<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(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, 1999
[ ] 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 TRUST
(Exact name of registrant as specified in its charter)
Maryland 13-3717318
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
355 Lexington Avenue
New York, NY 10017
(Address of principal executive offices) (Zip code)
(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 shares, as of the latest practicable date: 17,146,952 common shares, par
value $.0001 per share on August 13, 1999.
<PAGE> 2
PART 1. - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
LEXINGTON CORPORATE PROPERTIES TRUST AND CONSOLIDATED SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
June 30, 1999 (Unaudited) and December 31, 1998
(in thousands, except share and per share data)
<TABLE>
<CAPTION>
June 30, December 31,
ASSETS: 1999 1998
---- ----
<S> <C> <C>
Real estate, at cost $ 683,653 $ 675,793
Less: accumulated depreciation and amortization 75,558 66,076
--------- ---------
608,095 609,717
Cash and cash equivalents 8,315 11,084
Restricted cash 3,470 3,545
Other assets, net 23,674 22,661
--------- ---------
$ 643,554 $ 647,007
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY:
Mortgages payable $ 313,931 $ 300,279
Credit facility 42,822 52,621
Subordinated notes payable, including accrued interest 1,973 1,973
Origination fees payable, including accrued interest 6,812 5,849
Accounts payable and other liabilities 4,688 6,760
--------- ---------
370,226 367,482
Minority interests 70,848 74,381
--------- ---------
441,074 441,863
--------- ---------
Preferred shares, par value $0.0001 per share; authorized 10,000,000
shares. Class A Senior Cumulative Convertible Preferred, liquidation
preference $25,000; 2,000,000 shares issued and outstanding 24,369 24,369
--------- ---------
Shareholders' equity:
Common shares, par value $0.0001 per share, authorized 40,000,000 shares,
17,112,703 and 17,103,532 shares issued and outstanding in 1999 and
1998, respectively 2 2
Additional paid-in-capital 242,336 241,924
Deferred compensation, net (796) --
Accumulated distributions in excess of net income (61,437) (59,155)
--------- ---------
180,105 182,771
Less: notes receivable from officers/shareholders (1,994) (1,996)
--------- ---------
Total shareholders' equity 178,111 180,775
--------- ---------
$ 643,554 $ 647,007
========= =========
</TABLE>
The accompanying notes are an integral part of these unaudited
condensed consolidated financial statements.
<PAGE> 3
LEXINGTON CORPORATE PROPERTIES TRUST AND CONSOLIDATED SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
Three and six months ended June 30, 1999 and 1998
(Unaudited and in thousands, except per share data)
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30, June 30,
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues:
Rental $ 18,673 $ 14,478 $ 37,535 $ 27,455
Interest and other 277 516 576 1,519
-------- -------- -------- --------
18,950 14,994 38,111 28,974
-------- -------- -------- --------
Expenses:
Interest 6,991 5,371 14,132 10,016
Depreciation and amortization of real estate 4,461 3,515 8,900 6,682
Amortization of deferred expenses 242 242 485 484
General and administrative 1,186 900 2,196 1,801
Property operating 452 180 915 345
-------- -------- -------- --------
13,332 10,208 26,628 19,328
-------- -------- -------- --------
Income before gain (loss) on sale of properties
and minority interests 5,618 4,786 11,483 9,646
Gain (loss) on sale of properties 698 (388) 698 (388)
-------- -------- -------- --------
Income before minority interests 6,316 4,398 12,181 9,258
Minority interests 1,447 961 2,949 1,759
-------- -------- -------- --------
Net income $ 4,869 $ 3,437 $ 9,232 $ 7,499
======== ======== ======== ========
Net income per common share:
Basic $ 0.25 $ 0.17 $ 0.47 $ 0.38
Diluted $ 0.24 $ 0.17 $ 0.47 $ 0.37
</TABLE>
The accompanying notes are an integral part of these unaudited
condensed consolidated financial statements.
