As filed with the Securities and Exchange Commission on January 30, 2014November 1, 2023.
Registration Statement No. 333-192283333-
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Amendment No. 2
to
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
LEXINGTON REALTY
LXP INDUSTRIAL TRUST
(Exact name of registrant as specified in its charter)
Maryland | 6784 | |||
(State or
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See Table of Additional Registrant Guarantor
One Penn Plaza
Suite 4015
New York, NY 10019
New York 10119-4015
(212) 692-7200
(Address, including zip code, and telephone number, including area code, of registrant'sregistrant’s principal executive offices)
T. Wilson Eglin
President and
Chief Executive Officer
and President
LXP Industrial Trust
One Penn Plaza
Suite 4015
New York, NYNew York 10119-4015
(212) 692-7200
(Name, address, including zip code, and telephone number, including area code, of agent for service):
Copies of all communications, including communications sent to agent for service, should be sent to:
Michael McTiernan
Hogan Lovells US LLP
555 13th Street NW
Washington, D.C. 20004
(212) 318-6000
Scott R. Saks, Esq.
Paul Hastings LLP
75 East 55th Street
New York, NY 10022
(212) 318-6000
(Name, address, including zip code, and telephone number, including area code, of agent for service):
Approximate date of commencement of proposed exchange offer:
sale of the securities to the public: As soon as practicable after this Registration Statement is declared effective.becomes effective and upon completion of the merger described in the enclosed proxy statement/prospectus.
If the securities being registered on this formForm are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box.¨☐
If this formForm is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.¨☐
If this formForm is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.¨☐
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 emerging growth company. See the definitions of "large“large accelerated filer," "accelerated filer"” “accelerated filer,” “smaller reporting company,” and "smaller reporting company"“emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer | ☒ | Accelerated Filer | ☐ | |
Non-accelerated filer
| ☐ | Smaller reporting company | ☐ | |
Emerging growth company | ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act. ☐
If applicable, place an “X”X in the box to designate the appropriate rule provision relied upon in conducting this transaction:
Exchange Act Rule 13e-4(i) (Cross-Border Issuer Tender Offer)¨☐
Exchange Act Rule 14d-1(d)14d-l(d) (Cross-Border Third-Party Tender Offer)¨☐
CALCULATION OF REGISTRATION FEE
Title of each class of securities to be registered | Amount to be registered | Proposed maximum offering price per unit(1) | Proposed maximum aggregate offering price | Amount of registration fee | ||||||||||||
4.25% Senior Notes due 2023 | $ | 250,000,000 | 100 | % | $ | 250,000,000 | (1) | $ | 32,200 | (2) | ||||||
Guarantees of 4.25% Senior Notes due 2023 | (3) | (3) | (3) | (3) |
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The Registrantsregistrant hereby amendamends this registration statement on such date or dates as may be necessary to delay its effective date until the Registrantsregistrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until thethis registration statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.
TABLE OF ADDITIONAL REGISTRANT GUARANTOR
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Explanatory Note
This Amendment No. 2 to Form S-4 has been filed by Lexington Realty Trust and Lepercq Corporate Income Fund L.P to reflect Lepercq Corporate Income Fund L.P. as an additional registrant on the EDGAR filing.
The information in this prospectusdocument is not complete and may be changed. WeThe registrant may not sell thesethe securities offered by this document until the registration statement filed with the Securities and Exchange Commission, of which this document is a part, is declared effective. This prospectus preliminary isdocument shall not constitute an offer to sell these securities and it is not solicitingor the solicitation of an offer to buy nor shall there be an sale of these securities in any statejurisdiction where thesuch offer, solicitation or sale is not permitted.
PRELIMINARY — SUBJECT TO COMPLETION, DATED January 30, 2014November 1, 2023.
PROSPECTUS
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LEXINGTON REALTY TRUST
OFFER TO EXCHANGE
$250,000,000 aggregate principal amount of its
4.25% Senior Notes dueOn October 24, 2023,
which have been registered under the Securities Act of 1933, as amended,
for any LXP Industrial Trust, a Maryland real estate investment trust (“LXP”), and all of its outstanding 4.25% Senior Notes due 2023
Guaranteed by
Lepercq Corporate Income Fund L.P.
INVESTING IN THESE SECURITIES INVOLVES CERTAIN RISKS. SEE THE “RISK FACTORS” SECTION BEGINNING ON PAGE 9 OF THIS PROSPECTUS.LCIF.
BEFORE BUYING OUR SECURITIES, YOU SHOULD READ AND CONSIDER THE RISK FACTORS INCLUDED IN OUR PERIODIC REPORTS, IN THE PROSPECTUS SUPPLEMENTS OR ANY OFFERING MATERIAL RELATING TO ANY SPECIFIC OFFERING, AND IN OTHER INFORMATION THAT WE FILE WITHPursuant to the terms of the Merger Agreement, upon consummation of the Merger (the “Effective Time”), LCIF will be merged with and into LXP and the separate existence of LCIF will thereupon cease and LXP will be the surviving entity. At such time, each common unit of partnership interest in LCIF (each, an “LCIF Partnership Unit”) you hold will automatically be converted into the right to receive a number of registered shares of beneficial interest of LXP, par value $0.0001 per share, classified as common stock (“Common Shares”) equal to the number of LCIF Partnership Units you hold multiplied by the “Redemption Factor” (as defined in the Sixth Amended and Restated Agreement of Limited Partnership of LCIF (the “Partnership Agreement”), and which is currently equal to 1.126) (the “Merger Consideration”), except that to the extent you would be entitled to any fractional Common Shares upon such conversion, no fractional Common Shares will be issued and instead you will be entitled to receive the Cash Equivalent (as defined in the Merger Agreement) of such fractional shares. Subject to the satisfaction of the closing conditions set forth in the Merger Agreement, the Merger is expected to be consummated on or around December 31, 2023. The Common Shares are listed on the New York Stock Exchange and trade under the symbol “LXP”. As of September 30, 2023, there were 730,623.5 LCIF Partnership Units outstanding other than LCIF Partnership Units held, directly or indirectly, by LXP, which, if all were converted, would result in approximately 822,682 Common Shares being issued by LXP. LXP currently accounts for these LCIF Partnership Units as “noncontrolling interests.”
The Board of Trustees of LXP (the “LXP Board”) and the general partner of LCIF (the “General Partner”) have approved the Merger Agreement and the Merger. No further approvals are required to consummate the Merger.
This information statement/prospectus provides you with detailed information about the Merger and related matters. LXP and LCIF both encourage you to read the entire document carefully. In particular, see the section titled “Risk Factors” beginning on page 11 for a discussion of risks related to the Merger, the tax consequences of the Merger and ownership of the Common Shares received in the Merger.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION WHICH IS INCORPORATED BY REFERENCE IN THIS PROSPECTUS. SEE “WHERE YOU CAN FIND MORE INFORMATION.”
NEITHER THE SECURITIES AND EXCHANGE COMMISSION(“SEC”) NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THE EXCHANGE NOTES ORSECURITIES TO BE ISSUED IN CONNECTION WITH THE GUARANTEES THEREONMERGER OR DETERMINED IFTHAT THIS INFORMATION STATEMENT/PROSPECTUS IS TRUTHFULACCURATE OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
This information statement/prospectus is dated November 20, 2023, and is first being disseminated to LCIF limited partners on or about November 20, 2023
INFORMATION STATEMENT
NOTICE OF APPROVAL OF MERGER BY GENERAL PARTNER – WE ARE NOT ASKING YOU FOR
A PROXY AND YOU ARE REQUESTED NOT TO SEND
US A PROXY
To the limited partners of LCIF:
On October 24, 2023, LXP and LCIF entered into the Merger Agreement pursuant to which LCIF will merge with and into LXP, with LXP as the surviving entity.
Pursuant to the terms of the Merger Agreement, at the Effective Time, LCIF will be merged with and into LXP and the separate existence of LCIF will thereupon cease and LXP will be the surviving entity. At such time, each LCIF Partnership Unit you hold will automatically be converted into the right to receive a number of registered Common Shares equal to the number of LCIF Partnership Units you hold multiplied by the “Redemption Factor” (as defined in the Partnership Agreement, and which is currently equal to 1.126), except that to the extent you would be entitled to any fractional Common Shares upon such conversion, no fractional Common Shares will be issued and instead you will be entitled to receive the Cash Equivalent (as defined in the Merger Agreement) of such fractional shares. Subject to the satisfaction of the closing conditions set forth in the Merger Agreement, the Merger is expected to be consummated on or around December 31, 2023. The Common Shares are listed on the New York Stock Exchange and trade under the symbol “LXP”.
The LXP Board has (i) determined that the Merger Agreement, the Merger and the other transactions contemplated by the Merger Agreement are advisable and in the best interests of LXP and its shareholders, and (ii) has unanimously approved and adopted the Merger Agreement, the Merger and the other transactions contemplated by the Merger Agreement and authorized the issuance of the Common Shares as payment of the Merger Consideration. Approval of the Merger does require approval of LXP shareholders.
The General Partner has determined that the Merger Agreement, the Merger and the other transactions contemplated by the Merger Agreement are advisable and in the best interests of LCIF and its partners and has approved the Merger Agreement, the Merger and the other transactions contemplated by the Merger Agreement. Approval of the Merger does not require the approval of other LCIF partners. For this reason, this information statement/prospectus is being provided to you for informational purposes only. The General Partner has not solicited and is not soliciting your adoption and approval of the Merger Agreement.
The accompanying information statement/prospectus describes the Merger Agreement, the Merger, and the actions to be taken in connection with the Merger, as well as provides additional information about the parties involved. Please give this information your careful attention. A copy of the Merger Agreement is attached as Annex A to this information statement/prospectus.
Sincerely,
The dateT. Wilson Eglin
President of this prospectus is , 2014.Lex GP-1 Trust, the sole general partner of LCIF
November 20, 2023
IMPORTANT NOTE ABOUT THIS INFORMATION STATEMENT/PROSPECTUS
This information statement/prospectus incorporates by reference important business and financial information about LXP and LCIF and their respective subsidiaries from documents filed with the Securities and Exchange Commission (“SEC”) that have not been included in or delivered with this information statement/prospectus. This information is available without charge at the SEC’s website at www.sec.gov. You may also obtain certain of these documents at LXP’s website, www.lxp.com. Information contained on the LXP website does not constitute part of this information statement/prospectus. See “Where You Can Find More Information.”
You may also request copies of publicly filed documents from LXP without charge by requesting them in writing or by telephone at the following address and telephone number:
LXP Industrial Trust
One Penn Plaza
Suite 4015
New York, New York 10119-4015
Attention: LCIF Investor Relations
(212) 692-7200
If you request any such documents, LXP will mail them to you by first class mail, or another equally prompt means, after receipt of your request. To receive timely delivery of the documents, your request must be received no later than December 21, 2023.
The sections entitled “Questions and Answers” and “Summary” below highlight selected information from this information statement/prospectus, but they do not include all of the information that may be important to you. To better understand the Merger Agreement and the Merger, and for a more complete description of legal terms thereof, you should carefully read this entire information statement/prospectus, including the section entitled “Risk Factors” and the Merger Agreement, a copy of which is attached as Annex A hereto, as well as the documents that are incorporated by reference into this information statement/prospectus. See “Where You Can Find More Information.”
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TABLE OF CONTENTS
You should only rely on the information contained or incorporated by reference in this prospectus. We have not authorized anyone to provide information different from that contained or incorporated by reference in this prospectus. When you make a decision about whether to participate in the exchange offer, you should not rely upon any information other than the information contained or incorporated by reference in this prospectus. The delivery of this prospectus does not mean that information contained or incorporated by reference in this prospectus is correct after the date of this prospectus. This prospectus is not an offer to sell or solicitation of an offer to buy exchange notes in any circumstances under which the offer or solicitation is unlawful.
This prospectus incorporates important business and financial information about us that is not included in or delivered with this prospectus, and such information is available without charge to holders of the exchange notes upon written or oral request to Investor Relations, Lexington Realty Trust, One Penn Plaza, Suite 4015, New York, New York 10119-4015 (telephone: (212) 692-7200). To obtain timely delivery, holders of exchange notes must request the information no later than five business days prior to the expiration of the exchange offer contemplated by this prospectus, or , 2014.
Each broker-dealer that receives exchange notes for its own account pursuant to the exchange offer will acknowledge by participating in this exchange offer, as a condition to participating in this exchange offer, that it will deliver a prospectus in connection with any resale of such exchange notes. By so acknowledging and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act of 1933, as amended. This prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with resales of exchange notes received in exchange for outstanding private notes where such outstanding private notes were acquired by such broker-dealer as a result of market-making activities or other trading activities. We have agreed that, starting on the expiration date of the exchange offer and ending on the close of business one year after such expiration date, subject to extension in limited circumstances, we will make this prospectus available to any broker-dealer for use in connection with any such resale. See "Plan of Distribution."
All references to the “Company,” “we,” “our” and “us” in this prospectus means Lexington Realty Trust, and its consolidated subsidiaries, including Lepercq Corporate Income Fund L.P. and its consolidated subsidiaries, except as otherwise provided or where it is made clear that the term means only Lexington Realty Trust. All references to “the operating partnerships” in this prospectus mean Lepercq Corporate Income Fund L.P. and Lepercq Corporate Income Fund II L.P. All references to “LCIF” in this prospectus mean Lepercq Corporate Income Fund L.P. All references to “LCIF II” in this prospectus mean Lepercq Corporate Income Fund II L.P. On December 30, 2013, LCIF II merged with and into LCIF, with LCIF as the surviving entity. As a result, all references to LCIF with respect to periods after the merger include LCIF II as a predecessor entity. When we use the term “LXP,” we are referring to Lexington Realty Trust by itself and not including any of its subsidiaries. References to “common shares” or similar references refer to the shares of beneficial interest classified as common stock, par value $0.0001 per share, of LXP and references to “OP units” or similar references refer to the limited partnership units of LCIF and/or LCIF II, as applicable. The terms “you” or “your” refer to a prospective investor.
CAUTIONARY STATEMENTS CONCERNING FORWARD-LOOKING INFORMATION
This prospectus and the information and documents incorporated herein by reference include “forward-looking statements”, and as such may involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from expected future results, performance or achievements expressed or implied by these forward-looking statements. 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 the negative of these words or other similar words or terms. Factors which could have a material adverse effect on our operations and future prospects include, but are not limited to:
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These risks and uncertainties should be considered in evaluating any forward-looking statements contained or incorporated by reference in this prospectus. We caution you that any forward-looking statement reflects only our belief at the time the statement is made. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee our future results, levels of activity, performance or achievements. Except as required by law, we undertake no obligation to update any of the forward-looking statements to reflect events or developments after the date of this prospectus.
The following questions and answers are intended to briefly address some of the questions that you may have regarding the Merger and the Merger Agreement. We urge you to carefully read the remainder of this information statement/prospectus because these questions and answers may not address all questions or provide all information that might be important to you with respect to the Merger and the Merger Agreement. Additional important information is also contained in Annex A and the documents incorporated by reference into this information statement/prospectus. You may obtain the information incorporated by reference into this information statement/prospectus without charge by following the instructions under “Where You Can Find More Information.”
Q: | Why am I receiving these materials? |
A: | On October 24, 2023, LXP and LCIF entered into the Merger Agreement, pursuant to which LCIF will merge with and into LXP, with LXP as the surviving entity. The Merger Agreement is described in this information statement/prospectus and attached as Annex A hereto. You are receiving this document in connection with the issuance of Common Shares as the Merger Consideration. The General Partner has already approved the Merger Agreement and the Merger on behalf of LCIF and its partners. You are not being asked for a proxy or written consent, and you are requested not to send a proxy or written consent. |
Q: | What will LCIF partners be entitled to receive in the Merger? |
A: | If the Merger is successfully completed, each LCIF Partnership Unit you hold will automatically be converted into the right to receive 1.126 Common Shares, except that to the extent you would be entitled to any fractional Common Shares upon such conversion, no fractional Common Shares will be issued and instead you will be entitled to receive the Cash Equivalent (as defined in the Amended and Restated Merger Agreement) of such fractional shares. As of the Effective Time, all LCIF Partnership Units shall no longer be outstanding and shall automatically be canceled and shall cease to exist, and each holder of LCIF Partnership Units shall cease to have any rights with respect thereto. |
Q: | What will happen to LCIF as a result of the Merger? |
A: | If the Merger is successfully completed, LCIF will be merged with and into LXP, with LXP as the surviving entity, and LCIF will cease to exist. |
Q: | When will the Merger be completed? |
A: | The Merger is expected to close on December 31, 2023. |
Q: | Should LCIF partners deliver their LCIF Partnership Units now? |
A: | No. After the Merger is completed, any LCIF Partnership Units you hold as of the Effective Time automatically will be converted into the right to receive the Merger Consideration. |
Q: | What happens to future distributions with respect to LCIF Partnership Units? |
A: | If the Merger closes, as expected, on December 31, 2023, LCIF will have the obligation (which will be assumed by LXP) to pay a final quarterly distribution in accordance with the Partnership Agreement. LXP expects to make the distribution on January 16, 2024 to holders of LCIF Partnership Units as of the close of business on December 29, 2023. Following payment of this final quarterly distribution, LCIF limited partners will be entitled to receive any dividends paid by LXP with respect to the Common Shares received in the Merger, to the extent they continue to own such Common Shares on the applicable record date for any dividend. |
Q: | What approval by LCIF partners is required to approve the Merger Agreement and the transactions contemplated thereby, including the Merger? |
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A: | None. Pursuant to the Partnership Agreement, the General Partner has the authority to approve the Merger Agreement and the Merger and has already done so. There are no remaining LCIF approvals required. |
Q: | What are the expected U.S. federal income tax consequences for U.S. holders of LCIF Partnership Units as a result of the Merger? |
A: | The receipt of Common Shares in exchange for LCIF Partnership Units pursuant to the Merger Agreement will be a taxable transaction to U.S. holders (as defined in “Material U.S. Federal Income Tax Consequences”) for U.S. federal income tax purposes. A U.S. holder will generally recognize capital gain or loss on the receipt of Common Shares in exchange for LCIF Partnership Units. However, a portion of this gain or loss will be separately computed and taxed as ordinary income or loss to the extent attributable to “unrealized receivables,” including depreciation recapture, or to “inventory items” owned by LCIF and its subsidiaries. Passive losses that were not deductible by a U.S. holder in prior taxable periods because they exceeded the U.S. holder’s share of LCIF’s income (i.e., suspended passive losses) may become deductible in full as a result of the Merger and offset all or a portion of the gain recognized by such U.S. holder. A U.S. holder’s tax basis in the Common Shares received in the Merger will equal the fair market value of such shares. The holding period of the Common Shares received by a U.S. holder will generally begin the day after the Merger effective date. The U.S. federal income tax consequences of the Merger to U.S. holders of LCIF Partnership Units and of the ownership and disposition of any Common Shares received pursuant thereto will depend on each holder’s particular tax situation. Accordingly, you are strongly urged to consult your tax advisor for a full understanding of the particular tax consequences to you of the Merger and of the ownership and disposition of any Common Shares received by you in the Merger. See “Material U.S. Federal Income Tax Consequences-Tax Consequences of the Merger to U.S. Holders of LCIF Partnership Units.” |
Q: | What are the expected U.S. federal income tax consequences for a U.S. holder of LCIF Partnership Units of the ownership of Common Shares after the Merger is completed? |
A: | LXP is classified as a real estate investment trust (a “REIT”) for U.S. federal income tax purposes and intends to conduct its operations so as to continue to qualify for taxation as a REIT. No assurance, however, can be given that LXP has operated in a manner so as to qualify or will be able to operate in such a manner so as to remain qualified as a REIT. Qualification and taxation as a REIT depend upon LXP’s ability to meet on a continuing basis, through actual annual operating results, the required distribution levels, diversity of share ownership and the various qualification tests imposed under the Internal Revenue Code of 1986, as amended, (the “Code”) as discussed below, the results of which will not be reviewed by counsel. Given the highly complex nature of the rules governing REITs, the ongoing importance of factual determinations, and the possibility of future changes in LXP’s circumstances, no assurance can be given that the actual results of LXP’s operations for any one taxable year have satisfied or will continue to satisfy such requirements. See “Material U.S. Federal Income Tax Consequences.” |
Q: | Are holders of LCIF Partnership Units entitled to dissenters’ or appraisal rights in connection with the Merger? |
A: | No. Holders of LCIF Partnership Units do not have dissenters’ or appraisal rights under applicable law or contractual appraisal rights under the Partnership Agreement or the Merger Agreement. |
Q: | What happens if the Merger is not consummated? |
A: | If the Merger is not completed for any reason, you will not receive the Merger Consideration for any LCIF Partnership Units that you hold. In such case, the LCIF Partnership Units will remain outstanding, and LCIF will remain a Delaware limited partnership. |
Q: | Who do I call if I have further questions about the Merger or the Merger Agreement? |
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A: | Holders of LCIF Units who have questions about the Merger or the Merger Agreement or who desire additional copies of this information statement/prospectus or other additional materials should contact: |
Lepercq Corporate Income Fund L.P.
One Penn Plaza
Suite 4015
New York, NY 10119-4015
Attention: LCIF Investor Relations
(212) 692-7200
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This summary highlights selectedcertain information contained elsewhere or incorporated by reference in this prospectus. Because this is a summary, it doesabout the Merger but may not contain all of the information that is important to you. ForWe urge you to carefully read the remainder of the information statement/prospectus, including Annex A and the other documents to which we have referred you for a more complete understanding of the exchange offerMerger and the exchange notes, you should read carefully this entire prospectus and the documents incorporated by reference in this prospectus, as provided in “Where you can find more information” beginning on page 59 of this prospectus, especially the risk factors set forth in (i) LXP’s most recent Annual Report on Form 10-K, filed with the Commission, on February 25, 2013, which we refer to as LXP’s Annual Report, (ii) the information in any documents we filed with the Commission subsequent to LXP’s Annual Report or that we file in the future that are incorporated by reference herein as provided in “Where you can find more information” and (iii) the information under the caption “Risk factors” beginning on page 9 of this prospectus. Unless otherwise indicated, all financial and property information in this prospectus is presented as of and for the nine months ended September 30, 2013.
Explanatory Note
This prospectus includes combined disclosure for Lexington Realty Trust and Lepercq Corporate Income Fund L.P. Information with respect to LXP is incorporated by reference in this prospectus.LXP. See “Where you can find more information” beginning on page 59 of this prospectus.You Can Find More Information.”
On December 30, 2013, LCIF II merged with and into LCIF, with LCIF as the surviving entity. The merger was done to streamline the reporting obligations of LCIF and LCIF II into one entity on a going-forward basis. Except as otherwise indicated, all information with respect to LCIF and LCIF II in this prospectus is presented as of September 30, 2013, which is prior to the merger. Information subsequent to the merger assumes that all limited partners in LCIF II received OP units in LCIF as consideration in the merger.
Our Company
LXP Industrial Trust
LXP is a Maryland real estate investment trust, which has elected to qualify to be taxed as a REIT that owns a diversified portfolio of equity and debt investments infor federal income tax purposes, focused on single-tenant commercial properties and land.warehouse/distribution real estate investments. A majority of theseits properties and all land interests 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. We alsoHowever, certain leases provide investment advisory and asset management services to investors inthat the single-tenant area.
landlord is responsible for certain operating expenses. As of September 30, 2013, we2023, LXP had equity ownership interests in approximately 215115 consolidated real estate properties, located in 4119 states and encompassing 40.6containing an aggregate of approximately 53.9 million square feet 98.1%of space, approximately 99.0% of which was leased. IncludedAs of September 30, 2023, LXP’s portfolio consisted of 110 warehouse/distribution facilities and five other properties. LXP’s warehouse/distribution portfolio is primarily focused in LXP’s target markets within the Sunbelt and Midwest. LXP expects to grow these markets by executing on its development pipeline and opportunistically acquiring facilities in these properties are (1) 31 properties in which LCIF had an equity ownership interest in, located in 22 states and encompassing 4.9 million square feet, 96.1% of which was leased, and (2) nine properties in which LCIF II had an equity ownership interest in, located in seven states and encompassing 2.9 million square feet, 100.0% of which was leased. The properties in which we have an equity interest are leased to tenants in various industries, including finance/insurance, technology, service, automotive and energy.markets.
LCIF 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. LCIF II was formed as a limited partnership on January 27, 1987 under the laws of the state of Delaware to invest in existing real estate properties net leased to corporations or other entities. On December 30, 2013, LCIF II was merged with and into LCIF, with LCIF as the surviving entity.
The purpose of each of LCIF and LCIF II includes the conduct of any business that may be conducted lawfully by a limited partnership organized under the Delaware Revised Uniform Limited Partnership Act, or the Delaware Act, except that the partnership agreement of each of LCIF and LCIF II requires business to be conducted in such a manner that will permit LXP to continue to be classified as a REIT under Sections 856 through 860 of the Internal Revenue Code of 1986, as amended, or the Code, unless LXP ceases to qualify as a REIT for reasons other than the conduct of the business of LCIF or LCIF II, as applicable.
LXP is the sole equity owner of Lex GP-1 Trust, or Lex GP, a Delaware statutory trust, which is the general partner of LCIF and holds, as of December 31, 2013, approximately 0.4% of the outstanding OP units in LCIF. LXP is also the sole equity owner of Lex LP-1 Trust, or Lex LP, a Delaware statutory trust, which holds, as of December 31, 2013, approximately, 94.3% of the outstanding OP units in LCIF. The remaining OP units in LCIF are beneficially owned by E. Robert Roskind, Chairman of LXP, and certain non-affiliated investors. As the sole equity owner of the general partner of LCIF, LXP has the ability to control all of the day-to-day operations of LCIF subject to the terms of the LCIF partnership agreement.
The business of LCIF is substantially the same as the business of LXP and includes investment in single-tenant assets; except that LCIF is dependent on LXP for management of its operations and future investments. LCIF does not have any employees, executive officers or a board of directors. LXP also invests in assets and conducts business directly and through other subsidiaries. LXP allocates investments to itself and its other subsidiaries or to LCIF as it deems appropriate and in accordance with certain obligations under the LCIF partnership agreement, with respect to allocations of nonrecourse liabilities.
Neither LXP nor Lex GP receives any compensation for Lex GP’s services as general partner of LCIF. Lex GP and Lex LP, however, as partners in LCIF, have the same right to allocations and distributions as other partners of LCIF. In addition, LCIF reimburses Lex GP and LXP for all expenses incurred by them related to the ownership and operation of, or for the benefit of, LCIF. In the event that certain expenses are incurred for the benefit of LCIF and other entities (including LXP and its other subsidiaries), such expenses are allocated to LCIF in proportion to gross revenues. LXP has guaranteed the obligations of LCIF in connection with the redemption of OP units pursuant to the LCIF partnership agreement.
Further information with respect to LCIF and LCIF II is set forth in this prospectus.
TheLXP’s principal executive offices for LCIF are located at One Penn Plaza, Suite 4015, New York, New York 10119-4015;10119-4015 and our telephone number is (212) 692-7200.
THE EXCHANGE OFFER
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For a more detailed description of the exchange offer, see “The Exchange Offer.”
THE EXCHANGE NOTES
The following summary contains basicAdditional information about the exchange notes and is not intended to be complete. It does not contain all the information that may be important to you. For a more complete understanding of the exchange notes, please refer to the section entitled "Description of notes."
The form and terms of the exchange notes are the same as the form and terms of the private notes, except that the exchange notes will be registered under the Securities Act and, therefore, the exchange notes will not be subject to the transfer restrictions, registration rights and provisions providing for an increase in the interest rate applicable to the private notes. The exchange notes will evidence the same debt as the private notes, and both the private notes and the exchange notes are governed by the same indenture and will vote as a single class on all matters. We refer to the private notes and the exchange notes together in this prospectus as the "notes." Unless the context otherwise requires, when we refer to the private notes, we also refer to the guarantees associated with the private notes, and when we refer to the exchange notes, we also refer to the guarantees associated with the exchange notes.
The following summary of the exchange notes is provided solely for your convenience. This summary is not intended to be complete. You should read the full text and more specific details contained elsewhere in this prospectus. For a more detailed description of the exchange notes, see "Description of notes."
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SUMMARY HISTORICAL FINANCIAL DATA
The following tables set forth summary historical consolidated summary financial data for LCIF and LCIF II and their respective subsidiaries as of, and for each of the years ended December 31, 2012, 2011, 2010, 2009 and 2008 and for the nine months ended September 30, 2013 and 2012. The results of operations for the nine month periods are not necessarily indicative of the results that may be expected for a full year. The summary historical financial data is qualified in its entirety by reference to, and should be read in conjunction with, the “Risk factors” section included elsewhere in this prospectus, each of LCIF’s and LCIF II’s consolidated financial statements and notes thereto included elsewhere in this prospectus, and the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section included elsewhere in this prospectus for additional information. Summary historical consolidated financial data for LXP is availableincluded in the documents incorporated by reference into this information statement/prospectus. See “Where You Can Find More Information.”
LCIF
LCIF is a Delaware limited partnership that as of September 30, 2023, owned 21 properties. Lex GP-1 Trust, the General Partner of LCIF, is wholly-owned by LXP. LXP owns approximately 99% of the partnership interest in LCIF. LXP controls LCIF through its ownership of the General Partner, and certain of the executive officers and trustees of the General Partner are also officers and/or trustees of LXP.
The consolidated ratioMerger
Pursuant to and in accordance with the terms and conditions of earningsthe Merger Agreement, at the Effective Time, LCIF will merge with and into LXP, with LXP as the surviving entity, and the LCIF Partnership Units will be automatically converted, without any action of the holders thereof, into Common Shares at the applicable conversion rate. As of the Effective Time, all such LCIF Partnership Units shall no longer be outstanding and shall automatically be canceled and shall cease to combined fixed chargesexist, and preferred dividends for LXP was less than 1.0,each holder of LCIF Partnership Units shall cease to have any rights with respect thereto, except to receive a deficit of $25.5 million, $64.9 million, $49.3 million, $12.0 million and $1.6 million,quarterly distribution for the years ended December 31, 2012, 2011, 2010, 2009 and 2008, respectively, and $10.1 million and $14.0 million, for the nine months ended September 30, 2013 and 2012, respectively.
The consolidated balance sheet information as of December 31, 2012 and 2011 and the consolidated statement of operations information and the consolidated statement of cash flows information for the years ended 2012, 2011 and 2010 has been derived from LCIF and LCIF II's historical consolidated financial statements which have been audited by KPMG LLP, an independent registered public accounting firm. The consolidated balance sheet information as of December 31, 2010, 2009 and 2008 and the consolidated statement of operations information and the consolidated statements of cash flows information for the years ended December 31, 2009 and 2008 have been derived from unaudited historical consolidated financial statements not included in this prospectus. The consolidated balance sheet information, the consolidated statement of operations information and the consolidated statement of cash flows information for the nine months ended September 30, 2013 and 2012 have been derived from the unaudited historical consolidated financial statements of LCIF and LCIF II, which are included elsewhere in this prospectus and include all adjustments of a normal and recurring nature that management considers necessary for a fair presentation of such information. LCIF's and LCIF II's consolidated results of operations and financial condition as of and for the nine months ended September 30, 2013 do not purport to be indicative of its financial condition or results of operations as of or for the yearquarter ending December 31, 2013.2023 in accordance with the Partnership Agreement.
The composition of the LXP Board will remain the same after the closing of the Merger. LXP’s current executive officers are expected to continue to hold office after the closing of the Merger.
Merger Consideration
At the Effective Time, each LCIF Partnership Unit you hold will automatically be converted into the right to receive a number of registered Common Shares equal to the number of LCIF Partnership Units you hold multiplied by the “Redemption Factor” (as defined in the Partnership Agreement, and which is currently equal to 1.126), except that to the extent you would be entitled to any fractional Common Shares upon such conversion, no fractional Common Shares will be issued and instead you will be entitled to receive the Cash Equivalent (as defined in the Merger Agreement) of such fractional shares. Subject to the satisfaction of the closing conditions set forth in the Merger
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Agreement, the Merger is expected to be consummated on or around December 31, 2023. The Common Shares are listed on the New York Stock Exchange and trade under the symbol “LXP”.
Rationale for the Transaction
Lepercq Corporate Income Fund L.P.In deciding to approve the Merger and the Merger Agreement, the General Partner and LXP considered a number of factors, both potentially positive and potentially negative, including:
● | Administrative Cost Savings: LXP currently owns approximately 99% of the equity interest in LCIF. The Merger is expected to result in administrative cost savings by eliminating the costs of maintaining LCIF as a separate entity, which savings will benefit holders of LCIF Partnership Units and holders of Common Shares. |
● | Tax Consequences: The Merger will be a taxable transaction for the holders of LCIF Partnership Units. Section 7.1.D of the Partnership Agreement provides that the General Partner is under no obligation to take into account the tax consequences of an LCIF partner in deciding whether to cause LCIF to take (or decline to take) any actions. |
● | Liquidity for Limited Partners: With limited exceptions, holders of LCIF Partnership Units are subject to restrictions on transfer and these is no trading market for such units. Common Shares issued as Merger Consideration will generally not be subject to restriction on transfer, except as specified in the LXP Declaration of Trust, and are listed on the NYSE under the symbol “LXP”. Therefore, holders of LCIF Partnership Unit will achieve better liquidity as a result of the Merger. |
● | Avoidance of Conflicts of Interest: LXP conducts businesses similar to that of LCIF. The conduct of these businesses and the allocation of business opportunities and investments between LCIF and LXP may give rise to conflicts of interests. LXP has no obligation to allocate business opportunities or investments to LCIF. In addition, there are complexities in allocating resources and costs for overhead, personnel and other matters between LCIF and LXP. These conflict situations will be eliminated through the Merger. |
● | Enhanced Asset Diversification: LXP has significantly more assets than LCIF. As a result of the Merger, holders of LCIF Partnership Units will benefit from increased asset diversification. |
● | Greater Capital Resources and Opportunities for Growth: While the General Partner believes that cash flows from operations will continue to provide adequate capital to fund LCIF’s expenses, LXP has significantly greater access to short- and long-term capital resources. These resources better position LXP to take advantage of investment opportunities, which will further enhance asset diversification. |
● | Elimination of dependency on LXP and its personnel: LCIF is not self-administered or self-managed and is dependent upon LXP and its personnel whose continued service is not guaranteed. Loss of these services could adversely impact LCIF’s operations. The Merger would ensure the continued service of LXP and its personnel because LXP is a self-administered and self-managed REIT. |
In view of the wide variety of factors considered by LCIF and LXP, neither LCIF nor LXP found it practicable to quantify or otherwise attempt to assign relative weights to the specific factors considered.
Interests of LXP in the Merger
LXP, which owns approximately 99% of the partnership interest in LCIF and wholly-owns the General Partner, may have interests in the Merger that may be different from, or in addition to, the interests of other limited partners generally. The General Partner and the LXP Board were aware of these interests and considered them, among other matters, in approving the Merger. These interests include:
Nine Months ended September 30, (unaudited) | Years ended December 31, | |||||||||||||||||||||||||||
(in thousands, except per unit data and ratios) | 2013 | 2012 | 2012 | 2011 | 2010 | 2009 | 2008 | |||||||||||||||||||||
(unaudited) | (unaudited) | |||||||||||||||||||||||||||
Total gross revenues | $ | 40,862 | $ | 38,908 | $ | 51,371 | $ | 51,452 | $ | 54,078 | $ | 53,670 | $ | 52,398 | ||||||||||||||
Expenses applicable to revenues | (23,842 | ) | (22,886 | ) | (30,342 | ) | (30,842 | ) | (31,359 | ) | (30,991 | ) | (30,046 | ) | ||||||||||||||
Interest and amortization expense | (6,299 | ) | (8,965 | ) | (11,598 | ) | (13,143 | ) | (15,499 | ) | (16,960 | ) | (16,611 | ) | ||||||||||||||
Income from continuing operations | 8,076 | 5,480 | 7,535 | 6,332 | 6,176 | 3,583 | 3,017 | |||||||||||||||||||||
Total discontinued operations | 5,639 | 119 | 212 | (2,791 | ) | 10,864 | (22,479 | ) | 32,192 | |||||||||||||||||||
Net income (loss) | 13,715 | 5,599 | 7,747 | 3,541 | 17,040 | (18,896 | ) | 35,209 | ||||||||||||||||||||
Income from continuing operations per unit | 0.22 | 0.18 | 0.24 | 0.21 | 0.21 | 0.12 | 0.10 | |||||||||||||||||||||
Income (loss) from discontinued operations per unit | 0.16 | 0.01 | 0.01 | (0.09 | ) | 0.36 | (0.75 | ) | 1.07 | |||||||||||||||||||
Net income (loss) per unit | 0.38 | 0.19 | 0.25 | 0.12 | 0.57 | (0.63 | ) | 1.17 | ||||||||||||||||||||
Cash distributions per weighted-average unit (rounded) | 0.69 | 0.67 | 0.90 | 0.81 | 0.77 | 0.54 | 1.37 | |||||||||||||||||||||
Net cash provided by operating activities | 23,739 | 22,209 | 30,427 | 29,983 | 30,877 | 34,198 | 34,364 | |||||||||||||||||||||
Net cash provided by (used in) investing activities | 20,143 | (2,501 | ) | (58,732 | ) | 16,594 | (653 | ) | 25,790 | 34,585 | ||||||||||||||||||
Net cash provided by (used in) financing activities | (40,900 | ) | (21,886 | ) | 27,180 | (45,957 | ) | (31,688 | ) | (58,650 | ) | (80,963 | ) | |||||||||||||||
Ratio of earnings to fixed charges | 2.29 | 1.61 | 1.65 | 1.48 | 1.40 | 1.21 | 1.18 |
As of September 30, (unaudited) | As of December 31, | |||||||||||||||||||||||||||
(in thousands) | 2013 | 2012 | 2012 | 2011 | 2010 | 2009 | 2008 | |||||||||||||||||||||
(unaudited) | (unaudited) | (unaudited) | ||||||||||||||||||||||||||
Real estate assets, net, including real estate - intangible assets | $ | 402,186 | N/A | $ | 448,953 | $ | 412,579 | $ | 453,318 | $ | 504,708 | $ | 562,603 | |||||||||||||||
Loans receivable, net | 33,439 | N/A | 34,266 | 38,234 | 36,253 | 36,972 | 41,039 | |||||||||||||||||||||
Total assets | 472,369 | N/A | 511,465 | 478,511 | 520,361 | 569,475 | 643,867 | |||||||||||||||||||||
Mortgages and notes payable, including discontinued operations | 94,644 | N/A | 155,675 | 202,884 | 243,301 | 270,931 | 288,369 | |||||||||||||||||||||
Co-borrower debt | 53,453 | N/A | 39,385 | 10,013 | 10,687 | 41,770 | 41,756 | |||||||||||||||||||||
Partners' capital | 303,524 | N/A | 138,895 | 166,188 | 186,385 | 161,326 | 196,341 |
● | Stepped up basis: Upon consummation of the Merger, LXP will receive a stepped-up tax basis on its additional investment in LCIF’s assets through the Merger. |
● | Reimbursement of Expenses: LXP pays for certain general, administrative and other costs on LCIF’s behalf from time to time, which are reimbursable by LCIF in accordance with the Partnership Agreement. The reimbursement obligation will be extinguished upon the consummation of the Merger. |
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Lepercq Corporate Income Fund II L.P.
Nine Months ended September 30, (unaudited) | Years ended December 31, | |||||||||||||||||||||||||||
(in thousands, except per unit data and ratios) | 2013 | 2012 | 2012 | 2011 | 2010 | 2009 | 2008 | |||||||||||||||||||||
(unaudited) | (unaudited) | |||||||||||||||||||||||||||
Total gross revenues | $ | 10,506 | $ | 10,673 | $ | 14,246 | $ | 11,392 | $ | 7,885 | $ | 8,185 | $ | 11,251 | ||||||||||||||
Expenses applicable to revenues | (4,842 | ) | (4,840 | ) | (6,446 | ) | (5,406 | ) | (4,257 | ) | (4,172 | ) | (5,810 | ) | ||||||||||||||
Interest and amortization expense | (1,656 | ) | (2,726 | ) | (3,286 | ) | (2,970 | ) | (3,259 | ) | (3,496 | ) | (5,531 | ) | ||||||||||||||
Income (loss) from continuing operations | 3,940 | 3,741 | 5,106 | 8,149 | 6,539 | (284 | ) | (1,372 | ) | |||||||||||||||||||
Total discontinued operations | 125 | (1,764 | ) | (2,111 | ) | (6,894 | ) | 1,393 | 2,082 | 7,898 | ||||||||||||||||||
Net income (loss) | 4,065 | 1,977 | 2,995 | 1,255 | 7,932 | 1,798 | 6,526 | |||||||||||||||||||||
Income from continuing operations per unit | 0.32 | 0.62 | 0.68 | 1.35 | 1.09 | (0.05 | ) | (0.23 | ) | |||||||||||||||||||
Income (loss) from discontinued operations per unit | 0.01 | (0.29 | ) | (0.28 | ) | (1.14 | ) | 0.23 | 0.35 | 1.31 | ||||||||||||||||||
Net income per unit | 0.33 | 0.33 | 0.40 | 0.21 | 1.32 | 0.30 | 1.08 | |||||||||||||||||||||
Cash distributions per weighted-average unit (rounded) | 0.61 | 0.72 | 0.90 | 0.89 | 0.84 | 0.60 | 1.42 | |||||||||||||||||||||
Net cash provided by operating activities | 6,961 | 4,849 | 7,293 | 13,693 | 17,468 | 5,575 | 5,554 | |||||||||||||||||||||
Net cash provided by (used in) investing activities | 1,094 | 1,667 | 2,202 | (23,110 | ) | (53,720 | ) | 34,582 | 8,872 | |||||||||||||||||||
Net cash provided by (used in) financing activities | (6,263 | ) | (17,460 | ) | (20,196 | ) | 10,325 | 41,855 | (25,867 | ) | (28,350 | ) | ||||||||||||||||
Ratio of earnings to fixed charges (1) | 3.39 | 2.38 | 2.56 | 3.07 | 3.01 | N/A | N/A |
(1) N/A - Ratio is below 1.0, deficit of $282 and $1,316 exists at December 31, 2009 and 2008, respectively.
