SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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Form 8-K
Current Report
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): July 20, 2001
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LEXINGTON CORPORATE PROPERTIES TRUST
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(Exact Name of Registrant as specified in its charter)
Maryland 1-12386 13-3717318
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(State or other jurisdiction (Commission File (IRS Employer
of incorporation) Number) Identification No.)
355 Lexington Avenue New York, New York 10017
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(Address of Principal Executive Offices) (Zip Code)
(212) 692-7260
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Registrant's telephone number, including area code
Not Applicable
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(Former name or former address, if changed since last report)
ITEM 5. Other Events
On July 20, 2001, Lexington Corporate Properties Trust (the "Company")
announced amended terms of its agreement to acquire two Delaware limited
partnerships, Net 1 L.P. and Net 2 L.P. (the "Net Partnerships"), in a merger
transaction valued at approximately $140.0 million.
The Net Partnerships own twenty-four properties in fourteen states,
which generated approximately $14.8 million of rental revenue in 2000. The
Company will issue merger consideration consisting of $65.0 million of cash and
securities and will assume approximately $75.0 million mortgages with a weighted
average interest rate of 7.8%. The limited partners will receive 99% of the
merger consideration, payable 50% in cash and 50% in Lexington's common shares
issued at a value not less than $14.00 per share nor more than $16.00 per share.
The general partner will receive 1% of the merger consideration in operating
partnership units that are convertible into common shares on a one-for-one basis
after five years and that will receive the same dividends as holders of common
shares receive.
Under the terms of the original transaction, the limited partners would
have received at least one half of the $65.0 merger consideration in the
Company's Convertible Subordinated Debentures due 2009, with up to one half of
the merger consideration payable in the Company's common shares issued at a
value not less than $11.00 per share nor more than $13.00 per share. The general
partners would have received one half of their merger consideration in the form
of operating partnership units having economic rights comparable to the economic
rights attributable to the common shares of the Company and the other half in
the form of operating partnership units having economic rights comparable to the
economic rights attributable to the Convertible Subordinated Debentures.
E. Robert Roskind, the Company's Chairman and Co-Chief Executive
Officer, is also the controlling shareholder of the 1% general partner of each
of the Net Partnerships.
The merger is subject to approval by a majority in interest of the
Company's shareholders and the limited partners of the Net Partnerships, and to
customary closing conditions.
In addition, the Company announced its intention to sell 3.5 million
common shares.
ITEM 7. Financial Statements, Pro Forma Financial Information and Exhibits
(a) Not applicable
(b) Unaudited Pro forma Balance Sheet as of March 31, 2001
Unaudited Pro forma Income Statement for the Three Months Ended March
31, 2001
Unaudited Pro forma Income Statement for the Year Ended December 31,
2000
(c) Exhibits
99.1 Press release issued by the Company dated July 20, 2001
announcing the amendment of the agreement to merge Net 1 L.P. and
Net 2 L.P. with Net 3 Acquisition L.P., a Delaware limited
partnership and a wholly owned subsidiary of the Company.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
LEXINGTON CORPORATE PROPERTIES TRUST
Date: July 20, 2001 By: /s/ T. Wilson Eglin
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T. Wilson Eglin
President
EXHIBIT INDEX
Exhibit No. Exhibit
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99.1 Press release issued by the Company dated July 20, 2001
announcing the amendment of the agreement to merge Net 1 L.P. and
Net 2 L.P. with Net 3 Acquisition L.P., a Delaware limited
partnership and a wholly owned subsidiary of the Company.
PRO FORMA FINANCIAL INFORMATION
The accompanying unaudited pro forma consolidated balance sheet of
Lexington Corporate Properties Trust as of March 31, 2001 has been prepared from
the historical consolidated financial statements of Lexington, Net 1 L.P. and
Net 2 L.P., as adjusted to give effect to (i) Lexington's acquisition of Net 1
and Net 2 assuming that no limited partners select dissenter debentures and (ii)
the offering of 3.5 million common shares in a registered offering.
