Company's ratio of earnings to fixed charges for each of the years
ended 1996, 1995, 1994, 1993 and 1992 was 1.41, 1.31, 1.49, 1.40 and 1.45,
respectively. The ratios of earnings to fixed charges were computed by dividing
earnings by fixed charges. For this purpose, earnings consist of pre-tax income
from continued operations plus fixed charges (excluding capitalized interest).
Fixed charges consist of interest expense and the amortization of debt issuance
costs.
 
                         DESCRIPTION OF DEBT SECURITIES
 
GENERAL
 
     The Debt Securities will be direct obligations of the Company, which may be
secured or unsecured and may be either senior Debt Securities ("Senior
Securities") or subordinated Debt Securities ("Subordinated Securities"). The
Debt Securities will be issued under one or more indentures in the form filed as
an exhibit to the Registration Statement of which this Prospectus is a part (the
"Form of Indenture"). As provided in the Form of Indenture, the specific terms
of any Debt Security issued pursuant to an indenture will be set forth in one or
more Supplemental Indentures, each dated as of a date of or prior to the
issuance of the Debt Securities to which it relates (the "Supplemental
Indentures" and each a "Supplemental Indenture"). Senior Securities and
Subordinated Securities may be issued pursuant to separate indentures
(respectively, a "Senior Indenture" and a "Subordinated Indenture"), in each
case between the Company and a trustee (a "Trustee"), which may be the same
Trustee, subject to such amendments or supplements as may be adopted from time
to time. The Senior Indenture and the Subordinated Indenture, as amended or
supplemented from time to time, are sometimes hereinafter referred to
collectively as the "Indentures." The Indentures will be subject to and governed
by the Trust Indenture Act of 1939, as amended. The statements made under this
heading relating to the Debt Securities and the Indentures are summaries of the
provisions thereof, do not purport to be complete and are qualified in their
entirety by reference to the Indentures and such Debt Securities.
 
     Capitalized terms used herein and not defined shall have the meanings
assigned to them in the applicable Indenture.
 
TERMS
 
     The indebtedness represented by the Senior Securities will rank equally
with all other unsecured and unsubordinated indebtedness of the Company. The
indebtedness represented by Subordinated Securities will be subordinated in
right of payment to the prior payment in full of the Senior Debt of the Company
as described under "-- Subordination." The particular terms of the Debt
Securities offered by a Prospectus Supplement will be described in the
applicable Prospectus Supplement, along with any applicable federal income tax
considerations unique to such Debt Securities. Accordingly, for a description of
the terms of any series of Debt Securities, reference must be made to both the
Prospectus Supplement relating thereto and the description of the Debt
Securities set forth in this Prospectus.
 
     Except as set forth in any Prospectus Supplement, the Debt Securities may
be issued without limits as to aggregate principal amount, in one or more
series, in each case as established from time to time by the Company or as set
forth in the applicable Indenture or in one or more Supplemental Indentures. All
Debt Securities of one series need not be issued at the same time and, unless
otherwise provided, a series may be reopened, without the consent of the holders
of the Debt Securities of such series, for issuance of additional Debt
Securities of such series.
 
     The Form of Indenture provides that the Company may, but need not,
designate more than one Trustee thereunder, each with respect to one or more
series of Debt Securities. Any Trustee under an Indenture may resign or be
removed with respect to one or more series of Debt Securities and a successor
Trustee may be appointed to act with respect to such series. If two or more
persons are acting as Trustee with respect to different series of Debt
Securities, each such Trustee shall be a Trustee of a trust under the applicable
 
                                        9
   20
 
Indenture separate and apart from the trust administered by any other Trustee,
and, except as otherwise indicated herein, any action described herein to be
taken by each Trustee may be taken by each such Trustee with respect to, and
only with respect to, the one or more series of Debt Securities for which it is
Trustee under the applicable Indenture.
 
     The following summaries set forth certain general terms and provisions of
the Indentures and the Debt Securities. The Prospectus Supplement relating to
the series of Debt Securities being offered will contain further terms of such
Debt Securities, including the following specific terms:
 
          (1) The title of such Debt Securities and whether such Debt Securities
     are secured or unsecured or Senior Securities or Subordinated Securities;
 
          (2) The aggregate principal amount of such Debt Securities and any
     limit on such aggregate principal amount;
 
          (3) The price (expressed as a percentage of the principal amount
     thereof) at which such Debt Securities will be issued and, if other than
     the principal amount thereof, the portion of the principal amount thereof
     payable upon declaration of the maturity thereof, or (if applicable) the
     portion of the principal amount of such Debt Securities that is convertible
     into Common Stock or Preferred Stock, or the method by which any such
     portion shall be determined;
 
          (4) If convertible, the terms on which such Debt Securities are
     convertible, including the initial conversion price or rate and the
     conversion period and any applicable limitations on the ownership or
     transferability of the Common Stock or Preferred Stock receivable on
     conversion;
 
          (5) The date or dates, or the method for determining such date or
     dates, on which the principal of such Debt Securities will be payable;
 
          (6) The rate or rates (which may be fixed or variable), or the method
     by which such rate or rates shall be determined, at which such Debt
     Securities will bear interest, if any;
 
          (7) The date or dates, or the method for determining such date or
     dates, from which any such interest will accrue, the dates on which any
     such interest will be payable, the record dates for such interest payment
     dates, or the method by which such dates shall be determined, the persons
     to whom such interest shall be payable, and the basis upon which interest
     shall be calculated if other than that of a 360-day year of twelve 30-day
     months;
 
          (8) The place or places where the principal of (and premium, if any)
     and interest, if any, on such Debt Securities will be payable, where such
     Debt Securities may be surrendered for conversion or registration of
     transfer or exchange and where notices or demands to or upon the Company
     with respect to such Debt Securities and the applicable Indenture may be
     served;
 
          (9) The period or periods, if any, within which, the price or prices
     at which and the other terms and conditions upon which such Debt Securities
     may, pursuant to any optional or mandatory redemption provisions, be
     redeemed, as a whole or in part, at the option of the Company;
 
          (10) The obligation, if any, of the Company to redeem, repay or
     purchase such Debt Securities pursuant to any sinking fund or analogous
     provision or at the option of a holder thereof, and the period or periods
     within which, the price or prices at which and the other terms and
     conditions upon which such Debt Securities will be redeemed, repaid or
     purchased, as a whole or in part, pursuant to such obligation;
 
          (11) If other than U.S. dollars, the currency or currencies in which
     such Debt Securities are denominated and payable, which may be a foreign
     currency or units of two or more foreign currencies or a composite currency
     or currencies, and the terms and conditions relating thereto;
 
          (12) Whether the amount of payments of principal of (and premium, if
     any) or interest, if any, on such Debt Securities may be determined with
     reference to an index, formula or other method (which index, formula or
     method may, but need not, be based on a currency, currencies, currency unit
     or units, or composite currency or currencies) and the manner in which such
     amounts shall be determined;
 
                                       10
   21
 
          (13) Whether such Debt Securities will be issued in certificated or
     book-entry form and, if so, the identity of the depository for such Debt
     Securities;
 
          (14) Whether such Debt Securities will be in registered or bearer form
     or both and, if in registered form, the denominations thereof if other than
     $1,000 and any integral multiple thereof and, if in bearer form, the
     denominations thereof and terms and conditions relating thereto;
 
          (15) The applicability, if any, of the defeasance and covenant
     defeasance provisions described herein or set forth in the applicable
     Indenture, or any modification thereof;
 
          (16) Whether and under what circumstances the Company will pay any
     additional amounts on such Debt Securities in respect of any tax,
     assessment or governmental charge and, if so, whether the Company will have
     the option to redeem such Debt Securities in lieu of making such payment;
 
          (17) Any deletions from, modifications of or additions to the events
     of default or covenants of the Company, to the extent different from those
     described herein or set forth in the applicable Indenture with respect to
     such Debt Securities, and any change in the right of any Trustee or any of
     the holders to declare the principal amount of any of such Debt Securities
     due and payable;
 
          (18) The provisions, if any, relating to the security provided for
     such Debt Securities; and
 
          (19) Any other terms of such Debt Securities not inconsistent with the
     provisions of the applicable Indenture.
 
     If so provided in the applicable Prospectus Supplement, the Debt Securities
may be issued at a discount below their principal amount and provide for less
than the entire principal amount thereof to be payable upon declaration of
acceleration of the maturity thereof ("Original Issue Discount Securities"). In
such cases, any special U.S. federal income tax, accounting and other
considerations applicable to Original Issue Discount Securities will be
described in the applicable Prospectus Supplement.
 
     Except as may be set forth in any Prospectus Supplement, neither the Debt
Securities nor the Indenture will contain any provisions that would limit the
ability of the Company to incur indebtedness or that would afford holders of
Debt Securities protection in the event of a highly leveraged or similar
transaction involving the Company or in the event of a change of control,
regardless of whether such indebtedness, transaction or change of control is
initiated or supported by the Company, any affiliate of the Company or any other
party. However, certain restrictions on ownership and transfers of the Common
Stock and Preferred Stock are designed to preserve the Company's status as a
REIT and, therefore, may act to prevent or hinder a change of control. See
"Restrictions on Transfers of Capital Stock and Anti-Takeover Provisions."
Reference is made to the applicable Prospectus Supplement for information with
respect to any deletions from, modifications of, or additions to, the events of
default or covenants of the Company that are described below, including any
addition of a covenant or other provision providing event risk or similar
protection.
 
DENOMINATION, INTEREST, REGISTRATION AND TRANSFER
 
     Unless otherwise described in the applicable Prospectus Supplement, the
Debt Securities of any series will be issuable in denominations of $1,000 and
integral multiples thereof.
 
     Unless otherwise specified in the applicable Prospectus Supplement, the
principal of (and applicable premium, if any) and interest on any series of Debt
Securities will be payable at the corporate trust office of the applicable
Trustee, the address of which will be stated in the applicable Prospectus
Supplement; provided, however, that, at the option of the Company, payment of
interest may be made by check mailed to the address of the person entitled
thereto as it appears in the applicable register for such Debt Securities or by
wire transfer of funds to such person at an account maintained within the United
States.
 
     Subject to certain limitations imposed upon Debt Securities issued in
book-entry form, the Debt Securities of any series will be exchangeable for any
authorized denomination of other Debt Securities of the same series and of a
like aggregate principal amount and tenor upon surrender of such Debt Securities
at the corporate trust office of the applicable Trustee or at the office of any
transfer agent designated by the
 
                                       11
   22
 
Company for such purpose. In addition, subject to certain limitations imposed
upon Debt Securities issued in book-entry form, the Debt Securities of any
series may be surrendered for conversion or registration of transfer or exchange
thereof at the corporate trust office of the applicable Trustee or at the office
of any transfer agent designated by the Company for such purpose. Every Debt
Security surrendered for conversion, registration of transfer or exchange must
be duly endorsed or accompanied by a written instrument of transfer, and the
person requesting such action must provide evidence of title and identity
satisfactory to the applicable Trustee or transfer agent. No service charge will
be made for any registration of transfer or exchange of any Debt Securities, but
the Company may require payment of a sum sufficient to cover any tax or other
governmental charge payable in connection therewith. If the applicable
Prospectus Supplement refers to any transfer agent (in addition to the
applicable Trustee) initially designated by the Company with respect to any
series of Debt Securities, the Company may at any time rescind the designation
of any such transfer agent or approve a change in the location through which any
such transfer agent acts, except that the Company will be required to maintain a
transfer agent in each place of payment for such series. The Company may at any
time designate additional transfer agents with respect to any series of Debt
Securities.
 
     Neither the Company nor any Trustee shall be required (i) to issue,
register the transfer of or exchange Debt Securities of any series during a
period beginning at the opening of business 15 days before the day of mailing of
a notice of redemption of any Debt Securities that may be selected for
redemption and ending at the close of business on the day of such mailing; (ii)
to register the transfer of or exchange any Debt Security, or portion thereof,
so selected for redemption, in whole or in part, except the unredeemed portion
of any Debt Security being redeemed in part; or (iii) to issue, register the
transfer of or exchange any Debt Security that has been surrendered for
repayment at the option of the holder, except the portion, if any, of such Debt
Security not to be so repaid.
 
MERGER, CONSOLIDATION OR SALE OF ASSETS
 
     The Indentures will provide that the Company may, without the consent of
the holders of any outstanding Debt Securities, consolidate with, or sell, lease
or convey all or substantially all of its assets to, or merge with or into, any
other entity provided that (a) either the Company shall be the continuing
entity, or the successor entity (if other than the Company) formed by or
resulting from any such consolidation or merger or which shall have received the
transfer of such assets, is organized under the laws of any domestic
jurisdiction and assumes the Company's obligations to pay principal of (and
premium, if any) and interest on all of the Debt Securities and the due and
punctual performance and observance of all of the covenants and conditions
contained in each Indenture; (b) immediately after giving effect to such
transaction and treating any indebtedness that becomes an obligation of the
Company or any subsidiary as a result thereof as having been incurred by the
Company or such subsidiary at the time of such transaction, no event of default
under the Indentures, and no event which, after notice or the lapse of time, or
both, would become such an event of default, shall have occurred and be
continuing; and (c) an officers' certificate and legal opinion covering such
conditions shall be delivered to each Trustee.
 
CERTAIN COVENANTS
 
     Existence.  Except as permitted under "-- Merger, Consolidation or Sale of
Assets," the Indentures will require the Company to do or cause to be done all
things necessary to preserve and keep in full force and effect its corporate
existence, rights (by articles of incorporation, by-laws and statute) and
franchises; provided, however, that the Company will not be required to preserve
any right or franchise if its Board of Directors determines that the
preservation thereof is no longer desirable in the conduct of its business by
appropriate proceedings.
 
     Maintenance of Properties.  The Indentures will require the Company to
cause all of its material properties used or useful in the conduct of its
business or the business of any subsidiary to be maintained and kept in good
condition, repair and working order and supplied with all necessary equipment
and will cause to be made all necessary repairs, renewals, replacements,
betterments and improvements thereof, all as in the judgment of the Company may
be necessary so that the business carried on in connection therewith may be
properly and advantageously conducted at all times; provided, however, that the
Company and its subsidiaries
 
                                       12
   23
 
shall not be prevented from selling or otherwise disposing of their properties
for value in the ordinary course of business.
 
     Insurance.  The Indentures will require the Company to cause each of its
and its subsidiaries' insurable properties to be insured against loss or damage
with insurers of recognized responsibility and, if described in the applicable
Prospectus Supplement, having a specified rating from a recognized insurance
rating service, in such amounts and covering all such risks as shall be
customary in the industry in accordance with prevailing market conditions and
availability.
 
     Payment of Taxes and Other Claims.  The Indentures will require the Company
to pay or discharge or cause to be paid or discharged, before the same shall
become delinquent, (i) all taxes, assessments and governmental charges levied or
imposed upon it or any subsidiary or upon the income, profits or property of the
Company or any subsidiary and (ii) all lawful claims for labor, materials and
supplies which, if unpaid, might by law become a lien upon the property of the
Company or any subsidiary; provided, however, that the Company shall not be
required to pay or discharge or cause to be paid or discharged any such tax,
assessment, charge or claim whose amount, applicability or validity is being
contested in good faith.
 
