1
                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549


                                 FORM 10-K/A(1)


(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, 1996


                                       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, INC.
             (Exact name of Registrant as specified in its charter)



                  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:



                                                        Name of Each Exchange
         Title of Each Class                             on which Registered
    Common Stock, par value $.0001                     New York Stock Exchange



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 (Section229.405 of this chapter) is not contained herein, and
will not be contained, to the best of Registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. [X]

The aggregate market value of the voting stock held by non-affiliates of the
Registrant as of February 28, 1997 was $117,605,477.

Number of shares of common stock outstanding as of February 28, 1997 was
9,439,716.
Number of shares of preferred stock outstanding as of February 28, 1997 was
700,000.

Documents incorporated by reference: The Definitive Proxy Statement for
Registrant's 1997 Annual Meeting of Stockholders is incorporated herein by
reference into Part III.

1 Notwithstanding such Amendment, information set forth herein speaks as of and 
for the dates referred to in the Form 10-K originally filed by the Registrant.
Reference is made to annual and current reports filed by the Registrant since
December 31, 1996, for information regarding the Registrant.
   2
ITEM 6. SELECTED FINANCIAL DATA

Item 6 is amended and restated in its entirety as follows.

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, 1996.
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 report.




                                    1996                 1995                 1994                 1993                 1992
                               -------------        -------------        -------------        -------------        -------------

                                                                                                              
Total revenue                  $  31,675,355        $  25,001,762        $  26,037,906        $  25,870,791        $  25,797,248
Gain on sale of
   properties                  $          --        $   1,514,400        $          --        $          --        $          --
Proceeds from lease
   termination                 $          --        $   1,600,000        $          --        $          --        $          --
Expenses of the
   mergers                     $          --        $          --        $          --        $  (2,441,008)       $          --
Transactional expenses         $    (644,047)       $          --        $          --        $          --        $  (1,494,515)
Loss on extinguish-
   ment of debt(1)             $          --        $  (4,849,226)       $          --        $          --        $          --
Expenses, including
   minority interest           $ (25,565,484)       $ (19,982,936)       $ (20,559,110)       $ (18,902,010)       $ (19,109,367)
                               -------------        -------------        -------------        -------------        -------------
Net income                     $   5,465,824        $   3,284,000        $   5,478,796        $   4,527,773        $   5,193,366
                               =============        =============        =============        =============        =============
Net income per share           $        0.58        $        0.35        $        0.59        $        0.48        $        0.56
                               =============        =============        =============        =============        =============
Cash dividends de-
   clared per share            $        1.12        $        1.08        $        1.08        $        0.24        $          --
                               =============        =============        =============        =============        =============
Net cash provided by
   operating activities        $  14,972,348        $   7,216,497        $  12,423,001        $  11,151,273        $  12,001,982
Net cash (used in)
   provided by
   investing activities        $ (16,951,527)       $   7,886,892        $          --        $          --        $  (2,869,478)
Net cash provided by
    (used in)
   financing activities        $   1,858,853        $ (15,610,902)       $ (12,304,039)       $ (12,779,971)       $  (8,254,120)
                               -------------        -------------        -------------        -------------        -------------
Net (decrease) increase
   in cash                     $    (120,326)       $    (507,513)       $     118,962        $  (1,628,698)       $     878,384
                               =============        =============        =============        =============        =============

Total assets                   $ 309,126,114        $ 221,216,236        $ 216,019,450        $ 222,466,930        $ 230,386,588
                               =============        =============        =============        =============        =============
Long-term obligations
   (including related
   accrued interest)           $ 190,566,884        $ 121,690,421        $ 110,064,581        $ 112,500,673        $ 115,221,696
                               =============        =============        =============        =============        =============

Funds from operations(2)       $  12,988,901        $  11,829,937        $  11,281,948        $  12,877,703        $  12,580,306
                               =============        =============        =============        =============        =============
Rent received above
   (below) straight line
   rent                        $    (104,610)       $     399,812        $     568,592        $     419,876        $    (771,139)
                               =============        =============        =============        =============        =============


- --------

(1) Loss on extinguishment of debt is reported as an extraordinary item on the
consolidated statements of income.

(2) Management believes that Funds From Operations enhances an investor's
understanding of the Company's financial condition, results or operations and
cash flows and believes it is an appropriate performance measure for an equity
REIT which provided an indication of a REIT's ability to make cash
distributions. Funds From Operations is defined by the National Association of
Real Estate Investment Trusts, Inc. ("NAREIT") as "net income (or loss)
(computed in accordance with generally accepted accounting principles),
excluding gains (or losses) from debt restructuring and sales of property, plus
real estate depreciation and amortization and after adjustments for
unconsolidated partnerships and joint ventures." The Company's method of
calculating Funds From Operations excludes other non-recurring revenue and
expense items and may be different from methods used by other REITs and,
accordingly, is not comparable to such other REITs. Funds From Operations should
not be considered an alternative to net income as an indicator of operating
performance. Funds from Operations has been calculated without the potential
effect of outstanding stock options or the conversion of special limited
partnership units.

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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

Item 7 is amended and restated in its entirety as follows.

General

The Company was organized to combine, continue and expand the business of the
Partnerships, which own, operate and manage a diverse portfolio of real
properties. The Company, which has elected to qualify as a real estate
investment trust under the Internal Revenue Code of 1986, acquired the
Partnerships through mergers which were effected as of October 12, 1993. In
connection with the mergers, the Company issued 9,303,409 shares of its Common
Stock, 169,109 units of special limited partner interest in the Partnerships
(which are exchangeable for an equivalent number of shares of common stock) and
$1,877,390 in principal amount of 7.75% Subordinated Notes due 2000.

The mergers were accounted for as business combinations of entities under common
control using the "as if pooling-of-interest" method of accounting, with the
Company as the surviving entity. Under this method, the assets and liabilities
of the Partnerships have been recorded by the Company at their carrying values.

As of December 31, 1996, the Company was the indirect or direct owner of
thirty-eight real estate properties (or interests therein) (the "Properties")
triple net leased to corporations.

Liquidity and Capital Resources

REAL ESTATE ASSETS. As of December 31, 1996, the Company's real estate assets
consisted of the Properties. The Properties are located in twenty-three states
and contain an aggregate of 5,235,363 square feet of net rentable space. Each
Property is subject to a single tenant triple net lease, which is generally
characterized as a lease in which the tenant pays all or substantially all of
the cost and cost increases for real estate taxes, capital expenditures,
insurance and ordinary maintenance of the Property.

The Company's principal sources of liquidity are revenue generated from the
Properties, interest on cash balances and amounts available under its Credit
Facility and amounts that may be raised through the sale of preferred shares
described below or other private or public offerings. For the year ended
December 31, 1996, such leases on the Properties generated approximately
$31,244,000 in revenue compared to $24,523,000 in 1995. Minimum annual rent
receivable under non-cancelable leases is $36,342,000 for 1997.

DIVIDENDS. The Company paid a dividend of $.27 per share to stockholders in
respect of each of the calendar quarters of 1995 and the first quarter of 1996,
and $.28 per share in respect of the second and third quarters. The dividend
paid in respect of the fourth quarter of 1996, in the amount of $.29 per share,
was paid on February 14, 1997 to stockholders of record as of January 31, 1997.
The Company's annualized dividend rate is currently $1.16 per share.

UPREIT STRUCTURE. The Company's UPREIT structure permits the Company to effect
acquisitions by issuing to a seller, as a form of consideration, interests in
partnerships controlled by the Company. All of such interests are convertible at
certain times into shares of Common Stock 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. As a result, the Company's net income and funds from
operations are reduced proportionally based on the amount of the distributions
required to be paid by the terms of such partnership interests. The number of
shares of Common Stock that will be outstanding in the future should be expected
to increase, and minority interest expense should be expected to decrease, from
time to time, as such partnership interests are converted into shares of Common
Stock. The table set forth below provides certain information with respect to
such partnership interests as of December 31, 1996.
   4


                                                                  1997             CONVERTIBLE 
                                               NUMBER OF        ANNUALIZED          SHARES OF      TOTAL ANNUAL 
                                                 UNITS           PER UNIT             COMMON       DISTRIBUTION 
      PARTNERSHIP OR CLASS                       ISSUED        DISTRIBUTION        STOCK AS OF:        IN 1997
- ---------------------------------------       ----------       -------------       -----------       ----------
                                                                                               
LCIF - Special Limited Partners                  112,229       $   1.16            At any time       $  130,185
LCIF II - Special Limited Partners                56,880       $   1.16            At any time       $   65,981
                                               ---------                                             ----------
   Subtotal: Special Limited Partners            169,109                                             $  196,166
                                               ---------                                             ----------
Barnes Partnerships:                                                               
Barngiant Livingston                              52,335       $   0.27            3/04              $   14,130
Barnhale Modesto                                  23,267       $    -              2/06                     N/A
Barnes Rockshire                                  36,825       $    -              3/05                     N/A
Barnvyn Bakersfield                                7,441       $    -              1/03                     N/A
Barnhech Montgomery                               11,766       $   0.29            5/06              $    3,412
Barnward Brownsville                              35,400       $    -              11/04                    N/A
                                               ---------                                             ----------
   Subtotal: Barnes Partnerships                 167,034                                             $   17,542
                                               ---------                                             ----------
Red Butte Creek Associates                     1,715,294       $   0.66            5/98              $1,132,094
                                                 114,006       $   1.08            5/98              $  123,126
                                               ---------                                             ----------
   Subtotal: Red Butte Creek Associates        1,829,300                                             $1,255,220
                                               ---------                                             ----------
Fort Street Partners                             207,741       $    -              1/06                     N/A
                                                  17,259       $   1.12            1/99              $   19,330
                                               ---------                                             ----------
                                                 225,000                                             $   19,330
                                               ---------                                             ----------
Toy Properties Associates II                      95,000       $   1.12            1/99              $  106,400
Toy Properties Associates V                       35,000       $   1.12            1/99              $   39,200
                                               ---------                                             ----------
Grand Total                                    2,520,443                                             $1,633,858
                                               =========                                             ==========

                                                                           

Holders of the LCIF and LCIF II special limited partner units receive
distributions that are equal to distributions on Common Stock. Holders of the
Barnes Partnerships units receive distributions as described in the table above
until such units become eligible for conversion to Common Stock, upon which date
they will receive distributions based on their respective partnership interest
ownership percentages. The distribution to the class of Red Butte Creek
Associates units consisting of 1,715,294 units will increase to $1.08 per unit
annually in January 1998. The holders of the class of Red Butte Creek Associates
units consisting of 114,006 units receive distributions that are equal to
distributions on Common Stock, with an annual cap of $1.08 per unit. Holders of
the class of Fort Street Partners units consisting of 17,259 units, the Toy
Properties Associates II units and Toy Properties Associates V units receive
distributions that are equal to distributions on Common Stock, with an annual
cap of $1.12. The holders of the class of Fort Street Partners units consisting
of 207,741 units will receive distributions that are equal to distributions on
Common Stock, with an annual cap of $1.12, when they become eligible for
conversion to Common Stock.

