UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K
(Mark One)
| þ | ||
| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | ||
| For the fiscal year ended December 31, | ||
| or | ||
| o | 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 REALTY TRUST
(Exact name of Registrant as specified in its charter)
| Maryland | 13-3717318 | |
(State or other jurisdiction of incorporation or organization) One Penn Plaza, Suite 4015 | (I.R.S. Employer Identification No.) | |
| New York, NY | 10119-4015 | |
| (Address of principal executive offices) | (Zip Code) |
Registrant’s telephone number, including area code(212) 692-7200
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class | Name of Each Exchange on which Registered | |||
| classified as Common Stock | New York Stock Exchange | |||
8.05% Series B Cumulative Redeemable Preferred Stock, par value $0.0001 | New York Stock Exchange | |||
6.50% Series C Cumulative Convertible Preferred Stock, par value $0.0001 | New York Stock Exchange | |||
7.55% Series D Cumulative Redeemable Preferred Stock, par value $0.0001 | New York Stock Exchange |
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes þ¨ No oþ.
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No þ.
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 þ No o.
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 ofRegulation S-K (§ 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 thisForm 10-K or any amendment to thisForm 10-K. o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definition of “accelerated“large accelerated filer”, “large accelerated“accelerated filer” and “smaller reporting company” inRule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer þ Accelerated filer o¨ Non-accelerated filer o¨ Smaller reporting company o¨
(Do not check if a smaller reporting company)
Indicate by check mark whether the registrant is a shell company (as defined inRule 12b-2 of the Act). Yes o¨ No þ.
The aggregate market value of the voting shares held by non-affiliates of the Registrant as of June 30, 2007,2008, which was the last business day of the Registrant’s most recently completed second fiscal quarter was $1,276,495,750$846,151,259 based on the closing price of common shares as of that date, which was $20.80$13.63 per share.
Number of common shares outstanding as of February 22, 200823, 2009 was 61,323,810.100,641,638.
Certain information contained in the Definitive Proxy Statement for Registrant’s 2008 Annual Meeting of Shareholders, to be held on May 20, 200819, 2009 is incorporated by reference in this Annual Report onForm 10-K in response to Part III, Item 10, 11, 12, 13 and 14.
TABLE OF CONTENTS
| Item of | ||||||||
Form 10-K | Description | Page | ||||||
PART I | ||||||||
| 1 | Business | 1 | ||||||
| 1A. | Risk Factors | 8 | ||||||
| 1B. | Unresolved Staff Comments | 21 | ||||||
| 2. | Properties | 21 | ||||||
| 3. | Legal Proceedings | 34 | ||||||
| 4. | Submission of Matters to a Vote of Security Holders | 34 | ||||||
PART II | ||||||||
| 5. | Market for Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities | 36 | ||||||
| 6. | Selected Financial Data | 39 | ||||||
| 7. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 40 | ||||||
| 7A. | Quantitative and Qualitative Disclosures about Market Risk | 58 | ||||||
| 8. | Financial Statements and Supplementary Data | 60 | ||||||
| 9. | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure | 112 | ||||||
| 9A. | Controls and Procedures | 112 | ||||||
| 9B. | Other Information | 112 | ||||||
PART III | ||||||||
| 10. | Trustees and Executive Officers of the Registrant | 112 | ||||||
| 11. | Executive Compensation | 112 | ||||||
| 12. | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters | 112 | ||||||
| 13. | Certain Relationships and Related Transactions | 113 | ||||||
| 14. | Principal Accountant Fees and Services | 113 | ||||||
PART IV | ||||||||
| 15. | Exhibits and Financial Statement Schedules | 113 | ||||||
| Signatures | 120 | |||||||
| EX-12: STATEMENT OF COMPUTATION OF RATIO OF EARNINGS TO COMBINED FIXED CHARGES | ||||||||
| EX-14.1: AMENDED AND RESTATED CODE OF BUSINESS CONDUCT AND ETHICS | ||||||||
| EX-21: LIST OF SUBSIDIARIES | ||||||||
| EX-23: CONSENT OF KPMG LLP | ||||||||
| EX-31.1: CERTFICATION | ||||||||
| EX-31.2: CERTIFICATION | ||||||||
| EX-32.1: CERTIFICATION | ||||||||
| EX-32.2: CERTIFICATION | ||||||||
Item of Form 10-K | Description | Page | |||
| PART I | |||||
| 1 | Business | 1 | |||
| 1A. | Risk Factors | 9 | |||
| 1B. | Unresolved Staff Comments | 19 | |||
| 2. | Properties | 20 | |||
| 3. | Legal Proceedings | 32 | |||
| 4. | Submission of Matters to a Vote of Security Holders | 32 | |||
| PART II | |||||
| 5. | Market for Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities | 34 | |||
| 6. | Selected Financial Data | 37 | |||
| 7. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 37 | |||
| 7A. | Quantitative and Qualitative Disclosures about Market Risk | 58 | |||
| 8. | Financial Statements and Supplementary Data | 60 | |||
| 9. | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure | 101 | |||
| 9A. | Controls and Procedures | 101 | |||
| 9B. | Other Information | 101 | |||
| PART III | |||||
| 10. | Trustees and Executive Officers of the Registrant | 101 | |||
| 11. | Executive Compensation | 101 | |||
| 12. | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters | 101 | |||
| 13. | Certain Relationships and Related Transactions | 102 | |||
| 14. | Principal Accountant Fees and Services | 102 | |||
| PART IV | |||||
| 15. | Exhibits and Financial Statement Schedules | 102 | |||
| Signatures | 106 | ||||
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PART I.
Introduction
When we use the terms “Lexington,” the “Company,” “we,” “us” and “our,” we mean Lexington Realty Trust and all entities owned by us, including non-consolidated entities, except where it is clear that the term means only the parent company. References herein to our Annual Report are to our Annual Report onForm 10-K for the fiscal year ended December 31, 2007.2008.
All references to 2008, 2007 2006 and 20052006 refer to our fiscal years ended, or the dates, as the context requires, December 31, 2008, December 31, 2007, and December 31, 2006, and December 31, 2005, respectively.
Cautionary Statements Concerning Forward-Looking Statements
This Annual Report, together with other statements and information publicly disseminated by us contain certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. We intend such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995 and include this statement for purposes of complying with these safe harbor provisions. Forward-looking statements, which are based on certain assumptions and describe our future plans, strategies and expectations, are generally identifiable by use of the words “believes,” “expects,” “intends,” “anticipates,” “estimates,” “projects,” or similar expressions. Readers should not rely on forward-looking statements since they involve known and unknown risks, uncertainties and other factors which are, in some cases, beyond our control and which could materially affect actual results, performances or achievements. In particular, among the factors that could cause actual results to differ materially from current expectations include, among others, those risks discussed below and under “Risk Factors” in Part I, Item 1A of the Annual Report and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of the Annual Report. We undertake 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 occurrence of unanticipated events. Accordingly, there is no assurance that our expectations will be realized.
General
We are a self-managed and self-administered real estate investment trust, or REIT, formed under the laws of the State of Maryland. Our primary business is the acquisition, ownership and management of a geographically diverse portfolio of net leased office, industrial and industrialretail properties. In addition, we acquire and hold investments in loan assets and debt securities related to real estate, which are primarily acquired through a 50% owned co-investment program. Substantially all of ourthese properties are subject to triple net leases, which are generally characterized as leases in which the tenant bears all or substantially all of the costsand/or cost increases for real estate taxes, utilities, insurance and ordinary repairs.
As of December 31, 2008, we had ownership interests in approximately 225 consolidated real estate assets, located in 41 states and the MLP. NewkirkNetherlands and containing an aggregate of approximately 40.2 million square feet of space, approximately 93.3% of which was the general partnersubject to a lease. In 2008, 2007 and owned, at the time of completion of the Merger, a 31.0% general partner interest in the MLP. In connection with the Merger, Lexington Corporate Properties Trust changed its name to Lexington Realty Trust, the MLP was renamed The Lexington Master Limited
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In the Merger, Newkirk merged with and into us, with us as the surviving entity. Each holderaddition to our shares of Newkirk’s common stock received 0.80 of our common shares in exchange for eachbeneficial interests, par value $0.0001 per share, of Newkirk’s common stock, and the MLP effected a reverse unit-split pursuant to which each outstanding unit of limited partnership in the MLP, which we refer to as an MLP unit, was converted into 0.80 MLP units. Each MLP unit, other than the MLP units held directly or indirectly by us, is redeemable at the option of the holder for cash based on the value of one of our common shares or, if we elect, for our common shares on a one-for-one basis. As of December 31, 2007, we owned approximately 50.0% of the limited partner interest in the MLP.
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We elected to be taxed as a REIT under Sections 856 through 860 of the Internal Revenue Code of 1986, as amended, which we refer to as the Code, commencing with our taxable year ended December 31, 1993. If we qualify for taxation as a REIT, we generally will not be subject to federal corporate income taxes on our net income that is currently distributed to shareholders.
History
Our predecessor was organized in October 1993 upon the combination of two investment programs, Lepercq Corporate Income Fund L.P. and Lepercq Corporate Income Fund II L.P., which were formed to acquire net lease real estate assets that would provide current income. Our predecessor was merged into Lexington Corporate Properties Trust on December 31, 1997. On December 31, 2006, Lexington Corporate Properties Trust completed the Newkirk Merger. Newkirk’s primary business was similar to our primary business. All of Newkirk’s operations were conducted and all of its assets were held through its master limited partnership, The Newkirk Master Limited Partnership, which we refer to as the MLP. Newkirk was the general partner and owned, at the time of completion of the Newkirk Merger, a 31.0% general partner interest in the MLP. In connection with the Newkirk Merger, Lexington Corporate Properties Trust changed its name to Lexington Realty Trust, the MLP was renamed The Lexington Master Limited Partnership and one of our wholly-owned subsidiaries became the sole general partner of the MLP and another one of our wholly-owned susidiaries became the holder of a 31.0% limited partner interest in the MLP.
In the Newkirk Merger, each share of Newkirk’s common stock was exchanged for 0.80 of our common shares and the MLP effected a 1.0 for 0.80 reverse unit-split. Each MLP unit, other than the MLP units held directly or indirectly by us, was redeemable at the option of the holder for cash based on a value of our common shares or, if we elected, for our common shares on a one-for-one basis. As of December 31, 2007, we had ownershipowned approximately 50% of the limited partner interest in the MLP. As of December 31, 2008, the MLP was merged with and into us and we issued 6.4 million common shares for the MLP units we did not already own.
We are structured as an umbrella partnership REIT, or UPREIT, and a portion of our business is conducted through our three operating partnership subsidiaries: (1) Lepercq Corporate Income Fund L.P.; (2) Lepercq Corporate Income Fund II L.P.; and (3) Net 3 Acquisition L.P. We refer to these subsidiaries as our operating partnerships and to limited partner interests in approximately 280 consolidated real estate assets, located in 42 states and the Netherlands and containing an aggregate of approximately 45.5 million net rentable square feet of space, approximately 95.6% of which is subjectthese operating partnerships as OP units. The UPREIT structure enables us to acquire properties through our operating partnerships by issuing to a lease.
Global Credit and 2005,Financial Crisis
There is considerable uncertainty as to how severe the current global credit and financial crisis may be and how long it may continue. The crisis has impacted our ten largest tenants/guarantors represented 30.1%acquisition activity and 30.4%our financing ability and has strained the resources of certain of our trailing 12 month base rental revenue, respectively,tenants and their customers. It is difficult for us to predict how severe the impact of the crisis will be to our business.
We lease our properties to tenants in various industries, including finance/insurance, aerospace/defense, energy, technology and automotive. Tenant defaults at our proportionate shareproperties could negatively impact our operating results. Leased space was approximately 93.3% at December 31, 2008, down approximately 2.3% from last year. We expect to lose occupancy during 2009 due to non-renewals and current economic factors which may include increased tenant bankruptcies or government conservatorship of base rental revenuetenants.
Our principal sources of liquidity have been (1) undistributed cash flows generated from non-consolidated entities, properties held for saleour investments, (2) the public and properties sold through dateprivate equity and debt markets, including issuances of sale. In 2007, 2006OP units (3) property specific debt, (4) corporate level borrowings, and 2005, no tenant/guarantor represented greater than 10%(5) commitments from co-investment partners.
On February 13, 2009, we refinanced our (1) unsecured revolving credit facility, with $25.0 million outstanding as of December 31, 2008, which was scheduled to expire in June 2009, and (2) secured term loan, with $174.3 million outstanding as of December 31, 2008, which was scheduled to mature in June 2009 (but could have been extended to December 2009 at our option), with a secured credit facility consisting of a $165.0 million term loan and a $85.0 million revolving credit agreement with KeyBank National Association, which we refer to as KeyBank, as agent. The new facility bears interest at 2.85% over LIBOR and matures in February 2011, but can be extended until February 2012 at our option. The new credit facility is secured by ownership interest pledges and guarantees by certain of our annualsubsidiaries that in the aggregate own interests in a borrowing base rental revenue.consisting of 72 properties. With the consent of the lenders, we can increase the size of (1) the term loan by $135.0 million and (2) the revolving loan by $115.0 million (or $250.0 million in the aggregate, for a total facility size of $500.0 million) by adding properties to the borrowing base.
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We have consolidated property specific non-recourse debt with an aggregate of $60.3 million of balloon payments that mature in 2009. We also have (1) interest rate swap agreements directly and through our investment in Lex-Win Concord and (2) a direct forward equity commitment. The counterparties of these arrangements are major financial institutions; however, we are exposed to credit risk in the event of non-performance by the counterparties. In addition, we may be required to make additional prepayments pursuant to our forward equity commitment.
Objectives and Strategy
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As part of our ongoing business efforts, we expect to continue to (1) recycle capital in compliance with regulatory and contractual requirements; (2) refinance or repurchase outstanding indebtedness when advisable; (3) effect strategic transactions and portfolio and individual property acquisitions and dispositions; (2) explore new business lines and operating platforms; (3)(4) expand existing properties; (4)(5) execute new leases with tenants; (5)(6) extend lease maturities in advance of expiration; and (6) refinance outstanding indebtedness when advisable.(7) explore new business lines and operating platforms. Additionally, we may continue to enter into joint ventures and co-investment programs with third-party investors as a means of creating additional growth and expanding the revenue realized from advisory and asset management activities as situations warrant.
Strategic Restructuring Plan. In June 2007, we announced a strategic restructuring plan. The plan was intended to restructure us into a company consisting primarily of:
a wholly-owned portfolio of core office assets;
a wholly-owned portfolio of core warehouse/distribution assets;
a continuing 50% interest in a co-investment program that invests in senior and subordinated debt interests secured by real estate collateral;
an interest in a co-investment program that invests in specialty single tenant real estate assets; and
equity securities in other net lease companies owned either individually or through an interest in one or more joint ventures or co-investment programs.
During 2007, in connection with the strategic restructuring plan, we:
acquired all of the outstanding interests not otherwise owned by us in Triple Net Investment Company LLC, one of our former co-investment programs, which resulted in us becoming the sole owner of the co-investment program’s 15 primarily single tenant net leased properties;
acquired all of the outstanding interests not otherwise owned by us in Lexington Acquiport Company, LLC and Lexington Acquiport Company II, LLC, two of our former co-investment programs, which resulted in us becoming the sole owner of the co-investment programs’ 26 primarily single tenant net leased properties;
terminated Lexington/Lion Venture L.P., one of our former co-investment programs, and received a distribution in-kind of seven primarily single tenant net leased properties owned by the co-investment program;
commenced a disposition program, whereby we began marketing non-core assets for sale; and
formed a co-investment program, Net Lease Strategic Assets Fund LP, which we refer to as NLS, with a subsidiary of Inland American Real Estate Trust, Inc., which has acquired primarily 43 net leased assets plus a 40% interest in one property previously owned by us.
Capital Recycling. As part of our strategic restructuring plan, we began to dispose of non-core assets for sale. Following the completion of the strategic restructuring plan, we have continued to dispose of non-core assets and core assets, subject to regulatory and contractual requirements. During 2008, we primarily used the proceeds from such dispositions, to the extent permitted under our secured term loan agreements, to retire senior debt and preferred securities at what we believe are favorable spreads.
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Acquisition StrategiesStrategies.
During 2002-2005, our acquisition volume increased significantly due primarily to the availability of low-cost long-term financing. As competition for single tenant net lease properties increased, the volume of our acquisitions decreased. This decrease became noticeable during the fourth quarter of 2006. At such time, we were preparing for the integration of the operations of Newkirk with our operations. During 2007, acquisition activity was low, except for the acquisition of 48 primarily single-tenant net lease assets from our co-investment programs. During 2008, acquisition activity continued to decrease as we focused on retiring senior debt and preferred securities at a discount. We expect acquisition activity to increase if and when general market conditions improve.
In the Newkirk Merger, we succeeded Newkirk to an agreement with a third party pursuant to which we will pay the third party for properties acquired by us and identified by the third party in an amount equal to (1) 1.5% of the gross purchase price and (2) 25% of the net proceeds and net cash flow (as defined) after we receive all of our invested capital plus a 12% internal rate of return. As of December 31, 2008, only one property, which was acquired in 2006, has been acquired subject to these terms. We have no other sourcing agreements.
Strategic Transactions with Other Real Estate Investment Companies. We seek to capitalize on the unique investment experience of our executive management team as well as its network of relationships in the industry to achieve appropriate risk-adjusted yields through strategic transactions. Our strategic initiatives focus on the full spectrum of single-tenant investing through participation at various levels of the capital structure. Accordingly, we endeavor to pursue the (1) acquisition of portfolios of assets and equity interests in companies with a significant number of single-tenant assets, including through mergers and acquisitions activity, and (2) participation in strategic partnerships, co-investment programs and joint ventures.
In 1999, we established our first co-investment program with the New York State Common Retirement Fund. Following a second co-investment program with the New York State Common Retirement Fund, we established co-investment programs with ING Clarion Lion Properties Fund, the Utah State Retirement Investment Fund and Inland American Real Estate Trust, Inc. In addition, in the Newkirk Merger, we acquired an interest in a co-investment program with Winthrop Realty Trust, which we refer to as Winthrop.
During 2007, we acquired the interests of the New York State Common Retirement Fund and the Utah State Retirement Investment Fund in certain of the co-investment programs and we distributed the properties in the co-investment program with ING Clarion Lion Properties Fund to us and ING Clarion Lion Properties Fund, and terminated all of our co-investment programs except for NLS and Lex-Win Concord, our co-investment program with Winthrop.
We believe that entering into co-investment programs and joint ventures with institutional investors and other real estate investment companies may mitigate our risk in certain assets and increase our return on equity to the extent we earn management or other fees.
Acquisitions of PortfolioPortfolios and Individual Net Lease Properties. We seek to acquire portfolioportfolios and individual properties from (1) creditworthy corporations and other entities in sale/leaseback transactions for properties that are integral to the sellers’/tenants’ ongoing operations; (2) developers of newly-constructed properties built to suit the needs of a corporate tenant generally after construction has been completed to avoid the risks associated with the construction phase of a project; (3) other real estate investment companies through strategic transactions; and (4) sellers of properties subject to an existing lease. We believe that our geographical diversification acquisition
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Debt Investments. Primarily We originate and invest in real estate loan assets either directly or indirectly through our 50% owned co-investment programinterest in Lex-Win Concord. Lex-Win Concord’s primary asset is its interest in Concord Debt Holdings LLC, which we refer to as Concord,Concord. Our direct originations of loan assets primarily involve purchase money financing provided to purchasers of certain properties we seekhave sold.
At December 31, 2008, of our approximately $4.1 billion of total assets, (1) $84.3 million consisted of directly held loan assets and (2) $114.6 million consisted of our investment in and advances to acquire senior and subordinated debt interests secured by both net-leased and multi-tenanted real estate collateral. The MLP holds a 50.0% interest in this co-investment program. The MLP’s co-investment partner and holder of the other 50% interest inLex-Win Concord. Lex-Win Concord is a subsidiaryobligated to make additional capital contributions to Concord of Winthrop Realty Trust,up to $75.0 million only if such capital contributions are necessary under certain circumstances, of which we referour proportionate share is up to as Winthrop, a REIT listed on the NYSE. Our Executive Chairman and Director of Strategic Acquisitions, Michael L. Ashner, is the Chairman and Chief Executive Officer of Winthrop.$37.5 million.
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Competition
Through our predecessor entities we have been in the net lease business for over 3035 years. Over this period, we have established a broad network of contacts, including major corporate tenants, developers, brokers and lenders. In addition, our management is associated withand/or participates in many industry organizations. Notwithstanding these relationships, there are numerous commercial developers, real estate companies, financial institutions and other investors with greater financial or other resources that compete with us in seeking properties for acquisition and tenants who will lease space in these properties. Our competitors include other REITs, pension funds, private companies and individuals.
Co-Investment Programs and Other Equity Method Investment Limited Partnerships
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During 2008, we restructured our investment in connectionConcord by contributing our common interest, together with Winthrop, the Merger.holder of the other 50% common interest in Concord, to Lex-Win Concord. Our former Executive Chairman and Director of Strategic Acquisitions is the Chairmanchairman and Chief Executive Officerchief executive officer of Winthrop, our 50% co-investment partner.Winthrop. Following these contributions, Lex-Win Concord createsbecame the managing member of Concord and manages portfoliosholder of loan assets and debt securities. Asall of December 31, 2007 and 2006, we had $155.8 million and $93.1 million, respectively, as our investmentthe common equity in Concord. Our remaining capital commitment to Concord is $5.1 million as of December 31, 2007. See Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Off Balance Sheet Arrangements” for
In addition, a complete description of Concord’s business, assets and liabilities.
If certain terms and conditions are met, including payment to Inland Concord of a 10% priority return, both us and Winthrop may elect to reduce our aggregate capital investment in Concord to $200.0 million (or $100.0 million each) through distributions of principal payments from the maturity of existing loan assets and debt securities in Concord’s portfolio.
Net Lease Strategic Assets Fund L.P. NLS was formed in 2007 by us and a subsidiary of Inland American Real Estate Trust, Inc., which we refer to invest inas Inland NLS. NLS’s portfolio consists of 43 specialty single tenant net leased assets in the United States. In connection with the formation, we agreed to contribute/sell 53 single tenant net leased assets to NLS, which was later reduced to 43 assets, 30 of which were contributed/sold in December 2007 and 13 of which remain under contract. We can provide no assurance that the contribution/sale of the remaining 13 assets under contract will be consummated.
Since its formation, Inland NLS has contributed 12 real estate assets$216.0 million in cash to NLS. TheNLS and we have contributed 19 primarily net leased properties, hadhaving an agreed upon value of $408.5$318.1 million, and are subject$15.0 million in cash to $186.3NLS, and we sold fee and leasehold interests in 24 primarily net leased properties and a 40% tenant-in-common interest in a property, having an agreed upon value of $425.4 million, to NLS. The properties we contributed and sold were encumbered by $339.5 million of non-recourse mortgage debt that havewith stated interest rates ranging from 5.2%5.1% to 8.5% with, a weighted average statedinterest rate of 5.9%6.1% and maturity dates ranging from 2009 to 2025. We recognized a gain on the saleThe mortgage debt was assumed by NLS.
At December 31, 2008, Inland NLS owned 85% and we owned 15% of the real estate assets of $17.9 million, plus a $1.6 million gain which is reflected in the income statement in equity in earnings of non-consolidated entities relating to these sales.
Lex-Win, Acquisition LLC (“Lex-Win”). In May 2007, an entity in which we hold a 28% ownership interest, commenced a tender offer to acquire up to 45,000,000acquired 3.9 million shares of common stock in Piedmont Office Realty Trust, Inc. (formerly known as Wells Real Estate Investment Trust, Inc., which we refer to as Wells,or Wells), a non-exchange traded entity, at a price per share of $9.30. The$9.30, in a tender offer expired on July 20, 2007, at which time Lex-Win received tenders based on the letters of transmittal it received for approximately
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Other Equity Method Investment Limited Partnerships. We are a partner in eight other partnerships with ownership percentages ranging between 26% and Director of Strategic Acquisitions is Chairman40%, which own primarily net leased properties. All profits, losses and Chief Executive Officer of Winthrop.
Internal Growth;Growth and Effectively Managing Assets
Tenant Relations and Lease Compliance. We maintain close contact with our tenants in order to understand their future real estate needs. In addition to our headquarters in New York City, we have regional offices, located in properties we own, in Chicago and Dallas.
We monitor the financial, property maintenance and other lease obligations of our tenants through a variety of means, including periodic reviews of financial statements and physical inspections of the properties. We generally perform annual inspections of those properties where we have an ongoing obligation with respect to the maintenance of the property. Biannual physical inspections are generally undertaken for all other properties.
Extending Lease Maturities. We seek to extend our leases in advance of their expiration in order to maintain a balanced lease rollover schedule and high occupancy levels. During 2007, we entered into 108 lease extensions and new leases.
Revenue Enhancing Property Expansions. We undertake expansions of our properties based on tenant requirements or marketing opportunities. We believe that selective property expansions can provide us with attractive rates of return and actively seek such opportunities.
Property Sales. Subject to regulatory requirements, we sell properties (1) when we believe that the return realized from selling a property will exceed the expected return from continuing to hold such property.
Conversion to Multi-Tenant. If we are unable to renew a single-tenant net lease or if we are unable to find a replacement single tenant, we either attempt to sell the property or convert the property for multi-tenant use and (2) in accordancebegin the process of leasing space. When appropriate, we seek to sell our multi-tenant properties.
Financing Strategy
General. Since becoming a public company, our principal sources of financing have been the public and private equity and debt markets, property specific debt, our credit facility and term loans, issuance of OP units and undistributed cash flows.
Mortgage Debt. Generally, we seek to finance our assets with our strategic restructuring plan. During 2007,non-recourse secured debt that has amortization, term and interest rate characteristics matched to the term and characteristics of the cash flows from the underlying investments.
Corporate Level Borrowings. We also use corporate level borrowings, such as partrevolving loans and term loans, as needed when other forms of our strategic restructuring plan, we sold 63 properties, including 10 held in LION, and 30 properties were sold/contributed to NLS.financing are not available or appropriate.
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Common Share Repurchases. In March 2007, our
Our Board of Trustees has approved thea share repurchase of up to 10.0program. During 2008 and 2007, approximately 1.2 million and 9.8 million common shares/OP units, under a share repurchase program. During 2007, approximately 9.8 million common shares/OP unitsrespectively, were repurchased under this program at an average cost of $14.28 and $19.83 per share/OP unit, respectively, in the open market and through private transactions with our employees and OP unitholders. In December 2007, the authorization was increased by 5.0During 2008, we entered into a forward equity commitment to purchase 3.5 million common share/ OP units.shares at a price of $5.60 per share. We have prepaid $12.8 million of the $19.6 million purchase price. The contract is required to be settled no later than October 2011. As of December 31, 2007, 5.82008, 1.1 million common shares/OP units remainremained eligible for repurchase under the authorization.
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Advisory Contracts
General. Members of our management have been in the business of investing in single-tenant net lease properties since 1973. This experience has enabled us to provide advisory services to various net lease investors.
Third Party Investors. In 2001, Lexington Realty Advisors Inc., a wholly-owned, taxable REIT subsidiary, which we refer to as LRA, entered into an advisory and asset management agreement to invest and manage an equity commitment of up to $50.0 million on behalf of a private third party investment fund. The investment fund could, depending on leverage utilized, acquire up to $140.0 million in single tenant, net leased office, industrial and retail properties in the United States. LRA earns acquisition fees (90 basis points of total acquisition costs), annual asset management fees (30 basis points of gross asset value) and an incentive fee of 16% of the return in excess of an internal rate of return of 10% earned by the investment fund. During 2007, the investment fund sold a propertyone of its two properties and LRA recognized an incentive fee of $1.1 million (in additionand an additional $0.4 million was held back by the investment fund pursuant to the agreement).agreement. The investment fund made no purchases in 20072008 or 2006.2007.
In exchange for providing advisory services to NLS, LRA receives (1) a third party pursuantmanagement fee of 0.375% of the equity capital, (2) a property management fee of up to 3.0% of actual gross revenues from certain assets for which the MLP will paylandlord is obligated to provide property management services (contingent upon the third party for properties acquired byrecoverability of such fees from the MLPtenant under the applicable lease), and identified by the third party (1) 1.5%(3) an acquisition fee of 0.5% of the gross purchase price and (2) 25% of the net proceeds and net cash flow (as defined) after the MLP receives all its invested capital plus a 12% internal rate of return. As of December 31, 2007, only one property has beeneach acquired subject to these terms.asset by NLS.
From time to time, in connection with the conduct of our business and generally upon acquisition of a property, we authorize the preparation of Phase I and, when necessary, Phase II environmental reports with respect to our properties. Based upon such environmental reports and our ongoing review of our properties, as of the date of this
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Annual Report, we are not aware of any environmental condition with respect to any of our properties which we believe would be reasonably likely to have a material adverse effect on our financial conditionand/or results of operations. There can be no assurance, however, that (1) the discovery of environmental conditions, the existence or severity of which were previously unknown; (2) changes in law; (3) the conduct of tenants; or (4) activities relating to properties in the vicinity of our properties, will not expose us 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 our tenants, which would adversely affect our financial conditionand/or results of operations.
Recent Developments
The following summarizes our significant transactions during 2008.
Sales. We sold 40 properties to unaffiliated third parties for an aggregate gross sales price of $242.3 million. In addition, we disposed of one property through a foreclosure with a lender and we contributed or sold 13 properties to NLS. We also sold our entire interest in Wells for $8.31 per share.
Acquisitions. We acquired two office properties in Kansas and Colorado for an aggregate capitalized cost of $56.1 million.
Expansions. We funded the expansion of two properties for an aggregate capitalized costs of $9.4 million.
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Leasing. We entered into 103 lease extensions and new leases encompassing an aggregate 5.1 million square feet and we received $28.7 million from two lease terminations and land valued at $16.0 million which we recorded as non-operating income.
Investments. In addition to the properties we contributed to NLS, we invested $8.3 million in cash to NLS. In addition, we restructured our investment in Concord by forming Lex-Win Concord. During 2008, Lex-Win Concord recognized $104.9 million of other-than-temporary impairments and loan loss reserves of which our share was $52.4 million before minority interest.
Financing. With respect to financing activities, we:
| - | repurchased, with cash and issuance of common shares, $239.0 million original principal amount of our 5.45% Exchangeable Guaranteed Notes at an average discount of 19.3%; |
| - | retired $70.9 million face of our Trust Preferred Securities at a discount of 37.1%; |
| - | entered into $25.0 million and $45.0 million original principal amount secured term loans with KeyBank and used the net proceeds of $68.0 million to partially repay and refinance indebtedness on three cross-collateralized mortgages; |
| - | made balloon payments of $39.6 million on property specific, non-recourse mortgage debt; |
| - | retired $86.5 million in property non-recourse mortgage debt due to sale of properties to unrelated third parties; |
| - | retired $48.6 million in corporate level secured borrowings; |
| - | obtained two non-recourse mortgages, one of which was assumed, with an aggregate principal balance of $21.2 million and a weighted average interest rate of 6.0%; and |
| - | borrowed $25.0 million under our unsecured revolving credit facility. |
Capital. With respect to capital activities, we:
| - | repurchased 1.2 million common shares under our share repurchase program; |
| - | entered into a forward equity commitment to purchase 3.5 million of our common shares at a price of $5.60 per share and prepaid in cash $12.8 million of the $19.6 million purchase price; |
| - | merged the MLP into us by acquiring the remaining limited partner interests that we did not already own; |
| - | repurchased and retired 0.5 million of our Series C Preferred Shares by issuing 0.7 million common shares and $7.5 million in cash; and |
| - | issued approximately 3.5 million common shares (exclusive of shares issued in connection with debt repurchases) raising net proceeds of approximately $47.2 million. |
Subsequent to December 31, 2008, we:
| - | refinanced our (1) unsecured revolving credit facility, with $25.0 million outstanding as of December 31, 2008, which was scheduled to expire in June 2009, and (2) secured term loan, with $174.3 million outstanding as of December 31, 2008, which was scheduled to mature in June 2009 (or December 2009 at our option), with a secured credit facility consisting of a $165.0 million term loan and a $85.0 million revolving credit agreement with KeyBank, as agent; |
| - | sold one property for an aggregate gross sale price of $11.4 million and satisfied the $5.3 million non-recourse mortgage note encumbering the property; and |
| - | repurchased $13.0 million face of 5.45% Exchangeable Guaranteed Notes at a discount of 34.2%. |
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Other
Employees. As of December 31, 2007,2008, we had 65 full-time employees.
Industry Segments. We operate in primarily one industry segment, investment in net leased real estate assets.
Web Site. Our Internet address iswww.lxp.com and the investor relations section of our web site is located athttp://www.snl.com/irweblinkx/corporateprofile.aspx?iid=103128. We make available, free of charge, on or through the investor relations section of our web site or by contacting our Investor Relations Department, annual reports onForm 10-K, quarterly reports onForm 10-Q and current reports onForm 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as well as proxy statements, as soon as reasonably practicable after we electronically file such material with, or furnish it to, the U.S. Securities and Exchange Commission, which we refer to as the SEC. Also posted on our web site, and available in print upon request of any shareholder to our Investor Relations Department, are our amended and restated declaration of trust and amended and restated by-laws, charters for our Audit Committee, Compensation Committee, and Nominating and Corporate Governance Committee, our Corporate Governance Guidelines, our Code of Business Conduct and Ethics governing our trustees, officers and employees, and our Complaint Procedures Regarding Accounting and Auditing Matters. Within the time period required by the SEC and the NYSE, we will post on our web site any amendment to the Code of Business Conduct and Ethics and any waiver applicable to any of our trustees or executive officers. In addition, our web site includes information concerning purchases and sales of our equity securities by our executive officers and trustees, as well as disclosure relating to certain non-GAAP financial measures (as defined in the SEC’s Regulation G) that we may make public orally, telephonically, by webcast, by broadcast or by similar means from time to time. Information contained on our web site or the web site of any other person is not incorporated by reference into this Annual Report.
Our Investor Relations Department can be contacted at Lexington Realty Trust, One Penn Plaza, Suite 4015, New York, New YorkNY 10119-4015, Attn: Investor Relations, telephone:212-692-7200,e-mail:ir@lxp.com.
Principal Executive Offices. Our principal executive offices are located at One Penn Plaza, Suite 4015, New York, New YorkNY 10119-4015; our telephone number is(212) 692-7200. We also maintain regional offices in Chicago, Illinois, and Dallas, Texas.
NYSE CEO Certification. Our Chief Executive Officer made an unqualified certification to the NYSE with respect to our compliance with the NYSE corporate governance listing standards in June 2007.2008.
Item 1A. Risk Factors
Set forth below are material factors that may adversely affect our business and operations.
We are subject to risks involved in single tenant leases.
We focus our acquisition activities on real properties that are net leased to single tenants. Therefore, the financial failure of, or other default by, a single tenant under its lease is likely to cause a significant reduction in the operating cash flow generated by the property leased to that tenant and might decrease the value of that property. In addition, we will be responsible for 100% of the operating costs following a vacancy at a single tenant building.
We rely on revenues derived from major tenants.
Revenues from several of our tenantsand/or their guarantors constitute a significant percentage of our base rental revenues. As of December 31, 2007, our 10 largest tenants/guarantors, which occupied 47 properties, represented approximately 25.0% of our base rental revenue for the year ended December 31, 2007, including our
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We face uncertainties relating to lease renewals and re-letting of space.
Upon the expiration of current leases for space located in our properties, we may not be able to re-let all or a portion of that space, or the terms of re-letting (including the cost of concessions to tenants) may be less favorable to us than current lease terms or market rates. If we are unable to re-let promptly all or a substantial portion of the space located in our properties or if the rental rates we receive upon re-letting are significantly lower than current rates, our earnings and ability to make expected distributions to our shareholders will be adversely affected due to the resulting reduction in rent receipts and increase in our property operating costs. There can be no assurance that we will be able to retain tenants in any of our properties upon the expiration of their leases.
We could become more highly leveraged, resulting in increased risk of default on our obligations and in an increase in debt service requirements which could adversely affect our financial condition and results of operations and our ability to pay distributions.
We have incurred, and expect tomay continue to incur, indebtedness in furtherance of our activities. Neither our amended and restated declaration of trust nor any policy statement formally adopted by our Board of Trustees limits either the total amount of indebtedness or the specified percentage of indebtedness that we may incur. Accordingly, we could become more highly leveraged, resulting in an increased risk of default on our obligations and in an increase in debt service requirements which could adversely affect our financial condition and results of operations and our ability to pay distributions.
Market interest rates could have an adverse effect on our borrowing costs and profitability and can adversely affect our share price.
We have exposure to market risks relating to increases in interest rates due to our variable-rate debt. An increase in interest rates may increase our costs of borrowing on existing variable-rate indebtedness, leading to a reduction in our net income.earnings. As of December 31, 2007,2008, we had outstanding $213.6$199.3 million in consolidated variable-rate indebtedness.indebtedness, not subject to an interest-rate swap agreement. The level of our variable-rate indebtedness, along with the interest rate associated with such variable-rate indebtedness, may change in the future and materially affect our interest costs and net income.earnings. In addition, our interest costs on our fixed-rate indebtedness can increase if we are required to refinance our fixed-rate indebtedness at maturity at higher interest rates. We currently have an agreement with a third party for a notional amount of $290.0 million which caps our interest rate at 6.0%.
Furthermore, the public valuation of our common shares is related primarily to the earnings that we derive from rental income with respect to our properties and not from the underlying appraised value of the properties themselves. As a result, interest rate fluctuations and capital market conditions can affect the market value of our common shares. For instance, if interest rates rise, the market price of our common shares may decrease because potential investors seeking a higher dividend yield than they would receive from our common shares may sell our common shares in favor of higher rate interest-bearing securities.
Recent disruptions in the financial markets could affect our ability to obtain debt financing on reasonable terms and have other adverse effects on us.
The United States credit markets have recently experienced significant dislocations and liquidity disruptions which have caused the spreads on prospective debt financings to widen considerably. These circumstances have materially impacted liquidity in the debt markets, making financing terms for borrowers less attractive, and in certain cases have resulted in the unavailability of certain types of debt financing. Continued uncertainty in the credit markets may negatively impact our ability to access additional debt financing at reasonable terms, which may negatively affect our ability to make acquisitions. A prolonged downturn in the credit markets may cause us to seek alternative sources of potentially less attractive financing, and may require us to adjust our business plan accordingly. In addition, these factors may make it more difficult for us to sell properties or may adversely affect the price we receive for properties that we do sell, as prospective buyers may experience increased costs of debt financing or difficulties in obtaining debt financing. These events in the credit markets have also had an adverse effect on other financial markets in the United States, which may make it more difficult or costly for us to raise capital through the issuance of our common shares or preferred shares. These disruptions in the financial markets may have other adverse effects on us or the economy generally.
We also have interest rate swap agreements directly and through our investment in Lex-Win Concord and have a direct forward equity commitment. The counterparties of these arrangements are major financial institutions; however, we are exposed to credit risk in the event of non-performance by the counterparties. In addition, we may be required to make additional prepayments pursuant to our forward equity commitment.
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We face risks associated with refinancings.
A significant number of our properties, as well as corporate level borrowings, are subject to mortgage or other secured notes with balloon payments due at maturity. As of December 31, 2007,2008, the consolidated scheduled balloon payments, including discontinued operations, for the next five calendar years, are as follows:
| Year | Balloon Payments | ||
| 2009 (1) | $ | 259.6 million | |
| 2010 | $ | 110.6 million | |
| 2011 | $ | 88.8 million | |
| 2012 | $ | 402.0 million | |
| 2013 | $ | 295.7 million | |
(1) Subsequent to December 31, 2008, $199.3 million of the debt has been extended to 2011.
As of December 31, 2008, the scheduled balloon payments for our non-consolidated entities for the next five calendar years are as follows:
Year | Balloon Payments | |||||
Balloon Payments – our Proportionate Share | ||||||
| 2009 | $ | 69.3 million | $ | 32.2 million | ||
| 2010 | $ | 87.6 million | $ | 43.6 million | ||
| 2011 | $ | 190.5 million | $ | 94.3 million | ||
| 2012 | $ | 81.8 million | $ | 40.4 million | ||
| 2013 | $ | 16.6 million | $ | 8.0 million | ||
Our ability to make the scheduled balloon payments will depend upon our cash balances, the amount available under our credit facility and our ability either to refinance the related mortgage debt or to sell the related property.
Certain of our properties are cross-collateralized and certain of our indebtedness is cross-defaulted.
As of December 31, 2007, the scheduled balloon payments for our non-consolidated entities for the next five calendar years are as follows:
| Balloon Payments - our | ||||||||
| Proportionate | ||||||||
Year | Balloon Payments | Share | ||||||
| 2008 | $ 87 | .8 million | $ 43 | .9 million | ||||
| 2009 | $357 | .7 million | $176 | .3 million | ||||
| 2010 | $ — | $ — | ||||||
| 2011 | $ 2 | .1 million | $ 1 | .0 million | ||||
| 2012 | $ 81 | .8 million | $ 40 | .3 million | ||||
In addition, our credit facility, secured term loans and 5.45% Exchangeable Guaranteed Notes contain cross-default provisions which may be triggered if we default on indebtedness in excess of certain thresholds.
We face possible liability relating to environmental matters.
Under various federal, state and local environmental laws, statutes, ordinances, rules and regulations, as an owner of real property, we may be liable for the costs of removal or remediation of certain hazardous or toxic substances at, on, in or under our properties, as well as certain other potential costs relating to hazardous or toxic substances. These liabilities may include government fines and penalties and damages for injuries to persons and adjacent property. These laws may impose liability without regard to whether we knew of, or were responsible for, the presence or disposal of those substances. This liability may be imposed on us in connection with the activities of an operator of, or tenant at, the property. The cost of any required remediation, removal, fines or personal or property damages and our liability therefore could exceed the value of the propertyand/or our aggregate assets. In addition, the presence of those substances, or the failure to properly dispose of or remove those substances, may adversely affect our ability to sell or rent that property or to borrow using that property as collateral, which, in turn, would reduce our revenues and ability to make distributions.
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A property can also be adversely affected either through physical contamination or by virtue of an adverse effect upon value attributable to the migration of hazardous or toxic substances, or other contaminants that have or may have emanated from other properties. Although our tenants are primarily responsible for any environmental damages and claims related to the leased premises, in the event of the bankruptcy or inability of any of our tenants to satisfy any obligations with respect to the property leased to that tenant, we may be required to satisfy such obligations. In addition, we may be held directly liable for any such damages or claims irrespective of the provisions of any lease.
From time to time, in connection with the conduct of our business, we authorize the preparation of Phase I environmental reports and, when necessary, Phase II environmental reports, with respect to our properties. Based upon these environmental reports and our ongoing review of our properties, as of the date of this Annual Report, we are not aware of any environmental condition with respect to any of our properties that we believe would be reasonably likely to have a material adverse effect on us.
There can be no assurance, however, that the environmental reports will reveal all environmental conditions at our properties or that the following will not expose us to material liability in the future:
· | the discovery of previously unknown environmental conditions; | |
· | changes in law; | |
· | activities of tenants; or | |
| activities relating to properties in the vicinity of our properties. |
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 our tenants, which could adversely affect our financial condition or results of operations.
Uninsured losses or a loss in excess of insured limits could adversely affect our financial condition.
We carry comprehensive liability, fire, extended coverage and rent loss insurance on most of our properties, with policy specifications and insured limits that we believe are customary for similar properties. However, with respect to those properties where the leases do not provide for abatement of rent under any circumstances, we generally do not maintain rent loss insurance. In addition, there are certain types of losses, such as losses resulting from wars, terrorism or certain acts of God that generally are not insured because they are either uninsurable or not economically insurable. Should an uninsured loss or a loss in excess of insured limits occur, we could lose capital invested in a property, as well as the anticipated future revenues from a property, while remaining obligated for any mortgage indebtedness or other financial obligations related to the property. Any loss of these types would adversely affect our financial condition.
Future terrorist attacks such as the attacks which occurred in New York City, Pennsylvania and Washington, D.C. on September 11, 2001, and the military conflicts such as the military actions taken by the
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Among other things, it is possible that interest rates may be affected by these events. An increase in interest rates may increase our costs of borrowing, leading to a reduction in our net income.earnings. These types of terrorist acts could also result in significant damages to, or loss of, our properties.
We and our tenants may be unable to obtain adequate insurance coverage on acceptable economic terms for losses resulting from acts of terrorism. Our lenders may require that we carry terrorism insurance even if we do not believe this insurance is necessary or cost effective. We may also be prohibited under the applicable lease from passing all or a portion of the cost of such insurance through to the tenant. Should an act of terrorism result in an uninsured loss or a loss in excess of insured limits, we could lose capital invested in a property, as well as the anticipated future revenues from a property, while remaining obligated for any mortgage indebtedness or other financial obligations related to the property. Any loss of these types would adversely affect our financial condition.
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Competition may adversely affect our ability to purchase properties.
There are numerous commercial developers, real estate companies, financial institutions and other investors with greater financial resources than we have that compete with us in seeking properties for acquisition and tenants who will lease space in our properties. Due to our focus on net lease properties located throughout the United States, and because most competitors are locallyand/or regionally focused, we do not encounter the same competitors in each market. Our competitors include other real estate investment trusts, or REITs, financial institutions, insurance companies, pension funds, private companies and individuals. This competition may result in a higher cost for properties that we wish to purchase.
Our failure to maintain effective internal controls could have a material adverse effect on our business, operating results and share price.
Section 404 of the Sarbanes-Oxley Act of 2002 requires annual management assessments of the effectiveness of our internal controls over financial reporting. If we fail to maintain the adequacy of our internal controls, as such standards may be modified, supplemented or amended from time to time, we may not be able to ensure that we can conclude on an ongoing basis that we have effective internal controls over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act of 2002. Moreover, effective internal controls, particularly those related to revenue recognition, are necessary for us to produce reliable financial reports and to maintain our qualification as a REIT and are important to helping prevent financial fraud. If we cannot provide reliable financial reports or prevent fraud, our business and operating results could be harmed, our REIT qualification could be jeopardized, investors could lose confidence in our reported financial information, and the trading price of our shares could drop significantly.
We may have limited control over our co-investment programs and joint venture investments.
Our co-investment programs and joint venture investments may involve risks not otherwise present for investments made solely by us, including the possibility that our partner might, at any time, become bankrupt, have different interests or goals than we do, or take action contrary to our instructions, requests, policies or objectives, including our policy with respect to maintaining our qualification as a REIT. Other risks of co-investment programs and joint venture investments include impasse on decisions, such as a sale, because neither we nor our partner have full control over the co-investment programs or joint venture. Also, there is no limitation under our organizational documents as to the amount of funds that may be invested in co-investment programs and joint ventures.
One of our co-investment programs, Lex-Win Concord, is owned equally by the MLPus and a subsidiary of Winthrop. This co-investment program is managed by an investment committee which consists of seven members, three members appointedthe members. Material actions taken by each of the MLP and Winthrop (with one appointee from each of the MLP and Winthrop qualifying as “independent”) and the seventh member appointed by FUR Holdings LLC, the administrative manager ofLex-Win Concord and primary owner of the former external advisor of the MLP and the current external advisor of Winthrop. Each investment in excess of $20.0 million to be made by this joint venture, as well as additional material matters, requiresrequire the consent of the investment committee appointed by the MLPeach of us and Winthrop. Accordingly, Lex-Win Concord may
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not take certain actions or invest in certain assets even if the MLP believeswe believe it to be in its best interest. Michael L. Ashner, our former Executive Chairman and Director of Strategic Acquisitions is also the Chairman and Chief Executive Officer of each of Winthrop and WRP Sub-Management LLC, the managing memberadministrative manager of FUR Holdings LLC and the seventh member of Concord’s investment committee.Lex-Win Concord.
Another co-investment program, NLS, is managed by an Executive Committee comprised of three persons appointed by us and two persons appointed by our partner. With few exceptions, the vote of four members of the Executive Committee is required to conduct business. Accordingly, we do not control the business decisions of this co-investment.
Investments by our co-investment programs may conflict with our ability to make attractive investments.
Under the terms of the limited partnership agreement governing NLS, we are required to first offer to NLS all opportunities to acquire real estate assets which, among other criteria, are specialty in nature and net leased. Only if NLS elects not to approve the acquisition opportunity or the applicable exclusivity conditions have expired, may we pursue the opportunity directly. As a result, we may not be able to make attractive acquisitions directly and may only receive an interest in such acquisitions through our interest in NLS.
In addition, the agreements governing Lex-Win Concord and Concord may restrict our ability to make certain debt investments.
Certain of our trustees and officers may face conflicts of interest with respect to sales and refinancings.
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Accordingly, there may be instances in which we may not sell a property or pay down the debt on a property even though doing so would be advantageous to our other shareholders. In the event of an appearance of a conflict of interest, the conflicted trustee or officer must recuse himself or herself from any decision making or seek a waiver of our Code of Business Conduct and Ethics.
Our ability to change our portfolio is limited because real estate investments are illiquid.
Equity investments in real estate are relatively illiquid and, therefore, our ability to change our portfolio promptly in response to changed conditions will be limited. Our Board of Trustees may establish investment criteria or limitations as it deems appropriate, but currently does not limit the number of properties in which we may seek to invest or on the concentration of investments in any one geographic region. We could change our investment, disposition and financing policies without a vote of our shareholders.
There can be no assurance that we will remain qualified as a REIT for federal income tax purposes.
We believe that we have met the requirements for qualification as a REIT for federal income tax purposes beginning with our taxable year ended December 31, 1993, and we intend to continue to meet these requirements in the future. However, qualification as a REIT involves the application of highly technical and complex provisions of the Code, for which there are only limited judicial or administrative interpretations. No assurance can be given that we have qualified or will remain qualified as a REIT. The Code provisions and income tax regulations applicable to REITs are more complex than those applicable to corporations. The determination of various factual matters and circumstances not entirely within our control may affect our ability to continue to qualify as a REIT. In addition, no assurance can be given that legislation, regulations, administrative interpretations or court decisions will not significantly change the requirements for qualification as a REIT or the federal income tax consequences of such qualification. If we do not qualify as a REIT, we would not be allowed a deduction for distributions to shareholders in computing our net taxable income. In addition, our income would be subject to tax at the regular corporate rates. We also could be disqualified from treatment as a REIT for the four taxable years following the year during which qualification was lost. Cash available for distribution to our shareholders would be significantly reduced for each
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year in which we do not qualify as a REIT. In that event, we would not be required to continue to make distributions. Although we currently intend to continue to qualify as a REIT, it is possible that future economic, market, legal, tax or other considerations may cause us, without the consent of the shareholders, to revoke the REIT election or to otherwise take action that would result in disqualification.
We may be subject to the REIT prohibited transactions tax, which could result in significant U.S. federal income tax liability to us.
We previously announced a restructuring of our investment strategy, focusing on core and core plus assets. A real estate investment trust will incur a 100% tax on the net income from a prohibited transaction. Generally, a prohibited transaction includes a sale or disposition of property held primarily for sale to customers in the ordinary course of a trade or business. While we believe that the dispositions of our assets pursuant to the restructuring of our investment strategy should not be treated as prohibited transactions, whether a particular sale will be treated as a prohibited transaction depends on the underlying facts and circumstances. We have not sought and do not intend to seek a ruling from the Internal Revenue Service regarding any dispositions. Accordingly, there can be no assurance that our dispositions of such assets will not be subject to the prohibited transactions tax. If all or a significant portion of those dispositions were treated as prohibited transactions, we would incur a significant U.S. federal income tax liability, which could have a material adverse effect on our results of operations.
Distribution requirements imposed by law limit our flexibility.
To maintain our status as a REIT for federal income tax purposes, we are generally required to distribute to our shareholders at least 90% of our taxable income for that calendar year. Our taxable income is determined without regard to any deduction for dividends paid and by excluding net capital gains. To the extent that we satisfy the distribution requirement, but distribute less than 100% of our taxable income, we will be subject to federal corporate income tax on our undistributed income. In addition, we will incur a 4% nondeductible excise tax on the amount, if any, by which our distributions in any year are less than the sum of (i) 85% of our ordinary income for that year, (ii) 95% of our capital gain net income for that year and (iii) 100% of our undistributed taxable income from prior years. We intend to continue to make distributions to our shareholders to comply with the distribution requirements of the Code and to reduce exposure to federal income and nondeductible excise taxes. Differences in timing between the receipt of income and the payment of expenses in determining our income and the effect of required debt amortization payments could require us to borrow funds on a short-term basis in order to meet the distribution requirements that are necessary to achieve the tax benefits associated with qualifying as a REIT.
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Certain limitations limit a third party’s ability to acquire us or effectuate a change in our control.
Limitations imposed to protect our REIT status. In order to protect us against the loss of our REIT status, our declaration of trust limits any shareholder from owning more than 9.8% in value of any class of our outstanding shares, subject to certain exceptions. The ownership limit may have the effect of precluding acquisition of control of us.
Severance payments under employment agreements. Substantial termination payments may be required to be paid under the provisions of employment agreements with certain of our executives upon a change of control. We have entered into employment agreements with fivefour of our executive officers which provide that, upon the occurrence of a change in control of us (including a change in ownership of more than 50% of the total combined voting power of our outstanding securities, the sale of all or substantially all of our assets, dissolution, the acquisition, except from us, of 20% or more of our voting shares or a change in the majority of our Board of Trustees), four of those executive officers wouldmay be entitled to severance benefits based on their current annual base salaries, recent annual cash bonuses and the average of the value of the two most recent long-term incentive awards and one of those executive would be entitled to severance benefits based on his current annual base salary and recent annual cash bonus, as defined in the employment agreements. Accordingly, these payments may discourage a third party from acquiring us.
Limitation due to our ability to issue preferred shares. Our amended and restated declaration of trust authorizes our Board of Trustees to issue preferred shares, without shareholder approval. The Board of Trustees is able to establish the preferences and rights of any preferred shares issued which could have the effect of delaying or preventing someone from taking control of us, even if a change in control were in shareholders’ best interests. As of the date of this Annual Report,At December 31, 2008, we had outstanding 3,160,000 Series B Preferred Shares, that we issued in June 2003, 3,100,0002,598,300 Series C Preferred Shares, that we issued in December 2004 and January 2005, and 6,200,000 Series D Preferred Shares, that we issued in February 2007, and one share of our special voting preferred stock that we issued in December 2006 in connection with the Merger.2007. Our Series B, Series C and Series D Preferred Shares include provisions that may deter a change of control. The establishment and issuance of shares of our existing series of preferred shares or a future series of preferred shares could make a change of control of us more difficult.
Limitation imposed by the Maryland Business Combination Act. The Maryland General Corporation Law, as applicable to Maryland REITs, establishes special restrictions against “business combinations” between a Maryland REIT and “interested shareholders” or their affiliates unless an exemption is applicable. An interested shareholder includes a person who beneficially owns, and an affiliate or associate of the trust who, at any time within the two-year period prior to the date in question, was the beneficial owner of 10% or more of the voting
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power of our then-outstanding voting shares, but a person is not an interested shareholder if the Board of Trustees approved in advance the transaction by which he otherwise would have been an interested shareholder. Among other things, Maryland law prohibits (for a period of five years) a merger and certain other transactions between a Maryland REIT and an interested shareholder. The five-year period runs from the most recent date on which the interested shareholder became an interested shareholder. Thereafter, any such business combination must be recommended by the Board of Trustees and approved by two super-majority shareholder votes unless, among other conditions, the common shareholders receive a minimum price for their shares and the consideration is received in cash or in the same form as previously paid by the interested shareholder for its shares. The statute permits various exemptions from its provisions, including business combinations that are exempted by the Board of Trustees prior to the time that the interested shareholder becomes an interested shareholder. The business combination statute could have the effect of discouraging offers to acquire us and of increasing the difficulty of consummating any such offers, even if such acquisition would be in shareholders’ best interests. In connection with our merger with Newkirk, Vornado Realty Trust, which we refer to as Vornado, and Apollo Real Estate Investment Fund III, L.P., which we refer to as Apollo, werewas granted a limited exemption from the definition of “interested shareholder.”
Maryland Control Share Acquisition Act. Maryland law provides that “control shares” of a Maryland REIT acquired in a “control share acquisition” shall have no voting rights except to the extent approved by a vote oftwo-thirds of the vote entitled to be cast on the matter under the Maryland Control Share Acquisition Act. Shares owned by the acquiror, by our officers or by employees who are our trustees are excluded from shares entitled to vote on the matter. “Control Shares” means shares that, if aggregated with all other shares previously acquired by the acquiror or in respect of which the acquiror is able to exercise or direct the exercise of voting power (except solely by virtue of a revocable proxy), would entitle the acquiror to exercise voting power in electing trustees within one of the following ranges of voting power: one-tenth or more but less than one-third, one-third or more but less than a majority or a majority or more of all voting power. Control shares do not include shares the acquiring person is then entitled to vote as a result of having previously obtained shareholder approval. A “control share acquisition” means the acquisition of control shares, subject to certain exceptions. If voting rights of control shares acquired in a control share acquisition are not approved at a shareholders’ meeting, then subject to certain conditions and limitations the issuer may redeem any or all of the control shares for fair value. If voting rights of such control shares are approved at a shareholders’ meeting and the acquiror becomes entitled to vote a majority of the shares entitled to vote, all other shareholders may exercise appraisal rights. Any control shares acquired in a control share acquisition which are not exempt under our by-laws will be subject to the Maryland Control Share Acquisition Act. Our amended and restated by-laws contain a provision exempting from the Maryland Control Share Acquisition Act any and all acquisitions by any person of our shares. We cannot assure you that this provision will not be amended or eliminated at any time in the future.
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Limits on ownership of our capital shares may have the effect of delaying, deferring or preventing someone from taking control of us.
For us to qualify as a REIT for federal income tax purposes, among other requirements, not more than 50% of the value of our outstanding capital shares may be owned, directly or indirectly, by five or fewer individuals (as defined for federal income tax purposes to include certain entities) during the last half of each taxable year, and these capital shares must be beneficially owned by 100 or more persons during at least 335 days of a taxable year of 12 months or during a proportionate part of a shorter taxable year (in each case, other than the first such year for which a REIT election is made). Our amended and restated declaration of trust includes certain restrictions regarding transfers of our capital shares and ownership limits.
Actual or constructive ownership of our capital shares in excess of the share ownership limits contained in its declaration of trust would cause the violative transfer or ownership to be void or cause the shares to be transferred to a charitable trust and then sold to a person or entity who can own the shares without violating these limits. As a result, if a violative transfer were made, the recipient of the shares would not acquire any economic or voting rights attributable to the transferred shares. Additionally, the constructive ownership rules for these limits are complex and groups of related individuals or entities may be deemed a single owner and consequently in violation of the share ownership limits.
These restrictions and limits may not be adequate in all cases, however, to prevent the transfer of our capital shares in violation of the ownership limitations. The ownership limits discussed above may have the effect of delaying, deferring or preventing someone from taking control of us, even though a change of control could involve a premium price for the common shares or otherwise be in shareholders’ best interests.
Legislative or regulatory tax changes could have an adverse effect on us.
At any time, the federal income tax laws governing REITs or the administrative interpretations of those laws may be amended. Any of those new laws or interpretations may take effect retroactively and could adversely affect us or you as a shareholder. REIT dividends generally are not eligible for the reduced rates currently applicable to certain corporate dividends (unless attributable to dividends from taxable REIT subsidiaries and otherwise eligible for such rates). As a result, investment in non-REIT corporations may be relatively more attractive than investment in REITs. This could adversely affect the market price of our shares.
Our Board of Trustees may change our investment policy without shareholders’ approval.
Subject to our fundamental investment policy to maintain our qualification as a REIT, our Board of Trustees will determine its investment and financing policies, growth strategy and its debt, capitalization, distribution, acquisition, disposition and operating policies.
Our Board of Trustees may revise or amend these strategies and policies at any time without a vote by shareholders. Accordingly, shareholders’ control over changes in our strategies and policies is limited to the election of trustees, and changes made by our Board of Trustees may not serve the interests of shareholders and could adversely affect our financial condition or results of operations, including our ability to distribute cash to shareholders or qualify as a REIT.
Our inability to carry out our growth strategy could adversely affect our financial condition and results of operations.
Our growth strategy is based on the acquisition and development of additional properties and related assets, including acquisitions of large portfolios and real estate companies and acquisitions through co-investment programs such as joint ventures. In the context of our business plan, “development” generally means an expansion or renovation of an existing property or the acquisition of a newly constructed property. We may provide a developer with a commitment to acquire a property upon completion of construction of a property and commencement of rent from the tenant. Our plan to grow through the acquisition and development of new properties could be adversely affected by trends in the real estate and financing businesses. The consummation of any future acquisitions will be subject to satisfactory completion of an extensive valuation analysis and due diligence review and to the negotiation of definitive documentation. Our ability to implement our strategy may be impeded because we may have difficulty
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finding new properties and investments at attractive prices that meet our investment criteria, negotiating with new or existing tenants or securing acceptable financing. If we are unable to carry out our strategy, our financial condition and results of operations could be adversely affected.
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Acquisitions of additional properties entail the risk that investments will fail to perform in accordance with expectations, including operating and leasing expectations. Redevelopment and new project development are subject to numerous risks, including risks of construction delays, cost overruns or force majeure events that may increase project costs, new project commencement risks such as the receipt of zoning, occupancy and other required governmental approvals and permits, and the incurrence of development costs in connection with projects that are not pursued to completion.
Some of our acquisitions and developments may be financed using the proceeds of periodic equity or debt offerings, lines of credit or other forms of secured or unsecured financing that may result in a risk that permanent financing for newly acquired projects might not be available or would be available only on disadvantageous terms. If permanent debt or equity financing is not available on acceptable terms to refinance acquisitions undertaken without permanent financing, further acquisitions may be curtailed or cash available for distribution to shareholders may be adversely affected.
The concentration of ownership by certain investors may limit other shareholders from influencing significant corporate decisions.
E. Robert Roskind, our Co-Vice Chairman, beneficially owned as of December 31, 2007, 0.9 million of our common shares and 1.5 million units of limited partner interest in our other operating partnerships, which are redeemable for our common shares on a one for one basis, or with respect to a portion of the units, at our election, cash. On a fully diluted basis,Each of Vornado and Mr. Roskind heldmay have substantial influence over us and on the outcome of any matters submitted to our shareholders for approval. In addition, certain decisions concerning our operations or financial structure may present conflicts of interest between each of Vornado and Mr. Roskind and our other equity or debt holders. In addition, Vornado engages in a 2.4% ownershipwide variety of activities in the real estate business and may engage in activities that result in conflicts of interest inwith respect to matters affecting us, such as of December 31, 2007.competition for properties and tenants.
Securities eligible for future sale may have adverse effects on our share price.
An aggregate of approximately 39.77.3 million of our common shares are issuable upon the exercise of employee share options and the exchange of units of limited partnership interests in our operating partnership subsidiaries. Depending upon the number of such securities exchangedexercised or exercisedexchanged at one time, an exchangeexercise or exerciseexchange of such securities could be dilutive to or otherwise adversely affect the interests of holders of our common shares.
We are dependent upon our key personnel and the terms of Mr. Ashner’s employment agreement affects our ability to make certain investments.personnel.
We are dependent upon key personnel whose continued service is not guaranteed. We are dependent on our executive officers for business direction. We have entered into employment agreements with certain employees, including Michael L. Ashner, our Executive Chairman and our Director of Strategic Acquisitions, E. Robert Roskind, our Co-Vice-Chairman,Chairman, Richard J. Rouse, our Co-ViceVice Chairman and Chief Investment Officer, T. Wilson Eglin, our Chief Executive Officer, President and Chief Operating Officer, and Patrick Carroll, our Executive Vice President, Chief Financial Officer and Treasurer. Pursuant to Mr. Ashner’s employment agreement, Mr. Ashner may voluntarily terminate his employment with us and become entitled to receive a substantial severance payment if we
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Our inability to retain the services of any of our key personnel or our loss of any of their services could adversely impact our operations. We do not have key man life insurance coverage on our executive officers.
Risks Specific to Our Investment in Concord
In addition to the risks described above, our investment in Concord is subject to the following additional risks:
Concord engages in hedging transactions that may limit gains or result in losses.
Concord uses derivatives to hedge its liabilities and this has certain risks, including losses on a hedge position, which have in the past and may in the future reduce the return on our investment in Concord and such losses may exceed the amount invested in such instruments. In addition, counterparties to a hedging arrangement could default on their obligations. Concord may have to pay certain costs, such as transaction fees or brokerage costs related to its hedging transactions.
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The loans Concord invests in are subject to delinquency, foreclosure and loss.
Concord’s commercial real estate loans and loan securities are directly and indirectly secured by income producing property. These loans are subject to risks of delinquency and foreclosure as well as risk associated with the capital markets. The ability of a borrower to repay a loan secured by an income-producing property typically is dependent primarily upon the successful operation of such property rather than upon the existence of independent income or assets of the borrower. If a borrower were to default on a loan, it is possible that Concord would not recover the full value of the loan.
The subordinate loan assets Concord invests in may be subject to risks relating to the structure and terms of the transactions, and there may not be sufficient funds or assets remaining to satisfy our subordinate notes, which may result in losses to Concord.
Concord invests in loan assets that are subordinate in payment and collateral to more senior loans. If a borrower defaults or declares bankruptcy, after the more senior obligations are satisfied, there may not be sufficient funds or assets remaining to satisfy Concord’s subordinate notes. Because each transaction is privately negotiated, subordinate loan assets can vary in their structural characteristics and lender rights including Concord’s rights to control the default or bankruptcy process varies from transaction to transaction. The subordinate loan assets that Concord invests in may not give Concord the right to demand foreclosure as a subordinate debtholder. Furthermore, the presence of intercreditor agreements may limit Concord’s ability to amend the loan documents, assign the loans, accept prepayments, exercise remedies and control decisions made in bankruptcy proceedings relating to borrowers. Bankruptcy and borrower litigation can significantly increase the time needed for Concord to acquire possession of underlying collateral in the event of a default, during which time the collateral may decline in value. In addition, there are significant costs and delays associated with the foreclosure process.
Concord invests in subordinate mortgage-backed securities which are subject to a greater risk of loss than senior securities. Concord may hold the most junior class of mortgage-backed securities which are subject to the first risk of loss if any losses are realized on the underlying mortgage loans.
Concord invests in a variety of subordinate loan securities, and sometimes holdshold a “first loss” subordinate holder position. The ability of a borrower to make payments on the loan underlying these securities is dependent primarily upon the successful operation of the property rather than upon the existence of independent income or assets of the borrower since the underlying loans are generally non-recourse in nature. In the event of default and the exhaustion of any equity support, reserve funds, letters of credit and any classes of securities junior to those in which Concord invests, Concord will not be able to recover all of its investment in the securities purchased.
Although Concord acquired its loan assets and loan securities with the intent to hold them to maturity, the value of Concord’s loan assets and loan securities is dependent upon the yield demanded on these assets by the market based on the underlying mortgage loans (including litigation expenses), expensescredit. A large supply of protectingthese loan securities combined with reduced demand will generally cause the properties securingmarket to require a higher yield on these loan securities, resulting in a higher, or “wider,” spread over the mortgage loansbenchmark rate of such loan securities. Under these conditions such as those that we are currently experiencing, the value of loan securities in Concord’s portfolio has and the liens on the mortgaged properties, and, if such expenses are advanced by the servicer of the mortgage loans, interest on such advances will also be allocatedtend to such “first loss” securities prior to allocation to more senior classes of securities issueddecline. Such changes in the securitization. Prior to the reductionmarket value of distributions to more seniorConcord’s portfolio has and will adversely affect Concord’s net equity through their impact on unrealized gains or losses on available-for-sale loan securities, distributions to the “ first loss” securities may also be reduced by payment of compensation to any servicer engaged to enforce a defaulted mortgage loan. Such expenses and servicing compensation may be substantial and consequently, in the event of a default or loss on one or more mortgage loans contained in a securitization,therefore Concord’s cash flow since Concord may not recover its investment.
Concord prices its assets based on its assumptions about future credit spreads for financing of those assets. Concord has obtained in the past longer term financing for its assets using structured financing techniques such as collateralized debt obligations (CDOs). Such issuances entail interest rates set at a spread over a certain benchmark, such as the yield on United States Treasury obligations, swaps or LIBOR. If the spread that investors are paying on structured finance vehicles over the benchmark widens and the rates Concord charges on its securitized assets are not increased accordingly, this may reduce Concord’s income or cause losses.
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The deterioration of the credit markets has had an adverse impact on the ability of Concord’s borrowers to obtain replacement financing.
The deterioration of credit markets has made it extremely difficult for borrowers to obtain mortgage financing. The inability of Concord’s borrowers to obtain replacement financing has led and will likely continue to lead to more loan defaults thereby resulting in expensive and time consuming foreclosure actions and/or negotiated extensions to existing loans beyond their current expirations on terms which may not be as favorable to Concord as the existing loans.
The repurchase agreements that Concord uses to finance its investments may require it to provide additional collateral.
If the market value of the loan assets and loan securities pledged or sold by Concord to a repurchase counterpartycounterparties decline in value, which decline is determined, in most cases, by the repurchase counterparty,counterparties, Concord may be required by the repurchase counterpartycounterparties to provide additional collateral or pay down a portion of the funds advanced. Concord may not have the funds available to pay down its debt, which could result in defaults. Posting additional collateral to support its repurchase facilities will reduce Concord’s return on assets and liquidity andas well as limit its ability to leverage its assets. Because Concord’s obligations underIf Concord cannot post additional collateral, Concord will be required to satisfy the margin calls in cash. Accordingly, if Concord is required to use its repurchase facilities are recourse to Concord,cash, or if Concordit does not have sufficient liquiditycash, to meet such requirements, it would likelywill result in a rapid deterioration of Concord’s financial condition and solvency.solvency as well as the loss of assets to the repurchase counterparties, thereby adversely affecting our investment in Concord.
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The credit and capital market deterioration has significantly strained Concord’s future investment grade CDOs,liquidity.
The inability of Concord to obtain replacement financing coupled with pending maturities and margin calls on its repurchase obligations has significantly strained Concord’s liquidity as cash from operations is required to be used primarily to satisfy repayments under repurchase agreements and margin calls. Until there is a recovery in the credit and capital markets and depending on the length of the extent of margin calls and loan defaults, Concord will likely have to utilize its cash flow to meet regular debt service payments as well as margin calls on its repurchase facilities and preferred distribution payments thereby reducing distributions to members. In addition, if any, will be collateralized withalternative financing is not available or the level of defaults on Concord’s loan assets and loan securities increases, Concord may not have sufficient liquidity to satisfy its debt securities that are similarobligations which may require Concord to those collateralizing its existing investment grade CDO, and any adverse market trends are likely to adversely affect the issuance of future CDOs as well as Concord’s CDOs in general.liquidate assets at unfavorable pricing.
Credit ratings assigned to Concord’s investments are subject to ongoing evaluations and we cannot assure yoube sure that the ratings currently assigned to Concord’s investments will not be downgraded.
Some of Concord’s investments are rated by Moody’s Investors Service, Fitch Ratings or Standard & Poor’s, Inc.the major rating agencies. The credit ratings on these investments are subject to ongoing evaluation by credit rating agencies, and we cannot assure you that any such ratings will not be changed or withdrawn by a rating agency in the future if, in its judgment, circumstances warrant.agencies. If rating agencies assign a lower-than-expectedlower rating or reduce, or indicate that they may reduce, their ratings of Concord’s investments, the market value of those investments could significantly decline, which maycould have an adverse affect on Concord’s financial condition.
The use of CDO financings with coverage tests in Concord’s existing CDO may have a negative impact on Concord’s operating results and cash flows.
Concord’s current CDO contains and it is likely that future CDOs, if any, will contain coverage tests, including over-collateralization tests, which are used primarily to determine whether and to what extent principal and interest proceeds on the underlying collateral debt securities and other assets may be used to pay principal of and interest on the subordinate classes of bonds in the CDO. In the event the coverage tests are not met, distributions otherwise payable to Concord may be re-directed to pay principal on the bond classes senior to Concord’s. Therefore, Concord’s failure to satisfy the coverage tests could adversely affect Concord’s operating results and cash flows.
Certain coverage tests which may be applicable to Concord’s interest in its CDOs (based on delinquency levels or other criteria) may also restrict Concord’s ability to receive net income from assets pledged to secure the CDOs.CDO. If Concord’s assets fail to perform as anticipated, Concord’s over-collateralization or other credit enhancement expensesexpense associated with its CDOCDOs will increase. There can be no assurance of completing negotiations with the rating agencies or other key transaction parties on any future CDOs, as to what will be the actual terms of the delinquency tests, over-collateralization, cash flow release mechanisms or other significant factors regarding the calculation of net income to Concord. Failure to obtain favorable terms with regard to these matters may materially reduce net income to Concord.
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There are no unresolved written comments that were received from the SEC staff 180 days or more before the end of our fiscal year relating to our periodic or current reports under the Securities Exchange Act of 1934.
Item 2. Properties
Real Estate Portfolio
General. As of December 31, 2007,2008, we owned or had ownership interests in approximately 45.540.2 million square feet of rentable space in approximately 280225 consolidated office, industrial and retail properties. As of December 31, 2007,2008, our properties were 95.6%approximately 93.3% leased based upon net rentable square feet.
Our properties are generally subject to net leases; however, in certain leases we are responsible for roof and structural repairs. In such situations, we perform annual inspections of the properties. In addition, certain of our properties (including those held through non-consolidated entities) are subject to leases in which the landlord is responsible for a portion of the real estate taxes, utilities and general maintenance. We are responsible for all operating expenses of any vacant properties and we may be responsible for a significant amount of operating expenses of multi-tenant properties.
Ground Leases. Certain of our properties are subject to long-term ground leases where a third party owns and leases the underlying land to us. Certain of these properties are economically owned through the holding of industrial revenue bonds and as such neither ground lease payments nor bond interest payments are made or received, respectively. For certain of the properties held under a ground lease, we have a purchase option. At the end of these long-term ground leases, unless extended or the purchase option exercised, the land together with all improvements thereon reverts to the landowner. In addition, we have one property in which a portion of the land, on which a portion of the parking lot is located, is subject to a ground lease. At expiration of the ground lease, only that portion of the parking lot reverts to the landowner.
Leverage. As of December 31, 2007,2008, we had outstanding mortgages and notes payable, including mortgages classified as discontinued operations, of $3.0$2.4 billion with a weighted average interest rate of 5.9%5.6%.
