FORM 10-K
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K
(Mark One)
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal year ended December 31, 2006
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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 REALTY TRUST
(Exact name of Registrant as specified in its charter)
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| Maryland
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13-3717318 |
(State or other jurisdiction of
incorporation or organization)
One Penn Plaza, Suite 4015
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(I.R.S. Employer
Identification No.) |
| New York, NY
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10119-4015 |
| (Address of principal executive offices)
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(Zip Code) |
Registrant’s telephone number, including area code (212) 692-7200
Securities registered pursuant to Section 12(b) of the Act:
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| Title of Each Class
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Name of Each Exchange on which Registered |
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| Common Shares of beneficial interests, par value $0.0001
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New York Stock Exchange |
8.05% Series B Cumulative Redeemable Preferred Stock,
par value $0.0001
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New York Stock Exchange |
6.50% Series C Cumulative Convertible Preferred Stock,
par value $0.0001
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New York Stock Exchange |
7.55% Series D Cumulative Redeemable Preferred Stock,
par value $0.0001
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New York Stock Exchange |
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule
405 of the Securities Act. Yes þ No o.
Indicate by check mark if the registrant is not required to file reports pursuant to Section
13 or Section 15(d) of the Act. Yes o No þ.
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 þ No o.
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation
S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of
Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in
Part III of this Form 10-K or any amendment to this Form 10-K. o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated
filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated
filer” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer þ Accelerated filer o Non-accelerated filer o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of
the Act) Yes o No þ.
The aggregate market value of the voting shares held by non-affiliates of the Registrant as of
June 30, 2006, which was the last business day of the Registrant’s most recently completed second
fiscal quarter was $ 1,057,724,480 based on the closing price of common shares as of that date,
which was $21.60 per share.
Number of common shares outstanding as of February 23, 2007 was 70,232,063.
Certain information contained in the Definitive Proxy Statement for Registrant’s 2007 Annual
Meeting of Shareholders, to be held on May 22, 2007 is incorporated by reference in this Annual
Report on Form 10-K in response to Part III, Item 10, 11, 12, 13 and 14.
PART I.
Introduction
When we use the terms “Lexington,” the “Company,” “we,” “us” and “our,” we mean Lexington
Realty Trust and all entities owned by us, including non-consolidated entities, except where it is
clear that the term means only the parent company. References herein to our Annual Report are to
our Annual Report on Form 10-K for the fiscal year ended December 31, 2006.
All references to 2006, 2005 and 2004 refer to our fiscal years ended, or the dates, as the
context requires, December 31, 2006, December 31, 2005, and December 31, 2004, respectively.
We merged with Newkirk Realty Trust, Inc., or Newkirk, on December 31, 2006, which we refer to
as the Merger. Unless otherwise noted, (A) the information in this Annual Report regarding items in
our Consolidated Statements of Operations as of December 31, 2006, does not include the business
and operations of Newkirk, and (B) the information in this Annual Report regarding items in our
Consolidated Balance Sheet, includes the assets, liabilities and minority interests of Newkirk.
Cautionary Statements Concerning Forward-Looking Statements
This Annual Report, together with other statements and information publicly disseminated by us
contain certain forward-looking statements within the meaning of Section 27A of the Securities Act
of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. We intend
such forward-looking statements to be covered by the safe harbor provisions for forward-looking
statements contained in the Private Securities Litigation Reform Act of 1995 and include this
statement for purposes of complying with these safe harbor provisions. Forward-looking statements,
which are based on certain assumptions and describe our future plans, strategies and expectations,
are generally identifiable by use of the words “believes,” “expects,” “intends,” “anticipates,”
“estimates,” “projects,” or similar expressions. Readers should not rely on forward-looking
statements since they involve known and unknown risks, uncertainties and other factors which are,
in some cases, beyond our control and which could materially affect actual results, performances or
achievements. In particular, among the factors that could cause actual results to differ materially
from current expectations include, among others, those risks discussed below and under “Risk
Factors” in Part I, Item 1A of the Annual Report and “Management’s Discussion and Analysis of
Financial Condition and Results of Operations” in Part II, Item 7 of the Annual Report. We
undertake 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
occurrence of unanticipated events. Accordingly, there is no assurance that our expectations will
be realized.
Item 1. Business
General
We are a self-managed and self-administered real estate investment trust formed under the laws
of the State of Maryland. Our primary business is the acquisition, ownership and management of a
geographically diverse portfolio of net leased office, industrial and retail properties.
Substantially all of our properties are subject to triple net leases, which are generally
characterized as leases in which the tenant bears all or substantially all of the costs and/or cost
increases for real estate taxes, utilities, insurance and ordinary repairs.
Our predecessor was organized in October 1993 and merged into Lexington Corporate Properties
Trust on December 31, 1997. On December 31, 2006, Lexington Corporate Properties Trust completed
the Merger with Newkirk. Newkirk’s primary business was similar to our primary business. All of
Newkirk’s operations were conducted and all of its assets were held through its master limited
partnership, The Newkirk Master Limited Partnership, which we refer to as the MLP. Newkirk was the
general partner and owned, at the time of completion of the Merger, a 31.0% general partner
interest in the MLP. In connection with the Merger, Lexington Corporate Properties Trust changed
its name to Lexington Realty Trust, the MLP was renamed The Lexington Master Limited Partnership
and one of our wholly-owned subsidiaries became the sole general partner of the MLP and another one
of our wholly-owned subsidiaries became the holder of a 31.0% limited partner interest in the MLP.
In the Merger, Newkirk merged with and into us, with us as the surviving entity. Each holder
of Newkirk’s common stock received 0.80 of our common shares in exchange for each share of
Newkirk’s common stock, and the MLP effected a reverse unit-split pursuant to which each
outstanding unit of limited partnership in the MLP, which we refer to as an MLP Unit, was converted
into 0.80 MLP units. Each MLP unit, other than the MLP units held directly or indirectly by us, is
either currently redeemable or in the future will be redeemable at the option of the holder for
cash based on the value of one of our common shares or, if we elect, on a one-for-one basis for our
common shares.
1
In addition to our common shares, we have four outstanding classes of beneficial interests
classified as preferred stock, which we refer to as preferred shares: 8.05% Series B Cumulative
Redeemable Preferred Stock, which we refer to as our Series B Preferred Shares, 6.50% Series C
Cumulative Convertible Preferred Stock, which we refer to as our Series C Preferred Shares, 7.55%
Series D Cumulative Redeemable Preferred Stock, which we refer to as our Series D Preferred Shares,
and special voting preferred stock. Our common shares, Series B Preferred Shares, Series C
Preferred Shares and Series D Preferred Shares are traded on the New York Stock Exchange under the
symbols “LXP”, “LXP_pb”, “LXP_pc” and “LXP_pd”, respectively.
We elected to be taxed as a REIT under Sections 856 through 860 of the Internal Revenue Code
of 1986, as amended, which we refer to as the Code, commencing with our taxable year ended December
31, 1993. If we qualify for taxation as a REIT, we generally will not be subject to federal
corporate income taxes on our net income that is currently distributed to shareholders.
Following the completion of the Merger, we had ownership interests in approximately 365
properties, located in 44 states and The Netherlands and containing an aggregate of approximately
58.9 million net rentable square feet of space, approximately 97.5% of which is subject to a lease.
In addition, Lexington Realty Advisors, Inc., which we refer to as LRA, one of our wholly-owned
taxable REIT subsidiaries, manages two properties for an unaffiliated third party.
We have diversified our portfolio by geographical location, tenant industry segment, lease
term expiration and property type with the intention of providing steady internal growth with low
volatility. We believe that this diversification should help insulate us from regional recession,
industry specific downturns and price fluctuations by property type. For the year ended December
31, 2006, our ten largest tenants/guarantors, which occupied 38 of our properties, represented
30.1% of our trailing twelve month base rental revenue, including our proportionate share of base
rental revenue from non-consolidated entities, properties held for sale and properties sold through
the respective date of sale. As of December 31, 2005 and 2004, our ten largest tenants/guarantors
represented 30.4% and 34.2% of our trailing twelve month base rental revenue, respectively,
including our proportionate share of base rental revenue from non-consolidated entities, properties
held for sale and properties sold through date of sale. In 2006, 2005 and 2004, no tenant/guarantor
represented greater than 10% of our annual base rental revenue.
Objectives and Strategy
We grow our portfolio through (i) strategic transactions with other real estate investment
companies, (ii) acquisitions of individual properties and portfolios of properties from: (A)
corporations and other entities in sale/leaseback transactions; (B) developers of newly-constructed
properties built to suit the needs of a corporate tenant; and (C) sellers of properties subject to
an existing lease, (iii) debt investments secured by real estate assets and (iv) the building and
acquisition of new business lines and operating platforms.
As part of our ongoing business efforts, we expect to continue to (i) effect strategic
transactions and portfolio and individual property acquisitions and dispositions, (ii) explore new
business lines and operating platforms, (iii) expand existing properties, (iv) execute new leases
with investment grade and other quality tenants, (v) extend lease maturities in advance of
expiration and (vi) refinance outstanding indebtedness when advisable. Additionally, we expect to
continue to enter into joint ventures with third-party investors as a means of creating additional
growth and expanding the revenue realized from advisory and asset management activities.
Acquisition Strategies
We seek to enhance our net lease property portfolio through acquisitions of debt and equity
interests in general purpose, efficient, well-located properties in growing markets. Prior to
effecting any acquisitions, we analyze the (i) property’s design, construction quality, efficiency,
functionality and location with respect to the immediate sub-market, city and region; (ii) lease
integrity with respect to term, rental rate increases, corporate guarantees and property
maintenance provisions; (iii) present and anticipated conditions in the local real estate market;
and (iv) prospects for selling or re-leasing the property on favorable terms in the event of a
vacancy. We also evaluate each potential tenant’s financial strength, growth prospects, competitive
position within its respective industry and a property’s strategic location and function within a
tenant’s operations or distribution systems. We believe that our comprehensive underwriting process
is critical to the assessment of long-term profitability of any investment by us.
Strategic Transactions with Other Real Estate Investment Companies. We seek to capitalize on
the unique investment experience of our executive management team as well as its network of
relationships in the industry to achieve outstanding risk-adjusted yields through strategic
transactions. Our strategic initiatives involve the acquisitions of assets across the full spectrum
of single-tenant investing through participation at various levels of the capital structure.
Accordingly, we endeavor to pursue the acquisition of portfolios of opportunistic assets,
significant equity interests in other single-tenant companies including through mergers and
acquisitions activity, and participation in strategic partnerships and joint ventures both
domestically and abroad.
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Acquisitions of Portfolio and Individual Net Lease Properties. We seek to acquire portfolio
and individual properties from: (A) creditworthy corporations
and other entities in sale/leaseback
transactions for properties that are integral to the sellers’/tenants’ ongoing operations,
(B) developers of newly-constructed properties built to suit the needs of a corporate tenant generally
after construction has been completed to avoid the risks associated with the construction phase of
a project, and (C) sellers of properties subject to an existing lease. We believe there is
significantly less competition for the acquisition of property portfolios containing a number of
net leased properties located in more than one geographic region. We also believe that our
geographical diversification, acquisition experience and access to capital will allow us to compete
effectively for the acquisition of such net leased properties.
Debt Investments. We seek to acquire senior and subordinated debt interests secured by both
net-leased and multi-tenanted real estate collateral. In addition to several mortgage notes owned
by us, the MLP holds a 50.0% interest in a joint venture, Concord Debt Holdings LLC, which recently
closed its first collateralized debt obligation, which we refer to as the CDO offering. The MLP’s
joint venture partner and holder of the other 50% interest is Winthrop Realty Trust, which we refer
to as Winthrop, a REIT listed on the NYSE. Our Executive Chairman, Michael L. Ashner, is the
Chairman and Chief Executive Officer of Winthrop. An aggregate of $377 million of investment
grade-related debt was issued in the CDO offering and the joint venture retained an equity
investment in the portfolio with a notional amount of $88 million. The MLP anticipates that the
joint venture will significantly expand its operations in the foreseeable future.
Competition
Through our predecessor entities we have been in the net lease business for over 30 years.
Over this period, we have established close relationships with a large number of major corporate
tenants, which has enabled us to maintain a broad network of contacts including developers, brokers
and lenders. In addition, our management is associated with and/or participates in many industry
organizations. Notwithstanding these relationships, there are numerous commercial developers, real
estate companies, financial institutions and other investors with greater financial resources that
compete with us in seeking properties for acquisition and tenants who will lease space in these
properties. Our competitors include other REITs, pension funds, private companies and individuals.
Operating Partnership Structure
We are structured as an umbrella partnership REIT, or UPREIT, and a substantial portion of our
business is conducted through our four operating partnership subsidiaries: the MLP, Lepercq
Corporate Income Fund L.P., Lepercq Corporate Income Fund II L.P. and Net 3 Acquisition L.P. We
refer to these subsidiaries as our operating partnerships and to limited partnership interests in
these operating partnerships as OP units. The operating partnership structure enables us to acquire
properties through our operating partnerships by issuing to a property owner, as a form of
consideration in exchange for the property, OP units. The OP units are redeemable, after certain
dates, for our common shares or cash in certain instances. We believe that this structure
facilitates our ability to raise capital and to acquire portfolio and individual properties by
enabling us to structure transactions which may defer tax gains for a contributor of property. In
addition to the MLP Units, during 2006, one of our operating partnerships issued 33,954 OP units
(having a value of $0.8 million at issuance) as partial consideration in an acquisition of a
property. During 2005, one of our operating partnerships issued 352,244 OP units in exchange for
all of the outstanding partnership interests in Westport View Corporate Center L.P., a Delaware
limited partnership and the beneficiary of an escrow account with a qualified intermediary holding
$7.7 million in remaining cash proceeds from the sale of an investment property. As of December 31,
2006, there were 41,191,115 OP units outstanding, other than OP units held directly or indirectly
by us.
Co-Investment Programs
Lexington Acquiport Company, LLC. In 1999, we entered into a joint venture agreement with The
Comptroller of the State of New York as Trustee of the Common Retirement Fund, which we refer to as
CRF. The joint venture entity, Lexington Acquiport Company, LLC, which we refer to as LAC, was
created to acquire high quality office and industrial real estate properties net leased to
investment and non-investment grade single tenant users. We committed to make equity contributions
to LAC of up to $50.0 million and CRF committed to make equity
contributions to LAC of up to $100.0 million. These commitments have been satisfied and no more investments will be made by LAC unless
to complete a tax-free exchange.
LRA has a management agreement with LAC and a separate partnership owned by us and CRF whereby
LRA performs certain services for a fee relating to the acquisition and management of the
investments owned by LAC and the separate partnership.
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Lexington Acquiport Company II, LLC. In December 2001, we entered into a second joint venture
agreement with CRF. The joint venture entity, Lexington Acquiport Company II, LLC, which we refer
to as LAC II, was created to make the same investments as LAC. We have committed to make equity
contributions to LAC II of up to $50.0 million and CRF has committed to make equity contributions
to LAC II of up to $150.0 million. As of December 31, 2006, an aggregate of $135.1 million of these
commitments had been funded.
LRA has a management agreement with LAC II whereby LRA performs certain services for a fee
relating to the acquisition and management and direct placement of all mortgage debt. LAC II did
not acquired any properties in 2006.
We are required to first offer to LAC II 50% of our opportunities to acquire office and
industrial properties generally requiring a minimum investment of $15.0 million, which are net
leased primarily to investment grade tenants for a minimum term of ten years, are available for
immediate delivery and satisfy other specified investment criteria. Only if CRF elects not to
approve LAC II’s pursuit of an acquisition opportunity may we pursue the opportunity directly.
Lexington/Lion Venture L.P. In October 2003, we entered into a joint venture agreement with
Clarion Lion Properties Fund through two of its subsidiaries, which we collectively refer to as
Clarion. The joint venture entity, Lexington/Lion Venture L.P., which we refer to as LION, was
created to acquire high quality single tenant office, industrial and retail properties net leased
to investment and non-investment grade tenants. We initially committed to make equity contributions
to LION of up to $30.0 million and Clarion initially committed to make equity contributions to LION
of up to $70.0 million. In 2004, each of us and Clarion increased our equity commitment by $25.7
million and $60.0 million, respectively. These commitments have been satisfied and no additional
properties will be acquired unless both parties agree. During 2006, LION made one acquisition for a
capitalized cost of $28.4 million, of which $18.4 million was funded through the procurement of a
non-recourse mortgage, which bears interest at a fixed rate of 6.1% and matures in 2016.
LRA has a management agreement with LION whereby LRA performs certain services for a fee
relating to acquisition, financing and management of LION’s investments.
Triple Net Investment Company LLC. In June 2004, we entered into a joint venture agreement
with the Utah State Retirement Investment Fund, which we refer to as Utah. The joint venture
entity, Triple Net Investment Company LLC, which we refer to as TNI, was created to acquire high
quality single tenant office and industrial properties net leased to non-investment grade tenants;
however, TNI has acquired retail properties. We initially committed to fund equity contributions to
TNI of up to $15.0 million and Utah initially committed to fund equity contributions to TNI of up
to $35.0 million. In December 2004, each of us and Utah increased our equity commitment by $21.4
million and $50.0 million, respectively. As of December 31, 2006, an aggregate of $86.9 million of
these commitments had been funded. During 2006, TNI made one acquisition for a capitalized cost of
$13.5 million, of which $9.5 million was funded through the procurement of a non-recourse mortgage,
which bears interest at a fixed rate of 5.9% and matures in 2018.
LRA has a management agreement with TNI whereby LRA performs certain services for a fee
relating to acquisition, financing and management of TNI’s investments.
We are required to first offer to Utah all of our opportunities (other than the opportunities
we are required to offer LAC II) to acquire office and industrial properties requiring a minimum
investment of $8.0 million to $30.0 million, which are net leased to non-investment grade tenants
for a minimum term of at least nine years, are generally available for immediate delivery and
satisfy other specified investment criteria. Only if Utah elects and any overlapping co-investment
program with a similar exclusively right elects, not to approve TNI’s pursuit of an acquisition
opportunity may we pursue the opportunity directly.
Lexington Columbia L.L.C. In 1999, we formed a joint venture, Lexington Columbia L.L.C., which
we refer to as Lex Columbia, with a third party to own a property net leased to Blue Cross Blue
Shield of South Carolina, Inc. We hold a 40% interest in Lex Columbia. LRA has a management
agreement with Lex Columbia whereby LRA performs certain services for a fee relating to the
ownership and management of the property owned by Lex Columbia.
Oklahoma City, Oklahoma TIC. In 2005, we sold to a third party, at cost, a 60% tenancy in
common interest in our Oklahoma City, Oklahoma property net leased primarily to AT&T Wireless
Services Inc., which we acquired during 2005, for $4.0 million in cash and the assumption of $8.8
million in non-recourse mortgage debt. LRA has a management agreement with the tenancy in common,
whereby LRA performs certain services for a fee relating to the ownership and management of the
property.
4
Lexington Strategic Asset Corp. In October 2005, we contributed four properties (three of
which were subject to non-recourse mortgages aggregating $21.3 million) to Lexington Strategic
Asset Corp., which we refer to as LSAC, in exchange for approximately 3.3 million shares of common
stock of LSAC valued at $10.00 per share. In addition, LSAC sold in its initial private offering,
6.7 million shares of common stock, at $10.00 per share, generating net proceeds, after offering
costs and expenses, of $61.6 million. Due to our ownership percentage (approximately 32% of the
fully diluted outstanding shares of common stock) in LSAC, our investment in LSAC was accounted for
under the equity method until November 1, 2006. During 2006, we purchased directly from third party
stockholders approximately 4.6 million common shares of LSAC, at $9.30 per share, which increased
our ownership to approximately 76% of the fully diluted outstanding shares of common stock as of December 31,
2006. Due to this increased ownership percentage, LSAC became a consolidated entity as of November
1, 2006.
LRA earns an advisory fee from LSAC for performing day-to-day management duties for LSAC. In
addition, LRA is entitled to receive incentive distributions upon LSAC exceeding certain
performance thresholds. Certain of our officers were granted the right to 40% of the incentive
distributions earned by LRA. As of December 31, 2006, no incentive distributions have been earned.
Also, these officers purchased an aggregate of (A) 220,000 shares of common stock of LSAC for $0.1
million at LSAC’s formation in August of 2005 and (B) 100,000 shares of common stock for $1.0
million in LSAC’s initial private offering.
During 2006, LSAC acquired eight properties for an aggregate capitalized cost of $82.5 million
and obtained $62.0 million in non-recourse mortgages, which bear interest at a fixed
weighted-average rate of 6.1% and mature between 2016 and 2021. During 2005, LSAC acquired two
properties for an aggregate capitalized cost of $25.0 million. In addition, LSAC obtained a $10.1
million non-recourse mortgage note, secured by one of the properties contributed by us, which bears
interest at a fixed rate of 5.5% and matures in 2020.
We adopted a conflicts policy with respect to LSAC. Under the conflicts policy we are required
to first offer to LSAC, subject to the first offer rights of LAC II and TNI, all of our
opportunities to acquire (i) general purpose real estate net leased to unrated or below investment
grade credit tenants, (ii) net leased special purpose real estate located in the United States,
such as medical buildings, theaters, hotels and auto dealerships, (iii) net leased properties
located in the Americas outside of the United States with rent payments denominated in United
States dollars which are typically leased to U.S. companies, (iv) specialized facilities in the
United States supported by net leases or other contracts where a significant portion of the
facility’s value is in equipment or other improvements, such as power generation assets and cell
phone towers, and (v) net leased equipment and major capital assets that are integral to the
operations of LSAC’s tenants and LSAC’s real estate investments. To the extent that a specific
investment opportunity, which is not otherwise subject to a first offer obligation to LAC II or
TNI, is determined to be suitable to us and LSAC, the investment opportunity will be allocated to
LSAC. Where full allocation to LSAC is not reasonably practicable (for example, if LSAC does not
have sufficient capital), we may allocate a portion of the investment to ourselves after
determining in good faith that such allocation is fair and reasonable. We will apply the foregoing
allocation procedures between LSAC and any investment funds or programs, companies or vehicles or
other entities that we control which have overlapping investment objectives with LSAC.
Internal Growth; Effectively Managing Assets
Tenant Relations and Lease Compliance. We maintain close contact with our tenants in order to
understand their future real estate needs. We monitor the financial, property maintenance and other
lease obligations of our tenants through a variety of means, including periodic reviews of
financial statements and physical inspections of the properties. We perform annual inspections of
those properties where we have an ongoing obligation with respect to the maintenance of the
property. Biannual physical inspections are generally undertaken for all other properties.
Extending Lease Maturities. We, including through non-consolidated entities, seek to extend
our leases in advance of their expiration in order to maintain a balanced lease rollover schedule
and high occupancy levels. During 2006, we entered into nine lease extensions for leases scheduled
to expire at various dates ranging from 2006 to 2008, for an average 2.8 years and 6 leases
(expiring at various dates ranging from 2011 to 2021) for vacant space.
Revenue Enhancing Property Expansions. We undertake expansions of our properties based on
tenant requirements or marketing opportunities. We believe that selective property expansions can
provide us with attractive rates of return and actively seek such opportunities.
Property Sales. Subject to regulatory requirements, we sell properties when we believe that
the return realized from selling a property will exceed the expected return from continuing to hold
such property.
5
Access to Capital and Refinancing Existing Indebtedness
Capital Markets. On December 31, 2006, we completed the Merger and issued approximately 16.0
million common shares valued at $332.1 million and assumed $2.0 billion in liabilities and minority
interests.
In February 2007, we completed an offering of 6.2 million Series D Preferred Shares, at $25
per share and a dividend rate of 7.55%, raising net proceeds of $150.0 million.
During 2005, we completed a common share offering of 2.5 million shares, raising aggregate net
proceeds of $60.7 million. During 2005, we issued 400,000 Series C Preferred Shares, in connection
with the exercise of an underwriters over-allotment option, at $50 per share and a dividend rate of
6.50%, raising net proceeds of $19.5 million.
Non-Recourse Mortgage Financing. During 2006, in addition to the Merger, we, including through
non-consolidated entities, obtained $215.3 million in non-recourse mortgage financings on
properties at a fixed weighted average interest rate of 6.0%. The proceeds of the financings were
used to partially fund acquisitions.
In January 2007, the MLP issued $300.0 million in 5.45% guaranteed exchangeable notes due in
2027, which can be put by the holder every five years commencing 2012. The net proceeds of $292.7
were used to repay indebtedness under the MLP’s secured loan.
During 2005, we, including through non-consolidated entities, obtained $840.3 million in
non-recourse mortgage financings on properties at a fixed weighted average interest rate of 5.2%.
The proceeds of the financings were used to partially fund acquisitions.
Credit Facility. During 2005, we replaced our $100.0 million unsecured revolving credit
facility with a new $200.0 million unsecured revolving credit facility, which bears interest at a
rate of LIBOR plus 120-170 basis points depending on our leverage (as defined in the credit
facility) and matures in June 2008. The credit facility contains customary financial covenants,
including restrictions on the level of indebtedness, amount of variable rate debt to be borrowed
and net worth maintenance provisions. As of December 31, 2006, we were in compliance with all
covenants and $65.2 million was outstanding, $133.0 million was available to be borrowed and $1.8
million in letters of credit were outstanding under the credit facility.
The MLP has a secured loan, which bears interest at the election of the MLP at a rate equal to
either (i) LIBOR plus 175 basis points or (ii) the prime rate. As of December 31, 2006, $547.2
million was outstanding under the secured loan. The secured loan is
scheduled to mature in August 2008, subject to two one year extensions. The secured loan requires monthly payments of
interest and quarterly principal payments of approximately $1.9 million during the term of the
secured loan, increasing to $2.5 million per quarter during the extension periods. The MLP is also
required to make principal payments from the proceeds of property sales, refinancing and other
asset sales if proceeds are not reinvested into net leased properties. The required principal
payments are based on a minimum release price set forth in the secured loan agreement for property
sales and 100% of proceeds from refinancing, economic discontinuance, insurance settlements and
condemnations. The secured loan has customary covenants which the MLP was in compliance with at
December 31, 2006.
Common Share Repurchases. In November 2005, our Board of Trustees approved the repurchase of
up to 2.0 million common shares/OP units under a share repurchase program. During 2006,
approximately 0.5 million common shares/OP units were repurchased at an average cost of $21.15 per share, in
the open market and through private transactions with our employees.
Advisory Contracts
In addition to the contracts discussed above, in August 2000, LRA entered into an advisory and
asset management agreement to invest and manage an equity commitment of up to $50.0 million on
behalf of a private third party investment fund. The investment fund could, depending on leverage
utilized, acquire up to $140.0 million in single tenant, net leased office, industrial and retail
properties in the United States. LRA earns acquisition fees (90 basis points of total acquisition
costs), annual asset management fees (30 basis points of gross asset value) and a promoted interest
of 16% of the return in excess of an internal rate of return of 10% earned by the investment fund.
The investment fund made no purchases in 2006 or 2005.
The MLP entered into an agreement with a third party in which the MLP will pay the third party
for properties acquired in which the third party serves as the identifying party (i) 1.5% of the
gross purchase price and (ii) 25% of the net proceeds and net cash flow
6
(as defined) after the MLP receives all its invested capital plus a 12% internal rate of
return. As a December 31, 2006, only one property has been acquired subject to these terms.
Other
Environmental Matters. Under various federal, state and local environmental laws, statutes,
ordinances, rules and regulations, an owner of real property may be liable for the costs of removal
or remediation of certain hazardous or toxic substances at, on, in or under such property as well
as certain other potential costs relating to hazardous or toxic substances. These liabilities may
include government fines and penalties and damages for injuries to persons and adjacent property.
Such laws often impose liability without regard to whether the owner knew of, or was responsible
for, the presence or disposal of such substances. Although generally our tenants are primarily
responsible for any environmental damage and claims related to the leased premises, in the event of
the bankruptcy or inability of a tenant of such premises to satisfy any obligations with respect to
such environmental liability, we may be required to satisfy such obligations. In addition, as the
owner of such properties, we may be held directly liable for any such damages or claims
irrespective of the provisions of any lease.
From time to time, in connection with the conduct of our business, we authorize the
preparation of Phase I and, when necessary, Phase II environmental reports with respect to our
properties. Based upon such environmental reports and our ongoing review of our properties, as of
the date of this Annual Report, we are not aware of any environmental condition with respect to any
of our properties which we believe would be reasonably likely to have a material adverse effect on
our financial condition and/or results of operations. There can be no assurance, however, that (i)
the discovery of environmental conditions, the existence or severity of which were previously
unknown, (ii) changes in law, (iii) the conduct of tenants or (iv) activities relating to
properties in the vicinity of our properties, will not expose us to material liability in the
future. Changes in laws increasing the potential liability for environmental conditions existing on
properties or increasing the restrictions on discharges or other conditions may result in
significant unanticipated expenditures or may otherwise adversely affect the operations of our
tenants, which would adversely affect our financial condition and/or results of operations.
Employees. As of December 31, 2006, we had 56 full-time employees.
Industry Segments. We operate in one industry segment, investment in net leased real
properties.
Web
Site. Our Internet address is www.lxp.com and the investor relations section of our
web site is located at http://phx.corporate-ir.net/phoenix.zhtml?c=88679&p=irol-irhome. We
make available free of charge, on or through the investor relations section of our web site, annual
reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K and amendments
to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange
Act of 1934, as well as proxy statements, as soon as reasonably practicable after we electronically
file such material with, or furnish it to, the U.S. Securities and Exchange Commission, which we
refer to as the SEC. Also posted on our web site, and available in print upon request of any
shareholder to our Investor Relations Department, are our amended and restated declaration of trust
and amended and restated by-laws, charters for our Audit Committee, Compensation Committee, and
Nominating and Corporate Governance Committee, our Corporate Governance Guidelines, our Code of
Business Conduct and Ethics governing our trustees, officers and employees, our Complaint
Procedures Regarding Accounting and Auditing Matters and our Policy on Disclosure Controls. Within
the time period required by the SEC and the New York Stock Exchange, we will post on our web site
any amendment to the Code of Business Conduct and Ethics and any waiver applicable to any of our
trustees or executive officers. In addition, our web site includes information concerning purchases
and sales of our equity securities by our executive officers and trustees, as well as disclosure
relating to certain non-GAAP financial measures (as defined in the SEC’s Regulation G) that we may
make public orally, telephonically, by webcast, by broadcast or by similar means from time to time.
Our Investor Relations Department can be contacted at Lexington Realty Trust, One Penn Plaza,
Suite 4015, New York, New York 10119-4015, Attn: Investor Relations, telephone: 212-692-7200,
e-mail: ir@lxp.com.
Principal Executive Offices. Our principal executive offices are located at One Penn Plaza,
Suite 4015, New York, New York 10119-4015; our telephone number is (212) 692-7200. We also maintain
regional offices in Chicago, Illinois, Dallas, Texas and Boston, Massachusetts.
NYSE CEO Certification. Our Chief Executive Officer made an unqualified certification to the
New York Stock Exchange with respect to our compliance with the New York Stock Exchange corporate
governance listing standards in June 2006.
7
Item 1A. Risk Factors
Set forth below are material factors that may adversely affect our business and operations.
All references to the “Company,” “we,” “our” and “us” in this Item 1A mean Lexington Realty Trust
and all entities owned by us, including non-consolidated entities, except where it is made clear
that the term means only the parent company.
We are subject to risks involved in single tenant leases.
We focus our acquisition activities on real properties that are net leased to single tenants.
Therefore, the financial failure of, or other default by, a single tenant under its lease is likely
to cause a significant reduction in the operating cash flow generated by the property leased to
that tenant and might decrease the value of that property.
In March 2006, Dana Corporation, which we refer to as Dana, a tenant in 11 of our properties
(including non-consolidated entities), filed for Chapter 11 bankruptcy. Dana succeeded on motions
to reject leases on two of our properties and those of a non-consolidated entity and has affirmed
the nine other leases. During the second quarter of 2006, we recorded an impairment charge of $1.1
million and accelerated amortization of an above-market lease of $2.3 million, relating to the
write-off of lease intangibles and the above market lease for the disaffirmed lease of a
consolidated property. During the fourth quarter of 2006, we recorded an additional impairment
charge of approximately $6.1 million relating to this property. In addition, our proportionate
share from a non-consolidated entity of the impairment charge and accelerated amortization of an
above-market lease for a disaffirmed lease was $0.6 million and $1.4 million, respectively. In
addition, we sold our bankruptcy claim (including our interest through a non-consolidated entity)
related to the two rejected leases for approximately $7.1 million, which resulted in a gain of $6.9
million.
We rely on revenues derived from major tenants.
Revenues from several of our tenants and/or their guarantors constitute a significant
percentage of our base rental revenues. As of December 31, 2006, our 10 largest tenants/guarantors,
which occupied 38 properties, represented approximately 30.1% of our base rental revenue for the
year ended December 31, 2006, including our proportionate share of base rental revenue from
non-consolidated entities and base rental revenue recognized from properties sold through the
respective date of sale. The default, financial distress or bankruptcy of any of the tenants of
these properties could cause interruptions in the receipt of lease revenues from these tenants
and/or result in vacancies, which would reduce our revenues and increase operating costs until the
affected property is re-let, and could decrease the ultimate sales value of that property. Upon the
expiration or other termination of the leases that are currently in place with respect to these
properties, we may not be able to re-lease the vacant property at a comparable lease rate or
without incurring additional expenditures in connection with the re-leasing.
We could become more highly leveraged, resulting in increased risk of default on our
obligations and in an increase in debt service requirements which could adversely affect our
financial condition and results of operations and our ability to pay distributions.
We have incurred, and expect to continue to incur, indebtedness in furtherance of our
activities. Neither our declaration of trust nor any policy statement formally adopted by our Board
of Trustees limits either the total amount of indebtedness or the specified percentage of
indebtedness that we may incur. Accordingly, we could become more highly leveraged, resulting in an
increased risk of default on our obligations and in an increase in debt service requirements which
could adversely affect our financial condition and results of operations and our ability to pay
distributions.
Our credit facility and the MLP’s secured loan each contain cross-default provisions to, with
respect to our credit facility, our other material indebtedness (as defined therein), and, with
respect to the MLP’s secured loan, the MLP’s other indebtedness. In the event of a default on such
other material indebtedness, the indebtedness under our credit facility or the MLP’s indebtedness
under its secured loan, as applicable, could be accelerated. Depending upon the amount of
indebtedness under our credit facility and the MLP’s secured loan, such an acceleration could have
a material adverse impact on our financial condition and results of operations. Our current credit
facility and the MLP’s secured loan also each contain various covenants which limit the amount of
secured, unsecured and variable-rate indebtedness we may incur and restricts the amount of capital
we may invest in specific categories of assets in which we may otherwise want to invest.
8
Market interest rates could have an adverse effect on our borrowing costs and net income and
can adversely affect our share price.
We have exposure to market risks relating to increases in interest rates due to our
variable-rate debt. An increase in interest rates may increase our costs of borrowing on existing
variable-rate indebtedness, leading to a reduction in our net income. As of December 31, 2006, we
had outstanding $65.2 million in variable-rate indebtedness. The $547.2 million outstanding under
the MLP’s secured loan, as of December 31, 2006, is subject to an interest rate swap agreement and
an interest rate cap agreement, which have the effect of fixing the interest rate on the
borrowings. The level of our variable-rate indebtedness, along with the interest rate associated
with such variable-rate indebtedness, may change in the future and materially affect our interest
costs and net income. In addition, our interest costs on our fixed-rate indebtedness can increase
if we are required to refinance our fixed-rate indebtedness at maturity at higher interest rates.
Furthermore, the public valuation of our common shares is related primarily to the earnings
that we derive from rental income with respect to our properties and not from the underlying
appraised value of the properties themselves. As a result, interest rate fluctuations and capital
market conditions can affect the market value of our common shares. For instance, if interest rates
rise, the market price of our common shares may decrease because potential investors seeking a
higher dividend yield than they would receive from our common shares may sell our common shares in
favor of higher rate interest-bearing securities.