During 1996, the Company made the following acquisitions:

NORTHWEST PIPELINE CORPORATION. On May 22, 1996, the Company, through LCIF,
acquired the headquarters of Northwest Pipeline Corporation. Total assets
acquired and total liabilities assumed in the exchange were approximately $56.9
million and $38.5 million, respectively. The consolidated statement of income
for the year ended December 31, 1996 includes the operating results of the
acquired partnership commencing May 22, 1996.

The acquisition consisted of a 295,000 square foot office building and a 600 car
parking garage located in Salt Lake City, Utah. The property is 100% occupied by
and leased to Northwest Pipeline Corporation under a net lease which expires on
September 30, 2009, subject to two renewal options for a total of nineteen
years. The property is located on land leased through September 17, 2018,
subject to a ten year renewal option. The current annual net rent is
approximately $8.16 million, net of payments under the land lease. The property
is subject to two mortgage notes which have a total outstanding principal
balance of approximately $35.6 million as of December 31, 1996.
   5
JACKSONVILLE, ALABAMA PROPERTY. On May 31, 1996, the Company acquired a 56,132
square foot retail facility in Jacksonville, Alabama for a purchase price of
$2,014,000. The purchase price and related acquisition costs were satisfied with
funds from a draw on the Company's Credit Facility, in the amount of $2.1
million. The property is leased to Wal-Mart Stores, Inc. under a net lease which
expires on January 31, 2009, with annual net rent of $146,040.

PLYMOUTH, MICHIGAN, OBERLIN, OHIO AND NORTH CAROLINA PROPERTIES. On December 23,
1996, the Company acquired three industrial properties for approximately $14.7
million. Two of the properties, located in Plymouth, Michigan and Oberlin, Ohio,
were acquired for $11.3 million and net-leased to Johnson Controls, Inc. for a
term of ten years. The annual base rent is $1.14 million, or approximately
10.08% of the purchase price, and will be adjusted annually by three times the
percentage increase in the Consumer Price Index, not to exceed 4.5% per annum.
The two properties total 245, 320 square feet. The aggregate purchase price and
related acquisition costs of these two properties were satisfied with funds from
a draw on the Company's Credit Facility.

The third acquired property, totaling 72,868 square feet and located in
Franklin, North Carolina, was net-leased to SKF USA for a term of approximately
18 years. The purchase price was approximately $3.4 million. The annual net rent
is equal to approximately 9.46% of the purchase price and will increase every
three years by the percentage increase in the Consumer Price Index, not to
exceed 3% per annum. The purchase price and related acquisition costs were
satisfied by temporary financing in the form of a bridge loan in the amount of
approximately $2.8 million, and cash.

AFFILIATED PARTNERSHIP ACQUISITIONS. On December 31, 1996, the Company, through
LCIF, simultaneously acquired five properties from three partnerships, following
which the partnerships were dissolved.

The three partnerships involved in the transaction were Toy Properties
Associates II ("Toy II"), Toy Properties Associates V ("Toy V") and Fort Street
Partners ("Fort Street"). Details of the acquisitions involving the three
respective partnerships follows.

TOYS R US RETAIL PROPERTIES. In the Toy II transaction, the Company acquired
three retail stores located in Tulsa, Oklahoma; Clackamas, Oregon; and Lynwood,
Washington; (the "Toy II Properties") containing an aggregate of 129,070 square
feet and leased to Toys 'R' Us, Inc. under triple net leases which expire on May
31, 2006 and which are subject to five, five-year renewal options. The current
annual aggregate rent is approximately $1,067,000. As of December 31, 1996, the
Toy II Properties were subject to mortgage notes with an outstanding aggregate
principal balance of $5,827,758, bearing interest at a rate of 12.625% per
annum. On January 22, 1997, the aggregate principal balance of these notes, in
the amount of $5,801,069, plus an aggregate prepayment premium of approximately
$377,000, were all paid in full.

TOYS R US DISTRIBUTION FACILITY. In the Toy V transaction, the Company acquired
a 123,293 square foot distribution center located in Houston, Texas, (the "Toy V
Property") leased to Toys 'R' Us, Inc. under a triple net lease which expires on
August 31, 2006, and which is subject to five, five-year renewal options. The
current annual rent is approximately $400,000. As of December 31, 1996, the Toy
V Property was subject to a mortgage note with an outstanding balance of
$2,195,746, bearing interest at a rate of 12.625% per annum. On January 22,
1997, the aggregate principal balance plus a prepayment premium of approximately
$143,000 was paid in full.

FORT STREET PROPERTY. In the Fort Street transaction, the Company acquired an
85,610 square foot retail facility located in Honolulu, Hawaii (the "Fort Street
Property"), leased to Liberty House, Inc. under a triple net lease which expires
on September 30, 2009, and which is subject to one 115 month renewal option, one
two-year renewal option and three five-year renewal options. The current annual
rent is approximately $963,000. As of December 31, 1996, the Fort Street
Property was subject to a mortgage note with an outstanding balance of
$6,189,675, bearing interest at 10.25% per annum. Equal monthly payments of
interest and principal sufficient to fully amortize the note by September 30,
2010 are required.

TUSCALOOSA, ALABAMA PROPERTY. On February 20, 1997, the Company completed the
acquisition of a 58,800 square foot industrial property (the "Tuscaloosa
Property") in Tuscaloosa, Alabama for approximately $2.9 million. The Tuscaloosa
Property is leased 
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to Johnson Controls, Inc. for ten years. The annual net rent is $288,608 and
escalates annually by three times the percentage change in the Consumer Price
Index, not to exceed 4.5%.

EXEL LOGISTICS PROPERTIES. On March 19, 1997, the Company acquired three
industrial properties (the "Exel Properties") for $27.0 million. The Exel
Properties contain 761,200 square feet on 46.56 acres near Harrisburg,
Pennsylvania and are subject to net-leases with Exel Logistics, Inc. ("Exel")
which expire on November 30, 2006. The current annual net rent is $2,536,941 and
will increase by 9.27% on December 1, 1997 and by 9.27% every three years
thereafter. The obligations of Exel under the leases are unconditionally
guaranteed by its parent company, NFC plc.

EXCHANGEABLE REDEEMABLE SECURED NOTES. In connection with the acquisition of
certain properties leased to Exel, LCIF sold $25 million of 8% Exchangeable
Redeemable Secured Notes (the "Notes") to an institutional investor in a private
placement. The Notes require interest only payments at 8% per annum, payable
semi-annually in arrears, and have a seven year term. The Notes are secured by
first mortgage liens on the Exel Properties, will be guaranteed by Lexington,
and can be exchanged for Lexington common stock at $13 per share beginning in
the year 2000, subject to adjustment. The Notes may be redeemed at Lexington's
option after three years at a price of 103.2% of the principal amount, declining
to par after five years. The Notes are subordinated to obligations under
Lexington's Credit Facility.

PARTNERSHIP MERGER. In connection with the acquisition of the Exel Properties,
an unaffiliated partnership (the "Exel Partnership") merged into LCIF. As a
result of the merger, LCIF issued 480,000 partnership units exchangeable for
Lexington common stock, which units are entitled to distributions at the same
dividend rate as common stock. At the time of the merger, the Exel Partnership's
sole assets were approximately $6.0 million of cash from the prior sale of a
property and the right to acquire the Excel Properties in a tax-free exchange
under Internal Revenue Code Section 1031.

REVOLVING CREDIT FACILITY. The Company's Credit Facility, in a maximum committed
amount of $60,000,000, bears interest at 1.5% over LIBOR. The facility matures
on June 1, 1999, but will automatically renew for successive two year terms
unless the lender notifies the Company at least twelve months in advance of the
scheduled or extended maturity date of its intention to terminate the credit
facility. As of December 31, 1996, the Company had borrowed $25 million. As the
Credit Facility is collateralized by six of the Company's Properties, this
amount is included in the balance of mortgage notes payable as of December 31,
1996.

PREFERRED STOCK SALE. On December 31, 1996, the Company entered into an
agreement with Five Arrows Realty Securities L.L.C ("Five Arrows") providing for
the sale of up to 2,000,000 shares of Senior Cumulative Convertible Preferred
Stock ("Preferred Stock"). Under the terms of the agreement, the Company may
sell the Preferred Stock to Five Arrows at up to three closings, at Lexington's
option, during 1997 for an aggregate price of approximately $25 million. In
connection with such sale, the Company has entered into certain related
agreements with Five Arrows, providing, among other things, for certain
registration rights with respect to such shares and the right to designate a
member of the Board of Directors under certain circumstances. The Preferred
Stock, which is convertible into common stock on a one-for-one basis, is
entitled to quarterly distributions equal to the greater of $.295 or 105% of the
common stock dividend.

On January 21, 1997, the Company sold 700,000 shares of Preferred Stock to Five
Arrows and used the proceeds of $8.75 million to repay $7,996,817 of mortgage
debt, including prepayment premiums of $520,000. Such mortgage debt had been
bearing interest at 12.625% per annum and would have required interest and
principal payments of approximately $1.45 million in 1997.

DEBT SERVICE REQUIREMENT. The Company's principal liquidity needs are the
payment of interest and principal on outstanding mortgage debt. As of December
31, 1996, a total of thirty-seven properties were subject to outstanding
mortgages which had an aggregate principal amount, including accrued interest,
of $186,188,387. The weighted average interest rate on the Company's debt on
such date was approximately 9.04%. Approximate balloon payment amounts for the
next five calendar years are due as follows: $2,829,000 in 1997; $10,007,000 in
1998; $30,563,000 in 1999 (including the $25,000,000 Credit Facility which may
be extended) and $7,966,000 in 2000. There are no balloon payments due during
2001. The 
   7
amount due in 1997 consists of the bridge financing obtained in the acquisition
of the Franklin, North Carolina Property, in the amount of $2,828,640, which
must be refinanced by June 23, 1997 or repaid in full. See Note 6 of the
Company's Consolidated Financial Statements. 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 or have available amounts under its
credit facility sufficient to satisfy such balloon payments. The ability of the
Company to accomplish such goals will be affected by numerous economic factors
affecting the real estate industry, including the available mortgage rates 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 at the time. As of December 31, 1996, the Company's total
consolidated indebtedness (including origination fees payable and the related
accrued interest) was approximately $193 million. See also "Funds From
Operations" below.

LEASE OBLIGATIONS. Because the Company's tenants bear all or substantially all
of the cost of property maintenance and capital improvements, the Company does
not anticipate significant needs for cash for property maintenance or repairs.
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.

STOCK REPURCHASE. On November 15, 1994, the Company announced that its Board of
Directors had authorized the Company to repurchase, from time to time, up to
1,000,000 shares of its outstanding Common Stock, depending on market conditions
and other factors. As of December 31, 1996, the Company had repurchased 172,100
shares, at an average price of approximately $9.80 per share, all of which have
been retired.

