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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
------------------------

FORM 10-K

(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
FOR THE TRANSITION PERIOD FROM TO

COMMISSION FILE NUMBER 1-12386

LEXINGTON CORPORATE PROPERTIES TRUST
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

MARYLAND 13-3717318
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)

355 LEXINGTON AVENUE NEW YORK, NY 10017
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)

REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (212) 692-7260

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:

TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
- ------------------------------------------- ----------------------------------------------
COMMON SHARES, PAR VALUE $.0001 NEW YORK STOCK EXCHANGE

SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: NONE

Indicate by check mark whether the Registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K (sec.229.405 of this chapter) is not contained herein, and
will not be contained, to the best of Registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. [X]

The aggregate market value of the voting shares held by non-affiliates of
the Registrant as of February 26, 1999 was $196,297,862.

Number of common shares outstanding as of February 26, 1999 was 17,279,537.

Number of preferred shares outstanding as of February 26, 1999 was
2,000,000.

DOCUMENTS INCORPORATED BY REFERENCE:

The Definitive Proxy Statement for Registrant's 1999 Annual Meeting of
Shareholders is incorporated herein by reference into Part III.
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2

PART I.

FORWARD-LOOKING STATEMENTS

When used in this Form 10-K Annual Report, the words "believes," "expects,"
"estimates" and similar expressions are intended to identify forward-looking
statements. Such statements are subject to certain risks and uncertainties which
could cause actual results to differ materially. In particular, among the
factors that could cause actual results to differ materially are continued
qualification as a real estate investment trust, general business and economic
conditions, competition, increases in real estate construction costs, interest
rates, accessibility of debt and equity capital markets and other risks inherent
in the real estate business including tenant defaults or financial difficulties,
potential liability relating to environmental matters and illiquidity of real
estate investments. Readers are cautioned not to place undue reliance on these
forward-looking statements, which speak only as of the date hereof. The Company
undertakes no obligation to publicly release the results of any revisions to
these forward-looking statements which may be made to reflect events or
circumstances after the date hereof or to reflect the occurrence of
unanticipated events.

ITEM 1. BUSINESS

GENERAL

Lexington Corporate Properties Trust (the "Company"), is a self-managed and
self-administered real estate investment trust that acquires, owns and manages a
geographically diverse portfolio of net leased office, industrial and retail
properties. The Company's predecessor was organized in October 1993 and merged
into the Company on December 31, 1997.

As of December 31, 1998, the Company's real property portfolio consisted of
66 properties (or interests therein) (the "Properties") located in twenty-nine
states, including warehousing, distribution and manufacturing facilities, office
buildings and retail properties containing an aggregate 10.9 million net
rentable square feet of space. 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 increases for real estate
taxes, insurance and ordinary maintenance.

The Company manages its real estate and credit risk through geographic,
industry, tenant and lease maturity diversification. As of December 31, 1998 the
five largest tenants/guarantors, which occupy 9 Properties, represented 39.3% of
annualized revenues:

% OF
RENTAL
TENANT/GUARANTOR REVENUE
---------------- -------

Kmart Corporation -- 1 property............................. 11.9%
Northwest Pipeline Corp. -- 1 property...................... 11.4%
Exel Logistics, Inc. -- 4 properties........................ 6.6%
Honeywell, Inc. -- 2 properties............................. 4.7%
FirstPlus Financial Group, Inc. -- 1 property............... 4.7%
----
39.3%
====

As of December 31, 1997 and 1996 the five largest tenants/guarantors
represented 48.1% and 45.7% of annualized revenues, respectively. Northwest
Pipeline Corp. is the only current tenant that represented greater than 10% of
annualized revenues in 1997 and 1996.

OBJECTIVES AND STRATEGY

The Company's primary objectives are to increase Funds From Operations and
cash available for distribution per share to its shareholders. In an effort to
obtain these objectives management focuses on:

- effectively managing assets through lease extensions, revenue enhancing
property expansions, opportunistic property sales and redeployment of
assets, when advisable;

1
3

- acquiring portfolios and individual net lease properties from third
parties, completing sale/lease-back transactions, acquiring build-to-suit
properties, acquiring properties from affiliated net lease partnerships
and opportunistic use of our operating partnership units;

- refinancing existing indebtedness at lower average interest rates and
increasing the Company's access to capital to finance property
acquisitions and expansions;

- entering into strategic co-investment programs which generate higher
equity returns than direct investments due to acquisition and asset
management fees and in some cases increased leverage levels; and

- strategic repurchase of common shares.

Internal Growth; Effectively Managing Assets

Tenant Relations and Lease Compliance. The Company maintains close contact
with its tenants in order to understand their future real estate needs. The
Company monitors the financial, property maintenance and other lease obligations
of its tenants through a variety of means, including periodic reviews of
financial statements and physical inspections of the Properties. The Company
performs annual inspections of those Properties where it has an ongoing
obligation with respect to the maintenance of the Property and for all
Properties during each of the last three years immediately prior to a scheduled
lease expiration. Biannual physical inspections are undertaken for all other
Properties.

Extending Lease Maturities. The Company seeks to extend its leases in
advance of their expiration in order to maintain a balanced lease rollover
schedule. Since February 1994, the Company has entered into lease extensions of
three years or more on 12 of its Properties.

As of December 31, 1998, the scheduled lease maturities for each of the
next five years are as follows:

NUMBER CURRENT % OF
OF SQUARE ANNUAL ANNUALIZED
LEASES FOOTAGE RENT ($000'S) RENTS
--------- --------- ------------- ----------

1999.................................. 0 0 $ 0 0
2000.................................. 2 249,240 654 0.87%
2001.................................. 4 818,944 3,255 4.33%
2002.................................. 4 653,386 2,833 3.77%
2003.................................. 1 179,280 1,900 2.53%
-- --------- ------ -----
11 1,900,850 $8,642 11.50%
== ========= ====== =====

Revenue Enhancing Property Expansions. The Company undertakes expansions
of its Properties based on tenant requirements. The Company believes that
selective property expansions can provide it with attractive rates of return and
actively seeks such opportunities.

Property Sales and Redeployment of Assets. The Company may determine to
sell a Property, either to the Property's existing tenant or to a third party,
if it deems such disposition to be in the Company's best interest. Since 1993,
the Company has sold three Properties, generating an aggregate net gain of $4.6
million.

Acquisition Strategies

The Company seeks to enhance its net lease property portfolio through
acquisitions of general purpose, efficient, well-located properties in growing
markets. Management has diversified the Company's portfolio by geographical
location, tenant industry segment, lease term expiration and property type with
the intention of providing steady internal growth with low volatility.
Management believes that such diversification should help insulate the Company
from regional recession, industry specific downturns and price fluctuations by
property type. Prior to effecting any acquisitions, management analyzes the (i)
property's design, construction quality, efficiency, functionality and location
with respect to the immediate sub-market, city and region; (ii) lease integrity
with respect to term, rental rate increases, corporate guarantees and property
maintenance provisions;

2
4

(iii) present and anticipated conditions in the local real estate market; and
(iv) prospects for selling or releasing the property on favorable terms in the
event of a vacancy. Management also evaluates each potential tenant's financial
strength, growth prospects, competitive position within its respective industry
and a property's strategic location and function within a tenant's operations or
distribution systems. Management believes that its comprehensive underwriting
process is critical to the assessment of long-term profitability of any
investment by the Company.

Operating Partnership Structure. The operating partnership structure
enables the Company to acquire properties by issuing to a seller, as a form of
consideration, interests in the Company's operating partnerships ("OP Units").
Management believes that this structure facilitates the Company's ability to
raise capital and to acquire portfolio and individual properties by enabling the
Company to structure transactions which may defer tax gains for a contributor of
property while preserving the Company's available cash for other purposes,
including the payment of dividends and distributions. The Company has used OP
Units as a form of consideration in connection with the acquisition of 22
Properties.

Acquisitions of Portfolio and Individual Net Lease Properties. The Company
seeks to acquire portfolio and individual properties that are leased to
creditworthy tenants under long-term net leases. Management believes there is
significantly less competition for the acquisition of property portfolios
containing a number of net leased properties located in more than one geographic
region. Management also believes that the Company's geographical
diversification, acquisition experience and access to capital will allow it to
compete effectively for the acquisition of such net leased properties.

Sale/Leaseback Transactions. The Company seeks to acquire portfolio and
individual net lease properties in sale/leaseback transactions. The Company
selectively pursues sale/leaseback transactions with creditworthy
sellers/tenants with respect to properties that are integral to the
sellers/tenants ongoing operations.

Build-to-suit Properties. The Company may also acquire, after construction
has been completed, "build-to-suit" properties that are entirely pre-leased to
their intended corporate users before construction. As a result, the Company
does not assume the risk associated with the construction phase of a project.
During 1998, the Company acquired two "build-to-suit" properties net leased to
Fleet Mortgage Group, Inc. and Lear Technologies LLC (General Motors guarantor)
for an aggregate cost of $29.0 million and an average unleveraged yield of
10.35%. The Company is also obligated to purchase a third "build-to-suit"
property, which will be net leased to Blue Cross/Blue Shield of South Carolina,
for $38.7 million with a scheduled delivery date no later than January 2000.

Acquisitions from Affiliated Net Lease Partnerships. Management believes
that net lease partnerships affiliated with the Company provide it with an
opportunity to acquire properties with which management is already familiar. As
of December 31, 1998, the Company had acquired 14 Properties from affiliated
limited partnerships. In addition, on January 29, 1998, the Company completed
the acquisition of partnership interests in two limited partnerships, one of
which was an affiliate of an officer of the Company, in exchange for the
Company's OP Units. The sole assets of the partnerships acquired was
approximately $23.5 million in cash.

The LCP Group, L.P. ("LCP"), an affiliate of E. Robert Roskind, Chairman of
the Board of Trustees and Co-Chief Executive Officer of the Company, has granted
the Company an option exercisable at any time, to acquire general partnership
interests currently owned by LCP in two limited partnerships, Net 1, L.P. and
Net 2, L.P. (together, the "Net Partnerships"), which own net leased office,
industrial and retail properties. The Net Partnerships own a total of 62
single-tenant properties located in 16 states which contain approximately 1.6
million net rentable square feet. The tenants of such properties include Alco
Standard Corporation, Ameritech Services, Honeywell, Inc. and Wal-Mart Stores,
Inc. Under the terms of the option, the Company, subject to review of any such
transaction by the independent members of its Board of Trustees, may acquire the
general partnership interests 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, OP Units, cash or a
combination thereof.

3
5

Refinancing Existing Indebtedness and Increasing Access to Capital

As a result of the Company's financing activities, the weighted average
interest rate on the Company's outstanding indebtedness has been reduced from
approximately 10.00% as of December 31, 1994 to approximately 7.65% as of
December 31, 1998. In addition, management is constantly pursuing opportunities
to increase the Company's access to public and private capital in order to
achieve maximum operating flexibility. Scheduled balloon payments, excluding the
$52.6 million outstanding on the variable rate unsecured credit facility, over
the next five years are as follows:

WEIGHTED
AVERAGE
BALLOON AMOUNT INTEREST RATE
-------------- -------------

1999..................................................... $ 5,563,000 10.750%
2000..................................................... 13,093,000 8.875%
2001..................................................... 1,000,000 9.500%
2002..................................................... 9,559,000 7.250%
2003..................................................... -- --
----------- ------
$29,215,000 8.72 %
=========== ======

The Company's variable rate unsecured credit facility bears interest at
137.5 basis points over the Company's option of 1, 3 or 6 month LIBOR and is
scheduled to mature in July 2001. As of December 31, 1998, $51.2 million of the
outstanding borrowing under this facility bears interest at 6.6875% fixed
through June 1, 1999 with the remaining $1.4 million bearing interest at 6.4375%
through March 1, 1999. On March 1, 1999 the $1.4 million borrowing was extended
through April 1, 1999 at an interest rate of 6.375%.

Common Share Repurchase. On September 15, 1998, the Company's Board of
Trustees authorized the repurchase of up to 1 million common shares. As of
December 31, 1998 the Company has repurchased 129,875 common shares at an
average price of $11.92, all of which have been retired.

Competition. The real estate business is highly competitive and the
Company competes with numerous established companies having significant
resources and experience.

Environmental Matters. Under various federal, state and local
environmental laws, statutes, ordinances, rules and regulations, an owner of
real property may be liable for the costs of removal or redemption of certain
hazardous or toxic substances at, on, in or under such property as well as
certain other potential costs relating to hazardous or toxic substances
(including government fines and penalties and damages for injuries to persons
and adjacent property). Such laws often impose liability without regard to
whether the owner knew of, or was responsible for, the presence or disposal of
such substances. Although the Company's tenants are primarily responsible for
any environmental damage and claims related to the leased premises, in the event
of the bankruptcy or inability of the tenant of such premises to satisfy any
obligations with respect thereto, the Company may be required to satisfy such
obligations. In addition, under certain environmental laws, the Company, as the
owner of such properties, may be held directly liable for any such damages or
claims irrespective of the provisions of any lease.

From time to time, in connection with the conduct of the Company's
business, and prior to the acquisition of any property from a third party or as
required by the Company's financing sources, the Company authorizes the
preparation of Phase I environmental reports with respect to its Properties.
Based upon such environmental reports and management's ongoing review of its
Properties, as of the date of this Annual Report, management was not aware of
any environmental condition with respect to any of the Company's Properties
which management believed would be reasonably likely to have a material adverse
effect on the Company. There can be no assurance, however, that (i) the
discovery of environmental conditions, the existence or severity of which were
previously unknown, (ii) changes in law, (iii) the conduct of tenants or (iv)
activities relating to properties in the vicinity of the Company's Properties,
will not expose the Company to material liability in the future. Changes in laws
increasing the potential liability for environmental conditions existing on
properties or increasing the restrictions on discharges or other conditions may
result in

4
6

significant unanticipated expenditures or may otherwise adversely affect the
operations of the Company's tenants, which would adversely affect the Company's
financial condition and results of operations, including funds from operations.

Employees. As of December 31, 1998, the Company had twenty-five employees.

Industry Segments. The Company operates in one industry segment,
investment in net leased real property.

ITEM 2. PROPERTIES

Real Estate Portfolio

As of December 31, 1998, the Company's real estate portfolio was comprised
of approximately 10.9 million square feet of rentable space in 66 office,
industrial and retail properties. The Company's Properties are currently 98.5%
leased. The number, and percentage of annualized revenues and square footage mix
of the Company's portfolio is as follows:

SQUARE
NUMBER REVENUE FOOTAGE
------ ------- -------

Office................................................... 17 48% 27%
Industrial............................................... 25 34% 56%
Retail................................................... 24 18% 17%
-- --- ---
66 100% 100%
== === ===

The Company's Properties are subject to triple net leases, however, in
certain leases the Company is responsible for roof and structural repairs. In
such situations the Company performs annual inspections of the Properties.
During each of the years in three year period ended December 31, 1998, the
Company expended less than $250,000 relating to such leases. The Company's
Property in Palm Beach Gardens, Florida is subject to a lease in which the
Company is responsible for a portion of the real estate taxes and utilities.

The Company's tenants represent a variety of industries including banking,
computer and software services, health and fitness, general purpose retailing,
manufacturing, insurance and warehousing, and have a weighted average credit
strength of investment grade quality.

A substantial portion of the Company's income consists of base rent under
long-term leases. As of December 31, 1998, the average remaining term under the
Company's leases is approximately 9.5 years. Of the 65 current leases as of
December 31, 1998, 35 contain scheduled rent increases and 8 contain increases
based upon the Consumer Price Index. In addition four leases contain percentage
rent clauses.

The Company has 12 Properties accounting for $16.1 million of annualized
rental revenue that are subject to long term ground leases where a third party
owns and has leased the underlying land to the Company. In each of these
situations the rental payments made to the land owner are passed on to the
Company's tenant. At the end of these long-term ground leases, unless extended,
the land together with all improvements thereon revert to the land owner. These
ground leases, including renewal options, expire at various dates through 2074.

The Company has 17 Properties that are subject to lessee purchase options.
As of December 31, 1998, only one purchase option can be exercised. In each case
the Property can be purchased for no less than its current fair market value.

TABLE REGARDING REAL ESTATE HOLDINGS

The table on the following pages sets forth certain information relating to
the Company's real property portfolio as of December 31, 1998.

