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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
------------------------
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2001
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER 1-12386
LEXINGTON CORPORATE PROPERTIES TRUST
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<Table>
MARYLAND 13-3717318
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
355 LEXINGTON AVENUE NEW YORK, NY 10017
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (212) 692-7260
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
TITLE OF EACH CLASS
- ---------------------------------------------- NAME OF EACH EXCHANGE ON WHICH REGISTERED
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COMMON SHARES, PAR VALUE $.0001 NEW YORK STOCK EXCHANGE
</Table>
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: NONE
Indicate by check mark whether the Registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K (sec.229.405 of this chapter) is not contained herein, and
will not be contained, to the best of Registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. [X]
The aggregate market value of the voting shares held by non-affiliates of
the Registrant as of February 19, 2002 was $351,194,490, based on the closing
price of common shares as of that date, which was $14.90 per share.
Number of common shares outstanding as of February 19, 2002 was 24,668,049.
Number of preferred shares outstanding as of February 19, 2002 was
2,000,000.
DOCUMENTS INCORPORATED BY REFERENCE:
The Definitive Proxy Statement for Registrant's 2002 Annual Meeting of
Shareholders is incorporated herein by reference into Part III.
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PART I.
FORWARD-LOOKING STATEMENTS
When used in this Form 10-K Annual Report, the words "believes," "expects,"
"estimates" and similar expressions are intended to identify forward-looking
statements. Such statements are subject to certain risks and uncertainties,
which could cause actual results to differ materially. In particular, among the
factors that could cause actual results to differ materially are continued
qualification as a real estate investment trust, general business and economic
conditions, competition, increases in real estate construction costs, interest
rates, accessibility of debt and equity capital markets and other risks inherent
in the real estate business including tenant defaults or financial difficulties,
potential liability relating to environmental matters and illiquidity of real
estate investments. Readers are cautioned not to place undue reliance on these
forward-looking statements, which speak only as of the date hereof. The Company
undertakes no obligation to publicly release the results of any revisions to
these forward-looking statements which may be made to reflect events or
circumstances after the date hereof or to reflect the occurrence of
unanticipated events.
ITEM 1. BUSINESS
GENERAL
Lexington Corporate Properties Trust (the "Company"), is a self-managed and
self-administered real estate investment trust that acquires, owns and manages a
geographically diverse portfolio of net leased office, industrial and retail
properties. Lexington Realty Advisors, Inc. ("LRA"), a non-consolidated
affiliate of the Company, provides investment advisory and asset management
services to institutional investors in the net lease area. The Company's
predecessor was organized in October 1993 and merged into the Company on
December 31, 1997.
As of December 31, 2001, the Company's real property portfolio consisted of
98 properties (or interests therein) (the "Properties") located in thirty
states, including warehousing, distribution and manufacturing facilities, office
buildings and retail properties containing an aggregate 16.7 million net
rentable square feet of space. In addition, LRA manages 2 properties for a third
party. The Company's Properties are generally subject to triple net leases,
which are characterized as leases in which the tenant bears all, or
substantially all, of the costs and cost increases for real estate taxes,
insurance and ordinary maintenance. As of December 31, 2001, 98.3% of net
rentable square feet were subject to a lease.
The Company manages its real estate and credit risk through geographic,
industry, tenant and lease maturity diversification. As of December 31, 2001,
the ten largest tenants/guarantors, which occupy 18 Properties, represented
47.0% of trailing twelve month rent, including the Company's proportionate share
of non-consolidated investments.
<Table>
<Caption>
% OF 12 MONTH NUMBER OF
TENANT/GUARANTOR TRAILING RENT PROPERTY TYPE PROPERTIES
- ---------------- ------------- ------------- ----------
Kmart Corporation.............................. 9.6% Industrial 1
Northwest Pipeline Corporation................. 9.4 Office 1
Exel Logistics, Inc............................ 5.2 Industrial 4
Honeywell, Inc................................. 4.4 Office 3
Vartec Telecom, Inc............................ 3.7 Office 1
Circuit City Stores, Inc....................... 3.7 Office/Retail 1/3
Aventis Pharmaceuticals, Inc................... 3.0 Office 1
Artesyn North America, Inc..................... 2.7 Office 1
</Table>
1
<Table>
<Caption>
% OF 12 MONTH NUMBER OF
TENANT/GUARANTOR TRAILING RENT PROPERTY TYPE PROPERTIES
- ---------------- ------------- ------------- ----------
Boeing North American Services, Inc............ 2.7 Office 1
Avnet, Inc..................................... 2.6 Office 1
---- ---
47.0% 18
==== ===
</Table>
Kmart Corporation ("Kmart"), the Company's largest tenant based upon rental
revenues, filed for Chapter 11 bankruptcy protection on January 22, 2002. Kmart
leases a 1.7 million square foot distribution facility in Warren, Ohio. The
Company acquired the Property in 1998 by assuming a non-recourse mortgage of
$42.2 million, issuing operating partnership units of $18.9 million and $2.8
million in cash. The Company has no retail properties leased to Kmart. The Kmart
lease expires on September 30, 2007. Annual net rents are presently $8.4 million
($4.95 per square foot) and increase to $9.4 million on October 1, 2002. Rents
are paid semi-annually in arrears. The Property is encumbered by a non-recourse
first mortgage, bearing interest at 7% with an outstanding balance of $29.8
million at December 31, 2001. Annual debt service on this non-recourse mortgage,
which fully amortizes by maturity on October 1, 2007, is $6.2 million.
Accordingly, this Property currently provides an annual after debt service cash
flow to the Company of $2.2 million.
The Property is one of sixteen warehouse distribution facilities utilized
in Kmart's logistical operation. According to Kmart, this facility ranks third
by distribution volume, is the primary supply source for 185 Kmart retail stores
(approximately 9% of Kmart's total) and also supplies other distribution
facilities used by Kmart. As of December 31, 2001 the Company had $3.8 million
in accounts receivable from Kmart (including $1.7 million in straight-line
rents). Kmart is current in its rental obligation to the Company (the next
rental payment is due April 1, 2002) and there have been no discussions with
respect to the lease.
As of December 31, 2000 and 1999 the ten largest tenants/guarantors
represented 51.4% and 54.3% of trailing twelve month rent, respectively. In 2000
and 1999 Northwest Pipeline Corp. and Kmart Corporation each represented 11% and
12%, respectively, of revenues.
OBJECTIVES AND STRATEGY
The Company's primary objectives are to increase Funds From Operations,
cash available for distribution per share to its shareholders, and net asset
value per share. In an effort to achieve these objectives management focuses on:
- effectively managing assets through lease extensions, revenue enhancing
property expansions, opportunistic property sales and redeployment of
assets, when advisable;
- entering into strategic co-investment programs which generate higher
equity returns than direct investments due to acquisition, asset
management and debt placement fees and in some cases increased leverage
levels;
- LRA entering into third party advisory contracts to generate advisory fee
revenue;
- acquiring portfolios and individual net lease properties from third
parties, completing sale/leaseback transactions, acquiring build-to-suit
properties and opportunistically using common shares and operating
partnership units to effect acquisitions;
- refinancing existing indebtedness at lower average interest rates and
increasing the Company's access to capital to finance property
acquisitions and expansions; and
- repurchasing common shares and operating partnership units when they
trade at a discount to net asset value.
Internal Growth; Effectively Managing Assets
Tenant Relations and Lease Compliance. The Company maintains close contact
with its tenants in order to understand their future real estate needs. The
Company monitors the financial, property maintenance and other lease obligations
of its tenants through a variety of means, including periodic reviews of
financial statements and physical inspections of the Properties. The Company
performs annual inspections of those
2
Properties where it has an ongoing obligation with respect to the maintenance of
the Property and for all Properties during each of the last three years
immediately prior to a scheduled lease expiration. Biannual physical inspections
are undertaken for all other Properties.
Extending Lease Maturities. The Company seeks to extend its leases in
advance of their expiration in order to maintain a balanced lease rollover
schedule and high occupancy levels. Since February 1994, the Company has entered
into lease extensions of three years or more on 20 of its Properties. During
2001, the Company entered into 2 lease extensions for Properties with leases
scheduled to expire in 2001 for an average of 7.5 years and a 8.2% increase over
the then current average rental revenue.
As of December 31, 2001, the scheduled lease maturities for each of the
next five years are as follows:
<Table>
<Caption>
2002
NUMBER STRAIGHT LINE
OF SQUARE RENTS % OF
LEASES FOOTAGE ($000'S) RENT
--------- --------- ------------- ----
2002........................................ 2 290,800 $ 682 0.6%
2003........................................ 1 179,280 1,900 1.7
2004........................................ 1 27,360 337 0.3
2005........................................ 7 956,408 7,460 6.8
2006........................................ 15 2,085,538 12,739 11.6
-- --------- ------- ----
26 3,539,386 $23,118 21.0%
== ========= ======= ====
</Table>
Revenue Enhancing Property Expansions. The Company undertakes expansions
of its Properties based on tenant requirements. The Company believes that
selective property expansions can provide it with attractive rates of return and
actively seeks such opportunities. During 2001, the Company's joint venture with
a private investor completed a 107,894 square foot expansion of its 348,410
square foot office building in South Carolina. The Property is net leased to
Blue Cross Blue Shield of South Carolina. The expansion cost was $10.9 million.
The tenant has leased the expansion through September 30, 2009 at an average
annual rent of $2.0 million.
The Company also has entered into an agreement to expand its Property in
Lancaster, California net leased to Michaels Stores, Inc. The expansion,
expected to be completed in October 2002, will be leased to the tenant for
seventeen years at annual rent equal to 11.875% of construction cost which is
estimated to be $15.0 million. During the construction period, the Company will
earn interest on amounts advanced at 11.875% per annum. The Company expects to
fund the construction with draws on its unsecured revolving credit facility,
which at February 19, 2002 bears interest at a floating rate of approximately
3.35% per annum, and expects to place permanent financing on the expansion upon
completion of construction. In addition, the lease on the existing building,
which was scheduled to expire in June 2013, will be extended so that it is co-
terminus with lease on the expansion.
Acquisition Strategies
The Company seeks to enhance its net lease Property portfolio through
acquisitions of general purpose, efficient, well-located properties in growing
markets. Management has diversified the Company's portfolio by geographical
location, tenant industry segment, lease term expiration and property type with
the intention of providing steady internal growth with low volatility.
Management believes that such diversification should help insulate the Company
from regional recession, industry specific downturns and price fluctuations by
property type. Prior to effecting any acquisitions, management analyzes the (i)
property's design, construction quality, efficiency, functionality and location
with respect to the immediate sub-market, city and region; (ii) lease integrity
with respect to term, rental rate increases, corporate guarantees and property
maintenance provisions; (iii) present and anticipated conditions in the local
real estate market; and (iv) prospects for selling or re-leasing the property on
favorable terms in the event of a vacancy. Management also evaluates each
potential tenant's financial strength, growth prospects, competitive position
within its respective industry and a property's strategic location and function
within a tenant's operations or distribution systems. Management
3
believes that its comprehensive underwriting process is critical to the
assessment of long-term profitability of any investment by the Company.
Operating Partnership Structure. The operating partnership structure
enables the Company to acquire properties by issuing to a seller, as a form of
consideration, interests in the Company's operating partnerships ("OP Units").
Management believes that this structure facilitates the Company's ability to
raise capital and to acquire portfolio and individual properties by enabling the
Company to structure transactions which may defer tax gains for a contributor of
property while preserving the Company's available cash for other purposes,
including the payment of dividends and distributions. The Company has used OP
Units as a form of consideration in connection with the acquisition of 22
Properties, excluding the Properties purchased in the Net Partnerships
acquisition (see below).
Acquisitions of Portfolio and Individual Net Lease Properties. The
Company seeks to acquire portfolio and individual properties that are leased to
creditworthy tenants under long-term net leases. Management believes there is
significantly less competition for the acquisition of property portfolios
containing a number of net leased properties located in more than one geographic
region. Management also believes that the Company's geographical
diversification, acquisition experience and access to capital will allow it to
compete effectively for the acquisition of such net leased properties.
On November 28, 2001, the Company acquired Net 1 L.P. and Net 2 L.P. (the
"Net Partnerships") for $136.3 million which owned twenty-three Properties in
thirteen states. Subsequent to the acquisition of the Net Partnerships, the
Company sold one retail Property for $4.1 million. The twenty-two Properties
currently owned are scheduled to generate current rent of approximately $14.8
million. The Properties have a remaining weighted average lease term of
approximately 11.4 years and are net-leased to eighteen tenants, including
Hewlett Packard Company, Nextel Finance Company, Cox Communications, Inc., and
Wal-Mart Stores, Inc. The general partners of the Net Partnerships were
controlled by the Chairman and Co-Chief Executive Officer of the Company.
In connection with the acquisition, the Company assumed approximately $61.4
million of third party mortgage financing (excluding $11.1 million in
obligations due to the Company) with a weighted average interest rate of 7.9%
and issued 2,143,840 common shares, 44,858 operating partnership units, and paid
$31.6 million in cash to the partners of the Net Partnerships. The number of
common shares and operating partnership units issued was based on an issue price
of $14.49 per share/unit, which equaled the average of the Company's common
share closing price for the twenty trading days prior to the effective date of
the acquisition. The Company satisfied the cash portion of the acquisition with
cash balances on hand and by drawing on its unsecured credit facility.
Joint Venture Co-Investments. In 1999, the Company entered into a joint
venture agreement with The Comptroller of the State of New York as Trustee of
the Common Retirement Fund ("CRF"). The joint venture entity, Lexington
Acquiport Company, LLC ("LAC"), acquires high quality office and industrial real
estate properties net leased to investment and non-investment grade single
tenant users. The Company and CRF committed to make equity contributions to LAC
of up to $50 million and $100 million, respectively, of which $111.3 million has
been funded as of December 31, 2001. Property acquisitions will be additionally
funded through the use of non-recourse mortgages. During 2001, LAC made one
acquisition, for $14.4 million, of which $11.0 million was funded through a
non-recourse mortgage, which matures in 2011. As of December 31, 2001, LAC had
ownership interest in 7 Properties. The Property leases, which expire at various
dates ranging from 2009 to 2011, provide for current annual cash rent of
approximately $26.3 million. LAC also has an investment, an $11.0 million
participating note, which was used to partially fund the purchase of a 327,325
square foot office Property in Texas for $34.8 million. As of December 31, 2001,
LAC has made investments totaling $284.2 million.
LRA has a management agreement with LAC whereby LRA will perform certain
services for a fee relating to the acquisition (75 basis points of cost) and
management (200 basis points of rent collected annually) of the LAC investments.
During 2001 and 2000, LRA earned fees of $644,000 and $2.0 million relating to
this management agreement.
4
In December 2001, the Company and CRF announced the expansion of this joint
venture. The Company and CRF have committed to fund an additional $50 million
and $150 million, respectively, to purchase up to $560 million in single tenant
net lease office and industrial properties. LRA, in addition to earning fees as
discussed above, earns 50 basis points for all mortgage debt directly placed.
In 1999, the Company also formed a joint venture to own a Property net
leased to Blue Cross Blue Shield of South Carolina. The Company has a 40%
interest in the joint venture and LRA entered into a management agreement with
similar terms as the management agreement with LAC. During each of 2001 and
2000, LRA earned fees of $91,000 relating to this management contract.
Advisory Contracts. In 2000 LRA entered into an advisory and asset
management agreement to invest and manage $50 million of equity on behalf of a
private investment fund. The investment program could, depending on leverage
utilized, acquire up to $140 million in single tenant, net leased office,
industrial and retail properties in the United States. LRA earns acquisition
fees (90 basis points of total acquisition costs), annual asset management fees
(30 basis points of gross asset value) and a promoted interest of 16% of the
return in excess of an internal rate of return of 10% earned by the private
investment fund. During 2001 this fund purchased $25.4 million in properties,
and LRA earned $228,600 in acquisition fees and $22,900 in asset management fees
relating to these acquisitions.
Sale/Leaseback Transactions. The Company seeks to acquire portfolio and
individual net lease properties in sale/leaseback transactions. The Company
selectively pursues sale/leaseback transactions with creditworthy
sellers/tenants with respect to properties that are integral to the
sellers'/tenants' ongoing operations.
Build-to-Suit Properties. The Company also acquires, after construction
has been completed, "build-to-suit" properties that are entirely pre-leased to
their intended corporate users before construction. As a result, the Company
does not assume the risk associated with the construction phase of a project.
Lexington Realty Advisors, Inc. In addition to its management and advisory
business, LRA acquires properties for its own account with the intent to sell
them when market conditions warrant. During 2001 and 2000 LRA purchased two
Properties and one Property, respectively, for $31.5 million and $9.0 million,
respectively. Although the intent of LRA is to sell its Properties when an
appropriate offer is received, LRA only acquires net leased Properties that it
believes will meet its current and total return requirements if held for the
long-term. LRA has not sold any Properties purchased. See Note 5 of the Notes to
Consolidated Financial Statements included in this Annual Report on Form 10-K
for additional information regarding LRA.
Competition. Through our predecessor entities the Company has been in the
net lease business for 28 years and has established close relationships with a
large number of major corporate tenants and maintains a broad network of
contacts including developers, brokers and lenders. In addition, management is
associated with and/or participates in many industry organizations.
Notwithstanding these relationships, there are numerous commercial developers,
real estate companies, financial institutions and other investors with greater
financial resources, that compete with the Company in seeking properties for
acquisition and tenants who will lease space in these properties. Due to the
Company's focus on net lease properties located throughout the United States,
the Company does not encounter the same competitors in each region of the United
States since most competitors are locally and/or regionally focused. The
Company's competitors include other REITs, pension funds, private companies and
individuals.
Environmental Matters. Under various federal, state and local
environmental laws, statutes, ordinances, rules and regulations, an owner of
real property may be liable for the costs of removal or redemption of certain
hazardous or toxic substances at, on, in or under such property as well as
certain other potential costs relating to hazardous or toxic substances. These
liabilities may include government fines and penalties and damages for injuries
to persons and adjacent property. Such laws often impose liability without
regard to whether the owner knew of, or was responsible for, the presence or
disposal of such substances. Although the Company's tenants are primarily
responsible for any environmental damage and claims related to the leased
premises, in the event of the bankruptcy or inability of the tenant of such
premises to satisfy any obligations with respect to such
5
environmental liability, the Company may be required to satisfy such
obligations. In addition, the Company as the owner of such properties may be
held directly liable for any such damages or claims irrespective of the
provisions of any lease.
From time to time, in connection with the conduct of the Company's
business, and prior to the acquisition of any property from a third party or as
required by the Company's financing sources, the Company authorizes the
preparation of Phase I environmental reports with respect to its Properties.
Based upon such environmental reports and management's ongoing review of its
Properties, as of the date of this Annual Report, management is not aware of any
environmental condition with respect to any of the Company's Properties which
management believes would be reasonably likely to have a material adverse effect
on the Company. There can be no assurance, however, that (i) the discovery of
environmental conditions, the existence or severity of which were previously
unknown, (ii) changes in law, (iii) the conduct of tenants or (iv) activities
relating to properties in the vicinity of the Company's Properties, will not
expose the Company to material liability in the future. Changes in laws
increasing the potential liability for environmental conditions existing on
Properties or increasing the restrictions on discharges or other conditions may
result in significant unanticipated expenditures or may otherwise adversely
affect the operations of the Company's tenants, which would adversely affect the
Company's financial condition and results of operations, including funds from
operations.
Access to Capital and Refinancing Existing Indebtedness
During 2001, the Company completed a 4.4 million common share offering at
$15.20 per share raising $63.4 million of proceeds. The proceeds were used to
pay down debt and fund acquisitions.
As a result of the Company's financing activities, the weighted average
interest rate on the Company's outstanding indebtedness has been reduced from
approximately 7.79% as of December 31, 1999 to approximately 7.28% as of
December 31, 2001. Scheduled balloon payments, excluding the $10.0 million
outstanding on the variable rate unsecured credit facility due in 2004, over the
next five years are as follows ($000's):
<Table>
<Caption>
WEIGHTED
AVERAGE
BALLOON AMOUNTS INTEREST RATE
--------------- -------------
2002..................................................... $ -- --
2003..................................................... -- --
2004..................................................... 17,360 5.14%
2005..................................................... 80,963 7.31%
2006..................................................... -- --
------- ----
$98,323 6.93%
======= ====
</Table>
During 2001, excluding debt assumed in the Net Partnerships acquisition,
the Company obtained $60.7 million in non-recourse mortgage financings on
Properties at a fixed weighted average interest rate of 7.27% and $39.4 million
in variable rate mortgage financing at a rate of 5.12% at December 31, 2001. The
proceeds of the financings were used to (i) repay borrowings under the variable
rate unsecured credit facility, (ii) satisfy maturing mortgages and (iii) fund
joint venture and other investments.
The Company's variable rate unsecured credit facility bears interest at
150-250 basis points over the Company's option of 1, 3 or 6 month LIBOR,
depending on the amount of Properties the Company owns free and clear of
mortgage debt, and is scheduled to mature in March 2004. As of December 31,
2001, $10.0 million outstanding under this facility bore interest at a rate of
3.43%.
Common Share Repurchase. The Company's Board of Trustees authorized the
repurchase of up to 2.0 million common shares and/or operating partnership
units. As of December 31, 2001, the Company has repurchased approximately 1.4
million common shares/units at an average price of $10.55 per share/unit.
Employees. As of December 31, 2001, the Company had twenty-eight
employees.
6
Industry Segments. The Company operates in one industry segment,
investment in single tenant, net leased real property located throughout the
United States.
ITEM 2. PROPERTIES
Real Estate Portfolio
As of December 31, 2001, the Company owned or had interests in
approximately 16.7 million square feet of rentable space in 98 office,
industrial and retail Properties. The Company's Properties are currently 98.3%
leased based upon net rentable square feet. As of December 31, 2001, the number,
percentage of trailing 12 month rent and square footage mix of the Company's
portfolio is as follows:
<Table>
<Caption>
SQUARE
NUMBER RENT FOOTAGE
------ ------- -------
Office...................................................... 35 59.0% 35.3%
Industrial.................................................. 33 29.7% 52.6%
Retail...................................................... 30 11.3% 12.1%
-- ----- -----
98 100.0% 100.0%
== ===== =====
</Table>
The Company's Properties are subject to triple net leases, however, in
certain leases the Company is responsible for roof and structural repairs. In
such situations the Company performs annual inspections of the Properties. Two
of the Company's Properties in Florida (Palm Beach Gardens and Lake Mary) and
one in Fishers, Indiana are subject to leases in which the landlord is
responsible for a portion of the real estate taxes, utilities and general
maintenance. The Lake Mary and Fishers Properties are owned by LAC. The Company
is responsible for all operating expenses of vacant properties.
The Company's tenants represent a variety of industries including banking,
computer and software services, health and fitness, general purpose retailing,
manufacturing, insurance and warehousing, and have a weighted average credit
strength of investment grade quality based on publicly available rating agency
reports.
A substantial portion of the Company's income consists of base rent under
long-term leases. As of December 31, 2001, the average remaining term under the
Company's leases is approximately 9.3 years. Of the 96 current leases, 58
contain scheduled rent increases, 10 contain an increase based upon the Consumer
Price Index and 3 retail leases contain a percentage rent clause.
The Company has 11 Properties accounting for $15.5 million of rental
revenue that are subject to long term ground leases where a third party owns and
has leased the underlying land to the Company. In each of these situations the
rental payments made to the landowner are passed on to the Company's tenant. At
the end of these long-term ground leases, unless extended, the land together
with all improvements thereon revert to the landowner. These ground leases,
including renewal options, expire at various dates from 2028 through 2074.
TABLE REGARDING REAL ESTATE HOLDINGS
The table on the following pages sets forth certain information relating to
the Company's real Property portfolio, including non-consolidated Properties, as
of December 31, 2001. All the Properties listed have been fully leased by
tenants for the last five years, or since the date of purchase by the Company or
its non-consolidated entities if less than five years, with the exception of the
Memphis, Tennessee, Brownsville, Texas and Columbia, Maryland Properties. During
the last five years the Memphis Property was not leased from February 1998 to
October 1999; the Brownsville, Texas Property and Columbia, Maryland Property
have not been leased since September 2001. ($000's except per square foot data).
7
LEXINGTON CORPORATE PROPERTIES TRUST
PROPERTY CHART
<Table>
<Caption>
YEAR NET
TENANT CONSTRUCTED/ LAND AREA RENTABLE
PROPERTY LOCATION (GUARANTOR) REDEVELOPED (ACRES) SQUARE FEET
----------------- ------------------------------------ ------------ --------- -----------
OFFICE
3615 North 27th Avenue Bank One, Arizona, N.A. 1960 & 1979 10.26 179,280
Phoenix, AZ
183 Plains Road IKON Office Solutions 1994 3.01 27,360
Milford, CT
13430 N. Black Canyon Bull HN Information Systems, Inc. 1985 & 1994 13.37 137,058
Freeway
Phoenix, AZ
1301 California Circle Artesyn North America, Inc. 1985 6.34 100,026
Milpitas, CA (Balfour Beatty plc.)
200 Executive Boulevard Hartford Fire Insurance Co. 1983 12.40 153,364
South
Southington, CT
19019 No. 59th Avenue Honeywell, Inc. 1985 51.79 252,300
Glendale, AZ
401 Elm Street Lockheed Martin Corporation 1960 & 1988 36.94 126,000
Marlborough, MA (Honeywell, Inc.)