Results of Operations

Year ended December 31, 1996 compared to year ended December 31, 1995

Total Revenues. Total revenues for the year ended December 31, 1996 were
$31,675,355, an increase of $6,673,593 from the year ended December 31, 1995.
The increase in total revenues was attributable to an increase in rental
revenue, primarily due to revenues from properties acquired in August and
December 1995, and May 1996.

Total Expenses. Total expenses for the year ended December 31, 1996 were
$25,519,469 an increase of $5,629,284 from the year ended December 31, 1995. The
increase was primarily attributable to increases in interest expense,
depreciation and general and administrative expenses, and transactional expenses
incurred in 1996.

Interest expense for the year ended December 31, 1996 was $12,817,528, an
increase of $2,522,352 from the year ended December 31, 1995, which was
primarily due to interest expense incurred on the mortgage notes assumed in the
exchange transaction of May 22, 1996 to acquire the Salt Lake City, Utah
Property.

Depreciation expense for the year ended December 31, 1996 was $7,627,232, an
increase of $1,809,994 from the year ended December 31, 1995, which was
primarily due to properties acquired in August and December 1995 and May 1996.

General and administrative expenses for the year ended December 31, 1996 were
$3,125,100, a $431,340 increase from the year ended December 31, 1995. This
increase is due to an increase in performance-based compensation of $146,702 and
an increase in professional fees.

The transactional expenses totaled $644,047 and were comprised of costs of
$169,530 associated with a proposed equity offering which was abandoned in favor
of the completed private equity placement, and $474,517 of expenses incurred in
connection with transactions in progress for which expenses are required to be
charged to current operations.

The Company has added two senior corporate officers and one additional employee
as employees as of October 1, 1996, in connection with the Company entering into
management agreements with two partnerships which own 59 single tenant
net-leased office, industrial and retail properties. The cost of the additional
overhead is expected to be offset by expenses reimbursed pursuant to the
management agreements.
   8
Net income. Net income for the year ended December 31, 1996 was $5,465,824 an
increase of $2,181,824 from the year ended December 31, 1995. The increase was
primarily attributable to a non-recurring loss on extinguishment of debt
incurred in 1995 in the amount of $4,849,226, offset by non-recurring items in
1995 relating to the sale of the Eagan Property on March 31, 1995; a gain on the
sale of approximately $1.5 million and proceeds from lease termination of $1.6
million, offset by the related write-off of deferred rent receivable of
approximately $678,000. Additionally, the increase in rental revenue discussed
above also contributed to the increase in net income.

Year ended December 31, 1995 compared to year ended December 31, 1994

Total Revenues. Total revenues for the year ended December 31, 1995 were
$25,001,762, a decrease of $1,036,144 from the year ended December 31, 1994. The
decrease in total revenues resulted from a property sale that occurred in March,
1995. The loss of revenue resulting from the property sale was partially offset
by an increase in interest income of $334,648 and revenues from new
acquisitions.

Total Expenses. Total expenses for the year ended December 31, 1995 were
$19,890,185, a decrease of $571,338 from the year ended December 31, 1994.
Interest expense for the year ended December 31, 1995 was $10,295,176, a
decrease of $687,133 from 1994 as a result of debt refinancing. General and
administrative expenses for the year ended December 31, 1995 were $2,693,760, an
increase of $277,574 from the year ended December 31, 1994. The increase in
general and administrative expense is attributable to an expense of $441,562
relating to performance-based stock compensation. Property operating expenses
for the year ended December 31, 1995 were $620,058 a decrease of $188,360,
resulting from appraisal and environmental audit work undertaken in 1994.

Net Income. Net income for the year ended December 31, 1995 was $3,284,000, a
decrease of $2,194,796 from the year ended December 31, 1994. The decrease in
net income in 1995 was primarily attributable to a $4,849,226 loss on
extinguishment of debt, of which approximately $4.6 million was incurred by the
Company in connection with the REMIC Financing, which was partially offset when
the Company recognized a $1,514,400 gain and $1,600,000 of lease termination
proceeds resulting from the sale of the Company's property in Eagan, Minnesota.

FUNDS FROM OPERATIONS

Management believes that Funds From Operations enhances an investor's
understanding of the Company's financial condition, results of operations and
cash flows a believes it is an appropriate performance measure for an equity
REIT which provided an indication of a REIT's ability to make cash
distributions. Funds From Operations is defined by the National Association of
Real Estate Investment Trusts, Inc. ("NAREIT") as "net income (or loss)
(computed in accordance with generally accepted accounting principles),
excluding gains (or losses) from debt restructuring and sales of property, plus
real estate depreciation and amortization and after adjustments for
unconsolidated partnerships and joint ventures." The Company's method of
calculating Funds From Operations excludes other non-recurring revenue and
expense items and may be different from methods used by other REITs and,
accordingly, is not comparable to such other REITs. Funds From Operations
should not be considered an alternative to net income as an indicator of
operating performance.

The following table reflects the Company's FFO for the years ended December 31,
1996, 1995 and 1994.



                                                       1996              1995               1994
                                                    -----------       -----------        -----------
                                                                                        
Income before minority interests                    $ 6,155,886         3,376,751          5,576,383

Add back:
  Depreciation of real estate                         7,627,232         5,817,238          5,908,922
  Depreciation from unconsolidated
    partnerships                                         59,062            24,609                 --
Loss from debt restructuring                                            4,849,226                  
Less: 
  Gain on sale of properties                                           (1,514,400)                
  Write-off of deferred rent receivable
    related to property sale                                              678,078                 
  Proceeds from lease termination                                      (1,600,000)                
  Minority interest's share of depreciation            (751,482)         (150,376)          (105,770)
  Minority interest's share of income                  (690,062)          (92,751)           (97,587)
                                                    ------------      ------------        -----------
    Funds from operations before items below         12,400,636        11,388,375          11,281,948
Adjustments of other non-recurring items(1)
  Non-recurring stock compensation                      588,265           441,562                 --
                                                    -----------       -----------         ----------
    Funds from operations                            12,988,901        11,829,937          11,281,948
                                                    ===========       ===========         ===========


(1) For purposes of the calculation of Funds From Operations ("FFO"), the
Company has added back to net income amounts for non-recurring stock
compensation which management believes to be appropriate adjustments based  on
the non-recurring and unusual nature of such amounts. The Company's method of
calculating FFO may be different from methods used by other REITs.
Non-recurring stock compensation represents the expense of a simultaneous
exercise and re-granting of options to the Company's management during the
period between July 1995 and January 1996, which was intended to increase
management's ownership in the Company (a practice which has been discontinued).
The Board of Directors has determined that the Company will not engage in such
practices in the future. In 1996 transactional expenses of $644,047 were
incurred. Management believes such expenses were of an unusual and significant
nature for the Company at the time they were incurred. If such amount was added
back to net income, FFO for 1996 would have been $13,632,948.
   9
The Company's dividends paid to stockholders amounted to approximately 76% of
the Company's funds from operations for the year ended December 31, 1996.

   10
ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

     Item 8 is amended and restated in its entirety as follows.

LEXINGTON CORPORATE PROPERTIES, INC.
AND CONSOLIDATED SUBSIDIARIES

INDEX

                                                                           Page
                                                                           ----

Independent Auditors' Report                                               28

Consolidated Balance Sheets as of December 31, 1996 and 1995               29

Consolidated Statements of Income
    for the years ended December 31, 1996, 1995 and 1994                   30

Consolidated Statements of Changes in Stockholders' Equity
    for the years ended December 31, 1996, 1995 and 1994                   31

Consolidated Statements of Cash Flows
    for the years ended December 31, 1996, 1995 and 1994                   32-33

Notes to Consolidated Financial Statements                                 34-49

Financial Statement Schedule

Schedule III - Real Estate and Accumulated Depreciation                    50-52



- --------------------

All other schedules have been omitted because the required financial information
is not applicable or the information is shown in the consolidated financial
statements or notes thereto.
   11
INDEPENDENT AUDITORS' REPORT


The Stockholders
Lexington Corporate Properties, Inc.:

We have audited the consolidated financial statements of Lexington Corporate
Properties, Inc. and consolidated 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 generally accepted auditing
standards. 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, Inc. and consolidated subsidiaries as of December 31, 1996 and 1995,
and the results of their operations and their cash flows for each of the years
in the three-year period ended December 31, 1996 in conformity with generally
accepted accounting principles. Also in our opinion, the related financial
statement schedule, when considered in relation to the basic consolidated
financial statements taken as a whole, presents fairly, in all material
respects, the information set forth therein.





                                                           KPMG Peat Marwick LLP




New York, New York
January 21, 1997
   12
LEXINGTON CORPORATE PROPERTIES, INC.
AND CONSOLIDATED SUBSIDIARIES

Consolidated Balance Sheets

December 31, 1996 and 1995





                            ASSETS                              1996               1995
                                                            ------------       ------------
                                                                         
Real estate, at cost (notes 3 and 6):
    Buildings and building improvements                     $287,534,071       $196,431,021
    Land and land estates                                     38,371,974         34,287,129
    Land improvements                                          2,830,339          2,830,339
    Fixtures and equipment                                    10,674,288         10,674,288
                                                            ------------       ------------
                                                             339,410,672        244,222,777

    Less:  accumulated depreciation                           51,342,953         43,715,721
                                                            ------------       ------------
                                                             288,067,719        200,507,056

Cash and cash equivalents                                      2,468,189          2,588,515
Restricted cash (note 4)                                       3,750,138          3,464,554
Deferred expenses (net of accumulated
    amortization of $ 2,955,205 in 1996
    and $2,343,262 in 1995)                                    3,733,930          3,753,553
Rent receivable (note 2)                                       7,842,568          7,701,420
Investment in partnerships (note 2)                              172,058            170,127
Escrow deposits (note 5)                                         104,400            654,400
Other assets                                                   2,987,112          2,376,611
                                                            ------------       ------------
                                                            $309,126,114       $221,216,236
                                                            ============       ============
    LIABILITIES AND STOCKHOLDERS' EQUITY

Mortgage notes payable (note 6)                             $185,766,458       $121,249,633
Subordinated notes payable, including accrued
    interest (note 7)                                          1,973,241          1,973,241
Accrued interest payable on mortgage notes (note 6)              421,929            440,788
Origination fees payable, including accumulated
   accretion of $394,512  in 1996 (note 9)                       457,508                 --
Accrued interest on origination fees payable (note 9)          3,920,989                 --
Accounts payable and other liabilities                         1,394,109            558,617
                                                            ------------       ------------
                                                             193,934,234        124,222,279
                                                            ------------       ------------
Minority interests (note 10)                                  22,532,733            475,846
                                                            ------------       ------------
                                                             216,466,967        124,698,125
                                                            ------------       ------------

Commitments and contingencies (note 3)

Stockholders' equity (notes 1 and 12):
    Preferred stock, par value $0.0001 per share;
       authorized 10,000,000 shares, issued none                      --                 --
    Excess stock, par value $0.0001 per share;
       authorized 40,000,000 shares, issued none                      --                 --
    Common stock, par value $0.0001 per share,
       authorized 40,000,000 shares, 9,426,900 and
       9,331,982 shares issued and outstanding in
       1996 and 1995, respectively                                   943                933
    Additional paid-in-capital                               136,955,941        135,954,121
    Accumulated distributions in excess                   
       of net income                                         (44,297,737)       (39,436,943)
                                                            ------------       ------------
                  Total stockholders' equity                  92,659,147         96,518,111
                                                            ------------       ------------
                                                            $309,126,114       $221,216,236
                                                            ============       ============


See accompanying notes to consolidated financial statements.