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Table Regarding Real Estate Holdings
LEXINGTON CONSOLIDATED PORTFOLIO
PROPERTY CHART
OFFICE
| Primary | Net | |||||||||||||||
| Tenant | Rentable | Current Term | Percent | |||||||||||||
Property Location | City | State | (Guarantor) | Square Feet | Leases Expiration | Leased | ||||||||||
| 12209 W. Markham St. | Little Rock | AR | Entergy Arkansas, Inc. | 36,311 | 10/31/2010 | 100 | % | |||||||||
| 19019 N. 59th Ave | Glendale | AZ | Honeywell, Inc. | 252,300 | 7/15/2011 | 100 | % | |||||||||
| 2211 S. 47th St. | Phoenix | AZ | Avnet, Inc. | 176,402 | 11/14/2012 | 100 | % | |||||||||
| 13430 N. Black Canyon Freeway | Phoenix | AZ | Bull HN Information Systems, Inc. | 138,940 | 10/31/2010 | 80 | % | |||||||||
| 8555 S. River Pwy | Tempe | AZ | ASM Lithography, Inc. (ASM Lithography Holding N.V.) | 95,133 | 6/30/2013 | 100 | % | |||||||||
| 2005 E. Technology Circle | Tempe | AZ | (i) Structure, LLC (Infocrossing, Inc.) | 60,000 | 12/31/2025 | 100 | % | |||||||||
| 275 S. Valencia Ave | Brea | CA | Bank of America NT & SA | 637,503 | 6/30/2012 | 100 | % | |||||||||
| 2230 E. Imperial Hwy. 1 | El Segundo | CA | Raytheon Company/Direct TV, Inc. | 184,636 | 12/31/2013 | 100 | % | |||||||||
| 2200 & 2222 E. Imperial Hwy. 3 | El Segundo | CA | Raytheon Company | 184,636 | 12/31/2018 | 100 | % | |||||||||
| 2200 & 2222 E. Imperial Hwy. 2 | El Segundo | CA | Raytheon Company | 959,000 | 12/31/2008 | 100 | % | |||||||||
| 17770 Cartwright Rd | Irvine | CA | Associates First Capital Corporation | 136,180 | 8/31/2008 | 100 | % | |||||||||
| 26210 & 26220 Enterprise Court | Lake Forest | CA | Apria Healthcare, Inc. (Apria Healthcare Group, Inc.) | 100,012 | 1/31/2012 | 100 | % | |||||||||
| 1500 Hughes Way | Long Beach | CA | Raytheon Company | 490,054 | 12/31/2008 | 100 | % | |||||||||
| 27016 Media Center Dr. | Los Angeles | CA | Playboy Enterprises, Inc. | 83,252 | 11/7/2012 | 100 | % | |||||||||
| 5724 W. Las Positas Blvd. | Pleasanton | CA | NK Leasehold | 40,914 | 11/30/2009 | 100 | % | |||||||||
| 255 California St. | San Francisco | CA | Multi-tenanted | 169,846 | Various | 92 | % | |||||||||
| 599 Ygnacio Valley Rd | Walnut Creek | CA | Vacant | 54,528 | None | 0 | % | |||||||||
| 5550 Tech Center Dr. | Colorado Springs | CO | Federal Express Corporation | 61,690 | 4/30/2009 | 100 | % | |||||||||
| 1110 Bayfield Dr. | Colorado Springs | CO | Honeywell International, Inc. | 166,575 | 11/30/2013 | 100 | % | |||||||||
| 9201 E. Dry Creek Rd | Centennial | CO | The Shaw Group, Inc. | 128,500 | 9/30/2017 | 100 | % | |||||||||
| 3940 S. Teller St. | Lakewood | CO | Travelers Express, Inc | 68,165 | 3/31/2012 | 100 | % | |||||||||
| 10 John St. | Clinton | CT | Unilever Supply Chain, Inc. (Unilever United States, Inc.) | 41,188 | 12/19/2008 | 100 | % | |||||||||
| 200 Executive Blvd. S | Southington | CT | Hartford Fire Insurance Company | 153,364 | 12/31/2012 | 100 | % | |||||||||
| 100 Barnes Rd | Wallingford | CT | 3M Company | 44,400 | 12/31/2010 | 100 | % | |||||||||
| 5600 Broken Sound Blvd. | Boca Raton | FL | Océ Printing Systems USA, Inc. (Oce-USA Holding, Inc.) | 136,789 | 2/14/2020 | 100 | % | |||||||||
| 12600 Gateway Blvd. | Fort Meyers | FL | Gartner, Inc. | 62,400 | 1/31/2013 | 100 | % | |||||||||
| 600 Business Center Dr. | Lake Mary | FL | JP Morgan Chase Bank | 125,155 | 9/30/2009 | 100 | % | |||||||||
| 550 Business Center Dr. | Lake Mary | FL | JP Morgan Chase Bank | 125,920 | 9/30/2009 | 100 | % | |||||||||
| 6277 Sea Harbor Dr. | Orlando | FL | Harcourt Brace & Company (Reed Elsevier, Inc.) | 355,840 | 3/31/2009 | 100 | % | |||||||||
| Sandlake Rd./Kirkman Rd | Orlando | FL | Honeywell, Inc. | 184,000 | 4/30/2013 | 100 | % | |||||||||
| 9200 S. Park Center Loop | Orlando | FL | Corinthian Colleges, Inc. | 59,927 | 9/30/2013 | 100 | % | |||||||||
| 4200 RCA Blvd. | Palm Beach Gardens | FL | The Wackenhut Corporation | 114,518 | 2/28/2011 | 100 | % | |||||||||
| 10419 N. 30th St. | Tampa | FL | Time Customer Service, Inc. (Time, Inc.) | 132,981 | 6/30/2020 | 100 | % | |||||||||
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| Primary | Net | |||||||||||||||
| Tenant | Rentable | Current Term | Percent | |||||||||||||
Property Location | City | State | (Guarantor) | Square Feet | Leases Expiration | Leased | ||||||||||
| 6303 Barfield Rd | Atlanta | GA | International Business Machines Corporation (Internet Security Systems, Inc.) | 238,600 | 5/31/2013 | 100 | % | |||||||||
| 859 Mount Vernon Hwy | Atlanta | GA | International Business Machines Corporation (Internet Security Systems, Inc.) | 50,400 | 5/31/2013 | 100 | % | |||||||||
| 4000 Johns Creek Pwy | Suwanee | GA | Kraft Foods N.A., Inc. | 87,219 | 1/31/2012 | 100 | % | |||||||||
| 160 Clairemont Ave | Decatur | GA | Multi-tenanted | 121,686 | 12/31/2007 | 24 | % | |||||||||
| King St. | Honolulu | HI | Multi-tenanted | 236,545 | Various | 93 | % | |||||||||
| 1275 N.W. 128th St. | Clive | IA | Principal Life Insurance Company | 61,180 | 1/31/2012 | 100 | % | |||||||||
| 101 E. Erie St. | Chicago | IL | FCB Worldwide, Inc. (Interpublic Group of Companies, Inc.) | 227,569 | 3/15/2014 | 100 | % | |||||||||
| 850 & 950 Warrenville Rd | Lisle | IL | National Louis University | 99,329 | 12/31/2019 | 100 | % | |||||||||
| 500 Jackson St. | Columbus | IN | Cummins Engine Company, Inc. | 390,100 | 7/31/2019 | 100 | % | |||||||||
| 10300 Kincaid Dr. | Fishers | IN | Bank One Indiana, N.A. | 193,000 | 10/31/2009 | 100 | % | |||||||||
| 5757 Decatur Blvd. | Indianapolis | IN | Allstate Insurance Company | 89,956 | 8/31/2012 | 100 | % | |||||||||
| 10475 Crosspoint Blvd. | Fishers | IN | John Wiley & Sons, Inc. | 141,047 | 10/31/2019 | 100 | % | |||||||||
| 2300 Litton Lane | Hebron | KY | AGC Automotive Americas Company (AFG Industries, Inc.) | 80,441 | 8/31/2012 | 58 | % | |||||||||
| 5200 Metcalf Ave | Overland Park | KS | Employers Reinsurance Corporation | 291,168 | 12/22/2018 | 100 | % | |||||||||
| 4455 American Way | Baton Rouge | LA | Bell South Mobility, Inc. | 70,100 | 10/31/2012 | 100 | % | |||||||||
| 147 Milk St. | Boston | MA | Harvard Vanguard Medical Association | 52,337 | 5/31/2012 | 100 | % | |||||||||
| 33 Commercial St. | Foxboro | MA | Invensys Systems, Inc. (Siebe, Inc.) | 164,689 | 7/1/2015 | 100 | % | |||||||||
| 70 Mechanic St. | Foxboro | MA | Invensys Systems, Inc. (Siebe, Inc.) | 251,914 | 6/30/2014 | 100 | % | |||||||||
| 100 Light St. | Baltimore | MD | St. Paul Fire and Marine Insurance Company | 530,000 | 9/30/2009 | 100 | % | |||||||||
| 27404 Drake Rd | Farmington Hills | MI | Vacant | 108,499 | None | 0 | % | |||||||||
| 3701 Corporate Dr. | Farmington Hills | MI | Temic Automotive of North America, Inc. | 119,829 | 12/31/2016 | 100 | % | |||||||||
| 26555 Northwestern Hwy | Southfield | MI | Federal-Mogul Corporation | 187,163 | 1/31/2015 | 100 | % | |||||||||
| 3165 McKelvey Rd | Bridgeton | MO | BJC Health System | 52,994 | 3/31/2013 | 100 | % | |||||||||
| 9201 Stateline Rd | Kansas City | MO | Employers Reinsurance Corporation | 155,925 | 4/1/2019 | 100 | % | |||||||||
| 200 Lucent Lane | Cary | NC | Lucent Technologies, Inc. | 124,944 | 9/30/2011 | 100 | % | |||||||||
| 11707 Miracle Hills Dr. | Omaha | NE | (i) Structure, LLC (Infocrossing, Inc.) | 85,200 | 11/30/2025 | 100 | % | |||||||||
| 700 US Hwy. Route202-206 | Bridgewater | NJ | Biovail Pharmaceuticals, Inc. (Biovail Corporation) | 115,558 | 10/31/2014 | 100 | % | |||||||||
| 200 Milik St. | Carteret | NJ | Pathmark Stores, Inc. | 149,100 | 12/31/2011 | 100 | % | |||||||||
| 288 N. BRd. St. | Elizabeth | NJ | Bank of America | 30,000 | 8/31/2013 | 100 | % | |||||||||
| 389 & 399 Interpace Hwy | Parsippany | NJ | Sanofi-aventis U.S., Inc. (Aventis, Inc. & Aventis Pharma Holding GmbH) | 340,240 | 1/31/2010 | 100 | % | |||||||||
| 656 Plainsboro Rd | Plainsboro | NJ | Bank of America | 4,060 | 8/31/2013 | 100 | % | |||||||||
| 333 Mount Hope Ave | Rockaway | NJ | BASF Corporation | 95,500 | 9/30/2014 | 100 | % | |||||||||
23
| Primary | Net | |||||||||||||||
| Tenant | Rentable | Current Term | Percent | |||||||||||||
Property Location | City | State | (Guarantor) | Square Feet | Leases Expiration | Leased | ||||||||||
| 1415 Wyckoff Rd | Wall | NJ | New Jersey Natural Gas Company | 157,511 | 6/30/2021 | 100 | % | |||||||||
| 29 S. Jefferson Rd | Whippany | NJ | CAE SimuFlite, Inc. | 76,383 | 11/30/2021 | 100 | % | |||||||||
| 6226 W. Sahara Ave | Las Vegas | NV | Nevada Power Company | 282,000 | 1/31/2014 | 100 | % | |||||||||
| 180 S. Clinton St. | Rochester | NY | Frontier Corporation | 226,000 | 12/31/2014 | 100 | % | |||||||||
| 5550 Britton Pwy | Hilliard | OH | BMW Financial Services NA, LLC | 220,966 | 2/28/2021 | 100 | % | |||||||||
| 2000 Eastman Dr. | Milford | OH | Siemens Product Lifestyle Management Software, Inc. | 221,215 | 4/30/2011 | 100 | % | |||||||||
| 500 Olde Worthington Rd | Westerville | OH | InVentiv Communications, Inc. | 97,000 | 9/30/2015 | 100 | % | |||||||||
| 4848 129th E. Ave | Tulsa | OK | Metris Direct, Inc. (Metris Companies, Inc.) | 101,100 | 1/31/2010 | 100 | % | |||||||||
| 180 Rittenhouse Circle | Bristol | PA | Jones Apparel Group, Inc. | 96,000 | 7/31/2013 | 100 | % | |||||||||
| 250 Rittenhouse Circle | Bristol | PA | Jones Apparel Group, Inc. | 255,019 | 3/25/2008 | 100 | % | |||||||||
| 275 Technology Dr. | Canonsburg | PA | ANSYS, Inc. | 107,872 | 12/31/2014 | 100 | % | |||||||||
| 2550 Interstate Dr. | Harrisburg | PA | New Cingular Wireless PCS, LLC | 81,859 | 12/13/2013 | 100 | % | |||||||||
| 1701 Market St. | Philadelphia | PA | Morgan, Lewis & Bockius, LLC | 307,775 | 1/31/2014 | 100 | % | |||||||||
| 1460 Tobias Gadsen Blvd. | Charleston | SC | Hagemeyer North America, Inc. | 50,076 | 7/8/2020 | 100 | % | |||||||||
| 2210 Enterprise Dr. | Florence | SC | Washington Mutual Home Loans, Inc. | 177,747 | 6/30/2013 | 100 | % | |||||||||
| 3476 Stateview Blvd. | Fort Mill | SC | Wells Fargo Home Mortgage, Inc. | 169,083 | 1/30/2013 | 100 | % | |||||||||
| 2480 Stateview Blvd. | Fort Mill | SC | Wells Fargo Bank, N.A. | 169,218 | 5/31/2014 | 100 | % | |||||||||
| Nijborg 15 | 3927 DA Renswoude | The Netherlands | AS Watson (Health & Beauty Continental Europe) | 17,610 | 12/20/2011 | 100 | % | |||||||||
| Nijborg 17 | 3927 DA Renswoude | The Netherlands | AS Watson (Health & Beauty Continental Europe) | 114,195 | 6/14/2018 | 100 | % | |||||||||
| 207 Mockingbird Lane | Johnson City | TN | Sun Trust Bank | 63,800 | 11/30/2011 | 100 | % | |||||||||
| 1409 Centerpoint Blvd. | Knoxville | TN | Alstom Power, Inc. | 84,404 | 10/31/2014 | 100 | % | |||||||||
| 104 & 110 S. Front St. | Memphis | TN | Hnedak Bobo Group, Inc. | 37,229 | 10/31/2016 | 100 | % | |||||||||
| 3965 Airways Blvd. | Memphis | TN | Federal Express Corporation | 521,286 | 6/19/2019 | 100 | % | |||||||||
| 800 Ridgelake Blvd. | Memphis | TN | The Kroger Company | 75,000 | 7/1/2013 | 100 | % | |||||||||
| 601 & 701 Experian Pwy | Allen | TX | Experian Information Solutions, Inc. (TRW, Inc.) | 292,700 | 10/15/2010 | 100 | % | |||||||||
| 1401 & 1501 Nolan Ryan Pwy | Arlington | TX | Siemens Dematic Postal Automation, LP | 236,547 | 1/31/2014 | 100 | % | |||||||||
| 3535 Calder Ave | Beaumont | TX | Texas State Bank | 49,689 | 12/31/2012 | 100 | % | |||||||||
| 350 Pine St. | Beaumont | TX | Multi-tenanted | 425,198 | Various | 58 | % | |||||||||
| 1900 L. Don Dodson Dr. | Bedford | TX | Transamerica Life Insurance Company | 202,493 | 4/30/2019 | 29 | % | |||||||||
| 4201 Marsh Lane | Carrollton | TX | Carlson Restaurants Worldwide, Inc. (Carlson Companies, Inc.) | 130,000 | 11/30/2018 | 100 | % | |||||||||
| 4001 International Pwy | Carrollton | TX | Motel 6 Operating, LP (Accor S.A.) | 138,443 | 7/31/2015 | 100 | % | |||||||||
| 555 Dividend Dr. | Coppell | TX | Brinks, Inc. | 101,844 | 4/30/2017 | 100 | % | |||||||||
| 1600 Viceroy Dr. | Dallas | TX | TFC Services, Inc. (Freeman Decorating Company) | 249,452 | 1/31/2019 | 63 | % | |||||||||
| 6301 Gaston Ave | Dallas | TX | Multi-tenanted | 173,855 | Various | 62 | % | |||||||||
| 11511 Luna Rd | Farmers Branch | TX | Haggar Clothing Company (Texas Holding Clothing Corp. & Haggar Corp.) | 180,507 | 4/30/2016 | 100 | % | |||||||||
24
| Primary | Net | |||||||||||||||
| Tenant | Rentable | Current Term | Percent | |||||||||||||
Property Location | City | State | (Guarantor) | Square Feet | Leases Expiration | Leased | ||||||||||
| 1200 Jupiter Rd | Garland | TX | Raytheon Company | 278,759 | 5/31/2011 | 100 | % | |||||||||
| 10001 Richmond Ave | Houston | TX | Baker Hughes, Inc. | 554,385 | 9/27/2015 | 100 | % | |||||||||
| 15375 Memorial Dr. | Houston | TX | BP America Production Company | 327,325 | 9/15/2009 | 100 | % | |||||||||
| 810 & 820 Gears Rd | Houston | TX | IKON Office Solutions, Inc. | 157,790 | 1/31/2013 | 100 | % | |||||||||
| 2529 W. Thorn Dr. | Houston | TX | Baker Hughes, Inc. | 65,500 | 9/27/2015 | 100 | % | |||||||||
| 16676 Northchase Dr. | Houston | TX | Anadarko Petroleum Corporation | 101,111 | 7/31/2014 | 100 | % | |||||||||
| 1311 BRd.field Blvd. | Houston | TX | Transocean Offshore Deepwater Drilling, Inc. (Transocean Sedco Forex, Inc.) | 155,991 | 3/31/2011 | 100 | % | |||||||||
| 6555 Sierra Dr. | Irving | TX | TXU Energy Retail Company, LLC (Texas Competitive Electric Holdings Company, LLC) | 247,254 | 3/31/2023 | 100 | % | |||||||||
| 8900 Freeport Pwy | Irving | TX | Nissan Motor Acceptance Corporation (Nissan North America, Inc.) | 268,445 | 3/31/2013 | 100 | % | |||||||||
| 6200 Northwest Pwy | San Antonio | TX | PacifiCare Health Systems, Inc. | 142,500 | 11/30/2010 | 100 | % | |||||||||
| 12645 W. Airport Rd | Sugar Land | TX | Baker Hughes, Inc. | 165,836 | 9/27/2015 | 100 | % | |||||||||
| 11555 University Blvd. | Sugar Land | TX | KS Management Services, LLP (St. Luke’s Episcopal Health System Corporation) | 72,683 | 11/30/2020 | 100 | % | |||||||||
| 2050 Roanoke Rd | Westlake | TX | DaimlerChrysler Financial Services Americas, LLC | 130,290 | 12/31/2011 | 100 | % | |||||||||
| 100 E. Shore Dr. | Glen Allen | VA | Multi-tenanted | 67,508 | Various | 94 | % | |||||||||
| 120 E. Shore Dr. | Glen Allen | VA | Capital One Services, Inc. | 77,045 | 3/31/2010 | 100 | % | |||||||||
| 130 E. Shore Dr. | Glen Allen | VA | Capital One Services, Inc. | 79,675 | 2/10/2010 | 100 | % | |||||||||
| 400 Butler Farm Rd | Hampton | VA | Nextel Communications of the Mid-Atlantic, Inc. (Nextel Finance Company) | 100,632 | 12/31/2009 | 100 | % | |||||||||
| 421 Butler Farm Rd | Hampton | VA | Nextel Communications of the Mid-Atlantic, Inc. (Nextel Finance Company) | 56,515 | 1/14/2010 | 100 | % | |||||||||
| 13651 McLearen Rd | Herndon | VA | Boeing Service Company (The Boeing Company) | 159,664 | 5/30/2008 | 100 | % | |||||||||
| 13775 McLearen Rd | Herndon | VA | Equant, Inc. (Equant N.V.) | 125,293 | 4/30/2015 | 100 | % | |||||||||
| 2800 Waterford Lake Dr. | Richmond | VA | Alstom Power, Inc. | 99,057 | 10/31/2014 | 100 | % | |||||||||
| 9950 Mayland Dr. | Richmond | VA | Circuit City Stores, Inc. | 288,000 | 2/28/2010 | 100 | % | |||||||||
| 5150 220th Ave | Issaquah | WA | OSI Systems, Inc. (Instrumentarium Corporation) | 106,944 | 12/14/2014 | 100 | % | |||||||||
| 22011 S.E. 51st St. | Issaquah | WA | OSI Systems, Inc. (Instrumentarium Corporation) | 95,600 | 12/14/2014 | 100 | % | |||||||||
| 848 Main St. & 849 Front St. | Evanston | WY | Multi-tenanted | 29,500 | Various | 74 | % | |||||||||
| 295 Chipeta Way | Salt Lake City | UT | Northwest Pipeline Corporation | 295,000 | 9/30/2009 | 100 | % | |||||||||
| Office Total | 20,846,729 | |||||||||||||||
| Property Location | City | State | Primary Tenant (Guarantor) | Net Rentable Square Feet | Current Lease Term Expiration | Percent Leased | |||||||||
| 12209 W. Markham St. | Little Rock | AR | Entergy Arkansas, Inc. | 36,311 | 10/31/2010 | 100 | % | ||||||||
| 13430 N. Black Canyon Fwy | Phoenix | AZ | Bull HN Information Systems, Inc. | 138,430 | 10/31/2015 | 82 | % | ||||||||
| 2211 S. 47th St. | Phoenix | AZ | Avnet, Inc. | 176,402 | 11/14/2012 | 100 | % | ||||||||
| 2005 E. Technology Circle | Tempe | AZ | (i) Structure, LLC (Infocrossing, Inc.) | 60,000 | 12/31/2025 | 100 | % | ||||||||
| 275 S. Valencia Ave | Brea | CA | Bank of America NT & SA | 637,503 | 6/30/2012 | 100 | % | ||||||||
| 1770 Cartwright Rd | Irvine | CA | Multi-tenanted | 149,194 | Various | 74 | % | ||||||||
| 26210 & 26220 Enterprise Court | Lake Forest | CA | Apria Healthcare, Inc. (Apria Healthcare Group, Inc.) | 100,012 | 1/31/2012 | 100 | % | ||||||||
| 1500 Hughes Way | Long Beach | CA | Multi-tenanted | 490,054 | Various | 67 | % | ||||||||
| 2706 Media Center Dr. | Los Angeles | CA | Playboy Enterprises, Inc. | 83,252 | 11/7/2012 | 100 | % | ||||||||
| 3333 Coyote Hill Road | Palo Alto | CA | Xerox Corporation | 202,000 | 12/13/2013 | 100 | % | ||||||||
| 5724 W. Las Positas Blvd. | Pleasanton | CA | NK Leasehold | 40,914 | 11/30/2009 | 100 | % | ||||||||
| 255 California St. | San Francisco | CA | Multi-tenanted | 169,927 | Various | 93 | % | ||||||||
| 9201 E. Dry Creek Rd | Centennial | CO | The Shaw Group, Inc. | 128,500 | 9/30/2017 | 100 | % | ||||||||
| 1110 Bayfield Dr. | Colorado Springs | CO | Honeywell International, Inc. | 166,575 | 11/30/2013 | 100 | % | ||||||||
| 5550 Tech Center Dr. | Colorado Springs | CO | Federal Express Corporation | 61,690 | 4/30/2009 | 100 | % | ||||||||
| 3940 S. Teller St. | Lakewood | CO | Travelers Express Company, Inc. | 68,165 | 3/31/2012 | 100 | % | ||||||||
| 1315 W. Century Dr. | Louisville | CO | Global Healthcare Exchange | 106,877 | 4/30/2017 | 100 | % | ||||||||
| 10 John St. | Clinton | CT | Vacant | 41,188 | None | 0 | % | ||||||||
| 200 Executive Blvd. S. | Southington | CT | Hartford Fire Insurance Company | 153,364 | 12/31/2012 | 100 | % | ||||||||
| 100 Barnes Rd | Wallingford | CT | 3M Company | 44,400 | 12/31/2010 | 100 | % | ||||||||
| 5600 Broken Sound Blvd. | Boca Raton | FL | Océ Printing Systems USA, Inc. (Océ -USA Holding, Inc.) | 136,789 | 2/14/2020 | 100 | % | ||||||||
| 12600 Gateway Blvd. | Fort Meyers | FL | Gartner, Inc. | 62,400 | 1/31/2013 | 100 | % | ||||||||
| 550 Business Center Dr. | Lake Mary | FL | JPMorgan Chase Bank, NA | 125,920 | 9/30/2015 | 100 | % | ||||||||
| 600 Business Center Dr. | Lake Mary | FL | JPMorgan Chase Bank, NA | 125,155 | 9/30/2015 | 100 | % | ||||||||
21
LEXINGTON CONSOLIDATED PORTFOLIO
PROPERTY CHART
INDUSTRIAL
OFFICE
| Net | ||||||||||||||||
| Primary Tenant | Rentable | Current Term | Percent | |||||||||||||
Property Location | City | State | (Guarantor) | Square Feet | Lease Expiration | Leased | ||||||||||
| Moody Commuter & Tech Park | Moody | AL | CEVA Logistics U.S., Inc. (TNT Holdings B.V.) | 595,346 | 1/2/2014 | 100 | % | |||||||||
| 1665 Hughes Way | Long Beach | CA | Raytheon Company | 200,541 | 12/31/2008 | 100 | % | |||||||||
| 3333 Coyote Hill Road | Palo Alto | CA | Xerox Corporation | 202,000 | 12/13/2013 | 100 | % | |||||||||
| 2455 Premier Drive | Orlando | FL | Walgreen Company | 205,016 | 3/31/2011 | 100 | % | |||||||||
| 3102 Queen Palm Drive | Tampa | FL | Time Customer Service, Inc. (Time, Inc.) | 229,605 | 6/30/2020 | 100 | % | |||||||||
| 1420 Greenwood Road | McDonough | GA | Atlas Cold Storage America, LLC | 296,972 | 10/31/2017 | 100 | % | |||||||||
| 7500 Chavenelle Road | Dubuque | IA | The McGraw-Hill Companies, Inc. | 330,988 | 6/30/2017 | 100 | % | |||||||||
| 3600 Southgate Drive | Danville | IL | Sygma Network, Inc. (Sysco Corporation) | 149,500 | 10/31/2015 | 100 | % | |||||||||
| 749 Southrock Drive | Rockford | IL | Jacobson Warehouse Company, Inc. (Jacobson Transportation Company, Inc.) | 150,000 | 12/31/2015 | 100 | % | |||||||||
| 3686 S. Central Avenue | Rockford | IL | Jacobson Warehouse Company, Inc. (Jacobson Transportation Company, Inc.) | 90,000 | 12/31/2014 | 100 | % | |||||||||
| 10000 Business Boulevard | Dry Ridge | KY | Dana Corporation | 336,350 | 6/30/2025 | 100 | % | |||||||||
| 730 N. Black Branch Road | Elizabethtown | KY | Dana Corporation | 167,770 | 6/30/2025 | 100 | % | |||||||||
| 750 N. Black Branch Road | Elizabethtown | KY | Dana Corporation | 539,592 | 6/30/2025 | 100 | % | |||||||||
| 301 Bill Bryan Road | Hopkinsville | KY | Dana Corporation | 424,904 | 6/30/2025 | 100 | % | |||||||||
| 4010 Airpark Drive | Owensboro | KY | Dana Corporation | 211,598 | 6/30/2025 | 100 | % | |||||||||
| 1901 Ragu Drive | Owensboro | KY | Unilever Supply Chain, Inc. (Unilever United States, Inc.) | 443,380 | 12/19/2020 | 100 | % | |||||||||
| 7150 Exchequer Drive | Baton Rouge | LA | Corporate Express Office Products, Inc. (Buhrmann NV) | 79,086 | 10/31/2013 | 100 | % | |||||||||
| 5001 Greenwood Road | Shreveport | LA | Libbey Glass, Inc. | 646,000 | 10/30/2026 | 100 | % | |||||||||
| N. Wells Road | North Berwick | ME | United Technologies Corporation | 820,868 | 12/31/2010 | 100 | % | |||||||||
| 4425 Purks Road | Auburn Hills | MI | Vacant | 183,717 | None | 0 | % | |||||||||
| 6938 Elm Valley Drive | Kalamazoo | MI | Dana Corporation | 150,945 | 10/25/2021 | 100 | % | |||||||||
| 904 Industrial Road | Marshall | MI | Tenneco Automotive Operating Company, Inc. (Tenneco, Inc.) | 195,640 | 8/17/2010 | 100 | % | |||||||||
| 1601 Pratt Avenue | Marshall | MI | Joseph Campbell Company | 53,600 | 9/30/2011 | 100 | % | |||||||||
| 43955 Plymouth Oaks Boulevard | Plymouth | MI | Tower Automotive Operations USA I, LLC (Tower (Tower Automotive Holdings I, LLC) | 290,133 | 10/31/2012 | 100 | % | |||||||||
| 46600 Port Street | Plymouth | MI | Vacant | 134,160 | None | 0 | % | |||||||||
| 7111 Crabb Road | Temperance | MI | CEVA Logistics U.S., Inc. (TNT Holdings B.V.) | 752,000 | 8/4/2012 | 100 | % | |||||||||
| 7670 Hacks Cross Road | Olive Branch | MS | MAHLE Clevite, Inc. (MAHLE Industries, Inc,) | 268,104 | 2/28/2016 | 100 | % | |||||||||
| 1133 Poplar Creek Road | Henderson | NC | Corporate Express Office Products, Inc. (Buhrmann NV) | 196,946 | 1/31/2014 | 100 | % | |||||||||
| 250 Swathmore Avenue | High Point | NC | Steelcase, Inc. | 244,851 | 9/30/2017 | 100 | % | |||||||||
| 2880 Kenny Biggs Road | Lumberton | NC | Quickie Manufacturing Corporation | 423,280 | 11/30/2021 | 100 | % | |||||||||
| 2203 Sherrill Drive | Statesville | NC | LA-Z-Boy Greensboro, Inc. (LA-Z-Boy, Inc.) | 639,600 | 4/30/2010 | 100 | % | |||||||||
| 121 Technology Drive | Durham | NH | Heidelberg Web Systems, Inc. | 500,500 | 3/30/2021 | 100 | % | |||||||||
| 1109 Commerce Boulevard | Swedesboro | NJ | Linens’n Things, Inc. | 262,644 | 12/31/2008 | 100 | % | |||||||||
26
| Net | ||||||||||||||||
| Primary Tenant | Rentable | Current Term | Percent | |||||||||||||
Property Location | City | State | (Guarantor) | Square Feet | Lease Expiration | Leased | ||||||||||
| 75 North Street | Saugerties | NY | Rotron, Inc. (EG&G) | 52,000 | 12/31/2009 | 100 | % | |||||||||
| 10590 Hamilton Avenue | Cincinnati | OH | The Hillman Group, Inc. | 247,088 | 8/31/2016 | 100 | % | |||||||||
| 1650 & 1654 Williams Road | Columbus | OH | ODW Logistics, Inc. | 772,450 | 6/30/2018 | 100 | % | |||||||||
| 191 Arrowhead Drive | Hebron | OH | Owens Corning Insulating Systems, LLC | 250,450 | 4/13/2008 | 41 | % | |||||||||
| 200 Arrowhead Drive | Hebron | OH | Owens Corning Insulating Systems, LLC | 401,260 | 5/31/2009 | 100 | % | |||||||||
| 7005 Cochran Road | Glenwillow | OH | Royal Appliance Manufacturing Company | 458,000 | 7/31/2015 | 100 | % | |||||||||
| 10345 Philipp Parkway | Streetsboro | OH | L’Oreal USA, Inc. | 649,250 | 10/17/2019 | 100 | % | |||||||||
| 245 Salem Church Road | Mechanicsburg | PA | Exel Logistics, Inc. (NFC plc) | 252,000 | 12/31/2012 | 100 | % | |||||||||
| 6 Doughten Road | New Kingston | PA | Carolina Logistics Services | 330,000 | Month to month | 51 | % | |||||||||
| 34 East Main Street | New Kingston | PA | Quaker Sales and Distribution, Inc. | 179,200 | 2/29/2008 | 100 | % | |||||||||
| 159 Farley Drive | Dillon | SC | Harbor Freight Tools USA, Inc. (Central Purchasing, Inc.) | 1,010,859 | 12/31/2021 | 100 | % | |||||||||
| 50 Tyger River Drive | Duncan | SC | Plastic Omnium Exteriors, LLC | 218,382 | 5/31/2017 | 100 | % | |||||||||
| 101 Michelin Drive | Laurens | SC | CEVA Logistics U.S., Inc. (TNT Holdings B.V.) | 1,164,000 | 8/4/2012 | 100 | % | |||||||||
| 6050 Dana Way | Antioch | TN | W.M. Wright Company | 677,400 | 3/31/2021 | 50 | % | |||||||||
| 477 Distribution Parkway | Collierville | TN | Federal Express Corporation | 120,000 | 5/31/2021 | 100 | % | |||||||||
| 900 Industrial Boulevard | Crossville | TN | Dana Corporation | 222,200 | 9/30/2016 | 100 | % | |||||||||
| 120 S.E. Parkway Drive | Franklin | TN | Essex Group, Inc. (United Technologies Corporation) | 289,330 | 12/31/2013 | 100 | % | |||||||||
| 187 Spicer Drive | Gordonsville | TN | Dana Corporation | 148,000 | 8/31/2012 | 100 | % | |||||||||
| 3350 Miac Cove Road | Memphis | TN | Mimeo.com, Inc. | 141,359 | 9/30/2020 | 84 | % | |||||||||
| 3456 Meyers Avenue | Memphis | TN | Sears, Roebuck & Company | 780,000 | 2/28/2017 | 100 | % | |||||||||
| 3820 Micro Drive | Millington | TN | Ingram Micro, LP (Ingram Micro, Inc.) | 701,819 | 9/25/2011 | 100 | % | |||||||||
| 9110 Grogans Mill Road | Houston | TX | Baker Hughes, Inc. | 275,750 | 9/27/2015 | 100 | % | |||||||||
| 19500 Bulverde Road | San Antonio | TX | Harcourt Brace & Company (Reed Elsevier, Inc.) | 559,258 | 3/31/2016 | 100 | % | |||||||||
| 2425 Highway 77 N | Waxahachie | TX | James Hardie Building Products, Inc. (James Hardie N.V.) | 425,816 | 3/31/2020 | 100 | % | |||||||||
| 291 Park Center Drive | Winchester | VA | Kraft Foods North America, Inc. | 344,700 | 5/31/2011 | 100 | % | |||||||||
| Industrial Total | 21,086,207 | |||||||||||||||
27
| Property Location | City | State | Primary Tenant (Guarantor) | Net Rentable Square Feet | Current Lease Term Expiration | Percent Leased | |||||||||
| 6277 Sea Harbor Dr. | Orlando | FL | Harcourt Brace Jovanovich, Inc. | 355,840 | 3/31/2009 | 100 | % | ||||||||
| 9200 S. Park Center Loop | Orlando | FL | Corinthian Colleges, Inc. | 59,927 | 9/30/2013 | 100 | % | ||||||||
| Sandlake Rd./Kirkman Rd | Orlando | FL | Lockheed Martin Corporation | 184,000 | 4/30/2013 | 100 | % | ||||||||
| 4200 RCA Blvd. | Palm Beach Gardens | FL | The Wackenhut Corporation | 114,518 | 2/28/2011 | 100 | % | ||||||||
| 6303 Barfield Rd | Atlanta | GA | International Business Machines Corporation (Internet Security Systems, Inc.) | 238,600 | 5/31/2013 | 100 | % | ||||||||
| 859 Mount Vernon Hwy | Atlanta | GA | International Business Machines Corporation (Internet Security Systems, Inc.) | 50,400 | 5/31/2013 | 100 | % | ||||||||
| 160 Clairemont Ave | Decatur | GA | Multi-tenanted | 121,686 | Various | 47 | % | ||||||||
| 4000 Johns Creek Pkwy | Suwanee | GA | Kraft Foods N.A., Inc. | 87,219 | 1/31/2012 | 100 | % | ||||||||
| King St. | Honolulu | HI | Multi-tenanted | 239,291 | Various | 87 | % | ||||||||
| 1275 N.W. 128th St. | Clive | IA | Principal Life Insurance Company | 61,180 | 1/31/2012 | 100 | % | ||||||||
| 101 E. Erie St. | Chicago | IL | Draftfcb, Inc. (Interpublic Group of Companies, Inc.) | 230,684 | 3/15/2014 | 100 | % | ||||||||
| 850 & 950 Warrenville Rd | Lisle | IL | National Louis University | 99,329 | 12/31/2019 | 100 | % | ||||||||
| 500 Jackson St. | Columbus | IN | Cummins, Inc. | 390,100 | 7/31/2019 | 100 | % | ||||||||
| 10300 Kincaid Dr. | Fishers | IN | JP Morgan Chase Bank, N.A. | 193,000 | 10/31/2009 | 100 | % | ||||||||
| 10475 Crosspoint Blvd. | Fishers | IN | John Wiley & Sons, Inc. | 141,047 | 10/31/2019 | 100 | % | ||||||||
| 5757 Decatur Blvd. | Indianapolis | IN | Allstate Insurance Company | 89,956 | 8/31/2012 | 100 | % | ||||||||
| 11201 Renner Blvd. | Lenexa | KS | Applebee’s Services, Inc. (DineEquity, Inc.) | 178,000 | 7/31/2023 | 100 | % | ||||||||
| 5200 Metcalf Ave | Overland Park | KS | Swiss Re American Holding Corporation | 320,198 | 12/22/2018 | 100 | % | ||||||||
| 2300 Litton Lane | Hebron | KY | Zwicker & Associates, P.C. | 83,441 | 8/31/2012 | 100 | % | ||||||||
| 4455 American Way | Baton Rouge | LA | Bell South Mobility, Inc. | 70,100 | 10/31/2012 | 100 | % | ||||||||
| 147 Milk St. | Boston | MA | Harvard Vanguard Medical Association | 52,337 | 12/31/2022 | 100 | % | ||||||||
| 33 Commercial St. | Foxboro | MA | Invensys Systems, Inc. (Siebe, Inc.) | 164,689 | 7/1/2015 | 100 | % | ||||||||
| 100 Light St. | Baltimore | MD | Multi-tenanted | 523,240 | Various | 98 | % | ||||||||
| 37101 Corporate Dr. | Farmington Hills | MI | TEMIC Automotive of North America, Inc. | 119,829 | 12/31/2016 | 100 | % | ||||||||
| 26555 Northwestern Hwy | Southfield | MI | Federal-Mogul Corporation | 187,163 | 1/31/2015 | 100 | % | ||||||||
| 3165 McKelvey Rd | Bridgeton | MO | BJC Health System | 52,994 | 3/31/2013 | 100 | % | ||||||||
| 9201 Stateline Rd | Kansas City | MO | Swiss Re American Holding Corporation | 155,925 | 4/1/2019 | 100 | % | ||||||||
| 200 Lucent Lane | Cary | NC | Alcatel-Lucent USA, Inc. | 124,944 | 9/30/2011 | 100 | % | ||||||||
| 11707 Miracle Hills Dr. | Omaha | NE | Infocrossing, LLC (Infocrossing, Inc.) | 85,200 | 11/30/2025 | 100 | % | ||||||||
| 700 US Hwy. Route 202-206 | Bridgewater | NJ | Biovail Pharmaceuticals, Inc. (Biovail Corporation) | 115,558 | 10/31/2014 | 100 | % | ||||||||
| 389 & 399 Interpace Hwy | Parsippany | NJ | Sanofi-aventis U.S., Inc. (Aventis, Inc. & Aventis Pharma Holding GmbH) | 340,240 | 1/31/2010 | 100 | % | ||||||||
| 333 Mount Hope Ave | Rockaway | NJ | BASF Corporation | 95,500 | 9/30/2014 | 100 | % | ||||||||
| 1415 Wyckoff Rd | Wall | NJ | New Jersey Natural Gas Company | 157,511 | 6/30/2021 | 100 | % | ||||||||
| 29 S. Jefferson Rd | Whippany | NJ | CAE SimuFlite, Inc. | 123,734 | 11/30/2021 | 100 | % | ||||||||
22
LEXINGTON CONSOLIDATED PORTFOLIO
PROPERTY CHART
RETAIL/OTHER
OFFICE
| Net | ||||||||||||||||
| Primary Tenant | Rentable | Current Term | Percent | |||||||||||||
Property Location | City | State | (Guarantor) | Square Feet | Lease Expiration | Leased | ||||||||||
| 302 Coxcreek Parkway | Florence | AL | The Kroger Company | 42,130 | 7/1/2013 | 100 | % | |||||||||
| 5544 Atlanta Highway | Montgomery | AL | Vacant | 60,698 | None | 0 | % | |||||||||
| Bisbee Naco Highway & Highway 92 | Bisbee | AZ | Safeway Stores, Inc. | 30,181 | 3/31/2009 | 100 | % | |||||||||
| 10415 Grande Avenue | Sun City | AZ | Cafeteria Operators, LP (Furrs Restaurant Group, Inc.) | 10,000 | 4/30/2012 | 100 | % | |||||||||
| Grant Road & Craycroft Road | Tucson | AZ | Safeway Stores, Inc. | 37,268 | 3/31/2009 | 100 | % | |||||||||
| Old Mamoth Road & Meridian Boulevard | Mammoth Lakes | CA | Safeway Stores, Inc. | 44,425 | 5/31/2012 | 100 | % | |||||||||
| 255 Northgate Drive | Manteca | CA | Kmart Corporation | 107,489 | 12/31/2018 | 100 | % | |||||||||
| 12080 Carmel Mountain Road | San Diego | CA | Kmart Corporation | 107,210 | 12/31/2018 | 100 | % | |||||||||
| 12000 East Mississippi Ave | Aurora | CO | Safeway Stores, Inc. | 24,000 | 5/31/2012 | 100 | % | |||||||||
| Kipling Street & Bowles Avenue | Littleton | CO | Vacant | 29,360 | None | 0 | % | |||||||||
| 10340 U.S. 19 | Port Richey | FL | Kingswere Furniture | 53,820 | 11/30/2017 | 100 | % | |||||||||
| 2010 Apalachee Parkway | Tallahassee | FL | Kohl’s Department Stores, Inc. | 102,381 | 1/31/2028 | 100 | % | |||||||||
| 2223 N. Druid Hills Road | Atlanta | GA | Bank South, N.A. (Bank of America Corporation) | 6,260 | 12/31/2009 | 100 | % | |||||||||
| 956 Ponce de Leon Avenue | Atlanta | GA | Bank South, N.A. (Bank of America Corporation) | 3,900 | 12/31/2009 | 100 | % | |||||||||
| 4545 Chamblee-Dunwoody Road | Chamblee | GA | Bank South, N.A. (Bank of America Corporation) | 4,565 | 12/31/2009 | 100 | % | |||||||||
| 201 W. Main Street | Cumming | GA | Bank South, N.A. (Bank of America Corporation) | 14,208 | 12/31/2009 | 100 | % | |||||||||
| 3468 Georgia Highway 120 | Duluth | GA | Bank South, N.A. (Bank of America Corporation) | 9,300 | 12/31/2009 | 100 | % | |||||||||
| 1066 Main Street | Forest Park | GA | Bank South, N.A. (Bank of America Corporation) | 14,859 | 12/31/2009 | 100 | % | |||||||||
| 825 Southway Drive Boulevard | Jonesboro | GA | Bank South, N.A. (Bank of America Corporation) | 4,894 | 12/31/2009 | 100 | % | |||||||||
| 1698 Mountain Industrial | Stone Mountain | GA | Bank South, N.A. (Bank of America Corporation) | 5,704 | 12/31/2009 | 100 | % | |||||||||
| Fort Street Mall, King Street | Honolulu | HI | Macy’s Department Stores, Inc. | 85,610 | 9/30/2009 | 100 | % | |||||||||
| 1150 W. Carl Sandburg Drive | Galesburg | IL | Kmart Corporation | 94,970 | 12/31/2018 | 100 | % | |||||||||
| 928 First Avenue | Rock Falls | IL | Rock Falls Country Market, LLC (Rock Island Country Market, LLC) | 27,650 | 9/30/2011 | 100 | % | |||||||||
| 502 E. Carmel Drive | Carmel | IN | Marsh Supermarkets, Inc. | 38,567 | 10/31/2013 | 100 | % | |||||||||
| 5104 N. Franklin Road | Lawrence | IN | Marsh Supermarkets, Inc. | 28,721 | 10/31/2013 | 100 | % | |||||||||
| 205 Homer Road | Minden | LA | Safeway Stores, Inc. | 35,000 | 11/30/2012 | 100 | % | |||||||||
| 7200 Cradle Rock Way | Columbia | MD | GFS Realty, Inc. | 57,209 | 12/31/2008 | 100 | % | |||||||||
| 9580 Livingston Road | Oxon Hill | MD | GFS Realty, Inc. (Giant Food, Inc.) | 107,337 | 2/28/2014 | 100 | % | |||||||||
| 2401 Wooton Parkway | Rockville | MD | GFS Realty, Inc. (Giant Food, Inc.) | 51,682 | 4/30/2017 | 100 | % | |||||||||
| 24th Street W. & St. John’s Avenue | Billings | MT | Safeway Stores, Inc. | 40,800 | 5/31/2010 | 100 | % | |||||||||
| 35400 Cowan Road | Westland | MI | Sam’s Real Estate Business Trust | 101,402 | 1/31/2009 | 100 | % | |||||||||
| Little Rock Road & | ||||||||||||||||
| Tuckaseegee Road | Charlotte | NC | Food Lion, Inc. | 33,640 | 10/31/2013 | 100 | % | |||||||||
| Brown Mill Road & US 601 | Concord | NC | Food Lion, Inc. | 32,259 | 10/31/2013 | 100 | % | |||||||||
28
| Net | ||||||||||||||||
| Primary Tenant | Rentable | Current Term | Percent | |||||||||||||
Property Location | City | State | (Guarantor) | Square Feet | Lease Expiration | Leased | ||||||||||
| 104 Branchwood Shopping Center | Jacksonville | NC | Food Lion, Inc. | 23,000 | 2/28/2013 | 100 | % | |||||||||
| US 221 & Hospital Road | Jefferson | NC | Food Lion, Inc. | 23,000 | 2/28/2013 | 100 | % | |||||||||
| 291 Talbert Boulevard | Lexington | NC | Food Lion, Inc. | 23,000 | 2/28/2013 | 100 | % | |||||||||
| 835 Julian Avenue | Thomasville | NC | Food Lion, Inc. | 21,000 | 10/31/2008 | 100 | % | |||||||||
| 10 South Avenue | Garwood | NJ | Pathmark Stores, Inc. | 52,000 | 5/31/2011 | 100 | % | |||||||||
| 900 S. Canal Street | Carlsbad | NM | Cafeteria Operators, LP (Furrs Restaurant Group, Inc.) | 10,000 | 4/30/2012 | 100 | % | |||||||||
| 130 Midland Avenue | Portchester | NY | Pathmark Stores, Inc. | 59,000 | 10/31/2013 | 100 | % | |||||||||
| 21082 Pioneer Plaza Drive | Watertown | NY | Kmart Corporation | 120,727 | 12/31/2018 | 100 | % | |||||||||
| 4733 Hills and Dales Road | Canton | OH | Bally’s Total Fitness of the Midwest (Bally’s Health & Tennis Corporation) | 37,214 | 12/31/2009 | 100 | % | |||||||||
| 4831 Whipple Avenue N.W | Canton | OH | Best Buy Company, Inc. | 46,350 | 2/26/2018 | 100 | % | |||||||||
| 1084 E. Second Street | Franklin | OH | Marsh Supermarkets, Inc. | 29,119 | 10/31/2013 | 100 | % | |||||||||
| 5350 Leavitt Road | Lorain | OH | Kmart Corporation | 193,193 | 12/31/2018 | 100 | % | |||||||||
| N.E.C. 45th Street & Lee Boulevard | Lawton | OK | Safeway Stores, Inc. | 30,757 | 3/31/2009 | 100 | % | |||||||||
| 6910 S. Memorial Highway | Tulsa | OK | Toys “R” Us, Inc. | 43,123 | 5/31/2011 | 100 | % | |||||||||
| 12535 S.E. 82nd Avenue | Clackamas | OR | Toys “R” Us, Inc. | 42,842 | 5/31/2011 | 100 | % | |||||||||
| 1642 Williams Avenue | Grants Pass | OR | Safeway Stores, Inc. | 33,770 | 3/31/2009 | 100 | % | |||||||||
| 559 N. Main Street | Doylestown | PA | Citizens Bank of Pennsylvania | 3,800 | 8/31/2018 | 100 | % | |||||||||
| 25 E. Main Street | Lansdale | PA | Citizens Bank of Pennsylvania | 3,800 | 8/31/2018 | 100 | % | |||||||||
| 1055 W. Baltimore Pike | Lima | PA | Citizens Bank of Pennsylvania | 3,800 | 8/31/2018 | 100 | % | |||||||||
| 4947 N. Broad Street | Philadelphia | PA | Citizens Bank of Pennsylvania | 3,800 | 8/31/2018 | 100 | % | |||||||||
| 2001-03 Broad Street | Philadelphia | PA | Citizens Bank of Pennsylvania | 3,800 | 8/31/2018 | 100 | % | |||||||||
| 6201 N. 5th Street | Philadelphia | PA | Citizens Bank of Pennsylvania | 3,800 | 8/31/2018 | 100 | % | |||||||||
| 7323-29 Frankford Avenue | Philadelphia | PA | Citizens Bank of Pennsylvania | 3,800 | 8/31/2018 | 100 | % | |||||||||
| 15 S. 52nd Street | Philadelphia | PA | Citizens Bank of Pennsylvania | 3,800 | 8/31/2018 | 100 | % | |||||||||
| 10650 Bustleton Avenue | Philadelphia | PA | Citizens Bank of Pennsylvania | 3,800 | 8/31/2018 | 100 | % | |||||||||
| 1025 W. Lehigh Avenue | Philadelphia | PA | Citizens Bank of Pennsylvania | 3,800 | 8/31/2018 | 100 | % | |||||||||
| 2014 Cottman Avenue | Philadelphia | PA | Citizens Bank of Pennsylvania | 3,800 | 8/31/2018 | 100 | % | |||||||||
| 4160 Monument Road | Philadelphia | PA | Pathmark Stores, Inc. | 50,000 | 11/30/2010 | 100 | % | |||||||||
| 15 Newton — Richboro Road | Richboro | PA | Citizens Bank of Pennsylvania | 3,800 | 8/31/2018 | 100 | % | |||||||||
| 363 W. Lancaster Avenue | Wayne | PA | Citizens Bank of Pennsylvania | 3,800 | 8/31/2018 | 100 | % | |||||||||
| South Carolina 52/52 Bypass | Moncks Corner | SC | Food Lion, Inc. | 23,000 | 2/28/2013 | 100 | % | |||||||||
| 1000 U.S. Highway 17 | North Myrtle Beach | SC | Food Lion, Inc. | 43,021 | 10/31/2008 | 100 | % | |||||||||
| 399 Peach Wood Centre Drive | Spartanburg | SC | Best Buy Company, Inc. | 45,800 | 2/26/2018 | 100 | % | |||||||||
| 1600 E. 23rd Street | Chattanooga | TN | The Kroger Company | 42,130 | 7/1/2008 | 100 | % | |||||||||
| 1053 Mineral Springs Road | Paris | TN | The Kroger Company | 31,170 | 7/1/2013 | 100 | % | |||||||||
| 3040 Josey Lane | Carrollton | TX | Ong’s Family, Inc. | 61,000 | 1/31/2021 | 100 | % | |||||||||
| 4121 S. Port Avenue | Corpus Christi | TX | Cafeteria Operators, LP (Furr’s Restaurant Group, Inc.) | 10,000 | 4/30/2012 | 100 | % | |||||||||
| 1610 S. Westmoreland Avenue | Dallas | TX | Malone’s Food Stores | 68,024 | 3/31/2017 | 100 | % | |||||||||
| 119 N. Balboa Road | El Paso | TX | Cafeteria Operators, LP (Furrs Restaurant Group, Inc.) | 10,000 | 4/30/2012 | 100 | % | |||||||||
| 3451 Alta Mesa Boulevard | Fort Worth | TX | Safeway Stores, Inc. | 44,000 | 5/31/2012 | 100 | % | |||||||||
| 101 W. Buckingham Road | Garland | TX | Minyard Foods | 40,000 | 11/30/2012 | 100 | % | |||||||||
| 1415 Highway 377 E. | Granbury | TX | Safeway Stores, Inc. | 35,000 | 11/30/2012 | 100 | % | |||||||||
| 2500 E. Carrier Parkway | Grand Prairie | TX | Safeway Stores, Inc. | 49,349 | 3/31/2009 | 100 | % | |||||||||
| 4811 Wesley Street | Greenville | TX | Safeway Stores, Inc. | 48,427 | 5/31/2011 | 100 | % | |||||||||
29
| Net | ||||||||||||||||
| Primary Tenant | Rentable | Current Term | Percent | |||||||||||||
Property Location | City | State | (Guarantor) | Square Feet | Lease Expiration | Leased | ||||||||||
| 120 S. Waco Street | Hillsboro | TX | Safeway Stores, Inc. | 35,000 | 11/30/2012 | 100 | % | |||||||||
| 13133 Steubner Avenue | Houston | TX | The Kroger Company | 52,200 | 12/29/2011 | 100 | % | |||||||||
| 5402 4th Street | Lubbock | TX | Vacant | 53,820 | None | 0 | % | |||||||||
| 901 W. Expressway 83 | McAllen | TX | Cafeteria Operators, LP (Furrs Restaurant Group, Inc.) | 10,000 | 4/30/2012 | 100 | % | |||||||||
| 402 E. Crestwood Drive | Victoria | TX | Cafeteria Operators, LP (Furrs Restaurant Group, Inc.) | 10,000 | 4/30/2012 | 100 | % | |||||||||
| 9400 South 755 E | Sandy | UT | Vacant | 41,612 | None | 0 | % | |||||||||
| 3211 W. Beverly Street | Staunton | VA | Food Lion, Inc. | 23,000 | 2/28/2013 | 100 | % | |||||||||
| 9803 Edmonds Way | Edmonds | WA | PCC Natural Markets | 34,459 | 8/31/2028 | 100 | % | |||||||||
| 224th Street & Meridian Avenue | Graham | WA | Safeway Stores, Inc. | 44,718 | 3/31/2009 | 100 | % | |||||||||
| 18601 Alderwood Mall Boulevard | Lynnwood | WA | Toys “R” Us, Inc. | 43,105 | 5/31/2011 | 100 | % | |||||||||
| 400 E. Meridian Avenue | Milton | WA | Safeway Stores, Inc. | 44,718 | 3/31/2009 | 100 | % | |||||||||
| 1700 State Route 160 | Port Orchard | WA | Save-A-Lot, Ltd. | 27,968 | 1/31/2015 | 57 | % | |||||||||
| 228th Avenue N.E. | Redmond | WA | Safeway Stores, Inc. | 44,718 | 3/31/2009 | 100 | % | |||||||||
| 4512 N. Market Street | Spokane | WA | Safeway Stores, Inc | 38,905 | 3/31/2009 | 100 | % | |||||||||
| 3711 Gateway Drive | Eau Claire | WI | Kohl’s Deptartment Stores, Inc. | 76,164 | 1/25/2015 | 100 | % | |||||||||
| 97 Seneca Trail | Fairlea | WV | Kmart Corporation | 90,933 | 12/31/2018 | 100 | % | |||||||||
| 3621 E. Lincoln Way | Cheyenne | WY | Vacant | 31,420 | None | 0 | % | |||||||||
| Retail/Other Subtotal | 3,588,655 | |||||||||||||||
| Grand Total | 45,521,591 | |||||||||||||||
30
Property Location | City | State | Primary Tenant (Guarantor) | Net Rentable Square Feet | Current Lease Term Expiration | Percent Leased | |||||||||
| 6226 W. Sahara Ave | Las Vegas | NV | Nevada Power Company | 282,000 | 1/31/2014 | 100 | % | ||||||||
| 180 S. Clinton St. | Rochester | NY | Frontier Corporation | 226,000 | 12/31/2014 | 100 | % | ||||||||
| 5550 Britton Pkwy | Hilliard | OH | BMW Financial Services NA, LLC | 220,966 | 2/28/2021 | 100 | % | ||||||||
| 2000 Eastman Dr. | Milford | OH | Siemens Product Lifestyle Management Software, Inc. | 221,215 | 4/30/2016 | 100 | % | ||||||||
| 500 Olde Worthington Rd | Westerville | OH | InVentiv Communications, Inc. | 97,000 | 9/30/2015 | 100 | % | ||||||||
| 4848 129th E. Ave | Tulsa | OK | Metris Direct, Inc. (Metris Companies, Inc.) | 101,100 | 1/31/2010 | 100 | % | ||||||||
| 180 Rittenhouse Circle | Bristol | PA | Jones Management Service Company | 96,000 | 7/31/2018 | 100 | % | ||||||||
| 275 Technology Dr. | Canonsburg | PA | ANSYS, Inc. | 107,872 | 12/31/2014 | 100 | % | ||||||||
| 2550 Interstate Dr. | Harrisburg | PA | New Cingular Wireless PCS, LLC | 81,859 | 12/13/2013 | 100 | % | ||||||||
| 1701 Market St. | Philadelphia | PA | Morgan, Lewis & Bockius, LLC | 307,775 | 1/31/2014 | 100 | % | ||||||||
| 1460 Tobias Gadsen Blvd. | Charleston | SC | Hagemeyer North America, Inc. | 50,076 | 7/8/2020 | 100 | % | ||||||||
| 2210 Enterprise Dr. | Florence | SC | JPMorgan Chase Bank, NA | 179,300 | 6/30/2013 | 100 | % | ||||||||
| 3476 Stateview Blvd. | Fort Mill | SC | Wells Fargo Home Mortgage, Inc. | 169,083 | 1/30/2013 | 100 | % | ||||||||
| 3480 Stateview Blvd. | Fort Mill | SC | Wells Fargo Bank, N.A. | 169,218 | 5/31/2014 | 100 | % | ||||||||
| 15 Nijborg | 3927 DA Renswoude | The Netherlands | AS Watson (Health & Beauty Continental Europe, BV) | 17,610 | 12/20/2011 | 100 | % | ||||||||
| 17 Nijborg | 3927 DA Renswoude | The Netherlands | AS Watson (Health & Beauty Continental Europe, BV) | 114,195 | 6/14/2018 | 100 | % | ||||||||
| 207 Mockingbird Lane | Johnson City | TN | Sun Trust Bank | 63,800 | 11/30/2011 | 100 | % | ||||||||
| 1409 Centerpoint Blvd. | Knoxville | TN | Alstom Power, Inc. | 84,404 | 10/31/2014 | 100 | % | ||||||||
| 104 & 110 S. Front St. | Memphis | TN | Hnedak Bobo Group, Inc. | 37,229 | 10/31/2016 | 100 | % | ||||||||
| 3965 Airways Blvd. | Memphis | TN | Federal Express Corporation | 521,286 | 6/19/2019 | 100 | % | ||||||||
| 350 Pine St. | Beaumont | TX | Multi-tenanted | 425,198 | Various | 79 | % | ||||||||
| 3535 Calder Ave | Beaumont | TX | Compass Bank | 49,639 | 12/31/2014 | 100 | % | ||||||||
| 4001 International Pkwy | Carrollton | TX | Motel 6 Operating, LP (Accor S.A.) | 138,443 | 7/31/2015 | 100 | % | ||||||||
| 4201 Marsh Lane | Carrollton | TX | Carlson Restaurants Worldwide, Inc. (Carlson Companies, Inc.) | 130,000 | 11/30/2018 | 100 | % | ||||||||
| 555 Dividend Dr. | Coppell | TX | Brinks, Inc. | 101,844 | 4/30/2017 | 100 | % | ||||||||
| 1600 Viceroy Dr. | Dallas | TX | TFC Services, Inc. (Freeman Decorating Company) | 212,744 | 1/31/2019 | 74 | % | ||||||||
| 6301 Gaston Ave | Dallas | TX | Multi-tenanted | 173,855 | Various | 60 | % | ||||||||
| 11511 Luna Rd | Farmers Branch | TX | Haggar Clothing Company (Texas Holding Clothing Corporation & Haggar Corporation) | 180,507 | 4/30/2016 | 100 | % | ||||||||
| 10001 Richmond Ave | Houston | TX | Baker Hughes, Inc. | 554,385 | 9/27/2015 | 100 | % | ||||||||
| 1311 Broadfield Blvd. | Houston | TX | Transocean Offshore Deepwater Drilling, Inc. (Transocean Sedco Forex, Inc.) | 155,991 | 3/31/2011 | 100 | % | ||||||||
| 15375 Memorial Dr. | Houston | TX | BP America Production Company | 349,674 | 9/15/2009 | 100 | % | ||||||||
| Net | ||||||||||||||||
| Primary Tenant | Rentable | Current Term | Percent | |||||||||||||
Property Location | City | State | (Guarantor) | Square Feet | Lease Expiration | Leased | ||||||||||
| OFFICE | ||||||||||||||||
| 5201 W. Barraque Street | Pine Bluff | AR | Entergy Services, Inc. | 27,189 | 10/31/2010 | 100 | % | |||||||||
| Route 64 W. & Junction 333 | Russellville | AR | Entergy Gulf States | 191,950 | 5/9/2008 | 100 | % | |||||||||
| 1440 E. 15th Street | Tucson | AZ | Cox Communications, Inc. | 28,591 | 9/30/2016 | 100 | % | |||||||||
| 3500 N. Coop Court | McDonough | GA | Litton Loan Servicing, LP & Credit - Based Asset and Securitzation, LLC | 62,000 | 8/31/2018 | 100 | % | |||||||||
| 2500 Patrick Henry Parkway | McDonough | GA | Georgia Power Company | 111,911 | 6/30/2015 | 100 | % | |||||||||
| 3265 E. Goldstone Drive | Meridian | ID | Voicestream PCS II Corporation (T-Mobile USA, Inc.) | 77,484 | 6/28/2019 | 100 | % | |||||||||
| 101 E. Washington Boulevard | Fort Wayne | IN | American Electric Power | 348,452 | 10/31/2016 | 100 | % | |||||||||
| 9601 Renner Boulevard | Lenexa | KS | Voicestream PCS II Corporation (T-Mobile USA, Inc.) | 77,484 | 10/31/2019 | 100 | % | |||||||||
| First Park Drive | Oakland | ME | Omnipoint Holdings, Inc. (T-Mobile USA, Inc.) | 78,610 | 8/31/2020 | 100 | % | |||||||||
| 12000 &12025 Tech Center Drive | Livonia | MI | Kelsey-Hayes Company (TRW Automotive, Inc.) | 180,230 | 4/30/2014 | 100 | % | |||||||||
| 3943 Denny Avenue | Pascagoula | MS | Northrop Grumman Systems Corporation | 94,841 | 10/14/2008 | 100 | % | |||||||||
| 3201 Quail Springs Parkway | Oklahoma City | OK | AT& T Wireless Services, Inc. | 128,500 | 11/30/2010 | 100 | % | |||||||||
| 2999 SW 6th Street | Redmond | OR | Voice Stream PCS I LLC (T-Mobile USA, Inc.) | 77,484 | 1/31/2019 | 100 | % | |||||||||
| 265 Lehigh Street | Allentown | PA | Wachovia Bank N.A. | 71,230 | 10/31/2010 | 100 | % | |||||||||
| 17 Technology Circle | Columbia | SC | Blue Cross Blue Shield of South Carolina, Inc. | 456,304 | 9/30/2009 | 100 | % | |||||||||
| 420 Riverport Road | Kingport | TN | American Electric Power | 42,770 | 6/30/2013 | 100 | % | |||||||||
| 1600 Eberhardt Road | Temple | TX | Nextel of Texas | 108,800 | 1/31/2016 | 100 | % | |||||||||
| 26410 McDonald Road | Houston | TX | Montgomery County Management Company, LLC | 41,000 | 10/31/2019 | 100 | % | |||||||||
| 3711 San Gabriel | Mission | TX | Voice Stream PCS II Corporation (T-Mobile USA, Inc.) | 75,016 | 6/30/2015 | 100 | % | |||||||||
| 6455 State Hwy 303 N.E | Bremerton | WA | Nextel West Corporation | 60,200 | 5/14/2016 | 100 | % | |||||||||
| Office Total | 2,340,046 | |||||||||||||||
31
23
| Net | ||||||||||||||||
| Primary Tenant | Rentable | Current Term | Percent | |||||||||||||
Property Location | City | State | (Guarantor) | Square Feet | Lease Expiration | Leased | ||||||||||
| INDUSTRIAL | ||||||||||||||||
| 109 Stevens Street | Jacksonville | FL | Unisource Worldwide, Inc. | 168,800 | 9/30/2009 | 100 | % | |||||||||
| 359 Gateway Drive | Livonia | GA | TI Group Automotive Systems, LLC | 133,221 | 5/31/2020 | 100 | % | |||||||||
| 3600 Army Post Road | Des Moines | IA | EDS Information Services, LLC (Electronic Data Systems Corporation) | 405,000 | 4/30/2012 | 100 | % | |||||||||
| 2935 Van Vactor Way | Plymouth | IN | Bay Valley Foods, LLC | 300,500 | 6/30/2015 | 100 | % | |||||||||
| 1901 49th Avenue | Minneapolis | MN | Owens Corning Roofing and Asphalt, LLC | 18,620 | 6/30/2015 | 100 | % | |||||||||
| 324 Industrial Park Road | Franklin | NC | SKF USA, Inc. | 72,868 | 12/31/2014 | 100 | % | |||||||||
| 736 Addison Road | Erwin | NY | Corning, Inc. | 408,000 | 11/30/2016 | 100 | % | |||||||||
| 590 Ecology Lane | Chester | SC | Owens Corning | 420,597 | 7/14/2025 | 100 | % | |||||||||
| 2401 Cherahala Boulevard | Knoxville | TN | Advance PCS, Inc. | 59,748 | 5/31/2013 | 100 | % | |||||||||
| 2424 Alpine Road | Eau Claire | WI | Silver Spring Gardens, Inc. (Huntsinger Farms, Inc.) | 159,000 | 2/28/2027 | 100 | % | |||||||||
| Industrial Total | 2,146,354 | |||||||||||||||
32
LEXINGTON
NON-CONSOLIDATED CONSOLIDATED PORTFOLIO
PROPERTY
CHART
CHART
OFFICE
| Net | ||||||||||||||||
| Primary Tenant | Rentable | Current Term | Percent | |||||||||||||
Property Location | City | State | (Guarantor) | Square Feet | Lease Expiration | Leased | ||||||||||
| RETAIL/OTHER | ||||||||||||||||
| 101 Creger Drive | Ft. Collins | CO | Lithia Motors | 10,000 | 5/31/2012 | 100 | % | |||||||||
| 11411 N. Kelly Avenue | Oklahoma City | OK | American Golf Corporation | 13,924 | 12/31/2017 | 100 | % | |||||||||
| 25500 State Highway 249 | Tomball | TX | Parkway Chevrolet, Inc. | 77,076 | 8/31/2026 | 100 | % | |||||||||
| 1321 Commerce Street | Dallas | TX | Adolphus Associates (Met Life) | 498,122 | 6/15/2009 | 100 | % | |||||||||
| Retail/Other Total | 599,122 | |||||||||||||||
| Grand Total | 5,085,522 | |||||||||||||||
Property Location | City | State | Primary Tenant (Guarantor) | Net Rentable Square Feet | Current Lease Term Expiration | Percent Leased | |||||||||
| 16676 Northchase Dr. | Houston | TX | Anadarko Petroleum Corporation | 101,111 | 7/31/2014 | 100 | % | ||||||||
| 810 & 820 Gears Rd | Houston | TX | IKON Office Solutions, Inc. | 157,790 | 1/31/2013 | 100 | % | ||||||||
| 6555 Sierra Dr. | Irving | TX | TXU Energy Retail Company, LLC (Texas Competitive Electric Holdings Company, LLC) | 247,254 | 3/31/2023 | 100 | % | ||||||||
| 8900 Freeport Pkwy | Irving | TX | Nissan Motor Acceptance Corporation (Nissan North America, Inc.) | 268,445 | 3/31/2013 | 100 | % | ||||||||
| 6200 Northwest Pkwy | San Antonio | TX | United Healthcare Services, Inc. | 142,500 | 11/30/2010 | 100 | % | ||||||||
| 12645 W. Airport Rd | Sugar Land | TX | Baker Hughes, Inc. | 165,836 | 9/27/2015 | 100 | % | ||||||||
| 2050 Roanoke Rd | Westlake | TX | Daimler Chrysler Services North America, LLC | 130,290 | 12/31/2011 | 100 | % | ||||||||
| 295 Chipeta Way | Salt Lake City | UT | Northwest Pipeline Corporation | 295,000 | 9/15/2018 | 100 | % | ||||||||
| 100 E. Shore Dr. | Glen Allen | VA | Multi-tenanted | 67,508 | Various | 95 | % | ||||||||
| 120 E. Shore Dr. | Glen Allen | VA | Capital One Services, Inc. | 77,045 | 3/31/2010 | 100 | % | ||||||||
| 130 E. Shore Dr. | Glen Allen | VA | Capital One Services, Inc. | 79,675 | 2/10/2010 | 100 | % | ||||||||
| 400 Butler Farm Rd | Hampton | VA | Nextel Communications of the Mid-Atlantic, Inc. (Nextel Finance Company) | 100,632 | 12/31/2014 | 100 | % | ||||||||
| 421 Butler Farm Rd | Hampton | VA | Nextel Communications of the Mid-Atlantic, Inc. (Nextel Finance Company) | 56,515 | 1/14/2010 | 100 | % | ||||||||
| 13651 McLearen Rd | Herndon | VA | US Government | 159,664 | 5/30/2018 | 100 | % | ||||||||
| 13775 McLearen Rd | Herndon | VA | Equant, Inc. (Equant N.V.) | 125,293 | 4/30/2015 | 100 | % | ||||||||
| 2800 Waterford Lake Dr. | Richmond | VA | Alstom Power, Inc. | 99,057 | 10/31/2014 | 100 | % | ||||||||
| 9950 Mayland Dr. | Richmond | VA | Circuit City Stores, Inc. | 288,000 | 2/28/2010 | 100 | % | ||||||||
| 22011 S.E. 51st St. | Issaquah | WA | OSI Systems, Inc. (Instrumentarium Corporation) | 95,600 | 12/14/2014 | 100 | % | ||||||||
| 5150 220th Ave | Issaquah | WA | OSI Systems, Inc. (Instrumentarium Corporation) | 106,944 | 12/14/2014 | 100 | % | ||||||||
| Office Total | 17,496,829 | ||||||||||||||
LEXINGTON CONSOLIDATED PORTFOLIO
PROPERTY CHART
INDUSTRIAL
Property Location | City | State | Primary Tenant (Guarantor) | Net Rentable Square Feet | Current Lease Term Expiration | Percent Leased | |||||||||
| 2415 U.S. Hwy 78 E. | Moody | AL | CEVA Logistics U.S., Inc. (TNT Holdings B.V.) | 595,346 | 1/2/2014 | 100 | % | ||||||||
| 1665 Hughes Way | Long Beach | CA | Vacant | 200,541 | None | 0 | % | ||||||||
| 2455 Premier Dr. | Orlando | FL | Walgreen Company | 205,016 | 3/31/2011 | 100 | % | ||||||||
| 3102 Queen Palm Dr. | Tampa | FL | Time Customer Service, Inc. (Time, Inc.) | 229,605 | 6/30/2020 | 100 | % | ||||||||
| 1420 Greenwood Rd | McDonough | GA | Versacold USA, Inc. | 296,972 | 10/31/2017 | 100 | % | ||||||||
| 7500 Chavenelle Rd | Dubuque | IA | The McGraw-Hill Companies, Inc. | 330,988 | 6/30/2017 | 100 | % | ||||||||
| 3600 Southgate Dr. | Danville | IL | The Sygma Network, Inc. (Sysco Corporation) | 201,369 | 9/30/2023 | 100 | % | ||||||||
| 3686 S. Central Ave | Rockford | IL | Jacobson Warehouse Company, Inc. (Jacobson Distribution Company, Inc. and Jacobson Transportation Company, Inc.) | 90,000 | 12/31/2014 | 100 | % | ||||||||
| 749 Southrock Dr. | Rockford | IL | Jacobson Warehouse Company, Inc. (Jacobson Distribution Company, Inc. and Jacobson Transportation Company, Inc.) | 150,000 | 12/31/2015 | 100 | % | ||||||||
| 10000 Business Blvd. | Dry Ridge | KY | Dana Light Axle Products, LLC (Dana Limited) | 336,350 | 6/30/2025 | 100 | % | ||||||||
| 730 N. Black Branch Rd | Elizabethtown | KY | Dana Structural Products, LLC (Dana Limited) | 167,770 | 6/30/2025 | 100 | % | ||||||||
| 750 N. Black Branch Rd | Elizabethtown | KY | Dana Structural Products, LLC (Dana Limited) | 539,592 | 6/30/2025 | 100 | % | ||||||||
| 301 Bill Bryan Rd | Hopkinsville | KY | Dana Structural Products, LLC (Dana Limited) | 424,904 | 6/30/2025 | 100 | % | ||||||||
| 1901 Ragu Dr. | Owensboro | KY | Unilever Supply Chain, Inc. (Unilever United States, Inc.) | 443,380 | 12/19/2020 | 100 | % | ||||||||
| 4010 Airpark Dr. | Owensboro | KY | Dana Structural Products, LLC (Dana Limited) | 211,598 | 6/30/2025 | 100 | % | ||||||||
| 7150 Exchequer Dr. | Baton Rouge | LA | Corporate Express Office Products, Inc. (Corporate Express US, Inc.) | 79,086 | 10/31/2013 | 100 | % | ||||||||
| 5001 Greenwood Rd | Shreveport | LA | Libbey Glass, Inc. (Libbey, Inc.) | 646,000 | 10/31/2026 | 100 | % | ||||||||
| 113 Wells St. | North Berwick | ME | United Technologies Corporation | 820,868 | 12/31/2010 | 100 | % | ||||||||
| 1601 Pratt Ave | Marshall | MI | Joseph Campbell Company | 58,300 | 9/30/2011 | 100 | % | ||||||||
| 43955 Plymouth Oaks Blvd. | Plymouth | MI | Tower Automotive Operations USA I, LLC (Tower Automotive Holdings I, LLC) | 290,133 | 10/31/2012 | 100 | % | ||||||||
| 46600 Port St. | Plymouth | MI | Vacant | 134,160 | None | 0 | % | ||||||||
| 7111 Crabb Rd | Temperance | MI | CEVA Logistics U.S., Inc. (TNT Holdings B.V.) | 744,570 | 8/4/2012 | 100 | % | ||||||||
| 7670 Hacks Cross Rd | Olive Branch | MS | MAHLE Clevite, Inc. (MAHLE Industries, Inc,) | 268,104 | 2/28/2016 | 100 | % | ||||||||
| 1133 Poplar Creek Rd | Henderson | NC | Corporate Express Office Products, Inc. (Corporate Express US, Inc.) | 196,946 | 1/31/2014 | 100 | % | ||||||||
| 250 Swathmore Ave | High Point | NC | Steelcase, Inc. | 244,851 | 9/30/2017 | 100 | % | ||||||||
| 2880 Kenny Biggs Rd | Lumberton | NC | Quickie Manufacturing Corporation | 423,280 | 11/30/2021 | 100 | % | ||||||||
| 2203 Sherrill Dr. | Statesville | NC | LA-Z-Boy Greensboro, Inc. (LA-Z-Boy, Inc.) | 639,600 | 4/30/2010 | 100 | % | ||||||||
| 121 Technology Dr. | Durham | NH | Heidelberg Web Systems, Inc. | 500,500 | 3/30/2021 | 100 | % | ||||||||
| 1109 Commerce Blvd. | Swedesboro | NJ | Vacant | 262,644 | None | 0 | % | ||||||||
| 75 N. St. | Saugerties | NY | Rotron, Inc. (EG&G) | 52,000 | 12/31/2009 | 100 | % | ||||||||
| 10590 Hamilton Ave | Cincinnati | OH | The Hillman Group, Inc. | 247,088 | 8/31/2016 | 100 | % | ||||||||
| 1650 - 1654 Williams Rd | Columbus | OH | ODW Logistics, Inc. | 772,450 | 6/30/2018 | 100 | % | ||||||||
| 7005 Cochran Rd | Glenwillow | OH | Royal Appliance Manufacturing Company | 458,000 | 7/31/2025 | 100 | % | ||||||||
25
LEXINGTON CONSOLIDATED PORTFOLIO
PROPERTY CHART
INDUSTRIAL
Property Location | City | State | Primary Tenant (Guarantor) | Net Rentable Square Feet | Current Lease Term Expiration | Percent Leased | |||||||||
| 191 Arrowhead Dr. | Hebron | OH | Owens Corning Insulating Systems, LLC | 250,410 | Month to Month | 41 | % | ||||||||
| 200 Arrowhead Dr. | Hebron | OH | Owens Corning Insulating Systems, LLC | 401,260 | 5/31/2009 | 100 | % | ||||||||
| 10345 Philipp Pkwy | Streetsboro | OH | L'Oreal USA S/D, Inc. (L’Oreal USA, Inc.) | 649,250 | 10/17/2019 | 100 | % | ||||||||
| 250 Rittenhouse Circle | Bristol | PA | Vacant | 255,019 | None | 0 | % | ||||||||
| 245 Salem Church Rd | Mechanicsburg | PA | Exel Logistics, Inc. (NFC plc) | 252,000 | 12/31/2012 | 100 | % | ||||||||
| 34 E. Main St. | New Kingston | PA | Vacant | 179,200 | None | 0 | % | ||||||||
| 6 Doughten Rd | New Kingston | PA | Vacant | 330,000 | None | 0 | % | ||||||||
| 224 Harbor Freight Rd. | Dillon | SC | Harbor Freight Tools USA, Inc. (Central Purchasing, Inc.) | 1,010,859 | 12/31/2021 | 100 | % | ||||||||
| 50 Tyger River Dr. | Duncan | SC | Plastic Omnium Exteriors, LLC | 221,833 | 9/30/2018 | 100 | % | ||||||||
| 101 Michelin Dr. | Laurens | SC | CEVA Logistics U.S., Inc. (TNT Holdings B.V.) | 1,164,000 | 8/4/2012 | 100 | % | ||||||||
| 6050 Dana Way | Antioch | TN | W.M. Wright Company | 677,400 | 3/31/2021 | 50 | % | ||||||||
| 477 Distribution Pkwy | Collierville | TN | Federal Express Corporation | 120,000 | 5/31/2021 | 100 | % | ||||||||
| 900 Industrial Blvd. | Crossville | TN | Dana Commercial Vehicle Products, LLC (Dana Limited) | 222,200 | 9/30/2016 | 100 | % | ||||||||
| 3350 Miac Cove Rd | Memphis | TN | Mimeo.com, Inc. | 141,359 | 9/30/2020 | 84 | % | ||||||||
| 3456 Meyers Ave | Memphis | TN | Sears, Roebuck & Company | 780,000 | 2/28/2017 | 100 | % | ||||||||
| 3820 Micro Dr. | Millington | TN | Ingram Micro, LP (Ingram Micro, Inc.) | 701,819 | 9/25/2011 | 100 | % | ||||||||
| 19500 Bulverde Rd | San Antonio | TX | Harcourt, Inc. (Harcourt General, Inc.) | 559,258 | 3/31/2016 | 100 | % | ||||||||
| 2425 Hwy 77 N. | Waxahachie | TX | James Hardie Building Products, Inc. (James Hardie N.V.) | 335,610 | 3/31/2020 | 100 | % | ||||||||
| 291 Park Center Dr. | Winchester | VA | Kraft Foods North America, Inc. | 344,700 | 5/31/2011 | 100 | % | ||||||||
| Industrial Total | 19,858,188 | ||||||||||||||
26
LEXINGTON CONSOLIDATED PORTFOLIO PROPERTY CHART RETAIL/OTHER | |||||||||||||||
Property Location | City | State | Primary Tenant (Guarantor) | Net Rentable Square Feet | Current Lease Term Expiration | Percent Leased | |||||||||
| 302 Coxcreek Pkwy | Florence | AL | The Kroger Company | 42,130 | 7/1/2013 | 100 | % | ||||||||
| 5544 Atlanta Hwy | Montgomery | AL | Vacant | 60,698 | None | 0 | % | ||||||||
| 10415 Grande Ave | Sun City | AZ | Cafeteria Operators, LP (Furrs Restaurant Group, Inc.) | 10,000 | 4/30/2012 | 100 | % | ||||||||
| 255 Northgate Dr. | Manteca | CA | Kmart Corporation | 107,489 | 12/31/2018 | 100 | % | ||||||||
| 12080 Carmel Mountain Rd | San Diego | CA | Sears Holding Corporation | 107,210 | 12/31/2018 | 100 | % | ||||||||
| 10340 U.S. 19 | Port Richey | FL | Kingswere Furniture | 53,820 | 11/30/2017 | 100 | % | ||||||||
| 2010 Apalachee Pkwy | Tallahassee | FL | Kohl’s Department Stores, Inc. | 102,381 | 1/31/2028 | 100 | % | ||||||||
| 2223 N. Druid Hills Rd | Atlanta | GA | Bank of America, N.A. (Bank of America Corporation) | 6,260 | 12/31/2014 | 100 | % | ||||||||
| 956 Ponce de Leon Ave | Atlanta | GA | Bank of America, N.A. (Bank of America Corporation) | 3,900 | 12/31/2014 | 100 | % | ||||||||
| 4545 Chamblee-Dunwoody Rd | Chamblee | GA | Bank of America, N.A. (Bank of America Corporation) | 4,565 | 12/31/2014 | 100 | % | ||||||||
| 201 W. Main St. | Cumming | GA | Bank of America, N.A. (Bank of America Corporation) | 14,208 | 12/31/2014 | 100 | % | ||||||||
| 3468 Georgia Hwy 120 | Duluth | GA | Bank of America, N.A. (Bank of America Corporation) | 9,300 | 12/31/2009 | 100 | % | ||||||||
| 1066 Main St. | Forest Park | GA | Bank of America, N.A. (Bank of America Corporation) | 14,859 | 12/31/2014 | 100 | % | ||||||||
| 825 Southway Dr. Blvd. | Jonesboro | GA | Bank of America, N.A. (Bank of America Corporation) | 4,894 | 12/31/2014 | 100 | % | ||||||||
| 1698 Mountain Industrial | Stone Mountain | GA | Bank of America, N.A. (Bank of America Corporation) | 5,704 | 12/31/2014 | 100 | % | ||||||||
| 1032 Fort St. Mall | Honolulu | HI | Macy’s Department Stores, Inc. | 85,610 | 9/30/2009 | 100 | % | ||||||||
| 1150 W. Carl Sandburg Dr. | Galesburg | IL | Kmart Corporation | 94,970 | 12/31/2018 | 100 | % | ||||||||
| 928 First Ave | Rock Falls | IL | Rock Falls Country Market, LLC (Rock Island Country Market, LLC) | 27,650 | 9/30/2011 | 100 | % | ||||||||
| 5104 N. Franklin Rd | Lawrence | IN | Marsh Supermarkets, Inc. | 28,721 | 10/31/2013 | 100 | % | ||||||||
| 205 Homer Rd | Minden | LA | Brookshire Grocery | 35,000 | 11/30/2012 | 100 | % | ||||||||
| 35400 Cowan Rd | Westland | MI | Sam’s Real Estate Business Trust | 101,402 | 1/31/2009 | 100 | % | ||||||||
| 24th St. W. & St. John’s Ave | Billings | MT | Safeway Stores, Inc. | 40,800 | 5/31/2010 | 100 | % | ||||||||
| 2526 Little Rock Rd | Charlotte | NC | Food Lion, Inc. | 33,640 | 10/31/2013 | 100 | % | ||||||||
| 3501 U.S. 601 S. | Concord | NC | Food Lion, Inc. | 32,259 | 10/31/2013 | 100 | % | ||||||||
| 104 Branchwood Shopping Center | Jacksonville | NC | Food Lion, Inc. | 23,000 | 2/28/2013 | 100 | % | ||||||||
| US 221 & Hospital Rd | Jefferson | NC | Food Lion, Inc. | 23,000 | 2/28/2013 | 100 | % | ||||||||
| 291 Talbert Blvd. | Lexington | NC | Food Lion, Inc. | 23,000 | 2/28/2013 | 100 | % | ||||||||
| 835 Julian Ave | Thomasville | NC | Mighty Dollar, LLC | 23,767 | 9/30/2018 | 100 | % | ||||||||
| 900 S. Canal St. | Carlsbad | NM | Cafeteria Operators, LP (Furrs Restaurant Group, Inc.) | 10,000 | 4/30/2012 | 100 | % | ||||||||
| 130 Midland Ave | Port Chester | NY | Pathmark Stores, Inc. | 59,000 | 10/31/2013 | 100 | % | ||||||||
| 21082 Pioneer Plaza Dr. | Watertown | NY | Kmart Corporation | 120,727 | 12/31/2018 | 100 | % | ||||||||
| 4733 Hills and Dales Rd | Canton | OH | Bally’s Total Fitness of the Midwest (Bally’s Health & Tennis Corporation) | 37,214 | 12/31/2009 | 100 | % | ||||||||
| 4831 Whipple Avenue N.W. | Canton | OH | Best Buy Company, Inc. | 46,350 | 2/26/2018 | 100 | % | ||||||||
27
LEXINGTON CONSOLIDATED PORTFOLIO PROPERTY CHART RETAIL/OTHER | |||||||||||||||
Property Location | City | State | Primary Tenant (Guarantor) | Net Rentable Square Feet | Current Lease Term Expiration | Percent Leased | |||||||||
| 1084 E. Second St. | Franklin | OH | Marsh Supermarkets, Inc. | 29,119 | 10/31/2013 | 100 | % | ||||||||
| 5350 Leavitt Rd | Lorain | OH | Kmart Corporation | 193,193 | 12/31/2018 | 100 | % | ||||||||
| N.E.C. 45th Street & Lee Blvd. | Lawton | OK | Associated Wholesale Grocers, Inc. | 30,757 | 3/31/2014 | 100 | % | ||||||||
| 6910 S. Memorial Hwy | Tulsa | OK | Toys “R” Us, Inc. | 43,123 | 5/31/2011 | 100 | % | ||||||||
| 12535 S.E. 82nd Ave | Clackamas | OR | Toys “R” Us, Inc. | 42,842 | 5/31/2011 | 100 | % | ||||||||
| S. Carolina 52/52 Bypass | Moncks Corner | SC | Food Lion, Inc. | 23,000 | 2/28/2013 | 100 | % | ||||||||
| 811 U.S. Highway 17 | North Myrtle Beach | SC | Vacant | 41,021 | None | 0 | % | ||||||||
| 399 Peach Wood Centre Dr. | Spartanburg | SC | Best Buy Company, Inc. | 45,800 | 2/26/2018 | 100 | % | ||||||||
| 1600 E. 23rd St. | Chattanooga | TN | BI- LO, LLC | 42,130 | 7/1/2010 | 100 | % | ||||||||
| 1053 Mineral Springs Rd | Paris | TN | The Kroger Company | 31,170 | 7/1/2013 | 100 | % | ||||||||
| 3040 Josey Ln. | Carrollton | TX | Ong’s Family, Inc. | 61,000 | 1/31/2021 | 100 | % | ||||||||
| 4121 S. Port Ave | Corpus Christi | TX | Cafeteria Operators, LP (Furr’s Restaurant Group, Inc.) | 10,000 | 4/30/2012 | 100 | % | ||||||||
| 1610 S. Westmoreland Ave | Dallas | TX | Malone’s Food Stores | 68,024 | 3/31/2017 | 100 | % | ||||||||
| 119 N. Balboa Rd | El Paso | TX | Cafeteria Operators, LP (Furrs Restaurant Group, Inc.) | 10,000 | 4/30/2012 | 100 | % | ||||||||
| 3451 Alta Mesa Blvd. | Fort Worth | TX | Minyard Food Stores, Inc. | 44,000 | 5/31/2012 | 100 | % | ||||||||
| 101 W. Buckingham Rd | Garland | TX | Minyard Food Stores, Inc. | 40,000 | 11/30/2012 | 100 | % | ||||||||
| 1415 Highway 377 E. | Granbury | TX | The Kroger Company | 65,417 | 11/30/2012 | 100 | % | ||||||||
| 2500 E. Carrier Pkwy | Grand Prairie | TX | Grocer's Supply | 49,349 | 3/31/2009 | 100 | % | ||||||||
| 4811 Wesley St. | Greenville | TX | Safeway Stores, Inc. | 48,492 | 5/31/2011 | 100 | % | ||||||||
| 120 S. Waco St. | Hillsboro | TX | Brookshire Grocery | 35,000 | 11/30/2012 | 100 | % | ||||||||
| 13133 Steubner Ave | Houston | TX | The Kroger Company | 52,200 | 12/29/2011 | 100 | % | ||||||||
| 5402 4th St. | Lubbock | TX | Vacant | 53,820 | None | 0 | % | ||||||||
| 901 W. Expressway | McAllen | TX | Cafeteria Operators, LP (Furrs Restaurant Group, Inc.) | 10,000 | 4/30/2012 | 100 | % | ||||||||
| 402 E. Crestwood Dr. | Victoria | TX | Cafeteria Operators, LP (Furrs Restaurant Group, Inc.) | 10,000 | 4/30/2012 | 100 | % | ||||||||
| 9400 S. 755 E | Sandy | UT | Vacant | 41,612 | None | 0 | % | ||||||||
| 3211 W. Beverly St. | Staunton | VA | Food Lion, Inc. | 23,000 | 2/28/2013 | 100 | % | ||||||||
| 9803 Edmonds Way | Edmonds | WA | PCC Natural Markets | 34,459 | 8/31/2028 | 100 | % | ||||||||
| 18601 Alderwood Mall Blvd. | Lynnwood | WA | Toys “R” Us, Inc. | 43,105 | 5/31/2011 | 100 | % | ||||||||
| 1700 State Route 160 | Port Orchard | WA | Save-A-Lot, Ltd. | 27,968 | 1/31/2015 | 57 | % | ||||||||
