UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 FORM 10-K
(Mark One)
xANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 20162017
or
oTRANSITION 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)
33-04215 (Lepercq Corporate Income Fund L.P.)
LEXINGTON REALTY TRUST
LEPERCQ CORPORATE INCOME FUND L.P.
(Exact name of registrant as specified in its charter)
Maryland (Lexington Realty Trust)13-3717318 (Lexington Realty Trust)
Delaware (Lepercq Corporate Income Fund L.P.)13-3779859 (Lepercq Corporate Income Fund L.P.)
(State or other jurisdiction of
incorporation of organization)
(I.R.S. Employer
Identification No.)
One Penn Plaza, Suite 4015, New York, NY 10119-4015
(Address of principal executive offices) (zip code)
(212) 692-7200
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each className of each exchange on which registered
Lexington Realty Trust
Shares of beneficial interest, par value $0.0001 per share, classified as Common StockNew York Stock Exchange
6.50% Series C Cumulative Convertible Preferred Stock,
par value $0.0001 per share
New York Stock Exchange
Lepercq Corporate Income Fund L.P.
NoneNone

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.
Lexington Realty Trust
 Yes x   No ¨
Lepercq Corporate Income Fund L.P.
 Yes x   No ¨

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
Lexington Realty Trust
 Yes ¨   No x
Lepercq Corporate Income Fund L.P.
 Yes ¨   No x

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.
Lexington Realty Trust
 Yes x   No ¨
Lepercq Corporate Income Fund L.P.
 Yes x   No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Lexington Realty Trust
 Yes x   No ¨
Lepercq Corporate Income Fund L.P.
 Yes x   No ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation 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 this Form 10-K or any amendment to this Form 10-K.
Lexington Realty Trust
x 
Lepercq Corporate Income Fund L.P.¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company” and “smaller reporting“emerging growth company” in Rule 12b-2 of the Exchange Act.
Lexington Realty Trust:   
Large accelerated filer x
Accelerated filer ¨
Non-accelerated filer ¨
Smaller reporting company ¨
  (Do not check if a smaller reporting company)
Emerging growth company ¨
Lepercq Corporate Income Fund L.P.:   
Large accelerated filer ¨
Accelerated filer ¨
Non-accelerated filer x
Smaller reporting company ¨
  (Do not check if a smaller reporting company)
Emerging growth company ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).
Lexington Realty Trust
 Yes ¨   No x
Lepercq Corporate Income Fund L.P.
 Yes ¨   No x

The aggregate market value of the shares of beneficial interest, par value $0.0001 per share, classified as common stock (“common shares”) of Lexington Realty Trust held by non-affiliates as of June 30, 2016,2017, which was the last business day of the registrant's most recently completed second fiscal quarter, was $2,322,738,768$2,328,797,004 based on the closing price of the common shares on the New York Stock Exchange as of that date, which was $10.11$9.91 per share.
Number of common shares outstanding as of February 27, 201722, 2018 was 240,365,475.240,767,878.
There is no public trading market for the partnership units of Lepercq Corporate Income Fund L.P. As a result, an aggregate market value of the partnership units of Lepercq Corporate Income Fund L.P. cannot be determined.
DOCUMENTS INCORPORATED BY REFERENCE
Certain information contained in the Definitive Proxy Statement for Lexington Realty Trust's Annual Meeting of Shareholders, to be held on May 16, 2017,15, 2018, is incorporated by reference in this Annual Report on Form 10-K in response to Part III, Items 10, 11, 12, 13 and 14, which will be filed with the Securities and Exchange Commission not later than 120 days after the end of the fiscal year covered by this Annual Report on Form 10-K.
     
     



EXPLANATORY NOTE

This report, which we refer to as this Annual Report, combines the Annual Reports on Form 10-K for the fiscal year ended December 31, 20162017 of (1) Lexington Realty Trust and its subsidiaries and (2) Lepercq Corporate Income Fund L.P. and its subsidiaries. Unless stated otherwise or the context otherwise requires, (1) the “Company,” the “Trust,” “Lexington,” “we,” “our,” and “us” refer collectively to Lexington Realty Trust and its consolidated subsidiaries, including Lepercq Corporate Income Fund L.P. and its consolidated subsidiaries, and (2) “LCIF” and the “Partnership” refersrefer to Lepercq Corporate Income Fund L.P. and its consolidated subsidiaries. All of the Company's and LCIF's interests in properties are held, and all property operating activities are conducted, through special purpose entities, which we refer to as property owner subsidiaries or lender subsidiaries, which are separate and distinct legal entities, but in some instances are consolidated for financial statement purposes and/or disregarded for income tax purposes.

LexingtonThe Company is the sole equity owner of (1) Lex GP-1 Trust, or Lex GP, a Delaware statutory trust, and (2) Lex LP-1 Trust, or Lex LP, a Delaware statutory trust.  The Company, through Lex GP and Lex LP, holds, as of December 31, 2016,2017, approximately 96.0% of LCIF's outstanding units of limited partner interest, which we refer to as OP units. The remaining OP units are beneficially owned by E. Robert Roskind, Chairman of the Trust, and certain non-affiliated investors. OP units not owned by Lexington are accounted for as partners’ capital in LCIF’s consolidated financial statements and as noncontrolling interests in the Trust’s consolidated financial statements. As the sole equity owner of LCIF’s general partner, the Company has the ability to control all of LCIF’s day-to-day operations subject to the terms of LCIF’s partnership agreement.

OP units not owned by Lexington are accounted for as partners’ capital in LCIF’s consolidated financial statements and as noncontrolling interests in the Trust’s consolidated financial statements.

We believe it is important to understand the differences between the Trust and LCIF in the context of how the Trust and LCIF operate as an interrelated, consolidated company. The Trust’s and LCIF’s businesses are substantially the same; except that LCIF is dependent on the Trust for management of LCIF’s operations and future investments, as LCIF does not have any employees or executive officers or a board of directors.  

The Trust also invests in assets and conducts business directly and through its other subsidiaries.  The Trust allocates investments to itself and its subsidiaries, including LCIF, as it deems appropriate and in accordance with certain obligations under LCIF’s partnership agreement with respect to allocations of non-recourse liabilities. The Trust and LCIF are co-borrowers under the Trust’s unsecured revolving credit facility and unsecured term loans.  LCIF is a guarantor of the Trust’s publicly-traded debt securities.  

We believe combining the Annual Reports on Form 10-K of the Trust and LCIF into this single Annual Report results in the following benefits:

improved disclosure thatcombined reports better reflectsreflect how management and the analyst community view the business as a single operating unit;
enhancedcombined reports enhance investor understanding of the Trust and LCIF by enabling them to view the business as a whole and in the same manner as management;
increased efficiencycombined reports are more efficient for the Trust and LCIF to prepare, resulting in savings in time, effort and expense; and
increased efficiencycombined reports are more efficient for investors by reducingto review, as they reduce duplicative disclosure and providing a single document for their review.

To help investors understand the differences between the Trust and LCIF, this Annual Report separately presents the following for each of the Trust and LCIF: (1) Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchase and Equity Securities, (2) Selected Financial Data, (3) the consolidated financial statements and the notes thereto, (4) Management’s Discussion and Analysis of Financial Condition and Results of Operations, (5) Controls and Procedures, and (6) Exhibit 31 and Exhibit 32 certifications and certain other exhibits. In addition, certain disclosures in other sections including “Risk Factors” are separated by entity to the extent the discussions relate to just the Trust or LCIF.

When we use the term “REIT,” we mean real estate investment trust. All references to 2017, 2016 2015 and 20142015 refer to our fiscal years ended, or the dates, as the context requires, December 31, 2016,2017, December 31, 20152016 and December 31, 2014,2015, respectively.
When we use the term “GAAP,” we mean United States generally accepted accounting principles in effect from time to time.

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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, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. 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,” “may,” “plans,” “predicts,” “will,” “will likely result” 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, performances or achievements to differ materially from current expectations, strategies or plans include, among others, those risks discussed below under “Risk Factors” in Part I, Item 1A of this Annual Report and under “Management's Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of this Annual Report. Except as required by law, 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 the occurrence of unanticipated events. Accordingly, there is no assurance that our expectations will be realized.


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TABLE OF CONTENTS

 Description Page
    
 PART I  
 
 
 
 
 
 
 PART II  
 
 
 
 
 
 
 
 
 PART III  
 
 
 
 
 
 PART IV  
 

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PART I.

Item 1. Business
General
We are a Maryland real estate investment trust, qualified as a REIT for federal income tax purposes, that owns a diversified portfolio of equity and debt investments in single-tenant commercial properties. A majority of these properties are subject to net or similar leases, where the tenant bears all or substantially all of the costs, including cost increases, for real estate taxes, utilities, insurance and ordinary repairs. However, certain leases provide that the landlord is responsible for certain operating expenses.
As of December 31, 20162017, we had equity ownership interests in approximately 195175 consolidated real estate properties, located in 4037 states and containing an aggregate of approximately 43.348.6 million square feet of space, approximately 96.0%98.9% of which was leased, excluding properties subject to mortgages in default.leased. In 20162017, 20152016 and 20142015, no tenant/guarantor represented greater than 10% of our annual base rental revenue.
In addition to our shares of beneficial interest, par value $0.0001 per share, classified as common stock, which we refer to as common shares, as of December 31, 20162017, we had one outstanding class of beneficial interest classified as preferred stock, or preferred shares, our 6.50% Series C Cumulative Convertible Preferred Stock, par value $0.0001 per share, or our Series C Preferred Shares. Our common shares and Series C Preferred Shares are traded on the New York Stock Exchange, or NYSE, under the symbols “LXP” and “LXPPRC”, respectively.
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. We intend to continue to qualify as a REIT. 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 our common shareholders. We conduct certain taxable activities through our taxable REIT subsidiary, Lexington Realty Advisors, Inc.
History
The Partnership was formed as a limited partnership on March 14, 1986 under the laws of the state of Delaware to invest in existing real estate properties net leased to corporations or other entities. The Partnership commenced a public offering of OP units in July 1986, which was completed in March 1987.
Our predecessor, Lexington Corporate Properties, Inc., was organized in the state of Delaware in October 1993 upon the combination of two investment programs, LCIF and Lepercq Corporate Income Fund II L.P., which we refer to as LCIF II and which werewas also formed to acquire net-lease real estate assets providing current income. Our predecessor was merged into Lexington Corporate Properties Trust, a Maryland REIT,real estate investment trust, on December 31, 1997. On December 31, 2006, Lexington Corporate Properties Trust changed its name to Lexington Realty Trust and was the successor in a merger with Newkirk Realty Trust, or Newkirk, which we refer to as the Newkirk Merger. All of Newkirk's operations were conducted, and all of its assets were held, through its master limited partnership, subsequently named The Lexington Master Limited Partnership, which we refer to as the MLP. As of December 31, 2008, the MLP was merged with and into us. On December 30, 2013, LCIF II was merged with and into LCIF, with LCIF as the surviving entity.
Lexington is structured as an umbrella partnership REIT, or UPREIT, as a portion of its business is conducted through its operating partnership subsidiary, LCIF. Lexington is party to a funding agreement with LCIF under which Lexington may be required to fund distributions made on account of OP units. The UPREIT structure enables us to acquire properties through an operating partnership by issuing OP units to a seller of property, as a form of consideration in exchange for the property. The outstanding OP units not held by Lexington are generally redeemable for our common shares on a one OP unit for approximately 1.13 common shares basis, or, at our election in certain instances, cash. We believe that this structure facilitates our ability to raise capital and to acquire portfolio and individual properties by enabling us to structure transactions which may defer taxable gains for a contributor of property. As of December 31, 2016,2017, there were approximately 3.33.2 million OP units outstanding, other than OP units held by Lexington, which were convertible into approximately 3.83.6 million common shares, assuming redemptions are satisfied entirely with common shares.

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Investment and Strategy
General. Our current business strategy is focused on enhancing our cash flow stability, growing our portfolio,revenue, reducing lease rollover risk and maintaining a strong and flexible balance sheet to allow us to act on opportunities as they arise. Generally weWe seek to acquire general purpose, single-tenant net-leased officeindustrial and industrialoffice assets in well-located and growing markets or which are critical to the tenant's business. We also own other asset types including retail facilities, schools and medical facilities, but we attempt to manage residual value risk associated with such other asset types by acquiring such assets primarily through joint ventures or disposing of such assets when there is sufficient remaining lease term to generate favorable sale prices or by making loan investments secured by such assets at a loan-to-value ratio where we would be comfortable holding an equity interest. We believe our strategy of investing in these types of assets will ultimately provide shareholders with dividend growth and capital appreciation.
We implement our strategy by (1) recycling capital in compliance with regulatory and contractual requirements, (2) refinancing or repurchasing outstanding indebtedness when advisable, (3) using fixed-rate non-recourse secured indebtedness to partially finance certain asset acquisitions,assets, (4) effecting strategic transactions, portfolio and individual property acquisitions and dispositions, (5) expanding existing properties, (6) executing new leases with tenants, (7) extending lease maturities in advance of or at expiration and (8) exploring 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 mitigating risk, creating additional growth and expanding the revenue realized from advisory and asset management activities as situations warrant.
Portfolio diversification is central to our investment strategy as we seek to create and maintain an asset base that provides steady, predictable and growing cash flows while being insulated against rising property operating expenses, regional recessions, industry-specific downturns and fluctuations in property values and market rent levels. Regardless of capital market and economic conditions, we intend to stay focused on (1) enhancing operating results, (2) improving portfolio quality and reducing risks associated with lease rollover, (3) mitigating risks relating to interest rates and real estate cycles and (4) implementing strategies where our management skills and real estate expertise can add value. We attempt to maintain a portfolio of properties that provide for income and capital appreciation. The proportion of total return generated from rental income versus capital appreciation will vary by asset type, lease term, contractual rental escalations and market location. We believe that our business strategy will continue to improve our liquidity and strengthen our overall balance sheet while creating meaningful shareholder value.
We intend to maintain a strong balance sheet primarily by (1) financing property acquisitions with non-recourse mortgage debt or unsecured corporate level borrowings at what we believe are favorable rates, (2) issuing equity when market conditions are favorable, (3) selling non-core and underperforming assets and (4) extending debt maturities and refinancing debt at lower rates.
Investments. When opportunities arise, we intend to continue to make investments in single-tenant assets that we believe will generate favorable returns. In recent years, we have favored the acquisition of industrial assets over office assets. We seek to grow our portfolio primarily by (1) engaging in, or providing funds to, or partnering with, developers who are engaged in, build-to-suit projects for single-tenant corporate users, (2) providing capital to corporations by buying properties and leasing them back to the sellers under net or similar leases and (3) acquiring properties already subject to net or similar leases, including through strategic transactions such as portfolio acquisitions and (4) making mortgage and mezzanine loans generally secured by single-tenant properties subject to net or similar leases.mergers with other real estate companies.
Our management has established a broad network of contacts to source investments, including brokers, developers and major corporate tenants. We believe that our geographical diversification, acquisition experience and balance sheet strength will allow us to continue to compete effectively for such investments.
Prior to effecting any investment, our underwriting includes analyzing the (1) property's design, construction quality, efficiency, functionality and location with respect to the immediate sub-market, city and region, (2) lease integrity with respect to term, rental rate increases, tenant credit, corporate guarantees and property maintenance provisions, (3) present and anticipated conditions in the local real estate market and (4) prospects for selling or re-leasing the property on favorable terms in the event of a vacancy. To the extent of information publicly available or made available to us, we also evaluate each potential tenant's financial strength, growth prospects and competitive position within its respective industry and each property's strategic location and function within a tenant's operations or distribution systems. We believe that our comprehensive underwriting process is critical to the assessment of long-term profitability of any investment by us.
Strategic Transactions with Other Real Estate Investment Companies. We seek to capitalize on the unique investment experience of our management team as well as their network of relationships in the industry to achieve appropriate risk-adjusted yields through strategic transactions. Accordingly, we may 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.

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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. However, investments in co-investment programs and joint ventures limit our ability to make unilateral investment decisions relating to the assets and limit our ability to deploy capital.
Competition
There are numerous commercial developers, real estate companies, financial institutions, such as banks and insurance companies, 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, banks, private companies and individuals.
Internal Growth and Effectively Managing Assets
Tenant Relations and Lease Compliance. We endeavor to maintain close contact with the tenants in the properties in which we have an interest in order to understand their financial strength, operations and future real estate needs. We monitor the financial, property maintenance and other lease obligations of the tenants in properties in which we have an interest, through a variety of means, including periodic reviews of financial statements that we have access to and physical inspections of the properties.
Extending Lease Maturities. Our property owner subsidiaries seek to extend tenant leases in advance of the lease expiration in order for us to maintain a balanced lease rollover schedule and high occupancy levels.
Revenue Enhancing Property Expansions. Our property owner subsidiaries undertake expansions of properties based on lease requirements, tenant requirements or marketing opportunities. We believe that selective property expansions can provide attractive rates of return.

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Capital Recycling. Subject to regulatory and contractual requirements, we generally sell our interests in properties when we believe that the return realized from selling a property will exceed the expected return from continuing to hold such property and/or there is a better use of the capital to be received upon sale. We also focus our disposition efforts primarily on suburban office and non-core assets such as vacant, multi-tenant, retail and short-term leased assets and assets that are the only asset we own in a geographic location.
Occasionally, we provide seller financing as a means of efficiently disposing of an asset. As a result, if a buyer defaults under the seller financing, we will once again be the owner of the underlying asset.
Conversion to Multi-Tenant. If one of our property owner subsidiaries is unable to renew a single-tenant lease or if it is unable to find a replacement single tenant, we either attempt to sell our interest in the property or the property owner subsidiary may seek to market the property for multi-tenant use. When appropriate, we seek to sell our interests in multi-tenant properties.
Property Management. From time to time, our property owner subsidiaries use property managers to manage certain properties. Our property management joint venture with an unaffiliated third party manages substantially all of these properties. We believe this joint venture provides us with (1) better management of our assets, (2) better tenant relationships, (3) revenue-enhancing opportunities and (4) cost efficiencies.
Financing Strategy
General. Since becoming a public company, our principal sources of financing have been the public and private equity and debt markets, property specificincluding property-specific debt, revolving loans, corporate level term loans, corporate bonds, issuance of common and preferred equity, issuance of OP units and undistributed cash flows.
Property SpecificProperty-Specific Debt. Our property owner subsidiaries seek non-recourse secured debt on a limited basis includingto mitigate tenant credit risk and when credit tenant lease financing is available. Credit tenant lease financing allows us to significantly or fully leverage the rental stream from an investment at, what we believe are, attractive rates.
Corporate Level Borrowings. We also use corporate level borrowings, such as revolving loans, term loans, and debt offerings. We expect to continue to finance more of our operations with such corporate level borrowings as (1) non-recourse secured debt matures and (2) such corporate level borrowings are available on favorable terms.
Balance Sheet Management. In recent years, we have reduced our weighted-average interest rate through the retirement of higher rate non-recourse mortgage debt with proceeds from recourse corporate level borrowings. Our objective is to continually strengthen our balance sheet to provide financial flexibility.

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Common Share Issuances
From time to time, we raise capital by issuing common shares through (1) at-the-market offering programs, (2) underwritten public offerings, (3) block trades and (4) our direct share purchase plan. The proceeds from our common share offerings are generally used for working capital, including to fund investments and to retire indebtedness.
Share Repurchases
We have made, and may continue to make, repurchases of our common and preferred shares in individual transactions when we believe it is advantageous to do so, including when the discount to our net asset value or the liquidation preference, as the case may be, is attractive. During 2015, our Board of Trustees authorized a 10.0 million common share repurchase program of which approximately 6.6 million common shares remained available for repurchase as of December 31, 2016.2017. There were no share repurchases in 2017.
Advisory Contracts
Certain members of our managementWe provide, and have been in the business of investing in single-tenant net-lease properties since 1973. This experience has enabled us to provideprovided, advisory services to various net-lease investors, including institutional investors and high net-worth individuals.

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. 


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Summary of 20162017 Transactions and Recent Developments
The following summarizes certain of our transactions during 2016,2017, including transactions disclosed elsewhere and in our other periodic reports.
Acquisitions/Investments. With respect to acquisitions/investments, we:
purchased properties for an aggregate cost of $170.3$558.6 million;
completed consolidated build-to-suit properties for an aggregate capitalized cost of $139.8 million and a non-consolidated build-to-suit property for a capitalized cost of $80.0$169.0 million;
continued to fund ongoing build-to-suit transactions with an aggregate estimated total cost of $177.9 million of which $106.7 million was invested as of December 31, 2016; and
entered into two forward commitmentscontributed $5.8 million initially to acquire industrial propertiesform a joint venture with a developer, in Grand Prairie, Texas and Warren, Michigan forwhich we have a 90% interest, which acquired approximately $24.7 million and $47.0 million, respectively.151 acres of developable land.
Capital Recycling. With respect to capital recycling activity, we:
disposed of our interests in consolidated properties to unaffiliated third parties for an aggregate gross disposition price of $641.4 million, including the New York, New York land investments;$229.1 million;
conveyed in foreclosure two properties for full satisfaction of the related aggregate $21.6of $12.6 million in non-recourse mortgages;
disposed of a non-consolidated interest in an office property for $6.2 million; and
receivedcollected an aggregate $1.6of $138.0 million for the fullupon assignment or satisfaction of three loan investments, secured by portfolios of single-tenant retail properties.including a note receivable from a joint venture investment.
Leasing. We entered into 4740 new leases and lease extensions encompassing an aggregate 4.73.8 million square feet, ending the year with our overall portfolio leased at 96.0%98.9% as of December 31, 2016, excluding properties subject to mortgages in default.2017.
Financing. With respect to financing activities, we:
converted/satisfied the remaining $12.4 million aggregate principal amount of 6.00% Convertible Guaranteed Notes due 2030, or 6.00% Convertible Notes, forretired an aggregate 1,892,269 common shares and aggregate cash payments of $0.7 million;
retired $374.1$63.4 million in property non-recourse mortgage debt, including through foreclosure sales disclosed above, with a weighted-average fixed interest rate of 5.0% and a weighted-average term to maturity of 6.6 years;6.0%;

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obtained an aggregate of $254.7$45.4 million in non-recourse mortgage financing on an office property with a weighted-average fixed interest rate of 5.2% and a weighted-average term to maturity of 13.2 years;
through a joint venture, in which we have a 25% interest, obtained $50.0 million in non-recourse mortgage financing with a weighted-average fixed interest rate of 4.3%5.1% and a weighted-average term to maturity of 19.1five years; and
repaid $177.0 million, net underamended our revolving line of credit.
Capital. With respect to capital activities, we:
repurchased an aggregate 1,184,113 common shares at an average gross price of $7.56 per share undercredit facility, together with the share repurchase program;related term loans, increasing the borrowing capacity by $200.0 million; and
issued 976,1091,593,603 common shares at an average gross price of $10.75$10.89 per share under our At-The-Market, or ATM, offering program which was announced in 2013 and increased by $25.0for total gross proceeds of $17.4 million in the aggregate in 2016.
See “Management's Discussion and Analysis of Financial Condition and Results of Operations” in Part I, Item 7 of this Annual Report for more detail regarding the Company's and LCIF's 20162017 transaction activity.
Subsequent to December 31, 2016, we:2017, we sold two office properties for $21.0 million.
disposed of six properties to unrelated third parties for aggregate gross proceeds of $88.9 million;
acquired two industrial properties for an aggregate purchase price of $50.6 million;
issued 1,593,603 common shares at an average gross price of $10.89 per share under the ATM offering program;
completed the Lake Jackson, Texas build-to-suit project;
sold our tenant-in-common interest in the Oklahoma City, Oklahoma property for $6.3 million and collected $8.5 million in full satisfaction of the loan receivable owed from the other tenant-in-common; and
sold the Kennewick, Washington loan receivable for a gross sale price of $80.4 million.



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Other
Employees. As of December 31, 20162017, we had 59 full-time employees. Lexington Realty Trust is a master employer and employee costs are allocated to subsidiaries as applicable.
Industry Segments. We primarily operate in one industry segment, primarily single-tenant real estate assets.
Web Site. Our Internet address is www.lxp.com. We make available, free of charge, on or through the Investors section of our web site or by contacting our Investor Relations Department, our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act, as well as proxy statements, as soon as reasonably practicable after we electronically file such material with, or furnish it to, the Securities and Exchange Commission, or SEC. Also posted on our web site, and available in print upon request of any shareholder to our Investor Relations Department, are our declaration of trust and by-laws, charters for the Audit Committee, Compensation Committee and Nominating and Corporate Governance Committee of our Board of Trustees, our Corporate Governance Guidelines, and our Code of Business Conduct and Ethics governing our trustees, officers and employees (which contains our whistle blower procedures). 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 or any of our other filings with or furnishings withdocuments furnished to the SEC.
Our Investor Relations Department can be contacted at Lexington Realty Trust, One Penn Plaza, Suite 4015, New York, New York 10119-4015, Attn: Investor Relations, by telephone: (212) 692-7200, or by e-mail: ir@lxp.com.

Principal Executive Offices. Our principal executive offices are located at One Penn Plaza, Suite 4015, New York, New York 10119-4015; our telephone number is (212) 692-7200.

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 2016.2017.

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Item 1A. Risk Factors
Set forth below are material factors that may adversely affect our business and operations.
Risks Related to Our Business
We are subject to risks involving our leases and tenants.
We focus our acquisition activities on real estate properties that are net leased to single tenants, and certain of our tenants and/or their guarantors constitute a significant percentage of our base rental revenues. Therefore, the financial failure of, or other default by, a single tenant under its lease is likely to cause a significant or complete reduction in the operating cash flow generated by the property leased to that tenant and might decrease the value of that property and result in a non-cash impairment charge. If the tenant represents a significant portion of our base rental revenues, the impact on our financial position may be material. Further, in any such event, our property owner subsidiary will be responsible for 100% of the operating costs following a vacancy at a single-tenant building. Upon the expiration or other termination of leases that are currently in place, the property owner subsidiary may not be able to re-lease the vacant property at all or at a comparable lease rate without incurring additional expenditures in connection with the re-leasing, which may be material in amount.
Under current bankruptcy law, a tenant can generally assume or reject a rejected lease within a certain number of days of filing its bankruptcy petition. If a tenant rejects the lease, a landlord's damages, subject to availability of funds from the bankruptcy estate, are generally limited to the greater of (1) one year's rent and (2) the rent for 15% of the remaining term of the lease, not to exceed three years.
Certain of our leases may permit tenants to terminate the leases to which they are a party.
Certain of our leases contain tenant termination options, including economic discontinuance options, that permit the tenants to terminate their leases. While these termination options generally require a termination payment by the tenants, in most cases, the termination payments are less than the total remaining expected rental revenue. The termination of a lease by a tenant may impair the value of the property. In addition, we will be responsible for 100% of the operating costs following the termination by any such tenant and subsequent vacating of the property, and we will incur re-leasing costs. 
Our ability to fully control the maintenance of our net-leased properties may be limited.
The tenants of our net-leased properties are responsible for maintenance and other day-to-day management of the properties. If a property is not adequately maintained in accordance with the terms of the applicable lease, we may incur expenses for deferred maintenance or other liabilities once the property is no longer leased. We generally visit our properties on an annual basis, but these visits are not comprehensive inspections and deferred maintenance items may go unnoticed. While our leases generally provide for recourse against the tenant in these instances, a bankrupt or financially-troubled tenant may be more likely to defer maintenance, and it may be more difficult to enforce remedies against such a tenant.
Our tenants' ability to successfully operate their businessbusinesses may affect their ability to pay rent and maintain their leased property.
To the extent that tenants are unable to operate the property on a financially successful basis, their ability to pay rent to us may be adversely affected. Although we endeavor to monitor, on an ongoing basis, compliance by tenants with their lease obligations and other factors thatwhich could affect the financial performance of our properties, such monitoring may not always ascertain or forestall deterioration, either in the condition or value of a property or in the financial circumstances of a tenant.
You should not rely on the credit ratings of our tenants.
Some of our tenants, guarantors and/or their parent or sponsor entities are rated by certain rating agencies. In certain instances, we may disclose the credit ratings of our tenants or their parent or sponsor entities even though those parent or sponsor entities are not liable for the obligations of the tenant or guarantor under the lease. Any such credit ratings are subject to ongoing evaluation by these credit rating agencies and we cannot assure you that any such ratings will not be changed or withdrawn by these rating agencies in the future if, in their judgment, circumstances warrant. If these rating agencies assign a lower-than-expected rating or reduce or withdraw, or indicate that they may reduce or withdraw the credit rating of a tenant, guarantor or its parent entity, the value of our investment in any properties leased by such tenant could significantly decline.

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Our assets may be subject to impairment charges.
We periodically evaluate our real estate investments and other assets for impairment indicators. The judgment regarding the existence of impairment indicators is based on GAAP, which include a variety of factors such as market conditions, the status of significant leases, the financial condition of major tenants and other factors that could affect the cash flow or value of an investment. Based on this evaluation, we may from time to time take non-cash impairment charges, which could affect the implementation of our current business strategy. These impairments could have a material adverse effect on our financial condition and results of operations.
Furthermore, we may take an impairment charge on a property subject to a non-recourse secured mortgage which reduces the book value of such property to its fair value, which may be below the balance of the mortgage on our balance sheet. Upon foreclosure or other disposition, we may be required to recognize a gain on debt satisfaction equal to the difference between the fair value of the property and the balance of the mortgage.
IfOur real estate development activities are subject to additional risks.
In 2017, we entered into a sale-leaseback transactionjoint venture that acquired a developable parcel of land.  While the joint venture only intends to develop pre-leased properties, development activities generally require various government and other approvals, which the joint venture may not receive. In addition, the joint venture is re-characterized insubject to the following risks associated with development activities: 
Unsuccessful development opportunities could cause us to incur direct expenses;
Construction costs of a project may exceed original estimates, possibly making the project less profitable than originally estimated or unprofitable;
Time required to complete the construction of a project or to lease up the completed project may be greater than originally anticipated, thereby adversely affecting our cash flow and liquidity;
Occupancy rates and rents of a completed project may not be sufficient to make the project profitable; and
Favorable financing sources to fund the joint venture's development activities may not be available.
A tenant’s bankruptcy proceeding may result in the re-characterization of related sale-leaseback transactions or in the restructuring of the tenant's payment obligations to us, either of which could adversely affect our financial condition could be adversely affected.condition.
We have entered and may continue to enter into sale-leaseback transactions, whereby we purchase a property and then lease the same property back to the person from whom we purchased it. In the event of the bankruptcy of a tenant, a transaction structured as a sale-leaseback may be re-characterized as either a financing or a joint venture, eitherventure. As a result of which outcomesthe foregoing, the re-characterization of a sale-leaseback transaction could adversely affect our financial condition, cash flow and the amount available for distributions to our shareholders.
If the sale-leaseback were re-characterized as a financing, we might not be considered the owner of the property, and as a result would have the status of a creditor in relation to the tenant. In that event, we would no longer have the right to sell or encumber our ownership interest in the property. Instead, we would have a claim against the tenant for the amounts owed under the lease, with the claim arguably secured by the property. The tenant/debtor might have the ability to propose a plan restructuring the term, interest rate and amortization schedule of its outstanding balance. If confirmed by the bankruptcy court, we could be bound by the new terms and prevented from foreclosing our lien on the property. If the sale-leaseback were re-characterized as a joint venture, our tenant and we could be treated as co-venturers with regard to the property. As a result, we could be held liable, under some circumstances, for debts incurred by the tenant relating to the property.
Certain
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A significant portion of our leases mayare long-term and do not result inhave fair market lease rates over time,rental rate adjustments, which could negatively impact our income and reduce the amount of funds available to make distributions to shareholders.
A significant portion of our rental income comes from long-term net leases, which generally provide the tenant greater discretion in using the leased property than ordinary property leases, such as the right to freely sublease the property, to make alterations in the leased premises and to terminate the lease prior to its expiration under specified circumstances. Furthermore, net leases typically have longer lease terms and, thus, there is an increased risk that contractual rental increases in future years will fail to result in fair market rental rates during those years. If we do not accurately judge the potential for increases in market rental rates when negotiating these long-term leases or if we are unable to obtain any increases in rental rates over the terms of our leases, significant increases in future property operating costs, to the extent not covered under the net leases could result in us receiving less than fair value from these leases. As a result, our income and distributions to our shareholders could be lower than they would otherwise be if we did not engage in long-term net leases.
In addition, increases in interest rates may also negatively impact the value of our properties that are subject to long-term leases. While a significant number of our net leases provide for annual escalations in the rental rate, the increase in interest rates may outpace the annual escalations.
Our interests in loans receivable, if any, are subject to delinquency, foreclosure and loss.
Our interests in loans receivable, if any, are generally non-recourse and secured by real estate properties owned by borrowers that were unable to obtain similar financing from a commercial bank. These loans are subject to many risks including delinquency. The ability of a borrower to repay a loan secured by a real estate property is typically and primarily dependent 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 we would not recover the full value of the loan as the collateral may be non-performing.

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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 properties in which we have an interest, our property owner subsidiaries may not be able to re-let all or a portion of such space, or the terms of re-letting (including the cost of concessions to tenants and leasing commissions) may be less favorable than current lease terms or market rates. If our property owner subsidiaries are unable to promptly re-let all or a substantial portion of the space located in their respective properties, or if the rental rates a property owner subsidiary receives upon re-letting are significantly lower than current rates, our earnings and ability to satisfy our debt service obligations and to make expected distributions to our shareholders may be adversely affected due to the resulting reduction in rent receipts and increase in property operating costs. There can be no assurance that our property owner subsidiaries will be able to retain tenants in any of our properties upon the expiration of leases.
We may not be able to generate sufficient cash flow to meet our debt service obligations and to pay distributions on our common and preferred shares.shares, and LCIF may not meet its debt service or distribution obligations. 
Our ability to make payments on and to refinance our indebtedness, to make distributions on our common and preferred shares and to fund our operations, working capital and capital expenditures, and LCIF's ability to fulfill its similar obligations depends on our ability to generate cash in the future. To a certain extent, our cash flow is subject to general economic, industry, financial, competitive, operating, legislative, regulatory and other factors, many of which are beyond our control. We cannot assure you that our business will generate sufficient cash flow from operations or that future sources of cash will be available to us in an amount sufficient to enable us to pay amounts due on our indebtedness or to make distributions on our common and preferred shares and fund our other liquidity needs.needs or enable LCIF to fulfill its similar obligations. Additionally, if we incur additional indebtedness in connection with future acquisitions or development projects or for any other purpose, our debt service obligations could increase.
We may need to refinance all or a portion of our indebtedness on or before maturity. Our ability to refinance our indebtedness or obtain additional financing will depend on, among other things:
things, our financial condition and market conditions at the time;time and
restrictions in the agreements governing our indebtedness.
As a result, we may not be able to refinance any of our indebtedness on commercially reasonable terms, or at all. If we do not generate sufficient cash flow from operations, and additional borrowings or refinancings or proceeds of asset sales or other sources of cash are not available to us, we may not have sufficient cash to enable us to meet all of our obligations. Accordingly, if we cannot service our indebtedness, we may have to take actions such as seeking additional equity, or delaying strategic acquisitions and alliances or capital expenditures, any of which could have a material adverse effect on our operations. We cannot assure you that we will be able to effect any of these actions on commercially reasonable terms, or at all.

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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. In the context of our business plan, “development” generally means an expansion or renovation of an existing property or the financing and/or acquisition of a newly constructed build-to-suit property. For newly constructed build-to-suit properties, we may (1) provide a developer with either a combination of financing for construction of a build-to-suit property or a commitment to acquire a property upon completion of construction of a build-to-suit property and commencement of rent from the tenant, or (2) acquire a property subject to a lease and engage a developer to complete construction of a build-to-suit property as required by the lease.lease, or (3) partner with a developer to acquire an undeveloped parcel of land and pursue build-to-suit opportunities.
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 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. Acquisitions of additional properties entail the risk that investments will fail to perform in accordance with expectations, including operating and leasing expectations.
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 to satisfy our debt service obligations and distributions to shareholders may be adversely affected.

Our acquisition and disposition activity may lead to dilution.
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revenue from industrial assets to office assets.  We believe this strategy will lessen capital expenditures over time and mitigate revenue reductions on renewals and re-tenanting.   To implement this strategy, we have been selling certain office assets, which generally have higher capitalization rates, and buying industrial properties, which, in the current competitive market, generally have lower capitalization rates.  This strategy impacts growth in the short-term period. There can be no assurance that the implementation of our strategy will lead to improved results or that we will be able to execute our strategy as contemplated or on terms acceptable to us.
From time to time, we announce potential lease, financing, disposition or investment commitments or transactions, which may not be consummated on the terms we announce or at all.
We publicly communicate potential lease, financing, disposition and investment commitments or transactions in our public filings and furnishingsdocuments filed with or furnished to the SEC and press releases and on conference calls with analysts and investors.  We can give no assurances that any of these commitments or transactions will be consummated to our expectations or at all. 
Acquisition activities may not produce expected results and may be affected by outside factors.
Acquisitions of commercial properties entail certain risks, such as (1) underwriting assumptions, including occupancy, rental rates and expenses, may differ from estimates, (2) the properties may become subject to environmental liabilities that we were unaware of at the time we acquired the property despite any environmental testing, (3) we may have difficulty obtaining financing on acceptable terms or paying the operating expenses and debt service associated with acquired properties prior to sufficient occupancy and (4) projected exit strategies may not come to fruition due to a variety of factors such as market conditions and/or tenant credit conditions at the time of dispositions.
We may not be successful in identifying suitable real estate properties or other assets that meet our acquisition criteria. We may also fail to complete acquisitions or investments on satisfactory terms. Failure to identify or complete acquisitions could slow our growth, which could, in turn, have a material adverse effect on our financial condition and results of operations.

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We face certain risks associated with our build-to-suit activities.
From time to time, we engage in, or provide capital to developers who are engaged in, build-to-suit activities. We face uncertainties associated with a developer's performance and timely completion of a project, including the performance or timely completion by contractors and subcontractors. A developer's performance may be affected or delayed by their own actions or conditions beyond the developer's control. If a developer, contractor or subcontractor fails to perform, we may resort to legal action to compel performance, remove the developer or rescind the purchase or construction contract. Legal action may cause further delays and our costs may not be reimbursed.
We may incur additional risks when we make periodic progress payments or other advances to developers before completion of construction. These and other factors can result in increased costs of a project or loss of our investment. We also rely on third-party construction managers and/or engineers to monitor the construction activities.
Upon completion of construction, we are generally responsible to the tenant for any warranty claims. While we generally have a warranty from the developer or general contractor that was responsible for construction backstopping our warranty obligations to the tenant, we are subject to the risk of enforcement of such developer or general contractor warranty.
We rely on rental income and expense projections and estimates of the fair market value of a property upon completion of construction when agreeing upon a purchase price at the time we acquire the property, which may be up to two years prior to the estimated date of completion. If our projections are inaccurate or markets change, we may pay more than the fair value of a property.
In addition, the rental rates for a new build-to-suit project are generally derived from the cost to construct the project and may not equal a fair market lease rate for older existing properties in the same market.
Our multi-tenant properties expose us to additional risks.
Our multi-tenant properties involve risks not typically encountered in real estate properties which are operated by or for a single tenant. The ownership of multi-tenant properties could expose us to the risk that a sufficient number of suitable tenants may not be found to enable the property to operate profitably and provide a return to us. This risk may be compounded by the failure of existing tenants to satisfy their obligations due to various factors. These risks, in turn, could cause a material adverse impact to our results of operations and business.
Multi-tenant properties are also subject to tenant turnover and fluctuation in occupancy rates, which could affect our operating results. Furthermore, multi-tenant properties expose us to the risk of potential "CAM slippage," which may occur when the actual cost of taxes, insurance and maintenance at the property exceeds the operating expenses paid by tenants and/or the amounts budgeted.

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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, our property owner subsidiaries may be liable for the costs of removal or remediation of certain hazardous or toxic substances at, on, in or under the properties in which we have an interest 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 our property owner subsidiaries 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 be significant and could exceed the value of the property and/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 a property owner subsidiary's 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 satisfy our debt service obligations and to make distributions.
A property can also be adversely affected either through physical contamination or by virtue of an adverse effect upon value attributable to the migration of hazardous or toxic substances, or other contaminants that have or may have emanated from other properties. Although the tenants of the properties in which we have an interest 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 the tenants of the properties in which we have an interest to satisfy any obligations with respect to the property leased to that tenant, our property owner subsidiary 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.

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From time to time, in connection with the conduct of our business, our property owner subsidiaries authorize the preparation of Phase I environmental reports and, when recommended, Phase II environmental reports, with respect to their properties. There can be no assurance that these environmental reports will reveal all environmental conditions at the properties in which we have an interest 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 the properties in which we have an interest.
Changes in laws increasing the potential liability for environmental conditions existing on properties or increasing the restrictions on discharges or other conditions may result in significant unanticipated expenditures or may otherwise adversely affect the operations of the tenants of the properties in which we have an interest, which could adversely affect our financial condition or results of operations.
From time to time we are involved in legal proceedings arising in the ordinary course of our business.
Legal proceedings arising in the ordinary course of our business require time and effort.  The outcomes of legal proceedings are subject to significant uncertainty. In the event that we are unsuccessful defending or prosecuting these proceedings, as applicable, we may incur a judgment or fail to realize an award of damages that could have an adverse effect on our financial condition.
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 certain of the properties in which we have an interest, 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, certain of our leases require the tenant to maintain all insurance on the property, and the failure of the tenant to maintain the proper insurance could adversely impact our investment in a property in the event of a loss. Furthermore, 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 could adversely affect our financial condition and results of operations.

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Future terrorist attacks, military conflicts and unrest in various parts of the Middle Eastworld could have a material adverse effect on general economic conditions, consumer confidence and market liquidity.
The types of terroristTerrorist attacks, since 2001, ongoing and future military conflicts and the continued unrest in various parts of the Middle East and other regionsworld may affect commodity prices and interest rates, among other things. An increase in interest rates may increase our costs of borrowing, leading to a reduction in our earnings. Instability in the price of oil will also cause fluctuations in our operating costs, which may not be reimbursed by our tenants. Also, terrorist acts could result in significant damages to, or loss of, our properties or the value thereof.
We and the tenants of the properties in which we have an interest 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 remainingour property owner subsidiary remains obligated for any mortgage indebtedness or other financial obligations related to the property. Any loss of these types could adversely affect our financial condition.

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Cybersecurity risks and cyber incidents may adversely affect our business by causing a disruption to our operations, a compromise or corruption of our confidential information, misappropriatingmisappropriation of assets and/or damage to our business relationships, all of which could negatively impact our financial results.
A cyber incident is considered to be any adverse event that threatens the confidentiality, integrity or availability of our information resources. These incidents may be an intentional attack or an unintentional event and could involve gaining unauthorized access to our information systems for purposes of misappropriating assets, stealing confidential information, corrupting data or causing operational disruption. The result of these incidents may include disrupted operations, misstated or unreliable financial data, liability for stolen assets or information, increased cybersecurity protection and insurance costs, litigation and damage to our tenant, investor and/or vendor relationships. As our reliance on technology has increased, so have the risks posed to our information systems, both internal and those we have outsourced. Any processes, procedures and internal controls that we implement, as well as our increased awareness of the nature and extent of a risk of a cyber incident, do not guarantee that our financial results, operations, business relationships or confidential information will not be negatively impacted by such an incident.
Networks and information technology throughout the world and in companies of all sizes are threatened by cybersecurity risks on a regular basis.  We must continuously monitor and develop our networks and information technology to prevent, detect, address and mitigate the risk of unauthorized access, misuse, computer viruses and other events that could have a security impact.  Insider or employee cyber and security threats are increasingly a concern for all companies, including ours. In addition, social engineering and phishing are a particular concern for companies with employees.  We are continuously working to install new, and to upgrade our existing, network and information technology systems and to provide employee awareness training around phishing, malware and other cyber risks to ensure that we are protected, to the greatest extent possible, against cyber risks and security breaches. However, such upgrades, new technology and training may not be sufficient to protect us from all risks. 
As a smaller company, we use third-party vendors to assist us with our network and information technology requirements.  While we carefully select these third-party vendors, we cannot control their actions.  Any problems caused by these third parties, including those resulting from breakdowns or other disruptions in communication services provided by a vendor, failure of a vendor to handle current or higher volumes, cyber attacks and security breaches at a vendor could adversely affect our operations. 
Competition may adversely affect our ability to purchase properties.
There are numerous commercial developers, real estate companies, such as other REITs, financial institutions, such as banks and insurance companies, and other investors, such as pension funds, private companies and individuals, with greater financial and other resources than we have that compete with us in seeking investments and tenants. Due to our focus on single-tenant properties located throughout the United States, and because some competitors are often locally and/or regionally focused, we do not always encounter the same competitors in each market. Our competitors include other REITs, financial institutions, insurance companies, pension funds, private companies and individuals. This competition may result in a higher cost for properties and lower returns and impact our ability to grow.
Our failure to maintain effective internal control over financial reporting 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 control over financial reporting. Our management haspreviously identified and disclosed a material weakness in the effectiveness of our internal control over financial reporting as of December 31, 2016. See Item 9A “Controls and Procedures” for additional information about, andWe have determined that our plan to remediate, this weakness. Our remediation plan may not fully eliminateeliminated this weakness, andbut we cannot assure you that our controls will prevent this or other weaknesses from arising in the future. If we fail to remediate the existing weakness or to maintain the adequacy of our internal control over financial reporting in the future, as such standards may be modified, supplemented or amended from time to time, we will be required to disclose such failure, and our financial reporting may not be relied on by investors. Moreover, effective internal control particularly related to revenue recognition, is necessary for us to produce reliable financial reports and to maintain our qualification as a REIT and is important in 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 debt and equity securities could drop significantly.

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We may have limited control over our joint venture investments.
Our joint venture investments 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 expectations, its previous instructions or our instructions, requests, policies or objectives, including our policy with respect to maintaining our qualification as a REIT. Other risks of joint venture investments include impasses on decisions, such as a sale, because neither we nor our partner has full control over the joint venture. Also, there is no limitation under our organizational documents as to the amount of funds that may be invested in joint ventures.

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Our ability to change our portfolio is limited because real estate investments are illiquid.
Investments in real estate are relatively illiquid and, therefore, our ability to change our portfolio promptly in response to changed conditions is limited. Our Board of Trustees may establish investment criteria or limitations as it deems appropriate, but currently does not limit the number or type of properties in which we may seek to invest or on the concentration of investments in any one geographic region.
Our reported financial results may be adversely affected by changes in accounting principles applicable to us and the tenants of properties in which we have an interest.
GAAP is subject to interpretation by various bodies formed to promulgate and interpret appropriate accounting principles such as the Financial Accounting Standards Board. A change in these principles or interpretations could have a significant effect on our reported financial results, could affect the reporting of transactions completed before the announcement of a change and could affect the business practices and decisions of the tenants of properties in which we have an interest.
We have engaged and may engage in hedging transactions that may limit gains or result in losses.
We have used derivatives to hedge certain of our variable-rate liabilities. As of December 31, 2016,2017, we had aggregate interest rate swap agreements on $505.0 million of borrowings. The counterparties of these arrangements are major financial institutions; however, we are exposed to credit risk in the event of non-performance or default by the counterparties. This has certainFurther, additional risks, including losses on a hedge position, which may reduce the return on our investments. Such losses may exceed the amount invested in such instruments. In addition, counterparties to a hedging arrangement could default on their obligations. We may also have to pay certain costs, such as transaction fees or breakage costs, related to hedging transactions.
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 and invest in core assets, our Board of Trustees will determine our investment and financing policies, growth strategy and our 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. Changes made by our Board of Trustees may not serve the interests of debt or equity security holders and could adversely affect our financial condition or results of operations, including our ability to satisfy our debt service obligations, distribute cash to shareholders and qualify as a REIT. Accordingly, shareholders' control over changes in our strategies and policies is limited to the election of trustees.
We are dependent upon our key personnel.
We are dependent upon key personnel whose continued service is not guaranteed. We are dependent on certain of our executive officers for business direction. We haveThe employment agreements which expire in January 2018, with each of T. Wilson Eglin, our Chief Executive Officer and President, E. Robert Roskind, our Chairman, Richard J. Rouse, our Vice Chairman and Chief Investment Officer, and Patrick Carroll, our Executive Vice President, Chief Financial Officer and Treasurer. However, an employment agreement does not itself prevent an employee from resigning.Treasurer, expired in January 2018.
As part of our succession planning, we entered into retirement agreements with Mr. Rouse and Mr. Roskind which provide for respective retirement dates of January 14, 2018 and January 15, 2019. Messrs. Eglin and Carroll will continue in their current positions with us subject to certain severance payout rights upon certain termination events.
Our inability to retain the services of any of our key personnel, or ouran unplanned loss of any of their services or our inability to replace them upon termination as needed, could adversely impact our operations. We do not have key man life insurance coverage on our executive officers.

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There may be conflicts of interest between E. Robert Roskind and us.
E. Robert Roskind, our Chairman, beneficially owns a significant number of OP units, and as a result, may face different and more adverse tax consequences than our other shareholders will if we sell our interests in certain properties or reduce mortgage indebtedness on certain properties. Our Chairman may, therefore, have different objectives than us and our debt and equity security holders regarding the appropriate pricing and timing of any sale of such properties or reduction of mortgage debt. In addition, an affiliate of Mr. Roskind arranges real estate asset financings using funds raised from immigrant investors in accordance with the fifth preference employment-based immigration program administered by the U.S. Citizenship and Immigration Services. We are exploring two financings withDuring 2017, LCIF obtained a mezzanine loan from Mr. Roskind's affiliate on a non-binding basis.affiliate. In the event of an appearance of a conflict of interest and in accordance with our policy regarding related party transactions, Mr. Roskind is required to recuse himself from any decision making or seek a waiver of our Code of Business Conduct and Ethics, which will be reviewed by the non-conflicted members of our Board of Trustees or the Audit Committee of the Board of Trustees.
In addition, Mr. Roskind's employmentretirement agreement with us permits Mr. Roskind to spend approximately one third of his business time on the affairs of The LCP Group L.P. and its affiliates. While Mr. Roskind is required to prioritizeaffiliates during the remaining term of his business time to address our needs ahead of The LCP Group L.P.,employment with us. Mr. Roskind and The LCP Group L.P. may engage in a wide variety of activities in the real estate business which may result in actual or potential conflicts of interest with respect to matters affecting us.
Costs of complying with changes in governmental laws and regulations may adversely affect our results of operations.
We cannot predict what laws or regulations may be enacted, repealed or modified in the future, how future laws or regulations will be administered or interpreted, or how future laws or regulations will affect our properties. Compliance with new or modified laws or regulations, or stricter interpretation of existing laws, may require us or our tenants to incur significant expenditures, impose significant liability, restrict or prohibit business activities and could cause a material adverse effect on our results of operations.
We disclose Funds From Operations available to common shareholders and unitholders (“FFO”), Adjusted Company Funds from Operations available to all equityholders and unitholders (“Adjusted Company FFO”), Net Operating Income (“NOI”) and other non-GAAP financial measures in documents filed and/or furnished with the SEC; however, neither FFO, Adjusted Company FFO, NOI nor the other non-GAAP financial measures we disclose are equivalent to our net income or loss as determined under GAAP or other applicable comparable GAAP measures, and you should consider GAAP measures to be more relevant to our operating performance.
We use and disclose to investors FFO, Adjusted Company FFO, NOI and other non-GAAP financial measures. FFO, Adjusted Company FFO, NOI and the other non-GAAP financial measures are not equivalent to our net income or loss as determined in accordance with GAAP, and investors should consider these GAAP measures to be more relevant to evaluating our operating performance. FFO, Adjusted Company FFO and NOI, and GAAP net income (loss) differ because FFO, Adjusted Company FFO and NOI exclude many items that are factored into GAAP net income.income or loss.
Because of the differences between FFO, Adjusted Company FFO, NOI and GAAP net income or loss, FFO, Adjusted Company FFO and NOI may not be accurate indicators of our operating performance, especially during periods in which we are acquiring and selling properties. In addition, FFO, Adjusted Company FFO and NOI are not necessarily indicative of cash flow available to fund cash needs and investors should not consider FFO, Adjusted Company FFO or NOI as alternatives to cash flows from operations, as an indication of our liquidity or as indicative of funds available to fund our cash needs, including our ability to make distributions to our shareholders.
Neither the SEC nor any other regulatory body has passed judgment on the acceptability of the adjustments that we use to calculate FFO, Adjusted Company FFO and NOI. Also, because not all companies calculate FFO, Adjusted Company FFO and NOI the same way, comparisons with other companies measures with similar titles may not be meaningful.

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Risks Related to Our Indebtedness
Our substantial indebtedness could adversely affect our financial condition and our ability to fulfill our obligations under the documents governing our unsecured indebtedness and otherwise adversely impact our business and growth prospects.
We have a substantial amount of debt. We are more leveraged than certain of our competitors. We have incurred, and may continue to incur, direct and indirect indebtedness in furtherance of our activities. Neither our declaration of trust nor any policy statement formerly adopted by our Board of Trustees limits the total amount of indebtedness that we may incur, and accordingly, we could become even more highly leveraged. As of December 31, 2016,2017, our total consolidated indebtedness was approximately $1.9$2.1 billion and we had approximately $395.4$345.0 million available for borrowing under our principal credit agreement, subject to covenant compliance.
Our substantial indebtedness could adversely affect our financial condition and results of operations and have important consequences to us and our debt and equity security holders. For example, it could:
make it more difficult for us to satisfy our indebtedness and debt service obligations and adversely affect our ability to pay distributions;
increase our vulnerability to adverse economic and industry conditions;
require us to dedicate a substantial portion of our cash flow from operations to the payment of interest on and principal of our indebtedness, thereby reducing the availability of cash to fund working capital, capital expenditures and other general corporate purposes;
limit our ability to borrow money or sell stock to fund our development projects, working capital, capital expenditures, general corporate purposes or acquisitions;
restrict us from making strategic acquisitions or exploiting business opportunities;
place us at a disadvantage compared to competitors that have less debt; and
limit our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate.
In addition, the agreements that govern our current indebtedness contain, and the agreements that may govern any future indebtedness that we may incur may contain, financial and other restrictive covenants, that willwhich may limit our ability to engage in activities that may be in our long-term best interests. Our failure to comply with those covenants could result in an event of default that, if not cured or waived, could result in the acceleration of our debt.
Market interest rates could have an adverse effect on our borrowing costs, profitability and the value of our fixed ratefixed-rate debt securities.
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 earnings. As of December 31, 2016,2017, we had no outstanding consolidated variable-rate indebtedness that was not subject to an interest rate swap.  We have a $250.0$300.0 million unsecured term loan which matures August 2020 and a $255.0$300.0 million unsecured term loan which matures January 2021 that are LIBOR indexed. Theindexed; however, $250.0 million and $255.0 million of the unsecured term loans, respectively, are subject to interest rate swap agreements through February 2018 and January 2019, respectively. In addition, we have $129.1 million of debt that matures in April 2037 and $160.0 million outstanding under our revolving credit facility which has a fixed 6.804% interest rate through April 2017 and thereafter will have a variable interest rate equal to 90 daymatures August 2019, which are both LIBOR plus 1.70%.indexed. 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 earnings. In addition, our interest costs on our fixed-rate indebtedness may increase if we are required to refinance our fixed-rate indebtedness upon maturity at higher interest rates. Also, fixed rate debt securities generally decline in value as market rates rise because the premium, if any, over market interest rates will decline.

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Potential disruptions in the financial markets could affect our ability to obtain debt financing on reasonable terms and have other adverse effects on us.
Historically, theThe United States credit markets have periodically experienced significant dislocations and liquidity disruptions which have caused the spreads on prospective debt financings to widen considerably. These circumstances may materially impact liquidity in the debt markets, making financing terms for borrowers less attractive, and in certain cases may result in the unavailability of certain types of debt financing. Uncertainty in the credit markets may negatively impact our ability to access additional debt financing on 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 capital or difficulties in obtaining capital. These events in the credit markets may have 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, our tenants or the economy in general.
Covenants in certain of the agreements governing our debt could adversely affect our financial condition, investment activities and/or operating activities.
Our unsecured revolving credit facility, unsecured term loans and indentures governing our 4.40% and 4.25% Senior Notes contain certain cross-default and cross-acceleration provisions as well as customary restrictions, requirements and other limitations on our ability to incur indebtedness and consummate mergers, consolidations or sales of all or substantially all of our assets. Our ability to borrow under our unsecured revolving credit facility is also subject to compliance with certain other covenants. In addition, failure to comply with our covenants could cause a default under the applicable debt instrument and we may then be required to repay such debt with capital from other sources. Under those circumstances other sources of capital may not be available to us or be available only on unattractive terms. Additionally, our ability to satisfy current or prospective lenders' insurance requirements may be adversely affected if lenders generally insist upon greater insurance coverage against acts of terrorism than is available to us in the marketplace or on commercially reasonable terms.
We rely on debt financing, including borrowings under our unsecured revolving credit facility, unsecured term loan,loans, debt securities, and debt secured by individual properties, for working capital, including to finance our investment activities. If we are unable to obtain financing from these or other sources, or to refinance existing indebtedness upon maturity, our financial condition and results of operations could be adversely affected.
The documents governing our non-recourse indebtedness contain restrictions on the operations of our property owner subsidiaries and their properties. Certain activities, like leasing, may be subject to the consent of the applicable lender. In addition, certain lenders engage third-party loan servicers that may not be as responsive as we would be.be or as the leasing market requires.
A downgrade in our credit ratings could have a material adverse effect on our business and financial condition.
The credit ratings assigned to us and our debt could change based upon, among other things, our results of operations and financial condition or the real estate industry generally. These ratings are subject to ongoing evaluation by credit rating agencies, and we cannot assure you that any rating will not be changed or withdrawn by a rating agency in the future if, in itsthe applicable rating agency's judgment, circumstances warrant. Moreover, these credit ratings do not apply to our common and preferred shares and are not recommendations to buy, sell or hold any other securities. Any downgrade of us or our debt could have a material adverse effect on the market price of our debt securities and our common and preferred shares. If any of the credit rating agenciesagency that havehas rated us or our debt downgrades or lowers its credit rating, or if any credit rating agency indicates that it has placed any such rating on a so-called “watch list” for a possible downgrading or lowering or otherwise indicates that its outlook for that rating is negative, it could also have a material adverse effect on our costs and availability of capital, which could in turn have a material adverse effect on our financial condition, results of operations, cash flows and our ability to satisfy our debt service obligations and to make dividends and distributions on our common shares and preferred shares. 

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We face risks associated with refinancings.
A significant number of the properties in which we have an interest are subject to mortgage or other secured notes with balloon payments due at maturity. In addition, our corporate level borrowings require interest only payments with all principal due at maturity.
As of December 31, 2016,2017, the consolidated scheduled balloon payments for the next five calendar years are as follows ($ in millions):
Year 
Property-Specific
Balloon Payments(1)
 
Corporate Recourse Balloon Payments(2)
 
Property-Specific
Balloon Payments(1)
 
Corporate Recourse Balloon Payments(2)
2017 $62.7
 $
2018 $6.6
 $
 $6.6
 $
2019 $83.8
 $
 $83.8
 $160.0
2020 $32.0
 $250.0
 $32.0
 $300.0
2021 $17.0
 $255.0
 $17.0
 $300.0
2022 $8.0
 $
(1)    Inclusive of amounts owed by the Partnership of $31.8 million in 2019, $18.4 million in 2020, and $6.6 million in 2021.2021 and $8.0 million in 2022.
(2)    The Partnership is a co-borrower.
Our ability to make the scheduled balloon payments on any corporate recourse note will depend on our access to the capital markets, including our ability to refinance the maturing note. Our ability to make the scheduled balloon payment on any non-recourse mortgage note will depend upon (1) in the event we determine to contribute capital, our cash balances and the amount available under our unsecured credit facility, and (2) the property owner subsidiary's ability either to refinance the related mortgage debt or to sell the related property. If the property owner subsidiary is unable to refinance or sell the related property, the property may be conveyed to the lender through foreclosure or other means or the property owner subsidiary may declare bankruptcy.
We face risks associated with returning properties to lenders.
A number of the properties in which we have an interest are subject to non-recourse mortgages, which generally provide that a lender's only recourse upon an event of default is to foreclose on the property. In the event these properties are conveyed via foreclosure to the lenders thereof, we would lose all of our interest in these properties. The loss of a significant number of properties to foreclosure or through bankruptcy of a property owner subsidiary could adversely affect our financial condition and results of operations, relationships with lenders and ability to obtain additional financing in the future.
In addition, a lender may attempt to trigger a carve out to the non-recourse nature of a mortgage loan. To the extent a lender is successful, the ability of our property owner subsidiary to return the property to the lender may be inhibited and/or we may be liable for all or a portion of such loan.
Certain of our indebtedness is subject to cross-default and cross-acceleration provisions.
Substantially all of our corporate level borrowings and, in the future, certain of our secured indebtedness may, contain cross-default and/or cross-acceleration provisions, which may be triggered if we default on certain indebtedness in excess of certain thresholds. In the event of such a default, the resulting cross defaults and/or cross-accelerations may adversely impact our financial condition.

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Risks Related to Our Outstanding Debt Securities
The effective subordination of our unsecured indebtedness and any related guaranty may reduce amounts available for payment on our unsecured indebtedness and any related guaranty.
The holders of our secured debt may foreclose on the assets securing such debt, reducing the cash flow from the foreclosed property available for payment of unsecured debt and any related guaranty. The holders of any of our secured debt also would have priority over unsecured creditors in the event of a bankruptcy, liquidation or similar proceeding.
Not all of our subsidiaries are guarantors of our unsecured debt, assets of non-guarantor subsidiaries may not be available to make payments on our unsecured indebtedness and any related guarantees may be released in the future if certain events occur.
As of December 31, 2016,2017, only we and/or the Partnership were a borrower or a guarantor of our unsecured indebtedness.  In the event of a bankruptcy, liquidation or reorganization of any of our non-guarantor subsidiaries, holders of non-guarantor subsidiary debt, including trade creditors, will generally be entitled to payment of their claims from the assets of non-guarantor subsidiaries before any assets are made available for distribution to us or any of the subsidiary guarantors of our unsecured debt.
 In addition, any subsidiary guarantor, including the Partnership, will be deemed released from its obligations with respect to our unsecured debt if such subsidiary guarantor’s obligations as a borrower or guarantor under our principal credit agreement terminates pursuant to the terms of our principal credit agreement or if our principal credit agreement is amended to remove certain or all of the subsidiary guarantors as borrowers or guarantors. To the extent any of our unsecured indebtedness is no longer guaranteed by any of our subsidiaries in the future, such debt will be our obligations exclusively. All of our assets are held through our operating partnership and our other subsidiaries. Consequently, our cash flow and our ability to meet our debt service obligations depends in large part upon the cash flow of our subsidiaries and the payment of funds by our subsidiaries to us in the form of distributions or otherwise.
Federal and state statutes allow courts, under specific circumstances, to void guarantees and require holders of certain of our unsecured indebtedness to return payments received from us or any related guarantor.
Under the federal bankruptcy law and comparable provisions of state fraudulent transfer laws, a guarantee could be voided, or claims in respect of a guarantee could be subordinated to all other debts of that guarantor if, among other things, the guarantor, at the time it incurred the debt evidenced by its guarantee:
issued the guarantee to delay, hinder or defraud present or future creditors; or
received less than reasonably equivalent value or fair consideration for the incurrence of such guarantee, and:
was insolvent or rendered insolvent by reason of such incurrence;
was engaged or about to engage in a business or transaction for which the guarantor’s remaining unencumbered assets constituted unreasonably small capital to carry on its business; or
intended to incur, or believed that it would incur, debts beyond its ability to pay the debts as they mature.
In addition, any payment by that guarantor pursuant to its guarantee could be voided and required to be returned to the guarantor, or to a fund for the benefit of the creditors of the guarantor.
The measures of insolvency for purposes of these fraudulent transfer laws will vary depending upon the law applied in any proceeding to determine whether a fraudulent transfer has occurred. Generally, however, a guarantor would be considered insolvent if, at the time it incurred the debt:
the sum of its debts, including contingent liabilities, was greater than the fair saleable value of all of its assets;
the present fair saleable value of its assets was less than the amount that would be required to pay its probable liability on its existing debts, including contingent liabilities, as they become absolute and mature; or
it could not pay its debts as they become due.