   13
                      LEXINGTON CORPORATE PROPERTIES, INC.
                          AND CONSOLIDATED SUBSIDIARIES

                        Consolidated Statements of Income

                  Years ended December 31, 1996, 1995 and 1994



                                                            1996               1995                1994
                                                        ------------       ------------        ------------
                                                                                            
Revenues:
    Rental (note 8)                                     $ 31,244,063       $ 24,522,884        $ 25,893,676
    Interest and other                                       431,292            478,878             144,230
                                                        ------------       ------------        ------------
                                                          31,675,355         25,001,762          26,037,906
                                                        ------------       ------------        ------------

Expenses:
    Interest expense (notes 6 and 7)                      12,817,528         10,295,176          10,982,309
    Depreciation                                           7,627,232          5,817,238           5,908,922
    Amortization of deferred expenses                        619,362            463,953             345,688
    Property operating expenses                              686,200            620,058             808,418
    General and administrative expenses
       (notes 9, 11 and 14)                                3,125,100          2,693,760           2,416,186
    Transactional expenses                                   644,047                 --                  --
                                                        ------------       ------------        ------------
                                                          25,519,469         19,890,185          20,461,523
                                                        ------------       ------------        ------------

Income before minority interests, gain on sale of
    properties, lease termination proceeds, and
    extraordinary item                                     6,155,886          5,111,577           5,576,383
Minority interests (note 10)                                 690,062             92,751              97,587
                                                        ------------       ------------        ------------

Income before gain on sale of properties,
    lease termination proceeds and extraordinary
    item                                                   5,465,824          5,018,826           5,478,796
Gain on sale of properties                                        --          1,514,400                  --
Proceeds from lease termination                                   --          1,600,000                  --
                                                        ------------       ------------        ------------

Income before extraordinary item                           5,465,824          8,133,226           5,478,796

Extraordinary item - loss on extinguishment
     of debt                                                      --          4,849,226                  --
                                                        ------------       ------------        ------------
          Net income                                    $  5,465,824       $  3,284,000        $  5,478,796
                                                        ============       ============        ============

Income before extraordinary item,
    per share                                           $       0.58       $       0.88        $       0.59
Extraordinary item - loss on extinguishment
    of debt, per share                                            --              (0.53)                 --
                                                        ------------       ------------        ------------
Net income per share                                    $       0.58       $       0.35        $       0.59
                                                        ============       ============        ============
Weighted average shares outstanding                        9,392,727          9,263,169           9,306,173
                                                        ============       ============        ============




See accompanying notes to consolidated financial statements.
   14
                      LEXINGTON CORPORATE PROPERTIES, INC.
                          AND CONSOLIDATED SUBSIDIARIES

           Consolidated Statements of Changes in Stockholders' Equity

                  Years ended December 31, 1996, 1995 and 1994







                                                                                         Additional               Total
                                                  Number               Common              paid-in            stockholders'
                                                 of shares              stock              capital               equity
                                              -------------        -------------        -------------        -------------
                                                                                                           
Balance at December 31, 1993                      9,303,409        $       9,303        $ 105,642,554        $ 105,651,857

Net income                                               --                   --            5,478,796            5,478,796
Dividends paid to stockholders
    ($1.08 per share)                                    --                   --           (9,771,306)          (9,771,306)
Exchange of shares for subordinated
    notes payable                                    (2,224)                  --              (22,240)             (22,240)
Change in par value of stock                             --               (8,374)               8,374
                                                                                                             -------------
Common stock issued                                  17,275                   --              154,019              154,019
Common stock repurchased and retired                (30,100)                  --             (271,440)            (271,440)
                                              -------------        -------------        -------------        -------------

Balance at December 31, 1994                      9,288,360                  929          101,218,757
                                                                                                               101,219,686

Net income                                               --                   --            3,284,000            3,284,000
Dividends paid to stockholders
    ($1.08 per share)                                    --                   --          (10,010,808)         (10,010,808)
Exchange of special limited partnership
    units for partnership interests                      --                   --            1,503,315            1,503,315
Common stock issued                                 185,622                   18            1,936,520            1,936,538
Common stock repurchased
    and retired                                    (142,000)                 (14)          (1,414,606)
                                              -------------        -------------        -------------        -------------
                                                                                                                (1,414,620)
Balance at December 31, 1995                      9,331,982                  933           96,517,178
                                                                                                                96,518,111
Net income                                               --                   --            5,465,824            5,465,824
Dividends paid to stockholders
    ($1.10 per share)                                    --                   --          (10,326,618)         (10,326,618)
Common stock issued                                  94,918                   10            1,001,820            1,001,830
                                                  ---------        -------------        -------------        -------------

Balance at December 31, 1996                      9,426,900        $         943        $  92,658,204        $  92,659,147
                                                  =========        =============        =============        =============




See accompanying notes to consolidated financial statements.
   15
                      LEXINGTON CORPORATE PROPERTIES, INC.
                          AND CONSOLIDATED SUBSIDIARIES

                      Consolidated Statements of Cash Flows

                  Years ended December 31, 1996, 1995 and 1994



                                                           1996                1995                1994
                                                       ------------        ------------        ------------
                                                                                              
Cash flows from operating activities:
    Net income                                         $  5,465,824        $  3,284,000        $  5,478,796
                                                       ------------        ------------        ------------
    Adjustments to reconcile net
       income to net cash provided
       by operating activities net of effects
       from purchase of partnership assets:
          Depreciation and amortization                   8,246,594           6,281,191           6,254,610
          Net gain from sale of properties                       --          (1,514,400)                 --
          Write-off of deferred rent
              receivable                                         --             678,078                  --
          Write-off of unamortized deferred
              loan fees                                          --             323,168                  --
          (Increase) decrease in rent receivable           (141,148)            394,301             570,985
          Amortization of discount on
              mortgage notes payable                          8,764               5,478                  --
          Income from unconsolidated
              partnerships                                  (12,735)               (355)                 --
          Increase (decrease) in accounts
              payable and other liabilities                 746,342            (364,027)            436,853
          (Decrease) increase in accrued
              interest payable                              (18,859)             93,972             (80,748)
          Accrued interest added to principal
              balance of mortgage notes                          --              34,192             124,071
          Minority interests                                690,062              92,751              97,587
          Deferred lease costs                                   --                  --            (200,000)
          Increase in other assets                          (12,496)         (2,091,852)           (259,153)
                                                       ------------        ------------        ------------
                  Total adjustments                       9,506,524           3,932,497           6,944,205
                                                       ------------        ------------        ------------

                  Net cash provided by
                     operating activities                14,972,348           7,216,497          12,423,001
                                                       ------------        ------------        ------------

Cash flows from investing activities:
    Net proceeds from sale of properties                         --          16,347,058                  --
    Acquisitions of real estate properties
       and partnerships, net of cash acquired           (16,954,912)         (8,460,166)                 --
    Distributions from unconsolidated
       partnerships                                           3,385                  --                  --
                                                       ------------        ------------        ------------
                  Net cash (used in) provided by
                     investing activities               (16,951,527)          7,886,892                  --
                                                       ------------        ------------        ------------



   16
                                      2

                      LEXINGTON CORPORATE PROPERTIES, INC.
                          AND CONSOLIDATED SUBSIDIARIES

               Consolidated Statements of Cash Flows, Continued



                                                            1996                1995                1994
                                                        ------------        ------------        ------------
                                                                                       
Cash flows from financing activities:
   Proceeds of mortgage notes payable                   $ 19,618,640        $ 84,513,344        $         --
   Increase in deferred expenses                            (294,323)         (3,242,138)                 --
   Dividends to stockholders                             (10,326,618)        (10,010,808)         (9,771,306)
   Repayments on mortgage notes                           (7,533,655)        (83,196,026)         (2,437,748)
   (Increase) decrease in restricted cash                   (285,584)         (3,464,554)            200,000
   Decrease (increase) in escrow deposits                    550,000            (550,000)                 --
   Proceeds from issuance of common stock                  1,001,830           1,936,538             154,019
   Common stock repurchased                                       --          (1,414,620)           (271,440)
   Cash distributions to minority interests                 (871,437)           (182,638)           (177,564)
                                                        ------------        ------------        ------------

            Net cash provided by (used in)
               financing activities                        1,858,853         (15,610,902)        (12,304,039)
                                                        ------------        ------------        ------------

            (Decrease) increase in cash                     (120,326)           (507,513)            118,962

Cash and cash equivalents at beginning of year             2,588,515           3,096,028           2,977,066
                                                        ------------        ------------        ------------


Cash and cash equivalents at end of year                $  2,468,189        $  2,588,515        $  3,096,028
                                                        ============        ============        ============


Supplemental disclosure of cash flow information:
     Cash paid during the year for interest             $ 12,827,623        $ 10,161,534        $ 10,938,986
                                                        ============        ============        ============
     Cash paid during the year for taxes                $    155,740        $    181,921        $    137,947
                                                        ============        ============        ============



Supplemental disclosure of non-cash investing and financing activities:

On August 1, 1995, the Company acquired ownership interests in six partnerships
in exchange for special limited partnership units. The financial position of
four of these partnerships is included in the consolidated balance sheets as of
December 31, 1996 and 1995. Total assets and total liabilities acquired in the
exchange were $10,231,767 and $10,179,310, respectively. The Company's
proportionate share of the remaining two partnerships is included in investment
in partnerships.

On May 22 and December 31, 1996, the Company completed two separate acquisition
transactions involving certain partnerships, whereby six properties were
acquired in exchange for special limited partnership units, following which the
selling partnerships were dissolved. Total assets acquired and total liabilities
assumed in the exchanges were $79,128,985 and $56,890,723, respectively. The
difference has been recorded as minority interest.

For the year ended December 31, 1994, the Company exchanged common stock with a
value of $22,240 for subordinated notes payable.

See accompanying notes to consolidated financial statements.
   17
                      LEXINGTON CORPORATE PROPERTIES, INC.
                          AND CONSOLIDATED SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                        December 31, 1996, 1995 and 1994


       The Notes to Consolidated Financial Statements are amended and restated
       in their entirety as follows.

