<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K/A
Amendment No. 1 to Form 8-K
Current Report
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): December 31, 1996
LEXINGTON CORPORATE PROPERTIES, INC.
(Exact Name of Registrant as specified in its charter)
MARYLAND 1-12386 13-3717318
(State or other jurisdiction (Commission File (IRS Employer
of incorporation) Number) Identification No.)
355 LEXINGTON AVENUE, NEW YORK, NEW YORK 10017
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code:
(212) 692-7260
NOT APPLICABLE
(Former name or former address, if changed since last report)
<PAGE> 2
Item 2. Acquisition or Disposition of Assets
Pursuant to three Contribution Agreements, each dated as of December
31, 1996, Lexington Corporate Properties, Inc., a real estate investment trust
organized under the laws of the State of Maryland (the "Registrant"), through
its subsidiary Lepercq Corporate Income Fund L.P. ("LCIF"), a limited
partnership organized under the laws of the State of Delaware, acquired five
properties (the "Properties") from three limited partnerships through three
exchange transactions (individually, the "Toy II Exchange", "the "Toy V
Exchange" and the "Fort Street Exchange", and collectively, the "Exchanges").
Following the Exchanges, the tenants occupying the Properties will continue to
occupy their respective properties in accordance with the terms of their
respective leases. Certain information regarding each of the Exchanges
is set forth below.
Acquisition from Toy Properties Associates II.
Pursuant to a Contribution Agreement dated as of December 31, 1996,
the Registrant acquired three retail stores located in Tulsa, Oklahoma;
Clackamas, Oregon and Lynnwood, Washington (collectively, the "Toy II
Buildings"), together with Toy II's leasehold interests in the land on which the
Toy II Buildings are located (collectively, the "Toy II Properties"), from Toy
Properties Associates II, a limited partnership organized under the laws of the
State of New York ("Toy II"). The Toy II Buildings, which contain an aggregate
of 129,369 square feet, are leased to Toys 'R' Us, Inc. under triple net leases
which expire on May 31, 2006 and which are subject to five, five-year renewal
options. In addition, under the terms of such leases the tenant has the right to
purchase the Toy II Buildings as of May 31, 2006 for the fair market value
thereof as determined by the terms of the leases. The land on which the Toy II
Buildings are located is leased to the Registrant under rent-free leases which
expire on August 31, 2011, subject to the right of the Registrant to lease the
land for an additional 50 years at specified rental rates.
In connection with the Exchange, the Registrant effected the
following:
(1) The Registrant transferred to Toy II 72,580 limited partnership
units in LCIF ("Units" and each a "Unit"). The number of Units exchanged for the
Toy II Properties was based on a valuation of the Toy II Properties of
$9,296,982 based upon a discounting of the after-tax cash flow at approximately
4.75%. The holders of the Units are entitled to quarterly distributions of $0.28
per Unit ($1.12 per annum), subject to decrease by an amount proportionate to
any decrease in distributions on shares of the Registrant's common stock, par
value $.0001 per share (the "Common Stock"). In no event will distributions on
the Units exceed $1.12 annually. Each Unit will be exchangeable for one share of
the Registrant's Common Stock, subject to certain anti-dilution adjustments, on
January 15, 1999 and annually on each January 15 thereafter.
(2) The Registrant assumed liability under three mortgage notes (the
"Toy II Notes") to which the Toy II Buildings are subject. The Toy II Notes had
an outstanding aggregate principal balance of approximately $5,827,758 on
December 31, 1996. The Toy II Notes bear interest at a rate of 12.625% per
annum, require equal monthly payments of
2
<PAGE> 3
interest and principal sufficient to fully amortize the note by May 31, 2006 and
can be prepaid at any time after July 1, 1996 at a fixed premium of 6.5% of the
outstanding principal balance of the Toy II Notes, which percentage declines
rateably over the remaining ten years of the notes.
(3) The Registrant assumed a $2,253,063 obligation of Toy II (the "Toy
II Fee") (which includes interest accrued as of December 31, 1996) payable to
The LCP Group, L.P. ("LCP"), for services rendered in connection with the
acquisition of the Toy II Properties in 1980. LCP is owned and controlled by E.
Robert Roskind, Chairman and Co-Chief Executive Officer of the Registrant.
(4) The Registrant transferred 20,105 Units to LCP and 2,315 Units to
Richard J. Rouse, Vice-Chairman and Co-Chief Executive Officer of the
Registrant, in exchange for their contribution of their contractual rights
to receive from Toy II (i) certain future management fees that would have
been payable had current management arrangements remained in effect, (ii) a
2% disposition fee payable upon the ultimate disposition of the Toy II
Buildings and (iii) a .5% refinancing fee payable upon a refinancing of the
Toy II Notes. The Units transferred to LCP and Mr. Rouse are entitled to
distributions equal to distributions on the Units transferred to Toy II,
and will be exchangeable for shares of Common Stock on the same terms as the
Units transferred to Toy II.
The general partners of Toy II are Mr. Rouse and Capital Properties
Associates II, a limited partnership which is controlled by Mr. Roskind.
II. Acquisition from Toy Properties Associates V.
Pursuant to a Capital Contribution Agreement dated as of December 31,
1996, the Registrant acquired a 123,293 square foot distribution center located
in Houston, Texas (the "Toy V Building"), together with Toy V's leasehold
interest in the land on which the Toy V Building is located (collectively, the
"Toy V Property") from Toy Properties Associates V, a limited partnership
organized under the laws of the State of Texas ("Toy V"). The Toy V Building is
leased to Toys 'R' Us, Inc. under a triple net lease which expires on August 31,
2006, and which is subject to five, five-year renewal options. In addition,
under the terms of such lease, the tenant has the right to purchase the Toy V
Building as of August 31, 2006 for the fair market value thereof as determined
by the terms of the lease. The land on which the Toy V Building is located is
leased to the Registrant under a rent-free lease which expires on August 31,
2011, subject to the right of the Registrant to lease the land for an additional
50 years at specified rental rates.
In connection with the Toy V Exchange, the Registrant effected the
following:
(1) The Registrant transferred to Toy V 23,587 Units. The number of
Units exchanged for the Toy V Property was based on a valuation of the Toy V
Property of $3,426,532, based upon a discounting of after-tax cash flow at
approximately 5.50%. Holders of the Units are entitled to quarterly
distributions of $0.28 per Unit ($1.12 per
3
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annum), subject to decrease by an amount proportionate to any decrease in
distributions on shares of the Registrant's Common Stock. In no event will
distributions on the Units exceed $1.12 annually. Each Unit will be exchangeable
for one share of Common Stock, subject to certain anti-dilution adjustments, on
January 15, 1999 and annually on each January 15 thereafter.
(2) The Registrant assumed liability under one mortgage note (the "Toy
V Note") to which the Toy V Building is subject. The Toy V Note had an
outstanding principal balance of approximately $2,195,746 on December 31, 1996.
The Toy V Note bears interest at a rate of 12.625% per annum, requires equal
monthly payments of interest and principal sufficient to fully amortize the note
by August 31, 2006 and can be prepaid at any time after September 1, 1996 at a
fixed premium of 6.5% of the outstanding principal balance of the Toy V Note,
which percentage declines rateably over the remaining ten years of the note.
(3) The Registrant assumed a $1,322,115 obligation of Toy V (the "Toy V
Fee"), (which includes interest accrued as of December 31, 1996) payable to LCP
for services rendered in connection with the acquisition of the Toy V Property
in 1981.
(4) The Registrant transferred 10,451 Units to LCP and 962 Units to Mr.
Rouse, in exchange for their contribution of their contractual rights to receive
from Toy V (i) certain future management fees that would have been payable had
current management arrangements remained in effect, (ii) a 2% disposition fee
payable upon the ultimate disposition of the Toy V Building and (iii) a .5%
refinancing fee payable upon any refinancing of the Toy V Note. The Units
transferred to LCP and Mr. Rouse are entitled to distributions equal to
distributions on the Units transferred to Toy V, and will be exchangeable for
shares of Common Stock on the same terms as the Units transferred to Toy V.
The general partner of Toy V, Capital Properties Associates IV, is
controlled by Mr. Roskind.
III. Acquisition from Fort Street Partners.
Pursuant to a Capital Contribution Agreement dated as of December 31,
1996, the Registrant acquired from Fort Street Partners, a limited partnership
organized under the laws of the State of Connecticut ("Fort Street"), Fort
Street's interest in an 85,610 square foot retail facility located in Honolulu,
Hawaii (the "Fort Street Building"). The Fort Street Building is leased to
Liberty House, Inc. under a triple net lease which expires on September 30, 2009
and which is subject to one 115-month renewal option, one two-year renewal
option and three five-year renewal options. In addition, under the terms of such
lease, the tenant has the right to purchase the Fort Street Property upon the
expiration of the initial lease term on September 30, 2009 for the fair market
value thereof as determined by the terms of the lease.
