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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, 2002
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
----------------------------------------------
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]
Indicate by check mark whether the Registrant is an accelerated filer (as
defined by Rule 12b-2 of the Act). Yes [X] No [ ]
The aggregate market value of the voting shares held by non-affiliates of the
Registrant as of June 28, 2002, which was the last business day of the
Registrant's most recently completed second fiscal quarter, was $426,103,046,
based on the closing price of common shares as of that date, which was $16.50
per share.
Number of common shares outstanding as of March 20, 2003 was 30,438,278.
DOCUMENTS INCORPORATED BY REFERENCE:
The Definitive Proxy Statement for Registrant's 2003 Annual Meeting of
Shareholders is incorporated herein by reference into Part III.
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PART I.
CAUTIONARY STATEMENTS CONCERNING FORWARD-LOOKING STATEMENTS
Certain information included or incorporated by reference in this Annual
Report on Form 10-K may contain forward-looking statements within the meaning of
Section 27A of the Securities Act, and as such may involve known and unknown
risks, uncertainties and other factors which may cause our actual results,
performance or achievements to be materially different from future results,
performance or achievements expressed or implied by these forward-looking
statements. Forward-looking statements, which are based on certain assumptions
and describe our future plans, strategies and expectations, are generally
identifiable by use of the words "may," "will," "should," "expect,"
"anticipate," "estimate," "believe," "intend," "project," or the negative of
these words or other similar words or terms. Factors which could have a material
adverse effect on our operations and future prospects include, but are not
limited to, changes in economic conditions generally and the real estate market
specifically, adverse developments with respect to our tenants,
legislative/regulatory changes including changes to laws governing the taxation
of REITs, availability of debt and equity capital, interest rates, competition,
supply and demand for properties in our current and proposed market areas and
policies and guidelines applicable to REITs. These risks and uncertainties
should be considered in evaluating any forward-looking statements contained or
incorporated by reference in this Annual Report on Form 10-K.
We undertake no obligation to publicly update or revise any forward-looking
statements, whether as a result of new information, future events or otherwise.
In light of these risks, uncertainties and assumptions, the forward-looking
events discussed or incorporated by reference in this Annual Report on Form 10-K
may not occur and our actual results could differ materially from those
anticipated or implied in the forward-looking statements.
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 and 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.
The Company's Internet address is www.lxp.com. The Company makes available
free of charge through its web site its annual reports on Form 10-K, quarterly
reports on Form 10-Q, current reports on Form 8-K and amendments to these
reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange
Act as soon as reasonably practicable after it electronically files such
materials with the Securities and Exchange Commission.
As of December 31, 2002, the Company's real property portfolio consisted of
103 properties or interests therein located in thirty states and Canada,
including warehousing, distribution and manufacturing facilities, office
buildings and retail properties containing an aggregate 19.6 million net
rentable square feet of space. In addition, Lexington Realty Advisors, Inc.
("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. Of the
Company's 103 properties, four provide for operating expense stops, one is
subject to a modified gross lease and one requires the Company to be responsible
for real estate taxes in 2003 and for the tenant to be responsible thereafter.
As of December 31, 2002, 99.2% of net rentable square feet were subject to a
lease.
1
The Company manages its real estate and credit risk through geographic,
industry, tenant and lease maturity diversification. As of December 31, 2002,
the ten largest tenants/guarantors, which occupy 24 properties, represented
40.7% of trailing twelve month rent, including the Company's proportionate share
of non-consolidated investments and rental revenue from properties sold through
date of sale.
<Table>
<Caption>
NUMBER OF
TENANT (GUARANTOR) PROPERTIES PROPERTY TYPE
- ------------------ ---------- ---------------------
Kmart Corporation................................... 1 Industrial
Northwest Pipeline Corp............................. 1 Office
Exel Logistics, Inc. (NFC plc)...................... 4 Industrial
Honeywell, Inc...................................... 3 Office
Circuit City Stores, Inc............................ 4 Office (1)/Retail (3)
Vartec Telecom, Inc................................. 1 Office
Owens Corning....................................... 3 Industrial
Bally Total Fitness Corp............................ 5 Retail
Aventis Pharmaceuticals, Inc........................ 1 Office
Blue Cross Blue Shield of South Carolina Inc........ 1 Office
---
24
===
</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 paying
$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 $9.4
million. Rents are paid semi-annually in arrears. The property is encumbered by
a non-recourse first mortgage, bearing imputed interest at 7% per annum with an
outstanding balance of $25.6 million at December 31, 2002. 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 $3.2 million.
As of December 31, 2002 the Company had $7.3 million in accounts receivable
from Kmart (including $2.0 million in straight-line rental revenue in excess of
cash rents collected and $2.6 million in pre-petition rent). Kmart is current in
its rental obligation to the Company since filing for bankruptcy and the next
rental payment is due April 1, 2003.
As of December 31, 2001 and 2000 the ten largest tenants/guarantors
represented 47.0% and 51.4% of trailing twelve month rent, respectively,
including the Company's proportionate share of non-consolidated investments and
rental revenue from properties sold through date of sale. In 2002, no tenant
represented greater than 10% of rental income. In 2001 and 2000 Northwest
Pipeline Corp. and Kmart Corporation each represented 11% of rental income.
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;
- entering into third party advisory contracts to generate advisory fee
revenue;
2
- 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 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 24 of its properties. During
2002, the Company entered into 4 lease extensions for properties with leases
scheduled to expire in 2002 (two leases), 2010 (one) and 2013 (one) for an
average of 6.1 years and a 3.6% increase over the then average rental revenues.
As of December 31, 2002, the scheduled lease maturities for each of the
next five years are as follows:
<Table>
<Caption>
NUMBER 2002 % OF
YEAR ENDED OF SQUARE REVENUE 2002
DECEMBER 31, LEASES FOOTAGE ($000'S) REVENUE
- ------------ --------- --------- ------------- -------
2003.................................... 1 179,280 $ 1,900 1.9%
2004.................................... 1 27,360 337 0.3
2005.................................... 7 956,408 7,311 7.3
2006.................................... 14 1,961,907 12,239 12.2
2007.................................... 11 2,602,614 18,057 17.9
-- --------- ------- ----
34 5,727,569 $39,844 39.6%
== ========= ======= ====
</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 2002, the Company expanded its
property in Lancaster, California net leased to Michaels Stores, Inc. The
expansion, which cost $15.2 million is leased to the tenant through September
2019 at annual rent of $1.8 million. In addition, the lease on the existing
building, which was scheduled to expire in June 2013, has been 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.
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,
3
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 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.
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.
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 $127.6 million has
been funded as of December 31, 2002. In addition, LAC finances a portion of
acquisition costs through the use of non-recourse mortgages. During 2002, LAC
made two acquisitions, for $46.0 million (including closing costs), of which
$30.2 million was funded through non-recourse mortgages, maturing in 2012. As of
December 31, 2002, LAC had ownership interest in 9 properties.
The property leases, which expire at various dates ranging from 2009 to
2012, provide for current annual net cash rent of approximately $29.7 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, 2002, LAC has made investments totaling
$330.8 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 2002 and 2001, LRA earned asset management fees of $0.7 million and $0.6
million relating to this management agreement. In 2002, LRA earned $0.2 million
in acquisition fees.
In December 2001, the Company and CRF announced the formation of Lexington
Acquiport Company II, LLC. 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. No investments have been made under this program.
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 2002 and
2001, LRA earned fees of $0.1 million relating to this management contract.
In January 2002, the Company sold a 77.3% interest in its Florence, South
Carolina ("Florence") property net leased to Washington Mutual Home Loans, Inc.,
along with the proportionate share of mortgage debt for $4.6 million in
proceeds. The third party purchasers have the right for six months commencing 24
months after the sale to put their interest back to the Company for operating
partnership units in LCIF,
4
valued at $4.6 million. 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 provides management services to Florence for a fee of 3.5% of
rents and earned $0.1 million in 2002.
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. The fund made no purchases in 2002 and LRA earned $0.1 million
in asset management fees. During 2001 this fund purchased $25.4 million in
properties, and LRA earned $0.3 million in acquisition and asset management
fees.
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 2002 and 2001 LRA purchased one
property and two properties, respectively, for $2.9 million and $31.5 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 29 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 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.
5
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 2002, the Company completed a 2.7 million common share offering at
$15.85 per share raising $40.5 million of net proceeds. The proceeds were used
to repay 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 7.83% as of December 31, 2000 to approximately 6.95% as of
December 31, 2002. Scheduled balloon payments (excluding amounts owed under
corporate level debt agreements which total $31.0 million due in 2004 and $12.5
million due in 2007) over the next five years are as follows ($000's):
<Table>
<Caption>
WEIGHTED
AVERAGE
BALLOON AMOUNTS INTEREST RATE
--------------- -------------
2003..................................................... $ -- --
2004..................................................... 14,356 4.41%
2005..................................................... 76,558 7.18%
2006..................................................... -- --
2007..................................................... -- --
------- ----
$90,914 6.74%
======= ====
</Table>
During 2002, the Company, including its non-consolidated entities, obtained
$79.4 million in non-recourse mortgage financings on properties at a fixed
weighted average interest rate of 6.36%. The proceeds of the financings were
used to partially fund acquisitions.
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,
2002, $31.0 million outstanding under this facility bore interest at a rate of
3.20%.
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, 2002, the Company has repurchased approximately 1.4
million common shares/units at an average price of $10.55 per share/unit. The
Company did not repurchase any common shares or units in 2002.
Employees. As of December 31, 2002, the Company had thirty employees.
Industry Segments. The Company operates in one industry segment,
investment in single tenant, net leased real properties.
6
ITEM 2. PROPERTIES
Real Estate Portfolio
As of December 31, 2002, the Company owned or had interests in
approximately 19.6 million square feet of rentable space in 103 office,
industrial and retail properties. As of December 31, 2002, the Company's
properties were 99.2% leased based upon net rentable square feet. As of December
31, 2002, the number, percentage of trailing 12 month rental revenue (including
rental revenue from properties sold through date of sale and the Company's
proportionate share of non-consolidated entities) and square footage mix of the
Company's portfolio is as follows:
<Table>
<Caption>
SQUARE
NUMBER RENT FOOTAGE
------ ------- -------
Office...................................................... 39 55.6% 33.0%
Industrial.................................................. 35 32.4% 57.3%
Retail...................................................... 29 12.0% 9.7%
--- ----- -----
103 100.0% 100.0%
=== ===== =====
</Table>
The Company's properties are generally 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), one in Fishers, Indiana, one in Valley Forge, Pennsylvania and one
in Fort Mill, South Carolina are subject to leases in which the landlord is
responsible for a portion of the real estate taxes, utilities and general
maintenance. In addition, the Company is responsible for real estate taxes for
its property in Westmont, Illinois for 2003 and the tenant is responsible
thereafter. The Lake Mary and Fishers properties are owned by LAC. The Company
is responsible for all operating expenses of any vacant properties.
The Company's tenants represent a variety of industries including general
retailing, finance and insurance, energy, transportation and logistics,
technology, telecommunications and defense. For the year ended December 31, 2002
revenues, including revenues earned by non-consolidated entities and rental
revenue recognized on properties sold through date of sale, were earned from 73
tenants in 20 different industries.
Tenant Leases. A substantial portion of the Company's income consists of
base rent under long-term leases. As of December 31, 2002, the weighted average
remaining term under the Company's leases is approximately 7.1 years. Of the 103
current leases, 62 contain scheduled rent increases, 7 contain an increase based
upon the Consumer Price Index, 3 contain fixed step down provisions, 31 are flat
throughout the remaining lease term and 3 retail leases (which also are flat
throughout the remaining lease term) contain a percentage rent clause.
Ground Leases. The Company has 9 properties accounting for $15.2 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 2072.
7
The contractual rents due under these ground leases for each of the next
five years and thereafter (excluding renewal options) is as follows:
<Table>
<Caption>
RENTAL
YEAR ENDING PAYMENTS
DECEMBER 31, ($000'S)
- ------------ --------
2003........................................................ $ 898
2004........................................................ 898
2005........................................................ 898
2006........................................................ 898
2007........................................................ 898
Thereafter.................................................. 8,071
-------
$12,561
=======
</Table>
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, 2002. 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 and Columbia, Maryland properties. During the last five years
the Memphis property was not leased from February 1998 to October 1999 and the
Columbia, Maryland property has not been leased since September 2001, however, a
lease for 17,100 square feet out of a total of 65,200 square feet has been
executed on this property effective April 1, 2003. ($000's except per square
foot data).
8
LEXINGTON CORPORATE PROPERTIES TRUST
PROPERTY CHART
<Table>
<Caption>
NET
YEAR LAND RENTABLE BASE LEASE TERM AND
TENANT CONSTRUCTED/ AREA SQUARE ANNUAL RENTS PER NET
PROPERTY LOCATION (GUARANTOR) REDEVELOPED (ACRES) FEET RENTABLE SQUARE FOOT
- ----------------- --------------------------- ------------ -------- ---------- ----------------------------
OFFICE
3615 North 27th Avenue Bank One, Arizona, N.A. 1960 & 1979 10.26 179,280 11/30/88 - 11/30/03
Phoenix, AZ 12/01/98 - 11/30/03: $10.60
183 Plains Road IKON Office Solutions, Inc. 1994 3.01 27,360 12/23/94 - 12/31/04
Milford, CT 01/01/00 - 12/31/04: $12.31
13430 N. Black Canyon Freeway Bull HN Information 1985 & 1994 13.37 137,058 10/11/94 - 10/10/05