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We cannot be sure as to the standards that a court would use to determine whether or not any guarantor was solvent at the relevant time, or, regardless of the standard that the court uses, that the issuance of such guaranty would not be voided or any such guaranty would not be subordinated to that of such guarantor’s other debt. If a case were to occur, any such guaranty could also be subject to the claim that, since the guaranty was incurred for our benefit, and only indirectly for the benefit of such guarantor, the obligations of such guarantor were incurred for less than fair consideration. A court could thus void the obligations under the guarantees or subordinate the guarantees to such guarantor’s other debt or take other action detrimental to holders of our unsecured indebtedness.
Risks Related to Lexington's REIT Status
There can be no assurance that Lexington will remain qualified as a REIT for federal income tax purposes.
We believe that Lexington has met the requirements for qualification as a REIT for federal income tax purposes beginning with its taxable year ended December 31, 1993, and we intend for Lexington 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. 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 Lexington's ability to continue to qualify as a REIT. No assurance can be given that Lexington has qualified or will remain qualified 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 Lexington does not qualify as a REIT, Lexington would not be allowed a deduction for distributions to shareholders in computing its net taxable income. In addition, Lexington's income would be subject to tax at the regular corporate rates. Lexington also could be disqualified from treatment as a REIT for the four taxable years following the year during which qualification was lost. Cash available to satisfy Lexington's debt service obligations and distributions to its shareholders would be significantly reduced or suspended for each year in which Lexington does not qualify as a REIT. In that event, Lexington would not be required to continue to make distributions. Although we currently intend for Lexington to continue to qualify as a REIT, it is possible that future economic, market, legal, tax or other considerations may cause Lexington, 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.
A REIT 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 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 financial position, results of operations and cash flows.
Distribution requirements imposed by law limit our flexibility.
To maintain Lexington's status as a REIT for federal income tax purposes, Lexington is generally required to distribute to its shareholders at least 90% of its taxable income for that calendar year. Lexington's taxable income is determined without regard to any deduction for dividends paid and by excluding net capital gains. To the extent that Lexington satisfies the distribution requirement but distributes less than 100% of its taxable income, Lexington will be subject to federal corporate income tax on its undistributed income. In addition, Lexington will incur a 4% nondeductible excise tax on the amount, if any, by which its distributions in any year are less than the sum of (i) 85% of its ordinary income for that year, (ii) 95% of its capital gain net income for that year and (iii) 100% of its undistributed taxable income from prior years. We intend for Lexington to continue to make distributions to its 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 its taxable income and the effect of required debt amortization payments could require Lexington 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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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 debt and/or equity security holder. 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.
SeveralTax legislation signed into law on December 22, 2017, makes numerous changes to the tax rules that do not affect the REIT qualification rules directly, but may otherwise affect us or our shareholders. For example, the top federal income tax rate for individuals is reduced to 37%, there is a new deduction available for certain Qualified Business Income, that reduces the top effective tax rate applicable to ordinary dividends from REITs to 29.6% (through a 20% deduction for ordinary REIT dividends received) and various deductions are eliminated or limited. Most of the changes applicable to individuals are temporary. There are only minor changes to the REIT rules have been amended under(other than the Protecting Americans from Tax Hikes Act of 2015,20% deduction applicable to individuals for ordinary REIT dividends received). To date, the PATH Act, which was enactedInternal Revenue Service has issued only limited guidance on December 18, 2015. These rules were enacted with varying effective dates. Shareholders should consult with their tax advisors regarding the effect ofchanges made by the PATH Act in their particular circumstances.new legislation. It is unclear at this time whether Congress will address these issues or when the Internal Revenue Service will issue additional administrative guidance on the changes made by the new legislation.
Risks Related to Our Shares
We may change the dividend policy for our common shares in the future.
The decision to declare and pay dividends on our common shares in the future, as well as the timing, amount and composition of any such future dividends, will be at the sole discretion of our Board of Trustees in light of conditions then existing, including our earnings, financial condition, capital requirements, debt maturities, the availability of debt and equity capital, applicable REIT and legal restrictions and the general overall economic conditions and other factors. The actual dividend payable will be determined by our Board of Trustees based upon the circumstances at the time of declaration and the actual dividend payable may vary from such expected amount. Any change in our dividend policy could have a material adverse effect on the market price of our common shares.
We may in the future choose to pay dividends in shares, in which case you may be required to pay income taxes in excess of the cash dividends you receive.
We may in the future distribute taxable dividends that are payable in shares. Taxable shareholders receiving such dividends will be required to include the full amount of the dividend as ordinary income to the extent of our current and accumulated earnings and profits for United States federal income tax purposes. As a result, a U.S. shareholder may be required to pay income taxes with respect to such dividends even though no cash dividends were received. If a U.S. shareholder sells the shares it receives as a dividend in order to pay this tax, the sales proceeds may be less than the amount included in income with respect to the dividend, depending on the market price of the shares at the time of the sale. Furthermore, with respect to non-U.S. shareholders, we may be required to withhold U.S. tax with respect to such dividends. In addition, if a significant number of our shareholders determine to sell such shares received in a dividend in order to pay taxes owed on such dividend, it may put downward pressure on the trading price of our common shares.
Securities eligible for future sale may have adverse effects on our share price.
We have an unallocated universal shelf registration statement and we also maintain the ATM offering program and a direct share purchase plan, pursuant to which we may issue additional common shares. There is no restriction on our issuing additional common or preferred shares, including any securities that are convertible into or exchangeable for, or that represent the right to receive, common or preferred shares or any substantially similar securities. As of December 31, 2016,2017, an aggregate of approximately 4.23.8 million of our common shares were issuable upon the exercise of employee share options and upon the exchange of OP units. Depending upon the number of such securities issued, exercised or exchanged at one time, an issuance, exercise or exchange of such securities could be dilutive to or otherwise adversely affect the interests of holders or the market price of our common shares.

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There are certain limitations on 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 against the loss of our REIT status, among other purposes, our declaration of trust limits any shareholder from owning more than 9.8% in value of our outstanding equity shares, defined as common shares or preferred shares, subject to certain exceptions. These ownership limits may have the effect of precluding acquisition of control of us. Our Board of Trustees has granted a limited waiver of the ownership limits to BlackRock, Inc. with respect to BlackRock, Inc.'s mutual funds.

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Severance payments under employment agreements andour executive severance policy. Substantial termination payments may be required to be paid under the provisions of employment agreements with or severance policies applicable to certain of our executives upon a change of control and the subsequent termination of the executive. We have entered into employment agreements with four of our executive officers and we have a severance policy applicable to two ofand related agreements with our executive officers and certain other senior officers which provide that,executives upon the occurrencetermination 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), ifan executive. If those executive officers and senior officers are terminated without cause, as defined, or resign for good reason, as defined, those executive officers and senior officers may be entitled to severance benefits based on their current annual base salaries and trailing average of recent annual cash bonuses as defined in the employment agreements orour executive severance policy and related agreements and the acceleration of certain non-vested equity awards. Accordingly, these payments may discourage a third party from acquiring us.
Our ability to issue additional shares. Our declaration of trust authorizes 1,000,000,000 shares of beneficial interest (par value $0.0001 per share) consisting of 400,000,000 common shares, 100,000,000 preferred shares and 500,000,000 shares of beneficial interest classified as excess stock, or excess shares. Our Board of Trustees is authorized to cause us to issue these shares without shareholder approval. Our Board of Trustees may establish the preferences and rights of any such class or series of additional shares, 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. At December 31, 2016,2017, in addition to common shares, we had outstanding 1,935,400 Series C Preferred Shares. Our Series C Preferred Shares include provisions, such as increases in dividend rates or adjustments to conversion rates, that may deter a change of control. The establishment and issuance of shares of our existing series of preferred shares or a future class or series of shares could make a change of control of us more difficult.
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 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 such person otherwise would have become an interested shareholder, which approval may be conditioned by the Board of Trustees. 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, or an affiliate of 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 (as defined in the Maryland General Corporation Law) 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 the Newkirk Merger, Vornado Realty Trust, which we refer to as Vornado, was granted a limited exemption from the definition of “interested shareholder.”

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Maryland Control Share Acquisition Act. Maryland law provides that a holder of “control shares” of a Maryland REIT acquired in a “control share acquisition” has no voting rights with respect to such shares except to the extent approved by a vote of two-thirds of the votes entitled to be cast on the matter under the Maryland Control Share Acquisition Act. Shares owned by the acquirer, by our officers or by employees who are our trustees are excluded from shares entitled to vote on the matter. “Control Shares” are voting shares that, if aggregated with all other shares previously acquired by the acquirer or in respect of which the acquirer is able to exercise or direct the exercise of voting power (except solely by virtue of a revocable proxy), would entitle the acquirer 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 issued and outstanding 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 or if the acquiring person does not deliver an acquiring person statement as required under the statute, then, subject to certain conditions and limitations, the issuer may redeem any or all of the control shares for fair value, except those for which voting rights have been previously approved. If voting rights of such control shares are approved at a shareholders meeting and the acquirer 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. The Maryland Control Share Acquisition Act does not apply to shares acquired in a merger, consolidation or statutory share exchange if the Maryland REIT is a party to the transaction, or to acquisitions approved or exempted by the declaration of trust or by-laws of the Maryland REIT. Our 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.
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 declaration of trust includes certain restrictions regarding transfers of our capital shares and ownership limits.
Actual or constructive ownership of our capital shares in violation of the restrictions or in excess of the share ownership limits contained in our 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.
However, these restrictions and limits may not be adequate in all cases 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.
The trading price of our common shares has been, and may continue to be, subject to significant fluctuations.
From January 1, 2012 through the date of this Annual Report, the closing sale price of our common shares on the NYSE (composite) has ranged from $13.64 to $6.61 per share. The market price of our common shares may fluctuate in response to company-specific and general market events and developments, including those described in this Annual Report. In addition, our leverage may impact investor demand for our common shares, which could have a material effect on the market price of our common shares.
Furthermore, the public valuation of our common shares is related primarily to the earnings that we derive from rental income with respect to the properties in which we have an interest 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 yield than they would receive from our common shares may sell our common shares in favor of higher yielding securities.

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Risk Related Specifically To LCIF
The Partnership is dependent upon Lexington for its business.
The Partnership has no employees and the Partnership is dependent upon Lexington and its employees for the operation of its business, including the acquisition, disposition and management of its properties, investments and other assets and sourcing of equity and debt financing.  The continued service of Lexington and its employees is not guaranteed. Lexington has no obligation to allocate any investment opportunities to the Partnership or provide the Partnership debt or equity financing.  As a result, if Lexington and its employees were unable or unwilling to provide or were unsuccessful at providing such services to the Partnership, its business, financial condition and results of operations could be adversely affected.
The Partnership does not hold all or substantially all of the assets owned by Lexington.
The Partnership is not a traditional UPREIT operating partnership that holds all of the assets of the REIT. The Partnership holds less than half of Lexington's total assets. As a result, a holder of equity or debt securities of the Partnership does not have recourse against the assets of Lexington that are not owned by the Partnership.
The Partnership is the only subsidiary of Lexington that guarantees its debt and the assets of the Partnership's subsidiaries may not be available to make payments on Lexington’s or its unsecured indebtedness and any related guarantees may be released in the future if certain events occur.
As of December 31, 2016,2017, the Partnership was the only co-borrower or guarantor of Lexington’s unsecured indebtedness.  In the event of a bankruptcy, liquidation or reorganization of any of the Partnership's subsidiaries, holders of any such subsidiary’s debt, including trade creditors, will generally be entitled to payment of their claims from the assets of such subsidiaries before any assets are made available for distribution to Lexington or the Partnership.
In addition, the Partnership will be deemed released if the Partnership's obligations as a co-borrower or guarantor under Lexington’s principal credit agreement terminates pursuant to its terms or if it is amended to remove certain or all of Lexington’s guarantors as borrowers or guarantors. Substantially, all of the Partnership's assets are held through subsidiaries.  Consequently, the Partnership's cash flow and its ability to meet its debt service and guarantee obligations depends in large part upon the cash flow of its subsidiaries and the payment of funds by its subsidiaries to the Partnership in the form of distributions or otherwise. 

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Item 1B. Unresolved Staff Comments

There are no unresolved written comments that were received from the SEC staff relating to our or LCIF's periodic or current reports under the Securities Exchange Act of 1934.


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Item 2. Properties

Real Estate Portfolio

General. As of December 31, 20162017, we had equity ownership interests in approximately 195175 consolidated real estate properties containing approximately 43.348.6 million square feet of rentable space, which were approximately 96.0%98.9% leased based upon net rentable square feet, excluding properties subject to mortgages in default.feet. Generally, all properties in which we have an interest are held through at least one property owner subsidiary.

The propertiestenant in our Memphis, Tennessee industrial property purported to exercise an economic discontinuance option, which we have an interest are generally subjectbelieve was invalid. We expect the tenant to net or similar leases; however, in certain leases,cease paying rent on March 1, 2018. We intend to enforce the property owner subsidiaries are responsible for roof, structural and other repairs. In addition, certainterms of the properties in which we have an interest are subject to leases in which the landlord is responsible for a portion of the real estate taxes, utilities and general maintenance. Furthermore, the property owner subsidiaries are or will be responsible for all operating expenses of any vacant properties, and the property owner subsidiaries may be responsible for a significant amount of operating expenses of multi-tenant properties.lease.

Ground Leases. Certain of the properties in which we have an interest are subject to long-term ground leases where either the tenant of the building on the property or a third party owns and leases the underlying land to the property owner subsidiary. Certain of these properties are economically owned through the holding of industrial revenue bonds primarily for real estate tax abatement purposes 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, the ground lessee has a purchase option. At the end of these long-term ground leases, unless extended or the purchase option is exercised, the land together with all improvements thereon reverts to the landowner.

Leverage. As of December 31, 20162017, we had outstanding mortgages and notes payable of approximately $0.7 billion with a weighted-average interest rate of approximately 4.6% and a weighted-average maturity of 10.110.4 years.

Property Charts. The following tables list our properties by type, their locations, the primary tenant/guarantor, the net rentable square feet, the expiration of the primary lease term and percent leased, as applicable, as of December 31, 2016.2017. The Partnership's properties are included and are identified with an asterisk.

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LEXINGTON CONSOLIDATED PORTFOLIO
PROPERTY CHART
OFFICE
 As of December 31, 2016
 Property LocationCityStatePrimary Tenant (Guarantor)Net Rentable Square FeetCurrent Lease Term ExpirationPercent Leased
 12209 W. Markham St.Little RockAREntergy Arkansas, Inc.36,311
10/31/2020100%
 5201 W. Barraque St.Pine BluffAREntergy Services, Inc.27,189
10/31/2017100%
*3030 North 3rd St.PhoenixAZCopperPoint Mutual Insurance Company252,400
12/31/2032100%
 19019 North 59th Ave.GlendaleAZHoneywell International Inc.252,300
7/15/2019100%
 2005 E. Technology Cir.TempeAZWipro Data Center & Cloud Services, Inc. (Infocrossing, Inc.)60,000
12/31/2025100%
 8555 South River Pkwy.TempeAZVersum Materials US, LLC95,133
6/30/2022100%
 1440 East 15th St.TucsonAZCoxCom, LLC28,591
7/31/2022100%
 3333 Coyote Hill Rd.Palo AltoCAXerox Corporation202,000
12/14/2023100%
*9201 E. Dry Creek Rd.CentennialCOArrow Electronics, Inc.128,500
9/30/2017100%
 9655 Maroon Cir.EnglewoodCOTriZetto Corporation166,912
4/30/2028100%
*1315 West Century Dr.LouisvilleCOGlobal Healthcare Exchange, Inc. (Global Healthcare Exchange, LLC)106,877
4/30/2027100%
 143 Diamond Ave.ParachuteCOEncana Oil and Gas (USA) Inc. (Alenco Inc.)49,024
10/31/2032100%
*100 Barnes Rd.WallingfordCT3M Company44,400
6/30/2018100%
*5600 Broken Sound Blvd.Boca RatonFLCanon Solutions America, Inc. (Océ -USA Holding, Inc.)143,290
2/14/2020100%
 550 International ParkwayLake MaryFLJPMorgan Chase Bank, National Association125,920
9/30/2020100%
 600 Business Center Dr.Lake MaryFLJPMorgan Chase Bank, National Association125,155
9/30/2020100%
 9200 South Park Center LoopOrlandoFLZenith Education Group, Inc. (ECMC Group, Inc.)59,927
9/30/2020100%
 10419 North 30th St.TampaFLTime Customer Service, Inc. / Time Incorporated132,981
6/30/2026100%
 2500 Patrick Henry Pkwy.McDonoughGAGeorgia Power Company111,911
6/30/2025100%
 3500 N. Loop Rd.McDonoughGALitton Loan Servicing LP62,218
8/31/2018100%
 3265 E. Goldstone Dr.MeridianIDVoiceStream PCS Holding, LLC / T-Mobile PCS Holdings, LLC (T-Mobile USA, Inc.)77,484
6/30/2019100%
 850 & 950 Warrenville Rd.LisleILNational-Louis University99,414
12/31/2019100%
*231 N. Martingale Rd.SchaumburgILCEC Educational Services, LLC (Career Education Corporation)317,198
12/31/2022100%
 500 Jackson St.ColumbusINCummins Inc.390,100
7/31/2019100%
 10300 Kincaid Dr.FishersINRoche Diagnostics Operations, Inc.193,000
1/31/2017100%
 10475 Crosspoint Blvd.IndianapolisINJohn Wiley & Sons, Inc.141,416
10/31/2019100%
 9601 Renner Blvd.LenexaKSVoiceStream PCS II Corporation (T-Mobile USA, Inc.)77,484
10/31/2019100%

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LEXINGTON CONSOLIDATED PORTFOLIO
PROPERTY CHART
OFFICE
As of December 31, 2017
Property LocationCityStatePrimary Tenant (Guarantor)Net Rentable Square FeetCurrent Lease Term ExpirationPercent Leased
*3030 North 3rd St.PhoenixAZCopperPoint Mutual Insurance Company252,400
12/31/2032100%
19019 North 59th Ave.GlendaleAZHoneywell International Inc.252,300
7/15/2019100%
8555 South River Pkwy.TempeAZVersum Materials US, LLC95,133
6/30/2022100%
1440 East 15th St.TucsonAZCoxCom, LLC28,591
7/31/2022100%
3333 Coyote Hill Rd.Palo AltoCAXerox Corporation202,000
12/14/2023100%
*9201 E. Dry Creek Rd.CentennialCOArrow Electronics, Inc.128,500
3/31/2033100%
9655 Maroon Cir.EnglewoodCOTriZetto Corporation166,912
4/30/2028100%
*1315 West Century Dr.LouisvilleCOGlobal Healthcare Exchange, Inc. (GHX Ultimate Partner Corporation)106,877
4/30/2027100%
143 Diamond Ave.ParachuteCOEncana Oil and Gas (USA) Inc./Caerus Piceanco LLC (Alenco Inc.)49,024
10/31/2032100%
*100 Barnes Rd.WallingfordCT3M Company44,400
6/30/2018100%
*5600 Broken Sound Blvd.Boca RatonFLCanon Solutions America, Inc. (Océ -USA Holding, Inc.)143,290
2/14/2020100%
9200 South Park Center LoopOrlandoFLZenith Education Group, Inc. (ECMC Group, Inc.)59,927
9/30/2020100%
2500 Patrick Henry Pkwy.McDonoughGAGeorgia Power Company111,911
6/30/2025100%
3500 N. Loop Rd.McDonoughGALitton Loan Servicing LP62,218
8/31/2018100%
3265 E. Goldstone Dr.MeridianIDVoiceStream PCS Holding, LLC / T-Mobile PCS Holdings, LLC (T-Mobile USA, Inc.)77,484
6/30/2019100%
*231 N. Martingale Rd.SchaumburgILCEC Educational Services, LLC (Career Education Corporation)317,198
12/31/2022100%
LEXINGTON CONSOLIDATED PORTFOLIO
PROPERTY CHART
OFFICE
500 Jackson St.ColumbusINCummins Inc.390,100
7/31/2019100%
As of December 31, 201610475 Crosspoint Blvd.IndianapolisINJohn Wiley & Sons, Inc.141,416
10/31/2019100%
Property LocationCityStatePrimary Tenant (Guarantor)Net Rentable Square FeetCurrent Lease Term ExpirationPercent Leased9601 Renner Blvd.LenexaKSVoiceStream PCS II Corporation (T-Mobile USA, Inc.)77,484
10/31/2019100%
11201 Renner Blvd.LenexaKSUnited States of America169,585
10/31/2027100%11201 Renner Blvd.LenexaKSUnited States of America169,585
10/31/2027100%
*5200 Metcalf Ave.Overland ParkKSSwiss Re America Holding Corporation / Westport Insurance Corporation / Swiss RE Management (US) Corporation320,198
12/22/2018100%5200 Metcalf Ave.Overland ParkKSSwiss Re America Holding Corporation / Westport Insurance Corporation / Swiss RE Management (US) Corporation320,198
12/22/2018100%
*4455 American WayBaton RougeLANew Cingular Wireless PCS, LLC70,100
10/31/2017100%4455 American WayBaton RougeLANew Cingular Wireless PCS, LLC70,100
10/31/2022100%
133 First Park Dr.OaklandMEOmnipoint Holdings, Inc. (T-Mobile USA, Inc.)78,610
8/31/2020100%133 First Park Dr.OaklandMEOmnipoint Holdings, Inc. (T-Mobile USA, Inc.)78,610
8/31/2020100%
2800 High Meadow Cir.Auburn HillsMIFaurecia USA Holdings, Inc.278,000
3/31/2029100%2800 High Meadow Cir.Auburn HillsMIFaurecia USA Holdings, Inc.278,000
3/31/2029100%
12000 & 12025 Tech Center Dr.LivoniaMIKelsey-Hayes Company (TRW Automotive Inc.)180,230
12/31/2024100%12000 & 12025 Tech Center Dr.LivoniaMIKelsey-Hayes Company (ZF Friedrichshafen AG))180,230
12/31/2024100%
9201 Stateline Rd.Kansas CityMOSwiss Re America Holding Corporation / Westport Insurance Corporation / Swiss RE Management (US) Corporation155,925
4/1/2019100%9201 Stateline Rd.Kansas CityMOSwiss Re America Holding Corporation / Westport Insurance Corporation / Swiss RE Management (US) Corporation155,925
4/1/2019100%
3902 Gene Field Rd.St. JosephMOBoehringer Ingelheim Vetmedica, Inc. (Boehringer Ingelheim USA Corporation)98,849
6/30/2027100%
3943 Denny Ave.PascagoulaMSHuntington Ingalls Incorporated94,841
10/31/2018100%
11707 Miracle Hills Dr.OmahaNEWipro Data Center & Cloud Services, Inc. (Infocrossing, Inc.)85,200
11/30/2025100%
1331 Capitol Ave.OmahaNEThe Gavilon Group, LLC127,810
11/30/2033100%
333 Mount Hope Ave.RockawayNJAtlantic Health System, Inc.92,326
12/31/2027100%
1415 Wyckoff Rd.WallNJNew Jersey Natural Gas Company157,511
6/30/2021100%
29 S. Jefferson Rd.WhippanyNJCAE SimuFlite, Inc. (CAE INC.)123,734
11/30/2021100%
6226 West Sahara Ave.Las VegasNVNevada Power Company282,000
1/31/2029100%
5500 New Albany Rd.ColumbusOHEvans, Mechwart, Hambleton & Tilton, Inc.104,807
12/29/2026100%
2221 Schrock Rd.ColumbusOHMS Consultants, Inc.42,290
7/6/2027100%
500 Olde Worthington Rd.WestervilleOHInVentiv Communications, Inc.97,000
3/31/2026100%
1700 Millrace Dr.EugeneOROregon Research Institute / Educational Policy Improvement Center80,011
11/30/2027100%
2999 Southwest 6th St.RedmondORVoiceStream PCS I, LLC / T-Mobile West Corporation (T-Mobile USA, Inc.)77,484
1/31/2019100%
25 Lakeview Dr.JessupPATMG Health, Inc.150,000
8/7/2027100%
1701 Market St.PhiladelphiaPAMorgan, Lewis & Bockius LLP304,037
1/31/202199%
1362 Celebration Blvd.FlorenceSCMED3000, Inc.32,000
2/14/2024100%
*3476 Stateview Blvd.Fort MillSCWells Fargo Bank, N.A.169,083
5/31/2024100%
*3480 Stateview Blvd.Fort MillSCWells Fargo Bank, N.A.169,218
5/31/2024100%

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LEXINGTON CONSOLIDATED PORTFOLIO
PROPERTY CHART
OFFICE
 As of December 31, 2016
 Property LocationCityStatePrimary Tenant (Guarantor)Net Rentable Square FeetCurrent Lease Term ExpirationPercent Leased
 333 Three D Systems CircleRock HillSC3D Systems Corporation80,028
8/31/2021100%
 420 Riverport Rd.KingsportTNKingsport Power Company42,770
6/30/2018100%
 1409 Centerpoint Blvd.KnoxvilleTNAlstom Power, Inc.84,404
10/31/2024100%
 2401 Cherahala Blvd.KnoxvilleTNAdvancePCS, Inc. / CaremarkPCS, L.L.C.59,748
5/31/2020100%
 3965 Airways Blvd.MemphisTNFederal Express Corporation521,286
6/19/2019100%
 601 & 701 Experian Pkwy.AllenTXExperian Information Solutions, Inc. / TRW, Inc. (Experian Holdings, Inc.)292,700
3/14/2025100%
 1401 Nolan Ryan Expy.ArlingtonTXTriumph Aerostructures, LLC (Triumph Group, Inc.)161,808
1/31/202577%
 4201 Marsh Ln.CarrolltonTXCarlson Restaurants Inc. (Carlson, Inc.)130,000
11/30/2022100%
*4001 International Pkwy.CarrolltonTXMotel 6 Operating, LP138,443
12/31/2025100%
 810 Gears Rd.HoustonTXUnited States of America78,895
1/10/203187%
 820 Gears Rd.HoustonTXRicoh, USA, Inc.78,895
1/31/2018100%
 10001 Richmond Ave.HoustonTXSchlumberger Holdings Corp.554,385
9/30/2025100%
 1311 Broadfield Blvd.HoustonTXTransocean Offshore Deepwater Drilling, Inc. (Transocean Sedco Forex, Inc.)155,040
1/31/2017100%
 6555 Sierra Dr.IrvingTXTXU Energy Retail Company, LLC (Texas Competitive Electric Holding Company, LLC)247,254
2/28/2025100%
 8900 Freeport Pkwy.IrvingTXNissan Motor Acceptance Corporation (Nissan North America, Inc.)268,445
3/31/2023100%
 270 Abner Jackson Pkwy.Lake JacksonTXThe Dow Chemical Company389,188
10/31/2036100%
 3711 San GabrielMissionTXVoiceStream PCS II Corporation / T-Mobile West Corporation75,016
6/30/2020100%
 6200 Northwest Pkwy.San AntonioTXUnited HealthCare Services, Inc.142,500
11/30/2024100%
*2050 Roanoke Rd.WestlakeTXCharles Schwab & Co., Inc.130,199
6/30/2021100%
 400 Butler Farm Rd.HamptonVANextel Communications of the Mid-Atlantic, Inc. (Nextel Finance Company)(2019) / Wisconsin Physicians Service Insurance Corporation (71,073 sf - 2023)100,632
8/31/2023100%
 13651 McLearen Rd.HerndonVAUnited States of America159,644
5/30/2018100%
*13775 McLearen Rd.HerndonVAOrange Business Services U.S., Inc. (Equant N.V.)132,617
7/31/2020100%
 2800 Waterford Lake Dr.MidlothianVAAlstom Power, Inc.99,057
12/31/2021100%
 800 East Canal St.RichmondVAMcGuireWoods LLP330,309
8/31/2030100%
 500 Kinetic Dr.HuntingtonWVAMZN WVCS LLC (Amazon.com, Inc.)68,693
11/30/2026100%
    Office Total11,569,940
 99.6%
The 2016 net effective annual base cash rent for the office portfolio as of December 31, 2016 was $15.36 per square foot and the weighted-average remaining lease term was 7.2 years.
 
LEXINGTON CONSOLIDATED PORTFOLIO
PROPERTY CHART
OFFICE
 As of December 31, 2017
 Property LocationCityStatePrimary Tenant (Guarantor)Net Rentable Square FeetCurrent Lease Term ExpirationPercent Leased
 3902 Gene Field Rd.St. JosephMOBoehringer Ingelheim Vetmedica, Inc. (Boehringer Ingelheim USA Corporation)98,849
6/30/2027100%
 3943 Denny Ave.PascagoulaMSHuntington Ingalls Incorporated94,841
10/31/2018100%
*1210 AvidXchange Ln.CharlotteNCAvidXchange, Inc.201,450
4/30/2032100%
 11707 Miracle Hills Dr.OmahaNEWipro Data Center & Cloud Services, Inc. (Infocrossing, Inc.)85,200
11/30/2025100%
 1331 Capitol Ave.OmahaNEThe Gavilon Group, LLC127,810
11/30/2033100%
 333 Mount Hope Ave.RockawayNJAtlantic Health System, Inc.92,326
12/31/2029100%
 1415 Wyckoff Rd.WallNJNew Jersey Natural Gas Company157,511
6/30/2021100%
 29 S. Jefferson Rd.WhippanyNJCAE SimuFlite, Inc. (CAE INC.)123,734
11/30/2021100%
 6226 West Sahara Ave.Las VegasNVNevada Power Company282,000
1/31/2029100%
 5500 New Albany Rd.ColumbusOHEvans, Mechwart, Hambleton & Tilton, Inc.104,807
12/29/2026100%
 2221 Schrock Rd.ColumbusOHMS Consultants, Inc.42,290
7/6/2027100%
 500 Olde Worthington Rd.WestervilleOHInVentiv Communications, Inc.97,000
3/31/2026100%
 1700 Millrace Dr.EugeneOROregon Research Institute / Educational Policy Improvement Center80,011
11/30/2027100%
 2999 Southwest 6th St.RedmondORVoiceStream PCS I, LLC / T-Mobile West Corporation (T-Mobile USA, Inc.)77,484
1/31/2019100%
 25 Lakeview Dr.JessupPATMG Health, Inc.150,000
8/7/2027100%
 1701 Market St.PhiladelphiaPAMorgan, Lewis & Bockius LLP304,037
1/31/202199%
 1362 Celebration Blvd.FlorenceSCMED3000, Inc.32,000
2/14/2024100%
*3476 Stateview Blvd.Fort MillSCWells Fargo Bank, N.A.169,083
5/31/2024100%
*3480 Stateview Blvd.Fort MillSCWells Fargo Bank, N.A.169,218
5/31/2024100%
 420 Riverport Rd.KingsportTNKingsport Power Company42,770
6/30/2023100%
 1409 Centerpoint Blvd.KnoxvilleTNAlstom Power, Inc.84,404
10/31/2024100%
 2401 Cherahala Blvd.KnoxvilleTNAdvancePCS, Inc. / CaremarkPCS, L.L.C.59,748
5/31/2020100%
 3965 Airways Blvd.MemphisTNFederal Express Corporation521,286
6/19/2019100%
 601 & 701 Experian Pkwy.AllenTXExperian Information Solutions, Inc. / TRW, Inc. (Experian Holdings, Inc.)292,700
3/14/2025100%
 1401 Nolan Ryan Expy.ArlingtonTXTriumph Aerostructures, LLC (Triumph Group, Inc.)161,808
1/31/202577%
*4001 International Pkwy.CarrolltonTXMotel 6 Operating, LP138,443
12/31/2025100%

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LEXINGTON CONSOLIDATED PORTFOLIO
PROPERTY CHART
INDUSTRIAL
As of December 31, 2016
Property LocationCityStatePrimary Tenant (Guarantor)Net Rentable Square FeetCurrent Lease Term ExpirationPercent Leased
*2415 U.S. Hwy 78 EastMoodyALMichelin North America, Inc.595,346
12/31/2019100%
318 Pappy Dunn Blvd.AnnistonALInternational Automotive Components Group North America, Inc.276,782
11/24/2029100%
2455 Premier RowOrlandoFLWalgreen Co. / Walgreen Eastern Co.205,016
3/31/2021100%
*3102 Queen Palm Dr.TampaFLTime Customer Service, Inc. (Time Incorporated)229,605
6/30/2020100%
359 Gateway Dr.LavoniaGATI Group Automotive Systems, LLC (TI Automotive Ltd.)133,221
5/31/2020100%
1420 Greenwood Rd.McDonoughGAUnited States Cold Storage, Inc.296,972
8/31/2028100%
3301 Stagecoach Rd. NEThomsonGAHollander Sleep Products, LLC (Hollander Home Fashions Holdings)208,000
5/31/2030100%
3600 Army Post Rd.Des MoinesIAHP Enterprise Services, LLC405,000
4/30/2017100%
3931 Lakeview Corporate Dr.EdwardsvilleILAMAZON.COM.DEDC, LLC (Amazon.com, Inc.)769,500
9/30/2026100%
1001 Innovation Rd.RantoulILBell Sports, Inc. (Vista Outdoor Inc.)813,126
10/31/2034100%
3686 S. Central Ave.RockfordILPierce Packaging Co.93,000
12/31/2019100%
749 Southrock Dr.RockfordILJacobson Warehouse Company, Inc. (Jacobson Distribution Company and Jacobson Transportation Company, Inc.)150,000
12/31/2018100%
*1020 W. Airport Rd.RomeovilleILARYZTA LLC (ARYZTA AG)188,166
10/31/2031100%
2935 Van Vactor Dr.PlymouthINBay Valley Foods, LLC300,500
12/31/2018100%
10000 Business Blvd.Dry RidgeKYDana Light Axle Products, LLC (Dana Holding Corporation and Dana Limited)336,350
6/30/2025100%
730 North Black Branch Rd.ElizabethtownKYMetalsa Structural Products, Inc. / Dana Structural Products, LLC (Dana Holding Corporation and Dana Limited)167,770
6/30/2025100%
LEXINGTON CONSOLIDATED PORTFOLIO
PROPERTY CHART
OFFICE
750 North Black Branch Rd.ElizabethtownKYMetalsa Structural Products, Inc. / Dana Structural Products, LLC (Dana Holding Corporation and Dana Limited)539,592
6/30/2025100%As of December 31, 2017
301 Bill Bryan Rd.HopkinsvilleKYMetalsa Structural Products, Inc. / Dana Structural Products, LLC (Dana Holding Corporation and Dana Limited)424,904
6/30/2025100%Property LocationCityStatePrimary Tenant (Guarantor)Net Rentable Square FeetCurrent Lease Term ExpirationPercent Leased
4010 Airpark Dr.OwensboroKYMetalsa Structural Products, Inc. / Dana Structural Products, LLC (Dana Holding Corporation and Dana Limited)211,598
6/30/2025100%810 Gears Rd.HoustonTXUnited States of America78,895
1/10/203187%
1901 Ragu Dr.OwensboroKYUnilever Supply Chain, Inc. (Unilever United States, Inc.)443,380
12/19/2020100%820 Gears Rd.HoustonTXRicoh, USA, Inc.78,895
1/31/2019100%
5001 Greenwood Rd.ShreveportLALibbey Glass Inc. (Libbey Inc.)646,000
10/31/2026100%10001 Richmond Ave.HoustonTXSchlumberger Holdings Corp.554,385
9/30/2025100%
5417 Campus Dr.ShreveportLAThe Tire Rack, Inc.257,849
3/31/2022100%6555 Sierra Dr.IrvingTXTXU Energy Retail Company, LLC (Texas Competitive Electric Holding Company, LLC)247,254
2/28/2025100%
113 Wells St.North BerwickMEUnited Technologies Corporation993,685
4/30/2024100%8900 Freeport Pkwy.IrvingTXNissan Motor Acceptance Corporation (Nissan North America, Inc.)268,445
3/31/2023100%
2860 Clark St.DetroitMIFCA US LLC (f/k/a Chrysler Group LLC)190,003
10/22/2035100%270 Abner Jackson Pkwy.Lake JacksonTXThe Dow Chemical Company664,100
10/31/2036100%
3711 San GabrielMissionTXVoiceStream PCS II Corporation / T-Mobile West Corporation75,016
6/30/2020100%
6200 Northwest Pkwy.San AntonioTXUnited HealthCare Services, Inc.142,500
11/30/2024100%
*2050 Roanoke Rd.WestlakeTXCharles Schwab & Co., Inc.130,199
6/30/2021100%
400 Butler Farm Rd.HamptonVANextel Communications of the Mid-Atlantic, Inc. (Nextel Finance Company)(2019) / Wisconsin Physicians Service Insurance Corporation (71,073 sf - 2023)100,632
8/31/2023100%
*13651 McLearen Rd.HerndonVAUnited States of America159,644
5/30/2022100%
13775 McLearen Rd.HerndonVAOrange Business Services U.S., Inc. (Equant N.V.)132,617
7/31/2020100%
2800 Waterford Lake Dr.MidlothianVAAlstom Power, Inc.99,057
12/31/2021100%
800 East Canal St.RichmondVAMcGuireWoods LLP330,309
8/31/203087%
500 Kinetic Dr.HuntingtonWVAMZN WVCS LLC (Amazon.com, Inc.)68,693
11/30/2026100%
 Office Total10,881,264
 99.2%
The 2017 net effective annual base cash rent for the office portfolio as of December 31, 2017 was $15.97 per square foot and the weighted-average remaining lease term was 7.7 years.

32

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LEXINGTON CONSOLIDATED PORTFOLIO
PROPERTY CHART
INDUSTRIAL
As of December 31, 2016
Property LocationCityStatePrimary Tenant (Guarantor)Net Rentable Square FeetCurrent Lease Term ExpirationPercent Leased
LEXINGTON CONSOLIDATED PORTFOLIO
PROPERTY CHART
INDUSTRIAL
6938 Elm Valley Dr.KalamazooMIDana Commercial Vehicle Products, LLC (Dana Holding Corporation and Dana Limited)150,945
10/25/2021100%As of December 31, 2017
904 Industrial Rd.MarshallMITenneco Automotive Operating Company, Inc. (Tenneco, Inc.)246,508
9/30/2018100%Property LocationCityStatePrimary Tenant (Guarantor)Net Rentable Square FeetCurrent Lease Term ExpirationPercent Leased
*1601 Pratt Ave.MarshallMIAutocam Corporation58,707
12/31/2023100%2415 U.S. Hwy 78 EastMoodyALMichelin North America, Inc.595,346
12/31/2019100%
43955 Plymouth Oaks Blvd.PlymouthMITower Automotive Operations USA I, LLC / Tower Automotive Products Inc. (Tower Automotive, Inc.)290,133
10/31/2024100%318 Pappy Dunn Blvd.AnnistonALInternational Automotive Components Group North America, Inc.276,782
11/24/2029100%
1700 47th Ave NorthMinneapolisMNOwens Corning Roofing and Asphalt, LLC18,620
12/31/2025100%4801 North Park Dr.OpelikaALGolden State Foods Corp. (Golden State Enterprises, Inc.)165,493
5/31/2042100%
*549 Wingo Rd.ByhaliaMSAsics America Corporation (Asics Corporation)855,878
3/31/2030100%
554 Nissan Pkwy.CantonMSNissan North America, Inc.1,466,000
2/28/2027100%2455 Premier RowOrlandoFLWalgreen Co. / Walgreen Eastern Co.205,016
3/31/2021100%
*7670 Hacks Cross Rd.Olive BranchMSMAHLE Aftermarket Inc. (MAHLE Industries, Incorporated)268,104
2/28/2023100%3102 Queen Palm Dr.TampaFLTime Mailing Services, LLC (Time Inc.)229,605
6/30/2020100%
1133 Poplar Creek Rd.HendersonNCStaples, Inc.196,946
6/30/2018100%359 Gateway Dr.LavoniaGATI Group Automotive Systems, LLC (TI Automotive Ltd.)133,221
5/31/2020100%
*250 Swathmore Ave.High PointNCSteelcase Inc.244,851
9/30/2017100%
490 Westridge Pkwy.McDonoughGAGeorgia-Pacific Consumer Products LP (Georgia-Pacific LLC)1,121,120
1/31/2028100%
1420 Greenwood Rd.McDonoughGAUnited States Cold Storage, Inc.296,972
8/31/2028100%
3301 Stagecoach Rd. NEThomsonGAHollander Sleep Products, LLC (Hollander Home Fashions Holdings)208,000
5/31/2030100%
3931 Lakeview Corporate Dr.EdwardsvilleILAMAZON.COM.DEDC, LLC (Amazon.com, Inc.)769,500
9/30/2026100%
1001 Innovation Rd.RantoulILBell Sports, Inc. (Vista Outdoor Inc.)813,126
10/31/2034100%
3686 S. Central Ave.RockfordILPierce Packaging Co.93,000
12/31/2019100%
2880 Kenny Biggs Rd.LumbertonNCQuickie Manufacturing Corporation423,280
11/30/2021100%749 Southrock Dr.RockfordILJacobson Warehouse Company, Inc. (Jacobson Distribution Company and Jacobson Transportation Company, Inc.)150,000
12/31/2018100%
*671 Washburn Switch Rd.ShelbyNCClearwater Paper Corporation673,518
5/31/2031100%1020 W. Airport Rd.RomeovilleILARYZTA LLC (ARYZTA AG)188,166
10/31/2031100%
2203 Sherrill Dr.StatesvilleNCOzburn-Hessey Logistics, LLC (OHH Acquisition Corporation)639,800
12/31/2017100%1285 W. State Road 32LebanonINContinental Tire the Americas, LLC741,880
1/31/2024100%
121 Technology Dr.DurhamNHHeidelberg Americas, Inc. (Heidelberg Druckmaschinen AG) (2021) / Goss International Americas, Inc. (Goss International Corporation) (2026)500,500
3/30/2026100%1621 Veterans Memorial Pkwy ELafayetteINCaterpillar, Inc.309,400
9/30/2024100%
5625 North Sloan Ln.North Las VegasNVNicholas and Co., Inc.180,235
9/30/2034100%2935 Van Vactor Dr.PlymouthINBay Valley Foods, LLC300,500
12/31/2018100%
29-01 Borden Ave. / 29-10 Hunters Point Ave.Long Island CityNYFedEx Ground Package System, Inc. (FedEx Corporation)140,330
3/31/2028100%27200 West 157th St.New CenturyKSAmazon.com.ksdc, LLC (Amazon.com, Inc.)446,500
1/31/2027100%
736 Addison Rd.ErwinNYCorning Property Management Corporation408,000
11/30/2026100%10000 Business Blvd.Dry RidgeKYDana Light Axle Products, LLC (Dana Holding Corporation and Dana Limited)336,350
6/30/2025100%
351 Chamber Dr.ChillicotheOHThe Kitchen Collection, Inc.475,218
6/30/2026100%730 North Black Branch Rd.ElizabethtownKYMetalsa Structural Products, Inc. / Dana Structural Products, LLC (Dana Holding Corporation and Dana Limited)167,770
6/30/2025100%
10590 Hamilton Ave.CincinnatiOHThe Hillman Group, Inc.264,598
12/31/2027100%750 North Black Branch Rd.ElizabethtownKYMetalsa Structural Products, Inc. / Dana Structural Products, LLC (Dana Holding Corporation and Dana Limited)539,592
6/30/2025100%
1650 - 1654 Williams Rd.ColumbusOHODW Logistics, Inc.772,450
6/30/2018100%301 Bill Bryan Rd.HopkinsvilleKYMetalsa Structural Products, Inc. / Dana Structural Products, LLC (Dana Holding Corporation and Dana Limited)424,904
6/30/2025100%
7005 Cochran Rd.GlenwillowOHRoyal Appliance Mfg. Co.458,000
7/31/2025100%4010 Airpark Dr.OwensboroKYMetalsa Structural Products, Inc. / Dana Structural Products, LLC (Dana Holding Corporation and Dana Limited)211,598
6/30/2025100%
*191 Arrowhead Dr.HebronOHOwens Corning Insulating Systems, LLC250,410
12/31/2019100%
*200 Arrowhead Dr.HebronOHOwens Corning Insulating Systems, LLC400,522
12/31/2019100%
10345 Philipp Pkwy.StreetsboroOHL'Oreal USA S/D, Inc. (L'Oreal USA, Inc.)649,250
10/17/2019100%1901 Ragu Dr.OwensboroKYUnilever Supply Chain, Inc. (Unilever United States, Inc.)443,380
12/19/2020100%

33

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LEXINGTON CONSOLIDATED PORTFOLIO
PROPERTY CHART
INDUSTRIAL
 As of December 31, 2016
 Property LocationCityStatePrimary Tenant (Guarantor)Net Rentable Square FeetCurrent Lease Term ExpirationPercent Leased
 27255 SW 95th Ave.WilsonvilleORPacific Foods of Oregon Inc. d/b/a Pacific Natural Foods508,277
10/31/2032100%
*250 Rittenhouse Cir.BristolPANorthtec LLC (The Estée Lauder Companies Inc.)241,977
11/30/2026100%
 100 Ryobi Dr.AndersonSCOne World Technologies, Inc. (Techtronic Industries Co. Ltd.)1,327,022
6/30/2036100%
 590 Ecology Ln.ChesterSCBoral Stone Products LLC (Boral Limited)420,597
7/14/2025100%
 50 Tyger River Dr.DuncanSCPlastic Omnium Auto Exteriors, LLC221,833
9/30/2018100%
 101 Michelin Dr.LaurensSCMichelin North America, Inc.1,164,000
1/31/2020100%
 900 Industrial Blvd.CrossvilleTNDana Commercial Vehicle Products, LLC222,200
9/30/2026100%
 633 Garrett Pkwy.LewisburgTNCalsonic Kansei North America, Inc.310,000
3/31/2026100%
 120 Southeast Pkwy Dr.FranklinTNEssex Group, Inc. (United Technologies Corporation)289,330
12/31/2018100%
 3350 Miac Cove Rd.MemphisTNMimeo.com, Inc.140,079
9/30/202077%
 3456 Meyers Ave.MemphisTNSears, Roebuck and Co. / Sears Logistics Services780,000
2/28/2027100%
 3820 Micro Dr.MillingtonTNIngram Micro L.P. (Ingram Micro Inc.)701,819
9/30/2021100%
 1501 Nolan Ryan Expy.ArlingtonTXArrow Electronics, Inc.74,739
6/30/2027100%
 7007 F.M. 362 Rd.BrookshireTXOrizon Industries, Inc. (Spitzer Industries, Inc.)262,095
3/31/2035100%
 13863 Industrial Rd.HoustonTXCurtis Kelly, Inc. (Spitzer Industries, Inc.)187,800
3/31/2035100%
 13901/14035 Industrial Rd.HoustonTXIndustrial Terminals Management, L.L.C. (Maritime Holdings (Delaware) LLC)132,449
3/31/2038100%
 13930 Pike Rd.Missouri CityTXVulcan Construction Materials, LP (Vulcan Materials Company)N/A
4/30/2032100%
 2425 Hwy. 77 NorthWaxahachieTXJames Hardie Building Products, Inc. (James Hardie NV & James Hardie Industries NV)335,610
3/31/2020100%
 291 Park Center Dr.WinchesterVAKraft Heinz Foods Company344,700
5/31/2021100%
 901 East Bingen Point WayBingenWAThe Boeing Company124,539
5/31/2024100%
*2800 Polar WayRichlandWAPreferred Freezer Services of Richland, LLC (Preferred Freezer Services, LLC & Preferred Freezer Services Operating, LLC)456,412
8/31/2035100%
 2424 Alpine Rd.Eau ClaireWISilver Spring Foods, Inc. (Huntsinger Farms, Inc.)159,000
4/30/2027100%
 111 West Oakview Pkwy.Oak CreekWIStella & Chewy's LLC164,007
6/30/2035100%
    Industrial Total27,476,653
 99.9%

The 2016 net effective annual base cash rent for the industrial portfolio as of December 31, 2016 was $4.91 per square foot and the weighted-average remaining lease term was 10.4 years.
 
LEXINGTON CONSOLIDATED PORTFOLIO
PROPERTY CHART
INDUSTRIAL
 As of December 31, 2017
 Property LocationCityStatePrimary Tenant (Guarantor)Net Rentable Square FeetCurrent Lease Term ExpirationPercent Leased
 5001 Greenwood Rd.ShreveportLALibbey Glass Inc. (Libbey Inc.)646,000
10/31/2026100%
 5417 Campus Dr.ShreveportLAThe Tire Rack, Inc.257,849
3/31/2022100%
 113 Wells St.North BerwickMEUnited Technologies Corporation993,685
4/30/2024100%
 2860 Clark St.DetroitMI
Undisclosed(1)
189,960
10/22/2035100%
 6938 Elm Valley Dr.KalamazooMIDana Commercial Vehicle Products, LLC (Dana Holding Corporation and Dana Limited)150,945
10/25/2021100%
 904 Industrial Rd.MarshallMITenneco Automotive Operating Company, Inc. (Tenneco, Inc.)246,508
9/30/2028100%
*1601 Pratt Ave.MarshallMIAutocam Corporation (NN Inc.)58,707
12/31/2023100%
 43955 Plymouth Oaks Blvd.PlymouthMITower Automotive Operations USA I, LLC / Tower Automotive Products Inc. (Tower Automotive, Inc.)311,612
10/31/2024100%
 16950 Pine Dr.RomulusMI
Undisclosed(1)
500,023
8/24/2032100%
*26700 Bunert Rd.WarrenMILipari Foods Operating Company, LLC260,243
10/31/2032100%
 1700 47th Ave NorthMinneapolisMNOwens Corning Roofing and Asphalt, LLC18,620
12/31/2025100%
*549 Wingo Rd.ByhaliaMSAsics America Corporation (Asics Corporation)855,878
3/31/2030100%
 1550 Hwy 302ByhaliaMSMcCormick & Company, Inc.615,600
9/30/2027100%
 554 Nissan Pkwy.CantonMSNissan North America, Inc.1,466,000
2/28/2027100%
*7670 Hacks Cross Rd.Olive BranchMSMAHLE Aftermarket Inc. (MAHLE Industries, Incorporated)268,104
2/28/2023100%
 1133 Poplar Creek Rd.HendersonNCStaples, Inc.196,946
12/31/2018100%
 2880 Kenny Biggs Rd.LumbertonNCQuickie Manufacturing Corporation423,280
11/30/2021100%
*671 Washburn Switch Rd.ShelbyNCClearwater Paper Corporation673,425
5/31/2036100%
 2203 Sherrill Dr.StatesvilleNCGeodis Logistics, LLC (OHH Acquisition Corporation)639,800
12/31/2020100%
 121 Technology Dr.DurhamNHHeidelberg Americas, Inc. (Heidelberg Druckmaschinen AG) (2021) / Goss International Americas, Inc. (Goss International Corporation) (2026)500,500
3/30/2026100%
 5625 North Sloan Ln.North Las VegasNVNicholas and Co., Inc.180,235
9/30/2034100%
 29-01 Borden Ave. / 29-10 Hunters Point Ave.Long Island CityNYFedEx Ground Package System, Inc. (FedEx Corporation)140,330
3/31/2028100%
 736 Addison Rd.ErwinNYCorning Property Management Corporation408,000
11/30/2026100%

34

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LEXINGTON CONSOLIDATED PORTFOLIO
PROPERTY CHART
MULTI-TENANTED
 As of December 31, 2016
 Property LocationCityStatePrimary Tenant (Guarantor)Property TypeNet Rentable Square FeetCurrent Lease Term ExpirationPercent Leased
 13430 North Black Canyon Fwy.PhoenixAZMulti-tenantedOffice138,940
Various92%
*King St./1042 Fort St. MallHonoluluHIMulti-tenantedOffice77,459
Various50%
*33 Commercial St. AFoxboroughMA(Available for lease)Office84,441
N/A0%
*26555 Northwestern Hwy.SouthfieldMI(Available for lease)Office359,645
N/A0%
 7111 Crabb Rd.TemperanceMIHollingsworth Logistics Group, L.L.C.Industrial756,856
11/30/202138%
 3165 McKelvey Rd.BridgetonMOBJC Health SystemOffice51,067
12/31/201850%
*1460 Tobias Gadson Blvd.CharlestonSCVallen Distribution, Inc.Office50,076
6/30/201941%
*2210 Enterprise Dr.FlorenceSCCaliber Funding, LLCOffice176,557
6/30/201821%
 854 Paragon WayRock HillSC(Available for lease)Office104,497
N/A0%
 6050 Dana WayAntiochTNMulti-tenantedIndustrial674,528
Various98%
 104 & 110 S. Front St.MemphisTN(Available for lease)Office37,229
N/A0%
 11511 Luna Rd.Farmers BranchTXInternational Business Machines CorporationOffice181,072
4/30/202145%
 1200 Jupiter Rd.GarlandTX(Available for lease)Office278,759
N/A0%
    Multi-Tenanted Total 2,971,126
 43.2%

The 2016 net effective annual base cash rent for the multi-tenant portfolio as of December 31, 2016 was $2.56 per square foot and the weighted-average remaining lease term was 3.0 years.
 
LEXINGTON CONSOLIDATED PORTFOLIO
PROPERTY CHART
INDUSTRIAL
 As of December 31, 2017
 Property LocationCityStatePrimary Tenant (Guarantor)Net Rentable Square FeetCurrent Lease Term ExpirationPercent Leased
 351 Chamber Dr.ChillicotheOHThe Kitchen Collection, Inc.475,218
6/30/2026100%
 10590 Hamilton Ave.CincinnatiOHThe Hillman Group, Inc.264,598
12/31/2027100%
 1650 - 1654 Williams Rd.ColumbusOHODW Logistics, Inc. (Nessent Ltd. And Dist-Trans Co, LLC)772,450
6/30/2020100%
 7005 Cochran Rd.GlenwillowOHRoyal Appliance Mfg. Co.458,000
7/31/2025100%
*191 Arrowhead Dr.HebronOHOwens Corning Insulating Systems, LLC250,410
12/31/2019100%
*200 Arrowhead Dr.HebronOHOwens Corning Insulating Systems, LLC400,522
12/31/2019100%
 10345 Philipp Pkwy.StreetsboroOHL'Oreal USA S/D, Inc. (L'Oreal USA, Inc.)649,250
10/17/2019100%
 27255 SW 95th Ave.WilsonvilleORPacific Foods of Oregon Inc. d/b/a Pacific Natural Foods508,277
10/31/2032100%
*250 Rittenhouse Cir.BristolPANorthtec LLC (The Estée Lauder Companies Inc.)241,977
11/30/2026100%
 100 Ryobi Dr.AndersonSCOne World Technologies, Inc. (Techtronic Industries Co. Ltd.)1,327,022
6/30/2036100%
 590 Ecology Ln.ChesterSCBoral Stone Products LLC (Boral Limited)420,597
7/14/2025100%
 50 Tyger River Dr.DuncanSCPlastic Omnium Auto Exteriors, LLC221,833
9/30/2018100%
 101 Michelin Dr.LaurensSCMichelin North America, Inc.1,164,000
1/31/2020100%
 1520 Lauderdale Memorial Hwy.ClevelandTNGeneral Electric Company851,370
3/31/2024100%
 900 Industrial Blvd.CrossvilleTNDana Commercial Vehicle Products, LLC222,200
9/30/2026100%
 633 Garrett Pkwy.LewisburgTNCalsonic Kansei North America, Inc.310,000
3/31/2026100%
 120 Southeast Pkwy Dr.FranklinTNEssex Group, Inc. (United Technologies Corporation)289,330
12/31/2023100%
 201 James Lawrence Rd.JacksonTNKellogg Sales Company (Kellogg Company)1,062,055
10/31/2027100%
 3350 Miac Cove Rd.MemphisTNMimeo.com, Inc.140,079
9/30/202077%
 3456 Meyers Ave.MemphisTNSears, Roebuck and Co. / Sears Logistics Services780,000
2/28/2027100%
 3820 Micro Dr.MillingtonTNIngram Micro L.P. (Ingram Micro Inc.)701,819
9/30/2021100%
 200 Sam Griffin Rd.SmyrnaTNNissan North America, Inc.1,505,000
4/30/2027100%
 1501 Nolan Ryan Expy.ArlingtonTXArrow Electronics, Inc.74,739
6/30/2027100%
 7007 F.M. 362 Rd.BrookshireTXOrizon Industries, Inc. (Spitzer Industries, Inc.)262,095
3/31/2035100%
*4005 E I-30Grand PrairieTXO'Neal Metals (Texas) L.P. (O'Neal Industries, Inc.)215,000
3/31/2037100%
 13863 Industrial Rd.HoustonTXCurtis Kelly, Inc. (Spitzer Industries, Inc.)187,800
3/31/2035100%

35

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LEXINGTON CONSOLIDATED PORTFOLIO
PROPERTY CHART
OTHER
 As of December 31, 2016
 Property LocationCityStatePrimary Tenant (Guarantor)Net Rentable Square FeetCurrent Lease Term ExpirationPercent Leased
 255 Northgate Dr.MantecaCAKmart Corporation107,489
12/31/2018100%
 12080 Carmel Mountain Rd.San DiegoCASears, Roebuck and Co / Kmart Corporation107,210
12/31/2018100%
 499 Derbyshire Dr.VeniceFLLittlestone Brotherhood LLC31,180
1/31/2055100%
*832 N. Westover Blvd.AlbanyGAGander Mountain Company45,554
11/30/2028100%
 2223 N. Druid Hills Rd.AtlantaGABank of America, N.A. (Bank of America Corporation)6,260
12/31/2019100%
 956 Ponce de Leon Ave.AtlantaGABank of America, N.A. (Bank of America Corporation)3,900
12/31/2019100%
 201 W. Main St.CummingGABank of America, N.A. (Bank of America Corporation)14,208
12/31/2019100%
 4545 Chamblee-Dunwoody Rd.DunwoodyGABank of America, N.A. (Bank of America Corporation)4,565
12/31/2019100%
 1066 Main St.Forest ParkGABank of America, N.A. (Bank of America Corporation)14,859
12/31/2019100%
 825 Southway Dr.JonesboroGABank of America, N.A. (Bank of America Corporation)4,894
12/31/2019100%
 1698 Mountain Industrial Blvd.Stone MountainGABank of America, N.A. (Bank of America Corporation)5,704
12/31/2019100%
 1150 W. Carl Sandburg Dr.GalesburgILKmart Stores of Illinois LLC / Kmart Corporation94,970
12/31/2018100%
 5104 North Franklin Rd.LawrenceINMarsh Supermarkets, Inc. / Marsh Supermarkets, LLC28,721
10/31/2018100%
 30 Light St.BaltimoreMD30 Charm City, LLCN/A
12/31/2048100%
 201-215 N. Charles St.BaltimoreMD201 NC Leasehold LLCN/A
8/31/2112100%
 733 East Main St.JeffersonNCFood Lion, LLC / Delhaize America, Inc.34,555
2/28/2023100%
 291 Talbert Blvd.LexingtonNCFood Lion, LLC / Delhaize America, Inc.23,000
2/28/2018100%
 835 Julian Ave.ThomasvilleNCMighty Dollar, LLC23,767
9/30/2018100%
*1237 W. Sherman Ave.VinelandNJHealthSouth Rehabilitation Hospital of South Jersey, LLC (HealthSouth Corporation)39,287
2/28/2043100%
 130 Midland Ave.Port ChesterNYSt. Anthony Supermarket Corp. (Anthony Pena, Marina Pena, Anthony Corona and Robert Corona)59,613
10/31/2018100%
 21082 Pioneer Plaza Dr.WatertownNYKmart Corporation120,727
12/31/2018100%
 4831 Whipple Avenue N.W.CantonOHBest Buy Co., Inc.46,350
2/26/2018100%
 5350 Leavitt Rd.LorainOHKmart Corporation193,193
12/31/2018100%
 B.E.C. 45th St/Lee Blvd.LawtonOKAssociated Wholesale Grocers, Inc. / Safeway, Inc.30,757
3/31/2019100%
*6910 S. Memorial Hwy.TulsaOKToys "R" Us, Inc. / Toys “R” Us-Delaware, Inc.43,123
5/31/2026100%
 1600 E. 23rd St.ChattanoogaTNBI- LO, LLC / K-VA-T Food Stores, Inc.42,130
6/30/2019100%
 1053 Mineral Springs Rd.ParisTNThe Kroger Co.31,170
7/1/2018100%
 175 Holt Garrison Pkwy.DanvilleVAHome Depot USA, Inc.N/A
1/31/2029100%
 
LEXINGTON CONSOLIDATED PORTFOLIO
PROPERTY CHART
INDUSTRIAL
 As of December 31, 2017
 Property LocationCityStatePrimary Tenant (Guarantor)Net Rentable Square FeetCurrent Lease Term ExpirationPercent Leased
 13901/14035 Industrial Rd.HoustonTXIndustrial Terminals Management, L.L.C. (Maritime Holdings (Delaware) LLC)132,449
3/31/2038100%
 13930 Pike Rd.Missouri CityTXVulcan Construction Materials, LP (Vulcan Materials Company)N/A
4/30/2032100%
 16407 Applewhite Rd.San AntonioTXInternational Heating, Air-Conditioning and Refrigeration Solutions Company849,275
4/30/2027100%
 80 Tyson Dr.WinchesterVA
Undisclosed(1)
400,400
12/18/2031100%
 291 Park Center Dr.WinchesterVAKraft Heinz Foods Company344,700
5/31/2021100%
 901 East Bingen Point WayBingenWAThe Boeing Company124,539
5/31/2024100%
*2800 Polar WayRichlandWAPreferred Freezer Services of Richland, LLC (Preferred Freezer Services, LLC & Preferred Freezer Services Operating, LLC)456,412
8/31/2035100%
 111 West Oakview Pkwy.Oak CreekWIStella & Chewy's LLC164,007
6/30/2035100%
    Industrial Total35,396,894
 99.9%
(1)    Tenant is a domestic subsidiary of an international automaker.

The 2017 net effective annual base cash rent for the industrial portfolio as of December 31, 2017 was $4.67 per square foot and the weighted-average remaining lease term was 10.6 years.