| 3711 Gateway Dr. | Eau Claire | WI | Kohl’s Department Stores, Inc. | 76,164 | 1/25/2015 | 100 | % | ||||||||
| 97 Seneca Trail | Fairlea | WV | Kmart Corporation | 90,933 | 12/31/2018 | 100 | % | ||||||||
| Retail/Other Subtotal | 2,810,226 | ||||||||||||||
| Grand Total | 40,165,243 | ||||||||||||||
28
LEXINGTON NON-CONSOLIDATED PROPERTY CHART | |||||||||||||||
Property Location | City | State | Primary Tenant (Guarantor) | Net Rentable Square Feet | Current Lease Term Expiration | Percent Leased | |||||||||
| OFFICE | |||||||||||||||
| 5201 W. Barraque St. | Pine Bluff | AR | Entergy Services, Inc. | 27,189 | 10/31/2010 | 100 | % | ||||||||
| Route 64 W. & Junction 333 | Russellville | AR | Entergy Gulf States | 191,950 | 5/9/2016 | 100 | % | ||||||||
| 19019 N. 59th Ave | Glendale | AZ | Honeywell International, Inc. | 252,300 | 7/15/2011 | 100 | % | ||||||||
| 8555 S. River Pkwy | Tempe | AZ | ASM Lithography, Inc. (ASM Lithography Holding NV) | 95,133 | 6/30/2013 | 100 | % | ||||||||
| 1440 E. 15th St. | Tucson | AZ | Cox Communications, Inc. | 28,591 | 9/30/2016 | 100 | % | ||||||||
| 10419 N. 30th St. | Tampa | FL | Time Customer Service, Inc. | 132,981 | 6/30/2020 | 100 | % | ||||||||
| 2500 Patrick Henry Pkwy | McDonough | GA | Georgia Power Company | 111,911 | 6/30/2015 | 100 | % | ||||||||
| 3500 N. Loop Court | McDonough | GA | Litton Loan Servicing, LP | 62,218 | 8/31/2018 | 100 | % | ||||||||
| 3265 E. Goldstone Dr. | Meridian | ID | VoiceStream PCS Holding, LLC (T-Mobile USA, Inc.) | 77,484 | 6/28/2019 | 100 | % | ||||||||
| 101 E. Washington Blvd. | Fort Wayne | IN | American Electric Power | 348,452 | 10/31/2016 | 100 | % | ||||||||
| 9601 Renner Blvd | Lenexa | KS | Voicestream PCS II Corporation (T-Mobile USA, Inc.) | 77,484 | 10/31/2019 | 100 | % | ||||||||
| 70 Mechanic St. | Foxboro | MA | Invensys Systems, Inc. (Siebe, Inc.) | 251,914 | 6/30/2014 | 100 | % | ||||||||
| First Park Dr. | Oakland | ME | Omnipoint Holdings, Inc. (T-Mobile USA, Inc.) | 78,610 | 8/31/2020 | 100 | % | ||||||||
| 12000 & 12025 Tech Center Dr. | Livonia | MI | Kelsey-Hayes Company (TRW Automotive, Inc.) | 180,230 | 4/30/2014 | 100 | % | ||||||||
| 3943 Denny Ave | Pascagoula | MS | Northrop Grumman Systems Corporation | 94,841 | 10/14/2013 | 100 | % | ||||||||
| 3201 Quail Springs Pkwy | Oklahoma City | OK | AT& T Wireless Services, Inc. | 128,500 | 11/30/2010 | 100 | % | ||||||||
| 2999 SW 6th St. | Redmond | OR | VoiceStream PCS I, LLC (T-Mobile USA, Inc.) | 77,484 | 1/31/2019 | 100 | % | ||||||||
| 265 Lehigh St. | Allentown | PA | Wachovia Bank N.A. | 71,230 | 10/31/2010 | 100 | % | ||||||||
| 17 Technology Circle | Columbia | SC | Blue Cross Blue Shield of South Carolina, Inc. | 456,304 | 9/30/2010 | 100 | % | ||||||||
| 420 Riverport Rd | Kingport | TN | Kingsport Power Company | 42,770 | 6/30/2013 | 100 | % | ||||||||
| 2401 Cherahala Blvd. | Knoxville | TN | Advance PCS, Inc. | 59,748 | 5/31/2013 | 100 | % | ||||||||
| 601 & 701 Experian Pkwy | Allen | TX | Experian Information Solutions, Inc. (Experian North America) | 292,700 | 3/14/2018 | 100 | % | ||||||||
| 1401 & 1501 Nolan Ryan Pkwy | Arlington | TX | Siemens Dematic Postal Automation, LP | 236,547 | 1/31/2014 | 100 | % | ||||||||
| 1200 Jupiter Rd | Garland | TX | Raytheon Company | 278,759 | 5/31/2011 | 100 | % | ||||||||
| 2529 W. Thorne Dr. | Houston | TX | Baker Hughes, Inc. | 66,243 | 9/27/2015 | 100 | % | ||||||||
| 26410 McDonald Rd | Houston | TX | Montgomery County Management Company, LLC | 41,000 | 10/31/2019 | 100 | % | ||||||||
| 3711 San Gabriel | Mission | TX | VoiceStream PCS II Corporation (T-Mobile USA, Inc.) | 75,016 | 6/30/2015 | 100 | % | ||||||||
| 11555 University Blvd. | Sugar Land | TX | KS Management Services, LLP (St. Luke’s Episcopal Health System Corporation) | 72,683 | 11/30/2020 | 100 | % | ||||||||
| 1600 Eberhardt Rd | Temple | TX | Nextel of Texas | 108,800 | 1/31/2016 | 100 | % | ||||||||
| 6455 State Hwy 303 N.E. | Bremerton | WA | Nextel West Corporation | 60,200 | 5/14/2016 | 100 | % | ||||||||
| Office Total | 4,079,272 | ||||||||||||||
29
LEXINGTON NON-CONSOLIDATED PROPERTY CHART | |||||||||||||||
Property Location | City | State | Primary Tenant (Guarantor) | Net Rentable Square Feet | Current Lease Term Expiration | Percent Leased | |||||||||
| INDUSTRIAL | |||||||||||||||
| 109 Stevens St. | Jacksonville | FL | Unisource Worldwide, Inc. | 168,800 | 9/30/2009 | 100 | % | ||||||||
| 359 Gateway Dr. | Livonia | GA | TI Group Automotive Systems, LLC (TI Automotive Ltd.) | 133,221 | 5/31/2020 | 100 | % | ||||||||
| 3600 Army Post Rd | Des Moines | IA | Electronic Data Systems LLC | 405,000 | 4/30/2012 | 100 | % | ||||||||
| 2935 Van Vactor Way | Plymouth | IN | Bay Valley Foods, LLC | 300,500 | 6/30/2015 | 100 | % | ||||||||
| 6938 Elm Valley Dr. | Kalamazoo | MI | Dana Commercial Vehicle Products, LLC (Dana Limited) | 150,945 | 10/25/2021 | 100 | % | ||||||||
| 904 Industrial Rd | Marshall | MI | Tenneco Automotive Operating Company, Inc. (Tenneco, Inc.) | 246,508 | 8/17/2010 | 100 | % | ||||||||
| 1901 49th Ave | Minneapolis | MN | Owens Corning Roofing and Asphalt, LLC | 18,620 | 6/30/2015 | 100 | % | ||||||||
| 324 Industrial Park Rd | Franklin | NC | SKF USA, Inc. | 72,868 | 12/31/2014 | 100 | % | ||||||||
| 736 Addison Rd | Erwin | NY | Corning, Inc. | 408,000 | 11/30/2016 | 100 | % | ||||||||
| 590 Ecology Lane | Chester | SC | Owens Corning, Inc. | 420,597 | 7/14/2025 | 100 | % | ||||||||
| 120 S.E. Pkwy Dr. | Franklin | TN | Essex Group, Inc. (United Technologies Corporation) | 289,330 | 12/31/2013 | 100 | % | ||||||||
| 9110 Grogans Mill Rd | Houston | TX | Baker Hughes, Inc. | 275,750 | 9/27/2015 | 100 | % | ||||||||
| 2424 Alpine Rd | Eau Claire | WI | Silver Spring Gardens, Inc. (Huntsinger Farms, Inc.) | 159,000 | 4/30/2027 | 100 | % | ||||||||
| Industrial Total | 3,049,139 | ||||||||||||||
30
LEXINGTON NON-CONSOLIDATED PROPERTY CHART | |||||||||||||||
Property Location | City | State | Primary Tenant (Guarantor) | Net Rentable Square Feet | Current Lease Term Expiration | Percent Leased | |||||||||
| RETAIL/OTHER | |||||||||||||||
| 101 Creger Dr. | Ft. Collins | CO | Lithia Motors | 10,000 | 5/31/2012 | 100 | % | ||||||||
| 11411 N. Kelly Ave | Oklahoma City | OK | American Golf Corporation | 13,924 | 12/31/2017 | 100 | % | ||||||||
| 1321 Commerce St. | Dallas | TX | Adolphus Associates (Met Life) | 498,122 | 6/15/2009 | 100 | % | ||||||||
| 25500 State Hwy 249 | Tomball | TX | Parkway Chevrolet, Inc. (R. Durdin, J. Durdin) | 77,076 | 8/31/2026 | 100 | % | ||||||||
| Retail/Other Total | 599,122 | ||||||||||||||
| Grand Total | 7,727,533 | ||||||||||||||
31
Item 3. Legal Proceedings
From time to time we are involved in legal proceedings arising in the ordinary course of our business. In our management’s opinion, after consultation with legal counsel, the outcome of such matters, including the matters set forth below, are not expected to have a material adverse effect on our ownership, financial condition, management or operation of our properties or business.
Lexington Streetsboro LLC v. Alfred Geis, et al.
Beginning in January 2005, on behalf of one of our co-investment programs, we received notices from the tenant in our Streetsboro, Ohio facility regarding certain alleged deficiencies in the construction of the facility as compared to the original building specifications. Upon acquisition of the facility from the developer, the then owner of the facility obtained an indemnity from the principals of the developer covering a breach of construction warranties, the constructionand/or the condition of the premises. After two years of correspondence among the owner of the facility, the developer and the tenant, we (after our acquisition of the facility from our co-investment program) entered into an amendment to the lease with the tenant providing for the repair of a portion of the alleged deficiencies and commenced such repairs beginning in the summer of 2007.
Following a demand for reimbursement under the indemnity agreement, we filed suit against the developer and the principals of the developer in the Federal District Court for the Northern District of Ohio on August 10, 2007 to enforce our rightsfor breach of the indemnity agreement, declaratory judgment, unjust enrichment, breach of contract and negligent design (Lexington Streestboro LLC v. Alfred Geis, et al.,Case No. 5:07CV2450). On November 1, 2007, the developer filed (1) counter-claims against us for unjust enrichment regarding the repair work performed and for a declaration of its obligations under the indemnity agreement and (2) multiple cross-claims against its sub-contractors asking to be reimbursed for any deficiencies in the building specifications for which they are held liable. The developer was also permitted by the Court to file a claim against the tenant. The suit is on-going.claim against the tenant was withdrawn after a settlement of a portion of our claim against the developer.
As of December 31, 2007,2008, we have incurred $3.7$4.9 million of expensescosts in connection with repair and other work at the work covered byfacility.
In August and October 2008, we participated in a court ordered mediation, which did not result in a final settlement. The suit is ongoing and trial is scheduled for October 2009. We have reached a preliminary agreement to settle all claims for a $2.0 million cash payment to us. The agreement is being documented and it is expected that we will execute a settlement agreement within the lease amendment andnext 30 days. We can give no assurance that we will receive the enforcement of our rights under$2.0 million cash payment or enter into the indemnity agreement. We may seek an additional $2.5 million for future costs that may be incurred in connection with other potential deficiencies. We intend to vigorously pursue our claims and reimbursement under the indemnitysettlement agreement.
Deutsche Bank Securities, Inc. and SPCP Group LLC v. Lexington Drake, L.P., et al.
On June 30, 2006, we, including a co-investment program as it relates to the Antioch claim, sold to Deutsche Bank Securities, Inc., which we refer to as Deutsche Bank, (1) a $7.7 million bankruptcy damage claim against Dana Corporation for $5.4 million, which we refer to as the Farmington Hills claim, and (2) a $7.7 million bankruptcy damage claim against Dana Corporation for $5.7 million, which we refer to as the Antioch claim. Under the terms of the agreements covering the sale of the claims, we are obligated to reimburse Deutsche Bank should the claim ever be disallowed, subordinated or otherwise impaired, to the extent of such disallowance, subordination or impairment, plus interest at the rate of 10% per annum from the date of payment of the purchase price by Deutsche Bank to us. On October 12, 2007, Dana Corporation filed an objection to both claims. We assisted Deutsche Bank and the then holders of the claims in the preparation and filing of a response to the objection. Despite a belief by us that the objections were without merit, the holders of the claims, without our consent, settled the allowed amount of the claims at $6.5 million for the Farmington Hills claim and $7.2 million for the Antioch claim. Deutsche Bank has made a formal demand with respect to the Farmington Hills claim in the amount of $0.8 million plus interest, but hasdid not mademake a formal demand with respect to the Antioch claim, which we estimate would be $0.4claim. Following a rejection of the demand, Deutsche Bank and SPCP Group, LLC filed a summons and complaint with the Supreme Court of the State of New York, County of New York for the Farmington Hills and Antioch claims, and claimed damages of $1.2 million plus interest. interest and expenses.
We informed Deutsche Bank that we do notanswered the complaint on November 26, 2008 and served numerous discovery requests. We intend to honor any demandcontinue to vigorously defend the claims for a variety of reasons, including that (1) the holders of the claims arbitrarily settled the claims for reasons based on factors other than the merits and (2) the holders of the claims voluntarily reduced the claims to participate in certain settlement pools. We intend
Item 4. Submission of Matters to vigorously defend any further claims or demands by Deutsche Bank or the holdersa Vote of the claims.Security Holders
None.
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Executive Officers of the Registrant
The following sets forth certain information relating to our executive officers:
| Name | Business Experience | |
E. Robert Roskind Age | Mr. Roskind became our Chairman again on March 21, 2008, having previously served as our Co-Vice Chairman | |
Richard J. Rouse Age | Mr. Rouse became our Vice Chairman again on March 21, 2008, having previously served as our Co-Vice Chairman | |
T. Wilson Eglin Age | Mr. Eglin has served as our Chief Executive Officer since January 2003, our Chief Operating Officer since October 1993, our President since April 1996 and as a trustee since May 1994. He served as one of our Executive Vice Presidents from October 1993 to April 1996. Mr. Eglin is a member of the Investment Committee of Concord appointed by us. | |
Patrick Carroll Age | Mr. Carroll has served as our Chief Financial Officer since May 1998, our Treasurer since January 1999 and one of our Executive Vice Presidents since January 2003. Prior to joining us, Mr. Carroll was, from 1986 to 1998, in the real estate practice of Coopers & Lybrand L.L.P., a public accounting firm that was one of the predecessors of Pricewaterhouse Coopers LLP. | |
Paul R. Wood Age | Mr. Wood has served as one of our Vice Presidents, and our Chief Accounting Officer and Secretary since October 1993. |
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PART II.
Item 5. Market For The Registrant’s Common Equity, Related Shareholder Matters And Issuer Purchases of Equity Securities
Market Information. Our common shares are listed for trading on the NYSE under the symbol “LXP”. The following table sets forth the high and low sales prices as reported by the NYSE for our common shares for each of the periods indicated below:
For the Quarters Ended: | High | Low | ||||||
| December 31, 2007 | $ | 20.90 | $ | 14.52 | ||||
| September 30, 2007 | 21.54 | 18.78 | ||||||
| June 30, 2007 | 21.65 | 20.38 | ||||||
| March 31, 2007 | 22.42 | 20.02 | ||||||
| December 31, 2006 | 22.73 | 20.40 | ||||||
| September 30, 2006 | 21.90 | 19.53 | ||||||
| June 30, 2006 | 22.15 | 19.87 | ||||||
| March 31, 2006 | 22.90 | 19.64 | ||||||
| For the Quarters Ended: | High | Low | ||||||
| December 31, 2008 | $ | 16.85 | $ | 2.99 | ||||
| September 30, 2008 | 17.24 | 11.82 | ||||||
| June 30, 2008 | 15.77 | 13.55 | ||||||
| March 31, 2008 | 16.11 | 12.40 | ||||||
| December 31, 2007 | 20.90 | 14.52 | ||||||
| September 30, 2007 | 21.54 | 18.78 | ||||||
| June 30, 2007 | 21.65 | 20.38 | ||||||
| March 31, 2007 | 22.42 | 20.02 | ||||||
The per share closing price of our common shares was $15.18$3.17 on February 22, 2008.23, 2009.
Holders. As of February 22, 2008,23, 2009, we had approximately 2,4283,621 common shareholders of record.
Dividends. We have made quarterly distributions since October 1986 without interruption.
The common share dividends paid in each quarter for the last five years are as follows:
Quarters Ended | 2007 | 2006 | 2005 | 2004 | 2003 | |||||||||||||||
| March 31, | $ | 0.5975 | $ | 0.365 | $ | 0.360 | $ | 0.350 | $ | 0.335 | ||||||||||
| June 30, | $ | 0.375 | $ | 0.365 | $ | 0.360 | $ | 0.350 | $ | 0.335 | ||||||||||
| September 30, | $ | 0.375 | $ | 0.365 | $ | 0.360 | $ | 0.350 | $ | 0.335 | ||||||||||
| December 31, | $ | 0.375 | $ | 0.365 | $ | 0.360 | $ | 0.350 | $ | 0.335 | ||||||||||
| Quarters Ended | 2008 | 2007 | 2006 | 2005 | 2004 | |||||||||||||||
| March 31, | $ | 2.475 | $ | 0.5975 | $ | 0.365 | $ | 0.360 | $ | 0.350 | ||||||||||
| June 30, | $ | 0.33 | $ | 0.375 | $ | 0.365 | $ | 0.360 | $ | 0.350 | ||||||||||
| September 30, | $ | 0.33 | $ | 0.375 | $ | 0.365 | $ | 0.360 | $ | 0.350 | ||||||||||
| December 31, | $ | 0.33 | $ | 0.375 | $ | 0.365 | $ | 0.360 | $ | 0.350 | ||||||||||
During the fourth quarter of 2007, we declared a special dividend of $2.10 per common share which was paid in January 2008. During the fourth quarter 2006, we declared a special dividend of $0.2325 per common share which was paid in January 2007.
| 2007 | 2006 | 2005 | ||||||||||
| Total dividends per share | $ | 2.93342(1 | ) | $ | 1.46 | $ | 1.44 | |||||
| Ordinary income | 42.36 | % | 68.89 | % | 87.29 | % | ||||||
| 15% rate — qualifying dividend | 2.50 | 0.77 | 1.04 | |||||||||
| 15% rate gain | 35.62 | 7.97 | 8.72 | |||||||||
| 25% rate gain | 19.52 | 5.13 | 2.95 | |||||||||
| Return of capital | — | 17.24 | — | |||||||||
| 100.00 | % | 100.00 | % | 100.00 | % | |||||||
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| 2007 | 2006 | 2005 | ||||||||||
| Ordinary income | 42.36 | % | 83.24 | % | 87.29 | % | ||||||
| 15% rate — qualifying dividend | 2.50 | 0.93 | 1.04 | |||||||||
| 15% rate gain | 35.62 | 9.63 | 8.72 | |||||||||
| 25% rate gain | 19.52 | 6.20 | 2.95 | |||||||||
| 100.00 | % | 100.00 | % | 100.00 | % | |||||||
| 2007 | 2006 | 2005 | ||||||||||
| Ordinary income | 42.36 | % | 83.24 | % | 87.29 | % | ||||||
| 15% rate — qualifying dividend | 2.50 | 0.93 | 1.04 | |||||||||
| 15% rate gain | 35.62 | 9.63 | 8.72 | |||||||||
| 25% rate gain | 19.52 | 6.20 | 2.95 | |||||||||
| 100.00 | % | 100.00 | % | 100.00 | % | |||||||
While we intend to continue paying regular quarterly dividends to holders of our common shares, future dividend declarations will be at the discretion of theour Board of Trustees and will depend on our actual cash flow, our financial condition, capital requirements, the annual distribution requirements under the REIT provisions of the Code and such other factors as our Board of Trustees deems relevant. Due to the sale of properties during 2007 and the distribution of such proceeds via the special dividend, the recurring quarterly common dividend to be paid in 2008 has been reduced from $0.375 per share to $0.33 per share. The actual cash flow available to pay dividends will be affected by a number of factors, including, among others, the risks discussed under “Risk Factors” in Part I, Item 1A and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of this Annual Report.
We do not believe that the financial covenants contained in our indebtednessloan agreements will have any adverse impact on our ability to pay dividends in the normal course of business to our common and preferred shareholders or to distribute amounts necessary to maintain our qualification as a REIT.
We maintain a dividend reinvestment program pursuant to which our common shareholders and holders of OP units may elect to automatically reinvest their dividends and distributions to purchase our common shares free of commissions and other charges. We currently offer a 2.5% discount on the common shares purchased under the plan. We may, from time to time, either repurchase common shares in the open market, or
37
issue new common shares, for the purpose of fulfilling our obligations under the dividend reinvestment program. Currently all of the common shares issued under this program are to be purchased on the open market.new common shares issued by us.
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Equity Compensation Plan Information. The following table sets forth certain information, as of December 31, 2007,2008, with respect to the compensation plan under which our equity securities are authorized for issuance.
| Number of Securities | ||||||||||||
| Remaining Available for | ||||||||||||
| Number of Securities | Future Issuance Under | |||||||||||
| to be Issued Upon | Weighted-Average | Equity Compensation | ||||||||||
| Exercise of | Exercise Price of | Plans (Excluding | ||||||||||
| Outstanding Options, | Outstanding Options, | Securities Reflected in | ||||||||||
Plan Category | Warrants and Rights | Warrants and Rights | Column (a)) | |||||||||
| (a) | (b) | (c) | ||||||||||
| Equity compensation plans approved by security holders | 0 | $ | 0 | 4,999,422 | ||||||||
| Equity compensation plans not approved by security holders | 0 | 0 | — | |||||||||
| Total | 0 | $ | 0 | 4,999,422 | ||||||||
Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights | Weighted-Average Exercise Price of Outstanding Options, Warrants and Rights | Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in Column (a)) | ||||||||||
| Plan Category | (a) | (b) | (c) | |||||||||
| Equity compensation plans approved by security holders | 2,000,000 | $ | 5.60 | 2,756,099 | ||||||||
| Equity compensation plans not approved by security holders | 0 | 0 | — | |||||||||
| Total | 2,000,000 | $ | 5.60 | 2,756,099 | ||||||||
Comparison of Cumulative Five Year Total Return
| Company / Index | 2003 | 2004 | 2005 | 2006 | 2007 | 2008 | ||||||||||||||||||
| Lexington Realty Trust | 100 | 119.76 | 120.38 | 139.28 | 111.57 | 42.44 | ||||||||||||||||||
| S&P 500 Index | 100 | 110.88 | 116.33 | 134.70 | 142.10 | 89.53 | ||||||||||||||||||
| Russell 2000 Index | 100 | 118.33 | 123.72 | 146.44 | 144.15 | 95.44 | ||||||||||||||||||
| NAREIT Equity REIT Index | 100 | 131.58 | 147.58 | 199.32 | 168.05 | 104.65 | ||||||||||||||||||
Recent Sales of Unregistered Securities.
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Share Repurchase Program.
| Period | Total Number of Shares/Units Purchased | Average Price Paid per Share/Unit ($) | Total Number of Shares/Units Purchased as Part of Publicly Announced Plans or Programs (1) | Maximum Number of Shares That May Yet Be Purchased Under the Plans or Programs | ||||||||||||
| October 1 — 31, 2008 | 58,900 | 9.89 | 58,900 | 4,556,731 | ||||||||||||
| November 1 — 30, 2008 | 3,500,000 | (2) | 5.60 | 3,500,000 | 1,056,731 | |||||||||||
| December 1 — 31, 2008 | — | — | — | 1,056,731 | ||||||||||||
| Fourth Quarter 2008 | 3,558,900 | 5.67 | 3,558,900 | 1,056,731 | ||||||||||||
(1) Share repurchase plan most recently announced on December 17, 2007.
(2) Represents common shares subject to a forward equity commitment, with a purchase price of $5.60 per share (or $19.6 million in the aggregate). We paid $12.8 million during 2008 and must settle the forward commitment by October 2011.
During the fourth quarter of 2008, we repurchased $88.5 million original principal amount of our 5.45% Exchangeable Guaranteed Notes for $60.5 million, consisting of $51.7 million in cash and 597,826 common shares at $14.72 per share.
| Total Number of | Maximum Number of | |||||||||||||||
| Shares/Units | Shares That May Yet | |||||||||||||||
| Total Number of | Average Price | Purchased as Part of | Be Purchased Under | |||||||||||||
| Shares/Units | Paid per | Publicly Announced | the Plans or | |||||||||||||
Period | Purchased | Share/Unit ($) | Plans or Programs | Programs | ||||||||||||
| October 1 — 31, 2007 | 32,392 | 20.05 | 32,392 | 3,374,440 | ||||||||||||
| November 1 — 30, 2007 | 1,277,810 | 18.02 | 1,277,810 | 2,096,630 | ||||||||||||
| December 1 — 31, 2007 | 1,326,648 | 17.39 | 1,326,648 | 5,769,982 | ||||||||||||
| Fourth Quarter 2007 | 2,636,850 | 17.72 | 2,636,850 | 5,769,982 | ||||||||||||
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Item 6. Selected Financial Data
The following sets forth our selected consolidated financial data as of and for each of the years in the five-year period ended December 31, 2007.2008. The selected consolidated financial data should be read in conjunction with the Consolidated Financial Statements and the related notes appearing elsewhere in this Annual Report on Form 10-K. ($000’s, except per share data)
| 2007 | 2006 | 2005 | 2004 | 2003 | ||||||||||||||||
| Total gross revenues | $ | 431,747 | $ | 186,693 | $ | 162,383 | $ | 109,901 | $ | 73,999 | ||||||||||
| Expenses applicable to revenues | (297,139 | ) | (106,796 | ) | (81,645 | ) | (37,581 | ) | (24,568 | ) | ||||||||||
| Interest and amortization expense | (163,628 | ) | (65,097 | ) | (56,177 | ) | (36,448 | ) | (25,609 | ) | ||||||||||
| Income (loss) from continuing operations | (10,783 | ) | (7,909 | ) | 17,606 | 27,021 | 15,873 | |||||||||||||
| Total discontinued operations | 87,634 | 15,662 | 15,089 | 17,786 | 17,776 | |||||||||||||||
| Net income | 76,851 | 7,753 | 32,695 | 44,807 | 33,649 | |||||||||||||||
| Net income (loss) allocable to common shareholders | 50,118 | (8,682 | ) | 16,260 | 37,862 | 30,257 | ||||||||||||||
| Income (loss) from continuing operations per common share — basic | (0.58 | ) | (0.47 | ) | 0.03 | 0.43 | 0.37 | |||||||||||||
| Income from continuing operations per common share — diluted | (0.58 | ) | (0.47 | ) | 0.03 | 0.41 | 0.36 | |||||||||||||
| Income from discontinued operations — basic | 1.35 | 0.30 | 0.30 | 0.38 | 0.52 | |||||||||||||||
| Income from discontinued operations — diluted | 1.35 | 0.30 | 0.30 | 0.39 | 0.52 | |||||||||||||||
| Net income (loss) per common share — basic | 0.77 | (0.17 | ) | 0.33 | 0.81 | 0.89 | ||||||||||||||
| Net income (loss) per common share — diluted | 0.77 | (0.17 | ) | 0.33 | 0.80 | 0.88 | ||||||||||||||
| Cash dividends declared per common share | 3.60 | 2.0575 | 1.445 | 1.410 | 1.355 | |||||||||||||||
| Net cash provided by operating activities | 287,651 | 108,020 | 105,457 | 90,736 | 68,883 | |||||||||||||||
| Net cash used in investing activities | (31,490 | ) | (154,080 | ) | (643,777 | ) | (202,425 | ) | (295,621 | ) | ||||||||||
| Net cash provided by financing activities | 38,973 | 483 | 444,878 | 242,723 | 228,986 | |||||||||||||||
| Ratio of earnings to combined fixed charges and preferred dividends | N/A | N/A | 1.15 | 1.47 | 1.52 | |||||||||||||||
| Real estate assets, net | 3,715,447 | 3,471,027 | 1,641,927 | 1,227,262 | 1,001,772 | |||||||||||||||
| Investments in non-consolidated entities | 226,476 | 247,045 | 191,146 | 132,738 | 69,225 | |||||||||||||||
| Total assets | 5,265,163 | 4,624,857 | 2,160,232 | 1,697,086 | 1,207,411 | |||||||||||||||
| Mortgages, notes payable and credit facility, including discontinued operations | 3,047,550 | 2,132,661 | 1,170,560 | 765,909 | 551,385 | |||||||||||||||
| Shareholders’ equity | 939,071 | 1,122,444 | 891,310 | 847,290 | 579,848 | |||||||||||||||
| Preferred share liquidation preference | 389,000 | 234,000 | 234,000 | 214,000 | 79,000 | |||||||||||||||
| 2008 | 2007 | 2006 | 2005 | 2004 | ||||||||||||||||
| Total gross revenues | $ | 441,231 | $ | 419,658 | $ | 185,963 | $ | 157,941 | $ | 107,144 | ||||||||||
| Expenses applicable to revenues | (322,086 | ) | (286,814 | ) | (104,548 | ) | (80,290 | ) | (36,870 | ) | ||||||||||
| Interest and amortization expense | (156,063 | ) | (162,028 | ) | (63,282 | ) | (54,464 | ) | (35,495 | ) | ||||||||||
| Income (loss) from continuing operations | 9,124 | 3,874 | (9,785 | ) | 16,369 | 26,035 | ||||||||||||||
| Total discontinued operations | (659 | ) | 72,977 | 17,538 | 16,326 | 18,772 | ||||||||||||||
| Net income (loss) | 8,465 | 76,851 | 7,753 | 32,695 | 44,807 | |||||||||||||||
| Net income (loss) allocable to common shareholders | (12,772 | ) | 50,118 | (8,682 | ) | 16,260 | 37,862 | |||||||||||||
| Income (loss) from continuing operations per common share — basic | (0.18 | ) | (0.35 | ) | (0.50 | ) | — | 0.41 | ||||||||||||
| Income (loss) from continuing operations per common share — diluted | (0.18 | ) | (0.35 | ) | (0.50 | ) | — | 0.39 | ||||||||||||
| Income (loss) from discontinued operations — basic | (0.01 | ) | 1.12 | 0.33 | 0.33 | 0.40 | ||||||||||||||
| Income from (loss) discontinued operations — diluted | (0.01 | ) | 1.12 | 0.33 | 0.33 | 0.41 | ||||||||||||||
| Net income (loss) per common share — basic | (0.19 | ) | 0.77 | (0.17 | ) | 0.33 | 0.81 | |||||||||||||
| Net income (loss) per common share — diluted | (0.19 | ) | 0.77 | (0.17 | ) | 0.33 | 0.80 | |||||||||||||
| Cash dividends declared per common share | 1.17 | 3.60 | 2.0575 | 1.445 | 1.410 | |||||||||||||||
| Net cash provided by operating activities | 230,201 | 287,651 | 108,020 | 105,457 | 90,736 | |||||||||||||||
| Net cash provided by (used in) investing activities | 230,128 | (31,490 | ) | (154,080 | ) | (643,777 | ) | (202,425 | ) | |||||||||||
| Net cash provided by (used in) financing activities | (804,637 | ) | 38,973 | 483 | 444,878 | 242,723 | ||||||||||||||
| Ratio of earnings to combined fixed charges and preferred dividends | 1.18 | N/A | N/A | 1.13 | 1.45 | |||||||||||||||
| Real estate assets, net | 3,294,527 | 3,729,266 | 3,475,073 | 1,651,200 | 1,240,479 | |||||||||||||||
| Investments in non-consolidated entities | 179,133 | 226,476 | 247,045 | 191,146 | 132,738 | |||||||||||||||
| Total assets | 4,105,888 | 5,265,163 | 4,624,857 | 2,160,232 | 1,697,086 | |||||||||||||||
| Mortgages, notes payable and credit facility, including discontinued operations | 2,379,249 | 3,047,550 | 2,132,661 | 1,170,560 | 765,909 | |||||||||||||||
| Shareholders’ equity | 1,399,312 | 939,071 | 1,122,444 | 891,310 | 847,290 | |||||||||||||||
| Preferred share liquidation preference | 363,915 | 389,000 | 234,000 | 234,000 | 214,000 | |||||||||||||||
| N/A — Ratio is below 1.0, deficit of |
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All years have been adjusted to reflect the impact of operating properties sold during the years ended December 31,2008, 2007, 2006, 2005 and 2004 and properties classified as held for sale as of December 31, 2008, which are reflected in discontinued operations in the Consolidated Statements of Operations.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
In this discussion, we have included statements that may constitute “forward-looking statements” within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are not historical facts but instead represent only our beliefs regarding future events, many of which, by their nature, are inherently uncertain and outside our control. These statements may relate to our future plans and objectives, among other things. By identifying these statements for you in this manner, we are alerting you to the possibility that our actual results may differ, possibly materially, from the anticipated results indicated in these forward-looking statements. Important factors that could cause our results to differ, possibly materially, from those indicated in the forward-looking statements include, among others, those discussed below under “Risk Factors” in Part I, Item 1A of this Annual Report and “Cautionary Statements Concerning Forward Looking Statements” in Part I, of this Annual Report.
| Table of Contents | Page | |
| Overview | 38 | |
| Liquidity | 45 | |
| Capital Resources | 48 | |
| Results of Operations | 49 | |
| Off-Balance Sheet Arrangements | 51 | |
| Contractual Obligations | 58 |
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Overview
General
. We are a self-managed and self-administered real estate investment trust formed under the laws of the State of Maryland. We operate primarily in one segment and our primary business is the investment in and the acquisition, ownership and management of a geographically diverse portfolio of net leased office, industrial and retail properties. Substantially all of our properties are subject to triple net leases, which are generally characterized as leases in which the tenant bears all or substantially all of the costsand/or cost increases for real estate taxes, utilities, insurance and ordinary repairs.
As of December 31, 2007,2008, we had ownership interests in approximately 280225 consolidated real estate assets, located in 4241 states and the Netherlands and encompassing 45.5approximately 40.2 million rentable square feet. During 2007, we purchased eight properties from unrelated parties, for an aggregate capitalized cost of $131.5 million. In addition, we acquiredWe lease our partners’ interests in four co-investment programs for $366.6 million in cash.
Our revenues and cash flows are generated predominantly from property rent receipts. GrowthAs a result, growth in revenuerevenues and cash flows is directly correlated to our ability to (1) acquire income producing properties andreal estate assets, (2) to re-lease properties that are vacant, or may become vacant at favorable rental rates.rates and (3) earn fee income.
Global Credit and Financial Crisis. The current global credit and financial crisis intensified near the end of the quarter ended September 30, 2008 and continues with such intensity today. The crisis has impacted our business in a number of ways, including (1) a significant decrease in property acquisitions, (2) tenant defaults and bankruptcies, and (3) difficulty obtaining financing. The specific impacts and expected impacts of the crisis are discussed in detail below.
Acquisition Objectives. Acquiring income producing real estate assets is one of our primary focuses. The challenge we face is finding investments that will provide an attractive return without compromising our real estate underwriting criteria. WeWhile we believe we have access to acquisition opportunities due to our relationship with developers, brokers, corporate users and sellers.sellers, our acquisition activity decreased during the last few years as a result of market conditions.
As capitalization rates on investment opportunities began to compress at the end of 2006, we began to decrease our acquisition activity. Following the Newkirk Merger, our real estate acquisition activity consisted primarily of acquiring the interests that we did not already own in certain of our co-investment programs.
In response to the compression in capitalization rates, we refocused our efforts into (1) repurchasing our senior debt at what we believe are attractive and secure yields to maturity and (2) disposing of real estate assets in compliance with regulatory and contractual requirements. We believe we have benefited from this refocusing during the global credit and financial crisis.
Despite the global credit and financial crisis, we continue to review single acquisitions and strategic transactions including forming new co-investment programs and joint ventures. Capitalization rates have begun to decompress; however, the difficulty has been obtaining attractive financing during the crisis. We believe we are prepared to take advantage of opportunities when the financing markets rebound.
When we do acquire real estate assets, we look for general purpose office and industrial real estate assets subject to a long-term net lease which have one or more of the following characteristics (1) a credit-worthy tenant; (2) adaptability to a variety of users, including multi-tenant use; and (3) an attractive geographic location.
During 2008, we purchased two properties from unrelated parties, for an aggregate capitalized cost of $56.1 million.
Capital Recycling. During 2008, we continued to dispose of non-core and core assets, subject to regulatory and contractual requirements, in order to increase liquidity. We were, and believe we still are, able to dispose of these assets at prices that allow us to realize an attractive internal rate of return.
During 2008, we (1) sold 40 properties to unrelated third parties for an aggregate sales price of $242.3 million; disposed of one property through foreclosure, (2) contributed/sold 13 properties to NLS with an agreed upon value of $335.0 million and (3) sold our interest in Wells for $8.31 per share.
We primarily used the proceeds to repurchase senior debt and preferred securities at what we believe are favorable spreads. We believe this capital recycling provides us with enhanced return rates while allowing us to deleverage.
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During 2008, we retired a total of $309.9 million of 5.45% Exchangeable Guaranteed Notes and Trust Preferred Securities at a discounted cost to us of approximately $237.5 million, which we funded with $214.0 million in cash and through the issuance of 1.6 million common shares, at an average price of approximately $14.50 per share and an aggregate value at issuance of $23.5 million.
Leasing Objectives. Re-leasing properties as leases expire and properties currently vacant at favorable effective rates is one of our primary focuses. The primary risks associated with re-tenanting properties are (1) the period of time required to find a new tenant, (2) whether rental rates will be lower than previously received, (3) the significant leasing costs such as commissions and tenant improvement allowances and (4) the payment of operating costs such as real estate taxes and insurance while there is no offsetting revenue.
We addresstry to mitigate these risks by contacting tenants well in advance of lease maturity to get an understanding of their occupancy needs, contacting local brokers to determine the depth of the rental market and retaining local expertise to assist in the re-tenanting of a property. Pursuant to our strategic restructuring plan we focus on buying general purpose office and industrial real estate assets which have one or more of the following characteristics (1) an investment grade tenant; (2) adaptability to a variety of users, including multi-tenant use, and (3) an attractive geographic location. NoHowever, no assurance can be given that once a property becomes vacant it will subsequently be re-let.
We continue to monitor the credit of our tenants and are particularly focused on our tenants in the financial, retail and automotive industries. During 2007,the year ended December 31, 2008, certain of our tenants filed for bankruptcy, including Linens’n Things, Inc., which we sold 53refer to as Linens, Circuit City Stores, Inc., which we refer to as Circuit City, and Bally’s Total Fitness of the Midwest, which we refer to as Bally’s. Under current bankruptcy law, a tenant can generally assume or reject a lease within a certain number of days of filing its bankruptcy petition. If a tenant rejects the lease, our damages are generally limited to the greater of (1) one year’s rent and (2) the rent for 15%, not to exceed three years, of the remaining term of the lease.
Linens was the tenant at our 262,644 square foot distribution/warehouse facility located in Swedesboro, New Jersey. Linens rejected its lease for our facility and vacated the facility on December 31, 2008. The lease provided for annual rental revenue of $1.3 million and was scheduled to expire on December 31, 2010. The facility is subject to non-recourse first mortgage financing with a principal amount of $7.5 million as of December 31, 2008 and a fixed interest rate of 4.76%. We are seeking recovery of our damages; however, we do not anticipate recovering the entire amount.
Circuit City is currently the tenant in our 288,000 square foot office building located in Richmond, Virginia, which is part of its headquarter campus. On January 16, 2009, Circuit City announced that it has begun the process to liquidate its assets. Circuit City rejected its lease for our facility. We expect Circuit City to vacate the premises by the end of the first quarter of 2009. The lease provides for annual rental revenue of $2.9 million and expires on February 28, 2010. We are seeking recovery of our damages; however, we do not anticipate recovering the entire amount.
Bally’s is currently the tenant in our 37,214 square foot health club facility located in Canton, Ohio. As of the date of this Annual Report, Bally’s has yet to assume or reject the lease. The lease provides for annual rental revenue of $0.4 million and expires on December 31, 2009. In addition, we hold a mortgage note of approximately $3.2 million at December 31, 2008, which is secured by a facility leased to Bally’s in Vorhees, New Jersey. The borrower is current in its obligations under the mortgage note.
We own 16 consolidated properties for $423.6totaling approximately 4.0 million square feet with aggregate rental revenues of approximately $31.6 million that are leased to tenants in the automotive industry. The primary business of these tenants is supply, manufacturing and contributed/sold 30 propertiesinstallation. We are closely monitoring the automotive industry in general and our tenants within that industry.
If a property cannot be re-let to NLS for $121.7 million in casha single user and an equity positionthe property can be adapted to multi-tenant use, we determine whether the costs of $109.1 million. During 2006, we sold eight properties, including oneadapting the property through foreclosure, to unrelated third partiesmulti-tenant use outweigh the benefit of funding operating costs while searching for a net sales pricesingle-tenant. During 2008, two properties were converted to multi-tenant use following expiration of $94.0 million. During 2005, we sold eight properties, including one sold through a non-consolidated entity, to unrelated parties forlease with a net sales price of $74.7 million. In addition in 2005, we contributed seven properties to various non-consolidated entity programs for $124.7 million, which approximated carrying costs.
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Certain of the long-term leases on our properties contain provisions that may mitigate the adverse impact of inflation on our operating results. Such provisions include clauses entitling us to receive (1) scheduled fixed base rent increases and (2) base rent increases based upon the consumer price index. In addition, a majority of the leases on our properties require tenants to pay operating expenses, including maintenance, real estate taxes, insurance and utilities, thereby reducing our exposure to increases in costs and operating expenses. In addition, the leases on our properties are generally structured in a way that minimizes our responsibility for capital improvements.
Critical Accounting Policies and Recently Issued Accounting Standards
. Our accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States, which require our management to make estimates that affect the amounts of revenues, expenses, assets and liabilities reported. The following are criticalA summary of our significant accounting policies and recently issued accounting standards which are important to the portrayal of our financial condition and results of operations is set forth in note 2 to the Consolidated Financial Statements beginning on page 68 of this Annual Report and incorporated herein.
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The following is a summary of our critical accounting policies, which require some of management’s most difficult, subjective and complex judgments.
Basis of Presentation and Consolidation. Our consolidated financial statements are prepared on the accrual basis of accounting. The accountingfinancial statements reflect our accounts and the accounts of our consolidated subsidiaries. We determine whether an entity for these matters involveswhich we hold an interest should be consolidated pursuant to Financial Accounting Standards Board, which we refer to as FASB, Interpretation No. 46 (Revised), Consolidation of Variable Interest Entities, which we refer to as FIN 46R, and/or Emerging Issues Task Force, which we refer to as EITF, 04-05, Determining Whether a General Partner, or the makingGeneral Partners as a Group, Controls a Limited Partnership or Similar Entity When the Limited Partners Have Certain Rights, which we refer to as EITF 04-05. FIN 46R requires us to evaluate whether we have a controlling financial interest in an entity through means other than voting rights. If the entity is not a variable interest entity we apply the guidance in EITF 04-05, and if we control the entity’s voting shares or similar rights as determined in EITF 04-05, the entity is consolidated.
Use of Estimates. Our management has made a number of estimates and assumptions relating to the reporting of assets and liabilities, the disclosure of contingent assets and liabilities and the reported amounts of revenues and expenses to prepare these consolidated financial statements in conformity with U.S. generally accepted accounting principles. These estimates and assumptions are based on current facts, circumstancesour management’s best estimates and judgment. Our management evaluates its estimates and assumptions which could changeon an ongoing basis using historical experience and other factors, including the current economic environment. The current economic environment has increased the degree of uncertainty inherent in a manner that would materially affect management’s futurethese estimates with respectand assumptions. Our management adjusts such estimates when facts and circumstances dictate. The most significant estimates made include the recoverability of accounts receivable, allocation of property purchase price to such matters. Accordingly, future reportedtangible and intangible assets acquired and liabilities assumed, the determination of impairment of long-lived assets and equity method investments, valuation and impairment of assets held by equity method investees, valuation of derivative financial conditionsinstruments, and the useful lives of long-lived assets. Actual results could differ materially from financial conditions and results reported based on management’s currentthose estimates.
Business Combinations. We follow the provisions of Statement of Financial Accounting Standards, which we refer to as SFAS, No. 141, Business Combinations, which we refer to as SFAS 141, and record all assets acquired and liabilities assumed at fair value. On December 31, 2006, we acquired Newkirk, through the Merger, which was a variable interest entity (VIE). We follow the provisions of Financial Accounting Standards Board Interpretation No. 46 (Revised) Consolidation of Variable Interest Entities, which we refer to as FIN 46R, and as a result we have recorded the minority interest in Newkirk at estimated fair value on the date of acquisition. The value of the consideration issued in common shares wasis based upon a reasonable period before and after the date that the terms of the acquisitionNewkirk Merger were agreed to and announced.
In December 2007, the FASB issued SFAS No. 141R, Business Combinations, which we refer to as SFAS 141R. SFAS 141R requires most identifiable assets, liabilities, noncontrolling interests, and goodwill acquired in a business combination to be recorded at “full fair value” and acquisition related costs will generally be expensed rather than included as part of the basis of the acquisition. SFAS 141R expands required disclosures to improve the ability to evaluate the nature and financial effects of business combinations. SFAS 141R is effective for acquisitions in periods beginning on or after December 15, 2008. The adoption of this standard could materially impact our future financial results to the extent that we acquire significant amounts of real estate, as related acquisition costs will be expensed as incurred compared to current practice of capitalizing such costs and amortizing them over the estimated useful life of the assets acquired.
Purchase Accounting for Acquisition of Real Estate. We allocate the purchase price of real estate acquired in accordance with SFAS 141. SFAS 141 requires that the The fair value of the real estate acquired, which includes the impact of mark-to-marketfair value adjustments for assumed mortgage debt relatingrelated to property acquisitions, is allocated to the acquired tangible assets, consisting of land, building and improvements, and identified intangible assets and liabilities, consisting of the value of above-market and below-market leases, other value of in-place leases and value of tenant relationships, based in each case on their fair values.
The fair value of the tangible assets whichof an acquired property (which includes land, building and improvements and fixtures and equipment, of an acquired propertyequipment) is determined by valuing the property as if it were vacant, and the “as-if-vacant” value is then allocated to the tangible assetsland, building and improvements based on our management’s determination of relative fair values of these assets. Factors considered by our management in performing these analyses include an estimate of carrying costs during the expectedlease-up periods considering current market conditions and costs to execute similar leases. In estimating carrying costs, our management includes real estate taxes, insurance and other operating expenses and estimates of lost rental revenue during the expectedlease-up periods based on current market demand. ManagementOur management also estimates costs to execute similar leases including leasing commissions.
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In allocating the fair value of the identified intangible assets and liabilities of an acquired property, above-market and below-market in-place lease values are recorded based on the difference between the current in-place lease rent and a managementmanagement’s estimate of current market rents. Below-market lease intangibles are recorded as part of deferred revenue and amortized into rental revenue over the non-cancelable periods and any bargain renewal periods of the respective leases. Above-market leases are recorded as part of intangible assets and amortized as a direct charge against rental revenue over the non-cancelable portion of the respective leases.
The aggregate value of other acquired intangible assets, consisting of in-place leases and customer relationships, is measured by the excess of (1) the purchase price paid for a property over (2) the estimated fair value of the property as if vacant, determined as set forth above. This aggregate value is allocated between in-place lease values and customer relationships based on management’s evaluation of the specific characteristics of each tenant’s lease. The value of in-place leases are amortized to expense over the remaining non-cancelable periods and any bargain renewal periods of the respective leases. The value of customerCustomer relationships are amortized to expense over the applicable lease term plus expected renewal periods.
Revenue Recognition. We recognize revenue in accordance with Statement of Financial Accounting StandardsSFAS No. 13 Accounting for Leases, as amended, which we refer to as SFAS 13. SFAS 13 requires that revenue be recognized on a straight-line basis over the term of the lease unless another systematic and rational basis is more representative of the time pattern in which the use benefit is derived from the leased property. Renewal options in leases with rental terms that are lower than those in the primary term are excluded from the calculation of straight line rent if they dothe renewals are not meet the criteria of a bargain renewal option.reasonably assured. In those instances in which we fund tenant improvements and the improvements are deemed to be owned by us, revenue recognition will commence when the improvements are substantially completed and possession or control of the space is turned over to the tenant. When we determine that the tenant allowances are lease incentives, we commence revenue recognition when possession or control of the space is turned over to the tenant for tenant work to begin. The lease incentive is recorded as a deferred expense and amortized as a reduction of revenue on a straight-line basis over the respective lease term. We recognize lease termination payments as a component of rental revenue in the period received, provided that there are no further obligations under the lease. All above market lease assets, below market lease liabilities and deferred rent assets or liabilities for terminated leases are charged against or credited to rental revenue in the period the lease is terminated. All other capitalized lease costs and lease intangibles are accelerated via amortization expense to the date of termination.
Gains on sales of real estate are recognized in accordance with Statementpursuant to the provisions of Financial Accounting StandardsSFAS No. 66 Accounting for Sales of Real Estate, as amended, which we refer to as SFAS 66. The specific timing of the sale is measured against various criteria in SFAS 66 related to the terms of the transactions and any continuing involvement in the form of management or financial assistance associated with the properties. If the sales criteria are not met, the gain is deferred and the finance, installment or cost recovery method, as appropriate, is applied until the sales criteria are met. To the extent we sell a property and retain a partial ownership interest in the property, we recognize gain to the extent of the third party ownership interest in accordance with SFAS 66.
Accounts Receivable. We continuously monitor collections from our tenants and would make a provision for estimated losses based upon historical experience and any specific tenant collection issues that we have identified. As of December 31, 2008 and 2007, and 2006, theour allowance for doubtful accounts is insignificant.was not significant.
Impairment of Real Estate and Investment in Non-consolidated Entities.Estate. We evaluate the carrying value of all real estatetangible and investments in non-consolidated entitiesintangible assets held when a triggering event under Statement of Financial Accounting StandardsSFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, as amended, which we refer to as SFAS 144, has occurred to determine if an impairment has occurred which would require the recognition of a loss. The evaluation includes estimating and reviewing anticipated future cash flows of the property, based on current leases in place, and an estimate of what lease rents will be if the property is vacant coupled with an estimate of proceeds to be realized upon sale.derived from the asset. However, estimating market lease rents and future sale proceedscash flows is highly subjective and such estimates could differ materially from actual results.results
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Depreciation is determined by the straight-line method over the remaining estimated economic useful lives of the properties. We generally depreciate buildings and building improvements over periods ranging from 8 to 40 years, land improvements from 15 to 20 years, and fixtures and equipment from 2 to 16 years.
Only costs incurred to third parties in acquiring properties are capitalized. No internal costs (rents, salaries, overhead) are capitalized. Expenditures for maintenance and repairs are charged to operations as incurred. Significant renovations which extend the useful life of the properties are capitalized.
Impairment of Equity Method Investments. We assess whether there are indicators that the value of our equity method investments may be impaired. An investment’s value is impaired if we determine that a decline in the value of the investment below its carrying value is other than temporary. To the extent impairment has occurred, the loss shall be measured as the excess of the carrying amount of the investment over the estimated value of the investment.
Properties Held For Sale. We account for properties held for sale in accordance with SFAS 144. SFAS 144 requires that the assets and liabilities of properties that meet various criteria in SFAS 144 be presented separately in the Consolidated Balance Sheets, with assets and liabilities being separately stated. The operating results of these properties are reflected as discontinued operations in our Consolidated Statements of Operations. Properties that do not meet the held for sale criteria of SFAS 144 are accounted for as operating properties.
Investments in Non-consolidated Entities. We account for our investments in 50% or less owned entities under the equity method, unless pursuant to FIN 46R consolidation is required or if our investment in the entity is less than 3% and we have no influence over the control of the entity then the entity is accounted for under the cost method.
Marketable Equity Securities. We classify our existing marketable equity securities as available-for-sale in accordance with the provisions of SFAS No. 115, Accounting for Certain Investments in Debt and Equity Securities. These securities are carried at fair market value, with unrealized gains and losses, including our proportionate share of the unrealized gains or losses from non-consolidated entities, reported in shareholders’ equity as a component of accumulated other comprehensive income. Gains or losses on securities sold and other than temporary impairments are included in our Consolidated Statement of Operations. Sales of securities are recorded on the trade date and gains and losses are generally determined by the specific identification method.
Investments in Debt Securities. Investments in debt securities are classified as held-to-maturity, reported at amortized cost and are included with other assets in our Consolidated Balance Sheets. A decline in the market value of any held-to-maturity security below cost that is deemed to be other-than-temporary results in an impairment and would reduce the carrying amount to fair value. The impairment is charged to earnings and a new cost basis for the security is established. To determine whether an impairment is other-than-temporary, we consider whether it has the ability and intent to hold the investment until a market price recovery and considers whether evidence indicating the cost of the investment is recoverable outweighs evidence to the contrary. Evidence considered in this assessment includes the reasons for the impairment, the severity and duration of the impairment, changes in value subsequent to year-end, forecasted performance of the investee, and the general market condition in the geographic area or industry the investee operates in.
Notes Receivable. We evaluate the collectability of both interest and principal of each of our notes, if circumstances warrant, to determine whether it is impaired. A note is considered to be impaired, when based on current information and events, it is probable that we will be unable to collect all amounts due according to the existing contractual terms. When a note is considered to be impaired, the amount of the loss accrual is calculated by comparing the recorded investment to the value determined by discounting the expected future cash flows at the note’s effective interest rate. Interest on impaired notes is recognized on a cash basis.
Deferred Expenses. Deferred expenses consist primarily of debt and leasing costs. Debt costs are amortized using the straight-line method, which approximates the interest method, over the terms of the debt instruments and leasing costs are amortized over the term of the related lease.
Derivative Financial Instruments. We account for our interest rate swap agreements in accordance with SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, as amended and interpreted, which we refer to as SFAS 133. In accordance with SFAS 133, these agreements are carried on the balance sheet at their fair value, as an asset, if their fair value is positive, or as a liability, if their fair value is negative. If the interest rate swap is designated as a cash flow hedge, the effective portion of the swap’s change in fair value is reported as a component of other comprehensive income (loss) and the ineffective portion, if any, is recognized in earnings as an increase or decrease to interest expense.
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Upon entering into hedging transactions, we document the relationship between the interest rate swap agreements and the hedged liability. We also document our risk-management policies, including objectives and strategies, as they relate to our hedging activities. We assess, both at inception of a hedge and on an on-going basis, whether or not the hedge is highly effective, as defined by SFAS 133. We will discontinue hedge accounting on a prospective basis with changes in the estimated fair value reflected in earnings when: (1) it is determined that the derivative is no longer effective in offsetting cash flows of a hedge item (including forecasted transactions); (2) it is no longer probable that the forecasted transaction will occur; or (3) it is determined that designating the derivative as an interest rate swap is no longer appropriate. We may utilize interest rate swap and cap agreements to manage interest rate risk and do not anticipate entering into derivative transactions for speculative trading purposes.
Stock Compensation. We maintain an equity participation plan. Options granted under the plan in 2008 vest upon attainment of certain market performance measures and expire ten years from the date of grant. Non-vest share grants generally vest either based upon (i) time (ii) performance and/or (iii) market conditions.
Prior to January 1, 2003, we accounted for the plan under the intrinsic value-based method of accounting prescribed by Accounting Principles Board, which we refer to as APB, Opinion No. 25, Accounting for Stock Issued to Employees, and related interpretations including FASB Interpretation No. 44, Accounting for Certain Transactions involving Stock Compensation (an interpretation of APB Opinion No. 25). Effective January 1, 2003, we adopted the prospective method provisions of SFAS No. 148, Accounting for Stock-Based Compensation – Transition and Disclosure an Amendment of FASB Statement No. 123, which we refer to as SFAS No. 148, which applies the recognition provisions of FASB Statement No. 123, Accounting for Stock-Based Compensation, which we refer to as SFAS No. 123, to all employee awards granted, modified or settled after January 1, 2003.
During December 2004, the FASB issued SFAS No. 123 (revised 2004), Share-Based Payment, which we refer to as SFAS No. 123(R), and which is a revision of Statement 123. SFAS No. 123(R) supersedes APB Opinion 25. Generally, the approach in SFAS No. 123(R) is similar to the approach described in Statement 123. However, SFAS No. 123(R) requires all share-based payments to employees, including grants of employee stock options, to be recognized in the statement of operations based on their fair values. Pro-forma disclosure is no longer an alternative under SFAS No. 123(R). SFAS No. 123(R) was effective for fiscal years beginning after December 31, 2005. We began expensing stock based employee compensation with our adoption of the prospective method provisions of SFAS No. 148, effective January 1, 2003, as a result, the adoption of SFAS No. 123(R) did not have a material impact on our financial position or results of operations.
Tax Status.Matters. We have made an election to qualify, and believebelieves we are operating so as to qualify, as a REIT for federal income tax purposes. Accordingly, we generally will not be subject to federal income tax, provided that distributions to our shareholders equal at least the amount of our REIT taxable income as defined under Sections 856 through 860 of the Code.
We are now permitted to participate in certain activities from which we were previously precluded in order to maintain our qualification as a REIT, so long as these activities are conducted in entities which elect to be treated as taxable REIT subsidiaries under the Code. LRA and Lexington Contributions Inc., which we refer to as LCI, are, and LSAC was a, taxable REIT subsidiaries. As such, we are subject to federal and state income taxes on the income we receive from these activities.
Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis and operating loss and tax credit
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carry-forwards. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled.
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In June 2006, the FASB issued FASB Interpretation No. 48, Accounting for properties heldUncertainty in Income Taxes, which we refer to as FIN 48. FIN 48 clarifies the accounting for saleuncertainty in income taxes recognized in accordance with SFAS 144.No. 109, Accounting for Income Taxes, which we refer to as SFAS 144 requires that109. FIN 48 prescribes a recognition threshold and measurement attribute for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. FIN 48 was effective for fiscal years beginning after December 15, 2006. The adoption of FIN 48 did not have an impact on our consolidated financial position or results of operations.
Fair Value Measurements. In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements, as amended, which we refer to as SFAS 157. SFAS 157 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles and expands disclosures about fair value measurements. The provisions of SFAS 157 were effective for financial statements issued for fiscal years beginning after November 15, 2007 and interim periods within those fiscal years, except for those relating to non-financial assets and liabilities, which were deferred for one additional year, and a scope exception for purposes of propertiesfair value measurements affecting lease classification or measurement under SFAS No. 13 and related standards. SFAS 157 establishes a fair value hierarchy that meet various criteria be presented separatelyprioritizes observable and unobservable inputs used to measure fair value into three levels: Level 1 – quoted prices (unadjusted) in active markets that are accessible at the measurement date for assets or liabilities; Level 2 – observable prices that are based on inputs not quoted in active markets, but corroborated by market data; and Level 3 – unobservable inputs are used when little or no market data is available. The fair value hierarchy gives the highest priority to Level 1 inputs and the lowest priority to Level 3 inputs. In determining fair value, we utilize valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible as well as consider counterparty credit risk in our assessment of fair value. The adoption of the effective portions of this statement ofdid not have a material impact on our financial position, withresults of operations or cash flows. The implementation of this statement as it relates to non-financial assets and liabilities being separately stated. The operatingis not expected to have a material impact on our financial position, results of these propertiesoperations or cash flows.
