- -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 ------------------------ FORM 10-K (Mark One) [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED] FOR THE FISCAL YEAR ENDED DECEMBER 31, 2002 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED] FOR THE TRANSITION PERIOD FROM TO COMMISSION FILE NUMBER 1-12386 LEXINGTON CORPORATE PROPERTIES TRUST (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) <Table> <S> <C> MARYLAND 13-3717318 (STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.) 355 LEXINGTON AVENUE NEW YORK, NY 10017 (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE) REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (212) 692-7260 SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: TITLE OF EACH CLASS - ---------------------------------------------- NAME OF EACH EXCHANGE ON WHICH REGISTERED ---------------------------------------------- COMMON SHARES, PAR VALUE $.0001 NEW YORK STOCK EXCHANGE </Table> SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: NONE Indicate by check mark whether the Registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (sec.229.405 of this chapter) is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X] Indicate by check mark whether the Registrant is an accelerated filer (as defined by Rule 12b-2 of the Act). Yes [X] No [ ] The aggregate market value of the voting shares held by non-affiliates of the Registrant as of June 28, 2002, which was the last business day of the Registrant's most recently completed second fiscal quarter, was $426,103,046, based on the closing price of common shares as of that date, which was $16.50 per share. Number of common shares outstanding as of March 20, 2003 was 30,438,278. DOCUMENTS INCORPORATED BY REFERENCE: The Definitive Proxy Statement for Registrant's 2003 Annual Meeting of Shareholders is incorporated herein by reference into Part III. - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
PART I. CAUTIONARY STATEMENTS CONCERNING FORWARD-LOOKING STATEMENTS Certain information included or incorporated by reference in this Annual Report on Form 10-K may contain forward-looking statements within the meaning of Section 27A of the Securities Act, and as such may involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements to be materially different from future results, performance or achievements expressed or implied by these forward-looking statements. Forward-looking statements, which are based on certain assumptions and describe our future plans, strategies and expectations, are generally identifiable by use of the words "may," "will," "should," "expect," "anticipate," "estimate," "believe," "intend," "project," or the negative of these words or other similar words or terms. Factors which could have a material adverse effect on our operations and future prospects include, but are not limited to, changes in economic conditions generally and the real estate market specifically, adverse developments with respect to our tenants, legislative/regulatory changes including changes to laws governing the taxation of REITs, availability of debt and equity capital, interest rates, competition, supply and demand for properties in our current and proposed market areas and policies and guidelines applicable to REITs. These risks and uncertainties should be considered in evaluating any forward-looking statements contained or incorporated by reference in this Annual Report on Form 10-K. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. In light of these risks, uncertainties and assumptions, the forward-looking events discussed or incorporated by reference in this Annual Report on Form 10-K may not occur and our actual results could differ materially from those anticipated or implied in the forward-looking statements. ITEM 1. BUSINESS GENERAL Lexington Corporate Properties Trust (the "Company") is a self-managed and self-administered real estate investment trust that acquires, owns and manages a geographically diverse portfolio of net leased office, industrial and retail properties and provides investment advisory and asset management services to institutional investors in the net lease area. The Company's predecessor was organized in October 1993 and merged into the Company on December 31, 1997. The Company's Internet address is www.lxp.com. The Company makes available free of charge through its web site its annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to these reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after it electronically files such materials with the Securities and Exchange Commission. As of December 31, 2002, the Company's real property portfolio consisted of 103 properties or interests therein located in thirty states and Canada, including warehousing, distribution and manufacturing facilities, office buildings and retail properties containing an aggregate 19.6 million net rentable square feet of space. In addition, Lexington Realty Advisors, Inc. ("LRA") manages 2 properties for a third party. The Company's properties are generally subject to triple net leases, which are characterized as leases in which the tenant bears all, or substantially all, of the costs and cost increases for real estate taxes, insurance and ordinary maintenance. Of the Company's 103 properties, four provide for operating expense stops, one is subject to a modified gross lease and one requires the Company to be responsible for real estate taxes in 2003 and for the tenant to be responsible thereafter. As of December 31, 2002, 99.2% of net rentable square feet were subject to a lease. 1
The Company manages its real estate and credit risk through geographic, industry, tenant and lease maturity diversification. As of December 31, 2002, the ten largest tenants/guarantors, which occupy 24 properties, represented 40.7% of trailing twelve month rent, including the Company's proportionate share of non-consolidated investments and rental revenue from properties sold through date of sale. <Table> <Caption> NUMBER OF TENANT (GUARANTOR) PROPERTIES PROPERTY TYPE - ------------------ ---------- --------------------- <S> <C> <C> Kmart Corporation................................... 1 Industrial Northwest Pipeline Corp............................. 1 Office Exel Logistics, Inc. (NFC plc)...................... 4 Industrial Honeywell, Inc...................................... 3 Office Circuit City Stores, Inc............................ 4 Office (1)/Retail (3) Vartec Telecom, Inc................................. 1 Office Owens Corning....................................... 3 Industrial Bally Total Fitness Corp............................ 5 Retail Aventis Pharmaceuticals, Inc........................ 1 Office Blue Cross Blue Shield of South Carolina Inc........ 1 Office --- 24 === </Table> Kmart Corporation ("Kmart"), the Company's largest tenant based upon rental revenues, filed for Chapter 11 bankruptcy protection on January 22, 2002. Kmart leases a 1.7 million square foot distribution facility in Warren, Ohio. The Company acquired the property in 1998 by assuming a non-recourse mortgage of $42.2 million, issuing operating partnership units of $18.9 million and paying $2.8 million in cash. The Company has no retail properties leased to Kmart. The Kmart lease expires on September 30, 2007. Annual net rents are presently $9.4 million. Rents are paid semi-annually in arrears. The property is encumbered by a non-recourse first mortgage, bearing imputed interest at 7% per annum with an outstanding balance of $25.6 million at December 31, 2002. Annual debt service on this non-recourse mortgage, which fully amortizes by maturity on October 1, 2007, is $6.2 million. Accordingly, this property currently provides an annual after debt service cash flow to the Company of $3.2 million. As of December 31, 2002 the Company had $7.3 million in accounts receivable from Kmart (including $2.0 million in straight-line rental revenue in excess of cash rents collected and $2.6 million in pre-petition rent). Kmart is current in its rental obligation to the Company since filing for bankruptcy and the next rental payment is due April 1, 2003. As of December 31, 2001 and 2000 the ten largest tenants/guarantors represented 47.0% and 51.4% of trailing twelve month rent, respectively, including the Company's proportionate share of non-consolidated investments and rental revenue from properties sold through date of sale. In 2002, no tenant represented greater than 10% of rental income. In 2001 and 2000 Northwest Pipeline Corp. and Kmart Corporation each represented 11% of rental income. OBJECTIVES AND STRATEGY The Company's primary objectives are to increase Funds From Operations, cash available for distribution per share to its shareholders, and net asset value per share. In an effort to achieve these objectives management focuses on: - effectively managing assets through lease extensions, revenue enhancing property expansions, opportunistic property sales and redeployment of assets, when advisable; - entering into strategic co-investment programs which generate higher equity returns than direct investments due to acquisition, asset management and debt placement fees and in some cases increased leverage levels; - entering into third party advisory contracts to generate advisory fee revenue; 2
- acquiring portfolios and individual net lease properties from third parties, completing sale/leaseback transactions, acquiring build-to-suit properties and opportunistically using common shares and operating partnership units to effect acquisitions; - refinancing existing indebtedness at lower average interest rates and increasing the Company's access to capital to finance property acquisitions and expansions; and - repurchasing common shares and operating partnership units when they trade at a discount to net asset value. Internal Growth; Effectively Managing Assets Tenant Relations and Lease Compliance. The Company maintains close contact with its tenants in order to understand their future real estate needs. The Company monitors the financial, property maintenance and other lease obligations of its tenants through a variety of means, including periodic reviews of financial statements and physical inspections of the properties. The Company performs annual inspections of those properties where it has an ongoing obligation with respect to the maintenance of the property and for all properties during each of the last three years immediately prior to a scheduled lease expiration. Biannual physical inspections are undertaken for all other properties. Extending Lease Maturities. The Company seeks to extend its leases in advance of their expiration in order to maintain a balanced lease rollover schedule and high occupancy levels. Since February 1994, the Company has entered into lease extensions of three years or more on 24 of its properties. During 2002, the Company entered into 4 lease extensions for properties with leases scheduled to expire in 2002 (two leases), 2010 (one) and 2013 (one) for an average of 6.1 years and a 3.6% increase over the then average rental revenues. As of December 31, 2002, the scheduled lease maturities for each of the next five years are as follows: <Table> <Caption> NUMBER 2002 % OF YEAR ENDED OF SQUARE REVENUE 2002 DECEMBER 31, LEASES FOOTAGE ($000'S) REVENUE - ------------ --------- --------- ------------- ------- <S> <C> <C> <C> <C> 2003.................................... 1 179,280 $ 1,900 1.9% 2004.................................... 1 27,360 337 0.3 2005.................................... 7 956,408 7,311 7.3 2006.................................... 14 1,961,907 12,239 12.2 2007.................................... 11 2,602,614 18,057 17.9 -- --------- ------- ---- 34 5,727,569 $39,844 39.6% == ========= ======= ==== </Table> Revenue Enhancing Property Expansions. The Company undertakes expansions of its properties based on tenant requirements. The Company believes that selective property expansions can provide it with attractive rates of return and actively seeks such opportunities. During 2002, the Company expanded its property in Lancaster, California net leased to Michaels Stores, Inc. The expansion, which cost $15.2 million is leased to the tenant through September 2019 at annual rent of $1.8 million. In addition, the lease on the existing building, which was scheduled to expire in June 2013, has been extended so that it is co-terminus with lease on the expansion. Acquisition Strategies The Company seeks to enhance its net lease property portfolio through acquisitions of general purpose, efficient, well-located properties in growing markets. Management has diversified the Company's portfolio by geographical location, tenant industry segment, lease term expiration and property type. Management believes that such diversification should help insulate the Company from regional recession, industry specific downturns and price fluctuations by property type. Prior to effecting any acquisitions, management analyzes the (i) property's design, construction quality, efficiency, functionality and location with respect to the immediate sub-market, city and region; (ii) lease integrity with respect to term, rental rate increases, 3
corporate guarantees and property maintenance provisions; (iii) present and anticipated conditions in the local real estate market; and (iv) prospects for selling or re-leasing the property on favorable terms in the event of a vacancy. Management also evaluates each potential tenant's financial strength, growth prospects, competitive position within its respective industry and a property's strategic location and function within a tenant's operations or distribution systems. Management believes that its comprehensive underwriting process is critical to the assessment of long-term profitability of any investment by the Company. Operating Partnership Structure. The operating partnership structure enables the Company to acquire properties by issuing to a seller, as a form of consideration, interests in the Company's operating partnerships ("OP Units"). Management believes that this structure facilitates the Company's ability to raise capital and to acquire portfolio and individual properties by enabling the Company to structure transactions which may defer tax gains for a contributor of property while preserving the Company's available cash for other purposes, including the payment of dividends and distributions. The Company has used OP Units as a form of consideration in connection with the acquisition of 22 properties. Acquisitions of Portfolio and Individual Net Lease Properties. The Company seeks to acquire portfolio and individual properties that are leased to creditworthy tenants under long-term net leases. Management believes there is significantly less competition for the acquisition of property portfolios containing a number of net leased properties located in more than one geographic region. Management also believes that the Company's geographical diversification, acquisition experience and access to capital will allow it to compete effectively for the acquisition of such net leased properties. Joint Venture Co-Investments. In 1999, the Company entered into a joint venture agreement with The Comptroller of the State of New York as Trustee of the Common Retirement Fund ("CRF"). The joint venture entity, Lexington Acquiport Company, LLC ("LAC"), acquires high quality office and industrial real estate properties net leased to investment and non-investment grade single tenant users. The Company and CRF committed to make equity contributions to LAC of up to $50 million and $100 million, respectively, of which $127.6 million has been funded as of December 31, 2002. In addition, LAC finances a portion of acquisition costs through the use of non-recourse mortgages. During 2002, LAC made two acquisitions, for $46.0 million (including closing costs), of which $30.2 million was funded through non-recourse mortgages, maturing in 2012. As of December 31, 2002, LAC had ownership interest in 9 properties. The property leases, which expire at various dates ranging from 2009 to 2012, provide for current annual net cash rent of approximately $29.7 million. LAC also has an investment, an $11.0 million participating note, which was used to partially fund the purchase of a 327,325 square foot office property in Texas for $34.8 million. As of December 31, 2002, LAC has made investments totaling $330.8 million. LRA has a management agreement with LAC whereby LRA will perform certain services for a fee relating to the acquisition (75 basis points of cost) and management (200 basis points of rent collected annually) of the LAC investments. During 2002 and 2001, LRA earned asset management fees of $0.7 million and $0.6 million relating to this management agreement. In 2002, LRA earned $0.2 million in acquisition fees. In December 2001, the Company and CRF announced the formation of Lexington Acquiport Company II, LLC. The Company and CRF have committed to fund an additional $50 million and $150 million, respectively, to purchase up to $560 million in single tenant net lease office and industrial properties. LRA, in addition to earning fees as discussed above, earns 50 basis points for all mortgage debt directly placed. No investments have been made under this program. In 1999, the Company also formed a joint venture to own a property net leased to Blue Cross Blue Shield of South Carolina. The Company has a 40% interest in the joint venture and LRA entered into a management agreement with similar terms as the management agreement with LAC. During each of 2002 and 2001, LRA earned fees of $0.1 million relating to this management contract. In January 2002, the Company sold a 77.3% interest in its Florence, South Carolina ("Florence") property net leased to Washington Mutual Home Loans, Inc., along with the proportionate share of mortgage debt for $4.6 million in proceeds. The third party purchasers have the right for six months commencing 24 months after the sale to put their interest back to the Company for operating partnership units in LCIF, 4
valued at $4.6 million. The number of operating partnership units issued will be based upon 95% of the average closing price of the Company's common shares for the 20 trading days preceding conversion date with a minimum conversion price of $13.92 and maximum conversion price of $15.82 per operating partnership unit. The operating partnership units will have the same distribution rate as the common shares. LRA provides management services to Florence for a fee of 3.5% of rents and earned $0.1 million in 2002. Advisory Contracts. In 2000 LRA entered into an advisory and asset management agreement to invest and manage $50 million of equity on behalf of a private investment fund. The investment program could, depending on leverage utilized, acquire up to $140 million in single tenant, net leased office, industrial and retail properties in the United States. LRA earns acquisition fees (90 basis points of total acquisition costs), annual asset management fees (30 basis points of gross asset value) and a promoted interest of 16% of the return in excess of an internal rate of return of 10% earned by the private investment fund. The fund made no purchases in 2002 and LRA earned $0.1 million in asset management fees. During 2001 this fund purchased $25.4 million in properties, and LRA earned $0.3 million in acquisition and asset management fees. Sale/Leaseback Transactions. The Company seeks to acquire portfolio and individual net lease properties in sale/leaseback transactions. The Company selectively pursues sale/leaseback transactions with creditworthy sellers/tenants with respect to properties that are integral to the sellers'/tenants' ongoing operations. Build-to-Suit Properties. The Company also acquires, after construction has been completed, "build-to-suit" properties that are entirely pre-leased to their intended corporate users before construction. As a result, the Company does not assume the risk associated with the construction phase of a project. Lexington Realty Advisors, Inc. In addition to its management and advisory business, LRA acquires properties for its own account with the intent to sell them when market conditions warrant. During 2002 and 2001 LRA purchased one property and two properties, respectively, for $2.9 million and $31.5 million, respectively. Although the intent of LRA is to sell its properties when an appropriate offer is received, LRA only acquires net leased properties that it believes will meet its current and total return requirements if held for the long-term. LRA has not sold any properties purchased. See Note 5 of the Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K for additional information regarding LRA. Competition. Through our predecessor entities the Company has been in the net lease business for 29 years and has established close relationships with a large number of major corporate tenants and maintains a broad network of contacts including developers, brokers and lenders. In addition, management is associated with and/or participates in many industry organizations. Notwithstanding these relationships, there are numerous commercial developers, real estate companies, financial institutions and other investors with greater financial resources, that compete with the Company in seeking properties for acquisition and tenants who will lease space in these properties. Due to the Company's focus on net lease properties located throughout the United States, the Company does not encounter the same competitors in each region of the United States since most competitors are locally and/or regionally focused. The Company's competitors include other REITs, pension funds, private companies and individuals. Environmental Matters. Under various federal, state and local environmental laws, statutes, ordinances, rules and regulations, an owner of real property may be liable for the costs of removal or redemption of certain hazardous or toxic substances at, on, in or under such property as well as certain other potential costs relating to hazardous or toxic substances. These liabilities may include government fines and penalties and damages for injuries to persons and adjacent property. Such laws often impose liability without regard to whether the owner knew of, or was responsible for, the presence or disposal of such substances. Although the Company's tenants are primarily responsible for any environmental damage and claims related to the leased premises, in the event of the bankruptcy or inability of the tenant of such premises to satisfy any obligations with respect to such environmental liability, the Company may be required to satisfy such obligations. In addition, the Company as the owner of such properties may be held directly liable for any such damages or claims irrespective of the provisions of any lease. 5
From time to time, in connection with the conduct of the Company's business, and prior to the acquisition of any property from a third party or as required by the Company's financing sources, the Company authorizes the preparation of Phase I environmental reports with respect to its properties. Based upon such environmental reports and management's ongoing review of its properties, as of the date of this Annual Report, management is not aware of any environmental condition with respect to any of the Company's properties which management believes would be reasonably likely to have a material adverse effect on the Company. There can be no assurance, however, that (i) the discovery of environmental conditions, the existence or severity of which were previously unknown, (ii) changes in law, (iii) the conduct of tenants or (iv) activities relating to properties in the vicinity of the Company's properties, will not expose the Company to material liability in the future. Changes in laws increasing the potential liability for environmental conditions existing on properties or increasing the restrictions on discharges or other conditions may result in significant unanticipated expenditures or may otherwise adversely affect the operations of the Company's tenants, which would adversely affect the Company's financial condition and results of operations, including funds from operations. Access to Capital and Refinancing Existing Indebtedness During 2002, the Company completed a 2.7 million common share offering at $15.85 per share raising $40.5 million of net proceeds. The proceeds were used to repay debt and fund acquisitions. As a result of the Company's financing activities, the weighted average interest rate on the Company's outstanding indebtedness has been reduced from approximately 7.83% as of December 31, 2000 to approximately 6.95% as of December 31, 2002. Scheduled balloon payments (excluding amounts owed under corporate level debt agreements which total $31.0 million due in 2004 and $12.5 million due in 2007) over the next five years are as follows ($000's): <Table> <Caption> WEIGHTED AVERAGE BALLOON AMOUNTS INTEREST RATE --------------- ------------- <S> <C> <C> 2003..................................................... $ -- -- 2004..................................................... 14,356 4.41% 2005..................................................... 76,558 7.18% 2006..................................................... -- -- 2007..................................................... -- -- ------- ---- $90,914 6.74% ======= ==== </Table> During 2002, the Company, including its non-consolidated entities, obtained $79.4 million in non-recourse mortgage financings on properties at a fixed weighted average interest rate of 6.36%. The proceeds of the financings were used to partially fund acquisitions. The Company's variable rate unsecured credit facility bears interest at 150-250 basis points over the Company's option of 1, 3 or 6 month LIBOR, depending on the amount of properties the Company owns free and clear of mortgage debt, and is scheduled to mature in March 2004. As of December 31, 2002, $31.0 million outstanding under this facility bore interest at a rate of 3.20%. Common Share Repurchase. The Company's Board of Trustees authorized the repurchase of up to 2.0 million common shares and/or operating partnership units. As of December 31, 2002, the Company has repurchased approximately 1.4 million common shares/units at an average price of $10.55 per share/unit. The Company did not repurchase any common shares or units in 2002. Employees. As of December 31, 2002, the Company had thirty employees. Industry Segments. The Company operates in one industry segment, investment in single tenant, net leased real properties. 6
ITEM 2. PROPERTIES Real Estate Portfolio As of December 31, 2002, the Company owned or had interests in approximately 19.6 million square feet of rentable space in 103 office, industrial and retail properties. As of December 31, 2002, the Company's properties were 99.2% leased based upon net rentable square feet. As of December 31, 2002, the number, percentage of trailing 12 month rental revenue (including rental revenue from properties sold through date of sale and the Company's proportionate share of non-consolidated entities) and square footage mix of the Company's portfolio is as follows: <Table> <Caption> SQUARE NUMBER RENT FOOTAGE ------ ------- ------- <S> <C> <C> <C> Office...................................................... 39 55.6% 33.0% Industrial.................................................. 35 32.4% 57.3% Retail...................................................... 29 12.0% 9.7% --- ----- ----- 103 100.0% 100.0% === ===== ===== </Table> The Company's properties are generally subject to triple net leases; however, in certain leases the Company is responsible for roof and structural repairs. In such situations the Company performs annual inspections of the properties. Two of the Company's properties in Florida (Palm Beach Gardens and Lake Mary), one in Fishers, Indiana, one in Valley Forge, Pennsylvania and one in Fort Mill, South Carolina are subject to leases in which the landlord is responsible for a portion of the real estate taxes, utilities and general maintenance. In addition, the Company is responsible for real estate taxes for its property in Westmont, Illinois for 2003 and the tenant is responsible thereafter. The Lake Mary and Fishers properties are owned by LAC. The Company is responsible for all operating expenses of any vacant properties. The Company's tenants represent a variety of industries including general retailing, finance and insurance, energy, transportation and logistics, technology, telecommunications and defense. For the year ended December 31, 2002 revenues, including revenues earned by non-consolidated entities and rental revenue recognized on properties sold through date of sale, were earned from 73 tenants in 20 different industries. Tenant Leases. A substantial portion of the Company's income consists of base rent under long-term leases. As of December 31, 2002, the weighted average remaining term under the Company's leases is approximately 7.1 years. Of the 103 current leases, 62 contain scheduled rent increases, 7 contain an increase based upon the Consumer Price Index, 3 contain fixed step down provisions, 31 are flat throughout the remaining lease term and 3 retail leases (which also are flat throughout the remaining lease term) contain a percentage rent clause. Ground Leases. The Company has 9 properties accounting for $15.2 million of rental revenue that are subject to long term ground leases where a third party owns and has leased the underlying land to the Company. In each of these situations the rental payments made to the landowner are passed on to the Company's tenant. At the end of these long-term ground leases, unless extended, the land together with all improvements thereon revert to the landowner. These ground leases, including renewal options, expire at various dates from 2028 through 2072. 7