As of September 30, (unaudited) | As of December 31, | |||||||||||||||||||||||||||
(in thousands) | 2013 | 2012 | 2012 | 2011 | 2010 | 2009 | 2008 | |||||||||||||||||||||
(unaudited) | (unaudited) | (unaudited) | ||||||||||||||||||||||||||
Real estate assets, net, including real estate - intangible assets | $ | 103,339 | N/A | $ | 118,200 | $ | 129,518 | $ | 108,378 | $ | 103,863 | $ | 142,356 | |||||||||||||||
Loans receivable, net | 21,636 | N/A | 21,942 | 21,515 | 36,743 | — | — | |||||||||||||||||||||
Total assets | 143,917 | N/A | 164,232 | 186,603 | 174,421 | 123,837 | 160,751 | |||||||||||||||||||||
Mortgages and notes | 31,350 | N/A | 48,989 | 87,300 | 73,517 | 71,272 | 117,037 | |||||||||||||||||||||
Co-borrower debt | 15,336 | N/A | 11,601 | 3,438 | 2,194 | 8,092 | 8,733 | |||||||||||||||||||||
Partners' capital | 92,964 | N/A | 77,649 | 33,859 | 39,189 | 30,435 | 31,617 |
SELECTED UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL AND OTHER DATA
The following table shows pro forma information about LCIF’s financial condition and results of operations, including per unit data, after giving effect to the consummation of the merger of LCIF II with and into LCIF on December 30, 2013, with LCIF as the surviving entity. The table sets forth the information as if the merger had become effective on September 30, 2013, with respect to the balance sheet information, and as of January 1, 2012, with respect to the income statement information. The merger will be accounted for as a business combination between entities under common control using LCIF II’s historical cost basis.
The information is based on, and should be read together with, the historical financial statements, including the notes thereto, of each of LCIF and LCIF II and the more detailed unaudited pro forma financial information, including the notes thereto, appearing elsewhere in this prospectus. See “Index To Financial Statements.”
The unaudited pro forma information does not attempt to predict or suggest future results. It also does not necessarily reflect what the historical results of the combined company would have been had the operating partnerships been combined during these periods.
Pro Forma Combined | ||||||||
(Unaudited, dollars in thousands) | ||||||||
Year ended | Nine months ended | |||||||
December 31, 2012 | September 30, 2013 | |||||||
Total gross revenues | $ | 65,617 | $ | 51,368 | ||||
Expenses applicable to revenue | (36,788 | ) | (28,684 | ) | ||||
Interest and amortization expense | (14,884 | ) | (7,955 | ) | ||||
Income from continuing operations | 12,641 | 12,016 | ||||||
Income from continuing operations per unit | 0.33 | 0.25 | ||||||
Real estate assets, net, including real estate intangible assets | N/A | 505,525 | ||||||
Loans receivable, net | N/A | 55,075 | ||||||
Total assets | N/A | 616,286 | ||||||
Mortgages and notes payable | N/A | 125,994 | ||||||
Co-borrower debt | N/A | 68,789 | ||||||
Partners’ capital | N/A | 396,488 |
You should carefully consider the risks described below and the risk factors set forth in the documents incorporated by reference herein before making a decision to exchange your private notes for the exchange notes in the exchange offer. If any of the events described in the risk factors below or in the documents incorporated by reference herein occur, our business, financial condition, operating results and prospects could be materially adversely affected, which in turn could adversely affect our ability to repay the notes. The risk factors set forth below and in the documents incorporated by reference herein are generally applicable to the private notes as well as the exchange notes. These risks are not the only ones we face. Additional risks not presently known to us or that are currently deemed immaterial could also materially and adversely affect our financial condition, results of operations, business and prospects. The trading price of the notes, if any, could decline due to any of these risks, and you may lose all or part of your investment. This prospectus and the documents incorporated herein by reference herein also contain forward-looking statements that involve risks and uncertainties. Actual results could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including the risks faced by us and described below and in the documents incorporated herein by reference.
Risks related to this exchange offer and the exchange notes
Our substantial indebtedness could adversely affect our financial condition and LXP’s and the subsidiary guarantors’ ability to fulfill their obligations under the notes and otherwise adversely impact our business and growth prospects.
We have a substantial amount of debt. As of September 30, 2013, our total consolidated indebtedness was approximately $1.8 billion, consisting of $1.0 billion of mortgages and notes payable, $67.0 million outstanding on our unsecured revolving credit facility, $250.0 million of private notes, $319.0 million of term loans, $29.0 million of the 6.00% Convertible Notes due 2030, and $129.1 million of the Trust Preferred Securities. In addition, as of September 30, 2013, $511.4 million were available for us to borrow under our principal credit agreement, subject to covenant compliance.
Our substantial indebtedness could have important consequences to you. For example, it could:
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 will 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.
The effective subordination of the exchange notes and the guarantees may reduce amounts available for payment of the exchange notes and the guarantees.
Both the exchange notes and the guarantees are unsecured. The holders of any secured debt of LXP and its subsidiary guarantors may foreclose on the assets securing such debt, reducing the cash flow from the foreclosed property available for payment of unsecured debt, including the exchange notes and the guarantees. The holders of any secured debt of LXP and its subsidiary guarantors also would have priority over unsecured creditors in the event of their bankruptcy, liquidation or similar proceeding. As of September 30, 2013, LXP and the subsidiary guarantors had no secured indebtedness and $0.8 billion of unsecured and unsubordinated indebtedness outstanding.
Not all of LXP’s subsidiaries are guarantors, assets of non-guarantor subsidiaries may not be available to make payments on the exchange notes and the subsidiary guarantees may be released in the future if certain events occur.
On September 30, 2013, all of the subsidiary guarantors that initially guaranteed the private notes, except for LCIF and LCIF II, were released from their obligations under our principal credit agreement, which, in turn, allowed for the release of such subsidiary guarantors from their obligations under the guaranty of the private notes. As a result of this and the merger of LCIF II with and into LCIF on December 30, 2013, only LCIF remains as a subsidiary guarantor of the private notes and will become a guarantor of the exchange notes.
In addition to LCIF, any other existing or future subsidiaries of LXP that are borrowers or guarantors under our then principal credit agreement will provide guarantees of the exchange notes. Accordingly, LXP’s existing and future subsidiaries that do not guarantee the obligations under our principal credit agreement will similarly not be guarantors of the exchange notes. Payments on the exchange notes are only required to be made by LXP and the subsidiary guarantors. As a result, no payments are required to be made from assets of the non-guarantor subsidiaries unless those assets are transferred, by dividend or otherwise, to LXP or any of the subsidiary guarantors.
In the event of a bankruptcy, liquidation or reorganization of any of the 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 LXP or any of the subsidiary guarantors.
In addition, any subsidiary guarantor, including LCIF, will be deemed released if such subsidiary guarantor’s obligations as a borrower or guarantor under our principal credit agreement terminate 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 the exchange notes are no longer guaranteed by any of our subsidiaries in the future, the exchange notes will be LXP’s obligations exclusively. All of our assets are held through our operating partnerships 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.
As of September 30, 2013, LXP and its subsidiaries had approximately $2.5 billion of unpledged assets, which consisted of undepreciated real estate and loans receivable.
We may not be able to generate sufficient cash flow to meet our debt service obligations.
Our ability to make payments on and to refinance our indebtedness, including the ability of LXP and the subsidiary guarantors to make payments on and refinance the exchange notes, and to fund our operations, working capital and capital expenditures, 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, including the exchange notes, or to fund our other liquidity needs.
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, including the exchange notes, on or before maturity. Our ability to refinance our indebtedness or obtain additional financing will depend on, among other things:
As a result, we may not be able to refinance any of our indebtedness, including the exchange notes, 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, including payments on the exchange notes. 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.
Despite our substantial indebtedness, we may still incur significantly more debt, which could exacerbate any or all of the risks related to our indebtedness, including LXP’s and the subsidiary guarantors’ inability to pay the principal of or interest on the exchange notes.
Although the agreements governing our unsecured indebtedness and the indenture governing the notes limit our ability to incur additional indebtedness, these restrictions are subject to a number of qualifications and exceptions and, under certain circumstances, debt incurred in compliance with these restrictions could be substantial. To the extent that we incur additional indebtedness or other such obligations, we may face additional risks associated with our indebtedness, including LXP’s and the subsidiary guarantors’ possible inability to pay the principal of or interest on the exchange notes.
There is currently no trading market for the exchange notes, and an active public trading market for the exchange notes may not develop or, if it develops, may not be maintained or be public. The failure of an active liquid trading market for the exchange notes to develop or be maintained is likely to adversely affect the market price and liquidity of the exchange notes.
The exchange notes are a new issue of securities with no established trading market. LXP does not intend to apply for listing of the exchange notes on any securities exchange or for quotation of the exchange notes on any automated dealer quotation system.
Accordingly, an active trading market may not develop for the exchange notes and, even if one develops, may not be maintained. If an active trading market for the exchange notes does not develop or is not maintained, the market price and liquidity of the exchange notes is likely to be adversely affected, and holders may not be able to sell their exchange notes at desired times and prices or at all. If any of the exchange notes are traded after their purchase, they may trade at a discount from their purchase price.
The liquidity of the trading market, if any, and future trading prices of the exchange notes will depend on many factors, including, among other things, prevailing interest rates, the financial condition, results of operations, business, prospects and credit quality of us, and other comparable entities, the market for similar securities and the overall securities market, and may be adversely affected by unfavorable changes in any of these factors, some of which are beyond our control. In addition, market volatility or events or developments in the credit markets could materially and adversely affect the market value of the exchange notes, regardless of our financial condition, results of operations, business, prospects or credit quality.
The indenture governing the exchange notes, the principal credit agreement governing our $400.0 million unsecured revolving credit facility and our $250.0 million unsecured term loan and the term loan agreement governing our $255.0 million unsecured term loan contain restrictive covenants that limit our operating flexibility.
The indenture governing the exchange notes contains financial and operating covenants that, among other things, restrict our ability to take specific actions, even if we believe them to be in our best interest, including restrictions on our ability to:
In addition, the principal credit agreement and term loan agreement require us to meet specified financial and operating covenants. These covenants may restrict our ability to expand or fully pursue our business strategies. Our ability to comply with these and other provisions of the indenture governing the exchange notes, the principal credit agreement and the term loan agreement may be affected by changes in our operating and financial performance, changes in general business and economic conditions, adverse regulatory developments or other events adversely impacting us. The breach of any of these covenants could result in a default under our indebtedness, which could cause those and other obligations to become due and payable. If any of our indebtedness is accelerated, we may not be able to repay it.
Federal and state statutes allow courts, under specific circumstances, to void guarantees and require holders of the exchange notes to return payments received from LXP or the subsidiary guarantors.
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:
Intercompany advances: LXP has an intercompany loan with LCIF that is based on the rate of LXP’s revolving credit facility. As of September 30, 2023, the balance of the loan was |
In addition, any payment by that guarantor pursuant to its guarantee could be voided and required to be returned to the guarantor, or toThe Merger Agreement
The following is a fund for the benefitsummary 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:
We cannot be sure as to the standards that a court would use to determine whether or not the subsidiary guarantors were solvent at the relevant time, or, regardless of the standard that the court uses, that the issuance of the guarantees of the exchange notes would not be voided or any guarantee of the exchange notes would not be subordinated to that subsidiary guarantor’s other debt.
If a case were to occur, any guarantee of the exchange notes incurred by one or more of the subsidiary guarantors could also be subject to the claim that, since the guarantee was incurred for LXP’s benefit, and only indirectly for the benefit of the subsidiary guarantor, the obligations of the applicable subsidiary guarantor were incurred for less than fair consideration.
A court could thus void the obligations under the guarantees or subordinate the guarantees to the applicable guarantor’s other debt or take other action detrimental to holders of the exchange notes.
An increase in interest rates could result in a decrease in the relative value of the exchange notes.
In general, as market interest rates rise, notes bearing interest at a fixed rate generally decline in value because the premium, if any, over market interest rates will decline. Consequently, if you acquire exchange notes and market interest rates increase, the market value of your exchange notes may decline. We cannot predict the future level of market interest rates.
A downgrade in LXP’s credit ratings could materially adversely affect our business and financial condition.
In June 2013, we received a senior unsecured debt rating of Baa2 with a stable outlook from Moody’s Investor Services, Inc. and a senior unsecured debt rating of BBB- with a stable outlook from Standard & Poor’s Rating Services. We plan to manage our operations to maintain these credit ratings with a capital structure consistent with or better than our current profile, but there can be no assurance that we will be able to maintain the current credit ratings. Any downgrades in terms of ratings or outlook by any of the noted rating agencies could have a material adverse impact on our cost and availability of capital, which could in turn have a material adverse impact on our financial condition, results of operations and liquidity and the trading price of the exchange notes.
LXP may choose to redeem the exchange notes when prevailing interest rates are relatively low.
The exchange notes are redeemable at LXP’s option and LXP may choose to redeem some or all of the exchange notes from time to time, especially when prevailing interest rates are lower than the rate borne by the exchange notes. If prevailing rates are lower at the time of redemption, you would not be able to reinvest the redemption proceeds in a comparable security at an effective interest rate as high as the interest rate on the exchange notes being redeemed. See “Description of notes-LXP’s redemption rights.”
If you fail to exchange your private notes, they will continue to be restricted securities and may become less liquid.
Because we anticipate that most holders of private notes will elect to exchange their private notes, we expect that the liquidity of the market for any private notes remaining after the completion of the exchange offer may be substantially limited. Any private note tendered and exchanged in the exchange offer will reduce the aggregate principal amount of the private notes outstanding. Following the exchange offer, if you did not validly tender your private notes you generally will not have any further registration rights and your private notes will continue to be subject to transfer restrictions. Private notes which you do not tender or we do not accept will, following the exchange offer, continue to be restricted securities. You may not offer or sell any private notes you own following the exchange offer except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act and applicable state securities laws. Accordingly, the liquidity of the market for any private notes could be adversely affected.
You may not receive exchange notes in the exchange offer if the procedures for the exchange offer are not followed.
We will issue the exchange notes in exchange for your private notes only if you tender the private notes and deliver a properly completed and duly executed letter of transmittal or, in the case of book-entry delivery, an agent’s message, which binds holders of the private notes to the terms of the letter of transmittal and consent, and other required documents before expiration of the exchange offer. You should allow sufficient time to ensure timely delivery of the necessary documents. Neither the exchange agent nor we are under any duty to give notification of defects or irregularities with respect to the tenders of private notes for exchange. If you are the beneficial owner of private notes that are registered in the name of your broker, dealer, commercial bank, trust company or other nominee, and you wish to tender in the exchange offer, you should promptly contact the person in whose name your private notes are registered and instruct that person to tender on your behalf.
Merger Agreement. We may repurchase any private notes that are not tendered in the exchange offer on terms that are more favorable to the holders of the private notes than the terms of the exchange offer.
Although we do not currently intend to do so, we may, to the extent permitted by applicable law, purchase private notes in the open market, in privately negotiated transactions, through subsequent tender or exchange offers or otherwise. Any other purchases may be made on the same terms or on terms that are more or less favorable to holders than the terms of this exchange offer. We reserve the right to repurchase any private notes not tendered. If we decide to repurchase private notes on terms that are more favorable than the terms of the exchange offer, those holders who decide not to participate in the exchange offer could be better off than those that participated in the exchange offer.
Purpose of the Exchange Offer
On June 10, 2013, LXP issued $250.0 million of the private notes to Wells Fargo Securities, LLC, J.P. Morgan Securities LLC, Barclays Capital Inc., Merrill Lynch, Pierce, Fenner & Smith Incorporated, BB&T Capital Markets, a division of BB&T Securities, LLC, KeyBanc Capital Markets Inc., Capital One Southcoast, Inc., Fifth Third Securities, Inc., PNC Capital Markets LLC, RBS Securities Inc., Regions Securities LLC, TD Securities (USA) LLC and U.S. Bancorp Investments, Inc., the initial purchasers, pursuant to a purchase agreement. The initial purchasers subsequently sold the private notes to “qualified institutional buyers,” as defined in Rule 144A under the Securities Act, in reliance on Rule 144A, and to certain non-U.S. persons located outside the United States, in reliance on Regulation S under the Securities Act. As a condition to the sale of the private notes, we entered into a registration rights agreement with the initial purchasers on June 10, 2013. The registration rights agreement provides that:
Upon the effectiveness of the exchange offer registration statement, we will offer the exchange notes in exchange for the private notes. The registration rights agreement is listed as an exhibit to the registration statement of which this prospectus is part. The description of the registration rights agreement does not purport to be complete andThis summary is subject to, and is qualified in its entirety by reference to, the actual provisionsMerger Agreement, a complete copy of which is attached as Annex A to this information statement/prospectus. The rights and termsobligations of the registration rights agreement, whichparties are incorporated hereingoverned by reference.
Resalethe express terms and conditions of the Exchange NotesMerger Agreement and not by this summary or any other information contained in this information statement/prospectus. We encourage you to carefully read the Merger Agreement in its entirety, as it is the principal document that governs the Merger.
Under existing interpretations by the staffStructure of the Commission contained in no-action letters to third parties,Merger. The Merger Agreement provides for the exchange notes will generally be freely transferable by holders (other than by any holder that is an affiliate (as defined in Rule 405merger of LCIF with and into LXP, with LXP as the Securities Act) of us) after the exchange offer without further registration under the Securities Act, except that participating broker-dealers (as defined below)surviving company.
Governing Documents. There will be requiredno change to deliver a prospectus in connection with any resalethe declaration of trust (the “LXP Declaration of Trust”) or other transferby-laws of the exchange notes as described below.
If you wish to exchange your private notes for exchange notes in the exchange offer, you will be required to make certain representations. If you are not able to make these representations, you will not be entitled to participate in the exchange offer or to exchange your private notes for exchange notes.
Any broker-dealer who holds private notes acquired for its own accountLXP as a result of market-making activitiesthe Merger.
Trustees and Officers. There will be no change to the trustees or other trading activities (a participating broker-dealer) who exchanges those private notes for exchange notes in the exchange offer must deliverofficers of LXP as a prospectus meeting the requirementsresult of the Securities Act in connection withMerger.
Merger Consideration. At the Effective Time, each issued and outstanding LCIF Partnership Unit (other than units held by the General Partner) will automatically be converted into the right to receive 1.126 registered Common Shares, except that to the extent a holder of LCIF Partnership Units would be entitled to any resale of those exchange notes. We understand that the staff of the Commission has taken the position that participating broker-dealers may fulfill their prospectus delivery requirements with respect to exchange notes, other than a resale of an unsold allotment from the initial offering of the private notes, with the prospectus contained in the exchange offer registration statement. Under the registration rights agreement, for a period of one year following the expiration date of the exchange offer, participating broker-dealersfractional Common Shares upon such conversion, no fractional Common Shares will be issued and instead such holder will be entitled to usereceive the prospectus containedCash Equivalent (as defined in the exchange offer registration statement in connectionMerger Agreement) of such fractional Common Shares (without interest and less any applicable withholding taxes).
Closing of the Merger. The closing of the Merger will take place at such time and on a date to be specified by the parties, subject to satisfaction of the conditions to the Merger. The Merger is currently expected to occur on or around December 31, 2023. At the closing, LCIF and LXP will file articles of merger with the resaleState Department of Assessments and Taxation of Maryland and a certificate of merger with the Secretary of State of the exchange notes (and weState of Delaware. The Merger will agree to keepbecome effective at such time as the exchange offer registration statement continuously effectivearticles of merger are accepted for record by the State Department of Assessments and Taxation of Maryland and the related prospectus current during such period).
Termscertificate of merger is accepted for filing by the Secretary of State of the Exchange Offer
UponState of Delaware, or at such later time as the termsparties have agreed and subject to the conditions described in this prospectus anddesignated in the accompanying letterarticles of transmittal, which together constitutemerger and certificate of merger (the “Effective Time”).
Withholding Rights. LXP will be entitled to deduct and withhold from the exchange offer, we will accept any and all private notes validly tendered and not withdrawn before the expiration date. We will issue $2,000 principal amount of exchange notes in exchange for each $2,000 principal amount of outstanding private notes surrenderedconsideration otherwise payable pursuant to the exchange offer. You may tender private notes only in integral multiplesMerger Agreement to any holder of $1,000 in excess thereof.
The formLCIF Partnership Units such amounts as they are required to deduct and termswithhold with respect to the making of the exchange notes are the same as the form and terms of the private notes except that:
The exchange notes will evidence the same debt as the private notes and will be issued under the same indenture, so the exchange notes and the private notes will be treated as a single class of debt securities under the indenture.
As of the date of this prospectus, $250.0 million in aggregate principal amount of the private notes are outstanding and registered in the name of Cede & Co., as nominee for DTC. Only registered holders of the private notes, or their legal representative or attorney-in-fact, as reflected on the records of the trustee under the indenture, may participate in the exchange offer. We will not set a fixed record date for determining registered holders of the private notes entitled to participate in the exchange offer.
You do not have any appraisal or dissenters' rights under the indenture in connection with the exchange offer. We intend to conduct the exchange offer in accordance with the provisions of the registration rights agreement and the applicable requirements of the Securities Act, the Exchange ActCode and the rules and regulations promulgated thereunder, or any provision of applicable law.
Surrender and Payment. The Merger Agreement provides that, promptly following the Effective Time, LXP will cause the transfer agent to pay and deliver to each holder of LCIF Partnership Units the Merger Consideration, together with any amounts payable in respect of cash in lieu of fractional shares.
Distributions. The Merger Agreement provides that LXP assumes any obligation of LCIF to pay to holders of LCIF Partnership Units as of immediately prior to the Effective Time the Distributions of Operating Cash Flow (as defined in the Partnership Agreement) that have a Partnership Record Date (as defined in the Partnership Agreement) prior to the Effective Time and which have not been paid as of the Commission.Effective Time.
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We
Representations and Warranties. The Merger Agreement contains limited customary representations and warranties made by LXP to LCIF and LCIF to LXP. The representations and warranties in the Merger Agreement do not survive the Effective Time.
Conditions to the Merger. The completion of the Merger is subject to customary closing conditions, including that (i) the registration statement on Form S-4 of which this information statement/prospectus forms a part is effective and the subject of any stop order or proceedings seeking a stop order, (ii) the Common Shares to be issued in the Merger have been approved for listing on the NYSE, and (iii) no Governmental Authority (as defined in the Merger Agreement) in the United States has enacted, issued, promulgated, enforced or entered any Law (as defined in the Merger Agreement ) (whether temporary, preliminary or permanent) which is then in effect and has the effect of making the Merger illegal or otherwise restricting, preventing or prohibiting consummation of the Merger.
Termination of the Merger Agreement. The Merger Agreement may be terminated at any time prior to the Effective Time (i) by the mutual written consent of LCIF and LXP or (ii) by either party if a Governmental Authority permanently restrains, enjoins or otherwise prohibits the Merger.
Effect of Termination. If the Merger Agreement is terminated, then the Merger Agreement will be deemedvoid and of no further force or effect, and there will be no liability on the part of LCIF or LXP, or their respective officers, directors, trustees, subsidiaries or partners, as applicable, except that such termination shall not relieve any party of any liability or damages resulting from or arising out of any fraud or willful and material breaches of the Merger Agreement.
Amendment. Subject to have accepted validly tendered private notes when, ascompliance with applicable law and if we have given written noticethe Partnership Agreement, the Merger Agreement may not be amended except by an instrument signed by each of acceptancethe parties prior to the exchange agent.Effective Time.
Governing Law. The exchange agentMerger Agreement and all related transactions or actions are governed by the Laws of the State of New York, except to the extent required by the laws of the State of Maryland or the State of Delaware, the Merger will actbe governed by such laws.
The foregoing summary of the Merger Agreement is qualified in its entirety by the Merger Agreement, a copy of which is attached as your agent forAnnex A to this information statement/prospectus and incorporated into this information statement/prospectus.
No Dissenters’ or Appraisal Rights
No LCIF Partnership Unitholders will have dissenters’ or appraisal rights under applicable law or contractual appraisal rights under the purposesPartnership Agreement or the Merger Agreement.
Listing of receiving the exchange notes from us.
If you tender private notesCommon Shares to be Issued in the exchange offer you will notMerger
LXP expects to obtain approval to list the Common Shares to be required to pay brokerage commissions or fees with respect to the exchange of private notesissued pursuant to the exchange offer. We will pay all charges and expenses, other thanMerger Agreement on the applicable taxes described below, in connection withNYSE, subject to official notice of issuance, which approval is a condition to the exchange offer.
Expiration Date; Extensions; Amendments
The term "expiration date" will mean 5:00 p.m., New York City time on , 2014 (the 21st business day following commencementclosing of the exchange offer), unless we extendMerger.
Distributions
If the exchange offer, in which caseMerger closes, as expected, on or around December 31, 2023, LCIF will have the term expiration date will mean the latest date and time to which we extend the exchange offer.
To extend the exchange offer, we will notify the exchange agent and each registered holder of any extension in writing by a press release or other public announcement before 9:00 a.m., New York City time, on the next business day after the previously scheduled expiration date. The notice of extension will disclose the aggregate principal amount of the private notes that have been tendered as of the date of such notice.
We reserve the right, in our discretion:
in each case by written notice of the delay, extension or termination to the exchange agent and by press release or other public announcement.
We will follow any delay in acceptance, extension or termination as promptly as practicable by written notice to the registered holders by a press release or other public announcement. If we amend the exchange offer in a manner we determine constitutes a material change, we will promptly disclose the amendment in a prospectus supplement that we will distribute to the registered holders. We will also extend the exchange offer for a period of five to ten business days, depending upon the significance of the amendment and the manner of disclosure, if the exchange offer would otherwise expire during the five to ten business day period.
Interest on the Exchange notes
The exchange notes will bear interest at the same rate and on the same terms as the private notes. Consequently, the exchange notes will bear interest at a rate equal to 4.25% per year (calculated using a 360-day year). Interestobligation (which will be payable on the exchange notes semi-annually on each June 15 and December 15, beginning June 15, 2014.
Interest on the exchange notes will accrue from the last interest payment date on which interest was paid on the private notes or, if no interest has been paid on the private notes, from the date of initial issuance of the private notes. We will deem the rightassumed by LXP) to receive any interest accrued but unpaid on the private notes waived by you if we accept your private notes for exchange.
Procedures for Tendering
Valid Tender
Except as described below,pay a tendering holder must, prior to the expiration date, transmit to the exchange agent, at the address listed under the heading"–Exchange Agent":
In addition, a tendering holder must:
business on December 29, 2023.
The term "agent's message" means a message, transmitted by DTC to and received by the exchange agent and forming a partRestrictions on Resale of a book-entry confirmation, that states that DTC has received an express acknowledgment that the tendering holder agrees to be bound by the letter of transmittal and that we may enforce the letter of transmittal against this holder.
If the letter of transmittal is signed by a person other than the registered holder of private notes, the letter of transmittal must be accompanied by a written instrument of transfer or exchange in satisfactory form duly executed by the registered holder with the signature guaranteed by an eligible institution. The private notes must be endorsed or accompanied by appropriate powers of attorney. In either case, the private notes must be signed exactly as the name of any registered holder appears on the private notes.
If the letter of transmittal or any private notes or powers of attorney are signed by trustees, executors, administrators, guardians, attorneys-in-fact, officers of corporations or others acting in a fiduciary or representative capacity, these persons should so indicate when signing. Unless waived by us, proper evidence satisfactory to us of their authority to so act must be submitted.
By tendering private notes pursuant to the exchange offer, each holder will represent to us that, among other things:
Merger
The method of delivery of private notes, letters of transmittal and all other required documents is at your election and risk. If the delivery is by mail, we recommend that you use registered mail, properly insured, with return receipt requested. In all cases, you should allow sufficient time to assure timely delivery. You should not send letters of transmittal or private notes to us.
If you are a beneficial owner whose private notes are registered in the name of a broker, dealer, commercial bank, trust company or other nominee, and wish to tender, you should promptly instruct the registered holder to tender on your behalf. Any registered holder that is a participant in DTC's book-entry transfer facility system may make book-entry delivery of the private notes by causing DTC to transfer the private notes into the exchange agent's account, including by means of DTC's Automated Tender Offer Program.
Signature Guarantees
Signatures on a letter of transmittal or a notice of withdrawal must be guaranteed, unless the private notes surrendered for exchange are tendered:
If signatures on a letter of transmittal or a notice of withdrawal are required to be guaranteed, the guarantees must be by an "eligible institution." An "eligible institution" is an "eligible guarantor institution" meeting the requirements of the registrar for the notes, which requirements include membership or participation in the Security Transfer Agent Medallion Program, or STAMP, or such other "signature guarantee program" as may be determined by the registrar for the notes in addition to, or in substitution for, STAMP, all in accordance with the Exchange Act.
Book-Entry Transfer
The exchange agent will make a request to establish an account for the private notes at DTC for purposes of the exchange offer within two business days after the date of this prospectus. Any financial institution that is a participant in DTC's systems must make book-entry delivery of private notes by causing DTC to transfer those private notes into the exchange agent's account at DTC in accordance with DTC's procedure for transfer. The participant should transmit its acceptance to DTC at or prior to the expiration date or comply with the guaranteed delivery procedures described below. DTC will verify this acceptance, execute a book-entry transfer of the tendered private notes into the exchange agent's account at DTC and then send to the exchange agent confirmation of this book-entry transfer. The confirmation of this book-entry transfer will include an agent's message confirming that DTC has received an express acknowledgment from this participant that this participant has received and agrees to be bound by the letter of transmittal and that we may enforce the letter of transmittal against this participant.
Delivery of exchange notesCommon Shares issued in the exchange offer may be effected through book-entry transfer at DTC. However, the letter of transmittal or facsimile of it or an agent's message, with any required signature guarantees and any other required documents, must:
Delivery of documents to DTC in accordance with DTC's procedures does not constitute delivery to the exchange agent.
Guaranteed Delivery
If a registered holder of private notes desires to tender the private notes, and the private notes are not immediately available, or time will not permit the holder's private notes or other required documents to reach the exchange agent before the expiration date, or the procedure for book-entry transfer described above cannot be completed on a timely basis, a tender may nonetheless be made if:
Determination of Validity
We will determine in our sole discretion all questions as to the validity, form and eligibility of private notes tendered for exchange. This discretion extends to the determination of all questions concerning the time of receipt, acceptance and withdrawal of tendered private notes. These determinationsMerger will be final and binding. We reserve the absolute right to reject any and all private notes not properly tendered or any private notes our acceptance of which would, in the opinion of our counsel, be unlawful. We also reserve the right to waive any defects, irregularities or conditions of tender as to any particular private note either before or after the expiration date, including the right to waive the ineligibility of any tendering holder. Our interpretation of the terms and conditions of the exchange offer as to any particular private note either before or after the expiration date, including the letter of transmittal and the instructions to the letter of transmittal, shall be final and binding on all parties. Unless waived, you must cure any defects or irregularities with respect to tenders of private notes prior to the expiration date or within the time we determine. Although we intend to notify you of defects or irregularities with respect to tenders of private notes, neither we, the exchange agent nor any other person will incur any liability for failure to give you that notification. Unless waived, we will not deem tenders of private notes to have been made until and unless you cure the defects or irregularities prior to the expiration date or within the time we determine.
Other Rights
While we have no present plan to acquire any private notes that are not tendered in the exchange offer or to file a registration statement to permit resales of any private notes that are not tendered in the exchange offer, we reserve the right in our sole discretion to purchase or make offers for any private notes that remain outstanding after the expiration date.
Acceptance of Private Notes for Exchange; Issuance of Exchange Notes
Upon the terms and subject to the conditions of the exchange offer, we will accept, promptly after the expiration date, all private notes properly tendered. We will issue the exchange notes promptly after acceptance of the private notes. For purposes of the exchange offer, we will be deemed to have accepted properly tendered private notes for exchange when, as and if we have given oral or written notice to the exchange agent, with prompt written confirmation of any oral notice.
In all cases, issuance of exchange notes for private notes will be made only after timely receipt by the exchange agent of:
For each private note accepted for exchange, the holder of the private note will receive an exchange note having a principal amount equal to that of the surrendered private note.
Return of Notes
Unaccepted or non-exchanged private notes will be returned without expense to the tendering holder of the private notes. In the case of private notes tendered by book-entry transfer in accordance with the book-entry procedures described above, the non-exchanged private notes will be credited to an account maintained with DTC as promptly as practicable after the expiration or termination of the exchange offer.
Withdrawal of Tenders
Except as otherwise provided in this prospectus, you may withdraw tenders of private notes at any time before 5:00 p.m., New York City time, on the expiration date.
For a withdrawal to be effective, the exchange agent must receive a written notice of withdrawal at the address or, in the case of eligible institutions, at the facsimile number, indicated under "–Exchange Agent" before the expiration date. Any notice of withdrawal must:
If certificates for private notes have been delivered or otherwise identified to the exchange agent, then, prior to the release of these certificates the withdrawing holder must also submit the serial numbers of the particular certificates to be withdrawn and a signed notice of withdrawal with signatures guaranteed by an eligible institution, unless this holder is an eligible institution. If private notes have been tendered in accordance with the procedure for book-entry transfer described above, any notice of withdrawal must specify the name and number of the account at the book-entry transfer facility to be credited with the withdrawn private notes.
We will determine in our sole discretion all questions as to the validity, form and eligibility of the notices, and our determination will be final and binding on all parties. We will not deem any properly withdrawn private notes to have been validly tendered for purposes of the exchange offer, and we will not issue exchange notes with respect to those private notes, unless you validly retender the withdrawn private notes. You may retender properly withdrawn private notes by following the procedures described above under "-Procedures for Tendering" at any time before 5:00 p.m., New York City time, on the expiration date.
Conditions
Notwithstanding any other term of the exchange offer, we will not be required to accept for exchange, or exchange the exchange notes for, any private notes, and may terminate the exchange offer as provided in this prospectus before the expiration of the exchange offer, if the exchange offer violates applicable law or an applicable interpretation of the staff of the Commission.
Termination of Rights
All of your rights under the registration rights agreement will terminate upon consummation of the exchange offer, except with respect to our continuing obligations:
Shelf Registration
If:
then LXP and the subsidiary guarantors will use their commercially reasonable efforts to cause to be filed with the Commissionherein as soon as reasonably practicable but in no event more than 30 days after such determination, date or notice, as the case may be, a shelf registration statement, and will use commercially reasonable efforts to have such shelf registration statement declared effective by the Commission no later than 90 days after such determination date or notice.
If:
then LXP will pay additional interest to each holder of notes from and including the date on which any such registration default shall occur to but excluding the date on which all registration defaults have been cured or cease to exist.
With respect to the first 90-day period during which a registration default is continuing, additional interest will be paid at a rate equal to 0.25% per annum of the principal amount of notes outstanding. If all registration defaults are not cured or cease to exist prior to the end of such 90-day period, then, from and including the first day after such 90-day period, the rate at which additional interest is payable will increase by an additional 0.25% per annum. However, the maximum rate of additional interest will in no event exceed 0.50% per annum. Additional interest will accrue and be payable to but excluding the date on which all registration defaults have been cured or cease to exist.
Additional interest will be computed on the basis of a 360-day year comprised of twelve 30-day months and will be paid to the holders of the notes in the same manner and times as interest is otherwise payable on the notes. From and including the date on which all registration defaults have been cured or otherwise ceased to exist, additional interest will cease to accrue unless and until a subsequent registration default occurs. Additional interest will not be payable on any private notes or exchange notes other than notes.
Holders of the notes will be required to make certain representations to LXP (as described in the registration rights agreement) in order to participate in the exchange offer. In order to include notes in the shelf registration statement, if filed, and receive additional interest relating to a registration default with respect to the shelf registration statement, a holder will be required to provide certain information to LXP and to be named as a selling security holder in the shelf registration statement and the related prospectus, and will be subject to certain civil liability provisions under the Securities Act, in connection with sales under the shelf registration statement. By including notes in the shelf registration statement, ifexcept for shares issued to any a holder willperson who may be deemed to have agreed to indemnify us against certain losses arising outbe an “affiliate” of information furnished by such holder in writing for inclusion in any shelf registration statement.
If a shelf registration statement becomes effective underLXP within the Securities Act then, during any 365-day period thereafter LXP may, by notice to holders of notes registered pursuant to the shelf registration statement, suspend the availability of the shelf registration statement and the use of the related prospectus for up to two periods not to exceed a total of 60 days during any such 365-day period if:
Each holder of notes will be required to discontinue disposition of those notes pursuant to the shelf registration statement upon receipt from us of notice of any events described in the preceding sentence but will not be entitled to receive additional interest unless such suspension exceeds the number of days or periods specified above. If we effect the exchange offer, we will also be permitted to require any broker-dealers to discontinue disposition of exchange notes pursuant to this prospectus on the same terms and conditions described in this paragraph. If we suspend the use of the shelf registration statement or this prospectus during the period we are otherwise required to keep such registration statement effective, then the period that LXP and the subsidiary guarantors are required to keep the shelf registration statement effective or during which the exchange offer registration statement must remain effective and participating broker-dealers are entitled to use such prospectus, as the case may be, will be extended by a number of days equal to the period of any such suspension.
Exchange Agent
We have appointed U.S. Bank National Association as exchange agent for the exchange offer. All executed letters of transmittal and any other required documents should be directed to the exchange agent at the address or facsimile number set forth below. You should direct questions and requests for assistance and requests for additional copies of this prospectus or of the letter of transmittal and requests for notices of guaranteed delivery to the exchange agent addressed as follows:
U.S. Bank National Association
100 Wall Street, 16th Floor
New York, NY 10005
Facsimile: (212) 514-6841
Attention: William G. Keenan, Vice President
Reference: Lexington Realty Trust
4.25% Senior Notes due 2023
Fees and Expenses
We will bear the expenses of soliciting tenders. We have not retained any dealer manager in connection with the exchange offer and will not make any payments to brokers, dealers or others soliciting acceptances of the exchange offer. We will, however, pay the exchange agent reasonable and customary fees for its services and will reimburse it for its reasonable out-of-pocket expenses.
We will pay the cash expenses incurred in connection with the exchange offer. These expenses include registration fees, fees and expenses of the exchange agent and the trustee, accounting and legal fees and printing costs, among others.
We will pay all transfer taxes, if any, applicable to the exchange of notes pursuant to the exchange offer. If, however, a transfer tax is imposed for any reason other than the exchange of the private notes pursuant to the exchange offer, including the registration of any tendered private notes that may be transferred in connection with the exchange offer, then you must pay the amount of the transfer taxes. If satisfactory evidence of payment of such taxes or exemption therefrom is not submitted with the letter of transmittal, the amount of such transfer taxes will be billed directly to you.
Consequence of Failures to Exchange
Participation in the exchange offer is voluntary. We urge you to consult your financial and tax advisors in making your decisions on what action to take. Private notes that are not exchanged for exchange notes pursuant to the exchange offer will remain restricted securities. Accordingly, those private notes may be resold only:
In each case, the private notesAct. Persons who may be resold only in accordancedeemed to be
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affiliates generally include individuals or entities that, directly or indirectly through one or more intermediaries, control, are controlled by or are under common control with any applicable securities laws of any state of the United States or any other applicable jurisdiction.LXP.
Accounting Treatment
The exchange notesMerger will be recorded at the same carrying valueaccounted for as the private notes, as reflectedan equity transaction.
Comparison of Rights of LXP Shareholders and LCIF Partnership Unitholders
LXP is a Maryland real estate investment trust and LCIF is a Delaware limited partnership. Ownership interests in our accounting records on the datea limited partnership are fundamentally different from ownership interests in a real estate investment trust. For more information concerning these differences, see “Comparison of Rights of LXP Shareholders and LCIF Partnership Unitholders.”
Background of the exchange offer. Accordingly, no gain or loss for accounting purposes will be recognized.Merger
The exchange offer satisfies an obligation under the registration rights agreement. We will not receive any cash proceeds from the exchange offer.
