-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Sn6y37Z+9yyEanjuRRawr0m2Xif+K0J3tBtY88EwQDXOiQXvdkH6Pfh5204bE1N+ BZx8ZDaBsB6qOG2PNuwsyQ== 0000950123-98-003209.txt : 19980401 0000950123-98-003209.hdr.sgml : 19980401 ACCESSION NUMBER: 0000950123-98-003209 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 9 CONFORMED PERIOD OF REPORT: 19971231 FILED AS OF DATE: 19980331 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: LEXINGTON CORPORATE PROPERTIES INC CENTRAL INDEX KEY: 0000910108 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE INVESTMENT TRUSTS [6798] IRS NUMBER: 133717318 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: SEC FILE NUMBER: 001-12386 FILM NUMBER: 98582473 BUSINESS ADDRESS: STREET 1: 355 LEXINGTON AVE CITY: NEW YORK STATE: NY ZIP: 10017 BUSINESS PHONE: 2126927260 MAIL ADDRESS: STREET 1: 355 LEXINGTON AVE STREET 2: 14TH FLOOR CITY: NEW YORK STATE: NY ZIP: 10017 10-K405 1 FORM 10-K 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 10-K (Mark One) [X] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 [Fee required] For the fiscal year ended December 31, 1997 or [ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 [No Fee required] For the transition period from ______________________ to _______________________ Commission File Number 1-12386 LEXINGTON CORPORATE PROPERTIES TRUST ------------------------------------ (Exact name of Registrant as specified in its charter) Maryland 13-3717318 ----------------------------- ---------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 355 Lexington Avenue New York, NY 10017 ----------------------------------- -------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (212) 692-7260 -------------- Securities registered pursuant to Section 12(b) of the Act: Name of Each Exchange Title of Each Class on which Registered --------------------------- ------------------- Common Shares, par value $.0001 New York Stock Exchange Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark whether the Registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No[ ]. Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (ss.229.405 of this chapter) is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X] The aggregate market value of the voting shares held by non-affiliates of the Registrant as of February 27, 1998 was $236,478,000. Number of common shares outstanding as of February 27, 1998 was 16,520,248. Number of preferred shares outstanding as of February 27, 1998 was 2,000,000. Documents incorporated by reference: The Definitive Proxy Statement for Registrant's 1998 Annual Meeting of Shareholders is incorporated herein by reference into Part III. 1 2 PART I. Forward-Looking Statements When used in this Form 10-K Report, the words "believes," "expects," "estimates" and similar expressions are intended to identify forward-looking statements. Such statements are subject to certain risks and uncertainties which could cause actual results to differ materially. In particular, among the factors that could cause actual results to differ materially are continued qualification as a real estate investment trust, general business and economic conditions, competition, increases in real estate construction costs, interest rates, accessibility of debt and equity capital markets and other risks inherent in the real estate business including tenant defaults, potential liability relating to environmental matters and illiquidity of real estate investments. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. The Company undertakes no obligation to publicly release the results of any revisions to these forward-looking statements which may be made to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events. ITEM 1. BUSINESS General Lexington Corporate Properties Trust (the "Company"), formerly Lexington Corporate Properties, Inc., is a Maryland statutory real estate investment trust that acquires, owns, and manages a diverse portfolio of office, industrial and retail properties. The real properties owned by the Company are, with one exception, subject to triple net leases to corporate tenants. References herein to the "Company" shall include references to the Company, two affiliated partnerships (the "Partnerships") and the Company's predecessor, Lexington Corporate Properties, Inc., a Delaware corporation which was organized in October 1993, reincorporated in Maryland in June 1994 and was merged into the Company on December 31, 1997. As of December 31, 1997, the Company's real property portfolio consisted of fifty properties (or interests therein) (the "Properties") located in twenty-five states, including warehousing, distribution and manufacturing facilities, office buildings and retail properties containing an aggregate of approximately 6.95 million net rentable square feet of space. This does not include the Newark, California property held for sale. All of the Company's Properties, with one exception, are subject to triple net leases, which are generally characterized as leases in which the tenant bears all, or substantially all, of the costs and cost increases for real estate taxes, insurance and ordinary maintenance. The Company also has ownership interests of 33.85% and 19% in two partnerships whose real estate assets each consist of a property subject to a triple net lease. These two properties consist of an aggregate of 217,000 square feet of net rentable space. For the years ended December 31, 1997, 1996 and 1995, the Company's Properties generated consolidated rental revenue of approximately $42.5 million, $31.2 million and $24.5 million, respectively. The Properties are more fully described in Item 2 below. Of the fifty-one Properties indirectly or directly owned by the Company, the three following properties accounted for 10% or more of consolidated rental revenues for the years ended December 31:
Property 1997 1996 1995 -------- ---- ---- ---- Glendale, Arizona 4% 8% 13% Newark, California 6% 10% 13% Salt Lake City, Utah 20% 16% -
Objectives and Strategy The Company's primary objectives are to increase Funds From Operations (as defined in Item 7 Management's Discussion and Analysis of Financial Condition and Results of Operations) and cash available for distribution to its shareholders. Since 1995, management has principally focused on: o effectively managing assets through lease extensions, revenue enhancing property expansions, opportunistic property sales and redeployment of assets, when advisable; 2 3 o acquiring portfolios and individual net lease properties from third parties, completing sale/leaseback transactions, acquiring build-to-suit properties and acquiring properties from affiliated net lease partnerships; and o refinancing existing indebtedness at lower average interest rates and increasing the Company's access to capital to finance property acquisitions and expansions. Internal Growth; Effectively Managing Assets Tenant Relations and Lease Compliance. The Company maintains close contact with its tenants in order to understand their future real estate needs. The Company monitors the financial, property maintenance and other lease obligations of its tenants through a variety of means, including periodic reviews of financial statements and physical inspections of the Properties. The Company performs annual inspections of those Properties where it has an ongoing obligation with respect to the maintenance of the Property and for all Properties during each of the last three years immediately prior to lease expiration. Biannual physical inspections are undertaken for all other Properties. Extending Lease Maturities. The Company seeks to extend its leases in advance of their expiration in order to maintain a balanced lease rollover schedule. Since February 1994, the Company has entered into lease extensions of three years or more on ten of its Properties. Revenue Enhancing Property Expansions. The Company undertakes expansions of its Properties based on tenant requirements. The Company believes that selective property expansions can provide it with attractive rates of return and actively seeks such opportunities. Property Sales and Redeployment of Assets. The Company may determine to sell a Property, either to the Property's existing tenant or to a third party, if it deems such disposition to be in the Company's best interest. As of December 31, 1997, the Company had sold two Properties. The restrictions applicable to REITs may limit the Company's ability to dispose of a property. Acquisition Strategies The Company seeks to enhance its net lease property portfolio through acquisitions of general purpose, efficient, well-located buildings in growing markets. Management has diversified the Company's portfolio by geographical location, tenant industry segment, lease term expiration and property type with the intention of providing steady internal growth with low volatility. Management believes that such diversification should help insulate the Company from regional recession, industry specific downturns and price fluctuations by property type. Prior to effecting any acquisitions, management analyzes the (i) property's design, construction quality, efficiency, functionality and location with respect to the immediate sub-market, city and region; (ii) lease integrity with respect to term, rental rate increases, corporate guarantees and property maintenance provisions; (iii) present and anticipated conditions in the local real estate market; and (iv) prospects for selling or releasing the property on favorable terms in the event of a vacancy. Management also evaluates each potential tenant's financial strength, growth prospects, competitive position within its respective industry and a property's strategic location and function within a tenant's operations or distribution systems. Management believes that its comprehensive underwriting process is critical to the assessment of long-term profitability of any investment by the Company. Operating Partnership Structure. The operating partnership structure enables the Company to acquire properties by issuing to a seller, as a form of consideration, Operating Partnership Units ("OP Units"). Management believes that this structure facilitates the Company's ability to raise capital and to acquire portfolio and individual properties by enabling the Company to structure transactions which may defer tax gains for a contributor of property while preserving the Company's available cash for other purposes, including the payment of distributions. The Company has used OP Units as a form of consideration in connection with the acquisition of 15 of the 32 Properties or the interests therein acquired by the Company since January 1, 1995 (including the 2 properties in the 2 unconsolidated partnerships). Acquisitions of Portfolio and Individual Net Lease Properties. The Company seeks to acquire portfolio and individual properties that are leased to creditworthy tenants under long-term net leases. 3 4 Management believes there is significantly less competition for the acquisition of property portfolios containing a number of net leased properties located in more than one geographic region. Management also believes that the Company's geographical diversification, acquisition experience and access to capital will allow it to compete effectively for the acquisition of such net leased properties. Sale/Leaseback Transactions. The Company seeks to acquire portfolio and individual net lease properties in sale/leaseback transactions. The Company selectively pursues sale/leaseback transactions with creditworthy sellers/tenants with respect to properties that are integral to the sellers'/tenants' ongoing operations. Build-to-suit Properties. The Company may also acquire, after construction has been completed, "build-to-suit" properties that are entirely pre-leased to their intended corporate users before construction. As a result, the Company does not assume the risk associated with the construction phase of a project. Acquisitions from Affiliated Net Lease Partnerships. Management believes that net lease partnerships affiliated with the Company provide it with an opportunity to acquire properties with which management is already familiar. As of December 31, 1997, the Company had acquired ten Properties and minority interests in two additional properties from its affiliated limited partnerships. On January 29, 1998, the Company completed the acquisition of partnership interests in two limited partnerships, one of which was an affiliate of an officer of the Company, in exchange for the Company's operating partnership units. The assets of the partnerships acquired included approximately $23.5 million in cash. The units are exchangeable for an equal number of Common Shares and are entitled to receive distributions at the same dividend rate as the common shares. The LCP Group, L.P. ("LCP"), an affiliate of E. Robert Roskind, Chairman of the Board of Directors and Co-Chief Executive Officer of the Company, has granted the Company an option (the "Option"), exercisable at any time, to acquire general partnership interests ("General Partnership Interests") currently owned by LCP in two limited partnerships, Net 1, L.P. and Net 2, L.P. (together, the Net Partnerships"), which own net leased office, industrial and retail properties. The Net Partnerships own a total of 61 single-tenant properties located in 16 states which contain approximately 1.4 million net rentable square feet. The tenants of such properties include Alco Standard Corporation, Ameritech Services, Honeywell, Inc. and Wal-Mart Stores, Inc. Under the terms of the Option, the Company, subject to review of any such transaction by the independent members of its Board of Directors, may acquire the General Partnership Interests at their fair market value based upon a formula relating to partnership cash flows, with the Company retaining the option of paying such fair market value in securities of the Company, OP Units, cash or a combination thereof. The Company has not yet determined whether to exercise the Option. Refinancing Existing Indebtedness and Increasing Access to Capital As a result of the Company's financing activities, the weighted average interest rate on the Company's outstanding indebtedness has been reduced from approximately 10.00% as of December 31, 1994 to approximately 8.17% as of December 31, 1997. In addition, management is constantly pursuing opportunities to increase the Company's access to public and private capital in order to achieve maximum operating flexibility. Competition. The real estate business is highly competitive and the Company competes with numerous established companies having significant resources and experience. Environmental Matters. Under various federal, state and local environmental laws, statutes, ordinances, rules and regulations, an owner of real property may be liable for the costs of removal or redemption of certain hazardous or toxic substances at, on, in or under such property as well as certain other potential costs relating to hazardous or toxic substances (including government fines and penalties and damages for injuries to persons and adjacent property). Such laws often impose liability without regard to whether the owner knew of, or was responsible for, the presence or disposal of such substances. Although the Company's tenants are primarily responsible for any environmental damage and claims related to the leased premises, in the event of the bankruptcy or inability of the tenant of such premises to satisfy any obligations with respect thereto, the Company may be required to satisfy such obligations. In addition, under certain environmental laws, the Company, as the owner of such properties, may be held directly liable for any such damages or claims irrespective of the provisions of any lease. 4 5 From time to time, in connection with the conduct of the Company's business, and prior to the acquisition of any property from a third party or as required by the Company's financing sources, the Company authorizes the preparation of Phase I environmental reports with respect to its properties. Based upon such environmental reports and management's ongoing review of its properties, as of the date of this Report, management was not aware of any environmental condition with respect to any of the Company's Properties which management believed would be reasonably likely to have a material adverse effect on the Company. There can be no assurance, however, that (i) the discovery of environmental conditions, the existence or severity of which were previously unknown, (ii) changes in law, (iii) the conduct of tenants or (iv) activities relating to properties in the vicinity of the Company's Properties will not expose the Company to material liability in the future. Changes in laws increasing the potential liability for environmental conditions existing on properties or increasing the restrictions on discharges or other conditions may result in significant unanticipated expenditures or may otherwise adversely affect the operations of the Company's tenants, which would adversely affect the Company's funds from operations. Employees. As of December 31, 1997, the Company had a total of twenty-three employees. Industry Segments. The Company operates in one industry segment, investment in net leased real property. ITEM 2. PROPERTIES As of December 31, 1997, the net book value of the Company's real property portfolio totaled approximately $415.4 million, not including the Newark, California property held for sale. The Company does not believe that historical book value is necessarily indicative of current fair market value. As of December 31, 1997, forty-one of the fifty-one Properties were subject to outstanding mortgages, including accrued and unpaid interest as of such date, of approximately $220.6 million. This debt includes the amount outstanding under the Company's secured revolving credit facility and the REMIC financing. 1997 Property Acquisitions During 1997, the Company made the following acquisitions:
Annualized Base Rent Date of Purchase 12-31-97 Lease Square Acquisition Tenant Location Price ($M) ($000's) Expires Feet - ----------- ------ -------- ---------- -------- ------- ---- February 20 Johnson Controls, Inc. Cottondale, AL $ 2.910 $ 289 02-07 58,800 March 19 Exel Logistics, Inc. Various * 27.428 2,772 11-06 761,200 May 1 Cymer, Inc. Rancho Bernardo, CA 7.707 755 12-09 65,755 July 9 Bull HN Info. Systems, Inc. Phoenix, AZ 10.990 972 10-05 137,058 July 22 Lockheed Martin Corporation Marlborough, MA 15.541 1,671 12-06 126,000 September 4 FirstPlus Financial Group, Inc. Dallas, TX 32.645 3,224 08-12 247,968 October 31 Ryder Integrated Logistics, Inc. Waterloo, IA 9.321 891 07-12 276,480 December 31 Stevens-Arnold, Inc. Milpitas, CA 22.138 2,006 12-05 100,026 December 31 Allied Holdings, Inc. Decatur, GA 14.633 1,351 12-07 112,248 December 31 Circuit City Stores, Inc. Richmond, VA 27.234 2,478 02-10 288,562 December 31 Dana Corp. Gordonsville, TN 4.902 325 08-07 148,000 December 31 Allegiance Healthcare Bessemer, AL 3.377 473 11-01 123,924 ----- --- ------- TOTAL $ 178.826 $17,207 2,446,021 ========== ======= =========
* Consists of three properties; two located in New Kingston, PA, one in Mechanicsburg, PA. 5 6 Information Regarding Properties Representing in Excess of 10% of Rental Revenue
1997 1996 1995 ---- ---- ---- Glendale, Arizona Property Occupancy 100% 100% 100% Number of tenants 1 1 1 Annual straight-line rental revenue ($000) $1,892 $2,649 $3,249 Rent per square foot $ 7.50 $10.50 $12.88 Percentage of consolidated rental revenue 4% 8% 13% Newark, California Property Occupancy 100% 100% 100% Number of tenants 1 1 1 Annual straight-line rental revenue ($000)(for the period January 1 to September 30, 1997) $2,432 $3,242 $3,242 Rent per square foot $ 6.37 $ 6.37 $ 6.37 Percentage of consolidated rental revenue 6% 10% 13% Salt Lake City, Utah Property Occupancy 100% 100% N/A Number of tenants 1 1 Annual straight-line rental revenue ($000) (for 1996 from acquisition date, May 22, 1996 to December 31, 1996) $8,469 $5,103 Rent per square foot $28.71 $27.68 Percentage of consolidated rental revenue 20% 16%
Additional information regarding the Glendale Property, the Newark Property and the Salt Lake City Property is set forth in the table below and in Schedule III to this report on Form 10-K. Minimum Future Rent Minimum future rents receivable under non-cancelable operating leases during the base terms for the Properties owned by the Company at December 31, 1997 are as follows (in $000's):
Year ending December 31 Amount ----------- ------ 1998 $ 48,944 1999 49,179 2000 49,301 2001 47,007 2002 43,774 2003-2007 187,725 2008-2012 61,225 2013-2014 645 --------- $ 487,800 =========
Currently, only one of the Properties, the property located in Memphis, Tennessee is vacant and being marketed for re-leasing. The marketing program has included a national mailing to brokers. Table Regarding Real Estate Holdings The table on the following pages sets forth certain information relating to the Company's real property portfolio as of December 31, 1997, not including the Newark, California property held for sale: 6 7
=========================================================================================================================== Land Net Tenant Property Type/ Area Rentable Property Location (Guarantor) Year Constructed (acres) Square Feet =========================================================================================================================== 3350 Miac Cove Road Federal Express Corp. Office/Industrial 10.92 141,359 Memphis, TN 1987 904 Industrial Road Walker Manufacturing Company Office/Industrial 20.00 195,640 Marshall, MI (Tenneco Automotive, Inc.) 1968 & 1972 1601 Pratt Avenue Walker Manufacturing Company Office/Industrial 8.26 53,600 Marshall, MI (Tenneco Automotive, Inc.) 1979 19019 No. 59th Avenue Honeywell, Inc. Research/ 51.79 252,300 Glendale, AZ Development 1985 567 South Riverside Drive Crown Cork & Seal Co., Inc. Warehouse/ 5.80 146,000 Modesto, CA Manufacturing 1970 & 1976 1800 Third Avenue North Allegiance Healthcare Corp. (1) Industrial 10.16 123,924 Bessemer, AL (Baxter International, Inc.) 1991 Tappan Park White Consolidated Industries Warehouse/ 26.57 296,720 22 Chambers Road Distribution Mansfield, OH 1970 10419 North 30th Street Time, Inc. Office 14.38 132,981 Tampa, FL 1986 3102 Queen Palm Drive Time Customer Service, Inc. Office/Warehouse 15.02 229,605 Tampa, FL (Time, Inc.) 1986 109 Stevens Street Unisource Worldwide, Inc. Warehouse/ 7.00 168,800 Jacksonville, FL Industrial 1958 & 1969 3615 North 27th Avenue Bank One, Arizona, N.A. (2) Office 10.26 179,280 Phoenix, AZ 1960 & 1979 9580 Livingston Road GFS Realty, Inc. Retail 10.60 107,337 Oxon Hill, MD (Giant Food, Inc.) 1976 ================================================================================================================================== Base Lease Term 1998 (E) and Annual Rents 1998 Straight-Line per Net Rentable Renewal Minimum Rental Property Location Square Foot Options Rent ($000) Revenue ($000) ================================================================================================================================== 3350 Miac Cove Road 02/01/88 - 01/31/98 * $107 $99 Memphis, TN 02/01/93 - 01/31/98: $9.09 904 Industrial Road 08/18/87 - 08/17/00 None $487 $487 Marshall, MI 08/18/97 - 08/17/00: $2.49 1601 Pratt Avenue 08/18/87 - 08/17/00 None $167 $167 Marshall, MI 08/18/97 - 08/17/00: $3.11 19019 No. 59th Avenue 07/16/86 - 07/15/01 (4) 5 year $1,892 $1,892 Glendale, AZ 07/16/96 - 07/15/01: $7.50 567 South Riverside Drive 09/26/86 - 09/25/01 (1) 5 year $293 $293 Modesto, CA 09/26/96 - 09/25/01: $2.01 1800 Third Avenue North 11/01/91 - 11/01/01 (2) 5 year $473 $473 Bessemer, AL 11/01/91 - 11/01/01: $3.81 Tappan Park 12/31/86 - 12/31/01 (2) 5 year $593 $593 22 Chambers Road 01/01/97 - 12/31/01: $2.00 Mansfield, OH 10419 North 30th Street 04/01/87 - 03/31/02 (4) 5 Year $1,168 $1,099 Tampa, FL 01/01/97 - 12/31/97: $8.29 01/01/98 - 12/31/98: $8.78 01/01/99 - 12/31/99: $9.31 01/01/00 - 12/31/00: $9.87 01/01/01 - 12/31/01: $10.46 01/01/02 - 03/31/02: $11.09 3102 Queen Palm Drive 08/01/87 - 07/31/02 (1) 5 year $931 $957 Tampa, FL 08/1/96 - 07/31/98: $3.98 08/1/98 - 07/31/01: $4.16 08/1/01 - 07/31/02: $4.39 109 Stevens Street 10/01/87 - 09/30/02 None $380 $380 Jacksonville, FL 10/01/97 - 09/30/02: $2.25 3615 North 27th Avenue 11/30/88 - 11/30/03 (1) 5 year $1,961 $1,961 Phoenix, AZ 06/01/96 - 11/30/98 $10.97 12/01/98 - 11/30/03: $10.60 9580 Livingston Road 01/03/77 - 02/29/04 (6) 5 year $408 $407 Oxon Hill, MD 03/01/77 - 02/29/04: $3.80