12000 Tech Center Drive Kelsey-Hayes Company 1987 & 1988 5.72 80,230
Livonia, MI
2300 Litton Lane Fidelity Corporate 1987 24.00 81,744
Hebron, KY Real Estate, LLC (2)
2211 South 47th Street Avnet, Inc. 1997 11.33 176,402
Phoenix, AZ
160 Clairemont Avenue Allied Holdings, Inc. 1983 2.98 112,248
Decatur, GA
<Caption>
2002 2002 (E)
BASE LEASE TERM AND MINIMUM STRAIGHT-LINE
ANNUAL RENTS PER NET RENEWAL CASH RENTAL
PROPERTY LOCATION RENTABLE SQUARE FOOT OPTIONS RENT ($000) REVENUE ($000)
----------------- ---------------------------- ------------- ----------- --------------
OFFICE
3615 North 27th Avenue 11/30/88 - 11/30/03 (1) 5 year $ 1,900 $ 1,900
Phoenix, AZ 12/01/98 - 11/30/03: $10.60
183 Plains Road 12/23/94 - 12/31/04 (4) 5 year $ 337 $ 337
Milford, CT 01/01/00 - 12/31/04: $12.31
13430 N. Black Canyon 10/11/94 - 10/10/05 None $ 1,051 $ 1,086
Freeway 10/11/01 - 10/10/02: $7.90
Phoenix, AZ 10/11/02 - 10/10/03: $8.10
10/11/03 - 10/10/04: $8.30
10/11/04 - 10/10/05: $8.50
1301 California Circle 12/10/85 - 12/09/05 (9) 5 year $ 2,562 $ 2,548
Milpitas, CA 12/01/00 - 05/31/03: $25.56
06/01/03 - 12/09/05: $28.92
200 Executive Boulevard 09/01/91 - 12/31/05 (1) 5 year $ 2,166 $ 2,158
South 01/01/95 - 12/31/05: $14.12
Southington, CT
19019 No. 59th Avenue 07/16/86 - 07/15/06 (2) 5 year $ 2,002 $ 1,995
Glendale, AZ 07/16/01 - 07/15/06: $8.00
401 Elm Street 07/22/97 - 12/17/06: (6) 5 year $ 1,870 $ 1,870
Marlborough, MA 12/18/01 - 12/17/06: $14.84
75% of cumulative
increase in CPI
12000 Tech Center Drive 05/01/97 - 04/30/07 (2) 5 year $ 680 $ 679
Livonia, MI 05/01/99 - 04/30/02: $7.91
05/01/02 - 04/30/05: $8.75
05/01/05 - 04/30/07: $9.25
2300 Litton Lane 07/01/96 - 04/30/07 (2) 5 year $ 858 $ 965
Hebron, KY 05/01/97 - 04/30/02: $9.50
05/01/02 - 04/30/07: $11.00
2211 South 47th Street 11/15/97 - 11/14/07 (2) 5 year $ 2,335 $ 2,468
Phoenix, AZ 11/15/00 - 11/14/03: $13.24
11/15/03 - 11/14/06: $14.47
11/15/06 - 11/14/07: $15.81
160 Clairemont Avenue 01/01/98 - 12/31/07 (2) 5 year $ 1,505 $ 1,530
Decatur, GA 01/01/02 - 12/31/02: $13.41
01/01/03 - 12/31/03: $13.77
01/01/04 - 12/31/04: $14.15
01/01/05 - 12/31/05: $14.54
01/01/06 - 12/31/06: $14.84
01/01/07 - 12/31/07: $15.35
</Table>
8
<Table>
<Caption>
LEXINGTON CORPORATE PROPERTIES TRUST
PROPERTY CHART
YEAR NET
TENANT CONSTRUCTED/ LAND AREA RENTABLE
PROPERTY LOCATION (GUARANTOR) REDEVELOPED (ACRES) SQUARE FEET
----------------- ------------------------------------ ------------ --------- -----------
13651 McLearen Road Boeing North American Services, Inc. 1987 10.39 159,664
Herndon, VA
2210 Enterprise Drive Washington Mutual Home Loans, Inc. 1998 16.53 177,747
Florence, SC (6)
9275 SW Peyton Lane Hollywood Entertainment Corporation 1980 & 1998 8.72 122,853
Wilsonville, OR
670 Alpha Park Drive The Tranzonic Companies 1968 & 1989 5.23 119,641
Highland Heights, OH
295 Chipeta Way Northwest Pipeline Corp. (1) 1982 19.79 295,000
Salt Lake City, UT
400 Butler Farm Road Nextel Communications of the Mid- 1999 14.34 100,632
Hampton, VA Atlantic, Inc.
16275 Technology Drive Cymer, Inc. 1989 2.73 65,755
San Diego, CA (Hewlett Packard Company)
<Caption>
LEXINGTON CORPORATE PROPERTIES TRUST
PROPERTY CHART
2002 2002 (E)
BASE LEASE TERM AND MINIMUM STRAIGHT-LINE
ANNUAL RENTS PER NET RENEWAL CASH RENTAL
PROPERTY LOCATION RENTABLE SQUARE FOOT OPTIONS RENT ($000) REVENUE ($000)
----------------- ---------------------------- ------------- ----------- --------------
13651 McLearen Road 05/31/99 - 05/30/08 (2) 5 year $ 2,511 $ 2,493
Herndon, VA 05/31/01 - 05/30/02: $15.50
05/31/02 - 05/30/03: $15.89
05/31/03 - 05/30/04: $16.28
05/31/04 - 05/30/05: $16.69
05/31/05 - 05/30/06: $17.11
05/31/06 - 05/30/07: $17.54
05/31/07 - 05/30/08: $17.98
2210 Enterprise Drive 06/10/98 - 06/30/08 (2) 5 year $ 1,520 $ 1,635
Florence, SC 06/10/98 - 06/30/03: $8.55
07/01/03 - 06/30/08: $9.84
9275 SW Peyton Lane 09/29/98 - 11/30/08 (1) 5 year $ 1,458 $ 1,531
Wilsonville, OR 09/29/98 - 01/31/02: $10.95
02/01/02 - 12/31/05: $11.95
01/01/06 - 11/30/08: $13.25
670 Alpha Park Drive 02/28/89 - 02/28/09 (2) 10 year $ 762 $ 762
Highland Heights, OH 09/01/01 - 02/29/04: $6.37
03/01/04 - 02/28/09:
Adjusted by CPI factor
not to exceed 4.5%
per annum
295 Chipeta Way 10/01/82 - 09/30/09 (1) 9 year $ 8,571 $ 8,571
Salt Lake City, UT 10/01/97 - 09/30/09: $29.06 (1) 10 year
subject to a CPI adjustment
on a portion of the rent.
400 Butler Farm Road 03/20/00 - 12/31/09 (4) 5 year $ 1,214 $ 1,302
Hampton, VA 01/01/02 - 12/31/02: $12.07
01/01/03 - 12/31/03: $12.31
01/01/04 - 12/31/04: $12.56
01/01/05 - 12/31/05: $12.81
01/01/06 - 12/31/06: $13.07
01/01/07 - 12/31/07: $13.33
01/01/08 - 12/31/08: $13.60
01/01/09 - 12/31/09: $13.87
16275 Technology Drive 06/01/96 - 01/01/10 None $ 816 $ 888
San Diego, CA 06/01/01 - 05/31/03: $12.42
06/01/03 - 05/31/05: $13.04
06/01/05 - 05/31/07: $13.69
06/01/07 - 01/01/10: $14.37
</Table>
9
<Table>
<Caption>
LEXINGTON CORPORATE PROPERTIES TRUST
PROPERTY CHART
YEAR NET
TENANT CONSTRUCTED/ LAND AREA RENTABLE
PROPERTY LOCATION (GUARANTOR) REDEVELOPED (ACRES) SQUARE FEET
----------------- ------------------------------------ ------------ --------- -----------
421 Butler Farm Road Nextel Communications of the 2000 7.81 56,515
Hampton, VA Mid-Atlantic, Inc.
9950 Mayland Drive Circuit City Stores, Inc. (1) 1990 19.71 288,562
Richmond, VA
10419 North 30th Street Time Customer Service, Inc. 1986 14.38 132,981
Tampa, FL (Time, Inc.)
1440 East 15th Street Cox Communications, Inc. 1988 3.58 28,591
Tucson, AZ
4200 RCA Boulevard The Wackenhut Corp. (5) 1996 7.70 127,855
Palm Beach Gardens, FL
250 Rittenhouse Circle Jones Apparel Group USA, Inc. (4) 1982 15.63 255,019
Bristol, PA
<Caption>
LEXINGTON CORPORATE PROPERTIES TRUST
PROPERTY CHART
2002 2002 (E)
BASE LEASE TERM AND MINIMUM STRAIGHT-LINE
ANNUAL RENTS PER NET RENEWAL CASH RENTAL
PROPERTY LOCATION RENTABLE SQUARE FOOT OPTIONS RENT ($000) REVENUE ($000)
----------------- ---------------------------- ------------- ----------- --------------
421 Butler Farm Road 01/15/00 - 01/14/10 01/15/01 (2) 5 year $ 682 $ 719
Hampton, VA -01/14/02: $11.83 01/15/02 -
01/14/03: $12.07 01/15/03 -
01/14/04: $12.31 01/15/04 -
01/14/05: $12.56 01/15/05 -
01/14/06: $12.81 01/15/06 -
01/14/07: $13.07 01/15/07 -
01/14/08: $13.33 01/15/08 -
01/14/09: $13.60 01/15/09 -
01/14/10: $13.87
9950 Mayland Drive 02/28/90 - 02/28/10 03/01/00 (4) 10 year $ 2,859 $ 2,791
Richmond, VA -02/28/10: $9.91 (1) 5 year
10419 North 30th Street 04/01/87 - 07/31/10 08/01/01 (2) 5 Year $ 1,321 $ 1,457
Tampa, FL -07/31/02: $ 9.94
08/01/02 - 07/31/03: $10.21
08/01/03 - 07/31/04: $10.49
08/01/04 - 07/31/05: $10.78
08/01/05 - 07/31/06: $11.07
08/01/06 - 07/31/07: $11.38
08/01/07 - 07/31/08: $11.69
08/01/08 - 07/31/09: $12.01
08/01/09 - 07/31/10: $12.34
1440 East 15th Street 10/01/90 - 09/30/10 None $ 401 $ 401
Tucson, AZ 10/01/98 - 09/30/10: $14.03
Adjusted by 3x CPI
not to exceed rent
as defined
4200 RCA Boulevard 02/15/96 - 02/28/11 (3) 5 year $ 2,324 $ 2,304
Palm Beach Gardens, FL 12/01/97 - 02/28/11: $18.17
250 Rittenhouse Circle 03/26/98 - 03/25/13 03/26/98 (2) 5 year $ 1,150 $ 1,347
Bristol, PA -03/26/03: $4.51 03/27/03 -
03/26/08: $4.96 03/27/08 -
03/25/13: $5.46
</Table>
10
<Table>
<Caption>
LEXINGTON CORPORATE PROPERTIES TRUST
PROPERTY CHART
YEAR NET
TENANT CONSTRUCTED/ LAND AREA RENTABLE
PROPERTY LOCATION (GUARANTOR) REDEVELOPED (ACRES) SQUARE FEET
----------------- ------------------------------------ ------------ --------- -----------
180 Rittenhouse Circle Jones Apparel Group USA, Inc. 1998 4.73 96,000
Bristol, PA
250 Turnpike Road Honeywell Consumer Products 1984 9.83 57,698
Southborough, MA
1600 Viceroy Drive VarTec Telecom, Inc. 1986 8.17 249,452
Dallas, TX
-------- ----------
Office Subtotal 347.41 3,759,977
-------- ----------
INDUSTRIAL
109 Stevens Street Unisource Worldwide, Inc. 1958 & 1969 6.97 168,800
Jacksonville, FL
300 McCormick Road Ameritech Services, Inc. 1990 10.12 20,000
Columbus, OH
222 Tappan Drive North The Gerstenslager Company 1970 26.57 296,720
Mansfield, OH (Worthington Industries)
904 Industrial Road Tenneco Automotive Operating 1968 & 1972 20.00 195,640
Marshall, MI Company, Inc.
1601 Pratt Avenue Tenneco Automotive Operating 1979 8.26 53,600
Marshall, MI Company, Inc.
4425 Purks Road Lear Technologies, LLC 1989 & 1998 12.00 183,717
Auburn Hills, MI (Lear Corporation)
(General Motors Corp.)
<Caption>
LEXINGTON CORPORATE PROPERTIES TRUST
PROPERTY CHART
2002 2002 (E)
BASE LEASE TERM AND MINIMUM STRAIGHT-LINE
ANNUAL RENTS PER NET RENEWAL CASH RENTAL
PROPERTY LOCATION RENTABLE SQUARE FOOT OPTIONS RENT ($000) REVENUE ($000)
----------------- ---------------------------- ------------- ----------- --------------
180 Rittenhouse Circle 08/01/98 - 07/31/13 08/01/01 None $ 839 $ 970
Bristol, PA -07/31/02: $8.74
08/01/02 - 07/31/03: $9.00
08/01/03 - 07/31/04: $9.27
08/01/04 - 07/31/05: $9.55
08/01/05 - 07/31/06: $9.84
08/01/06 - 07/31/07: $10.14
08/01/07 - 07/31/08: $10.44
08/01/08 - 07/31/09: $10.75
08/01/09 - 07/31/10: $11.07
08/01/10 - 07/31/11: $11.41
08/01/11 - 07/31/12: $11.74
08/01/12 - 07/31/13: $12.09
250 Turnpike Road 10/01/95 - 09/30/15 10/01/00 (4) 5 Year $ 433 $ 433
Southborough, MA -09/30/05: $7.49
10/01/05 - 09/30/15:
Increase based upon CPI
every 5 years
1600 Viceroy Drive 04/11/00 - 09/30/15 (2) 5 year $ 3,195 $ 3,486
Dallas, TX 09/01/00 - 08/31/03: $12.81
09/01/03 - 08/31/07: $13.81
09/01/07 - 09/30/15: $14.81
------- -------
47,322 48,626
------- -------
INDUSTRIAL
109 Stevens Street 10/01/87 - 09/30/02 None $ 285 $ 285
Jacksonville, FL 10/01/97 - 09/30/02: $2.25
300 McCormick Road 09/14/90 - 05/31/05 None $ 255 $ 255
Columbus, OH 06/01/00 - 05/31/05: 12.75
222 Tappan Drive North 10/01/99 - 05/31/05 (3) 5 year $ 674 $ 667
Mansfield, OH 10/01/99 - 05/31/05: $2.27
904 Industrial Road 08/18/87 - 08/17/05 None $ 587 $ 583
Marshall, MI 08/18/00 - 08/17/03: $3.00
08/18/03 - 08/17/05: $3.10
1601 Pratt Avenue 08/18/87 - 08/17/05 None $ 161 $ 163
Marshall, MI 08/18/00 - 08/17/03: $3.00
08/18/03 - 08/17/05: $3.10
4425 Purks Road 07/23/88 - 07/22/06 None $ 1,359 $ 1,365
Auburn Hills, MI 07/23/98 - 07/22/02: $7.21
07/23/02 - 07/22/06: $7.63
</Table>
11
<Table>
<Caption>
LEXINGTON CORPORATE PROPERTIES TRUST
PROPERTY CHART
YEAR NET
TENANT CONSTRUCTED/ LAND AREA RENTABLE
PROPERTY LOCATION (GUARANTOR) REDEVELOPED (ACRES) SQUARE FEET
----------------- ------------------------------------ ------------ --------- -----------
6950 Greenwood Parkway Allegiance Healthcare Corp. (1) 1990 10.15 123,631
Bessemer, AL (Baxter International, Inc.)
245 Salem Church Road Exel Logistics Inc. 1985 12.52 252,000
Mechanicsburg, PA (NFC plc)
6 Doughten Road Exel Logistics Inc. 1989 24.38 330,000
New Kingston, PA (NFC plc)
34 East Main Street Exel Logistics Inc. 1981 9.66 179,200
New Kingston, PA (NFC plc)
450 Stern Street Johnson Controls, Inc. 1996 20.10 111,160
Oberlin, OH
46600 Port Street Johnson Controls, Inc. 1996 24.00 134,160
Plymouth, MI
12025 Tech Center Drive Kelsey-Hayes Company 1987 & 1988 9.18 100,000
Livonia, MI
One Spicer Drive Dana Corp. 1983 & 1985 20.95 148,000
Gordonsville, TN
541 Perkins Jones Road Kmart Corp. 1982 103.00 1,700,000
Warren, OH
NW Corner of Roosevelt The Tranzonic Companies 1981 2.81 49,951
Street & Fairmont Drive
Tempe, AZ
<Caption>
LEXINGTON CORPORATE PROPERTIES TRUST
PROPERTY CHART
2002 2002 (E)
BASE LEASE TERM AND MINIMUM STRAIGHT-LINE
ANNUAL RENTS PER NET RENEWAL CASH RENTAL
PROPERTY LOCATION RENTABLE SQUARE FOOT OPTIONS RENT ($000) REVENUE ($000)
----------------- ---------------------------- ------------- ----------- --------------
6950 Greenwood Parkway 09/01/91 - 10/31/06 (2) 3 year $ 478 $ 501
Bessemer, AL 11/1/01 - 10/31/02: $3.85
11/1/02 - 10/31/03: $3.95
11/1/03 - 10/31/04: $4.05
11/1/04 - 10/31/05: $4.15
11/1/05 - 10/31/06: $4.25
245 Salem Church Road 11/15/91 - 11/30/06 (2) 5 year $ 1,009 $ 1,000
Mechanicsburg, PA 12/01/00 - 11/30/03: $4.01
12/01/03 - 11/30/06: $4.38
6 Doughten Road 11/15/91 - 11/30/06 (2) 5 year $ 1,361 $ 1,349
New Kingston, PA 12/01/00 - 11/30/03: $4.12
12/01/03 - 11/30/06: $4.51
34 East Main Street 11/15/91 - 11/30/06 (2) 5 year $ 659 $ 654
New Kingston, PA 12/01/00 - 11/30/03: $3.68
12/01/03 - 11/30/06: $4.02
450 Stern Street 12/23/96 - 12/22/06 (2) 5 year $ 612 $ 612
Oberlin, OH 12/23/01 - 12/22/02: $5.51
12/23/02 - 12/22/06:
Annual increase of
3x CPI, but not more
than 4.5%
46600 Port Street 05/19/00 -12/22/06 (2) 5 year $ 809 $ 809
Plymouth, MI 12/23/01 - 12/22/02: $6.03
12/23/02 - 12/22/06:
Annual increase of
3x CPI, but not more
than 4.5%
12025 Tech Center Drive 05/01/97 - 04/30/07 (2) 5 year $ 955 $ 958
Livonia, MI 05/01/99 - 04/30/02: $9.16
05/01/02 - 04/30/05: $9.75
05/01/05 - 04/30/07: $10.25
One Spicer Drive 01/01/84 - 08/31/07 (2) 5 year $ 339 $ 341
Gordonsville, TN 08/01/99 - 07/31/02: $2.26 (1) 4 year,
08/01/02 - 07/31/05: $2.33 11 months
08/01/05 - 08/31/07: $2.40
541 Perkins Jones Road 10/01/82 - 09/30/07 (10) 5 year $ 8,409 $ 8,932
Warren, OH 10/01/98 - 09/30/02: $4.95
10/01/02 - 09/30/07: $5.51
NW Corner of Roosevelt 02/28/89 - 02/28/09 (2) 10 year $ 202 $ 202
Street & Fairmont Drive 09/01/01 - 02/29/04: $4.05
Tempe, AZ 03/01/04 - 02/28/09:
Adjusted by CPI factor not
to exceed 4.5% per annum
</Table>
12
<Table>
<Caption>
LEXINGTON CORPORATE PROPERTIES TRUST
PROPERTY CHART
YEAR NET
TENANT CONSTRUCTED/ LAND AREA RENTABLE
PROPERTY LOCATION (GUARANTOR) REDEVELOPED (ACRES) SQUARE FEET
----------------- ------------------------------------ ------------ --------- -----------
200 Arrowhead Drive Owens Corning 1999 21.62 400,522
Hebron, OH
3350 Miac Cove Road Mimeo.com, Inc. (3) 1987 10.92 141,359
Memphis, TN
191 Arrowhead Drive Owens Corning 2000 13.62 250,410
Hebron, OH
3102 Queen Palm Drive Time Customer Service, Inc. 1986 15.02 229,605
Tampa, FL (Time, Inc.)
567 South Riverside Drive Crown Cork & Seal Co., Inc. (7) 1970 & 1976 5.80 146,000
Modesto, CA
6345 Brackbill Boulevard Exel Logistics, Inc. 1985 & 1991 29.01 507,000
Mechanicsburg, PA (NFC plc)
2280 Northeast Drive Ryder Integrated Logistics, Inc. 1996 & 1997 25.70 276,480
Waterloo, IA (Ryder Systems, Inc.)
128 Crews Drive Stone Container Corporation 1968 & 1998 10.76 185,961
Columbia, SC
<Caption>
LEXINGTON CORPORATE PROPERTIES TRUST
PROPERTY CHART
2002 2002 (E)
BASE LEASE TERM AND MINIMUM STRAIGHT-LINE
ANNUAL RENTS PER NET RENEWAL CASH RENTAL
PROPERTY LOCATION RENTABLE SQUARE FOOT OPTIONS RENT ($000) REVENUE ($000)
----------------- ---------------------------- ------------- ----------- --------------
200 Arrowhead Drive 03/01/01 - 05/31/09 (1) 2 year $ 899 $ 989
Hebron, OH 06/01/01 - 05/31/04: $2.25 (2) 5 year
06/01/04 - 05/31/09: $2.56
3350 Miac Cove Road 11/01/99 - 10/31/09 None $ 235 $ 235
Memphis, TN 11/01/99 - 10/31/02: $5.00
11/01/02 - 10/31/04: $5.00
11/01/04 - 10/31/09: $5.50
191 Arrowhead Drive 06/01/01 - 02/28/10 (1) 2 year $ 578 $ 648
Hebron, OH 03/01/01 - 02/28/05: $2.31 (2) 5 year
03/01/05 - 02/28/10: $2.63
3102 Queen Palm Drive 08/01/87 - 07/31/10 (2) 5 year $ 931 $ 1,015
Tampa, FL 08/01/01 - 07/31/02: $4.01
08/01/02 - 07/31/03: $4.12
08/01/03 - 07/31/04: $4.23
08/01/04 - 07/31/05: $4.35
08/01/05 - 07/31/06: $4.47
08/01/06 - 07/31/07: $4.59
08/01/07 - 07/31/08: $4.72
08/01/08 - 07/31/09: $4.85
08/01/09 - 07/31/10: $4.98
567 South Riverside Drive 09/26/86 - 09/25/11 None $ 315 $ 333
Modesto, CA 09/26/01 - 09/25/06: $2.16
09/26/06 - 09/25/07: $2.28
09/26/07 - 09/25/08: $2.34
09/26/08 - 09/25/09: $2.40
09/26/09 - 09/25/10: $2.46
09/26/10 - 09/25/11: $2.52
6345 Brackbill Boulevard 10/29/90 - 03/19/12 (2) 10 year $ 1,977 $ 1,852
Mechanicsburg, PA 03/20/97 - 03/19/02: $3.49
03/20/02 - 03/19/07: $4.02
03/20/07 - 03/19/12:
greater of $4.62 or fair
market rent as specified in
lease
2280 Northeast Drive 08/01/97 - 07/31/12 (3) 5 year $ 935 $ 1,004
Waterloo, IA 08/01/97 - 07/31/02: $3.22
08/01/02 - 07/31/07: $3.61
08/01/07 - 07/31/12: $4.04
128 Crews Drive 12/16/82 - 08/31/12 None $ 503 $ 571
Columbia, SC 09/01/00 - 08/31/03: $2.71
09/01/03 - 08/31/06: $2.91
09/01/06 - 08/31/08: $3.12
09/01/08 - 08/31/12: $3.32
</Table>
13
<Table>
<Caption>
LEXINGTON CORPORATE PROPERTIES TRUST
PROPERTY CHART
YEAR NET
TENANT CONSTRUCTED/ LAND AREA RENTABLE
PROPERTY LOCATION (GUARANTOR) REDEVELOPED (ACRES) SQUARE FEET
----------------- ------------------------------------ ------------ --------- -----------
3501 West Avenue H Michaels Stores, Inc. 1998 37.18 431,250
Lancaster, CA
7150 Exchequer Drive Corporate Express Office 1998 5.23 65,043
Baton Rouge, LA Products, Inc.
(Buhrmann N.V.)
1133 Poplar Creek Road Corporate Express Office 1998 19.09 196,946
Henderson, NC Products, Inc.
(Buhrmann N.V.)
324 Industrial Park Road SKF USA, Inc. 1996 21.13 72,868
Franklin, NC
8305 SE 58th Avenue Associated Grocers of Florida, Inc. 1976 63.48 668,034
Ocala, FL
-------- ----------
Industrial Subtotal $ 599.23 7,618,057
-------- ----------
RETAIL
4450 California Street Mervyn's 1976 11.00 122,000
Bakersfield, CA (Dayton Hudson Corp.)
24100 Laguna Hills Mall Federated Department 1974 11.00 160,000
Laguna Hills, CA Stores, Inc. (1)
7111 Westlake Terrace The Home Depot USA, Inc. (1) 1980 & 2001 7.61 95,000
Bethesda, MD
6910 S. Memorial Highway Toys "R" Us, Inc. (1) 1981 4.44 43,123
Tulsa, OK
12535 SE 82nd Avenue Toys "R" Us, Inc. (1) 1981 5.85 42,842
Clackamas, OR
18601 Alderwood Mall Toys "R" Us, Inc. (1) 1981 3.64 43,105
Blvd.
Lynnwood, WA
<Caption>
LEXINGTON CORPORATE PROPERTIES TRUST
PROPERTY CHART
2002 2002 (E)
BASE LEASE TERM AND MINIMUM STRAIGHT-LINE
ANNUAL RENTS PER NET RENEWAL CASH RENTAL
PROPERTY LOCATION RENTABLE SQUARE FOOT OPTIONS RENT ($000) REVENUE ($000)
----------------- ---------------------------- ------------- ----------- --------------
3501 West Avenue H 06/19/98 - 06/18/13 (3) 5 year $ 1,398 $ 1,430
Lancaster, CA 06/19/98 - 06/18/03: $3.24
06/19/03 - 06/18/08: $3.31
06/19/08 - 06/18/13: $3.39
7150 Exchequer Drive 11/01/98 - 10/31/13 (3) 5 year $ 346 $ 368
Baton Rouge, LA 11/01/01 - 10/31/04: $5.32
11/01/04 - 10/31/07: $5.64
11/01/07 - 10/31/10: $5.98
11/01/10 - 10/31/13: $6.34
1133 Poplar Creek Road 01/20/99 - 01/19/14 (3) 5 year $ 751 $ 810
Henderson, NC 01/20/99 - 01/19/02: $3.61
01/20/02 - 01/19/05: $3.83
01/20/05 - 01/19/08: $4.01
01/20/08 - 01/19/11: $4.19
01/20/11 - 01/19/14: $4.46
324 Industrial Park Road 12/23/96 - 12/31/14 (3) 10 year $ 340 $ 340
Franklin, NC 01/01/00 - 12/31/02: $4.67
01/01/03 - 12/31/14:
CPI every 3 years
8305 SE 58th Avenue 01/08/99 - 12/31/18 (2) 10 year $ 1,872 $ 2,238
Ocala, FL 01/08/99 - 12/31/03: $2.80
01/01/04 - 12/31/08: $3.09
01/01/09 - 12/31/13: $3.42
01/01/14 - 12/31/18: $3.77
------- -------
$29,234 $30,509
------- -------
RETAIL
4450 California Street 02/23/77 - 12/31/02 (5) 5 year $ 407 $ 397
Bakersfield, CA 01/01/78 - 12/31/02: $3.34
24100 Laguna Hills Mall 02/01/76 - 01/31/06 (1) 8 year $ 677 $ 673
Laguna Hills, CA 02/01/80 - 01/31/06: $4.23 (2) 15 year
(1) 6 year
7111 Westlake Terrace 05/01/81 - 04/30/06 (1) 10 year $ 772 $ 648
Bethesda, MD 05/01/96 - 04/30/06: $8.13 (3) 5 year
6910 S. Memorial Highway 06/01/81 -- 05/31/06 (5) 5 year $ 362 $ 356
Tulsa, OK 06/01/01 -- 05/31/06: $8.40
12535 SE 82nd Avenue 06/01/81 -- 05/31/06 (5) 5 year $ 424 $ 417
Clackamas, OR 06/01/01 -- 05/31/06: $9.91
18601 Alderwood Mall 06/01/81 - 05/31/06 (5) 5 year $ 396 $ 389
Blvd. 06/01/01 - 05/31/06: $9.18
Lynnwood, WA
</Table>
14
<Table>
<Caption>
LEXINGTON CORPORATE PROPERTIES TRUST
PROPERTY CHART
YEAR NET
TENANT CONSTRUCTED/ LAND AREA RENTABLE
PROPERTY LOCATION (GUARANTOR) REDEVELOPED (ACRES) SQUARE FEET
----------------- ------------------------------------ ------------ --------- -----------
2832 Chandler Mountain Circuit City Stores, Inc. 1986 0.84 9,300
Road
Lynchburg, VA
5917 S. La Grange Road Bally Total Fitness Corp. 1987 2.73 25,250
Countryside, IL
1160 White Horse Road Physical Fitness Centers of 1987 2.87 31,750
Voorhees, NJ Philadelphia, Inc.
