<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q/A(1)
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1997
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Transition period from _________________ to ________________
Commission File Number 1-12386
LEXINGTON CORPORATE PROPERTIES, INC.
------------------------------------------------
(Exact name of registrant as specified in its charter)
Maryland 13-3717318
------------------------------ ----------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
355 Lexington Avenue
New York, NY 10017
------------------------------ -----------
(Address of principal executive offices) (Zip code)
(212) 692-7260
-----------------------------------------
(Registrant's telephone number, including area code)
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 the number of shares outstanding of each of the registrant's classes of
common stock, as of the latest practicable date: 12,677,808 shares of common
stock, par value $.0001 per share on July 31, 1997.
(1) Notwithstanding such Amendment, information set forth herein speaks as of
and for the dates referred to in the Form 10-Q originally filed by the
Registrant. Reference is made to annual and current reports filed by the
Registrant since June 30, 1997, for information regarding the Registrant.
<PAGE> 2
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Item 2 is amended and restated in its entirety as follows.
General
Lexington Corporate Properties, Inc. is a self-managed and self-administered
real estate investment trust ("REIT") that acquires, owns and manages a
geographically diversified portfolio of net leased office, industrial and retail
properties. The Company currently owns controlling interests in forty-five
properties and minority interests in two additional properties. The Properties
owned by the Company are subject to triple net leases, the majority of which are
net leased to investment grade corporate tenants. The Company was organized in
1993 to combine and continue to expand the business of two affiliated limited
partnerships (the "Partnerships"). References herein to the "Company" shall
include references to the Company, the Partnerships and the Company's
predecessor, Lexington Corporate Properties, Inc., a Delaware corporation which
was organized in October 1993 and was merged into the Company on June 27, 1994.
The Company was organized to combine, continue and expand the business of
Lepercq Corporate Income Fund L.P. ("LCIF") and Lepercq Corporate Income Fund II
L.P. ("LCIF II") (together, the "Partnerships"), which own, operate and manage a
diverse portfolio of real properties. The Company, which has elected to qualify
as a real estate investment trust under the Internal Revenue Code of 1986,
acquired the Partnerships through mergers which were effected as of October 12,
1993. In connection with the mergers, the Company issued 9,303,409 shares of its
Common Stock, 169,109 units of special limited partner interest in the
Partnerships (which are exchangeable for an equivalent number of shares of
Common Stock) and $1,877,390 in principal amount of 7.75% Subordinated Notes due
2000.
The mergers were accounted for as business combinations of entities under common
control using the "as if pooling-of-interest" method of accounting, with the
Company as the surviving entity. Under this method, the assets and liabilities
of the Partnerships have been recorded by the Company at their carrying values.
As of June 30, 1997, the Company was the indirect or direct owner of forty-three
real estate properties (or interests therein) (the "Properties") triple net
leased to corporations, and owned minority interests in two additional triple
net leased properties.
Liquidity and Capital Resources
LIQUIDITY. The Company's principal sources of liquidity are revenue generated
from the Properties, interest on cash balances, amounts available under its
Credit Facility described below and proceeds from capital market transactions.
REAL ESTATE ASSETS. As of June 30, 1997, the Company's real estate assets
consisted of the Properties and two minority interests. The Properties are
located in twenty-three states and contain an aggregate of 6,121,118 square feet
of net rentable space. Each Property is subject to a single tenant triple net
lease, which is generally characterized as a lease in which the tenant pays all
or substantially all of the cost and cost increases for real estate taxes,
capital expenditures, insurance and ordinary maintenance of the Property.
PUBLIC EQUITY OFFERING. In June 1997, the Company completed a public equity
offering of 2.8 million shares of Common Stock at $13.75 per share, generating
net proceeds of approximately $35.6 million. On July 7, 1997, the Company sold
an additional 420,000 shares in connection with the exercise of an
over-allotment option granted to the underwriters of the Company's offering in
June 1997, raising additional net proceeds of approximately $5.4 million.