(E) Estimated * The tenant did not renew its lease and the property is currently vacant. The Company is marketing the property for re-lease. 7 8
=========================================================================================================================== Land Net Tenant Property Type/ Area Rentable Property Location (Guarantor) Year Constructed (acres) Square Feet =========================================================================================================================== Amigoland Shopping Center Montgomery Ward & Co., Inc. (1) Retail 7.61 115,000 (Mexico St. & Palm Blvd.) 1973 Brownsville, TX Rockshire Village Center GFS Realty, Inc. (1) Retail 7.32 51,682 West Ritchie Parkway (Giant Food, Inc.) 1977 Rockville, MD 13430 Black Canyon Fwy. Bull HN Information Systems, Inc. (3) Office 13.37 137,058 Phoenix, AZ 1985 & 1994 1301 California Circle Stevens-Arnold, Inc. Office/Research 6.34 100,026 Milpitas, CA (BICC Public Ltd. Co.) & Development 1985 200 Southington The Hartford Fire Insurance Co. Office 12.40 153,364 Executive Park 1983 Southington, CT 24100 Laguna Hills Mall Federated Department Stores, Inc. (1) Retail 11.00 160,000 Laguna Hills, CA 1974 6910 S. Memorial Highway Toys "R" Us, Inc. (1) Retail 4.44 43,123 Tulsa, OK 1981 12535 SE 82nd Avenue Toys "R" Us, Inc. (1) Retail 5.85 42,842 Clackamas, OR 1981 18601 Alderwood Mall Blvd. Toys "R" Us, Inc. (1) Retail 3.64 43,105 Lynnwood, WA 1981 ================================================================================================================================== Base Lease Term 1998 (E) and Annual Rents 1998 Straight-Line per Net Rentable Renewal Minimum Rental Property Location Square Foot Options Rent ($000) Revenue ($000) ================================================================================================================================== Amigoland Shopping Center 11/01/74 - 10/31/04 (3) 5 year $153 $152 (Mexico St. & Palm Blvd.) 11/01/74 - 10/31/04: $1.33 Brownsville, TX Rockshire Village Center 01/01/78 - 02/28/05 (1) 12 year $224 $224 West Ritchie Parkway 01/01/78 - 02/28/05: $4.33 (2) 10 year Rockville, MD 13430 Black Canyon Fwy. 10/11/94 - 10/10/05 None $972 $1,028 Phoenix, AZ 10/11/94 - 10/10/00: $7.35 10/11/00 - 10/10/01: $7.70 10/11/01 - 10/10/02: $7.90 10/11/02 - 10/10/03: $8.10 10/11/03 - 10/10/04: $8.30 10/11/04 - 10/10/05: $8.50 1301 California Circle 12/10/85 - 12/09/05 (9) 5 year $2,158 $2,548 Milpitas, CA 12/01/95 - 05/31/98: $20.04 06/01/98 - 11/31/00: $22.68 12/01/00 - 05/31/03: $25.56 06/01/03 - 12/09/05: $28.92 200 Southington 09/01/91 - 12/31/05 (1) 5 year $2,166 $2,009 Executive Park 01/01/95 - 12/31/05: $14.12 Southington, CT 24100 Laguna Hills Mall 02/01/76 - 01/31/06 (1) 8 year $677 $673 Laguna Hills, CA 02/01/80 - 01/31/06: $4.23 (2) 15 year (1) 6 year 6910 S. Memorial Highway 06/01/81 - 05/31/06 (5) 5 year $354 $356 Tulsa, OK 06/01/86 -01/31/98: $7.58 02/01/98 - 05/31/01: $8.26 06/01/01 - 05/31/06: $8.40 12535 SE 82nd Avenue 06/01/81 - 05/31/06 (5) 5 year $414 $417 Clackamas, OR 07/01/94 - 01/31/98: $8.93 02/01/98 - 05/31/01: $9.74 06/01/01 - 05/31/06: $9.91 18601 Alderwood Mall Blvd. 06/01/81 - 05/31/06 (5) 5 year $387 $389 Lynnwood, WA 06/01/86 - 01/31/98: $8.29 02/01/98 - 05/31/01: $9.03 06/01/01 - 05/31/06: $9.18
(E) Estimated 8 9
=========================================================================================================================== Land Net Tenant Property Type/ Area Rentable Property Location (Guarantor) Year Constructed (acres) Square Feet =========================================================================================================================== West Wingfoot Road Toys "R" Us, Inc. (1) Industrial 7.56 123,293 Houston, TX 1981 245 Salem Church Road Exel Logistics Inc. Warehouse 12.52 252,000 Mechanicsburg, PA (NFC plc) 1985 6 Doughton Road Exel Logistics Inc. Warehouse 24.38 330,000 New Kingston, PA (NFC plc) 1989 34 East Main Street Exel Logistics Inc. Warehouse 9.66 179,200 New Kingston, PA (NFC plc) 1981 401 Elm Street Lockheed Martin Corp. Office/Research 36.94 126,000 Marlborough, MA (Honeywell) & Development 1960 & 1988 46600 Port Street Johnson Controls, Inc. Industrial 24.00 134,160 Plymouth, MI 1996 450 Stern Street Johnson Controls, Inc. Industrial 25.20 111,160 Oberlin, OH 1996 15911 Progress Drive Johnson Controls, Inc. Industrial 22.20 58,800 Cottondale, AL 1996 5917 S. La Grange Road Bally Total Fitness Corp. Retail/Health Club 2.73 25,250 Countryside, IL 1987 1160 White Horse Road Physical Fitness Centers of Retail/Health Club 2.87 31,750 Voorhees, NJ Philadelphia, Inc. 1987 (Bally Total Fitness Corp.) 5801 Bridge Street Bally Total Fitness Corp. Retail/Health Club 3.66 24,990 DeWitt, NY 1977 & 1987 ================================================================================================================================== Base Lease Term 1998 (E) and Annual Rents 1998 Straight-Line per Net Rentable Renewal Minimum Rental Property Location Square Foot Options Rent ($000) Revenue ($000) ================================================================================================================================== West Wingfoot Road 09/01/81 - 08/31/06 (5) 5 year $461 $478 Houston, TX 09/01/87 - 04/30/98: $3.25 05/01/98 - 08/31/06: $3.98 245 Salem Church Road 11/15/91 - 11/30/06 (2) 5 year $924 $1,000 Mechanicsburg, PA 12/01/97 - 11/30/00: $3.67 12/01/00 - 11/30/03: $4.01 12/01/03 - 11/30/06: $4.38 6 Doughton Road 11/15/91 - 11/30/06 (2) 5 year $1,245 $1,349 New Kingston, PA 12/01/97 - 11/30/00: $3.77 12/01/00 - 11/30/03: $4.12 12/01/03 - 11/30/06: $4.51 34 East Main Street 11/15/91 - 11/30/06 (2) 5 year $603 $654 New Kingston, PA 12/01/97 - 11/30/00: $3.37 12/01/00 - 11/30/03: $3.68 12/01/03 - 11/30/06: $4.02 401 Elm Street 07/22/97 - 12/17/06 (6) 5 year $1,671 $1,671 Marlborough, MA 07/22/97 - 12/17/01: $13.26 12/18/01 - 12/17/06: 75% of cumulative increase in CPI 46600 Port Street 12/23/96 - 12/22/06 (2) 5 year $678 $678 Plymouth, MI 12/23/97 - 12/22/06: CPI 450 Stern Street 12/23/96 - 12/22/06 (2) 5 year $513 $513 Oberlin, OH 12/23/97 - 12/22/06: CPI 15911 Progress Drive 02/19/97 - 02/18/07 (2) 5 year $300 $300 Cottondale, AL 02/19/97 - 02/18/98: $4.91 02/19/98 - 02/18/07: 3x CPI annual escalations not to exceed 4.5% 5917 S. La Grange Road 07/13/87 - 07/12/07 (2) 5 year $574 $542 Countryside, IL 07/13/97 - 07/12/02: $22.73 07/13/02 - 07/12/07: $26.14 1160 White Horse Road 07/14/87 - 07/13/07 (2) 5 year $713 $673 Voorhees, NJ 07/14/97 - 07/13/02: $22.45 07/14/02 - 07/13/07: $25.82 5801 Bridge Street 08/19/87 - 08/18/07 (2) 5 year $444 $419 DeWitt, NY 08/19/97 - 08/18/02: $17.78 08/19/02 - 08/18/07: $20.45
(E) Estimated 9 10
=========================================================================================================================== Land Net Tenant Property Type/ Area Rentable Property Location (Guarantor) Year Constructed (acres) Square Feet =========================================================================================================================== One Spricer Drive Dana Corp. Industrial 20.95 148,000 Gordonsville, TN 1983 & 1985 160 Clairemont Avenue Allied Holdings, Inc. Office 2.98 112,248 Decatur, GA 1983 2655 Shasta Way Fred Meyer, Inc. Retail 13.90 178,204 Klamath Falls, OR 1986 7272 55th Street Circuit City Stores, Inc. Retail 3.93 45,308 Sacramento, CA 1988 6405 South Viriginia St Circuit City Stores, Inc. Retail 2.72 31,400 Reno, NV 1988 5055 West Sahara Avenue Circuit City Stores, Inc. Retail 2.57 36,053 Las Vegas, NV 1988 4733 Hills & Dales Scandinavian Health Spa, Inc. Retail/Health Club 3.32 37,214 Canton, OH (Bally Total Fitness Holding Corp.) 1987 Highway 21 South Wal-Mart Stores, Inc. Retail 5.21 56,132 Jacksonville, AL 1982 295 Chipeta Way Northwest Pipeline Corp. (1) Office 19.79 295,000 Salt Lake City, UT 1982 King St. (Fort Street Mall) Liberty House, Inc. (1) Retail 1.22 85,610 Honolulu, HI 1980 ================================================================================================================================== Base Lease Term 1998 (E) and Annual Rents 1998 Straight-Line per Net Rentable Renewal Minimum Rental Property Location Square Foot Options Rent ($000) Revenue ($000) ================================================================================================================================== One Spricer Drive 01/01/84 - 08/31/07 (2) 5 year $325 $341 Gordonsville, TN 08/01/96 - 07/31/99: $2.20 (1) 4.11 year 08/01/99 - 07/31/02: $2.26 08/01/02 - 07/31/05: $2.33 08/01/05 - 08/31/07: $2.40 160 Clairemont Avenue 01/01/98 - 12/31/07 (2) 5 year $1,351 $1,530 Decatur, GA 01/01/98 - 12/31/98: $12.03 01/01/98 - 12/31/07: 2.75% annual escalations 2655 Shasta Way 03/10/88 - 03/31/08 (3) 10 year $1,009 $1,009 Klamath Falls, OR 03/10/88 - 03/31/08: $5.66 7272 55th Street 10/28/88-10/27/08 (3) 10 year $358 $376 Sacramento, CA 10/28/93-10/27/98: $7.78 10/28/98-10/27/03: $8.54 10/28/03-10/27/08: $9.30 6405 South Viriginia St 12/16/88 - 12/15/08 (3) 10 year $306 $325 Reno, NV 12/16/93 - 12/15/98: $9.71 12/16/98 - 12/15/03: $10.65 12/16/03 - 12/15/08: $11.60 5055 West Sahara Avenue 12/16/88 - 12/15/08 (3) 10 year $261 $278 Las Vegas, NV 12/16/93 - 12/15/98: $7.23 12/16/98 - 12/15/03: $7.93 12/16/03 - 12/15/08: $8.64 4733 Hills & Dales 01/01/89 - 12/31/08 (2) 5 year $626 $685 Canton, OH 01/01/97 - 12/31/97: $16.46 01/01/98 - 12/31/98: $16.82 01/01/99 - 12/31/08: 2.2% annual escalations Highway 21 South 08/31/83 - 01/31/09 (5) 5 year $146 $146 Jacksonville, AL 09/01/87 - 01/31/09: $2.60 295 Chipeta Way 10/01/82 - 09/30/09 (1) 9 year $8,571 $8,571 Salt Lake City, UT 10/01/97 - 09/30/09: $29.06 (1) 10 year subject to a CPI adjustment on a portion of the rent. King St. (Fort Street Mall) 10/01/80 - 09/30/09 (1) 9.7 year $963 $971 Honolulu, HI 10/01/95 - 09/30/05: $11.25 (1) 2 year 10/01/05 - 09/30/09: $11.56 (3) 5 year
(E) Estimated 10 11
=========================================================================================================================== Land Net Tenant Property Type/ Area Rentable Property Location (Guarantor) Year Constructed (acres) Square Feet =========================================================================================================================== 16275 Technology Drive Cymer, Inc. Office/Research 2.73 65,755 Rancho Bernardo, CA & Development 1989 9950 Mayland Drive Circuit City Stores, Inc. (1) Office Headquarters 19.71 288,562 Richmond, VA 1990 7055 Highway 85 South Wal-Mart Stores, Inc. Retail 8.61 81,911 Riverdale, GA 1985 Highway 101 Fred Meyer, Inc. Retail 8.81 118,179 Newport, OR 1986 6345 Brackbill Boulevard Exel Logistics, Inc. Warehouse/ 29.01 507,000 Mechanicsburg, PA (NFC plc) Distribution 1985 & 1991 2280 Northeast Drive Ryder Integrated Logistics, Inc. Warehouse 25.70 276,480 Waterloo, IA (Ryder Systems. Inc.) 1996 & 1997 1600 Viceroy Drive FirstPlus Financial Group, Inc. Office 8.17 247,968 Dallas, TX 1986 Industrial Boulevard SKF USA, Inc. Manufacturing 21.13 72,868 Franklin, NC 1996 ---------------------- 634.91 6,954,241 ====================== ================================================================================================================================== Base Lease Term 1998 (E) and Annual Rents 1998 Straight-Line per Net Rentable Renewal Minimum Rental Property Location Square Foot Options Rent ($000) Revenue ($000) ================================================================================================================================== 16275 Technology Drive 06/01/96 - 12/31/09 None $755 $860 Rancho Bernardo, CA 06/01/97 - 05/31/99: $11.26 06/01/99 - 05/31/01: $11.82 06/01/01 - 05/31/03: $12.42 06/01/03 - 05/31/05: $13.04 06/01/05 - 05/31/07: $13.69 06/01/07 - 12/31/09: $14.26 9950 Mayland Drive 02/28/90 - 02/29/10 4) 10 year $2,478 $2,791 Richmond, VA 01/01/98 - 02/29/00: $8.59 1) 5 year 03/01/00 - 02/29/10: $9.91 7055 Highway 85 South 12/04/85 - 01/31/11 (5) 5 year $270 $270 Riverdale, GA 12/04/85 - 01/31/11: $3.29 Highway 101 06/01/86 - 05/31/11 (3) 5 year $826 $826 Newport, OR 06/01/86 - 05/31/11: $6.99 plus .5% of gross sales over $20M ($61,000 in 1997) 6345 Brackbill Boulevard 10/29/90 - 03/19/12 2) 10 year $1,771 $1,933 Mechanicsburg, PA 3/20/97 - 03/19/02: $3.49 3/20/02 - 03/19/07: $4.02 3/20/07 - 03/19/12: greater of $4.62 or fair market rent as specified in lease 2280 Northeast Drive 08/01/97 - 07/31/12 (3) 5 year $891 $1,002 Waterloo, IA 08/01/97 - 07/31/02: $3.22 08/01/02 - 07/31/07: $3.61 08/01/07 - 07/31/12: $4.04 1600 Viceroy Drive 09/04/97 - 08/31/12 (4) 5 year $3,224 $3,557 Dallas, TX 09/04/97 - 08/31/02: $13.00 09/01/02 - 08/31/07: $14.30 09/01/07 - 08/31/12: $15.73 Industrial Boulevard 12/23/96 - 12/31/14 (3) 10 year $322 $322 Franklin, NC 12/23/96 - 12/31/99: $4.42 01/01/00 - 12/31/14: CPI -------------------------------- $48,944 $50,674 ================================ (E) Estimated ______________ (1) The Company holds leasehold interests in the land on which these buildings are situated. The Company owns in fee simple the land on which all other buildings are situated. (2) Effective December 1, 2000, tenant may cancel lease upon 12 months notice and payment of a cancellation fee equal to approximately $2.9 million. (3) Assumes the tenant pays its rent annually in advance, resulting in a prompt payment discount of 3.5% per year.
11 12 INVESTMENTS IN UNCONSOLIDATED PARTNERSHIPS
=================================================================================================================================== Base Lease Term Net and Annual Rents % Tenant Property Type/ Land Rentable per Net Rentable Owned Property Location (Guarantor) Year Constructed Area Square Feet Square Foot (acres) =================================================================================================================================== 19.00% 4450 California Street Mervyn's Retail 11.00 122,000 02/23/77 - 12/31/02 Bakersfield, CA (Dayton Hudson Corp.) 1976 01/01/78 - 12/31/02: $3.34 33.85% 7111 Westlake Terrace Hechinger & Co. (1) Retail 7.61 95,000 05/01/81 - 04/30/06 Bethesda, MD 1980 05/01/96 - 04/30/06: $8.13 ---------- --------------- 18.61 217,000 ========== =============== =============================================================================== 1998 (E) 1998 Straight-Line % Renewal Minimum Rental Owned Property Location Options Rent ($000) Revenue ($000) =============================================================================== 19.00% 4450 California Street (5) 5 year $407 $397 Bakersfield, CA 33.85% 7111 Westlake Terrace (1) 10 year $772 $648 Bethesda, MD (3) 5 year ----------------- ---------------- $1,179 $1,045 ================= ================
(E) Estimated. - ---------- (1) The Company holds a leasehold interest in the land on which this building is situated. The Company owns in fee simple the land on which the other building is situated. 12 13 ITEM 3. LEGAL PROCEEDINGS The Company was sued in the United States District Court for the Northern District of Illinois on May 31, 1995, by United Municipal Leasing Corporation. The complaint filed in this case alleged that the Company breached a letter of intent by failing to execute definitive documentation and close a transaction in which the plaintiff proposed to sell property to the Company. The complainant sought $800,000 in monetary damages. During 1997, the Court ruled in favor of the Company. No monetary damages were incurred by the Company in connection with this matter. On August 26, 1996, Ross Stores, Inc., the tenant in the Newark Property, exercised an option to purchase such Property for its fair market value. In connection with this negotiation the Company was required to post a bond in an amount equivalent to one year's rent. After some deliberation the parties have negotiated to sell the property on or about April 1, 1998 for $24.55 million. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No matters were submitted to a vote of the Company's shareholders during the last quarter of the calendar year ended December 31, 1997. ITEM 4A. EXECUTIVE OFFICERS OF THE COMPANY The following sets forth certain information relating to the executive officers of the Company: NAME BUSINESS EXPERIENCE E. ROBERT ROSKIND Mr. Roskind has served as the Chairman of the Board Age 53 of Directors and Co-Chief Executive Officer of the Company since October 1993. He founded The LCP Group, L.P. ("LCP") in 1973 and has been its Chairman since 1976. LCP has acted as general partner in limited partnerships in which the Company has had prior dealings. Prior to founding LCP, Mr. Roskind headed the net-leasing financing area of Lehman Brothers Inc. He is also a general partner for a variety of entities which serve as the general partner of various partnerships that hold net leased real properties or interests therein. Mr. Roskind is a director of Berkshire Realty Company, Inc., Krupp Government Income Trust I and Krupp Government Income Trust II. Mr. Roskind received his B.S. in 1966 from the University of Pennsylvania and is a 1969 Harlan Fiske Stone Graduate of the Columbia Law School. He has been a member of the Bar of the State of New York since 1970. RICHARD J. ROUSE Mr. Rouse has served as Co-Chief Executive Officer Age 52 and a director of the Company since October 1993. He served as the President of the Company from October 1993 to April 1996, and since April 1996 has served as the Vice Chairman. Mr. Rouse was also a managing director of LCP. He had been associated with LCP since 1979 and had been engaged there in all aspects of net lease finance, acquisition and syndication and corporate financing transactions. Mr. Rouse graduated from Michigan State University in 1968 and received his M.B.A. in 1970 from the Wharton School of Finance and Commerce of the University of Pennsylvania. T. WILSON EGLIN Mr. Eglin has served as Chief Operating Officer of Age 33 the Company since October 1993 and a director since May 1994. He served as Executive Vice President from October 1993 to April 1, 1996, and since April 1996 has served as the President. Prior to his current position with the Company, Mr. Eglin had been associated with LCP from 1987 to 1993 and had been its Vice President-Acquisitions from 1990 to 1993. In connection with his responsibilities with LCP, Mr. Eglin was an officer of affiliated companies that own and manage over 400 net leased real 13 14 properties and was involved in all aspects of real estate acquisition and finance, principally in net leased transactions. Mr. Eglin received his B.A. from Connecticut College in 1986. ANTONIA G. TRIGIANI Ms. Trigiani has served as the Chief Financial Age 37 Officer and Treasurer of the Company since October 1993. She had been associated with LCP since 1989 and had been its Vice President - Asset Management since 1990 until resigning from her position with LCP in April 1996. Prior to joining LCP, she was associated with HRE Properties, a REIT listed on the New York Shares Exchange, and Merrill Lynch, Hubbard Inc., a real estate division of Merrill Lynch & Co., Inc. In 1982, Ms. Trigiani received her B.A. in business administration from Saint Mary's College at Notre Dame University. PAUL R. WOOD Mr. Wood has served as the Vice President, Chief Age 38 Accounting Officer and Secretary of the Company since October 1993. He had been associated with LCP from 1988 to 1993 and from 1990 to 1993 had been responsible for all accounting activities relating to the net leased properties managed by LCP and its affiliates. Prior to joining LCP, Mr. Wood was, from 1987 to 1988, associated with E. F. Hutton & Company Inc. as a senior accountant. Mr. Wood received his B.B.A. from Adelphi University in 1982 and has been a Certified Public Accountant since 1985. STEPHEN C. HAGEN Mr. Hagen has served as Senior Vice President of the Age 55 Company since October 1996. Mr. Hagen had been associated with LCP from 1995 to 1996. Prior to joining LCP, Mr. Hagen was a principal of Pharus Realty Investments, a money manager focused on real estate sharess, and also served as Chief Operating Officer of HRE Properties, a New York Shares Exchange listed REIT. Mr. Hagen received his B.S. from the University of Kansas in 1965 and his M.B.A. from the Wharton School of Finance and Commerce in 1968. PHILIP L. KIANKA Mr. Kianka joined the Company in 1997 as Vice Age 41 President of Asset Management. Prior to joining Lexington, from 1985 through 1997, Mr. Kianka served as a Vice President and Senior Asset Manager at Merrill Lynch Hubbard, Inc., a real estate division of Merrill Lynch & Co., Inc. Mr. Kianka was involved in real estate acquisitions, development and asset management for a national portfolio of diversified properties. Mr. Kianka received his B.A. from Clemson University in 1978 and his M.A. from Clemson University in 1981. JANET M. KAZ Ms. Kaz has served as Vice President of the Company Age 34 since May 1995 and as Asset Manager since October 1993. Prior to that, Ms. Kaz was a member of LCP's property acquisition team from 1986 to 1990 and a member of LCP's asset management team from 1991 to 1993. Ms. Kaz received her B.A. from Muhlenberg College in 1985. 14 15 PART II. ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS The Common Shares of the Company are listed for trading on the New York Stock Exchange ("NYSE") under the symbol "LXP." The following table sets forth the high and low sales prices as reported by the NYSE for the Common Shares of the Company for each of the periods indicated below:
For the Quarters Ended: High Low Cash Dividend ----------------------- ---- --- ------------- December 31, 1997 $16.8125 $13.7500 $ 0.29 September 30, 1997 15.7500 13.8125 $ 0.29 June 30, 1997 14.5000 12.1250 $ 0.29 March 31, 1997 15.0000 12.1250 $ 0.29 December 31, 1996 15.0000 12.1250 $ 0.29 September 30, 1996 13.3750 11.5000 $ 0.28 June 30, 1996 12.3750 11.1250 $ 0.28 March 31, 1996 12.1250 10.5000 $ 0.27
The closing price of the shares of the Company's Common Shares was $14.625 on February 27, 1998. As of February 27, 1998, the Company had 2,549 shareholders of record. The Company's annualized dividend rate for the years ended December 31, 1997 and 1996 was $1.16 and $1.12 per share respectively. The Company's current annualized dividend rate is $1.16 per share. On February 13, 1998, the Company paid a dividend of $.29 per share to shareholders of record on January 30, 1998. Following is a summary of the taxable nature of the Company's dividends for the three years ended December 31:
1997 1996 1995 ---- ---- ---- Total dividends per share $ 1.16 $ 1.10 $ 1.08 ==== ==== ==== Percent taxable as ordinary income 68.91% 95.46% 41.36% Percent taxable as long-term capital gains - - 24.71% Percent non-taxable as return of capital 31.09% 4.54% 33.93% ------- ------- ------ 100.00% 100.00% 100.00% ====== ====== ======
Dividends per share of $0.73, $1.00 and $0.68 were required for the Company to maintain its REIT status in 1997, 1996 and 1995, respectively. 15 16 ITEM 6. SELECTED FINANCIAL DATA The following sets forth selected consolidated financial data for the Company as of and for each of the years in the five-year period ended December 31, 1997. The selected consolidated financial data for the Company should be read in conjunction with the Consolidated Financial Statements and the related notes appearing elsewhere in this report. (All amounts, except per share data, in $000's.)