The contractual rents due under these ground leases for each of the next five years and thereafter (excluding renewal options) is as follows: <Table> <Caption> RENTAL YEAR ENDING PAYMENTS DECEMBER 31, ($000'S) - ------------ -------- <S> <C> 2003........................................................ $ 898 2004........................................................ 898 2005........................................................ 898 2006........................................................ 898 2007........................................................ 898 Thereafter.................................................. 8,071 ------- $12,561 ======= </Table> TABLE REGARDING REAL ESTATE HOLDINGS The table on the following pages sets forth certain information relating to the Company's real property portfolio, including non-consolidated properties, as of December 31, 2002. All the properties listed have been fully leased by tenants for the last five years, or since the date of purchase by the Company or its non-consolidated entities if less than five years, with the exception of the Memphis, Tennessee and Columbia, Maryland properties. During the last five years the Memphis property was not leased from February 1998 to October 1999 and the Columbia, Maryland property has not been leased since September 2001, however, a lease for 17,100 square feet out of a total of 65,200 square feet has been executed on this property effective April 1, 2003. ($000's except per square foot data). 8
LEXINGTON CORPORATE PROPERTIES TRUST PROPERTY CHART <Table> <Caption> NET YEAR LAND RENTABLE BASE LEASE TERM AND TENANT CONSTRUCTED/ AREA SQUARE ANNUAL RENTS PER NET PROPERTY LOCATION (GUARANTOR) REDEVELOPED (ACRES) FEET RENTABLE SQUARE FOOT - ----------------- --------------------------- ------------ -------- ---------- ---------------------------- <S> <C> <C> <C> <C> <C> OFFICE 3615 North 27th Avenue Bank One, Arizona, N.A. 1960 & 1979 10.26 179,280 11/30/88 - 11/30/03 Phoenix, AZ 12/01/98 - 11/30/03: $10.60 183 Plains Road IKON Office Solutions, Inc. 1994 3.01 27,360 12/23/94 - 12/31/04 Milford, CT 01/01/00 - 12/31/04: $12.31 13430 N. Black Canyon Freeway Bull HN Information 1985 & 1994 13.37 137,058 10/11/94 - 10/10/05 Phoenix, AZ Systems, Inc. 10/11/02 - 10/10/03: $8.10 10/11/03 - 10/10/04: $8.30 10/11/04 - 10/10/05: $8.50 1301 California Circle Artesyn North America, Inc. 1985 6.34 100,026 12/10/85 - 12/09/05 Milpitas, CA (Balfour Beatty plc.) 12/01/00 - 05/31/03: $25.56 06/01/03 - 12/09/05: $28.92 200 Executive Boulevard South Hartford Fire Insurance Co. 1983 12.40 153,364 09/01/91 - 12/31/05 Southington, CT 01/01/95 - 12/31/05: $14.12 19019 No. 59th Avenue Honeywell, Inc. 1985 51.79 252,300 07/16/86 - 07/15/06 Glendale, AZ 07/16/01 - 07/15/06: $8.00 401 Elm Street Lockheed Martin Corporation 1960 & 1988 36.94 126,000 07/22/97 - 12/17/06 Marlborough, MA (Honeywell, Inc.) 12/18/01 - 12/17/06: $14.84 75% of cumulative increase in CPI 12000 Tech Center Drive Kelsey-Hayes Company 1987 & 1988 5.72 80,230 05/01/97 - 04/30/07 Livonia, MI 05/01/02 - 04/30/05: $8.75 05/01/05 - 04/30/07: $9.25 2300 Litton Lane Fidelity Corporate 1987 24.00 81,744 07/01/96 - 04/30/07 Hebron, KY Real Estate, LLC (2) 05/01/02 - 04/30/07: $11.00 2211 South 47th Street Avnet, Inc. 1997 11.33 176,402 11/15/97 - 11/14/07 Phoenix, AZ 11/15/00 - 11/14/03: $13.24 11/15/03 - 11/14/06: $14.47 11/15/06 - 11/14/07: $15.81 <Caption> 2003 2003 (E) MINIMUM STRAIGHT-LINE ESTIMATED CASH RENTAL REAL ESTATE TENANT RENT REVENUE TAXES PROPERTY LOCATION RENEWAL OPTIONS ($000) ($000) ($000) (12) - ----------------- -------------------------------- ------- ------------- ----------- <S> <C> <C> <C> <C> OFFICE 3615 North 27th Avenue 12/01/03 - 11/30/08: FMV $1,742 $ 1,742 $ 241 Phoenix, AZ 183 Plains Road 01/01/05 - 12/31/09: $13.54 $ 337 $ 337 $ 44 Milford, CT 13430 N. Black Canyon Freeway None $1,077 $ 1,086 $ 283 Phoenix, AZ 1301 California Circle 12/10/05 - 12/09/10: FMV $2,756 $ 2,548 $ 135 Milpitas, CA 12/10/10 - 12/09/15: FMV 12/10/15 - 12/09/20: FMV 12/10/20 - 12/09/25: FMV 12/10/25 - 12/09/30: FMV 12/10/30 - 12/09/35: FMV 12/10/35 - 12/09/40: FMV 12/10/40 - 12/09/45: FMV 12/10/45 - 12/09/50: FMV 200 Executive Boulevard South 01/01/06 - 12/31/11: FMV $2,166 $ 2,158 $ 326 Southington, CT 19019 No. 59th Avenue 07/16/06 - 07/15/11: FMV $2,002 $ 1,995 $ 405 Glendale, AZ 07/16/11 - 07/15/16: FMV 401 Elm Street 12/18/06 - 12/17/11: $1,870 $ 1,870 $ 147 Marlborough, MA 12/18/11 - 12/17/16: 12/18/16 - 12/17/21: 12/18/21 - 12/17/26: 12/18/26 - 12/17/31: 12/18/31 - 12/17/36: Rent for each renewal term is equal to prior term's rent plus 75% of increase in CPI 12000 Tech Center Drive 05/01/07 - 04/30/12: FMV $ 702 $ 679 $ 95 Livonia, MI 05/01/12 - 04/30/17: FMV 2300 Litton Lane 05/01/07 - 04/30/12: $12.65 $ 899 $ 965 $ 80 Hebron, KY 05/01/12 - 04/30/17: $15.18 2211 South 47th Street 11/15/07 - 11/14/12: 95% of FMV $2,362 $ 2,468 $ 9 Phoenix, AZ 11/15/12 - 11/14/16: 95% of FMV </Table> 9
<Table> <Caption> LEXINGTON CORPORATE PROPERTIES TRUST PROPERTY CHART NET YEAR LAND RENTABLE BASE LEASE TERM AND TENANT CONSTRUCTED/ AREA SQUARE ANNUAL RENTS PER NET PROPERTY LOCATION (GUARANTOR) REDEVELOPED (ACRES) FEET RENTABLE SQUARE FOOT - ----------------- --------------------------- ------------ -------- ---------- ---------------------------- <S> <C> <C> <C> <C> <C> 160 Clairemont Avenue Allied Holdings, Inc. 1983 2.98 112,248 01/01/98 - 12/31/07 Decatur, GA 01/01/03 - 12/31/03: $13.77 01/01/04 - 12/31/04: $14.15 01/01/05 - 12/31/05: $14.54 01/01/06 - 12/31/06: $14.94 01/01/07 - 12/31/07: $15.35 13651 McLearen Road Boeing North American 1987 10.39 159,664 05/31/99 - 05/30/08 Herndon, VA Services, Inc. 05/31/02 - 05/30/03: $15.89 05/31/03 - 05/30/04: $16.28 05/31/04 - 05/30/05: $16.69 05/31/05 - 05/30/06: $17.11 05/31/06 - 05/30/07: $17.54 05/31/07 - 05/30/08: $17.98 9275 SW Peyton Lane Hollywood Entertainment 1980 & 1998 8.72 122,853 09/29/98 - 11/30/08 Wilsonville, OR Corporation 02/01/02 - 12/31/05: $11.95 01/01/06 - 11/30/08: $13.25 295 Chipeta Way Northwest Pipeline Corp. 1982 19.79 295,000 10/01/82 - 09/30/09 Salt Lake City, UT (1) 10/01/97 - 09/30/05: $29.06 10/01/05 - 09/30/09: $20.74 subject to a CPI adjustment on a portion of the rent 400 Butler Farm Road Nextel Communications of 1999 14.34 100,632 03/20/00 - 12/31/09 Hampton, VA the Mid-Atlantic, Inc. 01/01/03 - 12/31/03: $12.31 01/01/04 - 12/31/04: $12.56 01/01/05 - 12/31/05: $12.81 01/01/06 - 12/31/06: $13.07 01/01/07 - 12/31/07: $13.33 01/01/08 - 12/31/08: $13.60 01/01/09 - 12/31/09: $13.87 16275 Technology Drive Cymer, Inc. 1989 2.73 65,755 06/01/96 - 01/01/10 San Diego, CA (Hewlett Packard) 06/01/01 - 05/31/03: $12.42 06/01/03 - 05/31/05: $13.04 06/01/05 - 05/31/07: $13.69 06/01/07 - 01/01/10: $14.37 421 Butler Farm Road Nextel Communications of 2000 7.81 56,515 01/15/00 - 01/14/10 Hampton, VA the Mid-Atlantic, Inc. 01/15/02 - 01/14/03: $12.07 01/15/03 - 01/14/04: $12.31 01/15/04 - 01/14/05: $12.56 01/15/05 - 01/14/06: $12.81 01/15/06 - 01/14/07: $13.07 01/15/07 - 01/14/08: $13.33 01/15/08 - 01/14/09: $13.60 01/15/09 - 01/14/10: $13.87 <Caption> LEXINGTON CORPORATE PROPERTIES TRUST PROPERTY CHART 2003 2003 (E) MINIMUM STRAIGHT-LINE ESTIMATED CASH RENTAL REAL ESTATE TENANT RENT REVENUE TAXES PROPERTY LOCATION RENEWAL OPTIONS ($000) ($000) ($000) (12) - ----------------- -------------------------------- ------- ------------- ----------- <S> <C> <C> <C> <C> 160 Clairemont Avenue 01/01/08 - 12/31/13: FMV $1,546 $ 1,530 $ 177 Decatur, GA 01/01/14 - 12/31/19: FMV 13651 McLearen Road 05/31/08 - 05/30/13: 90% of FMV $2,574 $ 2,493 $ 135 Herndon, VA 05/31/13 - 05/30/18: 90% of FMV 9275 SW Peyton Lane 12/1/08 - 11/30/13: rent during $1,468 $ 1,531 $ 87 Wilsonville, OR prior 40 months, increased by increase in CPI, subject to a 15% maximum increase 295 Chipeta Way 10/01/09 - 09/15/18: $11.73 $8,571 $ 8,571 $ 8 Salt Lake City, UT plus base cost component ($.06) adjusted by CPI, plus ($.03) 09/16/18 - 09/15/28: FMV 400 Butler Farm Road 01/01/10 - 12/31/14: FMV $1,239 $ 1,302 $ 70 Hampton, VA 01/01/15 - 12/31/19: FMV 01/01/20 - 12/31/24: FMV 01/01/25 - 12/31/29: FMV 16275 Technology Drive None $ 840 $ 888 $ 91 San Diego, CA 421 Butler Farm Road 01/15/10 - 01/14/15: FMV $ 695 $ 719 $ 74 Hampton, VA 01/15/15 - 01/14/20: FMV </Table> 10
<Table> <Caption> LEXINGTON CORPORATE PROPERTIES TRUST PROPERTY CHART NET YEAR LAND RENTABLE BASE LEASE TERM AND TENANT CONSTRUCTED/ AREA SQUARE ANNUAL RENTS PER NET PROPERTY LOCATION (GUARANTOR) REDEVELOPED (ACRES) FEET RENTABLE SQUARE FOOT - ----------------- --------------------------- ------------ -------- ---------- ---------------------------- <S> <C> <C> <C> <C> <C> 9950 Mayland Drive Circuit City Stores, Inc. 1990 19.71 288,562 02/28/90 - 02/28/10 Richmond, VA (1) 03/01/00 - 02/28/10: $9.91 10419 North 30th Street Time Customer Service, Inc. 1986 14.38 132,981 04/01/87 - 07/31/10 Tampa, FL (Time, Inc.) 08/01/02 - 07/31/03: $10.21 08/01/03 - 07/31/04: $10.49 08/01/04 - 07/31/05: $10.78 08/01/05 - 07/31/06: $11.07 08/01/06 - 07/31/07: $11.38 08/01/07 - 07/31/08: $11.69 08/01/08 - 07/31/09: $12.01 08/01/09 - 07/31/10: $12.34 4200 RCA Boulevard The Wackenhut Corp. (5) 1996 7.70 114,518 02/15/96 - 02/28/11 Palm Beach Gardens, FL 12/01/97 - 02/28/11: $18.88 2750 Monroe Boulevard Quest Diagnostics, Inc. (7) 1985 & 2001 10.50 109,281 05/01/01 - 04/30/11 Valley Forge, PA 05/01/02 - 04/30/03: $20.35 05/01/03 - 04/30/04: $21.10 05/01/04 - 04/30/05: $21.85 05/01/05 - 04/30/06: $22.60 05/01/06 - 04/30/07: $23.30 05/01/07 - 04/30/08: $24.00 05/01/08 - 04/30/09: $24.70 05/01/09 - 04/30/10: $25.40 05/01/10 - 04/30/11: $26.10 <Caption> LEXINGTON CORPORATE PROPERTIES TRUST PROPERTY CHART 2003 2003 (E) MINIMUM STRAIGHT-LINE ESTIMATED CASH RENTAL REAL ESTATE TENANT RENT REVENUE TAXES PROPERTY LOCATION RENEWAL OPTIONS ($000) ($000) ($000) (12) - ----------------- -------------------------------- ------- ------------- ----------- <S> <C> <C> <C> <C> 9950 Mayland Drive 03/01/10 - 02/29/20: CPI $2,859 $ 2,791 $ 159 Richmond, VA increase (subject to max increase of 42.66% of rent in year 2010) 03/01/20 - 02/28/30: CPI adj (subject to max increase of 14.02% over annual base rent during prior period) 03/01/30 - 02/29/40: CPI adj (subject to max increase of 14.02% over annual base rent during prior period) 03/01/40 - 02/28/50: FMV 03/01/50 - 02/28/55: FMV 10419 North 30th Street 08/01/10 - 07/31/15: FMV $1,373 $ 1,457 $ 194 Tampa, FL 08/01/15 - 07/31/20: FMV 4200 RCA Boulevard 03/01/11 - 02/28/16: FMV $2,162 $ 2,151 $ 373 Palm Beach Gardens, FL capped at $25.00 03/01/16 - 02/28/21: FMV capped at $25.00 03/01/21 - 02/28/26: FMV capped at $25.00 2750 Monroe Boulevard 05/01/11 - 04/30/16: FMV $2,279 $ 2,554 $ 172 Valley Forge, PA </Table> 11
<Table> <Caption> LEXINGTON CORPORATE PROPERTIES TRUST PROPERTY CHART NET YEAR LAND RENTABLE BASE LEASE TERM AND TENANT CONSTRUCTED/ AREA SQUARE ANNUAL RENTS PER NET PROPERTY LOCATION (GUARANTOR) REDEVELOPED (ACRES) FEET RENTABLE SQUARE FOOT - ----------------- --------------------------- ------------ -------- ---------- ---------------------------- <S> <C> <C> <C> <C> <C> 26210 and 26220 Enterprise Apria Healthcare, Inc. 2001 7.23 100,012 02/01/01 - 01/31/12 Court 02/01/02 - 01/31/03: $15.60 Lake Forest, CA 02/01/03 - 01/31/04: $16.07 02/01/04 - 01/31/05: $16.55 02/01/05 - 01/31/06: $17.05 02/01/06 - 01/31/07: $17.56 02/01/07 - 01/31/08: $18.08 02/01/08 - 01/31/09: $18.63 02/01/09 - 01/31/10: $19.19 02/01/10 - 01/31/11: $19.76 02/01/11 - 01/31/12: $20.35 3476 Stateview Boulevard Wells Fargo Home Mortgage, 2002 15.99 169,083 01/25/03 - 01/30/13 Fort Mill, SC Inc. (6) 01/25/03 - 01/31/04: $16.05 02/01/04 - 01/30/13: Annual increases of 3% of net rent 250 Rittenhouse Circle Jones Apparel Group USA, 1982 15.63 255,019 03/26/98 - 03/25/13 Bristol, PA Inc. (4) 03/26/98 - 03/26/03: $4.51 03/27/03 - 03/26/08: $4.96 03/27/08 - 03/25/13: $5.46 2401 Cherahala Boulevard Advance PCS, Inc. 2002 7.97 59,748 06/01/02 - 05/31/13 Knoxville, TN 06/01/02 - 05/31/03: $6.58 06/01/03 - 05/31/07: $13.15 06/01/07 - 05/31/13: $15.06 180 Rittenhouse Circle Jones Apparel Group USA, 1998 4.73 96,000 08/01/98 - 07/31/13 Bristol, PA Inc. 08/01/02 - 07/31/03: $9.00 08/01/03 - 07/31/04: $9.27 08/01/04 - 07/31/05: $9.55 08/01/05 - 07/31/06: $9.84 08/01/06 - 07/31/07: $10.14 08/01/07 - 07/31/08: $10.44 08/01/08 - 07/31/09: $10.75 08/01/09 - 07/31/10: $11.07 08/01/10 - 07/31/11: $11.41 08/01/11 - 07/31/12: $11.74 08/01/12 - 07/31/13: $12.09 250 Turnpike Road Honeywell Consumer Products 1984 9.83 57,698 10/01/95 - 09/30/15 Southborough, MA 10/01/00 - 09/30/05: $7.49 10/01/05 - 09/30/10: $7.94 10/01/10 - 09/30/15: $8.50 2010 & 2015 rent increases CPI based, not to exceed maximum set forth above <Caption> LEXINGTON CORPORATE PROPERTIES TRUST PROPERTY CHART 2003 2003 (E) MINIMUM STRAIGHT-LINE ESTIMATED CASH RENTAL REAL ESTATE TENANT RENT REVENUE TAXES PROPERTY LOCATION RENEWAL OPTIONS ($000) ($000) ($000) (12) - ----------------- -------------------------------- ------- ------------- ----------- <S> <C> <C> <C> <C> 26210 and 26220 Enterprise 02/01/12 - 01/31/17: FMV $1,603 $ 1,792 $ 117 Court 02/01/17 - 01/31/22: FMV Lake Forest, CA 3476 Stateview Boulevard 01/31/13 - 01/30/18: 95% of FMV $2,539 $ 2,539 $ 110 Fort Mill, SC 01/31/18 - 01/30/23: 95% of FMV 01/31/23 - 01/30/28: FMV 01/31/28 - 01/30/33: FMV 250 Rittenhouse Circle 03/26/13 - 03/25/18: FMV $1,238 $ 1,347 $ 40 Bristol, PA 03/26/18 - 03/26/23: FMV 2401 Cherahala Boulevard 06/01/13 - 05/31/18: 95% of FMV $ 622 $ 822 $ 40 Knoxville, TN 06/01/18 - 05/31/23: 95% of FMV 180 Rittenhouse Circle None $ 875 $ 970 $ 44 Bristol, PA 250 Turnpike Road 10/01/15 - 09/30/20: FMV $ 433 $ 433 $ 90 Southborough, MA 10/01/20 - 09/30/25: FMV 10/01/25 - 09/30/30: FMV 10/01/30 - 09/30/35: FMV </Table> 12
<Table> <Caption> LEXINGTON CORPORATE PROPERTIES TRUST PROPERTY CHART NET YEAR LAND RENTABLE BASE LEASE TERM AND TENANT CONSTRUCTED/ AREA SQUARE ANNUAL RENTS PER NET PROPERTY LOCATION (GUARANTOR) REDEVELOPED (ACRES) FEET RENTABLE SQUARE FOOT - ----------------- --------------------------- ------------ -------- ---------- ---------------------------- <S> <C> <C> <C> <C> <C> 1600 Viceroy Drive VarTec Telecom, Inc. 1986 8.17 249,452 04/11/00 - 09/30/15 Dallas, TX 09/01/00 - 08/31/03: $12.81 09/01/03 - 08/31/07: $13.81 09/01/07 - 09/30/15: $14.81 700 Oakmont Lane North American Van Lines 1989 17.93 269,715 12/01/02 - 11/30/15 Westmont, IL (8) 12/01/03 - 11/30/04: $8.50 (SIRVA, Inc.) 12/01/04 - 11/30/05: $8.76 12/01/05 - 11/30/06: $9.02 12/01/06 - 11/30/07: $9.29 12/01/07 - 11/30/08: $9.57 12/01/08 - 11/30/09: $9.85 12/01/09 - 11/30/10: $10.15 12/01/10 - 11/30/11: $10.45 12/01/11 - 11/30/12: $10.77 12/01/12 - 11/30/13: $11.09 12/01/13 - 11/30/14: $11.42 12/01/14 - 11/30/15: $11.77 1440 East 15th Street Cox Communications, Inc. 1988 3.58 28,591 10/01/90 - 09/30/16 Tuscon, AZ 10/01/98 - 09/30/03: $14.03 10/01/03 - 09/30/05: $14.98 10/01/05 - 09/30/10: $16.26 10/01/10 - 09/30/16: $16.62 -------- ---------- Office Subtotal 385.27 4,157,091 -------- ---------- INDUSTRIAL 300 McCormick Boulevard Ameritech Services, Inc. 1990 10.12 20,000 09/14/90 - 05/31/05 Columbus, OH 06/01/00 - 05/31/05: $12.75 222 Tappan Drive North The Gerstenslager Company 1970 26.57 296,720 10/01/99 - 05/31/05 Mansfield, OH (Worthington Industries) 10/01/99 - 05/31/05: $2.27 904 Industrial Road Tenneco Automotive 1968 & 1972 20.00 195,640 08/18/87 - 08/17/05 Marshall, MI Operating Company, Inc. 08/18/00 - 08/17/03: $3.00 (Tenneco Automotive, Inc.) 08/18/03 - 08/17/05: $3.10 1601 Pratt Avenue Tenneco Automotive 1979 8.26 53,600 08/18/87 - 08/17/05 Marshall, MI Operating Company, Inc. 08/18/00 - 08/17/03: $3.00 (Tenneco Automotive, Inc.) 08/18/03 - 08/17/05: $3.10 4425 Purks Road Lear Technologies LLC 1989 & 1998 12.00 183,717 07/23/88 - 07/22/06 Auburn Hills, MI (Lear Corporation) 07/23/02 - 07/22/06: $7.65 (General Motors Corp.) <Caption> LEXINGTON CORPORATE PROPERTIES TRUST PROPERTY CHART 2003 2003 (E) MINIMUM STRAIGHT-LINE ESTIMATED CASH RENTAL REAL ESTATE TENANT RENT REVENUE TAXES PROPERTY LOCATION RENEWAL OPTIONS ($000) ($000) ($000) (12) - ----------------- -------------------------------- ------- ------------- ----------- <S> <C> <C> <C> <C> 1600 Viceroy Drive 10/01/15 - 09/30/20: FMV $3,279 $ 3,486 $ 490 Dallas, TX 10/01/20 - 09/30/25: FMV 700 Oakmont Lane 12/01/15 - 11/30/20: 95% of FMV $ 191 $ 2,516 $ 283 Westmont, IL 12/01/20 - 11/30/25: FMV 1440 East 15th Street None $ 408 $ 457 $ 81 Tuscon, AZ ------- -------- ------- $52,707 $ 56,197 $ 4,600 ------- -------- ------- INDUSTRIAL 300 McCormick Boulevard None $ 255 $ 255 $ 21 Columbus, OH 222 Tappan Drive North 06/01/05 - 05/31/10: $2.59 $ 674 $ 667 $ 81 Mansfield, OH 06/01/10 - 11/30/10: $2.84 12/01/10 - 05/31/15: $2.78 06/01/15 - 05/31/20: $3.06 904 Industrial Road None $ 594 $ 583 $ 70 Marshall, MI 1601 Pratt Avenue None $ 163 $ 163 $ 34 Marshall, MI 4425 Purks Road None $1,405 $ 1,365 $ 138 Auburn Hills, MI </Table> 13
<Table> <Caption> LEXINGTON CORPORATE PROPERTIES TRUST PROPERTY CHART NET YEAR LAND RENTABLE BASE LEASE TERM AND TENANT CONSTRUCTED/ AREA SQUARE ANNUAL RENTS PER NET PROPERTY LOCATION (GUARANTOR) REDEVELOPED (ACRES) FEET RENTABLE SQUARE FOOT - ----------------- --------------------------- ------------ -------- ---------- ---------------------------- <S> <C> <C> <C> <C> <C> 245 Salem Church Road Exel Logistics Inc. 1985 12.52 252,000 11/15/91 - 11/30/06 Mechanicsburg, PA (NFC plc) 12/01/00 - 11/30/03: $4.01 12/01/03 - 11/30/06: $4.38 6 Doughten Road Exel Logistics Inc. 1989 24.38 330,000 11/15/91 - 11/30/06 New Kingston, PA (NFC plc) 12/01/00 - 11/30/03: $4.12 12/01/03 - 11/30/06: $4.51 34 East Main Street Exel Logistics Inc. 1981 9.66 179,200 11/15/91 - 11/30/06 New Kingston, PA (NFC plc) 12/01/00 - 11/30/03: $3.68 12/01/03 - 11/30/06: $4.02 450 Stern Street Johnson Controls, Inc. 1996 20.10 111,160 12/23/96 - 12/22/06 Oberlin, OH 12/23/02 - 12/22/03: $5.75 12/23/03 - 12/22/06: Annual increase of 3x CPI, but not more than 4.5% 46600 Port Street Johnson Controls, Inc. 1996 24.00 134,160 05/19/00 -12/22/06 Plymouth, MI 12/23/02 - 12/22/03: $6.29 12/23/03 - 12/22/06: Annual increase of 3x CPI, but not more than 4.5% 12025 Tech Center Drive Kelsey-Hayes Company 1987 & 1988 9.18 100,000 05/01/97 - 04/30/07 Livonia, MI 05/01/02 - 04/30/05: $9.75 05/01/05 - 04/30/07: $10.25 187 Spicer Drive Dana Corp. 1983 & 1985 20.95 148,000 01/01/84 - 08/31/07 Gordonsville, TN 08/01/02 - 07/31/05: $2.33 08/01/05 - 08/31/07: $2.40 541 Perkins Jones Road Kmart Corp. 1982 103.00 1,700,000 10/01/82 - 09/30/07 Warren, OH 10/01/02 - 09/30/07: $5.51 <Caption> LEXINGTON CORPORATE PROPERTIES TRUST PROPERTY CHART 2003 2003 (E) MINIMUM STRAIGHT-LINE ESTIMATED CASH RENTAL REAL ESTATE TENANT RENT REVENUE TAXES PROPERTY LOCATION RENEWAL OPTIONS ($000) ($000) ($000) (12) - ----------------- -------------------------------- ------- ------------- ----------- <S> <C> <C> <C> <C> 245 Salem Church Road 12/01/06 - 11/30/09: 85% of FMV $1,017 $ 1,000 $ 77 Mechanicsburg, PA 12/01/09 - 11/30/11: 109.12% of FMV 12/01/11 - 11/30/14: 85% of FMV 12/01/14 - 11/30/16: 109.12% of FMV 6 Doughten Road 12/01/06 - 11/30/09: 85% of FMV $1,371 $ 1,349 $ 108 New Kingston, PA 12/01/09 - 11/30/11: 109.12% of FMV 12/01/11 - 11/30/14: 85% of FMV 12/01/14 - 11/30/16: 109.12% of FMV 34 East Main Street 12/01/06 - 11/30/09: 85% of FMV $ 664 $ 654 $ 46 New Kingston, PA 12/01/09 - 11/30/11: 109.12% of FMV 12/01/11 - 11/30/14: 85% of FMV 12/01/14 - 11/30/16: 109.12% of FMV 450 Stern Street 12/23/06 - 12/22/11: $3.65 $ 639 $ 639 $ 72 Oberlin, OH 12/23/11 - 12/22/16: $4.20 46600 Port Street 12/23/06 - 12/22/11: $4.00 $ 845 $ 845 $ 62 Plymouth, MI 12/23/11 - 12/22/16: $4.60 12025 Tech Center Drive 05/01/07 - 04/30/12: FMV $ 975 $ 958 $ 158 Livonia, MI 05/01/12 - 04/30/17: FMV 187 Spicer Drive 09/01/07 - 08/31/12: FMV $ 345 $ 345 $ 49 Gordonsville, TN 09/01/12 - 08/31/17: FMV 09/07/17 - 06/30/22: FMV 541 Perkins Jones Road 10/01/07 - 09/30/12: $2.67 $9,359 $ 8,932 $ 389 Warren, OH 10/01/12 - 09/30/17: $2.67 10/01/17 - 09/30/22: $2.67 10/01/22 - 09/30/27: $2.67 10/01/27 - 09/30/32: $2.67 10/01/32 - 09/30/37: $2.67 10/01/37 - 09/30/42: FMV 10/01/42 - 09/30/47: FMV 10/01/47 - 09/30/52: FMV 10/01/52 - 09/30/57: FMV </Table> 14
<Table> <Caption> LEXINGTON CORPORATE PROPERTIES TRUST PROPERTY CHART NET YEAR LAND RENTABLE BASE LEASE TERM AND TENANT CONSTRUCTED/ AREA SQUARE ANNUAL RENTS PER NET PROPERTY LOCATION (GUARANTOR) REDEVELOPED (ACRES) FEET RENTABLE SQUARE FOOT - ----------------- --------------------------- ------------ -------- ---------- ---------------------------- <S> <C> <C> <C> <C> <C> 730 W. Fairmont The Tranzonic Companies 1981 2.81 49,951 02/28/89 - 02/28/09 Tempe, AZ 09/01/01 - 02/29/04: $4.05 03/01/04 - 02/28/09: Adjusted by CPI factor not to exceed 4.5% per annum 200 Arrowhead Drive Owens Corning 1999 21.62 400,522 03/01/01 - 05/31/09 Hebron, OH 06/01/01 - 05/31/04: $2.25 06/01/04 - 05/31/09: $2.56 109 Stevens Street Unisource Worldwide, Inc. 1958 & 1969 6.97 168,800 10/01/87 - 09/30/09 Jacksonville, FL 10/01/02 - 09/30/03: $3.20 10/01/03 - 09/30/04: $3.29 10/01/04 - 09/30/05: $3.38 10/01/05 - 09/30/06: $3.48 10/01/06 - 09/30/07: $3.57 10/01/07 - 09/30/08: $3.67 10/01/08 - 09/30/09: $3.77 3350 Miac Cove Road Mimeo.com, Inc. (3) 1987 10.92 141,359 11/01/99 - 10/31/09 Memphis, TN 11/01/02 - 10/31/04: $5.00 11/01/04 - 10/31/09: $5.50 191 Arrowhead Drive Owens Corning 2000 13.62 250,410 06/01/01 - 02/28/10 Hebron, OH 03/01/01 - 02/28/05: $2.31 03/01/05 - 02/28/10: $2.63 3102 Queen Palm Drive Time Customer Service, Inc. 1986 15.02 229,605 08/01/87 - 07/31/10 Tampa, FL (Time, Inc.) 08/01/02 - 07/31/03: $4.12 08/01/03 - 07/31/04: $4.23 08/01/04 - 07/31/05: $4.35 08/01/05 - 07/31/06: $4.47 08/01/06 - 07/31/07: $4.59 08/01/07 - 07/31/08: $4.72 08/01/08 - 07/31/09: $4.85 08/01/09 - 07/31/10: $4.98 6345 Brackbill Boulevard Exel Logistics, Inc. 1985 & 1991 29.01 507,000 10/29/90 - 03/19/12 Mechanicsburg, PA (NFC plc) 03/20/02 - 03/19/07: $4.02 03/20/07 - 03/19/12: greater of $4.78 or fair market rent as specified in lease <Caption> LEXINGTON CORPORATE PROPERTIES TRUST PROPERTY CHART 2003 2003 (E) MINIMUM STRAIGHT-LINE ESTIMATED CASH RENTAL REAL ESTATE TENANT RENT REVENUE TAXES PROPERTY LOCATION RENEWAL OPTIONS ($000) ($000) ($000) (12) - ----------------- -------------------------------- ------- ------------- ----------- <S> <C> <C> <C> <C> 730 W. Fairmont 03/01/09 - 02/28/19: CPI $ 202 $ 202 $ 56 Tempe, AZ capped at 4.5% 03/01/19 - 02/28/29: CPI capped at 4.5% 200 Arrowhead Drive 06/01/09 - 05/31/11: $ 899 $ 985 $ 17 Hebron, OH $2.57 to $2.95 06/01/11 - 05/31/16: $2.57 to $2.95 06/01/16 - 05/31/21: FMV 109 Stevens Street 10/01/09 - 09/30/14: $ 545 $ 588 $ 33 Jacksonville, FL lesser of $4.20 psf or FMV 3350 Miac Cove Road 11/1/09 - 10/31/14: FMV $ 175 $ 175 $ 82 Memphis, TN 191 Arrowhead Drive 03/01/10 - 02/28/12: $ 578 $ 646 $ 11 Hebron, OH $2.57 to $2.95 03/01/12 - 02/28/17: $2.57 to $2.95 03/01/17 - 02/28/22: FMV 3102 Queen Palm Drive 08/01/10 - 07/31/15: FMV $ 956 $ 1,015 $ 137 Tampa, FL 08/01/15 - 07/31/20: FMV 6345 Brackbill Boulevard 03/20/12 - 03/19/17: FMV $2,037 $ 1,852 $ 94 Mechanicsburg, PA 03/20/17 - 03/19/22: previous rent plus 15% 03/20/22 - 03/19/27: FMV 03/20/27 - 03/19/32: previous rent plus 15% </Table> 15
<Table> <Caption> LEXINGTON CORPORATE PROPERTIES TRUST PROPERTY CHART NET YEAR LAND RENTABLE BASE LEASE TERM AND TENANT CONSTRUCTED/ AREA SQUARE ANNUAL RENTS PER NET PROPERTY LOCATION (GUARANTOR) REDEVELOPED (ACRES) FEET RENTABLE SQUARE FOOT - ----------------- --------------------------- ------------ -------- ---------- ---------------------------- <S> <C> <C> <C> <C> <C> 6500 Adelaide Court Anda Pharmaceuticals 2002 22.67 354,676 04/01/02 - 03/31/12 Groveport, OH (Andrx Corporation) 04/01/02 - 03/31/03: $1.81 04/01/03 - 03/31/04: $2.63 04/01/04 - 03/31/06: $3.45 04/01/06 - 03/31/12: $3.65 2280 Northeast Drive Ryder Integrated Logistics, 1996 & 1997 25.70 276,480 08/01/97 - 07/31/12 Waterloo, IA Inc. 08/01/02 - 07/31/07: $3.61 (Ryder Systems, Inc.) 08/01/07 - 07/31/12: $4.04 128 Crews Drive Stone Container Corporation 1968 & 1998 10.76 185,961 12/16/82 - 08/31/12 Columbia, SC 09/01/00 - 08/31/03: $2.71 09/01/03 - 08/31/06: $2.91 09/01/06 - 08/31/08: $3.12 09/01/08 - 08/31/12: $3.32 7150 Exchequer Drive Corporate Express Office 1998 5.23 65,043 11/01/98 - 10/31/13 Baton Rouge, LA Products, Inc. 11/01/01 - 10/31/04: $5.32 (Buhrmann N.V.) 11/01/04 - 10/31/07: $5.64 11/01/07 - 10/31/10: $5.98 11/01/10 - 10/31/13: $6.34 1133 Poplar Creek Road Corporate Express Office 1998 19.09 196,946 01/20/99 - 01/31/14 Henderson, NC Products, Inc. 02/01/02 - 01/31/05: $3.83 (Buhrmann N.V.) 02/01/05 - 01/31/08: $4.01 02/01/08 - 01/31/11: $4.19 02/01/11 - 01/31/14: $4.45 324 Industrial Park Road SKF USA, Inc. 1996 21.13 72,868 12/23/96 - 12/31/14 Franklin, NC 01/01/03 - 12/31/14: $4.98 CPI every 3 years 8305 SE 58th Avenue Associated Grocers of 1976 63.48 668,034 01/08/99 - 12/31/18 Ocala, FL Florida, Inc. 01/08/99 - 12/31/03: $2.80 01/01/04 - 12/31/08: $3.09 01/01/09 - 12/31/13: $3.42 01/01/14 - 12/31/18: $3.77 3501 West Avenue H Michaels Stores, Inc. 1998 & 2002 37.18 762,775 06/19/98 - 09/30/19 Lancaster, CA 06/19/98 - 06/18/03: $4.20 06/19/03 - 06/18/08: $4.24 06/19/08 - 06/18/13: $4.29 06/19/13 - 09/30/19: $4.28 -------- ---------- Industrial Subtotal 605.95 8,034,627 -------- ---------- <Caption> LEXINGTON CORPORATE PROPERTIES TRUST PROPERTY CHART 2003 2003 (E) MINIMUM STRAIGHT-LINE ESTIMATED CASH RENTAL REAL ESTATE TENANT RENT REVENUE TAXES PROPERTY LOCATION RENEWAL OPTIONS ($000) ($000) ($000) (12) - ----------------- -------------------------------- ------- ------------- ----------- <S> <C> <C> <C> <C> 6500 Adelaide Court 04/01/12 - 03/31/17: 95% $ 859 $ 1,206 $ 93 Groveport, OH FMV or $3.90 psf 04/01/17 - 03/31/22: FMV or $4.10 psf 2280 Northeast Drive 08/01/12 - 07/31/17: $4.53 $ 998 $ 1,004 $ 365 Waterloo, IA 08/01/17 - 07/31/22: $5.07 08/01/22 - 07/31/27: $5.68 128 Crews Drive None $ 516 $ 571 $ 120 Columbia, SC 7150 Exchequer Drive 11/01/13 - 10/31/18: FMV $ 346 $ 368 $ 49 Baton Rouge, LA 11/01/18 - 10/31/23: FMV 11/01/23 - 10/31/28: FMV 1133 Poplar Creek Road 02/01/14 - 01/31/19: FMV $ 754 $ 810 $ 61 Henderson, NC 02/01/19 - 01/31/24: FMV 02/01/24 - 01/31/29: FMV 324 Industrial Park Road 01/01/15 - 12/31/24: FMV or $ 363 $ 363 $ 12 Franklin, NC rent in effect in prior year 01/01/25 - 12/31/34: prior years rent increased by 9% 01/01/35 - 12/31/44: prior years rent increased by 9% 8305 SE 58th Avenue 01/01/19 - 12/31/23: $4.16 $1,872 $ 2,238 $ 1,255 Ocala, FL 01/01/24 - 12/31/28: $4.60 01/01/29 - 12/31/33: $5.08 01/01/34 - 12/31/38: $5.60 3501 West Avenue H 10/01/19 - 09/30/24: FMV $3,223 $ 3,312 $ 191 Lancaster, CA 10/01/24 - 09/30/29: FMV ------- -------- ------- $32.629 $ 33,090 $ 3,881 ------- -------- ------- </Table> 16
<Table> <Caption> LEXINGTON CORPORATE PROPERTIES TRUST PROPERTY CHART NET YEAR LAND RENTABLE BASE LEASE TERM AND TENANT CONSTRUCTED/ AREA SQUARE ANNUAL RENTS PER NET PROPERTY LOCATION (GUARANTOR) REDEVELOPED (ACRES) FEET RENTABLE SQUARE FOOT - ----------------- --------------------------- ------------ -------- ---------- ---------------------------- <S> <C> <C> <C> <C> <C> RETAIL 24100 Laguna Hills Mall Federated Department 1974 11.00 160,000 02/01/76 - 01/31/06 Laguna Hills, CA Stores, Inc. (1) 02/01/80 - 01/31/06: $4.23 7111 Westlake Terrace The Home Depot USA, Inc. 1980 & 2001 7.61 95,000 05/01/81 - 04/30/06 Bethesda, MD (1) (11) 05/01/96 - 04/30/06: $8.13 6910 S. Memorial Highway Toys "R" Us, Inc. (1) 1981 4.44 43,123 06/01/81 - 05/31/06 Tulsa, OK 06/01/01 - 05/31/06: $8.40 12535 SE 82nd Avenue Toys "R" Us, Inc. (1) 1981 5.85 42,842 06/01/81 - 05/31/06 Clackamas, OR 06/01/01 - 05/31/06: $9.91 18601 Alderwood Mall Blvd Toys "R" Us, Inc. (1) 1981 3.64 43,105 06/01/81 - 05/31/06 Lynnwood, WA 06/01/01 - 05/31/06: $9.18 2832 Candlers Mountain Road Circuit City Stores, Inc. 1986 0.84 9,300 11/21/86 - 11/20/06 Lynchburg, VA 11/21/01 - 11/20/06: $10.85 5917 S. La Grange Road Bally Total Fitness Corp. 1987 2.73 25,250 07/13/87 - 07/12/07 Countryside, IL 07/13/02 - 07/12/07: $26.14 1160 White Horse Road Physical Fitness Centers of 1987 2.87 31,750 07/14/87 - 07/13/07 Voorhees, NJ Philadelphia, Inc. 07/14/02 - 07/13/07: $25.82 (Bally Total Fitness Corp.) 5801 Bridge Street Champion Fitness IV, Inc. 1977 & 1987 3.66 24,990 08/19/87 - 08/18/07 DeWitt, NY (Bally Total Fitness Corp.) 08/19/02 - 08/18/07: $20.45 4450 California Avenue Mervyn's (10) 1976 11.00 122,000 02/23/77 - 12/31/07 Bakersfield, CA (Dayton Hudson Corp.) 01/01/03 - 12/31/07: $1.71 <Caption> LEXINGTON CORPORATE PROPERTIES TRUST PROPERTY CHART 2003 2003 (E) MINIMUM STRAIGHT-LINE ESTIMATED CASH RENTAL REAL ESTATE TENANT RENT REVENUE TAXES PROPERTY LOCATION RENEWAL OPTIONS ($000) ($000) ($000) (12) - ----------------- -------------------------------- ------- ------------- ----------- <S> <C> <C> <C> <C> RETAIL 24100 Laguna Hills Mall 02/01/06 - 04/16/14: $1.81 $ 677 $ 673 $ 13 Laguna Hills, CA 04/17/14 - 04/16/29: $1.81 04/17/29 - 04/16/44: $1.81 04/17/44 - 04/16/50: $1.81 7111 Westlake Terrace 05/01/06 - 04/30/16: $3.96 $ 772 $ 648 $ 304 Bethesda, MD 05/01/16 - 04/30/21: $3.96 05/01/21 - 04/30/26: $3.96 05/01/26 - 04/30/31: $3.17 6910 S. Memorial Highway 06/01/06 - 05/31/11: $5.92 $ 362 $ 356 $ 35 Tulsa, OK 06/01/11 - 05/31/16: $5.92 06/01/16 - 05/31/21: $5.92 06/01/21 - 05/31/26: $5.92 06/01/26 - 05/31/31: $5.92 12535 SE 82nd Avenue 06/01/06 - 05/31/11: $6.96 $ 424 $ 417 $ 49 Clackamas, OR 06/01/11 - 05/31/16: $6.96 06/01/16 - 05/31/21: $6.96 06/01/21 - 05/31/26: $6.96 06/01/26 - 05/31/31: $6.96 18601 Alderwood Mall Blvd 06/01/06 - 05/31/11: $6.48 $ 396 $ 389 $ 46 Lynnwood, WA 06/01/11 - 05/31/16: $6.48 06/01/16 - 05/31/21: $6.48 06/01/21 - 05/31/26: $6.48 06/01/26 - 05/31/31: $6.48 2832 Candlers Mountain Road 11/21/06 - 11/20/11: $12.75 $ 101 $ 101 $ 8 Lynchburg, VA 11/21/11 - 11/20/16: $14.98 11/21/16 - 11/20/21: $17.60 11/21/21 - 11/20/26: $20.68 5917 S. La Grange Road 07/13/07 - 07/12/12: $30.06 $ 660 $ 542 $ 86 Countryside, IL 07/13/12 - 07/12/17: $34.57 1160 White Horse Road 07/13/07 - 07/12/12: $29.69 $ 820 $ 673 $ 105 Voorhees, NJ 07/13/12 - 07/12/17: $34.14 5801 Bridge Street 08/19/07 - 08/18/12: $23.52 $ 511 $ 419 $ 15 DeWitt, NY 08/19/12 - 08/18/17: $27.44 4450 California Avenue 01/01/08 - 12/31/12: $1.54 $ 209 $ 209 $ 54 Bakersfield, CA 01/01/13 - 12/31/17: $1.37 01/01/18 - 12/31/22: $1.20 01/01/23 - 12/31/27: $1.03 </Table> 17