DEBT SERVICE REQUIREMENTS. The Company's principal liquidity needs are the
payment of interest and principal on outstanding mortgage debt. As of June 30,
1997, a total of thirty-seven properties were subject to outstanding mortgages
which had an aggregate principal amount, including accrued interest, of
$176,567,889. The weighted average interest rate on the Company's debt on such
date was approximately 8.35% per annum. Approximate
<PAGE> 3
balloon payment amounts for the next five calendar years are due as follows:
$10,007,000 in 1998; $5,563,000 in 1999 and $7,996,000 in 2000. There are no
balloon payments due during 1997, 2001 or 2002. The ability of the Company to
make such balloon payments will depend upon its ability to refinance the
relevant mortgages, sell the mortgaged properties or draw from the Credit
Facility sufficient amounts to satisfy such balloon payments. The ability of the
Company to accomplish such goals may be affected by economic factors affecting
the real estate industry generally, including the available mortgage rates at
the time, the Company's equity in the mortgaged properties, the financial
condition of the Company, the operating history of the mortgaged properties, the
then current tax laws and the general national, regional and local economic
conditions at the time. As of June 30, 1997, the Company's total consolidated
indebtedness (including origination fees payable and the related accrued
interest) was approximately $183 million.
MORTGAGE REFINANCING. On May 30, 1997, the Company completed the refinancing of
$22.1 million of mortgage debt secured by the Salt Lake City, Utah Property. In
connection with the refinancing, the Company borrowed $24.25 million, with the
excess proceeds used to pay a prepayment premium, accrued interest and
transaction costs. As a result of the refinancing, the stated rate on the
refinanced amount was reduced from 12.9% to 7.61% per annum, and commencing
January 1, 1998, the Company's annual debt service payments will be reduced by
approximately $1.35 million. The principal balance on the refinanced amount will
fully amortize at maturity on October 1, 2009. This transaction resulted in an
extraordinary loss of early retirement of debt of approximately $1.8 million in
the accompanying consolidated statements of income.
LEASE OBLIGATIONS. Because the Company's tenants bear all or substantially all
of the cost of property maintenance and capital improvements, the Company does
not anticipate significant needs for cash for property maintenance or repairs.
The Company generally funds property expansions with additional secured
borrowings, the repayment of which is funded out of rental increases under the
leases covering the expanded properties.
DIVIDENDS. The Company paid a dividend of $.27 per share to stockholders in
respect of each of the calendar quarters of 1995 and the first quarter of 1996,
$.28 per share in respect of the second and third quarters of 1996, and $.29 per
share in respect of the fourth quarter of 1996 and the first quarter of 1997. On
July 21, 1997, the Company declared a dividend in respect of the second quarter
of 1997 of $.29 per share to stockholders of record as of July 30, 1997 to be
paid on August 14, 1997. The Company's annualized dividend rate is currently
$1.16 per share.
REVOLVING CREDIT FACILITY. The Company's Credit Facility provides for a maximum
committed amount of $60,000,000. Borrowings under the Credit Facility bear
interest at 1.5% over LIBOR. On June 24, 1997, the Company used a portion of the
proceeds from the public equity offering to pay down the entire remaining
outstanding $26.4 million balance. On July 22, 1997, in connection with a $15.5
million property acquisition, the Company took a drawdown on the Credit Facility
in the amount of $5.5 million. The Credit Facility is collateralized by seven of
the Company's Properties.
PREFERRED STOCK SALE. In December 1996, the Company entered into an agreement
with Five Arrows Realty Securities, L.L.C. ("Five Arrows") providing for the
sale of up to 2,000,000 shares of Convertible Preferred Stock. In connection
with this transaction, the Company designated 2,000,000 shares as "Class A
Senior Cumulative Convertible Preferred Stock" and reserved for issuance up to
2,000,000 shares of its Common Stock upon the conversion of the Convertible
Preferred Stock. Under the terms of the agreement, the Company may sell the
Convertible Preferred Stock to Five Arrows at up to three closings, at the
Company's option, during 1997 for an aggregate price of approximately $25
million. The Convertible Preferred Stock, which is convertible into Common Stock
on a one-for-one basis at $12.50 per share, subject to adjustment, beginning in
1998, is entitled to quarterly distributions equal to the greater of $.295 or
the product of 1.05 and the per share quarterly distribution on Common Stock.