1997 1996 1995 1994 1993 ---- ---- ---- ---- ---- Total revenue $ 43,569 $ 31,675 $ 25,002 $ 26,038 $ 25,871 Expenses, including minority interest (35,304) (25,565) (19,983) (20,559) (18,902) Gain on sale of properties 3,517 -- 1,514 -- -- Proceeds from lease termination -- -- 1,600 -- -- Expenses of the mergers -- -- -- -- (2,441) Transactional expenses -- (644) -- -- -- Loss on extinguishment of debt(1) (3,189) -- (4,849) -- -- --------- --------- --------- --------- --------- Net income 8,593 5,466 3,284 5,479 4,528 ========= ========= ========= ========= ========= Net income per common share - basic 0.33 0.58 0.35 0.59 0.48 ========= ========= ========= ========= ========= Net income per common share - diluted 0.32 0.56 0.35 0.59 0.48 ========= ========= ========= ========= ========= Cash dividends declared per common share 1.16 1.12 1.08 1.08 0.24 ========= ========= ========= ========= ========= Net cash provided by operating activities 23,820 14,972 7,216 12,423 11,151 Net cash (used in) provided by investing activities (110,764) (16,952) 7,887 -- -- Net cash provided by (used in) financing activities 88,116 1,859 (15,610) (12,304) (12,780) --------- --------- --------- --------- --------- Net increase (decrease) in cash and cash equivalents 1,172 (121) (507) 119 (1,629) ========= ========= ========= ========= ========= Total assets 467,115 309,126 221,216 216,019 222,467 ========= ========= ========= ========= ========= Long-term obligations (including related accrued interest) 227,160 192,540 123,664 112,038 114,410 ========= ========= ========= ========= ========= Funds from operations(2) 21,483 14,371 12,049 11,486 12,959 ========= ========= ========= ========= ========= Rent received above (below) straight line rent (924) (105) 400 569 420 ========= ========= ========= ========= =========
- ---------- (1) Loss on extinguishment of debt is reported as an extraordinary item on the consolidated statements of income. (2) The Company believes that Funds From Operations enhances an investor's understanding of the Company's financial condition, results of operations and cash flows. The Company believes that Funds From Operations is an appropriate measure of the performance of an equity REIT, and that it can be one measure of a REIT's ability to make cash distributions. Funds From Operations is defined by the National Association of Real Estate Investment Trusts, Inc. ("NAREIT") as "net income (or loss) (computed in accordance with generally accepted accounting principles ("GAAP")), excluding gains (or losses) from debt restructuring and sales of property, plus real estate depreciation and amortization and after adjustments for unconsolidated partnerships and joint ventures." The Company's method of calculating Funds From Operations excludes other non-recurring revenue and expense items and may be different from methods used by other REITs and accordingly, is not comparable to such other REITs. Funds From Operations should not be considered an alternative to net income, as an indicator of the Company's operating performance or to cash flows from operating activities as determined in accordance with GAAP, or as a measure of liquidity to other consolidated income or cash flow statement data as determined in accordance with GAAP. 16 17 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS General The Company, which has elected to qualify as a real estate investment trust under the Internal Revenue Code of 1986, acquires and manages net-leased commercial properties. The Company has operated as a REIT since October 1993 when it initially issued 9.3 million shares of its Common Shares, approximately 169,000 units of special limited partnership units (which are exchangeable for an equivalent number common shares shares) and approximately $1.877 million in principal amount of 7.75% Subordinated Notes due 2000. As of December 31, 1997, the Company was the indirect or direct owner of fifty-one triple net leased real estate properties (or interests therein) (including the Newark, California property held for sale). On December 31, 1997, the Company completed a reorganization, becoming a Maryland statutory real estate investment trust. Immediately prior to the reorganization, the Company had been a Maryland corporation. The reorganization did not result in any material change in the Company's business or operations. Liquidity and Capital Resources Real Estate Assets. As of December 31, 1997, the Company's real estate assets consisted of the Properties. The Properties are located in twenty-five states and contain an aggregate of approximately 7.5 million square feet of net rentable space. With one exception, each Property is subject to a single tenant triple net lease, which is generally characterized as a lease in which the tenant pays all or substantially all of the cost and cost increases for real estate taxes, capital expenditures, insurance and ordinary maintenance of the Property. During 1997, the Company acquired fourteen properties in ten states at a cost of approximately $178.8 million. For further information reference is made to the chart on page 5, Item 2. The Company's principal sources of liquidity are revenue generated from the Properties, interest on cash balances, amounts available under its Credit Facility and amounts that may be raised through the sale of securities in private or public offerings. For the year ended December 31, 1997, such leases on the Properties generated approximately $42.5 million in revenue compared to $31.2 million in 1996. On the basis of the leases in place as of December 31, 1997, minimum annual rent receivable under non-cancelable leases is $48.9 million for 1998. Dividends. The Company has made quarterly distributions since October, 1986 without interruption. The Company paid a dividend of $.27 per share to shareholders in respect of each of the calendar quarters of 1995; a dividend of $.27 per share to shareholders in respect of the first quarter of 1996; $.28 per share in respect of the second and third quarters of 1996; and $.29 per share in respect of the fourth quarter of 1996 and the first, second and third quarters of 1997. The dividend paid in respect of the fourth quarter of 1997, in the amount of $.29 per share, was paid on February 13, 1998 to shareholders of record as of January 30, 1998. The Company's annualized dividend rate is currently $1.16 per share. UPREIT Structure. The Company's UPREIT structure permits the Company to effect acquisitions by issuing to a seller, as a form of consideration, interests in partnerships controlled by the Company. All of such interests are redeemable at certain times for Common Shares on a one-for-one basis and all of such interests require the Company to pay certain distributions to the holders of such interests. The Company accounts for these interests in a manner similar to a minority interest holder. The number of Common Shares that will be outstanding in the future should be expected to increase, and minority interest expense should be expected to decrease, from time to time, as such partnership interests are redeemed for Common Shares. The table set forth below provides certain information with respect to such partnership interests as of December 31, 1997 (assuming the Company's dividend rate remains at $1.16 per share). 17 18
Total 1998 Annual Redeemable Annualized Distribution for Shares of Number Per Unit in 1998 Common Shares as of: of Units Distribution ($000's) - -------------------- -------- ------------ -------- At any time 169,109 $ 1.160 $ 196 May 1998 1,715,294 0.975 1,672 May 1998 114,006 1.080 123 January 1999 147,246 1.120 165 April 1999 480,028 1.160 557 January 2003 7,441 -- -- March 2004 52,335 0.270 14 November 2004 35,400 -- -- March 2005 36,825 -- -- January 2006 207,728 -- -- February 2006 23,267 -- -- May 2006 11,766 0.290 3 --------- --------- Total 3,000,445 $ 2,730 ========= =========
Of the total number of units, 313,435 are owned by affiliates of the Company. Financing Exchangeable Redeemable Secured Notes. In March 1997, in connection with the acquisition of certain properties leased to Exel, LCIF sold $25 million of 8% Exchangeable Redeemable Secured Notes (the "Notes") to an institutional investor in a private placement. The Notes require interest only payments at 8% per annum, payable semi-annually in arrears, and have a seven year term. The Notes are secured by first mortgage liens on the Exel Properties, are guaranteed by Lexington, and can be exchanged by the holders for Lexington common shares at $13 per share beginning in the year 2000, subject to adjustment. The Notes may be redeemed at Lexington's option after three years at a price of 103.2% of the principal amount, declining to par after five years. The Notes are subordinated to obligations under Lexington's Credit Facility. Partnership Mergers. In connection with the acquisition of the Exel Properties, an unaffiliated partnership (the "Exel Partnership") merged into a subsidiary of the Company, Lepercq Corporate Income Fund L.P., ("LCIF"). As a result of the merger, LCIF issued 480,028 partnership units redeemable for the Company's Common Shares, which units are entitled to distributions at the same dividend rate as Common Shares. At the time of the merger, the Exel Partnership's sole assets were approximately $6.0 million of cash from the prior sale of a property and the right to acquire the Exel Properties in a tax-free exchange under Internal Revenue Code Section 1031. On January 29, 1998 two affiliated partnerships merged into LCIF. As a result of the merger, LCIF issued 1,454,906 partnership units redeemable for the Company's Common Shares, which units are entitled to distributions at the same dividend rate as common shares. At the time of the merger, the partnerships' sole assets were approximately $23.5 million in cash from prior property sales and the right to acquire properties in tax free exchanges under Internal Revenue Code Section 1031. The Company is currently in the process of completing such tax free exchanges. Revolving Credit Facility. In February 1997, the Company's secured revolving credit facility (the "Credit Facility") was amended to extend the maturity date to June 1999 and to increase the maximum borrowing availability to $60.0 million. The Credit Facility bears interest at 1.5% over LIBOR and has an interest rate period of one month, three months, or six months, at the option of the Company. The Credit Facility contains various leverage, debt service coverage, net worth maintenance and other customary covenants. Due to these covenants, approximately $30 million was available to the Company at December 31, 1997. The Credit Facility matures on June 1, 1999, but will automatically renew for successive two year terms unless the lender notifies the Company at least twelve months in advance of the scheduled or extended maturity date of its intention to terminate the Credit Facility. As of December 18 19 31, 1997, the Company had borrowed $12 million. As the Credit Facility is collateralized by seven of the Company's Properties, this amount is included in the balance of mortgage notes payable as of December 31, 1997. Preferred Shares Sale. On December 31, 1996, the Company entered into an agreement with Five Arrows Realty Securities L.L.C ("Five Arrows") providing for the sale of up to 2,000,000 shares of Senior Cumulative Convertible Preferred Shares ("Preferred Shares") for an aggregate price of $25 million. In connection with such sale, the Company has entered into certain related agreements with Five Arrows, providing, among other things, for certain registration rights with respect to such shares and the right to designate a member of the Board of Directors under certain circumstances. The Preferred Shares, which are convertible at any time at the holder's option into Common Shares on a one-for-one basis, are entitled to quarterly distributions equal to the greater of $.295 per share or 105% of the quarterly common share dividend. On January 21, 1997, the Company sold 700,000 shares of Preferred Shares to Five Arrows and used the proceeds of $8.75 million to repay approximately $8.0 million of mortgage debt, including prepayment premiums of $520,000. Such mortgage debt had been bearing interest at 12.625% per annum and would have required interest and principal payments of approximately $1.45 million in 1997. On April 28, 1997, the Company sold an additional 625,000 shares of Convertible Preferred Shares to Five Arrows. Net proceeds to the Company were approximately $7.8 million. On May 1, 1997, the Company used the net proceeds to acquire the Rancho Bernardo Property for $7.7 million. On December 31, 1997, the Company sold an additional 675,000 shares of Convertible Preferred Shares to Five Arrows. Net proceeds to the Company were approximately $8.4 million. The Company used the net proceeds to satisfy a portion of the purchase price of the Decatur, Georgia Property. Debt Service Requirements. The Company's principal liquidity needs are the payment of interest and principal on outstanding mortgage debt. As of December 31, 1997, a total of forty-one properties were subject to outstanding mortgages which had an aggregate principal amount, including accrued interest, of $220.56 million. The weighted average interest rate on the Company's debt on such date was approximately 8.17%. Approximate balloon payment amounts for the next five calendar years are due as follows: $10.01 million in 1998; $17.56 million in 1999 (including the $12 million Credit Facility which may be extended); $13.09 million in 2000; $1.00 million in 2001 and $771,000 in 2002. See Note 5 of the Company's Consolidated Financial Statements. The ability of the Company to make such balloon payments will depend upon its ability to refinance the mortgage related thereto, sell the related property, have available amounts under its credit facility or access to other capital sufficient to satisfy such balloon payments. The ability of the Company to accomplish such goals will be affected by numerous economic factors affecting the real estate industry, including the available mortgage rates at the time, the Company's equity in the mortgaged properties, the financial condition of the Company, the operating history of the mortgaged properties, the then current tax laws and the general national, regional and local economic conditions at the time. The Company intends to repay balloon payments due in 1998 with amounts available under the Credit Facility. As of December 31, 1997, the Company's total consolidated indebtedness (including subordinated notes payable and origination fees payable and the respective related accrued interest) was approximately $227 million. See also "Funds From Operations" below. Lease Obligations. Because the Company's tenants bear all or substantially all of the cost of property maintenance and capital improvements, the Company does not anticipate significant needs for cash for property maintenance or repairs. The Company generally funds property expansions with additional secured borrowings, the repayment of which is funded out of rental increases under the leases covering the expanded properties. Shares Repurchase. On November 15, 1994, the Company announced that its Board of Directors had authorized the Company to repurchase, from time to time, up to 1,000,000 shares of its outstanding Common Shares, depending on market conditions and other factors. As of December 31, 1997, the Company had repurchased 172,100 shares, at an average price of approximately $9.80 per share, all of which have been retired. There has been no repurchase of shares since 1995. Impact of Year 2000 The Company is evaluating its computer and communication systems to identify the systems that could be affected by the "Year 2000" issue. The Year 2000 problem is the result of computer programs being written using two digits rather than four to define the applicable year. Any of the Company's systems 19 20 that have time-sensitive software may recognize a date using "00"as the year 1900 rather than the year 2000. This could result in a major system failure or miscalculations. The Company presently believes that the Year 2000 problem will not pose operational problems for the Company's computer and communication systems and will not have a material impact on the operations of the Company.
Results of Operations ($000) - ---------------------------- Increase(Decrease) Selected Income Statement Data 1997 1996 1995 1997-1996 1996-1995 ------ ------ ------ --------- --------- Total revenues $43,569 31,675 25,002 $11,894 $ 6,673 Total expenses $32,862 25,519 19,890 $ 7,343 $ 5,629 Interest 16,644 12,818 10,295 3,826 2,523 Depreciation & amortization 10,608 7,627 5,817 2,981 1,810 General & administrative 3,920 3,125 2,694 795 431 Net Income $ 8,593 5,466 3,284 $ 3,127 $ 2,182
Changes in the results of operations for the Company are primarily due to the growth of its portfolio and costs associated with such growth. The increase in interest expense due to the growth of the Company's portfolio has been offset in 1997 by a reduction in the weighted average interest rate from 9.04% as of December 31, 1996 to 8.17% as of December 31, 1997, due to debt refinancings and repayments. The Company's general and administrative expenses have decreased as a percentage of rental revenue to 9% in 1997 from 10% in 1996 and 11% in 1995 due to the growth of the Company's portfolio relative to these expenses. Other expenses in 1996 included $644,000 of expenses which were comprised of costs associated with a proposed equity offering which was abandoned in favor of the completed private equity placement, and expenses incurred in connection with transactions in progress for which expenses are required to be charged to current operations. The increase in net income for the year ended December 31, 1997 was primarily attributable to the gain on sale of the Stratus Property in the amount of $3.517 million offset by extraordinary losses on extinguishment of debt (net of minority interest) including $1.667 million in connection with the Stratus Property mortgage repayment and $1.466 million in connection with the Salt Lake City debt refinancing. The increase in net income for the year ended December 31, 1996 was primarily atrributable to a loss on extinguishment of debt incurred in 1995 in the amount of approximately $4.849 million offset by items relating to the sale of the Eagan, Minnesota property, a gain on the sale of approximately $1.5 million and proceeds from lease termination of $1.6 million, less the related write-off of deferred rent receivable of approximately $678,000. Funds From Operations Management believes that Funds From Operations enhances an investor's understanding of the Company's financial condition, results of operations and cash flows and believes it is an appropriate performance measure for an equity REIT which provides an indication of a REIT's ability to make cash distributions. Funds From Operations is defined by the National Association of Real estate Investment Trusts, Inc. (NAREIT) as "net income (or loss) (computed in accordance with generally accepted accounting principles ("GAAP")), excluding gains (or losses) from debt restructuring and sales of property, plus real estate depreciation and amortization and after adjustments for unconsolidated partnerships and joint ventures." The Company's method of calculating Funds From Operations excludes other non-recurring revenue and expense items and may be different from methods used by other REITs and, accordingly, is not comparable to such other REITs. Funds From Operations should not be considered an alternative to net income as an indicator of operating performance or to cash flows from operating activities as determined in accordance with GAAP, or as a measure of liquidity to other consolidated income or cash flow statement data as determined in accordance with GAAP. 20 21 The following table reflects the calculation of the Company's FFO and cash flow activities for the years ended December 31, 1997, 1996 and 1995 ($000).
1997 1996 1995 ------ ------ ------ Net income $ 8,593 $ 5,466 $ 3,284 Add back: Depreciation and amortization of real estate 10,608 7,627 5,817 Minority interest's share of net income 2,442 690 93 Loss from debt restructuring 3,189 -- 4,849 Property arbitration litigation expense 168 -- -- Less: Gain on sale of property (3,517) -- (1,514) Write off of deferred rent receivable related to property sale -- -- 678 Proceeds from lease termination -- -- (1,600) --------- --------- --------- Funds from operations before items below 21,483 13,783 11,607 Adjustments of other non-recurring items(1) Non-recurring shares compensation -- 588 442 --------- --------- --------- Funds From Operations $ 21,483 $ 14,371 $ 12,049 ========= ========= ========= Cash flows from operating activities $ 23,820 $ 14,972 $ 7,216 Cash flows from investing activities (110,764) (16,952) 7,887 Cash flows from financing activities 88,116 1,859 (15,610) ========= ========= =========
The Company's dividends paid to shareholders and distributions paid to unitholders amounted to approximately 73.5%, 77.9% and 84.6% of the Company's Funds From Operations for the years ended December 31, 1997, 1996 and 1995 respectively. Accounting Standards In June 1997, SFAS No. 130, "Reporting Comprehensive Income", and SFAS No. 131, Disclosures about Segments of an Enterprise and Related Information, were issued. SFAS No. 130 establishes standards for reporting and displaying comprehensive income and its components in a financial statement that is displayed with the same prominence as other financial statements. Reclassification of financial statements for earlier periods, provided for comparative purposes, is required. The statement also requires the accumulated balance of other comprehensive income to be displayed separately from retained earnings and additional paid-in capital in the equity section of the balance sheet. SFAS No. 131 establishes standards for reporting information about operating segments in annual and interim financial statements. Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance. Categories required to be reported as well as reconciled to the financial statements are segment profit or loss, certain specific revenue and expense items, and segment assets. SFAS No. 130 and No. 131 are effective for fiscal years beginning after December 15, 1997. These standards will have no impact on the Company's operations. - ---------- (1) For purposes of the calculation of Funds From Operations ("FFO"), the Company has added back to net income amounts for non-recurring shares compensation which management believes to be appropriate adjustments based on the non-recurring and unusual nature of such amounts. The Company's method of calculating FFO may be different from methods used by other REITs. Non-recurring shares compensation represents the expense of a simultaneous exercise and re-granting of options to the Company's management during the period between July 1995 and January 1996, which was intended to increase management's ownership in the Company (a practice which has been discontinued). The Board of Directors has determined that the Company will not engage in such practices in the future. In 1996 transactional expenses of $644 were incurred. Management believes such expenses were of an unusual and significant nature for the Company at the time they were incurred. If such amount was added back to net income, FFO for 1996 would have been $15.015 million. 21 22 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA LEXINGTON CORPORATE PROPERTIES TRUST AND CONSOLIDATED SUBSIDIARIES (formerly Lexington Corporate Properties, Inc.) INDEX Page ---- Independent Auditors' Report 23 Consolidated Balance Sheets as of December 31, 1997 and 1996 24 Consolidated Statements of Income for the years ended December 31, 1997, 1996 and 1995 25 Consolidated Statements of Changes in Shareholders' Equity for the years ended December 31, 1997, 1996 and 1995 26 Consolidated Statements of Cash Flows for the years ended December 31, 1997, 1996 and 1995 27-28 Notes to Consolidated Financial Statements 29-44 Financial Statement Schedule Schedule III - Real Estate and Accumulated Depreciation 45-47 - ---------- All other schedules have been omitted because the required financial information is not applicable or the information is shown in the consolidated financial statements or notes thereto. 22 23 Independent Auditors' Report The Shareholders Lexington Corporate Properties Trust: We have audited the consolidated financial statements of Lexington Corporate Properties Trust, formerly Lexington Corporate Properties, Inc., and consolidated subsidiaries as listed in the accompanying index. In connection with our audits of the consolidated financial statements, we also have audited the financial statement schedule as listed in the accompanying index. These consolidated financial statements and the financial statement schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements and the financial statement schedule based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Lexington Corporate Properties Trust and consolidated subsidiaries as of December 31, 1997 and 1996, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 1997 in conformity with generally accepted accounting principles. Also in our opinion, the related financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein. KPMG Peat Marwick LLP New York, New York January 22, 1998 23 24 LEXINGTON CORPORATE PROPERTIES TRUST AND CONSOLIDATED SUBSIDIARIES Consolidated Balance Sheets ($000 except share and per share amounts) December 31, 1997 and 1996
Assets 1997 1996 ---- ---- Real estate, at cost (notes 3 and 5): Buildings and building improvements $ 407,403 $ 287,534 Land and land estates 47,769 38,372 Land improvements 2,831 2,831 Fixtures and equipment 8,345 10,674 --------- --------- 466,348 339,411 Less: accumulated depreciation 50,993 51,343 --------- --------- 415,355 288,068 Property held for sale (note 10) 24,501 -- Cash and cash equivalents (note 5) 3,640 2,468 Restricted cash (note 4) 5,499 3,750 Deferred expenses (net of accumulated amortization of $2,543 in 1997 and $2,955 in 1996) 4,283 3,734 Rent receivable (note 2) 7,638 7,843 Escrow deposits 1,249 104 Other assets, net 4,950 3,159 --------- --------- $ 467,115 $ 309,126 ========= ========= Liabilities and Shareholders' Equity Mortgage notes payable, including accrued interest (note 5) $ 220,560 $ 186,188 Subordinated notes payable, including accrued interest (note 6) 1,973 1,973 Origination fees payable, including accrued interest and accumulated accretion (note 13) 4,627 4,379 Accounts payable and other liabilities 4,880 1,394 --------- --------- 232,040 193,934 Minority interests (note 8) 28,240 22,533 --------- --------- 260,280 216,467 --------- --------- Commitments and Contingencies (notes 3 and 10) Preferred shares, par value $0.0001 per share; authorized 10,000,000 shares. Class A Senior Cumulative Convertible Preferred, liquidation preference $25,000, 2,000,000 issued and outstanding at December 31, 1997 (note 9) 24,369 -- Shareholders' equity (note 1): Excess shares, par value $0.0001 per share; authorized 40,000,000 shares, issued none -- -- Common shares, par value $0.0001 per share, authorized 40,000,000 shares, 16,509,610 and 9,426,900 shares issued and outstanding in 1997 and 1996, respectively 2 1 Additional paid-in-capital 235,469 136,956 Accumulated distributions in excess of net income (53,005) (44,298) --------- --------- Total shareholders' equity 182,466 92,659 --------- --------- $ 467,115 $ 309,126 ========= =========