<Table> <Caption> LEXINGTON CORPORATE PROPERTIES TRUST PROPERTY CHART NET YEAR LAND RENTABLE BASE LEASE TERM AND TENANT CONSTRUCTED/ AREA SQUARE ANNUAL RENTS PER NET PROPERTY LOCATION (GUARANTOR) REDEVELOPED (ACRES) FEET RENTABLE SQUARE FOOT - ----------------- --------------------------- ------------ -------- ---------- ---------------------------- <S> <C> <C> <C> <C> <C> 2655 Shasta Way Fred Meyer, Inc. 1986 13.90 178,204 03/10/88 - 03/31/08 Klamath Falls, OR 03/10/88 - 03/31/08: $5.66 12235 N. Cave Creek Bally's Health & Tennis 1988 3.00 36,556 07/01/88 - 06/30/08 Phoenix, AZ Corp. 07/01/98 - 06/30/03: $20.65 07/01/03 - 06/30/08: $23.03 7272 55th Street Circuit City Stores, Inc. 1988 3.93 45,308 10/28/88 - 10/27/08 Sacramento, CA 10/28/98 - 10/27/03: $8.54 10/28/03 - 10/27/08: $9.30 6405 South Viriginia St Comp USA, Inc. 1988 2.72 31,400 12/16/88 - 12/15/08 Reno, NV 12/16/98 - 12/15/03: $10.65 12/16/03 - 12/15/08: $11.60 5055 West Sahara Avenue Circuit City Stores, Inc. 1988 2.57 36,053 12/16/88 - 12/15/08 Las Vegas, NV 12/16/98 - 12/15/03: $7.93 12/16/03 - 12/15/08: $8.64 4733 Hills & Dales Road Scandinavian Health Spa, 1987 3.32 37,214 01/01/89 - 12/31/08 Canton, OH Inc. 01/01/03 - 12/31/03: $18.76 (Bally Total Fitness 01/01/04 - 12/31/04: $19.17 Holding Corp.) 01/01/05 - 12/31/05: $19.59 01/01/06 - 12/31/06: $20.03 01/01/07 - 12/31/07: $20.47 01/01/08 - 12/31/08: $20.92 2275 Browns Bridge Road Wal-Mart Stores, Inc. 1984 8.10 89,199 12/29/83 - 01/31/09 Gainesville, GA 12/29/83 - 01/31/09: $2.45 Plus $110 a year in lieu of % rent 35400 Cowan Road Sam's Real Estate Business 1987 & 1997 9.70 102,826 06/06/97 - 01/31/09 Westland, MI Trust 06/06/87 - 01/31/09: $7.32 <Caption> LEXINGTON CORPORATE PROPERTIES TRUST PROPERTY CHART 2003 2003 (E) MINIMUM STRAIGHT-LINE ESTIMATED CASH RENTAL REAL ESTATE TENANT RENT REVENUE TAXES PROPERTY LOCATION RENEWAL OPTIONS ($000) ($000) ($000) (12) - ----------------- -------------------------------- ------- ------------- ----------- <S> <C> <C> <C> <C> 2655 Shasta Way 04/01/08 - 03/31/18: FMV $1,009 $ 1,009 $ 158 Klamath Falls, OR 04/01/18 - 03/31/28: FMV 04/01/28 - 03/31/38: FMV 12235 N. Cave Creek 07/01/08 - 06/30/13: $25.68 $ 798 $ 821 $ 77 Phoenix, AZ 07/01/13 - 06/30/18: $28.62 7272 55th Street 10/28/08 - 10/27/18: CPI $ 393 $ 376 $ 63 Sacramento, CA not to exceed $11.22 10/28/18 - 10/27/28: CPI not to exceed $12.39 10/28/28 - 10/27/38: CPI not to exceed $13.68 6405 South Viriginia St 12/16/08 - 12/15/18: CPI $ 335 $ 325 $ 60 Reno, NV not to exceed $14.00 12/16/18 - 12/15/28: CPI not to exceed $15.45 12/16/28 - 12/15/38: CPI not to exceed $17.06 5055 West Sahara Avenue 12/16/08 - 12/15/18: CPI $ 286 $ 278 $ 30 Las Vegas, NV 12/16/18 - 12/15/28: CPI 12/16/28 - 12/15/38: CPI 4733 Hills & Dales Road 01/01/09 - 12/31/13: $ 698 $ 685 $ 23 Canton, OH Annual increases of 2.2% 01/01/14 - 12/31/18: Annual increases of 2.2% 2275 Browns Bridge Road None $ 218 $ 218 $ 7 Gainesville, GA 35400 Cowan Road None $ 753 $ 753 $ 21 Westland, MI </Table> 18
<Table> <Caption> LEXINGTON CORPORATE PROPERTIES TRUST PROPERTY CHART NET YEAR LAND RENTABLE BASE LEASE TERM AND TENANT CONSTRUCTED/ AREA SQUARE ANNUAL RENTS PER NET PROPERTY LOCATION (GUARANTOR) REDEVELOPED (ACRES) FEET RENTABLE SQUARE FOOT - ----------------- --------------------------- ------------ -------- ---------- ---------------------------- <S> <C> <C> <C> <C> <C> A1 21 South Wal-Mart Real Estate 1983 5.21 56,132 06/29/99 - 01/31/09 Jacksonville, AL Business Trust 06/29/99 - 01/31/09: $2.60 Plus 1% of gross sales Fort Street Mall Liberty House, Inc. (1) 1980 1.22 85,610 10/01/80 - 09/30/09 King Street 10/01/95 - 09/30/05: $11.25 Honolulu, HI 10/01/05 - 09/30/09: $11.56 121 South Center Street Greyhound Lines, Inc. 1968 1.67 17,000 02/28/89 - 12/31/09 Stockton, CA 01/01/02 - 12/31/09: $11.35 Annual increase of CPI, but not more than 2.75% 7055 Highway 85 South Wal-Mart Stores East, Inc. 1985 8.61 81,911 12/04/85 - 01/31/11 Riverdale, GA 12/04/85 - 01/31/11: $3.29 150 NE 20th Street Fred Meyer, Inc. 1986 8.81 118,179 06/01/86 - 05/31/11 Highway 101 06/01/86 - 05/31/11: $6.99 Newport, OR plus .5% of gross sales over $20 million 6475 Dobbin Road Offenbacher Aquatics (9) 1983 2.50 65,200 04/01/03 - 03/31/13 Columbia, MD 04/01/03 - 03/31/04: $9.35 04/01/04 - 03/31/05: $9.70 04/01/05 - 03/31/06: $10.05 04/01/06 - 03/31/07: $10.40 04/01/07 - 03/31/08: $10.75 04/01/08 - 03/31/09: $11.50 04/01/09 - 03/31/10: $12.00 04/01/10 - 03/31/11: $12.50 04/01/11 - 03/31/12: $13.00 04/01/12 - 03/31/13: $13.50 9580 Livingston Road GFS Realty, Inc. 1976 10.60 107,337 01/03/77 - 02/28/14 Oxon Hill, MD (Giant Food, Inc.) 03/01/77 - 02/29/04: $3.80 03/01/04 - 02/28/14: $1.91 <Caption> LEXINGTON CORPORATE PROPERTIES TRUST PROPERTY CHART 2003 2003 (E) MINIMUM STRAIGHT-LINE ESTIMATED CASH RENTAL REAL ESTATE TENANT RENT REVENUE TAXES PROPERTY LOCATION RENEWAL OPTIONS ($000) ($000) ($000) (12) - ----------------- -------------------------------- ------- ------------- ----------- <S> <C> <C> <C> <C> A1 21 South 02/01/09 - 01/31/14: $2.42 $ 146 $ 146 $ 20 Jacksonville, AL Plus 1% of gross sales 02/01/14 - 01/31/19: $2.42 plus 1% of gross sales 02/01/19 - 01/31/24: $2.42 plus 1% of gross sales 02/01/24 - 01/31/29: $2.42 plus 1% of gross sales 02/01/29 - 01/31/34: $2.42 plus 1% of gross sales Fort Street Mall 10/01/09 - 04/30/19: $11.56 $ 963 $ 971 $ 194 King Street 05/01/19 - 04/30/21: $11.56 Honolulu, HI 05/01/26 - 04/30/31: FMV 05/01/31 - 04/30/36: FMV 121 South Center Street 01/01/10 - 12/31/20: CPI $ 201 $ 201 $ 15 Stockton, CA increase capped at 2.75% 01/01/21 - 12/31/31: CPI increase capped at 2.75% 7055 Highway 85 South 02/01/11 - 01/31/16: $3.29 $ 270 $ 270 $ 4 Riverdale, GA 02/01/16 - 01/31/21: $3.29 02/01/21 - 01/31/26: $3.29 02/01/26 - 01/31/31: $3.29 150 NE 20th Street 06/01/11 - 05/31/16: $6.99 $ 826 $ 826 $ 126 Highway 101 06/01/16 - 05/31/21: $6.99 Newport, OR 06/01/21 - 05/31/26: $6.99 6475 Dobbin Road 12/19/12 - 12/18/17: $14.50 $ 120 $ 145 $ 57 Columbia, MD 12/19/17 - 12/18/22: $16.30 9580 Livingston Road 03/01/14 - 02/29/19: $1.53 $ 408 $ 274 $ 28 Oxon Hill, MD 03/01/19 - 02/29/24: $1.53 03/01/24 - 02/29/29: $1.15 03/01/29 - 02/29/34: $1.15 </Table> 19
<Table> <Caption> LEXINGTON CORPORATE PROPERTIES TRUST PROPERTY CHART NET YEAR LAND RENTABLE BASE LEASE TERM AND TENANT CONSTRUCTED/ AREA SQUARE ANNUAL RENTS PER NET PROPERTY LOCATION (GUARANTOR) REDEVELOPED (ACRES) FEET RENTABLE SQUARE FOOT - ----------------- --------------------------- ------------ -------- ---------- ---------------------------- <S> <C> <C> <C> <C> <C> 3711 Gateway Drive Kohl's Department Stores, 1994 6.24 76,164 06/22/94 - 01/25/15 Eau Claire, WI Inc. 06/22/94 - 03/31/04: $5.71 04/01/04 - 01/25/15: $6.15 Rockshire Village Center GFS Realty, Inc. (1) 1977 7.32 51,682 01/01/78 - 06/19/17 2401 Wootton Parkway (Giant Food, Inc.) 01/01/78 - 02/28/05: $4.33 Rockville, MD 03/01/05 - 06/19/17: $2.23 4831 Whipple Avenue, N.W Best Buy Co., Inc. 1995 6.59 46,350 02/27/98 - 02/26/18: Canton, OH 02/27/98 - 02/26/18: $10.03 399 Peachwood Centre Drive Best Buy Co., Inc. 1996 7.49 45,800 02/27/98 - 02/26/18: Spartanburg, SC 02/27/98 - 02/26/18: $8.62 -------- ---------- Retail Subtotal 167.14 1,905,485 -------- ---------- Grand Total 1,158.36 14,097,203 ======== ========== <Caption> LEXINGTON CORPORATE PROPERTIES TRUST PROPERTY CHART 2003 2003 (E) MINIMUM STRAIGHT-LINE ESTIMATED CASH RENTAL REAL ESTATE TENANT RENT REVENUE TAXES PROPERTY LOCATION RENEWAL OPTIONS ($000) ($000) ($000) (12) - ----------------- -------------------------------- ------- ------------- ----------- <S> <C> <C> <C> <C> 3711 Gateway Drive 01/26/15 - 01/25/20: $6.40 $ 435 $ 463 $ 49 Eau Claire, WI 01/26/20 - 01/25/25: $6.64 01/26/25 - 01/25/30: $6.89 01/26/30 - 01/25/35: $7.14 Rockshire Village Center 06/20/17 - 05/31/27: $1.78 $ 224 $ 152 $ 90 2401 Wootton Parkway 06/01/27 - 05/31/37: $1.33 Rockville, MD 4831 Whipple Avenue, N.W 02/27/18 - 02/26/23: $10.03 $ 465 $ 465 $ 32 Canton, OH 02/27/23 - 02/26/28: $10.53 02/27/28 - 02/26/33: $11.06 399 Peachwood Centre Drive 02/27/18 - 02/26/23: $8.62 $ 395 $ 395 $ 15 Spartanburg, SC 02/27/23 - 02/26/28: $9.06 02/27/28 - 02/26/33: $9.51 ------- -------- ------- $13,875 $ 13,200 $ 1,784 ------- -------- ------- $99,211 $102,487 $10,265 ======= ======== ======= </Table> - --------------- (E) Estimated (1) The Company holds a leasehold interest in the land. The leases, including renewal options, expire at various dates ranging from 2028 through 2072. (2) Tenant can cancel lease on April 30, 2004 with 270 days notice and a payment of $899. (3) The tenant occupies 35,000 square feet. (4) Tenant can cancel lease on March 26, 2008 with 12 months notice and a payment of $1,392. (5) The Property contains two buildings with one additional tenant that occupies 18,400 square feet out of the total of 114,518. (6) Base rent is escalated 3% each year after subtracting the first year operating expense amount from the rent. Expense stop to be determined on first anniversary (01/01/04). Tenant has the right to contract leased space by 27,000 square feet (01/31/08) with 6 months notice and a payment estimated to be $696. The tenant can cancel lease on 01/31/10 with 12 months notice and a payment estimated to be $3,968. (7) Expense stop on this property is $393 per annum. (8) Tenant can cancel lease on November 30, 2013 with 12 months notice and a payment of $1,300. In addition the Company is responsible for real estate taxes in 2003. (9) 17,100 square feet subject to a lease to commence 04/01/03. (10) The Company has a 64% economic interest in the property. (11) The Company has a 33.85% economic interest in the property. (12) The Company recognized $354 in real estate taxes in 2002 FMV = Fair Market Value CPI = Consumer Price Index 20
LEXINGTON CORPORATE PROPERTIES TRUST JOINT VENTURE PROPERTY CHART <Table> <Caption> YEAR NET TENANT CONSTRUCTED/ LAND AREA RENTABLE PROPERTY LOCATION (GUARANTOR) REDEVELOPED (ACRES) SQUARE FEET - ----------------- ------------------------------------ ------------------ --------- ----------- <S> <C> <C> <C> <C> OFFICE 2210 Enterprise Drive Washington Mutual Home 1998 16.53 177,747 Florence, SC Loans, Inc. (13) 14040 Park Center Road NEC America, Inc. (14) 1987 13.30 108,000 Herndon, VA 15375 Memorial Drive Vastar Resources, Inc. (14) 1985 21.77 327,325 Houston, TX 550 International Parkway First USA Management 1999 12.80 125,920 Lake Mary, FL Services, Inc. (14) (17) (19) 600 Business Center Drive First USA Management 1997 13.30 125,155 Lake Mary, FL Services, Inc. (14) (17) (19) 17 Technology Circle Blue Cross Blue Shield 1999 46.82 456,304 Columbia, SC of South Carolina (15) (20) 10300 Kincaid Drive Bank One Indiana, N.A. (14) (18) 1999 13.30 193,000 Fishers, IN 6555 Sierra Drive True North Communications, Inc. (14) 1999 9.98 247,254 Irving, TX 389-399 Interpace Parkway Aventis, Inc. 2000 14.00 340,240 Morris Corporate Center IV (Aventis Pharma Holding GmbH) (14) Parsippany, NJ 2000 Eastman Drive Structural Dynamics 1991 12.36 212,836 Milford, OH Research Corp. (14) ------ --------- Office Subtotal 174.16 2,313,781 ------ --------- <Caption> BASE LEASE TERM AND TENANT 2003 2003 (E) ANNUAL RENTS PER NET RENEWAL MINIMUM CASH STRAIGHT-LINE RENTAL PROPERTY LOCATION RENTABLE SQUARE FOOT OPTIONS RENT ($000) REVENUE ($000) - ----------------- --------------------------- ------------------------------- ------------ --------------------- <S> <C> <C> <C> <C> OFFICE 2210 Enterprise Drive 06/10/98 - 06/30/08 07/01/08 - 06/30/13: 90% of FMV $ 1,635 $ 1,699 Florence, SC 06/10/98 - 06/30/03: $8.55 07/01/13 - 06/30/18: 90% of FMV 07/01/03 - 06/30/08: $9.84 14040 Park Center Road 08/13/99 - 08/12/09 08/13/09 - 08/12/14: FMV $ 1,848 $ 2,025 Herndon, VA 08/13/02 - 08/12/03: $16.98 08/13/14 - 08/12/19: FMV 08/13/03 - 08/12/04: $17.32 08/13/04 - 08/12/05: $19.67 08/13/05 - 08/12/06: $20.06 08/13/06 - 08/12/07: $20.46 08/13/07 - 08/12/08: $20.87 08/13/08 - 08/12/09: $21.29 15375 Memorial Drive 09/16/99 - 09/15/09 09/16/09 - 09/15/14: FMV $ 3,437 $ 3,437 Houston, TX 09/16/02 - 09/15/06: $10.50 09/16/14 - 09/15/19: FMV 09/16/06 - 09/15/09: $11.00 09/16/19 - 09/15/24: FMV 09/16/24 - 09/15/29: FMV 550 International Parkway 10/01/99 - 09/30/09 10/01/09 - 09/30/14: $24.65 $ 2,721 $ 2,820 Lake Mary, FL 10/01/02 - 09/30/03: $21.50 10/01/14 - 09/30/19: $26.90 10/01/03 - 09/30/04: $21.95 10/01/04 - 09/30/05: $22.40 10/01/05 - 09/30/06: $22.85 10/01/06 - 09/30/07: $23.30 10/01/07 - 09/30/08: $23.75 10/01/08 - 09/30/09: $24.20 600 Business Center Drive 10/01/99 - 09/30/09 10/01/09 - 09/30/14: FMV $ 2,824 $ 2,921 Lake Mary, FL 10/01/02 - 09/30/03: $22.45 10/01/14 - 09/30/19: FMV 10/01/03 - 09/30/04: $22.90 10/01/04 - 09/30/05: $23.35 10/01/05 - 09/30/06: $23.80 10/01/06 - 09/30/07: $24.25 10/01/07 - 09/30/08: $24.70 10/01/08 - 09/30/09: $25.15 17 Technology Circle 10/01/99 - 09/30/09 10/01/09 - 09/30/14: $15.06 $ 6,415 $ 6,930 Columbia, SC 10/01/01 - 09/30/04: $14.06 10/01/14 - 09/30/19: FMV 10/01/04 - 09/30/09: $16.17 10/01/19 - 09/30/24: FMV 10300 Kincaid Drive 11/01/99 - 10/31/09 11/01/09 - 10/31/14: 95% of FMV $ 3,185 $ 3,287 Fishers, IN 11/01/99 - 10/31/04: $16.50 11/01/14 - 10/31/19: 95% of FMV 11/01/04 - 10/31/09: $17.52 6555 Sierra Drive 02/01/00 - 01/31/10 02/01/10 - 01/31/15: FMV $ 4,009 $ 4,250 Irving, TX 02/01/00 - 01/31/05: $16.21 02/01/15 - 01/31/20: FMV 02/01/05 - 01/31/10: $18.05 389-399 Interpace Parkway 06/01/00 - 01/31/10 02/01/10 - 01/31/15: $31.00 $ 7,844 $ 8,487 Morris Corporate Center IV 06/01/00 - 01/31/05: $23.06 02/01/15 - 01/31/20: 95% of FMV Parsippany, NJ 02/01/05 - 01/31/10: $26.49 2000 Eastman Drive 05/01/91 - 04/30/11 05/01/11 - 04/30/16: FMV $ 2,657 $ 2,790 Milford, OH 05/01/02 - 04/30/03: $12.31 05/01/16 - 04/30/21: FMV 05/01/03 - 04/30/04: $12.57 05/01/21 - 04/30/26: FMV 05/01/04 - 04/30/05: $12.84 05/01/05 - 04/30/06: $13.11 05/01/06 - 04/30/07: $13.39 05/01/07 - 04/30/08: $13.73 05/01/08 - 04/30/09: $13.97 05/01/09 - 04/30/10: $14.27 05/01/10 - 04/30/11: $14.57 ------- ------- $36,575 $38,646 ------- ------- <Caption> ESTIMATED REAL ESTATE PROPERTY LOCATION TAXES ($000) (21) - ----------------- ----------------- <S> <C> OFFICE 2210 Enterprise Drive $ 5 Florence, SC 14040 Park Center Road $ 109 Herndon, VA 15375 Memorial Drive $ 312 Houston, TX 550 International Parkway $ 213 Lake Mary, FL 600 Business Center Drive $ 225 Lake Mary, FL 17 Technology Circle $ 4 Columbia, SC 10300 Kincaid Drive $ 98 Fishers, IN 6555 Sierra Drive $ 593 Irving, TX 389-399 Interpace Parkway $ 408 Morris Corporate Center IV Parsippany, NJ 2000 Eastman Drive $ 424 Milford, OH ------ $2,391 ------ </Table> 21
<Table> <Caption> YEAR NET TENANT CONSTRUCTED/ LAND AREA RENTABLE PROPERTY LOCATION (GUARANTOR) REDEVELOPED (ACRES) SQUARE FEET - ----------------- ------------------------------------ ------------------ --------- ----------- <S> <C> <C> <C> <C> INDUSTRIAL 291 Park Center Drive Kraft Foods North America, Inc. (14) 2001 25.50 344,700 Winchester, VA 7111 Crabb Road TNT Logistics North America, Inc. 1978 & 1993 51.41 752,000 Temperance, MI (14) (TNT Logistics Holdings B.V.) (TPG N.V.) 101 Michelin Drive TNT Logistics North America, Inc. 1991 & 1992 & 1993 118.14 1,164,000 Laurens, SC (14) (TNT Logistics Holdings B.V.) (TPG N.V.) 1 Boudreau Road TNT Canada, Inc. (16) 1993 8.62 122,876 St. Albert, Alberta, Canada (TNT Logistics Holdings B.V.) (TPG N.V.) 3600 Southgate Drive Sygma Network, Inc. (16) 2000 19.00 149,500 Danville, IL (Sysco Corporation) 224 Harbor Freight Road Harbor Freight Tools USA, Inc. (16) 2001 74.95 474,473 Dillon, SC (Central Purchasing, Inc.) 590 Ecology Lane Owens Corning (16) 2001 39.52 193,891 Chester, SC ------ --------- Industrial Subtotal 337.14 3,201,440 ------ --------- Total 511.30 5,515,221 ====== ========= <Caption> 2003 2003 (E) BASE LEASE TERM AND TENANT MINIMUM STRAIGHT-LINE ANNUAL RENTS PER NET RENEWAL CASH RENTAL PROPERTY LOCATION RENTABLE SQUARE FOOT OPTIONS RENT ($000) REVENUE ($000) - ----------------- --------------------------- ------------------------------- ----------- -------------- <S> <C> <C> <C> <C> INDUSTRIAL 291 Park Center Drive 06/01/01 - 05/31/11 06/01/11 - 05/31/16: 95% of FMV $ 1,420 $ 1,515 Winchester, VA 06/01/01 - 05/31/06: $4.12 06/01/16 - 05/31/21: FMV 06/01/06 - 05/31/11: $4.67 7111 Crabb Road 08/05/02 - 08/04/12 08/05/12 - 08/04/17: FMV $ 2,078 $ 2,161 Temperance, MI 08/05/02 - 08/04/08: $2.76 capped at $2.34 08/05/08 - 08/04/12: $3.04 08/05/17 - 08/04/22: FMV capped at $2.34 08/05/22 - 08/04/27: FMV capped at $2.34 08/05/27 - 08/04/32: FMV capped at $2.34 101 Michelin Drive 08/05/02 - 08/04/12 08/05/12 - 08/04/17: FMV $ 3,103 $ 3,227 Laurens, SC 08/05/02 - 08/04/08: $2.68 capped at $2.25 08/05/08 - 08/04/12: $2.95 08/05/17 - 08/04/22: FMV capped at $2.25 08/05/22 - 08/04/27: FMV capped at $2.25 08/05/27 - 08/04/32: FMV capped at $2.25 1 Boudreau Road 08/05/02 - 08/04/12 08/05/12 - 08/04/16: $2.85 $ 319 $ 331 St. Albert, Alberta, Canada 08/05/02 - 08/04/08: $2.59 08/05/17 - 08/04/22: $2.85 08/05/08 - 08/04/12: $2.85 08/05/22 - 08/04/26: $2.85 08/05/26 - 08/04/30: $2.85 3600 Southgate Drive 10/15/00 - 10/31/15 11/01/15 - 10/31/20: $6.87 $ 933 $ 933 Danville, IL 10/15/00 - 10/31/15: $6.24 11/01/20 - 10/31/25: $6.87 224 Harbor Freight Road 12/05/01 - 12/04/16 12/05/16 - 12/04/21: $4.61 $ 1,642 $ 1,812 Dillon, SC 12/05/01 - 12/04/06: $3.46 12/05/21 - 12/04/26: $5.07 12/05/06 - 12/04/11: $3.81 12/05/26 - 12/04/31: $5.57 12/05/11 - 12/04/16: $4.19 12/05/31 - 12/04/36: $6.13 590 Ecology Lane 01/01/01 - 12/31/20 01/01/21 - 12/31/25: $6.41 $ 1,619 $ 1,619 Chester, SC 01/01/01 - 12/31/20: $8.35 01/01/26 - 12/31/30: $7.08 ------- ------- $11,114 $11,598 ------- ------- $47,689 $50,244 ======= ======= <Caption> ESTIMATED REAL ESTATE PROPERTY LOCATION TAXES ($000) (21) - ----------------- ----------------- <S> <C> INDUSTRIAL 291 Park Center Drive $ 0 Winchester, VA 7111 Crabb Road $ 100 Temperance, MI 101 Michelin Drive $ 383 Laurens, SC 1 Boudreau Road $ 19 St. Albert, Alberta, Canada 3600 Southgate Drive $ 143 Danville, IL 224 Harbor Freight Road $ 31 Dillon, SC 590 Ecology Lane $ 4 Chester, SC ------ $ 680 ------ $3,071 ====== </Table> - --------------- (E) Estimated (13) The Company has a 22.7% economic interest in the entity which owns this property. (14) The Company has a 33 1/3% economic interest in the entity which owns this property. (15) The Company has a 40% economic interest in the entity which owns this property. (16) The Company has a 99% economic interest in the entity which owns this property. (17) The joint venture has operating expense stops on this property of $1,264. (18) The joint venture has operating expense stops on this property of $768. (19) The joint venture operates these investments as a single property. (20) The tenant expanded the premises by 107,894 square feet in 2001. (21) The non-consolidated entities recognized $631 in real estate taxes in 2002, gross of any expense stops. FMV = Fair Market Value CPI = Consumer Price Index 22
ITEM 3. LEGAL PROCEEDINGS The Company is not presently involved in any litigation nor to its knowledge is any litigation threatened against the Company or its subsidiaries that, in management's opinion, would result in any material adverse effect on the Company's ownership, financial condition, management or operation of its properties. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS NONE. ITEM 4A. EXECUTIVE OFFICERS AND TRUSTEES OF THE REGISTRANT The following sets forth certain information relating to the executive officers and trustees of the Company: <Table> <Caption> NAME BUSINESS EXPERIENCE ---- ------------------- <S> <C> E. ROBERT ROSKIND.................... Mr. Roskind has served as the Chairman of the Board of Age 58 Trustees since October 1993 and was Co-Chief Executive Officer of the Company until January 2003. He founded The LCP Group, L.P., a real estate advisory firm, in 1973 and has been its Chairman since 1976. The LCP Group, L.P. has been the general partner of various limited partnerships with which the Company has had prior dealings. Mr. Roskind received his B.S. in 1966 from the University of Pennsylvania and is a 1969 Harlan Fiske Stone Graduate of the Columbia Law School. He has been a member of the Bar of the State of New York since 1970. He is on the Board of Directors of Clarion CMBS Value Fund, Inc. RICHARD J. ROUSE..................... Mr. Rouse has served as Chief Investment Officer of the Age 57 Company since January 2003 and as a trustee of the Company since October 1993. He served as President of the Company from October 1993 to April 1996, was Co-Chief Executive Officer of the Company from October 1993 until January 2003, and since April 1996 has served as Vice Chairman of the Board of Trustees. Mr. Rouse graduated from Michigan State University in 1968 and received his M.B.A. in 1970 from the Wharton School of Finance and Commerce of the University of Pennsylvania. T. WILSON EGLIN...................... Mr. Eglin has served as Chief Executive Officer of the Age 38 Company since January 2003, Chief Operating Officer since October 1993, President since April 1996 and as a trustee since May 1994. He served as Executive Vice President from October 1993 to April 1996. Mr. Eglin received his B.A. from Connecticut College in 1986. PATRICK CARROLL...................... Mr. Carroll has served as Chief Financial Officer of the Age 39 Company since May 1998, Treasurer since January 1999 and Executive Vice President since January 2003. Prior to joining the Company, Mr. Carroll was, from 1993 to 1998, a Senior Manager in the real estate practice of Coopers & Lybrand L.L.P., a public accounting firm. Mr. Carroll received his B.B.A. from Hofstra University in 1986, his M.S. in Taxation from C.W. Post in 1995, and is a Certified Public Accountant. </Table> 23
<Table> <Caption> NAME BUSINESS EXPERIENCE ---- ------------------- <S> <C> WILLIAM N. CINNAMOND, JR. ........... Mr. Cinnamond has served as Senior Vice President and head Age 54 of asset management since September 2001. Prior to joining the Company, Mr. Cinnamond served as Vice President and Office/Industrial Real Estate Asset Management Sector Head for J.P. Morgan Fleming Asset Management, Inc. from 1989 to 2001. Mr. Cinnamond graduated from Boston University in 1970 and received his M.B.A. from Syracuse University in 1972. PAUL R. WOOD......................... Mr. Wood has served as Vice President, Chief Accounting Age 43 Officer and Secretary of the Company since October 1993. Mr. Wood received his B.B.A. from Adelphi University in 1982 and is a Certified Public Accountant. JANET M. KAZ......................... Ms. Kaz has served as Vice President of the Company since Age 39 May 1995 and as Asset Manager since October 1993. Ms. Kaz received her B.A. from Muhlenberg College in 1985. GEORGE P. WILSON..................... Mr. Wilson has served as Vice President of the Company since Age 42 December 2000 and as an Asset Manager since May 1999. Prior to joining the Company, Mr. Wilson was the Asset Manager for American Real Estate Partners, L.P., a publicly traded net lease real estate partnership from 1994 to 1999. He received his B.A. from Columbia College in 1983 and a M.S. in Real Estate Development from Columbia University in 1986. PHILIP L. KIANKA..................... Mr. Kianka has served as Vice President of the Company and Age 46 as an Asset Manager since 1997. Mr. Kianka received his B.A. from Clemson University in 1978 and his M.A. from Clemson University in 1981. NATASHA ROBERTS...................... Ms. Roberts has served as Vice President and as a member of Age 36 the acquisition department of the Company since 1997. Prior to joining the Company, Ms. Roberts worked for Net Lease Partners Realty Advisors, a real estate advisory firm and an affiliate of Mr. Roskind from January 1995 to January 1997. Ms. Roberts received her B.F.A. from New York University in 1989. BRENDAN P. MULLINIX.................. Mr. Mullinix has served as a Vice President of the Company Age 28 since February 2000 and as a member of the acquisitions department since October 1996. He received his B.A. from Columbia University in 1996. GEOFFREY DOHRMANN.................... Mr. Dohrmann has served as a trustee since August 2000. Mr. Age 52 Dohrmann co-founded Institutional Real Estate, Inc., a real estate-oriented publishing and consulting company in 1987 and is currently its Chairman and Chief Executive Officer. Mr. Dohrmann also belongs to the advisory boards for the National Real Estate Index, The Journal of Real Estate Portfolio Management and Center for Real Estate Enterprise Management. He is also a fellow of the Homer Hoyt Institute and holds the Counselors of Real Estate (CRE) designation. </Table> 24
<Table> <Caption> NAME BUSINESS EXPERIENCE ---- ------------------- <S> <C> CARL D. GLICKMAN..................... Mr. Glickman has served as a trustee since May 1994. He has Age 76 been President of The Glickman Organization, a real estate development and management firm, since 1953. He is on the Board of Directors of Alliance Tire & Rubber Co., Ltd., Bear Stearns Companies, Inc., and Jerusalem Economic Corporation Ltd. JACK A. SHAFFER...................... Mr. Shaffer has served as a trustee since April 2002. Mr. Age 73 Shaffer is the Principal, Co-Founder and Chairman of Jack A. Shaffer & Company LLC, a real estate investment advisory firm. Prior to starting Jack A. Shaffer & Company LLC in 2000, Mr. Shaffer served as Principal and Managing Director of International Relations for Sonnenblock-Goldman Company. Mr. Shaffer is a Governor and Trustee of the Urban Land Institute. SETH M. ZACHARY...................... Mr. Zachary has served as a trustee since November 1993. Age 50 Since 1987, he has been a partner, and is currently the Chairman, of the law firm Paul, Hastings, Janofsky & Walker LLP, counsel to the Company. </Table> 25
PART II. ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS The common shares of the Company are listed for trading on the New York Stock Exchange ("NYSE") under the symbol "LXP." The following table sets forth the closing high and low sales prices as reported by the NYSE for the common shares of the Company for each of the periods indicated below: <Table> <Caption> FOR THE QUARTERS ENDED: HIGH LOW - ----------------------- -------- -------- <S> <C> <C> December 31, 2002........................................... $16.3500 $13.2500 September 30, 2002.......................................... 16.8700 14.9000 June 30, 2002............................................... 16.5300 15.0000 March 31, 2002.............................................. 16.0000 14.2100 December 31, 2001........................................... $15.7000 $13.7000 September 30, 2001.......................................... 15.4800 13.0000 June 30, 2001............................................... 15.5500 12.7700 March 31, 2001.............................................. 13.4375 11.8125 </Table> The closing price of the common shares of the Company was $17.00 on March 20, 2003. As of March 20, 2003, the Company had 3,261 common shareholders of record. Dividends. The Company has made quarterly distributions since October 1986 without interruption. The dividends paid in each quarter for the last five years are as follows: <Table> <Caption> QUARTERS ENDED 2002 2001 2000 1999 1998 - -------------- ----- ----- ----- ----- ----- <S> <C> <C> <C> <C> <C> March 31, .................................... $0.33 $0.31 $0.30 $0.30 $0.29 June 30, ..................................... $0.33 $0.32 $0.30 $0.30 $0.29 September 30, ................................ $0.33 $0.32 $0.31 $0.30 $0.29 December 31, ................................. $0.33 $0.32 $0.31 $0.30 $0.30 </Table> The Company's current quarterly dividend rate is $0.335 per share, or $1.34 per share on an annualized basis. Following is a summary of the average taxable nature of the Company's dividends for the three years ended December 31: <Table> <Caption> 2002 2001 2000 ------- ------- ------- <S> <C> <C> <C> Total dividends per share............................. $ 1.32 $ 1.27 $ 1.22 ======= ======= ======= Ordinary income....................................... 77.89% 95.46% 87.78% Short-term capital gain............................... 2.27 -- -- 20% rate gain......................................... 4.12 -- 8.48 25% rate gain......................................... 5.65 -- 3.74 Percent non-taxable as return of capital.............. 10.07 4.54 -- ------- ------- ------- 100.00% 100.00% 100.00% ======= ======= ======= </Table> While the Company intends to continue paying regular quarterly dividends, future dividend declarations will be at the discretion of the Board of Trustees and will depend on the actual cash flow of the Company, its financial condition, capital requirements, the annual distribution requirements under the REIT provisions of the Code and such other factors as the Board of Trustees deems relevant. The actual cash flow available to pay dividends will be affected by a number of factors, including the revenues received from rental properties, the operating expenses of the Company, the interest and principal payments required under various borrowing 26