The Convertible Preferred Stock may be redeemed by the Company after five years
at a 6% premium over the liquidation preference of $12.50 per share (plus
accrued and unpaid dividends), with such premium declining to zero on or after
December 31, 2011. Each share of Convertible Preferred Stock is entitled to one
vote per share and holders will be entitled to vote on all matters submitted to
a vote of holders of outstanding Common Stock. In connection with such sale, the
Company has entered into certain related agreements with Five Arrows, providing,
among other things, for certain demand and piggyback registration rights with
respect to such shares and the right to
<PAGE> 4
designate a member or members of the Board of Directors under certain
circumstances. John D. McGurk is currently serving as Five Arrows' designee to
the Board of Directors of the Company.
On January 21, 1997, the Company sold 700,000 shares of Convertible Preferred
Stock to Five Arrows and used the proceeds to repay $7,996,817 of mortgage debt,
including prepayment premiums of $520,000. Such mortgage debt had been bearing
interest at 12.625% per annum and would have required interest and principal
payments of approximately $1.45 million in 1997.
On April 28, 1997, the Company sold an additional 625,000 shares of Convertible
Preferred Stock to Five Arrows, and on May 1, 1997 used the proceeds in a $7.725
million property acquisition.
Pursuant to the agreement with Five Arrows, the Company may sell an additional
675,000 shares of Convertible Preferred Stock for a sale price of $8.5 million
before December 31, 1997.
EXCHANGEABLE REDEEMABLE SECURED NOTES. In March 1997, in connection with the
acquisition of the Exel Properties, LCIF issued and sold $25 million of 8%
Exchangeable Redeemable Secured Notes (the "Notes") to an institutional investor
in a private placement. The Notes bear interest at a rate of 8.0% per annum and
mature in March 2004. The Notes are secured by first mortgage liens on the Exel
Properties, are fully guaranteed by the Company, and can be exchanged by the
holders thereof for shares of the Company's Common stock, par value $.0001 per
share ("Common Stock"), at $13 per share beginning in the year 2000, subject to
adjustment. The Notes require interest only payments semi-annually in arrears
and may be redeemed at the Company's option after three years at a price of
103.2% of the principal amount thereof, declining to par after five years. In
connection with the sale of the Notes, the Company entered into certain related
agreements providing for, among other things, certain demand and piggyback
registration rights to the initial purchaser of the Notes. The Notes are
subordinated in right of payment to the Company's obligations under the Credit
Facility.
OPERATING PARTNERSHIP STRUCTURE. The Company controls two principal operating
partnerships. This operating partnership structure enables the Company to
acquire properties by issuing to a seller, as a form of consideration, operating
partnership interests ("OP Units"). All of such OP Units are convertible at
certain times into shares of Common Stock on a one-for-one basis and currently,
a majority of such interests require the Company to pay certain distributions to
the holders of such interests. As a result, the Company's cash available for
distribution to holders of Common Stock and Convertible Preferred Stock is
reduced by the amount of the distributions required by the terms of such OP
Units, and the number of shares of Common Stock that will be outstanding in the
future should be expected to increase, from time to time, as such OP Units and
shares of Convertible Preferred Stock are converted into shares of Common Stock.
The Company accounts for these OP Units as minority interests. The table set
forth below provides certain information with respect to such OP Units as of
June 30, 1997.