See accompanying notes to consolidated financial statements. 24 25 LEXINGTON CORPORATE PROPERTIES TRUST AND CONSOLIDATED SUBSIDIARIES Consolidated Statements of Income ($000 except share and per share amounts) Years ended December 31, 1997, 1996 and 1995
1997 1996 1995 ---- ---- ---- Revenues: Rental (note 7) $ 42,493 $ 31,244 $ 24,523 Interest and other 1,076 431 479 ------------ ------------ ------------ 43,569 31,675 25,002 ------------ ------------ ------------ Expenses: Interest expense (notes 5 and 6) 16,644 12,818 10,295 Depreciation and amortization of real estate 10,608 7,627 5,817 Amortization of deferred expenses 876 619 464 General and administrative expenses (notes 7, 11, 12 and 13) 3,920 3,125 2,694 Other expenses 814 1,330 620 ------------ ------------ ------------ 32,862 25,519 19,890 ------------ ------------ ------------ Income before gain on sale of properties, lease termination proceeds, minority interests and extraordinary item 10,707 6,156 5,112 Gain on sale of properties (note 3) 3,517 -- 1,514 Proceeds from lease termination (note 3) -- -- 1,600 ------------ ------------ ------------ Income before minority interests and extraordinary item 14,224 6,156 8,226 Minority interests (note 8) 2,442 690 93 ------------ ------------ ------------ Income before extraordinary item 11,782 5,466 8,133 Extraordinary item - loss on extinguishment of debt (note 5) 3,189 -- 4,849 ------------ ------------ ------------ Net income $ 8,593 $ 5,466 $ 3,284 ============ ============ ============ Net income per common share - basic: (note 2) Income before extraordinary item, per common share $ 0.61 $ 0.58 $ 0.88 Extraordinary item - loss on extinguishment of debt, per common share (0.28) -- (0.53) ------------ ------------ ------------ Basic net income per common share $ 0.33 $ 0.58 $ 0.35 ============ ============ ============ Weighted average common shares outstanding 11,444,589 9,392,727 9,263,169 ============ ============ ============ Net income per common share - diluted (note 2): Income before extraordinary item, per common share $ 0.59 $ 0.56 $ 0.86 Extraordinary item - loss on extinguishment of debt, per common share (0.27) -- (0.51) ------------ ------------ ------------ Diluted net income per common share $ 0.32 $ 0.56 $ 0.35 ============ ============ ============ Weighted average common shares outstanding 11,639,683 10,897,011 9,502,355 ============ ============ ============
See accompanying notes to consolidated financial statements. 25 26 LEXINGTON CORPORATE PROPERTIES TRUST AND CONSOLIDATED SUBSIDIARIES Consolidated Statements of Changes in Shareholders' Equity ($000 except share and per share amounts) Years ended December 31, 1997, 1996 and 1995
Distributions Number Additional Paid in of paid-in Excess of Total shares Amount Capital Net Income Equity ----------- ------------ ------------ ------------ ------------ Balance at December 31, 1994 9,288,360 $ 1 $ 133,929 $ (32,710) $ 101,220 Net income -- -- -- 3,284 3,284 Dividends paid to shareholders ($1.08 per share) -- -- -- (10,011) (10,011) Exchange of special limited partnership units for partnership interests -- -- 1,503 -- 1,503 Common shares issued 185,622 -- 1,937 -- 1,937 Common shares repurchased and retired (142,000) -- (1,415) -- (1,415) ----------- ------------ ------------ ------------ ------------ Balance at December 31, 1995 9,331,982 1 135,954 (39,437) 96,518 Net income -- -- -- 5,466 5,466 Dividends paid to shareholders ($1.10 per share) -- -- -- (10,327) (10,327) Common shares issued, net of offering costs 94,918 -- 1,002 -- 1,002 ----------- ------------ ------------ ------------ ------------ Balance at December 31, 1996 9,426,900 1 136,956 (44,298) 92,659 Net income -- -- -- 8,593 8,593 Dividends paid to common shareholders ($1.16 per share) -- -- -- (12,836) (12,836) Dividends paid to preferred shareholders ($0.91 per share) -- -- -- (916) (916) Deemed dividend related to issuance of preferred shares -- -- 3,548 (3,548) -- Common shares issued, net of offering costs 7,082,710 1 94,965 -- 94,966 ----------- ------------ ------------ ------------ ------------ Balance at December 31, 1997 16,509,610 $ 2 $ 235,469 $ (53,005) $ 182,466 =========== ============ ============ ============ ============
See accompanying notes to consolidated financial statements. 26 27 LEXINGTON CORPORATE PROPERTIES TRUST AND CONSOLIDATED SUBSIDIARIES Consolidated Statements of Cash Flows ($000) Years ended December 31, 1997, 1996 and 1995
1997 1996 1995 ---- ---- ---- Cash flows from operating activities: Net income $ 8,593 $ 5,466 $ 3,284 Adjustments to reconcile net income to net cash provided by operating activities net of effects of acquisitions: Depreciation and amortization 11,484 8,247 6,281 Minority interests 2,442 690 93 Gain on sale of properties (3,517) -- (1,514) Extraordinary item - loss on extinguishment of debt 3,189 -- -- Increase (decrease) in accounts payable and other liabilities 3,280 746 (364) Other adjustments (net) (1,651) (177) (564) --------- --------- --------- Total adjustments 15,227 9,506 3,932 --------- --------- --------- Net cash provided by operating activities 23,820 14,972 7,216 --------- --------- --------- Cash flows from investing activities: Net proceeds from sale of properties 21,362 -- 16,347 Acquisitions of real estate properties and partnerships, net of issuance of limited partnership units and common shares, cash received and liabilities assumed (132,129) (16,955) (8,460) Distributions from unconsolidated partnerships 3 3 -- --------- --------- --------- Net cash (used in) provided by investing activities (110,764) (16,952) 7,887 --------- --------- --------- Cash flows from financing activities: Proceeds of mortgage notes payable $ 130,942 $ 19,619 $ 84,514 Dividends to common and preferred shareholders (13,752) (10,327) (10,011) Repayments on mortgage notes (118,401) (7,534) (83,196) Common shares issued, net of offering costs 75,133 1,002 1,937 Preferred shares issued, net of offering costs 24,369 -- -- Prepayment premium on early retirement of debt (3,560) -- -- Cash distributions to minority interests (2,034) (871) (183) (Increase) decrease in escrow deposits (1,145) 550 (550) Increase in deferred expenses (1,687) (294) (3,242) (Increase) decrease in restricted cash (1,749) (286) (3,464) Common shares repurchased -- -- (1,415) --------- --------- --------- Net cash provided by (used in) financing activities 88,116 1,859 (15,610) --------- --------- --------- Increase (decrease) in cash and cash equivalents 1,172 (121) (507) Cash and cash equivalents at beginning of year 2,468 2,589 3,096 --------- --------- --------- Cash and cash equivalents at end of year $ 3,640 $ 2,468 $ 2,589 ========= ========= ========= Supplemental disclosure of cash flow information: Cash paid during the year for interest $ 15,801 $ 12,828 $ 10,161 ========= ========= ========= Cash paid during the year for taxes $ 106 $ 156 $ 182 ========= ========= ========= (continued)
See accompanying notes to consolidated financial statements. 27 28 LEXINGTON CORPORATE PROPERTIES TRUST AND CONSOLIDATED SUBSIDIARIES Consolidated Statements of Cash Flows, Continued Supplemental disclosure of non-cash investing and financing activities: On December 31, 1997, the Company issued 1,284,725 common shares in exchange for all the shares of another company. The transaction was valued at $19.8 million and consisted of the acquisition of three properties for $35.1 million less $15.3 million of mortgage indebtedness assumed. On July 9, 1997, in connection with a property acquisition, the Company assumed approximately $5.9 million of first mortgage financing and issued a $600 note to the seller. On March 19, 1997, in connection with an acquisition of properties involving a partnership, the Company issued partnership units as partial satisfaction of the aggregate purchase price of $27.4 million. The issuance of these partnership units have been recorded as minority interest in the amount of $6.0 million in the accompanying consolidated financial statements. On December 31, 1996, the Company completed an acquisition transaction involving a partnership, whereby five properties were acquired in exchange for special limited partnership units, following which the selling partnership was dissolved. Total assets acquired and total liabilities assumed in the exchanges were $22.2 million and $18.4 million, respectively. On May 22, 1996, the Company completed an acquisition transaction involving a partnership, whereby a property was acquired in exchange for special limited partnership units, following which the selling partnership was dissolved. Total assets acquired and total liabilities assumed in the exchange were approximately $56.9 million and $38.5 million, respectively. On August 1, 1995, the Company acquired ownership interests in six partnerships in exchange for special limited partnership units. The financial position of four of these partnerships is included in the consolidated balance sheets as of December 31, 1996 and 1995. Total assets and total liabilities acquired in the exchange were $10.2 million and $10.2 million, respectively. The Company's proportionate share of the remaining two partnerships is included in investment in partnerships. See accompanying notes to consolidated financial statements. 28 29 LEXINGTON CORPORATE PROPERTIES TRUST AND CONSOLIDATED SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 1997, 1996 and 1995 (1) The Company Lexington Corporate Properties Trust, formally Lexington Corporate Properties, Inc. (the "Company"), is a Maryland statutory real estate investment trust that acquires, owns, and manages a diverse portfolio of office, industrial and retail properties. The real properties owned by the Company are, with one exception, subject to triple net leases to corporate tenants. References herein to the "Company" shall include references to the Company, two affiliated partnerships (the "Partnerships") and the Company's predecessor, Lexington Corporate Properties, Inc., a Delaware corporation which was organized in October 1993, reincorporated in Maryland in June 1994 and was merged into the Company on December 31, 1997. The total number of shares of all classes of capital shares that the Company has authority to issue is 90,000,000 shares, consisting of 40,000,000 shares of common shares with a par value of $.0001 per share, 40,000,000 shares of excess shares with a par value of $.0001 per share and 10,000,000 shares of preferred shares with a par value of $.0001 per share. The excess shares are not entitled to receive dividends, except upon liquidation of the Company. Such shares vote as a single class with holders of shares of the Company's Common Shares. The excess shares and Common Shares are considered equal for purposes of liquidation of the Company. On November 15, 1994, the Company announced that its Board of Directors had authorized the Company to repurchase, from time to time, up to 1,000,000 shares of its outstanding Common Shares, depending on market conditions and other factors. As of December 31, 1997, the Company had repurchased 172,100 shares at an average price of approximately $9.80 per share, all of which have been retired. There has been no repurchase of shares since 1995. (2) Summary of Significant Accounting Policies Basis Of Presentation and Consolidation. The Company's consolidated financial statements are prepared on the accrual basis of accounting for financial and Federal income tax reporting purposes. The financial statements reflect the accounts of the Company and its majority-owned subsidiaries, including, Lepercq Corporate Income Fund L.P. ("LCIF") and Lepercq Corporate Income Fund II L.P. ("LCIF II"). The Company is the sole general partner and majority limited partner of LCIF and LCIF II as well as general partner and majority limited partner in four other partnerships and, accordingly, accounts for them on a consolidated basis. Entities in which the Company has an interest of less than 50% are accounted for under the equity method and the investments in these partnerships are included in other assets in the accompanying consolidated balance sheets. Real Estate. The Company adopted the provisions of SFAS No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of, on January 1, 1996. This Statement requires that long-lived assets and certain identifiable intangibles be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceed the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell. Adoption of this Statement in 1996 and its application in 1997 did not have any impact on the Company's financial position or results of operations. Depreciation for financial reporting purposes is determined by the straight-line method over the remaining estimated economic useful lives of the properties. The Company depreciates buildings and building improvements over a 40-year period or the remaining useful lives from the dates of acquisition, land improvements over a 20-year period, and fixtures and equipment over a 12-year period. Acquisition fees incurred in connection with properties acquired have been capitalized as a 29 30 LEXINGTON CORPORATE PROPERTIES TRUST AND CONSOLIDATED SUBSIDIARIES Notes to Consolidated Financial Statements (2), Continued cost of the properties upon acquisition. Depreciation for tax purposes is determined in accordance with the Modified Accelerated Cost Recovery System. Revenue. The Company has determined that the leases relating to the properties are operating leases. Rental revenue is recognized on a straight-line basis over the minimum lease terms. The Company's rent receivable primarily represents the amounts of the excess of rental revenues recognized on a straight-line basis over the annual rents collectible under the leases. Deferred Financing Fees And Expenses. Deferred expenses are composed principally of debt placement, mortgage loan and other loan fees, and are amortized using the straight-line method, which approximates the interest method, over the terms of the mortgages. Origination Fees. Origination fees payable obligations have been discounted using an annual rate of 13%. Tax Status. The Company has qualified as a real estate investment trust under the Code. A real estate investment trust is generally not subject to Federal income tax on that portion of its real estate investment trust taxable income ("Taxable Income") which is distributed to its shareholders, provided that at least 95% of Taxable Income is distributed. No provision for Federal income taxes has been made in the consolidated financial statements, as the Company believes it is in compliance with the Code and has distributed all of its taxable income. A summary of the taxable nature of the Company's dividends for the three years ended December 31 is as follows:
1997 1996 1995 ---- ---- ---- Total dividends per share $ 1.16 $ 1.10 $ 1.08 Percent taxable as ordinary income 68.91% 95.46% 41.36% Percent taxable as long-term capital gains - - 24.71% Percent non-taxable as return of capital 31.09% 4.54% 33.93% ------- ------- ------ 100.00% 100.00% 100.00% ======= ======= =======
The Company and its consolidated subsidiaries are required to file tax returns in various states. States vary with respect to the taxation of REITs. Some states have a tax based on capital within the state; other states, not recognizing the REIT dividends paid deduction, have a tax based on apportioned income as it would any corporation. There are states that tax under both methods as well as states that have no additional taxes other than the minimum state tax requirement. The provision for state taxes is included in general and administrative expenses in the consolidated statements of income. There are no significant temporary differences giving rise to deferred taxes. Earnings Per Share. In February 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 128, Earnings Per Share ("SFAS No. 128"). SFAS No. 128 supersedes Accounting Principles Board Opinion No. 15, Earnings Per Share ("APB 15") and specifies the computation, presentation, and disclosure requirements for earnings per share ("EPS") for entities with publicly held common shares or potential common shares. SFAS No. 128 replaces the presentation of primary EPS with a presentation of basic EPS and fully diluted EPS with diluted EPS. This statement was adopted as required for the period ended December 31, 1997; the corresponding 1996 and 1995 per share data has been restated. Basic net income per share is computed by dividing net income reduced by preferred dividends and the "deemed dividends" described in note 9 by the weighted average number of common shares outstanding during the period. Reported basic per share amounts are based on 11,444,589, 9,392,727 and 9,263,169 common shares for the years ended December 31, 1997, 1996 and 1995, respectively. 30 31 LEXINGTON CORPORATE PROPERTIES TRUST AND CONSOLIDATED SUBSIDIARIES Notes to Consolidated Financial Statements (2), Continued Diluted net income per share amounts are similarly computed but include the effect, when dilutive, of the Company's other potentially dilutive securities. Diluted net income attributable to common shares is computed after giving effect to preferred dividends. The Company's Convertible Preferred Shares, OP Units and Exchangeable Notes are excluded from the 1997 computation due to their anti- dilutive effect during that period. The Company's Operating Partnership Units are included in the 1996 and 1995 computations due to their dilutive effect. Reported diluted per share amounts are based on 11,639,683, 10,897,011 and 9,502,355 common and common equivalent shares for the years ended December 31, 1997, 1996 and 1995, respectively. Fair Value of Financial Instruments. The Financial Accounting Standards Board's Statement of Financial Accounting Standards ("SFAS") No. 107, Disclosures about Fair Value of Financial Instruments, defines fair value of a financial instrument as the amount at which the instrument could be exchanged in a current transaction between willing parties. The Company's cash and cash equivalents, mortgage notes payable, subordinated notes payable, and accounts payable and other liabilities are carried at cost, which approximates fair value. Cash and Cash Equivalents. For purposes of the statements of cash flows, the Company considers all highly liquid instruments to be cash equivalents. Cash and cash equivalents on the balance sheets at December 31, 1997 and 1996 includes $3.64 million and $2.18 million of money market instruments, respectively. Stock Based Compensation. Prior to January 1, 1996, the Company accounted for its shares option plan in accordance with the provisions of Accounting Principles Board ("APB") Opinion No. 25, Accounting for Stock Issued to Employees, and related interpretations. As such, compensation expense would be recorded on the date of grant only if the current market price of the underlying shares exceeded the exercise price. On January 1, 1996, the Company adopted SFAS No. 123, Accounting for Stock-Based Compensation, which permits entities to recognize as expense over the vesting period the fair value of all shares-based awards on the date of grant. Alternatively, SFAS No. 123 also allows entities to continue to apply the provisions of APB Opinion No. 25 and provide pro forma net income and pro forma earnings per share disclosures for employee shares option grants made in 1995 and future years as if the fair-value-based method defined in SFAS No. 123 had been applied. The Company has elected to continue to apply the provisions of APB Opinion No. 25 and provide the pro forma disclosure provisions of SFAS No. 123. Use of Estimates. Management of the Company has made a number of estimates and assumptions relating to the reporting of assets and liabilities and the disclosure of contingent assets and liabilities to prepare these financial statements in conformity with generally accepted accounting principles. Actual results could differ from those estimates. Reclassifications. Certain amounts included in the prior years' financial statements have been reclassified to conform with the current year's presentation. (3) Investments in Real Estate The Company's real property portfolio as of December 31, 1997 consists of fifty-one properties (or interests therein) (the "Properties") located in twenty-five states, including warehousing, distribution and manufacturing facilities, office buildings and retail properties. All of the Company's properties, with one exception, are subject to triple net leases, which are generally characterized as leases in which the tenant bears all, or substantially all, of the costs and cost increase for real estate taxes, insurance and ordinary maintenance. The purchase prices on the Properties were satisfied with existing cash, proceeds of mortgage and equity financings, issuance of the Company's common shares, and the issuance of special limited partnership units of one of the Partnerships. 31 32 LEXINGTON CORPORATE PROPERTIES TRUST AND CONSOLIDATED SUBSIDIARIES Notes to Consolidated Financial Statements (3), Continued On September 2, 1997, the Company sold its property leased to Stratus Computer, Inc. in Marlborough, Massachusetts for approximately $21.36 million, realizing a gain of approximately $3.5 million. The Company also repaid a first mortgage loan with a balance of approximately $9.97 million and a related prepayment premium of approximately $1.86 million. The Company also incurred a write-off of unamortized loan costs of approximately $171,000. On March 31, 1995, the Company sold the Eagan, Minnesota Property for $16.55 million, realizing a gain of approximately $1.5 million. Additionally, the Company received lease termination proceeds of $1.6 million in connection with this transaction. The Company also incurred a write-off of deferred rent receivable in the amount of approximately $678,000 which is recorded as a reduction of rental revenue on the consolidated statements of income. During 1997, 1996 and 1995 the Company made the following acquisitions:
Annualized Net Base Rent Rentable Date of Acquisition 12-31-97 Lease Square Acquisition Tenant Location Cost ($M) ($000's) Expires Feet ---------------- -------------------------------- -------------------- ------------ ---------- ------- --------- 1997 February 20 Johnson Controls, Inc. Cottondale, AL $ 2.910 $ 289 02-07 58,800 March 19 Exel Logistics, Inc. Various * 27.428 2,772 11-06 761,200 May 1 Cymer, Inc. Rancho Bernardo, CA 7.707 755 12-09 65,755 July 9 Bull HN Info. Systems, Inc. Phoenix, AZ 10.990 972 10-05 137,058 July 22 Lockheed Martin Corporation Marlborough, MA 15.541 1,671 12-06 126,000 September 4 FirstPlus Financial Group, Inc. Dallas, TX 32.645 3,224 08-12 247,968 October 31 Ryder Integrated Logistics, Inc. Waterloo, IA 9.321 891 07-12 276,480 December 31 Stevens-Arnold, Inc. Milpitas, CA 22.138 2,006 12-05 100,026 December 31 Allied Holdings, Inc. Decatur, GA 14.633 1,351 12-07 112,248 December 31 Circuit City Stores, Inc. Richmond, VA 27.234 2,478 02-10 288,562 December 31 Dana Corp. Gordonsville, TN 4.902 325 08-07 148,000 December 31 Allegiance Healthcare Bessemer, AL 3.377 473 11-01 123,924 ------------ ---------- --------- TOTAL $ 178.826 $ 17,207 2,446,021 ============ ========== ========= 1996 May 22 Northwest Pipeline Corp. Salt Lake City, UT $ 55.396 $ 8,571 09-09 295,000 May 31 Wal-Mart Stores, Inc. Jacksonville, AL 2.049 146 02-07 56,132 December 23 Johnson Controls, Inc. Plymouth, MI 6.329 678 12-06 134,160 December 23 Johnson Controls, Inc. Oberlin, OH 4.791 513 12-06 111,160 December 23 SKF USA, Inc. Franklin, NC 3.448 322 12-14 72,868 December 31 Toys "R" Us, Inc. Tulsa, OK 2.711 327 05-06 43,123 December 31 Toys "R" Us, Inc. Clackamas, OR 3.173 383 05-06 42,842 December 31 Toys "R" Us, Inc. Lynwood, WA 2.963 357 05-06 43,105 December 31 Toys "R" Us, Inc. Houston, TX 3.793 400 08-06 123,293 December 31 Liberty House, Inc. Honolulu, HI 10.608 963 09-09 85,610 ------------ ---------- --------- TOTAL $ 95.261 $ 12,660 1,007,293 ============ ========== ========= 1995 August 1 GFS Realty, Inc. Rockville, MD $ 1.726 $ 224 02-05 51,682 August 1 GFS Realty, Inc. Oxon Hill, MD 2.534 408 02-04 107,337 August 1 Montgomery Ward & Co., Inc. Brownsville, TX 1.242 153 10-04 115,000 August 1 Federated Dept. Stores, Inc. Laguna Hills, CA 4.529 677 01-06 160,000 December 1 Wal-Mart Stores, Inc. Riverdale, CA 2.596 270 01-11 81,911 December 7 Scandinavian Health Spa, Inc. Canton, OH 4.421 626 12-08 37,214 ------------ ---------- --------- TOTAL $ 17.048 $ 2,358 553,144 ============ ========== =========
* Consists of three properties; two located in New Kingston, PA, one in Mechanicsburg, PA. 32 33 LEXINGTON CORPORATE PROPERTIES TRUST AND CONSOLIDATED SUBSIDIARIES Notes to Consolidated Financial Statements (3), Continued The acquisitions made during 1997, 1996 and 1995 have been accounted for using the purchase method of accounting. The following unaudited pro forma operating information for the years ended December 31, 1997 and 1996 has been prepared as if the acquisitions in 1997 and 1996 had been consummated as of January 1, 1996 and were carried forward through December 31, 1997. The information does not purport to be indicative of what the operating results of the Company would have been had the acquisitions been consummated on that date. Pro forma amounts are as follows:
($000's, except per share data) Unaudited Unaudited Pro forma Pro forma Year ended Year ended December 31, 1997 December 31, 1996 ----------------- ----------------- Revenues $ 56,947 $ 58,017 Net income 12,345 12,443 Net income per common share-basic 0.59 1.17 Net income per common share-diluted 0.58 1.15
The Company is committed to purchase a 103,000 square foot light industrial facility in Auburn Hills, Michigan (the "Auburn Hills Property") for approximately $13.875 million. The Auburn Hills Property will be leased to General Motors Corporation for eight years. The existing building will be renovated and an 81,000 square foot expansion completed in the third quarter of 1998 when the Company will acquire the property. On the basis of a project cost of $13.875 million, the annual net rent during the first four years would be $1.326 million and would escalate at the end of the fourth year by 6%. The Company is committed to purchase a 179,300 square foot office facility in Florence, South Carolina (the "Florence Property") for approximately $15.02 million. The Florence Property will be leased to Fleet Mortgage Group, Inc. for ten years. On the basis of a project cost of $15.02 million, the annual net rent during the first five years would be $1,520,464 and would escalate at the end of the fifth year by 17%. Construction of the property is scheduled for completion in the third quarter of 1998. The Company expects to close shortly thereafter subject to certain contingencies including the acceptance of the property by the tenant. (4) Restricted Cash On May 19, 1995, the Company, through its wholly owned subsidiary, LXP Funding Corp., completed a $70 million secured debt offering (the "REMIC Financing") by issuing commercial mortgage pass-through certificates. As a condition of the REMIC Financing, the trustee, established as part of the REMIC Financing, maintains a restricted cash account. Rent from the fifteen properties securing the debt is required to be deposited into this account. Additionally, there are certain reserves that are required to be funded and maintained in this account. The monthly debt service payments are made from the account and, after considering reserve requirements, any excess funds are transferred to the Company. 33 34 LEXINGTON CORPORATE PROPERTIES TRUST AND CONSOLIDATED SUBSIDIARIES Notes to Consolidated Financial Statements (5) Mortgage Notes Payable The Company's aggregate consolidated mortgage notes payable and related accrued interest as of December 31, 1997 was $220.56 million which consists of indebtedness outstanding under the REMIC Financing, borrowings outstanding under the Company's Credit Facility, and outstanding mortgage indebtedness related to nineteen of the Properties. Except as noted, all such debt bears interest at fixed rates. All of the Company's mortgages are nonrecourse and are secured by first mortgage liens on the properties and by collateral assignments of the leases. The following table sets forth certain information regarding the Company's aggregate mortgage indebtedness (including accrued interest) as of December 31, 1997 and 1996 (in $000's):