The net proceeds from the saleOn November 29, 2017, at a meeting of the private notes, after deducting discounts and offering expenses, were approximately $244.9 million. We used the net proceeds from the sale of the private notes to pay amounts outstanding under our unsecured revolving credit facility, and the remainder for general corporate purposes, including, without limitation, unspecified acquisitions.
RATIO OF EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED DIVIDENDS
The following table sets forth the ratios of earnings to combined fixed charges and preferred dividendsLXP Board, E. Robert Roskind, then Chairman of LXP, LCIF and LCIF II for each of the last five fiscal years and for the nine months ended September 30, 2013 and 2012. The ratios of earnings to combined fixed charges and preferred dividends were computed by dividing earnings by fixed charges and preferred dividends. For these purposes, “earnings” consist of income (loss) before provision for income taxes, noncontrolling interest, equity in earnings (losses) of non-consolidated entities, gain on acquisition and discontinued operations, plus fixed charges (excluding capitalized interest) and cash received from joint ventures. “Fixed charges” consist of interest expense, including capitalized interest and the amortization expense on debt issuance costs. This information is given on a historical basis.
Lexington Realty Trust:
Nine months ended September 30, (unaudited) | For the years ended December 31, | |||||||||||||||||||||||||||
2013 | 2012 | 2012 | 2011 | 2010 | 2009 | 2008 | ||||||||||||||||||||||
Ratio of earnings to combined fixed charges and preferred dividends (1) | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |||||||||||||||||||||
Deficiency (dollars in thousands) | $ | 10,076 | $ | 13,982 | $ | 25,454 | $ | 64,877 | $ | 49,287 | $ | 12,049 | $ | 1,562 |
LCIF:
Nine months ended September 30, (unaudited) | For the years ended December 31, | |||||||||||||||||||||||||||
2013 | 2012 | 2012 | 2011 | 2010 | 2009 | 2008 | ||||||||||||||||||||||
(unaudited) | (unaudited) | |||||||||||||||||||||||||||
Ratio of earnings to combined fixed charges and preferred dividends | 2.29 | 1.61 | 1.65 | 1.48 | 1.40 | 1.21 | 1.18 |
LCIF II:
Nine months ended September 30, (unaudited) | For the years ended December 31, | |||||||||||||||||||||||||||
2013 | 2012 | 2012 | 2011 | 2010 | 2009 | 2008 | ||||||||||||||||||||||
(unaudited) | (unaudited) | |||||||||||||||||||||||||||
Ratio of earnings to combined fixed charges and preferred dividends (1) | 3.39 | 2.38 | 2.56 | 3.07 | 3.01 | N/A | N/A | |||||||||||||||||||||
Deficiency (dollars in thousands) | N/A | N/A | N/A | N/A | N/A | $ | 282 | $ | 1,316 |
(1) N/A - Ratio is below 1.0.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION ANDRESULTS OF OPERATIONS
The following discussion relates to the consolidated financial statements of each of LCIF and LCIF II and their respective subsidiaries, and should be read in conjunction with such financial statements and notes thereto appearing elsewhere in this prospectus. Management’s Discussion and Analysis of Financial Condition and Results of Operations for LXP is available in the documents incorporated by reference into this prospectus.
In this discussion, we have included statements that may constitute “forward-looking statements.” Forward-looking statements are not historical facts but instead represent only our beliefs regarding future events, many of which, by their nature, are inherently uncertain and outside our control. These statements may relate to future plans and objectives, among other things. By identifying these statements for you in this manner, we are alerting you toproposed the possibility that actual results may differ, possibly materially, from the anticipated results indicated in these forward-looking statements. Important factors that could cause actual results to differ, possibly materially, from those indicated in the forward-looking statements include, among others, those discussed in “Risk factors” and “Cautionary statements concerning forward-looking statements” sections included elsewhere in this prospectus.
Explanatory Note
On December 30, 2013,of merging LCIF II mergedinto LXP, with and into LCIF, with LCIF asLXP being the surviving entity. The proposed transaction would require Mr. Roskind's consent as the beneficial owner of The LCP Group, L.P., which was the majority holder of LCIF Partnership Units held by LCIF’s special limited partners. Mr. Roskind informed the LXP Board that he would require a cash payment for his consent equal to the estimated tax liability he would incur in the event the proposed transaction was consummated. After considering the benefits and costs of the proposed transaction, the LXP Board determined not to proceed.
Following this LXP Board meeting, employees and counsel of LXP (the "LXP representatives") had periodic discussions with representatives of The LCP Group, L.P. (the "LCP representatives") regarding alternative transaction structures. The LXP Board continued to discuss a potential merger of LCIF into LXP at meetings on March 27, 2018, May 15, 2018 and September 13, 2018.
In September 2018, the LCP representatives proposed to the LXP representatives a two-step transaction pursuant to which an LCIF merger would be preceded by an exchange offer that would permit certain holders of LCIF Partnership Units to exchange such units, in a non-taxable transaction, for interests in a different LXP subsidiary that would hold a commercial real estate asset. The parties continued to explore the proposed transaction.
In January 2019, pursuant to a retirement agreement entered into in January 2018, Mr. Roskind retired as an employee and executive officer of LXP, but continued as a trustee of LXP and the non-executive Chairman of the LXP Board.
In March 2019, at a meeting of the LXP Board, Mr. Roskind formally proposed that The LCP Group, L.P. would consent to a merger of LCIF into LXP if the merger was donepreceded by a non-taxable exchange offer for interests in a different LXP subsidiary that would acquire a hotel development asset. After making the proposal, Mr. Roskind recused himself from further discussions and votes related to streamline the reporting obligationsproposed transaction. Following extensive deliberations and after conferring with its outside advisors, the LXP Board determined that the proposed transaction was not in the best interests of LXP, in part because acquiring the hotel development asset was not aligned with LXP's investment strategy.
On March 31, 2019, Mr. Roskind resigned his position as a trustee and non-executive Chairman of the LXP Board.
On June 6, 2019, the LCP representatives contacted the LXP representatives to recommence discussions regarding the proposed merger preceded by an exchange offer, but with the exchange offer involving a different commercial real estate asset from the transaction previously proposed. Subsequently, the LXP representatives and the LCP representatives had periodic discussions regarding this and other potential transaction structures and the LXP Board continued to be briefed on these discussions.
8 |
On October 15, 2019, LCIF and The LCP Group, L.P. sent a letter to holders of LCIF and LCIF II into one entity on a going-forward basis. Except as otherwise indicated, all information with respect to LCIF and LCIF II in this prospectus is presented as of September 30, 2013, which is prior to the merger. Information subsequent to the merger assumes that all limited partners in LCIF II received OP units in LCIF as consideration in the merger.
Overview
General. LCIF was formed as a limited partnership on March 14, 1986 under the lawsPartnership Units informing them of the state of Delawarepotential two-step transaction structure in an effort to invest in existing real estate properties net-leased to corporations or other entities. LCIF II was formed as a limited partnership on January 27, 1987 under the laws of the state of Delaware to invest in existing real estate properties net-leased to corporations or other entities. On December 30, 2013, LCIF II merged with and into LCIF, with LCIF as the surviving entity.
The purpose of LCIF includes the conduct of any business that may be conducted lawfully by a limited partnership organized under the Delaware Act, except that the LCIF partnership agreement of LCIF requires business to be conductedgauge such holders' interest in such a manner that will permittransaction. The LXP to continue to be classified as a REIT under Sections 856 through 860 of the Code, unless LXP ceases to qualify as a REIT for reasons other than the conduct of the business of LCIF.
LXP is the sole equity owner of Lex GP-1 Trust, a Delaware statutory trust, which is the general partner of LCIF and holds, as of December 31, 2013, approximately 0.4% of the outstanding OP units in LCIF. LXP is also the sole equity owner of Lex LP-1 Trust, a Delaware statutory trust, which holds, as of December 31, 2013, approximately 94.3% of the outstanding OP units in LCIF. The remaining OP units in LCIF are beneficially owned by E. Robert Roskind, Chairman of LXP, and certain non-affiliated investors. As the sole equity owner of the general partner of LCIF, LXP has the ability to control all of the day-to-day operations of LCIF, subject to the terms of the LCIF partnership agreement.
The business of LCIF is substantially the same as the business of LXP and includes investment in single-tenant assets; except that LCIF is dependent on LXP for management of its operations and future investments. LCIF does not have any employees, executive officers or a board of directors. LXP also invests in assets and conducts business directly and through other subsidiaries. LXP allocates investments to itself and its other subsidiaries or to LCIF as it deems appropriate and in accordance with certain obligations under the LCIF partnership agreement, with respect to allocations of nonrecourse liabilities.
LCIF’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 LCIF’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.
The business and management structure of LCIF II was substantially similar to the business and management structure of LCIF.
Critical Accounting Policies. The accompanying consolidated financial statements of each of LCIF and LCIF II have been prepared in accordance with United States generally accepted accounting principles, or GAAP, which require management of each of LCIF and LCIF II 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 each of LCIF’s and LCIF II’s significant accounting policies, as applicable, which are important to the portrayal of its financial condition and results of operations, is set forth in note 2 to the 2012 Consolidated Financial Statements of each of LCIF and LCIF II, which are exhibits hereto and incorporated herein.
The following is a summary of the critical accounting policies of LCIF and LCIF II, which require some of the most difficult, subjective and complex judgments.
Basis of Presentation and Consolidation. The consolidated financial statements of each of LCIF and LCIF II are prepared on the accrual basis of accounting. The financial statements reflect the accounts of each of LCIF and LCIF IIrepresentatives and the accounts of their respective consolidated subsidiaries. Each of LCIF and LCIF II consolidate its wholly-owned subsidiaries, partnerships and joint ventures, if any, which it 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 we referLCP representatives coordinated an outreach effort to as a VIE. Entities which it does not control and entities which are VIEs in which it is not the primary beneficiary are generally accounted for by the equity method. Significant judgments and assumptions are made by Lex GP, as the general partner, to determine whether an entity is a VIE such as those regarding an entity's equity at risk, the entity's equity holders' 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. The management of each of LCIF and LCIF II 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 of each of LCIF and LCIF II in conformityfollow up 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 current economic environment. The current economic environment has increased the degree of uncertainty inherent in these estimates and assumptions. The management of each of LCIF and LCIF II 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 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, the management of each of LCIF and LCIF II 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 management of each of LCIF and LCIF II 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. Each of LCIF and LCIF II 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. 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 either LCIF or LCIF II funds tenant improvements and the improvements are deemed to be owned by LCIF or LCIF II, as applicable, 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 management of each of LCIF and LCIF II determines that the tenant allowances are lease incentives, LCIF or LCIF II, as applicable, 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. Each of LCIF and LCIF II 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.
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 either LCIF or LCIF II sells a property and retains a partial ownership interest in the property, LCIF or LCIF II, as applicable, recognizes gain to the extent of the third-party ownership interest.
Accounts Receivable. The management of each of LCIF and LCIF II continuously monitors collections from the tenants of LCIF and LCIF II and would make a provision for estimated losses based upon historical experience and any specific tenant collection issues that it has identified.
Impairment of Real Estate. The management of LCIF and LCIF II 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 management of LCIF and LCIF II 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 management of LCIF and LCIF II evaluates loans receivable where LCIF or LCIF II participates in residual profits through loan provisions or other contracts to ascertain whether LCIF or LCIF II 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 LCIF or LCIF II 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. As controlled subsidiaries of LXP, each of LCIF and LCIF II relies on LXP’s principal sources of liquidity, which historically have been (1) undistributed cash flows generated from our investments, (2) the public and private equity and debt markets, including issuances of OP units to LXP, (3) property specific debt, (4) corporate level borrowings, (5) commitments from co-investment partners and (6) proceeds from the sales of investments.
Cash Flows. We believe that cash flows from operations of each of LCIF and LCIF II will continue to provide adequate capital to fund its operating and administrative expenses, regular debt service obligations and all distribution payments in accordance with partnership agreement requirements in both the short-term and long-term. However, without a capital event, which would most likely involve LXP, neither LCIF nor LCIF II has 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 (1) $23.7 million and $22.2 million for the nine months ended September 30, 2013 and 2012, respectively, and $30.4 million, $30.0 million and $30.9 million for 2012, 2011 and 2010, respectively, for LCIF and (2) $7.0 million and $4.8 million for the nine months ended September 30, 2013 and 2012, respectively, and $7.3 million, $13.7 million and $17.5 million for 2012, 2011 and 2010, respectively, for LCIF II. 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 LCIF and LCIF II 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. 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 (1) $20.1 million and $(2.5) million for the nine months ended September 30, 2013 and 2012, respectively, and $(58.7) million, $16.6 million and ($0.7) million in 2012, 2011 and 2010, respectively, for LCIF and (2) $1.1 million and $1.7 million for the nine months ended September 30, 2013 and 2012, respectively, and $2.2 million, $(23.1) million and ($53.7) million for 2012, 2011 and 2010, respectively, for LCIF II. 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. Cash used in investing activities related primarily to investments in real estate properties, co-investment programs and loans receivable, and an increase in deferred leasing costs, 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 (1) $(40.9) million and $(21.9) million for the nine months ended September 30, 2013 and 2012, respectively, and $27.2 million, $(46.0) million and $(31.7) million in 2012, 2011 and 2010, respectively, for LCIF and (2) $(6.3) million and $(17.5) million for the nine months ended September 30, 2013 and 2012, respectively, and $(20.2) million, $10.3 million and $41.9 million in 2012, 2011 and 2010, respectively, for LCIF II. Cash provided by financing activities was primarily attributable to net proceeds from non-recourse mortgages and related party advances, net, offset by distribution payments, related party payments, net and debt payments and repurchases.
OP units. Substantially all outstanding OP units are redeemable by the holder of the OP unit at certain times unit for approximately 1.13 common shares of LXP per one OP unit or, at Lex GP’s election, with respect to certain OP units, cash. Substantially all outstanding OP units require the applicable operating partnership to pay quarterly distributions to the holders of such OP units equal to the dividends paid to LXP 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 LXP’s 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. LXP, LCIF and LCIF II are parties to funding agreements under which each party may be required to fund distributions made on account of OP units or dividends made on account of LXP common shares. No OP units have a liquidation preference.
As of December 31, 2012 and September 30, 2013, (1) LCIF had a total of approximately 2.6 million and 2.4 million OP units respectively outstanding other than OP units held by us (approximately 0.8 million are held by related parties), and (2) LCIF II had a total of approximately 1.2 million OP units outstanding other than OP units held by us (approximately 0.7 million are held by related parties).
As a result of the general deterioration in real estate values which commenced in 2008, 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 LXP that will be outstanding in the future may decrease as such OP units are redeemed for our common shares.
Property Specific Debt. As of December 31, 2012 and September 30, 2013, (1) LCIF had $155.7 million and $94.6 million, respectively, of consolidated property specific debt outstanding and (2) LCIF II had $49.0 million and $31.4 million, respectively, of consolidated property specific debt outstanding. As of December 31, 2012, (1) LCIF had $28.7 million and $24.7 million of related balloon payments maturing in 2013 and 2014, respectively, and (2) LCIF II had no balloon payments maturing in 2013 and 2014. As of September 30, 2013, neither LCIF nor LCIF II had any balloon payments due on debt maturing in 2013 and 2014. If a mortgage is unable to be refinanced upon maturity, LCIF and LCIF II will be dependent on LXP’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.
The mortgages encumbering the properties in which LCIF and LCIF II have an interest are generally non-recourse to LCIF or LCIF II, as applicable, such that the title of the property may be transferred in satisfaction of the mortgage obligation. During 2012, LCIF II conveyed its interest in a vacant office property in Clive, Iowa in satisfaction of a $5.3 million non-recourse secured mortgage loan. During the nine months ended September 30, 2013, LCIF and LCIF II each conveyed properties in Southington, Connecticut and Farmington Hills, Michigan, respectively, in satisfaction of the respective $12.3 million and $17.5 million non-recourse secured mortgage loans. 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 prospectus.
The current economic environment has impacted each of LCIF’s and LCIF II’s ability to obtain property specific debt on favorable terms in many cases. In 2008, property specific mortgage lending nearly ceased. Since then, the number of lenders and available loan proceeds have diminished significantly. In addition, the required loan to value ratios have decreased and the covenants, including required reserve amounts, have increased. Accordingly, LCIF and LCIF II may not be able to find favorable financing to refinance existing mortgages upon maturity.
For the year ending December 31, 2011, LCIF II obtained a $15.0 million non-recourse mortgage loan with an interest rate of 4.71% and a maturity date of June 2016.
Corporate Borrowings. LCIF and LCIF II, together with LXP, are borrowers under LXP’s corporate borrowing facilities. Outstanding indebtedness is recorded on the books of the applicable borrower requesting and receiving the proceeds of such indebtedness. However, LCIF and LCIF II do not have the independent ability without LXP to obtain funds from such borrowing facilities.
Co-investment Programs and Joint Ventures. LXP believes that entering into co-investment programs and joint ventures with institutional investors and other real estate companies is a good way to access private capital while mitigating its risks in certain assets and increasing its return on equity to the extent it earns management or other fees. However, due to LXP’s REIT status, LCIF and LCIF II are prohibited from earning management fees because they are not taxable REIT subsidiaries. As a result, LXP’s investments in co-investment programs and joint ventures are generally outside of LCIF and LCIF II.
Capital Recycling. Part of LXP’s strategy to effectively manage its balance sheet involves pursuing and executing well on property dispositions and recycling of capital. LCIF disposed of its interests in two properties and a retail store and parking garage during the nine months ended September 30, 2013, one via conveyance to its lender, and four properties in 2011, for a gross disposition price of $43.3 million and $31.2 million, respectively. LCIF II disposed of its interests in one property during the nine months ended September 30, 2013 and one property during 2012 to their respective lenders in satisfaction of the $17.5 million and $5.3 million, respective non-recourse mortgage loans. The net proceeds received from dispositions were primarily used to retire indebtedness encumbering such properties and make new investments.
Liquidity Needs. Each of LCIF’s and LCIF II’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 either LCIF or LCIF II is unable to satisfy its liquidity needs with cash flow from operations, it intends to use borrowings and, with respect to distributions to the holders of OP units, the funding agreements described above. If such borrowings are unavailable, it or one of its subsidiaries may default on its obligations or lose its assets in foreclosure or through bankruptcy proceedings.
Capital Resources
General. Due to the net-lease structure of a majority of LCIF’s and LCIF II’s investments, each of LCIF and LCIF II historically have not incurred significant expenditures in the ordinary course of business to maintain the properties in which it has an interest. However, particularly since 2008, as leases have expired, each of LCIF and LCIF II have incurred 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 LCIF or LCIF II have 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, LCIF or LCIF II is responsible for replacement and/or repair of certain capital items, which may or may not be reimbursed. At certain single-tenant properties that are not subject to a net-lease, LCIF or LCIF II 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, LCIF or LCIF II 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 at these properties.
Vacant Properties. To the extent there is a vacancy in a property, LCIF or LCIF II would be obligated for all operating expenses, including real estate taxes and insurance. If a property is vacant for an extended period of time, LCIF or LCIF II may incur substantial capital expenditure 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 LCIF or LCIF II has an interest. In the past, these expansions have generally been funded, and in the future we expect 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 LXP's unsecured revolving credit facility or capital contributions from LXP.
Ground Leases. The tenants of properties in which LCIF or LCIF II 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, LCIF or LCIF II is responsible for these payments under certain leases and at vacant properties.
Environmental Matters.Based upon management's ongoing review of the properties in which LCIF and LCIF II have 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 LCIF or LCIF II. 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 LCIF or LCIF II has an interest, will not expose LCIF or LCIF II 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 LCIF or LCIF II has an interest.
Results of Operations
LCIF
Nine months ended September 30, 2013 compared with nine months ended September 30, 2012.The increase in total gross revenues in 2013 of $2.0 million is primarily attributable to an increase in rental revenue. The increase in rental revenue was primarily due to new property acquisition revenue of $3.6 million, offset by a reduction of $0.6 million due to lease extensions entered into at rents below previous rental amounts and $0.9 million related to an increase in vacancy at one property.
Depreciation and amortization increased $1.0 million primarily due to the acquisition of the Phoenix, Arizona property in December 2012.
The decrease in interest and amortization expense of $2.7 million was primarily due to retirement of debt.
Non-operating income decreased $0.4 million primarily due to the satisfaction of notes receivable resulting in less interest earned.
The decrease in litigation reserve of $0.9 million relates to our litigation with Deutsche Bank Securities, Inc., which was settled in 2012.
The increase in debt satisfaction charges, net, of $1.6 million was primarily due to defeasance costs and write-off of deferred financing costs relating to the satisfaction of secured nonrecourse mortgage debt in 2013.
Discontinued operations represent properties sold or held for sale. The increase in total income from discontinued operations of $5.5 million is primarily due to an increase in debt satisfaction gains, net, of $4.4 million, a $0.7 million increase in income from discontinued operations and an increase in gains on sales of properties of $7.2 million, offset in part by an increase in impairment charges of $6.8 million.
The increase in net income of $8.1 million was primarily due to the items discussed above.
Year ended December 31, 2012 compared with December 31,2011. Total gross revenues remained relatively flat in 2012 compared to 2011. LCIF acquired one property in December 2012 which did not have a significant impact on 2012 gross revenues.
The decrease in interest and amortization expense of $1.5 million was primarily due to the retirement of debt.
Depreciation and amortization decreased $1.2 million primarily due to assets becoming fully amortized in 2012.
The increase in property operating expense of $0.7 million was primarily due to an increase in ground rent expense at certain properties.
The litigation reserve of $0.9 million in 2012 relates to a litigation that has been settled with a payment by us of $0.9 million.
Discontinued operations represent properties sold or held for sale. The increase in net income from discontinued operations of $3.0 million was primarily due to a decrease in impairment charges of $4.1 million, offset by a decrease in gains on sales of properties of $1.2 million.
The increase in net income of $4.2 million was primarily due to the items discussed above.
Year ended December 31, 2011 compared with December 31, 2010. Of the decrease in total gross revenues in 2011 of $2.6 million, $2.2 million is attributable to a decrease in rental revenue and $0.4 million is due to a decrease in tenant reimbursements. The decrease in rental revenue was primarily due to lease rollover and new leases entered into at lease rates lower than the previous amounts.
The decrease in interest and amortization expense of $2.4 million is primarily due to the decrease in indebtedness.
The decrease in property operating expense of $0.7 million is primarily due to a decrease in the operating expenses at certain properties and certain tenants taking direct responsibility for payments of operating costs in which our property owner subsidiaries have an interest.
Discontinued operations represents properties sold or held for sale. The total discontinued operations loss increased $13.7 million due to an increase in impairment charges of $3.4 million and a decrease in gains on sales of properties of $10.7 million, offset by a decrease in debt satisfaction charges, net, of $0.4 million.
Net income decreased $13.5 million primarily due to the items discussed above.
LCIF II
Nine months ended September 30, 2013 compared with nine months ended September 30, 2012.Total gross revenues remained relatively flat in 2013 primarily due to limited portfolio activity.
Depreciation and amortization decreased $0.3 million primarily due to assets being fully depreciated in prior periods.
The increase in property operating expenses of $0.3 million was primarily due to an increase in real estate taxes at one property.
The decrease in interest and amortization expense of $1.1 million was primarily due to retirement of debt.
Non-operating income decreased $0.8 million primarily due to less interest earned and reduced interest income earned on a note receivable secured by an office property in Schaumburg, Illinois, which was in default and LCIF II ceased recognizing interest income commencing April 1, 2012. LCIF II foreclosed on the property subsequent to September 30, 2013.
Discontinued operations represent properties sold or held for sale. The increase in total income from discontinued operations of $1.9 million is primarily due to an increase in gains on sales of properties of $3.2 million plus a $1.4 million reduction in loss from discontinued operations, offset in part by an increase in debt satisfaction charges of $2.7 million.
The increase in net income of $2.1 million was primarily due to the items discussed above.
Year ended December 31, 2012 compared with December 31,2011. The increase in total gross revenues in 2012 of $2.9 million was primarily attributable to an increase in rental revenue of $2.6 million and an increase in tenant reimbursements of $0.3 million. The increase in rental revenue was primarily due to (1) 2011 property acquisitions of $2.2 million and (2) $0.3 million from a decrease in vacancy at our Hebron, Ohio property.
The increase in interest and amortization expense of $0.3 million was primarily due to the financing of a property, offset by the retirement of debt.
Depreciation and amortization increased $0.8 million primarily due to the acquisition of real estate properties in 2011, offset by assets becoming fully amortized.
Non-operating income decreased $4.5 million primarily due to the satisfaction of notes receivable resulting in less interest earned and reduced interest income earned on a note receivable, which was in default, secured by an office property in Schaumburg, Illinois.
Discontinued operations represent properties sold or held for sale. The decrease in net loss from discontinued operations of $4.8 million was primarily due to a decrease in impairment charges of $9.8 million, an increase in gains on sales of properties of $1.1 million, offset in part by an increase in debt satisfaction charges of $1.4 million and a $4.8 million increase in loss from discontinued operations.
The increase in net income of $1.7 million was primarily due to the items discussed above.
Year ended December 31, 2011 compared with December 31, 2010. The increase in total gross revenues in 2011 of $3.5 million is attributable to an increase in rental revenue of $3.5 million primarily due to the acquisition of properties in 2011.
The decrease in interest and amortization expense of $0.3 million is primarily due to the decrease in indebtedness.
Depreciation and amortization increased by $1.0 million primarily due to the acquisition of real estate properties.
The increase in general and administrative expense of $0.4 million is primarily due to an increase in the allocation of professional fees and payroll costs by LXP.
Non-operating income decreased $0.7 million which is primarily due to the satisfaction of loans receivable.
Discontinued operations represents properties sold or held for sale. The total discontinued operations loss increased $8.3 million due to an increase in impairment charges of $9.8 million, offset by an increase in the income from discontinued operations of $1.6 million.
Net income decreased $6.7 million 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 and leasing activity. Without acquisitions and favorable leasing activity, the sources of growth in net income are limited to 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 our periodic reports filed with the Commission.
Off-Balance Sheet Arrangements
LCIF and LCIF II are borrowers or guarantors of corporate borrowing facilities and debt securities of LXP. In addition, each of LCIF and LCIF II, from time to time, guarantee certain tenant improvement allowances and lease commissions on behalf of subsidiaries when required by the related tenant or lender. However, neither LCIF nor LCIF II believes these guarantees, as applicable, are material to it 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 LCIF’s and LCIF II’s principal contractual obligations as of December 31, 2012 ($000's):
2013 | 2014 | 2015 | 2016 | 2017 | 2018 and Thereafter | Total | ||||||||||||||||||||||
LCIF(1): | ||||||||||||||||||||||||||||
Notes payable(2) | $ | 34,075 | $ | 29,000 | $ | 29,762 | $ | 1,136 | $ | 9,785 | $ | 51,917 | $ | 155,675 | ||||||||||||||
Interest payable - fixed rate | 8,173 | 6,062 | 4,707 | 3,797 | 3,487 | 5,463 | 31,689 | |||||||||||||||||||||
Operating lease obligations(3) | 672 | 672 | 672 | 672 | 664 | 8,353 | 11,705 | |||||||||||||||||||||
Co-borrower debt(4) | - | - | - | - | - | 39,385 | 39,385 | |||||||||||||||||||||
$ | 42,920 | $ | 35,734 | $ | 35,141 | $ | 5,605 | $ | 13,936 | $ | 105,118 | $ | 238,454 | |||||||||||||||
LCIF II(1): | ||||||||||||||||||||||||||||
Notes payable(2) | $ | 198 | $ | 286 | $ | 9,321 | $ | 15,342 | $ | 368 | $ | 23,474 | $ | 48,989 | ||||||||||||||
Interest payable - fixed rate | 2,940 | 2,923 | 2,448 | 2,031 | 1,652 | 14,948 | 26,942 | |||||||||||||||||||||
Co-borrower debt(4) | - | - | - | - | - | 11,601 | 11,601 | |||||||||||||||||||||
$ | 3,138 | $ | 3,209 | $ | 11,769 | $ | 17,373 | $ | 2,020 | $ | 50,023 | $ | 87,532 |
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Explanatory Note
Partnership Units.
On December 30, 2013, LCIF II merged with and into LCIF, with LCIF as the surviving entity. The merger was done to streamline the reporting obligations of LCIF and LCIF II into one entity on11, 2019, at a going-forward basis. Except as otherwise indicated, all information with respect to LCIF and LCIF II in this prospectus is presented as of September 30, 2013, which is prior to the merger. Information subsequent to the merger assumes that all limited partners in LCIF II received OP units in LCIF as consideration in the merger.
General
Quantitative and qualitative disclosures about market risk for LXP are contained in the documents incorporated by reference into this prospectus. Each of LCIF’s and LCIF II’s exposure to market risk relates primarily to its fixed rate debt and, to the extent it relies on LXP for liquidity, LXP’s variable rate debt.
As of December 31, 2012, December 31, 2011 and September 30, 2013, (1) LCIF’s consolidated fixed-rate debt was $195.1 million, $212.9 million, and $148.1 million, respectively, which represented 100.0% of total long-term indebtedness, and (2) LCIF II’s consolidated fixed-rate debt was $60.6 million, $90.7 million, and $46.7 million, respectively, which represented 100.0% of total long-term indebtedness. LCIF and LCIF II had no consolidated variable rate indebtedness as of December 31, 2012, December 31, 2011 and September 30, 2013.
For certain of LCIF and LCIF II’s 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 value was determined using the interest rates that we believe LCIF and LCIF II’s outstanding fixed-rate debt would warrant as of September 30, 2013 and are indicativemeeting of the interest rate environment as of September 30, 2013, and do not take into considerationLXP Board, Mr. Joseph Bonventre, LXP's General Counsel, updated the effects of subsequent interest rate fluctuations. Accordingly, we estimate that the fair value of LCIF’s and LCIF II’s fixed-rate debt was $149.0 million and $46.6 million, respectively, as of September 30, 2013.
LCIF’s interest rate risk objectives are to limit the impact of interest rate fluctuations on cash flows and to lower overall borrowing costs. To achieve these objectives, LCIF manages exposure to fluctuations in market interest rates through the use of fixed rate debt instruments.
Explanatory Note
On December 30, 2013, LCIF II merged with and into LCIF, with LCIF as the surviving entity. The merger was done to streamline the reporting obligations of LCIF and LCIF II into one entity on a going-forward basis. Except as otherwise indicated, all information with respect to LCIF and LCIF II in this prospectus is presented as of September 30, 2013, which is prior to the merger. Information subsequent to the merger assumes that all limited partners in LCIF II received OP units in LCIF as consideration in the merger.
General
Disclosure of the business and properties of LXP is set forth in the documents incorporated by reference in this prospectus. Together, LCIF and LCIF II are the entities through which LXP, a self-managed and self-administered REIT formed under the laws of the state of Maryland, and the sole equity owner of their sole general partner, Lex GP, conducts a significant portion of its operations.
History
LCIF 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. LCIF commenced an offering to the public of OP units in July 1986, which was completed in March 1987. As of September 30, 2013, 2,446,948 OP units remain outstanding (not including 45,025,524 OP units issued by LCIF and held by us).
LCIF II was formed as a limited partnership on January 27, 1987 under the laws of the state of Delaware to invest in existing real estate properties net leased to corporations or other entities. LCIF II commenced an offering to the public of OP units in December 1987, which was completed in November 1988. As of September 30, 2013, 1,199,824.5 OP units remain outstanding (not including 12,376,393.5 OP units issued by LCIF II and held by us).
In October 1993, Lexington Corporate Properties Trust, Inc. (the predecessor to Lexington Realty Trust) was formed upon the roll-up of LCIF and LCIF II. In the roll-up transaction, LCIF and LCIF II became the operating partnership subsidiaries for Lexington Corporate Properties Trust, Inc. Lexington Corporate Properties Trust, Inc. changed its name to Lexington Corporate Properties Trust and ultimately to Lexington Realty Trust.
On December 30, 2013, LCIF II merged with and into LCIF, with LCIF as the surviving entity. Unaudited pro forma condensed consolidated financial information for LCIF reflecting the merger of LCIF II with and into LCIF are included in this prospectus beginning on page F-60. The Fifth Amended and Restated Limited Partnership Agreement of LCIF was amended and restated with the Sixth Amended and Restated Limited Partnership Agreement.
Current Economic Uncertainty and Capital Market Volatility
The business of LCIF continues to be impacted in a number of ways by the continued uncertainty in the overall economy and volatility in the capital markets. We encourage you to read “Risk Factors” included elsewhere in this prospectus for a discussion of certain risks LCIF is facing and “Management's Discussion and Analysis of Financial Condition and Results of Operations” included elsewhere in this prospectus for a detailed discussion of the trends we believe are impacting LCIF’s business.
Objectives and Strategy
Under and subject to the terms of the LCIF partnership agreement, LXP has the ability to control all of the day-to-day operations of LCIF. The business of LCIF is substantially the same as the business of LXP and includes investment in single-tenant assets; except that LCIF is dependent on LXP for management of its operations and future investments. LCIF has no employees, executive officers or a board of directors. LXP also invests in assets and conducts business directly and through other subsidiaries. LXP allocates investments to itself and its other subsidiaries or to LCIF as it deems appropriate and in accordance with certain obligations under the LCIF partnership agreement, with respect to allocations of nonrecourse liabilities.
LCIF generally acquires assets (1) that will be leveraged at or following acquisition, which supports the obligation of LCIF to allocate nonrecourse liabilities to its limited partners, and (2) as part of a tax-deferred exchange with the seller of the asset who is issued OP units as a form of consideration, although such tax deferred exchanges have not been utilized in recent years.
The assets which LCIF seeks are generally subject to net or similar leases, which allow LCIF, to distribute cash to holders of OP units without requiring cash contributions for operating expenses. However, cash distributions are reduced to the extent LCIF is obligated for operating and capital expenses, without reimbursement. To avoid such reductions, LCIF may borrow funds from LXP.
Competition
As an operating partnership subsidiary of LXP, LCIF competes with numerous commercial developers, real estate companies, financial institutions, such as banks and insurance companies, and other investors with greater financial or other resources when seeking properties for acquisition and tenants.
Environmental Matters
Under various federal, state and local environmental laws, statutes, ordinances, rules and regulations, an owner of real property may be liable for the costs of removal or remediation of certain hazardous or toxic substances at, on, in or under such property as well as certain other potential costs relating to hazardous or toxic substances. These liabilities may include government fines and penalties and damages for injuries to persons and adjacent property. Such laws often impose liability without regard to whether the owner knew of, or was responsible for, the presence or disposal of such substances. Although generally the tenants of the properties in which we have 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 a tenant of such premises to satisfy any obligations with respect to such environmental liability, a property owner subsidiary may be required to satisfy such obligations. In addition, as the owner of such properties, a property owner subsidiary may be held directly liable for any such damages or claims irrespective of the provisions of any lease.
From time to time, in connection with the conduct of our business and generally upon acquisition of a property and prior to surrender by a tenant, the property owner subsidiary authorizes the preparation of a Phase I and, when recommended, a Phase II environmental report with respect to its properties. Based upon management's ongoing review of the properties in which LCIF 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 LCIF. 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 LCIF has an interest, will not expose LCIF 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 LCIF has an interest.
Other
Employees. LCIF does not have any employees. All necessary personnel are provided by LXP through Lex GP.
Industry Segments. LCIF operates in primarily one industry segment, single-tenant real estate assets.
Web Site. LCIF does not have a web site.
LCIF can be contacted through LXP’s Investor Relations Department 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. The principal executive offices for LCIF are located at One Penn Plaza, Suite 4015, New York, New York 10119-4015; our telephone number is (212) 692-7200.
Properties
General. As of September 30, 2013, we had equity ownership interests in approximately 215 consolidated real estate properties, located in 41 states and encompassing 40.6 million square feet, 98.1% of which was leased. Included in these properties are 31 properties in which LCIF had an equity ownership interest in, located in 22 states and encompassing 4.9 million square feet, 96.1% of which was leased, and nine properties in which LCIF II had an equity ownership interest in, located in seven states and encompassing 2.9 million square feet, 100.0% of which was leased. The properties in which we have an equity interest are leased to tenants in various industries, including finance/insurance, technology, service, automotive and energy.
Due to the net-lease structure of a majority of LCIF’s investments, each of LCIF and LCIF II historically have not incurred significant expenditures in the ordinary course of business to maintain the properties in which it has an interest. However, particularly since 2008, as leases have expired, each of LCIF and LCIF II have incurred 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 LCIF 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, LCIF is responsible for replacement and/or repair of certain capital items, which may or may not be reimbursed. At certain single-tenant properties that are not subject to a net-lease, LCIF 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, LCIF 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 at these properties.
Vacant Properties. To the extent there is a vacancy in a property, LCIF would be obligated for all operating expenses, including real estate taxes and insurance. If a property is vacant for an extended period of time, LCIF may incur substantial capital expenditure 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 LCIF has an interest. In the past, these expansions have generally been funded, and in the future we expect 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 LXP's unsecured revolving credit facility or capital contributions from LXP.
Ground Leases. The tenants of properties in which LCIF 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, LCIF is responsible for these payments under certain leases and at vacant properties.
Leverage. As of December 31, 2012 and September 30, 2013, (1) LCIF had $195.1 million and $148.1 million, respectively, of consolidated debt outstanding, including co-borrower debt and (2) LCIF II had $60.6 million and $46.7 million, respectively, of consolidated debt outstanding, including co-borrower debt. As of December 31, 2012, (1) LCIF had $28.7 million and $24.7 million of related balloon payments maturing in 2013 and 2014, respectively, and (2) LCIF II had no balloon payments maturing in 2013 and 2014. As of September 30, 2013, neither LCIF nor LCIF II had any balloon payments maturing in 2013 or 2014.
Property Charts. The following tables list LCIF’s and LCIF II’s 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 September 30, 2013.