(1)    THE COMPANY



       Lexington Corporate Properties, Inc. (the "Company") is a Maryland
       corporation which was organized to combine and continue to expand the
       business of two affiliated Delaware limited partnerships (the
       "Partnerships") which own, operate and manage a diverse portfolio of real
       properties. The real properties owned by the Company are subject to
       triple net leases to corporate tenants. References herein to the
       "Company" shall include references to the Company, the Partnerships and
       the Company's predecessor, Lexington Corporate Properties, Inc., a
       Delaware corporation which was organized in October 1993 and was merged
       into the Company on June 27, 1994.



       The total number of shares of all classes of capital stock that the
       Company has authority to issue is 90,000,000 shares, consisting of
       40,000,000 shares of common stock with a par value of $.0001 per share,
       40,000,000 shares of excess stock with a par value of $.0001 per share
       and 10,000,000 shares of preferred stock with a par value of $.0001 per
       share.



       The excess stock is not entitled to receive dividends, except upon
       liquidation of the Company. Such shares vote as a single class with
       holders of shares of the Company's Common Stock. The excess stock and
       Common Stock are considered equal for purposes of liquidation of the
       Company.



       On November 15, 1994, the Company announced that its Board of Directors
       had authorized the Company to repurchase, from time to time, up to
       1,000,000 shares of its outstanding Common Stock, depending on market
       conditions and other factors. As of December 31, 1996, the Company had
       repurchased 172,100 shares at an average price of approximately $9.80 per
       share, all of which have been retired.



(2)    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES



       The Company's consolidated financial statements are prepared on the
       accrual basis of accounting for financial and Federal income tax
       reporting purposes. Depreciation for financial reporting purposes is
       determined by the straight-line method over the remaining estimated
       economic useful lives of the properties. The Company depreciates
       buildings and building improvements over a 40-year period or the
       remaining useful lives from the dates of acquisition, land improvements
       over a 20-year period, and fixtures and equipment over a 12-year period.
       Acquisition fees incurred in connection with properties acquired have
       been capitalized as a cost of the properties upon acquisition.
       Depreciation for tax purposes is determined in accordance with the
       Modified Accelerated Cost Recovery System.



       The financial statements reflect the accounts of the Company and its
       majority-owned subsidiaries, including, Lepercq Corporate Income Fund
       L.P. ("LCIF") and Lepercq Corporate Income Fund II L.P. ("LCIF II"). The
       Company is the sole general partner and majority limited partner of LCIF
       and LCIF II as well as general partner and majority limited partner in
       four other partnerships and, accordingly, accounts for them on a
       consolidated basis. Entities in which the Company has an interest of less
       than 50% are accounted for under the equity method and the investments in
       these partnerships are included in other assets in the accompanying
       consolidated balance sheets.



       The Company has determined that the leases relating to the properties are
       operating leases. Rental revenue is recognized on a straight-line basis
       over the minimum lease terms. The Company's rent receivable primarily
       represents the amounts of the excess of rental revenues recognized on a
       straight-line basis over the annual rents collectible under the leases.



       Deferred expenses are composed principally of debt placement, mortgage
       loan and other
   18
                      LEXINGTON CORPORATE PROPERTIES, INC.
                          AND CONSOLIDATED SUBSIDIARIES

                   Notes to Consolidated Financial Statements




(2),   CONTINUED


       loan fees, and are amortized using the straight-line method, which
       approximates the interest method, over the terms of the mortgages.


       Origination fees payable obligations have been discounted using an annual
       rate of 13%.


       The Company has qualified as a real estate investment trust under the
       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 ("Taxable Income") which is distributed to its stockholders,
       provided that at least 95% of Taxable Income is distributed. No provision
       for Federal income taxes has been made in the consolidated financial
       statements, as the Company believes it is in compliance with the Code and
       has distributed all of its taxable income.



       A summary of the taxable nature of the Company's dividends for the three
       years ended December 31 is as follows:





                                           1996           1995           1994
                                         --------       --------       --------
                                                              
Total dividends per share                $   1.10       $   1.08       $   1.08
                                         ========       ========       ========
Percent taxable as ordinary
income                                      95.46%         41.36%         89.90%
Percent taxable as long-term
capital gains                                  --          24.71%            --
Percent non-taxable as
return of capital                            4.54%         33.93%         10.10%
                                         --------       --------       --------
                                           100.00%        100.00%        100.00%
                                         ========       ========       ========



       The Company and its consolidated subsidiaries are required to file tax
       returns in various states. States vary with respect to the taxation of
       REITs. Some states have a tax based on capital within the state; other
       states, not recognizing the REIT dividends paid deduction, have a tax
       based on apportioned income as it would any corporation. There are states
       that tax under both methods as well as states that have no additional
       taxes other than the minimum state tax requirement. The provision for
       state taxes is included in general and administrative expenses in the
       consolidated statements of income. There are no significant temporary
       differences giving rise to deferred taxes.

       Net income per share is computed on the basis of the weighted average
       shares of common stock outstanding. The weighted average number of shares
       outstanding for the years ended December 31, 1996, 1995, and 1994 was
       9,392,727, 9,263,169 and 9,306,173, respectively. The assumed exercise of
       outstanding stock options using the treasury stock method and conversion
       of special limited partnership units are not considered dilutive.


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


       The Financial Accounting Standards Board's Statement of Financial
       Accounting Standards ("SFAS") No. 107, Disclosures about Fair Value of
       Financial Instruments, defines fair value of a financial instrument as
       the amount at which the instrument could be exchanged in a current
       transaction between willing parties. The Company's cash, mortgage notes
       payable, subordinated notes payable, and accounts payable and other
       liabilities are carried at cost, which approximates fair value.
   19
                      LEXINGTON CORPORATE PROPERTIES, INC.
                          AND CONSOLIDATED SUBSIDIARIES

                   Notes to Consolidated Financial Statements




(2), CONTINUED

       For purposes of the statements of cash flows, the Company considers all
       highly liquid instruments to be cash equivalents. Cash and cash
       equivalents on the balance sheet at December 31, 1996 includes $2,177,035
       of money market instruments.

       The Company adopted the provisions of SFAS No. 121, Accounting for the
       Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed
       Of, on January 1, 1996. This Statement requires that long-lived assets
       and certain identifiable intangibles be reviewed for impairment whenever
       events or changes in circumstances indicate that the carrying amount of
       an asset may not be recoverable. Recoverability of assets to be held and
       used is measured by a comparison of the carrying amount of an asset to
       future net cash flows expected to be generated by the asset. If such
       assets are considered to be impaired, the impairment to be recognized is
       measured by the amount by which the carrying amount of the assets exceed
       the fair value of the assets. Assets to be disposed of are reported at
       the lower of the carrying amount or fair value less costs to sell.
       Adoption of this Statement did not have any impact on the Company's
       financial position, results of operations, or liquidity.

       Prior to January 1, 1996, the Company accounted for its stock option plan
       in accordance with the provisions of Accounting Principles Board ("APB")
       Opinion No. 25, Accounting for Stock Issued to Employees, and related
       interpretations. As such, compensation expense would be recorded on the
       date of grant only if the current market price of the underlying stock
       exceeded the exercise price. On January 1, 1996, the Company adopted SFAS
       No. 123, Accounting for Stock-Based Compensation, which permits entities
       to recognize as expense over the vesting period the fair value of all
       stock-based awards on the date of grant. Alternatively, SFAS No. 123 also
       allows entities to continue to apply the provisions of APB Opinion No. 25
       and provide pro forma net income and pro forma earnings per share
       disclosures for employee stock option grants made in 1995 and future
       years as if the fair-value-based method defined in SFAS No. 123 had been
       applied. The Company has elected to continue to apply the provisions of
       APB Opinion No. 25 and provide the pro forma disclosure provisions of
       SFAS No. 123.

       Management of the Company has made a number of estimates and assumptions
       relating to the reporting of assets and liabilities and the disclosure of
       contingent assets and liabilities to prepare these financial statements
       in conformity with generally accepted accounting principles. Actual
       results could differ from those estimates.

(3) INVESTMENTS IN REAL ESTATE

       The Company's real property portfolio as of December 31, 1996 consists of
       thirty-eight properties (or interests therein) (the "Properties") located
       in twenty-three states, including warehousing, distribution and
       manufacturing facilities, office buildings and retail properties. All of
       the Company's properties are subject to triple net leases, which are
       generally characterized as leases in which the tenant bears all, or
       substantially all, of the costs and cost increase for real estate taxes,
       insurance and ordinary maintenance.

       The Company's Properties were acquired between 1986 and 1990 and in 1995
       and 1996. The purchase prices on the Properties were satisfied with
       capital contributions of the Partnerships along with proceeds of mortgage
       financing, issuance of the Company's common stock and the issuance of
       special limited partnership units in one of the Partnerships.
   20
                      LEXINGTON CORPORATE PROPERTIES, INC.
                          AND CONSOLIDATED SUBSIDIARIES

                   Notes to Consolidated Financial Statements




(3), CONTINUED

       During 1996, the Company made the following acquisitions:



       On May 22, 1996, the Company, through LCIF, acquired the headquarters of
       Northwest Pipeline Corporation in exchange for an aggregate of 1,715,294
       special limited partnership units in LCIF. The units become convertible
       into the Company's common stock on a one-for-one basis on May 22, 1998,
       the second anniversary of the transaction. The unitholders will receive a
       quarterly distribution of $0.165 per unit (or $0.66 per unit per annum)
       through January 1, 1998, increasing to $0.27 per unit per quarter (or
       $1.08 per unit per annum) thereafter. Additionally, 114,006 special
       limited partnership units in LCIF were issued to affiliates of the
       Company in exchange for the affiliates' contribution of their contractual
       right to receive certain future management and disposition fees from the
       selling partnership, and 9,000 shares of Lexington common stock were
       issued to the affiliates in exchange for accrued but unpaid management
       fees. The holders of the 114,006 units will have the same conversion
       rights as described above, and will receive a quarterly distribution of
       $0.27 per unit (or $1.08 per annum), and the holders of the 9,000 shares
       of common stock will be entitled to quarterly dividend payments as common
       stockholders. Total assets acquired and total liabilities assumed in the
       exchange were approximately $56.9 million and $38.5 million,
       respectively. The consolidated statement of income for the year ended
       December 31, 1996 includes the operating results of the acquired
       partnership commencing May 22, 1996.

       The acquisition consisted of a 295,000 square foot office building and a
       600 car parking garage located in Salt Lake City, Utah. The property is
       100% occupied by and leased to Northwest Pipeline Corporation under a net
       lease which expires on September 30, 2009, subject to two renewal options
       for a total of nineteen years. The property is located on land leased
       through September 17, 2018, subject to a ten year renewal option. The
       current annual net rent is approximately $8.16 million, net of payments
       under the land lease. The property is subject to two mortgage notes which
       have a total outstanding principal balance of approximately $35.6 million
       as of December 31, 1996.

