-----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, IS9QtM4zhzqJYMauaMDLOFC/RiJU0U+rgYPCrxBO/PLCZEDsIelVWMEzTn4hxydt cCZ+zb/517jNQXw66CYu8A== 0000950123-98-009807.txt : 19981113 0000950123-98-009807.hdr.sgml : 19981113 ACCESSION NUMBER: 0000950123-98-009807 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19980930 FILED AS OF DATE: 19981112 FILER: COMPANY DATA: COMPANY CONFORMED NAME: LEXINGTON CORPORATE PROPERTIES TRUST CENTRAL INDEX KEY: 0000910108 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE INVESTMENT TRUSTS [6798] IRS NUMBER: 133717318 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-12386 FILM NUMBER: 98744967 BUSINESS ADDRESS: STREET 1: 355 LEXINGTON AVE CITY: NEW YORK STATE: NY ZIP: 10017 BUSINESS PHONE: 2126927260 MAIL ADDRESS: STREET 1: 355 LEXINGTON AVE STREET 2: 14TH FLOOR CITY: NEW YORK STATE: NY ZIP: 10017 FORMER COMPANY: FORMER CONFORMED NAME: LEXINGTON CORPORATE PROPERTIES INC DATE OF NAME CHANGE: 19930816 10-Q 1 LEXINGTON CORPORATE PROPERTIES TRUST 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 1998 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 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) (212) 692-7260 ----------------------------------------- (Registrant's telephone number, including area code) 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 the number of shares outstanding of each of the registrant's classes of common shares, as of the latest practicable date: 17,153,278 common shares, par value $.0001 per share on October 30, 1998. 2 PART 1. - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS LEXINGTON CORPORATE PROPERTIES TRUST AND CONSOLIDATED SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS September 30, 1998 (Unaudited) and December 31, 1997 (in thousands, except share and per share data)
September 30, December 31, 1998 1997 --------- --------- ASSETS: Real estate, at cost $ 665,677 $ 467,606 Less: accumulated depreciation and amortization 60,621 50,993 --------- --------- 605,056 416,613 Property held for sale 2,937 24,501 Cash and cash equivalents 5,110 3,640 Restricted cash 2,566 5,499 Escrow deposits 276 1,249 Other assets, net 19,850 16,871 --------- --------- $ 635,795 $ 468,373 ========= ========= LIABILITIES AND SHAREHOLDERS' EQUITY: Mortgage notes payable $ 344,346 $ 219,553 Subordinated notes payable, including accrued interest 1,936 1,973 Accrued interest payable on mortgage notes 1,178 1,007 Origination fees payable 5,856 5,885 Accounts payable and other liabilities 3,411 4,880 --------- --------- 356,727 233,298 Minority interests 71,678 28,240 --------- --------- 428,405 261,538 --------- --------- 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: 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, 17,150,520 and 16,509,610 shares issued and outstanding in 1998 and 1997, respectively 2 2 Additional paid-in-capital 242,542 235,469 Accumulated distributions in excess of net income (57,525) (53,005) --------- --------- 185,019 182,466 Less: notes receivable from officer shareholders (1,998) -- --------- --------- Total shareholders' equity 183,021 182,466 --------- --------- $ 635,795 $ 468,373 ========= =========
See accompanying notes to unaudited condensed consolidated financial statements. 3 LEXINGTON CORPORATE PROPERTIES TRUST AND CONSOLIDATED SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME Quarters ended September 30, 1998 and 1997 and Nine Months Ended September 30, 1998 and 1997 (Unaudited and in thousands, except per share data)
Quarter Ended Nine Months Ended September 30, September 30, 1998 1997 1998 1997 -------- -------- -------- -------- Revenues: Rental $ 16,869 $ 11,242 $ 44,324 $ 31,420 Interest and other 286 163 1,805 447 -------- -------- -------- -------- 17,155 11,405 46,129 31,867 -------- -------- -------- -------- Expenses: Interest 6,271 4,045 16,287 12,628 Depreciation and amortization of real estate 4,057 2,844 10,739 7,920 Amortization of deferred expenses 249 234 733 649 General and administrative 1,245 874 3,153 2,718 Property arbitration litigation -- -- -- 167 Other 196 213 434 616 -------- -------- -------- -------- 12,018 8,210 31,346 24,698 -------- -------- -------- -------- Income before gain (loss) on sale of properties, minority interests and extraordinary item 5,137 3,195 14,783 7,169 Gain (loss) on sale of properties -- 3,517 (388) 3,517 -------- -------- -------- -------- Income before minority interests and extraordinary item 5,137 6,712 14,395 10,686 Minority interests 1,006 1,220 2,765 1,858 -------- -------- -------- -------- Income