LCIF CONSOLIDATED PORTFOLIO
PROPERTY CHART
As of September 30, 2013
Property Location | City | State | Primary Tenant (Guarantor) | Property Type | Net Rentable Square Feet | Current Lease Term Expiration | Percent Leased | |||||||||||||
2415 U.S. Hwy 78 East | Moody | AL | CEVA Logistics U.S., Inc. (CEVA Holdings, B.V. / PostNL N.V.) | Industrial | 595,346 | 12/31/2017 | 100 | % | ||||||||||||
2211 South 47th St. | Phoenix | AZ | Avnet, Inc. | Office | 176,402 | 2/28/2023 | 100 | % | ||||||||||||
3030 North 3rd Street | Phoenix | AZ | CopperPoint Mutual Insurance Company | Office | 252,400 | 12/31/2029 | 100 | % | ||||||||||||
26210 & 26220 Enterprise Court | Lake Forest | CA | Apria Healthcare, Inc. (Apria Healthcare Group, Inc.) | Office | 100,012 | 1/31/2022 | 100 | % | ||||||||||||
2706 Media Center Dr. | Los Angeles | CA | Sony Electronics Inc. | Office | 83,252 | 8/31/2015 | 24 | % | ||||||||||||
9201 E. Dry Creek Rd | Centennial | CO | The Shaw Group, Inc. | Office | 128,500 | 9/30/2017 | 100 | % | ||||||||||||
1315 West Century Dr. | Louisville | CO | Global Healthcare Exchange, Inc. (Global Healthcare Exchange, LLC) | Office | 106,877 | 4/30/2017 | 100 | % | ||||||||||||
100 Barnes Rd. | Wallingford | CT | 3M Company | Office | 44,400 | 6/30/2018 | 100 | % | ||||||||||||
5600 Broken Sound Blvd. | Boca Raton | FL | Canon Solutions America, Inc. (Océ -USA Holding, Inc.) | Office | 143,290 | 2/14/2020 | 100 | % | ||||||||||||
4200 Northcorp Pkwy. | Palm Beach Gardens | FL | Multi-tenanted | Office | 95,065 | Various | 36 | % | ||||||||||||
4400 Northcorp Pkwy. | Palm Beach Gardens | FL | Office Suites Plus Properties, Inc. | Office | 18,400 | 4/30/2014 | 100 | % | ||||||||||||
1042 Fort St. Mall/King St. | Honolulu | HI | Multi-tenanted | Office | 77,459 | Various | 77 | % | ||||||||||||
7500 Chavenelle Rd. | Dubuque | IA | The McGraw-Hill Companies, Inc. | Industrial | 330,988 | 6/30/2017 | 100 | % | ||||||||||||
5200 Metcalf Ave. | Overland Park | KS | Swiss Re American Holding Corporation / Westport Insurance Corporation | Office | 320,198 | 12/22/2018 | 100 | % | ||||||||||||
2300 Litton Ln. | Hebron | KY | Multi-tenanted | Office | 80,440 | Various | 100 | % | ||||||||||||
33 Commercial St. | Foxboro | MA | Invensys Systems, Inc. (Siebe, Inc.) | Office | 164,689 | 6/30/2015 | 100 | % | ||||||||||||
1601 Pratt Ave. | Marshall | MI | Autocam Corporation | Industrial | 58,707 | 12/31/2023 | 100 | % | ||||||||||||
26555 Northwestern Hwy. | Southfield | MI | Federal-Mogul Corporation | Office | 187,163 | 1/31/2015 | 100 | % | ||||||||||||
7670 Hacks Cross Rd. | Olive Branch | MS | MAHLE Clevite, Inc. (MAHLE Industries, Incorporated) | Industrial | 268,104 | 2/28/2016 | 100 | % | ||||||||||||
250 Swathmore Ave. | High Point | NC | Steelcase Inc. | Industrial | 244,851 | 9/30/2017 | 100 | % | ||||||||||||
6910 South Memorial Hwy. | Tulsa | OK | Toys "R" Us, Inc. / Toys “R” Us-Delaware, Inc. | Retail | 43,123 | 5/31/2016 | 100 | % | ||||||||||||
12535 Southeast 82nd Ave. | Clackamas | OR | Toys "R" Us-Delaware, Inc. / Toys "R" Us, Inc. / TRU 2005 RE I, LLC | Retail | 42,842 | 5/31/2016 | 100 | % | ||||||||||||
250 Rittenhouse Cir. | Bristol | PA | Northtec LLC (The Estée Lauder Companies Inc.) | Industrial | 241,977 | 11/30/2026 | 100 | % | ||||||||||||
2210 Enterprise Dr. | Florence | SC | Multi-tenanted | Office | 176,557 | Various | 70 | % | ||||||||||||
3476 Stateview Blvd. | Fort Mill | SC | Wells Fargo Bank, N.A. | Office | 169,083 | 5/31/2024 | 100 | % | ||||||||||||
3480 Stateview Blvd. | Fort Mill | SC | Wells Fargo Bank, N.A. | Office | 169,218 | 5/31/2024 | 100 | % | ||||||||||||
477 Distribution Pkwy. | Collierville | TN | Federal Express Corporation / FedEx Techconnect, Inc. | Industrial | 126,213 | 5/31/2021 | 100 | % | ||||||||||||
4001 International Pkwy. | Carrollton | TX | Motel 6 Operating, LP (Accor S.A.) | Office | 138,443 | 7/31/2015 | 100 | % | ||||||||||||
2050 Roanoke Rd. | Westlake | TX | TD Auto Finance LLC | Office | 130,290 | 12/31/2016 | 100 | % | ||||||||||||
13651 McLearen Rd. | Herndon | VA | United States of America | Office | 159,644 | 5/30/2018 | 100 | % | ||||||||||||
18601 Alderwood Mall Blvd. | Lynnwood | WA | Toys "R" Us-Delaware, Inc. / Toys "R" Us, Inc. /TRU 2005 RE I, LLC | Retail | 43,105 | 5/31/2016 | 100 | % | ||||||||||||
Consolidated Portfolio Total | 4,917,038 | 96.1 | % |
LCIF II CONSOLIDATED PORTFOLIO
PROPERTY CHART
As of September 30, 2013
Property Location | City | State | Primary Tenant (Guarantor) | Property Type | Net Rentable Square Feet | Current Lease Term Expiration | Percent Leased | |||||||||||||
3102 Queen Palm Dr. | Tampa | FL | Time Customer Service, Inc. (Time Incorporated) | Industrial | 229,605 | 6/30/2020 | 100 | % | ||||||||||||
4455 American Way | Baton Rouge | LA | New Cingular Wireless PCS, LLC | Office | 70,100 | 10/31/2017 | 100 | % | ||||||||||||
459 Wingo Rd. | Byhalia | MS | Asics America Corporation (Asics Corporation) | Industrial | 513,734 | 3/31/2026 | 100 | % | ||||||||||||
671 Washburn Switch Rd. | Shelby | NC | Clearwater Paper Corporation | Industrial | 673,518 | 5/31/2031 | 100 | % | ||||||||||||
191 Arrowhead Dr. | Hebron | OH | Owens Corning Insulating Systems, LLC | Industrial | 250,410 | 5/31/2014 | 100 | % | ||||||||||||
200 Arrowhead Dr. | Hebron | OH | Owens Corning Insulating Systems, LLC | Industrial | 400,522 | 5/31/2014 | 100 | % | ||||||||||||
1460 Tobias Gadsen Blvd. | Charleston | SC | Hagemeyer North America, Inc. | Office | 50,076 | 7/8/2020 | 100 | % | ||||||||||||
400 East Stone Ave. | Greenville | SC | Canal Insurance Company | Office | 128,041 | 12/31/2029 | 100 | % | ||||||||||||
19500 Bulverde Rd. | San Antonio | TX | Elsevier STM Inc. (Reed Elsevier Inc.) | Industrial | 559,258 | 3/31/2016 | 100 | % | ||||||||||||
Consolidated Portfolio Total | 2,875,264 | 100 | % |
MANAGEMENT AND EXECUTIVE COMPENSATION
Explanatory Note
On December 30, 2013, LCIF II merged with and into LCIF, with LCIF as the surviving entity. The merger was done to streamline the reporting obligations of LCIF and LCIF II into one entity on a going-forward basis. Except as otherwise indicated, all information with respect to LCIF and LCIF II in this prospectus is presented as of September 30, 2013, which is prior to the merger. Information subsequent to the merger assumes that all limited partners in LCIF II received OP units in LCIF as consideration in the merger.
General
Information with respect to management and executive compensation for LXP is contained in the documents incorporated by reference into this prospectus. LCIF does not have any employees, executive officers or a board of directors.
Neither LXP nor Lex GP receives any compensation for Lex GP’s services as general partner of LCIF. Lex GP and Lex LP, however, as partners in LCIF, have the same right to allocations and distributions as other partners of LCIF. In addition, LCIF reimburses Lex GP and LXP for all expenses incurred by them related to the ownership and operation of, or for the benefit of, LCIF. In the event that certain expenses are incurred for the benefit of LCIF and other entities (including LXP and its other subsidiaries), such expenses are allocated by LXP, as sole equity owner of Lex GP, the general partner of LCIF, to LCIF in proportion to gross revenues. LXP has guaranteed the obligations of LCIF in connection with the redemption of OP units pursuant to the LCIF partnership agreement.
During the year ended December 31, 2012, (1) cash distributions of $26.0 million and reimbursements of $3.5 million were earned by us or made to us by LCIF and (2) cash distributions of $5.9 and reimbursements of $1.1 million were earned by us or made to us by LCIF II.
DESCRIPTION OF THE PARTNERSHIP AGREEMENT
OF LEPERCQ CORPORATE INCOME FUND L.P.
We have summarized the material terms and provisions of the Sixth Amended and Restated Agreement of Limited Partnership of LCIF, which we refer to as the LCIF partnership agreement. This summary is not complete and is subject to change, and is qualified in its entirety by reference to the actual provisions and terms of, the LCIF partnership agreement itself, a form of which has previously been filed with the Commission by LXP, which we incorporate herein by reference.
Explanatory Note
On December 30, 2013, LCIF II merged with and into LCIF, with LCIF as the surviving entity. The merger was done to streamline the reporting obligations of LCIF and LCIF II into one entity on a going-forward basis. Except as otherwise indicated, all information with respect to LCIF and LCIF II in this prospectus is presented as of September 30, 2013, which is prior to the merger. Information subsequent to the merger assumes that all limited partners in LCIF II received OP units in LCIF as consideration in the merger.
General
LXP is the sole equity owner of Lex GP-1 Trust, a Delaware statutory trust, which is the general partner of LCIF and holds, as of December 31, 2013, approximately 0.4% of the outstanding OP units in LCIF. LXP is also the sole equity owner of Lex LP-1 Trust, a Delaware statutory trust, which holds, as of December 31, 2013, approximately 94.3% of the outstanding OP units in LCIF.
Issuance of OP Units
LXP’s operating partnership structure enables LXP to acquire property by issuing equity partnership units, including OP units, to a direct or indirect property owner as a form of consideration. Each of the OP units (other than OP units held directly or indirectly by LXP) which have been issued as of the date of this prospectus are generally redeemable, at the option of the holders thereof, on a one for approximately 1.13 common share basis (subject to certain anti-dilution adjustments) at various times, or, at LXP’s option, for cash in certain instances. All OP units entitle the holder thereof to distributions. As a result, our cash available for distribution to common shareholders is reduced by the amount of the distributions payable by the terms of such OP units, and the number of common shares that will be outstanding in the future is expected to increase, from time to time, as such OP units are redeemed for common shares. Lex GP has the right to redeem the OP units held by all, but not less than all, of the LCIF unitholders (other than those LCIF unitholders identified as the “Special Limited Partners” in the LCIF partnership agreement) under certain circumstances, including but not limited to a merger, sale of assets, consolidation, share issuance, share redemption or other similar transaction by LXP or LCIF, which would result in a change of beneficial ownership in LXP or LCIF, by 50% or more.
LCIF unitholders hold OP units and all LCIF unitholders are entitled to share in the profits and losses of LCIF.
Each LCIF unitholder has the right to which a limited partner is entitled under the LCIF partnership agreement and the Delaware Act. The OP units have not been registered pursuant to the federal or state securities laws and are not listed on any exchange or quoted on any national market system.
As of December 31, 2013, there are approximately 3.6 million OP units outstanding that are not held by us, all which are currently redeemable for an aggregate of 4.1 million common shares. As of December 31, 2013, of the total OP units, 1.5 million OP units are beneficially owned by E. Robert Roskind, the chairman of LXP’s Board of Trustees.
Purposes, Business and Management
The purpose of LCIF includes the conduct of any business that may be conducted lawfully by a limited partnership organized under the Delaware Act, except that the LCIF partnership agreement requires the business of LCIF to be conducted in such a manner that will permit LXP to continue to be classified as a REIT under Sections 856 through 860 of the Code, unless LXP ceases to qualify as a REIT for reasons other than the conduct of the business of LCIF. Subject to the foregoing limitation, LCIF may enter into partnerships, joint ventures or similar arrangements and may own interests in any other entity.
LXP, as sole equity owner of Lex GP, which is the sole general partner of LCIF, has exclusive power and authority to conduct the business of LCIF, subject to the consent of the limited partners in certain limited circumstances discussed below. No limited partner may take part in the operation, management or control of the business of LCIF by virtue of being a unitholder of LCIF.
Ability to Engage in Other Businesses; Conflicts of Interest
Lex GP may not, without the consent of the holders of a majority of the OP units held by the Special Limited Partners, engage in any business other than to act as general partner of LCIF and to hold and own OP units. The holders of a majority of the OP units held by the Special Limited Partners have consented to Lex GP’s acting as general partner of one of our other subsidiaries. Neither LXP nor other persons (including LXP’s officers, trustees, employees, agents and other affiliates) are prohibited under the LCIF partnership agreement from engaging in other business activities or are required to present any business opportunities to LCIF. Mr. Roskind, the chairman of LXP, beneficially owns a majority of the OP units held by the Special Limited Partners.
Distributions; Allocations of Income and Loss
Generally, LCIF unitholders are allocated and distributed amounts with respect to their OP units which approximate the amount of distributions made with respect to the same number of our common shares, as determined in the manner provided in the applicable partnership agreement and subject to certain restrictions and exceptions for certain limited partners. Remaining amounts available for distribution are generally allocated to Lex GP and Lex LP.
Borrowing by LCIF
Lex GP has full power and authority to cause LCIF to borrow money and to assume and guarantee debt.
Reimbursement of Expenses; Transactions with the General Partner and its Affiliates
Neither LXP nor Lex GP receives any compensation for Lex GP’s services as general partner of LCIF. Lex GP and Lex LP, however, as partners in LCIF, have the same right to allocations and distributions as other partners of LCIF. In addition, LCIF reimburses Lex GP and LXP for all expenses incurred by them relatedoutreach effort to the ownership and operation of, or for the benefit of, LCIF. In the event that certain expenses are incurred for the benefitthen 304 holders of LCIF and other entities (including LXP and its other subsidiaries), such expenses are allocated by LXP, as sole equity owner of Lex GP, the general partner of LCIF, to LCIFPartnership Units, which resulted in proportion to gross revenues. LXP has guaranteed the obligations of LCIF in connection with the redemption of OP24 holders redeeming their units pursuant to the LCIF partnership agreement.
LXP and its affiliates may engage in any transactions with LCIF subject to the fiduciary duties established under applicable law.
Funding Agreement
LXP and LCIF entered into a funding agreement. 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 equal to whichever is applicable of (i) a specified distribution set forth in the LCIF partnership agreement or (ii) the cash dividend payable with respect to whole or fractional common shares into which LCIF’s OP units would be converted if they were redeemed for our common sharesCommon Shares in accordance with the LCIF partnership agreement, LXP will fund the shortfall. Payments under the funding agreement will be madePartnership Agreement, 71 holders confirming interest in the formtransaction and 10 holders confirming no interest in the transaction. Mr. Bonventre presented proposed terms for the transaction. The LXP Board did not approve the proposed transaction due to concerns related to financing obligations LXP would have to undertake as part of loansthe transaction and uncertainty on the level of participation by holders of LCIF Partnership Units.
Following this LXP Board meeting, discussions between the LXP representatives and the LCP representatives continued. In March 2020, the parties began to explore using one or more of LXP’s non-industrial properties as the properties to be held by the new LXP subsidiary that would execute the exchange offer portion of the two-step transaction.
The LXP Board discussed the potential merger and exchange offer at meetings on April 1, 2020, May 19, 2020, September 23, 2020 and December 10, 2020.
In March 2021, the parties explored an alternative transaction structure pursuant to which LCIF Partnership Units held by the special limited partners and will bear interest at prevailing rates as determined by ustheir affiliates would be redeemed for interests in our discretion but no less thancertain non-core LXP assets and related financing arrangements. As part of the applicable federal rate.
Liability oftransaction, the special limited partners would consent to an amendment to the Partnership Agreement giving the General Partner and Limited Partners
Lex GP, as the general partner of LCIF, is ultimately liable for all general recourse obligations of LCIF,right to the extent not paid by LCIF. Lex GP is not liable for the nonrecourse obligations of LCIF. The limited partners of LCIF are not required to make additional capital contributions to LCIF. Assuming that a limited partner does not take part in the control of the business of LCIF, in its capacity as a limited partner thereof and otherwise acts in conformity with the provisions of the LCIF partnership agreement, the liability of the limited partner for obligations of LCIF under the LCIF partnership agreement and the Delaware Act is generally limited, subject to certain limited exceptions, to the loss of the limited partner’s investment in LCIF. LCIF will operate in a manner the general partner deems reasonable, necessary and appropriate to preserve the limited liability of the limited partners.
Exculpation and Indemnification of the General Partner
Generally, Lex GP, as general partner of LCIF (and LXP as the sole equity owner of Lex GP) will incur no liability to LCIF or any limited partner for losses sustained or liabilities incurred as a result of errors in judgment or of any act or omission if LXP carried out our duties in good faith. In addition, neither Lex GP nor LXP are responsible for any misconduct or negligence on the part of their agents, provided such agents were appointed in good faith. Lex GP and LXP may consult with legal counsel, accountants, appraisers, management consultants, investment bankers and other consultants and advisors, and any action it takes or omits to take in reliance upon the opinion of such persons, as to matters that Lex GP and LXP reasonably believe to be within their professional or expert competence, shall be conclusively presumed to have been done or omitted in good faith and in accordance with such opinion.
The LCIF partnership agreement also provides that LCIF will indemnify Lex GP and LXP, their respective directors, trustees and officers, and such other persons as Lex GP and LXP may from time to time designate to the fullest extent permitted under the Delaware Act.
Sales of Assets
Under the LCIF partnership agreement, Lex GP generally has the exclusive authority to determine whether, when and on what terms the assets of LCIF will be sold. LCIF, however, may be prohibited under the LCIF partnership agreement and certain contractual agreements from selling certain assets, except in certain limited circumstances. Lex GP may not consent to a sale of all or substantially all of the assets of LCIF, orconsummate a merger of LCIF with another entity, without the consent of a majority in interest of the Special Limited Partners. The consent of a majority in interest of the Special Limited Partners was obtained for the merger of LCIF II with and into LCIF on December 30, 2013.
Lex GP has the right to redeem the OP units held by all, but not less than all, of the LCIF unitholders (other than the Special Limited Partners) under certain circumstances, including but not limited to a merger, sale of assets, consolidation, share issuance, share redemption or other similar transaction by LXP or LCIF which would result in a change of beneficial ownership in us or LCIF, by 50% or more.
Removal of the General Partner; Restrictions on Transfer by the General Partner or LXP
The LCIF partnership agreement provides that the limited partners may not remove Lex GP as general partner of LCIF. Lex GP may not transfer any of its interests as the general partner of LCIF, and Lex LP may not transfer any of its interests as a limited partner in LCIF, except to each other, as applicable, or to LXP or another one of LXP’s wholly-owned subsidiaries.
Restrictions on Transfer of OP Units by LCIF Unitholders
LCIF unitholders may not transfer their OP units without the consent of Lex GP, which may be withheld in its sole and absolute discretion, provided that LCIF unitholders may transfer all or a portion of their OP units to (i) immediate family members, (ii) certain 501(c)(3) organizations, (iii) a partner in such LCIF unitholder, as applicable, in a distribution to all of its partners or (iv) a lender as security for a loan to be made or guaranteed by such LCIF unitholder, as applicable. However, a LCIF unitholder may assign the economic rights associated with its OP units, without the consent of Lex GP, but such assignee will not be (i) admitted to LCIF as a substituted limited partner or (ii) entitled to the same rights as a substituted limited partner. In addition, LCIF unitholders may dispose of their OP units by exercising their rights to have their OP units redeemed for common shares. See “– Issuance of OP Units” above.
Issuance of Additional Limited Partnership Interests
Lex GP is authorized, in its sole and absolute discretion and without the consent of the limited partners, to cause LCIF to issue additional OP units to any limited partners or any other persons for such consideration and on such terms and conditions as Lex GP deems appropriate. In addition, Lex GP may cause LCIF to issue additional partnership interests in different series or classes, which may be senior to the OP units.
Meetings; Voting
The LCIF partnership agreement provides that limited partners may not take part in the operation, management or control of LCIF’s business. The LCIF partnership agreement does not provide for annual meetings of the limited partners, and LCIF does not anticipate calling such meetings.
Amendment of the Partnership Agreement
The LCIF partnership agreement may be amended with the consent of Lex GP, Lex LP and a majority in interest of the applicable Special Limited Partners. Notwithstanding the foregoing, Lex GP has the power, without the consent of limited partners, to amend the LCIF partnership agreement in certain limited circumstances.
Dissolution, Winding Up and Termination
LCIF will continue indefinitely, unless sooner dissolved and terminated. LCIF will be dissolved, and its affairs wound up upon the occurrence of the earliest of: (1) the withdrawal of Lex GP as general partner (except in certain limited circumstances); (2) the sale of all or substantially all of its assets and properties; or (3) the entry of a decree of judicial dissolution of it pursuant to the provisions of the Delaware Act. Upon dissolution, Lex GP, as general partner, or any person elected as liquidator by a majority in interest of the limited partners, will proceed to liquidate the assets of LCIF and apply the proceeds therefrom in the order of priority set forth in the LCIF partnership agreement.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
Explanatory Note
On December 30, 2013, LCIF II merged with and into LCIF, with LCIF as the surviving entity. The merger was done to streamline the reporting obligations of LCIF and LCIF II into one entity on a going-forward basis. Except as otherwise indicated, all information with respect to LCIF and LCIF II in this prospectus is presented as of September 30, 2013, which is prior to the merger. Information subsequent to the merger assumes that all limited partners in LCIF II received OP units in LCIF as consideration in the merger.
Certain Relationships and Related Transactions
LXP is the sole equity owner of Lex GP which is the general partner of LCIF and holds, as of December 31, 2013, approximately 0.4% of the outstanding OP units in LCIF. LXP is also the sole equity owner of Lex LP which holds, as of December 31, 2013, approximately 94.3% of the outstanding OP units in LCIF. The remaining OP units in LCIF are beneficially owned by E. Robert Roskind, Chairman of LXP, and certain non-affiliated investors. As the sole equity owner of the general partner of LCIF and pursuant to the LCIF partnership agreement, LXP has the ability to control all of the day-to-day operations of LCIF, subject to the terms of the LCIF partnership agreement. LCIF is dependent on LXP for management of its operations and future investments. LCIF does not have any employees, executive officers or a board of directors. LXP allocates investments to itself and its other subsidiaries or to LCIF as it deems appropriate and in accordance with certain obligations under the LCIF partnership agreement with respect to allocations of nonrecourse liabilities.
Neither LXP nor Lex GP receives any compensation for Lex GP’s services as general partner of LCIF. Lex GP and Lex LP, however, as partners in LCIF, have the same right to allocations and distributions as other partners of LCIF. In addition, LCIF reimburses Lex GP and LXP for all expenses incurred by them related to the ownership and operation of, or for the benefit of, LCIF. In the event that certain expenses are incurred for the benefit of LCIF and other entities (including LXP and its other subsidiaries), such expenses are allocated by LXP, as sole equity owner of Lex GP, the general partner of LCIF, to LCIF in proportion to gross revenues. LXP has guaranteed the obligations of LCIF in connection with the redemption of OP units pursuant to the LCIF partnership agreement.
LXP and its affiliates may engage in any transactions with LCIF subject to applicable law and the LCIF partnership agreement.
Mr. Roskind, the chairman of LXP, beneficially owns a majority of the OP units held by the Special Limited Partners.
Lexington MKP Management L.P., in which we hold a 50% interest, earned $1.1 million from LCIF and $0.1 million from LCIF II during the year ended December 31, 2012 for property management services and reimbursements.
See the financial statements included and incorporated by reference in this prospectus for additional relationships and related party transactions.
Charitable and Political Contributions
During 2012, we did not make any charitable contribution to any tax-exempt organization in which any independent trustee serves as an executive officer. As a general policy, we do not make a charitable contribution unless there is an express business purpose. We did not make any direct political contributions during 2012, nor do we intend to make any direct political contributions during 2013.
We issued the private notes and will issue the exchange notes pursuant to an indenture, dated as of June 10, 2013, among LXP, certain of its Subsidiaries (as defined in “–Definitions” below) named therein, as guarantors (the “Subsidiary Guarantors”), and U.S. Bank National Association, as trustee, as supplemented by the First Supplemental Indenture, dated as of September 30, 2013, among LXP, LCIF, LCIF II and U.S. Bank National Association. The indenture, as amended and supplemented from time to time, including by the First Supplemental Indenture, is referred to herein as the indenture. The terms of the notes include those stated in the indenture and those made part of the indenture by reference to the Trust Indenture Act of 1939, as amended. You may request copies of the indenture and the form of the exchange notes from LXP.
The following description summarizes key terms and provisions of the notes and the indenture, does not purport to be complete and is subject to, and is qualified in its entirety by reference to, the actual terms and provisions of the notes and the indenture, which are filed as exhibits to the registration statement to which this prospectus forms a part and are incorporated herein by reference. We will provide copies of these documents to you upon request. Capitalized terms used but not otherwise defined herein shall have the meanings given to them in the notes, the indenture or the registration rights agreement, as applicable. Unless the context requires otherwise, the term “interest” includes additional interest, as described below and references to dollars mean U.S. dollars.
General
The form and terms of the exchange notes are the same as the form and terms of the private notes, except that the exchange notes will be registered under the Securities Act and, therefore, the exchange notes will not be subject to the transfer restrictions, registration rights and provisions providing for an increase in the interest rate applicable to the private notes. The exchange notes will evidence the same debt as the private notes, and both the private notes and the exchange notes are governed by the same indenture and will vote as a single class on all matters. We refer to the private notes and the exchange notes together in this prospectus as the "notes." Unless the context otherwise requires, when we refer to the private notes, we also refer to the guarantees associated with the private notes, and when we refer to the exchange notes, we also refer to the guarantees associated with the exchange notes.
The exchange notes will be issued only in fully registered, book-entry form, in denominations of $2,000 and integral multiples of $1,000 in excess thereof, except under the limited circumstances described below under “-Book-Entry System.” The registered holder of a note will be treated as its owner for all purposes.
If any interest payment date, stated maturity date or redemption date is not a business day, the payment otherwise required to be made on such date will be made on the next business day without any additional payment as a result of such delay. The term “business day” means, with respect to any note, any day, other than a Saturday, Sunday or any other day on which banking institutions in New York, New York are authorized or obligated by law or executive order to close. All payments will be made in U.S. dollars.
The private notes are, and the exchange notes will be, fully and unconditionally guaranteed by the Subsidiary Guarantors on an unsecured and unsubordinated basis. LCIF and any future domestic subsidiaries of LXP that are borrowers or guarantors under the Principal Credit Agreement (as defined in “–Definitions” below), will become Subsidiary Guarantors with respect to the notes. Additional domestic Subsidiaries that become guarantors or borrowers under the Principal Credit Agreement will be required to guarantee the notes, and the guarantees of the Subsidiary Guarantors with respect to the exchange notes will terminate or be released, in each case in the circumstances set forth under “-Guarantees.”
The terms of the notes provide that LXP is permitted to reduce interest payments and payments upon a redemption of notes otherwise payable to a holder for any amounts LXP is required to withhold by law. For example, non-United States holders of the notes may, under some circumstances, be subject to U.S. federal withholding tax with respect to payments of interest on the notes. LXP will set-off any such withholding tax that it is required to pay against payments of interest payable on the notes and payments upon a redemption of notes.
Ranking
The notes and the guarantees will be LXP’s and the Subsidiary Guarantors’ general unsecured and unsubordinated obligations and will rank equally in right of payment with all of LXP’s and the Subsidiary Guarantors’ existing and future unsecured and unsubordinated indebtedness. However, the exchange notes and the guarantees will be effectively subordinated in right of payment to all of LXP’s and the Subsidiary Guarantors’ existing and future secured indebtedness (to the extent of the value of the collateral securing such indebtedness). The notes and the guarantees will be structurally subordinated in right of payment to all existing and future liabilities and other indebtedness, whether secured or unsecured, and preferred stock of LXP’s Subsidiaries that are not Subsidiary Guarantors (the “Non-Guarantor Subsidiaries”). As of September 30, 2013, LXP and the Subsidiary Guarantors had no secured indebtedness and $0.8 billion of unsecured and unsubordinated indebtedness outstanding, and the Non-Guarantor Subsidiaries had approximately $1.0 billion of secured indebtedness outstanding and no unsecured indebtedness. In addition, as of September 30, 2013, $511.4 million was available for LXP to borrow under the Principal Credit Agreement subject to covenant compliance.
Except as described under “-Covenants” and “-Merger, consolidation or sale,” the indenture governing the notes does not prohibit LXP or any of its Subsidiaries from incurring additional indebtedness or issuing preferred equity in the future, nor does the indenture afford holders of the notes protection in the event of (1) a recapitalization transaction or other highly leveraged or similar transaction involving LXP or any of its Subsidiaries, (2) a change of control of LXP or any of its Subsidiaries or (3) a merger, consolidation, reorganization, restructuring or transfer or lease of substantially all of LXP’s or any of its Subsidiaries’ assets or similar transaction that may adversely affect the holders of the notes. LXP may, in the future, enter into certain transactions such as the sale of all or substantially all of LXP’s or its Subsidiary’s assets or a merger or consolidation that may increase the amount of LXP’s or its Subsidiary’s indebtedness or substantially change LXP’s or its Subsidiary assets, which may have an adverse effect on LXP’s and its Subsidiaries’ ability to service their indebtedness, including LXP’s and the Subsidiary Guarantors’ ability to service the exchange notes. See “Risk factors-Risks related to the exchange notes- Despite our substantial indebtedness, we may still incur significantly more debt, which could exacerbate any or all of the risks related to our indebtedness, including LXP’s and the subsidiary guarantors’ inability to pay the principal of or interest on the exchange notes.”
Guarantees
The Subsidiary Guarantors have unconditionally guaranteed, jointly and severally, the due and punctual payment of principal of and interest on the notes, when and as the same become due and payable, whether on the maturity date, by declaration of acceleration, upon redemption, repurchase or otherwise, and all of LXP’s other obligations under the indenture.
Each guarantee of the notes is:
See “–Risk factors-Risks related to the notes-Federal and state statutes allow courts, under specific circumstances, to void guarantees and require holders of the notes to return payments received from LXP or the Subsidiary Guarantors.”
All of LXP’s Subsidiaries that are guarantors or borrowers under the Principal Credit Agreement are required to become Subsidiary Guarantors with respect to the notes. As of the date hereof, LCIF is the only Subsidiary Guarantor. None of the Subsidiary Guarantors will be foreign subsidiaries.
In the event that, at any time, any of LXP’s domestic Subsidiaries which is not, or has previously been released as, a Subsidiary Guarantor becomes a guarantor or borrower under the Principal Credit Agreement, that Subsidiary will be required to become a Subsidiary Guarantor and guarantee the notes not later than 60 days following the date on which it becomes a guarantor or borrower under the Principal Credit Agreement.
In the event that, for any reason, the obligations of any Subsidiary Guarantor that has been a guarantor or borrower under the Principal Credit Agreement terminate as a guarantor or borrower thereunder (including, without limitation, pursuant to the terms of the Principal Credit Agreement, upon agreement of the requisite lenders under the Principal Credit Agreement or upon the termination of the Principal Credit Agreement or upon the replacement thereof with a credit facility not requiring such guarantees), that Subsidiary Guarantor will be deemed released from all of its obligations under the indenture and its guarantee of the notes will terminate. A Subsidiary Guarantor’s guarantee will also terminate and such Subsidiary Guarantor will be deemed released from all of its obligations under the indenture with respect to the notes in connection with any sale or other disposition by LXP of all of the capital stock of that Subsidiary Guarantor (including by way of merger or consolidation) or other transaction such that after giving effect to such transaction such Subsidiary Guarantor is no longer one of LXP’s domestic Subsidiaries. Any release described in this paragraph may be evidenced by a supplemental indenture or other instrument which may be entered into without the consent of any holders of LCIF Partnership Units. The parties continued to discuss and negotiate the notes.
proposed redemption transaction from March-July 2021 and the LXP Board was regularly updated.
As described in the LXP Form 8-K filed on July 16, 2021 and in LXP’s subsequent SEC periodic reports, in July 2021 the parties agreed upon the in-kind redemption transaction and amendment of the Partnership Agreement. On July 12, 2021, the Partnership Agreement was amended to give the General Partner the right to consummate a merger of LCIF into LXP without the consent of any holders of LCIF Partnership Units and LCIF redeemed 1,598,906 LCIF Partnership Units in exchange for the distribution of LXP entities that owned three non-core properties and the assumption of indebtedness secured by such properties.
On September 30, 2013,13, 2023, LCIF and LXP entered in the Merger Agreement, which the parties amended on September 15, 2023 and its Subsidiaries had approximately $2.5 billionSeptember 16, 2023. The Merger Agreement provided that the issuance of unpledged assets.Common Shares in the Merger would be effectuated as a private placement of shares based on an exemption from the registration requirement of the Securities Act. In order to permit LXP to satisfy the requirements of the Securities Act exemption, holders of LCIF Partnership Units were required to provide LXP a written questionnaire in order to receive the consideration.
Pursuant to a funding agreement, amongAfter experiencing difficulties in collecting properly completed written questionnaires, LXP senior management determined that it was in the best interests of LXP and LCIF to register the Common Shares to be issued in the Merger. On October 24, 2023, the parties amended and restated the Merger Agreement to reflect the registration of the issuance of the Common Shares in the Merger. The LXP Board and the General Partner approved the execution of the amended Merger Agreement, the Merger and the related transactions.
Regulatory Approvals Required for the Merger
LXP and LCIF are not aware of any material federal or state regulatory requirements (including any mandatory waiting period) that must be complied with, or regulatory approvals that must be obtained, in connection with the Merger, other than filings of applicable certificates or articles of merger with respect to the Merger with the Delaware Secretary of State and the State Department of Assessments and Taxation of Maryland.
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COMPARATIVE MARKET PRICES AND CASH DIVIDEND/DISTRIBUTION INFORMATION
Common Shares are listed on the NYSE under the symbol “LXP.” There is no trading market for LCIF Partnership Units. The following table presents the closing prices of Common Shares on (i) September 13, 2023, the date the Merger Agreement was initially executed, and (ii) October 31, 2023, the most recent practicable trading day before the date of this information statement/prospectus. The table also shows the equivalent per unit value of the Common Shares included in the Merger Consideration for each party agreed, that, if LCIF does not have sufficient cash available to make a quarterly distribution to its limited partners in an amount equal to whicheverPartnership Unit, which per unit value is applicablecalculated as the product of (i) a specified distributionthe applicable Common Share per share value, and (ii) 1.126, the redemption factor set forth in the LCIF partnership agreement or (ii)Partnership Agreement, rounded to the cash dividend payable with respect to a whole or fractional common shares into which LCIF’s OP units would be converted if they were redeemed for LXP’s common shares in accordance with the LCIF partnership agreement, LXP will fund the shortfall. Payments under the funding agreement will be made in the form of loans to LCIF and will bear interest at prevailing rates as determined by LXP in its discretion but no less than the applicable federal rate.nearest cent.
Date | Common Share Closing Price | Equivalent Per Unit Value | |||
September 13, 2023 | $ | 9.45 | $ | 10.64 | |
October 31, 2023 | $ | 7.91 | $ | 8.91 |
Dividend Policy
The indenture provides thatLXP Board determines the obligationstime and amount of each Subsidiary Guarantor under its guaranteedividends to holders of Common Shares. Generally, distributions to holders of LCIF Partnership Units are made at the same time and in the same amount as distributions to holders of Common Shares. Future LXP dividends will be limitedauthorized at the discretion of the LXP Board and will depend on LXP’s actual cash flow, its financial condition, its capital requirements, the annual distribution requirements under the REIT provisions of the Code and such other factors as the LXP Board may deem relevant.
Because the exchange ratio in the Merger is fixed and because the market price of Common Shares will fluctuate prior to the maximum amount that, after giving effect to all other contingent and fixed liabilitiescompletion of such Subsidiary Guarantor, would cause the obligationsMerger, holders of such Subsidiary Guarantor not to constitute a fraudulent conveyance or fraudulent transfer under any applicable law.LCIF Partnership Units cannot be sure of the market value of the Common Shares they will receive as Merger Consideration. See “Risk Factors.”
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Additional notes
The exchange notes will initially be limited to an aggregate principal amount of $250 million. LXP may, without the consent of holders of the exchange notes, increase the principal amount of the exchange notes by issuing additional exchange notes in the future on the same terms and conditions, except for any difference in the issue date, issue price, the date from which interest accrues on such exchange notes, and, if applicable, the first interest payment date, with the same CUSIP number as the exchange notes offered hereby. The exchange notes offered by this prospectus and any additional exchange notes would rank equally and ratably in right of payment and would be treated as a single series of debt securities for all purposes under the indenture.
Interest
Interest on the exchange notes will accrue at the rate of 4.25% per year from and including December 15, 2013 or the most recent interest payment date to which interest has been paid or provided for with respect to the private notes, and will be payable semi-annually in arrears on June 15 and December 15 of each year, beginning June 15, 2014. The interest so payable will be paid to each holder in whose name an exchange note is registered at the close of business on the June 1 or December 1 (whether or not a business day) immediately preceding the applicable interest payment date. Interest on the exchange notes will be computed on the basis of a 360-day year consisting of twelve 30-day months.
If any interest payment date or maturity or redemption date falls on a day that is not a business day, the required payment shall be made on the next business day as if it were made on the date such payment was due and no interest shall accrue on the amount so payable from and after such interest payment date or maturity or redemption date, as the case may be, to such next business day.
If LXP redeems the notes in accordance with the terms of such notes, LXP will pay accrued and unpaid interest and premium, if any, to the holders that surrender notes for redemption. However, if a redemption falls after a record date and on or prior to the corresponding interest payment date, LXP will pay the full amount of accrued and unpaid interest and premium, if any, due on such interest payment date to the holder of record at the close of business on the corresponding record date (instead of the holder surrendering such notes for redemption).
Maturity
The notes will mature on June 15, 2023 and will be paid against presentation and surrender thereof at the corporate trust office of the trustee unless earlier redeemed by LXP at its option as described under “-LXP’s redemption rights” below. The notes are not entitled to the benefits of, or be subject to, any sinking fund.
LXP’s redemption rights
LXP may redeem the notes at its option and in its sole discretion, at any time or from time to time prior to March 15, 2023 in whole or in part, at a redemption price equal to the greater of:
The Merger involves certain risks and other adverse factors. You are urged to read this information statement/prospectus carefully in each case, accruedits entirety, including the matters addressed in “Warning About Forward-Looking Statements,” and unpaid interest thereonshould carefully consider the following risk factors in considering the Merger.
The risks below relate to the applicable redemption date; provided, however, that if the redemption date falls after a record date and on or priorMerger. This section does not review risks relating to the corresponding interest payment date,existing business of LXP, which risks will payimpact holders of LCIF Partnership Units upon receipt of Common Shares upon closing of the full amountMerger. These risks are described in Part I, Item 1A of accruedLXP’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022, which is filed with the SEC and unpaid interest, if any (plus additional interest, if applicable), on such interest payment dateincorporated by reference into this information statement/prospectus. See “Where You Can Find More Information.”
Risks Related to the holder of record at the close of business on the corresponding record date (instead of the holder surrendering its notes for redemption).Merger
Notwithstanding the foregoing, if the notes are redeemed on or after March 15, 2023, the redemption priceThe exchange ratio is fixed and will not be equal to 100% of the principal amount of the notes being redeemed, plus accrued and unpaid interest thereon to, but not including, the applicable redemption date.
As used herein:
“Adjusted Treasury Rate” means, with respect to any redemption date, the rate per year equal to the semi-annual equivalent yield to maturity (computed on the third business day immediately preceding the redemption date) of the Comparable Treasury Issue, assuming a price for the Comparable Treasury Issue (expressed as a percentage of its principal amount) equal to the Comparable Treasury Price for such redemption date.
“Comparable Treasury Issue” means the United States Treasury security selected by the Quotation Agent as having an actual or interpolated maturity comparable to the remaining term of the notes to be redeemed that would be utilized, at the time of selection andadjusted in accordance with customary financial practice, in pricing new issues of corporate debt securities of comparable maturity to the remaining term of such notes.
“Comparable Treasury Price” means, with respect to any redemption date, (1) the average of the Reference Treasury Dealer Quotations for such redemption date, after excluding the highest and lowest of such Reference Treasury Dealer Quotations, (2) if the trustee obtains fewer than four such Reference Treasury Dealer Quotations, the average of all such Quotations, or (3) if only one Reference Treasury Dealer Quotation is received, such quotation.
“Quotation Agent” means the Reference Treasury Dealer appointed by LXP.
“Reference Treasury Dealer”means (1) a Primary Treasury Dealer (as defined below) selected by Wells Fargo Securities LLC or its successor, (2) J.P. Morgan Securities LLC or its successor and (3) any one other Primary Treasury Dealer selected by LXP; provided, however, that if any of the Reference Treasury Dealers referred to in clause (1), (2) or (3) above ceases to be a primary U.S. Government securities dealer (“Primary Treasury Dealer”), LXP will substitute therefor another Primary Treasury Dealer.
“Reference Treasury Dealer Quotations” means, with respect to each Reference Treasury Dealer and any redemption date, the average, as determined by LXP, of the bid and asked prices for the Comparable Treasury Issue (expressed in each case as a percentage of its principal amount) quoted in writing to the trustee by such Reference Treasury Dealer at 5:00 p.m., New York City time, on the third business day preceding such redemption date.
Notice of any redemption will be mailed at least 30 days but not more than 60 days before the redemption date to each holder of the notes to be redeemed. Unless LXP defaults in payment of the redemption price, on and after the redemption date, interest will cease to accrue on the notes or portions thereof called for redemption.
If LXP decides to redeem the notes in part, the trustee will select the notes to be redeemed (in principal amounts of $2,000 and integral multiples of $1,000 in excess thereof) on a pro rata basis or such other method it deems fair and appropriate or is required by the depository for the notes.
In the event of any redemptionchange in the share price of notesCommon Shares, so holders of LCIF Partnership Units cannot be sure of the market value of Common Shares that they will receive as Merger Consideration.
The market value of the consideration that LCIF Partnership Unitholders will receive in part, LXPthe Merger will not be required to:
Common Shares.
If the paying agent holds funds sufficient to pay the redemptionper share price of Common Shares at the notes onClosing is less than the redemption date, then on and after such date:
Such will be the case whether or not book-entry transfer of the notes in book-entry form is made and whether or not notes in certificated form, together with the necessary endorsements, are delivered to the paying agent.
LXP will not redeem the notes on any date if the principal amount of the notes has been accelerated, and such an acceleration has not been rescinded or cured on or prior to such date.
Certain covenants
Limitation on total outstanding debt.The indenture provides that LXP will not, and will not permit any of its Subsidiaries to, incur any Debt (as defined in “–Definitions” below) (including, without limitation, Acquired Debt (as defined in “–Definitions” below)) if, immediately after giving effect to the incurrence of such Debt and the application of the proceeds from such Debt on a pro forma basis, the aggregate principal amount of all of LXP’s and its Subsidiaries’ outstanding Debt (determined on a consolidated basis in accordance with GAAP) is greater than 60% of the sum of the following (without duplication): (1) LXP’s and its Subsidiaries’ Total Assets (as defined in “–Definitions” below) as of the last day of the then most recently ended fiscal quarter and (2) the aggregate purchaseper share price of any real estate assets or mortgages receivable acquired, and the aggregate amount of any securities offering proceeds received (to the extent such proceeds were not used to acquire real estate assets or mortgages receivable or used to reduce Debt) by LXP or any of its Subsidiaries since the end of such fiscal quarter, including the proceeds obtained from the incurrence of such additional Debt.