In connection with the Fort Street Exchange, the Registrant effected
the following:
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<PAGE> 5
(1) The Registrant transferred to Fort Street 207,741 Units. The number
of Units exchanged for the Fort Street Property was based on a valuation of the
Fort Street Property of $9,536,957, based upon a discounting of the after-tax
cash flow at approximately 8.25%. Holders of the Units will not be entitled to
distributions on the Units prior to January 15, 2006. Beginning on January 15,
2006, holders of the Units will be entitled to quarterly distributions of $0.28
per Unit ($1.12 per annum), subject to decrease by an amount proportionate to
any decrease in distributions on shares of the Registrant's Common Stock. In no
event will distributions on the Units exceed $1.12 annually. Each Unit will be
exchangeable for one share of Common Stock, subject to certain anti-dilution
adjustments, on January 15, 2006 and annually on each January 15 thereafter.
(2) The Registrant assumed liability under one mortgage note (the "Fort
Street Note") to which the Fort Street Building is subject. The Fort Street Note
had an outstanding principal balance of approximately $6,189,675 on December 31,
1996. The Fort Street Note bears interest at a rate of 10.25% per annum and
requires equal monthly payments of interest and principal sufficient to fully
amortize the note by September 30, 2010.
(3) The Registrant assumed a $2,124,061 obligation of Fort Street (the
"Fort Street Fee") (which includes interest accrued as of December 31, 1996),
payable to LCP for services rendered in connection with the acquisition of the
Fort Street Property in 1981.
(4) The Registrant transferred 13,444 Units to LCP and 3,815 Units to
Mr. Rouse in exchange for their contribution of their contractual rights to
receive from Fort Street certain future management fees that would have been
payable had current management arrangements remained in effect and a 2%
disposition fee payable upon the ultimate disposition of the Fort Street
Building. LCP and Mr. Rouse are entitled to quarterly distributions on these
Units of $0.28 per Unit ($1.12 per annum), subject to decreases by an amount
proportionate to any decrease in the Registrant's Common Stock. In no event will
distributions on these Units exceed $1.12 annually. Each Unit will be
exchangeable for one share of Common Stock, subject to certain anti-dilution
adjustments, on January 15, 1999 and annually on each January 15 thereafter.
The general partner of Fort Street, Glenrouse Associates, is a
partnership comprised of three individuals, including Mr. Roskind and Mr.
Rouse.
5
<PAGE> 6
Item 7. Financial Statements, Pro Forma Information and Exhibits.
(a) Financial statements of properties acquired.
Toy Properties Associates II Financial Statements for the year
ended December 31, 1995 (audited) and for the nine month period
ended September 30, 1996 (unaudited).
Toy Properties Associates V Financial Statements for the year ended
December 31, 1995 (audited) and for the nine month period ended
September 30, 1996 (unaudited).
Fort Street Partners Limited Partnership Financial Statements for
the year ended December 31, 1995 (audited) and for the nine month
period ended September 30, 1996 (unaudited).
(b) Pro forma financial information.
Lexington Corporate Properties, Inc. and Consolidated Subsidiaries
Pro Forma Combined Financial Statements for the year ended
December 31, 1995 and as of and for the nine months ended
September 30, 1996.
(c) Exhibits.
2.1 Contribution Agreement, dated as of December 31,
1996, among Toy Properties Associates II, Lepercq
Corporate Income Fund L.P., Lex GP-1, Inc., The LCP
Group, L.P., Richard J. Rouse and Lexington Toy II
Trust.*
2.2 Contribution Agreement, dated as of December 31,
1996, among Toy Properties Associates V, Lepercq
Corporate Income Fund L.P., Lex GP-1, Inc., The LCP
Group, L.P., Richard J. Rouse and Lexington Toy V
Trust.*
2.3 Contribution Agreement, dated as of December 31,
1996, among Fort Street Partners Limited Partnership,
Lepercq Corporate Income Fund L.P., Lex GP-1, Inc.,
The LCP Group, L.P., Richard J. Rouse and Lexington
Fort Street Trust.*
- --------------
* Previously filed
6
<PAGE> 7
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
LEXINGTON CORPORATE PROPERTIES, INC.
By: /s/ Antonia G. Trigiani
--------------------------------------
Antonia G. Trigiani
Chief Financial Officer and Treasurer
Date: March 14, 1997
7
<PAGE> 8
INDEX TO FINANCIAL STATEMENTS
Toy Properties Associates II
Financial Statements .................................................. F-
Toy Properties Associates V
Financial Statements .................................................. F-
Fort Street Partners Limited Partnership
Financial Statements .................................................. F-
<PAGE> 9
TOY PROPERTIES ASSOCIATES II
FINANCIAL STATEMENTS
<PAGE> 10
INDEPENDENT AUDITORS' REPORT
The Partners
Toy Properties Associates II:
We have audited the accompanying balance sheet of Toy Properties Associates II
(a New York Limited Partnership) as of December 31, 1995, and the related
statements of operations, changes in partners' deficit, and cash flows for the
year then ended. These financial statements are the responsibility of the
Partnership's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that out audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Toy Properties Associates II
as of December 31, 1995, and the results of its operations and its cash flows
for the year then ended in conformity with generally accepted accounting
principles.
/s/ KPMG Peat Marwick LLP
October 7, 1996
New York, New York
<PAGE> 11
TOY PROPERTIES ASSOCIATES II
(A New York Limited Partnership)
Balance Sheets
<TABLE>
<CAPTION>
September 30, December 31,
1996 1995
---- ----
ASSETS (unaudited)
<S> <C> <C>
Real estate, at cost (notes 4 and 5):
Building improvements $ 3,962,968 $ 3,962,968
Land estates 3,187,812 3,187,812
----------- -----------
7,150,780 7,150,780
Less accumulated depreciation and
amortization 3,305,746 3,154,712
----------- -----------
3,845,034 3,996,068
Cash 5,067 3,594
Deferred charges, net of accumulated
amortization of $43,547 and $41,417
for 1996 and 1995, respectively 27,453 29,583
Rent receivable (note 5) 1,374,933 1,409,978
Due from lender 918 918
Other assets 23,539 23,539
----------- -----------
$ 5,276,944 $ 5,463,680
=========== ===========
LIABILITIES AND PARTNERS' DEFICIT
Mortgage notes payable (note 4) $ 5,906,169 $ 6,127,158
Origination fee payable, including accumulated
accretion of $168,137 and $150,021 in 1996 and
1995, respectively (note 6) 196,017 177,901
Accrued interest on origination fee payable (note 6) 1,449,176 1,377,513
----------- -----------
7,551,362 7,682,572
Partners' deficit (note 1) (2,274,418) (2,218,892)
----------- -----------
$ 5,276,944 $ 5,463,680
=========== ===========
</TABLE>
See accompanying notes to financial statements.
<PAGE> 12
TOY PROPERTIES ASSOCIATES II
(A New York Limited Partnership)
Statements of Operations
<TABLE>
<CAPTION>
Nine Months Year Ended
Ended September 30, December 31,
------------------- ------------
1996 1995 1995
---- ---- ----
(unaudited)
<S> <C> <C> <C>
Income:
Rental income (note 5) $ 765,234 $ 765,234 $ 1,020,312
----------- ----------- -----------
Expenses:
Mortgage note interest (note 4) 571,027 597,110 789,180
Origination fee interest including accretion
of discount on origination fee (note 6) 89,779 87,582 117,128
Depreciation and amortization 153,164 153,164 204,217
Management fee (note 7) 3,000 4,500 6,000
Other expenses 3,790 3,836 4,650
----------- ----------- -----------
820,760 846,192 1,121,175
----------- ----------- -----------
Net loss $ (55,526) $ (80,958) $ (100,863)
=========== =========== ===========
Net loss allocated:
To the general partner $ (1,110) $ (1,619) $ (2,017)
To the class A limited partners (32,649) (47,603) (59,308)
To the special limited partners (21,767) (31,736) (39,538)
----------- ----------- -----------
$ (55,526) $ (80,958) $ (100,863)
=========== =========== ===========
Net loss per unit of limited partnership interest:
To the class A limited partners $ (1,306) $ (1,904) $ (2,372)
=========== =========== ===========
To the special limited partners $ (5,442) $ (7,934) $ (9,885)
=========== =========== ===========
</TABLE>
See accompanying notes to financial statements.
<PAGE> 13
TOY PROPERTIES ASSOCIATES II
(A New York Limited Partnership)
Statements of Changes in Partners' Deficit
<TABLE>
<CAPTION>
Class A Special
General Limited Limited
Total Partners Partners Partners
----- -------- -------- --------
<S> <C> <C> <C> <C>
Partners' deficit
at December 31, 1994 $(2,118,029) $ (243,980) $ (782,771) $(1,091,278)
Net loss for the year (100,863) (2,017) (59,308) (39,538)
----------- ----------- ----------- -----------
Partners' deficit
at December 31, 1995 (2,218,892) (245,997) (842,079) (1,130,816)
Net loss for the period (unaudited) (55,526) (1,110) (32,649) (21,767)
----------- ----------- ----------- -----------
Partners' deficit
at September 30, 1996
(unaudited) $(2,274,418) $ (247,107) $ (874,728) $(1,152,583)
=========== =========== =========== ===========
</TABLE>
See accompanying notes to financial statements.