Phoenix, AZ Systems, Inc. 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 Artesyn North America, Inc. 1985 6.34 100,026 12/10/85 - 12/09/05
Milpitas, CA (Balfour Beatty plc.) 12/01/00 - 05/31/03: $25.56
06/01/03 - 12/09/05: $28.92
200 Executive Boulevard South Hartford Fire Insurance Co. 1983 12.40 153,364 09/01/91 - 12/31/05
Southington, CT 01/01/95 - 12/31/05: $14.12
19019 No. 59th Avenue Honeywell, Inc. 1985 51.79 252,300 07/16/86 - 07/15/06
Glendale, AZ 07/16/01 - 07/15/06: $8.00
401 Elm Street Lockheed Martin Corporation 1960 & 1988 36.94 126,000 07/22/97 - 12/17/06
Marlborough, MA (Honeywell, Inc.) 12/18/01 - 12/17/06: $14.84
75% of cumulative
increase in CPI
12000 Tech Center Drive Kelsey-Hayes Company 1987 & 1988 5.72 80,230 05/01/97 - 04/30/07
Livonia, MI 05/01/02 - 04/30/05: $8.75
05/01/05 - 04/30/07: $9.25
2300 Litton Lane Fidelity Corporate 1987 24.00 81,744 07/01/96 - 04/30/07
Hebron, KY Real Estate, LLC (2) 05/01/02 - 04/30/07: $11.00
2211 South 47th Street Avnet, Inc. 1997 11.33 176,402 11/15/97 - 11/14/07
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
<Caption>
2003 2003 (E)
MINIMUM STRAIGHT-LINE ESTIMATED
CASH RENTAL REAL ESTATE
TENANT RENT REVENUE TAXES
PROPERTY LOCATION RENEWAL OPTIONS ($000) ($000) ($000) (12)
- ----------------- -------------------------------- ------- ------------- -----------
OFFICE
3615 North 27th Avenue 12/01/03 - 11/30/08: FMV $1,742 $ 1,742 $ 241
Phoenix, AZ
183 Plains Road 01/01/05 - 12/31/09: $13.54 $ 337 $ 337 $ 44
Milford, CT
13430 N. Black Canyon Freeway None $1,077 $ 1,086 $ 283
Phoenix, AZ
1301 California Circle 12/10/05 - 12/09/10: FMV $2,756 $ 2,548 $ 135
Milpitas, CA 12/10/10 - 12/09/15: FMV
12/10/15 - 12/09/20: FMV
12/10/20 - 12/09/25: FMV
12/10/25 - 12/09/30: FMV
12/10/30 - 12/09/35: FMV
12/10/35 - 12/09/40: FMV
12/10/40 - 12/09/45: FMV
12/10/45 - 12/09/50: FMV
200 Executive Boulevard South 01/01/06 - 12/31/11: FMV $2,166 $ 2,158 $ 326
Southington, CT
19019 No. 59th Avenue 07/16/06 - 07/15/11: FMV $2,002 $ 1,995 $ 405
Glendale, AZ 07/16/11 - 07/15/16: FMV
401 Elm Street 12/18/06 - 12/17/11: $1,870 $ 1,870 $ 147
Marlborough, MA 12/18/11 - 12/17/16:
12/18/16 - 12/17/21:
12/18/21 - 12/17/26:
12/18/26 - 12/17/31:
12/18/31 - 12/17/36:
Rent for each renewal term is
equal to prior term's rent plus
75% of increase in CPI
12000 Tech Center Drive 05/01/07 - 04/30/12: FMV $ 702 $ 679 $ 95
Livonia, MI 05/01/12 - 04/30/17: FMV
2300 Litton Lane 05/01/07 - 04/30/12: $12.65 $ 899 $ 965 $ 80
Hebron, KY 05/01/12 - 04/30/17: $15.18
2211 South 47th Street 11/15/07 - 11/14/12: 95% of FMV $2,362 $ 2,468 $ 9
Phoenix, AZ 11/15/12 - 11/14/16: 95% of FMV
</Table>
9
<Table>
<Caption>
LEXINGTON CORPORATE PROPERTIES TRUST
PROPERTY CHART
NET
YEAR LAND RENTABLE BASE LEASE TERM AND
TENANT CONSTRUCTED/ AREA SQUARE ANNUAL RENTS PER NET
PROPERTY LOCATION (GUARANTOR) REDEVELOPED (ACRES) FEET RENTABLE SQUARE FOOT
- ----------------- --------------------------- ------------ -------- ---------- ----------------------------
160 Clairemont Avenue Allied Holdings, Inc. 1983 2.98 112,248 01/01/98 - 12/31/07
Decatur, GA 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: $14.94
01/01/07 - 12/31/07: $15.35
13651 McLearen Road Boeing North American 1987 10.39 159,664 05/31/99 - 05/30/08
Herndon, VA Services, Inc. 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
9275 SW Peyton Lane Hollywood Entertainment 1980 & 1998 8.72 122,853 09/29/98 - 11/30/08
Wilsonville, OR Corporation 02/01/02 - 12/31/05: $11.95
01/01/06 - 11/30/08: $13.25
295 Chipeta Way Northwest Pipeline Corp. 1982 19.79 295,000 10/01/82 - 09/30/09
Salt Lake City, UT (1) 10/01/97 - 09/30/05: $29.06
10/01/05 - 09/30/09: $20.74
subject to a CPI adjustment
on a portion of the rent
400 Butler Farm Road Nextel Communications of 1999 14.34 100,632 03/20/00 - 12/31/09
Hampton, VA the Mid-Atlantic, Inc. 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 Cymer, Inc. 1989 2.73 65,755 06/01/96 - 01/01/10
San Diego, CA (Hewlett Packard) 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
421 Butler Farm Road Nextel Communications of 2000 7.81 56,515 01/15/00 - 01/14/10
Hampton, VA the Mid-Atlantic, Inc. 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
<Caption>
LEXINGTON CORPORATE PROPERTIES TRUST
PROPERTY CHART
2003 2003 (E)
MINIMUM STRAIGHT-LINE ESTIMATED
CASH RENTAL REAL ESTATE
TENANT RENT REVENUE TAXES
PROPERTY LOCATION RENEWAL OPTIONS ($000) ($000) ($000) (12)
- ----------------- -------------------------------- ------- ------------- -----------
160 Clairemont Avenue 01/01/08 - 12/31/13: FMV $1,546 $ 1,530 $ 177
Decatur, GA 01/01/14 - 12/31/19: FMV
13651 McLearen Road 05/31/08 - 05/30/13: 90% of FMV $2,574 $ 2,493 $ 135
Herndon, VA 05/31/13 - 05/30/18: 90% of FMV
9275 SW Peyton Lane 12/1/08 - 11/30/13: rent during $1,468 $ 1,531 $ 87
Wilsonville, OR prior 40 months, increased by
increase in CPI, subject to a
15% maximum increase
295 Chipeta Way 10/01/09 - 09/15/18: $11.73 $8,571 $ 8,571 $ 8
Salt Lake City, UT plus base cost component ($.06)
adjusted by CPI, plus ($.03)
09/16/18 - 09/15/28: FMV
400 Butler Farm Road 01/01/10 - 12/31/14: FMV $1,239 $ 1,302 $ 70
Hampton, VA 01/01/15 - 12/31/19: FMV
01/01/20 - 12/31/24: FMV
01/01/25 - 12/31/29: FMV
16275 Technology Drive None $ 840 $ 888 $ 91
San Diego, CA
421 Butler Farm Road 01/15/10 - 01/14/15: FMV $ 695 $ 719 $ 74
Hampton, VA 01/15/15 - 01/14/20: FMV
</Table>
10
<Table>
<Caption>
LEXINGTON CORPORATE PROPERTIES TRUST
PROPERTY CHART
NET
YEAR LAND RENTABLE BASE LEASE TERM AND
TENANT CONSTRUCTED/ AREA SQUARE ANNUAL RENTS PER NET
PROPERTY LOCATION (GUARANTOR) REDEVELOPED (ACRES) FEET RENTABLE SQUARE FOOT
- ----------------- --------------------------- ------------ -------- ---------- ----------------------------
9950 Mayland Drive Circuit City Stores, Inc. 1990 19.71 288,562 02/28/90 - 02/28/10
Richmond, VA (1) 03/01/00 - 02/28/10: $9.91
10419 North 30th Street Time Customer Service, Inc. 1986 14.38 132,981 04/01/87 - 07/31/10
Tampa, FL (Time, Inc.) 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
4200 RCA Boulevard The Wackenhut Corp. (5) 1996 7.70 114,518 02/15/96 - 02/28/11
Palm Beach Gardens, FL 12/01/97 - 02/28/11: $18.88
2750 Monroe Boulevard Quest Diagnostics, Inc. (7) 1985 & 2001 10.50 109,281 05/01/01 - 04/30/11
Valley Forge, PA 05/01/02 - 04/30/03: $20.35
05/01/03 - 04/30/04: $21.10
05/01/04 - 04/30/05: $21.85
05/01/05 - 04/30/06: $22.60
05/01/06 - 04/30/07: $23.30
05/01/07 - 04/30/08: $24.00
05/01/08 - 04/30/09: $24.70
05/01/09 - 04/30/10: $25.40
05/01/10 - 04/30/11: $26.10
<Caption>
LEXINGTON CORPORATE PROPERTIES TRUST
PROPERTY CHART
2003 2003 (E)
MINIMUM STRAIGHT-LINE ESTIMATED
CASH RENTAL REAL ESTATE
TENANT RENT REVENUE TAXES
PROPERTY LOCATION RENEWAL OPTIONS ($000) ($000) ($000) (12)
- ----------------- -------------------------------- ------- ------------- -----------
9950 Mayland Drive 03/01/10 - 02/29/20: CPI $2,859 $ 2,791 $ 159
Richmond, VA increase (subject to max
increase of 42.66% of rent in
year 2010)
03/01/20 - 02/28/30: CPI adj
(subject to max increase of
14.02% over annual base rent
during prior period)
03/01/30 - 02/29/40: CPI adj
(subject to max increase of
14.02% over annual base rent
during prior period)
03/01/40 - 02/28/50: FMV
03/01/50 - 02/28/55: FMV
10419 North 30th Street 08/01/10 - 07/31/15: FMV $1,373 $ 1,457 $ 194
Tampa, FL 08/01/15 - 07/31/20: FMV
4200 RCA Boulevard 03/01/11 - 02/28/16: FMV $2,162 $ 2,151 $ 373
Palm Beach Gardens, FL capped at $25.00
03/01/16 - 02/28/21: FMV
capped at $25.00
03/01/21 - 02/28/26: FMV
capped at $25.00
2750 Monroe Boulevard 05/01/11 - 04/30/16: FMV $2,279 $ 2,554 $ 172
Valley Forge, PA
</Table>
11
<Table>
<Caption>
LEXINGTON CORPORATE PROPERTIES TRUST
PROPERTY CHART
NET
YEAR LAND RENTABLE BASE LEASE TERM AND
TENANT CONSTRUCTED/ AREA SQUARE ANNUAL RENTS PER NET
PROPERTY LOCATION (GUARANTOR) REDEVELOPED (ACRES) FEET RENTABLE SQUARE FOOT
- ----------------- --------------------------- ------------ -------- ---------- ----------------------------
26210 and 26220 Enterprise Apria Healthcare, Inc. 2001 7.23 100,012 02/01/01 - 01/31/12
Court 02/01/02 - 01/31/03: $15.60
Lake Forest, CA 02/01/03 - 01/31/04: $16.07
02/01/04 - 01/31/05: $16.55
02/01/05 - 01/31/06: $17.05
02/01/06 - 01/31/07: $17.56
02/01/07 - 01/31/08: $18.08
02/01/08 - 01/31/09: $18.63
02/01/09 - 01/31/10: $19.19
02/01/10 - 01/31/11: $19.76
02/01/11 - 01/31/12: $20.35
3476 Stateview Boulevard Wells Fargo Home Mortgage, 2002 15.99 169,083 01/25/03 - 01/30/13
Fort Mill, SC Inc. (6) 01/25/03 - 01/31/04: $16.05
02/01/04 - 01/30/13:
Annual increases of 3% of
net rent
250 Rittenhouse Circle Jones Apparel Group USA, 1982 15.63 255,019 03/26/98 - 03/25/13
Bristol, PA Inc. (4) 03/26/98 - 03/26/03: $4.51
03/27/03 - 03/26/08: $4.96
03/27/08 - 03/25/13: $5.46
2401 Cherahala Boulevard Advance PCS, Inc. 2002 7.97 59,748 06/01/02 - 05/31/13
Knoxville, TN 06/01/02 - 05/31/03: $6.58
06/01/03 - 05/31/07: $13.15
06/01/07 - 05/31/13: $15.06
180 Rittenhouse Circle Jones Apparel Group USA, 1998 4.73 96,000 08/01/98 - 07/31/13
Bristol, PA Inc. 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 Honeywell Consumer Products 1984 9.83 57,698 10/01/95 - 09/30/15
Southborough, MA 10/01/00 - 09/30/05: $7.49
10/01/05 - 09/30/10: $7.94
10/01/10 - 09/30/15: $8.50
2010 & 2015 rent increases
CPI based, not to exceed
maximum set forth above
<Caption>
LEXINGTON CORPORATE PROPERTIES TRUST
PROPERTY CHART
2003 2003 (E)
MINIMUM STRAIGHT-LINE ESTIMATED
CASH RENTAL REAL ESTATE
TENANT RENT REVENUE TAXES
PROPERTY LOCATION RENEWAL OPTIONS ($000) ($000) ($000) (12)
- ----------------- -------------------------------- ------- ------------- -----------
26210 and 26220 Enterprise 02/01/12 - 01/31/17: FMV $1,603 $ 1,792 $ 117
Court 02/01/17 - 01/31/22: FMV
Lake Forest, CA
3476 Stateview Boulevard 01/31/13 - 01/30/18: 95% of FMV $2,539 $ 2,539 $ 110
Fort Mill, SC 01/31/18 - 01/30/23: 95% of FMV
01/31/23 - 01/30/28: FMV
01/31/28 - 01/30/33: FMV
250 Rittenhouse Circle 03/26/13 - 03/25/18: FMV $1,238 $ 1,347 $ 40
Bristol, PA 03/26/18 - 03/26/23: FMV
2401 Cherahala Boulevard 06/01/13 - 05/31/18: 95% of FMV $ 622 $ 822 $ 40
Knoxville, TN 06/01/18 - 05/31/23: 95% of FMV
180 Rittenhouse Circle None $ 875 $ 970 $ 44
Bristol, PA
250 Turnpike Road 10/01/15 - 09/30/20: FMV $ 433 $ 433 $ 90
Southborough, MA 10/01/20 - 09/30/25: FMV
10/01/25 - 09/30/30: FMV
10/01/30 - 09/30/35: FMV
</Table>
12
<Table>
<Caption>
LEXINGTON CORPORATE PROPERTIES TRUST
PROPERTY CHART
NET
YEAR LAND RENTABLE BASE LEASE TERM AND
TENANT CONSTRUCTED/ AREA SQUARE ANNUAL RENTS PER NET
PROPERTY LOCATION (GUARANTOR) REDEVELOPED (ACRES) FEET RENTABLE SQUARE FOOT
- ----------------- --------------------------- ------------ -------- ---------- ----------------------------
1600 Viceroy Drive VarTec Telecom, Inc. 1986 8.17 249,452 04/11/00 - 09/30/15
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
700 Oakmont Lane North American Van Lines 1989 17.93 269,715 12/01/02 - 11/30/15
Westmont, IL (8) 12/01/03 - 11/30/04: $8.50
(SIRVA, Inc.) 12/01/04 - 11/30/05: $8.76
12/01/05 - 11/30/06: $9.02
12/01/06 - 11/30/07: $9.29
12/01/07 - 11/30/08: $9.57
12/01/08 - 11/30/09: $9.85
12/01/09 - 11/30/10: $10.15
12/01/10 - 11/30/11: $10.45
12/01/11 - 11/30/12: $10.77
12/01/12 - 11/30/13: $11.09
12/01/13 - 11/30/14: $11.42
12/01/14 - 11/30/15: $11.77
1440 East 15th Street Cox Communications, Inc. 1988 3.58 28,591 10/01/90 - 09/30/16
Tuscon, AZ 10/01/98 - 09/30/03: $14.03
10/01/03 - 09/30/05: $14.98
10/01/05 - 09/30/10: $16.26
10/01/10 - 09/30/16: $16.62
-------- ----------
Office Subtotal 385.27 4,157,091
-------- ----------
INDUSTRIAL
300 McCormick Boulevard Ameritech Services, Inc. 1990 10.12 20,000 09/14/90 - 05/31/05
Columbus, OH 06/01/00 - 05/31/05: $12.75
222 Tappan Drive North The Gerstenslager Company 1970 26.57 296,720 10/01/99 - 05/31/05
Mansfield, OH (Worthington Industries) 10/01/99 - 05/31/05: $2.27
904 Industrial Road Tenneco Automotive 1968 & 1972 20.00 195,640 08/18/87 - 08/17/05
Marshall, MI Operating Company, Inc. 08/18/00 - 08/17/03: $3.00
(Tenneco Automotive, Inc.) 08/18/03 - 08/17/05: $3.10
1601 Pratt Avenue Tenneco Automotive 1979 8.26 53,600 08/18/87 - 08/17/05
Marshall, MI Operating Company, Inc. 08/18/00 - 08/17/03: $3.00
(Tenneco Automotive, Inc.) 08/18/03 - 08/17/05: $3.10
4425 Purks Road Lear Technologies LLC 1989 & 1998 12.00 183,717 07/23/88 - 07/22/06
Auburn Hills, MI (Lear Corporation) 07/23/02 - 07/22/06: $7.65
(General Motors Corp.)
<Caption>
LEXINGTON CORPORATE PROPERTIES TRUST
PROPERTY CHART
2003 2003 (E)
MINIMUM STRAIGHT-LINE ESTIMATED
CASH RENTAL REAL ESTATE
TENANT RENT REVENUE TAXES
PROPERTY LOCATION RENEWAL OPTIONS ($000) ($000) ($000) (12)
- ----------------- -------------------------------- ------- ------------- -----------
1600 Viceroy Drive 10/01/15 - 09/30/20: FMV $3,279 $ 3,486 $ 490
Dallas, TX 10/01/20 - 09/30/25: FMV
700 Oakmont Lane 12/01/15 - 11/30/20: 95% of FMV $ 191 $ 2,516 $ 283
Westmont, IL 12/01/20 - 11/30/25: FMV
1440 East 15th Street None $ 408 $ 457 $ 81
Tuscon, AZ
------- -------- -------
$52,707 $ 56,197 $ 4,600
------- -------- -------
INDUSTRIAL
300 McCormick Boulevard None $ 255 $ 255 $ 21
Columbus, OH
222 Tappan Drive North 06/01/05 - 05/31/10: $2.59 $ 674 $ 667 $ 81
Mansfield, OH 06/01/10 - 11/30/10: $2.84
12/01/10 - 05/31/15: $2.78
06/01/15 - 05/31/20: $3.06
904 Industrial Road None $ 594 $ 583 $ 70
Marshall, MI
1601 Pratt Avenue None $ 163 $ 163 $ 34
Marshall, MI
4425 Purks Road None $1,405 $ 1,365 $ 138
Auburn Hills, MI
</Table>
13
<Table>
<Caption>
LEXINGTON CORPORATE PROPERTIES TRUST
PROPERTY CHART
NET
YEAR LAND RENTABLE BASE LEASE TERM AND
TENANT CONSTRUCTED/ AREA SQUARE ANNUAL RENTS PER NET
PROPERTY LOCATION (GUARANTOR) REDEVELOPED (ACRES) FEET RENTABLE SQUARE FOOT
- ----------------- --------------------------- ------------ -------- ---------- ----------------------------
245 Salem Church Road Exel Logistics Inc. 1985 12.52 252,000 11/15/91 - 11/30/06
Mechanicsburg, PA (NFC plc) 12/01/00 - 11/30/03: $4.01
12/01/03 - 11/30/06: $4.38
6 Doughten Road Exel Logistics Inc. 1989 24.38 330,000 11/15/91 - 11/30/06
New Kingston, PA (NFC plc) 12/01/00 - 11/30/03: $4.12
12/01/03 - 11/30/06: $4.51
34 East Main Street Exel Logistics Inc. 1981 9.66 179,200 11/15/91 - 11/30/06
New Kingston, PA (NFC plc) 12/01/00 - 11/30/03: $3.68
12/01/03 - 11/30/06: $4.02
450 Stern Street Johnson Controls, Inc. 1996 20.10 111,160 12/23/96 - 12/22/06
Oberlin, OH 12/23/02 - 12/22/03: $5.75
12/23/03 - 12/22/06:
Annual increase of 3x CPI,
but not more than 4.5%
46600 Port Street Johnson Controls, Inc. 1996 24.00 134,160 05/19/00 -12/22/06
Plymouth, MI 12/23/02 - 12/22/03: $6.29
12/23/03 - 12/22/06:
Annual increase of 3x CPI,
but not more than 4.5%
12025 Tech Center Drive Kelsey-Hayes Company 1987 & 1988 9.18 100,000 05/01/97 - 04/30/07
Livonia, MI 05/01/02 - 04/30/05: $9.75
05/01/05 - 04/30/07: $10.25
187 Spicer Drive Dana Corp. 1983 & 1985 20.95 148,000 01/01/84 - 08/31/07
Gordonsville, TN 08/01/02 - 07/31/05: $2.33
08/01/05 - 08/31/07: $2.40
541 Perkins Jones Road Kmart Corp. 1982 103.00 1,700,000 10/01/82 - 09/30/07
Warren, OH 10/01/02 - 09/30/07: $5.51
<Caption>
LEXINGTON CORPORATE PROPERTIES TRUST
PROPERTY CHART
2003 2003 (E)
MINIMUM STRAIGHT-LINE ESTIMATED
CASH RENTAL REAL ESTATE
TENANT RENT REVENUE TAXES
PROPERTY LOCATION RENEWAL OPTIONS ($000) ($000) ($000) (12)
- ----------------- -------------------------------- ------- ------------- -----------
245 Salem Church Road 12/01/06 - 11/30/09: 85% of FMV $1,017 $ 1,000 $ 77
Mechanicsburg, PA 12/01/09 - 11/30/11: 109.12% of
FMV
12/01/11 - 11/30/14: 85% of FMV
12/01/14 - 11/30/16: 109.12% of
FMV
6 Doughten Road 12/01/06 - 11/30/09: 85% of FMV $1,371 $ 1,349 $ 108
New Kingston, PA 12/01/09 - 11/30/11: 109.12% of
FMV
12/01/11 - 11/30/14: 85% of FMV
12/01/14 - 11/30/16: 109.12% of
FMV
34 East Main Street 12/01/06 - 11/30/09: 85% of FMV $ 664 $ 654 $ 46
New Kingston, PA 12/01/09 - 11/30/11: 109.12% of
FMV
12/01/11 - 11/30/14: 85% of FMV
12/01/14 - 11/30/16: 109.12% of
FMV
450 Stern Street 12/23/06 - 12/22/11: $3.65 $ 639 $ 639 $ 72
Oberlin, OH 12/23/11 - 12/22/16: $4.20
46600 Port Street 12/23/06 - 12/22/11: $4.00 $ 845 $ 845 $ 62
Plymouth, MI 12/23/11 - 12/22/16: $4.60
12025 Tech Center Drive 05/01/07 - 04/30/12: FMV $ 975 $ 958 $ 158
Livonia, MI 05/01/12 - 04/30/17: FMV
187 Spicer Drive 09/01/07 - 08/31/12: FMV $ 345 $ 345 $ 49
Gordonsville, TN 09/01/12 - 08/31/17: FMV
09/07/17 - 06/30/22: FMV
541 Perkins Jones Road 10/01/07 - 09/30/12: $2.67 $9,359 $ 8,932 $ 389
Warren, OH 10/01/12 - 09/30/17: $2.67
10/01/17 - 09/30/22: $2.67
10/01/22 - 09/30/27: $2.67
10/01/27 - 09/30/32: $2.67
10/01/32 - 09/30/37: $2.67
10/01/37 - 09/30/42: FMV
10/01/42 - 09/30/47: FMV
10/01/47 - 09/30/52: FMV
10/01/52 - 09/30/57: FMV
</Table>
14
<Table>
<Caption>
LEXINGTON CORPORATE PROPERTIES TRUST
PROPERTY CHART
NET
YEAR LAND RENTABLE BASE LEASE TERM AND
TENANT CONSTRUCTED/ AREA SQUARE ANNUAL RENTS PER NET
PROPERTY LOCATION (GUARANTOR) REDEVELOPED (ACRES) FEET RENTABLE SQUARE FOOT
- ----------------- --------------------------- ------------ -------- ---------- ----------------------------
730 W. Fairmont The Tranzonic Companies 1981 2.81 49,951 02/28/89 - 02/28/09
Tempe, AZ 09/01/01 - 02/29/04: $4.05
03/01/04 - 02/28/09:
Adjusted by CPI factor not
to exceed 4.5% per annum
200 Arrowhead Drive Owens Corning 1999 21.62 400,522 03/01/01 - 05/31/09
Hebron, OH 06/01/01 - 05/31/04: $2.25
06/01/04 - 05/31/09: $2.56