<PAGE> 5
<TABLE>
<CAPTION>
1997 CONVERTIBLE
ANNUALIZED SHARES OF TOTAL ANNUAL
NUMBER OF PER UNIT COMMON STOCK DISTRIBUTION
PARTNERSHIP OR CLASS UNITS ISSUED DISTRIBUTION AS OF: IN 1997
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
LCIF - Special Limited Partners 112,229 $ 1.16 At any time $ 130,186
LCIF II - Special Limited Partners 56,880 $ 1.16 At any time $ 65,981
--------- ----------
Subtotal: Special Limited Partners 169,109 $ 196,167
--------- ----------
Barnes Partnerships:
Barngiant Livingston 52,335 $ 0.27 3/04 $ 14,130
Barnhale Modesto 23,267 $- 2/06 N/A
Barnes Rockshire 36,825 $- 3/05 N/A
Barnvyn Bakersfield 7,441 $- 1/03 N/A
Barnhech Montgomery 11,766 $ 0.29 5/06 $ 3,412
Barnward Brownsville 35,400 $- 11/04 N/A
--------- ----------
Subtotal: Barnes Partnerships 167,034 $ 17,542
--------- ----------
Red Butte Creek Associates 1,715,294 $ 0.66 5/98 $1,132,094
114,006 $ 1.08 5/98 $ 123,126
--------- ----------
Subtotal: Red Butte Creek Associates 1,829,300 $1,255,220
--------- ----------
Fort Street Partners 207,728 $- 1/06 N/A
17,259 $ 1.12 1/99 $ 19,330
--------- ----------
Subtotal: Fort Street Partners 224,987 $ 19,330
--------- ----------
Toy Properties Associates II 94,999 $ 1.12 1/99 $ 106,398
Toy Properties Associates V 34,988 $ 1.12 1/99 $ 39,186
Exel Partnership 480,028 $ 1.16 4/99 $ 556,832
--------- ----------
Grand Total 3,000,445 $2,190,675
</TABLE>
Holders of the LCIF and LCIF II special limited partner units receive
distributions that are equal to distributions on Common Stock. Holders of the
Barnes Partnerships units receive distributions as described in the table above
until such units become eligible for conversion to Common Stock, upon which date
they will receive distributions based on their respective partnership interest
ownership percentages. The distribution to the class of Red Butte Creek
Associates units consisting of 1,715,294 units will increase to $1.08 per unit
annually in January 1998. The holders of the class of Red Butte Creek Associates
units consisting of 114,006 units receive distributions that are equal to
distributions on Common Stock, with an annual cap of $1.08 per unit. Holders of
the class of Fort Street Partners units consisting of 17,259 units, the Toy
Properties Associates II units and Toy Properties Associates V units receive
distributions that are equal to distributions on Common Stock, with an annual
cap of $1.12. The holders of the class of Fort Street Partners units consisting
of 207,728 units will receive distributions that are equal to distributions on
Common Stock, with an annual cap of $1.12, when they become eligible for
conversion into Common Stock. The holders of the Exel Partnership units receive
distributions that are equal to distributions on Common Stock.
PARTNERSHIP MERGER. In connection with the acquisition of the Exel Properties,
an unaffiliated partnership (the "Exel Partnership") merged into LCIF. As a
result of the merger, LCIF issued 480,028 partnership units exchangeable for
Common Stock, which units are entitled to distributions at the same dividend
rate as Common Stock. At the time of the merger, the Exel Partnership's sole
assets were approximately $6.0 million of cash (from the prior sale of a
property) and the right to acquire the Properties in a tax-free exchange under
Internal Revenue Code Section 1031. The proceeds from the issuance of these
partnership units were recorded as minority interest in the accompanying
consolidated financial statements.
During the six months ended June 30, 1997, the Company completed the following
acquisitions:
<PAGE> 6
COTTONDALE, ALABAMA PROPERTY. On February 20, 1997, the Company completed the
acquisition of a 58,800 square foot industrial property (the "Cottondale
Property") in Cottondale, Alabama for approximately $2.9 million. The Cottondale
Property is leased to Johnson Controls, Inc. under a net lease which expires in
February 2007.. The current annualized base rent is $288,608 and increases
annually by three times the percentage change in the Consumer Price Index
("CPI"), not to exceed 4.5%.
EXEL LOGISTICS PROPERTIES. On March 19, 1997, the Company acquired three
industrial properties (the "Exel Properties") for $27.0 million. The Exel
Properties contain 761,200 square feet on 46.56 acres near Harrisburg,
Pennsylvania and are subject to net-leases with Exel Logistics, Inc. ("Exel")
which expire in November 2006. The current annualized base rent under the leases
is $2,536,941 and will increase by 9.27% on December 1, 1997 and by 9.27% every
three years thereafter. The average annual net rent payable during the remaining
terms of the leases is approximately $3.0 million, or approximately 11.1% of the
purchase price. The obligations of Exel under the leases are unconditionally
guaranteed by its parent company, NFC plc.