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7

PROPERTY NET
TENANT TYPE/YEAR LAND AREA RENTABLE
PROPERTY LOCATION (GUARANTOR) CONSTRUCTED (ACRES) SQUARE FEET
----------------- ----------------------------- ------------------- --------- -----------

904 Industrial Road Walker Manufacturing Company Industrial 20.00 195,640
Marshall, MI (Tenneco Automotive, Inc.) 1968 & 1972

1601 Pratt Avenue Walker Manufacturing Company Industrial 8.26 53,600
Marshall, MI (Tenneco Automotive, Inc.) 1979

19019 No. 59th Avenue Honeywell, Inc. Research/ 51.79 252,300
Glendale, AZ Development
1985

6950 Greenwood Parkway Allegiance Healthcare Industrial 10.15 123,924
Bessemer, AL Corp.(1) 1990
(Baxter International, Inc.)

567 South Riverside Drive Crown Cork & Seal Co., Inc. Warehouse/ 5.80 146,000
Modesto, CA Manufacturing
1970 & 1976

Tappan Park White Consolidated Warehouse/ 26.57 296,720
22 Chambers Road Industries, Distribution
Mansfield, OH Inc.(3) 1970

10419 North 30th Street Time Customer Service, Inc. Office 14.38 132,981
Tampa, FL (Time, Inc.) 1986

3102 Queen Palm Drive Time Customer Service, Inc. Office/Warehouse 15.02 229,605
Tampa, FL (Time, Inc.) 1986

109 Stevens Street Unisource Worldwide, Inc. Warehouse/ 6.97 168,800
Jacksonville, FL Industrial
1958 & 1969

4450 California Street Mervyn's Retail 11.00 122,000
Bakersfield, CA (Dayton Hudson Corp.) 1976

3615 North 27th Avenue Bank One, Arizona, N.A.(2) Office 10.26 179,280
Phoenix, AZ 1960 & 1979

Amigoland Shopping Montgomery Ward & Co., Inc. Retail 7.61 115,000
Center (1) 1973
Mexico St. & Palm Blvd.
Brownsville, TX

13430 N. Black Canyon Bull HN Information Systems, Office 13.37 137,058
Fwy. Inc. 1985 & 1994
Phoenix, AZ

1999 1999(E)
BASE LEASE TERM AND MINIMUM STRAIGHT-LINE
ANNUAL RENTS PER NET RENEWAL CASH RENTAL
PROPERTY LOCATION RENTABLE SQUARE FOOT OPTIONS RENT ($000) REVENUE ($000)
----------------- ----------------------------------- ------------- ----------- --------------

904 Industrial Road 08/18/87 - 08/17/00 None $ 487 $ 487
Marshall, MI 08/18/97 - 08/17/00: $2.49
1601 Pratt Avenue 08/18/87 - 08/17/00 None $ 167 $ 167
Marshall, MI 08/18/97 - 08/17/00: $3.11
19019 No. 59th Avenue 07/16/86 - 07/15/01 (3) 5 year $ 1,892 $ 1,892
Glendale, AZ 07/16/96 - 07/15/01: $7.50

6950 Greenwood Parkway 09/01/91 - 09/01/01 (2) 5 year $ 472 $ 472
Bessemer, AL 09/01/91 - 09/01/01: $3.81

567 South Riverside Drive 09/26/86 - 09/25/01 (1) 5 year $ 298 $ 298
Modesto, CA 09/26/96 - 09/25/01: $2.04

Tappan Park 12/31/86 - 12/31/01 (2) 5 year $ 593 $ 593
22 Chambers Road 01/01/97 - 12/31/01: $2.00
Mansfield, OH
10419 North 30th Street 04/01/87 - 03/31/02 (4) 5 Year $ 1,238 $ 1,099
Tampa, FL 01/01/99 - 12/31/99: $9.31
01/01/00 - 12/31/00: $9.87
01/01/01 - 12/31/01: 10.46
01/01/02 - 03/31/02: 11.09
3102 Queen Palm Drive 08/01/87 - 07/31/02 (1) 5 year $ 955 $ 957
Tampa, FL 08/01/98 - 07/31/01: $4.16
08/01/01 - 07/31/02: $4.39
109 Stevens Street 10/01/87 - 09/30/02 None $ 380 $ 380
Jacksonville, FL 10/01/97 - 09/30/02: $2.25

4450 California Street 02/23/77 - 12/31/02 (5) 5 year $ 407 $ 397
Bakersfield, CA 01/01/78 - 12/31/02: $3.34
3615 North 27th Avenue 11/30/88 - 11/30/03 (1) 5 year $ 1,900 $ 1,900
Phoenix, AZ 12/01/98 - 11/30/03: 10.60
Amigoland Shopping 11/01/74 - 10/31/04 (3) 5 year $ 153 $ 153
Center 11/01/74 - 10/31/04: $1.33
Mexico St. & Palm Blvd.
Brownsville, TX
13430 N. Black Canyon 10/11/94 - 10/10/05 None $ 972 $ 1,032
Fwy. 10/11/94 - 10/10/00: $7.35
Phoenix, AZ 10/11/00 - 10/10/01: $7.70
10/11/01 - 10/10/02: $7.90
10/11/02 - 10/10/03: $8.10
10/11/03 - 10/10/04: $8.30
10/11/04 - 10/10/05: $8.50

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8

1301 California Circle Stevens-Arnold, Inc. Office/Research 6.34 100,026
Milpitas, CA (BICC Public Ltd. Co.) & Development
1985

200 Southington Hartford Fire Insurance Co. Office 12.40 153,364
Executive Park 1983
Southington, CT

24100 Laguna Hills Mall Federated Department Stores, Retail 11.00 160,000
Laguna Hills, CA Inc.(1) 1974

7111 Westlake Terrace Hechinger & Company(1) Retail 7.61 95,000
Bethesda, MD 1980

6910 S. Memorial Highway Toys "R" Us, Inc.(1) Retail 4.44 43,123
Tulsa, OK 1981

12535 SE 82nd Avenue Toys "R" Us, Inc.(1) Retail 5.85 42,842
Clackamas, OR 1981

18601 Alderwood Mall Blvd. Toys "R" Us, Inc.(1) Retail 3.64 43,105
Lynnwood, WA 1981

4425 Purks Road Lear Technologies, LLC Industrial 12.00 183,717
Auburn Hills, MI (Lear Corporation) 1989 & 1998
(General Motors Corp.)

West Wingfoot Road Toys "R" Us, Inc.(1) Industrial 7.56 123,293
Houston, TX 1981

245 Salem Church Road Exel Logistics Inc. Warehouse 12.52 252,000
Mechanicsburg, PA (NFC plc) 1985

6 Doughton Road Exel Logistics Inc. Warehouse 24.38 330,000
New Kingston, PA (NFC plc) 1998

34 East Main Street Exel Logistics Inc. Warehouse 9.66 179,200
New Kingston, PA (NFC plc) 1981

401 Elm Street Lockheed Martin Corp Office/Research 36.94 126,000
Marlborough, MA (Honeywell, Inc.) & Development
1960 & 1988

1301 California Circle 12/10/85 - 12/10/05 (9) 5 year $ 2,377 $ 2,667
Milpitas, CA 06/01/98 - 11/30/00: $23.76
12/01/00 - 05/31/03: $26.88
06/01/03 - 12/10/05: $30.36
200 Southington 09/01/91 - 12/31/05 (1) 5 year $ 2,166 $ 2,009
Executive Park 01/01/95 - 12/31/05: $14.12
Southington, CT
24100 Laguna Hills Mall 02/01/76 - 01/31/06 (1) 8 year $ 677 $ 673
Laguna Hills, CA 02/01/80 - 01/31/06: $4.23 (2) 15 year
(1) 6 year
7111 Westlake Terrace 05/01/81 - 04/30/06 (1) 10 year $ 772 $ 648
Bethesda, MD 05/01/96 - 04/30/06: $8.13 (3) 5 year
6910 S. Memorial Highway 06/01/81 - 05/31/06 (5) 5 year $ 356 $ 356
Tulsa, OK 02/01/98 - 05/31/01: $8.26
06/01/01 - 05/31/06: $8.40
12535 SE 82nd Avenue 06/01/81 - 05/31/06 (5) 5 year $ 417 $ 417
Clackamas, OR 02/01/98 - 05/31/01: $9.74
06/01/01 - 05/31/06: $9.91
18601 Alderwood Mall Blvd. 06/01/81 - 05/31/06 (5) 5 year $ 389 $ 389
Lynnwood, WA 02/01/98 - 05/31/01: $9.03
06/01/01 - 05/31/06: $9.18
4425 Purks Road 07/23/98 - 07/22/06 none $ 1,325 $ 1,365
Auburn Hills, MI 07/23/98 - 07/22/02: $7.21
07/23/02 - 07/22/06: $7.63
West Wingfoot Road 09/01/81 - 08/31/06 (5) 5 year $ 491 $ 478
Houston, TX 05/01/98 - 08/31/06: $3.98
245 Salem Church Road 11/15/91 - 11/30/06 (2) 5 year $ 924 $ 1,000
Mechanicsburg, PA 12/01/97 - 11/30/00: $3.67
12/01/00 - 11/30/03: $4.01
12/01/03 - 11/30/06: $4.38
6 Doughton Road 11/15/91 - 11/30/06 (2) 5 year $ 1,245 $ 1,349
New Kingston, PA 12/01/97 - 11/30/00: $3.77
12/01/00 - 11/30/03: $4.12
12/01/03 - 11/30/06: $4.51
34 East Main Street 11/15/91 - 11/30/06 (2) 5 year $ 603 $ 654
New Kingston, PA 12/01/97 - 11/30/00: $3.37
12/01/00 - 11/30/03: $3.68
12/01/03 - 11/30/06: $4.02
401 Elm Street 07/22/97 - 12/17/06 (6) 5 year $ 1,671 $ 1,671
Marlborough, MA 07/22/97 - 12/17/01: $13.26
12/18/01 - 12/17/06:
75% of cumulative
increase in CPI

7
9

46600 Port Street Johnson Controls, Inc. Industrial 24.00 134,160
Plymouth, MI 1996

450 Stern Street Johnson Controls, Inc. Industrial 20.10 111,160
Oberlin, OH 1996

15911 Progress Drive Johnson Controls, Inc. Industrial 22.20 58,800
Cottondale, AL 1996

12000 Tech Center Drive Kelsey-Hayes (Tech I) Office 5.72 80,230
Livonia, MI 1987 & 1988

12025 Tech Center Drive Kelsey-Hayes (Tech II) Research/ 9.18 100,000
Livonia, MI Development
1987 & 1988

2300 Litton Lane Fidelity Corporate Office 24.00 81,744
Hebron, KY Real Estate, LLC (4) 1987

5917 S. La Grange Road Bally Total Fitness Corp. Retail/Health Club 2.73 25,250
Countryside, IL 1987

1160 White Horse Road Physical Fitness Centers of Retail/Health Club 2.87 31,750
Voorhees, NJ Philadelphia, Inc. 1987
(Bally Total Fitness Corp.)

5801 Bridge Street Champion Fitness IV, Inc. Retail/Health Club 3.66 24,990
DeWitt, NY (Bally Total Fitness Corp.) 1977 & 1987

One Spricer Drive Dana Corp. Industrial 20.95 148,000
Gordonsville, TN 1983 & 1985

46600 Port Street 12/23/96 - 12/22/06 (2) 5 year $ 709 $ 709
Plymouth, MI 12/23/98 - 12/22/99: $5.28
12/23/99 - 12/22/06:
Annual increase of 3x CPI,
but not more than 4.5%
450 Stern Street 12/23/96 - 12/22/06 (2) 5 year $ 536 $ 536
Oberlin, OH 12/23/98 - 12/22/99: $4.82
12/23/99 - 12/22/06:
Annual increase of 3x CPI,
but not more than 4.5%
15911 Progress Drive 02/19/97 - 02/18/07 (2) 5 year $ 313 $ 313
Cottondale, AL 02/19/98 - 02/18/99: $5.13
02/19/99 - 02/18/00: $5.32
02/19/00 - 02/18/07:
Annual increase of 3x CPI,
but not more than 4.5%
12000 Tech Center Drive 05/01/97 - 04/30/07 (2) 5 year $ 629 $ 679
Livonia, MI 05/01/97 - 04/30/99: $7.70
05/01/99 - 04/30/02: $7.91
05/01/02 - 04/30/05: $8.75
05/01/05 - 04/30/07: $9.25
12025 Tech Center Drive 05/01/97 - 04/30/07 (2) 5 year $ 912 $ 958
Livonia, MI 05/01/97 - 04/30/99: $9.05
05/01/99 - 04/30/02: $9.16
05/01/02 - 04/30/05: $9.75
05/01/05 - 04/30/07: $10.25
2300 Litton Lane 05/01/97 - 04/30/07 (2) 5 year $ 777 $ 817
Hebron, KY 05/01/97 - 04/30/02:
$9.50 05/01/02-04/30/07: $11.00
5917 S. La Grange Road 07/13/87 - 07/12/07 (2) 5 year $ 574 $ 542
Countryside, IL 07/13/97 - 07/12/02: $22.73
07/13/02 - 07/12/07: $26.14
1160 White Horse Road 07/14/87 - 07/13/07 (2) 5 year $ 713 $ 673
Voorhees, NJ 07/14/97 - 07/13/02: $22.45
07/14/02 - 07/13/07: $25.82
5801 Bridge Street 08/19/87 - 08/18/07 (2) 5 year $ 444 $ 419
DeWitt, NY 08/19/97 - 08/18/02: $17.78
08/19/02 - 08/18/07: $20.45
One Spricer Drive 01/01/84 - 08/31/07 (2) 5 year $ 329 $ 341
Gordonsville, TN 08/01/96 - 07/31/99: $2.20 (1) 4 year,
08/01/99 - 07/31/02: $2.26 11 months
08/01/02 - 07/31/05: $2.33
08/01/05 - 08/31/07: $2.40

8
10

541 Perkins Jones Road Kmart Corp. Warehouse/ 103.00 1,700,000
Warren, OH Distribution
1982

160 Clairemont Avenue Allied Holdings, Inc. Office 2.98 112,248
Decatur, GA 1983

2655 Shasta Way Fred Meyer, Inc. Retail 13.90 178,204
Klamath Falls, OR 1986

2210 Enterprise Drive Fleet Mortgage Group, Inc. Office 16.53 177,747
Florence, SC 1998

7272 55th Street Circuit City Stores, Inc. Retail 3.93 45,308
Sacramento, CA 1988

6405 South Virginia St. Comp USA, Inc. Retail 2.72 31,400
Reno, NV 1988

5055 West Sahara Avenue Circuit City Stores, Inc. Retail 2.57 36,053
Las Vegas, NV 1988

4733 Hills & Dales Road Scandinavian Health Spa, Inc. Retail/Health Club 3.32 37,214
Canton, OH (Bally Total Fitness 1987
Holding Corp.)

Highway 21 South Wal-Mart Real Estate Retail 5.21 56,132
Jacksonville, AL Business Trust 1982
(Wal-Mart Stores, Inc.)

