-----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, SZNQb5d5/RyzEtOoxJYJwIlu8sF42HK4galivsP0WBtBQ7mb3Ab8DUdVlKyFOzRF 5Sc/PghqAEMbJeBdBZVpeQ== 0000950123-98-008224.txt : 19980914 0000950123-98-008224.hdr.sgml : 19980914 ACCESSION NUMBER: 0000950123-98-008224 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980827 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 19980911 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: LEXINGTON CORPORATE PROPERTIES TRUST CENTRAL INDEX KEY: 0000910108 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE INVESTMENT TRUSTS [6798] IRS NUMBER: 133717318 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 001-12386 FILM NUMBER: 98708210 BUSINESS ADDRESS: STREET 1: 355 LEXINGTON AVE CITY: NEW YORK STATE: NY ZIP: 10017 BUSINESS PHONE: 2126927260 MAIL ADDRESS: STREET 1: 355 LEXINGTON AVE STREET 2: 14TH FLOOR CITY: NEW YORK STATE: NY ZIP: 10017 FORMER COMPANY: FORMER CONFORMED NAME: LEXINGTON CORPORATE PROPERTIES INC DATE OF NAME CHANGE: 19930816 8-K 1 LEXINGTON CORPORATE PROPERTIES TRUST 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 8-K Current Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported): August 27, 1998 LEXINGTON CORPORATE PROPERTIES TRUST (Exact Name of Registrant as specified in its charter) Maryland 1-12386 13-3717318 (State or other jurisdiction (Commission File (IRS Employer of incorporation) Number) Identification No.) 355 Lexington Avenue, New York, New York 10017 (Address of Principal Executive Offices) (Zip Code) Registrant's telephone number, including area code: (212) 692-7260 Not Applicable (Former name or former address, if changed since last report) 2 Item 2. Acquisitions or Disposition of Assets. Lexington Corporate Properties Trust (the "Company") has acquired 12 properties ("Property Acquisitions") in 1998 comprising approximately 3.6 million square feet of gross leasable area in 9 states. The total acquisition price for these Property Acquisitions is approximately $199.0 million. The Company's previous report on Form 8-K, dated March 27, 1998, provided specific information related to 8 properties that were acquired by the Company during 1998. These properties were acquired for approximately $91.2 million, of which $58.1 was satisfied through borrowings, $4 million through the issuance of Operating Partnership Units and the remainder in cash. Consequently, this report has been filed for the purpose of providing certain historical financial information relating to one additional property the Company acquired and pro forma financial information for the Property Acquisitions. Specific information with respect to the four additional Property Acquisitions is as follows: On June 19, 1998, the Company acquired a 432,000 square foot distribution facility in Lancaster, California (the "Lancaster Property") for approximately $15 million, of which approximately $1.8 million was in the form of Operating Partnership Units. The Lancaster Property was recently developed and is net leased to Michaels Stores Inc. for 15 years with an average annual net rent of $1.43 million. On July 2, 1998, the Company acquired a 179,300 square foot office building in Florence, South Carolina (the "Florence Property") for approximately $15 million. The Florence Property was the Company's first build-to-suit project and is net leased to Fleet Mortgage Group for 10 years with an average annual net rent of approximately $1.65 million. On July 24, 1998, the Company acquired a 184,000 square foot manufacturing and distribution facility in Auburn Hills, Michigan (the "Auburn Hills Property") for approximately $13.8 million. The Auburn Hills Property is another build-to-suit project and is net leased to GM Inland Seat for 8 years with an average annual net rent of approximately $1.4 million. Effective August 27, 1998, the Company completed an agreement with the general partners and a majority of the limited partners of an affiliated partnership to acquire a 1.7 million square foot distribution facility in Warren, Ohio (the "Warren Property") for approximately $63.9 million of which approximately $18.85 million is in the form of Operating Partnership Units, approximately $42.2 million in assumed mortgage debt and approximately $2.85 million in cash. Two of the general partners are the Co-Chief Executive Officers of the Company. As part of this transaction they received approximately $6 million in Operating Partnership Units in exchange for their partnership interests, management contract and