109 Stevens Street Unisource Worldwide, Inc. 1958 & 1969 6.97 168,800 10/01/87 - 09/30/09
Jacksonville, FL 10/01/02 - 09/30/03: $3.20
10/01/03 - 09/30/04: $3.29
10/01/04 - 09/30/05: $3.38
10/01/05 - 09/30/06: $3.48
10/01/06 - 09/30/07: $3.57
10/01/07 - 09/30/08: $3.67
10/01/08 - 09/30/09: $3.77
3350 Miac Cove Road Mimeo.com, Inc. (3) 1987 10.92 141,359 11/01/99 - 10/31/09
Memphis, TN 11/01/02 - 10/31/04: $5.00
11/01/04 - 10/31/09: $5.50
191 Arrowhead Drive Owens Corning 2000 13.62 250,410 06/01/01 - 02/28/10
Hebron, OH 03/01/01 - 02/28/05: $2.31
03/01/05 - 02/28/10: $2.63
3102 Queen Palm Drive Time Customer Service, Inc. 1986 15.02 229,605 08/01/87 - 07/31/10
Tampa, FL (Time, Inc.) 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
6345 Brackbill Boulevard Exel Logistics, Inc. 1985 & 1991 29.01 507,000 10/29/90 - 03/19/12
Mechanicsburg, PA (NFC plc) 03/20/02 - 03/19/07: $4.02
03/20/07 - 03/19/12:
greater of $4.78 or fair
market rent as specified in
lease
<Caption>
LEXINGTON CORPORATE PROPERTIES TRUST
PROPERTY CHART
2003 2003 (E)
MINIMUM STRAIGHT-LINE ESTIMATED
CASH RENTAL REAL ESTATE
TENANT RENT REVENUE TAXES
PROPERTY LOCATION RENEWAL OPTIONS ($000) ($000) ($000) (12)
- ----------------- -------------------------------- ------- ------------- -----------
730 W. Fairmont 03/01/09 - 02/28/19: CPI $ 202 $ 202 $ 56
Tempe, AZ capped at 4.5%
03/01/19 - 02/28/29: CPI
capped at 4.5%
200 Arrowhead Drive 06/01/09 - 05/31/11: $ 899 $ 985 $ 17
Hebron, OH $2.57 to $2.95
06/01/11 - 05/31/16:
$2.57 to $2.95
06/01/16 - 05/31/21: FMV
109 Stevens Street 10/01/09 - 09/30/14: $ 545 $ 588 $ 33
Jacksonville, FL lesser of $4.20 psf or FMV
3350 Miac Cove Road 11/1/09 - 10/31/14: FMV $ 175 $ 175 $ 82
Memphis, TN
191 Arrowhead Drive 03/01/10 - 02/28/12: $ 578 $ 646 $ 11
Hebron, OH $2.57 to $2.95
03/01/12 - 02/28/17:
$2.57 to $2.95
03/01/17 - 02/28/22: FMV
3102 Queen Palm Drive 08/01/10 - 07/31/15: FMV $ 956 $ 1,015 $ 137
Tampa, FL 08/01/15 - 07/31/20: FMV
6345 Brackbill Boulevard 03/20/12 - 03/19/17: FMV $2,037 $ 1,852 $ 94
Mechanicsburg, PA 03/20/17 - 03/19/22:
previous rent plus 15%
03/20/22 - 03/19/27: FMV
03/20/27 - 03/19/32:
previous rent plus 15%
</Table>
15
<Table>
<Caption>
LEXINGTON CORPORATE PROPERTIES TRUST
PROPERTY CHART
NET
YEAR LAND RENTABLE BASE LEASE TERM AND
TENANT CONSTRUCTED/ AREA SQUARE ANNUAL RENTS PER NET
PROPERTY LOCATION (GUARANTOR) REDEVELOPED (ACRES) FEET RENTABLE SQUARE FOOT
- ----------------- --------------------------- ------------ -------- ---------- ----------------------------
6500 Adelaide Court Anda Pharmaceuticals 2002 22.67 354,676 04/01/02 - 03/31/12
Groveport, OH (Andrx Corporation) 04/01/02 - 03/31/03: $1.81
04/01/03 - 03/31/04: $2.63
04/01/04 - 03/31/06: $3.45
04/01/06 - 03/31/12: $3.65
2280 Northeast Drive Ryder Integrated Logistics, 1996 & 1997 25.70 276,480 08/01/97 - 07/31/12
Waterloo, IA Inc. 08/01/02 - 07/31/07: $3.61
(Ryder Systems, Inc.) 08/01/07 - 07/31/12: $4.04
128 Crews Drive Stone Container Corporation 1968 & 1998 10.76 185,961 12/16/82 - 08/31/12
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
7150 Exchequer Drive Corporate Express Office 1998 5.23 65,043 11/01/98 - 10/31/13
Baton Rouge, LA Products, Inc. 11/01/01 - 10/31/04: $5.32
(Buhrmann N.V.) 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 Corporate Express Office 1998 19.09 196,946 01/20/99 - 01/31/14
Henderson, NC Products, Inc. 02/01/02 - 01/31/05: $3.83
(Buhrmann N.V.) 02/01/05 - 01/31/08: $4.01
02/01/08 - 01/31/11: $4.19
02/01/11 - 01/31/14: $4.45
324 Industrial Park Road SKF USA, Inc. 1996 21.13 72,868 12/23/96 - 12/31/14
Franklin, NC 01/01/03 - 12/31/14: $4.98
CPI every 3 years
8305 SE 58th Avenue Associated Grocers of 1976 63.48 668,034 01/08/99 - 12/31/18
Ocala, FL Florida, Inc. 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
3501 West Avenue H Michaels Stores, Inc. 1998 & 2002 37.18 762,775 06/19/98 - 09/30/19
Lancaster, CA 06/19/98 - 06/18/03: $4.20
06/19/03 - 06/18/08: $4.24
06/19/08 - 06/18/13: $4.29
06/19/13 - 09/30/19: $4.28
-------- ----------
Industrial Subtotal 605.95 8,034,627
-------- ----------
<Caption>
LEXINGTON CORPORATE PROPERTIES TRUST
PROPERTY CHART
2003 2003 (E)
MINIMUM STRAIGHT-LINE ESTIMATED
CASH RENTAL REAL ESTATE
TENANT RENT REVENUE TAXES
PROPERTY LOCATION RENEWAL OPTIONS ($000) ($000) ($000) (12)
- ----------------- -------------------------------- ------- ------------- -----------
6500 Adelaide Court 04/01/12 - 03/31/17: 95% $ 859 $ 1,206 $ 93
Groveport, OH FMV or $3.90 psf
04/01/17 - 03/31/22: FMV
or $4.10 psf
2280 Northeast Drive 08/01/12 - 07/31/17: $4.53 $ 998 $ 1,004 $ 365
Waterloo, IA 08/01/17 - 07/31/22: $5.07
08/01/22 - 07/31/27: $5.68
128 Crews Drive None $ 516 $ 571 $ 120
Columbia, SC
7150 Exchequer Drive 11/01/13 - 10/31/18: FMV $ 346 $ 368 $ 49
Baton Rouge, LA 11/01/18 - 10/31/23: FMV
11/01/23 - 10/31/28: FMV
1133 Poplar Creek Road 02/01/14 - 01/31/19: FMV $ 754 $ 810 $ 61
Henderson, NC 02/01/19 - 01/31/24: FMV
02/01/24 - 01/31/29: FMV
324 Industrial Park Road 01/01/15 - 12/31/24: FMV or $ 363 $ 363 $ 12
Franklin, NC rent in effect in prior year
01/01/25 - 12/31/34:
prior years rent increased by 9%
01/01/35 - 12/31/44:
prior years rent increased by 9%
8305 SE 58th Avenue 01/01/19 - 12/31/23: $4.16 $1,872 $ 2,238 $ 1,255
Ocala, FL 01/01/24 - 12/31/28: $4.60
01/01/29 - 12/31/33: $5.08
01/01/34 - 12/31/38: $5.60
3501 West Avenue H 10/01/19 - 09/30/24: FMV $3,223 $ 3,312 $ 191
Lancaster, CA 10/01/24 - 09/30/29: FMV
------- -------- -------
$32.629 $ 33,090 $ 3,881
------- -------- -------
</Table>
16
<Table>
<Caption>
LEXINGTON CORPORATE PROPERTIES TRUST
PROPERTY CHART
NET
YEAR LAND RENTABLE BASE LEASE TERM AND
TENANT CONSTRUCTED/ AREA SQUARE ANNUAL RENTS PER NET
PROPERTY LOCATION (GUARANTOR) REDEVELOPED (ACRES) FEET RENTABLE SQUARE FOOT
- ----------------- --------------------------- ------------ -------- ---------- ----------------------------
RETAIL
24100 Laguna Hills Mall Federated Department 1974 11.00 160,000 02/01/76 - 01/31/06
Laguna Hills, CA Stores, Inc. (1) 02/01/80 - 01/31/06: $4.23
7111 Westlake Terrace The Home Depot USA, Inc. 1980 & 2001 7.61 95,000 05/01/81 - 04/30/06
Bethesda, MD (1) (11) 05/01/96 - 04/30/06: $8.13
6910 S. Memorial Highway Toys "R" Us, Inc. (1) 1981 4.44 43,123 06/01/81 - 05/31/06
Tulsa, OK 06/01/01 - 05/31/06: $8.40
12535 SE 82nd Avenue Toys "R" Us, Inc. (1) 1981 5.85 42,842 06/01/81 - 05/31/06
Clackamas, OR 06/01/01 - 05/31/06: $9.91
18601 Alderwood Mall Blvd Toys "R" Us, Inc. (1) 1981 3.64 43,105 06/01/81 - 05/31/06
Lynnwood, WA 06/01/01 - 05/31/06: $9.18
2832 Candlers Mountain Road Circuit City Stores, Inc. 1986 0.84 9,300 11/21/86 - 11/20/06
Lynchburg, VA 11/21/01 - 11/20/06: $10.85
5917 S. La Grange Road Bally Total Fitness Corp. 1987 2.73 25,250 07/13/87 - 07/12/07
Countryside, IL 07/13/02 - 07/12/07: $26.14
1160 White Horse Road Physical Fitness Centers of 1987 2.87 31,750 07/14/87 - 07/13/07
Voorhees, NJ Philadelphia, Inc. 07/14/02 - 07/13/07: $25.82
(Bally Total Fitness Corp.)
5801 Bridge Street Champion Fitness IV, Inc. 1977 & 1987 3.66 24,990 08/19/87 - 08/18/07
DeWitt, NY (Bally Total Fitness Corp.) 08/19/02 - 08/18/07: $20.45
4450 California Avenue Mervyn's (10) 1976 11.00 122,000 02/23/77 - 12/31/07
Bakersfield, CA (Dayton Hudson Corp.) 01/01/03 - 12/31/07: $1.71
<Caption>
LEXINGTON CORPORATE PROPERTIES TRUST
PROPERTY CHART
2003 2003 (E)
MINIMUM STRAIGHT-LINE ESTIMATED
CASH RENTAL REAL ESTATE
TENANT RENT REVENUE TAXES
PROPERTY LOCATION RENEWAL OPTIONS ($000) ($000) ($000) (12)
- ----------------- -------------------------------- ------- ------------- -----------
RETAIL
24100 Laguna Hills Mall 02/01/06 - 04/16/14: $1.81 $ 677 $ 673 $ 13
Laguna Hills, CA 04/17/14 - 04/16/29: $1.81
04/17/29 - 04/16/44: $1.81
04/17/44 - 04/16/50: $1.81
7111 Westlake Terrace 05/01/06 - 04/30/16: $3.96 $ 772 $ 648 $ 304
Bethesda, MD 05/01/16 - 04/30/21: $3.96
05/01/21 - 04/30/26: $3.96
05/01/26 - 04/30/31: $3.17
6910 S. Memorial Highway 06/01/06 - 05/31/11: $5.92 $ 362 $ 356 $ 35
Tulsa, OK 06/01/11 - 05/31/16: $5.92
06/01/16 - 05/31/21: $5.92
06/01/21 - 05/31/26: $5.92
06/01/26 - 05/31/31: $5.92
12535 SE 82nd Avenue 06/01/06 - 05/31/11: $6.96 $ 424 $ 417 $ 49
Clackamas, OR 06/01/11 - 05/31/16: $6.96
06/01/16 - 05/31/21: $6.96
06/01/21 - 05/31/26: $6.96
06/01/26 - 05/31/31: $6.96
18601 Alderwood Mall Blvd 06/01/06 - 05/31/11: $6.48 $ 396 $ 389 $ 46
Lynnwood, WA 06/01/11 - 05/31/16: $6.48
06/01/16 - 05/31/21: $6.48
06/01/21 - 05/31/26: $6.48
06/01/26 - 05/31/31: $6.48
2832 Candlers Mountain Road 11/21/06 - 11/20/11: $12.75 $ 101 $ 101 $ 8
Lynchburg, VA 11/21/11 - 11/20/16: $14.98
11/21/16 - 11/20/21: $17.60
11/21/21 - 11/20/26: $20.68
5917 S. La Grange Road 07/13/07 - 07/12/12: $30.06 $ 660 $ 542 $ 86
Countryside, IL 07/13/12 - 07/12/17: $34.57
1160 White Horse Road 07/13/07 - 07/12/12: $29.69 $ 820 $ 673 $ 105
Voorhees, NJ 07/13/12 - 07/12/17: $34.14
5801 Bridge Street 08/19/07 - 08/18/12: $23.52 $ 511 $ 419 $ 15
DeWitt, NY 08/19/12 - 08/18/17: $27.44
4450 California Avenue 01/01/08 - 12/31/12: $1.54 $ 209 $ 209 $ 54
Bakersfield, CA 01/01/13 - 12/31/17: $1.37
01/01/18 - 12/31/22: $1.20
01/01/23 - 12/31/27: $1.03
</Table>
17
<Table>
<Caption>
LEXINGTON CORPORATE PROPERTIES TRUST
PROPERTY CHART
NET
YEAR LAND RENTABLE BASE LEASE TERM AND
TENANT CONSTRUCTED/ AREA SQUARE ANNUAL RENTS PER NET
PROPERTY LOCATION (GUARANTOR) REDEVELOPED (ACRES) FEET RENTABLE SQUARE FOOT
- ----------------- --------------------------- ------------ -------- ---------- ----------------------------
2655 Shasta Way Fred Meyer, Inc. 1986 13.90 178,204 03/10/88 - 03/31/08
Klamath Falls, OR 03/10/88 - 03/31/08: $5.66
12235 N. Cave Creek Bally's Health & Tennis 1988 3.00 36,556 07/01/88 - 06/30/08
Phoenix, AZ Corp. 07/01/98 - 06/30/03: $20.65
07/01/03 - 06/30/08: $23.03
7272 55th Street Circuit City Stores, Inc. 1988 3.93 45,308 10/28/88 - 10/27/08
Sacramento, CA 10/28/98 - 10/27/03: $8.54
10/28/03 - 10/27/08: $9.30
6405 South Viriginia St Comp USA, Inc. 1988 2.72 31,400 12/16/88 - 12/15/08
Reno, NV 12/16/98 - 12/15/03: $10.65
12/16/03 - 12/15/08: $11.60
5055 West Sahara Avenue Circuit City Stores, Inc. 1988 2.57 36,053 12/16/88 - 12/15/08
Las Vegas, NV 12/16/98 - 12/15/03: $7.93
12/16/03 - 12/15/08: $8.64
4733 Hills & Dales Road Scandinavian Health Spa, 1987 3.32 37,214 01/01/89 - 12/31/08
Canton, OH Inc. 01/01/03 - 12/31/03: $18.76
(Bally Total Fitness 01/01/04 - 12/31/04: $19.17
Holding Corp.) 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 Wal-Mart Stores, Inc. 1984 8.10 89,199 12/29/83 - 01/31/09
Gainesville, GA 12/29/83 - 01/31/09: $2.45
Plus $110 a year in lieu
of % rent
35400 Cowan Road Sam's Real Estate Business 1987 & 1997 9.70 102,826 06/06/97 - 01/31/09
Westland, MI Trust 06/06/87 - 01/31/09: $7.32
<Caption>
LEXINGTON CORPORATE PROPERTIES TRUST
PROPERTY CHART
2003 2003 (E)
MINIMUM STRAIGHT-LINE ESTIMATED
CASH RENTAL REAL ESTATE
TENANT RENT REVENUE TAXES
PROPERTY LOCATION RENEWAL OPTIONS ($000) ($000) ($000) (12)
- ----------------- -------------------------------- ------- ------------- -----------
2655 Shasta Way 04/01/08 - 03/31/18: FMV $1,009 $ 1,009 $ 158
Klamath Falls, OR 04/01/18 - 03/31/28: FMV
04/01/28 - 03/31/38: FMV
12235 N. Cave Creek 07/01/08 - 06/30/13: $25.68 $ 798 $ 821 $ 77
Phoenix, AZ 07/01/13 - 06/30/18: $28.62
7272 55th Street 10/28/08 - 10/27/18: CPI $ 393 $ 376 $ 63
Sacramento, CA not to exceed $11.22
10/28/18 - 10/27/28: CPI
not to exceed $12.39
10/28/28 - 10/27/38: CPI
not to exceed $13.68
6405 South Viriginia St 12/16/08 - 12/15/18: CPI $ 335 $ 325 $ 60
Reno, NV not to exceed $14.00
12/16/18 - 12/15/28: CPI
not to exceed $15.45
12/16/28 - 12/15/38: CPI
not to exceed $17.06
5055 West Sahara Avenue 12/16/08 - 12/15/18: CPI $ 286 $ 278 $ 30
Las Vegas, NV 12/16/18 - 12/15/28: CPI
12/16/28 - 12/15/38: CPI
4733 Hills & Dales Road 01/01/09 - 12/31/13: $ 698 $ 685 $ 23
Canton, OH Annual increases of 2.2%
01/01/14 - 12/31/18:
Annual increases of 2.2%
2275 Browns Bridge Road None $ 218 $ 218 $ 7
Gainesville, GA
35400 Cowan Road None $ 753 $ 753 $ 21
Westland, MI
</Table>
18
<Table>
<Caption>
LEXINGTON CORPORATE PROPERTIES TRUST
PROPERTY CHART
NET
YEAR LAND RENTABLE BASE LEASE TERM AND
TENANT CONSTRUCTED/ AREA SQUARE ANNUAL RENTS PER NET
PROPERTY LOCATION (GUARANTOR) REDEVELOPED (ACRES) FEET RENTABLE SQUARE FOOT
- ----------------- --------------------------- ------------ -------- ---------- ----------------------------
A1 21 South Wal-Mart Real Estate 1983 5.21 56,132 06/29/99 - 01/31/09
Jacksonville, AL Business Trust 06/29/99 - 01/31/09: $2.60
Plus 1% of gross sales
Fort Street Mall Liberty House, Inc. (1) 1980 1.22 85,610 10/01/80 - 09/30/09
King Street 10/01/95 - 09/30/05: $11.25
Honolulu, HI 10/01/05 - 09/30/09: $11.56
121 South Center Street Greyhound Lines, Inc. 1968 1.67 17,000 02/28/89 - 12/31/09
Stockton, CA 01/01/02 - 12/31/09: $11.35
Annual increase of CPI, but
not more than 2.75%
7055 Highway 85 South Wal-Mart Stores East, Inc. 1985 8.61 81,911 12/04/85 - 01/31/11
Riverdale, GA 12/04/85 - 01/31/11: $3.29
150 NE 20th Street Fred Meyer, Inc. 1986 8.81 118,179 06/01/86 - 05/31/11
Highway 101 06/01/86 - 05/31/11: $6.99
Newport, OR plus .5% of gross sales over
$20 million
6475 Dobbin Road Offenbacher Aquatics (9) 1983 2.50 65,200 04/01/03 - 03/31/13
Columbia, MD 04/01/03 - 03/31/04: $9.35
04/01/04 - 03/31/05: $9.70
04/01/05 - 03/31/06: $10.05
04/01/06 - 03/31/07: $10.40
04/01/07 - 03/31/08: $10.75
04/01/08 - 03/31/09: $11.50
04/01/09 - 03/31/10: $12.00
04/01/10 - 03/31/11: $12.50
04/01/11 - 03/31/12: $13.00
04/01/12 - 03/31/13: $13.50
9580 Livingston Road GFS Realty, Inc. 1976 10.60 107,337 01/03/77 - 02/28/14
Oxon Hill, MD (Giant Food, Inc.) 03/01/77 - 02/29/04: $3.80
03/01/04 - 02/28/14: $1.91
<Caption>
LEXINGTON CORPORATE PROPERTIES TRUST
PROPERTY CHART
2003 2003 (E)
MINIMUM STRAIGHT-LINE ESTIMATED
CASH RENTAL REAL ESTATE
TENANT RENT REVENUE TAXES
PROPERTY LOCATION RENEWAL OPTIONS ($000) ($000) ($000) (12)
- ----------------- -------------------------------- ------- ------------- -----------
A1 21 South 02/01/09 - 01/31/14: $2.42 $ 146 $ 146 $ 20
Jacksonville, AL Plus 1% of gross sales
02/01/14 - 01/31/19: $2.42
plus 1% of gross sales
02/01/19 - 01/31/24: $2.42
plus 1% of gross sales
02/01/24 - 01/31/29: $2.42
plus 1% of gross sales
02/01/29 - 01/31/34: $2.42
plus 1% of gross sales
Fort Street Mall 10/01/09 - 04/30/19: $11.56 $ 963 $ 971 $ 194
King Street 05/01/19 - 04/30/21: $11.56
Honolulu, HI 05/01/26 - 04/30/31: FMV
05/01/31 - 04/30/36: FMV
121 South Center Street 01/01/10 - 12/31/20: CPI $ 201 $ 201 $ 15
Stockton, CA increase capped at 2.75%
01/01/21 - 12/31/31: CPI
increase capped at 2.75%
7055 Highway 85 South 02/01/11 - 01/31/16: $3.29 $ 270 $ 270 $ 4
Riverdale, GA 02/01/16 - 01/31/21: $3.29
02/01/21 - 01/31/26: $3.29
02/01/26 - 01/31/31: $3.29
150 NE 20th Street 06/01/11 - 05/31/16: $6.99 $ 826 $ 826 $ 126
Highway 101 06/01/16 - 05/31/21: $6.99
Newport, OR 06/01/21 - 05/31/26: $6.99
6475 Dobbin Road 12/19/12 - 12/18/17: $14.50 $ 120 $ 145 $ 57
Columbia, MD 12/19/17 - 12/18/22: $16.30
9580 Livingston Road 03/01/14 - 02/29/19: $1.53 $ 408 $ 274 $ 28
Oxon Hill, MD 03/01/19 - 02/29/24: $1.53
03/01/24 - 02/29/29: $1.15
03/01/29 - 02/29/34: $1.15
</Table>
19
<Table>
<Caption>
LEXINGTON CORPORATE PROPERTIES TRUST
PROPERTY CHART
NET
YEAR LAND RENTABLE BASE LEASE TERM AND
TENANT CONSTRUCTED/ AREA SQUARE ANNUAL RENTS PER NET
PROPERTY LOCATION (GUARANTOR) REDEVELOPED (ACRES) FEET RENTABLE SQUARE FOOT
- ----------------- --------------------------- ------------ -------- ---------- ----------------------------
3711 Gateway Drive Kohl's Department Stores, 1994 6.24 76,164 06/22/94 - 01/25/15
Eau Claire, WI Inc. 06/22/94 - 03/31/04: $5.71
04/01/04 - 01/25/15: $6.15
Rockshire Village Center GFS Realty, Inc. (1) 1977 7.32 51,682 01/01/78 - 06/19/17
2401 Wootton Parkway (Giant Food, Inc.) 01/01/78 - 02/28/05: $4.33
Rockville, MD 03/01/05 - 06/19/17: $2.23
4831 Whipple Avenue, N.W Best Buy Co., Inc. 1995 6.59 46,350 02/27/98 - 02/26/18:
Canton, OH 02/27/98 - 02/26/18: $10.03
399 Peachwood Centre Drive Best Buy Co., Inc. 1996 7.49 45,800 02/27/98 - 02/26/18:
Spartanburg, SC 02/27/98 - 02/26/18: $8.62
-------- ----------
Retail Subtotal 167.14 1,905,485
-------- ----------
Grand Total 1,158.36 14,097,203
======== ==========
<Caption>
LEXINGTON CORPORATE PROPERTIES TRUST
PROPERTY CHART
2003 2003 (E)
MINIMUM STRAIGHT-LINE ESTIMATED
CASH RENTAL REAL ESTATE
TENANT RENT REVENUE TAXES
PROPERTY LOCATION RENEWAL OPTIONS ($000) ($000) ($000) (12)
- ----------------- -------------------------------- ------- ------------- -----------
3711 Gateway Drive 01/26/15 - 01/25/20: $6.40 $ 435 $ 463 $ 49
Eau Claire, WI 01/26/20 - 01/25/25: $6.64
01/26/25 - 01/25/30: $6.89
01/26/30 - 01/25/35: $7.14
Rockshire Village Center 06/20/17 - 05/31/27: $1.78 $ 224 $ 152 $ 90
2401 Wootton Parkway 06/01/27 - 05/31/37: $1.33
Rockville, MD
4831 Whipple Avenue, N.W 02/27/18 - 02/26/23: $10.03 $ 465 $ 465 $ 32
Canton, OH 02/27/23 - 02/26/28: $10.53
02/27/28 - 02/26/33: $11.06
399 Peachwood Centre Drive 02/27/18 - 02/26/23: $8.62 $ 395 $ 395 $ 15
Spartanburg, SC 02/27/23 - 02/26/28: $9.06
02/27/28 - 02/26/33: $9.51
------- -------- -------
$13,875 $ 13,200 $ 1,784
------- -------- -------
$99,211 $102,487 $10,265
======= ======== =======
</Table>
- ---------------
(E) Estimated
(1) The Company holds a leasehold interest in the land. The leases, including
renewal options, expire at various dates ranging from 2028 through 2072.