<PAGE> 14
TOY PROPERTIES ASSOCIATES II
(A New York Limited Partnership)
Statements of Cash Flows
<TABLE>
<CAPTION>
Nine Months Year Ended
Ended September 30, December 31,
------------------- ------------
1996 1995 1995
---- ---- ----
(unaudited)
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss $ (55,526) $ (80,958) $(100,863)
--------- --------- ---------
Adjustments to reconcile net loss to net
cash provided by operating activities:
Depreciation and amortization 153,164 153,164 204,217
Accumulated accretion on
origination fee payable 18,116 15,919 21,578
Decrease in rent receivable 35,045 35,045 46,727
Increase in other assets -- (812) (2,778)
Origination fee interest 71,663 71,663 95,550
Increase in accrued management fee -- 1,500 --
--------- --------- ---------
Total adjustments 277,988 276,479 365,294
--------- --------- ---------
Net cash provided by operating
activities 222,462 195,521 264,431
--------- --------- ---------
Cash flows used in financing activities:
Principal payments on mortgage note (220,989) (194,907) (264,063)
--------- --------- ---------
Increase in cash 1,473 614 368
Cash at beginning of period 3,594 3,226 3,226
--------- --------- ---------
Cash at end of period $ 5,067 $ 3,840 $ 3,594
========= ========= =========
Supplemental disclosure of cash flow information:
Cash paid during the period for interest $ 571,027 $ 597,110 $ 789,180
========= ========= =========
</TABLE>
See accompanying notes to financial statements.
<PAGE> 15
TOY PROPERTIES ASSOCIATES II
(A New York Limited Partnership)
Notes to Financial Statements
December 31, 1995 and
September 30, 1996 and 1995 (unaudited)
(1) ORGANIZATION
Toy Properties Associates II (the "Partnership") was formed in August,
1980 under the Uniform Limited Partnership Act of the State of New York
for the purposes of acquiring three estate-for-years interests (the "Land
Estates") together with all building improvements (collectively, the
"Property") located in Tulsa, Oklahoma; Lynwood, Washington; and
Clackamas, Oregon, and leasing the Property to Toys 'R' Us.
The general partners of the Partnership (the "General Partners") are
Richard J. Rouse and Capital Properties Associates II, a limited
partnership comprised of seven individuals, including E. Robert Roskind,
the general partner, and Mr. Rouse, a limited partner. Mr. Roskind and
Mr. Rouse are co-chief executive officers of Lexington Corporate
Properties, Inc.
Four Special Limited Partnership units were sold at $197,585 per unit.
Twenty-five Class A Limited Partnership Units were sold at a cost of
$40,000 per unit. All Limited Partners' capital contributions have been
paid.
The Partnership Agreement provides that the General Partners will be
allocated 2%, the Special Limited Partners 39.2% and the Class A Limited
Partners 58.8% of the profits and losses as well as distributions of cash
from operations.
(2) SIGNIFICANT ACCOUNTING POLICIES
BASIS OF ACCOUNTING
The financial statements of the Partnership have been prepared on the
accrual basis of accounting.
DEPRECIATION AND AMORTIZATION
Depreciation and amortization on the building improvements and land
estate are on the straight-line method over the 40 year and 30 year
useful lives, respectively.
RENTAL INCOME
The Partnership has determined that the leases relating to the property
are operating leases. Rental revenue is recognized on a straight-line
basis over the minimum lease terms. The Partnership's rent receivable
primarily represents the amounts of the excess of rental revenue
recognized on a straight-line basis over the annual rents collectible
under the leases.
DEFERRED CHARGES
Deferred charges are comprised of mortgage commitment fees which are
being amortized on the straight-line basis over the 25-year term of the
permanent financing.
(Continued)
<PAGE> 16
2
TOY PROPERTIES ASSOCIATES II
(A New York Limited Partnership)
Notes to Financial Statements
(2), CONTINUED
ORIGINATION FEE PAYABLE
The origination fee payable (see note 6) has a stated interest rate of
12.25% per annum on a simple interest basis. In accordance with generally
accepted accounting principles, the obligation was discounted using an
annual rate of 13%. The present value of this obligation at the date of
issuance amounted to $27,880.
INCOME TAXES
No provision has been made for income taxes since any such liability is
the liability of the individual partners.
FAIR VALUE OF FINANCIAL INSTRUMENTS
SFAS No. 107, "Disclosures about Fair Value of Financial Instruments,"
defines fair value of a financial instrument as the amount at which the
instrument could be exchanged in a current transaction between willing
parties. The Partnership's cash, due from lender and accrued interest on
origination fee payable are carried at cost, which approximates fair
value.
USE OF ESTIMATES
Management of the Partnership has made a number of estimates and
assumptions relating to the reporting of assets and liabilities and the
disclosure of contingent assets and liabilities to prepare these
financial statements in conformity with generally accepted accounting
principles. Actual results could differ from those estimates.
(3) UNAUDITED INFORMATION
The unaudited financial statements as of September 30, 1996 and for the
nine-month periods ended September 30, 1996 and 1995 reflect, in the
opinion of management, all adjustments (which include only normal
recurring adjustments) necessary to fairly present the results of
operations, cash flows and financial position as of and for the periods
presented. These unaudited financial statements should be read in
conjunction with the audited financial statements and related notes
thereto. The results for the interim periods presented are not
necessarily indicative of results to be expected for the full years.
(Continued)
<PAGE> 17
3
TOY PROPERTIES ASSOCIATES II
(A New York Limited Partnership)
Notes to Financial Statements
(4) MORTGAGE NOTES PAYABLE
The nonrecourse mortgage notes are collateralized by the Partnership's
interest in the Property and all rentals payable under the leases with
Toys 'R' Us, and bear interest at 12.625% per annum. The notes provide
for monthly payments of principal and interest of $88,002 to fully
amortize the loan by maturity in June 2006. Principal payments required
for each of the next five years are as follows:
<TABLE>
<CAPTION>
Year ending Amount
----------- ------
<S> <C>
1996 $ 299,399
1997 339,465
1998 384,891
1999 436,396
2000 494,793
==========
</TABLE>
The estimated fair value of the mortgage notes payable at December 31,
1995 is $6,525,423.
(5) NET LEASE
ACQUISITION OF PROPERTY
On August 27, 1980, pursuant to commitments obtained by an affiliate, the
Partnership acquired three Land Estates, representing a 30-year interest
in certain parcels of land together with all building improvements
constructed to date on such land from Toys 'R' Us. Pursuant to a
development agreement with the Partnership, Toys 'R' Us completed the
improvements, consisting of three retail toy stores, in September 1980.
Simultaneous with the acquisition of the Land Estates and the building
improvements, the Partnership also acquired from Toys 'R' Us an option to
enter into ground leases (the
"Remainder Ground Leases") of the land upon expiration of the Land
Estates. The Remainder Ground Leases will have an initial term of five
years and may be extended for an additional five renewal terms of five
years each.
PROPERTY LEASES
The Partnership and Toys 'R' Us entered into three net leases on August
27, 1980, whereby Toys 'R' Us leased the Partnership's interest beginning
in May 1981. Toys 'R' Us is responsible for all operating expenses
relating to the Property, including property taxes, maintenance, repairs,
renewals and betterments. The leases expire May 31, 2006 and provide Toys
'R' Us with five five-year optional renewal terms. Toys 'R' Us has the
option to purchase the Property from the Partnership at the expiration of
the original term of the lease at a price equal to the fair market value
of such Property.
(Continued)
<PAGE> 18
4
TOY PROPERTIES ASSOCIATES II
(A New York Limited Partnership)
Notes to Financial Statements
(5), CONTINUED
MINIMUM FUTURE RENTALS
Minimum future rentals under the net leases are summarized as follows:
<TABLE>
<CAPTION>
Year ending
December 31, Amount
------------ ------
<S> <C>
1996 $ 1,067,039
1997 1,067,039
1998 1,154,480
1999 1,162,430
2000 1,162,430
Thereafter 6,396,905
---------------
$ 12,010,323
===============
</TABLE>
(6) ORIGINATION FEE PAYABLE
The Partnership is obligated to pay an affiliate of the General Partners
a fee of $780,000 for rendering services in connection with the
structuring and arranging of the acquisition of the Property. Simple
interest accrues at the rate of 12.25% per annum. Interest is payable out
of available cash flow, as defined in the origination fee agreement,
until the end of the original term of the lease with the balance of the
obligation payable in 62 monthly installments beginning with the first
renewal period on June 1, 2006. The original principal amount has been
discounted at a rate of thirteen percent.
(7) TRANSACTIONS WITH RELATED PARTIES
For performing all administrative functions of the Partnership, an
affiliate of the General Partners receives an annual fee of $6,000.
<PAGE> 19
TOY PROPERTIES ASSOCIATES V
FINANCIAL STATEMENTS
<PAGE> 20
INDEPENDENT AUDITORS' REPORT
The Partners
Toy Properties Associates V:
We have audited the accompanying balance sheet of Toy Properties Associates V
(a Texas Limited Partnership) as of December 31, 1995, and the related
statements of operations, changes in partners' deficit, and cash flows for the
year then ended. These financial statements are the responsibility of the
Partnership's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Toy Properties Associates V
as of December 31, 1995, and the results of its operations and its cash flows
for the year then ended in conformity with generally accepted accounting
principles.