36

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LEXINGTON CONSOLIDATED PORTFOLIO
PROPERTY CHART
OTHER
 As of December 31, 2016
 Property LocationCityStatePrimary Tenant (Guarantor)Net Rentable Square FeetCurrent Lease Term ExpirationPercent Leased
 2411 W. Beverly St.StauntonVAFood Lion, LLC / Delhaize America, Inc.23,000
2/28/2018100%
 9803 Edmonds WayEdmondsWAPuget Consumers Co-op d/b/a PCC Natural Markets35,459
8/31/2028100%
 97 Seneca TrailFairleaWVKmart Corporation90,933
12/31/2018100%
        
    Other Total1,306,578
 100%
    Consolidated Portfolio Grand Total43,324,297
 95.9%
 
LEXINGTON CONSOLIDATED PORTFOLIO
PROPERTY CHART
OTHER
 As of December 31, 2017
 Property LocationCityStatePrimary Tenant (Guarantor)Property TypeNet Rentable Square FeetCurrent Lease Term ExpirationPercent Leased
 13430 North Black Canyon Fwy.PhoenixAZMulti-tenantedMulti-tenant - Office138,940
Various92%
 255 Northgate Dr.MantecaCAKmart CorporationRetail107,489
12/31/2018100%
 12080 Carmel Mountain Rd.San DiegoCASears, Roebuck and Co / Kmart CorporationRetail107,210
12/31/2018100%
 499 Derbyshire Dr.VeniceFLLittlestone Brotherhood LLC (Ralph Little)Specialty31,180
1/31/2055100%
*832 N. Westover Blvd.AlbanyGA(Available for lease)Multi-tenant - Retail45,554
N/A0%
*King St./1042 Fort St. MallHonoluluHIMulti-tenantedMulti-tenant - Office77,459
Various48%
 1150 W. Carl Sandburg Dr.GalesburgILKmart Stores of Illinois LLC / Kmart CorporationRetail94,970
12/31/2018100%
 5104 North Franklin Rd.LawrenceIN(Available for lease)Multi-tenant - Retail35,786
N/A0%
 30 Light St.BaltimoreMD30 Charm City, LLCSpecialtyN/A
12/31/2048100%
 201-215 N. Charles St.BaltimoreMD201 NC Leasehold LLCSpecialtyN/A
8/31/2112100%
 733 East Main St.JeffersonNCFood Lion, LLC / Delhaize America, Inc.Retail34,555
2/28/2023100%
 835 Julian Ave.ThomasvilleNCMighty Dollar, LLCRetail23,767
9/30/2018100%
*1237 W. Sherman Ave.VinelandNJHealthSouth Rehabilitation Hospital of South Jersey, LLC (HealthSouth Corporation)Specialty39,287
2/28/2043100%
 21082 Pioneer Plaza Dr.WatertownNYKmart CorporationRetail120,727
12/31/2018100%
 4831 Whipple Avenue N.W.CantonOHBest Buy Co., Inc.Retail46,350
2/26/2018100%
 B.E.C. 45th St/Lee Blvd.LawtonOKAssociated Wholesale Grocers, Inc. / Safeway, Inc.Retail30,757
3/31/2019100%
*1460 Tobias Gadson Blvd.CharlestonSCVallen Distribution, Inc.Multi-tenant - Office50,076
6/30/201941%
*2210 Enterprise Dr.FlorenceSCCaliber Funding, LLCMulti-tenant - Office176,557
6/30/201821%
 6050 Dana WayAntiochTNMulti-tenantedMulti-tenant - Industrial674,528
Various97%
 1600 E. 23rd St.ChattanoogaTNBI- LO, LLC / K-VA-T Food Stores, Inc.Retail42,130
6/30/2019100%
 1053 Mineral Springs Rd.ParisTNThe Kroger Co.Retail31,170
7/1/2023100%
 11511 Luna Rd.Farmers BranchTXInternational Business Machines CorporationMulti-tenant - Office181,072
4/30/202197%
 1311 Broadfield Blvd.HoustonTXSaipem America, Inc. (Saipem S.p.A.)Multi-tenant - Office155,407
3/31/202835%
 175 Holt Garrison Pkwy.DanvilleVAHome Depot USA, Inc.SpecialtyN/A
1/31/2029100%
 97 Seneca TrailFairleaWVKmart CorporationRetail90,933
12/31/2018100%
    Other Total 2,335,904
 81.8%
    Consolidated Portfolio Grand Total 48,614,062
 98.9%
The 20162017 net effective annual base cash rent for the other portfolio as of December 31, 20162017 was $7.51$5.82 per square foot and the weighted-average remaining lease term was 14.610.1 years.
The 20162017 net effective annual base cash rent for the consolidated portfolio as of December 31, 20162017 was $7.62$7.25 per square foot and the weighted-average remaining lease term was 8.69.1 years.

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LEXINGTON
NON-CONSOLIDATED PORTFOLIO PROPERTY
CHART
LEXINGTON
NON-CONSOLIDATED PORTFOLIO PROPERTY
CHART
LEXINGTON
NON-CONSOLIDATED PORTFOLIO PROPERTY
CHART
As of December 31, 2016
As of December 31, 2017As of December 31, 2017
Property LocationCityStatePrimary Tenant (Guarantor)Property TypeNet Rentable Square FeetCurrent Lease Term ExpirationPercent LeasedCityStatePrimary Tenant (Guarantor)Property TypeNet Rentable Square FeetCurrent Lease Term ExpirationPercent Leased
607 & 611 Lumsden Professional Ct.BrandonFLBluePearl Holdings, LLCOffice8,500
10/31/2033100%BrandonFLBluePearl Holdings, LLCOffice8,500
10/31/2033100%
4525 Ulmerton Rd.ClearwaterFLBluePearl Holdings, LLCOffice3,000
10/31/2033100%ClearwaterFLBluePearl Holdings, LLCOffice3,000
10/31/2033100%
100 Gander WayPalm Beach GardensFLGander Mountain CompanyOther120,000
3/31/2028100%Palm Beach GardensFL(Available for lease)Other120,000
N/A0%
455 Abernathy Rd.AtlantaGABluePearl Holdings, LLCOffice32,000
10/31/2033100%AtlantaGABluePearl Holdings, LLCOffice32,000
10/31/2033100%
820 Frontage Rd.NorthfieldILBluePearl Holdings, LLCOffice14,000
10/31/2033100%NorthfieldILBluePearl Holdings, LLCOffice14,000
10/31/2033100%
29080 Inkster Rd.SouthfieldMIBluePearl Holdings, LLCOffice38,000
10/31/2033100%SouthfieldMIBluePearl Holdings, LLCOffice38,000
10/31/2033100%
4126 Parkcard Rd.Ann ArborMIBluePearl Holdings, LLCOffice3,500
10/31/2033100%
3201 Quail Springs Pkwy.Oklahoma CityOKAT&T Corp. / AT&T Services, Inc. / New Cingular Wireless Services, Inc.Office128,500
11/30/2020100%
4126 Packard Rd.Ann ArborMIBluePearl Holdings, LLCOffice3,500
10/31/2033100%
18839 McKay Blvd.HumbleTXTriumph Rehabilitation Hospital of Northeast Houston, LLC (RehabCare Group, Inc.)Other55,646
1/31/2029100%HumbleTXTriumph Rehabilitation Hospital of Northeast Houston, LLC (RehabCare Group, Inc.)Other55,646
1/31/2029100%
2203 North Westgreen Blvd.KatyTXBritish Schools of America, LLCOther274,000
8/31/2036100%KatyTXBritish Schools of America, LLCOther274,000
8/31/2036100%
 Total 677,146
 100% Total 548,646
 78.1%
In addition, we have a non-consolidated joint venture with a developer, which owns a developable parcel of land in Etna, Ohio.
The 20162017 net effective annual base cash rent for our proportionate share of the non-consolidated portfolio as of December 31, 20162017 was $22.11$19.66 per square foot and the weighted-average remaining lease term was 14.017.0 years.

The following chart sets forth certain information regarding lease expirations for the next ten years in our consolidated portfolio:
Year
Number of
Lease Expirations
Square FeetGAAP Base Rent ($000)
Percentage of
Annual Rent
Number of
Lease Expirations
Square FeetGAAP Base Rent ($000)
Percentage of
Annual Rent
2017381,939,956
 $15,266
 4.7%
2018454,120,006
 26,751
 8.2%522,145,001
 $16,765
 4.9%
2019304,021,688
 31,791
 9.7%253,958,347
 30,844
 9.0%
2020173,301,430
 22,743
 7.0%184,091,519
 19,030
 5.5%
2021173,505,636
 23,902
 7.3%173,140,359
 24,476
 7.1%
20226831,639
 9,983
 3.1%6928,515
 12,607
 3.7%
20237909,047
 12,734
 3.9%101,272,317
 13,829
 4.0%
2024112,212,735
 15,555
 4.8%154,148,102
 19,843
 5.8%
2025194,312,564
 32,142
 9.8%194,317,352
 31,068
 9.0%
2026144,022,567
 15,391
 4.7%123,846,463
 17,101
 5.0%
2027177,701,857
 28,660
 8.3%

The following chart sets forth the 20162017 annual GAAP base rent ($000) based on the credit rating of our consolidated tenants at December 31, 20162017(1):
GAAP Base Rent PercentageGAAP Base Rent Percentage
Investment Grade$123,769
 37.0%$139,336
 40.1%
Non-investment Grade56,836
 17.0%53,825
 15.5%
Unrated153,563
 46.0%154,222
 44.4%
$334,168
 100.0%$347,383
 100.0%
(1) Credit ratings are based upon either tenant, guarantor or parent/sponsor. Generally, all multi-tenant assets are included in unrated. See Item 1A “Risk Factors”, above.

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Item 3. Legal Proceedings

From time to time we are directly and indirectly involved in legal proceedings arising in the ordinary course of our business. We believe, based on currently available information, and after consultation with legal counsel, that although the outcomes of those normal course proceedings are uncertain, the results of such proceedings, in the aggregate, will not have a material adverse effect on our business, financial condition and results of operations.

GSMSC II 2006-GG6 Bridgewater Hills Corporate Center, LLC v. Lexington Realty Trust (Supreme Court of the State of New York, County of New York-Index No. 653117/2015)

On September 16, 2015, GSMSC II 2006-GG6 Bridgewater Hills Corporate Center, LLC commenced an action as lender against usthe Company based on a limited guaranty of recourse obligations executed by a predecessor entity of the Company in connection with a mortgage loan secured by a property owner subsidiary's commercial property in Bridgewater, New Jersey.  The property owner subsidiary defaulted due to non-payment after the sole tenant vacated at the end of the lease term.  The lender currently seeksclaimed approximately $9.2 million in order to satisfy the outstanding amount of the loan, after offset for the lender's asserted value of the property it obtained in foreclosure, plus interest, reasonable attorney’s fees and other costs and disbursements related thereto. The Company had not recorded any liability relating to this litigation as of December 31, 2016 as the Company believes that a loss contingency is "reasonably possible" (as defined by FASB ASC 450-20-20) but not "probable" (as defined by FASB ASC 450-20-20).

The lender claimsclaimed that the Company's limited guaranty was triggered due to the merger of Newkirk Realty Trust, Inc. and Lexington Corporate Properties Trust on December 31, 2006,Merger, arguing that it constituted an event of default because it was a transfer that was not permitted by the loan agreement. The limited guaranty providesprovided that the guarantor's liability for the guaranteed obligations shall not exceed $10.0 million, which the Company believes is its maximum exposure to loss. The Company intends to vigorously defend the lender’s claim.million.  The Company filed a motion to dismiss, which was generally denied. The Company is currently conductingparties conducted discovery withconsisting of document production required to be completed by March 31, 2017, fact deposition to be completed by August 28,production. A mediation was held on October 5, 2017. As a result of discussions following the mediation, a settlement agreement was executed on November 6, 2017, and expert depositions to be completed by October 31,the Company made a $2.05 million payment in full settlement of the lender's claim. Following the settlement, the action was dismissed on November 22, 2017.

The lender also brought a foreclosure action against the property owner subsidiary. A foreclosure sale was held September 13, 2016 and the lender acquired the property for a nominal amount.
Item 4. Mine Safety Disclosures

Not applicable.


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PART II.
Item 5. Market For Registrant's Common Equity, Related Stockholder Matters And Issuer Purchases of Equity Securities

Lexington Realty Trust

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 (composite) for our common shares for each of the periods indicated below:
For the Quarters Ended: High Low
December 31, 2016 $11.01
 $9.23
September 30, 2016 11.02
 9.89
June 30, 2016 10.12
 8.36
March 31, 2016 8.81
 6.52
December 31, 2015 9.17
 7.97
September 30, 2015 9.01
 7.77
June 30, 2015 10.19
 8.42
March 31, 2015 11.75
 9.52
The per common share closing price on the NYSE (composite) was $11.30 on February 27, 2017.

Holders. As of February 27, 2017, we had approximately 3,032 common shareholders of record.

Dividends. Since our predecessor's formation in 1993, we have made quarterly distributions without interruption.

The common share dividends paid in each quarter for the last two years are as follows:
Quarters Ended 2016 2015
March 31, $0.170
 $0.170
June 30, $0.170
 $0.170
September 30, $0.170
 $0.170
December 31, $0.175
 $0.170

While we intend to continue paying regular quarterly dividends to holders of our common shares, the authorization of future dividend declarations will be at the discretion of our 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. 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 debt instruments 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.
Direct Share Purchase Plan. We maintain a direct share purchase plan, which has two components, (i) a dividend reinvestment component and (ii) a direct share purchase component. Under the dividend reinvestment component, common shareholders and holders of OP units may elect to automatically reinvest their dividends and distributions to purchase our common shares. Under the direct share purchase component, our current investors and new investors can make optional cash purchases of our common shares. The administrator of the plan, Computershare Trust Company, N.A., purchases common shares for the accounts of the participants under the plan, at our discretion, either directly from us, on the open market or through a combination of those two options. In 2016, 2015 and 2014, we issued approximately 0.6 million, 2.3 million and 2.6 million common shares, respectively, under the plan, raising net proceeds of $4.1 million, $20.8 million and $25.8 million, respectively.
ATM Program. In January 2013, we implemented, and in November 2016, we updated, our ATM offering program, under which we may, from time to time, sell up to $125.0 million in common shares over the term of the program. As of the date of filing this Annual Report, we have issued 5,979,639 common shares under this ATM offering program at a weighted-average issue price of $10.83 per common share, generating proceeds of approximately $63.7 million after deducting approximately $1.0 million of commissions. We intend to use the net proceeds from the ATM offering program for general working capital, which may include unspecified acquisitions and to repay indebtedness. As of the date of filing this Annual Report, we had approximately $60.3 million available for issuance under the ATM offering program.

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Table of Contents


Equity Compensation Plan Information. The following table sets forth certain information, as of December 31, 2016, with respect to our 2011 Equity-Based Award Plan under which our equity securities are authorized for issuance as compensation.
  
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 406,241
 $6.78
 2,344,136
Equity compensation plans not approved by security holders 
 
 
Total 406,241
 $6.78
 2,344,136

Lepercq Corporate Income Fund L.P.

General. There is no established public trading market for the OP units.

Holders. As of February 27, 2017, the Partnership had approximately 322 holders of record of OP units.

Distributions. Since its formation in 1986, the Partnership has made quarterly distributions without interruption.

The weighted-average distributions per OP unit paid in each quarter for the last two years are as follows:
Quarters Ended 2016 2015
March 31, $0.20
 $0.20
June 30, $0.20
 $0.21
September 30, $0.20
 $0.20
December 31, $0.20
 $0.22

Holders of OP units are able to participate in the dividend reinvestment component of the Trust's Direct Share Purchase Plan, where they can reinvest distributions on their OP units in Lexington's common shares.

Recent Sales of Unregistered Securities.

We issued an aggregate of approximately 1.9 million common shares upon conversion of the remaining $12.4 million principal amount of our 6.00% Convertible Notes at the then stated conversion rates during 2016.

Share Repurchase Program.

The following table summarizes common shares/OP units that were repurchased during the fourth quarter of 2016 pursuant to publicly announced repurchase plans(1):
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
Maximum number of
shares/units that may yet be purchased under the plans or programs
October 1-31, 2016


6,599,088
November 1-30, 2016


6,599,088
December 1-31, 2016


6,599,088
Total


6,599,088
(1)    Share repurchase authorization announced on July 2, 2015, which has no expiration date.

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Table of Contents


Item 6. Selected Financial Data

The following sets forth our and the Partnership's selected consolidated financial data as of and for each of the years in the five-year period ended December 31, 2016. The selected consolidated financial data should be read in conjunction with Item 7 “Management's Discussion and Analysis of Financial Condition and Results of Operations” below, and the Consolidated Financial Statements and the related notes set forth in Item 8 “Financial Statements and Supplementary Data”, below. ($000's, except per share data)

 2016 2015 2014 2013 2012
Lexington Realty Trust:         
Total gross revenues$429,496
 $430,839
 $423,818
 $361,055
 $295,202
Expenses applicable to revenues(213,403) (222,853) (218,510) (212,658) (183,672)
Interest and amortization expense(88,032) (89,739) (97,303) (85,892) (84,250)
Income (loss) from continuing operations96,450
 113,209
 47,842
 (21,021) 184,173
Total discontinued operations
 1,682
 49,621
 24,884
 465
Net income96,450
 114,891
 97,463
 3,863
 184,638
Net income attributable to Lexington Realty Trust shareholders95,624
 111,703
 93,104
 1,630
 180,316
Net income (loss) attributable to common shareholders89,109
 105,100
 86,324
 (14,089) 156,811
Income (loss) from continuing operations per common share - basic0.38
 0.44
 0.17
 (0.18) 0.99
Income from discontinued operations - basic
 0.01
 0.21
 0.11
 
Net income (loss) per common share - basic0.38
 0.45
 0.38
 (0.07) 0.99
Income (loss) from continuing operations per common share - diluted0.37
 0.44
 0.17
 (0.18) 0.94
Income (loss) from discontinued operations per common share - diluted
 0.01
 0.21
 0.11
 (0.01)
Net income (loss) per common share - diluted0.37
 0.45
 0.38
 (0.07) 0.93
Cash dividends declared per common share0.69
 0.68
 0.675
 0.615
 0.55
Net cash provided by operating activities235,273
 244,930
 214,672
 206,304
 163,810
Net cash used in investing activities(10,187) (388,271) (43,068) (597,583) (134,103)
Net cash provided by (used in) financing activities(231,698) 45,513
 (57,788) 434,516
 (59,394)
Ratio of earnings to combined fixed charges and preferred dividends(1)
1.80
 2.00
 1.37
 N/A
 N/A
Real estate assets, net, including real estate - intangible assets3,028,326
 3,397,922
 3,287,250
 3,425,420
 3,165,085
Total assets(2)
3,441,467
 3,808,403
 3,758,483
 3,753,983
 3,407,180
Mortgages, notes payable, credit facility and term loans, including discontinued operations(2)
1,860,598
 2,190,740
 2,076,042
 2,037,509
 1,867,185
Shareholders' equity1,392,777
 1,440,029
 1,485,766
 1,515,738
 1,306,730
Total equity1,412,491
 1,462,531
 1,508,920
 1,539,483
 1,333,165
Preferred share liquidation preference96,770
 96,770
 96,770
 96,770
 251,770

_________
(1)    N/A - Ratio is below 1.0, deficit of $28,929 and $20,065 existed at December 31, 2013 and 2012, respectively.
(2)    2015-2012 amounts restated to reflect the adoption of ASU 2015-03 on January 1, 2016.




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 2016 2015 2014 2013 2012
LCIF:         
Total gross revenues$124,169
 $128,001
 $118,133
 $74,871
 $60,553
Expenses applicable to revenues(48,678) (47,697) (42,387) (35,589) (33,076)
Interest and amortization expense(27,313) (29,269) (28,267) (13,111) (14,054)
Income (loss) from continuing operations(3,921) 42,315
 40,738
 9,177
 12,164
Total discontinued operations
 
 18,811
 4,523
 (1,422)
Net income (loss)(3,921) 42,315
 59,549
 13,700
 10,742
Income (loss) from continuing operations per unit(0.05) 0.58
 0.59
 0.17
 0.32
Income (loss) from discontinued operations  per unit
 
 0.28
 0.09
 (0.04)
Net income (loss) per unit(0.05) 0.58
 0.87
 0.26
 0.28
Cash distributions per weighted-average unit (rounded)0.80
 0.84
 0.82
 0.87
 0.90
Net cash provided by operating activities38,907
 38,410
 38,049
 43,272
 37,720
Net cash provided by (used in) investing activities153,630
 (179,408) (7,806) (285,645) (56,530)
Net cash provided by (used in) financing activities(159,636) 151,800
 (35,079) 248,190
 6,984
Ratio of earnings to fixed charges (1)
N/A
 2.43
 2.43
 1.70
 1.87
Real estate assets, net, including real estate - intangible assets639,476
 1,005,505
 849,969
 829,484
 567,153
Loans receivable, net
 
 15,448
 19,220
 56,208
Total assets(2)
728,604
 1,130,926
 942,883
 909,413
 674,956
Mortgages and notes payable, including discontinued operations(2)
169,212
 431,599
 323,155
 334,153
 203,923
Co-borrower debt146,404
 201,106
 136,967
 91,551
 50,986
Partners' capital387,623
 461,657
 432,041
 448,067
 216,544

_________
(1)    N/A - Ratio is below 1.0, deficit of $4,803 existed at December 31, 2016.
(2)    2015-2012 amounts restated to reflect the adoption of ASU 2015-03 on January 1, 2016.




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Item 7. Management's Discussion and Analysis of Financial Condition andResults of Operations
In this discussion, we have included statements that may constitute “forward-lookingstatements” within the meaning of the safe harbor provisions of the PrivateSecurities Litigation Reform Act of 1995. Forward-looking statements are nothistorical facts but instead represent only our beliefs regarding future events, manyof which, by their nature, are inherently uncertain and outside our control. Thesestatements may relate to our future plans and objectives, among other things. Byidentifying these statements for you in this manner, we are alerting you to thepossibility that our actual results may differ, possibly materially, from theanticipated results indicated in these forward-looking statements. Important factorsthat could cause our results to differ, possibly materially, from those indicated inthe forward-looking statements include, among others, those discussed above in“Risk Factors” in Part I, Item 1A of this Annual Report and “CautionaryStatements Concerning Forward-Looking Statements” in Part I, of this AnnualReport.

Introduction

The following is a discussion and analysis of the consolidated financial condition and results of operations of Lexington Realty Trust and LCIF for the years ended December 31, 2016, 2015 and 2014, and significant factors that could affect their prospective financial condition and results of operations. This discussion should be read together with the accompanying consolidated financial statements of the Company and the Partnership included herein and notes thereto.

Lexington Realty Trust

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 (composite) for our common shares for each of the periods indicated below:
For the Quarters Ended: High Low
December 31, 2017 $10.65
 $9.58
September 30, 2017 10.44
 9.61
June 30, 2017 10.56
 9.00
March 31, 2017 11.42
 9.84
December 31, 2016 11.01
 9.23
September 30, 2016 11.02
 9.89
June 30, 2016 10.12
 8.36
March 31, 2016 8.81
 6.52
The per common share closing price on the NYSE (composite) was $8.15 on February 22, 2018.

Holders. As of February 22, 2018, we had approximately 2,834 common shareholders of record.

Dividends. Since our predecessor's formation in 1993, we have made quarterly distributions without interruption.

The common share dividends paid in each quarter for the last two years are as follows:
Quarters Ended 2017 2016
March 31, $0.175
 $0.170
June 30, $0.175
 $0.170
September 30, $0.175
 $0.170
December 31, $0.175
 $0.175

While we intend to continue paying regular quarterly dividends to holders of our common shares, the authorization of future dividend declarations will be at the discretion of our 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. 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 debt instruments 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.
Direct Share Purchase Plan. We maintain a direct share purchase plan, which has two components, (i) a dividend reinvestment component and (ii) a direct share purchase component. Under the dividend reinvestment component, common shareholders and holders of OP units may elect to automatically reinvest their dividends and distributions to purchase our common shares. Under the direct share purchase component, our current investors and new investors can make optional cash purchases of our common shares. The administrator of the plan, Computershare Trust Company, N.A., purchases common shares for the accounts of the participants under the plan, at our discretion, either directly from us, on the open market or through a combination of those two options. In 2016 and 2015, we issued approximately 0.6 million and 2.3 million common shares, respectively, under the plan, raising net proceeds of $4.1 million and $20.8 million, respectively. We did not issue any shares under the plan in 2017.
ATM Program. In January 2013, we implemented, and in November 2016, we updated, our ATM offering program, under which we may, from time to time, sell up to $125.0 million in common shares over the term of the program. As of the date of the filing of this Annual Report, we have issued 5,979,639 common shares under this ATM offering program at a weighted-average issue price of $10.83 per common share, generating proceeds of approximately $63.7 million after deducting approximately $1.0 million of commissions. We intend to use the net proceeds from the ATM offering program for general working capital, which may include unspecified acquisitions and to repay indebtedness. As of the date of filing this Annual Report, we had approximately $60.3 million available for issuance under the ATM offering program.

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Equity Compensation Plan Information. The following table sets forth certain information, as of December 31, 2017, with respect to our Amended and Restated 2011 Equity-Based Award Plan under which our equity securities are authorized for issuance as compensation.
  
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 134,790
 $7.39
 4,978,802
Equity compensation plans not approved by security holders 
 
 
Total 134,790
 $7.39
 4,978,802

Lepercq Corporate Income Fund L.P.

General. There is no established public trading market for the OP units.

Holders. As of February 22, 2018, the Partnership had approximately 315 holders of record of OP units.

Distributions. Since its formation in 1986, the Partnership has made quarterly distributions without interruption.

The weighted-average distributions per OP unit paid in each quarter for the last two years are as follows:
Quarters Ended 2017 2016
March 31, $0.20
 $0.20
June 30, $0.20
 $0.20
September 30, $0.20
 $0.20
December 31, $0.18
 $0.20

Holders of OP units are able to participate in the dividend reinvestment component of the Trust's Direct Share Purchase Plan, where they can reinvest distributions on their OP units in Lexington's common shares.

Recent Sales of Unregistered Securities.
We did not issue any common shares during 2017 on an unregistered basis.

Share Repurchase Program.
The following table summarizes common shares/OP units that were repurchased during the fourth quarter of 2017 pursuant to publicly announced repurchase plans(1):
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
Maximum number of
shares/units that may yet be purchased under the plans or programs
October 1-31, 2017


6,599,088
November 1-30, 2017


6,599,088
December 1-31, 2017


6,599,088
Total


6,599,088
(1)    Share repurchase authorization announced on July 2, 2015, which has no expiration date.

During 2017, the Partnership retired certain OP units held by Lexington for an aggregate of $130.0 million.

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Item 6. Selected Financial Data

The following sets forth our and the Partnership's selected consolidated financial data as of and for each of the years in the five-year period ended December 31, 2017. The selected consolidated financial data should be read in conjunction with Item 7 “Management's Discussion and Analysis of Financial Condition and Results of Operations” below, and the Consolidated Financial Statements and the related notes set forth in Item 8 “Financial Statements and Supplementary Data”, below. ($000's, except per share data):

 2017 2016 2015 2014 2013
Lexington Realty Trust:         
Total gross revenues$391,641
 $429,496
 $430,839
 $423,818
 $361,055
Expenses applicable to revenues(223,162) (213,403) (222,853) (218,510) (212,658)
Interest and amortization expense(77,883) (88,032) (89,739) (97,303) (85,892)
Income (loss) from continuing operations86,629
 96,450
 113,209
 47,842
 (21,021)
Total discontinued operations
 
 1,682
 49,621
 24,884
Net income86,629
 96,450
 114,891
 97,463
 3,863
Net income attributable to Lexington Realty Trust shareholders85,583
 95,624
 111,703
 93,104
 1,630
Net income (loss) attributable to common shareholders79,067
 89,109
 105,100
 86,324
 (14,089)
Income (loss) from continuing operations per common share - basic0.33
 0.38
 0.44
 0.17
 (0.18)
Income from discontinued operations - basic
 
 0.01
 0.21
 0.11
Net income (loss) per common share - basic0.33
 0.38
 0.45
 0.38
 (0.07)
Income (loss) from continuing operations per common share - diluted0.33
 0.37
 0.44
 0.17
 (0.18)
Income from discontinued operations per common share - diluted
 
 0.01
 0.21
 0.11
Net income (loss) per common share - diluted0.33
 0.37
 0.45
 0.38
 (0.07)
Cash dividends declared per common share0.7025
 0.69
 0.68
 0.675
 0.615
Net cash provided by operating activities227,761
 235,273
 244,930
 214,672
 206,304
Net cash used in investing activities(259,116) (10,187) (388,271) (43,068) (597,583)
Net cash provided by (used in) financing activities52,480
 (231,698) 45,513
 (57,788) 434,516
Ratio of earnings to combined fixed charges and preferred dividends(1)
1.96
 1.80
 2.00
 1.37
 N/A
Real estate assets, net, including real estate - intangible assets3,309,900
 3,028,326
 3,397,922
 3,287,250
 3,425,420
Total assets3,553,020
 3,441,467
 3,808,403
 3,758,483
 3,753,983
Mortgages, notes payable, credit facility and term loans, including discontinued operations2,068,867
 1,860,598
 2,190,740
 2,076,042
 2,037,509
Shareholders' equity1,323,901
 1,392,777
 1,440,029
 1,485,766
 1,515,738
Total equity1,340,835
 1,412,491
 1,462,531
 1,508,920
 1,539,483
Preferred share liquidation preference96,770
 96,770
 96,770
 96,770
 96,770

_________
(1)    N/A - Ratio is below 1.0, deficit of $28,929 existed at December 31, 2013.




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 2017 2016 2015 2014 2013
LCIF:         
Total gross revenues$82,773
 $124,169
 $128,001
 $118,133
 $74,871
Expenses applicable to revenues(49,782) (48,678) (47,697) (42,387) (35,589)
Interest and amortization expense(15,969) (27,313) (29,269) (28,267) (13,111)
Income (loss) from continuing operations3,559
 (3,921) 42,315
 40,738
 9,177
Total discontinued operations
 
 
 18,811
 4,523
Net income (loss)3,559
 (3,921) 42,315
 59,549
 13,700
Income (loss) from continuing operations per unit0.04
 (0.05) 0.58
 0.59
 0.17
Income from discontinued operations  per unit
 
 
 0.28
 0.09
Net income (loss) per unit0.04
 (0.05) 0.58
 0.87
 0.26
Cash distributions per weighted-average unit (rounded)0.77
 0.80
 0.84
 0.82
 0.87
Net cash provided by operating activities43,868
 38,907
 38,410
 38,049
 43,272
Net cash provided by (used in) investing activities(81,380) 153,630
 (179,408) (7,806) (285,645)
Net cash provided by (used in) financing activities36,381
 (159,636) 151,800
 (35,079) 248,190
Ratio of earnings to fixed charges (1)
1.18
 N/A
 2.43
 2.43
 1.70
Real estate assets, net, including real estate - intangible assets677,982
 639,476
 1,005,505
 849,969
 829,484
Loans receivable, net
 
 
 15,448
 19,220
Total assets767,713
 728,604
 1,130,926
 942,883
 909,413
Mortgages and notes payable212,792
 169,212
 431,599
 323,155
 334,153
Co-borrower debt157,789
 146,404
 201,106
 136,967
 91,551
Partners' capital366,282
 387,623
 461,657
 432,041
 448,067

_________
(1)    N/A - Ratio is below 1.0, deficit of $4,803 existed at December 31, 2016.




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Item 7. Management's Discussion and Analysis of Financial Condition andResults of Operations
In this discussion, we have included statements that may constitute “forward-lookingstatements” within the meaning of the safe harbor provisions of the PrivateSecurities Litigation Reform Act of 1995. Forward-looking statements are nothistorical facts but instead represent only our beliefs regarding future events, manyof which, by their nature, are inherently uncertain and outside our control. Thesestatements may relate to our future plans and objectives, among other things. Byidentifying these statements for you in this manner, we are alerting you to thepossibility that our actual results may differ, possibly materially, from theanticipated results indicated in these forward-looking statements. Important factorsthat could cause our results to differ, possibly materially, from those indicated inthe forward-looking statements include, among others, those discussed above in“Risk Factors” in Part I, Item 1A of this Annual Report and “CautionaryStatements Concerning Forward-Looking Statements” in the beginning of this AnnualReport.

Introduction

The following is a discussion and analysis of the consolidated financial condition and results of operations of Lexington Realty Trust and LCIF for the years ended December 31, 2017, 2016 and 2015, and significant factors that could affect their prospective financial condition and results of operations. This discussion should be read together with the accompanying consolidated financial statements of the Company and the Partnership included herein and notes thereto.

Lexington Realty Trust

Overview
General. We are a Maryland REIT that owns a diversified portfolio of equity and debt investments in primarily single-tenant commercial properties.
As of December 31, 20162017, we had equity ownership interests in approximately 195175 consolidated real estate properties, located in 4037 states and encompassing approximately 43.348.6 million square feet, approximately 96.0%98.9% of which was leased, excluding properties subject to mortgages in default.leased.
Our revenues and cash flows are generated predominantly from property rent receipts. As a result, growth in revenues and cash flows is directly correlated to our ability to (1) acquire income producing real estate assets and (2) re-lease properties that are vacant, or may become vacant, at favorable rental rates.
In an effort to diversify our risk, we invest across the United States in properties leased to tenants in various industries. However, industry and regional declines, to the extent we have concentration, and general economic declines, could negatively impact our results of operations and cash flows.
Portfolio Management. For leases in place at December 31, 2016, we generated approximately 36.8%One of our 2016 base rental revenue from leases ten years or longer compared to approximately 42.5% of our 2015 base rental revenue for leases in place at December 31, 2015. The decrease relates primarily to the sale of the New York land investments. Our objectiveobjectives is to generate at least half of our rental revenue from leases ten years or longer, which we expect to achieve primarily through capital recycling of assets with shorter-term leases and acquiring new investments with leases longer than ten years. However, tenants with long-term leases may require purchase options and/or termination options.
For leases in place at December 31, 2017, we generated approximately 37.7% of our 2017 base rental revenue from leases ten years or longer compared to approximately 36.8% of our 2016 base rental revenue for leases in place at December 31, 2016. The increase related primarily to acquisitions of properties with longer lease terms and sales of shorter-leased properties. At December 31, 2016,2017, our base rental revenue from single-tenant leases scheduled to expire over the next five years was approximately 35.6%28.9% compared to approximately 31.4%35.6% at December 31, 2015.2016. We believe we no longer have concentrated risk of lease rollover in any one year and we believe our cash flows are stable. Our weighted-average lease term was 9.1 years at December 31, 2017 compared to approximately 8.6 years at December 31, 2016 compared to approximately 12.6 years or 9.1 years, adjusted to reflect the four New York, New York land investments, which were subject to 99-year leases, through their first purchase option date, at December 31, 2015 and sold in 2016. Certain of our long-term leases have tenant purchase options.
In recent years, demand for space in the suburban office market has not been as strong as demand for space in the industrial market. We believe this is due to a continuing trend of downsizing of corporate office employment and an increase in the demand for regionalized distribution facilities. In addition, industrial assets generally require less capital to maintain and re-lease than office assets. In recent years, we have focused on balancing our rental revenue between office and industrial properties. As of December 31, 2016, the ratio of base rental revenue from office assets to the base rental revenue from industrial assets was approximately 1.3:1, which is lower than the previous year. We expect that our office portfolio will be concentrated in fewer, but larger, markets over the next several years, which we expect to accomplish primarily through sales of office assets and growing our portfolio through disciplined investments. Our capital recycling strategy may have a near-term dilutive impact on earnings due to sales of revenue producing properties but we believe in the long-term this strategy will benefit shareholder value.


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Business Strategy. Our current business strategy is focused on enhancing our cash flow stability, growing our portfolio of attractive long-term leased investments and maintaining a strong and flexible balance sheet to allow us to act on opportunities as they arise. See “Business” in Part I, Item 1 of this Annual Report for a detailed description of our current business strategy.
We expect our business strategy will enable us to continue to improve our liquidity and strengthen our overall balance sheet. We believe liquidity and a strong balance sheet will allow us to take advantage of attractive investment opportunities as they arise.

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Investment Trends. Making investments in income producing single-tenant net-leased 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 or tenant credit underwriting criteria. We believe we have access to acquisition opportunities due to our relationships with developers, brokers, corporate users and sellers. However, competition for income producing single-tenant net-leased real estate assets continues to be strong. When we acquire real estate assets, we generally look for commercial real estate assets subject to long-term net-leases 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, (3) an attractive geographic location, and (4) the potential for capital appreciation.
Our acquisition volume consists primarilyIn recent years, demand for space in the suburban office market has not been as strong as demand for space in the industrial market. We believe this is due to a continuing trend of purchases from third parties, sale-leaseback transactionsdownsizing of corporate office requirements and build-to-suit transactions whereby we (1) providean increase in the demand for regionalized distribution and e-commerce facilities. In addition, industrial assets generally require less capital to developers who are engaged in build-to-suit transactions and/or commit to purchase the property from developers upon completion or (2) acquire a property subject to a single-tenant net-leasemaintain and engage a developer to complete construction of a build-to-suit property asre-lease than required by office assets. In recent years, we have focused on increasing our rental revenue from industrial assets as compared to office assets. As of December 31, 2017, the lease. However, noneratio of these transactions are donebase rental revenue from office assets to the base rental revenue from industrial assets was approximately 1.2:1, which is lower than it was at the end of the previous year. We expect that our office portfolio will be concentrated in fewer, but larger, markets over the next several years, which we expect to accomplish primarily through sales of office assets. Our capital recycling strategy may have a near-term dilutive impact on a speculative basis without a committed tenant subjectearnings due to a long-term lease. Wesales of revenue-producing properties, but we believe these arrangements offer developers and/or tenants access to capital while simultaneously providing us with attractive risk-adjusted projected yields.in the long term this strategy will benefit shareholder value.
During 2016,2017, we saw continued capitalization rate compression in the acquisition market for existing product. product, particularly for industrial assets. We expect that as interest rates rise, capitalization rates will rise. However, with the significant amount of competition in the current acquisition market, capitalization rates have continued to compress or hold steady even as interest rates rise.
We believe that build-to-suit transactions continue to have stabilized yields above those in the existing product market. Build-to-suit transactions, as compared with immediate deliverable acquisitions, result in a delay in the receipt of cash flow and the recognition of funds from operations during the construction period, but provide us with modern buildings subject to long-term leases. We expect that as interest rates rise, capitalization rates will rise. However, with the amount of competitionrecent demand for industrial assets has allowed developers to obtain construction financing from traditional banks and build on a speculative basis, which has limited our opportunities in the acquisitionindustrial build-to-suit market. In an effort to gain more exposure to the build-to-suit industrial market, capitalization rates may not rise as quickly aswe acquired a 90% interest rates.in a joint venture with a developer that acquired a developable parcel of land. The joint venture intends to source industrial build-to-suit projects for the land.
We expect investment activity to be more focused on the industrial sector. While industrial assets tend to generate less current yield than build-to-suit office assets, we believe that industrial assets are less vulnerable to volatility. We expect that someSome of our industrial investments are, and we expect in the future some will be, subject to leases shorter than we require for other asset typesoffice properties, because we believe renewal and in our opinion, critical toretenanting risks are mitigated because of the tenant and/or in markets that will allow for retenanting at attractive rates.fungibility of certain industrial assets.
We generally mitigate our cost exposure for build-to-suit properties and forward commitments by requiring purchase agreements, development agreements and/or loan agreements to specify a maximum price and/or loan commitment amount prior to our investment. Cost overruns are generally the responsibility of the developer or, in some cases, the prospective tenant. To further mitigate risk, we believe we perform stringent underwriting procedures such as, among other items, (1) requiring payment and performance bonds and/or completion guarantees from developers and/or contractors; (2) engaging third-party construction consultants and/or engineers to monitor construction progress and quality; (3) only hiring developers with a proven history of performance; (4) requiring developers to provide financial statements and in some cases personal guarantees from principals; (5) obtaining and reviewing detailed plans and construction budgets; (6) requiring a long-term tenant lease to be executed prior to funding; and (7) securing liens on the property to the extent of construction funding.
We believe that, despite the addition of some shorter-term industrial leases, the long-term leases with escalating rents we have been adding to our portfolio are strengthening our future cash flows by providing a hedge against rising interest rates, extending our weighted-average lease term, balancing our lease expiration schedule, reducing the average age of our portfolio and supporting our dividend growth objectives.

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The following is a summary of our investment activity for the year ended December 31, 2017:

Property Acquisitions
Location Property Type Square Feet (000's) Capitalized Cost (millions) Approximate Lease Term (Years) Date Acquired
New Century, KS Industrial 447
 $12.1
 10 1Q 2017
Lebanon, IN Industrial 742
 36.2
 7 1Q 2017
Cleveland, TN Industrial 851
 34.4
 7 2Q 2017
Grand Prairie, TX Industrial 215
 24.3
 20 2Q 2017
San Antonio, TX Industrial 849
 45.5
 10 2Q 2017
McDonough, GA(1)
 Industrial 1,121
 66.7
 10 3Q 2017
Byhalia, MS Industrial 616
 36.6
 10 3Q 2017
Jackson, TN Industrial 1,062
 57.9
 10 3Q 2017
Smyrna, TN Industrial 1,505
 104.9
 10 3Q 2017
Lafayette, IN Industrial 309
 17.4
 7 4Q 2017
Romulus, MI Industrial 500
 38.9
 15 4Q 2017
Warren, MI Industrial 260
 47.0
 15 4Q 2017
Winchester, VA Industrial 400
 36.7
 14 4Q 2017
    8,877
 $558.6
    

Completed Build-to-Suit Transactions
Location Property Type Square Feet (000's) Initial Capitalized Cost (millions) Lease Term (Years) Date Acquired/Completed Capitalized Cost Per Square Foot
Lake Jackson, TX(2)
 Office 275
 $70.4
 20 1Q 2017 $256.09
Charlotte, NC Office 201
 61.3
 15 2Q 2017 $304.49
Opelika, AL Industrial 165
 37.3
 25 3Q 2017 $225.20
    641
 $169.0
      
(1)Square footage includes a 220-thousand-square-foot expansion to be completed in 2018.
(2)Completed the construction on the final building of a four-building project. Initial cost basis excludes developer partner payout of $8.0 million.



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The following is a summary of our investment activity for the year ended December 31, 2016:

Property Acquisitions
Location Property Type Square Feet (000's) Capitalized Cost (millions) Approximate Lease Term (Years) Date Acquired
Detroit, MI Industrial 190
 $29.7
 20 1Q 2016
Wilsonville, OR Industrial 508
 43.1
 16 3Q 2016
Romeoville, IL Industrial 188
 52.7
 15 4Q 2016
Edwardsville, IL Industrial 770
 44.8
 10 4Q 2016
    1,656
 $170.3
    

Completed Build-to-Suit Transactions
Location Property Type Square Feet (000's) Initial Capitalized Cost(millions) Lease Term (Years) Date Acquired/Completed Capitalized Cost Per Square Foot Property Type Square Feet (000's) Initial Capitalized Cost(millions) Lease Term (Years) Date Acquired/Completed Capitalized Cost Per Square Foot
Consolidated:            
Anderson, SC Industrial 1,327
 $61.3
 20 Q2 2016 $46.23
 Industrial 1,327
 $61.3
 20 Q2 2016 $46.23
Lake Jackson, TX(1)
 Office 389
 78.5
 20 Q4 2016 $201.66
 Office 389
 78.5
 20 Q4 2016 $201.66
 1,716
 $139.8
   1,716
 $139.8
  
            
Consolidated:      
Non-consolidated:      
Houston, TX(2)
 Other 274
 $80.0
 20 3Q 2016 $291.84
 Other 274
 $80.0
 20 3Q 2016 $291.84
(1)Three of four buildings were completed in Q4 2016.
(2)We have a 25% interest in this joint venture. We are contractually committed to provide up to $56.7 million in construction financing to the joint venture, of which $46.4 million had been funded as of December 31, 2016.

Ongoing Build-to-Suit Transactions
Location 
Property
Type
 Square Feet (000's)Expected Maximum Commitment/Estimated Completion Cost (millions) 
Estimated Acquisition/
Completion
Date
 
GAAP Investment Balance
as of 12/31/16
(millions)
 Approximate Lease Term (Years)
Lake Jackson, TX(1)
 Office 275
 $78.5
 1Q 2017 $56.0
 20
Charlotte, NC Office 201
 62.4
 2Q 2017 40.4
 15
Opelika, AL Industrial 165
 37.0
 2Q 2017 10.2
 25
    641
 $177.9
   $106.6
  
(1)    Total project is 664,000 square feet. 389,000 square feet were completed in Q4 2016.
In addition, we committed to acquire the following properties:
Location Property Type Square Feet (000's) 
Maximum Acquisition
Cost (millions)
 Estimated Acquisition Date Approximate Lease Term (Years)
Grand Prairie, TX Industrial 215
 $24.7
 2Q 17 20
Warren, MI(1)
 Industrial 260
 47.0
 3Q 17 15
    475
 $71.7
    
(1)    We provided a $4.6 million letter of credit in 2016 to secure our obligation to purchase this property.

We can provide no assurance with respect to the completion, acquisition, cost or timing of these ongoing build-to-suit and forward purchase transactions.

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The following is a summary of our investment activity for the year ended December 31, 2015:
Property Acquisitions
Location Property Type Square Feet (000's) Capitalized Cost (millions) Approximate Lease Term (Years) Date Acquired
Auburn Hills, MI Office 278
 $40.0
 14 1Q 2015
Houston, TX Industrial 188
 28.7
 20 1Q 2015
Brookshire, TX Industrial 262
 22.4
 20 1Q 2015
Canton, MS Industrial 1,466
 89.3
 12 1Q 2015
Venice, FL Other 31
 16.9
 40 1Q 2015
Richland, WA Industrial 456
 152.0
 20 4Q 2015
    2,681
 $349.3
    

Completed Build-to-Suit Transactions
Location Property Type Square Feet (000's) Initial Capitalized Cost(millions) Lease Term (Years) Date Acquired/Completed Capitalized Cost Per Square Foot
Thomson, GA Industrial 208
 $10.1
 15 Q2 2015 $48.77
Oak Creek, WI Industrial 164
 22.1
 20 Q3 2015 $134.99
Richmond, VA(1)
 Office 330
 101.5
 15 Q4 2015 $307.26
    702
 $133.7
      
(1)    Initial basis does not include $8.1 million for estimated earnout lease payments for developer leased space.

Loan Investments. We invest inAs of December 31, 2017, all of the Company's loans receivable were fully satisfied. In 2017, we sold our loan assetsreceivable that was secured by single-tenant real estate assets, which (1) we feel comfortable owninga hospital in Kennewick, Washington for our investment should the borrower default for reasons other than an underlying tenant default or (2) are necessary for an efficient disposition of our equity interest$80.4 million. We also collected $8.5 million in the property. The following is a summary of our outstanding loan investments at December 31, 2016:
  
Loan carrying value(1)
(millions)
    
Loan 12/31/2016 Interest Rate Maturity Date
Kennewick, WA(2)
 $85.7
 9.00% 05/2022
Oklahoma City, OK(3)
 8.5
 11.50% 03/2016
  $94.2
    
(1)Loan carrying value includes accrued interest and is net of origination costs, if any.
(2)Loan provides for a current pay rate of 8.75%, an accrual rate of 9.0% and a balloon of $87.2 million at maturity. This loan was in covenant default as of December 31, 2016.
(3)Loan is in monetary default as of December 31, 2016 and we are exercising our remedies.
In 2015, we foreclosed against the borrowersfull satisfaction of a loan secured by a propertytenant-in-common's interest in Westmont, Illinois.an office property. In addition, to acquiring the office property collateral,in 2017, we acquired $2.5 million of cash collateral and received $1.4collected $49.1 million in full settlementsatisfaction of our claim against the guarantor. This property was sold in 2016. Also in 2015, we foreclosed on a loan secured by an officemade to a joint venture that owns a property in Southfield, Michigan. In 2014, we recognized a $2.5 million loan loss, as the borrower had indicated that it would not satisfyKaty, Texas. The joint venture satisfied the loan at maturity.with proceeds from a third-party mortgage financing in the original principal amount of $50.0 million.
Leasing Trends. Re-leasing properties that are currently vacant or as leases expire at favorable effective rates is one of our primary asset management 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 under previous leases, (3) the significance of leasing costs such as commissions and tenant improvement allowances and (4) the payment of capital expenditures and operating costs such as real estate taxes, insurance and maintenance with no offsetting revenue.
Our property owner subsidiaries seek to mitigate these risks by (1) staying in close contact with our tenants during the lease term in order to assess the tenant's current and future occupancy needs, (2) maintaining relationships with local brokers to determine the depth of the rental market and (3) retaining local expertise to assist in the re-tenanting of a property. However, no assurance can be given that once a property becomes vacant it will subsequently be re-let. Generally, a tenant in a single-tenant office property commences lease extension discussions well in advance of lease expiration. If the lease has a year or less remaining until expiration, generally, there is a high likelihood that the tenant will not extend the lease for the entire property or at all.

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Industrial renewals are generally not as time sensitive due to the minimal capital expenditures upon renewal as compared with office property renewals.
If a property cannot be re-let to a single user and the property can be adapted to multi-tenant use, we determine whether the costs of adapting the property to multi-tenant use outweigh the benefit of funding operating costs while searching for a single-tenant and whether selling a vacant property, which limits operating costs and allows us to redeploy capital, is in the best interest of our shareholders.

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Certain of the long-term leases on properties in which we have an ownership interest 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 the single-tenant properties in which we have an ownership interest 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 single-tenant properties in which we have an ownership interest are generally structured in a way that minimizes our responsibility for capital improvements. However, certain of our leases provide for some level of landlord responsibility for capital repairs and replacements, the cost of which is generally factored into the rental rate.
Our motivation to release vacant space requires us to meet market demands with respect to rental rates, tenant concessions and landlord responsibilities. As a result, the obligations of our property owner subsidiaries on new leases and newly renewed or extended leases generally increase to include, among other items, some form of responsibility for capital repairs and replacements.
During 2016,2017, we entered into 4740 consolidated new leases and lease extensions encompassing approximately 4.73.8 million square feet. The average GAAP base rent on these extended leases was approximately $4.99$5.60 per square foot compared to the average GAAP base rent on these leases before extension of $4.86$5.24 per square foot. The weighted-average cost of tenant improvements and lease commissions during 20162017 was approximately $8.77$18.59 per square foot for new leases and $3.28$2.64 per square foot for extended leases. Due to the nature of the expected lease rollovers in coming years, renewal rents may be lower than expiring rents and aggregate tenant improvement allowances and leasing costs may decrease from their current levels in such years. The impact of any such lower renewal rent may be mitigated by our capital recycling strategy and our long-term leases with annual or periodic rent increases.
We continue to monitor the credit of tenants of properties in which we have an interest by (1) subscribing to rating agency information, so that we can monitor changes in the ratings of our rated tenants, (2) reviewing financial statements that are publicly available or that are required to be delivered to us under the applicable lease, (3) monitoring news reports regarding our tenants and their respective businesses and (4) monitoring the timeliness of rent collections.
During 2017, 2016 2015 and 2014,2015, we conveyed in foreclosure or via a deed-in-lieu of foreclosure certain properties in which we had an interest as we deemed the balance of the non-recourse mortgagesmortgage loans encumbering the properties were in excess of the value of the property collateral. Our property owner subsidiaries may convey properties to lenders or the property owner subsidiary may declare bankruptcy in the future if there is no or limited recourse to us and a property owner subsidiary is unable to refinance, re-let or sell its vacated property or if a tenant renews at a lower rent or a new tenant pays a lower rent that does not justify a value of the property in excess of the mortgage loan balance.
Impairment charges. During 2017, 2016 2015 and 2014,2015, we incurred impairment charges on certain of our assets, excluding loan receivables, of $39.7 million, $100.2 million and $36.8 million, and $48.6 million, respectively, including amounts classified in discontinued operations, due primarily to the assets being sold below theireach asset's carrying value and, inbeing below its sale price or estimated fair value, as applicable. In 2016, we incurred impairment charges primarily due to the write-off of the deferred rent receivable for the sold New York, New York land investments and the rejection of the lease for the Rock Hill, South Carolina property.investments. The real estate assets we sold that resulted in impairment changescharges were primarily non-core assets including land investments, retail properties and under performing and multi-tenant properties. In addition, in 2014, we recognized a loan loss of $2.5 million relating to a loan receivable secured by a soon-to-be vacant suburban office property. We cannot estimate if we will incur, or the amount of, future impairment charges on our assets. See Part I, Item 1A “Risk Factors”, of this Annual Report.
Critical Accounting Policies. Our accompanying consolidated financial statements have been prepared in accordance with GAAP, which require our management to make estimates that affect the amounts of revenues, expenses, assets and liabilities reported and related disclosures of contingent assets and liabilities. A summary of our significant accounting policies 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, which are included in “Financial Statements and Supplementary Data” in Part II, Item 8 of this Annual Report.

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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.

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Basis of Presentation and Consolidation. Our consolidated financial statements are prepared on the accrual basis of accounting. The financial statements reflect our accounts and the accounts of our consolidated subsidiaries. We consolidate our wholly-owned subsidiaries, partnerships and joint ventures which we control through (1) voting rights or similar rights or (2) by means other than voting rights if we are the primary beneficiary of a variable interest entity, which we refer to as a VIE. Entities which we do not control and entities which are VIEs in which we are not the primary beneficiary are generally accounted for by the equity method. Significant judgments and assumptions are made by us to determine whether an entity is a VIE such as those regarding an entity's equity at risk, the entity's equityholders' obligations to absorb anticipated losses and other factors. In addition, the determination of the primary beneficiary of a VIE requires judgment to determine the party that has (1) power over the significant activities of the VIE and (2) an obligation to absorb losses or the right to receive benefits that could be potentially significant to the VIE.

Judgments and 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 our consolidated financial statements in conformity with GAAP. These estimates and assumptions are based on our management's best estimates and judgment. Our management evaluates its estimates and assumptions on an ongoing basis using historical experience and other factors, including the economic environment. The economic environment has increased the degree of uncertainty inherent in these estimates and 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 tangible and intangible assets acquired and liabilities assumed, the determination of VIEs and which entities that should be consolidated, the determination of impairment of long-lived assets, loans receivable and equity method investments, valuation and impairment of assets held by equity method investees, valuation of derivative financial instruments, valuation of compensation plans and the useful lives of long-lived assets. Actual results could differ materially from those estimated.
Purchase Accounting and Acquisition of Real Estate. The fair value of the real estate acquired, which includes the impact of 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. The “as-if-vacant” value is then allocated to land and 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 expected lease-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 expected lease-up periods based on current market demand. Our management also estimates costs to execute similar leases including leasing commissions. Our management generally retains a third party to assist in the allocations.
In allocating the fair value of the identified intangible assets and liabilities of an acquired property, above-market and below-market lease values are recorded based on the difference between the current in-place lease rent and management'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 tenant relationship values, 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 tenant relationship values based on management's evaluation of the specific characteristics of each tenant's lease. The value of in-place leases is amortized to expense over the remaining non-cancelable periods and any bargain renewal periods of the respective leases. The value of tenant relationships is amortized to expense over the applicable lease term plus expected renewal periods.

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Revenue Recognition. We recognize lease revenue 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. Revenue is recognized on a contractual basis for leases with escalations tied to a consumer price index with no floor. 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 the renewals are not 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. Determining if a tenant allowance is a lease incentive requires significant judgment. We recognize lease termination paymentsfees as a component of rental revenue in the period received and write off unamortized leases related intangibles and other lease related account balances, provided that there are no further obligations under the lease; otherwise the lease termination payment is amortizedlease. Otherwise, such fees and balances are recognized on a straight-line basis over the remaining obligation period. 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 based on the specific timing of the sale as measured against various criteria related to the terms of the transactions and any continuing involvement 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.
Impairment of Real Estate. We evaluate the carrying value of all tangible and intangible real estate assets for possible impairment when an event or change in circumstance has occurred that indicates its carrying value may not be recoverable. The evaluation includes estimating and reviewing anticipated future undiscounted cash flows to be derived from the asset. If such cash flows are less than the asset's carrying value, an impairment charge is recognized to the extent by which the asset's carrying value exceeds the estimated fair value. Estimating future cash flows is highly subjective and such estimates could differ materially from actual results.
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. The assessment of impairment is highly subjective and involves the application of significant assumptions and judgments about our intent and ability to recover our investment given the nature and operations of the underlying investment, including the level of our involvement therein, among other factors. To the extent impairment has occurred, the loss is measured as the excess of the carrying amount of the investment over the estimated value of the investment.
Loans Receivable. We evaluate the collectability of both interest and principal of each of our loans, if circumstances warrant, to determine whether the loan is impaired. A loan 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. Significant judgments are required in determining whether impairment has occurred. When a loan 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 loan's effective interest rate, the loan's observable current market price or the fair value of the underlying collateral. Interest on impaired loans is recognized on a cash basis.
Acquisition, Development and Construction Arrangements. We evaluate loans receivable where we participate in residual profits through loan provisions or other contracts to ascertain whether we have the same risks and rewards as an owner or a joint venture partner. Where we conclude that such arrangements are more appropriately treated as an investment in real estate, we reflect such loan receivable as an equity investment in real estate under construction in the Consolidated Balance Sheets. In these cases, no interest income is recorded on the loan receivable and we record capitalized interest during the construction period. In arrangements where we engage a developer to construct a property or provide funds to a tenant to develop a property, we will capitalize the funds provided to the developer/tenant and internal costs of interest and real estate taxes, if applicable, during the construction period.
The accounting for these critical accounting policies and implementation of accounting guidance issued in the future involves the making of estimates based on current facts, circumstances and assumptions which could change in a manner that would materially affect management's future estimates with respect to such matters. Accordingly, future reported financial conditions and results could differ materially from financial conditions and results reported based on management's current estimates.
Cyber Security.  While we have yet to experience a cyber attack that disrupted our operations in any material respect, all companies, including ours, need to allocate funds to address and protect against cybersecurity threats. 



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Liquidity
General. Since becoming a public company, our principal sources of liquidity 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, (4) corporate level borrowings, (5) commitments from co-investment partners and (6) proceeds from the sales of our investments.
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.
Cash Flows. 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, corporate level borrowings, capital recycling proceeds, issuances of equity and debt, mortgage proceeds and our other principal sources of liquidity will be available to provide the necessary capital required to fund our operations and allow us to grow.

Cash flows from operations as reported in the Consolidated Statements of Cash Flows totaled $227.8 million for 2017, $235.3 million for 2016 and $244.9 million for 2015 and $214.7 million for 2014.2015. Cash flows from operations increased in 2016 and 2015 compared with 2014have been decreasing primarily due to the impactdispositions as we reshape our portfolio to have a higher concentration of acquisitions, offset by dispositions and yield maintenance payments made on debt satisfactions.industrial assets versus other asset types. The underlying drivers that impact working capital and therefore cash flows from operations are the timing of (1) the collection of rents and tenant reimbursements and loan interest payments from borrowers, and (2) the payment of interest on mortgage debt and operating and general and administrative costs. We believe the net-lease structure of the leases encumbering a majority of the properties in which we have an interest mitigates the risks of the timing of 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 in investing activities totaled $259.1 million in 2017, $10.2 million in 2016 and $388.3 million in 2015 and $43.1 million in 2014.2015. Cash provided by investing activities related primarily to proceeds from the sale of properties, collection of loans receivable, and distributions from non-consolidated entities in excess of accumulated earnings.earnings and changes in deposits and restricted cash. Cash used in investing activities related primarily to investments in real estate properties, co-investment programs and loans receivable, and an increase inpayments of deferred leasing costs and changes in deposits and restricted cash. Therefore, the fluctuation in investing activities relates primarily to the timing of investments and dispositions.

Net cash provided by (used in) financing activities totaled $52.5 million in 2017, $(231.7) million in 2016 and $45.5 million in 2015 and $(57.8) million in 2014.2015. Cash provided by financing activities was primarily attributable to net proceeds from the issuance of common shares, and non-recourse mortgage and corporate borrowings. Cash used in financing activities related primarily to dividend and distribution payments, repurchases of common shares, purchasepurchase/redemption of a noncontrolling interest, an increase inpayments of deferred financing costs, payment of developer liabilities and debt payments and repurchases.

Public and Private Equity and Debt Markets. We access the public and private equity and debt markets when we (1) believe conditions are favorable and (2) have a compelling use of proceeds. During 2017, 2016 2015 and 2014,2015, we raised net proceeds of approximately $16.8 million, $12.2 million $19.4 million and $23.6$19.4 million, respectively, through the issuance of common shares, including option exercises. Due to the market price of our common shares, we limited the issuance of our common shares during most of 2017, 2016 2015 and 2014. During 2014,2015. Due to our ample borrowing capacity under our unsecured credit revolving credit facility and proceeds from dispositions and mortgage financings, we raised net proceeds of approximately $249.7 million throughdid not access the issuance of investment-grade rated 4.40% Senior Notes. We primarily used the proceeds to fund investments and retire indebtedness.

During 2010, we issued $115.0 million aggregate principal amount of 6.00% Convertible Notes. The notes paid interest semi-annuallypublic debt markets in arrears and were scheduled to mature in January 2030. During2017, 2016 2015 and 2014, notes with a principal amount of an aggregate of $12.4 million, $3.8 million and $12.8 million, respectively, were converted/satisfied for 1.9 million, 0.5 million and 1.9 million common shares, respectively, and an aggregate cash payment by us of $0.7 million, $0.5 million and $0.2 million, respectively, plus accrued and unpaid interest. As of December 31, 2016, all such notes had been converted or satisfied.2015.

During 2015, our Board of Trustees authorized a 10.0 million common share repurchase program. The share repurchase program does not expire. As of December 31, 2016,2017, we had repurchased 3,400,912 common shares for an aggregate $27.3 million, which was at an average price of $8.04 per share. We have continued to, and in the future may, repurchase our common shares in the context of our overall capital plan, and to the extent we believe market volatility offers prudent investment opportunities based on our common share price versus net asset value per share. However, over 2016 our common share price began to rise and in December 2016, we began selling common shares under our ATM offering program. In 2016, we increased the amount available to issue under our ATM offering program, and we issued 976,109 common shares in 2016 at an average issue price of $10.75 per common share, generating proceeds of approximately $10.4 million after deducting approximately $0.1 million of commissions.

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We expect to continue to access debt and equity markets and other markets in the future to implement our business strategy and to fund future growth. However, general economic uncertainty and the volatility in these markets can make accessing these markets challenging.more difficult at times.


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UPREIT Structure. Our UPREIT structure permits us to effect acquisitions by issuing OP units to a property owner as a form of consideration in exchange for the property. Substantially all outstanding OP units are redeemable by the holder at certain times on a one OP unit for approximately 1.13 common shares 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 on an as redeemed basis and the remaining OP units have stated distributions in accordance with their applicable 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. We are party to a funding agreement with our operating partnership under which we may be required to fund distributions made on account of OP units. No OP units have a liquidation preference. In recent years there has not been a great demand for OP units and, as a result, we expect the number of common shares that will be outstanding in the future should be expected to increase, and income attributable to noncontrolling interests should be expected to decrease, as such OP units are redeemed for our common shares.

As of December 31, 20162017, there were 3.33.2 million OP units outstanding which were convertible into 3.83.6 million common shares assuming we satisfied redemptions entirely with common shares. In recent years, few sellers of real estate have been seeking OP units as a form of consideration.

Property Specific Debt. As of December 31, 20162017, our consolidated property owner subsidiaries had relatedaggregate balloon payments of $62.7$6.6 million and $6.6$83.8 million maturing in 20172018 and 2018,2019, respectively. With respect to mortgages encumbering properties where the expected lease rental revenues are sufficient to provide an estimated property value in excess of the mortgage balance, we believe our property owner subsidiaries have sufficient sources of liquidity to meet these obligations through future cash flows from operations, the credit markets and, if determined appropriate by us, a capital contribution from us from either cash on hand ($86.6107.8 million at December 31, 20162017), property sale proceeds or borrowing capacity on our primary credit facility ($395.4345.0 million as of December 31, 20162017, subject to covenant compliance).
 
In the event that the estimated property value is less than the mortgage balance, as the mortgages encumbering the properties in which we have an interest are generally non-recourse to us and the property owner subsidiaries, a property owner subsidiary may, if appropriate, satisfy a mortgage obligation by transferring title of the property to the lender or permitting a lender to foreclose. There are significant risks associated with conveying properties to lenders through foreclosure which are described in "Risk Factors" in Part I, Item 1A of this Annual Report.

In 2017, 2016 2015 and 2014,2015, we obtained, through our consolidated property owner subsidiaries, $45.4 million, $254.7 million $190.8 million and $27.8$190.8 million, respectively, in non-recourse mortgage loans with interest rates ranging from 2.2%3.5% to 5.2%5.3% and maturity dates ranging from 20192022 to 2036. Our secured debt including secured debt classified as held for sale, decreased to approximately $697.1 million at December 31, 2017 compared to $745.2 million at December 31, 2016 compared to $891.3 million at December 31, 2015.2016. We now have fewer near-term debt maturities compared to recent years. We also expect to continue to use property specific, non-recourse mortgages in certain situations as we believe that by properly matching a debt obligation, including the balloon maturity risk, with the terms of a lease, our cash-on-cash returns increase and the exposure to residual valuation risk is reduced. In addition, we may procure credit tenant lease financing in certain situations where we are able to monetize all or a significant portion of the rental revenues of a property at an attractive rate. We believe our financing strategy will also allow us to further lower our financing costs and improve our cash flow, financial flexibility and certain credit metrics.