     Provision of Financial Information.  Whether or not the Company is subject
to Section 13 or 15(d) of the Exchange Act, the Indentures will require the
Company, within 15 days of each of the respective dates by which the Company
would have been required to file annual reports, quarterly reports and other
documents with the Commission if the Company were so subject, (i) to transmit by
mail to all holders of Debt Securities, as their names and addresses appear in
the applicable register for such Debt Securities, without cost to such holders,
copies of the annual reports, quarterly reports and other documents that the
Company would have been required to file with the Commission pursuant to Section
13 or 15(d) of the Exchange Act if the Company were subject to such Sections,
(ii) to file with the applicable Trustee copies of the annual reports, quarterly
reports and other documents that the Company would have been required to file
with the Commission pursuant to Section 13 or 15(d) of the Exchange Act if the
Company were subject to such Sections and (iii) to supply, promptly upon written
request and payment of the reasonable cost of duplication and delivery, copies
of such documents to any prospective holder.
 
     Additional Covenants.  Any additional covenants of the Company with respect
to any series of Debt Securities will be set forth in the Prospectus Supplement
relating thereto.
 
EVENTS OF DEFAULT, NOTICE AND WAIVER
 
     Unless otherwise provided in the applicable Prospectus Supplement, each
Indenture will provide that the following events are "Events of Default" with
respect to any series of Debt Securities issued thereunder: (i) default for 30
days in the payment of any installment of interest on any Debt Security of such
series; (ii) default in the payment of principal of (or premium, if any, on) any
Debt Security of such series at its maturity; (iii) default in making any
sinking fund payment as required for any Debt Security of such series; (iv)
default in the performance or breach of any other covenant or warranty of the
Company contained in the Indenture (other than a covenant added to the Indenture
solely for the benefit of a series of Debt Securities issued thereunder other
than such series), continued for 60 days after written notice as provided in the
applicable Indenture; (v) a default under any bond, debenture, note or other
evidence of indebtedness for money borrowed by the Company or any of its
subsidiaries (including obligations under leases required to be capitalized on
the balance sheet of the lessee under generally accepted accounting principles
but not including any indebtedness or obligations for which recourse is limited
to property purchased) in an aggregate principal amount in excess of $10,000,000
or under any mortgage, indenture or instrument under which there may be issued
or by which there may be secured or evidenced any indebtedness for money
borrowed by the Company or any its subsidiaries (including such leases, but not
including such indebtedness or obligations for which recourse is limited to
property purchased) in an aggregate principal amount in excess of $10,000,000,
whether such indebtedness exists on the date of such Indenture or shall
thereafter be created, with such obligations being accelerated and not rescinded
or annulled; (vi) certain events of bankruptcy, insolvency or reorganization, or
court appointment of a receiver, liquidator or trustee of the Company or any
Significant Subsidiary of the Company; and (vii) any other event of default
provided with respect to a particular series of Debt
 
                                       13
   24
 
Securities. The term "Significant Subsidiary" has the meaning ascribed to such
term in Regulation S-X promulgated under the Securities Act.
 
     If an event of default under any Indenture with respect to Debt Securities
of any series at the time outstanding occurs and is continuing, then in every
such case the applicable Trustee or the holders of not less than 25% in
principal amount of the Debt Securities of that series will have the right to
declare the principal amount (or, if the Debt Securities of that series are
Original Issue Discount Securities or indexed securities, such portion of the
principal amount as may be specified in the terms thereof) of all the Debt
Securities of that series to be due and payable immediately by written notice
thereof to the Company (and to the applicable Trustee if given by the holders).
However, at any time after such a declaration of acceleration with respect to
Debt Securities of such series (or of all Debt Securities then outstanding under
any Indenture, as the case may be) has been made, but before a judgment or
decree for payment of the money due has been obtained by the applicable Trustee,
the holders of not less than a majority in principal amount of outstanding Debt
Securities of such series (or of all Debt Securities then outstanding under the
applicable Indenture, as the case may be) may rescind and annul such declaration
and its consequences if (i) the Company shall have deposited with the applicable
Trustee all required payments of the principal of (and premium, if any) and
interest on the Debt Securities of such series (or of all Debt Securities than
outstanding under the applicable Indenture, as the case may be), plus certain
fees, expenses, disbursements and advances of the applicable Trustee and (ii)
all events of default, other than the non-payment of accelerated principal (or
specified portion thereof), with respect to Debt Securities of such series (or
of all Debt Securities then outstanding under the applicable Indenture, as the
case may be) have been cured or waived as provided in such Indenture. The
Indentures will also provide that the holders of not less than a majority in
principal amount of the outstanding Debt Securities of any series (or of all
Debt Securities then outstanding under the applicable Indenture, as the case may
be) may waive any past default with respect to such series and its consequences,
except a default (x) in the payment of the principal of (or premium, if any) or
interest on any Debt Security of such series or (y) in respect of a covenant or
provision contained in the applicable Indenture that cannot be modified or
amended without the consent of the holder of each outstanding Debt Security
affected thereby.
 
     The Indentures will require each Trustee to give notice to the holders of
Debt Securities within 90 days of a default under the applicable Indenture
unless such default shall have been cured or waived; provided, however, that
such Trustee may withhold notice to the holders of any series of Debt Securities
of any default with respect to such series (except a default in the payment of
the principal of (or premium, if any) or interest on any Debt Security of such
series or in the payment of any sinking fund installment in respect to any Debt
Security of such series) if specified responsible officers of such Trustee
consider such withholding to be in the interest of such holders.
 
     The Indentures will provide that no holder of Debt Securities of any series
may institute any proceeding, judicial or otherwise, with respect to such
Indenture or for any remedy thereunder, except in the case of failure of the
applicable Trustee, for 60 days, to act after it has received a written request
to institute proceedings in respect of an event of default from the holders of
not less than 25% in principal amount of the outstanding Debt Securities of such
series, as well as an offer of indemnity reasonably satisfactory to it. This
provision will not prevent, however, any holder of Debt Securities from
instituting suit for the enforcement of payment of the principal of (and
premium, if any) and interest on such Debt Securities at the respective due
dates thereof.
 
     The Indentures will provide that, subject to provisions in each Indenture
relating to its duties in case of default, a Trustee will be under no obligation
to exercise any of its rights or powers under an Indenture at the request or
direction of any holders of any series of Debt Securities then outstanding under
such Indenture, unless such holders shall have offered to the Trustee thereunder
reasonable security or indemnity. The holders of not less than a majority in
principal amount of the outstanding Debt Securities of any series (or of all
Debt Securities then outstanding under an Indenture, as the case may be) shall
have the right to direct the time, method and place of conducting any proceeding
for any remedy available to the applicable Trustee, or of exercising any trust
or power conferred upon such Trustee. However, a Trustee may refuse to follow
any direction which is in conflict with any law or the applicable Indenture,
which may involve such Trustee in personal liability or which may be unduly
prejudicial to the holders of Debt Securities of such series not joining
therein.
 
                                       14
   25
 
     Within 120 days after the close of each fiscal year, the Company will be
required to deliver to each Trustee a certificate, signed by one of several
specified officers of the Company, stating whether or not such officer has
knowledge of any default under the applicable Indenture and, if so, specifying
each such default and the nature and status thereof.
 
MODIFICATION OF THE INDENTURES
 
     Modifications and amendments of an Indenture will be permitted to be made
only with the consent of the holders of not less than a majority in principal
amount of all outstanding Debt Securities issued under such Indenture affected
by such modification or amendment; provided, however, that no such modification
or amendment may, without the consent of the holder of each such Debt Security
affected thereby, (i) change the stated maturity of the principal of, or any
installment of interest (or premium, if any) on, any such Debt Security; (ii)
reduce the principal amount of, or the rate or amount of interest on, or any
premium payable on redemption of, any such Debt Security, or reduce the amount
of principal of an Original Issue Discount Security that would be due and
payable upon declaration of acceleration of the maturity thereof or would be
provable in bankruptcy, or adversely affect any right of repayment of the holder
of any such Debt Security; (iii) change the place of payment, or the coin or
currency, for payment of principal of, premium, if any, or interest on any such
Debt Security; (iv) impair the right to institute suit for the enforcement of
any payment on or with respect to any such Debt Security; (v) reduce the
above-stated percentage of outstanding Debt Securities of any series necessary
to modify or amend the applicable Indenture, to waive compliance with certain
provisions thereof or certain defaults and consequences thereunder or to reduce
the quorum or voting requirements set forth in the applicable Indenture; or (vi)
modify any of the foregoing provisions or any of the provisions relating to the
waiver of certain past defaults or certain covenants, except to increase the
required percentage to effect such action or to provide that certain other
provisions may not be modified or waived without the consent of the holder of
such Debt Security.
 
     The holders of a majority in aggregate principal amount of the outstanding
Debt Securities of each series may, on behalf of all holders of Debt Securities
of that series, waive, insofar as that series is concerned, compliance by the
Company with certain restrictive covenants of the applicable Indenture.
 
     Modifications and amendments of an Indenture will be permitted to be made
by the Company and the respective Trustee thereunder without the consent of any
holder of Debt Securities for any of the following purposes: (i) to evidence the
succession of another person to the Company as obligor under such Indenture;
(ii) to add to the covenants of the Company for the benefit of the holders of
all or any series of Debt Securities or to surrender any right or power
conferred upon the Company in such Indenture; (iii) to add events of default for
the benefit of the holders of all or any series of Debt Securities; (iv) to add
or change any provisions of an Indenture to facilitate the issuance of, or to
liberalize certain terms of, Debt Securities in bearer form, or to permit or
facilitate the issuance of Debt Securities in uncertificated form; provided that
such action shall not adversely affect the interest of the holders of the Debt
Securities of any series in any material respect; (v) to change or eliminate any
provisions of an Indenture; provided that any such change or elimination shall
be effective only when there are no Debt Securities outstanding of any series
created prior thereto which are entitled to the benefit of such provision; (vi)
to secure the Debt Securities; (vii) to establish the form or terms of Debt
Securities of any series, including the provisions and procedures, if
applicable, for the conversion of such Debt Securities into Common Stock or
Preferred Stock; (viii) to provide for the acceptance of appointment by a
successor Trustee or facilitate the administration of the trusts under an
Indenture by more than one Trustee; (ix) to cure any ambiguity, defect or
inconsistency in an Indenture; provided that such action shall not adversely
affect the interests of holders of Debt Securities of any series issued under
such Indenture; or (x) to supplement any of the provisions of an Indenture to
the extent necessary to permit or facilitate defeasance and discharge of any
series of such Debt Securities; provided that such action shall not adversely
affect the interests of the holders of the outstanding Debt Securities of any
series.
 
     The Indentures will provide that, in determining whether the holders of the
requisite principal amount of outstanding Debt Securities of a series have given
any request, demand, authorization, direction, notice, consent or waiver
thereunder or whether a quorum is present at a meeting of holders of Debt
Securities,
 
                                       15
   26
 
(i) the principal amount of an Original Issue Discount Security that shall be
deemed to be outstanding shall be the amount of the principal thereof that would
be due and payable as of the date of such determination upon declaration of
acceleration of the maturity thereof, (ii) the principal amount of any Debt
Security denominated in a foreign currency that shall be deemed outstanding
shall be the U.S. dollar equivalent, determined on the issue date for such Debt
Security, of the principal amount (or, in the case of an Original Issue Discount
Security, the U.S. dollar equivalent on the issue date of such Debt Security of
the amount determined as provided in (i) above), (iii) the principal amount of
an indexed security that shall be deemed outstanding shall be the principal face
amount of such indexed security at original issuance, unless otherwise provided
with respect to such indexed security pursuant to such Indenture, and (iv) Debt
Securities owned by the Company or any other obligor upon the Debt Securities or
any affiliate of the Company or of such other obligor shall be disregarded.
 
     The Indentures will contain provisions for convening meetings of the
holders of Debt Securities of a series issued thereunder. A meeting may be
called at any time by the applicable Trustee, and also, upon request, by the
Company or the holder of at least 25% in principal amount of the outstanding
Debt Securities of such series, in any such case upon notice given as provided
in such Indenture. Except for any consent that must be given by the holder of
each Debt Security affected by certain modifications and amendments of an
Indenture, any resolution presented at a meeting or adjourned meeting duly
reconvened at which a quorum is present may be adopted by the affirmative vote
of the holders of a majority in principal amount of the outstanding Debt
Securities of that series; provided, however, that, except as referred to above,
any resolution with respect to any request, demand, authorization, direction,
notice, consent, waiver or other action that may be made, given or taken by the
holders of a specified percentage, which is less than a majority, in principal
amount of the outstanding Debt Securities of a series may be adopted at a
meeting or adjourned meeting duly reconvened at which a quorum is present by the
affirmative vote of the holders of such specified percentage in principal amount
of the outstanding Debt Securities of that series. Any resolution passed or
decision taken at any meeting of holders of Debt Securities of any series duly
held in accordance with an Indenture will be binding on all holders of Debt
Securities of that series. The quorum at any meeting called to adopt a
resolution, and at any reconvened meeting, will be persons holding or
representing a majority in principal amount of the outstanding Debt Securities
of a series; provided, however, that if any action is to be taken at such
meeting with respect to a consent or waiver which may be given by the holders of
not less than a specified percentage in principal amount of the outstanding Debt
Securities of a series, the persons holding or representing such specified
percentage in principal amount of the outstanding Debt Securities of such series
will constitute a quorum.
 
     Notwithstanding the foregoing provisions, the Indentures will provide that
if any action is to be taken at a meeting of holders of Debt Securities of any
series with respect to any request, demand, authorization, direction, notice,
consent, waiver and other action that such Indenture expressly provides may be
made, given or taken by the holders of a specified percentage in principal
amount of all outstanding Debt Securities affected thereby, or of the holders of
such series and one or more additional series; (i) there shall be no minimum
quorum requirement for such meeting, and (ii) the principal amount of the
outstanding Debt Securities of such series that vote in favor of such request,
demand, authorization, direction, notice, consent, waiver or other action shall
be taken into account in determining whether such request, demand,
authorization, direction, notice, consent, waiver or other action has been made,
given or taken under such Indenture.
 
SUBORDINATION
 
     Unless otherwise provided in the applicable Prospectus Supplement,
Subordinated Securities will be subject to the following subordination
provisions.
 