/s/ KPMG Peat Marwick LLP
October 7, 1996
New York, New York
<PAGE> 21
TOY PROPERTIES ASSOCIATES V
(A Texas Limited Partnership)
Balance Sheets
<TABLE>
<CAPTION>
September 30, December 31,
1996 1995
---- ----
(unaudited)
<S> <C> <C>
ASSETS
Real estate, at cost (notes 4 and 5):
Building improvements $ 2,487,823 $ 2,487,823
Land estate 449,395 449,395
----------- -----------
2,937,218 2,937,218
Less accumulated depreciation and amortization 1,176,919 1,119,040
----------- -----------
1,760,299 1,818,178
Cash 894 2,352
Mortgage brokerage fee, net of accumulated
amortization of $22,323 and $21,213
in 1996 and 1995, respectively 14,677 15,787
Partnership loan costs, net of accumulated
amortization of $6,637 and $6,307
in 1996 and 1995, respectively 4,363 4,693
Rent receivable (note 5) 876,810 885,910
Due from lender 491 491
----------- -----------
$ 2,657,534 $ 2,727,411
=========== ===========
LIABILITIES AND PARTNERS' DEFICIT
Mortgage loan payable (note 4) $ 2,224,419 $ 2,305,229
Origination fee payable including accumulated
accretion of $125,786 and $112,126
in 1996 and 1995, respectively (note 6) 147,254 133,594
Accrued interest on origination fee payable (note 6) 963,870 915,135
Other liabilities 3,844 2,595
----------- -----------
3,339,387 3,356,553
Partners' deficit (note 1) (681,853) (629,142)
----------- -----------
$ 2,657,534 $ 2,727,411
=========== ===========
</TABLE>
See accompanying notes to financial statements.
<PAGE> 22
TOY PROPERTIES ASSOCIATES V
(A Texas Limited Partnership)
Statements of Operations
<TABLE>
<CAPTION>
Nine Months
Ended Year Ended
September 30, December 31,
-------------------------- ------------
1996 1995 1995
---- ---- ----
(unaudited)
<S> <C> <C> <C>
Revenues:
Rental income (note 5) $ 291,051 $ 291,051 $ 388,068
--------- --------- ---------
Expenses:
Mortgage loan interest (note 4) 214,935 224,472 297,765
Origination fee interest, including
accretion of discount on origination
fee (note 6) 62,395 60,733 81,244
Depreciation and amortization 59,319 59,319 79,096
Management fee (note 7) 3,750 3,750 5,000
Other expenses 3,363 1,788 2,495
--------- --------- ---------
343,762 350,062 465,600
--------- --------- ---------
Net loss $ (52,711) $ (59,011) $ (77,532)
========= ========= =========
Net loss allocated:
To the general partner $ (527) $ (590) $ (775)
To the limited partners (52,184) (58,421) (76,757)
--------- --------- ---------
$ (52,711) $ (59,011) $ (77,532)
========= ========= =========
Net loss per unit of limited
partnership interest $ (1,739) $ (1,947) $ (2,559)
========= ========= =========
</TABLE>
See accompanying notes to financial statements.
<PAGE> 23
TOY PROPERTIES ASSOCIATES V
(A Texas Limited Partnership)
Statements of Changes in Partners' Deficit
<TABLE>
<CAPTION>
General Limited
Total Partner Partners
----- ------- --------
<S> <C> <C> <C>
Partners' deficit at December 31, 1994 $(551,610) $ (99,154) $(452,456)
Net loss for the year (77,532) (775) (76,757)
--------- --------- ---------
Partners' deficit at December 31, 1995 (629,142) (99,929) (529,213)
Net loss for the period (unaudited) (52,711) (527) (52,184)
--------- --------- ---------
Partners' deficit at September 30, 1996
(unaudited) $(681,853) $(100,456) $(581,397)
========= ========= =========
</TABLE>
See accompanying notes to financial statements.
<PAGE> 24
TOY PROPERTIES ASSOCIATES V
(A Texas Limited Partnership)
Statements of Cash Flows
<TABLE>
<CAPTION>
Nine Months
Ended Year Ended
September 30, December 31,
-------------------------- ------------
1996 1995 1995
---- ---- ----
(unaudited)
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss $ (52,711) $ (59,011) $ (77,532)
--------- --------- ---------
Adjustments to reconcile net
loss to net cash provided by
operating activities:
Depreciation and amortization 59,319 59,319 79,096
Accumulated accretion on
origination fee payable 13,660 11,998 16,264
Increase in other assets -- (587) --
Increase in other liabilities 1,249 1,250 2,501
Decrease in rent receivable 9,100 9,100 12,132
Origination fee interest 48,735 48,735 64,980
--------- --------- ---------
Total adjustments 132,063 129,815 174,973
--------- --------- ---------
Net cash provided by
operating activities 79,352 70,804 97,441
--------- --------- ---------
Cash flows from financing activities:
Principal payments on mortgage notes (80,810) (71,272) (96,560)
--------- --------- ---------
Net (decrease) increase in cash (1,458) (468) 881
Cash at beginning of period 2,352 1,471 1,471
--------- --------- ---------
Cash at end of period $ 894 $ 1,003 $ 2,352
========= ========= =========
Supplemental disclosure of cash flow information:
Cash paid during the period for interest $ 214,935 $ 224,472 $ 297,765
========= ========= =========
</TABLE>
See accompanying notes to financial statements.
<PAGE> 25
TOY PROPERTIES ASSOCIATES V
(A Texas Limited Partnership)
Notes to Financial Statements
December 31, 1995 and
September 30, 1996 and 1995 (unaudited)
(1) ORGANIZATION
Toy Properties Associates V (the "Partnership") is a Texas limited
partnership organized on June 16, 1981, to acquire a new distribution
center and estate-for-years interest in the underlying land (collectively
the "Property") for $3,257,750. The property, located in Houston, Texas,
is net leased to Toys 'R' Us, Inc. ("Toys 'R' Us").
Capital Properties Associates IV (the "General Partner") is a limited
partnership comprised of eight individuals, including E. Robert Roskind,
the general partner, and Richard J. Rouse, a limited partner. Mr. Roskind
and Mr. Rouse are co-chief executive officers of Lexington Corporate
Properties, Inc.
In December 1983, 30 units of limited partnership interest were sold to
investor limited partners (the "Limited Partners"). Each unit was sold
for $30,935 payable in eight installments. All Limited Partners' capital
contributions have been paid.
The Partnership Agreement provides that profits and losses and
distributions of the Partnership shall be allocated 99% to the Limited
Partners and 1% to the General Partner.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF ACCOUNTING
The financial statements of the Partnership have been prepared on the
accrual basis of accounting.
DEPRECIATION AND AMORTIZATION
Depreciation and amortization on the building improvements and land
estate is on the straight-line method over the 40-year and 30 year useful
lives, respectively.
RENTAL INCOME
The Partnership has determined that the lease relating to the property is
an operating lease. Rental revenue is recognized on a straight-line basis
over the minimum lease terms. The Partnership's rent receivable primarily
represents the amounts of the excess of rental revenue recognized on a
straight-line basis over the annual rents collectible under the lease.
(Continued)
<PAGE> 26
2
TOY PROPERTIES ASSOCIATES V
(A Texas Limited Partnership)
Notes to Financial Statements
(2), CONTINUED
ORIGINATION FEE PAYABLE
The origination fee payable (see note 6) has a stated interest rate of
19% per annum on a simple interest basis. In accordance with generally
accepted accounting principles, the obligation was discounted using an
annual rate of 13%. The present value of this obligation at the date of
issuance amounted to $21,468.
AMORTIZATION OF DEFERRED EXPENSES
The mortgage brokerage fee is amortized on a straight-line basis over the
25-year term of the mortgage loan.
The partnership loan costs include legal fees which are amortized on a
straight-line basis over the 25-year term of the mortgage loan.
INCOME TAXES
No provision has been made for income taxes since any such liability is
the liability of the individual partners.
FAIR VALUE OF FINANCIAL INSTRUMENTS
SFAS No. 107, "Disclosures about Fair Value of Financial Instruments,"
defines fair value of a financial instruments as the amount at which the
instruments could be exchanged in a current transaction between willing
parties. The Partnership's cash, due from lender, accrued interest on
origination fee payable and other liabilities are carried at cost, which
approximates fair value.
USE OF ESTIMATES
Management of the Partnership has made a number of estimates and
assumptions relating to the reporting of assets and liabilities and the
disclosure of contingent assets and liabilities to prepare these
financial statements in conformity with generally accepted accounting
principles. Actual results could differ from those estimates.
(3) UNAUDITED INFORMATION
The unaudited financial statements and related notes as of September 30,
1996 and for the nine month periods ended September 30, 1996 and 1995
reflect, in the opinion of management, all adjustments (which include
only normal recurring adjustments) necessary to fairly present the
results of operations, cash flows and financial position as of and for
the periods presented. These unaudited financial statements should be
read in conjunction with the audited financial statements and related
notes thereto. The results for the interim periods presented are not
necessarily indicative of results to be expected for the full years.
(Continued)
<PAGE> 27
3
TOY PROPERTIES ASSOCIATES V
(A Texas Limited Partnership)
Notes to Financial Statements
(4) MORTGAGE LOAN PAYABLE
The Partnership received a long-term mortgage loan from the State of
California Public Employees Retirement System. The non-recourse financing
is secured by a mortgage on the Property and an assignment of the net
lease. The mortgage loan provides for interest at the rate of 12.625% per
annum with monthly payments of principal and interest of $32,860 through
2006 to fully amortize the mortgage loan. The mortgage loan became
prepayable on September 1, 1996. Principal payments required for each of
the next five years are as follows:
<TABLE>
<CAPTION>
Year ending
December 31 Amount
----------- ------
<S> <C>
1996 $ 109,483
1997 124,133
1998 140,743
1999 159,578
2000 180,932
========
</TABLE>
The estimated fair value of the mortgage loan payable at December 31,
1995 is $2,455,069.
