<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, 2000
[ ] 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: 17,136,766
common shares, par value $.0001 per share on August 11, 2000.
<PAGE> 2
PART 1. - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
LEXINGTON CORPORATE PROPERTIES TRUST AND CONSOLIDATED SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
June 30, 2000 (Unaudited) and December 31, 1999
(in thousands, except share and per share data)
<TABLE>
<CAPTION>
June 30, December 31,
ASSETS: 2000 1999
-------- --------
<S> <C> <C>
Real estate, at cost $682,589 $688,926
Less: accumulated depreciation and amortization 89,709 82,334
-------- -------
592,880 606,592
Cash and cash equivalents 3,128 8,837
Restricted cash 2,231 2,470
Investment in and advances to joint ventures 20,210 11,523
Other assets, net 36,828 27,059
-------- -------
$655,277 $656,481
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY:
Mortgages and notes payable $304,131 $299,360
Credit facility 66,421 70,921
Subordinated notes payable, including accrued interest 1,973 1,973
Origination fees payable, including accrued interest 6,701 6,781
Accounts payable and other liabilities 6,475 6,168
-------- -------
385,701 385,203
Minority interests 65,890 66,303
-------- -------
451,591 451,506
-------- -------
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
-------- -------
Common shares, par value $0.0001 per share;
287,888 shares issued and outstanding,
liquidation preference $3,886 3,809 3,809
-------- -------
Shareholders' equity:
Common shares, par value $0.0001 per
share, authorized 40,000,000 shares,
16,793,155 and 16,905,285 shares issued
and outstanding in 2000 and 1999,
respectively 2 2
Additional paid-in-capital 239,198 240,339
Deferred compensation, net (1,197) (701)
Accumulated distributions in excess of net
income (60,506) (60,852)
-------- -------
177,497 178,788
Less: notes receivable from officers/
shareholders (1,989) (1,991)
-------- -------
Total shareholders' equity 175,508 176,797
-------- -------
$655,277 $656,481
======= =======
</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, 2000 and 1999
(Unaudited and in thousands, except per share data)
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30, June 30,
2000 1999 2000 1999
--------- --------- --------- --------
<S> <C> <C> <C> <C>
Revenues:
Rental $ 19,298 $ 18,673 $ 38,318 $ 37,535
Equity in earnings of joint ventures 231 -- 633 --
Interest and other 504 277 692 576
--------- --------- --------- --------
20,033 18,950 39,643 38,111
--------- --------- --------- --------
Expenses:
Interest 7,221 6,991 14,655 14,132
Depreciation and amortization of real
estate 4,367 4,461 8,793 8,900
Amortization of deferred expenses 380 242 673 485
General and administrative 1,312 1,186 2,598 2,196
Property operating 399 452 768 915
--------- --------- --------- --------
13,679 13,332 27,487 26,628
--------- --------- --------- --------
Income before gain on sale of properties
and minority interests 6,354 5,618 12,156 11,483
Gain on sale of properties 2,662 698 2,662 698
--------- --------- --------- --------
Income before minority interests 9,016 6,316 14,818 12,181
Minority interests 1,670 1,447 3,001 2,949
--------- --------- --------- --------
Net income $ 7,346 $ 4,869 $ 11,817 $ 9,232
========= ========= ========= ========
Net income per common share:
Basic $ 0.40 $ 0.25 $ 0.63 $ 0.47
Diluted $ 0.36 $ 0.24 $ 0.59 $ 0.47
</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, 2000 and 1999
(Unaudited and in thousands, except share data)
<TABLE>
<CAPTION>
2000 1999
-------- --------
<S> <C> <C>
Net cash provided by operating activities $ 19,869 $ 18,525
-------- --------
Cash flows from investing activities:
Acquisitions of real estate, net (27,077) (7,638)
Investment in and advances to joint ventures (6,005) -
Real estate deposits (5,547) -
Proceeds from sale of real estate, net 16,335 5,398
-------- --------
Net cash used in investing activities (22,294) (2,240)
-------- --------
Cash flows from financing activities:
Proceeds of mortgages and notes payable 36,800 18,400
Dividends to common and preferred shareholders (11,471) (11,514)