agreements, the ability of lessees to meet their obligations to the Company and any unanticipated capital expenditures. In addition to its common and preferred share offerings, the Company has capitalized the growth in its business through the issuance of secured and unsecured fixed and floating-rate debt. Borrowings under the Company's unsecured revolving credit facility have been a source of funds to both finance the purchase of properties and meet any short-term working capital requirements. The various instruments governing the Company's issuance of its unsecured bank debt impose certain restrictions on the Company with regard to dividends and incurring additional debt obligations. See "Management's Discussion and Analysis of Financial Condition and Results of Operations" and Note 6 of the Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K. The Company does not believe that the financial covenants contained in its unsecured revolving credit agreement and secured indebtedness will have any adverse impact on the Company's ability to pay dividends in the normal course of business to its common shareholders or to distribute amounts necessary to maintain its qualifications as a REIT. The Company maintains a dividend reinvestment program pursuant to which common shareholders may elect to automatically reinvest their dividends to purchase common shares of the Company at a 5% discount to the market price and free of commissions and other charges. The Company may, from time to time, either repurchase common shares in the open market, or issue new common shares, for the purpose of fulfilling its obligations under the dividend reinvestment program. Under this program none of the common shares issued were purchased on the open market. As of December 31, 2002 approximately 4.3 million common shares are enrolled in the dividend reinvestment program. Equity Compensation Plan Information. The following table sets forth certain information, as of December 31, 2002, with respect to compensation plans (including individual compensation arrangements) under which equity securities of the Company are authorized for issuance. <Table> <Caption> NUMBER OF SECURITIES REMAINING AVAILABLE FOR NUMBER OF SECURITIES FUTURE ISSUANCE UNDER TO BE ISSUED UPON WEIGHTED-AVERAGE EQUITY COMPENSATION EXERCISE OF EXERCISE PRICE OF PLANS (EXCLUDING OUTSTANDING OPTIONS, OUTSTANDING OPTIONS, SECURITIES REFLECTED IN WARRANTS AND RIGHTS WARRANTS AND RIGHTS COLUMN (A)) PLAN CATEGORY (A) (B) (C) ------------- -------------------- -------------------- ----------------------- <S> <C> <C> <C> Equity compensation plans approved by security holders.............. 1,233,057 $13.39 1,584,749 Equity compensation plans not approved by security holders..... -- -- -- -------- ------ -------- Total.................... 1,233,057 $13.39 1,584,749 ======== ====== ======== </Table> 27
ITEM 6. SELECTED FINANCIAL DATA The following sets forth selected consolidated financial data for the Company as of and for each of the years in the five-year period ended December 31, 2002. The selected consolidated financial data for the Company should be read in conjunction with the Consolidated Financial Statements and the related notes appearing elsewhere in this Annual Report on Form 10-K. ($000's, except per share data) <Table> <Caption> 2002 2001 2000 1999 1998 -------- -------- -------- --------- --------- <S> <C> <C> <C> <C> <C> Total revenues........................ $100,619 $ 82,862 $ 80,005 $ 77,300 $ 65,117 Operating expenses, including minority interest............................ (70,851) (61,656) (61,012) (61,080) (48,433) Transactional expenses................ -- -- -- -- (559) Gain (loss) on sale of properties..... 1,172 -- 2,959 5,127 (388) Income before extraordinary items..... 30,940 21,206 21,952 21,347 15,737 Extraordinary items................... (345) (3,144) -- -- -- Net income............................ 30,595 18,062 21,952 21,347 15,737 Income before extraordinary items per common share-basic.................. 1.12 0.95 1.15 1.11 0.79 Income before extraordinary items per common share-diluted................ 1.10 0.93 1.10 1.08 0.78 Net income per common share-basic..... 1.11 0.79 1.15 1.11 0.79 Net income per common share-diluted... 1.09 0.77 1.10 1.08 0.78 Cash dividends declared per common share............................... 1.32 1.29 1.23 1.20 1.18 Net cash provided by operating activities.......................... 58,129 44,852 41,175 39,783 32,380 Net cash used in investing activities.......................... (106,030) (64,321) (38,549) (64,942) (111,080) Net cash provided by (used in) financing activities................ 46,135 28,540 (6,671) 22,912 86,144 Ratio of earnings to combined fixed charges and preferred dividends..... 1.88 1.57 1.55 1.58 1.51 Real estate assets, net............... 779,150 714,047 584,198 606,592 609,717 Investments in non-consolidated entities............................ 54,261 48,764 40,836 11,523 -- Total assets.......................... 902,471 822,153 668,377 656,481 647,007 Mortgages and notes payable........... 491,517 455,771 387,326 372,254 354,281 Funds from operations(1).............. 62,163 50,270 46,316 40,652 35,141 Rent received below straight-line rent................................ 2,426 2,755 2,804 2,054 2,411 </Table> - --------------- (1) The Company believes that Funds From Operations ("FFO") enhances an investor's understanding of the Company's financial condition, results of operations and cash flows. The Company believes that FFO is an appropriate, but limited, measure of the performance of an equity REIT, and that it can be one measure of a REIT's ability to make cash distributions. FFO is defined in the October 1999 "White Paper", issued by the National Association of Real Estate Investment Trusts, Inc. ("NAREIT") as "net income (or loss), computed in accordance with generally accepted accounting principles ("GAAP"), excluding gains (or losses) from sales of property, plus real estate depreciation and amortization and after adjustments for unconsolidated partnerships and joint ventures." The Company included in the calculation of FFO the dilutive effect of the deemed conversion of its outstanding exchangeable notes which were redeemed by the Company in 2001. FFO should not be considered an alternative to net income as an indicator of operating performance or to cash flows from operating activities as determined in accordance with GAAP, or as a measure of liquidity to other consolidated income or cash flow statement data as determined in accordance with GAAP. 28
The Company believes that the book value of its real estate assets, which reflects the historical cost of such real estate assets less accumulated depreciation, is not indicative of the current market value of its properties. Historical operating results are not necessarily indicative of future operating results. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS GENERAL The Company, which has elected to qualify as a real estate investment trust under the Internal Revenue Code of 1986, acquires and manages net leased commercial properties. The Company has operated as a REIT since October 1993. As of December 31, 2002, the Company owned or had interests in 103 real estate properties. During 2002, the Company purchased 9 properties, including non-consolidated investments, for $148.0 million. During 2002, the Company sold 5 properties (including a 77.3% interest in a property) and one building in the Palm Beach Gardens, Florida property for $20.8 million, which resulted in an aggregate gain of approximately $1.2 million. During 2001, the Company sold one property for $4.1 million which approximated book value. CRITICAL ACCOUNTING POLICIES The Company's accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which require management to make estimates that affect the amounts of revenues, expenses, assets and liabilities reported. The following are critical accounting policies which are important to the portrayal of the Company's financial condition and results of operations and which require some of management's most difficult, subjective and complex judgments. The accounting for these matters involves the making of estimates based on current facts, circumstances and assumptions which could change in a manner that would materially affect management's future estimate with respect to such matters. Accordingly, future reported financial conditions and results could differ materially from financial conditions and results reported based on management's current estimates. Revenue Recognition. The Company recognizes revenue in accordance with Statement of Financial Accounting Standards No. 13 "Accounting for Leases" (SFAS No.13). SFAS No.13 requires that revenue be recognized on a straight-line basis over the term of the lease unless another systematic and rational basis is more representative of the time pattern in which the use benefit is derived from the leased property. Gains on sales of real estate are recognized pursuant to the provisions of SFAS No. 66 "Accounting for Sales of Real Estate." The specific timing of the sale is measured against various criteria in SFAS No. 66 related to the terms of the transactions and any continuing involvement in the form of management or financial assistance associated with the properties. If the sales criteria are not met, the gain is deferred and the finance, installment or cost recovery method, as appropriate, is applied until the sales criteria are met. Accounts Receivable. The Company continuously monitors collections from its tenants and would make a provision for estimated losses based upon historical experience and any specific tenant collection issues that the Company has identified. Real Estate. The Company evaluates the carrying value of all real estate held to determine if an impairment has occurred which would require the recognition of a loss. The evaluation includes reviewing anticipated cash flows of the property, based on current leases in place, coupled with an estimate of proceeds to be realized upon sale. However, estimating future sale proceeds is highly subjective and such estimates could differ materially from actual results. 29
LIQUIDITY AND CAPITAL RESOURCES Since becoming a public company, the Company's principal source of capital for growth has been the public and private equity markets, selective secured indebtedness, its unsecured credit facility, issuance of OP Units and undistributed funds from operations. The Company's current $60.0 million variable rate unsecured revolving credit facility, which is scheduled to expire in March 2004, has made available funds to finance acquisitions and meet any short-term working capital requirements. As of December 31, 2002, $31.0 million was outstanding at an interest rate of 3.20%. The Company pays an unused facility fee equal to 25 basis points if 50% or less of the facility is utilized and 15 basis points if greater than 50% of the facility is utilized. Since its formation in 1993, the Company has raised, through the issuance of common shares, preferred shares and OP Units, aggregate capital of approximately $234.5 million for the purposes of making acquisitions and retiring indebtedness. In addition, the Company has purchased $109.8 million in real estate through the direct issuance of its common shares and OP Units. During 2002, the Company completed a 2.7 million common share offering at $15.85 per share raising $40.5 million of net proceeds. The proceeds were used to repay debt and fund acquisitions. Dividends. In connection with its intention to continue to qualify as a REIT for Federal income tax purposes, the Company expects to continue paying regular dividends to its shareholders. These dividends are expected to be paid from operating cash flows and/or from other sources. Since cash used to pay dividends reduces amounts available for capital investments, the Company generally intends to maintain a conservative dividend payout ratio as a percentage of FFO, reserving such amounts as it considers necessary for the maintenance or expansion of properties in its portfolio, debt reduction, the acquisition of interests in new properties as suitable opportunities arise, and such other factors as the Board of Trustees considers appropriate. Dividends paid to common shareholders increased to $35.8 million in 2002, compared to $25.0 million in 2001 and $20.8 million in 2000. The Company's dividend and distribution FFO payout ratio, on a per share basis, for 2002, 2001, and 2000 was 70.2%, 71.3% and 69.3% respectively. Although the Company receives the majority of its rental payments on a monthly basis, it intends to continue paying dividends quarterly. The Company's two largest tenants, as a percentage of revenue, pay their rent semi-annually (Kmart Corporation) and quarterly (Northwest Pipeline Corp.). Amounts accumulated in advance of each quarterly distribution are invested by the Company in short-term money market or other suitable instruments. Kmart, the Company's largest tenant based upon rental revenues, filed for Chapter 11 bankruptcy protection on January 22, 2002. Kmart leases a 1.7 million square foot distribution facility in Warren, Ohio. The Company acquired the property in 1998 by assuming a non-recourse mortgage of $42.2 million, issuing operating partnership units valued at $18.9 million and paying $2.8 million in cash. The Company has no retail properties leased to Kmart. The Kmart lease expires on September 30, 2007. Annual net rents are presently $9.4 million. Rents are paid semi-annually in arrears. The property is encumbered by a non-recourse first mortgage, bearing imputed interest at 7% per annum with an outstanding balance of $25.6 million at December 31, 2002. Annual debt service on this non-recourse mortgage, which fully amortizes by maturity on October 1, 2007, is $6.2 million. Accordingly, this property currently provides after debt service cash flow to the Company of $3.2 million. The property is a warehouse distribution facility utilized in Kmart's logistical operation. As of December 31, 2002 the Company had $7.3 million in accounts receivable from Kmart (including $2.0 million in straight-line rents and $2.6 million in pre-petition rent). Kmart is current in its rental obligation to the Company since filing for bankruptcy and the next rental payment is due April 1, 2003. 30
The Company believes that cash flows from operations will continue to provide adequate capital to fund its operating and administrative expenses, regular debt service obligations and all dividend payments in accordance with REIT requirements in both the short-term and long-term. In addition, the Company anticipates that cash on hand, borrowings under its unsecured credit facility, issuance of equity and debt, as well as other alternatives, will provide the necessary capital required by the Company. Cash flows from operations as reported in the Consolidated Statements of Cash Flows increased to $58.1 million for 2002 from $44.9 million for 2001 and $41.2 million for 2000. Net cash used in investing activities totaled $106.0 million in 2002, $64.3 million in 2001 and $38.5 million in 2000. Cash used in investing activities related primarily to investments in real estate properties and joint ventures. Therefore, the fluctuation in investing activities relates primarily to the timing of investments and dispositions. In connection with the acquisition of the Net Partnerships, the Company acquired $3.8 million of cash in 2001. Net cash provided by (used in) financing activities totaled $46.1 million in 2002, $28.5 million in 2001 and $(6.7) million in 2000. Cash provided by (used in) financing activities during each year was primarily attributable to proceeds from equity offerings, non-recourse mortgages and advances/repayments under the Company's credit facility coupled with dividend and distribution payments, debt service payments and the repurchase of the Company's common shares/operating partnership units. UPREIT Structure. The Company's UPREIT structure permits the Company to effect acquisitions by issuing to a seller of real estate, as a form of consideration, interests in partnerships controlled by the Company. All of such interests are redeemable at certain times for common shares on a one-for-one basis and all of such interests require the Company to pay certain distributions to the holders of such interests. The Company accounts for these interests in a manner similar to a minority interest holder. The number of common shares that will be outstanding in the future should be expected to increase, and minority interest expense should be expected to decrease as such partnership interests are redeemed for common shares. The following table provides certain information with respect to such partnership interests as of December 31, 2002 (assuming the Company's annual dividend rate remains at the current $1.34 per share). <Table> <Caption> TOTAL CURRENT CURRENT TOTAL ANNUALIZED ANNUALIZED REDEEMABLE FOR NUMBER AFFILIATE PER UNIT DISTRIBUTION COMMON SHARES: OF UNITS UNITS DISTRIBUTION ($000) - -------------- --------- --------- ------------ ------------ <S> <C> <C> <C> <C> At any time...................................... 3,499,108 1,401,159 $1.34 $4,689 At any time...................................... 1,254,152 120,374 1.08 1,354 At any time...................................... 114,059 52,144 1.12 128 January 2003..................................... 17,901 -- -- -- December 2003.................................... 1,341 -- 1.34 2 March 2004....................................... 43,734 -- 0.27 12 March 2004....................................... 19,510 -- -- -- November 2004.................................... 24,552 2,856 -- -- March 2005....................................... 29,384 -- -- -- January 2006..................................... 171,168 416 -- -- February 2006.................................... 28,230 1,743 -- -- May 2006......................................... 9,368 -- 0.29 3 November 2006.................................... 44,858 44,858 1.34 60 --------- --------- ----- ------ 5,257,365 1,623,550 $1.19 $6,248 ========= ========= ===== ====== </Table> Affiliate units, which are included in total units, represent OP Units held by two executive officers (including their affiliates) of the Company. 31
FINANCING Revolving Credit Facility. The Company's $60.0 million unsecured credit facility, which expires March 2004, bears interest at 150-250 basis points over LIBOR depending on the amount of properties the Company owns free and clear of mortgage debt, and has an interest rate period of one, three, or six months, at the option of the Company. The credit facility contains various leverage, debt service coverage, net worth maintenance and other customary covenants. As of December 31, 2002, $31.0 million was outstanding and $24.8 million was available to be drawn. The Company had six outstanding letters of credit aggregating $4.2 million which expire in 2003 ($0.3 million), 2004 ($0.6 million), 2005 ($2.5 million), 2007 ($0.4 million) and 2010 ($0.4 million). Debt Service Requirements. The Company's principal liquidity needs are the payment of interest and principal on outstanding indebtedness. As of December 31, 2002, a total of 66 of the Company's 87 consolidated properties were subject to outstanding mortgages which had an aggregate principal amount of $448.0 million. As of December 31, 2002 the weighted average interest rate on the Company's outstanding mortgages, including line of credit borrowings and other corporate debt, was approximately 6.95%. The scheduled principal amortization payments for the next five years are as follows: $17.4 million in 2003; $17.7 million in 2004; $16.1 million in 2005, $14.5 million in 2006 and $15.3 million in 2007. Approximate balloon payment amounts, having a weighted average interest rate of 6.74%, excluding line of credit borrowings and other corporate debt, due the next five years are as follows: $0 million in 2003; $14.4 million in 2004; $76.6 million in 2005, $0 in 2006 and $0 in 2007. The ability of the Company to make such balloon payments will depend upon its ability to refinance the mortgage related thereto, sell the related property, have available amounts under its unsecured credit facility or access other capital. The ability of the Company to accomplish such goals will be affected by numerous economic factors affecting the real estate industry, including the availability and cost of mortgage debt at the time, the Company's equity in the mortgaged properties, the financial condition of the Company, the operating history of the mortgaged properties, the then current tax laws and the general national, regional and local economic conditions. Lease Obligations. Since the Company's tenants bear all or substantially all of the cost of property operations, maintenance and repairs, the Company does not anticipate significant needs for cash for these costs. For five of the properties, the Company has a level of property operating expense responsibility and a sixth obligates the Company to pay real estate taxes in 2003 and for the tenant to be responsible thereafter. The Company generally funds property expansions with additional secured borrowings, the repayment of which is funded out of rental increases under the leases covering the expanded properties. To the extent there is a vacancy in a property, the Company would be obligated for all operating expenses, including real estate taxes and insurance. The Company's tenants pay the rental obligations on ground leases either directly to the fee holder or to the Company as increased rent. The annual ground lease rental payment obligations for each of the next five years is $0.9 million. Origination Fees Payable. In connection with certain acquisitions, the Company assumed obligations ($2.2 million in principal plus accrued interest) which bear interest on the outstanding principal balances only at rates ranging from 12.3% to 19.0%. The scheduled annual payments for the next five years are as follows: $0.4 million in 2003; $0.4 million in 2004; $0.4 million in 2005; $0.7 million in 2006 and $0.9 million in 2007. As of December 31, 2002, $6.6 million is outstanding of which $3.4 million is due to two executive officers of the Company. Shares Repurchase. The Company's Board of Trustees has authorized the Company to repurchase, from time to time, up to 2.0 million common shares and operating partnership units depending on market conditions and other factors. As of December 31, 2002, the Company had repurchased approximately 1.4 million common shares and operating partnership units, at an average price of approximately $10.55 per common share/unit. No common shares or units were repurchased in 2002. 32
RESULTS OF OPERATIONS ($000) <Table> <Caption> INCREASE (DECREASE) --------------------- SELECTED INCOME STATEMENT DATA 2002 2001 2000 2002-2001 2001-2000 - ------------------------------ -------- ------- ------- --------- --------- <S> <C> <C> <C> <C> <C> Total revenues............................. $100,619 $82,862 $80,005 $17,757 $2,857 Total expenses............................. 64,975 56,272 54,997 8,703 1,275 Interest................................. 33,502 29,732 29,581 3,770 151 Depreciation and amortization of real estate................................ 21,480 18,312 17,513 3,168 799 General & administrative................. 5,741 4,952 4,902 789 50 Property operating....................... 2,357 1,636 1,504 721 132 Gains on sale.............................. 1,172 -- 2,959 1,172 (2,959) Extraordinary items........................ (345) (3,144) -- (2,799) 3,144 Net income................................. 30,595 18,062 21,952 12,533 (3,890) </Table> COMPARISON OF 2002 TO 2001 Changes in the results of operations for the Company are primarily due to the growth of its portfolio and costs associated with such growth. Of the increase in total revenues in 2002 of $17.8 million, $15.5 million is primarily attributable to rental revenue from properties purchased in 2001 (primarily the purchase of properties from Net 1 L.P. and Net 2 L.P. in November 2001) and owned in 2002 ($14.8 million) and properties purchased in 2002 ($2.9 million) offset by a reduction in rental revenue from a decrease in overall portfolio occupancy from 99.7% to 99.2% ($0.3 million) and property sales ($2.0 million). Of the remaining $2.3 million in revenue growth in 2002, $1.8 million was attributable to an increase in earnings from non-consolidated entities and $0.5 million was attributable primarily to higher interest earned due to greater cash balances carried. The $3.8 million increase in interest expense due to the growth of the Company's portfolio has been partially offset by a reduction in the weighted average interest rate from 7.28% for the year ended December 31, 2001 to 6.95% for the year ended December 31, 2002 due to debt refinancings, scheduled principal amortization payments, lower variable interest rates and lower interest rates on new debt incurred by the Company. The Company's general and administrative expenses, which increased in absolute dollars due to the acquisition of properties from Net 1 L.P. and Net 2 L.P., decreased to 5.7% of revenue in 2002 compared with 6.0% in 2001. Property operating expenses increased due to the vacancy of one property in the third quarter of 2001, which resulted in the Company incurring property level operating expenses which normally are the responsibility of the tenant, two properties in which the Company has a level of operating expense responsibility and an estimate of expenses for the Kmart property. Net income increased in 2002 due to the impact of items discussed above plus $1.2 million in gains on sale of properties and a net reduction of $2.8 million in extraordinary charges related to the retirement of debt. The Company's non-consolidated entities had aggregate net income of $14.1 million in 2002 compared with $10.2 million in 2001. The increase in net income is primarily attributable to an increase in rental revenue of $7.7 million in 2002 attributable to the acquisition of properties, the expansion of an existing property and the joint venturing of a single property in 2002. Advisory fee income increased by $0.3 million in 2002 due to the timing of transactions which generate acquisition fees. These revenue sources were partly offset by an increase in (i) interest expense of $2.5 million in 2002 due to partially funding third quarter 2002 and fourth quarter 2001 acquisitions with the use of non-recourse mortgage debt and the joint venturing of a single property in 2002, and (ii) depreciation expense of $1.5 million in 2002 due to more depreciable assets owned. The increase in net income in future periods will be closely tied to the level of acquisitions made by the Company. Without acquisitions, which in addition to generating rental revenue, generate acquisition, debt placement and asset management fees when such properties are acquired by joint venture or advisory programs, growth in net income is dependent on index adjusted rents (7 leases), percentage rents (3 leases), reduced interest expense on amortizing mortgages and by controlling variable overhead costs. However, there 33
are many factors beyond management's control that could offset these items including, without limitation, increased interest rates of variable debt ($78.4 million as of December 31, 2002 at a weighted average interest rate of 3.88%) and tenant monetary defaults. Effective January 1, 2003 the Company converted its non-voting interest in LRA to a 99% voting interest and accordingly LRA will be consolidated for financial reporting purposes instead of being treated under the equity method as it currently is. Had LRA been consolidated historically, general and administrative expenses as a percentage of revenue would have been 6.6%, 6.9%, and 7.4% for the years ended December 31, 2002, 2001 and 2000, respectively. COMPARISON OF 2001 TO 2000 Of the increase in total revenues in 2001 of $2.9 million, $1.5 million is attributable to increased earnings from non-consolidated entities established in 1999. The remaining revenue growth in 2001 was primarily attributable to increased rental revenues from the purchase of Net 1 L.P. and Net 2 L.P. in November 2001 ($1.3 million). The increase in interest expense due to the growth of the Company's portfolio has been partially offset by a reduction in the weighted average interest rate from 7.79% at December 31, 1999 to 7.28% at December 31, 2001 due to debt refinancings, repayments, lower variable interest rates and lower interest rates on new debt incurred by the Company. The Company's general and administrative expenses have remained constant in 2001 in absolute dollars and decreased to 6.0% of revenue in 2001 compared to 6.1% of revenue in 2000 due to the growth of the Company's portfolio relative to these expenses. The increase in property operating expenses in 2001 relates to costs incurred relating to two properties that became vacant in 2001, which resulted in the Company incurring property level operating expenses which normally are the responsibility of the tenant, and a third property in which the Company has a level of expense responsibility. Net income decreased in 2001 due to the impact of items discussed above offset by the incurring of a $3.1 million extraordinary charge for early extinguishment of debt and a $3.0 million reduction in gains on sales of properties. The Company's non-consolidated entities had aggregate net income of $10.2 million in 2001 and $4.8 million in 2000. The increase in net income is primarily attributable to an increase in rental income of $21.1 million in 2001 attributable to acquisition of properties and expansion of an existing property. Advisory fee income, which includes acquisition and asset management fees, decreased by $0.5 million in 2001 due to the reduction in the amount of acquisitions made by LAC in 2001 compared to 2000 which was partially offset by acquisitions made by the private investment fund client in 2001. These revenue sources were partly offset by an increase in (i) interest expense of $9.0 million in 2001 due to increased acquisition leverage, (ii) depreciation expense of $4.0 million in 2001 due to more depreciable assets owned and (iii) property operating/general and administrative expenses of $2.2 million in 2001 due to an increase in the asset base and advisory accounts. FUNDS FROM OPERATIONS The Company believes that Funds From Operations ("FFO") enhances an investor's understanding of the Company's financial condition, results of operations and cash flows. The Company believes that FFO is an appropriate, but limited, measure of the performance of an equity REIT, and that it can be one measure of a REIT's ability to make cash distributions. FFO is defined in the October 1999 "White Paper", issued by the National Association of Real Estate Investment Trusts, Inc. ("NAREIT") as "net income (or loss), computed in accordance with generally accepted accounting principles ("GAAP"), excluding gains (or losses) from sales of property, plus real estate depreciation and amortization and after adjustments for unconsolidated partnerships and joint ventures." The Company included in the calculation of FFO the dilutive effect of the deemed conversion of its outstanding exchangeable notes, which were fully satisfied in 2001. FFO should not be considered an alternative to net income as an indicator of operating performance or to cash flows from operating activities as determined in accordance with GAAP, or as a measure of liquidity to other consolidated income or cash flow statement data as determined in accordance with GAAP. 34