     Upon any distribution to creditors of the Company in a liquidation,
dissolution or reorganization, the payment of the principal of and interest on
any Subordinated Securities will be subordinated to the extent provided in the
applicable Indenture in right of payment to the prior payment in full of all
Senior Debt (as defined below), but the obligation of the Company to make
payments of the principal of and interest on such Subordinated Securities will
not otherwise be affected. No payment of principal or interest will be permitted
to be made on Subordinated Securities at any time if a default on Senior Debt
exists that permits the holders of
 
                                       16
   27
 
such Senior Debt to accelerate its maturity and the default is the subject of
judicial proceedings or the Company receives notice of the default. After all
Senior debt is paid in full and until the Subordinated Securities are paid in
full, holders will be subrogated to the rights of holders of Senior Debt to the
extent that distributions otherwise payable to holders have been applied to the
payment of Senior Debt. The Subordinated Indenture will not restrict the amount
of Senior Indebtedness or other indebtedness of the Company and its
subsidiaries. As a result of these subordination provisions, in the event of a
distribution of assets upon insolvency, holders of Subordinated Indebtedness may
recover less, ratably, than senior creditors of the Company.
 
     Senior Debt will be defined in the applicable Indenture as the principal of
and interest on, or substantially similar payments to be made by the Company in
respect of, the following, whether outstanding at the date of execution of the
applicable Indenture or thereafter incurred, created or assumed: (i)
indebtedness of the Company for money borrowed or represented by purchase-money
obligations, (ii) indebtedness of the Company evidenced by notes, debentures, or
bonds, or other securities issued under the provisions of an indenture, fiscal
agency agreement or other agreement, (iii) obligations of the Company as lessee
under leases of property either made as part of any sale and leaseback
transaction to which the Company is a party or otherwise, (iv) indebtedness of
partnerships and joint ventures which is included in the consolidated financial
statements of the Company, (v) indebtedness, obligations and liabilities of
others in respect of which the Company is liable contingently or otherwise to
pay or advance money or property or as guarantor, endorser or otherwise or which
the Company has agreed to purchase or otherwise acquire, and (vi) any binding
commitment of the real estate investment, in each case other than (a) any such
indebtedness, obligation or liability referred to in clauses (i) through (vi)
above as to which, in the instrument creating or evidencing the same pursuant to
which the same is outstanding, it is provided that such indebtedness, obligation
or liability is not superior in right of payment to the Subordinated Securities
or ranks pari passu with the Subordinated Securities, (b) any such indebtedness,
obligation or liability which is subordinated to indebtedness of the Company to
substantially the same extent as or to a greater extent than the Subordinated
Securities are subordinated, and (c) the Subordinated Securities. There will not
be any restriction in any Indenture relating to Subordinated Securities upon the
creation of additional Senior Debt.
 
     If this Prospectus is being delivered in connection with a series of
Subordinated Securities, the accompanying Prospectus Supplement or the
information incorporated herein by reference will set forth the approximate
amount of Senior Debt outstanding as of the end of the Company's most recent
fiscal quarter.
 
DISCHARGE, DEFEASANCE AND COVENANT DEFEASANCE
 
     Unless otherwise indicated in the applicable Prospectus Supplement, the
Company will be permitted, at its option, to discharge certain obligations to
holders of any series of Debt Securities issued under any Indenture that have
not already been delivered to the applicable Trustee for cancellation and that
either have become due and payable or will become due and payable within one
year (or scheduled for redemption within one year) by irrevocably depositing
with the applicable Trustee, in trust, funds in such currency or currencies,
currency unit or units or composite currency or currencies in which such Debt
Securities are payable in an amount sufficient to pay the entire indebtedness on
such Debt Securities with respect to principal (and premium, if any) and
interest to the date of such deposit (if such Debt Securities have become due
and payable) or to the stated maturity or redemption date, as the case may be.
 
     The Indentures will provide that, unless otherwise indicated in the
applicable Prospectus Supplement, the Company may elect either (i) to defease
and be discharged from any and all obligations (except for the obligation to pay
additional amounts, if any, upon the occurrence of certain events of tax
assessment or governmental charge with respect to payments on such Debt
Securities and the obligations to register the transfer or exchange of such Debt
Securities, to replace temporary or mutilated, destroyed, lost or stolen Debt
Securities, to maintain an office or agency in respect of such Debt Securities,
to hold moneys for payment in trust and, with respect to Subordinated Debt
Securities which are convertible or exchangeable, the right to convert or
exchange) with respect to such Debt Securities ("defeasance") or (ii) to be
released from its obligations with respect to such Debt Securities under the
applicable Indenture (being the restrictions described under "-- Certain
Covenants") or, if provided in the applicable Prospectus Supplement, its
 
                                       17
   28
 
obligations with respect to any other covenant, and any omission to comply with
such obligations shall not constitute an event of default with respect to such
Debt Securities ("covenant defeasance"), in either case upon the irrevocable
deposit by the Company with the applicable Trustee, in trust, of an amount, in
such currency or currencies, currency unit or units or composite currency or
currencies in which such Debt Securities are payable at stated maturity, or
Government Obligations (as defined below), or both, applicable to such Debt
Securities, which through the scheduled payment of principal and interest in
accordance with their terms will provide money in an amount sufficient to pay
the principal of (and premium, if any) and interest on such Debt Securities, and
any mandatory sinking fund or analogous payments thereon, on the scheduled due
dates therefor.
 
     Such a trust will only be permitted to be established if, among other
things, the Company has delivered to the applicable Trustee an opinion of
counsel (as specified in the applicable Indenture) to the effect that the
holders of such Debt Securities will not recognize income, gain or loss for U.S.
federal income tax purposes as a result of such defeasance or covenant
defeasance and will be subject to U.S. federal income tax on the same amounts,
in the same manner and at the same times as would have been the case if such
defeasance or covenant defeasance had not occurred, and such opinion of counsel,
in the case of defeasance, will be required to refer to and be based upon a
ruling received from or published by the Internal Revenue Service or a change in
applicable United States federal income tax law occurring after the date of the
Indenture. In the event of such defeasance, the holders of such Debt Securities
would thereafter be able to look only to such trust fund for payment of
principal (and premium, if any) and interest.
 
     "Government Obligations" means securities that are (i) direct obligations
of the United States of America or the government which issued the foreign
currency in which the Debt Securities of a particular series are payable, for
the payment of which its full faith and credit is pledged or (ii) obligations of
a person controlled or supervised by and acting as an agency or instrumentality
of the United States of America or such government which issued the foreign
currency in which the Debt Securities of such series are payable, the payment of
which is unconditionally guaranteed as a full faith and credit obligation by the
United States of America or such other government, which, in either case, are
not callable or redeemable at the option of the issuer thereof, and shall also
include a depository receipt issued by a bank or trust company as custodian with
respect to any such Government Obligation or a specific payment of interest on
or principal of any such Government Obligation held by such custodian for the
account of the holder of a depository receipt; provided that (except as required
by law) such custodian is not authorized to make any deduction from the amount
payable to the holder of such depository receipt from any amount received by the
custodian in respect of the Government Obligation or the specific payment of
interest on or principal of the Government Obligation evidenced by such
depository receipt.
 
     Unless otherwise provided in the applicable Prospectus Supplement, if after
the Company has deposited funds and/or Government Obligations to effect
defeasance or covenant defeasance with respect to Debt Securities of any series,
(i) the holder of a Debt Security of such series is entitled to, and does, elect
pursuant to the applicable Indenture or the terms of such Debt Security to
receive payment in a currency, currency unit or composite currency other than
that in which such deposit has been made in respect of such Debt Security, or
(ii) a Conversion Event (as defined below) occurs in respect of the currency,
currency unit or composite currency in which such deposit has been made, the
indebtedness represented by such Debt Security will be deemed to have been, and
will be, fully discharged and satisfied through the payment of the principal of
(and premium, if any) and interest on such Debt Security as they become due out
of the proceeds yielded by converting the amount so deposited in respect of such
Debt Security into the currency, currency unit or composite currency in which
such Debt Security becomes payable as a result of such election or such
cessation of usage based on the applicable market exchange rate. "Conversion
Event" means the cessation of use of (a) a currency, currency unit or composite
currency both by the government of the country which issued such currency and
for the settlement of transactions by a central bank or other public
institutions of or within the international banking community, (b) the ECU both
within the European Monetary System and for the settlement of transactions by
public institutions of or within the European Communities or (c) any currency
unit or composite currency other than the ECU for the purposes for which it was
established. Unless otherwise provided in the applicable Prospectus Supplement,
all payments of principal of (and premium, if
 
                                       18
   29
 
any) and interest on any Debt Security that is payable in a foreign currency
that ceases to be used by its government of issuance shall be made in U.S.
dollars.
 
     If the Company effects covenant defeasance with respect to any Debt
Securities and such Debt Securities are declared due and payable because of the
occurrence of any event of default other than the event of default described in
clause (iv) under "-- Events of Default, Notice and Waiver" with respect to
specified sections of an Indenture (which sections would no longer be applicable
to such Debt Securities) or described in clause (vii) under "-- Events of
Default, Notice and Waiver" with respect to any other covenant as to which there
has been covenant defeasance, the amount in such currency, currency unit or
composite currency in which such Debt Securities are payable, and Government
Obligations on deposit with the applicable Trustee, will be sufficient to pay
amounts due on such Debt Securities at the time of their stated maturity but may
not be sufficient to pay amounts due on such Debt Securities at the time of the
acceleration resulting from such event of default. However, the Company would
remain liable to make payment of such amounts due at the time of acceleration.
 
     The applicable Prospectus Supplement may further describe the provisions,
if any, permitting such defeasance or covenant defeasance, including any
modifications to the provisions described above, with respect to the Debt
Securities of or within a particular series.
 
CONVERSION RIGHTS
 
     The terms and conditions, if any, upon which the Debt Securities are
convertible into Common Stock or Preferred Stock will be set forth in the
applicable Prospectus Supplement relating thereto. Such terms will include
whether such Debt Securities are convertible into shares of Common Stock or
Preferred Stock, the conversion price (or manner of calculation thereof), the
conversion period, provisions as to whether conversion will be at the option of
the holders or the Company, the events requiring an adjustment of the conversion
price and provisions affecting conversion in the event of the redemption of such
Debt Securities and any restrictions on conversion, including restrictions
directed at maintaining the Company's REIT status.
 
PAYMENT
 
     Unless otherwise specified in the applicable Prospectus Supplement, the
principal of (and applicable premium, if any) and interest on any series of Debt
Securities will be payable at the corporate trust office of the Trustee, the
address of which will be stated in the applicable Prospectus Supplement;
provided that, at the option of the Company, payment of interest may be made by
check mailed to the address of the person entitled thereto as it appears in the
applicable register for such Debt Securities or by wire transfer of funds to
such person at an account maintained within the United States.
 
     All moneys paid by the Company to a paying agent or a Trustee for the
payment of the principal of or any premium or interest on any Debt Security
which remain unclaimed at the end of one year after such principal, premium or
interest has become due and payable will be repaid to the Company, and the
holder of such Debt Security thereafter may look only to the Company for payment
thereof.
 
GLOBAL SECURITIES
 
     The Debt Securities of a series may be issued in whole or in part in the
form of one or more global securities (the "Global Securities") that will be
deposited with, or on behalf of, a depositary identified in the applicable
Prospectus Supplement relating to such series. Global Securities may be issued
in either registered or bearer form and in either temporary or permanent form.
The specific terms of the depositary arrangement with respect to a series of
Debt Securities will be described in the applicable Prospectus Supplement
relating to such series.
 
                                       19
   30
 
                         DESCRIPTION OF PREFERRED STOCK
 
     The description of the Company's preferred stock, par value $.0001 per
share ("Preferred Stock"), set forth below does not purport to be complete and
is qualified in its entirety by reference to the Company's Articles of
Incorporation, Amended Bylaws (the "Bylaws") and Articles Supplementary.
 
GENERAL
 
     Under the Articles of Incorporation, the Company has authority to issue
10,000,000 shares of Preferred Stock, 1,325,000 of which, designated as Class A
Senior Cumulative Convertible Preferred Stock, were outstanding as of the date
of this Prospectus, as described below. Shares of Preferred Stock may be issued
from time to time, in one or more series, as authorized by the Board of
Directors of the Company. Prior to issuance of shares of each series, the Board
of Directors is required by the Maryland General Corporation Law ("MGCL") and
the Articles of Incorporation to fix for each series, subject to the provisions
of the Articles of Incorporation regarding excess stock, $.0001 par value per
share ("Excess Stock"), the terms, preferences, conversion or other rights,
voting powers, restrictions, limitations as to dividends or other distributions,
qualifications and terms or conditions of redemption, as are permitted by
Maryland law. The Preferred Stock will, when issued against payment therefor, be
fully paid and nonassessable and will not be subject to preemptive rights. The
Board of Directors could authorize the issuance of shares of Preferred Stock
with terms and conditions that could have the effect of discouraging a takeover
or other transaction that holders of Common Stock might believe to be in their
best interests or in which holders of some, or a majority, of the shares of
Common Stock might receive a premium for their shares over the then market price
of such shares of Common Stock.
 
TERMS
 
     The following description of the Preferred Stock sets forth certain general
terms and provisions of the Preferred Stock to which any Prospectus Supplement
may relate. The statements below describing the Preferred Stock are in all
respects subject to and qualified in their entirety by reference to the
applicable provisions of the Articles of Incorporation and Bylaws and any
applicable amendment to the Articles of Incorporation designating terms of a
series of Preferred Stock (a "Designating Amendment").
 
     Reference is made to the Prospectus Supplement relating to the Preferred
Stock offered thereby for specific terms, including:
 
          (1) The title and stated value of such Preferred Stock;
 
          (2) The number of shares of such Preferred Stock offered, the
     liquidation preference per share and the offering price of such Preferred
     Stock;
 
          (3) The dividend rate(s), period(s) and/or payment date(s) or
     method(s) of calculation thereof applicable to such Preferred Stock;
 
          (4) The date from which dividends on such Preferred Stock shall
     accumulate, if applicable;
 
          (5) The provision for a sinking fund, if any, for such Preferred
     Stock;
 
          (6) The provision for redemption, if applicable, of such Preferred
     Stock;
 
          (7) Any listing of such Preferred Stock on any securities exchange;
 
          (8) The terms and conditions, if applicable, upon which such Preferred
     Stock will be convertible into Common Stock, including the conversion price
     (or manner of calculation thereof);
 
          (9) Any other specific terms, preferences, rights, limitations or
     restrictions of such Preferred Stock;
 
          (10) A discussion of federal income tax considerations applicable to
     such Preferred Stock;
 
          (11) The relative ranking and preference of such Preferred Stock as to
     dividend rights and rights upon liquidation, dissolution or winding-up of
     the affairs of the Company;
 
                                       20
   31
 
          (12) Any limitations on issuance of any series of Preferred Stock
     ranking senior to or on a parity with such series of Preferred Stock as to
     dividend rights and rights upon liquidation, dissolution or winding-up of
     the affairs of the Company; and
 
          (13) Any limitations on direct or beneficial ownership and
     restrictions on transfer, in each case as may be appropriate to preserve
     the status of the Company as a REIT.
 