a beneficial interest in a deferred installment obligation. The mortgage debt matures in September 2007, and provides for semi-annual principal and interest payments of $3,080,000. The Warren Property is leased to and occupied by K-Mart Corporation under a net lease which expires on September 30, 2007. The average annual net rent under the K-Mart Corporation lease is $8.9 million. As part of the transaction the Company purchased an existing primary lease encumbering the Property. The Company partially funded the purchases of the Lancaster Property, the Florence Property and the Auburn Hills Property through aggregate draws on short-term credit facilities of approximately $42.0 million. These borrowings bear interest at 137.5 basis points over LIBOR which approximates 7.0% per annum. 3 The annualized Funds From Operations ("FFO") generated by the Property Acquisitions equates to an aggregate annualized yield of approximately 11.1% on the Company's total unleveraged investment in such properties. Item 7. Financial Statements, Pro Forma Information and Exhibits. [a] [b] Financial Statements and Pro Forma Financial Information The financial statements and pro forma financial information filed herewith is as follows: Independent Auditors' Report. Historical Summary of Revenue and Certain Operating Expenses for the Years Ended December 31, 1997, 1996 and 1995 of the Warren Property. Notes to Historical Summary of Revenue and Certain Operating Expenses for the Years Ended December 31, 1997, 1996 and 1995 of the Warren Property. Estimates of Taxable Operating Results and Funds from Operations of the Warren Property. Notes to Estimates of Taxable Operating Results and Funds from Operations of the Warren Property. Pro Forma Condensed Consolidated Balance Sheet as of June 30, 1998. Pro Forma Condensed Consolidated Statements of Income for the Year Ended December 31, 1997 and the Six Months Ended June 30, 1998. Notes to Pro Forma Condensed Consolidated Financial Statements. [c] Exhibits * 23.1 Consent of KPMG Peat Marwick LLP - ---------- * Filed herewith 4 INDEPENDENT AUDITORS' REPORT To the Board of Trustees and Shareholders of Lexington Corporate Properties Trust We have audited the accompanying Historical Summary of Revenue and Certain Operating Expenses of the Warren Property, as defined in the accompanying Note 1, for the years ended December 31, 1997, 1996 and 1995. This historical summary is the responsibility of the management of the Lexington Corporate Properties Trust. Our responsibility is to express an opinion on the historical summary 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 historical summary is free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the historical summary. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the historical summary. We believe that our audits provide a reasonable basis for our opinion. The accompanying Historical Summary of Revenue and Certain Operating Expenses of the Warren Property has been prepared for the purpose of complying with the rules and regulations of the Securities and Exchange Commission as described in Note 2, and is not intended to be a complete presentation of the revenue and expenses of the Warren Property. In our opinion, the historical summary referred to above presents fairly, in all material respects, the revenue and certain operating expenses, as described in Note 2, of the Warren Property for the years ended December 31, 1997, 1996 and 1995 in conformity with generally accepted accounting principles. New York, New York KPMG Peat Marwick LLP August 31, 1998 5 Lexington Corporate Properties Trust Historical Summary of Revenue And Certain Operating Expenses of the Warren Property For the Years Ended December 31, 1997, 1996 and 1995 (dollars in thousands)
1997 1996 1995 ---- ---- ---- Rental revenues $ 5,632 $ 5,632 $ 5,632 Certain operating expenses: Interest expense 3,107 3,415 3,740 ----- ----- ----- Excess of revenues over certain operating expenses $ 2,525 $ 2,217 $ 1,892 ===== ===== =====