We face risks associated with refinancings.
A significant number of our properties are subject to mortgage notes with balloon payments due
at maturity. As of December 31, 2006, the consolidated scheduled balloon payments for the next five
calendar years, are as follows:
| |
2007 — $0; |
|
2008 —
$631.1 million; |
|
2009 — $60.8 million; |
|
2010 — $56.6 million; and |
|
2011 — $108.7 million. |
As of December 31, 2006, the scheduled balloon payments on our joint venture real properties
for the next five calendar years were as follows:
| |
|
|
|
|
|
|
|
|
| |
|
Total |
|
Our Proportionate Share |
2007
|
|
$43.9 million
|
|
$21.9 million
|
|
|
|
|
|
|
|
|
|
2008
|
|
$0 |
|
|
|
$0 |
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
$69.0 million
|
|
$23.6 million
|
|
|
|
|
|
|
|
|
|
2010
|
|
$61.6 million
|
|
$20.5 million
|
|
|
|
|
|
|
|
|
|
2011
|
|
$67.0 million
|
|
$21.7 million
|
Our ability to make the scheduled balloon payments will depend upon the amount available under
our credit facility and our ability either to refinance the related mortgage debt or to sell the
related property.
Our ability to accomplish these goals will be affected by various factors existing at the
relevant time, such as the state of the national and regional economies, local real estate
conditions, available mortgage rates, the lease terms of the mortgaged properties, our equity in
the mortgaged properties, our financial condition, the operating history of the mortgaged
properties and tax laws. If we are unable to obtain sufficient financing to fund the scheduled
balloon payments or to sell the related property at a price that generates sufficient
proceeds to pay the scheduled balloon payments, we would lose our entire investment in the related
property.
9
On January 5, 2006, we announced that we informed the holder of the non-recourse mortgage on
one of our properties located in Milpitas, California that we will no longer make debt service
payments as a result of a vacancy caused by the expiration of the lease on this property in
December 2005. As a result of this decision, we recorded an impairment charge of approximately
$12.1 million in the fourth quarter of 2005, which was equal to the difference between this
property’s net book value (approximately $17.3 million) and our estimate of the property’s fair
market value (approximately $5.2 million). During the second quarter of 2006, the property was
conveyed to the lender in full satisfaction of the mortgage, which resulted in a gain on debt
satisfaction of $6.3 million. During the third quarter of 2006, the tenant in our Warren, Ohio
property exercised its option to purchase the property at fair market value, as defined in the
purchase agreement. We have received appraisals that estimate that the maximum fair market value,
as defined, will not exceed approximately $15.8 million. As a result of the exercise of the
purchase option, we recorded an impairment charge of $28.2 million (including $6.6 million
applicable to minority interest) in the third quarter of 2006.
We face uncertainties relating to lease renewals and re-letting of space.
Upon the expiration of current leases for space located in our properties, we may not be able
to re-let all or a portion of that space, or the terms of re-letting (including the cost of
concessions to tenants) may be less favorable to us than current lease terms. If we are unable to
re-let promptly all or a substantial portion of the space located in our properties or if the
rental rates we receive upon re-letting are significantly lower than current rates, our net income
and ability to make expected distributions to our shareholders will be adversely affected due to
the resulting reduction in rent receipts and increase in our property operating costs. There can be
no assurance that we will be able to retain tenants in any of our properties upon the expiration of
their leases.
This
risk is increased as a result of the Merger since the current lease term of many of the MLP’s
properties, including joint ventures, will expire over the next three years and the renewal rates are lower than the current
market rates. As of December 31, 2006, the MLP has 105 leases, with an estimated straight-line rent
of $107.7 million, scheduled to expire by the end of 2009.
Certain of our properties are cross-collateralized.
As of December 31, 2006, the mortgages on three sets of two properties are
cross-collateralized: (1) Canton, Ohio and Spartansburg, South Carolina leased to Best Buy Co.
Inc., (2) 730 N. Black Branch Road, Elizabethtown, Kentucky and 750 N. Black Branch Road,
Elizabethtown, Kentucky leased to Dana Corporation, and (3) Dry Ridge, Kentucky and Owensboro,
Kentucky leased to Dana Corporation. Furthermore, all properties of the MLP’s subsidiaries that are
not encumbered by property specific debt are cross-collateralized under the MLP’s secured loan and,
in addition, one set of four properties is cross-collateralized. To the extent that any of our
properties are cross-collateralized, any default by us under the mortgage note relating to one
property will result in a default under the financing arrangements relating to any other property
that also provides security for that mortgage note or is cross-collateralized with such mortgage
note.
We face possible liability relating to environmental matters.
Under various federal, state and local environmental laws, statutes, ordinances, rules and
regulations, as an owner of real property, we may be liable for the costs of removal or remediation
of certain hazardous or toxic substances at, on, in or under our properties, as well as certain
other potential costs relating to hazardous or toxic substances. These liabilities may include
government fines and penalties and damages for injuries to persons and adjacent property. These
laws may impose liability without regard to whether we knew of, or were responsible for, the
presence or disposal of those substances. This liability may be imposed on us in connection with
the activities of an operator of, or tenant at, the property. The cost of any required remediation,
removal, fines or personal or property damages and our liability therefore could exceed the value
of the property and/or our aggregate assets. In addition, the presence of those substances, or the
failure to properly dispose of or remove those substances, may adversely affect our ability to sell
or rent that property or to borrow using that property as collateral, which, in turn, would reduce
our revenues and ability to make distributions.
A property can also be adversely affected either through physical contamination or by virtue
of an adverse effect upon value attributable to the migration of hazardous or toxic substances, or
other contaminants that have or may have emanated from other properties. Although our tenants are
primarily responsible for any environmental damages and claims related to the leased premises, in
the event of the bankruptcy or inability of any of our tenants to satisfy any obligations with
respect to the property leased to that tenant, we may be required to satisfy such obligations. In
addition, we may be held directly liable for any such damages or claims irrespective of the
provisions of any lease.
10
From time to time, in connection with the conduct of our business, we authorize the
preparation of Phase I environmental reports and, when necessary, Phase II environmental reports,
with respect to our properties. Based upon these environmental reports and our ongoing review of
our properties, as of the date of this Annual Report, we are not aware of any environmental
condition with respect to any of our properties that we believe would be reasonably likely to have
a material adverse effect on us.
There can be no assurance, however, that the environmental reports will reveal all
environmental conditions at our properties or that the following will not expose us to material
liability in the future:
| |
• |
|
the discovery of previously unknown environmental conditions; |
| |
| |
• |
|
changes in law; |
| |
| |
• |
|
activities of tenants; or |
| |
| |
• |
|
activities relating to properties in the vicinity of our properties. |
Changes in laws increasing the potential liability for environmental conditions existing on
properties or increasing the restrictions on discharges or other conditions may result in
significant unanticipated expenditures or may otherwise adversely affect the operations of our
tenants, which could adversely affect our financial condition or results of operations.
Uninsured losses or a loss in excess of insured limits could adversely affect our financial
condition.
We carry comprehensive liability, fire, extended coverage and rent loss insurance on most of
our properties, with policy specifications and insured limits that we believe are customary for
similar properties. However, with respect to those properties where the leases do not provide for
abatement of rent under any circumstances, we generally do not maintain rent loss insurance. In
addition, there are certain types of losses, such as losses resulting from wars, terrorism or
certain acts of God that generally are not insured because they are either uninsurable or not
economically insurable. Should an uninsured loss or a loss in excess of insured limits occur, we
could lose capital invested in a property, as well as the anticipated future revenues from a
property, while remaining obligated for any mortgage indebtedness or other financial obligations
related to the property. Any loss of these types would adversely affect our financial condition.
Future terrorist attacks such as the attacks which occurred in New York City, Pennsylvania and
Washington, D.C. on September 11, 2001, and the military conflicts such as the military actions
taken by the United States and its allies in Afghanistan and Iraq, could have a material adverse
effect on general economic conditions, consumer confidence and market liquidity.
Among other things, it is possible that interest rates may be affected by these events. An
increase in interest rates may increase our costs of borrowing, leading to a reduction in our net
income. These types of terrorist acts could also result in significant damages to, or loss of, our
properties.
We and our tenants may be unable to obtain adequate insurance coverage on acceptable economic
terms for losses resulting from acts of terrorism. Our lenders may require that we carry terrorism
insurance even if we do not believe this insurance is necessary or cost effective. We may also be
prohibited under the applicable lease from passing all or a portion of the cost of such insurance
through to the tenant. Should an act of terrorism result in an uninsured loss or a loss in excess
of insured limits, we could lose capital invested in a property, as well as the anticipated future
revenues from a property, while remaining obligated for any mortgage indebtedness or other
financial obligations related to the property. Any loss of these types would adversely affect our
financial condition.
Competition may adversely affect our ability to purchase properties.
There are numerous commercial developers, real estate companies, financial institutions and
other investors with greater financial resources than we have that compete with us in seeking
properties for acquisition and tenants who will lease space in our properties. Due to our focus on
net lease properties located throughout the United States, and because most competitors are locally
and/or regionally focused, we do not encounter the same competitors in each market. Our competitors
include other REITs, financial institutions, insurance companies, pension funds, private companies
and individuals. This competition may result in a higher cost for properties that we wish to
purchase.
11
Our failure to maintain effective internal controls could have a material adverse effect on
our business, operating results and share price.
Section 404 of the Sarbanes-Oxley Act of 2002 requires annual management assessments of the
effectiveness of our internal controls over financial reporting and a report by our independent
registered public accounting firm addressing these assessments. If we fail to maintain the adequacy
of our internal controls, as such standards may be modified, supplemented or amended from time to
time, we may not be able to ensure that we can conclude on an ongoing basis that we have effective
internal controls over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act
of 2002. Moreover, effective internal controls, particularly those related to revenue recognition,
are necessary for us to produce reliable financial reports and to maintain our qualification as a
REIT and are important to helping prevent financial fraud. If we cannot provide reliable financial
reports or prevent fraud, our business and operating results could be harmed, our REIT
qualification could be jeopardized, investors could lose confidence in our reported financial
information, and the trading price of our shares could drop significantly.
We may have limited control over our joint venture investments.
Our joint venture investments constitute a significant portion of our assets and will
constitute a significant component of our growth strategy. Our joint venture investments may
involve risks not otherwise present for investments made solely by us, including the possibility
that our joint venture partner might, at any time, become bankrupt, have different interests or
goals than we do, or take action contrary to our instructions, requests, policies or objectives,
including our policy with respect to maintaining our qualification as a REIT. Other risks of joint
venture investments include impasse on decisions, such as a sale, because neither we nor a joint
venture partner have full control over the joint venture. Also, there is no limitation under our
organizational documents as to the amount of funds that may be invested in joint ventures.
One of the joint ventures, Concord Debt Holdings LLC, is owned equally by the MLP and a
subsidiary of Winthrop. This joint venture, which recently completed a CDO offering, is managed by
an investment committee which consists of five members, two members appointed by each of the MLP
and Winthrop (with one appointee from each of the MLP and Winthrop qualifying as “independent”) and
the fifth member appointed by FUR Holdings LLC, the primary owner of the former external advisor of
the MLP and the current external advisor of Winthrop. Each investment in excess of $20.0 million to
be made by this joint venture, as well as additional material matters, requires the consent of
three members of the investment committee appointed by the MLP and Winthrop. Accordingly, the joint
venture may not take certain actions or invest in certain assets even if the MLP believes it to be
in its best interest. Michael L. Ashner, our Executive Chairman and Director of Strategic
Transactions is also the Chairman and Chief Executive Officer of
Winthrop and managing member of FUR Holdings LLC.
Joint venture investments may conflict with our ability to make attractive investments.
Under the terms of our active joint venture with the CRF, we are required to first offer to
the joint venture 50% of our opportunities to acquire office and industrial properties requiring a
minimum investment of $15.0 million which are net leased primarily to investment grade tenants for
a minimum term of ten years, are available for immediate delivery and satisfy other specified
investment criteria.
Similarly, under the terms of our joint venture with Utah, unless 75% of Utah’s capital
commitment is funded, we are required to first offer to the joint venture all of our opportunities
to acquire certain office, bulk warehouse and distribution properties requiring an investment of
$8.0 million to $30.0 million which are net leased primarily to non-investment grade tenants for a
minimum term of at least nine years and satisfy other specified investment criteria, subject also
to our obligation to first offer such opportunities to our joint venture with CRF.
Our Board of Trustees adopted a conflicts policy with respect to us and LSAC, a real estate
investment company that we advise. Under the conflicts policy, we are required to first offer to
LSAC, subject to the first offer rights of CRF and Utah, all of our opportunities to acquire: (i)
general purpose real estate net leased to unrated or below investment grade credit tenants; (ii)
net leased special purpose real estate located in the United States, such as medical buildings,
theaters, hotels and auto dealerships; (iii) net leased properties located in the Americas outside
of the United States with rent payments denominated in United States dollars with such properties
typically leased to U.S. companies; (iv) specialized facilities in the United States supported by
net leases or other contracts where a significant portion of the facility’s value is in equipment
or other improvements, such as power generation assets and cell phone towers; and (v) net leased
equipment and major capital assets that are integral to the operations of LSAC’s tenants and LSAC’s
real estate investments. To the extent that a specific investment opportunity, which is not
otherwise subject to a first offer obligation to our joint ventures with CRF or Utah, is determined
to be suitable to us and LSAC, the investment opportunity will be allocated to
12
LSAC. If full allocation to LSAC is not reasonably practicable (for example, if LSAC does not
have sufficient capital), we may allocate a portion of the investment to ourselves after
determining in good faith that such allocation is fair and reasonable. We will apply the foregoing
allocation procedures between LSAC and any investment funds or programs, companies or vehicles or
other entities that we control or which have overlapping investment objectives with LSAC.
Only if a joint venture partner elects not to approve the applicable joint venture’s pursuit
of an acquisition opportunity or the applicable exclusivity conditions have expired may we pursue
the opportunity directly. As a result of the foregoing rights of first offer, we may not be able to
make attractive acquisitions directly and may only receive an interest in such acquisitions through
our interest in these joint ventures.
Certain of our trustees and officers may face conflicts of interest with respect to sales and
refinancings.
Michael L. Ashner, E. Robert Roskind and Richard J. Rouse, our Executive Chairman, Co-Vice
Chairman, and Co-Vice Chairman and Chief Investment Officer, respectively, each own limited
partnership interests in certain of our operating partnerships, and as a result, may face different
and more adverse tax consequences than our other shareholders will if we sell certain properties or
reduce mortgage indebtedness on certain properties. Those individuals may, therefore, have
different objectives than our other shareholders regarding the appropriate pricing and timing of
any sale of such properties or reduction of mortgage debt.
Accordingly, there may be instances in which we may not sell a property or pay down the debt
on a property even though doing so would be advantageous to our other shareholders. In the event of
an appearance of a conflict of interest, the conflicted trustee or officer must recuse himself or
herself from any decision making or seek a waiver of our Code of Business Conduct and Ethics.
Our ability to change our portfolio is limited because real estate investments are illiquid.
Equity investments in real estate are relatively illiquid and, therefore, our ability to
change our portfolio promptly in response to changed conditions will be limited. Our Board of
Trustees may establish investment criteria or limitations as it deems appropriate, but currently
does not limit the number of properties in which we may seek to invest or on the concentration of
investments in any one geographic region. We could change our investment, disposition and financing
policies without a vote of our shareholders.
There can be no assurance that we will remain qualified as a REIT for federal income tax
purposes.
We believe that we have met the requirements for qualification as a REIT for federal income
tax purposes beginning with our taxable year ended December 31, 1993, and we intend to continue to
meet these requirements in the future. However, qualification as a REIT involves the application of
highly technical and complex provisions of the Internal Revenue Code of 1986, as amended (the
“Code”), for which there are only limited judicial or administrative interpretations. No assurance
can be given that we have qualified or will remain qualified as a REIT. The Code provisions and
income tax regulations applicable to REITs are more complex than those applicable to corporations.
The determination of various factual matters and circumstances not entirely within our control may
affect our ability to continue to qualify as a REIT. In addition, no assurance can be given that
legislation, regulations, administrative interpretations or court decisions will not significantly
change the requirements for qualification as a REIT or the federal income tax consequences of such
qualification. If we do not qualify as a REIT, we would not be allowed a deduction for
distributions to shareholders in computing our net taxable income. In addition, our income would be
subject to tax at the regular corporate rates. We also could be disqualified from treatment as a
REIT for the four taxable years following the year during which qualification was lost. Cash
available for distribution to our shareholders would be significantly reduced for each year in
which we do not qualify as a REIT. In that event, we would not be required to continue to make
distributions. Although we currently intend to continue to qualify as a REIT, it is possible that
future economic, market, legal, tax or other considerations may cause us, without the consent of
the shareholders, to revoke the REIT election or to otherwise take action that would result in
disqualification.
Distribution requirements imposed by law limit our flexibility.
To maintain our status as a REIT for federal income tax purposes, we are generally required to
distribute to our shareholders at least 90% of our taxable income for that calendar year. Our
taxable income is determined without regard to any deduction for dividends paid and by excluding
net capital gains. To the extent that we satisfy the distribution requirement, but distribute less
than 100% of our taxable income, we will be subject to federal corporate income tax on our
undistributed income. In addition, we will incur a 4% nondeductible excise tax on the amount, if
any, by which our distributions in any year are less than the sum of (i) 85% of our ordinary income
for that year, (ii) 95% of our capital gain net income for that year and (iii) 100% of our
undistributed taxable income from prior years. We intend to continue to make distributions to our
shareholders to comply with the distribution requirements
13
of the Code and to reduce exposure to federal income and nondeductible excise taxes.
Differences in timing between the receipt of income and the payment of expenses in determining our
income and the effect of required debt amortization payments could require us to borrow funds on a
short-term basis in order to meet the distribution requirements that are necessary to achieve the
tax benefits associated with qualifying as a REIT.
Certain limitations limit a third party’s ability to acquire us or effectuate a change in our
control.
Limitations imposed to protect our REIT status. In order to protect us against the loss of our
REIT status, our declaration of trust limits any shareholder from owning more than 9.8% in value of
any class of our outstanding shares, subject to certain exceptions. The ownership limit may have
the effect of precluding acquisition of control of us.
Severance payments under employment agreements. Substantial termination payments may be
required to be paid under the provisions of employment agreements with certain of our executives
upon a change of control. We have entered into employment agreements with seven of our executive
officers which provide that, upon the occurrence of a change in control of us (including a change
in ownership of more than 50% of the total combined voting power of our outstanding securities, the
sale of all or substantially all of our assets, dissolution, the acquisition, except from us, of
20% or more of our voting shares or a change in the majority of our Board of Trustees), those
executive officers would be entitled to severance benefits based on their current annual base
salaries and recent annual bonuses, as defined in the employment agreements. The provisions of
these agreements could deter a change of control of us. Accordingly, these payments may discourage
a third party from acquiring us.
Limitation due to our ability to issue preferred shares. Our declaration of trust authorizes
the Board of Trustees to issue preferred shares, without shareholder approval. The Board of
Trustees is able to establish the preferences and rights of any preferred shares issued which could
have the effect of delaying or preventing someone from taking control of us, even if a change in
control were in shareholders’ best interests. As of the date of this Annual Report, we had
outstanding 3,160,000 Series B Preferred Shares that we issued in June 2003, 3,100,000 Series C
Preferred Shares that we issued in December 2004 and January 2005, 6,200,000 Series D Preferred
Shares that we issued in February 2007, and one share of our special voting preferred stock that we
issued in December 2006 in connection with the Merger. Our Series B, Series C and Series D
Preferred Shares and our special voting preferred stock include provisions that may deter a change
of control. The establishment and issuance of shares of our existing series of preferred shares or
a future series of preferred shares could make a change of control of us more difficult.
Limitation imposed by the Maryland Business Combination Act. The Maryland General Corporation
Law, as applicable to Maryland REITs, establishes special restrictions against “business
combinations” between a Maryland REIT and “interested shareholders” or their affiliates unless an
exemption is applicable. An interested shareholder includes a person who beneficially owns, and an
affiliate or associate of the trust who, at any time within the two-year period prior to the date
in question, was the beneficial owner of 10% or more of the voting power of our then-outstanding
voting shares, but a person is not an interested shareholder if the Board of Trustees approved in
advance the transaction by which he otherwise would have been an interested shareholder. Among
other things, Maryland law prohibits (for a period of five years) a merger and certain other
transactions between a Maryland REIT and an interested shareholder. The five-year period runs from
the most recent date on which the interested shareholder became an interested shareholder.
Thereafter, any such business combination must be recommended by the Board of Trustees and approved
by two super-majority shareholder votes unless, among other conditions, the common shareholders
receive a minimum price for their shares and the consideration is received in cash or in the same
form as previously paid by the interested shareholder for its shares. The statute permits various
exemptions from its provisions, including business combinations that are exempted by the Board of
Trustees prior to the time that the interested shareholder becomes an interested shareholder. The
business combination statute could have the effect of discouraging offers to acquire us and of
increasing the difficulty of consummating any such offers, even if such acquisition would be in
shareholders’ best interests. In connection with our merger with Newkirk, certain holders of MLP
securities were granted a limited exemption from the definition of “interested shareholder.”
Maryland Control Share Acquisition Act. Maryland law provides that “control shares” of a
Maryland REIT acquired in a “control share acquisition” shall have no voting rights except to the
extent approved by a vote of two-thirds of the vote entitled to be cast on the matter under the
Maryland Control Share Acquisition Act. Shares owned by the acquiror, by our officers or by
employees who are our trustees are excluded from shares entitled to vote on the matter. “Control
Shares” means shares that, if aggregated with all other shares previously acquired by the acquiror
or in respect of which the acquiror is able to exercise or direct the exercise of voting power
(except solely by virtue of a revocable proxy), would entitle the acquiror to exercise voting power
in electing trustees within one of the following ranges of voting power: one-tenth or more but less
than one-third, one-third or more but less than a majority or a majority or more of all voting
power. Control shares do not include shares the acquiring person is then entitled to vote as a
result of having previously obtained shareholder approval. A “control share acquisition” means the
acquisition of control shares, subject to certain
14
exceptions. If voting rights of control shares acquired in a control share acquisition are not
approved at a shareholders’ meeting, then subject to certain conditions and limitations the issuer
may redeem any or all of the control shares for fair value. If voting rights of such control shares
are approved at a shareholders’ meeting and the acquiror becomes entitled to vote a majority of the
shares entitled to vote, all other shareholders may exercise appraisal rights. Any control shares
acquired in a control share acquisition which are not exempt under our by-laws will be subject to
the Maryland Control Share Acquisition Act. Our by-laws contain a provision exempting from the
Maryland Control Share Acquisition Act any and all acquisitions by any person of our shares. We
cannot assure you that this provision will not be amended or eliminated at any time in the future.
Limits on ownership of our capital shares may have the effect of delaying, deferring or
preventing someone from taking control of us.
For us to qualify as a REIT for federal income tax purposes, among other requirements, not
more than 50% of the value of our outstanding capital shares may be owned, directly or indirectly,
by five or fewer individuals (as defined for federal income tax purposes to include certain
entities) during the last half of each taxable year, and these capital shares must be beneficially
owned by 100 or more persons during at least 335 days of a taxable year of 12 months or during a
proportionate part of a shorter taxable year (in each case, other than the first such year for
which a REIT election is made). Our declaration of trust includes certain restrictions regarding
transfers of our capital shares and ownership limits.
Actual or constructive ownership of our capital shares in excess of the share ownership limits
contained in its declaration of trust would cause the violative transfer or ownership to be void or
cause the shares to be transferred to a charitable trust and then sold to a person or entity who
can own the shares without violating these limits. As a result, if a violative transfer were made,
the recipient of the shares would not acquire any economic or voting rights attributable to the
transferred shares. Additionally, the constructive ownership rules for these limits are complex and
groups of related individuals or entities may be deemed a single owner and consequently in
violation of the share ownership limits.
These restrictions and limits may not be adequate in all cases, however, to prevent the
transfer of our capital shares in violation of the ownership limitations. The ownership limits
discussed above may have the effect of delaying, deferring or preventing someone from taking
control of us, even though a change of control could involve a premium price for the common shares
or otherwise be in shareholders’ best interests.
Legislative or regulatory tax changes could have an adverse effect on us.
At any time, the federal income tax laws governing REITs or the administrative interpretations
of those laws may be amended. Any of those new laws or interpretations may take effect
retroactively and could adversely affect us or you as a shareholder. REIT dividends generally are
not eligible for the reduced rates currently applicable to certain corporate dividends (unless
attributable to dividends from LSAC and other taxable REIT subsidiaries and otherwise eligible for
such rates). As a result, investment in non-REIT corporations may be relatively more attractive
than investment in REITs. This could adversely affect the market price of our shares.
Our Board of Trustees may change our investment policy without shareholders’ approval.
Subject to our fundamental investment policy to maintain our qualification as a REIT, our
Board of Trustees will determine its investment and financing policies, growth strategy and its
debt, capitalization, distribution, acquisition, disposition and operating policies.
Our Board of Trustees may revise or amend these strategies and policies at any time without a
vote by shareholders. Accordingly, shareholders’ control over changes in our strategies and
policies is limited to the election of trustees, and changes made by our Board of Trustees may not
serve the interests of shareholders and could adversely affect our financial condition or results
of operations, including our ability to distribute cash to shareholders or qualify as a REIT.
Our operations and the operations of Newkirk may not be integrated successfully, and the
intended benefits of the Merger may not be realized.
The Merger presents challenges to management, including the integration of our operations and
properties with those of Newkirk. The Merger also poses other risks commonly associated with
similar transactions, including unanticipated liabilities, unexpected costs and the diversion of
management’s attention to the integration of the operations of the two entities. Any difficulties
that we encounter in the transition and integration processes, and any level of integration that is
not successfully achieved, could have an adverse effect
15
on our
revenues, level of expenses and operating results. We may also experience operational
interruptions or the loss of key employees, tenants and customers. As a result, notwithstanding our
expectations, we may not realize any of the anticipated benefits or cost savings of the Merger.
Our inability to carry out our growth strategy could adversely affect our financial condition
and results of operations.
Our growth strategy is based on the acquisition and development of additional properties and
related assets, including acquisitions of large portfolios and real estate companies and
acquisitions through co-investment programs such as joint ventures. In the context of our business
plan, “development” generally means an expansion or renovation of an existing property or the
acquisition of a newly constructed property. We may provide a developer with a commitment to
acquire a property upon completion of construction of a property and commencement of rent from the
tenant. Our plan to grow through the acquisition and development of new properties could be
adversely affected by trends in the real estate and financing businesses. The consummation of any
future acquisitions will be subject to satisfactory completion of an extensive valuation analysis
and due diligence review and to the negotiation of definitive documentation. Our ability to
implement our strategy may be impeded because we may have difficulty finding new properties and
investments at attractive prices that meet our investment criteria, negotiating with new or
existing tenants or securing acceptable financing. If we are unable to carry out our strategy, our
financial condition and results of operations could be adversely affected.
Acquisitions of additional properties entail the risk that investments will fail to perform in
accordance with expectations, including operating and leasing expectations. Redevelopment and new
project development are subject to numerous risks, including risks of construction delays, cost
overruns or force majeure events that may increase project costs, new project commencement risks
such as the receipt of zoning, occupancy and other required governmental approvals and permits, and
the incurrence of development costs in connection with projects that are not pursued to completion.
Some of our acquisitions and developments may be financed using the proceeds of periodic
equity or debt offerings, lines of credit or other forms of secured or unsecured financing that may
result in a risk that permanent financing for newly acquired projects might not be available or
would be available only on disadvantageous terms. If permanent debt or equity financing is not
available on acceptable terms to refinance acquisitions undertaken without permanent financing,
further acquisitions may be curtailed or cash available for distribution to shareholders may be
adversely affected.
The concentration of ownership by certain investors may limit other shareholders from
influencing significant corporate decisions.
As of December 31, 2006 (after the exchange of all shares of Newkirk in the Merger), Michael
L. Ashner and Winthrop collectively owned 3,604,000 of our outstanding common shares and Mr.
Ashner, Vornado Realty Trust, which we refer to as Vornado, and Apollo Real Estate Investment Fund
III, L.P., which we refer to as Apollo, collectively owned 27,684,378 voting MLP units which are
redeemable by the holder thereof for, at our election, cash or our common shares. Accordingly, on a
fully-diluted basis, Mr. Ashner, Apollo, Vornado and Winthrop collectively held a 28.4% ownership
interest in us, as of December 31, 2006 (after the exchange of all shares of Newkirk in the
Merger). As holders of voting MLP units, Mr. Ashner, Vornado and Apollo, as well as other holders
of voting MLP units, have the right to direct the voting of our special voting preferred stock.
Holders of interests in our other operating partnerships do not have voting rights. In addition,
Mr. Ashner controls NKT Advisors, LLC, which holds the one share of our special voting preferred
stock pursuant to a voting trustee agreement. To the extent that an affiliate of Vornado is a
member of our Board of Trustees, NKT Advisors, LLC has the right to direct the vote of the voting
MLP units held by Vornado with respect to the election of members of our Board of Trustees.
E. Robert Roskind, our Co-Vice Chairman, owned, as of December 31, 2006, 819,656 of our common
shares and 1,565,282 units of our limited partnership interest in our other operating partnerships,
which are redeemable for, at our election, cash or our common shares. On a fully diluted basis, Mr.
Roskind held a 2.2% ownership interest in us as of December 31, 2006 (after the exchange of all
shares of common stock of Newkirk in the Merger).
Future issuances of shares pursuant to existing contractual arrangements may have adverse
effects on our stock price.
The joint ventures described below each have a provision in their respective joint venture
agreements permitting the joint venture partner to sell its equity position to us. In the event
that any of the joint venture partners exercises its right to sell its equity position to us, and
we elect to fund the acquisition of such equity position with our common shares, such venture
partner could acquire a large concentration of our common shares.
16
In 1999, we entered into a joint venture agreement with CRF to acquire properties. This joint
venture and a separate partnership established by the partners has made investments in 13
properties for an aggregated capitalized cost of $390.5 million and no additional investments will
be made unless they are made pursuant to a tax-free exchange. We have a 33.33% equity interest in
this joint venture. In December 2001, we formed a second joint venture with CRF to acquire
additional properties in an aggregate amount of up to approximately $560.0 million. We have a 25%
equity interest in this joint venture. As of December 31, 2006, this second joint venture has
invested in 13 properties for an aggregate capitalized cost of $421.9 million.
Under these joint venture agreements, CRF has the right to sell its equity position in the
joint ventures to us. In the event CRF exercises its right to sell its equity interest in either
joint venture to us, we may, at our option, either issue our common shares to CRF for the fair
market value of CRF’s equity position, based upon a formula contained in the respective joint
venture agreement, or pay cash to CRF equal to 110% of the fair market value of CRF’s equity
position. We have the right not to accept any property in the joint ventures (thereby reducing the
fair market value of CRF’s equity position) that does not meet certain underwriting criteria. In
addition, the joint venture agreements contain a mutual buy-sell provision in which either CRF or
us can force the sale of any property.
In October 2003, we entered into a joint venture agreement with Clarion, which has made
investments in 17 properties for an aggregate capitalized cost of $487.0 million. No additional
investments will be made unless they are made pursuant to a tax-free exchange or upon the mutual
agreement of Clarion and us. We have a 30% equity interest in this joint venture. Under the joint
venture agreement, Clarion has the right to sell its equity position in the joint venture to us. In
the event Clarion exercises its right to sell its equity interest in the joint venture to us, we
may, at our option, either issue our common shares to Clarion for the fair market value of
Clarion’s equity position, based upon a formula contained in the partnership agreement, or pay cash
to Clarion equal to 100% of the fair market value of Clarion’s equity position. We have the right
not to accept any property in the joint venture (thereby reducing the fair market value of
Clarion’s equity position) that does not meet certain underwriting criteria. In addition, the joint
venture agreement contains a mutual buy-sell provision in which either Clarion or us can force the
sale of any property.
In June 2004, we entered in a joint venture agreement with Utah which was expanded in December
2004, to acquire properties in an aggregate amount of up to approximately $345.0 million. As of
December 31, 2006, this joint venture has made investments in 15 properties for an aggregate
capitalized cost of $247.0 million. We have a 30% equity interest in this joint venture. Under the
joint venture agreement, Utah has the right to sell its equity position in the joint venture to us.
This right becomes effective upon the occurrence of certain conditions. In the event Utah exercises
its right to sell its equity interest in the joint venture to us, we may, at our option, either
issue our common shares to Utah for the fair market value of Utah’s equity position, based upon a
formula contained in the joint venture agreement, or pay cash to Utah equal to 100% of the fair
market value of Utah’s equity position. We have the right not to accept any property in the joint
venture (thereby reducing the fair market value of Utah’s equity position) that does not meet
certain underwriting criteria. In addition, the joint venture agreement contains a mutual buy-sell
provision in which either Utah or us can force the sale of any property.
Securities eligible for future sale may have adverse effects on our share price.
Following the completion of the Merger, an aggregate of approximately 41,207,615 of our common
shares became issuable upon: (i) the exchange of units of limited partnership interests in our
operating partnership subsidiaries (41,191,115 common shares in the aggregate), and (ii) the
exercise of outstanding options under our equity-based award plans (16,500 common shares).
Depending upon the number of such securities exchanged or exercised at one time, an exchange or
exercise of such securities could be dilutive to or otherwise adversely affect the interests of
holders of our common shares.
We have filed a registration statement with the SEC that registers 35,505,267 of our common
shares issuable on the redemption of outstanding MLP units to be sold. The registration statement
also covers the resale of 3,500,000 of our common shares owned by Winthrop, which shares were
previously subject to a lock up agreement that terminated on closing of the Merger, and 9,000 of
our common shares held by The LCP Group L.P., whose chairman is E. Robert Roskind, our Co-Vice
Chairman. The sale of these shares could result in a decrease in the market price of our common
shares.
We are dependent upon our key personnel and the terms of Mr. Ashner’s employment agreement
affects our ability to make certain investments.
We are dependent upon key personnel whose continued service is not guaranteed. We will be
dependent on our executive officers for strategic business direction and real estate experience.
Prior to the Merger, we had entered into employment agreements with E. Robert Roskind, our
Chairman, Richard J. Rouse, our Vice Chairman and Chief Investment Officer, T. Wilson Eglin, our
Chief Executive Officer, President and Chief Operating Officer, Patrick Carroll, our Executive Vice
President, Chief Financial Officer and
17
Treasurer, John B. Vander Zwaag, our Executive Vice President, and Paul Wood, our Vice
President, Chief Accounting Officer and Secretary. Upon the completion of the Merger, we entered
into an employment agreement with Michael L. Ashner, Newkirk’s former Chairman and Chief Executive
Officer. Pursuant to Mr. Ashner’s employment agreement, Mr. Ashner may voluntarily terminate his
employment with us and become entitled to receive a substantial severance payment if we acquire or
make an investment in a non-net lease business opportunity during the term of Mr. Ashner’s
employment. This provision in Mr. Ashner’s agreement may cause us not to avail ourselves of those
other business opportunities due to the potential consequences of acquiring such non-net lease
business opportunities.
Our inability to retain the services of any of our key personnel or our loss of any of their
services could adversely impact our operations. We do not have key man life insurance coverage on
our executive officers.
Item 1B. Unresolved Staff Comments
There are no unresolved written comments that were received from the SEC staff 180 days or
more before the end of our fiscal year relating to our periodic or current reports under the
Securities Exchange Act of 1934.
Item 2. Properties
Real Estate Portfolio
General. As of December 31, 2006, we owned or had interests in approximately 58.9 million
square feet of rentable space in approximately 365 office, industrial and retail properties. As of
December 31, 2006, our properties were 97.5% leased based upon net rentable square feet.