In October 2008, the FASB issued FASB Staff Position FAS 157-3, which we refer to as FSP FAS 157-3, Determining the Fair Value of a Financial Asset When the Market For That Asset is Not Active, which clarifies the application of FASB 157, Fair Value Measurements, in a market that is not active. Among other things, FSP FAS 157-3 clarifies that determination of fair value in a dislocated market depends on facts and circumstances and may require the use of significant judgment about whether individual transactions are reflected as discontinuedforced liquidations or distressed sales. In cases where the volume and level of trading activity for an asset have declined significantly, the available prices vary significantly over time or among market participants, or the prices are not current, observable inputs might not be relevant and could require significant adjustment. In addition, FSP FAS 157-3 also clarifies that broker or pricing service quotes may be appropriate inputs when measuring fair value, but are not necessarily determinative if an active market does not exist for the financial asset. Regardless of the valuation techniques used, FSP FAS 157-3 requires that an entity include appropriate risk adjustments that market participants would make for nonperformance and liquidity risks. FSP FAS 157-3 was effective upon issuance and includes prior periods for which financial statements have not been issued. We have adopted FSP FAS 157-3, which did not have a material impact on our financial position, results of operations inor cash flows.
Derivative Instruments and Hedging Activities. In March 2008, the statement of operations. Properties that do not meet the held for sale criteriaFASB issued SFAS No. 161, Disclosures about Derivative Instruments and Hedging Activities- an amendment of SFAS 144No.133,which we refer to as SFAS 161. SFAS 161, which amends SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, requires companies with derivative instruments to disclose information about how and why a company uses derivative instruments, how derivative instruments and related hedged items are accounted for as operating properties.under SFAS No. 133, and how derivative instruments and related hedged items affect a company’s financial position, financial performance and cash flows. The required disclosures include the fair value of derivative instruments and their gains or losses in tabular format, information about credit-risk-related contingent features in derivative agreements, counterparty, credit risk, and the company’s strategies and objectives for using derivative instruments. SFAS 161 is effective prospectively for periods beginning on or after November 15, 2008. The adoption of this statement is not expected to have a material impact on our financial position, results of operations or cash flows.
The following recently issued accounting standard is effective for fiscal years after December 31, 2008 and requires retroactive application.
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In May 2008, the FASB issued FASB Staff Position No. APB 14-1, Accounting for Convertible Debt Instruments That May Be Settled in Cash Upon Conversion (Including Partial Cash Settlement), which we holdrefer to as FSP 14-1. FSP 14-1 is applicable to issuers of convertible debt that may be settled wholly or partly in cash. The adoption of FSP 14-1 will affect the accounting for our 5.45% Exchangeable Guaranteed Notes issued in 2007. FSP 14-1 requires the initial proceeds from the sale of the 5.45% Exchangeable Guaranteed Notes to be allocated between a liability component representing debt and an equity component representing the conversion feature. The resulting discount will be amortized using the effective interest should be consolidated pursuantmethod over the period the debt is expected to FIN 46R. Ifremain outstanding as additional interest expense. FSP 14-1 is effective for fiscal years beginning after December 31, 2008, and requires retroactive application. The adoption of FSP 14-1 will result in recognition of an aggregate unamortized debt discount of approximately $6.9 million and approximately $19.5 million as of December 31, 2008 and 2007, respectively, in our Consolidated Balance Sheets and additional interest expense in our Consolidated Statements of Operations for the entityyears then ended. The current estimate of the incremental interest expense and debt satisfaction gain reduction, net of minority interest, for each reporting period is notas follows ($000s):
For the year ended December 31 | Interest expense | Debt satisfaction gain reduction | ||||||
| 2006 | $ | — | $ | — | ||||
| 2007 | $ | 1,602 | $ | — | ||||
| 2008 | $ | 1,997 | $ | (3,714 | ) | |||
The accounting for these critical accounting policies and recently issued accounting standards involves the making of estimates based on current facts, circumstances and assumptions which could change in a variable interest entity,manner that would materially affect management’s future estimates with respect to such matters. Accordingly, future reported financial conditions and we control the entity’s voting shares or similar rights, the entity is consolidated. FIN 46R requires us to evaluate whether we have a controllingresults could differ materially from financial interest in an entity through means other than voting rights.conditions and results reported based on management’s current estimates.
Liquidity and Capital Resources
General. Since becoming a public company, our principal sources of capital for growthliquidity have been (1) undistributed cash flows generated from our investments, (2) the public and private equity and debt markets, including issuances of OP units (3) property specific debt, our credit facility, issuance of OP units(4) corporate level borrowings, and undistributed cash flows. We expect to continue to have access to and use these sources in the future; however, there are factors that may have a material adverse effect on our access to capital sources. (5) commitments from co-investment partners.
Our ability to incur additional debt to fund acquisitions is dependent upon our existing leverage, the value of the assets we are attempting to leverage and general economic and credit market conditions, which may be outside of management’s control or influence.
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We believe that cash flows from operations will continue to provide adequate capital to fund our operating and administrative expenses, regular debt service obligations and all dividend payments in accordance with REIT requirements in both the short-term and long-term. In addition, we anticipate that cash on hand, borrowings under our credit facility, issuance of equity and debt and co-investment programs as well as other alternatives, will provide the necessary capital required by us.
Cash flows from operations as reported in the Consolidated Statements of Cash Flows increased tototaled $230.2 million for 2008, $287.7 million for 2007 fromand $108.0 million for 2006 and $105.5 million for 2005.2006. The underlying drivers that impact working capital and therefore cash flows from operations are the timing of collection of rents, including reimbursements from tenants, the collection of advisory fees, payment of interest on mortgage debt and payment of operating and general and administrative costs. We believe the net lease structure of the majority of our tenants’ leases enhances cash flows from operations since the payment and timing of operating costs related to the properties are generally borne directly by the tenant. Collection and timing of tenant rents is closely monitored by management as part of our cash management program.
Net cash used inprovided by (used in) investing activities totaled $31.5$230.1 million in 2008, ($31.5) million in 2007 $154.1and ($154.1) million in 2006 and $643.8 million in 2005. Cash used in investing activities related primarily to investments in real estate properties, joint ventures and notes receivable.2006. Cash provided by investing activities related primarily to collection of notes receivable, distributions from non-consolidated entities in excess of accumulated earnings, proceeds from the sale of marketable equity securities and proceeds from the sale of properties. Cash used in investing activities related primarily to investments in real estate properties, co-investment programs, notes receivable, an increase in deferred leasing costs and the purchase of minority interests. Therefore, the fluctuation in investing activities relates primarily to the timing of investments and dispositions.
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Net cash (used in) provided by financing activities totaled ($804.6) million in 2008, $39.0 million in 2007 and $0.5 million in 2006 and $444.9 million in 2005.2006. Cash provided by financing activities during each year was primarily attributable to proceeds from equity offerings, non-recourse mortgages and borrowings under our credit facility offset by dividend and distribution payments and debt payments.payments and repurchases.
Public and Private Equity and Debt Markets. We access the public and private equity and debt markets when we believe conditions are favorable and we have a compelling use of proceeds. During 2008, we issued approximately 3.5 million common shares raising net proceeds of approximately $47.2 million. We primarily used these proceeds to retire indebtedness.
In February 2007, we completed an offering of 6.2 million Series D Preferred Shares, having a liquidation amount of $25 per share and an annual dividend rate of 7.55%, raising net proceeds of $149.8 million.
During 2007, we issued, through a wholly-owned subsidiary, $200.0 million in Trust Preferred Securities, which bear interest at a fixed rate of 6.804% through April 2017 and thereafter at a variable rate of three month LIBOR plus 170 basis points through maturity. These securities are (1) classified as debt; (2) due in 2037; and (3) redeemable by us commencing April 2012. During 2008, we repurchased, through unsolicited offers, $70.9 million of these securities for $44.6 million in cash, which resulted in a gain on debt extinguishment of $24.7 million including a write off of $1.6 million in deferred financing costs.
During 2007, we issued an aggregate $450.0 million of 5.45% Exchangeable Guaranteed Notes due in 2027. These notes can be put to us commencing in 2012 and every five years thereafter through maturity. The notes are exchangeable by the holders into common shares at a current price of $21.99 per share, subject to adjustment upon certain events, including increases in our dividend rate above a certain threshold. Upon exchange, the holders of the notes would receive (1) cash equal to the principal amount of the note and (2) to the extent the exchange value exceeds the principal amount of the note, either cash or common shares at our option. During 2008, we repurchased $239.0 million original principal amount of the notes for $169.5 million in cash and 1.6 million common shares having a value at issuance of $23.5 million (or $14.50 per share), which resulted in gains on debt extinguishment of $42.0 million, including write-offs of $4.0 million in deferred financing costs.
During 2008, we (1) repurchased 1.2 million common shares at an average price of $14.28 per share and (2) repurchased and retired 501,700 of our Series C Preferred Shares by issuing 0.7 million common shares and paying $7.5 million in cash. The difference between the cost to retire these Series C Preferred Shares and their historical cost was $5.7 million and is treated as an increase to shareholders equity and as a reduction in preferred dividends paid for calculating earnings per share. We also entered into a forward equity commitment to purchase 3.5 million of our common shares at a price of $5.60 per share, we have prepaid in cash $12.8 million of the $19.6 million purchase price as of December 31, 2008, agreed to make floating payments during the term of the forward purchase at LIBOR plus 250 basis points per annum and we retain the dividends paid on the 3.5 million common shares.
Current market conditions are not favorable for accessing the public and private equity and debt markets. Once market conditions improve, we intend to access the public and private equity markets to further our deleveraging efforts.
UPREIT Structure. Our UPREIT structure permits us to effect acquisitions by issuing to a property owner, as a form of consideration in exchange for the property, OP units in our operating partnerships. Substantially all
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outstanding OP units are redeemable by the holder at certain times for common shares on a one-for-one basis or, at our election, with respect to certain OP units, cash. Substantially all outstanding OP units require us to pay quarterly distributions to the holders of such OP units equal to the dividends paid to our common shareholders and the remaining OP units have stated distributions in accordance with their respective partnership agreement. To the extent that our dividend per share is less than a stated distribution per unit per the applicable partnership agreement, the stated distributions per unit are reduced by the percentage reduction in our dividend. No OP units have a liquidation preference. We account for outstanding OP units in a manner similar to a minority interest holder. The number of common shares that will be outstanding in the future should be expected to increase, and minority interest expense should be expected to decrease, as such OP units are redeemed for our common shares.
were exchanged into an equal number of common shares. As of December 31, 2007,2008, there were 39.75.3 million OP units outstanding. Of the total OP units outstanding, approximately 29.21.6 million are held by related parties. As
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Property Specific Debt. We expect to continue to use property specific, non-recourse mortgages as we believe that by properly matching a debt obligation, including the balloon maturity risk, with a lease expiration, our cash-on-cash returns increase and the exposure to residual valuation risk is reduced. However, the global credit and financial crisis has impacted our ability to obtain property specific debt on favorable terms.
During 2008, we obtained or assumed $21.2 million in property specific non-recourse mortgage financings on two properties, which have a fixed weighted-average interest rate of 6.0%. The proceeds of the financing not assumed were used to retire existing indebtedness.
During 2008, we informed the lender for the mortgage secured by our property in Auburn Hills, Michigan that we would no longer make debt service payments and our intention to convey the property to the lender. Following discussion with the lender, the lender foreclosed on this property on December 23, 2008, and on December 31, 2006, there2008, we entered into a settlement agreement with the lender and we were 41.2 million OP units outstanding, other than OP units held directly or indirectly by us.released from obligations under the mortgage.
We have the ability to extend the maturity date of the facility to June 2009 by requesting such extension from the lenders between February 28, 2008 and March 28, 2008 and paying $0.4 million. We anticipate that we will extend the maturity date.
In 2007,March 2008, we obtained $25.0 million and $45.0 million secured term loans from KeyBank. The loans are interest only at LIBOR plus 60 basis points, however we entered into an interest rate swap agreement which fixed the MLP issued $450 millioninterest rate at 5.52%, and mature in 5.45% guaranteed exchangeable notes due in 2027, which can be put by the holder every five years commencing 2012 and upon certain events.2013. The net proceeds of the loans of $68.0 million were used to partially repay indebtedness.indebtedness on three cross-collateralized mortgages. After such repayment, the amount owed on the three mortgages was $103.5 million, the three loans were combined into one loan, which is interest only instead of having a portion as self-amortizing and matures in September 2014. As of December 31, 2008, $25.0 million and $35.7 million was outstanding on each secured term loan and we were in compliance with the covenants contained in each loan.
On February 13, 2009, we issued $200refinanced our (1) unsecured revolving credit facility, with $25.0 million outstanding as of December 31, 2008, which was scheduled to expire in June 2009, and (2) secured term loan, with $174.3 million outstanding as of December 31, 2008, which was scheduled to mature in 2009, with a secured credit facility consisting of a $165.0 million term loan and a $85.0 million revolving credit agreement with KeyBank, as agent. The new facility bears interest at 2.85% over LIBOR and matures in February 2011, but can be extended until February 2012 at our option. The new credit facility is secured by ownership interest pledges and guarantees by certain of our subsidiaries that in the aggregate own interests in a borrowing base consisting of 72 properties. With the consent of the lenders, we can increase the size of (1) the term loan by $135.0 million and (2) the revolving loan by $115.0 million (or $250.0 million in Trust Preferred Notes. These Trust Preferred Notes, which are classified as debt, (1) are due in 2037, (2) are redeemablethe aggregate, for a total facility size of $500.0 million) by us commencing April 2012 and (3) bear interest at a fixed rate of 6.804% through April 2017 and thereafter at a variable rate of three month LIBOR plus 170 basis points through maturity.adding properties to the borrowing base.
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Liquidity Needs. Our principal liquidity needs are the contractual obligations set forth under the heading “Contractual Obligations,” below, and the payment of interestdividends to our shareholders and principal on outstanding indebtedness. distributions to the holders of OP units.
As of December 31, 2007,2008, there were $3.0$2.4 billion of mortgages and notes payable outstanding, 5.45% Exchangeable Guaranteed Notes and Trust Preferred Securities, including discontinued operations. As of December 31, 2007, theoperations, with a weighted average interest rate on our outstanding debt wasof approximately 5.9%5.6%. Our ability to make debt service payments will dependdepends upon our rental
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revenues and our ability to refinance the mortgage related thereto, sell the related property, have available amounts under our credit facility or access other capital. Our ability to accomplish such goals will be affected by numerous economic factors affecting the real estate industry, including the availability and cost of mortgage debt at the time, our equity in the mortgaged properties, the financial condition and the operating history of the mortgaged properties, the then current tax laws and the general national, regional and local economic conditions.
If we are unable to satisfy our contractual obligations with our cash flow from operations, we intend to use borrowings under our secured credit facility and proceeds from issuances of equity or debt securities.
We elected to be taxed as a REIT under Sections 856 through 860 of the Code, commencing with our taxable year ended December 31, 1993. If we qualify for taxation as a REIT, we generally will not be subject to federal corporate income taxes on our net taxable income that is currently distributed to shareholders.
In connection with our intention to continue to qualify as a REIT for federal income tax purposes, we expect to continue paying regular dividends to use property specific, non-recourse mortgagesour shareholders. These dividends are expected to be paid from operating cash flows and/or from other sources. Since cash used to pay dividends reduces amounts available for capital investments, we generally intend to maintain a conservative dividend payout ratio or we may issue common shares in lieu of cash dividends as currently permitted under the Code, reserving such amounts as we believe thatconsider necessary for the maintenance or expansion of properties in our portfolio, debt reduction, the acquisition of interests in new properties as suitable opportunities arise, and such other factors as our Board of Trustees considers appropriate.
We paid approximately $241.3 million in dividends to our common and preferred shareholders in 2008. Although we receive the majority of our base rental payments on a monthly basis, we intend to continue paying dividends quarterly. Amounts accumulated in advance of each quarterly distribution are invested by properly matching a debt obligation, includingus in short-term money market or other suitable instruments.
Capital Resources
General. Due to the balloon maturity risk,net lease structure, we historically have not incurred significant expenditures in the ordinary course of business to maintain our properties. However, as leases expire, we incur costs in extending the existing tenant leases, re-tenanting the properties with a lease expiration, ourcash-on-cash returns increase and the exposure to residual valuation risk is reduced. In December 2005, we informed the lender for our Milpitas, California property that we would no longer make debt service payments and our intention to conveysingle-tenant, or converting the property to the lendermulti-tenant. The amounts of these expenditures can vary significantly depending on tenant negotiations, market conditions and rental rates.
Single-Tenant Properties. We do not anticipate significant capital expenditures at our properties that are subject to satisfy the mortgage. We recorded a $12.1 million impairment charge in 2005 relating to this property and a gain on debt satisfaction of $6.3 million upon foreclosure on the property by the lender in 2006. During 2006, we satisfied a $20.4 million mortgage note by making a $7.5 million cash payment plus assigning a $5.4 million escrow to the lender, which resulted in a gain of $7.5 million.
Multi-Tenant Properties. Primarily as a result of non-renewals at single-tenant net lease properties, we have multi-tenant properties in our consolidated portfolio. While tenants are generally responsible for increases over base year expenses, we are responsible for the base expenses and capital expenditures at the properties.
Our property in Baltimore, Maryland was previously net-leased to St. Paul Fire and Marine Insurance Company. In April 2008, we entered into a lease termination with St. Paul Fire and Marine Insurance Company, and we assumed the direct subleases for the property. On September 30, 2009, the lease with the largest subtenant, Legg Mason, expires and we expect the building to be approximately 25% leased.
We generally fundwill need to redevelop the property expansionsto assist with additional secured borrowings,our leasing effort. We expect to upgrade the repaymentexterior façade of which is funded out of rental increases under the leases coveringbuilding and redesign the expanded properties.lobby and outside plaza. We estimate these improvements will cost approximately $22.0 million and will be completed over the next several years. We also own an adjacent parcel and are constructing a parking garage to increase the parking ratio at the property.
Vacant Properties. To the extent there is a vacancy in a property, we would be obligated for all operating expenses, including real estate taxes and insurance. In addition
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Property Expansions. Under certain leases, require usour tenants have the right to expand the facility located on our property. In the past we have generally funded, and in the future we intend to generally fund, tenant expansions.these property expansions with additional secured borrowings, the repayment of which was funded out of rental increases under the leases covering the expanded properties.
Ground Leases. Our tenants generally pay the rental obligations on ground leases either directly to the fee holder or to us as increased rent.
| 2013 and | ||||||||||||||||||||||||||||
| 2008 | 2009 | 2010 | 2011 | 2012 | Thereafter | Total | ||||||||||||||||||||||
| Notes payable(2)(3) | $ | 100,083 | $ | 339,552 | $ | 164,550 | $ | 184,059 | $ | 677,991 | $ | 1,581,315 | $ | 3,047,550 | ||||||||||||||
| Contract rights payable | — | 229 | 491 | 540 | 593 | 11,591 | 13,444 | |||||||||||||||||||||
| Purchase obligations | — | — | — | — | — | — | — | |||||||||||||||||||||
| Tenant incentives | 8,445 | 10,000 | — | — | — | — | 18,445 | |||||||||||||||||||||
| Operating lease obligations(1) | 4,431 | 3,858 | 3,631 | 3,235 | 2,830 | 16,720 | 34,705 | |||||||||||||||||||||
| $ | 112,959 | $ | 353,639 | $ | 168,672 | $ | 187,834 | $ | 681,414 | $ | 1,609,626 | $ | 3,114,144 | |||||||||||||||
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Environmental MattersMatters.
Based upon management’s ongoing review of our properties, management is not aware of any environmental condition with respect to any of our properties, which would be reasonably likely to have a material adverse effect on us. There can be no assurance, however, that (1) the discovery of environmental conditions, which were previously unknown; (2) changes in law; (3) the conduct of tenants; or (4) activities relating to properties in the vicinity of our properties, will not expose us 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 our tenants, which would adversely affect our financial condition and results of operations.
The increase in property operating expense of $23.4 million is primarily due to an increase in properties for which we have operating expense responsibility, including vacancies and properties with tenant leases subject to expense stops and base year clauses.
The increase in depreciation and amortization of $11.8 million is due primarily to the FASB issued Interpretation No. 47, Accounting for Conditional Asset Retirement Obligations — an Interpretationgrowth in real estate and intangibles in 2007 through the acquisition of SFAS Statement No. 143 (“FIN 47”). FIN 47 clarifiesproperties from our co-investment programs and the timingacceleration of liability recognition for legal obligations associatedamortization of certain intangible assets relating to lease terminations in 2008. Intangible assets are amortized over a shorter period of time (generally the lease term) than real estate assets.
The decrease in general and administrative expenses of $8.8 million is due primarily to a reduction in (1) costs of severance agreements with former officers and (2) merger costs incurred in 2007.
Non-operating income increased $13.0 million due primarily to land received in connection with a lease termination.
Debt satisfaction gains (charges), net changed $66.9 million primarily due to gains recognized on the retirement of our 5.45% Exchangeable Guaranteed Notes and Trust Preferred Securities at a tangible long-lived asset whendiscount in 2008.
The change in value of forward equity commitment represents the timingchange in value of the prepaid portion of our forward purchase equity contract entered into in 2008.
The increase in gains on sale of properties— affiliates relates to the sale of properties to NLS.
Minority interests’ share of (income) loss changed $2.0 million due primarily to the merger of the MLP with and /or methodinto us and the exchange of settlement are conditional onOP units held by limited partners in the MLP for common shares.
The equity in earnings (losses) of non-consolidated entities changed $89.8 million and is primarily due to a future event. FIN 47 is effective for fiscal years ending after December 15, 2005. The applicationdecrease in earnings in our investment in Lex-Win Concord of FIN 47 did not have a material impact$35.3 million due to impairment charges and loan loss reserves of $104.9 million recognized by Lex-Win Concord, our share of which was $52.4 million; losses of $16.9 million recognized on our consolidated financial position or resultsinvestment in NLS in 2008; and gains on sale realized of $34.2 million in 2007 relating to the dissolution of one of our former co-investment programs.
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Net income decreased by $68.4 million primarily due to the net impact of items discussed above offset by a decrease of $73.6 million in income from discontinued operations.
In June 2005,2008, 42 properties were sold and/or foreclosed and classified as held for sale, compared to 56 properties sold and classified as held for sale in 2007. The total discontinued operations, which represents properties sold or held for sale, decreased $73.6 million due to a decrease in income from discontinued operations of $28.2 million and a decrease in gains on sales of properties of $79.7 million, offset by a decrease in impairment charges of $0.7 million, a decrease in the FASB ratifiedprovision for income taxes of $2.9 million, a change in debt satisfaction gains (charges), net of $11.0 million and a change in minority interests’ share of income of $19.7 million.
Net loss applicable to common shareholders in 2008 was $12.8 million compared to net income applicable to common shareholders in 2007 of $50.1 million. The decrease is due to the Emerging Issues Task Force’s (“EITF”) consensusitems discussed above plus a reduction in Series C Preferred Share dividends of $1.2 million and a redemption discount of $5.7 million due to the repurchase of Series C Preferred Shares offset by an increase of $1.4 million in Series D Preferred Share dividends. The increase in net income in future periods will be closely tied to the level of acquisitions made by us. Without acquisitions, the sources of growth in net income are limited to index adjusted rents (such as the consumer price index), percentage rents, reduced interest expense on amortizing mortgages and variable rate indebtedness and by controlling other variable overhead costs. However, there are many factors beyond management’s control that could offset these items including, without limitation, increased interest rates and tenant monetary defaults and the other risks described in this Annual Report.
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The increase in interest and amortization expense of $98.7 million is due to the increase in long-term debt due to the growth of our portfolio resulting from the Newkirk Merger and the acquisition of the outstanding interests in our co-investment programs.
The increase in property operating expense of $28.5 million is primarily due to an increase in properties for which we have operating expense responsibility, including an increase in vacancies.
The increase in depreciation and amortization of $153.8 million is due primarily to the growth in real estate and intangibles through the acquisition of properties in the Newkirk Merger and the acquisition of the outstanding interests in our co-investment programs. Intangible assets are amortized over a shorter period of time (generally the lease term) than real estate assets.
The increase in general and administrative expenses of $3.8 million is due primarily to (1) costs associated with the Newkirk Merger ($3.2 million); (2) the costs associated with the formation and dissolution of Lexington Strategic Assets Corp., which we refer to as LSAC, ($0.9 million); (3) costs incurred in the formation of NLS ($2.3 million); and (4) professional fees ($1.2 million) all of which is offset by a reduction in other costs including personnel costs ($5.1 million), which relates primarily to the accelerated amortization of non-vested common shares in 2006 of $10.8 million and an increase in severance costs in 2007 of $4.5 million.
Non-operating income increased $7.8 million due primarily to increased interest and dividends from investments.
Debt satisfaction gains (charges), net increased $1.0 million due to mortgages being satisfied at a loss in 2007 due to sales of properties to affiliates.
The increase in gains on sale of properties—affiliates relates to the sale of properties to NLS.
Benefit (provision) for income taxes increased $3.5 million due to the write-off deferred tax assets of LSAC, the gain realized due to the sale of properties to NLS and earnings of the taxable REIT subsidiaries.
Minority interests’ share of (income) loss changed $1.5 million due to an increase in minority interest in connection with the Newkirk Merger.
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The equity in earnings (losses) of non-consolidated entities increase of $42.2 million is primarily due to the gains on sale realized relating to the dissolution of one co-investment program ($34.2 million) and gain recognized relating to the sale of an investment to NLS ($1.6 million).
Net income increased by $69.1 million primarily due to the net impact on our financial position, results of operations or cash flows.items discussed above coupled with an increase of $55.4 million in income from discontinued operations.
In December 2007, the FASB issued SFAS No. 141R, Business Combinations (“SFAS 141R”). SFAS 141R requires most identifiable assets, liabilities, noncontrolling interests,56 properties were sold and goodwill acquiredclassified as held for sale. In 2006, 17 properties were sold and classified as held for sale. Discontinued operations represents properties sold or held for sale. The total discontinued operations increased $55.4 million due to an increase in income from discontinued operations of $12.6 million coupled with a business combinationreduction in impairment charges of $18.3 million and an increase in gains on sales of properties of $70.0 million offset by an increase in provision for income taxes of $3.4 million, change in debt satisfaction gains (charges), net of $19.9 million and a change in minority interests’ share of income of $22.2 million.
Net income applicable to be recorded at “full fair value”. SFAS 141Rcommon shareholders in 2007 increased to $50.1 million compared to a net loss applicable to common shareholders in 2006 of $8.7 million. The increase is effective for acquisitions in periods beginning on or after December 15, 2008.
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Off-Balance Sheet Arrangements
Net Lease Strategic Assets Fund L.P. (NLS)L.P
Inland NLS and we are currently entitled to a return on/of each of our respective investments as follows: (1) Inland NLS, 9% on its common equity, (2) us, 6.5% on our preferred equity, (3) us, 9% on our common equity, (4) return of our preferred equity, (5) return of Inland NLS common equity (6) return of our common equity and (7) any remaining cash flow is allocated 65% to Inland NLS and 35% to us as long as we are the general partner, if not, allocations are 85% to Inland NLS and 15% to us.
In addition to the properties already owned byinitial capital contributions, we and Inland NLS committed to invest up to an additional $22.5 million and $127.5 million, respectively, in NLS has a right to acquire an additional 13 properties from us. The acquisition of each of the 13 assets by NLS is subject to satisfaction of conditions precedent to closing, including the assumption of existing financing, obtaining certain consents and waivers, the continuing financial solvency of the tenants, and certain other customary conditions. Accordingly, neither the Company nor NLS can provide any assurance that the acquisition by NLS will be completed. In the event that NLS does not acquire 11 of the assets by March 31, 2008 and two of the assets by June 30, 2008, NLS will no longer have the right to acquire thespecialty single-tenant net leased assets.
LRA has entered into a management agreement with NLS whereby LRA will receive (1) a management fee of 0.375% of the equity capital, (2) a property management fee of up to 3.0% of actual gross revenues from certain assets for which the landlord is obligated to provide property management services (contingent upon the recoverability of such fees from the tenant under the applicable lease), and (3) an acquisition fee of 0.5% of the gross purchase price of each acquired asset by NLS.
Lex-Win Concord Debt Holdings LLC
General
Following the restructuring of our investment in Concord during the third quarter of 2008 and provided that certain terms and conditions are satisfied, including payment to Inland Concord of a 10% priority return, both us and Winthrop may elect to reduce our aggregate capital investment in Concord to $200.0 million through distributions of principal payments from the retirement of existing loans and bonds in Concord’s current portfolio. In addition, Lex-Win Concord is obligated to make additional capital contributions to Concord of up to $75.0 million, of which our proportionate share is $37.5 million, only if such capital contributions are necessary under certain circumstances. We expect to only make further capital contributions in Lex-Win Concord, if a capital contribution is required under the limited liability company agreement or we believe it is appropriate to our overall investment strategy.
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Concord’s business has been to acquire and originate loan assets and debt securities. Our co-investment partner and the holder of the other 50% interest in Concord is WRT Realty L.P., which we refer to as WRT. WRT is the operating partnership subsidiary of Winthrop Realty Trust, and Michael L. Ashner, our Executive Chairman and Director of Strategic Acquisitions, is the Chairman and Chief Executive Officer of Winthrop Realty Trust.
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commercial real estate securities including collateralized mortgage-backed securities, which we refer to as CMBS and real estate collateral debt obligations, which we referCDOs. Concord sought to as a CDO.
Concord initially sought to produce a stable income stream from its investments in loan assets and loan securities by managing credit risk and interest rate risk. However, the disruption in the capital and credit markets generally have experienced anincreased margin calls on Concord’s repurchase agreements. Furthermore, the ability to issue CDOs and the availability of new financing has effectively been eliminated, making the execution of Concord’s strategy unfeasible at this time. Consequently, Concord will focus on the recovery of its equity investments by maximizing the value of its existing assets and toward that end, has worked to increase its liquidity and reduce exposure to maturing debt.
Concord began experiencing declines in volatility and reductionthe fair value of its loan securities in liquidity since the secondfourth quarter of 2007 which was initially triggered by creditconsistent with liquidity concerns emanating fromimpacting the single family residential market, particularly those loans commonly referred to as sub-prime loans. As a result ofcommercial bond and real estate markets and the increased volatility and reduction in liquidity in the debt capital markets, securitizations have become difficult if not
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CDO-1
The financing through CDO-1 enhancedwas intended to enhance Concord’s return on the loan assets and loan securities held in CDO-1 as the weighted average interest rate on the loan assets and loan securities held in CDO-1 at December 31, 20072008 was 6.7%3.96% and the weighted average interest rate on the amount payable by Concord on its notes at December 31, 20072008 was 5.4%0.95%. Accordingly, assuming the loan assets and loan securities are paid in accordance with their terms, Concord retains an average spread of the difference between the interest received on the loan assets and loan securities and the interest paid on the loan assets and loan securities.
The following table summarizes thetables provide detail on CDO-1 as of December 31, 2008:
CDO-1 loan assets,
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| CDO Loan Assets and Loan Securities — December 31, 2007 | CDO Notes — December 31, 2007 | |||||||||||||||||||||||||||
| Weighted | Weighted | Weighted | ||||||||||||||||||||||||||
| Par Value of | Average | Averaged | Outstanding | Average | ||||||||||||||||||||||||
| Date | CDO | Interest | Life | CDO | Interest | Stated | Retained | |||||||||||||||||||||
Closed | Collateral(3) | Rate | (Years) | Notes(1) | Rate | Maturity | Interest(2) | |||||||||||||||||||||
| 12/21/2006 | $ | 464,601 | 6.70 | % | 4.29 | $ | 376,650 | 5.37 | % | 12/2016 | $ | 88,350 | ||||||||||||||||
CDO Loan Assets and Loan Securities December 31, 2008 | CDO Notes December 31, 2008 | |||||||||||||||||||||||||||
Date Closed | Par Value of CDO Collateral (2) | Weighted Average Interest Rate | Weighted Average Life (years) | Outstanding CDO Notes (1) | Weighted Average Interest Rate | Stated Maturity | Retained Interests | |||||||||||||||||||||
| 12/21/06 | $ | 464,744 | 3.96 | % | 2.81 | $ | 347,525 | 0.95 | % | 12/2016 | $ | 117,475 | ||||||||||||||||
| (1) | Includes only notes held by third parties. | |
| (2) | ||
| Consists of loan assets with a par value of |
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The following table sets forth the aggregate carrying values, allocation by loan type and weighted average coupons of the loan assets and loan securities held in CDO-1 as of December 31, 2007:2008 (in thousands):
| Fixed Rate: | Floating Rate: | |||||||||||||||||||
| Carrying | Allocation by | Average | Average Spread | |||||||||||||||||
| Value(1) | Par Value | Investment Type | Yield | over LIBOR(2) | ||||||||||||||||
| (In thousands) | ||||||||||||||||||||
| Whole loans, floating rate | $ | 20,000 | $ | 20,000 | 4.31 | % | — | 195 bps | ||||||||||||
| Whole loans, fixed rate | 20,900 | 20,900 | 4.50 | % | 6.56 | % | — | |||||||||||||
| Subordinate interests in whole loans, floating rate | 108,766 | 108,864 | 23.43 | % | — | 244 bps | ||||||||||||||
| Subordinate interests in whole loans, fixed rate | 24,567 | 27,619 | 5.95 | % | 7.46 | % | — | |||||||||||||
| Mezzanine loans, floating rate | 81,419 | 81,410 | 17.52 | % | — | 270 bps | ||||||||||||||
| Mezzanine loans, fixed rate | 77,669 | 79,888 | 17.19 | % | 5.92 | % | — | |||||||||||||
| Loan securities, floating rate | 100,955 | 103,428 | 22.26 | % | — | 189 bps | ||||||||||||||
| Loan securities, floating rate | 18,448 | 22,492 | 4.84 | % | 5.97 | % | — | |||||||||||||
| Total/Average | $ | 452,724 | $ | 464,601 | 100 | % | 6.30 | % | 230 bps | |||||||||||
| Par Value | Carrying Value (1) | Allocation by Investment Type | Fixed Rate: Average Yield | Floating Rate: Average Spread over LIBOR | ||||||||||||||||
| Whole loans, floating rate | $ | 20,000 | $ | 20,000 | 4.31 | % | - | 195 bps | ||||||||||||
| Whole loans, fixed rate | 30,267 | 30,140 | 6.51 | % | 6.36 | % | - | |||||||||||||
| Subordinate interests in whole loans, floating rate | 108,864 | 108,847 | 23.42 | % | - | 292 bps | ||||||||||||||
| Subordinate interests in whole loans, fixed rate | 27,451 | 25,082 | 5.91 | % | 7.45 | % | - | |||||||||||||
| Mezzanine loans, floating rate | 81,410 | 81,410 | 17.52 | % | - | 218bps | ||||||||||||||
| Mezzanine loans, fixed rate | 68,008 | 65,938 | 14.63 | % | 6.99 | % | - | |||||||||||||
| Loan securities, floating rate | 106,368 | 75,240 | 22.89 | % | - | 195 bps | ||||||||||||||
| Loan securities, fixed rate | 22,376 | 12,713 | 4.81 | % | 5.87 | % | - | |||||||||||||
| Total/Average | $ | 464,744 | $ | 419,370 | 100.00 | % | 6.78 | % | 227 bps | |||||||||||
| (1) | Net of |
CDO-1 loan assets were diversified by industry as follows at December 31, 2008:
| Industry | % of Par Value | |||
| Hospitality | 30.78 | % | ||
| Office | 45.52 | % | ||
| Mixed Use | 5.14 | % | ||
| Retail | 4.46 | % | ||
| Industrial | 7.13 | % | ||
| Multi-family | 6.97 | % | ||
| % | ||||
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The following table sets forth the maturity dates for the loan assets held in CDO-1 at December 31, 2007:2008 (in thousands):
| Number of Loan | ||||||||||||
Year of Maturity | Assets Maturing | Carrying Value | % of Total | |||||||||
| (In thousands) | ||||||||||||
| 2008 | 7 | $ | 140,183 | 42.06 | % | |||||||
| 2009 | 2 | 34,584 | 10.38 | % | ||||||||
| 2010 | 4 | 46,465 | 13.94 | % | ||||||||
| 2011 | 1 | 20,900 | 6.27 | % | ||||||||
| 2012 | 1 | 5,017 | 1.50 | % | ||||||||
| Thereafter | 7 | 86,172 | 25.85 | % | ||||||||
| Total | 22 | $ | 333,321 | 100 | % | |||||||
| Weighted average maturity is 3.45 years(1) | ||||||||||||
| Year of Maturity (1) | Number of Loan Assets Maturity | Carrying Value | % of Total | |||||||||
| 2009 | 9 | $ | 174,840 | 52.76 | % | |||||||
| 2010 | 4 | 46,890 | 14.15 | % | ||||||||
| 2011 | 1 | 6,300 | 1.90 | % | ||||||||
| 2012 | 1 | 5,045 | 1.52 | % | ||||||||
| 2013 and thereafter | 8 | 98,342 | 29.67 | % | ||||||||
| Total | 23 | $ | 331,417 | 100.00 | % | |||||||
| (1) | Weighted average maturity is 3.08 years. The calculation of weighted average maturity is based upon the remaining initial term and does not take into account any maturity extension periods or the ability to prepay the investment after a negotiated lock-out period, which may be available to the borrower. |
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The following table sets forth the maturity dates, assuming remaining extensions are exercised by the applicable borrower, for the loan assets held in CDO-1 at December 31, 2008 (in thousands):
| Year of Maturity (1) | Number of Loan Assets Maturing | Carrying Value | % of Total | |||||||||
| 2009 | - | $ | - | - | ||||||||
| 2010 | 3 | 26,472 | 7.99 | % | ||||||||
| 2011 | 9 | 177,963 | 53.70 | % | ||||||||
| 2012 | 3 | 28,640 | 8.64 | % | ||||||||
| 2013 and thereafter | 8 | 98,342 | 29.67 | % | ||||||||
| Total | 23 | $ | 331,417 | 100.00 | % | |||||||
| (1) | Weighted average maturity is 3.94 years. The calculation of weighted average maturity is based upon the remaining initial term and the exercise of any extension options available to the borrower. |
The following table sets forth a summary of the loan securities held in CDO-1 at December 31, 2007 (in thousands):2008:
| Gross Unrealized | Impairment | Carrying | ||||||||||||||||||
Description | Par Value | Loss | Loss | Value | ||||||||||||||||
| Floating rate | $ | 22,492 | $ | (321 | ) | $ | (1,601 | ) | $ | 18,448 | ||||||||||
| Fixed rate | 103,428 | (2,355 | ) | — | 100,955 | |||||||||||||||
| Total | $ | 125,920 | $ | (2,676 | ) | $ | (1,601 | ) | $ | 119,403 | ||||||||||
| Description | Par Value | Amortized Cost | Gross Unrealized Loss | Impairment Loss | Carrying Value | |||||||||||||||
| Fixed rate | $ | 22,376 | $ | 20,481 | $ | - | $ | (7,768 | ) | $ | 12,713 | |||||||||
| Floating rate | 106,368 | 106,325 | (30 | ) | (31,055 | ) | 75,240 | |||||||||||||
| Total | $ | 128,744 | $ | 126,806 | $ | (30 | ) | $ | (38,823 | ) | $ | 87,953 | ||||||||
The following table sets forth a summary of the underlying Standard & Poor’s credit rating of the loan securities held in CDO-1 at December 31, 2007:2008:
Rating | Par Value | Percentage | ||||||
| (In thousands) | ||||||||
| BBB+ | $ | 9,000 | 7.15 | % | ||||
| BBB | 2,151 | 1.71 | % | |||||
| BBB- | 44,384 | 35.25 | % | |||||
| BB+ | 33,392 | 26.52 | % | |||||
| BB | 18,500 | 14.69 | % | |||||
| B+ | 7,000 | 5.56 | % | |||||
| Not rated | 11,493 | 9.12 | % | |||||
| Total | $ | 125,920 | 100 | % | ||||
| Rating | Par Value | Percentage | ||||||
| (In thousands) | ||||||||
| A- | $ | 1,211 | 0.94 | % | ||||
| BBB+ | 9,000 | 6.99 | % | |||||
| BBB | 13,376 | 10.39 | % | |||||
| BBB- | 36,004 | 27.97 | % | |||||
| BB+ | 12,797 | 9.94 | % | |||||
| BB | 9,000 | 6.99 | % | |||||
| B+ | 20,000 | 15.53 | % | |||||
| B- | 9,393 | 7.30 | % | |||||
| CCC- | 11,000 | 8.54 | % | |||||
| Not rated | 6,963 | 5.41 | % | |||||
| Total | $ | 128,744 | 100.00 | % | ||||
Concord’s Other Loan Assets and Loan Securities
Concord acquired other loan assets and loan securities outside of CDO-1, which it originally intended to contribute to a second CDO. As the market for bonds collateralized by debt obligations has declined, Concord has been unable to launch a second CDO platform.
54
The following table setstables set forth the aggregate carrying values, allocation by loaninvestment type and weighted average couponsyields of Concord’s loan assets and loan securities in addition to its equity and debt interest inheld by Concord outside of CDO-1 as of December 31, 2007:2008 (in thousands):
| Fixed Rate: | Floating Rate: | |||||||||||||||||||
| Allocation by | Average | Average Spread | ||||||||||||||||||
| Carrying Value(1) | Par Value | Investment Type | Yield | over LIBOR(2) | ||||||||||||||||
| (In thousands) | ||||||||||||||||||||
| Whole loans, floating rate | $ | 136,260 | $ | 136,260 | 19 | % | — | 218 bps | ||||||||||||
| Whole loans, fixed rate | 6,300 | 6,300 | 1 | % | 6.40 | % | — | |||||||||||||
| Subordinate interests in whole loans, floating rate | 163,077 | 163,908 | 23 | % | — | 223 bps | ||||||||||||||
| Subordinate interests in whole loans, fixed rate | 14,196 | 15,750 | 2 | % | 8.63 | % | — | |||||||||||||
| Mezzanine loans, floating rate | 230,852 | 236,436 | 33 | % | — | 222 bps | ||||||||||||||
| Mezzanine loans, fixed rate | 68,028 | 71,718 | 10 | % | 7.45 | % | — | |||||||||||||
| Loan securities, floating rate | 43,260 | 56,400 | 8 | % | — | 143 bps | ||||||||||||||
| Loan securities, fixed rate | 25,411 | 27,084 | 4 | % | 6.68 | % | — | |||||||||||||
| Total/Average | $ | 687,384 | $ | 713,856 | 100 | % | 7.38 | % | 214 bps | |||||||||||
Par Value | Carrying Value (1) | Allocation by Investment Type | Fixed Rate: Average Yield | Floating Rate: Average Spread over LIBOR | ||||||||||||||||
| Whole loans, floating rate | $ | 109,172 | $ | 105,172 | 16.93 | % | - | 182 bps | ||||||||||||
| Whole loans, fixed rate | 39,900 | 30,000 | 6.19 | % | 9.15 | % | - | |||||||||||||
| Subordinate interests in whole loans, floating rate | 148,645 | 144,577 | 23.05 | % | - | 216 bps | ||||||||||||||
| Subordinate interests in whole loans, fixed rate | 15,750 | 14,291 | 2.44 | % | 8.63 | % | - | |||||||||||||
| Mezzanine loans, floating rate | 190,334 | 188,621 | 29.52 | % | - | 215 bps | ||||||||||||||
| Mezzanine loans, fixed rate | 65,702 | 54,098 | 10.19 | % | 8.35 | % | - | |||||||||||||
| Loan securities, floating rate | 75,364 | 30,538 | 11.68 | % | - | 141 bps | ||||||||||||||
| Loan loss reserve | - | (5,032 | ) | - | - | - | ||||||||||||||
| Total/Average | $ | 644,867 | $ | 562,265 | 100.00 | % | 8.65 | % | 198 bps | |||||||||||
| (1) | Net of | |
The following table sets forth the maturity dates, assuming no remaining extensions are exercised by the applicable borrower, for Concord’s other loan assets:
| Number of Loan | ||||||||||||
Year of Maturity | Assets Maturing | Carrying Value | % of Total | |||||||||
| (In thousands) | ||||||||||||
| 2008 | 9 | $ | 185,500 | 30.0 | % | |||||||
| 2009 | 9 | 134,052 | 21.7 | % | ||||||||
| 2010 | 3 | 81,903 | 13.2 | % | ||||||||
| 2011 | 1 | 6,300 | 1.0 | % | ||||||||
| 2012 | 3 | 72,968 | 11.8 | % | ||||||||
| Thereafter | 8 | 137,990 | 22.3 | % | ||||||||
| Total | 33 | $ | 618,713 | 100 | % | |||||||
| Weighted average maturity is 2.72 years(1) | ||||||||||||
Year of Maturity (1) | Number of Loan Assets Maturing | Carrying Value (in thousands) | % of Total | |||||||||
| 2009 | 18 | $ | 254,355 | 47.84 | % | |||||||
| 2010 | 5 | 154,164 | 28.98 | % | ||||||||
| 2011 | 1 | 16,000 | 3.01 | % | ||||||||
| 2012 | 3 | 70,576 | 13.27 | % | ||||||||
| 2013 and thereafter | 8 | 41,664 | 7.84 | % | ||||||||
| Loan loss reserve | (5,032 | ) | (0.94 | )% | ||||||||
| Total | 35 | $ | 531,727 | 100.00 | % | |||||||
| (1) | The calculation of weighted average maturity of 1.76 years is based upon the remaining initial term and does not take into account any maturity extension periods or the ability to prepay the investment after a negotiated lock-out period, which in either case may be available to the borrower. |
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The following table sets forth a summarythe maturity dates, assuming all remaining extensions are exercised, for Concord��s other loan assets:
| Year of Maturity (1) | Number of Loan Assets Maturing | Carrying Value (in thousands) | % of Total | |||||||||
| 2009 | 1 | $ | 1,438 | 0.27 | % | |||||||
| 2010 | 3 | 48,711 | 9.16 | % | ||||||||
| 2011 | 10 | 147,388 | 27.72 | % | ||||||||
| 2012 | 13 | 297,558 | 55.95 | % | ||||||||
| 2013 and thereafter | 8 | 41,664 | 7.84 | % | ||||||||
| Loan loss reserve | (5,032 | ) | (0.94 | )% | ||||||||
| Total | 35 | $ | 531,727 | 100.00 | % | |||||||
| (1) | The calculation of weighted average maturity of 3.24 years is based upon the remaining term, assuming the exercise of all extension options available to the borrower. |
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Concord’s non CDO-1 loan assets were diversified by industry as follows at December 31, 2008:
| Industry | % of Par Value | |||
| Hospitality | 41.65 | % | ||
| Office | 43.88 | % | ||
| Mixed Use | 5.88 | % | ||
| Industrial | 0.26 | % | ||
| Multi-family | 8.33 | % | ||
| 100.00 | % | |||
The following tables summarize Concord’s other loan securities at December 31, 2007:2008 (in thousands):
| Gross Unrealized | Impairment | Carrying | ||||||||||||||
Description | Par Value | Loss | Loss | Value | ||||||||||||
| Floating rate | $ | 56,400 | $ | (3,487 | ) | $ | (9,427 | ) | $ | 43,260 | ||||||
| Fixed rate | 27,084 | (1,673 | ) | — | 25,411 | |||||||||||
| Total | $ | 83,484 | $ | (5,160 | ) | $ | (9,427 | ) | $ | 68,671 | ||||||
| Description | Par Value | Amortized Cost | Gross Unrealized Gain | Impairment Loss | Carrying Value | |||||||||||||||
| Floating rate | $ | 75,364 | $ | 75,088 | $ | 120 | $ | (44,670 | ) | $ | 30,538 | |||||||||
The following table sets forth a summary of the underlying Standard & Poor’s credit rating of Concord’s other loan securities at December 31, 2007:2008:
Rating | Par Value | Percentage | ||||||
| AA- | $ | 1,381 | 1.65 | % | ||||
| A- | 1,966 | 2.36 | % | |||||
| BBB+ | 25,094 | 30.06 | % | |||||
| BBB | 15,833 | 18.97 | % | |||||
| BBB- | 30,392 | 36.40 | % | |||||
| BB+ | 5,000 | 5.99 | % | |||||
| Not rated | 3,818 | 4.57 | % | |||||
| Total | $ | 83,484 | 100 | % | ||||
| Rating | Par Value | Percentage | ||||||
| BBB+ | $ | 1,094 | 1.45 | % | ||||
| BBB | 6,260 | 8.31 | % | |||||
| BBB- | 22,280 | 29.56 | % | |||||
| BB | 4,700 | 6.24 | % | |||||
| B | 1,133 | 1.50 | % | |||||
| B- | 1,474 | 1.96 | % | |||||
| D | 14,246 | 18.90 | % | |||||
| Not rated | 24,177 | 32.08 | % | |||||
| Total | $ | 75,364 | 100.00 | % | ||||
Credit Facilities
On March 7, 2008, Concord entered into a $100.0 million secured revolving credit facility with KeyBank. The credit facility enables Concord to finance existing unlevered assets as well as new assets acquired by Concord. The initial maximum borrowings under the loan are $100.0 million, expandable to $350.0 million upon compliance with certain conditions. Borrowings under the facility bear interest at spreads over LIBOR ranging from 1.75% to 2.25%, depending on the underlying loan asset or debt security for which such borrowing is made. At December 31, 2008, $80.0 million was outstanding on the credit facility, the weighted average interest rate on amounts outstanding during the year was 2.71%, and the carrying value of loan assets securing the facility was approximately $136.0 million. The facility matures March 2010 and may be extended to March 2011. The credit facility is subject to financial covenants and other covenants on an ongoing basis.
Under the terms of the facility, Concord is required to maintain minimum liquidity, comprised of cash and cash equivalents, of at least $10.0 million at all times. At certain times during the year ended December 31, 2008 and at certain times subsequent to the year ended December 31, 2008, Concord’s cash balances declined to an amount below the $10.0 million liquidity requirements. On February 24, 2009, Concord received a waiver of the retrospective covenant violation from KeyBank. In addition, the covenant will be waived through June 30, 2009. In connection with the waiver, Concord agreed that all regular cash flow of Concord from interest payments on the KeyBank collateral shall be applied in the following manner:
| a) | first, to payments due to KeyBank; |
| b) | second, together with other available cash flow of Concord, for distribution by Concord for payment of the preferred distribution to holders of preferred membership interests; |
| c) | third, together with other available cash flow of Concord, up to $6.0 million annually for distribution by Concord for payment of common distribution to Lex-Win Concord; |
| d) | fourth, available cash flow in an amount such that not less than $10.0 million shall have been deposited and maintained in account at KeyBank as a cash reserve; and |
| e) | any remaining cash flow shall be paid to KeyBank to reduce the outstanding loan balance. |
56 | ||||
Under the terms of three of which are loan asset/loan security specific. That is, under the non-loan asset/loan security specific repurchase facilities, Concord hasis required to maintain minimum liquidity, comprised of cash and cash equivalents, of at least $10.0 million at all times. At certain times during the ability to pay back the loan with respect to such asset/loan securityyear ended December 31, 2008 and finance other loan assets or loan securities through such facility. With respectat certain times subsequent to the loan asset/loan security specific
57
year ended December 31, 2008, Concord’s cash balance declined to an amount below the $10.0 million minimum liquidity requirements. On February 22, 2009, Concord modified its repurchase facilities oncewith Column Financial Inc. to eliminate the loan assets or loan securities securing such facility satisfied,liquidity covenant and on February 24, 2009, Concord cannot usereceived a waiver of the facility for additional loan assets or loan securities.retrospective covenant as well as a waiver of the liquidity requirement through June 30, 2009 from Greenwich Capital Financial Products, Inc.
The following table summarizes the terms of Concord’s current repurchase facilities at December 31, 20072008 (in thousands):
| Maximum | Carrying Value of | |||||||||||||||||||
| Outstanding | Outstanding | Interest Rate — | Maturity | Assets | ||||||||||||||||
Counterparty | Balance | Balance | LIBOR Plus(5) | Date | Securing Facility | |||||||||||||||
| Greenwich(1) | $ | 39,079 | $ | 39,079 | 100 bps | 12/08 | $ | 55,827 | ||||||||||||
| Greenwich(1) | 59,613 | 59,613 | 100 bps | 12/12 | 70,146 | |||||||||||||||
| Column(1) | 16,414 | 16,414 | 100 bps | 3/09 | (3) | 25,270 | ||||||||||||||
| Column(2) | 350,000 | 308,508 | 85-135 bps(4 | ) | 3/09 | 412,561 | ||||||||||||||
| Bear Stearns(2) | 150,000 | 48,710 | 85-115 bps(4 | ) | 11/08 | 82,258 | ||||||||||||||
| Counterparty | Maximum Outstanding Balance | Outstanding Balance | Interest Rate – LIBOR Plus | Maturity Date | Carrying Value of Loan Assets Securing Facility | ||||||||||||
| Greenwich (1) | $ | 21,516 | $ | 21,516 | 100 bps | 12/09 | $ | 36,452 | |||||||||
| Greenwich (1) | 59,613 | 59,613 | 100 bps | 2/12 | 71,417 | ||||||||||||
| Column (1) | 15,000 | 15,000 | 100 bps | 3/09 | (4) | 25,880 | |||||||||||
| Column (2) | 150,000 | (4) | 144,475 | 85-135 bps (3) | 3/11 | 261,981 | |||||||||||
| (1) | Repurchase facilities cover specific loan assets and may not be used for any other loan assets. |
| (2) | Repurchase |
| (3) | Interest rate is based on type of loan asset or loan security for which financing is provided. Weighted average |
| (4) | In February 2009, the $15,000 asset-specific repurchase agreement was terminated and |
Concord utilizes interest rate swaps to manage interest rate risk. At December 31, 2008, Concord had $203.3 million of notional amounts of hedges. The three counterparties of these arrangements are major financial institutions. Concord is exposed to credit risk in the event of non-performance by these counterparties.
57
Contractual Obligations
The following summarizes the Company’s principal contractual obligations as of December 31, 2008 ($000’s):
| 2009 | 2010 | 2011 | 2012 | 2013 | 2014 and Thereafter | Total | ||||||||||||||||||||||
| Notes payable(2)(3)(5)(6) | $ | 305,464 | $ | 145,151 | $ | 119,901 | $ | 433,159 | $ | 318,587 | $ | 1,056,987 | $ | 2,379,249 | ||||||||||||||
| Contract rights payable | 229 | 491 | 540 | 593 | 652 | 12,271 | 14,776 | |||||||||||||||||||||
| Purchase obligations (4) | — | — | 6,802 | — | — | — | 6,802 | |||||||||||||||||||||
| Operating lease obligations(1) | 3,111 | 2,867 | 2,479 | 604 | 451 | 3,214 | 12,726 | |||||||||||||||||||||
| $ | 308,804 | $ | 148,509 | $ | 129,722 | $ | 434,356 | $ | 319,690 | $ | 1,072,472 | $ | 2,413,553 | |||||||||||||||
| (1) | Includes ground lease payments and office rent. Amounts disclosed do not include rents that adjust to fair market value. In addition certain ground lease payments due under bond leases allow for a right of offset between the lease obligation and the debt service and accordingly are not included. |
| (2) | We have $1.7 million in outstanding letters of credit. |
| (3) | Includes balloon payments. |
| (4) | Represents the December 31, 2008 fair value of the remaining forward purchase equity commitment which must be settled by October 2011. |
| (5) |
| (6) | |
We may be required to fund up to $37.5 million of additional capital to Lex-Win Concord as required by its limited liability company agreement. We may be required to fund up to $22.5 million of additional capital to NLS as required by its limited partnership agreement.
Item 7A. Quantitative and Qualitative Disclosure about Market Risk
Our exposure to market risk relates primarily to our variable rate and fixed rate debt. As of December 31, 2008 and 2007, and 2006, our consolidated variable rate indebtedness was approximately $199.3 million and $213.6 million, respectively, which represented 7.0%8.4% and 28.8%, respectively,7.0% of total mortgageslong-term indebtedness, respectively. During 2008 and notes payable. During 2007, and 2006, thisour variable rate indebtedness had a weighted average interest rate of 7.0%3.7% and 6.8%7.0%, respectively. Had the weighted average interest rate been 100 basis points higher, our interest expense for 2008 and 2007 would have been increased by $1.5approximately $2.0 million and $0.1$1.5 million, in 2007 and 2006, respectively. As of December 31, 2008 and 2007, and 2006, our consolidated fixed rate debt, including discontinued operations, was $2,833.9 millionapproximately $2.2 billion and $1,516.6 million,$2.8 billion respectively, which represented 93.0%91.6% and 71.2%93.0%, respectively, of total long-term indebtedness.
For certain of our financial instruments, fair values are not readily available since there are no active trading markets as characterized by current exchanges between willing parties. Accordingly, we derive or estimate fair values using various valuation techniques, such as computing the present value of estimated future cash flows using discount rates commensurate with the risks involved. However, the determination of estimated cash flows may be subjective and imprecise. Changes in assumptions or estimation methodologies can have a material effect on these estimated fair values. The weighted averagefollowing fair values were determined using the interest rates that we believe our outstanding fixed rate debt would warrant as of December 31, 20072008 and are indicative of the interest rate environment as of December 31, 2008, and do not take into consideration the effects of subsequent interest rate fluctuations. Accordingly, we estimate that the fair value of our fixed rate debt is $1.9 billion as of December 31, 2008.
Our interest rate risk objectives are to limit the impact of interest rate fluctuations on earnings and cash flows and to lower our overall borrowing costs. To achieve these objectives, we manage our exposure to fluctuations in market interest rates through the use of fixed rate debt was 5.9%, which approximatesinstruments to the weighted average fixed rate for debt obtained by us during 2007. The weighted averageextent that reasonably favorable rates are obtainable with such arrangements. We may enter into derivative financial instruments such as interest rate asswaps or caps to mitigate our interest rate risk on a related financial instrument or to effectively lock the interest rate on a portion of December 31, 2006 of fixedour variable rate debt was 6.0%. With only $31.8 million in consolidated debt maturing in 2008, we believedebt. Currently, we have limited market risk exposure to rising interest rates as it relates to our fixed rate debt obligations. However, had the fixedone interest rate been higher by 100 basis points, our interest expense would have been increased by $25.9 million and $11.9 million for years ended December 31, 2007 and 2006, respectively.swap agreement.
58
58
MANAGEMENT’S ANNUAL REPORT ON INTERNAL CONTROLS
OVER FINANCIAL REPORTING
Management is responsible for establishing and maintaining adequate internal controls over financial reporting. Our internal control system was designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation and fair presentation of published financial statements in accordance with U.S. generally accepted accounting principles.
All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.
In assessing the effectiveness of our internal controls over financial reporting, management used as guidance the criteria established inInternal Control — Integrated Frameworkissued by the Committee of Sponsoring Organizations of the Treadway Commission. Based upon the assessment performed, management believes that our internal controls over financial reporting are effective as of December 31, 2007.2008.
Our internal control over financial reporting includes policies and procedures that pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect transactions and dispositions of assets; provide reasonable assurances that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. generally accepted accounting principles, and that receipts and expenditures are being made only in accordance with authorizations of our management and the members of our Board of Trustees; and provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on our financial statements.
Our independent registered public accounting firm, KPMG LLP, independently assessed the effectiveness of our internal controls over financial reporting. KPMG LLP has issued a report which is included on page 6162 of this Annual Report.
59
Item 8. Financial Statements and Supplementary Data
LEXINGTON REALTY TRUST
AND CONSOLIDATED SUBSIDIARIES
INDEX
INDEX
| Page | ||||
| Reports of Independent Registered Public Accounting Firm | 61-62 | |||
| Consolidated Balance Sheets as of December 31, | 2007 | 63 | ||
| Consolidated Statements of Operations for the years ended December 31, 2008, 2007 | 2006 | 64 | ||
| Consolidated Statements of Comprehensive Income (Loss) for the years ended December 31, 2008, 2007 | 2006 | 65 | ||
| Consolidated Statements of Changes in Shareholders’ Equity for the years ended December 31, 2008, 2007 | 2006 | 66 | ||
| Consolidated Statements of Cash Flows for the years ended December 31, 2008, 2007 | 2006 | 67 | ||
| Notes to Consolidated Financial Statements | 68-96 | |||
| Financial Statement Schedule | ||||
| Schedule III — Real Estate and Accumulated Depreciation | 97-100 | |||
60
60
Report of Independent Registered Public Accounting Firm
The Trustees and Shareholders
Lexington Realty Trust:
We have audited the accompanying consolidated financial statements of Lexington Realty Trust and subsidiaries (the “Company”), 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 financial statement schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements and financial statement schedule based on our audits. We did not audit the financial statements of Lex-Win Concord LLC (“Concord”), a 50 percent-owned investee company. The Company’s investment in Concord at December 31, 2008 was $109.6 million, and its equity in losses of Concord and other comprehensive loss attributable to Concord was $30.2 million and $6.1 million, respectively, for the year then ended. The financial statements of Concord were audited by other auditors whose report has been furnished to us, and our opinion, insofar as it relates to the amounts included for Concord, is based solely on the report of the other auditors.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). 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 and the report of other auditors provide a reasonable basis for our opinion.
In our opinion, based on our audits and the report of other auditors, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Lexington Realty Trust and subsidiaries as of December 31, 2008 and 2007, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2008, in conformity with U.S. 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.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company’s internal control over financial reporting as of December 31, 2008, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated March 1, 2009 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.
(signed) KPMG LLP
New York, New York
March 1, 2009
61
Report of Independent Registered Public Accounting Firm
The Trustees and Shareholders
Lexington Realty Trust:
We have audited Lexington Realty Trust’s (the “Company”) internal control over financial reporting as of December 31, 2007,2008, based on criteria established in Internal Control —– Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying management’s annual report on internal controls over financial reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and trustees of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2007,2008, based on criteria established in Internal Control —– Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated financial statements as listed in the accompanying index, and our report dated February 28, 2008March 1, 2009 expressed an unqualified opinion on those consolidated financial statements.
New York, New York
61
62
62
LEXINGTON REALTY TRUST
AND CONSOLIDATED SUBSIDIARIES
Consolidated Balance Sheets
($000 except per share amounts)
As of December 31,
| 2008 | 2007 | |||||||
| ASSETS | ||||||||
| Real estate, at cost: | ||||||||
| Buildings and building improvements | $ | 3,106,784 | $ | 3,388,421 | ||||
| Land and land estates | 617,762 | 694,020 | ||||||
| Land improvements | 797 | 893 | ||||||
| Fixtures and equipment | 8,089 | 11,944 | ||||||
| Construction in progress | 22,756 | 13,819 | ||||||
| 3,756,188 | 4,109,097 | |||||||
| Less: accumulated depreciation and amortization | 461,661 | 379,831 | ||||||
| 3,294,527 | 3,729,266 | |||||||
| Properties held for sale — discontinued operations | 8,150 | 150,907 | ||||||
| Intangible assets (net of accumulated amortization of $283,926 in 2008 and $181,190 in 2007) | 343,192 | 516,698 | ||||||
| Cash and cash equivalents | 67,798 | 412,106 | ||||||
| Restricted cash | 31,369 | 41,026 | ||||||
| Investment in and advances to non-consolidated entities | 179,133 | 226,476 | ||||||
| Deferred expenses (net of accumulated amortization of $13,994 in 2008 and $12,154 in 2007) | 35,904 | 42,040 | ||||||
| Notes receivable | 68,812 | 69,775 | ||||||
| Rent receivable — current | 19,829 | 25,289 | ||||||
| Rent receivable — deferred | 19,255 | 15,303 | ||||||
| Other assets, net | 37,919 | 36,277 | ||||||
| $ | 4,105,888 | $ | 5,265,163 | |||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
| Liabilities: | ||||||||
| Mortgages and notes payable | $ | 2,033,854 | $ | 2,312,422 | ||||
| Exchangeable notes payable | 211,000 | 450,000 | ||||||
| Trust preferred securities | 129,120 | 200,000 | ||||||
| Contract rights payable | 14,776 | 13,444 | ||||||
| Dividends payable | 24,681 | 158,168 | ||||||
| Liabilities — discontinued operations | 6,142 | 119,093 | ||||||
| Accounts payable and other liabilities | 33,814 | 49,442 | ||||||
| Accrued interest payable | 16,345 | 23,507 | ||||||
| Deferred revenue – below market leases (net of accretion of $36,474 in 2008 and $14,076 in 2007) | 121,722 | 217,389 | ||||||
| Prepaid rent | 20,126 | 16,764 | ||||||
| 2,611,580 | 3,560,229 | |||||||
| Minority interests | 94,996 | 765,863 | ||||||
| 2,706,576 | 4,326,092 | |||||||
| Commitments and contingencies (Notes 8, 9, 11, 12, 14, & 16) | ||||||||
| Shareholders’ equity: | ||||||||
| Preferred shares, par value $0.0001 per share; authorized 100,000,000 shares; | ||||||||
| Series B Cumulative Redeemable Preferred, liquidation preference, $79,000, 3,160,000 shares issued and outstanding | 76,315 | 76,315 | ||||||
| Series C Cumulative Convertible Preferred, liquidation preference $129,915 and $155,000; 2,598,300 and 3,100,000 shares issued and outstanding in 2008 and 2007, respectively | 126,217 | 150,589 | ||||||
| Series D Cumulative Redeemable Preferred, liquidation preference $155,000; 6,200,000 shares issued and outstanding | 149,774 | 149,774 | ||||||
| Special Voting Preferred Share, par value $0.0001 per share; 1 share authorized, issued and outstanding in 2007 | — | — | ||||||
| Common shares, par value $0.0001 per share, authorized 400,000,000 shares, 100,300,238 and 61,064,334 shares issued and outstanding in 2008 and 2007, respectively | 10 | 6 | ||||||
| Additional paid-in-capital | 1,624,463 | 1,033,332 | ||||||
| Accumulated distributions in excess of net income | (561,817 | ) | (468,167 | ) | ||||
| Accumulated other comprehensive income (loss) | (15,650 | ) | (2,778 | ) | ||||
| Total shareholders’ equity | 1,399,312 | 939,071 | ||||||
| $ | 4,105,888 | $ | 5,265,163 | |||||
The accompanying notes are an integral part of these consolidated financial statements.
63
LEXINGTON REALTY TRUST
AND CONSOLIDATED SUBSIDIARIES
Consolidated Statements of Operations
($000 except per share amounts)
Years ended December 31,
| 2008 | 2007 | 2006 | ||||||||||
| Gross revenues: | ||||||||||||
| Rental | $ | 396,546 | $ | 373,877 | $ | 164,557 | ||||||
| Advisory and incentive fees | 1,432 | 13,567 | 4,555 | |||||||||
| Tenant reimbursements | 43,253 | 32,214 | 16,851 | |||||||||
| Total gross revenues | 441,231 | 419,658 | 185,963 | |||||||||
| Expense applicable to revenues: | ||||||||||||
| Depreciation and amortization | (239,899 | ) | (228,050 | ) | (74,280 | ) | ||||||
| Property operating | (82,187 | ) | (58,764 | ) | (30,268 | ) | ||||||
| General and administrative | (30,515 | ) | (39,334 | ) | (35,500 | ) | ||||||
| Non-operating income | 24,410 | 11,448 | 3,671 | |||||||||
| Interest and amortization expense | (156,063 | ) | (162,028 | ) | (63,282 | ) | ||||||
| Debt satisfaction gains (charges), net | 65,651 | (1,209 | ) | (216 | ) | |||||||
| Change in value of forward equity commitment | (2,128 | ) | — | — | ||||||||
| Gains on sales of properties - affiliates | 31,806 | 17,864 | — | |||||||||
| Income (loss) before benefit (provision) for income taxes, minority interests, equity in earnings (losses) of non-consolidated entities and discontinued operations | 52,306 | (40,415 | ) | (13,912 | ) | |||||||
| Benefit (provision) for income taxes | (3,008 | ) | (3,288 | ) | 237 | |||||||
| Minority interests’ share of (income) loss | 3,131 | 1,110 | (358 | ) | ||||||||
| Equity in earnings (losses) of non-consolidated entities | (43,305 | ) | 46,467 | 4,248 | ||||||||
| Income (loss) from continuing operations | 9,124 | 3,874 | (9,785 | ) | ||||||||
| Discontinued operations | ||||||||||||
| Income from discontinued operations | 753 | 28,948 | 16,356 | |||||||||
| Provision for income taxes | (506 | ) | (3,413 | ) | (73 | ) | ||||||
| Debt satisfaction gains (charges), net | 3,062 | (7,950 | ) | 11,935 | ||||||||
| Gains on sales of properties | 13,151 | 92,878 | 22,866 | |||||||||
| Impairment charges | (16,519 | ) | (17,170 | ) | (35,430 | ) | ||||||
| Minority interests’ share of (income) loss | (600 | ) | (20,316 | ) | 1,884 | |||||||
| Total discontinued operations | (659 | ) | 72,977 | 17,538 | ||||||||
| Net income | 8,465 | 76,851 | 7,753 | |||||||||
| Dividends attributable to preferred shares — Series B | (6,360 | ) | (6,360 | ) | (6,360 | ) | ||||||
| Dividends attributable to preferred shares — Series C | (8,852 | ) | (10,075 | ) | (10,075 | ) | ||||||
| Dividends attributable to preferred shares — Series D | (11,703 | ) | (10,298 | ) | — | |||||||
| Redemption discount – Series C | 5,678 | — | — | |||||||||
| Net income (loss) allocable to common shareholders | $ | (12,772 | ) | $ | 50,118 | $ | (8,682 | ) | ||||
| Income (loss) per common share — basic: | ||||||||||||
| Income (loss) from continuing operations, after preferred dividends | $ | (0.18 | ) | $ | (0.35 | ) | $ | (0.50 | ) | |||
| Income (loss) from discontinued operations | (0.01 | ) | 1.12 | 0.33 | ||||||||
| Net income (loss) allocable to common shareholders | $ | (0.19 | ) | $ | 0.77 | $ | (0.17 | ) | ||||
| Weighted average common shares outstanding — basic | 67,872,590 | 64,910,123 | 52,163,569 | |||||||||
| Income (loss) per common share — diluted: | ||||||||||||
| Income (loss) from continuing operations, after preferred dividends | $ | (0.18 | ) | $ | (0.35 | ) | $ | (0.50 | ) | |||
| Income (loss) from discontinued operations | (0.01 | ) | 1.12 | 0.33 | ||||||||
| Net income (loss) allocable to common shareholders | $ | (0.19 | ) | $ | 0.77 | $ | (0.17 | ) | ||||
| Weighted average common shares outstanding — diluted | 67,872,590 | 64,910,123 | 52,163,569 | |||||||||
The accompanying notes are an integral part of these consolidated financial statements.
| 2007 | 2006 | |||||||
ASSETS | ||||||||
| Real estate, at cost: | ||||||||
| Buildings and building improvements | $ | 3,388,421 | $ | 3,107,234 | ||||
| Land and land estates | 694,020 | 625,717 | ||||||
| Land improvements | 893 | 2,044 | ||||||
| Fixtures and equipment | 11,944 | 12,161 | ||||||
| 4,095,278 | 3,747,156 | |||||||
| Less: accumulated depreciation | 379,831 | 276,129 | ||||||
| 3,715,447 | 3,471,027 | |||||||
| Properties held for sale — discontinued operations | 150,907 | 69,612 | ||||||
| Intangible assets (net of accumulated amortization of $181,190 in 2007 and $33,724 in 2006) | 516,698 | 468,244 | ||||||
| Investment in and advances to non-consolidated entities | 226,476 | 247,045 | ||||||
| Cash and cash equivalents | 412,106 | 97,547 | ||||||
| Investment in marketable equity securities (cost of $2,647 in 2007 and $31,247 in 2006) | 2,609 | 32,036 | ||||||
| Deferred expenses (net of accumulated amortization of $12,154 in 2007 and $6,834 in 2006) | 42,040 | 16,084 | ||||||
| Rent receivable — current | 25,289 | 43,283 | ||||||
| Rent receivable — deferred | 15,303 | 29,410 | ||||||
| Notes receivable | 69,775 | 50,534 | ||||||
| Other assets, net | 88,513 | 100,035 | ||||||
| $ | 5,265,163 | $ | 4,624,857 | |||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
| Liabilities: | ||||||||
| Mortgages and notes payable | $ | 2,312,422 | $ | 2,126,810 | ||||
| Exchangable notes payable | 450,000 | — | ||||||
| Trust notes payable | 200,000 | — | ||||||
| Contract rights payable | 13,444 | 12,231 | ||||||
| Liabilities — discontinued operations | 119,093 | 6,064 | ||||||
| Accounts payable and other liabilities | 49,442 | 25,877 | ||||||
| Accrued interest payable | 23,507 | 10,818 | ||||||
| Dividends payable | 158,168 | 44,948 | ||||||
| Prepaid rent | 16,764 | 10,109 | ||||||
| Deferred revenue (net of accretion of $14,076 in 2007 and $1,029 in 2006) | 217,389 | 362,815 | ||||||
| 3,560,229 | 2,599,672 | |||||||
| Minority interests | 765,863 | 902,741 | ||||||
| 4,326,092 | 3,502,413 | |||||||
| Commitments and contingencies (Notes 8, 9, 11, 12, 14, & 16) | ||||||||
| Shareholders’ equity: | ||||||||
| Preferred shares, par value $0.0001 per share; authorized 100,000,000 shares; | ||||||||
| Series B Cumulative Redeemable Preferred, liquidation preference, $79,000, 3,160,000 shares issued and outstanding | 76,315 | 76,315 | ||||||
| Series C Cumulative Convertible Preferred, liquidation preference $155,000; 3,100,000 shares issued and outstanding | 150,589 | 150,589 | ||||||
| Series D Cumulative Convertible Preferred, liquidation preference $155,000; 6,200,000 shares issued and outstanding in 2007 | 149,774 | — | ||||||
| Special Voting Preferred Share, par value $0.0001 per share; authorized and issued 1 share in 2007 and 2006 | — | — | ||||||
| Common shares, par value $0.0001 per share, authorized 400,000,000 shares, 61,064,334 and 69,051,781 shares issued and outstanding in 2007 and 2006, respectively | 6 | 7 | ||||||
Additionalpaid-in-capital | 1,033,332 | 1,188,900 | ||||||
| Accumulated distributions in excess of net income | (468,167 | ) | (294,640 | ) | ||||
| Accumulated other comprehensive income (loss) | (2,778 | ) | 1,273 | |||||
| Total shareholders’ equity | 939,071 | 1,122,444 | ||||||
| $ | 5,265,163 | $ | 4,624,857 | |||||
64
LEXINGTON REALTY TRUST
AND CONSOLIDATED SUBSIDIARIES
Consolidated Statements of Comprehensive Income (Loss)
($000)
Years ended December 31,
| 2008 | 2007 | 2006 | ||||||||||
| Net income | $ | 8,465 | $ | 76,851 | $ | 7,753 | ||||||
| Other comprehensive income (loss): | ||||||||||||
| Change in unrealized gain (loss) in marketable equity securities, net | 107 | (896 | ) | 789 | ||||||||
| Change in unrealized gain (loss) in foreign currency translation | (96 | ) | 371 | 484 | ||||||||
| Change in share of unrealized loss on investments in non-consolidated entities, net of minority interest share, net | (5,800 | ) | (3,526 | ) | — | |||||||
| Change in unrealized loss on interest rate swap, net of minority interest share, net | (2,064 | ) | — | — | ||||||||
| Less reclassification of minority interest accumulated other comprehensive loss | (5,019 | ) | — | — | ||||||||
| Other comprehensive income (loss) | (12,872 | ) | (4,051 | ) | 1,273 | |||||||
| Comprehensive income (loss) | $ | (4,407 | ) | $ | 72,800 | $ | 9,026 | |||||
The accompanying notes are an integral part of these consolidated financial statements.