The accompanying notes are an integral part of this historical summary. 6 Lexington Corporate Properties Trust Notes to Historical Summary of Revenues And Certain Operating Expenses of the Warren Property 1. Property The Historical Summary of Revenue and Certain Operating Expenses relates to the operations of a property the Company acquired (the "Warren Property"), while under ownership previous to Lexington Corporate Properties Trust (the "Company"). Effective August 27, 1998, the Company completed an agreement with the general partners and a majority of the limited partners of the partnership which owned the Warren Property to acquire the 1.7 million square foot distribution facility in Warren, Ohio. Two of the general partners of the partnership are the Co-Chief Executive Officers of the Company. As part of this transaction, they received approximately $6 million in Operating Partnership Units in exchange for their partnership interests, management contract and beneficial interest in a deferred installment obligation. For each of the years in the three year period ended December 31, 1997, the Property was net leased to K Distribution Properties Inc, (which subleased the property to K-Mart Corporation) under a lease which expired on September 30, 2012 and had 5 five year tenant renewal options. The sublease has a basic term which expires on September 30, 2007 and has 10 five year renewal options. This Historical Summary reflects revenues under the primary lease. The purchase price is approximately $63.9 million including the assumption of $42.2 million in mortgage debt with an ascribed interest rate of 7%, the issuance of $18.85 million in Operating Partnership Units and $2.85 million in cash. The debt, which matures in September 2007, provides for semi-annual principal and interest payments of $3,080,000. As part of the transaction the Company purchased for $2.8 million the K Distribution Properties Inc. primary lease and a purchase money note. 2. Basis of Presentation The Historical Summary has been prepared on the accrual method of accounting. In accordance with the regulations of the Securities and Exchange Commission, certain debt interest, depreciation and general and administrative expenses have been excluded from certain operating expenses, as such costs are dependent upon a particular owner, purchase price or other financial agreement. 3. Revenue Recognition Minimum revenues from rental property are recognized on a straight-line basis over the terms of the related leases. The future minimum revenue under the terms of the noncancellable tenant lease is approximately as follows (in $000's): 1998 $ 8,395 1999 8,395 2000 8,395 2001 8,395 2002 8,617 Thereafter 64,933 --------- $ 107,130 =========
7 Lexington Corporate Properties Trust Notes to Historical Summary of Revenues And Certain Operating Expenses of the Warren Property The future minimum revenue under the terms of the noncancellable tenant sublease is approximately as follows (in 000's): 1998 $ 8,409 1999 8,409 2000 8,409 2001 8,409 2002 8,646 Thereafter 44,457 -------- $ 86,739 ========
8 Lexington Corporate Properties Trust Estimates of Taxable Operating Results and Funds From Operations of The Warren Property (Unaudited and dollars in thousands) The following statement represents estimates of taxable operating results and funds from operations of the Warren Property based on the rent to be received by the Company in the first year under the net lease with K-Mart Corporation. These estimated results do not purport to represent results of operations for the Warren Property in the future and were prepared on the basis described in the accompanying notes which should be read in conjunction herewith. Since the Company has qualified as a real estate investment trust it generally is not subject to Federal income taxes on the portion of its taxable income it distributes to its shareholders. In addition, management is not aware of any material supportable facts that would cause these estimates to be misleading. Estimated Taxable Operating Results: Cash rent under net lease $ 8,409 Less: Interest expense 2,816 ------- Estimated taxable operating results $ 5,593 ======= Estimated Funds from Operations: Estimated taxable operating results $ 5,593 Add: Incremental straight line rent 501 ------- Estimated funds from operations $ 6,094 =======