       On May 31, 1996, the Company acquired a 56,132 square foot retail
       facility in Jacksonville, Alabama for a purchase price of $2,014,000. The
       purchase price and related acquisition costs were satisfied with funds
       from a draw on the Company's revolving credit facility (the "Credit
       Facility"), in the amount of $2.1 million. The property is leased to
       Wal-Mart Stores, Inc. under a net lease which expires on January 31,
       2009, with annual net rent of $146,040.

       On December 23, 1996, the Company acquired three industrial properties
       for approximately $14.7 million. Two of the properties, located in
       Plymouth, Michigan and Oberlin, Ohio, were acquired for $11.3 million and
       net-leased to Johnson Controls, Inc. for a term of ten years. The annual
       base rent is $1.14 million, or approximately 10.08% of the purchase
       price, and will be adjusted annually by three times the percentage
       increase in the Consumer Price Index, not to exceed 4.5% per annum. The
       two properties total 245,320 square feet. The aggregate purchase price
       and related acquisition costs of these two properties were satisfied with
       funds from a draw on the Company's Credit Facility.
   21
                      LEXINGTON CORPORATE PROPERTIES, INC.
                          AND CONSOLIDATED SUBSIDIARIES

                   Notes to Consolidated Financial Statements




(3), CONTINUED

       The third acquired property, totaling 72,868 square feet and located in
       Franklin, North Carolina, was net-leased to SKF USA for a term of
       approximately eighteen years. The purchase price was approximately $3.4
       million. The annual net rent is equal to approximately 9.46% of the
       purchase price and will increase every three years by the percentage
       increase in the Consumer Price Index, not to exceed 3% per annum. The
       purchase price and related acquisition costs were satisfied by temporary
       financing in the form of a bridge loan in the amount of approximately
       $2.8 million, and cash.

       On December 31, 1996, the Company, through LCIF, simultaneously acquired
       five properties from three partnerships, in exchange for special limited
       partnership units in LCIF. These units become convertible into the
       Company's common stock on a one-for-one basis on various dates. The
       unitholders will receive a quarterly distribution of $0.28 per unit (or
       $1.12 per unit per annum), beginning on various dates, subject to
       decrease by an amount proportionate to any decrease in distributions on
       shares of the Company's common stock.

       Additionally, 51,092 special limited partnership units in LCIF were
       issued to affiliates of the Company in exchange for the affiliates'
       contribution of their contractual right to receive certain fees for
       services rendered in connection with the acquisition of the properties.
       The affiliated holders of these units will have the same conversion
       rights as previously described, with the initial date for eligible
       conversion being January 15, 1999, subsequently convertible annually on
       each January 15 thereafter. These affiliated unitholders will also
       receive quarterly dividends as previously described.

       The three partnerships involved in the transaction were Toy Properties
       Associates II ("Toy II"), Toy Properties Associates V ("Toy V") and Fort
       Street Partners ("Fort Street"). Details of the acquisitions involving
       the three respective partnerships follows.

       In the Toy II transaction, the Company acquired three retail stores
       located in Tulsa, Oklahoma; Clackamas, Oregon; and Lynwood, Washington;
       (the "Toy II Properties") containing an aggregate of 129,070 square feet
       and leased to Toys 'R' Us, Inc. under triple net leases which expire on
       May 31, 2006 and which are subject to five, five-year renewal options.
       The current annual aggregate rent is approximately $1,067,000. As of
       December 31, 1996, the Toy II Properties were subject to mortgage notes
       with an outstanding aggregate principal balance of $5,827,758, bearing
       interest at a rate of 12.625% per annum. On January 22, 1997, the
       aggregate principal balance of these notes, in the amount of $5,801,069,
       plus an aggregate prepayment premium of approximately $377,000, were all
       paid in full.

       In the consummation of the Toy II transaction, 72,580 LCIF units were
       transferred to the limited and general partners of Toy II, and 22,420
       units were transferred to affiliates for their contractual rights to fees
       from Toy II. The distribution rights on these units began immediately and
       the initial date for eligible conversion is January 15, 1999,
       subsequently convertible annually on each January 15 thereafter.

       In the Toy V transaction, the Company acquired a 123,293 square foot
       distribution center located in Houston, Texas, (the "Toy V Property")
       leased to Toys 'R' Us, Inc. under a triple net lease which expires on
       August 31, 2006, and which is subject to five, five-year renewal options.
       The current annual rent is approximately $400,000. As of December 31,
       1996, the Toy V Property was subject to a mortgage note with an
       outstanding balance of $2,195,746, bearing interest at a rate of 12.625%
       per annum. On January 22, 1997, the aggregate principal balance plus a
       prepayment premium of approximately $143,000 were paid in full.
   22
                      LEXINGTON CORPORATE PROPERTIES, INC.
                          AND CONSOLIDATED SUBSIDIARIES

                   Notes to Consolidated Financial Statements




(3), CONTINUED

       In the consummation of the Toy V transaction, 23,587 LCIF units were
       transferred to the limited and general partners of Toy V, and 11,413
       units were transferred to affiliates for their contractual rights to fees
       from Toy V. The distribution and conversion rights on these units are
       identical to those in the Toy II transaction, previously described.

       In the Fort Street transaction, the Company acquired an 85,610 square
       foot retail facility located in Honolulu, Hawaii (the "Fort Street
       Property"), leased to Liberty House, Inc. under a triple net lease which
       expires on September 30, 2009, and which is subject to one 115 month
       renewal option, one two-year renewal option and three five-year renewal
       options. The current annual rent is approximately $963,000. As of
       December 31, 1996, the Fort Street Property was subject to a mortgage
       note with an outstanding balance of $6,189,675, bearing interest at
       10.25% per annum. Equal monthly payments of interest and principal
       sufficient to fully amortize the note by September 30, 2010 are required.

       In the consummation of the Fort Street transaction, 207,741 LCIF units
       were transferred to limited and general partners of Fort Street. The
       distribution and conversion rights on these units are the same as
       previously described except that the holders of these units do not begin
       to receive distributions and do not become eligible to convert their
       units until January 15, 2006. Additionally, 17,259 units were transferred
       to affiliates for their contractual rights to fees from Fort Street. The
       distribution and conversion rights (and applicable dates) on these units
       are identical to those in the Toy II and Toy V transactions, previously
       described.

       The acquisitions made during 1996 have been accounted for using the
       purchase method of accounting.

       The following unaudited pro forma operating information for the year
       ended December 31, 1996 has been prepared as if the above acquisitions
       had been consummated as of January 1, 1996 and does not purport to be
       indicative of what the operating results would have been had the
       acquisitions been consummated on that date.
       Pro forma amounts are as follows:




                                            Unaudited Pro forma      Historical
                                             December 31, 1996    December 31, 1996
                                             -----------------    -----------------
                                                            
Revenues                                        $39,022,299          $31,675,355
Net income                                      $ 5,471,349          $ 5,465,824
Net income per share                            $      0.56          $      0.58



       The unaudited pro forma net income per share reflects the dilutive effect
of certain convertible limited partnership units treated as common stock
equivalents as if those units were issued at January 1, 1996.


(4) RESTRICTED CASH



       On May 19, 1995, the Company, through its wholly owned subsidiary, LXP
       Funding Corp., completed a $70 million secured debt offering (the "REMIC
       Financing") by issuing commercial mortgage pass-through certificates. As
       a condition of the REMIC Financing, the trustee, established as part of
       the REMIC Financing, maintains a restricted cash account. Rent from the
       fifteen secured properties is required to be deposited into this account.
       Additionally, there are certain reserves that are required to be funded
       and maintained in this account. The monthly debt service payments are
       made from the account and, after considering reserve requirements, any
       excess funds are transferred to the Company.
   23
                      LEXINGTON CORPORATE PROPERTIES, INC.
                          AND CONSOLIDATED SUBSIDIARIES

                   Notes to Consolidated Financial Statements



(5) ESCROW DEPOSITS

       On December 7, 1995, the Company, through a wholly owned subsidiary
       acquired a fitness center in Canton, Ohio. The purchase price was
       $4,100,000, consisting of 100,000 shares of Common Stock of the Company
       and $3,012,500 in cash. As a condition relating to the issuance of the
       Common Stock, the Company was required to register the stock within 90
       days of the closing, or it would have been obligated to repurchase all of
       the Common Stock at $10.875 per share.

       To secure this obligation, the Company was required at the closing to
       deposit $550,000 into an escrow account. On March 6, 1996, the
       registration of the Common Stock was effected, and the escrow monies were
       returned to the Company.

(6)    MORTGAGE NOTES PAYABLE

       The Company's aggregate consolidated mortgage notes payable as of
       December 31, 1996 was $185,766,458, which consisted of indebtedness
       outstanding under the REMIC Financing, borrowings outstanding under the
       Company's Credit Facility and outstanding mortgage indebtedness related
       to sixteen Properties.

       As of December 31, 1996, the indebtedness outstanding under the REMIC
       Financing was $68,804,233, with a weighted average interest rate of
       approximately 8.10% per annum. The REMIC Financing debt matures on May
       25, 2005, with a balloon payment in the amount of $60,001,000 due on that
       date. An aggregate amount of $6,352,611 in debt service payments will be
       due in 1997 on the REMIC Financing.

       The REMIC Financing is secured by mortgages on the following fifteen
       Properties: Modesto, California; Mansfield, Ohio; Marshall, Michigan (904
       Industrial Road); Marshall, Michigan (1601 Pratt Avenue); Memphis,
       Tennessee; Mechanicsburg, Pennsylvania; Newark, California; Countryside,
       Illinois; Voorhees, New Jersey; Dewitt, New York; Newport, Oregon;
       Sacramento, California; Reno, Nevada; Las Vegas, Nevada; and Klamath
       Falls, Oregon.

       The Company's Credit Facility, in a maximum committed amount of $60
       million, bears interest at 1.5% over LIBOR. The Facility matures on June
       1, 1999, but will automatically renew for successive two-year terms
       unless the lender notifies the Company at least twelve months in advance
       of the scheduled or extended maturity date of its intention to terminate
       the Credit Facility. As of December 31, 1996, the Company had borrowed
       $25 million, with a weighted average interest rate of approximately 7.12%
       per annum. Based on the weighted average interest rate in effect as of
       December 31, 1996, debt service payments on the Credit Facility in 1997
       would total $1,785,102.

       The Credit Facility is secured by first mortgage liens on the following
       six Properties: Glendale, Arizona; Southington, Connecticut; Riverdale,
       Georgia; Jacksonville, Alabama; Plymouth, Michigan; and Oberlin, Ohio.
       The Credit Facility requires compensating balances of $250,000.

