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Registration No. 333-137296
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For Lexington: | For Newkirk: | |
11:30 a.m. (local time) on November 20, 2006 | 10:00 a.m. (local time) on November 20, 2006 | |
at the offices of | at the offices of | |
Paul Hastings Janofsky & Walker LLP | Katten Muchin Rosenman LLP | |
75 E. 55th Street | 575 Madison Avenue | |
New York, New York 10022 | New York, New York 10022 |
/s/ T. Wilson Eglin | /s/ Michael L. Ashner | |
T. Wilson Eglin | Michael L. Ashner | |
Chief Executive Officer, President and Chief | Chairman and Chief Executive Officer | |
Operating Officer | Newkirk Realty Trust, Inc. | |
Lexington Corporate Properties Trust |
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One Penn Plaza, Suite 4015
New York, New York10119-4015
Attention: Investor Relations
Telephone:(212) 692-7200
7 Bulfinch Place, Suite 500
Boston, Massachusetts 02114
Attention: Investor Relations
Telephone:(617) 570-4680
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• | MARK, SIGN, DATE AND PROMPTLY RETURN the enclosed proxy card in the postage-paid envelope (it requires no postage if mailed in the United States); | |
• | USE THE TOLL-FREE TELEPHONE NUMBER shown on the enclosed proxy card (this call is free in the United States and Canada) and follow the recorded instructions; or | |
• | VISIT THE INTERNET WEBSITE shown on the enclosed proxy card and follow the instructions provided to authorize your proxy to vote through the Internet. |
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Exchange of Newkirk Common Stock for Lexington Common Shares (plus any cash in lieu of a fractional share) | 87 | |||
Information Reporting and Backup Withholding | 88 | |||
Pre Merger Dividend | 88 |
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General | 88 | |||
Lexington Common Shares | 89 | |||
Power to Reclassify and Issue Additional Shares | 89 | |||
Restrictions on Ownership and Transfer | 89 | |||
Transfer Agent and Registrar | 91 | |||
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Board of Trustees | 91 | |||
Removal of Trustees | 91 | |||
Business Combinations | 91 | |||
Control Share Acquisition | 92 | |||
Merger; Amendment to the Declaration of Trust | 93 | |||
Termination of Lexington | 93 | |||
Advance Notice of Trustee Nominations and New Business | 93 | |||
Unsolicited Takeovers | 93 | |||
Anti-takeover Effect of Certain Provisions of Maryland Law and of Lexington’s Amended and Restated Declaration of Trust and Lexington’s By-laws | 94 | |||
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ANNEXES | ||||
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Q: | Why am I receiving this document? | |
A: | Lexington’s board of trustees and Newkirk’s board of directors have each approved an agreement and plan of merger (which we refer to as the merger agreement) between Lexington Corporate Properties Trust (which we refer to as Lexington) and Newkirk Realty Trust, Inc. (which we refer to as Newkirk). The merger agreement provides for the merger of Newkirk with and into Lexington (which we refer to as the merger). | |
The Lexington common shares to be issued in the merger cannot be issued without the approval of the Lexington common shareholders, and the merger cannot be completed without the approval of the Lexington common shareholders and the Newkirk voting stockholders. Lexington and Newkirk will hold separate special meetings of their respective common shareholders and voting stockholders to obtain these approvals. This document is the joint proxy statement for Lexington and Newkirk to solicit proxies for their respective special meetings. It is also the prospectus of Lexington regarding the Lexington common shares of beneficial interest, par value $0.0001 per share (which we refer to as Lexington common shares), to be issued under and as contemplated by the merger agreement. | ||
This joint proxy statement/prospectus contains important information about the proposed merger and the special meetings of Lexington and Newkirk, and you should read it carefully. | ||
Q: | Why are Lexington and Newkirk proposing the merger? | |
A: | The board of trustees of Lexington and the board of directors of Newkirk believe that the merger represents a strategic combination that will be in the best interests of their respective shareholders and will achieve key elements of both companies’ strategic business plans. The combined company will own more than 350 properties located across 44 states with a presence in the nation’s premier growth markets and a high quality and diversified tenant base. The boards expect that the combined company will have significantly increased equity market capitalization and a conservative balance sheet, which the boards expect will provide greater financial flexibility and liquidity. Both boards believe that this financial flexibility coupled with a highly experienced management team will enable the combined company to exploit a wide range of investment opportunities and pursue both traditional and opportunistic single tenant related lines of business. The boards of both companies believe that the combined resources of our companies will create additional and more significant opportunities for long-term growth and value-creation than either company could achieve independently. To review each of our reasons for the merger in greater detail, please see “The Merger — Recommendation of Lexington’s Board of Trustees and Lexington’s Reasons for the Merger” and “The Merger — Recommendation of Newkirk’s Board of Directors and Newkirk’s Reasons for the Merger.” | |
Q: | What will Newkirk common stockholders receive in the merger? | |
A: | Newkirk common stockholders will receive 0.80 of a Lexington common share for each outstanding share of Newkirk common stock, par value $0.01 per share (which we refer to as Newkirk common stock), they own immediately prior to the consummation of the merger. Cash will be paid instead of issuing fractional shares. In this joint proxy statement/prospectus, we refer sometimes to the Lexington common shares to be issued in the merger as the merger consideration. | |
Q: | Will Newkirk Master Limited Partnership units currently redeemable for Newkirk common stock be redeemable for Lexington common shares? | |
A: | Yes. After the merger, the Newkirk Master Limited Partnership (which we refer to as the MLP) will become a subsidiary of Lexington and renamed the Lexington Master Limited Partnership and the MLP units will be redeemable for Lexington common shares. In order to give effect to the exchange ratio in the merger, there will be a 0.80 for 1 reverse split of MLP units upon consummation of the merger. |
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Thereafter each MLP unit may be redeemed at the holder’s option for cash, based on the value of one Lexington common share, or, at Lexington’s option, for one Lexington common share. | ||
Q: | What will Lexington common shareholders receive in the merger? | |
A: | Lexington common shareholders will not receive any additional shares in connection with the merger. Each Lexington common share held by Lexington common shareholders will continue to represent one Lexington common share after the consummation of the merger. If the merger is completed, Lexington intends, at the sole discretion of Lexington’s board of trustees, to make a one-time special dividend/distribution of $0.17 per Lexington common share/operating partnership unit to the holders thereof on a record date on or prior to the completion of the merger, whether or not any such shareholders voted to approve the merger. In addition, in the event Newkirk pays a dividend to maintain its REIT status or avoid imposition of entity-level income or excise taxes under the Code, in an amount in excess of its regular quarterly dividend, Lexington may make a corresponding dividend/distribution equal to 125% of the excess. | |
Q: | If the merger is completed, when can Newkirk stockholders expect to receive the merger consideration for their shares of Newkirk common stock? | |
A: | Promptly after the merger is completed, holders of Newkirk common stock at the time the merger is completed will receive detailed instructions regarding the surrender of their stock certificates. Such holders should not send their stock certificates to Lexington or anyone else until they receive these instructions. The exchange agent will arrange for the payment of the merger consideration to be sent to holders of Newkirk common stock as promptly as practicable following receipt of their stock certificates and other required documents. | |
Q: | What happens if the market price of Lexington common shares or Newkirk common stock changes before the closing of the merger? | |
A: | No change will be made to the 0.80 exchange ratio for the exchange of Newkirk common stock for Lexington common shares in the merger. Because the exchange ratio is fixed, the value of the consideration to be received by Newkirk common stockholders in the merger will depend upon the market price of Lexington common shares at the time of the merger. | |
Q: | Who will own Lexington common shares after the closing of the merger? | |
A: | Based on the number of Lexington common shares and operating partnership units and shares of Newkirk common stock and operating partnership units outstanding as of October 13, 2006, the record date for the special meetings, immediately after the closing of the merger, current Newkirk common stockholders and unitholders in The Newkirk Master Limited Partnership (who we refer to as MLP unitholders) will beneficially own approximately 46.7% and current Lexington common shareholders and unitholders in Lexington’s operating partnerships will beneficially own approximately 53.3%, of the then-outstanding Lexington common shares (assuming redemption of operating partnership units for Lexington common stock but not conversion of Lexington’s 6.50% Series C Cumulative Convertible Preferred Stock). | |
Q: | Is the percentage of voting shares that Newkirk stockholders and MLP unitholders will hold following the merger the same as their ownership percentage? | |
A: | No. As part of the merger, Newkirk’s special voting preferred stock will be converted into a share of special voting preferred stock of Lexington initially entitled to 36,000,000 votes on each matter submitted to Lexington shareholders. This voting share will be beneficially owned by the holders of MLP units that were outstanding as of November 7, 2005 (which we refer to as voting MLP units) and will entitle such MLP unitholders to direct the voting of this share. Unitholders in Lexington’s operating partnerships do not have such a voting right. Accordingly, based on Lexington common shares and Newkirk common stock and voting MLP units outstanding as of the record date, Newkirk stockholders and MLP unitholders will be entitled to castand/or direct approximately 49.2% of Lexington’s voting stock. |
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Q: | On what am I being asked to vote and what is the Board’s recommendation? | |
A: | Lexington common shareholders. You are being asked to approve the merger agreement, the merger and the related transactions, including the adoption of the Amended and Restated Declaration of Trust and the issuance of Lexington common shares under and as contemplated by the merger agreement. | |
Lexington’s board of trustees has approved the merger agreement, the merger and the related transactions, including the Amended and Restated Declaration of Trust (a copy of which is attached hereto as Annex B) and the Amended and Restated By-laws (a copy of which is attached as Annex C) and declared that the merger agreement, the merger and the related transactions are advisable and fair to, and in the best interests of, Lexington and its shareholders. Lexington’s board of trustees recommends that Lexington common shareholders vote “FOR” approval of the merger and the related transactions, including the adoption of the Amended and Restated Declaration of Trust and the issuance of Lexington common shares under and as contemplated by the merger agreement. | ||
Newkirk voting stockholders. You are being asked to vote to approve the merger agreement, the merger and the related transactions. | ||
The merger agreement also provides for the amendment and restatement of the Agreement of Limited Partnership of The Newkirk Master Limited Partnership (which we refer to as the MLP partnership agreement) to provide for, among other things, the substitution of a Lexington subsidiary as the general partner of the MLP, a 0.80 for 1 reverse split of MLP units and for the redemption of each MLP unit, either in cash or Lexington common shares, based on the value of one Lexington common share. You are not being asked to vote on the amendment and restatement of the MLP partnership agreement, which will be voted on separately by the MLP unitholders. Holders of more than a majority of the outstanding MLP units have either entered into agreements to vote in favor of the amendment or disclosed their intention to vote in favor of the amendment. | ||
Newkirk’s board of directors has approved the merger agreement, the merger and the related transactions and declared that the merger agreement, the merger and the related transactions are advisable and fair to, and in the best interests of, Newkirk and its stockholders. Newkirk’s board of directors recommends that Newkirk voting stockholders vote “FOR” the approval of the merger agreement, the merger and the related transactions. Beneficial owners of approximately 46.3% of Newkirk’s voting stock have agreed to vote in favor of the merger. | ||
Q: | How soon after the special meetings will the merger occur? | |
A: | We are working to complete the merger as soon as possible. A number of conditions must be satisfied before we can do so, including approval of the Lexington common shareholders and the Newkirk voting stockholders. Assuming that all of the conditions to the merger will be satisfied beforehand, we currently intend to complete the merger on or about December 29, 2006, unless we mutually agree to accelerate the closing date. | |
Q: | Who will manage Lexington after the merger? | |
A: | Lexington’s board of trustees will be increased from nine to 11 members at the effective time of the merger and will include seven current Lexington trustees, Michael L. Ashner, who is currently the Chairman and Chief Executive Officer of Newkirk, Clifford Broser and Richard Frary, who are currently members of Newkirk’s board of directors, and William J. Borruso, who is currently serving as a director of Lexington Strategic Asset Corp., a subsidiary of Lexington. Current Lexington trustees Seth M. Zachary and Stanley R. Perla will resign from Lexington’s board of trustees as of the effective time of the merger. Lexington’s existing management team will be joined by Michael L. Ashner and Lara Johnson, Newkirk’s Executive Vice President, who collectively will manage the operations of Lexington after the merger. | |
Q: | What will my dividends be before and after the merger? | |
A: | Newkirk’s regular quarterly dividend on Newkirk common stock is currently $0.40 per share. Following the merger it is expected that Lexington, at the sole discretion of Lexington’s board of trustees, will pay |
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quarterly dividends of $0.375 per share, which, from a Newkirk common stockholder’s perspective, would be equivalent to a quarterly distribution of $0.30 per share based on the exchange ratio of 0.80 Lexington shares for each Newkirk share. Until the merger is completed, Newkirk common stockholders will continue to receive regular quarterly dividends as authorized by Newkirk’s board of directors and declared by Newkirk. The merger agreement permits Newkirk to pay a regular quarterly cash dividend in an amount not to exceed $0.40 per share of Newkirk common stock. Newkirk currently intends to continue to pay regular quarterly dividends for any quarterly period that ends before the closing of the merger. Also, Newkirk may declare and pay, if necessary, a dividend equal to the amount necessary to maintain the REIT status of Newkirk and avoid any imposition of entity-level income or excise taxes under the Internal Revenue Code (which we refer to as the Code). Furthermore, in the event Lexington makes a dividend to maintain its REIT status or avoid taxes, in an amount in excess of its regularly quarterly dividend (other than the Lexington special dividend discussed below), Newkirk may make a corresponding dividend equal to 80% of the excess. | ||
Lexington’s regular quarterly dividend on Lexington common shares is currently $0.365 per share. Lexington common shareholders will continue to receive regular dividends as authorized by Lexington’s board of trustees and declared by Lexington. The merger agreement permits Lexington to pay regular quarterly cash dividends in an amount not to exceed $0.365 per Lexington common share. Lexington currently intends to continue to pay regular quarterly dividends. Also, Lexington may declare and pay, if necessary, a dividend equal to the amount necessary to maintain the REIT status of Lexington and avoid imposition of entity-level income or excise taxes under the Code. Furthermore, in the event Newkirk makes a dividend to maintain its REIT status or avoid taxes, in an amount in excess of its regularly quarterly dividend, Lexington may make a corresponding dividend equal to 125% of the excess. In addition, Lexington intends, at the sole discretion of Lexington’s board of trustees, to make a one-time special dividend/distribution of $0.17 per Lexington common share/operating partnership unit to the holders thereof on a record date on or prior to the completion of the merger. We refer to this one-time special dividend as the Lexington special dividend. | ||
The merger agreement provides that Lexington and Newkirk will coordinate the declaration, record and payment dates of any dividends in respect of their respective common shares (other than the Lexington special dividend described above). This coordination reflects the intention of Lexington and Newkirk that the holders of Lexington common shares and shares of Newkirk common stock not receive more than one dividend, or fail to receive one dividend, for any single calendar quarter with respect to the shares they currently own and any Lexington common shares received in the merger. | ||
Prior to the closing of the merger, each of Newkirk and Lexington will declare and set a record date prior to the closing for a pro rata dividend based on the number of days that have elapsed during the current quarter and the amount of their regular quarterly dividend. | ||
After the closing of the merger, former holders of Newkirk common stock that receive Lexington common shares in the merger will receive the dividends payable to all holders of Lexington common shares with a record date after the closing, for the period from the closing date through the end of the quarter, provided they continue to own their shares through the record date. Upon closing, at the sole discretion of Lexington’s board of trustees, Lexington is expected to increase its annual dividend to $1.50 per Lexington common share, or $0.375 per Lexington common share per quarter. | ||
Upon the closing of the merger, former holders of Newkirk common stock will cease receiving any distributions or dividends on all shares of Newkirk common stock held before the merger, other than any unpaid distributions or dividends declared by Newkirk before the closing of the merger. |
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Q: | Do Lexington common shareholders and Newkirk common stockholders have appraisal rights in connection with the merger? | |
A: | No. Lexington and Newkirk are both formed under Maryland law. Under Maryland law, because Lexington’s common shares and Newkirk’s common stock are each listed on a national securities exchange, Lexington common shareholders and Newkirk common stockholders do not have dissenters’ rights of appraisal in connection with the merger. | |
Q: | What will be the U.S. federal income tax consequences of the merger to the Newkirk stockholders? | |
A: | The merger is intended to qualify as a reorganization within the meaning of Section 368(a) of the Code so that, assuming the merger does qualify, you will not recognize any gain or loss upon the exchange of your Newkirk common stock for Lexington common shares in the merger, but you will recognize gain (or loss) for U.S. federal income tax purposes as a result of the merger to the extent of any cash received in lieu of fractional shares. | |
Tax matters are complicated and the tax consequences of the merger to Newkirk stockholders may vary depending on a Newkirk stockholder’s particular circumstances. Newkirk stockholders should consult their own tax advisors regarding the tax consequences of the merger to them. For further information concerning the U.S. federal income tax consequences of the merger, please see “Material Federal Income Tax Consequences of the Merger.” |
Q: | Where and when are the special meetings? | |
A: | Lexington common shareholders. The Lexington special meeting will take place at the New York offices of Paul, Hastings, Janofsky & Walker LLP (which we refer to as Paul Hastings), located at 75 East 55th Street, New York, New York 10022, on November 20, 2006, at 11:30 a.m. local time. | |
Newkirk voting stockholders. The Newkirk special meeting will take place at the New York offices of Katten Muchin Rosenman LLP (which we refer to as Katten Muchin), located at 575 Madison Avenue, New York, New York 10022 on November 20, 2006, at 10:00 a.m. local time. | ||
Q: | Who is entitled to vote? | |
A: | Holders of record of Lexington common shares and Newkirk voting stock, as applicable, at the close of business on October 13, 2006, the record date for the Lexington and Newkirk special meetings, are entitled to vote at their respective special meetings. On that date, there were 53,110,833 Lexington common shares outstanding and entitled to vote and 19,375,000 shares of Newkirk common stock outstanding and entitled to vote as well as 45,000,000 votes entitled to be cast by the Newkirk special voting preferred stock. | |
Q: | How do I cast my vote? | |
A: | If you are a Lexington common shareholder or a Newkirk voting stockholder of record, you may vote in person at your special meeting or submit a proxy for your special meeting. You can submit your proxy by completing, signing, dating and returning the enclosed proxy card in the accompanying pre-addressed postage-paid envelope. If you are a Lexington common shareholder, you may also instruct the proxy holders how to vote by telephone or through the internet by following the instructions on your proxy card. | |
Q: | What vote is required? | |
A: | Lexington common shareholders. Approval of the merger agreement, the merger and the related transactions, including the adoption of the Amended and Restated Declaration of Trust and the issuance of Lexington common shares under and as contemplated by the merger agreement, requires the affirmative vote of at least a majority of the votes entitled to be cast by holders of Lexington common shares at the Lexington special meeting. The affirmative vote of a majority of the votes cast by the holders of the |
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Lexington common shares voting either in person or by proxy at the Lexington special meeting is required to approve, if necessary, the extension of the solicitation period and the adjournment of the Lexington special meeting. | ||
Newkirk voting stockholders. The affirmative vote in person or by proxy of at least a majority of the votes entitled to be cast by holders of shares of Newkirk voting stock at the Newkirk special meeting is required to approve the merger agreement, the merger and the related transactions. The affirmative vote of a majority of the votes cast by the holders of the Newkirk voting stock voting either in person or by proxy at the Newkirk special meeting is required to approve, if necessary, the extension of the solicitation period and the adjournment of the Newkirk special meeting. Beneficial owners of approximately 46.3% of Newkirk’s voting stock have agreed to vote in favor of the merger. | ||
Q: | Can I change my vote after I have granted my proxy? | |
A: | Yes. You may revoke your proxy and change your vote at any time before your proxy is voted at your special meeting by following the procedures set forth under the applicable section of this joint proxy statement/prospectus entitled “The Lexington Special Meeting — How You May Revoke Your Proxy Instructions” and “The Newkirk Special Meeting — How You May Revoke Your Proxy Instructions.” | |
Q: | What happens if I am a Lexington common shareholder and I do not indicate how I want to vote, do not vote or abstain from voting on the Lexington proposals? | |
A: | If you are a Lexington common shareholder and you sign and send in your proxy but do not indicate how you want to vote on the proposals, your proxy will be voted in favor of all of the proposals on which a vote will take place at the special meeting.If you do not submit your proxy and do not attend the Lexington special meeting, your shares will not count towards a quorum, and if a quorum is present, your shares will have the effect of a vote against the merger proposal. Abstentions and broker non-votes will count towards a quorum but will not be counted as votes cast and will have the effect of a vote against the merger proposal. Abstentions and broker-non votes will have no effect on the proposal for the extension of the solicitation period and the adjournment of the Lexington special meeting. | |
Q: | What happens if I am a Newkirk voting stockholder and I do not indicate how I want to vote, do not vote or abstain from voting on the merger? | |
A: | If you are a Newkirk voting stockholder and you sign and send in your proxy but do not indicate how you want to vote on the merger, your proxy will be voted in favor of the proposal to approve the merger agreement, the merger and the related transactions.If you do not submit your proxy and do not attend the Newkirk special meeting, your shares will not count towards a quorum, and if a quorum is present, your shares will have effect of a vote against the merger proposal. Abstentions and broker non-votes will count towards a quorum but will not be counted as votes cast and will have the effect of a vote against the merger proposal. Abstentions and broker-non votes will have no effect on the proposal for the extension of the solicitation period and the adjournment of the Newkirk special meeting. | |
Q: | If my shares are held in “street name” by my broker, will my broker vote my shares for me? | |
A: | It depends.Your broker will NOT vote your Lexington common shares or Newkirk voting stock with respect to the merger proposal unless you tell the broker how to vote. To do so, you should follow the directions that your broker provides you. Your broker MAY vote your Lexington common shares or shares of Newkirk common stock with respect to the extension of the solicitation period and the adjournment of the special meeting. | |
Q: | Should I send in my Newkirk stock certificates now? | |
A: | No. If you hold any Newkirk stock certificates evidencing Newkirk common stock, you will receive written instructions for exchanging those Newkirk stock certificates for the merger consideration. You may not have received any stock certificates because your Newkirk securities were not directly registered. The written instructions you will receive will also advise you what to do if your securities were directly registered. |
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Q: | Who can answer my questions? | |
A: | Lexington common shareholders. Lexington common shareholders who have questions about the merger or want additional copies of this joint proxy statement/prospectus or additional proxy cards should contact: Investor Relations, Lexington Corporate Properties Trust, One Penn Plaza, Suite 4015, New York, New York10119-4015, Telephone(212) 692-7200. | |
Newkirk voting stockholders. Newkirk voting stockholders who have questions about the merger or want additional copies of this joint proxy statement/prospectus or additional proxy cards should contact: Investor Relations, Newkirk Realty Trust, Inc., 7 Bulfinch Place, Suite 500, Boston, Massachusetts 02114, Telephone(617) 570-4680. | ||
Lexington common shareholders and Newkirk voting stockholders can also contact our proxy solicitation agent: |
105 Madison Avenue
New York, New York 10016
Call Toll-Free:(800) 322-2885
Call Collect:(212) 929-5500
Email: proxy@mackenziepartners.com
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One Penn Plaza, Suite 4015
New York, New York10119-4015
(212) 692-7200
www.lxp.com
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7 Bulfinch Place, Suite 500
Boston, Massachusetts 02114
Attention: Investor Relations
Telephone:(617) 570-4680
www.newkirkreit.com
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• | the appointment of Mr. Ashner, the current Chairman and Chief Executive Officer of Newkirk, as Executive Chairman and Director of Strategic Transactions of Lexington pursuant to an employment agreement to be signed upon completion of the merger; | |
• | the receipt by NKT Advisors of $12.5 million for terminating its advisory agreement with Newkirk and the MLP. Vornado, an affiliate of Newkirk board member and Lexington board designee Clifford Broser, as well as a significant security holder of Newkirk, owns a 20% interest in NKT Advisors and will be entitled to receive up to $2.5 million of the termination fee being paid to NKT Advisors. Winthrop will receive $4.4 million of the $12.5 million payment for termination of Newkirk’s advisory agreement with NKT Advisors. Mr. Ashner is Chairman and Chief Executive Officer of NKT Advisors and Chief Executive Officer of Winthrop and he and other executive officers of Newkirk own a 28% minority economic interest in NKT Advisors and a 7.3% interest in Winthrop; | |
• | the early termination of a lock up agreement restricting the sale of 4,375,000 shares of Newkirk common stock owned by Winthrop. As of September 1, 2006, 468,750 of the shares owned by Winthrop were subject to forfeiture during a period expiring on November 7, 2008 and, upon closing of the merger, the forfeiture provisions will terminate. If the merger does not occur, these shares will be released from the forfeiture restrictions at the rate of 17,361 shares per month; |
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• | the continuation for one year of existing property management agreements between Winthrop Management LP, an affiliate of Mr. Ashner, and the MLP and the retention of Winthrop Management LP as a property manager on all properties acquired by Lexington during that period where a property manager is retained; | |
• | the granting by Lexington of exemptions from its 9.8% ownership limitation to two significant security holders in Newkirk, Apollo and its affiliates and Vornado Realty L.P., an affiliate of Vornado. Apollo and Vornado were each previously granted ownership waivers by Newkirk in connection with Newkirk’s initial public offering. Clifford Broser, a Newkirk director and a Lexington trustee designee, is affiliated with Vornado; | |
• | the early termination of lock up agreements with respect to shares of Newkirk common stock issuable to certain officers and directors of Newkirk with respect to approximately 747,542 post-reverse split MLP units. The lock up agreement restricting the sale of common shares by Mr. Ashner will continue in full effect; | |
• | the continued indemnification of current directors and officers of Newkirk and NKT Advisors under the merger agreement and the provision of directors’ and officers’ liability insurance to these individuals and this entity; and | |
• | the entry into the voting agreements described below. |
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• | a property that is either (a) triple net leased or (b) one in which a single tenant leases at least 85% of the rentable square footage of the property and, in addition to base rent, the tenant is required to pay some or all of the operating expenses for the property, and, in both (a) and (b) the lease has a remaining term, exclusive of all unexercised renewal terms, of more than 18 months; | |
• | management agreements and master leases with terms of greater than three years where a manager or master lessee bears all operating expenses of the property and pays the owner a fixed return; | |
• | securities of companies including, without limitation, corporations, partnerships and limited liability companies, whether or not publicly traded, that are primarily invested in assets that meet the two requirements listed above; and | |
• | all re-tenanting and redevelopment associated with such properties, agreements and leases, and all activities incidental thereto. |
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• | the approval by Newkirk voting stockholders of the merger agreement, the merger and the related transactions; | |
• | the approval by the Lexington common shareholders of the merger agreement, the merger and the related transactions, including the adoption of the Amended and Restated Declaration of Trust and the issuance of Lexington common shares under and as contemplated by the merger agreement; | |
• | the approval for listing on the New York Stock Exchange of the Lexington common shares to be issued under and as contemplated by the merger agreement (which approval was obtained on October 10, 2006); | |
• | the absence of legal prohibitions to the merger; | |
• | the continued effectiveness of the registration statement of which this joint proxy statement/prospectus is a part; | |
• | the accuracy of each company’s representations and warranties; | |
• | the performance by each company of its obligations under the merger agreement; | |
• | the absence of any material adverse effect on Lexington or Newkirk between July 23, 2006 and the date on which the merger is completed; | |
• | the receipt of legal opinions from counsel to each company as to the qualification of the merger as a reorganization under the Internal Revenue Code and as to each company’s qualification as a REIT under the Internal Revenue Code; and | |
• | approval of the amended and restated MLP partnership agreement. |
• | any merger or business combination (other than the merger discussed in this joint proxy statement/prospectus) involving either Lexington or Newkirk; | |
• | any sale of 25% or more of the assets of either Lexington or Newkirk; or | |
• | any tender offer or exchange offer for 25% or more of the voting power of outstanding equity securities of either Lexington or Newkirk. |
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• | the merger is not completed on or before March 31, 2007, other than due to a breach of the merger agreement by the party seeking to terminate the merger agreement; | |
• | a legal prohibition to the merger has become final and non-appealable; | |
• | a breach by the other party of any of its representations, warranties or agreements under the merger agreement such that a condition to completing the merger cannot be satisfied by the earlier of March 31, 2007 or 60 days after delivery of notice of such breach; or | |
• | the necessary approval of the other party’s shareholders or stockholders is not obtained at the other party’s special meeting. |
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Years Ended December 31, | Six Months Ended June 30, | |||||||||||||||||||||||||||
2005 | 2004 | 2003 | 2002 | 2001 | 2006 | 2005 | ||||||||||||||||||||||
(In thousands, except per share data) | (In thousands, except | |||||||||||||||||||||||||||
per share data) | ||||||||||||||||||||||||||||
Total gross revenues | $ | 197,132 | $ | 143,364 | $ | 105,974 | $ | 85,093 | $ | 74,602 | $ | 105,657 | $ | 85,325 | ||||||||||||||
Expenses applicable to revenues | (94,400 | ) | (49,684 | ) | (33,696 | ) | (25,760 | ) | (21,594 | ) | (55,863 | ) | (36,295 | ) | ||||||||||||||
Interest and amortization expense | (65,065 | ) | (44,857 | ) | (34,168 | ) | (32,354 | ) | (29,416 | ) | (35,446 | ) | (27,782 | ) | ||||||||||||||
Income from continuing operations | 18,192 | 35,293 | 24,411 | 22,409 | 15,180 | 10,263 | 18,172 | |||||||||||||||||||||
Total discontinued operations | 14,503 | 9,514 | 9,238 | 8,186 | 2,882 | 21,335 | 7,303 | |||||||||||||||||||||
Net income | 32,695 | 44,807 | 33,649 | 30,595 | 18,062 | 31,598 | 25,475 | |||||||||||||||||||||
Net income allocable to common shareholders | 16,260 | 37,862 | 30,257 | 29,902 | 15,353 | 23,380 | 17,257 | |||||||||||||||||||||
Income from continuing operations per common share — basic | 0.04 | 0.61 | 0.62 | 0.80 | 0.64 | 0.04 | 0.20 | |||||||||||||||||||||
Income from continuing operations per common share — diluted | 0.04 | 0.59 | 0.61 | 0.79 | 0.63 | 0.04 | 0.20 | |||||||||||||||||||||
Income from discontinued operations — basic | 0.29 | 0.20 | 0.27 | 0.31 | 0.15 | 0.41 | 0.15 | |||||||||||||||||||||
Income from discontinued operations — diluted | 0.29 | 0.21 | 0.27 | 0.30 | 0.14 | 0.41 | 0.13 | |||||||||||||||||||||
Net income per common share — basic | 0.33 | 0.81 | 0.89 | 1.11 | 0.79 | 0.45 | 0.35 | |||||||||||||||||||||
Net income per common share — diluted | 0.33 | 0.80 | 0.88 | 1.09 | 0.77 | 0.45 | 0.33 | |||||||||||||||||||||
Cash dividends declared per common share | 1.445 | 1.410 | 1.355 | 1.325 | 1.290 | 0.73 | 0.72 | |||||||||||||||||||||
Net cash provided by operating activities | 105,457 | 90,736 | 68,883 | 56,834 | 40,750 | 53,784 | 50,417 | |||||||||||||||||||||
Net cash used in investing activities | (643,777 | ) | (202,425 | ) | (295,621 | ) | (106,166 | ) | (63,794 | ) | (22,092 | ) | (622,518 | ) |
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Years Ended December 31, | Six Months Ended June 30, | |||||||||||||||||||||||||||
2005 | 2004 | 2003 | 2002 | 2001 | 2006 | 2005 | ||||||||||||||||||||||
(In thousands, except per share data) | (In thousands, except | |||||||||||||||||||||||||||
per share data) | ||||||||||||||||||||||||||||
Net cash provided by (used in) financing activities | 444,878 | 242,723 | 228,986 | 47,566 | 32,115 | (30,889 | ) | 467,524 | ||||||||||||||||||||
Ratio of earnings to combined fixed charges and preferred dividends | 1.15 | 1.57 | 1.59 | 1.82 | 1.47 | 1.27 | 1.50 | |||||||||||||||||||||
Real estate assets, net | 1,641,927 | 1,227,262 | 1,001,772 | 779,150 | 714,047 | 1,619,398 | 1,699,403 | |||||||||||||||||||||
Investments in non-consolidated entities | 191,146 | 132,738 | 69,225 | 54,261 | 48,764 | 186,391 | 159,387 | |||||||||||||||||||||
Total assets | 2,160,232 | 1,697,086 | 1,207,411 | 902,471 | 822,153 | 2,140,997 | 2,184,249 | |||||||||||||||||||||