The following table reflects the calculation of the Company's FFO and cash flow activities for each of the years in the three year period ended December 31, 2002 ($000): <Table> <Caption> 2002 2001 2000 -------- -------- -------- <S> <C> <C> <C> Net income.................................................. $ 30,595 $ 18,062 $ 21,952 Depreciation and amortization of real estate.............. 21,480 18,312 17,513 Minority interests' share of net income................... 5,627 5,215 5,772 Gain on sale of properties................................ (1,172) -- (2,959) Amortization of leasing commissions....................... 677 769 503 Deemed conversion of notes payable........................ -- 1,000 1,582 Joint venture adjustment-depreciation..................... 4,611 3,768 1,953 Extraordinary item........................................ 345 3,144 -- -------- -------- -------- Funds From Operations.................................. $ 62,163 $ 50,270 $ 46,316 ======== ======== ======== Cash flows from operating activities........................ $ 58,129 $ 44,852 $ 41,175 Cash flows used in investing activities..................... (106,030) (64,321) (38,549) Cash flows from (used in) financing activities.............. 46,135 28,540 (6,671) </Table> The Company's dividend and distribution FFO payout ratio, on a per share basis, was 70.2%, 71.3% and 69.3% for the years ended December 31, 2002, 2001 and 2000 respectively. RECENTLY ISSUED ACCOUNTING STANDARDS The Company's adoption of SFAS No. 144 "Accounting for the Impairment or Disposal of Long-Lived Assets," had no impact of the Company's consolidated financial position or results of operations. In April 2002, the FASB issued SFAS No. 145 which rescinds SFAS No. 4 which required all gains and losses on extinguishment of debt to be classified as an extraordinary item. The Company will adopt the provisions of SFAS No. 145 effective January 1, 2003. Had the statement been adopted earlier, the extraordinary items recorded in 2002 and 2001 would have been eliminated and the charges would have been reflected in interest expense. In July 2002, the FASB issued SFAS No. 146 which requires that exit or disposal costs be recorded when incurred and be measured at fair value. SFAS No. 146 is effective for an exit or disposal activity initiated after December 31, 2002. The Company does not expect that this statement will have any effect on the Company's consolidated results of operations or financial position. In January 2003, the Financial Accounting Standards Board issued FASB Interpretation No. 46, "Consolidation of Variable Interest Entities" ("FIN 46"). FIN 46 requires that companies that absorb the majority of another entity's expected losses, receive a majority of its expected residual returns, or both, as a result of holding variable interests, which are ownership, contractual, or other economic interests in an entity, consolidate the variable interest entity. The consolidation requirements apply to all variable interest entities created after January 31, 2003 and all other existing entities beginning July 1, 2003. The Company has not determined the impact the adoption of FIN 46 will have on its consolidated results of operations or financial position. However, it is possible that the adoption of FIN 46 will require the Company to consolidate its Florence joint venture. Financial information for this joint venture is included in Footnote 5 of the Company's financial statements. In November 2002, the FASB issued Interpretation No. 45 "Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others," which elaborates on the disclosures to be made by a guarantor in its interim and annual financial statements about its obligations under certain guarantees that it has issued. The initial recognition and measurement provisions of this Interpretation are applicable on a prospective basis to guarantees issued or modified after December 31, 2002. The Company believes that the adoption of this interpretation will not have a material effect to the Company's financial statements. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK The Company's exposure to market risk relates to its variable rate debt. As of December 31, 2002 and 2001 the Company's variable rate indebtedness represented 15.9% and 12.7%, respectively, of total mortgages and notes payable. During 2002 and 2001, this variable rate indebtedness had a weighted average interest rate of 4.12% and 6.56%, respectively. Had the weighted average interest rate been 100 basis points higher the Company's net income would have been reduced by $0.8 million and $0.3 million in 2002 and 2001, respectively. 35
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA LEXINGTON CORPORATE PROPERTIES TRUST AND CONSOLIDATED SUBSIDIARIES INDEX <Table> <Caption> PAGE ----- <S> <C> Independent Auditors' Report................................ 37 Consolidated Balance Sheets as of December 31, 2002 and 2001...................................................... 38 Consolidated Statements of Income for the years ended December 31, 2002, 2001 and 2000.......................... 39 Consolidated Statements of Changes in Shareholders' Equity for the years ended December 31, 2002, 2001 and 2000...... 40 Consolidated Statements of Cash Flows for the years ended December 31, 2002, 2001 and 2000.......................... 41 Notes to Consolidated Financial Statements.................. 42-64 Financial Statement Schedule Schedule III -- Real Estate and Accumulated Depreciation.... 65-66 </Table> 36
INDEPENDENT AUDITORS' REPORT The Shareholders Lexington Corporate Properties Trust: We have audited the consolidated financial statements of Lexington Corporate Properties Trust and subsidiaries as listed in the accompanying index. In connection with our audits of the consolidated financial statements, we also have audited the financial statement schedule as listed in the accompanying index. These consolidated financial statements and the financial statement schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements and the financial statement schedule based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Lexington Corporate Properties Trust and subsidiaries as of December 31, 2002 and 2001, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2002 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the related financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein. LOGO New York, New York January 28, 2003, except as to note 18 which is as of March 15, 2003 37
LEXINGTON CORPORATE PROPERTIES TRUST AND CONSOLIDATED SUBSIDIARIES CONSOLIDATED BALANCE SHEETS ($000 EXCEPT PER SHARE AMOUNTS) DECEMBER 31, <Table> <Caption> 2002 2001 -------- -------- <S> <C> <C> ASSETS Real estate, at cost Buildings and building improvements....................... $770,375 $702,494 Land and land estates..................................... 131,496 116,795 Land improvements......................................... 3,154 3,154 Fixtures and equipment.................................... 8,345 8,345 -------- -------- 913,370 830,788 Less: accumulated depreciation............................ 134,220 116,741 -------- -------- 779,150 714,047 Investment in and advances to non-consolidated entities..... 54,261 48,764 Cash and cash equivalents................................... 12,097 13,863 Deferred expenses (net of accumulated amortization of $6,269 in 2002 and $4,411 in 2001)............................... 8,168 8,875 Rent receivable............................................. 23,650 19,026 Other assets, net........................................... 25,145 17,578 -------- -------- $902,471 $822,153 ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY Mortgages and notes payable................................. $460,517 $445,771 Credit facility borrowings.................................. 31,000 10,000 Origination fees payable, including accrued interest........ 6,565 6,636 Accounts payable and other liabilities...................... 8,003 5,489 Accrued interest payable.................................... 2,755 1,507 -------- -------- 508,840 469,403 Minority interests.......................................... 56,846 57,859 -------- -------- 565,686 527,262 -------- -------- Commitments and contingencies (notes 6, 8 and 12) Preferred shares, par value $0.0001 per share; authorized 10,000,000 shares. Class A Senior Cumulative Convertible Preferred, liquidation preference $25,000, 2,000,000 shares issued and outstanding in 2001..................... -- 24,369 -------- -------- Common shares, par value $0.0001 per share; 287,888 shares issued and outstanding, liquidation preference $3,886..... 3,809 3,809 -------- -------- Shareholders' equity: Common shares, par value $0.0001 per share, authorized 80,000,000 shares, 29,742,160 and 24,219,409 shares issued and outstanding in 2002 and 2001, respectively........................................... 3 2 Additional paid-in-capital................................ 414,989 342,161 Deferred compensation, net................................ (1,766) (1,641) Accumulated distributions in excess of net income......... (77,777) (71,836) -------- -------- 335,449 268,686 Less: notes receivable from officers/shareholders......... (2,473) (1,973) -------- -------- Total shareholders' equity........................ 332,976 266,713 -------- -------- $902,471 $822,153 ======== ======== </Table> The accompanying notes are an integral part of these consolidated financial statements. 38
LEXINGTON CORPORATE PROPERTIES TRUST AND CONSOLIDATED SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME ($000 EXCEPT PER SHARE AMOUNTS) YEARS ENDED DECEMBER 31, <Table> <Caption> 2002 2001 2000 ----------- ----------- ----------- <S> <C> <C> <C> Revenues: Rental.............................................. $ 93,884 $ 78,402 $ 76,824 Equity in earnings of non-consolidated entities..... 5,079 3,328 1,851 Interest and other.................................. 1,656 1,132 1,330 ----------- ----------- ----------- 100,619 82,862 80,005 ----------- ----------- ----------- Expenses: Interest expense.................................... 33,502 29,732 29,581 Depreciation and amortization of real estate........ 21,480 18,312 17,513 Amortization of deferred expenses................... 1,895 1,640 1,497 General and administrative expenses................. 5,741 4,952 4,902 Property operating expenses......................... 2,357 1,636 1,504 ----------- ----------- ----------- 64,975 56,272 54,997 ----------- ----------- ----------- Income before gain on sale of properties, minority interests and extraordinary items................... 35,644 26,590 25,008 Gain on sale of properties............................ 1,172 -- 2,959 ----------- ----------- ----------- Income before minority interests and extraordinary items............................................... 36,816 26,590 27,967 Minority interests.................................... 5,876 5,384 6,015 ----------- ----------- ----------- Income before extraordinary items..................... 30,940 21,206 21,952 Extraordinary items................................... 345 3,144 -- ----------- ----------- ----------- Net income....................................... $ 30,595 $ 18,062 $ 21,952 =========== =========== =========== Income per common share -- basic: Income before extraordinary items..................... $ 1.12 $ 0.95 $ 1.15 Extraordinary items................................... (0.01) (0.16) -- ----------- ----------- ----------- Net income....................................... $ 1.11 $ 0.79 $ 1.15 =========== =========== =========== Weighted average common shares outstanding............ 27,026,789 19,522,323 16,900,039 =========== =========== =========== Income per common share -- diluted: Income before extraordinary items..................... $ 1.10 $ 0.93 $ 1.10 Extraordinary items................................... (0.01) (0.16) -- ----------- ----------- ----------- Net income....................................... $ 1.09 $ 0.77 $ 1.10 =========== =========== =========== Weighted average diluted common shares outstanding.... 32,602,069 19,862,880 24,714,219 =========== =========== =========== </Table> The accompanying notes are an integral part of these consolidated financial statements. 39
LEXINGTON CORPORATE PROPERTIES TRUST AND CONSOLIDATED SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY ($000 EXCEPT PER SHARE AMOUNTS) YEARS ENDED DECEMBER 31, <Table> <Caption> ACCUMULATED NOTES ADDITIONAL DEFERRED DISTRIBUTIONS RECEIVABLE TOTAL NUMBER OF PAID-IN COMPENSATION, IN EXCESS OF OFFICERS/ SHAREHOLDERS' SHARES AMOUNT CAPITAL NET NET INCOME SHAREHOLDERS EQUITY ---------- ------ ---------- ------------- ------------- ------------ ------------- <S> <C> <C> <C> <C> <C> <C> <C> Balance at December 31, 1999... 16,905,285 $2 $240,339 $ (701) $(60,852) $(1,991) $176,797 Net income..................... -- -- -- -- 21,952 -- 21,952 Dividends paid to common shareholders ($1.22 per share)....................... -- -- -- -- (20,765) -- (20,765) Dividends paid to preferred shareholders ($1.281 per share)....................... -- -- -- -- (2,562) -- (2,562) Common shares issued, net...... 353,494 -- 3,866 (664) -- -- 3,202 Amortization of deferred compensation................. -- -- -- 346 -- -- 346 Common shares repurchased and retired...................... (395,385) -- (4,093) -- -- -- (4,093) Repayments on notes............ -- -- -- -- -- 8 8 ---------- -- -------- ------- -------- ------- -------- Balance at December 31, 2000... 16,863,394 2 240,112 (1,019) (62,227) (1,983) 174,885 Net income..................... -- -- -- -- 18,062 -- 18,062 Dividends paid to common shareholders ($1.27 per share)....................... -- -- -- -- (25,004) -- (25,004) Dividends paid to preferred shareholders ($1.3335 per share)....................... -- -- -- -- (2,667) -- (2,667) Common shares issued, net...... 7,368,015 -- 102,206 (1,181) -- -- 101,025 Amortization of deferred compensation................. -- -- -- 559 -- -- 559 Common shares repurchased and retired...................... (12,000) -- (157) -- -- -- (157) Repayments on notes............ -- -- -- -- -- 10 10 ---------- -- -------- ------- -------- ------- -------- Balance at December 31, 2001... 24,219,409 2 342,161 (1,641) (71,836) (1,973) 266,713 Net income..................... -- -- -- -- 30,595 -- 30,595 Dividends paid to common shareholders ($1.32 per share)....................... -- -- -- -- (35,843) -- (35,843) Dividends paid to preferred shareholders ($0.3465 per share)....................... -- -- -- -- (693) -- (693) Conversion of preferred shares....................... 2,000,000 -- 24,369 -- -- -- 24,369 Common shares issued, net...... 3,522,751 1 48,459 (860) -- (500) 47,100 Amortization of deferred compensation................. -- -- -- 735 -- -- 735 ---------- -- -------- ------- -------- ------- -------- Balance at December 31, 2002... 29,742,160 $3 $414,989 $(1,766) $(77,777) $(2,473) $332,976 ========== == ======== ======= ======== ======= ======== </Table> The accompanying notes are an integral part of these consolidated financial statements. 40
LEXINGTON CORPORATE PROPERTIES TRUST AND CONSOLIDATED SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS ($000) YEARS ENDED DECEMBER 31, <Table> <Caption> 2002 2001 2000 -------- -------- --------- <S> <C> <C> <C> Cash flows from operating activities: Net income................................................ $ 30,595 $ 18,062 $ 21,952 Adjustments to reconcile net income to net cash provided by operating activities, net of effects from acquisitions: Depreciation and amortization.......................... 23,375 19,952 19,010 Minority interests..................................... 5,876 5,384 6,015 Gain on sale of properties............................. (1,172) -- (2,959) Extraordinary items.................................... 345 3,144 -- Straight-line rents.................................... (2,426) (2,755) (2,804) Other non-cash charges................................. 1,016 1,089 714 Equity in earnings of non-consolidated entities........ (5,079) (3,328) (1,851) Distributions from non-consolidated entities........... 5,704 4,593 1,092 Increase (decrease) in accounts payable and other liabilities.......................................... 539 (2,140) 310 Other adjustments, net................................. (644) 851 (304) -------- -------- --------- Net cash provided by operating activities......... 58,129 44,852 41,175 -------- -------- --------- Cash flows from investing activities: Net proceeds from sale of properties...................... 20,756 4,107 19,402 Acquisition of the Net Partnerships, net of debt assumed and $3,777 in cash..................................... -- (27,835) -- Investments in real estate................................ (114,272) (19,363) (27,116) Investments in non-consolidated entities.................. (5,539) (5,620) (26,247) Advances to non-consolidated entities..................... (2,158) (4,195) (4,588) Investment in and advances to the Net Partnerships........ -- (10,979) -- Real estate deposits...................................... (4,817) (436) -- -------- -------- --------- Net cash used in investing activities............. (106,030) (64,321) (38,549) -------- -------- --------- Cash flows from financing activities: Proceeds of mortgages and notes payable................... 49,165 100,194 84,340 Change in credit facility borrowing, net.................. 21,000 (31,821) (29,100) Dividends to common and preferred shareholders............ (36,536) (27,671) (23,327) Dividend reinvestment plan proceeds....................... 4,870 2,507 1,391 Principal payments on debt, excluding normal amortization........................................... (10,049) (48,611) (15,066) Principal amortization payments........................... (14,091) (12,354) (11,646) Origination fee amortization payments..................... (372) (372) (372) Common shares issued, net of offering costs............... 41,595 61,021 11 Cash distributions to minority interests.................. (6,304) (6,236) (6,323) Change in escrow deposits................................. (1,396) (1,002) 1,596 Increase in deferred expenses............................. (1,350) (3,203) (4,090) Common shares/partnership units repurchased............... -- (348) (4,093) Penalties paid on early retirement of debt................ (397) (3,575) -- Other..................................................... -- 11 8 -------- -------- --------- Net cash provided by (used in) financing activities...................................... 46,135 28,540 (6,671) -------- -------- --------- Change in cash and cash equivalents......................... (1,766) 9,071 (4,045) Cash and cash equivalents, beginning of year................ 13,863 4,792 8,837 -------- -------- --------- Cash and cash equivalents, end of year...................... $ 12,097 $ 13,863 $ 4,792 ======== ======== ========= </Table> The accompanying notes are an integral part of these consolidated financial statements. 41
LEXINGTON CORPORATE PROPERTIES TRUST AND CONSOLIDATED SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ($000'S EXCEPT PER SHARE DATA) (1) THE COMPANY Lexington Corporate Properties Trust (the "Company") is a self-managed and self-administered Maryland statutory real estate investment trust ("REIT") that acquires, owns, and manages a geographically diversified portfolio of net leased office, industrial and retail properties and provides investment advisory and asset management services to institutional investors in the net lease area. As of December 31, 2002 the Company owned or had interests in 103 properties in 30 states and Canada. The real properties owned by the Company are generally subject to triple net leases to corporate tenants, however four provide for operating expense stops, one is subject to a modified gross lease and one requires the Company to be responsible for real estate taxes in 2003 and for the tenant to be responsible thereafter. The Company's Board of Trustees authorized the Company to repurchase, from time to time, up to 2.0 million common shares and/or operating partnership units, depending on market conditions and other factors. As of December 31, 2002, the Company repurchased approximately 1.4 million common shares/ partnership units at an average price of approximately $10.55 per common share/ partnership unit. No shares or units were repurchased in 2002. (2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation and Consolidation. The Company's consolidated financial statements are prepared on the accrual basis of accounting. The financial statements reflect the accounts of the Company and its controlled subsidiaries, including Lepercq Corporate Income Fund L.P. ("LCIF"), Lepercq Corporate Income Fund II L.P. ("LCIF II") and Net 3 Acquisition L.P. ("Net 3"). The Company is the sole general partner and majority limited partner of LCIF, LCIF II and Net 3. Real Estate. Real estate assets are stated at cost, less accumulated depreciation and amortization. If there is an event or change in circumstance that indicates that an impairment in the value of a property has occurred, the Company's policy is to assess any impairment in value by making a comparison of the current and projected operating cash flows of each such property over its remaining useful life, on an undiscounted basis, to the carrying amount of the property. If such carrying amounts are in excess of the estimated projected operating cash flows of the property, the Company would recognize an impairment loss equivalent to an amount required to adjust the carrying amount to its estimated fair market value. For acquisitions that are consummated subsequent to June 30, 2001, the effective date of Statement of Financial Accounting Standards No. 141, ("SFAS No. 141") "Business Combinations," the fair value of the real estate acquired must be allocated among building, land, tenant improvements, the origination value of leases and the fair value (or negative value) of above or below market leases. The Company adopted the provisions of SFAS No.141 and determined that the purchase price to be allocated to origination value of leases and the fair value of above or below market leases were immaterial. Depreciation is determined by the straight-line method over the remaining estimated economic useful lives of the properties. The Company generally depreciates buildings and building improvements over periods not exceeding 40 years, land improvements over a 20-year period, and fixtures and equipment over a 12-year period. Only costs incurred to third parties in acquiring properties are capitalized. No internal costs (rents, salaries, overhead) are capitalized. Expenditures for maintenance and repairs are charged to operations as incurred. Significant renovations which extend the useful life of the properties are capitalized. 42
LEXINGTON CORPORATE PROPERTIES TRUST AND CONSOLIDATED SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) ($000'S EXCEPT PER SHARE DATA) Investments in non-consolidated entities. The Company accounts for its investments in less than 50% owned entities and Lexington Realty Advisors, Inc. ("LRA") under the equity method since it has influence over, but does not control such entities. Effective January 1, 2003 the Company converted its non-voting interest in LRA to a 99% voting interest and accordingly, effective this date, LRA will be consolidated. Revenue. The Company recognizes revenue in accordance with SFAS No. 13. SFAS No. 13 requires that revenue be recognized on a straight-line basis over the term of the lease unless another systematic and rationale basis is more representative of the time pattern in which the use benefit is derived from the leased property. The Company's rent receivable primarily represents the amount of the excess of rental revenues recognized over the annual rents collectible under the leases. The Company recognizes percentage rent revenue when the cash is received from the tenant unless it is a fixed amount in which case the Company recognizes it ratably over the accounting period. Gains on sales of real estate are recognized pursuant to the provisions of SFAS No. 66 "Accounting for Sales of Real Estate." The specific timing of the sale is measured against various criteria in SFAS No. 66 related to the terms of the transactions and any continuing involvement in the form of management or financial assistance associated with the properties. If the sales criteria are not met, the gain is deferred and the finance, installment or cost recovery method, as appropriate, is applied until the sales criteria are met. Deferred Expenses. Deferred expenses consist primarily of debt placement, mortgage loan and other loan fees, and are amortized using the straight-line method, which approximates the interest method, over the terms of the debt instruments. Tax Status. The Company has made an election to qualify, and believes it is operating so as to qualify, as a real estate investment trust under the Internal Revenue Code. A real estate investment trust is generally not subject to Federal income tax on that portion of its real estate investment trust taxable income which is distributed to its shareholders, provided that at least 90% of taxable income is distributed. As distributions have equaled or exceeded taxable income, no provision for Federal income taxes has been made. State and local income taxes, which are not significant, have been provided for those states and localities in which the Company operates and is subject to an income tax. LRA has elected to be treated as a taxable reit subsidiary. A summary of the average taxable nature of the Company's dividends for each of the years in the three year period ended December 31, 2002 is as follows: <Table> <Caption> 2002 2001 2000 ------ ------ ------ <S> <C> <C> <C> Total dividends per share................................ $ 1.32 $ 1.27 $ 1.22 ====== ====== ====== Ordinary income.......................................... 77.89% 95.46% 87.78% Short-term capital gain.................................. 2.27 -- -- 20% rate gain............................................ 4.12 -- 8.48 25% rate gain............................................ 5.65 -- 3.74 Percent non-taxable as return of capital................. 10.07 4.54 -- ------ ------ ------ 100.00% 100.00% 100.00% ====== ====== ====== </Table> Earnings Per Share. Basic net income per share is computed by dividing net income reduced by preferred dividends by the weighted average number of common shares outstanding during the period. Diluted net income per share amounts are similarly computed but include the effect, when dilutive, of in-the-money common share options, preferred shares, operating partnership units and exchangeable redeemable secured notes. The Company's preferred shares are excluded from the December 31, 2002 and 2000 computations since they are anti-dilutive. The Company's preferred shares, operating partnership units and exchangeable 43