(5) NET LEASE
ACQUISITION OF PROPERTY
On June 30, 1981, the Partnership acquired a Land Estate, representing a
30-year interest in a parcel of land, from Toys 'R' Us, together with all
building improvements constructed to date on such land.
Simultaneous with the acquisition of the Land Estate and the building
improvements, the Partnership also acquired from Toys 'R' Us an option to
enter into a ground lease (the "Remainder Ground Lease") of the land upon
the expiration of the Land Estate. The Remainder Ground Lease will have
an initial term of five years and may be extended for an additional five
renewal terms of five years each.
NET LEASE
The Partnership entered into a net lease with Toys 'R' Us. Toys 'R' Us is
obligated to pay all operating expenses, taxes, assessments, insurance,
and required capital expenditures. The primary term of the 25-year net
lease expires on August 31, 2006. Toys 'R' Us has options for five
renewal terms of five years each. Toys 'R' Us has the option to purchase
the Property from the Partnership at the expiration of the original term
of the lease at a price equal to the fair market value of such Property.
(Continued)
<PAGE> 28
4
TOY PROPERTIES ASSOCIATES V
(A Texas Limited Partnership)
Notes to Financial Statements
(5), CONTINUED
Minimum future rentals under the net lease are summarized as follows:
<TABLE>
<CAPTION>
Year ending
December 31 Amount
----------- ------
<S> <C>
1996 $ 400,200
1997 400,200
1998 460,713
1999 490,970
2000 490,970
Thereafter 2,782,163
---------------
$ 5,025,216
===============
</TABLE>
(6) ORIGINATION FEE PAYABLE
The Partnership is obligated to pay an affiliate of the General Partner a
fee of $342,000 for rendering services in connection with the acquisition
of the Property. Simple interest is payable monthly from available cash
flow after the first $10,000 of annual cash flow, at the rate of 19% per
annum on the unpaid portion of this fee. Accrual of interest commenced
upon admission of the Limited Partners. On May 1, 1998, the Partnership
is required to begin making monthly payments of $7,436 to retire the
obligation. Unpaid accrued interest outstanding on September 1, 2006,
will be satisfied by 59 monthly payments of $17,155. The original
principal amount has been discounted at a rate of thirteen percent.
(7) TRANSACTION WITH RELATED PARTIES
For performing all administrative functions of the Partnership, an
affiliate of the General Partner receives an annual fee of $5,000.
<PAGE> 29
FORT STREET PARTNERS
FINANCIAL STATEMENTS
<PAGE> 30
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Fort Street Partners Limited Partnership:
We have audited the accompanying balance sheet of Fort Street Partners Limited
Partnership (a Connecticut Limited Partnership) as of December 31, 1995, and
the related statements of operations, changes in partners' deficit, and cash
flows for the year then ended. These financial statements are the
responsibility of the Partnership's management. Our responsibility is to
express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Fort Street Partners Limited
Partnership as of December 31, 1995, and the results of its operations and its
cash flows for the year then ended in conformity with generally accepted
accounting principles.
/s/ KPMG Peat Marwick LLP
October 7, 1996
New York, New York
<PAGE> 31
FORT STREET PARTNERS LIMITED PARTNERSHIP
(A Connecticut Limited Partnership)
Balance Sheets
<TABLE>
<CAPTION>
September 30, December 31,
1996 1995
------------ ------------
(unaudited)
<S> <C> <C>
ASSETS
Real estate, at cost (notes 4 and 5):
Building improvements $ 6,670,228 $ 6,670,228
Less accumulated depreciation (2,570,772) (2,445,704)
----------- -----------
4,099,456 4,224,524
Cash 25,146 41,732
Lease negotiation fee, net of accumulated
amortization of $58,814 and $55,953
in 1996 and 1995, respectively 51,811 54,672
Mortgage brokerage fee, net of accumulated
amortization of $4,213 and $4,008
in 1996 and 1995, respectively 3,990 4,195
Rent receivable (note 5) 1,993,863 2,102,849
Other assets 7,293 3,034
----------- -----------
$ 6,181,559 $ 6,431,006
=========== ===========
LIABILITIES AND PARTNERS' DEFICIT
Mortgage note payable (note 4) $ 6,240,487 $ 6,385,369
Origination fee payable, including accumulated
accretion of $86,010 and $76,775 in 1996 and
1995, respectively (note 6) 99,658 90,423
Accrued interest on origination fee payable
(note 6) 1,442,791 1,467,811
Accounts payable -- 595
----------- -----------
7,782,936 7,944,198
Partners' deficit (note 1) (1,601,377) (1,513,192)
----------- -----------
$ 6,181,559 $ 6,431,006
=========== ===========
</TABLE>
See accompanying notes to financial statements.
<PAGE> 32
FORT STREET PARTNERS LIMITED PARTNERSHIP
(A Connecticut Limited Partnership)
Statements of Operations
<TABLE>
<CAPTION>
Nine Months Year ended
Ended September 30, December 31,
----------------------- ------------
1996 1995 1995
--------- --------- ------------
(unaudited)
<S> <C> <C> <C>
Income:
Rental income (note 5) $ 613,250 $ 613,250 $ 817,667
Interest income 114 396 405
--------- --------- ---------
613,364 613,646 818,072
--------- --------- ---------
Expenses:
Mortgage note interest (note 4) 485,995 494,402 658,513
Origination fee interest, including
amortization of origination fee
payable (note 6) 84,294 83,171 111,074
Depreciation and amortization 128,134 128,134 170,844
Management fee (note 7) 1,875 1,875 2,500
Other 3,693 1,766 2,353
--------- --------- ---------
703,991 709,348 945,284
--------- --------- ---------
Net loss $ (90,627) $ (95,702) $(127,212)
========= ========= =========
Net loss allocated:
To the general partner (906) (957) (1,272)
To the limited partners (89,721) (94,745) (125,940)
--------- --------- ---------
$ (90,627) $ (95,702) $(127,212)
========= ========= =========
Net loss per unit of
limited partnership unit $ (2,991) $ (3,158) $ (4,198)
========= ========= =========
</TABLE>
See accompanying notes to financial statements.
<PAGE> 33
FORT STREET PARTNERS LIMITED PARTNERSHIP
(A Connecticut Limited Partnership)
Statements of Changes in Partners' Deficit
<TABLE>
<CAPTION>
General Limited
Total Partner Partners
----------- -------- -----------
<S> <C> <C> <C>
Partners' deficit at December 31, 1994 $(1,349,350) $(37,980) $(1,311,370)
Cash distributions (36,630) -- (36,630)
Net loss for the year (127,212) (1,272) (125,940)
----------- -------- -----------
Partners' deficit at December 31, 1995 (1,513,192) (39,252) (1,473,940)
Cash contributions (unaudited) 2,442 -- 2,442
Net loss for the period (unaudited) (90,627) (906) (89,721)
----------- -------- -----------
Partners' deficit at September 30, 1996
(unaudited) $(1,601,377) $(40,158) $(1,561,219)
=========== ======== ===========
</TABLE>
See accompanying notes to financial statements.
<PAGE> 34
FORT STREET PARTNERS LIMITED PARTNERSHIP
(A Connecticut Limited Partnership)
Statements of Cash Flows
<TABLE>
<CAPTION>
Nine Months Year ended
Ended September 30, December 31,
1996 1995 1995
--------- --------- ------------
(unaudited)
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss $ (90,627) $ (95,702) $(127,212)
--------- --------- ---------
Adjustments to reconcile net loss to
net cash provided by operating activities:
Depreciation and amortization 128,134 128,134 170,844
Decrease (increase) in rent receivable 108,986 (52,476) (68,168)
Increase in other assets (4,259) (55,064) (2,100)
(Decrease) increase in accrued interest
on origination fee payable (25,020) 75,059 100,078
Increase in accumulated accretion on
origination fee payable 9,235 8,112 10,996
(Decrease) increase in accounts payable (595) -- 595
--------- --------- ---------
Total adjustments 216,481 103,765 212,245
--------- --------- ---------
Net cash provided by operating
activities 125,854 8,063 85,033
--------- --------- ---------
Cash flows from financing activities:
Principal payments on mortgage note (144,882) -- (45,881)
Cash contributions (distributions)
from/to partners 2,442 (36,630) (36,630)
--------- --------- ---------
Net cash used in financing
activities (142,440) (36,630) (82,511)
--------- --------- ---------
Net (decrease) increase in cash (16,586) (28,567) 2,522
Cash at beginning of period 41,732 39,210 39,210
--------- --------- ---------
Cash at end of period $ 25,146 $ 10,643 $ 41,732
========= ========= =========
Supplemental disclosure of cash
flow information:
Cash paid during the period for interest $ 586,074 $ 494,402 $ 658,513
========= ========= =========
</TABLE>
See accompanying notes to financial statements.