Our properties are generally subject to net leases; however, in certain leases we are
responsible for roof and structural repairs. In such situations, we perform annual inspections of
the properties. In addition, certain of our properties (including those held through
non-consolidated entities) are subject to leases in which the landlord is responsible for a portion
of the real estate taxes, utilities and general maintenance. We are responsible for all operating
expenses of any vacant properties.
Ground Leases. We, including through non-consolidated entities, have numerous properties that
are subject to long-term ground leases where a third party owns and leases the underlying land to
us. Certain of these properties are economically owned through the holding of industrial revenue
bonds and as such neither ground lease payments nor bond interest payments are made or received,
respectively. For certain of the properties held under a ground lease, we have a purchase option.
At the end of these long-term ground leases, unless extended or the purchase option exercised, the
land together with all improvements thereon reverts to the landowner. In addition, we have one
property in which a portion of the land, on which a portion of the parking lot is located, is
subject to a ground lease. At expiration of the ground lease, only that portion of the parking lot
reverts to the landowner.
Leverage. We generally use fixed rate, non-recourse mortgages to partially fund the
acquisition of real estate. As of December 31, 2006, we had outstanding mortgages, including
mortgages classified as discontinued operations, of $2.1 billion with a weighted average interest
rate of 6.1%.
Table Regarding Real Estate Holdings
The tables on the following pages sets forth certain information relating to the pre-merger
real property portfolio of Lexington Corporate Properties Trust, or the Lexington Portfolio,
Newkirk, or the Newkirk Portfolio, and the non-consolidated entities of Lexington Corporate
Properties Trust, or the Joint Venture Portfolio, as of December 31, 2006. All the properties
listed have been fully leased by tenants for the last five years, or since the date of purchase by
us or our non-consolidated entities if less than five years, with the exception of the properties
in the Newkirk Portfolio located in Bedford, Texas; Sandy, Utah; San Francisco, California;
Evanston, Wyoming; Aurora, Colorado; Littleton, Colorado; Port Richey, Florida; Tallahassee,
Florida; Lubbock, Texas; Cincinnati, Ohio; Edmonds, Washington; and Cheyenne, Wyoming acquired in
the Merger, which are fully vacant, except for San Francisco, California (16.3% vacant) and
Evanston, Wyoming (37.9% vacant) at December 31, 2006 and the properties in the Lexington Portfolio
and Joint Venture Portfolio located in Dallas, Texas; Hebron, Kentucky; Antioch, Tennessee;
Memphis, Tennessee; San Francisco, California; Honolulu, Hawaii; Farmington Hills, Michigan; Auburn
Hills, Michigan; and Phoenix, Arizona. During the last five years, (1) the Dallas, Texas property
(formerly leased to Vartec Telecom) was 100% and 37.2% vacant as of December 31, 2005 and 2006,
respectively, (2) the Hebron, Kentucky property (formerly leased to Fidelity Corporate Real Estate,
LLC) has been vacant
18
since April 2004 (except that 21,542 square feet was leased during 2005 and 9,164 square feet
leased in 2006), (3) the Antioch Tennessee property has been 50% vacant since the second quarter of
2006 and (4) the tenant at the Memphis, Tennessee property, Mimeo.com, Inc., entered into a lease
extension in 2005 leaving 33,959 square feet of rentable space vacant. The San Francisco,
California property (primarily leased to California Culinary and acquired by a non-consolidated
entity in 2005) has 13,461 square feet vacant. The Honolulu, Hawaii
(the multi-tenanted office portion), Farmington Hills, Michigan (formerly leased to Dana Corporation), Auburn Hills, Michigan
(formerly leased to Lear Corporation), and Phoenix, Arizona (partially leased to Bull Information
Systems, Inc.) properties are 2.5%, 100%, 100% and 36.3% vacant at December 31, 2006, respectively.
19
LEXINGTON PORTFOLIO
PROPERTY CHART
| |
|
|
|
|
|
|
|
|
| |
|
|
|
Net |
|
|
| |
|
Tenant/ |
|
Rentable |
|
Current Term |
| Property Location |
|
(Guarantor) |
|
Square Feet |
|
Lease Expiration |
OFFICE |
|
|
|
|
|
|
|
|
295 Chipeta Way
Salt Lake City, UT
|
|
Northwest Pipeline Corp.
|
|
|
295,000 |
|
|
09/30/09 |
|
|
|
|
|
|
|
|
|
10001 Richmond Avenue
Houston, TX
|
|
Baker Hughes, Inc.
|
|
|
554,385 |
|
|
09/27/15 |
|
|
|
|
|
|
|
|
|
6303 Barfield Road & 859 Mount Vernon Hwy.
Atlanta, GA
|
|
Internet Security Systems, Inc.
|
|
|
289,000 |
|
|
05/31/13 |
|
|
|
|
|
|
|
|
|
1701 Market Street
Philadelphia, PA
|
|
Morgan Lewis & Bockius LLC
|
|
|
321,815 |
|
|
01/31/14 |
|
|
|
|
|
|
|
|
|
3480 Stateview Blvd.
Fort Mill, SC
|
|
Wells Fargo Bank N.A.
|
|
|
169,218 |
|
|
05/31/14 |
|
|
|
|
|
|
|
|
|
33 Commercial Street
Foxboro, MA
|
|
Invensys Systems, Inc. (Siebe, Inc.)
|
|
|
164,689 |
|
|
07/01/15 |
|
|
|
|
|
|
|
|
|
3476 Stateview Boulevard
Fort Mill, SC
|
|
Wells Fargo Home Mortgage, Inc.
|
|
|
169,083 |
|
|
01/30/13 |
|
|
|
|
|
|
|
|
|
9950 Mayland Drive
Richmond, VA
|
|
Circuit City Stores, Inc.
|
|
|
288,562 |
|
|
02/28/10 |
|
|
|
|
|
|
|
|
|
1415 Wyckoff Road
Wall Township, NJ
|
|
New Jersey Natural Gas Co.
|
|
|
157,511 |
|
|
06/30/21 |
|
|
|
|
|
|
|
|
|
2750 Monroe Boulevard
Valley Forge, PA
|
|
Quest Diagnostics, Inc.
|
|
|
109,281 |
|
|
04/30/11 |
|
|
|
|
|
|
|
|
|
700 Oakmont Lane
Westmont, IL
|
|
North American Van Lines, Inc.
(SIRVA, Inc.)
|
|
|
269,715 |
|
|
11/30/15 |
|
|
|
|
|
|
|
|
|
70 Mechanic Street
Foxboro, MA
|
|
Invensys Systems, Inc.
(Siebe, Inc.)
|
|
|
251,914 |
|
|
07/01/14 |
|
|
|
|
|
|
|
|
|
13651 McLearen Road
Herndon, VA
|
|
Boeing North American Services, Inc.
(The Boeing Company)
|
|
|
159,664 |
|
|
05/30/08 |
|
|
|
|
|
|
|
|
|
1311 Broadfield Blvd.
Houston, TX
|
|
Transocean Offshore Deepwater Drilling,
Inc. (Transocean Sedco Forex, Inc.)
|
|
|
103,260 |
|
|
03/31/11 |
|
|
Newpark Drilling Fluids, Inc.
(Newpark Resources, Inc.)
|
|
|
52,731 |
|
|
08/31/09 |
|
|
|
|
|
|
|
|
|
601 & 701 Experian Pkwy.
Dallas, TX
|
|
Experian
Information Solutions, Inc.
(TRW Inc.)
|
|
|
292,700 |
|
|
10/15/10 |
|
|
|
|
|
|
|
|
|
2211 South 47th Street
Phoenix, AZ
|
|
Avnet, Inc.
|
|
|
176,402 |
|
|
11/14/12 |
|
|
|
|
|
|
|
|
|
5600 Broken Sound Blvd
Boca Raton, FL
|
|
Océ Printing Systems USA, Inc.
|
|
|
143,290 |
|
|
02/14/20 |
|
|
|
|
|
|
|
|
|
4200 RCA Boulevard
Palm Beach Gardens, FL
|
|
The Wackenhut Corp.
|
|
|
114,518 |
|
|
02/28/11 |
20
LEXINGTON PORTFOLIO
PROPERTY CHART
| |
|
|
|
|
|
|
|
|
| |
|
|
|
Net |
|
|
| |
|
Tenant/ |
|
Rentable |
|
Current Term |
| Property Location |
|
(Guarantor) |
|
Square Feet |
|
Lease Expiration |
OFFICE (continued) |
|
|
|
|
|
|
|
|
701 Brookfield Parkway
Greenville, SC
|
|
Verizon Wireless
|
|
|
192,884 |
|
|
01/31/12 |
|
|
|
|
|
|
|
|
|
19019 No. 59th Avenue
Glendale, AZ
|
|
Honeywell, Inc.
|
|
|
252,300 |
|
|
07/15/11 |
|
|
|
|
|
|
|
|
|
4201 Marsh Lane
Carrollton, TX
|
|
Carlson Restaurants Worldwide, Inc.
|
|
|
130,000 |
|
|
11/30/18 |
|
|
|
|
|
|
|
|
|
12645 W. Airport Road
Sugar Land, TX
|
|
Baker Hughes, Inc.
|
|
|
165,836 |
|
|
09/27/15 |
|
|
|
|
|
|
|
|
|
26210 and 26220 Enterprise
Court
Lake Forest, CA
|
|
Apria Healthcare Group, Inc.
|
|
|
100,012 |
|
|
01/31/12 |
|
|
|
|
|
|
|
|
|
10475 Crosspoint Blvd.
Indianapolis, IN
|
|
John Wiley & Sons, Inc.
|
|
|
141,047 |
|
|
10/31/09 |
|
|
|
|
|
|
|
|
|
2210 Enterprise Drive
Florence, SC
|
|
Washington Mutual Home Loans, Inc.
|
|
|
177,747 |
|
|
06/30/08 |
|
|
|
|
|
|
|
|
|
27404 Drake Road
Farmington Hills, MI
|
|
VACANT
|
|
|
111,454 |
|
|
— |
|
|
|
|
|
|
|
|
|
200 Executive Blvd. S
Southington, CT
|
|
Hartford Fire Insurance Co.
|
|
|
153,364 |
|
|
12/31/12 |
|
|
|
|
|
|
|
|
|
810 & 820 Gears Road
Houston, TX
|
|
IKON Office Solutions, Inc.
|
|
|
157,790 |
|
|
01/31/13 |
|
|
|
|
|
|
|
|
|
1600 Eberhardt Road
Temple, TX
|
|
Nextel of Texas
|
|
|
108,800 |
|
|
01/31/16 |
|
|
|
|
|
|
|
|
|
5757 Decatur Blvd.
|
|
Allstate Insurance Co.
|
|
|
84,200 |
|
|
08/31/12 |
Indianapolis, IN
|
|
Damar Services, Inc
|
|
|
5,756 |
|
|
03/31/07 |
|
|
|
|
|
|
|
|
|
6200 Northwest Pkwy.
San Antonio, TX
|
|
PacifiCare Health Systems, Inc.
|
|
|
142,500 |
|
|
11/30/10 |
|
|
|
|
|
|
|
|
|
4000 Johns Creek Pkwy.
|
|
Kraft Foods N.A., Inc.
|
|
|
73,264 |
|
|
01/31/12 |
Atlanta, GA
|
|
PerkinElmer Instruments LLC
|
|
|
13,955 |
|
|
11/30/16 |
|
|
|
|
|
|
|
|
|
6455 State Hwy 303 NE
Bremerton, WA
|
|
Nextel West Corporation
|
|
|
60,200 |
|
|
05/14/16 |
|
|
|
|
|
|
|
|
|
270 Billerica Road
Chelmsford, MA
|
|
Cadence Design Systems
|
|
|
100,000 |
|
|
09/30/13 |
|
|
|
|
|
|
|
|
|
2550 Interstate Dr.
Harrisburg, PA
|
|
AT&T Wireless Services, Inc.
|
|
|
81,859 |
|
|
11/15/08 |
|
|
|
|
|
|
|
|
|
180 Rittenhouse Circle
Bristol, PA
|
|
Jones Apparel Group USA, Inc.
(Jones Apparel Group, Inc.)
|
|
|
96,000 |
|
|
07/31/13 |
21
LEXINGTON PORTFOLIO
PROPERTY CHART
| |
|
|
|
|
|
|
|
|
| |
|
|
|
Net |
|
|
| |
|
Tenant/ |
|
Rentable |
|
Current Term |
| Property Location |
|
(Guarantor) |
|
Square Feet |
|
Lease Expiration |
OFFICE (continued) |
|
|
|
|
|
|
|
|
2529 West Thorns Drive
Houston, TX
|
|
Baker Hughes, Inc.
|
|
|
65,500 |
|
|
09/27/15 |
|
|
|
|
|
|
|
|
|
12000 Tech Center Drive
Livonia, MI
|
|
Kelsey-Hayes Company
|
|
|
80,230 |
|
|
04/30/14 |
|
|
|
|
|
|
|
|
|
2401 Cherahala Boulevard
Knoxville, TN
|
|
Advance PCS, Inc.
|
|
|
59,748 |
|
|
05/31/13 |
|
|
|
|
|
|
|
|
|
1275 NW 128th Street
Clive, IA
|
|
Principal Life Insurance Company
|
|
|
61,180 |
|
|
01/31/12 |
|
|
|
|
|
|
|
|
|
13430 N. Black Canyon Freeway
|
|
Bull HN Information Systems, Inc.
|
|
|
69,492 |
|
|
10/31/10 |
Phoenix, AZ
|
|
Associated Billing Services, LLC
|
|
|
17,767 |
|
|
07/31/16 |
|
|
VACANT
|
|
|
49,799 |
|
|
— |
|
|
|
|
|
|
|
|
|
12600 Gateway Blvd.
Fort Meyers, FL
|
|
Gartner, Inc.
|
|
|
62,400 |
|
|
01/31/13 |
|
|
|
|
|
|
|
|
|
421 Butler Farm Road
Hampton, VA
|
|
Nextel Communications of
the Mid-Atlantic, Inc.
(Nextel Finance Company)
|
|
|
56,515 |
|
|
01/14/10 |
|
|
|
|
|
|
|
|
|
3940 South Teller St.
Lakewood, CO
|
|
Travelers Express, Inc
|
|
|
68,165 |
|
|
03/31/12 |
|
|
|
|
|
|
|
|
|
100 Barnes Road
Wallingford, CT
|
|
Minnesota Mining and
Manufacturing Company
|
|
|
44,400 |
|
|
12/31/10 |
|
|
|
|
|
|
|
|
|
1440 East 15th Street
Tucson, AZ
|
|
Cox Communications, Inc.
|
|
|
28,591 |
|
|
09/30/16 |
|
|
|
|
|
|
|
|
|
250 Turnpike Road
Southborough, MA
|
|
Honeywell Consumer Products
|
|
|
57,698 |
|
|
09/30/15 |
|
|
|
|
|
|
|
|
|
11555 University Blvd.
Sugarland, TX
|
|
KS Management Services, LLP
(St. Luke’s Episcopal Health System
Corporation)
|
|
|
72,683 |
|
|
11/30/20 |
|
|
|
|
|
|
|
|
|
2999 SW 6th St.
Redmond, OR
|
|
Voice Stream PCS I LLC
(T-Mobile USA, Inc.)
|
|
|
77,484 |
|
|
01/31/19 |
|
|
|
|
|
|
|
|
|
160 Clairemont Avenue
Decatur, GA
|
|
Allied Holdings, Inc.
|
|
|
112,248 |
|
|
12/31/07 |
|
|
|
|
|
|
|
|
|
27016 Media Center Drive
|
|
Playboy Enterprises, Inc.
|
|
|
63,049 |
|
|
10/31/12 |
Los Angeles, CA
|
|
Sony Electronics, Inc.
|
|
|
20,203 |
|
|
08/31/09 |
|
|
|
|
|
|
|
|
|
2800 Waterford Lake Dr.
Richmond, VA
|
|
Alstom Power, Inc
|
|
|
99,057 |
|
|
10/31/14 |
|
|
|
|
|
|
|
|
|
26555 Northwestern Highway
Southfield, MI
|
|
Federal-Mogul Corporation
|
|
|
187,163 |
|
|
01/31/15 |
22
LEXINGTON PORTFOLIO
PROPERTY CHART
| |
|
|
|
|
|
|
|
|
| |
|
|
|
Net |
|
|
| |
|
Tenant/ |
|
Rentable |
|
Current Term |
| Property Location |
|
(Guarantor) |
|
Square Feet |
|
Lease Expiration |
OFFICE (Continued) |
|
|
|
|
|
|
|
|
4848 129th East Ave.
Tulsa, OK
|
|
Metris Companies, Inc.
|
|
|
101,100 |
|
|
01/31/10 |
|
|
|
|
|
|
|
|
|
10419 North 30th Street
Tampa, FL
|
|
Time Customer Service, Inc.
(Time, Inc.)
|
|
|
132,981 |
|
|
07/31/10 |
|
|
|
|
|
|
|
|
|
250 Rittenhouse Circle
Bristol, PA
|
|
Jones Apparel Group USA, Inc.
(Jones Apparel Group, Inc.)
|
|
|
255,019 |
|
|
03/25/13 |
|
|
|
|
|
|
|
|
|
8555 South River Pkwy.
Tempe, AZ
|
|
ASM Lithography Holding NV
|
|
|
95,133 |
|
|
06/30/13 |
|
|
|
|
|
|
|
|
|
400 Butler Farm Road
Hampton, VA
|
|
Nextel Communications of
the Mid-Atlantic, Inc.
|
|
|
100,632 |
|
|
12/31/09 |
|
|
|
|
|
|
|
|
|
16676 Northchase Dr.
Houston, TX
|
|
Kerr-McGee Oil and Gas Corporation
|
|
|
101,111 |
|
|
07/31/14 |
|
|
|
|
|
|
|
|
|
Nijborg 15 & 17, 3927 DA
Renswoude, The Netherlands
|
|
AS Watson
(Health & Beauty
Continental Europe)
|
|
|
122,450 |
|
|
12/20/11 & 6/18/18 |
|
|
|
|
|
|
|
|
|
2300 Litton Lane
|
|
AGC Automotive Americas Co.
|
|
|
21,542 |
|
|
08/31/12 |
Hebron, KY
|
|
FTJ FundChoice, LLC
|
|
|
9,164 |
|
|
01/31/13 |
|
|
VACANT
|
|
|
49,714 |
|
|
— |
| |
|
|
|
|
1600 Viceroy Drive
|
|
The Visiting Nurse Association of Texas
|
|
|
48,027 |
|
|
06/2016 |
Dallas, TX
|
|
TFC Services (Freeman Decorating Co.)
|
|
|
108,565 |
|
|
01/2019 |
|
|
VACANT
|
|
|
92,860 |
|
|
— |
|
|
|
|
|
|
|
|
|
104 and 110 South Front St.
Memphis, TN
|
|
Hnedak Bobo Group, Inc.
|
|
|
37,229 |
|
|
10/31/16 |
|
|
|
|
|
|
|
|
|
3943 Denny Avenue
Pascagoula, MS
|
|
Northrop Grumman Systems Corporation
|
|
|
94,841 |
|
|
10/14/08 |
|
|
|
|
|
|
|
|
|
1460 Tobias Gadsen Boulevard
Charleston, SC
|
|
Hagemeyer North American, Inc.
|
|
|
50,076 |
|
|
07/2020 |
|
|
|
|
|
|
|
|
|
29 South Jefferson Road
Whippany, NJ
|
|
CAE SimuFlite, Inc.
|
|
|
76,363 |
|
|
11/30/21 |
|
|
|
|
|
|
|
|
|
26410 McDonald Road
Houston, TX
|
|
Montgomery County Management
Company LLC
|
|
|
41,000 |
|
|
10/31/19 |
|
|
|
|
|
|
|
|
|
2005 East Technology Circle
Tempe, AZ
|
|
(i) Structure, LLC (Infocrossing, Inc.)
|
|
|
60,000 |
|
|
12/31/25 |
|
|
|
|
|
|
|
|
|
11707 Miracle Hills Drive
Omaha, NE
|
|
(i) Structure, LLC (Infocrossing, Inc.)
|
|
|
86,800 |
|
|
11/30/25 |
|
|
|
|
|
|
|
|
|
2310 Village Square Pkwy.
Jacksonville, FL
|
|
AmeriCredit Corporation
|
|
|
85,000 |
|
|
06/30/11 |
|
|
|
|
|
|
|
|
|
1409 Centerpoint Blvd.
Knoxville, TN
|
|
Alstom Power, Inc.
|
|
|
84,404 |
|
|
10/31/14 |
23
LEXINGTON PORTFOLIO
PROPERTY CHART
| |
|
|
|
|
|
|
|
|
| |
|
|
|
Net |
|
|
| |
|
Tenant/ |
|
Rentable |
|
Current Term |
| Property Location |
|
(Guarantor) |
|
Square Feet |
|
Lease Expiration |
OFFICE (Continued) |
|
|
|
|
|
|
|
|
King Street
|
|
Multi –Tenanted
|
|
|
206,535 |
|
|
Various |
Honolulu, HI
|
|
VACANT
|
|
|
5,296 |
|
|
|
|
|
|
|
|
|
|
|
|
5550 Britton Parkway
Hilliard, OH
|
|
BMW Financial Services NA, LLC
|
|
|
220,966 |
|
|
02/28/21 |
| |
|
|
|
|
|
|
Office Subtotal
|
|
|
10,071,886 |
|
|
|
| |
|
|
|
|
24
LEXINGTON PORTFOLIO
PROPERTY CHART
| |
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
Net |
|
|
| |
|
Tenant/ |
|
Rentable |
|
Current Term |
| Property Location |
|
(Guarantor) |
|
Square Feet |
|
Lease Expiration |
INDUSTRIAL |
|
|
|
|
|
|
|
|
|
|
|
|
541 Perkins Jones Road |
|
Kmart Corp. |
|
|
1,462,642 |
|
|
|
09/30/07 |
|
Warren, OH |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
19500 Bulverde Road |
|
Harcourt Brace & Company |
|
|
559,258 |
|
|
|
03/31/16 |
|
San Antonio, TX |
|
(Reed Elsevier, Inc.) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2425 Highway 77 North |
|
James Hardie Building Products, Inc. |
|
|
425,816 |
|
|
|
03/31/20 |
|
Waxahachie, TX |
|
(James Hardie NV) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3501 West Avenue H |
|
Michaels Stores, Inc. |
|
|
762,775 |
|
|
|
09/30/19 |
|
Lancaster, CA |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9110 Grogans Mill Road |
|
Baker Hughes, Inc. |
|
|
275,750 |
|
|
|
09/27/15 |
|
Houston, TX |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
159 Farley Drive |
|
Harbor Freight Tools USA, Inc. |
|
|
1,010,859 |
|
|
|
12/31/21 |
|
Dillon, SC |
|
(Central Purchasing, Inc.) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
590 Ecology Lane |
|
Owens Corning |
|
|
420,597 |
|
|
|
07/14/25 |
|
Chester, SC |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6345 Brackbill Boulevard |
|
Exel Logistics, Inc. (NFC plc) |
|
|
507,000 |
|
|
|
03/19/12 |
|
Mechanicsburg, PA |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3820 Micro Drive |
|
Ingram Micro, L.P |
|
|
701,819 |
|
|
|
09/25/11 |
|
Millington, TN |
|
(Ingram Micro, Inc) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
750 N. Black Branch Road |
|
Dana Corporation |
|
|
539,592 |
|
|
|
07/31/25 |
|
Elizabethtown, KY |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6938 Elm Valley Dr. |
|
Dana Corporation |
|
|
150,945 |
|
|
|
10/25/21 |
|
Kalamazoo, MI |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4425 Purks Road |
|
VACANT |
|
|
183,717 |
|
|
|
— |
|
Auburn Hills, MI |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6 Doughten Road |
|
Exel Logistics, Inc. (NFC plc) |
|
|
330,000 |
|
|
|
05/31/07 |
|
New Kingston, PA |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6500 Adelaide Court |
|
Anda Pharmaceuticals, Inc. |
|
|
354,676 |
|
|
|
03/31/12 |
|
Groveport, OH |
|
(Andrx Corporation) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7500 Chavenelle Road |
|
The McGraw-Hill Companies, Inc. |
|
|
330,988 |
|
|
|
06/30/17 |
|
Dubuque, IA |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12025 Tech Center Drive |
|
Kelsey-Hayes Company |
|
|
100,000 |
|
|
|
04/30/14 |
|
Livonia, MI |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
250 Swathmore Avenue |
|
Steelcase, Inc. |
|
|
244,851 |
|
|
|
09/30/17 |
|
High Point, NC |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Moody Commuter & Tech Park |
|
TNT Logistics North America, Inc. |
|
|
595,346 |
|
|
|
01/02/14 |
|
Moody, AL |
|
(TPG N.V.) |
|
|
|
|
|
|
|
|
25
LEXINGTON PORTFOLIO
PROPERTY CHART
| |
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
Net |
|
|
| |
|
Tenant/ |
|
Rentable |
|
Current Term |
| Property Location |
|
(Guarantor) |
|
Square Feet |
|
Lease Expiration |
INDUSTRIAL (Continued) |
|
|
|
|
|
|
|
|
|
|
|
|
3102 Queen Palm Drive |
|
Time Customer Service, Inc. (Time, Inc.) |
|
|
229,605 |
|
|
|
07/31/10 |
|
Tampa, FL |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2280 Northeast Drive |
|
Ryder Integrated Logistics, Inc. |
|
|
276,480 |
|
|
|
07/31/12 |
|
Waterloo, IA |
|
(Ryder Systems, Inc.) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
245 Salem Church Road |
|
Exel Logistics, Inc. (NFC plc) |
|
|
252,000 |
|
|
|
12/31/07 |
|
Mechanicsburg, PA |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
359 Gateway Drive |
|
TI Group Automotive Systems, LLC |
|
|
133,221 |
|
|
|
05/31/20 |
|
Livonia, GA |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
900 Industrial Boulevard |
|
Dana Corporation |
|
|
222,200 |
|
|
|
09/30/16 |
|
Crossville, TN |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2935 Van Vactor Way |
|
Bay Valley Foods, LLC |
|
|
300,500 |
|
|
|
06/30/15 |
|
Plymouth, IN |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
200 Arrowhead Drive |
|
Owens Corning Sales, Inc. |
|
|
400,522 |
|
|
|
05/31/09 |
|
Hebron, OH |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3600 Southgate Drive |
|
Sygma Network, Inc. |
|
|
149,500 |
|
|
|
10/31/15 |
|
Danville, IL |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
46600 Port Street |
|
Johnson Controls, Inc. |
|
|
134,160 |
|
|
|
08/31/07 |
|
Plymouth, MI |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
301 Bill Breyer Road |
|
Dana Corporation |
|
|
424,904 |
|
|
|
06/30/25 |
|
Hopkinsville, KY |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
450 Stern Street |
|
Johnson Controls, Inc. |
|
|
111,160 |
|
|
|
12/31/07 |
|
Oberlin, OH |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1133 Poplar Creek Road |
|
Corporate Express Office Products, Inc. |
|
|
196,946 |
|
|
|
01/31/14 |
|
Henderson, NC |
|
(Buhrmann, N.V.) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10000 Business Boulevard |
|
Dana Corporation |
|
|
336,350 |
|
|
|
07/31/25 |
|
Dry Ridge, KY |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7670 Hacks Cross Road |
|
Dana Corporation |
|
|
268,100 |
|
|
|
02/28/16 |
|
Olive Branch, MS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
34 East Main Street |
|
Exel Logistics, Inc. (NFC plc) |
|
|
179,200 |
|
|
|
02/29/08 |
|
New Kingston, PA |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
191 Arrowhead Drive |
|
Owens Corning Sales, Inc. |
|
|
250,410 |
|
|
|
07/31/07 |
|
Hebron, OH |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
904 Industrial Road |
|
Tenneco Automotive |
|
|
195,640 |
|
|
|
08/17/10 |
|
Marshall, MI |
|
Operating Company, Inc. |
|
|
|
|
|
|
|
|
|
|
(Tenneco Automotive, Inc.) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
109 Stevens Street |
|
Unisource Worldwide, Inc |
|
|
168,800 |
|
|
|
09/30/09 |
|
Jacksonville, FL |
|
|
|
|
|
|
|
|
|
|
|
|
26
LEXINGTON PORTFOLIO
PROPERTY CHART
| |
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
Net |
|
|
| |
|
Tenant/ |
|
Rentable |
|
Current Term |
| Property Location |
|
(Guarantor) |
|
Square Feet |
|
Lease Expiration |
INDUSTRIAL (Continued) |
|
|
|
|
|
|
|
|
|
|
|
|
1901 49th Avenue |
|
Owens Corning |
|
|
18,620 |
|
|
|
06/30/15 |
|
Minneapolis, MN |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7150 Exchequer Drive |
|
Corporate Express Office Products, Inc. |
|
|
79,086 |
|
|
|
10/31/13 |
|
Baton Rouge, LA |
|
(Buhrmann, N.V.) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4010 Airpark Drive |
|
Dana Corporation |
|
|
251,041 |
|
|
|
07/31/25 |
|
Owensboro, KY |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
324 Industrial Park Road |
|
SKF USA, Inc. |
|
|
72,868 |
|
|
|
12/31/14 |
|
Franklin, NC |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
187 Spicer Drive |
|
Dana Corporation |
|
|
148,000 |
|
|
|
08/31/07 |
|
Gordonsville, TN |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
730 N. Black Branch Road |
|
Dana Corporation |
|
|
167,770 |
|
|
|
07/31/25 |
|
Elizabethtown, KY |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3350 Miac Cove Road |
|
Mimeo.com, Inc. |
|
|
107,400 |
|
|
|
09/30/20 |
|
Memphis, TN |
|
VACANT |
|
|
33,959 |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
300 McCormick Road |
|
Ameritech Services, Inc. |
|
|
20,000 |
|
|
|
05/31/15 |
|
Columbus, OH |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1601 Pratt Avenue |
|
Joseph Campbell Company |
|
|
58,300 |
|
|
|
08/31/07 |
|
Marshall, MI |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
477 Distribution Pkwy. |
|
Federal Express Corporation |
|
|
120,000 |
|
|
|
05/31/21 |
|
Collierville, TN |
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
Industrial Subtotal |
|
|
14,263,373 |
|
|
|
|
|
| |
|
|
27
LEXINGTON PORTFOLIO
PROPERTY CHART
| |
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
Net |
|
|
| |
|
Tenant/ |
|
Rentable |
|
Current Term |
| Property Location |
|
(Guarantor) |
|
Square Feet |
|
Lease Expiration |
RETAIL/ OTHER |
|
|
|
|
|
|
|
|
|
|
|
|
2655 Shasta Way |
|
Fred Meyer, Inc. |
|
|
178,204 |
|
|
|
03/31/08 |
|
Klamath Falls, OR |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fort Street Mall, King Street |
|
Liberty House, Inc. |
|
|
85,610 |
|
|
|
09/30/09 |
|
Honolulu, HI |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
150 N.E. 20th Street |
|
Fred Meyer, Inc. |
|
|
118,179 |
|
|
|
05/31/11 |
|
Newport, OR |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
35400 Cowan Road |
|
Sam's Real Estate Business Trust |
|
|
102,826 |
|
|
|
01/31/09 |
|
Westland, MI |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4733 Hills & Dales Road |
|
Scandinavian Health Spa, Inc. |
|
|
37,214 |
|
|
|
12/31/08 |
|
Canton, OH |
|
(Bally Total Fitness Corp.) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4831 Whipple Avenue, N.W. |
|
Best Buy Co., Inc. |
|
|
46,350 |
|
|
|
02/26/18 |
|
Canton, OH |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11411 N. Kelly Avenue |
|
American Golf Corporation |
|
|
13,924 |
|
|
|
12/31/17 |
|
Oklahoma City, OK |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25500 State Hwy 249 |
|
Parkway Chevrolet, Inc. |
|
|
77,076 |
|
|
|
08/31/26 |
|
Tomball, TX 77375 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3711 Gateway Drive |
|
Kohl's Dept. Stores, Inc. |
|
|
76,164 |
|
|
|
01/25/15 |
|
Eau Claire, WI |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
399 Peach Wood Centre Dr. |
|
Best Buy Co., Inc. |
|
|
45,800 |
|
|
|
02/26/18 |
|
Spartanburg, SC |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12535 S.E. 82nd Avenue |
|
Toys "R" Us, Inc. |
|
|
42,842 |
|
|
|
05/31/11 |
|
Clackamas, OR |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
24100 Laguna Hills Mall |
|
Federated Department Stores, Inc. |
|
|
160,000 |
|
|
|
04/16/14 |
|
Laguna Hills, CA |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18601 Alderwood Mall Boulevard |
|
Toys "R" Us, Inc. |
|
|
43,105 |
|
|
|
05/31/11 |
|
Lynwood, WA |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6910 S. Memorial Highway |
|
Toys "R" Us, Inc. |
|
|
43,123 |
|
|
|
05/31/11 |
|
Tulsa, OK |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9580 Livingston Road |
|
GFS Realty, Inc. |
|
|
107,337 |
|
|
|
02/28/14 |
|
Oxon Hill, MD |
|
(Giant Food, Inc.) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
121 South Center Street |
|
Greyhound Lines, Inc. |
|
|
17,000 |
|
|
|
02/28/09 |
|
Stockton, CA |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2401 Wooton Parkway |
|
GFS Realty, Inc. |
|
|
51,682 |
|
|
|
04/30/17 |
|
Rockville, MD |
|
(Giant Food, Inc.) |
|
|
|
|
|
|
|
|
| |
|
|
|
|
Retail/ Other Subtotal |
|
|
1,246,436 |
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Grand Total |
|
|
25,581,695 |
|
|
|
|
|
| |
|
|
28
JOINT VENTURE PORTFOLIO
PROPERTY CHART
| |
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
Net |
|
|
| |
|
Tenant/ |
|
Rentable |
|
Current Term |
| Property Location |
|
(Guarantor) |
|
Square Feet |
|
Lease Expiration |
OFFICE |
|
|
|
|
|
|
|
|
|
|
|
|
389-399 Interpace Highway |
|
Aventis Pharmaceuticals, Inc |
|
|
340,240 |
|
|
|
06/30/15 |
|
Morris Corporate Center IV |
|
(Pharma Holdings GmbH) |
|
|
|
|
|
|
|
|
Parsippany, NJ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17 Technology Circle |
|
Blue Cross Blue Shield |
|
|
456,304 |
|
|
|
09/30/09 |
|
Columbia, SC |
|
of South Carolina Inc. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
275 South Valencia Ave. |
|
Bank of America NT & SA |
|
|
637,503 |
|
|
|
06/30/12 |
|
Los Angeles, CA |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
100 Wood Hollow Drive |
|
Greenpoint Mortgage Funding, Inc. |
|
|
124,600 |
|
|
|
07/31/11 |
|
Novato, CA |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6555 Sierra Drive |
|
True North Communications Inc. |
|
|
247,254 |
|
|
|
01/31/10 |
|
Irving, TX |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
101 East Erie Building |
|
Foote, Cone & Belding |
|
|
203,376 |
|
|
|
03/15/14 |
|
Chicago, IL |
|
(Interpublic Group of Companies, Inc.) |
|
|
|
|
|
|
|
|
|
|
Higgins Development Partners |
|
|
19,089 |
|
|
|
03/15/14 |
|
|
|
Lexington Realty Trust |
|
|
2,100 |
|
|
|
07/05/10 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5200 Metcalf Avenue |
|
GE Insurance Solutions |
|
|
320,198 |
|
|
|
12/22/18 |
|
Overland Park, KS |
|
(Employers Reinsurance Corporation) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
27027 Tourney Road |
|
Specialty Laboratories, Inc. |
|
|
187,262 |
|
|
|
08/31/24 |
|
Santa Clarita, CA |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8900 Freeport Pkwy |
|
Nissan Motor Acceptance |
|
|
268,445 |
|
|
|
03/31/13 |
|
Irving, TX |
|
Corporation/ (Nissan North
America, Inc.) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15375 Memorial Drive |
|
Vastar Resources, Inc |
|
|
327,325 |
|
|
|
09/15/09 |
|
Houston, TX |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10300 Kincaid Drive |
|
Bank One Indiana, N.A. |
|
|
193,000 |
|
|
|
10/31/09 |
|
Fishers, IN |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10300 Town Park Drive |
|
Veritas DGC, Inc. |
|
|
218,641 |
|
|
|
09/30/15 |
|
Houston, TX |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
600 Business Center Drive |
|
First USA Management Services, Inc. |
|
|
125,155 |
|
|
|
09/30/09 |
|
Lake Mary, FL |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
550 Business Center Drive |
|
First USA Management Services, Inc. |
|
|
125,920 |
|
|
|
09/30/09 |
|
Lake Mary, FL |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10940 White Rock Road |
|
Progressive Casualty Insurance Company |
|
|
158,582 |
|
|
|
07/31/12 |
|
10929 Disk Drive
Rancho Cordova, CA |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2000 Eastman Drive |
|
Structural Dynamic Research Corp. |
|
|
212,836 |
|
|
|
04/30/11 |
|
Milford, OH |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3701 Corporate Drive |
|
Motorola, Inc. |
|
|
119,829 |
|
|
|
12/31/16 |
|
Farmington Hills, MI |
|
|
|
|
|
|
|
|
|
|
|
|
29
JOINT VENTURE PORTFOLIO
PROPERTY CHART
| |
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
Net |
|
|
| |
|
Tenant/ |
|
Rentable |
|
Current Term |
| Property Location |
|
(Guarantor) |
|
Square Feet |
|
Lease Expiration |
OFFICE (Continued) |
|
|
|
|
|
|
|
|
|
|
|
|
2050 Roanoke Road |
|
Chrysler Financial Company LLC |
|
|
130,290 |
|
|
|
12/31/11 |
|
Westlake, TX |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1401 & 1501 Nolan Ryan Parkway |
|
Siemens Dematic Postal |
|
|
236,547 |
|
|
|
01/31/14 |
|
Arlington, TX |
|
Automation, L.P. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9201 East Dry Creek Road |
|
The Shaw Group, Inc. |
|
|
128,500 |
|
|
|
09/30/17 |
|
Centennial, CO |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
110, 120 & 130 E. Shore Dr. |
|
Capital One Services, Inc. |
|
|
225,220 |
|
|
|
03/13/10 |
|
Glen Allen, VA |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1475 Dunwoody Drive |
|
ING USA Annuity and Life |
|
|
125,000 |
|
|
|
05/31/10 |
|
West Chester, PA |
|
Insurance Company |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13775 McLearen Road |
|
Equant N.V. |
|
|
125,293 |
|
|
|
04/30/15 |
|
Herndon, VA |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
70 Valley Stream Parkway |
|
IKON Office Solutions, Inc. |
|
|
106,855 |
|
|
|
09/30/13 |
|
Malvern, PA |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5150 220th Avenue |
|
Spacelabs Medical, Inc |
|
|
106,944 |
|
|
|
12/14/14 |
|
Issaquah, WA |
|
(OSI Systems, Inc.) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9201 Stateline |
|
GE Insurance Solutions |
|
|
166,641 |
|
|
|
04/01/19 |
|
Kansas City, MO |
|
(Employers Reinsurance Corporation) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
22011 SE 51st Street |
|
Spacelabs Medical, Inc |
|
|
95,600 |
|
|
|
12/14/14 |
|
Issaquah, WA |
|
(OSI Systems, Inc.) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1110 Bayfield Drive |
|
Honeywell International, Inc. |
|
|
166,575 |
|
|
|
11/30/13 |
|
Colorado Springs, CO |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3601 Converse Drive |
|
Verizon Wireless |
|
|
160,500 |
|
|
|
12/31/16 |
|
Wilmington, NC |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
275 Technology Drive |
|
ANSYS, Inc. |
|
|
107,872 |
|
|
|
12/31/14 |
|
Canonsburg, PA |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9601 Renner Blvd. |
|
Voicestream PCS II Corporation |
|
|
77,484 |
|
|
|
11/01/19 |
|
Lenexa, KS |
|
(T-Mobile USA, Inc.) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3265 East Goldstone Drive |
|
Voicestream PCS II Corporation |
|
|
77,484 |
|
|
|
06/28/19 |
|
Meridian, ID |
|
(T-Mobile USA, Inc.) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3201 Quail Springs Pkwy. |
|
AT& T Wireless Services, Inc. |
|
|
103,500 |
|
|
|
11/30/10 |
|
Oklahoma City, OK |
|
Jordan Associates, Inc. |
|
|
25,000 |
|
|
|
12/31/08 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
200 Lucent Lane |
|
Lucent Technologies, Inc. |
|
|
124,944 |
|
|
|
09/30/11 |
|
Cary, NC |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4455 American Way |
|
Bell South Mobility, Inc. |
|
|
70,100 |
|
|
|
10/31/12 |
|
Baton Rouge, LA |
|
|
|
|
|
|
|
|
|
|
|
|
30
JOINT VENTURE PORTFOLIO
PROPERTY CHART
| |
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
Net |
|
|
| |
|
Tenant/ |
|
Rentable |
|
Current Term |
| Property Location |
|
(Guarantor) |
|
Square Feet |
|
Lease Expiration |
OFFICE (Continued) |
|
|
|
|
|
|
|
|
|
|
|
|
3711 San Gabriel |
|
Voice Stream PCS II Corporation |
|
|
75,016 |
|
|
|
06/30/15 |
|
Mission, TX |
|
(T-Mobile USA, Inc.) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4001 International Pkwy. |
|
Motel 6 Operating L.P. (Accor S.A.) |
|
|
138,443 |
|
|
|
07/31/15 |
|
Carrollton, TX |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
350 Rhode Island Street |
|
California Culinary Academy, |
|
|
103,838 |
|
|
|
11/14/19 |
|
San Francisco, CA |
|
LLC (Career Education Corp.) |
|
|
|
|
|
|
|
|
|
|
Starbucks Coffee Company |
|
|
1,500 |
|
|
|
09/30/13 |
|
|
|
Citibank |
|
|
6,545 |
|
|
|
02/29/12 |
|
|
|
VACANT |
|
|
13,461 |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2500 Patrick Henry Pkwy |
|
Georgia Power Company |
|
|
111,911 |
|
|
|
06/30/15 |
|
McDonough, GA |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Park Drive |
|
Omnipoint Holdings, Inc. |
|
|
78,610 |
|
|
|
08/31/20 |
|
Oakland, ME |