before extraordinary item 4,131 5,492 11,630 8,828 Extraordinary item - loss on extinguishment of debt -- (1,667) -- (3,189) -------- -------- -------- -------- Net income $ 4,131 $ 3,825 $ 11,630 $ 5,639 ======== ======== ======== ======== Income per common share - basic: Income before extraordinary item $ 0.21 $ 0.40 $ 0.58 $ 0.54 Extraordinary item - loss on extinguishment of debt -- (0.13) -- (0.30) -------- -------- -------- -------- Net income $ 0.21 $ 0.27 $ 0.58 $ 0.24 ======== ======== ======== ======== Income per common share - diluted: Income before extraordinary item $ 0.20 $ 0.37 $ 0.58 $ 0.53 Extraordinary item - loss on extinguishment of debt -- (0.10) -- (0.29) -------- -------- -------- -------- Net income $ 0.20 $ 0.27 $ 0.58 $ 0.24 ======== ======== ======== ========
See accompanying notes to unaudited condensed consolidated financial statements. 4 LEXINGTON CORPORATE PROPERTIES TRUST AND CONSOLIDATED SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS Nine Months ended September 30, 1998 and 1997 (Unaudited and in thousands, except share data)
Nine Months Ended September 30, 1998 1997 --------- --------- Net cash provided by operating activities $ 22,105 $ 16,196 --------- --------- Cash flows from investing activities: Additions to real estate assets, net of issuance of limited partnership units and liabilities assumed (133,740) (85,594) Net proceeds from sale of property 24,113 21,362 --------- --------- Net cash used in investing activities (109,627) (64,232) --------- --------- Cash flows from financing activities: Dividends to common and preferred shareholders (16,150) (9,662) Repayments on mortgage notes (66,237) (76,115) Prepayment premium on early retirement of debt -- (3,560) Proceeds of mortgage notes payable 148,798 83,542 Proceeds from issuance of limited partnership units 23,449 -- Cash distributions to minority interests (2,722) (1,460) Proceeds from the issuance of common shares, net 492 41,811 Proceeds from the issuance of preferred shares, net -- 16,021 Repurchase of common shares (654) -- Other financing activities, net 2,016 (1,741) --------- --------- Net cash provided by financing activities 88,992 48,836 --------- --------- Increase in cash and cash equivalents 1,470 800 Cash and cash equivalents, at beginning of period 3,640 2,468 --------- --------- Cash and cash equivalents, at end of period $ 5,110 $ 3,268 ========= ========= Supplemental disclosure of cash flow information: Cash paid during the period for interest $ 16,176 $ 12,467 ========= ========= Cash paid during the period for taxes $ 183 $ 89 ========= ========= Supplemental disclosure of non-cash investing and financing activities:
In connection with the acquisition of certain properties, the Company assumed mortgage indebtedness as partial satisfaction of the respective purchase prices, in the amounts of $42,226 and $5,904, during the nine months ended September 30, 1998 and 1997, respectively. In connection with the acquisition of certain properties, the Company issued partnership units as partial satisfaction of the respective purchase prices, in the amounts of $25,596 and $6,000, during the nine months ended September 30, 1998 and 1997, respectively. The issuance of these partnership units have been recorded as minority interest in the accompanying condensed consolidated balance sheets. During 1998, holders of an aggregate of 525,433 partnership units redeemed such units for common shares of the Company. This redemption resulted in an increase in shareholders' equity and a corresponding decrease in minority interest of $5,650. During 1998, the Company issued 131,000 common shares to two officers in exchange for notes aggregating $1,998 which mature on February 14, 2003, bear interest at 7.6% per annum and are secured by the common shares issued. See accompanying notes to unaudited condensed consolidated financial statements. 