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Corporate Borrowings. The following Senior Notes were outstanding as of December 31, 2016:2017:
Issue Date Face Amount (millions) Interest Rate Maturity Date Issue Price
May 2014 $250.0
 4.40% June 2024 99.883%
June 2013 250.0
 4.25% June 2023 99.026%
  $500.0
      
The Senior Notes are unsecured and pay interest semi-annually in arrears. We may redeem the Senior Notes at our option at any time prior to maturity in whole or in part by paying the principal amount of the Senior Notes being redeemed plus a premium.
We have a $905.0 million
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During 2017, our unsecured credit agreement with KeyBank National Association, as agent.agent, was amended to, among other things, increase the overall facility to $1.105 billion. With lender approval, we can increase the size of the amended facility to an aggregate $1.8$2.01 billion. A summary of the significant terms are as follows:
  Maturity Date Current
Interest Rate
$400.0505.0 Million Revolving Credit Facility(1)
 08/2019 LIBOR + 1.00%
$250.0300.0 Million Term Loan(2)
 08/2020 LIBOR + 1.10%
$255.0300.0 Million Term Loan(3)
 01/2021 LIBOR + 1.10%
(1)Maturity date can be extended to August 2020 at our option. The interest rate ranges from LIBOR plus 0.85% to 1.55%. At December 31, 2016,2017, the unsecured revolving credit facility had no amounts$160.0 million outstanding $4.6 million of letters of credit and availability of $395.4$345.0 million subject to covenant compliance.
(2)Increased from $250.0 million. The interest rate ranges from LIBOR plus 0.90% to 1.75%. We previously entered intohave aggregate interest-rate swap agreements to fix the LIBOR component at a weighted-average rate of 1.09% through February 2018 on the $250.0 million of the $300.0 million outstanding LIBOR-based borrowings.
(3)Increased from $255.0 million. The interest rate ranges from LIBOR plus 0.90% to 1.75%. We previously entered intohave aggregate interest-rate swap agreements to fix the LIBOR component at a weighted-average rate of 1.42% through January 2019 on the $255.0 million of of the $300.0 million outstanding LIBOR-based borrowings.

As of December 31, 20162017, we were in compliance with the financial covenants contained in our corporate level debt agreements.
During 2007, we issued $200.0 million in Trust Preferred Securities, which bearbore interest at a fixed rate of 6.804% through April 2017 and, thereafter, bears interest at a variable rate of three month LIBOR plus 170 basis points through maturity.points. These securities are (1) classified as debt, (2) due in 2037 and (3) currently redeemable by us. As of December 31, 20162017 and 2015,2016, there were $129.1 million of these securities outstanding.

While certain property specific mortgages with favorable terms have become harder to obtain on certain properties, credit tenant lease financings and corporate level borrowings have generally been available and we expect this to continue to be the case in the near future.

Co-investment Programs and Joint Ventures. We believe that enteringhave entered into co-investment programs and joint ventures with institutional investors and other real estate companies is a good way to access private capital while mitigatingmitigate our risk in certain assets and increasingincrease our return on equity to the extent we earn management or other fees. However, investments in co-investment programs and joint ventures limit our ability to make investment decisions unilaterally relating to the assets and limit our ability to deploy capital. IfDue to our size, we continue to grow, wedo not expect to enter into co-investment programs and joint ventures primarilyin the future, except with respect to assets that we ordinarily would not have invested in, such as non-core assets. We believe this mitigates our exposure to the risks inherent in non-core assets. In 2014, we entered into a joint venture to construct a private school in Houston, Texas, which was completed in 2016 and is net leaseddevelopers for a 20-year term upon completion.build-to-suit opportunities.

Capital Recycling. Part of our strategy to effectively manage our balance sheet involves pursuing and executing well on property dispositions and recycling of capital. During 2016,2017, we disposed of our interests in certain consolidated properties for a gross price of $641.4$229.1 million. These proceeds were used to retire indebtedness encumbering properties in which we have an interest and make investments. In addition, in 20162017 we disposed of our interest in properties via foreclosure in full satisfaction of an aggregate $21.6$12.6 million of related non-recourse mortgages.

As asset valuescapitalization rates have continued to rise,compressed in recent years, we have continued to look at opportunities to recycle capital with a focus on capturing the value of our multi-tenant and retail properties and reducing our exposure to the suburban office sector. The increase in asset values may result in our selling more properties than we acquire in any given year. We will continue to look at capital recycling opportunities as part of the ongoing effort to further transform our portfolio, with a greater emphasis on suburban office dispositions and non-core asset dispositions, in individual or portfolio transactions. We believe capital recycling (1) provides cost effective and timely capital support for our investment activities and (2) allows us to maintain line capacity and cash in advance of what we expect to be a growing investment pipeline.

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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 dividends to our shareholders and distributions to the holders of OP units.


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As of December 31, 20162017, we had approximately $1.9$2.1 billion of indebtedness, consisting of mortgages and notes payable outstanding, term loans, 4.40% and 4.25% Senior Notes and Trust Preferred Securities, with a weighted-average interest rate of approximately 4.1%3.6%. The ability of a property owner subsidiary to make debt service payments depends upon the rental revenues of its property and its ability to refinance the mortgage related thereto, sell the related property, or access capital from us or other sources. A property owner subsidiary's ability to accomplish such goals will be affected by numerous economic factors affecting the real estate industry, including the risks described under "Risk Factors" in Part I, Item 1A of this Annual Report.
If we are unable to satisfy our contractual obligations and other operating costs with our cash flow from operations, we intend to use borrowings and proceeds from issuances of equity or debt securities. If a property owner subsidiary is unable to satisfy its contractual obligations and other operating costs, it may default on its obligations and lose its assets in foreclosure or through bankruptcy proceedings.

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 our 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, reserving such amounts as we consider 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 $165.9$172.1 million in cash dividends to our common and preferred shareholders in 2016.2017. Although our property owner subsidiaries 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 us in short-term money market or other suitable instruments.

Capital Resources

General. Due to the net-lease structure of a majority of our investments, our property owner subsidiaries historically have not incurred significant expenditures in the ordinary course of business to maintain the properties in which we have an interest. As leases expire, we expect our property owner subsidiaries to incur costs in extending the existing tenant leases, re-tenanting the properties with a single-tenant, or converting the property to multi-tenant use. 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 the single-tenant properties in which we have an interest that are subject to net or similar leases since the tenants at these properties generally bear all or substantially all of the cost of property operations, maintenance and repairs. However, at certain properties subject to net leases, our property owner subsidiaries are responsible for replacement and/or repair of certain capital items, which may or may not be reimbursed. In addition, at certain single-tenant properties that are not subject to a net lease, our property owner subsidiaries have a level of property operating expense responsibility, which may or may not be reimbursed.
Multi-Tenant Properties. Primarily as a result of non-renewals at single-tenant net-lease properties, we have interests in multi-tenant properties in our consolidated portfolio. While tenants are generally responsible for increases over base year expenses, our property owner subsidiaries are generally responsible for the base-year expenses and capital expenditures, and are responsible for all expenses related to vacant space, at these properties.

Vacant Properties. To the extent there is a vacancy in a property, our property owner subsidiary would be obligated for all operating expenses, including capital expenditures, real estate taxes and insurance. When a property is vacant, our property owner subsidiary may incur substantial capital expenditure and releasing costs to re-tenant the property.

Property Expansions. Under certain leases, tenants have the right to expand the facility located on a property in which we have an interest. In the past, our property owner subsidiary has generally funded, and in the future our property owner subsidiary may fund, these property expansions with either additional secured borrowings, the repayment of which was, and will be, funded out of rental increases under the leases covering the expanded properties, or capital contributions from us.

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Ground Leases. The tenants of properties in which we have an interest generally pay the rental obligations on ground leases either directly to the fee holder or to our property owner subsidiary as increased rent. However, our property owner subsidiaries are responsible for these payments (1) under certain leases without reimbursement and (2) at vacant properties.

Environmental Matters. Based upon management's ongoing review of the properties in which we have an interest, management is not aware of any environmental condition with respect to any of these properties that 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 the properties in which we have an interest, 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 the tenants of properties in which we have an interest.

Results of Operations

Year ended December 31, 2017 compared with December 31, 2016. The decrease in total gross revenues in 2017 of $37.9 million was primarily attributable to a decrease in rental revenue of $38.2 million. The decrease in rental revenue was primarily due to a reduction of $66.1 million of rental revenue due to property sales, and a $14.1 million decrease in revenue recognized from lease terminations, partially offset by revenue from property acquisitions in 2017 and 2016 of $42.9 million.

Depreciation and amortization increased by $7.9 million primarily due to the acquisition of real estate properties in 2017 and 2016.

The increase in property operating expense of $1.8 million was primarily due to costs incurred on properties acquired in 2017 and 2016, costs incurred on vacant properties prior to sale and an increase in transaction costs, offset by reduced operating costs associated with sold properties.

The increase in general and administrative expense of $3.1 million was primarily due to an increase in professional fees, primarily legal costs incurred in a litigation.

The $2.05 million litigation settlement recognized in 2017 represents the settlement amount related to litigation disclosed in note 18 to our consolidated financial statements.

Non-operating income decreased by $2.7 million primarily due to the collection of loans receivable in 2017, partially offset by $3.9 million of earnings recognized in 2017 due to the write-off of unearned contingent acquisition consideration relating to a prior build-to-suit project.

The decrease in interest and amortization expense of $10.1 million was primarily due to the satisfaction of mortgage debt in connection with property sales and a decrease in the interest rate on our $129.1 million of trust preferred securities.

The change in debt satisfaction gains, net, of $7.2 million was primarily due to the timing of debt retirements, including foreclosures.

The decrease in impairment charges of $55.2 million related primarily to the impairment recognized on the sale of three land investments in New York, New York due to the write-off of the deferred rent receivable in 2016.

The decrease in gains on sales of properties of $18.1 million related primarily to the timing of sales of our properties.

The increase in the provision for income taxes of $0.5 million related primarily to state taxes.

The change in equity in earnings (losses) of non-consolidated entities of $8.4 million was primarily due to the timing of gains recognized on the sale of non-consolidated investments, partially offset by an impairment charge recognized in 2017 on our investment in Palm Beach Gardens, Florida where the sole tenant filed for bankruptcy.

The decrease in net income attributable to common shareholders of $10.0 million was primarily due to the items discussed above.


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Year ended December 31, 2016 compared with December 31, 2015. The decrease in total gross revenues in 2016 of $1.3 million was primarily attributable to a decrease in rental revenue of $1.4 million. The decrease in rental revenue was primarily due to a reduction of $37.5 million of rental revenue due to property sales and a reduction of $9.2 million due to changes in occupancy at certain properties, partially offset by 2016 and 2015 revenue from property acquisitions and expansions of $32.2 million and $13.1 million in revenue recognized from lease terminations.terminations in 2016 and 2015.

Depreciation and amortization increased by $2.9 million primarily due to the acquisition of real estate properties in 2016 and 2015.

The decrease in property operating expense of $12.3 million was primarily due to the sale of properties, particularly multi-tenant properties, where we had operating expense obligations.

The increase in general and administrative expense of $1.8 million was primarily due to an increase in personnel costs.

Non-operating income increased by $1.6 million primarily due to the loan made to fund the construction of the build-to-suit project in Houston, Texas.

The decrease in interest and amortization expense of $1.7 million was primarily due to a reduction in outstanding indebtedness.

The decrease in debt satisfaction gains, net, of $26.1 million was primarily due to the timing of debt retirements, including foreclosures.

The increase in impairment charges of $63.4 million related primarily to the impairment recognized on the sale of three land investments in New York, New York due to the write-off of the deferred rent receivable.

The increase in gains on sales of properties of $58.2 million related primarily to the timing of sales of our properties.

The increase in the provision for income taxes of $0.9 million related primarily to state income taxes.

The increase in equity in earnings of non-consolidated entities of $5.8 million was primarily due to a $5.4 million gain recognized on the sale of our investment in an office property in Russellville, Arkansas.
Discontinued operations represent properties sold during 2015 which were held for sale as of December 31, 2014. We had no discontinued operations in 2016.
The decrease in net income attributable to noncontrolling interests of $2.4 million was primarily due to the limited partners' share of the impairment charges recognized by LCIF in 2016.

The decrease in net income attributable to common shareholders of $16.0 million was primarily due to the items discussed above.

Year ended December 31, 2015 compared with December 31, 2014. The increase in total gross revenues in 2015 of $7.0 million was primarily attributable to an increase in rental revenue of $7.0 million. The increase in rental revenue was primarily due to 2015 and 2014 revenue from properties acquired/expanded of $27.7 million, offset in part by a reduction of $18.4 million of rental revenue associated with properties sold in 2015.

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Depreciation and amortization increased by $8.4 million primarily due to the acquisition of real estate properties in 2015 and 2014.

The decrease in property operating expense of $4.0 million was primarily due to the sale of multi-tenant properties where we had operating expense obligations.

The increase in general and administrative expense of $1.0 million was primarily due to an increase in personnel costs, professional fees and information technology costs.

Non-operating income decreased by $3.1 million primarily due to a decrease in interest recognized on loan investments due to borrower defaults and loan repayments, coupled with the sale of a property in 2014 subject to a capital lease.

The decrease in interest and amortization expense of $7.6 million was primarily due to a reduction in the weighted-average interest rate on outstanding indebtedness and an increase in capitalized interest, offset by an increase in outstanding indebtedness.

The gains on sales of financial assets, net, of $0.9 million in 2014 was primarily due to the gain recognized on the sale of an office property classified as a capital lease.

The increase in debt satisfaction gains, net, of $34.6 million was primarily due to the timing of debt retirements, including foreclosures.

The gains on sales of properties in 2015 of $23.3 million related primarily to gains recognized on the sale of our office properties in Fort Myers and Orlando, Florida.

The increase in equity in earnings of non-consolidated entities of $1.1 million was primarily due to a $0.5 million gain recognized on the sale of properties by a non-consolidated joint venture investment.

Discontinued operations represent properties sold during 2014 or held for sale as of December 31, 2014. The decrease in net income from discontinued operations of $47.9 million was primarily due to the adoption of ASU 2014-08, which was effective January 1, 2016. Following adoption of ASU 2014-08, we no longer include property sales in discontinued operations after December 31, 2014, except for properties held for sale as of December 31, 2014 or sold properties that represent a strategic shift in operations.
The decrease in net income attributable to noncontrolling interests of $1.2 million was primarily due to a decrease in earnings of consolidated, non-wholly owned entities.

The increase in net income attributable to common shareholders of $18.8 million was primarily due to the items discussed above.

The increase in net income or decrease in net loss 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 fixed rent adjustments and index adjustments (such as the consumer price index), 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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Same-Store ResultsCapital Resources

Same-store net operating income, or NOI, which is a non-GAAP measure, represents the NOI for consolidated properties that were owned and included in our portfolio for three comparable reporting periods, excluding properties encumbered by mortgage loans in default and the revenue associated with the expansion of properties, as applicable. We define NOI as operating revenues (rental income (less GAAP rent adjustments and lease termination income), tenant reimbursements and other property income) less property operating expenses. As same-store NOI excludes the change in NOI from acquired and disposed of properties and certain other properties, it highlights operating trends such as occupancy levels, rental rates and operating costs on properties. Other REITs may use different methodologies for calculating same-store NOI, and accordingly same-store NOI may not be comparable to other REITs. Management believes that same-store NOI is a useful supplemental measure of the Company's operating performance. However, same-store NOI should not be viewed as an alternative measure of the Company's financial performance since it does not reflect the operations of the Company's entire portfolio, nor does it reflect the impact of general and administrative expenses, acquisition-related expenses, interest expense, depreciation and amortization costs, other nonproperty income and losses, the level of capital expenditures and leasing costs necessary to maintain the operating performance of the Company's properties, or trends in development and construction activities which are significant economic costs and activities that could materially impact the Company's results of operations. Lexington believes that net income is the most directly comparable GAAP measure to same-store NOI.
The following presents our consolidated same-store NOI, for the years ended December 31, 2016, 2015 and 2014 ($000):
 2016 2015 2014
Total cash base rent$261,721
 $266,309
 $265,814
Tenant reimbursements24,623
 25,077
 25,306
Property operating expenses(38,232) (41,782) (42,707)
Same-store NOI$248,112
 $249,604
 $248,413
Our reported same-store NOI decreased from 2015 to 2016 by 0.6% and increased by 0.5% from 2014 to 2015. The primary reason for the decrease in same-store NOI between 2016 and 2015 periods primarily related to vacancy. The increase in same-store NOI between 2015 and 2014 was primarily due to an increase in cash base rent and a reduction in property operating expenses. As of December 31, 2016, 2015 and 2014, our historical same-store square footage leased was 95.8%, 98.1% and 98.2%, respectively.

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Below is a reconciliation of net income to same-store NOI for periods presented:
 Twelve Months ended December 31,
 2016 2015 2014
Net income$96,450
 $114,891
 $97,463
      
Interest and amortization expense88,032
 89,792
 100,400
Provision for income taxes1,439
 572
 1,168
Depreciation and amortization166,048
 163,198
 163,469
General and administrative31,104
 29,277
 28,285
Transaction costs836
 2,404
 1,901
Non-operating income(13,043) (11,429) (16,839)
Gains on sales of properties(81,510) (24,884) (57,507)
Gains on sales of financial assets
 
 (855)
Impairment charges and loan losses100,236
 36,832
 51,100
Debt satisfaction (gains) charges, net975
 (25,150) 9,764
Equity in earnings of non-consolidated entities(7,590) (1,752) (626)
Lease termination income(17,363) (4,241) (2,072)
Straight-line adjustments(37,748) (47,702) (47,227)
Lease incentives1,673
 1,544
 1,490
Amortization of above/below market leases2,057
 261
 1,136
      
NOI331,596
 323,613
 331,050
      
Less NOI:     
Disposed of properties(21,793) (42,208) (71,755)
Acquired properties(57,970) (28,326) (8,856)
Expansion revenue(1,530) (1,317) 
Properties in default(2,191) (2,158) (2,026)
      
Same-Store NOI$248,112
 $249,604
 $248,413
Funds From Operations

We believe that Funds from Operations, or FFO, which is a non-GAAP measure, is a widely recognized and appropriate measure of the performance of an equity REIT. We believe FFO is frequently used by securities analysts, investors and other interested parties in the evaluation of REITs, many of which present FFO when reporting their results. FFO is intended to exclude GAAP historical cost depreciation and amortization of real estate and related assets, which assumes that the value of real estate diminishes ratably over time. Historically, however, real estate values have risen or fallen with market conditions. As a result, FFO provides a performance measure that, when compared year over year, reflects the impact to operations from trends in occupancy rates, rental rates, operating costs, development activities, interest costs and other matters without the inclusion of depreciation and amortization, providing perspective that may not necessarily be apparent from net income.

The National Association of Real Estate Investment Trusts, or NAREIT, defines FFO as “net income (or loss) computed in accordance with GAAP, excluding gains (or losses) from sales of property, plus real estate depreciation and amortization and after adjustments for unconsolidated partnerships and joint ventures.” NAREIT clarified its computation of FFO to exclude impairment charges on depreciable real estate owned directly or indirectly. FFO does not represent cash generated from operating activities in accordance with GAAP and is not indicative of cash available to fund cash needs.

We present FFO available to common shareholders and unitholders - basic and also present FFO available to all equityholders and unitholders - diluted on a company-wide basis as if all securities that are convertible, at the holder's option, into our common shares, are converted at the beginning of the period. We also present Adjusted Company FFO available to all equityholders and unitholders - diluted, which adjusts FFO available to all equityholders and unitholders - diluted for certain items which we believe are not indicative of the operating results of our real estate portfolio. We believe this is an appropriate presentation as it is frequently requested by security analysts, investors and other interested parties. Since others do not calculate these measures in a similar fashion, these measures may not be comparable to similarly titled measures as reported by others. These measures should not be considered as an alternative to net income as an indicator of our operating performance or as an alternative to cash flow as a measure of liquidity.


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The following presents a reconciliation of net income attributable to common shareholders to FFO available to common shareholders and unitholders and Adjusted Company FFO available to all equityholders and unitholders for each of the years in the three year period ended December 31, 2016 (unaudited and dollars in thousands, except share and per share amounts):
  2016 2015 2014
FUNDS FROM OPERATIONS:     
Basic and Diluted:     
Net income attributable to common shareholders$89,109
 $105,100
 $86,324
Adjustments:     
 Depreciation and amortization159,363
 157,644
 157,537
 Impairment charges - real estate, including non-consolidated entities100,236
 36,832
 49,529
 Noncontrolling interests - OP units(159) 1,999
 2,990
 Amortization of leasing commissions6,684
 5,554
 5,932
 Joint venture and noncontrolling interest adjustment1,111
 1,788
 2,068
 Gains on sales of properties, including non-consolidated entities(87,520) (25,371) (58,426)
 Taxes on sales of properties52
 
 
FFO available to common shareholders and unitholders - basic268,876
 283,546
 245,954
 Preferred dividends6,290
 6,290
 6,290
 Interest and amortization on 6.00% Convertible Guaranteed Notes532
 1,048
 2,090
 Amount allocated to participating securities225
 313
 490
FFO available to all equityholders and unitholders - diluted275,923
 291,197
 254,824
 Debt satisfaction (gains) charges, net, including non-consolidated entities975
 (25,086) 9,764
 Impairment loss - loan receivable
 
 2,500
 Transaction costs / Other837
 1,864
 1,882
Adjusted Company FFO available to all equityholders and unitholders - diluted$277,735
 $267,975
 $268,970
Per Common Share and Unit Amounts     
Basic:     
FFO$1.13
 $1.19
 $1.06
      
Diluted:     
FFO$1.13
 $1.19
 $1.05
Adjusted Company FFO$1.14
 $1.10
 $1.11
Weighted-Average Common Shares:     
Basic:     
Weighted-average common shares outstanding - basic EPS233,633,058
 233,455,056
 228,966,253
Operating partnership units(1)
3,815,621
 3,848,434
 3,872,027
Weighted-average common shares outstanding - basic FFO237,448,679
 237,303,490
 232,838,280
      
Diluted:     
Weighted-average common shares outstanding - diluted EPS237,679,031
 233,751,775
 229,436,708
Unvested share-based payment awards549,049
 3,326
 120,973
6.00% Convertible Guaranteed Notes1,077,626
 2,041,629
 3,826,739
Operating partnership units(1)

 3,848,434
 3,872,027
Preferred shares - Series C4,710,570
 4,710,570
 4,710,570
Weighted-average common shares outstanding - diluted FFO244,016,276
 244,355,734
 241,967,017

(1) Includes OP units other than OP units held by us.

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Off-Balance Sheet Arrangements

As of December 31, 2016, we had investments in various real estate entities with varying structures. The real estate investments owned by these entities are generally financed with non-recourse debt. Non-recourse debt is generally defined as debt whereby the lenders' sole recourse with respect to borrower defaults is limited to the value of the assets collateralized by the debt. The lender generally does not have recourse against any other assets owned by the borrower or any of the members or partners of the borrower, except for certain specified exceptions listed in the particular loan documents. These exceptions generally relate to "bad boy" acts, including fraud, prohibited transfers and breaches of material representations. We have guaranteed such obligations for certain of our non-consolidated entities.

Contractual Obligations

The following summarizes our principal contractual obligations as of December 31, 2016 ($000's):
  2017 2018 2019 2020 2021 
2022 and
Thereafter
 Total
Mortgages and notes payable(1)
 $92,731
 $36,713
 $110,448
 $55,147
 $40,465
 $409,669
 $745,173
Term loans payable 
 
 
 250,000
 255,000
 
 505,000
Senior notes payable 
 
 
 
 
 500,000
 500,000
Trust preferred securities 
 
 
 
 
 129,120
 129,120
Interest payable - fixed rate(2)
 68,750
 57,368
 47,058
 42,277
 39,875
 158,219
 413,547
Operating lease obligations(3)
 6,480
 6,356
 5,852
 5,845
 5,526
 35,883
 65,942
  $167,961
 $100,437
 $163,358
 $353,269
 $340,866
 $1,232,891
 $2,358,782

1.Includes balloon payments.
2.Includes variable-rate debt subject to interest rate swap agreements through swap expiration date.
3.Includes ground lease payments and office rents. 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.

In addition, from time to time we may guarantee certain tenant improvement allowances and lease commissions on behalf of certain property owner subsidiaries when required by the related tenant or lender. However, we do not believe these guarantees are material to us as the obligations under and risks associated with such guarantees are priced into the rent under the lease or the value of the property.


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Lepercq Corporate Income Fund L.P.

Overview
General. The Partnership was formed asDue to the net-lease structure of a limited partnership on March 14, 1986 undermajority of our investments, our property owner subsidiaries historically have not incurred significant expenditures in the lawsordinary course of the state of Delaware to invest in existing real estate properties net-leased to corporations or other entities.
The Partnership's purpose includes the conduct of any business that may be conducted lawfully by a limited partnership organized under the Delaware Revised Uniform Limited Partnership Act, except that the Partnership's partnership agreement requires business to be conductedmaintain the properties in suchwhich we have an interest. As leases expire, we expect our property owner subsidiaries to incur costs in extending the existing tenant leases, re-tenanting the properties with a mannersingle-tenant, or converting the property to multi-tenant use. 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 the single-tenant properties in which we have an interest that will permitare subject to net or similar leases since the Company to continue to be classified as a REIT under Sections 856 through 860 of the Code, unless the Company ceases to qualify as a REIT for reasons other than the conduct of the Partnership's business.
The Partnership's business istenants at these properties generally bear all or substantially the same as the business of the Company and includes investment in single-tenant assets; except that the Partnership is dependent on the Company for management of its operations and future investments. The Partnership does not have any employees, executive officers or board of directors. The Company also invests in assets and conducts its business directly and through other subsidiaries. The Company allocates investments to itself and its other subsidiaries or to the Partnership as it deems appropriate and in accordance with certain obligations under the Partnership's partnership agreement with respect to allocations of non-recourse liabilities.
The Company, through Lex GP and Lex LP, holds, as of December 31, 2016, 96.0% of the Partnership's outstanding OP units. The Partnership's remaining OP units are beneficially owned by E. Robert Roskind, Chairman of the Company, and certain non-affiliated investors. As the sole equity owner of the Partnership's general partner, the Company has the ability to control all of the day-to-daycost of property operations, maintenance and repairs. However, at certain properties subject to the termsnet leases, our property owner subsidiaries are responsible for replacement and/or repair of the Partnership's partnership agreement.

 The Partnership's revenues and cash flows are generated predominantly from property rent receipts. As a result, growth in revenues and cash flows is directly correlated to the Partnerships ability to (1) acquire income producing real estate assets and (2) re-leasecertain capital items, which may or may not be reimbursed. In addition, at certain single-tenant properties that are vacant,not subject to a net lease, our property owner subsidiaries have a level of property operating expense responsibility, which may or may becomenot be reimbursed.
Multi-Tenant Properties. Primarily as a result of non-renewals at single-tenant net-lease properties, we have interests in multi-tenant properties in our consolidated portfolio. While tenants are generally responsible for increases over base year expenses, our property owner subsidiaries are generally responsible for the base-year expenses and capital expenditures, and are responsible for all expenses related to vacant space, at favorable rental rates. However,these properties.

Vacant Properties. To the Partnership's main objectives are to meet its distribution obligations and its obligations to allocate non-recourse liabilities to its partners and to operateextent there is a vacancy in a manner asproperty, our property owner subsidiary would be obligated for all operating expenses, including capital expenditures, real estate taxes and insurance. When a property is vacant, our property owner subsidiary may incur substantial capital expenditure and releasing costs to permitre-tenant the Company at all times to be classified as a REIT as required by the the Partnership's partnership agreement.property.

Critical Accounting Policies. The accompanying consolidated financial statements have been prepared in accordance with GAAP, which require management to make estimates that affect the amounts of revenues, expenses, assets and liabilities reported and related disclosures of contingent assets and liabilities. A summary of the Partnership's significant accounting policies, as applicable, which are important to the portrayal of the Partnership's financial condition and results of operations, is set forth in note 2 to the Consolidated Financial Statements, which are included in “Financial Statements and Supplementary Data” in Part II, Item 8 of this Annual Report.
The following is a summary of critical accounting policies, which require some of the most difficult, subjective and complex judgments.
Basis of Presentation and ConsolidationProperty Expansions. The consolidated financial statements are prepared on the accrual basis of accounting. The financial statements reflect the Partnership's accounts and the accounts of its consolidated subsidiaries. The Partnership consolidates its wholly-owned subsidiaries, partnerships and joint ventures, if any, which its controls through (1) voting rights or similar rights or (2) by means other than voting rights if it is the primary beneficiary of a variable interest entity, which the Partnership refers to as a VIE. Entities which the Partnership does not control and entities which are VIEs in which the Partnership is not the primary beneficiary are generally accounted for by the equity method. Significant judgments and assumptions are made by Lex GP, as the Partnership's general partner, to determine whether an entity is a VIE, such as those regarding an entity's equity at risk, the entity's equityholders' obligations to absorb anticipated losses and other factors. In addition, the determination of the primary beneficiary of a VIE requires judgment to determine the party that has (1) power over the significant activities of the VIE and (2) an obligation to absorb losses orUnder certain leases, tenants have the right to receive benefits that couldexpand the facility located on a property in which we have an interest. In the past, our property owner subsidiary has generally funded, and in the future our property owner subsidiary may fund, these property expansions with either additional secured borrowings, the repayment of which was, and will be, potentially significant tofunded out of rental increases under the VIE.leases covering the expanded properties, or capital contributions from us.


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Judgments and EstimatesGround Leases. The Partnership's management has made a numbertenants of estimates and assumptions relatingproperties in which we have an interest generally pay the rental obligations on ground leases either directly to the reporting of assetsfee holder or to our property owner subsidiary as increased rent. However, our property owner subsidiaries are responsible for these payments (1) under certain leases without reimbursement and liabilities, the disclosure of contingent assets and liabilities and the reported amounts of revenues and expenses to prepare the consolidated financial statements in conformity with GAAP. These estimates and assumptions are based on the Partnership's management's best estimates and judgment. The Partnership's management evaluates its estimates and assumptions on an ongoing basis using historical experience and other factors, including the economic environment. The economic environment has increased the degree of uncertainty inherent in these estimates and assumptions. The Partnership's 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 tangible and intangible assets acquired and liabilities assumed, the determination of VIEs and entities that should be consolidated, the determination of impairment of long-lived assets and loans receivable and the valuation and the useful lives of long-lived assets.
Purchase Accounting and Acquisition of Real Estate. The fair value of the real estate acquired, which includes the impact of 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. The “as-if-vacant” value is then allocated to land and building and improvements based on the Partnership's management's determination of relative fair values of these assets. Factors considered by the Partnership's management in performing these analyses include an estimate of carrying costs during the expected lease-up periods considering current market conditions and costs to execute similar leases. In estimating carrying costs, the Partnership's management includes real estate taxes, insurance and other operating expenses and estimates of lost rental revenue during the expected lease-up periods based on current market demand. The Partnership's management also estimates costs to execute similar leases including leasing commissions.
In allocating the fair value of the identified intangible assets and liabilities of an acquired property, above-market and below-market lease values are recorded based on the difference between the current in-place lease rent and management'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 tenant relationship values, is measured by the excess of (1) the purchase price paid for a property over (2) the estimated fair value of the property as ifat vacant determined as set forth above. This aggregate value is allocated between in-place lease values and tenant relationship values based on management's evaluation of the specific characteristics of each tenant's lease. The value of in-place leases is amortized to expense over the remaining non-cancelable periods and any bargain renewal periods of the respective leases. The value of tenant relationships is amortized to expense over the applicable lease term plus expected renewal periods.
Revenue Recognitionproperties.. The Partnership recognizes lease revenue 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. Revenue is recognized on a contractual basis for leases with escalations tied to a consumer price index with no floor. 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 the renewals are not reasonably assured. In those instances in which the Partnership funds tenant improvements and the improvements are deemed to be owned by the Partnership 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 Partnership's management determines that the tenant allowances are lease incentives, the Partnership 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. Determining if a tenant allowance is a lease incentive requires significant judgment. The Partnership recognizes lease termination payments as a component of rental revenue in the period received, provided that there are no further obligations under the lease; otherwise the lease termination payment is amortized on a straight-line basis over the remaining obligation period. 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.

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Gains on sales of real estate are recognized based on the specific timing of the sale as measured against various criteria related to the terms of the transactions and any continuing involvement 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 the Partnership sells a property and retains a partial ownership interest in the property, the Partnership recognizes gain to the extent of the third-party ownership interest.

Impairment of Real Estate.Environmental Matters. The Partnership's management evaluates the carrying value of all tangible and intangible real estate assets for possible impairment when an event or change in circumstance has occurred that indicates its carrying value may not be recoverable. The evaluation includes estimating and reviewing anticipated future undiscounted cash flows to be derived from the asset. If such cash flows are less than the asset's carrying value, an impairment charge is recognized to the extent by which the asset's carrying value exceeds the estimated fair value. Estimating future cash flows is highly subjective and such estimates could differ materially from actual results.
Loans Receivable. The Partnership's management evaluates the collectability of both interest and principal of any loans receivable and, if circumstances warrant, to determine whether the loan is impaired. A loan is considered to be impaired, when based on current information and events, it is probable that the holder will be unable to collect all amounts due according to the existing contractual terms. Significant judgments are required in determining whether impairment has occurred. When a loan 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 loan's effective interest rate, the loan's observable current market price or the fair value of the underlying collateral. Interest on impaired loans is recognized on a cash basis.
Acquisition, Development and Construction Arrangements. The Partnership's management evaluates loans receivable where it participates in residual profits through loan provisions or other contracts to ascertain whether it has the same risks and rewards as an owner or a joint venture partner. Where management concludes that such arrangements are more appropriately treated as an investment in real estate, such loan receivable is reflected as an equity investment in real estate under construction in the Consolidated Balance Sheets. In these cases, no interest income is recorded on the loan receivable and capitalized interest is recorded during the construction period. In arrangements where the Partnership engages a developer to construct a property or provide funds to a tenant to develop a property, the funds provided to the developer/tenant and internal costs of interest and real estate taxes, if applicable, are capitalized during the construction period.
The accounting for these critical accounting policies and implementation of accounting guidance issued in the future involves the making of estimates based on current facts, circumstances and assumptions which could change in a manner that would materially affectBased upon management's future estimates with respect to such matters. Accordingly, future reported financial conditions and results could differ materially from financial conditions and results reported based on management's current estimates.

Liquidity
General. The Partnership's principal sources of liquidity have been (1) undistributed cash flows generated from its investments, (2) the public and private equity and debt markets, including issuances of OP units to the Company, (3) property specific debt, (4) corporate level borrowings in conjunction with the Company, (5) commitments from co-investment partners and (6) proceeds from the sales of investments.
Cash Flows. The Partnership's management believes that cash flows from operations will continue to provide adequate capital to fund its operating and administrative expenses, regular debt service obligations and all distribution payments in accordance with its partnership agreement requirements in both the short-term and long-term. However, without a capital event, which would most likely involve the Company, the Partnership does not have the ability to fund balloon payments on maturing mortgages or acquire new investments.
Cash flows from operations as reported in the Consolidated Statements of Cash Flows totaled $38.9 million, $38.4 million and $38.0 million for 2016, 2015 and 2014, respectively. The underlying drivers that impact working capital and therefore cash flows from operations are the timing of (1) the collection of rents and tenant reimbursements and loan interest payments from borrowers, and (2) the payment of interest on mortgage debt and operating and general and administrative costs. The Partnership believes the net-lease structure of the leases encumbering a majorityongoing review of the properties in which it haswe have an interest, mitigatesmanagement is not aware of any environmental condition with respect to any of these properties that would be reasonably likely to have a material adverse effect on us. There can be no assurance, however, that (1) the risksdiscovery 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 the timingproperties in which we have an interest, 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 cash flowsthe tenants of properties in which we have an interest.

Results of Operations

Year ended December 31, 2017 compared with December 31, 2016. The decrease in total gross revenues in 2017 of $37.9 million was primarily attributable to a decrease in rental revenue of $38.2 million. The decrease in rental revenue was primarily due to a reduction of $66.1 million of rental revenue due to property sales, and a $14.1 million decrease in revenue recognized from operations since the paymentlease terminations, partially offset by revenue from property acquisitions in 2017 and timing2016 of operating costs related$42.9 million.

Depreciation and amortization increased by $7.9 million primarily due to the properties are generally borne directly by the tenant. Collection and timingacquisition of tenant rents is closely monitored by management as part of the Partnership's cash management program. Cash flows from operations are also impacted by the level of acquisition volume and sales of properties.

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Net cash provided by (used in) investing activities totaled $153.6 million, $(179.4) million and $(7.8) million in 2016, 2015 and 2014, respectively. Cash used in investing activities related primarily to investments in real estate properties in 2017 and co-investment programs,2016.

The increase in property operating expense of $1.8 million was primarily due to costs incurred on properties acquired in 2017 and 2016, costs incurred on vacant properties prior to sale and an increase in deferred leasingtransaction costs, depositsoffset by reduced operating costs associated with sold properties.

The increase in general and restricted cash. Cash providedadministrative expense of $3.1 million was primarily due to an increase in professional fees, primarily legal costs incurred in a litigation.

The $2.05 million litigation settlement recognized in 2017 represents the settlement amount related to litigation disclosed in note 18 to our consolidated financial statements.

Non-operating income decreased by investing activities related$2.7 million primarily due to proceeds from the sale of properties, collection of loans receivable distributions from non-consolidated entities in excess2017, partially offset by $3.9 million of accumulated earnings recognized in 2017 due to the write-off of unearned contingent acquisition consideration relating to a prior build-to-suit project.

The decrease in interest and changesamortization expense of $10.1 million was primarily due to the satisfaction of mortgage debt in escrow depositsconnection with property sales and restricted cash. Therefore,a decrease in the fluctuationinterest rate on our $129.1 million of trust preferred securities.

The change in investing activities relatesdebt satisfaction gains, net, of $7.2 million was primarily due to the timing of debt retirements, including foreclosures.

The decrease in impairment charges of $55.2 million related primarily to the impairment recognized on the sale of three land investments in New York, New York due to the write-off of the deferred rent receivable in 2016.

The decrease in gains on sales of properties of $18.1 million related primarily to the timing of investments and dispositions.sales of our properties.

Net cash provided by (used in) financing activities totaled $(159.6)The increase in the provision for income taxes of $0.5 million $151.8related primarily to state taxes.

The change in equity in earnings (losses) of non-consolidated entities of $8.4 million and $(35.1) million in 2016, 2015 and 2014, respectively. Cash provided by financing activities was primarily attributabledue to net proceeds from non-recourse mortgages and related party advances, net. Cash usedthe timing of gains recognized on the sale of non-consolidated investments, partially offset by financing activities was primarily attributable to distribution payments, redemption of OP units, debt payments and an increaseimpairment charge recognized in deferred financing costs.2017 on our investment in Palm Beach Gardens, Florida where the sole tenant filed for bankruptcy.

OP units. Substantially all outstanding OP units (other than OP units held by the Company) are redeemable by the holderThe decrease in net income attributable to common shareholders of the OP unit at certain times for approximately 1.13 common shares of Lexington per one OP unit or, at Lex GP’s election, with respect to certain OP units, cash. Substantially all outstanding OP units require the operating partnership to pay quarterly distributions$10.0 million was primarily due to the holders of such OP units equal to the dividends paid to the Company's common shareholders on an as redeemed basis and the remaining 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 a stated distribution per OP unit per the applicable partnership agreement, the stated distributions per OP unit are reduced by the percentage reduction in the Company's dividend. The Partnership and the Company are parties to a funding agreement under which each party may be required to fund distributions made on account of OP units or dividends made on account of the Company's common shares. No OP units have a liquidation preference.
As of 2016, the Partnership had a total of approximately 3.3 million aggregate OP units outstanding other than OP units held by the Company.
In recent years, few sellers of real estate have been seeking OP units as a form of consideration. Therefore, the number of OP units not owned, directly or indirectly, by the Company that will be outstanding in the future may decrease as such OP units are redeemed for the Company's common shares.
Property Specific Debt. As of December 31, 2016, the Partnership had $170.0 million of consolidated property specific debt outstanding. As of December 31, 2016, the Partnership had no property specific debt with related balloon payments maturing in 2017 and 2018. If a mortgage is unable to be refinanced upon maturity, the Partnership will be dependent on the Company's liquidity resources to satisfy such mortgage to avoid transferring the underlying property to the lender or selling the underlying property to a third party.
In the event that the estimated property value is less than the mortgage balance, as the mortgages encumbering the properties in which the Partnership has an interest are generally non-recourse to LCIF and the property owner subsidiaries, a property owner subsidiary may, if appropriate, satisfy a mortgage obligation by transferring the title of the property to the lender or permitting a lender to foreclose. There are significant risks associated with conveying properties to lenders through foreclosure which are described in "Risk Factors" included elsewhere or incorporated by reference in this Annual Report.
Corporate Borrowings. The Partnership, together with the Company, is a borrower under the Company's corporate borrowing facilities. Outstanding indebtedness is recorded on the books of the applicable borrower requesting and receiving the proceeds of such indebtedness. However, the Partnership does not have the independent ability without the Company to obtain funds from such borrowing facilities.items discussed above.

Acquisitions. During 2016 and 2015, the Partnership purchased one industrial property in each year for a cost of $52.7 million and $152.0 million, respectively. In 2014, the Partnership purchased two properties for an aggregate cost of $49.5 million.
Co-investment Programs and Joint Ventures. Due to the Company's REIT status, the Partnership is prohibited from earning management fees because the Partnership is not a taxable REIT subsidiary. As a result, the Company's investments in co-investment programs and joint ventures are generally outside of the Partnership.
Capital Recycling. Part of the Partnership's strategy to effectively manage its balance sheet involves pursuing and executing well on property dispositions and recycling of capital. During 2016, the Partnership sold certain properties for a gross sales price of $501.8 million ($375.7 million of which was from the New York, New York land sales). The Partnership did not sell any properties in 2015. During 2014, the Partnership disposed of its interests in certain properties for a gross disposition price of $52.6 million. The net proceeds received from the dispositions were primarily used to retire indebtedness and make new investments.

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 Liquidity NeedsYear ended December 31, 2016 compared with December 31, 2015.. The Partnership's principal liquidity needs are the contractual obligations set forth below under “–Contractual Obligations”decrease in total gross revenues in 2016 of $1.3 million was primarily attributable to a decrease in rental revenue of $1.4 million. The decrease in rental revenue was primarily due to a reduction of $37.5 million of rental revenue due to property sales and the paymenta reduction of distributions$9.2 million due to the holderschanges in occupancy at certain properties, partially offset by revenue from property acquisitions and expansions of OP units, each as applicable.$32.2 million and $13.1 million in revenue recognized from lease terminations in 2016 and 2015.

If the Partnership is unable to satisfy its liquidity needs with cash flow from operations, the Partnership intends to use borrowings, including from the Company,Depreciation and with respect to distributionsamortization increased by $2.9 million primarily due to the holdersacquisition of OP units, the funding agreement described above. If such borrowings are unavailable, the Partnership or one of its subsidiaries may default on its obligations or lose its assetsreal estate properties in foreclosure or through bankruptcy proceedings.2016 and 2015.

The decrease in property operating expense of $12.3 million was primarily due to the sale of properties, particularly multi-tenant properties, where we had operating expense obligations.

The increase in general and administrative expense of $1.8 million was primarily due to an increase in personnel costs.

Non-operating income increased by $1.6 million primarily due to the loan made to fund the construction of the build-to-suit project in Houston, Texas.

The decrease in interest and amortization expense of $1.7 million was primarily due to a reduction in outstanding indebtedness.

The decrease in debt satisfaction gains, net, of $26.1 million was primarily due to the timing of debt retirements, including foreclosures.

The increase in impairment charges of $63.4 million related primarily to the impairment recognized on the sale of three land investments in New York, New York due to the write-off of the deferred rent receivable.

The increase in gains on sales of properties of $58.2 million related primarily to the timing of sales of our properties.

The increase in the provision for income taxes of $0.9 million related primarily to state income taxes.

The increase in equity in earnings of non-consolidated entities of $5.8 million was primarily due to a $5.4 million gain recognized on the sale of our investment in an office property in Russellville, Arkansas.
Discontinued operations represent properties sold during 2015 which were held for sale as of December 31, 2014. We had no discontinued operations in 2016.
The decrease in net income attributable to noncontrolling interests of $2.4 million was primarily due to the limited partners' share of the impairment charges recognized by LCIF in 2016.

The decrease in net income attributable to common shareholders of $16.0 million was primarily due to the items discussed above.

The increase in net income or decrease in net loss 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 fixed rent adjustments and index adjustments (such as the consumer price index), 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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Capital Resources

General. Due to the net-lease structure of a majority of itsour investments, the Partnershipour property owner subsidiaries historically hashave not incurred significant expenditures in the ordinary course of business to maintain the properties in which it haswe have an interest. As leases expire, the Partnership expects itswe expect our property owner subsidiaries to incur costs in extending the existing tenant leases, re-tenanting the properties with a single-tenant, or converting the property to multi-tenant use. The amounts of these expenditures can vary significantly depending on tenant negotiations, market conditions and rental rates.

Single-Tenant Properties. The Partnership doesWe do not anticipate significant capital expenditures at the single-tenant properties in which it haswe have an interest since these propertiesthat are generally subject to net or similar leases wheresince the tenants at these properties generally bear all or substantially all of the cost of property operations, maintenance and repairs. However, at certain properties subject to net-leases, the Partnership isnet leases, our property owner subsidiaries are responsible for replacement and/or repair of certain capital items, which may or may not be reimbursed. In addition, at certain single-tenant properties that are not subject to a net-lease, the Partnership hasnet lease, our property owner subsidiaries have a level of property operating expense responsibility, which may or may not be reimbursed.
Multi-Tenant Properties. Primarily as a result of non-renewals at single-tenant net-lease properties, the Partnership maywe have interests in multi-tenant properties.properties in our consolidated portfolio. While tenants are generally responsible for increases over base year expenses, the landlord would beour property owner subsidiaries are generally responsible for the base-year expenses and capital expenditures, and are responsible for all expenses related to vacant space, at these properties.

Vacant Properties. To the extent there is a vacancy in a property, the Partnershipour property owner subsidiary would be obligated for all operating expenses, including capital expenditures, real estate taxes and insurance. When a property is vacant, the Partnershipour property owner subsidiary may incur substantial capital expenditure and re-leasingreleasing costs to re-tenant the property.

Property Expansions. Under certain leases, tenants have the right to expand the facility located on a property in which the Partnership haswe have an interest. In the past, these expansions haveour property owner subsidiary has generally been funded, and in the future the Partnership expectsour property owner subsidiary may fund, these property expansions to generally be funded, with either additional secured borrowings, the repayment of which was, and will be, funded out of rental increases under the leases covering the expanded properties, borrowings under the Company's unsecured revolving credit facility or capital contributions from the Company.us.

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Ground Leases. The tenants of properties in which the Partnership haswe have an interest generally pay the rental obligations on ground leases either directly to the fee holder or to the landlordour property owner subsidiary as increased rent. However, the Partnership isour property owner subsidiaries are responsible for these payments (1) under certain leases without reimbursement and (2) at vacant properties.

Environmental Matters. Based upon management's ongoing review of the properties in which the Partnership haswe have an interest, management is not aware of any environmental condition with respect to any of these properties whichthat 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 the properties in which the Partnership haswe have an interest, will not expose the Partnershipus to material liability in the future. Changes in laws increasing the potential liability for environmental conditions existing on properties or increasing the restrictions on discharges or other conditions may result in significant unanticipated expenditures or may otherwise adversely affect the operations of the tenants of properties in which the Partnership haswe have an interest.


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Results of Operations

Year ended December 31, 20162017 compared with the year ended December 31, 2015. 2016.The decrease in total gross revenues in 20162017 of $3.8$37.9 million was primarily attributable to a decrease in rental revenue of $2.4$38.2 million. The decrease in rental revenue was primarily due to a reduction of $66.1 million of rental revenue due to property sales, and a $14.1 million decrease in revenue recognized from lease terminations, partially offset by revenue from property acquisitions in 2017 and 2016 of $42.9 million.

Depreciation and amortization increased by $7.9 million primarily due to the acquisition of real estate properties in 2017 and 2016.

The increase in property operating expense of $1.8 million was primarily due to costs incurred on properties acquired in 2017 and 2016, costs incurred on vacant properties prior to sale and an increase in transaction costs, offset by reduced operating costs associated with sold properties.

The increase in general and administrative expense of $3.1 million was primarily due to an increase in professional fees, primarily legal costs incurred in a litigation.

The $2.05 million litigation settlement recognized in 2017 represents the settlement amount related to litigation disclosed in note 18 to our consolidated financial statements.

Non-operating income decreased by $2.7 million primarily due to the collection of loans receivable in 2017, partially offset by $3.9 million of earnings recognized in 2017 due to the write-off of unearned contingent acquisition consideration relating to a prior build-to-suit project.

The decrease in interest and amortization expense of $10.1 million was primarily due to the satisfaction of mortgage debt in connection with property sales and a decrease in the interest rate on our $129.1 million of trust preferred securities.

The change in debt satisfaction gains, net, of $7.2 million was primarily due to the timing of debt retirements, including foreclosures.

The decrease in impairment charges of $55.2 million related primarily to the impairment recognized on the sale of three land investments in New York, New York due to the write-off of the deferred rent receivable in 2016.

The decrease in gains on sales of properties of $18.1 million related primarily to the timing of sales of our properties.

The increase in the provision for income taxes of $0.5 million related primarily to state taxes.

The change in equity in earnings (losses) of non-consolidated entities of $8.4 million was primarily due to the timing of gains recognized on the sale of non-consolidated investments, partially offset by an impairment charge recognized in 2017 on our investment in Palm Beach Gardens, Florida where the sole tenant reimbursementsfiled for bankruptcy.

The decrease in net income attributable to common shareholders of $10.0 million was primarily due to the items discussed above.


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Year ended December 31, 2016 compared with December 31, 2015. The decrease in total gross revenues in 2016 of $1.3 million was primarily attributable to a decrease in rental revenue of $1.4 million. The decrease in rental revenue was primarily due to a reduction of $23.3$37.5 million of rental revenue due to theproperty sales of properties and a changereduction of $9.2 million due to changes in occupancy at certain properties, partially offset by revenue from property acquisitions and expansions of $32.2 million and $13.1 million in part by new property acquisitionrevenue recognized from lease terminations in 2016 and expansion revenue and lease termination revenue of $20.5 million. The decrease in tenant reimbursements was due to the sales of properties and a decrease in reimbursable property operating costs.2015.

Depreciation and amortization increased by $3.6$2.9 million primarily due to the acquisition of the Richland, Washington property, offsetreal estate properties in part by the impact of property sales.2016 and 2015.

The decrease in property operating expense of $2.6$12.3 million was primarily due to the sale of properties, in 2016, including multi-tenantedparticularly multi-tenant properties, withwhere we had operating expense responsibilities.obligations.

The increase in general and administrative expense of $1.0$1.8 million was primarily due to a greater allocationan increase in personnel costs.

Non-operating income increased by $1.6 million primarily due to the loan made to fund the construction of costs from Lexington, which allocation is based on gross rental revenue.the build-to-suit project in Houston, Texas.

The decrease in interest and amortization expense of $2.0$1.7 million was primarily due to a reduction in outstanding indebtedness.

The decrease in debt satisfaction gains, net, of $26.1 million was primarily due to the reduction in mortgagetiming of debt assumed by the buyers in connection with the sale of the New York, New York land investments in 2016 and an increase in capitalized interest, partially offset by interest and amortization expense on the Richland, Washington loan, which was obtained in 2015.retirements, including foreclosures.

The increase in debt satisfactionimpairment charges net, of $7.4$63.4 million related primarily to the satisfaction of non-recourse mortgage loans in connection with the sales of the properties.
The impairment charges in 2016 of $72.1 million primarily related to an impairment charge recognized uponon the sale of three land investments in New York, New York land investments and impairment charges in 2015due to the write-off of $0.8 million related to an impairment on a parcel of land in Clive, Iowa.the deferred rent receivable.

The increase in gains on sales of properties in 2016 of $36.4$58.2 million related primarily to the timing of sales of our properties.

The increase in the provision for income taxes of $0.9 million related primarily to state income taxes.

The increase in equity in earnings of non-consolidated entities of $5.8 million was primarily due to a $5.4 million gain recognized on the sale of our investment in an office property in Russellville, Arkansas.
Discontinued operations represent properties sold during 2015 which were held for sale as of December 31, 2014. We had no discontinued operations in 2016.
The decrease in net income attributable to noncontrolling interests of $2.4 million was primarily due to the limited partners' share of the impairment charges recognized by LCIF in 2016.

The decrease in net income of $46.2 million was primarily due to the items discussed above.
Year ended December 31, 2015 compared with the year ended December 31, 2014. The increase in total gross revenues in 2015 of $9.9 million is primarily attributable to an increase in rental revenuecommon shareholders of $8.4 million and an increase in tenant reimbursements of $1.5 million. The increase in rental revenue was primarily due to new property acquisition/expansion revenue of $7.4 million. The increase in tenant reimbursements relates to an increase in reimbursable property operating costs.
Depreciation and amortization increased by $3.0 million primarily due to property acquisitions.
The increase in property operating expense of $2.3 million was primarily due to an increase in vacancy at certain properties and new leases and lease renewals, where the Partnership was responsible for operating expenses.
The increase in general and administrative expense of $0.9 million was primarily due to an increase in allocable costs from Lexington, which allocation is based on gross rental revenue, offset by a reduction in professional fees.
Non-operating income decreased by $2.4 million primarily due to borrower defaults on loans receivable, coupled with the sale of a property in 2014 subject to a capital lease.
The increase in interest and amortization expense of $1.0 million was primarily due to the financing of a New York City land parcel acquired in 2014 and an increase in the allocation of interest from Lexington, offset in part by a reduction in interest expense related to mortgages satisfied in 2015 and 2014.
The gain on sale of financial asset of $0.8 million in 2014 was due to the gain recognized on the sale of an office property classified as a capital lease.
The loan loss in 2014 relates to a $2.5 million loan loss recognized on a loan receivable collateralized by an office property in Southfield, Michigan. In 2015, the Partnership foreclosed on and acquired the office property.
The impairment loss in 2015 of $0.8 million related to an impairment on a parcel of land in Clive, Iowa.

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Discontinued operations represent properties sold during 2014 as the Partnership did not sell any properties in 2015. The decrease in total income from discontinued operations of $18.8 million is primarily due to the adoption of ASU 2014-08, which was effective January 1, 2015. Due to the adoption of ASU 2014-08, the Partnership no longer includes property sales in discontinued operations after December 31, 2014, except for properties sold that represent a strategic shift in operations.
The decrease in net income of $17.2$16.0 million was primarily due to the items discussed above.

The increase in net income or decrease in net loss in future periods will be closely tied to the level of acquisitions made by us. Without acquisitions, and favorable leasing activity, the sources of growth in net income are limited to fixed rent adjustments and index-adjusted rentsindex adjustments (such as the consumer price index), reduced interest expense on amortizing mortgages and debt refinancingsvariable 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 decreased occupancy rates,and tenant monetary defaults delayed acquisitions and the other risks described in this Annual Report.




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Same-Store Results

Same-store net operating income, or NOI, which is a non-GAAP measure, represents the NOI for consolidated properties that were owned and included in our portfolio for three comparable reporting periods, excluding properties encumbered by mortgage loans in default and the revenue associated with the expansion of properties, as applicable. We define NOI as operating revenues (rental income (less GAAP rent adjustments and lease termination income), tenant reimbursements and other property income) less property operating expenses. As same-store NOI excludes the change in NOI from acquired and disposed of properties and certain other properties, it highlights operating trends such as occupancy levels, rental rates and operating costs on properties. Other REITs may use different methodologies for calculating same-store NOI, and accordingly same-store NOI may not be comparable to other REITs. Management believes that same-store NOI is a useful supplemental measure to be used by Management and investors to assess the Company's operating performance. However, same-store NOI should not be viewed as an alternative measure of the Company's financial performance since it does not reflect the operations of the Company's entire portfolio, nor does it reflect the impact of general and administrative expenses, acquisition-related expenses, interest expense, depreciation and amortization costs, other nonproperty income and losses, the level of capital expenditures and leasing costs necessary to maintain the operating performance of the Company's properties, or trends in development and construction activities which are significant economic costs and activities that could materially impact the Company's results of operations. Lexington believes that net income is the most directly comparable GAAP measure to same-store NOI.
The following presents our consolidated same-store NOI, for the years ended December 31, 2017, 2016 and 2015 ($000):
 2017 2016 2015
Total cash base rent$251,384
 $249,954
 $248,539
Tenant reimbursements22,134
 22,811
 23,930
Property operating expenses(34,697) (33,346) (37,469)
Same-store NOI$238,821
 $239,419
 $235,000
Our reported same-store NOI decreased from 2016 to 2017 by 0.2% and increased by 1.9% from 2015 to 2016. The primary reason for the decrease in same-store NOI between 2017 and 2016 periods primarily related to vacancy. The increase in same-store NOI between 2016 and 2015 was primarily due to an increase in cash base rent and a reduction in property operating expenses. As of December 31, 2017, 2016 and 2015, our historical same-store square footage leased was 98.4%, 98.7% and 98.9%, respectively.

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Below is a reconciliation of net income to same-store NOI for periods presented:
 Twelve Months ended December 31,
 2017 2016 2015
Net income$86,629
 $96,450
 $114,891
      
Interest and amortization expense77,883
 88,032
 89,792
Provision for income taxes1,917
 1,439
 572
Depreciation and amortization173,968
 166,048
 163,198
General and administrative34,158
 31,104
 29,277
Litigation settlement2,050
 
 
Transaction costs2,171
 836
 2,404
Non-operating income(10,378) (13,043) (11,429)
Gains on sales of properties(63,428) (81,510) (24,884)
Impairment charges and loan losses44,996
 100,236
 36,832
Debt satisfaction (gains) charges, net(6,196) 975
 (25,150)
Equity in (earnings) losses of non-consolidated entities848
 (7,590) (1,752)
Lease termination income(3,242) (17,363) (4,241)
Straight-line adjustments(19,784) (37,748) (47,702)
Lease incentives1,969
 1,673
 1,544
Amortization of above/below market leases1,544
 2,057
 261
      
NOI325,105
 331,596
 323,613
      
Less NOI:     
Acquisitions and dispositions(86,284) (92,177) (88,613)
Same-Store NOI$238,821
 $239,419
 $235,000
Funds From Operations

We believe that Funds from Operations, or FFO, which is a non-GAAP measure, is a widely recognized and appropriate measure of the performance of an equity REIT. We believe FFO is frequently used by securities analysts, investors and other interested parties in the evaluation of REITs, many of which present FFO when reporting their results. FFO is intended to exclude GAAP historical cost depreciation and amortization of real estate and related assets, which assumes that the value of real estate diminishes ratably over time. Historically, however, real estate values have risen or fallen with market conditions. As a result, FFO provides a performance measure that, when compared year over year, reflects the impact to operations from trends in occupancy rates, rental rates, operating costs, development activities, interest costs and other matters without the inclusion of depreciation and amortization, providing perspective that may not necessarily be apparent from net income.

The National Association of Real Estate Investment Trusts, or NAREIT, defines FFO as “net income (or loss) computed in accordance with GAAP, excluding gains (or losses) from sales of property, plus real estate depreciation and amortization and after adjustments for unconsolidated partnerships and joint ventures.” NAREIT clarified its computation of FFO to exclude impairment charges on depreciable real estate owned directly or indirectly. FFO does not represent cash generated from operating activities in accordance with GAAP and is not indicative of cash available to fund cash needs.

We present FFO available to common shareholders and unitholders - basic and also present FFO available to all equityholders and unitholders - diluted on a company-wide basis as if all securities that are convertible, at the holder's option, into our common shares, are converted at the beginning of the period. We also present Adjusted Company FFO available to all equityholders and unitholders - diluted, which adjusts FFO available to all equityholders and unitholders - diluted for certain items which we believe are not indicative of the operating results of our real estate portfolio. We believe this is an appropriate presentation as it is frequently requested by securities analysts, investors and other interested parties. Since others do not calculate these measures in a similar fashion, these measures may not be comparable to similarly titled measures as reported by others. These measures should not be considered as an alternative to net income as an indicator of our operating performance or as an alternative to cash flow as a measure of liquidity.

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The following presents a reconciliation of net income attributable to common shareholders to FFO available to common shareholders and unitholders and Adjusted Company FFO available to all equityholders and unitholders for each of the years in the three year period ended December 31, 2017 (dollars in thousands, except share and per share amounts):
  2017 2016 2015
FUNDS FROM OPERATIONS:     
Basic and Diluted:     
Net income attributable to common shareholders$79,067
 $89,109
 $105,100
Adjustments:     
 Depreciation and amortization168,683
 159,363
 157,644
 Impairment charges - real estate, including non-consolidated entities43,214
 100,236
 36,832
 Noncontrolling interests - OP units147
 (159) 1,999
 Amortization of leasing commissions5,285
 6,684
 5,554
 Joint venture and noncontrolling interest adjustment1,121
 1,111
 1,788
 Gains on sales of properties, including non-consolidated entities(64,880) (87,520) (25,371)
 Taxes on sales of properties
 52
 
FFO available to common shareholders and unitholders - basic232,637
 268,876
 283,546
 Preferred dividends6,290
 6,290
 6,290
 Interest and amortization on 6.00% Convertible Guaranteed Notes
 532
 1,048
 Amount allocated to participating securities226
 225
 313
FFO available to all equityholders and unitholders - diluted239,153
 275,923
 291,197
 Litigation settlement2,050
 
 
 Debt satisfaction (gains) charges, net, including non-consolidated entities(6,174) 975
 (25,086)
 Impairment loss - loan receivable5,294
 
 
 Unearned contingent acquisition consideration(3,922) 
 
 Transaction costs / Other2,171
 837
 1,864
Adjusted Company FFO available to all equityholders and unitholders - diluted$238,572
 $277,735
 $267,975
Per Common Share and Unit Amounts     
Basic:     
FFO$0.96
 $1.13
 $1.19
      
Diluted:     
FFO$0.97
 $1.13
 $1.19
Adjusted Company FFO$0.97
 $1.14
 $1.10
Weighted-Average Common Shares:     
Basic:     
Weighted-average common shares outstanding - basic EPS237,758,408
 233,633,058
 233,455,056
Operating partnership units(1)
3,693,144
 3,815,621
 3,848,434
Weighted-average common shares outstanding - basic FFO241,451,552
 237,448,679
 237,303,490
      
Diluted:     
Weighted-average common shares outstanding - diluted EPS241,537,837
 237,679,031
 233,751,775
Unvested share-based payment awards666,127
 549,049
 3,326
6.00% Convertible Guaranteed Notes
 1,077,626
 2,041,629
Operating partnership units(1)

 
 3,848,434
Preferred shares - Series C4,710,570
 4,710,570
 4,710,570
Weighted-average common shares outstanding - diluted FFO246,914,534
 244,016,276
 244,355,734

(1) Includes OP units other than OP units held by us.

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Off-Balance Sheet Arrangements

As of December 31, 2017, we had investments in various real estate entities with varying structures. The real estate investments owned by these entities are generally financed with non-recourse debt. Non-recourse debt is generally defined as debt whereby the lenders' sole recourse with respect to borrower defaults is limited to the value of the assets collateralized by the debt. The lender generally does not have recourse against any other assets owned by the borrower or any of the members or partners of the borrower, except for certain specified exceptions listed in the particular loan documents. These exceptions generally relate to "bad boy" acts, including fraud, prohibited transfers and breaches of material representations. We have guaranteed such obligations for certain of our non-consolidated entities.