Mortgages, notes payable and credit facility, including discontinued operations | 1,170,560 | 765,909 | 551,385 | 491,517 | 455,771 | 1,156,975 | 1,235,004 | |||||||||||||||||||||
Shareholders’ equity | 891,310 | 847,290 | 579,848 | 332,976 | 266,713 | 887,334 | 860,170 | |||||||||||||||||||||
Preferred share liquidation preference | 234,000 | 214,000 | 79,000 | — | 25,000 | 234,000 | 234,000 |
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The | The Previous | |||||||||||||||||||||||||||||||
Company(1) | The Predecessor(2) | Predecessor | ||||||||||||||||||||||||||||||
Period | Period | |||||||||||||||||||||||||||||||
November 7, | January 1, | Six Months | Six Months | |||||||||||||||||||||||||||||
2005 to | 2005 to | Year Ended | Year Ended | Year Ended | Year Ended | Ended | Ended | |||||||||||||||||||||||||
December 31, | November 6, | December 31, | December 31, | December 31, | December 31, | June 30, | June 30, | |||||||||||||||||||||||||
2005 | 2005 | 2004 | 2003 | 2002 | 2001(3) | 2006 | 2005 | |||||||||||||||||||||||||
(In thousands, except per share data) | ||||||||||||||||||||||||||||||||
Total revenues | $ | 31,739 | $ | 177,452 | $ | 211,679 | $ | 225,942 | $ | 216,688 | $ | 258,975 | $ | 116,121 | $ | 104,670 | ||||||||||||||||
Income from continuing operations before minority interest | 1,626 | 40,753 | 86,456 | 91,054 | 88,425 | 102,049 | 43,815 | 34,136 | ||||||||||||||||||||||||
Income from continuing operations | 144 | 24,815 | 67,972 | 72,757 | 77,740 | 46,387 | 12,176 | 24,824 | ||||||||||||||||||||||||
Income from discontinued operations | 1,205 | 18,356 | 69,836 | 72,407 | 45,122 | 3,224 | 2,450 | 1,035 | ||||||||||||||||||||||||
Net income | 1,349 | 43,171 | 137,808 | 145,164 | 122,862 | 49,611 | 14,626 | 25,859 | ||||||||||||||||||||||||
Net income per common share | 0.07 | — | — | — | — | — | 0.63 | — | ||||||||||||||||||||||||
Weighted average common shares outstanding | 19,375 | — | — | — | — | — | 19,375 | — | ||||||||||||||||||||||||
Distribution declared per share | 0.27 | — | — | — | — | — | 0.80 | — | ||||||||||||||||||||||||
Net cash provided by operating activities | 29,445 | 113,018 | 154,372 | 160,802 | 146,070 | — | 81,744 | 74,967 | ||||||||||||||||||||||||
Net cash provided by (used in) investing activities | (40,066 | ) | 60,788 | 92,103 | 61,392 | 11,080 | — | (180,145 | ) | (69 | ) | |||||||||||||||||||||
Net cash provided by (used in) financing activities | 125,872 | (135,558 | ) | (257,861 | ) | (214,834 | ) | (123,698 | ) | — | (27,810 | ) | (82,144 | ) | ||||||||||||||||||
Real estate investments, net of accumulated depreciation | 943,992 | — | 1,032,797 | 1,129,237 | 1,203,890 | 1,001,321 | 1,012,917 | 974,139 | ||||||||||||||||||||||||
Total assets | 1,345,084 | — | 1,237,129 | 1,384,094 | 1,476,623 | 1,476,922 | 1,428,054 | 1,178,120 | ||||||||||||||||||||||||
Total debt | 770,786 | — | 907,339 | 1,104,231 | 1,238,494 | 1,024,539 | 801,600 | 844,522 | ||||||||||||||||||||||||
Partners’ equity | — | — | 203,785 | 98,864 | (6,104 | ) | 257,518 | — | 209,116 | |||||||||||||||||||||||
Stockholders’ equity | 176,041 | — | — | — | — | — | 177,154 | — |
(1) | Represents historical financial data of Newkirk as adjusted for material discontinued operations. | |
(2) | Represents historical financial data for the Newkirk Master Limited Partnership and its subsidiaries as adjusted for material discontinued operations. | |
(3) | The combined consolidated balance sheet at December 31, 2001 and the combined consolidated operating results for the year ended December 31, 2001 are not comparable to the consolidated balance sheet data at December 31, 2002 and the consolidated operating data results for the year ended December 31, 2002. The Previous Predecessor Entity amounts include assets that were not transferred to the Newkirk Master Limited Partnership and certain discontinued operations, and the Newkirk Master Limited Partnership amounts include assets that were contributed to the Newkirk Master Limited Partnership by partners other than the Previous Predecessor Entity. |
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Lexington/Newkirk | ||||||||
Pro Forma Combined | ||||||||
Year Ended | Six Months Ended | |||||||
December 31, | June 30, | |||||||
2005 | 2006 | |||||||
(Unaudited, dollars in thousands) | ||||||||
Total gross revenues | $ | 332,892 | $ | 183,722 | ||||
Expenses applicable to revenues | (172,028 | ) | (97,304 | ) | ||||
Interest and amortization expense | (125,722 | ) | (60,695 | ) | ||||
Income from continuing operations | 9,224 | 13,293 | ||||||
Income (loss) from continuing operations per common share — basic | (0.11 | ) | 0.08 | |||||
Income (loss) from continuing operations per common share — diluted | (0.24 | ) | 0.08 | |||||
Real estate assets, net | 3,037,065 | |||||||
Investments in non-consolidated entities | 224,637 | |||||||
Total assets | 4,366,769 | |||||||
Mortgages, notes payable and credit facility payable | 1,952,686 | |||||||
Shareholders’ equity | 1,194,904 |
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Six Months Ended | Year Ended | |||||||
June 30, | December 31, | |||||||
2006 | 2005 | |||||||
Lexington — Historical | ||||||||
Income from continuing operations per common share — basic | $ | 0.04 | $ | 0.04 | ||||
Income from continuing operations per common share — diluted | 0.04 | 0.04 | ||||||
Book value per share at period end | 12.32 | 12.60 | ||||||
Newkirk — Historical | ||||||||
Income per basic share from continuing operations | $ | 0.63 | $ | 0.39 | ||||
Income per diluted share from continuing operations | 0.63 | 0.39 | ||||||
Book value per share at period end | 9.14 | 9.09 | ||||||
Unaudited Pro Forma Combined | ||||||||
Income (loss) from continuing operations per common share — basic | $ | 0.08 | $ | (0.11 | ) | |||
Income (loss) from continuing operations per common share — diluted | 0.08 | (0.24 | ) | |||||
Book value per share at June 30, 2006 | 14.02 | N/A | ||||||
Unaudited Pro Forma Combined — Newkirk Equivalents (A) | ||||||||
Income (loss) from continuing operations per common share — basic | $ | 0.06 | $ | (0.09 | ) | |||
Income (loss) from continuing operations per common share — diluted | 0.06 | (0.19 | ) | |||||
Book value per share at June 30, 2006 | 11.22 | N/A |
(A) | Represents unaudited pro forma combined amounts multiplied by the exchange ratio of 0.80 of a Lexington common share for each outstanding share of Newkirk common stock. |
Lexington Common Shares | Newkirk Common Stock(1) | ||||||||||||||||||||||||
High | Low | Dividends | High | Low | Dividends | ||||||||||||||||||||
2005 | |||||||||||||||||||||||||
First Quarter | $ | 23.90 | $ | 20.17 | $ | 0 | .36 | — | — | — | |||||||||||||||
Second Quarter | $ | 24.47 | $ | 21.68 | $ | 0 | .36 | — | — | — | |||||||||||||||
Third Quarter | $ | 25.26 | $ | 21.50 | $ | 0 | .36 | — | — | — | |||||||||||||||
Fourth Quarter | $ | 23.78 | $ | 20.26 | $ | 0 | .36 | $ | 16.14 | $ | 15.00 | $ | 0.27 | ||||||||||||
2006 | |||||||||||||||||||||||||
First Quarter | $ | 22.90 | $ | 19.64 | $ | 0 | .365 | $ | 19.22 | $ | 15.47 | $ | 0.40 | ||||||||||||
Second Quarter | $ | 22.15 | $ | 19.87 | $ | 0 | .365 | $ | 19.00 | $ | 16.60 | $ | 0.40 | ||||||||||||
Third Quarter | $ | 21.90 | $ | 19.53 | $ | 0 | .365 | $ | 18.40 | $ | 15.66 | $ | 0.40 | ||||||||||||
Fourth Quarter (through the date of this joint proxy/statement prospectus) | $ | 20.70 | $ | 21.41 | (2) | $ | 16.82 | $ | 16.25 | (2) |
(1) | Newkirk closed its initial public offering on November 7, 2005. Prior to that date, Newkirk’s common stock was not publicly traded. | |
(2) | Please see “Questions and Answers About the Mergers” for a description of the dividends anticipated to be paid by Lexington and Newkirk to holders of Lexington common shares and Newkirk common stock, respectively, for periods prior to the effective date of the merger. |
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Lexington | Newkirk | Newkirk | ||||||||||
Common | Common | Pro Forma | ||||||||||
Shares | Stock | Equivalent | ||||||||||
At July 21, 2006 | $ | 20.97 | $ | 16.95 | $ | 16.78 | ||||||
At October 12, 2006 | $ | 21.05 | $ | 16.50 | $ | 16.84 |
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• | the appointment of Mr. Ashner, the current Chairman and Chief Executive Officer of Newkirk, as Executive Chairman and Director of Strategic Transactions of Lexington upon completion of the merger pursuant to an employment agreement; | |
• | the receipt of a termination payment of $12.5 million by NKT Advisors, of which Mr. Ashner is Chairman and Chief Executive Officer. Vornado, an affiliate of Newkirk board member and Lexington board designee Clifford Broser, as well as a significant security holder of Newkirk, owns a 20% interest in NKT Advisors and will be entitled to receive up to $2.5 million of the termination fee being paid to NKT Advisors. Winthrop will also receive $4.4 million of the $12.5 million payment for termination of Newkirk’s advisory agreement with NKT Advisors. Mr. Ashner is Chairman and Chief Executive Officer of NKT Advisors and Chief Executive Officer of Winthrop and he and other executive officers own a 28% minority interest in NKT Advisors and a 7.3% interest in Winthrop; | |
• | Winthrop owns 4,375,000 shares of Newkirk common stock which are currently subject to a lock up agreement that is scheduled to expire on November 7, 2008. As of September 1, 2006, 468,750 of the foregoing shares were subject to forfeiture during a period expiring on November 7, 2008. Upon closing of the merger, the lock up and the forfeiture provisions will terminate. If the merger does not occur, these shares will be released from the forfeiture restrictions at the rate of 17,361 shares per month; | |
• | For a period of one year following the merger, all existing management agreements between Newkirk and Winthrop Management L.P., an affiliate of Mr. Ashner, will not be terminated except in accordance with their terms and Winthrop Management L.P. or its affiliate will be retained as the property manager for all of the MLP’s properties and all properties acquired by Lexington during that time, in all cases where a property manager is retained. After one year all such agreements may be terminated by Lexington without cause; | |
• | Lexington has agreed to grant exemption from its 9.8% ownership limitation to two significant security holders in Newkirk, Apollo and its affiliates and Vornado Realty L.P., an affiliate of Vornado. Apollo and Vornado were each previously granted ownership waivers by Newkirk in connection with Newkirk’s initial public offering; | |
• | the early termination of lock up agreements with certain officers and directors of Newkirk with respect to approximately 747,502 post-reverse split MLP units; a lock up agreement restricting the sale of common shares by Mr. Ashner will continue in full effect; | |
• | the continued indemnification of current directors and officers of Newkirk and NKT Advisors under the merger agreement and the provision of directors’ and officers’ liability insurance to these individuals and this entity; and | |
• | the entry into the voting agreements with Michael L. Ashner and his affiliates, and with Winthrop and with affiliates of Apollo. |
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• | either company may be required under certain circumstances to reimburse the other party for up to $5 million of expenses and, depending upon the circumstances, may be required to pay a termination fee of $25 million (inclusive of any prior expense reimbursement paid by such party); | |
• | the price of Lexington common sharesand/or Newkirk common stock may decline to the extent that the current market prices of Lexington common shares and Newkirk common stock reflects a market assumption that the merger will be completed; and | |
• | each company will have incurred substantial costs related to the merger, such as legal, accounting and financial advisor fees, which must be paid even if the merger is not completed. |
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Name | Title | |
Michael L. Ashner | Executive Chairman and Director of Strategic Acquisitions | |
E. Robert Roskind | Co-Vice Chairman | |
Richard J. Rouse | Co-Vice Chairman and Chief Investment Officer | |
T. Wilson Eglin | Chief Executive Officer, President and Chief Operating Officer | |
Patrick Carroll | Executive Vice President, Chief Financial Officer and Treasurer | |
John B. Vander Zwaag | Executive Vice President | |
Lara Johnson | Executive Vice President |
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• | increases in market interest rates, relative to the dividend yield on the combined company’s shares. If market interest rates go up, prospective purchasers of the combined company’s securities may require a higher yield. Higher market interest rates would not, however, result in more funds for the combined company to distribute and, to the contrary, would likely increase its borrowing costs and potentially decrease funds available for distribution. Thus, higher market interest rates could cause the market price of the combined company’s common shares to go down; | |
• | anticipated benefit of an investment in the combined company’s securities as compared to investment in securities of companies in other industries (including benefits associated with tax treatment of dividends and distributions); | |
• | perception by market professionals of REITs generally and REITs comparable to the combined company in particular; | |
• | level of institutional investor interest in the combined company’s securities; | |
• | relatively low trading volumes in securities of REITs; | |
• | the combined company’s results of operations and financial condition; and | |
• | investor confidence in the stock market generally. |
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• | Larger Size. With a total enterprise value in excess of $4.6 billion at the time the merger agreement was signed, the combined company would be the largest net lease REIT, and among the largest capitalized diversified REITs in the United States. As a result of the larger size, the combined company: |
• | is expected to have greater operating and financial flexibility and better access to capital markets; | |
• | should have a broader and deeper investment pipeline; and | |
• | should be able to consider future transactions that would not otherwise be possible; |
• | Efficiency of Portfolio Acquisition. The opportunity to acquire through a single transaction a portfolio of high quality properties, together with an experienced management team, that could not be easily replicated through acquisitions of individual assets; | |
• | Diversification of Assets. The combined company will have a pool of assets that is far more diversified than Lexington’s stand-alone portfolio in terms of tenant credit, property type, location, tenant industry and lease characteristics, thereby lessening the impact of exposure to particular industry sectors, markets and tenants; | |
• | Stronger Balance Sheet. The combined company will have a stronger balance sheet because of Newkirk’s lower debt to equity ratio, substantial cash balances and unleveraged assets; | |
• | Management Synergy. Lexington’s board of trustees believes that the combined company will benefit from the complementary skill sets of Lexington’s and Newkirk’s management teams, as well as the combined deal flow of the companies, thus further broadening the growth opportunities for the combined company; | |
• | Ownership Diversity. The combined company will have a broader shareholder base than Lexington. Lexington’s board of trustees believes that this broader shareholder base will enhance shareholder liquidity; | |
• | Tenant Quality Improvement. The combined company will have a majority of investment grade tenants due to the credit quality of Newkirk’s tenants; | |
• | Continued Representation in Management and on the Combined Company’s Board. Five of the seven executive officers of the combined company will be current executive officers of Lexington serving in similar capacities and (ii) eight of the eleven members of Lexington’s board of trustees will be appointed by Lexington as members of the board of trustees of the combined company; | |
• | Enhanced Investment Opportunities. Newkirk contributes a debt investment platform to the combined company. The merger allows Lexington to circumvent thestart-up investment and opportunity costs of developing its own debt platform; and |
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• | Opinion of Financial Advisor. Lexington’s board of trustees also considered the financial presentation of Wachovia Securities, including its opinion, dated July 23, 2006, as to the fairness, from a financial point of view as of the date of the opinion, to Lexington of the exchange ratio, as more fully described elsewhere in this joint proxy statement/prospectus. |
• | Integration Risks. The operations, technologies and personnel of the two companies may not be successfully integrated. The merger will include risks commonly associated with similar transactions, including unanticipated liabilities, unanticipated costs and diversion of management’s attention. The combined company may also experience operational interruptions or the loss of key employees or customers; | |
• | Strategic Benefits may not be Realized. The anticipated strategic and financial benefits of the merger may not be realized; | |
• | Significant Dilution. The merger is expected to be dilutive to per share funds from operations in the future. Future events that could increase such dilution include adverse changes in: |
• | the expected costs of the merger and the expected costs of integrating Newkirk’s business with Lexington’s business; | |
• | the combined company’s ability to achieve anticipated cost savings from the merger; and | |
• | general economic conditions and their effect on the REIT industry, including the combined company; |
• | Expenses of the Merger. Lexington and Newkirk are expected to incur one-time, pre-tax closing costs of approximately $35.5 million in connection with the merger inclusive of one-time pre-tax expenses of approximately $12.5 million related to the termination of Newkirk’s advisory agreement with NKT Advisors in connection with the merger. Lexington also expects to incur one-time, pre-tax cash and non-cash costs related to the integration of Lexington and Newkirk, which cannot be estimated at this time. The combined company may incur additional unanticipated costs and expenses in connection with the merger; | |
• | Possible Repayment/Refinancing of Debt. Consummation of the merger could trigger a mandatory prepayment (including a penalty in some cases) of Lexington’s or Newkirk’s debt unless appropriate lender consents or waivers are received. If those consents and waivers cannot be obtained prior to consummation of the merger, the existing debt of Lexington and Newkirk might need to be repaidand/or refinanced. This may result in higher than-anticipated transaction expenses to Lexington; | |
• | Fixed Merger Consideration. The exchange ratio is fixed and will not fluctuate as a result of changes in the price of Lexington common shares or Newkirk common stock. If the ratio of Newkirk’s stock price to Lexington’s share price upon the consummation of the merger were to be less than 0.80 to 1, then Lexington may be viewed as having paid more for Newkirk stock than it might otherwise have to pay if the exchange ratio had not been fixed; | |
• | Termination Fee. Each company agreed to pay the other party a termination fee of $25.0 million in specified circumstances, including where a third party acquires or seeks to acquire the terminating party within a specified time period after termination. The terminating party must also reimburse the other party for up to $5.0 million of expenses in specified circumstances, which would be credited against any subsequent termination fee, if payable. See “The Merger Agreement — Termination”; and | |
• | Other Negative Factors. Lexington’s board of trustees also considered the other risks of the merger described in “Risk Factors — Risks Relating to the Merger.” |
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• | Larger Size. With a total enterprise value in excess of $4.6 billion at the time the merger agreement was signed, the combined company would be the largest net lease REIT, and among the largest capitalized diversified REITs in the United States. As a result of the larger size, the combined company: |
• | is expected to have greater operating and financial flexibility and better access to capital markets; | |
• | should have a broader and deeper investment pipeline; | |
• | should be better positioned for future growth through development and enhanced cash flow; and | |
• | should be able to consider future transactions that would not otherwise be possible; |
• | Diversification of Assets. The combined company will have a pool of assets that is far more diversified than Newkirk’s stand-alone portfolio in terms of tenant credit, property type, location, tenant industry and lease characteristics, thereby lessening the impact of exposure to particular industry sectors, markets and tenants; |
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• | Elimination of External Advisory Structure. The combined company will be self-managed thereby eliminating the external advisory structure under which Newkirk presently operates. The board believes that internally managed REITs are typically viewed more favorably by the capital markets; | |
• | Average Lease Term Extension. The combined company would have leases with a substantially longer weighted average lease term compared to Newkirk, which will ease the significant rent-roll down challenge Newkirk faces in the future; | |
• | Management Synergy. Newkirk’s board of directors believes that the combined company will benefit from the complementary skill sets of Lexington’s and Newkirk’s management teams, as well as the combined deal flow of the companies, thus further broadening the growth opportunities for the combined company; | |
• | Ownership Diversity. The combined company will have a broader stockholder base than Newkirk. Newkirk’s board of directors believes that this broad stockholder base will enhance stockholder liquidity; | |
• | Continued Representation in Management and Lexington’s Board. Michael L. Ashner, the Chairman and Chief Executive Officer of Newkirk, and Lara Johnson, the Executive Vice President of Newkirk, are to be retained by Lexington in similar capacities. In addition, three members of Newkirk’s board of directors, including Michael L. Ashner, will be appointed to the board of trustees of Lexington; | |
• | Exchange Ratio. Newkirk’s board of directors believes that the 0.80 exchange ratio for the merger consideration that will be paid in Lexington common shares represents a fair valuation of Lexington from Newkirk’s perspective. Newkirk’s board of directors also believes it is beneficial that the exchange ratio is fixed and that it will not fluctuate as a result of changes in the price of Newkirk’s common stock or Lexington common shares; | |
• | Due Diligence Review. The results of the due diligence review of, among other things, Lexington’s business and operations, financial condition and management practices and procedures, conducted on behalf of Newkirk by Newkirk’s management, financial advisors and legal counsel; and | |
• | Opinion of Financial Advisor. Newkirk’s board of directors also considered the financial presentation of Bear Stearns, including its opinion, dated July 23, 2006, as to the fairness, from a financial point of view and as of the date of the opinion, to Newkirk of the merger consideration to be paid by Lexington pursuant to the merger agreement, as more fully described elsewhere in this joint proxy statement/prospectus. |
• | Strategic Benefits may not be Realized. The anticipated strategic and financial benefits of the merger may not be realized; | |
• | Integration Risks. The operations, technologies and personnel of the two companies may not be successfully integrated. The merger will include risks commonly associated with similar transactions, including unanticipated liabilities, unanticipated costs and diversion of management’s attention. The combined company may also experience operational interruptions or the loss of key employees or customers; | |
• | Reduction in Dividends for Newkirk Shareholders. It is anticipated that the combined company will pay a per share dividend that is 25% less than the current dividend paid by Newkirk after giving effect to the exchange ratio; | |
• | Expenses of the Merger. Lexington and Newkirk are expected to incur one-time, pre-tax closing costs of approximately $35.5 million in connection with the merger inclusive of one-time pre-tax expenses of approximately $12.5 million related to the termination of Newkirk’s advisory agreement in connection |
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with the merger. Lexington also expects to incur one-time, pre-tax cash and non-cash costs related to the integration of Lexington and Newkirk, which cannot be estimated at this time. The combined company may incur additional unanticipated costs and expenses in connection with the merger; |
• | Possible Repayment/Refinancing of Debt. Consummation of the merger could trigger a mandatory prepayment (including a penalty in some cases) of Lexington’s or Newkirk’s debt unless appropriate lender consents or waivers are received. If those consents and waivers cannot be obtained prior to consummation of the merger, the existing debt of Lexington and Newkirk might need to be repaidand/or refinanced. This may result in higher than-anticipated transaction expenses to Lexington; | |
• | Fixed Merger Consideration. The exchange ratio is fixed and will not fluctuate as a result of changes in the price of Lexington common shares or Newkirk common stock. If the ratio of Newkirk’s stock price to Lexington’s share price upon the consummation of the merger were to be more than 0.80 to 1, then Lexington may be viewed as having paid less for Newkirk stock than it might otherwise have to pay if the exchange ratio had not been fixed; | |
• | Termination Fee. Each company agreed to pay the other party a termination fee of $25.0 million in specified circumstances, including where a third party acquires or seeks to acquire the terminating party within a specified time period following termination. The terminating party may also be required to reimburse the other party for up to $5.0 million of expenses, inclusive of the termination fee. See “The Merger Agreement — Termination”; and | |
• | Other Negative Factors. Newkirk’s board of directors also considered the other risks of the merger described in “Risk Factors — Risks Relating to the Merger.” |
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• | Reviewed the merger agreement, including the financial terms of the merger agreement; | |
• | Reviewed Annual Reports to Shareholders and Annual Reports onForm 10-K for Lexington for the five years ended December 31, 2005; | |
• | Reviewed the Annual Report to Shareholders and Annual Report onForm 10-K for Newkirk for the year ended December 31, 2005; | |
• | Reviewed certain interim reports to shareholders and Quarterly Reports onForm 10-Q for Lexington and Newkirk; | |
• | Reviewed certain business, financial, and other information regarding each of Lexington and Newkirk that was publicly available; | |
• | Reviewed certain business, financial, and other information regarding Lexington (and the combined company following the merger) and its prospects, including financial forecasts, which were furnished to Wachovia Securities by Lexington’s management, and discussed the business and prospects of Lexington (and the combined company following the merger) with Lexington’s management; | |
• | Reviewed certain business, financial, and other information regarding Newkirk and its prospects, including financial forecasts, which were furnished to it by the managements of Lexington and Newkirk, and discussed the business and prospects of Newkirk and the combined company following the merger with the managements of Lexington and Newkirk; | |
• | Participated in discussions and negotiations among representatives of Lexington and Newkirk and their financial and legal advisors; | |
• | Reviewed the reported prices and trading activity of each of Lexington common shares and Newkirk common stock; | |
• | Compared certain publicly available business, financial, and other information regarding each of Lexington and Newkirk with similar information regarding certain other publicly traded companies that it deemed relevant; | |
• | Compared the proposed financial terms of the merger agreement with the financial terms of certain other business combinations and transactions that it deemed relevant; | |
• | Reviewed the potential pro forma impact of the merger on Lexington’s financial statements; and | |
• | Considered other information such as financial studies, analyses, and investigations as well as financial and economic and market criteria that it deemed relevant. |
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Lexington Common Share Closing Price | ||||||||||
Time Period/Trading Days | Price per Share | Time Period/Trading Days | Price per Share | |||||||
July 21, 2006 | $ | 20.97 | 180-Day Average | $ | 21.19 | |||||
10-Day Average | $ | 21.13 | 52-Week High (8/2/05) | $ | 24.32 | |||||
30-Day Average | $ | 20.80 | Last 12 Months Average | $ | 21.66 | |||||
60-Day Average | $ | 20.83 | Last 12 Months Median | $ | 21.49 | |||||
90-Day Average | $ | 20.89 | 52-Week Low (6/14/06) | $ | 19.89 |
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Implied Lexington | ||||
Common Share Price | ||||
High: | $ | 25.00 | ||
Low: | $ | 18.46 |
• | American Financial Realty Trust; | |
• | National Retail Properties, Inc.; | |
• | Newkirk Realty Trust, Inc.; | |
• | Realty Income Corporation; | |
• | Spirit Finance Corporation |
2006 FFO | Implied Lexington | |||||||
Multiple | Common Share Price | |||||||
High: | 16.8 | x | $ | 32.10 | ||||
Low: | 7.1 | x | $ | 13.55 |
Acquiror | Target | |
Brandywine Realty Trust | Prentiss Properties Trust | |
DRA Advisors LLC | Capital Automotive REIT | |
Eaton Vance/ProLogis | Keystone Property Trust | |
Commercial Net Lease Realty Inc. | Captec Net Lease Realty | |
General Electric Capital | Franchise Finance Corp. of America |
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Transaction | Implied Lexington | |||||||
FFO Multiple | Common Share Price | |||||||
High: | 14.5 | x | $ | 27.70 | ||||
Low: | 8.1 | x | $ | 15.47 |
Implied Lexington | ||||
Common Share Price | ||||
High: | $ | 24.53 | ||
Low: | $ | 20.55 |
Implied Lexington | ||||
Common Share Price | ||||
High: | $ | 23.50 | ||
Low: | $ | 18.95 |
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Newkirk Common Share Closing Price | ||||||||||
Time Period/Trading Days | Price per Share | Time Period/Trading Days | Price per Share | |||||||
July 21, 2006 | $ | 16.95 | 150-Day Average | $ | 17.04 | |||||
10-Day Average | $ | 17.24 | 52-Week High (3/15/06) | $ | 18.87 | |||||
30-Day Average | $ | 17.15 | Last 12 Months Average | $ | 16.76 | |||||
60-Day Average | $ | 17.31 | Last 12 Months Median | $ | 16.99 | |||||
90-Day Average | $ | 17.58 | 52-Week Low (11/2/05) | $ | 15.05 | |||||
IPO Price (11/1/05) | $ | 16.00 |
Implied Newkirk | ||||
Common Share Price | ||||
High: | $ | 18.00 | ||
Low: | $ | 17.50 |
• | American Financial Realty Trust; | |
• | Lexington Corporate Properties Trust; | |
• | National Retail Properties, Inc.; | |
• | Realty Income Corporation; | |
• | Spirit Finance Corporation |
2006 FFO | Implied Newkirk | |||||||
Multiple | Common Share Price | |||||||
High: | 16.8 | x | $ | 40.17 | ||||
Low: | 10.5 | x | $ | 25.12 |
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Acquiror | Target | |
Brandywine Realty Trust | Prentiss Properties Trust | |
DRA Advisors LLC | Capital Automotive REIT | |
Eaton Vance/ProLogis | Keystone Property Trust | |
Commercial Net Lease Realty Inc. | Captec Net Lease Realty | |
General Electric Capital | Franchise Finance Corp. of America |
Transaction | Implied Newkirk | |||||||
FFO Multiple | Common Share Price | |||||||
High: | 14.5 | x | $ | 34.66 | ||||
Low: | 8.1 | x | $ | 19.36 |
Implied Newkirk | ||||
Common Share Price | ||||
High: | $ | 19.83 | ||
Low: | $ | 16.61 |
Implied Newkirk | ||||
Common Share Price | ||||
High: | $ | 19.30 | ||
Low: | $ | 13.18 |
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Premium / | ||||
(Discount) | ||||
July 21, 2006 | (1.0 | )% | ||
10 Trading Days | (1.9 | )% | ||
30 Trading Days | (3.0 | )% | ||
60 Trading Days | (3.7 | )% | ||
90 Trading Days | (4.9 | )% | ||
January 1, 2006 to July 21, 2006 | (1.2 | )% | ||
Since November 1, 2005 | 1.1 | % |
Contribution % | ||||
FFO Estimates Based on Consensus Analysts’ Forecasts as Reported by First Call* | ||||
2006 | ||||
Lexington | 44.4 | % | ||
Newkirk | 55.6 | % | ||
2007 | ||||
Lexington | 48.9 | % | ||
Newkirk | 51.1 | % | ||
2008 | ||||
Lexington | 51.0 | % | ||
Newkirk | 49.0 | % | ||
Market Common Equity Value | ||||
Lexington | 52.9 | % | ||
Newkirk | 47.1 | % | ||
Economic Ownership of Lexington Realty Trust | ||||
Lexington | 53.2 | % | ||
Newkirk | 46.8 | % |
* | Adjusted estimates for Newkirk. |
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Low | High | |||||||
Historical Stock Trading | 0.6188 | x | 0.9487x | |||||
Analyst Consensus Net Asset Value | 0.7000 | x | 0.9751x | |||||
Comparable Companies | 0.7825 | x | 2.9652x | |||||
Precedent Transactions | 0.6990 | x | 2.2400x | |||||
Premiums Paid | 0.6770 | x | 0.9650x | |||||
Dividend Discount | 0.5606 | x | 1.0187x |
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• | An opinion fee of $1.1 million payable upon delivery of an opinion; and | |
• | A transaction fee of $9.5 million against which such opinion fee will be credited. |
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• | was provided to Newkirk’s board of directors for its benefit and use; | |
• | did not constitute a recommendation to the board of directors of Newkirk or to the stockholders of Newkirk as to how to vote in connection with the merger or otherwise; and | |
• | did not address Newkirk’s underlying business decision to pursue the merger, the relative merits of the merger as compared to any alternative business strategies that might exist for Newkirk, the financing of the merger or the effects of any other transaction in which Newkirk might engage. |
• | reviewed a draft dated July 23, 2006 of the Agreement and Plan of Merger in substantially final form; | |
• | reviewed Newkirk’s Annual Reports to Shareholders and Annual Report onForm 10-K for the years ended December 31, 2005, its Quarterly Reports onForm 10-Q for the period ended March 31, 2006, its preliminary results for the quarter ended June 30, 2006 and its Current Reports onForm 8-K filed since December 31, 2005; | |
• | reviewed certain operating and financial information relating to Newkirk’s businesses and prospects, including projections and projected acquisitions for the five years ended December 31, 2011 all as prepared and provided to Bear Stearns by Newkirk’s management (which we refer to as the Newkirk projections); | |
• | reviewed certain estimates of revenue enhancements, cost savings and other combination benefits expected to result from the merger, all as prepared and provided to Bear Stearns by Newkirk’s and Lexington’s managements, which Bear Stearns refers to as the synergies; | |
• | met with certain members of Newkirk’s senior management to discuss Newkirk’s and Lexington’s businesses, operations, historical and projected financial results and future prospects; | |
• | reviewed Lexington’s Annual Reports to Shareholders and Annual Reports onForm 10-K for the years ended December 31, 2003, 2004 and 2005, its Quarterly Reports onForm 10-Q for the period ended March 31, 2006, its preliminary results for the quarter ended June 30, 2006 and its Current Reports onForm 8-K filed since December 31, 2005; | |
• | reviewed certain operating and financial information relating to Lexington’s business and prospects, including projections and projected acquisitions for the 10 years ended December 31, 2016, (i) as prepared and provided to Bear Stearns by Lexington’s management in a Confidential Information Memorandum dated March 24, 2006 and adjusted by Newkirk’s management and (ii) as prepared by Lexington’s management and provided to Bear Stearns on July 13, 2006 and as adjusted by Newkirk’s |
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management (which we refer to collectively as the Lexington projections and together with the Newkirk projections as the projections); |
• | met with certain members of Lexington’s senior management to discuss Lexington’s business, operations, historical and projected financial results and future prospects; | |
• | reviewed the historical prices, trading multiples and trading volumes of the Newkirk common stock and Lexington common shares; | |
• | reviewed publicly available financial data, stock market performance data and trading multiples of companies which Bear Stearns deemed generally comparable to Newkirk and Lexington; | |
• | reviewed the terms of recent mergers and acquisitions involving companies which Bear Stearns deemed generally comparable to Newkirk; | |
• | performed discounted cash flow analyses based on various of the Newkirk projections and Lexington projections; | |
• | reviewed the relative contributions of Newkirk and Lexington to the combined company on a pro forma basis; | |
• | reviewed the pro forma financial results, financial condition and capitalization of Newkirk and the combined company giving effect to the merger; and | |
• | conducted such other studies, analyses, inquiries and investigations as Bear Stearns deemed appropriate. |
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National Retail Properties, Inc.
Entertainment Properties Trust
Spirit Finance Corporation
Getty Realty Corp.
Price/FFO | Price/AFFO | |||||||||||||||
2006E | 2007E | 2006E | 2007E | |||||||||||||
Realty Income Corporation | 13.4 | x | 12.7 | x | 13.3 | x | 12.7x | |||||||||
National Retail Properties, Inc. | 13.0 | 12.4 | 12.9 | 12.3 | ||||||||||||
Entertainment Properties Trust | 11.9 | 11.2 | 12.6 | 11.6 | ||||||||||||
Spirit Finance Corporation | 10.7 | 9.2 | 10.9 | 9.8 | ||||||||||||
Getty Realty Corp. | 14.3 | 13.9 | 15.4 | 15.0 | ||||||||||||
Lexington Corporate Properties Trust | 11.4 | 10.8 | 12.1 | 11.4 | ||||||||||||
Newkirk Realty, Inc. | 7.0 | 7.9 | 7.7 | 9.1 | ||||||||||||
Newkirk Realty, Inc. at July 19, 2006 | 6.9 | 7.8 | 7.6 | 9.0 |
US Restaurant Properties, Inc./CNL Restaurant Properties, Inc.
Captec Net Lease Realty, Inc./Commercial Net Lease Realty, Inc.