(2) Tenant can cancel lease on April 30, 2004 with 270 days notice and a payment
of $899.
(3) The tenant occupies 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 one additional tenant that occupies
18,400 square feet out of the total of 114,518.
(6) Base rent is escalated 3% each year after subtracting the first year
operating expense amount from the rent. Expense stop to be determined on
first anniversary (01/01/04). Tenant has the right to contract leased space
by 27,000 square feet (01/31/08) with 6 months notice and a payment
estimated to be $696. The tenant can cancel lease on 01/31/10 with 12 months
notice and a payment estimated to be $3,968.
(7) Expense stop on this property is $393 per annum.
(8) Tenant can cancel lease on November 30, 2013 with 12 months notice and a
payment of $1,300. In addition the Company is responsible for real estate
taxes in 2003.
(9) 17,100 square feet subject to a lease to commence 04/01/03.
(10) The Company has a 64% economic interest in the property.
(11) The Company has a 33.85% economic interest in the property.
(12) The Company recognized $354 in real estate taxes in 2002
FMV = Fair Market Value
CPI = Consumer Price Index
20
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
2210 Enterprise Drive Washington Mutual Home 1998 16.53 177,747
Florence, SC Loans, Inc. (13)
14040 Park Center Road NEC America, Inc. (14) 1987 13.30 108,000
Herndon, VA
15375 Memorial Drive Vastar Resources, Inc. (14) 1985 21.77 327,325
Houston, TX
550 International Parkway First USA Management 1999 12.80 125,920
Lake Mary, FL Services, Inc. (14) (17) (19)
600 Business Center Drive First USA Management 1997 13.30 125,155
Lake Mary, FL Services, Inc. (14) (17) (19)
17 Technology Circle Blue Cross Blue Shield 1999 46.82 456,304
Columbia, SC of South Carolina (15) (20)
10300 Kincaid Drive Bank One Indiana, N.A. (14) (18) 1999 13.30 193,000
Fishers, IN
6555 Sierra Drive True North Communications, Inc. (14) 1999 9.98 247,254
Irving, TX
389-399 Interpace Parkway Aventis, Inc. 2000 14.00 340,240
Morris Corporate Center IV (Aventis Pharma Holding GmbH) (14)
Parsippany, NJ
2000 Eastman Drive Structural Dynamics 1991 12.36 212,836
Milford, OH Research Corp. (14)
------ ---------
Office Subtotal 174.16 2,313,781
------ ---------
<Caption>
BASE LEASE TERM AND TENANT 2003 2003 (E)
ANNUAL RENTS PER NET RENEWAL MINIMUM CASH STRAIGHT-LINE RENTAL
PROPERTY LOCATION RENTABLE SQUARE FOOT OPTIONS RENT ($000) REVENUE ($000)
- ----------------- --------------------------- ------------------------------- ------------ ---------------------
OFFICE
2210 Enterprise Drive 06/10/98 - 06/30/08 07/01/08 - 06/30/13: 90% of FMV $ 1,635 $ 1,699
Florence, SC 06/10/98 - 06/30/03: $8.55 07/01/13 - 06/30/18: 90% of FMV
07/01/03 - 06/30/08: $9.84
14040 Park Center Road 08/13/99 - 08/12/09 08/13/09 - 08/12/14: FMV $ 1,848 $ 2,025
Herndon, VA 08/13/02 - 08/12/03: $16.98 08/13/14 - 08/12/19: FMV
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 09/16/09 - 09/15/14: FMV $ 3,437 $ 3,437
Houston, TX 09/16/02 - 09/15/06: $10.50 09/16/14 - 09/15/19: FMV
09/16/06 - 09/15/09: $11.00 09/16/19 - 09/15/24: FMV
09/16/24 - 09/15/29: FMV
550 International Parkway 10/01/99 - 09/30/09 10/01/09 - 09/30/14: $24.65 $ 2,721 $ 2,820
Lake Mary, FL 10/01/02 - 09/30/03: $21.50 10/01/14 - 09/30/19: $26.90
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 Business Center Drive 10/01/99 - 09/30/09 10/01/09 - 09/30/14: FMV $ 2,824 $ 2,921
Lake Mary, FL 10/01/02 - 09/30/03: $22.45 10/01/14 - 09/30/19: FMV
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 10/01/09 - 09/30/14: $15.06 $ 6,415 $ 6,930
Columbia, SC 10/01/01 - 09/30/04: $14.06 10/01/14 - 09/30/19: FMV
10/01/04 - 09/30/09: $16.17 10/01/19 - 09/30/24: FMV
10300 Kincaid Drive 11/01/99 - 10/31/09 11/01/09 - 10/31/14: 95% of FMV $ 3,185 $ 3,287
Fishers, IN 11/01/99 - 10/31/04: $16.50 11/01/14 - 10/31/19: 95% of FMV
11/01/04 - 10/31/09: $17.52
6555 Sierra Drive 02/01/00 - 01/31/10 02/01/10 - 01/31/15: FMV $ 4,009 $ 4,250
Irving, TX 02/01/00 - 01/31/05: $16.21 02/01/15 - 01/31/20: FMV
02/01/05 - 01/31/10: $18.05
389-399 Interpace Parkway 06/01/00 - 01/31/10 02/01/10 - 01/31/15: $31.00 $ 7,844 $ 8,487
Morris Corporate Center IV 06/01/00 - 01/31/05: $23.06 02/01/15 - 01/31/20: 95% of FMV
Parsippany, NJ 02/01/05 - 01/31/10: $26.49
2000 Eastman Drive 05/01/91 - 04/30/11 05/01/11 - 04/30/16: FMV $ 2,657 $ 2,790
Milford, OH 05/01/02 - 04/30/03: $12.31 05/01/16 - 04/30/21: FMV
05/01/03 - 04/30/04: $12.57 05/01/21 - 04/30/26: FMV
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
------- -------
$36,575 $38,646
------- -------
<Caption>
ESTIMATED
REAL ESTATE
PROPERTY LOCATION TAXES ($000) (21)
- ----------------- -----------------
OFFICE
2210 Enterprise Drive $ 5
Florence, SC
14040 Park Center Road $ 109
Herndon, VA
15375 Memorial Drive $ 312
Houston, TX
550 International Parkway $ 213
Lake Mary, FL
600 Business Center Drive $ 225
Lake Mary, FL
17 Technology Circle $ 4
Columbia, SC
10300 Kincaid Drive $ 98
Fishers, IN
6555 Sierra Drive $ 593
Irving, TX
389-399 Interpace Parkway $ 408
Morris Corporate Center IV
Parsippany, NJ
2000 Eastman Drive $ 424
Milford, OH
------
$2,391
------
</Table>
21
<Table>
<Caption>
YEAR NET
TENANT CONSTRUCTED/ LAND AREA RENTABLE
PROPERTY LOCATION (GUARANTOR) REDEVELOPED (ACRES) SQUARE FEET
- ----------------- ------------------------------------ ------------------ --------- -----------
INDUSTRIAL
291 Park Center Drive Kraft Foods North America, Inc. (14) 2001 25.50 344,700
Winchester, VA
7111 Crabb Road TNT Logistics North America, Inc. 1978 & 1993 51.41 752,000
Temperance, MI (14)
(TNT Logistics Holdings B.V.)
(TPG N.V.)
101 Michelin Drive TNT Logistics North America, Inc. 1991 & 1992 & 1993 118.14 1,164,000
Laurens, SC (14)
(TNT Logistics Holdings B.V.)
(TPG N.V.)
1 Boudreau Road TNT Canada, Inc. (16) 1993 8.62 122,876
St. Albert, Alberta, Canada (TNT Logistics Holdings B.V.)
(TPG N.V.)
3600 Southgate Drive Sygma Network, Inc. (16) 2000 19.00 149,500
Danville, IL (Sysco Corporation)
224 Harbor Freight Road Harbor Freight Tools USA, Inc. (16) 2001 74.95 474,473
Dillon, SC (Central Purchasing, Inc.)
590 Ecology Lane Owens Corning (16) 2001 39.52 193,891
Chester, SC
------ ---------
Industrial Subtotal 337.14 3,201,440
------ ---------
Total 511.30 5,515,221
====== =========
<Caption>
2003 2003 (E)
BASE LEASE TERM AND TENANT MINIMUM STRAIGHT-LINE
ANNUAL RENTS PER NET RENEWAL CASH RENTAL
PROPERTY LOCATION RENTABLE SQUARE FOOT OPTIONS RENT ($000) REVENUE ($000)
- ----------------- --------------------------- ------------------------------- ----------- --------------
INDUSTRIAL
291 Park Center Drive 06/01/01 - 05/31/11 06/01/11 - 05/31/16: 95% of FMV $ 1,420 $ 1,515
Winchester, VA 06/01/01 - 05/31/06: $4.12 06/01/16 - 05/31/21: FMV
06/01/06 - 05/31/11: $4.67
7111 Crabb Road 08/05/02 - 08/04/12 08/05/12 - 08/04/17: FMV $ 2,078 $ 2,161
Temperance, MI 08/05/02 - 08/04/08: $2.76 capped at $2.34
08/05/08 - 08/04/12: $3.04 08/05/17 - 08/04/22: FMV
capped at $2.34
08/05/22 - 08/04/27: FMV
capped at $2.34
08/05/27 - 08/04/32: FMV
capped at $2.34
101 Michelin Drive 08/05/02 - 08/04/12 08/05/12 - 08/04/17: FMV $ 3,103 $ 3,227
Laurens, SC 08/05/02 - 08/04/08: $2.68 capped at $2.25
08/05/08 - 08/04/12: $2.95 08/05/17 - 08/04/22: FMV
capped at $2.25
08/05/22 - 08/04/27: FMV
capped at $2.25
08/05/27 - 08/04/32: FMV
capped at $2.25
1 Boudreau Road 08/05/02 - 08/04/12 08/05/12 - 08/04/16: $2.85 $ 319 $ 331
St. Albert, Alberta, Canada 08/05/02 - 08/04/08: $2.59 08/05/17 - 08/04/22: $2.85
08/05/08 - 08/04/12: $2.85 08/05/22 - 08/04/26: $2.85
08/05/26 - 08/04/30: $2.85
3600 Southgate Drive 10/15/00 - 10/31/15 11/01/15 - 10/31/20: $6.87 $ 933 $ 933
Danville, IL 10/15/00 - 10/31/15: $6.24 11/01/20 - 10/31/25: $6.87
224 Harbor Freight Road 12/05/01 - 12/04/16 12/05/16 - 12/04/21: $4.61 $ 1,642 $ 1,812
Dillon, SC 12/05/01 - 12/04/06: $3.46 12/05/21 - 12/04/26: $5.07
12/05/06 - 12/04/11: $3.81 12/05/26 - 12/04/31: $5.57
12/05/11 - 12/04/16: $4.19 12/05/31 - 12/04/36: $6.13
590 Ecology Lane 01/01/01 - 12/31/20 01/01/21 - 12/31/25: $6.41 $ 1,619 $ 1,619
Chester, SC 01/01/01 - 12/31/20: $8.35 01/01/26 - 12/31/30: $7.08
------- -------
$11,114 $11,598
------- -------
$47,689 $50,244
======= =======
<Caption>
ESTIMATED
REAL ESTATE
PROPERTY LOCATION TAXES ($000) (21)
- ----------------- -----------------
INDUSTRIAL
291 Park Center Drive $ 0
Winchester, VA
7111 Crabb Road $ 100
Temperance, MI
101 Michelin Drive $ 383
Laurens, SC
1 Boudreau Road $ 19
St. Albert, Alberta, Canada
3600 Southgate Drive $ 143
Danville, IL
224 Harbor Freight Road $ 31
Dillon, SC
590 Ecology Lane $ 4
Chester, SC
------
$ 680
------
$3,071
======
</Table>
- ---------------
(E) Estimated
(13) The Company has a 22.7% economic interest in the entity which owns this
property.
(14) The Company has a 33 1/3% economic interest in the entity which owns this
property.
(15) The Company has a 40% economic interest in the entity which owns this
property.
(16) The Company has a 99% economic interest in the entity which owns this
property.
(17) The joint venture has operating expense stops on this property of $1,264.
(18) The joint venture has operating expense stops on this property of $768.
(19) The joint venture operates these investments as a single property.
(20) The tenant expanded the premises by 107,894 square feet in 2001.
(21) The non-consolidated entities recognized $631 in real estate taxes in 2002,
gross of any expense stops.
FMV = Fair Market Value
CPI = Consumer Price Index
22
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
NONE.
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 58 Trustees since October 1993 and was Co-Chief Executive
Officer of the Company until January 2003. 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 Chief Investment Officer of the
Age 57 Company since January 2003 and as a trustee of the Company
since October 1993. He served as President of the Company
from October 1993 to April 1996, was Co-Chief Executive
Officer of the Company from October 1993 until January 2003,
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 Executive Officer of the
Age 38 Company since January 2003, Chief Operating Officer since
October 1993, President since April 1996 and as a trustee
since May 1994. He served as Executive Vice President from
October 1993 to April 1996. Mr. Eglin received his B.A. from
Connecticut College in 1986.
PATRICK CARROLL...................... Mr. Carroll has served as Chief Financial Officer of the
Age 39 Company since May 1998, Treasurer since January 1999 and
Executive Vice President since January 2003. 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 1995, and is a Certified
Public Accountant.
</Table>
23
<Table>
<Caption>
NAME BUSINESS EXPERIENCE
---- -------------------
WILLIAM N. CINNAMOND, JR. ........... Mr. Cinnamond has served as Senior Vice President and head
Age 54 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.
PAUL R. WOOD......................... Mr. Wood has served as Vice President, Chief Accounting
Age 43 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 39 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 42 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 and
Age 46 as an Asset Manager since 1997. 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 36 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.
BRENDAN P. MULLINIX.................. Mr. Mullinix has served as a Vice President of the Company
Age 28 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 52 Dohrmann 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.
</Table>
24
<Table>
<Caption>
NAME BUSINESS EXPERIENCE
---- -------------------
CARL D. GLICKMAN..................... Mr. Glickman has served as a trustee since May 1994. He has
Age 76 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., and Jerusalem Economic Corporation
Ltd.
JACK A. SHAFFER...................... Mr. Shaffer has served as a trustee since April 2002. Mr.
Age 73 Shaffer is the Principal, Co-Founder and Chairman of Jack A.
Shaffer & Company LLC, a real estate investment advisory
firm. Prior to starting Jack A. Shaffer & Company LLC in
2000, Mr. Shaffer served as Principal and Managing Director
of International Relations for Sonnenblock-Goldman Company.
Mr. Shaffer is a Governor and Trustee of the Urban Land
Institute.
SETH M. ZACHARY...................... Mr. Zachary has served as a trustee since November 1993.
Age 50 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>
25
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, 2002........................................... $16.3500 $13.2500
September 30, 2002.......................................... 16.8700 14.9000
June 30, 2002............................................... 16.5300 15.0000
March 31, 2002.............................................. 16.0000 14.2100
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
</Table>
The closing price of the common shares of the Company was $17.00 on March
20, 2003.
As of March 20, 2003, the Company had 3,261 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 2002 2001 2000 1999 1998
- -------------- ----- ----- ----- ----- -----
March 31, .................................... $0.33 $0.31 $0.30 $0.30 $0.29
June 30, ..................................... $0.33 $0.32 $0.30 $0.30 $0.29
September 30, ................................ $0.33 $0.32 $0.31 $0.30 $0.29
December 31, ................................. $0.33 $0.32 $0.31 $0.30 $0.30
</Table>
The Company's current quarterly dividend rate is $0.335 per share, or $1.34
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>
2002 2001 2000
------- ------- -------
Total dividends per share............................. $ 1.32 $ 1.27 $ 1.22
======= ======= =======
Ordinary income....................................... 77.89% 95.46% 87.78%
Short-term capital gain............................... 2.27 -- --
20% rate gain......................................... 4.12 -- 8.48
25% rate gain......................................... 5.65 -- 3.74
Percent non-taxable as return of capital.............. 10.07 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
26
agreements, the ability of lessees to meet their obligations to the Company and
any unanticipated capital expenditures.
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 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, 2002 approximately 4.3 million common shares
are enrolled in the dividend reinvestment program.
Equity Compensation Plan Information. The following table sets forth
certain information, as of December 31, 2002, with respect to compensation plans
(including individual compensation arrangements) under which equity securities
of the Company are authorized for issuance.
<Table>
<Caption>
NUMBER OF SECURITIES
REMAINING AVAILABLE FOR
NUMBER OF SECURITIES FUTURE ISSUANCE UNDER
TO BE ISSUED UPON WEIGHTED-AVERAGE EQUITY COMPENSATION
EXERCISE OF EXERCISE PRICE OF PLANS (EXCLUDING
OUTSTANDING OPTIONS, OUTSTANDING OPTIONS, SECURITIES REFLECTED IN
WARRANTS AND RIGHTS WARRANTS AND RIGHTS COLUMN (A))
PLAN CATEGORY (A) (B) (C)
------------- -------------------- -------------------- -----------------------
Equity compensation plans approved
by security holders.............. 1,233,057 $13.39 1,584,749
Equity compensation plans not
approved by security holders..... -- -- --
-------- ------ --------
Total.................... 1,233,057 $13.39 1,584,749
======== ====== ========
</Table>
27
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, 2002. 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)
<Table>
<Caption>
2002 2001 2000 1999 1998
-------- -------- -------- --------- ---------
Total revenues........................ $100,619 $ 82,862 $ 80,005 $ 77,300 $ 65,117
Operating expenses, including minority
interest............................ (70,851) (61,656) (61,012) (61,080) (48,433)
Transactional expenses................ -- -- -- -- (559)
Gain (loss) on sale of properties..... 1,172 -- 2,959 5,127 (388)
Income before extraordinary items..... 30,940 21,206 21,952 21,347 15,737
Extraordinary items................... (345) (3,144) -- -- --
Net income............................ 30,595 18,062 21,952 21,347 15,737
Income before extraordinary items per
common share-basic.................. 1.12 0.95 1.15 1.11 0.79
Income before extraordinary items per
common share-diluted................ 1.10 0.93 1.10 1.08 0.78
Net income per common share-basic..... 1.11 0.79 1.15 1.11 0.79
Net income per common share-diluted... 1.09 0.77 1.10 1.08 0.78
Cash dividends declared per common
share............................... 1.32 1.29 1.23 1.20 1.18
Net cash provided by operating
activities.......................... 58,129 44,852 41,175 39,783 32,380
Net cash used in investing
activities.......................... (106,030) (64,321) (38,549) (64,942) (111,080)
Net cash provided by (used in)
financing activities................ 46,135 28,540 (6,671) 22,912 86,144
Ratio of earnings to combined fixed
charges and preferred dividends..... 1.88 1.57 1.55 1.58 1.51
Real estate assets, net............... 779,150 714,047 584,198 606,592 609,717
Investments in non-consolidated
entities............................ 54,261 48,764 40,836 11,523 --
Total assets.......................... 902,471 822,153 668,377 656,481 647,007
Mortgages and notes payable........... 491,517 455,771 387,326 372,254 354,281
Funds from operations(1).............. 62,163 50,270 46,316 40,652 35,141
Rent received below straight-line
rent................................ 2,426 2,755 2,804 2,054 2,411
</Table>
- ---------------
(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,
but limited, 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.
28
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.
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, 2002, the Company owned or had interests in 103 real
estate properties. During 2002, the Company purchased 9 properties, including
non-consolidated investments, for $148.0 million.
During 2002, the Company sold 5 properties (including a 77.3% interest in a
property) and one building in the Palm Beach Gardens, Florida property for $20.8
million, which resulted in an aggregate gain of approximately $1.2 million.
During 2001, the Company sold one property for $4.1 million which approximated
book value.
CRITICAL ACCOUNTING POLICIES
The Company's accompanying consolidated financial statements have been
prepared in conformity with accounting principles generally accepted in the
United States of America, which require management to make estimates that affect
the amounts of revenues, expenses, assets and liabilities reported. The
following are critical accounting policies which are important to the portrayal
of the Company's financial condition and results of operations and which require
some of management's most difficult, subjective and complex judgments. The
accounting for these matters involves the making of estimates based on current
facts, circumstances and assumptions which could change in a manner that would
materially affect management's future estimate with respect to such matters.