Contractual Obligations

The following summarizes our principal contractual obligations as of December 31, 2017 ($000's):
  2018 2019 2020 2021 2022 
2023 and
Thereafter
 Total
Mortgages and notes payable(1)
 $35,940
 $110,448
 $55,147
 $40,465
 $30,120
 $424,948
 $697,068
Revolving credit facility borrowings 
 160,000
 
 
 
 
 160,000
Term loans payable 
 
 300,000
 300,000
 
 
 600,000
Senior notes payable 
 
 
 
 
 500,000
 500,000
Trust preferred securities 
 
 
 
 
 129,120
 129,120
Interest payable - fixed rate(2)
 59,386
 49,401
 44,699
 42,290
 40,702
 139,863
 376,341
Operating lease obligations(3)
 5,628
 5,181
 5,183
 5,154
 5,229
 32,965
 59,340
  $100,954
 $325,030
 $405,029
 $387,909
 $76,051
 $1,226,896
 $2,521,869

1.Includes balloon payments.
2.Includes variable-rate debt subject to interest rate swap agreements through swap expiration date. Interest payable related to variable-rate debt that is not subject to an interest rate swap agreement is not included in the above chart. Variable-rate debt is comprised of $129.1 million Trust Preferred Securities (90-day LIBOR plus 1.7% and matures 2037); $45.0 million term loan (LIBOR plus 1.1% and matures 2020); $50.0 million term loan (LIBOR plus 1.1% and matures 2019) and $160.0 million in revolving credit facility borrowings (LIBOR plus 1.0% and matures 2019). Also a $250.0 million term loan and $255.0 million term loan, which are subject to interest rate swap agreements that expire in 2018 and 2019, respectively, each bear interest at LIBOR plus 1.1% after expiration of the interest rate swap agreements.
3.Includes ground lease payments and office rents. 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.

In addition, from time to time we may guarantee certain tenant improvement allowances and lease commissions on behalf of certain property owner subsidiaries when required by the related tenant or lender. However, we do not believe these guarantees are material to us as the obligations under and risks associated with such guarantees are priced into the rent under the lease or the value of the property.


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Lepercq Corporate Income Fund L.P.

Overview
General. The Partnership was formed as a limited partnership on March 14, 1986 under the laws of the state of Delaware to invest in existing real estate properties net-leased to corporations or other entities.
The Partnership's purpose includes the conduct of any business that may be conducted lawfully by a limited partnership organized under the Delaware Revised Uniform Limited Partnership Act, except that the Partnership's partnership agreement requires business to be conducted in such a manner that will permit the Company to continue to be classified as a REIT under Sections 856 through 860 of the Code, unless the Company ceases to qualify as a REIT for reasons other than the conduct of the Partnership's business.
The Partnership's business is substantially the same as the business of the Company and includes investment in single-tenant assets; except that the Partnership is dependent on the Company for management of its operations and future investments. The Partnership does not have any employees, executive officers or board of directors. The Company also invests in assets and conducts its business directly and through other subsidiaries. The Company allocates investments to itself and its other subsidiaries or to the Partnership as it deems appropriate and in accordance with certain obligations under the Partnership's partnership agreement with respect to allocations of non-recourse liabilities.
The Company, through Lex GP and Lex LP, holds, as of December 31, 2017, 96.0% of the Partnership's outstanding OP units. The Partnership's remaining OP units are beneficially owned by E. Robert Roskind, Chairman of the Company, and certain non-affiliated investors. As the sole equity owner of the Partnership's general partner, the Company has the ability to control all of the day-to-day operations, subject to the terms of the Partnership's partnership agreement.

 The Partnership's revenues and cash flows are generated predominantly from property rent receipts. As a result, growth in revenues and cash flows is directly correlated to the Partnership's ability to (1) acquire income producing real estate assets and (2) re-lease properties that are vacant, or may become vacant, at favorable rental rates. However, the Partnership's main objectives are to meet its distribution obligations and its obligations to allocate non-recourse liabilities to its partners and to operate in a manner as to permit the Company at all times to be classified as a REIT as required by the Partnership's partnership agreement.
Critical Accounting Policies. The accompanying consolidated financial statements have been prepared in accordance with GAAP, which require management to make estimates that affect the amounts of revenues, expenses, assets and liabilities reported and related disclosures of contingent assets and liabilities. A summary of the Partnership's significant accounting policies, as applicable, which are important to the portrayal of the Partnership's financial condition and results of operations, is set forth in note 2 to the Consolidated Financial Statements, which are included in “Financial Statements and Supplementary Data” in Part II, Item 8 of this Annual Report.
The following is a summary of critical accounting policies, which require some of the most difficult, subjective and complex judgments.
Basis of Presentation and Consolidation. The consolidated financial statements are prepared on the accrual basis of accounting. The financial statements reflect the Partnership's accounts and the accounts of its consolidated subsidiaries. The Partnership consolidates its wholly-owned subsidiaries, partnerships and joint ventures, if any, which its controls through (1) voting rights or similar rights or (2) by means other than voting rights if it is the primary beneficiary of a variable interest entity, which the Partnership refers to as a VIE. Entities which the Partnership does not control and entities which are VIEs in which the Partnership is not the primary beneficiary are generally accounted for by the equity method. Significant judgments and assumptions are made by Lex GP, as the Partnership's general partner, to determine whether an entity is a VIE, such as those regarding an entity's equity at risk, the entity's equityholders' obligations to absorb anticipated losses and other factors. In addition, the determination of the primary beneficiary of a VIE requires judgment to determine the party that has (1) power over the significant activities of the VIE and (2) an obligation to absorb losses or the right to receive benefits that could be potentially significant to the VIE.


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Judgments and Estimates. The Partnership's 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 the consolidated financial statements in conformity with GAAP. These estimates and assumptions are based on the Partnership's management's best estimates and judgment. The Partnership's management evaluates its estimates and assumptions on an ongoing basis using historical experience and other factors, including the economic environment. The Partnership's 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 tangible and intangible assets acquired and liabilities assumed, the determination of VIEs and which entities should be consolidated, the determination of impairment of long-lived assets, loans receivable and equity method investments and the useful lives of long-lived assets.
Purchase Accounting and Acquisition of Real Estate. The fair value of the real estate acquired, which includes the impact of 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. The “as-if-vacant” value is then allocated to land and building and improvements based on the Partnership's management's determination of relative fair values of these assets. Factors considered by the Partnership's management in performing these analyses include an estimate of carrying costs during the expected lease-up periods considering current market conditions and costs to execute similar leases. In estimating carrying costs, the Partnership's management includes real estate taxes, insurance and other operating expenses and estimates of lost rental revenue during the expected lease-up periods based on current market demand. The Partnership's management also estimates costs to execute similar leases including leasing commissions.
In allocating the fair value of the identified intangible assets and liabilities of an acquired property, above-market and below-market lease values are recorded based on the difference between the current in-place lease rent and management'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 tenant relationship values, 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 tenant relationship values based on management's evaluation of the specific characteristics of each tenant's lease. The value of in-place leases is amortized to expense over the remaining non-cancelable periods and any bargain renewal periods of the respective leases. The value of tenant relationships is amortized to expense over the applicable lease term plus expected renewal periods.
Revenue Recognition. The Partnership recognizes lease revenue 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. Revenue is recognized on a contractual basis for leases with escalations tied to a consumer price index with no floor. 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 the renewals are not reasonably assured. If the Partnership funds tenant improvements and the improvements are deemed to be owned by the Partnership, revenue recognition will commence when the improvements are substantially completed and possession or control of the space is turned over to the tenant. If the Partnership's management determines that the tenant allowances are lease incentives, the Partnership 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 Partnership recognizes lease termination fees as rental revenue in the period received, and writes off unamortized lease-related intangibles and other lease-related account balances, provided that there are no further Partnership obligations under the lease. Otherwise, such fees and balances are recognized on a straight-line basis over the remaining obligation period.
Gains on sales of real estate are recognized based on the specific timing of the sale as measured against various criteria related to the terms of the transactions and any continuing involvement 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 the Partnership sells a property and retains a partial ownership interest in the property, the Partnership recognizes gain to the extent of the third-party ownership interest.


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Impairment of Real Estate.The Partnership's management evaluates the carrying value of all tangible and intangible real estate assets for possible impairment when an event or change in circumstance has occurred that indicates its carrying value may not be recoverable. The evaluation includes estimating and reviewing anticipated future undiscounted cash flows to be derived from the asset. If such cash flows are less than the asset's carrying value, an impairment charge is recognized to the extent by which the asset's carrying value exceeds the estimated fair value. Estimating future cash flows is highly subjective and such estimates could differ materially from actual results.
Loans Receivable. The Partnership's management evaluates the collectability of both interest and principal of any loans receivable and, if circumstances warrant, to determine whether the loan is impaired. A loan is considered to be impaired, when based on current information and events, it is probable that the holder will be unable to collect all amounts due according to the existing contractual terms. Significant judgments are required in determining whether impairment has occurred. When a loan 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 loan's effective interest rate, the loan's observable current market price or the fair value of the underlying collateral. Interest on impaired loans is recognized on a cash basis.
Acquisition, Development and Construction Arrangements. The Partnership's management evaluates loans receivable where it participates in residual profits through loan provisions or other contracts to ascertain whether it has the same risks and rewards as an owner or a joint venture partner. Where management concludes that such arrangements are more appropriately treated as an investment in real estate, such loan receivable is reflected as an equity investment in real estate under construction in the Consolidated Balance Sheets. In these cases, no interest income is recorded on the loan receivable and capitalized interest is recorded during the construction period. In arrangements where the Partnership engages a developer to construct a property or provide funds to a tenant to develop a property, the funds provided to the developer/tenant and internal costs of interest and real estate taxes, if applicable, are capitalized during the construction period.
The accounting for these critical accounting policies and implementation of accounting guidance issued in the future involves the making of estimates based on current facts, circumstances and assumptions which could change in a manner that would materially affect management's future estimates with respect to such matters. Accordingly, future reported financial conditions and results could differ materially from financial conditions and results reported based on management's current estimates.

Liquidity
General. The Partnership's principal sources of liquidity have been (1) undistributed cash flows generated from its investments, (2) the public and private equity and debt markets, including issuances of OP units to the Company, (3) property specific debt, (4) corporate level borrowings in conjunction with the Company and (5) proceeds from the sales of investments.
Cash Flows. The Partnership's management believes that cash flows from operations will continue to provide adequate capital to fund its operating and administrative expenses, regular debt service obligations and all distribution payments in accordance with its partnership agreement requirements in both the short-term and long-term. However, without a capital event, which would most likely involve the Company, the Partnership does not have the ability to fund balloon payments on maturing mortgages or acquire new investments.
Cash flows from operations as reported in the Consolidated Statements of Cash Flows totaled $43.9 million, $38.9 million and $38.4 million for 2017, 2016 and 2015, respectively. The increase in 2017 was primarily due to the impact of cash flow generated by acquisitions and interest cost savings due to mortgage satisfactions, partially offset by reduced cash flow attributable to sold properties. The underlying drivers that impact working capital and therefore cash flows from operations are the timing of (1) the collection of rents and tenant reimbursements and loan interest payments from borrowers, and (2) the payment of interest on mortgage debt and operating and general and administrative costs. The Partnership believes the net-lease structure of the leases encumbering a majority of the properties in which it has an interest mitigates the risks of the timing of 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 the Partnership's cash management program. Cash flows from operations are also impacted by the level of acquisition volume and sales of properties.
Net cash provided by (used in) investing activities totaled $(81.4) million, $153.6 million and $(179.4) million in 2017, 2016 and 2015, respectively. Cash used in investing activities related primarily to investments in real estate properties and co-investment programs, payments of deferred leasing costs and changes in deposits and restricted cash. Cash provided by investing activities related primarily to proceeds from the sale of properties, collection of loans receivable, distributions from non-consolidated entities in excess of accumulated earnings and changes in escrow deposits and restricted cash. Therefore, the fluctuation in investing activities relates primarily to the timing of investments and dispositions.

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Net cash provided by (used in) financing activities totaled $36.4 million, $(159.6) million and $151.8 million in 2017, 2016 and 2015, respectively. Cash provided by financing activities was primarily attributable to net proceeds from borrowings and related party advances, net. Cash used in financing activities was primarily attributable to distribution payments, redemption of OP units, debt payments and payments of deferred financing costs.

OP units. Substantially all outstanding OP units (other than OP units held by the Company) are redeemable by the holder of the OP unit at certain times for approximately 1.13 common shares of Lexington per one OP unit or, at Lex GP’s election, with respect to certain OP units, cash. Substantially all outstanding OP units require the operating partnership to pay quarterly distributions to the holders of such OP units equal to the dividends paid to the Company's common shareholders on an as redeemed basis and the remaining 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 a stated distribution per OP unit per the applicable partnership agreement, the stated distributions per OP unit are reduced by the percentage reduction in the Company's dividend. The Partnership and the Company are parties to a funding agreement under which the Company may be required to fund distributions made on account of OP units. No OP units have a liquidation preference.
As of 2017, the Partnership had a total of approximately 3.2 million aggregate OP units outstanding other than OP units held by the Company.
In recent years, few sellers of real estate have been seeking OP units as a form of consideration. Therefore, the number of OP units not owned, directly or indirectly, by the Company that will be outstanding in the future may decrease as such OP units are redeemed for the Company's common shares.
Property Specific Debt. As of December 31, 2017, the Partnership had $214.3 million of consolidated property specific debt outstanding. As of December 31, 2017, the Partnership had no property specific debt with related balloon payments maturing in 2018 and $31.8 million of balloon payments maturing in 2019. If a mortgage is unable to be refinanced upon maturity, the Partnership will be dependent on the Company's liquidity resources to satisfy such mortgage to avoid transferring the underlying property to the lender or selling the underlying property to a third party.
In the event that the estimated property value is less than the mortgage balance, as the mortgages encumbering the properties in which the Partnership has an interest are generally non-recourse to LCIF and the property owner subsidiaries, a property owner subsidiary may, if appropriate, satisfy a mortgage obligation by transferring the title of the property to the lender or permitting a lender to foreclose. There are significant risks associated with conveying properties to lenders through foreclosure which are described in "Risk Factors" included elsewhere or incorporated by reference in this Annual Report.
Corporate Borrowings. The Partnership, together with the Company, is a borrower under the Company's corporate borrowing facilities. Outstanding indebtedness is recorded on the books of the applicable borrower requesting and receiving the proceeds of such indebtedness but is adjusted in accordance with LCIF's partnership agreement. However, the Partnership does not have the independent ability without the Company to obtain funds from such borrowing facilities.

Acquisitions. During 2017, the Partnership purchased two industrial properties and completed one built-to-suit office property for an aggregate cost of $132.6 million. In 2016 and 2015, the Partnership purchased one industrial property in each year for a cost of $52.7 million and $152.0 million, respectively.
Capital Recycling. Part of the Partnership's strategy to effectively manage its balance sheet involves pursuing and executing well on property dispositions and recycling of capital. During 2017 and 2016, the Partnership sold certain properties for a gross sales price of $18.8 million and $501.8 million ($375.7 million of which was from the New York, New York land sales), respectively. The Partnership did not sell any properties in 2015. The net proceeds received from the dispositions were primarily used to retire indebtedness and make new investments.
 Liquidity Needs. The Partnership's principal liquidity needs are the contractual obligations set forth below under “–Contractual Obligations” and the payment of distributions to the holders of OP units, each as applicable.

If the Partnership is unable to satisfy its liquidity needs with cash flow from operations, the Partnership intends to use borrowings, including from the Company, and, with respect to distributions to the holders of OP units, the funding agreement described above. If such borrowings are unavailable, the Partnership or one of its subsidiaries may default on its obligations or lose its assets in foreclosure or through bankruptcy proceedings.


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Capital Resources
General. Due to the net-lease structure of a majority of its investments, the Partnership historically has not incurred significant expenditures in the ordinary course of business to maintain the properties in which it has an interest. As leases expire, the Partnership expects its property owner subsidiaries to incur costs in extending the existing tenant leases, re-tenanting the properties with a single-tenant, or converting the property to multi-tenant use. The amounts of these expenditures can vary significantly depending on tenant negotiations, market conditions and rental rates.
Single-Tenant Properties. The Partnership does not anticipate significant capital expenditures at the single-tenant properties in which it has an interest since these properties are generally subject to net or similar leases where the tenants at these properties bear all or substantially all of the cost of property operations, maintenance and repairs. However, at certain properties subject to net-leases, the Partnership is responsible for replacement and/or repair of certain capital items, which may or may not be reimbursed. In addition, at certain single-tenant properties that are not subject to a net-lease, the Partnership has a level of property operating expense responsibility, which may or may not be reimbursed.
Multi-Tenant Properties. Primarily as a result of non-renewals at single-tenant net-lease properties, the Partnership may have interests in multi-tenant properties. While tenants are generally responsible for increases over base year expenses, the landlord would be generally responsible for the base-year expenses and capital expenditures, and are responsible for all expenses related to vacant space, at these properties.
Vacant Properties. To the extent there is a vacancy in a property, the Partnership would be obligated for all operating expenses, including capital expenditures, real estate taxes and insurance. When a property is vacant, the Partnership may incur substantial capital expenditure and re-leasing costs to re-tenant the property.
Property Expansions. Under certain leases, tenants have the right to expand the facility located on a property in which the Partnership has an interest. In the past, these expansions have generally been funded, and in the future the Partnership expects these expansions to generally be funded, with either additional secured borrowings, the repayment of which was, and will be, funded out of rental increases under the leases covering the expanded properties, borrowings under the Company's unsecured revolving credit facility or capital contributions from the Company.
Ground Leases. The tenants of properties in which the Partnership has an interest generally pay the rental obligations on ground leases either directly to the fee holder or to the landlord as increased rent. However, the Partnership is responsible for these payments under certain leases without reimbursement and at vacant properties.
Environmental Matters.Based upon management's ongoing review of the properties in which the Partnership has an interest, management is not aware of any environmental condition with respect to any of these 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 the properties in which the Partnership has an interest, will not expose the Partnership to material liability in the future. Changes in laws increasing the potential liability for environmental conditions existing on properties or increasing the restrictions on discharges or other conditions may result in significant unanticipated expenditures or may otherwise adversely affect the operations of the tenants of properties in which the Partnership has an interest.


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Results of Operations
Year ended December 31, 2017 compared with the year ended December 31, 2016. The decrease in total gross revenues in 2017 of $41.4 million was primarily attributable to a decrease in rental revenue of $40.7 million and a decrease in tenant reimbursements of $0.7 million. The decrease in rental revenue was primarily due to a reduction of $40.7 million of rental revenue due to the sales of properties and $9.7 million due to a decrease in lease termination revenue, offset in part by new property acquisition revenue of $8.9 million. The decrease in tenant reimbursements was due to the sales of properties and a decrease in reimbursable property operating costs.
Depreciation and amortization increased by $3.0 million primarily due to the acquisition of properties in 2017 and 2016, offset in part by the impact of property sales.
The decrease in property operating expense of $1.9 million was primarily due to the sale of properties in 2016, including multi-tenanted and/or vacant properties, with operating expense responsibilities.
The decrease in general and administrative expense of $2.8 million was primarily due to a decrease in allocation of costs from Lexington, which allocation is based on gross rental revenue.
The decrease in interest and amortization expense of $11.3 million was primarily due to the reduction in mortgage debt assumed by the buyers in connection with the sale of the New York, New York land investments in 2016 and a decrease in the allocation of interest and amortization expense from Lexington.
The decrease in debt satisfaction charges, net, of $7.4 million related primarily to the satisfaction of non-recourse mortgage loans in connection with the sales of properties in 2016.
The impairment charges in 2017 of $12.1 million primarily related to impairment charges recognized on three vacant or partially vacant office properties, and impairment charges in 2016 of $72.1 million primarily related to an impairment charge recognized upon the sale of three New York, New York land investments.
The change in gains on sales of properties of $31.9 million related to the timing of sales of properties.

The increase in net income of $7.5 million was primarily due to the items discussed above.
Year ended December 31, 2016 compared with the year ended December 31, 2015. The decrease in total gross revenues in 2016 of $3.8 million was primarily attributable to a decrease in rental revenue of $2.4 million and a decrease in tenant reimbursements of $1.4 million. The decrease in rental revenue was primarily due to a reduction of $23.3 million of rental revenue due to the sales of properties and a change in occupancy at certain properties, offset in part by new property acquisition and expansion revenue and lease termination revenue of $20.5 million. The decrease in tenant reimbursements was due to the sales of properties and a decrease in reimbursable property operating costs.
Depreciation and amortization increased by $3.6 million primarily due to the acquisition of the Richland, Washington property, offset in part by the impact of property sales.
The decrease in property operating expense of $2.6 million was primarily due to the sale of properties in 2016, including multi-tenanted properties, with operating expense responsibilities.
The increase in general and administrative expense of $1.0 million was primarily due to a greater allocation of costs from Lexington, which allocation is based on gross rental revenue.
The decrease in interest and amortization expense of $2.0 million was primarily due to the reduction in mortgage debt assumed by the buyers in connection with the sale of the New York, New York land investments in 2016 and an increase in capitalized interest, partially offset by interest and amortization expense on the Richland, Washington loan, which was obtained in 2015.
The increase in debt satisfaction charges, net, of $7.4 million related primarily to the satisfaction of non-recourse mortgage loans in connection with the sales of the properties.
The impairment charges in 2016 of $72.1 million primarily related to an impairment charge recognized upon the sale of three New York, New York land investments and impairment charges in 2015 of $0.8 million related to an impairment on a parcel of land in Clive, Iowa.
The gains on sales of properties in 2016 of $36.4 million related primarily to the timing of sales of properties.


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The decrease in net income of $46.2 million was primarily due to the items discussed above.

The increase in net income in future periods will be closely tied to the level of acquisitions made by us. Without acquisitions and favorable leasing activity, the sources of growth in net income are limited to fixed rent adjustments and index-adjusted rents (such as the consumer price index), reduced interest expense on amortizing mortgages and debt refinancings 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, decreased occupancy rates, tenant monetary defaults, delayed acquisitions and the other risks described in this Annual Report.
Off-Balance Sheet Arrangements
The Partnership is co-borrower or guarantor of corporate borrowing facilities and debt securities of the Company. In addition, the Partnership, from time to time, guarantees certain tenant improvement allowances and lease commissions on behalf of subsidiaries when required by the related tenant or lender. However, the Partnership does not believe these guarantees are material to the Partnership, as the obligations under and risks associated with such guarantees are priced into the rent under the lease or the value of the property.

Contractual Obligations
 
The following summarizes the Partnership's principal contractual obligations as of December 31, 20162017 ($000's):
 2017 2018 2019 2020 2021 
2022 and
Thereafter
 Total 2018 2019 2020 2021 2022 
2023 and
Thereafter
 Total
Mortgages and notes payable(1)
 $1,054
 $1,124
 $32,548
 $18,590
 $8,579
 $108,063
 $169,958
 $1,124
 $32,548
 $18,590
 $8,579
 $10,016
 $143,446
 $214,303
Mortgages and notes interest payable 8,066
 7,996
 6,835
 5,041
 4,432
 16,969
 49,339
 10,238
 9,249
 7,462
 6,846
 6,704
 32,611
 73,110
Operating lease obligations(2)
 260
 260
 260
 260
 260
 2,510
 3,810
Co-borrower debt(3)
 
 
 
 72,477
 73,927
 
 146,404
Co-borrower debt(2)
 
 33,219
 62,285
 62,285
 
 
 157,789
 $9,380
 $9,380
 $39,643
 $96,368
 $87,198
 $127,542
 $369,511
 $11,362
 $75,016
 $88,337
 $77,710
 $16,720
 $176,057
 $445,202

(1)Includes balloon payments.
(2)Includes ground lease payments. Amounts disclosed do not include rents that adjust to fair market value.
(3)The Partnership is a co-borrower with Lexington under a revolving credit facility and term loans. The Partnership is allocated a portion of this debt in accordance with its partnership agreement.


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Item 7A. Quantitative and Qualitative Disclosure about Market-Risk

Our exposure to market risk relates primarily to our variable-rate debtindebtedness not subject to interest rate swaps and our fixed-rate debt. Our consolidated aggregate principal variable-rate indebtedness was $384.1 million at December 31, 2017, which represented 18.4% of our aggregate principal consolidated indebtedness. We had no consolidated variable-rate indebtedness outstanding at December 31, 2016. As of December 31, 2015, we had $177.0 million consolidated variable-rate indebtedness not subject to an outstanding interest rate swap agreement, which represented 8.0% of total long term indebtedness. During 20162017 and 2015,2016, our variable-rate indebtedness had a weighted-average interest ratesrate of 1.4%2.7% and 1.5%1.4%, respectively. Had the weighted-average interest rate been 100 basis points higher, our interest expense for 20162017 and 20152016 would have been increased by approximately $1.0$1.7 million and $0.9$1.0 million, respectively. As of December 31, 20162017 and 2015,2016, our aggregate principal consolidated fixed-rate debt was approximately $1.9$1.7 billion and $2.0$1.9 billion, respectively, which represented 100.0%81.6% and 92.0%100.0%, respectively, of total long-term indebtedness in each year.our aggregate principal 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 following fair values werevalue was determined using the interest rates that we believe our outstanding fixed-rate debt would warrant as of December 31, 20162017 and is indicative of the interest rate environment as of December 31, 20162017, and does not take into consideration the effects of subsequent interest rate fluctuations. Accordingly, we estimate that the fair value of our fixed-rate debt was $1.8$1.7 billion as of December 31, 20162017.

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 instruments to the extent that reasonably favorable rates are obtainable with such arrangements. We generally enter into derivative financial instruments such as interest rate swaps or caps to mitigate our interest rate risk on a related financial instrument or to effectively lock the interest rate on a portion of our variable-rate debt. As of December 31, 20162017, we have ten interest rate swap agreements in our consolidated portfolio.


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Item 8. Financial Statements and Supplementary Data

 
 
 




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Report of Independent Registered Public Accounting Firm
To the shareholders and Trustees of
Lexington Realty Trust

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheet of Lexington Realty Trust and subsidiaries (the "Company") as of December 31, 2017, and the related consolidated statements of operations, comprehensive income (loss), changes in equity and cash flows, for the year ended December 31, 2017, and the related notes and the schedule listed in the Index at Item 15 for the year ended December 31, 2017 (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2017, and the results of its operations and its cash flows for the year ended December 31, 2017, in conformity with accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2017, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 26, 2018, expressed an unqualified opinion on the Company's internal control over financial reporting.

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.

/s/ Deloitte & Touche LLP
New York, NY
February 26, 2018
We have served as the Company's auditor since 2017.


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Report of Independent Registered Public Accounting Firm
To the shareholders and Trustees of
Lexington Realty Trust

Opinion on Internal Control over Financial Reporting
We have audited the internal control over financial reporting of Lexington Realty Trust and subsidiaries (the “Company”) as of December 31, 2017, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2017, based on criteria established in Internal Control - Integrated Framework (2013) issued by COSO.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements as of and for the year ended December 31, 2017, of the Company and our report dated February 26, 2018, expressed an unqualified opinion on those financial statements.

Basis for Opinion

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 Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. 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, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control over Financial Reporting

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 directors 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.


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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.

/s/ Deloitte & Touche LLP
New York, NY
February 26, 2018


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Report of Independent Registered Public Accounting Firm
The Trustees and Shareholders
Lexington Realty Trust:
We have audited the accompanying consolidated balance sheets of Lexington Realty Trust and subsidiaries (the “Company”) as of December 31, 2016 and 2015, and the related consolidated statements of operations, comprehensive income (loss), changes in equity, and cash flows for each of the years in the three‑year period ended December 31, 2016. In connection with our audits of the consolidated financial statements, we also have audited the accompanying financial statement schedule III. 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 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 provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Lexington Realty Trust and subsidiaries as of December 31, 2016 and 2015, and the results of their operations and their cash flows for each of the years in the three‑year period ended December 31, 2016, 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, present 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), Lexington Realty Trust’s internal control over financial reporting as of December 31, 2016, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated February 28, 2017 expressed an adverse opinion on the effectiveness of the Company’s internal control over financial reporting.

(signed) KPMG LLP
New York, New York
February 28, 2017




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Report of Independent Registered Public Accounting Firm

The Trustees and Shareholders
Lexington Realty Trust:
We have audited Lexington Realty Trust’s (the “Company’s”) internal control over financial reporting as of December 31, 2016, based on criteria established in Internal Control ‑ Integrated Framework (2013) 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 Control 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 directors 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.
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis. A material weakness related to ineffective controls over written policies and procedures regarding the Company's critical accounting policies and significant or unusual transactions, over the identification, authorization, analysis and communication to those charged with governance of critical accounting policies and significant or unusual transactions and the accounting for lease terminations has been identified and included in management's assessment.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheet of Lexington Realty Trust and subsidiaries as of December 31, 2016 and 2015 and the related consolidated statements of operations and comprehensive income (loss), changes in equity and cash flows for each of the years in the three‑year period ended December 31, 2016, and the financial statement schedule III. The material weakness was considered in determining the nature, timing, and extent of audit tests applied in our audit of the 2016 consolidated financial statements, and this report does not affect our report dated February 28, 2017, which expressed an unqualified opinion on those consolidated financial statements and financial statement schedule.

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In our opinion, because of the effect of the aforementioned material weakness on the achievement of the objectives of the control criteria, the Company has not maintained effective internal control over financial reporting as of December 31, 2016, based on criteria established in Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
We do not express an opinion or any other form of assurance on management’s statements referring to corrective actions taken after December 31, 2016, relative to the aforementioned material weakness in internal control over financial reporting.

(signed) KPMG LLP

New York, New York
February 28, 2017


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LEXINGTON REALTY TRUST AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
($000, except share and per share data)
As of December 31,
2016 20152017 2016
Assets:      
Real estate, at cost$3,533,172
 $3,789,711
$3,936,459
 $3,533,172
Real estate - intangible assets597,294
 692,778
599,091
 597,294
Investments in real estate under construction106,652
 95,402

 106,652
4,237,118
 4,577,891
4,535,550
 4,237,118
Less: accumulated depreciation and amortization1,208,792
 1,179,969
1,225,650
 1,208,792
Real estate, net3,028,326
 3,397,922
3,309,900
 3,028,326
Assets held for sale23,808
 24,425
2,827
 23,808
Cash and cash equivalents86,637
 93,249
107,762
 86,637
Restricted cash31,142
 10,637
4,394
 31,142
Investment in and advances to non-consolidated entities67,125
 31,054
17,476
 67,125
Deferred expenses (net of accumulated amortization of $31,095 in 2016 and $27,180 in 2015)33,360
 42,000
Deferred expenses (net of accumulated amortization of $35,072 in 2017 and $31,095 in 2016)31,693
 33,360
Loans receivable, net94,210
 95,871

 94,210
Rent receivable - current7,516
 7,193
5,450
 7,516
Rent receivable – deferred31,455
 87,547
52,769
 31,455
Other assets37,888
 18,505
20,749
 37,888
Total assets$3,441,467
 $3,808,403
$3,553,020
 $3,441,467
      
Liabilities and Equity: 
  
 
  
Liabilities: 
  
 
  
Mortgages and notes payable, net$738,047
 $872,643
$689,810
 $738,047
Revolving credit facility borrowings
 177,000
160,000
 
Term loans payable, net501,093
 500,076
596,663
 501,093
Senior notes payable, net494,362
 493,526
495,198
 494,362
Convertible notes payable, net
 12,126
Trust preferred securities, net127,096
 126,996
127,196
 127,096
Dividends payable47,264
 45,440
49,504
 47,264
Liabilities held for sale191
 8,405

 191
Accounts payable and other liabilities59,601
 41,479
38,644
 59,601
Accrued interest payable6,704
 8,851
5,378
 6,704
Deferred revenue - including below market leases (net of accumulated accretion of $31,309 in 2016 and $30,548 in 2015)39,895
 42,524
Deferred revenue - including below market leases (net of accumulated accretion of $26,081 in 2017 and $31,309 in 2016)33,182
 39,895
Prepaid rent14,723
 16,806
16,610
 14,723
Total liabilities2,028,976
 2,345,872
2,212,185
 2,028,976
      
Commitments and contingencies

 



 

Equity: 
  
 
  
Preferred shares, par value $0.0001 per share; authorized 100,000,000 shares, 
  
 
  
Series C Cumulative Convertible Preferred, liquidation preference $96,770 and 1,935,400 shares issued and outstanding94,016
 94,016
94,016
 94,016
Common shares, par value $0.0001 per share; authorized 400,000,000 shares, 238,037,177 and 234,575,225 shares issued and outstanding in 2016 and 2015, respectively24
 23
Common shares, par value $0.0001 per share; authorized 400,000,000 shares, 240,689,081 and 238,037,177 shares issued and outstanding in 2017 and 2016, respectively24
 24
Additional paid-in-capital2,800,736
 2,776,837
2,818,520
 2,800,736
Accumulated distributions in excess of net income(1,500,966) (1,428,908)(1,589,724) (1,500,966)
Accumulated other comprehensive loss(1,033) (1,939)
Accumulated other comprehensive income (loss)1,065
 (1,033)
Total shareholders’ equity1,392,777
 1,440,029
1,323,901
 1,392,777
Noncontrolling interests19,714
 22,502
16,934
 19,714
Total equity1,412,491
 1,462,531
1,340,835
 1,412,491
Total liabilities and equity$3,441,467
 $3,808,403
$3,553,020
 $3,441,467

The accompanying notes are an integral part of these consolidated financial statements.

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LEXINGTON REALTY TRUST AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
($000, except share and per share data)
Years ended December 31,
2016 2015 20142017 2016 2015
Gross revenues:          
Rental$398,065
 $399,485
 $392,480
$359,832
 $398,065
 $399,485
Tenant reimbursements31,431
 31,354
 31,338
31,809
 31,431
 31,354
Total gross revenues429,496
 430,839
 423,818
391,641
 429,496
 430,839
Expense applicable to revenues:          
Depreciation and amortization(166,048) (163,198) (154,837)(173,968) (166,048) (163,198)
Property operating(47,355) (59,655) (63,673)(49,194) (47,355) (59,655)
General and administrative(31,104) (29,276) (28,255)(34,158) (31,104) (29,276)
Litigation settlement(2,050) 
 
Non-operating income13,043
 11,429
 14,505
10,378
 13,043
 11,429
Interest and amortization expense(88,032) (89,739) (97,303)(77,883) (88,032) (89,739)
Gains on sales of financial assets, net
 
 855
Debt satisfaction gains (charges), net(975) 25,150
 (9,452)6,196
 (975) 25,150
Impairment charges and loan losses(100,236) (36,832) (37,333)(44,996) (100,236) (36,832)
Gains on sales of properties81,510
 23,307
 
63,428
 81,510
 23,307
Income before provision for income taxes, equity in earnings of non-consolidated entities and discontinued operations90,299
 112,025
 48,325
Income before provision for income taxes, equity in earnings (losses) of non-consolidated entities and discontinued operations89,394
 90,299
 112,025
Provision for income taxes(1,439) (568) (1,109)(1,917) (1,439) (568)
Equity in earnings of non-consolidated entities7,590
 1,752
 626
Equity in earnings (losses) of non-consolidated entities(848) 7,590
 1,752
Income from continuing operations96,450
 113,209
 47,842
86,629
 96,450
 113,209
Discontinued operations:          
Income from discontinued operations
 109
 6,252

 
 109
Provision for income taxes
 (4) (59)
 
 (4)
Debt satisfaction charges, net
 
 (312)
Gains on sales of properties
 1,577
 57,507

 
 1,577
Impairment charges
 
 (13,767)
Total discontinued operations
 1,682
 49,621

 
 1,682
Net income96,450
 114,891
 97,463
86,629
 96,450
 114,891
Less net income attributable to noncontrolling interests(826) (3,188) (4,359)(1,046) (826) (3,188)
Net income attributable to Lexington Realty Trust shareholders95,624
 111,703
 93,104
85,583
 95,624
 111,703
Dividends attributable to preferred shares – Series C – 6.50% rate(6,290) (6,290) (6,290)(6,290) (6,290) (6,290)
Allocation to participating securities(225) (313) (490)(226) (225) (313)
Net income attributable to common shareholders$89,109
 $105,100
 $86,324
$79,067
 $89,109
 $105,100
Income per common share – basic:          
Income from continuing operations$0.38
 $0.44
 $0.17
$0.33
 $0.38
 $0.44
Income from discontinued operations
 0.01
 0.21

 
 0.01
Net income attributable to common shareholders$0.38
 $0.45
 $0.38
$0.33
 $0.38
 $0.45
Weighted-average common shares outstanding – basic233,633,058
 233,455,056
 228,966,253
237,758,408
 233,633,058
 233,455,056
Income per common share – diluted:          
Income from continuing operations$0.37
 $0.44
 $0.17
$0.33
 $0.37
 $0.44
Income from discontinued operations
 0.01
 0.21

 
 0.01
Net income attributable to common shareholders$0.37
 $0.45
 $0.38
$0.33
 $0.37
 $0.45
Weighted-average common shares outstanding – diluted237,679,031
 233,751,775
 229,436,708
241,537,837
 237,679,031
 233,751,775
Amounts attributable to common shareholders:          
Income from continuing operations$89,109
 $103,418
 $37,652
$79,067
 $89,109
 $103,418
Income from discontinued operations
 1,682
 48,672

 
 1,682
Net income attributable to common shareholders$89,109
 $105,100
 $86,324
$79,067
 $89,109
 $105,100
The accompanying notes are an integral part of these consolidated financial statements.

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LEXINGTON REALTY TRUST AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
($000)
Years ended December 31,
2016 2015 20142017 2016 2015
Net income$96,450
 $114,891
 $97,463
$86,629
 $96,450
 $114,891
Other comprehensive income (loss): 
     
    
Change in unrealized gain (loss) on interest rate swaps, net906
 (2,343) (4,035)2,098
 906
 (2,343)
Other comprehensive income (loss)906
 (2,343) (4,035)2,098
 906
 (2,343)
Comprehensive income97,356
 112,548
 93,428
88,727
 97,356
 112,548
Comprehensive income attributable to noncontrolling interests(826) (3,188) (4,359)(1,046) (826) (3,188)
Comprehensive income attributable to Lexington Realty Trust shareholders$96,530
 $109,360
 $89,069
$87,681
 $96,530
 $109,360
The accompanying notes are an integral part of these consolidated financial statements.

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LEXINGTON REALTY TRUST AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
($000 except share amounts)
Year ended December 31, 2017

  Lexington Realty Trust Shareholders  
 Total Number of Preferred Shares Preferred Shares Number of Common Shares Common Shares Additional Paid-in-Capital Accumulated Distributions in Excess of Net Income Accumulated Other Comprehensive Income (Loss) Noncontrolling Interests
Balance December 31, 2016$1,412,491
 1,935,400
 $94,016
 238,037,177
 $24
 $2,800,736
 $(1,500,966) $(1,033) $19,714
Redemption of noncontrolling OP units for common shares
 
 
 140,746
 
 584
 
 
 (584)
Exercise of employee common share options478
 
 
 151,106
 
 478
 
 
 
Issuance of common shares and deferred compensation amortization, net24,673
 
 
 2,360,052
 
 24,673
 
 
 
Acquisition of consolidated joint venture partner's equity interest(7,951) 
 
 
 
 (7,951) 
 
 
Dividends/distributions(177,583) 
 
 
 
 
 (174,341) 
 (3,242)
Net income86,629
 
 
 
 
 
 85,583
 
 1,046
Other comprehensive income2,098
 
 
 
 
 
 
 2,098
 
Balance December 31, 2017$1,340,835
 1,935,400
 $94,016
 240,689,081
 $24
 $2,818,520
 $(1,589,724) $1,065
 $16,934

The accompanying notes are an integral part of the consolidated financial statements.


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LEXINGTON REALTY TRUST AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
($000 except share amounts)
Year ended December 31, 2016

  Lexington Realty Trust Shareholders  
 Total Number of Preferred Shares Preferred Shares Number of Common Shares Common Shares Additional Paid-in-Capital Accumulated Distributions in Excess of Net Income Accumulated Other Comprehensive Loss Noncontrolling Interests
Balance December 31, 2015$1,462,531
 1,935,400
 $94,016
 234,575,225
 $23
 $2,776,837
 $(1,428,908) $(1,939) $22,502
Redemption of noncontrolling OP units for common shares
 
 
 48,549
 
 210
 
 
 (210)
Repurchase of common shares(8,973) 
 
 (1,184,113) 
 (8,973) 
 
 
Issuance of common shares upon conversion of convertible notes12,027
 
 
 1,892,269
 
 12,027
 
 
 
Exercise of employee common share options(1,101) 
 
 170,412
 
 (1,101) 
 
 
Issuance of common shares and deferred compensation amortization, net21,737
 
 
 2,534,835
 1
 21,736
 
 
 
Dividends/distributions(171,086) 
 
 
 
 
 (167,682) 
 (3,404)
Net income96,450
 
 
 
 
 
 95,624
 
 826
Other comprehensive income906
 
 
 
 
 
 
 906
 
Balance December 31, 2016$1,412,491
 1,935,400
 $94,016
 238,037,177
 $24
 $2,800,736
 $(1,500,966) $(1,033) $19,714

The accompanying notes are an integral part of the consolidated financial statements.


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LEXINGTON REALTY TRUST AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
($000 except share amounts)
Year ended December 31, 2015

  Lexington Realty Trust Shareholders  
 Total Number of Preferred Shares Preferred Shares Number of Common Shares Common Shares Additional Paid-in-Capital Accumulated Distributions in Excess of Net Income Accumulated Other Comprehensive Income (Loss) Noncontrolling Interests
Balance December 31, 2014$1,508,920
 1,935,400
 $94,016
 233,278,037
 $23
 $2,763,374
 $(1,372,051) $404
 $23,154
Redemption of noncontrolling OP units for common shares
 
 
 32,780
 
 165
 
 
 (165)
Repurchase of common shares(18,431) 
 
 (2,216,799) 
 (18,431) 
 
 
Issuance of common shares upon conversion of convertible notes3,630
 
 
 519,664
 
 3,630
 
 
 
Issuance of common shares and deferred compensation amortization, net28,099
 
 
 2,961,543
 
 28,099
 
 
 
Acquisition of consolidated joint venture partner's equity interest(1,234) 
 
 
 
 
 (1,247) 
 13
Dividends/distributions(171,001) 
 
 
 
 
 (167,313) 
 (3,688)
Net income114,891
 
 
 
 
 
 111,703
 
 3,188
Other comprehensive loss(2,343) 
 
 
 
 
 
 (2,343) 
Balance December 31, 2015$1,462,531
 1,935,400
 $94,016
 234,575,225
 $23
 $2,776,837
 $(1,428,908) $(1,939) $22,502

The accompanying notes are an integral part of the consolidated financial statements.

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LEXINGTON REALTY TRUST AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
($000 except share amounts)
Year ended December 31, 2014

  Lexington Realty Trust Shareholders  
 Total Number of Preferred Shares Preferred Shares Number of Common Shares Common Shares Additional Paid-in-Capital Accumulated Distributions in Excess of Net Income Accumulated Other Comprehensive Income (Loss) Noncontrolling Interests
Balance December 31, 2013$1,539,483
 1,935,400
 $94,016
 228,663,022
 $23
 $2,717,787
 $(1,300,527) $4,439
 $23,745
Redemption of noncontrolling OP units for common shares(1,962) 
 
 29,086
 
 (858) 
 
 (1,104)
Issuance of common shares upon conversion of convertible notes14,347
 
 
 1,904,542
 
 14,347
 
 
 
Acquisition of consolidated joint venture partner's equity interest(2,100) 
 
 
 
 
 (2,262) 
 162
Exercise of employee common share options597
 
 
 303,852
 
 597
 
 
 
Forfeiture of employee common shares(57) 
 
 (13,658) 
 (57) 
 
 
Issuance of common shares and deferred compensation amortization, net31,558
 
 
 2,391,193
 
 31,558
 
 
 
Dividends/distributions(166,374) 
 
 
 
 
 (162,366) 
 (4,008)
Net income97,463
 
 
 
 
 
 93,104
 
 4,359
Other comprehensive loss(4,035) 
 
 
 
 
 
 (4,035) 
Balance December 31, 2014$1,508,920
 1,935,400
 $94,016
 233,278,037
 $23
 $2,763,374
 $(1,372,051) $404
 $23,154

The accompanying notes are an integral part of the consolidated financial statements.










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LEXINGTON REALTY TRUST AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
($000)
Years ended December 31,
2016 2015 20142017 2016 2015
Cash flows from operating activities:          
Net income$96,450
 $114,891
 $97,463
$86,629
 $96,450
 $114,891
Adjustments to reconcile net income to net cash provided by operating activities:          
Depreciation and amortization170,038
 167,186
 167,289
177,561
 170,038
 167,186
Gains on sales of properties(81,510) (24,884) (57,507)(63,428) (81,510) (24,884)
Gains on sales of financial assets, net
 
 (855)
Debt satisfaction (gains) charges, net(3,562) (25,240) 2,859
Debt satisfaction gains, net(6,305) (3,562) (25,240)
Impairment charges and loan losses100,236
 36,832
 51,100
44,996
 100,236
 36,832
Straight-line rents(37,445) (46,432) (46,254)(19,568) (37,445) (46,432)
Other non-cash (income) expense, net1,656
 3,695
 (390)8,093
 1,656
 3,695
Equity in earnings of non-consolidated entities(7,590) (1,752) (626)
Equity in (earnings) losses of non-consolidated entities848
 (7,590) (1,752)
Distributions of accumulated earnings from non-consolidated entities, net815
 2,056
 1,381
403
 815
 2,056
Unearned contingent acquisition consideration(3,922) 
 
Deferred taxes, net59
 (77) 124

 59
 (77)
Increase (decrease) in accounts payable and other liabilities(1,657) 4,314
 (3,716)(1,141) (1,657) 4,314
Change in rent receivable and prepaid rent, net(1,825) 1,967
 (617)2,922
 (1,825) 1,967
Increase (decrease) in accrued interest payable808
 2,438
 (963)
Increase in accrued interest payable16
 808
 2,438
Other adjustments, net(1,200) 9,936
 5,384
657
 (1,200) 9,936
Net cash provided by operating activities:235,273
 244,930
 214,672
227,761
 235,273
 244,930
Cash flows from investing activities:   
     
  
Investment in real estate, including intangible assets(167,797) (349,926) (122,395)(558,571) (167,797) (349,926)
Investment in real estate under construction(132,192) (137,158) (131,153)(83,274) (132,192) (137,158)
Capital expenditures(4,408) (29,110) (17,681)(15,184) (4,408) (29,110)
Net proceeds from sale of properties370,038
 156,461
 237,866
223,853
 370,038
 156,461
Net proceeds from sale of non-consolidated investment6,127
 
 
Principal payments received on loans receivable2,214
 4,746
 44,661
139,280
 2,214
 4,746
Investment in loans receivable
 (10,274) (43,555)
 
 (10,274)
Investments in and advances to non-consolidated entities, net(37,240) (18,900) (2,948)(9,898) (37,240) (18,900)
Distributions from non-consolidated entities in excess of accumulated earnings8,175
 1,728
 1,314
531
 8,175
 1,728
Increase in deferred leasing costs(6,558) (6,681) (10,484)
Proceeds from the sale of marketable equity securities
 
 725
Investment in marketable equity securities
 
 (689)
Payments of deferred leasing costs(6,526) (6,558) (6,681)
Change in escrow deposits and restricted cash(21,571) 2,745
 916
23,720
 (21,571) 2,745
Change in real estate deposits(20,848) (1,902) 355
20,826
 (20,848) (1,902)
Net cash used in investing activities(10,187) (388,271) (43,068)(259,116) (10,187) (388,271)
Cash flows from financing activities:   
     
  
Dividends to common and preferred shareholders(165,858) (164,737) (159,520)(172,101) (165,858) (164,737)
Proceeds from senior notes
 
 249,708
Conversion of convertible notes(672) (529) (233)
 (672) (529)
Principal amortization payments(26,796) (32,440) (35,206)(30,082) (26,796) (32,440)
Principal payments on debt, excluding normal amortization(109,973) (106,956) (202,262)(50,797) (109,973) (106,956)
Change in revolving credit facility borrowing, net(177,000) 177,000
 (48,000)160,000
 (177,000) 177,000
Payment of developer liabilities(4,016) 
 

 (4,016) 
Increase in deferred financing costs(1,842) (9,336) (4,558)
Payments of deferred financing costs(2,124) (1,842) (9,336)
Proceeds of mortgages and notes payable254,650
 190,843
 27,790
45,400
 254,650
 190,843
Proceeds from term loans
 
 99,000
95,000
 
 
Change in restricted cash
 (1,573) 
1,573
 
 (1,573)
Cash distributions to noncontrolling interests(3,404) (3,688) (4,008)(3,242) (3,404) (3,688)
Purchase of a noncontrolling interest
 (4,022) (2,100)
Purchase/redemption of a noncontrolling interest(7,951) 
 (4,022)
Repurchase of common shares(8,973) (18,431) 

 (8,973) (18,431)
Redemption of noncontrolling interests
 
 (1,962)
Issuance of common shares, net12,186
 19,382
 23,563
16,804
 12,186
 19,382
Net cash provided by (used in) financing activities(231,698) 45,513
 (57,788)52,480
 (231,698) 45,513
Change in cash and cash equivalents(6,612) (97,828) 113,816
21,125
 (6,612) (97,828)
Cash and cash equivalents, at beginning of year93,249
 191,077
 77,261
86,637
 93,249
 191,077
Cash and cash equivalents, at end of year$86,637
 $93,249
 $191,077
$107,762
 $86,637
 $93,249
The accompanying notes are an integral part of these consolidated financial statements.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
($000, except share/unit data)


(1)     The Company

Lexington Realty Trust (together with its consolidated subsidiaries, except when the context only applies to the parent entity, the “Company”) is a Maryland statutory real estate investment trust (“REIT”) that owns a diversified portfolio of equity and debt investments in single-tenant commercial properties.
As of December 31, 20162017, the Company had equity ownership interests in approximately 195175 consolidated properties located in 4037 states. The properties in which the Company has an interest are primarily net-leased to tenants in various industries.
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 are subject to federal income taxes on the income from these activities.
The Company conducts its operations either directly or indirectly through (1) property owner subsidiaries and lender subsidiaries, which are single purpose entities, (2) an operating partnership, Lepercq Corporate Income Fund L.P. (“LCIF”), in which the Company is the sole unit holder of the general partner and the sole unit holder of the limited partner that holds a majority of the limited partner interests, (3) a wholly-owned TRS, Lexington Realty Advisors, Inc. (“LRA”), and (4) investments in joint ventures. References to “OP Units” refer to units of limited partner interests in LCIF. Property owner subsidiaries are landlords under leases for properties in which the Company has an interest and/or borrowers under loan agreements secured by properties in which the Company has an interest and lender subsidiaries are lenders under loan agreements where the Company made an investment in a loan asset, but in all cases are separate and distinct legal entities. Each property owner subsidiary is a separate legal entity that maintains separate books and records. The assets and credit of each property owner subsidiary with a property subject to a mortgage loan are not available to creditors to satisfy the debt and other obligations of any other person, including any other property owner subsidiary or any other affiliate. Consolidated entities that are not property owner subsidiaries do not directly own any of the assets of a property owner subsidiary (or the general partner, member or managing member of such property owner subsidiary), but merely hold partnership, membership or beneficial interest therein, which interests are subordinate to the claims of such property owner subsidiary's (or its general partner's, member's or managing member's) creditors.
(2)Summary of Significant Accounting Policies
 
Basis of Presentation and Consolidation. The Company's consolidated financial statements are prepared on the accrual basis of accounting in accordance with U.S. generally accepted accounting principles (“GAAP”). The financial statements reflect the accounts of the Company and its consolidated subsidiaries. The Company consolidates its wholly-owned subsidiaries, partnerships and joint ventures which it controls (i) through voting rights or similar rights or (ii) by means other than voting rights if the Company is the primary beneficiary of a variable interest entity ("VIE"). Entities which the Company does not control and entities which are VIEs in which the Company is not the primary beneficiary are accounted for under appropriate GAAP.
On January 1, 2016, the Company adopted Accounting Standards Update (“ASU”) 2015-02 (Topic 810), Amendments to the Consolidation Analysis, modifying the analysis it must perform to determine whether it should consolidate certain types of legal entities. The guidance does not amend the existing disclosure requirements for VIEs or voting interest model entities. The adoption of this guidance had no impact on consolidated entities included in the Company's consolidated financial statements as all entities previously consolidated are still consolidated and all entities previously not consolidated are still not consolidated. However, under the revised guidance, the Company determined that certain of its affiliated limited partnerships and similar entities are now considered, by definition, VIEs. These entities were determined to be VIEs as the unaffiliated partners/members did not have simple majority substantive kick-out rights or participating rights.
The Company determined that it wasis the primary beneficiary of certain VIEs as it has a controlling financial interest in these entities. LCIF, which continues to beis consolidated and in which the Company has an approximate 96% interest, was determined to beis a VIE under this new guidance.VIE. See the consolidated financial statements of LCIF included within this Annual Report.
The Company had a joint venture limited partnership that owned the Lake Jackson, Texas property, with a developer which was a consolidated VIE. In 2017, upon the closeout of the build-to-suit project, the developer earned notional capital of $7,951, which was simultaneously redeemed by the limited partnership for $7,951. The Company treated the payment as a reduction in shareholders equity in accordance with ASC 810-10-45-23. As of December 31, 2017, the limited partnership, which is still consolidated, is wholly-owned by the Company and no longer a VIE.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
($000, except share/unit data)

The Company has a joint venture limited partnership with a developer which is a consolidated VIE. The joint venture is developing an office campus in Lake Jackson, Texas. The Company currently has a 100% interest in the joint venture; however, the developer has certain protective rights, and, upon project completion, the developer will be credited with a notional capital account for a profit interest and certain cost savings. During 2016, the joint venture completed three of four buildings. As of December 31, 2016 and December 31, 2015, the joint venture had $55,960 and $62,353, respectively, in real estate under construction.
The assets of each VIE are only available to satisfy such VIE's respective liabilities. As of December 31, 2017 and 2016, the VIEs' mortgages and notes payable were non-recourse to the Company. Below is a summary of selected financial data of consolidated VIEs for which the Company is the primary beneficiary included in the Consolidated Balance Sheets as of December 31, 20162017 and December 31, 2015:2016:
December 31, 2016 December 31, 2015December 31, 2017 December 31, 2016
Real estate, net$778,265
 $1,072,463
$682,587
 $778,265
Total assets$899,801
 $1,192,944
$766,025
 $899,801
Mortgages and notes payable, net$364,099
 $431,599
$212,792
 $364,099
Total liabilities$395,332
 $448,057
$226,331
 $395,332
Earnings Per Share. Basic net income (loss) per share is computed by dividing net income (loss) reduced by preferred dividends and amounts allocated to certain non-vested share-based payment awards, 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 in-the-money common share options and non-vested common shares, OP units and put options of certain convertible securities.
Use of Estimates. Management has made a number of significant 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 GAAP. 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 economic environment. The 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 receivable, allocation of property purchase price to tangible and intangible assets acquired and liabilities assumed, the determination of VIEs and which entities should be consolidated, the determination of impairment of long-lived assets, loans receivable and equity method investments, valuation of derivative financial instruments, valuation of compensation plans and the useful lives of long-lived assets. Actual results could differ materially from those estimates.
Fair Value Measurements. The Company follows the guidance in the Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") Topic 820, Fair Value Measurements and Disclosures ("Topic 820"), to determine the fair value of financial and non-financial instruments. Topic 820 defines fair value, establishes a framework for measuring fair value in GAAP and expands disclosures about fair value measurements. Topic 820 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, which 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 considering counterparty credit risk. The Company has formally elected to apply the portfolio exception within Topic 820 with respect to measuring counterparty risk for all of its derivative transactions subject to master netting arrangements.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
($000, except share/unit data)

Revenue Recognition. The Company recognizes lease revenue 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. Revenue is recognized on a contractual basis for leases with escalations tied to a consumer price index with no floor. 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 the renewals are not reasonably assured. If 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. If 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 fees as rental revenue in the period received and writes off unamortized lease-related intangible and other lease-related account balances, provided there are no further Company obligations under the lease. Otherwise, such fees and balances are recognized on a straight-line basis over the remaining obligation period with the termination payments being recorded as a component of rent receivable-deferred on the Consolidated Balance Sheets.
Gains on sales of real estate are recognized based upon the specific timing of the sale as measured against various criteria related to the terms of the transactions and any continuing involvement 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 the Company sells a property and retains a partial ownership interest in the property, the Company recognizes gain to the extent of the third-party ownership interest.

Purchase Accounting and Acquisition of Real Estate. The fair value of the real estate acquired, which includes the impact of 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. Acquisition costs are expensed as incurred and are included in property operating expense in the accompanying Consolidated Statement of Operations.
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. The “as-if-vacant” value is then allocated to land and 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 expected lease-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 expected lease-up periods based on current market demand. Management also estimates costs to execute similar leases including leasing commissions. Management generally retains a third party to assist in the allocations.
In allocating the fair value of the identified intangible assets and liabilities of an acquired property, above-market and below-market lease values are recorded based on the difference between the current in-place lease rent and management'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 tenant relationship values, 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 tenant relationship values based on management's evaluation of the specific characteristics of each tenant's lease. The value of in-place leases is amortized to expense over the remaining non-cancelable periods and any bargain renewal periods of the respective leases. The value of tenant relationships is amortized to expense over the applicable lease term plus expected renewal periods.
Depreciation is determined by the straight-line method over the remaining estimated economic useful lives of the properties. The Company generally depreciates its real estate assets over periods ranging up to 40 years.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
($000, except share/unit data)

Impairment of Real Estate. The Company evaluates the carrying value of all tangible and intangible real estate assets held for investment for possible impairment when an event or change in circumstance has occurred that indicates its carrying value may not be recoverable. The evaluation includes estimating and reviewing anticipated future undiscounted cash flows to be derived from the asset. If such cash flows are less than the asset's carrying value, an impairment charge is recognized to the extent by which the asset's carrying value exceeds its estimated fair value, which may be below the balance of any non-recourse financing. Estimating future cash flows and fair values is highly subjective and such estimates could differ materially from actual results.
Investments in Non-Consolidated Entities. The Company accounts for its investments in 50% or less owned entities under the equity method, unless consolidation is required. If the Company's investment in the entity is insignificant and the Company has no influence over the control of the entity then the entity is accounted for under the cost method.
Impairment of Equity Method Investments. The Company assesses whether there are indicators that the value of its equity method investments may be impaired. An impairment charge is recognized only if the Company determines that a decline in the value of the investment below its carrying value is other-than-temporary. The assessment of impairment is highly subjective and involves the application of significant assumptions and judgments about the Company's intent and ability to recover its investment given the nature and operations of the underlying investment, including the level of the Company's involvement therein, among other factors. To the extent an impairment is deemed to be other-than-temporary, the loss is measured as the excess of the carrying amount of the investment over the estimated fair value of the investment.
Loans Receivable. Loans held for investment are intended to be held to maturity and, accordingly, are carried at cost, net of unamortized loan origination costs and fees, loan purchase discounts, and net of an allowance for loan losses when such loan is deemed to be impaired. Loan origination costs and fees and loan purchase discounts are amortized over the term of the loan. The Company considers a loan impaired when, based upon current information and events, it is probable that it will be unable to collect all amounts due for both principal and interest according to the contractual terms of the loan agreement. Significant judgments are required in determining whether impairment has occurred. The Company performs an impairment analysis by comparing either the present value of expected future cash flows discounted at the loan's effective interest rate, the loan's observable current market price or the fair value of the underlying collateral to the net carrying value of the loan, which may result in an allowance and corresponding loan loss charge. Interest income is recorded on a cash basis for impaired loans.

Acquisition, Development and Construction Arrangements. The Company evaluates loans receivable where the Company participates in residual profits through loan provisions or other contracts to ascertain whether the Company has the same risks and rewards as an owner or a joint venture partner. Where the Company concludes that such arrangements are more appropriately treated as an investment in real estate, the Company reflects such loan receivable as an equity investment in real estate under construction in the Consolidated Balance Sheets. In these cases, no interest income is recorded on the loan receivable and the Company records capitalized interest during the construction period. In arrangements where the Company engages a developer to construct a property or provide funds to a tenant to develop a property, the Company will capitalize the funds provided to the developer/tenant and internal costs of interest and real estate taxes, if applicable, during the construction period.

Properties Held For Sale. Assets and liabilities of properties that meet various held for sale criteria, including whether it is probable that a sale will occur within 12 months, are presented separately in the Consolidated Balance Sheets. Commencing January 1, 2015, the operating results of these properties are reflected as discontinued operations in the Consolidated Statements of Operations only if the sale of these assets represents a strategic shift in operations,operations; if not, the operating results are included in continuing operations. Properties classified as held for sale are carried at the lower of net carrying value or estimated fair value less costs to sell and depreciation and amortization are no longer recognized. Properties that do not meet the held for sale criteria are accounted for as operating properties.

Deferred Expenses. Deferred expenses consist primarily of revolving line of credit 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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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
($000, except share/unit data)

Derivative Financial Instruments. The Company accounts for its interest rate swap agreements in accordance with FASB ASC Topic 815, Derivatives and Hedging ("Topic 815"). In accordance with Topic 815, these agreements are carried on the balance sheet at their respective fair values, as an asset if fair value is positive, or as a liability if fair value is negative. If the interest rate swap is designated as a cash flow hedge, the effective portion of the interest rate swap's change in fair value is reported as a component of other comprehensive income (loss); the ineffective portion, if any, is recognized in earnings as an increase or decrease to interest expense.

Upon entering into hedging transactions, the Company documents the relationship between the interest rate swap agreement and the hedged item. 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 ongoing basis, whether or not the hedge is highly effective. 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 hedged 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 does and may continue to utilize interest rate swap and cap agreements to manage interest rate risk, but does not anticipate entering into derivative transactions for speculative trading purposes.
Stock Compensation. The Company maintains an equity participation plan. Non-vested share grants generally vest either based upon (1) time, (2) performance and/or (3) market conditions. Options granted under the plan in 2010 vested over a five-year period and expire ten years from the date of grant. Options granted under the plan in 2008 vested upon attainment of certain market performance measures and expire ten years from the date of grant. All share-based payments to employees, including grants of employee stock options, are recognized in the Consolidated Statements of Operations based on their fair values.
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. As such, the Company is subject to federal and state income taxes on the income from these activities.

Income taxes, primarily related to the Company's taxable REIT subsidiaries, 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.
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 is comprised primarily of cash balances held in escrow withby lenders.

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, 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 most of the tenants of properties in which the Company has an interest 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, or if the tenant is not responsible, the Company's property owner subsidiary may be required to satisfy any such obligations, should they exist. In addition, the property owner subsidiary, as the owner of such a property, may be held directly liable for any such damages or claims irrespective of the provisions of any lease. As of December 31, 20162017, the Company was not aware of any environmental matter relating to any of its investments that would have a material impact on the consolidated financial statements.

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Segment Reporting. The Company operates generally in one industry segment, single-tenant real estate assets.

Reclassifications. Certain amounts included in prior years' financial statements have been reclassified to conform to the current year's presentation.