LEXINGTON CORPORATE PROPERTIES TRUST AND CONSOLIDATED SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) ($000'S EXCEPT PER SHARE DATA) redeemable secured notes are excluded from the 2001 computations since they are anti-dilutive. The Company's preferred shares were converted into common shares in April 2002 and the exchangeable redeemable secured notes were redeemed in July 2001. Cash and Cash Equivalents. The Company considers all highly liquid instruments with maturities of three months or less from the date of purchase to be cash equivalents. Use of Estimates. Management has made a number of estimates and assumptions relating to the reporting of assets and liabilities, the disclosure of contingent assets and liabilities and the reported amounts of revenues and expenses to prepare these consolidated financial statements in conformity with generally accepted accounting principles. The most significant estimates made include the recoverability of accounts receivable (primarily related to straight-line rents), the useful lives of real estate and the allocation of purchase price to individual properties purchased in a portfolio. Actual results could differ from those estimates. Recently Issued Accounting Standards. SFAS No. 144 "Accounting for the Impairment or Disposal of Long-Lived Assets" establishes a single accounting model for long-lived assets to be disposed of by sale and provides implementation guidance with respect to accounting for impairment of long-lived assets. Also, SFAS No. 144 requires that discontinued operations be measured at the lower of carrying amount or fair value less cost to sell, similar to the basis used for other long-lived assets. Additionally, future operating losses of discontinued operations are no longer recognized before they occur. Under SFAS No. 144, the properties sold by the Company to third parties are considered to be discontinued operations. However, properties contributed to entities in which the Company maintains an ownership interest are not considered to be discontinued operations under SFAS No. 144 due to the Company's continuing involvement with the property. For the year ended December 31, 2002, the Company is not reporting discontinued operations for the properties disposed of to third parties during the period as the effect of such presentation in the Company's consolidated statements of income is not material. In April 2002, the FASB issued SFAS No. 145 which rescinds SFAS No. 4 which required all gains and losses on extinguishment of debt to be classified as an extraordinary item. The Company adopted the provisions of SFAS No. 145 effective January 1, 2003. Had the statement been adopted earlier, the extraordinary item recorded in 2002 and 2001 would have been eliminated and the charge would have been reflected in interest expense. In July 2002, the FASB issued SFAS No. 146 which requires that exit or disposal costs be recorded when incurred and be measured at fair value. SFAS No. 146 is effective for an exit or disposal activity initiated after December 31, 2002. The Company does not expect that this statement will have any effect on the Company's consolidated results of operations or financial position. In January 2003, the Financial Accounting Standards Board issued FASB Interpretation No. 46, "Consolidation of Variable Interest Entities" ("FIN 46"). FIN 46 requires that companies that absorb the majority of another entity's expected losses, receive a majority of its expected residual returns, or both, as a result of holding variable interests, which are ownership, contractual, or other economic interests in an entity, consolidate the variable interest entity. The consolidation requirements apply to all variable interest entities created after January 31, 2003 and all other existing entities beginning July 1, 2003. The Company has not determined the impact the adoption of FIN 46 will have on its consolidated results of operations or financial position. However, it is possible that the adoption of FIN 46 will require the Company to consolidate its Florence joint venture. Financial information for this joint venture is included in Footnote 5. In November 2002, the FASB issued Interpretation No. 45 "Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others," which elaborates on the disclosures to be made by a guarantor in its interim and annual financial statements about its obligations under certain guarantees that it has issued. The initial recognition and measurement provisions of this Interpretation are applicable on a prospective basis to guarantees issued or modified after December 31, 2002. The Company believes that the adoption of this interpretation will not have a material effect to the Company's financial statements. 44
LEXINGTON CORPORATE PROPERTIES TRUST AND CONSOLIDATED SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) ($000'S EXCEPT PER SHARE DATA) Common Share Options. The Company has elected to adopt the disclosure only provisions of SFAS No. 123 "Accounting for Stock-Based Compensation," and accounts for its option plan under the recognition provisions of Accounting Principles Board Opinion No. 25 "Accounting for Stock Issued to Employees." Accordingly, no compensation cost has been recognized with regard to options granted in the consolidated statements of income. The per share weighted average fair value of options granted during 2002, 2001 and, 2000 were estimated to be $2.42, $2.00 and $2.02, respectively, using a Black-Scholes option pricing formula. The more significant assumptions underlying the determination of such fair values include: (i) a risk free interest rate of 3.32% in 2002 and 3.35% in 2001 and 5% in 2000; (ii) an expected life of five years; (iii) volatility factors of 15.11%, 15.79% and 19.20% for 2002, 2001 and 2000, respectively; and (iv) actual dividends paid. If stock based compensation cost had been recognized based upon the fair value at the date of grant for options awarded in 2002, 2001 and 2000 the Company's pro forma net income and pro forma net income per share would have been: <Table> <Caption> 2002 2001 2000 ------- ------- ------- <S> <C> <C> <C> Net income, as reported............................... $30,595 $18,062 $21,952 Pro forma net income.................................. $29,620 $16,653 $20,001 Net income per share, as reported Basic............................................... $ 1.11 $ 0.79 $ 1.15 Diluted............................................. $ 1.09 $ 0.77 $ 1.10 Pro forma net income per share Basic............................................... $ 1.07 $ 0.72 $ 1.03 Diluted............................................. $ 1.06 $ 0.70 $ 1.02 </Table> Reclassifications. Certain amounts included in prior years' financial statements have been reclassified to conform with the current year presentation. 45
LEXINGTON CORPORATE PROPERTIES TRUST AND CONSOLIDATED SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) ($000'S EXCEPT PER SHARE DATA) (3) EARNINGS PER SHARE The following is a reconciliation of numerators and denominators of the basic and diluted earnings per share computations for each of the years in the three year period ended December 31, 2002: <Table> <Caption> 2002 2001 2000 ----------- ----------- ----------- <S> <C> <C> <C> BASIC Income before extraordinary items............. $ 30,940 $ 21,206 $ 21,952 Less dividends attributable to preferred shares...................................... (693) (2,709) (2,562) ----------- ----------- ----------- Income attributed to common shareholders before extraordinary items.................. 30,247 18,497 19,390 Extraordinary items........................... (345) (3,144) -- ----------- ----------- ----------- Net income attributed to common shareholders................................ $ 29,902 $ 15,353 $ 19,390 =========== =========== =========== Weighted average number of common shares outstanding................................. 27,026,789 19,522,323 16,900,039 =========== =========== =========== Income per common share -- basic: Income before extraordinary items............. $ 1.12 $ 0.95 $ 1.15 Extraordinary items........................... (0.01) (0.16) -- ----------- ----------- ----------- Net income.................................... $ 1.11 $ 0.79 $ 1.15 =========== =========== =========== DILUTED Income attributed to common shareholders before extraordinary items.................. $ 30,247 $ 18,497 $ 19,390 Add incremental income attributed to assumed conversion of dilutive securities........... 5,627 -- 7,772 ----------- ----------- ----------- Income attributed to common shareholders before extraordinary items.................. 35,874 18,497 27,162 Extraordinary items........................... (345) (3,144) -- ----------- ----------- ----------- Net income attributed to common shareholders................................ $ 35,529 $ 15,353 $ 27,162 =========== =========== =========== Weighted average number of shares used in calculation of basic earnings per share..... 27,026,789 19,522,323 16,900,039 Add incremental shares representing: Shares issuable upon exercise of employee stock options............................ 300,102 340,557 166,806 Shares issuable upon conversion of dilutive securities............................... 5,275,178 -- 7,647,374 ----------- ----------- ----------- Weighted average number of shares used in calculation of diluted earnings per common share....................................... 32,602,069 19,862,880 24,714,219 =========== =========== =========== Income per common share -- diluted: Income before extraordinary items............. $ 1.10 $ 0.93 $ 1.10 Extraordinary items........................... (0.01) (0.16) -- ----------- ----------- ----------- Net income.................................... $ 1.09 $ 0.77 $ 1.10 =========== =========== =========== </Table> 46
LEXINGTON CORPORATE PROPERTIES TRUST AND CONSOLIDATED SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) ($000'S EXCEPT PER SHARE DATA) (4) INVESTMENTS IN REAL ESTATE During 2002 and 2001 the Company made the following acquisitions, excluding acquisitions made by non-consolidated entities: <Table> <Caption> NET RENTABLE DATE OF ACQUISITION BASE RENT LEASE SQUARE ACQUISITION TENANT LOCATION COST DECEMBER 31, EXPIRES FEET - ----------- --------------------------------------- -------------------- ----------- ------------ ------- --------- <S> <C> <C> <C> <C> <C> <C> 2002 March 15 Apria Healthcare Group, Inc. Lake Forest, CA $ 16,970 $ 1,791 01-12 100,012 August 27 Quest Diagnostics, Inc. Valley Forge, PA 19,500 2,161 04-11 109,281 August 30 AdvancePCS, Inc. Knoxville, TN 8,100 822 05-13 59,748 September 26 Anda Pharmaceuticals, Inc Groveport, OH 11,800 1,206 03-12 354,676 December 27 North American Van Lines Westmont, IL 24,825 2,516 11-15 269,715 December 30 Wells Fargo Home Mortgage Fort Mill, SC 17,933 1,868 01-13 169,083 ----------- ------------ --------- $ 99,128 $10,364 1,062,515 =========== ============ ========= 2001 March 30 Kraft Foods North America, Inc. Winchester, VA $ 14,400 $ 1,515 06-11 344,700 November 28 Bull HN Information Systems, Inc. Phoenix, AZ 11,436 1,086 10-05 137,058 November 28 Hollywood Entertainment Corp. Wilsonville, OR 13,328 1,531 11-08 122,853 November 28 Nextel Communications of the Mid- Atlantic, Inc. Hampton, VA 11,667 1,302 12-09 100,632 November 28 The Tranzonic Companies Highland Heights, OH 6,318 762 02-09 119,641 November 28 Hewlett Packard Company San Diego, CA 8,700 888 01-10 65,755 November 28 Cox Communication, Inc. Tuscon, AZ 3,284 401 09-10 28,591 November 28 IKON Office Solutions Milford, CT 2,832 337 12-04 27,360 November 28 Associated Grocers of Florida, Inc. Ocala, FL 19,013 2,238 12-18 668,034 November 28 Corporate Express Office Products, Inc. Henderson, NC 7,442 810 01-14 196,946 November 28 Stone Container Corporation Columbia, SC 4,638 571 08-12 185,961 November 28 Johnson Controls, Inc. Plymouth, MI 7,663 809 12-06 134,160 November 28 The Tranzonic Companies Tempe, AZ 1,892 202 02-09 49,951 November 28 Ameritech Services, Inc. Columbus, OH 1,594 255 05-05 20,000 November 28 Sam's Real Estate Business Trust Westland, MI 7,221 753 01-09 102,826 November 28 Wal-Mart Stores, Inc. Gainesville, GA 2,631 328 01-09 89,199 November 28 Kohl's Department Stores, Inc. Eau Claire, WI 4,302 462 01-15 76,164 November 28 Wal-Mart Real Estate Business Trust Jacksonville, AL 1,959 146 01-09 56,132 November 28 Best Buy Co, Inc. Canton, OH 4,417 465 02-18 46,350 November 28 Best Buy Co, Inc. Spartanburg, SC 4,167 395 02-18 45,800 November 28 Bally's Health & Fitness Corp. Phoenix, AZ 5,627 808 06-08 36,556 November 28 Greyhound Lines Inc. Stockton, CA 1,296 193 12-09 17,000 November 28 Circuit City Stores, Inc. Lynchburg, VA 797 101 11-06 9,300 November 28 Wal-Mart Stores, Inc. Sumter, SC 4,107 328 01-08 103,377 December 11 Owens Corning Hebron, OH 8,447 989 05-09 400,522 December 11 Owens Corning Hebron, OH 5,340 648 02-10 250,410 ----------- ------------ --------- $164,518 $18,323 3,435,278 =========== ============ ========= </Table> The Company sold four properties and one building in the Palm Beach Gardens, Florida property in 2002, one property in 2001 and three properties in 2000 for aggregate selling prices of $16,342, $4,107 and $19,600, respectively, which resulted in gains in 2002, 2001 and 2000 of $ 1,172, $0 and $2,959, respectively. In addition, the Company sold a 77.3% interest in a property (along with the related non-recourse mortgage) in Florence, South Carolina for net proceeds of $4,414 and deferred a $671 gain on sale since the purchasers can 47
LEXINGTON CORPORATE PROPERTIES TRUST AND CONSOLIDATED SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) ($000'S EXCEPT PER SHARE DATA) put their interests in the property to the Company for a six month period commencing January 2004 for $4,581. In addition, in 2001 and 2000 the Company contributed the Winchester, Virginia and Herndon, Virginia properties (along with non-recourse mortgage notes), respectively to Lexington Acquiport Company, LLC for capital contributions of $1,168 and $2,393, respectively. During 2002, the Company expanded its property in Lancaster, California net leased to Michaels Stores, Inc. The expansion, which cost $15,200, is leased to the tenant through September 2019 at annual rent of $1,808. In connection with the expansion, the initial lease term was also extended to September 2019. The Company has not presented pro forma information for 2002 because the acquisitions and dispositions are not significant individually or in the aggregate. The following unaudited pro forma operating information for the year ended December 31, 2001 has been prepared as if all Company acquisitions and dispositions (including non-consolidated entities) in 2001 had been consummated as of January 1, 2001. The information does not purport to be indicative of what the operating results of the Company would have been had the acquisitions and dispositions been consummated on January 1, 2001. Unaudited pro forma amounts are as follows: <Table> <Caption> DECEMBER 31, 2001 ----------------- <S> <C> Revenues.................................................... $98,098 Income before extraordinary items........................... $27,101 Net income.................................................. $23,958 Income before extraordinary items per common share: Basic..................................................... $ 1.14 Diluted................................................... $ 1.10 Net income per common share: Basic..................................................... $ 0.99 Diluted................................................... $ 0.98 </Table> (5) INVESTMENT IN NON-CONSOLIDATED ENTITIES The Company has investments in various real estate joint ventures. The business of each joint venture is to acquire, finance, hold for investment or sell single tenant net leased real estate. Lexington Acquiport Company, LLC Lexington Acquiport Company, LLC ("LAC"), is a joint venture with the Comptroller of the State of New York as Trustee for the Common Retirement Fund ("CRF"). The joint venture agreement expires December 2011. The Company and CRF originally committed to contribute up to $50,000 and $100,000, respectively, to invest in high quality office and industrial net leased real estate. Through December 31, 2002 total contributions were $127,623. LRA earns annual management fees of 2% of rent collected and acquisition fees equaling 75 basis points of purchase price of each property investment. All allocations of profit, loss and cash flows are made one-third to the Company and two-thirds to CRF. During 2001 the Company and CRF announced the formation of Lexington Acquiport Company II, LLC ("LAC II"). The Company and CRF have committed an additional $50,000 and $150,000, respectively. In addition to the fees LRA currently earns on acquisitions and asset management LRA will also earn 50 basis points on all mortgage debt directly placed. All allocations of profit, loss and cash flows from all properties acquired by this joint venture will be allocated 25% to the Company and 75% to CRF. There have been no investments made under this program. CRF can presently elect to put their equity position in LAC to the Company. The Company has the option of issuing common shares for the fair market value of CRF's equity position (as defined) or cash for 110% of the fair market value of CRF's equity position. The per common share value of shares issued for 48
LEXINGTON CORPORATE PROPERTIES TRUST AND CONSOLIDATED SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) ($000'S EXCEPT PER SHARE DATA) CRF's equity position will be the greater of (i) the price of the Company's common shares on the closing date (ii) the Company's funds from operations per share (as defined) multiplied by 8.5 or (iii) $13.40 for LAC properties (all properties that are currently owned) and $15.20 for LAC II properties purchased. The Company has the right not to accept any property (thereby reducing the fair market value of CRF's equity position) that does not meet certain underwriting criteria (e.g. lease term and tenant credit). In addition, the operating agreement contains a mutual buy-sell provision in which either partner can force the sale of any property. During 2002, 2001 and 2000, LAC made the following investments: <Table> <Caption> NET RENTABLE DATE OF ACQUISITION BASE RENT LEASE SQUARE ACQUISITION TENANT LOCATION COST DECEMBER 31, EXPIRES FEET - ----------- ---------------------------------------- -------------- ----------- ------------ ------- --------- <S> <C> <C> <C> <C> <C> <C> 2002 August 5 TNT Logistics North America, Inc. Laurens, SC $ 27,100 $ 3,227 08-12 1,164,000 August 5 TNT Logistics North America, Inc. Temperance, MI 18,186 2,161 08-12 752,000 -------- ------- --------- $ 45,286 $ 5,388 1,916,000 ======== ======= ========= 2001 May 6 Kraft Foods North America, Inc. Winchester, VA $ 14,400 $ 1,515 05-11 344,700 ======== ======= ========= 2000 January 20 Structural Dynamics Research Corporation Milford, OH $ 26,900 $ 2,790 04-11 212,836 March 29 Bank One Indiana, N.A. Fishers, IN 24,500 3,287 10-09 193,000 April 17 NEC America, Inc. Herndon, VA 19,087 2,025 08-09 108,000 September 6 True North Communications, Inc. Irving, TX 41,850 4,250 01-10 247,254 September 28 First USA Management Services, Inc. Lake Mary, FL 41,700 5,741 09-09 251,075 December 27 Aventis Pharmaceuticals, Inc. Parsippany, NJ 81,000 8,487 01-10 340,240 -------- ------- --------- $235,037 $26,580 1,352,405 ======== ======= ========= </Table> In 1999, LAC also made an $11,009 investment in a participating note receivable, which has a stated interest rate of 6.9% and a 50% interest in the property cash flows from the entity that owns the Houston, Texas property. Summarized balance sheet data as of December 31, 2002 and 2001 and income statement data for the years ended December 31, 2002, 2001 and 2000 is as follows: <Table> <Caption> 2002 2001 -------- -------- <S> <C> <C> Real estate, net............................................ $286,311 $245,537 Note receivable............................................. 11,009 11,009 Cash and cash equivalents................................... 3,989 3,623 Other assets................................................ 6,580 5,147 -------- -------- $307,889 $265,316 ======== ======== Mortgages payable........................................... $180,223 $151,697 Other liabilities........................................... 1,934 1,351 Equity...................................................... 125,732 112,268 -------- -------- $307,889 $265,316 ======== ======== </Table> 49
LEXINGTON CORPORATE PROPERTIES TRUST AND CONSOLIDATED SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) ($000'S EXCEPT PER SHARE DATA) <Table> <Caption> 2002 2001 2000 -------- -------- ------- <S> <C> <C> <C> Revenues.................................................... $ 31,228 $ 28,661 $10,525 Interest expense............................................ (12,628) (11,910) (4,327) Depreciation of real estate................................. (5,408) (4,932) (1,765) Other....................................................... (2,925) (3,147) (1,222) -------- -------- ------- Net income................................................ $ 10,267 $ 8,672 $ 3,211 ======== ======== ======= </Table> As of December 31, 2002, the LAC properties are 100% leased and have scheduled lease expiration dates ranging from 2009 to 2012. Minimum future rental receipts under non-cancelable tenant operating leases, assuming no new or negotiated leases, for the next five years and thereafter are as follows: <Table> <Caption> YEAR ENDING DECEMBER 31, - ------------ <S> <C> 2003........................................................ $ 31,688 2004........................................................ 32,010 2005........................................................ 34,005 2006........................................................ 34,493 2007........................................................ 34,760 Thereafter.................................................. 89,909 -------- $256,865 ======== </Table> The mortgages payable bear interest at rates ranging from 6.00% to 8.19% and mature at various dates ranging from 2010 to 2012. Scheduled principal amortization and balloon payments for the mortgages for the next five years and thereafter are as follows: <Table> <Caption> YEAR ENDING SCHEDULED BALLOON DECEMBER 31, AMORTIZATION PAYMENTS TOTAL - ------------ ------------ -------- -------- <S> <C> <C> <C> 2003.............................................. $ 2,218 $ -- $ 2,218 2004.............................................. 2,401 -- 2,401 2005.............................................. 2,643 -- 2,643 2006.............................................. 2,866 -- 2,866 2007.............................................. 3,123 -- 3,123 Thereafter........................................ 12,761 154,211 166,972 ------- -------- -------- $26,012 $154,211 $180,223 ======= ======== ======== </Table> Lexington Columbia LLC Lexington Columbia LLC ("Columbia") is a joint venture established December 30, 1999 with a private investor. Its sole purpose is to own a property in Columbia, South Carolina net leased to Blue Cross Blue Shield of South Carolina through September 2009. The purchase price of the property was approximately $42,500 and was partially funded through a 10 year, $25,300 non-recourse mortgage note bearing interest at 7.85%. In accordance with the operating agreement, net cash flows, as defined, will be allocated 40% to the 50
LEXINGTON CORPORATE PROPERTIES TRUST AND CONSOLIDATED SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) ($000'S EXCEPT PER SHARE DATA) Company and 60% to the partner until both parties have received a 12.5% return on capital. Thereafter cash flows will be distributed 60% to the Company and 40% to the partner. During 2001, Columbia expanded the property by 107,894 square feet bringing the total square feet of the property to 456,304. The $10,900 expansion was funded 40% by the Company and 60% by the partner. The tenant has leased the expansion through September 2009 at an average additional annual rent of $2,000. Cash flows from the expansion will be distributed 40% to the Company and 60% to the partner. LRA earns annual asset management fees of 2% of rents collected. Summarized financial information for the underlying property investment as of December 31, 2002 and 2001 and for the years ended December 31, 2002, 2001 and 2000 is as follows: <Table> <Caption> 2002 2001 ------- ------- <S> <C> <C> Real estate, net............................................ $48,454 $50,442 Other assets................................................ 2,438 1,529 ------- ------- $50,892 $51,971 ======= ======= Mortgage payable............................................ $24,653 $24,863 Accrued interest............................................ 167 -- Equity...................................................... 26,072 27,108 ------- ------- $50,892 $51,971 ======= ======= </Table> <Table> <Caption> 2002 2001 2000 ------- ------- ------- <S> <C> <C> <C> Rental income......................................... $ 6,930 $ 5,412 $ 4,906 Interest expense...................................... (1,970) (1,851) (2,009) Depreciation.......................................... (1,988) (1,664) (1,624) Other................................................. (196) (133) (143) ------- ------- ------- Net income.......................................... $ 2,776 $ 1,764 $ 1,130 ======= ======= ======= </Table> Minimum future rental receipts under the non-cancelable operating lease, assuming no new or renegotiated lease, for the next five years and thereafter is as follows: <Table> <Caption> YEAR ENDING DECEMBER 31, - ------------ <S> <C> 2003........................................................ $ 6,415 2004........................................................ 6,655 2005........................................................ 7,377 2006........................................................ 7,377 2007........................................................ 7,377 Thereafter.................................................. 12,908 ------- $48,109 ======= </Table> 51
LEXINGTON CORPORATE PROPERTIES TRUST AND CONSOLIDATED SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) ($000'S EXCEPT PER SHARE DATA) Scheduled principal amortization and balloon payment for the mortgage for the next five years and thereafter is as follows: <Table> <Caption> YEAR ENDING SCHEDULED BALLOON DECEMBER 31, AMORTIZATION PAYMENT TOTAL - ------------ ------------ ------- ------- <S> <C> <C> <C> 2003.................................................. $ 243 $ -- $ 243 2004.................................................. 257 -- 257 2005.................................................. 284 -- 284 2006.................................................. 307 -- 307 2007.................................................. 332 -- 332 Thereafter............................................ 644 22,586 23,230 ------ ------- ------- $2,067 $22,586 $24,653 ====== ======= ======= </Table> Lexington Realty Advisors, Inc. The Company has a 99% non-voting ownership interest in LRA, which provides management services to institutional investors and invests directly in real estate properties. The voting common shares are held by officers of the Company and one independent third party. (See Footnote 1) Summarized balance sheet data as of December 31, 2002 and 2001 and income statement data for the years ended December 31, 2002, 2001 and 2000 is as follows: <Table> <Caption> 2002 2001 ------- ------- <S> <C> <C> Real estate, net............................................ $41,613 $39,737 Cash........................................................ 1,579 806 Other assets................................................ 403 785 ------- ------- $43,595 $41,328 ======= ======= Mortgages payable........................................... $30,028 $30,480 Advances from the Company................................... 12,167 10,009 Other liabilities........................................... 651 598 Equity...................................................... 749 241 ------- ------- $43,595 $41,328 ======= ======= </Table> 52
LEXINGTON CORPORATE PROPERTIES TRUST AND CONSOLIDATED SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) ($000'S EXCEPT PER SHARE DATA) <Table> <Caption> 2002 2001 2000 ------- ------- ------- <S> <C> <C> <C> Rental income............................................... $ 4,499 $ 2,558 $ -- Advisory fees............................................... 1,417 1,125 1,619 Other income................................................ 6 14 70 ------- ------- ------- 5,922 3,697 1,689 ------- ------- ------- Interest expense............................................ (2,582) (1,574) (19) Operating expenses.......................................... (1,716) (1,555) (1,104) Depreciation expense........................................ (1,116) (760) -- Other....................................................... -- -- (136) ------- ------- ------- (5,414) (3,889) (1,259) ------- ------- ------- Net income (loss)........................................... $ 508 $ (192) $ 430 ======= ======= ======= </Table> Included in operating expenses for the years ended December 31, 2002, 2001 and 2000 are personnel costs reimbursable to the Company of $1,189, $1,008 and $1,104 respectively. During 2002 and 2001 LRA made the following acquisitions: <Table> <Caption> NET RENTABLE DATE OF ACQUISITION BASE RENT LEASE SQUARE ACQUISITION TENANT LOCATION COST DECEMBER 31, EXPIRES FEET - ----------- -------------------------- --------------- ----------- ------------ ------- -------- <S> <C> <C> <C> <C> <C> <C> 2002 August 5 TNT Canada, Inc. Alberta, Canada $ 2,896 $ 331 08-12 122,876 ======= ====== ======= 2001 January 15 Owens Corning, Inc. Chester, SC $15,401 $1,619 12-20 193,891 December 27 Harbor Freight Tools, Inc. Dillon, SC 16,113 1,812 12-16 474,473 ------- ------ ------- $31,514 $3,431 668,364 ======= ====== ======= </Table> Minimum future rental receipts under non-cancelable tenant operating leases, assuming no new or negotiated leases, for the next five years and thereafter are as follows: <Table> <Caption> YEAR ENDING DECEMBER 31, - ------------ <S> <C> 2003........................................................ $ 4,513 2004........................................................ 4,513 2005........................................................ 4,513 2006........................................................ 4,524 2007........................................................ 4,677 Thereafter.................................................. 47,517 ------- $70,257 ======= </Table> 53