5 LEXINGTON CORPORATE PROPERTIES TRUST AND CONSOLIDATED SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS September 30, 1998 (Unaudited) (1) The Company Lexington Corporate Properties Trust (the "Company") is a self-managed and self-administered real estate investment trust ("REIT") that acquires, owns and manages a geographically diversified portfolio of 64 net leased office, industrial and retail properties. The real properties owned by the Company are subject to triple net leases to corporate tenants. The Company was organized in 1993 to combine and continue to expand the business of two affiliated limited partnerships. The Company has qualified as a real estate investment trust ("REIT") under the Internal Revenue Code of 1986, as amended (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 which is distributed to its shareholders, provided that at least 95% of taxable income is distributed. Accordingly, no provision for Federal income taxes has been made. The unaudited financial statements reflect all adjustments which are, in the opinion of management, necessary to present a fair statement of the results for the interim periods. For a more complete understanding of the Company's operations and financial position, reference is made to the financial statements previously filed with the Securities and Exchange Commission with the Company's Annual Report on Form 10-K for the year ended December 31, 1997. (2) Summary of Significant Accounting Policies Basis of Presentation and Consolidation. The Company's consolidated financial statements are prepared on the accrual basis of accounting. The financial statements reflect the accounts of the Company and its 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. Earnings Per Share. Basic net income per share is computed by dividing net income reduced by preferred dividends by the weighted average number of common shares outstanding during the period. Diluted net income per share amounts are similarly computed but include the effect, when dilutive, of in-the-money common share options and the Company's other dilutive securities. The Company's operating partnership units are included in the 1998 computations since they are dilutive and the preferred shares and exchangeable redeemable secured notes are excluded since they are anti-dilutive. The Company's preferred shares and exchangeable redeemable secured notes are included in the computations for the quarter ended September 30, 1997 since they are dilutive and all exchangeable or convertible securities are excluded from the computations for the nine months ended September 30, 1997 calculations since they are anti-dilutive. 6 The following is a reconciliation of the numerators and denominators of the basic and diluted earnings per share computations for the quarters and nine months ended September 30, 1998 and 1997 (dollars in thousands, except per share data).
Quarter Ended Nine Months Ended September 30, September 30, 1998 1997 1998 1997 ------------ ------------ ------------ ------------ BASIC Income before extraordinary item $ 4,131 $ 5,492 $ 11,630 $ 8,828 Less cash and deemed dividends attributable to preferred shares (630) (404) (1,848) (3,065) ------------ ------------ ------------ ------------ Income attributed to common shareholders before extraordinary item 3,501 5,088 9,782 5,763 Extraordinary item - loss on extinguishment of debt -- (1,667) -- (3,189) ------------ ------------ ------------ ------------ Net income attributed to common shareholders $ 3,501 $ 3,421 $ 9,782 $ 2,574 ============ ============ ============ ============ Weighted average number of common shares outstanding 17,057,436 12,659,172 16,778,827 10,607,410 ============ ============ ============ ============ Income per common share - basic: Income before extraordinary item $ 0.21 $ 0.40 $ 0.58 $ 0.54 Extraordinary item - loss on extinguishment of debt -- (0.13) -- (0.30) ------------ ------------ ------------ ------------ Net income $ 0.21 $ 0.27 $ 0.58 $ 0.24 ============ ============ ============ ============ DILUTED Income attributed to common shareholders before extraordinary item $ 3,501 $ 5,088 $ 9,782 $ 5,763 Add incremental income attributed to assumed conversion of dilutive securities 992 904 2,672 -- ------------ ------------ ------------ ------------ Income attributed to common shareholders before extraordinary item 4,493 5,992 12,454 5,763 Extraordinary item - loss on extinguishment of debt -- (1,667) -- (3,189) ------------ ------------ ------------ ------------ Net income attributed to common shareholders $ 4,493 $ 4,325 $ 12,454 $ 2,574 ============ ============ ============ ============ Weighted average number of shares used in calculation of basic earnings per share 17,057,436 12,659,172 16,778,827 10,607,410 Add incremental shares representing: Shares issuable upon exercise of employee stock options 90,336 229,808 181,698 173,023 Shares issuable upon conversion of dilutive securities 5,133,917 3,248,077 4,639,221 -- ------------ ------------ ------------ ------------ Weighted average number of shares used in calculation of diluted earnings per common share 22,281,689 16,137,057 21,599,746 10,780,433 ============ ============ ============ ============ Income per common share - diluted: Income before extraordinary item $ 0.20 $ 0.37 $ 0.58 $ 0.53 Extraordinary item - loss on extinguishment of debt -- (0.10) -- (0.29) ------------ ------------ ------------ ------------ Net income $ 0.20 $ 0.27 $ 0.58 $ 0.24 ============ ============ ============ ============