The Company adopted ASU 2015-03, Simplifying the Presentation of Debt Issuance Costs, on January 1, 2016. ASU 2015-03 amended presentation guidance by requiring that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts.  Prior to the issuance of ASU 2015-03, debt issuance costs were presented as an asset in the balance sheet. As shown in the table below and pursuant to the guidance in ASU 2015-03, the Company has reclassified unamortized debt issuance costs associated with certain debt obligations in the Company's previously reported consolidated balance sheet as of December 31, 2015 as follows:
 As previously reported December 31, 2015 Reclassifications As adjusted December 31, 2015
Deferred expenses, net$63,832
 $(21,832) $42,000
Mortgages and notes payable, net882,952
 (10,309) 872,643
Term loans payable, net505,000
 (4,924) 500,076
Senior notes payable, net497,947
 (4,421) 493,526
Convertible guaranteed notes payable, net12,180
 (54) 12,126
Trust preferred securities, net129,120
 (2,124) 126,996
Recently Issued Accounting GuidanceGuidance. . In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606), which amends the guidance for revenue recognition to eliminate the industry-specific revenue recognition guidance and replace it with a principle based approach for determining revenue recognition. Leases are specifically excluded from this ASU and will be governed by the applicable lease codifications; however, this update may have implications in certain variable payment terms included in lease agreements and in sale and leaseback transactions. The effective date of the new guidance was updated by ASU 2015-14 and is effective for reporting periods beginning after December 15, 2017. The Company’s revenue-producing contracts are primarily leases that are not within the scope of this standard as leases are excluded from ASU 2014-09. The Company expects that it may be impacted upon adoption of ASU 2014-09 in its recognition of non-lease revenue, non-lease components of revenue from lease agreements (upon adoption of ASU 2016-02) and the timing of its recognition of real estate sale transactions. Under ASU 2014-09, revenue recognition for real estate sales is largely based on the transfer of control and the buyer having the ability to direct the use of, or obtain substantially all of the remaining benefit from, the asset (which generally will adoptoccur on the closing date); the factor of continuing involvement is no longer a specific consideration for the timing of recognition. As a result, the Company generally expects that the new guidance may result in transactions qualifying as sales of real estate at an earlier date than under current accounting guidance. The Company believes the impact would be limited to the timing and income statement presentation of revenue and not the total amount of revenue recognized over time. The Company adopted ASU 2014-09 effective January 1, 2018 and anticipates using the modified retrospective with cumulative-effective transition method. The Company is identifying applicable revenue streamsapproach, and, continues to evaluateas the impactmajority of the adoption ofCompany’s revenue is from rental income related to leases, the new guidanceCompany does not believe the ASU will have a material impact on its consolidated financial statements.
In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which requires lessees to recognize a right of use asset and related lease liability for those leases classified as operating leases at the commencement date that have lease terms of more than 12 months. The accounting applied to lessors under this new guidance is largely unchanged from priormonths and amends certain lessor guidance. Lessors in most cases will continue to record operating leases as operating leases and recognize lease income from those leases generally on a straight-line basis over the lease term. The ASU is expected to result in the recognition of a right-to-use asset and related liability to account for ourthe Company's future obligations under ourits ground lease arrangements for which the Company is the lessee. AsFrom a lessor perspective, the Company expects that lease components will primarily be recognized on a straight-line basis over the lease term. ASU 2016-02 originally stated that companies would be required to bifurcate certain lease revenues between lease and non-lease components, however, the FASB issued an exposure draft in January 2018 (2018 Exposure Draft) which, if adopted as written, would allow lessors a practical expedient by class of December 31, 2016, the remaining contractual payments under the Company's groundunderlying assets to account for lease agreements aggregated $53,863.and non-lease components as a single lease component if certain criteria are met. Additionally, the new ASU 2016-02 will require that the Company capitalize, as initial direct costs, only those costs that are incurred due to the execution of a lease. ASU 2016-02 will be effective for fiscal years beginning after December 15, 2018, and interim periods within those years, and requiresyears. ASU 2016-02 originally required a modified retrospective transition approach for leases existing at, or entered into after,method of adoption, however, the beginning2018 Exposure Draft indicates that companies may be permitted to recognize a cumulative-effect adjustment to the opening balance of the earliest comparative period presentedretained earnings in the financial statements; with early adoption permitted.period of adoption. The pronouncement allows some optional practical expedients. The Company continuesexpects to adopt this new guidance on January 1, 2019 and will continue to evaluate the impact of the adoption of the newthis guidance on its consolidated financial statements.until it becomes effective.
In March 2016, the FASB issued ASU 2016-09, Compensation-Stock Compensation-Improvements to Employee Share-Based Payment Accounting (Topic 718), which involves several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. This ASU is effective for fiscal years beginning after December 15, 2016, including interim periods within that reporting period; with early adoption permitted. The Company doesadopted this new guidance on January 1, 2017. This new guidance did not believe this guidance will have a material impact on itsthe Company's consolidated financial statements.

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In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Statements, which requires more timely recognition of credit losses associated with financial assets. The ASU is effective for fiscal years beginning after December 15, 2019, and for interim periods within those fiscal years; however, early adoption is permitted for fiscal years beginning after December 15, 2018. The Company is currently evaluating the impact of the adoption of the new guidance on its consolidated financial statements.has made an accounting policy election to account for share-based award forfeitures in compensation costs when they occur.
In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments, which addresses how certain cash receipts and cash payments are presented and classified in the statement of cash flows. The ASU is effective for fiscal years beginning after December 15, 2018,2017, including interim periods within those years; withhowever, early adoption is permitted. Entities must apply the guidance retrospectively to all periods presented but may apply it prospectively if retrospective application would be impracticable. The Company adopted this guidance effective January 1, 2018. The Company does not believe the adoption of this guidance will have a material impact on its consolidated financial statements.

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In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash, which clarifies guidance on the classification and presentation of changes in restricted cash. The ASU is effective for reporting periods beginning after December 15, 2017, with early adoption permitted, and will be applied retrospectively to all periods presented. Upon adoption, restricted cash balances will be included along with cash and cash equivalents as of the end of the period and beginning of period, respectively, in the Company's consolidated statement of cash flows for all periods presented. Upon adoption, separate line items showing changes in restricted cash balances will be eliminated from the Company's consolidated statement of cash flows. The Company adopted this guidance effective January 1, 2018.
In January 2017, the FASB issued ASU 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business, which clarifies the definition of a business when evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The ASU is effective for reporting periods beginning after December 15, 2017, with early adoption permitted. The Company expects that acquisitions of real estate or in-substance real estate will not meet the revised definition of a business and thus will be treated as asset acquisitions. Acquisition costs for those acquisitions that are not businesses will be capitalized rather than expensed. The Company adopted this guidance effective January 1, 2018. The Company does not believe that the adoption of this guidance will have a material impact on its consolidated financial statements.
In February 2017, the FASB issued ASU 2017-05, Other Income - Gains and Losses from the Derecognition of Nonfinancial Assets (Topic 610-20), which requires that all entities account for the derecognition of a business in accordance with ASC 810, including instances in which the business is considered in-substance real estate.  The ASU requires the Company to measure at fair value any retained interest in a partial sale of real estate. The ASU is effective for annual periods, and interim periods therein, beginning after December 15, 2017. The Company adopted ASU 2017-05 effective January 1, 2018 and it is not expected to have a material impact on its consolidated financial statements.
In August 2017, the FASB issued ASU-2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities, which amends the hedge accounting recognition and presentation requirements in Topic 815. The ASU is effective for reporting periods beginning after December 15, 2018. Early applicationadoption is permitted. The Company is currently evaluating the impact of the adoption of the new guidance on its consolidated financial statements.


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(3)Earnings Per Share
A significant portion of the Company's non-vested share-based payment awards are considered participating securities and as such, the Company is required to use the two-class method for the computation of basic and diluted earnings per share. Under the two-class computation method, net losses are not allocated to participating securities unless the holder of the security has a contractual obligation to share in the losses. The non-vested share-based payment awards are not allocated losses as the awards do not have a contractual obligation to share in losses of the Company.
The following is a reconciliation of the 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, 20162017:
2016 2015 20142017 2016 2015
BASIC          
Income from continuing operations attributable to common shareholders$89,109
 $103,418
 $37,652
$79,067
 $89,109
 $103,418
Income from discontinued operations attributable to common shareholders
 1,682
 48,672

 
 1,682
Net income attributable to common shareholders$89,109
 $105,100
 $86,324
$79,067
 $89,109
 $105,100
Weighted-average number of common shares outstanding233,633,058
 233,455,056
 228,966,253
237,758,408
 233,633,058
 233,455,056
Income per common share: 
    
 
    
Income from continuing operations$0.38
 $0.44
 $0.17
$0.33
 $0.38
 $0.44
Income from discontinued operations
 0.01
 0.21

 
 0.01
Net income attributable to common shareholders$0.38
 $0.45
 $0.38
$0.33
 $0.38
 $0.45
2016 2015 20142017 2016 2015
DILUTED:          
Income from continuing operations attributable to common shareholders$89,109
 $103,418
 $37,652
$79,067
 $89,109
 $103,418
Impact of assumed conversions(159) 
 
147
 (159) 
Income from continuing operations attributable to common shareholders88,950
 103,418
 37,652
79,214
 88,950
 103,418
Income from discontinued operations attributable to common shareholders
 1,682
 48,672

 
 1,682
Impact of assumed conversions:
 
 

 
 
Income from discontinued operations attributable to common shareholders
 1,682
 48,672

 
 1,682
Net income attributable to common shareholders$88,950
 $105,100
 $86,324
$79,214
 $88,950
 $105,100
          
Weighted-average common shares outstanding - basic233,633,058
 233,455,056
 228,966,253
237,758,408
 233,633,058
 233,455,056
Effect of dilutive securities:          
Share options230,352
 296,719
 470,455
86,285
 230,352
 296,719
Operating Partnership Units3,815,621
 
 
3,693,144
 3,815,621
 
Weighted-average common shares outstanding - diluted237,679,031
 233,751,775
 229,436,708
241,537,837
 237,679,031
 233,751,775
          
Income per common share:          
Income from continuing operations$0.37
 $0.44
 $0.17
$0.33
 $0.37
 $0.44
Income from discontinued operations
 0.01
 0.21

 
 0.01
Net income attributable to common shareholders$0.37
 $0.45
 $0.38
$0.33
 $0.37
 $0.45
For per common share amounts, all incremental shares are considered anti-dilutive for periods that have a loss from continuing operations attributable to common shareholders. In addition, other common share equivalents may be anti-dilutive in certain periods.


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(4)Investments in Real Estate and Real Estate Under Construction

The Company's real estate, net, consists of the following at December 31, 20162017 and 20152016:
 2016 2015 2017 2016
Real estate, at cost:        
Buildings and building improvements $3,050,082
 $3,032,457
 $3,476,022
 $3,050,082
Land, land estates and land improvements 472,394
 743,125
 456,134
 472,394
Fixtures and equipment 5,577
 5,577
 84
 5,577
Construction in progress 5,119
 8,552
 4,219
 5,119
Real estate intangibles:        
In-place lease values 436,185
 513,564
 461,624
 436,185
Tenant relationships 113,839
 123,796
 97,223
 113,839
Above-market leases 47,270
 55,418
 40,244
 47,270
Investments in real estate under construction 106,652
 95,402
 
 106,652
 4,237,118
 4,577,891
 4,535,550
 4,237,118
Accumulated depreciation and amortization(1)
 (1,208,792) (1,179,969) (1,225,650) (1,208,792)
Real estate, net $3,028,326
 $3,397,922
 $3,309,900
 $3,028,326
(1)
Includes accumulated amortization of real estate intangible assets of $363,861334,681 and $367,762363,861 in 20162017 and 20152016, respectively. The estimated amortization of the above real estate intangible assets for the next five years is $30,919 in 2017, $26,66431,401 in 2018, $21,74226,578 in 2019, $17,59823,360 in 2020 and, $16,13522,211 in 2021 and $20,951 in 2022.

The Company had below-market leases, net of accumulated accretion, which are included in deferred revenue, of $28,41623,308 and $28,96728,416, respectively as of December 31, 20162017 and 20152016. The estimated accretion for the next five years is $2,034 in 2017, $2,0261,526 in 2018, $1,7191,261 in 2019, $1,6201,235 in 2020 and, $1,5281,143 in 2021 and $1,113 in 2022.
The Company completed the following acquisitions and build-to-suit transactions during 20162017 and 20152016:
2016:2017:
         Real Estate Intangibles
Property TypeLocationAcquisition Date
Initial
Cost
Basis
Lease ExpirationLand and Land Estate Building and Improvements Lease in-place Value Below Market Lease
IndustrialDetroit, MIJanuary 2016$29,697
10/2035$1,133
 $25,009
 $3,555
 $
IndustrialAnderson, SCJune 201661,347
06/20364,663
 45,011
 11,673
 
IndustrialWilsonville, ORSeptember 201643,100
10/20326,815
 32,380
 5,920
 (2,015)
OfficeLake Jackson, TXNovember 201678,484
10/20364,357
 74,127
 
 
IndustrialRomeoville, ILDemember 201652,700
10/20317,524
 40,167
 5,009
 
IndustrialEdwardsville, ILDecember 201644,800
09/20264,593
 34,251
 5,956
 
   $310,128
 $29,085
 $250,945
 $32,113
 $(2,015)
            
Weighted-average life of intangible assets (years)      16.6
 16.1


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2015:
         Real Estate Intangible
Property TypeLocationAcquisition/Completion DateInitial Cost BasisLease ExpirationLand and Land Estate Building and Improvements Lease in-place Value
OtherVenice, FLJanuary 2015$16,850
01/2055$4,696
 $11,753
 $401
OfficeAuburn Hills, MIMarch 201540,025
03/20294,416
 30,012
 5,597
IndustrialHouston, TXMarch 201528,650
03/20354,674
 19,540
 4,436
IndustrialBrookshire, TXMarch 201522,450
03/20352,388
 16,614
 3,448
IndustrialCanton, MSMarch 201589,300
02/20275,077
 71,289
 12,934
IndustrialThomson, GAMay 201510,144
05/2030909
 7,746
 1,489
IndustrialOak Creek, WIJuly 201522,139
06/20353,015
 15,300
 3,824
IndustrialRichland, WANovember 2015152,000
08/20351,293
 126,947
 23,760
OfficeRichmond, VADecember 2015109,544
08/20307,331
 88,021
 14,192
   $491,102
 $33,799
 $387,222
 $70,081
          
Weighted-average life of intangible assets (years)     16.8

The Company recognized aggregate acquisition and pursuit expenses of $836 and $2,404 in 2016 and 2015, respectively, which are included in property operating expenses within the Company's Consolidated Statements of Operations.

The Company is engaged in various forms of acquisition and build-to-suit development activities, including: (1) lending funds to construct build-to-suit projects subject to a single-tenant lease and agree to purchase the properties upon completion of construction and commencement of a single-tenant lease, (2) hiring developers to construct built-to-suit projects on owned properties leased to single tenants, (3) funding the construction of build-to-suit projects on owned properties pursuant to the terms in single-tenant lease agreements and (4) entering into purchase and sale agreements with developers to acquire single-tenant build-to-suit properties upon completion.
As of December 31, 2016, the Company had the following development arrangements outstanding:
LocationProperty TypeSquare Feet Maximum Commitment/Estimated Completion Cost Lease Term (Years) Estimated Completion/Acquisition Date GAAP Investment Balance as of 12/31/2016
Lake Jackson, TX(1)
Office275
 $78,447
 20 1Q 17 $55,960
Charlotte, NCOffice201
 62,445
 15 2Q 17 40,443
Opelika, ALIndustrial165
 37,000
 25 2Q 17 10,249
  641
 $177,892
     $106,652
         Real Estate Intangibles
Property TypeLocationAcquisition Date
Initial
Cost
Basis
Lease ExpirationLand and Land Estate Building and Improvements Lease in-place Value Intangible Below Market Lease Intangible
Office
Lake Jackson, TX(1)
January 2017$70,401
10/2036$3,078
 $67,323
 $
 $
IndustrialNew Century, KSFebruary 201712,056
01/2027
 13,198
 1,648
 (2,790)
IndustrialLebanon, INFebruary 201736,194
01/20242,100
 29,443
 4,651
 
OfficeCharlotte, NCApril 201761,339
04/20323,771
 47,064
 10,504
 
IndustrialCleveland, TNMay 201734,400
03/20241,871
 29,743
 2,786
 
IndustrialGrand Prairie, TXJune 201724,317
03/20373,166
 17,985
 3,166
 
IndustrialSan Antonio, TXJune 201745,507
04/20271,311
 36,644
 7,552
 
IndustrialOpelika, ALJuly 201737,269
05/2042134
 33,183
 3,952
 
IndustrialMcDonough, GAAugust 201766,700
01/20285,441
 52,762
 8,497
 
IndustrialByhalia, MSSeptember 201736,590
09/20271,751
 31,236
 3,603
 
IndustrialJackson, TNSeptember 201757,920
10/20271,454
 49,026
 7,440
 
IndustrialSmyrna, TNSeptember 2017104,890
04/20271,793
 93,940
 9,157
 
IndustrialLafayette, INOctober 201717,450
09/2024662
 15,578
 1,210
 
IndustrialRomulus, MINovember 201738,893
08/20322,438
 33,786
 2,669
 
IndustrialWarren, MINovember 201746,955
10/2032972
 42,521
 3,462
 
IndustrialWinchester, VADecember 201736,700
12/20311,988
 32,501
 2,211
 
   $727,581
 $31,930
 $625,933
 $72,508
 $(2,790)
            
Weighted-average life of intangible assets (years)      12.2
 14.9
(1)Joint venture arrangement with developer. The Company currently hasCompleted the construction of the final building of a 100% economic interest. Threefour-building project. Initial cost basis excludes developer partner payout of four buildings completed in 2016. Estimated completion cost and GAAP investment balance at December 31, 2016 reflect the fourth building.$7,951 (see Note 2)

The Company has variable interests in certain developer entities constructing its build-to-suit facilities but is not the primary beneficiary of the entities as the Company does not have a controlling financial interest. As of December 31, 2016 and 2015, the Company's aggregate investment in development arrangements was $106,652 and $95,402, respectively, which includes $3,442 and $2,726 of interest capitalized, respectively, and is presented as investments in real estate under construction in the accompanying Consolidated Balance Sheets.


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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
($000, except share/unit data)

In addition, as2016:

         Real Estate Intangibles
Property TypeLocationAcquisition Date
Initial
Cost
Basis
Lease ExpirationLand and Land Estate Building and Improvements Lease in-place Value Below Market Lease
IndustrialDetroit, MIJanuary 2016$29,697
10/2035$1,133
 $25,009
 $3,555
 $
IndustrialAnderson, SCJune 201661,347
06/20364,663
 45,011
 11,673
 
IndustrialWilsonville, ORSeptember 201643,100
10/20326,815
 32,380
 5,920
 (2,015)
OfficeLake Jackson, TXNovember 201678,484
10/20364,357
 74,127
 
 
IndustrialRomeoville, ILDecember 201652,700
10/20317,524
 40,167
 5,009
 
IndustrialEdwardsville, ILDecember 201644,800
09/20264,593
 34,251
 5,956
 
   $310,128
 $29,085
 $250,945
 $32,113
 $(2,015)
            
Weighted-average life of intangible assets (years)      16.6
 16.1

The Company recognized aggregate acquisition and pursuit expenses of $2,171 and $836 in 2017 and 2016, respectively, which are included in property operating expenses within the Company's Consolidated Statements of Operations.

From time to time, the Company is engaged in various forms of build-to-suit development activities. As of December 31, 2017, the Company had no development arrangements outstanding. As of December 31, 2016, the Company's aggregate investment in development arrangements was $106,652, which included $3,442 of capitalized interest and is presented as investments in real estate under construction in the accompanying Consolidated Balance Sheets. During 2017, the Company hadrecognized $3,922 in non-operating income on the following forward purchase commitments:
LocationSq. Ft.Property Type Maximum Acquisition Cost Estimated Acquisition Date Approximate Lease Term (Yrs)
Grand Prairie, TX215
Industrial $24,725
 2Q 17 20
Warren, MI(1)
260
Industrial 47,000
 3Q 17 15
 475
  $71,725
    
(1)The Company issued a $4,600 letter of credit to secure its obligation to purchase the property.

Company's Consolidated Statement of Operations due to the write-off of contingent consideration relating to a 2015 build-to-suit project that was not required to be paid by the Company.
(5)Property Dispositions and Real Estate Impairment

For the years ended December 31, 20162017, 20152016 and 20142015, the Company disposed of its interests in certain properties (excluding Greenville, South Carolina in 2014, see note 6) generating aggregate net proceeds of $370,038223,853, $156,461370,038 and $226,375156,461, respectively, which resulted in gains on sales of $81,51063,428, $24,88481,510 and $57,50724,884, respectively. During 2016, 2015 and 2014, the Company recognized aggregate impairment charges of $73,772, $34,857 and $45,004, respectively, relating to properties that were ultimately disposed. The 2016 impairment charges include an aggregate impairment charge of $65,500 recognized on the sale of three land investments in New York, New York. For the years ended December 31, 20162017, 20152016 and 20142015, the Company recognized net debt satisfaction gains (charges) relating to properties ultimately sold including the Greenville, South Carolina property, of $(532)5,938, $21,498(532) and $(671)21,498, respectively. The results of operations for properties disposed of in 20162017 and 2015,2016, that were not classified as held for sale as of December 31, 2014,2015, are included within continuing operations in the consolidated financial statements. At December 31, 20162017 and 2015,2016, the Company had one and two properties, respectively, classified as held for sale.

Assets and liabilities of held for sale properties as of December 31, 20162017 and 20152016 consisted of the following:
December 31, 2016 December 31, 2015December 31, 2017 December 31, 2016
Assets:      
Real estate, at cost$25,957
 $16,590
$2,827
 $25,957
Real estate, intangible assets7,789
 10,786

 7,789
Accumulated depreciation and amortization(13,346) (4,069)
 (13,346)
Rent receivable - deferred1,715
 1,118

 1,715
Other1,693
 

 1,693
$23,808
 $24,425
$2,827
 $23,808
Liabilities:      
Mortgage payable$
 $8,373
Other191
 32
$
 $191
$191
 $8,405
$
 $191

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
($000, except share/unit data)

The Company assesses on a regular basis whether there are any indicators that the carrying value of real estate assets may be impaired. Potential indicators may include an increase in vacancy at a property, tenant financial instability and the potential sale of the property in the near future. An asset is determined to be impaired if the asset's carrying value is in excess of its estimated fair value.
As a result, during 2017, 2016 2015 and 2014,2015, the Company recognized additional impairment charges of $26,423, $1,975$39,702, $100,195 and $3,596$36,832 on assets that are includedwere sold, impaired prior to sale or held for use. The 2016 impairment charges include an aggregate impairment charge of $65,500 recognized on the sale of three land investments in real estate, net at December 31, 2016.New York, New York.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
($000, except share/unit data)

(6)Loans Receivable

As of December 31, 2017, all of the Company's loans receivable were fully satisfied. As of December 31, 2016, and 2015, the Company's loans receivable were comprised primarily of mortgage loans on real estate.
The following is a summary of ourthe Company's loans receivable as of December 31, 2016 and 2015:2016:
 
Loan carrying value(1)
   
Loan carrying-value(1)
  
Loan 12/31/2016 12/31/2015 Interest Rate Maturity Date 12/31/2016 Interest Rate Maturity Date
Kennewick, WA(2)
 $85,709
 $85,505
 9.00% 05/2022 $85,709
 9.00% 05/2022
Oklahoma City, OK(3)
 8,501
 8,501
 11.50% 03/2016 8,501
 11.50% 03/2016
Other(4)
 
 1,865
 8.00% 2021-2022
 $94,210
 $95,871
    $94,210
   
(1)Loan carrying value includesincluded accrued interest and iswas net of origination costs.costs, if any.
(2)Loan providesprovided for a current pay rate of 8.75%, an accrual rate of 9%9.0% and a balloon of $87,245 at maturity. ThisDuring 2017, the loan was in covenant default asassigned to a third party for 94% of December 31, 2016.its principal balance. The Company recognized a $5,294 loan loss on the transaction.
(3)In June 2015, the Company loaned a tenant-in-common $8,420. The loan iswas secured by the tenant-in-common's interest in an office property, in which the Company hashad a 40% tenant-in-common interest. The loan was satisfied in monetary default asfull in February 2017. The Company incurred professional fees of $376 to collect this loan. Such fees are included in general and administrative expenses on the Company's Consolidated Statements of Operations for the year ended December 31, 2016 and the Company is exercising its remedies.
(4)In 2016, the Company received $1,583 in full satisfaction of these loans and recognized a $41 impairment charge.2017.

As of December 31, 2016, the Company had one type of financing receivable, loans receivable secured by interests in commercial real estate. The Company determined that its financing receivables operated within one portfolio segment as they were both within the same industry and use the same impairment methodology. In addition, the Company assesses all financing receivables for impairment, when warranted, based on an individual analysis of each receivable. The Company had a capitalized financing lease for a property located in Greenville, South Carolina, which was sold in 2014 for net proceeds of $11,491.

The Company's financing receivables operate within one class of financing receivables as these assets (1) are collateralized by commercial real estate and (2) similar metrics are used to monitor the risk and performance of these assets. The Company's management uses credit quality indicators to monitor financing receivables such as quality of collateral, the underlying tenant's credit rating and collection experience. As of December 31, 2016, the financing receivables were performing as anticipated and there were no significant delinquent amounts outstanding, other than the maturity default of the borrower of the Oklahoma City, Oklahoma loan, for which the Company believes its collateral is sufficient to recover the full amount of the receivable.

During 2015, the Company acquired the office property collateral from the borrowers in Westmont, Illinois and Southfield, Michigan on two loans receivable that were impaired. In 2014, the Company recognized a $2,500 loan loss on the loan receivable collateralized by the Southfield, Michigan property. Also in 2015 and 2014, the Company recognized aggregate interest income relating to these impaired loans of $14 and $1,752, respectively. The Company sold the Westmont, Illinois property in 2016.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
($000, except share/unit data)

(7)Fair Value Measurements

The following tables present the Company's assets and liabilities measured at fair value on a recurring and non-recurring basis as of December 31, 20162017 and 20152016, aggregated by the level in the fair value hierarchy within which those measurements fall:
   Fair Value Measurements Using
Description2017 (Level 1) (Level 2) (Level 3)
Interest rate swap assets$1,065
 $
 $1,065
 $
Impaired real estate assets*$7,829
 $
 $
 $7,829

   Fair Value Measurements Using
Description2016 (Level 1) (Level 2) (Level 3)
Interest rate swap assets$44
 $
 $44
 $
Impaired real estate assets*$15,801
 $
 $
 $15,801
Interest rate swap liabilities$(1,077) $
 $(1,077) $
*Represents a non-recurring fair value measurement.measurement determined during the respective years.


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   Fair Value Measurements Using
Description2015 (Level 1) (Level 2) (Level 3)
Interest rate swap assets$4
 $
 $4
 $
Impaired real estate assets*$3,015
 $
 $
 $3,015
Interest rate swap liabilities$(1,943) $
 $(1,943) $
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*Represents a non-recurring fair value measurement.LEXINGTON REALTY TRUST AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
($000, except share/unit data)

The table below sets forth the carrying amounts and estimated fair values of the Company's financial instruments as of December 31, 20162017 and 20152016:
As of December 31, 2016 As of December 31, 2015As of December 31, 2017 As of December 31, 2016
Carrying
Amount
 Fair Value 
Carrying
Amount
 Fair Value
Carrying
Amount
 Fair Value 
Carrying
Amount
 Fair Value
Assets              
Loans Receivable$94,210
 $94,911
 $95,871
 $103,014
$
 $
 $94,210
 $94,911
              
Liabilities 
  
  
  
 
  
  
  
Debt$1,860,598
 $1,814,824
 $2,182,367
 $2,164,571
$2,068,867
 $2,013,226
 $1,860,598
 $1,814,824

The majority of the inputs used to value the Company's interest rate swap assets (liabilities) fall within Level 2 of the fair value hierarchy, such as observable market interest rate curves; however, the credit valuation associated with the interest rate swap assets (liabilities) utilizes Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by the Company and its counterparties. As of December 31, 20162017 and 2015,2016, the Company determined that the credit valuation adjustment relative to the overall interest rate swap assets (liabilities) is not significant. As a result, all interest rate swap assets (liabilities) have been classified in Level 2 of the fair value hierarchy.

The Company estimates the fair value of its real estate assets, including non-consolidated real estate assets, by using income and market valuation techniques. The Company may estimate fair values using market information such as broker opinions of value, recent sale offers or discounted cash flow models, which primarily rely on Level 3 inputs. The cash flow models include estimated cash inflows and outflows over a specified holding period. These cash flows may include contractual rental revenues, projected future rental revenues and expenses and forecasted tenant improvements and lease commissions based upon market conditions determined through discussion with local real estate professionals, experience the Company has with its other owned properties in such markets and expectations for growth. Capitalization rates and discount rates utilized in these models are estimated by management based upon rates that management believes to be within a reasonable range of current market rates for the respective properties based upon an analysis of factors such as property and tenant quality, geographical location and local supply and demand observations. To the extent the Company under-estimates forecasted cash outflows (tenant improvements, lease commissions and operating costs) or over-estimates forecasted cash inflows (rental revenue rates), the estimated fair value of its real estate assets could be overstated.


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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
($000, except share/unit data)

The Company estimatesestimated the fair values of its loans receivable utilizing Level 3 inputs by using an estimated discounted cash flow analysis consisting of scheduled cash flows and discount rate estimates to approximate those that a willing buyer and seller might use and/or the estimated value of the underlying collateral.

The fair value of the Company's debt is primarily estimated utilizing Level 3 inputs by using a discounted cash flow analysis, based upon estimates of market interest rates. The Company determines the fair value of its Senior Notes and 6.00% Convertible Guaranteed Notes using market prices. The inputs used in determining the fair value of these notes are categorized as Level 1 due to the fact that the Company uses quoted market rates to value these instruments. However, the inputs used in determining the fair value could be categorized as Level 2 if trading volumes are low.

Fair values cannot be determined with precision, may not be substantiated by comparison to quoted prices in active markets and may not be realized upon sale. Additionally, there are inherent uncertainties in any fair value measurement technique, and changes in the underlying assumptions used, including discount rates, liquidity risks and estimates of future cash flows, could significantly affect the fair value measurement amounts.

Cash Equivalents, Restricted Cash, Accounts Receivable and Accounts Payable. The Company estimates that the fair value of cash equivalents, restricted cash, accounts receivable and accounts payable approximates carrying value due to the relatively short maturity of the instruments.


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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
($000, except share/unit data)

(8)Investment in and Advances to Non-Consolidated Entities
As of December 31, 2016,2017, the Company had ownership interests ranging from 15% to 40%25% in certain non-consolidated entities, which primarily own single-tenant net-leased assets. The acquisitions of these assets by the non-consolidated entities were partially funded through non-recourse mortgage debt with an aggregate balance of $47,037$96,603 at December 31, 20162017 (the Company's proportionate share was $8,472)$20,886). In addition, in 2017, the Company formed a non-consolidated joint venture with rates ranging from 3.7%a developer to 4.7%. pursue industrial build-to-suit opportunities. The Company's initial contribution of $5,831 was used to acquire a 151-acre parcel of developable land.
In February 2017, the Company sold its 40% tenant-in-common interest in its Oklahoma City, Oklahoma office property for $6,198. In January 2016, the Company received $6,681 in connection with the sale of a non-consolidated office property in Russellville, Arkansas. The Company recognized a gaingains of $1,452 and $5,378, relating to the sale,respectively, in connection with these sales, which isare included in equity in earnings of non-consolidated entities. In 2015,
During 2017, the Company invested $5,613recognized an impairment charge of $3,512 on its investment in a retail property in Palm Beach Gardens, Florida due to the Oklahoma City tenant-in-common. Thebankruptcy of its tenant. This impairment charge reduced the Company's contribution, together with the other tenant-in-common's contribution, which was in the form of a loan provided by the Company, was usedinvestment balance to satisfy the related maturing mortgage loan.zero.
In November 2014, the Company formed a joint venture to construct a private school in Houston, Texas. As of December 31, 2016,2017, the Company had a 25% equity interest in the joint venture. The joint venture completed the project induring 2016 for a total construction cost of $79,964. The Company iswas contractually obligated to provide construction financing to the joint venture up to $56,686,$56,686. During 2017, the Company received $49,085 in full satisfaction of which $46,441 has been funded asthe construction financing from the proceeds of December 31, 2016. The property is net leased for a 20-year term.$50,000 third-party financing.
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 $693, $223$807, $693 and $348$223 for the years ended December 31, 2017, 2016, 2015 and 2014, respectively.2015.
(9)Mortgages and Notes Payable
The Company had the following mortgages and notes payable outstanding as of December 31, 20162017 and December 31, 2015:2016:
December 31, 2016 December 31, 2015December 31, 2017 December 31, 2016
Mortgages and notes payable$745,173
 $882,952
$697,068
 $745,173
Unamortized debt issuance costs(7,126) (10,309)(7,258) (7,126)
$738,047
 $872,643
$689,810
 $738,047
Interest rates, including imputed rates on mortgages and notes payable, ranged from 2.2% to 7.8% at December 31, 20162017 and the mortgages and notes payable mature between 20172018 and 2036. Interest rates, including imputed rates, ranged from 2.2% to 7.8% at December 31, 20152016. The weighted-average interest rate at December 31, 20162017 and 20152016 was approximately 4.6% and .4.9%, respectively.


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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
($000, except share/unit data)

The Company has a $905,000In 2017, the Company's unsecured credit agreement with KeyBank National Association, as agent.agent, was amended to, among other things, increase the overall facility to $1,105,000. With lender approval, the Company can increase the size of the amended facility to an aggregate $1,810,000.of $2,010,000. A summary of the significant terms are as follows:
 
Maturity Date
 Current
Interest Rate
$400,000505,000 Revolving Credit Facility(1)
08/August 2019 LIBOR + 1.00%
$250,000300,000 Term Loan(2)(4)
08/August 2020 LIBOR + 1.10%
$255,000300,000 Term Loan(3)(4)
01/January 2021 LIBOR + 1.10%
(1)Increased from $400,000. Maturity date can be extended to August 2020 at the Company's option. The interest rate ranges from LIBOR plus 0.85% to 1.55%. At December 31, 2016,2017, the unsecured revolving credit facility had no amounts$160,000 borrowings outstanding $4,600 of letters of credit and availability of $395,400,$345,000, subject to covenant compliance.
(2)Increased from $250,000. The interest rate ranges from LIBOR plus 0.90% to 1.75%. The Company previously entered intohas aggregate interest-rate swap agreements to fix the LIBOR component at a weighted-average rate of 1.09% through February 2018 on the $250,000 of the $300,000 outstanding LIBOR-based borrowings.
(3)Increased from $255,000. The interest rate ranges from LIBOR plus 0.90% to 1.75%. The Company previously entered intohas aggregate interest-rate swap agreements to fix the LIBOR component at a weighted-average rate of 1.42% through January 2019 on the $255,000 of the $300,000 outstanding LIBOR-based borrowings.
(4)The aggregate unamortized debt issuance costs for the term loans were $3,907$3,337 and $4,924$3,907 as of December 31, 20162017 and 2015 and2016, respectively.


The unsecured revolving credit facility and the unsecured term loans are subject to financial covenants, which the Company was in compliance with at December 31, 20162017.
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 prepayments.
Scheduled principal and balloon payments for mortgages, notes payable, credit facility borrowings and term loans for the next five years and thereafter are as follows:
Year ending
December 31,
 Total Total
2017 $92,731
2018 36,713
 $35,940
2019 110,448
 270,448
2020 305,147
 355,147
2021 295,465
 340,465
2022 30,120
Thereafter 409,669
 424,948
 1,250,173
 1,457,068
Unamortized debt discountsUnamortized debt discounts(11,033)Unamortized debt discounts(10,595)
 $1,239,140
 $1,446,473

Included in the Consolidated Statements of Operations, the Company recognized debt satisfaction gains (charges), net, excluding discontinued operations, of $258, $(7), $4,128 and $(6,657)$4,128 for the years ended December 31, 2017, 2016 2015 and 2014,2015, respectively, due to the satisfaction of mortgages and notes payable other than those disclosed elsewhere in these financial statements. In addition, the Company capitalized $1,174, $4,933 $6,062 and $3,441$6,062 in interest including discontinued operations, for the years ended 2017, 2016 and 2015, and 2014, respectively.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
($000, except share/unit data)

(10)Senior Notes, Convertible Notes and Trust Preferred Securities
The Company had the following Senior Notes outstanding as of December 31, 20162017 and 2015:2016:
Issue Date December 31, 2016 December 31, 2015 Interest Rate Maturity Date Issue Price December 31, 2017 December 31, 2016 Interest Rate Maturity Date Issue Price
May 2014 $250,000
 $250,000
 4.40% June 2024 99.883% $250,000
 $250,000
 4.40% June 2024 99.883%
June 2013 250,000
 250,000
 4.25% June 2023 99.026% 250,000
 250,000
 4.25% June 2023 99.026%
 500,000
 500,000
     500,000
 500,000
    
Unamortized debt discount (1,780) (2,053)     (1,507) (1,780)    
Unamortized debt issuance cost (3,858) (4,421)     (3,295) (3,858)    
 $494,362
 $493,526
     $495,198
 $494,362
    
Each series of the Senior Notes is unsecured and pays interest semi-annually in arrears. The Company may redeem the notes at its option at any time prior to maturity in whole or in part by paying the principal amount of the notes being redeemed plus a premium.
During 2010, the Company issued $115,000$115,000 aggregate principal amount of 6.00% Convertible Guaranteed Notes. The notes paid interest semi-annually in arrears and were scheduled to mature in January 2030.2030. The notes were fully satisfied/converted in 2016. During 2016 and at December 31, 2016, no such notes were outstanding. During 2016, 2015, $12,400 and 2014, $12,400, $3,828 and $12,763$3,828 aggregate principal amount of the notes were converted for 1,892,269 519,664 and 1,904,542519,664 common shares and an aggregate cash payment of $672 $529 and $233$529 plus accrued and unpaid interest, respectively. The Company recognized aggregate debt satisfaction charges of $436 $476 and $2,436,$476, during 2016 2015 and 2014,2015, respectively, relating to the conversions.

During 2007, the Company issued $200,000 unsecured$200,000 original principal amount of Trust Preferred Securities. The Trust Preferred Securities, which are classified as debt, are due in 2037,, were are open for redemption at the Company's option, commencing April 2012 and bearbore interest at a fixed rate of 6.804% through April 2017 and thereafter bear interest at a variable rate of three month LIBOR plus 170 basis points through maturity. The interest rate at December 31, 2017 was 3.078%. As of December 31, 20162017 and 2015,2016, there was $129,120$129,120 original principal amount of Trust Preferred Securities outstanding and $2,024$1,924 and $2,124,$2,024, respectively, of unamortized debt issuance cost.costs.

Scheduled principal payments for these debt instruments for the next five years and thereafter are as follows:

Year ending December 31, Total Total
2017 $
2018 
 $
2019 
 
2020 
 
2021 
 
2022 
Thereafter 629,120
 629,120
 629,120
 629,120
Unamortized debt discounts (1,780) (1,507)
Unamortized debt issuance costs (5,882) (5,219)
 $621,458
 $622,394

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
($000, except share/unit data)

(11)Derivatives and Hedging Activities

Risk Management Objective of Using Derivatives. The Company is exposed to certain risks arising from both its business operations and economic conditions. The Company principally manages its exposures to a wide variety of business and operational risks through management of its core business activities. The Company manages economic risks, including interest rate, liquidity, and credit risk primarily by managing the type, amount, sources, and duration of its debt funding and the use of derivative financial instruments. Specifically, the Company enters into derivative financial instruments to manage exposures that arise from business activities that result in the receipt or payment of future known and uncertain cash amounts, the value of which are determined by interest rates. The Company's derivative financial instruments are used to manage differences in the amount, timing, and duration of the Company's known or expected cash receipts and its known or expected cash payments principally related to the Company's investments and borrowings.

Cash Flow Hedges of Interest Rate Risk. The Company's objectives in using interest rate derivatives are to add stability to interest expense, to manage its exposure to interest rate movements and therefore manage its cash outflows as it relates to the underlying debt instruments. To accomplish these objectives the Company primarily uses interest rate swaps as part of its interest rate risk management strategy relating to certain of its variable rate debt instruments. Interest rate swaps designated as cash flow hedges involve the receipt of variable-rate amounts from a counterparty in exchange for the Company making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount.

The effective portion of changes in the fair value of derivatives designated and that qualify as cash flow hedges is recorded in accumulated other comprehensive income (loss) and is subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings. The ineffective portion of the change in fair value of the derivatives is recognized directly in earnings. The Company did not incur any ineffectiveness during 2017, 2016 2015 and 2014.2015.

The Company has designated the interest rate swap agreements with its counterparties as cash flow hedges of the risk of variability attributable to changes in the LIBOR swap rates on $505,000 of LIBOR-indexed variable-rate unsecured term loans. Accordingly, changes in the fair value of the swaps are recorded in other comprehensive income (loss) and reclassified to earnings as interest becomes receivable or payable. During 2015, the Company extended the maturity date of the $505,000 of LIBOR indexed variable rate unsecured term loans to August 2020 ($250,000) and January 2021 ($255,000). The extension of these term loans had no impact on the effectiveness of the corresponding cash flow hedges.

Amounts reported in accumulated other comprehensive income (loss) related to derivatives will be reclassified to interest expense as interest payments are made on the aggregate $505,000 term loans. During the next 12 months, the Company estimates that an additional $1,4621,023 will be reclassified as an increasea decrease to interest expense if the swaps remain outstanding.

As of December 31, 20162017, the Company had the following outstanding interest rate derivatives that were designated as cash flow hedges of interest rate risk:

Interest Rate DerivativeNumber of InstrumentsNotional
Interest Rate Swaps10$505,000

The table below presents the fair value of the Company's derivative financial instruments as well as their classification on the Consolidated Balance Sheets as of December 31, 20162017 and 20152016.
As of December 31, 2016 As of December 31, 2015As of December 31, 2017 As of December 31, 2016
Balance Sheet Location Fair Value Balance Sheet Location Fair ValueBalance Sheet Location Fair Value Balance Sheet Location Fair Value
Derivatives designated as hedging instruments:       
       
Interest Rate Swap AssetOther Assets $44
 Other Assets $4
Other Assets $1,065
 Other Assets $44
Interest Rate Swap LiabilityAccounts Payable and Other Liabilities $(1,077) Accounts Payable and Other Liabilities $(1,943)Accounts Payable and Other Liabilities $
 Accounts Payable and Other Liabilities $(1,077)


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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
($000, except share/unit data)

The tables below present the effect of the Company's derivative financial instruments on the Consolidated Statements of Operations for 20162017 and 2015:2016:
Derivatives in Cash Flow Amount of Loss Recognized
in OCI on Derivative
(Effective Portion)
December 31,
 
Location of Loss
Reclassified from
Accumulated OCI into Income (Effective Portion)
 Amount of Loss Reclassified
from Accumulated OCI into
Income (Effective Portion)
December 31,
 Amount of Loss Recognized
in OCI on Derivative
(Effective Portion)
December 31,
 
Location of Loss
Reclassified from
Accumulated OCI into Income (Effective Portion)
 Amount of Loss Reclassified
from Accumulated OCI into
Income (Effective Portion)
December 31,
Hedging Relationships  2016 2015 2016 2015  2017 2016 2017 2016
Interest Rate Swap $(3,084) $(7,809) Interest expense $3,990
 $5,466
 $1,168
 $(3,084) Interest expense $930
 $3,990

The Company's agreements with the swap derivative counterparties contain provisions whereby if the Company defaults on the underlying indebtedness, including default where repayment of the indebtedness has not been accelerated by the lender, then the Company could also be declared in default of the swap derivative obligation. As of December 31, 20162017, the Company had not posted any collateral related to the agreements.

(12)     Leases
Lessor:
Minimum future rental receipts under the non-cancelable portion of tenant leases, assuming no new or re-negotiated leases, for the next five years and thereafter are as follows:
Year ending
December 31,
 Total Total
2017 $328,054
2018 314,764
 $354,240
2019 283,225
 333,463
2020 248,427
 304,651
2021 229,201
 284,114
2022 265,346
Thereafter 1,846,042
 2,114,450
 $3,249,713
 $3,656,264
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, and upon payment of a termination fee to the landlord, 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.
Lessee:
The Company holds, through property owner subsidiaries, 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 these properties, the Company has an option to purchase the fee interest.


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Minimum future rental payments under non-cancelable 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:
Year ending
December 31,
 Total Total
2017 $5,186
2018 5,062
 $4,330
2019 4,557
 3,887
2020 4,549
 3,886
2021 4,201
 3,829
2022 3,893
Thereafter 30,308
 28,727
 $53,863
 $48,552
Rent expense for the leasehold interests including discontinued operations, was $987690, $868987 and $919868 in 2017, 2016 2015 and 2014,2015, respectively.
The Company leases its corporate headquarters. The lease expires March 2026. The Company is responsible for its proportionate share of operating expenses and real estate taxes above a base year. In addition, the Company leases office space for its regional offices. The minimum lease payments for the Company's offices are $1,294$1,298 for 2017,2018, $1,294 for 2018,2019, $1,2951,297 for 2019, $1,296 for 2020, and $1,325 for 2021 and $5,575$1,336 for 2022 and $4,238 thereafter. Rent expense for 2017, 2016 2015 and 20142015 was $1,2421,256, $1,4351,242 and $1,3561,435, respectively.

(13)Concentration of Risk
The Company seeks to reduce its operating and leasing risks through the geographic diversification of its properties, tenant industry diversification, avoidance of dependency on a single asset and the creditworthiness of its tenants. For the years ended December 31, 2017, 2016 2015 and 2014,2015, no single tenant represented greater than 10% of rental revenues.
Cash and cash equivalent balances at certain institutions may exceed insurable amounts. The Company believes it mitigates this risk by investing in or through major financial institutions.
(14)Equity
Shareholders' Equity:

During 2016, and 2015 and 2014, the Company issued 577,823, and 2,266,191 and 2,600,795 common shares, respectively, under its direct share purchase plan, which includes a dividend reinvestment component, raising net proceeds of approximately $4,115, and $20,797 and $25,813respectively. In 2017, no shares were issued under this plan. During 2013, the Company implemented, and in 2016, the Company updated, its At-The-Market offering program under which the Company may issue up to $125,000 in common shares over the term of this program. During 2017 and 2016, the Company issued 1,593,603 and 976,109 common shares, respectively, under this program and generated aggregate gross proceeds of $10,498.$17,362 and $10,498, respectively. No shares were sold under this program in 2015 or 2014.2015. The proceeds from these issuances were primarily used for general working capital, to fund investments and retire indebtedness.
The Company had 1,935,400 shares of Series C Cumulative Convertible Preferred Stock (“Series C Preferred”), outstanding at December 31, 20162017. The shares have a dividend of $3.25 per share per annum, have a liquidation preference of $96,770, and the Company, if certain common share prices are achieved, can force conversion into common shares of the Company. As of December 31, 2016,2017, each share is currently convertible into 2.4339 common shares. This conversion ratio may increase over time if the Company's common share dividend exceeds certain quarterly thresholds.
If certain fundamental changes occur, holders may require the Company, in certain circumstances, to repurchase all or part of their shares of Series C Preferred. In addition, upon the occurrence 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 shares of Series C Preferred becoming convertible into shares of the public acquiring or surviving company.

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The Company may, at the Company's option, cause shares of Series C Preferred 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 Preferred.
Investors in shares of Series C Preferred 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.
During 20162017, 20152016 and 20142015, the Company issued 1,084,835835,234, 860,7301,084,835 and 37,678860,730 of its common shares, respectively, to certain employees and trustees. Typically, trustee share grants vest immediately. Employee share grants generally vest ratably, on anniversaries of the grant date, however, in certain situations vesting is cliff-based after a specific number of years and/or subject to meeting certain performance criteria (see note 15).
In July 2015, the Company's Board of Trustees authorized the repurchase of up to 10,000,000 common shares. This share repurchase program has no expiration date. During 2016, and 2015, the Company repurchased 1,184,113 and 2,216,799 common shares respectively, at an average gross price of $7.56 and $8.29, respectively, per common share under this share repurchase program. No shares were repurchased in 2017.
AccumulatedA summary of the changes in accumulated other comprehensive lossincome (loss) related to the Company's cash flow hedges is as of December 31, 2016 and 2015 represented $(1,033) and $(1,939), respectively, of unrealized gain on interest rate swaps, net.

Changes in Accumulated Other Comprehensive Lossfollows:
  
Gains and Losses
on Cash Flow Hedges
Balance December 31, 2015 $(1,939)
Other comprehensive loss before reclassifications (3,084)
Amounts of loss reclassified from accumulated other comprehensive income to interest expense 3,990
Balance December 31, 2016 $(1,033)
  Twelve months ended December 31,
  2017 2016
Balance at beginning of period $(1,033) (1,939)
Other comprehensive income (loss) before reclassifications 1,168
 (3,084)
Amounts of loss reclassified from accumulated other comprehensive income to interest expense 930
 3,990
Balance at end of period $1,065
 (1,033)

Noncontrolling Interests:

In conjunction with several of the Company's acquisitions in prior years, sellers were issued OP units as a form of consideration. All OP units, other than OP units owned by the Company, are redeemable for common shares at certain times, at the option of the holders, and are generally not otherwise mandatorily redeemable by the Company. The OP units are classified as a component of permanent equity as the Company has determined that the OP units are not redeemable securities as defined by GAAP. Each OP unit is currently redeemable for approximately 1.13 common shares, subject to future adjustments.

During 2014, in connection with the merger of LCIF II with and into LCIF, former LCIF II partners representing 170,193 OP units elected or were deemed to elect to receive $1,962 in aggregate cash for such OP units.

During 20162017, 20152016 and 20142015, 140,746, 48,549, and 32,780 and 29,086 common shares, respectively, were issued by the Company, in connection with OP unit redemptions, for an aggregate value of $210584, $165210 and $148165, respectively.

As of December 31, 20162017, there were approximately 3,350,0003,223,000 OP units outstanding other than OP units owned by the Company. All OP units receive distributions in accordance with their respectivethe LCIF partnership agreements.agreement. To the extent that the Company's dividend per common share is less than the stated distribution per OP unit per the applicableLCIF partnership agreement, the distributions per OP unit are reduced by the percentage reduction in the Company's dividend per common share. No OP units have a liquidation preference.


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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
($000, except share/unit data)

The following discloses the effects of changes in the Company's ownership interests in its noncontrolling interests:
Net Income Attributable to Shareholders and Transfers from Noncontrolling InterestsNet Income Attributable to Shareholders and Transfers from Noncontrolling Interests
2016 2015 20142017 2016 2015
Net income attributable to Lexington Realty Trust shareholders$95,624
 $111,703
 $93,104
$85,583
 $95,624
 $111,703
Transfers from noncontrolling interests:          
Increase (decrease) in additional paid-in-capital for redemption of noncontrolling OP units210
 165
 (858)
Increase in additional paid-in-capital for redemption of noncontrolling OP units584
 210
 165
Change from net income attributable to shareholders and transfers from noncontrolling interests$95,834
 $111,868
 $92,246
$86,167
 $95,834
 $111,868

In July 2015, and 2014, the Company acquired a consolidated joint venture partner's interest in an office property in Philadelphia, Pennsylvania for $4,022 and $2,100, respectively, raising the Company's equity ownership in the office property to 100.0%.

(15)Benefit Plans

The Company maintains an equity award plan pursuant to which qualified and non-qualified options may be issued. No common share options were issued in 20162017, 20152016 and 2014.2015. The Company granted 1,248,501, 1,265,500 and 2,000,000 common share options on December 31, 2010 (“2010 options”), January 8, 2010 (“2009 options”) and December 31, 2008 (“2008 options”), respectively, at an exercise price of $7.95, $6.39 and $5.60, respectively. The 2010 options (1) vested 20% annually on each December 31, 2011 through 2015 and (2) terminate on the earlier of (x) six months of termination of service with the Company and (y) December 31, 2020. The 2009 options (1) vested 20% annually on each December 31, 2010 through 2014 and (2) terminate on the earlier of (x) six months of termination of service with the Company and (y) December 31, 2019. The 2008 options (1) vested 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 (“NYSE”) was $8.00 or higher and vested 50% following a 20-day trading period where the average closing price of a common share of the Company on the NYSE was $10.00 or higher, and (2) terminate on the earlier of (x) termination of service with the Company or (y) December 31, 2018. As a result of the share dividends paid in 2009, each of the 2008 options is exchangeable for approximately 1.13 common shares at an exercise price of $4.97 per common share.

The Company engaged third parties to value the options as of each option's respective grant date. The third parties determined the value to be $2,422 and $2,771 for the 2010 options and 2009 options, respectively, using the Black-Scholes model and $2,480 for the 2008 options using the Monte Carlo model. The options are considered equity awards as they are settled through the issuance of common shares. As such, the options were valued as of the grant date 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 were as follows:
  2010 Options 2009 Options 2008 Options
Weighted-average fair value of options granted $1.94
 $2.19
 $1.24
Weighted-average risk-free interest rate 2.54% 3.29% 1.33%
Weighted-average expected option lives (in years) 6.50
 6.70
 3.60
Weighted-average expected volatility 49.00% 59.08% 59.94%
Weighted-average expected dividend yield 7.40% 6.26% 14.40%
 
The Company recognized compensation expense relating to these options over an average of 5.0 years for the 2010 options and 2009 options and 3.6 years for the 2008 options. The Company recognized $480 and $1,038 in compensation expense in 2015 and 2014, respectively. All deferred compensation costs relating to the outstanding options were fully amortized by December 31, 2015. The intrinsic value of an option is the amount by which the market value of the underlying common share at the date the option is exercised exceeds the exercise price of the option. No options were exercised in 2015 and the total intrinsic value of options exercised for the years ended December 31, 2017 and 2016 were $1,064 and 2014 were $2,856 and $2,780,$2,856, respectively.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
($000, except share/unit data)

Share option activity during the years indicated is as follows:
 Number of
Shares
 
Weighted-Average
Exercise Price
Per Share
 Number of
Shares
 
Weighted-Average
Exercise Price
Per Share
Balance at December 31, 20131,955,701
 $6.95
Exercised(594,791) 6.71
Forfeited(10,500) 7.46
Balance at December 31, 2014 and 20151,350,410
 7.05
1,350,410
 $7.05
Exercised(944,169) 7.17
(944,169) 7.17
Balance at December 31, 2016406,241
 $6.78
406,241
 6.78
Exercised(271,451) 6.48
Balance at December 31, 2017134,790
 $7.39
As of December 31, 20162017, the aggregate intrinsic value of options that were outstanding and exercisable was $1,632305.
Non-vested share activity for the years ended December 31, 20162017 and 20152016, is as follows:
Number of
Shares
 
Weighted-Average
Value Per Share
Number of
Shares
 
Weighted-Average
Value Per Share
Balance at December 31, 20141,970,385
 $10.82
Granted812,679
 7.70
Vested(413,714) 11.95
Balance at December 31, 20152,369,350
 9.55
2,369,350
 $9.55
Granted1,034,019
 5.23
1,034,019
 5.23
Vested(252,059) 10.13
(252,059) 10.13
Balance at December 31, 20163,151,310
 $8.09
3,151,310
 8.09
Granted777,900
 6.83
Vested(161,912) 8.90
Balance at December 31, 20173,767,298
 $7.79

During 20162017 and 2015,2016, the Company granted common shares to certain employees and trustees as follows:
2016 20152017 2016
Performance Shares(1)
  
Shares issued:  
Index404,466 321,018
Peer404,463 321,011
Index - 1Q106,706 404,466
Peer - 1Q106,705 404,463
Index - 2Q163,466 
Peer - 2Q163,463 
  
Grant date fair value per share:(2)
  
Index$4.53 $6.86
Peer$4.58 $6.66
Index - 1Q$6.82 $4.53
Peer - 1Q$6.34 $4.58
Index - 2Q$4.05 $—
Peer - 2Q$4.27 $—
  
Non-Vested Common Shares:(3)
  
Shares issued225,090 170,650237,560 225,090
Grant date fair value$1,724 $1,916$2,551 $1,724
 
Non-management Board of Trustee grant:(4)
 
Shares issued17,500 20,400
Grant date fair value$131 $209
(1)The shares vest based on the Company's total shareholder return growth after a three-year measurement period relative to an index and a group of Company peers. Dividends will not be paid on these grants until earned. Once the performance criteria are met and the actual number of shares earned is determined, such shares vest immediately. The 2Q shares were subject to shareholder approval, which was obtained in May 2017.
(2)The fair value of grants was determined at the grant date using a Monte Carlo simulation model.
(3)The shares vest ratably over a three-year service period.
(4)Annual grant and shares vested upon grant.

In addition, during 2017, 2016 and 2015, the Company issued 57,334, 50,816, and 48,051, respectively, of fully vested common shares to non-management members of the Company's Board of Trustees with a fair value of $596, $427, and $468, respectively.

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As of December 31, 20162017, of the remaining 3,151,3103,767,298 non-vested shares, 1,693,8551,769,503 are subject to time-based vesting and 1,457,4551,997,795 are subject to performance-based vesting. At December 31, 20162017, there are 2,344,1364,978,802 awards available for grant. The Company has $11,1288,707 in unrecognized compensation costs relating to the non-vested shares that will be charged to compensation expense over an average of approximately 2.82.5 years.
The Company has established a trust for certain officers in which vested common shares 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, 20162017 and 20152016, there were 427,531 common shares in the trust.
The Company sponsors a 401(k) retirement savings plan covering all eligible employees. The Company makes a discretionary matching contribution on a portion of employee participant salaries and, based on its profitability, may make an additional discretionary contribution at each fiscal year end to all eligible employees. These 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 $357439, $333357 and $299333 of contributions are applicable to 20162017, 20152016 and 20142015, respectively.
During 20162017, 20152016 and 20142015, the Company recognized $8,415,$8,333, $8,2018,415 and $7,5508,201, respectively, in expense relating to scheduled vesting and issuance of common share grants.

(16)Related Party Transactions
The Company has an indemnity obligation to Vornado Realty Trust ("VNO"), one of its significant shareholders, with respect to actions by the Company that affect Vornado Realty Trust's status as a REIT.
All related party acquisitions, sales and loans are approved by the independent members of the Company's Board of Trustees or the Audit Committee.
The Company leasesleased a property to an entity in which VNO, a significant shareholder, has an interest. During 2017, 2016 2015 and 2014,2015, the Company recognized $234, $236 $255 and $255, respectively, in rental revenue from this property. This property was sold in 2017. The Company leases its corporate office from an affiliate of Vornado Realty Trust. Rent expense for this property was $1,179, $1,176 and $1,323 in 2017, 2016 and $1,252 in 2016, 2015, and 2014, respectively.
In connection with efforts, on a non-binding basis, to procure non-recourse mezzanine financing from an affiliate of the Company's Chairman, pursuant to the terms of the EB-5 visa program administered by the United States Citizenship and Immigration Services (“USCIS”), for a joint venture investment in Houston, Texas, in which the Company has an investment, the Company executed a guaranty in favor of an affiliate of its Chairman. The guaranty provides that the Company will reimburse investors providing the funds for such financing if the following occurs: (1) the joint venture receives such funds, (2) the USCIS denies the financing solely because the project is not permitted under the EB-5 visa program, and (3) the joint venture fails to return such funds. As of December 31, 2016,During 2017, USCIS approved the joint venture has not received any such fundsproject, and the Company has not recorded any liability as it relates to this guaranty. The maximum amount of funds that would be subject to the guaranty obligation is $18,000.terminated by its terms.
In addition, in connection with efforts, on a non-binding basis, to procurethe Company obtained non-recourse mezzanine financing in the initial amount of $8,000 from an affiliate of the Company's Chairman, pursuant to the terms of the EB-5 visa program administered by the USCIS, for an investment in Charlotte, North Carolina theowned by LCIF. The Company agreed to reimbursereimbursed the Chairman's affiliate up to approximately $7$105 for its expenses.expenses and paid a $120 structuring fee to the Chairman's affiliate. The loan may be increased to $12,000 upon certain events.

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(17)Income Taxes
The 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.
Income taxes have been provided for on the asset and liability method. 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.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
($000, except share/unit data)

The Company's provision for income taxes for the years ended December 31, 20162017, 20152016 and 20142015 is summarized as follows:
 2016 2015 2014
Current:     
Federal$(140) $
 $145
State and local(1,299) (645) (1,130)
NOL utilized59
 
 
Deferred:     
Federal(44) 59
 (91)
State and local(15) 18
 (33)
 $(1,439) $(568) $(1,109)

Net deferred tax assets (liabilities) of $0 and $59 are included in other assets (liabilities) on the accompanying Consolidated Balance Sheets at December 31, 2016 and 2015, respectively. These net deferred tax assets (liabilities) relate to net operating loss carry forwards.
 2017 2016 2015
Current:     
Federal$(107) $(140) $
State and local(1,810) (1,299) (645)
NOL utilized
 59
 
Deferred:     
Federal
 (44) 59
State and local
 (15) 18
 $(1,917) $(1,439) $(568)

The income tax provision differs from the amount computed by applying the statutory federal income tax rate to pre-tax operating income as follows:
2016 2015 20142017 2016 2015
Federal provision at statutory tax rate (34%)$(154) $65
 $(43)$(182) $(154) $65
State and local taxes, net of federal benefit(30) 12
 (9)(40) (30) 12
Other(1,255) (645) (1,057)(1,695) (1,255) (645)
$(1,439) $(568) $(1,109)$(1,917) $(1,439) $(568)

For the years ended December 31, 20162017, 20152016 and 20142015, the “other” amount is comprised primarily of state franchise taxes of $1,2521,598, $6791,252 and $1,183679, respectively.

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, 20162017, is as follows:
2016 2015 20142017 2016 2015
Total dividends per share$0.685
 $0.68
 $0.67
$0.700
 $0.685
 $0.68
Ordinary income96.73% 63.07% 49.44%59.93% 96.73% 63.07%
Qualifying dividend0.22% 
 0.05%0.15% 0.22% 
Capital gain
 
 

 
 
Return of capital3.05% 36.93% 50.51%39.92% 3.05% 36.93%
100.00% 100.00% 100.00%100.00% 100.00% 100.00%


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($000, except share/unit data)

A summary of the average taxable nature of the Company's dividend on shares of its Series C Preferred for each of the years in the three-year period ended December 31, 20162017, is as follows:
2016 2015 20142017 2016 2015
Total dividends per share$3.25
 $3.25
 $3.25
$3.25
 $3.25
 $3.25
Ordinary income99.78% 100.00% 99.90%99.75% 99.78% 100.00%
Qualifying dividend0.22% 
 0.10%0.25% 0.22% 
Capital gain
 
 

 
 
Return of capital
 
 

 
 
100.00% 100.00% 100.00%100.00% 100.00% 100.00%


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(18)Commitments and Contingencies

In addition to the commitments and contingencies disclosed elsewhere, the Company has the following commitments and contingencies.
 
The Company is obligated under certain tenant leases, including its proportionate share for leases for non-consolidated entities, to fund the expansion of the underlying leased properties. The Company, under certain circumstances, may guarantee to tenants the completion of base building improvements and the payment of tenant improvement allowances and lease commissions on behalf of its subsidiaries.

The Company and LCIF are parties to a funding agreement under which the Company may be required to fund distributions made on account of LCIF's OP units. Pursuant to the funding agreement, the parties agreed that, if LCIF does not have sufficient cash available to make a quarterly distribution to its limited partners in an amount in accordance with the partnership agreement, Lexington will fund the shortfall. Payments under the agreement will be made in the form of loans to LCIF and will bear interest at prevailing rates as determined by the Company in its discretion but, no less than the applicable federal rate. LCIF's right to receive these loans will expire if no OP units remain outstanding and all such loans are repaid. No amounts have been advanced under this agreement.

From time to time, the Company is directly or indirectly involved in legal proceedings arising in the ordinary course of business. Management believes, based on currently available information, and after consultation with legal counsel, that although the outcomes of those normal course proceedings are uncertain, the results of such proceedings, in the aggregate, will not have a material adverse effect on the Company's business, financial condition and results of operations.

GSMSC II 2006-GG6 Bridgewater Hills Corporate Center, LLC v. Lexington Realty Trust (Supreme Court of the State of New York, County of New York-Index No. 653117/2015)
On September 16, 2015, GSMSC II 2006-GG6 Bridgewater Hills Corporate Center, LLC commenced an action as lender against the Company based on a limited guaranty of recourse obligations executed by a predecessor entity of the Company in connection with a mortgage loan secured by a property owner subsidiary's commercial property in Bridgewater, New Jersey.  The property owner subsidiary defaulted due to non-payment after the sole tenant vacated at the end of the lease term.  The lender currently seeksclaimed approximately $9,200 in order to satisfy the outstanding amount of the loan, after offset for the lender's asserted value of the property it obtained in foreclosure, plus interest, reasonable attorney’s fees and other costs and disbursements related thereto. The Company had not recorded any liability relating to this litigation as of December 31, 2016 as the Company believes that a loss contingency is "reasonably possible" (as defined by FASB ASC 450-20-20) but not "probable" (as defined by FASB ASC 450-20-20).
The lender claimsclaimed that the Company's limited guaranty was triggered due to the merger of Newkirk Realty Trust, Inc. and Lexington Corporate Properties Trust on December 31, 2006, arguing that it constituted an event of default because it was a transfer that was not permitted by the loan agreement. The limited guaranty providesprovided that the guarantor's liability for the guaranteed obligations shall not exceed $10,000, which the Company believes is its maximum exposure to loss. The Company intends to vigorously defend the lender’s claim.$10,000.  The Company filed a motion to dismiss, which was generally denied. The parties conducted discovery consisting of document production. A mediation was held on October 5, 2017. As a result of discussions, following the mediation, a settlement agreement was executed and the Company is currently conducting discovery, with document production requiredmade a $2,050 payment in full settlement of the lender's claims. The action was subsequently dismissed.
The lender also brought a foreclosure action against the property owner subsidiary. A foreclosure sale was held September 13, 2016 and the lender acquired the property for a nominal amount.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
($000, except share/unit data)

During 2017, the Company incurred $2,255 in legal costs relating to be completed by March 31, 2017, fact depositions to be completed by August 28, 2017this litigation, which are included in general and expert dispositions to be completed by October 31, 2017.administrative expense on the Company's consolidated statement of operations.
Other. FourAs of December 31, 2017, four of the Company's executive officers havehad employment contracts and arewere entitled to severance benefits upon termination by the Company without cause or termination by the executive officer with good reason, in each case, as defined in the employment contract. The employment agreements expired in January 2018. In addition,January 2018, the Company adopted an executive severance policy and entered into related agreements with certain of its executive officers whereby the Company's other two executive officers and certain other members of the Company's senior managementexecutives are entitled to severance benefits upon substantially similar events. Also, in January 2018, the same events.Company entered into retirement agreements with two of the four executive officers that had employment contracts. One of the retirement agreements provides for contingent payments, not to exceed $795, in future years upon the receipt of certain incentive fees by the Company, if any.