Principal payments on debt, excluding normal
amortization (13,093) (5,513)
Principal amortization payments (5,476) (4,902)
Change in credit facility borrowing, net (4,500) (9,799)
Cash distributions to minority partners (3,113) (3,298)
Proceeds from the issuance of common shares, net 539 427
Repurchase of common shares (3,211) (2,483)
Other financing activities, net 241 (372)
-------- --------
Net cash used in financing activities (3,284) (19,054)
-------- --------
Change in cash and cash equivalents (5,709) (2,769)
Cash and cash equivalents, at beginning of period 8,837 11,084
-------- --------
Cash and cash equivalents, at end of period $ 3,128 $ 8,315
======== ========
</TABLE>
Supplemental disclosure of non-cash investing
and financing activities:
During 2000 and 1999, the Company issued 73,800 and 69,850 common shares,
respectively, to certain employees and trustees resulting in $664 and
$877, respectively, of deferred compensation. These common shares vest
ratably over a 2 to 5 year period.
During 2000 and 1999, holders of an aggregate of 68,759 and 117,876
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 $830 and
$1,554, respectively.
During 2000, 83,400 partnership units were issued to acquire two real
estate asset management contracts valued at $585.
During 2000, the Company sold a property and received a $3,067 note which
bears interest at 10%. The note subsequently was repaid.
During 2000, the Company purchased a property and issued a $3,488
promissory note to the seller.
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, 2000
(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
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. As of June 30, 2000 the Company had ownership interests
in sixty-seven properties and managed an additional twenty-five
properties.
The Company has qualified as a REIT under the Internal Revenue Code of
1986, as amended. A REIT 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, 1999.
(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
are excluded from the six months ended June 30, 2000 computations since
they are anti-dilutive. The preferred shares and exchangeable
redeemable secured notes are excluded from all 1999 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, 2000 and 1999.
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30, June 30,
2000 1999 2000 1999
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
BASIC
Net income $ 7,346 $ 4,869 $ 11,817 $ 9,232
Less preferred dividends 630 630 1,260 1,260
----------- ----------- ----------- -----------
Net income attributed to common shareholders $ 6,716 $ 4,239 $ 10,557 $ 7,972
=========== =========== =========== ===========
Weighted average number of common shares outstanding 16,838,967 16,965,118 16,881,301 17,003,654
=========== =========== =========== ===========
Net income per common share - basic: $ 0.40 $ 0.25 $ 0.63 $ 0.47
=========== =========== =========== ===========
DILUTED
Net income attributed to common shareholders $ 6,716 $ 4,239 $ 10,557 $ 7,972
Add incremental income attributed to assumed
conversion of dilutive securities 2,752 1,397 3,908 2,843
----------- ----------- ----------- -----------
Net income attributed to common shareholders $ 9,468 $ 5,636 $ 14,465 $ 10,815
=========== =========== =========== ===========
Weighted average number of common shares used in
calculation of basic earnings per share 16,838,967 16,965,118 16,881,301 17,003,654
Add incremental shares representing:
Shares issuable upon exercise of employee stock options 79,998 14,280 72,604 18,602
Shares issuable upon conversion of dilutive securities 9,680,911 6,148,875 7,651,085 6,169,354
----------- ----------- ----------- -----------
Weighted average number of shares used in calculation
of diluted earnings per common share 26,599,876 23,128,273 24,604,990 23,191,610
=========== =========== =========== ===========
Net income per common share - diluted: $ 0.36 $ 0.24 $ 0.59 $ 0.47
=========== =========== =========== ===========
</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 1999 financial
statements have been reclassified to conform with the 2000 presentation.