       As of December 31, 1996, a total of sixteen properties (in addition to
       the Properties securing the REMIC Financing and the Credit Facility) were
       subject to outstanding mortgages with an aggregate outstanding principal
       balance of $91,962,225. The following table sets forth certain
       information regarding outstanding mortgage indebtedness on the sixteen
       properties as of December 31, 1996:
   24
                      LEXINGTON CORPORATE PROPERTIES, INC.
                          AND CONSOLIDATED SUBSIDIARIES

                   Notes to Consolidated Financial Statements



(6) CONTINUED



       [GRAPHIC OMITTED]




      * On January 22, 1997, the mortgages on the following four Properties were
      paid in full: Tulsa, Oklahoma; Clackamas, Oregon; Lynwood, Washington; and
      Houston, Texas. The aggregate principal amount paid was $7,996,817 and the
      aggregate prepayment premiums were approximately $520,000. The stated
      interest rate on these four mortgages was 12.625%.

       The mortgages on the two Tampa, Florida Properties are
       cross-collateralized.

       The weighted average interest rate on the two mortgage notes on the Salt
       Lake City, Utah Property at December 31, 1996 was 11.038% per annum.

       The mortgage on the Franklin, NC Property represents temporary bridge
       financing which, if not refinanced by June 23, 1997, must be repaid in
       full, including any accrued but unpaid interest. The annual interest rate
       was 8.25% through January 1, 1997, and was adjusted to 7.1875% as of
       February 1, 1997.

       All of the Company's mortgages are nonrecourse and are secured by first
       mortgage liens on the properties and by collateral assignments of the
       leases.
   25
                      LEXINGTON CORPORATE PROPERTIES, INC.
                          AND CONSOLIDATED SUBSIDIARIES

                   Notes to Consolidated Financial Statements



(6),   CONTINUED




       Principal paydowns of the mortgage notes payable for the succeeding five
       years are as follows:




        Year ending December 31            Amount
                                     
                 1997                   $ 8,205,848

                 1998                    15,748,155

                 1999                    36,654,022

                 2000                    14,389,803

                 2001                     6,530,142



       These amounts do not include the repayments of the four mortgages, in the
       amount of approximately $8 million, on January 22, 1997, as previously
       discussed. Included in the amount for 1997 is the bridge financing of
       approximately $2.8 million which must either be refinanced or repaid on
       June 23, 1997. Included in the amount for 1998 are balloon payments for
       the Tampa Property - $4,289,775, and the North Tampa Property -
       $5,717,444. Included in the amount for 1999 is a balloon payment for the
       Phoenix Property - $5,562,818 and $25 million currently outstanding under
       the Credit Facility, although it automatically extends for successive
       two-year periods unless the Company is properly notified by the lender of
       its intention to terminate the facility, according to the terms of the
       agreement. Included in the amount for 2000 is a balloon payment for the
       Marlborough Property - $7,965,712. Balloon payments on the notes issued
       in the REMIC Financing, in the aggregate of $60 million, are due in 2005.

(7)    SUBORDINATED NOTES PAYABLE

       Unitholders of the Partnerships who denied consent to the mergers
       described in Note 1 and qualified as dissenters received, in lieu of
       shares of Common Stock, Subordinated Notes of the Company having a
       principal amount equal to the net asset value of the Units exchanged for
       such notes. The notes were issued under an indenture between the Company
       and The Bank of New York, as Trustee. The notes bear interest at 7.75%
       per annum, payable semi-annually on January 1 and July 1 of each year,
       and are due on October 12, 2000.
   26
                      LEXINGTON CORPORATE PROPERTIES, INC.
                          AND CONSOLIDATED SUBSIDIARIES


                   Notes to Consolidated Financial Statements



(8) LEASES

       Minimum future rents receivable under noncancellable operating leases as
       of December 31, 1996 are as follows:





                     Year ending December 31                          Amount
                                                               
                             1997                                 $  36,341,863

                             1998                                    33,619,067

                             1999                                    31,443,518

                             2000                                    29,125,641

                             2001                                    27,790,302

                             Thereafter                             159,588,231



                                                                  $ 317,908,622




       The leases are triple net leases which generally require the lessee to
       pay all or substantially all taxes, insurance, maintenance, and all other
       similar charges and expenses relating to the Properties and their use and
       occupancy.


       Percentage rent from the Newport Property for the years ended December
       31, 1996, 1995 and 1994 amounted to $55,291, $45,172 and $42,538,
       respectively.


       Each of the following properties accounted for 10% or more of
       consolidated rental revenues for the years ended December 31:




                    Property            1996           1995           1994
                    --------            ----           ----           ----
                                                             
                    Glendale               8%            13%            13%

                    Newark                10%            13%            13%

                    Utah                  16%            --             --



       Ross Stores, Inc., the tenant of the Newark, California Property, has
       exercised an option to purchase such property for its fair market value
       as encumbered by a lease that expires on August 31, 2002 and presently
       provides for annual rental payments of $3,255,492. California state court
       ruled in favor of the tenant's motion to confirm an arbitration decision
       which would allow the tenant to purchase the property for $24.8 million
       on or about September 1, 1997. This motion was confirmed and the Company
       is appealing the decision, the outcome of which cannot be determined. The
       net book value of the assets related to the Newark Property at December
       31, 1996 is $25,690,333, which includes approximately $989,000 of
       straight-line rent receivable and approximately $559,000 of deferred
       expenses related to the REMIC Financing allocated to the Property. If the
       Company does not prevail on its appealing of the decision, the potential
       loss on the property would be approximately $430,000.

(9) RELATED PARTY TRANSACTIONS

       The Company has been granted an option by the LCP Group, L.P. ("LCP"),
       exercisable any time to acquire (i) general partnership interests
       currently owned by LCP in two limited partnerships, Net 1 L.P. and Net 2
       L.P. (collectively, the "Net Partnerships"), which own net leased office,
       industrial and retail properties and (ii) a 49% equity interest in an
       affiliated pension fund advisory company and real estate management
       company which manages six net leased properties with an aggregate value
       of approximately $39 million. Under the terms of the option, the Company,
       subject to review of any such transaction by the independent members of
       its Board of Directors, may acquire the general partnership interests in
       either or both of the Net Partnerships at their fair market value based
       upon a formula relating to partnership cash flows, with the Company
       retaining the option of paying such fair market value in securities of
       the Company, units representing interests in partnerships controlled by
       the Company or cash (or a combination thereof).
   27
                      LEXINGTON CORPORATE PROPERTIES, INC.
                          AND CONSOLIDATED SUBSIDIARIES


                   Notes to Consolidated Financial Statements


(9), CONTINUED

       On October 1, 1996, the Company hired three former employees of LCP who
       previously performed certain management duties for the Net Partnerships
       and entered into a management agreement with LCP with respect to the Net
       Partnerships pursuant to which the Net Partnerships will pay to the
       Company management compensation previously paid by the Net Partnerships
       to LCP (which aggregated approximately $220,000 in 1995). The cost of the
       new employees is expected to be offset by such management compensation.
       From the inception of the management agreement (October 1, 1996) to
       December 31, 1996, such compensation amounted to $48,435.

       In connection with the origination fees payable obligations, the Company
       is obligated to pay LCP an aggregate principal amount of $1,778,250 for
       rendering services in connection with the original acquisitions of
       certain properties. 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 12.25% to
       19%. Monthly installment payments are to commence at various dates to
       satisfy principal and current interest payments as well as any unpaid
       accrued interest outstanding. The original principal amounts have been
       discounted at an annual rate of thirteen percent.

       A member of the Company's Board of Directors is a partner in the firm
       that serves as general counsel to the Company. The Company intends to
       continue to retain the services of this firm for general, corporate and
       other matters.

(10) MINORITY INTERESTS

       In conjunction with several of the Company's acquisitions, sellers were
       given interests in partnerships controlled by the Company as a form of
       consideration. All of such interests are convertible at certain times
       into shares of Common Stock on a one-for-one basis at various dates
       through May 2006. The total number of special limited partnership units
       outstanding as of December 31, 1996 was 2,520,433. These units, subject
       to certain adjustments through the date of conversion, have distributions
       per unit in varying amounts up to $1.16 per unit. Minority interests in
       the accompanying consolidated financial statements relates to interests
       in such partnerships held by parties other than the Company.

(11)  EMPLOYEE BENEFIT PLAN

       Effective January 1, 1994, the Company established 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. Approximately $74,501, $59,261
       and $41,950 were contributed in 1996, 1995 and 1994, respectively.

(12)  PREFERRED STOCK

       On December 31, 1996, the Company entered into a definitive agreement
       with Five Arrows Realty Securities L.L.C. ("Five Arrows") providing for
       the sale of up to 2,000,000 shares of Senior Cumulative Convertible
       Preferred Stock (" Preferred Stock"). In connection with this
       transaction, the Company designated 2,000,000 shares as "Excess Class A
       Preferred Stock" and reserved for issuance up to 2,000,000 shares of its
       Common Stock upon the conversion of the Preferred Stock. Under the terms
       of the agreement, the Company may sell the Preferred Stock to Five Arrows
       at up to three closings, at Lexington's option, during 1997 for an
       aggregate price of approximately $25 million. In connection with such
       sale, the Company has entered into certain related agreements with
   28
                      LEXINGTON CORPORATE PROPERTIES, INC.
                          AND CONSOLIDATED SUBSIDIARIES


                   Notes to Consolidated Financial Statements


(12), CONTINUED

       Five Arrows, providing, among other things, for certain registration
       rights with respect to such shares and the right to designate a member of
       the Board of Directors under certain circumstances. The Preferred Stock,
       which is convertible into common stock on a one-for-one basis, is
       entitled to dividends equal to the greater of $.295 or 105% of the common
       stock dividend. On January 21, 1997, the Company sold 700,000 shares of
       Preferred Stock to Five Arrows and used the proceeds of $8.75 million to
       repay $7,996,817 of mortgage debt, including prepayments of $520,000.
       Such mortgage debt had been bearing interest at a stated rate of 12.625%
       per annum and would have required interest and principal payments of
       approximately $1.45 million in 1997.

(13)   LEGAL PROCEEDINGS

       The Company was sued in the United States District Court for the Northern
       District of Illinois on May 31, 1995, by United Municipal Leasing
       Corporation. The complaint filed in this case alleges that the Company
       breached a letter of intent by failing to execute definitive
       documentation and close a transaction in which the plaintiff proposed to
       sell property to the Company. The complaint seeks $800,000 in monetary
       damages. The Company believes that this suit is without merit, and plans
       to vigorously defend its position and, in any case, would not expect a
       material adverse effect on the Company in the event of a negative
       outcome.

       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.

(14) STOCK OPTION PLAN

       On June 17, 1993, the Company's Board of Directors adopted a stock option
       plan (the "Plan") pursuant to which stock options may be granted to
       officers and key employees. The Plan authorized grants of options to
       purchase up to 800,000 shares of authorized but unissued common stock.
       The Plan was amended on May 23, 1996 to increase by 800,000 the number of
       shares of Common Stock available for the grant of options thereunder,
       subject to certain limitations. Stock options are granted with an
       exercise price equal to the stock's fair market value at the date of
       grant. All stock options vest immediately and are exercisable over
       five-year terms.