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LEXINGTON REALTY TRUST AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
($000, except share/unit data)

(19)Supplemental Disclosure of Statement of Cash Flow Information

In addition to disclosures discussed elsewhere, during 20162017, 20152016 and 20142015, the Company paid $87,69275,069, $88,72587,692 and $100,08088,725, respectively, for interest and $1,2402,340, $7411,240 and $859741, respectively, for income taxes.

During 2017, 2016 and 2015, the Company conveyed its interests in certain properties to its lenders in full satisfaction of the $12,616, $21,582 and 2014,$47,528, respectively, non-recourse mortgage notes payable. In addition, during 2016 and 2015, the Company sold its interests in certain properties, which included the assumption by the buyers of the related non-recourse mortgage debt in the aggregate amount of $242,269 and $55,000, and $30,140, respectively. In addition, during 2016, 2015 and 2014, the Company conveyed its interests in certain properties to its lenders in full satisfaction of the $21,582, $47,528 and $9,900, respectively, non-recourse mortgage notes payable.

(20)    Unaudited Quarterly Financial Data

This unaudited quarterly financial data for each of the quarters ended March 31, 2016, June 30, 2016 and September 30, 2016 is being amended from the amounts previously reflected in the respective Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission to correct an error in the treatment of a lease termination payment received in the quarter ended June 30, 2016 in the amount of $7,685. The lease termination payment was originally amortized over the life of the new tenant lease that necessitated the lease termination, but is now fully recognized in total gross revenues in the quarter ended June 30, 2016. The following summarizes the impact.
Quarter ended March 31, 2016     
 As Originally Reported Correction As Adjusted
Total gross revenues$111,616
 $(339) $111,277
Net income (loss)$50,792
 $(339) $50,453
Net income (loss) attributable to common shareholders$48,107
 $(326) $47,781
Net income (loss) attributable to common shareholders - basic per share$0.21
 $
 $0.21
Net income (loss) attributable to common shareholders - diluted per share$0.21
 $(0.01) $0.20
Quarter ended June 30, 2016     
 As Originally Reported Correction As Adjusted
Total gross revenues$109,577
 $7,335
 $116,912
Net income (loss)$49,345
 $7,335
 $56,680
Net income (loss) attributable to common shareholders$46,830
 $7,045
 $53,875
Net income (loss) attributable to common shareholders - basic per share$0.20
 $0.03
 $0.23
Net income (loss) attributable to common shareholders - diluted per share$0.20
 $0.03
 $0.23
Quarter ended September 30, 2016     
 As Originally Reported Correction As Adjusted
Total gross revenues$106,331
 $(350) $105,981
Net income (loss)$(27,262) $(350) $(27,612)
Net income (loss) attributable to common shareholders$(26,653) $(322) $(26,975)
Net income (loss) attributable to common shareholders - basic per share$(0.11) $(0.01) $(0.12)
Net income (loss) attributable to common shareholders - diluted per share$(0.11) $(0.01) $(0.12)


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LEXINGTON REALTY TRUST AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
($000, except share/unit data)
 3/31/2017 6/30/2017 9/30/2017 12/31/2017
Total gross revenues$96,099
 $95,684
 $97,689
 $102,169
Net income$42,220
 $7,365
 $5,596
 $31,448
Net income attributable to common shareholders$40,397
 $5,519
 $3,916
 $29,235
Net income attributable to common shareholders - basic per share$0.17
 $0.02
 $0.02
 $0.12
Net income attributable to common shareholders - diluted per share$0.17
 $0.02
 $0.02
 $0.12

  12/31/2016
Total gross revenues $95,326
Net income (loss) $16,929
Net income (loss) attributable to common shareholders $14,391
Net income (loss) attributable to common shareholders - basic per share $0.06
Net income (loss) attributable to common shareholders - diluted per share $0.06
 3/31/2015 6/30/2015 9/30/2015 12/31/2015
Total gross revenues(1)$108,442
 $110,333
 $105,438
 $106,626
Net income (loss)$34,371
 $50,207
 $(5,200) $35,513
Net income (loss) attributable to common shareholders$31,829
 $47,654
 $(7,629) $33,229
Net income (loss) attributable to common shareholders - basic per share$0.14
 $0.20
 $(0.03) $0.14
Net income (loss) attributable to common shareholders - diluted per share$0.14
 $0.20
 $(0.03) $0.14
_____________
(1) All periods have been adjusted to reflect the impact of properties classified as held for sale as of December 31, 2014, which are reflected in discontinued operations in the Consolidated Statements of Operations.
 3/31/2016 6/30/2016 9/30/2016 12/31/2016
Total gross revenues$111,277
 $116,912
 $105,981
 $95,326
Net income (loss)$50,453
 $56,680
 $(27,612) $16,929
Net income (loss) attributable to common shareholders$47,781
 $53,875
 $(26,975) $14,391
Net income (loss) attributable to common shareholders - basic per share$0.21
 $0.23
 $(0.12) $0.06
Net income (loss) attributable to common shareholders - diluted per share$0.20
 $0.23
 $(0.12) $0.06

The sum of the quarterly income (loss) attributable to common shareholders and per common share amounts may not equal the full year amounts primarily because the computations of amounts allocated to participating securities and the weighted-average number of common shares of the Company outstanding for each quarter and the full year are made independently.

(21)Subsequent Events

Subsequent to December 31, 20162017 and in addition to disclosures elsewhere in the financial statements, the Company:
Company sold six properties to unrelated third parties for an aggregate gross sales price of $88,873;
acquired two industrialoffice properties for an aggregate purchase price of $50,594;
issued $21,000.1,593,603 common shares at an average gross price of $10.89 per share under its ATM offering program;
completed the Lake Jackson, Texas build-to-suit project;
sold its tenant-in-common interest in the Oklahoma City, Oklahoma property for $6,270 and collected $8,498 in full satisfaction of the loan receivable owed from the other tenant-in-common; and
sold the Kennewick, Washington loan receivable for a gross sale price of $80,385.

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Report of Independent Registered Public Accounting Firm
To the Partners of
Lepercq Corporate Income Fund L.P.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheet of Lepercq Corporate Income Fund L.P. and subsidiaries (the "Partnership") as of December 31, 2017, and the related consolidated statements of operations, changes in partners’ capital, and cash flows, for the year ended December 31, 2017, and the related notes and the schedule listed in the Index at Item 15 for the year ended December 31, 2017 (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Partnership as of December 31, 2017, and the results of its operations and its cash flows for the year ended December 31, 2017, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion
These financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on the Partnership's financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Partnership in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Partnership is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Partnership’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.

/s/ Deloitte & Touche LLP
New York, NY
February 26, 2018
We have served as the Partnership's auditor since 2017.



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Report of Independent Registered Public Accounting Firm
The Partners
Lepercq Corporate Income Fund L.P.:
We have audited the accompanying consolidated balance sheets of Lepercq Corporate Income Fund L.P. and subsidiaries (the “Partnership”) as of December 31, 2016 and 2015, and the related consolidated statements of operations, changes in partners’ capital, and cash flows for each of the years in the three-year period ended December 31, 2016. In connection with our audits of the consolidated financial statements, we have also audited the accompanying financial statement schedule III. These consolidated financial statements and financial statement schedule are the responsibility of the Partnership’s management. Our responsibility is to express an opinion on these consolidated financial statements and financial statement schedule based on our audits.
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 provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Lepercq Corporate Income Fund L.P. and subsidiaries as of December 31, 2016 and 2015, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2016, 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 take as a whole, presents fairly, in all material respects, the information set forth therein.

(signed) KPMG LLP
New York, New York
February 28, 2017



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LEPERCQ CORPORATE INCOME FUND L.P. AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
($000, except unit data)
As of December 31,

 2016 2015 2017 2016
Assets:        
Real estate, at cost $731,202
 $1,061,606
 $794,242
 $731,202
Real estate - intangible assets 104,761
 189,700
 116,861
 104,761
Investment in real estate under construction 40,443
 9,223
 
 40,443
 876,406
 1,260,529
 911,103
 876,406
Less: accumulated depreciation and amortization 236,930
 255,024
 233,121
 236,930
Real estate, net 639,476
 1,005,505
 677,982
 639,476
Cash and cash equivalents 52,031
 19,130
 50,900
 52,031
Restricted cash 1,545
 2,457
 932
 1,545
Investment in and advances to non-consolidated entities 5,526
 5,924
 6,477
 5,526
Deferred expenses (net of accumulated amortization of $4,910 in 2016 and $5,634 in 2015) 5,070
 8,459
Deferred expenses (net of accumulated amortization of $5,878 in 2017 and $4,910 in 2016) 6,326
 5,070
Rent receivable - current 358
 801
 365
 358
Rent receivable - deferred 17,449
 87,150
 22,529
 17,449
Related party advances, net 5,967
 
 
 5,967
Other assets 1,182
 1,500
 2,202
 1,182
Total assets $728,604
 $1,130,926
 $767,713
 $728,604
        
Liabilities and Partners' Capital:        
Liabilities:        
Mortgages and notes payable, net $169,212
 $431,599
 $212,792
 $169,212
Co-borrower debt 146,404
 201,106
 157,789
 146,404
Related party advances, net 
 3,232
 2,422
 
Accounts payable and other liabilities 3,559
 5,503
 8,748
 3,559
Accrued interest payable 673
 942
 691
 673
Deferred revenue - including below market leases (net of accumulated accretion of $3,180 in 2016 and $3,148 in 2015) 1,003
 5,306
Deferred revenue - including below market leases (net of accumulated accretion of $355 in 2017 and $3,180 in 2016) 804
 1,003
Distributions payable 16,916
 17,214
 14,952
 16,916
Prepaid rent 3,214
 4,367
 3,233
 3,214
Total liabilities 340,981
 669,269
 401,431
 340,981
        
Commitments and contingencies 
 
 
 
Partners' capital 387,623
 461,657
 366,282
 387,623
Total liabilities and partners' capital $728,604
 $1,130,926
 $767,713
 $728,604

The accompanying notes are an integral part of these consolidated financial statements.


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LEPERCQ CORPORATE INCOME FUND L.P. AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
($000, except unit data)
Years ended December 31,

 2016 2015 2014 2017 2016 2015
Gross revenues:            
Rental $115,403
 $117,847
 $109,455
 $74,707
 $115,403
 $117,847
Tenant reimbursements 8,766
 10,154
 8,678
 8,066
 8,766
 10,154
Total gross revenues 124,169
 128,001
 118,133
 82,773
 124,169
 128,001
Expense applicable to revenues:            
Depreciation and amortization (34,264) (30,651) (27,649) (37,266) (34,264) (30,651)
Property operating (14,414) (17,046) (14,738) (12,516) (14,414) (17,046)
General and administrative (9,570) (8,541) (7,691) (6,721) (9,570) (8,541)
Non-operating income 299
 531
 2,927
 386
 299
 531
Interest and amortization expense (27,313) (29,269) (28,267) (15,969) (27,313) (29,269)
Debt satisfaction charges, net (7,388) (33) (357) 
 (7,388) (33)
Gain on sale of financial asset 
 
 831
Impairment charges and loan losses (72,072) (787) (2,500)
Impairment charges (12,061) (72,072) (787)
Gains on sales of properties 36,380
 
 
 4,491
 36,380
 
Income (loss) before provision for income taxes, equity in earnings of non-consolidated entities and discontinued operations (4,173) 42,205
 40,689
Income (loss) before provision for income taxes and equity in earnings of non-consolidated entities 3,117
 (4,173) 42,205
Provision for income taxes (72) (48) (80) (34) (72) (48)
Equity in earnings of non-consolidated entities 324
 158
 129
 476
 324
 158
Income (loss) from continuing operations (3,921) 42,315
 40,738
Discontinued operations:      
Income from discontinued operations 
 
 882
Provision for income taxes 
 
 (15)
Gains on sales of properties 
 
 17,944
Total discontinued operations 
 
 18,811
Net income (loss) $(3,921) $42,315
 $59,549
 $3,559
 $(3,921) $42,315
Income (loss) per unit:      
Income (loss) from continuing operations $(0.05) $0.58
 $0.59
Income from discontinued operations 
 
 0.28
Net income (loss) $(0.05) $0.58
 $0.87
Net income (loss) per unit $0.04
 $(0.05) $0.58
Weighted-average units outstanding 83,241,396
 72,615,795
 68,758,733
 82,537,628
 83,241,396
 72,615,795

The accompanying notes are an integral part of these consolidated financial statements.


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LEPERCQ CORPORATE INCOME FUND L.P. AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
($000, except unit amounts)
Year ended December 31,

 Units Partners' Capital Units Partners' Capital
Balance December 31, 2013 68,280,702
 $448,067
Changes in co-borrower debt 
 (45,416)
Issuance of units 2,571,757
 27,981
Redemption of units (170,193) (1,962)
Distributions 
 (56,178)
Net Income 
 59,549
Balance December 31, 2014 70,682,266
 432,041
 70,682,266
 $432,041
Changes in co-borrower debt 
 (64,139) 
 (64,139)
Issuance of units 12,559,130
 112,286
 12,559,130
 112,286
Distributions 
 (60,846) 
 (60,846)
Net Income 
 42,315
 
 42,315
Balance December 31, 2015 83,241,396
 461,657
 83,241,396
 461,657
Changes in co-borrower debt 
 (3,298) 
 (3,298)
Distributions 
 (66,815) 
 (66,815)
Net Loss 
 (3,921) 
 (3,921)
Balance December 31, 2016 83,241,396
 $387,623
 83,241,396
 387,623
Changes in co-borrower debt 
 168,615
Redemption of OP units (2,675,785) (129,990)
Distributions 
 (63,525)
Net Income 
 3,559
Balance December 31, 2017 80,565,611
 $366,282

The accompanying notes are an integral part of these consolidated financial statements.


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LEPERCQ CORPORATE INCOME FUND L.P. AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
($000)
Year ended December 31,
 2016 2015 2014 2017 2016 2015
Cash flows from operating activities:            
Net income (loss) $(3,921) $42,315
 $59,549
 $3,559
 $(3,921) $42,315
Adjustments to reconcile net income to net cash provided by operating activities:      
Adjustments to reconcile net income (loss) to net cash provided by operating activities:      
Depreciation and amortization 34,660
 31,145
 29,187
 37,356
 34,660
 31,145
Gains on sales of properties (36,380) 
 (17,944) (4,491) (36,380) 
Gain on sale of financial asset 
 
 (831)
Debt satisfaction charges, net 4,733
 33
 27
 
 4,733
 33
Impairment charges and loan losses 72,072
 787
 2,500
Impairment charges 12,061
 72,072
 787
Straight-line rents (26,891) (35,962) (34,146) (4,499) (26,891) (35,962)
Other non-cash income, net (1,914) (2,190) (1,510) (603) (1,914) (2,190)
Equity in earnings of non-consolidated entities (324) (158) (129) (476) (324) (158)
Distributions of accumulated earnings from non-consolidated entities 324
 150
 15
 408
 324
 150
Increase in accounts payable and other liabilities (2,180) 1,129
 (1,892)
Change in accounts payable and other liabilities 397
 (2,180) 1,129
Change in rent receivable and prepaid rent, net (710) (316) 284
 12
 (710) (316)
Change in accrued interest payable (269) (215) (149) 18
 (269) (215)
Other adjustments, net (293) 1,692
 3,088
 126
 (293) 1,692
Net cash provided by operating activities 38,907
 38,410
 38,049
 43,868
 38,907
 38,410
Cash flows from investing activities:            
Investment in real estate, including intangible assets (52,700) (152,000) (49,526) (71,272) (52,700) (152,000)
Investment in real estate under construction (31,220) (20,699) (3,682) (20,894) (31,220) (20,699)
Capital expenditures (1,466) (6,295) (6,860) (4,277) (1,466) (6,295)
Net proceeds from sale of properties 238,891
 
 52,327
 17,847
 238,891
 
Investment in loan receivable 
 (318) 
 
 
 (318)
Principal payments received on loans receivable 
 3,480
 1,304
 
 
 3,480
Investments in and advances to non-consolidated entities (81) (1,683) (263) (1,737) (81) (1,683)
Distributions from non-consolidated entities in excess of accumulated earnings 478
 503
 738
 854
 478
 503
Increase in deferred leasing costs (1,156) (1,553) (4,558)
Payments of deferred leasing costs (2,474) (1,156) (1,553)
Real estate deposits (28)



 (40)
(28)

Change in restricted cash 912
 (843) 2,714
 613
 912
 (843)
Net cash provided by (used in) investing activities 153,630
 (179,408) (7,806) (81,380) 153,630
 (179,408)
Cash flows from financing activities:            
Distributions to partners (67,113) (19,741) (31,923) (65,489) (67,113) (19,741)
Principal amortization payments (1,311) (1,454) (1,828) (1,054) (1,311) (1,454)
Principal payments on debt, excluding normal amortization (23,934) (28,626) (9,000) 
 (23,934) (28,626)
Proceeds of mortgages and notes payable 
 139,193
 
 45,400
 
 139,193
Proceeds of related party note 
 
 8,250
Related party note payment 
 (8,250) 
 
 
 (8,250)
Co-borrower debt payment (58,000) 
 
Increase in deferred financing costs (79) (1,281) (694)
Co-borrower debt borrowings (payments), net 180,000
 (58,000) 
Payments of deferred financing costs (875) (79) (1,281)
Related party advances, net (9,199) 71,959
 2,078
 8,389
 (9,199) 71,959
Redemption of OP units 
 
 (1,962) (129,990) 
 
Net cash provided by (used in) financing activities (159,636) 151,800
 (35,079) 36,381
 (159,636) 151,800
Change in cash and cash equivalents 32,901
 10,802
 (4,836) (1,131) 32,901
 10,802
Cash and cash equivalents, at beginning of year 19,130
 8,328
 13,164
 52,031
 19,130
 8,328
Cash and cash equivalents, at end of year $52,031
 $19,130
 $8,328
 $50,900
 $52,031
 $19,130

The accompanying notes are an integral part of these consolidated financial statements.


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LEPERCQ CORPORATE INCOME FUND L.P. AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
($000, except share/unit data)


(1)    The Partnership

Lepercq Corporate Income Fund L.P. (together with its consolidated subsidiaries, except when the context only applies to the parent entity, the “Partnership”) was organized in 1986 as a limited partnership under the Delaware Revised Uniform Limited Partnership Act. The Partnership's sole general partner, Lex GP-1 Trust (the “General Partner”), is a wholly-owned subsidiary of Lexington Realty Trust (“Lexington”). The Partnership is an operating partnership subsidiary of Lexington. As of December 31, 2016,2017, Lexington, through Lex LP-1 Trust, a wholly-owned subsidiary, and the General Partner owned approximately 96.0% of the outstanding units of the Partnership. As of December 31, 2016,2017, the Partnership had equity ownership interests in 3332 consolidated real estate properties located in 2220 states. The properties in which the Partnership has an interest are primarily net-leased to tenants in various industries.

On December 30, 2013, another operating partnership subsidiary of Lexington, Lepercq Corporate Income Fund II L.P. (“LCIF II”) was merged with and into the Partnership, with the Partnership as the surviving entity. In connection with the merger of LCIF II with and into the Partnership, former LCIF II partners representing 170,193 limited partner interests (“OP Units”) elected or were deemed to elect to receive an aggregate amount of $1,962 in cash for the repurchase of such OP units.

A majority of the real properties in which the Partnership had an interest are generally subject to net leases or similar leases where the tenant pays all or substantially all of the cost, including cost increases, for real estate taxes, insurance, utilities and ordinary maintenance of the property. However, certain leases provide that the landlord is responsible for certain operating expenses. Property owner subsidiaries are landlords under leases for properties in which the Partnership has an interest and/or borrows under loan agreements secured by properties in which the Partnership has an interest and lender subsidiaries are lenders under loan agreements where the Partnership made an investment in a loan asset, but in all cases are separate and distinct legal entities. The assets and credit of a property owner subsidiary or lender subsidiary are not available to satisfy the debt and other obligations of any other person, including any other property owner subsidiary or lender subsidiary or any other affiliate.

(2)    Summary of Significant Accounting Policies

Basis of Presentation and Consolidation. The Partnership's consolidated financial statements are prepared on the accrual basis of accounting in accordance with U.S. generally accepted accounting principles (“GAAP”). The financial statements reflect the accounts of the Partnership and its consolidated subsidiaries. The Partnership consolidates its wholly-owned subsidiaries, partnerships and joint ventures which it controls (i) through voting rights or similar rights or (ii) by means other than voting rights if the Partnership is the primary beneficiary of a variable interest entity (“VIE”). Entities which the Partnership does not control and entities which are VIEs in which the Partnership is not the primary beneficiary are accounted for under appropriate GAAP.

Earnings Per Unit. Net income (loss) per unit is computed by dividing net income (loss) by the weighted-average number of units outstanding during the period. There are no potential dilutive securities.
 
Unit Redemptions. The Partnership's limited partner units that are issued and outstanding, other than those held by Lexington, are currently redeemable at certain times, only at the option of the holders, for Lexington shares of beneficial interests, par value $0.0001 per share classified as common stock (“common shares”), on a one to approximately 1.13 basis, subject to future adjustments. These units are not otherwise mandatorily redeemable by the Partnership. As of December 31, 2016,2017, Lexington's common shares had a closing price of $10.80$9.65 per share. The estimated fair value of these units was $40,734,$35,021, assuming all outstanding limited partner units not held by Lexington were redeemed on such date.
 
Allocation of Overhead Expenses. The Partnership does not pay a fee to the General Partner for the day-to-day management of the Partnership. Certain expenses incurred by the General Partner and its affiliates, including Lexington, such as corporate-level interest, amortization of deferred loan costs, payroll and general and administrative expenses are allocated to the Partnership and reimbursed to the General Partner in accordance with the Partnership's partnership agreement. The allocation is based upon gross rental revenues.


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Distributions; Allocations of Income and Loss. As provided in the Partnership's partnership agreement, distributions and income and loss for financial reporting purposes are allocated to the partners based on their ownership of units. Special allocation rules included in the partnership agreement affect the allocation of taxable income and loss. The Partnership paid or accrued gross distributions of $66,815$63,525 ($0.800.77 per weighted average unit), $60,846$66,815 ($0.840.80 per weighted-average unit) and $56,178$60,846 ($0.820.84 per weighted-average unit) to its partners during the years ended December 31, 2017, 2016 and 2015, and 2014, respectively. Certain units owned indirectly by Lexington are entitled to distributions of $3.25 per unit.
 

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Use of Estimates. The Partnership has made a number of significant 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 GAAP. These estimates and assumptions are based on management's best estimates and judgment. The Partnership evaluates its estimates and assumptions on an ongoing basis using historical experience and other factors, including the economic environment. The economic environment has increased the degree of uncertainty inherent in these estimates and assumptions. The Partnership 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 tangible and intangible assets acquired and liabilities assumed, the determination of VIEs and which entities should be consolidated, the determination of impairment of long-lived assets, loans receivable and equity method investments and the useful lives of long-lived assets. Actual results could differ materially from those estimates.
 
Fair Value Measurements. The Partnership follows the guidance in the Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") Topic 820, Fair Value Measurements and Disclosures ("Topic 820"), to determine the fair value of financial and non-financial instruments. Topic 820 defines fair value, establishes a framework for measuring fair value in GAAP and expands disclosures about fair value measurements. Topic 820 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, which 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 Partnership utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible, as well as considering counter-party credit risk.
 
Revenue Recognition. The Partnership recognizes lease revenue 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. Revenue is recognized on a contractual basis for leases with escalations tied to a consumer price index with no floor. 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 the renewals are not reasonably assured. If the Partnership funds tenant improvements and the improvements are deemed to be owned by the Partnership, revenue recognition will commence when the improvements are substantially completed and possession or control of the space is turned over to the tenant. If the Partnership determines that the tenant allowances are lease incentives, the Partnership 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 Partnership recognizes lease termination fees as rental revenue in the period received and writes off unamortized lease-related intangible and other lease-related account balances, provided there are no further Partnership obligations under the lease. Otherwise, such fees and balances are recognized on a straight-line basis over the remaining obligation period with the termination payments being recorded as a component of rent receivable-deferred on the Consolidated Balance Sheets.
 
Gains on sales of real estate are recognized based upon the specific timing of the sale as measured against various criteria related to the terms of the transactions and any continuing involvement 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 the Partnership sells a property and retains a partial ownership interest in the property, the Partnership recognizes gain to the extent of the third-party ownership interest.
 

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Purchase Accounting and Acquisition of Real Estate. The fair value of the real estate acquired, which includes the impact of 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. Acquisition costs are expensed as incurred and are included in property operating expense in the accompanying Consolidated Statement of Operations.
��

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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. The “as-if-vacant” value is then allocated to land and 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 expected lease-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 expected lease-up periods based on current market demand. The Partnership also estimates costs to execute similar leases including leasing commissions. The Partnership's management generally retains a third party to assist in the allocations.
 
In allocating the fair value of the identified intangible assets and liabilities of an acquired property, above-market and below-market lease values are recorded based on the difference between the current in-place lease rent and the Partnership'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 tenant relationship values, 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 tenant relationship values based on management's evaluation of the specific characteristics of each tenant's lease. The value of in-place leases is amortized to expense over the remaining non-cancelable periods and any bargain renewal periods of the respective leases. The value of tenant relationships are amortized to expense over the applicable lease term plus expected renewal periods.
 
Depreciation is determined by the straight-line method over the remaining estimated economic useful lives of the properties. The Partnership generally depreciates its real estate assets over periods ranging up to 40 years.
 
Impairment of Real Estate. The Partnership evaluates the carrying value of all tangible and intangible real estate assets held for investment for possible impairment when an event or change in circumstance has occurred that indicates its carrying value may not be recoverable. The evaluation includes estimating and reviewing anticipated future undiscounted cash flows to be derived from the asset. If such cash flows are less than the asset's carrying value, an impairment charge is recognized to the extent by which the asset's carrying value exceeds the estimated fair value, which may be below the balance of any non-recourse financing. Estimating future cash flows and fair values is highly subjective and such estimates could differ materially from actual results.
 
Investments in Non-Consolidated Entities. The Partnership accounts for its investments in 50% or less owned entities under the equity method, unless consolidation is required. If the Partnership's investment in the entity is insignificant and the Partnership has no influence over the control of the entity then the entity is accounted for under the cost method.
 
Impairment of Equity Method Investments. The Partnership assesses whether there are indicators that the value of its equity method investments may be impaired. An impairment charge is recognized only if the Partnership determines that a decline in the value of the investment below its carrying value is other-than-temporary. The assessment of impairment is highly subjective and involves the application of significant assumptions and judgments about the Partnership's intent and ability to recover its investment given the nature and operations of the underlying investment, among other factors. To the extent an impairment is deemed to be other-than-temporary, the loss is measured as the excess of the carrying amount of the investment over the estimated fair value of the investment.


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Properties Held For Sale. Assets and liabilities of properties that meet various held for sale criteria, including whether it is probable that a sale will occur within 12 months, are presented separately in the Consolidated Balance Sheets. Commencing January 1, 2015, the operating results of these properties are reflected as discontinued operations in the Consolidated Statements of Operations only if the sale of these assets represents a strategic shift in operations, if not, the operating results are included in continuing operations. Properties classified as held for sale are carried at the lower of net carrying value or estimated fair value less costs to sell and depreciation and amortization are no longer recognized. Properties that do not meet the held for sale criteria are accounted for as operating properties.
 

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Acquisition, Development and Construction Arrangements. The Partnership evaluates loans receivable where the Partnership participates in residual profits through loan provisions or other contracts to ascertain whether the Partnership has the same risks and rewards as an owner or a joint venture partner. Where the Partnership concludes that such arrangements are more appropriately treated as an investment in real estate, the Partnership reflects such loan receivable as an equity investment in real estate under construction in the Consolidated Balance Sheets. In these cases, no interest income is recorded on the loan receivable and the Partnership records capitalized interest during the construction period. In arrangements where the Partnership engages a developer to construct a property or provide funds to a tenant to develop a property, the Partnership will capitalize the funds provided to the developer/tenant and internal costs of interest and real estate taxes, if applicable, during the construction period.
 
Deferred Expenses. Deferred expenses consist primarily of leasing costs, which are amortized over the term of the related lease.
 
Income Taxes. Because the Partnership is a limited partnership, taxable income or loss of the Partnership is reported in the income tax returns of its partners. Accordingly, no provision for income taxes is made in the Consolidated Financial Statements of the Partnership. However, the Partnership is required to pay certain state and local entity level taxes which are expensed as incurred. The Partnership does not have any unrecognized tax benefits or any additional tax liabilities as of December 31, 20162017 and 2015.2016.
 
Cash and Cash Equivalents. The Partnership 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 is comprised primarily of cash balances held in escrow withby lenders.

Co-borrower Debt.In February 2013, the FASB issued Accounting Standards Update (“ASU”) 2013-04, Obligations Resulting from Joint and Several Liability Arrangements for Which the Total Amount of the Obligation The Partnership is Fixed at the Reporting Date (“ASU 2013-04”), requiringsubject to ASC 405-40, which requires recognition of such obligations as to which it is a co-borrower as the sum of (a) the amount the reporting entity agreed to pay on the basis of its arrangement among its co-obligors and (b) any additional amount the reporting entity expects to pay on behalf of its co-obligors.

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, 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 most of the tenants of properties in which the Partnership has an interest 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, or if the tenant is not responsible, the Partnership's property owner subsidiary may be required to satisfy any such obligations, should they exist. In addition, the property owner subsidiary, as the owner of such a property, may be held directly liable for any such damages or claims irrespective of the provisions of any lease. As of December 31, 2016,2017, the Partnership was not aware of any environmental matter relating to any of its investments that would have a material impact on the consolidated financial statements.
Segment Reporting. The Partnership operates generally in one industry segment, single-tenant real estate assets.
Reclassifications. Certain amounts included in prior years' financial statements have been reclassified to conform to the current year's presentation.

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The Partnership adopted ASU 2015-03, Simplifying the Presentation of Debt Issuance Costs on January 1, 2016. ASU 2015-03 amended presentation guidance by requiring that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts.  Prior to the issuance of ASU 2015-03, debt issuance costs were presented as an asset in the balance sheet.  As shown in the table below, pursuant to the guidance in ASU 2015-03, the Partnership has reclassified unamortized debt issuance costs associated with certain debt obligations in the Partnership's previously reported Consolidated Balance Sheet as of December 31, 2015 as follows:
 
As previously reported
December 31, 2015
 Reclassifications 
As adjusted
December 31, 2015
Deferred expenses, net$14,352
 $(5,893) $8,459
Mortgages and notes payable, net437,492
 (5,893) 431,599
Recently Issued Accounting Guidance. In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606), which amends the guidance for revenue recognition to eliminate the industry-specific revenue recognition guidance and replace it with a principle based approach for determining revenue recognition. The effective date of the new guidance was updated by ASU 2015-14 and is effective for reporting periods beginning after December 15, 2017. The Partnership’s revenue-producing contracts are primarily leases that are not within the scope of this standard as leases are excluded from ASU 2014-09. The Partnership expects that it may be impacted in its recognition of non-lease revenue, non-lease components of revenue from lease agreements (upon adoption of ASU 2016-02) and the timing of its recognition of real estate sale transactions. Under ASU 2014-09, revenue recognition for real estate sales is largely based on the transfer of control and the buyer having the ability to direct the use of, or obtain substantially all of the remaining benefit from, the asset (which generally will adoptoccur on the closing date); the factor of continuing involvement is no longer a specific consideration for the timing of recognition. As a result, the Partnership generally expects that the new guidance may result in transactions qualifying as sales of real estate at an earlier date than under current accounting guidance. The Partnership believes the impact would be limited to the timing and income statement presentation of revenue and not the total amount of revenue recognized over time. The Partnership adopted ASU 2014-09 effective January 1, 2018 and anticipates using the modified retrospective with cumulative-effective transition method. The Partnership is identifying applicable revenue streams and continues to evaluateapproach. As the impactmajority of the adoption ofPartnership’s revenue is from rental income related to leases, the new guidancePartnership does not believe the ASU will have a material impact on its consolidated financial statements.

In February 2015, the FASB issued ASU 2015-02, “Consolidation (Topic 810) - Amendments to the Consolidation Analysis,” which provides guidance on the consolidation evaluation for reporting organizations that are required to evaluate whether they should consolidate certain legal entities. In accordance with the guidance, all legal entities are subject to reevaluation under the revised consolidation model. The guidance was effective in the first quarter of fiscal 2016. The adoption of this guidance did not have an impact on the Partnership.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which requires lessees to recognize a right of use asset and related lease liability for those leases classified as operating leases at the commencement date andthat have lease terms of more than 12 months. The accounting applied to lessors under this new guidance is largely unchanged from priormonths and amends certain lessor guidance. Lessors in most cases will continue to record operating leases as operating leases and recognize lease income from these leases generally on a straight-line basis over the lease term. The ASU is expected to result in the recognition of a right-to-use asset and related liability to account for ourthe Partnership's future obligations under ourits ground lease arrangements for which the Partnership is the lessee. AsFrom a lessor perspective, the Partnership expects that lease components will primarily be recognized on a straight-line basis over the lease term. ASU 2016-02 originally stated that companies would be required to bifurcate certain lease revenues between lease and non-lease components, however, the FASB issued an exposure draft in January 2018 (2018 Exposure Draft) which, if adopted as written, would allow lessors a practical expedient by class of December 31, 2016, the remaining contractual payments under the Partnership's groundunderlying assets to account for lease agreements aggregated $3,810.and non-lease components as a single lease component if certain criteria are met. Additionally, the new ASU 2016-02 will require that the Partnership capitalize, as initial direct costs, only those costs that are incurred due to the execution of a lease. ASU 2016-02 iswill be effective for fiscal years beginning after December 15, 2018, and interim periods within those years, and requiresyears. ASU 2016-02 originally required a modified retrospective transition approach for leases existing at, or entered into after,method of adoption, however, the beginning2018 Exposure Draft indicates that companies may be permitted to recognize a cumulative-effect adjustment to the opening balance of the earliest comparative period presentedretained earnings in the financial statements. Early adoption is permitted.period of adoption. The pronouncement allows some optional practical expedients. The Partnership continuesexpects to adopt this new guidance on January 1, 2019 and will continue to evaluate the impact of the adoption of the newthis guidance on its consolidated financial statements.

until it becomes effective.
In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments, which addresses how certain cash receipts and cash payments are presented and classified in the statement of cash flows. The ASU is effective for fiscal years beginning after December 15, 2018,2017, including interim periods within those years; however, early adoption is permitted. Entities must apply the guidance retrospectively to all periods presented but may apply it prospectively if retrospective application would be impracticable. The Partnership adopted this guidance effective January 1, 2018. The Partnership does not believe the adoption of this guidance will have a material impact on its consolidated financial statements.
In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash, which clarifies guidance on the classification and presentation of changes in restricted cash. The ASU is effective for reporting periods beginning after December 15, 2017, with early adoption permitted, and will be applied retrospectively to all periods presented. Upon adoption, restricted cash balances will be included along with cash and cash equivalents as of the end of the period and beginning of period, respectively, in the Partnership's consolidated statement of cash flows for all periods presented. Upon adoption, separate line items showing changes in restricted cash balances will be eliminated from the Partnership's consolidated statement of cash flows. The Partnership adopted this guidance effective January 1, 2018.

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In January 2017, the FASB issued ASU 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business, which clarifies the definition of a business when evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The ASU is effective for reporting periods beginning after December 15, 2017, with early adoption permitted. The Partnership expects that acquisitions of real estate or in-substance real estate will not meet the revised definition of a business and thus will be treated as asset acquisitions. Acquisition costs for those acquisitions that are not businesses will be capitalized rather than expensed. The Partnership adopted this guidance effective January 1, 2018. The Partnership does not believe that the adoption of this guidance will have a material impact on its consolidated financial statements.
In February 2017, the FASB issued ASU 2017-05, Other Income - Gains and Losses from the Derecognition of Nonfinancial Assets (Topic 610-20), which requires that all entities account for the derecognition of a business in accordance with ASC 810, including instances in which the business is considered in-substance real estate. The ASU requires the Partnership to measure at fair value any retained interest in a partial sale of real estate. The ASU is effective for annual periods, and interim periods therein, beginning after December 15, 2017. Early application is permitted.  The Partnership adopted ASU 2017-05 effective January 1, 2018 and it is currently evaluating thenot expected to have a material impact of the adoption of the new guidance on its consolidated financial statements.
(3)     Investments in Real Estate and Real Estate Under Construction

The Partnership's real estate, net, consists of the following at December 31, 20162017 and 2015:2016:
 2016 2015 2017 2016
Real estate, at cost:        
Buildings and building improvements $644,173
 $705,547
 $705,565
 $644,173
Land, land estates and land improvements 86,120
 355,608
 88,589
 86,120
Fixtures and equipment 84
 84
 84
 84
Construction in progress 825
 367
 4
 825
Real estate intangibles:        
In-place lease values 82,190
 165,413
 95,166
 82,190
Tenant relationships 19,943
 20,256
 19,067
 19,943
Above-market leases 2,628
 4,031
 2,628
 2,628
Investment in real estate under construction 40,443
 9,223
 
 40,443
 876,406
 1,260,529
 911,103
 876,406
Accumulated depreciation and amortization(1)
 (236,930) (255,024) (233,121) (236,930)
Real estate, net $639,476
 $1,005,505
 $677,982
 $639,476
(1)
Includes accumulated amortization of real estate intangible assets of $54,425$54,745 and $55,334$54,425 in 20162017 and 20152016, respectively. The estimated amortization of the above real estate intangible assets for the next five years is $4,767 in 2017, $4,215$5,307 in 2018, $3,466$4,557 in 2019, $3,353$4,445 in 2020, $4,431 in 2021 and $3,339$4,431 in 2021.2022.
In addition, the Partnership had below-market leases, net of accumulated accretion, which are included in deferred revenue, of $64$32 and $96,$64, respectively as of December 31, 20162017 and 2015.2016. The estimated accretion for the next five years is $32 in 2017, $32 in 2018, $0 in 2019, $0 in 2020, $0 in 2021 and $0 in 2021.
The Partnership, through property owner subsidiaries, completed the following acquisition during 2016: 
Property Type Location Acquisition Initial Cost Basis Lease Expiration Land Building and ImprovementsLease in-place Value
Industrial Romeoville, IL Dec-16 $52,700
 10/2031 $7,524
 $40,167
 $5,009
               
Life of intangible asset (years)       14.9

2022.
The Partnership, through property owner subsidiaries, completed the following build-to-suit transactiontransaction/acquisitions during 2015:2017: 
Property Type Location Acquisition Initial Cost Basis Lease Expiration Land and Land Estates Building and ImprovementsLease in-place Value Location Acquisition Date Initial Cost Basis Lease Expiration Land Building and ImprovementsLease in-place Value Intangible
Office Charlotte, NC Apr-17 $61,339
 04/2032 $3,771
 $47,064
 $10,504
Industrial Grand Prairie, TX Jun-17 24,317
 03/2037 3,166
 17,985
 3,166
Industrial Richland, WA Nov-15 $152,000
 08/2035 1,293
 126,947
 23,760
 Warren, MI Nov-17 46,955
 10/2032 972
 42,521
 3,462
         $132,611
 $7,909
 $107,570
 $17,132
Life of intangible asset (years)     19.8
        
Weighted-average life of intangible assets (years)Weighted-average life of intangible assets (years)     15.9

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In addition, during 2015, the Partnership acquired the office property collateral from the borrowers in Westmont, Illinois and Southfield, Michigan on two loans receivable that were impaired. The Partnership, soldthrough property owner subsidiaries, completed the Westmont, Illinois property in 2016.following acquisition during 2016:
Property Type Location Acquisition Date Initial Cost Basis Lease Expiration Land and Land Estates Building and ImprovementsLease in-place Value Intangible
Industrial Romeoville, IL Dec-16 $52,700
 10/2031 $7,524
 $40,167
 $5,009
               
Life of intangible asset (years)       14.9

The Partnership recognized aggregate acquisition and pursuit expenses of $343 and $359 in 2017 and $85 in 2016, and 2015, respectively.

As of December 31, 2016, the Partnership had the following development arrangement outstanding:

Location Property Type Square Feet Expected Maximum Commitment Lease Term (Years) Estimated Completion Date GAAP Investment Balance as of 12/31/16
Charlotte, NC Office 201
 $62,445
 15 2Q 17 $40,443

(4)     Sales ofProperty Dispositions and Real Estate Discontinued Operations and Impairment

For the years ended December 31, 20162017 and 2014,2016, the Partnership disposed of its interests in certain properties generating aggregate net proceeds of $238,891,$17,847 and $40,836,$238,891, respectively, which resulted in gains on sales of $36,380$4,491 and $17,944,$36,380, respectively. During 2017, 2016 and 2015, the Partnership recognized aggregate impairment charges of $5,259, $72,072 and $787, respectively, relating to properties that were ultimately sold.disposed. The aggregate 2016 impairment charges related primarily to the sale of three land investments in New York, New York for $65,500. For the yearsyear ended December 31, 2016, the Partnership recognized debt satisfaction charges, net, relating to sold properties of $7,388. No properties were disposed of during the year ended December 31, 2015. At December 31, 20162017 and 2015,2016, the Partnership had no properties classified as held for sale.

In addition, the Partnership had a capitalized financing lease for a property located in Greenville, South Carolina, which was sold in 2014 for net proceeds of $11,491.

The Partnership assesses on a regular basis whether there are any indicators that the carrying value of real estate assets may be impaired. Potential indicators may include an increase in vacancy at a property, tenant reduction in utilization of a property, tenant financial instability and the potential sale of the property in the near future. An asset is determined to be impaired if the asset's carrying value is in excess of its estimated fair value.

In 2014, During 2017, the Partnership recognized an impairment charge of $6,802 on a $2,500 loan loss on the loan receivable collateralized by the Southfield, Michigan property. During 2015 and 2014, the Partnership recognized aggregate interest income relating to impaired loans of $14 and $1,752, respectively.partially vacant office property located in Florence, South Carolina.

(5)    Investments in and Advances to Non-Consolidated Entities

In July 2014, the Partnership acquired a 1.0% interest in an office property in Philadelphia, Pennsylvania for $263. The Partnership accounts for this investment under the cost basis of accounting.
On September 1, 2012, the Partnership acquired a 2% equity interest in Net Lease Strategic Assets Fund L.P. (“NLS”) for cash of $189 and the issuance of 457,211 limited partner units to Lexington.
The Partnership's carrying value in NLS at December 31, 2017 and 2016 was $6,175 and 2015 was $5,224, and $5,622, respectively. The Partnership recognized net income from NLS of $458, $302 $141 and $114$141 in equity in earnings from non-consolidated entities during 2017, 2016 2015 and 2014,2015, respectively. The Partnership contributed $81$1,737 and $1,643$81 to NLS in 20162017 and 2015.2016. In addition, the Partnership received distributions of $1,244, $781 $636 and $738$636 from NLS in 2017, 2016 and 2015, and 2014, respectively.


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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
($000, except share/unit data)

(6)    Fair Value Measurements

The following tables present the Partnership's assets and liabilities measured at fair value on a non-recurring basis during the year ended December 31, 2015,2017, aggregated by the level in the fair value hierarchy within which those measurements fall:
  Fair Value Measurements Using  Fair Value Measurements Using
Description2015 (Level 1) (Level 2) (Level 3)2017 (Level 1) (Level 2) (Level 3)
Impaired real estate asset*$371
 $
 $
 $371
$2,090
 $
 $
 $2,090
*Represents a non-recurring fair value measurement.measurement determined during the year.

The table below sets forth the carrying amounts and estimated fair values of the Partnership's financial instruments as of December 31, 20162017 and 2015:2016:
 As of December 31, 2016 As of December 31, 2015 As of December 31, 2017 As of December 31, 2016
 Carrying Amount Fair Value Carrying Amount Fair Value Carrying Amount Fair Value Carrying Amount Fair Value
Liabilities                
Debt $315,616
 $314,509
 $632,705
 $650,785
 $370,581
 $352,806
 $315,616
 $314,509

The fair value of the Partnership's debt is primarily estimated utilizing Level 3 inputs by using an estimated discounted cash flow analysis, based upon estimates of market interest rates.
The Partnership estimates the fair value of its real estate assets, including non-consolidated real estate assets, by using income and market valuation techniques. The Partnership may estimate fair values using market information such as broker opinions of value, recent sale offers or discounted cash flow models, which primarily rely on Level 3 inputs. The cash flow models include estimated cash inflows and outflows over a specified holding period. These cash flows may include contractual rental revenues, projected future rental revenues and expenses and forecasted tenant improvements and lease commissions based upon market conditions determined through discussion with local real estate professionals, experience the Partnership has with its other owned properties in such markets and expectations for growth. Capitalization rates and discount rates utilized in these models are estimated by management based upon rates that management believes to be within a reasonable range of current market rates for the respective properties based upon an analysis of factors such as property and tenant quality, geographical location and local supply and demand observations. To the extent the Partnership under-estimates forecasted cash outflows (tenant improvements, lease commissions and operating costs) or over-estimates forecasted cash inflows (rental revenue rates), the estimated fair value of its real estate assets could be overstated.
Fair values cannot be determined with precision, may not be substantiated by comparison to quoted prices in active markets and may not be realized upon sale. Additionally, there are inherent uncertainties in any fair value measurement technique, and changes in the underlying assumptions used, including discount rates, liquidity risks and estimates of future cash flows, could significantly affect the fair value measurement amounts.
Cash Equivalents, Restricted Cash, Accounts Receivable and Accounts Payable. The Partnership estimates that the fair value of cash equivalents, restricted cash, accounts receivable and accounts payable approximates carrying value due to the relatively short maturity of the instruments.

(7)    Mortgages and Notes Payable and Co-Borrower Debt

The Partnership had the following mortgages and notes payable outstanding as of December 31, 2016 and 2015:
 December 31, 2016 December 31, 2015
Mortgages and notes payable$169,958
 $437,492
Unamortized debt issuance costs(746) (5,893)
 $169,212
 $431,599

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
($000, except share/unit data)

(7)    Mortgages and Notes Payable and Co-Borrower Debt

The Partnership had the following mortgages and notes payable outstanding as of December 31, 2017 and 2016:
 December 31, 2017 December 31, 2016
Mortgages and notes payable$214,303
 $169,958
Unamortized debt issuance costs(1,511) (746)
 $212,792
 $169,212
Interest rates, including imputed rates, ranged from 4.0% to 6.5% at December 31, 20162017 and the mortgages and notes payable mature between 2019 and 2026.2033. Interest rates, including imputed rates, ranged from 4.0% to 6.5% at December 31, 2015.2016. The weighted-average interest rate at December 31, 20162017 and 20152016 was approximately 4.8% and 4.7%., respectively.
In 2015, the Partnership obtained $110,000 of non-recourse secured financing on an industrial facility in Richland, Washington. The debt bears interest at a fixed rate of 4.0% and matures in January 2026.
Lexington,Lexington's, and the PartnershipPartnership's as co-borrower, have a $905,000 unsecured credit agreement with KeyBank National Association, as agent.agent, was amended in 2017 to, among other things, increase the overall facility to $1,105,000. With lender approval, Lexington can increase the size of the amended facility to an aggregate $1,810,000.$2,010,000. A summary of the significant terms are as follows:
 Maturity Date Current
Interest Rate
$400,000505,000 Revolving Credit Facility(1)
08/August 2019 LIBOR + 1.00%
$250,000300,000 Term Loan(2)
08/August 2020 LIBOR + 1.10%
$255,000300,000 Term Loan(3)
01/January 2021 LIBOR + 1.10%
(1)Increased from $400,000. Maturity date can be extended to August 2020 at the Lexington's option. The interest rate ranges from LIBOR plus 0.85% to 1.55%. At December 31, 2016,2017, the unsecured revolving credit facility had no amounts$160,000 of borrowings outstanding $4,600 of letters of credit and availability of $395,400$345,000 subject to covenant compliance.
(2)Increased from $250,000. The interest rate ranges from LIBOR plus 0.90% to 1.75%. Interest-rate swap agreements were previously entered intoexist to fix the LIBOR component at a weighted-average rate of 1.09% through February 2018 on the $250,000 of the $300,000 outstanding LIBOR-based borrowings.
(3)Increased from $255,000. The interest rate ranges from LIBOR plus 0.90% to 1.75%. Interest-rate swap agreements were previously entered intoexist to fix the LIBOR component at a weighted-average rate of 1.42% through January 2019 on the $255,000 of the $300,000 outstanding LIBOR-based borrowings.

The unsecured revolving credit facility and the unsecured term loans are subject to financial covenants, which Lexington was in compliance with at December 31, 2016.2017.
In accordance with the guidance of ASU 2013-04, the Partnership recognizes a proportion of the outstanding amounts of the above mentioned term loans and revolving credit facility as it is a co-borrower with Lexington, as co-borrower debt in the accompanying balances sheets. In accordance with the Partnership’s partnership agreement, the Partnership is allocated a portion of these debts based on gross rental revenues, which represents its agreed to obligation. The Partnership's allocated co-borrower debt was $146,404$157,789 and $201,106$146,404 as of December 31, 20162017 and 2015,2016, respectively. Changes in co-borrower debt are recognized in partners’ capital, exclusive of direct borrowings/payments, in the accompanying consolidated statements of changes in partners’ capital.
 
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 prepayments. In addition, certain mortgages are cross-collateralized and cross-defaulted.
 
Scheduled principal and balloon payments for mortgages and notes payable and co-borrower debt for the next five years and thereafter are as follows:
Year ending
December 31,
 Total
2017 $1,054
2018 1,124
2019 32,548
2020 91,067
2021 82,506
Thereafter 108,063
  $316,362
Unamortized debt issuance costs (746)
  $315,616


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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
($000, except share/unit data)

Scheduled principal and balloon payments for mortgages and notes payable and co-borrower debt for the next five years and thereafter are as follows:
Year ending
December 31,
 Total
2018 $1,124
2019 65,767
2020 80,875
2021 70,864
2022 10,016
Thereafter 143,446
  $372,092
Unamortized debt issuance costs (1,511)
  $370,581
Included in the Consolidated Statements of Operations, the Partnership recognized debt satisfaction charges, net of $33 and $357 for the yearsyear ended December 31, 2015 and 2014, respectively, due to the satisfaction of mortgages and notes payable. In addition, the Partnership capitalized $596, $954 $152 and $60$152 in interest for the years ended 2017, 2016, and 2015, and 2014, respectively.

(8)    Leases

Lessor:

Minimum future rental receipts under the non-cancelable portion of tenant leases, assuming no new or re-negotiated leases, for the next five years and thereafter are as follows:

Year ending
December 31,
 Total Total
2017 $65,008
2018 59,103
 $73,224
2019 50,008
 68,794
2020 44,802
 63,719
2021 41,117
 59,332
2022 54,811
Thereafter 405,828
 534,397
 $665,866
 $854,277
 
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, and upon payment of a termination fee to the landlord, 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.
Lessee:
The Partnership holds,held, and may in the future hold, through property owner subsidiaries, 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 Partnership as additional rent. For certainAs of these properties,December 31, 2017, the Partnership has an option to purchase the fee interest.

Minimum future rental payments under non-cancelablehad no 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:
Year ending
December 31,
 Total
2017 $260
2018 260
2019 260
2020 260
2021 260
Thereafter 2,510
  $3,810

interests.
Rent expense for the leasehold interests including discontinued operations, was $171, $286 and $307 in 2017, 2016, and $289 in 2016, 2015, and 2014, respectively.


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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
($000, except share/unit data)

(9)    Concentration of Risk

The Partnership seeks to reduce its operating and leasing risks through the geographic diversification of its properties, tenant industry diversification, avoidance of dependency on a single asset and the creditworthiness of its tenants. For the years ended December 31, 2017, 2016, 2015, and 2014,2015, the following tenants represented greater than 10% of rental revenues:
 2016 2015 2014 2017 2016 2015
SM Ascott LLC(1)
 11.2% 14.7% 15.9% % 11.2% 14.7%
Tribeca Ascott LLC(1)
 % 12.6% 13.6% % % 12.6%
AL-Stone Ground Tenant LLC(1)
 % 11.5% 12.4% % % 11.5%
Preferred Freezer Services of Richland, LLC 11.4% % % 17.6% 11.4% %
(1)The Partnership net leased individual land parcels to the tenants listed above under non-cancellable 99-year (original term) leases. The improvements on these parcels are owned by the tenants and consist of three high-rise hotels located in New York, NY. The Partnership sold these assets in September 2016.

Cash and cash equivalent balances at certain institutions may exceed insurable amounts. The Partnership believes it mitigates this risk by investing in or through major financial institutions.

(10)    Related Party Transactions

The Partnership had the following related party transactions in addition to related party transactions discussed elsewhere in this report.
The Partnership had outstanding net advances owed from/(to) Lexington of $5,967$(2,422) and $(3,232)$5,967 as of December 31, 20162017 and 2015,2016, respectively. The advances are receivable/payable on demand. Lexington earneddistributions were $61,072, $64,319 and $58,361 during 2017, 2016 and 2015, respectively. In 2017, the Partnership redeemed 2,675,785 OP units owned by Lexington that were entitled to aggregate annual distributions of $64,319, $58,361 and $53,728 during 2016, 2015 and 2014, respectively.$3.25 per unit for $129,990. During 2015, and 2014, the Partnership issued 12,559,130 and 2,571,757 units respectively, to Lexington to satisfy $112,286 and $27,981, respectively, of outstanding distributions and advances.
The Partnership was allocated interest and amortization expense by Lexington, in accordance with the Partnership agreement, relating to certain of its lending facilities of $8,237, $11,392 $12,253 and $10,282$12,253 for the years ended December 31, 2017, 2016 2015 and 2014,2015, respectively.
Lexington, on behalf of the General Partner, pays for certain general administrative and other costs on behalf of the Partnership from time to time. These costs are reimbursable by the Partnership. These costs were approximately $6,557, $9,767 and $8,618 for 2017, 2016 and $7,335 for 2016, 2015, and 2014, respectively.
 A Lexington affiliate provides property management services for certain Partnership properties. The Partnership recognized property operating expenses including from discontinued operations, of $672, $764 $905 and $1,004$905 for the years ended December 31, 2017, 2016 2015 and 2014,2015, respectively, for aggregate fees and reimbursements charged by the affiliate.
The Partnership leasesleased a property to an entity in which Vornado Realty Trust, a significant Lexington shareholder, has an interest. During 2017, 2016 2015 and 2014,2015, the Partnership recognized $234, $236 $255 and $255, respectively, in rental revenue from this property.

In connection with efforts, on a non-binding basis, to procureaddition, the Partnership obtained non-recourse mezzanine financing in the initial amount of $8,000 from an affiliate of Lexington's Chairman, who is also the holder of the most OP units other than Lexington, pursuant to the terms of the EB-5 visa program administered by the United States Citizenship and Immigration Services,USCIS, for an investment in Charlotte, North Carolina, theCarolina. The Partnership agreed to reimbursereimbursed the Chairman's affiliate up to approximately $7$105 for its expenses.expenses and paid the Chairman's affiliate a $120 structuring fee. The loan may be increased to $12,000 upon certain events.


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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
($000, except share/unit data)

(11)    Commitments and Contingencies

In addition to the commitments and contingencies disclosed elsewhere, the Partnership has the following commitments and contingencies.
 
The Partnership is obligated under certain tenant leases, including its proportionate share for leases for non-consolidated entities, to fund the expansion of the underlying leased properties. The Partnership, under certain circumstances, may guarantee to tenants the completion of base building improvements and the payment of tenant improvement allowances and lease commissions on behalf of its subsidiaries.

The Partnership and Lexington are parties to a funding agreement under which Lexington may be required to fund distributions made on account of OP units. Pursuant to the funding agreement, the parties agreed that, if the Partnership does not have sufficient cash available to make a quarterly distribution to its limited partners in an amount in accordance with the partnership agreement, Lexington will fund the shortfall. Payments under the agreement will be made in the form of loans to the Partnership and will bear interest at prevailing rates as determined by Lexington in its discretion, but no less than the applicable federal rate. The Partnership's right to receive these loans will expire if no OP units remain outstanding and all such loans repaid. No amounts have been advanced under this agreement.

From time to time, the Partnership is directly or indirectly involved in legal proceedings arising in the ordinary course of the Partnership's business. The Partnership believes, based on currently available information, and after consultation with legal counsel, that although the outcomes of those normal course proceedings are uncertain, the results of such proceedings, in the aggregate, will not have a material adverse effect on the Partnership's business, financial condition and results of operations.

In May 2014, the Partnership guaranteed $250,000 aggregate principal amount of 4.40% Senior Notes due 2024 (“2024 Senior Notes”) issued by Lexington at an issuance price of 99.883% of the principal amount and in June 2013, the Partnership guaranteed $250,000 aggregate principal amount of 4.25% Senior Notes due 2023 (“2023 Senior Notes”) issued by Lexington at an issuance price of 99.026% of the principal amount, collectively the Senior Notes. The Senior Notes are unsecured, pay interest semi-annually in arrears and mature in June 2024 and 2023, respectively. Lexington may redeem the notes at its option at any time prior to maturity in whole or in part by paying the principal amount of the notes being redeemed plus a premium.
During 2010, the Partnership guaranteed $115,000 aggregate principal amount of 6.00% Convertible Guaranteed Notes due 2030 issued by Lexington. The notes paid interest semi-annually in arrears and were scheduled to mature in January 2030. As of December 31, 2016, the Partnership was relieved of its guarantee of the notes as all outstanding amounts under the notes were satisfied.

(12)    Supplemental Disclosure of Statement of Cash Flow Information

In addition to disclosures discussed elsewhere, during 2017, 2016 2015 and 2014,2015, the Partnership paid $15,846, $27,262 $28,191 and $27,199,$28,191, respectively, for interest and $119, $34 $60 and $161,$60, respectively, for income taxes.
During 2016, the Partnership sold its interests in certain properties, which included the assumption by the buyers of the related non-recourse mortgage debt in the aggregate amount of $242,269.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
($000, except share/unit data)

(13)     Unaudited Quarterly Financial Data

This unaudited quarterly financial data for each of the quarters ended March 31, 2016, June 30, 2016 and September 30, 2016 is being amended from the amounts previously reflected in the respective Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission to correct an error in the treatment of a lease termination payment received in the quarter ended June 30, 2016 in the amount of $7,685. The lease termination payment was originally amortized over the life of the new tenant lease that necessitated the lease termination, but is now fully recognized in total gross revenues in the quarter ended June 30, 2016. The following summarizes the impact.

  3/31/2017 6/30/2017 9/30/2017 12/31/2017
Total gross revenues $19,281
 $20,646
 $21,242
 $21,604
Net income (loss) $(470) $(8) $(4,422) $8,459
Net income (loss) per unit $(0.01) $
 $(0.05) $0.11
For the quarter ended March 31, 2016    
 As Originally Reported Correction As Adjusted
Total gross revenues$34,439
 $(339) $34,100
Net income (loss)$18,342
 $(315) $18,027
Net income (loss) per unit$0.22
 $
 $0.22
For the quarter ended June 30, 2016    
 As Originally Reported Correction As Adjusted
Total gross revenues$33,437
 $7,335
 $40,772
Net income (loss)$15,907
 $6,847
 $22,754
Net income (loss) per unit$0.19
 $0.08
 $0.27
For the quarter ended September 30, 2016    
 As Originally Reported Correction As Adjusted
Total gross revenues$30,908
 $(350) $30,558
Net income (loss)$(60,901) $(678) $(61,579)
Net income (loss) per unit$(0.73) $(0.01) $(0.74)
  12/31/2016
Total gross revenues $18,739
Net income (loss) $16,877
Net income (loss) per unit $0.20
  3/31/2015 6/30/2015 9/30/2015 12/31/2015
Total gross revenues $31,959
 $32,301
 $30,762
 $32,979
Net income $11,356
 $11,163
 $9,827
 $9,969
Net income per unit $0.16
 $0.16
 $0.13
 $0.13
  3/31/2016 6/30/2016 9/30/2016 12/31/2016
Total gross revenues $34,100
 $40,772
 $30,558
 $18,739
Net income (loss) $18,027
 $22,754
 $(61,579) $16,877
Net income (loss) per unit $0.22
 $0.27
 $(0.74) $0.20

The sum of the quarterly per units amounts may not equal the full year amounts primarily because the computations of the weighted-average number of units of the Partnership outstanding for each quarter and the full year are made independently.