(Bally Total Fitness Corp.)
5801 Bridge Street Champion Fitness IV, Inc. 1977 & 1987 3.66 24,990
DeWitt, NY (Bally Total Fitness Corp.)
2655 Shasta Way Fred Meyer, Inc. 1986 13.90 178,204
Klamath Falls, OR
12235 N. Cave Creek Bally's Health & Tennis Corp. 1988 3.00 36,556
Phoenix, AZ
7272 55th Street Circuit City Stores, Inc. 1988 3.93 45,308
Sacramento, CA
6405 South Virginia St. Comp USA, Inc. 1988 2.72 31,400
Reno, NV
5055 West Sahara Avenue Circuit City Stores, Inc. 1988 2.57 36,053
Las Vegas, NV
4733 Hills & Dales Road Scandinavian Health Spa, Inc. 1987 3.32 37,214
Canton, OH (Bally Total Fitness Holding Corp.)
2275 Browns Bridge Road Wal-Mart Stores, Inc. 1984 8.10 89,199
Gainesville, GA
35400 Cowan Road Sam's Real Estate Business Trust 1987 & 1997 9.70 102,826
Westland, MI
<Caption>
LEXINGTON CORPORATE PROPERTIES TRUST
PROPERTY CHART
2002 2002 (E)
BASE LEASE TERM AND MINIMUM STRAIGHT-LINE
ANNUAL RENTS PER NET RENEWAL CASH RENTAL
PROPERTY LOCATION RENTABLE SQUARE FOOT OPTIONS RENT ($000) REVENUE ($000)
----------------- ---------------------------- ------------- ----------- --------------
2832 Chandler Mountain 11/21/86 - 11/20/06 (2) 10 year $ 101 $ 101
Road 11/21/01 - 11/20/06: $10.85
Lynchburg, VA
5917 S. La Grange Road 07/13/87 - 07/12/07 (2) 5 year $ 614 $ 542
Countryside, IL 07/13/97 - 07/12/02: $22.73
07/13/02 - 07/12/07: $26.14
1160 White Horse Road 07/14/87 - 07/13/07 (2) 5 year $ 763 $ 673
Voorhees, NJ 07/14/97 - 07/13/02: $22.45
07/14/02 - 07/13/07: $25.82
5801 Bridge Street 08/19/87 - 08/18/07 (2) 5 year $ 469 $ 419
DeWitt, NY 08/19/97 - 08/18/02: $17.78
08/19/02 - 08/18/07: $20.45
2655 Shasta Way 03/10/88 - 03/31/08 (3) 10 year $ 1,009 $ 1,009
Klamath Falls, OR 03/10/88 - 03/31/08: $5.66
12235 N. Cave Creek 07/01/88 - 06/30/08 (2)5 year $ 755 $ 808
Phoenix, AZ 07/01/98 - 06/30/03: $20.65
07/01/03 - 06/30/08: $23.03
7272 55th Street 10/28/88 - 10/27/08 (3) 10 year $ 387 $ 376
Sacramento, CA 10/28/98 - 10/27/03: $8.54
10/28/03 - 10/27/08: $9.30
6405 South Virginia St. 12/16/88 - 12/15/08 (3) 10 year $ 335 $ 325
Reno, NV 12/16/98 - 12/15/03: $10.65
12/16/03 - 12/15/08: $11.60
5055 West Sahara Avenue 12/16/88 - 12/15/08 (3) 10 year $ 286 $ 278
Las Vegas, NV 12/16/98 - 12/15/03: $7.93
12/16/03 - 12/15/08: $8.64
4733 Hills & Dales Road 01/01/89 - 12/31/08 (2) 5 year $ 683 $ 685
Canton, OH 01/01/02 - 12/31/02: $18.36
01/01/03 - 12/31/03: $18.76
01/01/04 - 12/31/04: $19.17
01/01/05 - 12/31/05: $19.59
01/01/06 - 12/31/06: $20.03
01/01/07 - 12/31/07: $20.47
01/01/08 - 12/31/08: $20.92
2275 Browns Bridge Road 12/29/83 - 01/31/09 None $ 328 $ 328
Gainesville, GA 12/29/83 - 01/31/09: $3.68
35400 Cowan Road 06/06/97 - 01/31/09 None $ 753 $ 753
Westland, MI 06/06/87 - 01/31/09: $7.32
Plus 1% of gross sales
</Table>
15
<Table>
<Caption>
LEXINGTON CORPORATE PROPERTIES TRUST
PROPERTY CHART
YEAR NET
TENANT CONSTRUCTED/ LAND AREA RENTABLE
PROPERTY LOCATION (GUARANTOR) REDEVELOPED (ACRES) SQUARE FEET
----------------- ------------------------------------ ------------ --------- -----------
A1 21 South Wal-Mart Real Estate Business Trust 1983 5.21 56,132
Jacksonville, AL
Fort Street Mall Liberty House, Inc. (1) 1980 1.22 85,610
King St.
Honolulu, HI
121 South Center Street Greyhound Lines, Inc. 1968 1.67 17,000
Stockton, CA
7055 Highway 85 South Wal-Mart Stores, Inc. 1985 8.61 81,911
Riverdale, GA
150 NE 20th Street Fred Meyer, Inc. 1986 8.81 118,179
Newport, OR
9580 Livingston Road GFS Realty, Inc. 1976 10.60 107,337
Oxon Hill, MD (Giant Food, Inc.)
3711 Gateway Drive Kohl's Department Stores, Inc. 1994 6.24 76,164
Eau Claire, WI
Rockshire Village Center GFS Realty, Inc. (1) 1977 7.32 51,682
West Ritchie Parkway (Giant Food, Inc.)
Rockville, MD
4831 Whipple Avenue, Best Buy Co., Inc. 1995 6.59 46,350
N.W.
Canton, OH
399 Peachwood Centre Best Buy Co., Inc. 1996 7.49 45,800
Drive
Spartanburg, SC
<Caption>
LEXINGTON CORPORATE PROPERTIES TRUST
PROPERTY CHART
2002 2002 (E)
BASE LEASE TERM AND MINIMUM STRAIGHT-LINE
ANNUAL RENTS PER NET RENEWAL CASH RENTAL
PROPERTY LOCATION RENTABLE SQUARE FOOT OPTIONS RENT ($000) REVENUE ($000)
----------------- ---------------------------- ------------- ----------- --------------
A1 21 South 06/29/99 - 01/31/09 (5) 5 year $ 146 $ 146
Jacksonville, AL 06/29/99 - 01/31/09: $2.60
Plus 1% of gross sales
Fort Street Mall 10/01/80 - 09/30/09 (1) 9 year, $ 963 $ 971
King St. 10/01/95 - 09/30/05: $11.25 7 months
Honolulu, HI 10/01/05 - 09/30/09: $11.56 (1) 2 year
(3) 5 year
121 South Center Street 02/28/89 - 12/31/09 (2) 10 year $ 193 $ 193
Stockton, CA 01/01/02 - 12/31/09: $11.35
Annual increase of
CPI, but not more
than 2.75%
7055 Highway 85 South 12/04/85 - 01/31/11 (5) 5 year $ 270 $ 270
Riverdale, GA 12/04/85 - 01/31/11: $3.29
150 NE 20th Street 06/01/86 - 05/31/11 (3) 5 year $ 826 $ 826
Newport, OR 06/01/86 - 05/31/11: $6.99
plus .5% of gross sales
over $20 million
9580 Livingston Road 01/03/77 - 02/28/14 (4) 5 year $ 408 $ 274
Oxon Hill, MD 03/01/77 - 02/29/04: $3.80
03/01/04 - 02/28/14: $1.91
3711 Gateway Drive 06/22/94 - 01/25/15 (4) 5 year $ 435 $ 462
Eau Claire, WI 06/22/94 - 03/31/04: $5.71
04/01/04 - 01/25/15: $6.15
Rockshire Village Center 01/01/78 - 04/30/17 (2) 10 year $ 224 $ 152
West Ritchie Parkway 01/01/78 - 02/28/05: $4.33
Rockville, MD 03/01/05 - 04/30/17: $2.23
4831 Whipple Avenue, 02/27/98 - 02/26/18: (3) 5 year $ 465 $ 465
N.W. 02/27/98 - 02/26/18: $10.03
Canton, OH
399 Peachwood Centre 02/27/98 - 02/26/18: (3) 5 year $ 395 $ 395
Drive 02/27/98 - 02/26/18: $8.62
Spartanburg, SC
</Table>
16
<Table>
<Caption>
LEXINGTON CORPORATE PROPERTIES TRUST
PROPERTY CHART
YEAR NET
TENANT CONSTRUCTED/ LAND AREA RENTABLE
PROPERTY LOCATION (GUARANTOR) REDEVELOPED (ACRES) SQUARE FEET
----------------- ------------------------------------ ------------ --------- -----------
6475 Dobbin Road Vacant 1983 2.50 65,200
Columbia, MD
Amigoland Shopping Center Vacant (1) 1973 7.61 115,000
Mexico St. & Palm Blvd.
Brownsville, TX
-------- ----------
Retail Subtotal 174.75 2,020,485
-------- ----------
Grand Total 1,121.39 13,398,519
======== ==========
<Caption>
LEXINGTON CORPORATE PROPERTIES TRUST
PROPERTY CHART
2002 2002 (E)
BASE LEASE TERM AND MINIMUM STRAIGHT-LINE
ANNUAL RENTS PER NET RENEWAL CASH RENTAL
PROPERTY LOCATION RENTABLE SQUARE FOOT OPTIONS RENT ($000) REVENUE ($000)
----------------- ---------------------------- ------------- ----------- --------------
6475 Dobbin Road -- --
Columbia, MD
Amigoland Shopping Center
Mexico St. & Palm Blvd.
Brownsville, TX
------- -------
$13,846 $13,331
------- -------
$90,402 $92,466
======= =======
</Table>
- ---------------
(E) Estimated
(1) The Company holds leasehold interest in the land. The leases, including
renewal options, expire at various dates ranging from 2028 through 2074.
(2) Tenant can cancel lease on April 30, 2004 with 270 days notice and a payment
of $899.
(3) The tenant occupies 107,399 square feet. Commencing 03/01/02 occupancy will
be 35,000 square feet.
(4) Tenant can cancel lease on March 26, 2008 with 12 months notice and a
payment of $1,392.
(5) The Property contains two buildings with four additional tenants that occupy
31,737 square feet out of the total of 127,855.
(6) This Property was sold to a joint venture in 2002 in which the Company
retained a 22.7% ownership interest.
(7) PACCAN has leased the Property from 09/26/06 through 09/25/11.
17
LEXINGTON CORPORATE PROPERTIES TRUST
JOINT VENTURE PROPERTY CHART
<Table>
<Caption>
YEAR NET
TENANT CONSTRUCTED/ LAND AREA RENTABLE
PROPERTY LOCATION (GUARANTOR) REDEVELOPED (ACRES) SQUARE FEET
- ----------------- ----------------------------------- ------------ --------- -----------
OFFICE
14040 Park Center Road NEC America, Inc. (8) 1987 13.30 108,000
Herndon, VA
15375 Memorial Drive Vastar Resources, Inc. (8) 1985 21.77 327,325
Houston, TX
550 International Parkway First USA Management 1999 12.80 125,920
Lake Mary, FL Services, Inc. (8) (11) (13)
600 International Parkway First USA Management 1997 13.30 125,155
Lake Mary, FL Services, Inc. (8) (11) (13)
17 Technology Circle Blue Cross Blue Shield 1999 42.46 456,304
Columbia, SC of South Carolina (9) (14)
10300 Kincaid Drive Bank One Indiana, N.A. (8) (12) 1999 13.30 193,000
Fishers, IN
6555 Sierra Drive True North Communications, Inc. (8) 1999 9.98 247,254
Irving, TX
<Caption>
2002 2002 (E)
BASE LEASE TERM AND MINIMUM STRAIGHT-LINE
ANNUAL RENTS PER NET RENEWAL CASH RENTAL
PROPERTY LOCATION RENTABLE SQUARE FOOT OPTIONS RENT ($000) REVENUE ($000)
- ----------------- --------------------------- ---------- ----------- --------------
OFFICE
14040 Park Center Road 08/13/99 - 08/12/09 (2) 5 year $ 1,812 $ 2,025
Herndon, VA 08/13/01 - 08/12/02: $16.65
08/13/02 - 08/12/03: $16.98
08/13/03 - 08/12/04: $17.32
08/13/04 - 08/12/05: $19.67
08/13/05 - 08/12/06: $20.06
08/13/06 - 08/12/07: $20.46
08/13/07 - 08/12/08: $20.87
08/13/08 - 08/12/09: $21.29
15375 Memorial Drive 09/16/99 - 09/15/09 (4) 5 year $ 3,321 $ 3,437
Houston, TX 09/16/99 - 09/15/02: $10.00
09/16/02 - 09/15/06: $10.50
09/16/06 - 09/15/09: $11.00
550 International Parkway 10/1/99 - 09/30/09 (2) 5 year $ 2,665 $ 2,820
Lake Mary, FL 10/01/01 - 09/30/02: $21.05
10/01/02 - 09/30/03: $21.50
10/01/03 - 09/30/04: $21.95
10/01/04 - 09/30/05: $22.40
10/01/05 - 09/30/06: $22.85
10/01/06 - 09/30/07: $23.30
10/01/07 - 09/30/08: $23.75
10/01/08 - 09/30/09: $24.20
600 International Parkway 10/1/99 - 09/30/09 (2) 5 year $ 2,767 $ 2,921
Lake Mary, FL 10/01/01 - 09/30/02: $22.00
10/01/02 - 09/30/03: $22.45
10/01/03 - 09/30/04: $22.90
10/01/04 - 09/30/05: $23.35
10/01/05 - 09/30/06: $23.80
10/01/06 - 09/30/07: $24.25
10/01/07 - 09/30/08: $24.70
10/01/08 - 09/30/09: $25.15
17 Technology Circle 10/01/99 - 09/30/09 (2) 5 year $ 6,415 $ 6,930
Columbia, SC 10/01/01 - 09/30/04: $14.06
10/01/04 - 09/30/09: $16.17
10300 Kincaid Drive 03/29/00 - 10/31/09 (2) 5 year $ 3,185 $ 3,287
Fishers, IN 03/29/00 - 10/31/04: $16.50
11/01/04 - 10/31/09: $17.52
6555 Sierra Drive 02/01/00 - 01/31/10 (2) 5 year $ 4,009 $ 4,250
Irving, TX 02/01/00 - 01/31/05: $16.21
02/01/05 - 01/31/10: $18.05
</Table>
18
<Table>
<Caption>
LEXINGTON CORPORATE PROPERTIES TRUST
JOINT VENTURE PROPERTY CHART
YEAR NET
TENANT CONSTRUCTED/ LAND AREA RENTABLE
PROPERTY LOCATION (GUARANTOR) REDEVELOPED (ACRES) SQUARE FEET
- ----------------- ----------------------------------- ------------ --------- -----------
389-399 Interpace Parkway Aventis Pharmaceuticals, Inc. 2000 14.00 340,240
Morris Corporate Center IV (Pharma Holdings GmbH) (8)
Parsippany, NJ
2000 Eastman Drive Structural Dynamic Research Corp. 1991 12.36 212,836
Milford, OH (8)
------ ---------
Office Subtotal 153.27 2,136,034
------ ---------
INDUSTRIAL
291 Park Center Drive Kraft Foods North America, Inc. (8) 2001 25.50 344,700
Winchester, VA
3600 Southgate Drive Sygma Network, Inc. (10) 2000 19.00 149,500
Danville, IL (Sysco Corporation)
224 Harbor Freight Road Harbor Freight Tools (10) 2001 74.95 474,473
Dillon, SC (Central Purchasing, Inc.)
590 Ecology Lane Owens Corning (10) 2001 39.52 193,891
Chester, SC
------ ---------
Industrial Subtotal 158.97 1,162,564
------ ---------
Total 312.24 3,298,598
====== =========
<Caption>
LEXINGTON CORPORATE PROPERT LEXINGTON CORPORATE PROPERTIES TRUST
JOINT VENTURE PROPERTY CHAR JOINT VENTURE PROPERTY CHART
2002 2002 (E)
BASE LEASE TERM AND MINIMUM STRAIGHT-LINE
ANNUAL RENTS PER NET RENEWAL CASH RENTAL
PROPERTY LOCATION RENTABLE SQUARE FOOT OPTIONS RENT ($000) REVENUE ($000)
- ----------------- --------------------------- ---------- ----------- --------------
389-399 Interpace Parkway 06/01/00 - 01/31/10 (2) 5 year $ 7,844 $ 8,487
Morris Corporate Center IV 06/01/00 - 01/31/05: $23.06
Parsippany, NJ 02/01/05 - 01/31/10: $26.49
2000 Eastman Drive 05/01/91 - 04/30/11 (3) 5 year $ 2,601 $ 2,790
Milford, OH 05/01/01 - 04/30/02: $12.05
05/01/02 - 04/30/03: $12.31
05/01/03 - 04/30/04: $12.57
05/01/04 - 04/30/05: $12.84
05/01/05 - 04/30/06: $13.11
05/01/06 - 04/30/07: $13.39
05/01/07 - 04/30/08: $13.73
05/01/08 - 04/30/09: $13.97
05/01/09 - 04/30/10: $14.27
05/01/10 - 04/30/11: $14.57
------- -------
$34,619 $36,947
------- -------
INDUSTRIAL
291 Park Center Drive 06/01/01 - 06/01/11 (2) 5 year $ 1,420 $ 1,515
Winchester, VA 06/01/01 - 06/30/06: $3.92
07/01/06 - 06/30/11: $4.45
3600 Southgate Drive 10/15/00 - 10/31/15 (2) 5 year $ 933 $ 933
Danville, IL 10/15/00 - 10/31/15: $6.24
224 Harbor Freight Road 12/05/01 - 12/04/16 (4) 5 year $ 1,642 $ 1,812
Dillon, SC 12/05/01 - 12/04/06: $3.46
12/05/06 - 12/04/11: $3.81
12/05/11 - 12/04/16: $4.19
590 Ecology Lane 01/01/01 - 01/01/21 (2) 5 year $ 1,619 $ 1,619
Chester, SC 01/01/01 - 01/01/21: $8.35
------- -------
$ 5,614 $ 5,879
------- -------
$40,233 $42,826
======= =======
</Table>
- ---------------
(E) Estimated
(8) The Company has a 33% economic interest in the entity which owns this
Property.
(9) The Company has a 40% economic interest in the entity which owns this
Property.
(10) The Company has a 99% economic interest in the entity which owns this
Property.
(11) The joint venture has operating expense stops on this Property of $1,264.
(12) The joint venture has operating expense stops on this Property of $768.
(13) The joint venture operates these investments as a single Property.
(14) The tenant expanded the premises by 107,894 square feet in 2001 .
19
ITEM 3. LEGAL PROCEEDINGS
The Company is not presently involved in any litigation nor to its
knowledge is any litigation threatened against the Company or its subsidiaries
that, in management's opinion, would result in any material adverse effect on
the Company's ownership, financial condition, management or operation of its
Properties.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On November 28, 2001 a Special Meeting of Shareholders of the Company was
held to vote (i) on the acquisition of the Net Partnerships and (ii) on an
increase in the authorized common shares of the Company from 40 million to 80
million.
As it relates to the items noted above the votes cast were as follows:
<Table>
<Caption>
ITEM (I) ITEM (II)
---------- ----------
For......................................................... 11,649,311 19,538,472
Against..................................................... 538,042 676,553
Abstain..................................................... 278,730 278,427
</Table>
ITEM 4A. EXECUTIVE OFFICERS AND TRUSTEES OF THE REGISTRANT
The following sets forth certain information relating to the executive
officers and trustees of the Company:
<Table>
<Caption>
NAME BUSINESS EXPERIENCE
---- -------------------
E. ROBERT ROSKIND.................... Mr. Roskind has served as the Chairman of the Board of
Age 57 Trustees and Co-Chief Executive Officer of the Company since
October 1993. He founded The LCP Group, L.P., a real estate
advisory firm, in 1973 and has been its Chairman since 1976.
The LCP Group, L.P. has been the general partner of various
limited partnerships with which the Company has had prior
dealings. Mr. Roskind received his B.S. in 1966 from the
University of Pennsylvania and is a 1969 Harlan Fiske Stone
Graduate of the Columbia Law School. He has been a member of
the Bar of the State of New York since 1970. He is on the
Board of Directors of Clarion CMBS Value Fund, Inc.
RICHARD J. ROUSE..................... Mr. Rouse has served as Co-Chief Executive Officer and as a
Age 56 trustee of the Company since October 1993. He served as
President of the Company from October 1993 to April 1996,
and since April 1996 has served as Vice Chairman of the
Board of Trustees. Mr. Rouse graduated from Michigan State
University in 1968 and received his M.B.A. in 1970 from the
Wharton School of Finance and Commerce of the University of
Pennsylvania.
T. WILSON EGLIN...................... Mr. Eglin has served as Chief Operating Officer of the
Age 37 Company since October 1993 and as a trustee since May 1994.
He served as Executive Vice President from October 1993 to
April 1996, and since April 1996 has served as the
President. Mr. Eglin received his B.A. from Connecticut
College in 1986.
</Table>
20
<Table>
<Caption>
NAME BUSINESS EXPERIENCE
---- -------------------
PATRICK CARROLL...................... Mr. Carroll has served as Chief Financial Officer of the
Age 38 Company since May 1998, Treasurer since January 1999 and
Vice President since November 2001. Prior to joining the
Company, Mr. Carroll was, from 1993 to 1998, a Senior
Manager in the real estate practice of Coopers & Lybrand
L.L.P., a public accounting firm. Mr. Carroll received his
B.B.A. from Hofstra University in 1986, his M.S. in Taxation
from C.W. Post in 1991, and is a Certified Public
Accountant.
WILLIAM N. CINNAMOND, JR............. Mr. Cinnamond has served as Senior Vice President and head
Age 53 of asset management since September 2001. Prior to joining
the Company, Mr. Cinnamond served as Vice President and
Office/Industrial Real Estate Asset Management Sector Head
for J.P. Morgan Fleming Asset Management, Inc. from 1989 to
2001. Mr. Cinnamond graduated from Boston University in 1970
and received his M.B.A. from Syracuse University in 1972.
STEPHEN C. HAGEN..................... Mr. Hagen has served as Senior Vice President of the Company
Age 59 since October 1996. Mr. Hagen had been associated with The
LCP Group, L.P. from 1995 to 1996. Mr. Hagen received his
B.S. from the University of Kansas in 1965 and his M.B.A. in
1968 from the Wharton School of Finance and Commerce of the
University of Pennsylvania.
PAUL R. WOOD......................... Mr. Wood has served as Vice President, Chief Accounting
Age 41 Officer and Secretary of the Company since October 1993. Mr.
Wood received his B.B.A. from Adelphi University in 1982 and
is a Certified Public Accountant.
JANET M. KAZ......................... Ms. Kaz has served as Vice President of the Company since
Age 38 May 1995 and as Asset Manager since October 1993. Ms. Kaz
received her B.A. from Muhlenberg College in 1985.
GEORGE P. WILSON..................... Mr. Wilson has served as Vice President of the Company since
Age 41 December 2000 and as an Asset Manager since May 1999. Prior
to joining the Company, Mr. Wilson was the Asset Manager for
American Real Estate Partners, L.P., a publicly traded net
lease real estate partnership from 1994 to 1999. He received
his B.A. from Columbia College in 1983 and a M.S. in Real
Estate Development from Columbia University in 1986.
PHILIP L. KIANKA..................... Mr. Kianka has served as Vice President of the Company since
Age 45 1997. Prior to joining the Company, from 1985 through 1997,
Mr. Kianka served as a Vice President and Senior Asset
Manager at Merrill Lynch Hubbard, Inc., a real estate
division of Merrill Lynch & Co., Inc. Mr. Kianka received
his B.A. from Clemson University in 1978 and his M.A. from
Clemson University in 1981.
NATASHA ROBERTS...................... Ms. Roberts has served as Vice President and as a member of
Age 35 the acquisition department of the Company since 1997. Prior
to joining the Company, Ms. Roberts worked for Net Lease
Partners Realty Advisors, a real estate advisory firm and an
affiliate of Mr. Roskind from January 1995 to January 1997.
Ms. Roberts received her B.F.A. from New York University in
1989.
</Table>
21
<Table>
<Caption>
NAME BUSINESS EXPERIENCE
---- -------------------
BRENDAN P. MULLINIX.................. Mr. Mullinix has served as a Vice President of the Company
Age 27 since February 2000 and as a member of the acquisitions
department since October 1996. He received his B.A. from
Columbia University in 1996.
GEOFFREY DOHRMANN.................... Mr. Dohrmann has served as a trustee since August 2000. Mr.
Age 50 Dorhmann co-founded Institutional Real Estate, Inc., a real
estate-oriented publishing and consulting company in 1987
and is currently its Chairman and Chief Executive Officer.
Mr. Dohrmann also belongs to the advisory boards for the
National Real Estate Index, The Journal of Real Estate
Portfolio Management and Center for Real Estate Enterprise
Management. He is also a fellow of the Homer Hoyt Institute
and holds the Counselors of Real Estate (CRE) designation.