|
(T-Mobile USA, Inc.) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11511 Luna Road |
|
Haggar Clothing Company |
|
|
180,507 |
|
|
|
4/19/16 |
|
Farmers Branch, TX |
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
Office Subtotal |
|
|
7,357,839 |
|
|
|
|
|
| |
|
|
31
JOINT VENTURE PORTFOLIO
PROPERTY CHART
| |
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
Net |
|
|
| |
|
Tenant/ |
|
Rentable |
|
Current Term |
| Property Location |
|
(Guarantor) |
|
Square Feet |
|
Lease Expiration |
INDUSTRIAL |
|
|
|
|
|
|
|
|
|
|
|
|
101 Michelin Drive |
|
TNT Logistics North America, Inc. |
|
|
1,164,000 |
|
|
|
08/04/12 |
|
Laurens, SC |
|
(TPG N.V.) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10345 Philipp Parkway |
|
L'Oreal USA, Inc. |
|
|
649,250 |
|
|
|
10/17/19 |
|
Streetsboro, OH |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7111 Crabb Road |
|
TNT Logistics North America, Inc. |
|
|
752,000 |
|
|
|
08/04/12 |
|
Temperance, MI |
|
(TPG N.V.) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6050 Dana Way |
|
VACANT |
|
|
338,700 |
|
|
|
— |
|
Antioch, TN |
|
W.M Wright Company |
|
|
338,700 |
|
|
|
03/31/21 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3600 Army Post Rd. |
|
EDS Information Services LLC |
|
|
405,000 |
|
|
|
04/30/12 |
|
Des Moines, IA |
|
(Electronic Data Systems Corporation) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2400 West Haven Avenue |
|
Michaels Stores Procurement |
|
|
693,185 |
|
|
|
01/31/24 |
|
New Lenox, IL |
|
Company, Inc. (Michaels Stores, Inc.) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
43955 Plymouth Oaks Boulevard |
|
Tower Automotive Products Company |
|
|
290,133 |
|
|
|
10/31/12 |
|
Plymouth, MI |
|
(Tower Automotive, Inc.) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
121 Technology Drive |
|
Heidelberg Web Systems, Inc. |
|
|
500,500 |
|
|
|
03/30/21 |
|
Durham, NH |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3225 Meridian Parkway |
|
Hagemeyer Foods, Inc. |
|
|
201,845 |
|
|
|
12/31/12 |
|
Weston, FL |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
291 Park Center Drive |
|
Kraft Foods North America, Inc. |
|
|
344,700 |
|
|
|
03/31/11 |
|
Winchester, VA |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1109 Commerce Boulevard |
|
Linens-n-Things, Inc. |
|
|
262,644 |
|
|
|
12/31/08 |
|
Logan Township, NJ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3245 Meridian Parkway |
|
Circuit City Stores, Inc. |
|
|
230,600 |
|
|
|
02/28/17 |
|
Weston, FL |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
736 Addison Road |
|
Corning, Inc. |
|
|
408,000 |
|
|
|
11/30/16 |
|
Erwin, NY |
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
Subtotal Industrial |
|
|
6,579,257 |
|
|
|
|
|
| |
|
|
32
JOINT VENTURE PORTFOLIO
PROPERTY CHART
| |
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
Net |
|
|
| |
|
Tenant/ |
|
Rentable |
|
Current Term |
| Property Location |
|
(Guarantor) |
|
Square Feet |
|
Lease Expiration |
RETAIL/OTHER |
|
|
|
|
|
|
|
|
|
|
|
|
12080 Carmel Mountain Road |
|
Kmart Corporation |
|
|
107,210 |
|
|
|
12/31/18 |
|
San Diego, CA |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5350 Leavitt Road |
|
Kmart Corporation |
|
|
193,193 |
|
|
|
12/31/18 |
|
Lorain, OH |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
255 Northgate Drive |
|
Kmart Corporation |
|
|
107,489 |
|
|
|
12/31/18 |
|
Manteca, CA |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
21082 Pioneer Plaza Drive |
|
Kmart Corporation |
|
|
120,727 |
|
|
|
12/31/18 |
|
Watertown, NY |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
97 Seneca Trail |
|
Kmart Corporation |
|
|
90,933 |
|
|
|
12/31/18 |
|
Fairlea, WV |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1150 West Carl Sandburg Drive |
|
Kmart Corporation |
|
|
94,970 |
|
|
|
12/31/18 |
|
Galesburg, IL |
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
Retail/ Other Subtotal |
|
|
714,522 |
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Grand Total |
|
|
14,651,618 |
|
|
|
|
|
| |
|
|
33
NEWKIRK PORTFOLIO
PROPERTY CHART
| |
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
Net |
|
|
| |
|
Tenant/ |
|
Rentable |
|
Current Term |
| Property Location |
|
(Guarantor) |
|
Square Feet |
|
Lease Expiration |
OFFICE |
|
|
|
|
|
|
|
|
|
|
|
|
12209 W. Markham Street |
|
Entergy Arkansas, Inc. |
|
|
36,311 |
|
|
|
10/31/10 |
|
Little Rock, AR |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5201 West Barraque Street |
|
Entergy Services, Inc. |
|
|
27,189 |
|
|
|
10/31/10 |
|
Pine Bluff, AR |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2230 East Imperial Highway 1 |
|
Raytheon Company/Direct TV |
|
|
184,636 |
|
|
|
12/31/13 |
|
El Segundo, CA |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2200 & 2222 East Imperial Highway 3 |
|
Raytheon Company |
|
|
184,636 |
|
|
|
12/31/18 |
|
El Segundo, CA |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1500 Hughes Way |
|
Raytheon Company |
|
|
478,437 |
|
|
|
12/31/08 |
|
Long Beach, CA |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
599 Ygnacio Valley Road |
|
Hercules Credit, Inc. |
|
|
54,528 |
|
|
|
08/31/07 |
|
Walnut Creek, CA |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5550 Tech Center Drive |
|
Federal Express Corporation |
|
|
71,000 |
|
|
|
04/30/08 |
|
Colorado Spring, CO |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10 John Street |
|
Chesebrough Ponds |
|
|
41,188 |
|
|
|
12/19/08 |
|
Clinton, CT |
|
(Unilever United States, Inc.) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6277 Sea Harbor Drive |
|
Harcourt Brace & Company |
|
|
357,280 |
|
|
|
03/31/09 |
|
Orlando, FL |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sandlake Road/Kirkman Road |
|
Lockheed Martin Corporation |
|
|
184,000 |
|
|
|
04/30/08 |
|
Orlando, FL |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
500 Jackson Street |
|
Cummins Engine Company Inc. |
|
|
390,100 |
|
|
|
07/31/19 |
|
Columbus, IN |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
313 Carondelet |
|
Hibernia Corporation |
|
|
222,432 |
|
|
|
09/08/08 |
|
New Orleans, LA |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1111 Tulane Street |
|
Hibernia Corporation |
|
|
180,595 |
|
|
|
09/08/08 |
|
New Orleans, LA |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
100 Light Street |
|
St. Paul Fire and Marine Insurance Co. |
|
|
530,000 |
|
|
|
09/30/09 |
|
Baltimore, MD |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3165 McKelvey Road |
|
BJC Health System |
|
|
52,994 |
|
|
|
03/31/13 |
|
Bridgeton, MD |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
200 Milik Street |
|
Pathmark Stores, Inc. |
|
|
96,400 |
|
|
|
12/31/11 |
|
Carteret, NJ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
288 North Broad Street |
|
Bank of America |
|
|
30,000 |
|
|
|
08/31/08 |
|
Elizabeth, NJ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Columbia Road and Park Avenue |
|
Honeywell International Inc. |
|
|
225,121 |
|
|
|
05/31/08 |
|
Morris Township, NJ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Columbia Road and Park Avenue |
|
Honeywell International Inc. |
|
|
49,791 |
|
|
|
05/31/08 |
|
Morris Township, NJ |
|
|
|
|
|
|
|
|
|
|
|
|
34
NEWKIRK PORTFOLIO
PROPERTY CHART
| |
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
Net |
|
|
| |
|
Tenant/ |
|
Rentable |
|
Current Term |
| Property Location |
|
(Guarantor) |
|
Square Feet |
|
Lease Expiration |
OFFICE (Continued) |
|
|
|
|
|
|
|
|
|
|
|
|
Columbia Road and Park Avenue |
|
Honeywell International Inc. |
|
|
136,516 |
|
|
|
05/31/08 |
|
Morris Township, NJ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Columbia Road and Park Avenue |
|
Honeywell International Inc. |
|
|
316,129 |
|
|
|
05/31/08 |
|
Morris Township, NJ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
656 Plainsboro Road |
|
Bank of America |
|
|
2,000 |
|
|
|
08/31/08 |
|
Plainsboro, NJ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6226 West Sahara Avenue |
|
Nevada Power Company |
|
|
282,000 |
|
|
|
01/31/14 |
|
Las Vegas, NV |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9393 Springsboro Pike |
|
Reed Elsevier, Inc. |
|
|
61,229 |
|
|
|
01/31/08 |
|
Miamisburg, OH |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9393 Springsboro Pike |
|
Reed Elsevier, Inc. |
|
|
85,873 |
|
|
|
01/31/08 |
|
Miamisburg, OH |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
265 Lehigh Street |
|
Wachovia Bank N.A. |
|
|
71,230 |
|
|
|
10/31/10 |
|
Allentown, PA |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
207
Mockingbird Lane |
|
Sun Trust Bank |
|
|
63,800 |
|
|
|
11/30/11 |
|
Johnson City, TN |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
420 Riverport Road |
|
American Electric Power |
|
|
42,770 |
|
|
|
06/30/08 |
|
Kingport, TN |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3965 Airways Boulevard |
|
Federal Express Corporation |
|
|
521,286 |
|
|
|
06/19/19 |
|
Memphis, TN |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
800 Ridgelake Boulevard |
|
The Kroger Co. |
|
|
75,000 |
|
|
|
07/01/08 |
|
Memphis, TN |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3535 Calder Avenue |
|
Wells Fargo & Co. |
|
|
49,689 |
|
|
|
11/30/07 |
|
Beaumont, TX |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
350 Pine Street |
|
Entergy Gulf States |
|
|
427,104 |
|
|
|
07/31/07 |
|
Beaumont, TX |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1900 L. Don Dodson Drive |
|
VACANT |
|
|
206,905 |
|
|
|
— |
|
Bedford, TX |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010 Alderson Drive |
|
Wells Fargo & Co. |
|
|
185,000 |
|
|
|
12/31/07 |
|
Dallas, TX |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1200 Jupiter Road |
|
Raytheon Company |
|
|
278,759 |
|
|
|
05/31/11 |
|
Garland, TX |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Route 64 West & Junction 333 |
|
Entergy Gulf States |
|
|
191,950 |
|
|
|
05/09/08 |
|
Russellville, AR |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
101 East Washington Boulevard |
|
Bank One |
|
|
69,690 |
|
|
|
10/31/16 |
|
Fort Wayne, IN |
|
American Electric Power |
|
|
278,762 |
|
|
|
10/31/16 |
|
35
NEWKIRK PORTFOLIO
PROPERTY CHART
| |
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
Net |
|
|
| |
|
Tenant/ |
|
Rentable |
|
Current Term |
| Property Location |
|
(Guarantor) |
|
Square Feet |
|
Lease Expiration |
OFFICE (Continued) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
700 US Hwy Route 202-206 |
|
Biovail Pharmaceuticals, Inc. |
|
|
115,558 |
|
|
|
10/31/14 |
|
Bridgewater, NJ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
850-950 Warrenville Road |
|
National Louis University |
|
|
85,532 |
|
|
|
12/31/19 |
|
Lisle, IL |
|
James J. Benes & Associates |
|
|
6,347 |
|
|
|
01/31/14 |
|
|
|
PRIMMS, Inc. |
|
|
7,535 |
|
|
|
08/31/09 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
333 Mt. Hope Avenue |
|
BASF Corporation |
|
|
95,500 |
|
|
|
09/30/14 |
|
Rockway, NJ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
180 South Clinton Street |
|
Frontier Corporation |
|
|
226,000 |
|
|
|
12/31/14 |
|
Rochester, NY |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17770 Cartwright Road |
|
Associates First Capital Corporation |
|
|
200,000 |
|
|
|
09/08/08 |
|
Irvine, CA |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
255 California Street |
|
Multi-Tenanted |
|
|
142,239 |
|
|
Various |
San Francisco, CA |
|
VACANT |
|
|
27,607 |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5724 W. Las Positas Boulevard |
|
NK Leasehold |
|
|
41,760 |
|
|
|
11/30/09 |
|
Pleasanton, CA |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
849 Front Street |
|
Multi-Tenanted |
|
|
13,852 |
|
|
Various |
Evanston, WY |
|
VACANT |
|
|
8,442 |
|
|
|
— |
|
| |
|
|
|
|
Office Subtotal |
|
|
7,712,702 |
|
|
|
|
|
| |
|
|
36
NEWKIRK PORTFOLIO
PROPERTY CHART
| |
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
Net |
|
|
| |
|
Tenant/ |
|
Rentable |
|
Current Term |
| Property Location |
|
(Guarantor) |
|
Square Feet |
|
Lease Expiration |
INDUSTRIAL |
|
|
|
|
|
|
|
|
|
|
|
|
1665 Hughes Way |
|
Raytheon Company |
|
|
200,541 |
|
|
|
12/31/08 |
|
Long Beach, CA |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3333 Coyote Hill Road |
|
Xerox Corporation |
|
|
123,000 |
|
|
|
12/13/13 |
|
Palo Alto, CA |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2455 Premier Drive |
|
Walgreen Co. |
|
|
205,016 |
|
|
|
03/31/11 |
|
Orlando, FL |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1901 Ragu Drive |
|
Ragu Foods, Inc |
|
|
443,380 |
|
|
|
12/19/08 |
|
Owensboro, KY |
|
(Unilever United States, Inc.) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North Wells Road |
|
United Technologies Corp. |
|
|
820,868 |
|
|
|
12/31/10 |
|
North Berwick, ME |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
75 North Street |
|
Rotron Inc. (EG&G) |
|
|
52,000 |
|
|
|
12/31/09 |
|
Saugerties, NY |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
US Highway 17 |
|
Food Lion, Inc. |
|
|
36,828 |
|
|
|
10/31/08 |
|
North Myrtle Beach, SC |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
120 South East Parkway Drive |
|
United Technologies Corp. |
|
|
289,330 |
|
|
|
12/31/08 |
|
Franklin, TN |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3456 Meyers Avenue |
|
Sears, Roebuck & Company |
|
|
780,000 |
|
|
|
02/28/17 |
|
Memphis,TN |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
300 Bennett Lane |
|
Xerox Corporation |
|
|
256,000 |
|
|
|
06/30/08 |
|
Lewisville, TX |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4400 State Road 19 |
|
Walgreen Co. |
|
|
356,000 |
|
|
|
02/28/12 |
|
Windsor, WI |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
749 Southrock Drive |
|
Jacobson Warehouse Company, Inc. |
|
|
150,000 |
|
|
|
12/31/15 |
|
Rockford, IL |
|
(Jacobson Transportation Company, Inc.) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3686 South Central Avenue |
|
Jacobson Warehouse Company, Inc. |
|
|
90,000 |
|
|
|
12/31/14 |
|
Rockford, IL |
|
(Jacobson Transportation Company, Inc.) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2203 Sherrill Drive |
|
LA-Z-Boy Greenboro, Inc. |
|
|
639,600 |
|
|
|
04/30/10 |
|
Statesville, NC |
|
(LA-Z-Boy Incorporated) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7005 Cochran Road |
|
Royal Appliance Mfg. Co. |
|
|
458,000 |
|
|
|
07/31/15 |
|
Glen Willow, OH |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1420 Greenwood Road |
|
Atlas Cold Storage America LLC |
|
|
201,583 |
|
|
|
10/31/17 |
|
McDonough, GA |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1650-1654 Williams Road |
|
ODW Logistics, Inc. |
|
|
744,800 |
|
|
|
06/30/18 |
|
Columbus, OH |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2880 Kenny Biggs Road |
|
Quickie Manufacturing Corp. |
|
|
308,000 |
|
|
|
11/30/21 |
|
Lumberton, NC |
|
|
|
|
|
|
|
|
|
|
|
|
37
NEWKIRK PORTFOLIO
PROPERTY CHART
| |
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
Net |
|
|
| |
|
Tenant/ |
|
Rentable |
|
Current Term |
| Property Location |
|
(Guarantor) |
|
Square Feet |
|
Lease Expiration |
INDUSTRIAL (Continued) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10590 Hamilton Avenue |
|
The Hillman Group, Inc. |
|
|
247,000 |
|
|
|
08/31/16 |
|
Cincinnati, OH |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
Industrial Subtotal |
|
|
6,401,946 |
|
|
|
|
|
| |
|
|
38
NEWKIRK PORTFOLIO
PROPERTY CHART
| |
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
Net |
|
|
| |
|
Tenant/ |
|
Rentable |
|
Current Term |
| Property Location |
|
(Guarantor) |
|
Square Feet |
|
Lease Expiration |
RETAIL/ OTHER |
|
|
|
|
|
|
|
|
|
|
|
|
302 Croxcreek Parkway |
|
The Kroger Co. |
|
|
42,130 |
|
|
|
07/01/08 |
|
Florence, AL |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5544 Atlanta Highway |
|
Beasley Development LLC |
|
|
60,698 |
|
|
Month-To-Month |
Montgomery, AL |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bisbee Naco Highway & Highway 92 |
|
Safeway Stores, Inc. |
|
|
30,181 |
|
|
|
03/31/09 |
|
Bisbee, AZ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Grant Road & Craycroft |
|
Safeway Stores, Inc. |
|
|
37,268 |
|
|
|
03/31/09 |
|
Tucson, AZ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
22765 Aspan Street |
|
Mark C. Bloome (Goodyear) |
|
|
10,250 |
|
|
|
05/31/09 |
|
Lake Forest, CA |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Old Mamoth Road/Meridian Blvd |
|
Safeway Stores, Inc. |
|
|
44,425 |
|
|
|
05/31/12 |
|
Mammoth Lakes, CA |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15745 Monterey Road |
|
Gerard Tire Services (Goodyear) |
|
|
10,250 |
|
|
|
05/31/09 |
|
Morgan Hill, CA |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1400 Stoneridge Mall |
|
Federated Department Stores |
|
|
175,000 |
|
|
|
08/31/12 |
|
Pleasanton, CA |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1631 West Redlands Boulevard |
|
Mark C. Bloome (Goodyear) |
|
|
11,200 |
|
|
|
05/31/09 |
|
Redlands, CA |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
270 Fashion Valley Road |
|
Nordstrom, Inc. |
|
|
225,919 |
|
|
|
12/31/16 |
|
San Diego, CA |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
315 Colorado Avenue |
|
Federated Department Stores |
|
|
150,000 |
|
|
|
09/30/12 |
|
Santa Monica, CA |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18182 Irvine Boulevard |
|
Mervyn’s |
|
|
72,000 |
|
|
|
12/31/07 |
|
Tustin, CA |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
34734 Alvarado Niles Road |
|
Gerard Tire Services (Goodyear) |
|
|
10,800 |
|
|
|
05/31/09 |
|
Union City, CA |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
500 East Harbor Boulevard |
|
City of San Buenaventura |
|
|
39,600 |
|
|
|
11/30/13 |
|
Venture, CA |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17005 Imperial Highway |
|
Mark C. Bloome (Goodyear) |
|
|
10,800 |
|
|
|
05/31/09 |
|
Yorba Linda., CA |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15220 East 6th Avenue |
|
VACANT |
|
|
41,384 |
|
|
|
— |
|
Aurora, CO |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12000 East Mississippi Avenue |
|
Safeway Stores, Inc. |
|
|
24,000 |
|
|
|
05/31/12 |
|
Aurora, CO |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kipling Street & Bowles Avenue |
|
VACANT |
|
|
29,360 |
|
|
|
— |
|
Littleon, CO |
|
|
|
|
|
|
|
|
|
|
|
|
39
NEWKIRK PORTFOLIO
PROPERTY CHART
| |
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
Net |
|
|
| |
|
Tenant/ |
|
Rentable |
|
Current Term |
| Property Location |
|
(Guarantor) |
|
Square Feet |
|
Lease Expiration |
RETAIL/ OTHER (Continued) |
|
|
|
|
|
|
|
|
|
|
|
|
10340 U.S. 19 |
|
VACANT |
|
|
53,820 |
|
|
|
— |
|
Port Richey, FL |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010 Apalachee Parkway |
|
VACANT |
|
|
53,820 |
|
|
|
— |
|
Tallahassee, FL |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2223 North Druid Hills Road |
|
Bank of America |
|
|
6,260 |
|
|
|
12/31/09 |
|
Atlanta, GA |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
956 Ponce de Leon Avenue |
|
Bank of America |
|
|
3,900 |
|
|
|
12/31/09 |
|
Atlanta, GA |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4545 Chamblee — Dunwoody Road |
|
Bank of America |
|
|
4,565 |
|
|
|
12/31/09 |
|
Chamblee, GA |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
201 West Main Street |
|
Bank of America |
|
|
14,208 |
|
|
|
12/31/09 |
|
Cumming, GA |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3468 Georgia Highway 120 |
|
Bank of America |
|
|
9,300 |
|
|
|
12/31/09 |
|
Duluth, GA |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1066 Main Street |
|
Bank of America |
|
|
14,859 |
|
|
|
12/31/09 |
|
Forest Park, GA |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
825 Southway Drive |
|
Bank of America |
|
|
4,894 |
|
|
|
12/31/09 |
|
Jonesboro, GA |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1698 Mountain Indus. Boulevard |
|
Bank of America |
|
|
5,704 |
|
|
|
12/31/09 |
|
Stone Mountain, GA |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
502 East Carmel Drive |
|
Marsh Supermarkets, Inc. |
|
|
38,567 |
|
|
|
10/31/08 |
|
Carmel, IN |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5104 North Franklin Road |
|
Marsh Supermarkets, Inc. |
|
|
28,721 |
|
|
|
10/31/08 |
|
Lawrence, IN |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2440 Bardstown Road (Supermarket) |
|
The Kroger Co. |
|
|
40,019 |
|
|
|
12/29/11 |
|
Louisville, KY |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2440 Bardstown Road |
|
The Kroger Co. |
|
|
9,600 |
|
|
|
01/28/11 |
|
Louisville, KY |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
205 Homer Road |
|
Safeway Stores, Inc. |
|
|
35,000 |
|
|
|
11/30/07 |
|
Minden, LA |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
24th Street West & St. John’s Avenue |
|
Safeway Stores, Inc. |
|
|
40,800 |
|
|
|
05/31/10 |
|
Billings, MT |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Little Rock Road/Tuckaseegee Road |
|
Food Lion, Inc. |
|
|
33,640 |
|
|
|
10/31/08 |
|
Charlotte, NC |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Brown Mill Road/US 601 |
|
Food Lion, Inc. |
|
|
32,259 |
|
|
|
10/31/08 |
|
Concord, NC |
|
|
|
|
|
|
|
|
|
|
|
|
40
NEWKIRK PORTFOLIO
PROPERTY CHART
| |
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
Net |
|
|
| |
|
Tenant/ |
|
Rentable |
|
Current Term |
| Property Location |
|
(Guarantor) |
|
Square Feet |
|
Lease Expiration |
RETAIL/ OTHER (Continued) |
|
|
|
|
|
|
|
|
|
|
|
|
Gum Branch Road |
|
Food Lion, Inc. |
|
|
23,000 |
|
|
|
02/28/08 |
|
Jacksonville, NC |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
US 221 & Hospital Road |
|
Food Lion, Inc. |
|
|
23,000 |
|
|
|
02/28/08 |
|
Jefferson, NC |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
291 Talbet Boulevard |
|
Food Lion, Inc. |
|
|
23,000 |
|
|
|
02/28/08 |
|
Lexington, NC |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Julian Avenue/Clominger Street |
|
Food Lion, Inc. |
|
|
21,000 |
|
|
|
10/31/08 |
|
Thomasville, NC |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10 South Avenue |
|
Pathmark Stores, Inc. |
|
|
52,000 |
|
|
|
05/30/11 |
|
Garwood, NJ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2910 Juan Tabo Blvd. |
|
Safeway Stores, Inc. |
|
|
35,000 |
|
|
|
11/30/12 |
|
Albuquerque, NM |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
130 Midland Avenue |
|
Pathmark Stores, Inc. |
|
|
59,000 |
|
|
|
10/31/08 |
|
Portchester, NY |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1606 North Bend Road |
|
VACANT |
|
|
25,628 |
|
|
|
— |
|
Cincinnati, OH |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2000 East Main Street |
|
The Kroger Co. |
|
|
34,019 |
|
|
|
12/29/11 |
|
Columbus, OH |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1084 East Second Street |
|
Marsh Supermarkets, Inc. |
|
|
29,119 |
|
|
|
10/31/08 |
|
Franklin, OH |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
N.E.C. 45th Street/Lee Boulevard
|
|
Safeway Stores, Inc. |
|
|
30,757 |
|
|
|
03/31/09 |
|
Lawton, OK |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1642 Williams Avenue |
|
Safeway Stores, Inc. |
|
|
33,770 |
|
|
|
03/31/09 |
|
Grants Pass, OR |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
559 North Main Street |
|
Citizens Bank of Pennsylvania |
|
|
3,800 |
|
|
|
08/31/08 |
|
Doylestown, PA |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25 East Main Street |
|
Citizens Bank of Pennsylvania |
|
|
3,800 |
|
|
|
08/31/08 |
|
Lansdale, PA |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1055 West Baltimore Pike |
|
Citizens Bank of Pennsylvania |
|
|
3,800 |
|
|
|
08/31/08 |
|
Lima, PA |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4947 North Broad Street |
|
Citizens Bank of Pennsylvania |
|
|
3,800 |
|
|
|
08/31/08 |
|
Philadelphia, PA |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2001-03 Broad Street |
|
Citizens Bank of Pennsylvania |
|
|
3,800 |
|
|
|
08/31/08 |
|
Philadelphia, PA |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6201 North 5th Street |
|
Citizens Bank of Pennsylvania |
|
|
3,800 |
|
|
|
08/31/08 |
|
Philadelphia, PA |
|
|
|
|
|
|
|
|
|
|
|
|
41
NEWKIRK PORTFOLIO
PROPERTY CHART
| |
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
Net |
|
|
| |
|
Tenant/ |
|
Rentable |
|
Current Term |
| Property Location |
|
(Guarantor) |
|
Square Feet |
|
Lease Expiration |
RETAIL/ OTHER (Continued) |
|
|
|
|
|
|
|
|
|
|
|
|
7323-29 Frankford Avenue |
|
Citizens Bank of Pennsylvania |
|
|
3,800 |
|
|
|
08/31/08 |
|
Philadelphia, PA |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15 South 52nd Street |
|
Citizens Bank of Pennsylvania |
|
|
3,800 |
|
|
|
08/31/08 |
|
Philadelphia, PA |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10650 Bustleton Avenue |
|
Citizens Bank of Pennsylvania |
|
|
3,800 |
|
|
|
08/31/08 |
|
Philadelphia, PA |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1025 West Lehigh Avenue |
|
Citizens Bank of Pennsylvania |
|
|
3,800 |
|
|
|
08/31/08 |
|
Philadelphia, PA |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2014 Cottman Avenue |
|
Citizens Bank of Pennsylvania |
|
|
3,800 |
|
|
|
08/31/08 |
|
Philadelphia, PA |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4160 Monument Road |
|
Pathmark Stores, Inc. |
|
|
50,000 |
|
|
|
11/31/10 |
|
Philadelphia, PA |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15 Newton — Richboro Road |
|
Citizens Bank of Pennsylvania |
|
|
3,800 |
|
|
|
08/31/08 |
|
Richboro, PA |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
363 West Lancaster Avenue |
|
Citizens Bank of Pennsylvania |
|
|
3,800 |
|
|
|
08/31/08 |
|
Wayne, PA |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
S. Carlina 52/52 Bypass |
|
Food Lion, Inc. |
|
|
23,000 |
|
|
|
02/28/13 |
|
Moncks Corner, SC |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1600 East 23rd Street |
|
The Kroger Co. |
|
|
42,130 |
|
|
|
07/01/08 |
|
Chattanooga, TN |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1053 Mineral Springs Raod |
|
The Kroger Co. |
|
|
31,170 |
|
|
|
07/01/08 |
|
Paris, TN |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3040 Josey Lane |
|
Ong's Family Inc. |
|
|
61,000 |
|
|
|
01/31/21 |
|
Carrolton, TX |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1610 South Westmoreland Avenue |
|
Malone's Food Stores |
|
|
68,024 |
|
|
|
03/31/17 |
|
Dallas, TX |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3451 Alta Mesa Boulevard |
|
Safeway Stores, Inc. |
|
|
44,000 |
|
|
|
05/31/07 |
|
Fort Worth, TX |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
101 West Buckingham Road |
|
Safeway Stores, Inc. |
|
|
40,000 |
|
|
|
11/30/12 |
|
Garland, TX |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1415 Highway 377 East |
|
Safeway Stores, Inc. |
|
|
35,000 |
|
|
|
11/30/07 |
|
Granbury, TX |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2500 E. Carrier Parkway |
|
Safeway Stores, Inc. |
|
|
49,349 |
|
|
|
03/31/09 |
|
Grand Prairie, TX |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4811 Wesley Street |
|
Safeway Stores, Inc. |
|
|
48,427 |
|
|
|
05/31/11 |
|
Greenville, TX |
|
|
|
|
|
|
|
|
|
|
|
|
42
NEWKIRK PORTFOLIO
PROPERTY CHART
| |
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
Net |
|
|
| |
|
Tenant/ |
|
Rentable |
|
Current Term |
| Property Location |
|
(Guarantor) |
|
Square Feet |
|
Lease Expiration |
RETAIL/ OTHER (Continued) |
|
|
|
|
|
|
|
|
|
|
|
|
120 South Waco Street |
|
Safeway Stores, Inc. |
|
|
35,000 |
|
|
|
11/30/07 |
|
Hillsboro, TX |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13133 Steubner Ave |
|
The Kroger Co. |
|
|
52,200 |
|
|
|
12/29/11 |
|
Houston, TX |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5402 4th Street |
|
VACANT |
|
|
53,820 |
|
|
|
— |
|
Lubbock, TX |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3211 W. Beverly Street |
|
Food Lion, Inc. |
|
|
23,000 |
|
|
|
02/28/08 |
|
Staunton, VA |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9803 Edmonds Way |
|
VACANT |
|
|
35,459 |
|
|
|
— |
|
Edmonds, WA |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
224th Street & Meridan |
|
Safeway Stores, Inc. |
|
|
44,718 |
|
|
|
03/31/09 |
|
Graham, WA |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Meridan & 65th |
|
Safeway Stores, Inc. |
|
|
44,718 |
|
|
|
03/31/09 |
|
Milton, WA |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1700 State Route 160 |
|
Jubilee Fun |
|
|
27,968 |
|
|
month to month |
Port Orchard, WA |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
228th Avenue, N.E. |
|
Safeway Stores, Inc. |
|
|
44,718 |
|
|
|
03/31/09 |
|
Redmond, WA |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
849 Front Street |
|
Bank of the West |
|
|
7,206 |
|
|
|
03/31/09 |
|
Evanston, WY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10415 Grande Avenue |
|
Furrs Cafeterias Operators LP |
|
|
10,000 |
|
|
|
04/30/12 |
|
Sun City, AZ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
101 Creger |
|
Lithia Motors |
|
|
10,000 |
|
|
|
05/31/12 |
|
Ft. Collins, CO |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
900 South Canal Street. |
|
Furrs Cafeterias Operators LP |
|
|
10,000 |
|
|
|
04/30/12 |
|
Carlsbad, NM |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4121 South Port Avenue |
|
Furrs Cafeterias Operators LP |
|
|
10,000 |
|
|
|
04/30/12 |
|
Corpus Christi, TX |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
119 North Balboa Road |
|
Furrs Cafeterias Operators LP |
|
|
10,000 |
|
|
|
04/30/12 |
|
El Paso, TX |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
901 West Expressway |
|
Furrs Cafeterias Operators LP |
|
|
10,000 |
|
|
|
04/30/12 |
|
McAllen, TX |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
402 East Crestwood Drive |
|
Furrs Cafeterias Operators LP |
|
|
10,000 |
|
|
|
04/30/12 |
|
Victoria, TX |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
928 First Avenue |
|
Rock Falls County Market |
|
|
27,650 |
|
|
|
09/30/11 |
|
Rock Falls, IL |
|
|
|
|
|
|
|
|
|
|
|
|
43
NEWKIRK PORTFOLIO
PROPERTY CHART
| |
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
Net |
|
|
| |
|
Tenant/ |
|
Rentable |
|
Current Term |
| Property Location |
|
(Guarantor) |
|
Square Feet |
|
Lease Expiration |
RETAIL/ OTHER Continued |
|
|
|
|
|
|
|
|
|
|
|
|
4512 N Market |
|
Safeway Stores, Inc |
|
|
38,905 |
|
|
|
03/31/09 |
|
Spokane, WA |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3621 E Lincoln Way |
|
VACANT |
|
|
31,420 |
|
|
|
— |
|
Cheyenne, WY |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9400 South 755 East |
|
VACANT |
|
|
41,612 |
|
|
|
— |
|
Sandy, UT |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7470 El Camino Real |
|
CSK Auto (Albertsons Inc.) |
|
|
4,000 |
|
|
|
01/31/09 |
|
Atascadero, CA |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
635 Highland Spring Road |
|
CSK Auto (Albertsons Inc.). |
|
|
4,000 |
|
|
|
01/31/09 |
|
Beaumont, CA |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2044 West Main Street |
|
CSK Auto (Albertsons Inc.) |
|
|
7,000 |
|
|
|
01/31/09 |
|
Paso Robles, CA |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1321 Commerce Street |
|
Adolphus Associates (Met Life) |
|
|
498,122 |
|
|
|
06/15/09 |
|
Dallas, TX |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2200/2230 & 2222 East Imperial , Highway 2 |
|
Raytheon Company |
|
|
959,000 |
|
|
|
12/31/18 |
|
El Segundo, CA |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2404 West Main Street |
|
CSK Auto (Albertsons Inc.) |
|
|
3,030 |
|
|
|
01/31/09 |
|
Farmington, NM |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2520 E. Bonanza Road |
|
CSK Auto (Albertsons Inc.) |
|
|
2,800 |
|
|
|
01/31/09 |
|
Las Vegas, NV |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8960 Dyer Street |
|
CSK Auto (Albertsons Inc.) |
|
|
2,625 |
|
|
|
01/31/09 |
|
El Paso, TX |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6100 Alameda Avenue |
|
CSK Auto (Albertsons Inc.) |
|
|
2,800 |
|
|
|
01/31/09 |
|
El Paso, TX |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3322 82nd Street |
|
CSK Auto (Albertsons Inc.) |
|
|
2,550 |
|
|
|
01/31/09 |
|
Lubbock, TX |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25 E. McKellips Road |
|
CSK Auto (Albertsons Inc.) |
|
|
2,660 |
|
|
|
01/31/09 |
|
Mesa, AZ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7200 Cradle Rock Way |
|
GFS Realty, Inc. |
|
|
57,209 |
|
|
|
12/31/08 |
|
Columbia, MD |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
185 Washburn Circle |
|
Mark C. Bloome (Goodyear) |
|
|
9,400 |
|
|
|
09/30/12 |
|
Corona, CA |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
810124 Highway 111 |
|
Mark C. Bloome (Goodyear) |
|
|
9,600 |
|
|
|
09/30/12 |
|
Indio, CA |
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
Retail/Other Subtotal |
|
|
4,529,184 |
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Grand Total |
|
|
18,643,832 |
|
|
|
|
|
| |
|
|
44
Item 3. Legal Proceedings
From time to time we are involved in legal proceedings arising in the ordinary course of our
business. In our management’s opinion, after consultation with legal counsel, the outcome of such
matters is not expected to have a material adverse effect on our ownership, financial condition,
management or operation of our properties or business.