<PAGE> 35
FORT STREET PARTNERS LIMITED PARTNERSHIP
(A Connecticut Limited Partnership)
Notes to Financial Statements
December 31, 1995 and
September 30, 1996 and 1995 (unaudited)
(1) ORGANIZATION
Fort Street Partners Limited Partnership (the "Partnership") is a
Connecticut Limited Partnership organized on May 1, 1981, to acquire a
leasehold interest and to lease, under a net lease, a department store in
Honolulu, Hawaii (the "Property") to Liberty House, Inc. ("Liberty House"),
a wholly owned subsidiary of Amfac, Inc.
Glenrouse Associates (the "General Partner"), the sole General Partner, is
a general partnership comprised of three individuals, including E. Robert
Roskind and Richard J. Rouse. Mr. Roskind and Mr. Rouse are co-chief
executive officers of Lexington Corporate Properties, Inc.
In May 1981, 30 units of limited partnership interest were sold to Investor
Limited Partners (the "Limited Partners"). All Limited Partners' capital
contributions have been paid.
The Partnership Agreement provides that profits and losses and
distributions of the Partnership shall be allocated 99% to the Limited
Partners and 1% of the General Partner.
(2) SIGNIFICANT ACCOUNTING POLICIES
BASICS OF ACCOUNTING
The financial statements of the Partnership have been prepared on the
accrual basis of accounting.
DEPRECIATION
Depreciation on the building improvements is on the straight-line method
over the 40 year useful life.
AMORTIZATION OF DEFERRED EXPENSES
The lease negotiation fee is amortized on a straight-line basis over the
29-year term of the lease.
The mortgage brokerage fee is amortized on a straight-line basis over the
30-year term of the permanent mortgage loan.
RENTAL INCOME
The Partnership has determined that the lease relating to the property is
an operating lease. Rental revenue is recognized on a straight-line basis
over the minimum lease terms. The Partnership's rent receivable primarily
represents the amounts of the excess of rental revenue recognized on a
straight-line basis over the annual rents collectible under the lease.
(Continued)
<PAGE> 36
2
FORT STREET PARTNERS LIMITED PARTNERSHIP
(A Connecticut Limited Partnership)
Notes to Financial Statements
(2), CONTINUED
ORIGINATION FEE PAYABLE
The origination fee payable (see note 6) has a stated interest rate of
15.25% per annum on a simple interest basis. In accordance with generally
accepted accounting principles, the obligation was discounted using an
annual rate of 13%. The present value of this obligation at the date of
issuance amounted to $13,648.
INCOME TAXES
No provision has been made for income taxes since any such liability is the
liability of the individual partners.
FAIR VALUE OF FINANCIAL INSTRUMENTS
SFAS No. 107, "Disclosures about Fair Value of Financial Instruments,"
defines fair value of a financial instrument as the amount at which the
instrument could be exchanged in a current transaction between willing
parties. The Partnership's cash, accrued interest on origination fee
payable and accounts payable are carried at cost, which approximates fair
value.
USE OF ESTIMATES
Management of the Partnership has made a number of estimates and
assumptions relating to the reporting of assets and liabilities and the
disclosure of contingent assets and liabilities to prepare these financial
statements in conformity with generally accepted accounting principles.
Actual results could differ from those estimates.
(3) UNAUDITED INFORMATION
The unaudited financial statements and related notes as of September 30,
1996 and for the nine-month periods ended September 30, 1996 and 1995
reflect, in the opinion of management, all adjustments (which include only
normal recurring adjustments) necessary to fairly present the results of
operations, cash flows and financial position as of and for the periods
presented. These unaudited financial statements should be read in
conjunction with the audited financial statements and related notes
thereto. The results for the interim periods presented are not necessarily
indicative of results to be expected for the full years.
(4) MORTGAGE NOTE PAYABLE
The Partnership received a long-term mortgage loan in 1981 from Principal
Financial Group. The non-recourse financing is secured by a mortgage on the
Property and an assignment of the net lease. The permanent financing
provides for interest at the rate of 10.25% per annum with monthly payments
of $54,934 of interest only for the first 15 years, through September 30,
1995, and monthly payments of principal and interest of $70,097 thereafter
to fully amortize the loan by its maturity on October 1, 2010. The mortgage
financing may not be prepaid before October 1, 2003.
(Continued)
<PAGE> 37
3
FORT STREET PARTNERS LIMITED PARTNERSHIP
(A Connecticut Limited Partnership)
Notes to Financial Statements
(4), CONTINUED
Principal payments required for the next five years are as follows:
<TABLE>
<CAPTION>
Year ending
December 31 Amount
----------- ---------
<S> <C>
1996 $ 195,694
1997 216,722
1998 240,009
1999 265,800
2000 294,361
=========
</TABLE>
The estimated fair value of the mortgage note payable at December 31, 1995
is $6,704,637.
(5) NET LEASE
The Partnership entered into a net lease with Liberty House. Liberty House
is obligated to pay all operating expenses, taxes, assessments, insurance,
and required capital expenditures. The primary term of the lease expires on
September 30, 2009. Liberty House has options to five renewal terms, the
first for nine years and seven months, the second for two years, and the
third through fifth for five years each. Liberty House has the option to
purchase the Property from the Partnership at the expiration of the
original term of the lease at a price equal to the fair market value of
such Property.
Minimum future rentals under the net lease are summarized as follows:
<TABLE>
Year ending
December 31, Amount
------------ -----------
<S> <C>
1996 $ 962,981
1997 962,981
1998 962,981
1999 962,981
2000 962,981
Thereafter 8,532,660
-----------
$ 13,347,565
============
</TABLE>
(6) ORIGINATION FEE PAYABLE
The Partnership is obligated to pay an affiliate of the General Partner a
fee of $656,250 for rendering services in connection with the acquisition
of the Property. Simple interest is payable monthly from available net cash
flow as defined in the Partnership Agreement, after the first $15,000 of
annual net cash flow has been distributed to the partners, at the
(Continued)
<PAGE> 38
4
FORT STREET PARTNERS LIMITED PARTNERSHIP
(A Connecticut Limited Partnership)
Notes to Financial Statements
(6), CONTINUED
rate of 15.25% per annum on the unpaid portion of this fee. Accrual of
interest commenced upon admission of the Limited Partners. Commencing
October 1, 2010, the Partnership is required to make twelve monthly
payments to satisfy principal plus current interest payments (see note 2).
Additionally, accrued interest, if any, shall be paid in 120 equal monthly
payments to retire the remaining balance of accrued interest. The original
principal amount has been discounted at a rate of thirteen percent.
(7) TRANSACTIONS WITH RELATED PARTIES
For performing all administrative functions of the Partnership, an
affiliate of the General Partner receives an annual fee of $2,500.
<PAGE> 39
PRO FORMA INFORMATION
<PAGE> 40
LEXINGTON CORPORATE PROPERTIES, INC.
AND CONSOLIDATED SUBSIDIARIES
PRO FORMA COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND SEPTEMBER 30, 1996
The following pro forma combined financial statements of Lexington Corporate
Properties, Inc. and Consolidated Subsidiaries (the "Company"), the LP
Properties acquisitions and other partnership and property acquisitions listed
below ("the Acquired Partnerships and Properties") (together, the "Consolidated
Company") have been prepared by combining the historical financial statements of
the Company and the Acquired Partnerships and Properties, where applicable,
adjusted to give effect to the acquisition of the Acquired Partnerships and
Properties by the Company, as well as other pro forma adjustments. The
accompanying pro forma combined balance sheet for the Consolidated Company as of
September 30, 1996 has been prepared as if the acquisitions had been consummated
on that date. The accompanying pro forma combined statements of income for the
year ended December 31, 1995 and the nine months ended September 30, 1996 have
been prepared as if the acquisitions had been consummated as of January 1, 1995
and January 1, 1996, respectively.
These pro forma combined financial statements of the Consolidated Company must
be read in conjunction with the historical financial statements of the Company
and the Acquired Partnerships and Properties, where applicable. These pro forma
combined financial statements are not indicative of what the financial position
or results of operations would have been had the acquisitions been consummated
on the dates indicated or necessarily indicative of the Company's results in the
future.