CARL D. GLICKMAN..................... Mr. Glickman has served as a trustee since May 1994. He has
Age 75 been President of The Glickman Organization, a real estate
development and management firm, since 1953. He is on the
Board of Directors of Alliance Tire & Rubber Co., Ltd., Bear
Stearns Companies, Inc., Jerusalem Economic Corporation Ltd.
and OfficeMax Inc., as well as numerous private companies.
JOHN D. MCGURK....................... Mr. McGurk has served as a trustee since January 1997, as
Age 58 the designee of Five Arrows Realty Securities, L.L.C., which
is the holder, as of December 31, 2001, of 7.5% of the
Company's total outstanding voting securities. He is the
founder and President of Rothschild Realty, Inc., the
advisor to Five Arrows. Prior to starting Rothschild Realty,
Inc. in 1981, Mr. McGurk served as a Regional Vice President
for The Prudential Insurance Company of America where he
oversaw its New York City real estate loan portfolio, equity
holdings, joint ventures and projects under development. Mr.
McGurk is a member of the Urban Land Institute, Pension Real
Estate Association, Real Estate Board of New York and the
National Real Estate Association, and is a member of the
Trustee Committee of the Caedmon School.
SETH M. ZACHARY...................... Mr. Zachary has served as a trustee since November 1993.
Age 49 Since 1987, he has been a partner, and is currently the
Chairman, of the law firm Paul, Hastings, Janofsky & Walker
LLP, counsel to the Company.
</Table>
22
PART II.
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER
MATTERS
The common shares of the Company are listed for trading on the New York
Stock Exchange ("NYSE") under the symbol "LXP." The following table sets forth
the closing high and low sales prices as reported by the NYSE for the common
shares of the Company for each of the periods indicated below:
<Table>
<Caption>
FOR THE QUARTERS ENDED: HIGH LOW
- ----------------------- -------- --------
December 31, 2001........................................... $15.7000 $13.7000
September 30, 2001.......................................... 15.4800 13.0000
June 30, 2001............................................... 15.5500 12.7700
March 31, 2001.............................................. 13.4375 11.8125
December 31, 2000........................................... 11.9375 10.6875
September 30, 2000.......................................... 12.2500 11.0625
June 30, 2000............................................... 11.3125 9.9375
March 31, 2000.............................................. 11.6250 9.0000
</Table>
The closing price of the common shares of the Company was $14.90 on
February 19, 2002.
As of February 19, 2002, the Company had 3,710 common shareholders of
record.
Dividends. The Company has made quarterly distributions since October 1986
without interruption.
The dividends paid in each quarter for the last five years are as follows:
<Table>
<Caption>
QUARTERS ENDED 2001 2000 1999 1998 1997
- -------------- ----- ----- ----- ----- -----
March 31, ................................... $0.31 $0.30 $0.30 $0.29 $0.29
June 30, .................................... $0.32 $0.30 $0.30 $0.29 $0.29
September 30, ............................... $0.32 $0.31 $0.30 $0.29 $0.29
December 31, ................................ $0.32 $0.31 $0.30 $0.30 $0.29
</Table>
The Company's current quarterly dividend rate is $0.33 per share, or $1.32
per share on an annualized basis.
Following is a summary of the average taxable nature of the Company's
dividends for the three years ended December 31:
<Table>
<Caption>
2001 2000 1999
------- ------- -------
Total dividends per share............................. $ 1.27 $ 1.22 $ 1.20
======= ======= =======
Ordinary income....................................... 95.46% 87.78% 83.73%
20% rate gain......................................... -- 8.48% 10.21%
25% rate gain......................................... -- 3.74% 6.06%
Percent non-taxable as return of capital.............. 4.54% -- --
------- ------- -------
100.00% 100.00% 100.00%
======= ======= =======
</Table>
While the Company intends to continue paying regular quarterly dividends,
future dividend declarations will be at the discretion of the Board of Trustees
and will depend on the actual cash flow of the Company, its financial condition,
capital requirements, the annual distribution requirements under the REIT
provisions of the Code and such other factors as the Board of Trustees deems
relevant. The actual cash flow available to pay dividends will be affected by a
number of factors, including the revenues received from rental properties, the
operating expenses of the Company, the interest and principal payments required
under various borrowing agreements, the ability of lessees to meet their
obligations to the Company and any unanticipated capital expenditures.
23
In addition to its common and preferred share offerings, the Company has
capitalized the growth in its business through the issuance of secured and
unsecured fixed and floating-rate debt. Borrowings under the Company's unsecured
revolving credit facility have been a source of funds to both finance the
purchase of properties and meet any short-term working capital requirements. The
various instruments governing the Company's issuance of its unsecured bank debt
impose certain restrictions on the Company with regard to dividends and
incurring additional debt obligations. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations" and Note 6 of the Notes to
Consolidated Financial Statements included in this Annual Report on Form 10-K.
The Company does not believe that the financial covenants contained in its
unsecured revolving credit agreement and secured indebtedness will have any
adverse impact on the Company's ability to pay dividends in the normal course of
business to its common and preferred shareholders or to distribute amounts
necessary to maintain its qualifications as a REIT.
The Company maintains a dividend reinvestment program pursuant to which
common shareholders may elect to automatically reinvest their dividends to
purchase common shares of the Company at a 5% discount to the market price and
free of commissions and other charges. The Company may, from time to time,
either repurchase common shares in the open market, or issue new common shares,
for the purpose of fulfilling its obligations under the dividend reinvestment
program. Under this program none of the common shares issued were purchased on
the open market. As of December 31, 2001 approximately 3.0 million common shares
are enrolled in the dividend reinvestment program.
ITEM 6. SELECTED FINANCIAL DATA
The following sets forth selected consolidated financial data for the
Company as of and for each of the years in the five-year period ended December
31, 2001. The selected consolidated financial data for the Company should be
read in conjunction with the Consolidated Financial Statements and the related
notes appearing elsewhere in this Annual Report on Form 10-K. ($000's, except
per share data)
On November 28, 2001, the Company acquired twenty-three properties from the
Net Partnerships. See Note 4 of the Notes to Consolidated Financial Statements
included in this Annual Report on Form 10-K for additional information.
<Table>
<Caption>
2001 2000 1999 1998 1997
-------- -------- -------- --------- ---------
Total revenues........................ $ 82,862 $ 80,005 $ 77,300 $ 65,117 $ 43,569
Operating expenses, including minority
interest............................ (61,656) (61,012) (61,080) (48,433) (35,304)
Transactional expenses................ -- -- -- (559) --
Gain (loss) on sale of properties..... -- 2,959 5,127 (388) 3,517
Income before extraordinary item...... 21,206 21,952 21,347 15,737 11,782
Extraordinary item.................... (3,144) -- -- -- (3,189)
Net income............................ 18,062 21,952 21,347 15,737 8,593
Income before extraordinary item per
common share -- basic............... 0.95 1.15 1.11 0.79 0.61
Income before extraordinary item per
common share -- diluted............. 0.93 1.10 1.08 0.78 0.59
Net income per common
share -- basic...................... 0.79 1.15 1.11 0.79 0.33
Net income per common
share -- diluted.................... 0.77 1.10 1.08 0.78 0.32
Cash dividends declared per common
share............................... 1.29 1.23 1.20 1.18 1.16
Net cash provided by operating
activities.......................... 44,480 40,803 39,411 32,008 23,823
Net cash used in investing
activities.......................... (64,321) (38,549) (64,942) (111,080) (110,767)
</Table>
24
<Table>
<Caption>
2001 2000 1999 1998 1997
-------- -------- -------- --------- ---------
Net cash provided by (used in)
financing activities................ 28,912 (6,299) 23,284 86,516 88,116
Ratio of earnings to combined fixed
charges and preferred dividends..... 1.57 1.55 1.58 1.51 1.59
Real estate assets, net............... 714,047 584,198 606,592 609,717 416,613
Total assets.......................... 822,153 668,377 656,481 647,007 468,373
Mortgages and notes payable........... 455,771 387,326 372,254 354,281 220,934
Funds from operations(1).............. 50,270 46,316 40,652 35,141 21,315
Rent received below straight line
rent................................ 2,755 2,804 2,054 2,411 924
</Table>
The Company believes that the book value of its real estate assets, which
reflects the historical cost of such real estate assets less accumulated
depreciation, is not indicative of the current market value of its Properties.
Historical operating results are not necessarily indicative of future operating
results.
- ---------------
(1) The Company believes that Funds From Operations ("FFO") enhances an
investor's understanding of the Company's financial condition, results of
operations and cash flows. The Company believes that FFO is an appropriate
measure of the performance of an equity REIT, and that it can be one measure
of a REIT's ability to make cash distributions. FFO is defined in the
October 1999 "White Paper", issued by the National Association of Real
Estate Investment Trusts, Inc. ("NAREIT") as "net income (or loss), computed
in accordance with generally accepted accounting principles ("GAAP"),
excluding gains (or losses) from sales of property, plus real estate
depreciation and amortization and after adjustments for unconsolidated
partnerships and joint ventures." The Company included in the calculation of
FFO the dilutive effect of the deemed conversion of its outstanding
exchangeable notes which were redeemed by the Company in 2001. FFO should
not be considered an alternative to net income as an indicator of operating
performance or to cash flows from operating activities as determined in
accordance with GAAP, or as a measure of liquidity to other consolidated
income or cash flow statement data as determined in accordance with GAAP.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
GENERAL
The Company, which has elected to qualify as a real estate investment trust
under the Internal Revenue Code of 1986, acquires and manages net leased
commercial properties. The Company has operated as a REIT since October 1993.
As of December 31, 2001, the Company owned (or had interests in) 98 real
estate Properties. During 2001, the Company purchased 28 Properties, including
non-consolidated investments, for $196.2 million.
During 2001, the Company sold one Property for $4.1 million which
approximated book value. During 2000, the Company sold two Properties to the Net
Partnerships for $15.6 million, which resulted in an aggregate gain of
approximately $2.3 million, and one Property to the tenant for $4.0 million,
which resulted in an aggregate gain of $3.0 million.
LIQUIDITY AND CAPITAL RESOURCES
Since becoming a public company, the Company's principal source of capital
for growth has been the public and private equity markets, selective secured
indebtedness, its unsecured credit facility, issuance of OP Units and
undistributed funds from operations.
The Company's current $60.0 million variable rate unsecured revolving
credit facility, which is scheduled to expire in March 2004, has made available
funds to finance acquisitions and meet any short-term working capital
requirements. As of December 31, 2001, $10.0 million was outstanding at an
interest rate of 3.43%.
25
Since its formation in 1993, the Company has raised, through the issuance
of common shares, preferred shares and OP Units, aggregate capital of
approximately $194.0 million for the purposes of making acquisitions and
retiring indebtedness. In addition, the Company has purchased $109.8 million in
real estate through the direct issuance of its common shares and OP Units.
During 2001, the Company completed a 4.4 million common share offering at
$15.20 per share raising $63.4 million of proceeds. The proceeds were used to
paydown debt and fund acquisitions.
Dividends. In connection with its intention to continue to qualify as a
REIT for Federal income tax purposes, the Company expects to continue paying
regular dividends to its shareholders. These dividends are expected to be paid
from operating cash flows which are expected to increase due to Property
acquisitions and growth in rental revenues in the existing portfolio and from
other sources. Since cash used to pay dividends reduces amounts available for
capital investments, the Company generally intends to maintain a conservative
dividend payout ratio, reserving such amounts as it considers necessary for the
expansion of Properties in its portfolio, debt reduction, the acquisition of
interests in new properties as suitable opportunities arise, and such other
factors as the Board of Trustees considers appropriate.
Cash dividends paid to common shareholders increased to $25.0 million in
2001, compared to $20.8 million in 2000 and $20.5 million in 1999. The Company's
dividend and distribution FFO payout ratio, on a per share basis, for 2001,
2000, and 1999 was 71.3%, 69.3%, and 74.1% respectively.
Although the Company receives the majority of its rental payments on a
monthly basis, it intends to continue paying dividends quarterly. The Company's
two largest tenants, as a percentage of revenue, pay their rent semi-annually
(Kmart Corporation) and quarterly (Northwest Pipeline Corp.). Amounts
accumulated in advance of each quarterly distribution are invested by the
Company in short-term money market or other suitable instruments.
Kmart, the Company's largest tenant based upon rental revenues, filed for
Chapter 11 bankruptcy protection on January 22, 2002. Kmart leases a 1.7 million
square foot distribution facility in Warren, Ohio. The Company acquired the
Property in 1998 by assuming a non-recourse mortgage of $42.2 million, issuing
operating partnership units valued at $18.9 million and $2.8 million in cash.
The Company has no retail properties leased to Kmart. The Kmart lease expires on
September 30, 2007. Annual net rents are presently $8.4 million ($4.95 per
square foot) and increase to $9.4 million on October 1, 2002. Rents are paid
semi-annually in arrears. The Property is encumbered by a non-recourse first
mortgage, bearing interest at 7% with an outstanding balance of $29.8 million at
December 31, 2001.
Annual debt service on this non-recourse mortgage, which fully amortizes by
maturity on October 1, 2007, is $6.2 million. Accordingly, this Property
currently provides after debt service cash flow to the Company of $2.2 million.
The Property is one of sixteen warehouse distribution facilities utilized
in Kmart's logistical operation. According to Kmart, this facility ranks third
by distribution volume, is the primary supply source for 185 Kmart retail stores
(approximately 9% of Kmart's total) and also supplies other distribution
facilities used by Kmart. As of December 31, 2001 the Company had $3.8 million
in accounts receivable from Kmart (including $1.7 million in straight-line
rents). Kmart is current in its rental obligation to the Company (the next
rental payment is due April 1, 2002) and there have been no discussions with
respect to the lease.
The Company anticipates that cash flows from operations will continue to
provide adequate capital to fund its operating and administrative expenses,
regular debt service obligations and all dividend payments in accordance with
REIT requirements in both the short-term and long-term. In addition, the Company
anticipates that cash on hand, borrowings under its unsecured credit facility,
issuance of equity and debt, as well as other alternatives, will provide the
necessary capital required by the Company. Cash flows from operations as
reported in the Consolidated Statements of Cash Flows increased to $44.5 million
for 2001 from $40.8 million for 2000 and $39.4 million for 1999.
Net cash used in investing activities totaled $64.3 million in 2001, $38.5
million in 2000 and $64.9 million in 1999. Cash used in investing activities
related primarily to investments in real estate Properties and joint
26
ventures. Therefore, the fluctuation in investing activities relates primarily
to the timing of investments and dispositions. In connection with the
acquisition of the Net Partnerships, the Company acquired $3.8 million of cash
in 2001.
Net cash provided by (used in) financing activities totaled $28.9 million
in 2001, $(6.3) million in 2000 and $23.3 million in 1999. Cash provided by
(used in) financing activities during each year was primarily attributable to
proceeds from non-recourse mortgages and advances/repayments under the Company's
credit facility coupled with dividend and distribution payments, debt service
payments and the repurchase of the Company's common shares/operating partnership
units. In addition, in 2001 the Company completed an equity offering raising
$63.4 million.
UPREIT Structure. The Company's UPREIT structure permits the Company to
effect acquisitions by issuing to a seller of real estate, as a form of
consideration, interests in partnerships controlled by the Company. All of such
interests are redeemable at certain times for common shares on a one-for-one
basis and all of such interests require the Company to pay certain distributions
to the holders of such interests. The Company accounts for these interests in a
manner similar to a minority interest holder. The number of common shares that
will be outstanding in the future should be expected to increase, and minority
interest expense should be expected to decrease as such partnership interests
are redeemed for common shares.
The following table provides certain information with respect to such
partnership interests as of December 31, 2001 (assuming the Company's annual
dividend rate remains at the current $1.32 per share).
<Table>
<Caption>
TOTAL
CURRENT CURRENT
TOTAL ANNUALIZED ANNUALIZED
REDEEMABLE FOR NUMBER AFFILIATE PER UNIT DISTRIBUTION
COMMON SHARES: OF UNITS UNITS DISTRIBUTION ($000)
- -------------- --------- --------- ------------ ------------
At any time...................................... 3,430,793 1,317,759 $1.32 $4,529
At any time...................................... 1,271,073 120,374 1.08 1,373
At any time...................................... 133,050 52,144 1.12 149
June 2002........................................ 83,400 83,400 1.32 110
January 2003..................................... 17,901 -- -- --
March 2004....................................... 43,734 -- 0.27 12
March 2004....................................... 19,510 -- -- --
November 2004.................................... 24,552 2,856 -- --
March 2005....................................... 29,384 -- -- --
January 2006..................................... 171,168 416 -- --
February 2006.................................... 28,230 1,743 -- --
May 2006......................................... 9,368 -- 0.29 3
November 2006.................................... 44,858 44,858 1.32 59
--------- --------- ----- ------
5,307,021 1,623,550 $1.17 $6,235
========= ========= ===== ======
</Table>
Affiliate units, which are included in total units, represent OP Units held
by two executive officers (including their affiliates) of the Company.
FINANCING
Revolving Credit Facility. The Company's $60.0 million unsecured credit
facility, which expires March 2004, bears interest at 150-250 basis points over
LIBOR depending on the amount of Properties the Company owns free and clear of
mortgage debt and has an interest rate period of one, three, or six months, at
the option of the Company. The credit facility contains various leverage, debt
service coverage, net worth maintenance and other customary covenants. As of
December 31, 2001, $10.0 million was outstanding and
27
$46.7 million was available to be drawn. The Company had four outstanding
letters of credit aggregating $3.3 million which expire in 2005 ($2.5 million),
2007 ($0.4 million) and 2010 ($0.4 million).
Debt Service Requirements. The Company's principal liquidity needs are the
payment of interest and principal on outstanding indebtedness. As of December
31, 2001, a total of 64 of the Company's 86 consolidated Properties were subject
to outstanding mortgages which had an aggregate principal amount of $445.8
million. The weighted average interest rate on the Company's debt, including
line of credit borrowings, on such date was approximately 7.28%. The scheduled
principal amortization payments for the next five years are as follows: $14.6
million in 2002; $15.6 million in 2003; $16.4 million in 2004; $15.8 million in
2005 and $14.0 million in 2006. Approximate balloon payment amounts, excluding
line of credit borrowings, having a weighted average interest rate of 6.93%, due
the next five years are as follows: $0 million in 2002; $0 million in 2003;
$17.4 million in 2004; $81.0 million in 2005 and $0 million in 2006. The ability
of the Company to make such balloon payments will depend upon its ability to
refinance the mortgage related thereto, sell the related Property, have
available amounts under its unsecured credit facility or access other capital.
The ability of the Company to accomplish such goals will be affected by numerous
economic factors affecting the real estate industry, including the availability
and cost of mortgage debt at the time, the Company's equity in the mortgaged
properties, the financial condition of the Company, the operating history of the
mortgaged Properties, the then current tax laws and the general national,
regional and local economic conditions.
Lease Obligations. Since the Company's tenants bear all or substantially
all of the cost of Property operations, maintenance and repairs, the Company
does not anticipate significant needs for cash for these costs. For three of the
Properties, the Company does have a level of property operating expense
responsibility. The Company generally funds Property expansions with additional
secured borrowings, the repayment of which is funded out of rental increases
under the leases covering the expanded Properties. To the extent there is a
vacancy in a Property, the Company would be obligated for all operating
expenses, including real estate taxes and insurance.
Origination Fees Payable. In connection with certain acquisitions, the
Company assumed obligations ($2.2 million in principal plus accrued interest)
which bear interest on the outstanding principal balances only at rates ranging
from 12.3% to 19.0%. The scheduled annual payments for the years 2002 through
2006 are $0.4 million.
Shares Repurchase. The Company's Board of Trustees has authorized the
Company to repurchase, from time to time, up to 2.0 million common shares and
operating partnership units depending on market conditions and other factors. As
of December 31, 2001, the Company had repurchased approximately 1.4 million
common shares and operating partnership units, at an average price of
approximately $10.55 per common share/unit.
RESULTS OF OPERATIONS ($000)
<Table>
<Caption>
INCREASE
(DECREASE)
---------------------
SELECTED INCOME STATEMENT DATA 2001 2000 1999 2001-2000 2000-1999
- ------------------------------ ------- ------- ------- --------- ---------
Total revenues.............................. $82,862 $80,005 $77,300 $ 2,857 $2,705
Total expenses.............................. 56,272 54,997 54,642 1,275 355
Interest.................................. 29,732 29,581 29,099 151 482
Depreciation and amortization of real
estate................................. 18,312 17,513 18,000 799 (487)
General & administrative.................. 4,952 4,902 4,687 50 215
Property operating........................ 1,636 1,504 1,865 132 (361)
Net income.................................. 18,062 21,952 21,347 (3,890) 605
</Table>
Changes in the results of operations for the Company are primarily due to
the growth of its portfolio and costs associated with such growth. Of the
increase in total revenues in 2001, $1.5 million is attributable to increased
earnings from non-consolidated entities established in 1999. The remaining
revenue growth in 2001
28
was primarily attributable to increased rental revenues from Properties
purchased in 2000 and owned for the entire year in 2001 and Properties purchased
in 2001. Of the increase in total revenues in 2000, $1.8 million is attributable
to increased earnings from non-consolidated entities established in the third
and fourth quarter of 1999. The remaining revenue growth in 2000 relates to
rental revenues from Properties purchased in 1999 and owned for the entire year
in 2000. The increase in interest expense due to the growth of the Company's
portfolio has been offset by a reduction in the weighted average interest rate
from 7.79% at December 31, 1999 to 7.28% at December 31, 2001 due to debt
refinancings, repayments, lower variable interest rates and lower interest rates
on new debt incurred by the Company. The Company's general and administrative
expenses have remained the same and/or decreased as a percentage of total
revenue to 6.0% in 2001, 6.1% in 2000 and 6.1% in 1999 due to the growth of the
Company's portfolio relative to these expenses. The increase in property
operating expenses in 2001 relates to costs incurred relating to two Properties
that became vacant in 2001, which resulted in the Company incurring Property
level operating expenses which normally are the responsibility of the tenant,
and a third Property in which the Company has a level of operating expense
responsibility. The decrease in property operating expense in 2000 relates to
the tenanting of a Property that was vacant in 1999. Net income decreased in
2001 due to the impact of items discussed above offset by the incurring of a
$3.1 million extraordinary charge for early extinguishment of debt and a $3.0
million reduction in gains on sales of Properties. Net income increased in 2000
due to the impact of the items discussed above offset by the reduction in gains
on sale of Properties of approximately $2.2 million.
The Company's non-consolidated entities had aggregate net income of $10.2
million in 2001 compared with $4.8 million in 2000 and $0.2 million in 1999. The
increase in net income is primarily attributable to an increase in rental income
of $21.1 million in 2001 and $14.4 million in 2000 attributable to acquisition
of Properties and expansion of an existing Property. In addition, advisory fee
income, which includes acquisition and asset management fees, decreased by $0.5
million in 2001 due to the reduction in the amount of acquisitions made by LAC
in 2001 compared to 2000 which was partially offset by acquisitions made by the
private investment fund client in 2001 and increased by $1.0 million in 2000 due
to the increase in Properties purchased in 2000 by LAC compared to 1999. These
revenue sources were partly offset by an increase in (i) interest expense of
$9.0 million in 2001 and $6.4 million in 2000 due to increased acquisition
leverage, (ii) depreciation expense of $4.0 million in 2001 and $3.4 million in
2000 due to more depreciable assets owned and (iii) property operating/general
and administrative expenses of $2.2 million in 2001 and $1.9 million in 2000 due
to an increase in the asset base and advisory accounts.
The increase in net income in future periods will be closely tied to the
level of acquisitions made by the Company. Without acquisitions, which in
addition to generating rental revenue, generates acquisition, debt placement and
asset management fees from co-investment programs, the sources of growth in net
income are limited to index adjusted rents (10 leases), percentage rents (3
leases), reduced interest expense on amortizing mortgages and by controlling
other variable overhead costs. However, there are many factors beyond
management's control, that could offset these items including, without
limitation, increased interest rates of variable debt ($57.7 million as of
December 31, 2001 at a weighted average interest rate of 4.68%) and tenant
monetary defaults.
FUNDS FROM OPERATIONS
The Company believes that Funds From Operations ("FFO") enhances an
investor's understanding of the Company's financial condition, results of
operations and cash flows. The Company believes that FFO is an appropriate
measure of the performance of an equity REIT, and that it can be one measure of
a REIT's ability to make cash distributions. FFO is defined in the October 1999
"White Paper", issued by the National Association of Real Estate Investment
Trusts, Inc. ("NAREIT") as "net income (or loss), computed in accordance with
generally accepted accounting principles ("GAAP"), excluding gains (or losses)
from sales of property, plus real estate depreciation and amortization and after
adjustments for unconsolidated partnerships and joint ventures." The Company
included in the calculation of FFO the dilutive effect of the deemed conversion
of its outstanding exchangeable notes, which were fully satisfied in 2001. FFO
should not be considered an alternative to net income as an indicator of
operating performance or to cash flows from
29
operating activities as determined in accordance with GAAP, or as a measure of
liquidity to other consolidated income or cash flow statement data as determined
in accordance with GAAP.
The following table reflects the calculation of the Company's FFO and cash
flow activities for each of the years in the three year period ended December
31, 2001 ($000):
<Table>
<Caption>
2001 2000 1999
-------- -------- --------
Net income.................................................. $ 18,062 $ 21,952 $ 21,347
Depreciation and amortization of real estate.............. 18,312 17,513 18,000
Minority interests' share of net income................... 5,215 5,772 6,226
Gain on sale of property.................................. -- (2,959) (5,127)
Amortization of leasing commissions....................... 769 503 --
Deemed conversion of notes payable........................ 1,000 1,582 --
Joint venture adjustment -- depreciation.................. 3,768 1,953 206
Extraordinary item........................................ 3,144 -- --
-------- -------- --------
Funds From Operations.................................. $ 50,270 $ 46,316 $ 40,652
======== ======== ========
Cash flows from operating activities........................ $ 44,480 $ 40,803 $ 39,411
Cash flows used in investing activities..................... (64,321) (38,549) (64,942)
Cash flows from (used in) financing activities.............. 28,912 (6,299) 23,284
</Table>
The Company's dividend and distribution FFO payout ratio, on a per share
basis, was 71.3%, 69.3% and 74.1% for the years ended December 31, 2001, 2000
and 1999 respectively.