Mortgage Indebtedness Scheduled as of December 31, Interest Balloon Debt Service Property Location 12-31-97 12-31-96 Rate Maturity Payment in 1998 (i) - ----------------- -------- -------- ---- -------- ------- ----------- REMIC Financing (a) $ 68,202 $ 68,988 8.100% 05-25-05 $ 60,001 $ 6,353 Credit Facility (b) 12,044 25,072 8.130% 06-01-99 12,000 976 Individually encumbered properties: Tampa, FL (Queen Palm Dr) (c) 4,322 4,322 9.125% 05-01-98 4,290 163 Tampa, FL (North 30th) (c) 5,902 6,172 8.600% 06-01-98 5,717 392 Phoenix, AZ (Bank One) 5,630 5,713 10.750% 05-01-99 5,563 693 Richmond, VA 13,093 -- 8.875% 03-01-00 13,093 1,162 Bessemer, AL 1,000 -- 9.500% 09-01-01 1,000 95 Gordonsville, TN 1,248 -- 9.500% 10-01-02 771 194 Oxon Hill, MD 1,967 2,217 6.250% 03-01-04 -- 381 Mechanicsburg, PA (3 Exel props) (d) 25,641 -- 8.000% 03-20-04 25,000 2,000 Brownsville, TX 934 1,004 8.375% 11-01-04 260 150 Rockville, MD 1,183 1,294 8.820% 03-01-05 -- 221 Phoenix, AZ (Bull Promissory Note) 610 -- 6.380% 09-30-05 592 38 Phoenix, AZ (Bull) 5,845 -- 8.120% 10-01-05 4,245 621 Salt Lake City, UT 12,092 13,185 7.870% 10-01-05 -- 2,099 Laguna Hills, CA 4,451 4,735 8.375% 02-01-06 1,020 666 Canton, OH 2,664 2,792 9.490% 02-28-09 -- 388 Salt Lake City, UT (e) 22,401 22,446 7.610% 10-01-09 -- 2,901 Honolulu, HI 6,252 6,468 10.250% 10-01-10 -- 841 Dallas, TX 22,800 -- 7.490% 12-31-12 15,961 1,708 Franklin, NC (f) 2,279 2,835 8.500% 04-01-15 -- 222 Tulsa, OK (g) -- 1,913 -- -- -- -- Clackamas, OR (g) -- 2,212 -- -- -- -- Lynwood, WA (g) -- 2,090 -- -- -- -- Houston, TX (g) -- 2,342 -- -- -- -- Marlborough, MA (h) -- 10,388 -- -- -- -- -------- ------- -------- Subtotal 140,314 92,128 14,935 -------- ------- -------- Total (including accrued interest) $220,560 186,188 $ 22,264 ======== ======= ========
34 35 LEXINGTON CORPORATE PROPERTIES TRUST AND CONSOLIDATED SUBSIDIARIES Notes to Consolidated Financial Statements (5), Continued (a) The REMIC Financing is secured by mortgages on the following fifteen Properties: Modesto, California; Mansfield, Ohio; Marshall, Michigan (904 Industrial Road); Marshall, Michigan (1601 Pratt Avenue); Memphis, Tennessee; Mechanicsburg, Pennsylvania; Newark, California; Countryside, Illinois; Voorhees, New Jersey; Dewitt, New York; Newport, Oregon; Sacramento, California; Reno, Nevada; Las Vegas, Nevada; and Klamath Falls, Oregon. Due to the impending sale of the Newark, California Property (see Note 10), the Company is currently working to substitute that property with another pursuant to the terms of the agreement. (b) In February 1997, the Company's secured revolving credit facility (the "Credit Facility") was amended to extend the maturity to June 1, 1999 and to increase the maximum borrowing availibility to $60 million. The Company's Credit Facility bears interest at 1.5% over LIBOR and has an interest rate period of one, three or six months, at the option of the Company. The Credit Facility contains various leverage, debt service coverage, net worth maintenance and other customary covenants. Due to these covenants, approximately $30 million was available to the Company at December 31, 1997. The Credit Facility matures on June 1, 1999, but will automatically renew for successive two-year terms unless the lender notifies the Company at least twelve months in advance of the scheduled or extended maturity date of its intention to terminate the Credit Facility. As of December 31, 1997, the amount outstanding under the Credit Facility was $12 million, with a weighted average interest rate of approximately 8.13% per annum. Based on the weighted average interest rate in effect as of December 31, 1997, debt service payments on the Credit Facility in 1998 would total $976,000. The Credit Facility is secured by first mortgage liens on the following seven Properties: Glendale, Arizona; Southington, Connecticut; Riverdale, Georgia; Jacksonville, Alabama; Plymouth, Michigan; Oberlin, Ohio; and Cottondale, Alabama. The Credit Facility requires compensating balances of $250,000. The Credit Facility contains various leverage, debt service coverage, net worth maintenance, and other customary covenants. The Company is in compliance with such covenants. (c) The mortgages on the two Tampa, Florida Properties are cross-collateralized. The Company intends to repay balloon payments due on these properties in 1998 with amounts available under the Credit Facility. (d) In March 1997, in connection with the acquisition of these properties, LCIF sold $25 million of Notes to an institutional investor in a private placement. The Notes require interest only payments at 8% per annum, payable semi-annually in arrears, and have a seven year term. The Notes are secured by these properties, are guaranteed by the Company, and can be exchanged by the holders for the Company's common shares at $13 per share beginning in the year 2000, subject to adjustment. The Notes may be redeemed at the Company's option after three years at a price of 103.2% of the principal amount, declining to par after five years. The Notes are subordinated to obligation under the Company's Credit Facility. (e) As of December 31, 1996, this note on the Salt Lake City, Utah Property was bearing interest at a rate of 12.9% per annum and had a maturity date of October 1, 2005. This note was refinanced on May 30, 1997, with a new note bearing interest at 7.61% per annum and having a maturity date of October 1, 2009. (f) As of December 31, 1996, the mortgage on the Franklin, North Carolina Property consisted of temporary bridge financing bearing interest at 8.25% per annum. On March 31, 1997, the bridge financing was repaid in full with proceeds from permanent financing, bearing interest at 8.50% per annum and having a maturity date of April 1, 2015. 35 36 LEXINGTON CORPORATE PROPERTIES TRUST AND CONSOLIDATED SUBSIDIARIES Notes to Consolidated Financial Statements (5), Continued (g) On January 22, 1997, the mortgages encumbering these four properties were paid in full. The aggregate principal amount paid was $7,997,000 and the aggregate prepayment premiums were approximately $520,000. The stated interest rate on each of the four mortgages was 12.625% per annum. The loans were assumed in December 1996 in connection with an acquisition and assigned a fair value such that the prepayment premiums were included in the carrying value on the balance sheet at acquisition. (h) The mortgage was paid off in conjunction with the sale of this property (see Note 3). (i) Principal paydowns of the mortgage notes payable for the succeeding fifteen years are as follows (in 000's):
Years ending December 31 Amount ----------- ------ 1998 $ 14,924 1999 22,654 2000 18,913 2001 7,302 2002 7,569 2003-2007 120,028 2008-2012 27,446
On September 2, 1997, the Company sold its property leased to Stratus Computers, Inc. In connection with the sale, the Company, after repaying a first mortgage loan, realized a prepayment premium of approximately $1.86 million and incurred a write-off of unamortized loan costs of approximately $171,000. On May 30, 1997, the Company completed the refinancing of $22.1 million of mortgage debt secured by the Salt Lake City, Utah Property. In connection with the refinancing, the Company realized a prepayment premium of approximately $1.67 million and incurred a write-off of unamortized loan costs of approximately $130,000. The amounts shown as extraordinary item - loss on extinguishment of debt for the above transactions are recorded net of the minority interests in the consolidated statements of income. On May 19, 1995, the Company completed the $70 million REMIC Financing by issuing commercial mortgage pass-through certificates. Of the fifteen properties securing the REMIC Financing, eight properties had been encumbered by mortgage debt of approximately $50.83 million in the aggregate, which had been repaid out of the proceeds from the REMIC Financing. In connection with this repayment, the Company incurred prepayment premiums totaling approximately $4.068 million and the write-off of unamortized deferred expenses and other related costs of approximately $510,000. On November 15, 1995, the Company closed on a revolving credit facility with a maximum committed amount of $25 million. Upon the closing of the revolving credit facility, the Company borrowed approximately $8.4 million and repaid an existing mortgage loan secured by its property in Southington, Connecticut. In connection with this repayment, a prepayment premium of approximately $271,000 was incurred. 36 37 LEXINGTON CORPORATE PROPERTIES TRUST AND CONSOLIDATED SUBSIDIARIES Notes to Consolidated Financial Statements (6) Subordinated Notes Payable Unitholders of the Partnerships who denied consent to the mergers described in Note 1 and qualified as dissenters received, in lieu of Common Shares, Subordinated Notes of the Company having a principal amount equal to the net asset value of the Units exchanged for such notes. The notes were issued under an indenture between the Company and The Bank of New York, as Trustee. The notes bear interest at 7.75% per annum, payable semi-annually on January 1 and July 1 of each year, and are due on October 12, 2000. The Subordinated Notes are redeemable at the Company's option, in whole or in part at a redemption price equal to 100% of the principal amount plus all accrued and unpaid interest through the date of redemption. (7) Leases Minimum future rents receivable under noncancellable operating leases as of December 31, 1997 are as follows (in 000's):
Year ending December 31 Amount ----------- ------ 1998 $ 48,944 1999 49,179 2000 49,301 2001 47,007 2002 43,774 2003-2007 187,725 2008-2012 61,225 2013-2014 645 --------- $ 487,800 =========
The leases are triple net leases which generally require the lessee to pay all or substantially all taxes, insurance, maintenance, and all other similar charges and expenses relating to the Properties and their use and occupancy. Each of the following properties accounted for 10% or more of consolidated rental revenues for the years ended December 31:
Property 1997 1996 1995 --------------- ---- ---- ---- Glendale, AZ 4% 8% 13% Newark, CA 6% 10% 13% Salt Lake City, UT 20% 16% -
In addition, the Company leases office space under a non-cancelable lease. Minimum future rental payments under this lease as of December 31, 1997 are approximately as follows (in $000's):
Year Ending December 31 Amount ----------- -------- 1998 $ 233 1999 233 2000 233 2001 233 2002 233 thereafter 350 --------- $ 1,515 =========
Rental expense under this lease for the years ended December 31, 1997, 1996 and 1995 was (in $000's) $202, $126, and $114, respectively. 37 38 LEXINGTON CORPORATE PROPERTIES TRUST AND CONSOLIDATED SUBSIDIARIES Notes to Consolidated Financial Statements (8) Minority Interests In conjunction with several of the Company's acquisitions, sellers were given interests in Partnerships controlled by the Company as a form of consideration. All of such interests are redeemable at certain times for Common Shares on a one-for-one basis at various dates through May 2006. The total number of special limited partnership units outstanding as of December 31, 1997 was 3,000,445. These units, subject to certain adjustments through the date of conversion, have distributions per unit in varying amounts up to $1.16 per unit. Minority interests in the accompanying consolidated financial statements relates to interests in the Partnerships held by parties other than the Company. (9) Preferred Shares On December 31, 1996, the Company entered into a definitive agreement with Five Arrows Realty Securities L.L.C. ("Five Arrows") providing for the sale of up to 2,000,000 shares of Senior Cumulative Convertible Preferred Shares (" Preferred Shares"). In connection with this transaction, the Company designated 2,000,000 shares as "Excess Class A Preferred Shares" and reserved for issuance up to 2,000,000 shares of its Common Shares upon the conversion of the Preferred Shares. In connection with such sale, the Company has entered into certain related agreements with Five Arrows, providing, among other things, for certain registration rights with respect to such shares and the right to designate a member of the Board of Directors under certain circumstances. The Preferred Shares, which is convertible at any time at the holder's option into common shares on a one-for-one basis, is entitled to quarterly dividends equal to the greater of $.295 per share or 105% of the quarterly common shares dividend. During 1997, all of the Preferred Shares were sold. Based on the market price of the Company's common shares on the dates of issuance, the Preferred Shares were deemed to have a beneficial conversion feature equal to the difference between the market price per share and $12.50 per share. This difference, which is non-cash and was non-recurring, amounted to approximately $3.5 million for the year ended December 31, 1997 and has been recorded as a dividend, with an offset to additional paid-in capital, in the accompanying statements of changes in shareholders' equity. The Preferred Shares may be redeemed by the Company after December 31, 2001 at a premium of 6% over the liquidation preference of $12.50 per share, with such premium declining to zero on or after December 31, 2011. Each share is entitled to one vote. In certain instances, including a change of control of the Company (as defined in the agreement), the holder of the Preferred Shares may require the Company to redeem its shares at a price equal to $13.75 per share plus any accrued dividends. (10) Legal Proceedings The Company was sued in the United States District Court for the Northern District of Illinois on May 31, 1995, by United Municipal Leasing Corporation. The complaint filed in this case alleged that the Company breached a letter of intent by failing to execute definitive documentation and close a transaction in which the plaintiff proposed to sell property to the Company. The complainant sought $800,000 in monetary damages. In 1997, the Court ruled in favor of the Company. No monetary damages were incurred by the Company. On August 26, 1996, Ross Stores, Inc., the tenant in the Newark Property, exercised an option to purchase such Property for its fair market value. In connection with this negotiation the Company was required to post a bond in an amount equivalent to one year's rent. After some deliberation the parties have negotiated to sell the property on or about April 1, 1998 for $24.55 million. 38 39 LEXINGTON CORPORATE PROPERTIES TRUST AND CONSOLIDATED SUBSIDIARIES Notes to Consolidated Financial Statements (10) Continued, The Company is involved in various legal actions arising in the ordinary course of business. In the opinion of management, the ultimate disposition of these matters will not have a material adverse effect on the Company's consolidated financial position, results of operations or liquidity. (11) Stock Option Plan On June 17, 1993, the Company's Board of Directors adopted a stock option plan (the "Plan") pursuant to which stock options may be granted to officers and key employees. The Plan authorized grants of options to purchase up to 800,000 shares of authorized but unissued common shares. The Plan was amended on May 23, 1996 to increase by 800,000 the number of Common Shares available for the grant of options thereunder, subject to certain limitations. Stock options are granted with an exercise price equal to the shares' fair market value at the date of grant. All stock options are exercisable over five-year terms and, with the exception of those shown below, vest immediately. In 1997, the Compensation Committee granted 221,897 options to key employees. Those options will vest on the fourth anniversary of the grant. Vesting will accelerate upon an executive's retiring (as defined by the Compensation Committee), death or disability. In addition, 25% of the options will vest in any year in which Funds From Operations ("FFO") increases by an amount equal to or greater than 10% over the FFO achieved in the preceding year. Additionally, each independent trustee of the Company receives options each year to purchase 2,500 common shares at the fair market value as of the date of grant. Such grants automatically occur on each January 1. All options granted to the directors are exercisable, after a one-year holding period, for a period not to exceed five years from the date of grant. At December 31, 1997, there were 560,803 additional options available for grant under the Plan. The per share weighted-average fair value of share options granted at market during 1997, 1996 and 1995 was $3.75, $2.60 and $1.85 on the date of grant using the Black Scholes option-pricing model. The per share weighted average fair value of share options granted with an exercise price less than market during 1997 was $5.83. The following weighted-average assumptions were used: risk-free interest rate of 6.5% and an expected life of five years for all years and volatility factors of 17.09%, 16.29% and 15.02% for the years 1997, 1996 and 1995, respectively. The model was based on actual dividends paid, which, on an annualized basis were $1.16, $1.10 and $1.08 per share for the years ended December 31, 1997, 1996 and 1995, respectively. The Company applies APB Opinion No. 25 in accounting for its Plan and, accordingly, no compensation cost has been recognized for its share options in the financial statements. Had the Company determined compensation cost based on the fair value at the grant date for its share options under SFAS No. 123, the Company's net income would have been reduced to the pro forma amounts below (in $000's):
1997 1996 1995 ---- ---- ---- Net income As reported $ 8,593 $ 5,466 $ 3,284 Pro forma 8,276 4,994 3,270 Pro forma net income per share: Basic $ 0.30 $ 0.52 $ 0.35 Diluted 0.29 0.50 0.35 ====== ====== ======
39 40 LEXINGTON CORPORATE PROPERTIES TRUST AND CONSOLIDATED SUBSIDIARIES Notes to Consolidated Financial Statements (11) Continued, Pro forma net income reflects only options granted in 1997, 1996 and 1995. Therefore, the full impact of calculating compensation cost for shares options under SFAS No. 123 is not reflected in the pro forma net income amounts presented above because compensation cost for options granted prior to January 1, 1995 is not considered. Share option activity during the periods indicated is as follows:
Number of Weighted-Average Shares Exercise Price ---------- ----------------- Balance at December 31, 1994 407,500 $ 10.00 Granted(1) 587,500 10.46 Exercised(1) (392,500) 10.00 Forfeited (-) - Expired (-) - --------- ------- Balance at December 31, 1995 602,500 10.45 Granted(1) 370,600 11.56 Exercised(1) (192,500) 9.15 Forfeited (5,300) 11.39 Expired (-) - --------- ------- Balance at December 31, 1996 775,300 11.30 Granted 276,397 12.50 Exercised (10,000) 10.09 Forfeited (2,500) 14.25 Expired (-) (-) --------- ------- Balance at December 31, 1997 1,039,197 $ 11.62 ========== =======
(1) In 1996 and 1995, certain officers and employees exchanged existing options for new options with exercise prices equal to the fair market value of the common shares at that time. These options are reflected in the amounts exercised and granted in the table above. The difference between the exercise prices of the original and the new options, which amounted to $588,000 and $442,000 in 1996 and 1995, respectively, has been reflected in general and administrative expenses in the accompanying financial statements. At December 31, 1997, the range of exercise prices and weighted-average remaining contractual life of outstanding options was $9.00 to $14.50 and 3.18 years, respectively. At December 31, 1997, 1996 and 1995, the number of options exercisable was 837,300, 767,800, and 405,000, respectively, and the weighted-average exercise price of those options was $11.45, $11.29 and $11.09, respectively. 40 41 LEXINGTON CORPORATE PROPERTIES TRUST AND CONSOLIDATED SUBSIDIARIES Notes to Consolidated Financial Statements (12) Employee Benefit Plan Effective January 1, 1994, the Company established a 401(k) retirement savings plan covering all eligible employees. The Company will match 25% of the first 4% of employee contributions. In addition, based on its profitability, the Company may make a discretionary contribution at each fiscal year end to all eligible employees. The matching and discretionary contributions are subject to vesting under a schedule providing for 25% annual vesting starting with the first year of employment and 100% vesting after four years of employment. Approximately $80,000, $75,000 and $59,000 were contributed in 1997, 1996 and 1995, respectively. (13) Related Party Transactions The Company has been granted an option by the LCP Group, L.P. ("LCP"), exercisable any time, to acquire the general partnership interests currently owned by LCP in two limited partnerships, Net 1 L.P. and Net 2 L.P. (collectively, the "Net Partnerships"), which own net leased office, industrial and retail properties. Under the terms of the option, the Company, subject to review of any such transaction by the independent members of its Board of Trustees, may acquire the general partnership interests in either or both of the Net Partnerships at their fair market value based upon a formula relating to partnership cash flows, with the Company retaining the option of paying such fair market value in securities of the Company, units representing interests in partnerships controlled by the Company or cash (or a combination thereof). The Chairman of the Company is a partner in LCP. The Company currently provides administrative and acquisition support to the Net Partnerships and is reimbursed for the costs of such services. The reimbursements amounted to $279,000 and $197,000 for the years ended December 31, 1997 and 1996, respectively, and are shown net of the Company's general and administrative expenses in the accompanying statements of income. There were no reimbursements for 1995. In connection with the origination fees payable obligations, the Company is obligated to pay LCP an aggregate principal amount of $1,778,000 for rendering services in connection with the original acquisitions of certain properties. Simple interest is payable monthly from available net cash flow of the respective original properties on the various unpaid principal portions of the fees, at annual rates ranging from 12.25% to 19%. Monthly installment payments are to commence at various dates to satisfy principal and current interest payments as well as any unpaid accrued interest outstanding. The original principal amounts have been discounted at an annual rate of thirteen percent. A member of the Company's Board of Trustees is a partner in the firm that serves as general counsel to the Company. The Company intends to continue to retain the services of this firm for general, corporate and other matters. (14) Subsequent Events (Unaudited) On January 29, 1998, the Company completed the acquisition of partnership interests in two limited partnerships in exchange for the Company's operating partnership units. The assets of the partnerships acquired included approximately $23.5 million in cash. The units are exchangeable for an equal number of Common Shares and are entitled to receive distributions at the same dividend rate as the Company's common shares. On February 13, 1998, the Company paid a dividend of $.29 per share to shareholders of record on January 30, 1998. On March 27, 1998, the Company completed the acquisition of an 81,744 square foot two-story office facility in Hebron, Kentucky (the "Hebron Property") for approximately $8.045 million. The Hebron Property is leased to Fidelity Corporate Real Estate, LLC under a lease expiring April 2007. The current annual net rent is $776,568 and will increase by 14.5% on May 1, 2002. 41 42 LEXINGTON CORPORATE PROPERTIES TRUST AND CONSOLIDATED SUBSIDIARIES Notes to Consolidated Financial Statements (14) Continued, On March 27, 1998, the Company completed the acquisition of a 419,205 office/warehouse facility in Bristol, Pennsylvania (the "Bristol Property") for approximately $12.5 million. The Bristol Property is leased to Jones Apparel Group for 15 years. The annual net rent is $1.15 million and will increase in years 2003 and 2008 by 10%. On March 27, 1998, the Company completed the acquisition of two properties in Livonia, Michigan (the "Livonia Properties") for approximately $16.4 million. The Livonia Properties are leased to Kelsey-Hayes Corporation and are subject to net leases which expire in April 2007. The current annual net rents are approximately $1.52 million and escalate at various rates over the term of the lease. 42 43 LEXINGTON CORPORATE PROPERTIES TRUST AND CONSOLIDATED SUBSIDIARIES Notes to Consolidated Financial Statements (15) Quarterly Financial Data (Unaudited) ($000 except per share data)
Three months ended --------------------------------------- March 31 June 30, --------------------------------------- 1997 1996 1997 1996 ---- ---- ---- ---- Revenues $ 9,824 6,799 10,638 7,682 Expenses 7,984 5,072 8,504 5,907 ------- ------- ------- ------- Income before minority interests and extraordinary item 1,840 1,727 2,134 1,775 Minority interests 274 54 364 147 ------- ------- ------- ------- Income before extraordinary item 1,566 1,673 1,770 1,628 Extraordinary item - loss on extinguishment of debt * 56 -- 1,466 -- ------- ------- ------- ------- Net income $ 1,510 1,673 304 1,628 ======= ======= ======= ======= Net income per common share - basic: Income (loss) before extraordinary item, per common share $ (0.01) 0.18 0.14 0.17 Extraordinary item - loss on extinguishment of debt, per common share (0.01) -- (0.15) -- ------- ------- ------- ------- Basic net income (loss) per common share$ (0.02) 0.18 (0.01) 0.17 ======= ======= ======= ======= Net income per common share - diluted: Income (loss) before extraordinary item, per common share $ (0.01) 0.18 0.13 0.17 Extraordinary item - loss on extinguishment of debt, per common share (0.01) -- (0.14) -- ------- ------- ------- ------- Diluted net income (loss) per common share $ (0.02) 0.18 (0.01) 0.17 ======= ======= ======= =======
* This item has been reclassified from Expenses, as shown in the First Quarter report.