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LEXINGTON REALTY TRUST AND CONSOLIDATED SUBSIDIARIES
Real Estate and Accumulated Depreciation and Amortization
Schedule III ($000)



DescriptionLocation Encumbrances
Land and Land EstatesBuildings and ImprovementsTotalAccumulated Depreciation and AmortizationDate AcquiredDate ConstructedUseful life computing depreciation in latest income statement (years)Location Encumbrances
Land and Land EstatesBuildings and ImprovementsTotal
Accumulated Depreciation and Amortization(1)
Date AcquiredDate Constructed
OfficeLittle Rock, AR $
$1,353
$2,260
$3,613
$600
Dec-0640Glendale, AZ $
$9,418
$8,394
$17,812
$3,553
Sep-12
OfficePine Bluff, AR 
171
223
394
14
Sep-123 & 9Phoenix, AZ 
5,585
36,923
42,508
5,556
Dec-12
OfficeGlendale, AZ 
9,418
8,394
17,812
2,877
Sep-127, 10, 20 & 24Tempe, AZ 

13,086
13,086
2,525
Sep-12
OfficePhoenix, AZ 
5,585
36,923
42,508
4,417
Dec-1210, 15, 17 & 40Tucson, AZ 
681
4,037
4,718
929
Sep-12
OfficeTempe, AZ 

13,086
13,086
2,016
Sep-125, 7, 10, 11, 15 & 36Palo Alto, CA 37,846
12,398
16,977
29,375
21,909
Dec-06
OfficeTempe, AZ 

9,442
9,442
3,171
Dec-0530 & 40Centenial, CO 
4,851
19,351
24,202
7,123
May-07
OfficeTucson, AZ 
681
4,037
4,718
754
Sep-127, 10 & 30Englewood, CO 
2,207
27,851
30,058
4,934
Apr-132013
OfficePalo Alto, CA 43,285
12,398
16,977
29,375
20,664
Dec-0640Louisville, CO 
3,657
11,645
15,302
4,196
Sep-08
OfficeCentenial, CO 
4,851
15,239
20,090
6,491
May-0710 & 40Parachute, CO 
1,400
10,751
12,151
1,187
Jan-14
OfficeEnglewood, CO 
2,207
27,851
30,058
3,896
Apr-13201315, 19 & 40Wallingford, CT 
1,049
4,773
5,822
2,010
Dec-03
OfficeLouisville, CO 
3,657
11,504
15,161
3,692
Sep-088, 9, 10, 11, 12 & 40Boca Raton, FL 19,088
4,290
17,160
21,450
6,382
Feb-03
OfficeParachute, CO 
1,400
10,751
12,151
884
Jan-1419, 24 & 40Orlando, FL 
3,538
9,863
13,401
6,737
Jan-07
OfficeWallingford, CT 
1,049
4,773
5,822
1,831
Dec-038 & 40McDonough, GA 
1,443
11,794
13,237
2,215
Sep-12
OfficeBoca Raton, FL 19,365
4,290
17,160
21,450
5,953
Feb-0340McDonough, GA 
693
6,405
7,098
1,372
Sep-12
OfficeLake Mary, FL 
4,535
15,047
19,582
5,681
Jun-073, 4, 7, 10, 12, 15, 18 & 40Meridian, ID 8,428
2,255
7,797
10,052
2,142
Sep-12
OfficeLake Mary, FL 
4,438
15,294
19,732
5,704
Jun-073, 4, 7, 10, 15, 20 & 40Schaumburg, IL 
5,007
22,340
27,347
6,225
Oct-13
OfficeOrlando, FL 9,309
3,538
9,863
13,401
6,049
Jan-075, 6, 12, 15, 25 & 40Columbus, IN 11,842
235
45,729
45,964
30,595
Dec-06
OfficeTampa, FL 
2,018
7,993
10,011
1,903
Sep-128, 25 & 27Indianapolis, IN 
1,700
18,591
20,291
13,777
Apr-05
OfficeMcDonough, GA 
1,443
11,794
13,237
1,812
Sep-123, 9,10, 11 & 38Lenexa, KS 33,212
6,909
41,966
48,875
14,057
Jul-08
OfficeMcDonough, GA 
693
6,405
7,098
1,115
Sep-126, 11 & 40Lenexa, KS 8,631
2,828
6,075
8,903
1,538
Sep-12
OfficeMeridian, ID 8,883
2,255
7,797
10,052
1,741
Sep-12 7 & 37Overland Park, KS 32,828
4,769
41,956
46,725
15,769
Jun-07
OfficeLisle, IL 9,275
1,660
4,792
6,452
66
Dec-061, 3, 18 & 30Baton Rouge, LA 
1,252
11,085
12,337
4,924
May-07
OfficeSchaumburg, IL 
5,007
22,340
27,347
4,736
Oct-137, 9, 20 & 30Oakland, ME 8,370
551
8,774
9,325
1,922
Sep-12
OfficeColumbus, IN 16,649
235
45,729
45,964
24,047
Dec-0640Auburn Hills, MI 
4,416
30,012
34,428
4,120
Mar-15
OfficeFishers, IN 
2,808
19,373
22,181
6,323
Jun-073 - 40Livonia, MI 
935
13,714
14,649
3,347
Sep-12
OfficeIndianapolis, IN 
1,700
18,541
20,241
13,373
Apr-055, 6 - 40Kansas City, MO 15,618
2,433
20,154
22,587
7,553
Jun-07
OfficeLenexa, KS 34,981
6,909
41,684
48,593
12,565
Jul-085, 12, 13,14, 15 & 40St Joseph, MO 
607
14,004
14,611
2,355
Sep-122012
OfficeLenexa, KS 9,056
2,828
6,075
8,903
1,250
Sep-127, 12 & 37Pascagoula, MS 
618
3,677
4,295
868
Sep-12
OfficeOverland Park, KS 33,503
4,769
41,956
46,725
14,376
Jun-0712 & 40Charlotte, NC 45,400
3,771
47,064
50,835
1,262
Apr-172017
OfficeBaton Rouge, LA 
1,252
11,085
12,337
4,437
May-073, 4, 6 & 40Omaha, NE 
2,058
32,343
34,401
3,856
Dec-13
OfficeOakland, ME 8,627
551
8,774
9,325
1,561
Sep-128, 12 & 40Omaha, NE 
2,566
8,324
10,890
3,070
Nov-05
OfficeAuburn Hills, MI 
4,416
30,012
34,428
2,665
Mar-156, 14 & 25Rockaway, NJ 
4,646
23,143
27,789
7,088
Dec-06
OfficeLivonia, MI 
935
13,714
14,649
2,802
Sep-122 - 34Wall, NJ 11,924
8,985
26,961
35,946
14,671
Jan-04
OfficeKansas City, MO 15,968
2,433
20,154
22,587
6,884
Jun-0712 & 40Whippany, NJ 12,704
4,063
19,711
23,774
9,018
Nov-06
OfficeSt Joseph, MO 
607
14,004
14,611
1,914
Sep-12201215 & 40Las Vegas, NV 
12,099
53,164
65,263
14,947
Dec-06
OfficePascagoula, MS 
618
3,677
4,295
728
Sep-121, 9 & 31Columbus, OH 
1,594
10,481
12,075
1,834
Dec-10
OfficeOmaha, NE 
2,058
32,343
34,401
2,892
Dec-1320 & 40Columbus, OH 
432
2,773
3,205
451
Jul-11
OfficeOmaha, NE 
2,566
8,324
10,890
2,817
Nov-0530 & 40Westerville, OH 
2,085
9,411
11,496
3,322
May-07
OfficeRockaway, NJ 
4,646
23,143
27,789
6,391
Dec-0612, 20 & 40Eugene, OR 
1,541
13,098
14,639
2,290
Dec-122012
OfficeWall, NJ 14,816
8,985
26,961
35,946
13,621
Jan-0422 & 40Redmond, OR 
2,064
8,316
10,380
1,913
Sep-12
OfficeWhippany, NJ 13,219
4,063
19,711
23,774
8,207
Nov-0620 & 40Jessup, PA 
2,520
17,688
20,208
3,792
Aug-122012
OfficeLas Vegas, NV 
12,099
53,164
65,263
13,589
Dec-0640Philadelphia, PA 
13,209
57,071
70,280
39,639
Jun-05
OfficeColumbus, OH 
1,594
10,481
12,075
1,572
Dec-1040Florence, SC 
774
3,629
4,403
622
Feb-122012
OfficeColumbus, OH 
432
2,773
3,205
381
Jul-1140Fort Mill, SC 
1,798
26,038
27,836
18,142
Nov-04
OfficeWesterville, OH 
2,085
9,411
11,496
3,087
May-075 & 40Fort Mill, SC 
3,601
15,340
18,941
5,833
Dec-02
OfficeEugene, OR 
1,541
13,098
14,639
1,832
Dec-1220127, 12, 15, 25 & 40Kingsport, TN 
513
403
916
233
Sep-12
OfficeRedmond, OR 
2,064
8,316
10,380
1,554
Sep-126, 13 & 40Knoxville, TN 
621
6,487
7,108
1,428
Sep-12
OfficeJessup, PA 
2,520
17,678
20,198
3,091
Aug-12201213, 15 & 40Knoxville, TN 
1,079
11,351
12,430
7,505
Mar-05
OfficePhiladelphia, PA 
13,209
57,071
70,280
36,291
Jun-054 - 40Memphis, TN 
5,291
97,032
102,323
27,795
Dec-06
OfficeAllen, TX 
5,591
25,421
31,012
10,705
May-11
OfficeArlington, TX 
1,274
15,309
16,583
2,980
Sep-12
OfficeCarrollton, TX 
2,599
22,050
24,649
9,273
Jun-07
OfficeCarrollton, TX 
828

828

Jun-07
OfficeHouston, TX 
1,875
17,323
19,198
8,982
Apr-05
OfficeHouston, TX 
1,875
10,959
12,834
8,176
Apr-05

125

Table of Contents
LEXINGTON REALTY TRUST AND CONSOLIDATED SUBSIDIARIES
Real Estate and Accumulated Depreciation and Amortization
Schedule III ($000) - continued

DescriptionLocation EncumbrancesLand and Land EstatesBuildings and ImprovementsTotalAccumulated Depreciation and AmortizationDate AcquiredDate ConstructedUseful life computing depreciation in latest income statement (years)Location EncumbrancesLand and Land EstatesBuildings and ImprovementsTotal
Accumulated Depreciation and Amortization(1)
Date AcquiredDate Constructed
OfficeFlorence, SC 
774
3,629
4,403
517
Feb-12201212 & 40
OfficeFort Mill, SC 
1,798
26,038
27,836
16,732
Nov-0411, 15 & 40
OfficeFort Mill, SC 
3,601
15,340
18,941
5,393
Dec-025, 11, 20 & 40
OfficeRock Hill, SC 
551
4,313
4,864
611
May-1140
OfficeKingsport, TN 
513
403
916
201
Sep-125, 6 & 14
OfficeKnoxville, TN 
621
6,487
7,108
1,182
Sep-121, 5, 7, 20 & 40
OfficeKnoxville, TN 
1,079
11,351
12,430
6,876
Mar-059, 10, 11, 14 & 40
OfficeMemphis, TN 
5,291
97,032
102,323
25,269
Dec-0613 & 40
OfficeAllen, TX 
5,591
25,421
31,012
8,950
May-116, 7, 11 & 25
OfficeArlington, TX 
1,274
15,309
16,583
2,471
Sep-121, 10, 12 & 40
OfficeCarrollton, TX 
2,599
22,050
24,649
8,583
Jun-078 & 40
OfficeCarrollton, TX 
828

828

Jun-07N/A
OfficeHouston, TX 
1,875
17,323
19,198
7,864
Apr-05 5, 10, 13, 15, 20 & 40
OfficeHouston, TX 
1,875
10,959
12,834
7,500
Apr-054, 13, 20 & 40
OfficeHouston, TX 
800
26,962
27,762
21,017
Apr-051, 10, 11 & 40
OfficeHouston, TX 
16,613
63,770
80,383
18,178
Mar-0410 & 40Houston, TX 
16,613
63,770
80,383
20,604
Mar-04
OfficeIrving, TX 
7,476
45,985
53,461
19,505
May-076 - 40Irving, TX 
7,476
45,985
53,461
21,479
May-07
OfficeIrving, TX 
4,889
30,192
35,081
11,566
Jun-0710, 12 & 40Irving, TX 
4,889
30,192
35,081
12,645
Jun-07
OfficeLake Jackson, TX 196,512
4,357
74,127
78,484
260
Nov-16201620 & 25Lake Jackson, TX 192,451
7,435
141,436
148,871
6,182
Nov-162016/2017
OfficeMission, TX 
2,556
2,911
5,467
769
Sep-123, 8 & 35Mission, TX 
2,556
2,911
5,467
903
Sep-12
OfficeSan Antonio, TX 
2,800
15,619
18,419
11,829
Apr-056, 10, 11 & 40San Antonio, TX 
2,800
15,619
18,419
12,110
Apr-05
OfficeWestlake, TX 
2,361
23,572
25,933
10,521
May-074 - 40Westlake, TX 
2,361
26,591
28,952
11,913
May-07
OfficeHampton, VA 
2,333
11,354
13,687
4,779
Mar-002, 5, 10, 15 & 40Hampton, VA 
2,333
12,132
14,465
5,147
Mar-00
OfficeHerndon, VA 
5,127
24,640
29,767
9,913
Dec-999 - 40Herndon, VA 
5,127
25,293
30,420
10,626
Dec-99
OfficeHerndon, VA 
9,409
14,477
23,886
5,565
Jun-0710, 25 & 40Herndon, VA 
9,409
14,951
24,360
6,126
Jun-07
OfficeMidlothian, VA 
1,100
12,707
13,807
7,835
Apr-056, 7, 15 & 40Midlothian, VA 
1,100
12,767
13,867
8,601
Apr-05
OfficeRichmond, VA 57,500
7,329
89,318
96,647
4,553
Dec-15201510, 13, 14, 15 & 25Richmond, VA 57,500
7,329
89,810
97,139
8,817
Dec-152015
OfficeHuntington, WV 
1,368
9,527
10,895
1,594
Jan-12201214 & 40Huntington, WV 
1,368
9,527
10,895
1,918
Jan-122012
IndustrialAnniston, AL 
1,201
16,771
17,972
1,579
Dec-148, 15 & 24Anniston, AL 
1,201
16,771
17,972
2,369
Dec-14
IndustrialMoody, AL 
654
9,943
10,597
6,728
Feb-0415 & 40Moody, AL 
654
9,943
10,597
7,251
Feb-04
IndustrialOrlando, FL 
1,030
10,869
11,899
3,065
Dec-0640Opelika, AL 
134
33,183
33,317
579
Jul-172017
IndustrialTampa, FL 
2,160
8,488
10,648
6,185
Jul-889 - 40Orlando, FL 
1,030
10,869
11,899
3,371
Dec-06
IndustrialLavonia, GA 7,326
171
7,657
7,828
938
Sep-12  8, 12 & 40Tampa, FL 
2,160
8,526
10,686
6,457
Jul-88
IndustrialMcDonough, GA 21,922
2,463
24,791
27,254
6,556
Dec-061, 9, 12 & 40Lavonia, GA 7,010
171
7,657
7,828
1,155
Sep-12
IndustrialThomson, GA 
909
7,746
8,655
622
May-1520158, 15 & 25McDonough, GA 
5,441
52,762
58,203
912
Aug-17
IndustrialDes Moines, IA 
1,528
14,247
15,775
2,539
Sep-125, 11 & 34McDonough, GA 
2,463
24,811
27,274
7,188
Dec-06
IndustrialEdwardsville, IL 
4,593
34,251
38,844

Dec-1617 & 25Thomson, GA 
909
7,746
8,655
995
May-152015
IndustrialRantoul, IL 
1,304
32,562
33,866
2,684
Jan-14201420, 21 & 40Edwardsville, IL 
4,593
34,251
38,844
1,416
Dec-16
IndustrialRockford, IL 
371
2,573
2,944
727
Dec-0640Rantoul, IL 
1,304
32,562
33,866
3,579
Jan-142014
IndustrialRockford, IL 
509
5,289
5,798
1,450
Dec-0640Rockford, IL 
371
2,573
2,944
789
Dec-06
IndustrialRomeoville, IL 
7,524
40,166
47,690
138
Dec-1617 & 25Rockford, IL 
509
5,289
5,798
1,595
Dec-06
IndustrialPlymouth, IN 
254
8,025
8,279
1,247
Sep-123, 6, 12, 20 & 34Romeoville, IL 
7,524
40,167
47,691
1,798
Dec-16
IndustrialDry Ridge, KY 
560
12,553
13,113
5,016
Jun-0522 & 40Lafayette, IN 
662
15,578
16,240
200
Oct-17
IndustrialElizabethtown, KY 
890
26,868
27,758
10,738
Jun-0525 & 40Lebanon, IN 
2,100
29,443
31,543
1,108
Feb-17
IndustrialElizabethtown, KY 
352
4,862
5,214
1,943
Jun-0525 & 40Plymouth, IN 
254
8,101
8,355
1,529
Sep-12
IndustrialHopkinsville, KY 
631
16,154
16,785
6,844
Jun-0525 & 40New Century, KS 

13,198
13,198
491
Feb-17
IndustrialOwensboro, KY 
393
11,956
12,349
5,481
Jun-0525 & 40Dry Ridge, KY 
560
12,553
13,113
5,453
Jun-05
IndustrialOwensboro, KY 
819
2,439
3,258
937
Dec-0640Elizabethtown, KY 
890
26,868
27,758
11,671
Jun-05
IndustrialShreveport, LA 
1,078
10,134
11,212
1,678
Jun-1220128,10 & 40Elizabethtown, KY 
352
4,862
5,214
2,112
Jun-05
IndustrialShreveport, LA 19,000
860
21,840
22,700
5,346
Mar-0740Hopkinsville, KY 
631
16,154
16,785
7,453
Jun-05
IndustrialNorth Berwick, ME 3,426
1,383
35,659
37,042
8,696
Dec-0610, 25 & 40Owensboro, KY 
393
11,956
12,349
5,978
Jun-05
IndustrialDetroit, MI 
1,133
25,009
26,142
1,301
Jan-1610, 20 & 25Owensboro, KY 
819
2,439
3,258
1,014
Dec-06
IndustrialKalamazoo, MI 
1,942
14,169
16,111
2,467
Sep-128, 9 & 40Shreveport, LA 
1,078
10,134
11,212
2,050
Jun-122012
IndustrialMarshall, MI 
143
4,302
4,445
2,044
Sep-124, 6 & 10Shreveport, LA 
860
21,840
22,700
5,892
Mar-07
IndustrialNorth Berwick, ME 1,992
1,383
35,659
37,042
9,678
Dec-06
IndustrialDetroit, MI 
1,133
25,009
26,142
2,602
Jan-16
IndustrialKalamazoo, MI 
1,942
14,169
16,111
3,036
Sep-12
IndustrialMarshall, MI 
143
4,302
4,445
2,469
Sep-12
IndustrialMarshall, MI 
40
2,236
2,276
1,164
Aug-87
IndustrialPlymouth, MI 
2,296
15,819
18,115
6,079
Jun-07
IndustrialRomulus, MI 
2,438
33,786
36,224
296
Nov-17
IndustrialWarren, MI 
972
42,521
43,493
296
Nov-17
IndustrialMinneapolis, MN 
1,886
1,922
3,808
322
Sep-12
IndustrialByhalia, MS 
1,751
31,236
32,987
455
Sep-17
IndustrialByhalia, MS 
1,006
35,795
36,801
5,131
May-112011
IndustrialCanton, MS 
5,077
71,289
76,366
9,497
Mar-15
IndustrialOlive Branch, MS 
198
10,276
10,474
7,283
Dec-04
IndustrialHenderson, NC 
1,488
5,953
7,441
2,400
Nov-01
IndustrialLumberton, NC 
405
12,049
12,454
4,263
Dec-06
IndustrialShelby, NC 
1,421
18,862
20,283
4,593
Jun-112011
IndustrialStatesville, NC 
891
16,771
17,662
5,355
Dec-06
IndustrialDurham, NH 
3,464
18,094
21,558
6,441
Jun-07

126

Table of Contents
LEXINGTON REALTY TRUST AND CONSOLIDATED SUBSIDIARIES
Real Estate and Accumulated Depreciation and Amortization
Schedule III ($000) - continued

DescriptionLocation EncumbrancesLand and Land EstatesBuildings and ImprovementsTotalAccumulated Depreciation and AmortizationDate AcquiredDate ConstructedUseful life computing depreciation in latest income statement (years)Location EncumbrancesLand and Land EstatesBuildings and ImprovementsTotal
Accumulated Depreciation and Amortization(1)
Date AcquiredDate Constructed
IndustrialMarshall, MI 
40
2,236
2,276
1,009
Aug-879, 10, 12, 15, 20 & 40North Las Vegas, NV 
3,244
21,732
24,976
2,317
Jul-132014
IndustrialPlymouth, MI 
2,296
13,608
15,904
5,606
Jun-0730 & 40Erwin, NY 6,991
1,648
12,514
14,162
2,450
Sep-12
IndustrialMinneapolis, MN 
1,886
1,922
3,808
263
Sep-123, 29 & 40Long Island City, NY 43,334

42,759
42,759
13,737
Mar-132013
IndustrialByhalia, MS 
1,006
35,795
36,801
4,022
May-11201125 & 40Chillicothe, OH 
735
9,021
9,756
2,745
Oct-11
IndustrialCanton, MS 
5,077
71,289
76,366
6,043
Mar-158, 12, 25, & 51Cincinnati, OH 
1,049
8,784
9,833
2,785
Dec-06
IndustrialOlive Branch, MS 
198
10,276
10,474
7,027
Dec-048, 15 & 40Columbus, OH 
1,990
10,742
12,732
3,837
Dec-06
IndustrialHenderson, NC 
1,488
5,953
7,441
2,252
Nov-0140Glenwillow, OH 
2,228
24,530
26,758
7,176
Dec-06
IndustrialHigh Point, NC 
1,330
11,183
12,513
6,184
Jul-0418 & 40Hebron, OH 
1,063
4,947
6,010
1,827
Dec-97
IndustrialLumberton, NC 
405
12,049
12,454
3,876
Dec-0640Hebron, OH 
1,681
8,179
9,860
3,349
Dec-01
IndustrialShelby, NC 
1,421
18,862
20,283
3,887
Jun-11201111, 20 & 40Streetsboro, OH 16,931
2,441
25,282
27,723
8,824
Jun-07
IndustrialStatesville, NC 
891
16,771
17,662
4,958
Dec-063, 15 & 40Wilsonville, OR 
6,815
32,380
39,195
1,771
Sep-16
IndustrialDurham, NH 
3,464
18,094
21,558
5,880
Jun-0740Bristol, PA 
2,508
15,863
18,371
7,137
Mar-98
IndustrialNorth Las Vegas, NV 
3,244
21,732
24,976
1,685
Jul-13201419, 20 & 40Anderson, SC 
4,663
44,987
49,650
3,298
Jun-162016
IndustrialErwin, NY 7,448
1,648
12,355
14,003
1,929
Sep-124, 8, 10 & 34Chester, SC 7,271
1,629
8,470
10,099
1,650
Sep-12
IndustrialLong Island City, NY 46,309

42,759
42,759
10,889
Mar-13201315 & 25Duncan, SC 
884
8,626
9,510
2,393
Jun-07
IndustrialChillicothe, OH 
735
9,021
9,756
2,329
Oct-116, 15 & 26Laurens, SC 
5,552
21,908
27,460
7,203
Jun-07
IndustrialCincinnati, OH 
1,049
8,784
9,833
2,496
Dec-0610, 14 & 40Cleveland, TN 
1,871
29,743
31,614
865
May-17
IndustrialColumbus, OH 
1,990
10,580
12,570
3,479
Dec-0640Crossville, TN 
545
6,999
7,544
4,218
Jan-06
IndustrialGlenwillow, OH 
2,228
24,530
26,758
6,578
Dec-0640Franklin, TN 

5,673
5,673
2,596
Sep-12
IndustrialHebron, OH 
1,063
4,817
5,880
1,659
Dec-976, 10, 15, 20 & 40Jackson, TN 
1,454
49,026
50,480
525
Sep-17
IndustrialHebron, OH 
1,681
8,102
9,783
3,097
Dec-011, 2, 3, 5, 6, 10,15, 20 & 40Lewisburg, TN 
173
10,865
11,038
1,244
May-14
IndustrialStreetsboro, OH 17,304
2,441
25,092
27,533
8,024
Jun-0712, 20, 25 & 40Memphis, TN 
1,054
11,538
12,592
11,463
Feb-88
IndustrialWilsonville, OR 
6,815
32,380
39,195
354
Sep-1610, 16 & 25Memphis, TN 
214
1,902
2,116
20
Dec-06
IndustrialBristol, PA 
2,508
15,863
18,371
6,578
Mar-9810, 16, 30 & 40Millington, TN 
723
19,383
20,106
12,022
Apr-05
IndustrialAnderson, SC 
4,663
44,987
49,650
1,099
Jun-1620168, 20 & 25Smyrna, TN 
1,793
93,940
95,733
1,031
Sep-17
IndustrialChester, SC 8,055
1,629
8,470
10,099
1,341
Sep-129, 13 & 34Arlington, TX 
589
7,750
8,339
1,310
Sep-12
IndustrialDuncan, SC 
884
8,626
9,510
2,174
Jun-0740Brookshire, TX 
2,388
16,614
19,002
2,138
Mar-15
IndustrialLaurens, SC 
5,552
21,741
27,293
6,572
Jun-072, 4, 5, 20 & 40Grand Prairie, TX 
3,166
17,985
21,151
390
Jun-17
IndustrialCrossville, TN 
545
6,999
7,544
3,865
Jan-0617 & 40Houston, TX 
4,674
19,540
24,214
5,879
Mar-15
IndustrialFranklin, TN 

5,673
5,673
2,134
Sep-121, 4 & 12Houston, TX 
15,055
57,949
73,004
8,568
Mar-13
IndustrialLewisburg, TN 
173
10,865
11,038
905
May-1412, 18 & 34Missouri City, TX 
14,555
5,895
20,450
4,772
Apr-12
IndustrialMemphis, TN 
1,054
11,538
12,592
11,440
Feb-888 &15San Antonio, TX 
1,311
36,644
37,955
788
Jun-17
IndustrialMemphis, TN 
1,553
12,326
13,879
3,791
Dec-0640Winchester, VA 
1,988
32,501
34,489

Dec-17
IndustrialMillington, TN 
723
19,383
20,106
11,093
Apr-059, 10, 16 & 40Winchester, VA 
3,823
12,276
16,099
4,008
Jun-07
IndustrialArlington, TX 
589
7,655
8,244
997
Sep-121, 12 & 40Bingen, WA 

18,075
18,075
3,338
May-142014
IndustrialBrookshire, TX 
2,388
16,614
19,002
1,360
Mar-155, 20 & 25Richland, WA 110,000
1,293
126,947
128,240
11,380
Nov-15
IndustrialHouston, TX 
4,674
19,540
24,214
3,741
Mar-155, 10 & 20Oak Creek, WI 
3,015
15,300
18,315
1,663
Jul-152015
IndustrialHouston, TX 
15,055
57,949
73,004
6,764
Mar-1311, 12, 16 & 35
IndustrialMissouri City, TX 
14,555
5,895
20,450
3,930
Apr-127
IndustrialWaxahachie, TX 
652
13,045
13,697
10,295
Dec-0310, 16 & 40
IndustrialWinchester, VA 
3,823
12,276
16,099
3,704
Jun-074 & 40
IndustrialBingen, WA 

18,075
18,075
2,406
May-14201410, 13 & 40
IndustrialRichland, WA 110,000
1,293
126,947
128,240
6,127
Nov-1510, 20 & 25
IndustrialOak Creek, WI 
3,015
15,300
18,315
975
Jul-15201510, 20, & 25
Multi-tenantedPhoenix, AZ 
1,831
15,635
17,466
4,233
Nov-015 - 40
Multi-tenantedHonolulu, HI 
8,259
7,363
15,622
2,380
Dec-062, 3, & 5
Multi-tenantedFoxborough, MA 
1,174
13,478
14,652
8,224
Dec-0416 & 40
Multi-tenantedSouthfield, MI 

15,434
15,434
8,928
Jul-043, 7, 16, 25
Multi-tenantedTemperance, MI 
3,040
14,924
17,964
4,501
Jun-072, 5, & 40
Multi-tenantedBridgeton, MO 
603
1,271
1,874
124
Dec-063 & 32
Multi-tenantedCharleston, SC 7,090
1,189
9,127
10,316
3,847
Nov-0625 & 40
Multi-tenantedFlorence, SC 
3,235
13,141
16,376
5,490
May-043
Multi-tenantedRock Hill, SC 
1,160
5,740
6,900

Mar-1415, 19 & 37
OtherPhoenix, AZ 
1,831
15,635
17,466
4,918
Nov-01
OtherManteca, CA 187
2,082
6,464
8,546
2,041
May-07
OtherSan Diego, CA 119

13,310
13,310
3,637
May-07
OtherVenice, FL 
4,696
11,753
16,449
6,755
Jan-15
OtherAlbany, GA 
1,468
5,137
6,605
1,192
Oct-132013
OtherHonolulu, HI 
8,259
7,398
15,657
4,199
Dec-06
OtherGalesburg, IL 105
91
250
341
3
May-07
OtherLawrence, IN 
139
435
574

Dec-06
OtherBaltimore, MD 
4,605

4,605

Dec-06
OtherBaltimore, MD 
5,000

5,000

Dec-15
OtherJefferson, NC 
71
884
955
281
Dec-06
OtherThomasville, NC 
208
561
769
104
Dec-06
OtherVineland, NJ 
2,698
12,790
15,488
1,291
Oct-14
OtherWatertown, NY 176
386
5,162
5,548
1,713
May-07
OtherLawton, OK 
663
1,288
1,951
538
Dec-06
OtherCharleston, SC 6,987
1,189
9,133
10,322
4,244
Nov-06
OtherFlorence, SC 
744
1,280
2,024
160
May-04
OtherAntioch, TN 
3,847
12,659
16,506
2,923
May-07

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LEXINGTON REALTY TRUST AND CONSOLIDATED SUBSIDIARIES
Real Estate and Accumulated Depreciation and Amortization
Schedule III ($000) - continued

DescriptionLocation EncumbrancesLand and Land EstatesBuildings and ImprovementsTotalAccumulated Depreciation and AmortizationDate AcquiredDate ConstructedUseful life computing depreciation in latest income statement (years)Location EncumbrancesLand and Land EstatesBuildings and ImprovementsTotal
Accumulated Depreciation and Amortization(1)
Date AcquiredDate Constructed
Multi-tenantedAntioch, TN 
3,847
12,500
16,347
2,379
May-075 - 40
Multi-tenantedMemphis, TN 3,496
191
1,059
1,250

Nov-0610 & 30
Multi-tenantedFarmers Branch, TX 
3,984
27,308
31,292
11,053
Jun-0740
Multi-tenantedGarland, TX 
1,161
833
1,994
833
Sep-121
OtherManteca, CA 546
2,082
6,464
8,546
1,860
May-0723 & 40
OtherSan Diego, CA 348

13,310
13,310
3,299
May-0723 & 40
OtherVenice, FL 
4,696
11,753
16,449
4,439
Jan-155 & 12
OtherAlbany, GA 
1,468
5,137
6,605
503
Oct-13201315 & 40
OtherAtlanta, GA 
1,014
269
1,283
329
Dec-0640
OtherAtlanta, GA 
870
187
1,057
268
Dec-0640
OtherCumming, GA 
1,558
1,368
2,926
739
Dec-0640
OtherDunwoody, GA 
770
186
956
260
Dec-0640
OtherForest Park, GA 
668
1,242
1,910
493
Dec-0640
OtherJonesboro, GA 
778
146
924
236
Dec-0640
OtherStone Mountain, GA 
672
276
948
243
Dec-0640
OtherGalesburg, IL 307
560
2,366
2,926
788
May-0712 & 40
OtherLawrence, IN 
404
1,737
2,141
442
Dec-0640
OtherBaltimore, MD 
5,000

5,000

Dec-15N/A
OtherBaltimore, MD 
4,605

4,605

Dec-06N/A
OtherJefferson, NC 
71
884
955
255
Dec-0640
OtherLexington, NC 
832
1,429
2,261
358
Dec-0640
OtherThomasville, NC 
208
561
769
89
Dec-0640
OtherVineland, NJ 
2,698
12,790
15,488
909
Oct-143, 28 & 40
OtherPort Chester, NY 
3,841
5,246
9,087
1,185
Dec-0640
OtherWatertown, NY 514
386
5,162
5,548
1,564
May-0723 & 40
OtherCanton, OH 
884
3,534
4,418
1,336
Nov-0140
OtherLorain, OH 773
1,893
7,024
8,917
2,023
May-0723 & 40
OtherLawton, OK 
663
1,288
1,951
489
Dec-0640
OtherTulsa, OK 
445
2,433
2,878
2,508
Dec-9614 & 24
OtherChattanooga, TN 
487
956
1,443
148
Dec-0640Chattanooga, TN 
487
956
1,443
175
Dec-06
OtherParis, TN 
247
547
794
200
Dec-0640Paris, TN 
247
547
794
220
Dec-06
OtherDanville, VA 
3,454

3,454

Oct-13N/AFarmers Branch, TX 
3,984
30,798
34,782
12,375
Jun-07
OtherStaunton, VA 
1,028
326
1,354
104
Dec-0640Houston, TX 
800
27,670
28,470
21,400
Apr-05
OtherEdmonds, WA 

3,947
3,947
1,211
Dec-0640Danville, VA 
3,454

3,454

Oct-13
OtherFairlea, WV 361
501
1,985
2,486
545
May-0712 & 40Fairlea, WV 123
501
1,985
2,486
600
May-07
Construction in progress 


5,119

  


4,219

 
Deferred loan costs, net (7,126)



  (7,258)



 
 $738,047
$472,394
$3,055,659
$3,533,172
$844,931
  $689,810
$456,134
$3,476,106
$3,936,459
$890,969
 


(1) Depreciation and amortization expense is calculated on a straight-line basis over the following lives:
Building and improvementsUp to 40 years
Land estatesUp to 51 years
Tenant improvementsShorter of useful life or term of related lease




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LEXINGTON REALTY TRUST AND CONSOLIDATED SUBSIDIARIES
Real Estate and Accumulated Depreciation and Amortization
Schedule III ($000) - continued

(A) The initial cost includes the purchase price paid directly or indirectly by the Company. The total cost basis of the Company's properties at December 31, 20162017 for federal income tax purposes was approximately $4.4$4.7 billion.
    
2016 2015 20142017 2016 2015
Reconciliation of real estate, at cost:          
Balance at the beginning of year$3,789,711
 $3,671,560
 $3,812,294
$3,533,172
 $3,789,711
 $3,671,560
Additions during year291,004
 478,717
 210,143
676,355
 291,004
 478,717
Properties sold and impaired during the year(527,597) (343,976) (347,569)(270,241) (527,597) (343,976)
Other reclassifications(19,946) (16,590) (3,308)(2,827) (19,946) (16,590)
Balance at end of year$3,533,172
 $3,789,711
 $3,671,560
$3,936,459
 $3,533,172
 $3,789,711
          
Reconciliation of accumulated depreciation and amortization:          
Balance at the beginning of year$812,207
 $795,486
 $775,617
$844,931
 $812,207
 $795,486
Depreciation and amortization expense128,384
 124,618
 119,156
139,493
 128,384
 124,618
Accumulated depreciation and amortization of properties sold and impaired during year(86,428) (106,268) (98,698)(93,455) (86,428) (106,268)
Other reclassifications(9,232) (1,629) (589)
 (9,232) (1,629)
Balance at end of year$844,931
 $812,207
 $795,486
$890,969
 $844,931
 $812,207


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LEPERCQ CORPORATE INCOME FUND L.P. AND CONSOLIDATED SUBSIDIARIES
Real Estate and Accumulated Depreciation and Amortization
Schedule III ($000)


DescriptionLocationEncumbrancesLand and Land EstatesBuildings and ImprovementsTotalAccumulated Depreciation and AmortizationDate AcquiredDate ConstructedUseful life computing depreciation in latest income statement (years)LocationEncumbrancesLand and Land EstatesBuildings and ImprovementsTotal
Accumulated Depreciation and Amortization(1)
Date AcquiredDate Constructed
OfficePhoenix, AZ$
$5,585
$36,923
$42,508
$5,556
Dec-12
OfficePhoenix, AZ$
$5,585
$36,923
$42,508
$4,417
Dec-1210, 15, 17 & 40Centenial, CO
4,851
19,351
24,202
7,123
May-07
OfficeCentenial, CO
4,851
15,239
20,090
6,491
May-0710 & 40Louisville, CO
3,657
11,645
15,302
4,196
Sep-08
OfficeLouisville, CO
3,657
11,504
15,161
3,692
Sep-088, 9, 10, 11, 12 & 40Wallingford, CT
1,049
4,773
5,822
2,010
Dec-03
OfficeWallingford, CT
1,049
4,773
5,822
1,831
Dec-038 & 40Boca Raton, FL19,088
4,290
17,160
21,450
6,382
Feb-03
OfficeBoca Raton, FL19,365
4,290
17,160
21,450
5,953
Feb-0340Schaumburg, IL
5,007
22,340
27,347
6,225
Oct-13
OfficeSchaumburg, IL
5,007
22,340
27,347
4,736
Oct-137, 9, 20 & 30Overland Park, KS32,828
4,769
41,956
46,725
15,769
Jun-07
OfficeOverland Park, KS33,503
4,769
41,956
46,725
14,376
Jun-0712 & 40Baton Rouge, LA
1,252
11,085
12,337
4,924
May-07
OfficeBaton Rouge, LA
1,252
11,085
12,337
4,437
May-073, 4, 6 & 40Charlotte, NC45,400
3,771
47,064
50,835
1,262
Apr-172017
OfficeFort Mill, SC
1,798
26,038
27,836
16,732
Nov-0411, 15 & 40Fort Mill, SC
1,798
26,038
27,836
18,142
Nov-04
OfficeFort Mill, SC
3,601
15,340
18,941
5,393
Dec-025, 11, 20 & 40Fort Mill, SC
3,601
15,340
18,941
5,833
Dec-02
OfficeCarrollton, TX
2,599
22,050
24,649
8,583
Jun-078 & 40Carrollton, TX
2,599
22,050
24,649
9,273
Jun-07
OfficeCarrollton, TX
828

828

Jun-07N/ACarrollton, TX
828

828

Jun-07
OfficeWestlake, TX
2,361
23,572
25,933
10,521
May-074 - 40Westlake, TX
2,361
26,591
28,952
11,913
May-07
OfficeHerndon, VA
5,127
24,640
29,767
9,913
Dec-999 - 40Herndon, VA
5,127
25,293
30,420
10,626
Dec-99
IndustrialMoody, AL
654
9,943
10,597
6,728
Feb-0415 & 40Moody, AL
654
9,943
10,597
7,251
Feb-04
IndustrialTampa, FL
2,160
8,488
10,648
6,185
Jul-889 - 40Tampa, FL
2,160
8,526
10,686
6,457
Jul-88
IndustrialRomeoville, IL
7,524
40,166
47,690
138
Dec-1617 & 25Romeoville, IL
7,524
40,167
47,691
1,798
Dec-16
IndustrialMarshall, MI
40
2,236
2,276
1,009
Aug-879, 10, 12, 15, 20 & 40Marshall, MI
40
2,236
2,276
1,164
Aug-87
IndustrialByhalia, MS
1,006
35,795
36,801
4,022
May-11201125 & 40Warren, MI
972
42,521
43,493
296
Nov-17
IndustrialOlive Branch, MS
198
10,276
10,474
7,027
Dec-048, 15 & 40Byhalia, MS
1,006
35,795
36,801
5,131
May-112011
IndustrialHigh Point, NC
1,330
11,183
12,513
6,184
Jul-0418 & 40Olive Branch, MS
198
10,276
10,474
7,283
Dec-04
IndustrialShelby, NC
1,421
18,918
20,339
3,887
Jun-11201111, 20 & 40Shelby, NC
1,421
18,917
20,338
4,593
Jun-112011
IndustrialHebron, OH
1,063
4,817
5,880
1,659
Dec-976, 10, 15, 20 & 40Hebron, OH
1,063
4,947
6,010
1,827
Dec-97
IndustrialHebron, OH
1,681
8,102
9,783
3,097
Dec-011, 2, 3, 5, 6, 10,15, 20 & 40Hebron, OH
1,681
8,179
9,860
3,349
Dec-01
IndustrialBristol, PA
2,508
15,863
18,371
6,578
Mar-9810, 16, 30 & 40Bristol, PA
2,508
15,863
18,371
7,137
Mar-98
IndustrialRichland, WA110,000
1,293
126,947
128,240
6,127
Nov-1510, 20 & 25Grand Prairie, TX
3,166
17,985
21,151
390
Jun-17
Multi-tenantedHonolulu, HI
8,259
7,363
15,622
2,380
Dec-062, 3, & 5
Multi-tenantedFoxborough, MA
1,174
13,478
14,652
8,224
Dec-0416 & 40
Multi-tenantedSouthfield, MI

15,434
15,434
8,928
Jul-043, 7, 16, 25
Multi-tenantedCharleston, SC7,090
1,189
9,127
10,316
3,847
Nov-0625 & 40
Multi-tenantedFlorence, SC
3,235
13,141
16,376
5,490
May-043
IndustrialRichland, WA110,000
1,293
126,947
128,240
11,380
Nov-15
OtherAlbany, GA
1,468
5,137
6,605
1,192
Oct-132013
OtherHonolulu, HI
8,259
7,398
15,657
4,199
Dec-06
OtherAlbany, GA
1,468
5,137
6,605
503
Oct-13201315 & 40Vineland, NJ
2,698
12,790
15,488
1,291
Oct-14
OtherVineland, NJ
2,698
12,790
15,488
909
Oct-143, 28 & 40Charleston, SC6,987
1,189
9,133
10,322
4,244
Nov-06
OtherTulsa, OK
445
2,433
2,878
2,508
Dec-9614 & 24Florence, SC
744
1,280
2,024
160
May-04
Construction in progressConstruction in progress


825

 Construction in progress


4

 
Deferred loan costs, netDeferred loan costs, net(746)



 Deferred loan costs, net(1,511)



 
 $169,212
$86,120
$644,257
$731,202
$182,505
  $212,792
$88,589
$705,649
$794,242
$178,376
 

(1) Depreciation and amortization expense is calculated on a straight-line basis over the following lives:
Building and improvementsUp to 40 years
Tenant improvementsShorter of useful life or term of related lease


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LEPERCQ CORPORATE INCOME FUND L.P. AND CONSOLIDATED SUBSIDIARIES
Real Estate and Accumulated Depreciation and Amortization
Schedule III ($000) - continued

(A) The initial cost includes the purchase price paid directly or indirectly by the Partnership. The total cost basis of the Partnership's properties at December 31, 20162017 for federal income tax purposes was approximately $0.9 billion.
    
2016 2015 20142017 2016 2015
Reconciliation of real estate, at cost:          
Balance at the beginning of year$1,061,606
 $910,113
 $892,621
$731,202
 $1,061,606
 $910,113
Additions during year49,417
 152,280
 58,511
123,261
 49,417
 152,280
Properties sold and impaired during year(379,821) (787) (41,016)(60,221) (379,821) (787)
Other reclassifications
 
 (3)
Balance at end of year$731,202
 $1,061,606
 $910,113
$794,242
 $731,202
 $1,061,606
          
Reconciliation of accumulated depreciation and amortization:          
Balance at the beginning of year$199,690
 $176,167
 $172,965
$182,505
 $199,690
 $176,167
Depreciation and amortization expense26,989
 23,523
 21,837
30,701
 26,989
 23,523
Accumulated depreciation and amortization of properties sold and impaired during year(44,174) 
 (18,635)(34,830) (44,174) 
Balance at end of year$182,505
 $199,690
 $176,167
$178,376
 $182,505
 $199,690


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Table of Contents


Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Not applicable.
Item 9A. Controls and Procedures
Lexington Realty Trust:
Evaluation of Disclosure Controls and Procedures
An evaluation of the effectiveness of the design and operation of our “disclosure controls and procedures” (as defined in Rule 13a-15(e) or 15d-15(e) under 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 who are our Principal Executive Officer and our Principal Financial Officer, respectively. As described below, management has identified a material weakness in our internal control over financial reporting. As a result, management,Management, including each of our Chief Executive Officer and our Chief Financial Officer, has concluded that our disclosure controls and procedures were not effective as of December 31, 2016. Management believes the consolidated financial statements contained herein present fairly, in all material respects, our financial position as of the specified dates and our results of operations and cash flows for the specified periods.2017.
Management's Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting and for performing an assessment of the effectiveness of internal control over financial reporting as of December 31, 2016.2017. Our system of internal control over financial reporting is 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. Our system of internal control over financial reporting includes policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets; (2) provide reasonable assurance 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 (3) 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.
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 that financial statements are fairly presented in accordance with U.S. generally accepted accounting principles.
Our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2016.2017. In assessing the effectiveness of our internal control over financial reporting, management used as guidance the criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based upon the assessment performed, management has concluded that the following represents a material weakness in internal control over financial reporting. A material weakness is defined as a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.
Management concluded that we did not maintain an effective control environment, specifically we did not design and maintain:
sufficient written policies and procedures regarding our critical accounting policies and significant or unusual transactions; and
appropriate and sufficient controls over the identification, authorization, analysis and communication to those charged with governance of critical accounting policies and significant or unusual transactions.
As a result, we did not have effective controls over the accounting for lease terminations.
These deficiencies in internal control resulted in a misstatement in rent receivable - deferred and gross revenues, rental in our consolidated financial statements for the quarterly periods ended March 31, 2016, June 30, 2016 and September 30, 2016, which were disclosed as immaterial error corrections in note 20 to the consolidated financial statements as at and for the year ended December 31, 2016. However, the ineffectiveness of the design, implementation, and operation of the controls create a reasonable possibility that a material misstatement to the consolidated financial statements would not be detected on a timely basis. Accordingly, our management concluded that our internal control over financial reporting was not effective as of December 31, 2016

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2017.
Our independent registered public accounting firm, KPMGDeloitte & Touche LLP, which audited the financial statements included in this Annual Report on Form 10-K that contain the disclosure required by this Item, independently assessed the effectiveness of the Company's internal control over financial reporting. KPMGDeloitte & Touche LLP has issued an adverseunqualified report on the Company's internal control over financial reporting, which is included in “Financial Statements and Supplementary Data” in Part II, Item 8 of this Annual Report.
Remediation Plan
Management, and our Board of Trustees, is focused on improving our processes and internal controls. Management, with the concurrence of the Audit Committee of our Board of Trustees has directed management to proceed with a remediation plan. Accordingly, management is in the process of developing and implementing a plan to remediate the deficiencies in internal control referenced above. Specifically:
Management will evaluate and revise our financial reporting process to ensure that our control environment, business processes and monitoring and personnel are fully aligned with our financial reporting objectives, with an emphasis on critical accounting policies and significant or unusual transactions.
Management will improve the documentation of our system of internal control over financial reporting, specifically the application of critical accounting policies and identification of significant or unusual transactions, by establishing a policy guidance for the identification and critical accounting analysis of significant or unusual transactions.
Management will design and maintain appropriate controls over the communication, review and authorization of significant or unusual transactions, including, appropriate oversight by our Board of Trustees and Audit Committee of our Board of Trustees, as applicable.  
We intend to execute our remediation plan as soon as feasible. We will test the ongoing effectiveness of the new controls and will consider the material weakness remediated after the new controls operate effectively for a sufficient period of time. There is no assurance, however, that these measures will remediate the material weakness or ensure that our internal controls over financial reporting will be effective in the future.
Changes in Internal Control Over Financial Reporting
ThereDuring the fourth quarter ended December 31, 2017, we operated and tested the previously reported remediation plan resulting from the material weakness reported as of December 31, 2016. Other than the operation and testing of such remediation plan, there were no other changes to our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) during the fourth quarter ended December 31, 20162017 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. Subsequent to the fourth quarter ended December 31, 2016, management identified the material weakness described above and will begin implementing the remediation efforts described above during the first quarter of fiscal 2017.
Lepercq Corporate Income Fund L.P.:
Evaluation of Disclosure Controls and Procedures
An evaluation of the effectiveness of the design and operation of the Partnership’s “disclosure controls and procedures” (as defined in Rule 13a-15(e) or 15d-15(e) under 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 the Partnership’s management, including the Partnership’s general partner's President and Vice President and Treasurer, who are the Partnership’s Principal Executive Officer and the Partnership’s Principal Financial Officer, respectively. As described below, the Partnership’s the Partnership’s management has identified a material weakness in our internal control over financial reporting. As a result,The Partnership's management, including each of our Chief Executive Officerthe Partner's general partner's President and Chief Financial Officer,Vice President and Treasurer, has concluded that ourthe Partnership's disclosure controls and procedures were not effective as of December 31, 2016. Management believes the consolidated financial statements contained herein present fairly, in all material respects, our financial position as of the specified dates and our results of operations and cash flows for the specified periods.2017.

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Management's Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting and for performing an assessment of the effectiveness of internal control over financial reporting as of December 31, 2016.2017. Our system of internal control over financial reporting is 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. Our system of internal control over financial reporting includes policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets; (2) provide reasonable assurance 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 (3) 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.
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 that financial statements are fairly presented in accordance with U.S. generally accepted accounting principles.
Our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2016.2017. In assessing the effectiveness of our internal control over financial reporting, management used as guidance the criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based upon the assessment performed, management has concluded that the following represents a material weakness in internal control over financial reporting. A material weakness is defined as a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.
The Partnership’s management concluded that the Partnership did not maintain an effective control environment, specifically we did not design and maintain:
sufficient written policies and procedures regarding our critical accounting policies and significant or unusual transactions; and
appropriate and sufficient controls over the identification, authorization, analysis and communication to those charged with governance of critical accounting policies and significant or unusual transactions.
As a result, the Partnership did not have effective controls over the accounting for lease terminations.
These deficiencies in internal control resulted in a misstatement in rent receivable - deferred and gross revenues, rental in the Partnership’s consolidated financial statements for the quarterly periods ended March 31, 2016, June 30, 2016 and September 30, 2016, which were disclosed as immaterial error corrections in note 13 to the consolidated financial statements as at and for the year ended December 31, 2016. However, the ineffectiveness of the design, implementation, and operation of the controls create a reasonable possibility that a material misstatement to the consolidated financial statements would not be detected on a timely basis. Accordingly, the Partnership’s management concluded that the Partnership’sPartnership's internal control over financial reporting was not effective as of December 31, 2016
Remediation Plan
The Partnership’s management, and Lexington’s Board of Trustees, is focused on improving the Partnership’s processes and internal controls. The Partnership’s management, with the concurrence of the Audit Committee of Lexington’s Board of Trustees has directed the Partnership’s management to proceed with a remediation plan. Accordingly, the Partnership’s management is in the process of developing and implementing a plan to remediate the deficiencies in internal control referenced above. Specifically:
The Partnership’s management will evaluate and revise the Partnership’s financial reporting process to ensure that the Partnership’s control environment, business processes and monitoring and personnel are fully aligned with the Partnership’s financial reporting objectives, with an emphasis on critical accounting policies and significant or unusual transactions.
The Partnership’s management will improve the documentation of the Partnership’s system of internal control over financial reporting, specifically the application of critical accounting policies and identification of significant or unusual transactions, by establishing a policy guidance for the identification and critical accounting analysis of significant or unusual transactions.
The Partnership’s management will design and maintain appropriate controls over the communication, review and authorization of significant or unusual transactions, including, appropriate oversight by Lexington’s Board of Trustees and Audit Committee of Lexington’s Board of Trustees, as applicable.  

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The Partnership intends to execute its remediation plan as soon as feasible. The Partnership will test the ongoing effectiveness of the new controls and will consider the material weakness remediated after the new controls operate effectively for a sufficient period of time. There is no assurance, however, that these measures will remediate the material weakness or ensure that the Partnership’s internal controls over financial reporting will be effective in the future.2017.
This Annual Report does not include an attestation report of the Partnership’s independent registered public accounting firm regarding internal control over financial reporting. The Partnership’s management’s report was not subject to attestation by the Partnership’s independent registered public accounting firm pursuant to the permanent deferral adopted by the Securities and Exchange Commission that permits the Partnership to provide only management’s report.
Changes in Internal Control Over Financial Reporting
ThereDuring the fourth quarter ended December 31, 2017, the Partnership operated and tested the previously reported remediation plan resulting from the material weakness reported as of December 31, 2016. Other than the operation and testing of such remediation plan, there were no other changes to the Partnership’s internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) during the fourth quarter ended December 31, 20162017 that have materially affected, or are reasonably likely to materially affect, the Partnership’s internal control over financial reporting. Subsequent to the fourth quarter ended December 31, 2016, the Partnership’s management identified the material weakness described above and will begin implementing the remediation efforts described above during the first quarter of fiscal 2017.
Item 9B. Other Information
Not applicable.

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PART III.

Item 10. Directors, Executive Officers and Corporate Governance

Executive Officers of Lexington

The following sets forth certain information relating to our executive officers:
NameBusiness Experience
E. Robert Roskind
 Age 7172
Mr. Roskind has served as our Chairman since March 2008 and previously served as Co-Vice Chairman from December 2006 to March 2008, Chairman from October 1993 to December 2006 and Co-Chief Executive Officer from October 1993 to January 2003. Mr. Roskind will retire as one of our executives effective January 2019. He founded The LCP Group, L.P., a real estate advisory firm, in 1973 and has been its Chairman since 1976. Mr. Roskind also serves as Chairman of Crescent Hotels and Resorts and Live In America Financial Services LLC.
Richard J. Rouse
 Age 71
Mr. Rouse has served as our Vice Chairman since March 2008 and as our Chief Investment Officer since January 2003, and he previously served as one of our trustees from October 1993 to May 2010, our Co-Vice Chairman from December 2006 to March 2008, our President from October 1993 to April 1996 and our Co-Chief Executive Officer from October 1993 to January 2003. Mr. Rouse also serves as Vice President and a Director of Lex GP.
T. Wilson Eglin
 Age 5253
Mr. Eglin has served as our Chief Executive Officer since January 2003, 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 and our Chief Operating Officer from October 1993 to December 2010. Mr. Eglin also serves as President and a Director of Lex GP.
Patrick Carroll
 Age 5354
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 PricewaterhouseCoopers LLP. Mr. Carroll is a Certified Public Accountant. Mr. Carroll also serves as Vice President, Treasurer and a Director of Lex GP.
Joseph S. Bonventre
Age 4142
Mr. Bonventre has served as our General Counsel since 2004, one of our Executive Vice Presidents since 2008 and our Secretary since 2014. Prior to joining us in September 2004, Mr. Bonventre was an associate in the corporate department of the law firm now known as Paul Hastings LLP. Mr. Bonventre is admitted to practice law in the State of New York. Mr. Bonventre also serves as Vice President and Secretary of Lex GP.
Beth Boulerice
Age 5253
Ms. Boulerice has served as our Chief Accounting Officer since January 2011 and one of our Executive Vice Presidents since January 2013. Prior to joining us in January 2007, Ms. Boulerice was employed by First Winthrop Corporation and was the Chief Accounting Officer of Newkirk Realty Trust. Ms. Boulerice is a Certified Public Accountant. Ms. Boulerice also serves as Vice President of Lex GP.
Brendan P. Mullinix
Age 43


Mr. Mullinix was appointed an executive officer in February 2018 and has served as one of our Executive Vice Presidents focusing on debt capital markets.  Mr. Mullinix joined us in 1996 and has previously served as a Senior Vice President and a Vice President.  
Lara Johnson
Age 45
Ms. Johnson was appointed an executive officer in February 2018 and has served as one of our Executive Vice Presidents focusing on dispositions and strategic transactions. Prior to joining us in 2007, Ms. Johnson was an executive vice president of Newkirk Realty Trust and a member of its board of directors. Ms. Johnson previously served as senior vice president of Winthrop Financial Associates, as a vice president of Shelbourne I, Shelbourne II and Shelbourne III, three publicly-traded REITs, and as Director of Investor Relations for National Property Investors, Inc.
James Dudley
Age 37
Mr. Dudley was appointed an executive officer in February 2018 and has served as an Executive Vice President and Director of Asset Management. He has been with the company since 2006 and has held various roles within the Asset Management Department. Prior to joining the firm, Mr. Dudley was employed by ORIX Capital Markets.
The 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 Committee financial expert, and certain information relating to our executive officers, trustees and trustee independence will be in our Definitive Proxy Statement for our 20172018 Annual Meeting of Shareholders, which we refer to as our Proxy Statement, and is incorporated herein by reference. Lex GP is the sole general partner of LCIF.


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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. Lex GP is the sole general partner of LCIF.

The Partnership does not have any employees, executive officers or board of directors.  Neither Lexington nor Lex GP receives any compensation for Lex GP’s services as the general partner of the Partnership.  Lex GP and Lex LP, however, as partners of the Partnership, have the same rights to allocations and distributions as other partners of the Partnership, as set forth in the partnership agreement of the Partnership.  In addition, the Partnership reimburses Lex GP and Lexington for all expenses incurred by them related to the ownership and operation of, or for the benefit of, the Partnership.  In the event that certain expenses are incurred for the benefit of the Partnership and other entities (including Lexington or its other subsidiaries), such expenses are allocated by Lexington, as sole equity owner of Lex GP, the general partner of the Partnership, to the Partnership in proportion to gross rental revenue.  Lexington has guaranteed the Partnership’s obligations in connection with the redemption of OP units pursuant to the partnership agreement of the Partnership.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

Additional 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.

The following table indicates, as of the close of business on December 31, 2016,2017, (a) the number of OP units beneficially owned by each person known by the Partnership to own in excess of five percent of the outstanding OP units and the number of OP units beneficially owned by the general partner of the Partnership and (b) the percentage such OP units represent of the total outstanding OP units. All OP units were owned directly on such date with sole voting and investment power unless otherwise indicated, calculated as set forth in footnote 1 to the table.
Name of Beneficial Owner
Number of OP Units
Beneficially Owned (1)
Percentage of Class
Number of OP Units
Beneficially Owned (1)
Percentage of Class
Lexington (2)79,891,802.596%77,342,559.596%
_________________________
(1)For purposes of this table, a person is deemed to beneficially own any OP unit as of a given date which such person owns or has the right to acquire within 60 days after such date.
(2)Lexington beneficially owns OP units through Lex GP and Lex LP.  Lexington’s address is One Penn Plaza, Suite 4015, New York, NY 10119-4015.

None of the officers of Lex GP beneficially own any OP units. Mr. Roskind is not an officer of Lex GP.  However, as of December 31, 2016,2017, Mr. Roskind beneficially owned 1,474,296 OP units, which is approximately 2% of the class.

Item 13. Certain Relationships and Related Transactions, and Director Independence

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 16 to the Company's Consolidated Financial Statements and note 10 to the Partnership's Consolidated Financial Statements in “Financial Statements and Supplementary Data” in Part II, Item 8 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.

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PART IV.
Item 15. Exhibits, Financial Statement Schedules
 Page
(a)(1) Financial Statements
(2) Financial Statement Schedules
(3) Exhibits
Exhibit No.   Description
     
  
  
  
  
  Agreement
  
  
  
  Indenture, dated as of January 29, 2007, among the Company (as successor by merger), the other guarantors named therein and U.S. Bank National Association, as trustee (“U.S. Bank”) (filed as Exhibit 4.1 to the Company’s Current Report on Form 8-K filed January 29, 2007)(1)
4.4
4.5  
4.6  Fourth Supplemental Indenture, dated as of December 31, 2008, among the Company, the other guarantors named therein and U.S. Bank, as trustee (filed as Exhibit 4.1 to the Company’s Current Report on Form 8-K filed on January 2, 2009 (the “01/02/09 8-K”))(1)
4.7Fifth Supplemental
4.8Sixth Supplemental Indenture, dated as of January 26, 2010 among the Company, the guarantors named therein and U.S. Bank, as trustee, including the Form of 6.00% Convertible Guaranteed Notes due 2030 (filed as Exhibit 4.1 to the Company’s Current Report on Form 8-K filed January 26, 2010)(1)
4.9Seventh Supplemental Indenture, dated as of September 28, 2012, among the Company, certain subsidiaries of the Company signatories thereto, and U.S. Bank National Association, as trustee (filed as Exhibit 4.1 to the Company's Current Report on Form 8-K filed on October 3, 2012)(1)
4.10Eight Supplemental Indenture, dated as of February 13,10, 2013, among the Company, certain subsidiaries of the Company signatories thereto, and U.S. Bank, as trustee (filed as Exhibit 4.1 to the Company's Current Report on Form 8-K filed on FebruaryJune 13, 2013)(1)
4.11  Ninth Supplemental Indenture, dated as of May 6, 2013, among the Company, certain subsidiaries of the Company signatories thereto, and U.S. Bank, as trustee (filed as Exhibit 4.1 to the Company's Current Report on Form 8-K filed on May 8, 2013)(1)

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4.12Tenth Supplemental Indenture, dated as of June 10, 2013, among the Company, certain subsidiaries of the Company signatories thereto, and U.S. Bank, as trustee (filed as Exhibit 4.3 to the Company's Current Report on Form 8-K filed on June 13, 2013 (the “06/13/13 8-K”))(1)
4.13Tenth Supplemental Indenture, dated as of September 30, 2013, among the Company, certain subsidiaries of the Company signatories thereto, and U.S. Bank, as trustee (filed as Exhibit 4.1 to the Company's Current Report on Form 8-K filed on October 3, 2013)(the “10/3/13 8-K”))(1)
4.14Indenture, dated as of June 10, 2013, among the Company, certain subsidiaries of the Company signatories thereto, and U.S. Bank, as trustee (filed as Exhibit 4.1 to the 06/13/13 8-K)(1)
4.15First Supplemental Indenture, dated as of September 30, 2013, among the Company, certain subsidiaries of the Company signatories thereto, and U.S. Bank, as trustee (filed as Exhibit 4.2 to the 10/3/13 8-K)Company's Current Report on Form 8-K filed on October 3, 2013)(1)
4.16  
4.17  
10.1  1994 Employee Stock Purchase Plan (filed as Exhibit D to the Company’s Definitive Proxy Statement dated April 12, 1994)(1, 4)
  The Company’s
  

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10.9Form of Nonvested Share Agreement (filed as Exhibit 10.1 to the Company's Current Report on Form 8-K filed on December 26, 2012)January 2, 2009)(1, 4)
10.10  
10.11  
10.12  
10.13  
10.14  Long-Term Nonvested Share
10.15  
10.16  
10.17  
10.18  

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10.19  
10.20  
10.21  
10.22  
10.23  
10.24  

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10.25  
10.26  
10.27  
10.28  
  
  
  
  
23  
24  
  
  
  
  
  
  
  
  
101.INS  XBRL Instance Document (2, 5)
101.SCH  XBRL Taxonomy Extension Schema (2, 5)

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101.CAL  XBRL Taxonomy Extension Calculation Linkbase (2, 5)
101.DEF  XBRL Taxonomy Extension Definition Linkbase Document (2, 5)
101.LAB  XBRL Taxonomy Extension Label Linkbase Document (2, 5)
101.PRE  XBRL Taxonomy Extension Presentation Linkbase Document (2, 5)
(1)Incorporated by reference.
(2)Filed herewith.
(3)This exhibit shall not be deemed “filed” for purposes of Section 11 or 12 of the Securities Act of 1933, as amended (the “Securities Act”), or Section 18 of the Securities Exchanges Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of those sections, and shall not be part of any registration statement to which it may relate, and shall not be incorporated by reference into any registration statement or other document filed under the Securities Act or the Exchange Act, except as set forth by specific reference in such filing or document.
(4)Management contract or compensatory plan or arrangement.
(5)Attached as Exhibit 101 to this Annual Report on Form 10-K are the following materials, formatted in XBRL (Extensible Business Reporting Language): (i) the Consolidated Balance Sheets at December 31, 20162017 and 2015;2016; (ii) the Consolidated Statements of Operations for the years ended December 31, 2017, 2016 2015 and 2014;2015; (iii) the Consolidated Statements of Comprehensive Income (Loss) for the years ended December 31, 2017, 2016 2015 and 2014;2015; (iv) the Consolidated Statements of Changes in Equity for the years ended December 31, 2017, 2016 2015 and 2014;2015; (v) the Consolidated Statements of Cash Flows for the years ended December 31, 2017, 2016 2015 and 2014;2015; and (vi) Notes to Consolidated Financial Statements, detailed tagged.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
  Lexington Realty Trust
    
    
Dated:February 28, 201727, 2018By:/s/ T. Wilson Eglin
   T. Wilson Eglin
   Chief Executive Officer
    

  Lepercq Corporate Income Fund L.P.
    
  By:Lex GP-1 Trust, its General Partner
    
Date:February 28, 201727, 2018By:/s/ T. Wilson Eglin
   T. Wilson Eglin
   President



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POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints 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 on Form 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 registrant and in the capacities and on the date indicated.
SignatureTitle
  
/s/ E. Robert Roskind
E. Robert Roskind
Chairman of the Trust
  
/s/ Richard J. Rouse
Richard J. Rouse
Vice Chairman,
Chief Investment Officer and Trustee of the Trust and Vice President and a Director of the General Partner of the Partnership
/s/ T. Wilson Eglin
T. Wilson Eglin
Chief Executive Officer, President and Trustee of the Trust and President and a Director of the General Partner of the Partnership
(principal executive officer)
  
/s/ Patrick Carroll
Patrick Carroll
Chief Financial Officer, Executive Vice President and Treasurer of the Trust and Vice President and Treasurer of the General Partner of the Partnership
 (principal financial officer)
  
/s/ Beth Boulerice
Beth Boulerice
Executive Vice President and Chief Accounting Officer of the Trust and Vice President of the Partnership
(principal accounting officer)
  
/s/ Harold First
Harold First
Trustee of the Trust
  
/s/ Richard S. Frary
Richard S. Frary
Trustee of the Trust
  
/s/ Lawrence L. Gray
Lawrence L. Gray
Trustee of the Trust
  
/s/ Jamie Handwerker
Jamie Handwerker
Trustee of the Trust
/s/ Claire A. Koeneman
Claire A. Koeneman
Trustee of the Trust
/s/ Howard Roth
Howard Roth
Trustee of the Trust
Each dated: February 28, 201727, 2018

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