<PAGE> 4
LEXINGTON CORPORATE PROPERTIES TRUST AND CONSOLIDATED SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Six months ended June 30, 1999 and 1998
(Unaudited and in thousands, except share data)
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Net cash provided by operating activities $ 18,525 $ 14,285
--------- ---------
Cash flows from investing activities:
Acquisitions of real estate, net (7,638) (115,967)
Proceeds from sale of real estate, net 5,398 24,113
--------- ---------
Net cash used in investing activities (2,240) (91,854)
--------- ---------
Cash flows from financing activities:
Proceeds of mortgages and notes payable 18,400 33,816
Dividends to common and preferred shareholders (11,514) (10,594)
Principal payments on debt, excluding normal amortization (5,513) --
Principal amortization payments (4,902) (2,493)
Change in credit facility borrowing, net (9,799) 34,160
Proceeds from issuance of limited partnership units -- 23,449
Cash distributions to minority partners (3,298) (1,606)
Proceeds from the issuance of common shares, net 427 329
Repurchase of common shares (2,483) --
Other financing activities, net (372) 514
--------- ---------
Net cash (used in) provided by financing activities (19,054) 77,575
--------- ---------
Change in cash and cash equivalents (2,769) 6
Cash and cash equivalents, at beginning of period 11,084 3,640
--------- ---------
Cash and cash equivalents, at end of period $ 8,315 $ 3,646
========= =========
Supplemental disclosure of cash flow information:
Cash paid during the period for interest $ 14,162 $ 9,724
========= =========
Cash paid during the period for taxes $ 66 $ 114
========= =========
</TABLE>
Supplemental disclosure of non-cash investing and financing activities:
During 1999 and 1998, holders of an aggregate of 117,876 and 525,433
partnership units, respectively, redeemed such units for common shares of
the Company. This redemption resulted in an increase in shareholders' equity
and a corresponding decrease in minority interests of $1,554 and $5,650,
respectively.
During 1999, the Company issued 69,850 common shares to certain employees
and trustees resulting in $877 of deferred compensation. These common shares
vest ratably over a 2 to 5 year period.
During 1998, the Company issued 131,000 common shares to two officers in
exchange for notes aggregating $1,998 which mature on February 14, 2003,
bear interest at 7.6% per annum and are secured by the common shares issued.
During 1998, the Company issued $5,780 in limited partnership units as
partial satisfaction of the purchase price of real estate. The issuance of
these units has been recorded as minority interests in the accompanying
unaudited condensed consolidated balance sheets.
The accompanying notes are an integral part of these unaudited
condensed consolidated financial statements.
<PAGE> 5
LEXINGTON CORPORATE PROPERTIES TRUST AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1999
(Unaudited and in thousands, except share and per share data)
(1) The Company
Lexington Corporate Properties Trust (the "Company") is a self-managed
and self-administered real estate investment trust ("REIT") that
acquires, owns and manages a geographically diversified portfolio of
sixty-five net leased office, industrial and retail properties. The
real properties owned by the Company are subject to triple net leases
to corporate tenants. The Company was organized in 1993 to combine and
continue to expand the business of two affiliated limited partnerships.
The Company has qualified as a real estate investment trust ("REIT")
under the Internal Revenue Code of 1986, as amended (the "Code"). A
real estate investment trust is generally not subject to Federal income
tax on that portion of its real estate investment trust taxable income,
which is distributed to its shareholders, provided that at least 95% of
taxable income is distributed. Accordingly, no provision for Federal
income taxes has been made.
The unaudited financial statements reflect all adjustments, which are,
in the opinion of management, necessary to present a fair statement of
the results for the interim periods. For a more complete understanding
of the Company's operations and financial position, reference is made
to the financial statements previously filed with the Securities and
Exchange Commission with the Company's Annual Report on Form 10-K for
the year ended December 31, 1998.
(2) Summary of Significant Accounting Policies
Basis of Presentation and Consolidation. The Company's consolidated
financial statements are prepared on the accrual basis of accounting.
The financial statements reflect the accounts of the Company and its
consolidated subsidiaries, including Lepercq Corporate Income Fund L.P.
("LCIF") and Lepercq Corporate Income Fund II L.P. ("LCIF II"). The
Company is the sole general partner and majority limited partner of
LCIF and LCIF II.
Earnings Per Share. Basic net income per share is computed by dividing
net income reduced by preferred dividends by the weighted average
number of common shares outstanding during the period.
Diluted net income per share amounts are similarly computed but include
the effect, when dilutive, of in-the-money common share options and the
Company's other dilutive securities. The Company's preferred shares and
exchangeable redeemable secured notes are excluded in the 1999 and 1998
computations since they are anti-dilutive. In addition the Company's
operating partnership units are also excluded in the 1998 computations
since they are anti-dilutive.