TriNet Corporate Realty Trust, Inc./Starwood Financial Trust
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9.0%/8.0% | 9.5%/8.5% | 10.0%/9.0% | 10.5%/9.5% | ||||||||||||||||||
7.00 | % | 0.779 | x | 0.791 | x | 0.804 | x | 0.817 | x | ||||||||||||
Exit | 7.25 | 0.794 | 0.806 | 0.820 | 0.834 | ||||||||||||||||
Cap | 7.50 | 0.808 | 0.822 | 0.837 | 0.852 | ||||||||||||||||
Rate | 7.75 | 0.823 | 0.838 | 0.854 | 0.871 | ||||||||||||||||
8.00 | 0.839 | 0.855 | 0.872 | 0.890 |
2005A | 2006PF | 2007P | 2008P | 2009P | 2010P | 2011P | ||||||||||||||||||||||
Newkirk Existing Portfolio | 54.5 | % | 54.3 | % | 48.6 | % | 47.3 | % | 40.4 | % | 36.7 | % | 37.6 | % | ||||||||||||||
Lexington Existing Portfolio | 45.5 | % | 45.7 | % | 51.4 | % | 52.7 | % | 59.6 | % | 63.3 | % | 62.4 | % |
2005A | 2006PF | 2007P | 2008P | 2009P | 2010P | 2011P | ||||||||||||||||||||||
Newkirk Existing Portfolio | 54.5 | % | 53.6 | % | 44.9 | % | 40.8 | % | 33.5 | % | 29.3 | % | 29.5 | % | ||||||||||||||
Newkirk Base Acquisitions | 0.0 | % | 1.4 | % | 6.8 | % | 12.2 | % | 14.7 | % | 16.4 | % | 17.3 | % | ||||||||||||||
Lexington Acquisitions | 0.0 | % | 0.0 | % | 0.8 | % | 1.6 | % | 2.5 | % | 3.7 | % | 4.6 | % | ||||||||||||||
Lexington Existing Portfolio | 45.5 | % | 45.0 | % | 47.5 | % | 45.4 | % | 49.3 | % | 50.6 | % | 48.8 | % |
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2005A | 2006PF | 2007P | 2008P | 2009P | 2010P | 2011P | ||||||||||||||||||||||
Newkirk Existing Portfolio | 54.5 | % | 53.6 | % | 44.9 | % | 40.2 | % | 32.1 | % | 27.5 | % | 27.0 | % | ||||||||||||||
Newkirk Base Acquisitions | 0.0 | % | 1.4 | % | 6.8 | % | 12.1 | % | 14.1 | % | 15.4 | % | 16.0 | % | ||||||||||||||
Newkirk Acquisitions Leveraging Platform | 0.0 | % | 0.0 | % | 0.0 | % | 1.3 | % | 4.0 | % | 6.1 | % | 7.8 | % | ||||||||||||||
Lexington Acquisitions | 0.0 | % | 0.0 | % | 0.8 | % | 1.5 | % | 2.4 | % | 3.5 | % | 4.2 | % | ||||||||||||||
Lexington Existing Portfolio | 45.5 | % | 45.0 | % | 47.5 | % | 44.8 | % | 47.3 | % | 47.5 | % | 45.0 | % |
2005A | 2006PF | 2007P | 2008P | 2009P | 2010P | 2011P | ||||||||||||||||||||||
Newkirk Existing Portfolio | 55.5 | % | 58.6 | % | 52.3 | % | 46.3 | % | 38.6 | % | 38.0 | % | 40.2 | % | ||||||||||||||
Lexington Existing Portfolio | 44.5 | % | 41.4 | % | 47.7 | % | 53.7 | % | 61.4 | % | 62.0 | % | 59.8 | % |
2005A | 2006PF | 2007P | 2008P | 2009P | 2010P | 2011P | ||||||||||||||||||||||
Newkirk Existing Portfolio | 55.5 | % | 57.8 | % | 48.9 | % | 40.5 | % | 32.1 | % | 30.5 | % | 31.9 | % | ||||||||||||||
Newkirk Base Acquisitions | 0.0 | % | 1.3 | % | 6.0 | % | 11.2 | % | 14.6 | % | 16.4 | % | 16.6 | % | ||||||||||||||
Lexington Acquisitions | 0.0 | % | 0.0 | % | 0.6 | % | 1.4 | % | 2.3 | % | 3.5 | % | 4.1 | % | ||||||||||||||
Lexington Existing Portfolio | 44.5 | % | 40.9 | % | 44.5 | % | 47.0 | % | 51.0 | % | 49.7 | % | 47.4 | % |
2005A | 2006PF | 2007P | 2008P | 2009P | 2010P | 2011P | ||||||||||||||||||||||
Newkirk Existing Portfolio | 55.5 | % | 57.8 | % | 48.9 | % | 40.0 | % | 30.9 | % | 28.7 | % | 29.6 | % | ||||||||||||||
Newkirk Base Acquisitions | 0.0 | % | 1.3 | % | 6.0 | % | 11.1 | % | 14.1 | % | 15.4 | % | 15.5 | % | ||||||||||||||
Newkirk Acquisitions Leveraging Platform | 0.0 | % | 0.0 | % | 0.0 | % | 1.1 | % | 3.7 | % | 5.7 | % | 7.0 | % | ||||||||||||||
Lexington Acquisitions | 0.0 | % | 0.0 | % | 0.6 | % | 1.4 | % | 2.3 | % | 3.3 | % | 3.8 | % | ||||||||||||||
Lexington Existing Portfolio | 44.5 | % | 40.9 | % | 44.5 | % | 46.5 | % | 49.1 | % | 46.8 | % | 44.0 | % |
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Accretion / Dilution Versus Existing Rent in-Place FFO | ||||||||||||
Lexington Board | ||||||||||||
Deployment of | Deployment With | Presentation Dated | ||||||||||
Year | Existing Capital | Leverage | July 12 | |||||||||
2006PF | (15.9 | )% | (15.9 | )% | NA | |||||||
2007P | (13.4 | )% | (13.4 | )% | (17.4 | )% | ||||||
2008P | 3.9 | % | 5.3 | % | (0.7 | )% | ||||||
2009P | 38.8 | % | 44.8 | % | 37.1 | % | ||||||
2010P | 67.7 | % | 78.8 | % | 68.7 | % |
Accretion / Dilution Versus Deployment of Existing Capital and Incremental Leverage FFO | ||||||||||||
Lexington Board | ||||||||||||
Deployment of | Deployment With | Presentation Dated | ||||||||||
Year | Existing Capital | Leverage | July 12 | |||||||||
2006PF | (17.8 | )% | (17.8 | )% | NA | |||||||
2007P | (25.1 | )% | (25.1 | )% | (28.6 | )% | ||||||
2008P | (21.4 | )% | (20.45 | ) | (24.9 | )% | ||||||
2009P | (4.7 | )% | (0.6 | )% | (5.9 | )% | ||||||
2010P | 9.2 | % | 16.4 | % | 9.9 | % |
Accretion / Dilution Versus Existing Rent in-Place AFFO | ||||||||||||
Lexington Board | ||||||||||||
Deployment of | Deployment With | Presentation Dated | ||||||||||
Year | Existing Capital | Leverage | July 12 | |||||||||
2006PF | (21.6 | )% | (21.6 | )% | NA | |||||||
2007P | (3.2 | )% | (3.2 | )% | (8.1 | )% | ||||||
2008P | 19.3 | % | 20.7 | % | 16.6 | % | ||||||
2009P | 54.5 | % | 60.4 | % | 52.5 | % | ||||||
2010P | 65.6 | % | 75.0 | % | 63.5 | % |
Accretion / Dilution Versus Deployment of Existing Capital and Incremental Leverage AFFO | ||||||||||||
Lexington Board | ||||||||||||
Deployment of | Deployment With | Presentation Dated | ||||||||||
Year | Existing Capital | Leverage | July 12 | |||||||||
2006PF | (23.0 | )% | (23.0 | )% | NA | |||||||
2007P | (14.4 | )% | (14.4 | )% | (18.7 | )% | ||||||
2008P | (8.0 | )% | (6.9 | )% | (10.1 | )% | ||||||
2009P | 5.4 | % | 9.5 | % | 4.1 | % | ||||||
2010P | 8.9 | % | 15.1 | % | 7.5 | % |
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• | existence, good standing, authority and compliance with law; | |
• | subsidiaries; | |
• | capitalization; | |
• | authority to enter into the merger agreement and related agreements and to consummate the merger; | |
• | no conflicts, required filings and consents; | |
• | neither the merger agreement nor the consummation of the merger will breach organizational documents or material agreements; | |
• | neither the merger agreement nor the consummation of the merger requires any governmental consents; | |
• | permits; | |
• | compliance; | |
• | compliance with SEC reporting requirements; | |
• | financial statements prepared in accordance with United States generally accepted accounting principles (“U.S. GAAP”); | |
• | no material undisclosed liabilities; | |
• | the absence of certain changes since April 1, 2006; | |
• | the absence of material legal proceedings; | |
• | benefits, labor and employee matters; | |
• | accuracy and compliance of this joint proxy statement/prospectus; | |
• | real property and leases; | |
• | pending transactions regarding personal property; | |
• | property title and title insurance; | |
• | compliance with requirements of governmental authorities; | |
• | condemnation or rezoning proceedings; | |
• | third-party purchase options; | |
• | site work and reimbursements due from third parties; | |
• | property management agreements; | |
• | participation agreements; | |
• | required material repairs or alterations; | |
• | renovations or restorations in progress; | |
• | intellectual property; | |
• | tax matters, including qualification as a REIT and tax protection agreements; | |
• | environmental matters; | |
• | material contracts, debt instruments and hedging transactions; |
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• | brokers’, finders’ or investment bankers’ fees; | |
• | receipt of opinions of financial advisors; | |
• | insurance; | |
• | disclosure of all related party transactions; | |
• | exemption of the merger from anti-takeover statutes; | |
• | inapplicability of the Investment Company Act of 1940; and | |
• | compliance with the Patriot Act. |
• | conduct its business only in the ordinary course of business and in a manner that is consistent with past practice; | |
• | use commercially reasonable efforts to keep available the services of its officers and key employees and to preserve its relationships with tenants, customers, suppliers and others with whom it does business; and | |
• | use commercially reasonable efforts to maintain its assets and properties in their current condition between signing and closing; |
• | amend its charter/declaration of trust or by-laws or the organizational or governance documents of its operating partnership(s); | |
• | issue, sell, repurchase or redeem any shares of its capital stock or equity equivalents, other than: |
• | with respect to Lexington: (i) the issuance of Lexington common shares (A) under outstanding options, Lexington’s Series C Preferred Shares and Lexington’s joint venture investment programs, (B) in exchange for operating partnership units, (C) in connection with Lexington’s dividend reinvestment plan, employee stock purchase plan or director stock plan; (ii) the issuance of shares by Lexington Strategic Asset Corp. in connection with its initial public offering; (iii) the issuance of operating partnership units in connection with property acquisitions; and (iv) the repurchase of up to 2.0 million Lexington common shares; and | |
• | with respect to Newkirk: (i) the issuance of shares of Newkirk common stock in exchange for MLP units; (ii) the issuance of MLP units in connection with property acquisitions; and (iii) the redemption of MLP units pursuant to the MLP partnership agreement. |
• | split, combine or reclassify any of its or its subsidiaries’ shares or partnership interests; |
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• | declare, set aside or pay any dividends or distributions on any of its subsidiaries’ equity securities, other than |
• | with respect to Lexington: (i) regular quarterly dividends on Lexington common shares and corresponding regular quarterly distributions payable to operating partnership unitholders (not in excess of $0.365 per share or unit); (ii) distributions required under Lexington’s joint venture agreements; (iii) the Lexington special distribution; (iv) regular cash dividends on Lexington’s preferred shares; (v) dividends or distributions paid by any of Lexington’s subsidiaries to Lexington directly or indirectly; (vi) dividends or distributions required for Lexington to maintain its status as a REIT or avoid paying income or excise tax otherwise payable; and (vii) in the event Newkirk makes a distribution to maintain its status as a REIT or avoid income or excise tax, a corresponding distribution equal to 125% of the excess of Newkirk’s distribution over its regular quarterly dividend; and | |
• | with respect to Newkirk: (i) regular quarterly dividends on shares of Newkirk common stock and corresponding regular quarterly distributions payable to operating partnership unit holders (not in excess of $0.40 per share or unit); (ii) distributions by 111 Debt Acquisition Holdings LLC; (iii) dividends or distributions paid by any of its subsidiaries to it directly or indirectly; (iv) dividends or distributions required for it to maintain its status as a REIT or avoid paying income or excise tax otherwise payable; and (v) in the event Lexington makes a distribution to maintain its status as a REIT or to avoid income or excise tax, a corresponding distribution equal to 80% of the excess of Lexington’s distribution over its regular quarterly dividend; |
• | except for identified assets or within certain thresholds and for obligations in effect on July 23, 2006, purchase or acquire any assets; | |
• | subject to certain exceptions, incur debt in excess of normal working capital borrowings; | |
• | except as may be required by any benefit plan in effect on July 23, 2006, increase the compensation or benefits payable, or grant any severance rights, to directors, trustees, officers or employees; | |
• | subject to certain exceptions pay, prepay or satisfy any debt where a prepayment penalty or similar charge will apply; | |
• | except as contemplated by the merger agreement, amend or waive any performance or vesting criteria or accelerate vesting, exercisability or funding under any benefit plan; | |
• | change, in any material respect, any of Lexington’s accounting principles or practices except as required by U.S. GAAP or changes in law; | |
• | except pursuant to agreed-upon criteria and for obligations in effect on December 21, 2005, enter into, renew, terminate or materially modify any lease; | |
• | make capital expenditures or undertake development activities, in each case other than in accordance with agreed-upon budgets; | |
• | except for identified assets or within certain thresholds and for obligations in effect on July 23, 2006, dispose of or sell any assets; | |
• | settle or compromise any material litigation; | |
• | make any material tax election or settle or compromise any material tax liability; | |
• | enter into any tax protection agreements; | |
• | with respect to Newkirk, amend the advisory agreement with NKT Advisors; | |
• | subject to certain exceptions, enter into agreements with affiliates; and | |
• | agree to take any of the foregoing actions. |
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• | preparing and filing with the SEC this joint proxy statement/prospectus and holding a shareholders’ or stockholders’ meeting to vote on the merger agreement, the merger and the related transactions; | |
• | subject to certain limitations, Lexington’s board of trustees recommending that Lexington common shareholders and Newkirk’s board of directors recommending that Newkirk voting stockholders approve the merger agreement, the merger and the related transactions and use reasonable efforts to obtain the necessary shareholder or stockholder approval; | |
• | providing the other party and its representatives and designees access to its and its subsidiaries’ properties, books, records, contracts and other information; | |
• | with respect solely to Newkirk, preparing and filing with the SEC a proxy statement and holding a meeting of the MLP unitholders to vote on the amended MLP partnership agreement; | |
• | subject to certain exceptions, refraining from soliciting proposals for alternative acquisition transactions; | |
• | entering into agreements with Apollo and Vornado exempting their ownership interests in Lexington Realty Trust from the ownership limits under Lexington’s Amended and Restated Declaration of Trust; and | |
• | taking certain steps to consummate and make effective the merger. |
• | approval of the merger by the requisite number of shareholders of Lexington and holders of Newkirk voting stock; | |
• | absence of any governmental order prohibiting, restricting or preventing the merger; | |
• | execution by the MLP, Lexington and certain operating partnerships of Lexington of a funding agreement described under “Ancillary Agreements”; | |
• | effectiveness of this registration statement and proxy onForm S-4; | |
• | no action or investigation by the SEC to suspend the effectiveness of this registration statement shall have been initiated and be continuing; and |
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• | receipt of all necessary approvals under state securities laws, the Securities Act or the Exchange Act relating to the issuance or trading of Lexington common shares. |
• | the representations and warranties of Newkirk in the merger agreement that (i) are not made as of a specific date shall be true and correct in all material respects (without giving effect to any limitation as to “materiality” set forth therein) as of the date of the merger agreement and as of the closing of the merger, as though made on and as of the closing; and (ii) are made as of a specific date shall be true and correct (without giving effect to any limitation as to “materiality” set forth therein) as of such date, in each case except where the failure of such representations or warranties to be true and correct (without giving effect to any limitation as to “materiality” or “Material Adverse Effect” set forth therein) would not have a Material Adverse Effect; | |
• | Newkirk 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 on or prior to the Closing; | |
• | each of the ancillary agreements to which Newkirk or certain of its subsidiaries is a party shall have been duly executed and delivered by Newkirk; | |
• | the Amended MLP partnership agreement shall have been approved and adopted by the requisite vote of the holders of the MLP units; | |
• | Michael L. Ashner shall have executed his employment agreement with Lexington; | |
• | Lexington shall have received the opinion of Paul Hastings as to the qualification of the merger as a reorganization under the Code and Newkirk shall have received the opinion of Katten Muchin as to certain tax matters relating to Newkirk’s status as a REIT; | |
• | Newkirk shall have received certain specified permits, authorizations, consents and approvals; and | |
• | 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 Newkirk. |
• | the representations and warranties of Lexington in the merger agreement that (i) are not made as of a specific date shall be true and correct in all material respects (without giving effect to any limitation as to “materiality” set forth therein) as of the date of the merger agreement and as of the closing of the merger, as though made on and as of the closing; and (ii) are made as of a specific date shall be true and correct (without giving effect to any limitation as to “materiality” set forth therein) as of such date, in each case except where the failure of such representations or warranties to be true and correct (without giving effect to any limitation as to “materiality” or “Material Adverse Effect” set forth therein) would not have a Material Adverse Effect; | |
• | Lexington 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 on or prior to the Closing; | |
• | each of the ancillary agreements to which Lexington is a party shall have been duly executed and delivered by Lexington; |
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• | Lexington shall have taken all action necessary to reconstitute its board of trustees as set forth in the merger agreement, effective as of the closing of the merger; | |
• | Lexington shall have validly authorized its common shares to be issued in connection with the merger and such shares shall have been approved for listing on the New York Stock Exchange; | |
• | Newkirk shall have received the opinion of Katten Muchin as to the qualification of the merger as a reorganization under the Code and Lexington shall have received the opinion of Paul Hastings as to certain tax matters relating to Lexington’s status as a REIT; | |
• | Lexington shall have received certain specified permits, authorizations, consents and approvals; and | |
• | 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 Lexington. |
• | any decrease in the market price or trading volume of Lexington common shares or Newkirk common stock, as applicable; | |
• | any events, circumstances, changes or effects that affect the real estate ownership and leasing business generally; | |
• | any changes in the United States or global economy or capital, financial or securities markets generally, including changes in interest or exchange rates; | |
• | the commencement or escalation of a war or armed hostilities or the occurrence of acts of terrorism or sabotage; | |
• | any changes in the general economic, legal, regulatory or political conditions in the geographic regions in which Lexington and its subsidiaries operate or Newkirk and its subsidiaries operate, as applicable; | |
• | any events, circumstances, changes or effects arising from the consummation or anticipation of the merger or the announcement of the execution of the merger agreement; | |
• | any events, circumstances, changes or effects arising from the compliance with the terms of, or the taking of any action required by, the merger agreement; | |
• | earthquakes, hurricanes or other natural disasters; | |
• | changes in law or U.S. GAAP; or | |
• | damage or destruction of any Lexington property or Newkirk property, as applicable, caused by casualty and not covered by insurance. |
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• | soliciting, or initiating the submission of, any acquisition proposal; or | |
• | participating in any negotiations regarding, or furnishing any information with respect to, or otherwise cooperating with respect to any acquisition proposal. |
• | such acquisition proposal was unsolicited and the board of Lexington or Newkirk, as the case may be, determines in good faith that such acquisition proposal constitutes or is reasonably likely to result in a superior proposal; and | |
• | the board of Lexington or Newkirk, as the case may be, determines in good faith that failure to participate in such negotiations, furnish information or otherwise cooperate would be reasonably likely to be inconsistent with such board’s duties under applicable law. |
• | merger, consolidation or similar transaction involving Lexington, certain Lexington partnerships or any Significant Subsidiary of Lexington (as defined inRule 1-02 ofRegulation S-X, but substituting 25% for the references to 10% therein); | |
• | sale, lease or other disposition, directly or indirectly, by merger, consolidation, share exchange or otherwise, of any assets of Lexington or its subsidiaries representing 25% or more of the consolidated assets of Lexington or its subsidiaries; | |
• | issue, sale or other disposition of (including by way of merger, consolidation, share exchange or any similar transaction) securities (or options, rights or warrants to purchase, or securities convertible into, such securities) representing 25% or more of the votes associated with the outstanding securities of Lexington; | |
• | tender offer or exchange offer in which any person, entity or “group” (as such term is defined under the Exchange Act) shall acquire beneficial ownership (as such term is defined inRule 13d-3 under the Exchange Act), or the right to acquire beneficial ownership, of 25% or more of the outstanding shares of Lexington common shares or outstanding equity interest of certain Lexington partnerships; | |
• | recapitalization, restructuring, liquidation, dissolution, or other similar type of transaction with respect to Lexington or the Lexington operating partnerships; or | |
• | transaction which is similar in form, substance or purpose to any of the foregoing transactions. |
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• | by the mutual written consent of Newkirk and Lexington; | |
• | by either Lexington or Newkirk by written notice to the other party if there exists any order, decree or ruling or any other action, in each case permanently restraining, enjoining or otherwise prohibiting the transactions contemplated by the merger agreement; | |
• | by either Lexington or Newkirk by written notice to the other party if Newkirk, on the one hand, or Lexington, on the other hand, has materially breached any of its representations, warranties, covenants or agreements set forth in the merger agreement, such that such party’s applicable closing condition is not satisfied and such breach is either not curable or has not been cured by the earlier of 60 days and March 31, 2007 (except that this right to terminate the merger agreement will not be available to any party if such party is then in material breach of any of its representations, warranties, covenants or agreements set forth in the merger agreement such that its applicable closing condition would not be satisfied or if such party’s action or failure to act has been a principal cause of or resulting in the failure of the merger to be consummated on or prior to such date); | |
• | by either Lexington or Newkirk if Lexington shareholders do not approve the merger agreement and the merger at the Lexington special meeting duly convened or at any adjournment of that meeting; | |
• | by either Lexington or Newkirk if Newkirk stockholders do not approve the merger agreement and the merger at the Newkirk special meeting duly convened or at any adjournment of that meeting; | |
• | by Newkirk if Lexington’s board of trustees (i) publicly withdraws or modifies in a manner adverse to Newkirk its approval or recommendation of the merger agreement or the transactions contemplated by the merger agreement, including the merger; or (ii) publicly recommends or approves any acquisition proposal other than that contemplated by the merger agreement; | |
• | by Lexington if Newkirk’s board of directors (i) publicly withdraws or modifies in a manner adverse to Lexington its approval or recommendation of the merger agreement or the transactions contemplated by the merger agreement, including the merger; or (ii) publicly recommends or approves any acquisition proposal other than that contemplated by the merger agreement; | |
• | by Lexington if, prior to obtaining the approval of the Lexington shareholders at the Lexington special meeting, Lexington’s board of trustees determines in good faith (i) to accept a superior proposal in accordance with the terms and subject to the conditions described in “No Solicitation,” and (ii) that failure to terminate the merger agreement would reasonably be likely to be inconsistent with the duties of Lexington’s board of trustees under applicable law; | |
• | by Newkirk if, prior to obtaining the approval of the Newkirk stockholders at the Newkirk special meeting, Newkirk’s board of directors determines in good faith (i) to accept a superior proposal in accordance with the terms and subject to the conditions described in “No Solicitation,” and (ii) that failure to terminate the merger agreement would reasonably be likely to be inconsistent with the duties of Newkirk’s board of directors under applicable law; or | |
• | by either Lexington or Newkirk if the merger has not been completed by March 31, 2007, except that this right to terminate the merger agreement will not be available to any party if such party is in material breach of the merger agreement. |
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• | For Failure to Obtain Shareholder Approval. If the merger agreement is terminated by Lexington or Newkirk on account of a failure by the other party to obtain shareholder approval, then the party that failed to get shareholder approval will promptly pay to the other party the lesser of (i) such party’s transaction expenses and (ii) $5.0 million (such amount referred to as the Non-Approval Expense Fee). If after such termination the party that failed to obtain shareholder approval enters into a definitive agreement with respect to an alternative acquisition proposal within six months, then upon signing of such definitive agreement, such party will pay the other party an amount equal to the difference between $25.0 million (such amount referred to as the Break Up Fee) and the amount of theNon-Approval Expense Fee previously paid. | |
• | For Breach of Representations, Warranties, Covenants or Agreements. If the merger agreement is terminated by Lexington orNewkirk on account of an uncured breach by the other party, then the breaching party will promptly pay to the other party the lesser of (i) the terminating party’s actual transaction expenses and (ii) $5,000,000 (such amount referred to as the Expense Fee), and if within six months following such termination, the breaching party enters into a definitive agreement with respect to an alternative acquisition proposal, then, upon signing of such definitive agreement, the breaching party will pay to the other party an amount equal to the difference between the Break Up Fee and the Expense Fee previously paid. | |
• | For Withdrawal of Recommendation. If the merger agreement is terminated by Lexington or Newkirk on account of it’s board either withdrawing its recommendation of the merger or recommending an alternative acquisition proposal, then the party withdrawing its recommendation or recommending an alternative acquisition proposal will promptly pay to the other party the Expense Fee, and if within six months following such termination, such party withdrawing its recommendation or recommending an alternative acquisition transaction enters into a definitive agreement with respect to an alternative acquisition proposal, then upon signing of such definitive agreement, such party will pay to the other party an amount equal to the difference between the Break Up Fee and the Expense Fee previously paid. |
• | For Good Faith Acceptance of Superior Proposal. If the merger agreement is terminated by Lexington or Newkirk on account of the other party accepting a superior proposal, then the party accepting such superior proposal will, upon termination of the merger agreement, pay to the other party the Break Up Fee. |
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• | to vote all Newkirk voting shares beneficially owned by each of them as of the record date at the Newkirk special meeting in favor of the merger proposal and, if applicable, amending the MLP Agreement (and against competing proposals); and | |
• | not to transfer Newkirk voting shares beneficially owned by each of them until after the “termination date.” |
• | of the closing of the merger; | |
• | of the termination of the merger agreement pursuant to its terms; | |
• | if any, upon which Newkirk’s board of directors withdraws its recommendation of the merger; and | |
• | if any, upon which Newkirk’s board of directors recommends any acquisition proposal other than the merger. |
• | if Lexington terminates the employment of Mr. Ashner other than for “cause” (as defined in the employment agreement between Lexington and Mr. Ashner) or if Mr. Ashner terminates his employment with Lexington for “good reason” (as defined in such employment agreement), the later of such date or the date on which Mr. Ashner ceases to be a trustee of Lexington; or | |
• | other than as set forth above, the six month anniversary of the later of (i) the date on which Mr. Ashner ceases to be an officer of Lexington and (ii) the date on which Mr. Ashner ceases to be a trustee of Lexington. |
• | a property that is either (a) triple net leased or (b) where a single tenant leases at least 85% of the rentable square footage of the property and, in addition to base rent, the tenant is required to pay some or all of the operating expenses for the property, and, in both (a) and (b) the lease has a remaining term, exclusive of all unexercised renewal terms, of more than 18 months; |
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• | management agreements and master leases with terms of greater than three years where a manager or master lessee bears all operating expenses of the property and pays the owner a fixed return; | |
• | securities of companies including, without limitation, corporations, partnerships and limited liability companies, whether or not publicly traded, that are primarily invested in assets that meet the two requirements listed above; and | |
• | all re-tenanting and redevelopment associated with such properties, agreements and leases, and all activities incidental thereto. |
• | incorporate the terms of Lexington’s outstanding preferred shares, the Series B Preferred Shares and the Series C Preferred Shares, and all previous amendments to the declaration of trust made from time to time; | |
• | remove the terms of Lexington’s Class A Senior Cumulative Convertible Preferred Stock, par value $0.01 per share, which is no longer outstanding or authorized to be issued; and | |
• | reflect the current information with respect to the registered agent and principal office of Lexington in the State of Maryland and identify the individuals that will serve as trustees until their successors are elected and qualified, as required by Maryland law in a restatement. |
• | change Lexington’s name to Lexington Realty Trust; |
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• | increase the total number of shares of beneficial interest of all classes which Lexington has authority to issue from 340,000,000 to 1,000,000,000 shares of beneficial interest (par value $.0001 per share), of which 400,000,000 shares (formerly 160,000,000) shares are classified as “Common Stock,” 500,000,000 shares (formerly 170,000,000 shares) are classified as “Excess Stock” and 100,000,000 shares (formerly 10,000,000 shares) are classified as “Preferred Stock.” | |
• | classify and set the terms of one share of beneficial interest in Lexington, designated as special voting preferred stock, par value $0.0001 per share, which share will be issued in the merger to the holder of the special voting preferred stock of Newkirk (as described above under the heading “Special Voting Preferred Stock”); | |
• | remove as unnecessary a provision relating to the rights of successor trustees to the trust property; | |
• | eliminate a requirement to hold the annual meeting of shareholders within 15 days of the delivery of the annual report and six months after the end of the fiscal year, which is no longer required by Maryland law, and clarify that the annual meeting shall be called in accordance with the By-laws; | |
• | eliminate the requirement that conformed the delivery requirements and content of the annual report to a Maryland statute that has been repealed; | |
• | clarify that after termination of Lexington, it is a majority of the trustees that must execute and file with the records of Lexington and the State of Maryland evidence of such termination; | |
• | clarify that the Maryland General Corporation Law shall apply to Lexington to the extent not inconsistent with Lexington’s declaration or By-Laws or the Maryland REIT Law; and | |
• | conform defined terms and paragraph and section references throughout. |
• | provide that the Maryland Control Share Acquisition Act does not apply to any acquisition of Lexington shares; | |
• | eliminate the provision requiring at least 3 and no more than 9 trustees; | |
• | provide that the trustees may consent to actions without a meeting by electronic consent; | |
• | require the approval of a majority of the independent trustees of Lexington for any operating partnership of which Lexington or any of its affiliates is the general partner to make a distribution per unit that is larger than any corresponding distribution to be made by any other such operating partnership; | |
• | clarify that Lexington’s board of trustees shall have a nominating and corporate governance committee consisting solely of independent trustees; | |
• | clarify the vote required to adjourn a shareholder meeting; | |
• | clarify the positions and duties of the officers of Lexington; and | |
• | provide that Lexington’s board of trustees shall determine who shall be authorized to sign checks, notes, drafts, etc. and the manner in which they shall be signed. |
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• | Mr. Ashner will devote such business time, energy, experience and talents to the business of Lexington and its affiliates as is reasonably required to perform his duties hereunder; provided, however, that Mr. Ashner will be able to engage in certain “permitted activities” including without limitation, serving as Chairman and Chief Executive Officer of each of Winthrop, First Winthrop Corporation and Winthrop Realty Partners, L.P. and their respective affiliates, and serving as principal of FUR Advisors LLC, provided that FUR Advisors LLC engages in no business other than acting as advisor for Winthrop; | |
• | The initial term of the agreement is three years, and is thereafter automatically renewable for additional periods of one year; | |
• | Mr. Ashner’s initial base salary will be $450,000, subject to annual review. Mr. Ashner is also entitled to bonuses and incentive compensation, and will receive medical, dental, pension, disability, life insurance, vacation, sick leave, and reimbursement of reasonable expenses; | |
• | Mr. Ashner’s employment may be terminated at any time by Lexington with or without “cause” or by Mr. Ashner with or without “good reason.” If Mr. Ashner is terminated by Lexington prior to but in connection with a merger, such termination will be deemed to be without “cause.” |
• | “Cause” includes (A) Mr. Ashner’s conviction of, plea of nolo contendere to, or written admission of the commission of, a felony (but not a traffic infraction or similar offense), (B) Mr. Ashner’s breach of any material provision of the employment agreement; (C) any act by Mr. Ashner involving moral turpitude, fraud or misrepresentation with respect to his duties for Lexington or its affiliates; or (D) gross negligence or willful misconduct on the part of Mr. Ashner in the performance of his duties as an employee, officer or member of Lexington or its affiliates (that in only the case of gross negligence results in a material economic harm to Lexington); provided, however, that Lexington may not terminate Mr. Ashner’s employment under clauses (B), (C) or (D) unless Mr. Ashner fails to cure after receiving notice from Lexington. | |
• | “Good Reason” includes the occurrence of one or more of the following events without Mr. Ashner’s written consent or, in the case of clause (E) below, without prior written notice to, and the participation or consent of Winthrop, provided that Mr. Ashner first gives Lexington written notice of his intention to terminate and of the grounds for such termination within 90 days of such event, and, with respect to clauses (A) — (D), Lexington has not cured such good reason within thirty (30) days of the Executive giving Lexington written notice thereof: (A) a material reduction of Mr. Ashner’s authority, duties and responsibilities, (B) a reduction in Mr. Ashner’s base salary; (C) a material breach by Lexington of the employment agreement; (D) Lexington’s requiring Mr. Ashner to be based at any office or location located more than fifty (50) miles from the New York metropolitan area, or (E) Lexington acquires or makes an investment in real property other than a net lease business opportunity. |
• | If Mr. Ashner terminates his employment for Good Reason, if Lexington terminates Mr. Ashner’s employment without Cause, or if Mr. Ashner’s employment is terminated prior to but in connection with a change of control of Lexington, Mr. Ashner will be entitled to receive: |
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• | any earned and unpaid base salary and unpaid bonuses for periods ending prior to the termination date; | |
• | rights to which he is entitled under any employee benefit plan, fringe benefit or incentive plan; | |
• | 2.99 times the sum of his base salary at the time of termination plus his regular target bonus (assuming all targets have been achieved); provided that Mr. Ashner will only receive 50% of such amount if he terminates his employment on account of clause (E) of the definition of Good Reason set forth above; and | |
• | a pro rata annual bonus, with all targets deemed to have been achieved, based on the number of days worked by Mr. Ashner during the current fiscal year. |
• | If Mr. Ashner’s employment is terminated on account of death or disability, Mr. Ashner will be entitled to receive: |
• | any earned and unpaid base salary and unpaid bonuses for periods ending prior to the termination date; | |
• | rights to which he is entitled under any employee benefit plan, fringe benefit or incentive plan; | |
• | one times his base salary at the time of termination; and | |
• | a pro rata portion of the annual bonuses he would have received plus a pro rata portion of any long-term incentive awards he would have received, based on the number of days worked by Mr. Ashner during the current fiscal year. |
• | In the event that any payments due to Mr. Ashner become subject to excise tax under Section 4999 of the internal revenue code, Lexington will make Mr. Ashner whole with respect to any such excise taxes. | |
• | Mr. Ashner is obligated not to compete with Lexington, solicit employees, or solicit customers, subject to certain exceptions and limitations. These obligations terminate upon the termination of the exclusivity period under the amended and restated exclusivity agreement. | |
• | Upon the closing of the merger, 83,200 Lexington common shares issuable in connection with the merger and 847,542 MLP units owned by Michael L. Ashner will be subject to transfer restrictions until the earlier of November 1, 2009 and the termination of Mr. Ashner’s employment with Lexington. Until such date, Mr. Ashner has agreed to not transfer or otherwise dispose of such common shares or common shares issued on redemption of such MLP units. |
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• | a United States citizen or resident alien; |
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• | a corporation, or other entity taxable as a corporation for United States federal income tax purposes, created or organized under the laws of the United States or any state therein or the District of Columbia; | |
• | an estate, the income of which is subject to United States federal income taxation regardless of its source; and | |
• | a trust if (i) it is subject to the primary supervision of a court within the United States and one or more United States persons have the authority to control all substantial decisions of the trust or (ii) it was in existence on August 20, 1996 and has a valid election in effect under applicable Treasury Regulations to be treated as a United States person. |
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OF LEXINGTON’S AMENDED AND RESTATED DECLARATION OF TRUST AND BY-LAWS
• | any person who beneficially owns 10% or more of the voting power of the trust’s shares; or | |
• | an affiliate or associate of the trust who, at any time within the two-year period prior to the date in question, was the beneficial owner of 10% or more of the voting power of the then outstanding voting shares of the trust. |
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• | 80% of the votes entitled to be cast by holders of outstanding voting shares of the trust; and | |
• | two-thirds of the votes entitled to be cast by holders of voting shares of the trust other than shares held by the interested shareholder with whom or with whose affiliate the business combination is to be effected or held by an affiliate or associate of the interested shareholder. |
• | 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. |
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• | a classified board; |
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• | a two-thirds vote requirement for removing a trustee; | |
• | a requirement that the number of trustees by fixed only by vote of the trustees; | |
• | a requirement that a vacancy on the board be filled only by the remaining trustees and for the remainder of the full term of the class of trustees in which the vacancy occurred; and | |
• | a majority requirement for the calling of a special meeting of shareholders. |
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SHAREHOLDERS AND NEWKIRK COMMON STOCKHOLDERS
Newkirk | Lexington | |