7 Use of Estimates. Management 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 1997 financial statements have been reclassified to conform with the 1998 presentation. (3) Investments in Real Estate During the nine months ended September 30, 1998, the Company made the following acquisitions:
Lease Net Annualized Expiration Rentable Date of Capitalized Base Rent Date Square Acquisition Tenant Location Cost ($000) ($000) (month/year) Feet ------------ ---------------------------------- ------------- ----------- ---------- ------------ --------- March 27 Jones Apparel Group, Inc. Bristol, PA $ 12,539 $ 1,208 03-13 255,019 March 27 Fidelity Corporate Real Estate, LLC Hebron, KY 8,077 817 04-07 81,744 March 27 Kelsey-Hayes Corp. Livonia, MI 16,437 1,637 04-07 180,230 May 11 Eagle Hardware & Garden. Inc. Federal Way, WA 13,751 1,233 08-17 133,861 May 11 Eagle Hardware & Garden. Inc. Anchorage, AK 17,689 1,587 10-17 157,525 May 15 Stone Container Corporation Columbia, SC 3,178 389 08-12 142,400 May 18 Wackenhut Corporation* Palm Beach Gardens, FL 19,815 2,219 02-11 126,355 June 19 Michaels Stores, Inc. Lancaster, CA 15,096 1,430 06-13 431,250 July 2 Fleet Mortgage Group Florence, SC 15,061 1,635 07-08 179,300 July 24 GM Inland Seat Auburn Hills, MI 13,930 1,365 07-06 184,000 August 27 Kmart Corporation** Warren, OH 63,877 8,900 09-07 1,700,000 --------- --------- --------- TOTALS $ 199,450 $ 22,420 3,571,684 ========= ========= =========
* The property has five additional tenants which represent 27% of net rentable square feet with lease expirations from 2001 through 2006. ** The Company's Co-Chief Executive Officers received approximately $6.0 million in operating partnership units relating to their interests in the Warren Ohio Property. On June 3, 1998, the Company completed the sale of its Newark, California property, realizing net proceeds of approximately $24.1 million and recognizing a loss of approximately $0.4 million. 8 The following unaudited pro forma operating information for the nine months ended September 30, 1998 and 1997 has been prepared as if the 1998 and 1997 acquisitions and dispositions had been consummated as of January 1, 1997. The information does not purport to be indicative of what the operating results of the Company would have been had the acquisitions or dispositions been consummated on that date or to be indicative of operating results which can be expected for future periods. The unaudited pro forma amounts are as follows:
($000, except per share data) Pro forma Nine Months Ended September 30, 1998 1997 ---------- ---------- Revenues $ 56,253 $ 56,141 Income before extraordinary item $ 13,275 $ 10,089 Net income $ 13,275 $ 7,133 Per common share: Income before extraordinary item - basic $ 0.68 $ 0.66 Income before extraordinary item - diluted $ 0.67 $ 0.61 Net income - basic $ 0.68 $ 0.38 Net income - diluted $ 0.67 $ 0.36
(4) Mortgage Notes Payable As of September 30, 1998 the amount outstanding on the Company's three year $100 million unsecured credit facility, which expires July 2001, was approximately $53.2 million and bore interest at 7.1% per annum. The credit facility agreement contains various covenant provisions which could limit the amount available for future borrowings. As of September 30, 1998 the Company was in compliance with such covenants. During the nine months ended September 30, 1998, exclusive of borrowings under its credit facility, the Company increased its secured indebtedness by $97.2 million which has an average interest rate of 7.1% and an average maturity of 9 years. (5) Minority Interests In conjunction with several of the Company's acquisitions, sellers were given interests in LCIF or LCIF II 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. As of September 30, 1998, the total number of limited partnership units of LCIF and LCIF II outstanding was 6,033,982. These units, subject to certain adjustments through the date of redemption, have distributions per unit in varying amounts up to $1.20 per annum. Minority interests in the accompanying consolidated financial statements include the interests in such partnerships held by parties other than the Company. (6) Subsequent Events On October 21, 1998, the