Item 4. Submission of Matters to a Vote of Security Holders
Special Shareholder Meeting
On November 20, 2006, we held a special meeting of our common shareholders of record as of
October 13, 2006 to consider and vote on the following two proposals:
| |
• |
|
To approve the Agreement and Plan of Merger, dated as of July 23, 2006, by and among
us and Newkirk including the merger of Newkirk with and into us, the adoption of the
Amended and Restated Declaration of Trust of us and the issuance of our common shares
under and as contemplated by the merger agreement. |
| |
| |
• |
|
To approve the adjournment or postponement of the special meeting, if necessary, to
permit further solicitation of proxies if there are not sufficient votes at the time the
special meeting to approve the proposals. |
At this meeting the common shareholders approved the first proposal, which dispensed the need
to hold a vote on the second proposal. The number of votes cast for, against, or abstained, with
respect to first proposal follows:
| |
|
|
|
|
| For |
|
Against |
|
Abstain |
37,832,419
|
|
770,201
|
|
193,121 |
Executive Officers of the Registrant
The following sets forth certain information relating to our executive officers:
| |
|
|
| Name |
|
Business Experience |
Michael L. Ashner
Age 54
|
|
Mr. Ashner served as Chairman and the
Chief Executive Officer of Newkirk
until consummation of the merger, a
position he held since June 2005. On
December 31, 2006, Mr. Ashner was
appointed as our Executive Chairman and
Director of Strategic Acquisitions. Mr.
Ashner also serves as a trustee and the
Chairman and Chief Executive Officer of
Winthrop Realty Trust, positions he has
held since January 2004. Since 1996 he
has also served as the Chief Executive
Officer of Winthrop Realty Partners,
L.P., which we refer to as Winthrop, a
real estate investment and management
company. Mr. Ashner
devotes the business time to us as is
reasonably required to perform his
duties. Mr. Ashner served as a director
and Chief Executive Officer of
Shelbourne Properties I, Inc.,
Shelbourne Properties II, Inc. and
Shelbourne Properties III, Inc., three
real estate investment trusts, from
August 2002 until their liquidation in
April 2004. Mr. Ashner also serves on
the board of directors of NBTY, Inc., a
manufacturer and distributor of
nutritional supplements. |
|
|
|
E. Robert Roskind
Age 61
|
|
Mr. Roskind became Co-Vice Chairman on December 31,
2006, and served as our Chairman from October 1993 to
December 31, 2006 and our Co-Chief Executive Officer
from October 1993 to January 2003. Mr. Roskind also
serves as the Chairman of LSAC. He founded The LCP
Group, L.P., a real estate advisory firm, in 1973 and
has been its Chairman since 1976. Mr. Roskind also serves as
Chairman of Crescent Hotels and Resorts, as a member of the Board of
Directors of LCP Investment Corporation, a Japanese real estate
investment trust listed on the Tokyo Stock Exchange, and as a member
of the Board of Directors of LCP Reit Advisors, the external advisor
to LCP Investment Corporation, each of which is an affiliate of the
LCP Group L.P. Mr. Roskind spends
approximately 25% of his business time on the affairs of
The LCP Group L.P. and its affiliates; however, Mr. Roskind prioritizes his business time to address our
needs ahead of The LCP Group L.P. |
|
|
|
Richard J. Rouse
Age 61
|
|
Mr. Rouse became Co-Vice Chairman on December 31, 2006,
served, and continues to serve as our Chief Investment
Officer since January 2003 and as one of our trustees
since October 1993. He served as our President from
October 1993 to April 1996, was our Co-Chief Executive
Officer from October 1993 until January 2003, and since April 1996 served as our Vice Chairman. Mr. Rouse also
serves as Chief Investment Officer of LSAC. |
45
| |
|
|
T. Wilson Eglin
Age 42
|
|
Mr. Eglin has served as our Chief Executive Officer
since January 2003, our Chief Operating Officer since
October 1993, our President since April 1996 and as a
trustee since May 1994. He served as one of our
Executive Vice Presidents from October 1993 to April
1996. Mr. Eglin also serves as Chief Executive
Officer and President and a member of the Board of
Directors of LSAC. |
|
|
|
Patrick Carroll
Age 43
|
|
Mr. Carroll has served as our Chief Financial Officer
since May 1998, our Treasurer since January 1999 and
one of our Executive Vice Presidents since January
2003. Mr. Carroll also serves as an Executive Vice
President and the Chief Financial Officer of LSAC.
Prior to joining us, Mr. Carroll was, from 1993 to
1998, a Senior Manager in the real estate practice of
Coopers & Lybrand L.L.P., a public accounting firm
that was one of the predecessors of Pricewaterhouse
Coopers LLP. |
|
|
|
John B. Vander Zwaag
Age 49
|
|
Mr. Vander Zwaag has been employed by us since May
2003 and currently is one of our Executive Vice
Presidents. Mr. Vander Zwaag also serves as an
Executive Vice President of LSAC. From 1982 to 1992,
he was employed by The LCP Group L.P. serving as
Director of Acquisitions from 1987 to 1992. Between
his employment by The LCP Group L.P. and the Company,
Mr. Vander Zwaag was managing director of Chesterton
Binswanger Capital Advisors (1992 — 1997) and
Managing Director with Cohen Financial (1997 — 2003). |
|
|
|
Paul R. Wood
Age 46
|
|
Mr. Wood has served as one of our Vice Presidents,
and our Chief Accounting Officer and Secretary since
October 1993. |
46
PART II.
|
|
|
| Item 5. |
|
Market For The Registrant’s Common Equity, Related Shareholder Matters And Issuer Purchases
of Equity Securities |
Market Information. Our common shares are listed for trading on the New York Stock Exchange
(“NYSE”) under the symbol “LXP.” The following table sets forth the high and low sales prices as
reported by the NYSE for our common shares for each of the periods indicated below:
| |
|
|
|
|
|
|
|
|
| For the Quarters Ended: |
|
High |
|
Low |
December 31, 2006 |
|
$ |
22.73 |
|
|
$ |
20.40 |
|
September 30, 2006 |
|
|
21.90 |
|
|
|
19.53 |
|
June 30, 2006 |
|
|
22.15 |
|
|
|
19.87 |
|
March 31, 2006 |
|
|
22.90 |
|
|
|
19.64 |
|
December 31, 2005 |
|
|
23.62 |
|
|
|
20.37 |
|
September 30, 2005 |
|
|
25.19 |
|
|
|
21.65 |
|
June 30, 2005 |
|
|
24.39 |
|
|
|
21.99 |
|
March 31, 2005 |
|
|
23.56 |
|
|
|
20.65 |
|
The per share closing price of our common shares was $20.99 on February 23, 2007.
Holders. As of February 23, 2007, we had approximately 2,561 common shareholders of record.
Dividends. We have made quarterly distributions since October 1986 without interruption.
The common share dividends paid in each quarter for the last five years are as follows:
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Quarters Ended |
|
2006 |
|
2005 |
|
2004 |
|
2003 |
|
2002 |
March 31, |
|
$ |
0.365 |
|
|
$ |
0.360 |
|
|
$ |
0.350 |
|
|
$ |
0.335 |
|
|
$ |
0.330 |
|
June 30, |
|
$ |
0.365 |
|
|
$ |
0.360 |
|
|
$ |
0.350 |
|
|
$ |
0.335 |
|
|
$ |
0.330 |
|
September 30, |
|
$ |
0.365 |
|
|
$ |
0.360 |
|
|
$ |
0.350 |
|
|
$ |
0.335 |
|
|
$ |
0.330 |
|
December 31, |
|
$ |
0.365 |
|
|
$ |
0.360 |
|
|
$ |
0.350 |
|
|
$ |
0.335 |
|
|
$ |
0.330 |
|
Our current quarterly common share dividend rate is $0.365 per share, or $1.46 per common
share on an annualized basis. We disclosed that we anticipate that our annualized divided would be
increased to $1.50 per share, subject to approval by our Board of Trustees.
The following is a summary of the average taxable nature of our common share dividends for the
three years ended December 31:
| |
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
2006 |
|
|
2005 |
|
|
2004 |
|
Total dividends per share |
|
$ |
1.46 |
|
|
$ |
1.44 |
|
|
$ |
1.40 |
|
|
|
|
|
|
|
|
|
|
|
Ordinary income |
|
|
68.89 |
% |
|
|
87.29 |
% |
|
|
84.09 |
% |
15% rate — qualifying dividend |
|
|
0.77 |
|
|
|
1.04 |
|
|
|
6.82 |
|
15% rate gain |
|
|
7.97 |
|
|
|
8.72 |
|
|
|
0.34 |
|
25% rate gain |
|
|
5.13 |
|
|
|
2.95 |
|
|
|
2.28 |
|
Return of capital |
|
|
17.24 |
|
|
|
— |
|
|
|
6.47 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
100.00 |
% |
|
|
100.00 |
% |
|
|
100.00 |
% |
|
|
|
|
|
|
|
|
|
|
The per share dividend on our Series B Cumulative Redeemable Preferred Shares is $2.0125 per
annum.
The following is a summary of the average taxable nature of the dividend on our Series B
Cumulative Redeemable Preferred Shares for the years ended December 31:
| |
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
2006 |
|
2005 |
|
2004 |
Ordinary income |
|
|
83.24 |
% |
|
|
87.29 |
% |
|
|
89.91 |
% |
15% rate — qualifying dividend |
|
|
0.93 |
|
|
|
1.04 |
|
|
|
7.29 |
|
15% rate gain |
|
|
9.63 |
|
|
|
8.72 |
|
|
|
0.37 |
|
25% rate gain |
|
|
6.20 |
|
|
|
2.95 |
|
|
|
2.43 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
100.00 |
% |
|
|
100.00 |
% |
|
|
100.00 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
47
The per share dividend on our Series C Cumulative Convertible Preferred Shares is $3.25 per
annum.
The following is a summary of the average taxable nature of the dividend on our Series C
Cumulative Convertible Preferred Shares for the year ended December 31:
| |
|
|
|
|
|
|
|
|
| |
|
2006 |
|
2005 |
Ordinary income |
|
|
83.24 |
% |
|
|
87.29 |
% |
15% rate — qualifying dividend |
|
|
0.93 |
|
|
|
1.04 |
|
15% rate gain |
|
|
9.63 |
|
|
|
8.72 |
|
25% rate gain |
|
|
6.20 |
|
|
|
2.95 |
|
|
|
|
|
|
|
|
|
|
|
|
|
100.00 |
% |
|
|
100.00 |
% |
|
|
|
|
|
|
|
|
|
While we intend to continue paying regular quarterly dividends to holders of our common
shares, future dividend declarations will be at the discretion of the Board of Trustees and will
depend on our actual cash flow, our financial condition, capital requirements, the annual
distribution requirements under the REIT provisions of the Code and such other factors as our Board
of Trustees deems relevant. The actual cash flow available to pay dividends will be affected by a
number of factors, including, among others, the risks discussed under “Risk Factors” in Part I,
Item 1A and “Management Discussion and Analysis of Financial Condition and Results of Operations”
in Part II, Item 7 of this Annual Report.
The various instruments governing our credit facility and the MLP secured loan impose certain
restrictions on us with regard to dividends and incurring additional debt obligations. See “Risk
Factors” in Part I, Item 1A, “Management’s Discussion and Analysis of Financial Condition and
Results of Operations” in Part II, Item 7 and Note 9 to the Notes to Consolidated Financial
Statements included in this Annual Report.
We do not believe that the financial covenants contained in our credit facility, the MLP’s
secured loan and our secured indebtedness will have any adverse impact on our ability to pay
dividends in the normal course of business to our common and preferred shareholders or to
distribute amounts necessary to maintain our qualification as a REIT.
We maintain a dividend reinvestment program pursuant to which our common shareholders and
holders of OP units may elect to automatically reinvest their dividends and distributions to
purchase our common shares at a 5% discount to the market price and free of commissions and other
charges. We may, from time to time, either repurchase common shares in the open market, or issue
new common shares, for the purpose of fulfilling our obligations under the dividend reinvestment
program. To date, none of the common shares issued under this program were purchased on the open
market.
Equity Compensation Plan Information. The following table sets forth certain information, as
of December 31, 2006, with respect to the compensation plan under which our equity securities are
authorized for issuance.
| |
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
Number of securities |
|
| |
|
|
|
|
|
|
|
|
|
remaining available for |
|
| |
|
Number of securities |
|
|
|
|
|
|
future issuance under |
|
| |
|
to be issued upon |
|
|
Weighted-average |
|
|
equity compensation |
|
| |
|
exercise of |
|
|
exercise price of |
|
|
plans (excluding |
|
| |
|
outstanding options, |
|
|
outstanding options, |
|
|
securities reflected in |
|
| |
|
warrants and rights |
|
|
warrants and rights |
|
|
column (a)) |
|
| Plan Category |
|
(a) |
|
|
(b) |
|
|
(c) |
|
Equity compensation plans approved by security holders |
|
|
16,500 |
|
|
$ |
15.56 |
|
|
|
592,802 |
|
Equity compensation plans not approved by security holders |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
16,500 |
|
|
$ |
15.56 |
|
|
|
592,802 |
|
|
|
|
|
|
|
|
|
|
|
Recent Sales of Unregistered Securities.
In January 2007, the MLP issued $300.0 million in 5.45% guaranteed exchangeable notes due in
2027 which can be put by the holder every five years commencing 2012. The net proceeds of $292.7
were used to repay indebtedness under the MLP’s secured loan. The notes are exchangeable for cash
and, at our option, any excess above the par value of the notes may be exchanged for our common
shares.
In connection with the Merger, the MLP effected a reverse unit-split pursuant to which each
outstanding MLP unit was converted into 0.80 units totaling 35.5 million OP units. During 2006, one
of our operating partnerships issued 34 thousand units (or $750) in connection with an acquisition.
During 2005, one of our operating partnerships issued 0.4 million OP units for approximately $7.7
million in cash. All of such interest are redeemable at certain times, only at the option of the
holders, for cash or common shares, at our option, on a one-for-one basis at various dates.
48
Share Repurchase Program.
Our board of Trustees has authorized the repurchase of up to 2.0 million common shares/OP
units. The following table summarizes repurchases of our common
shares during the fourth quarter of
2006:
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
Total Number of |
|
|
Maximum Number of |
|
| |
|
|
|
|
|
|
|
|
|
Shares/Units |
|
|
Shares That May Yet |
|
| |
|
Total Number of |
|
|
Average Price |
|
|
Purchased as Part of |
|
|
Be Purchased Under |
|
| |
|
Shares/Units |
|
|
Paid Per |
|
|
Publicly Announced |
|
|
the Plans or |
|
| Period |
|
Purchased |
|
|
Share/Unit |
|
|
Plans or Programs |
|
|
Programs |
|
October 1 – 31, 2006 |
|
|
— |
|
|
$ |
— |
|
|
|
— |
|
|
|
1,926,088 |
|
November 1 – 30, 2006 |
|
|
220,000 |
|
|
$ |
20.74 |
|
|
|
220,000 |
|
|
|
1,706,088 |
|
December 1 – 31, 2006 |
|
|
234,565 |
|
|
$ |
21.94 |
|
|
|
234,565 |
|
|
|
1,471,523 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fourth Quarter 2006 |
|
|
454,565 |
|
|
$ |
21.36 |
|
|
|
454,565 |
|
|
|
1,471,523 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Item 6. Selected Financial Data
The following sets forth selected consolidated financial data for the Company as of and for
each of the years in the five-year period ended December 31, 2006. The selected consolidated
financial data for the Company should be read in conjunction with the Consolidated Financial
Statements and the related notes appearing elsewhere in this Annual Report on Form 10-K. ($000’s,
except per share data)
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
2006 |
|
2005 |
|
2004 |
|
2003 |
|
2002 |
Total gross revenues |
|
$ |
207,391 |
|
|
$ |
183,458 |
|
|
$ |
129,977 |
|
|
$ |
91,777 |
|
|
$ |
70,737 |
|
Expenses applicable to revenues |
|
|
(112,855 |
) |
|
|
(87,954 |
) |
|
|
(42,990 |
) |
|
|
(29,130 |
) |
|
|
(22,061 |
) |
Interest and amortization expense |
|
|
(71,402 |
) |
|
|
(62,617 |
) |
|
|
(42,456 |
) |
|
|
(30,883 |
) |
|
|
(28,232 |
) |
Income (loss) from continuing operations |
|
|
(663 |
) |
|
|
24,938 |
|
|
|
34,576 |
|
|
|
20,091 |
|
|
|
17,834 |
|
Total discontinued operations |
|
|
8,416 |
|
|
|
7,757 |
|
|
|
10,231 |
|
|
|
13,558 |
|
|
|
12,761 |
|
Net income |
|
|
7,753 |
|
|
|
32,695 |
|
|
|
44,807 |
|
|
|
33,649 |
|
|
|
30,595 |
|
Net income (loss) allocable to common shareholders |
|
|
(8,682 |
) |
|
|
16,260 |
|
|
|
37,862 |
|
|
|
30,257 |
|
|
|
29,902 |
|
Income (loss) from continuing operations per
common share — basic |
|
|
(0.33 |
) |
|
|
0.17 |
|
|
|
0.59 |
|
|
|
0.49 |
|
|
|
0.64 |
|
Income from continuing operations per common
share — diluted |
|
|
(0.33 |
) |
|
|
0.17 |
|
|
|
0.58 |
|
|
|
0.49 |
|
|
|
0.63 |
|
Income from discontinued operations — basic |
|
|
0.16 |
|
|
|
0.16 |
|
|
|
0.22 |
|
|
|
0.40 |
|
|
|
0.47 |
|
Income from discontinued operations — diluted |
|
|
0.16 |
|
|
|
0.16 |
|
|
|
0.22 |
|
|
|
0.39 |
|
|
|
0.46 |
|
Net income (loss) per common share — basic |
|
|
(0.17 |
) |
|
|
0.33 |
|
|
|
0.81 |
|
|
|
0.89 |
|
|
|
1.11 |
|
Net income (loss) per common share — diluted |
|
|
(0.17 |
) |
|
|
0.33 |
|
|
|
0.80 |
|
|
|
0.88 |
|
|
|
1.09 |
|
Cash dividends declared per common share |
|
|
2.0575 |
|
|
|
1.445 |
|
|
|
1.410 |
|
|
|
1.355 |
|
|
|
1.325 |
|
Net cash provided by operating activities |
|
|
108,020 |
|
|
|
105,457 |
|
|
|
90,736 |
|
|
|
68,883 |
|
|
|
56,834 |
|
Net cash used in investing activities |
|
|
(154,080 |
) |
|
|
(643,777 |
) |
|
|
(202,425 |
) |
|
|
(295,621 |
) |
|
|
(106,166 |
) |
Net cash provided by financing activities |
|
|
483 |
|
|
|
444,878 |
|
|
|
242,723 |
|
|
|
228,986 |
|
|
|
47,566 |
|
Ratio of earnings to combined fixed charges and
preferred dividends |
|
|
1.02 |
|
|
|
1.25 |
|
|
|
1.59 |
|
|
|
1.52 |
|
|
|
1.70 |
|
Real estate assets, net |
|
|
3,471,027 |
|
|
|
1,641,927 |
|
|
|
1,227,262 |
|
|
|
1,001,772 |
|
|
|
779,150 |
|
Investments in non-consolidated entities |
|
|
247,045 |
|
|
|
191,146 |
|
|
|
132,738 |
|
|
|
69,225 |
|
|
|
54,261 |
|
Total assets |
|
|
4,624,857 |
|
|
|
2,160,232 |
|
|
|
1,697,086 |
|
|
|
1,207,411 |
|
|
|
902,471 |
|
Mortgages, notes payable and credit facility,
including discontinued operations |
|
|
2,129,025 |
|
|
|
1,170,560 |
|
|
|
765,909 |
|
|
|
551,385 |
|
|
|
491,517 |
|
Shareholders’ equity |
|
|
1,122,444 |
|
|
|
891,310 |
|
|
|
847,290 |
|
|
|
579,848 |
|
|
|
332,976 |
|
Preferred share liquidation preference |
|
|
234,000 |
|
|
|
234,000 |
|
|
|
214,000 |
|
|
|
79,000 |
|
|
|
— |
|
49
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
General
We are a self-managed and self-administered real estate investment trust formed under the laws
of the State of Maryland. We operate in one segment and our primary business is the investment in
and the acquisition, ownership and management of a geographically diverse portfolio of net leased
office, industrial and retail properties. Substantially all of our properties are subject to triple
net leases, which are generally characterized as leases in which the tenant bears all or
substantially all of the costs and/or cost increases for real estate taxes, utilities, insurance
and ordinary repairs.
We elected to be taxed as a REIT under Sections 856 through 860 of the Internal Revenue Code
of 1986, as amended, which we refer to as the Code, commencing with our taxable year ended December
31, 1993. If we qualify for taxation as a REIT, we generally will not be subject to federal
corporate income taxes on our net income that is currently distributed to shareholders.
When we use the terms “Lexington,” the “Company,” “we,” “us” and “our,” we mean Lexington
Realty Trust and all entities owned by us, including non-consolidated entities, except where it is
clear that the term means only the parent company. References herein to our Annual Report are to
our Annual Report on Form 10-K for the fiscal year ended December 31, 2006.
All references to 2006, 2005 and 2004 refer to our fiscal years ended, or the dates, as the
context requires, December 31, 2006, December 31, 2005, and December 31, 2004, respectively.
We merged with Newkirk Realty Trust, Inc., or Newkirk, on December 31, 2006, which we refer to
as the Merger. Unless otherwise noted, (A) the information in this Annual Report regarding items in
our Consolidated Statements of Operations as of December 31, 2006, does not include the business
and operations of Newkirk, and (B) the information in this Annual Report regarding items in our
Consolidated Balance Sheet, include the assets, liabilities and minority interests of Newkirk.
In this discussion, we have included statements that may constitute “forward-looking
statements” within the meaning of the safe harbor provisions of the Private Securities Litigation
Reform Act of 1995. Forward-looking statements are not historical facts but instead represent only
our beliefs regarding future events, many of which, by their nature, are inherently uncertain and
outside our control. These statements may relate to our future plans and objectives, among other
things. By identifying these statements for you in this manner, we are alerting you to the
possibility that our actual results may differ, possibly materially, from the anticipated results
indicated in these forward-looking statements. Important factors that could cause our results to
differ, possibly materially, from those indicated in the forward-looking statements include, among
others, those discussed below under “Risk Factors” in Part I, Item 1A of this Annual Report and
“Cautionary Statements Concerning Forward Looking Statements” in Part I, of this Annual Report.
As of December 31, 2006, we owned or had interests in approximately 365 real estate properties
encompassing 58.9 million rentable square feet. During 2006, we purchased 185 properties, including
properties acquired through the Merger and non-consolidated investments, for an aggregate
capitalized cost of $2.3 billion.
As of December 31, 2006, we, including through non-consolidated entities, leased properties to
approximately 285 tenants in 22 different industries. Our revenues and cash flows are generated
predominantly from property rent receipts. Growth in revenue and cash flows is directly correlated
to our ability to (i) acquire income producing properties and (ii) to re-lease properties that are
vacant, or may become vacant at favorable rental rates. The challenge we face is finding
investments that will provide an attractive return without compromising our real estate
underwriting criteria. We believe we have access to acquisition
opportunities due to our relationship with developers, brokers, corporate users and sellers.
We have experienced minimal lease turnover in the recent past, and accordingly, minimal
capital expenditures. There can be no assurance that this will continue. Re-leasing properties as
leases expire and properties currently vacant at favorable effective rates is one of our primary
focuses.
The primary risks associated with re-tenanting properties are (i) the period of time required
to find a new tenant, (ii) whether rental rates will be lower than previously received, (iii) the
significant leasing costs such as commissions and tenant improvement allowances and (iv) the
payment of operating costs such as real estate taxes and insurance while there is no offsetting
revenue. We address these risks by contacting tenants well in advance of lease maturity to get an
understanding of their occupancy needs, contacting local brokers to determine the depth of the
rental market and retaining local expertise to assist in the re-tenanting of a property. As part of
the acquisition underwriting process, we focus on buying general purpose real estate which can be
leased to other tenants without significant modification to the properties. No assurance can be
given that once a property becomes vacant it will subsequently be re-let.
50
During
2006, we sold eight properties, including one property through
foreclosure, to unrelated third parties for a net sales price of
$94.0 million. During 2005, we sold eight properties, including one sold through a in a
non-consolidated entity, to unrelated parties for a net sales price of $74.7 million. In addition,
we contributed seven properties to various non-consolidated entity programs for $124.7 million,
which approximated carrying costs. During 2004, we sold eight properties for $36.7 million to
unrelated parties. In addition, we contributed eight properties to various non-consolidated entity
programs for $197.0 million, which approximated carrying costs. Also we were reimbursed for certain
holding costs by the partners in the respective ventures.
Inflation
Certain of the long-term leases on our properties contain provisions that may mitigate the
adverse impact of inflation on our operating results. Such provisions include clauses entitling us
to receive (i) scheduled fixed base rent increases and (ii) base rent increases based upon the
consumer price index. In addition, a majority of the leases on our properties require tenants to
pay operating expenses, including maintenance, real estate taxes, insurance and utilities, thereby
reducing our exposure to increases in costs and operating expenses. In addition, the leases on our
properties are generally structured in a way that minimizes our responsibility for capital
improvements.
Critical Accounting Policies
Our accompanying consolidated financial statements have been prepared in conformity with
accounting principles generally accepted in the United States, which require our management to make
estimates that affect the amounts of revenues, expenses, assets and liabilities reported. The
following are critical accounting policies which are important to the portrayal of our financial
condition and results of operations and which require some of management’s most difficult,
subjective and complex judgments. The accounting for these matters involves the making of estimates
based on current facts, circumstances and assumptions which could change in a manner that would
materially affect management’s future estimates with respect to such matters. Accordingly, future
reported financial conditions and results could differ materially from financial conditions and
results reported based on management’s current estimates.
Business Combinations. We follow the provisions of Statement of Financial Accounting Standards
No. 141, Business Combinations, which we refer to as SFAS 141, and record all assets acquired and
liabilities assumed at fair value. On December 31, 2006, we acquired Newkirk through the Merger,
which was a variable interest entity (VIE). We follow the provisions of Financial Accounting
Standards Board Interpretation No. 46 Consolidation of Variable Interest Entities, which we refer
to as FIN 46R, and, as a result, we have recorded the minority interest in Newkirk at estimated
fair value on the date of acquisition. The value of the consideration issued in common shares was
based upon a reasonable period before and after the date that the terms of the acquisition were
agreed to and announced.
Purchase Accounting for Acquisition of Real Estate. We allocate the purchase price of real
estate acquired in accordance with SFAS 141. SFAS 141 requires that the fair value of the real
estate acquired, which includes the impact of mark-to-market adjustments for assumed mortgage debt
relating to property acquisitions, is allocated to the acquired tangible assets, consisting of
land, building and improvements, and identified intangible assets and liabilities, consisting of
the value of above-market and below-market leases, other value of in-place leases and value of
tenant relationships, based in each case on their fair values.
The fair value of the tangible assets, which includes land, building and improvements, and
fixtures and equipment, of an acquired property is determined by valuing the property as if it were
vacant, and the “as-if-vacant” value is then allocated to the tangible assets based on management’s
determination of relative fair values of these assets. Factors considered by management in
performing these analyses include an estimate of carrying costs during the expected lease-up
periods considering current market conditions and costs to execute similar leases. In estimating
carrying costs, management includes real estate taxes, insurance and other operating expenses and
estimates of lost rental revenue during the expected lease-up periods based on current market
demand. Management also estimates costs to execute similar leases including leasing commissions.
In allocating the fair value of the identified intangible assets and liabilities of an
acquired property, above-market and below-market in-place lease values are recorded based on the
difference between the current in-place lease rent and a management estimate of current market
rents. Below-market lease intangibles are recorded as part of deferred revenue and amortized into
rental revenue over the non-cancelable periods and any bargain renewal periods of the respective
leases. Above-market leases are recorded as part of intangible assets and amortized as a direct
charge against rental revenue over the non-cancelable portion of the respective leases.
The aggregate value of other acquired intangible assets, consisting of in-place leases and
tenant relationships, is measured by the excess of (i) the purchase price paid for a property over
(ii) the estimated fair value of the property as if vacant, determined as set forth above. This
aggregate value is allocated between in-place lease values and tenant relationships based on
management’s evaluation of the specific characteristics of each tenant’s lease. The value of
in-place leases are amortized to expense over the remaining non-cancelable periods and any bargain
renewal periods of the respective leases. The value of customer
relationships are amortized to expense
over the applicable lease term plus expected renewal periods.