6475 Dobbin Road Upton's, Inc. Retail 2.50 60,000
Columbia, MD 1983

295 Chipeta Way Northwest Pipeline Corp.(1) Office 19.79 295,000
Salt Lake City, UT 1982

Fort Street Mall Liberty House, Inc.(1) Retail 1.22 85,610
King St. 1980
Honolulu, HI

541 Perkins Jones Road 10/01/82 - 09/30/07 (10) 5 year $ 8,409 $ 8,932
Warren, OH 10/01/98 - 09/30/02: $4.95
10/01/02 - 09/30/07: $5.51
160 Clairemont Avenue 01/01/98 - 12/31/07 (2) 5 year $ 1,388 $ 1,530
Decatur, GA 01/01/98 - 12/31/99: $12.36
01/01/00 - 12/31/07:
Rent increases
2.75% annually
2655 Shasta Way 03/10/88 - 03/31/08 (3) 10 year $ 1,009 $ 1,009
Klamath Falls, OR 03/10/88 - 03/31/08: $5.66
2210 Enterprise Drive 06/10/98 - 06/30/08 (2) 5 year $ 1,520 $ 1,635
Florence, SC 06/10/98 - 06/30/03: $8.55
07/01/03 - 06/30/08: $9.84
7272 55th Street 10/28/88 - 10/27/08 (3) 10 year $ 387 $ 376
Sacramento, CA 10/28/98 - 10/27/03: $8.54
10/28/03 - 10/27/08: $9.30
6405 South Virginia St. 12/16/88 - 12/15/08 (3) 10 year $ 335 $ 325
Reno, NV 12/16/98 - 12/15/03: $10.65
12/16/03 - 12/15/08: $11.60
5055 West Sahara Avenue 12/16/88 - 12/15/08 (3) 10 year $ 286 $ 278
Las Vegas, NV 12/16/98 - 12/15/03: $7.93
12/16/03 - 12/15/08: $8.64
4733 Hills & Dales Road 01/01/89 - 12/31/08 (2) 5 year $ 640 $ 685
Canton, OH 01/01/99 - 12/31/99: $17.20
01/01/00 - 12/31/08:
Rent increases 2.2% annually
Highway 21 South 08/31/83 - 01/31/09 (5) 5 year $ 146 $ 146
Jacksonville, AL 09/01/87 - 01/31/09: $2.60
plus 1% of gross sales
in excess of $10 million
($46,000 in 1998)
6475 Dobbin Road 08/01/83 - 07/30/09 (4) 5 year $ 570 $ 549
Columbia, MD 08/01/98 - 07/30/04: $9.50
08/01/04 - 07/30/09: $8.75
295 Chipeta Way 10/01/82 - 09/30/09 (1) 9 year $ 8,571 $ 8,571
Salt Lake City, UT 10/01/97 - 09/30/09: $29.06 (1) 10 year
subject to a CPI adjustment on a
portion of the rent.
Fort Street Mall 10/01/80 - 09/30/09 (1) 9 year, $ 963 $ 971
King St. 10/01/95 - 09/30/05: $11.25 7 months
Honolulu, HI 10/01/05 - 09/30/09: $11.56 (1) 2 year
(3) 5 year

9
11

16275 Technology Drive Cymer, Inc. Office/Research 2.73 65,755
San Diego, CA & Development 1989

9950 Mayland Drive Circuit City Stores, Inc.(1) Office Headquarters 19.71 288,562
Richmond, VA 1990

7055 Highway 85 South Wal-Mart Stores, Inc. Retail 8.61 81,911
Riverdale, GA 1985

4200 RCA Boulevard The Wackenhut Corp. Office 7.70 127,855
Palm Beach Gardens, FL 1996

Highway 101 Fred Meyer, Inc. Retail 8.81 118,179
Newport, OR 1986

6345 Brackbill Boulevard Exel Logistics, Inc. Warehouse/ 29.01 507,000
Mechanicsburg, PA (NFC plc) Distribution
1985 & 1991

2280 Northeast Drive Ryder Integrated Logistics, Warehouse 25.70 276,480
Waterloo, IA Inc. 1996 & 1997
(Ryder Systems, Inc.)

128 Crews Drive Stone Container Corp. Industrial/ 10.76 185,960
Columbia, SC Warehouse
1968 & 1998

1600 Viceroy Drive FirstPlus Financial Group, Office 8.17 247,968
Dallas, TX Inc. 1986

250 Rittenhouse Circle Jones Apparel Group, Inc.(5) Office/ 15.63 255,019
Bristol, PA Warehouse
1982

16275 Technology Drive 06/01/96 - 12/31/09 None $ 762 $ 860
San Diego, CA 06/01/97 - 05/31/99: $11.26
06/01/99 - 05/31/01: $11.82
06/01/01 - 05/31/03: $12.42
06/01/03 - 05/31/05: $13.04
06/01/05 - 05/31/07: $13.69
06/01/07 - 12/31/09: $14.26
9950 Mayland Drive 02/28/90 - 02/28/10 (4) 10 year $ 2,478 $ 2,791
Richmond, VA 01/01/98 - 02/29/00: $8.59 (1) 5 year
03/01/00 - 02/28/10: $9.91
7055 Highway 85 South 12/04/85 - 01/31/11 (5) 5 year $ 270 $ 270
Riverdale, GA 12/04/85 - 01/31/11: $3.29
4200 RCA Boulevard 02/15/96 - 02/28/11 (3) 5 year $ 2,241 $ 2,241
Palm Beach Gardens, FL 12/01/97 - 02/28/11: $17.53
Highway 101 06/01/86 - 05/31/11 (3) 5 year $ 826 $ 826
Newport, OR 06/01/86 - 05/31/11: $6.99
plus .5% of gross sales
over $20 million
($66,000 in 1998)
6345 Brackbill Boulevard 10/29/90 - 03/19/12 (2) 10 year $ 1,771 $ 1,933
Mechanicsburg, PA 3/20/97 - 03/19/02: $3.49
3/20/02 - 03/19/07: $4.02
3/20/07 - 03/19/12:
greater of $4.62 or fair
market rent as specified
in lease
2280 Northeast Drive 08/01/97 - 07/31/12 (3) 5 year $ 891 $ 1,004
Waterloo, IA 08/01/97 - 07/31/02: $3.22
08/01/02 - 07/31/07: $3.61
08/01/07 - 07/31/12: $4.04
128 Crews Drive 12/16/82 - 08/31/12 None $ 465 $ 549
Columbia, SC 09/01/98 - 08/31/00: $2.50
09/01/00 - 08/31/03: $2.71
09/01/03 - 08/31/06: $2.91
09/01/06 - 08/31/08: $3.12
09/01/08 - 08/31/12: $3.32
1600 Viceroy Drive 09/04/97 - 08/31/12 (4) 5 year $ 3,224 $ 3,557
Dallas, TX 09/04/97 - 08/31/02: $13.00
09/01/02 - 08/31/07: $14.30
09/01/07 - 08/31/12: $15.73
250 Rittenhouse Circle 03/26/98 - 03/25/13 (2) 5 year $ 1,150 $ 1,224
Bristol, PA 03/26/98 - 03/26/03: $4.51
03/27/03 - 03/26/08: $4.96
03/27/08 - 03/25/13: $5.46

10
12

3501 West Avenue H Michaels Stores, Inc. Warehouse/ 37.18 431,250
Lancaster, CA Distribution
1998

7150 Exchequer Drive Corporate Express Office Warehouse/ 5.23 65,043
Baton Rouge, LA Products, Inc. Distribution
(CEX Holdings, Inc.) 1998

9580 Livingston Road GFS Realty, Inc. Retail 10.60 107,337
Oxon Hill, MD (Giant Food, Inc.) 1976

324 Industrial Park Road SKF USA, Inc. Manufacturing 21.13 72,868
Franklin, NC 1996

Rockshire Village Center GFS Realty, Inc.(1) Retail 7.32 51,682
West Ritchie Parkway (Giant Food, Inc.) 1977
Rockville, MD

35205 16th Avenue South Eagle Hardware & Garden Inc. Retail 8.19 133,861
Federal Way, WA 1992

333 East Tudor Road Eagle Hardware & Garden Inc. Retail 11.00 157,525
Anchorage, AK 1992

3501 West Avenue H 06/19/98 - 06/18/13 (3) 5 year $ 1,398 $ 1,430
Lancaster, CA 06/19/98 - 06/18/03: $3.24
06/19/03 - 06/18/08: $3.31
06/19/08 - 06/18/13: $3.39
7150 Exchequer Drive 11/01/98 - 10/31/13 (3) 5 year $ 327 $ 368
Baton Rouge, LA 11/01/98 - 10/31/01: $5.02
11/01/01 - 10/31/04: $5.32
11/01/04 - 10/31/07: $5.64
11/01/07 - 10/31/10: $5.98
11/01/10 - 10/31/13: $6.34
9580 Livingston Road 01/03/77 - 02/28/14 (4) 5 year $ 408 $ 274
Oxon Hill, MD 03/01/77 - 02/29/04: $3.80
03/01/04 - 02/28/14: $1.91
324 Industrial Park Road 12/23/96 - 12/31/14 (3) 10 year $ 322 $ 322
Franklin, NC 12/23/96 - 12/31/99: $4.42
01/01/00 - 12/31/14: CPI
every 3 years
Rockshire Village Center 01/01/78 - 04/30/17 (2) 10 year $ 224 $ 152
West Ritchie Parkway 01/01/78 - 02/28/05: $4.33
Rockville, MD 03/01/05 - 04/30/17: $2.23
35205 16th Avenue South 09/01/92 -08/31/17 None $ 1,233 $ 1,233
Federal Way, WA 09/01/97 - 08/31/02: $9.21
09/01/02 - 08/31/17:
CPI adjusted every 5 years
not to exceed 15%; plus
2% of annual sales in
excess of $38.5 million
($0 in 1998)
333 East Tudor Road 11/01/92 - 10/31/17 None $ 1,588 $ 1,588
Anchorage, AK 11/01/97 - 10/31/02: $10.08
11/01/02 - 10/31/17:
CPI adjusted every 5 years
not to exceed 15%; plus
2% of annual sales in
excess of $50 million
($53,000 in 1998)

11
13

3350 Miac Cove Road Vacant Office/Industrial 10.92 141,359
Memphis, TN 1987
------ ----------
917.00 10,911,192
====== ==========

3350 Miac Cove Road N/A N/A N/A N/A
Memphis, TN
------- -------
$73,065 $75,119
======= =======

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

(E) Estimated
(1) The Company holds leasehold interest in the land. The leases, including
renewal options, expire at various dates through 2074.
(2) Tenant can cancel lease on November 30, 2000 with 12 months notice and a
payment of $2.9 million.

(3) Tenant can cancel lease anytime after March 1, 1999 with 12 months notice
and a payment of four months rent.

(4) Tenant can cancel lease on April 30, 2004 with 270 days notice and a payment
of $899,184.

(5) Tenant can cancel lease on March 26, 2008 with 12 months notice and a
payment of $1,391,500.

12
14

ITEM 3. LEGAL PROCEEDINGS

The Company is not presently involved in any litigation nor to its
knowledge is any litigation threatened against the Company or its subsidiaries
that, in management's opinion, would result in any material adverse effect on
the Company's ownership, management or operation of its Properties.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.

ITEM 4A. EXECUTIVE OFFICERS AND TRUSTEES OF THE REGISTRANT

The following sets forth certain information relating to the executive
officers and Trustees of the Company:

NAME BUSINESS EXPERIENCE
---- -------------------

E. ROBERT ROSKIND.............. Mr. Roskind has served as the Chairman of the Board of
Age 54 Trustees and Co-Chief Executive Officer of the Company since
October 1993. He founded The LCP Group, L.P. in 1973 and has
been its Chairman since 1976. LCP has acted as general
partner in limited partnerships in which the Company has had
prior dealings. Prior to founding LCP, Mr. Roskind headed
the net-leasing financing area of Lehman Brothers Inc. He is
also a general partner for a variety of entities which serve
as the general partner of various partnerships that hold net
leased real properties or interests therein. Mr. Roskind is
a director of Berkshire Realty Company, Inc., Krupp
Government Income Trust I and Krupp Government Income Trust
II. Mr. Roskind received his B.S. in 1966 from the
University of Pennsylvania and is a 1969 Harlan Fiske Stone
Graduate of the Columbia Law School. He has been a member of
the Bar of the State of New York since 1970.
RICHARD J. ROUSE............... Mr. Rouse has served as Co-Chief Executive Officer and a
Age 53 trustee of the Company since October 1993. He served as the
President of the Company from October 1993 to April 1996,
and since April 1996 has served as the Vice Chairman. Mr.
Rouse was also a managing director of LCP. He had been
associated with LCP since 1979 and had been engaged there in
all aspects of net lease finance, acquisition and
syndication and corporate financing transactions. Mr. Rouse
graduated from Michigan State University in 1968 and
received his M.B.A. in 1970 from the Wharton School of
Finance and Commerce of the University of Pennsylvania.
T. WILSON EGLIN................ Mr. Eglin has served as Chief Operating Officer of the
Age 34 Company since October 1993 and a trustee since May 1994. He
served as Executive Vice President from October 1993 to
April 1, 1996, and since April 1996 has served as the
President. Prior to his current position with the Company,
Mr. Eglin had been associated with LCP from 1987 to 1993 and
had been its Vice President -- Acquisitions from 1990 to
1993. In connection with his responsibilities with LCP, Mr.
Eglin was an officer of affiliated companies that owned and
managed over 400 net leased real estate properties and was
involved in all aspects of real estate acquisition and
finance, principally in net leased transactions. Mr. Eglin
received his B.A. from Connecticut College in 1986.

13
15

NAME BUSINESS EXPERIENCE
---- -------------------

PATRICK CARROLL................ Mr. Carroll has served as the Chief Financial Officer of the
Age 35 Company since May 1998 and Treasurer effective January 1999.
Prior to joining the Company, Mr. Carroll was, from 1993 to
1998, a Senior Manager in the real estate unit of Coopers &
Lybrand L.L.P. serving both publicly and privately held real
estate entities with a focus on due diligence and public
equity/debt offerings. Mr. Carroll received his B.B.A. from
Hofstra University in 1986, a M.S. in Taxation from C.W.
Post in 1991 and is a Certified Public Accountant.
PAUL R. WOOD................... Mr. Wood has served as the Vice President, Chief Accounting
Age 38 Officer and Secretary of the Company since October 1993. He
had been associated with LCP from 1988 to 1993 and from 1990
to 1993 had been responsible for all accounting activities
relating to the net leased properties managed by LCP and its
affiliates. Prior to joining LCP, Mr. Wood was, from 1987 to
1988, associated with E. F. Hutton & Company Inc. as a
senior accountant. Mr. Wood received his B.B.A. from Adelphi
University in 1982 and has been a Certified Public
Accountant since 1985.
STEPHEN C. HAGEN............... Mr. Hagen has served as Senior Vice President of the Company
Age 56 since October 1996. Mr. Hagen had been associated with LCP
from 1995 to 1996. Prior to joining LCP, Mr. Hagen was a
principal of Pharus Realty Investments, a money manager
focused on real estate shares, and also served as Chief
Operating Officer of HRE Properties, a New York Stock
Exchange listed REIT. Mr. Hagen received his B.S. from the
University of Kansas in 1965 and his M.B.A. from the Wharton
School of Finance and Commerce in 1968.
JANET M. KAZ................... Ms. Kaz has served as Vice President of the Company since
Age 35 May 1995 and as Asset Manager since October 1993. Prior to
that, Ms. Kaz was a member of LCP's property acquisition
team from 1986 to 1990 and a member of LCP's asset
management team from 1991 to 1993. Ms. Kaz received her B.A.
from Muhlenberg College in 1985.
PHILIP L. KIANKA............... Mr. Kianka joined the Company in 1997 as Vice President of
Age 42 Asset Management. Prior to joining the Company, from 1985
through 1997, Mr. Kianka served as a Vice President and
Senior Asset Manager at Merrill Lynch Hubbard, Inc., a real
estate division of Merrill Lynch & Co., Inc. Mr. Kianka was
involved in real estate acquisitions, development and asset
management for a national portfolio of diversified
properties. Mr. Kianka received his B.A. from Clemson
University in 1978 and his M.A. from Clemson University in
1981.
CARL D. GLICKMAN............... Mr. Glickman has served as a trustee and the Chairman of the
Age 72 Executive Committee of the Board of Trustees of the Company
since May 1994 and as a member of the Compensation Committee
of the Board of Trustees until May 1998. He has been
President of the Glickman Organization since 1953. He is on
the Board of Directors of Alliance Tire & Rubber Co., Ltd.,
Bear Stearns Companies, Inc., Kuala Healthcare, Inc., Infu-
Tech, Inc., Jerusalem Economic Corporation Ltd. and
OfficeMax Inc., as well as numerous private companies.

14
16

NAME BUSINESS EXPERIENCE
---- -------------------

KEVIN W. LYNCH................. Mr. Lynch has served as a trustee of the Company since May
Age 46 1996 and is a founder and principal of the Townsend Group,
an institutional real estate consulting firm founded in
1983. Prior to forming the Townsend Group, Mr. Lynch was a
Vice President for Stonehenge Capital Corporation. Mr. Lynch
has been involved in the commercial real estate industry
since 1974, and is a director of First Industrial Realty
Trust.
JOHN D. MCGURK................. Mr. McGurk became a member of the Board in January 1997 as
Age 55 the designee of Five Arrows Realty Securities, L.L.C. ("Five
Arrows") to the Board of Trustees. He is the founder and
President of Rothschild Realty, Inc., the advisor to Five
Arrows. Prior to starting Rothschild Realty, Inc. in 1981,
Mr. McGurk served as a Regional Vice President for The
Prudential Insurance Company of America where he oversaw its
New York City real estate loan portfolio, equity holdings,
joint ventures and projects under development. Mr. McGurk is
a member of the Urban Land Institute, Pension Real Estate
Association, Real Estate Board of New York and the National
Real Estate Association, and is a member of the Trustee
Committee of the Caedmon School.
SETH M. ZACHARY................ Mr. Zachary has served as a trustee and a member of the
Age 46 Audit Committee and Compensation Committee of the Board of
Trustees of the Company since November 1993. Since 1987, he
has been a partner in the law firm of Paul, Hastings,
Janofsky & Walker LLP, counsel to the Company.