Accordingly, future reported financial conditions and results could differ
materially from financial conditions and results reported based on management's
current estimates.
Revenue Recognition. The Company recognizes revenue in accordance with
Statement of Financial Accounting Standards No. 13 "Accounting for Leases" (SFAS
No.13). SFAS No.13 requires that revenue be recognized on a straight-line basis
over the term of the lease unless another systematic and rational basis is more
representative of the time pattern in which the use benefit is derived from the
leased property.
Gains on sales of real estate are recognized pursuant to the provisions of
SFAS No. 66 "Accounting for Sales of Real Estate." The specific timing of the
sale is measured against various criteria in SFAS No. 66 related to the terms of
the transactions and any continuing involvement in the form of management or
financial assistance associated with the properties. If the sales criteria are
not met, the gain is deferred and the finance, installment or cost recovery
method, as appropriate, is applied until the sales criteria are met.
Accounts Receivable. The Company continuously monitors collections from
its tenants and would make a provision for estimated losses based upon
historical experience and any specific tenant collection issues that the Company
has identified.
Real Estate. The Company evaluates the carrying value of all real estate
held to determine if an impairment has occurred which would require the
recognition of a loss. The evaluation includes reviewing anticipated cash flows
of the property, based on current leases in place, coupled with an estimate of
proceeds to be realized upon sale. However, estimating future sale proceeds is
highly subjective and such estimates could differ materially from actual
results.
29
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, 2002, $31.0 million was outstanding at an
interest rate of 3.20%. The Company pays an unused facility fee equal to 25
basis points if 50% or less of the facility is utilized and 15 basis points if
greater than 50% of the facility is utilized.
Since its formation in 1993, the Company has raised, through the issuance
of common shares, preferred shares and OP Units, aggregate capital of
approximately $234.5 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 2002, the Company completed a 2.7 million common share offering at
$15.85 per share raising $40.5 million of net proceeds. The proceeds were used
to repay 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 and/or 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 as a
percentage of FFO, reserving such amounts as it considers necessary for the
maintenance or 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.
Dividends paid to common shareholders increased to $35.8 million in 2002,
compared to $25.0 million in 2001 and $20.8 million in 2000. The Company's
dividend and distribution FFO payout ratio, on a per share basis, for 2002,
2001, and 2000 was 70.2%, 71.3% and 69.3% 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 paying $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 $9.4 million.
Rents are paid semi-annually in arrears. The property is encumbered by a
non-recourse first mortgage, bearing imputed interest at 7% per annum with an
outstanding balance of $25.6 million at December 31, 2002.
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 $3.2 million.
The property is a warehouse distribution facility utilized in Kmart's
logistical operation. As of December 31, 2002 the Company had $7.3 million in
accounts receivable from Kmart (including $2.0 million in straight-line rents
and $2.6 million in pre-petition rent). Kmart is current in its rental
obligation to the Company since filing for bankruptcy and the next rental
payment is due April 1, 2003.
30
The Company believes that cash flows from operations will continue to
provide adequate capital to fund its operating and administrative expenses,
regular debt service obligations and all 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 $58.1 million
for 2002 from $44.9 million for 2001 and $41.2 million for 2000.
Net cash used in investing activities totaled $106.0 million in 2002, $64.3
million in 2001 and $38.5 million in 2000. Cash used in investing activities
related primarily to investments in real estate properties and joint 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 $46.1 million
in 2002, $28.5 million in 2001 and $(6.7) million in 2000. Cash provided by
(used in) financing activities during each year was primarily attributable to
proceeds from equity offerings, 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.
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, 2002 (assuming the Company's annual
dividend rate remains at the current $1.34 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...................................... 3,499,108 1,401,159 $1.34 $4,689
At any time...................................... 1,254,152 120,374 1.08 1,354
At any time...................................... 114,059 52,144 1.12 128
January 2003..................................... 17,901 -- -- --
December 2003.................................... 1,341 -- 1.34 2
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 1.34 60
--------- --------- ----- ------
5,257,365 1,623,550 $1.19 $6,248
========= ========= ===== ======
</Table>
Affiliate units, which are included in total units, represent OP Units held
by two executive officers (including their affiliates) of the Company.
31
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, 2002, $31.0 million was outstanding and $24.8 million was available
to be drawn. The Company had six outstanding letters of credit aggregating $4.2
million which expire in 2003 ($0.3 million), 2004 ($0.6 million), 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, 2002, a total of 66 of the Company's 87 consolidated properties were subject
to outstanding mortgages which had an aggregate principal amount of $448.0
million. As of December 31, 2002 the weighted average interest rate on the
Company's outstanding mortgages, including line of credit borrowings and other
corporate debt, was approximately 6.95%. The scheduled principal amortization
payments for the next five years are as follows: $17.4 million in 2003; $17.7
million in 2004; $16.1 million in 2005, $14.5 million in 2006 and $15.3 million
in 2007. Approximate balloon payment amounts, having a weighted average interest
rate of 6.74%, excluding line of credit borrowings and other corporate debt, due
the next five years are as follows: $0 million in 2003; $14.4 million in 2004;
$76.6 million in 2005, $0 in 2006 and $0 in 2007. 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 five of the
properties, the Company has a level of property operating expense responsibility
and a sixth obligates the Company to pay real estate taxes in 2003 and for the
tenant to be responsible thereafter. 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.
The Company's tenants pay the rental obligations on ground leases either
directly to the fee holder or to the Company as increased rent. The annual
ground lease rental payment obligations for each of the next five years is $0.9
million.
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 next five years are
as follows: $0.4 million in 2003; $0.4 million in 2004; $0.4 million in 2005;
$0.7 million in 2006 and $0.9 million in 2007. As of December 31, 2002, $6.6
million is outstanding of which $3.4 million is due to two executive officers of
the Company.
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, 2002, 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. No common shares or units were
repurchased in 2002.
32
RESULTS OF OPERATIONS ($000)
<Table>
<Caption>
INCREASE
(DECREASE)
---------------------
SELECTED INCOME STATEMENT DATA 2002 2001 2000 2002-2001 2001-2000
- ------------------------------ -------- ------- ------- --------- ---------
Total revenues............................. $100,619 $82,862 $80,005 $17,757 $2,857
Total expenses............................. 64,975 56,272 54,997 8,703 1,275
Interest................................. 33,502 29,732 29,581 3,770 151
Depreciation and amortization of real
estate................................ 21,480 18,312 17,513 3,168 799
General & administrative................. 5,741 4,952 4,902 789 50
Property operating....................... 2,357 1,636 1,504 721 132
Gains on sale.............................. 1,172 -- 2,959 1,172 (2,959)
Extraordinary items........................ (345) (3,144) -- (2,799) 3,144
Net income................................. 30,595 18,062 21,952 12,533 (3,890)
</Table>
COMPARISON OF 2002 TO 2001
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 2002 of $17.8 million, $15.5 million is primarily
attributable to rental revenue from properties purchased in 2001 (primarily the
purchase of properties from Net 1 L.P. and Net 2 L.P. in November 2001) and
owned in 2002 ($14.8 million) and properties purchased in 2002 ($2.9 million)
offset by a reduction in rental revenue from a decrease in overall portfolio
occupancy from 99.7% to 99.2% ($0.3 million) and property sales ($2.0 million).
Of the remaining $2.3 million in revenue growth in 2002, $1.8 million was
attributable to an increase in earnings from non-consolidated entities and $0.5
million was attributable primarily to higher interest earned due to greater cash
balances carried. The $3.8 million increase in interest expense due to the
growth of the Company's portfolio has been partially offset by a reduction in
the weighted average interest rate from 7.28% for the year ended December 31,
2001 to 6.95% for the year ended December 31, 2002 due to debt refinancings,
scheduled principal amortization payments, lower variable interest rates and
lower interest rates on new debt incurred by the Company. The Company's general
and administrative expenses, which increased in absolute dollars due to the
acquisition of properties from Net 1 L.P. and Net 2 L.P., decreased to 5.7% of
revenue in 2002 compared with 6.0% in 2001. Property operating expenses
increased due to the vacancy of one property in the third quarter of 2001, which
resulted in the Company incurring property level operating expenses which
normally are the responsibility of the tenant, two properties in which the
Company has a level of operating expense responsibility and an estimate of
expenses for the Kmart property. Net income increased in 2002 due to the impact
of items discussed above plus $1.2 million in gains on sale of properties and a
net reduction of $2.8 million in extraordinary charges related to the retirement
of debt.
The Company's non-consolidated entities had aggregate net income of $14.1
million in 2002 compared with $10.2 million in 2001. The increase in net income
is primarily attributable to an increase in rental revenue of $7.7 million in
2002 attributable to the acquisition of properties, the expansion of an existing
property and the joint venturing of a single property in 2002. Advisory fee
income increased by $0.3 million in 2002 due to the timing of transactions which
generate acquisition fees. These revenue sources were partly offset by an
increase in (i) interest expense of $2.5 million in 2002 due to partially
funding third quarter 2002 and fourth quarter 2001 acquisitions with the use of
non-recourse mortgage debt and the joint venturing of a single property in 2002,
and (ii) depreciation expense of $1.5 million in 2002 due to more depreciable
assets owned.
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, generate acquisition, debt placement and
asset management fees when such properties are acquired by joint venture or
advisory programs, growth in net income is dependent on index adjusted rents (7
leases), percentage rents (3 leases), reduced interest expense on amortizing
mortgages and by controlling variable overhead costs. However, there
33
are many factors beyond management's control that could offset these items
including, without limitation, increased interest rates of variable debt ($78.4
million as of December 31, 2002 at a weighted average interest rate of 3.88%)
and tenant monetary defaults. Effective January 1, 2003 the Company converted
its non-voting interest in LRA to a 99% voting interest and accordingly LRA will
be consolidated for financial reporting purposes instead of being treated under
the equity method as it currently is. Had LRA been consolidated historically,
general and administrative expenses as a percentage of revenue would have been
6.6%, 6.9%, and 7.4% for the years ended December 31, 2002, 2001 and 2000,
respectively.
COMPARISON OF 2001 TO 2000
Of the increase in total revenues in 2001 of $2.9 million, $1.5 million is
attributable to increased earnings from non-consolidated entities established in
1999. The remaining revenue growth in 2001 was primarily attributable to
increased rental revenues from the purchase of Net 1 L.P. and Net 2 L.P. in
November 2001 ($1.3 million). The increase in interest expense due to the growth
of the Company's portfolio has been partially 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 constant in 2001 in
absolute dollars and decreased to 6.0% of revenue in 2001 compared to 6.1% of
revenue in 2000 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 expense responsibility. 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.
The Company's non-consolidated entities had aggregate net income of $10.2
million in 2001 and $4.8 million in 2000. The increase in net income is
primarily attributable to an increase in rental income of $21.1 million in 2001
attributable to acquisition of properties and expansion of an existing property.
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. These revenue
sources were partly offset by an increase in (i) interest expense of $9.0
million in 2001 due to increased acquisition leverage, (ii) depreciation expense
of $4.0 million in 2001 due to more depreciable assets owned and (iii) property
operating/general and administrative expenses of $2.2 million in 2001 due to an
increase in the asset base and advisory accounts.
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, but
limited, 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 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.
34
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, 2002 ($000):
<Table>
<Caption>
2002 2001 2000
-------- -------- --------
Net income.................................................. $ 30,595 $ 18,062 $ 21,952
Depreciation and amortization of real estate.............. 21,480 18,312 17,513
Minority interests' share of net income................... 5,627 5,215 5,772
Gain on sale of properties................................ (1,172) -- (2,959)
Amortization of leasing commissions....................... 677 769 503
Deemed conversion of notes payable........................ -- 1,000 1,582
Joint venture adjustment-depreciation..................... 4,611 3,768 1,953
Extraordinary item........................................ 345 3,144 --
-------- -------- --------
Funds From Operations.................................. $ 62,163 $ 50,270 $ 46,316
======== ======== ========
Cash flows from operating activities........................ $ 58,129 $ 44,852 $ 41,175
Cash flows used in investing activities..................... (106,030) (64,321) (38,549)
Cash flows from (used in) financing activities.............. 46,135 28,540 (6,671)
</Table>
The Company's dividend and distribution FFO payout ratio, on a per share
basis, was 70.2%, 71.3% and 69.3% for the years ended December 31, 2002, 2001
and 2000 respectively.
RECENTLY ISSUED ACCOUNTING STANDARDS
The Company's adoption of SFAS No. 144 "Accounting for the Impairment or
Disposal of Long-Lived Assets," had no impact of the Company's consolidated
financial position or results of operations. In April 2002, the FASB issued SFAS
No. 145 which rescinds SFAS No. 4 which required all gains and losses on
extinguishment of debt to be classified as an extraordinary item. The Company
will adopt the provisions of SFAS No. 145 effective January 1, 2003. Had the
statement been adopted earlier, the extraordinary items recorded in 2002 and
2001 would have been eliminated and the charges would have been reflected in
interest expense. In July 2002, the FASB issued SFAS No. 146 which requires that
exit or disposal costs be recorded when incurred and be measured at fair value.
SFAS No. 146 is effective for an exit or disposal activity initiated after
December 31, 2002. The Company does not expect that this statement will have any
effect on the Company's consolidated results of operations or financial
position.
In January 2003, the Financial Accounting Standards Board issued FASB
Interpretation No. 46, "Consolidation of Variable Interest Entities" ("FIN 46").
FIN 46 requires that companies that absorb the majority of another entity's
expected losses, receive a majority of its expected residual returns, or both,
as a result of holding variable interests, which are ownership, contractual, or
other economic interests in an entity, consolidate the variable interest entity.
The consolidation requirements apply to all variable interest entities created
after January 31, 2003 and all other existing entities beginning July 1, 2003.
The Company has not determined the impact the adoption of FIN 46 will have on
its consolidated results of operations or financial position. However, it is
possible that the adoption of FIN 46 will require the Company to consolidate its
Florence joint venture. Financial information for this joint venture is included
in Footnote 5 of the Company's financial statements.
In November 2002, the FASB issued Interpretation No. 45 "Guarantor's
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others," which elaborates on the disclosures to be
made by a guarantor in its interim and annual financial statements about its
obligations under certain guarantees that it has issued. The initial recognition
and measurement provisions of this Interpretation are applicable on a
prospective basis to guarantees issued or modified after December 31, 2002. The
Company believes that the adoption of this interpretation will not have a
material effect to the Company's financial statements.
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, 2002 and 2001 the Company's variable rate indebtedness
represented 15.9% and 12.7%, respectively, of total mortgages and notes payable.
During 2002 and 2001, this variable rate indebtedness had a weighted average
interest rate of 4.12% and 6.56%, respectively. Had the weighted average
interest rate been 100 basis points higher the Company's net income would have
been reduced by $0.8 million and $0.3 million in 2002 and 2001, respectively.
35
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
LEXINGTON CORPORATE PROPERTIES TRUST
AND CONSOLIDATED SUBSIDIARIES
INDEX
<Table>
<Caption>
PAGE
-----
Independent Auditors' Report................................ 37
Consolidated Balance Sheets as of December 31, 2002 and
2001...................................................... 38
Consolidated Statements of Income for the years ended
December 31, 2002, 2001 and 2000.......................... 39
Consolidated Statements of Changes in Shareholders' Equity
for the years ended December 31, 2002, 2001 and 2000...... 40
Consolidated Statements of Cash Flows for the years ended
December 31, 2002, 2001 and 2000.......................... 41
Notes to Consolidated Financial Statements.................. 42-64
Financial Statement Schedule
Schedule III -- Real Estate and Accumulated Depreciation.... 65-66
</Table>
36
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, 2002 and 2001,
and the results of their operations and their cash flows for each of the years
in the three-year period ended December 31, 2002 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.
LOGO
New York, New York
January 28, 2003, except
as to note 18 which
is as of March 15, 2003
37
LEXINGTON CORPORATE PROPERTIES TRUST
AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
($000 EXCEPT PER SHARE AMOUNTS)
DECEMBER 31,
<Table>
<Caption>
2002 2001
-------- --------
ASSETS
Real estate, at cost
Buildings and building improvements....................... $770,375 $702,494
Land and land estates..................................... 131,496 116,795
Land improvements......................................... 3,154 3,154
Fixtures and equipment.................................... 8,345 8,345
-------- --------
913,370 830,788
Less: accumulated depreciation............................ 134,220 116,741
-------- --------
779,150 714,047
Investment in and advances to non-consolidated entities..... 54,261 48,764
Cash and cash equivalents................................... 12,097 13,863
Deferred expenses (net of accumulated amortization of $6,269
in 2002 and $4,411 in 2001)............................... 8,168 8,875
Rent receivable............................................. 23,650 19,026
Other assets, net........................................... 25,145 17,578
-------- --------
$902,471 $822,153
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Mortgages and notes payable................................. $460,517 $445,771
Credit facility borrowings.................................. 31,000 10,000
Origination fees payable, including accrued interest........ 6,565 6,636
Accounts payable and other liabilities...................... 8,003 5,489
Accrued interest payable.................................... 2,755 1,507
-------- --------
508,840 469,403
Minority interests.......................................... 56,846 57,859
-------- --------
565,686 527,262
-------- --------
Commitments and contingencies (notes 6, 8 and 12)
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 in 2001..................... -- 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, 29,742,160 and 24,219,409 shares
issued and outstanding in 2002 and 2001,
respectively........................................... 3 2
Additional paid-in-capital................................ 414,989 342,161
Deferred compensation, net................................ (1,766) (1,641)
Accumulated distributions in excess of net income......... (77,777) (71,836)
-------- --------
335,449 268,686
Less: notes receivable from officers/shareholders......... (2,473) (1,973)
-------- --------
Total shareholders' equity........................ 332,976 266,713
-------- --------
$902,471 $822,153
======== ========
</Table>
The accompanying notes are an integral part of these consolidated financial
statements.
38
LEXINGTON CORPORATE PROPERTIES TRUST
AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
($000 EXCEPT PER SHARE AMOUNTS)
YEARS ENDED DECEMBER 31,
<Table>
<Caption>
2002 2001 2000
----------- ----------- -----------
Revenues:
Rental.............................................. $ 93,884 $ 78,402 $ 76,824
Equity in earnings of non-consolidated entities..... 5,079 3,328 1,851
Interest and other.................................. 1,656 1,132 1,330
----------- ----------- -----------
100,619 82,862 80,005
----------- ----------- -----------
Expenses:
Interest expense.................................... 33,502 29,732 29,581
Depreciation and amortization of real estate........ 21,480 18,312 17,513
Amortization of deferred expenses................... 1,895 1,640 1,497
General and administrative expenses................. 5,741 4,952 4,902
Property operating expenses......................... 2,357 1,636 1,504
----------- ----------- -----------
64,975 56,272 54,997
----------- ----------- -----------
Income before gain on sale of properties, minority
interests and extraordinary items................... 35,644 26,590 25,008
Gain on sale of properties............................ 1,172 -- 2,959
----------- ----------- -----------
Income before minority interests and extraordinary
items............................................... 36,816 26,590 27,967
Minority interests.................................... 5,876 5,384 6,015
----------- ----------- -----------
Income before extraordinary items..................... 30,940 21,206 21,952
Extraordinary items................................... 345 3,144 --
----------- ----------- -----------
Net income....................................... $ 30,595 $ 18,062 $ 21,952
=========== =========== ===========
Income per common share -- basic:
Income before extraordinary items..................... $ 1.12 $ 0.95 $ 1.15
Extraordinary items................................... (0.01) (0.16) --
----------- ----------- -----------
Net income....................................... $ 1.11 $ 0.79 $ 1.15
=========== =========== ===========
Weighted average common shares outstanding............ 27,026,789 19,522,323 16,900,039
=========== =========== ===========
Income per common share -- diluted:
Income before extraordinary items..................... $ 1.10 $ 0.93 $ 1.10
Extraordinary items................................... (0.01) (0.16) --
----------- ----------- -----------
Net income....................................... $ 1.09 $ 0.77 $ 1.10
=========== =========== ===========
Weighted average diluted common shares outstanding.... 32,602,069 19,862,880 24,714,219
=========== =========== ===========
</Table>
The accompanying notes are an integral part of these consolidated financial
statements.
39
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, 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
Net income..................... -- -- -- -- 30,595 -- 30,595
Dividends paid to common
shareholders ($1.32 per
share)....................... -- -- -- -- (35,843) -- (35,843)
Dividends paid to preferred
shareholders ($0.3465 per
share)....................... -- -- -- -- (693) -- (693)
Conversion of preferred
shares....................... 2,000,000 -- 24,369 -- -- -- 24,369
Common shares issued, net...... 3,522,751 1 48,459 (860) -- (500) 47,100
Amortization of deferred
compensation................. -- -- -- 735 -- -- 735
---------- -- -------- ------- -------- ------- --------
Balance at December 31, 2002... 29,742,160 $3 $414,989 $(1,766) $(77,777) $(2,473) $332,976
========== == ======== ======= ======== ======= ========
</Table>
The accompanying notes are an integral part of these consolidated financial
statements.