RANK
 
     Unless otherwise specified in the Prospectus Supplement, the Preferred
Stock will, with respect to dividend rights and rights upon liquidation,
dissolution or winding-up of the Company, rank (i) senior to all classes or
series of Common Stock of the Company, and to all equity securities ranking
junior to such Preferred Stock with respect to dividend rights or rights upon
liquidation, dissolution or winding-up of the Company, (ii) on a parity with all
equity securities issued by the Company the terms of which specifically provide
that such equity securities rank on a parity with the Preferred Stock with
respect to dividend rights or rights upon liquidation, dissolution or winding-up
of the Company; and (iii) junior to all equity securities issued by the Company
the terms of which specifically provide that such equity securities rank senior
to the Preferred Stock with respect to dividend rights or rights upon
liquidation, dissolution or winding-up of the Company. The term "equity
securities" does not include convertible debt securities.
 
DIVIDENDS
 
     Holders of the Preferred Stock of each series will be entitled to receive,
when, as and if declared by the Board of Directors of the Company, out of assets
of the Company legally available for payment, cash dividends at such rates and
on such dates as will be set forth in the applicable Prospectus Supplement. Each
such dividend shall be payable to holders of record as they appear on the share
transfer books of the Company on such record dates as shall be fixed by the
Board of Directors of the Company.
 
     Dividends on any series of the Preferred Stock may be cumulative or
non-cumulative, as provided in the applicable Prospectus Supplement. Dividends,
if cumulative, will be cumulative from and after the date set forth in the
applicable Prospectus Supplement. If the Board of Directors of the Company fails
to declare a dividend payable on a dividend payment date on any series of the
Preferred Stock for which dividends are non-cumulative, then the holders of such
series of the Preferred Stock will have no right to receive a dividend in
respect of the dividend period ending on such dividend payment date, and the
Company will have no obligation to pay the dividend accrued for such period,
whether or not dividends on such series are declared payable on any future
dividend payment date.
 
     If Preferred Stock of any series is outstanding, no dividends will be
declared or paid or set apart for payment on any capital stock of the Company of
any other series ranking, as to dividends, on a parity with or junior to the
Preferred Stock of such series for any period unless (i) if such series of
Preferred Stock has a cumulative dividend, full cumulative dividends have been
or contemporaneously are declared and paid or declared and a sum sufficient for
the payment thereof is set apart for such payment on the Preferred Stock of such
series for all past dividend periods and the then current dividend period or
(ii) if such series of Preferred Stock does not have a cumulative dividend, full
dividends for the then current dividend period have been or contemporaneously
are declared and paid or declared and a sum sufficient for the payment thereof
is set apart for such payment on the Preferred Stock of such series. When
dividends are not paid in full (or a sum sufficient for such full payment is not
so set apart) upon Preferred Stock of any series and the shares of any other
series of Preferred Stock ranking on a parity as to dividends with the Preferred
Stock of such series, all dividends declared upon Preferred Stock of such series
and any other series of Preferred Stock ranking on a parity as to dividends with
such Preferred Stock shall be declared pro rata so that the amount of dividends
declared per share of Preferred Stock of such series and such other series of
Preferred Stock shall in all cases bear to each other the same ratio that
accrued dividends per share on the Preferred Stock of such series (which shall
not include any accumulation in respect of unpaid dividends for prior dividend
periods if such Preferred Stock does not have a cumulative dividend) and such
other series of Preferred Stock bear to each
 
                                       21
   32
 
other. No interest, or sum of money in lieu of interest, shall be payable in
respect of any dividend payment or payments on Preferred Stock of such series
which may be in arrears.
 
     Except as provided in the immediately preceding paragraph, unless (i) if
such series of Preferred Stock has a cumulative dividend, full cumulative
dividends on the Preferred Stock of such series have been or contemporaneously
are declared and paid or declared and a sum sufficient for the payment thereof
is set apart for payment for all past dividend periods and the then current
dividend period, and (ii) if such series of Preferred Stock does not have a
cumulative dividend, full dividends on the Preferred Stock of such series have
been or contemporaneously are declared and paid or declared and a sum sufficient
for the payment thereof is set apart for payment for the then current dividend
period, no dividends (other than in shares of Common Stock or other shares of
capital stock ranking junior to the Preferred Stock of such series as to
dividends and upon liquidation) shall be declared or paid or set aside for
payment nor shall any other distribution be declared or made upon the Common
Stock, or any other capital stock of the Company ranking junior to or on a
parity with the Preferred Stock of such series as to dividends or upon
liquidation, nor shall any shares of Common Stock, or any other shares of
capital stock of the Company ranking junior to or on a parity with the Preferred
Stock of such series as to dividends or upon liquidation be redeemed, purchased
or otherwise acquired for any consideration (or any moneys be paid to or made
available for a sinking fund for the redemption of any such shares) by the
Company (except by conversion into or exchange for other capital stock of the
Company ranking junior to the Preferred Stock of such series as to dividends and
upon liquidation).
 
     Any dividend payment made on shares of a series of Preferred Stock shall
first be credited against the earliest accrued but unpaid dividend due with
respect to shares of such series which remains payable.
 
REDEMPTION
 
     If so provided in the applicable Prospectus Supplement, the Preferred Stock
will be subject to mandatory redemption or redemption at the option of the
Company, as a whole or in part, in each case upon the terms, at the times and at
the redemption prices set forth in such Prospectus Supplement.
 
     The Prospectus Supplement relating to a series of Preferred Stock that is
subject to mandatory redemption will specify the number of shares of such
Preferred Stock that shall be redeemed by the Company in each year commencing
after a date to be specified, at a redemption price per share to be specified,
together with an amount equal to all accrued and unpaid dividends thereon (which
shall not, if such Preferred Stock does not have a cumulative dividend, include
any accumulation in respect of unpaid dividends for prior dividend periods) to
the date of redemption. The redemption price may be payable in cash or other
property, as specified in the applicable Prospectus Supplement. If the
redemption price for Preferred Stock of any series is payable only from the net
proceeds of the issuance of shares of capital stock of the Company, the terms of
such Preferred Stock may provide that, if no such shares of capital stock shall
have been issued or to the extent the net proceeds from any issuance are
insufficient to pay in full the aggregate redemption price then due, such
Preferred Stock shall automatically and mandatorily be converted into the
applicable shares of capital stock of the Company pursuant to conversion
provisions specified in the applicable Prospectus Supplement.
 
     Notwithstanding the foregoing, unless (i) if a series of Preferred Stock
has a cumulative dividend, full cumulative dividends on all shares of all such
series of Preferred Stock shall have been or contemporaneously are declared and
paid or declared and a sum sufficient for the payment thereof set apart for
payment for all past dividend periods and the then current dividend period, and
(ii) if a series of Preferred Stock does not have a cumulative dividend, full
dividends on all shares of the Preferred Stock of such series have been or
contemporaneously are declared and paid or declared and a sum sufficient for the
payment thereof set apart for payment for the then current dividend period, no
shares of such series of Preferred Stock shall be redeemed unless all
outstanding shares of Preferred Stock of such series are simultaneously
redeemed; provided, however, that the foregoing shall not prevent the purchase
or acquisition of Preferred Stock of such series to preserve the REIT status of
the Company or pursuant to a purchase or exchange offer made on the same terms
to holders of all outstanding shares of Preferred Stock of such series. In
addition, unless (a) if such series of Preferred Stock has a cumulative
dividend, full cumulative dividends on all outstanding shares of
 
                                       22
   33
 
such series of Preferred Stock have been or contemporaneously are declared and
paid or declared and a sum sufficient for the payment thereof set apart for
payment for all past dividend periods and the then current dividend period, and
(b) if such series of Preferred Stock does not have a cumulative dividend, full
dividends on the Preferred Stock of such series have been or contemporaneously
are declared and paid or declared and a sum sufficient for the payment thereof
set apart for payment for the then current dividend period, the Company shall
not purchase or otherwise acquire directly or indirectly any shares of Preferred
Stock of such series (except by conversion into or exchange for capital shares
of the Company ranking junior to the Preferred Stock of such series as to
dividends and upon liquidation); provided, however, that the foregoing shall not
prevent the purchase or acquisition of shares of Preferred Stock of such series
to preserve the REIT status of the Company or pursuant to a purchase or exchange
offer made on the same terms to holders of all outstanding shares of Preferred
Stock of such series.
 
     If fewer than all of the outstanding shares of Preferred Stock of any
series are to be redeemed, the number of shares to be redeemed will be
determined by the Company and such shares may be redeemed pro rata from the
holders of record of such shares in proportion to the number of such shares held
or for which redemption is requested by such holder (with adjustments to avoid
redemption of fractional shares) or by any other equitable manner determined by
the Company.
 
     Notice of redemption will be mailed at least 15 days but not more than 60
days before the redemption date to each holder of record of Preferred Stock of
any series to be redeemed at the address shown on the stock transfer books of
the Company. Each notice shall state: (i) the redemption date; (ii) the number
of shares and series of the Preferred Stock to be redeemed; (iii) the redemption
price; (iv) the place or places where certificates for such Preferred Stock are
to be surrendered for payment of the redemption price; (v) that dividends on the
shares to be redeemed will cease to accrue on such redemption date; and (vi) the
date upon which the holder's conversion rights, if any, as to such shares shall
terminate. If fewer than all the shares of Preferred Stock of any series are to
be redeemed, the notice mailed to each such holder thereof shall also specify
the number of shares of Preferred Stock to be redeemed from each such holder. If
notice of redemption of any Preferred Stock has been given and if the funds
necessary for such redemption have been set aside by the Company in trust for
the benefit of the holders of any Preferred Stock so called for redemption, then
from and after the redemption date dividends will cease to accrue on such
Preferred Stock, and all rights of the holders of such shares will terminate,
except the right to receive the redemption price.
 
LIQUIDATION PREFERENCE
 
     Upon any voluntary or involuntary liquidation, dissolution or winding-up of
the affairs of the Company, then, before any distribution or payment shall be
made to the holders of any Common Stock or any other class or series of capital
stock of the Company ranking junior to the Preferred Stock in the distribution
of assets upon any liquidation, dissolution or winding-up of the Company, the
holders of each series of Preferred Stock shall be entitled to receive out of
assets of the Company legally available for distribution to stockholders
liquidating distributions in the amount of the liquidation preference per share,
if any, set forth in the applicable Prospectus Supplement, plus an amount equal
to all dividends accrued and unpaid thereon (which shall not include any
accumulation in respect of unpaid noncumulative dividends for prior dividend
periods). After payment of the full amount of the liquidating distributions to
which they are entitled, the holders of Preferred Stock will have no right or
claim to any of the remaining assets of the Company. In the event that, upon any
such voluntary or involuntary liquidation, dissolution or winding-up, the
available assets of the Company are insufficient to pay the amount of the
liquidating distributions on all outstanding shares of Preferred Stock and the
corresponding amounts payable on all shares of other classes or series of
capital stock of the Company ranking on a parity with the Preferred Stock in the
distribution of assets, then the holders of the Preferred Stock and all other
such classes or series of capital stock shall share ratably in any such
distribution of assets in proportion to the full liquidating distributions to
which they would otherwise be respectively entitled.
 
     If liquidating distributions shall have been made in full to all holders of
Preferred Stock, the remaining assets of the Company shall be distributed among
the holders of any other classes or series of capital stock ranking junior to
the Preferred Stock upon liquidation, dissolution or winding-up, according to
their respective rights and preferences and in each case according to their
respective number of shares. For such purposes, the
 
                                       23
   34
 
consolidation or merger of the Company with or into any other corporation, trust
or entity, or the sale, lease or conveyance of all or substantially all of the
property or business of the Company, shall not be deemed to constitute a
liquidation, dissolution or winding-up of the Company.
 
VOTING RIGHTS
 
     Holders of the Preferred Stock will not have any voting rights, except as
set forth below or as otherwise from time to time required by law or as
indicated in the applicable Prospectus Supplement.
 
     Unless provided otherwise for any series of Preferred Stock, so long as any
shares of Preferred Stock of a series remain outstanding, the Company will not,
without the affirmative vote or consent of the holders of a percentage to be
specified in the applicable Prospectus Supplement of the shares of such series
of Preferred Stock outstanding at the time, given in person or by proxy, either
in writing or at a meeting (such series voting separately as a class), (i)
authorize or create, or increase the authorized or issued amount of, any class
or series of capital stock ranking prior to such series of Preferred Stock with
respect to payment of dividends or the distribution of assets upon liquidation,
dissolution or winding-up or reclassify any authorized capital stock of the
Company into such shares, or create, authorize or issue any obligation or
security convertible into or evidencing the right to purchase any such shares;
or (ii) amend, alter or repeal the provisions of the Articles of Incorporation
or the Designating Amendment for such series of Preferred Stock, whether by
merger, consolidation or otherwise (an "Event"), so as to materially and
adversely affect any right, preference, privilege or voting power of such series
of Preferred Stock or the holders thereof; provided, however, with respect to
the occurrence of any of the Events set forth in (ii) above, so long as the
Preferred Stock remains outstanding with the terms thereof materially unchanged,
taking into account that upon the occurrence of an Event the Company may not be
the surviving entity, the occurrence of any such Event shall not be deemed to
materially and adversely affect such rights, preferences, privileges or voting
power of holders of Preferred Stock, and provided further that (x) any increase
in the amount of the authorized Preferred Stock or the creation or issuance of
any other series of Preferred Stock, or (y) any increase in the amount of
authorized shares of such series or any other series of Preferred Stock, in each
case ranking on a parity with or junior to the Preferred Stock of such series
with respect to payment of dividends or the distribution of assets upon
liquidation, dissolution or winding-up, shall not be deemed to materially and
adversely affect such rights, preferences, privileges or voting powers.
 
     The foregoing voting provisions will not apply if, at or prior to the time
when the act with respect to which such vote would otherwise be required shall
be effected, all outstanding shares of such series of Preferred Stock shall have
been redeemed or called for redemption and sufficient funds shall have been
deposited in trust to effect such redemption.
 
CONVERSION RIGHTS
 
     The terms and conditions, if any, upon which any series of Preferred Stock
is convertible into Common Stock will be set forth in the applicable Prospectus
Supplement relating thereto. Such terms will include the number of shares of
Common Stock into which the shares of Preferred Stock are convertible, the
conversion price (or manner of calculation thereof), the conversion period,
provisions as to whether conversion will be at the option of the holders of the
Preferred Stock or the Company, the events requiring an adjustment of the
conversion price and provisions affecting conversion in the event of the
redemption of such series of Preferred Stock.
 
RESTRICTIONS ON OWNERSHIP
 
     For the Company to qualify as a REIT under the Code, not more than 50% in
value of its outstanding capital stock may be owned, directly or indirectly, by
five or fewer individuals (as defined in the Code to include certain entities)
during the last half of a taxable year. To assist the Company in meeting this
requirement, the Company may take certain actions to limit the beneficial
ownership, directly or indirectly, by a single person of the Company's
outstanding equity securities, including any Preferred Stock of the Company.
Therefore, the Designating Amendment for each series of Preferred Stock may
contain provisions restricting
 
                                       24
   35
 
the ownership and transfer of the Preferred Stock. The applicable Prospectus
Supplement will specify any additional ownership limitation relating to a series
of Preferred Stock. See "Restrictions on Transfers of Capital Stock and
Anti-Takeover Provisions."
 