63
65
LEXINGTON REALTY TRUST
AND CONSOLIDATED SUBSIDIARIES
Consolidated Statements of Operations
Changes in Shareholders’ Equity
Changes in Shareholders’ Equity
($000 except per share amounts)
Years ended December 31,
| 2007 | 2006 | 2005 | ||||||||||
| Gross revenues: | ||||||||||||
| Rental | $ | 385,898 | $ | 165,275 | $ | 146,848 | ||||||
| Advisory and incentive fees | 13,567 | 4,555 | 5,365 | |||||||||
| Tenant reimbursements | 32,282 | 16,863 | 10,170 | |||||||||
| Total gross revenues | 431,747 | 186,693 | 162,383 | |||||||||
| Expense applicable to revenues: | ||||||||||||
| Depreciation and amortization | (236,044 | ) | (75,849 | ) | (61,004 | ) | ||||||
| Property operating | (61,095 | ) | (30,947 | ) | (20,641 | ) | ||||||
| General and administrative | (39,389 | ) | (35,514 | ) | (17,554 | ) | ||||||
| Impairment charges | (15,500 | ) | (7,221 | ) | — | |||||||
| Non-operating income | 10,726 | 8,913 | 1,502 | |||||||||
| Interest and amortization expense | (163,628 | ) | (65,097 | ) | (56,177 | ) | ||||||
| Debt satisfaction gains (charges), net | (1,209 | ) | 7,228 | 4,409 | ||||||||
| Income (loss) before benefit (provision) for income taxes, minority interests, equity in earnings of non-consolidated entities, gains on sale of properties-affiliates and discontinued operations | (74,392 | ) | (11,794 | ) | 12,918 | |||||||
| Benefit (provision) for income taxes | (3,374 | ) | 238 | 150 | ||||||||
| Minority interests | 2,652 | (601 | ) | (1,694 | ) | |||||||
| Equity in earnings of non-consolidated entities | 46,467 | 4,248 | 6,232 | |||||||||
| Gains on sale of properties-affiliates | 17,864 | — | — | |||||||||
| Income (loss) from continuing operations | (10,783 | ) | (7,909 | ) | 17,606 | |||||||
| Discontinued operations | ||||||||||||
| Income from discontinued operations | 29,561 | 14,459 | 17,593 | |||||||||
| Provision for income taxes | (3,327 | ) | (73 | ) | — | |||||||
| Debt satisfaction (charges) gains | (7,950 | ) | 4,492 | (731 | ) | |||||||
| Gains on sales of properties | 92,878 | 22,866 | 12,291 | |||||||||
| Impairment charges | (1,670 | ) | (28,209 | ) | (13,006 | ) | ||||||
| Minority interests share of (income) loss | (21,858 | ) | 2,127 | (1,058 | ) | |||||||
| Total discontinued operations | 87,634 | 15,662 | 15,089 | |||||||||
| Net income | 76,851 | 7,753 | 32,695 | |||||||||
| Dividends attributable to preferred shares — Series B | (6,360 | ) | (6,360 | ) | (6,360 | ) | ||||||
| Dividends attributable to preferred shares — Series C | (10,075 | ) | (10,075 | ) | (10,075 | ) | ||||||
| Dividends attributable to preferred shares — Series D | (10,298 | ) | — | — | ||||||||
| Net income (loss) allocable to common shareholders | $ | 50,118 | $ | (8,682 | ) | $ | 16,260 | |||||
| Income (loss) per common share — basic: | ||||||||||||
| Income (loss) from continuing operations | $ | (0.58 | ) | $ | (0.47 | ) | $ | 0.03 | ||||
| Income from discontinued operations | 1.35 | 0.30 | 0.30 | |||||||||
| Net income (loss) | $ | 0.77 | $ | (0.17 | ) | $ | 0.33 | |||||
| Weighted average common shares outstanding — basic | 64,910,123 | 52,163,569 | 49,835,773 | |||||||||
| Income (loss) per common share — diluted: | ||||||||||||
| Income (loss) from continuing operations | $ | (0.58 | ) | $ | (0.47 | ) | $ | 0.03 | ||||
| Income from discontinued operations | 1.35 | 0.30 | 0.30 | |||||||||
| Net income (loss) | $ | 0.77 | $ | (0.17 | ) | $ | 0.33 | |||||
| Weighted average common shares outstanding — diluted | 64,910,123 | 52,163,569 | 49,902,649 | |||||||||
Number of Preferred Shares | Amount | Number of Common Shares | Amount | Additional Paid-in Capital | Deferred Compensation, Net | Accumulated Distributions In Excess of Net Income | Accumulated Other Comprehensive Income (Loss) | Total Shareholders’ Equity | ||||||||||||||||||||||||||||
| Balance at December 31, 2005 | 6,260,000 | $ | 226,904 | 52,155,855 | $ | 5 | $ | 848,564 | $ | (11,401 | ) | $ | (172,762 | ) | $ | — | $ | 891,310 | ||||||||||||||||||
| Net income | — | — | — | — | — | — | 7,753 | — | 7,753 | |||||||||||||||||||||||||||
| Adoption of new accounting principle (Note 2) | — | — | — | — | (11,401 | ) | 11,401 | — | — | — | ||||||||||||||||||||||||||
| Dividends — common shareholders | — | — | — | — | — | — | (109,088 | ) | — | (109,088 | ) | |||||||||||||||||||||||||
| Dividends — preferred shareholders | — | — | — | — | — | — | (20,543 | ) | — | (20,543 | ) | |||||||||||||||||||||||||
| Issuance of common shares, net | — | — | 16,895,926 | 2 | 351,737 | — | — | — | 351,739 | |||||||||||||||||||||||||||
| Issuance of special voting preferred | 1 | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||
| Other comprehensive income | — | — | — | — | — | — | — | 1,273 | 1,273 | |||||||||||||||||||||||||||
| Balance at December 31, 2006 | 6,260,001 | 226,904 | 69,051,781 | 7 | 1,188,900 | — | (294,640 | ) | 1,273 | 1,122,444 | ||||||||||||||||||||||||||
| Net income | — | — | — | — | — | — | 76,851 | — | 76,851 | |||||||||||||||||||||||||||
| Dividends — common shareholders | — | — | — | — | — | — | (223,746 | ) | — | (223,746 | ) | |||||||||||||||||||||||||
| Dividends — preferred shareholders | — | — | — | — | — | — | (26,733 | ) | — | (26,733 | ) | |||||||||||||||||||||||||
| Issuance of common shares, net | — | — | 1,608,369 | — | 34,554 | — | 101 | — | 34,655 | |||||||||||||||||||||||||||
| Repurchase of common shares | — | — | (9,595,816 | ) | (1 | ) | (190,122 | ) | — | — | — | (190,123 | ) | |||||||||||||||||||||||
| Issuance of preferred shares, net | 6,200,000 | 149,774 | — | — | — | — | — | — | 149,774 | |||||||||||||||||||||||||||
| Other comprehensive income (loss) | — | — | — | — | — | — | — | (4,051 | ) | (4,051 | ) | |||||||||||||||||||||||||
| Balance at December 31, 2007 | 12,460,001 | 376,678 | 61,064,334 | 6 | 1,033,332 | — | (468,167 | ) | (2,778 | ) | 939,071 | |||||||||||||||||||||||||
| Net income | — | — | — | — | — | — | 8,465 | — | 8,465 | |||||||||||||||||||||||||||
| Dividends — common shareholders | — | — | — | — | — | — | (80,904 | ) | — | (80,904 | ) | |||||||||||||||||||||||||
| Dividends — preferred shareholders | — | — | — | — | — | — | (26,915 | ) | — | (26,915 | ) | |||||||||||||||||||||||||
| Redemption discount – Series C | — | — | — | — | — | — | 5,678 | — | 5,678 | |||||||||||||||||||||||||||
| Retirement of special voting preferred | (1 | ) | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||
| Issuance of common shares, net | — | — | 40,415,704 | 4 | 607,984 | — | 26 | — | 608,014 | |||||||||||||||||||||||||||
| Repurchase of common shares | — | — | (1,179,800 | ) | — | (16,853 | ) | — | — | — | (16,853 | ) | ||||||||||||||||||||||||
| Repurchase of preferred shares | (501,700 | ) | (24,372 | ) | — | — | — | — | — | — | (24,372 | ) | ||||||||||||||||||||||||
| Other comprehensive income (loss) | — | — | — | — | — | — | — | (12,872 | ) | (12,872 | ) | |||||||||||||||||||||||||
| Balance at December 31, 2008 | 11,958,300 | $ | 352,306 | 100,300,238 | $ | 10 | $ | 1,624,463 | $ | — | $ | (561,817 | ) | $ | (15,650 | ) | $ | 1.399,312 | ||||||||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
64
66
LEXINGTON REALTY TRUST
AND CONSOLIDATED SUBSIDIARIES
Consolidated Statements of Comprehensive Income
($000)
Cash Flows
Cash Flows
($000 except per share amounts)
Years ended December 31,
| 2007 | 2006 | 2005 | ||||||||||
| Net income | $ | 76,851 | $ | 7,753 | $ | 32,695 | ||||||
| Change in other comprehensive income: | ||||||||||||
| Unrealized gain (loss) in marketable equity securities | (896 | ) | 789 | — | ||||||||
| Unrealized gain in foreign currency translation | 371 | 484 | — | |||||||||
| Unrealized loss on investments in non-consolidated entities | (3,526 | ) | — | — | ||||||||
| Other comprehensive income (loss) | (4,051 | ) | 1,273 | — | ||||||||
| Comprehensive income | $ | 72,800 | $ | 9,026 | $ | 32,695 | ||||||
| 2008 | 2007 | 2006 | ||||||||||
| Cash flows from operating activities: | ||||||||||||
| Net income | $ | 8,465 | $ | 76,851 | $ | 7,753 | ||||||
| Adjustments to reconcile net income to net cash provided by operating activities, net of effects from acquisitions: | ||||||||||||
| Depreciation and amortization | 248,928 | 253,535 | 84,734 | |||||||||
| Minority interests | (2,531 | ) | 19,206 | (1,525 | ) | |||||||
| Gains on sales of properties | (44,957 | ) | (110,742 | ) | (22,866 | ) | ||||||
| Debt satisfaction charges (gains), net | (68,830 | ) | 2,250 | (14,761 | ) | |||||||
| Impairment charges | 16,519 | 17,170 | 35,430 | |||||||||
| Straight-line rents | 2,114 | 16,151 | (4,923 | ) | ||||||||
| Other non-cash charges | 5,093 | 16,774 | 17,233 | |||||||||
| Equity in (earnings) losses of non-consolidated entities | 43,305 | (46,474 | ) | (4,186 | ) | |||||||
| Distributions of accumulated earnings from non-consolidated entities | 1,697 | 7,930 | 8,058 | |||||||||
| Deferred tax assets, net | 1,313 | 2,358 | (738 | ) | ||||||||
| (Decrease) increase in accounts payable and other liabilities | (9,129 | ) | 4,999 | 1,999 | ||||||||
| Change in rent receivable and prepaid rent, net | 22,829 | 12,378 | (3,521 | ) | ||||||||
| (Decrease) increase in accrued interest payable | (6,026 | ) | 15,193 | 1,383 | ||||||||
| Other adjustments, net | 11,411 | 72 | 3,950 | |||||||||
| Net cash provided by operating activities | 230,201 | 287,651 | 108,020 | |||||||||
| Cash flows from investing activities: | ||||||||||||
| Net proceeds from sales/transfers of properties | 238,600 | 423,634 | 76,627 | |||||||||
| Net proceeds from sales of properties-affiliates | 95,576 | 126,628 | — | |||||||||
| Purchase of minority interests | (5,311 | ) | — | — | ||||||||
| Cash paid relating to Merger | — | — | (12,395 | ) | ||||||||
| Investments in real estate including intangible assets | (94,610 | ) | (163,746 | ) | (173,661 | ) | ||||||
| Investments in and advances to non-consolidated entities | (18,388 | ) | (97,942 | ) | (9,865 | ) | ||||||
| Acquisition of interest in certain non-consolidated entities | — | (366,614 | ) | — | ||||||||
| Acquisition of additional interest in LSAC | — | (24,199 | ) | (42,619 | ) | |||||||
| Collection of notes from affiliate | — | — | 8,300 | |||||||||
| Issuance of notes receivable to affiliate | — | — | (8,300 | ) | ||||||||
| Principal payments received on loans receivable | 1,468 | 8,499 | — | |||||||||
| Real estate deposits | 223 | 1,756 | 359 | |||||||||
| Investment in notes receivable | (1,000 | ) | — | (11,144 | ) | |||||||
| Proceeds from the sale of marketable equity securities | 2,506 | 29,462 | — | |||||||||
| Investment in marketable equity securities | — | (723 | ) | (5,019 | ) | |||||||
| Distribution from non-consolidated entities in excess of accumulated earnings | 26,355 | 9,457 | 19,640 | |||||||||
| Increase in deferred leasing costs | (11,988 | ) | (5,713 | ) | (1,737 | ) | ||||||
| Change in escrow deposits and restricted cash | (3,303 | ) | 28,011 | 5,734 | ||||||||
| Net cash provided by (used in) investing activities | 230,128 | (31,490 | ) | (154,080 | ) | |||||||
| Cash flows from financing activities: | ||||||||||||
| Proceeds of mortgages and notes payable | 13,700 | 246,965 | 147,045 | |||||||||
| Change in credit facility borrowing, net | 25,000 | (65,194 | ) | 65,194 | ||||||||
| Dividends to common and preferred shareholders | (241,306 | ) | (137,259 | ) | (93,681 | ) | ||||||
| Dividend reinvestment plan proceeds | — | 5,652 | 12,525 | |||||||||
| Repurchase of exchangeable notes | (169,479 | ) | — | — | ||||||||
| Repurchase of trust preferred securities | (44,561 | ) | — | — | ||||||||
| Principal payments on debt, excluding normal amortization | (242,679 | ) | (665,124 | ) | (82,010 | ) | ||||||
| Principal amortization payments | (64,552 | ) | (73,351 | ) | (28,966 | ) | ||||||
| Debt deposits | — | — | 291 | |||||||||
| Proceeds from term loan | 70,000 | 225,000 | — | |||||||||
| Proceeds from trust preferred securities | — | 200,000 | — | |||||||||
| Proceeds from exchangeable notes | — | 450,000 | — | |||||||||
| Issuance of common/preferred shares | 47,014 | 149,898 | 272 | |||||||||
| Repurchase of common and preferred shares | (24,374 | ) | (190,123 | ) | (11,159 | ) | ||||||
| Contributions from minority partners | 1,957 | — | 810 | |||||||||
| Cash distributions to minority partners | (158,930 | ) | (84,858 | ) | (8,554 | ) | ||||||
| Increase in deferred financing costs | (2,712 | ) | (18,707 | ) | (1,169 | ) | ||||||
| Swap termination costs | (415 | ) | — | — | ||||||||
| Payments on forward purchase of common shares | (12,825 | ) | — | — | ||||||||
| Purchases of partnership units | (475 | ) | (3,926 | ) | (115 | ) | ||||||
| Net cash (used in) provided by financing activities | (804,637 | ) | 38,973 | 483 | ||||||||
| Cash acquired in co-investment program acquisition | — | 20,867 | — | |||||||||
| Cash associated with sale of interest in entity | — | (1,442 | ) | — | ||||||||
| Cash attributable to newly consolidated entity | — | — | 31,985 | |||||||||
| Cash attributable to Merger | — | — | 57,624 | |||||||||
| Change in cash and cash equivalents | (344,308 | ) | 314,559 | 44,032 | ||||||||
| Cash and cash equivalents, beginning of year | 412,106 | 97,547 | 53,515 | |||||||||
| Cash and cash equivalents, end of year | $ | 67,798 | $ | 412,106 | $ | 97,547 | ||||||
The accompanying notes are an integral part of these consolidated financial statements.
65
67
LEXINGTON REALTY TRUST
AND CONSOLIDATED SUBSIDIARIES
| �� | Accumulated | Accumulated | ||||||||||||||||||||||||||||||||||
| Number of | Number of | Additional | Deferred | Distributions | Other | Total | ||||||||||||||||||||||||||||||
| Preferred | Common | Paid-in | Compensation, | In Excess of | Comprehensive | Shareholders’ | ||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Net | Net Income | Income (Loss) | Equity | ||||||||||||||||||||||||||||
| Balance at December 31, 2004 | 5,860,000 | $ | 207,441 | 48,621,273 | $ | 5 | $ | 766,882 | $ | (8,692 | ) | $ | (118,346 | ) | $ | — | $ | 847,290 | ||||||||||||||||||
| Net income | — | — | — | — | — | — | 32,695 | — | 32,695 | |||||||||||||||||||||||||||
| Dividends — common shareholders | — | — | — | — | — | — | (72,617 | ) | — | (72,617 | ) | |||||||||||||||||||||||||
| Dividends — preferred shareholders | — | — | — | — | — | — | (14,494 | ) | — | (14,494 | ) | |||||||||||||||||||||||||
| Issuance of common shares, net | — | — | 3,534,582 | — | 81,682 | (5,575 | ) | — | — | 76,107 | ||||||||||||||||||||||||||
| Issuance of preferred shares, net | 400,000 | 19,463 | — | — | — | — | — | — | 19,463 | |||||||||||||||||||||||||||
| Amortization of deferred compensation | — | — | — | — | — | 2,866 | — | — | 2,866 | |||||||||||||||||||||||||||
| Balance at December 31, 2005 | 6,260,000 | 226,904 | 52,155,855 | 5 | 848,564 | (11,401 | ) | (172,762 | ) | — | 891,310 | |||||||||||||||||||||||||
| Net income | — | — | — | — | — | — | 7,753 | — | 7,753 | |||||||||||||||||||||||||||
| Adoption of new accounting principle (Note 2) | — | — | — | — | (11,401 | ) | 11,401 | — | — | — | ||||||||||||||||||||||||||
| Dividends — common shareholders | — | — | — | — | — | — | (109,088 | ) | — | (109,088 | ) | |||||||||||||||||||||||||
| Dividends — preferred shareholders | — | — | — | — | — | — | (20,543 | ) | — | (20,543 | ) | |||||||||||||||||||||||||
| Issuance of common shares, net | — | — | 16,895,926 | 2 | 351,737 | — | — | — | 351,739 | |||||||||||||||||||||||||||
| Issuance of special voting preferred | 1 | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||
| Other comprehensive income | — | — | — | — | — | — | — | 1,273 | 1,273 | |||||||||||||||||||||||||||
| Balance at December 31, 2006 | 6,260,001 | 226,904 | 69,051,781 | 7 | 1,188,900 | — | (294,640 | ) | 1,273 | 1,122,444 | ||||||||||||||||||||||||||
| Net income | — | — | — | — | — | — | 76,851 | — | 76,851 | |||||||||||||||||||||||||||
| Dividends — common shareholders | — | — | — | — | — | — | (223,746 | ) | — | (223,746 | ) | |||||||||||||||||||||||||
| Dividends — preferred shareholders | — | — | — | — | — | — | (26,733 | ) | — | (26,733 | ) | |||||||||||||||||||||||||
| Issuance of common shares, net | — | — | 1,608,369 | — | 34,554 | — | 101 | — | 34,655 | |||||||||||||||||||||||||||
| Repurchase of common shares | — | — | (9,595,816 | ) | (1 | ) | (190,122 | ) | — | — | — | (190,123 | ) | |||||||||||||||||||||||
| Issuance of preferred shares, net | 6,200,000 | 149,774 | — | — | — | — | — | — | 149,774 | |||||||||||||||||||||||||||
| Other comprehensive loss | — | — | — | — | — | — | — | (4,051 | ) | (4,051 | ) | |||||||||||||||||||||||||
| Balance at December 31, 2007 | 12,460,001 | $ | 376,678 | 61,064,334 | $ | 6 | $ | 1,033,332 | $ | — | $ | (468,167 | ) | $ | (2,778 | ) | $ | 939,071 | ||||||||||||||||||
66
| 2007 | 2006 | 2005 | ||||||||||
| Cash flows from operating activities: | ||||||||||||
| Net income | $ | 76,851 | $ | 7,753 | $ | 32,695 | ||||||
| Adjustments to reconcile net income to net cash provided by operating activities, net of effects from acquisitions: | ||||||||||||
| Depreciation and amortization | 253,535 | 84,734 | 73,034 | |||||||||
| Minority interests | 19,206 | (2,842 | ) | 2,165 | ||||||||
| Gains on sales of properties | (110,742 | ) | (21,549 | ) | (11,578 | ) | ||||||
| Debt satisfaction charges (gains), net | 2,250 | (14,761 | ) | (4,536 | ) | |||||||
| Impairment charges | 17,170 | 35,430 | 12,879 | |||||||||
| Straight-line rents | 16,151 | (4,923 | ) | (3,447 | ) | |||||||
| Other non-cash charges | 16,774 | 17,233 | 4,196 | |||||||||
| Equity in earnings of non-consolidated entities | (46,474 | ) | (4,186 | ) | (6,220 | ) | ||||||
| Distributions of accumulated earnings from non-consolidated entities | 7,930 | 8,058 | 7,561 | |||||||||
| Deferred tax assets | 2,358 | (738 | ) | (466 | ) | |||||||
| Increase (decrease) in accounts payable and other liabilities | 4,999 | 1,999 | (788 | ) | ||||||||
| Change in rent receivable and prepaid rent, net | 12,378 | (3,521 | ) | 2,790 | ||||||||
| Increase in accrued interest payable | 15,193 | 1,383 | 235 | |||||||||
| Other adjustments, net | 72 | 3,950 | (3,063 | ) | ||||||||
| Net cash provided by operating activities | 287,651 | 108,020 | 105,457 | |||||||||
| Cash flows from investing activities: | ||||||||||||
| Net proceeds from sales/transfers of properties | 423,634 | 76,627 | 96,685 | |||||||||
| Net proceeds from sales of properties-affiliates | 126,628 | — | — | |||||||||
| Cash paid relating to Merger | — | (12,395 | ) | — | ||||||||
| Investments in real estate properties and intangible assets | (163,746 | ) | (173,661 | ) | (759,656 | ) | ||||||
| Investments in and advances to non-consolidated entities | (97,942 | ) | (9,865 | ) | (41,943 | ) | ||||||
| Acquisition of interest in certain non-consolidated entities | (366,614 | ) | — | — | ||||||||
| Acquisition of additional interest in LSAC | (24,199 | ) | (42,619 | ) | — | |||||||
| Collection of notes from affiliate | — | 8,300 | 45,800 | |||||||||
| Issuance of notes receivable to affiliate | — | (8,300 | ) | — | ||||||||
| Principal payments received on loans receivable | 8,499 | — | — | |||||||||
| Collection of notes | — | — | 3,488 | |||||||||
| Real estate deposits | 1,756 | 359 | 1,579 | |||||||||
| Investment in notes receivable | — | (11,144 | ) | — | ||||||||
| Proceeds from the sale of marketable equity securities | 29,462 | — | — | |||||||||
| Investment in marketable equity securities | (723 | ) | (5,019 | ) | — | |||||||
| Distribution from non-consolidated entities in excess of accumulated earnings | 9,457 | 19,640 | 17,202 | |||||||||
| Increase in deferred leasing costs | (5,713 | ) | (1,737 | ) | (2,919 | ) | ||||||
| Change in escrow deposits and restricted cash | 28,011 | 5,734 | (4,013 | ) | ||||||||
| Net cash used in investing activities | (31,490 | ) | (154,080 | ) | (643,777 | ) | ||||||
| Cash flows from financing activities: | ||||||||||||
| Proceeds of mortgages and notes payable | 246,965 | 147,045 | 516,520 | |||||||||
| Change in credit facility borrowing, net | (65,194 | ) | 65,194 | — | ||||||||
| Dividends to common and preferred shareholders | (137,259 | ) | (93,681 | ) | (87,111 | ) | ||||||
| Dividend reinvestment plan proceeds | 5,652 | 12,525 | 13,815 | |||||||||
| Principal payments on debt, excluding normal amortization | (665,124 | ) | (82,010 | ) | (50,936 | ) | ||||||
| Principal amortization payments | (73,351 | ) | (28,966 | ) | (25,313 | ) | ||||||
| Debt deposits | — | 291 | 1,334 | |||||||||
| Proceeds from term loan | 225,000 | — | — | |||||||||
| Proceeds from trust preferred notes | 200,000 | — | — | |||||||||
| Proceeds from exchangeable notes | 450,000 | — | — | |||||||||
| Issuance of common/preferred shares | 149,898 | 272 | 80,671 | |||||||||
| Repurchase of common shares | (190,123 | ) | (11,159 | ) | — | |||||||
| Contributions from minority partners | — | 810 | 9,412 | |||||||||
| Cash distributions to minority partners | (84,858 | ) | (8,554 | ) | (7,028 | ) | ||||||
| Increase in deferred financing costs | (18,707 | ) | (1,169 | ) | (6,403 | ) | ||||||
| Purchases of partnership units | (3,926 | ) | (115 | ) | (83 | ) | ||||||
| Net cash provided by financing activities | 38,973 | 483 | 444,878 | |||||||||
| Cash acquired in co-investment program acquisition | 20,867 | — | — | |||||||||
| Cash associated with sale of interest in entity | (1,442 | ) | — | — | ||||||||
| Cash attributable to newly consolidated entity | — | 31,985 | — | |||||||||
| Cash attributable to Merger | — | 57,624 | — | |||||||||
| Change in cash and cash equivalents | 314,559 | 44,032 | (93,442 | ) | ||||||||
| Cash and cash equivalents, beginning of year | 97,547 | 53,515 | 146,957 | |||||||||
| Cash and cash equivalents, end of year | $ | 412,106 | $ | 97,547 | $ | 53,515 | ||||||
67
($000 except per share/unit amounts)
December 31, 20072008 and 20062007
(1) The Company
Lexington Realty Trust, formerly Lexington Corporate Properties Trust (the “Company”), is a self-managed and self-administered Maryland statutory real estate investment trust (“REIT”) that acquires, owns, and manages a geographically diversified portfolio of net leased office, industrial and retail properties and provides investment advisory and asset management services to institutional investors in the net lease area. As of December 31, 2007,2008, the Company owned or had ownership interests in approximately 280225 consolidated properties located in 4241 states and the Netherlands. The real properties owned by the Company are generally subject to triple net leases to corporate tenants, howeverwhich are generally characterized as leases in which the tenant pays all or substantially all of the cost and/or cost increases for real estate taxes, insurance, utilities and ordinary maintenance of the property. However, certain leases provide forthat the Company to beis responsible for certain operating expenses. As of December 31, 2006,2007, the Company owned or had ownership interests in approximately 365280 consolidated properties in 4442 states and the Netherlands.
On December 31, 2006, the Company completed its merger (the “Merger”) with Newkirk Realty Trust, Inc., (“Newkirk”). Newkirk’s primary business was similar to the primary business of the Company. All of Newkirk’s operations were conducted and all of its assets were held through its master limited partnership, The Newkirk Master Limited Partnership which we refer to as the MLP.(“MLP”). Newkirk was the general partner and owned 31.0% of the units of limited partnershippartner interest in the MLP (the “MLP units”). In connection with the Merger, the Company changed its name to Lexington Realty Trust, the MLP was renamed The Lexington Master Limited Partnership and an affiliate of the Company became the general partner of the MLP and another affiliate of the Company became the holder of a 31.0% ownership interest in the MLP. As of December 31, 2007, the Company owns 50.0% of the MLP.
In the Merger, Newkirk merged with and into the Company, with the Company as the surviving entity. Each holdershare of Newkirk’s common stock receivedwas exchanged for 0.80 common shares of the Company, in exchange for each share of Newkirk’s common stock, and the MLP effected a 1.0 for 0.80 reverse unit-split, pursuant to which each outstanding MLP unit was converted into 0.80 units, resulting in 35.5 million MLP units applicable to the minority interest being outstanding after the Merger. Each MLP unit is currentlywas redeemable at the option of the holder for cash based on the value of a common share of the Company or, ifat the Company elects,Company’s election, on aone-for-one basis into Lexington common shares. On December 31, 2008, the remaining 6.4 million MLP units were redeemed for Lexington common shares.shares, the Company became the sole owner of the MLP and the MLP was merged into the Company and ceased to exist. The acquisition of the remaining MLP units was recorded at the minority interests’ carrying value.
The Company believes it has qualified as a REIT under the Internal Revenue Code of 1986, as amended (the “Code”). Accordingly, the Company will not be subject to federal income tax, provided that distributions to its shareholders equal at least the amount of its REIT taxable income as defined under the Code. The Company is permitted to participate in certain activities from which it was previously precluded in order to maintain its qualification as a REIT, so long as these activities are conducted in entities which elect to be treated as taxable REIT subsidiaries (“TRS”) under the Code. As such, the TRS will beare subject to federal income taxes on the income from these activities.
(2) Summary of approximately $19.83 per common share/OP unit, in the open market and through private transactions with employees and third parties.Significant Accounting Policies
68
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 consolidated subsidiaries, including Lepercq Corporate Income Fund L.P. (“LCIF”), Lepercq Corporate Income FundLCIF, LCIF II, L.P. (“LCIF II”), Net 3, Acquisition L.P. (“Net 3”), the MLP, Lexington Realty Advisors, Inc. (“LRA”), Lexington Contributions, Inc. (“LCI”),LRA and Six Penn Center L.P. LRA and LCI are wholly owned taxable REIT subsidiaries, and the Company is the sole unitholder of the general partner, and the sole unitholder of a significant limited partner, of each of LCIF, LCIF II, Net 3, theThe MLP, and Six Penn Center L.P. Lexington Strategic Asset Corp. (“LSAC”), formerly a majority owned taxable REITan operating partnership subsidiary, was merged with and into the Company as of December 31, 2008. Lexington Contributions, Inc. (“LCI”) and Lexington Strategic Asset Corp. (“LSAC”), each a formerly majority owned TRS, were merged with and into the Company as of March 25, 2008 and June 30, 2007.2007, respectively. The Company determines whether an entity for which it holds an interest should be consolidated pursuant to Financial Accounting Standards Board (“FASB”) Interpretation No. 46 (Revised), Consolidation of Variable Interest Entities (“FIN 46R”) and/or Emerging Issues Task Force (“EITF”) 04-05, Determining Whether a General Partner, or the General Partners as a Group, Controls a Limited Partnership or Similar Entity When the Limited Partners Have Certain Rights (“EITF 04-05”). FIN 46R requires the Company to evaluate whether it has a controlling financial interest in an entity through means other than voting rights. If the entity is not a variable interest entity the Company applies the guidance in EITF 04-05, and if the Company controls the entity’s voting shares or similar rights as determined in EITF 04-05, the entity is consolidated.
68
LEXINGTON REALTY TRUST
AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements – (Continued)
($000 except per share/unit amounts)
Earnings Per Share. Basic net income (loss) per share is computed by dividing net income reduced by preferred dividends, if applicable, by the weighted average number of common shares outstanding during the period. Diluted net income (loss) per share amounts are similarly computed but include the effect, when dilutive, of
69
in-the-money common share options, OP units, put options of certain partners’ interests in non-consolidated entities and convertible preferred shares.
Recently Issued Accounting Standards. In December 2004, the FASB issued Statement of Financial Accounting Standards (“SFAS”) No. 123, (revised 2004) Share-Based Payment (“SFAS 123R”), which supersedes Accounting Principals Board (“APB”) Opinion No. 25, Accounting for Stock Issued to Employees, and its related implementation guidance. SFAS 123R establishes standards for the accounting for transactions in which an entity exchanges its equity instruments for goods or services. It also addresses transactions in which an entity incurs liabilities in exchange for goods or services that are based on the fair value of the entity’s equity instruments or that may be settled by the issuance of those equity instruments. SFAS 123R focuses primarily on accounting for transactions in which an entity obtains employee services in share-based payment transactions. SFAS 123R requires a public entity to measure the cost of employee services received in exchange for an award of equity instruments based on the grant date fair value of the award. The cost will be recognized over the period in which an employee is required to provide services in exchange for the award. SFAS 123R was effective for the fiscal year beginning on January 1, 2006. The impact of adopting this statement resulted in the elimination of $11,401 of deferred compensation and additionalpaid-in-capital from the Consolidated Statements of Changes in Shareholders’ Equity and the adoption did not have a material impact on the Company’s results of operations or cash flow.
70
In June 2006, the FASB issued FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes (“FIN 48”). FIN 48 clarifies the accounting for uncertainty in income taxes recognized in accordance with Statement of Financial Accounting Standards (“SFAS”) No. 109 Accounting for Income Taxes (“SFAS 109.109”). FIN 48 prescribes a recognition threshold and measurement attribute for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. FIN 48 iswas effective for fiscal years beginning after December 15, 2006. The adoption of FIN 48 did not have an impact on the Company’s consolidated financial position or results of operations.
In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements, as amended (“SFAS 157”). SFAS 157 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles and expands disclosures about fair value measurements. The provisions of SFAS 157 iswere effective for financial statements issued for fiscal years beginning after November 15, 2007 and interim periods within those fiscal years, except for those relating to non-financial assets and liabilities, which iswere deferred for one additional year.year, and a scope exception for purposes of fair value measurements affecting lease classification or measurement under SFAS No. 13 Accounting for Leases, as Amended (“SFAS 13”) and related standards. SFAS 157 establishes a fair value hierarchy that prioritizes observable and unobservable inputs used to measure fair value into three levels: Level 1 – quoted prices (unadjusted) in active markets that are accessible at the measurement date for assets or liabilities; Level 2 – observable prices that are based on inputs not quoted in active markets, but corroborated by market data; and Level 3 – unobservable inputs are used when little or no market data is available. The fair value hierarchy gives the highest priority to Level 1 inputs and the lowest priority to Level 3 inputs. In determining fair value, the Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible as well as consider counterparty credit risk in the Company’s assessment of fair value. The adoption of the effective portions of this statement did not have a material impact on the Company’s financial position, results of operations or cash flows. The implementation of this statement as it relates to non-financial assets and liabilities is not expected to have a material impact on the Company’s financial position, results of operations or cash flows.
The following table presents the Company’s financial assets and liabilities measured at fair value as of December 31, 2008, aggregated by the level within the SFAS 157 fair value hierarchy within which those measurements fall:
Fair Value Measurements using
Quoted Prices in Active Markets for Identical Assets and Liabilities (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | Balance December 31, 2008 | |||||||||||||
| Forward purchase equity asset | $ | — | $ | 10,698 | $ | — | $ | 10,698 | ||||||||
| Interest rate swap liability | $ | — | $ | 7,055 | $ | — | $ | 7,055 | ||||||||
Although the Company has determined that the majority of the inputs used to value its swap obligation fall within Level 2 of the fair value hierarchy, the credit valuation associated with the swap obligation utilizes Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by itself and its counterparties. However, as of December 31, 2008, the Company has determined that the credit valuation adjustment relative to the overall swap obligation is not significant. As a result, the entire swap obligation has been classified in Level 2 of the fair value hierarchy.
69
LEXINGTON REALTY TRUST
AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements – (Continued)
($000 except per share/unit amounts)
The Company has determined that the forward purchase equity asset should fall within Level 2 of the fair value hierarchy as its value is based not only on the value of the Company’s common share price but other observable inputs.
In September 2006, the Securities and Exchange Commission (the “SEC”) released Staff Accounting Bulletin No. 108 (“SAB 108”). SAB 108 provides guidance on how the effects of the carryover or reversal of prior year financial statements misstatements should be considered in quantifying a current period misstatement. In addition, upon adoption, SAB 108 permits the Company to adjust the cumulative effect of immaterial errors relating to prior years in the carrying amount of assets and liabilities as of the beginning of the current fiscal year, with an offsetting adjustment to the opening balance of retained earnings. SAB 108 also requires the adjustment of any prior quarterly financial statement within the fiscal year of adoption for the effects of such errors on the quarters when the information is next presented. The Company adopted SAB 108 effectivefor the year ended December 31, 2006, and its adoption had no impact on the Company’s financial position, results of operations or cash flows.
In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities — Including an Amendment of FASB Statement No. 115 (“SFAS 159”). SFAS 159 permits entities to choose to measure many financial assets and liabilities and certain other items at fair value. An enterprise will report unrealized gains and losses on items for which the fair value option has been elected in earnings at each subsequent reporting date. The fair value option may be applied on aninstrument-by-instrument basis, with several exceptions, such as investments accounted for by the equity method, and once elected, the option is irrevocable unless a new election date occurs. The fair value option can be applied only to entire instruments and not to portions thereof. SFAS 159 is effective as of the beginning of an entity’s first fiscal year beginning after November 15, 2007. Management has determinedThe Company did not elect to adopt the optional fair value provisions of this pronouncement and thus it did not have an impact on the Company’s financial position, results of operations or cash flows.
In June 2007, the SEC announced revisions to EITF Topic D-98 related to the release of SFAS 159, pursuant to which the SEC will no longer accept liability classification for financial instruments that meet the conditions for temporary equity classification under ASR 268, Presentation in Financial Statements of “Redeemable Preferred Stocks” and EITF Topic No. D-98. As a result, the fair value option under SFAS 159 may not be applied to any financial instrument (or host contract) that qualifies as temporary equity. This is effective for all instruments that are entered into, modified, or otherwise subject to a remeasurement event in the first fiscal quarter beginning after September 15, 2007. As the Company willdid not adopt the fair value provisions of SFAS 159, the adoption of this pronouncement so it willannouncement did not have noa material impact on the Company’s financial statements.positions.
In December 2007, the FASB issued SFAS No. 141R, Business Combinations (“SFAS 141R”). SFAS 141R requires most identifiable assets, liabilities, noncontrolling interests, and goodwill acquired in a business combination to be recorded at “full fair value”. and acquisition related costs will generally be expensed rather than included as part of the basis of the acquisition. SFAS 141R expands required disclosures to improve the ability to evaluate the nature and financial effects of business combinations. SFAS 141R is effective for acquisitions in periods beginning on or after December 15, 2008. The adoption of this standard could materially impact the Company’s future financial results to the extent that the Company acquires significant amounts of real estate, as related acquisition costs will be expensed as incurred compared to current practice of capitalizing such costs and amortizing them over the estimated useful life of the assets acquired.
In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interest in Consolidated Financial Statements – an amendment of ARB 51 (“SFAS No. 160”). SFAS No. 160 will require noncontrolling interests (previously referred to as minority interests) to be treated as a separate component of equity, not as a liability or other item outside of permanent equity. SFAS No. 160 is effective for periods beginning on or after December 15, 2008. The adoption of this statement will result in the minority interest currently classified in the “mezzanine” section of the balance sheet to be reclassified as a component of shareholders’ equity, and minority interest expenseinterest’s share of income or loss will no longer be recorded in the income statement.
71
statement of operations.
In December 2007, the FASB ratified EITF consensus onEITF 07-06, Accounting for the Sale of Real Estate Subject to the Requirements of FASB Statement No. 66, Accounting for Sales of Real Estate, When the Agreement Includes a Buy-Sell Clause( (“EITF 07-06).EITF07-06”). EITF 07-06 clarifies that a buy-sell clause in a sale of real estate that otherwise qualifies for partial sale accounting does not by itself constitute a form of continuing involvement that would preclude partial sale accounting under SFAS No. 66.EITF 07-06 is effective for fiscal years beginning after December 15, 2007. The adoption ofEITF 07-06 did not have a material impact on the Company’s financial position, results of operations or cash flows.
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LEXINGTON REALTY TRUST
AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements – (Continued)
($000 except per share/unit amounts)
In March 2008, the FASB issued SFAS No. 161, Disclosures about Derivative Instruments and Hedging Activities- an amendment of SFAS No.133 (“SFAS 161”). SFAS 161, which amends SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, requires companies with derivative instruments to disclose information about how and why a company uses derivative instruments, how derivative instruments and related hedged items are accounted for under SFAS No. 133, and how derivative instruments and related hedged items affect a company’s financial position, financial performance and cash flows. The required disclosures include the fair value of derivative instruments and their gains or losses in tabular format, information about credit-risk-related contingent features in derivative agreements, counterparty, credit risk, and the company’s strategies and objectives for using derivative instruments. SFAS 161 is effective prospectively for periods beginning on or after November 15, 2008. The adoption of this statement is not expected to have a material impact on the Company’s financial position, results of operations or cash flows.
In May 2008, the FASB issued FASB Staff Position (“FSP”) No. APB 14-1, Accounting for Convertible Debt Instruments That May Be Settled in Cash Upon Conversion (Including Partial Cash Settlement) ("FSP 14-1"). FSP 14-1 is applicable to issuers of convertible debt that may be settled wholly or partly in cash. The adoption of FSP 14-1 will affect the accounting for the Company’s 5.45% Exchangeable Guaranteed Notes issued in 2007. FSP 14-1 requires the initial proceeds from the sale of the 5.45% Exchangeable Guaranteed Notes to be allocated between a liability component representing debt and an equity component representing the conversion feature. The resulting discount will be amortized using the effective interest method over the period the debt is expected to remain outstanding as additional interest expense. FSP 14-1 is effective for fiscal years beginning after December 31, 2008, and requires retroactive application. The adoption of FSP 14-1 will result in recognition of an aggregate unamortized debt discount of $6,926 and $19,462 as of December 31, 2008 and 2007, respectively, in the Company’s Consolidated Balance Sheets and additional interest expense in the Company’s Consolidated Statements of Operations for the years then ended. The current estimate of the incremental interest expense and debt satisfaction gain reduction, net of minority interest, for each reporting period is as follows:
For the year ended December 31 | Interest expense | Debt satisfaction gain reduction | ||||||
| 2006 | $ | — | $ | — | ||||
| 2007 | $ | 1,602 | $ | — | ||||
| 2008 | $ | 1,997 | $ | ( 3,714 | ) | |||
In June 2007,2008, the FASB issued FSP EITF 03-6-1, Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities ("FSP 03-6-1"). FSP 03-6-1 requires unvested share based payment awards that contain nonforfeitable rights to dividends or dividend equivalents to be treated as participating securities as defined in EITF Issue No. 03-6, Participating Securities and Exchange staff announced revisions to EITF Topic D-98 related to the release of SFAS 159. The SecuritiesTwo-Class Method under FASB Statement No. 128, and, Exchange Commission announced that it will no longer accept liability classification for financial instruments that meettherefore, included in the conditions for temporary equity classificationearnings allocation in computing earnings per share under ASR 268, Presentationthe two-class method described in Financial Statements of “Redeemable Preferred Stocks” and EITF TopicFASB Statement No. D-98. As a consequence, the fair value option under SFAS 159 may not be applied to any financial instrument (or host contract) that qualifies as temporary equity. This128, Earnings per Share. FSP 03-6-1 is effective for all instruments that are entered into, modified, or otherwise subject to a remeasurement event in the firstfinancial statements issued for fiscal quarteryears beginning after SeptemberDecember 15, 2007.2008, and interim periods within those years. Management does not believe that the adoption of FSP 03-6-1 will have an impact on the Company’s financial statements as the number of unvested shares is not material.
In October 2008, the FASB issued FASB Staff Position FAS 157-3 (“FSP FAS 157-3”), Determining the Fair Value of a Financial Asset When the Market For That Asset is Not Active, which clarifies the application of FASB 157, Fair Value Measurements, in a market that is not active. Among other things, FSP FAS 157-3 clarifies that determination of fair value in a dislocated market depends on facts and circumstances and may require the use of significant judgment about whether individual transactions are forced liquidations or distressed sales. In cases where the volume and level of trading activity for an asset have declined significantly, the available prices vary significantly over time or among market participants, or the prices are not current, observable inputs might not be relevant and could require significant adjustment. In addition, FSP FAS 157-3 also clarifies that broker or pricing service quotes may be appropriate inputs when measuring fair value, but are not necessarily determinative if an active market does not exist for the financial asset. Regardless of the valuation techniques used, FSP FAS 157-3 requires that an entity include appropriate risk adjustments that market participants would make for nonperformance and liquidity risks. FSP FAS 157-3 was effective upon issuance and includes prior periods for which financial statements have not been issued. The Company has adopted FSP FAS 157-3, which did not have a material impact on the Company’s financial position, results of operations or cash flows.
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LEXINGTON REALTY TRUST
AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements – (Continued)
($000 except per share/unit amounts)
On November 13, 2008, the FASB ratified EITF consensus on EITF Issue No. 08-6, “Equity Method Investment Accounting Considerations” (“EITF 08-6”). EITF 08-6 addresses questions about the potential effect of FASB Statement No. 141R, Business Combinations, and FASB Statement No. 160, Noncontrolling Interests in Consolidated Financial Statements – an amendment of ARB No. 51, on equity-method accounting under Accounting Principles Board (“APB”) Opinion 18, The Equity Method of Accounting for Investments in Common Stock (“APB 18”). EITF 08-6 generally continues existing practices under APB 18 including the use of a cost-accumulation approach to initial measurement of the investment. EITF 08-6 does not require the investor to perform a separate impairment test on the underlying assets of an equity method investment. However, an equity-method investor is required to recognize its proportionate share of impairment charges recognized by the investee, adjusted for basis differences, if any, between the investee’s carrying amount for the impaired assets and the cost allocated to such assets by the investor. The investor is also required to perform an overall other-than-temporary impairment test of its investment in accordance with APB 18. EITF 08-6 is effective for fiscal years beginning on or after December 15, 2008 and interim periods within those fiscal years and shall be applied prospectively. The adoption of this announcementpronouncement is not expected to have a material impact on the Company’s financial position, results of operations or cash flows.
On December 11, 2008, the FASB issued FSP FAS 140-4 and FIN 46(R)-8, Disclosures about Transfers of Financial Assets and Interests in Variable Interest Entities (“FSP FAS 140-4 and FIN 46R-8”). This FSP includes disclosure objectives and requires public entities to provide additional year-end and interim disclosures about transfers of financial assets and involvement with variable interest entities. The requirements apply to transferors, sponsors, servicers, primary beneficiaries, and holders of significant variable interests in a variable-interest entity or qualifying special purpose entity. FSP FAS 140-4 and FIN 46R-8 is effective for the first interim period or fiscal year ending after December 15, 2008. The Company does not believe that the adoption of FSP FAS 140-4 and FIN 46R-8 will have an impact on the Company’s financial statements as the Company does not have significant variable interests.
Use of Estimates. Management has made a number of estimates and assumptions relating to the reporting of assets and liabilities, the disclosure of contingent assets and liabilities and the reported amounts of revenues and expenses to prepare these consolidated financial statements in conformity with U.S. generally accepted accounting principles. These estimates and assumptions are based on management’s best estimates and judgment. Management evaluates its estimates and assumptions on an ongoing basis using historical experience and other factors, including the current economic environment. The current economic environment has increased the degree of uncertainty inherent in these estimates and assumptions. Management adjusts such estimates when facts and circumstances dictate. The most significant estimates made include the recoverability of accounts and notes receivable, allocation of property purchase price to tangible and intangible assets acquired and liabilities assumed, the determination of impairment of long-lived assets and investment inequity method investments, valuation and advances to non-consolidated entitiesimpairment of assets held by equity method investees, valuation of derivative financial instruments, and the useful lives of long-lived assets. Actual results could differ materially from those estimates.
Business Combinations. The Company follows the provisions of Statement of Financial Accounting StandardsSFAS No. 141, Business Combinations (“SFAS 141”) and records all assets acquired and liabilities assumed at fair value. On December 31, 2006, the Company acquired Newkirk which was a variable interest entity (VIE). The Company follows the provisions of Financial Accounting Standards BoardFASB Interpretation No. 46 (Revised), Consolidation of Variable Interest Entities (“FIN 46R”), and as a result has recorded the minority interest in Newkirk at estimated fair value on the date of acquisition. The value of the consideration issued in common shares is based upon a reasonable period before and after the date that the terms of the Merger were agreed to and announced.
Purchase Accounting for Acquisition of Real Estate. The fair value of the real estate acquired, which includes the impact ofmark-to-market fair value adjustments for assumed mortgage debt related to property acquisitions, is allocated to the acquired tangible assets, consisting of land, building and improvements, and identified intangible assets and liabilities, consisting of the value of above-market and below-market leases, other value of in-place leases and value of tenant relationships, based in each case on their fair values.
The fair value of the tangible assets of an acquired property (which includes land, building and improvements and fixtures and equipment) is determined by valuing the property as if it were vacant, and the “as-if-vacant” value is then allocated to land, building and improvements based on management’s determination of relative fair values of these assets. Factors considered by management in performing these analyses include an estimate of carrying costs during the expectedlease-up periods considering current market conditions and costs to execute similar leases. In estimating carrying costs, management includes real estate taxes, insurance and other operating expenses and estimates of lost rental revenue during the expectedlease-up periods based on current market demand. Management also estimates costs to execute similar leases including leasing commissions.
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LEXINGTON REALTY TRUST
AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements —– (Continued)
($000 except per share/unit amounts)
In allocating the fair value of the identified intangible assets and liabilities of an acquired property, above-market and below-market in-place lease values are recorded based on the difference between the current in-place lease rent and a managementmanagement’s estimate of current market rents. Below-market lease intangibles are recorded as part of deferred revenue and amortized into rental revenue over the non-cancelable periods and bargain renewal periods of the respective leases. Above-market leases are recorded as part of intangible assets and amortized as a direct charge against rental revenue over the non-cancelable portion of the respective leases.
The aggregate value of other acquired intangible assets, consisting of in-place leases and customer relationships, is measured by the excess of (1) the purchase price paid for a property over (2) the estimated fair value of the property as if vacant, determined as set forth above. This aggregate value is allocated between in-place lease values and customer relationships based on management’s evaluation of the specific characteristics of each tenant’s lease. The value of in-place leases are amortized to expense over the remaining non-cancelable periods and any bargain renewal periods of the respective leases. Customer relationships are amortized to expense over the applicable lease term plus expected renewal periods.
Revenue Recognition. The Company recognizes revenue in accordance with Statement of Financial Accounting Standards No. 13 Accounting for Leases, as amended (“SFAS 13”).13. SFAS 13 requires that revenue be recognized on a straight-line basis over the term of the lease unless another systematic and rational basis is more representative of the time pattern in which the use benefit is derived from the leased property. Renewal options in leases with rental terms that are lower than those in the primary term are excluded from the calculation of straight line rent if they dothe renewals are not meet the criteria of a bargain renewal option.reasonably assured. In those instances in which the Company funds tenant improvements and the improvements are deemed to be owned by the Company, revenue recognition will commence when the improvements are substantially completed and possession or control of the space is turned over to the tenant. When the Company determines that the tenant allowances are lease incentives, the Company commences revenue recognition when possession or control of the space is turned over to the tenant for tenant work to begin. The lease incentive is recorded as a deferred expense and amortized as a reduction of revenue on a straight-line basis over the respective lease term. The Company recognizes lease termination payments as a component of rental revenue in the period received, provided that there are no further obligations under the lease. All above market lease assets, below market lease liabilities and deferred rent assets or liabilities for terminated leases are charged against or credited to rental revenue in the period the lease is terminated. All other capitalized lease costs and lease intangibles are accelerated via amortization expense to the date of termination.
Gains on sales of real estate are recognized pursuant to the provisions of Statement of Financial Accounting StandardsSFAS No. 66 Accounting for Sales of Real Estate, as amended (“SFAS 66”). The specific timing of the sale is measured against various criteria in SFAS 66 related to the terms of the transactions and any continuing involvement in the form of management or financial assistance associated with the properties. If the sales criteria are not met, the gain is deferred and the finance, installment or cost recovery method, as appropriate, is applied until the sales criteria are met. To the extent we sellthe Company sells a property and retainretains a partial ownership interest in the property, we recognizethe Company recognizes gain to the extent of the third party ownership interest in accordance with SFAS 66.
Accounts Receivable. The Company continuously monitors collections from its tenants and would make a provision for estimated losses based upon historical experience and any specific tenant collection issues that the Company has identified. As of December 31, 20072008 and 2006,2007, the Company’s allowance for doubtful accounts was insignificant.not significant.
Impairment of Real Estate and Investments in Non-consolidated Entities.Estate. The Company evaluates the carrying value of all real estate and investments in non-consolidated entitiestangible and intangible assets held when a triggering event under Statement of Financial Accounting StandardsSFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, as amended (“SFAS 144”) has occurred to determine if an impairment has occurred which would require the recognition of a loss. The evaluation includes estimating and reviewing anticipated future cash flows of the property, based on current leases in place, coupled with an estimate of proceeds to be realized upon sale.derived from the asset. However, estimating future sale proceedscash flows is highly subjective and such estimates could differ materially from actual results.
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Depreciation is determined by the straight-line method over the remaining estimated economic useful lives of the properties. The Company generally depreciates buildings and building improvements over periods ranging from 8 to 40 years, land improvements from 15 to 20 years, and fixtures and equipment from 2 to 16 years.
Only costs incurred to third parties in acquiring properties are capitalized. No internal costs (rents, salaries, overhead) are capitalized. Expenditures for maintenance and repairs are charged to operations as incurred. Significant renovations which extend the useful life of the properties are capitalized.
Impairment of Equity Method Investments. The Company assesses whether there are indicators that the value of its equity method investments may be impaired. An investment’s value is impaired if the Company determines that a decline in the value of the investment below its carrying value is other than temporary. To the extent impairment has occurred, the loss shall be measured as the excess of the carrying amount of the investment over the estimated value of the investment.
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LEXINGTON REALTY TRUST
AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements – (Continued)
($000 except per share/unit amounts)
Properties Held For Sale. The Company accounts for properties held for sale in accordance with SFAS 144. SFAS 144 requires that the assets and liabilities of properties that meet various criteria in SFAS 144 be presented separately in the Consolidated Balance Sheets, with assets and liabilities being separately stated. The operating results of these properties are reflected as discontinued operations in the Consolidated Statements of Operations. Properties that do not meet the held for sale criteria of SFAS 144 are accounted for as operating properties.
Investments in Non-consolidated Entities. The Company accounts for its investments in 50% or less owned entities under the equity method, unless pursuant to FIN 46R consolidation is required or if its investment in the entity is less than 3% and it has no influence over the control of the entity and then the entity is accounted for under the cost method.
Marketable Equity Securities. The Company classifies its existing marketable equity securities asavailable-for-sale in accordance with the provisions of SFAS No. 115, Accounting for Certain Investments in Debt and Equity Securities. These securities are carried at fair market value, with unrealized gains and losses, including the Company’s proportionate share of the unrealized gains or losses from non-consolidated entities, reported in shareholders’ equity as a component of accumulated other comprehensive income. Gains or losses on securities sold and other than temporary impairments are included in the Consolidated Statement of Operations. Sales of securities are recorded on the trade date and gains and losses are generally determined by the specific identification method.
Investments in Debt Securities. Investments in debt securities are classified asheld-to-maturity, reported at amortized cost and are included with other assets in the accompanying Consolidated Balance SheetSheets and amounted to $15,926$15,447 and $16,372$15,926 at December 31, 20072008 and 2006,2007, respectively. A decline in the market value of anyheld-to-maturity security below cost that is deemed to beother-than-temporary results in an impairment and would reduce the carrying amount to fair value. The impairment is charged to earnings and a new cost basis for the security is established. To determine whether an impairment isother-than-temporary, the Company considers whether it has the ability and intent to hold the investment until a market price recovery and considers whether evidence indicating the cost of the investment is recoverable outweighs evidence to the contrary. Evidence considered in this assessment includes the reasons for the impairment, the severity and duration of the impairment, changes in value subsequent to year-end, forecasted performance of the investee, and the general market condition in the geographic area or industry the investee operates in.
Notes Receivable. The Company evaluates the collectability of both interest and principal of each of its notes, if circumstances warrant, to determine whether it is impaired. A note is considered to be impaired, when based on current information and events, it is probable that the Company will be unable to collect all amounts due according to the existing contractual terms. When a note is considered to be impaired, the amount of the loss accrual is calculated by comparing the recorded investment to the value determined by discounting the expected future cash flows at the note’s effective interest rate. Interest on impaired notes is recognized on a cash basis.
Deferred Expenses. Deferred expenses consist primarily of debt and leasing costs. Debt costs are amortized using the straight-line method, which approximates the interest method, over the terms of the debt instruments and leasing costs are amortized over the term of the related lease.
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Derivative Financial Instruments. The Company accounts for its interest rate cap agreement and its interest rate swap agreementagreements in accordance with FASSFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, as amended and interpreted (“SFAS 133”). In accordance with SFAS 133, interest rate capthese agreements are carried on the balance sheet at their fair value, as an asset, if their fair value is positive, or as a liability, if their fair value is negative. TheIf the interest rate swap is designated as a cash flow hedge, the effective portion of the swap’s change in fair value is reported as a component of other comprehensive income (loss) and the interest rate cap agreementineffective portion, if any, is not designated as a hedge instrument and is measured at fair value with the resulting gain or loss recognized in interest expense in the period of change. Any ineffective amount of the interest rate swap is to be recognized in earnings each quarter. The fair value of these derivatives is included in other assets in theas an increase or decrease to interest expense.
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LEXINGTON REALTY TRUST
AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Balance Sheet. As of December 31, 2007, only the interest rate cap agreement remains outstanding.Financial Statements – (Continued)
($000 except per share/unit amounts)
Upon entering into hedging transactions, the Company documents the relationship between the interest rate swap and cap agreements and the hedged liability. The Company also documents its risk-management policies, including objectives and strategies, as they relate to its hedging activities. The Company assesses, both at inception of a hedge and on an on-going basis, whether or not the hedge is highly effective, as defined by SFAS 133. The Company will discontinue hedge accounting on a prospective basis with changes in the estimated fair value reflected in earnings when: (1) it is determined that the derivative is no longer effective in offsetting cash flows of a hedge item (including forecasted transactions); (2) it is no longer probable that the forecasted transaction will occur; or (3) it is determined that designating the derivative as an interest rate swap is no longer appropriate. The Company may utilize interest rate swap and cap agreements to manage interest rate risk and does not anticipate entering into derivative transactions for speculative trading purposes.
Stock Compensation. The Company maintains an equity participation plan. Options granted under the plan in 2008 vest upon attainment of certain market performance measures and expire ten years from the date of grant. Non-vest share grants generally vest either based upon (i) time (ii) performance and/or (iii) market conditions.
Prior to January 1, 2003, the Company accounted for the plan under the intrinsic value-based method of accounting prescribed by APB Opinion No. 25, Accounting for Stock Issued to Employees, and related interpretations including FASB Interpretation No. 44, Accounting for Certain Transactions involving Stock Compensation (an interpretation of APB Opinion No. 25). Effective January 1, 2003, the Company adopted the prospective method provisions of SFAS No. 148, Accounting for Stock-Based Compensation – Transition and Disclosure an Amendment of FASB Statement No. 123 (“SFAS No. 148”), which applies the recognition provisions of FASB Statement No. 123, Accounting for Stock-Based Compensation (“SFAS No. 123”) to all employee awards granted, modified or settled after January 1, 2003.
During December 2004, the FASB issued SFAS No. 123 (revised 2004), “Share-Based Payment” (“SFAS No. 123(R)”), which is a revision of Statement 123. SFAS No. 123(R) supersedes APB Opinion 25. Generally, the approach in SFAS No. 123(R) is similar to the approach described in Statement 123. However, SFAS No. 123(R) requires all share-based payments to employees, including grants of employee stock options, to be recognized in the statement of operations based on their fair values. Pro-forma disclosure is no longer an alternative under SFAS No. 123(R). SFAS No. 123(R) was effective for fiscal years beginning after December 31, 2005. The Company began expensing stock based employee compensation with its adoption of the prospective method provisions of SFAS No. 148, effective January 1, 2003, as a result, the adoption of SFAS No. 123(R) did not have a material impact on the Company’s financial position or results of operations.
Tax Status. The Company has made an election to qualify, and believes it is operating so as to qualify, as a REIT for federal income tax purposes. Accordingly, the Company generally will not be subject to federal income tax, provided that distributions to its shareholders equal at least the amount of its REIT taxable income as defined under Sections 856 through 860 of the Code.
The Company is permitted to participate in certain activities from which it was previously precluded in order to maintain its qualification as a REIT, so long as these activities are conducted in entities which elect to be treated as taxable REIT subsidiaries under the Code. LRA is, and LCI are, and LSAC was, awere, taxable REIT subsidiaries. As such, the Company is subject to federal and state income taxes on the income from these activities.
Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis and operating loss and tax credit carry-forwards. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled.
During the fourth quarter of 2007, the Board of Trustees declared a special common share dividend of $2.10 per common share, which was paid in January 2008. During the fourth quarter of 2006, the Board of Trustees declared a special common share dividend of $0.2325 per common share, which was paid in January 2007.
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LEXINGTON REALTY TRUST
AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements —– (Continued)
($000 except per share/unit amounts)
A summary of the average taxable nature of the Company’s common dividends for each of the years in the three year period ended December 31, 2007,2008, is as follows:
| 2007 | 2006 | 2005 | ||||||||||
| Total dividends per share | $ | 2.93342 | (i) | $ | 1.46 | $ | 1.44 | |||||
| Ordinary income | 42.36 | % | 68.89 | % | 87.29 | % | ||||||
| 15% rate — qualifying dividend | 2.50 | 0.77 | 1.04 | |||||||||
| 15% rate gain | 35.62 | 7.97 | 8.72 | |||||||||
| 25% rate gain | 19.52 | 5.13 | 2.95 | |||||||||
| Return of capital | — | 17.24 | — | |||||||||
| 100.00 | % | 100.00 | % | 100.00 | % | |||||||
| 2008 | 2007 | 2006 | ||||||||||
| Total dividends per share | $ | 2.25408 | (ii) | $ | 2.93342 | (i)(ii) | $ | 1.46 | ||||
| Ordinary income | 62.24 | % | 42.36 | % | 68.89 | % | ||||||
| 15% rate — qualifying dividend | 0.66 | % | 2.50 | 0.77 | ||||||||
| 15% rate gain | 14.12 | % | 35.62 | 7.97 | ||||||||
| 25% rate gain | 9.56 | % | 19.52 | 5.13 | ||||||||
| Return of capital | 13.42 | % | — | 17.24 | ||||||||
| 100.00 | % | 100.00 | % | 100.00 | % | |||||||
| (i) | Includes the special dividend of $0.2325 paid in January 2007 and a portion of the special dividend of $2.10 paid in January 2008. | |
| (ii) | Of the total dividend paid in January 2008, $1.21092 is allocated to 2007 and $1.26408 is allocated to 2008. |
A summary of the average taxable nature of the Company’s dividend on Series B Cumulative Redeemable Preferred Shares for each of the years in the three year period ended December 31, 2007,2008, is as follows:
| 2007 | 2006 | 2005 | ||||||||||
| Total dividends per share | $ | 2.0125 | $ | 2.0125 | $ | 2.0125 | ||||||
| Ordinary income | 42.36 | % | 83.24 | % | 87.29 | % | ||||||
| 15% rate — qualifying dividend | 2.50 | 0.93 | 1.04 | |||||||||
| 15% rate gain | 35.62 | 9.63 | 8.72 | |||||||||
| 25% rate gain | 19.52 | 6.20 | 2.95 | |||||||||
| 100.00 | % | 100.00 | % | 100.00 | % | |||||||
| 2008 | 2007 | 2006 | ||||||||||
| Total dividends per share | $ | 2.0125 | $ | 2.0125 | $ | 2.0125 | ||||||
| Ordinary income | 71.90 | % | 42.36 | % | 83.24 | % | ||||||
| 15% rate — qualifying dividend | 0.76 | % | 2.50 | 0.93 | ||||||||
| 15% rate gain | 16.30 | % | 35.62 | 9.63 | ||||||||
| 25% rate gain | 11.04 | % | 19.52 | 6.20 | ||||||||
| 100.00 | % | 100.00 | % | 100.00 | % | |||||||
A summary of the average taxable nature of the Company’s dividend on Series C Cumulative Convertible Preferred Shares for each of the years in the three year period ended December 31, 2007,2008, is as follows:
| 2007 | 2006 | 2005 | ||||||||||
| Total dividends per share | $ | 3.25 | $ | 3.25 | $ | 2.624 | ||||||
| Ordinary income | 42.36 | % | 83.24 | % | 87.29 | % | ||||||
| 15% rate — qualifying dividend | 2.50 | 0.93 | 1.04 | |||||||||
| 15% rate gain | 35.62 | 9.63 | 8.72 | |||||||||
| 25% rate gain | 19.52 | 6.20 | 2.95 | |||||||||
| 100.00 | % | 100.00 | % | 100.00 | % | |||||||
76
| 2008 | 2007 | 2006 | ||||||||||
| Total dividends per share | $ | 7.63976 | (i) | $ | 3.25 | $ | 3.25 | |||||
| Ordinary income | 66.35 | % | 42.36 | % | 83.24 | % | ||||||
| 15% rate — qualifying dividend | 0.70 | % | 2.50 | 0.93 | ||||||||
| 15% rate gain | 15.05 | % | 35.62 | 9.63 | ||||||||
| 25% rate gain | 10.19 | % | 19.52 | 6.20 | ||||||||
| Return of capital | 7.71 | % | — | — | ||||||||
| 100.00 | % | 100.00 | % | 100.00 | % | |||||||
| (i) | Includes deemed distribution of $4.38976 due to an adjustment to the conversion rate. |
A summary of the average taxable nature of the Company’s dividend on Series D Cumulative Redeemable Preferred shares for the yearyears in the two-year period ended December 31, 2007,2008, is as follows:
| 2007 | ||||
| Total dividends per share | $ | 1.662 | ||
| Ordinary income | 42.36 | % | ||
| 15% rate — qualifying dividend | 2.50 | |||
| 15% rate gain | 35.62 | |||
| 25% rate gain | 19.52 | |||
| 100.00 | % | |||
| 2008 | 2007 | ||||||||
| Total dividends per share | $ | 1.415625 | (i) | $ | 1.662049 | ||||
| Ordinary income | 71.90 | % | 42.36 | % | |||||
| 15% rate — qualifying dividend | 0.76 | % | 2.50 | ||||||
| 15% rate gain | 16.30 | % | 35.62 | ||||||
| 25% rate gain | 11.04 | % | 19.52 | ||||||
| 100.00 | % | 100.00 | % | ||||||
| (i) | Dividend paid in January 2008 is allocated to 2007. |
Cash and Cash Equivalents. The Company considers all highly liquid instruments with maturities of three months or less from the date of purchase to be cash equivalents.
Restricted Cash. Restricted cash which is included in other assets in the consolidated balance sheet, is comprised primarily of cash balances held by lenders for construction and tenant improvement reserves and amounts deposited to complete tax-free exchanges.
76
LEXINGTON REALTY TRUST
AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements – (Continued)
($000 except per share/unit amounts)
Foreign Currency. The Company has determined that the functional currency of its foreign operations is the respective local currency. As such, assets and liabilities of the Company’s foreign operations are translated using period-end exchange rates, and revenues and expenses are translated using exchange rates as determined throughout the period. Unrealized gains or losses resulting from translation are included in accumulated other comprehensive income (loss) and as a separate component of the Company’s shareholders’ equity.
77
| 2005 | ||||
| Net income allocable to common shareholders, as reported — basic | $ | 16,260 | ||
| Add: Stock based employee compensation expense included in reported net income | — | |||
| Deduct: Total stock based employee compensation expense determined under fair value based method for all awards | 6 | |||
| Pro forma net income — basic | $ | 16,254 | ||
| Net income per share — basic | ||||
| Basic — as reported | $ | 0.33 | ||
| Basic — pro forma | $ | 0.33 | ||
| Net income allocable to common shareholders, as reported — diluted | $ | 16,260 | ||
| Add: Stock based employee compensation expense included in reported net income | — | |||
| Deduct: Total stock based employee compensation expense determined under fair value based method for all awards | 6 | |||
| Pro forma net income — diluted | $ | 16,254 | ||
| Net income per share — diluted | ||||
| Diluted — as reported | $ | 0.33 | ||
| Diluted — pro forma | $ | 0.33 | ||
Environmental Matters. Under various federal, state and local environmental laws, statutes, ordinances, rules and regulations, an owner of real property may be liable for the costs of removal or remediation of certain hazardous or toxic substances at, on, in or under such property as well as certain other potential costs relating to hazardous or toxic substances. These liabilities may include government fines and penalties and damages for injuries to persons and adjacent property. Such laws often impose liability without regard to whether the owner knew of, or was responsible for, the presence or disposal of such substances. Although the Company’s tenants are primarily responsible for any environmental damage and claims related to the leased premises, in the event of the bankruptcy or inability of the tenant of such premises to satisfy any obligations with respect to such environmental liability, the Company may be required to satisfy any obligations. In addition, the Company as the owner of such properties may be held directly liable for any such damages or claims irrespective of the provisions of any lease. As of December 31, 20072008 and 2006,2007, the Company iswas not aware of any environmental matter that could have a material impact on the Company’s financial statements.position, results of operations or cash flows.
Segment Reporting. The Company operates generally in one industry segment, investment in net-leased real properties.
Reclassifications. Certain amounts included in prior years’ financial statements have been reclassified to conform with the current year presentation, including reclassifying certain income statement captions for properties held for sale as of December 31, 20072008 and properties sold during 2007,2008, which are presented as discontinued operations.
78
(3) Earnings Per Share
The following is a reconciliation of numerators and denominators of the basic and diluted earnings per share computations for each of the years in the three year period ended December 31, 2007:2008:
| 2008 | 2007 | 2006 | ||||||||||
| BASIC | ||||||||||||
| Income (loss) from continuing operations | $ | 9,124 | $ | 3,874 | $ | (9,785 | ) | |||||
| Less preferred dividends | (21,237 | ) | (26,733 | ) | (16,435 | ) | ||||||
| Income (loss) attributable to common shareholders from continuing operations | (12,113 | ) | (22,859 | ) | (26,220 | ) | ||||||
| Total income (loss) from discontinued operations | (659 | ) | 72,977 | 17,538 | ||||||||
| Net income (loss) attributable to common shareholders | $ | (12,772 | ) | $ | 50,118 | $ | (8,682 | ) | ||||
| Weighted average number of common shares outstanding - basic | 67,872,590 | 64,910,123 | 52,163,569 | |||||||||
| Income (loss) per common share — basic: | ||||||||||||
| Income (loss) from continuing operations | $ | (0.18 | ) | $ | (0.35 | ) | $ | (0.50 | ) | |||
| Income (loss) from discontinued operations | (0.01 | ) | 1.12 | 0.33 | ||||||||
| Net income (loss) | $ | (0.19 | ) | $ | 0.77 | $ | (0.17 | ) | ||||
| DILUTED | ||||||||||||
| Income (loss) attributable to common shareholders from continuing operations — basic | $ | (12,113 | ) | $ | (22,859 | ) | $ | (26,220 | ) | |||
| Add — incremental loss attributable to assumed conversion of dilutive securities | — | — | — | |||||||||
| Income (loss) attributable to common shareholders from continuing operations | (12,113 | ) | (22,859 | ) | (26,220 | ) | ||||||
| Income (loss) from discontinued operations | (659 | ) | 72,977 | 17,538 | ||||||||
| Net income (loss) attributable to common shareholders | $ | (12,772 | ) | $ | 50,118 | $ | (8,682 | ) | ||||
| Weighted average number of shares used in calculation of basic earnings per share | 67,872,590 | 64,910,123 | 52,163,569 | |||||||||
| Add — incremental shares representing: | ||||||||||||
| Shares issuable upon exercise of employee share options/non-vested shares | — | — | — | |||||||||
| Shares issuable upon conversion of dilutive securities | — | — | — | |||||||||
| Weighted average number of common shares – diluted | 67,872,590 | 64,910,123 | 52,163,569 | |||||||||
| Income (loss) per common share — diluted: | ||||||||||||
| Income (loss) from continuing operations | $ | (0.18 | ) | $ | (0.35 | ) | $ | (0.50 | ) | |||
| Income (loss) from discontinued operations | (0.01 | ) | 1.12 | 0.33 | ||||||||
| Net income (loss) | $ | (0.19 | ) | $ | 0.77 | $ | (0.17 | ) | ||||
77
| 2007 | 2006 | 2005 | ||||||||||
BASIC | ||||||||||||
| Income (loss) from continuing operations | $ | (10,783 | ) | $ | (7,909 | ) | $ | 17,606 | ||||
| Less — dividends attributable to preferred shares | (26,733 | ) | (16,435 | ) | (16,435 | ) | ||||||
| Income (loss) attributable to common shareholders from continuing operations | (37,516 | ) | (24,344 | ) | 1,171 | |||||||
| Total discontinued operations | 87,634 | 15,662 | 15,089 | |||||||||
| Net income (loss) attributable to common shareholders | $ | 50,118 | $ | (8,682 | ) | $ | 16,260 | |||||
| Weighted average number of common shares outstanding | 64,910,123 | 52,163,569 | 49,835,773 | |||||||||
| Income (loss) per common share — basic: | ||||||||||||
| Income (loss) from continuing operations | $ | (0.58 | ) | $ | (0.47 | ) | $ | 0.03 | ||||
| Income from discontinued operations | 1.35 | 0.30 | 0.30 | |||||||||
| Net income (loss) | $ | 0.77 | $ | (0.17 | ) | $ | 0.33 | |||||
DILUTED | ||||||||||||
| Income (loss) attributable to common shareholders from continuing operations — basic | $ | (37,516 | ) | $ | (24,344 | ) | $ | 1,171 | ||||
| Add — incremental income attributable to assumed conversion of dilutive interests | — | — | — | |||||||||
| Income (loss) attributable to common shareholders from continuing operations | (37,516 | ) | (24,344 | ) | 1,171 | |||||||
| Income from discontinued operations | 87,634 | 15,662 | 15,089 | |||||||||
| Net income (loss) attributable to common shareholders | $ | 50,118 | $ | (8,682 | ) | $ | 16,260 | |||||
| Weighted average number of shares used in calculation of basic earnings per share | 64,910,123 | 52,163,569 | 49,835,773 | |||||||||
| Add — incremental shares representing: | ||||||||||||
| Shares issuable upon exercise of employee share options | — | — | 66,876 | |||||||||
| Weighted average number of shares used in calculation of diluted earnings per common share | 64,910,123 | 52,163,569 | 49,902,649 | |||||||||
| Income (loss) per common share — diluted: | ||||||||||||
| Income (loss) from continuing operations | $ | (0.58 | ) | $ | (0.47 | ) | $ | 0.03 | ||||
| Income from discontinued operations | 1.35 | 0.30 | 0.30 | |||||||||
| Net income (loss) | $ | 0.77 | $ | (0.17 | ) | $ | 0.33 | |||||
79
LEXINGTON REALTY TRUST
AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements —– (Continued)
($000 except per share/unit amounts)
During 2007the second quarter of 2008, the Company redeemed 501,700 shares of 6.50% Series C Cumulative Convertible Preferred stock (“Series C Preferred”) at a $5,678 discount to their historical cost basis. In accordance with EITF D-42, The Effect on the Calculation of Earnings Per Share for the Redemption or Induced Conversion of Preferred Stock, this discount constitutes a deemed negative dividend, offsetting other dividends, and 2006,is accretive to the common shareholders and, accordingly, it has been added to net income to arrive at net income allocable to common shareholders for the year ended December 31, 2008.