The Acquired Partnerships and Properties Acquisition Date
Barnes Properties August 1, 1995
Red Butte Creek
(the "Northwest Property") May 22, 1996
LP Properties December 31, 1996
Walmart -
Riverdale, GA December 1, 1995
Bally's -
Canton, OH December 7, 1995
Walmart -
Jacksonville, AL May 31, 1996
SKF -
Franklin, NC December 23, 1996
Johnson Controls -
Plymouth, MI December 23, 1996
Johnson Controls -
Oberlin, OH December 23, 1996
<PAGE> 41
LEXINGTON CORPORATE PROPERTIES, INC. AND CONSOLIDATED SUBSIDIARIES
PRO FORMA COMBINED STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
BARNES
HISTORICAL
LEXINGTON (1/1-7/31/95 LP PROPERTIES RED BUTTE CREEK
HISTORICAL ONLY) (A) HISTORICAL HISTORICAL
---------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues:
Rental $24,522,884 $ 850,059 $ 2,226,047 $5,904,421
Interest and other 478,878 (1,547) 405 2,486
----------------------------------------------------------
Total Revenues 25,001,762 848,512 2,226,452 5,906,907
----------------------------------------------------------
Expenses:
Interest expense 10,295,176 478,127 2,054,904 4,695,003
Depreciation 5,817,238 216,034 445,309 872,816
Amortization of deferred expenses 463,953 5,331 8,848 19,930
Management fees -- -- 13,500 85,000
Property operating expenses 620,058 -- -- 202,180
General and administrative expenses 2,693,760 8,419 9,498 2,640
----------------------------------------------------------
Total Expenses 19,890,185 707,911 2,532,059 5,877,569
----------------------------------------------------------
Income (loss) before minority interests and extraordinary items 5,111,577 140,601 (305,607) 29,338
Minority interests 92,751 46,933 -- --
----------------------------------------------------------
Pro Forma Net income (loss) before extraordinary items $ 5,018,826 $ 93,668 $ (305,607) $ 29,338
==========================================================
Pro forma net income before extraordinary items, per share $ 0.54 $ -- $ -- $ --
==========================================================
Cash dividends declared per share $ 1.08 $ -- $ -- $ --
==========================================================
Weighted average shares outstanding 9,263,169 -- -- --
==========================================================
<CAPTION>
WALMART - BALLY'S -
RIVERDALE, GA CANTON, OH WALMART - SKF -
(1/1-11/30/95 (1/1-12/6/95 JKSONVILLE, AL FRANKLIN, NC
ONLY) (B) ONLY) (B) (C) (C)
--------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues:
Rental $247,291 $549,549 $ 146,040 $322,397
Interest and other -- -- -- --
----------------------------------------------------------
Total Revenues 247,291 549,549 146,040 322,397
----------------------------------------------------------
Expenses:
Interest expense 177,891 238,620 145,523 233,363
Depreciation 55,811 91,753 43,978 75,635
Amortization of deferred expenses -- -- -- --
Management fees -- -- -- --
Property operating expenses -- -- -- --
General and administrative expenses -- -- -- --
----------------------------------------------------------
Total Expenses 233,702 330,373 189,501 308,998
----------------------------------------------------------
Income (loss) before minority interests and extraordinary items 13,589 219,176 (43,461) 13,399
Minority interests -- -- -- --
----------------------------------------------------------
Pro Forma Net income (loss) before extraordinary items $ 13,589 $219,176 $ (43,461) $ 13,399
==========================================================
Pro forma net income before extraordinary items, per share $ -- $ -- $ -- $ --
==========================================================
Cash dividends declared per share $ -- $ -- $ -- $ --
==========================================================
Weighted average shares outstanding -- -- -- --
==========================================================
</TABLE>
(continued)
<PAGE> 42
LEXINGTON CORPORATE PROPERTIES, INC. AND CONSOLIDATED SUBSIDIARIES
PRO FORMA COMBINED STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 1995 (CONTINUED)
<TABLE>
<CAPTION>
JOHNSON JOHNSON
CONTROLS - CONTROLS -
PLYMOUTH, MI OBERLIN, OH PRO FORMA
(C) (C) ADJUSTMENTS TOTAL PRO FORMA
--------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues:
Rental $648,801 $491,042 $ (9,309)(G) $ 36,248,716
349,494 (H)
Interest and other -- -- 480,222
------------------------------------------- ------------
Total Revenues 648,801 491,042 340,185 36,728,938
------------------------------------------- ------------
Expenses:
Interest expense 450,056 340,624 -- 19,109,287
Depreciation 120,882 112,220 1,571,656 (D) 9,591,126
167,794 (I)
Amortization of deferred expenses -- -- -- 498,062
Management fees -- -- (98,500) (E) --
Property operating expenses -- -- -- 822,238
General and administrative expenses -- -- -- 2,714,317
------------------------------------------- ------------
Total Expenses 570,938 452,844 1,640,950 32,735,030
------------------------------------------- ------------
Income (loss) before minority interests and extraordinary items 77,863 38,198 (1,300,765) 3,993,908
Minority interests -- -- 504,019 (F) 643,703
------------------------------------------- ------------
Pro Forma Net income (loss) before extraordinary items $ 77,863 $ 38,198 $(1,804,784) $ 3,350,205
=========================================== ============
Pro forma net income before extraordinary items, per share $ -- $ -- $ (0.18) $ 0.36
=========================================== ============
Cash dividends declared per share $ -- $ -- $ -- $ 1.08
=========================================== ============
Weighted average shares outstanding -- -- 9,000 9,272,169
=========================================== ============
</TABLE>
See accompanying notes to unaudited pro forma financial statements.
<PAGE> 43
LEXINGTON CORPORATE PROPERTIES, INC.
AND CONSOLIDATED SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1995
Rental revenue in the combined pro forma statement of income (both historical
and pro forma) is generated from leases that are "net leases", under which the
tenant is responsible for substantially all costs of real estate taxes,
insurance and ordinary maintenance.
Applicable to the Canton, Ohio Property, pro forma rental income represents
straight-line rent under FASB #13, calculated as the difference between the cash
rent paid under the lease and the straight-line rent over the term of the lease.
Pro forma interest expense is calculated based on annual interest rates on the
respective debt as of the acquisition dates.
A. This column reflects historical results for the period January 1, 1995
to July 31, 1995 for the six Barnes Properties which Lexington
Corporate Properties, Inc. (the "Company") acquired on August 1, 1995.
The results of operations for the period August 1, 1995 through
December 31, 1995 are included in the Company's historical financial
data.
B. These columns reflect pro forma adjustments for the period from January
1 to November 30, 1995 for the Riverdale, Georgia Property (acquired
December 1, 1995), and for the period from January 1 to December 6,
1995 for the Canton, Ohio Property (acquired December 7, 1995). The
results of operations for the periods from the respective acquisition
dates to December 31, 1995 are included in the Company's historical
financial data.
C. The Jacksonville, Alabama Property, the Franklin, North Carolina
Property, the Plymouth, Michigan Property and the Oberlin, Ohio
Property were all acquired during 1996. These columns reflect pro forma
adjustments for the year ended December 31, 1995 for these properties.
D. This amount represents depreciation expense for the year ended December
31, 1995 of $211,412 and $1,236,543 on the stepped-up bases of the real
estate for the LP Properties and the Red Butte Creek Associates
Property (the "Northwest Property"), respectively and $123,701 on the
Barnes Properties for the period January 1, 1995 to July 31, 1995.
E. This amount represents the elimination of the accrued but unpaid
Northwest Property management fee of $85,000 and of the LP Properties
management fees of $13,500 which would not be payable by the Company
under the terms of the acquisitions.
F. This amount represents the effect on minority interest of the issuance
of partnership units in a subsidiary of the Company in the Northwest
Property acquisition and the acquisition of the LP Properties.
<PAGE> 44
NOTES TO UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME FOR THE YEAR
ENDED DECEMBER 31, 1995.
Continued from previous page.
G. This amount represents the elimination of straight-line rental revenue
which was recorded under FASB #13 for the LP Properties prior to the
acquisition of the LP Properties by the Company.
H. This amount represents straight-line rental revenue recorded under FASB
#13 for the LP Properties as if the acquisitions had been consummated
as of January 1, 1995.
I. This amount represents depreciation expense on amounts allocated to
real estate from purchase price adjustments as if the acquisitions of
the LP Properties had occurred on January 1, 1995.