PART II.

ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER
MATTERS

The common shares of the Company are listed for trading on the New York
Stock Exchange ("NYSE") under the symbol "LXP." The following table sets forth
the high and low sales prices as reported by the NYSE for the common shares of
the Company for each of the periods indicated below:

FOR THE QUARTERS ENDED: HIGH LOW CASH DIVIDEND
----------------------- -------- -------- -------------

December 31, 1998................................ $13.2500 $11.0000 $0.30
September 30, 1998............................... 14.6250 10.8125 $0.30
June 30, 1998.................................... 15.2500 13.7500 $0.29
March 31, 1998................................... 16.3750 14.2500 $0.29

December 31, 1997................................ 16.8125 13.7500 $0.29
September 30, 1997............................... 15.7500 13.8125 $0.29
June 30, 1997.................................... 14.5000 12.1250 $0.29
March 31, 1997................................... 15.0000 12.1250 $0.29

The closing price of the common shares of the Company was $11.75 on
February 26, 1999.

As of February 26, 1999, the Company had 2,326 common shareholders of
record.

Dividends. The Company has made quarterly distributions since October,
1986 without interruption. The Company paid a dividend of $.27 per share to
shareholders in respect of each of the calendar quarters of 1994, 1995 and the
first quarter of 1996; $.28 per share in respect of the second and third
quarters of 1996; and $.29 per share in respect of the fourth quarter of 1996,
each of the calendar quarters of 1997 and the first and second quarters of 1998;
and $.30 per share in respect of the third and fourth quarters of 1998. The
Company declared the dividend in respect of the fourth quarter of 1998, in the
amount of $.30 per share to shareholders

15
17

of record as of February 1, 1999 which was paid on February 16, 1999. The
Company's annualized dividend rate is currently $1.20 per share.

Following is a summary of the average taxable nature of the Company's
dividends for the three years ended December 31:

1998 1997 1996
------- ------- -------

Total dividends per share............................. $ 1.17 $ 1.16 $ 1.10
======= ======= =======
Percent taxable as ordinary income.................. 88.06% 68.91% 95.46%
Percent taxable as long-term capital gain........... 2.30% -- --
Percent non-taxable as return of capital............ 9.64% 31.09% 4.54%
------- ------- -------
100.00% 100.00% 100.00%
======= ======= =======

While the Company intends to continue paying regular quarterly dividends,
future dividend declarations will be at the discretion of the Board of Trustees
and will depend on the actual cash flow of the Company, its financial condition,
capital requirements, the annual distribution requirements under the REIT
provisions of the Code and such other factors as the Board of Trustees deems
relevant. The actual cash flow available to pay dividends will be affected by a
number of factors, including the revenues received from rental properties, the
operating expenses of the Company, the interest and principal payments required
under various borrowing agreements, the ability of lessees to meet their
obligations to the Company and any unanticipated capital expenditures.

In addition to its common and preferred share offerings, the Company has
capitalized the growth in its business through the issuance of secured and
unsecured fixed and floating-rate debt. Borrowings under the Company's revolving
credit facility have also been an interim source of funds to both finance the
purchase of properties and meet any short-term working capital requirements. The
various instruments governing the Company's issuance of its unsecured bank debt
impose certain restrictions on the Company with regard to dividends and
incurring additional debt obligation. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations" and Notes 5 and 6 of the Notes
to Consolidated Financial Statements included in this Annual Report on Form
10-K.

The Company does not believe that the financial covenants contained in its
unsecured revolving credit agreement and secured indebtedness will have any
adverse impact on the Company's ability to pay dividends in the normal course to
its common shareholders or to distribute amounts necessary to maintain its
qualifications as a REIT.

The Company maintains a dividend reinvestment program pursuant to which
common shareholders may elect to automatically reinvest their dividends to
purchase common shares of the Company at a 5% discount to the market price and
free of commissions and other charges. The Company may, from time to time,
either (i) repurchase common shares in the open market, or (ii) issue new common
shares, for the purpose of fulfilling its obligations under the dividend
reinvestment program.

ITEM 6. SELECTED FINANCIAL DATA

The following sets forth selected consolidated financial data for the
Company as of and for each of the years in the five-year period ended December
31, 1998. The selected consolidated financial data for the Company should be
read in conjunction with the Consolidated Financial Statements and the related
notes appearing elsewhere in this Annual Report on Form 10-K. (All amounts,
except per share data, in $000's.)

The Company believes that the book value of its real estate assets, which
reflects the historical costs of such real estate assets less accumulated
depreciation, is not indicative of the current market value of its Properties.
Historical operating results are not necessarily indicative of future operating
results.

16
18

1998 1997 1996 1995 1994
--------- --------- -------- -------- --------

Total revenue............................. $ 65,117 $ 43,569 $ 31,675 $ 25,002 $ 26,038
Operating expenses, including minority
interest................................ (48,433) (35,304) (26,209) (19,983) (20,559)
Transactional expenses.................... (559) -- -- -- --
Gain (loss) on sale of properties......... (388) 3,517 -- 1,514 --
Proceeds from lease termination........... -- -- -- 1,600 --
Loss on extinguishment of debt............ -- (3,189) -- (4,849) --
--------- --------- -------- -------- --------
Net income................................ 15,737 8,593 5,466 3,284 5,479
========= ========= ======== ======== ========
Net income per common share -- basic...... 0.79 0.33 0.58 0.35 0.59
========= ========= ======== ======== ========
Net income per common share -- diluted.... 0.78 0.32 0.56 0.35 0.59
========= ========= ======== ======== ========
Cash dividends declared per common
share................................... 1.17 1.16 1.12 1.08 1.08
========= ========= ======== ======== ========
Net cash provided by operating
activities.............................. 32,008 23,823 14,975 7,216 12,423
========= ========= ======== ======== ========
Net cash (used in) provided by
investing activities.................... (111,080) (110,767) (16,955) 7,887 --
========= ========= ======== ======== ========
Net cash provided by (used in)
financing activities.................... 86,516 88,116 1,859 (15,610) (12,304)
========= ========= ======== ======== ========
Real estate assets, net................... 609,717 416,613 289,326 200,507 202,602
========= ========= ======== ======== ========
Total assets.............................. 647,007 468,373 310,384 221,216 216,019
========= ========= ======== ======== ========
Long-term obligations..................... 360,722 227,411 193,798 123,664 112,038
========= ========= ======== ======== ========
Funds from operations(1).................. 35,700 21,483 14,371 12,049 11,486
========= ========= ======== ======== ========
Rent received above (below) straight line
rent.................................... (2,411) (924) (105) 400 569
========= ========= ======== ======== ========

- ---------------
(1) The Company believes that Funds From Operations ("FFO") enhances an
investor's understanding of the Company's financial condition, results of
operations and cash flows. The Company believes that Funds From Operations
is an appropriate measure of the performance of an equity REIT, and that it
can be one measure of a REIT's ability to make cash distributions. 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 ("GAAP")),
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 or to cash flows from operating activities as
determined in accordance with GAAP, or as a measure of liquidity to other
consolidated income or cash flow statement data as determined in accordance
with GAAP.

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

GENERAL

The Company, which has elected to qualify as a real estate investment trust
under the Internal Revenue Code of 1986, acquires and manages net-leased
commercial properties. The Company has operated as a REIT since October 1993
when it initially issued 9.3 million common shares, approximately 169,000
special limited partnership units (which are exchangeable for an equivalent
number common shares) and approximately $1.9 million in 7.75% subordinated notes
due in 2000.

17
19

As of December 31, 1998, the Company owned 66 real estate properties.
During 1998, the Company purchased fourteen properties for $208.8 million.

LIQUIDITY AND CAPITAL RESOURCES

Since becoming a public company, the Company's principal source of capital
for growth has been the public and private equity markets, selective secured
indebtedness, its unsecured credit facility and issuance of OP Units.

The Company's current $100 million unsecured credit facility, which is
scheduled to expire in July 2001, has made available funds to finance
acquisitions and meet any short-term working capital requirements. As of
December 31, 1998, $52.6 million was outstanding under this credit facility with
a weighted average interest rate of 6.68%.

Since its formation in 1993, the Company has raised, through the issuance
of common shares, preferred shares and OP Units, aggregate capital of
approximately $126.3 million for the purposes of retiring indebtedness and
acquiring properties. In addition, the Company has purchased $77.6 million in
real estate through the direct issuance of its common shares and OP Units.

Dividends. In connection with its intention to continue to qualify as a
REIT for Federal income tax purposes, the Company expects to continue paying
regular dividends to its shareholders. These dividends are expected to be paid
from operating cash flows which are expected to increase due to property
acquisitions and growth in rental revenues in the existing portfolio and from
other sources. Since cash used to pay dividends reduces amounts available for
capital investments, the Company generally intends to maintain a conservative
dividend payout ratio, reserving such amounts as it considers necessary for the
expansion of Properties in its portfolio, debt reduction, the acquisition of
interests in new properties as suitable opportunities arise, and such other
factors as the Board of Trustees considers appropriate.

Cash dividends paid to common shareholders increased to $19.6 million in
1998, compared to $12.8 million in 1997 and $10.3 million in 1996. The Company's
dividend and distribution FFO payout ratio for 1998, 1997, and 1996 was
approximately 73.6%, 73.5%, and 77.9% respectively.

Although the Company receives most of its rental payments on a monthly
basis, it intends to continue paying dividends quarterly. Amounts accumulated in
advance of each quarterly distribution are invested by the Company in short-term
money market or other suitable instruments.

The Company anticipates that cash flows from operations will continue to
provide adequate capital to fund its operating and administrative expenses,
regular debt service obligations and all dividend payments in accordance with
REIT requirements in both the short-term and long-term. In addition, the Company
anticipates that cash on hand, borrowings under its unsecured credit facility,
issuance of equity and debt, as well as other debt and equity alternatives, will
provide the necessary capital required by the Company. Cash flows from
operations as reported in the Consolidated Statements of Cash Flows increased to
$32.0 million for 1998 from $23.8 million for 1997 and $15.0 million for 1996.

UPREIT Structure. The Company's UPREIT structure permits the Company to
effect acquisitions by issuing to a seller of real estate, as a form of
consideration, interests in partnerships controlled by the Company. All of such
interests are redeemable at certain times for common shares on a one-for-one
basis and all of such interests require the Company to pay certain distributions
to the holders of such interests. The Company accounts for these interests in a
manner similar to a minority interest holder. The number of common shares that
will be outstanding in the future should be expected to increase, and minority
interest expense should be expected to decrease, from time to time, as such
partnership interests are redeemed for common shares. The following table
provides certain information with respect to such partnership interests as of
December 31, 1998 (assuming the Company's annual dividend rate remains at $1.20
per share).

18
20

CURRENT TOTAL CURRENT
TOTAL ANNUALIZED ANNUALIZED
REDEEMABLE FOR NUMBER AFFILIATE PER UNIT DISTRIBUTION
COMMON SHARES : OF UNITS UNITS DISTRIBUTION ($000)
- --------------- --------- --------- ------------ -------------

At any time....................................... 169,109 130,531 $1.20 $ 203
At any time....................................... 1,303,867 120,546 1.08 1,408
January 1999...................................... 147,246 52,144 1.12 165
January 1999...................................... 1,670,212 606,198 1.20 2,004
March 1999........................................ 125,416 -- 1.20 151
April 1999........................................ 480,028 -- 1.20 576
July 1999......................................... 279,191 -- 1.20 335
September 1999.................................... 1,450,036 475,785 1.20 1,740
December 1999..................................... 214,167 105,245 1.20 257
January 2003...................................... 7,441 978 -- --
March 2004........................................ 52,335 797 0.27 14
March 2004........................................ 27,314 -- -- --
November 2004..................................... 35,400 2,856 -- --
March 2005........................................ 38,661 1,933 -- --
January 2006...................................... 207,728 416 -- --
February 2006..................................... 34,852 1,743 -- --
May 2006.......................................... 11,766 695 0.29 3
--------- --------- ----- ------
Total................................... 6,254,769 1,499,867 $1.10 $6,856
========= ========= ===== ======

Affiliate units, which are included in total units, represent OP Units held
by two executive officers (including their affiliates) of the Company.

FINANCING

Partnership Mergers. On January 29, 1998 two affiliated partnerships
merged into a controlled partnership, Lepercq Corporate Income Fund ("LCIF"). As
a result of the merger, LCIF issued 1,454,906 partnership units redeemable for
the Company's common shares, which units are entitled to distributions at the
same dividend rate as common shares. At the time of the merger, the
partnerships' sole assets were approximately $23.5 million in cash from prior
property sales and the right to acquire properties in tax free exchanges under
Internal Revenue Code Section 1031. During 1998, the Company completed such tax
free exchanges.

Revolving Credit Facility. In July 1998, the Company obtained a three year
unsecured credit facility with a maximum borrowing availability of $100 million.
This replaced the Company's $60 million, secured credit facility. The credit
facility bears interest at 137.5 basis points over LIBOR and has an interest
rate period of one, three, or six months, at the option of the Company. The
credit facility contains various leverage, debt service coverage, net worth
maintenance and other customary covenants. Approximately $6.4 million was
available to the Company at December 31, 1998. The amount of available
borrowings can increase by identifying additional unencumbered properties as
eligible for the computation of the borrowing base which supports the credit
facility. As of December 31, 1998 approximately $52.6 million was outstanding.

Debt Service Requirements. The Company's principal liquidity needs are the
payment of interest and principal on outstanding indebtedness. As of December
31, 1998, a total of forty-four properties were subject to outstanding mortgages
which had an aggregate principal amount of $300.3 million. The weighted average
interest rate on the Company's debt, including line of credit borrowings, on
such date was approximately 7.65%. Approximate balloon payment amounts having an
weighted average interest rate of 8.72% due the next five calendar years are as
follows: $5.56 million in 1999; $13.1 million in 2000; $1.0 million in 2001;
$9.6 million in 2002 and $0 in 2003. The ability of the Company to make such
balloon payments will depend upon its ability to refinance the mortgage related
thereto, sell the related property, have available amounts under its

19
21

unsecured credit facility or access other capital. The ability of the Company to
accomplish such goals will be affected by numerous economic factors affecting
the real estate industry, including the availability and cost of mortgage debt
at the time, the Company's equity in the mortgaged properties, the financial
condition of the Company, the operating history of the mortgaged properties, the
then current tax laws and the general national, regional and local economic
conditions.

Lease Obligations. Since the Company's tenants bear all or substantially
all of the cost of property 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.

Shares Repurchase. On September 15, 1998, the Company announced that its
Board of Trustees had authorized the Company to repurchase, from time to time,
up to 1,000,000 common shares depending on market conditions and other factors.
As of December 31, 1998, the Company had repurchased and retired 129,875 common
shares, at an average price of approximately $11.92 per common share.

IMPACT OF YEAR 2000

The Year 2000 compliance issue concerns the inability of computer systems
to accurately calculate, store or use a date after 1999. This could result in a
system failure or miscalculations causing disruptions of operations. The Year
2000 issue affects virtually all companies and organizations.

The Company has been taking the necessary steps to understand the nature
and extent of the work required to make its core information computer systems
and non-information embedded systems Year 2000 compliant. The Company has
determined that it will not be necessary to significantly modify, update or
replace its computer hardware and software applications.

The vendor that provides the Company's existing general ledger software has
released a Year 2000 compliant version of its product which the Company is
currently using. The cost of the general ledger system did not have a material
effect on the Company's financial condition or results of operations.

The Company's Properties, which have no scheduled lease expirations prior
to August 17, 2000, are subject to net leases and accordingly the Year 2000
compliance of embedded systems (e.g., security, HVAC, fire and elevator systems)
are the responsibility of the tenants. The Company has contacted each of its
tenants asking them to identify and evaluate the changes and modifications
necessary to make these systems compliant for Year 2000 processing. The costs
associated with the effort to make the embedded systems Year 2000 compliant are
the tenant's responsibility. However, no assurances can be given that the
Properties embedded systems will be Year 2000 compliant by December 31, 1999.
However, compliance costs, if any, incurred by the Company would not be
significant.