Secured debt test.The indenture provides that LXP will not, and will not permit any of its Subsidiaries to, incur any Debt (including, without limitation, Acquired Debt) secured by any Lien (as defined in “–Definitions” below) on any of LXP’s or any of its Subsidiaries’ property or assets, whether ownedCommon Shares on the date that the Merger Agreement was signed, then the market value of the indenture or subsequently acquired, if, immediately after giving effect to the incurrence of such Debt and the application of the proceeds from such Debt on a pro forma basis, the aggregate principal amount of all of LXP’s and its Subsidiaries’ outstanding Debt (determined on a consolidated basis in accordance with GAAP) which is secured by a Lien on any of LXP’s or its Subsidiaries’ property or assets is greater than 40% of the sum of (without duplication): (1) LXP’s and its Subsidiaries’ Total Assets as of the last day of the then most recently ended fiscal quarter; and (2) the aggregate purchase price of any real estate assets or mortgages receivable acquired, and the aggregate amount of any securities offering proceeds received (to the extent such proceeds were not used to acquire real estate assets or mortgages receivable or used to reduce Debt) by LXP or any of its Subsidiaries since the end of such fiscal quarter, including the proceeds obtained from the incurrence of such additional Debt.
Debt service test.The indenture provides that LXPMerger Consideration will not, and will not permit any of its Subsidiaries to, incur any Debt (including without limitation Acquired Debt) if the ratio of Consolidated Income Available for Debt Service (as defined in “–Definitions” below) to Annual Debt Service Charge (as defined in “–Definitions” below) for the period consisting of the four consecutive fiscal quarters most recently ended prior to the date on which such additional Debt is to be incurred shall have been less than 1.5:1 on a pro forma basis after giving effect to the incurrence of such Debt and the application of the proceeds from such Debt (determined on a consolidated basis in accordance with GAAP), and calculated on the following assumptions: (1) such Debt and any other Debt (including, without limitation, Acquired Debt) incurred by LXP or any of its Subsidiaries since the first day of such four-quarter period had been incurred, and the application of the proceeds from such Debt (including to repay or retire other Debt) had occurred, on the first day of such period; (2) the repayment or retirement of any other Debt of LXP or any of its Subsidiaries since the first day of such four-quarter period had occurred on the first day of such period (except that, in making this computation, the amount of Debt under any revolving credit facility, line of credit or similar facility will be computed based upon the average daily balance of such Debt during such period); and (3) in the case of any acquisition or disposition by LXP or any of its Subsidiaries of any asset or group of assets with a fair market value in excess of $1.0 million since the first day of such four-quarter period, whether by merger, stock purchase or sale or asset purchase or sale or otherwise, such acquisition or disposition had occurred as of the first day of such period with the appropriate adjustments with respect to such acquisition or disposition being included in such pro forma calculation.
If the Debt giving rise to the need to make the calculation described above or any other Debt incurred after the first day of the relevant four-quarter period bears interest at a floating rate, then, for purposes of calculating the Annual Debt Service Charge, the interest rate on such Debt will be computed on a pro forma basis by applying the average daily rate which would have been in effect during the entire four-quarter period to the greater of the amount of such Debt outstandingcontemplated at the end of such period ortime the average amount of such Debt outstanding during such period. For purposes of the foregoing, DebtMerger Agreement was signed.
You generally will be deemed to be incurred by LXP or any of its Subsidiaries whenever LXP or any of its Subsidiaries shall create, assume, guarantee or otherwise become liable in respect thereof.
Maintenance of total unencumbered assets.The indenture provides that LXP and its Subsidiaries will not have at any time Total Unencumbered Assets (as defined in “–Definitions” below) of less than 150% of the aggregate principal amount of all of LXP’s and its Subsidiaries’ outstanding Unsecured Debt (as defined in “–Definitions” below) determined on a consolidated basis in accordance with GAAP.
Existence.Except as permitted under “-Merger, consolidation or sale,” LXP will do or cause to be done all things necessary to preserve and keep in full force and effect LXP’s existence, rights (charter and statutory) and franchises, and LXP will do or cause to be done all things necessary to preserve and keep in full force and effect its existence, rights (charter and statutory) and franchises. However, LXP will not be required to preserve any right or franchise if LXP’s Board of Trustees (or any duly authorized committee of that Board of Trustees), as the case may be, determines that the preservation of the right or franchise is no longer desirable in the conduct of LXP’s business.
Maintenance of properties.The indenture provides that LXP will cause all of LXP’s and its Subsidiaries’ properties used or useful in the conduct of LXP’s business or any of its Subsidiaries’ businesses to be maintained and kept in good condition, repair and working order and supplied with all necessary equipment and cause all necessary repairs, renewals, replacements, betterments and improvements to be made, all as in LXP’s judgment may be necessary in order for LXP to at all times properly and advantageously conduct LXP’s business carried on in connection with such properties.
Insurance.The indenture provides that LXP will, and will cause each of its Subsidiaries to, keep in force upon all of LXP’s and each of its Subsidiaries’ properties and operations insurance policies carried with responsible companies in such amounts and covering all such risks as is customary in the industry in which LXP and its Subsidiaries do business in accordance with prevailing market conditions and availability.
Payment of taxes and other claims.The indenture provides that LXP will pay or discharge or cause to be paid or discharged before it becomes delinquent:
However, LXP will not be required to pay or discharge or cause to be paid or discharged any tax, assessment, charge or claim the amount, applicability or validity of which is being contested in good faith.
Provision of financial information.The indenture provides that:
Calculations in respect of the notes
Except as explicitly specified otherwise herein, LXP will be responsible for making all calculations required under the notes. LXP will make all these calculations in good faith and, absent manifest error, its calculations will be final and binding on holders of the notes. LXP will provide a schedule of its calculations to the trustee, and the trustee is entitled to rely upon the accuracy of LXP’s calculations without independent verification. The trustee will forward LXP’s calculations to any holder of notes upon request.
Merger, consolidation or sale
The indenture provides that LXP may consolidate with, or sell, lease or convey all or substantially all of its assets to, or merge with or into, any other entity, provided that the following conditions are met:
In the event of any transaction described in and complying with the conditions listed in the immediately preceding paragraph in which LXP is not the continuing entity, the successor person formed or remaining shall succeed, and be substituted for, and may exercise every right and power of LXP’s, and LXP shall be discharged from its obligations under the notes, the indenture and the registration rights agreement.
LXP will not permit any Subsidiary Guarantor to consolidate with, or sell, lease or convey all or substantially all of its assets to, or merge with or into, any other entity unless the following conditions are met:
In the event of any transaction described in and complying with the conditions listed in the immediately preceding paragraph in which such Subsidiary Guarantor is not the continuing entity, the successor person formed or remaining shall succeed, and be substituted for, and may exercise every right and power of such Subsidiary Guarantor, and such Subsidiary Guarantor shall be discharged from its obligations under the exchange notes, the indenture and the registration rights agreement.
Events of default
The indenture provides that the following events are “Events of Default” with respect to the notes:
If an Event of Default under the indenture with respect to the notes occurs and is continuing (other than an Event of Default specified in the last bullet above with respect to LXP, which shall result in an automatic acceleration), then in every case the trustee or the holders of not less than 25% in principal amount of the outstanding notes may declare the principal amount of all of the notes to be due and payable immediately by written notice thereof to LXP (and to the trustee if given by the holders). However, at any time after the declaration of acceleration with respect to the notes has been made, but before a judgment or decree for payment of the money due has been obtained by the trustee, the holders of not less than a majority in principal amount of outstanding notes may waive all defaults or Events of Default and rescind and annul such declaration and its consequences if all Events of Default, other than the non-payment of accelerated principal of (or specified portion thereof) or interest on the notes have been cured or waived as provided in the indenture.
The indenture also provides that the holders of not less than a majority in principal amount of the outstanding notes may waive any past default with respect to the notes and its consequences, except a default:
The trustee will be required to give notice to the holders of the notes of a default under the indenture unless the default has been cured or waived within 90 days; provided, however, that the trustee may withhold notice to the holders of the notes of any default with respect to the notes (except a default in the payment of the principal of or interest on the notes) if specified responsible officers of the trustee consider the withholding to be in the interest of the holders.
The indenture provides that no holders of the notes may institute any proceedings, judicial or otherwise, with respect to the indenture or for any remedy thereunder, except in the case of failure of the trustee, for 90 days, to act after it has received a written request to institute proceedings in respect of an Event of Default from the holders of not less than 25% in principal amount of the outstanding notes, as well as an offer of reasonable indemnity. This provision will not prevent, however, any holder of the notes from instituting suit for the enforcement of payment of the principal of and interest on the notes at the respective due dates thereof.
Subject to provisions in the indenture relating to its duties in case of default, the trustee is under no obligation to exercise any of its rights or powers under the indenture at the request or direction of any holders of the notes then outstanding under the indenture, unless the holders shall have offered to the trustee reasonable security or indemnity. The holders of not less than a majority in principal amount of the outstanding notes (or of all notes then outstanding under the indenture, as the case may be) shall have the right to direct the time, method and place of conducting any proceeding for any remedy available to the trustee, or of exercising any trust or power conferred upon the trustee. However, the trustee may refuse to follow any direction which is in conflict with any law or the indenture, or which may be unduly prejudicial to the holders of the notes not joining therein.
Within 120 days after the close of each fiscal year, LXP must deliver a certificate of an officer certifying to the trustee whether or not the officer has knowledge of any default under the indenture and, if so, specifying each default and the nature and status thereof.
Defeasance
LXP may, at its option and at any time, elect to have its obligations and the obligations of the Subsidiary Guarantors discharged with respect to the outstanding notes and guarantees (“Legal Defeasance”).
Legal Defeasance means that LXP and the Subsidiary Guarantors shall be deemed to have paid and discharged the entire indebtedness represented by the outstanding notes and guarantees, and to have satisfied all other obligations under such exchange notes, the guarantees and the indenture, except as to:
In addition, LXP may, at its option and at any time, elect to have its obligations and the obligations of the Subsidiary Guarantors released with respect to certain covenants under the indenture, including the covenants listed under “-Certain Covenants” above, as described in the indenture (“Covenant Defeasance”), and thereafter any omission to comply with such obligations shall not constitute a default or an Event of Default. In the event Covenant Defeasance occurs, certain Events of Default (not including non-payment, bankruptcy, receivership, rehabilitation and insolvency events) will no longer apply. Except as specified in the indenture, however, the remainder of the indenture and such notes and guarantees will be unaffected by the occurrence of Covenant Defeasance, and the notes will continue to be deemed “outstanding” for all other purposes under the indenture other than for the purposes of any direction, waiver, consent or declaration or act of holders (and the consequences of any thereof) in connection with any of the defeased covenants.
In order to exercise either Legal Defeasance or Covenant Defeasance:
in either case to the effect that, and based thereon, such opinion of counsel shall confirm that, the holders of the outstanding notes will not recognize income,taxable gain or loss for U.S. federal income tax purposes as a result of such Legal Defeasance and will be subject tothe Merger.
In general, under applicable U.S. federal income tax on the same amounts, in the same mannerlaws and at the same times as would have been the case if such Legal Defeasance had not occurred;
Holders of LCIF Partnership Units will be entitled to different rights as holders of Common Shares than those to which they are entitled as holders of LCIF Partnership Units.
Following completion of the Merger, holders of LCIF Partnership Units will no longer hold LCIF Partnership Units, but will instead hold Common Shares. LXP is a Maryland real estate investment trust, and LCIF is a Delaware limited partnership. There are important differences between the rights of holders of LCIF Partnership Units and the rights of holders of Common Shares. See “Comparison of Rights of LXP Shareholders and LCIF Partnership Unitholders.”
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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This information statement/prospectus and the information incorporated by reference in this information statement/prospectus includes forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These forward-looking statements are subject to risks and uncertainties, and actual results might differ materially from those discussed in, or implied by, the forward-looking statements. Forward-looking statements are based on the current beliefs and assumptions of the management of LXP and LCIF and can often be identified by terms and phrases that include “anticipate,” “believe,” “intend,” “estimate,” “expect,” “continue,” “should,” “would,” “could,” “may,” “plan,” “project,” “predict,” “will,” “potential,” “forecast,” “target,” “guidance,” “outlook,” or other similar terminology. Various factors may cause actual results to be materially different than the suggested outcomes within forward-looking statements. Accordingly, there is no assurance that results will be realized.
In light of these risks, uncertainties and assumptions, the events described in forward-looking statements included or incorporated by reference in this information statement/prospectus might not occur or might occur to a different extent or at a different time than described. Actual results may differ materially from the current expectations of LXP and LCIF depending on a number of factors affecting their businesses and risks associated with the successful execution of the Merger. In evaluating these forward-looking statements, you should carefully consider the risks described herein and in the reports that LXP files with the SEC. See “Risk Factors” and “Where You Can Find More Information.” Factors that could have a material adverse effect on operations and future prospects or that could cause events or circumstances to differ from the forward-looking statements include, but are not limited to:
● | the uncertainty of the value of the Merger Consideration due to the fixed exchange ratio and potential fluctuation in the market price of Common Shares; |
● | the different rights associated with owning Common Shares as opposed to LCIF Partnership Units; |
● | the risk that the market value of Common Shares will decline; and |
● | other business, financial, operational and legal risks and uncertainties detailed from time to time in LXP’s SEC filings, including, but not limited to those discussed under Part I, Item 1A of LXP’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022, which is filed with the SEC and incorporated by reference into this information statement/prospectus. |
Except as otherwise required by law, neither LXP nor LCIF is under any obligation, and each expressly disclaims any obligation, to update, alter, or otherwise revise any forward-looking statements, whether written or oral, that may be made from time to time, whether as a result of such Covenant Defeasance and will be subjectnew information, future events or otherwise. Persons reading this information statement/prospectus are cautioned not to U.S. federal income taxplace undue reliance on the same amounts, in the same manner and at the same timesany forward-looking statements, which speak only as would have been the case if such Covenant Defeasance had not occurred;
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COMPARISON OF RIGHTS OF LXP SHAREHOLDERS AND LCIF PARTNERSHIP UNITHOLDERS
Form Of Organization and Assets Owned
LXP | LCIF | |
LXP is a Maryland statutory real estate investment trust within the meaning of Title 8 of the Corporations and Associations Article of the Annotated Code of Maryland (the “Maryland REIT Law”). The rights of LXP’s shareholders are governed by the Maryland REIT Law, certain provisions of the Maryland General Corporation Law (the “MGCL”), the LXP Declaration of Trust and the LXP bylaws. LXP owns, directly and indirectly, commercial real estate properties and is focused on single-tenant warehouse/distribution real estate investments. A majority of LXP’s 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. | LCIF is organized as a Delaware limited partnership. LCIF owns interests (directly and indirectly through subsidiaries) in properties and assets similar to LXP’s investment focus. The rights of partners are governed by Delaware law and the Partnership Agreement. |
Length of Investment
LXP | LCIF | |
LXP has a perpetual term and intends to continue its operations for an indefinite time period. | LCIF has a perpetual term, unless sooner dissolved and terminated. |
Purpose and Permitted Investments
LXP | LCIF | |
LXP’s purposes are to engage in the real estate business and any lawful activities incidental thereto, and to engage in any lawful act or activity for which real estate investment trusts may be organized under the applicable laws of the State of Maryland. | LCIF’s purpose is to conduct any business that may be lawfully conducted by a limited partnership organized pursuant to the Delaware Revised Uniform Limited Partnership Act, provided that such business is to be conducted in such a manner that permits LXP to be qualified as a REIT unless LXP ceases to qualify as a REIT for reasons other than the conduct of LCIF’s business. |
Additional Equity
LXP | LCIF | |
Under the LXP Declaration of Trust, the LXP Board may cause LXP to issue up to 1,400,000,000 shares of beneficial interest, par value $0.0001 per share, of which 600,000,000 shares are classified as Common Shares, 700,000,000 shares are classified as excess stock, or excess shares, and 100,000,000 shares are classified as preferred stock, or preferred shares. The LXP Board may cause LXP to issue, in its discretion, equity securities consisting of Common Shares and/or preferred shares. However, the total number of shares issued may not exceed the authorized number of shares of beneficial interest set forth in the LXP Declaration of Trust. The proceeds of equity capital raised by LXP are not required to be contributed to LCIF. | LCIF is authorized to issue partnership interests as determined by the General Partner in its sole discretion. |
Borrowing Policies
LXP | LCIF | |
Neither the LXP Declaration of Trust nor the LXP bylaws impose any restrictions on its ability to borrow money. LXP is not required to incur its indebtedness through LCIF. | LCIF has no restrictions on borrowings, and the General Partner has full power and authority to borrow money on LCIF’s behalf. |
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Satisfaction and dischargeOther Investment Restrictions
LXP | LCIF | |
Neither the LXP Declaration of Trust nor the LXP bylaws impose any restrictions upon the types of investments made by LXP. However, contractual obligations or REIT qualification requirements may inhibit LXP’s ability to invest in certain asset types | Other than restrictions precluding investments by LCIF that would adversely affect LXP’s qualification as a REIT, there are generally no restrictions upon LCIF’s authority to enter into investment transactions. |
The indenture will be discharged and will cease to be of further effect (except as to surviving rights or registration of transfer or exchange of the notes, as expressly provided for in the indenture) as to all outstanding notes when:
Management Control
LXP | LCIF | |
The LXP Board has exclusive control over LXP’s business and affairs subject only to the restrictions in the LXP Declaration of Trust and the LXP bylaws. The LXP Board consists of eight trustees, which number may be increased or decreased by vote of at least a majority of the entire LXP Board pursuant to the LXP bylaws. The trustees are elected at each annual meeting of LXP’s shareholders. The policies adopted by the LXP Board may be altered or eliminated without a vote of the shareholders. Accordingly, except for their vote in the elections of trustees, shareholders have no control over LXP’s ordinary business policies | All management powers over LCIF’s business and affairs are vested in the General Partner, and no limited partner has any right to participate in or exercise control or management power over LCIF’s business and affairs, subject to the limited voting rights discussed below. The General Partner may not be removed by the limited partners with or without cause. |
Duties
LXP | LCIF | |
Under Maryland law, LXP’s trustees must perform their duties in good faith, in a manner that they reasonably believe to be in LXP’s best interests and with the care that an ordinarily prudent person in a like position would use under similar circumstances. Trustees who act in such a manner generally will not be liable to LXP for monetary damages arising from their activities. | Under Delaware law, except as provided in the Partnership Agreement, the General Partner is accountable to LCIF as a fiduciary and, consequently, is required to exercise good faith and integrity in all of its dealings with respect to LCIF’s affairs. |
Management Liability and Indemnification
LXP | LCIF | |
Under the |
Under Delaware law, the General Partner has liability for the payment of LCIF’s obligations and debts unless limitations upon such liability are stated in the document or instrument evidencing the obligation. Under the Partnership Agreement, LCIF agreed to indemnify the General Partner and LXP, and any director, trustee or officer of LCIF, LXP or the initial limited partner, to the fullest extent permitted under the Delaware Revised Uniform Limited Partnership Act. The reasonable expenses incurred by an indemnitee may be reimbursed by LCIF in advance of the final disposition of the proceeding upon receipt by LCIF of a written affirmation by such indemnitee of his, her or its good faith belief that the standard of conduct necessary for |
Board of Trustees or Partners
LXP | LCIF | |
LXP is managed and controlled by the LXP Board presently consisting of eight members. Each trustee is elected by the shareholders at annual meetings of LXP’s shareholders. The LXP Declaration of Trust permits the LXP Board to classify any reclassify any unissued shares of beneficial interest into one or more series having voting power which may differ from that of the Common Shares. See “Description of Common Shares” elsewhere in this information statement/prospectus. | The General Partner may not be removed by the limited partners. | |
Removal: Subject to the rights of holders of any class separately entitled to elect one or more trustees, trustees may be removed only for cause and then only by the affirmative vote of the holders of at least 80% of the combined voting power of all classes of shares of beneficial interest entitled to vote in the election of trustees. Vacancies: The shareholders shall elect a successor to fill a vacancy on the LXP Board which results from the removal of a trustee. A trustee elected by the shareholders to fill a vacancy which results from the removal of a trustee serves for the balance of the term of the removed trustee. A majority of the remaining trustees on the LXP Board, whether or not sufficient to constitute a quorum, may fill a vacancy on the LXP Board which results from any increase in the authorized number of trustees, or death, resignation, retirement or other cause. A trustee elected by the LXP Board to fill a vacancy serves until the next annual meeting of shareholders and until their successor is elected and qualifies. |
Anti-Takeover Provisions
LXP | LCIF | |
Maryland law provides that holders of “control shares” of a Maryland REIT acquired in a “control share acquisition” have Control shares are voting shares which, if aggregated with all other shares owned by the acquiror or in respect of which the acquiror is able to exercise or direct the exercise of voting power (except solely by virtue of a revocable proxy), would entitle the acquiror to exercise voting power in electing trustees within one of the following ranges of voting power: (i) one-tenth or more but less than one-third; (ii) one-third or more but less than a majority; or (iii) 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 or shares acquired directly from the corporation. A control share acquisition means the acquisition of issued and outstanding control shares, subject to certain exceptions. A person who has made or proposes to make a control share acquisition may compel the board of trustees of the trust to call a special meeting of shareholders to be held within 50 days of demand to consider the voting rights of the shares. The right to compel the calling of a special meeting is subject to the | Except in limited circumstances (see “—Voting Rights” below), the General Partner has exclusive management power over LCIF’s business and affairs. The General Partner may not be removed by the limited partners. Without the consent of the General Partner, a transferee will not be (i) admitted to LCIF as a substituted limited partner or (ii) entitled to the same rights as a substituted limited partner. | |
If voting rights are not approved at the meeting or if the acquiring person does not deliver an acquiring person statement as required by the statute, then the trust may redeem for fair value any or all of the control shares, except those for which voting rights have previously been approved. The right of the trust to redeem control shares is subject to certain conditions and limitations. Fair value is determined, without regard to the absence of voting rights for the The control share acquisition statute does not apply (a) to shares acquired in a merger, consolidation or share exchange if the trust is a party to the transaction or (b) to acquisitions approved or exempted by the declaration of trust or bylaws of the trust. The LXP bylaws contain a provision exempting from the control share acquisition statute any and all acquisitions by any person of LXP’s shares. There can be no assurance that this provision will not be amended or eliminated at any time in the future. Under Maryland law, certain “business combinations” between a Maryland real estate investment trust and an “interested shareholder” or an affiliate of an interested shareholder are prohibited for five years after the most recent date on which the interested shareholder became an interested shareholder. These business combinations include a merger, consolidation, share exchange, or, in circumstances specified in the statute, an asset transfer or issuance or reclassification of equity securities. An interested shareholder is defined as:(i) any person who beneficially owns, directly or indirectly, ten percent or more of the voting power of LXP’s shares; or (ii) an affiliate or associate of LXP who, at any time within the two-year period prior to the date in question, was the beneficial owner, directly or indirectly, of ten percent or more of the voting power of LXP’s shares. A person is not an interested shareholder under the statute if the board of trustees approved in advance the transaction by which the person otherwise would have become After the five-year prohibition, any such business combination between the Maryland real estate investment trust and These super-majority vote requirements do not apply if the trust’s common shareholders receive a minimum price, as defined under Maryland law, for their shares in the form of cash or other consideration 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 Maryland law provides that a Maryland REIT with a class of equity securities registered under the Exchange Act and that has at least three independent trustees, may elect by provision of its declaration of trust or LXP has not elected to be governed by any of these specific provisions. However, the LXP Declaration of Trust and/or the LXP bylaws, as applicable, already provide for an 80% shareholder vote to remove trustees and then only for cause, and that the |
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Voting Rights
LXP | LCIF | |
Election of Trustees: All Common Shares have one vote. In uncontested elections of trustees at a meeting duly called at which a quorum is present, the affirmative vote of a majority of the total votes cast by shareholders entitled to vote is sufficient to elect a trustee nominee. In contested elections at a meeting duly called at which a quorum is present, a plurality of votes cast by shareholders entitled to vote is required for the election of a trustee. | All decisions relating to LCIF’s operation and management are made by the General Partner. As of the date of this information statement/prospectus, LXP held, indirectly, approximately 99% of the partnership interest in LCIF. | |
Amendment of Declaration of Trust and Bylaws: Amendments to the LXP Declaration of Trust must be authorized by the LXP Board and approved generally by at least a majority of the votes entitled to be cast on that matter at a meeting of shareholders. Amendments to provisions relating to the termination of LXP requires the affirmative vote of two-thirds of the outstanding Common Shares. In addition, the LXP Declaration of Trust may be amended by a two-thirds majority of its trustees, without shareholder approval, in order to preserve its qualification as a REIT under the Code. Subject to the special provisions of the LXP bylaws relating to the power of the LXP Board to establish, increase or decrease the number of trustees, in accordance with the LXP Declaration of Trust, the LXP bylaws may be repealed, altered, amended or rescinded (a) by the shareholders of LXP only by vote of not less than 80% of the outstanding shares of beneficial interest LXP entitled to vote generally in the election of trustees (considered for this purpose as one class) cast at any meeting of the shareholders called for that purpose (provided that notice of such | Amendment of Partnership Agreement: Generally, the General Partner may not amend the Partnership Agreement without the consent of the holders of the majority of LCIF Partnership Units, except the General Partner may, without the consent of the limited partners, amend the Partnership Agreement to reflect the admission, substitution, termination, or | |
Vote Required to Terminate: LXP may be terminated only if declared advisable by the LXP Board and upon the affirmative vote of the holders of two-thirds of the outstanding shares entitled to vote thereon. | Vote Required to Dissolve: LCIF may be dissolved upon the occurrence of certain events, none of which require the consent of the limited partners. | |
Vote Required in Extraordinary Transactions: Under the Maryland REIT Law, a Maryland real estate investment trust generally cannot merge with, or convert into, another entity unless advised by its board of trustees and approved by the affirmative vote of shareholders entitled to cast at least two-thirds of the votes entitled to be cast on the matter unless a different percentage (but not less than a majority of all of the votes entitled to be cast on the matter) is set forth in its declaration of trust. The LXP Declaration of Trust provides that those actions will be valid and effective if advised by the LXP Board and authorized by holders of a majority of the total number of shares of all classes outstanding and entitled to vote thereon. | Vote Required to Sell Assets or Merge: The General Partner may cause LCIF to participate in any merger, consolidation or other combination with or into another person or sale of all or substantially all of its assets without any further act, vote or approval of any limited partner or other person. |
Compensation, Fees and Distributions
LXP | LCIF | |
LXP’s non-employee trustees and officers receive compensation for their services. | The General Partner does not receive any compensation for its services as the general partner of LCIF. The General Partner and LXP, in their capacity as partners, have the right to allocations and distributions as provided |
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Liability of Investors
LXP | LCIF | |
Under Maryland law, LXP’s shareholders are generally not personally liable for LXP’s debts or obligations solely as a result of their status as shareholders. | Under the Partnership Agreement and applicable state law, the liability of limited partners for LCIF’s debts and obligations is generally limited to the amount of their investment in LCIF. |
Nature of Investment
LXP | LCIF | |
Common Shares constitute equity interests in LXP. Each holder of Common Shares will be entitled to its pro rata share of any dividends or distributions paid with respect to the Common Shares. The dividends payable to holders of Common Shares are not fixed in amount and are only paid if, when and as authorized by the LXP Board and declared by LXP. In order to continue to qualify as a REIT, LXP generally must distribute at least 90% of its net taxable income (excluding capital gains), and any taxable income (including capital gains) not distributed will be subject to corporate income tax. | The LCIF Partnership Units constitute equity interests in LCIF. Generally, unitholders are allocated and distributed amounts in accordance with their respective percentage interest in LCIF, from time to time, but not less than semi-annually, as determined in the manner provided in the Partnership Agreement and subject to certain restrictions and exceptions for certain limited partners. |
Potential Dilution of Rights
LXP | LCIF | |
The LXP Board may authorize LXP to issue, in its discretion, additional Common Shares, and has the authority to cause LXP to issue from authorized capital a variety of other equity securities with such | The General Partner is authorized, in its sole discretion and without limited partner approval, to cause LCIF to issue additional LCIF Partnership Units and other equity securities for any partnership purpose at any time to the limited partners or |
Liquidity
LXP | LCIF | |
The Common Shares are generally freely transferable as registered securities under the To assist LXP in continuing to remain a qualified REIT, among other purposes, the LXP Declaration of Trust, subject to certain exceptions, provides that no holder may own, or | Holders of LCIF Partnership Units may not transfer their LCIF Partnership Units without the General Partner’s consent. Without the consent of the General Partner, a transferee will not be (i) admitted to LCIF as a substituted limited partner or |
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U.S. Federal Income Taxation
LXP | LCIF | |
LXP has elected to be taxed as a REIT for U.S. federal income tax purposes. So long as LXP qualifies as a REIT, it will be permitted to deduct distributions paid to its shareholders, which effectively will reduce the “double taxation” that typically results when a corporation earns income and distributes that income to its shareholders in the form of dividends. A qualified REIT, however, is subject to federal income tax on income that is not distributed and also may be subject to federal income and excise taxes in certain circumstances. Each year, shareholders will receive an IRS Form 1099 used by corporations to report dividends paid to their shareholders. Shareholders who are individuals generally will not be required to file state income tax returns and/or pay state income taxes outside of their state of residence with respect to LXP’s operations and distributions. LXP may be required to pay state income taxes in certain states. Please see “Material U.S. Federal Income Tax Consequences,” below. | LCIF is generally not subject to U.S. federal income taxes. Instead, each unitholder includes its allocable share of LCIF’s taxable income or loss in determining its individual federal income tax liability. A unitholder’s share of income and loss generated by LCIF generally is subject to the “passive activity” limitations. Under the “passive activity” rules, income and loss from LCIF that are considered “passive income” generally can be offset against income and loss from other investments that constitute “passive activities.” Cash distributions from LCIF are not taxable to a unitholder except to the extent such distributions exceed such unitholder’s basis in its interest in LCIF (which will include such holder’s allocable share of LCIF’s taxable income and nonrecourse debt). Shareholders who are individuals may be required to file state income tax returns and/or pay state income taxes outside of their state of residence with respect to LCIF’s operations and distributions. LCIF may also be required to pay state income taxes in certain states. Each year, unitholders will receive a Schedule K-1 containing detailed tax information for inclusion in preparing their federal income tax returns. |
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The following summary of the material terms and provisions of LXP’s Common Shares does not purport to be paid all other sums payable under the indenture by LXP;complete andLXP has delivered is subject to the trustee an officers’ certificate and an opinion of counsel, each stating that all conditions precedent provided for in the indenture relating to the satisfaction and dischargedetailed provisions of the indenture have been complied with.
Modification, waiverLXP Declaration of Trust and meetings
Modifications and amendments of, and supplementsthe LXP bylaws, each as supplemented, amended or restated, which are incorporated by reference as exhibits to the indenture (other than certain modifications, supplements and amendments for administrative purposes orLXP’s Quarterly Report on Form 10-Q for the benefitquarter ended September 30, 2023. You should carefully read each of note holders,these documents in each case as further described below) will be permittedorder to be made only with the consent of the holders of not less than a majority in principal amount of all outstanding notes; provided, however, that no modification or amendment may, without the consent of the holder of each note affected thereby:
General
Under the LXP Declaration of Trust, we have the authority to issue up to 1,400,000,000 shares of beneficial interest, par value $0.0001 per share, of which 600,000,000 shares are classified as Common Shares, 700,000,000 are classified as excess stock, or excess shares, and 100,000,000 shares are classified as preferred stock, or preferred shares, including 3,100,000 preferred shares classified as 6.50% Series C Cumulative Convertible Preferred Stock, $0.0001 per value per share.
Terms
Subject to the preferential rights of any other shares or class or series of our obligations in respect of the payment of principalequity securities and interest; or
Notwithstanding the foregoing, modifications and amendments of the indenture will be permitted to be made by LXP, the Subsidiary Guarantors and the trustee without the consent of any holder of the notes for any of the following purposes:
Subject to the extent necessaryprovisions of the LXP Declaration of Trust regarding excess shares, each outstanding Common Share entitles the holder to permitone vote on all matters submitted to a vote of shareholders, including the election of trustees and, except as otherwise required by law or facilitate defeasance and dischargeexcept as otherwise provided in the LXP Declaration of Trust with respect to any other class or series of the notes; provided, that the action shall not adversely affect the interests ofshares, the holders of the notes in any material respect; or
In determining whether the holders of the requisite principal amount of outstanding notes have given any request, demand, authorization, direction, notice, consent or waiver thereunder or whether a quorum is presenttrustees at a meeting of holders of the notes, the indenture will provide that notes owned by LXP or any other obligor upon the notes or any of LXP’s affiliates or affiliates of the other obligors shall be disregarded.
The indenture contains provisions for convening meetings of the holders of the notes. A meeting will be permitted to beduly called at any time by the trustee, and also, upon request, by LXP or the holders of at least 10% in principal amount of the outstanding notes, in any case upon notice given as provided in the indenture. Except for any consent that must be given by the holder of each note affected by certain modifications and amendments of the indenture, any resolution presented at a meeting or adjourned meeting duly reconvened at which a quorum is present, will be permitted to be adopted by the affirmative vote of the holders of a majority in principal amount of the outstanding notes; provided, however, that, except as referredtotal votes cast by shareholders entitled to above, any resolution with respectvote is sufficient to any request, demand, authorization, direction, notice, consent, waiver or other action that may be made, given or taken by the holders ofelect a specified percentage, which is less than a majority, in principal amount of the outstanding notes may be adoptedtrustee nominee. In contested elections at a meeting or adjourned meeting duly reconvenedcalled at which a quorum is present, a plurality of votes cast by shareholders entitled to vote is required for the election of a trustee. A majority of the votes cast means that the number of shares voted “for” a trustee nominee must exceed the number of votes cast “against” or “withheld” with respect to such trustee nominee. Votes “against” or “withheld” with respect to a nominee will count as votes cast with respect to that nominee, but “abstentions” and broker non-votes with respect to that nominee will not count as votes cast with respect to that nominee. There is no cumulative voting in the election of trustees, which means that the holders of a majority of our outstanding Common Shares can elect all of the trustees then standing for election, and the holders of the remaining Common Shares will not be able to elect any trustees.
Subject to the provisions of the LXP Declaration of Trust regarding excess shares, holders of Common Shares have no conversion, sinking fund or redemption rights or preemptive rights to subscribe for any of our securities.
We furnish our shareholders with annual reports containing audited consolidated financial statements and an opinion thereon expressed by an independent registered public accounting firm.
Subject to the provisions of the LXP Declaration of Trust regarding excess shares, all of the Common Shares have equal dividend, distribution, liquidation and other rights and generally have no preference, appraisal or exchange rights.
Transfer Agent
The transfer agent and registrar for the Common Shares is Computershare Shareowner Services.
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Restrictions Relating to REIT Status
For us to qualify as a REIT under the Code, among other things, not more than 50% in value of our outstanding shares of beneficial interest may be owned, directly or indirectly, by five or fewer individuals (defined in the Code to include certain entities) during the last half of a taxable year, and such shares of beneficial interest 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). To assist us in continuing to remain a qualified REIT, among other purposes, the LXP Declaration of Trust, subject to certain exceptions, provides that no holder may own, or be deemed to own by virtue of the attribution provisions of the Code, more than 9.8% in value of our equity shares, defined as Common Shares or preferred shares. We refer to this restriction as the Ownership Limit. The LXP Board may exempt a person from the Ownership Limit if upon receipt of a ruling from the Internal Revenue Service or an opinion of counsel or other evidence satisfactory to the LXP Board is presented that the exemption will not result in us having fewer than 100 beneficial owners or in us being “closely held.” Any transfer of equity shares or any security convertible into equity shares that would create a direct or indirect ownership of equity shares in excess of the Ownership Limit or that would result in the equity shares being owned by fewer than 100 persons or result in us being “closely held” within the meaning of Section 856(h) of the Code, will be null and void, and the intended transferee will acquire no rights to such equity shares. The foregoing restrictions on transferability and ownership will not apply if the LXP Board determines that it is no longer in our best interests to attempt to qualify, or to continue to qualify, as a REIT.
In addition, equity shares owned, or deemed to be owned, or transferred to a shareholder in excess of the Ownership Limit or that would cause us to become “closely held” within the meaning of the Code, will automatically be converted into an equal number of excess shares that will be transferred, to us as trustee of a trust for the exclusive benefit of the transferees to whom such shares of beneficial interest in us may be ultimately transferred without violating the Ownership Limit. While the excess shares are held in trust, they will not be entitled to vote (except as required by Maryland law), they will not be considered for purposes of any shareholder vote or the determination of a quorum for such vote and, except upon liquidation, they will not be entitled to participate in dividends or other distributions. Any dividend or distribution paid on excess shares prior to our discovery that equity shares have converted for excess shares will be repaid to us upon demand. The excess shares are not treasury shares, but rather constitute a separate class of our issued and outstanding shares. The original transferee-shareholder may, at any time the excess shares are held by us in trust, designate a beneficiary of its interest in the trust (representing the excess shares held by the charitable trust attributable to a purported transfer that resulted in the excess shares) if the excess shares would not be excess shares in the hands of the beneficiary and, such transferee-shareholder does not receive a price for such designation that exceeds the price paid by the original transferee-shareholder for the equity shares that were exchanged into excess shares, or, if the transferee-shareholder did not give value for such shares, a price not in excess of the market price (as determined in the manner set forth in the LXP Declaration of Trust) on the date of the purported transfer. Immediately upon the transfer to the permitted transferee, the excess shares will automatically be converted into equity shares of the class from which they were converted. If the foregoing transfer restrictions are determined to be void or invalid by virtue of any legal decision, statute, rule or regulation, then the intended transferee of any excess shares may be deemed, at our option, to have acted as an agent on our behalf in acquiring the excess shares and to hold the excess shares on our behalf.
In addition to the foregoing transfer restrictions, we will have the right, for a period of 90 days during the time any excess shares are held by us in trust, to purchase all or any portion of the excess shares from the original transferee-shareholder for the lesser of the price paid for the equity shares by the original transferee-shareholder or the market price (as determined in the manner set forth in the LXP Declaration of Trust) on the date we exercise our option to purchase. The 90-day period begins on the later of the date of the transfer that resulted in excess stock or the date on which the LXP Board determines in good faith that a transfer resulting in excess shares has occurred, if we do not receive written notice of the transfer or other event resulting in the exchange of equity shares for excess shares.
Any person who acquires or attempts to acquire equity shares in violation of the foregoing restrictions, or any person who is a transferee such that excess shares resulted from such transfer, will be required to give written notice immediately to us of such event and provide us with such other information as we may request in order to determine the effect, if any, of such transfer, or attempted transfer, on our status as a REIT.
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All persons who own, directly or indirectly, (i) more than 5% of the outstanding equity shares during any periods in which the number of such beneficial or constructive owners exceeds 1,999, (ii) more than 1% of the outstanding equity shares during any period in which the number of beneficial or constructive owners is fewer than 2,000 or (iii) such lower percentages as required pursuant to regulations under the Code must, within 30 days after January 1 of each year, provide to us a written statement or affidavit stating the name and address of such direct or indirect owner, the number of equity shares owned directly or indirectly, and a description of how such shares are held. In addition, each direct or indirect shareholder shall provide to us such additional information as we may request in order to determine the effect, if any, of such ownership on our status as a REIT and to ensure compliance with the ownership limitation.
This Ownership Limit may have the effect of precluding an acquisition of control unless the LXP Board determines that maintenance of REIT status is no longer in our best interests.
Authorized Capital
We may issue such shares from time to time in the discretion of the LXP Board to raise additional capital, acquire assets, including additional real properties, redeem or retire debt or for any other business purpose. In addition, the undesignated preferred shares may be issued in one or more additional classes or series with such designations, preferences and relative, participating, optional or other special rights including, without limitation, preferential dividend or voting rights, and rights upon liquidation, as will be fixed by the LXP Board. The LXP Board is authorized to classify and reclassify any of our unissued shares of beneficial interest by setting or changing, in any one or more respects, the preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends, qualifications or terms or conditions of redemption of such shares. This authority includes, without limitation, subject to the provisions of the LXP Declaration of Trust, authority to classify or reclassify any unissued shares into a class or classes of preferred shares, preference shares, special shares or other shares, and to divide and reclassify shares of any class into one or more series of that class.
In some circumstances, the issuance of preferred shares, or the exercise by the LXP Board of its right to classify or reclassify shares, could have the effect of deterring individuals or entities from making tender offers for our Common Shares or seeking to change incumbent management.
Maryland Law
Our Board of Trustees. The LXP Declaration of Trust and bylaws provide that the number of our trustees may be established, increased or decreased only by a majority of the entire LXP Board. The LXP Board currently consists of eight trustees.