<PAGE> 6
The following is a reconciliation of the numerators and denominators of
the basic and diluted earnings per share computations for the three and
six months ended June 30, 1999 and 1998.
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30, June 30,
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
BASIC
Net income $ 4,869 $ 3,437 $ 9,232 $ 7,499
Less preferred dividends (630) (609) (1,260) (1,218)
----------- ----------- ----------- -----------
Net income attributed to common shareholders $ 4,239 $ 2,828 $ 7,972 $ 6,281
=========== =========== =========== ===========
Weighted average number of common shares outstanding 16,965,118 16,758,370 17,003,654 16,637,214
=========== =========== =========== ===========
Net income per common share - basic: $ 0.25 $ 0.17 $ 0.47 $ 0.38
=========== =========== =========== ===========
DILUTED
Net income attributed to common shareholders $ 4,239 $ 2,828 $ 7,972 $ 6,281
Add incremental income attributed to assumed
conversion of dilutive securities 1,397 -- 2,843 --
----------- ----------- ----------- -----------
Net income attributed to common shareholders $ 5,636 $ 2,828 $ 10,815 $ 6,281
=========== =========== =========== ===========
Weighted average number of shares used in calculation
of basic earnings per share 16,965,118 16,758,370 17,003,654 16,637,214
Add incremental shares representing:
Shares issuable upon exercise of employee stock
options 14,280 197,337 18,602 222,180
Shares issuable upon conversion of dilutive
securities 6,148,875 -- 6,169,354 --
----------- ----------- ----------- -----------
Weighted average number of shares used in calculation
of diluted earnings per common share 23,128,273 16,955,707 23,191,610 16,859,394
=========== =========== =========== ===========
Net income per common share - diluted: $ 0.24 $ 0.17 $ 0.47 $ 0.37
=========== =========== =========== ===========
</TABLE>
Use of Estimates. Management has made a number of estimates and
assumptions relating to the reporting of assets and liabilities, the
disclosure of contingent assets and liabilities and the reported
amounts of revenues and expenses to prepare these financial statements
in conformity with generally accepted accounting principles. Actual
results could differ from those estimates.
Reclassifications. Certain amounts included in the 1998 financial
statements have been reclassified to conform with the 1999
presentation.
(3) Investments in Real Estate
The Company purchased a property in Henderson, North Carolina leased to
Corporate Express Office Products, Inc. for $7,300. The lease, which
expires January 31, 2014, provides for annual revenues of $791.
The Company sold two properties which are located in Cottondale,
Alabama (leased to Johnson Controls, Inc.) and Jacksonville, Alabama
(leased to Wal-Mart Stores, Inc.) for net proceeds of approximately
$5,398 resulting in a gain of approximately $698. The Jacksonville,
Alabama property was sold to an affiliate of a Co-Chief Executive
Officer of the Company.
The following unaudited pro forma operating information for the six
months ended June 30, 1999 and 1998 has been prepared as if the 1999
and 1998 acquisitions and dispositions had been consummated as of
January 1, 1998. The
<PAGE> 7
information does not purport to be indicative of what the operating
results of the Company would have been had the acquisitions and
dispositions been consummated on that date or to be indicative of
operating results which can be expected for future periods. The
unaudited pro forma amounts are as follows:
<TABLE>
<CAPTION>
Pro forma
Six months ended
June 30,
1999 1998
---- ----
<S> <C> <C>
Revenues $37,927 $38,351
Net income $ 8,361 $ 9,229
Net income per common share:
Basic $ 0.42 $ 0.48
Diluted $ 0.42 $ 0.48
</TABLE>
(4) Minority Interests
In conjunction with several of the Company's acquisitions, sellers were
given interests in LCIF or LCIF II as a form of consideration. All of
such interests are redeemable at certain times for common shares on a
one-for-one basis at various dates through May 2006.
As of June 30, 1999, the total number of limited partnership units of
LCIF and LCIF II outstanding was 6,143,785. These units, subject to
certain adjustments through the date of redemption, require
distributions per unit in varying amounts up to $1.20 per annum and
have a current average distribution of $1.09 per annum. Minority
interests in the accompanying consolidated financial statements include
the interests in such partnerships held by parties other than the
Company.