Revenue Recognition. We recognize revenue in accordance with Statement of Financial
Accounting Standards No. 13 Accounting for Leases, as amended, which we refer to as SFAS 13. SFAS
13 requires that revenue be recognized on a straight-line basis over the
51
term of the lease unless another systematic and rational basis is more representative of the
time pattern in which the use benefit is derived from the leased property. Renewal options in
leases with rental terms that are lower than those in the primary term are excluded from the
calculation of straight line rent, if they do not meet the criteria of a bargain renewal option. In
those instances in which we fund tenant improvements and the improvements are deemed to be owned by
us, revenue recognition will commence when the improvements are substantially completed and
possession or control of the space is turned over to the tenant. When we determine that the tenant
allowances are lease incentives, we commence revenue recognition when possession or control of the
space is turned over to the tenant for tenant work to begin. The
lease incentive is recorded as a deferred expense and amortized as a
reduction of revenue on a straight-line basis over the respective lease term.
Gains on sales of real estate are recognized in accordance with Statement of Financial
Accounting Standards No. 66 Accounting for Sales of Real Estate, as amended, which we refer to as
SFAS 66. The specific timing of the sale is measured against various criteria in SFAS 66 related to
the terms of the transactions and any continuing involvement in the form of management or financial
assistance associated with the properties. If the sales criteria are not met, the gain is deferred
and the finance, installment or cost recovery method, as appropriate, is applied until the sales
criteria are met.
Accounts Receivable. We continuously monitor collections from our tenants and would make a
provision for estimated losses based upon historical experience and any specific tenant collection
issues that we have identified. As of December 31, 2006 and 2005, we did not record an allowance
for doubtful accounts.
Impairment of Real Estate. We evaluate the carrying value of all real estate held when a
triggering event under Statement of Financial Accounting Standards No. 144, Accounting for the
Impairment or Disposal of Long-Lived Assets, as amended, which we refer to as SFAS 144, has
occurred to determine if an impairment has occurred which would require the recognition of a loss.
The evaluation includes reviewing anticipated cash flows of the property, based on current leases
in place, and an estimate of what lease rents will be if the property is vacant coupled with an
estimate of proceeds to be realized upon sale. However, estimating market lease rents and future
sale proceeds is highly subjective and such estimates could differ materially from actual results.
Tax Status. We have made an election to qualify, and believe we are operating so as to
qualify, as a REIT for federal income tax purposes. Accordingly, we generally will not be subject
to federal income tax, provided that distributions to our shareholders equal at least the amount of
our REIT taxable income as defined under Sections 856 through 860 of the Code.
We are now permitted to participate in certain activities from which we were previously
precluded in order to maintain our qualification as a REIT, so long as these activities are
conducted in entities which elect to be treated as taxable subsidiaries under the Code. LRA,
Lexington Contributions Inc., which we refer to as LCI, and LSAC are taxable REIT subsidiaries. As
such, we are subject to federal and state income taxes on the income we receive from these
activities.
Income taxes are accounted for under the asset and liability method. Deferred tax assets and
liabilities are recognized for the estimated future tax consequences attributable to differences
between the financial statement carrying amounts of existing assets and liabilities and their
respective tax basis and operating loss and tax credit carry-forwards. Deferred tax assets and
liabilities are measured using enacted tax rates in effect for the year in which those temporary
differences are expected to be recovered or settled.
Properties Held For Sale. We account for properties held for sale in accordance with SFAS
144. SFAS 144 requires that the assets and liabilities of properties that meet various criteria be
presented separately in the statement of financial position, with assets and liabilities being
separately stated. The operating results of these properties are reflected as discontinued
operations in the statement of operations. Properties that do not meet the held for sale criteria
of SFAS 144 are accounted for as operating properties.
Basis of Consolidation. We determine whether an entity for which we hold an interest should
be consolidated pursuant FIN 46R. If the entity is not a variable interest entity, and we control
the entity’s voting shares or similar rights, the entity is consolidated. FIN 46R requires us to
evaluate whether we have a controlling financial interest in an entity through means other than
voting rights.
Liquidity and Capital Resources
Since becoming a public company, our principal sources of capital for growth have been the
public and private equity markets, property specific debt, our credit facility, issuance of OP
units and undistributed cash flows. We expect to continue to have access to and use these sources
in the future; however, there are factors that may have a material adverse effect on our access to
capital sources. Our ability to incur additional debt to fund acquisitions is dependent upon our
existing leverage, the value of the assets we are attempting to leverage and general economic
conditions which may be outside of management’s influence.
In February 2007, we completed an offering of 6.2 million Series D Preferred Shares, at $25
per share and a dividend rate of 7.55% raising net proceeds of $150 million.
During 2005, we replaced our $100 million unsecured revolving credit facility with a new $200
million unsecured revolving credit facility, which bears interest at a rate of LIBOR plus 120-170
basis points depending on our leverage (as defined in the credit facility) and matures in June
2008. Our credit facility contains customary financial covenants, including restrictions on the
level of indebtedness, amount of variable rate debt to be borrowed and net worth maintenance
provisions. As of December 31, 2006, we were
52
in compliance with all covenants, $65.2 million was outstanding, $133.0 million was available
to be borrowed and $1.8 million in letters of credit were outstanding under our credit facility.
The MLP has a secured loan, which bears interest, at the election of the MLP, at a rate equal
to either (i) LIBOR plus 175 basis points or (ii) the prime rate. As of December 31, 2006, $547.2
million was outstanding under the secured loan. The secured loan is scheduled to mature in August
2008, subject to two one year extensions. The secured loan requires monthly payments of interest
and quarterly principal payments of approximately $1.9 million during the term of the secured loan,
increasing to $2.5 million per quarter during the extension periods. The MLP is also required to
make principal payments from the proceeds of property sales,
refinancings and other asset sales if
proceeds are not reinvested into net leased properties. The required principal payments are based
on a minimum release price set forth in the secured loan agreement for property sales and 100% of
proceeds from refinancings, economic discontinuance, insurance settlements and condemnations. The
secured loan has customary covenants which the MLP was in compliance with at December 31, 2006.
During 2005, we completed a common share offering of 2.5 million shares raising aggregate net
proceeds of $60.7 million. During 2005, we issued 400,000 Series C Preferred Shares, at $50 per
share and a dividend rate of 6.50%, raising net proceeds of $19.5 million.
In January 2007, the MLP issued $300.0 million in 5.45% guaranteed exchangeable notes due in
2027, which can be put by the holder every five years commencing 2012. The net proceeds of $292.7
were used to repay indebtedness. The notes are exchangeable at certain times by the holders into
our common shares at a price of $25.25 per share; however, the principal balance must be satisfied
in cash.
During 2006, in addition to the Merger, we, including through non-consolidated entities,
obtained $215.3 million in non-recourse mortgage financings on properties at a fixed weighted
average interest rate of 6.0%. The proceeds of the financings were used to partially fund
acquisitions.
We
have made equity commitments to our various joint venture programs,
of which $35.3 million
remained unfunded as of December 31, 2006. This amount will be funded as investments are made by
the joint venture programs. In addition, the agreements governing
certain of these joint venture programs
provide the partners, under certain circumstances, the ability to put their interests to us for
cash or common shares at our option. Exercise of these put rights could require us to use our
resources to purchase these assets instead of more favorable investment opportunities. As of
December 31, 2006, the aggregate contingent commitment is calculated to be approximately $611.1
million. This assumes we issue common shares to settle the put and that we do not use our rights
under the agreements governing the joint venture programs to block certain properties to be put to
us.
Dividends. In connection with our intention to continue to qualify as a REIT for federal
income tax purposes, we expect to continue paying regular dividends to our shareholders. These
dividends are expected to be paid from operating cash flows and/or from other sources. Since cash
used to pay dividends reduces amounts available for capital investments, we generally intend to
maintain a conservative dividend payout ratio, reserving such amounts as we consider necessary for
the maintenance or expansion of properties in our portfolio, debt reduction, the acquisition of
interests in new properties as suitable opportunities arise, and such other factors as our Board of
Trustees considers appropriate.
Dividends paid to our common shareholders increased to $77.2 million in 2006, compared to
$72.6 million in 2005 and $65.1 million in 2004. Preferred dividends paid were $16.4 million, $14.5
million and $6.4 million in 2006, 2005 and 2004, respectively.
Although we receive the majority of our base rental payments on a monthly basis, we intend to
continue paying dividends quarterly. Amounts accumulated in advance of each quarterly distribution
are invested by us in short-term money market or other suitable instruments.
We believe that cash flows from operations will continue to provide adequate capital to fund
our operating and administrative expenses, regular debt service obligations and all dividend
payments in accordance with REIT requirements in both the short-term and long-term. In addition, we
anticipate that cash on hand, borrowings under our credit facility, issuance of equity and debt, as
well as other alternatives, will provide the necessary capital required by the Company. Cash flows
from operations as reported in the Consolidated Statements of Cash Flows increased to $108.0
million for 2006 from $105.5 million for 2005 and
$90.7 million for 2004. The underlying drivers that impact
working capital and therefore cash flows from operations are the
timing of collection of rents, including reimbursements from tenants,
the collection of advisory fees, payment of interest on mortgage debt
and payment of operating and general and administrative costs. We
believe the net lease structure of the majority of our tenants’ leases enhances cash flows from operations
since the payment and timing of operating costs related to the properties are generally borne directly by the tenant. Collection and timing of tenant rents is closely monitored by management as part of our cash management program.
53
Net cash used in investing activities totaled $154.1 million in 2006, $643.8 million in 2005
and $202.4 million in 2004. Cash used in investing activities related primarily to investments in
real estate properties, joint ventures and notes receivable. Cash provided by investing activities
related primarily to collection of notes receivable, distributions from non-consolidated entities
in excess of accumulated earnings and proceeds from the sale of properties. Therefore, the
fluctuation in investing activities relates primarily to the timing of investments and
dispositions.
Net cash provided by financing activities totaled $0.5 million in 2006, $444.9 million in 2005
and $242.7 million in 2004. Cash provided by financing activities during each year was primarily
attributable to proceeds from equity offerings, non-recourse mortgages and borrowings under our
credit facility offset by dividend and distribution payments and debt payments.
UPREIT Structure. Our UPREIT structure permits us to effect acquisitions by issuing to a
property owner, as a form of consideration in exchange for the property, OP units in our operating
partnerships. All outstanding OP units are redeemable at certain times for common shares on a
one-for-one basis and substantially all outstanding OP units require us to pay quarterly
distributions to the holders of such OP units. We account for outstanding OP units in a manner
similar to a minority interest holder. The number of common shares that will be outstanding in the
future should be expected to increase, and minority interest expense should be expected to
decrease, as such OP units are redeemed for our common shares.
In conjunction with several of our acquisitions, property owners were issued OP units as a
form of consideration in exchange for the property. In connection with the Merger, the MLP effected
a reverse unit-split pursuant to which each outstanding MLP unit was converted into 0.80 MLP units
totaling 35.5 million MLP units, other than MLP units held directly or indirectly by us. All of
such interest are redeemable at certain times, only at the option of the holders, for cash or
common shares, at our option, on a one-for-one basis at various dates and are not otherwise
mandatorily redeemable by us. During 2006, one of our operating partnerships issued 34 thousand
units (or $750) in connection with an acquisition. During 2005, one of our operating partnerships
issued 0.4 million OP units for approximately $7.7 million in cash. As of December 31, 2006, there
were 41.2 million OP units outstanding. Of the total OP units outstanding, approximately 29.4
million are held by related parties. Generally holders of OP units are entitled to receive
distributions equal to the dividends paid to our common shareholders, except that certain OP units
have stated distributions in accordance with their respective partnership agreement. To the extent
that our dividend per share is less than a stated distribution per unit per the applicable
partnership agreement, the stated distributions per unit are reduced by the percentage reduction in
our dividend. No OP units have a liquidation preference. As of December 31, 2005, there were 5.7
million OP units outstanding, other than OP units held directly or indirectly by us.
Financing
Revolving Credit Facility. Our $200.0 million revolving credit facility, which expires June
2008, bears interest at 120-170 basis points over LIBOR depending on our leverage (as defined) in
the credit facility, Our credit facility contains customary financial covenants including
restrictions on the level of indebtedness, amount of variable debt to be borrowed and net worth
maintenance provisions. As of December 31, 2006, we were in compliance with all covenants, $65.2
million was outstanding, $133.0 million was available to be borrowed, and $1.8 million letters of
credit were outstanding under the credit facility.
The MLP has a secured loan, which bears interest at the election of the MLP at a rate equal to
either (i) LIBOR plus 175 basis points or (ii) the prime rate. As of December 31, 2006, $547.2
million was outstanding under the secured loan. The secured loan is scheduled to mature in August
2008, subject to two one year extensions. The secured loan requires monthly payments of interest
and quarterly principal payments of $1.9 million during the term of the loan, increasing to $2.5
million per quarter during the extension periods. The MLP is also required to make principal
payments from the proceeds of property sales, refinancings and other asset sales if proceeds are not
reinvested into net leased properties. The required principal payments are based on a minimum
release price set forth in the secured loan agreement for property sales and 100% of proceeds from
refinancings, economic discontinuance, insurance settlements and condemnations. The secured loan has
customary covenants which the MLP was in compliance with at December 31, 2006.
In January 2007, the MLP issued $300.0 million in 5.45% guaranteed exchangeable notes due in
2027, which can be put by the holder every five years commencing 2012. The net proceeds of $292.7
were used to repay indebtedness.
Debt Service Requirements. Our principal liquidity needs are the payment of interest and
principal on outstanding indebtedness. As of December 31, 2006, there were $2.1 billion of
mortgages and notes payable outstanding, including discontinued operations. As of December 31,
2006, the weighted average interest rate on our outstanding debt was approximately 6.1%. The
scheduled principal amortization and balloon payments for the next five years are as follows: $73.1
million in 2007, $699.5 million in 2008, $104.4 million in 2009, $90.4 million in 2010 and $142.8
million in 2011. Our ability to make certain of these payments will depend upon our rental revenues
and our ability to refinance the mortgage related thereto, sell the related property, have
available amounts under our credit facility or access other capital. Our ability to accomplish such
goals will be affected by numerous economic factors affecting the real estate industry, including
the availability and cost of mortgage debt at the time, our equity in the mortgaged properties, the
financial condition, the operating history of the mortgaged properties, the then current tax laws
and the general national, regional and local economic conditions.
54
We expect to continue to use property specific, non-recourse mortgages as we believe that by
properly matching a debt obligation, including the balloon maturity risk, with a lease expiration,
our cash-on-cash returns increase and the exposure to residual valuation risk is reduced. In
December 2005, we informed the lender for our Milpitas, California property that we would no longer
make debt service payments and our intention to convey the property to the lender to satisfy the
mortgage. We recorded a $12.1 million impairment charge in 2005 relating to this property and a
gain on debt satisfaction of $6.3 million upon foreclosure on the property by the lender in 2006.
During 2006, the Company satisfied a $20.4 million mortgage note by making a $7.5 million cash
payment plus assigning a $5.4 million escrow to the lender, which resulted in a gain of $7.5
million.
Other
Lease Obligations. Since our tenants generally bear all or substantially all of the cost of
property operations, maintenance and repairs, we do not anticipate significant needs for cash for
these costs; however, for certain properties, we have a level of property operating expense
responsibility. We generally fund property expansions with additional secured borrowings, the
repayment of which is funded out of rental increases under the leases covering the expanded
properties. To the extent there is a vacancy in a property, we would be obligated for all operating
expenses, including real estate taxes and insurance. As of December 31, 2006, 12 properties were
fully vacant. In addition certain leases require us to fund tenant
expansions.
Our
tenants generally pay the rental obligations on ground leases either directly to the fee holder or
to us as increased rent. The annual ground lease rental payment obligations for each of the next
five years is $4.0 million in 2007, $3.5 million in 2008, $3.1 million in 2009, $2.6 million in
2010 and $2.2 million in 2011. These amounts do not include payments due under bond leases in which
a right of offset exists between the lease obligation and the debt service.
Contractual Obligations. The following summarizes the Company’s principal contractual
obligations as of December 31, 2006 ($000’s):
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2012 and |
|
|
|
|
| |
|
2007 |
|
|
2008 |
|
|
2009 |
|
|
2010 |
|
|
2011 |
|
|
thereafter |
|
|
Total(3) |
|
Notes payable (2) (4) |
|
$ |
73,075 |
|
|
$ |
699,526 |
|
|
$ |
104,378 |
|
|
$ |
90,363 |
|
|
$ |
142,793 |
|
|
$ |
1,018,890 |
|
|
$ |
2,129,025 |
|
Purchase obligations |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Tenant incentives |
|
|
4,272 |
|
|
|
3,500 |
|
|
|
10,000 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
17,772 |
|
Operating lease obligations(1) |
|
|
4,635 |
|
|
|
4,103 |
|
|
|
3,108 |
|
|
|
2,589 |
|
|
|
2,167 |
|
|
|
14,975 |
|
|
|
31,577 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
81,982 |
|
|
$ |
707,129 |
|
|
$ |
117,486 |
|
|
$ |
92,952 |
|
|
$ |
144,960 |
|
|
$ |
1,033,865 |
|
|
$ |
2,178,374 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (1) |
|
Includes ground lease payments and office rent. Amounts disclosed through 2008 include rent
for our principal executive office which is fixed through 2008 and adjusted to fair market
value as determined at January 2009. Therefore, the amounts for 2009 and thereafter do not
include principal executive office rent. |
| |
| (2) |
|
We have $1.8 million in outstanding letters of credit. |
| |
| (3) |
|
We have approximately $35.3 million of unfunded equity commitments to joint ventures. In
addition, certain of the joint venture agreements provide the partners, under certain circumstances, the
ability to put their interest to us for cash or common shares. The aggregate contingent
commitment, as of December 31, 2006, is approximately $611.1 million. |
| |
| (4) |
|
Includes balloon payments. |
Capital Expenditures. Due to the net lease structure, we do not incur significant
expenditures in the ordinary course of business to maintain our properties. However, as leases
expire, we expect to incur costs in extending the existing tenant leases or re-tenanting the
properties. The amounts of these expenditures can vary significantly depending on tenant
negotiations, market conditions and rental rates. These expenditures are expected to be funded from
operating cash flows or borrowings on our credit facility.
Shares Repurchase. In September 1998, our Board of Trustees approved a funding limit for the
repurchase of 1.0 million common shares/OP units, and authorized any repurchase transactions within
that limit. In November 1998, our Board of Trustees approved an additional 1.0 million common
shares/OP units for repurchase, thereby increasing the funding limit to 2.0 million common
shares/OP units available for repurchase. From September 1998 to March 2005, we repurchased
approximately 1.4 million common shares/OP units at an average price of $10.62 per common share/OP
unit. In November 2005, our Board of Trustees increased the remaining amount of common shares/OP
units eligible for repurchase, so that an aggregate of 2.0 million common shares/OP units were then
available for repurchase under the share repurchase program. In 2006, approximately 0.5 million
common shares/OP units have been repurchased at an average price of $21.15 per share, in the open market and
through private transactions with our employees.
55
Results of Operations
Comparison of 2006 to 2005. Changes in the results of our operations are primarily due to the
growth of our portfolio and costs associated with such growth. Of the increase in total gross
revenues in 2006 of $23.9 million, $18.1 million is attributable to increases in rental revenue.
The remaining $5.8 million increase in gross revenues in 2006 was attributable to an increase in
tenant reimbursements of $6.7 million and a decrease of $0.8 million in advisory fees. The increase
in interest and amortization expense of $8.8 million is due to increased leverage incurred relating
to acquisitions and has been partially offset by interest savings resulting from scheduled
principal amortization payments and mortgage satisfactions. The increase in depreciation and
amortization of $14.6 million is due primarily to the growth in real estate and intangibles assets
due to property acquisitions. Our general and administrative expenses increased by $17.9 million
primarily due to the accelerated amortization of time based non-vested shares ($10.8 million), an
increase in amortization of all non-vested shares ($2.5 million) and an increase in other personnel
costs ($3.9 million). The increase in property operating expenses of $10.3 million is due
primarily to incurring property level operating expenses for properties in which we have operating
expense responsibility and an increase in vacancy. Debt satisfaction gains increased by $2.8
million due to the timing of mortgage payoffs. Impairment charges increased by $7.2 million due to
an impairment of one property in 2006. Non-operating income increased $7.4 million primarily due to
the sale of a tenant bankruptcy claim in 2006. Minority interest expense decreased by $1.0 million
due to the decrease in earnings of our subsidiaries. Equity in earnings of non-consolidated entities
decreased $2.0 million due to a decrease in net income of non-consolidated entities, related
primarily to increased depreciation. Net income decreased by $24.9 million primarily due to the
impact of items discussed above offset by an increase in total discontinued operations of $0.7
million. The total discontinued operations income increase was comprised of an increase in gains on
sale of properties of $10.0 million, an increase in debt satisfaction gains of $4.4 million, an
increase in impairment charges of $10.3 million and a reduction in income from discontinued
operations of $3.4 million. Net income allocable to common shareholders decreased due to the items
discussed.
Any increase in net income in future periods will be closely tied to the level of acquisitions
made by us. Without acquisitions, which in addition to generating rental revenue, generate
acquisition, debt placement and asset management fees when such properties are acquired by joint
venture or advisory programs, growth in net income is dependent on index adjusted rents, percentage
rents, reduced interest expense on amortizing mortgages and by controlling variable overhead costs.
However, there are many factors beyond management’s control that could offset these items
including, without limitation, increased interest rates of debt and tenant monetary defaults.
Comparison of 2005 to 2004. Changes in the results of our operations are primarily due to the
growth of our portfolio and costs associated with such growth. Of the increase in total gross
revenues in 2005 of $53.5 million, $47.6 million is primarily attributable to increases in rental
revenue. The remaining $5.9 million increase in gross revenues in 2005 was attributable to an
increase in tenant reimbursements of $5.4 million and a $0.5 million increase in advisory fees. The
increase in interest and amortization expense of $20.2 million is due to increased leverage
incurred relating to acquisitions and has been partially offset by interest savings resulting from
scheduled principal amortization payments, lower interest rates and mortgage satisfactions. The
increase in depreciation and amortization of $32.0 million is due primarily to the growth in real
estate and intangibles assets due to property acquisitions. Our general and administrative expenses
increased by $3.8 million primarily due to greater professional service fees ($0.4 million),
personnel costs ($2.0 million), terminated deal costs ($0.3 million), technology costs ($0.3
million), insurance ($0.2 million) and rent ($0.2 million). We incurred a $2.9 million write-off of
assets relating to the bankruptcy of the tenant in our Dallas, Texas property in 2004. The increase
in property operating expenses of $12.9 million is due primarily to incurring property level
operating expenses for properties in which we have operating expense responsibility and an increase
in vacancy. Debt satisfaction gains increased by $4.5 million due to the payoff of certain
mortgages in 2005. Non-operating income decreased $1.8 million primarily due to a decrease in
reimbursement of certain costs from non-consolidated entities and interest earned. The provision
for income taxes decreased by $1.3 million due to a decrease in earnings in taxable REIT
subsidiaries. Equity in earnings of non-consolidated entities decreased $1.0 million due to a
decrease in net income of non-consolidated entities due primarily to increased depreciation and
amortization. Net income decreased by $12.1 million primarily due to the impact of items discussed
above plus a $2.5 million decrease in the total discontinued operations income. The total
discontinued operations income decrease was comprised of an increase in gains on sales of
properties of $6.1 million, an increase in impairment charges of $5.9 million, a reduction in
income from discontinued operations of $2.0 million and an increase in debt satisfaction charges of
$0.7 million. Net income allocable to common shareholders decreased due to the items discussed
above plus by an increase in preferred dividends of $9.5 million resulting from the issuance of
preferred shares in 2005 and 2004.
Environmental Matters
Based upon management’s ongoing review of our properties, management is not aware of any
environmental condition with respect to any of our properties, which would be reasonably likely to
have a material adverse effect on us. There can be no assurance, however, that (i) the discovery of
environmental conditions, which were previously unknown, (ii) changes in law, (iii) the conduct of
tenants or (iv) activities relating to properties in the vicinity of our properties, will not
expose us to material liability in the future. Changes in laws increasing the potential liability
for environmental conditions existing on properties or increasing the restrictions on discharges or
other conditions may result in significant unanticipated expenditures or may otherwise adversely
affect the operations of our tenants, which would adversely affect our financial condition and
results of operations.
56
Recently Issued Accounting Standards
FASB Statement No. 150, Accounting for Certain Financial Instruments with Characteristics of
Both Liabilities and Equity, as amended, which we refer to as SFAS 150, was issued in May 2003.
SFAS 150 establishes standards for the classification and measurement of certain financial
instruments with characteristics of both liabilities and equity. SFAS 150 also includes required
disclosures for financial instruments within its scope. For us, SFAS 150 was effective for
instruments entered into or modified after May 31, 2003 and otherwise was effective as of January
1, 2004, except for mandatorily redeemable financial instruments. SFAS 150 has been deferred
indefinitely for certain types of mandatorily redeemable financial instruments. The adoption of the
required portions of SFAS 150 had no impact on us.
In February 2007, the FASB issued FASB Statement No. 159, The Fair Value Option for Financial
Assets and Financial Liabilities – Including an Amendment of FASB Statement No. 115, which we refer
to as SFAS 159. This standard permits entities to choose to measure many financial assets and
liabilities and certain other items at fair value. An enterprise will report unrealized gains and
losses on items for which the fair value option has been elected in earnings at each subsequent
reporting date. The fair value option may be applied on an instrument-by-instrument basis, with
several exceptions, such as investments accounted for by the equity method, and once elected, the
option is irrevocable unless a new election date occurs. The fair value option can be applied only
to entire instruments and not to portions thereof. SFAS 159 is effective as of the beginning of an
entity’s first fiscal year beginning after November 15 2007. We are currently evaluating the
effects of adopting SFAS 159 on our financial statements.
In December 2004, the FASB issued Statement of Financial Accounting Standards No. 123,
(revised 2004) Share-Based Payment, which we refer to as SFAS 123R, which supersedes Accounting
Principals Board Opinion No. 25, Accounting for Stock Issued to Employees, which we refer to as APB
Opinion No. 29, and its related implementation guidance. SFAS 123R establishes standards for the
accounting for transactions in which an entity exchanges its equity instruments for goods or
services. It also addresses transactions in which an entity incurs liabilities in exchange for
goods or services that are based on the fair value of the entity’s equity instruments or that may
be settled by the issuance of those equity instruments. SFAS 123R focuses primarily on accounting
for transactions in which an entity obtains employee services in share-based payment transactions.
SFAS 123R requires a public entity to measure the cost of employee services received in exchange
for an award of equity instruments based on the grant date fair value of the award. The cost will
be recognized over the period in which an employee is required to provide services in exchange for
the award. SFAS 123R was effective for fiscal years beginning after January 1, 2006. The impact of
adopting this statement resulted in the elimination of
$11.4 million of deferred compensation and
additional paid-in-capital from the Consolidated Statements of Changes in Shareholders’ Equity. The
adoption did not have a material impact on our results of operations.
In December 2004, the FASB issued Statement No. 153, Exchange of Non-monetary Assets — an
amendment of APB Opinion No. 29, which we refer to as SFAS 153. The guidance in APB Opinion No. 29,
Accounting for Non-monetary Transactions, is based on the principle that exchanges of non-monetary
assets should be measured based on the fair value of the assets exchanged. The guidance in that
opinion, however, included certain exceptions to that principle. SFAS 153 amends APB Opinion No. 29
to eliminate the exception for non-monetary assets that do not have commercial substance. A
non-monetary exchange has commercial substance if the future cash flows of the entity are expected
to change significantly as a result of the exchange. SFAS 153 was effective for non-monetary asset
exchanges, occurring in fiscal periods beginning after June 15, 2005. The impact of adopting this
statement did not have a material impact on our financial position or results of operations.
In March 2005, the FASB issued Interpretation No. 47, Accounting for Conditional Asset
Retirement Obligations — an Interpretation of SFAS Statement No. 143, which we refer to as FIN 47.
FIN 47 clarifies the timing of liability recognition for legal obligations associated with the
retirement of a tangible long-lived asset when the timing and/or method of settlement are
conditional on a future event. FIN 47 is effective for fiscal years ending after December 15, 2005.
The application of FIN 47 did not have a material impact on our consolidated financial position or
results of operations.
In May 2005, the FASB issued SFAS No. 154, Accounting Changes and Error Corrections, which we
refer to as SFAS 154, which replaces APB Opinion No. 20 Accounting Changes and SFAS No. 3,
Reporting Accounting Changes in Interim Financial Statements — An Amendment of APB Opinion No. 28.
SFAS 154 provides guidance on the accounting for and reporting of accounting changes and error
corrections. It establishes retrospective application as the required method for reporting a change
in accounting principle and the reporting of a correction of an error. SFAS 154 was effective for
accounting changes and corrections of errors made in fiscal years beginning after December 15,
2005. The adoption this statement did not have a material impact on our financial position or
results of operations.
In June 2005, the FASB ratified the Emerging Issues Task Force’s, which we refer to as EITF
consensus on EITF 04-05, Determining Whether a General Partner, or the General Partners as a Group,
Controls a Limited Partnership or Similar Entity When the Limited Partners Have Certain Rights,
which we refer to as EITF 04-05. EITF 04-05 provides a framework for determining whether a general
partner controls, and should consolidate, a limited partnership or a similar entity. It was
effective after June 29, 2005, for all newly formed limited partnerships and for any pre-existing
limited partnerships that modify their partnership agreements after that date. General partners of
all other limited partnerships were required to apply EITF 04-05 no later than the beginning of the
first reporting period in fiscal years beginning after December 15, 2005. The adoption of EITF
04-05 did not have a material impact on our financial position or results of operations.
57
In 2005, the EITF released Issue No. 05-06, Determining the Amortization Period for Leasehold
Improvements, which we refer to as EITF 05-06, which clarifies the period over which leasehold
improvements should be amortized. EITF 05-06 requires all leasehold improvements to be amortized
over the shorter of the useful life of the assets, or the applicable lease term, as defined. The
applicable lease term is determined on the date the leasehold improvements are acquired and
includes renewal periods for which exercise is reasonably assured. EITF 05-06 was effective for
leasehold improvements acquired in reporting periods beginning after June 29, 2005. The impact of
the adoption of EITF 05-06 did not have a material impact on our financial position or results of
operations.
In June 2006, the FASB issued FASB Interpretation No. 48, Accounting for Uncertainty in
Income Taxes, which we refer to as FIN 48. FIN 48 clarifies the accounting for uncertainty in
income taxes recognized in accordance with SFAS 109. FIN 48 prescribes a recognition threshold and
measurement attribute for financial statement recognition and measurement of a tax position taken
or expected to be taken in a tax return. FIN 48 is effective for fiscal years beginning after
December 15, 2006. The Company does not expect that the adoption of FIN 48 will have material
impact on our consolidated financial position or results of operations.
In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements, which we refer to as
SFAS 157. SFAS 157 defines fair value, establishes a framework for measuring fair value in
generally accepted accounting principles and expands disclosures about fair value measurements.
SFAS 157 is effective for financial statements issued for fiscal years beginning after November 15,
2007 and interim periods within those fiscal years. The adoption of this statement is not expected
to have a material impact on our consolidated financial position or results of operations.
In September 2006, the SEC released Staff Accounting Bulletin No. 108, which we refer to as
SAB 108. SAB 108 provides guidance on how the effects of the carryover or reversal of prior year
financial statements misstatements should be considered in quantifying a current period
misstatement. In addition, upon adoption, SAB 108 permits the Company to adjust the cumulative
effect of immaterial errors relating to prior years in the carrying amount of assets and
liabilities as of the beginning of the current fiscal year, with an offsetting adjustment to the
opening balance of retained earnings. SAB 108 also requires the adjustment of any prior quarterly
financial statement within the fiscal year of adoption for the effects of such errors on the
quarters when the information is next presented. We will adopt SAB 108 in the first quarter of
2007, and we do not anticipate that it will have a material impact on our results of operations and
financial condition.
Off-Balance Sheet Arrangements
Non-Consolidated Real Estate Entities. As of December 31, 2006, we had investments in various
real estate entities with varying structures and ownership percentages ranging from 1% to 50%. The
investments owned by these entities are financed with non-recourse debt. Non-recourse debt is
generally defined as debt whereby the lenders’ sole recourse with respect to borrower defaults is
limited to the value of the asset collateralized by the debt. The lender generally does not have
recourse against any other assets owned by the borrower or any of the members of the borrower,
except for certain specified exceptions listed in the particular loan documents. These exceptions
generally relate to limited circumstances including breaches of material representations.
We invest in entities with third parties to increase portfolio diversification, reduce the
amount of equity invested in any one property and to increase returns on equity due to the
realization of advisory fees. See Note 8 to the condensed consolidated financial statements for
summary combined balance sheet and income statement data relating to these entities.
In addition, as of December 31, 2006, we have issued $1.8 million in letters of credit
under our credit facility.
Item 7A. Quantitative and Qualitative Disclosure about Market Risk
Our exposure to market risk relates primarily to our debt. As of December 31, 2006, and 2005,
our variable rate indebtedness represented 28.8% and 1.0%, respectively, of total mortgages and
notes payable. Although we have an interest rate swap and cap agreement on $547.2 million of the
MLP’s debt the amount is considered variable for this analysis. During 2006 and 2005, this variable
rate indebtedness had a weighted average interest rate of 6.8% and 6.0%, respectively. Had the
weighted average interest rate been 100 basis points higher our net income would have been reduced
by $0.1 million and $0.3 million in 2006 and 2005, respectively. As of December 31, 2006 and 2005,
our fixed rate debt, including discontinued operations, was $1,516.6 million and $1,158.7 million,
respectively, which represented 71.2% and 99.0%, respectively, of total long-term indebtedness. The
weighted average interest rate as of December 31, 2006 of fixed rate debt was 6.0%, which
approximates the weighted average fixed rate for debt obtained by us during 2006. The weighted
average interest rate as of December 31, 2005 of fixed rate debt was 6.0%. With no fixed rate debt
maturing until 2008, we believe we have limited market risk exposure to rising interest rates as it
relates to our fixed rate debt obligations. However, had the fixed interest rate been higher by 100
basis points, our net income would have been reduced by $11.9 million and $10.3 million for years
ended December 31, 2006 and 2005, respectively.
58
MANAGEMENT’S ANNUAL REPORT ON INTERNAL CONTROLS
OVER FINANCIAL REPORTING
Management
is responsible for establishing and maintaining adequate internal controls over
financial reporting. Our internal control system was designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation and fair presentation of
published financial statements in accordance with U.S. generally accepted accounting principles.
All internal control systems, no matter how well designed, have inherent limitations.
Therefore, even those systems determined to be effective can provide only reasonable assurance with
respect to financial statement preparation and presentation.
We completed the Merger with Newkirk on December 31, 2006. While Newkirk’s assets and
liabilities are included in our Consolidated Balance Sheet, Newkirk’s business and operations are
not included in our Consolidated Statements of Operations. As a result, management excluded
Newkirk’s business and operations from its assessment of the effectiveness of our internal control
over financial reporting as of December 31, 2006.
In
assessing the effectiveness of our internal controls over financial reporting, management
used as guidance the criteria established in Internal Control — Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission. Based upon the assessment
performed, management believes that our internal controls over financial reporting are effective as
of December 31, 2006.
Our internal control over financial reporting includes policies and procedures that pertain to
the maintenance of records that, in reasonable detail, accurately and fairly reflect transactions
and dispositions of assets; provide reasonable assurances that transactions are recorded as
necessary to permit preparation of financial statements in accordance with U.S. generally accepted
accounting principles, and that receipts and expenditures are being made only in accordance with
authorizations of our management and the members of our Board of Trustees; and provide reasonable
assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition
of our assets that could have a material effect on our financial statements.
In addition, KPMG LLP, our independent registered public accounting firm, has issued an
unqualified attestation report on management’s assessment of our internal controls over financial
reporting which is included on page 61 of this Annual Report.