Three months ended ------------------------------------------ September 30, December 31, ------------------------------------------ 1997 1996 1997 1996 ---- ---- ---- ---- Revenues $ 11,405 8,655 11,702 8,539 Expenses 8,210 6,840 8,164 7,700 -------- -------- -------- -------- Income before gain on sale of properties, minority interests and extraordinary item 3,195 1,815 3,538 839 Gain on sale of properties 3,517 -- -- -- -------- -------- -------- -------- Income before minority interests and extraordinary item 6,712 1,815 3,538 839 Minority interests 1,220 260 584 229 -------- -------- -------- -------- Income before extraordinary item 5,492 1,555 2,954 610 Extraordinary item - loss on extinguishment of debt 1,667 -- -- -- -------- -------- -------- -------- Net income $ 3,825 1,555 2,954 610 ======== ======== ======== ======== Net income per common share - basic: Income before extraordinary item, per common share $ 0.40 0.17 0.04 0.06 Extraordinary item - loss on extinguishment of debt, per common share (0.13) -- -- -- -------- -------- -------- -------- Basic net income per common share $ 0.27 0.17 0.04 0.06 ======== ======== ======== ======== Net income per common share - diluted: Income before extraordinary item, per common share $ 0.37 0.15 0.04 0.06 Extraordinary item - loss on extinguishment of debt, per common share (0.10) -- -- -- -------- -------- -------- -------- Diluted net income per common share $ 0.27 0.15 0.04 0.06 ======== ======== ======== ========
43 44 LEXINGTON CORPORATE PROPERTIES TRUST AND CONSOLIDATED SUBSIDIARIES Notes to Consolidated Financial Statements (15) Continued, The reported amounts for minority interest and for extraordinary items in the quarters ended March 30, June 30, and September 30, 1997 have been adjusted by offsetting amounts from those reported in the Company's quarterly filings on Form 10-Q. As a result, income before extraordinary items per common share has been restated by $0.00, ($0.03) and ($0.03), respectively. Net income and net income per common share for those periods were not affected by these adjustments. In addition, as described in notes 2 and 9, to compute earnings per share, net income attributed to common shareholders was reduced by the deemed dividend relating to the sales of the Preferred Shares. Income per common share data for the quarters ended March 31 and June 30, 1997 has been restated by ($0.16) and ($0.01), respectively , to reflect the deemed dividend of the beneficial conversion feature of the Preferred Shares. 44 45 LEXINGTON CORPORATE PROPERTIES TRUST AND CONSOLIDATED SUBSIDIARIES Real Estate and Accumulated Depreciated and Amortization Schedule III ($000) Initial cost to Company and Gross Amount at which carried at End of Year (A)
- --------------------------------------------------------------------------------------------------------------------------- Land and Buildings Land and Description Location Encumbrances Estates Improvements Total (B) (C) - --------------------------------------------------------------------------------------------------------------------------- Warehouse & Manufacturing Modesto, CA $ 2,133 $ 257 $ 3,809 $ 4,066 Office Southington, CT 3,336 3,240 20,415 23,655 Research & Development Glendale, AZ 4,378 4,996 24,392 29,388 Health Club Countryside, IL 2,417 628 3,722 4,350 Health Club Voorhees Township, NJ 3,057 577 4,820 5,397 Health Club DeWitt, NY 1,849 445 3,043 3,488 Warehouse & Distribution Mansfield, OH 3,342 120 4,597 4,717 Office & Industrial Marshall, MI 2,240 33 3,378 3,411 Office & Industrial Marshall, MI 853 14 926 940 Warehouse & Office (1) Newark, CA 15,589 5,000 25,844 30,844 Retail Newport, OR 6,257 1,400 7,270 8,670 Publishing Memphis, TN 6,754 1,053 10,908 11,961 Warehouse & Distribution Mechanicsburg, PA 10,309 1,439 13,987 15,426 Office, Warehouse & Manufacturing Tampa, FL 4,322 1,389 7,563 8,952 Retail Klamath Falls, OR 7,110 727 9,160 9,887 Office North Tampa, FL 5,902 1,900 9,736 11,636 Warehouse Jacksonville, FL - 157 3,034 3,191 Retail Sacramento, CA 2,382 885 2,705 3,590 Office Complex Phoenix, AZ 5,630 2,804 13,921 16,725 Retail Reno, NV 2,062 1,200 1,904 3,104 Retail Las Vegas, NV 1,849 900 1,759 2,659 Retail Rockville, MD 1,183 - 1,726 1,726 Retail Oxon Hill, MD 1,967 403 2,131 2,534 Retail Brownsville, TX 934 - 1,242 1,242 Retail Laguna Hills, CA 4,451 255 4,274 4,529 Retail Riverdale, GA 567 363 2,233 2,596 Health Club Canton, OH 2,664 602 3,819 4,421 Office Salt Lake City, UT 34,493 - 55,396 55,396 - ---------------------------------------------------------------------------------------------------------------------- Accumulated Useful life computing Depreciation depreciation in and Date Date latest income Description Amortization Acquired Constructed statements (D) (years) - ---------------------------------------------------------------------------------------------------------------------- Warehouse & Manufacturing $ 1,075 Sept. 1986 1970 & 1976 40 & 12 Office 6,896 Oct. 1986 1983 40 & 12 Research & Development 9,088 Nov. 1986 1985 40 & 12 Health Club 1,334 Jul. 1987 1987 40 & 12 Health Club 1,633 Jul. 1987 1987 40 & 12 Health Club 1,061 Aug. 1987 1977 & 1987 40 & 12 Warehouse & Distribution 1,364 Jul. 1987 1970 40, 20 & 12 Office & Industrial 1,084 Aug. 1987 1968 & 1972 40, 20 & 12 Office & Industrial 298 Aug. 1987 1979 40, 20 & 12 Warehouse & Office (1) 7,327 Aug. 1987 1984-1985 40 & 12 Retail 2,181 Sept. 1987 1986 40, 20 & 12 Publishing 2,693 Feb. 1988 1987 40 Warehouse & Distribution 2,211 Oct. 1990 1985 & 1991 40 Office, Warehouse & Manufacturing 2,075 Nov. 1987 1986 40 & 20 Retail 2,242 Mar. 1988 1986 40 Office 2,294 Jul. 1988 1986 40 Warehouse 727 Jul. 1988 1958 & 1969 40 & 20 Retail 831 Oct. 1988 1988 40, 20 & 12 Office Complex 3,161 Nov. 1988 1960 & 1979 40 Retail 568 Dec. 1988 1988 40, 20 & 12 Retail 523 Dec. 1988 1988 40, 20 & 12 Retail 299 Aug. 1995 1977 22.375, 16.583 & 15.583 Retail 338 Aug. 1995 1976 21.292 Retail 162 Aug. 1995 1973 18.542 Retail 512 Aug. 1995 1974 20 & 20.5 Retail 112 Dec. 1995 1985 40 Health Club 191 Dec. 1995 1987 40 Office 3,479 May 1996 1982 25.958
45 46 LEXINGTON CORPORATE PROPERTIES TRUST AND CONSOLIDATED SUBSIDIARIES Real Estate and Accumulated Depreciated and Amortization Schedule III ($000) (continued)
- --------------------------------------------------------------------------------------------------------------------------- Land and Buildings Land and Description Location Encumbrances Estates Improvements Total (B) (C) - --------------------------------------------------------------------------------------------------------------------------- Retail Jacksonville, FL 417 286 1,763 2,049 Manufacturing Franklin, NC 2,279 386 3,062 3,448 Industrial Plymouth, MI 1,532 1,461 4,868 6,329 Industrial Oberlin, OH 1,063 276 4,515 4,791 Retail Tulsa, OK - 447 2,264 2,711 Retail Clackamas, OR - 523 2,650 3,173 Retail Lynwood, WA - 488 2,475 2,963 Industrial Houston, TX - 217 3,576 3,793 Retail Honolulu, HI 6,251 - 10,608 10,608 Warehouse New Kingston, PA Industrial Cottondale, AL 750 720 2,190 2,910 Warehouse New Kingston, PA (Silver Springs) 5,641 674 5,360 6,034 Warehouse New Kingston, PA (Cumberland) 11,539 1,380 10,963 12,343 Warehouse Mechanicsburg, PA (Hampden IV) 8,462 1,012 8,039 9,051 Office/ Research & Development San Diego, CA - 693 7,014 7,707 Office/ Research & Development Marlborough, MA - 1,707 13,834 15,541 Office Phoenix, AZ 6,455 1,872 9,118 10,990 Office Dallas, TX 22,800 3,582 29,063 32,645 Warehouse Waterloo, IA - 1,025 8,296 9,321 Office/ Research & Development Milipitas, CA - 3,542 18,596 22,138 Industrial Gordonsville, TN 1,248 52 3,325 3,377 Office Decatur, GA - 975 13,658 14,633 Office Richmond, VA 13,093 - 27,234 27,234 Warehouse & Distribution Bessemer, AL 1,000 664 4,238 4,902 ------------------------------------------------------------ Subtotal $ 220,560 52,769 444,423 497,192 ================= (1) Less property held for sale: Warehouse & Office Newark, CA (5,000) (25,844) (30,844) ------------------------------------------- Total $ 47,769 $ 418,579 $ 466,348 =========================================== - ---------------------------------------------------------------------------------------------------------------------- Accumulated Useful life computing Depreciation depreciation in and Date Date latest income Description Amortization Acquired Constructed statements (D) (years) - ---------------------------------------------------------------------------------------------------------------------- Retail 72 May 1996 1982 40 Manufacturing 76 Dec. 1996 1996 40 Industrial 122 Dec. 1996 1996 40 Industrial 113 Dec. 1996 1996 40 Retail 129 Dec. 1996 1981 23.583 & 13.583 Retail 151 Dec. 1996 1981 23.583 & 13.583 Retail 141 Dec. 1996 1981 23.583 & 13.583 Industrial 161 Dec. 1996 1981 24.5 & 14.5 Retail 440 Dec. 1996 1980 24.33 Warehouse Industrial 48 Feb. 1997 1996 & 1997 40 Warehouse 106 Mar. 1997 1981 40 Warehouse 217 Mar. 1997 1989 40 Warehouse 159 Mar. 1997 1985 40 Office/ Research & Development 110 May 1997 1989 40 Office/ Research & Development 158 Jul. 1997 1960 & 1988 40 Office 104 Jul. 1997 1985 & 1994 40 Office 211 Sept. 1997 1986 & 1997 40 Warehouse 43 Oct. 1997 1996 & 1997 40 Office/ Research & Development - Dec. 1997 1985 40 Industrial - Dec. 1997 1983 34.75 Office - Dec. 1997 1983 40 Office - Dec. 1997 1990 32.25 Warehouse & Distribution - Dec. 1997 1991 33.75 --------- 58,320 (1) Less property held for sale: Warehouse & Office (7,327) --------- $ 50,993 =========
46 47 LEXINGTON CORPORATE PROPERTIES TRUST AND CONSOLIDATED SUBSIDIARIES Real Estate and Accumulated Depreciated and Amortization Schedule III ($000) (continued) (A) The initial cost includes the purchase price paid by the Company and acquisition fees and expenses. The total cost basis of the Company's Properties at December 31, 1997 for Federal income tax purposes was $337,491 (not including the Newark, CA property held for sale). The total costs of the properties acquired may exceed the initial costs due to the Company's or Partnership's subsequent incurrence of other costs related to the acquisition, however such amounts have not been significant. (B) Balances include accrued interest payable at December 31, 1997 in the amount of $1,007. (C) Reconciliation of real estate owned:
1997 1996 1995 =================================== Balance at the beginning of the year $ 339,411 $ 244,223 $ 243,281 Additions during year 179,257 95,188 18,555 Properties sold during year (21,476) -- (17,613) Property reclassed to held for sale (30,844) -- -- ----------------------------------- Balance at end of year $ 466,348 $ 339,411 $ 244,223 ===================================
(D) Reconciliation of accumulated depreciation and amortization: Balance at beginning of year $ 51,343 $ 43,716 $ 40,679 Depreciation and amortization expense 10,608 7,627 5,817 Accumulated depreciation of properties sold during year (3,631) -- (2,780) Accumulated depreciation of property reclassed to held for sale (7,327) -- -- ----------------------------------- Balance at end of year $ 50,993 $ 51,343 $ 43,716 ===================================
47 48 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. PART III. ITEM 10. TRUSTEES AND EXECUTIVE OFFICERS OF THE REGISTRANT The information regarding directors of the Company required to be furnished pursuant to this item is set forth under the caption "Election of Trustees" in the Proxy Statement and is incorporated herein by reference. The information regarding executive officers of the Company required to be furnished pursuant to this item is set forth in Item 4A of this report. ITEM 11. EXECUTIVE COMPENSATION The information required to be furnished pursuant to this item is set forth under the caption "Compensation of Executive Officers" in the Proxy Statement, and is incorporated herein by reference. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The information required to be furnished pursuant to this item is set forth under the captions "Principal Security Holders" and "Share Ownership of Trustees and Executive Officers" in the Proxy Statement, and is incorporated herein by reference. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The information required to be furnished pursuant to this item is set forth under the caption "Election of Trustees - Certain Relationships and Related Transactions" in the Proxy Statement, and is incorporated herein by reference. Note, the Definitive Proxy Statement will be filed with the Securities and Exchange Commission on or about April 17, 1998. 48 49 PART IV. ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K. Page ---- (a)(1) Financial Statements 23-44 (2) Financial Statement Schedules 45-47 (3) Exhibits Exhibit No. Exhibit - ----------- ------- 2.1 -- Form of Agreement and Plan of Merger by and among Lexington Corporate Properties, Inc. (the "Company"), Lepercq Corporate Income Fund L.P. ("LCIF I") and Lex M-1, L.P. (filed as Appendix C-I to the Company's Registration Statement of Form S-4 (File No. 33-66858) (the "Form S-4"))* 2.2 -- Form of Agreement and Plan of Merger by and among the Company, Lepercq Corporate Income Fund II L.P. ("LCIF II"), and Lex M-2, L.P. (filed as Appendix C-II to the Form S-4)* 2.3 -- Form of Agreement and Articles of Merger between the Company and Lexington Corporate Properties - Maryland, Inc. (filed as Exhibit 2.3 to Report on 10-K for year ended December 31, 1993 (the "1993 10-K"))* 2.4 -- Agreement and Plan of Merger between the Company and Lexington Corporate Properties Trust (filed as Exhibit 2.1 to Form 8-K filed 1-16-98.)* 3.1 -- Declaration of Trust of the Company, dated December 31, 1997 (filed as Exhibit 3.1 to Form 8K filed 1-16-98)* 3.2 -- By-Laws of the Company 4.1 -- Specimen of Common Shares Certificate of the Trust 4.2 -- Form of Indenture between the Company and The Bank of New York, as Trustee, including the form of 7.75% Subordinated Note due 2000 (filed as Exhibit 4.2 to the Form S-4)* 10.7 -- Form of Incentive Stock Option Agreement by and between the Company and E. Robert Roskind (filed as Exhibit 10.7 to the Form S-4)* 10.8 -- Form of 1994 Outside Director Shares Plan of the Company (filed as Exhibit 10.8 to 1993 10-K)* 10.9 -- Form of Incentive Stock Option Agreement by and between the Company and Richard J. Rouse (filed as Exhibit 10.8 to the Form S-4)* 10.10 -- Form of Incentive Stock Option Agreement by and between the Company and T. Wilson Eglin (filed as Exhibit 10.10 to the Form S-4)* 10.11 -- Form of Incentive Stock Option Agreement by and between the Company and Antonia G. Trigiani (filed as Exhibit 10.11 to the Form S-4)* 10.12 -- Form of Non-Qualified Stock Option Agreement by and between the Company and E. Robert Roskind (filed as Exhibit 10.12 to the Form S-4)* 10.13 -- Form of Non-Qualified Stock Option Agreement by and between the Company and Richard J. Rouse (filed as Exhibit 10.13 to the Form S-4)* 10.14 -- Form of Non-Qualified Stock Option Agreement by and between the Company and T. Wilson Eglin (filed as Exhibit 10.14 to the Form S-4)* 10.15 -- Form of Non-Qualified Stock Option Agreement by and between the Company and Antonia G. Trigiani (filed as Exhibit 10.15 to the Form S-4)* 49 50 Exhibit No. Exhibit - ----------- ------- 10.16 -- Indemnification Agreement, dated as of July 19, 1993, by and between the Company and E. Robert Roskind, Director and Co-Chief Executive Officer (filed as Exhibit 10.15 to the Form S-4)* 10.17 -- Indemnification Agreement, dated as of July 19, 1993, by and between the Company and Richard J. Rouse, Director and Co-Chief Executive Officer (filed as Exhibit 10.16 to the Form S-4)* 10.18 -- Indemnification Agreement, dated as of July 19, 1993, by and between the Company and T. Wilson Eglin, Executive Officer (filed as Exhibit 10.17 to the Form S-4)* 10.19 -- Indemnification Agreement, dated as of July 19, 1993, by and between the Company and Antonia G. Trigiani, Executive Officer (filed as Exhibit 10.18 to the Form S-4)* 10.20 -- Indemnification Agreement, dated as of July 19, 1993, by and between the Company and Paul R. Wood, Executive Officer (filed as Exhibit 10.19 to the Form S-4)* 10.21 -- Form of Indemnification Agreement by and between the Company and Seth M. Zachary, Director (filed as Exhibit 10.20 to the Form S-4)* 10.24 -- Class A Mortgage Note to Pacific Mutual Life Insurance Company and Lexington Mortgage Company dated May 19, 1995 in the amount of $34,000,000 (filed as Exhibit 10.24 to Report on 10-K for year ended December 31, 1995 (the "1995 10-K"))* 10.25 -- Class B Mortgage Note to Pacific Mutual Life Insurance Company and Lexington Mortgage Company dated May 19, 1995 in the amount of $18,500,000 (filed as Exhibit 10.25 to the 1995 10-K)* 10.26 -- Class C Mortgage Note to Pacific Mutual Life Insurance Company and Lexington Mortgage Company dated May 19, 1995 in the amount of $17,500,000 (filed as Exhibit 10.26 to the 1995 10-K)* 10.28 -- Indenture of Mortgage, Deed of Trust, Security Agreement, Financing Statement, Fixture Filing and Assignment of Leases, Rents and Security Deposits to First American Title Insurance Company and Pacific Mutual Life Insurance Company and Lexington Mortgage Company dated May 19, 1995 (filed as Exhibit 10.28 to the 1995 10-K)* 10.29 -- Assignment of Leases, Rents, and Security Deposits to Pacific Mutual Life Insurance Company and Lexington Mortgage Company dated May 19, 1995 (filed as Exhibit 10.29 to the 1995 10-K)* 10.30 -- Cash Collateral Account, Security, Pledge and Assignment Agreement with the Bank of New York, as agent and Pacific Mutual Life Insurance Company and Lexington Mortgage Company dated May 19, 1995 (filed as Exhibit 10.30 to the 1995 10-K)* 10.31 -- Trust and Servicing Agreement with Pacific Mutual Life Insurance Company, LaSalle National Bank and ABN AMRO Bank N.V. dated May 19, 1995 (filed as Exhibit 10.31 to the 1995 10-K)* 10.32 -- Revolving Credit and Term Loan Agreement with Fleet National Bank dated November 14, 1995 in the amount of $25,000,000 (filed as Exhibit 10.32 to the 1995 10-K)* 10.33 -- Investment Agreement dated as of December 31, 1996 with Five Arrows Realty Securities L.L.C.* 10.34 -- Operating Agreement dated as of January 21, 1997 with Five Arrows Realty Securities L.L.C.* 10.35 -- Articles Supplementary Classifying 2,000,000 shares of Preferred Shares as Class A Senior Cumulative Convertible Preferred Shares and 2,000,000 shares of Excess Shares as Excess Class A Preferred Shares of the Company* 50 51 Exhibit No. Exhibit - ----------- ------- 10.36 -- Amended and Restated Revolving Credit Agreement with Fleet National Bank dated February 20, 1997 in the amount of $60,000,000 (filed as Exhibit 10.36 to Report on 10-K for year ended December 31, 1996)* 11 -- Schedule of Computations of Per Share Earnings 12 -- Statement of Computation of Ratio of Earnings to Fixed Charges (filed as Exhibit 12 to the Form S-4)* 21 -- List of Subsidiaries of the Company 23 -- Consent of KPMG Peat Marwick LLP 27.1 -- Financial Data Schedule as of and for the year ended December 31, 1997 27.2 -- Financial Data Schedule -- restated earnings per share for the year ended December 31, 1996 27.3 -- Financial Data Schedule -- restated earnings per share for the year ended December 31, 1995 (b) Reports on Form 8-K and Form 8-K/A Issuance and sale of up to 2.875 million shares of Common Stock in a public offering - filed November 14, 1997. Acquisition of property on May 1, 1997, and announcement of a definitive agreement to acquire three properties through a merger with CRIT - filed June 17, 1997, and Amendment No. 1 thereto, containing pro forma financial statements for the Registrant for the year ended December 31, 1996 - filed November 17, 1997. Acquisition of property on September 4, 1997 - filed September 19, 1997, and Amendment No. 1 thereto, containing pro forma financial statements for the Registrant for the year ended December 31, 1996 - filed November 21, 1997. - ---------- * Incorporated by reference. 51 52 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. LEXINGTON CORPORATE PROPERTIES TRUST By:/s/ E. Robert Roskind ------------------- E. Robert Roskind Chairman Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Company and in the capacities and on the date indicated. Signature Title --------- ----- ___________________________ E. Robert Roskind Chairman of the Board of Trustees and Co-Chief Executive Officer ___________________________ Richard J. Rouse Vice Chairman of the Board of Trustees and Co-Chief Executive Officer ___________________________ T. Wilson Eglin President and Chief Operating Officer and Trustee ___________________________ Antonia G. Trigiani Chief Financial Officer and Treasurer ___________________________ Paul R. Wood Vice President, Chief Accounting Officer and Secretary ___________________________ Carl D. Glickman Trustee ___________________________ Kevin W. Lynch Trustee ___________________________ John D. McGurk Trustee ___________________________ Seth M. Zachary Trustee DATE: March 31, 1998 52 53 EXHIBIT INDEX Exhibit No. Exhibit - ----------- ------- 2.1 -- Form of Agreement and Plan of Merger by and among Lexington Corporate Properties, Inc. (the "Company"), Lepercq Corporate Income Fund L.P. ("LCIF I") and Lex M-1, L.P. (filed as Appendix C-I to the Company's Registration Statement of Form S-4 (File No. 33-66858) (the "Form S-4"))* 2.2 -- Form of Agreement and Plan of Merger by and among the Company, Lepercq Corporate Income Fund II L.P. ("LCIF II"), and Lex M-2, L.P. (filed as Appendix C-II to the Form S-4)* 2.3 -- Form of Agreement and Articles of Merger between the Company and Lexington Corporate Properties - Maryland, Inc. (filed as Exhibit 2.3 to Report on 10-K for year ended December 31, 1993 (the "1993 10-K"))* 2.4 -- Agreement and Plan of Merger between the Company and Lexington Corporate Properties Trust (filed as Exhibit 2.1 to Form 8-K filed 1-12-98.)* 3.1 -- Declaration of Trust of the Company, dated December 31, 1997 (filed as Exhibit 3.1 to Form 8K filed 1-16-98)* 3.2 -- By-Laws of the Company 4.1 -- Specimen of Common Shares Certificate of the Trust 4.2 -- Form of Indenture between the Company and The Bank of New York, as Trustee, including the form of 7.75% Subordinated Note due 2000 (filed as Exhibit 4.2 to the Form S-4)* 10.7 -- Form of Incentive Stock Option Agreement by and between the Company and E. Robert Roskind (filed as Exhibit 10.7 to the Form S-4)* 10.8 -- Form of 1994 Outside Director Shares Plan of the Company (filed as Exhibit 10.8 to 1993 10-K)* 10.9 -- Form of Incentive Stock Option Agreement by and between the Company and Richard J. Rouse (filed as Exhibit 10.8 to the Form S-4)* 10.10 -- Form of Incentive Stock Option Agreement by and between the Company and T. Wilson Eglin (filed as Exhibit 10.10 to the Form S-4)* 10.11 -- Form of Incentive Stock Option Agreement by and between the Company and Antonia G. Trigiani (filed as Exhibit 10.11 to the Form S-4)* 10.12 -- Form of Non-Qualified Stock Option Agreement by and between the Company and E. Robert Roskind (filed as Exhibit 10.12 to the Form S-4)* 10.13 -- Form of Non-Qualified Stock Option Agreement by and between the Company and Richard J. Rouse (filed as Exhibit 10.13 to the Form S-4)* 10.14 -- Form of Non-Qualified Stock Option Agreement by and between the Company and T. Wilson Eglin (filed as Exhibit 10.14 to the Form S-4)* 10.15 -- Form of Non-Qualified Stock Option Agreement by and between the Company and Antonia G. Trigiani (filed as Exhibit 10.15 to the Form S-4)* 54 Exhibit No. Exhibit - ----------- ------- 10.16 -- Indemnification Agreement, dated as of July 19, 1993, by and between the Company and E. Robert Roskind, Director and Co-Chief Executive Officer (filed as Exhibit 10.15 to the Form S-4)* 10.17 -- Indemnification Agreement, dated as of July 19, 1993, by and between the Company and Richard J. Rouse, Director and Co-Chief Executive Officer (filed as Exhibit 10.16 to the Form S-4)* 10.18 -- Indemnification Agreement, dated as of July 19, 1993, by and between the Company and T. Wilson Eglin, Executive Officer (filed as Exhibit 10.17 to the Form S-4)* 10.19 -- Indemnification Agreement, dated as of July 19, 1993, by and between the Company and Antonia G. Trigiani, Executive Officer (filed as Exhibit 10.18 to the Form S-4)* 10.20 -- Indemnification Agreement, dated as of July 19, 1993, by and between the Company and Paul R. Wood, Executive Officer (filed as Exhibit 10.19 to the Form S-4)* 10.21 -- Form of Indemnification Agreement by and between the Company and Seth M. Zachary, Director (filed as Exhibit 10.20 to the Form S-4)* 10.24 -- Class A Mortgage Note to Pacific Mutual Life Insurance Company and Lexington Mortgage Company dated May 19, 1995 in the amount of $34,000,000 (filed as Exhibit 10.24 to Report on 10-K for year ended December 31, 1995 (the "1995 10-K"))* 10.25 -- Class B Mortgage Note to Pacific Mutual Life Insurance Company and Lexington Mortgage Company dated May 19, 1995 in the amount of $18,500,000 (filed as Exhibit 10.25 to the 1995 10-K)* 10.26 -- Class C Mortgage Note to Pacific Mutual Life Insurance Company and Lexington Mortgage Company dated May 19, 1995 in the amount of $17,500,000 (filed as Exhibit 10.26 to the 1995 10-K)* 10.28 -- Indenture of Mortgage, Deed of Trust, Security Agreement, Financing Statement, Fixture Filing and Assignment of Leases, Rents and Security Deposits to First American Title Insurance Company and Pacific Mutual Life Insurance Company and Lexington Mortgage Company dated May 19, 1995 (filed as Exhibit 10.28 to the 1995 10-K)* 10.29 -- Assignment of Leases, Rents, and Security Deposits to Pacific Mutual Life Insurance Company and Lexington Mortgage Company dated May 19, 1995 (filed as Exhibit 10.29 to the 1995 10-K)* 10.30 -- Cash Collateral Account, Security, Pledge and Assignment Agreement with the Bank of New York, as agent and Pacific Mutual Life Insurance Company and Lexington Mortgage Company dated May 19, 1995 (filed as Exhibit 10.30 to the 1995 10-K)* 10.31 -- Trust and Servicing Agreement with Pacific Mutual Life Insurance Company, LaSalle National Bank and ABN AMRO Bank N.V. dated May 19, 1995 (filed as Exhibit 10.31 to the 1995 10-K)* 10.32 -- Revolving Credit and Term Loan Agreement with Fleet National Bank dated November 14, 1995 in the amount of $25,000,000 (filed as Exhibit 10.32 to the 1995 10-K)* 10.33 -- Investment Agreement dated as of December 31, 1996 with Five Arrows Realty Securities L.L.C.