       Additionally, each independent director of the Company receives options
       each year to purchase 2,500 shares of common stock at the fair market
       value as of the date of grant. Such grants automatically occur on each
       January 1. An initial grant of options for 2,500 shares of common stock
       was made to each independent director effective as of November 1, 1993.
       All options granted to the directors are exercisable, after a one-year
       holding period, for a period not to exceed five years from the date of
       grant.

       At December 31, 1996, there were 298,272 additional options available for
       grant under the Plan. The per share weighted-average fair value of stock
       options granted during 1996 and 1995 was $2.60 and $1.85 on the date of
       grant using the Black Scholes option-pricing model with the following
       weighted-average assumptions: risk-free interest rate of 6.5% and an
       expected life of five years for both of the years and volatility factors
       of 16.29% and 15.02% for the years 1996 and 1995, respectively. The model
       was based on actual dividends paid, which, on an annualized basis were
       $1.10 and $1.08 per share for the years ended December 31, 1996 and 1995,
       respectively.
   29
                      LEXINGTON CORPORATE PROPERTIES, INC.
                          AND CONSOLIDATED SUBSIDIARIES

                   Notes to Consolidated Financial Statements



(14), CONTINUED

       The Company applies APB Opinion No. 25 in accounting for its Plan and,
       accordingly, no compensation cost has been recognized for its stock
       options in the financial statements. Had the Company determined
       compensation cost based on the fair value at the grant date for its stock
       options under SFAS No. 123, the Company's net income would have been
       reduced to the pro forma amounts below:



                                                       1996                      1995
                                                       ----                      ----
                                                                   
       Net income          As reported            $  5,465,824              $   3,284,000

                           Pro forma                 4,993,924                  3,270,125


       Pro forma net income reflects only options granted in 1996 and 1995.
       Therefore, the full impact of calculating compensation cost for stock
       options under SFAS No. 123 is not reflected in the pro forma net income
       amounts presented above because compensation cost for options granted
       prior to January 1, 1995 is not considered.

       Stock option activity during the periods indicated is as follows:



                                                        Number of   Weighted-Average
                                                         Shares      Exercise Price
                                                         ------      --------------
                                                              
       Balance at December 31, 1993                      400,000        $ 10.00
                           Granted                         7,500         10.125
                           Exercised                         (--)           (--)
                           Forfeited                         (--)           (--)
                           Expired                           (--)           (--)
                                                        --------        -------



       Balance at December 31, 1994                      407,500          10.00
                           Granted(1)                    586,300          10.46
                           Exercised(1)                 (392,500)        (10.00)
                           Forfeited                         (--)           (--)
                           Expired                           (--)           (--)
                                                        --------        -------



       Balance at December 31, 1995                      601,300          10.45
                           Granted(1)                    367,800          11.56
                           Exercised(1)                 (191,300)         (9.15)
                           Forfeited                      (5,300)         11.39
                           Expired                           (--)           (--)
                                                        --------        -------



       Balance at December 31, 1996                      772,500        $ 10.72
                                                        ========        =======




       (1) In 1996 and 1995, certain officers and employees exchanged existing
       options for new options with exercise prices equal to the fair market
       value of the common stock at that time. These options are reflected in
       the amounts exercised and granted in the table above. The difference
       between the exercise prices of the original and the new options, which
       amounted to $588,000 and $442,000 in 1996 and 1995, respectively, has
       been reflected in general and administrative expenses in the accompanying
       financial statements.

       At December 31, 1996, the range of exercise prices and weighted-average
       remaining contractual life of outstanding options was $9.00 to $11.875
       and 3.75 years, respectively.
   30
                      LEXINGTON CORPORATE PROPERTIES, INC.
                          AND CONSOLIDATED SUBSIDIARIES


                   Notes to Consolidated Financial Statements




(14), CONTINUED

       At December 31, 1996, 1995 and 1994, the number of options exercisable
       was 775,300, 405,000, and 397,500, respectively, and the weighted-average
       exercise price of those options was $11.29, $11.09 and $10.00,
       respectively.

(15) SUBSEQUENT EVENTS (UNAUDITED)

       On February 14, 1997, the Company paid a dividend of $.29 per share to
       stockholders of record on January 31, 1997.

       On February 20, 1997, the Company completed the acquisition of a 58,800
       square foot industrial property (the "Tuscaloosa Property") in
       Tuscaloosa, Alabama for approximately $2.9 million. The Tuscaloosa
       Property is leased to Johnson Controls, Inc. for ten years. The annual
       net rent is $288,608 and escalates annually by three times the percentage
       change in the Consumer Price Index, not to exceed 4.5%.

       On March 19, 1997, the Company acquired three industrial properties (the
       "Exel Properties") for $27.0 million. The Exel Properties contain 761,200
       square feet on 46.56 acres near Harrisburg, Pennsylvania and are subject
       to net-leases with Exel Logistics, Inc. ("Exel") which expire on November
       30, 2006. The current annual net rent is $2,536,941 and will increase by
       9.27% on December 1, 1997 and by 9.27% every three years thereafter. The
       obligations of Exel under the leases are unconditionally guaranteed by
       its parent company, NFC plc.

       In connection with the acquisition of the Exel Properties, LCIF sold $25
       million of 8% Exchangeable Redeemable Secured Notes (the "Notes") to an
       institutional investor in a private placement. The Notes require interest
       only payments at 8% per annum, payable semi-annually in arrears, and have
       a seven year term. The Notes are secured by first mortgage liens on the
       Exel Properties, will be guaranteed by Lexington, and be exchanged for
       Lexington common stock at $13 per share beginning in the year 2000,
       subject to adjustment. The Notes may be redeemed after three years at a
       price of 103.2% of the principal amount, declining to par after five
       years. The Notes are subordinated to Lexington's revolving credit
       facility.

       In connection with the acquisition of the Exel Properties, an
       unaffiliated partnership (the "Exel Partnership") merged into LCIF. As a
       result of the merger, LCIF issued 480,000 partnership units exchangeable
       for Lexington common stock, which units are entitled to distributions at
       the same dividend rate as common stock. At the time of the merger, the
       Exel Partnership's sole assets were approximately $6.0 million of cash
       from the prior sale of a property and the right to acquire the Properties
       in a tax-free exchange under Internal Revenue Code Section 1031.
   31
                      LEXINGTON CORPORATE PROPERTIES, INC.
                          AND CONSOLIDATED SUBSIDIARIES

                   Notes to Consolidated Financial Statements



(16)     QUARTERLY FINANCIAL DATA (UNAUDITED)





                                                              Three months ended
                                                     March 31                    June 30,
                                                1996          1995          1996          1995
                                             ----------    ----------    ----------    ----------
                                                                            
       Revenues                              $6,799,356     5,862,519     7,682,441     6,187,949
       Expenses                               5,072,232     4,967,118     5,906,792     4,694,306
                                             ----------    ----------    ----------    ----------
       Income before minority interests,
          gain on sale of properties,
          lease termination proceeds
          and extraordinary item              1,727,124       895,401     1,775,649     1,493,643

       Minority Interests                        53,679        70,172       147,151       (53,982)
                                             ----------    ----------    ----------    ----------

       Income before gain on sale of
          properties, lease termination
          proceeds and extraordinary item     1,673,445       825,229     1,628,498     1,547,625

       Gain on sale of properties                    --     1,514,400            --            --
       Proceeds from lease termination               --     1,600,000            --            --
                                             ----------    ----------    ----------    ----------

       Income before extraordinary item       1,673,445     3,939,629     1,628,498     1,547,625

       Extraordinary item - loss on
          extinguishment of debt                     --            --            --     4,578,346
                                             ----------    ----------    ----------    ----------
       Net income (loss)                     $1,673,445     3,939,629     1,628,498    (3,030,721)
                                             ==========    ==========    ==========    ==========

       Income before extraordinary
          item, per share                    $     0.18          0.43          0.17          0.16

       Extraordinary item - loss on
          extinguishment of debt,
          per share                                  --            --            --         (0.49)
                                             ----------    ----------    ----------    ==========
       Net income (loss) per share           $     0.18          0.43          0.17         (0.33)
                                             ==========    ==========    ==========    ==========

   32
                      LEXINGTON CORPORATE PROPERTIES, INC.
                          AND CONSOLIDATED SUBSIDIARIES

                   Notes to Consolidated Financial Statements




(16) QUARTERLY FINANCIAL DATA (UNAUDITED)




                                                           Three months ended
                                                 September 30,               December 31,
                                              1996          1995          1996          1995
                                           ----------    ----------    ----------    ----------
                                                                          
       Revenues                            $8,654,605     6,376,242     8,538,953     6,575,052
       Expenses                             6,840,267     4,979,411     7,700,178     5,249,350
                                           ----------    ----------    ----------    ----------

       Income before minority interests
          and extraordinary item            1,814,338     1,396,831       838,775     1,325,702
       Minority interests                     259,771        37,861       229,461        38,700
                                           ----------    ----------    ----------    ----------
       Income before extraordinary
          item                              1,554,567     1,358,970       609,314     1,287,002
       Extraordinary item - loss on
           extinguishment of debt                  --            --            --       270,880
                                           ----------    ----------    ----------    ----------
       Net income                          $1,554,567     1,358,970       609,314     1,016,122
                                           ==========    ==========    ==========    ==========

       Income before extraordinary
          item, per share                  $     0.17          0.15          0.06          0.14
       Extraordinary item - loss on
          extinguishment of debt,
           per share                               --            --            --         (0.03)
                                           ----------    ----------    ----------    ----------
       Net income per share                $     0.17          0.15          0.06          0.11
                                           ==========    ==========    ==========    ----------

   33
                                   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, INC.

By: /s/ E. Robert Roskind
     ____________________

      E. Robert Roskind
      Chairman

Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the Company
and in the capacities and on the date indicated.


Signature                     Title
_________                     _____

/s/ E. Robert Roskind
______________________
E. Robert Roskind             Chairman of the Board of Directors
                              and Co-Chief Executive Officer

/s/ Richard J. Rouse
______________________
Richard J. Rouse              Vice Chairman and Co-Chief
                              Executive Officer and Director


/s/ T. Wilson Eglin
______________________
T. Wilson Eglin               President and Chief Operating Officer
                              and Director


/s/ Antonia G. Trigiani
______________________
Antonia G. Trigiani           Chief Financial Officer and Treasurer


/s/ Paul R. Wood 
______________________
Paul R. Wood                  Vice President, Chief Accounting
                              Officer and Secretary


/s/ Carl D. Glickman
______________________
Carl D. Glickman              Director


/s/ Kevin W. Lynch
______________________
Kevin W. Lynch                Director


/s/ John D. McGurk 
______________________
John D. McGurk                Director


/s/ Harry E. Petersen, Jr.
______________________
Harry E. Petersen, Jr.        Director


/s/ Seth M. Zachary
______________________
Seth M. Zachary               Director


DATE: November 14, 1997