The shareholders shall elect a successor to fill a vacancy on the LXP Board which results from the removal of a trustee. A trustee elected by the shareholders to fill a vacancy which results from the removal of a trustee serves for the balance of the term of the removed trustee. A majority of the remaining trustees, whether or not sufficient to constitute a quorum, may fill a vacancy on the LXP Board which results from any increase in the authorized number of trustees, or death, resignation, retirement or other cause. A trustee elected by the LXP Board to fill a vacancy serves until the next annual meeting of shareholders and until their successor is elected and qualifies.
Removal of Trustees. The LXP Declaration of Trust provides that, subject to the rights of the holders of any class separately entitled to elect one or more trustees, a trustee may be removed, but only for cause and then only by the affirmative vote of the holdersat least 80% of the specified percentage in principal amount of the outstanding notes. Any resolution passed or decision taken at any meeting of holders of the notes duly held in accordance with the indenture will be binding on all holders of the notes. The quorum at any meeting called to adopt a resolution, and at any adjourned meeting duly reconvened, will be holders holding or representing a majority in principal amount of the outstanding notes; provided, however, that if any action isvotes entitled to be taken atcast in the meeting with respect to a consent or waiver which may be given by the holderselection of not less than a specified percentage in principal amount of the outstanding notes, holders holding or representing the specified percentage in principal amount of the outstanding notes will constitute a quorum.trustees.
NotwithstandingExtraordinary Actions, Amendment of Declaration of Trust. Under the foregoing provisions, any action takenMaryland REIT Law, a Maryland real estate investment trust generally cannot amend its declaration of trust or to be taken at a meetingmerge with, or convert into, another entity unless advised by its board of holders of the notes with respect to any request, demand, authorization, direction, notice, consent, waiver or other action that the indenture expressly provides may be made, given or taken by the holders of a specified percentage which is less than a majority in principal amount of the outstanding notes may be taken at a meeting at which a quorum is presenttrustees and approved by the affirmative vote of shareholders entitled to cast at least two-thirds of the votes entitled to be cast on the matter unless a different percentage (but not less than a majority of all of the votes entitled to be cast on the matter) is set forth in its declaration of trust. The LXP Declaration of Trust provides that those actions, with the exception of certain amendments to the LXP Declaration of Trust for which a higher vote requirement has been set, will be valid and effective if authorized by holders of the specified percentage in principal amounta majority of the total number of shares of all classes outstanding notes.and entitled to vote thereon. Under the LXP Declaration of Trust, our dissolution and termination requires the affirmation of shareholders entitled to cast at least two-thirds of the votes entitled to be cast on the matter.
Trustee
U.S. Bank National Association currently acts asAmendment to Our Bylaws. Subject to the trustee, registrar, exchange agent and paying agent forspecial provisions of the notes, subjectLXP bylaws relating to replacementthe power of the LXP Board to establish, increase or decrease the number of trustees, in accordance with the LXP Declaration of Trust, the LXP bylaws may be repealed, altered, amended or rescinded (a) by our shareholders only by the affirmative vote of at LXP’s option as providedleast 80% of the votes entitled to be cast in the indenture.
If an Eventelection of Default occurs and is continuing, the trustee will be required to use the degreetrustees or (b) by vote of care and skill of a prudent person in the conduct of its own affairs. The trustee will become obligated to exercise any of its powers under the indenture at the request of anytwo-thirds of the holders of the required percentage under the indenture of holders of the notes only after those holders have offered the trustee indemnity reasonably satisfactory to it.LXP Board.
If the trustee becomes one of our creditors, it will be subject to limitations on its rights to obtain payment of claims or to realize on some property received for any such claim, as security or otherwise. The trustee is permitted to engage in other transactions with us. If, however, it acquires any conflicting interest, it must eliminate that conflict or resign.
No conversion or exchange rights
The notes are not convertible into or exchangeable for any shares of beneficial interest in LXP.
No personal liability of trustees, officers, employees and shareholders
None of LXP’s trustees, officers, employees, incorporators or shareholders will have any liability for any of LXP’s obligations under the notes, the indenture, any guarantees or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each holder of notes by accepting a note waives and releases all such liability. The waiver and release are part of the consideration for issuance of the notes. The waiver may not be effective to waive liabilities under the federal securities laws.
Book-entry, delivery and form
Except as set forth below, the notes will be issued in registered, global form in minimum denominations of $2,000 and integral multiples of $1,000 in excess thereof.
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Except asMeetings of Shareholders. Under our bylaws, annual meetings of shareholders are held on a date and at a time and place, or by means of remote communication, set by the LXP Board. Special meetings of shareholders may be called only by the Chairman of the LXP Board, our President or a majority of the LXP Board. Subject to the provisions of our bylaws, a special meeting of our shareholders to act on any matter that may properly be considered by our shareholders will also be called by our secretary upon the written request of the shareholders entitled to cast not less than 25% of all the votes entitled to be cast at such meeting. Only matters set forth below,in the notes issued in global form (“Global Notes”)notice of the special meeting may be transferred, in wholeconsidered and not in part, only to another nominee of DTC or toacted upon at such a successor of DTC or its nominee. Beneficial interests in the Global Notes may not be exchanged for definitive notes in registered certificated form (“Certificated Notes”) except in the limited circumstances described below. See “-Exchange of Global Notes for Certificated Notes.” Except in the limited circumstances described below, owners of beneficial interests in the Global Notes will not be entitled to receive physical delivery of notes in certificated form.meeting.
Depository proceduresAdvance Notice of Trustee Nominations and New Business. Our bylaws provide that in order to make nominations of individuals for election as trustees or proposals of business to be considered by shareholders at any annual meeting, shareholders generally must provide notice to our Secretary not earlier than the 150th day not later than the close of business on the 120th day prior to the first anniversary of the release date of our proxy statement to shareholders in connection with the preceding year’s annual meeting. A shareholder’s notice must contain certain information specified by our bylaws about the shareholder and any proposed business or nominee for election as a trustee, including information about the economic interest of the shareholder and any proposed nominee, and otherwise comply with the terms of the bylaws.
The following descriptionProxy Access Procedures for Qualifying Shareholders. Our bylaws permit a shareholder, or a group of up to 20 shareholders, that owns 3% or more of our Common Shares continuously for at least three years to nominate and include in our proxy materials candidates for election as trustees, subject to certain terms and conditions. Such shareholder(s) or group(s) of shareholders may nominate trustee candidates constituting up to the greater of two persons or 20% of the operationsLXP Board up for election, provided that the shareholder(s) and procedures of DTC, Euroclearthe trustee nominee(s) satisfy the eligibility, notice and Clearstream are provided solely as a matter of convenience. These operations and procedures are solely withinother requirements specified in the control of the respective settlement systems and are subject to changes by them. LXP takes no responsibility for these operations and procedures and urge investors to contact the system or their participants directly to discuss these matters.bylaws.
DTC has advised LXP that DTCBusiness Combinations. Under Maryland law, certain “business combinations” between a Maryland real estate investment trust and an “interested shareholder” or an affiliate of an interested shareholder are prohibited for five years after the most recent date on which the interested shareholder became an interested shareholder. These business combinations include a merger, consolidation, share exchange, or, in circumstances specified in the statute, an asset transfer or issuance or reclassification of equity securities. An interested shareholder is a limited-purpose trust company created to hold securities for its participating organizations (collectively, the “Participants”) and to facilitate the clearance and settlement of transactions in those securities between the Participants through electronic book-entry changes in accounts of its Participants. The Participants include securities brokers and dealers, banks, trust companies, clearing corporations and certain other organizations. Access to DTC’s system is also available to other entities such as banks, brokers, dealers and trust companies that clear through or maintain a custodial relationship with a Participant, either directly or indirectly (collectively, the “Indirect Participants”). Persons who are not Participants may beneficially own securities held by or on behalf of DTC only through the Participants or the Indirect Participants. The ownership interests in, and transfers of ownership interests in, each security held by or on behalf of DTC are recorded on the records of the Participants and Indirect Participants.
DTC has also advised LXP that, pursuant to procedures established by it:defined as:
● | an affiliate or associate of the |
A person is not an interested shareholder under the statute if the board of trustees approved in advance the transaction by which the person otherwise would have become an interested shareholder. However, in approving a transaction, the board of trustees may provide that its approval is subject to compliance, at or after the time of approval, with any terms or conditions determined by the board of trustees.
After the five-year prohibition, any such business combination between the Maryland real estate investment trust and an interested shareholder generally must be recommended by the board of trustees of the trust and approved by the affirmative vote of at least:
● | eighty percent of the votes entitled to be cast by holders of outstanding voting shares of the trust; and |
Investors
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These super-majority vote requirements do not apply if the trust’s common shareholders receive a minimum price, as defined under Maryland law, for their shares in the Global Notesform of cash or other consideration 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 may discourage others from trying to acquire control of us and increase the difficulty of consummating any offer.
Control Share Acquisitions. Maryland law provides that holders of “control shares” of a Maryland real estate investment trust acquired in a “control share acquisition” have no voting rights with respect to the control shares except to the extent approved by a vote of two-thirds of the votes entitled to be cast on the matter. Shares owned by the acquiror, by officers or by employees who are Participantstrustees of the trust are excluded from shares entitled to vote on the matter. Control shares are voting shares which, if aggregated with all other shares owned by the acquiror or in respect of which the acquiror is able to exercise or direct the exercise of voting power (except solely by virtue of a revocable proxy), would entitle the acquiror to exercise voting power in electing trustees within one of the following ranges of voting power:
● | one-tenth or more but less than one-third; |
● | one-third or more but less than a majority; or |
● | a majority or more of all voting power. |
Control shares do not include shares the acquiring person is then entitled to vote as a result of having previously obtained shareholder approval or shares acquired directly from the corporation. A control share acquisition means the acquisition of issued and outstanding control shares, subject to certain exceptions.
A person who has made or proposes to make a control share acquisition may hold their interests therein directly through DTC. Investors incompel the Global Notes who are not Participants may hold their interests therein indirectly through organizations (including Euroclear and Clearstream) which are Participants. All interests inboard of trustees of the trust to call a Global note, including thosespecial meeting of shareholders to be held through Euroclear or Clearstream, may bewithin 50 days of demand to consider the voting rights of the shares. The right to compel the calling of a special meeting is subject to the procedures and requirementssatisfaction of DTC. Those interests held through Euroclearcertain conditions, including an undertaking to pay the expenses of the meeting. If no request for a meeting is made, the trust may itself present the question at any shareholders’ meeting.
If voting rights are not approved at the meeting or Clearstreamif the acquiring person does not deliver an acquiring person statement as required by the statute, then the trust may also beredeem for fair value any or all of the control shares, except those for which voting rights have previously been approved. The right of the trust to redeem control shares is subject to certain conditions and limitations. Fair value is determined, without regard to the proceduresabsence of voting rights for the control shares, as of the date of the last control share acquisition by the acquiror or if any meeting of shareholders at which the voting rights of the shares are considered and requirementsnot approved, the date of such systems.meeting. If voting rights for 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. The lawsfair value of some states require that certain persons take physical deliverythe shares as determined for purposes of appraisal rights may not be less than the highest price per share paid by the acquiror in definitive form of securities that they own. Consequently, the abilitycontrol share acquisition.
The control share acquisition statute does not apply (a) to transfer beneficial interestsshares acquired in a Global Notemerger, consolidation or share exchange if the trust is a party to such persons will be limitedthe transaction or (b) to that extent. Because DTC can act only on behalfacquisitions approved or exempted by the declaration of trust or bylaws of the Participants, which in turn act on behalftrust.
Our bylaws contain a provision exempting from the control share acquisition statute any and all acquisitions by any person of the Indirect Participants, the ability of a person having beneficial interests in a Global Note to pledge such interests to personsour shares. There can be no assurance that do not participate in the DTC system, or otherwise take actions in respect of such interests, may be affected by the lack of a physical certificate evidencing such interests.
Except as described below, owners of interests in the Global Notes will not have notes registered in their names, will not receive physical delivery of notes in certificated form andthis provision will not be consideredamended or eliminated at any time in the future.
Certain Elective Provisions of Maryland Law. Maryland law provides that a Maryland real estate investment trust with a class of equity securities registered owners or “holders” thereof under the indenture governing the notes for any purpose.Exchange Act, and that has at least three independent trustees, may elect by provision of its declaration of trust or bylaws or by resolution adopted by its board of trustees to be
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Payments in respect of the principal of, and interest and premium, if any, on, a Global Note registered in the name of DTC or its nominee will be payablesubject to DTC in its capacity as the registered holder under the indenture governing the notes. Under the terms of the indenture, LXP and the trustee will treat the persons in whose names the notes, including the Global Notes, are registered as the owners of the notes for the purpose of receiving payments and for all other purposes. Consequently, neither LXP, the trustee nor any agent of LXP or the trustee has or will have any responsibility or liability for:
DTC has advised LXP that its current practice, upon receipt of any payment in respect of securities such as the notes (including principal and interest), is to credit the accounts of the relevant Participants with the payment on the payment date unless DTC has reason to believe that it will not receive payment on such payment date. Each relevant Participant is credited with an amount proportionate to its beneficial ownership of an interest in the principal amount of the relevant security as shown on the records of DTC. Payments by the Participants and the Indirect Participants to the beneficial owners of notes will be governed by standing instructions and customary practices and will be the responsibility of the Participants or the Indirect Participants and will not be the responsibility of DTC, the trustee or LXP. Neither LXP nor the trustee will be liable for any delay by DTC or any of the Participantsfollowing provisions, notwithstanding any contrary provisions contained in its existing declaration of trust or bylaws and without shareholder approval:
● | a classified board; |
● | a two-thirds vote of outstanding shares to remove a trustee; |
● | a requirement that the number of trustees be fixed only by vote of the board of trustees; |
● | a requirement that a vacancy on the board of trustees be filled only by the affirmative vote of a majority of the remaining trustees and that such trustee filling the vacancy serve for the remainder of the full term of the class of trustees in which the vacancy occurred and until a successor is duly elected and qualifies; and |
● | a majority requirement for the calling of shareholder-requested special meetings of shareholders. |
We have not elected to be governed by any of these specific provisions. However, the Indirect Participants in identifyingLXP Declaration of Trust and/or bylaws, as applicable, already provide for an 80% shareholder vote to remove trustees and then only for cause, and that the beneficial ownersnumber of trustees may be determined by a majority of the notes, and LXP andBoard, subject to a minimum number. In addition, we can elect to be governed by any or all of the trustee may conclusively rely on and will be protectedforegoing provisions of Maryland law at any time in relying on instructions from DTC or its nominee for all purposes.the future.
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DTC has advised LXP that it will take any action permitted to be taken by a holder of notes only at the direction of one or more Participants to whose account DTC has credited the interests in the Global Notes and only in respect of such portion of the aggregate principal amount at maturity of the notes as to which such Participant or Participants has or have given such direction. However, if there is an Event of Default under the notes, DTC reserves the right to exchange the Global Notes for legended notes in certificated form, and to distribute such notes to its Participants.
Exchange of Global Notes for Certificated Notes
A Global Note is exchangeable for Certificated Notes if:
In addition, beneficial interests in a Global Note may be exchanged for Certificated Notes upon prior written notice given to the trustee by or on behalf of DTC in accordance with the indenture. In all cases, Certificated Notes delivered in exchange for any Global Note or beneficial interests in Global Notes will be registered in the names, and issued in any approved denominations, requested by or on behalf of the depositary (in accordance with its customary procedures).
Exchange of Certificated Notes for Global Notes
Certificated Notes may be exchanged for beneficial interests in any Global note.
Same day settlement and payment
LXP will make payments in respect of the notes represented by the Global Notes (including principal, premium, if any, and interest) by wire transfer of immediately available funds to the accounts specified by DTC or its nominee. LXP will make all payments of principal, interest and premium, if any, with respect to Certificated Notes by wire transfer of immediately available funds to the accounts specified by the holders of the Certificated Notes or, if no such account is specified, by mailing a check to each such holder’s registered address. The notes represented by the Global Notes are expected to trade in DTC’s Same-Day Funds Settlement System, and any permitted secondary market trading activity in such notes will, therefore, be required by DTC to be settled in immediately available funds. LXP expects that secondary trading in any Certificated Notes will also be settled in immediately available funds.
Because of time zone differences, the securities account of a Euroclear or Clearstream participant purchasing an interest in a Global note from a Participant will be credited, and any such crediting will be reported to the relevant Euroclear or Clearstream participant, during the securities settlement processing day (which must be a business day for Euroclear and Clearstream) immediately following the settlement date of DTC. DTC has advised LXP that cash received in Euroclear or Clearstream as a result of sales of interests in a Global note by or through a Euroclear or Clearstream participant to a Participant will be received with value on the settlement date of DTC but will be available in the relevant Euroclear or Clearstream cash account only as of the business day for Euroclear or Clearstream following DTC’s settlement date.
Notices
Except as otherwise provided in the indenture, notices to holders of the notes will be given by mail to the addresses of holders of the notes as they appear in the note register; provided that notices given to holders holding notes in book-entry form may be given through the facilities of DTC or any successor depository.
Governing law
The indenture, the notes and the guarantees are governed by, and construed in accordance with, the law of the State of New York.
Definitions
As used in the indenture, the following terms have the respective meanings specified below:
“Acquired Debt”means Debt of a person:
Acquired Debt shall be deemed to be incurred on the date the acquired person is merged or consolidated with or into LXP or any of its Subsidiaries or becomes a Subsidiary of LXP or the date of the related acquisition, as the case may be.
“Annual Debt Service Charge”means, for any period, the interest expense of LXP and its Subsidiaries for such period, determined on a consolidated basis in accordance with GAAP.
“Consolidated Income Available for Debt Service”for any period means Consolidated Net Income (as defined below) of LXP and its Subsidiaries for such period, plus amounts which have been deducted and minus amounts which have been added for, without duplication:
all determined on a consolidated basis in accordance with GAAP.
“Consolidated Net Income”for any period means the amount of net income (or loss) of LXP and its Subsidiaries for such period, excluding, without duplication:
all determined on a consolidated basis in accordance with GAAP.
“Debt”means, with respect to any person, any indebtedness of such person in respect of (without duplication):
and also includes, to the extent not otherwise included, any non-contingent obligation of such person to be liable for, or to pay, as obligor, guarantor or otherwise (other than for purposes of collection in the ordinary course of business), Debt of the types referred to above of another person (it being understood that Debt shall be deemed to be incurred by such person whenever such person shall create, assume, guarantee (on a non-contingent basis) or otherwise become liable in respect thereof).
“Lien”means any mortgage, deed of trust, lien, charge, pledge, security interest, security agreement, or other encumbrance of any kind.
“Material Subsidiary” means any Subsidiary that meets either of the following conditions: (1) LXP’s and its Subsidiaries’ investments in and advances to such Subsidiary exceed 10% of LXP’s and its Subsidiaries’ total assets consolidated (determined in accordance with GAAP) as of the end of the most recent fiscal quarter for which a periodic report has been filed under the Exchange Act; or (2) LXP’s and its Subsidiaries’ proportionate share of the total assets (after intercompany eliminations) of such Subsidiary exceeds 10% of LXP’s and its Subsidiaries’ total assets consolidated (determined in accordance with GAAP) as of the end of the most recent fiscal quarter for which a periodic report has been filed under the Exchange Act.
“Principal Credit Agreement” means the Second Amended and Restated Credit Agreement, dated as of February 12, 2013, among LXP and the operating partnerships, collectively as borrowers, each of the lenders party thereto, and KeyBank National Association, as agent, as the same may be amended, supplemented or otherwise modified from time to time, and any successor credit agreement thereto (whether by renewal, replacement, refinancing or otherwise) that LXP in good faith designate to be LXP’s principal credit agreement (taking into account the maximum principal amount of the credit facility provided thereunder, the recourse nature of the agreement and such other factors as LXP deems reasonable in light of the circumstances), such designation (or the designation that at a given time there is no principal credit agreement) to be made by an officers’ certificate delivered to the trustee.
“Subsidiary”means, with respect to LXP, any person (as defined in the indenture but excluding an individual) a majority of the outstanding voting stock, partnership interests, membership interests or other equity interest, as the case may be, of which is owned or controlled, directly or indirectly, by LXP or by one or more other Subsidiaries of LXP. For the purposes of this definition, “voting stock” means stock having voting power for the election of directors, trustees or managers, as the case may be, whether at all times or only so long as no senior class of stock has such voting power by reason of any contingency.
“Total Assets”means the sum of, without duplication:
all determined on a consolidated basis in accordance with GAAP.
“Total Unencumbered Assets”means, as of any date, the Total Assets of LXP and its Subsidiaries, which are not subject to a Lien securing Debt, all determined on a consolidated basis in accordance with GAAP; provided, however, that, in determining Total Unencumbered Assets as a percentage of outstanding Unsecured Debt for purposes of the covenant set forth above in “Certain Covenants-Maintenance of Total Unencumbered Assets,” all investments in unconsolidated limited partnerships, unconsolidated limited liability companies and other unconsolidated entities shall be excluded from Total Unencumbered Assets.
“Undepreciated Real Estate Assets”means, as of any date, the cost (original cost plus capital improvements) of real estate assets and related intangibles of LXP and its Subsidiaries on such date, before depreciation and amortization, all determined on a consolidated basis in accordance with GAAP.
“Unsecured Debt”means Debt of LXP or any of its Subsidiaries which is not secured by a Lien on any property or assets of LXP or any of its Subsidiaries.
CERTAINMATERIAL U.S. FEDERAL INCOME TAX CONSIDERATIONSCONSEQUENCES
TO ENSURE COMPLIANCE WITH U.S. TREASURY DEPARTMENT CIRCULAR 230, THE ISSUER HEREBY NOTIFIES YOU THAT:
(A)ANY DISCUSSION OF U.S. FEDERAL INCOME TAX ISSUES IN THIS PROSPECTUS IS NOT INTENDED OR WRITTEN TO BE RELIED UPON, AND CANNOT BE RELIED UPON, BY YOU FOR THE PURPOSE OF AVOIDING PENALTIES THAT MAY BE IMPOSED ON HOLDERS UNDER THE U.S. INTERNAL REVENUE CODE;
(B)SUCH DISCUSSION IS WRITTEN TO SUPPORT THE PROMOTION OR MARKETING WITHIN THE MEANING OF CIRCULAR 230 OF THE TRANSACTIONS OR MATTERS ADDRESSED IN THIS PROSPECTUS; AND
(C)YOU SHOULD SEEK ADVICE BASED ON YOUR PARTICULAR CIRCUMSTANCES FROM AN INDEPENDENT TAX ADVISOR.
The followingThis discussion is provided for general information only and is not a general discussioncomplete analysis or description of certain U.S.all potential U.S.. federal income tax considerations relating toconsequences of the purchase,Merger or the receipt, ownership and disposition of shares of Common Shares received in the exchange notes by aMerger. Each holder who acquiredof LCIF Partnership Units is strongly urged to consult with and rely upon its own tax advisor as to the exchange notes pursuantspecific federal, state, local and non-U.S.. tax consequences to this prospectus. Thissuch holder of the Merger and the receipt, ownership and disposition of Common Shares received in the Merger, taking into account its own particular circumstances.
The following discussion is based upon the Internal Revenue Code, of 1986, as amended, existingfinal and proposedtemporary Treasury Regulations promulgated under the Code, referred to as the Treasury Regulations, rulings and other administrative interpretations and practices of the IRS (including administrative interpretations and practices expressed in private letter rulings which are binding on the IRS only with respect to the particular taxpayers who requested and received those rulings), and judicial decisions, and administrative interpretations thereunder,all as of the date hereof,currently in effect, and all of which are subject to differing interpretations or to change, possibly with retroactive effect, or differing interpretations. We cannot assure you that the IRS willeffect. This discussion does not challenge one or more of the tax considerations described below. We have not obtained, and do not intend to obtain, a ruling from the IRS or an opinion of counsel with respect to theaddress any U.S. federal tax considerations resulting from acquiring, holdingtaxes (other than income taxes) or disposing ofstate, local or non-U.S. taxes. This discussion is limited to U.S. holders (as defined below) that hold their LCIF Partnership Units or, after the exchange notes.
In this discussion, we do not purport to address all of the tax considerations that may be relevant to a particular holder of the exchange notes in light of that holder’s circumstances or to certain categories of investors (suchEffective Time, Common Shares as financial institutions, insurance companies, tax-exempt organizations, dealers in securities, persons who hold the exchange notes through partnerships or other pass-through entities, U.S. expatriates, persons subject to alternative minimum tax or persons who hold the exchange notes as part of a hedge, a straddle or a conversion transaction“capital assets” within the meaning of Section 12581221 of the Code (generally, property held for investment). This discussion does not address all U.S. federal income tax consequences relevant to a constructive sale transaction withinU.S. holder’s particular circumstances, including the meaning of Section 1259impact of the Code, an integrated transactionalternative minimum tax or other risk reduction transactions,the tax on net investment income, and all references to non-corporate tax rates (including maximum non-corporate tax rates) are exclusive of any tax on net investment income, if applicable. In addition, this discussion does not address U.S. federal income tax considerations applicable to holders whose “functional currency” is not the U.S. dollar) that may beare subject to special rules. This discussion is limited to initial holders who exchange the private notes for exchange notes pursuant to this prospectus and who hold the exchange notes as capital assets. This discussion also does not address the tax considerations arisingtreatment under the laws of any foreign, state or local jurisdiction, or any U.S. federal tax law other than income tax law, (such as estate and gift tax law).including, without limitation, for example:
● | financial institutions; |
● | S corporations, partnerships or other entities treated as partnerships for U.S. federal income tax purposes, or other pass-through entities (and investors therein); |
● | persons acting as nominees or otherwise not as beneficial owners; |
● | insurance companies; |
● | broker-dealers; |
● | tax-exempt organizations; |
● | dealers in securities; |
● | traders in securities that elect to use a mark to market method of accounting; |
● | persons that hold Common Shares or LCIF Partnership Units as part of a straddle, hedge, constructive sale, conversion transaction, or other integrated transaction for U.S. federal income tax purposes; |
● | regulated investment companies; |
● | REITs; |
● | U.S. expatriates, former citizens or long-term residents of the United States; |
● | governmental organizations; |
● | holders who actually or constructively own or have owned more than 5% of LCIF Partnership Units or Common Shares; |
● | non-U.S. persons; |
● | U.S. holders or U.S. shareholders (as defined below) whose “functional currency” is not the U.S. dollar; |
● | “controlled foreign corporations,” “passive foreign investment companies,” and corporations that accumulate earnings to avoid U.S. federal income tax; and |
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● | persons who acquired their Common Shares or LCIF Partnership Units through the exercise of options or otherwise in connection with compensation. |
For purposes of this discussion, the terma “U.S. holder” means a beneficial owner of LCIF Partnership Units or, after the Effective Time, a note“U.S. shareholder” means a beneficial owner of Common Shares that for U.S. federal income tax purposes, is:
an individual who is a citizen or resident of the United |
a corporation |
an estate the income of which is subject to U.S. federal income taxation regardless of its source; or |
a trust |
As used herein, the term “non-U.S. holder” meansIf a beneficial owner ofpartnership (or other entity or arrangement treated as a note that,partnership for U.S. federal income tax purposes, is an individual, corporation, estate or trust that is not a U.S. holder.
If an entity or arrangement taxable as a partnershippurposes) holds LCIF Partnership Units (or, following the private notes,Merger, Common Shares), the tax treatment of a partner in the partnership generally will generally depend on the status of the partner, and on the activities of the partnership. If you are a partner inpartnership and certain determinations made at the partnership level. Any such partnership or other entity or arrangement treated as a partnership consideringfor U.S. federal income tax purposes, and the partners in such partnership (as determined for U.S. federal income tax purposes), should consult their tax advisors regarding the U.S. federal income tax consequences to them of the Merger and the ownership and disposition of Common Shares received pursuant to the Merger.
This discussion of material U.S. federal income tax considerations is not binding on the IRS. No assurance can be given that the IRS would not assert, or that a court would not sustain, a position contrary to any described herein.
THE U.S. FEDERAL INCOME TAX RULES APPLICABLE TO THE MERGER, TO HOLDING AND DISPOSING OF COMMON SHARES, AND TO REITS GENERALLY ARE HIGHLY TECHNICAL AND COMPLEX. HOLDERS OF LCIF PARTNERSHIP UNITS ARE URGED TO CONSULT THEIR TAX ADVISORS REGARDING THE SPECIFIC TAX CONSEQUENCES TO THEM OF THE MERGER, THE OWNERSHIP OF COMMON SHARES RECEIVED PURSUANT TO THE MERGER, AND LXP’S QUALIFICATION AS A REIT, INCLUDING THE APPLICABILITY AND EFFECT OF U.S. FEDERAL, STATE, LOCAL AND NON-U.S. INCOME AND OTHER TAX LAWS, AND POTENTIAL CHANGES IN APPLICABLE TAX LAWS, IN LIGHT OF THEIR PARTICULAR CIRCUMSTANCES.
Tax Consequences of the Merger to U.S. Holders of LCIF Partnership Units
The receipt of Common Shares in exchange for LCIF Partnership Units pursuant to the Merger Agreement will be a taxable transaction to U.S. holders for U.S. federal income tax purposes. A U.S. holder will generally recognize capital gain or loss on the receipt of Common Shares in exchange for LCIF Partnership Units. The amount of gain or loss from the sale will be based on the difference between a U.S. holder’s amount realized for tax purposes and its adjusted tax basis in such LCIF Partnership Units. The amount realized will be measured by the fair market value of property received (i.e., the Common Shares and cash, if any) plus the portion of LCIF’s liabilities allocable to the LCIF Partnership Units sold. The amount of LCIF liabilities considered in this calculation will include LCIF’s share of the liabilities of some entities in which LCIF owns an investment ininterest. In general, a U.S. holder’s tax basis will be the exchange notes, youcost of the LCIF Partnership Units, adjusted for the U.S. holder’s allocable share of LCIF’s income, loss, distributions and liabilities, as applicable. To the extent that the amount realized exceeds the U.S. holder’s basis for the LCIF Partnership Units disposed of, such U.S. holder will recognize gain; to the extent that the U.S. holder’s basis for the LCIF Partnership Units disposed of exceeds the amount realized, such U.S. holder will recognize loss. It is possible that the amount of gain recognized or even the tax liability resulting from such gain could exceed the fair market value of Common Shares received upon such disposition.
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You should consult your own tax advisors.
THIS DISCUSSION IS FOR INFORMATION PURPOSES ONLY AND IS NOT INTENDED AS TAX ADVICE. YOU SHOULD CONSULT YOUR OWN TAX ADVISORS AS TO THE PARTICULAR TAX CONSIDERATIONS TO YOU OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF THE EXCHANGE NOTES, INCLUDING THE EFFECT AND APPLICABILITY OF STATE, LOCAL, FOREIGN OR OTHER FEDERAL TAX LAWS OR ANY TAX TREATY.
Effects of Certain Contingencies
We may be obligatedadvisor regarding the tax consequences to pay holders amounts in excessyou of the stated interestexchange of your LCIF Partnership Units, including the U.S. federal, state, local and principal payable onnon-U.S. tax consequences of the exchange notes, as described under “Description of notes-LXP’s redemption rights,” “Description of notes-Events of default”units in your particular circumstances and “Description of notes-Shelf Registration.” The obligation to make such contingent payments may implicate the provisions of Treasury Regulations governing “contingent payment debt instruments.” If the exchange notes were treated as contingent payment debt instruments, holders subject to U.S. federal income taxation generally would be required to treatpotential changes in applicable laws.
Generally, any gain recognized on theupon a sale or other disposition of LCIF Partnership Units will be treated as gain attributable to the sale or disposition of a notecapital asset. To the extent, however, that the amount realized upon the sale of LCIF Partnership Units attributable to a U.S. holder’s share of LCIF’s “unrealized receivables” (as defined in Section 751 of the Code) exceeds the basis attributable to those assets, such excess will be treated as interestordinary income. Unrealized receivables include, to the extent not previously included in LCIF’s income, rather thanany rights to payment for services rendered or to be rendered. Unrealized receivables also include amounts that would be subject to recapture as ordinary income if LCIF had sold its assets at their fair market value at the time of the transfer of LCIF Partnership Units.
Generally, any loss recognized upon a sale or other disposition of LCIF Partnership Units will be treated as loss attributable to the sale or disposition of a capital asset. Capital losses in any year are generally deductible only to the extent of capital gains plus, in the case of a non-corporate taxpayer, $3,000 of ordinary income ($1,500 for married individuals filing separately).
The passive activity loss rules of the Code limit the use of losses by individuals, estates, trusts and certain closely held corporations and personal service corporations derived from certain passive activities, which generally include investments in limited partnership interests such as the LCIF Partnership Units. Previously-suspended and unused passive losses of a holder of LCIF Partnership Units generally may be deducted in full in the taxable year when such holder completely disposes of its LCIF Partnership Units. Each U.S. holder of LCIF Partnership Units subject to the passive activity loss rules should consult its own tax advisor concerning whether, and the extent to which, it has available suspended passive activity losses that may be used to offset the gain, if any, resulting from the exchange of LCIF Partnership Units in the Merger.
For noncorporate U.S. holders, the maximum rate of tax on the net capital gain (i.e., long-term capital gain less short-term capital loss) from a sale or exchange of a long-term capital asset (i.e., a capital asset held for more than 12 months) is 20%, provided that the LCIF Partnership Units are held as a long-term capital asset and subject to the timing and amount751 ordinary income treatment described above. However, such holders may be required to treat a portion of income inclusions onsuch net capital gain as “unrecaptured Section 1250 gain,” taxable at 25% to the note may also be affected.extent of their allocable share of unrecaptured Section 1250 gain.
Under applicable Treasury Regulations, one or more contingencies will notIt is possible that the exchange by LCIF in the Merger of LCIF Partnership Units issued in connection with a contribution of property to LCIF could cause a debt instrumentthe original transfer of property to LCIF to be treated as a contingent payment debt instrument“disguised sale” of property. Section 707 of the Code and the Treasury Regulations thereunder (the “Disguised Sale Regulations”) generally provide that, unless one of the prescribed exceptions is applicable, a partner’s contribution of property to a partnership and a simultaneous or subsequent transfer of money or other consideration (which may include the assumption of or taking subject to a liability) from the partnership to the partner will be presumed to be a sale, in whole or in part, of such property by the partner to the partnership. Further, the Disguised Sale Regulations provide generally that, in the absence of an applicable exception, if based on allmoney or other consideration is transferred by a partnership to a partner within two years of the partner’s contribution of property, the transactions are presumed to be a sale of the contributed property unless the facts and circumstances as of the issue date, such contingency or contingencies, in the aggregate, are “remote” or “incidental.” We intend to take the position, and assume in this discussion,clearly establish that the likelihoodtransfers do not constitute a sale. The Disguised Sale Regulations also provide that contingent paymentsif two years have passed between the transfer of money or other consideration and the contribution of property, the transactions will be made onpresumed not to be a sale unless the exchange notesfacts and circumstances clearly establish that the transfers constitute a sale. Given the amount of time that has passed since the original transfers of properties to LCIF by current holders of LCIF Partnership Units other than LXP, it is remote and/or that such payments are incidental, and, therefore,unlikely, though still possible, that the exchange notesof LCIF Partnership Units in connection with the Merger would cause such original transfers to be treated as disguised sales of property under the Disguised Sale Regulations.
Each U.S. holder of LCIF Partnership Units should consult with its own tax advisor to determine whether the exchange of LCIF Partnership Units could be subject to the Disguised Sale Regulations.
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Taxation of LXP as a REIT
For purposes of the following discussion, references to “our,” “we” and “us” mean only LXP and not its subsidiaries or affiliates.
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, upon the filing of our U.S. federal income tax return for such period. We believe that we are organized and operate in such a manner, and will continue to be organized and operate in such a manner, as to qualify for taxation as a REIT under the applicable provisions of the Code.
Our qualification and taxation as a REIT depends on our ability to meet on a continuing basis, through actual operating results, distribution levels, and diversity of share ownership, various qualification requirements imposed upon REITs by the Code. Our ability to qualify to be taxed as a REIT also requires that we satisfy certain asset tests, some of which depend upon the fair market values of assets that we own directly or indirectly. Such fair market values may not contingent payment debt instruments withinbe susceptible to a precise determination. Accordingly, no assurance can be given that the meaningactual results of our operations for any taxable year will satisfy such requirements for qualification and taxation as a REIT.
Taxation of REITs in General
As indicated above, our qualification and taxation as a REIT depends upon our ability to meet, on a continuing basis, various qualification requirements imposed upon REITs by the Code. The material qualification requirements are summarized below under “—Requirements for Qualification—General.” While we intend to operate so that we qualify and continue to qualify to be taxed as a REIT, no assurance can be given that the IRS will not challenge our qualification, or that we will be able to operate in accordance with the REIT requirements in the future. See “—Failure to Qualify,” below.
Provided that we qualify to be taxed as a REIT, generally we will be entitled to a deduction for distributions that we pay and therefore will not be subject to U.S. federal corporate income tax on our REIT taxable income that is currently distributed to our shareholders. This treatment substantially eliminates the “double taxation” at the corporate and shareholder levels that generally results from an investment in a “C corporation.” A C corporation is a corporation that generally is required to pay tax at the corporate level. Double taxation means taxation once at the corporate level when income is earned and once again at the shareholder level when the income is distributed. In general, the income that we generate (other than at any taxable REIT subsidiary (“TRS”) of ours) is taxed only at the shareholder level upon a distribution to our shareholders.
Most U.S. shareholders that are individuals, trusts or estates are taxed on corporate dividends at a maximum U.S. federal income tax rate of 20% (the same as long-term capital gains). With limited exceptions, however, distributions from us or from other entities that are taxed as REITs are generally not eligible for this rate and will continue to be taxed at rates applicable Treasury Regulations. Under such position, if we become obligated to redeem exchange notes as described under “Description of notes-LXP’s redemption rights” any amounts received (less an amountordinary income, but non-corporate shareholders will generally be eligible for a deduction equal to any accrued20% of such distributions. Currently, the highest marginal non-corporate U.S. federal income tax rate applicable to ordinary income is 37% (before application of the 20% deduction which results in an effective 29.6% tax rate). See “—Taxation of Shareholders—Taxation of Taxable U.S. Shareholders—Distributions” below.
Any of our net operating losses, foreign tax credits and other tax attributes generated or incurred by us generally do not pass through to LXP shareholders, subject to special rules for certain items such as the undistributed but designated capital gain that we recognize. See “—Taxation of Shareholders—Taxation of Taxable U.S. Shareholders—Distributions” below.
If we qualify to be taxed as a REIT, we will nonetheless be subject to U.S. federal tax in the following circumstances:
● | We will be taxed at regular corporate rates on any undistributed taxable income, including undistributed net capital gains. |
● | If we have net income from prohibited transactions, which are, in general, sales or other dispositions of inventory or property held primarily for sale to customers in the ordinary course of business, other than foreclosure property, such income will be subject to a 100% tax. See “—Prohibited Transactions” and “—Foreclosure Property” below. |
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● | If we elect to treat property that we acquire in connection with certain leasehold terminations as “foreclosure property,” we may thereby avoid the 100% tax on gain from a resale of that property (if the sale would otherwise constitute a prohibited transaction), but the income from the sale or operation of the property may be subject to corporate income tax at the highest applicable rate (currently 21%). |
● | If we fail to satisfy the 75% gross income test and/or the 95% gross income test, as discussed below, but nonetheless maintain our qualification as a REIT because we satisfy other requirements, we will be subject to a 100% tax on an amount based on the magnitude of the failure, as adjusted to reflect the profit margin associated with our gross income. |
● | If we violate the asset tests (other than certain de minimis violations) or certain other requirements applicable to REITs, as described below, and yet maintain qualification as a REIT because there is reasonable cause for the failure and other applicable requirements are met, we may be subject to a penalty tax. In that case, the amount of the penalty tax will be at least $50,000 per failure, and, in the case of certain asset test failures, will be determined as the amount of net income generated by the nonqualifying assets in question multiplied by the highest corporate tax rate (currently 21%) if that amount exceeds $50,000 per failure. |
● | If we fail to distribute during each calendar year at least the sum of (i) 85% of our ordinary income for such year, (ii) 95% of our capital gain net income for such year and (iii) any undistributed net taxable income from prior periods, we will be subject to a nondeductible 4% excise tax on the excess of the required distribution over the sum of (a) the amounts that we actually distributed and (b) the amounts we retained and upon which we paid income tax at the corporate level. |
● | We may be required to pay monetary penalties to the IRS in certain circumstances, including if we fail to meet record-keeping requirements intended to monitor our compliance with rules relating to the composition of a REIT’s shareholders, as described below in “—Requirements for Qualification—General” below. |
● | A 100% tax may be imposed on certain transactions between us and a TRS that do not reflect arm’s-length terms. |
● | If we acquire appreciated assets from a corporation that is not a REIT (i.e., a “C” corporation) in a transaction in which the adjusted tax basis of the assets in our hands is determined by reference to the adjusted tax basis of the assets in the hands of the C corporation, we may be subject to tax on such appreciation at the highest corporate income tax rate then applicable if we subsequently recognize gain on a disposition of any such assets during the five-year period following our acquisition from the C corporation. Treasury Regulations exclude from the application of this built-in gains tax any gain from the sale of property we acquire in an exchange under Section 1031 (a like-kind exchange) or 1033 (an involuntary conversion) of the Code. |
● | The taxable income of our TRSs will be subject to U.S. federal corporate income tax. |
● | We may elect to retain and pay income tax on our net capital gain. In that case, a shareholder would include its proportionate share of our undistributed net capital gain (to the extent we make a timely designation of such gain to the shareholder) in its income, would be deemed to have paid the tax that we paid on such gain, and would be allowed a credit for the shareholder’s proportionate share of the tax deemed to have been paid, and an adjustment would be made to increase the shareholder’s basis in our shares. |
In addition, we and our subsidiaries may be subject to a variety of taxes, including payroll taxes and state, local, and foreign income, property, gross receipts and other taxes on our assets and operations. We could also be subject to tax in situations and on transactions not presently contemplated.