<PAGE> 45
LEXINGTON CORPORATE PROPERTIES, INC. AND CONSOLIDATED SUBSIDIARIES
PRO FORMA COMBINED BALANCE SHEET
SEPTEMBER 30, 1996
<TABLE>
<CAPTION>
LP
Lexington Properties Red Butte Creek Walmart - SKF - Franklin,
Historical Historical Historical (A) Jacksonville, NC (C)
AL (B)
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Assets:
Real estate, at cost $302,640,518 $ 16,758,226 $ -- $ -- $3,413,111
less: accumulated depreciation and amortization 49,225,852 7,053,437 -- -- --
----------------------------------------------------------------------------
253,414,666 9,704,789 -- -- 3,413,111
Cash 2,863,756 31,107 -- -- --
Restricted cash 3,980,448 -- -- -- --
Deferred expenses, net 3,564,894 102,294 -- -- --
Rent receivable 7,737,724 4,245,606 -- -- --
Investment in partnerships 173,202 -- -- -- --
Escrow deposits 104,400 -- -- -- --
Other assets 3,588,712 32,241 -- -- --
----------------------------------------------------------------------------
Total assets $275,427,802 $ 14,116,037 $ -- $ -- $3,413,111
============================================================================
Liabilities and Stockholder's Equity:
Mortgage notes payable $157,318,896 $ 14,371,075 $ -- $ -- $2,828,640
Purchase mortgage note, including accretion -- -- -- -- --
Origination fee payable, including accretion -- 442,929 -- -- --
Subordinated notes payable,
including accrued interest 1,936,435 -- -- -- --
Accrued interest payable 330,877 3,855,837 -- -- --
Accounts payable and other liabilities 2,397,716 3,844 -- -- --
Minority interests, net 797,777 -- -- -- --
----------------------------------------------------------------------------
162,781,701 18,673,685 -- -- 2,828,640
----------------------------------------------------------------------------
Stockholder's equity:
Common stock 942 -- -- -- --
Additional paid-in-capital / partners' capital 112,645,159 (4,557,648) -- -- 584,471
----------------------------------------------------------------------------
Total stockholder's equity / partners' capital 112,646,101 (4,557,648) -- -- 584,471
----------------------------------------------------------------------------
$275,427,802 $ 14,116,037 $ -- $ -- $3,413,111
============================================================================
</TABLE>
<TABLE>
<CAPTION>
Johnson Controls- Johnson Controls - Pro Forma Total Pro
Plymouth, MI (C) Oberlin, OH (C) Adjustments Forma
------------------------------------------------------ -------------
<S> <C> <C> <C> <C>
Assets:
Real estate, at cost $6,295,924 $ 4,765,040 $ 8,798,726 (D) $ 339,863,714
(7,053,437)(F)
4,245,606 (J)
less: accumulated depreciation and amortization -- -- (7,053,437)(F) 49,225,852
------------------------------------------------------ -------------
6,295,924 4,765,040 13,044,332 290,637,862
Cash -- -- -- 2,894,863
Restricted cash -- -- -- 3,980,448
Deferred expenses, net -- -- -- 3,667,188
Rent receivable -- -- (4,245,606)(J) 7,737,724
Investment in partnerships -- -- -- 173,202
Escrow deposits -- -- -- 104,400
Other assets -- -- -- 3,620,953
------------------------------------------------------ -------------
Total assets $6,295,924 $ 4,765,040 $ 8,798,726 $ 312,816,640
====================================================== =============
Liabilities and Stockholder's Equity:
Mortgage notes payable $6,261,220 $ 4,738,780 $ -- $ 185,518,611
Purchase mortgage note, including accretion -- -- -- --
Origination fee payable, including accretion -- -- -- 442,929
Subordinated notes payable,
including accrued interest -- -- -- 1,936,435
Accrued interest payable -- -- -- 4,186,714
Accounts payable and other liabilities -- -- -- 2,401,560
Minority interests, net -- -- 1,753,741(I) 2,551,518
------------------------------------------------------ -------------
6,261,220 4,738,780 1,753,741 197,037,767
------------------------------------------------------ -------------
Stockholder's equity:
Common stock -- -- -- 942
Additional paid-in-capital / partners' capital 34,704 26,260 8,798,726 115,777,931
(1,753,741)(I)
------------------------------------------------------ -------------
Total stockholder's equity / partners' capital 34,704 26,260 7,044,985 115,778,873
------------------------------------------------------ -------------
$6,295,924 $ 4,765,040 $ 8,798,726 $ 312,816,640
====================================================== =============
</TABLE>
See accompanying notes to unaudited pro forma financial statements.
<PAGE> 46
LEXINGTON CORPORATE PROPERTIES, INC. AND CONSOLIDATED SUBSIDIARIES
PRO FORMA COMBINED STATEMENT OF INCOME
NINE MONTHS ENDED SEPTEMBER 30, 1996
<TABLE>
<CAPTION>
Walmart -
Red Butte Creek Jacksonville, AL SKF - Franklin,
Lexington LP Properties Historical (1/1- (1/1-5/30/96 NC
Historical Historical 5/21/96 only) (A) only) (B) (C)
=====================================================================================
<S> <C> <C> <C> <C> <C>
Revenues:
Rental $22,805,441 $ 1,669,535 $3,264,007 $ 60,850 $241,798
Interest and other 330,961 114 1,430 -- --
-------------------------------------------------------------------------------------
Total Revenues 23,136,402 1,669,649 3,265,437 60,850 241,798
-------------------------------------------------------------------------------------
Expenses:
Interest expense 9,213,254 1,508,425 1,623,058 60,635 175,022
Depreciation 5,510,131 333,981 340,494 18,324 56,726
Amortization of deferred expenses 450,278 6,636 7,775 -- --
Management fees -- 8,625 33,159 -- --
Property operating expenses 498,636 -- 78,872 -- --
General and administrative expenses 2,146,992 10,846 162,111 -- --
-------------------------------------------------------------------------------------
Total Expenses 17,819,291 1,868,513 2,245,469 78,959 231,748
-------------------------------------------------------------------------------------
Income (loss) before minority interests 5,317,111 (198,864) 1,019,968 (18,109) 10,050
Minority interests 460,601 -- -- -- --
-------------------------------------------------------------------------------------
Pro Forma Net income (loss) $ 4,856,510 $ (198,864) $1,019,968 $(18,109) $ 10,050
=====================================================================================
Pro Forma Net income per share $ 0.52 $ -- $ -- $ -- $ --
=====================================================================================
Cash dividends declared per share $ 0.83 $ -- $ -- $ -- $ --
=====================================================================================
Weighted average shares outstanding 9,383,055 -- -- -- --
=====================================================================================
</TABLE>
<TABLE>
<CAPTION>
Johnson Johnson
Controls - Controls -
Plymouth, MI Oberlin, OH Pro Forma Total Pro
(C) (C) Adjustments Forma
========================================== ===========
<S> <C> <C> <C> <C>
Revenues:
Rental $486,601 $368,281 $ 153,130 (K) $29,173,106
(L) 123,463
Interest and other -- -- -- 332,505
------------------------------------------ -----------
Total Revenues 486,601 368,281 276,593 29,505,611
------------------------------------------ -----------
Expenses:
Interest expense 337,542 255,468 -- 13,173,404
Depreciation 90,662 84,165 648,731 (E) 7,214,281
(M) 131,067
Amortization of deferred expenses -- -- -- 464,689
Management fees -- -- (41,784)(G) --
Property operating expenses -- -- -- 577,508
General and administrative expenses -- -- -- 2,319,949
------------------------------------------ -----------
Total Expenses 428,204 339,633 738,014 23,749,831
------------------------------------------ -----------
Income (loss) before minority interests 58,397 28,648 (461,421) 5,755,780
Minority interests -- -- 409,119 (H) 869,720
------------------------------------------ -----------
Pro Forma Net income (loss) $ 58,397 $ 28,648 $(870,540) $ 4,886,060
========================================== ===========
Pro Forma Net income per share $ -- $ -- $ 0.00 $ 0.52
========================================== ===========
Cash dividends declared per share $ -- $ -- $ -- $ 0.83
========================================== ===========
Weighted average shares outstanding -- -- -- 9,383,055
========================================== ===========
</TABLE>
See accompanying notes to unaudited pro forma financial statements.
<PAGE> 47
LEXINGTON CORPORATE PROPERTIES, INC.
AND CONSOLIDATED SUBSIDIARIES
UNAUDITED NOTES TO PRO FORMA COMBINED FINANCIAL STATEMENTS
AS OF AND FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996
Rental revenue in these pro forma combined financial statements (both
historical and pro forma) is generated from leases that are "net
leases", under which the tenant is responsible for substantially all
costs of real estate taxes, insurance and ordinary maintenance.
Pro forma mortgage notes payable consists of borrowing obtained at the
time of acquisition, where applicable. Applicable pro forma interest
expense is calculated based on annual interest rates on the respective
debt as of the acquisition dates.
A. This column reflects historical results for the period from January 1
to May 21, 1996 for the Northwest Property acquired by Lexington
Corporate Properties, Inc. on May 22, 1996. The results of operations
for the period from May 22 to September 30, 1996 and all balance sheet
data as of September 30, 1996 are included in the Company's historical
financial data.
B. This column reflects pro forma adjustments for the period from January
1 to May 30, 1996 for the Jacksonville, Alabama Property (acquired May
31, 1996). The results of operations for the period from May 31 to
September 30, 1996 and all balance sheet data as of September 30, 1996
are included in the Company's historical financial data.
C. The Franklin, North Carolina Property, the Plymouth, Michigan Property
and the Oberlin, Ohio Property were all acquired during December 1996.
The pro forma combined statement of income reflects pro forma
adjustments for the nine months ended September 30, 1996 for these
properties as if the acquisition had taken place on January 1, 1996.
The pro forma combined balance sheet reflects pro forma adjustments as
if the acquisitions occurred on September 30, 1996.
D. This amount represents a step-up in basis of the real estate based on
the acquisition of the LP Properties by Lexington.
E. This amount represents depreciation expense of $164,976 and $483,755 on
the stepped-up bases of the real estate for the LP Properties for the
nine months ended September 30, 1996, and the Northwest Property
building, for the period from January 1, 1996 to May 22, 1996,
respectively.
F. This amount represents the entry to reflect the LP Properties at their
net book value as of September 30, 1996 prior to allocating the
purchase price to the fair value of assets acquired and liabilities
assumed.
<PAGE> 48
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS AS OF AND
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996.
Continued from previous page.
G. This amount represents the elimination of the Northwest Property
management fee of $33,159 and of the LP Properties management fees of
$8,625 which would not be payable by the Company under the terms of the
acquisitions.
H. This amount represents the minority interest in the net income of LCIF
due to the issuance of partnership units in the Northwest Property
acquisition and the acquisition of the LP Properties.
I. This amount represents the effect on minority interest as a result of
the issuance of partnership units in conjunction with the acquisition
of the LP Properties.
J. This amount represents purchase price adjustments to historical rent
receivable of the LP Properties as of September 30, 1996.
K. This amount represents the elimination of straight-line rental revenue
which was recorded under FASB #13 for the LP Properties prior to the
acquisition of the LP Properties by the Company.
L. This amount represents straight-line rental revenue recorded under FASB
#13 for the LP Properties as if the acquisitions had been consummated
as of January 1,1996.
M. This amount represents depreciation expense on amounts allocated to
real estate from purchase price adjustments as if the acquisitions of
the LP Properties had occurred on January 1, 1996.