In accordance with EITF D-53, Computation of Earnings Per Share for a Period That Includes a Redemption or an Induced Conversion of a Portion of a Class of Preferred Stock, for purposes of computing diluted earnings per share for the year ended December 31, 2008, the discount on redemption has been subtracted from net income allocable to common shareholders in the incremental loss attributed to assumed conversion of dilutive securities, and the Series C shares have been assumed redeemed for common shares at the beginning of the period. The Company determined that the Series C Preferred shares that were not redeemed were not dilutive to basic earnings per share.
All incremental shares are considered anti-dilutive for periods that have a loss from continuing operations applicable to common shareholders. In addition, other common share equivalents may be anti-dilutive in certain periods.
(4) Investments in Real Estate and Intangible Assets
During 2008 and 2007, the Company made acquisitions, excluding (1) properties acquired in the Merger, (2) acquired from the acquisition of the four former co-investment programs, and (3)(2) acquisitions made directly by non-consolidated entities (including LSAC), totaling $131,532$57,488 and $124,910,$131,532, respectively.
In 2007, the Company acquired additional shares in LSAC for $16,781 and LSAC paid $7,418 to repurchase its common stock in a tender offer. On June 30, 2007, LSAC was merged with and into the Company and ceased to exist.
During the second quarter of 2007, the Company, including through its consolidated subsidiaries, completed transactions with its joint venture partners as summarized as follows:
Triple Net Investment Company LLC (“TNI”)
Lexington Acquiport Company LLC (“LAC”) and Lexington Acquiport Company II LLC (“LAC II”)
78
LEXINGTON REALTY TRUST
AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements – (Continued)
($000 except per share/unit amounts)
Lexington/Lion Venture L.P. (“LION”)
80
During 2007, the Company formed a new co-investment program. See note 8 for a discussion of this transaction.
For properties acquired during 2007, including those acquired from our four co-investment programs,2008, the components of intangible assets and their respective weighted average lives are as follows:
| Weighted | ||||||||
| Average | ||||||||
| Costs | Life (yrs) | |||||||
| Lease origination costs | $ | 165,885 | 8.9 | |||||
| Customer relationships | 117,636 | 7.0 | ||||||
| Above — market leases | 22,560 | 7.0 | ||||||
| $ | 306,081 | |||||||
Costs | Weighted Average Life (yrs) | |||||||
| Lease origination costs | $ | 4,830 | 12.1 | |||||
| Customer relationships | 2,161 | 10.8 | ||||||
| $ | 6,991 | |||||||
As of December 31, 20072008 and 2006,2007, the components of intangible assets, are as follows:
| 2007 | 2006 | |||||||
| Lease origination costs | $ | 404,820 | $ | 301,449 | ||||
| Customer relationships | 178,716 | 93,323 | ||||||
| Above-market leases | 114,352 | 107,196 | ||||||
| $ | 697,888 | $ | 501,968 | |||||
| 2008 | 2007 | |||||||
| Lease origination costs | $ | 362,712 | $ | 404,820 | ||||
| Customer relationships | 165,009 | 178,716 | ||||||
| Above-market leases | 99,397 | 114,352 | ||||||
| $ | 627,118 | $ | 697,888 | |||||
The estimated amortization of the above intangibles for the next five years is $125,462 in 2008, $90,330$70,445 in 2009, $58,715$54,184 in 2010, $52,257$49,172 in 2011, $38,720 in 2012 and $44,434$27,529 in 2012.2013.
Below-market leases, net of amortization,accretion, which are included in deferred revenue, are $216,923$121,284 and $360,227,$216,923, respectively in 20072008 and 2006.2007. The estimated amortizationaccretion for the next five years is $13,234 in 2008, $13,139$10,436 in 2009, $12,151$8,616 in 2010, $11,883$8,482 in 2011, $8,132 in 2012 and $11,440$7,680 in 2012.
81
2013.
(5) Newkirk Merger
On December 31, 2006, Newkirk merged with and into the Company pursuant to an Agreement and Plan of Merger dated as of July 23, 2006. The Company believes this strategic combination of two real estate companies achieved key elements of its then strategic business plan. The Company believed that the Merger enhanced its property portfolio in key markets, reduced its exposure to any one property or tenant credit, enabled the Company to gain immediate access to a debt platform and will allow it to build on its existing customer relationships. At the time of the Merger, Newkirk owned or held an ownership interest in approximately 170 industrial, office and retail properties.
| Fair value of common shares issued | $ | 332,050 | ||
| Merger costs | 13,537 | |||
| Purchase price, net of assumed liabilities and minority interests | 345,587 | |||
| Fair value of liabilities assumed, including debt and minority interest | 2,049,801 | |||
| Purchase price | $ | 2,395,388 | ||
The allocation of the purchase price iswas based upon estimates and assumptions. The Company engaged a third party valuation expert to assist with the fair value assessment of the real estate. During 2007, certain estimates were revised and these revisions did not have a significant impact on its financial position or results of operations. The reallocation to real estate was $8,235 during 2007.
79
82
LEXINGTON REALTY TRUST
AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements —– (Continued)
($000 except per share/unit amounts)
| Total real estate assets, including intangibles | $ | 2,081,704 | ||
| Investment in and advances to non-consolidated entities | 99,396 | |||
| Cash and cash equivalents | 57,624 | |||
| Accounts receivable | 46,905 | |||
| Restricted cash | 39,640 | |||
| Marketable equity securities | 25,760 | |||
| Other assets | 44,359 | |||
| Total assets acquired | 2,395,388 | |||
| Less: | ||||
| Debt assumed | 838,735 | |||
| Minority interest | 833,608 | |||
| Below market leases | 356,788 | |||
| Accounts payable, accrued expenses and other liabilities assumed | 20,670 | |||
| Purchase price, net of assumed liabilities and minority interest | $ | 345,587 | ||
| Weighted Average | ||||||||
| Cost | Useful Life (yrs) | |||||||
| Lease origination costs | $ | 175,658 | 13.1 | |||||
| Customer relationships | 57,543 | 7.2 | ||||||
| Above-market leases | 85,511 | 3.2 | ||||||
| $ | 318,712 | |||||||
The following unaudited pro forma financial information for the year ended December 31, 2006, gives effect to the Merger as if it had occurred on January 1, 2005. The pro forma results are based on historical data and are not intended to be indicative of the results of future operations.
| Year Ending | ||||||||
| December 31, | ||||||||
| 2006 | 2005 | |||||||
| Total gross revenues | $ | 376,659 | $ | 346,080 | ||||
| Income (loss) from continuing operations | 586 | (3,163 | ) | |||||
| Net income | 34,967 | 15,338 | ||||||
| Net income (loss) per common share — basic | 0.27 | (0.02 | ) | |||||
| Net income (loss) per common share — diluted | 0.27 | (0.02 | ) | |||||
Year Ended December 31, | ||||
| 2006 | ||||
| Total gross revenues | $ | 376,659 | ||
| Income from continuing operations | 586 | |||
| Net income | 34,967 | |||
| Net income per common share — basic | 0.27 | |||
| Net income per common share — diluted | 0.27 | |||
Certain non-recurring charges recognized historically by Newkirk have been eliminated for purposes of the unaudited pro forma consolidated information.
On December 31, 2008, the remaining MLP units were redeemed for common shares of the Company, the Company became the sole owner of the MLP, and the MLP ceased to exist.
(6) Discontinued Operations and Assets Held For Sale
At December 31, 2008, the Company had held for sale assets of $8,150, which represented the assets of one property and the receivables from recently sold properties. The Company had held for sale liabilities of $6,142 as of December 31, 2008, which included the liabilities of one property and the payables of recently sold properties, including a mortgage note payable of $5,275 which was due to mature in 2009. As of December 31, 2007, the Company had three properties held for sale, with aggregate assets of $150,907 and aggregate liabilities, principally mortgage notes payable and below-marketbelow market lease obligations, aggregatingof $119,093. As of
83
The Company sold, to unrelated parties, 41 properties in 2008, one of which was conveyed through foreclosure, 53 properties in 2007 and seven properties in 2006, for aggregate net proceeds of $238,600, $423,634 and $76,627, respectively, which resulted in gains in 2008, 2007 and 2006 of $13,151, $92,878 and $22,866, respectively. These gains are included in discontinued operations.
The following presents the operating results for the properties sold and held for sale during the years ended December 31, 2008, 2007 2006 and 2005:2006:
| Year Ending December 31, | ||||||||||||
| 2007 | 2006 | 2005 | ||||||||||
| Total gross revenues | $ | 53,613 | $ | 32,599 | $ | 42,057 | ||||||
| Pre-tax income, including gains on sales | $ | 90,961 | $ | 15,735 | $ | 15,089 | ||||||
| Year Ending December 31, | ||||||||||||
| 2008 | 2007 | 2006 | ||||||||||
| Total gross revenues | $ | 10,856 | $ | 65,703 | $ | 33,329 | ||||||
| Pre-tax income (loss), including gains on sales | $ | (153 | ) | $ | 76,390 | $ | 17,611 | |||||
The provision for income taxes included in discontinued operations in 2007 of $3,327$3,413 relates primarily to taxes incurred on the sale of properties by taxable REIT subsidiaries, including C-Corp built in gain taxes. The federal and state portion of the $3,327$3,413 is $2,731 and $596,$682, respectively.
| Year Ended | ||||
December 31, | Total | |||
| 2008 | $ | 759 | ||
| 2009 | 987 | |||
| 2010 | 1,230 | |||
| 2011 | 1,299 | |||
| 2012 | 1,371 | |||
| Thereafter | 79,482 | |||
| $ | 85,128 | |||
During 2007, the Company sold one property for a sale price of $35,700 and provided $27,700 in secured financing to the buyer at a rate of 6.45%. The note matures in 2015 when a balloon payment of 25,731$25,731 is due.
During 2006, the Company conveyed a property to a lender for full satisfaction of a loan and satisfied the related mortgages on properties sold, which resulted in a net debt satisfaction gain of $4,492. In addition, the Company sold one property for a sale price of $6,400 and provided $3,200 in interest only secured financing to the buyer at a rate of 6.0%, which matures in 2017.
80
LEXINGTON REALTY TRUST
AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements – (Continued)
($000 except per share/unit amounts)
During 2006, the tenant in a property in Warren, Ohio exercised its option to purchase the property at fair market value, as defined in the lease. Based on the appraisals received and the procedure set forth in the lease, the Company estimated that the fair market value, as defined in the lease, would not exceed approximately $15,800. Accordingly, the Company recorded an impairment charge of $28,209 in the third quarter of 2006. The Company sold the property in 2007 for $15,800.
The Company has not treated properties sold to Net Lease Strategic Assets Fund LPL.P. as discontinued operations as it has continuing involvement with such assets through its partnership interest. In addition, management will not
84
consider “non-core” assets being marketed for sale as discontinued operations until all criteria of SFAS 144 have been met, including that it is probable that a sale will take place within 12 months.
(7) Notes Receivable
As of December 31, 20072008 and 2006,2007, the Company’s notes receivable, including accrued interest, are comprised primarily of first and second mortgage loans on real estate aggregating $69,775$68,812 and $50,534,$69,775, respectively, bearing interest, including imputed interest, at rates ranging from 5.46%3.5% to 8.33%16.0% and maturing at various dates between 2011 and 20222022.
(8) Investment in Non-Consolidated Entities
In 2007 the Company acquired additional shares in LSAC for $16,781 and LSAC paid $7,418 to repurchase its common stock in a tender offer. On June 30, 2007, LSAC was merged with and into Company and ceased to exist.
During 2007, the Company acquired all the interests it did not already own in TNI, LAC, LACII and LION. See note 4.
The Company received a waiver from the Securities and Exchange CommissionSEC from the requirement in Rule 3-09 of Regulation S-K to not provide audited financial statements of LION, which was dissolved in June 2007, for the period January 1, 2007 through May 31, 2007, as long as summarized financial data of LION for such period is provided.
The following is a summary income statement data for LION for the period January 1, 2007 through May 31, 2007 and the yearsyear ended December 31, 2006 and 2005:2006:
| 2007 | 2006 | 2005 | ||||||||||
| Gross rental revenues | $ | 21,883 | $ | 51,425 | $ | 42,362 | ||||||
| Depreciation and amortization | (9,349 | ) | (21,895 | ) | (18,508 | ) | ||||||
| Interest expense | (6,669 | ) | (15,657 | ) | (13,619 | ) | ||||||
| Property operating and other | (5,272 | ) | (12,461 | ) | (8,227 | ) | ||||||
| Income before gain on sale | $ | 593 | $ | 1,412 | $ | 2,008 | ||||||
| 2007 | 2006 | |||||||
| Gross rental revenues | $ | 21,883 | $ | 51,425 | ||||
| Depreciation and amortization | (9,349 | ) | (21,895 | ) | ||||
| Interest expense | (6,669 | ) | (15,657 | ) | ||||
| Property operating and other | (5,272 | ) | (12,461 | ) | ||||
| Income before gain on sale | $ | 593 | $ | 1,412 | ||||
Concord Debt Holdings LLC (“Concord”) and Lex-Win Concord LLC (“Lex-Win Concord”)
The MLPCompany and WRT Realty L.P. (“Winthrop”) have a co-investment program to acquire and originate loans secured, directly and indirectly, by real estate assets through Concord. The Company’s former Executive Chairman and Director of Strategic Acquisitions is also the Chairman and Chief Executive Officer of the parent of Winthrop. The co-investment program iswas equally owned and controlled by the MLPCompany and Winthrop.
81
LEXINGTON REALTY TRUST
AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements – (Continued)
($000 except per share/unit amounts)
During the third quarter of 2008, the Company and Winthrop formed a jointly-owned subsidiary, Lex-Win Concord LLC, and the Company and Winthrop each contributed to Lex-Win Concord all of their right, title, interest and obligations in Concord and WRP Management LLC, the entity that provides collateral management and asset management services to Concord and its existing CDO. Immediately following the contribution, a subsidiary of Inland American Real Estate Trust Inc. ("Inland Concord") entered into an agreement to contribute up to $100,000 in redeemable preferred membership interest over an 18 month period to Concord, of which $76,000 has been contributed as of December 31, 2008. Lex-Win Concord, as managing member, and Inland Concord, as a preferred member, entered into the Second Amended and Restated Limited Liability Company Agreement of Concord. Under the terms of the agreement, additional contributions by Inland Concord are to be used primarily for the origination and acquisition of additional debt instruments including whole loans, B notes and mezzanine loans. In addition, provided that certain terms and conditions are satisfied, including payment to Inland Concord of a 10% priority return, both the Company and Winthrop may elect to reduce their aggregate capital investment in Concord to $200,000 through distributions of principal payments from the retirement of existing loans and bonds in Concord's current portfolio. In addition, Lex-Win Concord is obligated to make additional capital contributions to Concord of up to $75,000 only if such capital contributions are necessary under certain circumstances.
The MLPCompany and Winthrop have committed to invest up toinvested $162,500 each in Lex-Win Concord. As of December 31, 2008 and 2007, $114,604 and 2006, $155,830, and $93,051, respectively, was the Company’s investment in and advances to Lex-Win Concord. All profits, losses and cash flows are distributed in accordance with the respective membership interests.
85
The following is summary balance sheet data as of December 31, 20072008 and 20062007 and income statement data for the yearyears ended December 31, 2008 and 2007 for Lex-Win Concord:
| As of 12/31/07 | As of 12/31/06 | |||||||
| Investments | $ | 1,140,108 | $ | 450,870 | ||||
| Cash, including restricted cash | 19,094 | 148,261 | ||||||
| Warehouse debt facilities obligations | 472,324 | 43,893 | ||||||
| Collateralized debt obligations | 376,650 | 376,650 | ||||||
| Members’ equity | 310,922 | 186,515 | ||||||
| As of 12/31/08 | As of 12/31/07 | |||||||
| Investments, net of impairments and reserves | $ | 981,635 | $ | 1,140,108 | ||||
| Cash, including restricted cash | 15,134 | 19,554 | ||||||
| Warehouse debt and credit facilities obligations | 320,604 | 472,324 | ||||||
| Collateralized debt obligations | 347,525 | 376,650 | ||||||
| Minority interest | 76,555 | 102 | ||||||
| Members’ equity | 219,208 | 310,921 | ||||||
| For the Year | ||||
| Ended 12/31/07 | ||||
| Interest and other income | $ | 68,453 | ||
| Interest expense | (41,675 | ) | ||
| Impairment charge | (11,028 | ) | ||
| Other expenses and minority interests | (5,554 | ) | ||
| Net income | 10,196 | |||
| Other comprehensive loss (unrealized loss on investments and swaps) | (16,780 | ) | ||
| Comprehensive loss | $ | (6,584 | ) | |
For the Year Ended 12/31/08 | For the Year Ended 12/31/07 | |||||||
| Interest and other income | $ | 71,733 | $ | 68,453 | ||||
| Gain on debt extinguishment | 15,603 | — | ||||||
| Interest expense, including non-qualifying cash flow hedge | (36,410 | ) | (41,675 | ) | ||||
| Impairment charges and loan loss reserves | (104,885 | ) | (11,028 | ) | ||||
| Other expenses and minority interests | (6,455 | ) | (5,554 | ) | ||||
| Net income (loss) | (60,414 | ) | 10,196 | |||||
| Other comprehensive loss | (12,273 | ) | (17,932 | ) | ||||
| Comprehensive loss | $ | (72,687 | ) | $ | (7,736 | ) | ||
Concord’s loan assets are intended to be held to maturity and, accordingly, are carried at cost, net of unamortized loan origination costs and fees, repayments and unfunded commitments unless such loan is deemed to be other-than-termporarily impaired. Concord’s bonds are treated as available for sale securities and, accordingly, aremarked-to-market on a quarterly basis based on valuations performed by Concord’s management. During 2008, the management of Concord performed a complete evaluation of its bond and loan portfolio, including an analysis of any underlying collateral supporting these investments. This resulted in a charge to earnings at Concord of $104,885 for the year ended December 31, 2008 relating to other-than-temporary impairments and loan loss reserves.
The unrealized loss on Concord’s bonds isCompany has determined that as of December 31, 2008, Lex-Win Concord met the resultconditions of a decrease in the value comparedsignificant subsidiary under Rule 1-02(w) of Regulation S-X. The separate financial statements of Lex-Win Concord required pursuant to Rule 3-09 of Regulation S-X are filed as Exhibit 99.1 to the acquisition cost of the securities. The MLP’s share of Concord’s net income and other comprehensive loss were $5,098 and $(8,390), respectively.Company's Annual Report on Form 10-K.
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Notes to Consolidated Financial Statements – (Continued)
($000 except per share/unit amounts)
Net Lease Strategic Assets Fund L.P. (“NLS”)
Inland and the Company are currently entitled to a return on/of their respective investments as follows: (1) Inland, −9%9% on its common equity, (2) the Company, −6.5%6.5% on its preferred equity, (3) the Company, −9%9% on its common equity, (4) return of the Company preferred equity, (5) return of Inland common equity (6) return of the Company
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common equity and (7) any remaining cash flow is allocated 65% to Inland and 35% to the Company as long as the Company is the general partner, if not, allocations are 85% to Inland and 15% to the Company.
In addition to the initial capital contributions described above, the Company and Inland mayhave committed to invest up to an additional $22,500 and $127,500, respectively, in NLS to acquire additional specialty single-tenant net leased assets.
LRA has entered into a management agreement with NLS whereby LRA will receive (1) a management fee of 0.375% of the equity capital, (2) a property management fee of up to 3.0% of actual gross revenues from certain assets for which the landlord is obligated to provide property management services (contingent upon the recoverability of such fees from the tenant under the applicable lease), and (3) an acquisition fee of 0.5% of the gross purchase price of each acquired asset by the NLS.
The following is summary historical cost basis selected balance sheet data as of December 31, 2008 and 2007 and income statement of operations data for the period from December 20, 2007 (date of sale/contribution)(inception) to December 31, 2007.2007 and for the year ended December 31, 2008.
| As of 12/31/07 | ||||
| Real estate, including intangibles | $ | 405,834 | ||
| Cash | 1,884 | |||
| Mortgages payable | 171,556 | |||
| As of 12/31/08 | As of 12/31/07 | |||||||
| Real estate, including intangibles, net | $ | 719,409 | $ | 405,834 | ||||
| Cash, including restricted cash | 9,370 | 2,230 | ||||||
| Mortgages payable | 320,898 | 171,556 | ||||||
| Preferred equity | 170,772 | 87,802 | ||||||
| Partners’ capital | 233,281 | 143,854 | ||||||
| For the Period | ||||
| 12/20/07 to 12/31/07 | ||||
| Gross rental revenues | $ | 951 | ||
| Expenses | (352 | ) | ||
| Net income | $ | 599 | ||
For the Year Ended 12/31/08 | For the Period 12/20/07 to 12/31/07 | |||||||
| Total gross revenues | $ | 50,312 | $ | 951 | ||||
| Depreciation and amortization | (32,499 | ) | — | |||||
| Interest expense | (17,667 | ) | (338 | ) | ||||
| Other expenses, net | (2,968 | ) | (14 | ) | ||||
| Net income (loss) | $ | (2,822 | ) | $ | 599 | |||
During the year ended December 31, 2008, the Company recognized $(16,902) equity in losses relating to NLS based upon the hypothetical liquidation book value method. The difference between the assets contributed to NLS and the fair value of the Company’s equity investment in NLS is $94,723 and is accreted into income over the estimated useful lives of NLS’s assets. During 2008, the Company recorded earnings of $3,213 related to this difference, which is included in equity in earnings (losses) of non-consolidated entities on the accompanying Consolidated Statement of Operations.
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AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements – (Continued)
($000 except per share/unit amounts)
During 2008 and 2007, the Company incurred transaction costs relating to the formation of NLS of $1,138 and $2,316, respectively, which are included in general and administrative expenses in the consolidatedConsolidated Statements of Operations.
The Company has determined that as of December 31, 2008, NLS met the conditions of a significant subsidiary under Rule 1-02(w) of Regulation S-X. The separate financial statements of operations.NLS required pursuant to Rule 3-09 of Regulation S-X are filed as Exhibit 99.2 to the Company's Annual Report on Form 10-K.
Lex-Win Acquisition LLC (“Lex-Win”)
During 2007, Lex-Win, an entity in which the Company holds a 28% ownership interest, commenced a tender offer to acquire up to 45,000,000acquired 3.9 million shares of common stock in Piedmont Office Realty Trust, Inc. (formerly known as Wells Real Estate Investment Trust, Inc.,) (“Wells”), a non-exchange traded entity, at a price per share of $9.30. The$9.30 in a tender offer expired in 2007 at which time Lex-Win received tenders based on the letters of transmittal it received for approximately 4,800,000 shares representing approximately 1% of the outstanding shares in Wells. After submission of the letters to Wells, the actual number of shares acquired in Wells was approximately 3,900,000.offer. During 2007, the Company funded $12,542 relating to this tender and received $1,890 relating to thean adjustment of the tendered shares. WRT Realty, L.P. also holds a 28% interestnumber of shares tendered. Winthrop and three other members hold the remaining interests in Lex-Win. The Company’s former Executive Chairman and Director of Strategic Acquisitions is the Chief Executive Officer of the Company is an affiliateparent of WRT Realty, L.P.Winthrop. Profits, losses and cash flows of Lex-Win are allocated in accordance with the membership interests. During 2008, Lex-Win incurred losses of $3,847 relating to its investment in Wells and sold its entire interest in Wells for $32,289.
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Other Equity Method Investment Limited Partnerships
The Company is a partner in eight partnerships with ownership percentages ranging between 26% and 40%, which own primarily net leased properties. All profits, losses and cash flows are distributed in accordance with the respective partnership agreements. The partnerships are encumbered by $100,944$73,215 in mortgage debt (the Company’s proportionate share is $32,987)$23,497) with interest rates ranging from 5.2%6.7% to 15.0% with a weighted average rate of 8.6%9.9% and maturity dates ranging from 20082009 to 2018.
The Company, through LRA, earns advisory fees from certain of these non-consolidated entities for services related to acquisitions, asset management and debt placement. Advisory fees earned from these non-consolidated investments were $1,105, $1,226, and $3,815 in 2008, 2007 and $4,742 in 2007, 2006, and 2005, respectively. In addition, the Company earned incentive fees in 2007 of $11,685.
(9) Mortgages and Notes Payable and Contract Rights Payable
The Company had outstanding mortgages and notes payable of $2,312,422$2,033,854 and $2,126,810$2,312,422 as of December 31, 20072008 and 2006,2007, respectively, excluding discontinued operations. Interest rates, including imputed rates on mortgages and notes payable, ranged from 3.89%2.0% to 10.5% at December 31, 20072008 and the mortgages and notes payable mature between 20082009 and 2022. Interest rates, including imputed rates, ranged from 3.89%3.9% to 10.5% at December 31, 2006.2007. The weighted average interest rate at December 31, 20072008 and 20062007 was approximately 5.9%5.5% and 6.1%5.9%, respectively.
During 2007 and 2006,2008, the Company obtained $25,000 and $45,000 original principal amount secured term loans from KeyBank National Association (“KeyBank”). The loans are interest only at LIBOR plus 60 basis points and mature in 2013. The net proceeds of the loans of $68,000 were used to partially repay indebtedness on three cross-collateralized mortgages. After such repayment, the amount owed on the three mortgages was $103,511, the three mortgages were combined into one mortgage, which is interest only instead of having a portion as self-amortizing and matures in September 2014. The Company was in compliance with the loan covenants as of December 31, 2008. These loans have an outstanding principal balance of $25,000 and $35,723, respectively, as of December 31, 2008.
Pursuant to the new loan agreements, the Company simultaneously entered into an interest-rate swap agreement with KeyBank to swap the LIBOR rate on the loans for a fixed rate of 4.9196% through March 18, 2013, and the Company assumed a liability for the fair value of the swap at inception of approximately $5,696 ($7,055 at December 31, 2008). The new debt is presented net of a discount at inception of $5,696 ($4,158 at December 31, 2008). The discount is being amortized as interest expense over the term of the loans.
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Notes to Consolidated Financial Statements – (Continued)
($000 except per share/unit amounts)
Also at inception, in accordance with SFAS No. 133, as amended, the Company designated the swap as a cash flow hedge of the risk of variability attributable to changes in the LIBOR swap rate on $45,000 and $25,000 original principal amount of LIBOR-indexed variable-rate debt. Accordingly, changes in the fair value of the swap are recorded in other comprehensive income and reclassified to earnings as interest becomes receivable or payable. Because the fair value of the swap at inception of the hedge was not zero, the Company cannot assume that there will be no ineffectiveness in the hedging relationship. However, the Company expects the hedging relationship to be highly effective and will measure and report any ineffectiveness in earnings. During 2008, the Company terminated a portion of the swap for a notional amount of $9,277 due to required principal payments of the same amount on the $45,000 original principal amount secured term loan. The Company recognized $253 of interest expense during 2008 due to the swap's ineffectiveness and forecasted transactions no longer being probable.
During 2008 and 2007, the Company obtained $21,245 and $246,965 and $187,447original principal amount in non-recourse mortgages that bear interest at a weighted averageweighted-average fixed rate of 6.1%6.0% and 6.0%6.1%, respectively, and have maturity dates ranging from 20142012 to 2021.
The MLP had a secured loan, which bore interest, at the election of the MLP, at a rate equal to either (1) LIBOR plus 175 basis points or (2) the prime rate. This loan was fully repaid during 2007. As of December 31, 2006, $547,199 was outstanding.
The Company hashad a $200,000 revolving credit facility, which expireswas scheduled to expire in June 2008, bears2009, bore interest at120-170 basis points over LIBOR, depending on the amount of the Company’s leverage level and hashad an interest rate period of one, three or six months, at the option of the Company. The credit facility containscontained various leverage, debt service coverage, net worth maintenance and other customary covenants, which the Company was in compliance with as of December 31, 20072008 and 2006.2007. As of December 31, 2007,2008, there were no$25,000 in outstanding borrowings under the credit facility, approximately $198,500$173,327 was available to be borrowed and the Company hashad outstanding letters of credit aggregating $1,500.$1,673. The Company payspaid an unused facility fee equal to 25 basis points if 50% or less of the credit facility is utilized and 15 basis points if greater than 50% of the credit facility is utilized. As ofThis revolving credit facility was refinanced subsequent to the year ended December 31, 2006 approximately $65,194 was outstanding under this line of credit and is included in2008. See note 22.
In June 2007, the $2,126,810 above.
During 2007, the Company settled an interest rate swap agreement for $1,870 in cash and recognized a loss of $649.
Included in the Consolidated Statements of Operations, the Company recognized debt satisfaction gains (losses)(charges), excluding discontinued operations, of $(1,209)($1,073), $7,228($1,209) and $4,409($216) for the years ended December 31, 2008, 2007 and 2006, respectively, due to the satisfaction of mortgages and 2005, respectively.notes payable other than the 5.45% Exchangeable Guaranteed Notes and Trust Preferred Securities.
Contract rightsright mortgage payable is a promissory note with a fixed interest rate of 9.68%, which provides for the following amortization payments:
| Year ending | ||||
December 31, | Total | |||
| 2008 | $ | — | ||
| 2009 | 229 | |||
| 2010 | 491 | |||
| 2011 | 540 | |||
| 2012 | 593 | |||
| Thereafter | 11,591 | |||
| $ | 13,444 | |||
Year ending December 31, | Total | |||
| 2009 | $ | 229 | ||
| 2010 | 491 | |||
| 2011 | 540 | |||
| 2012 | 593 | |||
| 2013 | 652 | |||
| Thereafter | 12,271 | |||
| $ | 14,776 | |||
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LEXINGTON REALTY TRUST
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Notes to Consolidated Financial Statements – (Continued)
($000 except per share/unit amounts)
Mortgages payable and secured loans are generally collateralized by real estate and the related leases. Certain mortgages payable have yield maintenance or defeasance requirements relating to any repayments. In addition, certain mortgages are cross-collateralized and cross-defaulted.
Scheduled principal and balloon payments for mortgages and notes payable, excluding mortgages payable relating to discontinued operations, for the next five years and thereafter are as follows:
| Years ending | ||||
December 31, | Total | |||
| 2008 | $ | 99,324 | ||
| 2009 | 338,565 | |||
| 2010 | 163,319 | |||
| 2011 | 182,760 | |||
| 2012 | 226,621 | |||
| Thereafter | 1,301,833 | |||
| $ | 2,312,422 | |||
Year ending December 31, | Total | |||
| 2009 (1) | $ | 300,189 | ||
| 2010 | 145,151 | |||
| 2011 | 119,901 | |||
| 2012 | 222,159 | |||
| 2013 | 318,587 | |||
| Thereafter | 927,867 | |||
| $ | 2,033,854 | |||
| (1) | |
(10) Exchangeable Notes and Trust Preferred Securities
During 2007, the Company issued an aggregate $450,000 original principal amount of 5.45% Exchangeable Guaranteed Notes due in 2027. These notes can be put to the Company commencing in 2012 and every five years thereafter through maturity and upon certain events. The notes are convertibleexchangeable by the holders into common shares of the Company at a current price of $25.25$21.99 per share, subject to adjustment upon certain events. The initial exchange rate is subject to adjustment under certain events including increases in the Company’s rate of dividends. Due to the special dividend declared by the Board of Trustees in 2007, the exchange price per share is currently $21.99. Upon exchange the holders of the notes would receive (1) cash equal to the principal amount of the note and (2) to the extent the conversionexchange value exceeds the principal amount of the note, either cash or common shares of the Company at the Company’s option.
During 2007, the Company, through a wholly-owned subsidiary, issued $200,000 inoriginal principal amount of Trust Preferred Securities. The Trust Preferred Securities, which are classified as debt, are due in 2037, are redeemable by the Company
89
commencing April 2012 and bear interest at a fixed rate of 6.804% through April 2017 and thereafter, at a variable rate of three month LIBOR plus 170 basis points through maturity. During 2008, the Company repurchased $70,880 original principal amount of the Trust Preferred Securities for a cash payment of $44,561, which resulted in a gain on debt extinguishment of $24,742 including a write-off of $1,577 in deferred financing costs. As of December 31, 2008, there was $129,120 original principal amount of Trust Preferred Securities outstanding.
Scheduled principal payments for these debt instrument for the next five years and thereafter are as follows:
| Year ending | ||||
December 31, | Total | |||
| 2008 | $ | — | ||
| 2009 | — | |||
| 2010 | — | |||
| 2011 | — | |||
| 2012 | 450,000 | (1) | ||
| Thereafter | 200,000 | |||
| $ | 650,000 | |||
Year ending December 31, | Total | |||
| 2009 | $ | — | ||
| 2010 | — | |||
| 2011 | — | |||
2012 (1) | 211,000 | |||
| 2013 | — | |||
| Thereafter | 129,120 | |||
| $ | 340,120 | |||
| (1) | Although the |
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LEXINGTON REALTY TRUST
AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements – (Continued)
($000 except per share/unit amounts)
The estimated fair value of these debt instruments is $593,750. In addition, the Company is in compliance with its obligations under the documents governing these debt instruments.
Lessor:
Minimum future rental receipts under the non-cancellable portion of tenant leases, excluding leasesincluding the lease on propertiesa property held for sale, assuming no new or re-negotiated leases, for the next five years and thereafter are as follows:
| Years ending | ||||
December 31, | Total | |||
| 2008 | $ | 422,579 | ||
| 2009 | 359,495 | |||
| 2010 | 308,388 | |||
| 2011 | 286,200 | |||
| 2012 | 254,431 | |||
| Thereafter | 983,308 | |||
| $ | 2,614,401 | |||
Year ending December 31, | Total | |||
| 2009 | $ | 338,585 | ||
| 2010 | 307,819 | |||
| 2011 | 293,217 | |||
| 2012 | 262,801 | |||
| 2013 | 223,679 | |||
| Thereafter | 845,047 | |||
| $ | 2,271,148 | |||
The above minimum lease payments do not include reimbursements to be received from tenants for certain operating expenses and real estate taxes and do not include early termination payments provided for in certain leases.
Certain leases allow for the tenant to terminate the lease if the property is deemed obsolete, as defined, but must make a termination payment to the Company, as stipulated in the lease. In addition, certain leases provide the tenant with the right to purchase the leased property at fair market value or a stipulated price.
The Company holds leasehold interests in various properties. Generally, the ground rents on these properties are either paid directly by the tenants to the fee holder or reimbursed to the Company as additional rent. Certain properties are economically owned through the holding of industrial revenue bonds and as such neither ground lease payments nor bond debt service payments are made or received, respectively. For certain of thethese properties, the Company has an option to purchase the land.fee interest.
Minimum future rental payments under non-cancellable leasehold interests, excluding leases held through industrial revenue bonds and lease payments in the future that are based upon fair market value for the next five years and thereafter are as follows:
| Years ending | ||||
December 31, | Total | |||
| 2008 | $ | 3,744 | ||
| 2009 | 3,768 | |||
| 2010 | 3,538 | |||
| 2011 | 3,140 | |||
| 2012 | 2,806 | |||
| Thereafter | 16,720 | |||
| $ | 33,716 | |||
Year ending December 31, | Total | |||
| 2009 | $ | 1,811 | ||
| 2010 | 1,564 | |||
| 2011 | 1,173 | |||
| 2012 | 580 | |||
| 2013 | 451 | |||
| Thereafter | 3,214 | |||
| $ | 8,793 | |||
Rent expense for the leasehold interests was $3,255,$995, $1,481 and $604 in 2008, 2007 and $528 in 2007, 2006, and 2005, respectively.
The Company leases its corporate headquarters. The lease expires December 2015, with rent fixed at $599$1,211 per annum through December 20082011 and will be adjusted to fair market value, as defined in the lease, thereafter. The Company is also responsible for its proportionate share of operating expenses and real estate taxes. As an incentive to enter the lease, the Company received a payment of $845 which it is amortizing as a reduction of rent expense. The Company also leases an office in San Francisco until March 2012.2012, which it has subleased to a third-party. The minimum lease payments for these offices are $686 for 2008, $90$1,300 for 2009, $92$1,303 for 2010, $95$1,306 for 2011 and $24 for 2012. Rent expense for these offices for 2008, 2007 and 2006 was $958, $975 and 2005 was $975, $877, and $861, respectively, and is included in general and administrative expenses.
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LEXINGTON REALTY TRUST
AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements – (Continued)
($000 except per share/unit amounts)
(12) Minority Interests
In conjunction with several of the Company’s acquisitions property ownersin prior years, sellers were issued OP units as a form of consideration in exchange for the property. In connection with the Merger, the MLP effected a reverse unit-split pursuant to which each outstanding MLP unit was converted into 0.80 MLP units totaling 35.5 million, excluding MLP units held directly or indirectly by the Company. Holders of certain MLP units have voting rights equivalent to common shareholders of the Company through the Special Voting Preferred Share. Pursuant to a voting trustee agreement, NKT Advisors, LLC, an affiliate of Michael L. Ashner, the Company’s Executive Chairman, holds the one share of the Company’s special voting preferred stock and is required to cast the votes attached to the special voting preferred stock in proportion to the votes it receives from holders of voting MLP units, other than the general partner of the MLP or any other Lexington affiliate, provided that Vornado Realty Trust (“Vornado”) will not have the right to vote for board members of the Company at any time when an affiliate of Vornado is serving or standing for election as a board member of the Company. NKT Advisors, LLC will be entitled to vote Vornado’s voting MLP units in its sole discretion to the extent the voting rights of Vornado’s affiliates are so limited. Substantially all of OP units, other than the OP units held directly or indirectly by the Company, are redeemable at certain times, only at the option of the holders, for common shares of the Company or, on aone-for-one basis, at the Company’s option, cash at various dates and are not otherwise mandatorily redeemable by the Company. During 2006, one of the Company’s operating
91
partnerships issued 33,954 OP units ($750) in connection with an acquisition. During 2005, one of the Company’s operating partnerships issued 352,244 OP units for $7,714 in cash. As of December 31, 2007, there were 39.7 million OP units outstanding. Of the total OP units outstanding at December 31, 2007, 29.2 million were held by related parties. During 2008, the remaining MLP units were redeemed and the MLP was merged into the Company and ceased to exist. As of December 31, 2008, there were 5.3 million OP units outstanding, of which 1.6 million are held by related parties. Generally, holders of OP units are entitled to receive distributions equal to the dividends paid to ourthe Company’s common shareholders, except that certain OP units have stated distributions in accordance with their respective partnership agreement. To the extent that the Company’s dividend per share is less than the stated distribution per unit per the applicable partnership agreement, the stated distributions per unit are reduced by the percentage reduction in the Company’s dividend. No OP units have a liquidation preference. As of December 31, 2006, there were 41.2 million OP units outstanding. As of December 31, 2007,2008, the Company’s common shares had a closing price of $14.54$5.00 per share. Assuming all outstanding OP units not held by the Company were redeemed on such date, the estimated fair value of the OP units is $577,517.$26,535. The Company has the ability and intent to settle such redemptions in common shares.shares of the Company.
(13) Shareholders’ Equity
During 2008, the Company repurchased and retired 501,700 shares of Series C Preferred by issuing 727,759 of its common shares and paying $7,522 in cash. The difference between the cost to retire these shares of Series C Preferred and the historical cost of these shares was $5,678 and is treated as an increase to shareholders equity and as a reduction in preferred dividends paid for calculating earnings per share.
On June 30, 2008, the Company issued 3,450,000 of its common shares raising net proceeds of approximately $47,237. The proceeds, along with cash held, were used to retire $25,000 original principal amount of the 5.45% Exchangeable Guaranteed Notes at a price plus accrued interest of $22,937, and $67,755 original principal amount of the Trust Preferred Securities at a price plus accrued interest of $43,454.
During 2008, 2007 and 2006, the Company repurchased and retired 1,213,251, 9,784,062 and 522,969, respectively, of its common shares and OP units under a repurchase plan authorized by the Company’s Board of Trustees. The common shares and OP units were repurchased in the open market and through private transactions with employees and third parties at an average price of $14.28, $19.83 and $21.15, respectively, per common share/OP unit. As of December 31, 2008, approximately 1,057,000 common shares/OP units were eligible for repurchase under the current authorization adopted by the Company’s Board of Trustees.
During 2007, the Company issued 6,200,000 of its Series D Cumulative Redeemable Preferred Stock (“Series D Preferred”) withhaving a liquidation amount of $155,000 which paysand annual dividends at an annuala rate of 7.55%, raising net proceeds of $149,774. The Series D Preferred has no maturity date and the Company is not required to redeem the Series D Preferred at any time. Accordingly, the Series D Preferred will remain outstanding indefinitely, unless the Company decides at its option on or after February 14, 2012, to exercise its redemption right. If at any time following a change of control, the Series D Preferred are not listed on any of the national stock exchanges, the Company will have the option to redeem the Series D Preferred, in whole but not in part, within 90 days after the first date on which both the change of control has occurred and the Series D Preferred are not so listed, for cash at a redemption price of $25.00 per share, plus accrued and unpaid dividends (whether or not declared) up to but excluding the redemption date. If the Company does not redeem the Series D Preferred and the Series D Preferred are not so listed, the Series D Preferred will pay dividends at an annual rate of 8.55%.
During 2006, the Company issued 15,994,702 of its common shares relating to the Merger.
During 2005,2008, 2007 and 2006, holders of an aggregate of 34,377,989, 1,283,629 and 96,205 OP units redeemed such OP units for common shares of the Company. These redemptions resulted in an aggregate increase in shareholders’ equity and corresponding decrease in minority interest of $517,736, $25,223 and $1,099, respectively.
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LEXINGTON REALTY TRUST
AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements – (Continued)
($000 except per share/unit amounts)
During 2008, 2007 and 2006, the Company issued 2,500,000211,125, 0 and 639,353 of its common shares, in public offerings raising $60,722 in proceeds, which was usedrespectively, to retire mortgage debt and fund acquisitions.
During 2005,2008, 2007 and 2006, the Company issued 400,0000, 282,051 and 627,497 common shares, (which were issued pursuantrespectively, under its dividend reinvestment plan which allows shareholders to an underwriters over allotment option)reinvest dividends in common shares of the Company.
The Company has 2,598,300 shares of Series C Cumulative Convertible Preferred, Stock, raising net proceeds of $19,463.outstanding at December 31, 2008. The shares have a dividend of $3.25 per share per annum, have a liquidation preference of $20,000,$129,915, and the Company commencing November 2009, if certain common share prices are achieved, can force conversion into common shares. At issuance each share wasshares of the Company. The shares are currently convertible into 1.86432.1683 common shares. This conversion ratio may increase over time if the Company’s common share dividend exceeds certain quarterly thresholds. Due to the special dividend declared by the Company’s Board of Trustees, each share is convertible into 2.1683 common shares as of December 31, 2007.
If certain fundamental changes occur, holders may require the Company, in certain circumstances, to repurchase all or part of their Series C Cumulative Convertible Preferred Stock.Preferred. In addition, upon the occurrence
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of certain fundamental changes, the Company will under certain circumstances increase the conversion rate by a number of additional common shares or, in lieu thereof, may in certain circumstances elect to adjust the conversion rate upon the Series C Cumulative Convertible Preferred Stock becoming convertible into shares of the public acquiring or surviving company.
On or after November 16, 2009, the Company may, at the Company’s option, cause the Series C Cumulative Convertible Preferred Stock to be automatically converted into that number of common shares that are issuable at the then prevailing conversion rate. The Company may exercise its conversion right only if, at certain times, the closing price of the Company’s common shares equals or exceeds 125% of the then prevailing conversion price of the Series C Cumulative Convertible Preferred Stock.Preferred.
Investors in the Series C Cumulative Convertible Preferred Stock generally have no voting rights, but will have limited voting rights if the Company fails to pay dividends for six or more quarters and under certain other circumstances. Upon conversion the Company may choose to deliver the conversion value to investors in cash, common shares, or a combination of cash and common shares.
The Company maintains a common share optionan equity award plan pursuant to which qualified and non-qualified options may be issued. Options granted under the plan prior to 2008 generally vestvested over a period of one to four years and expireexpired five years from date of grant. No compensation cost iswas reflected in net income as all options granted under the plan prior to 2008 had an exercise price equal to the market value of the underlying common shares on the date of grant. The Company granted 2,000,000 common share options on December 31, 2008. The options vest 50% following a 20-day trading period where the average closing price of a common share of the Company on the New York Stock Exchange is $8.00 or higher and 50% following a 20-day trading period where the average closing price is $10.00 or higher and expire 10 years from date of grant.
The Company engaged a third party to value the options as of December 31, 2008. The third party determined the value to be $2,480 using the Monte Carlo simulation model. The options are considered equity awards as the number of options issued is fixed and determinable at the date of grant. As such, the options were valued as of the date of the grant and do not require subsequent remeasurement. There were several assumptions used to fair value the options including the expected volatility in the Company’s common share price based upon the fluctuation in the Company’s historical common share price. The more significant assumptions underlying the determination of fair value for options granted during 2008 were as follows:
| Year Ended December 31, | 2008 | |||
| Weighted average fair value of options granted | $ | 1.24 | ||
| Weighted average risk-free interest rates | 1.33 | % | ||
| Weighted average expected option lives (in years) | 3.60 | |||
| Weighted average expected volatility | 59.94 | % | ||
| Weighted average expected dividend yield | 14.40 | % | ||
In addition, the Company has unrecognized compensation costs of $2,480 relating to the outstanding options issued on December 31, 2008 that will be charged to compensation expense over an average of approximately 3.6 years.
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LEXINGTON REALTY TRUST
AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements —– (Continued)
($000 except per share/unit amounts)
Share option activity during the years indicated is as follows:
| Weighted-Average | ||||||||
| Number of | Exercise Price | |||||||
| Shares | Per Share | |||||||
| Balance at December 31, 2004 | $ | 176,330 | $ | 14.70 | ||||
| Granted | — | — | ||||||
| Exercised | (133,830 | ) | 14.71 | |||||
| Forfeited | (2,000 | ) | 13.66 | |||||
| Expired | — | — | ||||||
| Balance at December 31, 2005 | 40,500 | 14.71 | ||||||
| Granted | — | — | ||||||
| Exercised | (20,500 | ) | 14.15 | |||||
| Forfeited | (2,000 | ) | 15.50 | |||||
| Expired | (1,500 | ) | 11.82 | |||||
| Balance at December 31, 2006 | 16,500 | 15.56 | ||||||
| Granted | — | — | ||||||
| Exercised | (15,500 | ) | 15.56 | |||||
| Forfeited | — | — | ||||||
| Expired | (1,000 | ) | 15.50 | |||||
| Balance at December 31, 2007 | $ | — | $ | — | ||||
Number of Shares | Weighted-Average Exercise Price Per Share | |||||||
| Balance at December 31, 2005 | 40,500 | $ | 14.71 | |||||
| Granted | — | — | ||||||
| Exercised | (20,500 | ) | 14.15 | |||||
| Forfeited | (2,000 | ) | 15.50 | |||||
| Expired | (1,500 | ) | 11.82 | |||||
| Balance at December 31, 2006 | 16,500 | 15.56 | ||||||
| Granted | — | — | ||||||
| Exercised | (15,500 | ) | 15.56 | |||||
| Forfeited | — | — | ||||||
| Expired | (1,000 | ) | 15.50 | |||||
| Balance at December 31, 2007 | — | — | ||||||
| Granted | 2,000,000 | 5.60 | ||||||
| Balance at December 31, 2008 | 2,000,000 | $ | 5.60 | |||||
The Company hassponsors a 401(k) retirement savings plan covering all eligible employees. TheDuring the year ended December 31, 2008, the Company will matchmatched 100% of the first 2.5% 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 $366, $382 $229 and $179$229 of contributions are applicable to 2008, 2007 2006 and 2005,2006, respectively.
Non-vested share activity for the yearyears ended December 31, 2008 and 2007, is as follows:
| Number of | Weighted-Average | |||||||
| Shares | Value Per Share | |||||||
| Balance at December 31, 2006 | 654,761 | $ | 21.52 | |||||
| Granted | — | — | ||||||
| Forfeited | (8,430 | ) | 21.99 | |||||
| Vested | (224,608 | ) | 20.48 | |||||
| Balance at December 31, 2007 | 421,723 | $ | 22.06 | |||||
Number of Shares | Weighted-Average Value Per Share | |||||||
| Balance at December 31, 2006 | 654,761 | $ | 21.52 | |||||
| Granted | — | — | ||||||
| Forfeited | (8,430 | ) | 21.99 | |||||
| Vested | (224,608 | ) | 20.48 | |||||
| Balance at December 31, 2007 | 421,723 | 22.06 | ||||||
| Granted | 211,125 | 13.47 | ||||||
| Forfeited | (5,622 | ) | 18.47 | |||||
| Vested | (139,682 | ) | 17.54 | |||||
| Balance at December 31, 2008 | 487,544 | $ | 19.48 | |||||
As of December 31, 2007,2008, of the remaining 421,723487,544 non-vested shares, 140,424253,105 are subject to time vesting and 281,299234,439 are subject to performance vesting. ThereAt December 31, 2008, there are 4,999,4222,756,099 awards available for grant at December 31, 2007 andafter the issuance of the 2,000,000 options. The Company has $6,394$5,731 in unrecognized compensation costs relating to the unvested shares that will be charged to compensation expense over an average of approximately 3.52.7 years.
In 2006, the Company’s Board of Trustees approved the accelerated vesting of certain time based non-vested shares, which resulted in a charge to earnings of $10,758, which is included in general and administrative expenses.
During 2008, 2007 2006 and 2005,2006, the Company recognized $3,980, $3,645 and $16,950 (including the $10,758 in accelerated amortization of non-vested shares), and $3,595, respectively, in compensation relating to share grants to trustees and employees.
The Company has established a trust for certain officers in which non-vested common shares, which generally vest ratably over five years, granted for the benefit of the officers are deposited. The officers exert no control over the common shares in the trust and the common shares are available to the general creditors of the Company. As of December 31, 20072008 and 2006,2007, there were 427,531 common shares in the trust.
90
LEXINGTON REALTY TRUST
AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements – (Continued)
($000 except per share/unit amounts)
On February 6, 2007, the Company’s Board of Trustees established the Lexington Realty Trust 2007 Outperformance Program, a long-term incentive compensation program. Under this program, participating officers will share in an “outperformance pool” if the Company’s total shareholder return for the three-year performance period beginning on the effective date of the Program,program, January 1, 2007, exceeds the greater of an absolute compounded annual total shareholder return of 10% or 110% of the compounded annual return of the MSCI US REIT INDEX during the same period measured against a baseline value equal to the average of the ten consecutive trading days immediately prior to April 1, 2007. The size of the outperformance pool for this program will be 10% of the Company’s total shareholder return in excess of the performance hurdle, subject to a maximum amount of $40,000. On April 2, 2007, the Company’s Compensation Committee modified the effective date of the program from January 1, 2007 to April 1, 2007. On December 20, 2007, the program was modified to clarify the definition of annual shareholder return.
The awards are considered liability awards because the number of shares issued to the participants are not fixed and determinable as of the grant date. These awards contain both a service condition and a market condition. As these awards are liability based awards, the measurement date for liability instruments is the date of settlement. Accordingly, liabilities incurred under share-based payment arrangements were initially measured on the grant date of February 6, 2007 and are required to be measured at the end of each reporting period until settlement.
A third party was engaged to value the awards and the Monte Carlo simulation approachmodel was used to estimate the compensation expense of the outperformance pool. As of grant date, it was determined that the value of the awards was $1,901. As of December 31, 2008 and 2007, the value of the awards was $715.$343 and $715, respectively. The Company recognized $111$15 and ($111) in compensation expensesincome (expense) relating to the award during the yearyears ended December 31, 2007.2008 and 2007, respectively.
Each participating officer’s award under this program will be designated as a specified participation percentage of the aggregate outperformance pool. On February 6, 2007, the Company’s Compensation Committee allocated 83% of the outperformance pool to certain of the Company’s officers. During the second quarter of 2007 one officerand 2008, two participating officers separated from the Company and the rights relating to histheir aggregate allocated 8%19% were forfeited. The remaining unallocated balance of 25%36% may be allocated by the Company’s Compensation Committee in its discretion.
If the performance hurdle is met, the Company will grant each participating officer non-vested common shares as of the end of the performance period with a value equal to such participating officer’s share of the outperformance pool. The non-vested common shares would vest in two equal installments on the first two anniversaries of the date the performance period ends provided the executive continues employment. Once issued, the non-vested common shares would be entitled to dividends and voting rights.
In the event of a change in control (as determined for purposes of the program) during the performance period, the performance period will be shortened to end on the date of the change in control and participating officers’ awards will be based on performance relative to the hurdle through the date of the change in control and participating officers’ awards will be based on performance relative to the hurdle through the date of the change in control. Any common shares earned upon a change in control will be fully vested. In addition, the performance period will be shortened to each for an executive officer if he or she is terminated by the Company without “cause” or he or she resigns for “good reason,” as such terms are defined in the executive officer’s employment agreement.
95
All determinations, interpretations, and assumptions relating to the vesting and the calculation of the awards under this program will be made by the Company’s Compensation Committee.
During 2008, the Company and a former executive officer and his affiliate entered into a Services and Non-Compete Agreement and a Separation and General Release. In addition to an aggregate cash payment of $1,500 paid in 2008, non-vested common shares previously issued to the officer were accelerated and immediately vested which resulted in a charge of $265.
During the second quarter of 2007, the Company and an executive officer entered into an employment separation agreement. In addition to a cash payment of $3,600, non-vested common shares were accelerated and immediately vested which resulted in a charge of $933.
(15) Income Taxes
The benefit (provision) for income taxes relates primarily to the taxable income of the Company’s taxable REIT subsidiaries. The earnings, other than in taxable REIT subsidiaries, of the Company are not generally subject to Federal income taxes at the Company level due to the REIT election made by the Company.
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LEXINGTON REALTY TRUST
AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements – (Continued)
($000 except per share/unit amounts)
Income taxes have been provided for on the asset and liability method as required by Statement of Financial Accounting Standards No. 109, Accounting for Income Taxes.SFAS 109. Under the asset and liability method, deferred income taxes are recognized for the temporary differences between the financial reporting basis and the tax basis of assets and liabilities.
The Company’s benefit (provision) for income taxes for the years ended December 31, 2008, 2007 2006 and 20052006 is summarized as follows:
| 2007 | 2006 | 2005 | ||||||||||
| Current: | ||||||||||||
| Federal | $ | (928 | ) | $ | (139 | ) | $ | (222 | ) | |||
| State and local | (2,679 | ) | (331 | ) | (93 | ) | ||||||
| NOL utilized | 799 | — | — | |||||||||
| Deferred: | ||||||||||||
| Federal | (407 | ) | 561 | 358 | ||||||||
| State and local | (159 | ) | 147 | 107 | ||||||||
| $ | (3,374 | ) | $ | 238 | $ | 150 | ||||||
| 2008 | 2007 | 2006 | ||||||||||
| Current: | ||||||||||||
| Federal | $ | (395 | ) | $ | (928 | ) | $ | (139 | ) | |||
| State and local | (1,889 | ) | (2,593 | ) | (332 | ) | ||||||
| NOL utilized | 629 | 799 | — | |||||||||
| Deferred: | ||||||||||||
| Federal | (972 | ) | (407 | ) | 561 | |||||||
| State and local | (381 | ) | (159 | ) | 147 | |||||||
| $ | (3,008 | ) | $ | (3,288 | ) | $ | 237 | |||||
Deferred tax assets (liability) of $872($442) and $3,230$872 are included in other assets (other liabilities) on the accompanying Consolidated Balance Sheets at December 31, 20072008 and 2006,2007, respectively. These deferred tax assets relate primarily to differences in the timing of the recognition of income/(loss) between GAAP and tax, basis of real estate investments and net operating loss carry forwards.
The income tax benefit (provision) differs from the amount computed by applying the statutory federal income tax rate to pre-tax operating income as follows:
| 2007 | 2006 | 2005 | ||||||||||
| Federal benefit at statutory tax rate (34)% | $ | 488 | $ | 548 | $ | 96 | ||||||
| State and local taxes, net of Federal benefit | 4 | 86 | 24 | |||||||||
| Other | (3,866 | ) | (396 | ) | 30 | |||||||
| $ | (3,374 | ) | $ | 238 | $ | 150 | ||||||
| 2008 | 2007 | 2006 | ||||||||||
| Federal benefit (provision) at statutory tax rate (34)% | $ | (397 | ) | $ | 488 | $ | 548 | |||||
| State and local taxes, net of federal benefit | (45 | ) | 4 | 86 | ||||||||
| Other | (2,566 | ) | (3,780 | ) | (397 | ) | ||||||
| $ | (3,008 | ) | $ | (3,288 | ) | $ | 237 | |||||
For the years ended December 31, 2008 and 2007, the “other” amount of $3,866$2,566 and $3,780, respectively, is comprised primarily of state taxes of $2,396$1,827 and $2,310, respectively, and the write-off of deferred tax assets of $742 and $1,605, respectively, relating to the dissolution of LSAC and the acquisition of our co-investment programs.
96
Company’s taxable subsidiaries.
As of December 31, 20072008 and 2006,2007, the Company has estimated net operating loss carry forwards for federal income tax reporting purposes of $5,126$3,476 and $11,781,$5,126, respectively, which would begin to expire in tax year 2025. No valuation allowances have been recorded against deferred tax assets as the Company believes they are fully realizable, based upon projected future taxable income.
(16) Commitments and Contingencies
In addition to the commitments and contingencies disclosed elsewhere, the Company has the following commitments and contingencies.
From time to time the Company is involved in legal proceedings arising in the ordinary course of business. In management’s opinion, after consultation with legal counsel, the outcome of such matters, including the matters set forth below, are not expected to have a material adverse effect on the Company’s financial position, result of operations or cash flows.
Lexington Streetsboro LLC v. Alfred Geis, et al.
Beginning in January 2005, on behalf of one of the Company’s co-investment programs, the Company received notices from the tenant in theits Streetsboro, Ohio facility regarding certain alleged deficiencies in the construction of the facility as compared to the original building specifications. Upon acquisition of the facility from the developer, the then owner of the facility obtained an indemnity from the principals of the developer covering a breach of construction warranties, the constructionand/or the condition of the premises. After two years of correspondence among the owner of the facility, the developer and the tenant, the Company (after the Company’s acquisition of the facility from ourits co-investment program) entered into an amendment to the lease with the tenant providing for the repair of a portion of the alleged deficiencies and commenced such repairs beginning in the summer of 2007.
Following a demand for reimbursement under the indemnity agreement, the Company filed suit against the developer and the principals of the developer in the Federal District Court for the Northern District of Ohio on August 10, 2007 to enforce our rightsfor breach of the indemnity agreement, declaratory judgment, unjust enrichment, breach of contract and negligent design (Lexington Streestboro LLC v. Alfred Geis, et al.,Case No. 5:07CV2450). On November 1, 2007, the developer filed (1) counter-claims against the Company for unjust enrichment regarding the repair work performed and for a declaration of its obligations under the indemnity agreement and (2) multiple cross-claims against itssub-contractors asking to be reimbursed for any deficiencies in the building specifications for which they are held liable. The developer was also permitted by the Court to file a claim against the tenant. The suit is on-going.claim against the tenant was withdrawn after a settlement of a portion of the Company’s claim against the developer.
As of December 31, 2007,2008, the Company has incurred $3.7 million$4,924 of expensescosts in connection with repair and other work at the work covered byfacility.
In August and October 2008, the lease amendmentCompany participated in a court ordered mediation, which did not result in a final settlement. The suit is ongoing and the enforcement of the Company’s rights under the indemnity agreement.trial is scheduled for October 2009. The Company may seek an additional $2.5 millionhas reached a preliminary agreement to settle all claims for future costsa $2,000 cash payment to the Company. The agreement is being documented and it is expected that may be incurred in connection with other potential deficiencies.the Company will execute a settlement agreement within the next 30 days. The Company intends to vigorously pursue its claims and reimbursement undercan give no assurance that it will receive the indemnity agreement, and believes that$2,000 cash payment or enter into the receivable recorded is collectable.settlement agreement.
Deutsche Bank Securities, Inc. and SPCP Group LLC v. Lexington Drake, L.P., et al.
On June 30, 2006, the Company, including a non-consolidated entity,co-investment program as it relates to the Antioch claim, sold to Deutsche Bank Securities, Inc., (“ ("Deutsche Bank”Bank"), (1) a $7,680 bankruptcy damage claim against Dana Corporation for $5,376 (“ Farmington(the "Farmington Hills claim”claim"), and (2) a $7,727 bankruptcy damage claim against Dana Corporation for $5,680 (“ Antioch claim”million (the "Antioch claim"). Under the terms of the agreements covering the sale of the claims, the Company is obligated to reimburse Deutsche Bank should the claim ever be disallowed, subordinated or otherwise impaired, to the extent of such disallowance, subordination or impairment, plus interest at the rate of 10% per annum from the date of payment of the purchase price by Deutsche Bank.Bank to the Company. On October 12, 2007, Dana Corporation filed an objection to both claims. The Company assisted Deutsche Bank and the then holders of the claims in the preparation and filing of a response to the objection. Despite a belief by the Company that the objections were without merit, the holders of the claims, without the Company’s consent, settled the allowed amount of the claims at $6,500 for the Farmington Hills claim and $7,200
97
for the Antioch claim. Deutsche Bank has made a formal demand with respect to the Farmington Hills claim in the amount of $826 plus interest, but hasdid not mademake a formal demand with respect to the Antioch claim, whichclaim. Following a rejection of the estimate is $388demand, Deutsche Bank and SPCP Group, LLC filed a summons and complaint with the Supreme Court of the State of New York, County of New York for the Farmington Hills and Antioch claims, and claimed damages of approximately $1,200 plus interest. interest and expenses.
The Company informed Deutsche Bank that it does not intendanswered the complaint on November 26, 2008 and served numerous discovery requests. The Company intends to honor any demandcontinue to vigorously defend the claims for a variety of reasons, including that (1) the holders of the claims arbitrarily settled the claims for reasons based on factors other than the merits and (2) the holders of the claims voluntarily reduced the claims to participate in certain settlement pools. The Company intends to vigorously defend any further claims or demands by Deutsche Bank or the holders of the claims. The Company believes that no material amount will be paid to Deutsche Bank relating to this item.
Certain employees have employment contracts and are entitled to severance benefits in the case of a change of control, as defined in the employment contract.
The Company, including its non-consolidated entities, are obligated under certain tenant leases to fund the expansion of the underlying leased properties.
During 2007, the Company wrote off approximately $431 relating to costs incurred for the LSAC initial public offering. The costs were written off when LSAC decided not to pursue an initial public offering of its shares.
92
LEXINGTON REALTY TRUST
AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements – (Continued)
($000 except per share/unit amounts)
During 2008, the Company entered into a forward purchase equity commitment with a financial institution to purchase 3,500,000 common shares of the Company at $5.60 per share. The Company has prepaid $12,798 with the remainder to be paid in October 2011 through (i) physical settlement or (ii) cash settlement, net share settlement or a combination of both, at the Company’s option. The Company agreed to make floating payments during the term of the forward purchase at LIBOR plus 250 basis points per annum and the Company retains the dividends paid on the common shares. In addition, the Company may be required to make additional prepayments pursuant to the forward purchase equity commitment. The Company’s third party consultant determined the fair value of this asset to be $10,698 at December 31, 2008 and the Company recognized a charge to earnings of $2,128 primarily relating to the decrease in the fair value. The asset is included in other assets on the December 31, 2008 Consolidated Balance Sheet.
The Company has entered into sales agreements with two financial institutions to sell up to 9,000,000 common shares of the Company from time to time in controlled at-the-market equity offerings. Sales of the common shares of the Company, if any, will depend on market conditions and other factors. The Company has no obligations to sell any common shares of the Company covered by the sales agreements and may terminate the sales agreements at any time.
(17) Related Party Transactions
In addition to related party transactions disclosed elsewhere, the Company was a party to the following related party transactions.
Certain officers of the Company own OP units or other interests in entities consolidated or accounted for under the equity method.
All related party acquisitions, sales and loans were approved by the independent members of the Company’s Board of Trustees or the Audit Committee.
Entities partially owned and $16,371, respectively.
On March 20, 2008, the Company owns an equity interest. The total fees earned byentered into a Services and overhead reimbursed to thisNon-Compete Agreement with its former Executive Chairman and Director or Strategic Acquisitions and his affiliate, in 2007 was $2,606.
As of December 31, 2008 and 2007, $4,102 and 2006, $21,378, and $20,886, respectively, in mortgage notes payable are due to entities owned by significant OP unitholdersshareholders and the former Executive Chairman and Director of Strategic Acquisitions. The mortgages were assumed in connection with the Merger. In addition, the Company leases four properties to these entities.entities owned by significant shareholders and/or the former Executive Chairman and Director of Strategic Acquisitions. During 2008 and 2007, the Company recognized $1,575 per year in rental revenue from these properties. The Company leases its corporate office in New York City from Vornado, a significant OP unitholder.shareholder. Rent expense for this property was $865 and $829 in 2007.2008 and 2007, respectively.
During 2007, the Company repurchased common shares from two of its officers for an aggregate of $405 and purchased LSAC shares from several of its officers for $2,200.
During 2007, the MLPCompany and Winthrop, Realty L.P., an entity affiliated with the Company’s former Executive Chairman and Director of Strategic Acquisitions, entered into a joint venture with other unrelated partners, to acquire shares of Wells Real Estate Investment Trust (see note 8).
Winthrop, Realty L.P., an affiliate of the Company’s former Executive Chairman and Director of Strategic Acquisitions, is the 50% partner in Lex-Win Concord Debt Holdings LLC (see note 8).
In addition, the Company earns fees from certain of its non-consolidated investments (see note 8).
93
LEXINGTON REALTY TRUST
AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements – (Continued)
($000 except per share/unit amounts)
The Company has an indemnity obligation to one of its significant shareholders with respect to actions by the Company that affect the significant shareholder’s status as a REIT.
(18) Fair Market Value of Financial Instruments
Cash Equivalents, Restricted Cash, Accounts Receivable and Accounts Payable. The Company estimates that the fair value approximates carrying value due to the relatively short maturity of the instruments.
Notes Receivable. The Company determines the fair value of these instruments based upon a discounted cash flow analysis using a discount rate that approximates the current borrowing rates for instruments having similar maturities. Based on this, the Company has determined that the fair value of these instruments approximateswas approximately $62,000 at December 31, 2008 and approximated carrying costs at December 31, 2007 as their interest rates approximateapproximated market.
Mortgages and Notes Payable, Exchangeable Notes and Contract Rights Payable.Trust Preferred Securities. The Company determines the fair value of these instruments based on recent repurchases and/or on a discounted cash flow analysis using a discount rate that approximates the current borrowing rates for instruments of similar maturities. Based on this, the Company has determined that the fair value of these instruments approximates the carrying value as ofwas approximately $2,055,000 at December 31, 20072008 and 2006.approximated carrying values at December 31, 2007. The Company has applied SFAS 157 to evaluate the fair value of these instruments at December 31, 2008. The Company has determined that the fair value of the 5.45% Exchangeable Guaranteed Notes of approximately $134,000 at December 31, 2008, falls within Level 2 of the SFAS 157 fair value hierarchy as the Company repurchased these instruments in December 2008 at a discount to original cost of 36.5%. The fair value of the remaining mortgages and notes payable and Trust Preferred Securities of approximately $1,921,000 at December 31, 2008 falls within Level 3 of the SFAS 157 fair value hierarchy.
(19) Concentration of Risk
The Company seeks to reduce its operating and leasing risks through diversification achieved by the geographic distribution of its properties, avoiding dependency on a single property and the creditworthiness of its tenants.
For the years ended December 31, 2008, 2007 2006 and 2005,2006, no tenant represented 10% or more of gross revenues.
Cash and cash equivalent balances may exceed insurable amounts. The Company believes it mitigates risk by investing in or through major financial institutions.
(20) Supplemental Disclosure of Statement of Cash Flow Information
During 2007, 2006 and 2005, the Company paid $154,917, $70,256 and $65,635, respectively, for interest and $3,452, $273, and $1,703, respectively, for income taxes.
In connection with the formation of NLS in 2008 and 2007, the Company contributed real estate and intangibles, net of accumulated depreciation and amortization, of $90,200 and $129,427, respectively, to NLS. The Company’s contributed or sold properties to NLS with consolidated mortgage notes payable in the unrealized gain (loss) on marketableamount of $155,824 and $171,502, respectively, which were assumed by NLS.
During 2008, 2007 and 2006, holders of an aggregate of 34,377,989, 1,283,629 and 96,205 OP units, respectively, redeemed such units for common shares of the Company. These redemptions resulted in increases in shareholders’ equity securitiesand corresponding decreases in minority interests of $(896)$517,736, $25,223 and $789$1,099, respectively.
During 2008, the Company assumed a $7,545 mortgage note payable in connection with a property acquisition.
In 2008, the Company received land in a lease termination transaction with an appraised value of $16,000, which is included in non-operating income in the Consolidated Statement of Operations.
During 2008, the Company entered into a swap obligation with an initial value or $5,696, which was reflected as a reduction of mortgages payable and included in accounts payable and other liabilities.
During 2008, the Company sold one property through foreclosure with a mortgage principal balance of $6,516 and an unrealized gain in foreign currency translationasset carrying value of $371 and $484, respectively. $6,488.
In addition, the Company had an unrealized loss from investments held by non-consolidated entities of $3,526 in 2007. As of December 31, 20072008, the Company had a cumulative (1) unrealized loss on marketable securitiesnet decrease in the non-cash accruals for construction in progress, deferred leasing costs and deferred financing costs of $107, (2) unrealized gain on foreign currency translation of $855 and (3) unrealized loss on investment from non-consolidated entities of $3,526.$14,333.
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99
LEXINGTON REALTY TRUST
AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements —– (Continued)
($000 except per share/unit amounts)
During 2008, the Company issued 1,620,879 common shares (with a value at issuance of $23,505) and cash of $5,432 to repurchase $32,500 of 5.45% Exchangeable Guaranteed Notes.
During 2007, the Company sold one property for a sale price of $35,700 and provided $27,700 in secured financing to the buyer.
In connection with the acquisition of the co-investment programs in 2007, the Company paid approximately $366,600 in cash and acquired approximately $1,071,000 in real estate, $264,000 in intangibles, $21,000 in cash, assumed $785,000 in mortgages payable, $40,000 in below-market leases and $14,000 in all other assets and liabilities (see note 8).
During 2006, the Company sold a property in which the purchaser assumed a mortgage note encumbering the property in the amount of $14,170. In addition, the Company provided a $3,200, 6.00% interest only mortgage due in 2017 relating to the sale of another property.
During 2005, the Company provided $11,050 in secured financing related to the sale of a property.
During 2006, the Company issued 33,954 OP Unitsunits valued at $750 to acquire a single net leased property.
Effective November 1, 2006, LSAC became a consolidated subsidiary of the Company. The assets and liabilities of LSAC are treated as non-cash activities for the Consolidated Statement of Cash Flows, were as follows:
| Real estate | $ | 106,112 | ||
| Cash | $ | 31,985 | ||
| Other assets | $ | 23,476 | ||
| Mortgage payable | $ | 72,057 | ||
| Other liabilities | $ | 1,341 |
| Real estate | $ | 106,112 | ||
| Cash | $ | 31,985 | ||
| Other assets | $ | 23,476 | ||
| Mortgage payable | $ | 72,057 | ||
| Other liabilities | $ | 1,341 |
See footnote 5 for discussion of the Merger.
(21) Unaudited Quarterly Financial Data
| 2008 | ||||||||||||||||
| 3/31/2008 | 6/30/2008 | 9/30/2008 | 12/31/2008 | |||||||||||||
| Total gross revenues(1) | $ | 105,522 | $ | 126,711 | $ | 103,901 | $ | 105,097 | ||||||||
| Net income (loss) | $ | 7,812 | $ | 15,725 | $ | (3,717 | ) | $ | (11,355 | ) | ||||||
| Net income (loss) allocable to common shareholders — basic | $ | 777 | $ | 14,777 | $ | (10,343 | ) | $ | (17,983 | ) | ||||||
| Net income (loss) allocable to common shareholders — per share: | ||||||||||||||||
| Basic | $ | .01 | $ | .25 | $ | (.16 | ) | $ | (.21 | ) | ||||||
| Diluted | $ | .01 | $ | (.04 | ) | $ | (.16 | ) | $ | (.21 | ) | |||||
| 2007 | ||||||||||||||||
| 3/31/2007 | 6/30/2007 | 9/30/2007 | 12/31/2007 | |||||||||||||
| Total gross revenues(1) | $ | 78,850 | $ | 106,482 | $ | 115,026 | $ | 119,300 | ||||||||
| Net income | $ | 2,215 | $ | 28,939 | $ | 14,463 | $ | 31,234 | ||||||||
| Net income (loss) allocable to common shareholders — basic | $ | (3,416 | ) | $ | 21,906 | $ | 7,429 | $ | 24,199 | |||||||
| Net income (loss) allocable to common shareholders — per share: | ||||||||||||||||
| Basic | $ | (0.05 | ) | $ | 0.34 | $ | 0.12 | $ | 0.39 | |||||||
| Diluted | $ | (0.05 | ) | $ | 0.34 | $ | 0.12 | $ | 0.39 | |||||||
| 2007 | ||||||||||||||||
| 3/31/2007 | 6/30/2007 | 9/30/2007 | 12/31/2007 | |||||||||||||
| Total gross revenues(1) | $ | 81,943 | $ | 109,510 | $ | 118,032 | $ | 122,262 | ||||||||
| Net income | $ | 2,215 | $ | 28,939 | $ | 14,463 | $ | 31,234 | ||||||||
| Net income (loss) allocable to common shareholders — basic | $ | (3,416 | ) | $ | 21,906 | $ | 7,429 | $ | 24,199 | |||||||
| Net income (loss) allocable to common shareholders — per share: | ||||||||||||||||
| Basic | $ | (0.05 | ) | $ | 0.34 | $ | 0.12 | $ | 0.39 | |||||||
| Diluted | $ | (0.05 | ) | $ | 0.34 | $ | 0.12 | $ | 0.39 | |||||||
| 2006 | ||||||||||||||||
| 3/31/2006 | 6/30/2006 | 9/30/2006 | 12/31/2006 | |||||||||||||
| Total gross revenues(1) | $ | 46,367 | $ | 44,209 | $ | 46,216 | $ | 49,901 | ||||||||
| Net income (loss) | $ | 6,078 | $ | 25,520 | $ | (17,596 | ) | $ | (6,249 | ) | ||||||
| Net income (loss) allocable to common shareholders — basic | $ | 1,969 | $ | 21,411 | $ | (21,704 | ) | $ | (10,358 | ) | ||||||
| Net income (loss) allocable to common shareholders — per share: | ||||||||||||||||
| Basic | $ | 0.04 | $ | 0.41 | $ | (0.42 | ) | $ | (0.20 | ) | ||||||
| Diluted | $ | 0.04 | $ | 0.41 | $ | (0.42 | ) | $ | (0.20 | ) | ||||||
| (1) | All periods have been adjusted to reflect the impact of properties sold during the years ended December 31, |
The sum of the quarterly income (loss) per common share amounts may not equal the full year amounts primarily because the computations of the weighted average number of common shares of the Company outstanding for each quarter and the full year are made independently.