The accompanying unaudited pro forma statements of income of Lexington
for the year ended December 31, 2000 and the three months ended March 31, 2001
have been prepared as if Lexington's acquisition of Net 1 and Net 2 had been
consummated as of January 1, 2000, all 2001 and 2000 property purchases and
sales were consummated as of January 1, 2000 and the 3.5 million common share
offering occurred on January 1, 2000. The unaudited pro forma financial data
does not purport to be indicative of what the results of operations or financial
position of Lexington would have been had the merger, all other property
purchases and sales, and the common share offering been completed on the date
assumed, nor is such unaudited financial data necessarily indicative of the
results of operations of Lexington that may exist in the future. The unaudited
pro forma financial data must be read in conjunction with the Notes thereto and
with the historical Consolidated Financial Statements and the related Notes in
Lexington's Annual Report on Form 10-K for the year ended December 31, 2000 and
the Quarterly Report on Form 10-Q for the quarter ended March 31, 2001.
Lexington Corporate Properties Trust
Unaudited Pro Forma Income Statement
for the Three Months Ended March 31, 2001
All other Proforma Proforma
Lexington Net 1 Net 2 Transactions(i) Adjustments Adjusted
----------- ----------- ---------- ------------------------------ --------
(Dollar amounts in thousands, except per share data)
Revenues
Rental............................... $ 19,363 $ 1,706 $ 2,634 $ -- $ 24 (a) $ 23,727
Equity in earnings of
non-consolidated entities............ 610 -- -- 156 -- 766
Interest and other .................. 260 18 61 -- (63)(b) 276
----------- ----------- ---------- --------------- ------------- ------------
20,233 1,724 2,695 156 (39) 24,769
----------- ----------- ---------- --------------- ------------- ------------
Expenses
Interest expense..................... 7,632 407 1,134 -- (24)(c) 9,149
Depreciation and amortization of real
estate............................... 4,357 253 519 -- 44 (d) 5,173
Amortization of deferred expenses.... 348 -- 51 -- -- 399
General and administrative expenses.. 1,242 121 318 -- (39)(e) 1,642
Property operating expenses.......... 371 -- -- -- -- 371
----------- ----------- ---------- --------------- ------------- ------------
13,950 781 2,022 -- (19) 16,734
----------- ----------- ---------- --------------- ------------- ------------
Income before minority interests and
extraordinary item................... 6,283 943 673 156 (20) 8,035
Minority interests...................... 1,435 -- -- -- 17 (h) 1,452
----------- ----------- ---------- --------------- ------------- ------------
Income before extraordinary item........ 4,848 943 673 156 (37) 6,583
Extraordinary item...................... 270 -- -- -- -- 270
----------- ----------- ---------- --------------- ------------- ------------
Net income.............................. $ 4,578 $ 943 $ 673 $ 156 $ (37) $ 6,313
=========== =========== ========== =============== ============= ============
Income per common share - basic:
Income before extraordinary item..... $ 0.24 $ 0.26
Extraordinary item................... (0.01) (0.01)
----------- ------------
Net income........................... $ 0.23 $ 0.25
=========== ============
Weighted average common shares
outstanding ......................... 17,086,939 22,731,939
=========== ============
Income per common share - diluted:
Income before extraordinary item..... $ 0.24 $ 0.26
Extraordinary item................... (0.01) (0.01)
----------- ------------
Net income........................... $ 0.23 $ 0.25
=========== ============
Weighted average common shares
outstanding.......................... 22,961,096 28,110,429
=========== ============
Note
If limited partners elect to receive up to $20,000 in dissenter debentures then
net income would decrease by $425.