(5) Mortgages Payable
During the six months ended June 30, 1999 the Company:
(i) Obtained a $11,480 mortgage-bearing interest at 7.80% secured
by its Livonia, Michigan Properties. The mortgage, which
matures April 2009, provides for annual principal and interest
payments of approximately $992 and a balloon payment at
maturity of $10,000.
(ii) Obtained a $4,700 mortgage-bearing interest at 7.39% secured
by its Henderson, North Carolina Property. The mortgage, which
matures May 2009, provides for annual principal and interest
payments of approximately $417 and a balloon payment at
maturity of $3,800.
(iii) Obtained a $2,180 mortgage-bearing interest at 7.375% secured
by its Baton Rouge, Louisiana Property. The mortgage, which
matures February 2009, provides for annual principal and
interest payments of approximately $208 and a balloon payment
at maturity of $1,500.
(iv) Satisfied its $5,500 balloon mortgage payment due on its
Phoenix, Arizona Property. The mortgage had an interest rate
of 10.75% per annum.
(6) Subsequent Events
The Company entered into a joint venture agreement with the New York
State Common Retirement Fund ("NYSCRF") to purchase office and
industrial properties net leased to single tenant users. The Company
and NYSCRF will make equity contributions of up to $50 million and $100
million, respectively, to the joint venture, which will then borrow up
to $278 million in secured debt to purchase properties. In addition to
its one-third economic interest, the Company's affiliate, Lexington
Realty Advisors, Inc., will earn annual asset management fees of 2% of
cash rents and acquisition fees of 0.75% of aggregate purchase price.
<PAGE> 8
The Company declared a $0.30 and $0.315 dividend on its common and
preferred shares, respectively, for shareholders of record on July 30,
1999, payable August 16, 1999.
The Company purchased a 108,000 square foot office building located in
Herndon, Virginia net leased to NEC America, Inc. for approximately
$19,000. The lease, which expires August 15, 2009 and contains two 5
year renewal options, provides for annual rental revenues of
approximately $2,000. The purchase was partially financed through a
$12,375 mortgage note. The mortgage note, which bears interest at 7.6%
and matures in August 2009, provides for annual principal and interest
payments of $1,107 and a balloon payment of $9,891 at maturity.
The Company increased its net borrowing on its line of credit by
$4,800.
The Company sold a property in Columbia, South Carolina (leased to
Stone Container Corp.) for net proceeds of approximately $4,735
resulting in a gain of approximately $530. The property was sold to an
affiliate of a Co-Chief Executive Officer of the Company.
<PAGE> 9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Forward-Looking Statements
When used in this Form 10-Q Report, the words "believes," "expects," "estimates"
and similar expressions are intended to identify forward-looking statements.
Such statements are subject to certain risks and uncertainties which could cause
actual results to differ materially. In particular, among the factors that could
cause actual results to differ materially failure to continue to qualify as a
real estate investment trust, general business and economic conditions,
competition, increases in real estate construction costs, change in interest
rates, accessibility of debt and equity capital markets and other risks inherent
in the real estate business including tenant defaults, potential liability
relating to environmental matters and illiquidity of real estate investments.
Readers are cautioned not to place undue reliance on these forward-looking
statements, which speak only as of the date hereof. The Company undertakes no
obligation to publicly release the results of any revisions to these
forward-looking statements which may be made to reflect events or circumstances
after the date hereof or to reflect the occurrence of unanticipated events.
General
The Company, which has elected to qualify as a real estate investment trust
under the Internal Revenue Code of 1986, acquires and manages net-leased
commercial properties.
As of June 30, 1999, the Company owned sixty-five real estate properties or
interests therein (the "Properties).
Liquidity and Capital Resources
Real Estate Assets. As of June 30, 1999, the Company's real estate assets were
located in twenty-nine states and contained an aggregate of approximately 11.0
million square feet of net rentable space. The Properties are subject to tenant
triple net leases, which are generally characterized as leases 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. Sixty-four of the sixty- five properties are currently leased.
During the six months ended June 30, 1999, the Company acquired a property for
$7.3 million at an unleveraged average annual yield of 10.84% and sold two
properties for $5.5 million resulting in a gain of approximately $698,000.