40
LEXINGTON CORPORATE PROPERTIES TRUST
AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
($000)
YEARS ENDED DECEMBER 31,
<Table>
<Caption>
2002 2001 2000
-------- -------- ---------
Cash flows from operating activities:
Net income................................................ $ 30,595 $ 18,062 $ 21,952
Adjustments to reconcile net income to net cash provided
by operating activities, net of effects from
acquisitions:
Depreciation and amortization.......................... 23,375 19,952 19,010
Minority interests..................................... 5,876 5,384 6,015
Gain on sale of properties............................. (1,172) -- (2,959)
Extraordinary items.................................... 345 3,144 --
Straight-line rents.................................... (2,426) (2,755) (2,804)
Other non-cash charges................................. 1,016 1,089 714
Equity in earnings of non-consolidated entities........ (5,079) (3,328) (1,851)
Distributions from non-consolidated entities........... 5,704 4,593 1,092
Increase (decrease) in accounts payable and other
liabilities.......................................... 539 (2,140) 310
Other adjustments, net................................. (644) 851 (304)
-------- -------- ---------
Net cash provided by operating activities......... 58,129 44,852 41,175
-------- -------- ---------
Cash flows from investing activities:
Net proceeds from sale of properties...................... 20,756 4,107 19,402
Acquisition of the Net Partnerships, net of debt assumed
and $3,777 in cash..................................... -- (27,835) --
Investments in real estate................................ (114,272) (19,363) (27,116)
Investments in non-consolidated entities.................. (5,539) (5,620) (26,247)
Advances to non-consolidated entities..................... (2,158) (4,195) (4,588)
Investment in and advances to the Net Partnerships........ -- (10,979) --
Real estate deposits...................................... (4,817) (436) --
-------- -------- ---------
Net cash used in investing activities............. (106,030) (64,321) (38,549)
-------- -------- ---------
Cash flows from financing activities:
Proceeds of mortgages and notes payable................... 49,165 100,194 84,340
Change in credit facility borrowing, net.................. 21,000 (31,821) (29,100)
Dividends to common and preferred shareholders............ (36,536) (27,671) (23,327)
Dividend reinvestment plan proceeds....................... 4,870 2,507 1,391
Principal payments on debt, excluding normal
amortization........................................... (10,049) (48,611) (15,066)
Principal amortization payments........................... (14,091) (12,354) (11,646)
Origination fee amortization payments..................... (372) (372) (372)
Common shares issued, net of offering costs............... 41,595 61,021 11
Cash distributions to minority interests.................. (6,304) (6,236) (6,323)
Change in escrow deposits................................. (1,396) (1,002) 1,596
Increase in deferred expenses............................. (1,350) (3,203) (4,090)
Common shares/partnership units repurchased............... -- (348) (4,093)
Penalties paid on early retirement of debt................ (397) (3,575) --
Other..................................................... -- 11 8
-------- -------- ---------
Net cash provided by (used in) financing
activities...................................... 46,135 28,540 (6,671)
-------- -------- ---------
Change in cash and cash equivalents......................... (1,766) 9,071 (4,045)
Cash and cash equivalents, beginning of year................ 13,863 4,792 8,837
-------- -------- ---------
Cash and cash equivalents, end of year...................... $ 12,097 $ 13,863 $ 4,792
======== ======== =========
</Table>
The accompanying notes are an integral part of these consolidated financial
statements.
41
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 and provides investment advisory and
asset management services to institutional investors in the net lease area. As
of December 31, 2002 the Company owned or had interests in 103 properties in 30
states and Canada. The real properties owned by the Company are generally
subject to triple net leases to corporate tenants, however four provide for
operating expense stops, one is subject to a modified gross lease and one
requires the Company to be responsible for real estate taxes in 2003 and for the
tenant to be responsible thereafter.
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,
2002, the Company repurchased approximately 1.4 million common shares/
partnership units at an average price of approximately $10.55 per common share/
partnership unit. No shares or units were repurchased in 2002.
(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.
For acquisitions that are consummated subsequent to June 30, 2001, the
effective date of Statement of Financial Accounting Standards No. 141, ("SFAS
No. 141") "Business Combinations," the fair value of the real estate acquired
must be allocated among building, land, tenant improvements, the origination
value of leases and the fair value (or negative value) of above or below market
leases. The Company adopted the provisions of SFAS No.141 and determined that
the purchase price to be allocated to origination value of leases and the fair
value of above or below market leases were immaterial.
Depreciation is determined by the straight-line method over the remaining
estimated economic useful lives of the properties. The Company generally
depreciates buildings and building improvements over periods not exceeding 40
years, 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.
42
LEXINGTON CORPORATE PROPERTIES TRUST
AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
($000'S EXCEPT PER SHARE DATA)
Investments in non-consolidated entities. The Company accounts for its
investments in less than 50% owned entities and Lexington Realty Advisors, Inc.
("LRA") under the equity method since it has influence over, but does not
control such entities. Effective January 1, 2003 the Company converted its
non-voting interest in LRA to a 99% voting interest and accordingly, effective
this date, LRA will be consolidated.
Revenue. The Company recognizes revenue in accordance with SFAS No. 13.
SFAS No. 13 requires that revenue be recognized on a straight-line basis over
the term of the lease unless another systematic and rationale basis is more
representative of the time pattern in which the use benefit is derived from the
leased property. The Company's rent receivable primarily represents the amount
of the excess of rental revenues recognized over the annual rents collectible
under the leases. The Company recognizes percentage rent revenue when the cash
is received from the tenant unless it is a fixed amount in which case the
Company recognizes it ratably over the accounting period.
Gains on sales of real estate are recognized pursuant to the provisions of
SFAS No. 66 "Accounting for Sales of Real Estate." The specific timing of the
sale is measured against various criteria in SFAS No. 66 related to the terms of
the transactions and any continuing involvement in the form of management or
financial assistance associated with the properties. If the sales criteria are
not met, the gain is deferred and the finance, installment or cost recovery
method, as appropriate, is applied until the sales criteria are met.
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. LRA has elected to be treated as a taxable reit subsidiary.
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, 2002 is as follows:
<Table>
<Caption>
2002 2001 2000
------ ------ ------
Total dividends per share................................ $ 1.32 $ 1.27 $ 1.22
====== ====== ======
Ordinary income.......................................... 77.89% 95.46% 87.78%
Short-term capital gain.................................. 2.27 -- --
20% rate gain............................................ 4.12 -- 8.48
25% rate gain............................................ 5.65 -- 3.74
Percent non-taxable as return of capital................. 10.07 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, preferred shares, operating partnership units and exchangeable
redeemable secured notes. The Company's preferred shares are excluded from the
December 31, 2002 and 2000 computations since they are anti-dilutive. The
Company's preferred shares, operating partnership units and exchangeable
43
LEXINGTON CORPORATE PROPERTIES TRUST
AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
($000'S EXCEPT PER SHARE DATA)
redeemable secured notes are excluded from the 2001 computations since they are
anti-dilutive. The Company's preferred shares were converted into common shares
in April 2002 and the exchangeable redeemable secured notes were redeemed in
July 2001.
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.
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. SFAS No. 144 "Accounting for the
Impairment or Disposal of Long-Lived Assets" establishes a single accounting
model for long-lived assets to be disposed of by sale and provides
implementation guidance with respect to accounting for impairment of long-lived
assets. Also, SFAS No. 144 requires that discontinued operations be measured at
the lower of carrying amount or fair value less cost to sell, similar to the
basis used for other long-lived assets. Additionally, future operating losses of
discontinued operations are no longer recognized before they occur. Under SFAS
No. 144, the properties sold by the Company to third parties are considered to
be discontinued operations. However, properties contributed to entities in which
the Company maintains an ownership interest are not considered to be
discontinued operations under SFAS No. 144 due to the Company's continuing
involvement with the property. For the year ended December 31, 2002, the Company
is not reporting discontinued operations for the properties disposed of to third
parties during the period as the effect of such presentation in the Company's
consolidated statements of income is not material. In April 2002, the FASB
issued SFAS No. 145 which rescinds SFAS No. 4 which required all gains and
losses on extinguishment of debt to be classified as an extraordinary item. The
Company adopted the provisions of SFAS No. 145 effective January 1, 2003. Had
the statement been adopted earlier, the extraordinary item recorded in 2002 and
2001 would have been eliminated and the charge would have been reflected in
interest expense. In July 2002, the FASB issued SFAS No. 146 which requires that
exit or disposal costs be recorded when incurred and be measured at fair value.
SFAS No. 146 is effective for an exit or disposal activity initiated after
December 31, 2002. The Company does not expect that this statement will have any
effect on the Company's consolidated results of operations or financial
position.
In January 2003, the Financial Accounting Standards Board issued FASB
Interpretation No. 46, "Consolidation of Variable Interest Entities" ("FIN 46").
FIN 46 requires that companies that absorb the majority of another entity's
expected losses, receive a majority of its expected residual returns, or both,
as a result of holding variable interests, which are ownership, contractual, or
other economic interests in an entity, consolidate the variable interest entity.
The consolidation requirements apply to all variable interest entities created
after January 31, 2003 and all other existing entities beginning July 1, 2003.
The Company has not determined the impact the adoption of FIN 46 will have on
its consolidated results of operations or financial position. However, it is
possible that the adoption of FIN 46 will require the Company to consolidate its
Florence joint venture. Financial information for this joint venture is included
in Footnote 5.
In November 2002, the FASB issued Interpretation No. 45 "Guarantor's
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others," which elaborates on the disclosures to be
made by a guarantor in its interim and annual financial statements about its
obligations under certain guarantees that it has issued. The initial recognition
and measurement provisions of this Interpretation are applicable on a
prospective basis to guarantees issued or modified after December 31, 2002. The
Company believes that the adoption of this interpretation will not have a
material effect to the Company's financial statements.
44
LEXINGTON CORPORATE PROPERTIES TRUST
AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
($000'S EXCEPT PER SHARE DATA)
Common Share Options. The Company has elected to adopt the disclosure only
provisions of SFAS No. 123 "Accounting for Stock-Based Compensation," and
accounts for its option plan under the recognition provisions of Accounting
Principles Board Opinion No. 25 "Accounting for Stock Issued to Employees."
Accordingly, no compensation cost has been recognized with regard to options
granted in the consolidated statements of income.
The per share weighted average fair value of options granted during 2002,
2001 and, 2000 were estimated to be $2.42, $2.00 and $2.02, 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 3.32% in 2002 and 3.35% in 2001 and 5% in 2000; (ii) an
expected life of five years; (iii) volatility factors of 15.11%, 15.79% and
19.20% for 2002, 2001 and 2000, respectively; and (iv) actual dividends paid.
If stock based compensation cost had been recognized based upon the fair
value at the date of grant for options awarded in 2002, 2001 and 2000 the
Company's pro forma net income and pro forma net income per share would have
been:
<Table>
<Caption>
2002 2001 2000
------- ------- -------
Net income, as reported............................... $30,595 $18,062 $21,952
Pro forma net income.................................. $29,620 $16,653 $20,001
Net income per share, as reported
Basic............................................... $ 1.11 $ 0.79 $ 1.15
Diluted............................................. $ 1.09 $ 0.77 $ 1.10
Pro forma net income per share
Basic............................................... $ 1.07 $ 0.72 $ 1.03
Diluted............................................. $ 1.06 $ 0.70 $ 1.02
</Table>
Reclassifications. Certain amounts included in prior years' financial
statements have been reclassified to conform with the current year presentation.
45
LEXINGTON CORPORATE PROPERTIES TRUST
AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
($000'S EXCEPT PER SHARE DATA)
(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, 2002:
<Table>
<Caption>
2002 2001 2000
----------- ----------- -----------
BASIC
Income before extraordinary items............. $ 30,940 $ 21,206 $ 21,952
Less dividends attributable to preferred
shares...................................... (693) (2,709) (2,562)
----------- ----------- -----------
Income attributed to common shareholders
before extraordinary items.................. 30,247 18,497 19,390
Extraordinary items........................... (345) (3,144) --
----------- ----------- -----------
Net income attributed to common
shareholders................................ $ 29,902 $ 15,353 $ 19,390
=========== =========== ===========
Weighted average number of common shares
outstanding................................. 27,026,789 19,522,323 16,900,039
=========== =========== ===========
Income per common share -- basic:
Income before extraordinary items............. $ 1.12 $ 0.95 $ 1.15
Extraordinary items........................... (0.01) (0.16) --
----------- ----------- -----------
Net income.................................... $ 1.11 $ 0.79 $ 1.15
=========== =========== ===========
DILUTED
Income attributed to common shareholders
before extraordinary items.................. $ 30,247 $ 18,497 $ 19,390
Add incremental income attributed to assumed
conversion of dilutive securities........... 5,627 -- 7,772
----------- ----------- -----------
Income attributed to common shareholders
before extraordinary items.................. 35,874 18,497 27,162
Extraordinary items........................... (345) (3,144) --
----------- ----------- -----------
Net income attributed to common
shareholders................................ $ 35,529 $ 15,353 $ 27,162
=========== =========== ===========
Weighted average number of shares used in
calculation of basic earnings per share..... 27,026,789 19,522,323 16,900,039
Add incremental shares representing:
Shares issuable upon exercise of employee
stock options............................ 300,102 340,557 166,806
Shares issuable upon conversion of dilutive
securities............................... 5,275,178 -- 7,647,374
----------- ----------- -----------
Weighted average number of shares used in
calculation of diluted earnings per common
share....................................... 32,602,069 19,862,880 24,714,219
=========== =========== ===========
Income per common share -- diluted:
Income before extraordinary items............. $ 1.10 $ 0.93 $ 1.10
Extraordinary items........................... (0.01) (0.16) --
----------- ----------- -----------
Net income.................................... $ 1.09 $ 0.77 $ 1.10
=========== =========== ===========
</Table>
46
LEXINGTON CORPORATE PROPERTIES TRUST
AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
($000'S EXCEPT PER SHARE DATA)
(4) INVESTMENTS IN REAL ESTATE
During 2002 and 2001 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
- ----------- --------------------------------------- -------------------- ----------- ------------ ------- ---------
2002
March 15 Apria Healthcare Group, Inc. Lake Forest, CA $ 16,970 $ 1,791 01-12 100,012
August 27 Quest Diagnostics, Inc. Valley Forge, PA 19,500 2,161 04-11 109,281
August 30 AdvancePCS, Inc. Knoxville, TN 8,100 822 05-13 59,748
September
26 Anda Pharmaceuticals, Inc Groveport, OH 11,800 1,206 03-12 354,676
December 27 North American Van Lines Westmont, IL 24,825 2,516 11-15 269,715
December 30 Wells Fargo Home Mortgage Fort Mill, SC 17,933 1,868 01-13 169,083
----------- ------------ ---------
$ 99,128 $10,364 1,062,515
=========== ============ =========
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 Communications 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. Tuscon, 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
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
=========== ============ =========
</Table>
The Company sold four properties and one building in the Palm Beach
Gardens, Florida property in 2002, one property in 2001 and three properties in
2000 for aggregate selling prices of $16,342, $4,107 and $19,600, respectively,
which resulted in gains in 2002, 2001 and 2000 of $ 1,172, $0 and $2,959,
respectively. In addition, the Company sold a 77.3% interest in a property
(along with the related non-recourse mortgage) in Florence, South Carolina for
net proceeds of $4,414 and deferred a $671 gain on sale since the purchasers can
47
LEXINGTON CORPORATE PROPERTIES TRUST
AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
($000'S EXCEPT PER SHARE DATA)
put their interests in the property to the Company for a six month period
commencing January 2004 for $4,581. 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.
During 2002, the Company expanded its property in Lancaster, California net
leased to Michaels Stores, Inc. The expansion, which cost $15,200, is leased to
the tenant through September 2019 at annual rent of $1,808. In connection with
the expansion, the initial lease term was also extended to September 2019.
The Company has not presented pro forma information for 2002 because the
acquisitions and dispositions are not significant individually or in the
aggregate. The following unaudited pro forma operating information for the year
ended December 31, 2001 has been prepared as if all Company acquisitions and
dispositions (including non-consolidated entities) in 2001 had been consummated
as of January 1, 2001. 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, 2001. Unaudited pro forma amounts
are as follows:
<Table>
<Caption>
DECEMBER 31, 2001
-----------------
Revenues.................................................... $98,098
Income before extraordinary items........................... $27,101
Net income.................................................. $23,958
Income before extraordinary items per common share:
Basic..................................................... $ 1.14
Diluted................................................... $ 1.10
Net income per common share:
Basic..................................................... $ 0.99
Diluted................................................... $ 0.98
</Table>
(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 or
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, 2002 total contributions were $127,623. 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 the Company and CRF announced the formation of Lexington
Acquiport Company II, LLC ("LAC II"). The Company and CRF have committed an
additional $50,000 and $150,000, respectively. In addition to the fees LRA
currently earns on acquisitions and asset management 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 by this joint venture will be allocated
25% to the Company and 75% to CRF. There have been no investments made under
this program.
CRF can presently elect 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
48
LEXINGTON CORPORATE PROPERTIES TRUST
AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
($000'S EXCEPT PER SHARE DATA)
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 LAC properties (all
properties that are currently owned) and $15.20 for LAC II properties purchased.
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 2002, 2001 and 2000, LAC made the following investments:
<Table>
<Caption>
NET
RENTABLE
DATE OF ACQUISITION BASE RENT LEASE SQUARE
ACQUISITION TENANT LOCATION COST DECEMBER 31, EXPIRES FEET
- ----------- ---------------------------------------- -------------- ----------- ------------ ------- ---------
2002
August 5 TNT Logistics North America, Inc. Laurens, SC $ 27,100 $ 3,227 08-12 1,164,000
August 5 TNT Logistics North America, Inc. Temperance, MI 18,186 2,161 08-12 752,000
-------- ------- ---------
$ 45,286 $ 5,388 1,916,000
======== ======= =========
2001
May 6 Kraft Foods North America, Inc. Winchester, VA $ 14,400 $ 1,515 05-11 344,700
======== ======= =========
2000
January 20 Structural Dynamics Research Corporation Milford, OH $ 26,900 $ 2,790 04-11 212,836
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, Inc. Irving, TX 41,850 4,250 01-10 247,254
September 28 First USA Management Services, Inc. Lake Mary, FL 41,700 5,741 09-09 251,075
December 27 Aventis Pharmaceuticals, Inc. Parsippany, NJ 81,000 8,487 01-10 340,240
-------- ------- ---------
$235,037 $26,580 1,352,405
======== ======= =========
</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.
Summarized balance sheet data as of December 31, 2002 and 2001 and income
statement data for the years ended December 31, 2002, 2001 and 2000 is as
follows:
<Table>
<Caption>
2002 2001
-------- --------
Real estate, net............................................ $286,311 $245,537
Note receivable............................................. 11,009 11,009
Cash and cash equivalents................................... 3,989 3,623
Other assets................................................ 6,580 5,147
-------- --------
$307,889 $265,316
======== ========
Mortgages payable........................................... $180,223 $151,697
Other liabilities........................................... 1,934 1,351
Equity...................................................... 125,732 112,268
-------- --------
$307,889 $265,316
======== ========
</Table>
49
LEXINGTON CORPORATE PROPERTIES TRUST
AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
($000'S EXCEPT PER SHARE DATA)
<Table>
<Caption>
2002 2001 2000
-------- -------- -------
Revenues.................................................... $ 31,228 $ 28,661 $10,525
Interest expense............................................ (12,628) (11,910) (4,327)
Depreciation of real estate................................. (5,408) (4,932) (1,765)
Other....................................................... (2,925) (3,147) (1,222)
-------- -------- -------
Net income................................................ $ 10,267 $ 8,672 $ 3,211
======== ======== =======
</Table>
As of December 31, 2002, the LAC properties are 100% leased and have
scheduled lease expiration dates ranging from 2009 to 2012.