TRANSFER AGENT
 
     The transfer agent and registrar for the Preferred Stock will be set forth
in the applicable Prospectus Supplement.
 
TERMS OF CLASS A SENIOR CUMULATIVE CONVERTIBLE PREFERRED STOCK
 
     In December 1996, the Company entered into an agreement with Five Arrow
Realty Securities L.L.C. ("Five Arrows") providing for the sale of up to
2,000,000 shares of the Company's Class A Senior Cumulative Convertible
Preferred Stock ("Convertible Preferred Stock"). Under the terms of the
agreement, the Company may sell the Convertible Preferred Stock to Five Arrows
at up to three closings, at the Company's option, during 1997 for an aggregate
price of $25 million. The Convertible Preferred Stock, which is convertible into
Common Stock on a one-for-one basis at $12.50 per share, subject to adjustment,
is entitled to quarterly distributions equal to the greater of $.295 or the
product of 1.05 and the per share quarterly distribution on Common Stock. The
Convertible Preferred Stock may be redeemed by the Company after five years at a
6% premium over the liquidation preference of $12.50 per share (plus accrued and
unpaid dividends), with such premium declining to zero on or after December 31,
2011. Each share of Convertible Preferred Stock is entitled to one vote per
share and holders are entitled to vote on all matters submitted to a vote of
holders of outstanding Common Stock. In connection with such sale, the Company
has entered into certain related agreements with Five Arrows, providing, among
other things, for certain demand and piggyback registration rights with respect
to such shares and the right to designate a member or members of the Board of
Directors of the Company. Five Arrows' designee, John D. McGurk, is currently
serving as a member of the Board of Directors of the Company.
 
                                       25
   36
 
                          DESCRIPTION OF COMMON STOCK
 
     The description of the Company's Common Stock set forth below does not
purport to be complete and is qualified in its entirety by reference to the
Articles of Incorporation and Bylaws.
 
GENERAL
 
     Under the Articles of Incorporation, the Company has authority to issue
40,000,000 shares of Common Stock, par value $.0001 per share. Under Maryland
law, stockholders generally are not responsible for a corporation's debts or
obligations. At November 3, 1997, the Company had outstanding 12,713,633 shares
of Common Stock.
 
TERMS
 
     Subject to the preferential rights of any other shares or series of stock
and to the provisions of the Articles of Incorporation regarding Excess Stock,
holders of shares of Common Stock are entitled to receive dividends on shares of
Common Stock if, as and when authorized and declared by the Board of Directors
of the Company out of assets legally available therefor and to share ratably in
the assets of the Company legally available for distribution to its stockholders
in the event of its liquidation, dissolution or winding-up after payment of, or
adequate provision for, all known debts and liabilities of the Company and the
amount to which holders of any class of stock classified or reclassified or
having a preference on distributions in liquidation, dissolution or winding-up
of the Company have a right.
 
     Subject to the provisions of the Articles of Incorporation regarding Excess
Stock, each outstanding share of Common Stock entitles the holder to one vote on
all matters submitted to a vote of stockholders, including the election of
Directors and, except as otherwise required by law or except as provided with
respect to any other class or series of stock, the holders of Common Stock will
possess the exclusive voting power. There is no cumulative voting in the
election of Directors, which means that the holders of a majority of the
outstanding shares of Common Stock can elect all of the Directors then standing
for election, and the holders of the remaining shares of Common Stock will not
be able to elect any Directors.
 
     Holders of Common Stock have no conversion, sinking fund or redemption
rights, or preemptive rights to subscribe for any securities of the Company.
 
     The Company furnishes its stockholders with annual reports containing
audited consolidated financial statements and an opinion thereon expressed by an
independent public accounting firm and quarterly reports for the first three
quarters of each fiscal year containing unaudited financial information.
 
     Subject to the provisions of the Articles of Incorporation regarding Excess
Stock, all shares of Common Stock will have equal dividend, distribution,
liquidation and other rights, and will have no preference, appraisal or exchange
rights.
 
     Pursuant to the MGCL, a corporation generally cannot dissolve, amend its
Articles of Incorporation, merge, sell all or substantially all of its assets,
engage in a share exchange or engage in similar transactions outside the
ordinary course of business unless approved by the affirmative vote of
stockholders holding at least two-thirds of the shares entitled to vote on the
matter unless a lesser percentage (but not less than a majority of all of the
votes to be cast on the matter) is set forth in the corporation's Articles of
Incorporation. However, the Articles of Incorporation provide that such actions,
with the exception of certain amendments to the Articles of Incorporation for
which a higher vote requirement has been set, shall be valid and effective if
authorized by holders of a majority of the total number of shares of all classes
outstanding and entitled to vote thereon.
 
RESTRICTIONS ON OWNERSHIP
 
     For the Company to qualify as a REIT under the Code, not more than 50% in
value of its outstanding capital stock may be owned, directly or indirectly, by
five or fewer individuals (as defined in the Code to include certain entities)
during the last half of a taxable year. To assist the Company in meeting this
 
                                       26
   37
 
requirement, the Company may take certain actions to limit the beneficial
ownership, directly or indirectly, by a single person of the Company's
outstanding equity securities. See "Restrictions on Transfers of Capital Stock
and Anti-Takeover Provisions."
 
TRANSFER AGENT
 
     The transfer agent and registrar for the Common Stock is ChaseMellon
Shareholder Services LLC.
 
                                       27
   38
 
                   RESTRICTIONS ON TRANSFERS OF CAPITAL STOCK
                          AND ANTI-TAKEOVER PROVISIONS
 
RESTRICTIONS RELATING TO REIT STATUS
 
     For the Company to qualify as a REIT under the Code, among other things,
not more than 50% in value of its outstanding capital stock may be owned,
directly or indirectly, by five or fewer individuals (defined in the Code to
include certain entities) during the last half of a taxable year, and such
capital stock must be beneficially owned by 100 or more persons during at least
335 days of a taxable year of 12 months or during a proportionate part of a
shorter taxable year (in each case, other than the first such year). To assist
the Company in continuing to remain a qualified REIT, the Articles of
Incorporation, subject to certain exceptions, provide that no holder may own, or
be deemed to own by virtue of the attribution provisions of the Code, more than
9.8% (the "Ownership Limit") of the Company's equity stock, defined as Common
Stock or Preferred Stock. The Board of Directors may waive the Ownership Limit
if evidence satisfactory to the Board of Directors and the Company's tax counsel
is presented that the changes in ownership will not then or in the future
jeopardize the Company's status as a REIT. Any transfer of equity stock or any
security convertible into equity stock that would create a direct or indirect
ownership of equity stock in excess of the Ownership Limit or that would result
in the disqualification of the Company as a REIT, including any transfer that
results in the equity stock being owned by fewer than 100 persons or results in
the Company being "closely held" within the meaning of Section 856(h) of the
Code, shall be null and void, and the intended transferee will acquire no rights
to the equity stock. The foregoing restrictions on transferability and ownership
will not apply if the Board of Directors determines that it is no longer in the
best interests of the Company to attempt to qualify, or to continue to qualify,
as a REIT.
 
     Equity stock owned, or deemed to be owned, or transferred to a stockholder
in excess of the Ownership Limit, will automatically be exchanged for shares of
Excess Stock that will be transferred, by operation of law, to the Company as
trustee of a trust for the exclusive benefit of the transferees to whom such
capital stock may be ultimately transferred without violating the Ownership
Limit. While the Excess Stock is held in trust, it will not be entitled to vote,
it will not be considered for purposes of any stockholder vote or the
determination of a quorum for such vote and, except upon liquidation, it will
not be entitled to participate in dividends or other distributions. Any dividend
or distribution paid to a proposed transferee of Excess Stock prior to the
discovery by the Company that equity stock has been transferred in violation of
the provisions of the Articles of Incorporation shall be repaid to the Company
upon demand. The Excess Stock is not treasury stock, but rather constitutes a
separate class of issued and outstanding stock of the Company. The original
transferee-stockholder may, at any time the Excess Stock is held by the Company
in trust, transfer the interest in the trust representing the Excess Stock to
any individual whose ownership of the equity stock exchanged into such Excess
Stock would be permitted under the Articles of Incorporation, at a price not in
excess of the price paid by the original transferee-stockholder for the equity
stock that was exchanged into Excess Stock, or, if the transferee-stockholder
did not give value for such equity stock, a price not in excess of the market
price (as determined in the manner set forth in the Articles of Incorporation)
on the date of the purported transfer. Immediately upon the transfer to the
permitted transferee, the Excess Stock will automatically be exchanged for
equity stock of the class from which it was converted. If the foregoing transfer
restrictions are determined to be void or invalid by virtue of any legal
decision, statute, rule or regulation, then the intended transferee of any
Excess Stock may be deemed, at the option of the Company, to have acted as an
agent on behalf of the Company in acquiring the Excess Stock and to hold the
Excess Stock on behalf of the Company.
 
     In addition to the foregoing transfer restrictions, the Company will have
the right, for a period of 90 days during the time any Excess Stock is held by
the Company in trust, to purchase all or any portion of the Excess Stock from
the original transferee-stockholder for the lesser of the price paid for the
equity stock by the original transferee-stockholder or the market price (as
determined in the manner set forth in the Articles of Incorporation) of the
equity stock on the date the Company exercises its option to purchase. The
90-day period begins on the date on which the Company receives written notice of
the transfer or other event resulting in the exchange of equity stock for Excess
Stock.
 
                                       28
   39
 
     Each stockholder shall upon demand be required to disclose to the Company
in writing any information with respect to the direct, indirect and constructive
ownership of beneficial interests as the Board of Directors deems necessary to
comply with the provisions of the Code applicable to REITs, to comply with the
requirements of any taxing authority or governmental agency or to determine any
such compliance.
 
     This ownership limitation may have the effect of precluding acquisition of
control of the Company unless the Board of Directors determines that maintenance
of REIT status is no longer in the best interests of the Company.
 
  Authorized Capital
 
     The Company has an aggregate of 40,000,000 authorized shares of Common
Stock, 40,000,000 shares of Excess Stock and 10,000,000 undesignated shares of
Preferred Stock available for issuance in its Articles of Incorporation. Such
shares (other than reserved shares) may be issued from time to time by the
Company in the discretion of the Board to raise additional capital, acquire
assets, including additional real properties, redeem or retire debt or for any
other business purpose. In addition, the undesignated shares of Preferred Stock
may be issued in one or more additional classes with such designations,
preferences and relative, participating, optional or other special rights
including, without limitation, preferential dividend or voting rights, and
rights upon liquidation, as shall be fixed by the Board. Also, the Board of
Directors is authorized to classify and reclassify any unissued shares of
capital stock by setting or changing, in any one or more respects, the
preferences, conversion or other rights, voting powers, restrictions,
limitations as to dividends, qualifications or terms or conditions of redemption
of such shares of stock. Such authority includes, without limitation, subject to
the provisions of the Articles of Incorporation, authority to classify or
reclassify any unissued shares of such stock into a class or classes of
preferred stock, preference stock, special stock or other stock, and to divide
and reclassify shares of any class into one or more series of such class. In
certain circumstances, the issuance of Preferred Stock, or the exercise by the
Board of such rights to classify or reclassify stock, could have the effect of
deterring individuals or entities from making tender offers for the shares of
Common Stock or seeking to change incumbent management.
 
  Maryland Corporation Law
 
     The General Corporation Law of the State of Maryland includes certain other
provisions which may also discourage a change in control of management of the
Company. Maryland law provides that a Maryland corporation may not engage in any
"business combination" with any "interested stockholder." An "interested
stockholder" is defined, in essence, as any person owning beneficially, directly
or indirectly, 10% or more of the outstanding voting stock of a Maryland
corporation. Unless an exemption applies, the Company may not engage in any
business combination with an interested stockholder for a period of five years
after the interested stockholder became an interested stockholder, and
thereafter may not engage in a business combination unless it is recommended by
the Board and approved by the affirmative vote of at least (i) 80% of the votes
entitled to be cast by the holders of all outstanding voting stock of the
Company, and (ii) 66 2/3% of the votes entitled to be cast by all holders of
outstanding shares of voting stock other than voting stock held by the
interested stockholder. The voting requirements do not apply at any time to
business combinations with an interested stockholder or its affiliates if
approved by the Board prior to the time the interested stockholder first became
an interested stockholder. Additionally, if the business combination involves
the receipt of consideration by the stockholders in exchange for the Company's
stock, the voting requirements do not apply if certain "fair price" conditions
are met.
 
     Maryland law provides for the elimination of the voting rights of any
person who makes a Control Share Acquisition (as defined) except to the extent
that such acquisition is exempt or is approved by at least 66 2/3% of all votes
entitled to be cast on the matter, excluding shares of capital stock owned by
the acquirer or by officers or directors who are employees of the Company. A
control share acquisition ("Control Share Acquisition") is the direct or
indirect acquisition by any person of ownership of, or the power to direct the
exercise of voting power with respect to, shares of voting stock ("Control
Shares") that would, if aggregated with all other voting stock owned by such
person, entitle such person to exercise voting power in electing directors
within one of the following ranges of voting power: (i) 20% or more but less
than 33 1/3%; (ii) 33 1/3%
 
                                       29
   40
 
or more but less than a majority; or (iii) a majority of voting power. A person
who has made or proposes to make a Control Share Acquisition, upon satisfaction
of certain conditions (including an undertaking to pay expenses), may compel the
Board to call a special meeting of stockholders to be held within 50 days of
demand to consider the voting rights of the shares. If no request for a meeting
is made, the Company may itself present the question at any stockholder meeting.
If voting rights are not approved at the meeting or if the acquiring person does
not deliver an acquiring person statement as permitted by the statute, then,
subject to certain conditions and limitations, the Company may redeem any or all
of the Control Shares (except those for which voting rights have previously been
approved) for fair value determined, without regard to voting rights, as of the
date of the last Control Share Acquisition or of any meeting of stockholders at
which the voting rights of such shares are considered and not approved. If
voting rights for Control Shares are approved at a stockholders meeting and the
acquirer becomes entitled to vote a majority of the shares entitled to vote, all
other stockholders may exercise appraisal rights. The fair value of the stock as
determined for purposes of such appraisal rights may not be less than the
highest price per share paid in the Control Share Acquisition, and certain
limitations and restrictions otherwise applicable to the exercise of dissenters'
rights do not apply in the context of a Control Share Acquisition. The Control
Share Acquisition statute does not apply to stock acquired in a merger,
consolidation or stock exchange if the Company is a party to the transaction, or
to acquisitions approved or exempted by the charter or by-laws of the Company.
 