(3) Investments in Real Estate
During the six months ended June 30, 2000:
(i) The Company purchased a property in Hampton, Virginia leased
to Nextel Communications of the Mid-Atlantic, Inc. for $6,700.
The lease, which expires January 2010, provides for annual
revenues of $719.
(ii) The Company purchased a property in Phoenix, Arizona leased to
Avnet, Inc. for $23,250. The lease, which expires October
2007, provides for annual revenues of $2,470.
The Company sold three properties which are located in Houston, Texas
(leased to Toys R Us), Plymouth, Michigan (leased to Johnson Controls,
Inc.) and Henderson, North Carolina (leased to Corporate Express Office
Products, Inc.) for an aggregate selling price of $19,600. In
addition, the Company contributed its property in Herndon, Virginia
(leased to NEC America, Inc.) to its joint venture with an
institutional partner. The Company realized $4,600 in proceeds for the
<PAGE> 7
contribution. The Plymouth and Henderson properties were sold to an
affiliate of a Co-Chief Executive Officer of the Company. The Company
received a $3,067, 10% note in connection with the Henderson sale. In
July 2000, the note was repaid in full.
The following unaudited pro forma operating information for the six
months ended June 30, 2000 and 1999 has been prepared as if the 2000
and 1999 acquisitions and dispositions had been consummated as of
January 1, 1999. The information does not purport to be indicative of
what the operating results of the Company would have been had the
acquisitions and dispositions been consummated on 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,
2000 1999
---- ----
<S> <C> <C>
Revenues $39,995 $37,948
Net income $ 9,145 $ 8,150
Net income per common share:
Basic $ 0.47 $ 0.41
Diluted $ 0.47 $ 0.40
</TABLE>
(4) Investments in Joint Ventures
The Company's joint venture with an institutional partner has acquired
three properties in 2000, including one purchased from the Company, for
$70,910, of which $46,021 was funded through non-recourse mortgages
which mature in 2010 ($28,221) and 2012 ($17,800) and have a weighted
average interest rate of 8.03%. The leases, which expire in August
2009, October 2009 and April 2011, provide for annual rental revenues
of approximately $8,083.
(5) 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. During 2000, LCIF
issued 83,400 partnership units to an affiliate of a Co-Chief Executive
Officer of the Company to acquire two property management contracts.
This resulted in an increase to minority interest of $585.
The total number of limited partnership units of LCIF and LCIF II
outstanding is 5,774,601. These units, subject to certain adjustments
through the date of redemption, require distributions per unit in
varying amounts up to $1.24 per annum and have a current average
distribution of $1.12 per annum. Minority interests in the
accompanying consolidated financial statements include the interests in
such partnerships held by parties other than the Company.
(6) Mortgages and Notes Payable
During the six months ended June 30, 2000 the Company obtained the
following non-recourse mortgages:
(i) $17,000 mortgage bearing interest at 8.10% secured by its
Richmond, Virginia property. The mortgage, which matures
February 2010, provides for annual principal and interest
payments of approximately $1,510 and a balloon payment at
maturity of $15,237.
(ii) $4,600 mortgage bearing interest at 8.26% secured by its
Hampton, Virginia property. The mortgage, which matures April
2010, provides for annual principal and interest payments of
approximately $415 and a balloon payment at maturity of
$4,139.
(iii) $15,200 mortgage bearing interest at 7.89% secured by its
Phoenix, Arizona property. The mortgage, which matures June
2008, provides for annual principal and interest payments of
approximately $1,434 and a balloon payment at maturity of
$12,713.
<PAGE> 8
In addition, the Company obtained seller financing of $3,488 relating
to the purchase of the Phoenix, Arizona property. This financing,
which matures May 2010, provides for interest only payments of 7.5%
through May 2003 and 8% thereafter.