The Company is communicating with significant third-party service providers
and vendors with which it does business to determine the efforts being made on
their part for compliance. The Company is attempting to receive compliance
certificates from all third parties that have a material impact on the Company's
operations, but no assurance can be given with respect to the cost or timing of
such efforts or the potential effects of any failure to comply.

Management will closely monitor the Company's entire Year 2000 compliance
function and will develop contingency plans no later than third quarter of 1999,
if necessary.

20
22

RESULTS OF OPERATIONS ($000)

INCREASE
----------------------
SELECTED INCOME STATEMENT DATA 1998 1997 1996 1998-1997 1997-1996
- ------------------------------ ------- ------ ------ --------- ---------

Total revenues............................ $65,117 43,569 31,675 $21,548 $11,894
Total expenses............................ 45,059 32,862 25,519 12,197 7,343
Interest................................ 23,055 16,644 12,818 6,411 3,826
Depreciation & amortization............. 15,083 10,608 7,627 4,475 2,981
General & administrative................ 4,518 3,644 3,050 874 594
Transactional expenses.................. 559 -- -- 559 --
Net Income................................ $15,737 8,593 5,466 $ 7,144 $ 3,127

Changes in the results of operations for the Company are primarily due to
the growth of its portfolio and costs associated with such growth. The increase
in interest expense due to the growth of the Company's portfolio has been offset
by a reduction in the weighted average interest rate from 9.04% as of December
31, 1996 to 8.17% as of December 31, 1997, and 7.65% as of December 31, 1998 due
to debt refinancings, repayments and lower variable interest rates negotiated on
the credit facility and lower interest rates on new debt incurred by the
Company. The Company's general and administrative expenses have decreased as a
percentage of total revenue to 6.9% in 1998 from 8.4% in 1997 and 9.6% in 1996
due to the growth of the Company's portfolio relative to these expenses.
Transactional expenses in 1998 relate to costs incurred in an abandoned private
equity placement.

The increase in net income for the year ended December 31, 1998 was
primarily attributable to the growth in the Company's real estate portfolio
combined with reduced borrowing costs offset by a slight increase in general and
administrative expenses.

The increase in net income for the year ended December 31, 1997 was
primarily attributable to the gain on sale of one property in the amount of $3.5
million offset by a $3.2 million extraordinary loss on extinguishment of debt.

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 and believes it is an appropriate performance measure for an equity
REIT which provides an indication of a REIT's ability to make cash
distributions. Funds From Operations is defined by NAREIT as "net income (or
loss) (computed in accordance with generally accepted accounting principles
("GAAP")), 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 or to cash flows from operating activities as determined in
accordance with GAAP, or as a measure of liquidity to other consolidated income
or cash flow statement data as determined in accordance with GAAP.

21
23

The following table reflects the calculation of the Company's FFO and cash
flow activities for each of the years in the three year period ended December
31, 1998 ($000):

1998 1997 1996
--------- --------- --------

Net income............................................... $ 15,737 $ 8,593 $ 5,466
Depreciation and amortization of real estate........... 15,083 10,608 7,627
Minority interest's share of net income................ 3,933 2,442 690
Loss from debt restructuring........................... -- 3,189 --
Property arbitration litigation expense................ -- 168 --
Loss (gain) on sale of property........................ 388 (3,517) --
Transactional expenses................................. 559 -- --
--------- --------- --------
Funds from operations before items below............... 35,700 21,483 13,783
Adjustments for other items(1)
Shares compensation.................................... -- -- 588
--------- --------- --------
Funds From Operations............................... $ 35,700 $ 21,483 $ 14,371
========= ========= ========
Cash flows from operating activities..................... $ 32,008 $ 23,823 $ 14,975
Cash flows from investing activities..................... (111,080) (110,767) (16,955)
Cash flows from financing activities..................... 86,516 88,116 1,859

The Company's dividend and distribution FFO payout ratio was 73.6%, 73.5%
and 77.9% for the years ended December 31, 1998, 1997 and 1996 respectively.
- ---------------
(1) For purposes of the calculation of FFO, the Company has added back to net
income amounts for shares compensation which management believes to be
appropriate adjustments based on the infrequent and unusual nature of such
amounts. The Company's method of calculating FFO may be different from
methods used by other REITs. Shares 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 Trustees has determined that the Company will
not engage in such practices in the future.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

The Company's exposure to market risk relates to its variable rate
unsecured credit facility. As of December 31, 1998 the Company's variable rate
indebtedness represented 14.6% of total long-term indebtedness. During 1998,
this variable rate indebtedness had a weighted average interest rate of 7.50%.
Had the weighted average interest rate been 100 basis points higher the
Company's net income would have been approximately $350,000 less.

22
24

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

LEXINGTON CORPORATE PROPERTIES TRUST
AND CONSOLIDATED SUBSIDIARIES

INDEX

PAGE
-----

Independent Auditors' Report................................ 24
Consolidated Balance Sheets as of December 31, 1998 and
1997...................................................... 25
Consolidated Statements of Income for the years ended
December 31, 1998, 1997 and 1996.......................... 26
Consolidated Statements of Changes in Shareholders' Equity
for the years ended December 31, 1998, 1997 and 1996...... 27
Consolidated Statements of Cash Flows for the years ended
December 31, 1998, 1997 and 1996.......................... 28
Notes to Consolidated Financial Statements.................. 29-39
Financial Statement Schedule
Schedule III -- Real Estate and Accumulated Depreciation.... 40-41

23
25

INDEPENDENT AUDITORS' REPORT

The Shareholders
Lexington Corporate Properties Trust:

We have audited the consolidated financial statements of Lexington
Corporate Properties Trust 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 Trust and consolidated subsidiaries as of December 31, 1998
and 1997, and the results of their operations and their cash flows for each of
the years in the three-year period ended December 31, 1998 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 LLP

New York, New York
January 25, 1999

24
26

LEXINGTON CORPORATE PROPERTIES TRUST
AND CONSOLIDATED SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
($000 EXCEPT SHARE AND PER SHARE AMOUNTS)
DECEMBER 31, 1998 AND 1997

1998 1997
-------- --------

ASSETS
Real estate, at cost:
Buildings and building improvements....................... $578,836 $408,661
Land and land estates..................................... 85,781 47,769
Land improvements......................................... 2,831 2,831
Fixtures and equipment.................................... 8,345 8,345
-------- --------
675,793 467,606
Less: accumulated depreciation............................ 66,076 50,993
-------- --------
609,717 416,613
Property held for sale...................................... -- 24,501
Cash and cash equivalents................................... 11,084 3,640
Restricted cash............................................. 3,545 5,499
Deferred expenses (net of accumulated amortization of $3,515
in 1998 and $2,543 in 1997)............................... 4,942 4,283
Rent receivable............................................. 12,436 7,638
Escrow deposits............................................. 104 1,249
Other assets, net........................................... 5,179 4,950
-------- --------
$647,007 $468,373
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Mortgages payable........................................... $300,279 $207,553
Credit facility............................................. 52,621 12,000
Subordinated notes payable, including accrued interest...... 1,973 1,973
Origination fees payable, including accrued interest........ 5,849 5,885
Accounts payable and other liabilities...................... 4,588 4,880
Accrued interest payable.................................... 2,172 1,007
-------- --------
367,482 233,298
Minority interests.......................................... 74,381 28,240
-------- --------
441,863 261,538
-------- --------
Commitments and Contingencies (notes 4, 7 and 10)
Preferred shares, par value $0.0001 per share; authorized
10,000,000 shares. Class A Senior Cumulative Convertible
Preferred, liquidation preference $25,000, 2,000,000
issued and outstanding.................................... 24,369 24,369
-------- --------
Shareholders' equity:
Common shares, par value $0.0001 per share, authorized
40,000,000 shares, 17,103,532 and 16,509,610 shares
issued and outstanding in 1998 and 1997,
respectively........................................... 2 2
Additional paid-in-capital................................ 241,924 235,469
Accumulated distributions in excess of net income......... (59,155) (53,005)
-------- --------
182,771 182,466
Less: notes receivable from officers/shareholders......... (1,996) --
-------- --------
Total shareholders' equity........................ 180,775 182,466
-------- --------
$647,007 $468,373
======== ========

See accompanying notes to consolidated financial statements.
25
27

LEXINGTON CORPORATE PROPERTIES TRUST
AND CONSOLIDATED SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME
($000 EXCEPT SHARE AND PER SHARE AMOUNTS)
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996

1998 1997 1996
----------- ----------- ----------

Revenues:
Rental............................................. $ 62,846 $ 42,493 $ 31,244
Interest and other................................. 2,271 1,076 431
----------- ----------- ----------
65,117 43,569 31,675
----------- ----------- ----------
Expenses:
Interest expense................................... 23,055 16,644 12,818
Depreciation and amortization of real estate....... 15,083 10,608 7,627
Amortization of deferred expenses.................. 987 876 619
General and administrative expenses................ 4,518 3,644 3,050
Property operating expenses........................ 857 922 1,405
Transactional expenses............................. 559 -- --
Property arbitration litigation expense............ -- 168 --
----------- ----------- ----------
45,059 32,862 25,519
----------- ----------- ----------
Income before gain (loss) on sale of properties,
minority interests and extraordinary item.......... 20,058 10,707 6,156
(Loss) gain on sale of properties.................... (388) 3,517 --
----------- ----------- ----------
Income before minority interests and extraordinary
item............................................... 19,670 14,224 6,156
Minority interests................................... 3,933 2,442 690
----------- ----------- ----------
Income before extraordinary item..................... 15,737 11,782 5,466
Extraordinary item................................... -- 3,189 --
----------- ----------- ----------
Net income................................. $ 15,737 $ 8,593 $ 5,466
=========== =========== ==========
Income per common share -- basic:
Income before extraordinary item..................... $ 0.79 $ 0.61 $ 0.58
Extraordinary item................................... -- (0.28) --
----------- ----------- ----------
Net income........................................... $ 0.79 $ 0.33 $ 0.58
=========== =========== ==========
Weighted average common shares outstanding........... 16,835,414 11,444,589 9,392,727
=========== =========== ==========
Income per common share -- diluted:
Income before extraordinary item..................... $ 0.78 $ 0.59 $ 0.56
Extraordinary item................................... -- (0.27) --
----------- ----------- ----------
Net income........................................... $ 0.78 $ 0.32 $ 0.56
=========== =========== ==========
Weighted average common shares outstanding........... 21,983,876 11,639,683 10,897,011
=========== =========== ==========

See accompanying notes to consolidated financial statements.
26
28

LEXINGTON CORPORATE PROPERTIES TRUST
AND CONSOLIDATED SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
($000 EXCEPT SHARE AND PER SHARE AMOUNTS)
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996

ACCUMULATED NOTES
ADDITIONAL DISTRIBUTIONS RECEIVABLE
NUMBER PAID-IN IN EXCESS OF OFFICERS/ TOTAL
OF SHARES AMOUNT CAPITAL NET INCOME SHAREHOLDERS EQUITY
----------- ------ ---------- ------------- ------------ --------

Balance at December 31, 1995... 9,331,982 $ 1 $135,954 $(39,437) $ -- $ 96,518
Net income..................... -- -- -- 5,466 -- 5,466
Dividends paid to shareholders
($1.10 per share)............ -- -- -- (10,327) -- (10,327)
Common shares issued, net of
offering costs............... 94,918 -- 1,002 -- -- 1,002
----------- --- -------- -------- ------- --------
Balance at December 31, 1996... 9,426,900 1 136,956 (44,298) -- 92,659
Net income..................... -- -- -- 8,593 -- 8,593
Dividends paid to common share-
holders ($1.16 per share).... -- -- -- (12,836) -- (12,836)
Dividends paid to preferred
share-holders ($0.91 per
share)....................... -- -- -- (916) -- (916)
Deemed dividend related to
issuance of preferred
shares....................... -- -- 3,548 (3,548) -- --
Common shares issued, net of
offering costs............... 7,082,710 1 94,965 -- -- 94,966
----------- --- -------- -------- ------- --------
Balance at December 31, 1997... 16,509,610 2 235,469 (53,005) -- 182,466
Net income..................... -- -- -- 15,737 -- 15,737
Dividends paid to common share-
holders ($1.17 per share).... -- -- -- (19,633) -- (19,633)
Dividends paid to preferred
share-holders ($1.2285 per
share)....................... -- -- -- (2,254) -- (2,254)
Common shares issued, net...... 723,797 -- 8,013 -- (1,996) 6,017
Common shares repurchased and
retired...................... (129,875) -- (1,558) -- -- (1,558)
----------- --- -------- -------- ------- --------
Balance at December 31, 1998... 17,103,532 $ 2 $241,924 $(59,155) $(1,996) $180,775
=========== === ======== ======== ======= ========

See accompanying notes to consolidated financial statements.
27
29

LEXINGTON CORPORATE PROPERTIES TRUST
AND CONSOLIDATED SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
($000)
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996

1998 1997 1996
--------- --------- --------

Cash flows from operating activities:
Net income................................................ $ 15,737 $ 8,593 $ 5,466
Adjustments to reconcile net income to net cash provided
by operating activities net of effects of acquisitions:
Depreciation and amortization.......................... 16,070 11,484 8,246
Minority interests..................................... 3,933 2,442 690
Loss (gain) on sale of properties...................... 388 (3,517) --
Other non cash charges................................. 75 83 67
Extraordinary item..................................... -- 3,189 --
Decrease (increase) in accounts payable and other
liabilities.......................................... (292) 3,280 746
Other adjustments, net................................. (3,903) (1,731) (240)
--------- --------- --------
Net cash provided by operating activities......... 32,008 23,823 14,975
--------- --------- --------
Cash flows from investing activities:
Net proceeds from sale of properties...................... 24,113 21,362 --
Acquisitions of real estate properties and partnerships,
net of issuance of limited partnership units and common
shares, cash received and liabilities assumed.......... (135,193) (132,129) (16,955)
--------- --------- --------
Net cash used in investing activities............. (111,080) (110,767) (16,955)
--------- --------- --------
Cash flows from financing activities:
Proceeds of mortgages and notes payable................... 160,483 130,942 19,619
Dividends to common and preferred shareholders............ (21,887) (13,752) (10,327)
Principal payments on debt, excluding normal
amortization........................................... (64,412) (112,451) --
Principal amortization payments........................... (6,939) (5,950) (7,534)
Proceeds from the issuance of limited partnership units... 23,449 -- --
Common shares issued, net of offering costs............... 293 75,133 1,002
Preferred shares issued, net of offering costs............ -- 24,369 --
Prepayment premium on early retirement of debt............ -- (3,560) --
Cash distributions to minority interests.................. (4,381) (2,034) (871)
Decrease (increase) in escrow deposits.................... 1,145 (1,145) 550
Increase in deferred expenses............................. (1,631) (1,687) (294)
Decrease (increase) in restricted cash.................... 1,954 (1,749) (286)
Common shares repurchased................................. (1,558) -- --
--------- --------- --------
Net cash provided by financing activities......... 86,516 88,116 1,859
--------- --------- --------
Increase (decrease) in cash and cash equivalents............ 7,444 1,172 (121)
Cash and cash equivalents, beginning of year................ 3,640 2,468 2,589
--------- --------- --------
Cash and cash equivalents, end of year...................... $ 11,084 $ 3,640 $ 2,468
========= ========= ========
Supplemental disclosure of cash flow information:
Cash paid during the year for interest.................... $ 21,916 $ 15,801 $ 12,828
========= ========= ========
Cash paid during the year for taxes....................... $ 261 $ 106 $ 156
========= ========= ========

See accompanying notes to consolidated financial statements.
28
30

LEXINGTON CORPORATE PROPERTIES TRUST
AND CONSOLIDATED SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1) THE COMPANY

Lexington Corporate Properties Trust, (the "Company"), is a Maryland
statutory real estate investment trust ("REIT") that acquires, owns, and manages
a geographically diversified portfolio of net leased office, industrial and
retail properties. As of December 31, 1998 the Company owned 66 properties in 29
states. The real properties owned by the Company are subject to triple net
leases to corporate tenants.