RANCHO BERNARDO PROPERTY. On May 1, 1997, the Company used the proceeds of the
April Preferred Stock Sale to acquire an office/research and development
facility in Rancho Bernardo, California (the "Rancho Bernardo Property") for
$7,725,000. The Rancho Bernardo Property contains 65,755 net rentable square
feet and is leased to Cymer, Inc. under the terms of a net lease which expires
in December 2009. Upon acquisition, the lease provided for annualized base
rental payments (including a management fee) of $736,872, which increased to
$755,294 on June 1, 1997 and which will increase by approximately 5% every two
years thereafter. The average annual net rent payable during the remaining lease
term is $860,419, or approximately 11.1% of the purchase price.
During July 1997, the Company completed two additional acquisitions, described
as follows:
BULL PROPERTY. On July 9, 1997, the Company acquired a 137,058 square foot
office building leased to Bull HN Information Systems, Inc. (the "Bull
Property") in Phoenix, Arizona for approximately $10.9 million. The purchase
price was satisfied with approximately $600,000 in a promissory note issued to
the seller, the assumption of approximately $5.9 million of mortgage debt which
bears interest at 8.12% per annum, a credit received by the Company for the
transfer of an existing security deposit of approximately $1.0 million and cash
of approximately $3.4 million. The lease on the Bull Property is a net lease
which expires October 10, 2005. The current annualized base rent is $972,118,
which will increase by approximately 4.8% on October 10, 2000 and by
approximately 2.5% annually thereafter.
LOCKHEED PROPERTY. On July 22, 1997, the Company acquired a two-story, 126,000
square foot office/research and development facility on 36.94 acres of land,
leased to Lockheed Martin Corporation (the "Lockheed Property") for $15.5
million. The purchase price was satisfied with a drawdown on the Credit Facility
in the amount of $5.5 million, and the balance in cash. The lease on the
Lockheed Property is a net lease which expires on December 17, 2006. The current
annualized based rent is $1,671,292 and will increase on December 18, 2001 by
75% of the cumulative increase in the Consumer Price Index for the preceding
sixty months. The obligations of the lessee under the lease are unconditionally
guaranteed by Honeywell, Inc. Currently, the entire land parcel is subject to
the lease, however the Company has the right to have approximately 24 acres of
the almost 37 acres removed from the lease without any reduction in the rent
paid by the tenant.
Results of Operations
Quarter and six months ended June 30, 1997 compared to quarter and six months
ended June 30, 1996
Total Revenues. Total revenues for the quarter and six months ended June 30,
1997 were $10,638,123 and $20,462,330, representing increases of $2,955,682 and
$5,980,533 from the same periods in 1996. The increases in revenues were
primarily attributable to increases in rental revenue of $2,882,931 and
$5,924,376 for the quarter and six month periods, respectively. Rental revenue
increased primarily due to revenues from properties acquired in May and December
1996, and in February, March and May 1997. Interest and other revenues for the
quarter and
<PAGE> 7
six months ended June 30, 1997 increased $72,751 and $56,157 from the same
periods in 1996 primarily due to higher interest-bearing cash balances during
the six months ended June 30, 1997.
Total Expenses. Total expenses for the quarter and six months ended June 30,
1997 were $8,504,476 and $16,487,505, representing increases of $2,597,684 and
$5,508,481 from the same periods in 1996. The increases were primarily
attributable to increases in interest expense, depreciation and amortization of
real estate, and amortization of real estate general and administrative expenses
and amortization of deferred expenses, all of which increased principally as a
result of property acquisitions and increased property portfolio activity.