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,
- ------------
2003........................................................ $ 31,688
2004........................................................ 32,010
2005........................................................ 34,005
2006........................................................ 34,493
2007........................................................ 34,760
Thereafter.................................................. 89,909
--------
$256,865
========
</Table>
The mortgages payable bear interest at rates ranging from 6.00% 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
- ------------ ------------ -------- --------
2003.............................................. $ 2,218 $ -- $ 2,218
2004.............................................. 2,401 -- 2,401
2005.............................................. 2,643 -- 2,643
2006.............................................. 2,866 -- 2,866
2007.............................................. 3,123 -- 3,123
Thereafter........................................ 12,761 154,211 166,972
------- -------- --------
$26,012 $154,211 $180,223
======= ======== ========
</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 non-recourse
mortgage note bearing interest at 7.85%. In accordance with the operating
agreement, net cash flows, as defined, will be allocated 40% to the
50
LEXINGTON CORPORATE PROPERTIES TRUST
AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
($000'S EXCEPT PER SHARE DATA)
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 an average additional 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 December 31, 2002 and 2001 and for the years ended December 31, 2002, 2001
and 2000 is as follows:
<Table>
<Caption>
2002 2001
------- -------
Real estate, net............................................ $48,454 $50,442
Other assets................................................ 2,438 1,529
------- -------
$50,892 $51,971
======= =======
Mortgage payable............................................ $24,653 $24,863
Accrued interest............................................ 167 --
Equity...................................................... 26,072 27,108
------- -------
$50,892 $51,971
======= =======
</Table>
<Table>
<Caption>
2002 2001 2000
------- ------- -------
Rental income......................................... $ 6,930 $ 5,412 $ 4,906
Interest expense...................................... (1,970) (1,851) (2,009)
Depreciation.......................................... (1,988) (1,664) (1,624)
Other................................................. (196) (133) (143)
------- ------- -------
Net income.......................................... $ 2,776 $ 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,
- ------------
2003........................................................ $ 6,415
2004........................................................ 6,655
2005........................................................ 7,377
2006........................................................ 7,377
2007........................................................ 7,377
Thereafter.................................................. 12,908
-------
$48,109
=======
</Table>
51
LEXINGTON CORPORATE PROPERTIES TRUST
AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
($000'S EXCEPT PER SHARE DATA)
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
- ------------ ------------ ------- -------
2003.................................................. $ 243 $ -- $ 243
2004.................................................. 257 -- 257
2005.................................................. 284 -- 284
2006.................................................. 307 -- 307
2007.................................................. 332 -- 332
Thereafter............................................ 644 22,586 23,230
------ ------- -------
$2,067 $22,586 $24,653
====== ======= =======
</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 officers of the Company
and one independent third party. (See Footnote 1)
Summarized balance sheet data as of December 31, 2002 and 2001 and income
statement data for the years ended December 31, 2002, 2001 and 2000 is as
follows:
<Table>
<Caption>
2002 2001
------- -------
Real estate, net............................................ $41,613 $39,737
Cash........................................................ 1,579 806
Other assets................................................ 403 785
------- -------
$43,595 $41,328
======= =======
Mortgages payable........................................... $30,028 $30,480
Advances from the Company................................... 12,167 10,009
Other liabilities........................................... 651 598
Equity...................................................... 749 241
------- -------
$43,595 $41,328
======= =======
</Table>
52
LEXINGTON CORPORATE PROPERTIES TRUST
AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
($000'S EXCEPT PER SHARE DATA)
<Table>
<Caption>
2002 2001 2000
------- ------- -------
Rental income............................................... $ 4,499 $ 2,558 $ --
Advisory fees............................................... 1,417 1,125 1,619
Other income................................................ 6 14 70
------- ------- -------
5,922 3,697 1,689
------- ------- -------
Interest expense............................................ (2,582) (1,574) (19)
Operating expenses.......................................... (1,716) (1,555) (1,104)
Depreciation expense........................................ (1,116) (760) --
Other....................................................... -- -- (136)
------- ------- -------
(5,414) (3,889) (1,259)
------- ------- -------
Net income (loss)........................................... $ 508 $ (192) $ 430
======= ======= =======
</Table>
Included in operating expenses for the years ended December 31, 2002, 2001
and 2000 are personnel costs reimbursable to the Company of $1,189, $1,008 and
$1,104 respectively.
During 2002 and 2001 LRA made the following acquisitions:
<Table>
<Caption>
NET
RENTABLE
DATE OF ACQUISITION BASE RENT LEASE SQUARE
ACQUISITION TENANT LOCATION COST DECEMBER 31, EXPIRES FEET
- ----------- -------------------------- --------------- ----------- ------------ ------- --------
2002
August 5 TNT Canada, Inc. Alberta, Canada $ 2,896 $ 331 08-12 122,876
======= ====== =======
2001
January 15 Owens Corning, Inc. Chester, SC $15,401 $1,619 12-20 193,891
December 27 Harbor Freight Tools, Inc. Dillon, SC 16,113 1,812 12-16 474,473
------- ------ -------
$31,514 $3,431 668,364
======= ====== =======
</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,
- ------------
2003........................................................ $ 4,513
2004........................................................ 4,513
2005........................................................ 4,513
2006........................................................ 4,524
2007........................................................ 4,677
Thereafter.................................................. 47,517
-------
$70,257
=======
</Table>
53
LEXINGTON CORPORATE PROPERTIES TRUST
AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
($000'S EXCEPT PER SHARE DATA)
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
- ------------ ------------ -------- -------
2003................................................ $ 636 $ -- $ 636
2004................................................ 594 10,474 11,068
2005................................................ 452 -- 452
2006................................................ 491 -- 491
2007................................................ 532 -- 532
Thereafter.......................................... 6,998 9,851 16,849
------- ------- -------
$ 9,703 $20,325 $30,028
======= ======= =======
</Table>
Lexington Florence LLC
Lexington Florence LLC ("Florence") is a joint venture established in
January 2002 with unaffiliated investors. Its sole purpose is to own a property
in Florence, South Carolina net leased to Washington Mutual Home Loans, Inc.
through June 2008. The property is encumbered by a non-recourse mortgage bearing
interest at 7.50% per annum which matures February 2009. The Company sold a
77.3% interest in Florence to the unaffiliated investors for $4,581. The
investors have the right to put their interests in Florence to the Company for
units in LCIF (valued at $4,581). The number of units issued will have a minimum
price of $13.92 and a maximum price of $15.82.
The put is effective January 2004 and expires June 2004.
LRA earns annual asset management fees of 3.5% of rents collected.
Summarized financial information for the underlying property investment as
of December 31, 2002 and for the period January 25, 2002 (date of inception) to
December 31, 2002 is as follows:
<Table>
Real estate, net............................................ $15,544
Other assets................................................ 656
-------
$16,200
=======
Mortgage payable............................................ $ 9,544
Other liabilities........................................... 163
Equity...................................................... 6,493
-------
$16,200
=======
Rental income............................................... $ 1,576
Interest expense............................................ (676)
Depreciation................................................ (304)
Other....................................................... (46)
-------
Net income............................................. $ 550
=======
</Table>
54
LEXINGTON CORPORATE PROPERTIES TRUST
AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
($000'S EXCEPT PER SHARE DATA)
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,
- ------------
2003........................................................ $1,635
2004........................................................ 1,750
2005........................................................ 1,750
2006........................................................ 1,750
2007........................................................ 1,750
Thereafter.................................................. 875
------
$9,510
======
</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
- ------------ ------------ ------- ------
2003................................................. $ 149 $ -- $ 149
2004................................................. 158 -- 158
2005................................................. 173 -- 173
2006................................................. 186 -- 186
2007................................................. 201 -- 201
Thereafter........................................... 234 8,443 8,677
------ ------ ------
$1,101 $8,443 $9,544
====== ====== ======
</Table>
(6) MORTGAGES AND NOTES PAYABLE
The following table sets forth certain information regarding the Company's
mortgage and notes payable as of December 31, 2002 and 2001:
<Table>
<Caption>
2003
ESTIMATED
INTEREST ANNUAL BALLOON
PROPERTY LEVEL DEBT -- FIXED RATE 2002 2001 RATE MATURITY DEBT SERVICE PAYMENT
- --------------------------------- -------- -------- -------- -------- ------------ --------
Gainesville, GA................. $ 219 $ 396 13.000% 01-01-04 $ 219 $ --
Oxon Hill, MD................... 457 825 6.250% 03-01-04 381 --
REMIC Financing (b)............. 63,054 64,205 8.150% 05-25-05 6,353 60,001
Salt Lake City, UT.............. 5,145 6,759 7.870% 10-01-05 2,099 --
Bethesda, MD.................... 1,955 2,456 9.250% 05-01-06 669 --
Warren, OH...................... 25,615 29,763 7.000% 10-01-07 6,160 --
Bristol, PA..................... 9,833 9,916 7.400% 02-01-08 831 9,262
Decatur, GA..................... 6,830 6,936 6.720% 06-01-08 579 6,049
Phoenix, AZ..................... 14,553 14,805 7.890% 06-05-08 1,434 12,591
Palm Beach Gardens, FL.......... 11,509 13,288 7.010% 06-15-08 970 10,418
Canton, OH...................... 3,395 3,459 7.150% 08-11-08 313 2,936
</Table>
55
LEXINGTON CORPORATE PROPERTIES TRUST
AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
($000'S EXCEPT PER SHARE DATA)
<Table>
<Caption>
2003
ESTIMATED
INTEREST ANNUAL BALLOON
PROPERTY LEVEL DEBT -- FIXED RATE 2002 2001 RATE MATURITY DEBT SERVICE PAYMENT
- --------------------------------- -------- -------- -------- -------- ------------ --------
Spartanburg, SC................. 2,819 2,873 7.150% 08-11-08 260 2,438
Hebron, KY...................... 5,414 5,479 7.000% 10-23-08 451 4,935
Gainesville, GA (f)............. 837 777 7.500% 01-01-09 -- --
Ocala, FL....................... 13,429 13,746 7.250% 02-01-09 1,332 10,700
Canton, OH...................... 1,823 2,010 9.490% 02-28-09 388 --
Baton Rouge, LA................. 1,969 2,025 7.375% 03-01-09 208 1,470
Bristol, PA..................... 6,190 6,298 7.250% 04-01-09 571 5,228
Livonia, MI (2 properties)...... 11,133 11,240 7.800% 04-01-09 992 10,236
Henderson, NC................... 4,497 4,574 7.390% 05-01-09 417 3,854
Westland, MI.................... 3,320 3,611 10.500% 09-01-09 683 --
Salt Lake City, UT.............. 15,204 16,868 7.610% 10-01-09 2,901 --
Richmond, VA.................... 16,633 16,772 8.100% 02-01-10 1,511 15,257
Hampton, VA..................... 4,512 4,545 8.260% 04-01-10 415 4,144
Hampton, VA..................... 7,357 7,415 8.270% 04-01-10 677 6,758
Tampa, FL (Queen Palm Dr.)...... 6,096 6,150 6.880% 08-01-10 485 5,495
Tampa, FL (North 30th).......... 8,427 8,500 6.930% 08-01-10 674 7,603
Herndon, VA..................... 18,964 19,107 8.180% 12-05-10 1,723 17,301
San Diego, CA................... 4,347 4,422 7.500% 01-01-11 411 3,420
Tuscon, AZ...................... 2,483 2,519 7.500% 01-01-11 226 2,076
Columbia, SC.................... 3,472 3,522 7.540% 01-01-11 317 2,905
Valley Forge, PA................ 13,306 -- 7.120% 02-10-11 1,166 10,927
Glendale, AZ.................... 14,930 15,054 7.400% 04-01-11 1,258 13,365
Auburn Hills, MI................ 7,325 7,444 7.010% 06-01-11 637 5,918
Plymouth, MI.................... 4,866 4,932 7.960% 07-01-11 463 3,949
New Kingston, PA................ 7,364 7,450 7.790% 01-01-12 678 6,101
Mechanicsburg, PA............... 5,437 5,500 7.780% 01-01-12 500 4,503
New Kingston, PA................ 3,509 3,550 7.780% 01-01-12 323 2,906
Lake Forest, CA................. 10,939 -- 7.260% 02-01-12 901 9,708
Groveport, OH (g)............... 7,800 -- 6.030% 10-01-12 477 6,860
Dallas, TX...................... 21,785 22,128 7.490% 12-31-12 2,020 16,030
Fort Mill, SC................... 11,657 -- 6.000% 01-01-13 839 9,904
Lancaster, CA................... 10,761 10,881 7.020% 09-01-13 900 8,637
Knoxville, TN (h)............... 5,330 -- 5.950% 09-01-13 356 4,488
Eau Claire, WI.................. 2,360 2,470 8.000% 07-01-14 313 --
Franklin, NC.................... 2,053 2,111 8.500% 04-01-15 263 --
Southborough, MA................ 2,251 2,345 7.500% 09-01-15 275 --
Phoenix, AZ (k)................. -- 5,154 8.120% -- -- --
Phoenix, AZ (k)................. -- 3,488 7.500% -- -- --
Brownsville, TX (l)............. -- 616 8.375% -- -- --
Florence, SC (m)................ -- 9,681 7.500% -- -- --
-------- -------- ------- ------- --------
413,164 398,065 7.534% 46,019 308,373
-------- -------- ------- ------- --------
</Table>
56
LEXINGTON CORPORATE PROPERTIES TRUST
AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
($000'S EXCEPT PER SHARE DATA)
<Table>
<Caption>
2003
ESTIMATED
INTEREST ANNUAL BALLOON
2002 2001 RATE MATURITY DEBT SERVICE PAYMENT
-------- -------- -------- -------- ------------ --------
PROPERTY LEVEL DEBT -- VARIABLE
RATE
Milpitas, CA (a) (e)............ 17,100 17,100 4.409% 07-01-04 2,299 14,356
Marlborough, MA (c)............. 8,102 8,306 3.610% 08-01-05 524 7,477
Hebron, OH (d) (2 properties)... 9,651 9,800 3.688% 12-05-05 542 9,080
-------- -------- ------- ------- --------
34,853 35,206 4.024% 3,365 30,913
-------- -------- ------- ------- --------
CORPORATE LEVEL DEBT
Credit Facility (i)............. 31,000 10,000 3.199% 03-30-04 1,005 31,000
Warren, OH (j).................. 12,500 12,500 5.170% 10-01-07 655 12,500
-------- -------- ------- ------- --------
43,500 22,500 3.765% 1,660 43,500
-------- -------- ------- ------- --------
Total........................... $491,517 $455,771 6.952% $51,044 $382,786
======== ======== ======= ======= ========
</Table>
(a) Floating rate debt, 30 day LIBOR plus 297 bps.
(b) The REMIC Financing is secured by mortgages on 17 properties.
(c) Floating rate debt, 90 day LIBOR plus 190 bps.
(d) Floating rate debt, 30 day LIBOR plus 225 bps.
(e) Commencing 03/01/03 all property cash flows will be used for principal
amortization.
(f) Accrual only through 01/31/04. Commencing 02/01/04 annual debt service of
$218 is due.
(g) Interest only through April 2004, and $563 in annual debt service
thereafter.
(h) Interest only through May 2003, and $381 in annual debt service thereafter.
(i) 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, 2002 was 3.20%. 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, 2002. Approximately $24,836 was available to the Company at December
31, 2002. The Company has six outstanding letters of credit aggregating
$4,164 which mature between 2003 and 2010. The Company pays an unused
facility fee equal to 25 basis points if 50% or less of the facility is
utilized and 15 basis points if greater than 50% of the facility is
utilized.
(j) Floating rate debt, 90 day LIBOR plus 375 bps.
(k) Note was satisfied in 2002.
(l) Property was sold in 2002 and mortgage assumed.
(m) Property was sold to a joint venture in 2002 therefore is no longer
consolidated.
57
LEXINGTON CORPORATE PROPERTIES TRUST
AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
($000'S EXCEPT PER SHARE DATA)
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
- ------------ ------------ -------- --------
2003.............................................. $ 17,417 $ -- $ 17,417
2004.............................................. 17,709 45,356 63,065
2005.............................................. 16,117 76,558 92,675
2006.............................................. 14,496 -- 14,496
2007.............................................. 15,313 12,500 27,813
Thereafter........................................ 27,679 248,372 276,051
-------- -------- --------
$108,731 $382,786 $491,517
======== ======== ========
</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%. As of
December 31, 2003, $3,411 in origination fees payable are owed to two executive
officers of the Company.
The scheduled payments of these obligations for the next five years and
thereafter are as follows:
<Table>
<Caption>
YEARS ENDING
DECEMBER 31, PRINCIPAL INTEREST TOTAL
- ------------ --------- -------- ------
2003.................................................... $ 89 $ 283 $ 372
2004.................................................... 98 274 372
2005.................................................... 110 262 372
2006.................................................... 452 209 661
2007.................................................... 773 141 914
Thereafter.............................................. 5,043 331 5,374
------ ------ ------
$6,565 $1,500 $8,065
====== ====== ======
</Table>
58
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,
- ------------
2003........................................................ $ 99,279
2004........................................................ 101,887
2005........................................................ 100,016
2006........................................................ 87,839
2007........................................................ 75,321
Thereafter.................................................. 274,879
--------
$739,221
========
</Table>
The Company holds various leasehold interests in properties. The ground
rent on these properties are either directly paid by the tenants or reimbursed
to the Company as additional rent.
Minimum future rental payments under all noncancellable leasehold interests
for the next five years and thereafter are as follows:
<Table>
<Caption>
YEAR ENDING
DECEMBER 31,
- ------------
2003........................................................ $ 898
2004........................................................ 898
2005........................................................ 898
2006........................................................ 898
2007........................................................ 898
Thereafter.................................................. 8,071
-------
$12,561
=======
</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, 2002, there were 5,257,365
operating partnership units outstanding of which 4,867,319 were currently
redeemable for common shares. As of December 31, 2002 these units, subject to
certain adjustments through the date of conversion, had annual distributions per
unit in varying amounts from $0 to $1.32 per unit with a weighted average
distribution of $1.17 per unit.
59
LEXINGTON CORPORATE PROPERTIES TRUST
AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
($000'S EXCEPT PER SHARE DATA)
(10) PREFERRED AND COMMON SHARES
During 2002 and 2001, the Company issued 64,249 and 100,000 common shares,
respectively, to certain employees and trustees resulting in $996 and $1,181 of
deferred compensation, respectively. These common shares vest ratably, primarily
over a 5 year period.
During 2002, the Company issued 34,483 common shares in respect of a 15
year, 8% interest only recourse note to an officer for $500. The note provides
for forgiveness of the principal balance under certain circumstances.
During 2002, the holders of the Company's outstanding 2,000,000 preferred
shares converted these shares into 2,000,000 common shares.
During 2002 and 2001, holders of an aggregate of 50,997 and 418,411
partnership units redeemed such units for common shares of the Company. These
redemptions resulted in an increase in shareholders' equity and corresponding
decrease in minority interest of $619 and $5,713, respectively.
During 2002 and 2001, the Company issued 2,690,000 and 4,400,000 common
shares raising $40,508 and $63,400 in proceeds, respectively, which was used to
retire mortgage debt and fund acquisitions. In addition, in 2001 the Company
issued 2,143,840 common shares valued at $31,622 in connection with the
acquisition of the Net Partnerships.
(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 and expire five years
from date of grant. No compensation cost is reflected in net income as all
options granted under the plan had an exercise price equal to the market value
of the underlying common shares on 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, 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
Granted............................................... 411,500 15.50
Exercised............................................. (1,050,866) 11.59
Forfeited............................................. (53,650) 11.98
Expired............................................... (2,500) 14.25
---------- ------
Balance at December 31, 2002............................ 1,233,057 $13.39
========== ======
</Table>
60
LEXINGTON CORPORATE PROPERTIES TRUST
AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
($000'S EXCEPT PER SHARE DATA)
The following is additional disclosures for common share options
outstanding at December 31, 2002:
<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...... 153,863 $ 9.23 1.9 117,897 $ 9.22
$11.8125-$12.5625.. 407,082 11.91 2.5 228,766 11.94
$13.1875-$15.50.... 672,112 15.23 2.7 331,237 15.13
--------- ------ ---- ------- ------
1,233,057 $13.39 2.5 677,900 $13.03
========= ====== ==== ======= ======
</Table>
There are 1,584,749 options available for grant at December 31, 2002.
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 $124, $112 and $107 were
contributed in 2002, 2001 and 2000, respectively.
The Company has established a trust for certain officers in which nonvested
common shares, which vest ratably over five years, granted for the benefit of
the officers are deposited. The officers exert no control over the common shares
in the trust and the common shares are available to the general creditors of the
Company. As of December 31, 2002 and 2001, there were 265,385 and 227,708 common
shares, respectively, in the trust. In addition, certain officers can delay, to
a specified date, the receipt of common shares that would be received upon
exercise of common share options. These common shares are deposited in the
trust. As of December 31, 2002 there were 222,615 common shares deposited in the
trust.
(12) COMMITMENTS AND CONTINGENCIES
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.
The Company, including its non-consolidated entities, are obligated under
certain tenant leases to fund the expansion of the underlying leased properties.
(13) RELATED PARTY TRANSACTIONS
In 2002, the Company issued 34,483 common shares in respect of a 15-year,
8% interest only recourse note to an officer for $500.
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.
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 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.
61
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, whose sole asset was a mortgage note receivable from
a 64% 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 shares 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 and $359 for the years ended December
31, 2001 and 2000, 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 in 2000 which is included in interest and other income in
the accompanying consolidated statements of income.
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%.
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.
Mortgages and 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.
62
LEXINGTON CORPORATE PROPERTIES TRUST
AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
($000'S EXCEPT PER SHARE DATA)
For the year ended December 31, 2002, no tenant represented 10% or more of
rental income. For the years ended December 31, 2001 and 2000 the following
tenants represented 10% or greater of rental income:
<Table>
<Caption>
2001 2000
---- ----
Northwest Pipeline Corporation.............................. 11% 11%
Kmart Corporation........................................... 11% 11%
</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.
(16) SUPPLEMENTAL DISCLOSURE OF STATEMENT OF CASH FLOW INFORMATION
During 2002, 2001 and 2000, the Company paid $32,255, $30,624 and $29,758,
respectively, for interest and $262, $204 and $126, respectively, for taxes.
During 2002, the holder of the Company's 2 million preferred shares
converted them into 2 million common shares.
In 2002, 2001 and 2000, the Company contributed properties (along with
non-recourse mortgage notes) to joint venture entities for capital contributions
of $643, $1,168 and $2,393, respectively.