95
LEXINGTON REALTY TRUST
AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements – (Continued)
($000 except per share/unit amounts)
(22) Subsequent Events
Subsequent to December 31, 2007,2008, the Company:
Refinanced its (1) unsecured revolving credit facility, with $25,000 outstanding as of December 31, 2008, which was scheduled to expire in June 2009, and (2) secured term loan, with $174,280 outstanding as of December 31, 2008, which was scheduled to mature in 2009, with a secured credit facility consisting of a $165,000 term loan and a $85,000 revolving credit agreement with KeyBank, as agent. The new facility bears interest at 2.85% over LIBOR and matures in February 2011, but can be extended until February 2012 at the Company’s option. The new credit facility is secured by ownership interest pledges and guarantees by certain of the Company’s subsidiaries that in the aggregate own interests in a borrowing base consisting of 72 properties. With the consent of the lenders, the Company can increase the size of (1) the term loan by $135,000 and (2) the revolving loan by $115,000 (or $250,000 in the aggregate, for a total facility size of $500,000) by adding properties to the borrowing base;
Sold one property, which was classified as held for sale at December 31, 2008, for an aggregate sales price of $11,386 and satisfied the $5,259 non-recourse mortgage note encumbering the property; and
Repurchased $13,000 face amount of the 5.45% Exchangeable Guaranteed Notes for $8,860, including accrued interest.
96
LEXINGTON REALTY TRUST AND CONSOLIDATED SUBSIDIARIES
Real Estate and Accumulated Depreciation and Amortization
Schedule III ($000)
Initial cost to Company and Gross Amount at which carried at End of Year(A)
| Accumulated | ||||||||||||||||||||||||||||||
| Buildings | Depreciation | Useful life computing | ||||||||||||||||||||||||||||
| Land, Improvements | and | and | Date | Date | depreciation in latest | |||||||||||||||||||||||||
Description | Location | Encumbrances | and Land Estates | Improvements | Total | Amortization | Acquired | Constructed | income statements (years) | |||||||||||||||||||||
| R&D | Glendale, AZ | $ | 14,084 | $ | 4,996 | $ | 24,392 | $ | 29,388 | $ | 14,557 | Nov-86 | 1985 | 12 & 40 | ||||||||||||||||
| Industrial | Marshall, MI | 0 | 40 | 900 | 940 | 526 | Aug-87 | 1979 | 12, 20 & 40 | |||||||||||||||||||||
| Industrial | Marshall, MI | 0 | 129 | 3,836 | 3,965 | 1,992 | Aug-87 | 1968/1972 | 12, 20, 22 & 40 | |||||||||||||||||||||
| Office/Warehouse | Tampa, FL | 7,941 | 1,900 | 9,854 | 11,754 | 4,758 | Nov-87 | 1986 | 28, 30 & 40 | |||||||||||||||||||||
| Office/Warehouse | Memphis, TN | *** | 1,053 | 11,538 | 12,591 | 9,566 | Feb-88 | 1987 | 8 &15 | |||||||||||||||||||||
| Office | Tampa, FL | 5,741 | 2,160 | 7,127 | 9,287 | 4,234 | Jul-88 | 1986 | 10, 24, 26, 31, & 40 | |||||||||||||||||||||
| Retail | Oxon Hill, MD | 0 | 403 | 2,765 | 3,168 | 1,616 | Aug-95 | 1976 | 18.21 & 24 | |||||||||||||||||||||
| Retail | Rockville, MD | 0 | 0 | 1,784 | 1,784 | 1,041 | Aug-95 | 1977 | 20 & 22 | |||||||||||||||||||||
| Retail/Health Club | Canton, OH | 427 | 602 | 3,819 | 4,421 | 1,145 | Dec-95 | 1987 | 40 | |||||||||||||||||||||
| Office | Salt Lake City, UT | 4,712 | 0 | 55,404 | 55,404 | 24,821 | May-96 | 1982 | 26 | |||||||||||||||||||||
| Retail | Honolulu, HI | *** | 0 | 11,147 | 11,147 | 9,458 | Dec-96 | 1980 | 5 | |||||||||||||||||||||
| Retail | Tulsa, OK | 0 | 447 | 2,432 | 2,879 | 1,492 | Dec-96 | 1981 | 14 & 24 | |||||||||||||||||||||
| Retail | Clackamas, OR | 0 | 523 | 2,847 | 3,370 | 1,747 | Dec-96 | 1981 | 14 & 24 | |||||||||||||||||||||
| Retail | Lynwood, WA | 0 | 488 | 2,658 | 3,146 | 1,631 | Dec-96 | 1981 | 14 & 24 | |||||||||||||||||||||
| Warehouse | New Kingston, PA | 3,230 | 674 | 5,360 | 6,034 | 1,446 | Mar-97 | 1981 | 40 | |||||||||||||||||||||
| Warehouse | Mechanicsburg, PA | 5,005 | 1,012 | 8,039 | 9,051 | 2,169 | Mar-97 | 1985 | 40 | |||||||||||||||||||||
| Warehouse | New Kingston, PA | 6,780 | 1,380 | 10,963 | 12,343 | 2,958 | Mar-97 | 1989 | 40 | |||||||||||||||||||||
| Office | Dallas, TX | 0 | 3,582 | 37,246 | 40,828 | 8,563 | Sep-97 | 1981 | 40 | |||||||||||||||||||||
| Office | Decatur, GA | 6,106 | 975 | 14,252 | 15,227 | 3,438 | Dec-97 | 1983 | 40 | |||||||||||||||||||||
| Office | Richmond, VA | 15,745 | 0 | 27,282 | 27,282 | 8,460 | Dec-97 | 1990 | 32.25 | |||||||||||||||||||||
| Office | Hebron, OH | *** | 1,063 | 4,271 | 5,334 | 645 | Dec-97 | 2000 | 40 | |||||||||||||||||||||
| Office/Warehouse | Bristol, PA | 9,262 | 2,508 | 10,915 | 13,423 | 2,446 | Mar-98 | 1982 | 40 | |||||||||||||||||||||
| Office | Hebron, KY | 0 | 1,615 | 7,958 | 9,573 | 1,830 | Mar-98 | 1987 | 6, 12 & 40 | |||||||||||||||||||||
| Office | Palm Beach Gardens, FL | 10,536 | 3,578 | 14,848 | 18,426 | 3,435 | May-98 | 1996 | 40 | |||||||||||||||||||||
| Industrial | Auburn Hills, MI | 6,590 | 2,788 | 6,648 | 9,436 | 2,638 | Jul-98 | 1989/1998 | 40 | |||||||||||||||||||||
| Warehouse/Distribution | Baton Rouge, LA | 1,581 | 685 | 3,316 | 4,001 | 764 | Oct-98 | 1998 | 9 & 40 | |||||||||||||||||||||
| Office | Herndon, VA | 18,041 | 5,127 | 20,730 | 25,857 | 4,135 | Dec-99 | 1987 | 40 | |||||||||||||||||||||
| Office | Bristol, PA | 5,442 | 1,073 | 7,709 | 8,782 | 1,550 | Dec-99 | 1998 | 40 | |||||||||||||||||||||
| Office | Hampton, VA | 6,984 | 2,333 | 9,352 | 11,685 | 1,431 | Mar-00 | 1999 | 40 | |||||||||||||||||||||
| Office | Phoenix, AZ | 18,807 | 4,666 | 19,966 | 24,632 | 3,689 | May-00 | 1997 | 6 & 40 | |||||||||||||||||||||
| Industrial | Danville, IL | 6,161 | 1,796 | 7,182 | 8,978 | 1,266 | Dec-00 | 2000 | 40 | |||||||||||||||||||||
| Retail | Eau Claire, WI | 1,583 | 860 | 3,441 | 4,301 | 527 | Nov-01 | 1994 | 40 | |||||||||||||||||||||
| Retail | Canton, OH | 2,993 | 884 | 3,534 | 4,418 | 541 | Nov-01 | 1995 | 40 | |||||||||||||||||||||
| Industrial | Plymouth, MI | 4,442 | 1,533 | 6,130 | 7,663 | 939 | Nov-01 | 1996 | 40 | |||||||||||||||||||||
| Retail | Spartanburg, SC | 2,486 | 834 | 3,334 | 4,168 | 510 | Nov-01 | 1996 | 40 | |||||||||||||||||||||
| Industrial | Henderson, NC | 4,007 | 1,488 | 5,953 | 7,441 | 912 | Nov-01 | 1998 | 40 | |||||||||||||||||||||
| Office | Hampton, VA | 4,283 | 1,353 | 5,441 | 6,794 | 1,060 | Nov-01 | 2000 | 40 | |||||||||||||||||||||
| Retail | Westland, MI | 1,087 | 1,444 | 5,777 | 7,221 | 884 | Nov-01 | 1987/1997 | 40 | |||||||||||||||||||||
| Office | Phoenix, AZ | *** | 2,287 | 20,584 | 22,871 | 2,009 | Nov-01 | 1995/1994 | 20 & 40 | |||||||||||||||||||||
| Industrial | Hebron, OH | *** | 1,681 | 6,779 | 8,460 | 1,038 | Dec-01 | 1999 | 5 & 40 | |||||||||||||||||||||
| Industrial | Dillon, SC | 22,950 | 3,223 | 26,054 | 29,277 | 3,254 | Dec-01 | 2001/2005 | 22 & 40 | |||||||||||||||||||||
| Office | Lake Forest, CA | 10,352 | 3,442 | 13,769 | 17,211 | 1,994 | Mar-02 | 2001 | 40 | |||||||||||||||||||||
| Office | Fort Mill, SC | 10,903 | 3,601 | 14,404 | 18,005 | 1,815 | Dec-02 | 2002 | 40 | |||||||||||||||||||||
| Office | Boca Raton, FL | 20,400 | 4,290 | 17,160 | 21,450 | 2,091 | Feb-03 | 1983/2002 | 40 | |||||||||||||||||||||
Description | Location | Encumbrances | Land, Improvements and Land Estates | Buildings and Improvements | Total | Accumulated Depreciation and Amortization | Date Acquired | Date Constructed | Useful life computing depreciation in latest income statements (years) | ||||||||||||||||||||||||||
| Industrial | Marshall, MI | 2 | 0 | 40 | 900 | 940 | 548 | Aug-87 | 1979 | 12, 20 & 40 | |||||||||||||||||||||||||
| Office/Warehouse | Memphis, TN | 1,2 | 0 | 1,054 | 11,539 | 12,593 | 10,494 | Feb-88 | 1987 | 8 & 15 | |||||||||||||||||||||||||
| Office | Tampa, FL | 5,655 | 2,160 | 7,258 | 9,418 | 4,429 | Jul-88 | 1986 | 9, 10, 24, 26, 31 & 40 | ||||||||||||||||||||||||||
| Retail/Health Club | Canton, OH | 64 | 603 | 3,819 | 4,422 | 1,241 | Dec-95 | 1987 | 40 | ||||||||||||||||||||||||||
| Office | Salt Lake City, UT | 2,096 | 0 | 55,404 | 55,404 | 26,954 | May-96 | 1982 | 26 | ||||||||||||||||||||||||||
| Retail | Honolulu, HI | 1,2 | 0 | 0 | 11,147 | 11,147 | 11,017 | Dec-96 | 1980 | 5 | |||||||||||||||||||||||||
| Retail | Tulsa, OK | 2 | 0 | 447 | 2,432 | 2,879 | 1,629 | Dec-96 | 1981 | 14 & 24 | |||||||||||||||||||||||||
| Retail | Clackamas, OR | 2 | 0 | 523 | 2,848 | 3,371 | 1,907 | Dec-96 | 1981 | 14 & 24 | |||||||||||||||||||||||||
| Retail | Lynnwood, WA | 2 | 0 | 488 | 2,658 | 3,146 | 1,780 | Dec-96 | 1981 | 14 & 24 | |||||||||||||||||||||||||
| Warehouse | New Kingston, PA | 3,161 | 674 | 5,360 | 6,034 | 1,580 | Mar-97 | 1981 | 40 | ||||||||||||||||||||||||||
| Warehouse | Mechanicsburg, PA | 4,897 | 1,012 | 8,039 | 9,051 | 2,370 | Mar-97 | 1985 | 40 | ||||||||||||||||||||||||||
| Warehouse | New Kingston, PA | 6,635 | 1,380 | 10,963 | 12,343 | 3,232 | Mar-97 | 1989 | 40 | ||||||||||||||||||||||||||
| Office | Dallas, TX | 0 | 3,582 | 38,115 | 41,697 | 9,933 | Sep-97 | 1981 | 5, 12 & 40 | ||||||||||||||||||||||||||
| Office | Decatur, GA | 0 | 975 | 14,910 | 15,885 | 3,874 | Dec-97 | 1983 | 4, 5, 6, 15 & 40 | ||||||||||||||||||||||||||
| Office | Richmond, VA | 15,522 | 0 | 27,282 | 27,282 | 9,306 | Dec-97 | 1990 | 32.25 | ||||||||||||||||||||||||||
| Office | Hebron, OH | 1 | 0 | 1,063 | 4,271 | 5,334 | 752 | Dec-97 | 2000 | 40 | |||||||||||||||||||||||||
| Office/Warehouse | Bristol, PA | 0 | 2,508 | 11,558 | 14,066 | 2,737 | Mar-98 | 1982 | 40 | ||||||||||||||||||||||||||
| Office | Hebron, KY | 2 | 0 | 1,615 | 8,125 | 9,740 | 2,167 | Mar-98 | 1987 | 6, 10, 12 & 40 | |||||||||||||||||||||||||
| Office | Palm Beach Gardens, FL | 2 | 0 | 3,578 | 15,478 | 19,056 | 3,844 | May-98 | 1996 | 10, 20 & 40 | |||||||||||||||||||||||||
| Warehouse/Distribution | Baton Rouge, LA | 1,487 | 685 | 3,316 | 4,001 | 881 | Oct-98 | 1998 | 9 & 40 | ||||||||||||||||||||||||||
| Office | Herndon, VA | 17,809 | 5,127 | 20,730 | 25,857 | 4,654 | Dec-99 | 1987 | 40 | ||||||||||||||||||||||||||
| Office | Hampton, VA | 6,891 | 2,333 | 9,352 | 11,685 | 1,665 | Mar-00 | 1999 | 40 | ||||||||||||||||||||||||||
| Office | Phoenix, AZ | 18,449 | 4,666 | 19,966 | 24,632 | 4,391 | May-00 | 1997 | 6 & 40 | ||||||||||||||||||||||||||
| Industrial | Danville, IL | 6,030 | 1,796 | 15,922 | 17,718 | 1,591 | Dec-00 | 2000 | 40 | ||||||||||||||||||||||||||
| Retail | Eau Claire, WI | 1,406 | 860 | 3,441 | 4,301 | 613 | Nov-01 | 1994 | 40 | ||||||||||||||||||||||||||
| Retail | Canton, OH | 2 | 0 | 884 | 3,534 | 4,418 | 629 | Nov-01 | 1995 | 40 | |||||||||||||||||||||||||
| Industrial | Plymouth, MI | 4,372 | 1,533 | 6,130 | 7,663 | 1,092 | Nov-01 | 1996 | 40 | ||||||||||||||||||||||||||
| Retail | Spartanburg, SC | 2 | 0 | 833 | 3,334 | 4,167 | 594 | Nov-01 | 1996 | 40 | |||||||||||||||||||||||||
| Industrial | Henderson, NC | 3,887 | 1,488 | 5,953 | 7,441 | 1,060 | Nov-01 | 1998 | 40 | ||||||||||||||||||||||||||
| Office | Hampton, VA | 4,225 | 1,353 | 5,441 | 6,794 | 1,196 | Nov-01 | 2000 | 40 | ||||||||||||||||||||||||||
| Retail | Westland, MI | 490 | 1,444 | 5,777 | 7,221 | 1,029 | Nov-01 | 1987/1997 | 40 | ||||||||||||||||||||||||||
| Office | Phoenix, AZ | 1,2 | 0 | 2,287 | 20,759 | 23,046 | 2,751 | Nov-01 | 1995/1994 | 5, 8, 10.5 & 40 | |||||||||||||||||||||||||
| Industrial | Hebron, OH | 1,2 | 0 | 1,681 | 6,779 | 8,460 | 1,212 | Dec-01 | 1999 | 5 & 40 | |||||||||||||||||||||||||
| Industrial | Dillon, SC | 22,501 | 3,223 | 26,054 | 29,277 | 4,090 | Dec-01 | 2001/2005 | 22 & 40 | ||||||||||||||||||||||||||
| Office | Lake Forest, CA | 10,210 | 3,442 | 13,769 | 17,211 | 2,338 | Mar-02 | 2001 | 40 | ||||||||||||||||||||||||||
| Office | Fort Mill, SC | 10,725 | 3,601 | 14,404 | 18,005 | 2,176 | Dec-02 | 2002 | 40 | ||||||||||||||||||||||||||
| Office | Boca Raton, FL | 20,400 | 4,290 | 17,160 | 21,450 | 2,520 | Feb-03 | 1983/2002 | 40 | ||||||||||||||||||||||||||
| Industrial | Dubuque, IA | 10,442 | 2,052 | 8,443 | 10,495 | 1,180 | Jul-03 | 2002 | 11, 12 & 40 | ||||||||||||||||||||||||||
| Office | Wallingford, CT | 3,318 | 1,049 | 4,198 | 5,247 | 529 | Dec-03 | 1978/1985 | 40 | ||||||||||||||||||||||||||
| Industrial | Waxahachie, TX | 2 | 0 | 652 | 13,045 | 13,697 | 4,625 | Dec-03 | 1996/1997 | 10, 16 & 40 | |||||||||||||||||||||||||
| Office | Wall Township, NJ | 28,891 | 8,985 | 26,961 | 35,946 | 5,212 | Jan-04 | 1983 | 22 & 40 | ||||||||||||||||||||||||||
| Industrial | Moody, AL | 7,111 | 654 | 9,943 | 10,597 | 2,546 | Feb-04 | 2004 | 15 & 40 | ||||||||||||||||||||||||||
| Office | Sugar Land, TX | 14,677 | 1,834 | 16,536 | 18,370 | 1,964 | Mar-04 | 1997 | 40 | ||||||||||||||||||||||||||
| Office | Houston, TX | 56,740 | 16,613 | 52,682 | 69,295 | 6,256 | Mar-04 | 1976/1984 | 40 | ||||||||||||||||||||||||||
| Office | Florence, SC | 2 | 0 | 3,235 | 12,941 | 16,176 | 2,244 | May-04 | 1998 | 40 | |||||||||||||||||||||||||
| Office | Clive, IA | 5,697 | 2,761 | 7,453 | 10,214 | 2,041 | Jun-04 | 2003 | 12, 13 & 40 | ||||||||||||||||||||||||||
| Office | Carrollton, TX | 13,693 | 1,789 | 18,157 | 19,946 | 3,161 | Jun-04 | 2003 | 19 & 40 | ||||||||||||||||||||||||||
| Industrial | High Point, NC | 7,928 | 1,330 | 11,183 | 12,513 | 2,215 | Jul-04 | 2002 | 18 & 40 | ||||||||||||||||||||||||||
| Office | Southfield, MI | 1,2 | 0 | 0 | 12,124 | 12,124 | 3,472 | Jul-04 | 1963/1965 | 7, 16 & 40 | |||||||||||||||||||||||||
| Industrial | San Antonio, TX | 28,210 | 2,482 | 38,535 | 41,017 | 8,271 | Jul-04 | 2001 | 17 & 40 | ||||||||||||||||||||||||||
| Office | Fort Mill, SC | 19,973 | 1,798 | 25,192 | 26,990 | 5,830 | Nov-04 | 2004 | 15 & 40 | ||||||||||||||||||||||||||
| Office | Foxboro, MA | 16,120 | 2,231 | 25,653 | 27,884 | 5,251 | Dec-04 | 1982 | 16 & 40 | ||||||||||||||||||||||||||
| Industrial | Olive Branch, MS | 2 | 0 | 198 | 10,276 | 10,474 | 3,034 | Dec-04 | 1989 | 8, 15 & 40 | |||||||||||||||||||||||||
| Office | Los Angeles, CA | 11,064 | 5,110 | 10,911 | 16,021 | 2,604 | Dec-04 | 2000 | 13 & 40 | ||||||||||||||||||||||||||
| Industrial | Knoxville, TN | 7,525 | 1,079 | 10,762 | 11,841 | 2,170 | Mar-05 | 2001 | 14 & 40 | ||||||||||||||||||||||||||
| Industrial | Millington, TN | 17,170 | 723 | 19,118 | 19,841 | 3,534 | Apr-05 | 1997 | 16 & 40 | ||||||||||||||||||||||||||
| Office | Fort Meyers, FL | 8,912 | 1,820 | 10,198 | 12,018 | 2,251 | Apr-05 | 1997 | 13 & 40 | ||||||||||||||||||||||||||
| Office | Harrisburg, PA | 8,832 | 900 | 10,556 | 11,456 | 3,295 | Apr-05 | 1998 | 9 & 40 | ||||||||||||||||||||||||||
| Office | Indianapolis, IN | 12,688 | 1,700 | 16,448 | 18,148 | 4,685 | Apr-05 | 1999 | 10 & 40 | ||||||||||||||||||||||||||
| Office | Tulsa, OK | 7,394 | 2,126 | 8,493 | 10,619 | 2,365 | Apr-05 | 2000 | 11 & 40 | ||||||||||||||||||||||||||
| Office | Houston, TX | 17,005 | 3,750 | 21,149 | 24,899 | 4,669 | Apr-05 | 2000 | 13 & 40 | ||||||||||||||||||||||||||
| Office | Houston, TX | 16,340 | 800 | 22,538 | 23,338 | 5,685 | Apr-05 | 2000 | 11 & 40 | ||||||||||||||||||||||||||
| Office | San Antonio, TX | 12,598 | 2,800 | 14,587 | 17,387 | 3,780 | Apr-05 | 2000 | 11 & 40 | ||||||||||||||||||||||||||
| Office | Richmond, VA | 10,222 | 1,100 | 11,919 | 13,019 | 2,361 | Apr-05 | 2000 | 15 & 40 | ||||||||||||||||||||||||||
| Office | Suwannee, GA | 11,325 | 3,200 | 10,903 | 14,103 | 2,581 | Apr-05 | 2001 | 12 & 40 | ||||||||||||||||||||||||||
| Office | Indianapolis, IN | 9,277 | 1,360 | 13,150 | 14,510 | 2,959 | Apr-05 | 2002 | 12 & 40 | ||||||||||||||||||||||||||
| Office | Lakewood, CO | 8,364 | 1,400 | 8,653 | 10,053 | 2,024 | Apr-05 | 2002 | 12 & 40 | ||||||||||||||||||||||||||
| Office | Atlanta, GA | 43,629 | 4,600 | 55,333 | 59,933 | 11,939 | Apr-05 | 2003 | 13 & 40 | ||||||||||||||||||||||||||
| Office | Houston, TX | 12,762 | 1,500 | 14,581 | 16,081 | 2,939 | Apr-05 | 2003 | 14 & 40 | ||||||||||||||||||||||||||
| Office | Philadelphia, PA | 48,040 | 13,209 | 50,999 | 64,208 | 10,214 | Jun-05 | 1957 | 5, 10, 14, 15 & 40 | ||||||||||||||||||||||||||
| Industrial | Dry Ridge, KY | 6,701 | 560 | 12,553 | 13,113 | 1,527 | Jun-05 | 1988 | 25 & 40 | ||||||||||||||||||||||||||
| Industrial | Elizabethtown, KY | 2,917 | 352 | 4,862 | 5,214 | 591 | Jun-05 | 2001 | 25 & 40 | ||||||||||||||||||||||||||
| Industrial | Elizabethtown, KY | 15,463 | 890 | 26,868 | 27,758 | 3,268 | Jun-05 | 1995/2001 | 25 & 40 | ||||||||||||||||||||||||||
| Industrial | Owensboro, KY | 5,967 | 393 | 11,956 | 12,349 | 1,508 | Jun-05 | 1998/2000 | 25 & 40 | ||||||||||||||||||||||||||
| Industrial | Hopkinsville, KY | 9,063 | 631 | 16,154 | 16,785 | 1,964 | Jun-05 | Various | 25 & 40 | ||||||||||||||||||||||||||
| Office | Southington, CT | 13,248 | 3,240 | 25,339 | 28,579 | 12,415 | Nov-05 | 1983 | 12, 28 & 40 | ||||||||||||||||||||||||||
| Office | Omaha, NE | 8,680 | 2,566 | 8,324 | 10,890 | 791 | Nov-05 | 1995 | 20 & 40 | ||||||||||||||||||||||||||
| Office | Tempe, AZ | 8,198 | 0 | 9,442 | 9,442 | 874 | Dec-05 | 1998 | 30 & 40 | ||||||||||||||||||||||||||
| Industrial | Collierville, TN | 1,2 | 0 | 714 | 2,483 | 3,197 | 309 | Dec-05 | 2005 | 14, 20 & 40 | |||||||||||||||||||||||||
| Industrial | Crossville, TN | 2 | 0 | 545 | 6,999 | 7,544 | 1,042 | Jan-06 | 1989/2006 | 17 & 40 | |||||||||||||||||||||||||
97
LEXINGTON REALTY TRUST AND CONSOLIDATED SUBSIDIARIES
Real Estate and Accumulated Depreciation and Amortization
Schedule III ($000) —– (continued)
| Accumulated | ||||||||||||||||||||||||||||||
| Buildings | Depreciation | Useful life computing | ||||||||||||||||||||||||||||
| Land, Improvements | and | and | Date | Date | depreciation in latest | |||||||||||||||||||||||||
Description | Location | Encumbrances | and Land Estates | Improvements | Total | Amortization | Acquired | Constructed | income statements (years) | |||||||||||||||||||||
| Industrial | Dubuque, IA | 10,597 | 2,052 | 8,443 | 10,495 | 955 | Jul-03 | 2002 | 12 & 40 | |||||||||||||||||||||
| Office | Wallingford, CT | 3,371 | 1,049 | 4,198 | 5,247 | 424 | Dec-03 | 1978/1985 | 40 | |||||||||||||||||||||
| Industrial | Waxahachie, TX | 0 | 652 | 13,045 | 13,697 | 3,709 | Dec-03 | 1996/1997 | 10, 16 & 40 | |||||||||||||||||||||
| Office | Wall Township, NJ | 29,430 | 8,985 | 26,961 | 35,946 | 4,160 | Jan-04 | 1983 | 22 & 40 | |||||||||||||||||||||
| Industrial | Moody, AL | 7,241 | 654 | 9,943 | 10,597 | 2,024 | Feb-04 | 2004 | 10, 15 & 40 | |||||||||||||||||||||
| Industrial | Houston, TX | 24,498 | 13,894 | 14,488 | 28,382 | 1,358 | Mar-04 | 1992 | 40 | |||||||||||||||||||||
| Office | Sugar Land, TX | 15,670 | 1,834 | 16,536 | 18,370 | 1,550 | Mar-04 | 1997 | 40 | |||||||||||||||||||||
| Office | Houston, TX | 6,948 | 644 | 7,424 | 8,068 | 696 | Mar-04 | 1981/1999 | 40 | |||||||||||||||||||||
| Office | Florence, SC | 8,678 | 3,235 | 12,941 | 16,176 | 1,920 | May-04 | 1998 | 40 | |||||||||||||||||||||
| Office | Clive, IA | 5,784 | 2,761 | 7,453 | 10,214 | 1,590 | Jun-04 | 2003 | 12, 13 & 40 | |||||||||||||||||||||
| Office | Carrollton, TX | 13,921 | 2,487 | 18,157 | 20,644 | 2,379 | Jun-04 | 2003 | 19 & 40 | |||||||||||||||||||||
| Industrial | High Point, NC | 8,146 | 1,330 | 11,183 | 12,513 | 1,718 | Jul-04 | 2002 | 18 & 40 | |||||||||||||||||||||
| Office | Southfield, MI | *** | 0 | 12,124 | 12,124 | 2,707 | Jul-04 | 1963/1965 | 7, 16 & 40 | |||||||||||||||||||||
| Industrial | San Antonio, TX | 28,671 | 2,482 | 38,535 | 41,017 | 6,416 | Jul-04 | 2001 | 17 & 40 | |||||||||||||||||||||
| Office | Fort Mill, SC | 20,238 | 1,798 | 25,192 | 26,990 | 4,497 | Nov-04 | 2004 | 15 & 40 | |||||||||||||||||||||
| Office/R&D | Foxboro, MA | 14,091 | 1,586 | 18,245 | 19,831 | 2,971 | Nov-04 | 1965/1988 | 15 & 40 | |||||||||||||||||||||
Description | Location | Encumbrances | Land, Improvements and Land Estates | Buildings and Improvements | Total | Accumulated Depreciation and Amortization | Date Acquired | Date Constructed | Useful life computing depreciation in latest income statements (years) | ||||||||||||||||||||||||||
| Office | Renswoude, Netherlands | 36,645 | 2,788 | 25,277 | 28,065 | 3,452 | Jan-06 | 1994/2003 | 17 & 40 | ||||||||||||||||||||||||||
| Office | Memphis, TN | 3,951 | 464 | 4,467 | 4,931 | 392 | Nov-06 | 1888 | 20 & 40 | ||||||||||||||||||||||||||
| Office | Charleston, SC | 7,350 | 1,189 | 8,724 | 9,913 | 807 | Nov-06 | 2006 | 40 | ||||||||||||||||||||||||||
| Office | Hanover, NJ | 16,341 | 4,063 | 19,711 | 23,774 | 1,724 | Nov-06 | 2006 | 20 & 40 | ||||||||||||||||||||||||||
| Industrial | Saugerties, NY | 2 | 0 | 508 | 2,837 | 3,345 | 147 | Dec-06 | 1979 | 40 | |||||||||||||||||||||||||
| Industrial | Owensboro, KY | 2 | 0 | 819 | 2,439 | 3,258 | 318 | Dec-06 | 1975 | 40 | |||||||||||||||||||||||||
| Industrial | Memphis, TN | 2 | 0 | 1,553 | 12,326 | 13,879 | 758 | Dec-06 | 1973 | 40 | |||||||||||||||||||||||||
| Industrial | N. Myrtle Beach, SC | 1 | 0 | 1,481 | 2,078 | 3,559 | 261 | Dec-06 | 1983 | 40 | |||||||||||||||||||||||||
| Industrial | Long Beach, CA | 4 | 2,027 | 6,230 | 7,802 | 14,032 | 772 | Dec-06 | 1981 | 40 | |||||||||||||||||||||||||
| Industrial | Lumberton, NC | 1,2 | 0 | 405 | 12,049 | 12,454 | 775 | Dec-06 | 1998 | 40 | |||||||||||||||||||||||||
| Industrial | McDonough, GA | 23,000 | 2,463 | 24,291 | 26,754 | 1,240 | Dec-06 | 2000 | 40 | ||||||||||||||||||||||||||
| Industrial | Columbus, OH | 1,2 | 0 | 1,990 | 10,580 | 12,570 | 696 | Dec-06 | 1973 | 40 | |||||||||||||||||||||||||
Office | Palo Alto, CA | 1,2 | 0 | 12,398 | 16,977 | 29,375 | 4,448 | Dec-06 | 1974 | 40 | |||||||||||||||||||||||||
| Industrial | Rockford, IL | 0 | 371 | 2,573 | 2,944 | 151 | Dec-06 | 1998 | 40 | ||||||||||||||||||||||||||
| Industrial | Rockford, IL | 6,876 | 509 | 5,289 | 5,798 | 290 | Dec-06 | 1992 | 40 | ||||||||||||||||||||||||||
| Industrial | North Berwick, ME | 1,2 | 0 | 1,383 | 31,817 | 33,200 | 1,640 | Dec-06 | 1965 | 40 | |||||||||||||||||||||||||
| Industrial | Statesville, NC | 14,051 | 891 | 16,494 | 17,385 | 1,275 | Dec-06 | 1999 | 40 | ||||||||||||||||||||||||||
| Industrial | Orlando, FL | 1,2 | 0 | 1,030 | 10,869 | 11,899 | 613 | Dec-06 | 1981 | 40 | |||||||||||||||||||||||||
| Industrial | Cincinnati, OH | 1,2 | 0 | 1,009 | 7,007 | 8,016 | 425 | Dec-06 | 1991 | 40 | |||||||||||||||||||||||||
| Land | Baltimore, MD | 0 | 4,605 | 0 | 4,605 | 0 | Dec-06 | N/A | N/A | ||||||||||||||||||||||||||
| Office | Clinton, CT | 0 | 285 | 4,043 | 4,328 | 532 | Dec-06 | 1971 | 40 | ||||||||||||||||||||||||||
| Office | Irvine, CA | 0 | 4,758 | 36,300 | 41,058 | 4,314 | Dec-06 | 1983 | 40 | ||||||||||||||||||||||||||
| Office | Lisle, IL | 10,390 | 3,236 | 13,667 | 16,903 | 901 | Dec-06 | 1985 | 40 | ||||||||||||||||||||||||||
| Office | Dallas, TX | 1 | 0 | 4,042 | 16,961 | 21,003 | 997 | Dec-06 | 1981 | 40 | |||||||||||||||||||||||||
| Office | Beaumont, TX | 0 | 456 | 3,506 | 3,962 | 190 | Dec-06 | 1978 | 40 | ||||||||||||||||||||||||||
| Office | Bridgewater, NJ | 14,805 | 4,738 | 27,331 | 32,069 | 1,449 | Dec-06 | 1986 | 40 | ||||||||||||||||||||||||||
| Office | Pleasanton, CA | 4,101 | 2,671 | 2,839 | 5,510 | 554 | Dec-06 | 1984 | 40 | ||||||||||||||||||||||||||
| Office | San Francisco, CA | 21,197 | 14,539 | 36,570 | 51,109 | 1,875 | Dec-06 | 1959 | 40 | ||||||||||||||||||||||||||
| Office | Colorado Springs, CO | 1 | 0 | 1,018 | 2,459 | 3,477 | 205 | Dec-06 | 1982 | 40 | |||||||||||||||||||||||||
| Office | Bridgeton, MO | 1,2 | 0 | 1,853 | 4,469 | 6,322 | 251 | Dec-06 | 1980 | 40 | |||||||||||||||||||||||||
| Office | Glenwillow, OH | 16,939 | 2,228 | 24,530 | 26,758 | 1,335 | Dec-06 | 1996 | 40 | ||||||||||||||||||||||||||
| Office | Columbus, IN | 3 | 25,831 | 235 | 45,729 | 45,964 | 2,181 | Dec-06 | 1983 | 40 | |||||||||||||||||||||||||
| Office | Johnson City, TN | 1,2 | 0 | 1,214 | 7,568 | 8,782 | 423 | Dec-06 | 1983 | 40 | |||||||||||||||||||||||||
| Office | Memphis, TN | 3 | 46,252 | 5,291 | 97,032 | 102,323 | 5,054 | Dec-06 | 1985 | 40 | |||||||||||||||||||||||||
| Office | Orlando, FL | 1,2 | 0 | 586 | 35,012 | 35,598 | 1,817 | Dec-06 | 1982 | 40 | |||||||||||||||||||||||||
| Office | Long Beach, CA | 4 | 5,472 | 19,672 | 67,478 | 87,150 | 5,003 | Dec-06 | 1981 | 40 | |||||||||||||||||||||||||
| Office | Little Rock, AR | 1,2 | 0 | 1,353 | 2,260 | 3,613 | 135 | Dec-06 | 1980 | 40 | |||||||||||||||||||||||||
| Office | Baltimore, MD | 1 | 0 | 32,959 | 78,959 | 111,918 | 21,221 | Dec-06 | 1973 | 40 | |||||||||||||||||||||||||
| Office | Rockaway, NJ | 14,900 | 4,646 | 20,428 | 25,074 | 1,296 | Dec-06 | 2002 | 40 | ||||||||||||||||||||||||||
| Office | Orlando, FL | 1 | 0 | 11,498 | 33,671 | 45,169 | 3,748 | Dec-06 | 1984 | 40 | |||||||||||||||||||||||||
| Office | Beaumont, TX | 1,2 | 0 | 0 | 27,094 | 27,094 | 1,347 | Dec-06 | 1983 | 40 | |||||||||||||||||||||||||
| Office | Rochester, NY | 18,734 | 645 | 25,892 | 26,537 | 1,404 | Dec-06 | 1988 | 40 | ||||||||||||||||||||||||||
| Office | Las Vegas, NV | 3 | 31,428 | 8,824 | 53,164 | 61,988 | 2,718 | Dec-06 | 1982 | 40 | |||||||||||||||||||||||||
| Other | Sun City, AZ | 2 | 0 | 2,154 | 2,775 | 4,929 | 142 | Dec-06 | 1982 | 40 | |||||||||||||||||||||||||
| Other | Carlsbad, NM | 2 | 0 | 918 | 775 | 1,693 | 50 | Dec-06 | 1980 | 40 | |||||||||||||||||||||||||
| Other | Corpus Christi, TX | 2 | 0 | 987 | 974 | 1,961 | 52 | Dec-06 | 1983 | 40 | |||||||||||||||||||||||||
| Other | El Paso, TX | 2 | 0 | 220 | 1,749 | 1,969 | 90 | Dec-06 | 1982 | 40 | |||||||||||||||||||||||||
| Other | McAllen, TX | 2 | 0 | 606 | 1,257 | 1,863 | 66 | Dec-06 | 2004 | 40 | |||||||||||||||||||||||||
| Other | Victoria, TX | 2 | 0 | 300 | 1,149 | 1,449 | 61 | Dec-06 | 1981 | 40 | |||||||||||||||||||||||||
| Retail | Rock Falls, IL | 1,2 | 0 | 135 | 702 | 837 | 81 | Dec-06 | 1991 | 40 | |||||||||||||||||||||||||
| Retail | Florence, AL | 1,2 | 0 | 862 | 3,747 | 4,609 | 189 | Dec-06 | 1983 | 40 | |||||||||||||||||||||||||
| Retail | Chattanooga, TN | 1,2 | 0 | 556 | 1,241 | 1,797 | 74 | Dec-06 | 1982 | 40 | |||||||||||||||||||||||||
| Retail | Paris, TN | 1 | 0 | 247 | 547 | 794 | 41 | Dec-06 | 1982 | 40 | |||||||||||||||||||||||||
| Retail | Carrollton, TX | 2 | 0 | 2,262 | 1,085 | 3,347 | 112 | Dec-06 | 1984 | 40 | |||||||||||||||||||||||||
| Retail | Atlanta, GA | 2 | 0 | 1,014 | 269 | 1,283 | 71 | Dec-06 | 1972 | 40 | |||||||||||||||||||||||||
| Retail | Atlanta, GA | 2 | 0 | 870 | 187 | 1,057 | 56 | Dec-06 | 1975 | 40 | |||||||||||||||||||||||||
| Retail | Chamblee, GA | 2 | 0 | 770 | 186 | 956 | 65 | Dec-06 | 1972 | 40 | |||||||||||||||||||||||||
| Retail | Cumming, GA | 2 | 0 | 1,558 | 1,368 | 2,926 | 152 | Dec-06 | 1968 | 40 | |||||||||||||||||||||||||
| Retail | Duluth, GA | 2 | 0 | 660 | 1,014 | 1,674 | 90 | Dec-06 | 1971 | 40 | |||||||||||||||||||||||||
| Retail | Forest Park, GA | 2 | 0 | 668 | 1,242 | 1,910 | 108 | Dec-06 | 1969 | 40 | |||||||||||||||||||||||||
| Retail | Jonesboro, GA | 2 | 0 | 778 | 146 | 924 | 50 | Dec-06 | 1971 | 40 | |||||||||||||||||||||||||
| Retail | Stone Mountain, GA | 2 | 0 | 672 | 276 | 948 | 52 | Dec-06 | 1973 | 40 | |||||||||||||||||||||||||
| Retail | Charlotte, NC | 1 | 0 | 606 | 2,561 | 3,167 | 128 | Dec-06 | 1982 | 40 | |||||||||||||||||||||||||
| Retail | Concord, NC | 1 | 0 | 685 | 943 | 1,628 | 72 | Dec-06 | 1983 | 40 | |||||||||||||||||||||||||
| Retail | Thomasville, NC | 1,2 | 0 | 610 | 1,854 | 2,464 | 94 | Dec-06 | 1998 | 40 | |||||||||||||||||||||||||
| Retail | Lawrence, IN | 2 | 0 | 404 | 1,737 | 2,141 | 97 | Dec-06 | 1983 | 40 | |||||||||||||||||||||||||
| Retail | Franklin, OH | 2 | 0 | 1,089 | 1,699 | 2,788 | 86 | Dec-06 | 1961 | 40 | |||||||||||||||||||||||||
| Retail | Houston, TX | 0 | 1,336 | 5,183 | 6,519 | 333 | Dec-06 | 1982 | 40 | ||||||||||||||||||||||||||
| Retail | Dallas, TX | 2 | 0 | 1,637 | 5,381 | 7,018 | 419 | Dec-06 | 1960 | 40 | |||||||||||||||||||||||||
| Retail | Port Richey, FL | 0 | 1,376 | 1,664 | 3,040 | 152 | Dec-06 | 1980 | 40 | ||||||||||||||||||||||||||
| Retail | Billings, MT | 2 | 0 | 506 | 3,062 | 3,568 | 221 | Dec-06 | 1981 | 40 | |||||||||||||||||||||||||
| Retail | Fort Worth, TX | 2 | 0 | 1,003 | 3,304 | 4,307 | 257 | Dec-06 | 1985 | 40 | |||||||||||||||||||||||||
| Retail | Greenville, TX | 2 | 0 | 562 | 2,743 | 3,305 | 168 | Dec-06 | 1985 | 40 | |||||||||||||||||||||||||
| Retail | Lawton, OK | 2 | 0 | 663 | 1,288 | 1,951 | 99 | Dec-06 | 1984 | 40 | |||||||||||||||||||||||||
| Retail | Grand Prairie, TX | 0 | 1,132 | 4,754 | 5,886 | 574 | Dec-06 | 1984 | 40 | ||||||||||||||||||||||||||
| Retail | Sandy, UT | 1 | 0 | 1,505 | 3,375 | 4,880 | 289 | Dec-06 | 1981 | 40 | |||||||||||||||||||||||||
| Retail | Jacksonville, NC | 0 | 1,151 | 221 | 1,372 | 40 | Dec-06 | 1982 | 40 | ||||||||||||||||||||||||||
| Retail | Jefferson, NC | 2 | 0 | 71 | 884 | 955 | 52 | Dec-06 | 1979 | 40 | |||||||||||||||||||||||||
98
LEXINGTON REALTY TRUST AND CONSOLIDATED SUBSIDIARIES
Real Estate and Accumulated Depreciation and Amortization
Schedule III ($000) —– (continued)
| Accumulated | ||||||||||||||||||||||||||||||
| Buildings | Depreciation | Useful life computing | ||||||||||||||||||||||||||||
| Land, Improvements | and | and | Date | Date | depreciation in latest | |||||||||||||||||||||||||
Description | Location | Encumbrances | and Land Estates | Improvements | Total | Amortization | Acquired | Constructed | income statements (years) | |||||||||||||||||||||
| Office | Foxboro, MA | 18,351 | 2,231 | 25,653 | 27,884 | 3,952 | Dec-04 | 1982 | 16 & 40 | |||||||||||||||||||||
| Industrial | Olive Branch, MS | 0 | 198 | 10,276 | 10,474 | 2,234 | Dec-04 | 1989 | 8, 15 & 40 | |||||||||||||||||||||
| Office | Los Angeles, CA | 11,235 | 5,110 | 10,911 | 16,021 | 1,952 | Dec-04 | 2000 | 13 & 40 | |||||||||||||||||||||
| Industrial | Knoxville, TN | 7,628 | 1,079 | 10,762 | 11,841 | 1,598 | Mar-05 | 2001 | 14 & 40 | |||||||||||||||||||||
| Office | Tempe, AZ | 13,336 | 0 | 14,564 | 14,564 | 2,285 | Apr-05 | 1998 | 13 & 40 | |||||||||||||||||||||
| Office | Farmington Hills, MI | 0 | 3,400 | 6,040 | 9,440 | 2,333 | Apr-05 | 1999 | 22 & 40 | |||||||||||||||||||||
| Industrial | Kalamazoo, MI | 17,243 | 960 | 17,714 | 18,674 | 1,867 | Apr-05 | 1999 | 22 & 40 | |||||||||||||||||||||
| Industrial | Millington, TN | 17,427 | 723 | 19,119 | 19,842 | 2,549 | Apr-05 | 1997 | 16 & 40 | |||||||||||||||||||||
| Office | Fort Meyers, FL | 8,912 | 1,820 | 10,198 | 12,018 | 1,644 | Apr-05 | 1997 | 13 & 40 | |||||||||||||||||||||
| Office | Harrisburg, PA | 8,968 | 900 | 10,526 | 11,426 | 2,406 | Apr-05 | 1998 | 9 & 40 | |||||||||||||||||||||
| Office | Indianapolis, IN | 12,881 | 1,700 | 16,448 | 18,148 | 3,422 | Apr-05 | 1999 | 10 & 40 | |||||||||||||||||||||
| Office | Tulsa, OK | 7,509 | 2,126 | 8,493 | 10,619 | 1,727 | Apr-05 | 2000 | 11 & 40 | |||||||||||||||||||||
| Office | Houston, TX | 17,261 | 3,750 | 21,149 | 24,899 | 3,410 | Apr-05 | 2000 | 13 & 40 | |||||||||||||||||||||
| Office | Houston, TX | 16,589 | 800 | 22,538 | 23,338 | 4,152 | Apr-05 | 2000 | 11 & 40 | |||||||||||||||||||||
| Office | San Antonio, TX | 12,784 | 2,800 | 14,587 | 17,387 | 2,761 | Apr-05 | 2000 | 11 & 40 | |||||||||||||||||||||
| Office | Richmond, VA | 10,373 | 1,100 | 11,919 | 13,019 | 1,725 | Apr-05 | 2000 | 15 & 40 | |||||||||||||||||||||
| Office | Suwannee, GA | 11,325 | 3,200 | 10,903 | 14,103 | 1,885 | Apr-05 | 2001 | 12 & 40 | |||||||||||||||||||||
| Office | Indianapolis, IN | 9,419 | 1,360 | 13,067 | 14,427 | 2,160 | Apr-05 | 2002 | 12 & 40 | |||||||||||||||||||||
| Office | Lakewood, CO | 8,493 | 1,400 | 8,653 | 10,053 | 1,478 | Apr-05 | 2002 | 12 & 40 | |||||||||||||||||||||
| Office | Atlanta, GA | 44,228 | 4,600 | 55,333 | 59,933 | 8,715 | Apr-05 | 2003 | 13 & 40 | |||||||||||||||||||||
| Office | Houston, TX | 12,955 | 1,500 | 14,581 | 16,081 | 2,146 | Apr-05 | 2003 | 14 & 40 | |||||||||||||||||||||
| Office | Allen, TX | 30,582 | 7,600 | 35,343 | 42,943 | 6,759 | Apr-05 | 1981/1983 | 11 & 40 | |||||||||||||||||||||
| Office | Philadelphia, PA | 48,727 | 13,209 | 50,744 | 63,953 | 7,284 | Jun-05 | 1957 | 10, 14, 15 & 40 | |||||||||||||||||||||
| Industrial | Dry Ridge, KY | 7,112 | 560 | 12,553 | 13,113 | 1,091 | Jun-05 | 1988 | 25 & 40 | |||||||||||||||||||||
| Industrial | Elizabethtown, KY | 2,994 | 352 | 4,862 | 5,214 | 422 | Jun-05 | 2001 | 25 & 40 | |||||||||||||||||||||
| Industrial | Elizabethtown, KY | 15,874 | 890 | 26,868 | 27,758 | 2,334 | Jun-05 | 1995/2001 | 25 & 40 | |||||||||||||||||||||
| Industrial | Owensboro, KY | 6,346 | 393 | 11,956 | 12,349 | 1,011 | Jun-05 | 1998/2000 | 25 & 40 | |||||||||||||||||||||
| Industrial | Hopkinsville, KY | 9,304 | 631 | 16,154 | 16,785 | 1,355 | Jun-05 | Various | 25 & 40 | |||||||||||||||||||||
| Office | Southington, CT | 13,456 | 3,240 | 25,339 | 28,579 | 11,828 | Nov-05 | 1983 | 12, 28 & 40 | |||||||||||||||||||||
| Office | Omaha, NE | 8,802 | 2,566 | 8,324 | 10,890 | 538 | Nov-05 | 1995 | 20 & 40 | |||||||||||||||||||||
Description | Location | Encumbrances | Land, Improvements and Land Estates | Buildings and Improvements | Total | Accumulated Depreciation and Amortization | Date Acquired | Date Constructed | Useful life computing depreciation in latest income statements (years) | ||||||||||||||||||||||||
| Retail | Lexington, NC | 2 | 0 | 832 | 1,429 | 2,261 | 73 | Dec-06 | 1983 | 40 | |||||||||||||||||||||||
| Retail | Moncks Corner, SC | 2 | 0 | 13 | 1,510 | 1,523 | 81 | Dec-06 | 1982 | 40 | |||||||||||||||||||||||
| Retail | Staunton, VA | 2 | 0 | 1,028 | 326 | 1,354 | 45 | Dec-06 | 1971 | 40 | |||||||||||||||||||||||
| Retail | Montgomery, AL | 0 | 730 | 3,210 | 3,940 | 223 | Dec-06 | 1980 | 40 | ||||||||||||||||||||||||
| Retail | Port Orchard, WA | 0 | 2,167 | 1,399 | 3,566 | 205 | Dec-06 | 1983 | 40 | ||||||||||||||||||||||||
| Retail | Minden, LA | 2 | 0 | 334 | 4,888 | 5,222 | 246 | Dec-06 | 1982 | 40 | |||||||||||||||||||||||
| Retail | Garland, TX | 1,2 | 0 | 905 | 3,448 | 4,353 | 641 | Dec-06 | 1983 | 40 | |||||||||||||||||||||||
| Retail | Granbury, TX | 0 | 1,255 | 3,986 | 5,241 | 201 | Dec-06 | 1982 | 40 | ||||||||||||||||||||||||
| Retail | Hillsboro, TX | 2 | 0 | 139 | 1,581 | 1,720 | 87 | Dec-06 | 1982 | 40 | |||||||||||||||||||||||
| Retail | Portchester, NY | 2 | 0 | 7,086 | 9,313 | 16,399 | 936 | Dec-06 | 1982 | 40 | |||||||||||||||||||||||
| Retail | Tallahassee, FL | 2 | 0 | 0 | 3,700 | 3,700 | 185 | Dec-06 | 1980 | 40 | |||||||||||||||||||||||
| Retail | Lubbock, TX | 1 | 0 | 417 | 1,783 | 2,200 | 110 | Dec-06 | 1978 | 40 | |||||||||||||||||||||||
| Retail | Edmonds, WA | 1,2 | 0 | 0 | 3,947 | 3,947 | 152 | Dec-06 | 1981 | 40 | |||||||||||||||||||||||
| Office | Hilliard, OH | 28,960 | 3,214 | 29,028 | 32,242 | 2,754 | Dec-06 | 2006 | 40 | ||||||||||||||||||||||||
| Retail, Office, Garage | Honolulu, HI | 1,2 | 0 | 21,094 | 13,217 | 34,311 | 656 | Dec-06 | 1917/1955/1960/1980 | 40 | |||||||||||||||||||||||
| Office | Orlando, FL | 9,975 | 3,538 | 9,019 | 12,557 | 1,138 | Jan-07 | 2003 | 12 & 40 | ||||||||||||||||||||||||
| Office | Boston, MA | 13,700 | 3,814 | 14,728 | 18,542 | 660 | Mar-07 | 1910 | 40 | ||||||||||||||||||||||||
| Office | Coppell, TX | 14,400 | 2,470 | 12,793 | 15,263 | 574 | Mar-07 | 2002 | 40 | ||||||||||||||||||||||||
| Industrial | Shreveport, LA | 19,000 | 860 | 21,840 | 22,700 | 978 | Mar-07 | 2006 | 40 | ||||||||||||||||||||||||
| Office | Westlake, TX | 18,755 | 2,361 | 22,396 | 24,757 | 2,537 | May-07 | 2007 | 5, 40 | ||||||||||||||||||||||||
| Industrial | Antioch, TN | 14,123 | 5,568 | 16,610 | 22,178 | 1,660 | May-07 | 1983 | 14 & 40 | ||||||||||||||||||||||||
| Office | Canonsburg, PA | 9,073 | 1,055 | 10,910 | 11,965 | 1,195 | May-07 | 1997 | 8 & 40 | ||||||||||||||||||||||||
| Retail | Galesburg, IL | 989 | 560 | 2,366 | 2,926 | 197 | May-07 | 1992 | 12 & 40 | ||||||||||||||||||||||||
| Retail | Lewisburg, WV | 1,163 | 501 | 1,985 | 2,486 | 108 | May-07 | 1993 | 12 & 40 | ||||||||||||||||||||||||
| Retail | Lorain, OH | 2,493 | 1,893 | 7,024 | 8,917 | 451 | May-07 | 1993 | 23 &40 | ||||||||||||||||||||||||
| Retail | Manteca, CA | 1,761 | 2,082 | 6,464 | 8,546 | 413 | May-07 | 1993 | 23 & 40 | ||||||||||||||||||||||||
| Retail | San Diego, CA | 1,122 | 0 | 13,310 | 13,310 | 595 | May-07 | 1993 | 23 & 40 | ||||||||||||||||||||||||
| Retail | Watertown, NY | 1,656 | 386 | 5,162 | 5,548 | 368 | May-07 | 1993 | 23 & 40 | ||||||||||||||||||||||||
| Office | Irving, TX | 39,100 | 7,476 | 42,780 | 50,256 | 4,736 | May-07 | 1999 | 6 & 40 | ||||||||||||||||||||||||
| Office | Westerville, OH | 2 | 0 | 2,085 | 9,265 | 11,350 | 541 | May-07 | 2000 | 40 | |||||||||||||||||||||||
| Office | Baton Rouge, LA | 6,366 | 1,252 | 10,244 | 11,496 | 1,007 | May-07 | 1997 | 6 & 40 | ||||||||||||||||||||||||
| Office | Centenial, CO | 15,013 | 4,851 | 15,187 | 20,038 | 1,705 | May-07 | 2001 | 10 & 40 | ||||||||||||||||||||||||
| Office | Overland Park, KS | 37,477 | 4,769 | 41,956 | 46,725 | 3,210 | Jun-07 | 1980 | 12 & 40 | ||||||||||||||||||||||||
| Office | Carrollton, TX | 20,305 | 3,427 | 22,050 | 25,477 | 1,889 | Jun-07 | 2003 | 8 & 40 | ||||||||||||||||||||||||
| Industrial | Durham, NH | 19,261 | 3,464 | 18,094 | 21,558 | 1,394 | Jun-07 | 1986 | 40 | ||||||||||||||||||||||||
| Office | Dallas, TX | 18,544 | 3,984 | 27,308 | 31,292 | 2,215 | Jun-07 | 2002 | 40 | ||||||||||||||||||||||||
| Office | Kansas City, MO | 17,880 | 2,433 | 20,154 | 22,587 | 1,531 | Jun-07 | 1980 | 12 & 40 | ||||||||||||||||||||||||
| Industrial | Streetsboro, OH | 19,428 | 2,441 | 22,171 | 24,612 | 1,734 | Jun-07 | 2004 | 12 & 40 | ||||||||||||||||||||||||
| Office | Issaquah, WA | 31,729 | 5,126 | 13,554 | 18,680 | 1,481 | Jun-07 | 1987 | 8 & 40 | ||||||||||||||||||||||||
| Office | Issaquah, WA | 0 | 6,268 | 16,058 | 22,326 | 1,697 | Jun-07 | 1987 | 8 & 40 | ||||||||||||||||||||||||
| Office | Houston, TX | 18,861 | 12,835 | 26,690 | 39,525 | 3,368 | Jun-07 | 2000 | 2 & 40 | ||||||||||||||||||||||||
| Industrial | Laurens, SC | 15,844 | 5,552 | 20,886 | 26,438 | 1,808 | Jun-07 | 1991 | 40 | ||||||||||||||||||||||||
| Industrial | Winchester, VA | 10,374 | 3,823 | 12,226 | 16,049 | 1,174 | Jun-07 | 2001 | 40 | ||||||||||||||||||||||||
| Industrial | Temperance, MI | 10,621 | 3,040 | 14,738 | 17,778 | 1,239 | Jun-07 | 1980 | 40 | ||||||||||||||||||||||||
| Industrial | Logan, NJ | 7,246 | 1,825 | 10,776 | 12,601 | 705 | Jun-07 | 1998 | 40 | ||||||||||||||||||||||||
| Industrial | Plymouth, MI | 11,519 | 2,296 | 13,398 | 15,694 | 1,701 | Jun-07 | 1996 | 40 | ||||||||||||||||||||||||
| Office | Fishers, IN | 13,745 | 2,808 | 18,661 | 21,469 | 2,245 | Jun-07 | 1999 | 40 | ||||||||||||||||||||||||
| Office | Irving, TX | 25,773 | 4,889 | 29,598 | 34,487 | 3,330 | Jun-07 | 1999 | 40 | ||||||||||||||||||||||||
| Office | Milford, OH | 15,375 | 3,124 | 15,726 | 18,850 | 2,173 | Jun-07 | 1991 | 40 | ||||||||||||||||||||||||
| Office | Lake Mary, FL | 12,722 | 4,535 | 13,950 | 18,485 | 1,773 | Jun-07 | 1997 | 40 | ||||||||||||||||||||||||
| Office | Lake Mary, FL | 12,712 | 4,438 | 14,202 | 18,640 | 1,713 | Jun-07 | 1999 | 40 | ||||||||||||||||||||||||
| Office | Parisppany, NJ | 39,239 | 7,478 | 84,051 | 91,529 | 8,098 | Jun-07 | 2000 | 40 | ||||||||||||||||||||||||
| Office | Colorado Springs, CO | 11,182 | 2,748 | 12,554 | 15,302 | 1,141 | Jun-07 | 1980 | 40 | ||||||||||||||||||||||||
| Office | Herndon, VA | 11,751 | 9,409 | 12,853 | 22,262 | 1,535 | Jun-07 | 1987 | 40 | ||||||||||||||||||||||||
| Office | Chicago, IL | 29,085 | 5,155 | 46,187 | 51,342 | 4,760 | Jun-07 | 1986 | 40 | ||||||||||||||||||||||||
| Office | Glen Allen, VA | 19,522 | 2,361 | 28,888 | 31,249 | 3,830 | Jun-07 | 1998 | 40 | ||||||||||||||||||||||||
| Office | Cary, NC | 12,656 | 5,342 | 14,866 | 20,208 | 1,752 | Jun-07 | 1999 | 40 | ||||||||||||||||||||||||
| Industrial | Duncan, SC | 2 | 0 | 884 | 8,626 | 9,510 | 340 | Jun-07 | 2005 | 40 | |||||||||||||||||||||||
| Office | Farmington Hills, MI | 19,277 | 4,876 | 21,115 | 25,991 | 2,527 | Jun-07 | 1999 | 10 & 40 | ||||||||||||||||||||||||
| Office | Brea, CA | 77,326 | 37,269 | 45,695 | 82,964 | 5,053 | Jun-07 | 1983 | 40 | ||||||||||||||||||||||||
| Office | Lenexa, KS | 2 | 0 | 6,909 | 29,032 | 35,941 | 402 | Jul-08 | 2007 | 15 & 40 | |||||||||||||||||||||||
| Office | Louisville, CO | 7,520 | 3,657 | 9,524 | 13,181 | 117 | Sep-08 | 1987 | 9 & 40 | ||||||||||||||||||||||||
| Construction in progress | 22,756 | 22,756 | |||||||||||||||||||||||||||||||
| subtotal | 1,778,009 | 618,559 | 3,137,629 | 3,756,188 | 461,661 | ||||||||||||||||||||||||||||
| 1 (see note below) | 205,845 | ||||||||||||||||||||||||||||||||
| 3 (see note below) | 25,000 | ||||||||||||||||||||||||||||||||
| Total | 2,008,854 | 618,559 | 3,137,629 | 3,756,188 | 461,661 | ||||||||||||||||||||||||||||
1) properties are collateral for $205,845 in secured term loans at December 31, 2008
2) properties are collateral for $165,000 secured term loan and $85,000 secured revolving credit facility entered into on February 13, 2009
3) properties are cross-collateralized for a $25,000 million secured term loan at 12/31/08
4) properties are encumbered by a $14,776 contract right payable.