Lexington Corporate Properties Trust
Unaudited Pro Forma Income Statement
for the Year Ended December 31, 2000
All other Proforma Proforma
Lexington Net 1 Net 2 Transactions(i) Adjustments Adjusted
----------- ----------- ---------- ------------------------------ --------
(Dollar amounts in thousands, except per share data)
Revenues
Rental .......................... $ 76,824 $ 4,774 $ 10,126 $ 1,173 $ 96 (a) $ 92,993
Equity in earnings of 1,018
non-consolidated entities........ 1,851 -- -- -- 2,869
Interest and other .............. 1,330 163 541 -- (394)(b) 1,640
----------- ----------- ---------- --------------- ------------- ------------
80,005 4,937 10,667 2,191 (298) 97,502
----------- ----------- ---------- --------------- ------------- ------------
Expenses
Interest expense................. 29,581 1,605 4,785 772 (183)(c) 36,560
Depreciation and amortization of 245
real estate...................... 17,513 941 2,049 176 (d) 20,924
Amortization of deferred
expenses ........................ 1,497 -- 383 7 -- 1,887
General and administrative
expenses......................... 4,902 447 1,011 -- (91)(e) 6,269
Property operating expenses...... 1,504 -- -- -- -- 1,504
Transaction costs................ -- 400 400 -- (800)(f) --
----------- ----------- ---------- --------------- ------------- ------------
54,997 3,393 8,628 1,024 (898) 67,144
----------- ----------- ---------- --------------- ------------- ------------
Income before gain on sale of
properties and minority
interests ....................... 25,008 1,544 2,039 1,167 600 30,358
Gain on sale of properties ......... 2,959 -- -- (695) (2,264)(g) --
----------- ----------- ---------- --------------- ------------- ------------
Income before minority interests.... 27,967 1,544 2,039 472 (1,664) 30,358
Minority interests.................. 6,015 -- -- -- 39 (h) 6,054
----------- ----------- ---------- --------------- ------------- ------------
Net income.......................... $ 21,952 $ 1,544 $ 2,039 $ 472 $ (1,703) $ 24,304
=========== ========== ========== =============== ============= ============
Income per common share - basic:
Net income....................... $ 1.15 $ 0.96
=========== ============
Weighted average common shares
outstanding .................. 16,900,039 22,545,039
=========== ============
Income per common share - diluted:
Net income....................... $ 1.10 $ 0.96
=========== ============
Weighted average common shares
outstanding................... 24,714,219 22,711,845
=========== ============
Note
If limited partners elect to receive up to $20,000 in dissenter debentures then
net income would decrease by $1,700.
Notes to Unaudited Pro Forma Income Statement
For
the
For the Three
Year Months
ended Ended
12/31/00 3/31/01
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(a) Reflects straight line revenues relating to new
measurement date for the Net 1 and Net 2 property leases..... $ 96 $ 24
======= ======
(b) Reflects the following:
Elimination of acquisition fees earned by Lexington on
third party acquisitions made by Net 1 and Net 2............. $ (120) $ --
Elimination of asset management fees earned by
Lexington. In May 2000, Lepercq Corporate Income Fund,
L.P. purchased the entity that performed asset
management services for the Net Partnerships................. (91) (39)
Elimination of interest earned in inter-entity notes
payable/receivable........................................... (183) (24)
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$ (394) $ (63)
======= ======
(c) Elimination of interest expenses or inter-entity notes
payable/receivable........................................... (183) (24)
======= ======
(d) Depreciation expense on the merger consideration allocated to
the real estate assets of Net 1 and Net 2. The allocation of
the purchase price for pro forma purposes is based upon
Lexington management's best estimate of the relative fair
value of each asset acquired and liability assumed. This
estimate was determined based upon the familiarity with the
Net Partnerships and industry experience. Accordingly, for
such pro forma purposes 80% of the purchase price, in
excess of other identifiable assets, has been allocated to
real estate with a 40 year life and 20% to land. Upon
consummation of the merger allocations may
vary....................................................... $ 176 $ 44
======= ======
(e) Elimination of asset management fees paid by Net 1 & Net 2
since May 2000............................................... $ (91) $ (39)
======= ======
(f) Elimination of merger costs incurred by Net 1 and Net 2....... $ (800) $ --
======= ======
(g) Elimination of gains on sale of real estate for
transactions between Lexington and Net 1 and Net 2........... $(2,264) $ --
======= ======
(h) Impact on minority interest relating to the pro forma
adjustments.................................................. $ 39 $ 17
======= ======
(i) Represents the pro forma impact on each respective income
statement item for all 2001 and 2000 Lexington, Net 1 and
Net 2 purchases and sales of real estate.