Company declared a dividend of $.30 per share to its common shareholders of record on October 30, 1998 to be paid on November 16, 1998. The Company also declared a dividend of $.315 per share to its preferred shareholders of record on October 30, 1998 to be paid on November 16, 1998. On October 23, 1998, the Company obtained approximately $5.65 million in secured mortgage financing on its property in Hebron, Kentucky. The mortgage has a stated interest rate of 7.0%, matures in October 2008 and provides for annual principal and interest payments of $451,000. On October 26, 1998, the Company purchased a 65,000 square foot industrial facility in Baton Rouge, Louisiana for approximately $3.4 million. The property is net leased to Corporate Express Inc. through October 2013 and provides for an annual rent of $368,000. 9 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Forward-Looking Statements When used in this Form 10-Q 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. 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. As of September 30, 1998, the Company owned sixty-four real estate properties or interests therein (the "Properties). Liquidity and Capital Resources Real Estate Assets. As of September 30, 1998, the Company's real estate assets were located in twenty-eight states and contained an aggregate of approximately 10.7 million square feet of net rentable space. The Properties are subject to tenant triple net leases, which are 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. Sixty-three of the sixty-four properties are currently leased. During the nine months ended September 30, 1998, the Company made acquisitions totaling $199.0 million at an unleveraged average annual yield of 11.1%. 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 quarter and nine months ended September 30, 1998, the leases on the Properties generated approximately $16.9 million and $44.3 million in revenue compared to $11.2 million and $31.4 million during the same periods in 1997. 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 and the first quarter of 1996; $.28 per share in respect of the second and third quarters of 1996; and $.29 per share in respect of the fourth quarter of 1996, each of the calendar quarters of 1997 and the first and second quarters of 1998. The Company declared a dividend in respect of the third quarter of 1998, in the amount of $.30 per share to shareholders of record as of October 30, 1998 to be paid on November 16, 1998. The Company's annualized dividend rate is currently $1.20 per share. On June 3, 1998, the Company completed the sale of the Newark, California property, realizing net proceeds of approximately $24.1 million and recognized a loss approximately $0.4 million. 10 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 September 30, 1998.
Current Total Redeemable Annualized Annualized for Shares of Number Per Unit Distribution Common Shares as of: of Units Distribution ($000) - ------------------- ------------ ------------ -------------- At any time 169,109 $1.20 $ 203 At any time 1,303,867 1.08 1,408 January 1999 147,246 1.12 165 January 1999 1,670,212 1.20 2,004 March 1999 125,416 1.20 151 April 1999 480,028 1.20 576 May 1999 279,191 1.20 335 September 1999 1,450,036 1.20 1,740 January 2003 7,441 -- -- March 2004 52,335 0.27 14 March 2004 27,314 -- -- November 2004 35,400 -- -- March 2005 38,661 -- -- January 2006 207,728 -- -- February 2006 28,232 -- -- May 2006 11,766 0.29 3 --------- ----- --------- Total 6,033,982 $1.09 $ 6,599 ========= ===== =========
Financing Revolving Credit Facility. As of September 30, 1998 the amount outstanding on the Company's credit facility was approximately $53.2 million and bore interest at 7.1% per annum. Debt Service Requirements. The Company's principal liquidity needs are the payment of interest and principal on outstanding mortgage debt. As of September 30, 1998, a total of fifty-one properties were subject to outstanding mortgages which had an aggregate principal amount of $344.3 million. The weighted average interest rate on the Company's debt on such date was approximately 7.71%. Approximate balloon payment amounts for the next five calendar years, including the remainder of 1998, are due as follows: $0 in 1998; $5.6 million in 1999; $13.1 million in 2000; $1.0 million in 2001 and $9.6 million in 2002. There are no balloon payments due in 2003. 