The Company's principal sources of liquidity are revenue generated from the
Properties, interest on cash balances, amounts available under its credit
facility and amounts that may be raised through the sale of securities in
private or public offerings. For the six months ended June 30, 1999, the leases
on the Properties generated approximately $37.5 million in revenue compared to
$27.5 million during the same period in 1998.
Dividends. The Company has made quarterly distributions since October 1986
without interruption. The Company paid a dividend of $.27 per share to common
shareholders 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; $.29 per share in respect of the fourth quarter of 1996, each of the
calendar quarters of 1997 and the first and second quarters of 1998; $0.30 per
share in respect of the third and fourth quarters of 1998 and the first quarter
of 1999. The Company declared a dividend in respect of the second quarter of
1999, in the amount of $.30 per share to shareholders of record as of July 30,
1999 to be paid on August 16, 1999. The Company's annualized dividend rate is
currently $1.20 per share.
UPREIT Structure. The Company's UPREIT structure permits the Company to effect
acquisitions by issuing to a seller, as a form of consideration, interests in
partnerships controlled by the Company. All of such interests are redeemable at
certain times for common shares of the Company on a one-for-one basis and all of
such interests require the Company to pay certain distributions to the holders
of such interests. The Company accounts for these interests in a manner similar
to a minority interest holder. The number of common shares that will be
outstanding in the future should be expected to increase, and minority interest
expense should be expected to decrease, from time to time, as such partnership
interests are redeemed for common shares. The table set forth below provides
certain information with respect to such partnership interests as of June 30,
1999.
<PAGE> 10
<TABLE>
<CAPTION>
Current Total
Redeemable Annualized Annualized
for Shares of Number Per Unit Distribution
Common Shares as of: of Units Distribution ($000)
- ------------------- ------------ ------------ --------------
<S> <C> <C> <C>
At any time 2,370,524 $ 1.20 $ 2,845
At any time 1,273,368 1.08 1,375
At any time 134,110 1.12 150
September 1999 1,729,227 1.20 2,075
December 1999 214,802 1.20 258
January 2003 13,698 - -
March 2004 52,335 0.27 14
March 2004 27,314 - -
November 2004 35,400 - -
March 2005 38,661 - -
January 2006 207,728 - -
February 2006 34,852 - -
May 2006 11,766 0.29 3
------------ ---- ----------
Total 6,143,785 $ 1.09 $ 6,720
============ ==== ==========
</TABLE>
Financing
Revolving Credit Facility. As of June 30, 1999, the amount outstanding on the
Company's credit facility was approximately $42.8 million, bore interest at
6.305% per annum and had $14.0 million available for additional borrowings.
Debt Service Requirements. The Company's principal liquidity needs are the
payment of interest and principal on outstanding mortgage debt. As of June 30,
1999, a total of forty-nine properties were subject to outstanding mortgages,
which had an aggregate principal amount of $313.9 million. The weighted average
interest rate on the Company's mortgages and notes payable, including line of
credit borrowings, on such date was approximately 7.65%.
Lease Obligations. Since the Company's tenants bear all or substantially all of
the cost of property maintenance and capital improvements, the Company does not
anticipate significant needs for cash for property maintenance or repairs. The
Company generally funds property expansions with additional secured borrowings,
the repayment of which is funded out of rental increases under the leases
covering the expanded properties.
Impact of Year 2000
The Year 2000 compliance issue concerns the inability of computer systems to
accurately calculate, store or use a date after 1999. This could result in a
system failure or miscalculations causing disruptions of operations.
The Year 2000 issue affects virtually all companies and organizations.
The Company has been taking the necessary steps to understand the nature and
extent of the work required to make its core information computer systems and
non-information embedded systems Year 2000 compliant. The Company has determined
that it will not be necessary to modify, update or replace its computer hardware
and software applications.
The vendor that provides the Company's existing general ledger software has
released a Year 2000 compliant version of its product, which the Company is
currently using. The cost of the general ledger system did not have a material
effect on the Company's financial condition or results of operations.