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Requirements for Qualification—General
The Code defines a REIT as a corporation, trust or association:
● | that is managed by one or more trustees or directors; |
● | the beneficial ownership of which is evidenced by transferable shares, or by transferable certificates of beneficial interest; |
● | that would be taxable as a domestic corporation but for its election to be subject to tax as a REIT; |
● | that is neither a financial institution nor an insurance company subject to specific provisions of the Code; |
● | the beneficial ownership of which is held by 100 or more persons; |
● | in which, during the last half of each taxable year, not more than 50% in value of the outstanding shares or other beneficial interest is owned, directly or indirectly, by five or fewer “individuals” (as defined in the Code to include certain entities such as private foundations); |
● | that makes an election to be taxed as a REIT, or has made such an election for a previous taxable year which has not been revoked or terminated; |
● | that has no earnings and profits from any non-REIT taxable year at the close of any taxable year; and |
● | that meets other tests described below, including with respect to the nature of its income and assets and the amounts of its distributions. |
The Code provides that the first through fourth conditions above must be met during the entire taxable year, and that the fifth condition above must be met during at least 335 days of a taxable year of 12 months, or during a proportionate part of a shorter taxable year. Our declaration of trust provides restrictions regarding the ownership and transfer of our shares of beneficial interest, which are intended to assist us in satisfying the share ownership requirements described in the fifth and sixth conditions above. These restrictions, however, may not previously includedensure that we, in income, whichall cases, will be able to satisfy the share ownership requirements described in the fifth and sixth conditions above. If we fail to satisfy these share ownership requirements, except as provided in the next two sentences, our status as a REIT will terminate. To monitor our compliance with the sixth condition above, we are generally required to maintain records regarding the actual ownership of our shares. If we comply with the record-keeping requirement and we do not know or, exercising reasonable diligence, would not have known of our failure to meet the sixth condition above, then we will be treated as interest incomehaving met the sixth condition above.
To monitor compliance with the share ownership requirements, we generally are required to maintain records regarding the actual ownership of our shares of beneficial interest. To do so, we must demand written statements each year from the record holders of significant percentages of our shares pursuant to which the record holders must disclose the actual owners of the shares (i.e., the persons required to include our distributions in their gross income). We must maintain a list of those persons failing or refusing to comply with this demand as part of our records. We could be subject to monetary penalties if we fail to comply with these record-keeping requirements. If you fail or refuse to comply with the demands, you will be required by Treasury Regulations to submit a statement with your tax return disclosing your actual ownership of our shares and other information.
In addition, a REIT must have a taxable year that is the calendar year. We have adopted December 31 as our taxable year-end to satisfy this requirement.
Effect of Subsidiary Entities
Ownership of Partnership Interests
We have been and currently are a partner in entities that are treated as partnerships for U.S. federal income tax purposes. In the future, we may be a partner in additional entities treated as partnerships. For such partnerships, Treasury Regulations provide that we are deemed to own our proportionate share of the partnership’s assets, and withholding tax purposes) should be includedto earn our proportionate share of the partnership’s income, for purposes of the asset and gross income tests applicable to REITs. Our proportionate share of a partnership’s assets and income is based on our capital interest in the holder’s amount realized upon such redemption.partnership (except that for purposes of the 10% value test, as described below, our proportionate share of the partnership’s assets is based on our proportionate interest in the equity and certain debt securities issued by the
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partnership). We calculate our capital interest in any partnership based on either our percentage ownership of the capital of the partnership or based on the allocations provided in the applicable partnership’s operating agreement, using the more conservative calculation. In addition, if we become obligatedthe assets and gross income of the partnership are deemed to make additional interest payments as described under “Descriptionretain the same character in our hands. Thus, our proportionate share of notes-Shelf Registration,” a holder should be required to include inthe assets and items of income the amount of any such payments atof our subsidiary partnerships will be treated as our assets and items of income for purposes of applying the time such payments are received or accruedREIT requirements.
In the event that any partnership in accordance with such holder’s method of accounting. Our position is binding onwhich we hold an interest were treated as an association, the entity would be taxable as a holdercorporation and therefore would be subject to an entity level tax on its income. In such a situation, the character of our assets and items of gross income would change and might preclude us from qualifying as a REIT. We believe that each partnership in which we hold a material interest (either directly or indirectly) is properly treated as a partnership for tax purposes (and not as an association taxable as a corporation).
Disregarded Subsidiaries
We own corporate subsidiaries that are classified as “qualified REIT subsidiaries.” In the future, we may form or acquire additional qualified REIT subsidiaries. Each such subsidiary is generally disregarded as a separate entity for U.S. federal income taxation unless such holder disclosestax purposes, and all of the subsidiary’s assets, liabilities and items of income, deduction and credit are treated as our assets, liabilities and items of income, deduction and credit, including for purposes of the gross income and asset tests applicable to REITs. A qualified REIT subsidiary is any corporation, other than a contrary positionTRS (as described below), that is directly or indirectly (through disregarded subsidiaries) wholly-owned by a REIT. Other entities that are wholly-owned by us or our subsidiaries, including single member limited liability companies that have not elected to be taxed as corporations for U.S. federal income tax purposes, are also generally disregarded as separate entities for U.S. federal income tax purposes, including for purposes of the REIT income and asset tests. Disregarded subsidiaries, along with any partnerships in which we hold an equity interest, are sometimes referred to herein as “pass-through subsidiaries.”
In the event that a disregarded subsidiary of ours ceases to be wholly-owned—for example, if any equity interest in the manner thatsubsidiary is requiredacquired by applicable Treasury Regulations. Holders should consult their owna person other than us or another disregarded subsidiary of ours—the subsidiary’s separate existence would no longer be disregarded for U.S. federal income tax advisors regardingpurposes. Instead, the possible application of the contingent payment debt instrument rules to the exchange notes.
U.S. Holders
Exchange pursuant to the exchange offer
The exchange of private notes for exchange notes in the exchange offer will notsubsidiary would have multiple owners and would generally be treated as a either a partnership or a taxable corporation. Such an event could, depending on the circumstances, adversely affect our ability to satisfy the various asset and gross income requirements applicable to REITs, including the requirements that REITs generally may not own, directly or indirectly, more than 10% of the securities of another corporation. See “—Asset Tests” and “—Income Tests” below.
Taxable REIT Subsidiaries
In general, we may jointly elect with a subsidiary corporation, whether or not wholly-owned, to treat such subsidiary corporation as a TRS. We generally may not own more than 10% of the securities of a taxable corporation, as measured by voting power or value, and no more than 5% of the value of our assets can be represented by the securities of any single taxable corporation, in each case unless we and such corporation elect to treat such corporation as a TRS, provided that not more than 20% of the value of our total assets is represented by securities of one or more TRSs. The separate existence of a TRS or other taxable corporation is not ignored for U.S. federal income tax purposes. Accordingly, (1) a U.S. Holder willTRS or other taxable subsidiary corporation generally is subject to corporate income tax on its earnings, which may reduce the cash flow that we and our subsidiaries generate in the aggregate and may reduce our ability to make distributions to LXP shareholders.
We are not recognizetreated as holding the assets of a TRS or other taxable gainsubsidiary corporation or loss as receiving any income that the subsidiary earns. Rather, the stock issued by a result of exchangingtaxable subsidiary corporation to us is an asset in our hands, and we generally treat the distributions paid to us from such holder’s notes; (2) the holding period of the exchange notes wouldtaxable subsidiary corporation, if any, as income. This treatment can affect our income and asset test calculations, as described below. Because we do not include the holding periodassets and income of TRSs or other taxable subsidiary corporations on a look-through basis in determining our compliance with the private notes exchanged therefor; and (3)REIT requirements, we may use such entities to undertake indirectly activities that the adjusted tax basisREIT rules might otherwise preclude us from doing directly or through pass-through subsidiaries. For example, we may use TRSs or other taxable subsidiary corporations to perform services or conduct activities that give rise to certain
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categories of the exchange notes receivedincome or to conduct activities that, if conducted by us directly, would be the sametreated in our hands as the adjusted tax basis of the private notes.prohibited transactions.
Stated interest
Stated interest on the exchange notes generally will be taxable to a U.S. holder as ordinary interest income at the time it is paid or accrued in accordance with such holder’s regular method of accounting for U.S. federal income tax purposes.law limits the deductibility of interest paid or accrued by a TRS to its parent REIT to assure that the TRS is subject to an appropriate level of corporate taxation. Further, the rules impose a 100% excise tax on certain transactions between a TRS and its parent REIT or the REIT’s tenants that are not conducted on an arm’s-length basis. We intend that all of our transactions with our TRSs will be conducted on an arm’s-length basis.
SaleIn the future, we may form or other taxable dispositionacquire additional TRSs, or elect to treat certain existing subsidiaries that are qualified REIT subsidiaries or disregarded entities as TRSs. TRSs might be used to hold all or a portion of the exchange notes
Upon the disposition of a note by sale, exchange, redemption or other taxable disposition, a U.S. holder generally will recognize gain or loss in an amount equal to the difference, if any, between: (i) the amount realized on the sale, exchange, redemption or other taxable disposition (other than amounts attributable to accrued but unpaid stated interest which, if not previously included in income, willinvestment that, for example, would be treated as interest paida non-real estate security for purposes of the REIT asset tests or excess personal property when testing rents from real property.
Income Tests
In order to qualify to be taxed as a REIT, we must satisfy two gross income requirements on an annual basis. First, at least 75% of our gross income for each taxable year, excluding gross income from sales of inventory or dealer property in “prohibited transactions,” discharge of indebtedness, certain hedging transactions and certain foreign currency gains, generally must be derived from “rents from real property,” gains from the exchange notes) and (ii) a U.S. holder’s adjusted U.S. federal income tax basis in the note. A U.S. holder’s adjusted U.S. federal income tax basis in a note generally will equal the amount paidsale of real estate assets (other than certain publicly offered REIT debt instruments that would not be real estate assets but for the note, increased by any OID previously included in income and reduced by the amountinclusion of any payments other than qualified stated interest received by the U.S. holder.
Any gain or loss recognized will be capital gain or loss and will be long-term capital gain or loss if, on the date of the sale, exchange, redemption or other taxable disposition, the U.S. holder has held the note for more than one year. Long-term capital gain realized by a non-corporate U.S. holder generally will be subject to a maximum tax rate of 20 percent. Corporate U.S. holders generally are taxed on their net capital gains at regular corporate income tax rates. The deductibility of capital losses is subject to certain limitations.
Medicare contribution tax on unearned income
Certain U.S. holders who are individuals, estates or certain trusts will generally be subject to an additional 3.8% tax on, among other things,publicly offered REIT debt instruments), interest and accrued OID ongain derived from mortgage loans secured by real property or an interest in real property (including certain types of mortgage-backed securities and certain mortgage loans secured by both real and personal property), dividends received from other REITs, and specified income from temporary investments. Second, at least 95% of our gross income in each taxable year, excluding gross income from “prohibited transactions,” discharge of indebtedness, certain hedging transactions and certain foreign currency gains, must be derived from some combination of income that qualifies under the exchange notes75% gross income test described above, as well as other dividends, interest, and capital gain from the sale or other taxable disposition of stock or securities, which need not have any relation to real property. Income and gain from certain hedging transactions will be excluded from both the exchange notes, unless certain exceptions apply. U.S. holders should consult their tax advisors regardingnumerator and the effect,denominator for purposes of both the 75% and 95% gross income tests.
Rents from Real Property
Rents we receive from a tenant generally will qualify as “rents from real property” for the purpose of satisfying the gross income requirements for a REIT described above only if any,all of the Medicare contribution tax on their ownership and disposition of the exchange notes.conditions described below are met:
● | The amount of rent is not based in whole or in part on the income or profits of any person from the property. However, an amount we receive or accrue generally will not be excluded from the term “rents from real property” solely because it is based on a fixed-percentage or percentages of gross receipts or sales; |
Non-U.S. Holders
Exchange offer
The exchange of the private notes for exchange notes would not constitute a taxable exchange
● | Neither we nor an actual or constructive owner of 10% or more of LXP shares actually or constructively owns 10% or more of the interests in the assets or net profits of a non-corporate tenant, or, if the tenant is a corporation for U.S. federal income tax purposes,
Interest Income Interest income constitutes qualifying mortgage interest for purposes of the 75% gross income test (as described above) to the extent that the obligation upon which such interest is paid is secured by a mortgage on (i) real property or an interest in real property or (ii) property described in (i) and other property if such other property constitutes 15% or less of the total fair market value of the secured property. If we receive interest income with respect to a mortgage loan that is described in the preceding clause (ii), such interest income may need to be apportioned between the real property and the other collateral for purposes of the 75% gross income test. Even if a loan is not secured by real property, or is not fully secured by real property, the income that it generates may nonetheless qualify for purposes of the 95% gross income test. The term “interest” generally does not include any amount received or accrued, directly or indirectly, if the determination of all or some of the amount depends in any way on the income or profits of any person. However, an amount received or accrued generally will not be excluded from the term “interest” solely by reason of being based on a fixed percentage or percentages of receipts or sales. We may originate or acquire mezzanine loans or investments treated as subordinated debt for U.S. federal income tax purposes. Mezzanine loans include loans secured by equity interests in an entity that directly or indirectly owns real property, rather than by a direct mortgage of the real property. Revenue Procedure 2003-65 provides Although Revenue Procedure 2003-65 provides a safe harbor on which taxpayers may rely, it does not prescribe rules of substantive tax law. Moreover, it is possible that some mezzanine loans may not meet all of the Dividend Income We may directly or indirectly receive distributions from TRSs or other Fee Income Any fee income that we earn will generally not be qualifying income for purposes of either gross income test. Any fees earned by a TRS, however, will not be included for purposes of our gross income tests. Forward Sale Agreements We may enter into forward sale agreements from time to time and, subject to certain conditions, we have the right to elect physical, cash or
shares, including pursuant to a “securities futures contract,” as defined in the Failure to Satisfy the Gross Income Tests If we fail to satisfy one or both of the 75% or 95% gross income tests for any taxable year, we may still qualify to be taxed as a REIT for such year if we are entitled to relief under applicable provisions of the Code. These relief provisions will be generally available if (i) our failure to meet these tests was due to reasonable cause and Asset Tests At the close of each calendar quarter, we must also satisfy certain tests relating to the nature of our assets. Specifically:
Similarly, although stock of another REIT is a qualifying asset for purposes of the
Certain securities will not cause a violation of the 10% asset test (for purposes of value) described above. Such securities include instruments that constitute “straight debt,” which term generally excludes, among other things, securities having contingency features. A security does not qualify as “straight debt” where a REIT (or a controlled TRS of the REIT) owns other securities of the same issuer which do not qualify as straight debt, unless the value of those other securities constitute, in the aggregate, 1% or less of the total value of that issuer’s outstanding securities. In addition to straight debt, the Code provides that certain other securities will not violate the 10% value limitation. Such securities include (i) any loan made to an individual or an estate, (ii) certain rental agreements pursuant to which one or more payments are to be made in subsequent years (other than agreements between a REIT and certain persons related to the REIT under attribution rules), (iii) any obligation to pay rents from real property, (iv) securities issued by governmental entities that are not dependent in whole or in part on the profits of (or payments made by) a non-governmental entity, (v) any security (including debt securities) issued by another REIT and (vi) any debt instrument issued by a partnership if the partnership’s income is of a nature that it would satisfy the 75% gross income test described above under “—Income Tests.” In applying the 10% value limitation, a debt security issued by a partnership is not taken into account to the extent, if any, of the REIT’s proportionate interest in the equity and certain debt securities issued by that partnership. No independent appraisals have been obtained to support our conclusions as to the value of our total assets or the value of any particular security or securities. Moreover, the values of some assets may not be susceptible to a precise determination, and values are subject to
Certain relief provisions are available to allow REITs to satisfy the asset requirements or to maintain REIT qualification, notwithstanding certain violations of the asset and other requirements. For example, if we should fail to satisfy the asset tests at the end of a calendar quarter, such a failure would not cause us to lose our REIT qualification if (i) we satisfied the asset tests at the close of the preceding calendar quarter and (ii) the discrepancy between the value of its assets and the asset requirements was not wholly or partly caused by an acquisition of nonqualifying assets, but instead arose from changes in the relative market values of our assets. If the condition described in (ii) were not satisfied, we still could avoid disqualification by eliminating any discrepancy within 30 days after the close of the calendar quarter in which it arose or by making use of the relief provisions described below. In the case of de minimis violations of the 10% and 5% asset tests, a REIT may maintain its qualification despite a violation of such requirements if (i) the value of the assets causing the violation does not exceed the lesser of 1% of the REIT’s total assets and $10,000,000 and (ii) the REIT either disposes of the assets causing the failure within six months after the last day of the quarter in which it identifies the failure or the period of time prescribed by Treasury Regulations to be issued, or the relevant tests are otherwise satisfied within that time frame. Even if we did not qualify for the foregoing relief provisions, one additional provision allows a REIT that fails one or more of the asset requirements to nevertheless maintain its REIT qualification if (i) the REIT provides the IRS with a description of each asset causing the failure, (ii) the failure is due to reasonable cause and not willful neglect, (iii) the REIT pays a tax equal to the greater of (a) $50,000 per failure and (b) the product of the net income generated by the assets that caused the failure multiplied by the highest applicable corporate tax rate and (iv) the REIT either disposes of the assets causing the failure within six months after the last day of the quarter in which it
identifies the failure or the period of time prescribed by Treasury Regulations to be issued, or otherwise satisfies the relevant asset tests within that time frame. Annual Distribution Requirements In order to qualify to be taxed as a REIT, we are required to make distributions, other than capital gain dividends, to our shareholders in an amount at least equal to the sum of:
We generally must make these distributions in the taxable year to which they relate, or in the following taxable year if declared before we timely file our tax return for the year and if paid with or before the first regular distribution payment after such declaration. These distributions will be treated as received by LXP shareholders in the year in which paid, except that any distribution that we declare in October, November or December of any year and that is payable to a shareholder of record on a specified date in any such month will be treated as both paid by us and received by the shareholder on December 31 of such year, provided that we actually pay the distribution before the end of January of the following calendar year. If we fail to distribute, with respect to each calendar year, at least the sum of (i) 85% of our ordinary income for such year, (ii) 95% of our capital gain net income for such year and (iii) any undistributed net taxable income from prior periods, we will be subject to a To the extent that we distribute at least 90%, but less than 100%, of our REIT taxable income, as adjusted, we will be subject to tax at ordinary corporate tax rates on the retained portion. We have the ability to elect to retain, rather than distribute, some or all of our net long-term capital gains and pay tax on such gains. If we were to make this election, LXP shareholders would include their proportionate shares of such undistributed long-term capital gains in income and receive a corresponding credit for their share of the tax that we paid. LXP shareholders would then increase the adjusted basis of their shares by the difference between (i) the amounts of capital gain dividends that we designated and that they included in their taxable income, minus (ii) the tax that we paid on their behalf with respect to that income. To the extent that we may have available net operating losses carried forward from prior tax years, such From time to time, we may not have sufficient cash or other liquid assets to meet the distribution requirements described above, including due to timing differences between the actual receipt of income and actual payment of deductible expenses, and the inclusion of income and deduction of expenses in determining our taxable income. In addition, we may decide to retain our cash, rather than distribute it, in order to repay debt, acquire assets, or for other reasons. If these timing differences occur, we may borrow funds to pay distributions or we may pay distributions through the distribution of other property (including our shares) in order to meet the distribution requirements, while preserving our cash. If our taxable income for a particular year is subsequently determined to have been understated, we may be able to rectify a resultant failure to meet the distribution requirements for a year by paying “deficiency dividends” to shareholders in a later year, which may be included in our deduction for distributions paid for the earlier year but treated as an additional distribution to our shareholders in the year such dividends are paid. In this case, we may be
able to avoid losing REIT qualification or being taxed on amounts distributed as deficiency dividends. We will be required to pay interest based on the amount of any deduction taken for deficiency dividends. Prohibited Transactions Net income that we derive from a prohibited transaction is subject to a 100% tax. The term “prohibited transaction” generally includes a sale or other disposition of property (other than foreclosure property, as discussed below) that is held as inventory or primarily for sale to customers in the ordinary course of a trade or business. We intend to conduct our operations so that no asset that we own (or are treated as owning) will be treated as, or having been, held as inventory or for sale to customers, and that a sale of any such asset will not be treated as having been in the ordinary course of our business. Whether property is held as inventory or “primarily for sale to customers in the ordinary course of a trade or business” depends on the particular facts and circumstances. No assurance can be given that any property that we sell will not be treated as inventory or property held for sale to customers, or that we can comply with certain safe-harbor provisions of the Code that would prevent such treatment. The 100% tax does not apply to gains from the sale of property that is held through a TRS or other taxable corporation, although such income will be subject to tax in the hands of the corporation at regular corporate rates. We intend to structure our activities to avoid prohibited transaction characterization. Derivatives and Hedging Transactions We have entered, and may in the future enter, into hedging transactions with respect to interest rate exposure on one or more of our assets or liabilities. Any such hedging transactions could take a variety of forms, including the use of derivative instruments such as interest rate swap contracts, interest rate cap or floor contracts, futures or forward contracts, and options. Except to the extent provided by Treasury Regulations, (i) income from a hedging transaction we enter into (A) in the normal course of our business primarily to manage risk of interest rate changes or currency fluctuations with respect to borrowings made or to be made, or ordinary obligations incurred or to be incurred, to acquire or carry real estate assets, including gain from the sale or disposition of a position in such a transaction or (B) primarily to manage risk of currency fluctuations with respect to any item of income or gain that would be qualifying income under the 75% or 95% income tests will not constitute gross income for purposes of the 75% or 95% gross income test; and (ii) if we enter into a position described in clause (i)(A) above with respect to indebtedness described therein or clause (i)(B) above with respect to property generating income described therein, and in connection with the extinguishment or disposition of such indebtedness or property we enter into a transaction that would be a hedging transaction within the meaning of clause (i) above as to any position referred to in this clause (ii) if such position were ordinary property, then any income from such a position or transaction described in this clause (ii) will not constitute gross income for purposes of the 75% or 95% gross income test so long as, in each of the foregoing clauses (i) and (ii), the transaction or position is clearly identified, as specified in Treasury Regulations, before the close of the day on which it was acquired, originated, or entered into. To the extent that we enter into hedging transactions that are not described in the preceding clause (i) or (ii), the income from these transactions is likely to be treated as nonqualifying income for purposes of both the 75% and 95% gross income tests. We intend to structure and have structured any hedging transactions in a manner that does not jeopardize our qualification as a REIT. We may conduct some or all of our hedging activities (including hedging activities relating to currency risk) through a TRS or other corporate entity, the income from which may be subject to U.S. federal income tax, rather than by participating in the arrangements directly or through pass-through subsidiaries. No assurance can be given, however, that our hedging activities will not give rise to income or assets that do not qualify for purposes of the REIT tests, or that our hedging activities will not adversely affect our ability to satisfy the REIT qualification requirements. Foreclosure Property Foreclosure property is real property and any personal property incident to such real property (i) that we acquire as the result of having bid in the property at foreclosure, or having otherwise reduced the property to ownership or possession by agreement or process of law, after a default (or upon imminent default) on a lease of the property or a mortgage loan held by us and secured by the property, (ii) for which we acquired the related loan or lease at a time when default was not imminent or anticipated and (iii) with respect to which we made a proper election to treat the property as foreclosure property. We generally will be subject to tax at the maximum corporate rate (currently 21%) on any net income from foreclosure property, including any gain from the disposition of the
foreclosure property, other than income that would otherwise be qualifying income for purposes of the 75% gross income test. Any gain from the sale of property for which a foreclosure property election has been made will not be subject to the 100% tax on gains from prohibited transactions described above, even if the property would otherwise constitute inventory or dealer property. We do not anticipate receiving any income from foreclosure property that does not qualify for purposes of the 75% gross income test. Penalty Tax Any redetermined rents, redetermined deductions, excess interest or redetermined TRS service income we generate will be subject to a 100% penalty tax. In general, redetermined rents are rents from real property that are overstated as a result of any services furnished to any of our tenants by a TRS, and redetermined deductions and excess interest represent any amounts that are deducted by a TRS for amounts paid to us that are in excess of the amounts that would have been deducted based on arm’s-length negotiations or if the interest payments were at a commercially reasonable rate. Rents that we receive will not constitute redetermined rents if they qualify for certain safe harbor provisions contained in the Code. Redetermined TRS service income generally represents income of a TRS that is understated as a result of services provided to us or on our behalf. Record Keeping Requirements We are required to comply with applicable record keeping requirements. Failure to comply could result in monetary penalties. For example, we must request on an annual basis information from our shareholders designed to disclose the actual ownership of our outstanding Common Shares. Built-In Gains Tax If we dispose of any asset we acquired from a corporation which is or has been a C corporation in a transaction in which our basis in the asset is determined by reference to the basis of the asset in the hands of that C corporation, during the five-year period beginning on the date we acquire the asset, we could be required to pay tax at the highest corporate rate on the gain, if any, we recognize on the disposition of the asset, to the extent that gain does not exceed the excess of (1) the fair market value of the asset over (2) our adjusted basis in the asset, in each case on the date we acquired the asset. Such gain is taken into account in determining our taxable income and capital gains, and the amount of tax paid is taken into account as a loss for purposes of the distribution requirements. Failure to Qualify If we fail to satisfy one or more requirements for REIT qualification other than the income or asset tests, we could avoid disqualification as a REIT if our failure is due to reasonable cause and not to willful neglect and we pay a penalty of $50,000 for each such failure. Relief provisions are also available for failures of the income tests and asset tests, as described above in “—Income Tests” and “—Asset Tests.” If we fail to qualify for taxation as a REIT in any taxable year, and the relief provisions described above do not apply, we would be subject to tax on our taxable income at regular corporate rates. We cannot deduct distributions to shareholders in any year in which we are not a REIT, nor would we be required to make distributions in such a year. In this situation, to the extent of current and accumulated earnings and profits
Taxation of Taxable U.S. Shareholders Distributions So long as we qualify to be taxed as a REIT, the distributions that we make to our taxable U.S. shareholders out of current or accumulated earnings and profits (as determined for U.S. federal income tax purposes) that we do not designate as capital gain dividends will generally be taken into account by such shareholders as ordinary income and will not be eligible for the dividends received deduction for corporations. With limited exceptions, our distributions are not eligible for taxation at the preferential income tax rates (i.e., currently at a 20% maximum U.S. federal income tax rate) for qualified dividends received by most U.S. shareholders that are individuals, trusts and estates from taxable C corporations but are generally eligible for a deduction equal to 20% of such distributions. This deduction is scheduled to expire after 2025. Such U.S. shareholders, however, are taxed at the preferential rates on distributions designated by and received from REITs to the extent that the distributions are attributable to:
Dividends that we designate as capital gain dividends will generally be taxed to our U.S. shareholders as long-term capital gains to the extent that such dividends do not exceed our actual net capital gain for the taxable year or our dividends paid for the taxable year, without regard to the period for which the U.S. shareholder that receives such dividend has held its shares. We may elect to retain and pay taxes on some or all of our net long-term capital gains, in which case we may elect to apply provisions of the Code that treat our U.S. shareholders as having received, solely for tax purposes, our undistributed capital gains, and the shareholders as receiving a corresponding credit for taxes that we paid on such undistributed capital gains and an increase in the adjusted basis of their shares equal to the difference between (i) the amount of such undistributed capital gains, minus (ii) the amount of such taxes that we paid on their behalf. See “—Taxation of LXP” and “—Annual Distribution Requirements.” U.S. shareholders that are corporations may be required to treat up to 20% of some capital gain dividends as ordinary income. Long-term capital gains are generally taxable at maximum U.S. federal rates of 20% in the case of U.S. shareholders that are individuals, trusts and estates (although depending on the characteristics of the assets that produced these gains and on designations that we may make, certain capital gain dividends may be taxed at a 25% rate), and 21% in the case of U.S. shareholders that are corporations. Distributions in excess of our current and accumulated earnings and profits (as determined for U.S. federal income tax purposes) will generally represent a return of capital and will not be taxable to a U.S. shareholder to the extent that the amount of such distributions does not exceed the adjusted basis of the U.S. shareholder’s shares in respect of which the distributions were made. Rather, the distribution will reduce the adjusted basis of the U.S. shareholder’s shares. To the extent that such distributions exceed the adjusted basis of a U.S. shareholder’s shares, the shareholder generally must include such distributions in income as long-term capital gain if the shares have been held for more than one year, or short-term capital gain if the shares have been held for one year or less. In addition, any distribution that we declare in October, November or December of any year and that is payable to a U.S. shareholder of record on a specified date in any such month will be treated as both paid by us and received by the U.S. shareholder on December 31 of such year, provided that we actually pay the distribution before the end of January of the following calendar year. To the extent that we have available net operating losses and capital losses carried forward from prior tax years, such losses may reduce the amount of distributions that we must make in order to comply with the REIT distribution requirements. See “—Taxation of LXP” and “—Annual Distribution Requirements.” Such losses, however, are not passed through to U.S. shareholders and do not offset income of U.S. shareholders from other sources, nor would such losses affect the character of any distributions that we make, which are generally subject to tax in the hands of U.S. shareholders to the extent that we have current or accumulated earnings and profits (as determined for U.S. federal income tax purposes).
Dispositions of Our Common Shares If a U.S. shareholder sells or disposes of our Common Shares, it will generally recognize gain or loss for U.S. federal income tax purposes in an amount equal to the difference between the amount of cash and the fair market value of any property received on the sale or other disposition, and the shareholder’s adjusted tax basis in the shares (generally the amount paid for such shares). In general, capital gains recognized by individuals, trusts and estates upon the sale or disposition of shares of our Common Shares will be subject to a maximum U.S. federal income tax rate of 20% if the shares are held for more than one year, and will be taxed at ordinary income rates (of up to 37%) if the shares are held for one year or less. Gains recognized by U.S. shareholders that are corporations are subject to U.S. federal income tax at a maximum rate of 21%, whether or not such gains are classified as long-term capital gains. Capital losses recognized by a U.S. shareholder upon the disposition of our Common Shares that were held for more than one year at the time of disposition will be considered long-term capital losses, and are generally available only to offset capital gain income of the U.S. shareholder but not ordinary income (except in the case of individuals, trusts and estates who may also offset up to $3,000 of ordinary income each year). In addition, any loss upon a sale or exchange of shares of our Common Shares by a U.S. shareholder who has held the shares for six months or less, after applying holding period rules, will be treated as a long-term capital loss to the extent of actual or deemed distributions that we make that are required to be treated by the shareholder as long-term capital gain. If an investor recognizes a loss upon a subsequent disposition of shares of our shares in an amount that exceeds a prescribed threshold, it is possible that the provisions of Treasury Regulations involving “reportable transactions” could apply, with a resulting requirement to separately disclose the loss-generating transaction to the IRS. These regulations, though directed towards “tax shelters,” are broadly written and apply to transactions that would not typically be considered tax shelters. The Code imposes significant penalties for failure to comply with these requirements. You should consult your tax advisor concerning any possible disclosure obligation with respect to the receipt or disposition of shares of our shares or transactions that we might undertake directly or indirectly. Moreover, you should be aware that we and other participants in the transactions in which we are involved (including their advisors) might be subject to disclosure or other requirements pursuant to these Treasury Regulations. Passive Activity Losses and Investment Interest Limitations Distributions that we make and gains arising from the sale or exchange by a U.S. shareholder of our Common Shares will not be treated as passive activity income. As a result, shareholder will not be able to apply any “passive losses” against income or gain relating to our Common Shares. A U.S. shareholder may elect to treat capital gain dividends, capital gains from the disposition of our capital shares and income designated as qualified dividend income, as described above, as investment income for purposes of computing the investment interest limitation, but in such case, the shareholder will be taxed at ordinary income rates on such amount. To the extent that other distributions we make do not constitute a return of capital, they will generally be treated as investment income for purposes of computing the investment interest limitation. Other Tax Considerations Legislative or Other Actions Affecting REITs The present U.S. federal income tax treatment of REITs may be modified, possibly with retroactive effect, by legislative, judicial or administrative action at any time. The REIT rules are regularly reviewed by persons involved in the legislative process, the IRS and the U.S. Treasury, which may result in statutory changes as well as revisions to regulations and administrative interpretations. Recently enacted changes to the U.S. federal income tax laws could have an adverse impact on an investment in our shares. For example, certain changes in law pursuant to the Tax Cuts and Jobs Act made significant changes to the U.S. federal income tax laws that affect REITs and their shareholders. We cannot predict the effect of any future law changes on REITs or their shareholders. Backup Withholding and Information Reporting In general, LXP is required to report to U.S. shareholders of our Common Shares and to the IRS the amount of dividends paid during each calendar year and the amount of any tax withheld. Backup withholding, at a rate of
taxpayer identification number
Foreign Account Tax Compliance Act
State, Local and Foreign Taxes We and our subsidiaries and shareholders may be subject to state, local or foreign taxation in various jurisdictions, including those in which we or they transact business, own property or reside. Our state, local or foreign tax treatment and that of our shareholders may not conform to the U.S. federal income tax treatment discussed above. Any foreign taxes that we or our subsidiaries may incur do not pass through to our shareholders as a credit against their U.S. federal income tax liability. Prospective investors should consult their tax advisors regarding the application and effect of state, local and foreign income and other tax laws applicable to an investment in
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WHERE YOU CAN FIND MORE INFORMATION
LXP files LXP
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LXP Industrial Trust One Penn Plaza Suite 4015 If you request any such documents, LXP will mail them to you by first class mail, or another equally prompt means, after receipt of your request. To obtain timely delivery of these documents, you must request the information no later than December 21, 2023. You may also obtain more information regarding LXP by consulting its website, at www.lxp.com. The information of LXP’s website (other than the documents expressly incorporated by reference as set forth above) is not incorporated by reference in this LXP has not authorized anyone to provide you with different information. If anyone provides with different or inconsistent information, you should not rely on it. The information that appears in this information statement/prospectus and that is incorporated by reference in this information statement/prospectus may only be accurate as of the date of this information statement/prospectus or the date of the document in which incorporated information appears. The business, financial condition, results of operations and prospects may have changed for LXP since such date.
AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER by and between LXP INDUSTRIAL TRUST and LEPERCQ CORPORATE INCOME FUND L.P. Dated as of October 24, 2023 TABLE OF CONTENTS Page
AMENDED AND RESTATED THIS AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER (this “Agreement”), dated as of October 24, 2023, is made by and between LXP Industrial Trust, a Maryland real estate investment trust (the “Company”), and Lepercq Corporate Income Fund L.P., a Delaware limited partnership (“LCIF”). RECITALS WHEREAS, the Company and LCIF previously entered into an Agreement and Plan of Merger, dated as of September 13, 2023 (as amended on September 15, 2023 and as further amended on September 16, 2023, the “Original Agreement”); WHEREAS, the parties now wish to effect a business combination through a merger of LCIF with and into the Company (the “LCIF Merger”) on the terms and subject to the conditions set forth in this Agreement and in accordance with Section 17-211 of the Delaware Revised Uniform Limited Partnership Act, as amended (the “DRULPA”), and Section 8-501.1 of the Corporations and Associations Articles of the Annotated Code of Maryland, as amended (the “Maryland REIT Law”), in which each LCIF Partnership Unit (other than LCIF Partnership Units held by the Company or any of its wholly owned subsidiaries) shall be converted into the right to receive the Merger Consideration (defined herein); WHEREAS, this Agreement and the LCIF Merger must be approved by each of (i) the Board of Trustees of the Company (the “Company Board”), and (ii) the general partner of LCIF (the “General Partner”); WHEREAS, the General Partner is a wholly-owned subsidiary of the Company; WHEREAS, in accordance with Section 8-501.1(c)(3) of the Maryland REIT Law, the Company Board (including all of the independent trustees) has (i) determined that this Agreement, the LCIF Merger and the other transactions contemplated by this Agreement are advisable and in the best interests of the Company and its shareholders, and (ii) has unanimously approved and adopted this Agreement, the LCIF Merger and the other transactions contemplated by this Agreement and authorized the issuance of Common Shares (defined herein) as payment of the Merger Consideration (defined herein); WHEREAS, the General Partner has determined that this Agreement, the LCIF Merger and the other transactions contemplated by this Agreement are advisable and in the best interests of LCIF and its partners and has approved this Agreement, the LCIF Merger and the other transactions contemplated by this Agreement; WHEREAS, the parties hereto desire to make certain representations, warranties, covenants and agreements in connection with the LCIF Merger and also to prescribe various conditions to the LCIF Merger; and WHEREAS, in furtherance of the foregoing, and in accordance with the Original Agreement, the Company and LCIF desire to enter into this Agreement for the purpose of setting forth their mutual understandings and agreements with respect to the foregoing and amending and restating the Original Agreement. NOW, THEREFORE, in consideration of the premises and the mutual representations, warranties, covenants and agreements contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows: ARTICLE I SECTION 1.01. Specific Definitions. For purposes of this Agreement: “Additional Limited Partners” has the meaning given to such term in the LCIF Partnership Agreement. “By-Laws” means the Third Amended and Restated By-Laws of the Company. “Cash Equivalent” shall mean the average of the closing price of a Common Share on the New York Stock Exchange, as reported in The Wall Street Journal, for the 20 consecutive trading days ending on and including the second (2nd) trading day immediately preceding the Closing Date. “Code” means the Internal Revenue Code of 1986, as amended. “Common Shares” means the shares of beneficial interest classified as “Common Stock,” par value $0.0001 per share, of the Company. “Exchange Act” means the Securities Exchange Act of 1934, as amended. “LCIF Partnership Agreement” means the Sixth Amended and Restated Agreement of Limited Partnership of Lepercq Corporate Income Fund L.P., dated and effective as of December 30, 2013, as amended by the First Amendment to Sixth Amended and Restated Agreement of Limited Partnership of Lepercq Corporate Income Fund L.P., dated and effective as of July 12, 2021. “LCIF Partnership Units” mean units of partnership interests in LCIF, denominated as “Partnership Units” in the LCIF Partnership Agreement. “Liens” means, with respect to any asset (including any security), any mortgage, claim, lien, pledge, charge, security interest or encumbrance of any kind in respect of such asset.