RECENTLY ISSUED ACCOUNTING STANDARDS. In August 2001, the FASB issued SFAS
No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets," which
addresses financial accounting and reporting for the impairment or disposal of
long-lived assets. This statement supersedes SFAS No. 121, "Accounting for the
Impairment or Disposal of Long-Lived Assets and for Long-Lived Assets to be
Disposed Of" and the accounting and reporting provisions of APB Opinion No. 30,
"Reporting the Results of Operations -- Reporting the Effects of a Disposal of a
Business and Extraordinary, Unusual and Infrequently Occurring Events and
Transactions," for the disposal of a segment of a business. This Statement also
amends ARB No. 51, "Consolidated Financial Statements," to eliminate the
exception to consolidation for a subsidiary for which control is likely to be
temporary. SFAS No. 144 is effective for fiscal years beginning after December
15, 2001, and interim periods within those fiscal years. The provisions of this
Statement generally are to be applied prospectively. The Company has not
evaluated the effect of this statement, however, it is not expected that this
statement will have a material effect on the Company's consolidated results of
operations or financial position.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
The Company's exposure to market risk relates to its variable rate debt. As
of December 31, 2001 and 2000 the Company's variable rate indebtedness
represented 12.7% and 13.0%, respectively, of total mortgages and notes payable.
During 2001 and 2000, this variable rate indebtedness had a weighted average
interest rate of 6.56% and 7.86%, respectively. Had the weighted average
interest rate been 100 basis points higher the Company's net income would have
been reduced by $252,000 and $699,000 in 2001 and 2000, respectively.
30
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
LEXINGTON CORPORATE PROPERTIES TRUST
AND CONSOLIDATED SUBSIDIARIES
INDEX
<Table>
<Caption>
PAGE
-----
Independent Auditors' Report................................ 32
Consolidated Balance Sheets as of December 31, 2001 and
2000...................................................... 33
Consolidated Statements of Income for the years ended
December 31, 2001, 2000 and 1999.......................... 34
Consolidated Statements of Changes in Shareholders' Equity
for the years ended December 31, 2001, 2000 and 1999...... 35
Consolidated Statements of Cash Flows for the years ended
December 31, 2001, 2000 and 1999.......................... 36
Notes to Consolidated Financial Statements.................. 37-58
Financial Statement Schedule
Schedule III -- Real Estate and Accumulated Depreciation.... 59-61
</Table>
31
INDEPENDENT AUDITORS' REPORT
The Shareholders
Lexington Corporate Properties Trust:
We have audited the consolidated financial statements of Lexington
Corporate Properties Trust and subsidiaries as listed in the accompanying index.
In connection with our audits of the consolidated financial statements, we also
have audited the financial statement schedule as listed in the accompanying
index. These consolidated financial statements and the financial statement
schedule are the responsibility of the Company's management. Our responsibility
is to express an opinion on these consolidated financial statements and the
financial statement schedule based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Lexington
Corporate Properties Trust and subsidiaries as of December 31, 2001 and 2000,
and the results of their operations and their cash flows for each of the years
in the three-year period ended December 31, 2001 in conformity with accounting
principles generally accepted in the United States of America. Also in our
opinion, the related financial statement schedule, when considered in relation
to the basic consolidated financial statements taken as a whole, presents
fairly, in all material respects, the information set forth therein.
/s/ KPMG LLP
New York, New York
January 23, 2002
32
LEXINGTON CORPORATE PROPERTIES TRUST
AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
($000 EXCEPT PER SHARE AMOUNTS)
DECEMBER 31,
<Table>
<Caption>
2001 2000
-------- --------
ASSETS
Real estate, at cost
Buildings and building improvements....................... $702,494 $583,522
Land and land estates..................................... 116,795 87,606
Land improvements......................................... 3,154 3,154
Fixtures and equipment.................................... 8,345 8,345
-------- --------
830,788 682,627
Less: accumulated depreciation............................ 116,741 98,429
-------- --------
714,047 584,198
Investment in and advances to non-consolidated entities..... 48,764 40,836
Cash and cash equivalents................................... 13,863 4,792
Restricted cash............................................. 1,825 1,598
Deferred expenses (net of accumulated amortization of $4,411
in 2001 and $5,222 in 2000)............................... 8,875 7,958
Rent receivable............................................. 19,026 16,583
Other assets, net........................................... 15,753 12,412
-------- --------
$822,153 $668,377
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Mortgages payable........................................... $445,771 $345,505
Credit facility borrowings.................................. 10,000 41,821
Origination fees payable, including accrued interest........ 6,636 6,703
Accounts payable and other liabilities...................... 5,489 4,312
Accrued interest payable.................................... 1,507 2,161
-------- --------
469,403 400,502
Minority interests.......................................... 57,859 64,812
-------- --------
527,262 465,314
-------- --------
Commitments and contingencies (notes 6 and 8)
Preferred shares, par value $0.0001 per share; authorized
10,000,000 shares. Class A Senior Cumulative Convertible
Preferred, liquidation preference $25,000, 2,000,000
shares issued and outstanding............................. 24,369 24,369
-------- --------
Common shares, par value $0.0001 per share; 287,888 shares
issued and outstanding, liquidation preference $3,886..... 3,809 3,809
-------- --------
Shareholders' equity:
Common shares, par value $0.0001 per share, authorized
80,000,000 shares, 24,219,409 and 16,863,394 shares
issued and outstanding in 2001 and 2000,
respectively........................................... 2 2
Additional paid-in-capital................................ 342,161 240,112
Deferred compensation, net................................ (1,641) (1,019)
Accumulated distributions in excess of net income......... (71,836) (62,227)
-------- --------
268,686 176,868
Less: notes receivable from officers/shareholders......... (1,973) (1,983)
-------- --------
Total shareholders' equity........................ 266,713 174,885
-------- --------
$822,153 $668,377
======== ========
</Table>
The accompanying notes are an integral part of these consolidated financial
statements.
33
LEXINGTON CORPORATE PROPERTIES TRUST
AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
($000 EXCEPT PER SHARE AMOUNTS)
YEARS ENDED DECEMBER 31,
<Table>
<Caption>
2001 2000 1999
---------- ---------- ----------
Revenues:
Rental................................................. $ 78,402 $ 76,824 $ 75,760
Equity in earnings of non-consolidated entities........ 3,328 1,851 25
Interest and other..................................... 1,132 1,330 1,515
---------- ---------- ----------
82,862 80,005 77,300
---------- ---------- ----------
Expenses:
Interest expense....................................... 29,732 29,581 29,099
Depreciation and amortization of real estate........... 18,312 17,513 18,000
Amortization of deferred expenses...................... 1,640 1,497 991
General and administrative expenses.................... 4,952 4,902 4,687
Property operating expenses............................ 1,636 1,504 1,865
---------- ---------- ----------
56,272 54,997 54,642
---------- ---------- ----------
Income before gain on sale of properties, minority
interests and extraordinary item....................... 26,590 25,008 22,658
Gain on sale of properties............................... -- 2,959 5,127
---------- ---------- ----------
Income before minority interests and extraordinary
item................................................... 26,590 27,967 27,785
Minority interests....................................... 5,384 6,015 6,438
---------- ---------- ----------
Income before extraordinary item......................... 21,206 21,952 21,347
Extraordinary item....................................... 3,144 -- --
---------- ---------- ----------
Net income.......................................... $ 18,062 $ 21,952 $ 21,347
========== ========== ==========
Income per common share -- basic:
Income before extraordinary item......................... $ 0.95 $ 1.15 $ 1.11
Extraordinary item....................................... (0.16) -- --
---------- ---------- ----------
Net income.......................................... $ 0.79 $ 1.15 $ 1.11
========== ========== ==========
Weighted average common shares outstanding............... 19,522,323 16,900,039 16,979,925
========== ========== ==========
Income per common share -- diluted:
Income before extraordinary item......................... $ 0.93 $ 1.10 $ 1.08
Extraordinary item....................................... (0.16) -- --
---------- ---------- ----------
Net income.......................................... $ 0.77 $ 1.10 $ 1.08
========== ========== ==========
Weighted average common shares outstanding............... 19,862,880 24,714,219 24,945,267
========== ========== ==========
</Table>
The accompanying notes are an integral part of these consolidated financial
statements.
34
LEXINGTON CORPORATE PROPERTIES TRUST
AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
($000 EXCEPT PER SHARE AMOUNTS)
YEARS ENDED DECEMBER 31,
<Table>
<Caption>
ACCUMULATED NOTES
ADDITIONAL DEFERRED DISTRIBUTIONS RECEIVABLE TOTAL
NUMBER OF PAID-IN COMPENSATION, IN EXCESS OF OFFICERS/ SHAREHOLDERS'
SHARES AMOUNT CAPITAL NET NET INCOME SHAREHOLDERS EQUITY
---------- ------ ---------- ------------- ------------- ------------ -------------
Balance at December 31, 1998... 17,103,532 $2 $241,924 $ -- $(59,155) $(1,996) $180,775
Net income..................... -- -- -- -- 21,347 -- 21,347
Dividends paid to common
shareholders ($1.20 per
share)....................... -- -- -- -- (20,524) -- (20,524)
Dividends paid to preferred
shareholders ($1.26 per
share)....................... -- -- -- -- (2,520) -- (2,520)
Common shares issued, net...... 673,262 -- 7,635 (701) -- -- 6,934
Common shares repurchased and
retired...................... (871,509) -- (9,220) -- -- -- (9,220)
Repayments on notes............ -- -- -- -- -- 5 5
---------- -- -------- ------- -------- ------- --------
Balance at December 31, 1999... 16,905,285 2 240,339 (701) (60,852) (1,991) 176,797
Net income..................... -- -- -- -- 21,952 -- 21,952
Dividends paid to common
shareholders ($1.22 per
share)....................... -- -- -- -- (20,765) -- (20,765)
Dividends paid to preferred
shareholders ($1.281 per
share)....................... -- -- -- -- (2,562) -- (2,562)
Common shares issued, net...... 353,494 -- 3,866 (664) -- -- 3,202
Amortization of deferred
compensation................. -- -- -- 346 -- -- 346
Common shares repurchased and
retired...................... (395,385) -- (4,093) -- -- -- (4,093)
Repayments on notes............ -- -- -- -- -- 8 8
---------- -- -------- ------- -------- ------- --------
Balance at December 31, 2000... 16,863,394 2 240,112 (1,019) (62,227) (1,983) 174,885
Net income..................... -- -- -- -- 18,062 -- 18,062
Dividends paid to common
shareholders ($1.27 per
share)....................... -- -- -- -- (25,004) -- (25,004)
Dividends paid to preferred
shareholders ($1.3335 per
share)....................... -- -- -- -- (2,667) -- (2,667)
Common shares issued, net...... 7,368,015 -- 102,206 (1,181) -- -- 101,025
Amortization of deferred
compensation................. -- -- -- 559 -- -- 559
Common shares repurchased and
retired...................... (12,000) -- (157) -- -- -- (157)
Repayments on notes............ -- -- -- -- -- 10 10
---------- -- -------- ------- -------- ------- --------
Balance at December 31, 2001... 24,219,409 $2 $342,161 $(1,641) $(71,836) $(1,973) $266,713
========== == ======== ======= ======== ======= ========
</Table>
The accompanying notes are an integral part of these consolidated financial
statements.
35
LEXINGTON CORPORATE PROPERTIES TRUST
AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
($000)
YEARS ENDED DECEMBER 31,
<Table>
<Caption>
2001 2000 1999
-------- -------- ---------
Cash flows from operating activities:
Net income................................................ $ 18,062 $ 21,952 $ 21,347
Adjustments to reconcile net income to net cash provided
by operating activities, net of effects from
acquisitions:
Depreciation and amortization.......................... 19,952 19,010 18,991
Minority interests..................................... 5,384 6,015 6,438
Gain on sale of properties............................. -- (2,959) (5,127)
Extraordinary item..................................... 3,144 -- --
Straight-line rents.................................... (2,755) (2,804) (2,054)
Other non-cash charges................................. 1,089 714 244
Equity in earnings of non-consolidated entities........ (3,328) (1,851) (25)
Distributions from non-consolidated entities........... 4,593 1,092 --
Increase (decrease) in accounts payable and other
liabilities.......................................... (2,140) 310 (1,013)
Other adjustments, net................................. 479 (676) 610
-------- -------- ---------
Net cash provided by operating activities......... 44,480 40,803 39,411
-------- -------- ---------
Cash flows from investing activities:
Net proceeds from sale of properties...................... 4,107 19,402 31,548
Proceeds from sale of joint venture interest.............. -- -- 10,781
Acquisition of the Net Partnerships, net of debt assumed
and $3,777 in cash..................................... (27,835) -- --
Investment in real estate................................. (19,363) (27,116) (102,987)
Investments in non-consolidated entities.................. (5,620) (26,247) (4,284)
Advances to non-consolidated entities..................... (4,195) (4,588) --
Investment in and advances to the Net Partnerships........ (10,979) -- --
Real estate deposits...................................... (436) -- --
-------- -------- ---------
Net cash used in investing activities............. (64,321) (38,549) (64,942)
-------- -------- ---------
Cash flows from financing activities:
Proceeds of mortgages and notes payable................... 100,194 84,340 56,075
Change in credit facility borrowing, net.................. (31,821) (29,100) 18,300
Dividends to common and preferred shareholders............ (27,671) (23,327) (23,044)
Principal payments on debt, excluding normal
amortization........................................... (48,611) (15,066) (5,513)
Principal amortization payments........................... (12,354) (11,646) (10,468)
Common shares issued, net of offering costs............... 63,528 1,402 4,676
Cash distributions to minority interests.................. (6,236) (6,323) (6,533)
Change in escrow deposits................................. (775) 724 104
Increase in deferred expenses............................. (3,203) (4,090) (1,718)
Change in restricted cash................................. (227) 872 745
Common shares/partnership units repurchased............... (348) (4,093) (9,220)
Penalties paid on early retirement of debt................ (3,575) -- --
Other..................................................... 11 8 (120)
-------- -------- ---------
Net cash provided by (used in) financing
activities...................................... 28,912 (6,299) 23,284
-------- -------- ---------
Change in cash and cash equivalents......................... 9,071 (4,045) (2,247)
Cash and cash equivalents, beginning of year................ 4,792 8,837 11,084
-------- -------- ---------
Cash and cash equivalents, end of year...................... $ 13,863 $ 4,792 $ 8,837
======== ======== =========
</Table>
The accompanying notes are an integral part of these consolidated financial
statements.
36
LEXINGTON CORPORATE PROPERTIES TRUST
AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
($000'S EXCEPT PER SHARE DATA)
(1) THE COMPANY
Lexington Corporate Properties Trust, (the "Company"), is a self-managed
and self-administered Maryland statutory real estate investment trust ("REIT")
that acquires, owns, and manages a geographically diversified portfolio of net
leased office, industrial and retail properties. Lexington Realty Advisors, Inc.
("LRA"), a non-consolidated affiliate of the Company, provides investment
advisory and asset management services to institutional investors in the net
lease area. As of December 31, 2001 the Company owned or had interests in 98
properties in 30 states. The real properties owned by the Company are subject to
triple net leases to corporate tenants, although for three investments the
leases provide a level of operating expenses which are landlord
responsibilities.
The Company's Board of Trustees authorized the Company to repurchase, from
time to time, up to 2.0 million common shares and/or operating partnership
units, depending on market conditions and other factors. As of December 31,
2001, the Company repurchased approximately 1.4 million common
shares/partnership units at an average price of approximately $10.55 per common
share/partnership unit.
On November 28, 2001, the shareholders of the Company approved an increase
in the number of authorized common shares from 40.0 million shares to 80.0
million shares.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation and Consolidation. The Company's consolidated
financial statements are prepared on the accrual basis of accounting. The
financial statements reflect the accounts of the Company and its controlled
subsidiaries, including Lepercq Corporate Income Fund L.P. ("LCIF"), Lepercq
Corporate Income Fund II L.P. ("LCIF II") and Net 3 Acquisition L.P. ("Net 3").
The Company is the sole general partner and majority limited partner of LCIF,
LCIF II and Net 3.
Real Estate. Real estate assets are stated at cost, less accumulated
depreciation and amortization. If there is an event or change in circumstance
that indicates that an impairment in the value of a property has occurred, the
Company's policy is to assess any impairment in value by making a comparison of
the current and projected operating cash flows of each such property over its
remaining useful life, on an undiscounted basis, to the carrying amount of the
property. If such carrying amounts are in excess of the estimated projected
operating cash flows of the property, the Company would recognize an impairment
loss equivalent to an amount required to adjust the carrying amount to its
estimated fair market value.
Depreciation is determined by the straight-line method over the remaining
estimated economic useful lives of the properties. The Company generally
depreciates buildings and building improvements over a 40-year period, land
improvements over a 20-year period, and fixtures and equipment over a 12-year
period.
Only costs incurred to third parties in acquiring properties are
capitalized. No internal costs (rents, salaries, overhead) are capitalized.
Expenditures for maintenance and repairs are charged to operations as incurred.
Significant renovations which extend the useful life of the properties are
capitalized.
Investments in non-consolidated entities. The Company accounts for its
investments in less than 50% owned entities and LRA under the equity method
since it has influence over, but does not control, such entities.
Revenue. Rental revenue is recognized on a straight-line basis over the
minimum lease terms. The Company's rent receivable primarily represents the
amount of the excess of rental revenues recognized on a straight-line basis over
the annual rents collectible under the leases. The Company recognizes percentage
rent revenue when the cash is received from the tenant.
37
LEXINGTON CORPORATE PROPERTIES TRUST
AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
($000'S EXCEPT PER SHARE DATA)
Deferred Expenses. Deferred expenses consist primarily of debt placement,
mortgage loan and other loan fees, and are amortized using the straight-line
method, which approximates the interest method, over the terms of the debt
instruments.
Tax Status. The Company has made an election to qualify, and believes it
is operating so as to qualify, as a real estate investment trust under the
Internal Revenue Code. A real estate investment trust is generally not subject
to Federal income tax on that portion of its real estate investment trust
taxable income which is distributed to its shareholders, provided that at least
90% of taxable income is distributed. As distributions have equaled or exceeded
taxable income, no provision for Federal income taxes has been made. State and
local income taxes, which are not significant, have been provided for those
states and localities in which the Company operates and is subject to an income
tax.
A summary of the average taxable nature of the Company's dividends for each
of the years in the three year period ended December 31, 2001 is as follows:
<Table>
<Caption>
2001 2000 1999
------ ------ ------
Total dividends per share................................ $ 1.27 $ 1.22 $ 1.20
====== ====== ======
Ordinary income.......................................... 95.46% 87.78% 83.73%
20% rate gain............................................ -- 8.48% 10.21%
25% rate gain............................................ -- 3.74% 6.06%
Percent non-taxable as return of capital................. 4.54% -- --
------ ------ ------
100.00% 100.00% 100.00%
====== ====== ======
</Table>
Earnings Per Share. Basic net income per share is computed by dividing net
income reduced by preferred dividends by the weighted average number of common
shares outstanding during the period. Diluted net income per share amounts are
similarly computed but include the effect, when dilutive, of in-the-money common
share options and the Company's other dilutive securities which can include
operating partnership units, exchangeable notes and convertible preferred
shares. In 2001 all other securities were not dilutive and in 2000 and 1999 the
preferred shares were not dilutive.
Cash and Cash Equivalents. The Company considers all highly liquid
instruments with maturities of three months or less from the date of purchase to
be cash equivalents.
Restricted Cash. Restricted cash includes tenant security deposits and
amounts for certain debt obligations including funding requirements.
Use of Estimates. Management has made a number of estimates and
assumptions relating to the reporting of assets and liabilities, the disclosure
of contingent assets and liabilities and the reported amounts of revenues and
expenses to prepare these consolidated financial statements in conformity with
generally accepted accounting principles. The most significant estimates made
include the recoverability of accounts receivable (primarily related to
straight-line rents), the useful lives of real estate and the allocation of
purchase price to individual properties purchased in a portfolio. Actual results
could differ from those estimates.
Recently Issued Accounting Standards. In August 2001, the FASB issued SFAS
No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets," which
addresses financial accounting and reporting for the impairment or disposal of
long-lived assets. This statement supersedes SFAS No. 121, "Accounting for the
Impairment or Disposal of Long-Lived Assets and for Long-Lived Assets to be
Disposed Of" and the accounting and reporting provisions of APB Opinion No. 30,
"Reporting the Results of Operations --
38
LEXINGTON CORPORATE PROPERTIES TRUST
AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
($000'S EXCEPT PER SHARE DATA)
Reporting the Effects of a Disposal of a Business and Extraordinary, Unusual and
Infrequently Occurring Events and Transactions," for the disposal of a segment
of a business. This Statement also amends ARB No. 51, "Consolidated Financial
Statements," to eliminate the exception to consolidation for a subsidiary for
which control is likely to be temporary. SFAS No. 144 is effective for fiscal
years beginning after December 15, 2001, and interim periods within those fiscal
years. The provisions of this Statement generally are to be applied
prospectively. The Company has not evaluated the effect of this statement,
however, it is not expected that this statement will have a material effect on
the Company's consolidated results of operations or financial position.
Reclassifications. Certain amounts included in prior years' financial
statements have been reclassified to conform with the current year presentation.
(3) EARNINGS PER SHARE
The following is a reconciliation of numerators and denominators of the
basic and diluted earnings per share computations for each of the years in the
three year period ended December 31, 2001:
<Table>
<Caption>
2001 2000 1999
----------- ----------- -----------
BASIC
Income before extraordinary item.............. $ 21,206 $ 21,952 $ 21,347
Less dividends attributable to preferred
shares...................................... (2,709) (2,562) (2,520)
----------- ----------- -----------
Income attributed to common shareholders
before extraordinary item................... 18,497 19,390 18,827
Extraordinary item............................ (3,144) -- --
----------- ----------- -----------
Net income attributed to common
shareholders................................ $ 15,353 $ 19,390 $ 18,827
=========== =========== ===========
Weighted average number of common shares
outstanding................................. 19,522,323 16,900,039 16,979,925
=========== =========== ===========
Income per common share -- basic:
Income before extraordinary item.............. $ 0.95 $ 1.15 $ 1.11
Extraordinary item............................ (0.16) -- --
----------- ----------- -----------
Net income.................................... $ 0.79 $ 1.15 $ 1.11
=========== =========== ===========
DILUTED
Income attributed to common shareholders
before extraordinary item................... $ 18,497 $ 19,390 $ 18,827
Add incremental income attributed to assumed
conversion of dilutive securities........... -- 7,772 8,225
----------- ----------- -----------
Income attributed to common shareholders
before extraordinary item................... 18,497 27,162 27,052
Extraordinary item............................ (3,144) -- --
----------- ----------- -----------
Net income attributed to common
shareholders................................ $ 15,353 $ 27,162 $ 27,052
=========== =========== ===========
Weighted average number of shares used in
calculation of basic earnings per share..... 19,522,323 16,900,039 16,979,925
</Table>
39
LEXINGTON CORPORATE PROPERTIES TRUST
AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
($000'S EXCEPT PER SHARE DATA)
<Table>
<Caption>
2001 2000 1999
----------- ----------- -----------
Add incremental shares representing:
Shares issuable upon exercise of employee
stock options............................ 340,557 166,806 4,194
Shares issuable upon conversion of dilutive
securities............................... -- 7,647,374 7,961,148
----------- ----------- -----------
Weighted average number of shares used in
calculation of diluted earnings per common
share....................................... 19,862,880 24,714,219 24,945,267
=========== =========== ===========
Income per common share -- diluted:
Income before extraordinary item.............. $ 0.93 $ 1.10 $ 1.08
Extraordinary item............................ (0.16) -- --
----------- ----------- -----------
Net income.................................... $ 0.77 $ 1.10 $ 1.08
=========== =========== ===========
</Table>
(4) INVESTMENTS IN REAL ESTATE
On November 28, 2001 the Company acquired all the interests in the Net
Partnerships, which consisted of twenty-three properties. The aggregate purchase
price was $136,300 which included $31,612 in cash and common shares and
operating partnership units valued at $32,283. The number of common shares and
operating partnership units issued was based upon a per share/unit price of
$14.49, which was the average closing price of the Company's common shares for
the 20 trading days prior to closing.
The following table summarizes the fair value of the assets acquired and
liabilities assumed as of November 28, 2001:
<Table>
Real estate................................................. $136,331
Cash........................................................ 3,777
Other assets................................................ 554
Mortgages................................................... (61,389)
Notes payable -- Lexington.................................. (11,114)
Other liabilities........................................... (2,888)
--------
Net assets acquired......................................... $ 65,271
========
</Table>
During 2001 and 2000 the Company made the following acquisitions, excluding
acquisitions made by non-consolidated entities:
<Table>
<Caption>
NET
RENTABLE
DATE OF ACQUISITION BASE RENT LEASE SQUARE
ACQUISITION TENANT LOCATION COST DECEMBER 31, EXPIRES FEET
- ----------- --------------------------------------- -------------------- ----------- ------------ ------- ---------
2001
March 30 Kraft Foods North America, Inc. Winchester, VA $14,400 $1,515 06-11 344,700
November 28 Bull HN Information Systems, Inc. Phoenix, AZ 11,436 1,086 10-05 137,058
November 28 Hollywood Entertainment Corp. Wilsonville, OR 13,328 1,531 11-08 122,853
November 28 Nextel Communication of the
Mid-Atlantic, Inc. Hampton, VA 11,667 1,302 12-09 100,632
November 28 The Tranzonic Companies Highland Heights, OH 6,318 762 02-09 119,641
November 28 Hewlett Packard Company San Diego, CA 8,700 888 01-10 65,755
November 28 Cox Communication, Inc. Tucson, AZ 3,284 401 09-10 28,591
November 28 IKON Office Solutions Milford, CT 2,832 337 12-04 27,360
November 28 Associated Grocers of Florida, Inc. Ocala, FL 19,013 2,238 12-18 668,034
</Table>
40
LEXINGTON CORPORATE PROPERTIES TRUST
AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
($000'S EXCEPT PER SHARE DATA)
<Table>
<Caption>
NET
RENTABLE
DATE OF ACQUISITION BASE RENT LEASE SQUARE
ACQUISITION TENANT LOCATION COST DECEMBER 31, EXPIRES FEET
- ----------- --------------------------------------- -------------------- ----------- ------------ ------- ---------
November 28 Corporate Express Office Products, Inc. Henderson, NC 7,442 810 01-14 196,946
November 28 Stone Container Corporation Columbia, SC 4,638 571 08-12 185,961
November 28 Johnson Controls, Inc. Plymouth, MI 7,663 809 12-06 134,160
November 28 The Tranzonic Companies Tempe, AZ 1,892 202 02-09 49,951
November 28 Ameritech Services, Inc. Columbus, OH 1,594 255 05-05 20,000
November 28 Sam's Real Estate Business Trust Westland, MI 7,221 753 01-09 102,826
November 28 Wal-Mart Stores, Inc. Gainesville, GA 2,631 328 01-09 89,199
November 28 Kohl's Department Stores, Inc. Eau Claire, WI 4,302 462 01-15 76,164
November 28 Wal-Mart Real Estate Business Trust Jacksonville, AL 1,959 146 01-09 56,132
November 28 Best Buy Co, Inc. Canton, OH 4,417 465 02-18 46,350
November 28 Best Buy Co, Inc. Spartanburg, SC 4,167 395 02-18 45,800
November 28 Bally's Health & Fitness Corp. Phoenix, AZ 5,627 808 06-08 36,556
November 28 Greyhound Lines, Inc. Stockton, CA 1,296 193 12-09 17,000
November 28 Circuit City Stores, Inc. Lynchburg, VA 797 101 11-06 9,300
November 28 Wal-Mart Stores, Inc. Sumter, SC 4,107 328 01-08 103,377
December 11 Owens Corning Hebron, OH 8,447 989 05-09 400,522
December 11 Owens Corning Hebron, OH 5,340 648 02-10 250,410
----------- ------------ ---------
$164,518 $18,323 3,435,278
=========== ============ =========
2000
March 20 Nextel Communications of the
Mid-Atlantic , Inc. Hampton, VA $6,715 $719 01-10 56,515
May 11 Avnet, Inc. Phoenix, AZ 23,250 2,468 11-07 176,402
----------- ------------ ---------
$29,965 $3,187 232,917
=========== ============ =========
</Table>
The Company sold one property in 2001, three properties in 2000 and seven
properties in 1999 for aggregate selling prices of $4,107, $19,600, and $63,900,
respectively, which resulted in gains in 2001, 2000 and 1999 of $0, $2,959 and
$5,127, respectively. In addition, in 2001 and 2000 the Company contributed the
Winchester, Virginia and Herndon, Virginia properties (along with non-recourse
mortgage notes), respectively to Lexington Acquiport Company, LLC for capital
contributions of $1,168 and $2,393, respectively.