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 impacted by numerous economic factors, 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. Lease Obligations. Since the Company's tenants bear all or substantially all of the cost of property maintenance and capital improvements, the Company does not anticipate significant needs for cash for property maintenance or repairs. The Company generally funds property expansions with additional secured borrowings, the repayment of which is funded out of rental increases under the leases covering the expanded properties. 11 Impact of Year 2000 The Year 2000 compliance issue concerns the inability of computer systems to accurately calculate, store or use a date after 1999. This could result in a system failure or miscalculations causing disruptions of operations. The Year 2000 issue affects virtually all companies and organizations. The Company has been taking the necessary steps to understand the nature and extent of the work required to make its core information computer systems and non-information embedded systems Year 2000 compliant. The Company has determined that it will not be necessary to modify, update or replace it's computer hardware and software applications. The vendor that provides the Company's existing general ledger software has released a compliant version of its product which the Company is currently using. The cost of the general ledger system did not have a material effect on the Company's financial condition or results of operations. The Company's properties, which have no scheduled lease expirations prior to August 17, 2000, are subject to net leases and accordingly the Year 2000 compliance of embedded systems (e.g., security, HVAC, fire and elevator systems) are the responsibility of the tenants. The Company has contacted each of its tenants asking them to identify and evaluate the changes and modifications necessary to make these systems compliant for Year 2000 processing. The costs associated with the effect to make the embedded systems Year 2000 compliant are the tenant's responsibility. However, no assurances can be given that the properties embedded systems will be Year 2000 compliant by December 31, 1999 and compliance costs, if any, incurred by the Company would not be significant. The Company is communicating with significant third-party service providers and vendors with which it does business to determine the efforts being made on their part for compliance. The Company is attempting to receive compliance certificates from all third parties that have a material impact on the Company's operations, but no assurance can be given with respect to the cost or timing of such efforts or the potential effects of any failure to comply. Management will closely monitor the Company's entire Year 2000 compliance function and will develop contingency plans if necessary. Results of Operations ($000)
Quarter ended Nine months ended September 30, September 30, Increase Increase Selected Income Statement Data 1998 1997 (Decrease) 1998 1997 (Decrease) ---- ---- ---------- ---- ---- ---------- Total revenues $17,155 $11,405 $ 5,750 $46,129 $31,867 $14,262 Rental 16,869 11,242 5,627 44,324 31,420 12,904 Interest and other 286 163 123 1,805 447 1,358 Total expenses $12,018 8,210 $ 3,808 $31,346 $24,698 $ 6,648 Interest 6,271 4,045 2,226 16,287 12,628 3,659 Depreciation & amortization of real estate 4,057 2,844 1,213 10,739 7,920 2,819 General & administrative 1,245 874 371 3,153 2,718 435 Net Income $ 4,131 $ 3,825 $ 306 $11,630 $ 5,639 $ 5,991
Changes in the results of operations for the Company were primarily due to the growth of its portfolio and costs associated with such growth. The increase in interest income and other revenue was primarily due to income recorded on the Newark, California Property, which was sold, and interest income earned on the increased escrow deposits. The increase in interest expense due to the growth of the Company's portfolio was partially offset by a reduction in the weighted average interest rate from 8.06% as of September 30, 1997 to 7.71% as of September 30, 1998, due to debt refinancings and repayments. The Company's general and administrative expenses decreased as a percentage of revenue to 7.3% and 6.8% for the quarter and nine months ended September 30, 1998, respectively, from 7.7% and 8.5% for the quarter and nine months ended September 30, 1997 due to the growth of the Company's portfolio relative to these expenses. 12 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. The following table reflects the calculation of the Company's Funds From Operations and cash flow activities for the quarters and nine months ended September 30, 1998 and 1997 ($000).