* 10.34 -- Operating Agreement dated as of January 21, 1997 with Five Arrows Realty Securities L.L.C.* 10.35 -- Articles Supplementary Classifying 2,000,000 shares of Preferred Shares as Class A Senior Cumulative Convertible Preferred Shares and 2,000,000 shares of Excess Shares as Excess Class A Preferred Shares of the Company* 55 Exhibit No. Exhibit - ----------- ------- 10.36 -- Amended and Restated Revolving Credit Agreement with Fleet National Bank dated February 20, 1997 in the amount of $60,000,000 (filed as Exhibit 10.36 to Report on 10-K for year ended December 31, 1996)* 11 -- Schedule of Computations of Per Share Earnings 12 -- Statement of Computation of Ratio of Earnings to Fixed Charges (filed as Exhibit 12 to the Form S-4)* 21 -- List of Subsidiaries of the Company 23 -- Consent of KPMG Peat Marwick LLP 27.1 -- Financial Data Schedule as of and for the year ended December 31, 1997 27.2 -- Financial Data Schedule -- restated earning per share for the year ended December 31, 1996 27.3 -- Financial Data Schedule -- restated earnings per sharefor the year ended December 31, 1995 * Incorporated by reference. EX-3.2 2 BY-LAWS OF THE COMPANY 1 LEXINGTON CORPORATE PROPERTIES TRUST BY-LAWS ARTICLE I. SHAREHOLDERS SECTION 1.01. Annual Meeting. The Company shall hold an annual meeting of its shareholders to elect trustees and transact any other business within its powers, either at 10:00 a.m. on the first day of May in each year if not a legal holiday, or at such other time on such other day falling on or before the 30th day thereafter as shall be set by the Board of Trustees. Except as the Declaration of Trust or statute provides otherwise, any business may be considered at an annual meeting without the purpose of the meeting having been specified in the notice. Failure to hold an annual meeting does not invalidate the Company's existence or affect any otherwise valid corporate acts. SECTION 1.02. Special Meeting. At any time in the interval between annual meetings, a special meeting of the shareholders may be called by the Chairman of the Board of Trustees or the President or by a majority of the Board of Trustees by vote at a meeting or in writing (addressed to the Secretary of the Company) with or without a meeting. Special meetings of the shareholders shall be called as may be required by law. SECTION 1.03. Place of Meetings. Meetings of shareholders shall be held at such place in the United States as is set from time to time by the Board of Trustees. SECTION 1.04. Notice of Meetings; Waiver of Notice. Not less than ten nor more than 90 days before each shareholders' meeting, the Secretary shall give written notice of the meeting to each shareholder entitled to vote at the meeting and each other shareholder entitled to notice of the meeting. The notice shall state the time and place of the meeting and, if the meeting is a special meeting or notice of the purpose is required by statute, the purpose of the meeting. Notice is given to a shareholder when it is personally delivered to him, left at his residence or usual place of business, or mailed to him at his address as it appears on the records of the Company. Notwithstanding the foregoing provisions, each person who is entitled to notice waives notice if he before or after the meeting signs a waiver of the notice which is filed with the records of shareholders' meetings, or is present at the meeting in person or by proxy. SECTION 1.05. Quorum Voting. Unless statute or the Declaration of Trust provides otherwise, at a meeting of shareholders the presence in person or by proxy of shareholders entitled to cast a majority of all the votes entitled to be cast at the meeting 2 constitutes a quorum, and a majority of all the votes cast at a meeting at which a quorum is present is sufficient to approve any matter which properly comes before the meeting, except that a plurality of all the votes cast at a meeting at which a quorum is present is sufficient to elect a trustee. SECTION 1.06. Adjournments. Whether or not a quorum is present, a meeting of shareholders convened on the date for which it was called may be adjourned from time to time without further notice by a majority vote of the shareholders present in person or by proxy to a date not more than 120 days after the original record date. Any business which might have been transacted at the meeting as originally notified may be deferred and transacted at any such adjourned meeting at which a quorum shall be present. SECTION 1.07. General Right to Vote; Proxies. Unless the Declaration of Trust provides for a greater or lesser number of votes per share or limits or denies voting rights, each outstanding share of beneficial interest, regardless of class, is entitled to one vote on each matter submitted to a vote at a meeting of shareholders. In all elections for trustees, each share of beneficial interest may be voted for as many individuals as there are trustees to be elected and for whose election the share is entitled to be voted. A shareholder may vote the beneficial interest he owns of record either in person or by written proxy signed by the shareholder or by his duly authorized attorney in fact. Unless a proxy provides otherwise, it is not valid more than 11 months after its date. SECTION 1.08. List of Shareholders. At each meeting of shareholders, a full, true and complete list of all shareholders entitled to vote at such meeting, showing the number and class of shares held by each and certified by the transfer agent for such class or by the Secretary, shall be furnished by the Secretary. SECTION 1.09. Conduct of Business and Voting. At all meetings of shareholders, unless the voting is conducted by an inspector, the proxies and ballots shall be received, and all questions touching the qualification of voters and the validity of proxies, the acceptance or rejection of votes and procedures for the conduct of business not otherwise specified by these By-Laws, the Declaration of Trust or law, shall be decided or determined by the chairman of the meeting. If demanded by shareholders, present in person or by proxy, entitled to cast 10% in number of votes entitled to be cast, or if ordered by the chairman of the meeting, the vote upon any election or question shall be taken by ballot and, upon like demand or order, the voting shall be conducted by an inspector, in which event the proxies and ballots shall be received, and all questions touching the qualification of voters and the validity of proxies and the acceptance or rejection of votes shall be decided, by such inspector. Unless so demanded or ordered, no vote need be by ballot and voting need not be conducted by an inspector. The shareholders at any meeting may choose an inspector to act at such meeting, and in -2- 3 default of such election, the chairman of the meeting may appoint an inspector. No candidate for election as trustee at a meeting shall serve as an inspector thereat. SECTION 1.10. Informal Action by Shareholders. Any action required or permitted to be taken at a meeting of shareholders may be taken without a meeting if there is filed with the records of shareholder's meetings a unanimous written consent which sets forth the action and is signed by each shareholder entitled to vote on the matter and a written waiver of any right to dissent signed by each shareholder entitled to notice of the meeting but not entitled to vote at it. SECTION 1.11. Shareholder Proposals. For any shareholder proposal to be presented in connection with an annual meeting of shareholders of the Company, including any proposal relating to the nomination of a trustee to be elected to the Board of Trustees of the Company, the shareholders must have given timely notice thereof in writing to the Secretary of the Company. To be timely, a shareholder's proposal shall be delivered to the Secretary at the principal executive offices of the Company not less than 120 days in advance of the release date of the Company's proxy statement to shareholders in connection with the preceding year's annual meeting; provided, however, that in the event that the date of the annual meeting is advanced by more than 30 days or delayed by more than 60 days from such anniversary date, notice by the shareholder to be timely must be so delivered not earlier than the 90th day prior to such annual meeting and not later than the close of business on the later of the 60th day prior to such annual meeting or the tenth day following the day on which public announcement of the date of such meeting is first made. Such shareholders' notice shall set forth (a) as to each person whom the shareholder proposes to nominate for election or re-election as a trustee all information relating to such person that is required to be disclosed in solicitations of proxies for election of trustees, or is otherwise required, in each case, pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended (the "Exchange Act") (including such person's written consent to being named in the proxy statement as a nominee and to serving as a trustee if elected); (b) as to any other business that the shareholder proposes to bring before the meeting, a brief description of the business desired to be brought before the meeting, the reasons for conducting such business at the meeting and any material interest in such business of such shareholder and of the beneficial owner, if any, on whose behalf the proposal is made; and (c) as to the shareholder giving the notice and the beneficial owner, if any, on whose behalf the nomination or proposal is made, (i) the name and address of such shareholder, as they appear on the Company's books, and of such beneficial owner and (ii) the class and number of shares of beneficial interest of the Company which are owned beneficially and of record by such shareholders and such beneficial owner. For the 1995 annual meeting the previous year's meeting shall be deemed to have taken place on May 12, 1994; provided that this sentence shall cease to be a part of these By-Laws after the holding of the 1995 annual meeting and any adjournments thereof. -3- 4 ARTICLE II. BOARD OF TRUSTEES SECTION 2.01. Function of Trustees. The business and affairs of the Company shall be managed under the direction of its Board of Trustees. All powers of the Company may be exercised by or under authority of the Board of Trustees, except as conferred on or reserved to the shareholders by statute or by the Declaration of Trust or By-Laws. SECTION 2.02. Number of Trustees. The Company shall have at least three trustees; provided that, if there are no shares of beneficial interest outstanding, the number of Trustees may be less than three but not less than one, and, if there are shares of beneficial interest outstanding and so long as there are less than three shareholders, the number of Trustees may be less than three but not less than the number of shareholders. The Company shall have the number of Trustees provided in the Declaration of Trust until changed as herein provided. Except as the Declaration of Trust provides otherwise, a majority of the entire Board of Trustees may alter the number of trustees set by the Declaration of Trust to not exceeding nine nor less than the minimum number then permitted herein, but the action may not affect the tenure of office of any trustee. SECTION 2.03. Election and Tenure of Trustees. At each annual meeting the shareholders shall elect trustees to hold office until the next annual meeting and until their successors are elected and qualify. SECTION 2.04. Removal of Trustee. Any trustee or the entire Board of Trustees may be removed only in accordance with the provisions of the Declaration of Trust. SECTION 2.05 Vacancy on Board of Trustees. The shareholders shall elect a successor to fill a vacancy on the Board of Trustees which results from the removal of a trustee. A trustee elected by the shareholders to fill a vacancy which results from the removal of a trustee serves for the balance of the term of the removed trustee. A majority of the remaining Trustees, whether or not sufficient to constitute a quorum, may fill a vacancy on the Board of Trustees which results from any increase in the authorized number of Trustees, or death, resignation, retirement or other cause. A trustee elected by the Board of Trustees to fill a vacancy serves until the next annual meeting of shareholders and until his successor is elected and qualifies. SECTION 2.06. Regular Meetings. After each meeting of shareholders at which trustees shall have been elected, the Board of Trustees shall meet as soon as -4- 5 practicable for the purpose of organization and the transaction of other business. In the event that no other time and place are specified by resolution of the Board of Trustees, the President or the Chairman of the Board of Trustees, with notice in accordance with Section 2.08, the Board of Trustees shall meet immediately following the close of, and at the place of, such shareholders' meeting. Any other regular meeting of the Board of Trustees shall be held on such date and at any place as may be designated from time to time by the Board of Trustees. SECTION 2.07. Special Meetings. Special meetings of the Board of Trustees may be called at any time by the Chairman of the Board of Trustees or the President or by a majority of the Board of Trustees by vote at a meeting or in writing with or without a meeting. A special meeting of the Board of Trustees shall be held on such date and at any place as may be designated from time to time by the Board of Trustees. In the absence of designation such meeting shall be held at such place as may be designated in the call. SECTION 2.08. Notice of Meeting. Except as provided in Section 2.06, the Secretary shall give notice to each trustee of each regular and special meeting of the Board of Trustees. The notice shall state the time and place of the meeting. Notice is given to a trustee when it is delivered personally to him, left at his residence or usual place of business, or sent by telegraph, facsimile transmission or telephone, at least 24 hours before the time of the meeting or, in the alternative by mail to his address as it shall appear on the records of the Company, at least 72 hours before the time of the meeting. Unless these By-Laws or a resolution of the Board of Trustees provides otherwise, the notice need not state the business to be transacted at or the purposes of any regular or special meeting of the Board of Trustees. No notice of any meeting of the Board of Trustees need be given to any trustee who attends except where a trustee attends a meeting for the express purpose of objecting to the transaction of any business because the meeting is not lawfully called or convened, or to any trustee who, in writing executed and filed with the records of the meeting either before or after the holding thereof, waives such notice. Any meeting of the Board of Trustees, regular or special, may adjourn from time to time to reconvene at the same or some other place, and no notice need be given of any such adjourned meeting other than by announcement. SECTION 2.09. Action by Trustees. Unless statute, the Declaration of Trust or these By-Laws requires a greater proportion, the action of a majority of the trustees present at a meeting at which a quorum is present is action of the Board of Trustees. A majority of the entire Board of Trustees shall constitute a quorum for the transaction of business. In the absence of a quorum, the trustees present by majority vote and without notice other than by announcement may adjourn the meeting from time to time until a quorum shall attend. At any such adjourned meeting at which a quorum shall be present, any business may be transacted which might have been transacted at the -5- 6 meeting as originally notified. Any action required or permitted to be taken at a meeting of the Board of Trustees may be taken without a meeting, if a unanimous written consent which sets forth the action is signed by each member of the Board of Trustees and filed with the minutes of proceeding of the Board of Trustees SECTION 2.10. Meeting by Conference Telephone. Members of the Board of Trustees may participate in a meeting by means of a conference telephone or similar communications equipment if all persons participating in the meeting can hear each other at the same time. Participation in a meeting by these means constitutes presence in person at a meeting. SECTION 2.11. Compensation. By resolution of the Board of Trustees a fixed sum and expenses, if any, for attendance at each regular or special meeting of the Board of Trustees or of committees thereof, and other compensation for their services as such or on committees of the Board of Trustees, may be paid to trustees. Trustees who are full-time employees of the Company need not be paid for attendance at meetings of the Board of Trustees or committees thereof for which fees are paid to other trustees. A trustee who serves the Company in any other capacity also may receive compensation for such other services, pursuant to a resolution of the Board of Trustees. SECTION 2.12. Advisory Trustees. The Board of Trustees may by resolution appoint advisory trustees to the Board of Trustees, who may also serve as trustees emeriti, and shall have such authority and receive such compensation and reimbursement as the Board of Trustees shall provide. Advisory trustees or trustees emeriti shall not have the authority to participate by vote in the transaction of business. ARTICLE III. COMMITTEES SECTION 3.01. Committees. The Board of Trustees may appoint from among its members an Audit Committee, a Compensation Committee and other committees composed of two or more trustees and delegate to these committees any of the powers of the Board of Trustees, except the power to declare dividends or other distributions on beneficial interest, elect Trustees, issue beneficial interest other than as provided in the next sentence, recommend to the shareholders any action which requires shareholder approval, amend these By-Laws, or approve any merger or share exchange which does not require shareholder approval. The entire Audit Committee shall be trustees who are independent of management. The entire Compensation Committee shall be trustees who are "disinterested persons" within the meaning of Rule 16b-3 of the Securities Exchange Act of 1934, as amended. If the Board of Trustees has given general -6- 7 authorization for the issuance of beneficial interest, a committee of the Board of Trustees, in accordance with a general formula or method specified by the Board of Trustees by resolution or by adoption of a beneficial interest option or other plan, may fix the terms of beneficial interest subject to classification or reclassification and the terms on which any beneficial interest may be issued, including all terms and conditions required or permitted to be established or authorized by the Board of Trustees. SECTION 3.02. Committee Procedure. Each committee may fix rules of procedure for its business. A majority of the members of a committee shall constitute a quorum for the transaction of business and the act of a majority of those present at a meeting at which a quorum is present shall be the act of the committee. The members of a committee present at any meeting, whether or not they constitute a quorum, may appoint a trustee to act in the place of an absent member. Any action required or permitted to be taken at a meeting of a committee may be taken without a meeting, if a unanimous written consent which sets forth the action is signed by each member of the committee and filed with the minutes of the committee. The members of a committee may conduct any meeting thereof by conference telephone in accordance with the provisions of Section 2.10. SECTION 3.03. Emergency. In the event of a state of disaster of sufficient severity to prevent the conduct and management of the affairs and business of the Company by its trustees and officers as contemplated by the Declaration of Trust and these By-Laws, the available trustees shall elect a Special Executive Committee consisting of any two members of the Board of Trustees, whether or not they be officers of the Company, which two members shall constitute the Special Executive Committee for the full conduct and management of the affairs of the Company in accordance with the foregoing provisions of this Section. This Section shall be subject to implementation by resolution of the Board of Trustees passed from time to time for that purpose, and any provisions of these By-Laws (other than this Section) and any resolutions which are contrary to the provisions of this Section or to the provisions of any such implementary resolutions shall be suspended until it shall be determined by any Special Executive Committee acting under this Section that it shall be to the advantage of the Company to resume the conduct and management of its affairs and business under all the other provisions of these By-Laws. ARTICLE IV. OFFICERS SECTION 4.01. Executive and Other Officers. The Company shall have a President, a Secretary, and a Treasurer. It may also have a Chairman of the Board of -7- 8 Trustees. The Board of Trustees shall designate who shall serve as chief executive officer, who shall have general supervision of the business and affairs of the Company, and may designate a chief operating officer, who shall have supervision of the operations of the Company. In the absence of any designation, the Chairman of the Board of Trustees, if there be one, shall serve as chief executive officer and the President shall serve as chief operating officer. In the absence of the Chairman of the Board of Trustees, or if there be none, the President shall be the chief executive officer. The same person may hold both offices. The Company may also have one or more Vice-Presidents, assistant officers, and subordinate officers as may be established by the Board of Trustees. A person may hold more than one office in the Company except that no person may serve concurrently as both President and a Vice-President of the Company. The Chairman of the Board of Trustees shall be a trustee; the other officers may be trustees. SECTION 4.02. Chairman of the Board of Trustees. The Chairman of the Board of Trustees, if one be elected, shall preside at all meetings of the Board of Trustees and of the shareholders at which he shall be present. Unless otherwise specified by the Board of Trustees, he shall be the chief executive officer of the Company and perform the duties customarily performed by chief executive officers, and may perform any duties of the President. In general, he shall perform all such duties as are from time to time assigned to him by the Board of Trustees. SECTION 4.03. President. Unless otherwise provided by resolution of the Board of Trustees, the President, in the absence of the Chairman of the Board of Trustees, shall preside at all meetings of the Board of Trustees and of the shareholders at which he shall be present. Unless otherwise specified by the Board of Trustees, the President shall be the chief operating officer of the Company and perform the duties customarily performed by chief operating officers. He may sign and execute, in the name of the Company, all authorized deeds, mortgages, bonds, contracts or other instruments, except in cases in which the signing and execution thereof shall have been expressly delegated to some other officer or agent of the Company. In general, he shall perform such other duties usually performed by a president of a Company and such other duties as are from time to time assigned to him by the Board of Trustees or the chief executive officer of the Company. SECTION 4.04. Vice-Presidents. The Vice-President or Vice-Presidents, at the request of the chief executive officer or the President, or in the President's absence or during his inability to act, shall perform the duties and exercise the functions of the President, and when so acting shall have the powers of the President. If there be more than one Vice-President, the Board of Trustees may determine which one or more of the Vice-Presidents shall perform any of such duties or exercise any of such functions, or if such determination is not made by the Board of Trustees, the chief executive officer, or the President may make such determination; otherwise any of the Vice-Presidents may -8- 9 perform any of such duties or exercise any of such functions. The Vice-President or Vice-Presidents