(7) Acquisition of Management Contracts
During 2000, LCIF acquired through the issuance of 83,400 partnership
units, two property management contracts valued at $585. The contracts
provide for annual property management fees equal to 1% (estimated to
be $150) of rental revenue of two publicly registered partnerships
which own single tenant, net lease office, industrial and retail
properties. The contracts were acquired from an affiliate of a
Co-Chief Executive Officer of the Company. Also an affiliate of the
Co-Chief Executive Officer is the general partner of the publicly
registered partnerships. The independent members of the Board of Trustees
approved this transaction.
(8) Subsequent Events
The Company declared a $0.31 and $0.3255 dividend on its common and
preferred shares, respectively, for shareholders of record on July 31,
2000, payable August 14, 2000.
The Company repaid $9,500 of its outstanding credit line borrowings.
The Company obtained a $8,500 non-recourse mortgage bearing interest at
190 basis points over 90 day LIBOR (currently at 8.65%) secured by its
Marlborough property, which matures August 2005.
The Company's note receivable of $3,067 relating to the sale of the
Henderson property was repaid in full.
<PAGE> 9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(dollars in thousand, except per share amounts)
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 are 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, 2000, the Company owned sixty-seven real estate properties or
interests therein (the "Properties) and managed an additional twenty-five
properties.
Liquidity and Capital Resources
Real Estate Assets. As of June 30, 2000, the Company's real estate assets
were located in twenty-nine states and contained an aggregate of
approximately 11.6 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. All of the Company's Properties are currently
leased.
During the six months ended June 30, 2000, the Company acquired two
properties for $29,950 at an unleveraged average annual yield of 10.65% and
sold three properties for $19,600.
The Company's principal sources of liquidity are revenue generated from the
Properties, asset and acquisition fees generated from joint venture
investments and third party management contracts, 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, 2000, the leases on the Properties generated
approximately $38,318 in revenue compared to $37,535 during the same period
in 1999.
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,
each of the calendar quarters of 1999 and the first quarter of 2000. The
Company declared a dividend in respect of the second quarter of 2000, in the
amount of $.31 per share to shareholders of record as of July 31, 2000 to be
paid on August 14, 2000. The Company's annualized dividend rate is currently
$1.24 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, 2000:
<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 3,912,352 $ 1.24 $ 4,851
At any time 1,271,073 1.08 1,373
At any time 133,050 1.12 149
June 2002 83,400 1.24 103
January 2003 17,901 - -
March 2004 43,734 0.27 12
March 2004 27,314 - -
November 2004 29,976 - -
March 2005 29,384 - -
January 2006 187,163 - -
February 2006 29,886 - -
May 2006 9,368 0.29 3
--------- ---- ------
Total 5,774,601 $ 1.12 $ 6,491
========= ==== ======
</TABLE>
Financing
Revolving Credit Facility. As of June 30, 2000, the amount outstanding on
the Company's credit facility was $66,421, bore interest at 7.67% per annum
and had $9,131 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, 2000, a total of forty-eight properties were subject to outstanding
mortgages, which had an aggregate principal amount of $304,131. The weighted
average interest rate on the Company's mortgages and notes payable, including
line of credit borrowings, on such date was approximately 7.76%.
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.