On September 15, 1998, the Company's Board of Trustees had authorized the
Company to repurchase, from time to time, up to 1,000,000 common shares,
depending on market conditions and other factors. During 1998, the Company
repurchased and retired 129,875 common shares at an average price of
approximately $11.92 per common share.

(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis Of Presentation and Consolidation. The Company's consolidated
financial statements are prepared on the accrual basis of accounting. The
financial statements reflect the accounts of the Company and its controlled
subsidiaries, including Lepercq Corporate Income Fund L.P. ("LCIF") 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.

Real Estate. Real estate assets are stated at cost, less accumulated
depreciation and amortization. If there is an event or change in circumstance
that indicates an impairment in the value of a property has occurred, the
Company's policy is to assess any impairment in value by making a comparison of
the current and projected operating cash flows of each such property over its
remaining useful life, on an undiscounted basis, to the carrying amount of the
property. If such carrying amounts are in excess of the estimated projected
operating cash flows of the property, the Company would recognize an impairment
loss equivalent to an amount required to adjust the carrying amount to its
estimated fair market value. No such impairment loss has occurred.

Depreciation is determined by the straight-line method over the remaining
estimated economic useful lives of the properties. The Company generally
depreciates buildings and building improvements over a 40-year period, land
improvements over a 20-year period, and fixtures and equipment over a 12-year
period.

All direct costs associated with the acquisition of real estate are
capitalized. Expenditures for maintenance and repairs are charged to operations
as incurred. Significant renovations which extend the useful life of the
properties are capitalized.

Revenue. 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. Deferred expenses are composed principally of debt
placement, mortgage loan and other loan fees, and are amortized using the
straight-line method, which approximates the interest method, over the terms of
the debt instruments.

Tax Status. The Company has made an election to qualify, and believes it
is operating so as to qualify, as a real estate investment trust under the
Internal Revenue Code. A real estate investment trust is generally not subject
to Federal income tax on that portion of its real estate investment trust
taxable income which is distributed to its shareholders, provided that at least
95% of taxable income is distributed. As distributions have exceeded taxable
income, no provision for Federal income taxes has been made. State income taxes
are not significant.

29
31
LEXINGTON CORPORATE PROPERTIES TRUST
AND CONSOLIDATED SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

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

1998 1997 1996
------- ------- -------

Total dividends per share............................. $ 1.17 $ 1.16 $ 1.10
======= ======= =======
Percent taxable as ordinary income.................... 88.06% 68.91% 95.46%
Percent taxable as long-term capital gains............ 2.30% -- --
Percent non-taxable as return of capital.............. 9.64% 31.09% 4.54%
------- ------- -------
100.00% 100.00% 100.00%
======= ======= =======

Earnings Per Share. Basic net income per share is computed by dividing net
income reduced by all preferred dividends by the weighted average number of
common shares outstanding during the period. Diluted net income per share
amounts are similarly computed but include the effect, when dilutive, of
in-the-money common share options and the Company's other dilutive securities
which can include operating partnership units, exchangeable notes and
convertible preferred shares. In 1998, the exchangeable notes and preferred
shares were not dilutive; in 1997 all the securities were not dilutive; and in
1996 the exchangeable notes were not dilutive.

Cash and Cash Equivalents. The Company considers all highly liquid
instruments with maturities of three months or less from the date of purchase to
be cash equivalents.

Restricted Cash. Includes tenants security deposits and amounts for
certain debt obligations including funding requirements.

Use of Estimates. Management has made a number of estimates and
assumptions relating to the reporting of assets and liabilities, the disclosure
of contingent assets and liabilities and the reported amounts of revenues and
expenses to prepare these consolidated financial statements in conformity with
generally accepted accounting principles. Actual results could differ from those
estimates.

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

New Accounting Pronouncements. In June 1997, SFAS No. 130, "Reporting
Comprehensive Income", and SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information", were issued. SFAS No. 130 establishes
standards for reporting and displaying comprehensive income and its components
in a financial statement that is displayed with the same prominence as other
financial statements. Reclassification of financial statements for earlier
periods, provided for comparative purposes, is required. The statement also
requires the accumulated balance of other comprehensive income to be displayed
separately from retained earnings and additional paid-in capital in the equity
section of the balance sheet. SFAS No. 131 establishes standards for reporting
information about operating segments in annual and interim financial statements.
Operating segments are defined as components of an enterprise about which
separate financial information is available that is evaluated regularly by the
chief operating decision maker in deciding how to allocate resources and in
assessing performance. Categories required to be reported as well as reconciled
to the financial statements are segment profit or loss, certain specific revenue
and expense items, and segment assets. SFAS No. 130 and No. 131 are effective
for fiscal years beginning after December 15, 1997. The adoption of these
standards had no impact on the Company's consolidated financial position and
consolidated operating results as of and for the year ended December 31, 1998.

30
32
LEXINGTON CORPORATE PROPERTIES TRUST
AND CONSOLIDATED SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(3) EARNINGS PER SHARE

The following is a reconciliation of numerators and denominators of the
basic and diluted earnings per share computations for each of the years in the
three year period ended December 31, 1998 ($000's except per share data):

1998 1997 1996
----------- ----------- -----------

BASIC
Income before extraordinary item............ $ 15,737 $ 11,782 $ 5,466
Less cash and deemed dividends attributable
to preferred shares....................... (2,478) (4,871) --
----------- ----------- -----------
Income attributed to common shareholders
before extraordinary item................. 13,259 6,911 5,466
Extraordinary item.......................... -- (3,189) --
----------- ----------- -----------
Net income attributed to common
shareholders.............................. $ 13,259 $ 3,722 $ 5,466
=========== =========== ===========
Weighted average number of common shares
outstanding............................... 16,835,414 11,444,589 9,392,727
=========== =========== ===========
Income per common share -- basic:
Income before extraordinary item............ $ 0.79 $ 0.61 $ 0.58
Extraordinary item.......................... -- (0.28) --
----------- ----------- -----------
Net income.................................. $ 0.79 $ 0.33 $ 0.58
=========== =========== ===========
DILUTED
Income attributed to common shareholders
before extraordinary item................. $ 13,259 $ 6,911 $ 5,466
Add incremental income attributed to assumed
conversion of dilutive securities......... 3,831 -- 588
----------- ----------- -----------
Income attributed to common shareholders
before extraordinary item................. 17,090 6,911 6,054
Extraordinary item.......................... -- (3,189) --
----------- ----------- -----------
Net income attributed to common
shareholders.............................. $ 17,090 $ 3,722 $ 6,054
=========== =========== ===========
Weighted average number of shares used in
calculation of basic earnings per share... 16,835,414 11,444,589 9,392,727
Add incremental shares representing:
Shares issuable upon exercise of employee
stock options.......................... 156,391 195,094 50,513
Shares issuable upon conversion of
dilutive securities.................... 4,992,071 -- 1,453,771
----------- ----------- -----------
Weighted average number of shares used in
calculation of diluted earnings per common
share..................................... 21,983,876 11,639,683 10,897,011
=========== =========== ===========
Income per common share -- diluted:
Income before extraordinary item............ $ 0.78 $ 0.59 $ 0.56
Extraordinary item.......................... -- (0.27) $ --
----------- ----------- -----------
Net income.................................. $ 0.78 $ 0.32 $ 0.56
=========== =========== ===========

31
33
LEXINGTON CORPORATE PROPERTIES TRUST
AND CONSOLIDATED SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(4) INVESTMENTS IN REAL ESTATE

During 1998, 1997 and 1996 the Company made the following acquisitions:

ANNUALIZED
BASE RENT NET
ACQUISITION DECEMBER RENTABLE
DATE OF COST 31, LEASE SQUARE
ACQUISITION TENANT LOCATION ($000'S) ($000'S) EXPIRES FEET
- ----------- --------------------------------------- ---------------------- ----------- ---------- ------- ---------

1998
- ----
March 27 Jones Apparel Group, Inc. Bristol, PA $ 12,539 $ 1,224 03-13 255,019
March 27 Fidelity Corporate Real Estate, LLC Hebron, KY 8,077 817 04-07 81,744
March 27 Kelsey-Hayes (Tech I & II) Livonia, MI 16,442 1,637 04-07 180,230
May 11 Eagle Hardware & Garden. Inc Federal Way, WA 13,751 1,233 08-17 133,861
May 11 Eagle Hardware & Garden. Inc. Anchorage, AK 17,690 1,588 10-17 157,525
May 15 Stone Container Corporation Columbia, SC 4,230 549 08-12 185,960
May 18 The Wackenhut Corporation Palm Beach Gardens, FL 19,817 2,241 02-11 127,855
June 19 Michaels Stores, Inc. Lancaster, CA 15,102 1,430 06-13 431,250
July 2 Fleet Mortgage Group, Inc. Florence, SC 15,061 1,635 06-08 177,747
July 24 Lear Technologies LLC Auburn Hills, MI 13,939 1,365 07-06 183,717
August 27 Kmart Corporation Warren, OH 63,877 8,932 09-07 1,700,000
October 26 Corporate Express Office Products, Inc. Baton Rouge, LA 3,425 368 10-13 65,043
December 31 Upton's, Inc. Columbia, MD 4,880 549 07-09 60,000
-------- ------- ---------
TOTAL $208,830 $23,568 3,739,951
======== ======= =========
1997
- ----
February 20 Johnson Controls, Inc. Cottondale, AL $ 2,910 $ 313 02-07 58,800
March 19 Exel Logistics Inc. Various * 27,428 3,003 11-06 761,200
May 1 Cymer, Inc. San Diego, CA 7,707 860 12-09 65,755
July 9 Bull HN Info. Systems, Inc. Phoenix, AZ 10,990 1,032 10-05 137,058
July 22 Lockheed Martin Corporation Marlborough, MA 15,541 1,671 12-06 126,000
September 4 FirstPlus Financial Group, Inc. Dallas, TX 32,645 3,557 08-12 247,968
October 31 Ryder Integrated Logistics, Inc. Waterloo, IA 9,321 1,002 07-12 276,480
December 31 Stevens-Arnold, Inc. Milpitas, CA 22,138 2,667 12-05 100,026
December 31 Allied Holdings, Inc. Decatur, GA 14,633 1,530 12-07 112,248
December 31 Circuit City Stores, Inc. Richmond, VA 27,234 2,791 02-10 288,562
December 31 Dana Corp. Gordonsville, TN 3,377 341 08-07 148,000
December 31 Allegiance Healthcare Corp. Bessemer, AL 4,902 472 09-01 123,924
-------- ------- ---------
TOTAL $178,826 $19,239 2,446,021
======== ======= =========
1996
- ----
May 22 Northwest Pipeline Corp. Salt Lake City, UT $ 55,396 $ 8,571 09-09 295,000
May 31 Wal-Mart Stores, Inc. Jacksonville, AL 2,049 146 01-09 56,132
December 23 Johnson Controls, Inc Plymouth, MI 6,329 709 12-06 134,160
December 23 Johnson Controls, Inc. Oberlin, OH 4,791 536 12-06 111,160
December 23 SKF USA, Inc. Franklin, NC 3,448 322 12-14 72,868
December 31 Toys "R" Us, Inc. Tulsa, OK 2,711 356 05-06 43,123
December 31 Toys "R" Us, Inc. Clackamas, OR 3,173 417 05-06 42,842
December 31 Toys "R" Us, Inc. Lynwood, WA 2,963 389 05-06 43,105
December 31 Toys "R" Us, Inc. Houston, TX 3,793 478 08-06 123,293
December 31 Liberty House, Inc. Honolulu, HI 10,608 971 09-09 85,610
-------- ------- ---------
TOTAL $ 95,261 $12,895 1,007,293
======== ======= =========

- ---------------
* Consists of three properties; two located in New Kingston, PA, one in
Mechanicsburg, PA.

32
34
LEXINGTON CORPORATE PROPERTIES TRUST
AND CONSOLIDATED SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The Company sold a property in each of 1998 and 1997 for cash proceeds of
$24,113,000 and $21,362,000, respectively, which resulted in a 1998 loss of
$388,000 and a 1997 gain of $3,517,000.

In addition the Company is obligated to purchase a property for $38.7
million which is currently being developed and expected to be delivered no later
than January 2000.

The following unaudited pro forma operating information for the years ended
December 31, 1998 and 1997 has been prepared as if the acquisitions and
dispositions in 1998 and 1997 had been consummated as of January 1, 1997. The
information does not purport to be indicative of what the operating results of
the Company would have been had the acquisitions been consummated on that date.
Pro forma amounts are as follows:

($000'S, EXCEPT PER SHARE DATA)
--------------------------------------
UNAUDITED UNAUDITED
PRO FORMA PRO FORMA
YEAR ENDED YEAR ENDED
DECEMBER 31, 1998 DECEMBER 31, 1997
----------------- -----------------

Revenues........................................... $76,242 $76,328
Net income......................................... 18,683 12,450
Per common share:
Income before extraordinary item -- basic........ 0.96 0.92
Income before extraordinary item -- diluted...... 0.89 0.84
Net income -- basic.............................. 0.96 0.66
Net income -- diluted............................ 0.89 0.60

33
35

(5) MORTGAGES AND NOTES PAYABLE

The following table sets forth certain information regarding the Company's
aggregate indebtedness as of December 31, 1998 and 1997 (in $000's):

INTEREST BALLOON
PROPERTY LOCATION 1998 1997 RATE MATURITY PAYMENT
- ----------------- -------- -------- -------- -------- --------

REMIC Financing (a)....................... $ 67,173 $ 68,020 8.100% 05-25-05 $ 60,001
Credit Facility (b)....................... 52,621 12,000 6.680% 07-24-01 52,621
Individually encumbered properties:
Phoenix, AZ (Bank One).................... 5,538 5,630 10.750% 05-01-99 5,563
Richmond, VA.............................. 13,093 13,093 8.875% 03-01-00 13,093
Bessemer, AL.............................. 1,000 1,000 9.500% 09-01-01 1,000
Tampa, FL (Queen Palm Dr.) (c)............ 4,290 4,290 7.050% 08-15-02 4,020
Tampa, FL (North 30th) (c)................ 5,697 5,860 7.050% 08-15-02 4,768
Gordonsville, TN.......................... 1,158 1,238 9.500% 10-01-02 771
Columbia, MD.............................. 1,980 -- 10.750% 07-20-03 --
Oxon Hill, MD............................. 1,702 1,967 6.250% 03-01-04 --
Mechanicsburg, PA (3 Exel properties)
(d)..................................... 25,000 25,000 8.000% 03-20-04 25,000
Brownsville, TX........................... 852 927 8.375% 11-01-04 260
Rockville, MD............................. 1,061 1,183 8.820% 03-01-05 --
Phoenix, AZ (Bull Promissory Note)........ 592 592 6.380% 09-30-05 592
Phoenix, AZ (Bull)........................ 5,692 5,844 8.120% 10-01-05 4,245
Salt Lake City, UT........................ 10,911 12,092 7.870% 10-01-05 --
Laguna Hills, CA.......................... 4,113 4,420 8.375% 02-01-06 1,020
Warren, OH................................ 40,624 -- 7.000% 10-01-07 --
Federal Way, WA........................... 8,635 -- 7.480% 05-11-08 7,655
Anchorage, AK............................. 11,267 -- 7.480% 05-11-08 9,988
Palm Beach Gardens, FL.................... 13,756 -- 7.010% 06-15-08 11,866
Hebron, KY................................ 5,642 -- 7.000% 10-23-08 4,935
Canton, OH................................ 2,523 2,664 9.490% 02-28-09 --
Salt Lake City, UT........................ 21,170 22,401 7.610% 10-01-09 --
Honolulu, HI.............................. 5,901 6,253 10.250% 10-01-10 --
San Diego, CA............................. 4,635 -- 7.500% 01-01-11 3,420
Dallas, TX................................ 22,800 22,800 7.490% 12-31-12 15,961
Lancaster, CA............................. 11,224 -- 7.020% 09-01-13 8,614
Franklin, NC.............................. 2,250 2,279 8.500% 04-01-15 --
-------- -------- ------- --------
Total..................................... $352,900 $219,553 7.650% $235,393
======== ======== ======= ========

- ---------------
(a) The REMIC Financing is secured by mortgages on 17 Properties.