99
LEXINGTON REALTY TRUST AND CONSOLIDATED SUBSIDIARIES
Real Estate and Accumulated Depreciation and Amortization
Schedule III ($000) —– (continued)
| Accumulated | ||||||||||||||||||||||||||||
| Buildings | Depreciation | Useful life computing | ||||||||||||||||||||||||||
| Land, Improvements | and | and | Date | Date | depreciation in latest | |||||||||||||||||||||||
Description | Location | Encumbrances | and Land Estates | Improvements | Total | Amortization | Acquired | Constructed | income statements (years) | |||||||||||||||||||
| Office | Sugarland, TX | 9,742 | 2,725 | 10,027 | 12,752 | 878 | Nov-05 | 2004 | 20 & 40 | |||||||||||||||||||
| Office | Tempe, AZ | 8,313 | 0 | 9,443 | 9,443 | 586 | Dec-05 | 1998 | 30 & 40 | |||||||||||||||||||
| Industrial | Collierville, TN | *** | 714 | 2,455 | 3,169 | 204 | Dec-05 | 2005 | 20 & 40 | |||||||||||||||||||
| Industrial | Crossville, TN | 0 | 545 | 6,999 | 7,544 | 692 | Jan-06 | 1989/2006 | 17 & 40 | |||||||||||||||||||
| Office | Renswoude, Netherlands | 39,178 | 2,913 | 26,403 | 29,316 | 2,386 | Jan-06 | 1994/2003 | 17 & 40 | |||||||||||||||||||
| Office | Memphis, TN | 3,951 | 464 | 4,467 | 4,931 | 207 | Nov-06 | 1888 | 20 & 40 | |||||||||||||||||||
| Office | Charleston, SC | 7,350 | 1,189 | 8,724 | 9,913 | 427 | Nov-06 | 2006 | 40 | |||||||||||||||||||
| Office | Hanover, NJ | 16,627 | 4,063 | 19,711 | 23,774 | 913 | Nov-06 | 2006 | 20 & 40 | |||||||||||||||||||
| Office | Hilliard, OH | 28,960 | 3,214 | 29,028 | 32,242 | 1,405 | Dec-06 | 2006 | 40 | |||||||||||||||||||
| Retail, Office, Garage | Honolulu, HI | *** | 21,094 | 13,163 | 34,257 | 326 | Dec-06 | 1917/1980 | 40 | |||||||||||||||||||
| Industrial | Long Beach, CA | 5,902 | 6,230 | 7,802 | 14,032 | 386 | Dec-06 | 1981 | 40 | |||||||||||||||||||
| Industrial | Palo Alto, CA | *** | 12,398 | 16,977 | 29,375 | 2,224 | Dec-06 | 1974 | 40 | |||||||||||||||||||
| Industrial | Orlando, FL | *** | 1,030 | 10,869 | 11,899 | 306 | Dec-06 | 1981 | 40 | |||||||||||||||||||
| Industrial | McDonough, GA | 23,000 | 2,463 | 24,291 | 26,754 | 585 | Dec-06 | 2000 | 40 | |||||||||||||||||||
| Industrial | Rockford, IL | 4,278 | 509 | 5,289 | 5,798 | 145 | Dec-06 | 1992 | 40 | |||||||||||||||||||
| Industrial | Rockford Central, IL | 2,622 | 371 | 2,573 | 2,944 | 76 | Dec-06 | 1998 | 40 | |||||||||||||||||||
| Industrial | Owensboro, KY | 4,666 | 819 | 2,439 | 3,258 | 159 | Dec-06 | 1975 | 40 | |||||||||||||||||||
| Industrial | North Berwick, ME | *** | 1,383 | 31,817 | 33,200 | 820 | Dec-06 | 1965 | 40 | |||||||||||||||||||
| Industrial | Lumberton, NC | *** | 405 | 12,049 | 12,454 | 387 | Dec-06 | 1998 | 40 | |||||||||||||||||||
| Industrial | Statesville, NC | 14,100 | 891 | 16,494 | 17,385 | 638 | Dec-06 | 1999 | 40 | |||||||||||||||||||
| Industrial | Saugerties, NY | 0 | 508 | 2,837 | 3,345 | 73 | Dec-06 | 1979 | 40 | |||||||||||||||||||
| Industrial | Cincinnati, OH | *** | 1,009 | 7,007 | 8,016 | 212 | Dec-06 | 1991 | 40 | |||||||||||||||||||
| Industrial | Columbus, OH | *** | 1,990 | 10,580 | 12,570 | 348 | Dec-06 | 1973 | 40 | |||||||||||||||||||
| Industrial | N. Myrtle Beach, SC | *** | 1,481 | 2,078 | 3,559 | 91 | Dec-06 | 1983 | 40 | |||||||||||||||||||
| Industrial | Franklin, TN | 0 | 964 | 8,783 | 9,747 | 449 | Dec-06 | 1970 | 40 | |||||||||||||||||||
| Industrial | Memphis, TN | 0 | 1,553 | 12,326 | 13,879 | 379 | Dec-06 | 1973 | 40 | |||||||||||||||||||
| Industrial | Garland, TX | 0 | 2,606 | 20,452 | 23,058 | 434 | Dec-06 | 1980 | 40 | |||||||||||||||||||
| Land | Baltimore, MD | 0 | 4,571 | 0 | 4,571 | 0 | Dec-06 | N/A | N/A | |||||||||||||||||||
| Office | Little Rock, AR | *** | 1,353 | 2,260 | 3,613 | 68 | Dec-06 | 1980 | 40 | |||||||||||||||||||
| Office | Irvine, CA | 4,079 | 4,758 | 36,262 | 41,020 | 930 | Dec-06 | 1983 | 40 | |||||||||||||||||||
105
| Accumulated | ||||||||||||||||||||||||||||||
| Buildings | Depreciation | Useful life computing | ||||||||||||||||||||||||||||
| Land, Improvements | and | and | Date | Date | depreciation in latest | |||||||||||||||||||||||||
Description | Location | Encumbrances | and Land Estates | Improvements | Total | Amortization | Acquired | Constructed | income statements (years) | |||||||||||||||||||||
| Office | Long Beach, CA | 15,923 | 19,672 | 67,478 | 87,150 | 2,501 | Dec-06 | 1981 | 40 | |||||||||||||||||||||
| Office | Pleasanton, CA | 4,414 | 2,671 | 2,839 | 5,510 | 276 | Dec-06 | 1984 | 40 | |||||||||||||||||||||
| Office | San Francisco, CA | 22,455 | 14,539 | 36,505 | 51,044 | 932 | Dec-06 | 1959 | 40 | |||||||||||||||||||||
| Office | Walnut Creek,, CA | *** | 4,214 | 13,803 | 18,017 | 374 | Dec-06 | 1983 | 40 | |||||||||||||||||||||
| Office | Colorado Springs, CO | *** | 1,018 | 2,459 | 3,477 | 109 | Dec-06 | 1982 | 40 | |||||||||||||||||||||
| Office | Clinton, CT | 721 | 285 | 4,044 | 4,329 | 112 | Dec-06 | 1971 | 40 | |||||||||||||||||||||
| Office | Orlando, FL | *** | 586 | 35,012 | 35,598 | 908 | Dec-06 | 1982 | 40 | |||||||||||||||||||||
| Office | Orlando, FL | *** | 11,498 | 33,671 | 45,169 | 1,874 | Dec-06 | 1984 | 40 | |||||||||||||||||||||
| Office | Lisle, IL | 10,450 | 3,236 | 13,667 | 16,903 | 451 | Dec-06 | 1985 | 40 | |||||||||||||||||||||
| Office | Columbus, IN | 42,800 | 235 | 45,729 | 45,964 | 941 | Dec-06 | 1983 | 40 | |||||||||||||||||||||
| Office | Baltimore, MD | *** | 16,959 | 78,959 | 95,918 | 2,572 | Dec-06 | 1973 | 40 | |||||||||||||||||||||
| Office | Bridgeton, MO | *** | 1,016 | 4,469 | 5,485 | 151 | Dec-06 | 1980 | 40 | |||||||||||||||||||||
| Office | Bridgewater, NJ | 14,805 | 4,738 | 27,331 | 32,069 | 724 | Dec-06 | 1986 | 40 | |||||||||||||||||||||
| Office | Carteret, NJ | 0 | 3,834 | 16,653 | 20,487 | 621 | Dec-06 | 1980 | 40 | |||||||||||||||||||||
| Office | Elizabeth, NJ | *** | 1,324 | 6,484 | 7,808 | 164 | Dec-06 | 1984 | 40 | |||||||||||||||||||||
| Office | Plainsboro, NJ | 0 | 383 | 176 | 559 | 25 | Dec-06 | 1980 | 40 | |||||||||||||||||||||
| Office | Rockaway, NJ | 14,900 | 4,646 | 20,428 | 25,074 | 648 | Dec-06 | 2002 | 40 | |||||||||||||||||||||
| Office | Las Vegas, NV | 52,782 | 8,824 | 53,164 | 61,988 | 1,359 | Dec-06 | 1982 | 40 | |||||||||||||||||||||
| Office | Rochester, NY | 18,800 | 645 | 25,892 | 26,537 | 702 | Dec-06 | 1988 | 40 | |||||||||||||||||||||
| Office | Glenwillow, OH | 17,000 | 2,228 | 24,530 | 26,758 | 668 | Dec-06 | 1996 | 40 | |||||||||||||||||||||
| Office | Johnson City, TN | *** | 1,214 | 7,568 | 8,782 | 212 | Dec-06 | 1983 | 40 | |||||||||||||||||||||
| Office | Memphis, TN | *** | 1,353 | 8,124 | 9,477 | 241 | Dec-06 | 1982 | 40 | |||||||||||||||||||||
| Office | Memphis, TN | 76,800 | 5,291 | 97,032 | 102,323 | 2,527 | Dec-06 | 1985 | 40 | |||||||||||||||||||||
| Office | Beaumont, TX | 0 | 456 | 3,454 | 3,910 | 106 | Dec-06 | 1978 | 40 | |||||||||||||||||||||
| Office | Beaumont, TX | *** | 0 | 22,988 | 22,988 | 1,900 | Dec-06 | 1983 | 40 | |||||||||||||||||||||
| Office | Bedford, TX | *** | 1,983 | 6,486 | 8,469 | 124 | Dec-06 | 1983 | 40 | |||||||||||||||||||||
| Office | Dallas, TX | *** | 4,042 | 18,104 | 22,146 | 522 | Dec-06 | 1981 | 40 | |||||||||||||||||||||
| Other | Sun City, AZ | 0 | 2,154 | 2,775 | 4,929 | 71 | Dec-06 | 1982 | 40 | |||||||||||||||||||||
| Other | Carlsbad, NM | 0 | 918 | 775 | 1,693 | 25 | Dec-06 | 1980 | 40 | |||||||||||||||||||||
106
| Accumulated | ||||||||||||||||||||||||||||||
| Buildings | Depreciation | Useful life computing | ||||||||||||||||||||||||||||
| Land, Improvements | and | and | Date | Date | depreciation in latest | |||||||||||||||||||||||||
Description | Location | Encumbrances | and Land Estates | Improvements | Total | Amortization | Acquired | Constructed | income statements (years) | |||||||||||||||||||||
| Other | Corpus Christi, TX | 0 | 987 | 974 | 1,961 | 26 | Dec-06 | 1983 | 40 | |||||||||||||||||||||
| Other | El Paso, TX | 0 | 220 | 1,749 | 1,969 | 45 | Dec-06 | 1982 | 40 | |||||||||||||||||||||
| Other | McAllen, TX | 0 | 606 | 1,257 | 1,863 | 33 | Dec-06 | 2004 | 40 | |||||||||||||||||||||
| Other | Victoria, TX | 0 | 300 | 1,149 | 1,449 | 30 | Dec-06 | 1981 | 40 | |||||||||||||||||||||
| Retail | Florence, AL | *** | 796 | 3,747 | 4,543 | 114 | Dec-06 | 1983 | 40 | |||||||||||||||||||||
| Retail | Montgomery, AL | 0 | 730 | 3,255 | 3,985 | 148 | Dec-06 | 1980 | 40 | |||||||||||||||||||||
| Retail | Bisbee, AZ | 0 | 478 | 2,426 | 2,904 | 73 | Dec-06 | 1984 | 40 | |||||||||||||||||||||
| Retail | Tucson, AZ | 0 | 1,459 | 3,596 | 5,055 | 128 | Dec-06 | 1984 | 40 | |||||||||||||||||||||
| Retail | Mammoth Lakes, CA | 0 | 6,279 | 2,761 | 9,040 | 228 | Dec-06 | 1982 | 40 | |||||||||||||||||||||
| Retail | Aurora, CO | 0 | 1,224 | 1,431 | 2,655 | 77 | Dec-06 | 1981 | 40 | |||||||||||||||||||||
| Retail | Port Richey, FL | 0 | 2,214 | 2,656 | 4,870 | 101 | Dec-06 | 1980 | 40 | |||||||||||||||||||||
| Retail | Tallahassee, FL | 0 | 0 | 3,700 | 3,700 | 92 | Dec-06 | 1980 | 40 | |||||||||||||||||||||
| Retail | Atlanta, GA | 0 | 1,014 | 269 | 1,283 | 36 | Dec-06 | 1972 | 40 | |||||||||||||||||||||
| Retail | Atlanta, GA | 0 | 870 | 187 | 1,057 | 28 | Dec-06 | 1975 | 40 | |||||||||||||||||||||
| Retail | Chamblee, GA | 0 | 770 | 186 | 956 | 32 | Dec-06 | 1972 | 40 | |||||||||||||||||||||
| Retail | Cumming, GA | 0 | 1,558 | 1,368 | 2,926 | 76 | Dec-06 | 1968 | 40 | |||||||||||||||||||||
| Retail | Duluth, GA | 0 | 660 | 1,014 | 1,674 | 45 | Dec-06 | 1971 | 40 | |||||||||||||||||||||
| Retail | Forest Park, GA | 0 | 668 | 1,242 | 1,910 | 54 | Dec-06 | 1969 | 40 | |||||||||||||||||||||
| Retail | Jonesboro, GA | 0 | 778 | 146 | 924 | 25 | Dec-06 | 1971 | 40 | |||||||||||||||||||||
| Retail | Stone Mountain, GA | 0 | 672 | 276 | 948 | 26 | Dec-06 | 1973 | 40 | |||||||||||||||||||||
| Retail | Rock Falls, IL | *** | 135 | 702 | 837 | 41 | Dec-06 | 1991 | 40 | |||||||||||||||||||||
| Retail | Lawrence, IN | 0 | 404 | 1,737 | 2,141 | 49 | Dec-06 | 1983 | 40 | |||||||||||||||||||||
| Retail | Minden, LA | 0 | 334 | 4,888 | 5,222 | 123 | Dec-06 | 1982 | 40 | |||||||||||||||||||||
| Retail | Columbia, MD | 942 | 4,297 | 3,664 | 7,961 | 99 | Dec-06 | 1979 | 40 | |||||||||||||||||||||
| Retail | Billings, MT | 0 | 506 | 3,062 | 3,568 | 110 | Dec-06 | 1981 | 40 | |||||||||||||||||||||
| Retail | Charlotte, NC | *** | 606 | 2,561 | 3,167 | 64 | Dec-06 | 1982 | 40 | |||||||||||||||||||||
| Retail | Concord, NC | *** | 685 | 943 | 1,628 | 48 | Dec-06 | 1983 | 40 | |||||||||||||||||||||
| Retail | Jacksonville, NC | 0 | 1,151 | 221 | 1,372 | 35 | Dec-06 | 1982 | 40 | |||||||||||||||||||||
| Retail | Jefferson, NC | 0 | 71 | 884 | 955 | 23 | Dec-06 | 1979 | 40 | |||||||||||||||||||||
| Retail | Lexington, NC | 0 | 832 | 1,429 | 2,261 | 37 | Dec-06 | 1983 | 40 | |||||||||||||||||||||
107
| Accumulated | ||||||||||||||||||||||||||||||
| Buildings | Depreciation | Useful life computing | ||||||||||||||||||||||||||||
| Land, Improvements | and | and | Date | Date | depreciation in latest | |||||||||||||||||||||||||
Description | Location | Encumbrances | and Land Estates | Improvements | Total | Amortization | Acquired | Constructed | income statements (years) | |||||||||||||||||||||
| Retail | Thomasville, NC | *** | 610 | 1,854 | 2,464 | 47 | Dec-06 | 1998 | 40 | |||||||||||||||||||||
| Retail | Garwood, NJ | 95 | 3,920 | 8,052 | 11,972 | 259 | Dec-06 | 1980 | 40 | |||||||||||||||||||||
| Retail | Portchester, NY | 0 | 7,086 | 9,313 | 16,399 | 468 | Dec-06 | 1982 | 40 | |||||||||||||||||||||
| Retail | Cincinnati, OH | 0 | 0 | 0 | 0 | 0 | Dec-06 | 1980 | 40 | |||||||||||||||||||||
| Retail | Franklin, OH | 0 | 1,089 | 1,699 | 2,788 | 43 | Dec-06 | 1961 | 40 | |||||||||||||||||||||
| Retail | Lawton, OK | 0 | 663 | 1,288 | 1,951 | 50 | Dec-06 | 1984 | 40 | |||||||||||||||||||||
| Retail | Grants Pass, OR | 0 | 1,894 | 1,470 | 3,364 | 84 | Dec-06 | 1984 | 40 | |||||||||||||||||||||
| Retail | Doylestown, PA | 0 | 980 | 589 | 1,569 | 22 | Dec-06 | 1976 | 40 | |||||||||||||||||||||
| Retail | Lansdale, PA | 0 | 488 | 85 | 573 | 10 | Dec-06 | 1966 | 40 | |||||||||||||||||||||
| Retail | Lima, PA | 0 | 1,011 | 656 | 1,667 | 23 | Dec-06 | 1983 | 40 | |||||||||||||||||||||
| Retail | Philadelphia, PA | 0 | 92 | 771 | 863 | 28 | Dec-06 | 1920 | 40 | |||||||||||||||||||||
| Retail | Philadelphia, PA | 0 | 122 | 973 | 1,095 | 36 | Dec-06 | 1920 | 40 | |||||||||||||||||||||
| Retail | Philadelphia, PA | 0 | 106 | 485 | 591 | 14 | Dec-06 | 1975 | 40 | |||||||||||||||||||||
| Retail | Philadelphia, PA | 0 | 165 | 1,362 | 1,527 | 50 | Dec-06 | 1960 | 40 | |||||||||||||||||||||
| Retail | Philadelphia, PA | 0 | 92 | 791 | 883 | 36 | Dec-06 | 1921 | 40 | |||||||||||||||||||||
| Retail | Philadelphia, PA | 0 | 629 | 459 | 1,088 | 29 | Dec-06 | 1970 | 40 | |||||||||||||||||||||
| Retail | Philadelphia, PA | 0 | 114 | 551 | 665 | 24 | Dec-06 | 1922 | 40 | |||||||||||||||||||||
| Retail | Philadelphia, PA | 0 | 267 | 963 | 1,230 | 38 | Dec-06 | 1980 | 40 | |||||||||||||||||||||
| Retail | Philadelphia, PA | 0 | 2,548 | 8,370 | 10,918 | 319 | Dec-06 | 1980 | 40 | |||||||||||||||||||||
| Retail | Richboro, PA | 0 | 686 | 649 | 1,335 | 23 | Dec-06 | 1976 | 40 | |||||||||||||||||||||
| Retail | Wayne, PA | 0 | 1,877 | 503 | 2,380 | 25 | Dec-06 | 1983 | 40 | |||||||||||||||||||||
| Retail | Moncks Corner, SC | 0 | 13 | 1,510 | 1,523 | 41 | Dec-06 | 1982 | 40 | |||||||||||||||||||||
| Retail | Chattanooga, TN | *** | 550 | 1,241 | 1,791 | 53 | Dec-06 | 1982 | 40 | |||||||||||||||||||||
| Retail | Paris, TN | *** | 247 | 547 | 794 | 21 | Dec-06 | 1982 | 40 | |||||||||||||||||||||
| Retail | Carrollton, TX | 0 | 2,262 | 1,085 | 3,347 | 73 | Dec-06 | 1984 | 40 | |||||||||||||||||||||
| Retail | Dallas, TX | 0 | 1,637 | 5,381 | 7,018 | 209 | Dec-06 | 1960 | 40 | |||||||||||||||||||||
| Retail | Fort Worth, TX | 0 | 1,003 | 3,304 | 4,307 | 128 | Dec-06 | 1985 | 40 | |||||||||||||||||||||
| Retail | Garland, TX | *** | 763 | 3,448 | 4,211 | 586 | Dec-06 | 1983 | 40 | |||||||||||||||||||||
| Retail | Granbury, TX | 0 | 1,131 | 3,986 | 5,117 | 129 | Dec-06 | 1982 | 40 | |||||||||||||||||||||
108
| Accumulated | ||||||||||||||||||||||||||||||
| Buildings | Depreciation | Useful life computing | ||||||||||||||||||||||||||||
| Land, Improvements | and | and | Date | Date | depreciation in latest | |||||||||||||||||||||||||
Description | Location | Encumbrances | and Land Estates | Improvements | Total | Amortization | Acquired | Constructed | income statements (years) | |||||||||||||||||||||
| Retail | Grand Prairie, TX | 0 | 1,132 | 4,754 | 5,886 | 150 | Dec-06 | 1984 | 40 | |||||||||||||||||||||
| Retail | Greenville, TX | 0 | 562 | 2,743 | 3,305 | 84 | Dec-06 | 1985 | 40 | |||||||||||||||||||||
| Retail | Hillsboro, TX | 0 | 139 | 1,581 | 1,720 | 44 | Dec-06 | 1982 | 40 | |||||||||||||||||||||
| Retail | Houston, TX | 0 | 1,336 | 5,183 | 6,519 | 167 | Dec-06 | 1982 | 40 | |||||||||||||||||||||
| Retail | Lubbock, TX | *** | 417 | 1,783 | 2,200 | 55 | Dec-06 | 1978 | 40 | |||||||||||||||||||||
| Retail | Sandy, UT | *** | 1,505 | 3,375 | 4,880 | 145 | Dec-06 | 1981 | 40 | |||||||||||||||||||||
| Retail | Staunton, VA | 0 | 1,028 | 325 | 1,353 | 37 | Dec-06 | 1971 | 40 | |||||||||||||||||||||
| Retail | Edmonds, WA | 0 | 0 | 2,600 | 2,600 | 65 | Dec-06 | 1981 | 40 | |||||||||||||||||||||
| Retail | Graham, WA | 0 | 2,195 | 4,478 | 6,673 | 168 | Dec-06 | 1984 | 40 | |||||||||||||||||||||
| Retail | Milton, WA | 0 | 1,941 | 5,310 | 7,251 | 183 | Dec-06 | 1989 | 40 | |||||||||||||||||||||
| Retail | Port Orchard, WA | 0 | 2,167 | 1,293 | 3,460 | 96 | Dec-06 | 1983 | 40 | |||||||||||||||||||||
| Retail | Redmond, WA | 0 | 4,654 | 5,355 | 10,009 | 252 | Dec-06 | 1985 | 40 | |||||||||||||||||||||
| Retail | Spokane, WA | 0 | 449 | 3,070 | 3,519 | 89 | Dec-06 | 1984 | 40 | |||||||||||||||||||||
| Retail | Cheyenne, WY | *** | 956 | 1,974 | 2,930 | 49 | Dec-06 | 1981 | 40 | |||||||||||||||||||||
| Office | Evanston, WY | *** | 362 | 2,554 | 2,916 | 73 | Dec-06 | 1975 | 40 | |||||||||||||||||||||
| Office | Orlando, FL | 9,975 | 3,538 | 9,019 | 12,557 | 557 | Jan-07 | 2003 | 12 & 40 | |||||||||||||||||||||
| Office | Boston, MA | *** | 3,814 | 14,728 | 18,542 | 291 | Mar-07 | 1910 | 40 | |||||||||||||||||||||
| Office | Coppell, TX | 14,400 | 2,470 | 12,793 | 15,263 | 253 | Mar-07 | 2002 | 40 | |||||||||||||||||||||
| Industrial | Shreveport, LA | 19,000 | 860 | 21,840 | 22,700 | 432 | Mar-07 | 2006 | 40 | |||||||||||||||||||||
| Office | Westlake, TX | 18,981 | 2,361 | 22,396 | 24,757 | 1,547 | May-07 | 2007 | 40 | |||||||||||||||||||||
| Industrial | Antioch, TN | 14,781 | 5,568 | 16,609 | 22,177 | 1,097 | May-07 | 1983 | 14-40 | |||||||||||||||||||||
| Office | Canonsburg, PA | 9,070 | 1,055 | 10,910 | 11,965 | 756 | May-07 | 1997 | 8-40 | |||||||||||||||||||||
| Retail | Galesburg, IL | 1,307 | 560 | 2,366 | 2,926 | 123 | May-07 | 1992 | 12-40 | |||||||||||||||||||||
| Retail | Lewisburg, WV | 1,538 | 501 | 1,985 | 2,486 | 54 | May-07 | 1993 | 12-40 | |||||||||||||||||||||
| Retail | Lorain, OH | 3,297 | 1,893 | 7,025 | 8,918 | 254 | May-07 | 1993 | 23-40 | |||||||||||||||||||||
| Retail | Manteca, CA | 2,329 | 2,082 | 6,464 | 8,546 | 232 | May-07 | 1993 | 23-40 | |||||||||||||||||||||
| Retail | San Diego, CA | 1,484 | 0 | 13,310 | 13,310 | 258 | May-07 | 1993 | 23-40 | |||||||||||||||||||||
| Retail | Watertown, NY | 2,190 | 386 | 5,162 | 5,548 | 217 | May-07 | 1993 | 23-40 | |||||||||||||||||||||
| Office | Irving, TX | 39,580 | 7,476 | 42,692 | 50,168 | 2,964 | May-07 | 1999 | 6-40 | |||||||||||||||||||||
109
| Accumulated | ||||||||||||||||||||||||||||||
| Buildings | Depreciation | Useful life computing | ||||||||||||||||||||||||||||
| Land, Improvements | and | and | Date | Date | depreciation in latest | |||||||||||||||||||||||||
Description | Location | Encumbrances | and Land Estates | Improvements | Total | Amortization | Acquired | Constructed | income statements (years) | |||||||||||||||||||||
| Office | Baton Rouge, LA | 6,461 | 1,252 | 10,244 | 11,496 | 644 | May-07 | 1997 | 6 & 40 | |||||||||||||||||||||
| Office | Centenial, CO | 15,322 | 4,851 | 15,187 | 20,038 | 1,107 | May-07 | 2001 | 10-40 | |||||||||||||||||||||
| Office | Westerville, OH | 0 | 2,085 | 9,265 | 11,350 | 210 | May-07 | 2000 | 40 | |||||||||||||||||||||
| Office | Overland Park, KS | 37,465 | 4,769 | 41,956 | 46,725 | 1,815 | Jun-07 | 1980 | 12 & 40 | |||||||||||||||||||||
| Office | Carrollton, TX | 20,246 | 3,427 | 22,050 | 25,477 | 1,020 | Jun-07 | 2003 | 8 & 40 | |||||||||||||||||||||
| Industrial | Durham, NH | 19,273 | 3,464 | 18,094 | 21,558 | 833 | Jun-07 | 1986 | 40 | |||||||||||||||||||||
| Office | Dallas, TX | 18,563 | 3,984 | 27,308 | 31,292 | 1,084 | Jun-07 | 2002 | 40 | |||||||||||||||||||||
| Office | Farmington Hills, MI | 19,616 | 4,876 | 21,115 | 25,991 | 1,811 | Jun-07 | 1999 | 10-40 | |||||||||||||||||||||
| Office | Arlington, TX | 20,860 | 4,424 | 22,826 | 27,250 | 1,637 | Jun-07 | 2003 | 7-40 | |||||||||||||||||||||
| Office | Kansas City, MO | 17,876 | 2,433 | 20,154 | 22,587 | 864 | Jun-07 | 1980 | 12-40 | |||||||||||||||||||||
| Industrial | Streetsboro, OH | 19,462 | 2,441 | 22,171 | 24,612 | 1,064 | Jun-07 | 2004 | 12-40 | |||||||||||||||||||||
| Office | Issaquah, WA | 31,588 | 5,126 | 13,554 | 18,680 | 917 | Jun-07 | 1987 | 8-40 | |||||||||||||||||||||
| Office | Issaquah, WA | 0 | 6,268 | 16,058 | 22,326 | 1,043 | Jun-07 | 1987 | 8-40 | |||||||||||||||||||||
| Office | Houston, TX | 19,663 | 12,835 | 26,690 | 39,525 | 2,395 | Jun-07 | 2000 | 2-40 | |||||||||||||||||||||
| Industrial | Plymouth, MI | 11,847 | 2,296 | 13,398 | 15,694 | 1,202 | Jun-07 | 1996 | 40 | |||||||||||||||||||||
| Industrial | Temperance, MI | 10,909 | 3,040 | 14,738 | 17,778 | 828 | Jun-07 | 1980 | 40 | |||||||||||||||||||||
| Industrial | Logan, NJ | 7,318 | 1,825 | 10,776 | 12,601 | 416 | Jun-07 | 1998 | 40 | |||||||||||||||||||||
| Industrial | Laurens, SC | 16,240 | 5,552 | 20,886 | 26,438 | 1,220 | Jun-07 | 1991 | 40 | |||||||||||||||||||||
| Industrial | Winchester, VA | 10,606 | 3,823 | 12,226 | 16,049 | 848 | Jun-07 | 2001 | 40 | |||||||||||||||||||||
| Office | Colorado Springs, CO | 11,381 | 2,748 | 12,554 | 15,302 | 652 | Jun-07 | 1980 | 40 | |||||||||||||||||||||
| Office | Lake Mary, FL | 13,079 | 4,535 | 13,950 | 18,485 | 1,248 | Jun-07 | 1997 | 40 | |||||||||||||||||||||
| Office | Lake Mary, FL | 13,040 | 4,438 | 13,716 | 18,154 | 1,220 | Jun-07 | 1999 | 40 | |||||||||||||||||||||
| Office | Chicago, IL | 28,975 | 5,155 | 45,904 | 51,059 | 3,013 | Jun-07 | 1986 | 40 | |||||||||||||||||||||
| Office | Fishers, IN | 14,283 | 2,808 | 18,661 | 21,469 | 1,570 | Jun-07 | 1999 | 40 | |||||||||||||||||||||
| Office | Cary, NC | 12,589 | 5,342 | 14,866 | 20,208 | 1,034 | Jun-07 | 1999 | 40 | |||||||||||||||||||||
| Office | Parisppany, NJ | 40,151 | 7,478 | 84,051 | 91,529 | 5,272 | Jun-07 | 2000 | 40 | |||||||||||||||||||||
| Office | Milford, OH | 16,220 | 3,124 | 15,396 | 18,520 | 1,637 | Jun-07 | 1991 | 40 | |||||||||||||||||||||
| Office | Irving , TX | 26,408 | 4,889 | 22,806 | 27,695 | 2,536 | Jun-07 | 1999 | 40 | |||||||||||||||||||||
| Office | Glen Allen, VA | 19,485 | 2,361 | 28,504 | 30,865 | 2,222 | Jun-07 | 1998 | 40 | |||||||||||||||||||||
| Office | Herndon, VA | 11,930 | 9,409 | 12,853 | 22,262 | 1,034 | Jun-07 | 1987 | 40 | |||||||||||||||||||||
| Industrial | Duncan, SC | 0 | 884 | 7,944 | 8,828 | 124 | Jun-07 | 2005 | 40 | |||||||||||||||||||||
| Office | Brea, CA | 78,092 | 37,270 | 45,691 | 82,961 | 3,074 | Dec-07 | 1983 | 40 | |||||||||||||||||||||
| Office | Houston, TX | 60,193 | 16,613 | 52,682 | 69,295 | 4,939 | Dec-07 | 1976/1984 | 40 | |||||||||||||||||||||
| subtotal | 2,098,787 | 694,913 | 3,400,365 | 4,095,278 | 379,831 | |||||||||||||||||||||||||
| *** (see note below) | 213,635 | — | — | — | — | |||||||||||||||||||||||||
| Total | $ | 2,312,422 | $ | 694,913 | $ | 3,400,365 | $ | 4,095,278 | $ | 379,831 | ||||||||||||||||||||
110
(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, 20072008 for Federal income tax purposes was approximately $4.1$4.2 billion.
| 2007 | 2006 | 2005 | ||||||||||
| Reconciliation of real estate owned: | ||||||||||||
| Balance at the beginning of year | $ | 3,747,156 | $ | 1,883,115 | $ | 1,407,872 | ||||||
| Merger basis reallocation | 8,235 | — | — | |||||||||
| Additions during year | 146,252 | 1,918,700 | 671,955 | |||||||||
| Properties sold during year | (634,560 | ) | (53,696 | ) | (34,120 | ) | ||||||
| Property contributed to joint venture during year | (132,054 | ) | — | (117,411 | ) | |||||||
| Properties consolidated during the year | 1,109,064 | 110,728 | — | |||||||||
| Reclassified held for sale properties | (138,163 | ) | (113,033 | ) | (32,339 | ) | ||||||
| Properties impaired during the year | (15,500 | ) | (6,100 | ) | (12,842 | ) | ||||||
| Properties held for sale placed back in service | 1,830 | 7,442 | — | |||||||||
| Translation adjustment on foreign currency | 3,018 | — | — | |||||||||
| Balance at end of year | $ | 4,095,278 | $ | 3,747,156 | $ | 1,883,115 | ||||||
| Balance of beginning of year | $ | 276,129 | $ | 241,188 | $ | 180,610 | ||||||
| Depreciation and amortization expense | 137,525 | 67,456 | 60,096 | |||||||||
| Accumulated depreciation and amortization of properties sold and held for sale during year | (54,737 | ) | (37,178 | ) | 1,506 | |||||||
| Accumulated depreciation of property contributed to joint venture | (16,887 | ) | — | (1,024 | ) | |||||||
| Accumulated depreciation of properties consolidated during the year | 37,597 | 4,616 | — | |||||||||
| Translation adjustment on foreign currency | 204 | 47 | — | |||||||||
| Balance at end of year | $ | 379,831 | $ | 276,129 | $ | 241,188 | ||||||
| 2008 | 2007 | 2006 | ||||||||||
| Reconciliation of real estate owned: | ||||||||||||
| Balance at the beginning of year | $ | 4,109,097 | $ | 3,751,202 | $ | 1,883,115 | ||||||
| Merger basis reallocation | — | 8,235 | — | |||||||||
| Additions during year | 101,038 | 146,252 | 1,918,700 | |||||||||
| Properties sold during year | (341,762 | ) | (634,560 | ) | (53,696 | ) | ||||||
| Property contributed to joint venture during year | (100,415 | ) | (132,054 | ) | — | |||||||
| Properties consolidated during the year | — | 1,109,064 | 110,728 | |||||||||
| Reclassified held for sale properties | (8,782 | ) | (138,163 | ) | (113,033 | ) | ||||||
| Properties impaired during the year | — | (15,500 | ) | (6,100 | ) | |||||||
| Properties held for sale placed back in service | — | 1,830 | 7,442 | |||||||||
| Translation adjustment on foreign currency | (1,250 | ) | 3,018 | — | ||||||||
| Other reclassification | (1,738 | ) | — | — | ||||||||
| Construction in progress reclassification | — | 9,773 | 4,046 | |||||||||
| Balance at end of year | $ | 3,756,188 | $ | 4,109,097 | $ | 3,751,202 | ||||||
| Reconciliation of accumulated depreciation and amortization: | ||||||||||||
| Balance at the beginning of year | $ | 379,831 | $ | 276,129 | $ | 241,188 | ||||||
| Depreciation and amortization expense | 142,597 | 137,525 | 67,456 | |||||||||
| Accumulated depreciation and amortization of properties sold and held for sale during year | (15,859 | ) | (54,737 | ) | (37,178 | ) | ||||||
| Accumulated depreciation of property contributed to joint venture | (43,018 | ) | (16,887 | ) | — | |||||||
| Accumulated depreciation of properties consolidated during the year | — | 37,597 | 4,616 | |||||||||
| Translation adjustment on foreign currency | (152 | ) | 204 | 47 | ||||||||
| Other reclassification | (1,738 | ) | — | — | ||||||||
| Balance at end of year | $ | 461,661 | $ | 379,831 | $ | 276,129 | ||||||
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Not applicable.
Item 9A. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
An evaluation of the effectiveness of the design and operation of our “disclosure controls and procedures” (as defined inrule 13a-15(e) or15d-15(e) under the Securities Exchange Act of 1934, as amended, which we refer to as the Exchange Act), as of the end of the period covered by this Annual Report was made under the supervision and with the participation of our management, including our Chief Executive Officer and our Chief Financial Officer. Based upon this evaluation, our Chief Executive Officer and our Chief Financial Officer have concluded that our disclosure controls and procedures (a) are effective to ensure that information required to be disclosed by us in reports filed or submitted under the Exchange Act is timely recorded, processed, summarized and reported and (b) include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in reports filed or submitted under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and our Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.
Management’s Report on Internal Control Over Financial Reporting
Management’s Report on Internal Control Over Financial Reporting, which appears on page 59 of this Annual Report, is incorporated herein by reference.
Attestation Report of the Registered Public Accounting Firm.
The Report of the Independent Registered Public Accounting Firm constituting the Attestation Report of the Registered Public Accounting Firm, which appears on page 62 of this Annual Report, is incorporated herein by reference.
Changes in Internal Control Over Financial Reporting
There were no changes to our internal controls over financial reporting during the fourth quarter ended December 31, 20072008 that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.
Item 9B. Other Information
Not applicable.
PART III.
Item 10. Trustees and Executive Officers of the Registrant
The information regarding our trustees and executive officers required to be furnished pursuant to this item is set forth in Part I following Item 4A4 of this Annual Report. Information relating to our Code of Business Conduct and Ethics, is included in Part I, Item 1 of this Annual Report. The information relating to our trustees, including the audit committee of our Board of Trustees and our audit committeeAudit Committee financial expert, and certain information relating to our executive officers will be in our Definitive Proxy Statement for our 20082009 Annual Meeting of Shareholders, which we refer to as our Proxy Statement and is incorporated herein by reference.
Item 11. Executive Compensation
The information required to be furnished pursuant to this item will be set forth under the appropriate captions in the Proxy Statement, and is incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The information required to be furnished pursuant to this item will be set forth under the appropriate captions in the Proxy Statement, and is incorporated herein by reference.
112
Item 13. Certain Relationships and Related Transactions
The information required to be furnished pursuant to this item will be set forth under the appropriate captions in the Proxy Statement, and is incorporated herein by reference. In addition, certain information regarding related party transactions is set forth in note 17 to the Consolidated Financial Statements on page 93 of this Annual Report.
Item 14. Principal Accounting Fees and Services
The information required to be furnished pursuant to this item will be set forth under the appropriate captions in the Proxy Statement, and is incorporated herein by reference.
PART IV.
Item 15. Exhibits, Financial Statement Schedules
| Page | ||
| 60 | |||
| 97 | |||
| (3) Exhibits | 102 |
| Exhibit No. | Description | ||||
| 3.1 | |||||
| Articles of Merger and Amended and Restated Declaration of Trust of the Company, dated December 31, 2006 (filed as Exhibit 3.1 to the Company’s Current Report on Form 8-K filed January 8, 2007 (the “01/08/07 8-K”))(1) | |||||
| Articles Supplementary Relating to the 7.55% Series D Cumulative Redeemable Preferred Stock, par value $.0001 per share (filed as Exhibit 3.3 to the Company’s Registration Statement on Form 8A filed February 14, 2007 (the “02/14/07 Registration Statement”))(1) | |||||
| — | Amended and Restated By-laws of the Company (filed as Exhibit 3.2 to the 01/08/07 8-K)(1) | ||||
| 3.4 | — | Fifth Amended and Restated Agreement of Limited Partnership of Lepercq Corporate Income Fund L.P. (“LCIF”), dated as of December 31, 1996, as supplemented (the “LCIF Partnership Agreement”) (filed as Exhibit 3.3 to the Company’s Registration Statement of Form S-3/A filed September 10, 1999 (the “09/10/99 Registration Statement”))(1) | |||
| 3.5 | — | Amendment No. 1 to the LCIF Partnership Agreement dated as of December 31, 2000 (filed as Exhibit 3.11 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2003, filed February 26, 2004 (the “2003 10-K”))(1) | |||
| 3.6 | — | First Amendment to the LCIF Partnership Agreement effective as of June 19, 2003 (filed as Exhibit 3.12 to the 2003 10-K)(1) | |||
| 3.7 | — | Second Amendment to the LCIF Partnership Agreement effective as of June 30, 2003 (filed as Exhibit 3.13 to the 2003 10-K)(1) | |||
| 3.8 | — | Third Amendment to the LCIF Partnership Agreement effective as of December 31, 2003 (filed as Exhibit 3.13 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2004, filed on March 16, 2005 (the “2004 10-K”))(1) | |||
| 3.9 | — | Fourth Amendment to the LCIF Partnership Agreement effective as of October 28, 2004 (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed November 4, 2004)(1) | |||
| 3.10 | — | Fifth Amendment to the LCIF Partnership Agreement effective as of December 8, 2004 (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed December 14, 2004 (the “12/14/04 8-K”))(1) | |||
| 3.11 | — | Sixth Amendment to the LCIF Partnership Agreement effective as of June 30, 2003 (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed January 3, 2005 (the “01/03/05 8-K”))(1) | |||
| 3.12 | — | Seventh Amendment to the LCIF Partnership Agreement (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed November 3, 2005)(1) | |||
| 3.13 | — | Second Amended and Restated Agreement of Limited Partnership of Lepercq Corporate Income Fund II L.P. (“LCIF II”), dated as of August 27, 1998 the (“LCIF II Partnership Agreement”) (filed as Exhibit 3.4 to the 9/10/99 Registration Statement)(1) | |||
| 3.14 | — | First Amendment to the LCIF II Partnership Agreement effective as of June 19, 2003 (filed as Exhibit 3.14 to the 2003 10-K)(1) | |||
| 3.15 | — | Second Amendment to the LCIF II Partnership Agreement effective as of June 30, 2003 (filed as Exhibit 3.15 to the 2003 10-K)(1) | |||
| 3.16 | — | Third Amendment to the LCIF II Partnership Agreement effective as of December 8, 2004 (filed as Exhibit 10.2 to 12/14/04 8-K)(1) |
102
| Exhibit No. |
Exhibit No. | Description | |||||
| 2 | .1 | — | Agreement and Plan of Merger, dated July 23, 2006, by and between Newkirk Realty Trust, Inc. (“Newkirk”) and Lexington Realty Trust (formerly known as Lexington Corporate Properties Trust, the “Company”) (filed as Exhibit 2.1 to the Company’s Current Report onForm 8-K filed July 24, 2006 (the “07/24/068-K”))(1) | |||
| 2 | .2 | — | Amendment No. 1 to Agreement and Plan of Merger, dated as of September 11, 2006, by and between Newkirk and the Company (filed as Exhibit 2.1 to the Company’s Current Report onForm 8-K filed September 13, 2006 (the “09/13/068-K”))(1) | |||
| 2 | .3 | — | Amendment No. 2 to Agreement and Plan of Merger, dated as of October 13, 2006, by and between Newkirk and the Company (filed as Exhibit 2.1 to the Company’s Current Report onForm 8-K filed October 13, 2006)(1) | |||
| 3 | .1 | — | Articles of Merger and Amended and Restated Declaration of Trust of the Company, dated December 31, 2006 (filed as Exhibit 3.1 to the Company’s Current Report onForm 8-K filed January 8, 2007 (the “01/08/078-K”))(1) | |||
| 3 | .2 | — | Articles Supplementary Relating to the 7.55% Series D Cumulative Redeemable Preferred Stock, par value $.0001 per share (filed as Exhibit 3.3 to the Company’s Registration Statement on Form 8A filed February 14, 2007 (the “02/14/07 Registration Statement”))(1) | |||
| 3 | .3 | — | Amended and Restated By-laws of the Company (filed as Exhibit 3.2 to the 01/08/078-K)(1) | |||
| 3 | .4 | — | Fifth Amended and Restated Agreement of Limited Partnership of Lepercq Corporate Income Fund L.P. (“LCIF”), dated as of December 31, 1996, as supplemented (the “LCIF Partnership Agreement”) (filed as Exhibit 3.3 to the Company’s Registration Statement ofForm S-3/A filed September 10, 1999 (the “09/10/99 Registration Statement”))(1) | |||
| 3 | .5 | — | Amendment No. 1 to the LCIF Partnership Agreement dated as of December 31, 2000 (filed as Exhibit 3.11 to the Company’s Annual Report onForm 10-K for the year ended December 31, 2003, filed February 26, 2004 (the “200310-K”))(1) | |||
| 3 | .6 | — | First Amendment to the LCIF Partnership Agreement effective as of June 19, 2003 (filed as Exhibit 3.12 to the 200310-K)(1) | |||
| 3 | .7 | — | Second Amendment to the LCIF Partnership Agreement effective as of June 30, 2003 (filed as Exhibit 3.13 to the 200310-K)(1) | |||
| 3 | .8 | — | Third Amendment to the LCIF Partnership Agreement effective as of December 31, 2003 (filed as Exhibit 3.13 to the Company’s Annual Report onForm 10-K for the year ended December 31, 2004, filed on March 16, 2005 (the “200410-K”))(1) | |||
| 3 | .9 | — | Fourth Amendment to the LCIF Partnership Agreement effective as of October 28, 2004 (filed as Exhibit 10.1 to the Company’s Current Report onForm 8-K filed November 4, 2004)(1) | |||
113
Exhibit No. | Description | |||||
| 3 | .10 | — | Fifth Amendment to the LCIF Partnership Agreement effective as of December 8, 2004 (filed as Exhibit 10.1 to the Company’s Current Report onForm 8-K filed December 14, 2004 (the “12/14/048-K”))(1) | |||
| 3 | .11 | — | Sixth Amendment to the LCIF Partnership Agreement effective as of June 30, 2003 (filed as Exhibit 10.1 to the Company’s Current Report onForm 8-K filed January 3, 2005 (the “01/03/058-K”))(1) | |||
| 3 | .12 | — | Seventh Amendment to the LCIF Partnership Agreement (filed as Exhibit 10.1 to the Company’s Current Report onForm 8-K filed November 3, 2005)(1) | |||
| 3 | .13 | — | Second Amended and Restated Agreement of Limited Partnership of Lepercq Corporate Income Fund II L.P. (“LCIF II”), dated as of August 27, 1998 the (“LCIF II Partnership Agreement”) (filed as Exhibit 3.4 to the 9/10/99 Registration Statement)(1) | |||
| 3 | .14 | — | First Amendment to the LCIF II Partnership Agreement effective as of June 19, 2003 (filed as Exhibit 3.14 to the 200310-K)(1) | |||
| 3 | .15 | — | Second Amendment to the LCIF II Partnership Agreement effective as of June 30, 2003 (filed as Exhibit 3.15 to the 200310-K)(1) | |||
| 3 | .16 | — | Third Amendment to the LCIF II Partnership Agreement effective as of December 8, 2004 (filed as Exhibit 10.2 to 12/14/048-K)(1) | |||
| 3 | .17 | — | Fourth Amendment to the LCIF II Partnership Agreement effective as of January 3, 2005 (filed as Exhibit 10.2 to 01/03/058-K)(1) | |||
| 3 | .18 | — | Fifth Amendment to the LCIF II Partnership Agreement effective as of July 23, 2006 (filed as Exhibit 99.5 to the 07/24/068-K)(1) | |||
| 3 | .19 | — | Sixth Amendment to the LCIF II Partnership Agreement effective as of December 20, 2006 (filed as Exhibit 10.1 to the Company’s Current Report onForm 8-K filed December 22, 2006)(1) | |||
| 3 | .20 | — | Amended and Restated Agreement of Limited Partnership of Net 3 Acquisition L.P. (the “Net 3 Partnership Agreement”) (filed as Exhibit 3.16 to the Company’s Registration Statement ofForm S-3 filed November 16, 2006)(1) | |||
| 3 | .21 | — | First Amendment to the Net 3 Partnership Agreement effective as of November 29, 2001 (filed as Exhibit 3.17 to the 200310-K)(1) | |||
| 3 | .22 | — | Second Amendment to the Net 3 Partnership Agreement effective as of June 19, 2003 (filed as Exhibit 3.18 to the 200310-K)(1) | |||
| 3 | .23 | — | Third Amendment to the Net 3 Partnership Agreement effective as of June 30, 2003 (filed as Exhibit 3.19 to the 200310-K)(1) | |||
| 3 | .24 | — | Fourth Amendment to the Net 3 Partnership Agreement effective as of December 8, 2004 (filed as Exhibit 10.3 to 12/14/048-K)(1) | |||
| 3 | .25 | — | Fifth Amendment to the Net 3 Partnership Agreement effective as of January 3, 2005 (filed as Exhibit 10.3 to 01/03/058-K)(1) | |||
| 3 | .26 | — | Second Amended and Restated Agreement of Limited Partnership of The Lexington Master Limited Partnership (formerly known as The Newkirk Master Limited Partnership, the “MLP”), dated as of December 31, 2006, between Lex GP-1 Trust and Lex LP-1 Trust (filed as Exhibit 10.4 to the 01/08/078-K)(1) | |||
| 4 | .1 | — | Specimen of Common Shares Certificate of the Company (filed as Exhibit 4.1 to the Company’s Annual Report onForm 10-K for the year ended December 31, 2006 (the “200610-K”))(1) | |||
| 4 | .2 | — | Form of 8.05% Series B Cumulative Redeemable Preferred Stock certificate (filed as Exhibit 4.1 to the Company’s Registration Statement on Form 8A filed June 17, 2003)(1) | |||
| 4 | .3 | — | Form of 6.50% Series C Cumulative Convertible Preferred Stock certificate (filed as Exhibit 4.1 to the Company’s Registration Statement on Form 8A filed December 8, 2004)(1) | |||
| 4 | .4 | — | Form of 7.55% Series D Cumulative Redeemable Preferred Stock certificate (filed as Exhibit 4.1 to the 02/14/07 Registration Statement)(1) | |||
| 4 | .5 | — | Form of Special Voting Preferred Stock certificate (filed as Exhibit 4.5 to the 200610-K)(1) | |||
114
Exhibit No. | Description | |||||
| 4 | .6 | — | Indenture, dated as of January 29, 2007, among The Lexington Master Limited Partnership, the Company, the other guarantors named therein and U.S. Bank National Association, as trustee (filed as Exhibit 4.1 to the Company’s Current Report onForm 8-K filed January 29, 2007 (the “01/29/078-K”))(1) | |||
| 4 | .7 | — | First Supplemental Indenture, dated as of January 29, 2007, among The Lexington Master Limited Partnership, the Company, the other guarantors named therein and U.S. Bank National Association, as trustee, including the Form of 5.45% Exchangeable Guaranteed Notes due 2027 (filed as Exhibit 4.2 to the 01/29/078-K)(1) | |||
| 4 | .8 | — | Second Supplemental Indenture, dated as of March 9, 2007, among The Lexington Master Limited Partnership, the Company, the other guarantors named therein and U.S. Bank National Association, as trustee, including the Form of 5.45% Exchangeable Guaranteed Notes due 2027 (filed as Exhibit 4.3 to the Company’s Current Report onform 8-k filed on March 9, 2007 (the “03/09/078-K”))(1) | |||
| 4 | .9 | — | Amended and Restated Trust Agreement, dated March 21, 2007, among Lexington Realty Trust, The Bank of New York Trust Company, National Association, The Bank of New York (Delaware), the Administrative Trustees (as named therein) and the several holders of the Preferred Securities from time to time (filed as Exhibit 4.1 to the Company’s Current Report onForm 8-K filed on March 27, 2007 (the “03/27/20078-K”))(1) | |||
| 4 | .10 | — | Third Supplemental Indenture, dated as of June 19, 207, among the MLP, the Company, the other guarantors named therein and U.S. bank National Association, as trustee, including the form of 5.45% Exchangeable Guaranteed Notes due 2027 (filed as Exhibit 4.1 to the Company’s Report onform 8-k filed on June 22, 2007(1) | |||
| 4 | .11 | — | Junior Subordinated Indenture, dated as of March 21, 2007, between Lexington Realty Trust and The Bank of New York Trust Company, National Association (filed as Exhibit 4.2 to the 03/27/078-K)(1) | |||
| 9 | .1 | — | Voting Trustee Agreement, dated as of December 31, 2006, among the Company, The Lexington Master Limited Partnership and NKT Advisors LLC (filed as Exhibit 10.6 to the 01/08/078-K)(1) | |||
| 10 | .1 | — | Form of 1994 Outside Director Shares Plan of the Company (filed as Exhibit 10.8 to the Company’s Annual Report onForm 10-K for the year ended December 31, 1993) (1, 4) | |||
| 10 | .2 | — | Amended and Restated 2002 Equity-Based Award Plan of the Company (filed as Exhibit 10.54 to the Company’s Annual Report onForm 10-K for the year ended December 31, 2002, filed on March 24, 2003 (the “200210-K”))(1) | |||
| 10 | .3 | — | 1994 Employee Stock Purchase Plan (filed as Exhibit D to the Company’s Definitive Proxy Statement dated April 12, 1994) (1, 4) | |||
| 10 | .4 | — | 1998 Share Option Plan (filed as Exhibit A to the Company’s Definitive Proxy Statement filed on April 22, 1998) (1, 4) | |||
| 10 | .5 | — | Amendment to 1998 Share Option Plan (filed as Exhibit 10.3 to the Company’s Current Report onForm 8-K filed on February 6, 2006 (the “02/06/068-K”)) (1, 4) | |||
| 10 | .6 | — | Amendment to 1998 Share Option Plan (filed as Exhibit 10.3 to the Company’s Current Report onForm 8-K filed on January 3, 2007 (the “01/03/078-K”)) (1, 4) | |||
| 10 | .7 | — | 2007 Outperformance Program (filed as Exhibit 10.1 to the Company’s Current Report onForm 8-K filed on April 5, 2007) (1,4) | |||
| 10 | .8 | — | Amendment to 2007 Outperformance Program (filed as Exhibit 10.6 to the Company’s Current Report onform 8-K filed on December 20,2007 (the 12/26/078-K)) (1,4) | |||
| 10 | .9 | — | Form of Compensation Agreement (Long-Term Compensation) between the Company and each of the following officers: Richard J. Rouse and Patrick Carroll (filed as Exhibit 10.15 to the 200410-K) (1, 4) | |||
| 10 | .10 | — | Form of Compensation Agreement (Bonus and Long-Term Compensation) between the Company and each of the following officers: E. Robert Roskind and T. Wilson Eglin (filed as Exhibit 10.16 to the 200410-K) (1, 4) | |||
115
Exhibit No. | Description | |||||
| 10 | .11 | — | Form of Nonvested Share Agreement (Performance Bonus Award) between the Company and each of the following officers: E. Robert Roskind, T. Wilson Eglin, Richard J. Rouse and Patrick Carroll (filed as Exhibit 10.1 to the 02/06/068-K) (1, 4) | |||
| 10 | .12 | — | Form of Nonvested Share Agreement (Long-Term Incentive Award) between the Company and each of the following officers: E. Robert Roskind, T. Wilson Eglin, Richard J. Rouse and Patrick Carroll and (filed as Exhibit 10.2 to the 02/06/068-K) (1, 4) | |||
| 10 | .13 | — | Form of the Company’s Nonvested Share Agreement, dated as of December 28, 2006 (filed as Exhibit 10.2 to the 01/03/078-K) (1,4) | |||
| 10 | .14 | — | Form ofLock-Up and Claw-Back Agreement, dated as of December 28, 2006 (filed as Exhibit 10.4 to the 01/03/078-K)(1) | |||
| 10 | .15 | — | Form of 2007 Annual Long-Term Incentive Award Agreement (filed as Exhibit 10.1 to the Company’s current Report onForm 8-k filed on January 11, 2008 (1,4) | |||
| 10 | .16 | — | Employment Agreement between the Company and E. Robert Roskind, dated May 4, 2006 (filed as Exhibit 99.1 to the Company’s Current Report onForm 8-K filed May 5, 2006 (the “05/05/068-K”)) (1, 4) | |||
| 10 | .17 | — | Employment Agreement between the Company and T. Wilson Eglin, dated May 4, 2006 (filed as Exhibit 99.2 to the 05/05/068-K) (1, 4) | |||
| 10 | .18 | — | Employment Agreement between the Company and Richard J. Rouse, dated May 4, 2006 (filed as Exhibit 99.3 to the 05/05/068-K) (1, 4) | |||
| 10 | .19 | — | Employment Agreement between the Company and Patrick Carroll, dated May 4, 2006 (filed as Exhibit 99.4 to the 05/05/068-K) (1, 4) | |||
| 10 | .20 | — | Employment Agreement, effective as of December 31, 2006, between the Company and Michael L. Ashner (filed as Exhibit 10.16 to the 01/08/078-K) (1,4) | |||
| 10 | .21 | — | Waiver Letters, dated as of July 23, 2006 and delivered by each of E. Robert Roskind, Richard J. Rouse, T. Wilson Eglin and Patrick Carroll (filed as Exhibit 10.17 to the 01/08/078-K)(1) | |||
| 10 | .22 | — | 2007 Trustee Fees Term Sheet (detailed on the Company’s Current Report onForm 8-K filed February 12, 2007) (1, 4) | |||
| 10 | .23 | — | Form of Indemnification Agreement between the Company and certain officers and trustees (filed as Exhibit 10.3 to the 200210-K)(1) | |||
| 10 | .24 | — | Credit Agreement, dated as of June 2, 2005 (“Credit Facility”) among the Company, LCIF, LCIF II, Net 3 Acquisition L.P., jointly and severally as borrowers, certain subsidiaries of the Company, as guarantors, Wachovia Capital Markets, LLC, as lead arranger, Wachovia Bank, National Association, as agent, Key Bank, N.A., as Syndication agent, each of Sovereign Bank and PNC Bank, National Association, as co-documentation agent, and each of the financial institutions initially a signatory thereto together with their assignees pursuant to Section 12.5(d) therein (filed as Exhibit 10.1 to the Company’s Current Report onForm 8-K filed June 30, 2005)(1) | |||
| 10 | .25 | — | First Amendment to Credit facility, dated as of June 1, 2006 (filed as Exhibit 10.1 to the Company’s Current Report onForm 8-K filed June 2, 2006)(1) | |||
| 10 | .26 | — | Second Amendment to Credit facility, dated as of December 27, 2006 (filed as Exhibit 10.1 to the 01/03/078-K)(1) | |||
| 10 | .27 | — | Third Amendment to Credit Agreement, dated as of December 20, 2007(filed as Exhibit 10.1 to the 12/26/078-K)(1) | |||
| 10 | .28 | — | Credit Agreement, dated as of June 1, 2007, among the Company, the MLP, LCIF, LCIF II and Net 3, jointly and severally as borrowers, KeyBanc Capital Markets, as lead arranger and book running manager, KeyBank National Association, as agent, and each of the financial institutions initially a signatory thereto together with their assignees pursuant to Section 12.5.(d) therein (filed as Exhibit 10.1 to the Company’s Current Report onForm 8-K filed on June 7, 2007 (the “06/07/20078-K”))(1) | |||
116
Exhibit No. | Description | |||||
| 10 | .29 | — | Master Repurchase Agreement, dated May 24, 2006, between Bear, Stearns International Limited and 111 Debt Acquisition-Two LLC (filed as Exhibit 10.1 to Newkirk’s Current Report onForm 8-K filed May 30, 2006)(1) | |||
| 10 | .30 | — | Master Repurchase Agreement, dated March 30, 2006, among Column Financial Inc., 111 Debt Acquisition LLC, 111 Debt Acquisition Mezz LLC and Newkirk (filed as Exhibit 10.2 to Newkirk’s Current Report onForm 8-K filed April 5, 2006 (the “NKT 04/05/068-K”))(1) | |||
| 10 | .31 | — | Amended and Restated Limited Liability Company Agreement of Concord Debt Holdings LLC, dated as of September 21, 2007, among the MLP, WRT Realty, L.P. and FUR Holdings LLC (filed as Exhibit 10.1 to the Company’s current Report onForm 8-K filed on September 24, 2007) | |||
| 10 | .32 | — | Amendment No. 1 to Amended and Restated Limited Liability Company Agreement of Concord Debt Holdings LLC, dated as of January 7, 2008(filed as Exhibit 10.1 to the Company’s Current Report onform 8-K filed January 11, 2008)(1) | |||
| 10 | .33 | — | Funding Agreement, dated as of July 23, 2006, by and among LCIF, LCIF II and Net 3 Acquisition L.P. (“Net 3”) and the Company (filed as Exhibit 99.4 to the 07/24/068-K)(1) | |||
| 10 | .34 | — | Funding Agreement, dated as of December 31, 2006, by and among LCIF, LCIF II, Net 3, the MLP and the Company (filed as Exhibit 10.2 to the 01/08/078-K)(1) | |||
| 10 | .35 | — | Guaranty Agreement, effective as of December 31, 2006, between the Company and the MLP (filed as Exhibit 10.5 to the 01/08/078-K)(1) | |||
| 10 | .36 | — | Amended and Restated Exclusivity Services Agreement, dated as of December 31, 2006, between the Company and Michael L. Ashner (filed as Exhibit 10.1 to the 01/08/078-K)(1) | |||
| 10 | .37 | — | Transition Services Agreement, dated as of December 31, 2006, between the Company and First Winthrop Corporation (filed as Exhibit 10.3 to the 01/08/078-K)(1) | |||
| 10 | .38 | — | Acquisition Agreement, dated as of November 7, 2005, between Newkirk and First Union Real Estate Equity and Mortgage Investments (“First Union”) (filed as Exhibit 10.4 to First Union’s Current Report onForm 8-K filed on November 10, 2005)(1) | |||
| 10 | .39 | — | Amendment to Acquisition Agreement and Assignment and Assumption, dated as of December 31, 2006, among NKT, Winthrop Realty Trust and the Company (filed as Exhibit 10.7 to the 01/08/078-K)(1) | |||
| 10 | .40 | — | Letter Agreement among Newkirk, Apollo Real Estate Investment Fund III, L.P., the MLP, NKT Advisors LLC, Vornado Realty Trust, VNK Corp., Vornado Newkirk LLC, Vornado MLP GP LLC and WEM Bryn Mawr Associates LLC (filed as Exhibit 10.15 to Amendment No. 5 to Newkirk Registration Statement onForm S-11/A filed October 28, 2005 (“Amendment No. 5 to NKT’sS-11”))(1) | |||
| 10 | .41 | — | Amendment to the Letter Agreement among Newkirk, Apollo Real Estate Investment Fund III, L.P., the MLP, NKT Advisors LLC, Vornado Realty Trust, Vornado Realty L.P., VNK Corp., Vornado Newkirk LLC, Vornado MLP GP LLC, and WEM-Brynmawr Associates LLC (filed as Exhibit 10.25 to Amendment No. 5 to Newkirk’sS-11)(1) | |||
| 10 | .42 | — | Ownership Limit Waiver Agreement, dated as of December 31, 2006, between the Company and Vornado Realty, L.P. (filed as Exhibit 10.8 to the 01/08/078-K)(1) | |||
| 10 | .43 | — | Ownership Limit Waiver Agreement, dated as of December 31, 2006, between the Company and Apollo Real Estate Investment Fund III, L.P. (filed as Exhibit 10.9 to the 01/08/078-K)(1) | |||
| 10 | .44 | — | Registration Rights Agreement, dated as of December 31, 2006, between the Company and Michael L. Ashner (filed as Exhibit 10.10 to the 01/08/078-K)(1) | |||
| 10 | .45 | — | Registration Rights Agreement, dated as of December 31, 2006, between the Company and WEM-Brynmawr Associates LLC (filed as Exhibit 10.11 to the 01/08/078-K)(1) | |||
| 10 | .46 | — | Registration Rights Agreement, dated as of November 7, 2005, between Newkirk and Vornado Realty Trust (filed as Exhibit 10.4 to Newkirk’s Current Report onForm 8-K filed November 15, 2005 (“NKT’s 11/15/058-K”))(1) | |||
117
Exhibit No. | Description | |||||
| 10 | .47 | — | Registration Rights Agreement, dated as of November 7, 2005, between Newkirk and Apollo Real Estate Investment Fund III, L.P. (“Apollo”) (filed as Exhibit 10.5 to NKT’s 11/15/058-K)(1) | |||
| 10 | .48 | — | Registration Rights Agreement, dated as of November 7, 2005, between the Company and First Union (filed as Exhibit 10.6 to NKT’s 11/15/058-K)(1) | |||
| 10 | .49 | — | Assignment and Assumption Agreement, effective as of December 31, 2006, among Newkirk, the Company, and Vornado Realty L.P. (filed as Exhibit 10.12 to the 01/08/078-K)(1) | |||
| 10 | .50 | — | Assignment and Assumption Agreement, effective as of December 31, 2006 among Newkirk, the Company, and Apollo Real Estate Investment Fund III, L.P. (filed as Exhibit 10.13 to the 01/08/078-K)(1) | |||
| 10 | .51 | — | Assignment and Assumption Agreement, effective as of December 31, 2006, among Newkirk, the Company, and Winthrop Realty Trust filed as Exhibit 10.14 to the 01/08/078-K)(1) | |||
| 10 | .52 | — | Registration Rights Agreement, dated as of January 29, 2007, among the MLP, the Company, LCIF, LCIF II, Net 3, Lehman Brothers Inc. and Bear, Stearns & Co. Inc., for themselves and on behalf of the initial purchasers named therein (filed as Exhibit 4.3 to the 01/29/078-K)(1) | |||
| 10 | .53 | — | Common Share Delivery Agreement, made as of January 29, 2007, between the MLP and the Company (filed as Exhibit 10.77 to the 200610-K)(1) | |||
| 10 | .54 | — | Registration Rights Agreement, dated as of March 9, 2007, among the MLP, the Company, LCIF, LCIF II, Net 3, Lehman Brothers Inc. and Bear, Stearns & Co. Inc., for themselves and on behalf of the initial purchasers named therein (filed as Exhibit 4.4 to the 03/09/078-K)(1) | |||
| 10 | .55 | — | Common Share Delivery Agreement, made as of January 29, 2007 between the MLP and the Company (filed as Exhibit 4.5 to the 03/09/20078-K)(1) | |||
| 10 | .56 | — | Property Management Agreement, made as of December 31, 2006, among the Company (Filed as Exhibit 10.15 to the 01/08/078-K)(1) | |||
| 10 | .57 | — | Second Amendment and Restated Limited Partnership Agreement, dated as of February 20, 2008, among LMLP GP LLC, The Lexington Master Limited Partnership and Inland American (Net Lease) Sub, LLC (filed as Exhibit 10.1 to the Company’s Current Report onForm 8-K filed on February 21, 2008 (the “2/21/088-K”))(1) | |||
| 10 | .58 | — | Contribution Agreement, dated as of August 10, 2007, between The Lexington Master Limited Partnership and Net Lease Strategic Assets Fund L.P. (filed as Exhibit 10.2 to the Company’s Current Report onform 8-K filed on August 16, 2007 ( the 08/16/20078-K”))(1) | |||
| 10 | .59 | — | Amendment No. 1 to Contribution Agreement, dated as of December 20, 2007(filed as Exhibit 10.3 to the 12/26/078-K)(1) | |||
| 10 | .60 | — | Amendment No. 2 to Contribution Agreement, dated as of February 20, 2008 (filed as Exhibit 10.2 to the 02/21/088-K)(1) | |||
| 10 | .61 | — | Purchase and Sale Agreement, dated as of August 10, 2007, between The Lexington Master Limited Partnership and Net Lease Strategic Assets Fund L.P. (filed as Exhibit 10.3 to the 08/16/20078-K)(1) | |||
| 10 | .62 | — | Amendment No. 1 to Purchase and Sale Agreement, dated as of December 20, 2007 (filed as Exhibit 10.4 to the 12/26/078-K)(1) | |||
| 10 | .63 | — | Amendment No. 2 to Purchase and Sale Agreement, dated as of February 20, 2008 (filed as Exhibit 10.3 to the 02/20/088-K)(1) | |||
| 10 | .64 | — | Management Agreement, dated as of August 10, 2007, between Net Lease Strategic Assets Fund L.P. and Lexington Realty Advisors, Inc. (filed as Exhibit 10.4 to the 08/16/20078-K)(1) | |||
| 10 | .65 | — | Purchase Agreement, dated as of June 1, 2007, between the Company and the Common Retirement Fund of the State of New York for interests in Lexington Acquiport Company II, LLC (filed as Exhibit 10.4 to the 06/07/20078-K)(1) | |||
| 10 | .66 | — | Partial Redemption Agreement, dated as of June 5, 2007, between Lexington/Lion Venture L.P., CLPF-LXP/LV, L.P. and the Company (filed as Exhibit 10.1 to the Company’s Current Report onForm 8-K filed on June 28, 2007 (the “06/28/20078-K”)(1) | |||
118
Exhibit No. | Description | |||||
| 10 | .67 | — | Contribution Agreement, dated as of June 5, 2007, between the Company and the MLP (filed as Exhibit 10.2 to the 06/28/20078-K)(1) | |||
| 10 | .68 | — | Redemption Agreement, dated as of June 5, 2007, between Lexington/Lion Venture L.P., CLPF-LXP/LV, L.P. and CLPF-LXP/Lion Venture GP, LLC (filed as Exhibit 10.3 to the 06/28/20078-K)(1) | |||
| 10 | .69 | — | Form of Contribution Agreement dated as of December 20, 2007 (filed as Exhibit 10.5 to the 12/26/07 8-K)(1) | |||
| 12 | — | Statement of Computation of Ratio of Earnings to Combined Fixed Charges and Preferred Dividends(2) | ||||
| 14 | .1 | — | Amended and Restated Code of Business Conduct and Ethics(2) | |||
| 21 | — | List of Subsidiaries(2) | ||||
| 23 | — | Consent of KPMG LLP(2) | ||||
| 31 | .1 | — | Certification of Chief Executive Officer pursuant torule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002(3) | |||
| 31 | .2 | — | Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002(3) | |||
| 32 | .1 | — | Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002(3) | |||
| 32 | .2 | — | Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002(3) | |||
| Description | ||||
| Fourth Amendment to the LCIF II Partnership Agreement effective as of January 3, 2005 (filed as Exhibit 10.2 to 01/03/05 8-K)(1) | ||||
| 3.18 | — | Fifth Amendment to the LCIF II Partnership Agreement effective as of July 23, 2006 (filed as Exhibit 99.5 to the Company’s Current Report on Form 8-K filed July 24, 2006 (the “07/24/06 8-K”))(1) | ||
| Sixth Amendment to the LCIF II Partnership Agreement effective as of December 20, 2006 (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed December 22, 2006)(1) | ||||
| 3.20 | — | Amended and Restated Agreement of Limited Partnership (“the Net 3 Partnership Agreement”) of Net 3 Acquisition L.P. (“Net 3”) (filed as Exhibit 3.16 to the Company’s Registration Statement of Form S-3 filed November 16, 2006)(1) | ||
| First Amendment to the Net 3 Partnership Agreement effective as of November 29, 2001 (filed as Exhibit 3.17 to the 2003 10-K)(1) | ||||
| 3.22 | — | Second Amendment to the Net 3 Partnership Agreement effective as of June 19, 2003 (filed as Exhibit 3.18 to the 2003 10-K)(1) | ||
| — | Third Amendment to the Net 3 Partnership Agreement effective as of June 30, 2003 (filed as Exhibit 3.19 to the 2003 10-K)(1) | |||
| 3.24 | — | Fourth Amendment to the Net 3 Partnership Agreement effective as of December 8, 2004 (filed as Exhibit 10.3 to 12/14/04 8-K)(1) | ||
| 3.25 | — | Fifth Amendment to the Net 3 Partnership Agreement effective as of January 3, 2005 (filed as Exhibit 10.3 to 01/03/05 8-K)(1) | ||
| 4.1 | — | Specimen of Common Shares Certificate of the Company (filed as Exhibit 4.1 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2006 (the “2006 10-K”))(1) | ||
| 4.2 | — | Form of 8.05% Series B Cumulative Redeemable Preferred Stock certificate (filed as Exhibit 4.1 to the Company’s Registration Statement on Form 8A filed June 17, 2003)(1) | ||
| 4.3 | — | Form of 6.50% Series C Cumulative Convertible Preferred Stock certificate (filed as Exhibit 4.1 to the Company’s Registration Statement on Form 8A filed December 8, 2004)(1) | ||
| 4.4 | — | Form of 7.55% Series D Cumulative Redeemable Preferred Stock certificate (filed as Exhibit 4.1 to the 02/14/07 Registration Statement)(1) | ||
| 4.5 | — | Indenture, dated as of January 29, 2007, among the Company (as successor to the MLP), the other guarantors named therein and U.S. Bank National Association, as trustee (filed as Exhibit 4.1 to the Company’s Current Report on Form 8-K filed January 29, 2007 (the “01/29/07 8-K”))(1) | ||
| 4.6 | — | First Supplemental Indenture, dated as of January 29, 2007, among the Company (as successor to the MLP), the other guarantors named therein and U.S. Bank National Association, as trustee, including the Form of 5.45% Exchangeable Guaranteed Notes due 2027 (filed as Exhibit 4.2 to the 01/29/07 8-K)(1) | ||
| 4.7 | — | Second Supplemental Indenture, dated as of March 9, 2007, among the Company (as successor to the MLP), the other guarantors named therein and U.S. Bank National Association, as trustee (filed as Exhibit 4.3 to the Company’s Current Report on Form 8-K filed on March 9, 2007 (the “03/09/07 8-K”))(1) | ||
| 4.8 | — | Amended and Restated Trust Agreement, dated March 21, 2007, among the Company, The Bank of New York Trust Company, National Association, The Bank of New York (Delaware), the Administrative Trustees (as named therein) and the several holders of the Preferred Securities from time to time (filed as Exhibit 4.1 to the Company’s Current Report on Form 8-K filed on March 27, 2007 (the “03/27/2007 8-K”))(1) | ||
| 4.9 | — | Third Supplemental Indenture, dated as of June 19, 2007, among the Company (as successor to The Lexington Master Limited Partnership), the other guarantors named therein and U.S. Bank National Association, as trustee (filed as Exhibit 4.1 to the Company’s Report on Form 8-K filed on June 22, 2007) (1) | ||
| 4.10 | — | Junior Subordinated Indenture, dated as of March 21, 2007, between Lexington Realty Trust and The Bank of New York Trust Company, National Association (filed as Exhibit 4.2 to the 03/27/07 8-K)(1) | ||
| 4.11 | — | Fourth Supplemental Indenture, dated as of December 31, 2008, among the Company, the other guarantors named therein and U.S. Bank National Association, as trustee (filed as Exhibit 4.1 to the Company’s Report on Form 8-K filed on January 2, 2009 (the “01/02/09 8-K”)) (1) | ||
| 10.1 | — | 1994 Employee Stock Purchase Plan (filed as Exhibit D to the Company’s Definitive Proxy Statement dated April 12, 1994) (1, 4) | ||
| 10.2 | — | The Company’s 2007 Equity Award Plan (filed as Annex A to the Company’s Definitive Proxy Statement dated April 19, 2007) (1,4) | ||
| 10.3 | — | 2007 Outperformance Program (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on April 5, 2007) (1,4) | ||
| 10.4 | — | Amendment to 2007 Outperformance Program (filed as Exhibit 10.6 to the Company’s Current Report on form 8-K filed on December 20,2007 (the 12/26/07 8-K)) (1,4) |
103
| Exhibit No. | Description | |||
| 10.5 | — | Form of Compensation Agreement (Long-Term Compensation) between the Company and each of the following officers: Richard J. Rouse and Patrick Carroll (filed as Exhibit 10.15 to the 2004 10-K) (1, 4) | ||
| 10.6 | — | Form of Compensation Agreement (Bonus and Long-Term Compensation) between the Company and each of the following officers: E. Robert Roskind and T. Wilson Eglin (filed as Exhibit 10.16 to the 2004 10-K) (1, 4) | ||
| 10.7 | — | Form of Nonvested Share Agreement (Performance Bonus Award) between the Company and each of the following officers: E. Robert Roskind, T. Wilson Eglin, Richard J. Rouse and Patrick Carroll (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on February 6, 2006 (the “02/06/06 8-K”)) (1, 4) | ||
| 10.8 | — | Form of Nonvested Share Agreement (Long-Term Incentive Award) between the Company and each of the following officers: E. Robert Roskind, T. Wilson Eglin, Richard J. Rouse and Patrick Carroll and (filed as Exhibit 10.2 to the 02/06/06 8-K) (1, 4) | ||
| 10.9 | — | Form of the Company’s Nonvested Share Agreement, dated as of December 28, 2006 (filed as Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on January 3, 2007 (the “01/03/07 8-K”)) (1,4) | ||
| 10.10 | — | Form of Lock-Up and Claw-Back Agreement, dated as of December 28, 2006 (filed as Exhibit 10.4 to the 01/03/07 8-K)(1) | ||
| 10.11 | — | Form of 2007 Annual Long-Term Incentive Award Agreement (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on January 11, 2008) (1,4) | ||
| 10.12 | — | Form of Share Option Award Agreement (filed as Exhibit 10.3 to the 01/02/09 8-K) (1,4) | ||
| 10.13 | — | Amended and Restated Rabbi Trust Agreement, originally dated January 26, 1999 (filed as Exhibit 10.2 to the 01/02/09 8-K) (1,4) | ||
| 10.14 | — | Employment Agreement between the Company and E. Robert Roskind, dated May 4, 2006 (filed as Exhibit 99.1 to the Company’s Current Report on Form 8-K filed May 5, 2006 (the “05/05/06 8-K”)) (1, 4) | ||
| 10.15 | — | Employment Agreement between the Company and T. Wilson Eglin, dated May 4, 2006 (filed as Exhibit 99.2 to the 05/05/06 8-K) (1, 4) | ||
| 10.16 | — | Employment Agreement between the Company and Richard J. Rouse, dated May 4, 2006 (filed as Exhibit 99.3 to the 05/05/06 8-K) (1, 4) | ||
| 10.17 | — | Employment Agreement between the Company and Patrick Carroll, dated May 4, 2006 (filed as Exhibit 99.4 to the 05/05/06 8-K) (1, 4) | ||
| 10.18 | — | Form of Amendment No. 1 to Employment Agreements with E. Robert Roskind, T. Wilson Eglin, Richard J. Rouse and Patrick Carroll (filed as Exhibit 10.1 to the 01/02/09 8-K) (1, 4) | ||
| 10.19 | — | Waiver Letters, dated as of July 23, 2006 and delivered by each of E. Robert Roskind, Richard J. Rouse, T. Wilson Eglin and Patrick Carroll (filed as Exhibit 10.17 to the 01/08/07 8-K)(1) | ||
| 10.20 | — | Form of Amended and Restated Indemnification Agreement between the Company and certain officers and trustees (1) | ||
| 10.21 | — | Credit Agreement, dated as of February 13, 2009 among the Company, LCIF, LCIF II, Net 3, jointly and severally as borrowers, certain subsidiaries of the Company, as guarantors, KeyBank National Association, as agent, and each of the financial institutions initially a signatory thereto together with their assignees pursuant to Section 12.5 therein (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed February 17, 2009)(1) | ||
| 10.22 | — | Master Repurchase Agreement, dated March 30, 2006, among Column Financial Inc., 111 Debt Acquisition LLC, 111 Debt Acquisition Mezz LLC and Newkirk (filed as Exhibit 10.2 to Newkirk’s Current Report on Form 8-K filed April 5, 2006 (the “NKT 04/05/06 8-K”))(1) | ||
| 10.23 | — | Master Terms and Conditions for Issuer Forward Transactions between the Company and Citigroup Financial Products Inc., effective as of October 28, 2008 (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed November 6, 2008 (the “11/06/08 8-K”))(1) | ||
| 10.24 | — | Second Amended and Restated Limited Liability Company Agreement of Concord Debt Holdings LLC, dated as of August 2, 2008, between Lex-Win Concord and Inland American (Concord) Sub, LLC (filed as Exhibit 10.1 to the Company’s current Report on Form 8-K filed on August 4, 2008 (the “08/04/08 8-K”)(1)) | ||
| 10.25 | — | Limited Liability Company Agreement of Lex-Win Concord, dated as of August 2, 2008 (filed as Exhibit 10.2 to 08/04/08 8-K)(1) | ||
| 10.26 | — | Administration and Advisory Agreement, dated as of August 2, 2008, among Lex-Win Concord, WRP Management LLC and WRP Sub-Management LLC (filed as Exhibit 10.3 to the Company’s 08/04/08 8-K)(1) | ||
| 10.27 | — | Funding Agreement, dated as of July 23, 2006, by and among LCIF, LCIF II and Net 3 Acquisition L.P. (“Net 3”) and the Company (filed as Exhibit 99.4 to the 07/24/06 8-K)(1) | ||
| 10.28 | — | Letter Agreement among Newkirk, Apollo Real Estate Investment Fund III, L.P., the MLP, NKT Advisors LLC, Vornado Realty Trust, VNK Corp., Vornado Newkirk LLC, Vornado MLP GP LLC and WEM Bryn Mawr Associates LLC (filed as Exhibit 10.15 to Amendment No. 5 to Newkirk Registration Statement on Form S-11/A filed October 28, 2005 (“Amendment No. 5 to NKT’s S-11”))(1) |
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| Exhibit No. | Description | |||
| 10.29 | — | Amendment to the Letter Agreement among Newkirk, Apollo Real Estate Investment Fund III, L.P., the MLP, NKT Advisors LLC, Vornado Realty Trust, Vornado Realty L.P., VNK Corp., Vornado Newkirk LLC, Vornado MLP GP LLC, and WEM-Brynmawr Associates LLC (filed as Exhibit 10.25 to Amendment No. 5 to Newkirk’s S-11)(1) | ||
| 10.30 | — | Amended and Restated Ownership Limit Waiver Agreement, dated as of October 28, 2008, between the Company and Vornado Realty, L.P. (together with certain affiliates) (filed as Exhibit 10.2 to the 11/06/08 8-K)(1) | ||
| 10.31 | — | Registration Rights Agreement, dated as of December 31, 2006, between the Company and Michael L. Ashner (filed as Exhibit 10.10 to the 01/08/07 8-K)(1) | ||
| 10.32 | — | Amended and Restated Registration Rights Agreement, dated as of November 3, 2008, between the Company and Vornado Realty, L.P. and Vornado LXP LLC (filed as Exhibit 10.3 to the11/06/08 8-K)(1) | ||
| 10.33 | — | Registration Rights Agreement, dated as of January 29, 2007, among the MLP, the Company, LCIF, LCIF II, Net 3, Lehman Brothers Inc. and Bear, Stearns & Co. Inc., for themselves and on behalf of the initial purchasers named therein (filed as Exhibit 4.3 to the 01/29/07 8-K)(1) | ||
| 10.34 | — | Common Share Delivery Agreement, made as of January 29, 2007, between the MLP and the Company (filed as Exhibit 10.77 to the 2006 10-K)(1) | ||
| 10.35 | — | Registration Rights Agreement, dated as of March 9, 2007, among the MLP, the Company, LCIF, LCIF II, Net 3, Lehman Brothers Inc. and Bear, Stearns & Co. Inc., for themselves and on behalf of the initial purchasers named therein (filed as Exhibit 4.4 to the 03/09/07 8-K)(1) | ||
| 10.36 | — | Common Share Delivery Agreement, made as of January 29, 2007 between the MLP and the Company (filed as Exhibit 4.5 to the 03/09/2007 8-K)(1) | ||
| 10.37 | — | Second Amendment and Restated Limited Partnership Agreement, dated as of February 20, 2008, among LMLP GP LLC, The Lexington Master Limited Partnership and Inland American (Net Lease) Sub, LLC (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on February 21, 2008 (the “2/21/08 8-K”))(1) | ||
| 10.38 | — | Management | ||
| 10.39 | — | Form of Contribution Agreement dated as of December 20, 2007 (filed as Exhibit 10.5 to the 12/26/07 8-K)(1) | ||
| 10.40 | — | Sales Agreement with Cantor Fitzgerald & Co., dated as of December 12, 2008 (filed as Exhibit 1.1 to the Company’s Current Report on Form 8-K filed on December 12, 2008 (the “12/12/08 8-K”))(1) | ||
| 10.41 | — | Sales Agreement with Merrill Lynch, Pierce, Fenner & Smith Incorporated, dated as of December 12, 2008 (filed as Exhibit 1.1 to the 12/12/08 8-K)(1) | ||
| 12 | — | Statement of Computation of Ratio of Earnings to Combined Fixed Charges and Preferred Dividends(2) | ||
| 14.1 | — | Amended and Restated Code of Business Conduct and Ethics (filed as Exhibit 14.1 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2007)(1) | ||
| 21 | — | List of Subsidiaries(2) | ||
| 23.1 | — | Consent of KPMG LLP(2) | ||
| 23.2 | — | Consent of PricewaterhouseCoopers LLP(2) | ||
| 23.3 | — | Consent of KPMG LLP(2) | ||
| 31.1 | — | Certification of Chief Executive Officer pursuant to rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002(3) | ||
| 31.2 | — | Certification of Chief Financial Officer pursuant to rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002(3) | ||
| 32.1 | — | Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002(3) | ||
| 32.2 | — | Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002(3) | ||
| 99.1 | — | Financial statements and related financial statement schedule of Lex-Win Concord LLC(2) | ||
| 99.2 | Financial statements and related financial statement schedule of Net Lease Strategic Assets Fund L.P.(2) |
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(1) Incorporated by reference.
(2) Filed herewith.
(3) Furnished herewith.
(4) Management Contract or compensatory plan or arrangement.
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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 Realty Trust | |||
| By: | /s/ T. Wilson Eglin | ||
| T. Wilson Eglin | |||
| Chief Executive Officer | |||
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Michael L. Ashner and T. Wilson Eglin and Patrick Carroll, and each of them severally, his true and lawful attorney-in-fact with power of substitution and resubstitution to sign in his name, place and stead, in any and all capacities, to do any and all things and execute any and all instruments that such attorney may deem necessary or advisable under the Securities Exchange Act of 1934 and any rules, regulations and requirements of the U.S. Securities and Exchange Commission in connection with this Annual Report onForm 10-K and any and all amendments hereto, as fully for all intents and purposes as he might or could do in person, and hereby ratifies and confirms all said attorneys-in-fact and agents, each acting alone, and his substitute or substitutes, may lawfully do or cause to be done by virtue hereof. 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 | ||||
/s/ | ||||
Richard J. Rouse | and Chief Investment Officer | |||
/s/ T. Wilson Eglin | Chief Executive Officer, President, Chief | |||
| T. Wilson Eglin | Operating Officer and Trustee | |||
/s/ Patrick Carroll | Chief Financial Officer, Treasurer and | |||
| Patrick Carroll | Executive Vice President | |||
/s/ Paul R. Wood | Vice President, Chief Accounting Officer | |||
| Paul R. Wood | and Secretary | |||
/s/ Clifford Broser | Trustee | |||
| Clifford Broser | ||||
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/s/ | Trustee | |||
| Geoffrey Dohrmann | ||||
/s/ | Trustee | |||
| Carl D. Glickman | ||||
/s/ | Trustee | |||
| James Grosfeld | ||||
/s/ | Trustee | |||
| Harold First | ||||
/s/ Richard Frary | Trustee | |||
| Richard Frary | ||||
| /s/ Kevin W. Lynch | Trustee | |||
| Kevin W. Lynch | ||||
DATE: February 29, 2008March 2, 2009
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