The following unaudited pro forma operating information for the years ended
December 31, 2001 and 2000 has been prepared as if all Company acquisitions and
dispositions (including non-consolidated entities) in 2001 and 2000 had been
consummated as of January 1, 2000. The information does not purport to be
indicative of what the operating results of the Company would have been had the
acquisitions and dispositions been consummated on January 1, 2000. Unaudited pro
forma amounts are as follows:
<Table>
<Caption>
DECEMBER 31, 2001 DECEMBER 31, 2000
----------------- -----------------
Revenues............................................. $98,098 $99,076
Income before extraordinary item..................... $27,101 $27,166
Net income........................................... $23,958 $27,166
Income before extraordinary item per common share:
Basic.............................................. $ 1.14 $ 1.29
Diluted............................................ $ 1.10 $ 1.23
Net income per common share:
Basic.............................................. $ 0.99 $ 1.29
Diluted............................................ $ 0.98 $ 1.23
</Table>
41
LEXINGTON CORPORATE PROPERTIES TRUST
AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
($000'S EXCEPT PER SHARE DATA)
(5) INVESTMENT IN NON-CONSOLIDATED ENTITIES
The Company has investments in various real estate joint ventures. The
business of each joint venture is to acquire, finance, hold for investment and
sell single tenant net leased real estate.
Lexington Acquiport Company, LLC
Lexington Acquiport Company, LLC ("LAC"), is a joint venture with the
Comptroller of the State of New York as Trustee for the Common Retirement Fund
("CRF"). The joint venture agreement expires December 2011. The Company and CRF
originally committed to contribute up to $50,000 and $100,000, respectively, to
invest in high quality office and industrial net leased real estate. Through
December 31, 2001 total contributions were $111,283. LRA earns annual management
fees of 2% of rent collected and acquisition fees equaling 75 basis points of
purchase price of each property investment. All allocations of profit, loss and
cash flows are made one-third to the Company and two-thirds to CRF.
During 2001 this joint venture was expanded whereby Lexington and CRF
committed an additional $50,000 and $150,000, respectively. In addition to the
fees LRA currently earns on acquisitions and asset management, under the
expanded joint venture LRA will also earn 50 basis points on all mortgage debt
directly placed. All allocations of profit, loss and cash flows from all
properties acquired under the expanded joint venture are allocated 25% to the
Company and 75% to CRF.
CRF can indicate their election to put their equity position in LAC to the
Company. The Company has the option of issuing common shares for the fair market
value of CRF's equity position (as defined) or cash for 110% of the fair market
value of CRF's equity position. The per common share value of shares issued for
CRF's equity position will be the greater of (i) the price of the Company's
common shares on the closing date (ii) the Company's funds from operations per
share (as defined) multiplied by 8.5 or (iii) $13.40 for the initial joint
venture (all properties that are currently owned) and $15.20 for any properties
purchased under the expanded joint venture. The Company has the right not to
accept any property (thereby reducing the fair market value of CRF's equity
position) that does not meet certain underwriting criteria (e.g. lease term and
tenant credit). In addition the operating agreement contains a mutual buy-sell
provision in which either partner can force the sale of any property.
During 2001, 2000 and 1999, LAC made the following investments:
<Table>
<Caption>
NET
RENTABLE
DATE OF ACQUISITION BASE RENT LEASE SQUARE
ACQUISITION TENANT LOCATION COST DECEMBER 31, EXPIRES FEET
- ----------- ------------------------------ -------------- ----------- ------------ ------- ---------
2001
May 6 Kraft Foods North America, Winchester, VA $ 14,400 $ 1,515 06-11 344,700
Inc.
======== ======= =========
2000
January 20 Structural Dynamics Research Milford, OH $ 26,900 $ 2,790 04-11 212,836
Corporation
March 29 Bank One Indiana, N.A. Fishers, IN 24,500 3,287 10-09 193,000
April 17 NEC America, Inc. Herndon, VA 19,087 2,025 08-09 108,000
September 6 True North Communications, Irving, TX 41,850 4,250 01-10 247,254
Inc.
September 28 First USA Management Services, Lake Mary, FL 41,700 5,741 09-09 251,075
Inc.
December 27 Aventis Pharmaceuticals, Inc. Parsippany, NJ 81,000 8,487 01-10 340,240
-------- ------- ---------
$235,037 $26,580 1,352,405
======== ======= =========
1999
September 15 Vastar Resources, Inc. Houston, TX $ 34,770 $ 3,437 09-09 327,325
======== ======= =========
</Table>
In 1999, LAC also made an $11,009 investment in a participating note
receivable, which has a stated interest rate of 6.9% and a 50% interest in the
property cash flows from the entity that owns the Houston, Texas property.
42
LEXINGTON CORPORATE PROPERTIES TRUST
AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
($000'S EXCEPT PER SHARE DATA)
Summarized balance sheet data as of December 31, 2001 and 2000 and income
statement data for the years ended December 31, 2001, 2000 and 1999 is as
follows:
<Table>
<Caption>
2001 2000
-------- --------
Real estate, net............................................ $245,537 $236,076
Note receivable............................................. 11,009 11,009
Cash and cash equivalents................................... 3,623 3,459
Other assets................................................ 5,147 3,262
-------- --------
$265,316 $253,806
======== ========
Mortgages payable........................................... $151,697 $152,874
Accounts payable............................................ 661 218
Other liabilities........................................... 690 840
Equity...................................................... 112,268 99,874
-------- --------
$265,316 $253,806
======== ========
</Table>
<Table>
<Caption>
2001 2000 1999
-------- ------- ----
Revenues.................................................... $ 28,661 $10,525 $267
Interest expense............................................ (11,910) (4,327) --
Depreciation of real estate................................. (4,932) (1,765) --
Other....................................................... (3,147) (1,222) (85)
-------- ------- ----
Net income............................................. $ 8,672 $ 3,211 $182
======== ======= ====
</Table>
As of December 31, 2001, the LAC properties are 100% leased and have
scheduled lease expiration dates ranging from 2009 to 2011.
Minimum future rental receipts under non-cancelable tenant operating
leases, assuming no new or negotiated leases, for the next five years and
thereafter are as follows:
<Table>
<Caption>
YEAR ENDING
DECEMBER 31,
- ------------
2002........................................................ $ 26,303
2003........................................................ 26,508
2004........................................................ 26,830
2005........................................................ 28,825
2006........................................................ 29,313
Thereafter.................................................. 93,607
--------
$231,386
========
</Table>
43
LEXINGTON CORPORATE PROPERTIES TRUST
AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
($000'S EXCEPT PER SHARE DATA)
The mortgages payable bear interest at rates ranging from 7.33% to 8.19%
and mature at various dates ranging from 2010 to 2012. Scheduled principal
amortization and balloon payments for the mortgages for the next five years and
thereafter are as follows:
<Table>
<Caption>
YEAR ENDING SCHEDULED BALLOON
DECEMBER 31, AMORTIZATION PAYMENTS TOTAL
- ------------ ------------ -------- --------
2002.............................................. $ 1,577 $ -- $ 1,577
2003.............................................. 1,750 -- 1,750
2004.............................................. 1,866 -- 1,866
2005.............................................. 2,073 -- 2,073
2006.............................................. 2,135 -- 2,135
Thereafter........................................ 11,507 130,789 142,296
------- -------- --------
$20,908 $130,789 $151,697
======= ======== ========
</Table>
Lexington Columbia LLC
Lexington Columbia LLC ("Columbia") is a joint venture established December
30, 1999 with a private investor. Its sole purpose is to own a property in
Columbia, South Carolina net leased to Blue Cross Blue Shield of South Carolina
through September 2009. The purchase price of the property was approximately
$42,500 and was partially funded through a 10 year, $25,300 mortgage note
bearing interest at 7.85%. In accordance with the operating agreement, net cash
flows, as defined, will be allocated 40% to the Company and 60% to the partner
until both parties have received a 12.5% return on capital. Thereafter cash
flows will be distributed 60% to the Company and 40% to the partner.
During 2001, Columbia expanded the property by 107,894 square feet bringing
the total square feet of the property to 456,304. The $10,900 expansion was
funded 40% by the Company and 60% by the partner. The tenant has leased the
expansion through September 2009 at average annual rent of $2,000. Cash flows
from the expansion will be distributed 40% to the Company and 60% to the
partner.
LRA earns annual asset management fees of 2% of rents collected.
Summarized financial information for the underlying property investment as
of and for the years ended December 31, 2001 and 2000 is as follows:
<Table>
<Caption>
2001 2000
------- -------
Real estate, net............................................ $50,442 $41,043
Other assets................................................ 1,529 992
------- -------
$51,971 $42,035
======= =======
Mortgage payable............................................ $24,863 $25,071
Equity...................................................... 27,108 16,964
------- -------
$51,971 $42,035
======= =======
</Table>
44
LEXINGTON CORPORATE PROPERTIES TRUST
AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
($000'S EXCEPT PER SHARE DATA)
<Table>
<Caption>
2001 2000
------- -------
Rental income............................................... $ 5,412 $ 4,906
Interest expense............................................ (1,851) (2,009)
Depreciation................................................ (1,664) (1,624)
Other....................................................... (133) (143)
------- -------
Net income............................................. $ 1,764 $ 1,130
======= =======
</Table>
Minimum future rental receipts under the non-cancelable operating lease,
assuming no new or renegotiated lease, for the next five years and thereafter is
as follows:
<Table>
<Caption>
YEAR ENDING
DECEMBER 31,
- ------------
2002........................................................ $ 6,415
2003........................................................ 6,415
2004........................................................ 6,655
2005........................................................ 7,377
2006........................................................ 7,377
Thereafter.................................................. 20,286
--------
$ 54,525
========
</Table>
Scheduled principal amortization and balloon payment for the mortgage for
the next five years and thereafter is as follows:
<Table>
<Caption>
YEAR ENDING SCHEDULED BALLOON
DECEMBER 31, AMORTIZATION PAYMENT TOTAL
- ------------ ------------ ------- -------
2002................................................ $ 226 $ -- $ 226
2003................................................ 244 -- 244
2004................................................ 259 -- 259
2005................................................ 286 -- 286
2006................................................ 310 -- 310
Thereafter.......................................... 952 22,586 23,538
------ ------- -------
$2,277 $22,586 $24,863
====== ======= =======
</Table>
Lexington Realty Advisors, Inc.
The Company has a 99% non-voting ownership interest in LRA, which provides
management services to institutional investors and invests directly in real
estate properties. The voting common shares are held by five officers of the
Company and one independent third party.
45
LEXINGTON CORPORATE PROPERTIES TRUST
AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
($000'S EXCEPT PER SHARE DATA)
Summarized balance sheet data as of December 31, 2001 and 2000 and income
statement data for the years ended December 31, 2001, 2000 and 1999 is as
follows:
<Table>
<Caption>
2001 2000
------- -------
Real estate, net............................................ $39,737 $ 8,983
Development costs........................................... -- 13,190
Cash........................................................ 806 261
Other assets................................................ 785 304
------- -------
$41,328 $22,738
======= =======
Mortgages payable........................................... $30,480 $ 6,875
Construction loan payable................................... -- 8,759
Advances from the Company................................... 10,009 5,814
Other liabilities........................................... 598 857
Equity...................................................... 241 433
------- -------
$41,328 $22,738
======= =======
</Table>
<Table>
<Caption>
2001 2000 1999
------ ------ ----
Rental income............................................... $2,558 $ -- $ --
Advisory fees............................................... 1,125 1,619 576
Other income................................................ 14 70 --
------ ------ ----
3,697 1,689 576
------ ------ ----
Interest expense............................................ (1,574) (19) --
Operating expenses.......................................... (1,555) (1,104) (573)
Depreciation expense........................................ (760) -- --
Other....................................................... -- (136) --
------ ------ ----
(3,889) (1,259) (573)
------ ------ ----
Net (loss) income........................................... $ (192) $ 430 $ 3
====== ====== ====
</Table>
Included in operating expenses for the years ended December 31, 2001, 2000
and 1999 are personnel costs reimbursable to the Company of $1,008, $1,104 and
$542, respectively.
46
LEXINGTON CORPORATE PROPERTIES TRUST
AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
($000'S EXCEPT PER SHARE DATA)
During 2001 and 2000 LRA made the following acquisitions:
<Table>
<Caption>
NET
RENTABLE
DATE OF ACQUISITION BASE RENT LEASE SQUARE
ACQUISITION TENANT LOCATION COST DECEMBER 31, EXPIRES FEET
- ----------- -------------------------- ----------- ----------- ------------ ------- --------
2001
January 15 Owens Corning, Inc. Chester, SC $15,401 $1,619 01-21 193,891
December 27 Harbor Freight Tools, Inc. Dillon, SC 16,113 1,812 12-16 474,473
------- ------ -------
$31,514 $3,431 668,364
======= ====== =======
2000
December 29 Sygma Network, Inc. Danville, $ 8,992 $ 933 10-15 149,500
IL
======= ====== =======
</Table>
Minimum future rental receipts under non-cancelable tenant operating
leases, assuming no new or negotiated leases, for the next five years and
thereafter are as follows:
<Table>
<Caption>
YEAR ENDING
DECEMBER 31,
- ------------
2002........................................................ $ 4,194
2003........................................................ 4,194
2004........................................................ 4,194
2005........................................................ 4,194
2006........................................................ 4,206
Thereafter.................................................. 50,286
-------
$71,268
=======
</Table>
Scheduled principal amortization and balloon payments for the mortgages for
the next five years and thereafter are as follows:
<Table>
<Caption>
YEAR ENDING SCHEDULED BALLOON
DECEMBER 31, AMORTIZATION PAYMENTS TOTAL
- ------------ ------------ -------- -------
2002................................................ $ 455 $ -- $ 455
2003................................................ 628 -- 628
2004................................................ 588 10,493 11,081
2005................................................ 453 -- 453
2006................................................ 492 -- 492
Thereafter.......................................... 7,591 9,780 17,371
------- ------- -------
$10,207 $20,273 $30,480
======= ======= =======
</Table>
47
LEXINGTON CORPORATE PROPERTIES TRUST
AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
($000'S EXCEPT PER SHARE DATA)
(6) MORTGAGES AND NOTES PAYABLE
The following table sets forth certain information regarding the Company's
mortgage and notes payable as of December 31, 2001 and 2000:
<Table>
<Caption>
2002
ESTIMATED
ANNUAL
INTEREST DEBT BALLOON
PROPERTY LEVEL DEBT 2001 2000 RATE MATURITY SERVICE PAYMENT
- ------------------- -------- -------- -------- -------- ------------ --------
Gainesville, GA................. $ 396 $ -- 13.000% 01-01-04 $ 218 $ --
Oxon Hill, MD................... 825 1,118 6.250% 03-01-04 381 --
Milpitas, CA (c)................ 17,100 -- 5.089% 07-01-04 870 17,100
Brownsville, TX (h)............. 616 680 8.375% 11-01-04 150 260
REMIC Financing (b)............. 64,205 65,271 8.100% 05-25-05 6,353 60,001
Marlborough, MA (d)............. 8,306 8,459 4.130% 08-01-05 673 7,522
Phoenix, AZ..................... 5,154 -- 8.120% 10-01-05 621 4,268
Salt Lake City, UT.............. 6,759 8,252 7.870% 10-01-05 2,099 --
Hebron, OH (e) (2 properties)... 9,800 -- 4.375% 12-11-05 588 9,172
Bethesda, MD.................... 2,456 2,844 9.250% 05-01-06 669 --
Warren, OH...................... 29,763 33,635 7.000% 10-01-07 6,160 --
Bristol, PA..................... 9,916 9,994 7.400% 02-01-08 831 9,262
Decatur, GA..................... 6,936 -- 6.720% 06-01-08 579 6,049
Phoenix, AZ..................... 14,805 15,060 7.890% 06-05-08 1,434 12,591
Palm Beach Gardens, FL.......... 13,288 13,455 7.010% 06-15-08 1,105 11,889
Canton, OH...................... 3,459 -- 7.150% 08-11-08 313 2,935
Spartanburg, SC................. 2,873 -- 7.150% 08-11-08 260 2,438
Hebron, KY...................... 5,479 5,534 7.000% 10-23-08 451 4,935
Gainesville, GA................. 777 -- 7.500% 01-01-09 -- --
Ocala, FL....................... 13,746 -- 7.250% 02-01-09 1,332 10,700
Florence, SC.................... 9,681 9,800 7.500% 02-01-09 869 8,443
Canton, OH...................... 2,010 2,198 9.490% 02-28-09 388 --
Baton Rouge, LA................. 2,025 2,081 7.375% 03-01-09 208 1,470
Bristol, PA..................... 6,298 6,408 7.250% 04-01-09 571 5,228
Livonia, MI (2 Properties)...... 11,240 11,338 7.800% 04-01-09 992 10,236
Henderson, NC................... 4,574 -- 7.390% 05-01-09 417 3,854
Westland, MI.................... 3,611 -- 10.500% 09-01-09 683 --
Salt Lake City, UT.............. 16,868 18,411 7.610% 10-01-09 2,901 --
Richmond, VA.................... 16,772 16,892 8.100% 02-01-10 1,511 15,237
Hampton, VA..................... 4,545 4,580 8.260% 04-01-10 415 4,139
Hampton, VA..................... 7,415 -- 8.270% 04-01-10 677 6,758
Phoenix, AZ..................... 3,488 3,488 7.500% 05-11-10 262 3,488
Tampa, FL (Queen Palm Dr.)
(g)........................... 6,150 4,151 6.880% 08-01-10 485 5,495
Tampa, FL (North 30th) (g)...... 8,500 5,220 6.930% 08-01-10 674 7,603
Herndon, VA..................... 19,107 19,240 8.180% 12-05-10 1,723 17,276
San Diego, CA................... 4,422 -- 7.500% 01-01-11 411 3,420
Tucson, AZ...................... 2,519 -- 7.500% 01-01-11 226 2,076
Columbia, SC.................... 3,522 -- 7.540% 01-01-11 317 2,905
Glendale, AZ.................... 15,054 -- 7.400% 04-01-11 1,258 13,115
</Table>
48
LEXINGTON CORPORATE PROPERTIES TRUST
AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
($000'S EXCEPT PER SHARE DATA)
<Table>
<Caption>
2002
ESTIMATED
ANNUAL
INTEREST DEBT BALLOON
PROPERTY LEVEL DEBT 2001 2000 RATE MATURITY SERVICE PAYMENT
- ------------------- -------- -------- -------- -------- ------------ --------
Auburn Hills, MI................ 7,444 -- 7.010% 06-01-11 637 5,918
Plymouth, MI.................... 4,932 -- 7.960% 07-01-11 463 3,949
Mechanicsburg, PA............... 7,450 -- 7.790% 12-01-11 678 5,984
Mechanicsburg, PA............... 5,500 -- 7.780% 12-01-11 500 4,417
Mechanicsburg, PA............... 3,550 -- 7.780% 12-01-11 323 2,851
Dallas, TX...................... 22,128 22,477 7.490% 12-31-12 2,020 15,961
Lancaster, CA................... 10,881 11,002 7.020% 09-01-13 900 8,614
Eau Claire, WI.................. 2,470 -- 8.000% 07-01-14 313 --
Franklin, NC.................... 2,111 2,169 8.500% 04-01-15 240 --
Southborough, MA................ 2,345 2,440 7.500% 09-01-15 275 --
Mechanicsburg, PA (3 properties)
(g)........................... -- 25,000 -- -- --
Bessemer, AL (g)................ -- 1,000 -- -- --
Rockville, MD (g)............... -- 782 -- -- --
Laguna Hills, CA (g)............ -- 3,416 -- -- --
Honolulu, HI (g)................ -- 5,173 -- -- --
Gordonsville, TN (g)............ -- 974 -- -- --
Bakersfield, CA (g)............. -- 1,623 -- -- --
Columbia, MD (g)................ -- 1,340 -- -- --
-------- -------- ------- ------- --------
433,271 345,505 7.417% 46,424 317,559
-------- -------- ------- ------- --------
CORPORATE LEVEL DEBT
Credit Facility (a)............. 10,000 41,821 3.430% 03-30-04 343 10,000
Warren, OH (f).................. 12,500 -- 5.731% 10-01-07 716 12,500
-------- -------- ------- ------- --------
22,500 41,821 4.708% 1,059 22,500
-------- -------- ------- ------- --------
Total........................... $455,771 $387,326 7.283% $47,483 $340,059
======== ======== ======= ======= ========
</Table>
(a) The Company's $60,000 unsecured revolving credit facility, which expires
March 2004, bears interest at 150-250 basis points over LIBOR depending on
the amount of properties the Company owns free and clear of mortgage debt
and has an interest rate period of one, three or six months, at the option
of the Company, which rate at December 31, 2001 was 3.43%. The credit
facility is provided by Fleet Bank, NA. The credit facility contains
various leverage, debt service coverage, net worth maintenance and other
customary covenants with which the Company is in compliance as of December
31, 2001. Approximately $46,663 was available to the Company at December
31, 2001. The Company has four outstanding letters of credit aggregating
$3,337 which mature between 2005 and 2010.
(b) The REMIC Financing is secured by mortgages on 17 Properties.
(c) Floating rate debt, 30 day LIBOR plus 297 bps
(d) Floating rate debt, 90 day LIBOR plus 190 bps
(e) Floating rate debt, 30 day LIBOR plus 225 bps
(f) Floating rate debt, 90 day LIBOR plus 375 bps
(g) During 2001, the Company prepaid the outstanding mortgages on these
properties which resulted in an extraordinary charge of $3,144.
49
LEXINGTON CORPORATE PROPERTIES TRUST
AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
($000'S EXCEPT PER SHARE DATA)
(h) The tenant of the Brownsville, Texas property filed for Chapter 7
bankruptcy in 2001 and ceased paying its rental obligations. No debt
service payments have been made since rental receipts ceased.
Scheduled principal amortization and balloon payments for mortgages and
notes payable for the next five years and thereafter are as follows:
<Table>
<Caption>
YEARS ENDING SCHEDULED BALLOON
DECEMBER 31, AMORTIZATION PAYMENTS TOTAL
------------ ------------ -------- --------
2002.............................................. $ 14,559 $ -- $ 14,559
2003.............................................. 15,568 -- 15,568
2004.............................................. 16,431 27,360 43,791
2005.............................................. 15,808 80,963 96,771
2006.............................................. 14,004 -- 14,004
Thereafter........................................ 39,342 231,736 271,078
-------- -------- --------
$115,712 $340,059 $455,771
======== ======== ========
</Table>
(7) ORIGINATION FEES PAYABLE
In connection with certain acquisitions the Company assumed obligations
($2,178 in principal plus accrued interest) which bear interest, on the
outstanding principal balances only, at rates ranging from 12.3% to 19.0%.
The scheduled amortization of these obligations for the next five years and
thereafter are as follows:
<Table>
<Caption>
YEAR ENDING
DECEMBER 31,
- ------------
2002........................................................ $ 372
2003........................................................ 372
2004........................................................ 372
2005........................................................ 372
2006........................................................ 426
Thereafter.................................................. 4,722
------
$6,636
======
</Table>
50
LEXINGTON CORPORATE PROPERTIES TRUST
AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
($000'S EXCEPT PER SHARE DATA)
(8) LEASES
Minimum future rental receipts under noncancellable tenant operating
leases, assuming no new or negotiated leases, for the next five years and
thereafter are as follows:
<Table>
<Caption>
YEAR ENDING
DECEMBER 31,
- ------------
2002........................................................ $ 90,522
2003........................................................ 91,385
2004........................................................ 91,173
2005........................................................ 89,403
2006........................................................ 76,674
Thereafter.................................................. 239,638
--------
$678,795
========
</Table>
The Company leases its corporate headquarters, but no other corporate
facility, for approximately $263 per annum through June 30, 2004.
(9) MINORITY INTERESTS
In conjunction with several of the Company's acquisitions, sellers were
issued interests in partnerships controlled by the Company as a form of
consideration. All of such interests are redeemable at certain times for common
shares on a one-for-one basis. As of December 31, 2001, there were 5,307,021
operating partnership units outstanding of which 4,834,916 are currently
redeemable for common shares. These units, subject to certain adjustments
through the date of conversion, currently have annual distributions per unit in
varying amounts from $0 to $1.32 per unit with a weighted average distribution
of $1.17 per unit.
(10) PREFERRED AND COMMON SHARES
The preferred shares are cumulative and convertible at any time at the
holder's option into common shares on a one-for-one basis and are entitled to
quarterly dividends equal to the greater of $0.295 per share or 105% of the
quarterly common shares dividend. Currently the quarterly dividend is $0.3465
per share.
The preferred shares may be redeemed by the Company after December 31, 2001
at a premium of 6% over the liquidation preference of $12.50 per share, with
such premium declining to zero on or after December 31, 2011. Each share is
entitled to one vote. In certain instances, including a change of control of the
Company (as defined in the agreement), the holder of the preferred shares may
require the Company to redeem its shares at a price equal to $12.75 per share
plus any accrued dividends.