LEXINGTON CORPORATE PROPERTIES TRUST AND CONSOLIDATED SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) ($000'S EXCEPT PER SHARE DATA) Scheduled principal amortization and balloon payments for the mortgages for the next five years and thereafter are as follows: <Table> <Caption> YEAR ENDING SCHEDULED BALLOON DECEMBER 31, AMORTIZATION PAYMENTS TOTAL - ------------ ------------ -------- ------- <S> <C> <C> <C> 2003................................................ $ 636 $ -- $ 636 2004................................................ 594 10,474 11,068 2005................................................ 452 -- 452 2006................................................ 491 -- 491 2007................................................ 532 -- 532 Thereafter.......................................... 6,998 9,851 16,849 ------- ------- ------- $ 9,703 $20,325 $30,028 ======= ======= ======= </Table> Lexington Florence LLC Lexington Florence LLC ("Florence") is a joint venture established in January 2002 with unaffiliated investors. Its sole purpose is to own a property in Florence, South Carolina net leased to Washington Mutual Home Loans, Inc. through June 2008. The property is encumbered by a non-recourse mortgage bearing interest at 7.50% per annum which matures February 2009. The Company sold a 77.3% interest in Florence to the unaffiliated investors for $4,581. The investors have the right to put their interests in Florence to the Company for units in LCIF (valued at $4,581). The number of units issued will have a minimum price of $13.92 and a maximum price of $15.82. The put is effective January 2004 and expires June 2004. LRA earns annual asset management fees of 3.5% of rents collected. Summarized financial information for the underlying property investment as of December 31, 2002 and for the period January 25, 2002 (date of inception) to December 31, 2002 is as follows: <Table> <S> <C> Real estate, net............................................ $15,544 Other assets................................................ 656 ------- $16,200 ======= Mortgage payable............................................ $ 9,544 Other liabilities........................................... 163 Equity...................................................... 6,493 ------- $16,200 ======= Rental income............................................... $ 1,576 Interest expense............................................ (676) Depreciation................................................ (304) Other....................................................... (46) ------- Net income............................................. $ 550 ======= </Table> 54
LEXINGTON CORPORATE PROPERTIES TRUST AND CONSOLIDATED SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) ($000'S EXCEPT PER SHARE DATA) Minimum future rental receipts under the non-cancelable operating lease, assuming no new or renegotiated lease, for the next five years and thereafter is as follows: <Table> <Caption> YEAR ENDING DECEMBER 31, - ------------ <S> <C> 2003........................................................ $1,635 2004........................................................ 1,750 2005........................................................ 1,750 2006........................................................ 1,750 2007........................................................ 1,750 Thereafter.................................................. 875 ------ $9,510 ====== </Table> Scheduled principal amortization and balloon payment for the mortgage for the next five years and thereafter is as follows: <Table> <Caption> YEAR ENDING SCHEDULED BALLOON DECEMBER 31, AMORTIZATION PAYMENT TOTAL - ------------ ------------ ------- ------ <S> <C> <C> <C> 2003................................................. $ 149 $ -- $ 149 2004................................................. 158 -- 158 2005................................................. 173 -- 173 2006................................................. 186 -- 186 2007................................................. 201 -- 201 Thereafter........................................... 234 8,443 8,677 ------ ------ ------ $1,101 $8,443 $9,544 ====== ====== ====== </Table> (6) MORTGAGES AND NOTES PAYABLE The following table sets forth certain information regarding the Company's mortgage and notes payable as of December 31, 2002 and 2001: <Table> <Caption> 2003 ESTIMATED INTEREST ANNUAL BALLOON PROPERTY LEVEL DEBT -- FIXED RATE 2002 2001 RATE MATURITY DEBT SERVICE PAYMENT - --------------------------------- -------- -------- -------- -------- ------------ -------- <S> <C> <C> <C> <C> <C> <C> Gainesville, GA................. $ 219 $ 396 13.000% 01-01-04 $ 219 $ -- Oxon Hill, MD................... 457 825 6.250% 03-01-04 381 -- REMIC Financing (b)............. 63,054 64,205 8.150% 05-25-05 6,353 60,001 Salt Lake City, UT.............. 5,145 6,759 7.870% 10-01-05 2,099 -- Bethesda, MD.................... 1,955 2,456 9.250% 05-01-06 669 -- Warren, OH...................... 25,615 29,763 7.000% 10-01-07 6,160 -- Bristol, PA..................... 9,833 9,916 7.400% 02-01-08 831 9,262 Decatur, GA..................... 6,830 6,936 6.720% 06-01-08 579 6,049 Phoenix, AZ..................... 14,553 14,805 7.890% 06-05-08 1,434 12,591 Palm Beach Gardens, FL.......... 11,509 13,288 7.010% 06-15-08 970 10,418 Canton, OH...................... 3,395 3,459 7.150% 08-11-08 313 2,936 </Table> 55
LEXINGTON CORPORATE PROPERTIES TRUST AND CONSOLIDATED SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) ($000'S EXCEPT PER SHARE DATA) <Table> <Caption> 2003 ESTIMATED INTEREST ANNUAL BALLOON PROPERTY LEVEL DEBT -- FIXED RATE 2002 2001 RATE MATURITY DEBT SERVICE PAYMENT - --------------------------------- -------- -------- -------- -------- ------------ -------- <S> <C> <C> <C> <C> <C> <C> Spartanburg, SC................. 2,819 2,873 7.150% 08-11-08 260 2,438 Hebron, KY...................... 5,414 5,479 7.000% 10-23-08 451 4,935 Gainesville, GA (f)............. 837 777 7.500% 01-01-09 -- -- Ocala, FL....................... 13,429 13,746 7.250% 02-01-09 1,332 10,700 Canton, OH...................... 1,823 2,010 9.490% 02-28-09 388 -- Baton Rouge, LA................. 1,969 2,025 7.375% 03-01-09 208 1,470 Bristol, PA..................... 6,190 6,298 7.250% 04-01-09 571 5,228 Livonia, MI (2 properties)...... 11,133 11,240 7.800% 04-01-09 992 10,236 Henderson, NC................... 4,497 4,574 7.390% 05-01-09 417 3,854 Westland, MI.................... 3,320 3,611 10.500% 09-01-09 683 -- Salt Lake City, UT.............. 15,204 16,868 7.610% 10-01-09 2,901 -- Richmond, VA.................... 16,633 16,772 8.100% 02-01-10 1,511 15,257 Hampton, VA..................... 4,512 4,545 8.260% 04-01-10 415 4,144 Hampton, VA..................... 7,357 7,415 8.270% 04-01-10 677 6,758 Tampa, FL (Queen Palm Dr.)...... 6,096 6,150 6.880% 08-01-10 485 5,495 Tampa, FL (North 30th).......... 8,427 8,500 6.930% 08-01-10 674 7,603 Herndon, VA..................... 18,964 19,107 8.180% 12-05-10 1,723 17,301 San Diego, CA................... 4,347 4,422 7.500% 01-01-11 411 3,420 Tuscon, AZ...................... 2,483 2,519 7.500% 01-01-11 226 2,076 Columbia, SC.................... 3,472 3,522 7.540% 01-01-11 317 2,905 Valley Forge, PA................ 13,306 -- 7.120% 02-10-11 1,166 10,927 Glendale, AZ.................... 14,930 15,054 7.400% 04-01-11 1,258 13,365 Auburn Hills, MI................ 7,325 7,444 7.010% 06-01-11 637 5,918 Plymouth, MI.................... 4,866 4,932 7.960% 07-01-11 463 3,949 New Kingston, PA................ 7,364 7,450 7.790% 01-01-12 678 6,101 Mechanicsburg, PA............... 5,437 5,500 7.780% 01-01-12 500 4,503 New Kingston, PA................ 3,509 3,550 7.780% 01-01-12 323 2,906 Lake Forest, CA................. 10,939 -- 7.260% 02-01-12 901 9,708 Groveport, OH (g)............... 7,800 -- 6.030% 10-01-12 477 6,860 Dallas, TX...................... 21,785 22,128 7.490% 12-31-12 2,020 16,030 Fort Mill, SC................... 11,657 -- 6.000% 01-01-13 839 9,904 Lancaster, CA................... 10,761 10,881 7.020% 09-01-13 900 8,637 Knoxville, TN (h)............... 5,330 -- 5.950% 09-01-13 356 4,488 Eau Claire, WI.................. 2,360 2,470 8.000% 07-01-14 313 -- Franklin, NC.................... 2,053 2,111 8.500% 04-01-15 263 -- Southborough, MA................ 2,251 2,345 7.500% 09-01-15 275 -- Phoenix, AZ (k)................. -- 5,154 8.120% -- -- -- Phoenix, AZ (k)................. -- 3,488 7.500% -- -- -- Brownsville, TX (l)............. -- 616 8.375% -- -- -- Florence, SC (m)................ -- 9,681 7.500% -- -- -- -------- -------- ------- ------- -------- 413,164 398,065 7.534% 46,019 308,373 -------- -------- ------- ------- -------- </Table> 56
LEXINGTON CORPORATE PROPERTIES TRUST AND CONSOLIDATED SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) ($000'S EXCEPT PER SHARE DATA) <Table> <Caption> 2003 ESTIMATED INTEREST ANNUAL BALLOON 2002 2001 RATE MATURITY DEBT SERVICE PAYMENT -------- -------- -------- -------- ------------ -------- <S> <C> <C> <C> <C> <C> <C> PROPERTY LEVEL DEBT -- VARIABLE RATE Milpitas, CA (a) (e)............ 17,100 17,100 4.409% 07-01-04 2,299 14,356 Marlborough, MA (c)............. 8,102 8,306 3.610% 08-01-05 524 7,477 Hebron, OH (d) (2 properties)... 9,651 9,800 3.688% 12-05-05 542 9,080 -------- -------- ------- ------- -------- 34,853 35,206 4.024% 3,365 30,913 -------- -------- ------- ------- -------- CORPORATE LEVEL DEBT Credit Facility (i)............. 31,000 10,000 3.199% 03-30-04 1,005 31,000 Warren, OH (j).................. 12,500 12,500 5.170% 10-01-07 655 12,500 -------- -------- ------- ------- -------- 43,500 22,500 3.765% 1,660 43,500 -------- -------- ------- ------- -------- Total........................... $491,517 $455,771 6.952% $51,044 $382,786 ======== ======== ======= ======= ======== </Table> (a) Floating rate debt, 30 day LIBOR plus 297 bps. (b) The REMIC Financing is secured by mortgages on 17 properties. (c) Floating rate debt, 90 day LIBOR plus 190 bps. (d) Floating rate debt, 30 day LIBOR plus 225 bps. (e) Commencing 03/01/03 all property cash flows will be used for principal amortization. (f) Accrual only through 01/31/04. Commencing 02/01/04 annual debt service of $218 is due. (g) Interest only through April 2004, and $563 in annual debt service thereafter. (h) Interest only through May 2003, and $381 in annual debt service thereafter. (i) The Company's $60,000 unsecured revolving credit facility, which expires March 2004, bears interest at 150-250 basis points over LIBOR depending on the amount of properties the Company owns free and clear of mortgage debt and has an interest rate period of one, three or six months, at the option of the Company, which rate at December 31, 2002 was 3.20%. The credit facility is provided by Fleet Bank, NA. The credit facility contains various leverage, debt service coverage, net worth maintenance and other customary covenants with which the Company is in compliance as of December 31, 2002. Approximately $24,836 was available to the Company at December 31, 2002. The Company has six outstanding letters of credit aggregating $4,164 which mature between 2003 and 2010. The Company pays an unused facility fee equal to 25 basis points if 50% or less of the facility is utilized and 15 basis points if greater than 50% of the facility is utilized. (j) Floating rate debt, 90 day LIBOR plus 375 bps. (k) Note was satisfied in 2002. (l) Property was sold in 2002 and mortgage assumed. (m) Property was sold to a joint venture in 2002 therefore is no longer consolidated. 57
LEXINGTON CORPORATE PROPERTIES TRUST AND CONSOLIDATED SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) ($000'S EXCEPT PER SHARE DATA) Scheduled principal amortization and balloon payments for mortgages and notes payable for the next five years and thereafter are as follows: <Table> <Caption> YEARS ENDING SCHEDULED BALLOON DECEMBER 31, AMORTIZATION PAYMENTS TOTAL - ------------ ------------ -------- -------- <S> <C> <C> <C> 2003.............................................. $ 17,417 $ -- $ 17,417 2004.............................................. 17,709 45,356 63,065 2005.............................................. 16,117 76,558 92,675 2006.............................................. 14,496 -- 14,496 2007.............................................. 15,313 12,500 27,813 Thereafter........................................ 27,679 248,372 276,051 -------- -------- -------- $108,731 $382,786 $491,517 ======== ======== ======== </Table> (7) ORIGINATION FEES PAYABLE In connection with certain acquisitions the Company assumed obligations ($2,178 in principal plus accrued interest) which bear interest, on the outstanding principal balances only at rates ranging from 12.3% to 19.0%. As of December 31, 2003, $3,411 in origination fees payable are owed to two executive officers of the Company. The scheduled payments of these obligations for the next five years and thereafter are as follows: <Table> <Caption> YEARS ENDING DECEMBER 31, PRINCIPAL INTEREST TOTAL - ------------ --------- -------- ------ <S> <C> <C> <C> 2003.................................................... $ 89 $ 283 $ 372 2004.................................................... 98 274 372 2005.................................................... 110 262 372 2006.................................................... 452 209 661 2007.................................................... 773 141 914 Thereafter.............................................. 5,043 331 5,374 ------ ------ ------ $6,565 $1,500 $8,065 ====== ====== ====== </Table> 58
LEXINGTON CORPORATE PROPERTIES TRUST AND CONSOLIDATED SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) ($000'S EXCEPT PER SHARE DATA) (8) LEASES Minimum future rental receipts under noncancellable tenant operating leases, assuming no new or negotiated leases, for the next five years and thereafter are as follows: <Table> <Caption> YEAR ENDING DECEMBER 31, - ------------ <S> <C> 2003........................................................ $ 99,279 2004........................................................ 101,887 2005........................................................ 100,016 2006........................................................ 87,839 2007........................................................ 75,321 Thereafter.................................................. 274,879 -------- $739,221 ======== </Table> The Company holds various leasehold interests in properties. The ground rent on these properties are either directly paid by the tenants or reimbursed to the Company as additional rent. Minimum future rental payments under all noncancellable leasehold interests for the next five years and thereafter are as follows: <Table> <Caption> YEAR ENDING DECEMBER 31, - ------------ <S> <C> 2003........................................................ $ 898 2004........................................................ 898 2005........................................................ 898 2006........................................................ 898 2007........................................................ 898 Thereafter.................................................. 8,071 ------- $12,561 ======= </Table> The Company leases its corporate headquarters, but no other corporate facility, for approximately $263 per annum through June 30, 2004. (9) MINORITY INTERESTS In conjunction with several of the Company's acquisitions, sellers were issued interests in partnerships controlled by the Company as a form of consideration. All of such interests are redeemable at certain times for common shares on a one-for-one basis. As of December 31, 2002, there were 5,257,365 operating partnership units outstanding of which 4,867,319 were currently redeemable for common shares. As of December 31, 2002 these units, subject to certain adjustments through the date of conversion, had annual distributions per unit in varying amounts from $0 to $1.32 per unit with a weighted average distribution of $1.17 per unit. 59
LEXINGTON CORPORATE PROPERTIES TRUST AND CONSOLIDATED SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) ($000'S EXCEPT PER SHARE DATA) (10) PREFERRED AND COMMON SHARES During 2002 and 2001, the Company issued 64,249 and 100,000 common shares, respectively, to certain employees and trustees resulting in $996 and $1,181 of deferred compensation, respectively. These common shares vest ratably, primarily over a 5 year period. During 2002, the Company issued 34,483 common shares in respect of a 15 year, 8% interest only recourse note to an officer for $500. The note provides for forgiveness of the principal balance under certain circumstances. During 2002, the holders of the Company's outstanding 2,000,000 preferred shares converted these shares into 2,000,000 common shares. During 2002 and 2001, holders of an aggregate of 50,997 and 418,411 partnership units redeemed such units for common shares of the Company. These redemptions resulted in an increase in shareholders' equity and corresponding decrease in minority interest of $619 and $5,713, respectively. During 2002 and 2001, the Company issued 2,690,000 and 4,400,000 common shares raising $40,508 and $63,400 in proceeds, respectively, which was used to retire mortgage debt and fund acquisitions. In addition, in 2001 the Company issued 2,143,840 common shares valued at $31,622 in connection with the acquisition of the Net Partnerships. (11) BENEFIT PLANS The Company maintains a common share option plan pursuant to which qualified and non-qualified options may be issued. Options granted under the plan generally vest over a period of one to four years and expire five years from date of grant. No compensation cost is reflected in net income as all options granted under the plan had an exercise price equal to the market value of the underlying common shares on the date of grant. Share option activity during the years indicated is as follows: <Table> <Caption> WEIGHTED-AVERAGE NUMBER OF EXERCISE PRICE SHARES PER SHARE ---------- ---------------- <S> <C> <C> Balance at December 31, 1999............................ 1,503,648 $12.54 Granted............................................... 831,625 9.85 Forfeited............................................. (26,000) 13.12 Expired............................................... (331,250) 11.13 ---------- ------ Balance at December 31, 2000............................ 1,978,023 11.63 Granted............................................... 568,000 11.99 Exercised............................................. (603,142) 11.02 Forfeited............................................. (9,308) 12.17 Expired............................................... (5,000) 11.25 ---------- ------ Balance at December 31, 2001............................ 1,928,573 11.93 Granted............................................... 411,500 15.50 Exercised............................................. (1,050,866) 11.59 Forfeited............................................. (53,650) 11.98 Expired............................................... (2,500) 14.25 ---------- ------ Balance at December 31, 2002............................ 1,233,057 $13.39 ========== ====== </Table> 60
LEXINGTON CORPORATE PROPERTIES TRUST AND CONSOLIDATED SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) ($000'S EXCEPT PER SHARE DATA) The following is additional disclosures for common share options outstanding at December 31, 2002: <Table> <Caption> OPTIONS OUTSTANDING EXERCISABLE OPTIONS -------------------------------- -------------------- WEIGHTED WEIGHTED RANGE OF AVERAGE REMAINING AVERAGE EXERCISE EXERCISE LIFE EXERCISE PRICES NUMBER PRICE (YEARS) NUMBER PRICE - ------------------- --------- -------- --------- -------- --------- <S> <C> <C> <C> <C> <C> $9.00-$10.875...... 153,863 $ 9.23 1.9 117,897 $ 9.22 $11.8125-$12.5625.. 407,082 11.91 2.5 228,766 11.94 $13.1875-$15.50.... 672,112 15.23 2.7 331,237 15.13 --------- ------ ---- ------- ------ 1,233,057 $13.39 2.5 677,900 $13.03 ========= ====== ==== ======= ====== </Table> There are 1,584,749 options available for grant at December 31, 2002. The Company has a 401(k) retirement savings plan covering all eligible employees. The Company will match 25% of the first 4% of employee contributions. In addition, based on its profitability, the Company may make a discretionary contribution at each fiscal year end to all eligible employees. The matching and discretionary contributions are subject to vesting under a schedule providing for 25% annual vesting starting with the first year of employment and 100% vesting after four years of employment. Approximately $124, $112 and $107 were contributed in 2002, 2001 and 2000, respectively. The Company has established a trust for certain officers in which nonvested common shares, which vest ratably over five years, granted for the benefit of the officers are deposited. The officers exert no control over the common shares in the trust and the common shares are available to the general creditors of the Company. As of December 31, 2002 and 2001, there were 265,385 and 227,708 common shares, respectively, in the trust. In addition, certain officers can delay, to a specified date, the receipt of common shares that would be received upon exercise of common share options. These common shares are deposited in the trust. As of December 31, 2002 there were 222,615 common shares deposited in the trust. (12) COMMITMENTS AND CONTINGENCIES The Company is involved in various legal actions arising in the ordinary course of business. In the opinion of management, the ultimate disposition of these matters will not have a material adverse effect on the Company's consolidated financial position, results of operations or liquidity. The Company, including its non-consolidated entities, are obligated under certain tenant leases to fund the expansion of the underlying leased properties. (13) RELATED PARTY TRANSACTIONS In 2002, the Company issued 34,483 common shares in respect of a 15-year, 8% interest only recourse note to an officer for $500. On November 28, 2001, the Company acquired Net 1 L.P. and Net 2 L.P. (collectively, the "Net Partnerships"), in a merger transaction valued at approximately $136,300, which owned twenty-three properties in fourteen states. The Company issued 2,143,840 common shares (valued at $31,622), 44,858 operating partnership units (valued at $661), $31,612 in cash and assumed approximately $61,389 of third party mortgage debt (excluding $11,114 in Net Partnership obligations to the Company). The Company's Chairman was the controlling shareholder of the general partners of the Net Partnerships. The general partners received 44,858 operating partnership units valued on the same basis as the limited partners for their 1% ownership interest in the Net Partnerships. The units, which receive distributions equal to the dividends on common shares, are convertible into the Company's common shares on a one-for-one basis beginning November 2006. 61
LEXINGTON CORPORATE PROPERTIES TRUST AND CONSOLIDATED SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) ($000'S EXCEPT PER SHARE DATA) During 2001, the Company issued 24,620 common shares to acquire a company controlled by the Chairman, whose sole asset was a mortgage note receivable from a 64% owned partnership of the Company. During 2001, the Company renegotiated $1,973 in notes receivable from two officers. The notes were issued in connection with the officers' purchases of 131,000 common shares at $15.25 per common share. The new notes have a 15-year maturity, are 8% interest only, recourse to the officers and provide for forgiveness of the principal balances if certain operating results are achieved. During 2000, the Company sold two properties to the Net Partnerships which are located in Henderson, North Carolina (leased to Corporate Express Office Products, Inc.) and Plymouth, Michigan (leased to Johnson Controls, Inc.) for $15,600 resulting in gains of $2,300. During 2000, the Company issued 83,400 operating partnership units in LCIF to acquire the property management contract for the Net Partnerships from an affiliate of the Chairman of the Company and was subsequently sold to LRA for $585. The fees earned during 2001 and 2000, under this contract, were $139 and $91 and the reimbursement of costs for services provided by the Company on behalf of the Net Partnerships were $564 and $359 for the years ended December 31, 2001 and 2000, respectively. The reimbursements are shown net, in the Company's general and administrative expenses in the accompanying consolidated statements of income. The Company and LRA also received brokerage commissions relating to the purchase and sale of properties by the Net Partnerships, with unaffiliated parties, totaling $120 in 2000 which is included in interest and other income in the accompanying consolidated statements of income. In connection with the acquisition of certain properties in 1996, the Company assumed an obligation to pay The LCP Group, L.P., an affiliate of the Company's Chairman, an aggregate principal amount of $2,178 for rendering services in connection with the original acquisition of the properties in 1980 and 1981. Simple interest is payable monthly from available net cash flow of the respective original properties on the various unpaid principal portions of the fees, at annual rates ranging from 12.3% to 19.0%. All related party acquisitions, sales and loans were approved by the independent members of the Board of Trustees. (14) FAIR MARKET VALUE OF FINANCIAL INSTRUMENTS Cash Equivalents, Restricted Cash, Accounts Receivable and Accounts Payable The Company estimates that the fair value approximates carrying value due to the relatively short maturity of the instruments. Mortgages and Notes Payables The Company determines the fair value of these instruments based on a discounted cash flow analysis using a discount rate that approximates the current borrowing rates for instruments of similar maturities. Based on this, the Company has determined that the fair value of these instruments approximates carrying values. (15) CONCENTRATION OF RISK The Company seeks to reduce its operating and leasing risks through diversification achieved by the geographic distribution of its properties, avoiding dependency on a single property and the creditworthiness of its tenants. 62
LEXINGTON CORPORATE PROPERTIES TRUST AND CONSOLIDATED SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) ($000'S EXCEPT PER SHARE DATA) For the year ended December 31, 2002, no tenant represented 10% or more of rental income. For the years ended December 31, 2001 and 2000 the following tenants represented 10% or greater of rental income: <Table> <Caption> 2001 2000 ---- ---- <S> <C> <C> Northwest Pipeline Corporation.............................. 11% 11% Kmart Corporation........................................... 11% 11% </Table> Both of these tenants are publicly registered companies subject to the Securities Exchange Act of 1934, as amended and accordingly file financial information with the Securities and Exchange Commission. (16) SUPPLEMENTAL DISCLOSURE OF STATEMENT OF CASH FLOW INFORMATION During 2002, 2001 and 2000, the Company paid $32,255, $30,624 and $29,758, respectively, for interest and $262, $204 and $126, respectively, for taxes. During 2002, the holder of the Company's 2 million preferred shares converted them into 2 million common shares. In 2002, 2001 and 2000, the Company contributed properties (along with non-recourse mortgage notes) to joint venture entities for capital contributions of $643, $1,168 and $2,393, respectively. During 2002, 2001 and 2000, holders of an aggregate of 50,997, 418,411 and 102,849 operating partnership units, respectively, redeemed such units for common shares of the Company. These redemptions resulted in increases in shareholders' equity and corresponding decreases in minority interests of $619, $5,713 and $1,438, respectively. During 2001, the Company purchased the Net Partnerships by issuing, in addition to $31,612 in cash, 2,143,840 common shares (valued at $31,622), 44,858 operating partnership units (valued at $661), assumed $61,389 in third party debt and $11,114 in Net Partnership debt obligations to the Company. During 2000, the Company issued 83,400 operating partnership units (valued at $585) in LCIF to acquire a property management contract from an affiliate of the Chairman of the Company. During 2000, the Company purchased a property and issued a note payable to the seller of $3,488 as partial satisfaction of the purchase price. During 2002, 2001 and 2000, the Company issued 64,249, 100,000 and 73,800 common shares to certain employees and trustees resulting in $996, $1,181 and $664 of deferred compensation. These common shares vest ratably over a 2 to 5 year period. (17) UNAUDITED QUARTERLY FINANCIAL DATA <Table> <Caption> 2002 -------------------------------------- 3/31/02 6/30/02 9/30/02 12/31/02 ------- ------- ------- -------- <S> <C> <C> <C> <C> Revenues............................................... $24,813 $24,486 $25,080 $26,240 Income before extraordinary items...................... $ 7,961 $ 7,879 $ 7,646 $ 7,454 Net income............................................. $ 7,961 $ 7,879 $ 7,646 $ 7,109 Income before extraordinary items per common share: Basic................................................ $ 0.30 $ 0.30 $ 0.28 $ 0.25 Diluted.............................................. $ 0.29 $ 0.29 $ 0.28 $ 0.25 Net income per common share: Basic................................................ $ 0.30 $ 0.30 $ 0.28 $ 0.24 Diluted.............................................. $ 0.29 $ 0.29 $ 0.28 $ 0.24 </Table> 63