During 2002, 2001 and 2000, holders of an aggregate of 50,997, 418,411 and
102,849 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 $619,
$5,713 and $1,438, 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 obligations 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 2002, 2001 and 2000, the Company issued 64,249, 100,000 and 73,800
common shares to certain employees and trustees resulting in $996, $1,181 and
$664 of deferred compensation. These common shares vest ratably over a 2 to 5
year period.
(17) UNAUDITED QUARTERLY FINANCIAL DATA
<Table>
<Caption>
2002
--------------------------------------
3/31/02 6/30/02 9/30/02 12/31/02
------- ------- ------- --------
Revenues............................................... $24,813 $24,486 $25,080 $26,240
Income before extraordinary items...................... $ 7,961 $ 7,879 $ 7,646 $ 7,454
Net income............................................. $ 7,961 $ 7,879 $ 7,646 $ 7,109
Income before extraordinary items per common share:
Basic................................................ $ 0.30 $ 0.30 $ 0.28 $ 0.25
Diluted.............................................. $ 0.29 $ 0.29 $ 0.28 $ 0.25
Net income per common share:
Basic................................................ $ 0.30 $ 0.30 $ 0.28 $ 0.24
Diluted.............................................. $ 0.29 $ 0.29 $ 0.28 $ 0.24
</Table>
63
LEXINGTON CORPORATE PROPERTIES TRUST
AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
($000'S EXCEPT PER SHARE 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 items...................... $ 4,848 $ 5,090 $ 4,921 $ 6,347
Net income............................................. $ 4,578 $ 5,090 $ 2,047 $ 6,347
Income before extraordinary items 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>
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
Subsequent to year end, the Company purchased a property for $23,500 net
leased to Oce Printing Systems USA, Inc. through February 2020. The purchase was
partially funded through the use of a $15,275 interest only, non-recourse
mortgage which bears interest at 5.25%, and matures March 2008. The lease
provides for an average annual rent of $2,245.
The Company also obtained a $16,380 non-recourse mortgage note for its
Westmont, Illinois property. The mortgage bears interest at 6.21%, provides for
annual debt service of $1,292 and matures March 2018 when a balloon payment of
$9,662 is due.
The Company also obtained a $9,000 non-recourse mortgage note for the
expansion of its Lancaster, California property. The mortgage bears interest at
5.92%, provides for annual debt service of $642 and matures September 2013 when
a balloon payment of $7,518 is due.
64
LEXINGTON CORPORATE PROPERTIES TRUST AND CONSOLIDATED SUBSIDIARIES
REAL ESTATE AND ACCUMULATED DEPRECIATION
SCHEDULE III ($000)
INITIAL COST TO COMPANY AND GROSS AMOUNT AT WHICH CARRIED AT END OF YEAR(A)
<Table>
<Caption>
ACCUMULATED
LAND AND BUILDINGS DEPRECIATION
LAND AND AND
DESCRIPTION LOCATION ENCUMBRANCES ESTATES IMPROVEMENTS TOTAL AMORTIZATION
- ----------- ---------------------- ------------ -------- ------------ -------- -------------
Office.......................... Southington, CT $ 8,120 $ 3,240 $ 20,440 $ 23,680 $ 9,344
Research & Development.......... Glendale, AZ 14,930 4,996 24,392 29,388 11,952
Retail/Health Club.............. Countryside, IL 2,235 628 3,722 4,350 1,802
Retail/Health Club.............. Voorhees, NJ 2,827 577 4,820 5,397 2,237
Retail/Health Club.............. DeWitt, NY 1,709 445 3,043 3,488 1,414
Warehouse & Distribution........ Mansfield, OH 3,089 120 5,965 6,085 2,117
Industrial...................... Marshall, MI 2,071 33 3,378 3,411 1,521
Industrial...................... Marshall, MI 789 14 926 940 418
Retail.......................... Newport, OR 5,784 1,400 7,270 8,670 3,267
Office & Warehouse.............. Memphis, TN 6,245 1,053 11,174 12,227 5,010
Warehouse & Distribution........ Mechanicsburg, PA 9,531 1,439 13,987 15,426 3,959
Office & Warehouse.............. Tampa, FL 6,096 1,389 7,762 9,151 3,131
Retail.......................... Klamath Falls, OR 6,573 727 9,160 9,887 3,387
Office.......................... Tampa, FL 8,427 1,900 9,854 11,754 3,519
Warehouse & Industrial.......... Jacksonville, FL -- 157 3,563 3,720 1,133
Retail.......................... Sacramento, CA 2,202 885 2,705 3,590 1,240
Office.......................... Phoenix, AZ -- 2,804 13,921 16,725 5,258
Retail.......................... Reno, NV 1,906 1,200 1,904 3,104 850
Retail.......................... Las Vegas, NV 1,709 900 1,759 2,659 784
Retail.......................... Rockville, MD -- -- 1,784 1,784 669
Retail.......................... Oxon Hill, MD 457 403 2,765 3,168 967
Retail.......................... Laguna Hills, CA -- 255 5,035 5,290 1,764
Retail.......................... Riverdale, GA -- 333 2,233 2,566 391
Retail/Health Club.............. Canton, OH 1,823 602 3,819 4,421 668
Office.......................... Salt Lake City, UT 20,349 -- 55,404 55,404 14,150
Manufacturing................... Franklin, NC 2,053 386 3,062 3,448 459
Industrial...................... Oberlin, OH 2,098 276 4,515 4,791 677
Retail.......................... Tulsa, OK -- 447 2,432 2,879 811
Retail.......................... Clackamas, OR -- 523 2,847 3,370 949
Retail.......................... Lynwood, WA -- 488 2,658 3,146 886
Retail.......................... Honolulu, HI -- -- 11,147 11,147 2,755
Warehouse....................... New Kingston, PA
(Silver Springs) 3,509 674 5,360 6,034 776
Warehouse....................... New Kingston, PA
(Cumberland) 7,364 1,380 10,963 12,343 1,587
Warehouse....................... Mechanicsburg, PA
(Hampden IV) 5,437 1,012 8,039 9,051 1,164
Office/Research & Development... Marlborough, MA 8,102 1,999 13,834 15,833 1,888
Office.......................... Dallas, TX 21,785 3,582 30,598 34,180 3,924
Warehouse....................... Waterloo, IA 4,194 1,025 8,296 9,321 1,080
Office/Research & Development... Milpitas, CA 17,100 3,542 18,603 22,145 2,325
Industrial...................... Gordonsville, TN 1,972 52 3,325 3,377 478
Office.......................... Decatur, GA 6,829 975 13,677 14,652 1,710
Office.......................... Richmond, VA 16,634 -- 27,282 27,282 4,230
Office/Warehouse................ Bristol, PA 9,833 2,508 10,031 12,539 1,191
Office.......................... Hebron, KY 5,414 1,615 6,462 8,077 767
Office.......................... Livonia, MI 5,344 1,554 6,219 7,773 739
Office.......................... Valley Forge, PA 13,306 3,960 15,891 19,851 149
Research & Development.......... Livonia, MI 5,789 1,733 6,936 8,669 824
Office.......................... Palm Beach Gardens, FL 11,509 3,576 14,249 17,825 1,648
Warehouse/Distribution.......... Lancaster, CA 10,761 2,028 28,225 30,253 1,592
Industrial...................... Auburn Hills, MI 7,325 2,788 11,169 13,957 1,237
Warehouse/Distribution.......... Warren, OH 38,115 10,231 51,280 61,511 9,305
Warehouse/Distribution.......... Baton Rouge, LA 1,969 685 2,748 3,433 287
Retail.......................... Columbia, MD -- 1,002 4,294 5,296 411
Retail.......................... Bakersfield, CA -- 400 1,662 2,062 586
Retail.......................... Bethesda, MD 1,955 926 2,415 3,341 1,209
<Caption>
USEFUL LIFE COMPUTING
DEPRECIATION IN LATEST
DATE DATE INCOME STATEMENTS
DESCRIPTION ACQUIRED CONSTRUCTED (YEARS)
- ----------- ---------- ----------- -----------------------
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 & 3
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 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 & Development... Jul. 1997 1960 & 1988 40
Office.......................... Sept. 1997 1986 40
Warehouse....................... Oct. 1997 1996 & 1997 40
Office/Research & Development... Dec. 1997 1985 40
Industrial...................... Dec. 1997 1983 & 1985 34.75
Office.......................... Dec. 1997 1983 40
Office.......................... Dec. 1997 1990 32.25
Office/Warehouse................ Mar. 1998 1982 40
Office.......................... Mar. 1998 1987 40
Office.......................... Mar. 1998 1987 & 1988 40
Office.......................... Aug. 2002 1985 & 2001 40
Research & Development.......... Mar. 1998 1987 & 1988 40
Office.......................... May 1998 1996 40
Warehouse/Distribution.......... Jun. 1998 1998 40
Industrial...................... Jul. 1998 1989 & 1998 40
Warehouse/Distribution.......... Aug. 1998 1982 10 & 40
Warehouse/Distribution.......... Oct. 1998 1998 40
Retail.......................... Dec. 1998 1983 40
Retail.......................... Aug. 1995 1976 40
Retail.......................... Aug. 1995 1980 40
</Table>
65
LEXINGTON CORPORATE PROPERTIES TRUST AND CONSOLIDATED SUBSIDIARIES
REAL ESTATE AND ACCUMULATED DEPRECIATION
SCHEDULE III ($000) -- (CONTINUED)
<Table>
<Caption>
ACCUMULATED
LAND AND BUILDINGS DEPRECIATION
LAND AND AND
DESCRIPTION LOCATION ENCUMBRANCES ESTATES IMPROVEMENTS TOTAL AMORTIZATION
- ----------- ---------------------- ------------ -------- ------------ -------- -------------
Office.......................... Bristol, PA 6,190 1,073 7,709 8,782 586
Office.......................... Southborough, MA 2,251 456 4,291 4,747 326
Office.......................... Herndon, VA 18,964 5,127 20,570 25,697 1,547
Office.......................... Hampton, VA 4,512 1,353 5,446 6,799 380
Office.......................... Phoenix, AZ 14,553 4,665 18,682 23,347 1,225
Industrial...................... Hebron, OH 3,764 1,063 4,296 5,359 111
Industrial...................... Hebron, OH 5,887 1,681 6,794 8,475 176
Retail.......................... Phoenix, AZ -- 1,126 4,501 5,627 127
Retail.......................... Stockton, CA -- 259 1,037 1,296 29
Retail.......................... Lynchburg, VA -- 159 638 797 18
Office.......................... San Diego, CA 4,347 1,740 6,960 8,700 196
Office.......................... Phoenix, AZ -- 2,287 9,149 11,436 257
Industrial...................... Henderson, NC 4,497 1,488 5,954 7,442 167
Industrial...................... Tempe, AZ -- 378 1,514 1,892 43
Industrial...................... Columbus, OH -- 319 1,275 1,594 36
Office.......................... Tuscon, AZ 2,484 657 2,794 3,451 74
Retail.......................... Eau Claire, WI 2,360 860 3,442 4,302 97
Office.......................... Milford, CT -- 567 2,265 2,832 64
Retail.......................... Westland, MI 3,320 1,444 5,777 7,221 162
Retail.......................... Canton, OH 3,395 883 3,534 4,417 99
Retail.......................... Spartanburg, SC 2,819 833 3,334 4,167 94
Office.......................... Wilsonville, OR -- 2,666 10,662 13,328 300
Industrial...................... Ocala, FL 13,429 3,803 15,210 19,013 428
Retail.......................... Jacksonville, AL -- 392 1,567 1,959 44
Industrial...................... Columbia, SC 3,472 928 3,710 4,638 104
Office.......................... Hampton, VA 7,357 2,333 9,351 11,684 263
Industrial...................... Plymouth, MI 4,866 1,533 6,130 7,663 172
Retail.......................... Gainesville, GA 1,056 526 2,105 2,631 59
Office.......................... Lake Forest, CA 10,939 3,442 13,779 17,221 273
Office.......................... Knoxville, TN 5,330 1,624 6,503 8,127 61
Industrial...................... Groveport, OH 7,800 2,385 9,547 11,932 70
Office.......................... Westmont, IL -- 4,978 19,940 24,918 21
Office.......................... Fort Mill, SC 11,656 3,601 14,404 18,005 15
-------- -------- -------- -------- --------
Total...................... $460,517 $131,496 $781,874 $913,370 $134,220
======== ======== ======== ======== ========
<Caption>
USEFUL LIFE COMPUTING
DEPRECIATION IN LATEST
DATE DATE INCOME STATEMENTS
DESCRIPTION ACQUIRED CONSTRUCTED (YEARS)
- ----------- ---------- ----------- -----------------------
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
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
Office.......................... Mar. 2002 2001 40
Office.......................... Aug. 2002 2002 40
Industrial...................... Sep. 2002 2002 40
Office.......................... Dec. 2002 1989 40
Office.......................... Dec. 2002 2002 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, 2002 for Federal income tax purposes was
approximately $669 million.
Reconciliation of real estate owned:
<Table>
<Caption>
2002 2001 2000
-------- -------- --------
Balance at the beginning of the year.................... $830,788 $682,627 $688,926
Additions during year................................... 116,264 166,668 30,603
Properties sold during year............................. (18,621) (4,107) (17,727)
Property contributed to joint venture during year....... (15,061) (14,400) (19,175)
-------- -------- --------
Balance at end of year.................................. $913,370 $830,788 $682,627
======== ======== ========
Balance at beginning of year............................ $116,741 $ 98,429 $ 82,334
Depreciation and amortization expense................... 21,480 18,312 17,513
Accumulated depreciation and amortization of properties
sold during year..................................... (2,934) -- (1,162)
Accumulated depreciation of property contributed to
joint venture during year............................ (1,067) -- (256)
-------- -------- --------
Balance at end of year.................................. $134,220 $116,741 $ 98,429
======== ======== ========
</Table>
66
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
In 2002, the Company issued 34,483 common shares in respect of a 15-year,
8% interest only recourse note to an officer for $500.
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.
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 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.
During 2001, the Company issued 24,620 common shares to acquire a company
controlled by the Chairman, whose sole asset was a mortgage note receivable from
a 64% 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 shares 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 and $359 for the years ended December
31, 2001 and 2000, respectively. The reimbursements are
67
shown net, in the Company's general and administrative expenses in the
accompanying consolidated statements of income.
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%.
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 in 2000 which is included in interest and other income in
the accompanying consolidated statements of income.
PART IV.
ITEM 14. CONTROLS AND PROCEDURES.
Evaluation of Disclosure Controls and Procedures.
An evaluation of the effectiveness of the design and operation of the
Company's "disclosure controls and procedures" (as defined in rule 13a-14(c)
under the Securities Exchange Act of 1934, as amended (the "Exchange Act")) was
carried out within 90 days prior to the filing of this annual report. This
evaluation was made under the supervision and with the participation of the
Company's management, including its Chief Executive Officer and its Chief
Financial Officer. Based upon this evaluation, the Company's Chief Executive
Officer and its Chief Financial Officer have concluded that the Company's
disclosure controls and procedures (a) are effective to ensure that information
required to be disclosed by the Company in reports filed or submitted under the
Exchange Act is timely recorded, processed, summarized and reported and
(b) include, without limitation, controls and procedures designed to ensure that
information required to be disclosed by the Company in reports filed or
submitted under the Exchange Act is accumulated and communicated to the
Company's management, including its Chief Executive Officer and its Chief
Financial Officer, as appropriate to allow timely decisions regarding required
disclosure.
Changes in Internal Controls.
There have been no significant changes in the Company's internal controls
or in other factors that could significantly affect these controls subsequent to
the date of the Company's evaluation.
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
<Table>
<Caption>
PAGE
----
(a)(1) Financial Statements........................................ 38-64
(2) Financial Statement Schedule................................ 65-66
(3) Exhibits....................................................
</Table>
<Table>
<Caption>
EXHIBIT NO. EXHIBIT
- ----------- -------
3.1 -- Declaration of Trust of Lexington Corporate Properties Trust
(the "Company"), dated December 31, 1997 (filed as
Exhibit 3.1 to the Company's Current Report on Form 8-K
filed January 16, 1998 (the "1998 8-K"))*
3.2 -- 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 (filed as
Exhibit 5.3 to the Company's Current Report on Form 8-K
filed February 10, 1997)*
</Table>
68
<Table>
<Caption>
EXHIBIT NO. EXHIBIT
- ----------- -------
3.3 -- By-Laws of the Company (filed as Exhibit 3.2 to the
Company's Annual Report on 10-K for the year ended December
31, 1997 (the "1997 10-K"))*
3.4 -- Articles of Amendment of Declaration of Trust of the Company
(filed as Exhibit 3.3 to the Company's Registration
Statement on Form S-4 (File No. 333-70790) (the "2001 Form
S-4"))*
4.1 -- Specimen of Common Shares Certificate of the Company (filed
as Exhibit 3.2 to the 1997 10-K)*
10.8 -- Form of 1994 Outside Director Shares Plan of the Company
(filed as Exhibit 10.8 to the Company's Annual Report on
10-K for the year ended December 31, 1993)*
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 the
Company's Annual Report on Form 10-K for the 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)*
10.38 -- Operating Agreement and Management Agreement between the
Company and Lexington Acquiport Company, LLC ("LAC I")
(filed as Exhibit 2 to the Company's Current Report on
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 the Company's Annual Report on Form 10-K
for the year ended December 31, 1999)*
10.40 -- Investment Advisory and Asset Management Agreement by and
between AGAR International Holdings Ltd. and Lexington
Realty Advisors, Inc. ("LRA") (filed as Exhibit 10.40 to the
Company's Annual Report on Form 10-K for the year ended
December 31, 2000)*
10.42 -- Contribution Agreement between Net 3 Acquisition L.P.
("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)*
</Table>
69
<Table>
<Caption>
EXHIBIT NO. EXHIBIT
- ----------- -------
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 the
Company, LCIF, LCIF II, and Net 3 in favor of Fleet National
Bank (filed as Exhibit 99.2 to the Company's Current Report
on Form 8-K filed December 21, 2001 (the "2001 8-K")*
10.46 -- Operating Agreement of Lexington Acquiport Company II, LLC
("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 LRA (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 LRA (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)*
10.51 -- Agreement and Plan of Merger by and among the Company, Net 3
and Net 1 L.P., as amended (filed as Exhibit 2.5 to the
Company's Registration Statement on Form S-4 (File No.
333-70790) (the "2001 Form S-4"))*
10.52 -- Agreement and Plan of Merger by and among the Company, Net 3
and Net 2 L.P., as amended (filed as Exhibit 2.6 to the 2001
Form S-4)*
10.53 -- Form of Indemnification Agreement between the Company and
E. Robert Roskind dated June 6, 2002 +
10.54 -- Amended and Restated 2002 Equity-Based Award Plan of the
Company +
12 -- Statement of Computation of Ratio of Earnings to Fixed
Charges +
21 -- List of Subsidiaries of the Trust +
23 -- Consent of KPMG LLP +
99.1 -- Certification of Chief Executive Officer pursuant to
18 U.S.C. Section 1350, as adopted pursuant to Section 906
of the Sarbanes-Oxley Act of 2002 +
99.2 -- Certification of Chief Financial Officer pursuant to
18 U.S.C. Section 1350, as adopted pursuant to Section 906
of the Sarbanes-Oxley Act of 2002 +
</Table>
- ---------------
* Incorporated by reference.
+ Filed Herewith.
70
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/ T. WILSON EGLIN
------------------------------------
T. Wilson Eglin
Chief Executive Officer
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
- ---------------------------------------------------
E. Robert Roskind
/s/ RICHARD J. ROUSE Vice Chairman of the Board of Trustees and
- --------------------------------------------------- Chief Investment Officer
Richard J. Rouse
/s/ T. WILSON EGLIN Chief Executive Officer, President, Chief
- --------------------------------------------------- Operating Officer and Trustee
T. Wilson Eglin
/s/ PATRICK CARROLL Chief Financial Officer, Treasurer and
- --------------------------------------------------- Executive Vice President
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/ JACK A. SHAFFER Trustee
- ---------------------------------------------------
Jack A. Shaffer
/s/ SETH M. ZACHARY Trustee
- ---------------------------------------------------
Seth M. Zachary
</Table>
DATE: March 24, 2003
71
CERTIFICATION
I, T. Wilson Eglin, certify that:
1. I have reviewed this annual report on Form 10-K of Lexington Corporate
Properties Trust;
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this annual report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of this
annual report (the "Evaluation Date"); and
c) presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on our evaluation
as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent functions):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in this
annual report whether there were significant changes in internal controls or in
other factors that could significantly affect internal controls subsequent to
the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.
Date March 24, 2003
By: /s/ T. WILSON EGLIN
------------------------------
T. Wilson Eglin
Chief Executive Officer
72
CERTIFICATION
I, Patrick Carroll, certify that:
1. I have reviewed this annual report on Form 10-K of Lexington Corporate
Properties Trust;
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this annual report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of this
annual report (the "Evaluation Date"); and
c) presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on our evaluation
as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent functions):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in this
annual report whether there were significant changes in internal controls or in
other factors that could significantly affect internal controls subsequent to
the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.
Date March 24, 2003
/s/ PATRICK CARROLL
- --------------------------
Patrick Carroll
Chief Financial Officer
73