Newkirk may issue up to 500,000,000 shares of stock, consisting of 400,000,000 shares of common stock and 100,000,000 shares of preferred stock, including one share of preferred stock classified as special voting preferred stock. As permitted by the MGCL, Newkirk’s charter provides that Newkirk’s board of directors, without any action by Newkirk’s stockholders, may amend the charter to increase or decrease the aggregate number of shares of stock or the number of shares of stock beneficial interest of any class or series that Newkirk has authority to issue. Newkirk had, as of October 13, 2006, 19,375,000 shares of common stock and one share of special voting preferred stock outstanding. | Lexington may issue up to 1,000,000,000 shares of beneficial interest, consisting of 400,000,000 shares of common stock, 500,000,000 shares of excess stock and 100,000,000 shares of preferred stock, of which 3,160,000 shares are classified as 8.05% Series B Cumulative Redeemable Preferred Stock, or Series B Preferred Shares, and 3,100,000 shares are classified as 6.50% Series C Cumulative Convertible Preferred Stock, or Series C Preferred Shares, and one share will be classified as special voting preferred stock. Lexington had, as of October 13, 2006, 53,110,833 common shares, 3,160,000 Series B Preferred Shares, 3,100,000 Series C Preferred Shares and no special voting preferred stock outstanding. | |
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Newkirk | Lexington | |
Newkirk’s charter provides that the number of directors may be increased or decreased pursuant to its By-laws. Newkirk’s By-laws provide that a majority of its entire board of directors may establish, increase or decrease the number of directors, provided that the number thereof shall never be less than the minimum number required by the MGCL, which is one, or greater than 11. Newkirk’s board of directors currently consists of eleven directors. Except in the case of a vacancy, a majority of Newkirk’s board of directors must be made up at all time of directors who meet the definition of an “independent director” under the rules of the NYSE or other exchange on which the Newkirk common stock is listed. | Lexington’s Declaration of Trust and By-laws provide that the number of trustees may be increased or decreased by vote of at least a majority of its entire board of trustees, provided that the number thereof shall never be less than the minimum number required by the MRL, which is one. Lexington’s board of trustees will be increased from nine to 11 members at the effective time of the merger. Lexington’s Declaration of Trust and By-laws do not have a comparable requirement with respect to independent trustees, although Lexington is subject to a comparable requirement under the listing standards of the NYSE and, pursuant to Lexington’s Amended and Restated Declaration of Trust and Lexington’s By-laws, certain matters relating to Lexington’s special voting preferred stock and excess distributions by Lexington’s operating partnerships require the approval of trustees who are ‘‘independent” under the rules of the NYSE or other exchange on which the Lexington common shares are listed. |
Newkirk | Lexington | |
Newkirk’s charter provides that any director, or the entire board of directors, may be removed from office at any time, but only for cause and only by the affirmative vote of the holders of at least a majority of the votes of the stock entitled to be cast in the election of directors. | Lexington’s Declaration of Trust provides that any trustee, or the entire board of trustees, may be removed from office at any time, but only for cause and only by the affirmative vote of at least 80% of the votes entitled to be cast generally in the election of the trustees. |
Newkirk | Lexington | |
Newkirk’s By-laws provide that vacancies on the board of directors may be filled by the affirmative vote of the remaining directors except that a vacancy resulting from an increase in the number of directors must be filled by a majority of the entire board of directors and a vacancy resulting from the removal of a board member may also be filled by a vote of the stockholders. | Lexington’s Declaration of Trust provides that vacancies on the board of trustees resulting from an increase in the authorized number of trustees, or death, resignation or retirement or other cause shall be filled by a vote of the shareholders or a majority of trustees then in office. A vacancy on the board of trustees resulting from removal of a trustee by the shareholders shall be filled by a vote of the shareholders. |
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Newkirk | Lexington | |
With the exception of the amendment of the provisions of the charter relating to removal of directors, which requires the affirmative vote of at least two-thirds of all of the votes entitled to be cast by the stockholders on the matter, Newkirk’s charter may be amended only if declared advisable by Newkirk’s board of directors and approved by the affirmative vote of the holders of at least a majority of all of the votes entitled to be cast by the stockholders on the matter. | Subject to the terms of Lexington’s preferred stock, and with the exception of the amendment of certain provisions relating to the termination of Lexington, which requires the affirmative vote of holders of at least two-thirds of all of the votes entitled to be cast on the matter, and certain provisions relating trustees (including removal) and the power of the board of trustees to amend Lexington’s By-laws, each of which requires the affirmative vote of holders of at least 80% of all of the votes entitled to be cast on the matter, Lexington’s Declaration of Trust may be amended only if declared advisable by its board of trustees and approved by Lexington shareholders by the affirmative vote of not less than a majority of all of the votes entitled to be cast on the matter. Two-thirds of the trustees may, after 15 days’ written notice to the shareholders, also amend the Declaration of Trust without the vote or consent of shareholders if in good faith they deem it necessary to conform the declaration to the requirements of the REIT provisions of the Internal Revenue Code. |
Newkirk | Lexington | |
Newkirk’s By-laws provide that Newkirk’s board of directors has the exclusive power to adopt, alter or repeal the By-laws or make new by-laws. Subject to certain exceptions requiring the approval of a majority or all of the “Independent Directors.” Newkirk’s By-laws may be altered, amended or repealed, and new by-laws adopted, by the vote of a majority of the directors present at a meeting at which a quorum is present. | Lexington’s Declaration of Trust provides that its board of trustees is expressly authorized to make, alter or repeal the By-laws of Lexington, provided that any such alteration or repeal shall require the vote of a majority of Lexington’s board of trustees. Lexington’s By-laws provide that they may be repealed, altered, amended or rescinded (a) by the shareholders of Lexington by a vote of not less than 80% of the outstanding shares of beneficial interest entitled to vote generally in the election of trustees or (b) by vote of two-thirds of Lexington’s board of trustees. |
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Newkirk | Lexington | |
Newkirk’s board of directors adopted a resolution excluding Newkirk from the business combination provisions of the MGCL and, consequently, the five-year prohibition and the super-majority vote requirements will not apply to business combinations between Newkirk and any interested stockholder. Such resolution may repealed or modified in the future if such repeal or modification is approved by a unanimous vote of Newkirk’s independent directors. For additional information with respect to the Business Combination Act, see “Certain Provisions of Maryland Law and of Lexington’s Amended and Restated Declaration ofTrust By-laws — Business Combinations.” | Lexington’s board of trustees has not opted out of the business combination provisions of Maryland law and is subject to the five-year prohibition and the super-majority voting requirements with respect to business combinations involving Lexington; however, as permitted under Maryland law, Lexington’s board of trustees may elect to opt out of these provisions in the future. In connection with the merger, Lexington’s board of trustees adopted a resolution excluding certain holders of Newkirk common stock who will receive Lexington common shares in the merger from the provisions of this statute, subject to certain ownership limitations. |
Newkirk | Lexington | |
Newkirk’s By-laws contain a provision exempting from the control share acquisition statute any and all acquisitions by any person of Newkirk’s common stock and, consequently, the provisions of the control share acquisition statute will not apply to holders of Newkirk shares unless Newkirk’s By-laws are amended, with the approval of Newkirk’s independent directors, to modify or eliminate this provision. For additional information with respect to the Maryland Control Share Acquisition Act, see “Certain Provisions of Maryland Law and of Lexington’s Amended and Restated Declaration of Trust andBy-laws — Control Share Acquisitions.” | In connection with its approval of the merger agreement, Lexington’s board of trustees amended the Lexington By-laws to include a provision exempting any and all acquisitions by any person of Lexington shares from the control share acquisition statute. This provision of the Lexington By-laws may be amended or eliminated in the future in accordance with the terms of the By-laws. |
Newkirk | Lexington | |
Newkirk’s charter provides that the Maryland unsolicited takeover statute does not apply to Newkirk. It will remain inapplicable unless Newkirk’s charter is amended, with stockholder approval, to modify or eliminate this provision. For additional information with respect to these unsolicited takeover provisions, see “Certain Provisions of Maryland Law and of Lexington’s Amended and Restated Declaration of Trust andBy-laws — Unsolicited Takeovers.” | The Maryland unsolicited takeover statute, as applicable to a Maryland real estate investment trust that has a class of equity securities registered under the Securities Exchange Act of 1934, permits the board of trustees, without shareholder approval and regardless of what is currently provided in the Declaration of Trust or By-laws, to implement takeover defenses, some of which (for example, a classified board) Lexington does not yet have. |
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Newkirk | Lexington | |
Under the MGCL and Newkirk’s charter, Newkirk generally cannot dissolve, amend its charter, merge, consolidate, transfer all or substantially all of its assets, engage in a statutory share exchange or engage in similar transactions outside the ordinary course of business unless it is declared advisable by its board of directors and approved by the affirmative vote of stockholders holding at least a majority of all of the votes entitled to be cast on the matter. | Under the MRL and Lexington’s Amended and Restated Declaration of Trust, Lexington generally cannot amend its Declaration of Trust or engage in a merger, unless it is declared advisable by its board of trustees and approved by the affirmative vote of shareholders entitled to cast at least a majority of all of the votes entitled to be cast on the matter. Lexington’s Amended and Restated Declaration of Trust also provides that Lexington’s termination must be approved by Lexington’s shareholders by the affirmative vote of at least two-thirds of the votes entitled to be cast on the matter. |
Newkirk | Lexington | |
Newkirk’s By-laws provide that its board of directors may authorize any agreement or other transaction with any beneficial owner of more than 4.9% of Newkirk’s stock entitled to vote generally in the election of directors, or an officer, director, member, partner or greater than 4.9% stockholder of any such owner, or certain other specified holders, if and only if: (i) the existence is disclosed or known to the board of directors, and the contract or transaction is authorized, approved or ratified by the affirmative vote of not less than a majority of the disinterested directors, even if they constitute less than a quorum of the Board of Directors; or (ii) the existence is disclosed to the stockholders entitled to vote, and the agreement or transaction is authorized, approved or ratified by a majority of the votes cast by the disinterested stockholders. | Lexington’s Declaration of Trust and By-laws do not contain a comparable provision with respect to greater than 4.9% holders. |
Newkirk | Lexington | |
Newkirk’s By-laws provide that special meetings of stockholders may only be called by Newkirk’s chairman of the board, chief executive officer or board of directors or by the secretary upon the written request of stockholders entitled to cast not less than a majority of all the votes entitled to be cast at such a meeting pursuant to the procedures set forth in Newkirk’s By-laws for making such a request. | Lexington’s By-laws provide that a special meeting of the shareholders may be called by the chairman of the board of trustees or the president or by a majority of the board of trustees by vote at a meeting or in writing (addressed to the secretary of Lexington) with or without a meeting and as may be required by law. |
Newkirk | Lexington | |
Newkirk’s By-laws provide that with respect to an annual meeting of stockholders, nominations of individuals for election to the board of directors and the proposal of business to be considered by | Lexington’s By-laws provide that for any shareholder proposal to be presented in connection with an annual meeting of shareholders, including any proposal relating to the nomination of a trustee, the |
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Newkirk | Lexington | |
stockholders may be made only: (i) pursuant to Newkirk’s notice of the meeting; (ii) by the board of directors; or (iii) by a stockholder who is entitled to vote at the meeting and who has complied with the advance notice procedures of the By-laws. With respect to special meetings of stockholders, only the business specified in Newkirk’s notice of the meeting may be brought before the meeting. To be timely, subject to certain exceptions when the date of the meeting is advanced or delayed, a stockholder’s proposal shall set forth the information required by Newkirk’s By-laws and shall be delivered to the secretary at the principal executive offices of Newkirk not less than 90 days nor more than 120 days prior to the first anniversary of the date of mailing of the notice of the prior year’s annual meeting. | shareholders must have given timely notice thereof in writing to the secretary of Lexington. To be timely, subject to certain exceptions when the date of the meeting is advanced or delayed, a shareholder’s proposal shall be delivered to the secretary at the principal executive offices of Lexington not less than 120 days in advance of the release date of Lexington’s proxy statement to shareholders in connection with the preceding year’s annual meeting. Such notice must also contain the information required by Lexington’s By-laws. Lexington’s By-laws do not contain a comparable provision with respect to special meetings. | |
Nominations of individuals for election to the board of directors at a special meeting may be made only (i) pursuant to Newkirk’s notice of the meeting; (ii) by the board of directors; or (iii) provided that the board of directors has determined that directors will be elected at the meeting, by a stockholder who is entitled to vote at the meeting and who has complied with the advance notice provisions of the By-laws. | ||
To be timely, a stockholder’s nomination of a director shall set forth the information required by Newkirk’s By-laws and shall be delivered to the secretary at the principal executive offices of Newkirk not earlier than the 120th day prior to such special meeting and not later than the close of business on the 90th day prior to such special meeting or the tenth day following the day on which public announcement is first made of the date of the special meeting and the nominees proposed by the board of directors to be elected at such meeting. |
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Newkirk | Lexington | |
Under the MGCL, a stockholder has the right to demand and receive payment of fair value of his stock from the successor if: (i) the corporation consolidates or merges with another corporation; (ii) the stockholder’s stock is to be acquired in a share exchange; (iii) the corporation transfers all or substantially all of its assets; (iv) the corporation alters its charter in a way which alters the contract rights as set forth in the charter of any outstanding stock and substantially adversely affects the stockholder’s rights, unless the right to do so is reserved in the charter; or (v) the transaction is one governed by the Maryland business combination act or exempted pursuant to the minimum price provisions. However, this right to demand and receive payment of fair value is not available, except for transactions subject pursuant to the Maryland business combination act, if: (i) the stock is listed on a national securities exchange; (ii) the stock is that of a successor merger, unless the merger alters the contract rights of the stock and the charter does not reserve the right to do so or the stock is changed into something other than stock in the successor or cash, scrip or other rights or interest arising out of the treatment of fractional shares; (iii) the stock is not entitled to be voted on the transaction; (iv) the charter provides that the holders of the stock are not entitled to exercise the rights of an objecting stockholder; or (v) the stock is that of an open-end investment company. | Under the MRL, each shareholder of a Maryland real estate investment trust objecting to the merger of such trust has the right to exercise the same rights as an objecting stockholder of a Maryland corporation. Such rights also apply to a Maryland real estate investment trust in the context of the Maryland business combination act. Lexington’s Declaration of Trust does not contain a comparable provision prohibiting its shareholders from exercising the rights of an objecting shareholder. | |
As permitted by the MGCL, Newkirk’s charter provides that holders of shares of stock shall not be entitled to exercise any rights of an objecting stockholder unless Newkirk’s board of directors, upon the affirmative vote of a majority of the board of directors, shall determine that such rights apply, with respect to all or any classes or series of stock, to one or more transactions occurring after the date of such determination in connection with which holders of such shares would otherwise be entitled to exercise such rights. |
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100 F Street, N.E., Room 1580
Washington, D.C. 20549
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Lexington Filings (File No. 001-12386) | Period | |
Annual Report onForm 10-K | Year ended December 31, 2005, as amended by Amendment No. 1 thereto filed onForm 10-K/A on March 16, 2006 | |
Quarterly Reports onForm 10-Q | Quarter ended March 31, 2006 | |
Quarter ended June 30, 2006 | ||
Current Reports onForm 8-K | Filed on: | |
January 5, 2006 | ||
January 6, 2006 | ||
February 6, 2006 | ||
February 16, 2006 | ||
March 20, 2006 | ||
March 27, 2006 | ||
April 27, 2006 | ||
May 5, 2006 | ||
June 2, 2006 | ||
July 24, 2006 | ||
August 1, 2006 | ||
August 15, 2006 | ||
September 13, 2006 | ||
October 6, 2006 | ||
October 10, 2006 | ||
October 13, 2006 |
One Penn Plaza, Suite 4015
New York, New York10119-4015
Attention: Investor Relations
Telephone:(212) 692-7200
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• | statements relating to the cost savings that Lexington anticipates will result from the merger; | |
• | statements relating to the accretion/dilution to funds from operations per share that Lexington expects from the merger; | |
• | statements regarding other perceived benefits expected to result from the merger; | |
• | statements with respect to various actions to be taken or requirements to be met in connection with completing the merger or integrating Lexington and Newkirk; and | |
• | statements relating to revenue, income and operations of the combined company after the merger is completed. |
• | cost savings expected from the merger may not be fully realized; | |
• | revenue of the combined company following the merger may be lower than expected; | |
• | costs or difficulties related to the integration of the businesses of Lexington and Newkirk following the merger may be greater than expected; | |
• | general economic conditions, either internationally or nationally or in the jurisdictions in which Lexington or Newkirk is doing business, may be less favorable than expected; | |
• | legislative or regulatory changes, including changes in environmental regulation, may adversely affect the businesses in which Lexington and Newkirk are engaged; | |
• | there may be environmental risks and liability under federal, state and foreign environmental laws and regulations; and | |
• | changes may occur in the securities or capital markets. |
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INDEX TO UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
Page | ||||
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Pro Forma | ||||||||||||||||
Lexington | Newkirk(P) | Merger | Pro Forma | |||||||||||||
(Historical) | (Historical) | Adjustments | Adjusted | |||||||||||||
(Dollars in thousands) | ||||||||||||||||
ASSETS | ||||||||||||||||
Real estate at cost, net | $ | 1,619,398 | $ | 1,012,917 | $ | 404,750 | (C) | $ | 3,037,065 | |||||||
Properties held for sale — discontinued operations | 7,956 | 146,108 | 62,911 | (D) | 216,975 | |||||||||||
Intangible assets, net | 133,046 | 19,895 | 382,743 | (F) | 535,684 | |||||||||||
Cash and cash equivalents | 54,318 | 48,605 | (31,468 | )(B) | 71,455 | |||||||||||
Investment in non-consolidated entities | 186,391 | 42,588 | (4,342 | )(E) | 224,637 | |||||||||||
Deferred expenses, net | 14,440 | 10,552 | (9,138 | )(G) | 15,854 | |||||||||||
Notes receivable, including accrued interest | 33,757 | 14,974 | 18,396 | (H) | 67,127 | |||||||||||
Investments in marketable equity securities | 4,221 | 10,045 | — | 14,266 | ||||||||||||
Rent receivable — current | 6,052 | 51,577 | — | 57,629 | ||||||||||||
Rent receivable — deferred | 26,551 | 22,463 | (22,463 | )(I) | 26,551 | |||||||||||
Other assets | 54,867 | 48,330 | (3,671 | )(J) | 99,526 | |||||||||||
Total assets | $ | 2,140,997 | $ | 1,428,054 | $ | 797,718 | $ | 4,366,769 | ||||||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||||||||||
Borrowings on credit facility | $ | — | $ | 557,065 | $ | — | $ | 557,065 | ||||||||
Mortgages and notes payable | 1,152,805 | 244,535 | (1,719 | )(K) | 1,395,621 | |||||||||||
Liabilities — discontinued operations | 4,180 | 58,424 | (259 | )(L) | 62,345 | |||||||||||
Accounts payable and other liabilities | 24,305 | 12,672 | 14,059 | (M) | 51,036 | |||||||||||
Accrued interest payable | 5,885 | 5,518 | — | 11,403 | ||||||||||||
Deferred revenue | 6,141 | 13,434 | 131,085 | (N) | 150,660 | |||||||||||
Total liabilities | 1,193,316 | 891,648 | 143,166 | 2,228,130 | ||||||||||||
Minority interests | 60,347 | 359,252 | 524,136 | (O) | 943,735 | |||||||||||
Shareholders’ equity | 887,334 | 177,154 | 130,416 | (A) | 1,194,904 | |||||||||||
Total liabilities and shareholders’ equity | $ | 2,140,997 | $ | 1,428,054 | $ | 797,718 | $ | 4,366,769 | ||||||||
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Notes to Unaudited Pro Forma Condensed Consolidated Balance Sheet
June 30, 2006
(dollars in thousands, except per share data)
(A | ) | Shareholders’ equity | ||||||
Newkirk common stock outstanding at June 30, 2006 | 19,375,000 | |||||||
Exchange ratio | 0.80 | |||||||
Shares of Lexington to be issued | 15,500,000 | |||||||
Average share price (rounded) | $ | 20.42 | ||||||
Fair value of equity to be issued | 316,583 | |||||||
Special dividend of $0.17 per share assumed to be paid by Lexington prior to or on the effective date of the merger | (9,013 | ) | ||||||
Newkirk historical equity | (177,154 | ) | ||||||
Pro forma equity adjustment | $ | 130,416 | ||||||
(B | ) | Cash and cash equivalents | ||||||
Reduction in cash for items assumed to be paid by Newkirk prior to or on the effective date of the merger, for: | ||||||||
Termination of advisory fee agreement pursuant to merger agreement | $ | (12,500 | ) | |||||
Merger investment advisory fees | (6,000 | ) | ||||||
Merger legal and accounting fees | (3,000 | ) | ||||||
Reduction in cash for special dividend/distribution of $0.17 per share/unit assumed to be paid by Lexington prior to or on the effective date of the merger | (9,968 | ) | ||||||
$ | (31,468 | ) | ||||||
(C | ) | Real estate at cost, net | ||||||
Adjustment to real estate at cost, net, calculated as follows: | ||||||||
Estimated fair value of Newkirk real estate | $ | 1,417,667 | ||||||
Newkirk historical basis | (1,012,917 | ) | ||||||
$ | 404,750 | |||||||
(D | ) | Properties held for sale — discontinued operations | ||||||
Adjustment to historical basis of Newkirk’s real estate and other assets held for sale to equal net sale contract prices or estimate of fair value of the assets | $ | 62,911 | ||||||
(E | ) | Investment in non-consolidated entities | ||||||
Adjustment to reduce Newkirk’s historical cost basis of partnership interests to estimated fair value based on most recent tender offers made by Newkirk and accepted by the investors in the partnerships | $ | (4,342 | ) | |||||
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Notes to Unaudited Pro Forma Condensed Consolidated Balance Sheet
June 30, 2006
(dollars in thousands, except per share data) — (Continued)
(F | ) | Intangible assets, net | ||||||
Allocation of estimated fair market value of the acquired assets to the following: | ||||||||
Estimated above-market leases | $ | 170,856 | ||||||
Estimated lease in place costs | 231,782 | |||||||
Reversal of Newkirk historical unamortized basis | (19,895 | ) | ||||||
$ | 382,743 | |||||||
(G | ) | Deferred expenses | ||||||
Write-off of Newkirk historical unamortized deferred financing costs and deferred leasing costs | $ | (10,552 | ) | |||||
Estimated costs to be incurred relating to assuming Newkirk debt | 1,414 | |||||||
$ | (9,138 | ) | ||||||
(H | ) | Notes receivable, including accrued interest | ||||||
Adjustment to bring Newkirk’s historical basis of loans and accrued interest receivable to fair value | $ | 18,396 | ||||||
(I | ) | Rent receivable — deferred | ||||||
Write-off of historical Newkirk straight-line rent receivable | $ | (22,463 | ) | |||||
(J | ) | Other assets | ||||||
Adjustment to other assets is comprised of the following: | ||||||||
Write-off of Newkirk historical deferred costs related to exclusivity agreement and lease options | $ | (11,752 | ) | |||||
Valuing transition services and asset management contracts at estimated fair value | 2,900 | |||||||
Increasing basis in investment in REMIC certificates to estimated fair value | 5,697 | |||||||
Other | (516 | ) | ||||||
$ | (3,671 | ) | ||||||
(K | ) | Mortgage and notes payable | ||||||
Adjustment of mortgage debt to estimated fair value | $ | (1,719 | ) | |||||
(L | ) | Liabilities — discontinued operations | ||||||
Adjustment of below market lease intangibles to fair value | $ | (259 | ) | |||||
(M | ) | Accounts payable and other liabilities | ||||||
Estimated merger costs to be incurred by Lexington | $ | 12,645 | ||||||
Estimated costs to be incurred relating to assuming Newkirk debt | 1,414 | |||||||
$ | 14,059 | |||||||
(N | ) | Deferred revenue | ||||||
Record estimated value of below market leases relating to real estate assets acquired | $ | 144,519 | ||||||
Reversal of Newkirk historical basis | (13,434 | ) | ||||||
$ | 131,085 | |||||||
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Notes to Unaudited Pro Forma Condensed Consolidated Balance Sheet
June 30, 2006
(dollars in thousands, except per share data) — (Continued)
(O | ) | Minority Interests | ||||||
Record estimated fair value of minority partners’ equity in revalued assets and liabilities relating to the merger | $ | 884,343 | ||||||
Special distribution of $0.17 per unit assumed to be paid by Lexington prior to or on the effective date of the merger | (955 | ) | ||||||
Reversal of Newkirk historical basis | (359,252 | ) | ||||||
$ | 524,136 | |||||||
(P | ) | Newkirk (historical) | ||||||
Certain balance sheet categories have been reclassified to conform with the Lexington presentation |
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Newkirk | Predecessor(B) | |||||||||||||||||||||||
(Historical for | (Historical for | Pro Forma | ||||||||||||||||||||||
Lexington | November 7, 2005 to | January 1, 2005 to | Reclassif- | Merger | Pro Forma | |||||||||||||||||||
Gross Revenues | (Historical) | December 31, 2005) | November 6, 2005) | ications(A) | Adjustments | Adjusted | ||||||||||||||||||
(Dollars in thousands, except per share data) | ||||||||||||||||||||||||
Rental | $ | 180,871 | $ | 30,333 | $ | 174,371 | $ | (27 | ) | $ | (69,231 | )(C) | $ | 316,317 | ||||||||||
Advisory fee | 5,365 | 38 | 249 | — | — | 5,652 | ||||||||||||||||||
Tenant reimbursements | 10,896 | — | — | 27 | — | 10,923 | ||||||||||||||||||
Interest income | — | 1,366 | 2,832 | (4,198 | ) | — | — | |||||||||||||||||
Gain from disposal of real estate securities held for sale | — | 2 | — | (2 | ) | — | — | |||||||||||||||||
Total gross revenues | 197,132 | 31,739 | 177,452 | (4,200 | ) | (69,231 | ) | 332,892 | ||||||||||||||||
Depreciation and amortization | $ | (70,906 | ) | $ | (6,715 | ) | $ | (31,986 | ) | $ | — | $ | (35,879 | )(E) | $ | (145,486 | ) | |||||||
Property operating | (23,494 | ) | (244 | ) | (534 | ) | (2,270 | ) | — | (26,542 | ) | |||||||||||||
General and administrative | (17,612 | ) | (1,268 | ) | (3,812 | ) | (10,500 | ) | 10,300 | (H) | (22,892 | ) | ||||||||||||
Impairment charges | (12,050 | ) | — | (16,954 | ) | — | 16,954 | (I) | (12,050 | ) | ||||||||||||||
Non-operating income | 1,519 | — | — | 4,200 | (573 | )(D) | 5,146 | |||||||||||||||||
Interest and amortization | (65,065 | ) | (8,466 | ) | (55,218 | ) | — | 3,027 | (F) | (125,722 | ) | |||||||||||||
Debt satisfaction gains (charges), net | 4,409 | — | (27,521 | ) | — | — | (23,112 | ) | ||||||||||||||||
Compensation expense for exclusivity rights | — | (10,500 | ) | — | 10,500 | — | — | |||||||||||||||||
Ground rent | — | (379 | ) | (1,891 | ) | 2,270 | — | — | ||||||||||||||||
Income (loss) before benefit (provision) for income taxes, minority interests and equity in earnings of non-consolidated entities | 13,933 | 4,167 | 39,536 | — | (75,402 | ) | (17,766 | ) | ||||||||||||||||
Benefit (provision) for income taxes | 150 | (182 | ) | (1,415 | ) | — | (1,447 | ) | ||||||||||||||||
Minority interest expense of partially owned entities | — | (2,855 | ) | — | (15,938 | ) | 19,060 | (J) | 267 | |||||||||||||||
Minority interest | (2,111 | ) | (1,482 | ) | (15,938 | ) | 15,938 | 22,306 | (K) | 18,713 | ||||||||||||||
Equity in earnings of non consolidated entities | 6,220 | 496 | 2,632 | — | 109 | (G) | 9,457 | |||||||||||||||||
Income from continuing operations | $ | 18,192 | $ | 144 | $ | 24,815 | — | $ | (33,927 | ) | $ | 9,224 | ||||||||||||
Income (loss) from continuing operations per common share | ||||||||||||||||||||||||
— basic | 0.04 | — | — | — | — | (0.11 | ) | |||||||||||||||||
Income (loss) from continuing operations per common share | ||||||||||||||||||||||||
— diluted | 0.04 | — | — | — | — | (0.24 | ) | |||||||||||||||||
Weighted average shares outstanding | ||||||||||||||||||||||||
— basic | 49,836 | — | — | — | 15,500 | (L) | 65,336 | |||||||||||||||||
Weighted average shares outstanding | ||||||||||||||||||||||||
— diluted | 49,903 | — | — | — | 56,899 | (M) | 106,802 |
F-7
Table of Contents
Notes to Unaudited Pro Forma Condensed Consolidated Statement of Income
Year Ended December 31, 2005
(dollars and shares in thousands)
(A | ) | Reclassifications | ||||||
Certain balances contained in the Newkirk historical Statement of Income have been reclassified to conform with Lexington’s presentation | ||||||||
(B | ) | Other Adjustments | ||||||
Represents historical financial data for the Newkirk Master Limited Partnership and its subsidiaries | ||||||||
(C | ) | Rental Income | ||||||
Adjustment to Newkirk’s historical rental income, calculated as follows: | ||||||||
Reversal of historical straight-line rent adjustment | $ | 5,684 | ||||||
New straight-line rent adjustment | (20,018 | ) | ||||||
New amortization, net of above and below market leases over the applicable remaining lease periods | (54,897 | ) | ||||||
$ | (69,231 | ) | ||||||
(D | ) | Non-operating Income | ||||||
Adjustment to Newkirk’s non-operating income, calculated as follows: | ||||||||
Reversal of historical interest income related to contract rights receivable | $ | (19 | ) | |||||
New interest income based on fair market value of contract rights receivable at acquisition | 237 | |||||||
Reversal of historical interest income from REMIC certificates | (1,583 | ) | ||||||
New interest income on the investment in REMIC certificates based on fair value | 792 | |||||||
$ | (573 | ) | ||||||
(E | ) | Depreciation & Amortization | ||||||
Adjustment to Newkirk’s historical real estate depreciation & amortization, calculated as follows: | ||||||||
Reversal of historical depreciation expense | $ | 35,819 | ||||||
New depreciation expense based on real estate fair value at acquisition over estimated useful life of 40 years | (28,898 | ) | ||||||
Reversal of historical amortization expense | 2,884 | |||||||
New amortization of fair value of intangible assets from leases in place over remaining noncancellable lease term | (45,684 | ) | ||||||
$ | (35,879 | ) | ||||||
(F | ) | Interest and Amortization | ||||||
Adjustment to Newkirk’s historical interest and amortization calculated as follows: | ||||||||
Reversal of historical deferred financing costs | $ | 3,260 | ||||||
Record amortization of costs expected to be incurred related to loan assumption | (233 | ) | ||||||
$ | 3,027 | |||||||
(G | ) | Equity in Earnings of Non-Consolidated Entities | ||||||
Record reduction to depreciation from a reduction in basis to fair value | $ | 109 | ||||||
F-8
Table of Contents
Notes to Unaudited Pro Forma Condensed Consolidated Statement of Income
Year Ended December 31, 2005
(dollars and shares in thousands) — (Continued)
(H | ) | General and Administrative | ||||||
Assumes an increase in directors and officers insurance | $ | (200 | ) | |||||
Reversal of historical compensation expense from exclusivity agreement upon consummation of the merger | 10,500 | |||||||
$ | 10,300 | |||||||
(I | ) | Impairment Loss | ||||||
Elimination of impairment charges relating to revaluing assets to estimated fair value as of January 1, 2005 | $ | 16,954 | ||||||
(J | ) | Minority Interest Expense of Partially Owned Entities | ||||||
Adjustment to Newkirk minority interest expense, calculated as follows: | ||||||||
Minority interest share of estimated straight-line rent adjustment | $ | 2,338 | ||||||
Minority interest share of estimated amortization on above/below market lease intangibles | 8,321 | |||||||
Reversal of minority interest in partially owned entities share of historical depreciation and amortization | (2,156 | ) | ||||||
Minority interest share of estimated depreciation on fair value basis | 3,650 | |||||||
Minority interest share of estimated amortization on fair value basis | 6,907 | |||||||
$ | 19,060 | |||||||
(K | ) | Minority Interest | ||||||
Adjustment for the 69.9% minority interest partner’s share of pro forma loss of the Newkirk Operating Partnership for the year ended December 31, 2005 | $ | 22,306 | ||||||
(L | ) | Weighted Average Shares Outstanding — Basic | ||||||
Newkirk historical common shares outstanding | 19,375 | |||||||
Exchange ratio | .80 | |||||||
15,500 | ||||||||
(M | ) | Weighted Average Shares Outstanding — Diluted | ||||||
Newkirk historical common shares outstanding | 19,375 | |||||||
Newkirk historical operating partnership units outstanding | 45,040 | |||||||
64,415 | ||||||||
Exchange ratio | .80 | |||||||
51,532 | ||||||||
Lexington historical operating partnership units — dilutive | 5,434 | |||||||
Lexington historical common shares options — anti-dilutive | (67 | ) | ||||||
56,899 | ||||||||
F-9
Table of Contents
Unaudited Pro Forma Condensed Consolidated Statement of Income
Six months ended June 30, 2006
Lexington | Newkirk | Pro Forma | Pro Forma | |||||||||||||||||
Historical | (Historical) | Reclassifications(A) | Adjustments | Adjusted | ||||||||||||||||
(Dollars in thousands, except per share data) | ||||||||||||||||||||
Gross revenues | ||||||||||||||||||||
Rental | $ | 94,936 | $ | 108,926 | $ | (393 | ) | $ | (30,985 | )(B) | $ | 172,484 | ||||||||
Advisory fee | 2,401 | 124 | — | — | 2,525 | |||||||||||||||
Tenant reimbursements | 8,320 | — | 393 | — | 8,713 | |||||||||||||||
Interest income | — | 7,071 | (7,071 | ) | — | — | ||||||||||||||
Total gross revenues | 105,657 | 116,121 | (7,071 | ) | (30,985 | ) | 183,722 | |||||||||||||
Depreciation & amortization | $ | (40,592 | ) | $ | (25,376 | ) | $ | — | $ | (11,915 | )(D) | $ | (77,883 | ) | ||||||
Property operating | (15,271 | ) | (2,984 | ) | (1,166 | ) | — | (19,421 | ) | |||||||||||
General and administrative | (10,479 | ) | (5,018 | ) | (1,667 | ) | 1,567 | (H) | (15,597 | ) | ||||||||||
Impairment charges | (1,121 | ) | — | — | — | (1,121 | ) | |||||||||||||
Non-operating income | 6,706 | — | 7,159 | (1,816 | )(C) | 12,049 | ||||||||||||||
Interest and amortization | (35,446 | ) | (26,019 | ) | — | 770 | (E) | (60,695 | ) | |||||||||||
Debt satisfaction gain, net | 294 | — | — | — | 294 | |||||||||||||||
Compensation expense for exclusivity rights | — | (1,667 | ) | 1,667 | — | — | ||||||||||||||
Ground rent | — | (1,166 | ) | 1,166 | — | — | ||||||||||||||
Income (loss) before benefit (provision) for income taxes, minority interests, and equity in earnings of non-consolidated entities | 9,748 | 53,891 | 88 | (42,379 | ) | 21,348 | ||||||||||||||
Benefit (provision) for income taxes | 155 | (1,181 | ) | — | — | (1,026 | ) | |||||||||||||
Minority interest expense of partially owned entities | — | (10,692 | ) | — | 8,575 | (F) | (2,117 | ) | ||||||||||||
Minority interest | (1,710 | ) | (31,639 | ) | — | 24,603 | (I) | (8,746 | ) | |||||||||||
Equity in earnings of non-consolidated entities | 2,070 | 1,709 | — | 55 | (G) | 3,834 | ||||||||||||||
Gain on sale of securities | — | 88 | (88 | ) | — | — | ||||||||||||||
Income (loss) from continuing operations | $ | 10,263 | $ | 12,176 | $ | 0 | $ | (9,146 | ) | $ | 13,293 | |||||||||
Income from continuing operations per common share — basic | 0.04 | — | — | — | 0.08 | |||||||||||||||
Income from continuing operations per common share — diluted | 0.04 | — | — | — | 0.08 | |||||||||||||||
Weighted average shares outstanding — basic | 51,981 | — | — | 15,500 | (J) | 67,481 | ||||||||||||||
Weighted average shares outstanding — diluted | 52,007 | — | — | 15,500 | (J) | 67,507 |
F-10
Table of Contents
Notes to Unaudited Pro Forma Condensed Consolidated Statement of Income
Six months ended June 30, 2006
(dollars and shares in thousands)
(A | ) | Reclassifications | ||||||
Certain balances contained in the Newkirk historical Statement of Income have been reclassified to conform with Lexington’s presentation. | ||||||||
(B | ) | Rental Income | ||||||
Adjustment to Newkirk’s historical rental income, calculated as follows: | ||||||||
Reversal of historical straight-line rent adjustment | $ | 3,031 | ||||||
New straight-line rent adjustment | (6,599 | ) | ||||||
New amortization, net of above and below market leases over the applicable remaining lease periods | (27,417 | ) | ||||||
$ | (30,985 | ) | ||||||
(C | ) | Non-operating income | ||||||
Adjustment to Newkirk non-operating income, calculated as follows: | ||||||||
Reversal of historical interest income related to contract rights receivable | $ | (2,178 | ) | |||||
New interest income based on fair market value of contract rights receivable at acquisition | 777 | |||||||
Reversal of historical interest income from investment in REMIC certificates | (823 | ) | ||||||
New interest income from investment in REMIC certificates based on fair market value | 408 | |||||||
$ | (1,816 | ) | ||||||
(D | ) | Depreciation & Amortization | ||||||
Adjustment to Newkirk’s historical real estate depreciation & amortization, calculated as follows: | ||||||||
Reversal of historical depreciation expense | $ | 22,572 | ||||||
New depreciation expense based on real estate fair value at acquisition over estimated useful life of 40 years | (14,449 | ) | ||||||
Reversal of historical amortization expense | 2,804 | |||||||
New amortization of fair value of intangible assets from leases in place over remaining noncancellable lease term | (22,842 | ) | ||||||
$ | (11,915 | ) | ||||||
(E | ) | Interest and Amortization | ||||||
Adjustment to Newkirk’s historical interest and amortization, calculated as follows: | ||||||||
Reversal of historical deferred financing costs | $ | 1,137 | ||||||
Record amortization of costs expected to be incurred related to loan assumption | (117 | ) | ||||||
Reversal of certain historical mortgage interest expense that is being marked to market | 465 | |||||||
Record interest expense on certain mortgage debt based on fair market value | (715 | ) | ||||||
$ | 770 | |||||||
F-11
Table of Contents
Notes to Unaudited Pro Forma Condensed Consolidated Statement of Income
Six months ended June 30, 2006
(dollars and shares in thousands) — (Continued)
(F | ) | Minority Interest Expense of Partially Owned Entities | ||||||
Adjustment to Newkirk minority interest expense, calculated as follows: | ||||||||
Minority interest share of estimated FAS 13 straight-line rent adjustment | $ | 359 | ||||||
Minority interest share of estimated amortization on above/below market rents lease intangible | 4,073 | |||||||
Reversal of minority interest in partially owned entities share of depreciation and amortization | (1,136 | ) | ||||||
Minority interest share of estimated depreciation on fair market value basis | 1,825 | |||||||
Minority interest share of estimated amortization on fair market value basis | 3,454 | |||||||
$ | 8,575 | |||||||
(G | ) | Equity in Earnings of Non Consolidated Entities | ||||||
Record reduction to depreciation from a reduction in basis to fair value | $ | 55 | ||||||
(H | ) | General and Administrative | ||||||
Assumes an increase in directors and officers insurance | $ | (100 | ) | |||||
Reversal of historical compensation expense from exclusivity agreement upon consummation of the merger | 1,667 | |||||||
$ | 1,567 | |||||||
(I | ) | Minority Interest | ||||||
Adjustment for the 69.9% minority interest partner’s share of the Newkirk Operating Partnership | $ | 24,603 | ||||||
(J | ) | Weighted AverageShares Outstanding-Basic and Diluted | ||||||
Newkirk historical common shares outstanding | 19,375 | |||||||
Exchange ratio | 0.80 | |||||||
15,500 | ||||||||
F-12
Table of Contents
by and among
LEXINGTON CORPORATE PROPERTIES TRUST
and
NEWKIRK REALTY TRUST, INC.