  Reorganization of the Company as a Maryland Real Estate Investment Trust
 
     The Board of Directors of the Company is currently incorporated under the
laws of the State of Maryland, but intends to reorganize as a Maryland REIT in
1997. The reorganization is expected to result in franchise tax savings for the
Company in certain jurisdictions in which the Company owns properties. The
reorganization will be effected by merging the Company with and into a newly
formed Maryland REIT. In the merger, each outstanding share of Common Stock and
Convertible Preferred Stock of the Company will be converted into one common
share of beneficial interest or preferred share of beneficial interest, as the
case may be, of the Maryland REIT. Each common or preferred share of beneficial
interest in the Maryland REIT will entitle the holder thereof to the same voting
rights to which such stockholder was entitled prior to the merger, and it will
not be necessary for stockholders of the Company to surrender or exchange their
existing stock certificates for new certificates of the Maryland REIT. The Board
of Directors does not believe that the reorganization will result in any
material change in the Company's business or operations, or otherwise have any
affect on the Company's financial statements. Upon the effectiveness of the
merger, the Company will be known as Lexington Corporate Properties Trust.
 
     The Company believes that the merger will be treated for federal income tax
purposes as a reorganization within the meaning of Section 368(a)(1)(F) of the
Code. Accordingly, holders of shares of Common Stock and Convertible Preferred
Stock will not recognize any gain or loss for federal income tax purposes as a
result of the conversion of their shares into shares of the Maryland REIT. For
federal income tax purposes, a holder's aggregate basis in the shares of the
Maryland REIT received in the merger will equal such holder's adjusted basis in
the shares converted therefor and such holder's holding period for the new
shares received in the merger will include such holder's holding period in the
shares converted therefor. In addition, the Company will not recognize any gain
or loss for federal income tax purposes upon the transfer or its property to the
Maryland REIT pursuant to the merger.
 
                                       30
   41
 
                       FEDERAL INCOME TAX CONSIDERATIONS
 
  GENERAL
 
     The following is a general summary of the requirements for qualification as
a REIT and the federal income tax treatment of a REIT and its stockholders. The
following discussion, which is not exhaustive of all possible tax
considerations, does not include a detailed discussion of any state, local or
foreign tax considerations. Nor does it discuss all of the aspects of federal
income taxation that may be relevant to a prospective stockholder in light of
its particular circumstances or to certain types of stockholders (including
insurance companies, tax-exempt entities, financial institutions or
broker-dealers, foreign corporations and persons who are not citizens or
residents of the United States) who are subject to special treatment under the
federal income tax laws. As discussed below, the Taxpayer Relief Act of 1997
(the "1997 Act") contains certain changes to the REIT qualification requirements
and to the taxation of REITs that may be material to a holder of Common Stock,
but which will become effective only for the Company's taxable years commencing
on or after January 1, 1998.
 
     EACH PROSPECTIVE PURCHASER OF COMMON STOCK IS URGED TO CONSULT WITH ITS OWN
TAX ADVISOR TO DETERMINE THE IMPACT OF SUCH PROSPECTIVE PURCHASER'S PERSONAL TAX
SITUATION ON THE ANTICIPATED TAX CONSEQUENCES OF THE PURCHASE, OWNERSHIP AND
SALE OF COMMON STOCK IN AN ENTITY ELECTING TO BE TAXED AS A REIT, INCLUDING THE
FEDERAL, STATE, LOCAL, FOREIGN AND OTHER TAX CONSEQUENCES OF SUCH PURCHASE,
OWNERSHIP, SALE AND ELECTION, AND OF POTENTIAL CHANGES IN APPLICABLE TAX LAWS.
 
TREATMENT OF THE COMPANY AS A REIT
 
     General.  The Company elected to be taxed as a REIT under Sections 856
through 860 of the Code effective for its taxable year ended December 31, 1993.
The Company believes that it was organized, and has operated, in such a manner
so as to qualify for taxation as a REIT under the Code and intends to conduct
its operations so as to qualify for taxation as a REIT. No assurance, however,
can be given that the Company has operated in a manner so as to qualify or will
be able to operate in such a manner so as to remain qualified as a REIT.
Qualification and taxation as a REIT depend upon the Company's ability to meet,
through actual annual operating results, the required distribution levels,
diversity of stock ownership and the various qualification tests imposed under
the Code discussed below, the results of which will not be reviewed by counsel.
Accordingly, no assurance can be given that the actual results of the Company's
operations for any one taxable year will satisfy such requirements.
 
     If the Company qualifies for taxation as a REIT, it generally will not be
subject to Federal corporate income taxes on its net income that is currently
distributed to stockholders. This treatment substantially eliminates the "double
taxation" (at the corporate and stockholder levels) that generally results from
investment in a corporation. However, the Company will be subject to Federal
income tax as follows: First, the Company will be taxed at regular corporate
rates on any undistributed REIT taxable income, including undistributed net
capital gains. Second, under certain circumstances, the Company may be subject
to the "alternative minimum tax" on its items of tax preference. Third, if the
Company has (i) net income from the sale or other disposition of "foreclosure
property" which is held primarily for sale to customers in the ordinary course
of business or (ii) other nonqualifying income from foreclosure property, it
will be subject to tax at the highest corporate rate on such income. Fourth, if
the Company has net income from prohibited transactions (which are, in general,
certain sales or other dispositions of property held primarily for sale to
customers in the ordinary course of business other than foreclosure property),
such income will be subject to a 100% tax. Fifth, if the Company should fail to
satisfy the 75% gross income test or the 95% gross income test (as discussed
below), but nonetheless has maintained its qualification as a REIT because
certain other requirements have been met, it will be subject to a 100% tax on an
amount equal to (a) the gross income attributable to the greater of the amount
by which the Company fails the 75% or 95% test multiplied by (b) a fraction
intended to reflect the Company's profitability. Sixth, if the Company should
fail to distribute during each calendar year
 
                                       31
   42
 
at least the sum of (i) 85% of its REIT ordinary income for such year, (ii) 95%
of its REIT capital gain net income for such year, and (iii) any undistributed
taxable income from prior periods, the Company would be subject to a 4% excise
tax on the excess of such required distribution over the amounts actually
distributed. Seventh, if the Company acquires any asset from a C corporation
(i.e., a corporation generally subject to full corporate level tax) in a
transaction in which the basis of the asset in the Company's hands is determined
by reference to the basis of the asset (or any other property) in the hands of
the C corporation, and the Company recognizes gain on the disposition of such
asset during the 10-year period beginning on the date on which such asset was
acquired by the Company, then, to the extent of such property's "built-in gain"
(the excess of the fair market value of such property at the time of the
acquisition by the Company over the adjusted basis of such property at such
time), such gain will be subject to tax at the highest regular corporate rate
applicable (as provided in Internal Revenue Service regulations that have not
yet been promulgated).
 
     Requirements for Qualification.  A REIT is a corporation, trust or
association (i) which is managed by one or more trustees or directors, (ii) the
beneficial ownership of which is evidenced by transferable shares, or by
transferable certificates of beneficial interest, (iii) which would be taxable
as a domestic corporation, but for Sections 856 through 859 of the Code, (iv)
which is neither a financial institution nor an insurance company subject to
certain provisions of the Code, (v) the beneficial ownership of which is held by
100 or more persons, (vi) during the last half of each taxable year not more
than 50% in value of the outstanding stock of which is owned, directly or
indirectly, by five or fewer individuals (as defined in the Code to include
certain entities), and (vii) which meets certain other tests, described below,
regarding the nature of its income and assets. The Code provides that conditions
(i) through (iv), inclusive, must be met during the entire taxable year and that
condition (v) must be met during at least 335 days of a taxable year of 12
months, or during a proportionate part of a taxable year of less than 12 months.
The Company believes that it currently satisfies requirements (i) through (vi).
In addition, the Company's Articles of Incorporation include restrictions
regarding the transfer of its stock that are intended to assist the Company in
continuing to satisfy requirements (v) and (vi). See "Description of Preferred
Stock," "Description of Common Stock" and "Restrictions on Transfers of Capital
Stock and Anti-Takeover Provisions." Moreover, pursuant to the 1997 Act, for the
Company's taxable years commencing on or after January 1, 1998, if the Company
complies with regulatory rules pursuant to which it is required to send annual
letters to holders of Common Stock requesting information regarding the actual
ownership of the Common Stock, and the Company does not know, or exercising
reasonable diligence would not have known, whether it failed to meet requirement
(vi) above, the Company will be treated as having met the requirement.
 
     In the case of a REIT which is a partner in a partnership, Treasury
Regulations provide that the REIT will be deemed to own its proportionate share
of each of the assets of the partnership and will be deemed to be entitled to
the income of the partnership attributable to such share. In addition, the
character of the assets and items of gross income of the partnership will retain
the same character in the hands of the REIT for purposes of Section 856 of the
Code, including satisfying the gross income tests and assets (as discussed
below). Thus, the Company's proportionate share of the assets, liabilities, and
items of gross income of the partnerships in which the Company owns an interest
are treated as assets, liabilities and items of the Company for purposes of
applying the requirements described herein.
 
     Income Tests.  In order to maintain qualification as a REIT for the
Company's tax years commencing on and after January 1, 1998, the Company
annually must satisfy two gross income requirements. First, at least 75% of the
Company's gross income (excluding gross income from prohibited transactions) for
each taxable year must be derived directly or indirectly from investments
relating to real property or mortgages on real property (including "rents from
real property" and, in certain circumstances, interest) or from certain types of
temporary investments. Second, at least 95% of the Company's gross income
(excluding gross income from prohibited transactions) for each taxable year must
be derived from such real property investments, dividends, interest and gain
from the sale or disposition of stock or securities. In addition, for its tax
years ending on or before December 31, 1997, short-term gain from the sale or
other disposition of stock or securities, gain from prohibited transactions and
gain on the sale or other disposition of real property held for less than four
years (apart from involuntary conversions and sales of foreclosure property)
must represent less than 30% of the
 
                                       32
   43
 
Company's gross income (including gross income from prohibited transactions).
Pursuant to the 1997 Act, the Company will not have to meet the 30% test for its
taxable years commencing on or after January 1, 1998.
 
     Rents received by the Company will qualify as "rents from real property" in
satisfying the gross income requirements for a REIT described above only if
several conditions are met. First, the amount of rent must not be based in whole
or in part on the income or profits of any person. However, an amount received
or accrued generally will not be excluded from the term "rents from real
property" solely by reason of being based on a fixed percentage or percentages
of receipts or sales. Second, the Code provides that rents received from a
tenant will not qualify as "rents from real property" in satisfying the gross
income tests if the Company, or an owner of 10% or more of the Company, actually
or constructively owns 10% or more of such tenant (a "Related Party Tenant").
Third, if rent attributable to personal property, leased in connection with a
lease of real property, is greater than 15% of the total rent received under the
lease, then the portion of rent attributable to such personal property will not
qualify as "rents from real property." Finally, for rents received to qualify as
"rents from real property," the Company generally must not operate or manage the
property (subject to a de minimus exception applicable to the Company's tax
years commencing on and after January 1, 1998 as described below) or furnish or
render services to the tenants of such property, other than through an
independent contractor from whom the Company derives no revenue. The Company
may, however, directly perform certain services that are "usually or customarily
rendered" in connection with the rental of space for occupancy only and are not
otherwise considered "rendered to the occupant" of the property ("Permissible
Services").
 
     Pursuant to the 1997 Act, for the Company's taxable years commencing on or
after January 1, 1998, rents received generally will qualify as rents from real
property notwithstanding the fact that the Company provides services that are
not Permissible Services so long as the amount received for such services meets
a de minimis standard. The amount received for "impermissible services" with
respect to a property (or, if services are available only to certain tenants,
possibly with respect to such tenants) cannot exceed one percent of all amounts
received, directly or indirectly, by the Company with respect to such property
(or, if services are available only to certain tenants, possibly with respect to
such tenants). The amount that the Company will be deemed to have received for
performing "impermissible services" will be the greater of the actual amount so
received or 150% of the direct cost to the Company of providing those services.
 
     If the Company fails to satisfy one or both of the 75% or 95% gross income
tests for any taxable year, it may nevertheless qualify as a REIT for such year
if such failure was due to reasonable cause and not willful neglect, it
disclosed the nature and amounts of its items of gross income in a schedule
attached to its return, and any incorrect information on the schedule was not
due to fraud with intent to evade tax. A 100% penalty tax would be imposed on
the amount by which the Company failed the 75% or 95% test (whichever amount is
greater), less an amount which generally reflects expenses attributable to
earning the nonqualified income. No analogous relief is available for failure to
satisfy the 30% income test.
 
     Subject to certain safe harbor exceptions, any gain realized by the Company
on the sale of any property held as inventory or other property held primarily
for sale to customers in the ordinary course of business will be treated as
income from a prohibited transaction that is subject to a 100% penalty tax. Such
prohibited transaction income may also have an adverse effect upon the Company's
ability to satisfy the income tests for qualification as a REIT. Under existing
law, whether property is held as inventory or primarily for sale to customers in
the ordinary course of a trade or business is a question of fact that depends on
all the facts and circumstances with respect to the particular transaction.
 
     Asset Tests.  The Company must also satisfy three tests relating to the
nature of its assets every quarter. First, at least 75% of the value of the
Company's total assets must be represented by real estate assets (including (i)
its allocable share of real estate assets held by partnerships in which the
Company owns an interest or held by "qualified REIT subsidiaries" (as defined in
the Code) of the Company and (ii) stock or debt instruments held for not more
than one year purchased with the proceeds of a stock offering or long-term (at
least five years) debt offering of the Company, cash, cash items and government
securities). Second, not more than 25% of the Company's total assets may be
represented by securities other than those in the 75% asset class. Third, of the
investments included in the 25% asset class, the value of any one issuer's
securities
 
                                       33
   44
 
owned by the Company may not exceed 5% of the value of the Company's total
assets and the Company may not own more than 10% of any one issuer's outstanding
voting securities. The Company expects that substantially all of its assets will
consist of (i) real properties, (ii) stock or debt investments that earn
qualified temporary investment income, (iii) other qualified real estate assets,
and (iv) cash, cash items and government securities. The Company may also invest
in securities of other entities, provided that such investments will not prevent
the Company from satisfying the asset and income tests for REIT qualification
set forth above.
 
     If the Company inadvertently fails one or more of the asset tests at the
end of a calendar quarter, such a failure would not cause it to lose its REIT
status, provided that (i) it satisfied all of the asset tests at the close of a
preceding calendar quarter, and (ii) the discrepancy between the values of the
Company's assets and the standards imposed by the asset test either did not
exist immediately after the acquisition of any particular acquisition or was not
wholly partly caused by such an acquisition. If the condition described in
clause (ii) of the preceding sentence were not satisfied, the Company could
still avoid disqualification by eliminating any discrepancy within 30 days after
the close of the calendar quarter in which it arose.
 