Lexington Corporate Properties Trust
Unaudited Pro Forma
Balance Sheet as of March 31, 2001
Proforma Proforma
Lexington Net 1 Net 2 Adjustment Adjusted
--------- -------- -------- ------------- ----------
(Dollar amounts in thousands, except per share data)
Real estate, net ................................ $ 581,098 $ 43,601 $ 93,762 $ 8,790(a) $ 727,251
Cash and cash equivalents........................ 1,637 1,278 670 15,912(b) 19,497
Restricted cash ................................. 1,718 -- -- -- 1,718
Investment in non-consolidated entities ......... 47,428 -- -- -- 47,428
Other assets..................................... 40,711 1,647 2,800 (6,573)(c) 38,585
--------- -------- -------- ---------- ----------
Total assets ................................. $ 672,592 $ 46,526 $ 97,232 $ 18,129 $ 834,479
========= ======== ======== ========== ==========
Mortgages and notes payable ..................... $ 393,855 $ 20,220 $ 58,985 $ (1,353)(d) $ 471,707
Deferred installment obligations ................ 6,673 -- -- -- 6,673
Other liabilities ............................... 4,999 2,135 598 814(e) 8,546
--------- -------- -------- ------------- ----------
405,527 22,355 59,583 (539) 486,926
--------- -------- -------- ------------- ----------
Minority interest ............................... 62,031 -- -- 288(f) 62,319
--------- -------- -------- ------------- ----------
Mezzanine equity:
Preferred shares ............................. 24,369 -- -- -- 24,369
--------- -------- -------- ------------- ----------
Common shares ................................ 3,809 -- -- -- 3,809
--------- -------- -------- ------------- ----------
Partners' capital ............................... -- 24,171 37,649 (61,820)(g) --
Shareholders' equity:
Common shares ................................ 2 -- -- -- 2
Additional paid in capital ................... 244,537 -- -- 80,200(h) 324,737
Deferred compensation ........................ (2,061) -- -- -- (2,061)
Accumulated distribution in excess of
earnings..................................... (63,641) -- -- -- (63,641)
Notes receivable from officers/
shareholders ................................ (1,981) -- -- -- (1,981)
--------- -------- -------- ------------- ----------
Shareholders' equity/partners' capital........ 176,856 24,171 37,649 18,380 257,056
--------- -------- -------- ------------- ----------
$ 672,592 $ 46,526 $ 97,232 $ 18,129 $ 834,479
========= ======== ======== ========== ==========
Note
If limited partners in Net 1 and Net 2 elect to receive up to $20,000 of their
merger consideration in dissenter debentures the impact to mortgages and notes
payable and shareholders equity would be to increase mortgages and notes payable
and decrease shareholders' equity by $20,000.