The Company's properties, which have no scheduled lease expirations prior to
August 17, 2000, are subject to net leases and accordingly the Year 2000
compliance of embedded systems (e.g., security, HVAC, fire and elevator systems)
are the responsibility of the tenants. The Company has contacted each of its
tenants asking them to identify and evaluate the changes and modifications
necessary to make these systems compliant for Year 2000 processing. The costs
associated with the effect to make the embedded systems Year 2000 compliant are
the tenant's responsibility. However, no assurances can be given that the
Properties embedded systems will be Year 2000 compliant by December 31, 1999 and
compliance costs, if any, incurred by the Company would not be significant.
<PAGE> 11
The Company is communicating with significant third-party service providers and
vendors with which it does business to determine the efforts being made on their
part for compliance. The Company is attempting to receive compliance
certificates from all third parties that have a material impact on the Company's
operations, but no assurance can be given with respect to the cost or timing of
such efforts or the potential effects of any failure to comply.
Management will closely monitor the Company's entire Year 2000 compliance
function and will develop contingency plans no later than third quarter of 1999,
if necessary.
Results of Operations ($000)
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30, June 30,
Increase Increase
Selected Income Statement Data 1999 1998 (Decrease) 1999 1998 (Decrease)
---- ---- ---------- ---- ---- ----------
<S> <C> <C> <C> <C> <C> <C>
Total revenues $18,950 $14,994 $3,956 $38,111 $28,974 $ 9,137
Rental 18,673 14,478 4,195 37,535 27,455 10,080
Interest and other 277 516 (239) 576 1,519 (943)
Total expenses 13,332 10,208 3,124 26,628 19,328 7,300
Interest 6,991 5,371 1,620 14,132 10,016 4,116
Depreciation & amortization of real estate 4,461 3,515 946 8,900 6,682 2,218
General & administrative 1,186 900 286 2,196 1,801 395
Property operating 452 180 272 915 345 570
Net Income 4,869 3,437 1,432 9,232 7,499 1,733
</TABLE>
Changes in the results of operations for the Company were primarily due to the
growth of its portfolio and costs associated with such growth. The decrease in
interest and other revenue was primarily due to income recorded on the Newark,
California Property, which was sold during the second quarter of 1998, and
interest income earned on the increased escrow deposits. The increase in
interest expense due to the growth of the Company's portfolio was partially
offset by a reduction in the weighted average interest rate to 7.61% as of June
30, 1999 from 7.91% as of June 30, 1998, due to debt refinancings and
repayments. The Company's general and administrative expenses decreased as a
percentage of revenue to 5.76% for the six months ended June 30, 1999, from
6.21% for the six months ended June 30, 1998 due to the growth of the Company's
portfolio relative to these expenses. The increase in property operating
expenses relates to the vacancy of the Memphis property and certain landlord
operating expense responsibilities for the Palm Beach Gardens, Florida property.
The tenant in the Company's Dallas, Texas Property has been experiencing
liquidity problems. The Company entered into an agreement with the tenant which
deferred $100,000 of its $268,000 monthly rent for the period March 1, 1999 to
June 30, 1999 and will defer $126,000 of its monthly rent from July 1, 1999 to
September 30, 1999.
Funds From Operations
Management believes that Funds From Operations enhances an investor's
understanding of the Company's financial condition, results of operations and
cash flows and believes it is an appropriate performance measure for an equity
REIT which provides an indication of a REIT's ability to make cash
distributions. Funds From Operations is defined by the National Association of
Real Estate Investment Trusts, Inc. (NAREIT) as "net income (or loss) (computed
in accordance with generally accepted accounting principles ("GAAP")), excluding
gains (or losses) from debt restructuring and sales of property, plus real
estate depreciation and amortization and after adjustments for unconsolidated
partnerships and joint ventures." The Company's method of calculating Funds From
Operations excludes other non-recurring revenue and expense items and may be
different from methods used by other REITs and, accordingly, is not comparable
to such other REITs. Funds From Operations should not be considered an
alternative to net income as an indicator of operating performance or to cash
flows from operating activities as determined in accordance with GAAP, or as a
measure of liquidity to other consolidated income or cash flow statement data as
determined in accordance with GAAP.
<PAGE> 12
The following table reflects the calculation of the Company's Funds From
Operations and cash flow activities for the three and six months ended June 30,
1999 and 1998 ($000).