During 2001, the Company issued 4,400,000 common shares raising $63,400 in
proceeds, which was used to retire mortgage debt and fund acquisitions. In
addition, the Company issued 2,143,840 common shares valued at $31,622 in
connection with the acquisition of the Net Partnerships.
During 1999, the Company issued 287,888 common shares raising $3,886. The
holders of the common shares have agreed not to sell more than 20% of the common
shares each year for a five year period. On the fifth anniversary of the
transaction, the holders of the common shares have the right to put to the
Company their shares, up to 287,888, at $13.50 per share.
51
LEXINGTON CORPORATE PROPERTIES TRUST
AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
($000'S EXCEPT PER SHARE DATA)
(11) BENEFIT PLANS
The Company maintains a common share option plan pursuant to which
qualified and non-qualified options may be issued. Options granted under the
plan generally vest over a period of one to four years, expire five years from
date of grant and are exercisable at the market price of the date of grant.
Share option activity during the years indicated is as follows:
<Table>
<Caption>
WEIGHTED-AVERAGE
NUMBER OF EXERCISE PRICE
SHARES PER SHARE
--------- ----------------
Balance at December 31, 1998............................. 1,410,197 $12.58
Granted................................................ 286,625 12.06
Exercised.............................................. (5,000) 9.00
Forfeited.............................................. (188,174) 12.13
--------- ------
Balance at December 31, 1999............................. 1,503,648 12.54
Granted................................................ 831,625 9.85
Forfeited.............................................. (26,000) 13.12
Expired................................................ (331,250) 11.13
--------- ------
Balance at December 31, 2000............................. 1,978,023 11.63
Granted................................................ 568,000 11.99
Exercised.............................................. (603,142) 11.02
Forfeited.............................................. (9,308) 12.17
Expired................................................ (5,000) 11.25
--------- ------
Balance at December 31, 2001............................. 1,928,573 $11.93
========= ======
</Table>
The following is additional disclosures for common share options
outstanding at December 31, 2001:
<Table>
<Caption>
OPTIONS OUTSTANDING EXERCISABLE OPTIONS
-------------------------------- --------------------
WEIGHTED WEIGHTED
RANGE OF AVERAGE REMAINING AVERAGE
EXERCISE EXERCISE LIFE EXERCISE
PRICES NUMBER PRICE (YEARS) NUMBER PRICE
- ------------------- --------- -------- --------- -------- ---------
$ 9.00 - $ 10.875.. 347,396 $ 9.14 2.95 178,699 $ 9.14
$ 11.125 - $12.5625.. 1,178,377 $11.73 3.15 663,291 $11.60
$13.1875 - $ 15.25.. 402,800 $14.90 1.48 95,000 $14.32
--------- ------ ---- ------- ------
1,928,573 $11.93 2.77 936,990 $11.41
========= ====== ==== ======= ======
</Table>
There are 437,433 options available for grant at December 31, 2001.
The per share weighted average fair value of options granted during 2001,
2000 and, 1999 were estimated to be $2.00, $2.02 and $2.41, respectively, using
a Black-Scholes option pricing formula. The more significant assumptions
underlying the determination of such fair values include: (i) a risk free
interest rate of 3.35% in 2001 and 5% in 2000 and 1999; (ii) an expected life of
five years; (iii) volatility factors of 15.79%, 19.20% and 16.94% for 2001, 2000
and 1999, respectively; (iv) and actual dividends paid.
The Company has elected to adopt the disclosure only provisions of SFAS No.
123. Accordingly no compensation cost has been recognized with regard to options
granted in the accompanying consolidated statements of income. If stock based
compensation cost had been recognized based upon the fair value at the
52
LEXINGTON CORPORATE PROPERTIES TRUST
AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
($000'S EXCEPT PER SHARE DATA)
date of grant for options awarded in 2001, 2000 and 1999 the Company's pro forma
net income and pro forma net income per share would have been:
<Table>
<Caption>
2001 2000 1999
------- ------- -------
Net income, as reported............................... $18,062 $21,952 $21,347
Pro forma net income.................................. $16,653 $20,001 $20,384
Net income per share, as reported
Basic............................................... $ 0.79 $ 1.15 $ 1.11
Diluted............................................. $ 0.77 $ 1.10 $ 1.08
Pro forma net income per share
Basic............................................... $ 0.72 $ 1.03 $ 1.05
Diluted............................................. $ 0.70 $ 1.02 $ 1.04
</Table>
The Company has a 401(k) retirement savings plan covering all eligible
employees. The Company will match 25% of the first 4% of employee contributions.
In addition, based on its profitability, the Company may make a discretionary
contribution at each fiscal year end to all eligible employees. The matching and
discretionary contributions are subject to vesting under a schedule providing
for 25% annual vesting starting with the first year of employment and 100%
vesting after four years of employment. Approximately $112, $107 and $98 were
contributed in 2001, 2000 and 1999, respectively.
The Company sponsors a deferred compensation plan for certain officers in
which restricted common shares, which vest over five years, granted for the
benefit of the officers are held in trust. The officers exert no control over
the common shares in the trust and the common shares are available to the
general creditors of the Company. As of December 31, 2001 and 2000, there were
227,708 and 139,847 common shares, respectively, in the trust.
(12) LEGAL PROCEEDINGS
The Company is involved in various legal actions arising in the ordinary
course of business. In the opinion of management, the ultimate disposition of
these matters will not have a material adverse effect on the Company's
consolidated financial position, results of operations or liquidity.
(13) RELATED PARTY TRANSACTIONS
On November 28, 2001, the Company acquired Net 1 L.P. and Net 2 L.P.
(collectively, the "Net Partnerships"), in a merger transaction valued at
approximately $136,300, which owned twenty-three properties in fourteen states.
In December 2001 the Company sold one property for $4,107.
The twenty-two properties currently owned generate approximately $14,843 of
rental revenue. The properties have a remaining weighted average lease term of
approximately 11.4 years and are net-leased to eighteen tenants.
The Company issued 2,143,840 common shares (valued at $31,622), 44,858
operating partnership units (valued at $661), $31,612 in cash and assumed
approximately $61,389 of third party mortgage debt (excluding $11,114 in Net
Partnership obligations to the Company).
The Company's Chairman and Co-Chief Executive Officer was the controlling
shareholder of the general partners of the Net Partnerships. The general
partners received 44,858 operating partnership units valued on the same basis as
the limited partners for their 1% ownership interest in the Net Partnerships.
The units, which receive distributions equal to the dividends on common shares,
are convertible into the Company's common shares on a one-for-one basis
beginning November 2006.
53
LEXINGTON CORPORATE PROPERTIES TRUST
AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
($000'S EXCEPT PER SHARE DATA)
During 2001, the Company issued 24,620 common shares to acquire a company
controlled by the Chairman and Co-Chief Executive Officer, whose sole asset was
a mortgage note receivable from a 68% owned partnership of the Company.
During 2001, the Company renegotiated $1,973 in notes receivable from two
officers. The notes were issued in connection with the officers' purchases of
131,000 common share at $15.25 per common share. The new notes have a 15-year
maturity, are 8% interest only, recourse to the officers and provide for
forgiveness of the principal balances if certain operating results are achieved.
During 2000, the Company sold two properties to the Net Partnerships which
are located in Henderson, North Carolina (leased to Corporate Express Office
Products, Inc.) and Plymouth, Michigan (leased to Johnson Controls, Inc.) for
$15,600 resulting in gains of $2,300.
During 2000, the Company issued 83,400 operating partnership units in LCIF
to acquire the property management contract for the Net Partnerships from an
affiliate of the Chairman of the Company and was subsequently sold to LRA for
$585. The fees earned during 2001 and 2000, under this contract, were $139 and
$91 and the reimbursement of costs for services provided by the Company on
behalf of the Net Partnerships were $564, $359 and $435 for the years ended
December 31, 2001, 2000 and 1999, respectively. The reimbursements are shown
net, in the Company's general and administrative expenses in the accompanying
consolidated statements of income.
The Company and LRA also received brokerage commissions relating to the
purchase and sale of properties by the Net Partnerships, with unaffiliated
parties, totaling $120 and $175 in 2000 and 1999, respectively, which are
included in interest and other income in the accompanying consolidated
statements of income.
During 1999, the Company sold four properties to the Net Partnerships which
are located in Jacksonville, Alabama (leased to Wal-Mart Stores, Inc.);
Columbia, South Carolina (leased to Stone Container Corp.); San Diego,
California (leased to Hewlett Packard Company) and Phoenix, Arizona (leased to
Bull HN Information Systems, Inc.) for an aggregate sales price, which included
a $1,200, 8% interest only accruing 5 year note, of $26,900 resulting in a gain
of $2,544. The Company purchased two properties for $13,500 from the Net
Partnerships.
In connection with the acquisition of certain properties in 1996, the
Company assumed an obligation to pay The LCP Group, L.P., an affiliate of the
Company's Chairman, an aggregate principal amount of $2,178 for rendering
services in connection with the original acquisition of the properties in 1980
and 1981. Simple interest is payable monthly from available net cash flow of the
respective original properties on the various unpaid principal portions of the
fees, at annual rates ranging from 12.3% to 19.0%. Monthly installment payments
are to commence at various dates to satisfy principal and current interest
payments as well as any unpaid accrued interest outstanding.
All related party acquisitions, sales and loans were approved by the
independent members of the Board of Trustees.
(14) FAIR MARKET VALUE OF FINANCIAL INSTRUMENTS
Cash Equivalents, Restricted Cash, Accounts Receivable and Accounts Payable
The Company estimates that the fair value approximates carrying value due
to the relatively short maturity of the instruments.
54
LEXINGTON CORPORATE PROPERTIES TRUST
AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
($000'S EXCEPT PER SHARE DATA)
Mortgages, Notes and Subordinated Notes Payables
The Company determines the fair value of these instruments based on a
discounted cash flow analysis using a discount rate that approximates the
current borrowing rates for instruments of similar maturities. Based on this,
the Company has determined that the fair value of these instruments approximates
carrying values.
(15) CONCENTRATION OF RISK
The Company seeks to reduce its operating and leasing risks through
diversification achieved by the geographic distribution of its properties,
avoiding dependency on a single property and the creditworthiness of its
tenants.
For each of the years in the three year period ended December 31, 2001 the
following tenants represented 10% or greater of rent:
<Table>
<Caption>
2001 2000 1999
---- ---- ----
Northwest Pipeline Corporation.............................. 11% 11% 12%
Kmart Corporation (See Note 18)............................. 11% 11% 12%
</Table>
Both of these tenants are publicly registered companies subject to the
Securities Exchange Act of 1934, as amended and accordingly file financial
information with the Securities and Exchange Commission.
The following is a summary of the most recent quarterly and annual
financial data for all tenants that represent greater than 10% of the Company's
consolidated revenues:
<Table>
<Caption>
FOR THE NINE MONTHS
ENDED
10/31/01 YEAR ENDED
KMART CORPORATION (UNAUDITED) 1/31/01
- ----------------- ------------------- -----------
Sales.................................................. $25,274,000 $37,028,000
Cost of sales.......................................... 20,092,000 29,658,000
Net loss............................................... 344,000 244,000
Current assets......................................... 9,556,000 7,624,000
Non current assets..................................... 7,451,000 7,006,000
Current liabilities.................................... 5,460,000 3,799,000
Non current liabilities................................ 4,803,000 3,861,000
Redeemable preferred securities........................ 890,000 887,000
Shareholders' equity................................... 5,854,000 6,083,000
</Table>
55
LEXINGTON CORPORATE PROPERTIES TRUST
AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
($000'S EXCEPT PER SHARE DATA)
<Table>
<Caption>
FOR THE NINE MONTHS
ENDED
9/30/01 YEAR ENDED
NORTHWEST PIPELINE CORPORATION (UNAUDITED) 12/31/00
- ------------------------------ ------------------- -----------
Operating revenues..................................... $ 212,703 $ 296,361
Operating expenses..................................... 108,910 146,499
Net income............................................. 51,251 79,742
Current assets......................................... 112,126 121,799
Non current assets..................................... 984,184 982,280
Current liabilities.................................... 70,069 110,039
Non current liabilities................................ 525,609 524,659
Shareholders' equity................................... 500,632 469,381
</Table>
(16) SUPPLEMENTAL DISCLOSURE OF STATEMENT OF CASH FLOW INFORMATION
During 2001, 2000 and 1999, the Company paid $30,624, $29,758 and $29,157,
respectively, for interest and $204, $126 and $115, respectively, for taxes.
In 2001 and 2000, the Company contributed properties (along with
non-recourse mortgage notes) to a joint venture entity for capital contributions
of $1,168 and $2,393, respectively.
During 2001, 2000 and 1999, holders of an aggregate of 418,411, 102,849 and
506,882 operating partnership units, respectively, redeemed such units for
common shares of the Company. These redemptions resulted in increases in
shareholders' equity and corresponding decreases in minority interests of
$5,713, $1,438 and $5,824, respectively.
During 2001, the Company purchased the Net Partnerships by issuing, in
addition to $31,612 in cash, 2,143,840 common shares (valued at $31,622), 44,858
operating partnership units (valued at $661), assumed $61,389 in third party
debt and $11,114 in Net Partnership debt obligation to the Company.
During 2000, the Company issued 83,400 operating partnership units (valued
at $585) in LCIF to acquire a property management contract from an affiliate of
the Chairman of the Company.
During 2000, the Company purchased a property and issued a note payable to
the seller of $3,488 as partial satisfaction of the purchase price.
During 2001, 2000 and 1999, the Company issued 100,000, 73,800 and 69,850
common shares to certain employees and trustees resulting in $1,181, $664 and
$877 of deferred compensation. These common shares vest ratably over a 2 to 5
year period.
During 1999, the Net Partnerships purchased two of the Company's real
estate properties assuming mortgage debt of approximately $10,156 and issuing a
note payable to the Company for $1,200.
56
LEXINGTON CORPORATE PROPERTIES TRUST
AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
($000'S EXCEPT PER SHARE DATA)
(17) UNAUDITED QUARTERLY FINANCIAL DATA
<Table>
<Caption>
2001
--------------------------------------
3/31/01 6/30/01 9/30/01 12/31/01
------- ------- ------- --------
Revenues............................................... $20,233 $20,448 $20,222 $21,959
Income before extraordinary item....................... $ 4,848 $ 5,090 $ 4,921 $ 6,347
Net income............................................. $ 4,578 $ 5,090 $ 2,047 $ 6,347
Income before extraordinary item per common share:
Basic................................................ $ 0.24 $ 0.25 $ 0.21 $ 0.25
Diluted.............................................. $ 0.24 $ 0.25 $ 0.20 $ 0.24
Net income per common share:
Basic................................................ $ 0.23 $ 0.25 $ 0.07 $ 0.25
Diluted.............................................. $ 0.23 $ 0.25 $ 0.07 $ 0.24
</Table>
<Table>
<Caption>
2000
--------------------------------------
3/31/00 6/30/00 9/30/00 12/31/00
------- ------- ------- --------
Revenues............................................... $19,610 $20,033 $20,087 $20,275
Net income............................................. $ 4,471 $ 7,346 $ 5,120 $ 5,015
Net income per common share:
Basic................................................ $ 0.23 $ 0.40 $ 0.26 $ 0.26
Diluted.............................................. $ 0.23 $ 0.36 $ 0.26 $ 0.25
</Table>
The sum of the quarterly income per common share amounts may not equal the
full year amounts primarily because the computations of the weighted average
number of common shares outstanding for each quarter and the full year are made
independently.
(18) SUBSEQUENT EVENTS
Kmart Corporation ("Kmart"), the Company's largest tenant based upon rental
revenues, filed for Chapter 11 bankruptcy protection on January 22, 2002. Kmart
leases from the Company a 1.7 million square foot distribution facility in
Warren, Ohio. The Company acquired the property in 1998 by assuming a non-
recourse mortgage of $42,226, issuing operating partnership units of $18,850 and
$2,800 in cash. The Company has no retail properties leased to Kmart. The Kmart
lease expires on September 30, 2007. Annual net rents are presently $8,409
($4.95 per square foot) and increase to $9,359 on October 1, 2002. Rents are
paid semi-annually in arrears each April 1 and October 1. The property is
encumbered by a non-recourse first mortgage, bearing interest at 7% with an
outstanding balance of $29,763 at December 31, 2001. Annual debt service on this
non-recourse mortgage, which fully amortizes by maturity on October 1, 2007, is
$6,160. Accordingly this property currently provides after debt service cash
flow to the Company of $2,249.
The property is one of sixteen warehouse distribution facilities utilized
in Kmart's logistical operation. According to Kmart, this facility ranks third
by distribution volume, is the primary supply service for 185 Kmart retail
stores (approximately 9% of Kmart's total) and also supplies other distribution
facilities used by Kmart. As of December 31, 2001 the Company had $3,846 in
accounts receivable from Kmart (including $1,744 in straight-line rents). Kmart
is current in its rental obligation to the Company (the next rental payment is
due April 1, 2002) and there have been no discussions with respect to the lease.
In January 2002, the Company sold a 77.3% interest in its Florence, South
Carolina property net leased to Washington Mutual Home Loans, Inc., along with
the proportionate share of mortgage debt for $4,581 in net proceeds. The third
party purchasers have the right for six months commencing 24 months after the
sale to put
57
LEXINGTON CORPORATE PROPERTIES TRUST
AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
($000'S EXCEPT PER SHARE DATA)
their interest back to the Company for operating partnership units in LCIF,
valued at $4,581. The number of operating partnership units issued will be based
upon 95% of the average closing price of the Company's common shares for the 20
trading days preceding conversion date with a minimum conversion price of $13.92
and maximum conversion price of $15.82 per operating partnership unit. The
operating partnership units will have the same distribution rate as the common
shares.
LRA will manage the property for 10 years for an annual asset management
fee of 3.5% of rents for 2 years and 5% thereafter.
58
LEXINGTON CORPORATE PROPERTIES TRUST AND CONSOLIDATED SUBSIDIARIES
REAL ESTATE AND ACCUMULATED DEPRECIATION AND AMORTIZATION
SCHEDULE III ($000)
INITIAL COST TO COMPANY AND GROSS AMOUNT AT WHICH CARRIED AT END OF YEAR(A)
<Table>
<Caption>
LAND ACCUMULATED
AND BUILDINGS DEPRECIATION
LAND AND AND
DESCRIPTION LOCATION ENCUMBRANCES ESTATES IMPROVEMENTS TOTAL AMORTIZATION
----------- ------------------------ ------------ -------- ------------ -------- -------------
Warehouse & Manufacturing...... Modesto, CA $ 2,008 $ 257 $ 3,809 $ 4,066 $ 1,456
Office......................... Southington, CT 8,268 3,240 20,440 23,680 8,887
Research & Development......... Glendale, AZ 15,054 4,996 24,392 29,388 11,431
Retail/Health Club............. Countryside, IL 2,276 628 3,722 4,350 1,723
Retail/Health Club............. Voorhees, NJ 2,878 577 4,820 5,397 2,132
Retail/Health Club............. DeWitt, NY 1,740 445 3,043 3,488 1,349
Warehouse & Distribution....... Mansfield, OH 3,146 120 5,963 6,083 1,947
Industrial..................... Marshall, MI 2,108 33 3,378 3,411 1,442
Industrial..................... Marshall, MI 803 14 926 940 396
Retail......................... Newport, OR 5,890 1,400 7,270 8,670 3,046
Office & Warehouse............. Memphis, TN 6,359 1,053 11,174 12,227 4,108
Warehouse & Distribution....... Mechanicsburg, PA 9,705 1,439 13,987 15,426 3,610
Office & Warehouse............. Tampa, FL 6,150 1,389 7,685 9,074 2,918
Retail......................... Klamath Falls, OR 6,693 727 9,160 9,887 3,158
Office......................... Tampa, FL 8,500 1,900 9,826 11,726 3,272
Warehouse & Industrial......... Jacksonville, FL -- 157 3,034 3,191 1,052
Retail......................... Sacramento, CA 2,242 885 2,705 3,590 1,170
Office......................... Phoenix, AZ -- 2,804 13,921 16,725 4,553
Retail......................... Reno, NV 1,941 1,200 1,904 3,104 803
Retail......................... Las Vegas, NV 1,740 900 1,759 2,659 740
Retail......................... Rockville, MD -- -- 1,784 1,784 595
Retail......................... Oxon Hill, MD 825 403 2,765 3,168 839
Retail......................... Brownsville, TX 616 -- 1,242 1,242 642
Retail......................... Laguna Hills, CA -- 255 5,035 5,290 1,507
Retail......................... Riverdale, GA -- 333 2,233 2,566 335
Retail/Health Club............. Canton, OH 2,010 602 3,819 4,421 573
Office......................... Salt Lake City, UT 23,627 -- 55,404 55,404 12,015
Manufacturing.................. Franklin, NC 2,111 386 3,062 3,448 383
Industrial..................... Oberlin, OH 2,137 276 4,515 4,791 564
Retail......................... Tulsa, OK -- 447 2,432 2,879 674
Retail......................... Clackamas, OR -- 523 2,847 3,370 789
Retail......................... Lynwood, WA -- 488 2,658 3,146 737
Retail......................... Honolulu, HI -- -- 11,147 11,147 2,292
Warehouse...................... New Kingston, PA
(Silver Springs) 3,550 674 5,360 6,034 642
Warehouse...................... New Kingston, PA
(Cumberland) 7,450 1,380 10,963 12,343 1,313
Warehouse...................... Mechanicsburg, PA
(Hampden IV) 5,500 1,012 8,039 9,051 963
Office/Research & Marlborough, MA 8,306 1,707 13,834 15,541 1,542
Development...................
Office......................... Dallas, TX 22,128 3,582 30,598 34,180 3,155
Warehouse...................... Waterloo, IA 4,271 1,025 8,296 9,321 873
Office/Research & Milipitas, CA 17,100 3,542 18,603 22,145 1,860
Development...................
Industrial..................... Gordonsville, TN -- 52 3,325 3,377 383
Office......................... Decatur, GA 6,936 975 13,677 14,652 1,368
Office......................... Richmond, VA 16,772 -- 27,282 27,282 3,384
Industrial..................... Bessemer, AL -- 664 4,238 4,902 502
Office/Warehouse............... Bristol, PA 9,916 2,508 10,031 12,539 940
Office......................... Hebron, KY 5,479 1,615 6,462 8,077 605
Office......................... Livonia, MI 5,314 1,554 6,219 7,773 583
Research & Development......... Livonia, MI 5,926 1,733 6,936 8,669 649
Office......................... Palm Beach Gardens, FL 13,288 3,960 15,924 19,884 1,441
Warehouse/Distribution......... Lancaster, CA 10,881 2,028 13,201 15,229 1,154
Office......................... Florence, SC 9,681 3,012 12,067 15,079 1,053
Industrial..................... Auburn Hills, MI 7,444 2,788 11,169 13,957 957
<Caption>
USEFUL LIFE
COMPUTING
DEPRECIATION IN
LATEST INCOME
DATE DATE STATEMENTS
DESCRIPTION ACQUIRED CONSTRUCTED (YEARS)
----------- ---------- ----------- -----------------------
Warehouse & Manufacturing...... Sept. 1986 1970 & 1976 40 & 12
Office......................... Oct. 1986 1983 40 & 12
Research & Development......... Nov. 1986 1985 40 & 12
Retail/Health Club............. Jul. 1987 1987 40 & 12
Retail/Health Club............. Jul. 1987 1987 40 & 12
Retail/Health Club............. Aug. 1987 1977 & 1987 40 & 12
Warehouse & Distribution....... Jul. 1987 1970 40, 20 & 12
Industrial..................... Aug. 1987 1968 & 1972 40, 20 & 12
Industrial..................... Aug. 1987 1979 40, 20 & 12
Retail......................... Sept. 1987 1986 40, 20 & 12
Office & Warehouse............. Feb. 1988 1987 40
Warehouse & Distribution....... Oct. 1990 1985 & 1991 40
Office & Warehouse............. Nov. 1987 1986 40 & 20
Retail......................... Mar. 1988 1986 40
Office......................... Jul. 1988 1986 40
Warehouse & Industrial......... Jul. 1988 1958 & 1969 40 & 20
Retail......................... Oct. 1988 1988 40, 20 & 12
Office......................... Nov. 1988 1960 & 1979 40
Retail......................... Dec. 1988 1988 40, 20 & 12
Retail......................... Dec. 1988 1988 40, 20 & 12
Retail......................... Aug. 1995 1977 22.375, 16.583 & 15.583
Retail......................... Aug. 1995 1976 21.292
Retail......................... Aug. 1995 1973 18.542
Retail......................... Aug. 1995 1974 20 & 20.5
Retail......................... Dec. 1995 1985 40
Retail/Health Club............. Dec. 1995 1987 40
Office......................... May 1996 1982 25.958
Manufacturing.................. Dec. 1996 1996 40
Industrial..................... Dec. 1996 1996 40
Retail......................... Dec. 1996 1981 23.583 & 13.583
Retail......................... Dec. 1996 1981 23.583 & 13.583
Retail......................... Dec. 1996 1981 23.583 & 13.583
Retail......................... Dec. 1996 1980 24.33
Warehouse......................
Mar. 1997 1981 40
Warehouse......................
Mar. 1997 1989 40
Warehouse......................
Mar. 1997 1985 40
Office/Research & Jul. 1997 1960 & 1988 40
Development...................
Office......................... Sept. 1997 1986 40
Warehouse...................... Oct. 1997 1996 & 1997 40
Office/Research & Dec. 1997 1985 40
Development...................