LEXINGTON CORPORATE PROPERTIES TRUST AND CONSOLIDATED SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) ($000'S EXCEPT PER SHARE DATA) <Table> <Caption> 2001 -------------------------------------- 3/31/01 6/30/01 9/30/01 12/31/01 ------- ------- ------- -------- <S> <C> <C> <C> <C> Revenues............................................... $20,233 $20,448 $20,222 $21,959 Income before extraordinary items...................... $ 4,848 $ 5,090 $ 4,921 $ 6,347 Net income............................................. $ 4,578 $ 5,090 $ 2,047 $ 6,347 Income before extraordinary items per common share: Basic................................................ $ 0.24 $ 0.25 $ 0.21 $ 0.25 Diluted.............................................. $ 0.24 $ 0.25 $ 0.20 $ 0.24 Net income per common share: Basic................................................ $ 0.23 $ 0.25 $ 0.07 $ 0.25 Diluted.............................................. $ 0.23 $ 0.25 $ 0.07 $ 0.24 </Table> The sum of the quarterly income per common share amounts may not equal the full year amounts primarily because the computations of the weighted average number of common shares outstanding for each quarter and the full year are made independently. (18) SUBSEQUENT EVENTS Subsequent to year end, the Company purchased a property for $23,500 net leased to Oce Printing Systems USA, Inc. through February 2020. The purchase was partially funded through the use of a $15,275 interest only, non-recourse mortgage which bears interest at 5.25%, and matures March 2008. The lease provides for an average annual rent of $2,245. The Company also obtained a $16,380 non-recourse mortgage note for its Westmont, Illinois property. The mortgage bears interest at 6.21%, provides for annual debt service of $1,292 and matures March 2018 when a balloon payment of $9,662 is due. The Company also obtained a $9,000 non-recourse mortgage note for the expansion of its Lancaster, California property. The mortgage bears interest at 5.92%, provides for annual debt service of $642 and matures September 2013 when a balloon payment of $7,518 is due. 64
LEXINGTON CORPORATE PROPERTIES TRUST AND CONSOLIDATED SUBSIDIARIES REAL ESTATE AND ACCUMULATED DEPRECIATION SCHEDULE III ($000) INITIAL COST TO COMPANY AND GROSS AMOUNT AT WHICH CARRIED AT END OF YEAR(A) <Table> <Caption> ACCUMULATED LAND AND BUILDINGS DEPRECIATION LAND AND AND DESCRIPTION LOCATION ENCUMBRANCES ESTATES IMPROVEMENTS TOTAL AMORTIZATION - ----------- ---------------------- ------------ -------- ------------ -------- ------------- <S> <C> <C> <C> <C> <C> <C> Office.......................... Southington, CT $ 8,120 $ 3,240 $ 20,440 $ 23,680 $ 9,344 Research & Development.......... Glendale, AZ 14,930 4,996 24,392 29,388 11,952 Retail/Health Club.............. Countryside, IL 2,235 628 3,722 4,350 1,802 Retail/Health Club.............. Voorhees, NJ 2,827 577 4,820 5,397 2,237 Retail/Health Club.............. DeWitt, NY 1,709 445 3,043 3,488 1,414 Warehouse & Distribution........ Mansfield, OH 3,089 120 5,965 6,085 2,117 Industrial...................... Marshall, MI 2,071 33 3,378 3,411 1,521 Industrial...................... Marshall, MI 789 14 926 940 418 Retail.......................... Newport, OR 5,784 1,400 7,270 8,670 3,267 Office & Warehouse.............. Memphis, TN 6,245 1,053 11,174 12,227 5,010 Warehouse & Distribution........ Mechanicsburg, PA 9,531 1,439 13,987 15,426 3,959 Office & Warehouse.............. Tampa, FL 6,096 1,389 7,762 9,151 3,131 Retail.......................... Klamath Falls, OR 6,573 727 9,160 9,887 3,387 Office.......................... Tampa, FL 8,427 1,900 9,854 11,754 3,519 Warehouse & Industrial.......... Jacksonville, FL -- 157 3,563 3,720 1,133 Retail.......................... Sacramento, CA 2,202 885 2,705 3,590 1,240 Office.......................... Phoenix, AZ -- 2,804 13,921 16,725 5,258 Retail.......................... Reno, NV 1,906 1,200 1,904 3,104 850 Retail.......................... Las Vegas, NV 1,709 900 1,759 2,659 784 Retail.......................... Rockville, MD -- -- 1,784 1,784 669 Retail.......................... Oxon Hill, MD 457 403 2,765 3,168 967 Retail.......................... Laguna Hills, CA -- 255 5,035 5,290 1,764 Retail.......................... Riverdale, GA -- 333 2,233 2,566 391 Retail/Health Club.............. Canton, OH 1,823 602 3,819 4,421 668 Office.......................... Salt Lake City, UT 20,349 -- 55,404 55,404 14,150 Manufacturing................... Franklin, NC 2,053 386 3,062 3,448 459 Industrial...................... Oberlin, OH 2,098 276 4,515 4,791 677 Retail.......................... Tulsa, OK -- 447 2,432 2,879 811 Retail.......................... Clackamas, OR -- 523 2,847 3,370 949 Retail.......................... Lynwood, WA -- 488 2,658 3,146 886 Retail.......................... Honolulu, HI -- -- 11,147 11,147 2,755 Warehouse....................... New Kingston, PA (Silver Springs) 3,509 674 5,360 6,034 776 Warehouse....................... New Kingston, PA (Cumberland) 7,364 1,380 10,963 12,343 1,587 Warehouse....................... Mechanicsburg, PA (Hampden IV) 5,437 1,012 8,039 9,051 1,164 Office/Research & Development... Marlborough, MA 8,102 1,999 13,834 15,833 1,888 Office.......................... Dallas, TX 21,785 3,582 30,598 34,180 3,924 Warehouse....................... Waterloo, IA 4,194 1,025 8,296 9,321 1,080 Office/Research & Development... Milpitas, CA 17,100 3,542 18,603 22,145 2,325 Industrial...................... Gordonsville, TN 1,972 52 3,325 3,377 478 Office.......................... Decatur, GA 6,829 975 13,677 14,652 1,710 Office.......................... Richmond, VA 16,634 -- 27,282 27,282 4,230 Office/Warehouse................ Bristol, PA 9,833 2,508 10,031 12,539 1,191 Office.......................... Hebron, KY 5,414 1,615 6,462 8,077 767 Office.......................... Livonia, MI 5,344 1,554 6,219 7,773 739 Office.......................... Valley Forge, PA 13,306 3,960 15,891 19,851 149 Research & Development.......... Livonia, MI 5,789 1,733 6,936 8,669 824 Office.......................... Palm Beach Gardens, FL 11,509 3,576 14,249 17,825 1,648 Warehouse/Distribution.......... Lancaster, CA 10,761 2,028 28,225 30,253 1,592 Industrial...................... Auburn Hills, MI 7,325 2,788 11,169 13,957 1,237 Warehouse/Distribution.......... Warren, OH 38,115 10,231 51,280 61,511 9,305 Warehouse/Distribution.......... Baton Rouge, LA 1,969 685 2,748 3,433 287 Retail.......................... Columbia, MD -- 1,002 4,294 5,296 411 Retail.......................... Bakersfield, CA -- 400 1,662 2,062 586 Retail.......................... Bethesda, MD 1,955 926 2,415 3,341 1,209 <Caption> USEFUL LIFE COMPUTING DEPRECIATION IN LATEST DATE DATE INCOME STATEMENTS DESCRIPTION ACQUIRED CONSTRUCTED (YEARS) - ----------- ---------- ----------- ----------------------- <S> <C> <C> <C> Office.......................... Oct. 1986 1983 40 & 12 Research & Development.......... Nov. 1986 1985 40 & 12 Retail/Health Club.............. Jul. 1987 1987 40 & 12 Retail/Health Club.............. Jul. 1987 1987 40 & 12 Retail/Health Club.............. Aug. 1987 1977 & 1987 40 & 12 Warehouse & Distribution........ Jul. 1987 1970 40, 20 & 12 Industrial...................... Aug. 1987 1968 & 1972 40, 20 & 12 Industrial...................... Aug. 1987 1979 40, 20 & 12 Retail.......................... Sept. 1987 1986 40, 20 & 12 Office & Warehouse.............. Feb. 1988 1987 40 Warehouse & Distribution........ Oct. 1990 1985 & 1991 40 Office & Warehouse.............. Nov. 1987 1986 40 & 20 Retail.......................... Mar. 1988 1986 40 Office.......................... Jul. 1988 1986 40 Warehouse & Industrial.......... Jul. 1988 1958 & 1969 40 & 20 Retail.......................... Oct. 1988 1988 40, 20 & 12 Office.......................... Nov. 1988 1960 & 1979 40 & 3 Retail.......................... Dec. 1988 1988 40, 20 & 12 Retail.......................... Dec. 1988 1988 40, 20 & 12 Retail.......................... Aug. 1995 1977 22.375, 16.583 & 15.583 Retail.......................... Aug. 1995 1976 21.292 Retail.......................... Aug. 1995 1974 20 & 20.5 Retail.......................... Dec. 1995 1985 40 Retail/Health Club.............. Dec. 1995 1987 40 Office.......................... May 1996 1982 25.958 Manufacturing................... Dec. 1996 1996 40 Industrial...................... Dec. 1996 1996 40 Retail.......................... Dec. 1996 1981 23.583 & 13.583 Retail.......................... Dec. 1996 1981 23.583 & 13.583 Retail.......................... Dec. 1996 1981 23.583 & 13.583 Retail.......................... Dec. 1996 1980 24.33 Warehouse....................... Mar. 1997 1981 40 Warehouse....................... Mar. 1997 1989 40 Warehouse....................... Mar. 1997 1985 40 Office/Research & Development... Jul. 1997 1960 & 1988 40 Office.......................... Sept. 1997 1986 40 Warehouse....................... Oct. 1997 1996 & 1997 40 Office/Research & Development... Dec. 1997 1985 40 Industrial...................... Dec. 1997 1983 & 1985 34.75 Office.......................... Dec. 1997 1983 40 Office.......................... Dec. 1997 1990 32.25 Office/Warehouse................ Mar. 1998 1982 40 Office.......................... Mar. 1998 1987 40 Office.......................... Mar. 1998 1987 & 1988 40 Office.......................... Aug. 2002 1985 & 2001 40 Research & Development.......... Mar. 1998 1987 & 1988 40 Office.......................... May 1998 1996 40 Warehouse/Distribution.......... Jun. 1998 1998 40 Industrial...................... Jul. 1998 1989 & 1998 40 Warehouse/Distribution.......... Aug. 1998 1982 10 & 40 Warehouse/Distribution.......... Oct. 1998 1998 40 Retail.......................... Dec. 1998 1983 40 Retail.......................... Aug. 1995 1976 40 Retail.......................... Aug. 1995 1980 40 </Table> 65
LEXINGTON CORPORATE PROPERTIES TRUST AND CONSOLIDATED SUBSIDIARIES REAL ESTATE AND ACCUMULATED DEPRECIATION SCHEDULE III ($000) -- (CONTINUED) <Table> <Caption> ACCUMULATED LAND AND BUILDINGS DEPRECIATION LAND AND AND DESCRIPTION LOCATION ENCUMBRANCES ESTATES IMPROVEMENTS TOTAL AMORTIZATION - ----------- ---------------------- ------------ -------- ------------ -------- ------------- <S> <C> <C> <C> <C> <C> <C> Office.......................... Bristol, PA 6,190 1,073 7,709 8,782 586 Office.......................... Southborough, MA 2,251 456 4,291 4,747 326 Office.......................... Herndon, VA 18,964 5,127 20,570 25,697 1,547 Office.......................... Hampton, VA 4,512 1,353 5,446 6,799 380 Office.......................... Phoenix, AZ 14,553 4,665 18,682 23,347 1,225 Industrial...................... Hebron, OH 3,764 1,063 4,296 5,359 111 Industrial...................... Hebron, OH 5,887 1,681 6,794 8,475 176 Retail.......................... Phoenix, AZ -- 1,126 4,501 5,627 127 Retail.......................... Stockton, CA -- 259 1,037 1,296 29 Retail.......................... Lynchburg, VA -- 159 638 797 18 Office.......................... San Diego, CA 4,347 1,740 6,960 8,700 196 Office.......................... Phoenix, AZ -- 2,287 9,149 11,436 257 Industrial...................... Henderson, NC 4,497 1,488 5,954 7,442 167 Industrial...................... Tempe, AZ -- 378 1,514 1,892 43 Industrial...................... Columbus, OH -- 319 1,275 1,594 36 Office.......................... Tuscon, AZ 2,484 657 2,794 3,451 74 Retail.......................... Eau Claire, WI 2,360 860 3,442 4,302 97 Office.......................... Milford, CT -- 567 2,265 2,832 64 Retail.......................... Westland, MI 3,320 1,444 5,777 7,221 162 Retail.......................... Canton, OH 3,395 883 3,534 4,417 99 Retail.......................... Spartanburg, SC 2,819 833 3,334 4,167 94 Office.......................... Wilsonville, OR -- 2,666 10,662 13,328 300 Industrial...................... Ocala, FL 13,429 3,803 15,210 19,013 428 Retail.......................... Jacksonville, AL -- 392 1,567 1,959 44 Industrial...................... Columbia, SC 3,472 928 3,710 4,638 104 Office.......................... Hampton, VA 7,357 2,333 9,351 11,684 263 Industrial...................... Plymouth, MI 4,866 1,533 6,130 7,663 172 Retail.......................... Gainesville, GA 1,056 526 2,105 2,631 59 Office.......................... Lake Forest, CA 10,939 3,442 13,779 17,221 273 Office.......................... Knoxville, TN 5,330 1,624 6,503 8,127 61 Industrial...................... Groveport, OH 7,800 2,385 9,547 11,932 70 Office.......................... Westmont, IL -- 4,978 19,940 24,918 21 Office.......................... Fort Mill, SC 11,656 3,601 14,404 18,005 15 -------- -------- -------- -------- -------- Total...................... $460,517 $131,496 $781,874 $913,370 $134,220 ======== ======== ======== ======== ======== <Caption> USEFUL LIFE COMPUTING DEPRECIATION IN LATEST DATE DATE INCOME STATEMENTS DESCRIPTION ACQUIRED CONSTRUCTED (YEARS) - ----------- ---------- ----------- ----------------------- <S> <C> <C> <C> Office.......................... Dec. 1999 1998 40 Office.......................... Dec. 1999 1984 40 Office.......................... Dec. 1999 1987 40 Office.......................... Mar. 2000 2000 40 Office.......................... May 2000 1997 40 Industrial...................... Dec. 2001 2000 40 Industrial...................... Dec. 2001 1999 40 Retail.......................... Nov. 2001 1988 40 Retail.......................... Nov. 2001 1968 40 Retail.......................... Nov. 2001 1986 40 Office.......................... Nov. 2001 1989 40 Office.......................... Nov. 2001 1985 & 1994 40 Industrial...................... Nov. 2001 1998 40 Industrial...................... Nov. 2001 1981 40 Industrial...................... Nov. 2001 1990 40 Office.......................... Nov. 2001 1988 40 Retail.......................... Nov. 2001 1994 40 Office.......................... Nov. 2001 1994 40 Retail.......................... Nov. 2001 1987 & 1997 40 Retail.......................... Nov. 2001 1995 40 Retail.......................... Nov. 2001 1996 40 Office.......................... Nov. 2001 1980 & 1998 40 Industrial...................... Nov. 2001 1976 40 Retail.......................... Nov. 2001 1983 40 Industrial...................... Nov. 2001 1968 & 1998 40 Office.......................... Nov. 2001 1999 40 Industrial...................... Nov. 2001 1996 40 Retail.......................... Nov. 2001 1984 40 Office.......................... Mar. 2002 2001 40 Office.......................... Aug. 2002 2002 40 Industrial...................... Sep. 2002 2002 40 Office.......................... Dec. 2002 1989 40 Office.......................... Dec. 2002 2002 40 Total...................... </Table> - --------------- (A) The initial cost includes the purchase price paid by the Company and acquisition fees and expenses. The total cost basis of the Company's properties at December 31, 2002 for Federal income tax purposes was approximately $669 million. Reconciliation of real estate owned: <Table> <Caption> 2002 2001 2000 -------- -------- -------- <S> <C> <C> <C> Balance at the beginning of the year.................... $830,788 $682,627 $688,926 Additions during year................................... 116,264 166,668 30,603 Properties sold during year............................. (18,621) (4,107) (17,727) Property contributed to joint venture during year....... (15,061) (14,400) (19,175) -------- -------- -------- Balance at end of year.................................. $913,370 $830,788 $682,627 ======== ======== ======== Balance at beginning of year............................ $116,741 $ 98,429 $ 82,334 Depreciation and amortization expense................... 21,480 18,312 17,513 Accumulated depreciation and amortization of properties sold during year..................................... (2,934) -- (1,162) Accumulated depreciation of property contributed to joint venture during year............................ (1,067) -- (256) -------- -------- -------- Balance at end of year.................................. $134,220 $116,741 $ 98,429 ======== ======== ======== </Table> 66
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. PART III. ITEM 10. TRUSTEES AND EXECUTIVE OFFICERS OF THE REGISTRANT The information regarding trustees and executive officers of the Company required to be furnished pursuant to this item is set forth in Item 4A of this report. ITEM 11. EXECUTIVE COMPENSATION The information required to be furnished pursuant to this item will be set forth under the caption "Compensation of Executive Officers" in the Proxy Statement, and is incorporated herein by reference. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The information required to be furnished pursuant to this item will be set forth under the captions "Principal Security Holders" and "Share Ownership of Trustees and Executive Officers" in the Proxy Statement, and is incorporated herein by reference. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS In 2002, the Company issued 34,483 common shares in respect of a 15-year, 8% interest only recourse note to an officer for $500. On November 28, 2001, the Company acquired Net 1 L.P. and Net 2 L.P. (collectively, the "Net Partnerships"), in a merger transaction valued at approximately $136,300, which owned twenty-three properties in fourteen states. The Company issued 2,143,840 common shares (valued at $31,622), 44,858 operating partnership units (valued at $661), $31,612 in cash and assumed approximately $61,389 of third party mortgage debt (excluding $11,114 in Net Partnership obligations to the Company). The Company's Chairman was the controlling shareholder of the general partners of the Net Partnerships. The general partners received 44,858 operating partnership units valued on the same basis as the limited partners for their 1% ownership interest in the Net Partnerships. The units, which receive distributions equal to the dividends on common shares, are convertible into the Company's common shares on a one-for-one basis beginning November 2006. During 2001, the Company issued 24,620 common shares to acquire a company controlled by the Chairman, whose sole asset was a mortgage note receivable from a 64% owned partnership of the Company. During 2001, the Company renegotiated $1,973 in notes receivable from two officers. The notes were issued in connection with the officers' purchases of 131,000 common shares at $15.25 per common share. The new notes have a 15-year maturity, are 8% interest only, recourse to the officers and provide for forgiveness of the principal balances if certain operating results are achieved. During 2000, the Company sold two properties to the Net Partnerships which are located in Henderson, North Carolina (leased to Corporate Express Office Products, Inc.) and Plymouth, Michigan (leased to Johnson Controls, Inc.) for $15,600 resulting in gains of $2,300. During 2000, the Company issued 83,400 operating partnership units in LCIF to acquire the property management contract for the Net Partnerships from an affiliate of the Chairman of the Company and was subsequently sold to LRA for $585. The fees earned during 2001 and 2000, under this contract, were $139 and $91 and the reimbursement of costs for services provided by the Company on behalf of the Net Partnerships were $564 and $359 for the years ended December 31, 2001 and 2000, respectively. The reimbursements are 67
shown net, in the Company's general and administrative expenses in the accompanying consolidated statements of income. In connection with the acquisition of certain properties in 1996, the Company assumed an obligation to pay The LCP Group, L.P., an affiliate of the Company's Chairman, an aggregate principal amount of $2,178 for rendering services in connection with the original acquisition of the properties in 1980 and 1981. Simple interest is payable monthly from available net cash flow of the respective original properties on the various unpaid principal portions of the fees, at annual rates ranging from 12.3% to 19.0%. The Company and LRA also received brokerage commissions relating to the purchase and sale of properties by the Net Partnerships, with unaffiliated parties, totaling $120 in 2000 which is included in interest and other income in the accompanying consolidated statements of income. PART IV. ITEM 14. CONTROLS AND PROCEDURES. Evaluation of Disclosure Controls and Procedures. An evaluation of the effectiveness of the design and operation of the Company's "disclosure controls and procedures" (as defined in rule 13a-14(c) under the Securities Exchange Act of 1934, as amended (the "Exchange Act")) was carried out within 90 days prior to the filing of this annual report. This evaluation was made under the supervision and with the participation of the Company's management, including its Chief Executive Officer and its Chief Financial Officer. Based upon this evaluation, the Company's Chief Executive Officer and its Chief Financial Officer have concluded that the Company's disclosure controls and procedures (a) are effective to ensure that information required to be disclosed by the Company in reports filed or submitted under the Exchange Act is timely recorded, processed, summarized and reported and (b) include, without limitation, controls and procedures designed to ensure that information required to be disclosed by the Company in reports filed or submitted under the Exchange Act is accumulated and communicated to the Company's management, including its Chief Executive Officer and its Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. Changes in Internal Controls. There have been no significant changes in the Company's internal controls or in other factors that could significantly affect these controls subsequent to the date of the Company's evaluation. ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K. <Table> <Caption> PAGE ---- <C> <S> <C> (a)(1) Financial Statements........................................ 38-64 (2) Financial Statement Schedule................................ 65-66 (3) Exhibits.................................................... </Table> <Table> <Caption> EXHIBIT NO. EXHIBIT - ----------- ------- <C> <S> <C> 3.1 -- Declaration of Trust of Lexington Corporate Properties Trust (the "Company"), dated December 31, 1997 (filed as Exhibit 3.1 to the Company's Current Report on Form 8-K filed January 16, 1998 (the "1998 8-K"))* 3.2 -- Articles Supplementary Classifying 2,000,000 shares of Preferred Shares as Class A Senior Cumulative Convertible Preferred Shares and 2,000,000 shares of Excess Shares as Excess Class A Preferred Shares of the Company (filed as Exhibit 5.3 to the Company's Current Report on Form 8-K filed February 10, 1997)* </Table> 68
<Table> <Caption> EXHIBIT NO. EXHIBIT - ----------- ------- <C> <S> <C> 3.3 -- By-Laws of the Company (filed as Exhibit 3.2 to the Company's Annual Report on 10-K for the year ended December 31, 1997 (the "1997 10-K"))* 3.4 -- Articles of Amendment of Declaration of Trust of the Company (filed as Exhibit 3.3 to the Company's Registration Statement on Form S-4 (File No. 333-70790) (the "2001 Form S-4"))* 4.1 -- Specimen of Common Shares Certificate of the Company (filed as Exhibit 3.2 to the 1997 10-K)* 10.8 -- Form of 1994 Outside Director Shares Plan of the Company (filed as Exhibit 10.8 to the Company's Annual Report on 10-K for the year ended December 31, 1993)* 10.24 -- Class A Mortgage Note to Pacific Mutual Life Insurance Company and Lexington Mortgage Company dated May 19, 1995 in the amount of $34,000,000 (filed as Exhibit 10.24 to the Company's Annual Report on Form 10-K for the year ended December 31, 1995 (the "1995 10-K"))* 10.25 -- Class B Mortgage Note to Pacific Mutual Life Insurance Company and Lexington Mortgage Company dated May 19, 1995 in the amount of $18,500,000 (filed as Exhibit 10.25 to the 1995 10-K)* 10.26 -- Class C Mortgage Note to Pacific Mutual Life Insurance Company and Lexington Mortgage Company dated May 19, 1995 in the amount of $17,500,000 (filed as Exhibit 10.26 to the 1995 10-K)* 10.28 -- Indenture of Mortgage, Deed of Trust, Security Agreement, Financing Statement, Fixture Filing and Assignment of Leases, Rents and Security Deposits to First American Title Insurance Company and Pacific Mutual Life Insurance Company and Lexington Mortgage Company dated May 19, 1995 (filed as Exhibit 10.28 to the 1995 10-K)* 10.29 -- Assignment of Leases, Rents, and Security Deposits to Pacific Mutual Life Insurance Company and Lexington Mortgage Company dated May 19, 1995 (filed as Exhibit 10.29 to the 1995 10-K)* 10.30 -- Cash Collateral Account, Security, Pledge and Assignment Agreement with the Bank of New York, as agent and Pacific Mutual Life Insurance Company and Lexington Mortgage Company dated May 19, 1995 (filed as Exhibit 10.30 to the 1995 10-K)* 10.31 -- Trust and Servicing Agreement with Pacific Mutual Life Insurance Company, LaSalle National Bank and ABN AMRO Bank N.V. dated May 19, 1995 (filed as Exhibit 10.31 to the 1995 10-K)* 10.38 -- Operating Agreement and Management Agreement between the Company and Lexington Acquiport Company, LLC ("LAC I") (filed as Exhibit 2 to the Company's Current Report on Form 8-K filed August 31, 1999)* 10.39 -- Form of Employment Agreement between the Company and E. Robert Roskind dated September 20, 1999 (filed as Exhibit 10.39 to the Company's Annual Report on Form 10-K for the year ended December 31, 1999)* 10.40 -- Investment Advisory and Asset Management Agreement by and between AGAR International Holdings Ltd. and Lexington Realty Advisors, Inc. ("LRA") (filed as Exhibit 10.40 to the Company's Annual Report on Form 10-K for the year ended December 31, 2000)* 10.42 -- Contribution Agreement between Net 3 Acquisition L.P. ("Net 3") and Lepercq Net 1 L.P., as amended (filed as Exhibit 10.42 to the 2001 Form S-4)* 10.43 -- Contribution Agreement between Net 3 and Lepercq Net 2 L.P., as amended (filed as Exhibit 10.43 to the 2001 Form S-4)* </Table> 69
<Table> <Caption> EXHIBIT NO. EXHIBIT - ----------- ------- <C> <S> <C> 10.44 -- Unsecured Revolving Credit Agreement with Fleet National Bank dated March 30, 2001 in the amount of $35,000,000 (filed as Exhibit 10.44 to the 2001 Form S-4)* 10.45 -- Loan Assumption, First Modification And Ratification Agreement, dated as of November 28, 2001, by and among the Company, LCIF, LCIF II, and Net 3 in favor of Fleet National Bank (filed as Exhibit 99.2 to the Company's Current Report on Form 8-K filed December 21, 2001 (the "2001 8-K")* 10.46 -- Operating Agreement of Lexington Acquiport Company II, LLC ("LAC II"), dated as of December 5, 2001 (filed as Exhibit 99.4 to the 2001 8-K)* 10.47 -- Management Agreement, dated as of December 5, 2001, by and between LAC II and LRA (filed as Exhibit 99.5 to the 2001 8-K)* 10.48 -- First Amendment to Operating Agreement of LAC I, dated as of December 5, 2001 (filed as Exhibit 99.6 to the 2001 8-K)* 10.49 -- First Amendment to Management Agreement, dated as of December 5, 2001, by and between LAC I and LRA (filed as Exhibit 99.7 to the 2001 8-K)* 10.50 -- Form of Amended and Restated Agreement of Limited Partnership of Net 3 (filed as Exhibit 99.1 to the 2001 Form S-4)* 10.51 -- Agreement and Plan of Merger by and among the Company, Net 3 and Net 1 L.P., as amended (filed as Exhibit 2.5 to the Company's Registration Statement on Form S-4 (File No. 333-70790) (the "2001 Form S-4"))* 10.52 -- Agreement and Plan of Merger by and among the Company, Net 3 and Net 2 L.P., as amended (filed as Exhibit 2.6 to the 2001 Form S-4)* 10.53 -- Form of Indemnification Agreement between the Company and E. Robert Roskind dated June 6, 2002 + 10.54 -- Amended and Restated 2002 Equity-Based Award Plan of the Company + 12 -- Statement of Computation of Ratio of Earnings to Fixed Charges + 21 -- List of Subsidiaries of the Trust + 23 -- Consent of KPMG LLP + 99.1 -- Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 + 99.2 -- Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 + </Table> - --------------- * Incorporated by reference. + Filed Herewith. 70
SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. LEXINGTON CORPORATE PROPERTIES TRUST By: /s/ T. WILSON EGLIN ------------------------------------ T. Wilson Eglin Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Company and in the capacities and on the date indicated. <Table> <Caption> SIGNATURE TITLE --------- ----- <C> <S> /s/ E. ROBERT ROSKIND Chairman of the Board of Trustees - --------------------------------------------------- E. Robert Roskind /s/ RICHARD J. ROUSE Vice Chairman of the Board of Trustees and - --------------------------------------------------- Chief Investment Officer Richard J. Rouse /s/ T. WILSON EGLIN Chief Executive Officer, President, Chief - --------------------------------------------------- Operating Officer and Trustee T. Wilson Eglin /s/ PATRICK CARROLL Chief Financial Officer, Treasurer and - --------------------------------------------------- Executive Vice President Patrick Carroll /s/ PAUL R. WOOD Vice President, Chief Accounting Officer and - --------------------------------------------------- Secretary Paul R. Wood /s/ GEOFFREY DOHRMANN Trustee - --------------------------------------------------- Geoffrey Dohrmann /s/ CARL D. GLICKMAN Trustee - --------------------------------------------------- Carl D. Glickman /s/ JACK A. SHAFFER Trustee - --------------------------------------------------- Jack A. Shaffer /s/ SETH M. ZACHARY Trustee - --------------------------------------------------- Seth M. Zachary </Table> DATE: March 24, 2003 71
CERTIFICATION I, T. Wilson Eglin, certify that: 1. I have reviewed this annual report on Form 10-K of Lexington Corporate Properties Trust; 2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report; 3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the "Evaluation Date"); and c) presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this annual report whether there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date March 24, 2003 By: /s/ T. WILSON EGLIN ------------------------------ T. Wilson Eglin Chief Executive Officer 72
CERTIFICATION I, Patrick Carroll, certify that: 1. I have reviewed this annual report on Form 10-K of Lexington Corporate Properties Trust; 2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report; 3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the "Evaluation Date"); and c) presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this annual report whether there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date March 24, 2003 /s/ PATRICK CARROLL - -------------------------- Patrick Carroll Chief Financial Officer 73