“Material Adverse Effect” means any event, circumstance, change or effect that is materially adverse to the financial condition or results of operations of the Company or LCIF, as applicable in the context. “NYSE” means the New York Stock Exchange. “Person” means an individual, corporation, partnership, limited partnership, limited liability company, syndicate, person (including, without limitation, a “person” as defined in Section 13(d)(3) of the Exchange Act), trust, association, entity, government, political subdivision, agency or instrumentality of a government. “Redemption Factor” shall have the meaning set forth in the LCIF Partnership Agreement. “Securities Act” means the U.S. Securities Act of 1933, as amended. “Taxes” means any and all taxes, fees, levies, duties, tariffs, imposts and other charges of any kind (together with any and all interest, penalties, additions to tax and additional amounts imposed with respect thereto) imposed by any Governmental Authority (defined herein) or taxing authority, including, without limitation: taxes or other charges on or with respect to income, franchise, windfall or other profits, gross receipts, property, sales, use, capital stock, payroll, employment, social security, workers’ compensation, unemployment compensation or net worth; taxes or other charges in the nature of excise, withholding, ad valorem, stamp, transfer, value-added or gains taxes; license, registration and documentation fees; and customers’ duties, tariffs and similar charges. SECTION 1.02. Other Definitions. The following terms are defined in the sections indicated below:
ARTICLE II SECTION 2.01. LCIF Merger. Subject to the terms and conditions of this Agreement, and in accordance with the DRULPA and the Maryland REIT Law, at the Effective Time, LCIF and the Company shall consummate the LCIF Merger pursuant to which (a) LCIF shall be merged with and into the Company, and the separate existence of LCIF shall thereupon cease and (b) the Company shall be the surviving entity in the LCIF Merger (the “Surviving Entity”). The LCIF Merger shall have the effects specified in the DRULPA and the Maryland REIT Law. Without limiting the generality of the foregoing, and subject thereto, at the Effective Time, all of the property, rights, privileges, powers and franchises of LCIF shall vest in the Surviving Entity, and all debts, liabilities and duties of LCIF shall become the debts, liabilities and duties of the Surviving Entity. SECTION 2.02. Declaration of Trust. Upon the Effective Time, the Company Declaration of Trust in effect immediately prior to the Effective Time shall be the declaration of trust of the Surviving Entity, until such declaration of trust is thereafter amended as provided by applicable Law and the applicable provisions of such declaration of trust. SECTION 2.03. By-Laws. Upon the Effective Time, the By-Laws of the Company in effect immediately prior to the Effective Time shall be the bylaws of the Surviving Entity, until such bylaws are thereafter amended or repealed as provided by applicable Law and the applicable provisions of such bylaws. SECTION 2.04. Trustees and Officers of the Surviving Entity. Upon the Effective Time, (a) the trustees of the Company immediately prior to the Effective Time shall, from and after the Effective Time, be the trustees of the Surviving Entity and shall continue to hold office in accordance with the declaration of trust and bylaws of the Surviving Entity, or as otherwise provided by applicable Law, and (b) the officers of the Company immediately prior to the Effective Time shall, from and after the Effective Time, be the officers of
the Surviving Entity and shall continue to hold office in accordance with the declaration of trust and bylaws of the Surviving Entity. SECTION 2.05. Effective Time. At the Closing, LCIF and the Company shall duly execute and file (i) articles of merger (the “Articles of Merger”) with the State Department of Assessments and Taxation of Maryland (the “SDAT”) in accordance with the Maryland REIT Law, and (ii) a certificate of merger (the “Certificate of Merger”) with the Secretary of State of the State of Delaware (the “Delaware Secretary of State”) in accordance with the DRULPA. The LCIF Merger shall become effective at such time as the Articles of Merger have been accepted for record by the SDAT and the Certificate of Merger has been accepted for filing by the Delaware Secretary of State, or at such later time to which the parties hereto shall have agreed and designated in the Articles of Merger in accordance with the Maryland REIT Law and the Certificate of Merger in accordance with the DRULPA as the effective time of the LCIF Merger (the “Effective Time”). SECTION 2.06. Closing. The closing of the LCIF Merger (the “Closing”) shall occur as promptly as practicable after all of the conditions set forth in Article VII (other than conditions which are waived or by their terms are required to be satisfied at the Closing) shall have been satisfied or waived by the party entitled to the benefit of the same, and, subject to the foregoing, shall take place at such time and on a date to be specified by the parties (the “Closing Date”). The Closing shall take place at the offices of the Company, One Penn Plaza, Suite 4015, New York, New York, or at such other place as agreed to by the parties hereto. ARTICLE III SECTION 3.01. Conversion of LCIF Partnership Units. At the Effective Time, by virtue of the LCIF Merger and without any action on the part of any party hereto or the holders of LCIF Partnership Units: (a) Each LCIF Partnership Unit issued and outstanding immediately prior to the Effective Time, other than
any, to receive the Fractional Share Consideration, together with the amounts, if any, payable pursuant to Section 3.02(c). (b) Each LCIF Partnership Unit held by the Company or any of its wholly owned subsidiaries as of immediately prior to the Effective Time shall automatically be cancelled and shall cease to exist, and no consideration shall be delivered in exchange therefor. (c) Each Common Share and any other share of beneficial interest of the Company issued and outstanding immediately prior to the Effective Time shall remain unchanged and continue to remain outstanding as a Common Share or other share of beneficial interest of the Company, as applicable. SECTION 3.02. Surrender and Payment. (a) Prior to the Effective Time, the Company shall authorize one or more transfer agent(s) to act as exchange agent hereunder (the “Transfer Agent”) with respect to the LCIF Merger for the payment and delivery of the Merger Consideration and the Fractional Share Consideration. Prior to the Effective Time, the Company will enter into an exchange agent agreement with the Transfer Agent in a form reasonably acceptable to the Company, setting forth the procedures to be used in accomplishing the deliveries and other actions contemplated by this Section 3.02. At or prior to the Effective Time, the Company shall deposit (or cause to be deposited) with the Transfer Agent (i) an amount of Common Shares in book entry form equal to the aggregate Merger Consideration issuable pursuant to Section 3.01(a) and (ii) cash in immediately available funds in an amount sufficient to pay the aggregate Fractional Share Consideration (clauses (i) and (ii), together with any dividends, distributions and cash deposited with the Transfer Agent, the “Exchange Fund”). The Exchange Fund shall be for the sole benefit of the holders of LCIF Partnership Units that were outstanding as of immediately prior to the Effective Time. The Company shall cause the Transfer Agent to make, and the Transfer Agent shall make, delivery of the Merger Consideration, payment of the Fractional Share Consideration and any amounts payable in respect of dividends or other distributions on Common Shares in accordance with Section 3.02(c) out of the Exchange Fund in accordance with this Agreement. The Exchange Fund shall not be used for any other purpose. (b) At the Effective Time, each registered holder of one or more Book Entry Units (as defined herein) that immediately prior to the Effective Time represented outstanding LCIF Partnership Units whose units were converted into the right to receive the Merger Consideration pursuant to Section 3.01(a) shall automatically upon the Effective Time be entitled to receive, and the Company shall cause the Transfer Agent to pay and deliver to such holder, promptly following the Effective Time, the Merger Consideration in accordance with Section 3.01(a), together with any amounts payable in respect of the Fractional Share Consideration and any distribution to which such holder is entitled pursuant to Section 3.02(c) for each Book Entry Unit. Payment of the Merger Consideration, Fractional Share Consideration and distributions with respect to Book Entry Units shall only be made to the Person in whose name such Book Entry Units are registered. No interest shall be paid or accrue on any cash payable upon the conversion of any Book Entry Unit.
(c) Dividends with Respect to Common Shares. No dividends or other distributions with respect to Common Shares with a record date after the Effective Time shall be paid to the holder of any unsurrendered Book Entry Unit with respect to the Common Shares issuable hereunder, and all such dividends and other distributions shall be paid by the Company to the Transfer Agent and shall be included in the Exchange Fund, in each case until the surrender of such Book Entry Unit with respect to the Common Shares issuable hereunder in accordance with this Agreement. Subject to applicable Laws, following the surrender of each Book Entry Unit, there shall be paid to the holder thereof, without interest, (i) the amount of dividends or other distributions with a record date after the Effective Time theretofore paid with respect to such Common Shares to which such holder is entitled pursuant to this Agreement, and (ii) at the appropriate payment date, the amount of dividends or other distributions with a record date after the Effective Time but prior to such surrender and with a payment date subsequent to such surrender payable with respect to such Common Shares. (d) Termination of Exchange Fund. Any portion of the Exchange Fund (including any cash in lieu of fractional shares and any applicable dividends or other distributions with respect to Common Shares) which remains undistributed to the holders of unsurrendered Book Entry Units as of December 31, 2024 shall be delivered to the Surviving Entity, upon demand, and any former holders of LCIF Partnership Units prior to the LCIF Merger who have not theretofore complied with this Section 3.02 shall thereafter look only to the Company and only as general creditors thereof for payment of the Merger Consideration subject to the terms and conditions of this Article III. (e) No Liability. None of LCIF, the Company, the Transfer Agent, or any employee, officer, trustee, director, agent or affiliate thereof, shall be liable to any Person if any portion of the Exchange Fund has been delivered to a public official pursuant to any applicable abandoned property, escheat or similar Law. Any amounts remaining unclaimed by former holders of any LCIF Partnership Units immediately prior to the time at which such amounts would otherwise escheat to, or become property of, any Governmental Authority shall, to the extent permitted by applicable Law, become the property of the Company, free and clear of any claims or interest of such holders or their successors, assigns or personal representatives previously entitled thereto. (f) Distributions. The Company shall assume any obligation of LCIF to pay to holders of LCIF Partnership Units as of immediately prior to the Effective Time the Distributions of Operating Cash Flow (as defined in the LCIF Partnership Agreement) that have a Partnership Record Date (as defined in the LCIF Partnership Agreement) prior to the Effective Time and which Distributions of Operating Cash Flow have not been paid as of the Effective Time. Any such amounts will be paid on or about the date of the associated Common Share dividend payment date in accordance with past practices. SECTION 3.03. Withholding Rights. The Surviving Entity or the Transfer Agent, as applicable, shall be entitled to deduct and withhold from the Merger Consideration and the Fractional Share Consideration (and any other amounts otherwise payable pursuant to this Agreement) to any holder of LCIF Partnership Units such amounts as it is required to deduct and withhold with respect to the making of such
payment under the Code, and the rules and regulations promulgated thereunder, or any provision of applicable Law (it being understood and agreed that failure to return to the Company a duly completed IRS Form W-9 prior to the Effective Time will result in withholding). To the extent that amounts are so withheld by the Surviving Entity or the Transfer Agent, as applicable, such withheld amounts shall be paid over to the applicable Governmental Authority in accordance with applicable Law and shall be treated for all purposes of this Agreement as having been paid to the holder of LCIF Partnership Units in respect of which such deduction and withholding was made by the Surviving Entity or the Transfer Agent, as applicable. SECTION 3.04. Appraisal Rights. No objectors’ or appraisal rights shall be available to the holders of LCIF Partnership Units in connection with the LCIF Merger or the other transactions contemplated hereby. SECTION 3.05. Allocations Upon Conversion of LCIF Partnership Units. Any amounts required to be allocated to the LCIF Partnership Units for the taxable year during which the conversion contemplated by Section 3.01(a) of this Agreement is completed shall be allocated to each Person who was the holder of such LCIF Partnership Unit during such taxable year using the interim closing of the books method. SECTION 3.06. Adjustments. If between the date hereof and the Effective Time the outstanding LCIF Partnership Units shall have been changed into a different number of LCIF Partnership Units by reason of the occurrence or record date of any split, distribution of LCIF Partnership Units to the holders of LCIF Partnership Units (including any distribution of securities convertible into LCIF Partnership Units), reorganization, recapitalization, reclassification, combination, exchange or other like change, the Merger Consideration and any other amounts payable pursuant to this Article III shall be appropriately adjusted to reflect such split, distribution, reorganization, recapitalization, reclassification, combination, exchange of shares or other like change. ARTICLE IV The Company hereby represents and warrants to LCIF as follows: SECTION 4.01. Existence; Good Standing; Authority. The Company is a real estate investment trust duly formed, validly existing and in good standing under the laws of the State of Maryland. The declaration of trust of the Company (the “Company Declaration of Trust”) is in effect, and no dissolution, revocation or forfeiture proceedings regarding the Company have been commenced. The Company is duly qualified or licensed to do business as a foreign entity and is in good standing under the Laws of any other jurisdiction in which the character of the properties owned, leased or operated by it therein or in which the transaction of its business makes such qualification or licensing necessary, other than in such jurisdictions where the failure to be so qualified or licensed would not have a Material
Adverse Effect. The Company has all requisite trust power and authority to own, lease and operate its properties and to carry on its businesses as now conducted and proposed by the Company to be conducted. SECTION 4.02. Authority Relative to this Agreement. (a) The Company has all necessary trust power and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby. No other trust proceedings on the part of the Company are necessary to authorize this Agreement or to consummate the transactions contemplated hereby (other than the acceptance for record by the SDAT of the Articles of Merger). This Agreement has been duly and validly executed and delivered by the Company and, assuming due authorization, execution and delivery hereof by LCIF, constitutes a valid, legal and binding agreement of the Company, enforceable against the Company in accordance with and subject to its terms and conditions, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer and similar Laws of general applicability relating to or affecting creditors’ rights or by general equity principles. (b) The Company Board, by consent and in accordance with Section 8-501.1(c)(3) of the Maryland REIT Law, has (i) declared that this Agreement, the LCIF Merger and the other transactions contemplated by this Agreement are advisable and in the best interests of the Company and its shareholders, and (ii) approved and adopted this Agreement, the LCIF Merger and the other transactions contemplated by this Agreement and authorized the issuance of Common Shares as payment of the Merger Consideration. (c) The Company has reserved a sufficient number of Common Shares in order to fulfill its obligations hereunder. All Common Shares that may be issued pursuant to this Agreement will, when issued in accordance with the terms of this Agreement for the consideration expressed herein, be duly authorized, validly issued, fully paid and nonassessable, and no Person will have any preemptive right of subscription or purchase in respect thereof. All such Common Shares will be issued pursuant to the Form S-4 and will, when issued, be listed on the NYSE, subject to official notice of issuance. The Company has available sufficient cash or lines of credit to pay the aggregate Fractional Share Consideration pursuant to Section 3.01(a). SECTION 4.03. No Conflict; Required Filings and Consents. (a) The execution and delivery by the Company of this Agreement do not, and the performance of its obligations hereunder will not, (i) conflict with or violate the organizational documents of the Company, (ii) assuming that all consents, approvals, authorizations and other actions described in subsection (b) have been obtained and all filings and obligations described in subsection (b) have been made, conflict with or violate any foreign or domestic statute, law, ordinance, regulation, rule, code, executive order, injunction, judgment, decree or other order (“Law”) applicable to the Company or by which any property or asset of the Company is bound or affected, or (iii) result in any breach of, or constitute a default (or an event which, with notice or lapse of time or both, would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, or result
in the creation of a Lien or other encumbrance on any property or asset of the Company, or result in any increase in any cost or obligation of the Company or the loss of any benefit of the Company, pursuant to, any note, bond, mortgage, indenture, contract, agreement, lease, license, permit, franchise or other instrument or obligation to which the Company is a party or by which the Company or any of its properties or assets is bound or affected, except, with respect to clauses (ii) and (iii), for any such conflicts, violations, breaches, defaults or other occurrences that would not have a Material Adverse Effect. (b) The execution and delivery by the Company of this Agreement do not, and the performance of its obligations hereunder will not, require any consent, approval, authorization or permit of, or filing with or notification to, any United States federal, state, county or local or any foreign government, governmental, regulatory or administrative authority, agency, instrumentality or commission or any court, tribunal, or judicial or arbitral body (a “Governmental Authority”), except (i) for (A) applicable requirements, if any, of the Securities Act, the Exchange Act, state securities or “blue sky” laws (“Blue Sky Laws”) and state takeover Laws, (B) any filings required under the rules and regulations of the NYSE, (C) the filing with the SEC of a registration statement on Form S-4 pursuant to which the offer and sale of Common Shares in the LCIF Merger will be registered pursuant to the Securities Act and (D) the filing of the Articles of Merger with, and the acceptance for record thereof by, the SDAT, and the filing of the Certificate of Merger with, and the acceptance for filing thereof by, the Delaware Secretary of State, and (ii) where the failure to obtain such consents, approvals, authorizations or permits, or to make such filings or notifications, would not have a Material Adverse Effect. SECTION 4.04. Compliance. The Company is not in conflict with, or in default, breach or violation of, (a) any Law applicable to the Company or by which any of its properties or assets is bound or affected, or (b) any note, bond, mortgage, indenture, contract, agreement, lease, license, permit, franchise or other instrument or obligation to which the Company is a party or by which the Company or any of its properties or assets is bound, except for any such conflicts, defaults, breaches or violations that would not have a Material Adverse Effect. SECTION 4.05. Brokers. No broker, finder or investment banker is entitled to any brokerage, finder’s or other fee or commission in connection with the transactions contemplated hereby based upon arrangements made by or on behalf of the Company. SECTION 4.06. Compliance with Laws. The Company has not violated or failed to comply with any statute, Law, ordinance, regulation, rule, judgment, decree or order of any Governmental Authority applicable to its business, properties or operations, except in each case to the extent that such violation or failure would not reasonably be expected to have a Material Adverse Effect.
SECTION 4.07. Information Supplied. None of the information supplied or to be supplied by or on behalf of the Company for inclusion or incorporation by reference in the Form S-4 will, at the time such document is filed with the SEC, at any time such document is amended or supplemented or at the time it is declared effective under the Securities Act, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they are SECTION 4.08. No Other Representations or Warranties. Except for the representations and warranties of the Company contained in this Article IV, ARTICLE V LCIF hereby represents and warrants to the Company as follows: SECTION 5.01. Existence; Good Standing; Authority. LCIF is a limited partnership duly formed, validly existing and in good standing under the laws of the State of Delaware. The certificate of limited partnership of LCIF (the “LCIF Certificate of Limited Partnership”) is in effect, and no dissolution, revocation or forfeiture proceedings regarding LCIF have been commenced. LCIF is duly qualified or licensed to do business as a foreign entity and is in good standing under the Laws of any other jurisdiction in which the character of the properties owned, leased or operated by it therein or in which the transaction of its business makes such qualification or licensing necessary, other than in such jurisdictions where the failure to be so qualified or licensed would not have a Material Adverse Effect. LCIF has all requisite partnership power and authority to own, lease and operate its properties and to carry on its businesses as now conducted and proposed by LCIF to be conducted.
SECTION 5.02. Authority Relative to this Agreement. (a) LCIF has all necessary partnership power and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby. No other partnership proceedings on the part of LCIF are necessary to authorize this Agreement or to consummate the transactions contemplated hereby (other than the acceptance for record by the Delaware Secretary of State of the Certificate of Merger). This Agreement has been duly and validly executed and delivered by LCIF and, assuming due authorization, execution and delivery hereof by the Company, constitutes a valid, legal and binding agreement of LCIF, enforceable against LCIF in accordance with and subject to its terms and conditions, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer and similar Laws of general applicability relating to or affecting creditors’ rights or by general equity principles. (b) The General Partner, by written consent, has determined that this Agreement, the LCIF Merger and the other transactions contemplated by this Agreement are advisable and in the best interests of LCIF and its partners and has approved this Agreement, the LCIF Merger and the other transactions contemplated by this Agreement. SECTION 5.03. Capitalization. The Company owns all of the equity interests in the General Partner. The General Partner is the sole general partner of LCIF. As of the date hereof, the General Partner owned 252,798 LCIF Partnership Units and the Additional Limited Partners owned 78,713,907 LCIF Partnership Units (including 77,983,283.50 LCIF Partnership Units held by Lex LP-1 Trust, a wholly owned subsidiary of the Company). Other than LCIF Partnership Units held by the General Partner and the Additional Limited Partners, there are no other issued or outstanding equity or voting interests of LCIF. As of the date hereof, no LCIF Partnership Units or other equity or voting interests of LCIF have been issued, authorized or reserved for issuance. Except as set forth in this Section 5.03, there are no existing options, warrants, calls, subscriptions, convertible securities or other rights, agreements or commitments which obligate LCIF to issue, transfer or sell any partnership interests of LCIF. Except as set forth in the LCIF Partnership Agreement, there are no outstanding contractual obligations of LCIF to repurchase, redeem or otherwise acquire any partnership interests of LCIF. The partnership interests owned by the Company and, to the Company’s knowledge, the partnership interests owned by the Additional Limited Partners, are subject only to the restrictions on transfer set forth in the LCIF Partnership Agreement and those imposed by applicable securities Laws. All issued and outstanding LCIF Partnership Units are duly authorized, validly issued, fully paid and free of preemptive rights. All issued and outstanding LCIF Partnership Units are uncertificated and held in book entry form (a “Book Entry Unit”). SECTION 5.04. No Conflict; Required Filings and Consents. (a) The execution and delivery by LCIF of this Agreement do not, and the performance of its obligations hereunder will not, (i) conflict with or violate the organizational documents of LCIF, (ii) assuming that all consents, approvals, authorizations and other actions described in subsection (b) have been obtained and all filings and obligations described in subsection (b) have been made, conflict with or violate any Law applicable to LCIF or by
which any property or asset of LCIF is bound or affected, or (iii) result in any breach of, or constitute a default (or an event which, with notice or lapse of time or both, would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, or result in the creation of a Lien or other encumbrance on any property or asset of LCIF, or result in any increase in any cost or obligation of LCIF or the loss of any benefit of LCIF, pursuant to, any note, bond, mortgage, indenture, contract, agreement, lease, license, permit, franchise or other instrument or obligation to which LCIF is a party or by which LCIF or any of its properties or assets is bound or affected, except, with respect to clauses (ii) and (iii), for any such conflicts, violations, breaches, defaults or other occurrences that would not have a Material Adverse Effect. (b) The execution and delivery by LCIF of this Agreement do not, and the performance of its obligations hereunder will not, require any consent, approval, authorization or permit of, or filing with or notification to, any Governmental Authority, except (i) for (A) applicable requirements, if any, of the Securities Act, the Exchange Act, Blue Sky Laws and state takeover Laws, (B) any filings required under the rules and regulations of the NYSE, and (C) the filing of the Articles of Merger with, and the acceptance for record thereof by, the SDAT, and the filing of the Certificate of Merger with, and the acceptance for filing thereof by, the Delaware Secretary of State, and (ii) where the failure to obtain such consents, approvals, authorizations or permits, or to make such filings or notifications, would not have a Material Adverse Effect. SECTION 5.05. Compliance. LCIF is not in conflict with, or in default, breach or violation of, (a) any Law applicable to LCIF or by which any of its properties or assets is bound or affected, or (b) any note, bond, mortgage, indenture, contract, agreement, lease, license, permit, franchise or other instrument or obligation to which LCIF is a party or by which LCIF or assets is bound, except for any such conflicts, defaults, breaches or violations that would not have a Material Adverse Effect. SECTION 5.06. Brokers. No broker, finder or investment banker is entitled to any brokerage, finder’s or other fee or commission in connection with the transactions contemplated hereby based upon arrangements made by or on behalf of LCIF. SECTION 5.07. Compliance with Laws. LCIF has not violated or failed to comply with any statute, Law, ordinance, regulation, rule, judgment, decree or order of any Governmental Authority applicable to its business, properties or operations, except in each case to the extent that such violation or failure would not reasonably be expected to have a Material Adverse Effect. SECTION 5.08. Information Supplied. None of the information supplied or to be supplied by or on behalf of LCIF for inclusion or incorporation by reference in the Form S-4 will, at the time such document is filed with the SEC, at any time such document is amended or supplemented or at the time it is declared
effective under the Securities Act, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they are made, not misleading. At the time described in the preceding sentence, the Form S-4 will (with respect to LCIF, its general partner and its subsidiaries) comply as to form in all material respects with the applicable requirements of any Securities Laws. No representation or warranty is made hereunder as to statements made or incorporated by reference in the Form S-4 that were not supplied by or on behalf of LCIF. SECTION 5.09. No Other Representations or Warranties. Except for the representations and warranties of LCIF contained in this Article V, the Company acknowledges that neither LCIF nor any other Person on behalf of LCIF has made, and the Company has not relied upon any representation or warranty, whether express or implied, with respect to LCIF or its business, affairs, assets, liabilities, financial condition, results of operations or prospects or with respect to the accuracy or completeness of any other information provided or made available to the Company by or on behalf of LCIF, and the Company hereby expressly disclaims any reliance on any of the foregoing. Neither LCIF nor any other Person will have or be subject to any liability or indemnification obligation to the Company or any other Person resulting from the distribution in written or verbal communications to the Company, or use by the Company of any such information, including any information, documents, projections, forecasts or other material made available to the Company, confidential information memoranda or management interviews and presentations in expectation of the transactions contemplated by this Agreement, and the Company hereby acknowledges that it has not relied upon any of the foregoing (except for the representations and warranties of LCIF contained in this Article V). ARTICLE VI SECTION 6.01. Form S-4 and Other Filings. As promptly as reasonably practicable following the date of this Agreement, the Company shall prepare and, once reasonably acceptable to the Company and LCIF, file with the SEC the Form S-4 in connection with the registration under the Securities Act of the Common Shares to be issued in connection with the LCIF Merger in accordance with Section 3.01(a) (together with any amendments or supplements thereto, the “Form S-4”). The Company shall cause the Form S-4 to comply as to form in all material respects with the applicable provisions of the Securities Act, the Exchange Act and the rules and regulations promulgated thereunder. The Company shall promptly notify LCIF upon the receipt of any comments from the SEC or its staff or any request from the SEC or its staff for amendments or supplements to the Form S-4 and shall promptly provide LCIF with copies of all correspondence between the Company and its representatives, on the one hand, and the SEC and its staff, on the other hand, relating to the Form S-4. If at any time prior to the completion of the LCIF Merger, any information relating to the Company or any of its affiliates, officers or directors, should be discovered by the Company or LCIF which should be set forth in an amendment or supplement to the Form S-4, so that the Form S-4 shall not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they are made, not misleading, the party that discovers such
information shall promptly notify the other party, and an appropriate amendment or supplement describing such information shall be filed with the SEC and, to the extent required by applicable Law, disseminated to the holders of the Common Shares. Notwithstanding anything to the contrary stated above, prior to filing the Form S-4 (or any amendment or supplement thereto) or responding to any comments of the SEC with respect thereto, the Company shall provide LCIF a reasonable opportunity to review and comment on such document or response and will include in such documents or responses all comments reasonably proposed by LCIF, and to the extent practicable, the Company will provide LCIF with the opportunity to participate in any substantive calls between the Company, or any of its representatives, and the SEC concerning the S-4. The Company shall use its commercially reasonable efforts, and LCIF shall cooperate with the Company, to have the Form S-4 declared effective by the SEC as promptly as practicable and kept effective as long as is necessary to complete the LCIF Merger. The Company shall promptly notify LCIF, if applicable, of (i) the time when the Form S-4 has become effective, (ii) the filing of any supplement or amendment thereto, (iii) the issuance of any stop order, and (iv) the suspension of the qualification and registration of the Common Shares. The Company also shall use commercially reasonable efforts (including by provision of customary representations and certifications) to cause Hogan Lovells US LLP or other counsel reasonably satisfactory to LCIF to have delivered an opinion, which opinion shall be filed as an exhibit to the Form S-4, as to federal income tax matters as are required to be addressed in the Form S-4. Such opinion shall contain customary exceptions, assumptions and qualifications and be based upon customary representations. SECTION 6.02. Reasonable Best Efforts. Subject to the terms and conditions of this Agreement, the Company and LCIF shall use their respective reasonable best efforts to promptly take, or cause to be taken, all actions, and do, or cause to be done, all things, necessary, proper or advisable under applicable Law to consummate the LCIF Merger and the other transactions contemplated hereby, including (i) preparing and filing as promptly as practicable with any Governmental Authority all documentation to effect all necessary filings, notices, petitions, statements, registrations, submissions of information, applications and other documents, (ii) obtaining and maintaining all consents, registrations, permits, and other confirmations required to be obtained from any Governmental Authority or third party that are necessary, proper or advisable to consummate the LCIF Merger and the transactions contemplated hereby, and (iii) cooperating to defend through litigation on the merits any action, including administrative or judicial action, asserted by any Person in order to avoid the entry of, or to have vacated, lifted, reversed, terminated or overturned any decree, judgment, injunction or other order (whether temporary, preliminary or permanent) that in whole or in part restricts, delays, prevents or prohibits consummation of the LCIF Merger or the transactions contemplated hereby, including, without limitation, by vigorously pursuing all available avenues of administrative and judicial appeal. SECTION 6.03. Transfer Taxes. LCIF and the Company shall cooperate in the preparation, execution and filing of all returns, questionnaires, applications or other documents regarding any real property transfer or gains, sales, use, transfer, value added, stock transfer or stamp taxes, any transfer, recording, registration and other fees and any similar Taxes that become payable in connection with the
transactions contemplated by this Agreement (together with any related interests, penalties or additions to Tax, “Transfer Taxes”), and shall cooperate in attempting to minimize the amount of Transfer Taxes. From and after the Effective Time, the Surviving Entity shall pay or cause to be paid, without deduction or withholding from any consideration or amounts payable to the holders of LCIF Partnership Units as Merger Consideration, all Transfer Taxes. SECTION 6.04. Agreed Tax Treatment. The parties hereto intend that the exchange of LCIF Partnership Units for Common Shares contemplated by Section 3.01(a) of this Agreement shall be treated, in accordance with Situation 1 of Revenue Ruling 99-6, 1999-1 CB 432 (1999), as the purchase by the Company of an undivided interest in the assets of LCIF, and the sale of the LCIF Partnership Units held by all unitholders other than the Company. ARTICLE VII SECTION 7.01. Conditions to the Obligations of Each Party. The obligations of each of the Company and LCIF to effect the LCIF Merger and consummate the other transactions contemplated by this Agreement are subject to the satisfaction, or, to the extent permitted by Law, waiver by each of the parties hereto, at or prior to the Closing, of the following conditions: (a) No Order. No Governmental Authority in the United States shall have enacted, issued, promulgated, enforced or entered any Law (whether temporary, preliminary or permanent) which is then in effect and has the effect of making the LCIF Merger illegal or otherwise restricting, preventing or prohibiting consummation of the LCIF Merger. (b) Form S-4. The Form S-4 shall have become effective under the Securities Act and shall not be the subject of any stop order suspending its effectiveness issued by the SEC, and no proceedings seeking such stop order shall have been initiated or, to the knowledge of the Company, threatened by the SEC. (c) Listing. The Common Shares to be issued in the LCIF Merger shall have been approved for listing on the NYSE, subject to official notice of issuance. SECTION 7.02. Conditions to the Obligations of LCIF. The obligations of LCIF to effect the LCIF Merger and consummate the other transactions contemplated by this Agreement are subject to the satisfaction or waiver (to the extent permitted by Law) by LCIF, at or prior to the Closing, of the following additional conditions: (a) Representations and Warranties. (i) The representations and warranties of the Company contained in Section 4.01 and Section 4.05 shall be true and correct in all material respects as of the date hereof and as of the Closing as if made at and as of such time (except to the extent a representation or warranty is made as of a specified time, in which case
such representation or warranty shall be true and correct in all material respects at and as of such time), (ii) the representations and warranties of the Company contained in Section 4.02 shall be true and correct in all respects as of the date hereof and as of the Closing as if made at and as of such time (except to the extent a representation or warranty is made as of a specified time, in which case such representation or warranty shall be true and correct in all respects at and as of such time), and (iii) each of the other representations and warranties of the Company contained in this Agreement shall be true and correct as of the date hereof and as of the Closing as if made at and as of such time (except to the extent a representation or warranty is made as of a specified time, in which case such representation or warranty shall be true and correct at and as of such time), with only such exceptions, in the case of this clause (iii), as would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect; provided, however, that, with respect to the foregoing clauses (i) and (iii), any exceptions and qualifications with regard to materiality or Material Adverse Effect contained therein shall be disregarded for purposes of this Section 7.02(a).; (b) Agreements and Covenants. The Company shall have performed, in all material respects, all obligations and complied with, in all material respects, all agreements and covenants to be performed and complied with by it under this Agreement at or prior to the Closing; and (c) No Material Adverse Effect. There shall not have occurred any event, circumstance, change or effect that individually or in the aggregate has had or is reasonably likely to have a Material Adverse Effect with respect to the Company. (d) Delivery of Certificate. The Company shall have delivered to LCIF a certificate, dated as of the Closing Date and signed on behalf of the Company certifying to the effect that the conditions set forth in Sections 7.02(a), 7.02(b) and 7.02(c) have been satisfied. SECTION 7.03. Conditions to the Obligations of the Company. The obligations of the Company to effect the LCIF Merger and consummate the other transactions contemplated by this Agreement are subject to the satisfaction or waiver (to the extent permitted by Law) by the Company, at or prior to the Closing, of the following additional conditions: (a) Representations and Warranties. (i) The representations and warranties of LCIF contained in Section 5.01 and Section 5.06 shall be true and correct in all material respects as of the date hereof and as of the Closing as if made at and as of such time (except to the extent a representation or warranty is made as of a specified time, in which case such representation or warranty shall be true and correct in all material respects at and as of such time), (ii) the representations and warranties of LCIF contained in Section 5.02 shall be true and correct in all respects as of the date hereof and as of the Closing as if made at and as of such time (except to the extent a representation or warranty is made as of a specified time, in which case such representation or warranty shall be true and correct in all respects at and as of such time), (iii) the representations and warranties of LCIF contained in Section 5.03 shall be true and correct in all but de minimis respects as of the date hereof and as of the Closing as if made at and as of such time (except to the extent a representation or warranty is made as of a
specified time, in which case such representation or warranty shall be true and correct in all but de minimis respects at and as of such time), and (iv) each of the other representations and warranties of LCIF contained in this Agreement shall be true and correct as of the date hereof and as of the Closing as if made at and as of such time (except to the extent a representation or warranty is made as of a specified time, in which case such representation or warranty shall be true and correct at and as of such time), with only such exceptions, in the case of this clause (iv), as would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect; provided, however, that, with respect to the foregoing clauses (i) and (iv), any exceptions and qualifications with regard to materiality or Material Adverse Effect contained therein shall be disregarded for purposes of this Section 7.03(a). (b) Agreements and Covenants. LCIF shall have performed, in all material respects, all obligations and complied with, in all material respects, all agreements and covenants to be performed and complied with by it under this Agreement at or prior to the Closing; (c) No Material Adverse Effect. There shall not have occurred any event, circumstance, change or effect that individually or in the aggregate has had or is reasonably likely to have a Material Adverse Effect with respect to LCIF; and (d) Delivery of Certificate. LCIF shall have delivered to the Company a certificate, dated as of the Closing Date and signed on behalf of LCIF certifying to the effect that the conditions set forth in Sections 7.03(a), 7.03(b) and 7.03(c) have been satisfied. ARTICLE VIII SECTION 8.01. Termination. This Agreement may be terminated in writing, and the LCIF Merger may be abandoned, at any time prior to the Effective Time (the date of any such termination, the “Termination Date”): (a) by the mutual written consent of LCIF and the Company; or (b) by either the Company or LCIF by written notice to the other party if any Governmental Authority with jurisdiction over such matters shall have issued a governmental order permanently restraining, enjoining or otherwise prohibiting the LCIF Merger, and such governmental order shall have become final and unappealable; provided, however, that the terms of this Section 8.01(b) shall not be available to any party unless such party shall have used its reasonable best efforts to oppose any such governmental order or to have such governmental order vacated or made inapplicable to the LCIF Merger. SECTION 8.02. Effect of Termination. In the event of termination of this Agreement and abandonment of the LCIF Merger and the other transactions contemplated by this Agreement pursuant to and in accordance with Section 8.01, this Agreement shall forthwith become void and of no further force or effect
whatsoever (except that this Section 8.02, Section 8.03, Article IX, and the definitions of all defined terms appearing in such sections, shall survive the termination hereof), and there shall be no liability on the part of any party hereto, or their respective officers, directors, trustees, subsidiaries or partners, as applicable, to this Agreement; provided, however, that nothing contained in this Agreement shall relieve any party to this Agreement from any liability or damages resulting from or arising out of any fraud in connection with this Agreement or any willful and material breach of any agreement or covenant hereunder prior to such termination of this Agreement. For purposes of the foregoing, “willful and material breach” shall mean an intentional and willful act, or an intentional and willful failure to act, in each case that is the consequence of an act or omission by a Person with the actual knowledge that the taking of such act or failure to take such act would or would reasonably be expected to cause a material breach of this Agreement. If this Agreement is terminated as provided herein, all filings, applications and other submissions made pursuant to this Agreement, to the extent practicable, shall be withdrawn from the Person to which they were made. SECTION 8.03. Fees and Expenses. All costs and expenses incurred in connection with this Agreement, the LCIF Merger and the other transactions contemplated hereby shall be paid by the party hereto incurring such expenses, whether or not the LCIF Merger and the other transactions contemplated by this Agreement are consummated. ARTICLE IX SECTION 9.01. Non-Survival of Representations and Warranties. The representations and warranties in this Agreement and in any instrument delivered pursuant to this Agreement, including any rights arising out of any breach of such representations and warranties, and the covenants to be performed prior to or at the Closing, shall terminate upon the earlier of (a) the Closing and (b) the termination of this Agreement. This Section 9.01 shall not limit any covenant or agreement of the parties hereto that by its terms contemplates performance in whole or in part after the Effective Time. SECTION 9.02. Notices. All notices, requests, claims, demands and other communications hereunder shall be in writing and shall be given (and shall be deemed to have been duly given upon receipt) by delivery in person or by a recognized overnight courier service to the respective parties at the following addresses (or at such other address if to LCIF:
One Penn Plaza Suite 4015 New York,
if to the Company: LXP Industrial Trust One Penn Plaza Suite 4015 SECTION 9.03. Severability. If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any rule of law, or public policy, all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner materially adverse to any party. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in a mutually acceptable manner in order that the transactions contemplated hereby be consummated as originally contemplated to the fullest extent possible. SECTION 9.04. Amendment. This Agreement may not be amended except by an instrument in writing signed by each of the parties hereto prior to the Effective Time, subject to compliance with applicable Law and the LCIF Partnership Agreement. SECTION 9.05. Entire Agreement; Assignment. This Agreement constitutes the entire agreement between the parties with respect to the subject matter hereof and thereof and supersedes all prior agreements and undertakings, both written and oral, among the parties, or any of them, with respect to the subject matter hereof and thereof. This Agreement shall not be assigned by operation of law or otherwise (except to the Surviving Entity). SECTION 9.06. Parties in Interest. This Agreement shall be binding upon and inure solely to the benefit of each party hereto, and, subject to Section 9.05, their respective successors and permitted assigns. Nothing in this Agreement, express or implied, is intended to or shall confer upon any Person any right, benefit or remedy of any nature whatsoever under or by reason of this Agreement other than the parties hereto and, subject to Section 9.05, their respective successors and permitted assigns, except following the Effective Time, the rights of holders of LCIF Partnership Units to receive the Merger Consideration. SECTION 9.07. Extension; Waiver. At any time prior to the Effective Time, the parties hereto may (a) extend the time for the performance of any of the obligations or other acts of the other party hereto, (b) waive any
inaccuracies in the representations and warranties of the other party hereto contained in this Agreement or in any document delivered pursuant to this Agreement or (c) subject to the requirements of applicable Law, waive compliance with any of the agreements or conditions contained in this Agreement. Any agreement on the part of a party hereto to any such extension or waiver shall be valid only if set forth in an instrument in writing signed on behalf of such party (provided that any waiver must be signed by the party or parties hereto to whose benefit the relevant provision inures). The failure of any party to this Agreement to assert any of its rights under this Agreement or otherwise shall not constitute a waiver of those rights.
SECTION 9.08. Specific Performance. The
SECTION 9.09. Governing Law; Consent to This Agreement and
SECTION 9.10. Waiver of Jury Trial. Each of the parties hereto hereby IRREVOCABLY waives to the fullest extent permitted by applicable Law any right it may have to a
in connection with this Agreement or the SECTION 9.11. Headings. The descriptive headings contained in this Agreement are included for convenience of reference only and shall not affect in any way the SECTION 9.12. Counterparts. This Agreement may be executed in counterparts with the SECTION 9.13. Mutual Drafting. Each party hereto has participated in the
SECTION 9.14. No Recourse. This Agreement may only be enforced against, and
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PART II. INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. Indemnification of Directors and
The Maryland REIT
Pursuant to
The foregoing reference is necessarily subject to the complete text of
We have also purchased liability insurance for our trustees and officers, which also covers our
Insofar as indemnification for liabilities arising under the Securities Act may be permitted to trustees, directors, officers or persons controlling the registrants pursuant to the foregoing provisions, the registrants have been informed that in the opinion of the
Schedules
The undersigned registrant hereby undertakes: (a)
(1) each prospectus filed by the registrant pursuant to Rule 424(b)(3) shall be deemed to be part of the registration statement as of the date the filed prospectus was deemed part of and included in the registration statement; and (2) each prospectus required to be filed pursuant to Rule 424(b)(2), (b)(5), or (b)(7) as part of a registration statement in reliance on Rule 430B relating to an offering
(g) that, prior to any public reoffering of the securities registered hereunder through use of a prospectus which is a part of this registration statement, by any person or party who is deemed to be an underwriter within the meaning of Rule 145(c), the issuer undertakes that such reoffering prospectus will contain the information called for by the applicable registration form with respect to reofferings by persons who may be deemed underwriters, in addition to the information called for by the other Items of the applicable form; (h) that every prospectus that (i) is filed pursuant to paragraph (g) immediately preceding, or (ii) purports to meet the requirements of section 10(a)(3) of the Securities Act of 1933 and is used in connection with an offering of securities subject to Rule 415, will be filed as a part of an amendment to this registration statement and will not be used until such amendment is effective, and that, for purposes of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof; (i) insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that, in the opinion of the Securities and Exchange Commission, such indemnification is against public policy as expressed in the Securities Act of 1933 and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act of 1933 and will be governed by the final adjudication of such issue; (j) to respond to requests for information that is incorporated by reference into the prospectus pursuant to Items 4, 10(b), 11 or 13 of this form, within one business day of receipt of such request, and to send the incorporated documents by first class mail or other equally prompt means. This includes information contained in documents filed subsequent to the effective date of the registration statement through the date of responding to the request; and
(k) to supply by means of a post-effective amendment all information concerning a transaction, and the company being acquired involved therein, that was not the subject of and included in this registration statement when it became effective.
SIGNATURES Pursuant to the requirements of the Securities Act, November 1, 2023.
KNOW ALL PERSONS BY THESE PRESENT, that each person whose signature appears below constitutes and appoints T. Wilson Eglin, Beth Boulerice and Joseph S. Bonventre, and each or either of them, his or her true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for him or her and in his or her name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments or any abbreviated registration statement and any amendments thereto filed pursuant to Rule 462(b) increasing the number of securities for which registration is sought) to this registration statement, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the SEC, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, or their, his or her substitutes or substitute, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act, November 1, 2023.
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