Dated as of July 23, 2006
Table of Contents
Page | ||||
ARTICLE I DEFINITIONS | A-2 | |||
Section 1.01.Definitions | A-2 | |||
ARTICLE II THE MERGER | A-10 | |||
Section 2.01. REIT Merger | A-10 | |||
Section 2.02. Declaration of Trust | A-10 | |||
Section 2.03. By-laws | A-10 | |||
Section 2.04. Effective Time | A-10 | |||
Section 2.05. Closing | A-10 | |||
Section 2.06. Trustees and Officers of the Surviving Entity | A-11 | |||
ARTICLE III EFFECT OF THE MERGER | A-11 | |||
Section 3.01. Conversion of NRT Common Stock | A-11 | |||
Section 3.02. Surrender and Payment | A-12 | |||
Section 3.03. NRT Preferred Stock | A-13 | |||
Section 3.04. No Fractional Shares | A-13 | |||
Section 3.05. Withholding Rights | A-13 | |||
Section 3.06. Appraisal Rights | A-13 | |||
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE COMPANY | A-13 | |||
Section 4.01. Existence; Good Standing; Authority; Compliance with Law | A-14 | |||
Section 4.02. Capitalization | A-15 | |||
Section 4.03. Authority Relative to this Agreement and the Ancillary Agreements | A-16 | |||
Section 4.04. No Conflict; Required Filings and Consents | A-17 | |||
Section 4.05. Permits; Compliance | A-18 | |||
Section 4.06. SEC Filings; Financial Statements | A-18 | |||
Section 4.07. Absence of Certain Changes or Events | A-19 | |||
Section 4.08. Absence of Litigation | A-19 | |||
Section 4.09. Employee Benefit Matters | A-19 | |||
Section 4.10. Labor Matters | A-21 | |||
Section 4.11. Information Supplied | A-22 | |||
Section 4.12. Property and Leases | A-22 | |||
Section 4.13. Intellectual Property | A-25 | |||
Section 4.14. Taxes | A-25 | |||
Section 4.15. Environmental Matters | A-26 | |||
Section 4.16. Material Contracts | A-27 | |||
Section 4.17. No Payments to Employees, Officers or Directors | A-28 | |||
Section 4.18. Brokers | A-29 | |||
Section 4.19. Opinion of Financial Advisor | A-29 | |||
Section 4.20. Insurance | A-29 | |||
Section 4.21. Related Party Transactions | A-29 | |||
Section 4.22. Takeover Statutes | A-29 | |||
Section 4.23. Investment Company Act | A-29 | |||
Section 4.24. Patriot Act | A-30 | |||
Section 4.25. Compliance with Laws | A-30 | |||
Section 4.26. No Other Representations or Warranties | A-30 | |||
A-i
Table of Contents
Page | ||||
ARTICLE V REPRESENTATIONS AND WARRANTIES OF NRT | A-30 | |||
Section 5.01. Existence; Good Standing; Authority; Compliance with Law | A-31 | |||
Section 5.02. Capitalization | A-31 | |||
Section 5.03. Authority Relative to this Agreement and the Ancillary Agreements | A-33 | |||
Section 5.04. No Conflict; Required Filings and Consents | A-34 | |||
Section 5.05. Permits; Compliance | A-34 | |||
Section 5.06. SEC Filings; Financial Statements | A-35 | |||
Section 5.07. Absence of Certain Changes or Events | A-35 | |||
Section 5.08. Absence of Litigation | A-35 | |||
Section 5.09. Employee Benefit Matters | A-35 | |||
Section 5.10. Labor Matters | A-37 | |||
Section 5.11. Proxy Statement | A-38 | |||
Section 5.12. Property and Leases | A-39 | |||
Section 5.13. Intellectual Property | A-41 | |||
Section 5.14. Taxes | A-41 | |||
Section 5.15. Environmental Matters | A-42 | |||
Section 5.16. Material Contracts | A-43 | |||
Section 5.17. No Payments to Employees, Officers or Directors | A-44 | |||
Section 5.18. Brokers | A-45 | |||
Section 5.19. Opinion of Financial Advisor | A-45 | |||
Section 5.20. Insurance | A-45 | |||
Section 5.21. Related Party Transactions | A-45 | |||
Section 5.22. Takeover Statutes | A-45 | |||
Section 5.23. Investment Company Act | A-45 | |||
Section 5.24. Patriot Act | A-45 | |||
Section 5.25. Compliance with Laws | A-46 | |||
Section 5.26. Tender Offers | A-46 | |||
Section 5.27. No Other Representations or Warranties | A-46 | |||
ARTICLE VI CONDUCT OF BUSINESS PENDING THE CLOSING | A-46 | |||
Section 6.01. Conduct of Business by the Company | A-46 | |||
Section 6.02. Conduct of Business by NRT | A-50 | |||
Section 6.03. Like-kind Exchanges | A-53 | |||
ARTICLE VII ADDITIONAL AGREEMENTS | A-53 | |||
Section 7.01. Shareholders’ Meetings; NRT OP Unitholder’s Meeting | A-53 | |||
Section 7.02. Registration Statement; REIT Merger Proxy Statement | A-54 | |||
Section 7.03. NRT OP Proxy Statement | A-55 | |||
Section 7.04. NRT Advisor Voting | A-55 | |||
Section 7.05. Access to Information; Confidentiality | A-56 | |||
Section 7.06. No Solicitation of Transactions | A-56 | |||
Section 7.07. Further Action; Reasonable Best Efforts | A-57 | |||
Section 7.08. Public Announcements | A-58 | |||
Section 7.09. Indemnification | A-58 | |||
Section 7.10. Employee Benefit Matters | A-60 | |||
Section 7.11. Transfer Taxes | A-61 | |||
Section 7.12. Compliance with Agreements | A-61 | |||
Section 7.13. Advisory Agreement Termination | A-61 |
A-ii
Table of Contents
Page | ||||
Section 7.14. Voting Trustee Agreement | A-62 | |||
Section 7.15. Lock-Up Agreements | A-62 | |||
Section 7.16. Amended and Restated Exclusivity Arrangement; Amendment to Acquisition Agreement | A-62 | |||
Section 7.17. Employment Agreement | A-62 | |||
Section 7.18. Registration Rights | A-62 | |||
Section 7.19. Contribution, Funding Agreement and MLP Guarantee | A-62 | |||
Section 7.20. Listing Of Shares | A-63 | |||
Section 7.21. Reorganization | A-63 | |||
Section 7.22. Amended NRT OP Limited Partnership Agreement | A-63 | |||
Section 7.23. Tax Returns | A-63 | |||
Section 7.24. Transition Services Agreement | A-63 | |||
Section 7.25. Property Management Agreements | A-63 | |||
Section 7.26. Ownership Waiver | A-63 | |||
Section 7.27. REIT Merger Voting Agreements | A-64 | |||
ARTICLE VIII CONDITIONS | A-64 | |||
Section 8.01. Conditions to the Obligations of Each Party | A-64 | |||
Section 8.02. Conditions to the Obligations of NRT | A-64 | |||
Section 8.03. Conditions to the Obligations of the Company | A-65 | |||
ARTICLE IX TERMINATION, AMENDMENT AND WAIVER | A-66 | |||
Section 9.01. Termination | A-66 | |||
Section 9.02. Effect of Termination | A-67 | |||
Section 9.03. Fees and Expenses | A-68 | |||
ARTICLE X GENERAL PROVISIONS | A-69 | |||
Section 10.01. Non-Survival of Representations and Warranties | A-69 | |||
Section 10.02. Notices | A-69 | |||
Section 10.03. Severability | A-69 | |||
Section 10.04. Amendment | A-70 | |||
Section 10.05. Entire Agreement; Assignment | A-70 | |||
Section 10.06. Parties in Interest | A-70 | |||
Section 10.07. Specific Performance | A-70 | |||
Section 10.08. Governing Law | A-70 | |||
Section 10.09. Waiver of Jury Trial | A-70 | |||
Section 10.10. Headings | A-71 | |||
Section 10.11. Counterparts | A-71 | |||
Section 10.12. Mutual Drafting | A-71 |
A-iii
Table of Contents
Exhibit A-1 | Amended and Restated Declaration | |||
Exhibit A-2 | Surviving By-laws | |||
Exhibit B-1 | Surviving Entity Officers | |||
Exhibit B-2 | Initial Members of the Standing Committees of the Board of Trustees | |||
Exhibit C | Amended NRT OP Limited Partnership Agreement | |||
Exhibit D | Voting Trustee Agreement | |||
Exhibit E-1 | Amended and Restated Exclusivity Agreement | |||
Exhibit E-2 | Acquisition Agreement Amendment, Assignment and Assumption | |||
Exhibit F | NRT Executive Employment Agreement | |||
Exhibit G | Transition Services Agreement | |||
Exhibit H | Form of Waiver Agreement | |||
Exhibit I | Form of Funding Agreement | |||
Exhibit J | Change of Control Waiver | |||
Exhibit K | MLP Guaranty Agreement |
A-iv
Table of Contents
A-1
Table of Contents
A-2
Table of Contents
A-3
Table of Contents
A-4
Table of Contents
A-5
Table of Contents
Location of | ||||
Defined Term | Definition | |||
Acquisition Agreement | § 7.16 | |||
Acquisition Agreement Amendment and Assumption | § 7.16 | |||
Advisory Agreement | § 7.13 | |||
Agreement | Preamble | |||
Amended and Restated Exclusivity Agreement | § 7.16 | |||
Amended NRT OP Limited Partnership Agreement | § 5.03(d) | |||
Articles of Merger | § 2.04(a) | |||
Amended and Restated Declaration | § 2.02 | |||
Blue Sky Laws | § 4.04(b) | |||
Break Up Fee | § 9.03(b) | |||
Claim | § 7.09(a) | |||
Closing | § 2.05 | |||
Closing Date | § 2.05 |
A-6
Table of Contents
Location of | ||||
Defined Term | Definition | |||
Code | Recitals | |||
Common Conversion Consideration | § 3.01(a) | |||
Company | Preamble | |||
Company Benefit Plans | § 7.10(a) | |||
Company Board | Recitals | |||
Company By-laws | § 4.01(f) | |||
Company Cure Period | § 9.01(c) | |||
Company Declaration of Trust | § 4.01(a) | |||
Company Disclosure Schedule | Article IV | |||
Company Excess Shares | § 4.02(a) | |||
Company Expense Fee | § 9.03(b) | |||
Company Ground Lease | § 4.12(g) | |||
Company Incentive Plans | § 4.02(a) | |||
Company Intellectual Property | § 4.13 | |||
Company Leases | § 4.12(f) | |||
Company Material Contract | § 4.16(a) | |||
Company OP Units | § 4.02(f) | |||
Company Participation Agreements | § 4.12(j) | |||
Company Participation Interest | § 4.12(j) | |||
Company Participation Party | § 4.12(j) | |||
Company Partnerships | Recitals | |||
Company Plans | § 4.09(a) | |||
Company Preferred Shares | § 4.02(a) | |||
Company Preferred Units | § 4.02(f) | |||
Company Property | § 4.12(a) | |||
Company Share Options | § 4.02(a) | |||
Company Share Rights | § 4.02(c) | |||
Company Shareholder Approval | § 4.03(b) | |||
Company Third Party | § 4.12(h) | |||
Company Title Insurance Policy | § 4.12(c) | |||
Confidentiality Agreement | § 7.05(c) | |||
Contribution | § 7.19 | |||
Contribution Date | § 7.19 | |||
de minimis Shares | § 3.01(a) | |||
Drop Dead Date | § 9.01(j) | |||
Effective Time | § 2.04(a) | |||
Environmental Mitigation | § 4.12(e) | |||
ERISA | § 4.09(a) | |||
Exchange Act | § 4.04(b) | |||
Exchange Agent | § 3.02(a) | |||
Exchange Instructions | § 3.02(b) | |||
Exchange Ratio | § 3.01(a) | |||
Exclusivity Agreement | § 7.16 | |||
Existing Registration Rights Agreements | § 7.18 |
A-7
Table of Contents
Location of | ||||
Defined Term | Definition | |||
Existing Units | § 4.02(c) | |||
Expenses | § 7.09(a) | |||
Funding Agreement | § 7.19 | |||
GAAP | § 4.06(b) | |||
Governmental Authority | § 4.04(b) | |||
HMO | § 4.09(g) | |||
Interim Period | § 6.01(a) | |||
IRS | § 4.09(a) | |||
Joint Venture Formation Documents | § 4.01(j) | |||
Law | § 4.04(a) | |||
Lesh GP | Recitals | |||
Lock-Up Agreement | § 7.15 | |||
Maryland REIT Law | Recitals | |||
MGCL | Recitals | |||
Non-Approval Expense Fee | § 9.03(b) | |||
NQDC Plan | § 4.09(k) | |||
NRT | Preamble | |||
NRT Advisor | § 5.11(c) | |||
NRT Advisor Termination | § 7.13 | |||
NRT Articles | § 5.01(a) | |||
NRT Board | Recitals | |||
NRT By-laws | § 5.01(f) | |||
NRT Common Stock | § 3.01(a) | |||
NRT Cure Period | § 9.01(d) | |||
NRT Disclosure Schedule | Article V | |||
NRT Employees | § 7.10(a) | |||
NRT Executive Employment Agreement | § 7.17(a) | |||
NRT Expense Fee | § 9.03(b) | |||
NRT Ground Lease | § 5.12(g) | |||
NRT Indemnified Parties | § 7.09(a) | |||
NRT Insiders | § 7.10(d) | |||
NRT Intellectual Property | § 5.13 | |||
NRT Leases | § 5.12(f) | |||
NRT Material Contract | § 5.16(a) | |||
NRT OP | Recitals | |||
NRT OP Approval | § 5.03(c) | |||
NRT OP Direction Votes | § 7.04 | |||
NRT OP Limited Partnership Agreement | § 5.02(f) | |||
NRT OP Unitholder’s Meeting | § 7.01(c) | |||
NRT OP Units | § 5.02(f) | |||
NRT Participation Agreements | § 5.12(j) | |||
NRT Participation Party | § 5.12(j) | |||
NRT Participation Interest | § 5.12(j) | |||
NRT Permits | § 5.05 |
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Location of | ||||
Defined Term | Definition | |||
NRT Plans | § 5.09(a) | |||
NRT Preferred Stock | § 3.03 | |||
NRT Property | § 5.12(a) | |||
NRT Stock Certificate | § 3.01(a) | |||
NRT Stockholder Approval | § 5.03(b) | |||
NRT Third Party | § 5.12(h) | |||
NRT Title Insurance Policy | § 5.12(c) | |||
NRT Voting Agreement | Recitals | |||
NYSE | § 4.04(b) | |||
OP-1 Partnership | Recitals | |||
OP-1 Partnership Agreement | § 4.01(g) | |||
OP-2 Partnership | Recitals | |||
OP-2 Partnership Agreement | § 4.01(h) | |||
OP-3 Partnership | Recitals | |||
OP-3 Partnership Agreement | § 4.01(i) | |||
Partnership Agreements | § 4.01(i) | |||
Partnership Merger | § 7.19 | |||
Permits | § 4.05 | |||
Property Management Agreement | § 7.25 | |||
Property Restrictions | § 4.12(a) | |||
Registration Statement | § 4.11 | |||
REIT Merger | Recitals | |||
REIT Merger Consideration | § 3.01(a) | |||
REIT Merger Proxy Statement | § 7.02(a) | |||
REIT Merger Voting Agreement | § 7.27 | |||
SDAT | § 2.04(a) | |||
SEC | § 4.04(b) | |||
SEC Reports | § 4.06(a) | |||
Section 16 | § 7.10(d) | |||
Securities Act | § 4.04(b) | |||
Series B Preferred Shares | § 4.02(a) | |||
Series B Preferred Units | § 4.02(f) | |||
Series C Preferred Shares | § 4.02(a) | |||
Series C Preferred Units | § 4.02(f) | |||
Surviving By-laws | § 2.03 | |||
Surviving Entity | § 2.01 | |||
Surviving Declaration of Trust | § 2.02 | |||
Surviving Partnership | § 7.19 | |||
Surviving Special Preferred Stock | § 3.03 | |||
Termination Date | § 9.01 | |||
Terminating Company Breach | § 9.01(c) | |||
Transferred NRT Employee | §7.10(c) | |||
Transfer Taxes | § 7.11 | |||
Transition Services Agreement | § 7.24 |
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Location of | ||||
Defined Term | Definition | |||
TRS | § 4.14(f) | |||
Voting Trustee Agreement | § 7.14 | |||
Waiver Agreement | § 7.26 | |||
Waiver Party | § 7.26 | |||
WARN Act | § 4.10(b) | |||
WEM | § 7.18 | |||
WEM Registration Rights Agreement | § 7.18 | |||
Winthrop | § 6.02(b)(xiv) |
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7 Bulfinch Place
Suite 500
P.O. Box 9507
Fax No:(617) 742-4643
Attn: Carolyn Tiffany
575 Madison Avenue
New York, NY 10022
Fax No:(212) 940-8776
Attention: | Mark I. Fisher, Esq. Elliot Press, Esq. |
One Penn Plaza, Suite 4015
New York, New York10119-4015
Fax:(212) 594-6600
Attention: | T. Wilson Eglin Joseph S. Bonventre |
75 East 55th Street
New York, New York 10022
Fax No.:(212) 319-4090
Attention: | Mark Schonberger, Esq. William F. Schwitter, Esq. |
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By: | /s/ Michael Ashner |
By: | /s/ T. Wilson Eglin |
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Name | Title | |
Michael L. Ashner | Executive Chairman and Director of Strategic Acquisitions | |
E. Robert Roskind | Co-Vice Chairman | |
Richard J. Rouse | Co-Vice Chairman and Chief Investment Officer | |
T. Wilson Eglin | Chief Executive Officer, President and Chief Operating Officer | |
Patrick Carroll | Executive Vice President, Chief Financial Officer and Treasurer | |
John B. Vander Zwaag | Executive Vice President | |
Lara Sweeney Johnson | Executive Vice President — Strategic Acquisitions Group | |
Brendan P. Mullinix | Senior Vice President | |
Natasha Roberts | Senior Vice President and Director of Acquisitions | |
Joseph S. Bonventre | Vice President, General Counsel and Assistant Secretary | |
Paul R. Wood | Vice President, Chief Accounting Officer and Secretary |
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By: | /s/ T. Wilson Eglin |
Title: | Chief Executive Officer |
By: | /s/ Michael L. Ashner |
Title: | Chief Executive Officer |
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By: | /s/ T. Wilson Eglin |
Title: | Chief Executive Officer |
By: | /s/ Michael L. Ashner |
Title: | Chief Executive Officer |
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Effective | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Date | 22.35 | 25.00 | 27.50 | 30.00 | 32.50 | 35.00 | 37.50 | 40.00 | 45.00 | 50.00 | 55.00 | 60.00 | 65.00 | 70.00 | 75.00 | |||||||||||||||||||||||||||||||||||||||||||||
December 2, 2004 | 0.373 | 0.289 | 0.222 | 0.171 | 0.133 | 0.102 | 0.081 | 0.064 | 0.044 | 0.032 | 0.025 | 0.020 | 0.017 | 0.014 | 0.012 | |||||||||||||||||||||||||||||||||||||||||||||
November 15, 2005 | 0.373 | 0.289 | 0.211 | 0.157 | 0.117 | 0.087 | 0.066 | 0.053 | 0.033 | 0.024 | 0.018 | 0.015 | 0.012 | 0.010 | 0.008 | |||||||||||||||||||||||||||||||||||||||||||||
November 15, 2006 | 0.342 | 0.258 | 0.191 | 0.143 | 0.107 | 0.081 | 0.063 | 0.050 | 0.035 | 0.027 | 0.022 | 0.019 | 0.017 | 0.015 | 0.013 | |||||||||||||||||||||||||||||||||||||||||||||
November 15, 2007 | 0.362 | 0.261 | 0.184 | 0.130 | 0.093 | 0.066 | 0.049 | 0.038 | 0.026 | 0.021 | 0.018 | 0.016 | 0.014 | 0.012 | 0.011 | |||||||||||||||||||||||||||||||||||||||||||||
November 15, 2008 | 0.347 | 0.245 | 0.162 | 0.103 | 0.062 | 0.034 | 0.019 | 0.010 | 0.005 | 0.003 | 0.002 | 0.002 | 0.001 | 0.001 | 0.001 | |||||||||||||||||||||||||||||||||||||||||||||
November 15, 2009 | 0.340 | 0.237 | 0.153 | 0.085 | 0.030 | 0.000 | 0.000 | 0.000 | 0.000 | 0.000 | 0.000 | 0.000 | 0.000 | 0.000 | 0.000 | |||||||||||||||||||||||||||||||||||||||||||||
November 15, 2010 | 0.310 | 0.222 | 0.145 | 0.082 | 0.029 | 0.000 | 0.000 | 0.000 | 0.000 | 0.000 | 0.000 | 0.000 | 0.000 | 0.000 | 0.000 | |||||||||||||||||||||||||||||||||||||||||||||
November 15, 2011 | 0.332 | 0.230 | 0.147 | 0.082 | 0.028 | 0.000 | 0.000 | 0.000 | 0.000 | 0.000 | 0.000 | 0.000 | 0.000 | 0.000 | 0.000 | |||||||||||||||||||||||||||||||||||||||||||||
November 15, 2012 | 0.326 | 0.225 | 0.143 | 0.079 | 0.027 | 0.000 | 0.000 | 0.000 | 0.000 | 0.000 | 0.000 | 0.000 | 0.000 | 0.000 | 0.000 | |||||||||||||||||||||||||||||||||||||||||||||
November 15, 2013 | 0.325 | 0.223 | 0.141 | 0.078 | 0.026 | 0.000 | 0.000 | 0.000 | 0.000 | 0.000 | 0.000 | 0.000 | 0.000 | 0.000 | 0.000 | |||||||||||||||||||||||||||||||||||||||||||||
November 15, 2014 | 0.304 | 0.214 | 0.138 | 0.077 | 0.026 | 0.000 | 0.000 | 0.000 | 0.000 | 0.000 | 0.000 | 0.000 | 0.000 | 0.000 | 0.000 |
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Clifford Broser
William J. Borruso
Geoffrey Dohrmann
T. Wilson Eglin
Richard Frary
Carl D. Glickman
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Kevin W. Lynch
E. Robert Roskind
Kevin W. Lynch
Carl D. Glickman
John D. McGurk
Seth M. Zachary
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• | Reviewed the Agreement, including the financial terms of the Agreement. | |
• | Reviewed Annual Reports to Shareholders and Annual Reports onForm 10-K for the Company for the five years ended December 31, 2005. | |
• | Reviewed the Annual Report to Shareholders and Annual Report onForm 10-K for NRT for the year ended December 31, 2005. | |
• | Reviewed certain interim reports to shareholders and Quarterly Reports onForm 10-Q for the Company and NRT. | |
• | Reviewed certain business, financial, and other information regarding each of the Company and NRT that was publicly available. | |
• | Reviewed certain business, financial, and other information regarding the Company (and the combined company following the REIT Merger) and its prospects, including financial forecasts, which were furnished to us by the management of the Company, and discussed the business and prospects of the Company (and the combined company following the REIT Merger) with the Company’s management. | |
• | Reviewed certain business, financial, and other information regarding NRT and its prospects, including financial forecasts, which were furnished to us by the managements of the Company and NRT, and discussed the business and prospects of NRT and the combined company following the REIT Merger with managements of the Company and NRT. | |
• | Participated in discussions and negotiations among representatives of the Company and NRT and their financial and legal advisors. | |
• | Reviewed the reported prices and trading activity of each of the Company Common Shares and NRT Common Stock. |
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• | Compared certain publicly available business, financial, and other information regarding each of the Company and NRT with similar information regarding certain other publicly traded companies that we deemed relevant. | |
• | Compared the proposed financial terms of the Agreement with the financial terms of certain other business combinations and transactions that we deemed relevant. | |
• | Reviewed the potential pro forma impact of the REIT Merger on the Company’s financial statements. | |
• | Considered other information such as financial studies, analyses, and investigations as well as financial and economic and market criteria that we deemed relevant. |
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• | reviewed a draft dated July 23, 2006 of the Agreement; | |
• | reviewed Newkirk’s Annual Report to Shareholders and Annual Report onForm 10-K for the year ended December 31, 2005, its Quarterly Report onForm 10-Q for the period ended March 31, 2006, its preliminary results for the quarter ended June 30, 2006 and its Current Reports onForm 8-K filed since December 31, 2005; | |
• | reviewed certain operating and financial information relating to Newkirk’s business and prospects, including projections and projected acquisitions for the five years ended December 31, 2011, all as prepared and provided to us by Newkirk’s management (the “Newkirk Projections”); | |
• | reviewed certain estimates of potential revenue enhancements, cost savings and other combination benefits expected to result from the Merger, all as prepared and provided to us by Newkirk’s and Lexington’s managements (collectively, the “Synergies”); | |
• | met with certain members of Newkirk’s senior management to discuss Newkirk’s and Lexington’s businesses, operations, historical and projected financial results and future prospects; | |
• | reviewed Lexington’s Annual Reports to Shareholders and Annual Reports onForm 10-K for the years ended December 31, 2003, 2004, and 2005, its Quarterly Report onForm 10-Q for the period ended March 31, 2006, its preliminary results for the quarter ended June 30, 2006 and its Current Reports onForm 8-K filed since December 31, 2005; |
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• | reviewed certain operating and financial information relating to Lexington’s business and prospects, including projections and projected acquisitions for the ten years ended December 31, 2016, (i) as prepared and provided to us by Lexington’s management in a Confidential Information Memorandum dated March 24, 2006 and adjusted by Newkirk’s management and (ii) as prepared by Lexington’s management and provided to us on July 13, 2006 and as adjusted by Newkirk’s management (collectively, the “Lexington Projections” and, together with the Newkirk Projections, the “Projections”); | |
• | met with certain members of Lexington’s senior management to discuss Lexington’s business, operations, historical and projected financial results and future prospects; | |
• | reviewed the historical prices, trading multiples and trading volumes of the Newkirk Common Stock and the Lexington Common Shares; | |
• | reviewed publicly available financial data, stock market performance data and trading multiples of companies which we deemed generally comparable to Newkirk and Lexington; | |
• | reviewed the terms of recent mergers and acquisitions involving companies which we deemed generally comparable to Newkirk; | |
• | performed discounted cash flow analyses based on various of the Newkirk Projections and Lexington Projections; | |
• | reviewed the relative contributions of Newkirk and Lexington to the combined company on a pro forma basis; | |
• | reviewed the pro forma financial results, financial condition and capitalization of Newkirk and the combined company giving effect to the Merger; and | |
• | conducted such other studies, analyses, inquiries and investigations as we deemed appropriate. |
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Page | ||
BUSINESS | Annex F-2 | |
PROPERTIES | Annex F-13 | |
LEGAL PROCEEDINGS | Annex F-27 | |
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS | Annex F-28 | |
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS | Annex F-43 |
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• | Newkirk issued 3,125,000 shares of common stock in a private transaction to Winthrop in exchange for $50,000,000 and issued an additional 1,250,000 shares of common stock ($20,000,000 value) in a private transaction to Winthrop in consideration for its assignment to Newkirk of certain exclusivity rights with respect to net-lease business opportunities offered to or generated by Michael L. Ashner, Newkirk’s and Winthrop’s Chairman and Chief Executive Officer, 625,000 shares (reducing by 17,361 per month) issued in exchange for the assignment of the exclusivity right are subject to forfeiture upon the occurrence of certain events. All shares of Newkirk’s common stock issued to Winthrop are subject to alock-up period expiring November 7, 2008, subject to certain exceptions. Upon the consummation of the merger, thelock-up and forfeiture restrictions will expire. | |
• | Both Newkirk and the MLP retained NKT Advisors to manage Newkirk’s assets and theday-to-day operations of Newkirk and the MLP, subject to the supervision of Newkirk’s board of directors; | |
• | Newkirk acquired 15,625,000 newly-issued units of limited partnership interest in the MLP in exchange for $235,800,000 and an additional 1,250,000 units in exchange for the contribution of the exclusivity rights described above. Newkirk also purchased 2,375,000 outstanding MLP units from Apollo and 125,000 units of limited partnership interest from an entity primarily owned by Newkirk’s executive officers for an aggregate purchase price of $37,700,000, resulting in an aggregate ownership of 19,375,000 units of limited partnership in the MLP or 30.1% of the total outstanding units; | |
• | Newkirk was admitted as the general partner of the MLP; | |
• | NKT Advisors was issued Newkirk’s special voting preferred stock entitling it to vote on all matters for which Newkirk’s common stockholders are entitled to vote. The number of votes that NKT Advisors will be entitled to cast in respect of the special voting preferred stock was initially 45,000,000 votes or approximately 69.9% of the 64,375,000 votes entitled to be cast. The 45,000,000 votes represent the total number of units outstanding immediately following consummation of the IPO (excluding units held by Newkirk). As units are redeemed at the option of a limited partner, the number of votes attaching to NKT Advisors’ special voting preferred stock will decrease by an equivalent amount. The advisory agreement provides that on all matters for which NKT Advisors is entitled to cast votes in respect of its special voting preferred stock, it will cast its votes in direct proportion to the votes that are cast by limited partners of the MLP, other than Newkirk, on such matters, except that NKT Advisors (through its managing member) will be entitled to vote in its sole discretion to the extent that the voting rights of affiliates of Vornado are limited under certain circumstances; and | |
• | Newkirk granted registration rights to Apollo and Vornado in connection with shares issuable upon conversion of their units in the MLP and to Winthrop in connection with their shares of common stock. |
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• | acquire individual net leased properties and portfolios of net leased properties; | |
• | complete sale/leaseback transactions, through which Newkirk acquires properties and leases the properties back to the seller or operator under a net lease; | |
• | acquire controlling and non-controlling interests in private and public companies primarily engaged in the business of making net lease investments; | |
• | acquire equity and debt interests in entities that own, develop, manage or advise third parties with regard to net leased investments; | |
• | acquire senior and subordinated loans secured by mortgages on net leased properties, mezzanine loans secured by ownership interests in entities that own net leased properties as well as commercial mortgage backed securities, B Notes and bridge loans, relating to net leased properties; | |
• | participate in development projects relating to net lease properties; | |
• | explore investment opportunities in non-domestic markets; | |
• | where opportunity arises, enter into strategic alliances with entities that historically have been leading sellers of net-lease assets; and | |
• | refinance Newkirk’s existing indebtedness to the extent strategically viable at lower average interest rates or on more attractive terms and increase Newkirk’s access to capital to finance property acquisitions and expansions. |
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Class E | Class F | Class G | ||||||||||
Certificate | Certificate | Certificate | ||||||||||
Contractual Principal Amount at June 30, 2006 | $ | 4,824,000 | $ | 3,859,000 | $ | 5,793,625 | ||||||
Interest Rate | 8.29 | % | 8.29 | % | 8.29 | % |
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• | a $1,500,000 mezzanine loan secured by the ownership interests in entities owning fee title to a 130,000 square foot industrial facility that is triple net leased to Rockwell Automation. The loan bears an interest rate of 12% and matures in 10 years. | |
• | a $10,000,000 participation in a mezzanine loan secured by the ownership interests in entities owning fee title to One Madison Avenue, a 1,100,000 square foot office building located in New York City and 95% leased to Credit Suisse. The loan was purchased for $8,469,030 and has an expected unleveraged yield to maturity of 7.58%. |
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• | a $20,000,000 mezzanine loan secured by the ownership interests in entities owning fee title to One Pepsi Way, a 540,000 square foot Class A office building situated on 206 acres in Westchester County, New York. The two-year loan bears an interest rate of LIBOR plus 4.25% and is subject to three,one-year extensions. | |
• | a junior participation in a $13,000,000 B Note secured by a 638,000 square foot Class A office building in downtown Atlanta for a purchase price of $10,473,000. The B Note has an interest rate of 6.09%, resulting in a yield of 12.43%. | |
• | a $4,500,000 participation in a B note secured by an office portfolio known as Boston Wharf Properties containing a total of 439,000 square feet located in Boston, Massachusetts. The two-year loan bears an interest rate of LIBOR plus 2.25% and is subject to three, one-year extensions. | |
• | a $3,000,000 BB rated bond, BALL 2003-BBA2 Class L for a price of $2,984,063. | |
• | a $13,000,000 BB rated bond, BSCMS 2004-BA5A Class K for a price of $12,870,000. | |
• | three BBB-rated CMBS bonds: (i) BALL 2004-BBA4 $7,000,000 Class K for a price of $7,061,250; (ii) COMM 20005 FL11 $15,700,000 Class L for a price of $15,431,612; and (iii) and BSCMS 2006-BBA7 $4,785,000 Class K for a price of $$4,783,610. |
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• | excluding the transaction with Raytheon Company described above, four tenants representing leases at four properties containing approximately 933,000 square feet exercised their renewal option. | |
• | excluding the property located in Toledo, Ohio discussed under Property Sales above, one tenant representing a lease at one property containing approximately 42,000 square feet notified the MLP that they would not exercise their renewal options. The MLP is currently marketing this property for lease. | |
• | two properties containing approximately 89,000 square feet have been fully leased, and one property has been partially leased to an 8,000 square foot tenant. | |