Quarter ended Nine months ended September 30, September 30 1998 1997 1998 1997 --------- --------- --------- --------- Net income $ 4,131 $ 3,825 $ 11,630 $ 5,639 Add back: Depreciation and amortization of real estate 4,057 2,844 10,739 7,920 Minority interest's share of net income 1,006 1,220 2,765 1,858 Loss (gain) on sale of real estate -- (3,517) 388 (3,517) Extraordinary item -- 1,667 -- 3,189 Property arbitration litigation expense -- -- -- 167 --------- --------- --------- --------- Funds From Operations $ 9,194 $ 6,039 $ 25,522 $ 15,256 ========= ========= ========= ========= Cash flows from operating activities $ 7,820 $ 6,692 $ 22,105 $ 16,196 Cash flows from investing activities (17,773) (31,850) (109,627) (64,232) Cash flows from financing activities 11,417 16,559 88,992 48,836
The Company's dividends paid to shareholders and distributions paid to unitholders amounted to approximately 79.0% of the Company's Funds From Operations for the quarter ended September 30, 1998. Accounting Standards Not Yet Adopted In June, 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 133 ("SFAS 133") "Accounting for Derivative Instruments and Hedging Activities". The Statement establishes accounting and reporting standards for derivative instruments and hedging activities. This Statement is effective for all fiscal quarters of fiscal years beginning after June 15, 1999. The adoption of SFAS 133 is not expected to have any impact on the financial position or results of operations of the Company. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Not applicable. 13 PART II - OTHER INFORMATION ITEM 1. Legal Proceedings - not applicable. ITEM 2. Changes in Securities - not applicable. ITEM 3. Defaults under the Senior Securities - not applicable. ITEM 4. Submission of Matters to a Vote of Security Holders - not applicable. ITEM 5. Other Information - not applicable. ITEM 6. Exhibits and Reports on Form 8-K. (a) Exhibits - Exhibit No. Exhibit 27.1 Financial Data Schedule as of and for the nine months ended September 30, 1998 27.2 Financial Data Schedule - restated earnings per share for the nine months ended September 30, 1997 (b) Reports on Form 8-K filed during the quarter ended September 30, 1998. There were two Form 8-K's filed during the quarter ended September 30, 1998. (i) Form 8-K dated March 27, 1998, filed July 1, 1998. Provided historical financial information for certain acquired properties and pro forma financial information for the Company. (ii) Form 8-K dated August 27, 1998, filed September 11, 1998. Provided historical financial information for one property acquisition and pro forma financial information for the Company. 14 SIGNATURES 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 thereunto duly authorized. Lexington Corporate Properties Trust Date: November 12, 1998 By: /s/ E. Robert Roskind ----------------------------- E. Robert Roskind Chairman and Co-Chief Executive Officer Date: November 12, 1998 By: /s/ Patrick Carroll ----------------------------- Patrick Carroll Chief Financial Officer EX-27.1 2 FINANCIAL DATA SCHEDULE FOR 9 MOS ENDED 9/30/98
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONDENSED CONSOLIDATED BALANCE SHEET AND THE CONDENSED CONSOLIDATED STATEMENT OF INCOME AS OF AND FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AS CONTAINED IN THE COMPANY'S FORM 10-Q FOR SUCH PERIOD AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FORM 10-Q. DOLLARS ARE IN THOUSANDS, EXCEPT PER SHARE DATA. 1,000 9-MOS DEC-31-1998 JAN-01-1998 SEP-30-1998 7,676 0 9,745 0 0 0 665,677 60,621 635,795 0 353,316 24,369 0 2 183,019 635,795 0 46,129 0 11,173 733 0 16,287 14,395 0 11,630 0 0 0 11,630 0.58 0.58
EX-27.2 3 FINANCIAL DATA SCHEDULE RESTATED EARINGS PER SHARE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONDENSED CONSOLIDATED STATEMENTS OF INCOME FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997 AS CONTAINED IN THE COMPANY'S FORM 10-Q FOR SEPTEMBER 30, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FORM 10-Q. 9-MOS DEC-31-1997 JAN-01-1997 SEP-30-1997 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 0.24 0.24 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", which is effective for financial statements for periods ending after December 15, 1997. The Company has restated its earnings per share accordingly, as indicated on this schedule.
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