     Distribution Test.  With respect to each taxable year, the Company must
distribute to its shareholders an amount equal to the sum of (i) 95% of its
"REIT Taxable Income" (determined without regard to the deduction for dividends
paid and by excluding any net capital gain), and (ii) 95% of any after-tax net
income from foreclosure property, in each case less any "excess noncash income."
REIT Taxable Income is generally computed in the same manner as taxable income
of ordinary corporations, with several adjustments, such as a deduction allowed
for dividends paid, but not for dividends received. "Excess noncash income" is
the amount, if any, by which the sum of certain items of noncash income exceeds
5% of REIT Taxable Income for the taxable year (determined without regard to the
deduction for dividends paid and by excluding any net capital gain). With
respect to the Company's tax years commencing prior to January 1, 1998, these
items of noncash income for which relief from the distribution requirement is
provided are (i) the excess of amounts includible in gross income due to the
operation of Section 467 of the Code (relating to deferred rental agreements)
over the amounts that would have been includible without regard to such
provision, (ii) income from certain like-kind exchanges not eligible for
tax-free treatment and (iii) in the case of a REIT using the cash method of
accounting for United States federal income tax purposes, the amounts includible
in gross income with respect to the amount by which original issue discount on
purchase money debt obligations (but not other kinds of original issue discount
or market discount) exceed the amount of money and fair market value of other
property received during the taxable year under such instruments. With respect
to the Company's tax years commencing on and after January 1, 1998, "excess
noncash income" also includes income from the cancellation of indebtedness, and
the category of "excess noncash income" described in clause (iii) above applies
equally to REITs that use the accrual method of accounting for United States
federal income tax purposes.
 
     The Company will be subject to tax on amounts not distributed at regular
United States federal corporate income tax rates. With respect to its tax years
beginning on and after January 1, 1998, the Company may elect to retain, rather
than distribute, net long-term capital gain, and be subject to regular United
States federal income tax thereon. For the consequences of such an election to
the REIT's shareholders, see "Taxation of Taxable Shareholders." In addition, a
nondeductible 4% excise tax is imposed on the excess of (i) 85% of the Company's
ordinary income for the year plus 95% of capital gain net income for the year
and the undistributed portion of the required distribution for the prior year
over (ii) the actual distribution to shareholders during the year (if any). Net
operating losses generated by the Company may be carried forward (but not
carried back) and used by the Company for 15 years (or 20 years in the case of
net operating losses generated in the Company's tax years commencing on or after
January 1, 1998) to reduce REIT Taxable Income and the amount that the Company
will be required to distribute in order to remain qualified as a REIT. Net
capital losses of the Company may be carried forward for five years (but not
carried back) and used to reduce capital gains.
 
     In general, a distribution must be made during the taxable year to which it
relates to satisfy the distribution test and to be deducted in computing REIT
Taxable Income. However, the Company may elect to treat a dividend declared and
paid after the end of the year (a "subsequent declared dividend") as paid
 
                                       34
   45
 
during such year for purposes of complying with the distribution test and
computing REIT Taxable Income, if the dividend is (i) declared before the
regular or extended due date of the Company's tax return for such year and (ii)
paid not later than the date of the first regular dividend payment made after
the declaration (but in no case later than 12 months after the end of the year).
For purposes of computing the 4% excise tax, a subsequent declared dividend is
considered paid when actually distributed. Furthermore, any dividend that is
declared by the Company in October, November of December of a calendar year, and
payable to stockholders of record as of a specified date in such month of such
year will be deemed to have been paid by the Company (and received by
stockholders) on December 31 of such calendar year, but only if such dividend is
actually paid by the Company in January of the following calendar year. For
purposes of complying with the distribution test for a taxable year as a result
of an adjustment in certain of its items of income, gain or deduction by the
IRS, the Company may be permitted to remedy such failure by paying a "deficiency
dividend" in a later year together with interest and a penalty. Such deficiency
dividend may be included in the Company's deduction of dividends paid for the
earlier year for purposes of satisfying the distribution test. For purposes of
the 4% excise tax, the deficiency dividend is taken into account when paid, and
any income giving rise to the deficiency adjustment is treated as arising when
the deficiency dividend is paid.
 
     The Company believes that it has distributed and intends to continue to
distribute to its stockholders an amount at least equal to 95% of the sum of (i)
its REIT Taxable Income (determined without regard to the deduction for
dividends paid and by excluding any net capital gains) and (ii) any after-tax
net income from foreclosure properties less any "excess noncash income," as
those amounts are determined in good faith by the Company or its independent
accountants. However, it is possible that timing differences between the accrual
of income and its actual collection, and the need to make deductible
expenditures (such as capital improvements or principal payments on debt) may
cause the Company to recognize taxable income in excess of its net cash
receipts, thus increasing the difficulty of compliance with the distribution
requirement. In order to meet the 95% requirement, the Company might find it
necessary to arrange for short-term, or possibly long-term, borrowings.
 
     Failure to Qualify.  If the Company fails to qualify as a REIT for any
taxable year, and if certain relief provisions of the Code do not apply, it
would be subject to federal income tax (including applicable alternative minimum
tax) on its taxable income at regular corporate rates. Distributions to
stockholders in any year in which the Company fails to qualify will not be
deductible by the Company nor will they be required to be made. As a result, the
Company's failure to qualify as a REIT would reduce the cash available for
distribution by the Company to its stockholders. In addition, if the Company
fails to qualify as a REIT, all distributions to stockholders will be taxable as
ordinary income, to the extent of the Company's current and accumulated earnings
and profits. Subject to certain limitations of the Code, corporate distributees
may be eligible for the dividends received deduction.
 
     If the Company's failure to qualify as a REIT is not due to reasonable
cause but results from willful neglect, the Company would not be permitted to
elect REIT status for the four taxable years after the taxable year for which
such disqualification is effective. In the event the Company were to fail to
qualify as a REIT in one year and subsequently requalify in a later year, the
Company might be required to recognize taxable income based on the net
appreciation in value of its assets as a condition to requalification. In the
alternative, the Company may be taxed on the net appreciation in value of its
assets if it sells properties within ten years of the date the Company
requalifies as a REIT under federal income tax laws.
 
TAXATION OF TAXABLE DOMESTIC STOCKHOLDERS
 
     As long as the Company qualifies as a REIT, distributions made to the
Company's taxable U.S. stockholders out of current or accumulated earnings and
profits (and not designated as capital gain dividends) will be taken into
account by them as ordinary income and corporate stockholders will not be
eligible for the dividends received deductions as to such amount. For purposes
of computing the Company's earnings and profits, depreciation for depreciable
real estate will be computed on a straight-line basis over a 40-year period.
 
     Distributions that are properly designated as capital gain dividends will
be taxed as gains from the sale or exchange of a capital asset held for more
than one year (to the extent they do not exceed the Company's
 
                                       35
   46
 
actual net capital gain for the taxable year) without regard to the period for
which the stockholder has held its stock. However, corporate stockholders may be
required to treat up to 20% of certain capital gain dividends as ordinary income
pursuant to Section 291 of the Code. As described below, the 1997 Act changed
significantly the taxation of capital gains by taxpayers who are individuals,
estates, or trust. It is not clear whether, for a taxable domestic stockholder
who is an individual or an estate or trust, amounts designated as capital gain
dividends will be taxable at the rate applicable to mid-term capital gains
(i.e., gains from the sale of capital assets held for more than one year but not
more than 18 months) or at the rate applicable to long-term capital gains (i.e.,
gains from the sale of capital assets held for more than 18 months). This
uncertainty may be clarified by future legislation or regulations. See
"-- Recent Legislation."
 
     Distributions in excess of current and accumulated earnings and profits
will constitute a non-taxable return of capital to a stockholder to the extent
that such distributions do not exceed the adjusted basis of the stockholder's
shares, and will result in a corresponding reduction in the stockholder's basis
in the shares. Any reduction in a stockholder's tax basis for its shares will
increase the amount of taxable gain or decrease the deductible loss that will be
realized upon the eventual disposition of the shares. The Company will notify
stockholders at the end of each year as to the portions of the distributions
which constitute ordinary income, capital gain or a return of capital. Any
portion of such distributions that exceed the adjusted basis of a stockholder's
shares will be taxed as capital gain from the disposition of shares, provided
that the shares are held as capital assets.
 
     Aside from the different income tax rates applicable to ordinary income and
capital gain dividends, regular and capital gain dividends from the Company will
be treated as dividend income for most other federal income tax purposes. In
particular, such dividends will be treated as "portfolio" income for purposes of
the passive activity loss limitation (including all individuals) and generally
will not be able to offset any "passive losses" against such dividends.
Dividends will be treated as investment income for purposes of the investment
interest limitation contained in Section 63(d) of the Code, which limits the
deductibility of interest expense incurred by noncorporate taxpayers with
respect to indebtedness attributable to certain investment assets.
 
     In general, dividends paid by the Company will be taxable to stockholders
in the year in which they are received, except in the case of dividends declared
at the end of the year, but paid in the following January, as discussed above.
 
     In general, a domestic stockholder will realize capital gain or loss on the
disposition of Common Stock equal to the difference between (i) the amount of
cash and the fair market value of any property received on such disposition and
(ii) the stockholder's adjusted basis of such Common Stock. With respect to
dispositions occurring after July 28, 1997, in the case of a taxable domestic
stockholder who is an individual or an estate or trust, such gain or loss will
be mid-term capital gain or loss if such shares have been held for more than one
year but not more than 18 months and long-term capital gain or loss if such
shares have been held for more than 18 months. In the case of a taxable domestic
stockholder that is a corporation, such gain or loss will be long-term capital
gain or loss if such shares have been held for more than one year. Loss upon a
sale or exchange of Common Stock by a stockholder who has held such Common Stock
for six months or less (after applying certain holding period rules) will be
treated as long-term capital loss to the extent of distribution from the Company
required to be treated by such stockholder as long-term capital gain.
 
     Pursuant to the 1997 Act, for the Company's taxable years commencing on or
after January 1, 1998, the Company may elect to require the holders of Common
Stock to include the Company's undistributed net capital gains in their income.
If the Company makes such an election, the holders of Common Stock will (i)
include in their income as long-term capital gains their proportionate share of
such undistributed capital gains and (ii) be deemed to have paid their
proportionate share of the tax paid by the Company on such undistributed capital
gains and thereby receive a credit or refund for such amount. A holder of Common
Stock will increase the basis in its Common Stock by the difference between the
amount of capital gain included in its income and the amount of the tax it is
deemed to have paid. The earnings and profits of the Company will be adjusted
appropriately. As described below in "-- Recent Legislation," with respect to
such long-term capital gain of a taxable domestic stockholder that is an
individual or an estate or trust, the IRS has authority to issue regulations
that could apply the special tax rate applicable to sales of depreciable real
property by an
 
                                       36
   47
 
individual or estate or trust to the portion of the long-term capital gains of
an individual or an estate or trust attributable to deductions for depreciation
taken with respect to depreciable real property.
 
TAXATION OF FOREIGN STOCKHOLDERS
 
     The following discussion is only a summary of the rules governing United
States federal income taxation of nonresident alien individuals, foreign
corporations, foreign partnerships and other foreign stockholders (collectively,
"Non-U.S. Stockholders"). Prospective Non-U.S. Stockholders should consult with
their own tax advisors to determine the impact of federal, state and local
income tax laws with regard to an investment in shares, including any reporting
requirements.
 
     Distributions that are not attributable to gain from sales or exchanges by
the Company of United States real property interests and not designated by the
Company as capital gains dividends will be treated as dividends of ordinary
income to the extent that they are made out of current or accumulated earnings
and profits of the Company. Such distributions ordinarily will be subject to a
withholding tax equal to 30% of the gross amount of the distribution unless an
applicable tax treaty reduces or eliminates that tax. Certain tax treaties limit
the extent to which dividends paid by a REIT can qualify for a reduction of the
withholding tax on dividends. The Company expects to withhold United States
income tax at the rate of 30% on the gross amount of any such dividends made to
a Non-U.S. Stockholder unless (i) a lower treaty rate applies and the
stockholder files an IRS Form 1001 or (ii) the Non-U.S. Stockholders files a
properly completed IRS Form 4224 with the Company claiming that the distribution
is effectively connected with the Non-U.S. Stockholder's conduct of a U.S. trade
or business. Distributions in excess of current and accumulated earnings and
profits of the Company will not be taxable to a Non-U.S. Stockholder to the
extent that they do not exceed the adjusted basis of the Stockholder's shares,
but rather will reduce the adjusted basis of such shares. To the extent that
such distributions exceed the adjusted basis of a Non-U.S. Stockholder's shares,
they will give rise to gain from the sale or exchange of its Common Stock, the
tax treatment of which is described below. As a result of a legislative change
made by the Small Business Job Protection Act of 1996, it appears that the
Company will be required to withhold 10% of any distribution in excess of the
Company's current and accumulated earnings and profits. Consequently, although
the Company intends to withhold at a rate of 30% on the entire amount of any
distribution (or a lower applicable treaty rate), to the extent that the Company
does not do so, any portion of a distribution not subject to withholding at a
rate of 30% (or a lower applicable treaty rate) will be subject to withholding
at a rate of 10%. However, the Non-U.S. Stockholder may seek a refund of such
amounts from the IRS if it subsequently determined that such distribution was,
in fact, in excess of current or accumulated earnings and profits of the
Company, and the amount withheld exceeded the Non-U.S. Stockholder's United
States tax liability, if any, with respect to the distribution.
 
     For any year in which the Company qualifies as a REIT, distributions that
are attributable to gain from sales or exchanges by the Company of United States
real property interests will be taxed to a Non-U.S. Stockholder under the
provisions of the Foreign Investment in Real Property Tax Act of 1980
("FIRPTA"). Under FIRPTA, a Non-U.S. Stockholder is taxed as if such gain were
effectively connected with a United States business. Non-U.S. Stockholders would
thus be taxed at the normal capital gain rates applicable to U.S. stockholders
(subject to applicable alternative minimum tax and a special alternative minimum
tax in the case of non-resident alien individuals). Also, distributions subject
to FIRPTA may be subject to a 30% branch profits tax in the hands of a corporate
Non-U.S. Stockholder not entitled to treaty relief. The Company is required by
applicable regulations to withhold 35% of any distribution that could be
designated by the Company as a capital gains dividend regardless of the amount
actually designated as a capital gain dividend. This amount is creditable
against the Non-U.S. Stockholder's FIRPTA tax liability.
 
     Although the law is not entirely clear on the matter, it appears that
amounts designated by the Company pursuant to the 1997 Act as undistributed
capital gains in respect of shares of Common Stock (see "Taxation of
Stockholders -- Taxation of Taxable Domestic Stockholders" above) would be
treated with respect to Non-U.S. Stockholders in the manner outlined in the
preceding paragraph for actual distributions by the Company of capital gain
dividends. Under that approach, the Non-U.S. Stockholders would be able to
offset as a credit against their United States federal income tax liability
resulting therefrom their proportionate share of the tax paid by the Company on
such undistributed capital gains (and to receive from the IRS a refund to
 
                                       37
   48
 
the extent their proportionate share of such tax paid by the Company were to
exceed their actual United States federal income tax liability).
 