9 Lexington Corporate Properties Trust Notes to Estimates of Taxable Operating Results and Funds From Operations Of The Warren Property (Unaudited) 1. Basis of Presentation Cash rent under net lease represents the rental payments the Company is expected to receive during the first year of the K-Mart Corporation lease. Interest expense represents the tax deductible interest that will be incurred under the mortgage debt assumed relating to the purchase of the Warren Property. This interest expense approximates the interest expense recognized in accordance with generally accepted accounting principles. Incremental straight line rent represents the additional straight line rental revenue expected to be recognized in accordance with generally accepted accounting principles. The accompanying statement does not include depreciation expense since the real estate is fully depreciated for tax purposes as of December 31, 1997. No income taxes have been provided because the Company is organized and operates in such a manner so as to qualify as a Real Estate Investment Trust under the provisions of the Internal Revenue Code ("Code"). Accordingly, the Company generally will not pay Federal income tax provided that distributions to its shareholders equal at least the amount of its real estate investment trust taxable income as defined under the Code. 2. Acquisition Considerations In assessing property acquisitions, the Company's management considers the (i) credit worthiness of the tenant, (ii) remaining lease term, including scheduled rent increases, (iii) local economic markets and (iv) physical condition and configuration of the property. 10 Lexington Corporate Properties Trust Pro Forma Condensed Consolidated Balance Sheet and Statements of Income The accompanying Pro Forma Condensed Consolidated Balance Sheet as of June 30, 1998 gives effect to the purchase of the Auburn Hills Property and the Warren Property as if these properties had been acquired as of June 30, 1998. The funding for the Florence Property was made on June 30, 1998 and accordingly has been reflected as real estate and mortgages payable in the June 30, 1998 historical balance sheet. The accompanying Pro Forma Condensed Consolidated Statements of Income for the year ended December 31, 1997 and the six months ended June 30, 1998 assume that the Property Acquisitions and all 1997 acquisitions had occurred as of January 1, 1997. The pro forma information is based on the historical financial statements of the Company after giving effect to the acquisition of these properties. The Pro Forma Condensed Consolidated Balance Sheet and the Statements of Income have been prepared by the management of the Company. These pro forma statements may not be indicative of the results that would have actually occurred if the Property Acquisitions had been in effect on the dates indicated. Also, they may not be indicative of the results that may be achieved in the future. The Pro Forma Condensed Consolidated Balance Sheet and Statements of Income should be read in conjunction with the Company's audited financial statements as of December 31, 1997 and for the year then ended (which are contained in the Company's Form 10-K for the year ended December 31, 1997), and the unaudited condensed consolidated financial statements as of June 30, 1998 and for the six months then ended (which are contained in the Company's Form 10-Q for the period ended June 30, 1998) and the accompanying notes thereto. 11 Lexington Corporate Properties Trust Pro Forma Condensed Consolidated Balance Sheet June 30, 1998 (Unaudited and in thousands, except share and per share data)
Pro Forma Historical Adjustments Pro Forma ---------- ----------- --------- ASSETS: Real estate, net $528,045 $ 77,700 $605,745 Property held for sale 2,937 2,937 Cash and cash equivalents 3,646 (2,850) 796 Restricted cash 4,735 4,735 Escrow deposits 276 276 Other assets, net 17,789 -- 17,789 -------- --------- -------- $557,428 $ 74,850 $632,278 ======== ========= ======== LIABILITIES AND SHAREHOLDERS' EQUITY: Mortgage notes payable, including accrued interest $286,323 $ 56,000 $342,323 Subordinated notes payable, including accrued interest 1,973 1,973 Origination fees payable 4,639 4,639 Accounts payable and other liabilities 3,160 -- 3,160 -------- --------- -------- 296,095 56,000 352,095 Minority interests 51,976 18,850 70,826 -------- --------- -------- 348,071 74,850 422,921 -------- --------- -------- Preferred shares, par value $0.0001 per share; authorized 10,000,000 shares. Class A Senior Cumulative Convertible Preferred, liquidation preference $25,000; 2,000,000 shares issued and outstanding 24,369 - 24,369 -------- --------- -------- Shareholders' equity 184,988 - 184,988 -------- --------- -------- $557,428 $ 74,850 $632,278 ======== ========= ========