• | one property containing approximately 28,000 square feet was fully leased, and one property was partially leased to an approximately 4,000 square foot tenant. |
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Year | Amount | |||
2006 | $ | 3,750,000 | ||
2007 | 7,500,000 | |||
2008 | 545,815,000 | |||
(1 | ) | |||
$ | 557,065,000 | |||
(1) | Unless extended in which event a $10,000,000 per annum principal payment is required during the extension period. |
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In-Place Annualized | ||||||||||||
Property Type | Number | Square Footage | Rental Revenues | |||||||||
Office | 45 | 8,318,242 | $ | 169,794,234 | ||||||||
Retail | 99 | 3,026,862 | 26,767,507 | |||||||||
Industrial | 14 | 4,442,563 | 26,427,165 | |||||||||
Other | 8 | 1,029,000 | 16,588,569 | |||||||||
TOTAL | 166 | 16,816,667 | $ | 239,577,475 | ||||||||
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Lease Term | ||||||||||||||||||||||||||||
Maturity | Current | |||||||||||||||||||||||||||
(Including | Term | Contractual | ||||||||||||||||||||||||||
Ground | Type | Exercised | Remaining | Rent | Renewal | |||||||||||||||||||||||
City | State | Ownership(1) | Tenant | of Property | Sq. Ft. | Options) | Renewal Terms | PSF ($) | Rent PSF ($) | |||||||||||||||||||
Long Beach(2) | CA | LE | Raytheon Company | Industrial | 200,541 | 12/31/08 | Six 5yr Terms | 14.88 | 8.34 | |||||||||||||||||||
Palo Alto | CA | GL | Xerox Corporation | Industrial | 123,000 | 01/31/08 | One 5yr Term | 32.37 | 28.45 | |||||||||||||||||||
Orlando | FL | GL | Walgreen Company | Industrial | 205,016 | 03/31/11 | Four 5yr Terms | 2.48 | 2.48 | |||||||||||||||||||
Owensboro(3) | KY | GL | Ragu Foods, Inc. | Industrial | 443,380 | 12/19/08 | Five 5yr Terms | 11.93 | 2.68 | |||||||||||||||||||
Rockford(4) | IL | Fee | Jacobsen Companies | Industrial | 240,000 | 12/31/14 | One 5yr | 3.68 | 4.04 | |||||||||||||||||||
North Berwick | ME | Fee | United Technologies Corp. | Industrial | 820,868 | 04/30/10 | Five 5yr Terms | 2.86 | 2.21 | |||||||||||||||||||
Statesville | NC | Fee | La-Z-Boy | Industrial | 639,600 | 04/30/10 | One 5yr | 2.58 | 2.84 | |||||||||||||||||||
Saugerties(14) | NY | Fee | Rotron Inc/EG&G/URS | Industrial | 52,000 | 12/31/09 | Four 5yr Terms | 2.35 | 2.35 | |||||||||||||||||||
N. Myrtle Beach | SC | GL | Food Lion, LLC (Delhaize America Inc.) | Industrial | 36,828 | 10/31/08 | Four 5yr Terms | 3.88 | 3.88 | |||||||||||||||||||
Franklin | TN | GL | Essex Group, Inc. | Industrial | 289,330 | 12/31/08 | Four 5yr Terms | 5.10 | 2.54 | |||||||||||||||||||
Memphis | TN | GL | Sears, Roebuck & Company | Industrial | 780,000 | 02/28/17 | Two 10yr Terms | 3.67 | 2.04 | |||||||||||||||||||
Lewisville | TX | Fee | Xerox Corporation | Industrial | 256,000 | 06/30/08 | Six 5yr Terms | 5.89 | 4.18 | |||||||||||||||||||
Windsor | WI | GL | Walgreen Company | Industrial | 356,000 | 02/28/12 | Four 5yr Terms | 7.52 | 3.12 | |||||||||||||||||||
Little Rock | AR | Fee | Entergy Arkansas | Office | 36,361 | 10/31/10 | Four 5yr Terms | 6.53 | 6.53 | |||||||||||||||||||
Pine Bluff | AR | Fee | Entergy Arkansas | Office | 27,189 | 10/31/10 | Four 5yr Terms | 7.08 | 7.08 | |||||||||||||||||||
El Segundo(5) | CA | Fee | Raytheon Company | Office | 184,636 | (5) | (5) | 16.10 | (5 | ) | ||||||||||||||||||
El Segundo(5) | CA | Fee | Raytheon Company | Office | 184,636 | (5) | (5) | 16.10 | (5 | ) | ||||||||||||||||||
Irvine(6) | CA | Fee | Associates First Financial Corp./Citigroup | Office | 200,000 | 09/08/08 | Six 5yr Terms | 28.52 | 12.00 | |||||||||||||||||||
Long Beach(2) | CA | LE | Raytheon Company | Office | 478,437 | 12/31/08 | Six 5yr Terms | 35.51 | 19.89 | |||||||||||||||||||
Pleasanton(7) | CA | LE | Multi-tenant | Office | 41,760 | 11/30/09 | none | 19.79 | NA | |||||||||||||||||||
San Francisco(8) | CA | LE | Multi-tenant | Office | 172,543 | various | various | 15.21 | various | |||||||||||||||||||
Walnut Creek | CA | LE | Hercules Credit, Inc. | Office | 54,528 | 08/31/07 | Six 5yr Terms | 37.52 | 18.17 | |||||||||||||||||||
Colorado Springs | CO | Fee | Federal Express Corporation | Office | 71,000 | 04/30/08 | Six 5yr Terms | 31.13 | 13.26 | |||||||||||||||||||
Clinton(3) | CT | GL | Chesebrough Ponds/Unilever | Office | 41,188 | 12/19/08 | Five 5yr Terms | 19.71 | 8.50 | |||||||||||||||||||
Orlando | FL | GL | Martin Marietta (Lockheed Martin) | Office | 184,000 | 04/30/08 | Six 5yr Terms | 5.22 | 5.22 | |||||||||||||||||||
Orlando | FL | Fee | Harcourt Brace & Company (Reed Elsevier) | Office | 357,280 | 03/31/09 | Six 5yr Terms | 13.00 | 10.45 |
Annex F-14
Table of Contents
Lease Term | ||||||||||||||||||||||||||||
Maturity | Current | |||||||||||||||||||||||||||
(Including | Term | Contractual | ||||||||||||||||||||||||||
Ground | Type | Exercised | Remaining | Rent | Renewal | |||||||||||||||||||||||
City | State | Ownership(1) | Tenant | of Property | Sq. Ft. | Options) | Renewal Terms | PSF ($) | Rent PSF ($) | |||||||||||||||||||
Lisle(4) | IL | Fee | National Louis University/Primms/James Benes & Assoc. | Office | 99,414 | 01/19 - 08/09 - 01/14 | One 5yr | 12.31 | FMV | |||||||||||||||||||
Columbus | IN | GL | Cummins Engine Company Inc. | Office | 390,100 | 07/31/09 | Six 5yr Terms | 8.00 | 9.26 | |||||||||||||||||||
New Orleans(9) | LA | LE | Hibernia Corporation | Office | 222,432 | 09/08/08 | Five 5yr Terms | 20.86 | 9.69 | |||||||||||||||||||
New Orleans(9) | LA | LE | Hibernia Corporation | Office | 180,595 | 09/08/08 | Five 5yr Terms | 20.19 | 6.46 | |||||||||||||||||||
Baltimore | MD | GL | St Paul Fire and Marine Insurance Co. | Office | 530,000 | 09/30/09 | Six 5yr Terms | 48.74 | 25.18 | |||||||||||||||||||
Bridgeton | MO | GL | BCG Healthcare | Office | 54,205 | 03/31/13 | Two 5yr Terms @ FMV | 6.84 | FMV | |||||||||||||||||||
Bridgewater | NJ | Fee | Biovail | Office | 115,508 | 10/31/14 | Two 5 yr | 17.50 | 95% FMV | |||||||||||||||||||
Carteret | NJ | Fee | Pathmark Stores, Inc. | Office | 96,400 | 12/31/11 | Five 5yr Terms | 18.25 | 10.37 | |||||||||||||||||||
Elizabeth | NJ | Fee | Bank of America | Office | 30,000 | 08/31/08 | Six 5yr Terms | 25.73 | 12.26 | |||||||||||||||||||
Morris Township | NJ | GL | Allied Signal Corp./Honeywell | Office | 225,121 | 05/31/08 | Six 5yr Terms | 26.20 | 12.59 | |||||||||||||||||||
Morris Township | NJ | GL | Allied Signal Corp./Honeywell | Office | 49,791 | 05/31/08 | Six 5yr Terms | 29.41 | 14.13 | |||||||||||||||||||
Morris Township | NJ | GL | Allied Signal Corp./Honeywell | Office | 136,516 | 05/31/08 | Six 5yr Terms | 25.99 | 12.49 | |||||||||||||||||||
Morristown | NJ | GL | Allied Signal Corp./Honeywell | Office | 316,129 | 03/31/08 | Six 5yr Terms | 27.87 | 12.18 | |||||||||||||||||||
Plainsboro | NJ | Fee | Bank of America | Office | 2,000 | 08/31/08 | Six 5yr Terms | 77.97 | 34.98 | |||||||||||||||||||
Rockaway | NJ | Fee | BASF | Office | 95,500 | 09/30/14 | Two 5 yr | 23.50 | FMV | |||||||||||||||||||
Las Vegas | NV | Fee | Nevada Power Company | Office | 282,000 | 01/31/14 | Five 5yr Terms | 27.43 | 9.77 | |||||||||||||||||||
Rochester | NY | Fee | Frontier Corporation | Office | 226,000 | 12/31/14 | Two 5 yr | 11.36 | FMV | |||||||||||||||||||
Miamisburg | OH | GL | Reed Elsevier, Inc. | Office | 61,229 | 01/31/08 | Six 5yr Terms | 11.62 | 11.62 | |||||||||||||||||||
Miamisburg | OH | GL | Reed Elsevier, Inc. | Office | 85,873 | 01/31/08 | Six 5yr Terms | 6.01 | 6.01 | |||||||||||||||||||
Toledo(16) | OH | GL | Owens-Illinois | Office | 707,482 | 09/30/06 | Tenant did not renew | 18.89 | 10.33 | |||||||||||||||||||
Allentown | PA | Fee | Wachovia | Office | 71,230 | 10/31/10 | Three 5yr Terms | 3.49 | 3.49 | |||||||||||||||||||
Johnson City | TN | Fee | Sun Trust Bank | Office | 63,800 | 11/30/11 | Four 5yr Terms | 10.58 | 10.58 | |||||||||||||||||||
Kingport | TN | Fee | American Electric Power | Office | 42,770 | 06/30/08 | Six 5yr Terms | 10.98 | 7.25 |
Annex F-15
Table of Contents
Lease Term | ||||||||||||||||||||||||||||
Maturity | Current | |||||||||||||||||||||||||||
(Including | Term | Contractual | ||||||||||||||||||||||||||
Ground | Type | Exercised | Remaining | Rent | Renewal | |||||||||||||||||||||||
City | State | Ownership(1) | Tenant | of Property | Sq. Ft. | Options) | Renewal Terms | PSF ($) | Rent PSF ($) | |||||||||||||||||||
Memphis | TN | LE | The Kroger Co. | Office | 75,000 | 07/01/08 | Six 5yr Terms | 16.57 | 5.62 | |||||||||||||||||||
Memphis(17) | TN | Fee | Federal Express Corporation | Office | 521,286 | 06/19/09 | Six 5yr Terms | 27.56 | 10.31 | |||||||||||||||||||
Beaumont | TX | Fee | Wells Fargo & Co. | Office | 49,689 | 11/29/07 | Six 5yr Terms | 29.10 | 17.68 | |||||||||||||||||||
Beaumont | TX | GL | Entergy Gulf States | Office | 426,000 | 07/31/07 | Three 10yr Terms | 26.46 | 14.57 | |||||||||||||||||||
Bedford | TX | Fee | Vacant | Office | 206,905 | Vacant | Vacant | NA | NA | |||||||||||||||||||
Dallas | TX | Fee | Wells Fargo & Co. | Office | 185,000 | 12/31/07 | Six 5yr Terms | 16.39 | 9.40 | |||||||||||||||||||
Garland | TX | Fee | E Systems Inc. | Office | 278,759 | 05/31/11 | Five 5yr Terms | 5.40 | 5.40 | |||||||||||||||||||
Glenwillow | OH | Fee | Royal Appliance | Office/Distribution | 458,000 | 07/31/15 | Two 5 yr Terms | 3.74 | 95% FMV | |||||||||||||||||||
El Segundo(5) | CA | Fee | Raytheon Company | Office/Parking | 959,000 | (5) | (5) | 16.10 | (5 | ) | ||||||||||||||||||
Sun City | AZ | Fee | Furrs Cafeterias | Other | 10,000 | 04/30/12 | No Renewal Terms | 15.00 | 25.00 | |||||||||||||||||||
Ft. Collins | CO | Fee | Lithia Motors | Other | 10,000 | 05/31/12 | One 5yr Term | 24.96 | 21.25 | |||||||||||||||||||
Carlsbad | NM | Fee | Furrs Cafeterias | Other | 10,000 | 04/30/12 | No Renewal Terms | 15.00 | 6.50 | |||||||||||||||||||
Corpus Christi | TX | Fee | Furrs Cafeterias | Other | 10,000 | 04/30/12 | No Renewal Terms | 15.00 | 10.00 | |||||||||||||||||||
El Paso | TX | Fee | Furrs Cafeterias | Other | 10,000 | 04/30/12 | No Renewal Terms | 15.00 | 8.50 | |||||||||||||||||||
McAllen | TX | Fee | Furrs Cafeterias | Other | 10,000 | 04/30/12 | No Renewal Terms | 15.00 | 15.00 | |||||||||||||||||||
Victoria | TX | Fee | Furrs Cafeterias | Other | 10,000 | 04/30/12 | No Renewal Terms | 15.00 | 7.00 | |||||||||||||||||||
Florence | AL | LE | The Kroger Co. | Retail | 42,130 | 07/01/08 | Six 5yr Terms | 15.65 | 5.31 | |||||||||||||||||||
Montgomery | AL | GL | Vacant | Retail | 53,820 | Vacant | Vacant | NA | NA | |||||||||||||||||||
Bisbee | AZ | LE | Safeway, Inc. | Retail | 30,181 | 03/31/09 | Six 5yr Terms | 9.06 | 5.03 | |||||||||||||||||||
Mesa(10) | AZ | Fee | Albertson’s/CSK Auto | Retail | 3,080 | 01/31/09 | Six 5yr Terms | 5.70 | 5.70 | |||||||||||||||||||
Tucson | AZ | LE | Safeway, Inc. | Retail | 37,268 | 03/31/09 | Six 5yr Terms | 9.77 | 5.42 | |||||||||||||||||||
Atascadero(10) | CA | Fee | Albertson’s/CSK Auto | Retail | 4,000 | 01/31/09 | Six 5yr Terms | 8.02 | 8.02 | |||||||||||||||||||
Beaumont(10) | CA | Fee | Albertson’s/CSK Auto | Retail | 4,000 | 01/31/09 | Six 5yr Terms | 7.61 | 7.61 | |||||||||||||||||||
Corona | CA | LE | Mark C. Bloome (Goodyear) | Retail | 9,400 | 09/30/12 | Five 5yr Terms | 26.43 | 9.02 | |||||||||||||||||||
Indio | CA | LE | Mark C. Bloome (Goodyear) | Retail | 9,600 | 09/30/12 | Five 5yr Terms | 22.70 | 7.75 | |||||||||||||||||||
Lake Forest(11) | CA | Fee | Mark C. Bloome (Goodyear) | Retail | 10,250 | 05/31/09 | Six 5yr Terms | 11.75 | 11.75 | |||||||||||||||||||
Mammoth Lakes | CA | LE | Safeway, Inc. | Retail | 44,425 | 05/31/07 | Six 5yr Terms | 18.33 | 9.23 |
Annex F-16
Table of Contents
Lease Term | ||||||||||||||||||||||||||||
Maturity | Current | |||||||||||||||||||||||||||
(Including | Term | Contractual | ||||||||||||||||||||||||||
Ground | Type | Exercised | Remaining | Rent | Renewal | |||||||||||||||||||||||
City | State | Ownership(1) | Tenant | of Property | Sq. Ft. | Options) | Renewal Terms | PSF ($) | Rent PSF ($) | |||||||||||||||||||
Morgan Hill(11) | CA | Fee | Mark C. Bloome (Goodyear) | Retail | 10,250 | 05/31/09 | Six 5yr Terms | 6.91 | 6.91 | |||||||||||||||||||
Paso Robles(10) | CA | Fee | Albertson’s/CSK Auto | Retail | 7,000 | 01/31/09 | Six 5yr Terms | 4.70 | 4.70 | |||||||||||||||||||
Pleasanton | CA | Fee | Federated Western Properties Inc. | Retail | 175,000 | 08/31/12 | One 8yr & Four 5yr Terms | 6.73 | 5.20 | |||||||||||||||||||
Redlands(11) | CA | Fee | Mark C. Bloome (Goodyear) | Retail | 11,200 | 05/31/09 | Six 5yr Terms | 5.53 | 5.53 | |||||||||||||||||||
San Diego | CA | GL | Nordstrom, Inc. | Retail | 225,919 | 12/31/16 | One 15 yr Term and one 5 yr. Term | 7.08 | 6.41 | |||||||||||||||||||
Santa Monica | CA | Fee | Federated Department Stores | Retail | 150,000 | 09/30/12 | One 8yr & Four 5yr Terms | 5.74 | 4.38 | |||||||||||||||||||
Tustin(12) | CA | Fee | Target | Retail | 72,000 | 12/31/07 | Four 5yr Terms | 1.99 | 1.40 | |||||||||||||||||||
Union City(11) | CA | Fee | Mark C. Bloome (Goodyear) | Retail | 10,800 | 05/31/09 | Six 5yr Terms | 7.32 | 7.32 | |||||||||||||||||||
Ventura | CA | GL | City of Buenaventura | Retail | 39,600 | 11/30/13 | No Renewal Terms | 19.92 | 1.30 | |||||||||||||||||||
Yorba Linda(11) | CA | Fee | Mark C. Bloome (Goodyear) | Retail | 10,800 | 05/31/09 | Six 5yr Terms | 7.62 | 7.62 | |||||||||||||||||||
Aurora | CO | LE | Safeway, Inc. | Retail | 24,000 | 05/31/12 | Five 5yr Terms | 21.26 | 10.71 | |||||||||||||||||||
Aurora | CO | Fee | Vacant | Retail | 41,384 | Vacant | Vacant | NA | NA | |||||||||||||||||||
Littleton | CO | Fee | Vacant | Retail | 29,360 | Vacant | Vacant | NA | NA | |||||||||||||||||||
Port Richey | FL | GL | Vacant | Retail | 53,820 | Vacant | Vacant | NA | NA | |||||||||||||||||||
Tallahassee | FL | GL | Vacant | Retail | 53,820 | Vacant | Vacant | NA | NA | |||||||||||||||||||
Atlanta | GA | LE | Bank of America | Retail | 6,260 | 12/31/09 | Six 5yr Terms | 25.29 | 17.89 | |||||||||||||||||||
Atlanta | GA | LE | Bank of America | Retail | 3,900 | 12/31/09 | Six 5yr Terms | 28.46 | 20.13 | |||||||||||||||||||
Chamblee | GA | LE | Bank of America | Retail | 4,565 | 12/31/09 | Six 5yr Terms | 27.36 | 19.35 | |||||||||||||||||||
Cumming | GA | LE | Bank of America | Retail | 14,208 | 12/31/09 | Six 5yr Terms | 19.73 | 13.96 | |||||||||||||||||||
Duluth | GA | LE | Bank of America | Retail | 9,300 | 12/31/09 | Six 5yr Terms | 20.26 | 14.33 | |||||||||||||||||||
Forest Park | GA | LE | Bank of America | Retail | 14,859 | 12/31/09 | Six 5yr Terms | 18.98 | 13.42 | |||||||||||||||||||
Jonesboro | GA | LE | Bank of America | Retail | 4,894 | 12/31/09 | Six 5yr Terms | 22.30 | 15.77 | |||||||||||||||||||
Stone Mountain | GA | LE | Bank of America | Retail | 5,704 | 12/31/09 | Six 5yr Terms | 23.56 | 16.66 | |||||||||||||||||||
Rock Falls | IL | Fee | Albertson’s/Lucky Stores | Retail | 27,650 | 9/30/11 | Two 5yr Terms | 2.28 | 5.06 | |||||||||||||||||||
Carmel | IN | Fee | Marsh Supermarkets, Inc. | Retail | 38,567 | 10/31/08 | Six 5yr Terms | 4.11 | 4.11 | |||||||||||||||||||
Lawrence | IN | Fee | Marsh Supermarkets, Inc. | Retail | 28,721 | 10/31/08 | Six 5yr Terms | 6.72 | 6.72 | |||||||||||||||||||
Louisville | KY | LE | The Kroger Co. | Retail | 40,019 | 12/29/11 | Five 5yr Terms | 16.45 | 6.11 | |||||||||||||||||||
Louisville | KY | GL | The Kroger Co. | Retail | 9,600 | 12/28/11 | None | 11.57 | 4.34 |
Annex F-17
Table of Contents
Lease Term | ||||||||||||||||||||||||||||
Maturity | Current | |||||||||||||||||||||||||||
(Including | Term | Contractual | ||||||||||||||||||||||||||
Ground | Type | Exercised | Remaining | Rent | Renewal | |||||||||||||||||||||||
City | State | Ownership(1) | Tenant | of Property | Sq. Ft. | Options) | Renewal Terms | PSF ($) | Rent PSF ($) | |||||||||||||||||||
Minden | LA | Fee | Safeway, Inc. | Retail | 35,000 | 11/30/07 | Six 5yr Terms | 11.55 | 5.51 | |||||||||||||||||||
Columbia(13) | MD | Fee | Giant Foods/Royal Ahold | Retail | 57,209 | 12/31/08 | 12/31/33 | 5.23 | 2.56 | |||||||||||||||||||
Billings | MT | GL | Safeway, Inc. | Retail | 40,800 | 05/31/10 | One 5yr Term | 9.05 | 4.56 | |||||||||||||||||||
Charlotte | NC | Fee | Food Lion, LLC (Delhaize America Inc.) | Retail | 33,640 | 10/31/08 | Six 5yr Terms | 2.90 | 2.90 | |||||||||||||||||||
Concord | NC | Fee | Food Lion, LLC (Delhaize America Inc.) | Retail | 32,259 | 10/31/08 | Six 5yr Terms | 6.09 | 6.09 | |||||||||||||||||||
Jacksonville | NC | Fee | Food Lion, LLC (Delhaize America Inc.) | Retail | 23,000 | 02/28/08 | Six 5yr Terms | 3.63 | 3.63 | |||||||||||||||||||
Jefferson | NC | GL | Food Lion, LLC (Delhaize America Inc.) | Retail | 23,000 | 02/28/08 | Two 5yr Terms | 3.17 | 3.17 | |||||||||||||||||||
Lexington | NC | GL/Fee | Food Lion, LLC (Delhaize America Inc.) | Retail | 23,000 | 02/28/08 | Six 5yr Terms | 6.02 | 6.02 | |||||||||||||||||||
Thomasville | NC | Fee | Food Lion, LLC (Delhaize America Inc.) | Retail | 21,000 | 10/31/08 | Six 5yr Terms | 5.07 | 5.07 | |||||||||||||||||||
Garwood | NJ | Fee | Pathmark Stores, Inc. | Retail | 52,000 | 05/31/11 | Two 5yr Terms | 5.33 | 5.33 | |||||||||||||||||||
Albuquerque | NM | Fee | Safeway, Inc. | Retail | 35,000 | 11/30/07 | Six 5yr Terms | 18.70 | 8.92 | |||||||||||||||||||
Farmington(10) | NM | Fee | Albertson’s/CSK Auto | Retail | 3,030 | 01/31/09 | Six 5yr Terms | 5.20 | 5.20 | |||||||||||||||||||
Las Vegas(10) | NV | Fee | Albertson’s/CSK Auto | Retail | 2,800 | 01/31/09 | Six 5yr Terms | 8.85 | 8.85 | |||||||||||||||||||
Port Chester | NY | GL | Pathmark Stores, Inc. | Retail | 59,000 | 10/31/08 | Three 5yr Terms | 18.89 | 7.77 | |||||||||||||||||||
Cincinnati | OH | GL | The Kroger Co. | Retail | 25,628 | 12/28/06 | Tenant did not renew | 14.39 | 5.37 | |||||||||||||||||||
Columbus | OH | LE | The Kroger Co. | Retail | 34,019 | 12/29/11 | Five 5yr Terms | 23.44 | 8.65 | |||||||||||||||||||
Franklin | OH | Fee | Marsh Supermarkets, Inc. | Retail | 29,119 | 10/31/08 | Six 5yr Terms | 3.83 | 3.83 | |||||||||||||||||||
Lawton | OK | LE | Safeway, Inc. | Retail | 30,757 | 03/31/09 | Six 5yr Terms | 10.84 | 6.02 | |||||||||||||||||||
Grants Pass | OR | LE | Safeway, Inc. | Retail | 33,770 | 03/31/09 | Six 5yr Terms | 8.65 | 4.80 | |||||||||||||||||||
Doylestown | PA | Fee | Meritor Savings Bank (Mellon Bank/Citizens Bank) | Retail | 3,800 | 08/31/08 | Six 5yr Terms | 38.81 | 18.69 | |||||||||||||||||||
Lansdale | PA | Fee | Meritor Savings Bank (Mellon Bank/Citizens Bank) | Retail | 3,800 | 08/31/08 | Six 5yr Terms | 41.04 | 19.77 | |||||||||||||||||||
Lima | PA | Fee | Meritor Savings Bank (Mellon Bank/Citizens Bank) | Retail | 3,800 | 08/31/08 | Six 5yr Terms | 44.66 | 21.52 | |||||||||||||||||||
Philadelphia | PA | Fee | Meritor Savings Bank (Mellon Bank/Citizens Bank) | Retail | 3,800 | 08/31/08 | Six 5yr Terms | 36.58 | 17.62 |
Annex F-18
Table of Contents
Lease Term | ||||||||||||||||||||||||||||
Maturity | Current | |||||||||||||||||||||||||||
(Including | Term | Contractual | ||||||||||||||||||||||||||
Ground | Type | Exercised | Remaining | Rent | Renewal | |||||||||||||||||||||||
City | State | Ownership(1) | Tenant | of Property | Sq. Ft. | Options) | Renewal Terms | PSF ($) | Rent PSF ($) | |||||||||||||||||||
Philadelphia | PA | Fee | Meritor Savings Bank (Mellon Bank/Citizens Bank) | Retail | 3,800 | 08/31/08 | Six 5yr Terms | 52.19 | 25.15 | |||||||||||||||||||
Philadelphia | PA | Fee | Meritor Savings Bank (Mellon Bank/Citizens Bank) | Retail | 3,800 | 08/31/08 | Six 5yr Terms | 11.77 | 5.65 | |||||||||||||||||||
Philadelphia | PA | Fee | Meritor Savings Bank (Mellon Bank/Citizens Bank) | Retail | 3,800 | 08/31/08 | Six 5yr Terms | 42.99 | 20.71 | |||||||||||||||||||
Philadelphia | PA | Fee | Meritor Savings Bank (Mellon Bank/Citizens Bank) | Retail | 3,800 | 08/31/08 | Six 5yr Terms | 49.12 | 23.67 | |||||||||||||||||||
Philadelphia | PA | Fee | Meritor Savings Bank (Mellon Bank/Citizens Bank) | Retail | 3,800 | 08/31/08 | Six 5yr Terms | 38.81 | 18.69 | |||||||||||||||||||
Philadelphia | PA | Fee | Meritor Savings Bank (Mellon Bank/Citizens Bank) | Retail | 3,800 | 08/31/08 | Six 5yr Terms | 39.09 | 18.83 | |||||||||||||||||||
Philadelphia | PA | Fee | Meritor Savings Bank (Mellon Bank/Citizens Bank) | Retail | 3,800 | 08/31/08 | Six 5yr Terms | 55.26 | 26.63 | |||||||||||||||||||
Philadelphia | PA | Fee | Pathmark Stores, Inc. | Retail | 50,000 | 11/30/10 | Five 5yr Terms | 8.08 | 8.08 | |||||||||||||||||||
Richboro | PA | Fee | Meritor Savings Bank (Mellon Bank/Citizens Bank) | Retail | 3,800 | 08/31/08 | Six 5yr Terms | 36.02 | 17.35 | |||||||||||||||||||
Wayne | PA | Fee | Meritor Savings Bank (Mellon Bank/Citizens Bank) | Retail | 3,800 | 08/31/08 | Six 5yr Terms | 52.75 | 25.42 | |||||||||||||||||||
Moncks Corner | SC | GL | Food Lion, LLC (Delhaize America Inc.) | Retail | 23,000 | 02/28/08 | Two 5yr Terms | 2.69 | 2.69 | |||||||||||||||||||
Chattanooga | TN | LE | The Kroger Co. | Retail | 42,130 | 07/01/08 | Six 5yr Terms | 16.81 | 5.71 | |||||||||||||||||||
Paris | TN | LE | The Kroger Co. | Retail | 31,170 | 07/01/08 | Six 5yr Terms | 15.04 | 5.10 | |||||||||||||||||||
Carrolton | TX | GL | Hongs Family Grocery | Retail | 61,000 | 01/31/21 | None | 3.95 | NA | |||||||||||||||||||
Dallas | TX | GL | The Kroger Co. | Retail | 68,024 | 12/28/06 | Kroger did not renew (15) | 7.89 | 5.26(15 | ) | ||||||||||||||||||
El Paso(10) | TX | Fee | Albertson’s/CSK Auto | Retail | 2,625 | 01/31/09 | Six 5yr Terms | 7.79 | 7.79 | |||||||||||||||||||
El Paso(10) | TX | Fee | Albertson’s/CSK Auto | Retail | 2,800 | 01/31/09 | Six 5yr Terms | 6.44 | 6.44 | |||||||||||||||||||
Fort Worth | TX | LE | Safeway, Inc. | Retail | 44,000 | 05/31/07 | Six 5yr Terms | 13.72 | 6.91 | |||||||||||||||||||
Garland | TX | LE | Safeway, Inc. | Retail | 40,000 | 11/30/07 | Six 5yr Terms | 17.05 | 8.14 | |||||||||||||||||||
Granbury | TX | LE | Safeway, Inc. | Retail | 35,000 | 11/30/07 | Six 5yr Terms | 12.15 | 5.80 | |||||||||||||||||||
Grand Prairie | TX | LE | Safeway, Inc. | Retail | 49,349 | 03/31/09 | Six 5yr Terms | 10.02 | 5.56 | |||||||||||||||||||
Greenville | TX | GL | Safeway, Inc. | Retail | 48,427 | 05/31/11 | Five 5yr Terms | 4.20 | 3.53 | |||||||||||||||||||
Hillsboro | TX | LE | Safeway, Inc. | Retail | 35,000 | 11/30/07 | Six 5yr Terms | 9.62 | 4.59 |
Annex F-19
Table of Contents
Lease Term | ||||||||||||||||||||||||||||
Maturity | Current | |||||||||||||||||||||||||||
(Including | Term | Contractual | ||||||||||||||||||||||||||
Ground | Type | Exercised | Remaining | Rent | Renewal | |||||||||||||||||||||||
City | State | Ownership(1) | Tenant | of Property | Sq. Ft. | Options) | Renewal Terms | PSF ($) | Rent PSF ($) | |||||||||||||||||||
Houston | TX | LE | The Kroger Co. | Retail | 52,200 | 12/29/11 | Five 5yr Terms | 14.45 | 5.39 | |||||||||||||||||||
Lubbock(10) | TX | Fee | Albertson’s/CSK Auto | Retail | 2,550 | 01/31/09 | Six 5yr Terms | 6.82 | 6.82 | |||||||||||||||||||
Lubbock | TX | GL | Vacant | Retail | 53,820 | Vacant | Vacant | NA | NA | |||||||||||||||||||
Sandy | UT | GL | Albertson’s Inc. | Retail | 41,612 | 12/31/06 | Tenant did not renew | 4.78 | 3.69 | |||||||||||||||||||
Staunton | VA | Fee | Food Lion, LLC (Delhaize America Inc.) | Retail | 23,000 | 02/28/08 | Six 5yr Terms | 7.20 | 7.20 | |||||||||||||||||||
Edmonds | WA | GL | Vacant | Retail | 35,459 | Vacant | Vacant | NA | NA | |||||||||||||||||||
Graham | WA | LE | Safeway, Inc. | Retail | 44,718 | 03/31/09 | Six 5yr Terms | 9.22 | 5.12 | |||||||||||||||||||
Milton | WA | LE | Safeway, Inc. | Retail | 44,718 | 03/31/09 | Six 5yr Terms | 10.63 | 5.90 | |||||||||||||||||||
Port Orchard | WA | GL | Jubilee Fun | Retail | 27,968 | Month to Month | None | 3.00 | NA | |||||||||||||||||||
Redmond | WA | LE | Safeway, Inc. | Retail | 44,718 | 03/31/09 | Six 5yr Terms | 11.26 | 6.25 | |||||||||||||||||||
Spokane | WA | LE | Safeway, Inc. | Retail | 38,905 | 03/31/09 | Six 5yr Terms | 9.63 | 5.34 | |||||||||||||||||||
Cheyenne | WY | Fee | Albertson’s Inc. | Retail | 31,420 | Vacant | Vacant | NA | NA | |||||||||||||||||||
Evanston | WY | Fee | Community First Bank (Bank of the West) | Retail | 10,378 | 03/31/09 | One 5yr Term | 3.91 | — | |||||||||||||||||||
Evanston | WY | Fee | Various | Retail | 28,086 | Multi-Tenant | Multi-Tenant | NA | — |
Annex F-20
Table of Contents
(1) | GL means a ground lease and LE means land estate. | |
(2) | The MLP holds a 55% ownership interest in the entity that owns this property. | |
(3) | The MLP holds a 63.2% ownership interest in the entity that owns this property. | |
(4) | Two properties. Information is for both properties in the aggregate. | |
(5) | The MLP holds a 53% ownership interest in the entity that owns these properties. Property consists of two 184,636 square foot office towers and a parking garage with approximately 150,000 square feet of office space above the garage. Tenant recently entered into lease extension for a term expiring January 1, 2019 for all of the space at 2200 E. Imperial Highway and approximately 160,741 square feet of office space at 2222 E. Imperial Highway and 63% of the parking structure. In connection with the lease extension, the tenant is obligated to pay annual rent of $4,921,000 from January 2009 through December 2013, increasing to $5,267,000 for the period from January 2014 to December 2018. Tenant has (i) three five 5 year renewal terms at fair market rent with respect to 2200 E. Imperial Highway, and (ii) five 5 year renewal terms at fair market rent with respect to one of the office towers (2230 E. Imperial Highway) and the remaining space at 2222 E. Imperial Highway. | |
(6) | The MLP holds a 59.9% ownership interest in the entity that owns this property. | |
(7) | The MLP holds the general partner interest in the entity that owns this property. | |
(8) | The MLP holds a second mortgage on this property that effectively gives the MLP all of the economic rights with respect to the property. | |
(9) | The MLP holds a 47.5% ownership interest in the entity that owns this property. | |
(10) | The MLP holds a 49.9% ownership interest in the entity that owns this property. | |
(11) | The MLP holds a 32.1% ownership interest in the entity that owns this property. | |
(12) | The MLP holds a 85.4% ownership interest in the entity that owns this property. | |
(13) | The MLP holds a 45% ownership interest in the entity that owns this property. | |
(14) | The MLP holds a 57.8% ownership interest in the entity that owns this property. | |
(15) | The Kroger Co. has elected not to renew. Malone’s has entered into an agreement to lease the property from 1/1/07 through 3/31/17 at a rent of $5.26 per square foot. |
(16) | This property was sold on September 29, 2006. See “BUSINESS —Developments since the IPO — Property Matters — Sales.” |
(17) | The MLP entered into a lease amendment on October 11, 2006, pursuant to which the term was extended to June 19, 2019 and the per square footage rental rate was modified to range between $13.00 and $14.11. The tenant retained the right to renew the lease at the end of the extended term for four five-year terms as provided in the original lease. |
Annex F-21
Table of Contents
Percentage of | ||||||||||||||||
2005 Aggregate | ||||||||||||||||
Number of | Square | 2005 Rental | Annual Rental | |||||||||||||
Tenant(1) | Properties | Footage | Revenues | Revenue | ||||||||||||
Raytheon Company(2) | 6 | 2,286,009 | $ | 42,863,692 | 17.9 | |||||||||||
St. Paul Fire and Marine Insurance Co. | 1 | 530,000 | 25,832,664 | 10.8 | ||||||||||||
Albertson’s Inc.(3) | 71 | 2,842,909 | 22,590,094 | 9.4 | ||||||||||||
Honeywell, Inc.(4) | 4 | 727,557 | 19,833,669 | 8.3 | ||||||||||||
Federal Express Corporation | 2 | 592,286 | 16,575,578 | 6.9 | ||||||||||||
Owens-Illinois, Inc.(5) | 1 | 707,482 | 13,364,335 | 5.6 | ||||||||||||
Entergy Corporation | 3 | 489,500 | 11,849,734 | 4.9 | ||||||||||||
Safeway Inc. | 19 | 736,036 | 8,494,155 | 3.5 | ||||||||||||
Hibernia National Bank | 2 | 403,027 | 8,286,145 | 3.5 | ||||||||||||
Nevada Power Company | 1 | 282,000 | 7,735,260 | 3.2 |
(1) | The listed company is either the tenant, the obligor or guarantor with respect to the lease or thesuccessor-in-interest to the initial tenant. | |
(2) | Properties leased to Raytheon represented approximately 12.9% of the MLP’s total assets for financial reporting purposes as of December 31, 2005. Raytheon is a public company subject to the reporting requirements of the Securities Exchange Act of 1934. As of December 31, 2005, no other lessee leased property from the MLP representing more than 10% of Newkirk’s total assets. (3) 50 properties were sold in July 2006. |
(4) | In June 2005, the MLP entered into an agreement with Honeywell International, Inc., the tenant of four office buildings owned by the MLP in Morris Township, New Jersey to restructure the lease on the properties. |
(5) | This property was sold on September 29, 2006. |
Approximate | ||||||||||||||||
Number of | Sq. Ft. | Aggregate | Cumulative | |||||||||||||
Properties at | Covered by | in Place | Percentage of | |||||||||||||
Which Lease | Expiring | Rental | Aggregate | |||||||||||||
Lease Expiration Date | Expires(1) | Leases(1) | Income(1)(2) | Revenues(1) | ||||||||||||
2006 | 13 | 1,283,375 | $ | 17,230,920 | 7.2 | % | ||||||||||
2007 | 32 | 3,005,442 | 37,284,017 | 22.7 | % | |||||||||||
2008 | 63 | 5,755,504 | 99,190,024 | 64.1 | % | |||||||||||
2009 | 45 | 2,746,105 | 58,627,451 | 88.6 | % | |||||||||||
2010 | 12 | 1,295,191 | 4,118,356 | 90.3 | % | |||||||||||
2011 | 16 | 1,158,446 | 9,992,346 | 94.4 | % | |||||||||||
2012 | 9 | 395,000 | 3,187,134 | 95.8 | % | |||||||||||
2013 | 1 | 39,600 | 788,722 | 96.1 | % | |||||||||||
2014 | 1 | 282,000 | 7,735,260 | 99.3 | % | |||||||||||
2015 | — | — | — | 99.3 | % | |||||||||||
2016 | 1 | 225,919 | 1,600,000 | 100.0 | % | |||||||||||
Vacant | 10 | 584,442 | — | |||||||||||||
TOTAL PORTFOLIO | 203 | 16,771,024 | $ | 239,754,230 | 100.0 | % | ||||||||||
(1) | Covers current term lease expirations only. | |
(2) | Based on rent from continuing operations for the year ended December 31, 2005. |
Annex F-22
Table of Contents
Current Term | ||||||||
City | State | Expiration | Renewal Options | Ground Rent | ||||
Russellville | AK | 5/9/2026 | n/a | $2,200 per year | ||||
Montgomery | AL | 1/1/2011 | 3-5 year renewal options. | $78,960 per year increasing by 7/5% each renewal term. | ||||
Palo Alto | CA | 2/1/2008 | 1 term expiring 12/14/2013, then 2-5 year renewal options. | $61,000 per year current term, fair market value all renewal terms. | ||||
San Diego | CA | 1/1/2017 | 10-5 year renewal options. | $60,000 per year thru 7th renewal then fair market value. | ||||
Tustin(1) | CA | 12/31/2007 | 12-5 year renewal options. | $45,990 per year during current term; $30,660 per year during 2nd through 5th renewal term; then fair market value. | ||||
Ventura | CA | 12/1/2018 | 4-5 year renewal options. | Current term is $45,000 per year, fair market value for all renewal terms. | ||||
Clinton | CT | 12/19/2018 | 8-5 year renewal options. | $7,200 per year for all terms. | ||||
Port Richey | FL | 12/31/2010 | 8-5 year renewal options. | $64,420 per year thru 1st renewal term, increases by 10% each renewal term. | ||||
Orlando | FL | 5/2/2008 | 10-5 year renewal options. | Fair Market Value. Current rent is $326,066.25 per year. | ||||