Results of Operations ($000)
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30, June 30,
Increase Increase
Selected Income Statement Data 2000 1999 (Decrease) 2000 1999 (Decrease)
------- ------- ---------- ------- ------- ----------
<S> <C> <C> <C> <C> <C> <C>
Total revenues $20,033 $18,950 $ 1,083 $39,643 $38,111 $ 1,532
Rental 19,298 18,673 625 38,318 37,535 783
Equity in earnings from joint ventures 231 -- 231 633 -- 633
Interest and other 504 277 227 692 576 116
Total expenses 13,679 13,332 347 27,487 26,628 859
Interest 7,221 6,991 230 14,655 14,132 523
Depreciation & amortization of real estate 4,367 4,461 (94) 8,793 8,900 (107)
General & administrative 1,312 1,186 126 2,598 2,196 402
Property operating 399 452 (53) 768 915 (147)
Net Income 7,346 4,869 2,477 11,817 9,232 2,585
</TABLE>
The increase in rental revenues were primarily due to the growth of the
portfolio. The formation of real estate joint ventures in the third and
fourth quarter of 1999 is responsible for the increase in the equity in
earnings from joint ventures. The increase in interest and other income
relates primarily to interest income earned on notes receivable from two
property sales coupled with increase rates
<PAGE> 11
on overnight investments of available cash. The increase in interest expense is
due to the growth of the Company's portfolio which is partially funded through
increased leverage along with an increase in the average borrowing rate. The
increase in general and administrative expenses is primarily due to the
addition of personnel in the second half of 1999 to support the growth of the
Company's advisory business, coupled with the commencement of the amortization
of the Company's accounting software systems and increased professional fees.
The reduction in property operating expense is the result of the portfolio
being 100% occupied in 2000 compared with one vacancy in 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 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.
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, 2000 and 1999 ($000).
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30, June 30,
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net income $ 7,346 $ 4,869 $ 11,817 $ 9,232
Adjustments:
Depreciation and amortization of real estate 4,367 4,461 8,793 8,900
Gain on sale of properties (2,662) (698) (2,662) (698)
Minority interest's share of net income 1,622 1,397 2,908 2,843
Amortization of lease costs 134 -- 167 --
Deemed conversion of notes payable 500 -- 582 --
Joint venture adjustment 448 -- 845 --
------------ ----------- ------------ ------------
Funds From Operations $ 11,755 $ 10,029 $ 22,450 $ 20,277
============ =========== ============ ============
Cash flows from operating activities $ 10,989 $ 9,302 $ 19,869 $ 18,525
Cash flows from investing activities (8,159) 5,280 (22,294) (2,240)
Cash flows from financing activities (353) (13,293) (3,284) (19,054)
</TABLE>
The Company's aggregate dividends paid to shareholders and distributions paid
to unit holders amounted to 70.1% and 74.1% of the Company's Funds From
Operations for the six months ended June 30, 2000 and 1999, respectively.
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, 2000 and 1999, the Company's variable rate
indebtedness represented 17.8% and 11.7%, respectively, of total long-term
indebtedness. During the three and six months ended June 30, 2000 and 1999,
this variable rate indebtedness had a weighted average interest rate of 7.68%
and 7.60% and 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 reduced by $175 and $352 and $124 and $242 for the three and six
months ended June 30, 2000 and 1999, respectively.
<PAGE> 12
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 24,
2000, the following action was taken:
The shareholders elected the seven individuals nominated to serve
as trustees of the Company until the 2001 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 15,634,324 657,799
Richard J. Rouse 15,636,523 655,600
T. Wilson Eglin 15,788,084 504,039
Carl D. Glickman 15,868,066 424,057
Kevin W. Lynch 16,034,743 257,380
John D. McGurk 15,888,593 403,530
Seth M. Zachary 15,852,648 439,475
</TABLE>
ITEM 5. Other Information - not applicable.
ITEM 6. Exhibits and Reports on Form 8-K.
(a) Exhibits -
<TABLE>
<CAPTION>
Exhibit No. Exhibit
----------- -------
<S> <C>
27 Financial Data Schedule as of and for the six months ended
June 30, 2000
</TABLE>
(b) Reports on Form 8-K filed during the quarter ended
June 30, 2000.
None.
<PAGE> 13
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 14, 2000 By:/S/E.Robert Roskind
------------------------- -----------------------------------
E. Robert Roskind
Chairman and Co-Chief Executive
Officer
Date: August 14, 2000 By:/S/Patrick Carroll
------------------------- -----------------------------------
Patrick Carroll
Chief Financial Officer and
Treasurer