12 Lexington Corporate Properties Trust Notes to Pro Forma Condensed Consolidated Balance Sheet (Unaudited) 1. Pro Forma Adjustments The adjustment to real estate, net reflects the purchase price of the Auburn Hills Property and the Warren Property. The adjustment to cash and cash equivalents reflects the use of cash in partial settlement for the purchase of one of the Property Acquisitions. The adjustment to mortgage notes payable reflects the additional borrowings relating to the purchase of the Auburn Hills Property and the Warren Property. The adjustment to minority interests reflects the value of the additional operating partnership units issued in connection with the purchase of one Property. 13 Lexington Corporate Properties Trust Pro Forma Condensed Consolidated Statement of Income For the Year Ended December 31, 1997 (Unaudited and in thousands, except per share data)
Pro Forma Historical Adjustments Pro Forma ---------- ----------- --------- Revenues: Rental $42,493 $35,555 $78,048 Interest and other 1,076 -- 1,076 ------- ------- ------- 43,569 35,555 79,124 ------- ------- ------- Expenses: Interest expense 16,644 16,922 33,566 Depreciation and amortization of real estate 10,608 7,881 18,489 Other 5,610 -- 5,610 ------- ------- ------- 32,862 24,803 57,665 ------- ------- ------- Income before gain on sale of properties, minority interests and extraordinary item 10,707 10,752 21,459 Gain on sale of property 3,517 -- 3,517 ------- ------- ------- Income before minority interests and extraordinary item 14,224 10,752 24,976 Minority interests 2,442 3,321 5,763 ------- ------- ------- Income before extraordinary item 11,782 7,431 19,213 Extraordinary item - loss on extinguishment of debt 3,189 -- 3,189 ------- ------- ------- Net income $ 8,593 $ 7,431 $16,024 ======= ======= ======= Income per common share - basic: Income before extraordinary item $ 0.61 $ 1.13 Net income $ 0.33 $ 0.88 Income per common share - diluted: Income before extraordinary item $ 0.59 $ 0.99 Net income $ 0.32 $ 0.83
14 Lexington Corporate Properties Trust Pro Forma Condensed Consolidated Statement of Income For the six months ended June 30, 1998 (Unaudited and in thousands, except per share data)
Pro Forma Historical Adjustments Pro Forma ---------- ----------- --------- Revenues: Rental $ 27,455 $ 9,463 $ 36,918 Interest and other 1,519 (183) 1,336 -------- ------- -------- 28,974 9,280 38,254 -------- ------- -------- Expenses: Interest expense 10,016 4,253 14,269 Depreciation and amortization of real estate 6,682 2,072 8,754 Other 3,018 -- 3,018 -------- ------- -------- 19,716 6,325 26,041 -------- ------- -------- Income before minority interests 9,258 2,955 12,213 Minority interests 1,759 1,092 2,851 -------- ------- -------- Net income $ 7,499 $ 1,863 $ 9,362 ======== ======== ======== Net income per common share: Basic $ 0.38 $ 0.49 Diluted $ 0.37 $ 0.48
15 Lexington Corporate Properties Trust Notes to Pro Forma Condensed Consolidated Statements of Income (Unaudited) 1. Pro Forma Adjustments The adjustment to rental revenues relates to the establishment of a new measurement date for straight lining tenant rents resulting from the property acquisitions. The adjustment to interest and other relates to the elimination of interest earned on funds assumed to have been expended as of January 1, 1997 for property acquisitions. The adjustment to interest expense relates to the additional borrowings related to the acquisition of the properties. The adjustment to depreciation was based upon an estimated useful life of 40 years for the building and 10 years for building improvements using the straight-line method. The adjustment to minority interest reflects operating partnership unitholder's proportionate interest in pro forma adjustments. 16 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. Lexington Corporate Properties Trust Registrant September 11, 1998 By: /s/ Patrick Carroll -------------------------------- Patrick Carroll Chief Financial Officer 17 EXHIBIT INDEX Exhibit No. Description - ----------- -------------------------------- * 23.1 Consent of KPMG Peat Marwick LLP - ---------- * Filed herewith EX-23.1 2 CONSENT OF KPMG PEAT MARWICK LLP 1 Exhibit 23.1 The Board of Trustees Lexington Corporate Properties Trust: We consent to incorporation by reference in the registration statements (No. 333-57853 and No. 333-49351) on Form S-3 of Lexington Corporate Properties Trust of our report dated August 31, 1998, relating to the historical summary of revenues and certain operating expenses of the Warren Property by Lexington Corporate Properties Trust for the years ended December 31, 1997, 1996 and 1995, which report appears in this Form 8-K of Lexington Corporate Properties Trust. KPMG Peat Marwick LLP New York, New York September 11, 1998 -----END PRIVACY-ENHANCED MESSAGE-----