shall have such other powers and perform such other duties, and have such additional descriptive designations in their titles (if any), as are from time to time assigned to them by the Board of Trustees, the chief executive officer, or the President. SECTION 4.05. Secretary. The Secretary shall keep the minutes of the meetings of the shareholders, of the Board of Trustees and of any committees, in books provided for the purpose; he shall see that all notices are duly given in accordance with the provisions of these By-Laws or as required by law; he shall be custodian of the records of the Company; he may witness any document on behalf of the Company, the execution of which is duly authorized, see that the corporate seal is affixed where such document is required or desired to be under its seal, and, when so affixed, may attest the same; and, in general, he shall perform all duties incident to the office of a secretary of a Company, and such other duties as are from time to time assigned to him by the Board of Trustees, the chief executive officer or the President. SECTION 4.06. Treasurer. The Treasurer shall have charge of and be responsible for all funds, securities, receipts and disbursements of the Company, and shall deposit, or cause to be deposited, in the name of the Company, all moneys or other valuable effects in such banks, trust companies or other depositories as shall, from time to time, be selected by the Board of Trustees; he shall render to the President and to the Board of Trustees, whenever requested, an account of the financial condition of the Company; and, in general, he shall perform all the duties incident to the office of a treasurer of a Company, and such other duties as are from time to time assigned to him by the Board of Trustees, the chief executive officer, or the President. The Treasurer shall also be the Chief Financial Officer of the Company. SECTION 4.07. Assistant and Subordinate Officers. The assistant and subordinate officers of the Company are all officer below the office of Vice-President, Secretary or Treasurer. The assistant or subordinate officers shall have such duties as are from time to time assigned to them by the Board of Trustees, the chief executive officer, or the President. SECTION 4.08. Election; Tenure and Removal of Officers. The Board of Trustees shall elect the officers. The Board of Trustees may from time to time authorize any committee or officer to appoint assistant and subordinate officers. Election or appointment of an officer, employee or agent shall not of itself create contract rights. All officers shall be appointed to hold their offices, respectively, at the pleasure of the Board of Trustees. The Board of Trustees (or, as to any assistant or subordinate officer, any committee or officer authorized by the Board of Trustees) may remove an officer at any time. The removal of an officer does not prejudice any of his contract rights. The Board of Trustees (or, as to any assistant or subordinate officer, any committee or officer authorized by the Board of Trustees) may fill a vacancy which occurs in any office for the unexpired portion of the term. -9- 10 SECTION 4.09. Compensation. The Board of Trustees shall have power to fix the salaries and other compensation and remuneration, of whatever kind, of all officers of the Company. No officer shall be prevented from receiving such salary by reason of the fact that he is also a trustee of the Company. The Board of Trustees may authorize any committee or officer, upon whom the power of appointing assistant and subordinate officers may have been conferred, to fix the salaries, compensation and remuneration of such assistant and subordinate officers. ARTICLE V. DIVISIONAL TITLES SECTION 5.01. Conferring Divisional Titles. The Board of Trustees may from time to time confer upon any employee of a division of the Company the title of President, Vice President, Treasurer or Secretary of such division or any other title or titles deemed appropriate, or may authorize the Chairman of the Board of Trustees or the President to do so. Any such titles so conferred may be discontinued and withdrawn at any time by the Board of Trustees, or by the Chairman of the Board of Trustees or the President if so authorized by the Board of Trustees. Any employee of a division designated by such a divisional title shall have the powers and duties with respect to such division as shall be prescribed by the Board of Trustees, the Chairman of the Board of Trustees or the President. SECTION 5.02. Effect of Divisional Titles. The conferring of divisional titles shall not create an office of the Company under Article IV unless specifically designated as such by the Board of Trustees; but any person who is an officer of the Company may also have a divisional title. ARTICLE VI . BENEFICIAL INTEREST SECTION 6.01. Certificates for Beneficial interest. Each shareholder is entitled to certificates which represent and certify the shares of beneficial interest he holds in the Company. Each beneficial interest certificate shall include on its face the name of the Company, the name of the shareholder or other person to whom it is issued, and the class of beneficial interest and number of shares it represents. It shall be in such form, not inconsistent with law or with the Declaration of Trust, as shall be approved by the Board of Trustees or any officer or officers designated for such purpose by resolution of the Board of Trustees. Each beneficial interest certificate shall be signed by the Chairman of the Board of Trustees, the President, or a Vice-President, and countersigned by the Secretary, an Assistant Secretary, the Treasurer, or an Assistant Treasurer. Each certificate may be sealed with the actual corporate seal or a facsimile of -10- 11 it or in any other form and the signatures may be either manual or facsimile signatures. A certificate is valid and may be issued whether or not an officer who signed it is still an officer when it is issued. SECTION 6.02. Transfers. The Board of Trustees shall have power and authority to make such rules and regulations as it may deem expedient concerning the issue, transfer and registration of certificates of beneficial interest; and may appoint transfer agents and registrars thereof. The duties of transfer agent and registrar may be combined. SECTION 6.03. Record Dates and Closing of Transfer Books. The Board of Trustees may set a record date or direct that the beneficial interest transfer books be closed for a stated period for the purpose of making any proper determination with respect to shareholders, including which shareholders are entitled to notice of a meeting, vote at a meeting, receive a dividend or be allotted other rights. The record date may not be prior to the close of business on the day the record date is fixed nor, subject to Section 1.06, more than 90 days before the date on which the action requiring the determination will be taken; the transfer books may not be closed for a period longer than 20 days; and, in the case of a meeting of shareholders, the record date or the closing of the transfer books shall be at least ten days before the date of the meeting. SECTION 6.04. Beneficial Interest Ledger. The Company shall maintain a beneficial interest ledger which contains the name and address of each shareholder and the number of shares of beneficial interest of each class which the shareholder holds. The beneficial interest ledger may be in written form or in any other form which can be converted within a reasonable time into written form for visual inspection. The original or a duplicate of the beneficial interest ledger shall be kept at the offices of a transfer agent for the particular class of beneficial interest, or, if none, at the principal office in the State of Maryland or the principal executive offices of the Company. SECTION 6.05. Certification of Beneficial Owners. The Board of Trustees may adopt by resolution a procedure by which a shareholder of the Company may certify in writing to the Company that any shares of beneficial interest registered in the name of the shareholder are held for the account of a specified person other than the shareholder. The resolution shall set forth the class of shareholders who may certify; the purpose for which the certification may be made; the form of certification and the information to be contained in it; if the certification is with respect to a record date or closing of the beneficial interest transfer books, the time after the record date or closing of the beneficial interest transfer books within which the certification must be received by the Company; and any other provisions with respect to the procedure which the Board of Trustees considers necessary or desirable. On receipt of a certification which complies with the procedure adopted by the Board of Trustees in accordance with this Section, the person specified in the certification is, for the purpose set forth in the certification, the holder of record of the specified beneficial interest in place of the shareholder who makes the certification. -11- 12 SECTION 6.06. Lost Beneficial Interest Certificates. The Board of Trustees of the Company may determine the conditions for issuing a new beneficial interest certificate in place of one which is alleged to have been lost, stolen, or destroyed, or the Board of Trustees may delegate such power to any officer or officers of the Company. In their discretion, the Board of Trustees or such officer or officers may refuse to issue such new certificate save upon order of some court having jurisdiction in the premises. ARTICLE VII. FINANCE SECTION 7.01. Checks, Drafts, Etc. All checks, drafts and orders for the payment of money, notes and other evidences of indebtedness, issued in the name of the Company, shall, unless otherwise provided by resolution of the Board of Trustees, be signed by the President, a Vice-President or an Assistant Vice-President and countersigned by the Treasurer, an Assistant Treasurer, the Secretary or an Assistant Secretary. SECTION 7.02. Annual Statement of Affairs. The President or chief accounting officer shall prepare annually a full and correct statement of the affairs of the Company, to include a balance sheet and a financial statement of operations for the preceding fiscal year. The statement of affairs shall be submitted at the annual meeting of the shareholders and, within 20 days after the meeting, placed on file at the Company's principal. SECTION 7.03. Fiscal Year. The fiscal year of the Company shall be the twelve calendar months ending December 31 in each year, unless otherwise provided by the Board of Trustees. SECTION 7.04. Dividends. If declared by the Board of Trustees at any meeting thereof, the Company may pay dividends on its shares in cash, property, or in shares of the capital beneficial interest of the Company, unless such dividend is contrary to law or to a restriction contained in the Declaration of Trust. SECTION 7.05. Contracts. To the extent permitted by applicable law, and except as otherwise prescribed by the Declaration of Trust or these By-Laws with respect to certificates for shares, the Board of Trustees may authorize any officer, employee, or agent of the Company to enter into any contract or execute and deliver any instrument in the name of and on behalf of the Company. Such authority may be general or confined to specific instances. ARTICLE VIII. -12- 13 INDEMNIFICATION SECTION 8.01. Procedure. Any indemnification, or payment of expenses in advance of the final disposition of any proceeding, shall be made promptly, and in any event within 60 days, upon the written request of the trustee or officer entitled to seek indemnification (the "Indemnified Party"). The right to indemnification and advances hereunder shall be enforceable by the Indemnified Party in any court of competent jurisdiction, if (i) the Company denies such request, in whole or in part, or (ii) no disposition thereof is made within 60 days. The Indemnified Party's costs and expenses incurred in connection with successfully establishing his right to indemnification, in whole or in part, in any such action shall also be reimbursed by the Company. It shall be a defense to any action for advance of expenses that (a) a determination has been made that the facts then known to those making the determination would preclude indemnification or (b) the Company has not received either (i) an undertaking as required by law to repay such advances in the event it shall ultimately be determined that the standard of conduct has not been met or (ii) a written affirmation by the Indemnified Party of such Indemnified Party's good faith belief that the standard of conduct necessary for indemnification by the Company has been met. SECTION 8.02. Exclusivity; Etc. The indemnification and advance of expenses provided by the Declaration of Trust and these By-Laws shall not be deemed exclusive of any other rights to which a person seeking indemnification or advance of expenses may be entitled under any law (common or statutory), or any agreement, vote of shareholders or disinterested trustees or other provision that is consistent with law, both as to action in his official capacity and as to action in another capacity while holding office or while employed by or acting as agent for the Company, shall continue in respect of all events occurring while a person was a trustee or officer after such person has ceased to be a trustee or officer, and shall inure to the benefit of the estate, heirs, executors and administrators of such person. All rights to indemnification and advance of expenses under the Declaration of Trust of the Company and hereunder shall be deemed to be a contract between the Company and each trustee or officer of the Company who serves or served in such capacity at any time while this By-Law is in effect. Nothing herein shall prevent the amendment of this By-Law, provided that no such amendment shall diminish the rights' of any person hereunder with respect to events occurring or claims made before its adoption or as to claims made after its adoption in respect of events occurring before its adoption. Any repeal or modification of this By-Law shall not in any way diminish any rights to indemnification or advance of expenses of such trustee or officer or the obligations of the Company arising hereunder with respect to events occurring, or claims made, while this By-Law or any provision hereof is in force. SECTION 8.03. Severability: Definitions. The invalidity or unenforceability of any provision of this Article VIII shall not affect the validity or enforceability of any other provision hereof. The phrase "this By-Law" in this Article VIII means this Article VIII in its entirety. -13- 14 ARTICLE IX. SUNDRY PROVISIONS SECTION 9.01. Books and Records. The Company shall keep correct and complete books and records of its accounts and transactions and minutes of the proceedings of its shareholders and Board of Trustees and of any committee when exercising any of the powers of the Board of Trustees. The books and records of a Company may be in written form or in any other form which can be converted within a reasonable time into written form for visual inspection. Minutes shall be recorded in written form but may be maintained in the form of a reproduction. The original or a certified copy of these By-Laws shall be kept at the principal office of the Company. SECTION 9.02. Corporate Seal. The Board of Trustees shall provide a suitable seal, bearing the name of the Company, which shall be in the charge of the Secretary. The Board of Trustees may authorize one or more duplicate seals and provide for the custody thereof. If the Company is required to place its corporate seal to a document, it is sufficient to meet the requirement of any law, rule, or regulation relating to a corporate seal to place the word "Seal" adjacent to the signature of the person authorized to sign the document on behalf of the Company. SECTION 9.03. Bonds. The Board of Trustees may require any officer, agent or employee of the Company to give a bond to the Company, conditioned upon the faithful discharge of his duties, with one or more sureties and in such amount as may be satisfactory to the Board of Trustees. SECTION 9.04. Voting Upon Shares in Other Companies. Beneficial interest of other Companies or associations, registered in the name of the Company, may be voted by the President, a Vice-President, or a proxy appointed by either of them. The Board of Trustees, however, may by resolution appoint some other person to vote such shares, in which case such person shall be entitled to vote such shares upon the production of a certified copy of such resolution. SECTION 9.05. Mail. Any notice or other document which is required by these By-Laws to be mailed shall be deposited in the United States mails, postage prepaid. SECTION 9.06. Execution of Documents. A person who holds more than one office in the Company may not act in more than one capacity to execute, acknowledge, or verify an instrument required by law to be executed, acknowledged, or verified by more than one officer. SECTION 9.07. Amendments. Subject to the special provisions of Section 2.02, in accordance with the Declaration of Trust, these By-Laws may be repealed, altered, amended or -14- 15 rescinded (a) by the shareholders of the Company only by vote of not less than 80% of the outstanding shares of beneficial interest of the Company entitled to vote generally in the election of trustees (considered for this purpose as one class) cast at any meeting of the shareholders called for that purpose (provided that notice of such proposed repeal, alteration, amendment or rescission is included in the notice of such meeting) or (b) by vote of two-thirds of the Board of Trustees at a meeting held in accordance with the provisions of these By-Laws. -15- EX-4.1 3 SPECIMEN STOCK CERTIFICATE 1 Exhibit 4.1 Specimen of Common Stock Certificate COMMON COMMON PAR VALUE $.0001 PAR VALUE $.0001 THIS CERTIFICATE IS TRANSFERABLE IN CUSIP 529043 10 1 THE CITIES OF DENVER OR NEW YORK SEE RESTRICTIVE LEGEND ON REVERSE SEE REVERSE FOR CERTAIN DEFINITIONS LEXINGTON CORPORATE PROPERTIES TRUST This certifies that is the record holder of FULLY PAID AND NONASSESSABLE SHARES OF THE COMMON STOCK OF Lexington Corporate Properties Trust transferable on the books of the Corporation in person or by duly authorized attorney upon surrender of the Certificate properly endorsed. This certificate is not valid until countersigned by the Transfer Agent and registered by the Registrar. Witness the facsimile seal of the Corporation and the facsimile signatures of its duly authorized officers. Dated: COUNTERSIGNED AND REGISTERED: CHASEMELLON SHAREHOLDER SERVICES TRANSFER AGENT AND REGISTRAR PRESIDENT BY SECRETARY AUTHORIZED SIGNATURE EX-11 4 SCHEDULE OF COMPUTATIONS OF PER SHARE EARNINGS 1 Exhibit 11 Schedule of Computations of Per Share Earnings (in thousands, except share and per share data)
Years ended December 31, 1997 1996 1995 ------------- ------------- ------------- BASIC ----- Calculation of income for basic earnings per common share purposes: Income before extraordinary item $ 11,782 $ 5,466 $ 8,133 Less: Preferred dividends paid or declared (1,322) -- -- Deemed additional preferred dividends (non-cash) (3,549) -- -- ------------- ------------- ------------- Income before extraordinary item attributable to common shares, for basic earnings per common share 6,911 5,466 8,133 Extraordinary item - loss on extinguishment of debt (3,189) -- (4,849) ------------- ------------- ------------- Net income for basic earnings per common share $ 3,722 $ 5,466 $ 3,284 ============= ============= ============= Weighted average number of common shares outstanding 11,444,589 9,392,727 9,263,169 ============= ============= ============= Basic earnings per common share: Income before extraordinary item $ 0.61 $ 0.58 $ 0.88 Extraordinary item - loss on extinguishment of debt (0.28) -- (0.53) ------------- ------------- ------------- Net income $ 0.33 $ 0.58 $ 0.35 ============= ============= ============= DILUTED ------- Income before extraordinary item attributable to common shares, for basic earnings per common share $ 6,911 $ 5,466 $ 8,133 Add: Minority interests attributable to limited partnership units assuming conversion of such units -- 588 59 ------------- ------------- ------------- Income before extraordinary item attributable to common shares, for diluted earnings per share 6,911 6,054 8,192 Extraordinary item - loss on extinguishment of debt (3,189) -- (4,849) ------------- ------------- ------------- Net income for fully diluted earnings per common share $ 3,722 $ 6,054 $ 3,343 ============= ============= ============= Weighted average number of common shares outstanding 11,444,589 9,392,727 9,263,169 Add incremental shares representing: Additional common share equivalents relating to employee shares options 195,094 50,513 60 Assumed conversion of limited partnership interests -- 1,453,771 239,126 ------------- ------------- ------------- Weighted average number of common shares used in calculation of diluted earnings per share 11,639,683 10,897,011 9,502,355 ============= ============= ============= Diluted earnings per share: Income before extraordinary item $ 0.59 $ 0.56 $ 0.86 Extraordinary item - loss on extinguishment of debt (0.27) -- (0.51) ------------- ------------- ------------- Net income $ 0.32 $ 0.56 $ 0.35 ============= ============= =============
EX-21 5 LIST OF SUBSIDIARIES 1 Exhibit 21 SUBSIDIARIES OF LEXINGTON CORPORATE PROPERTIES TRUST (JURISDICTION OR ORGANIZATION) Lepercq Corporate Income Fund L.P. (Delaware) Lepercq Corporate Income Fund II L.P. (Delaware) Lex GP-1, Inc. (Delaware) Lex LP-1, Inc. (Delaware) Lexington Phoenix Corp. (Arizona) LXP Canton, Inc. (Delaware) LXP Funding Corp. (Delaware) LXP I, L.P. (Delaware) LXP I, Inc. (Delaware) LXP II, L.P. (Delaware) LXP II, Inc. (Delaware) North Tampa Associates (Florida) Union Hills Associates (Arizona) Union Hills Associates II (Arizona) Barnes Rockshire Associates Limited Partnership (Maryland) Barngiant Livingston Associates Limited Partnership (Maryland) Barnhale Modesto Properties (New York) Barnhech Montgomery Associates Limited Partnership (Maryland) Barnvyn Bakersfield Associates L. P. (California) Barnward Brownsville Properties (New York) EX-23 6 CONSENT OF KPMG PEAT MARWICK LLP 1 Exhibit 23 Accountants' Consent The Board of Trustees Lexington Corporate Properties Trust: We consent to incorporation by reference in the registration statement (No. 1-12386) on Form S-3 of Lexington Corporate Properties Trust of our report dated January 22, 1998, relating to the consolidated balance sheets of Lexington Corporate Properties Trust and subsidiaries as of December 31, 1997 and 1996, and the related consolidated statements of income, changes in shareholders' equity, and cash flows for each of the years in the three-year period ended December 31, 1997, and the related schedule, which report appears in the December 31, 1997 annual report on Form 10-K of Lexington Corporate Properties Trust. KPMG PEAT MARWICK LLP New York, New York March 26, 1998 EX-27.1 7 FINANCIAL DATA SCHEDULE
5 This schedule contains summary financial information extracted from the consolidated statement of income for the year ended December 31, 1997 and the consolidated balance sheet as of December 31, 1997 as contained in the Company's Form 10-K for December 31, 1997 and is qualified in its entirety by reference to such Form 10-K. Dollars are in thousands, except per share data. 1,000 YEAR DEC-31-1997 JAN-01-1997 DEC-31-1997 9,139 0 7,638 0 0 0 466,348 (50,993) 467,115 0 227,160 24,369 0 2 182,464 467,115 0 43,569 0 11,422 876 0 16,644 10,707 0 11,782 0 (3,189) 0 8,593 0.33 0.32
EX-27.2 8 FINANCIAL DATA SCHEDULE
5 This schedule contains summary financial information extracted from the consolidated statements of income for the years ended December 31, 1997, 1996 and 1995 as contained in the Company's Form 10-K for December 31, 1997 and is qualified in its entirety by reference to such Form 10-K. In accordance with Rule 601(c)(2)iii of Regulation S-K, due to the provisions of the Financial Accounting Standards Board's Statement of Financial Accounting Standards No. 128, Earnings Per Share ("SFAS 128"), which is effective for financial statements for periods ending after December 31, 1997, the Company has restated its earnings per share accordingly, as indicted above. YEAR DEC-31-1996 JAN-01-1996 DEC-31-1996 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0.58 0.56
EX-27.3 9 FINANCIAL DATA SCHEDULE
5 This schedule contains summary financial information extracted from the consolidated statements of income for the years ended December 31, 1997, 1996 and 1995 as contained in the Company's Form 10-K for December 31, 1997 and is qualified in its entirety by reference to such Form 10-K. In accordance with Rule 601(c)(2)iii of Regulation S-K, due to the provisions of the Financial Accounting Standards Board's Statement of Financial Accounting Standards No. 128, Earnings Per Share ("SFAS 128"), which is effective for financial statements for periods ending after December 31, 1997, the Company has restated its earnings per share accordingly, as indicted above. YEAR DEC-31-1995 JAN-01-1995 DEC-31-1995 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0.35 0.35
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