(b) The Company's $100 million unsecured revolving credit facility, which
replaced the Company's $60 million secured credit facility, bears interest
at 137.5 basis points over LIBOR and has an interest rate period of one,
three or six months, at the option of the Company. The credit facility
contains various leverage, debt service coverage, net worth maintenance and
other customary covenants all of which the Company is in compliance. Due to
these covenants, approximately $6.4 million was available to the Company at
December 31, 1998. In addition, the Company has issued a letter of credit
totaling $2.8 million. The amount of available borrowings can increase by
identifying additional encumbered properties as eligible for the
computation of the borrowing base which supports the credit facility.

(d) The Notes can be exchanged by the holders for the Company's common shares
at $13 per share beginning in the year 2000, subject to adjustment. The
Notes may be redeemed at the Company's option

34
36

beginning March 2000 at a price of 103.2% of the principal amount,
declining to par after March 2002. The Notes are subordinated to
obligations under the Company's credit facility.

Scheduled principal paydowns of the mortgage notes payable, excluding
borrowings under the credit facility, for the next five years and thereafter are
as follows (in $000's):

YEARS ENDING SCHEDULED
DECEMBER 31, AMORTIZATION BALLOON TOTAL
- ------------ ------------ -------- --------

1999.............................................. $ 9,608 $ 5,563 $ 15,171
2000.............................................. 10,669 13,093 23,762
2001.............................................. 11,524 1,000 12,524
2002.............................................. 12,303 9,559 21,862
2003.............................................. 12,948 -- 12,948
Thereafter........................................ 60,455 153,557 214,012
-------- -------- --------
$117,507 $182,772 $300,279
======== ======== ========

(6) SUBORDINATED NOTES PAYABLE

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. The
Subordinated Notes are redeemable at the Company's option, in whole or in part
at a redemption price equal to 100% of the principal amount plus all accrued and
unpaid interest through the date of redemption.

(7) LEASES

Minimum future rental receipts under noncancellable tenant leases assuming
no new or negotiated leases for the next five years and thereafter are as
follows (in $000's):

YEAR ENDING
DECEMBER 31, AMOUNT
- ------------ --------

1999........................................................ $ 73,070
2000........................................................ 72,720
2001........................................................ 70,174
2002........................................................ 67,826
2003........................................................ 68,077
Thereafter.................................................. 347,203
--------
$699,070
========

The Company leases its corporate headquarters for approximately $233,000 per
annum through June 30, 2004.

(8) 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 redeemable at certain times for common
shares on a one-for-one basis. As of December 31, 1998, there were 6,254,769 OP
Units outstanding. These units, subject to certain adjustments through the date
of conversion, have distributions per unit in varying amounts up to $1.20 per
unit.

(9) PREFERRED SHARES

The preferred shares are cumulative and convertible at any time at the
holder's option into common shares on a one-for-one basis and are entitled to
quarterly dividends equal to the greater of $.295 per share or 105% of the
quarterly common shares dividend. Currently the dividend is $.315 per share.

35
37

During 1997, the Company sold 2,000,000 preferred shares to a single
entity. Based on the market price of the Company's common shares on the dates of
issuance, the Preferred Shares were deemed to have a beneficial conversion
feature equal to the difference between the market price per share and $12.50
per share. This difference, which is non-cash and non-recurring, amounted to
approximately $3.5 million for the year ended December 31, 1997 and has been
recorded as a dividend, with an offset to additional paid-in capital, in the
accompanying statements of changes in shareholders' equity.

The preferred shares may be redeemed by the Company after December 31, 2001
at a premium of 6% over the liquidation preference of $12.50 per share, with
such premium declining to zero on or after December 31, 2011. Each share is
entitled to one vote. In certain instances, including a change of control of the
Company (as defined in the agreement), the holder of the Preferred Shares may
require the Company to redeem its shares at a price equal to $12.75 per share
plus any accrued dividends.

(10) LEGAL PROCEEDINGS

The Company is involved in various legal actions arising in the ordinary
course of business. In the opinion of management, the ultimate disposition of
these matters will not have a material adverse effect on the Company's
consolidated financial position, results of operations or liquidity.

(11) BENEFIT PLANS

The Company maintains a common share option plan pursuant to which
qualified and non-qualified options may be issued. In 1998 the number of options
that can be issued under the plan were increased by 800,000. Options granted
under the plan generally vest over a period of one to four years, expire five
years from date of grant and are exercisable at the market price of the date of
grant.

Share option activity during the periods indicated is as follows:

WEIGHTED-AVERAGE
NUMBER OF EXERCISE PRICE PER
SHARES SHARE
--------- ------------------

Balance at December 31, 1995............................. 602,500 $10.45
Granted(1)............................................. 370,600 11.56
Exercised(1)........................................... (192,500) 9.15
Forfeited.............................................. (5,300) 11.39
--------- ------
Balance at December 31, 1996............................. 775,300 11.30
Granted................................................ 276,397 12.50
Exercised.............................................. (10,000) 10.09
Forfeited.............................................. (2,500) 14.25
--------- ------
Balance at December 31, 1997............................. 1,039,197 11.62
Granted................................................ 386,600 15.11
Exercised.............................................. (8,230) 10.28
Forfeited.............................................. (7,370) 14.51
--------- ------
Balance at December 31, 1998............................. 1,410,197 $12.58
========= ======

- ---------------
(1) In 1996, certain officers and employees exchanged existing options for new
options with exercise prices equal to the fair market value of the common
shares 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 has been
reflected in general and administrative expenses in the accompanying
financial statements.

At December 31, 1998, the range of exercise prices and weighted-average
remaining contractual life of outstanding options was $9.00 to $15.25 and 2.74
years, respectively. In addition, 989,803 options are still available for grant.

36
38

At December 31, 1998, 1997 and 1996, the number of options exercisable was
1,107,697, 837,300, and 767,800, respectively, and the weighted-average exercise
price of those options was $11.88, $11.45 and $11.29, respectively.

The per share weighted average fair value of options granted during 1998,
1997 and 1996 were estimated to be $3.46, $3.75 and $2.60, respectively, using a
Black-Scholes option pricing formula. The more significant assumptions
underlying the determination of such fair values include: (i) a risk free
interest rate of 5% in 1998 and 6.5% in 1997 and 1996; (ii) an expected life of
five years; (iii) volatility factors of 18.47%, 17.09% and 16.29%, for 1998,
1997 and 1996 respectively; (iv) and actual dividends paid.

The Company has elected to adopt the disclosure only provisions of SFAS No.
123. Accordingly no compensation cost has been recognized with regard to options
granted in the accompanying consolidated statements of income. If stock based
compensation cost had been recognized based upon the fair value at the date of
grant for options awarded in 1998, 1997 and 1996 the Company's pro forma net
income and pro forma net income per share would have been:

1998 1997 1996
------- ------ ------

Pro forma net income.................................... $14,737 $8,276 $4,994
Pro forma net income per share..........................
Basic................................................. $ 0.73 $ 0.30 $ 0.52
Diluted............................................... $ 0.73 $ 0.29 $ 0.50

The Company has a 401(k) retirement savings plan covering all eligible
employees. The Company will match 25% of the first 4% of employee contributions.
In addition, based on its profitability, the Company may make a discretionary
contribution at each fiscal year end to all eligible employees. The matching and
discretionary contributions are subject to vesting under a schedule providing
for 25% annual vesting starting with the first year of employment and 100%
vesting after four years of employment. Approximately $77,000, $80,000 and
$75,000 were contributed in 1998, 1997 and 1996, respectively.

(12) RELATED PARTY TRANSACTIONS

The Company has been granted an option by the LCP Group, L.P. ("LCP"),
exercisable any time, to acquire the 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. Under the terms of the option, the Company, subject to
review of any such transaction by the independent members of its Board of
Trustees, 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). The
Chairman of the Company is a partner in LCP.

The Company currently provides administrative and acquisition support to
the Net Partnerships and is reimbursed for the costs of such services. The
reimbursements amounted to $393,000, $279,000 and $197,000 for the years ended
December 31, 1998, 1997 and 1996, respectively, and are shown net of the
Company's general and administrative expenses in the accompanying statements of
income.

The Company also received brokerage commissions, relating to the purchase
and sale of properties, from the Net Partnerships totaling $376,000 in 1998,
which is included in other income in the accompanying statement of income.

In connection with the acquisition of certain properties, the Company
assumed an obligation to pay LCP an aggregate principal amount of $1,778,000 for
rendering services in connection with the original acquisition of the properties
in 1980 and 1981. These properties were acquired by the Company in 1996. 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

37
39

to commence at various dates to satisfy principal and current interest payments
as well as any unpaid accrued interest outstanding.

During 1998, the Company issued 1,187,228 OP Units to the Co-Chief
Executive Officers and an affiliate of one of the Co-Chief Executive Officers in
exchange for their interests in certain partnerships and related contractual
obligations.

During 1998, the Company issued 131,000 common shares to two officers in
exchange for notes aggregating $1,998,000 which mature on February 14, 2003,
bear interest at 7.6% per annum and are secured by the common shares issued.

(13) FAIR MARKET VALUE OF FINANCIAL INSTRUMENTS

Cash Equivalents and Restricted Cash

The Company estimates that the fair value approximates carrying value due
to the relatively short maturity of the instruments.

Mortgages, Notes and Subordinated Notes Payables

The Company determines the fair value of these instruments based on a
discounted cash flow analysis using a discount rate that approximates the
current borrowing rates for instruments of similar maturities. Based on this,
the Company has determined that the fair value of these instruments approximates
carrying values.

(14) CONCENTRATION OF RISK

The Company seeks to reduce its operating and leasing risks through
diversification achieved by the geographic distribution of its Properties,
avoiding dependency on a single property and the creditworthiness of its
tenants.

For each of the years in the three year period ended December 31, 1998 the
following tenants represented 10% or greater of rental revenue:

1998 1997 1996
---- ---- ----

Northwest Pipeline Corp..................................... 14% 20% 16%
Ross Stores, Inc............................................ -- -- 10%

The Ross Store, Inc. property was sold to the tenant in 1998.

(15) SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES

During 1998, in connection with the acquisition of certain properties, the
Company assumed $44.2 million in mortgage indebtedness as partial satisfaction
of the purchase price.

During 1998, in connection with the acquisition of certain properties, the
Company issued $28.8 million in OP Units as partial satisfaction of the purchase
price. The issuance of these OP Units have been recorded as minority interest in
the accompanying consolidated balance sheets.

During 1998, holders of an aggregate of 525,433 partnership units redeemed
such units for common shares of the Company. This redemption resulted in an
increase in shareholders' equity and a corresponding decrease in minority
interest of $5.65 million.

During 1998, the Company issued 131,000 common shares, at the current
market price, to two officers in exchange for notes aggregating $1,998,000 which
mature on February 14, 2003, bear interest at 7.6% per annum and are secured by
the common shares issued.

During 1997, the Company issued 1,284,725 common shares in exchange for all
the shares of another company. The Company acquired three properties valued at
$35.1 million less the $15.3 million of mortgage indebtedness assumed.

38
40

During 1997, in connection with a property acquisition, the Company assumed
approximately $5.9 million of first mortgage financing and issued a $600,000
note to the seller.

During 1997, in connection with an acquisition of properties involving a
partnership, the Company issued $6 million in OP Units as partial satisfaction
of the purchase price. The issuance of these OP Units have been recorded as
minority interest in the accompanying consolidated financial statements.

During 1996, the Company completed acquisitions whereby six properties were
acquired in exchange for OP Units. Total assets acquired and total liabilities
assumed in the exchanges were $79.1 million and $56.9 million, respectively.

(16) UNAUDITED QUARTERLY FINANCIAL DATA (IN $000'S, EXCEPT PER SHARE DATA)

THREE MONTHS ENDED
-------------------------------------
MARCH 31, JUNE 30,
----------------- ----------------
1998 1997 1998 1997
------- ------ ------ ------

Revenues....................................... $13,980 9,824 14,994 10,638
Income before extraordinary item............... $ 4,062 1,566 3,437 1,770
Net income..................................... $ 4,062 1,510 3,437 304
Income (loss) per common share:
Before extraordinary item
Basic..................................... $ 0.21 (0.01) 0.17 0.14
Diluted................................... $ 0.20 (0.01) 0.17 0.13
Net income (loss)
Basic..................................... $ 0.21 (0.02) 0.17 (0.01)
Diluted................................... $ 0.20 (0.02) 0.17 (0.01)

THREE MONTHS ENDED
-------------------------------------
SEPTEMBER 30, DECEMBER 31,
----------------- ----------------
1998 1997 1998 1997
------- ------ ------ ------

Revenues....................................... $17,155 11,405 18,988 11,702
Income before extraordinary item............... $ 4,131 5,492 4,107 2,954
Net income..................................... $ 4,131 3,825 4,107 2,954
Income (loss) per common share:
Before extraordinary item
Basic..................................... $ 0.21 0.40 0.21 0.04
Diluted................................... $ 0.20 0.37 0.20 0.04
Net income
Basic..................................... $ 0.21 0.27 0.21 0.04
Diluted................................... $ 0.20 0.27 0.20 0.04

The sum of the quarterly income (loss) per common share amounts may not
equal the full year amounts primarily because the computations of the weighted
average number of common shares outstanding for each quarter and the full year
are made independently.

(17) SUBSEQUENT EVENTS (UNAUDITED)

The Company borrowed an additional $3 million on its unsecured line of
credit at an interest rate of 6.3125%.

The Company purchased a property in Henderson, North Carolina leased to
Corporate Express Office Products, Inc. for $7.3 million. The lease, which
expires January 31, 2014, provides for annual revenues of $765,000.

The Company obtained a $2.18 million mortgage on its property in Baton
Rouge, Louisiana. The mortgage which bears interest at 7.375% provides for
annual debt service payments of approximately $202,000 through February 16, 2009
when a balloon payment of approximately $1.5 million is due.

39
41

LEXINGTON CORPORATE PROPERTIES TRUST AND CONSOLIDATED SUBSIDIARIES

REAL ESTATE AND ACCUMULATED DEPRECIATION AND AMORTIZATION
SCHEDULE III ($000)

INITIAL COST TO COMPANY AND GROSS AMOUNT AT WHICH CARRIED AT END OF YEAR(A)

LAND ACCUMULATED
AND BUILDINGS DEPRECIATION
LAND AND AND
DESCRIPTION LOCATION ENCUMBRANCES ESTATES IMPROVEMENTS TOTAL AMORTIZATION
----------- ------------------------ ------------ ------- ------------ -------- -------------

Warehouse & Manufacturing....... Modesto, CA $ 2,101 $ 257 $ 3,809 $ 4,066 $ 1,171
Office.......................... Southington, CT 8,650 3,240 20,440 23,680 7,481
Research & Development.......... Glendale, AZ -- 4,996 24,392 29,388 9,868
Retail/Health Club.............. Countryside, IL 2,381 628 3,722 4,350 1,462
Retail/Health Club.............. Voorhees NJ 3,011 577 4,820 5,397 1,789
Retail/Health Club.............. DeWitt, NY 1,821 445 3,043 3,488 1,112
Warehouse & Distribution........ Mansfield, OH 3,291 120 4,597 4,717 1,494
Industrial...................... Marshall, MI 2,206 33 3,378 3,411 1,189
Industrial...................... Marshall, MI 840 14 926 940 327
Retail.......................... Newport, OR 6,162 1,400 7,270 8,670 2,392
Office & Warehouse.............. Memphis, TN 6,652 1,053 10,908 11,961 2,966
Warehouse & Distribution........ Mechanicsburg, PA 10,154 1,439 13,987 15,426 2,561
Office & Warehouse.............. Tampa, FL 4,290 1,389 7,629 9,018 2,284
Retail.......................... Klamath Falls, OR 7,003 727 9,160 9,887 2,471
Office.......................... Tampa, FL 5,697 1,900 9,736 11,636 2,538
Warehouse & Industrial.......... Jacksonville, FL -- 157 3,034 3,191 808
Retail.......................... Sacramento, CA 2,346 885 2,705 3,590 922
Office.......................... Phoenix, AZ 5,538 2,804 13,921 16,725 3,509
Retail.......................... Reno, NV 2,031 1,200 1,904 3,104 631
Retail.......................... Las Vegas, NV 1,821 900 1,759 2,659 581
Retail.......................... Rockville, MD 1,061 -- 1,784 1,784 372
Retail.......................... Oxon Hill, MD 1,702 403 2,765 3,168 450
Retail.......................... Brownsville, TX 852 -- 1,242 1,242 229
Retail.......................... Laguna Hills, CA 4,113 255 5,028 5,283 735
Retail.......................... Riverdale, GA -- 363 2,233 2,596 167
Retail/Health Club.............. Canton, OH 2,523 602 3,819 4,421 286
Office.......................... Salt Lake City, UT 32,081 -- 55,404 55,404 5,613
Retail.......................... Jacksonville, AL -- 286 1,763 2,049 115
Manufacturing................... Franklin, NC 2,250 386 3,062 3,448 153
Industrial...................... Plymouth, MI -- 1,461 4,868 6,329 243
Industrial...................... Oberlin, OH 2,235 276 4,515 4,791 226
Retail.......................... Tulsa, OK -- 447 2,432 2,879 265
Retail.......................... Clackamas, OR -- 523 2,847 3,370 311
Retail.......................... Lynwood, WA -- 488 2,658 3,146 290
Industrial...................... Houston, TX -- 217 3,745 3,962 329
Retail.......................... Honolulu, HI 5,901 -- 11,147 11,147 903
Industrial...................... Cottondale, AL -- 720 2,190 2,910 103
Warehouse....................... New Kingston, PA
(Silver Springs) 5,498 674 5,360 6,034 240
Warehouse....................... New Kingston, PA
(Cumberland) 11,250 1,380 10,963 12,343 491
Warehouse....................... Mechanicsburg, PA
(Hampden IV) 8,252 1,012 8,039 9,051 360