59
Item 8. Financial Statements and Supplementary Data
LEXINGTON REALTY TRUST
AND CONSOLIDATED SUBSIDIARIES
INDEX
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Page |
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61-62 |
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63 |
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64 |
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65 |
|
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|
66 |
|
|
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|
67 |
|
|
|
|
68-88 |
|
Financial Statement Schedule |
|
|
|
|
|
|
|
89-93 |
|
60
Report of Independent Registered Public Accounting Firm
The Shareholders
Lexington Realty Trust:
We have audited management’s assessment, included in the accompanying Management’s Annual
Report on Internal Controls Over Financial Reporting, that Lexington Realty Trust, formerly known
as Lexington Corporate Properties Trust (the “Company”), maintained effective internal control over
financial reporting as of December 31, 2006, based on criteria established in Internal Control —
Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission
(COSO). The Company’s management is responsible for maintaining effective internal control over
financial reporting and for its assessment of the effectiveness of internal control over financial
reporting. Our responsibility is to express an opinion on management’s assessment and an opinion on
the effectiveness of the Company’s internal control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting
Oversight Board (United States). Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether effective internal control over financial reporting was
maintained in all material respects. Our audit included obtaining an understanding of internal
control over financial reporting, evaluating management’s assessment, testing and evaluating the
design and operating effectiveness of internal control, and performing such other procedures as we
considered necessary in the circumstances. We believe that our audit provides a reasonable basis
for our opinion.
A company’s internal control over financial reporting is a process designed to provide
reasonable assurance regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with generally accepted accounting
principles. A company’s internal control over financial reporting includes those policies and
procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately
and fairly reflect the transactions and dispositions of the assets of the company; (2) provide
reasonable assurance that transactions are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting principles, and that receipts and
expenditures of the company are being made only in accordance with authorizations of management and
directors of the company; and (3) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use, or disposition of the company’s assets that could have
a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent
or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are
subject to the risk that controls may become inadequate because of changes in conditions, or that
the degree of compliance with the policies or procedures may deteriorate.
In our opinion, management’s assessment that the Company maintained effective internal control
over financial reporting as of December 31, 2006, is fairly stated, in all material respects, based
on criteria established in Internal Control — Integrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission (COSO). Also, in our opinion, the Company
maintained, in all material respects, effective internal control over financial reporting as of
December 31, 2006, based on criteria established in Internal Control — Integrated Framework issued
by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
The Company acquired Newkirk Realty Trust, Inc. (“Newkirk”) on December 31, 2006, and
management excluded from its assessment of the effectiveness of the Company’s internal control over
financial reporting as of December 31, 2006, Newkirk’s internal control over financial reporting
associated with total assets of $2.4 billion, included in the consolidated financial statements of
Lexington Realty Trust and subsidiaries as of and for the year ended December 31, 2006. Our audit
of internal control over financial reporting for Lexington Realty Trust also excluded an evaluation
of the internal control over financial reporting of Newkirk.
We also have audited, in accordance with the standards of the Public Company Accounting
Oversight Board (United States), the consolidated statements and financial statement schedule as
listed in the accompanying index, and our report dated February 28, 2007 expressed an unqualified
opinion on those consolidated financial statements and financial statement schedule.
/s/ KPMG LLP
New York, New York
February 28, 2007
61
Report of Independent Registered Public Accounting Firm
The Shareholders
Lexington Realty Trust:
We have audited the accompanying consolidated financial statements of Lexington Realty Trust,
formerly known as Lexington Corporate Properties Trust, and subsidiaries (the “Company”) as listed
in the accompanying index. In connection with our audits of the consolidated financial statements,
we also have audited the financial statement schedule as listed in the accompanying index. These
consolidated financial statements and financial statement schedule are the responsibility of the
Company’s management. Our responsibility is to express an opinion on these consolidated financial
statements and financial statement schedule based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting
Oversight Board (United States). Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all
material respects, the financial position of Lexington Realty Trust and subsidiaries as of December
31, 2006 and 2005, and the results of their operations and their cash flows for each of the years
in the three-year period ended December 31, 2006, in conformity with U.S. generally accepted
accounting principles. Also in our opinion, the related financial statement schedule, when
considered in relation to the basic consolidated financial statements taken as a whole, present
fairly, in all material respects, the information set forth therein.
We also have audited, in accordance with the standards of the Public Company Accounting
Oversight Board (United States), the effectiveness of the Company’s internal control over financial
reporting as of December 31, 2006, based on criteria established in Internal Control — Integrated
Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO),
and our report dated February 28, 2007, expressed an unqualified opinion on management’s assessment
of, and the effective operation of, internal control over financial reporting.
/s/ KPMG LLP
New York, New York
February 28, 2007
62
LEXINGTON REALTY TRUST
AND CONSOLIDATED SUBSIDIARIES
Consolidated Balance Sheets
($000 except per share amounts)
Years ended December 31,
| |
|
|
|
|
|
|
|
|
| |
|
2006 |
|
|
2005 |
|
ASSETS |
|
|
|
|
|
|
|
|
Real estate, at cost |
|
|
|
|
|
|
|
|
Buildings and building improvements |
|
$ |
3,107,234 |
|
|
$ |
1,608,175 |
|
Land and land estates |
|
|
625,717 |
|
|
|
259,682 |
|
Land improvements |
|
|
2,044 |
|
|
|
2,044 |
|
Fixtures and equipment |
|
|
12,161 |
|
|
|
13,214 |
|
|
|
|
|
|
|
|
|
|
|
3,747,156 |
|
|
|
1,883,115 |
|
Less: accumulated depreciation |
|
|
276,129 |
|
|
|
241,188 |
|
|
|
|
|
|
|
|
|
|
|
3,471,027 |
|
|
|
1,641,927 |
|
Properties held for sale — discontinued operations |
|
|
69,612 |
|
|
|
49,397 |
|
Intangible assets (net of accumulated amortization of $33,724 in 2006 and $15,181 in 2005) |
|
|
468,244 |
|
|
|
128,775 |
|
Investment in and advances to non-consolidated entities |
|
|
247,045 |
|
|
|
191,146 |
|
Cash and cash equivalents |
|
|
97,547 |
|
|
|
53,515 |
|
Investment in marketable equity securities (cost $31,247 in 2006) |
|
|
32,036 |
|
|
|
— |
|
Deferred expenses (net of accumulated amortization of $6,834 in 2006 and $4,740 in 2005) |
|
|
16,084 |
|
|
|
13,582 |
|
Rent receivable — current |
|
|
53,744 |
|
|
|
7,673 |
|
Rent receivable — deferred |
|
|
29,410 |
|
|
|
24,778 |
|
Notes receivable |
|
|
50,534 |
|
|
|
11,050 |
|
Other assets, net |
|
|
89,574 |
|
|
|
38,389 |
|
|
|
|
|
|
|
|
|
|
$ |
4,624,857 |
|
|
$ |
2,160,232 |
|
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS’ EQUITY |
|
|
|
|
|
|
|
|
Liabilities: |
|
|
|
|
|
|
|
|
Mortgages and notes payable |
|
$ |
2,123,174 |
|
|
$ |
1,139,971 |
|
Contract rights payable |
|
|
12,231 |
|
|
|
— |
|
Liabilities — discontinued operations |
|
|
6,064 |
|
|
|
32,145 |
|
Accounts payable and other liabilities |
|
|
29,513 |
|
|
|
13,250 |
|
Accrued interest payable |
|
|
10,818 |
|
|
|
5,859 |
|
Dividends payable |
|
|
44,948 |
|
|
|
— |
|
Prepaid rent |
|
|
10,109 |
|
|
|
10,054 |
|
Deferred revenue (net of amortization of $1,029 in 2006 and $554 in 2005) |
|
|
362,815 |
|
|
|
6,271 |
|
|
|
|
|
|
|
|
|
|
|
2,599,672 |
|
|
|
1,207,550 |
|
Minority interests |
|
|
902,741 |
|
|
|
61,372 |
|
|
|
|
|
|
|
|
|
|
|
3,502,413 |
|
|
|
1,268,922 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commitments
and contingencies (notes 8, 9, 10, 11, 13 and 15) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders’ equity: |
|
|
|
|
|
|
|
|
Preferred shares, par value $0.0001 per share; authorized 10,000,000 shares; |
|
|
|
|
|
|
|
|
Series B Cumulative Redeemable Preferred, liquidation preference, $79,000, 3,160,000
shares issued and outstanding |
|
|
76,315 |
|
|
|
76,315 |
|
Series C Cumulative Convertible Preferred, liquidation preference $155,000; 3,100,000
shares issued and outstanding |
|
|
150,589 |
|
|
|
150,589 |
|
Special Voting Preferred Share, par value $0.0001 per share; authorized and issued 1
share in 2006 |
|
|
— |
|
|
|
— |
|
Common shares, par value $0.0001 per share, authorized 160,000,000 shares, 69,051,781
and 52,155,855 shares issued and outstanding in 2006 and 2005, respectively |
|
|
7 |
|
|
|
5 |
|
Additional paid-in-capital |
|
|
1,188,900 |
|
|
|
848,564 |
|
Deferred compensation, net |
|
|
— |
|
|
|
(11,401 |
) |
Accumulated distributions in excess of net income |
|
|
(294,640 |
) |
|
|
(172,762 |
) |
Accumulated other comprehensive income |
|
|
1,273 |
|
|
|
— |
|
|
|
|
|
|
|
|
Total shareholders’ equity |
|
|
1,122,444 |
|
|
|
891,310 |
|
|
|
|
|
|
|
|
|
|
$ |
4,624,857 |
|
|
$ |
2,160,232 |
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these consolidated financial statements.
63
LEXINGTON REALTY TRUST
AND CONSOLIDATED SUBSIDIARIES
Consolidated Statements of Operations
($000 except per share amounts)
Years ended December 31,
| |
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
2006 |
|
|
2005 |
|
|
2004 |
|
Gross revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
Rental |
|
$ |
185,312 |
|
|
$ |
167,253 |
|
|
$ |
119,663 |
|
Advisory fees |
|
|
4,555 |
|
|
|
5,365 |
|
|
|
4,885 |
|
Tenant reimbursements |
|
|
17,524 |
|
|
|
10,840 |
|
|
|
5,429 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total gross revenues |
|
|
207,391 |
|
|
|
183,458 |
|
|
|
129,977 |
|
Expense applicable to revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
(80,688 |
) |
|
|
(66,041 |
) |
|
|
(34,017 |
) |
Property operating |
|
|
(32,167 |
) |
|
|
(21,913 |
) |
|
|
(8,973 |
) |
General and administrative |
|
|
(35,530 |
) |
|
|
(17,587 |
) |
|
|
(13,832 |
) |
Impairment charges |
|
|
(7,221 |
) |
|
|
— |
|
|
|
— |
|
Non-operating income |
|
|
8,913 |
|
|
|
1,514 |
|
|
|
3,269 |
|
Interest and amortization expense |
|
|
(71,402 |
) |
|
|
(62,617 |
) |
|
|
(42,456 |
) |
Debt satisfaction gains (charges), net |
|
|
7,228 |
|
|
|
4,409 |
|
|
|
(56 |
) |
Write-off — tenant bankruptcy |
|
|
— |
|
|
|
— |
|
|
|
(2,884 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before benefit (provision) for income taxes,
minority interests, equity in earnings of non-consolidated
entities and discontinued operations |
|
|
(3,476 |
) |
|
|
21,223 |
|
|
|
31,028 |
|
Benefit (provision) for income taxes |
|
|
238 |
|
|
|
150 |
|
|
|
(1,181 |
) |
Minority interests |
|
|
(1,611 |
) |
|
|
(2,655 |
) |
|
|
(2,465 |
) |
Equity in earnings of non-consolidated entities |
|
|
4,186 |
|
|
|
6,220 |
|
|
|
7,194 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations |
|
|
(663 |
) |
|
|
24,938 |
|
|
|
34,576 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discontinued operations, net of minority interests and taxes: |
|
|
|
|
|
|
|
|
|
|
|
|
Income from discontinued operations |
|
|
4,853 |
|
|
|
8,206 |
|
|
|
10,203 |
|
Debt satisfaction gains (charges) |
|
|
3,626 |
|
|
|
(725 |
) |
|
|
— |
|
Impairment charges |
|
|
(21,612 |
) |
|
|
(11,302 |
) |
|
|
(5,447 |
) |
Gains on sales of properties |
|
|
21,549 |
|
|
|
11,578 |
|
|
|
5,475 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total discontinued operations |
|
|
8,416 |
|
|
|
7,757 |
|
|
|
10,231 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
|
7,753 |
|
|
|
32,695 |
|
|
|
44,807 |
|
Dividends attributable to preferred shares — Series B |
|
|
(6,360 |
) |
|
|
(6,360 |
) |
|
|
(6,360 |
) |
Dividends attributable to preferred shares — Series C |
|
|
(10,075 |
) |
|
|
(10,075 |
) |
|
|
(585 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) allocable to common shareholders |
|
$ |
(8,682 |
) |
|
$ |
16,260 |
|
|
$ |
37,862 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) per common share — basic: |
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations |
|
$ |
(0.33 |
) |
|
$ |
0.17 |
|
|
$ |
0.59 |
|
Income from discontinued operations |
|
|
0.16 |
|
|
|
0.16 |
|
|
|
0.22 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
(0.17 |
) |
|
$ |
0.33 |
|
|
$ |
0.81 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding — basic |
|
|
52,163,569 |
|
|
|
49,835,773 |
|
|
|
46,551,328 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) per common share — diluted: |
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations |
|
$ |
(0.33 |
) |
|
$ |
0.17 |
|
|
$ |
0.58 |
|
Income from discontinued operations |
|
|
0.16 |
|
|
|
0.16 |
|
|
|
0.22 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
(0.17 |
) |
|
$ |
0.33 |
|
|
$ |
0.80 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding — diluted |
|
|
52,163,569 |
|
|
|
49,902,649 |
|
|
|
52,048,909 |
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these consolidated financial statements.
64
LEXINGTON REALTY TRUST
AND CONSOLIDATED SUBSIDIARIES
Consolidated Statements of Comprehensive Income
($000)
Years ended December 31,
| |
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
2006 |
|
|
2005 |
|
|
2004 |
|
Net income |
|
$ |
7,753 |
|
|
$ |
32,695 |
|
|
$ |
44,807 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income: |
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized gain in marketable equity securities |
|
|
789 |
|
|
|
— |
|
|
|
— |
|
Unrealized gain in foreign currency translation |
|
|
484 |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income |
|
|
1,273 |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income |
|
$ |
9,026 |
|
|
$ |
32,695 |
|
|
$ |
44,807 |
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these consolidated financial statements.
65
LEXINGTON REALTY TRUST
AND CONSOLIDATED SUBSIDIARIES
Consolidated Statements of Changes in Shareholders’ Equity
($000 except per share amounts)
Years ended December 31,
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated |
|
|
Accumulated |
|
|
|
|
| |
|
Number of |
|
|
|
|
|
|
Number of |
|
|
|
|
|
|
Additional |
|
|
Deferred |
|
|
Distributions |
|
|
Other |
|
|
Total |
|
| |
|
Preferred |
|
|
|
|
|
|
Common |
|
|
|
|
|
|
Paid-in |
|
|
Compensation, |
|
|
In Excess of |
|
|
Comprehensive |
|
|
Shareholders’ |
|
| |
|
Shares |
|
|
Amount |
|
|
Shares |
|
|
Amount |
|
|
Capital |
|
|
net |
|
|
Net Income |
|
|
Income |
|
|
Equity |
|
Balance at December 31, 2003 |
|
|
3,160,000 |
|
|
$ |
76,315 |
|
|
|
40,394,113 |
|
|
$ |
4 |
|
|
$ |
601,501 |
|
|
$ |
(6,265 |
) |
|
$ |
(91,707 |
) |
|
|
— |
|
|
$ |
579,848 |
|
Net income |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
44,807 |
|
|
|
— |
|
|
|
44,807 |
|
Dividends paid to common
shareholders |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(65,086 |
) |
|
|
— |
|
|
|
(65,086 |
) |
Dividends paid to preferred
shareholders |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(6,360 |
) |
|
|
— |
|
|
|
(6,360 |
) |
Issuance of common shares, net |
|
|
— |
|
|
|
— |
|
|
|
7,939,272 |
|
|
|
1 |
|
|
|
161,572 |
|
|
|
(4,381 |
) |
|
|
— |
|
|
|
— |
|
|
|
157,192 |
|
Issuance of preferred shares,
net |
|
|
2,700,000 |
|
|
|
131,126 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
131,126 |
|
Amortization of deferred
compensation |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
1,954 |
|
|
|
— |
|
|
|
— |
|
|
|
1,954 |
|
Reclass of common shares from
mezzanine equity |
|
|
— |
|
|
|
— |
|
|
|
287,888 |
|
|
|
— |
|
|
|
3,809 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
3,809 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2004 |
|
|
5,860,000 |
|
|
|
207,441 |
|
|
|
48,621,273 |
|
|
|
5 |
|
|
|
766,882 |
|
|
|
(8,692 |
) |
|
|
(118,346 |
) |
|
|
— |
|
|
|
847,290 |
|
Net income |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
32,695 |
|
|
|
— |
|
|
|
32,695 |
|
Dividends paid to common
shareholders |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(72,617 |
) |
|
|
— |
|
|
|
(72,617 |
) |
Dividends paid to preferred
shareholders |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(6,360 |
) |
|
|
— |
|
|
|
(6,360 |
) |
Dividends paid to preferred
shareholders |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(8,134 |
) |
|
|
— |
|
|
|
(8,134 |
) |
Issuance of common shares, net |
|
|
— |
|
|
|
— |
|
|
|
3,534,582 |
|
|
|
— |
|
|
|
81,682 |
|
|
|
(5,575 |
) |
|
|
— |
|
|
|
— |
|
|
|
76,107 |
|
Issuance of preferred shares,
net |
|
|
400,000 |
|
|
|
19,463 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
19,463 |
|
Amortization of deferred
compensation |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
2,866 |
|
|
|
— |
|
|
|
— |
|
|
|
2,866 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2005 |
|
|
6,260,000 |
|
|
|
226,904 |
|
|
|
52,155,855 |
|
|
|
5 |
|
|
|
848,564 |
|
|
|
(11,401 |
) |
|
|
(172,762 |
) |
|
|
— |
|
|
|
891,310 |
|
Net income |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
7,753 |
|
|
|
— |
|
|
|
7,753 |
|
Adoption of new accounting
principle (Note 2) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(11,401 |
) |
|
|
11,401 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Dividends declared to common
shareholders |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(109,088 |
) |
|
|
— |
|
|
|
(109,088 |
) |
Dividends declared to preferred
shareholders |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(7,949 |
) |
|
|
— |
|
|
|
(7,949 |
) |
Dividends declared to preferred
shareholders |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(12,594 |
) |
|
|
— |
|
|
|
(12,594 |
) |
Issuance of common shares, net |
|
|
— |
|
|
|
— |
|
|
|
16,895,926 |
|
|
|
2 |
|
|
|
351,737 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
351,739 |
|
Issuance of special voting
preferred |
|
|
1 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Other comprehensive income |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
1,273 |
|
|
|
1,273 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2006 |
|
|
6,260,001 |
|
|
$ |
226,904 |
|
|
|
69,051,781 |
|
|
$ |
7 |
|
|
$ |
1,188,900 |
|
|
$ |
— |
|
|
$ |
(294,640 |
) |
|
$ |
1,273 |
|
|
$ |
1,122,444 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these consolidated financial statements.
66
LEXINGTON REALTY TRUST
AND CONSOLIDATED SUBSIDIARIES
Consolidated Statements of Cash Flows
($000 except per share amounts)
Years ended December 31,
| |
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
2006 |
|
|
2005 |
|
|
2004 |
|
Cash flows from operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
7,753 |
|
|
$ |
32,695 |
|
|
$ |
44,807 |
|
Adjustments to reconcile net income to net cash provided by operating
activities, net of effects from acquisitions: |
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
84,734 |
|
|
|
73,034 |
|
|
|
41,710 |
|
Minority interests |
|
|
(2,842 |
) |
|
|
2,165 |
|
|
|
2,983 |
|
Gains on sales of properties |
|
|
(21,549 |
) |
|
|
(11,578 |
) |
|
|
(5,475 |
) |
Debt satisfaction gain, net |
|
|
(14,761 |
) |
|
|
(4,536 |
) |
|
|
— |
|
Impairment charges |
|
|
35,430 |
|
|
|
12,879 |
|
|
|
6,375 |
|
Write-off-tenant bankruptcy |
|
|
— |
|
|
|
— |
|
|
|
2,884 |
|
Straight-line rents |
|
|
(4,923 |
) |
|
|
(3,447 |
) |
|
|
(3,395 |
) |
Other non-cash charges |
|
|
17,233 |
|
|
|
4,196 |
|
|
|
2,556 |
|
Equity in earnings of non-consolidated entities |
|
|
(4,186 |
) |
|
|
(6,220 |
) |
|
|
(7,194 |
) |
Distributions of accumulated earnings from non-consolidated entities |
|
|
8,058 |
|
|
|
7,561 |
|
|
|
5,170 |
|
Deferred tax assets |
|
|
(738 |
) |
|
|
(466 |
) |
|
|
(2,026 |
) |
Increase (decrease) in accounts payable and other liabilities |
|
|
1,999 |
|
|
|
(788 |
) |
|
|
1,710 |
|
Other adjustments, net |
|
|
1,812 |
|
|
|
(38 |
) |
|
|
631 |
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities |
|
|
108,020 |
|
|
|
105,457 |
|
|
|
90,736 |
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
Net proceeds from sales/transfers of properties |
|
|
76,627 |
|
|
|
96,685 |
|
|
|
101,367 |
|
Cash paid relating to Merger |
|
|
(12,395 |
) |
|
|
— |
|
|
|
— |
|
Investments in real estate properties and intangible assets |
|
|
(173,661 |
) |
|
|
(759,656 |
) |
|
|
(203,678 |
) |
Investments in and advances to non-consolidated entities |
|
|
(9,865 |
) |
|
|
(41,943 |
) |
|
|
(86,171 |
) |
Investment in convertible mortgage receivable |
|
|
— |
|
|
|
— |
|
|
|
(19,800 |
) |
Acquisition of controlling interest in LSAC |
|
|
(42,619 |
) |
|
|
— |
|
|
|
— |
|
Collection of notes from affiliate |
|
|
8,300 |
|
|
|
45,800 |
|
|
|
— |
|
Issuance of notes receivable to affiliate |
|
|
(8,300 |
) |
|
|
— |
|
|
|
(32,800 |
) |
Collection of notes |
|
|
— |
|
|
|
3,488 |
|
|
|
— |
|
Real estate deposits |
|
|
359 |
|
|
|
1,579 |
|
|
|
1,180 |
|
Investment in notes receivable |
|
|
(11,144 |
) |
|
|
— |
|
|
|
— |
|
Investment in marketable securities |
|
|
(5,019 |
) |
|
|
— |
|
|
|
— |
|
Distribution from non-consolidated entities in excess of accumulated
earnings |
|
|
19,640 |
|
|
|
17,202 |
|
|
|
38,651 |
|
Increase in deferred leasing costs |
|
|
(1,737 |
) |
|
|
(2,919 |
) |
|
|
(207 |
) |
Change in escrow deposits and restricted cash |
|
|
5,734 |
|
|
|
(4,013 |
) |
|
|
(967 |
) |
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities |
|
|
(154,080 |
) |
|
|
(643,777 |
) |
|
|
(202,425 |
) |
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds of mortgages and notes payable |
|
|
147,045 |
|
|
|
516,520 |
|
|
|
159,760 |
|
Change in credit facility borrowing, net |
|
|
65,194 |
|
|
|
— |
|
|
|
(94,000 |
) |
Dividends to common and preferred shareholders |
|
|
(93,681 |
) |
|
|
(87,111 |
) |
|
|
(71,446 |
) |
Dividend reinvestment plan proceeds |
|
|
12,525 |
|
|
|
13,815 |
|
|
|
10,608 |
|
Principal payments on debt, excluding normal amortization |
|
|
(82,010 |
) |
|
|
(50,936 |
) |
|
|
(6,543 |
) |
Principal amortization payments |
|
|
(28,966 |
) |
|
|
(25,313 |
) |
|
|
(19,704 |
) |
Debt deposits |
|
|
291 |
|
|
|
1,334 |
|
|
|
(1,384 |
) |
Origination fee amortization payments |
|
|
— |
|
|
|
— |
|
|
|
(29 |
) |
Issuance of common/preferred shares |
|
|
272 |
|
|
|
80,671 |
|
|
|
275,644 |
|
Repurchase of common shares |
|
|
(11,159 |
) |
|
|
— |
|
|
|
— |
|
Contributions from minority partners |
|
|
810 |
|
|
|
9,412 |
|
|
|
— |
|
Cash distributions to minority partners |
|
|
(8,554 |
) |
|
|
(7,028 |
) |
|
|
(8,975 |
) |
Increase in deferred financing costs |
|
|
(1,169 |
) |
|
|
(6,403 |
) |
|
|
(1,087 |
) |
Purchases of partnership units |
|
|
(115 |
) |
|
|
(83 |
) |
|
|
(121 |
) |
|
|
|
|
|
|
|
|
|
|
Net cash provided by financing activities |
|
|
483 |
|
|
|
444,878 |
|
|
|
242,723 |
|
|
|
|
|
|
|
|
|
|
|
Cash attributable to newly consolidated entity |
|
|
31,985 |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
Cash attributable to Merger |
|
|
57,624 |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
Change in cash and cash equivalents |
|
|
44,032 |
|
|
|
(93,442 |
) |
|
|
131,034 |
|
Cash and cash equivalents, beginning of year |
|
|
53,515 |
|
|
|
146,957 |
|
|
|
15,923 |
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, end of year |
|
$ |
97,547 |
|
|
$ |
53,515 |
|
|
$ |
146,957 |
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these consolidated financial statements.
67
LEXINGTON REALTY TRUST
AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements
($000 except per share/unit amounts)
(1) The Company
Lexington Realty Trust, formerly Lexington Corporate Properties Trust (the “Company”), is a
self-managed and self-administered Maryland statutory real estate investment trust (“REIT”) that
acquires, owns, and manages a geographically diversified portfolio of net leased office, industrial
and retail properties and provides investment advisory and asset management services to
institutional investors in the net lease area. As of December 31, 2006, the Company owned or had
interests in approximately 365 properties in 44 states and the Netherlands. The real properties
owned by the Company are generally subject to net leases to corporate tenants, however certain
leases provide for the Company to be responsible for certain operating expenses. As of December 31,
2005, the Company owned or had interests in 189 properties in 39 states.
On December 31, 2006, the Company completed its merger with Newkirk Realty Trust, Inc., or
Newkirk (the “Merger”). Newkirk’s primary business was similar to the primary business of the
Company. All of Newkirk’s operations were conducted and all of its assets were held through its
master limited partnership, The Newkirk Master Limited Partnership which we refer to as the MLP.
Newkirk was the general partner and owned 31.0% of the units of limited partnership in the MLP (the
“MLP units”). In connection with the Merger, the Company changed its name to Lexington Realty
Trust, the MLP was renamed The Lexington Master Limited Partnership and an affiliate of the Company
became the general partner of the MLP and another affiliate of the Company became the holder of a
31.0% ownership interest in the MLP.
In the Merger, Newkirk merged with and into the Company, with the Company as the surviving
entity. Each holder of Newkirk’s common stock received 0.80 common shares of the Company in
exchange for each share of Newkirk’s common stock, and the MLP effected a reverse unit-split
pursuant to which each outstanding MLP unit was converted into 0.80 units, resulting in 35.5
million MLP units applicable to the minority interest being outstanding after the Merger. Each MLP
unit is currently redeemable at the option of the holder for cash based on the value of a common
share of the Company or, if the Company elects, on a one-for-one basis for Lexington common shares.
The Company believes it has qualified as a REIT under the Internal Revenue Code of 1986, as
amended (the “Code”). Accordingly, the Company will not be subject to federal income tax, provided
that distributions to its shareholders equal at least the amount of its REIT taxable income as
defined under the Code. The Company is permitted to participate in certain activities from which it
was previously precluded in order to maintain its qualification as a REIT, so long as these
activities are conducted in entities which elect to be treated as taxable REIT subsidiaries (“TRS”)
under the Code. As such, the TRS will be subject to federal income taxes on the income from these
activities.
The Company’s Board of Trustees authorized the Company to repurchase, from time to time, up to
2.0 million common shares and/or operating partnership units in the Company’s operating partnership
subsidiaries (“OP Units”) depending on market conditions and other factors. As of December 31,
2006, the Company repurchased approximately 0.5 million common shares/OP Units at an average price
of approximately $21.15 per common share/OP Unit, in the open market and through private
transactions with employees.
(2) Summary of Significant Accounting Policies
Basis of Presentation and Consolidation. The Company’s consolidated financial statements are
prepared on the accrual basis of accounting. The financial statements reflect the accounts of the
Company and its controlled subsidiaries, including Lepercq Corporate Income Fund L.P. (“LCIF”),
Lepercq Corporate Income Fund II L.P. (“LCIF II”), Net 3 Acquisition L.P. (“Net 3”), the MLP,
Lexington Realty Advisors, Inc. (“LRA”), Lexington Strategic Asset Corp. (“LSAC”), Lexington
Contributions, Inc. (“LCI”) and Six Penn Center L.P. LRA and LCI are wholly owned taxable REIT
subsidiaries, LSAC is a majority owned taxable REIT subsidiary and the Company is the sole
unitholder of the general partner and a limited partner of each of LCIF, LCIF II, Net 3, the MLP
and Six Penn Center L.P. The Company determines whether an entity for which it holds an interest
should be consolidated pursuant to Financial Accounting Standards Board (“FASB”) Interpretation No.
46, Consolidation of Variable Interest Entities (“FIN 46R”). FIN 46R requires the Company to
evaluate whether it has a controlling financial interest in an entity through means other than
voting rights. If the entity is not a variable interest entity and the Company controls the
entity’s voting shares or similar rights, the entity is consolidated.
Earnings Per Share. Basic net income (loss) per share is computed by dividing net income
reduced by preferred dividends, if applicable, by the weighted average number of common shares
outstanding during the period. Diluted net income (loss) per share amounts are similarly computed
but include the effect, when dilutive, of in-the-money common share options, OP Units, put options
of certain partners’ interests in non-consolidated entities and convertible preferred shares.
68
Recently Issued Accounting Standards. FASB Statement No. 150, Accounting for Certain Financial
Instruments with Characteristics of Both Liabilities and Equity, as amended, (“SFAS 150”), was
issued in May 2003. SFAS 150 establishes standards for the classification and measurement of
certain financial instruments with characteristics of both liabilities and equity. SFAS 150 also
includes required disclosures for financial instruments within its scope. For the Company, SFAS 150
was effective for instruments entered into or modified after May 31, 2003 and otherwise was
effective as of January 1, 2004, except for mandatorily redeemable financial instruments. SFAS 150
has been deferred indefinitely for certain types of mandatorily redeemable financial instruments.
The adoption of the required portions of SFAS 150 had no impact on the Company.
In February 2007, the FASB issued FASB Statement No. 159, The Fair Value Option for Financial
Assets and Financial Liabilities – Including an Amendment of FASB Statement No. 115 (“SFAS 159”).
This standard permits entities to choose to measure many financial assets and liabilities and
certain other items at fair value. An enterprise will report unrealized gains and losses on items
for which the fair value option has been elected in earnings at each subsequent reporting date. The
fair value option may be applied on an instrument-by-instrument basis, with several exceptions,
such as investments accounted for by the equity method, and once elected, the option is irrevocable
unless a new election date occurs. The fair value option can be applied only to entire instruments
and not to portions thereof. SFAS 159 is effective as of the beginning of an entity’s first fiscal
year beginning after November 15 2007. Management is currently evaluating the effects of adopting
SFAS 159 on the Company’s financial statements.
In December 2004, the FASB issued Statement of Financial Accounting Standards (“SFAS”) No.
123, (revised 2004) Share-Based Payment (“SFAS 123R”), which supersedes Accounting Principals Board
(“APB”) Opinion No. 25, Accounting for Stock Issued to Employees, and its related implementation
guidance. SFAS 123R establishes standards for the accounting for transactions in which an entity
exchanges its equity instruments for goods or services. It also addresses transactions in which an
entity incurs liabilities in exchange for goods or services that are based on the fair value of the
entity’s equity instruments or that may be settled by the issuance of those equity instruments.
SFAS 123R focuses primarily on accounting for transactions in which an entity obtains employee
services in share-based payment transactions. SFAS 123R requires a public entity to measure the
cost of employee services received in exchange for an award of equity instruments based on the
grant date fair value of the award. The cost will be recognized over the period in which an
employee is required to provide services in exchange for the award. SFAS 123R was effective for the
fiscal year beginning on January 1, 2006. The impact of adopting this statement resulted in the
elimination of $11,401 of deferred compensation and additional paid-in-capital from the
Consolidated Statements of Changes in Shareholders’ Equity and the adoption did not have a material
impact on the Company’s results of operations or cash flow.
In December 2004, the FASB issued Statement No. 153, Exchange of Non-monetary Assets — an
amendment of APB Opinion No. 29 (“SFAS 153”). The guidance in APB Opinion No. 29, Accounting for
Non-monetary Transactions, is based on the principle that exchanges of non-monetary assets should
be measured based on the fair value of the assets exchanged. The guidance in that opinion, however,
included certain exceptions to that principle. SFAS 153 amends APB Opinion No. 29 to eliminate the
exception for non-monetary assets that do not have commercial substance. A non-monetary exchange
has commercial substance if the future cash flows of the entity are expected to change
significantly as a result of the exchange. SFAS 153 is effective for non-monetary asset exchanges,
occurring in fiscal periods beginning after June 15, 2005. The impact of adopting this statement
did not have a material impact on the Company’s financial position or results of operations.
In March 2005, the FASB issued Interpretation No. 47, Accounting for Conditional Asset
Retirement Obligations — an Interpretation of SFAS Statement No. 143 (“FIN 47”). FIN 47 clarifies
the timing of liability recognition for legal obligations associated with the retirement of a
tangible long-lived asset when the timing and/or method of settlement are conditional on a future
event. FIN 47 is effective for fiscal years ending after December 15, 2005. The application of FIN
47 did not have a material impact on the Company’s consolidated financial position or results of
operations.
In May 2005, the FASB issued SFAS No. 154, Accounting Changes and Error Corrections (“SFAS
154”) which replaces APB Opinions No. 20 Accounting Changes and SFAS No. 3, Reporting Accounting
Changes in Interim Financial Statements — An Amendment of APB Opinion No. 28. SFAS 154 provides
guidance on the accounting for and reporting of accounting changes and error corrections. It
establishes retrospective application as the required method for reporting a change in accounting
principle and the reporting of a correction of an error. SFAS 154 was effective for accounting
changes and corrections of errors made in fiscal years beginning after December 15, 2005. The
impact of adopting this statement did not have a material impact on the Company’s financial
position or results of operations.
In June 2005, the FASB ratified the Emerging Issues Task Force’s (“EITF”) consensus on EITF
04-05, Determining Whether a General Partner, or the General Partners as a Group, Controls a
Limited Partnership or Similar Entity When the Limited Partners Have Certain Rights (“EITF 04-05”).
EITF 04-05 provides a framework for determining whether a general partner controls, and should
consolidate, a limited partnership or a similar entity. It was effective after June 29, 2005, for
all newly formed limited partnerships and for any pre-existing limited partnerships that modify
their partnership agreements after that date. General partners of all other limited partnerships
were required to apply the consensus no later than the beginning of the first reporting period in
fiscal years beginning after December 15, 2005. The impact of the adoption of EITF 04-05 did not
have a material impact on the Company’s financial position or results of operations.