Orlando | FL | 3/31/2011 | 8-5 year renewal options. | $76,000 per year all terms. | ||||
Tallahassee | FL | 1/2/2007 | 9-5 year renewal options. | $64,102 per year through current term, then fair market value all renewal terms with no renewal rent less than the preceding term. Percentage rents are also payable to the extent of 1/2% gross sales in excess of $13,000,000. | ||||
Columbus | IN | 2/1/2009 | 9-5 year renewal options. | Fair Market Value. | ||||
Owensboro | KY | 12/19/2018 | 8-5 year renewal options. | $30,000 per year for all terms. | ||||
Louisville | KY | 1/30/2011 | 3-5 year renewal options. | Current rent is $67,100 and increases by $5,000 each renewal term. | ||||
Baltimore | MD | 11/2/2014 | 8-5 year renewal options. | $550,000 per year all terms. | ||||
Bridgeton | MO | 4/1/2011 | 9- 5 year renewal options. | $10,000 per year. | ||||
Billings | MT | 7/7/2010 | 4-5 year renewal options. | $40,000 per year plus percentage rent for all terms. | ||||
Jefferson | NC | 10/19/2007 | 4-5 year renewal options. | $35,000 per year current term, $37,500 thru 1st renewal then increase by $2,500 each renewal term plus percentage rent equal to .5% of gross sales in excess of $11,550,00 to max of $15,000,000. | ||||
Lexington | NC | 3/1/2008 | 14-5 year renewal options. | $3,333 per year through 6th renewal term, fair market value all remaining terms. | ||||
Morris Township | NJ | 11/30/2010 | 1-2.5 year & 9-5 year renewal options. | $11,727 per year all terms. |
Annex F-23
Table of Contents
Current Term | ||||||||
City | State | Expiration | Renewal Options | Ground Rent | ||||
Morris Township | NJ | 11/30/2010 | 1-2.5 year & 9-5 year renewal options. | $5,729 per year all terms. | ||||
Morris Township | NJ | 11/30/2010 | 1-2.5 year & 9-5 year renewal options. | $6,060 per year all terms. | ||||
Morristown | NJ | 9/30/2010 | 1-2.5 year & 9-5 year renewal options. | $14,766 per year all terms. | ||||
Port Chester | NY | 10/31/2008 | 6-5 year renewal options. | $276,367 per year increasing by 13% each renewal term. | ||||
Cincinnati | OH | 12/30/2006 | 4-5 year renewal options. | Current rent is $120,000 per year and $220,000 per year for all renewal terms. | ||||
Miamisburg | OH | 2/1/2008 | 10-5 year renewal options. | $10,000 per year thru 6th renewal term then fair market value. | ||||
Toledo(2) | OH | 9/30/2006 | 10-5 year renewal options. | $113,320 per year, 9% of FMV of the land as encumbered by the improvements. | ||||
Miamisburg | OH | 2/1/2008 | 10-5 year renewal options. | $10,000 thru 6th renewal then fair market value. | ||||
N. Myrtle Beach | SC | 8/16/2008 | 7-5 year renewal options. | $42,125 through first renewal term then increasing by 12% for each term up to $88,703 during the last renewal term. | ||||
Moncks Corner | SC | 1/4/2013 | 2-10 year renewal options. | $36,380 per year current term, increasing $2,500 per renewal term. | ||||
Memphis | TN | 3/1/2007 | 5-10 year renewal options | $22,500 for current term and thru 3rd renewal then 9% of fair market value. | ||||
Franklin | TN | 1/2/2011 | 1-3 year & 8- 5 year renewal options. | $36,564 all terms. | ||||
Carrolton | TX | 2/1/2011 | 9-5 year renewal options. | $2,500 through 5th renewal term and fair market value thereafter. | ||||
Dallas | TX | 12/30/2006 | 1-3 year & 5-5 year renewal options. | $5,800 thru 1st renewal term then increase by $600 each renewal term. | ||||
Greenville | TX | 6/6/2006 | 10-5 year renewal options. | $2,000 per year all terms. | ||||
Beaumont | TX | 8/1/2007 | 3-10 year & 4-5 year renewal options. | $123,001 per year during current term, fair market value all renewal terms. | ||||
Lubbock | TX | 1/2/2011 | 8-5 year renewal options. | $50,000 per year all terms. Percentage rents also payable to the extent of 1/2% of gross sales in excess of $20,000,000. | ||||
Bountiful | UT | 1/31/2011 | 4-5 year renewal options. | $70,000 + percentage rent for all terms. | ||||
Sandy | UT | 1/1/2007 | 5-5 year renewal options | $40,000 per year current term, $40,000 per year all renewal terms plus percentage equal to .5% of gross sales in excess of $20,000,000. | ||||
Port Orchard | WA | 1/1/2011 | 6-5 year renewal options. | $31,000 thru 2nd renewal, $35,000 thru 4th renewal, $38,000 for the remaining terms. |
Annex F-24
Table of Contents
Current Term | ||||||||
City | State | Expiration | Renewal Options | Ground Rent | ||||
Edmonds | WA | 1/2/2007 | 7-5 year renewal options. | $43,420 per year, then fair market value plus $13,000. | ||||
Windsor | WI | 3/1/2009 | 1-3 year &8-5 year renewal options. | $22,266 per year all terms. |
(1) | The MLP owns the land and an 86% ownership interest in the owning entity. |
(2) | This property was sold on September 29, 2006. See “BUSINESS —Developments since the IPO — Property Matters — Sales.” |
Land Estate | ||||||||
City | State | Expiration | Ground Lease Terms | Ground Lease Rent | ||||
Florence | AL | 7/3/2010 | Option to enter into a ground lease expiring 7/3/13 with9-5 year renewal options. | Commencing 7/4/2010, $2,500 per year for all terms. | ||||
Bisbee | AZ | 4/2/2011 | Option to enter ground lease expiring 4/2/2014 with 9-5 year renewal options. | $1,000 per year all terms. | ||||
Tucson | AZ | 4/2/2011 | Option to enter ground lease expiring 4/2/2014 with 9-5 year renewal options. | $1,000 per year all terms. | ||||
Corona | CA | 1/1/2008 | Option to enter into ground lease expiring 1/1/2013 with13-5 year renewal options. | Commencing 1/2/2008, $40,000 per year thru 7th renewal term then fair market value thereafter. | ||||
Indio | CA | 1/1/2008 | Option to enter into ground lease expiring 1/1/2013 with13-5 year renewal options. | Commencing 1/2/2008, $40,000 per year thru 7th renewal term then fair market value thereafter. | ||||
Long Beach | CA | 1/3/2011 | Option to enter ground lease expiring 1/2/2014 with 9-5 year renewal options. | Commencing 1/3/2011, $3,076 per year for all terms. | ||||
Long Beach | CA | 1/3/2011 | Option to enter ground lease expiring 1/2/2014 with 9-5 year renewal options. | Commencing 1/3/2011, $6,924 per year for all terms. | ||||
Mammoth Lakes | CA | 6/1/2009 | Option to enter ground lease expiring 6/1/2012 with 9-5 year renewal options. | Commencing 6/2/2012, $2,500 per year for all terms. | ||||
Pleasanton | CA | 12/1/2009 | Option to enter ground lease expiring 12/1/2014 with 5-5 year renewal options. | $12,999 per year all terms. | ||||
San Francisco | CA | 12/1/2009 | Option to enter ground lease expiring 12/1/2014 with 5-5 year renewal options. | $12,999 per year all terms. | ||||
Walnut Creek | CA | 9/2/2009 | Option to enter into ground lease expiring 9/2/2012 with9-5 year renewal options. | Commencing 9/3/2009, $10,000 per year all renewal terms. |
Annex F-25
Table of Contents
Land Estate | ||||||||
City | State | Expiration | Ground Lease Terms | Ground Lease Rent | ||||
Aurora | CO | 6/1/2009 | Option to enter ground lease expiring 6/1/2012 with 9-5 year renewal options. | Commencing 6/2/2012, $2,500 per year for all terms. | ||||
Atlanta | GA | 1/1/2010 | Option to enter into a ground lease expiring 1/1/15 with9-5 year renewal options. | Commencing 1/2/2010, $1,000 per year for all terms. | ||||
Atlanta | GA | 1/1/2010 | Option to enter into a ground lease expiring 1/1/15 with9-5 year renewal options. | Commencing 1/2/2010, $1,000 per year for all terms. | ||||
Chamblee | GA | 1/1/2010 | Option to enter into a ground lease expiring 1/1/15 with9-5 year renewal options | Commencing 1/2/2010, $1,000 per year for all terms. | ||||
Cumming | GA | 1/1/2010 | Option to enter into a ground lease expiring 1/1/15 with9-5 year renewal options. | Commencing 1/2/2010, $1,000 per year for all terms. | ||||
Duluth | GA | 1/1/2010 | Option to enter into a ground lease expiring 1/1/15 with9-5 year renewal options. | Commencing 1/2/2010, $1,000 per year for all terms. | ||||
Forest Park | GA | 1/1/2010 | Option to enter into a ground lease expiring 1/1/15 with9-5 year renewal options. | Commencing 1/2/2010, $1,000 per year for all terms. | ||||
Jonesboro | GA | 1/1/2010 | Option to enter into a ground lease expiring 1/1/15 with9-5 year renewal options. | Commencing 1/2/2010, $1,000 per year for all terms. | ||||
Stone Mountain | GA | 1/1/2010 | Option to enter into a ground lease expiring 1/1/15 with9-5 year renewal options. | Commencing 1/2/2010, $1,000 per year for all terms. | ||||
Louisville | KY | 12/31/2008 | Option to enter into ground lease expiring 12/31/2011 with 9-5 year renewal options. | Commencing 1/1/2008, $3,500 per year for all terms. | ||||
New Orleans | LA | 9/8/2008 | Option to enter ground lease expiring 9/8/2013 with 9-5 year renewal options. | Annual rent equal to 8% of the fair market value of the land as unencumbered by the improvements. | ||||
New Orleans | LA | 9/8/2008 | Option to enter ground lease expiring 9/8/2013 with 9-5 year renewal options. | Annual rent equal to 8% of the fair market value of the land as unencumbered by the improvements. | ||||
Columbus | OH | 12/31/2008 | Option to enter into ground lease expiring 12/31/2011 with 9-5 year renewal options. | Commencing 1/1/2008, $3,500 per year for all terms. | ||||
Lawton | OK | 4/2/2011 | Option to enter ground lease expiring 4/2/2014 with 9-5 year renewal options. | $1,000 per year all terms. | ||||
Grants Pass | OR | 4/2/2011 | Option to enter ground lease expiring 4/2/2014 with 9-5 year renewal options. | $1,000 per year all terms. | ||||
Chattanooga | TN | 7/3/2010 | Option to enter into a ground lease expiring 7/3/13 with9-5 year renewal options. | Commencing 7/4/2010, $2,500 per year for all terms. |
Annex F-26
Table of Contents
Land Estate | ||||||||
City | State | Expiration | Ground Lease Terms | Ground Lease Rent | ||||
Paris | TN | 7/3/2010 | Option to enter into a ground lease expiring 7/3/13 with9-5 year renewal options. | Commencing 7/4/2010, $2,500 per year for all terms. | ||||
Memphis | TN | 7/3/2010 | Option to enter into a ground lease expiring 7/3/13 with9-5 year renewal options. | Commencing 7/4/2010, $2,500 per year for all terms. | ||||
Houston | TX | 12/31/2008 | Option to enter into ground lease expiring 12/31/2011 with 9-5 year renewal options. | Commencing 1/1/2008, $3,500 per year for all terms. | ||||
Fort Worth | TX | 6/1/2009 | Option to enter ground lease expiring 6/1/2012 with 9-5 year renewal options. | Commencing 6/2/2012, $2,500 per year for all terms. | ||||
Grand Prairie | TX | 4/2/2011 | Option to enter ground lease expiring 4/2/2014 with 9-5 year renewal options. | $1,000 per year all terms. | ||||
Garland | TX | 12/1/2009 | Option to enter into ground lease expiring 12/1/2012 with9-5 year renewal options. | Commencing 12/2/2009, $14,280.60 per year all terms. | ||||
Granbury | TX | 12/1/2009 | Option to enter into ground lease expiring 12/1/2012 with9-5 year renewal options. | Commencing 12/2/2009, $14,280.60 per year all terms. | ||||
Hillsboro | TX | 12/1/2009 | Option to enter into ground lease expiring 12/1/2012 with9-5 year renewal options. | Commencing 12/2/2009, $14,280.60 per year all terms. | ||||
Graham | WA | 4/2/2011 | Option to enter ground lease expiring 4/2/2014 with 9-5 year renewal options. | $1,000 per year all terms. | ||||
Milton | WA | 4/2/2011 | Option to enter ground lease expiring 4/2/2014 with 9-5 year renewal options. | $1,000 per year all terms. | ||||
Redmond | WA | 4/2/2011 | Option to enter ground lease expiring 4/2/2014 with 9-5 year renewal options. | $1,000 per year all terms. | ||||
Spokane | WA | 4/2/2011 | Option to enter ground lease expiring 4/2/2014 with 9-5 year renewal options. | $1,000 per year all terms. |
(1) | The MLP subsidiary is the owner of the remainder interest. |
Annex F-27
Table of Contents
Due by Period | ||||||||||||||||||||
Less than | ||||||||||||||||||||
Contractual Obligations | Total | 1 Year | 2-3 Years | 4-5 Years | After 5 Years | |||||||||||||||
Mortgage Loan Payable | $ | 166,195 | $ | 36,700 | $ | 80,469 | $ | 16,625 | $ | 32,401 | ||||||||||
Note Payable | 593,463 | 7,500 | 585,963 | — | — | |||||||||||||||
Contract Right Mortgage Loan(4) | 11,128 | — | 720 | 10,408 | ||||||||||||||||
Ground Lease Obligations(1) | 1,291 | 269 | 522 | 497 | 3 | |||||||||||||||
Advisors’ Fee(2) | 14,400 | (3) | 4,800 | 9,600 | — | — | (3) | |||||||||||||
$ | 786,477 | $ | 49,269 | $ | 676,554 | $ | 17,842 | $ | 42,812 | |||||||||||
Commitments(5) | — | — | — | — | — |
Annex F-28
Table of Contents
(1) | Does not include ground lease obligations where the lease agreements require the tenant to pay the ground rent expense. | |
(2) | Based upon equity in place at December 31, 2005. No effect given to the incentive fee as it is a product of future performance. | |
(3) | No amounts have been included due to the automatic annual renewal provisions of the Advisory Agreement. | |
(4) | No payments until 2009. | |
(5) | Excludes pending acquisitions from January 1, 2006 to January 26, 2006 of $36,400,000 that were subject to due diligence at December 31, 2005. |
Annex F-29
Table of Contents
Annex F-30
Table of Contents
Annex F-31
Table of Contents
Annex F-32
Table of Contents
Annex F-33
Table of Contents
Annex F-34
Table of Contents
Annex F-35
Table of Contents
Annex F-36
Table of Contents
Annex F-37
Table of Contents
Annex F-38
Table of Contents
Annex F-39
Table of Contents
Annex F-40
Table of Contents
Annex F-41
Table of Contents
Pre-Consolidation | Consolidated | |||||||
Assets: | ||||||||
Cash | $ | $ | 177 | |||||
Land | — | 1,028 | ||||||
Building, net | — | 18,663 | ||||||
Equity investment in limited partnership | $ | 6,538 | $ | 20,202 | ||||
Deferred costs, net | — | 334 | ||||||
Liabilities: | — | 1,028 | ||||||
Mortgage loan | $ | 6,538 | $ | 20,202 | ||||
$ | — | $ | 13,664 | |||||
Annex F-42
Table of Contents
THE NEWKIRK MASTER LIMITED PARTNERSHIP
Page | ||
REPORTS OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMS FINANCIAL STATEMENTS | Annex F-44 and | |
Annex F-45 | ||
Consolidated Balance Sheet for Newkirk Realty Trust, Inc. (the “Company”) as of December 31, 2005 and the Consolidated Balance Sheet for The Newkirk Master Limited Partnership (the “Predecessor”) as of December 31, 2004 | Annex F-46 | |
Consolidated Statement of Operations and Comprehensive Income for the Company for the period from November 7, 2005 through December 31, 2005 and the Consolidated Statements of Operations and Comprehensive Income for the Predecessor for the period from January 1, 2005 through November 6, 2005 and for the years ended December 31, 2004 and 2003 | Annex F-47 | |
Consolidated Statement of Stockholders’ Equity for the Company for the period from November 7, 2005 through December 31, 2005 and the Consolidated Statement of Partners’ Equity for the Predecessor for the period from January 1, 2005 through November 6, 2005 and for the years ended December 31, 2004 and 2003 | Annex F-48 | |
Consolidated Statement of Cash Flows for the Company for the period November 7, 2005 through December 31, 2005 and the Consolidated Statements of Cash Flows for the Predecessor for the period from January 1, 2005 through November 6, 2005 and for the years ended December 31, 2004 and 2003 | Annex F-49 | |
Supplemental Information | Annex F-50 | |
Notes to Consolidated Financial Statements | Annex F-51 — | |
Annex F-71 | ||
Unaudited Consolidated Balance Sheet for the Company at June 30, 2006 and Consolidated Balance Sheet for the Company at December 31, 2005 | Annex F-72 | |
Unaudited Consolidated Statements of Operations and Comprehensive Income for the Company for the Three and Six Months Ended June 30, 2006 and Unaudited Consolidated Statements of Operations and Comprehensive Income for the Predecessor for the Three and Six Months Ended June 30, 2005 | Annex F-73 | |
Unaudited Consolidated Statement of Stockholders’ Equity for the Company for the Six Months Ended June 30, 2006 | Annex F-74 | |
Unaudited Consolidated Statements of Cash Flows for the Company for the Six Months Ended June 30, 2006 and Unaudited Consolidated Statements of Cash Flows for the Predecessor for the Six Months Ended June 30, 2005 | Annex F-75 — | |
Annex F-77 | ||
Notes to Unaudited Consolidated Financial Statements | Annex F-78 — | |
Annex F-91 |
Annex F-43
Table of Contents
Annex F-44
Table of Contents
Annex F-45
Table of Contents
THE NEWKIRK MASTER LIMITED PARTNERSHIP (THE “PREDECESSOR”)
CONSOLIDATED BALANCE SHEETS
The Company | The Predecessor | |||||||
December 31, | December 31, | |||||||
2005 | 2004 | |||||||
(In thousands, except | ||||||||
per-share data) | ||||||||
ASSETS | ||||||||
Real estate investments: | ||||||||
Land | $ | 36,593 | $ | 32,172 | ||||
Land estates | 43,997 | 43,997 | ||||||
Buildings and improvements | 1,407,602 | 1,502,013 | ||||||
Total real estate investments | 1,488,192 | 1,578,182 | ||||||
Less accumulated depreciation and amortization | (544,200 | ) | (545,385 | ) | ||||
Real estate investments, net | 943,992 | 1,032,797 | ||||||
Real estate held for sale, net of accumulated depreciation of $44,522 and $9,713 | 41,685 | 27,536 | ||||||
Cash and cash equivalents | 174,816 | 21,317 | ||||||
Restricted cash | 25,233 | 8,216 | ||||||
Real estate securities held for sale | 5,194 | — | ||||||
Receivables (including $6,078 and $10,119 from related parties) | 58,727 | 68,661 | ||||||
Deferred rental income receivable | 21,246 | 27,052 | ||||||
Loans receivable | 16,058 | 11,440 | ||||||
Equity investments in limited partnerships | 13,846 | 11,107 | ||||||
Deferred costs, net of accumulated amortization of $17,677 and $34,991 | 8,771 | 15,072 | ||||||
Lease intangibles, net of accumulated amortization of $415 | 7,657 | — | ||||||
Other assets (including $1,304 and $10,111 from related parties) | 27,314 | 13,687 | ||||||
Other assets of discontinued operations | 545 | 244 | ||||||
Total Assets | $ | 1,345,084 | $ | 1,237,129 | ||||
LIABILITIES, MINORITY INTEREST AND STOCKHOLDERS’/PARTNERS’ EQUITY | ||||||||
Liabilities: | ||||||||
Mortgage notes payable (including $15,536 and $14,871 to a related party) | $ | 166,195 | $ | 478,939 | ||||
Note payable | 593,463 | 165,328 | ||||||
Contract right mortgage notes payable (including 0 and $178,529 to a related party) | 11,128 | 263,072 | ||||||
Accrued interest payable (including $378 and $71,279 to related parties) | 7,514 | 102,141 | ||||||
Accounts payable and accrued expenses | 5,656 | 3,758 | ||||||
Dividend payable | 5,231 | — | ||||||
Other liabilities | 4,834 | — | ||||||
Liabilities of discontinued operations | 40,491 | 17,497 | ||||||
Total Liabilities | 834,512 | 1,030,735 | ||||||
Contingencies | ||||||||
Minority interests | 334,531 | 2,609 | ||||||
Stockholders’ equity/partners’ equity | ||||||||
Preferred stock; $.01 par value; 100,000,000 shares authorized; 1 issued and outstanding | — | — | ||||||
Common stock; $.01 par value; 400,000,000 shares authorized; 19,375,000 issued and outstanding | 194 | — | ||||||
Additional paid-in capital | 179,871 | — | ||||||
Accumulated dividends in excess of net income | (3,882 | ) | — | |||||
Accumulated other comprehensive loss | (142 | ) | — | |||||
Partners’ Equity (47,864,193 limited partnership units outstanding at December 31, 2004) | — | 203,785 | ||||||
Total Stockholders’ Equity/Partners’ Equity | 176,041 | 203,785 | ||||||
Total Liabilities, Minority Interests and Stockholders’ Equity | $ | 1,345,084 | $ | 1,237,129 | ||||
Annex F-46
Table of Contents
THE NEWKIRK MASTER LIMITED PARTNERSHIP (THE “PREDECESSOR”)
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
The Company | The Predecessor | |||||||||||||||
For the Period | For the Period | |||||||||||||||
November 7, 2005 | January 1, 2005 | |||||||||||||||
to December 31, | to November 6, | Year Ended December 31, | ||||||||||||||
2005 | 2005 | 2004 | 2003 | |||||||||||||
(In thousands, except per-share data) | ||||||||||||||||
Revenue: | ||||||||||||||||
Rental income | $ | 30,333 | $ | 174,371 | $ | 207,928 | $ | 222,554 | ||||||||
Interest income | 1,366 | 2,832 | 3,419 | 2,970 | ||||||||||||
Management fees | 38 | 249 | 332 | 418 | ||||||||||||
Gain from disposal of real estate securities for sale | 2 | — | — | — | ||||||||||||
Total revenue | 31,739 | 177,452 | 211,679 | 225,942 | ||||||||||||
Expenses: | ||||||||||||||||
Interest (including $118, $15,501, $19,869 and $7,546 to related parties, respectively) | 8,466 | 55,218 | 77,656 | 86,685 | ||||||||||||
Loss from early extinguishment of debt | — | 27,521 | 68 | 3,268 | ||||||||||||
Depreciation | 6,203 | 29,616 | 30,308 | 30,852 | ||||||||||||
Compensation expense for exclusivity rights | 10,500 | — | — | — | ||||||||||||
General and administrative (including $720, $1,638, $1,882 and $1,843 to related parties, respectively) | 1,268 | 3,812 | 3,670 | 8,726 | ||||||||||||
Operating | 244 | 534 | 430 | 10 | ||||||||||||
Impairment loss | — | 16,954 | 9,600 | — | ||||||||||||
Amortization | 512 | 2,370 | 2,694 | 4,582 | ||||||||||||
Ground rent | 379 | 1,891 | 2,096 | 2,080 | ||||||||||||
State and local taxes | 182 | 1,415 | 1,363 | 739 | ||||||||||||
Other expense | 2,855 | — | — | — | ||||||||||||
Total expenses | 30,609 | 139,331 | 127,885 | 136,942 | ||||||||||||
Income from continuing operations before equity in income from investments in limited partnerships and minority interest | 1,130 | 38,121 | 83,794 | 89,000 | ||||||||||||
Equity in income from investments in limited partnerships | 496 | 2,632 | 2,662 | 2,054 | ||||||||||||
Minority interest | (1,482 | ) | (15,938 | ) | (18,484 | ) | (18,297 | ) | ||||||||
Income from continuing operations | 144 | 24,815 | 67,972 | 72,757 | ||||||||||||
Discontinued operations: | ||||||||||||||||
(Loss) income before minority interest | 2,270 | 15,136 | 23,929 | 45,014 | ||||||||||||
Impairment loss | — | (12,761 | ) | (3,465 | ) | (1,560 | ) | |||||||||
Gain from disposal of real estate | 1,733 | 15,974 | 49,808 | 33,844 | ||||||||||||
Minority interest | (2,798 | ) | 7 | (436 | ) | (4,891 | ) | |||||||||
Income from discontinued operations | 1,205 | 18,356 | 69,836 | 72,407 | ||||||||||||
Net income | $ | 1,349 | $ | 43,171 | $ | 137,808 | $ | 145,164 | ||||||||
Comprehensive income: | ||||||||||||||||
Net income | $ | 1,349 | $ | 43,171 | $ | 137,808 | $ | 145,164 | ||||||||
Unrealized gain on real estate securities available for sale | 164 | — | — | — | ||||||||||||
Unrealized (loss) gain on interest rate derivative | (636 | ) | 1,636 | — | — | |||||||||||
Minority interest in other comprehensive loss | 330 | — | — | — | ||||||||||||
Comprehensive income | $ | 1,207 | $ | 44,807 | $ | 137,808 | $ | 145,164 | ||||||||
Per share data: | ||||||||||||||||
Income from continuing operations | $ | 0.01 | ||||||||||||||
Income from discontinued operations | $ | 0.06 | ||||||||||||||
Net income applicable to Common Stock | $ | 0.07 | ||||||||||||||
Weighted average Common Stock | 19,375 |
Annex F-47
Table of Contents
THE NEWKIRK MASTER LIMITED PARTNERSHIP (THE “PREDECESSOR”)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY AND PARTNERS’ EQUITY
Accumulated | Accumulated | |||||||||||||||||||||||||||||||||||
Dividends in | Other | |||||||||||||||||||||||||||||||||||
Preferred Stock | Common Stock | Additional | Excess of Net | Comprehensive | Partners’ | |||||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Paid-in Capital | Income | Income (Loss) | Equity | Total | ||||||||||||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||||||||||||||
THE PREDECESSOR | ||||||||||||||||||||||||||||||||||||
Balance at January 1, 2003 | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | (6,104 | ) | $ | (6,104 | ) | |||||||||||||||||
Acquisition of entities under common control | — | — | — | — | — | — | — | (13,637 | ) | (13,637 | ) | |||||||||||||||||||||||||
Minority interest charge | — | — | — | — | — | — | — | 12,109 | 12,109 | |||||||||||||||||||||||||||
Distributions | — | — | — | — | — | — | — | (34,731 | ) | (34,731 | ) | |||||||||||||||||||||||||
Limited partner buyouts | — | — | — | — | — | — | — | (3,937 | ) | (3,937 | ) | |||||||||||||||||||||||||
Net income | — | — | — | — | — | — | — | 145,164 | 145,164 | |||||||||||||||||||||||||||
Balance as of December 31, 2003 | — | — | — | — | — | — | — | 98,864 | 98,864 | |||||||||||||||||||||||||||
Equity contributions | — | — | — | — | — | — | — | 836 | 836 | |||||||||||||||||||||||||||
Minority interest charge | — | — | — | — | — | — | — | 13,101 | 13,101 | |||||||||||||||||||||||||||
Distributions | — | — | — | — | — | — | — | (46,106 | ) | (46,106 | ) | |||||||||||||||||||||||||
Limited partner buyouts | — | — | — | — | — | — | — | (718 | ) | (718 | ) | |||||||||||||||||||||||||
Net income | — | — | — | — | — | — | — | 137,808 | 137,808 | |||||||||||||||||||||||||||
Balance as of December 31, 2004 | — | — | — | — | — | — | — | 203,785 | 203,785 | |||||||||||||||||||||||||||
Minority interest charge | — | — | — | — | — | — | — | 11,233 | 11,233 | |||||||||||||||||||||||||||
Distributions | — | — | — | — | — | — | — | (37,692 | ) | (37,692 | ) | |||||||||||||||||||||||||
Limited partner buyouts | — | — | — | — | — | — | — | (2,042 | ) | (2,042 | ) | |||||||||||||||||||||||||
Net income | — | — | — | — | — | — | — | 43,171 | 43,171 | |||||||||||||||||||||||||||
Other comprehensive income | — | — | — | — | — | — | 1,636 | — | 1,636 | |||||||||||||||||||||||||||
Balance as of November 6, 2005 | — | — | — | — | — | — | 1,636 | 218,455 | 220,091 | |||||||||||||||||||||||||||
THE COMPANY | ||||||||||||||||||||||||||||||||||||
Reclassify Predecessor Partners’ Equity | — | — | — | — | 220,091 | — | (1,636 | ) | (218,455 | ) | — | |||||||||||||||||||||||||
Net proceeds from sale of Common Stock | — | — | 18,250 | 181 | 271,968 | — | — | — | 272,149 | |||||||||||||||||||||||||||
Issuance of Common Stock for Exclusivity Agreement | — | — | 1,125 | 13 | 19,987 | — | — | — | 20,000 | |||||||||||||||||||||||||||
Issuance of Preferred Stock | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||
Record minority interests for former owners’ continuing interests | — | — | — | — | (332,175 | ) | — | — | — | (332,175 | ) | |||||||||||||||||||||||||
Net income | — | — | — | — | — | 1,349 | — | — | 1,349 | |||||||||||||||||||||||||||
Dividends accrued on Common Stock | — | — | — | — | — | (5,231 | ) | — | — | (5,231 | ) | |||||||||||||||||||||||||
Other comprehensive loss | — | — | — | — | — | — | (142 | ) | — | (142 | ) | |||||||||||||||||||||||||
Balance December 31, 2005 | — | $ | — | $ | 19,375 | $ | 194 | $ | 179,871 | $ | (3,882 | ) | $ | (142 | ) | $ | — | $ | 176,041 | |||||||||||||||||
Annex F-48
Table of Contents
THE NEWKIRK MASTER LIMITED PARTNERSHIP (THE “PREDECESSOR”)
CONSOLIDATED STATEMENTS OF CASH FLOWS
The Company | The Predecessor | |||||||||||||||
For the Period | For the Period | |||||||||||||||
November 7, 2005 to | January 1, 2005 to | Year Ended | Year Ended | |||||||||||||
December 31, | November 6, | December 31, | December 31, | |||||||||||||
2005 | 2005 | 2004 | 2003 | |||||||||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||||||||||
Net income | $ | 1,349 | $ | 43,171 | $ | 137,808 | $ | 145,164 | ||||||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||||||||||
Amortization of deferred costs and land estates | 1,949 | 5,063 | 9,914 | 9,892 | ||||||||||||
Depreciation expense | 8,445 | 38,516 | 36,823 | 40,339 | ||||||||||||
Gain from disposal of real estate securities held for sale | (2 | ) | — | — | — | |||||||||||
Gain from disposal of real estate | (1,733 | ) | (15,974 | ) | (49,808 | ) | (33,844 | ) | ||||||||
Net loss (gain) from early extinguishment of debt | 121 | 30,339 | 6,575 | (4,708 | ) | |||||||||||
Compensation expense for exclusivity agreement | 10,500 | — | — | — | ||||||||||||
Impairment loss | — | 29,715 | 13,065 | 1,560 | ||||||||||||
Minority interest expense | 4,280 | 15,931 | 18,920 | 23,188 | ||||||||||||
Straight-lining of rental income | 1,064 | 4,677 | 5,139 | (3,248 | ) | |||||||||||
Interest earned on restricted cash | (79 | ) | (160 | ) | (68 | ) | (115 | ) | ||||||||
Equity in undisturbed earnings of limited partnerships | (473 | ) | (2,256 | ) | (2,273 | ) | (1,562 | ) | ||||||||
Changes in operating assets and liabilities: | ||||||||||||||||
Receivables | (6,185 | ) | 3,294 | (7,126 | ) | (7,466 | ) | |||||||||
Loans receivable | 325 | 1,556 | 1,768 | 1,851 | ||||||||||||
Accounts payable and accrued expenses | 2,055 | (448 | ) | (5,238 | ) | 3,344 | ||||||||||
Accrued interest-mortgages and contract rights | 4,402 | (38,560 | ) | (10,819 | ) | (13,613 | ) | |||||||||
Other assets | 572 | (1,846 | ) | (308 | ) | 20 | ||||||||||
Other liabilities | 2,855 | — | — | — | ||||||||||||
Net cash provided by operating activities | 29,445 | 113,018 | 154,372 | 160,802 | ||||||||||||
CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||||||||||
Building improvements and land additions | (127 | ) | (159 | ) | (2,557 | ) | (2,518 | ) | ||||||||
Change in restricted cash | (2,110 | ) | (14,667 | ) | (3,000 | ) | 3,076 | |||||||||
Proceeds from disposal of real estate securities held for sale | 143 | — | — | — | ||||||||||||
Deposits for future real estate acquisitions | (2,075 | ) | (51 | ) | — | — | ||||||||||
Purchase of real estate securities held for sale | (5,171 | ) | — | — | — | |||||||||||
Issuance of loan receivable | (6,500 | ) | — | — | — | |||||||||||
Net proceeds from disposal of real estate | 13,570 | 31,341 | 98,771 | 61,491 | ||||||||||||
Leasing costs incurred | (64 | ) | (1 | ) | — | — | ||||||||||
Cash related to previously unconsolidated limited partnerships | — | 44,405 | — | 650 | ||||||||||||
Acquisition of units from existing unitholders | (37,732 | ) | — | — | — | |||||||||||
Investments in limited partnership interests | — | (80 | ) | (1,111 | ) | (1,307 | ) | |||||||||
Net cash (used in) provided by investing activities | (40,066 | ) | 60,788 | 92,103 | 61,392 | |||||||||||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||||||||||
Principal payments of mortgage notes | (5,645 | ) | (272,040 | ) | (121,956 | ) | (126,806 | ) | ||||||||
Principal payments of notes payable | (138,470 | ) | (180,565 | ) | (43,028 | ) | (287,391 | ) | ||||||||
Principal payments of contract right mortgage notes | — | (85,481 | ) | (36,179 | ) | (6,623 | ) | |||||||||
Proceeds from note payable | — | 477,759 | — | 262,338 | ||||||||||||
Proceeds from termination of rate cap | 120 | — | — | — | ||||||||||||
Mortgage prepayment penalties | — | (23,548 | ) | (326 | ) | (400 | ) | |||||||||
Net proceeds from sale of common stock | 268,871 | — | — | — | ||||||||||||
Distributions to partner | — | (37,692 | ) | (46,106 | ) | (34,731 | ) | |||||||||
Limited partner buyouts | — | (2,042 | ) | (718 | ) | (3,937 | ) | |||||||||
Distributions to minority interests | (461 | ) | (5,161 | ) | (9,715 | ) | (8,734 | ) | ||||||||
Contributions from minority interests | 1,500 | 166 | — | — | ||||||||||||
Deferred financing costs | (43 | ) | (6,954 | ) | 167 | (8,550 | ) | |||||||||
Net cash provided by (used in) financing activities | 125,872 | (135,558 | ) | (257,861 | ) | (214,834 | ) | |||||||||
Net increase (decrease) in cash and cash equivalents | 115,251 | 38,248 | (11,386 | ) | 7,360 | |||||||||||
Cash and Cash Equivalents at Beginning of Year | 59,565 | 21,317 | 32,703 | 25,343 | ||||||||||||
Cash and Cash Equivalents at End of Year | $ | 174,816 | $ | 59,565 | $ | 21,317 | $ | 32,703 | ||||||||