Notes to Unaudited Pro Forma Balance Sheet
(a) Reflects the excess over historical cost basis of consideration paid by
Lexington for the real estate of Net 1 and Net 2 as determined as follows:
Merger consideration issued.......................................... $ 65,000
Mortgages assumed.................................................... 77,852
Merger costs......................................................... 2,010
Other liabilities assumed............................................ 2,577
---------
Purchase price.............................................. $ 147,439
Allocation
Identifiable other assets............................ (1,113)
Share issuance costs, contra equity.................. (2,010)
---------
Subtotal................. 144,316
Reclassification of Lexington investment in and
receivables from Net 1 and Net 2...................... 1,837
---------
Allocation to real estate, net....................... 146,153
Historical Net Partnership real estate basis......... (137,363)
---------
$ 8,790
=========
(b) Reflects the following:
The payment of costs incurred by the Net 1 and Net 2 associated with the
mergers ............................................................. $ (1,948)
Cash proceeds from common share issuance, net of underwriters discount
and estimated offering costs......................................... 50,035
Cash paid to the limited partners of Net 1 and Net 2....................... (32,175)
---------
$ 15,912
=========
(c) Reflects the following:
Elimination of inter-entity notes receivable and accrued interest.......... $ (1,353)
Elimination of Lexington basis in its investments in limited partner units
of Net 1 and Net 2................................................... (328)
Elimination of capitalized merger costs paid by Lexington.................. (1,040)
Elimination of accounts receivable - straight line rents for Net 1 and
Net 2 property leases................................................ (2,421)
Elimination of inter-entity accounts receivable............................ (156)
Elimination of Lexington percentage ownership in the Net 1 and Net 2 asset
management contracts................................................. (362)
Elimination of capitalized financing costs of Net 1 and Net 2.............. (913)
---------
$ (6,573)
=========
(d) Elimination of inter-entity notes payable and accrued interest............. $ (1,353)
=========
(e) Reflects the following:
Elimination of inter-entity accounts payable............................... $ (156)
Estimated merger costs to be paid by Lexington............................. 970
---------
$ 814
=========
(f) Reflects the following:
Issuance of 43,333 limited partnership units in Net 3, assuming a $15 per
Unit price, in exchange for the general partnership interests in
Net 1 and Net 2...................................................... $ 650
Elimination of Lexington percentage ownership in the Net 1 and Net 2 asset
management contracts................................................. (362)
---------
$ 288
=========
(g) Reflects the elimination of Net 1 and Net 2 partners' capital.............. $ (61,820)
=========
(h) Reflects the following:
The issuance of 2,145,000 common shares, assuming a $15 per share price,
associated with the merger net of offering costs to be paid by
Lexington of $2,010.................................................. $ 30,165
The issuance of 3,500,000 common shares at $15.19 per share price, less
underwriters discount and estimated offering costs........................ 50,035
---------
$ 80,200
=========
Lexington Corporate Properties Trust
Unaudited Pro Forma Income Statement
for the Year Ended December 31, 2000
and the Three Months Ended March 31, 2001
Earnings Per Share Calculations
The following is a reconciliation of numerators and denominators of the pro
forma basic and diluted earnings per share computations for each of the periods
presented ($000's except per share data):
12/31/00 3/31/01
-------- -------
BASIC
Income before extraordinary item ................... $ 24,304 $ 6,583
Less preferred dividends ........................... (2,562) (672)
----------- -----------
Income attributed to common shareholders before
extraordinary item............................... 21,742 5,911
Extraordinary item ................................. -- (270)
----------- -----------
Net income attributed to common shareholders ....... $ 21,742 5,641
=========== ===========
Weighted average number of common shares
outstanding - historical ........................ 6,900,039 17,086,939
Issued in merger ................................... 2,145,000 2,145,000
Common shares issued in offering. .................. 3,500,000 3,500,000
----------- -----------
Weighted average number of common shares used in
calculation of basic earnings per common share .. 22,545,039 22,731,939
=========== ===========
Income per common share - basic:
Income before extraordinary item ................ $ 0.96 $ 0.26
Extraordinary item .............................. -- (0.01)
----------- -----------
Net income ...................................... $ 0.96 $ 0.25
=========== ===========
DILUTED
Income attributable to common shareholders before
extraordinary item .............................. $ 21,742 $ 5,911
Add incremental income attributed to assumed
conversion of dilutive securities ............... -- 1,363
Extraordinary item ................................. -- (270)
Net income attributed to common shareholders ....... $ 21,742 $ 6,289
=========== ===========
Weighted average number of common shares used in
calculation of basic earnings per common share .. 22,545,039 22,731,939
Add incremental shares representing:
Shares issuable upon exercise of employee share
options ....................................... 166,806 241,864
Shares issuable upon conversion of dilutive
securities .................................... -- 5,675,626
Weighted average number of common shares used in ----------- -----------
calculation of diluted earnings per common
share............................................ 22,711,845 28,110,429
=========== ===========
Income per common share - diluted:
Income before extraordinary item ................ $ 0.96 $ 0.26
Extraordinary item .............................. -- (0.01)
----------- -----------
Net income ...................................... $ 0.96 $ 0.25
=========== ===========