USEFUL LIFE
COMPUTING
DEPRECIATION IN
LATEST INCOME
DATE DATE STATEMENTS
DESCRIPTION ACQUIRED CONSTRUCTED (YEARS)
----------- ---------- ----------- -----------------------

Warehouse & Manufacturing....... Sept. 1986 1970 & 1976 40 & 12
Office.......................... Oct. 1986 1983 40 & 12
Research & Development.......... Nov. 1986 1985 40 & 12
Retail/Health Club.............. Jul. 1987 1987 40 & 12
Retail/Health Club.............. Jul. 1987 1987 40 & 12
Retail/Health Club.............. Aug. 1987 1977 & 1987 40 & 12
Warehouse & Distribution........ Jul. 1987 1970 40, 20 & 12
Industrial...................... Aug. 1987 1968 & 1972 40, 20 & 12
Industrial...................... Aug. 1987 1979 40, 20 & 12
Retail.......................... Sept. 1987 1986 40, 20 & 12
Office & Warehouse.............. Feb. 1988 1987 40
Warehouse & Distribution........ Oct. 1990 1985 & 1991 40
Office & Warehouse.............. Nov. 1987 1986 40 & 20
Retail.......................... Mar. 1988 1986 40
Office.......................... Jul. 1988 1986 40
Warehouse & Industrial.......... Jul. 1988 1958 & 1969 40 & 20
Retail.......................... Oct. 1988 1988 40, 20 & 12
Office.......................... Nov. 1988 1960 & 1979 40
Retail.......................... Dec. 1988 1988 40, 20 & 12
Retail.......................... Dec. 1988 1988 40, 20 & 12
Retail.......................... Aug. 1995 1977 22.375, 16.583 & 15.583
Retail.......................... Aug. 1995 1976 21.292
Retail.......................... Aug. 1995 1973 18.542
Retail.......................... Aug. 1995 1974 20 & 20.5
Retail.......................... Dec. 1995 1985 40
Retail/Health Club.............. Dec. 1995 1987 40
Office.......................... May 1996 1982 25.958
Retail.......................... May 1996 1982 40
Manufacturing................... Dec. 1996 1996 40
Industrial...................... Dec. 1996 1996 40
Industrial...................... Dec. 1996 1996 40
Retail.......................... Dec. 1996 1981 23.583 & 13.583
Retail.......................... Dec. 1996 1981 23.583 & 13.583
Retail.......................... Dec. 1996 1981 23.583 & 13.583
Industrial...................... Dec. 1996 1981 24.5 & 14.5
Retail.......................... Dec. 1996 1980 24.33
Industrial...................... Feb. 1997 1996 40
Warehouse.......................
Mar. 1997 1981 40
Warehouse.......................
Mar. 1997 1989 40
Warehouse.......................
Mar. 1997 1985 40

40
42
LEXINGTON CORPORATE PROPERTIES TRUST AND CONSOLIDATED SUBSIDIARIES

REAL ESTATE AND ACCUMULATED DEPRECIATION AND AMORTIZATION
SCHEDULE III ($000) -- (CONTINUED)

Office/Research & Development... San Diego, CA 4,635 693 7,014 7,707 285
Office/Research & Development... Marlborough, MA -- 1,707 13,834 15,541 504
Office.......................... Phoenix, AZ 6,284 1,872 9,118 10,990 332
Office.......................... Dallas, TX 22,800 3,582 29,063 32,645 938
Warehouse....................... Waterloo, IA 4,468 1,025 8,296 9,321 251
Office/Research & Development... Milipitas, CA -- 3,542 18,603 22,145 465
Industrial...................... Gordonsville, TN 1,158 52 3,325 3,377 96
Office.......................... Decatur, GA -- 975 13,677 14,652 342
Office.......................... Richmond, VA 13,093 -- 27,282 27,282 846
Industrial...................... Bessemer, AL 1,000 664 4,238 4,902 126
Office/Warehouse................ Bristol, PA -- 2,508 10,031 12,539 188
Office.......................... Hebron, KY 5,642 1,615 6,462 8,077 121
Office.......................... Livonia, MI -- 1,554 6,219 7,773 117
Research & Development.......... Livonia, MI -- 1,733 6,936 8,669 130
Retail.......................... Federal Way, WA 8,635 2,749 11,015 13,764 176
Retail.......................... Anchorage, AK 11,267 3,537 14,169 17,706 226
Industrial/Warehouse............ Columbia, SC -- 636 3,608 4,244 44
Office.......................... Palm Beach Gardens, FL 13,756 3,960 15,870 19,830 249
Warehouse/Distribution.......... Lancaster, CA 11,224 2,028 13,117 15,145 174
Office.......................... Florence, SC -- 3,012 12,067 15,079 151
Industrial...................... Auburn Hills, MI -- 2,788 11,169 13,957 122
Warehouse/Distribution.......... Warren, OH 40,624 10,231 51,239 61,470 742
Warehouse/Distribution.......... Baton Rouge, LA -- 685 2,746 3,431 14
Retail.......................... Columbia, MD 1,980 976 3,910 4,886 --
-------- ------- -------- -------- --------

Total $300,279 $85,781 $590,012 $675,793 $ 66,076
======== ======= ======== ======== ========

USEFUL LIFE
COMPUTING
DEPRECIATION IN
LATEST INCOME
DATE DATE STATEMENTS
DESCRIPTION ACQUIRED CONSTRUCTED (YEARS)
----------- ---------- ----------- -----------------------

Office/Research & Development... May 1997 1989 40
Office/Research & Development... Jul. 1997 1960 & 1988 40
Office.......................... Jul. 1997 1985 & 1994 40
Office.......................... Sept. 1997 1986 40
Warehouse....................... Oct. 1997 1996 & 1997 40
Office/Research & Development... Dec. 1997 1985 40
Industrial...................... Dec. 1997 1983 & 1985 34.75
Office.......................... Dec. 1997 1983 40
Office.......................... Dec. 1997 1990 32.25
Industrial...................... Dec. 1997 1990 33.75
Office/Warehouse................ Mar. 1998 1982 40
Office.......................... Mar. 1998 1987 40
Office.......................... Mar. 1998 1987 & 1988 40
Research & Development.......... Mar. 1998 1987 & 1988 40
Retail.......................... May 1998 1992 40
Retail.......................... May 1998 1992 40
Industrial/Warehouse............ May 1998 1968 & 1998 40
Office.......................... May 1998 1996 40
Warehouse/Distribution.......... Jun. 1998 1998 40
Office.......................... Jul. 1998 1998 40
Industrial...................... Jul. 1998 1989 & 1998 40
Warehouse/Distribution.......... Aug. 1998 1982 40
Warehouse/Distribution.......... Oct. 1998 1998 40
Retail.......................... Dec. 1998 1983 40
Total

- ---------------
(A) The initial cost includes the purchase price paid by the Company and
acquisition fees and expenses. The total cost basis of the Company's
Properties at December 31, 1998 for Federal income tax purposes was $458
million.

Reconciliation of real estate owned

1998 1997 1996
-------- -------- --------

Balance at the beginning of the year.................... $467,606 $340,669 $244,223
Additions during year................................... 208,187 179,257 96,446
Properties sold during year............................. -- (21,476) --
Property reclassed to held for sale..................... -- (30,844) --
-------- -------- --------
Balance at end of year.................................. $675,793 $467,606 340,669
======== ======== ========

Reconciliation of accumulated depreciation and amortization:

Balance at beginning of year............................ $ 50,993 $ 51,343 $ 43,716
Depreciation and amortization expense................... 15,083 10,608 7,627
Accumulated depreciation of properties sold during
year................................................. -- (3,631) --
Accumulated depreciation of property reclassed to held
for sale............................................. -- (7,327) --
-------- -------- --------
Balance at end of year.................................. $ 66,076 $ 50,993 $ 51,343
======== ======== ========

41
43

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

None.

PART III.

ITEM 10. TRUSTEES AND EXECUTIVE OFFICERS OF THE REGISTRANT

The information regarding trustees and executive officers of the Company
required to be furnished pursuant to this item is set forth in Item 4A of this
report.

ITEM 11. EXECUTIVE COMPENSATION

The information required to be furnished pursuant to this item will be set
forth under the caption "Compensation of Executive Officers" in the Proxy
Statement, and is incorporated herein by reference.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The information required to be furnished pursuant to this item will be set
forth under the captions "Principal Security Holders" and "Share Ownership of
Trustees and Executive Officers" in the Proxy Statement, and is incorporated
herein by reference.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The information required to be furnished pursuant to this item will be set
forth under the caption "Election of Trustees -- Certain Relationships and
Related Transactions" in the Proxy Statement, and is incorporated herein by
reference.

Note, the Definitive Proxy Statement will be filed with the Securities and
Exchange Commission on or about April 16, 1999.

PART IV.

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.

PAGE
----

(a)(1) Financial Statements........................................ 25-39
(2) Financial Statement Schedule................................ 40-41
(3) Exhibits

EXHIBIT NO. EXHIBIT
- ----------- -------

2.1 -- Form of Agreement and Plan of Merger by and among Lexington
Corporate Properties, Inc. (the "Company"), Lepercq
Corporate Income Fund L.P. ("LCIF I") and Lex M-1, L.P.
(filed as Appendix C-I to the Company's Registration
Statement of Form S-4 (File No. 33-66858) (the "Form S-4"))*
2.2 -- Form of Agreement and Plan of Merger by and among the
Company, Lepercq Corporate Income Fund II L.P. ("LCIF II"),
and Lex M-2, L.P. (filed as Appendix C-II to the Form S-4)*
2.3 -- Form of Agreement and Articles of Merger between the Company
and Lexington Corporate Properties -- Maryland, Inc. (filed
as Exhibit 2.3 to Report on 10-K for year ended December 31,
1993 (the "1993 10-K"))*
2.4 -- Agreement and Plan of Merger between the Company and
Lexington Corporate Properties Trust (filed as Exhibit 2.1
to Form 8-K filed 1-16-98.)*
3.1 -- Declaration of Trust of the Company, dated December 31, 1997
(filed as Exhibit 3.1 to Form 8K filed 1-16-98)*

42
44

EXHIBIT NO. EXHIBIT
- ----------- -------

3.2 -- By-Laws of the Company (filed as Exhibit 3.2 to Form 10-K
filed 3-31-98)*
4.1 -- Specimen of Common Shares Certificate of the Trust (filed as
Exhibit 3.2 to Form 10-K filed 3-31-98)*
4.2 -- Form of Indenture between the Company and The Bank of New
York, as Trustee, including the form of 7.75% Subordinated
Note due 2000 (filed as Exhibit 4.2 to the Form S-4)*
10.8 -- Form of 1994 Outside Director Shares Plan of the Company
(filed as Exhibit 10.8 to 1993 10-K)*
10.24 -- Class A Mortgage Note to Pacific Mutual Life Insurance
Company and Lexington Mortgage Company dated May 19, 1995 in
the amount of $34,000,000 (filed as Exhibit 10.24 to Report
on 10-K for year ended December 31, 1995 (the "1995 10-K"))*
10.25 -- Class B Mortgage Note to Pacific Mutual Life Insurance
Company and Lexington Mortgage Company dated May 19, 1995 in
the amount of $18,500,000 (filed as Exhibit 10.25 to the
1995 10-K)*
10.26 -- Class C Mortgage Note to Pacific Mutual Life Insurance
Company and Lexington Mortgage Company dated May 19, 1995 in
the amount of $17,500,000 (filed as Exhibit 10.26 to the
1995 10-K)*
10.28 -- Indenture of Mortgage, Deed of Trust, Security Agreement,
Financing Statement, Fixture Filing and Assignment of
Leases, Rents and Security Deposits to First American Title
Insurance Company and Pacific Mutual Life Insurance Company
and Lexington Mortgage Company dated May 19, 1995 (filed as
Exhibit 10.28 to the 1995 10-K)*
10.29 -- Assignment of Leases, Rents, and Security Deposits to
Pacific Mutual Life Insurance Company and Lexington Mortgage
Company dated May 19, 1995 (filed as Exhibit 10.29 to the
1995 10-K)*
10.30 -- Cash Collateral Account, Security, Pledge and Assignment
Agreement with the Bank of New York, as agent and Pacific
Mutual Life Insurance Company and Lexington Mortgage Company
dated May 19, 1995 (filed as Exhibit 10.30 to the 1995
10-K)*
10.31 -- Trust and Servicing Agreement with Pacific Mutual Life
Insurance Company, LaSalle National Bank and ABN AMRO Bank
N.V. dated May 19, 1995 (filed as Exhibit 10.31 to the 1995
10-K)*
10.33 -- Investment Agreement dated as of December 31, 1996 with Five
Arrows Realty Securities L.L.C. *
10.34 -- Operating Agreement dated as of January 21, 1997 with Five
Arrows Realty Securities L.L.C.*
10.35 -- Articles Supplementary Classifying 2,000,000 shares of
Preferred Shares as Class A Senior Cumulative Convertible
Preferred Shares and 2,000,000 shares of Excess Shares as
Excess Class A Preferred Shares of the Company*
10.37 -- Unsecured Revolving Credit Agreement with Fleet National
Bank as administrative agent for itself and lenders dated
July 22, 1998 in the amount of $100,000,000.
12 -- Statement of Computation of Ratio of Earnings to Fixed
Charges (filed as Exhibit 12 to the Form S-4)*
21 -- List of Subsidiaries of the Company (filed as Exhibit 21 to
Form 10-K filed 3-31-98)*
23 -- Consent of KPMG LLP
27 -- Financial Data Schedule as of and for the year ended
December 31, 1998

- ---------------
* Incorporated by reference.

(b) Reports on Form 8-K and Form 8-K/A

None.

43
45

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Company has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

LEXINGTON CORPORATE PROPERTIES TRUST

BY: /s/ E. ROBERT ROSKIND
------------------------------------
E. Robert Roskind
Chairman

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

SIGNATURE TITLE
--------- -----

/s/ E. ROBERT ROSKIND Chairman of the Board of Trustees and Co-Chief
- --------------------------------------------------- Executive Officer
E. Robert Roskind

/s/ RICHARD J. ROUSE Vice Chairman of the Board of Trustees and
- --------------------------------------------------- Co-Chief Executive Officer
Richard J. Rouse

/s/ T. WILSON EGLIN President and Chief Operating Officer and
- --------------------------------------------------- Trustee
T. Wilson Eglin

/s/ PATRICK CARROLL Chief Financial Officer and Treasurer
- ---------------------------------------------------
Patrick Carroll

/s/ PAUL R. WOOD Vice President, Chief Accounting Officer and
- --------------------------------------------------- Secretary
Paul R. Wood

/s/ CARL D. GLICKMAN Trustee
- ---------------------------------------------------
Carl D. Glickman

/s/ KEVIN W. LYNCH Trustee
- ---------------------------------------------------
Kevin W. Lynch

/s/ JOHN D. MCGURK Trustee
- ---------------------------------------------------
John D. McGurk

/s/ SETH M. ZACHARY Trustee
- ---------------------------------------------------
Seth M. Zachary

DATE: March 5, 1999