Supplemental Disclosure of Cash Flow Information: | ||||||||||||||||
Cash paid for state and local taxes | $ | — | $ | 1,562 | $ | 1,353 | $ | 1,072 | ||||||||
Cash paid for interest | $ | 3,466 | $ | 122,460 | $ | 104,021 | $ | 124,342 | ||||||||
Accrued distributions | $ | 17,381 | $ | — | $ | — | $ | — | ||||||||
Annex F-49
Table of Contents
Annex F-50
Table of Contents
THE NEWKIRK MASTER LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
• | The Company issued 15,000,000 shares of its common stock; | |
• | The Company issued 3,125,000 common shares in a private transaction to Winthrop Realty Trust (formerly known as First Union Real Estate Equity and Mortgage Investments) in exchange for $50,000,000 and issued an additional 1,250,000 common shares ($20,000,000 value) in a private transaction to Winthrop Realty Trust in consideration for its assignment to the Company of certain exclusivity rights with respect to net-lease business opportunities offered to or generated by Michael Ashner, the Company and Winthrop Realty Trust’s Chairman and Chief Executive Officer. 625,000 shares (reducing by 17,361 per month) issued in exchange for the assignment of the exclusivity right are subject to forfeiture upon the occurrence of certain events. All shares of our common stock issued to Winthrop Realty Trust are subject to alock-up period expiring November 7, 2008, subject to certain exceptions. | |
• | Both the Company and the Operating Partnership retained NKT Advisors LLC (“NKT Advisors”), an entity partially owned by the Company’s executive officers, pursuant to an advisory agreement (the “Advisory Agreement”) to manage the Company’s assets and theday-to-day operations of the Company and the Operating Partnership, subject to the supervision of the Company’s Board of Directors; |
Annex F-51
Table of Contents
THE NEWKIRK MASTER LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
• | The Company acquired 15,625,000 newly-issued units of limited partnership interest in the Operating Partnership in exchange for $235,800,000 and an additional 1,250,000 units in exchange for the exclusivity rights described above. The Company also purchased 2,375,000 outstanding units from Apollo and 125,000 units of limited partnership interest from WEM, for an aggregate purchase price of $37,700,000, resulting in an aggregate ownership of 19,375,000 units of limited partnership in the Operating Partnership or 30.1% of the total outstanding units; | |
• | The Company was admitted as the general partner of the Operating Partnership; | |
• | NKT Advisors was issued the Company’s special voting preferred stock entitling it to vote on all matters for which the Company’s common stockholders are entitled to vote. The number of votes that NKT Advisors will be entitled to cast in respect of the special voting preferred stock will initially be 45,000,00 votes or approximately 69.9% of the 64,375,000 votes entitled to be cast. The 45,000,000 votes represent the total number of units outstanding immediately following consummation of IPO (excluding units held by the Company). As units are redeemed at the option of a limited partner, the number of votes attaching to NKT Advisors’ special voting preferred stock will decrease by an equivalent amount. The Advisory Agreement provides that on all matters for which NKT Advisors is entitled to cash votes in respect of its special voting preferred stock, it will cast its votes in direct proportion to the votes that are cast by limited partners of the Operating Partnership, other than the Company, on such matters, except that NKT Advisors (through its managing member) will be entitled to vote in its sole discretion to the extent that the voting rights of affiliates of Vornado are limited under certain circumstances; and | |
• | The Company granted registration rights to Apollo and Vornado in connection with shares issuable upon conversion of their units in the Operating Partnership and to Winthrop in connection with their shares of common stock. |
Annex F-52
Table of Contents
THE NEWKIRK MASTER LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Annex F-53
Table of Contents
THE NEWKIRK MASTER LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Annex F-54
Table of Contents
THE NEWKIRK MASTER LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Annex F-55
Table of Contents
THE NEWKIRK MASTER LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Annex F-56
Table of Contents
THE NEWKIRK MASTER LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Annex F-57
Table of Contents
THE NEWKIRK MASTER LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
2006 | $ | 238,365 | ||
2007 | 208,847 | |||
2008 | 156,645 | |||
2009 | 57,680 | |||
2010 | 25,832 | |||
Thereafter | 43,817 | |||
$ | 731,186 | |||
Annex F-58
Table of Contents
THE NEWKIRK MASTER LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
2006 | $ | 3,122 | ||
2007 | 2,496 | |||
2008 | 1,673 | |||
2009 | 982 | |||
2010 | 569 | |||
Thereafter | 192 | |||
9,034 | ||||
Annex F-59
Table of Contents
THE NEWKIRK MASTER LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Annex F-60
Table of Contents
THE NEWKIRK MASTER LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Mortgage | Contract | |||||||||||||||||||||||
Notes | Mortgage Notes | Accrued | ||||||||||||||||||||||
Year | Payable | Note Payable | Payable | Principal Total | Interest | Total | ||||||||||||||||||
2006 | $ | 36,700 | $ | 7,500 | $ | — | $ | 44,200 | $ | 7,514 | $ | 51,714 | ||||||||||||
2007 | 38,946 | 7,500 | — | 46,446 | — | 46,446 | ||||||||||||||||||
2008 | 41,523 | 578,463 | — | 619,986 | — | 619,986 | ||||||||||||||||||
2009 | 16,245 | — | 229 | 16,474 | — | 16,474 | ||||||||||||||||||
2010 | 380 | — | 491 | 871 | — | 871 | ||||||||||||||||||
Thereafter | 32,401 | — | 10,408 | 42,809 | — | 42,809 | ||||||||||||||||||
$ | 166,195 | $ | 593,463 | $ | 11,128 | $ | 770,786 | $ | 7,514 | $ | 778,300 |
2005 | 2004 | |||||||
Balance, beginning of year | $ | 11,107 | $ | 8,492 | ||||
Investments in limited partnership | 10 | 342 | ||||||
Equity in income of limited partnerships | 3,128 | 2,662 | ||||||
Distributions from limited partnerships | (399 | ) | (389 | ) | ||||
Balance, end of year | $ | 13,846 | $ | 11,107 | ||||
Annex F-61
Table of Contents
THE NEWKIRK MASTER LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The Company | The Predecessor | |||||||||||||||
For the Period | ||||||||||||||||
For the Period | January 1, 2005 | For the Year | ||||||||||||||
November 7, 2005 | to | Ended | For the Year Ended | |||||||||||||
to December 31, | November 6, | December 31, | December 31, | |||||||||||||
2005 | 2005 | 2004 | 2003 | |||||||||||||
(Unaudited) | ||||||||||||||||
Rental revenue and interest income | $ | 3,977 | $ | 22,613 | $ | 26,571 | $ | 26,528 | ||||||||
Interest expense | 1,423 | 8,491 | $ | 11,051 | 12,052 | |||||||||||
Administrative expense | 15 | 56 | 77 | 54 | ||||||||||||
Depreciation expense | 522 | 2,967 | 3,051 | 3,400 | ||||||||||||
Amortization expense | 78 | 447 | 525 | 525 | ||||||||||||
Net income | $ | 1,939 | $ | 10,652 | $ | 11,417 | $ | 10,497 | ||||||||
December 31, | December 31, | |||||||
2005 | 2004 | |||||||
(Unaudited) | ||||||||
Cash | $ | 1,744 | $ | 1,690 | ||||
Real estate, net | 81,043 | 84,598 | ||||||
Other assets | 2,928 | 3,318 | ||||||
Total assets | $ | 85,715 | $ | 89,606 | ||||
Accounts payable and other liabilities | $ | 1,436 | $ | 1,920 | ||||
Mortgages payable | 96,238 | 110,399 | ||||||
Partners’ deficit | (11,959 | ) | (22,713 | ) | ||||
Total liabilities and partners’ deficit | $ | 85,715 | $ | 89,606 | ||||
Annex F-62
Table of Contents
THE NEWKIRK MASTER LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Year | Return | |||
2005 and 2006 | 25 | % | ||
2007 | 22 | % | ||
2008 | 20 | % | ||
2009 | 15 | % | ||
2010 | 12 | % | ||
Thereafter | 10 | % |
Annex F-63
Table of Contents
THE NEWKIRK MASTER LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Annex F-64
Table of Contents
THE NEWKIRK MASTER LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Cash | $ | 44.4 | ||
Contract right mortgage notes receivable | 239.7 | |||
Accounts payable | (12.8 | ) | ||
Notes payable | (269.4 | ) | ||
Accrued interest payable | (0.3 | ) | ||
Gain | (1.6 | ) |
Annex F-65
Table of Contents
THE NEWKIRK MASTER LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Annex F-66
Table of Contents
THE NEWKIRK MASTER LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Annex F-67
Table of Contents
THE NEWKIRK MASTER LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The Company | The Predecessor | |||||||||||||||
For the Period | For the Period | |||||||||||||||
November 7, 2005 to | January 1, 2005 to | For the Year Ended | For the Year Ended | |||||||||||||
December 31, 2005 | November 6, 2005 | December 31, 2004 | December 31, 2003 | |||||||||||||
Revenue | $ | 5,618 | $ | 37,148 | $ | 53,170 | $ | 69,181 | ||||||||
Expenses | (3,227 | ) | (19,194 | ) | (22,783 | ) | (32,900 | ) | ||||||||
Impairment loss on real estate | — | (12,761 | ) | (3,465 | ) | (1,560 | ) | |||||||||
Net (loss) gain from early extinguishment of debt | (121 | ) | (2,818 | ) | (6,458 | ) | 8,733 | |||||||||
Gain from disposal of real estate | 1,733 | 15,974 | 49,808 | 33,844 | ||||||||||||
Minority interest | (2,798 | ) | 7 | (436 | ) | (4,891 | ) | |||||||||
Income from discontinued operations | $ | 1,205 | $ | 18,356 | $ | 69,836 | $ | 72,407 | ||||||||
2005 | 2004 | |||||||
Receivables | $ | 213 | $ | 81 | ||||
Other assets | 332 | 163 | ||||||
545 | 244 | |||||||
2005 | 2004 | |||||||
Mortgage notes and accrued interest payable | $ | 40,491 | $ | 5,672 | ||||
Contract right mortgage notes and accrued interest payable (including $0 and $11,825 to related parties) | — | 11,825 | ||||||
$ | 40,491 | $ | 17,497 | |||||
Annex F-68
Table of Contents
THE NEWKIRK MASTER LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
2005 | 2004 | 2003 | ||||||||||
Net income for financial reporting purposes | $ | 49,295 | $ | 137,808 | $ | 145,164 | ||||||
Depreciation and amortization | 40,729 | 30,472 | 37,364 | |||||||||
Compensation expense | 10,500 | — | — | |||||||||
Interest expense | 3,112 | 4,650 | 10,219 | |||||||||
Gain on sale of real estate | 15,084 | 42,290 | 80,517 | |||||||||
Impairment loss | 29,715 | 13,065 | 1,560 | |||||||||
Other | 3,581 | (8,538 | ) | 85 | ||||||||
Net loss (gain) from early extinguishment of debt | 48,311 | 6,269 | (4,266 | ) | ||||||||
Straight-line rent adjustment | 5,741 | 5,139 | (3,248 | ) | ||||||||
Taxable income | $ | 206,068 | $ | 231,155 | $ | 267,395 | ||||||
Annex F-69
Table of Contents
THE NEWKIRK MASTER LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The Predecessor | The Company | |||||||||||||||||||||||
Period | Period | |||||||||||||||||||||||
Quarter Ended | Quarter Ended | Quarter Ended | October 1, 2005 to | November 7, 2005 | ||||||||||||||||||||
March 31, 2005 | June 30, 2005 | September 30, 2005 | November 6, 2005 | to December 31, 2005 | ||||||||||||||||||||
(In thousands, except per share amounts) | ||||||||||||||||||||||||
Revenues | $ | 52,682 | $ | 51,814 | $ | 52,072 | $ | 20,884 | $ | 31,739 | ||||||||||||||
Net income (loss) | $ | 27,131 | (1) | $ | (1,272 | )(2) | $ | 7,160 | (3) | $ | 10,152 | (4) | $ | 1,349 | (5) | |||||||||
Net income per Common Share | N/A | N/A | N/A | N/A | $ | .07 |
Annex F-70
Table of Contents
THE NEWKIRK MASTER LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The Predecessor | ||||||||||||||||
Quarter Ended | Quarter Ended | Quarter Ended | Quarter Ended | |||||||||||||
March 31, 2004 | June 30, 2004 | September 30, 2004 | December 31, 2004 | |||||||||||||
Revenues | $ | 53,667 | $ | 53,093 | $ | 52,592 | $ | 52,327 | ||||||||
Net income (loss) | $ | 37,844 | (6) | $ | 19,355 | (7) | $ | 53,886 | (8) | $ | 26,723 | (9) | ||||
Net income per Common Share | N/A | N/A | N/A | N/A |
(1) | Includes gain from disposal of real estate of $600,000. | |
(2) | Includes loss from early extinguishment of debt of $100,000. | |
(3) | Includes gain from disposal of real estate of $15,500,000 and a loss from early extinguishment of debt of $29,100,000. | |
(4) | Includes loss from disposal of real estate of $100,000 and a gain from early extinguishment of debt of $400,000. | |
(5) | Includes gain from disposal of real estate of $500,000. | |
(6) | Includes gain from disposal of real estate of $7,700,000. | |
(7) | Includes gain from disposal of real estate of $1,800,000 and an impairment loss of $9,700,000. | |
(8) | Includes gain from disposal of real estate of $38,900,000, an impairment loss of $3,400,000 and a net loss from early extinguishment of debt of $6,700,000. | |
(9) | Includes gain from disposal of real estate of $1,000,000. |
Annex F-71
Table of Contents
June 30, | December 31, | |||||||
2006 | 2005 | |||||||
(Unaudited) | ||||||||
(In thousands, except share and per-share data) | ||||||||
ASSETS | ||||||||
Real estate investments: | ||||||||
Land | $ | 52,194 | $ | 36,593 | ||||
Land estates | 45,902 | 43,997 | ||||||
Buildings and improvements | 1,435,406 | 1,407,602 | ||||||
Total real estate investments | 1,533,502 | 1,488,192 | ||||||
Less accumulated depreciation and amortization | (520,585 | ) | (544,200 | ) | ||||
Real estate investments, net | 1,012,917 | 943,992 | ||||||
Real estate held for sale, net of accumulated depreciation of $99,018 and $44,522 | 135,329 | 41,685 | ||||||
Cash and cash equivalents | 48,605 | 174,816 | ||||||
Restricted cash | 15,444 | 25,233 | ||||||
Real estate securities available for sale | 10,045 | 5,194 | ||||||
Receivables (including $1,024 and $6,078 from related parties) | 51,577 | 58,727 | ||||||
Deferred rental income receivable | 22,463 | 21,246 | ||||||
Loans receivable | 14,974 | 16,058 | ||||||
Equity investments in limited partnerships | 8,636 | 13,846 | ||||||
Equity investment in joint venture | 33,952 | — | ||||||
Deferred costs, net of accumulated amortization of $21,471 and $17,677 | 11,826 | 8,771 | ||||||
Lease intangibles, net | 19,895 | 7,657 | ||||||
Other assets (including $1,418 and $1,304 from related parties) | 31,612 | 27,314 | ||||||
Other assets of discontinued operations | 10,779 | 545 | ||||||
Total Assets | $ | 1,428,054 | $ | 1,345,084 | ||||
LIABILITIES, MINORITY INTEREST AND STOCKHOLDERS’ EQUITY | ||||||||
Liabilities: | ||||||||
Mortgage notes payable (including $15,880 and $15,536 to a related party) | $ | 232,868 | $ | 166,195 | ||||
Note payable | 557,065 | 593,463 | ||||||
Contract right mortgage notes payable | 11,667 | 11,128 | ||||||
Accrued interest payable (including $386 and $378 to a related party) | 5,518 | 7,514 | ||||||
Accounts payable and accrued expenses | 4,922 | 4,763 | ||||||
Below market lease intangibles, net | 13,434 | 893 | ||||||
Dividend payable | 7,750 | 5,231 | ||||||
Other liabilities | 7,298 | 4,834 | ||||||
Liabilities of discontinued operations | 58,424 | 40,491 | ||||||
Total Liabilities | 898,946 | 834,512 | ||||||
Commitments and contingencies | ||||||||
Minority interests | 351,954 | 334,531 | ||||||
Stockholders’ equity: | ||||||||
Preferred stock; $.01 par value; 100,000,000 shares authorized; 1 issued and outstanding | — | — | ||||||
Common stock; $.01 par value; 400,000,000 shares authorized; 19,375,000 issued and outstanding | 194 | 194 | ||||||
Additional paid-in capital | 179,871 | 179,871 | ||||||
Accumulated dividends in excess of net income | (4,756 | ) | (3,882 | ) | ||||
Accumulated other comprehensive income (loss) | 1,845 | (142 | ) | |||||
Total Stockholders’ Equity | 177,154 | 176,041 | ||||||
Total Liabilities, Minority Interests and Stockholders’ Equity | $ | 1,428,054 | $ | 1,345,084 | ||||
Annex F-72
Table of Contents
AND THE NEWKIRK MASTER LIMITED PARTNERSHIP (THE “PREDECESSOR”)
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
The Company | The Predecessor | The Company | The Predecessor | |||||||||||||
Three Months Ended | Three Months Ended | Six Months Ended | Six Months Ended | |||||||||||||
June 30, 2006 | June 30, 2005 | June 30, 2005 | June 30, 2005 | |||||||||||||
(Unaudited) | ||||||||||||||||
(In thousands, except per share data) | ||||||||||||||||
Revenue: | ||||||||||||||||
Rental income | $ | 55,458 | $ | 51,055 | $ | 108,926 | $ | 102,960 | ||||||||
Interest income | 2,868 | 767 | 7,071 | 1,551 | ||||||||||||
Management fees | 60 | 78 | 124 | 159 | ||||||||||||
Total revenue | 58,386 | 51,900 | 116,121 | 104,670 | ||||||||||||
Expenses: | ||||||||||||||||
Interest | 13,330 | 17,571 | 26,019 | 34,767 | ||||||||||||
Depreciation | 11,445 | 7,404 | 22,572 | 14,849 | ||||||||||||
Compensation expense for exclusivity rights | 833 | — | 1,667 | — | ||||||||||||
General and administrative | 2,489 | 986 | 5,018 | 1,830 | ||||||||||||
Operating | 1,652 | 236 | 2,984 | 223 | ||||||||||||
Impairment loss | — | 14,754 | — | 16,954 | ||||||||||||
Amortization | 1,545 | 655 | 2,804 | 1,313 | ||||||||||||
Ground rent | 577 | 528 | 1,166 | 1,043 | ||||||||||||
State and local taxes | 339 | 807 | 1,181 | 1,077 | ||||||||||||
Minority interest expense of partially-owned entities | 5,346 | — | 10,692 | — | ||||||||||||
Total expenses | 37,556 | 42,941 | 74,103 | 72,056 | ||||||||||||
Income from continuing operations before other income (expense) | 20,830 | 8,959 | 42,018 | 32,615 | ||||||||||||
Other income (expense): | ||||||||||||||||
Equity in income from investments in limited partnerships and joint ventures | 1,245 | 766 | 1,709 | 1,521 | ||||||||||||
Gain on sale of securities | 109 | — | 88 | — | ||||||||||||
Minority interest | (16,007 | ) | (4,660 | ) | (31,639 | ) | (9,312 | ) | ||||||||
Income from continuing operations | 6,177 | 5,065 | 12,176 | 24,824 | ||||||||||||
Discontinued operations: | ||||||||||||||||
Income before minority interest | 4,468 | 5,866 | 8,454 | 12,637 | ||||||||||||
Gain from disposal of real estate | — | — | 601 | |||||||||||||
Impairment loss | — | (12,211 | ) | — | (12,211 | ) | ||||||||||
Minority interest | (3,159 | ) | 7 | (6,004 | ) | 8 | ||||||||||
Income (loss) from discontinued operations | 1,309 | (6,337 | ) | 2,450 | 1,035 | |||||||||||
Net income (loss) | $ | 7,486 | $ | (1,272 | ) | $ | 14,626 | $ | 25,859 | |||||||
Comprehensive income: | ||||||||||||||||
Net income (loss) | $ | 7,486 | $ | (1,272 | ) | $ | 14,626 | $ | 25,859 | |||||||
Unrealized loss on real estate securities available for sale | (455 | ) | — | (96 | ) | — | ||||||||||
Unrealized gain on interest rate derivative | 2,917 | — | 6,700 | — | ||||||||||||
Minority interest in other comprehensive income | (1,696 | ) | — | (4,617 | ) | — | ||||||||||
Comprehensive income (loss) | $ | 8,252 | $ | (1,272 | ) | $ | 16,613 | $ | 25,859 | |||||||
Per share data: | ||||||||||||||||
Income from continuing operations | $ | 0.32 | $ | 0.63 | ||||||||||||
Income from discontinued operations | 0.07 | 0.13 | ||||||||||||||
Net income applicable to Common Stock | $ | 0.39 | $ | 0.76 | ||||||||||||
Weighted average Common Stock | 19,375 | 19,375 | ||||||||||||||
Annex F-73
Table of Contents
For the Six Months Ended June 30, 2006
Accumulated | Accumulated | |||||||||||||||||||||||||||||||
Preferred Stock | Common Stock | Additional | Dividends of Excess | Other Comprehensive | ||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Paid-in Capital | of Net Income | Income (Loss) | Total | |||||||||||||||||||||||||
(Unaudited) | ||||||||||||||||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||||||||||
Balance December 31, 2005 | — | $ | — | $ | 19,375 | $ | 194 | $ | 179,871 | $ | (3,882 | ) | $ | (142 | ) | $ | 176,041 | |||||||||||||||
Net Income | — | — | — | — | — | 14,626 | — | 14,626 | ||||||||||||||||||||||||
Dividends paid or accrued on Common Stock | — | — | — | — | — | (15,500 | ) | — | (15,500 | ) | ||||||||||||||||||||||
Other comprehensive income | — | — | — | — | — | — | 1,987 | 1,987 | ||||||||||||||||||||||||
Balance as of June 30, 2006 | — | $ | — | $ | 19,375 | $ | 194 | $ | 179,871 | $ | (4,756 | ) | $ | 1,845 | $ | 177,154 | ||||||||||||||||
Annex F-74
Table of Contents
AND THE NEWKIRK MASTER LIMITED PARTNERSHIP (THE “PREDECESSOR”)
CONSOLIDATED STATEMENTS OF CASH FLOWS
The Company | The Predecessor | |||||||
Six Months | Six Months | |||||||
Ended | Ended | |||||||
June 30, | June 30, | |||||||
2006 | 2005 | |||||||
(Unaudited) | ||||||||
(In thousands, except supplemental data) | ||||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
Net income | $ | 14,626 | $ | 25,859 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Amortization of deferred costs, land estates and in-place lease intangibles | 3,879 | 3,829 | ||||||
Amortization of loan discounts | (10 | ) | — | |||||
Depreciation expense | 23,395 | 18,100 | ||||||
Gain from disposal of real estate securities available for sale | (88 | ) | — | |||||
Gain from disposal of real estate | — | (601 | ) | |||||
Net loss from early extinguishment of debt | — | 101 | ||||||
Compensation expense for exclusivity rights | 1,667 | — | ||||||
Impairment loss | — | 29,165 | ||||||
Minority interest expense | 37,643 | 9,304 | ||||||
Straight-lining of rental income | 3,030 | 2,619 | ||||||
Interest earned on restricted cash | (335 | ) | (39 | ) | ||||
Equity in undistributed earnings of limited partnerships and joint venture | (1,500 | ) | (1,314 | ) | ||||
Changes in operating assets and liabilities: | ||||||||
Receivables | (7,427 | ) | (1,042 | ) | ||||
Loans receivable | 1,071 | 941 | ||||||
Accounts payable and accrued expenses | 217 | (797 | ) | |||||
Accrued interest-mortgages and contract rights | (946 | ) | (11,482 | ) | ||||
Other assets | (4,170 | ) | 324 | |||||
Other liabilities | 10,692 | — | ||||||
Net cash provided by operating activities | 81,744 | 74,967 | ||||||
Annex F-75
Table of Contents
AND THE NEWKIRK MASTER LIMITED PARTNERSHIP (THE “PREDECESSOR”)
CONSOLIDATED STATEMENTS OF CASH FLOWS — (Continued)
The Company | The Predecessor | |||||||
Six Months | Six Months | |||||||
Ended | Ended | |||||||
June 30, | June 30, | |||||||
2006 | 2005 | |||||||
(Unaudited) | ||||||||
(In thousands, except supplemental data) | ||||||||
CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
Land and building additions and improvements | (127,268 | ) | (144 | ) | ||||
Change in restricted cash | 10,124 | (3,000 | ) | |||||
Deposits for future real estate acquisitions | (2,630 | ) | — | |||||
Refund of deposits for real estate acquisitions | 4,699 | — | ||||||
Investments in debt securities | (53,616 | ) | — | |||||
Proceeds from disposal of real restate securities available for sale | 1,379 | |||||||
Proceeds from real estate available for sale | 5,891 | — | ||||||
Purchase of real estate securities available for sale | (5,980 | ) | — | |||||
Collection of loan receivable | 32 | — | ||||||
Loan origination costs | (21 | ) | — | |||||
Net proceeds from disposal of real estate | — | 3,120 | ||||||
Leasing costs incurred | (871 | ) | — | |||||
Cash related to previously unconsolidated limited partnerships | 419 | — | ||||||
Investments in limited partnerships | (1,061 | ) | (45 | ) | ||||
Investment in joint venture | (22,116 | ) | — | |||||
Return of capital from investment in joint venture | 10,874 | — | ||||||
Net cash used in investing activities | (180,145 | ) | (69 | ) | ||||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
Principal payments of mortgage notes | (25,355 | ) | (49,709 | ) | ||||
Principal payments of notes payable | (15,044 | ) | (1,879 | ) | ||||
Principal payments of contract right mortgage notes | — | (469 | ) | |||||
Proceeds from mortgage notes | 28,755 | — | ||||||
Proceeds from line of credit | 32,025 | — | ||||||
Dividends paid to common stockholders | (12,981 | ) | (24,846 | ) | ||||
Limited partner buyouts | — | (2,042 | ) | |||||
Distributions to minority interests | (33,517 | ) | (3,191 | ) | ||||
Deferred financing costs | (1,693 | ) | (8 | ) | ||||
Net cash used in financing activities | (27,810 | ) | (82,144 | ) | ||||
Net decrease in cash and cash equivalents | (126,211 | ) | (7,246 | ) | ||||
Cash and Cash Equivalents at Beginning of Period | 174,816 | 21,317 | ||||||
Cash and Cash Equivalents at End of Period | $ | 48,605 | $ | 14,071 | ||||
Supplemental Disclosure of Cash Flow Information: | ||||||||
Cash paid for state and local taxes | $ | 1,454 | $ | 1,298 | ||||
Cash paid for interest | $ | 28,555 | $ | 45,343 | ||||
Accrued dividends | $ | 7,750 | — | |||||
Annex F-76
Table of Contents
Annex F-77
Table of Contents
AND THE NEWKIRK MASTER LIMITED PARTNERSHIP (THE “PREDECESSOR”)
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
Note 1 | ORGANIZATION AND BUSINESS |
Note 2 | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
Annex F-78
Table of Contents
AND THE NEWKIRK MASTER LIMITED PARTNERSHIP (THE “PREDECESSOR”)
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Pre-Consolidation | Consolidated | |||||||
Assets: | ||||||||
Cash | $ | — | $ | 177 | ||||
Land | — | 1,028 | ||||||
Building, net | — | 18,663 | ||||||
Equity investment in limited partnership | 6,538 | — | ||||||
Deferred costs, net | — | 334 | ||||||
$ | 6,538 | $ | 20,202 | |||||
Liabilities: | $ | — | $ | 13,664 | ||||
Mortgage loan | $ | — | $ | 13,664 | ||||
Note 3 | REAL ESTATE ACQUISITIONS, DISPOSITIONS, FINANCINGS AND SIGNIFICANT LEASING ACTIVITIES |
Annex F-79
Table of Contents
AND THE NEWKIRK MASTER LIMITED PARTNERSHIP (THE “PREDECESSOR”)
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Annex F-80
Table of Contents
AND THE NEWKIRK MASTER LIMITED PARTNERSHIP (THE “PREDECESSOR”)
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Annex F-81
Table of Contents
AND THE NEWKIRK MASTER LIMITED PARTNERSHIP (THE “PREDECESSOR”)
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Note 4 | INVESTMENT IN JOINT VENTURE |
Annex F-82
Table of Contents
AND THE NEWKIRK MASTER LIMITED PARTNERSHIP (THE “PREDECESSOR”)
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Balance, beginning of year | $ | — | ||
Investment in joint venture | 44,077 | |||
Return of capital from joint venture | (10,874 | ) | ||
Equity in income of joint venture | 749 | |||
Balance, June 30, 2006 | $ | 33,952 | ||
June 30, 2006 | ||||
Cash and restricted cash | $ | 4,027 | ||
Investment in debt securities and interest receivable | 142,279 | |||
Other assets | 1,475 | |||
Total assets | $ | 147,781 | ||
Accounts payable and other liabilities | $ | 505 | ||
Line of credit payable | 79,567 | |||
Members’ equity | 67,709 | |||
Total liabilities and members’ equity | $ | 147,781 | ||
On the Company’s Consolidated Balance Sheet: | ||||
Equity investment in joint venture | $ | 33,952 | ||
Revenue | $ | 2,441 | ||
Interest expense | (624 | ) | ||
General and administrative | (318 | ) | ||
Net income | $ | 1,499 | ||
On the Company’s Consolidated Statement of Operations and Comprehensive Income: | ||||
Equity in income from investments in limited partnerships and joint ventures | $ | 749 | ||
Note 5 | EQUITY INVESTMENTS IN LIMITED PARTNERSHIPS |
Balance, beginning of year | $ | 13,846 | ||
Equity in income of limited partnerships | 959 | |||
Distributions from limited partnerships | (209 | ) | ||
Investment in limited partnerships | 724 | |||
Consolidation of previously unconsolidated limited partnership | (6,684 | ) | ||
Balance, June 30, 2006 | $ | 8,636 | ||
Annex F-83
Table of Contents
AND THE NEWKIRK MASTER LIMITED PARTNERSHIP (THE “PREDECESSOR”)
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Three Months Ended | Six Months Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2006 | 2005 | 2006 | 2005 | |||||||||||||
Rental revenue and interest income | $ | 5,533 | $ | 6,995 | $ | 10,743 | $ | 13,640 | ||||||||
Interest expense | (1,930 | ) | (2,530 | ) | (3,894 | ) | (5,106 | ) | ||||||||
Administrative expenses | (362 | ) | (371 | ) | (374 | ) | (380 | ) | ||||||||
Depreciation expense | (725 | ) | (872 | ) | (1,448 | ) | (1,744 | ) | ||||||||
Amortization expense | (66 | ) | (131 | ) | (132 | ) | (263 | ) | ||||||||
Net income | $ | 2,450 | $ | 3,091 | $ | 4,895 | $ | 6,147 | ||||||||
On the Company’s Consolidated Statements of Operations and Comprehensive Income: | ||||||||||||||||
Equity in income from investments in limited partnerships and joint venture | $ | 496 | $ | 766 | $ | 960 | $ | 1,521 | ||||||||
June 30, 2006 | December 31, 2005 | |||||||
Cash | $ | 1,290 | $ | 1,744 | ||||
Real estate, net | 64,749 | 81,043 | ||||||
Other assets | 2,386 | 2,928 | ||||||
Total assets | $ | 68,425 | $ | 85,715 | ||||
Accounts payable and other liabilities | $ | 1,097 | $ | 1,436 | ||||
Mortgages payable | 76,055 | 96,238 | ||||||
Partners’ deficit | (8,727 | ) | (11,959 | ) | ||||
Total liabilities and partners’ deficit | $ | 68,425 | $ | 85,715 | ||||
On the Company’s Consolidated Balance Sheet: | ||||||||
Equity investments in limited partnerships | $ | 8,636 | $ | 13,846 | ||||
Annex F-84
Table of Contents
AND THE NEWKIRK MASTER LIMITED PARTNERSHIP (THE “PREDECESSOR”)
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Note 6 | VARIABLE INTEREST ENTITIES |
Note 7 | MORTGAGE NOTES PAYABLE, NOTE PAYABLE AND CONTRACT RIGHT MORTGAGE NOTE PAYABLE |
Annex F-85
Table of Contents
AND THE NEWKIRK MASTER LIMITED PARTNERSHIP (THE “PREDECESSOR”)
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Annex F-86
Table of Contents
AND THE NEWKIRK MASTER LIMITED PARTNERSHIP (THE “PREDECESSOR”)
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Note 8 | RELATED PARTY TRANSACTIONS |
Annex F-87
Table of Contents
AND THE NEWKIRK MASTER LIMITED PARTNERSHIP (THE “PREDECESSOR”)
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Note 9 | COMMITMENTS AND CONTINGENCIES |
1. | 1.5% of the gross purchase price | |
2. | 25% of net proceeds and net cash flow (as defined) after the Company receives a return of all its invested capital plus a 12% IRR. |
Note 10 | DISCONTINUED OPERATIONS AND SALES OF REAL ESTATE |
Annex F-88
Table of Contents
AND THE NEWKIRK MASTER LIMITED PARTNERSHIP (THE “PREDECESSOR”)
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The Company | The Predecessor | The Company | The Predecessor | |||||||||||||
Three Months | Three Months | Six Months | Six Months | |||||||||||||
Ended | Ended | Ended | Ended | |||||||||||||
June 30, | June 30, | June 30, | June 30, | |||||||||||||
2006 | 2005 | 2006 | 2005 | |||||||||||||
Revenue | $ | 6,112 | $ | 10,743 | $ | 12,451 | $ | 22,402 | ||||||||
Expenses | (1,644 | ) | (4,877 | ) | (3,997 | ) | (9,765 | ) | ||||||||
Impairment loss | — | (12,211 | ) | — | (12,211 | ) | ||||||||||
Gain from disposal of real estate | — | 1 | — | 601 | ||||||||||||
Minority interest | (3,159 | ) | 7 | (6,004 | ) | 8 | ||||||||||
Income (loss) from discontinued operations | $ | 1,309 | $ | (6,337 | ) | $ | 2,450 | $ | 1,035 | |||||||
June 30, 2006 | December 31, 2005 | |||||||
Receivables | $ | 10,105 | $ | 213 | ||||
Other assets | 674 | 332 | ||||||
$ | 10,779 | $ | 545 | |||||
June 30, 2006 | December 31, 2005 | |||||||
Mortgage notes and accrued interest payable | $ | 58,054 | $ | 40,491 | ||||
Other liabilities | 370 | — | ||||||
$ | 58,424 | 40,491 | ||||||
Note 11 | SUBSEQUENT EVENTS |
Annex F-89
Table of Contents
AND THE NEWKIRK MASTER LIMITED PARTNERSHIP (THE “PREDECESSOR”)
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Annex F-90
Table of Contents
AND THE NEWKIRK MASTER LIMITED PARTNERSHIP (THE “PREDECESSOR”)
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Annex F-91