Interest expense for the quarter and six months ended June 30, 1997 increased
$1,321,988 and $2,982,554 from the same periods in 1996 primarily due to
interest expense incurred on the additional debt obtained or assumed in
connection with acquisitions in May and December 1996 and February and March
1997. Depreciation and amortization of real estate for the quarter and six
months ended June 30, 1997 increased $787,117 and $1,682,595 from the same
periods in 1996 primarily due to properties acquired in May and December 1996,
and February, March and May 1997. General and administrative expenses for the
quarter and six months ended June 30, 1997 increased $398,039 and $623,559 from
the same periods in 1996 as a result of increases in certain operating costs due
to the incremental growth of the Company. Additionally, property arbitration
litigation expenses relating to the Newark, California Property of $167,351 were
incurred during the quarter ended June 30, 1997. Amortization of deferred
expenses for the quarter and six months ended June 30, 1997 increased $70,411
and $118,036 from the same periods in 1996 due to an increase in amortizable
deferred loan expenses incurred in connection with debt obtained or assumed in
property acquisitions.
Excluding the property arbitration litigation expenses, general and
administrative expenses for the quarter and six months ended June 30, 1997 were
approximately 9% of rental revenues, compared to approximately 10% for the same
respective periods in 1996.
Net Income. Net income for the quarter and six months ended June 30, 1997 was
$303,546 and $1,813,996, representing decreases of $1,324,952 and $1,487,947
from the same periods in 1996. The decreases were primarily attributable to an
extraordinary loss on extinguishment of debt incurred in connection with the
Salt Lake City debt refinancing, in the amount of $1,787,428. Income before
extraordinary item for the quarter and six months ended June 30, 1997 increased
$462,476 and $368,324 from the same periods in 1996.
In February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128, Earnings Per Share ("SFAS No. 128").
SFAS No. 128 supersedes Accounting Principles Board Opinion No. 15, Earnings Per
Share ("APB 15") and specifies the computation, presentation, and disclosure
requirements for earnings per share ("EPS") for entities with publicly held
common stock or potential common stock. SFAS No. 128 replaces the presentation
of primary EPS with a presentation of basic EPS and fully diluted EPS with
diluted EPS. It also requires dual presentation of basic and diluted EPS on the
face of the income statement for all entities with complex capital structures
and requires reconciliation of the numerator and denominator of the basic EPS
computation to the numerator and denominator of the diluted EPS computation.
This statement will be adopted for both interim and annual periods ending after
December 15, 1997.
The following table reflects what the Company's basic and diluted EPS would have
been under SFAS 128 for the quarters and six months ended June 30, 1997 and
1996:
<TABLE>
<CAPTION>
Quarters ended Six months ended
June 30, 1997 June 30, 1996 June 30, 1997 June 30, 1996
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Basic:
Income before
extraordinary item $ 0.18 $ 0.17 $ 0.33 $ 0.35
Extraordinary item -
loss on extinguishment of debt (0.18) - (0.19) -
------ ----- ----- ------
</TABLE>
<PAGE> 8
<TABLE>
<S> <C> <C> <C> <C>
Net income $ 0.00 $ 0.17 $ 0.14 $ 0.35
==== ==== ==== ====
Diluted:
Income before
extraordinary item $ 0.14 $ 0.17 $ 0.27 $ 0.34
Extraordinary item -
loss on extinguishment of debt (0.14) - (0.15) -
---- ------- ----- ------
Net income $ 0.00 $ 0.17 $ 0.12 $ 0.34
==== ==== ==== ====
</TABLE>
Funds from Operations
The Company believes that Funds From Operations enhances an investor's
understanding of the Company's financial condition, results of operations and
cash flows. The Company believes that Funds From Operations is an appropriate
measure of the performance of an equity REIT, and that it can be one measure of
a REIT's ability to make cash distributions. Funds From Operations is defined by
the National Association of Real Estate Investment Trusts, Inc. as "net income
(or loss) (computed in accordance with generally accepted accounting
principles), excluding gains (or losses) from debt restructuring and sales of
property, plus real estate depreciation and amortization and after adjustments
for unconsolidated partnerships and joint ventures." The Company's method of
calculating Funds From Operations excludes other non-recurring revenue and
expense items and may be different from methods used by other REITs and,
accordingly, is not comparable to such other REITs. Funds From Operations should
not be considered an alternative to net income, as an indicator of the Company's
operating performance or to cash flows from operating activities as determined
in accordance with generally accepted accounting principles ("GAAP"), or a
measure of liquidity to other consolidated income or cash flow statement data as
determined in accordance with GAAP.