     Gain recognized by a Non-U.S. Stockholder upon a sale of shares generally
will not be taxed under FIRPTA if the Company is a "domestically controlled
REIT," defined generally as a REIT in which at all times during specified
testing period less than 50% in value of the stock was held directly or
indirectly by foreign persons. It is anticipated that the Company will be a
"domestically controlled REIT;" therefore, the sale of shares will not be
subject to taxation under FIRPTA. However, gain not subject to FIRPTA will be
taxable to a Non-U.S. Stockholder if (i) investment in the shares is effectively
connected with the Non-U.S. Stockholder's United States trade or business, in
which case the Non-U.S. Stockholder will be subject to the same treatment as
U.S. Stockholders with respect to such gain, or (ii) the Non-U.S. Stockholder is
a nonresident alien individual who was present in the United States for 183 days
or more during the taxable year and such gain is attributable to an office or
fixed place of business in the United States or such nonresident alien
individual has a "tax home" in the United States and such gain is not
attributable to an office or fixed place of business located outside the United
States or, if such gain is attributable to an office or fixed place of business
located outside the United States, it is not subject to foreign income tax equal
to at least 10% of such gain. If the gain on the sale of shares were to be
subject to taxation under FIRPTA, the Non-U.S. Stockholder will be subject to
the same treatment as U.S. Stockholders with respect to such gain (subject to
applicable alternative minimum tax, special alternative minimum tax in the case
of nonresident alien individuals and possible application of the 30% branch
profits tax in the case of foreign corporations) and the purchaser would be
required to withhold and remit to the Internal Revenue Service 10% of the
purchase price.
 
TAXATION OF TAX-EXEMPT STOCKHOLDERS
 
     Tax-exempt entities, including qualified employee pension and profit
sharing trusts and individual retirement accounts ("Exempt Organizations"),
generally are exempt from federal income taxation. However, they are subject to
taxation on their unrelated business taxable income ("UBTI"). While investments
in real estate may generate UBTI, the Service has issued a published ruling to
the effect that dividend distributions by a REIT to an exempt employee pension
trust do not constitute UBTI, provided that the shares of the REIT are not
otherwise used in an unrelated trade or business of the exempt employee pension
trust. Based on that ruling and on the intention of the Company to invest its
assets in a manner that will avoid the recognition of UBTI by the Company,
amounts distributed by the Company to Exempt Organizations generally should not
constitute UBTI. However, if an Exempt Organization finances its acquisition of
stock with debt, a portion of its income from the Company, if any, will
constitute UBTI pursuant to the "debt-financed property" rules. Furthermore,
social clubs, voluntary employee benefit associations, supplemental unemployment
benefit trusts, and qualified group legal services plans that are exempt from
taxation under paragraphs (7), (9), (17), and (20), respectively, of Code
Section 501(c) are subject to different UBTI rules, which generally will require
them to characterize distributions from the Company as UBTI.
 
     In addition, a pension trust that owns more than 10% of the Company is
required to treat a percentage of the dividends from the Company as UBTI (the
"UBTI Percentage") in certain circumstances. The UBTI Percentage is the gross
income derived from an unrelated trade or business (determined as if the Company
were a pension trust) divided by the gross income of the Company for the year in
which the dividends are paid. The UBTI rule applies only if (i) the UBTI
Percentage is at least 5%, (ii) the Company qualifies as a REIT by reason of the
modification of the 5/50 Rule that allows the beneficiaries of the pension trust
to be treated as holding shares of the Company in proportion to their actuarial
interests in the pension trust, and (iii) either (A) one pension trust owns more
than 25% of the value of the Company's stock or (B) a group of pension trusts
individually holding more than 10% of the value of the Company's stock
collectively own more than 50% of the value of the Company's stock.
 
     While an investment in the Company by an Exempt Organization generally is
not expected to result in UBTI except in the circumstances described in the
preceding paragraph, any gross UBTI that does arise from such an investment will
be combined with all other gross UBTI of the Exempt Organization for a taxable
year and reduced by all deductions attributable to the UBTI plus $1,000. Any
amount then remaining will constitute UBTI on which the Exempt Organization will
be subject to tax. If the gross income taken into
 
                                       38
   49
 
account in computing UBTI exceeds $1,000, the Exempt Organization is obligated
to file a tax return for such year on IRS Form 990-T. None of the Company, the
Board of Directors, or any of their Affiliates expects to undertake the
preparation or filing of IRS Form 990-T for any Exempt Organization in
connection with an investment by such Exempt Organization in the Common Stock.
Generally, IRS Form 990-T must be filed with the Service by April 15 of the year
following the year in which it relates.
 
RECENT LEGISLATION
 
     As described above, 1997 Act contains certain changes to the REIT
qualification requirements and to the taxation of REITs. The 1997 Act also
contains certain changes to the taxation of capital gains of individuals, trusts
and estates.
 
     Capital Gain Rates.  Subject to certain exceptions, for individuals, trusts
and estates, the maximum rate of tax on the net capital gain from a sale or
exchange occurring after July 28, 1997 of a long-term capital asset (i.e., a
capital asset held for more than 18 months) has been reduced to from 28% to 20%.
The maximum rate has been reduced to 18% for capital assets acquired after
December 21, 2000 and held for more than five years. The maximum rate for
mid-term capital assets (i.e., capital assets held for more than one year but
not more than 18 months) remains at 28%. The maximum rate for net capital gains
attributable to the sale of depreciable real property held for more than 18
months is 25% to the extent of the prior deductions for "unrecaptured Section
1250 gain" (that is depreciation deductions not otherwise recaptured as ordinary
income under the existing depreciation recapture rules). Capital gain from the
sale of depreciable real property held for more than 18 months allocated by the
Company to a non-corporate stockholder will be subject to the 25% rate to the
extent that the capital gain on the real property sold by the Company does not
exceed prior depreciation deductions with respect to such property. The 1997 Act
provides the IRS with authority to issue regulations that could, among other
things, apply these rates on a look-through basis in the case of "pass-through"
entities such as the Company. The taxation of capital gains of corporations was
not changed by the 1997 Act.
 
     REIT Provisions.  In addition to the provisions discussed above, the 1997
Act contains a number of technical provisions that either (i) reduce the risk
that the Company will inadvertently cease to qualify as a REIT, or (ii) provide
additional flexibility with which the Company can meet the REIT qualification
requirements. These provisions are effective for the Company's taxable years
commencing on or after January 1, 1998.
 
TAXATION OF REINVESTED DIVIDENDS
 
     Those holders of shares of Common Stock who elect to participate in the
Dividend Reinvestment Plan will be deemed to have received the gross amount of
dividends distributed on their behalf by the Plan Agent as agent for the
participants in such plan. Such deemed dividends will be treated as actual
dividends to such stockholders by the Company and will retain their character
and have the tax effects as described above. Participants that are subject to
federal income tax will thus be taxed as if they received such dividends despite
the fact that their distributions have been reinvested and, as a result, they
will not receive any cash with which to pay the resulting tax liability.
 
OTHER TAX CONSIDERATIONS
 
     Entity Classification.  A significant number of the Company's investments
are held through partnerships. If any such partnerships were treated as an
association, the entity would be taxable as a corporation and therefore would be
subject to an entity level tax on its income. In such a situation, the character
of the Company's assets and items of gross income would change and might
preclude the Company from qualifying as a REIT.
 
     Prior to January 1, 1997, an organization formed as a partnership or a
limited liability company was treated as a partnership for federal income tax
purposes rather than as a corporation only if it had no more than two of the
four corporate characteristics that the Treasury Regulations in effect at that
time used to distinguish a partnership from a corporation for tax purposes.
These four characteristics were (i) continuity of
 
                                       39
   50
 
life, (ii) centralization of management, (iii) limited liability and (iv) free
transferability of interests. Under final Treasury Regulations which became
effective January 1, 1997, the four factor test has been eliminated and an
entity formed as a partnership or as a limited liability company will be taxed
as a partnership for federal income tax purposes, unless it specifically elects
otherwise. The Regulations provide that the IRS will not challenge the
classification of an existing partnership or limited liability company for tax
periods prior to January 1, 1997 so long as (1) the entity had a reasonable
basis for its claimed classification, (2) the entity and all its members
recognized the federal income tax consequences of any changes in the entity's
classification within the 60 months prior to January 1, 1997, and (3) neither
the entity nor any member of the entity had been notified in writing on or
before May 8, 1996, that the classification of the entity was under examination
by the IRS.
 
     The Company believes that each partnership in which it holds an interest
(either directly or indirectly) is properly treated as a partnership for tax
purposes (and not as an association taxable as a corporation).
 
     Tax Allocations with Respect to the Properties.  When property is
contributed to a partnership in exchange for an interest in the partnership, the
partnership generally takes a carryover basis in that property for tax purposes
equal to the adjusted basis of the contributing partner in the property, rather
than a basis equal to the fair market value of the property at the time of
contribution (this difference is referred to as "Book-Tax Difference"). Special
rules under 704(c) of the Code and the regulations thereunder tend to eliminate
the Book-Tax Difference on an annual basis or with respect to a specific taxable
transaction such as a sale. Thus, the carryover basis of the contributed
properties in the hands of the partnership could cause the Company (i) to be
allocated lower amounts of depreciation and other deductions for tax purposes
than would be allocated to the Company if all properties were to have a tax
basis equal to their fair market value at the time the properties were
contributed to the partnership, and (ii) possibly to be allocated taxable gain
in the event of a sale of such contributed properties in excess of the economic
or book income allocated to the Company as a result of such sale.
 
                              PLAN OF DISTRIBUTION
 
     The Company may sell Securities through underwriters or dealers, directly
to one or more purchasers, through agents or through a combination of any such
methods of sale.
 
     The distribution of the Securities may be effected from time to time in one
or more transactions at a fixed price or prices, which may be changed, at market
prices prevailing at the time of sale, at prices related to such prevailing
market prices, or at negotiated prices.
 
     In connection with the sale of Securities, underwriters or agents may
receive compensation from the Company or from purchasers of Securities, for whom
they may act as agents, in the form of discounts, concessions or commissions.
Underwriters may sell Securities to or through dealers, and such dealers may
receive compensation in the form of discounts, concessions or commissions from
the underwriters and/or commissions from the purchasers for whom they may act as
agents. Underwriters, dealers, and agents that participate in the distribution
of Securities may be deemed to be underwriters under the Securities Act, and any
discounts or commissions they receive from the Company and any profit on the
resale of Securities they realize may be deemed to be underwriting discounts and
commissions under the Securities Act. Any such underwriter or agent will be
identified, and any such compensation received from the Company will be
described, in the applicable Prospectus Supplement.
 
     Unless otherwise specified in the related Prospectus Supplement, each
series of Securities will be a new issue with no established trading market,
other than the Common Stock which is listed on the NYSE. Any shares of Common
Stock sold pursuant to a Prospectus Supplement will be listed on the NYSE,
subject to official notice of issuance. The Company may elect to list any series
of Debt Securities or Preferred Stock on an exchange, but is not obligated to do
so. It is possible that one or more underwriters may make a market in a series
of Securities, but will not be obligated to do so and may discontinue any market
making at any time without notice. Therefore, no assurance can be given as to
the liquidity of, or the trading market for, the Securities.
 
                                       40
   51
 
     Under agreements into which the Company may enter, underwriters, dealers
and agents who participate in the distribution of Securities may be entitled to
indemnification by the Company against certain liabilities, including
liabilities under the Securities Act.
 
     Underwriters, dealers and agents may engage in transactions with, or
perform services for, or be tenants of, the Company in the ordinary course of
business.
 
     In order to comply with the securities laws of certain states, if
applicable, the Securities offered hereby will be sold in such jurisdictions
only through registered or licensed brokers or dealers. In addition, in certain
states Securities may not be sold unless they have been registered or qualified
for sale in the applicable state or an exemption from the registration or
qualification requirement is available and is complied with.
 
                                    EXPERTS
 
     The consolidated financial statements of the Company incorporated into this
Prospectus by reference to the Annual Report on Form 10-K for the year ended
December 31, 1996, have been so incorporated in reliance on the report
(incorporated by reference) of KPMG Peat Marwick LLP, independent certified
public accountants given on authority of said firm as experts in accounting and
auditing.
 
     The Company's Current Report on Form 8-K/A filed on June 17, 1997 including
the financial statements included within Corporate Realty Income Trust I's
Annual Report on Form 10-K for the year ended December 31, 1996, is incorporated
into this Prospectus in reliance on the report of Ernst & Young LLP, independent
certified public accountants, given on authority of said firm as experts in
accounting and auditing.
 
                                 LEGAL MATTERS
 
     Certain legal matters, including the validity of the Securities and certain
tax matters, will be passed upon for the Company by Paul, Hastings, Janofsky &
Walker LLP, a limited liability partnership including professional corporations,
New York, New York. Seth M. Zachary, a partner of Paul, Hastings, Janofsky &
Walker LLP, is presently serving as a director of the Company and will continue
to serve as a director until the Company's 1998 Annual Meeting of Stockholders.
In connection with certain matters related to the laws of the State of Maryland,
Paul, Hastings, Janofsky & Walker LLP will rely on the opinion of Piper &
Marbury L.L.P., Baltimore, Maryland.
 
                                       41
   52
 
          ============================================================
 
  NO DEALER, SALES REPRESENTATIVE OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO
GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THIS
OFFERING OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS SUPPLEMENT OR PROSPECTUS,
AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY UNDERWRITER. THIS
PROSPECTUS SUPPLEMENT OR PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A
SOLICITATION OF ANY OFFER TO BUY ANY SECURITIES OTHER THAN THE REGISTERED
SECURITIES TO WHICH IT RELATES. THIS PROSPECTUS SUPPLEMENT OR PROSPECTUS DOES
NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF ANY OFFER TO BUY SUCH
SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL.
NEITHER THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT OR PROSPECTUS NOR ANY SALE
MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE
HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT
THE INFORMATION OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE INFORMATION
CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.
 
                            ------------------------
 
                               TABLE OF CONTENTS
 


                                            PAGE
                                            -----
                                         
              PROSPECTUS SUPPLEMENT
 
The Company...............................    S-2
Use of Proceeds...........................    S-2
Description of Class A Cumulative
  Convertible Preferred Stock.............    S-2
Legal Matters.............................   S-12
 
                   PROSPECTUS
 
Available Information.....................      2
Incorporation of Certain Documents by
  Reference...............................      2
The Company...............................      3
Risk Factors..............................      4
Use of Proceeds...........................      8
Ratio of Earnings to Fixed Charges........      8
Description of Debt Securities............      8
Description of Preferred Stock............     20
Description of Common Stock...............     26
Restrictions on Transfers of Capital Stock
  and Anti-takeover Provisions............     28
Federal Income Tax Considerations.........     31
Plan of Distribution......................     40
Experts...................................     41
Legal Matters.............................     41

 
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                                 675,000 SHARES
                              LEXINGTON CORPORATE
                                PROPERTIES, INC.
                           CLASS A SENIOR CUMULATIVE
                          CONVERTIBLE PREFERRED STOCK
               --------------------------------------------------
 
                             PROSPECTUS SUPPLEMENT
               --------------------------------------------------
                               December 31, 1997
 
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