Industrial..................... Dec. 1997 1983 & 1985 34.75
Office......................... Dec. 1997 1983 40
Office......................... Dec. 1997 1990 32.25
Industrial..................... Dec. 1997 1990 33.75
Office/Warehouse............... Mar. 1998 1982 40
Office......................... Mar. 1998 1987 40
Office......................... Mar. 1998 1987 & 1988 40
Research & Development......... Mar. 1998 1987 & 1988 40
Office......................... May 1998 1996 40
Warehouse/Distribution......... Jun. 1998 1998 40
Office......................... Jul. 1998 1998 40
Industrial..................... Jul. 1998 1989 & 1998 40
</Table>
59
LEXINGTON CORPORATE PROPERTIES TRUST AND CONSOLIDATED SUBSIDIARIES
REAL ESTATE AND ACCUMULATED DEPRECIATION AND AMORTIZATION
SCHEDULE III ($000) -- (CONTINUED)
<Table>
<Caption>
LAND ACCUMULATED
AND BUILDINGS DEPRECIATION
LAND AND AND
DESCRIPTION LOCATION ENCUMBRANCES ESTATES IMPROVEMENTS TOTAL AMORTIZATION
----------- ------------------------ ------------ -------- ------------ -------- -------------
Warehouse/Distribution......... Warren, OH 42,263 10,231 51,280 61,511 7,164
Warehouse/Distribution......... Baton Rouge, LA 2,025 685 2,748 3,433 218
Retail......................... Columbia, MD -- 1,002 4,283 5,285 303
Retail......................... Bakersfield, CA -- 400 1,662 2,062 510
Retail......................... Bethesda, MD 2,456 926 2,415 3,341 1,051
Office......................... Bristol, PA 6,298 1,073 7,709 8,782 393
Office......................... Southborough, MA 2,345 456 4,291 4,747 219
Office......................... Herndon, VA 19,107 5,127 20,570 25,697 1,033
Office......................... Hampton, VA 4,545 1,353 5,446 6,799 244
Office......................... Phoenix, AZ 18,293 4,665 18,682 23,347 758
Industrial..................... Hebron, OH 3,796 1,063 4,277 5,340 4
Industrial..................... Hebron, OH 6,004 1,681 6,766 8,447 7
Retail......................... Phoenix, AZ -- 1,126 4,501 5,627 14
Retail......................... Stockton, CA -- 259 1,037 1,296 3
Retail......................... Lynchburg, VA -- 159 638 797 3
Office......................... San Diego, CA 4,422 1,740 6,960 8,700 22
Office......................... Phoenix, AZ 5,154 2,287 9,149 11,436 29
Industrial..................... Henderson, NC 4,574 1,488 5,954 7,442 19
Office......................... Highland Heights, OH -- 1,264 5,054 6,318 16
Industrial..................... Tempe, AZ -- 378 1,514 1,892 5
Industrial..................... Columbus, OH -- 319 1,275 1,594 4
Office......................... Tucson, AZ 2,519 657 2,627 3,284 8
Retail......................... Eau Claire, WI 2,470 860 3,442 4,302 11
Office......................... Milford, CT -- 567 2,265 2,832 7
Retail......................... Westland, MI 3,611 1,444 5,777 7,221 18
Retail......................... Canton, OH 3,459 883 3,534 4,417 11
Retail......................... Spartanburg, SC 2,873 833 3,334 4,167 10
Office......................... Wilsonville, OR -- 2,666 10,662 13,328 33
Industrial..................... Ocala, FL 13,746 3,803 15,210 19,013 47
Retail......................... Jacksonville, AL -- 392 1,567 1,959 5
Industrial..................... Columbia, SC 3,522 928 3,710 4,638 12
Office......................... Hampton, VA 7,415 2,333 9,334 11,667 29
Industrial..................... Plymouth, MI 4,932 1,533 6,130 7,663 19
Retail......................... Gainesville, GA 1,173 526 2,105 2,631 7
-------- -------- -------- -------- --------
Total..................... $445,771 $116,795 $713,993 $830,788 $116,741
======== ======== ======== ======== ========
<Caption>
USEFUL LIFE
COMPUTING
DEPRECIATION IN
LATEST INCOME
DATE DATE STATEMENTS
DESCRIPTION ACQUIRED CONSTRUCTED (YEARS)
----------- ---------- ----------- -----------------------
Warehouse/Distribution......... Aug. 1998 1982 40
Warehouse/Distribution......... Oct. 1998 1998 40
Retail......................... Dec. 1998 1983 40
Retail......................... Aug. 1995 1976 40
Retail......................... Aug. 1995 1980 40
Office......................... Dec. 1999 1998 40
Office......................... Dec. 1999 1984 40
Office......................... Dec. 1999 1987 40
Office......................... Mar. 2000 2000 40
Office......................... May 2000 1997 40
Industrial..................... Dec. 2001 2000 40
Industrial..................... Dec. 2001 1999 40
Retail......................... Nov. 2001 1988 40
Retail......................... Nov. 2001 1968 40
Retail......................... Nov. 2001 1986 40
Office......................... Nov. 2001 1989 40
Office......................... Nov. 2001 1985 & 1994 40
Industrial..................... Nov. 2001 1998 40
Office......................... Nov. 2001 1968 & 1989 40
Industrial..................... Nov. 2001 1981 40
Industrial..................... Nov. 2001 1990 40
Office......................... Nov. 2001 1988 40
Retail......................... Nov. 2001 1994 40
Office......................... Nov. 2001 1994 40
Retail......................... Nov. 2001 1987 & 1997 40
Retail......................... Nov. 2001 1995 40
Retail......................... Nov. 2001 1996 40
Office......................... Nov. 2001 1980 & 1998 40
Industrial..................... Nov. 2001 1976 40
Retail......................... Nov. 2001 1983 40
Industrial..................... Nov. 2001 1968 & 1998 40
Office......................... Nov. 2001 1999 40
Industrial..................... Nov. 2001 1996 40
Retail......................... Nov. 2001 1984 40
Total.....................
</Table>
- ---------------
(A) The initial cost includes the purchase price paid by the Company and
acquisition fees and expenses. The total cost basis of the Company's
Properties at December 31, 2001 for Federal income tax purposes was
approximately $609 million.
Reconciliation of real estate owned:
<Table>
<Caption>
2001 2000 1999
-------- -------- --------
Balance at the beginning of the year.................... $682,627 $688,926 $675,793
Additions during year................................... 166,668 30,603 115,006
Properties sold during year............................. (4,107) (17,727) (101,873)
Property contributed to joint venture during year....... (14,400) (19,175) --
-------- -------- --------
Balance at end of year.................................. $830,788 $682,627 $688,926
======== ======== ========
</Table>
60
LEXINGTON CORPORATE PROPERTIES TRUST AND CONSOLIDATED SUBSIDIARIES
REAL ESTATE AND ACCUMULATED DEPRECIATION AND AMORTIZATION
SCHEDULE III ($000) -- (CONTINUED)
<Table>
<Caption>
2001 2000 1999
-------- -------- --------
Balance at beginning of year............................ $ 98,429 $ 82,334 $ 66,076
Depreciation and amortization expense................... 18,312 17,513 18,000
Accumulated depreciation and amortization of properties
sold during year..................................... -- (1,162) (1,742)
Accumulated depreciation of property contributed to
joint venture during year............................ -- (256) --
-------- -------- --------
Balance at end of year.................................. $116,741 $ 98,429 $ 82,334
======== ======== ========
</Table>
61
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III.
ITEM 10. TRUSTEES AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information regarding trustees and executive officers of the Company
required to be furnished pursuant to this item is set forth in Item 4A of this
report.
ITEM 11. EXECUTIVE COMPENSATION
The information required to be furnished pursuant to this item will be set
forth under the caption "Compensation of Executive Officers" in the Proxy
Statement, and is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required to be furnished pursuant to this item will be set
forth under the captions "Principal Security Holders" and "Share Ownership of
Trustees and Executive Officers" in the Proxy Statement, and is incorporated
herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During 2001, the Company acquired Net 1 L.P. and Net 2 L.P. (collectively,
the "Net Partnerships"), in a merger transaction valued at approximately $136.3
million.
The Company issued 2,143,840 common shares (valued at $31.6 million),
44,858 operating partnership units (valued at $661,000), $31.6 million in cash
and assumed $61.4 million of third party mortgages (excluding $11.1 million in
Net Partnership obligations to the Company).
The Company's Chairman and Co-Chief Executive Officer was the controlling
shareholder of the general partners of the Net Partnerships. The general
partners received 44,858 operating partnership units valued on the same basis as
the limited partners for their 1% ownership interest in the Net Partnerships,
which receive distributions equal to the dividends on common shares. The units
are convertible into the Company's common shares on a one-for-one basis
beginning in November 2006.
During 2001, the Company issued 24,620 common shares to acquire a company
controlled by the Chairman and Co-Chief Executive Officer, whose sole asset was
a mortgage note receivable from a 68% owned partnership of the Company.
During 2001, the Company renegotiated $1,973 in notes receivable from two
officers. The notes were issued in connection with the officers' purchases of
131,000 common share at $15.25 per common share. The new notes have a 15-year
maturity, are 8% interest only, recourse to the officers and provide for
forgiveness of the principal balances if certain operating results are achieved.
During 2000, the Company issued 83,400 operating partnership units in LCIF
to acquire the property management contract for the Net Partnerships from an
affiliate of the Chairman of the Company and was subsequently sold to LRA for
$585. The fees earned during 2001 and 2000, under this contract, were $139 and
$91 and the reimbursement of costs for services provided by the Company on
behalf of the Net Partnerships were $564, $359 and $435 for the years ended
December 31, 2001, 2000 and 1999, respectively. The reimbursements are shown
net, in the Company's general and administrative expenses in the accompanying
consolidated statements of income.
The Company and LRA also received brokerage commissions relating to the
purchase and sale of properties by the Net Partnerships, with unaffiliated
parties, totaling $120,000 and $175,000 in 2000 and 1999, respectively, which is
included in interest and other income in the accompanying consolidated
statements of income.
62
During 2000, the Company sold two properties to the Net Partnerships for
$15.6 million which resulted in gains of $2.3 million.
During 1999, the Company sold four properties to the Net Partnerships for
$26.9 million.
All related party acquisitions, sales and loans were approved by the
independent members of the Board of Trustees.
PART IV.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
<Table>
<Caption>
PAGE
----
(a)(1) Financial Statements........................................ 33-58
(2) Financial Statement Schedule................................ 59-61
(3) Exhibits....................................................
</Table>
<Table>
<Caption>
EXHIBIT NO. EXHIBIT
- ----------- -------
2.1 -- Form of Agreement and Plan of Merger by and among Lexington
Corporate Properties, Inc. (the "Company"), Lepercq
Corporate Income Fund L.P. ("LCIF I") and Lex M-1, L.P.
(filed as Appendix C-I to the Company's Registration
Statement of Form S-4 (File No. 33-66858) (the "Form S-4"))*
2.2 -- Form of Agreement and Plan of Merger by and among the
Company, Lepercq Corporate Income Fund II L.P. ("LCIF II"),
and Lex M-2, L.P. (filed as Appendix C-II to the Form S-4)*
2.3 -- Form of Agreement and Articles of Merger between the Company
and Lexington Corporate Properties -- Maryland, Inc. (filed
as Exhibit 2.3 to Report on 10-K for year ended December 31,
1993 (the "1993 10-K"))*
2.4 -- Agreement and Plan of Merger between the Company and
Lexington Corporate Properties Trust (filed as Exhibit 2.1
to Form 8-K filed 1-16-98.)*
2.5 -- Agreement and Plan of Merger by and among Lexington, Net 3
Acquisition LP ("Net 3") and Net 1 L.P. ("Net 1"), as
amended (filed as Exhibit 2.5 to Lexington's Registration
Statement on Form S-4 (file No. 333-70790) (the "2001 Form
S-4"))*
2.6 -- Agreement and Plan of Merger by and among Lexington, Net 3
and Net 2 L.P. ("Net 2"), as amended (filed as Exhibit 2.6
to the 2001 Form S-4)*
3.1 -- Declaration of Trust of the Company, dated December 31, 1997
(filed as Exhibit 3.1 to Form 8-K filed 1-16-98)*
3.2 -- By-Laws of the Company (filed as Exhibit 3.2 to Form 10-K
filed 3-31-98)*
3.3 -- Articles of Amendment of Declaration of Trust of Lexington
(filed as Exhibit 3.3 to the 2001 Form S-4)*
4.1 -- Specimen of Common Shares Certificate of the Trust (filed as
Exhibit 3.2 to Form 10-K filed 3-31-98)*
4.2 -- Form of Indenture between Lexington and The Bank of New
York, as Trustee, including the form of 7.75% Subordinated
Note due 2000 (filed as Exhibit 4.2 to the Form S-4)*
10.8 -- Form of 1994 Outside Director Shares Plan of the Company
(filed as Exhibit 10.8 to 1993 10-K)*
10.24 -- Class A Mortgage Note to Pacific Mutual Life Insurance
Company and Lexington Mortgage Company dated May 19, 1995 in
the amount of $34,000,000 (filed as Exhibit 10.24 to Report
on 10-K for year ended December 31, 1995 (the "1995 10-K"))*
</Table>
63
<Table>
<Caption>
EXHIBIT NO. EXHIBIT
- ----------- -------
10.25 -- Class B Mortgage Note to Pacific Mutual Life Insurance
Company and Lexington Mortgage Company dated May 19, 1995 in
the amount of $18,500,000 (filed as Exhibit 10.25 to the
1995 10-K)*
10.26 -- Class C Mortgage Note to Pacific Mutual Life Insurance
Company and Lexington Mortgage Company dated May 19, 1995 in
the amount of $17,500,000 (filed as Exhibit 10.26 to the
1995 10-K)*
10.28 -- Indenture of Mortgage, Deed of Trust, Security Agreement,
Financing Statement, Fixture Filing and Assignment of
Leases, Rents and Security Deposits to First American Title
Insurance Company and Pacific Mutual Life Insurance Company
and Lexington Mortgage Company dated May 19, 1995 (filed as
Exhibit 10.28 to the 1995 10-K)*
10.29 -- Assignment of Leases, Rents, and Security Deposits to
Pacific Mutual Life Insurance Company and Lexington Mortgage
Company dated May 19, 1995 (filed as Exhibit 10.29 to the
1995 10-K)*
10.30 -- Cash Collateral Account, Security, Pledge and Assignment
Agreement with the Bank of New York, as agent and Pacific
Mutual Life Insurance Company and Lexington Mortgage Company
dated May 19, 1995 (filed as Exhibit 10.30 to the 1995
10-K)*
10.31 -- Trust and Servicing Agreement with Pacific Mutual Life
Insurance Company, LaSalle National Bank and ABN AMRO Bank
N.V. dated May 19, 1995 (filed as Exhibit 10.31 to the 1995
10-K)*
10.33 -- Investment Agreement dated as of December 31, 1996 with Five
Arrows Realty Securities L.L.C.*
10.34 -- Operating Agreement dated as of January 21, 1997 with Five
Arrows Realty Securities L.L.C.*
10.35 -- Articles Supplementary Classifying 2,000,000 shares of
Preferred Shares as Class A Senior Cumulative Convertible
Preferred Shares and 2,000,000 shares of Excess Shares as
Excess Class A Preferred Shares of the Company*
10.38 -- Operating Agreement and Management Agreement between the
Company and Lexington Acquiport Company, LLC (filed as
Exhibit 2 to Form 8-K filed August 31, 1999)*
10.39 -- Form of Employment Agreement between the Company and E.
Robert Roskind dated September 20, 1999 (filed as Exhibit
10.39 to Form 10-K filed March 15, 2000)*
10.40 -- Investment Advisory and Asset Management Agreement by and
between AGAR International Holdings Ltd. and Lexington
Realty Advisors, Inc. (filed as Exhibit 10.40 to Form 10-K
filed April 2, 2001)*
10.41 -- Underwriting Agreement between Lexington, First Union
Securities, Inc., CIBC World Markets Corp., A.G. Edwards &
Sons, Inc. and Raymond James & Associates, Inc., dated July
26, 2001 (filed as Exhibit 10.41 to Lexington's Quarterly
Report on Form 10-Q for the quarter ended June 30, 2001)*
10.42 -- Contribution Agreement between Net 3 and Lepercq Net 1 L.P.,
as amended (filed as Exhibit 10.42 to the 2001 Form S-4)*
10.43 -- Contribution Agreement between Net 3 and Lepercq Net 2 L.P.,
as amended (filed as Exhibit 10.43 to the 2001 Form S-4)*
10.44 -- Unsecured Revolving Credit Agreement with Fleet National
Bank dated March 30, 2001 in the amount of $35,000,000
(filed as Exhibit 10.44 to the 2001 Form S-4)*
</Table>
64
<Table>
<Caption>
EXHIBIT NO. EXHIBIT
- ----------- -------
10.45 -- Loan Assumption, First Modification And Ratification
Agreement, dated as of November 28, 2001, by and among
Lexington, Lepercq Corporate Income Fund L.P., Lepercq
Corporate Income Fund II L.P., and Net 3 Acquisition L.P. in
favor of Fleet National Bank (filed as Exhibit 99.2 to
Lexington's Current Report on Form 8-K filed December 21,
2001 (the "2001 8-K")*
10.46 -- Operating Agreement of LAC II, dated as of December 5, 2001
(filed as Exhibit 99.4 to the 2001 8-K)*
10.47 -- Management Agreement, dated as of December 5, 2001, by and
between LAC II and Lexington Realty Advisors, Inc. (filed as
Exhibit 99.5 to the 2001 8-K)*
10.48 -- First Amendment to Operating Agreement of LAC I, dated as of
December 5, 2001 (filed as Exhibit 99.6 to the 2001 8-K)*
10.49 -- First Amendment to Management Agreement, dated as of
December 5, 2001, by and between LAC I and Lexington Realty
Advisors, Inc. (filed as Exhibit 99.7 to the 2001 8-K)*
10.50 -- Form of Amended and Restated Agreement of Limited
Partnership of Net 3 (filed as Exhibit 99.1 to the 2001 Form
S-4)*
12 -- Statement of Computation of Ratio of Earnings to Fixed
Charges+
21 -- List of Subsidiaries of the Trust+
23 -- Consent of KPMG LLP+
</Table>
- ---------------
* Incorporated by reference.
+ Filed Herewith.
(b) Reports on Form 8-K and Form 8-K/A
Current Report on Form 8-K dated December 21, 2001
Current Report on Form 8-K dated November 30, 2001
Current Report on Form 8-K/A dated December 11, 2001
65
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Company has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
LEXINGTON CORPORATE PROPERTIES TRUST
BY: /s/ E. ROBERT ROSKIND
------------------------------------
E. Robert Roskind
Chairman
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the Company
and in the capacities and on the date indicated.
<Table>
<Caption>
SIGNATURE TITLE
--------- -----
/s/ E. ROBERT ROSKIND Chairman of the Board of Trustees and Co-Chief
- --------------------------------------------------- Executive Officer
E. Robert Roskind
/s/ RICHARD J. ROUSE Vice Chairman of the Board of Trustees and
- --------------------------------------------------- Co-Chief Executive Officer
Richard J. Rouse
/s/ T. WILSON EGLIN President and Chief Operating Officer and
- --------------------------------------------------- Trustee
T. Wilson Eglin
/s/ PATRICK CARROLL Chief Financial Officer and Treasurer
- ---------------------------------------------------
Patrick Carroll
/s/ PAUL R. WOOD Vice President, Chief Accounting Officer and
- --------------------------------------------------- Secretary
Paul R. Wood
/s/ GEOFFREY DOHRMANN Trustee
- ---------------------------------------------------
Geoffrey Dohrmann
/s/ CARL D. GLICKMAN Trustee
- ---------------------------------------------------
Carl D. Glickman
/s/ JOHN D. MCGURK Trustee
- ---------------------------------------------------
John D. McGurk
/s/ SETH M. ZACHARY Trustee
- ---------------------------------------------------
Seth M. Zachary
</Table>
DATE: February 21, 2002
66
EXHIBIT INDEX
<Table>
<Caption>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
2.1 -- Form of Agreement and Plan of Merger by and among Lexington
Corporate Properties, Inc. (the "Company"), Lepercq
Corporate Income Fund L.P. ("LCIF I") and Lex M-1, L.P.
(filed as Appendix C-I to the Company's Registration
Statement of Form S-4 (File No. 33-66858) (the "Form S-4"))*
2.2 -- Form of Agreement and Plan of Merger by and among the
Company, Lepercq Corporate Income Fund II L.P. ("LCIF II"),
and Lex M-2, L.P. (filed as Appendix C-II to the Form S-4)*
2.3 -- Form of Agreement and Articles of Merger between the Company
and Lexington Corporate Properties -- Maryland, Inc. (filed
as Exhibit 2.3 to Report on 10-K for year ended December 31,
1993 (the "1993 10-K"))*
2.4 -- Agreement and Plan of Merger between the Company and
Lexington Corporate Properties Trust (filed as Exhibit 2.1
to Form 8-K filed 1-16-98.)*
2.5 -- Agreement and Plan of Merger by and among Lexington, Net 3
Acquisition LP ("Net 3") and Net 1 L.P. ("Net 1"), as
amended (filed as Exhibit 2.5 to Lexington's Registration
Statement on Form S-4 (file No. 333-70790) (the "2001 Form
S-4"))*
2.6 -- Agreement and Plan of Merger by and among Lexington, Net 3
and Net 2 L.P. ("Net 2"), as amended (filed as Exhibit 2.6
to the 2001 Form S-4)*
3.1 -- Declaration of Trust of the Company, dated December 31, 1997
(filed as Exhibit 3.1 to Form 8-K filed 1-16-98)*
3.2 -- By-Laws of the Company (filed as Exhibit 3.2 to Form 10-K
filed 3-31-98)*
3.3 -- Articles of Amendment of Declaration of Trust of Lexington
(filed as Exhibit 3.3 to the 2001 Form S-4)*
4.1 -- Specimen of Common Shares Certificate of the Trust (filed as
Exhibit 3.2 to Form 10-K filed 3-31-98)*
4.2 -- Form of Indenture between Lexington and The Bank of New
York, as Trustee, including the form of 7.75% Subordinated
Note due 2000 (filed as Exhibit 4.2 to the Form S-4)*
10.8 -- Form of 1994 Outside Director Shares Plan of the Company
(filed as Exhibit 10.8 to 1993 10-K)*
10.24 -- Class A Mortgage Note to Pacific Mutual Life Insurance
Company and Lexington Mortgage Company dated May 19, 1995 in
the amount of $34,000,000 (filed as Exhibit 10.24 to Report
on 10-K for year ended December 31, 1995 (the "1995 10-K"))*
10.25 -- Class B Mortgage Note to Pacific Mutual Life Insurance
Company and Lexington Mortgage Company dated May 19, 1995 in
the amount of $18,500,000 (filed as Exhibit 10.25 to the
1995 10-K)*
10.26 -- Class C Mortgage Note to Pacific Mutual Life Insurance
Company and Lexington Mortgage Company dated May 19, 1995 in
the amount of $17,500,000 (filed as Exhibit 10.26 to the
1995 10-K)*
10.28 -- Indenture of Mortgage, Deed of Trust, Security Agreement,
Financing Statement, Fixture Filing and Assignment of
Leases, Rents and Security Deposits to First American Title
Insurance Company and Pacific Mutual Life Insurance Company
and Lexington Mortgage Company dated May 19, 1995 (filed as
Exhibit 10.28 to the 1995 10-K)*
10.29 -- Assignment of Leases, Rents, and Security Deposits to
Pacific Mutual Life Insurance Company and Lexington Mortgage
Company dated May 19, 1995 (filed as Exhibit 10.29 to the
1995 10-K)*
10.30 -- Cash Collateral Account, Security, Pledge and Assignment
Agreement with the Bank of New York, as agent and Pacific
Mutual Life Insurance Company and Lexington Mortgage Company
dated May 19, 1995 (filed as Exhibit 10.30 to the 1995
10-K)*
10.31 -- Trust and Servicing Agreement with Pacific Mutual Life
Insurance Company, LaSalle National Bank and ABN AMRO Bank
N.V. dated May 19, 1995 (filed as Exhibit 10.31 to the 1995
10-K)*
</Table>
<Table>
<Caption>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
10.33 -- Investment Agreement dated as of December 31, 1996 with Five
Arrows Realty Securities L.L.C.*
10.34 -- Operating Agreement dated as of January 21, 1997 with Five
Arrows Realty Securities L.L.C.*
10.35 -- Articles Supplementary Classifying 2,000,000 shares of
Preferred Shares as Class A Senior Cumulative Convertible
Preferred Shares and 2,000,000 shares of Excess Shares as
Excess Class A Preferred Shares of the Company*
10.38 -- Operating Agreement and Management Agreement between the
Company and Lexington Acquiport Company, LLC (filed as
Exhibit 2 to Form 8-K filed August 31, 1999)*
10.39 -- Form of Employment Agreement between the Company and E.
Robert Roskind dated September 20, 1999 (filed as Exhibit
10.39 to Form 10-K filed March 15, 2000)*
10.40 -- Investment Advisory and Asset Management Agreement by and
between AGAR International Holdings Ltd. and Lexington
Realty Advisors, Inc. (filed as Exhibit 10.40 to Form 10-K
filed April 2, 2001)*
10.41 -- Underwriting Agreement between Lexington, First Union
Securities, Inc., CIBC World Markets Corp., A.G. Edwards &
Sons, Inc. and Raymond James & Associates, Inc., dated July
26, 2001 (filed as Exhibit 10.41 to Lexington's Quarterly
Report on Form 10-Q for the quarter ended June 30, 2001)*
10.42 -- Contribution Agreement between Net 3 and Lepercq Net 1 L.P.,
as amended (filed as Exhibit 10.42 to the 2001 Form S-4)*
10.43 -- Contribution Agreement between Net 3 and Lepercq Net 2 L.P.,
as amended (filed as Exhibit 10.43 to the 2001 Form S-4)*
10.44 -- Unsecured Revolving Credit Agreement with Fleet National
Bank dated March 30, 2001 in the amount of $35,000,000
(filed as Exhibit 10.44 to the 2001 Form S-4)*
10.45 -- Loan Assumption, First Modification And Ratification
Agreement, dated as of November 28, 2001, by and among
Lexington, Lepercq Corporate Income Fund L.P., Lepercq
Corporate Income Fund II L.P., and Net 3 Acquisition L.P. in
favor of Fleet National Bank (filed as Exhibit 99.2 to
Lexington's Current Report on Form 8-K filed December 21,
2001 (the "2001 8-K")*
10.46 -- Operating Agreement of LAC II, dated as of December 5, 2001
(filed as Exhibit 99.4 to the 2001 8-K)*
10.47 -- Management Agreement, dated as of December 5, 2001, by and
between LAC II and Lexington Realty Advisors, Inc. (filed as
Exhibit 99.5 to the 2001 8-K)*
10.48 -- First Amendment to Operating Agreement of LAC I, dated as of
December 5, 2001 (filed as Exhibit 99.6 to the 2001 8-K)*
10.49 -- First Amendment to Management Agreement, dated as of
December 5, 2001, by and between LAC I and Lexington Realty
Advisors, Inc. (filed as Exhibit 99.7 to the 2001 8-K)*
10.50 -- Form of Amended and Restated Agreement of Limited
Partnership of Net 3 (filed as Exhibit 99.1 to the 2001 Form
S-4)*
12 -- Statement of Computation of Ratio of Earnings to Fixed
Charges+
21 -- List of Subsidiaries of the Trust+
23 -- Consent of KPMG LLP+
</Table>
- ---------------
* Incorporated by reference.
+ Filed Herewith.
(b) Reports on Form 8-K and Form 8-K/A
Current Report on Form 8-K dated December 21, 2001
Current Report on Form 8-K dated November 30, 2001
Current Report on Form 8-K/A dated December 11, 2001