The Company reports Funds From Operations ("FFO") on a fully diluted basis
(Total FFO) assuming the conversion of all operating partnership units. This
reporting method treats all operating partnership units as common stock
equivalents even though many units are not immediately convertible and receive
distributions below the level paid in respect of the Company's common stock.
The following table reflects the Company's FFO for the quarter and six months
ended June 30, 1997 and 1996:
<TABLE>
<CAPTION>
Quarter ended Six months ended
June 30, 1997 June 30, 1996 June 30, 1997 June 30, 1996
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Net income $ 303,546 $ 1,628,498 $ 1,813,996 $ 3, 301,943
Add back:
Depreciation and amortization of real estate 2,614,850 1,827,733 5,075,395 3,392,800
Minority interests share of income 42,673 147,151 304,558 200,830
Losses from debt restructuring 1,787,428 - 1,856,271 -
Property arbitration litigation expense 167,351 - 167,351 -
--------- --------------- --------- -------------
Total FFO - for shares and partnership units
before items below 4,915,848 3,603,382 9,217,571 6,895,573
</TABLE>
<PAGE> 9
<TABLE>
<S> <C> <C> <C> <C>
Adjustments of other non-recurring items1
Non-recurring stock compensation -- 147,066 -- 294,132
------------ ------------ ------------ ------------
Total FFO for shares and partnership units 4,915,848 3,750,448 9,217,571 7,189,705
Less:
Minority interests share of depreciation (451,568) (163,106) (805,815) (165,036)
Minority interests share of income (42,673) (147,151) (304,558) (200,830)
------------ ------------ ------------ ------------
FFO - for common and preferred shares only $ 4,421,607 $ 3,440,191 $ 8,107,198 $ 6,823,839
============ ============ ============ ============
Weighted average common and preferred
shares outstanding 10,833,374 9,383,641 10,512,972 9,370,584
Weighted average OP units outstanding 3,000,445 1,140,232 2,796,234 738,187
------------ ------------ ------------ ------------
Total weighted average shares and units 13,833,819 10,523,873 13,309,206 10,108,771
============ ============ ============ ============
</TABLE>
Below are the cash flows provided by (used in) operating, investing and
financing activities for the quarters and six months ended June 30, 1997 and
1996:
<TABLE>
<CAPTION>
Quarters ended Six months ended
June 30, 1997 June 30, 1996 June 30, 1997 June 30, 1996
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Cash flows provided by (used in):
Operating activities $ 5,027,496 $ 3,739,969 $ 9,504,045 $ 6,915,449
Investing activities (8,053,146) (2,138,796) (32,382,615) (2,232,482)
Financing activities 10,762,793 (1,680,942) 32,277,078 (4,840,413)
========== =========== ========== ===========
</TABLE>
The number of weighted average shares used by the Company in calculating FFO
differs from those used in calculating earnings per share under generally
accepted accounting principles.
The Company's dividends declared, on a weighted average basis, to be paid to
stockholders (including preferred stockholders) amounted to approximately 71% of
the Company's FFO for the quarter ended June 30, 1997. The Company's total
declared dividends and partnership distributions, on a weighted average basis,
amounted to approximately 75% of the Company's FFO for the quarter ended June
30, 1997.
- ------------------
1 For purposes of the calculation of Funds From Operations, the Company has
added back to net income amounts for non-recurring stock compensation, which
management believes to be an appropriate adjustment based on the non-recurring
and unusual nature of such amounts. The Company's method of calculating Funds
From Operations may be different from methods used by other REITs. Non-recurring
stock compensation represents the expense of a simultaneous exercise and
re-granting of options to the Company's management during the period between
July 1995 and January 1996, which was intended to increase management's
ownership in the Company (a practice which has been discontinued). The Board of
Directors has determined that the Company will not engage in such practices in
the future.
<PAGE> 10
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Lexington Corporate Properties, Inc.
Date: November 14, 1997 By:/s/ E. Robert Roskind
---------------------------------
E. Robert Roskind
Chairman and Co-Chief Executive Officer
Date: November 14, 1997 By:/s/ Paul R. Wood
----------------------------------
Paul R. Wood
Vice President and Chief Accounting Officer