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30, June 30,
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net income $ 4,869 $ 3,437 $ 9,232 $ 7,499
Adjustments:
Depreciation and amortization of real estate 4,461 3,515 8,900 6,682
(Gain) loss on sale of properties (698) 388 (698) 388
Minority interest's share of net income 1,397 961 2,843 1,759
-------- -------- -------- --------
Funds From Operations $ 10,029 $ 8,301 $ 20,277 $ 16,328
======== ======== ======== ========
Cash flows from operating activities $ 9,302 $ 8,054 $ 18,525 $ 14,285
Cash flows from investing activities 5,280 (54,867) (2,240) (91,854)
Cash flows from financing activities (13,293) 45,601 (19,054) 77,575
</TABLE>
The Company's aggregate dividends paid to shareholders and distributions paid to
unit holders amounted to approximately 73.0% of the Company's Funds From
Operations for the six months ended June 30, 1999.
ITEM 3. QUANTITATIVE AND QUALITATIVE
DISCLOSURES ABOUT MARKET RISK
The Company's exposure to market risk relates to its variable rate unsecured
credit facility. As of June 30, 1999 the Company's variable rate indebtedness
represented 11.7% of total long-term indebtedness. During the three and six
months ended June 30, 1999 this variable rate indebtedness had a weighted
average interest rate of 6.62% and 6.33%, respectively. Had the weighted average
interest rate been 100 basis points higher the Company's net income would have
been approximately $124,000 and $242,000 less for the three and six months ended
June 30, 1999, respectively.
<PAGE> 13
PART II - OTHER INFORMATION
ITEM 1. Legal Proceedings - not applicable.
ITEM 2. Changes in Securities - not applicable.
ITEM 3. Defaults under the Senior Securities - not applicable.
ITEM 4. Submission of Matters to a Vote of Security Holders -
At the Company's Annual Meeting of Shareholders held on May
19, 1999, the following action was taken:
The shareholders elected the seven individuals nominated to
serve as trustees of the Company until the 2000 Annual
Meeting, as set forth in Proposal No. 1 in the Company's
Notice of Annual Meeting of Shareholders and Proxy Statement
for the Annual Meeting. The seven individuals elected, and the
number of votes cast for, or withheld, with respect to each of
them, follows:
<TABLE>
<CAPTION>
For Withheld
--- --------
<S> <C> <C>
E. Robert Roskind 16,783,311 240,279
Richard J. Rouse 16,785,731 237,859
T. Wilson Eglin 16,786,581 237,009
Carl D. Glickman 16,818,800 204,790
Kevin W. Lynch 16,826,153 197,437
John D. McGurk 16,826,053 197,537
Seth M. Zachary 16,779,504 244,086
</TABLE>
ITEM 5. Other Information - not applicable.
ITEM 6. Exhibits and Reports on Form 8-K.
(a) Exhibits -
Exhibit No. Exhibit
27 Financial Data Schedule as of and
for the six months ended June 30,
1999
(b) Reports on Form 8-K filed during the quarter ended
June 30, 1999.
None.
<PAGE> 14
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 Trust
Date: August 13, 1999 By: /s/ E. ROBERT ROSKIND
------------------- ------------------------------------------
E. Robert Roskind
Chairman and Co-Chief Executive Officer
Date: August 13, 1999 By: /s/ PATRICK CARROLL
------------------- ------------------------------------------
Patrick Carroll
Chief Financial Officer and Treasurer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
condensed consolidated balance sheet and the condensed consolidated statement of
income as of and for the six months ended June 30, 1999 as contained in the
company's form 10-Q for such period and is qualified in its entirety by
reference to such form 10-Q. Dollars are in thousands, except per share data.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<EXCHANGE-RATE> 1
<CASH> 8,315
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 683,653
<DEPRECIATION> 75,558
<TOTAL-ASSETS> 643,554
<CURRENT-LIABILITIES> 0
<BONDS> 365,538
24,369
0
<COMMON> 2
<OTHER-SE> 178,109
<TOTAL-LIABILITY-AND-EQUITY> 643,554
<SALES> 0
<TOTAL-REVENUES> 38,111
<CGS> 0
<TOTAL-COSTS> 9,815
<OTHER-EXPENSES> 485
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 14,132
<INCOME-PRETAX> 12,181
<INCOME-TAX> 0
<INCOME-CONTINUING> 9,232
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 9,232
<EPS-BASIC> 0.47
<EPS-DILUTED> 0.47
</TABLE>