In 2005, the EITF released Issue No. 05-06, Determining the Amortization Period for Leasehold
Improvements (“EITF 05-06”), which clarifies the period over which leasehold improvements should be
amortized. EITF 05-06 requires all leasehold improvements to
69
be amortized over the shorter of the useful life of the assets, or the applicable lease term,
as defined. The applicable lease term is determined on the date the leasehold improvements are
acquired and includes renewal periods for which exercise is reasonably assured. EITF 05-06 was
effective for leasehold improvements acquired in reporting periods beginning after June 29, 2005.
The impact of the adoption of EITF 05-06 did not have a material impact on the Company’s financial
position or results of operations.
In June 2006, the FASB issued FASB Interpretation No. 48, Accounting for Uncertainty in
Income Taxes (“FIN 48”). FIN 48 clarifies the accounting for uncertainty in income taxes recognized
in accordance with SFAS 109. FIN 48 prescribes a recognition threshold and measurement attribute
for financial statement recognition and measurement of a tax position taken or expected to be taken
in a tax return. FIN 48 is effective for fiscal years beginning after December 15, 2006. The
Company does not expect that the adoption of FIN 48 will have material impact on the Company’s
consolidated financial position or results of operations.
In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements (“SFAS 157”). SFAS
157 defines fair value, establishes a framework for measuring fair value in generally accepted
accounting principles and expands disclosures about fair value measurements. SFAS 157 is effective
for financial statements issued for fiscal years beginning after November 15, 2007 and interim
periods within those fiscal years. The adoption of this statement is not expected to have a
material impact on the Company’s consolidated financial position or results of operations.
In September 2006, the Securities and Exchange Commission released Staff Accounting Bulletin
No. 108 ( “ SAB 108”). SAB 108 provides guidance on how the effects of the carryover or reversal of
prior year financial statements misstatements should be considered in quantifying a current period
misstatement. In addition, upon adoption, SAB 108 permits the Company to adjust the cumulative
effect of immaterial errors relating to prior years in the carrying amount of assets and
liabilities as of the beginning of the current fiscal year, with an offsetting adjustment to the
opening balance of retained earnings. SAB 108 also requires the adjustment of any prior quarterly
financial statement within the fiscal year of adoption for the effects of such errors on the
quarters when the information is next presented. The Company will adopt SAB 108 in the first
quarter of 2007, and does not anticipate that it will have a material impact on its consolidated
financial position or results of operations.
Use of Estimates. Management has made a number of estimates and assumptions relating to the
reporting of assets and liabilities, the disclosure of contingent assets and liabilities and the
reported amounts of revenues and expenses to prepare these consolidated financial statements in
conformity with generally accepted accounting principles. The most significant estimates made
include the recoverability of accounts receivable (primarily related to straight-line rents),
allocation of property purchase price to tangible and intangible assets, the determination of
impairment of long-lived assets and the useful lives of long-lived assets. Actual results could
differ from those estimates.
Business Combinations. The Company follows the provisions of Statement of Financial Accounting
Standards No. 141, Business Combinations (“SFAS 141”) and records all assets acquired and
liabilities assumed at fair value. On December 31, 2006, the Company acquired Newkirk which was a
variable interest entity (VIE). The Company follows the provisions of Financial Accounting
Standards Board Interpretation No. 46, Consolidation of Variable Interest Entities (“FIN 46R”), and
as a result has recorded the minority interest in Newkirk at estimated fair value on the date of
acquisition. The value of the consideration issued in common shares is based upon a reasonable
period before and after the date that the terms of the Merger were agreed to and announced.
Purchase Accounting for Acquisition of Real Estate. The fair value of the real estate
acquired, which includes the impact of mark-to-market adjustments for assumed mortgage debt related
to property acquisitions, is allocated to the acquired tangible assets, consisting of land,
building and improvements, and identified intangible assets and liabilities, consisting of the
value of above-market and below-market leases, other value of in-place leases and value of tenant
relationships, based in each case on their fair values.
The fair value of the tangible assets of an acquired property (which includes land, building
and improvements and fixtures and equipment) is determined by valuing the property as if it were
vacant, and the “as-if-vacant” value is then allocated to land, building and improvements based on
management’s determination of relative fair values of these assets. Factors considered by
management in performing these analyses include an estimate of carrying costs during the expected
lease-up periods considering current market conditions and costs to execute similar leases. In
estimating carrying costs, management includes real estate taxes, insurance and other operating
expenses and estimates of lost rental revenue during the expected lease-up periods based on current
market demand. Management also estimates costs to execute similar leases including leasing
commissions.
In allocating the fair value of the identified intangible assets and liabilities of an
acquired property, above-market and below-market in-place lease values are recorded based on the
difference between the current in-place lease rent and a management estimate of current market
rents. Below-market lease intangibles are recorded as part of deferred revenue and amortized into
rental revenue over the non-cancelable periods and bargain renewal periods of the respective
leases. Above-market leases are recorded as part of intangible assets and amortized as a direct
charge against rental revenue over the non-cancelable portion of the respective leases.
The aggregate value of other acquired intangible assets, consisting of in-place leases and
tenant relationships, is measured by the excess of (i) the purchase price paid for a property over
(ii) the estimated fair value of the property as if vacant, determined as set forth above. This
aggregate value is allocated between in-place lease values and tenant relationships based on
management’s evaluation of the specific characteristics of each tenant’s lease. The value of
in-place leases are amortized to expense over the remaining non-
70
cancelable periods and any bargain renewal periods of the respective leases. Customer
relationships are amortized to expense over the applicable lease term plus expected renewal
periods.
Revenue Recognition. The Company recognizes revenue in accordance with Statement of Financial
Accounting Standards No. 13 Accounting for Leases, as amended (“SFAS 13”). SFAS 13 requires that
revenue be recognized on a straight-line basis over the term of the lease unless another systematic
and rational basis is more representative of the time pattern in which the use benefit is derived
from the leased property. Renewal options in leases with rental terms that are lower than those in
the primary term are excluded from the calculation of straight line rent if they do not meet the
criteria of a bargain renewal option. In those instances in which the Company funds tenant
improvements and the improvements are deemed to be owned by the Company, revenue recognition will
commence when the improvements are substantially completed and possession or control of the space
is turned over to the tenant. When the Company determines that the tenant allowances are lease
incentives, the Company commences revenue recognition when possession or control of the space is
turned over to the tenant for tenant work to begin. The lease
incentive is recorded as a deferred expense and amortized as a
reduction of revenue on a straight-line basis over the respective lease term.
Gains on sales of real estate are recognized pursuant to the provisions of Statement of
Financial Accounting Standards No. 66 Accounting for Sales of Real Estate, as amended (“SFAS 66”).
The specific timing of the sale is measured against various criteria in SFAS 66 related to the
terms of the transactions and any continuing involvement in the form of management or financial
assistance associated with the properties. If the sales criteria are not met, the gain is deferred
and the finance, installment or cost recovery method, as appropriate, is applied until the sales
criteria are met.
Accounts Receivable. The Company continuously monitors collections from its tenants and would
make a provision for estimated losses based upon historical experience and any specific tenant
collection issues that the Company has identified. As of December 31, 2006 and 2005, the Company
did not record an allowance for doubtful accounts. However, in 2004, the Company wrote-off $2,884
in receivables from a tenant who declared bankruptcy.
Impairment of Real Estate. The Company evaluates the carrying value of all real estate and
intangible assets held when a triggering event under Statement of Financial Accounting Standards
No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, as amended (“SFAS 144”)
has occurred to determine if an impairment has occurred which would require the recognition of a
loss. The evaluation includes reviewing anticipated cash flows of the property, based on current
leases in place, coupled with an estimate of proceeds to be realized upon sale. However, estimating
future sale proceeds is highly subjective and such estimates could differ materially from actual
results.
Depreciation is determined by the straight-line method over the remaining estimated economic
useful lives of the properties. The Company generally depreciates buildings and building
improvements over periods ranging from 8 to 40 years, land improvements from 15 to 20 years, and
fixtures and equipment from 5 to 16 years.
Only costs incurred to third parties in acquiring properties are capitalized. No internal
costs (rents, salaries, overhead) are capitalized. Expenditures for maintenance and repairs are
charged to operations as incurred. Significant renovations which extend the useful life of the
properties are capitalized.
Properties Held For Sale. The Company accounts for properties held for sale in accordance
with SFAS 144. SFAS 144 requires that the assets and liabilities of properties that meet various
criteria in SFAS 144 be presented separately in the Consolidated Balance Sheets, with assets and
liabilities being separately stated. The operating results of these properties are reflected as
discontinued operations in the Consolidated Statements of Operations. Properties that do not meet
the held for sale criteria of SFAS 144 are accounted for as operating properties.
Investments in non-consolidated entities. The Company accounts for its investments in 50% or
less owned entities under the equity method, unless pursuant to FIN 46R consolidation is required
or if its investment in the entity is less than 3% and it has no influence over the control of the
entity and then the entity is accounted for under the cost method.
Marketable Equity Securities. The Company classifies its existing marketable equity
securities as available-for-sale in accordance with the provisions of SFAS No. 115, Accounting for
Certain Investments in Debt and Equity Securities. These securities are carried at fair market
value, with unrealized gains and losses reported in shareholders’ equity as a component of
accumulated other comprehensive income. Gains or losses on securities sold and other than temporary
impairments are included in the Consolidated Statement of Operations. Sales of securities are
recorded on the trade date and gains and losses are determined by the specific identification
method.
Investments in Debt Securities. Investments in debt securities are classified as
held-to-maturity, reported at amortized cost and are included with other assets in the accompanying
Consolidated Balance Sheet and amounted to $16,372 at December 31,
2006. A decline in the market value of any held-to-maturity security below
cost that is deemed to be other-than-temporary results in an
impairment and would reduce the carrying
amount to fair value. The impairment is charged to earnings and a new cost basis for the security
is established. To determine whether an impairment is other-than-temporary, the Company considers
whether it has the ability and intent to hold the investment until a market price recovery and
considers whether evidence indicating the cost of the investment is recoverable outweighs evidence
to the contrary. Evidence considered in this assessment includes the reasons for the impairment,
the severity and duration of the impairment, changes in value
71
subsequent to year-end, forecasted performance of the investee, and the general market
condition in the geographic area or industry the investee operates in.
Notes Receivable. The Company evaluates the collectibility of both interest and principal of
each of its notes, if circumstances warrant, to determine whether it is impaired. A note is
considered to be impaired, when based on current information and events, it is probable that the
Company will be unable to collect all amounts due according to the existing contractual terms. When
a note is considered to be impaired, the amount of the loss accrual is calculated by comparing the
recorded investment to the value determined by discounting the expected future cash flows at the
note’s effective interest rate. Interest on impaired notes is recognized on a cash basis.
Deferred Expenses. Deferred
expenses consist primarily of debt and leasing costs. Debt costs
are amortized using the straight-line method, which approximates the interest method, over the
terms of the debt instruments and leasing costs are amortized over the term of the related lease.
Deferred Compensation. Deferred compensation consists of the value of non-vested common shares
issued by the Company to employees. The deferred compensation is amortized ratably over the vesting
period which generally is five years. Certain common shares vest only when certain performance
based measures are met.
Derivative Financial Instruments. The Company accounts for its interest rate swap agreement
and interest rate cap agreement in accordance with FAS No.133, Accounting for Derivative
Instruments and Hedging Activities, as amended and interpreted (“SFAS 133”). In accordance with
SFAS 133, interest rate swaps and cap agreements are carried on the balance sheet at their fair
value, as an asset, if their fair value is positive, or as a liability, if their fair value is
negative. The interest rate swap is designated as a cash flow hedge and the interest rate cap
agreement is not designated as a hedge instrument and is measured at fair value with the resulting
gain or loss recognized in interest expense in the period of change. Any ineffective amount of the
interest rate swap is to be recognized in earnings each quarter. The fair value of these
derivatives is included in other assets in the Consolidated Balance Sheet.
Upon entering into hedging transactions, the Company documents the relationship between the
interest rate swap and cap agreements and the hedged liability. The Company also documents its
risk-management policies, including objectives and strategies, as they relate to its hedging
activities. The Company assesses, both at inception of a hedge and on
an on-going basis, whether or
not the hedge is highly effective, as defined by SFAS 133. The Company will discontinue hedge
accounting on a prospective basis with changes in the estimated fair value reflected in earnings
when: (i) it is determined that the derivative is no longer effective in offsetting cash flows of a
hedge item (including forecasted transactions); (ii) it is no longer probable that the forecasted
transaction will occur; or (iii) it is determined that designating the derivative as an interest
rate swap is no longer appropriate. To date, the Company has not discontinued
hedge accounting for its interest rate swap agreement. The Company utilizes interest rate swap and
cap agreements to manage interest rate risk and does not anticipate entering into derivative
transactions for speculative trading purposes.
Tax Status. The Company has made an election to qualify, and believes it is operating so as
to qualify, as a REIT for federal income tax purposes. Accordingly, the Company generally will not
be subject to federal income tax, provided that distributions to its shareholders equal at least
the amount of its REIT taxable income as defined under Sections 856 through 860 of the Code.
The Company is now permitted to participate in certain activities from which it was previously
precluded in order to maintain its qualification as a REIT, so long as these activities are
conducted in entities which elect to be treated as taxable REIT subsidiaries under the Code. LRA,
LSAC and LCI are taxable REIT subsidiaries. As such, the Company is subject to federal and state
income taxes on the income from these activities.
Income taxes are accounted for under the asset and liability method. Deferred tax assets and
liabilities are recognized for the estimated future tax consequences attributable to differences
between the financial statement carrying amounts of existing assets and liabilities and their
respective tax basis and operating loss and tax credit carry-forwards. Deferred tax assets and
liabilities are measured using enacted tax rates in effect for the year in which those temporary
differences are expected to be recovered or settled.
72
A summary of the average taxable nature of the Company’s common dividends for each of the
years in the three year period ended December 31, 2006, is as follows:
| |
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
2006 |
|
|
2005 |
|
|
2004 |
|
Total dividends per share |
|
$ |
1.46 |
|
|
$ |
1.44 |
|
|
$ |
1.40 |
|
|
|
|
|
|
|
|
|
|
|
Ordinary income |
|
|
68.89 |
% |
|
|
87.29 |
% |
|
|
84.09 |
% |
15% rate — qualifying dividend |
|
|
0.77 |
|
|
|
1.04 |
|
|
|
6.82 |
|
15% rate gain |
|
|
7.97 |
|
|
|
8.72 |
|
|
|
0.34 |
|
25% rate gain |
|
|
5.13 |
|
|
|
2.95 |
|
|
|
2.28 |
|
Return of capital |
|
|
17.24 |
|
|
|
— |
|
|
|
6.47 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
100.00 |
% |
|
|
100.00 |
% |
|
|
100.00 |
% |
|
|
|
|
|
|
|
|
|
|
A summary of the average taxable nature of the Company’s dividend on Series B Cumulative
Redeemable Preferred Shares for each of the years in the three year period ended December 31, 2006,
is as follows:
| |
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
2006 |
|
|
2005 |
|
|
2004 |
|
Total dividends per share |
|
$ |
2.0125 |
|
|
$ |
2.0125 |
|
|
$ |
2.0125 |
|
|
|
|
|
|
|
|
|
|
|
Ordinary income |
|
|
83.24 |
% |
|
|
87.29 |
% |
|
|
89.91 |
% |
15% rate — qualifying dividend |
|
|
0.93 |
|
|
|
1.04 |
|
|
|
7.29 |
|
15% rate gain |
|
|
9.63 |
|
|
|
8.72 |
|
|
|
0.37 |
|
25% rate gain |
|
|
6.20 |
|
|
|
2.95 |
|
|
|
2.43 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
100.00 |
% |
|
|
100.00 |
% |
|
|
100.00 |
% |
|
|
|
|
|
|
|
|
|
|
A summary of the average taxable nature of the Company’s dividend on Series C Cumulative
Convertible Preferred Shares for the years ended December 31, 2006 and 2005, is as follows:
| |
|
|
|
|
|
|
|
|
| |
|
2006 |
|
|
2005 |
|
Total dividends per share |
|
$ |
3.25 |
|
|
$ |
2.6239 |
|
|
|
|
|
|
|
|
Ordinary income |
|
|
83.24 |
% |
|
|
87.29 |
% |
15% rate — qualifying dividend |
|
|
0.93 |
|
|
|
1.04 |
|
15% rate gain |
|
|
9.63 |
|
|
|
8.72 |
|
25% rate gain |
|
|
6.20 |
|
|
|
2.95 |
|
|
|
|
|
|
|
|
|
|
|
100.00 |
% |
|
|
100.00 |
% |
|
|
|
|
|
|
|
Cash and Cash Equivalents. The Company considers all highly liquid instruments with
maturities of three months or less from the date of purchase to be cash equivalents.
Foreign Currency. Assets and liabilities of the Company’s foreign operations are translated
using period-end exchange rates, and revenues and expenses are translated using exchange rates as
determined throughout the period. Unrealized gains or losses resulting from translation are
included in other comprehensive income and as a separate component of the Company’s shareholders’
equity.
Common Share Options. All common share options outstanding were fully vested as of December
31, 2005. Common share options granted generally vest ratably over a four-year term and expire five
years from the date of grant. The following table illustrates the effect on net income and net
income per share if the fair value based method had been applied historically to all outstanding
share option awards in each period:
| |
|
|
|
|
|
|
|
|
| |
|
2005 |
|
|
2004 |
|
Net income allocable to common shareholders, as reported — basic |
|
$ |
16,260 |
|
|
$ |
37,862 |
|
Add: Stock based employee compensation expense included in reported net income |
|
|
— |
|
|
|
— |
|
Deduct: Total stock based employee compensation expense determined under fair
value based method for all awards |
|
|
6 |
|
|
|
255 |
|
|
|
|
|
|
|
|
Pro forma net income — basic |
|
$ |
16,254 |
|
|
$ |
37,607 |
|
|
|
|
|
|
|
|
Net income per share — basic
|
|
|
|
|
|
|
|
|
Basic — as reported |
|
$ |
0.33 |
|
|
$ |
0.81 |
|
|
|
|
|
|
|
|
Basic — pro forma |
|
$ |
0.33 |
|
|
$ |
0.81 |
|
|
|
|
|
|
|
|
Net income allocable to common shareholders, as reported — diluted |
|
$ |
16,260 |
|
|
$ |
41,615 |
|
Add: Stock based employee compensation expense included in reported net income |
|
|
— |
|
|
|
— |
|
Deduct: Total stock based employee compensation expense determined under fair
value based method for all awards |
|
|
6 |
|
|
|
255 |
|
|
|
|
|
|
|
|
Pro forma net income — diluted |
|
$ |
16,254 |
|
|
$ |
41,360 |
|
|
|
|
|
|
|
|
Net income per share — diluted |
|
|
|
|
|
|
|
|
Diluted — as reported |
|
$ |
0.33 |
|
|
$ |
0.80 |
|
|
|
|
|
|
|
|
Diluted — pro forma |
|
$ |
0.33 |
|
|
$ |
0.79 |
|
|
|
|
|
|
|
|
There were no common share options issued in 2006, 2005 and 2004.
73
Environmental Matters. Under various federal, state and local environmental laws, statutes,
ordinances, rules and regulations, an owner of real property may be liable for the costs of removal
or remediation of certain hazardous or toxic substances at, on, in or under such property as well
as certain other potential costs relating to hazardous or toxic substances. These liabilities may
include government fines and penalties and damages for injuries to persons and adjacent property.
Such laws often impose liability without regard to whether the owner knew of, or was responsible
for, the presence or disposal of such substances. Although the Company’s tenants are primarily
responsible for any environmental damage and claims related to the leased premises, in the event of
the bankruptcy or inability of the tenant of such premises to satisfy any obligations with respect
to such environmental liability, the Company may be required to satisfy any obligations. In
addition, the Company as the owner of such properties may be held directly liable for any such
damages or claims irrespective of the provisions of any lease. As of December 31, 2006, the Company
is not aware of any environmental matter that could have a material impact on the financial
statements.
Segment Reporting. The Company operates in one industry segment, investment in net leased
real properties.
Reclassifications. Certain amounts included in prior years’ financial statements have been
reclassified to conform with the current year presentation, including reclassifying certain income
statement captions for properties held for sale as of December 31, 2006 and properties sold during
2006, which are presented as discontinued operations.
(3) Earnings Per Share
The following is a reconciliation of numerators and denominators of the basic and diluted
earnings per share computations for each of the years in the three year period ended December 31,
2006:
| |
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
2006 |
|
|
2005 |
|
|
2004 |
|
BASIC |
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations |
|
$ |
(663 |
) |
|
$ |
24,938 |
|
|
$ |
34,576 |
|
Less — dividends attributable to preferred shares |
|
|
(16,435 |
) |
|
|
(16,435 |
) |
|
|
(6,945 |
) |
|
|
|
|
|
|
|
|
|
|
Income (loss) attributable to common shareholders from
continuing operations |
|
|
(17,098 |
) |
|
|
8,503 |
|
|
|
27,631 |
|
Total discontinued operations |
|
|
8,416 |
|
|
|
7,757 |
|
|
|
10,231 |
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) attributable to common shareholders |
|
$ |
(8,682 |
) |
|
$ |
16,260 |
|
|
$ |
37,862 |
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of common shares outstanding |
|
|
52,163,569 |
|
|
|
49,835,773 |
|
|
|
46,551,328 |
|
|
|
|
|
|
|
|
|
|
|
Income (loss) per common share — basic: |
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations |
|
$ |
(0.33 |
) |
|
$ |
0.17 |
|
|
$ |
0.59 |
|
Income from discontinued operations |
|
|
0.16 |
|
|
|
0.16 |
|
|
|
0.22 |
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
(0.17 |
) |
|
$ |
0.33 |
|
|
$ |
0.81 |
|
|
|
|
|
|
|
|
|
|
|
DILUTED |
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) attributable to common shareholders from
continuing operations — basic |
|
$ |
(17,098 |
) |
|
$ |
8,503 |
|
|
$ |
27,631 |
|
Add — incremental income attributable to assumed conversion
of dilutive interests |
|
|
— |
|
|
|
— |
|
|
|
2,465 |
|
|
|
|
|
|
|
|
|
|
|
Income (loss) attributable to common shareholders from
continuing operations |
|
|
(17,098 |
) |
|
|
8,503 |
|
|
|
30,096 |
|
Income from discontinued operations |
|
|
8,416 |
|
|
|
7,757 |
|
|
|
11,519 |
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) attributable to common shareholders |
|
$ |
(8,682 |
) |
|
$ |
16,260 |
|
|
$ |
41,615 |
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of shares used in calculation of
basic earnings per share |
|
|
52,163,569 |
|
|
|
49,835,773 |
|
|
|
46,551,328 |
|
Add — incremental shares representing: |
|
|
|
|
|
|
|
|
|
|
|
|
Shares issuable upon exercise of employee share options |
|
|
— |
|
|
|
66,876 |
|
|
|
131,415 |
|
Shares issuable upon conversion of dilutive interests |
|
|
— |
|
|
|
— |
|
|
|
5,366,166 |
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of shares used in calculation of
diluted earnings per common share |
|
|
52,163,569 |
|
|
|
49,902,649 |
|
|
|
52,048,909 |
|
|
|
|
|
|
|
|
|
|
|
Income (loss) per common share — diluted: |
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations |
|
$ |
(0.33 |
) |
|
$ |
0.17 |
|
|
$ |
0.58 |
|
Income from discontinued operations |
|
|
0.16 |
|
|
|
0.16 |
|
|
|
0.22 |
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
(0.17 |
) |
|
$ |
0.33 |
|
|
$ |
0.80 |
|
|
|
|
|
|
|
|
|
|
|
(4) Investments in Real Estate and Intangible Assets
During 2006
and 2005, the Company made acquisitions, excluding properties acquired in the
Merger and acquisitions made directly by non-consolidated entities (including LSAC), totaling
$124,910 and $733,830, respectively. The 2005 amount includes properties purchased by the Company
that were subsequently transferred to non-consolidated entities.
74
In 2005, the Company contributed seven properties, including intangible assets, to various
non-consolidated entities for $124,706, which approximated cost, and the non-consolidated entities
assumed $36,041 in non-recourse mortgages. The Company received a cash payment of $55,534 relating
to these contributions. In 2004, the Company contributed eight properties, including intangible
assets, to various non-consolidated entities for $196,982 which approximated cost, and the
non-consolidated entities assumed $97,641 in non-recourse debt. The Company received a cash payment
of $68,203 related to these contributions.
The Company sold to unrelated parties, seven properties in 2006, seven properties in 2005 and,
eight properties in 2004, for aggregate net proceeds of $76,627, $41,151 and $36,651, respectively, which resulted in gains in
2006, 2005 and 2004 of $21,549, $11,578 and $5,475 respectively, which are included in
discontinued operations.
During the second quarter of 2006, the Company recorded an impairment charge of $1,121 and
accelerated amortization of an above market lease of $2,349 relating to the write-off of lease
intangibles and the above market lease for the disaffirmed lease of a property whose lease was
rejected by the previous tenant in bankruptcy. The Company sold to an unrelated third party its
bankruptcy claim to the disaffirmed lease for $5,376, which resulted in a gain of $5,242, which is
included in non-operating income. In the fourth quarter of 2006, the Company recorded an additional
impairment charge of $6,100 relating to this property.
For properties acquired during 2006, excluding the Merger, the components of intangible assets
and their respective weighted average lives are as follows:
| |
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
Weighted |
|
| |
|
|
|
|
|
Average |
|
| |
|
Costs |
|
|
Life (yrs) |
|
Lease origination costs |
|
$ |
19,335 |
|
|
|
13.3 |
|
Customer relationships |
|
|
3,983 |
|
|
|
12.1 |
|
Above — market leases |
|
|
7,540 |
|
|
|
12.3 |
|
|
|
|
|
|
|
|
|
|
|
$ |
30,858 |
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2006 and 2005, the components of intangible assets, excluding those
acquired in the Merger, are as follows:
| |
|
|
|
|
|
|
|
|
| |
|
2006 |
|
|
2005 |
|
Lease origination costs |
|
$ |
125,791 |
|
|
$ |
98,502 |
|
Customer relationships |
|
|
35,780 |
|
|
|
30,603 |
|
Above-market leases |
|
|
21,685 |
|
|
|
14,851 |
|
|
|
|
|
|
|
|
|
|
$ |
183,256 |
|
|
$ |
143,956 |
|
|
|
|
|
|
|
|
The estimated amortization of the above intangibles for the next five years is $18,740 in
2007, $18,255 in 2008, $16,651 in 2009, $15,153 in 2010 and $13,544 in 2011.
Below market leases, net of amortization, which are included in deferred revenue, excluding
those acquired in the Merger, are $3,439 and $3,899, respectively for
2006 and 2005. The estimated amortization for the next five years is $483 in 2007, $483 in 2008, $476 in
2009, $476 in 2010 and $476 in 2011.
(5) Newkirk Merger
On December 31, 2006 Newkirk merged with and into the Company pursuant to an Agreement and
Plan of Merger dated as of July 23, 2006. The Company believes this strategic combination of two
real estate companies achieved key elements of its strategic business plan. The Company believes
that the Merger enhanced its property portfolio in key markets, reduced its exposure to any one
property or tenant credit, enabled the Company to gain immediate access to a debt platform and will
allow it to build on its existing customer relationships. At the time of the Merger, Newkirk owned
or held an ownership interest in approximately 170 industrial, office and retail properties.
Under the terms of the Merger Agreement, Newkirk stockholders received common shares of the
Company for their Newkirk stock. The Merger Agreement provided that each Newkirk stockholder
received 0.8 of a common share of the Company, for each share of Newkirk common stock that the
stockholder owned. Fractional shares, which were not material, were paid in cash. In connection
with the Merger, the Company issued approximately 16.0 million common shares of the Company to
former Newkirk stockholders.
75
The calculation of the purchase price was as follows:
| |
|
|
|
|
Fair value of common shares issued |
|
$ |
332,050 |
|
Merger costs |
|
|
13,537 |
|
|
|
|
|
Purchase price, net of assumed liabilities and minority interests |
|
|
345,587 |
|
Fair value of liabilities assumed, including debt and minority interest |
|
|
2,049,801 |
|
|
|
|
|
Purchase price |
|
$ |
2,395,388 |
|
|
|
|
|
The allocation of the purchase price is based upon estimates and assumptions. The Company
engaged a third party valuation expert to assist with the fair value assessment of the real estate.
The current allocations are substantially complete; however, there may be certain items that the
Company will finalize once it receives additional information. Accordingly, these allocations are
subject to revision when final information is available, although the Company does not expect
future revisions to have a significant impact on its financial position or results of operations.
The assets acquired and liabilities assumed were recorded at their estimated fair value at the
date of acquisition, as summarized below.
Allocation of purchase price:
| |
|
|
|
|
Total real estate assets, including intangibles |
|
$ |
2,081,704 |
|
Investment in and advances to non-consolidated entities |
|
|
99,396 |
|
Cash and cash equivalents |
|
|
57,624 |
|
Accounts receivable |
|
|
46,905 |
|
Restricted cash |
|
|
39,640 |
|
Marketable equity securities |
|
|
25,760 |
|
Other assets |
|
|
44,359 |
|
|
|
|
|
Total assets acquired |
|
|
2,395,388 |
|
Less: |
|
|
|
|
Debt assumed |
|
|
838,735 |
|
Minority interest |
|
|
833,608 |
|
Below market leases |
|
|
356,788 |
|
Accounts payable, accrued expenses and other liabilities assumed |
|
|
20,670 |
|
|
|
|
|
Purchase price, net of assumed liabilities and minority interest |
|
$ |
345,587 |
|
|
|
|
|
In connection with the Merger, the Company allocated the purchase price to the following
intangibles, included in total real estate assets above:
| |
|
|
|
|
|
|
|
|
| |
|
Cost |
|
|
Weighted
average
useful life (yrs) |
|
Lease origination costs |
|
$ |
175,658 |
|
|
|
13.1 |
|
Customer relationships |
|
|
57,543 |
|
|
|
7.2 |
|
Above-market leases |
|
|
85,511 |
|
|
|
3.2 |
|
|
|
|
|
|
|
|
|
|
|
$ |
318,712 |
|
|
|
|
|
|
|
|
|
|
|
|
|
The estimated amortization of the above intangibles for the next five years is $100,879 in
2007, $69,128 in 2008, $32,508 in 2009, $13,998 in 2010 and $12,476 in 2011.
Below market leases assumed in the Merger were $356,788. The estimated amortization for the
next five years is $17,273 in 2007, $15,880 in 2008, $15,772 in 2009, $15,112 in 2011 and $14,872
in 2012. The weighted average useful life is 27.3 years.
The following unaudited pro forma financial information for the years ended December 31, 2006
and 2005, gives effect to the Merger as if it had occurred on January 1, 2005. The pro forma
results are based on historical data and are not intended to be indicative of the results of future
operations.
| |
|
|
|
|
|
|
|
|
| |
|
Year Ended |
|
| |
|
December 31, |
|
| |
|
2006 |
|
|
2005 |
|
Total gross revenues |
|
$ |
376,659 |
|
|
$ |
346,080 |
|
Income (loss) from continuing operations |
|
|
586 |
|
|
|
(3,163 |
) |
Net income |
|
|
34,967 |
|
|
|
15,338 |
|
Net income
(loss) per common share – basic |
|
|
0.27 |
|
|
|
(0.02 |
) |
Net income
(loss) per common share – diluted |
|
|
0.27 |
|
|
|
(0.02 |
) |
Certain
non-recurring charges recognized historically by Newkirk have been
eliminated for purposes of the unaudited pro forma consolidated
information. However, the pro forma loss from continuing operations
in 2005 includes a $25,306 loss on early
extinguishment of debt.
76
(6) Discontinued Operations and Assets Held For Sale
At December 31, 2006, the Company had nine properties held for sale with aggregate assets of
$69,612 and liabilities, principally mortgage notes payable, aggregating $6,064. As of December 31,
2005, the Company had three properties held for sale, with aggregate assets of $49,397 and
liabilities of $32,145. In 2006, 2005 and 2004, the Company recorded impairment charges, net of
minority interests, of $21,612, $11,302 and $5,447, respectively, related to discontinued
operations.
The following presents the operating results for the properties sold and held for sale during
the years ended December 31, 2006, 2005 and 2004:
| |
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Year Ended December 31, |
|
| |
|
2006 |
|
|
2005 |
|
|
2004 |
|
Total gross revenues |
|
$ |
11,902 |
|
|
$ |
20,983 |
|
|
$ |
25,055 |
|
Pre-tax income, including gains on sales |
|
$ |
8,491 |
|
|
$ |
7,757 |
|
|
$ |
10,231 |
|
During 2006, the Company conveyed a property to a lender for full satisfaction of a loan and
satisfied the related mortgages on properties sold, which resulted in a net debt satisfaction gain
of $3,626. In addition, the Company sold one property for a sale price of $6,400 and provided
$3,200 in interest only secured financing to the buyer at a rate of 6.0%, which matures in 2017.
During the 2006, the tenant in a property in Warren, Ohio exercised its option to purchase the
property at fair market value, as defined in the lease. Based on the appraisals received and the
procedure set forth in the lease, the Company estimated that the fair market value, as defined in
the lease, will not exceed approximately $15,800. Accordingly, the Company recorded an impairment
charge of $28,209 in the third quarter of 2006.
During 2005, the Company sold one property for an aggregate sales price of $14,500 and
provided $11,050 in secured financing to the buyer at a rate of 5.46% which matures on August 1,
2015. The note is interest only through August 2007 and requires annual debt service payments of
$750 thereafter and a balloon payment of $9,688 at maturity. In addition, annual real estate tax
and insurance escrows are required.
(7) Notes Receivable
The Company’s notes receivable, including accrued interest, are comprised of five first
mortgage loans on real estate aggregating $33,400, bearing interest at rates ranging from 5.5% to
8.5% and maturing at various dates between 2010 and 2017. In addition, the Company has second
mortgages on real estate aggregating $17,134, with an imputed rate of
8.0% and maturing at various dates through 2022.
(8) Investment in Non-Consolidated Entities
The Company has investments in various real estate joint ventures.
Lexington Acquiport Company, LLC (The Company has 33 1/3% interest.)
Lexington Acquiport Company, LLC (“LAC”) is a joint venture with the Comptroller of the State
of New York as Trustee for the Common Retirement Fund (“CRF”). The Company and CRF originally
committed to contribute up to $50,000 and $100,000, respectively, to invest in high quality office
and industrial net leased real estate. The partners agreed that they would close the funding
obligations to LAC. LRA earns annual management fees of 2% of rent collected and acquisition fees
equaling 75 basis points of the purchase price of each property investment. All allocations of
profit, loss and cash flows from LAC are made one-third to the Company and two-thirds to CRF.
During 2005, LAC sold a property for net proceeds of $23,496 which resulted in a gain of
$5,219.
Lexington Acquiport Company II, LLC (The Company has 25% interest.)
Lexington Acquiport Company II, LLC (“LAC II”) is another joint venture with CRF. The Company
and CRF have committed $50,000 and $150,000, respectively. In addition to the fees LRA earns on
acquisitions and asset management in LAC, LRA also earns 50 basis points on all mortgage debt
directly placed in LAC II. All allocations of profit, loss and cash flows from LAC II will be
allocated 25% to the Company and 75% to CRF. As of December 31, 2006 and 2005, $135,088 had been
funded by the members.
During 2006, LAC II did not purchase any properties.
77
During 2005, LAC II purchased four properties for a capitalized cost of $181,867, two of which
were transferred from the Company for $52,125. LAC II partially funded these acquisitions by the
use of $124,155 in non-recourse mortgages, which bear interest at fixed rates ranging from 5.2% to
5.9% and mature at various dates ranging from 2013 to 2020.
CRF can presently elect to put its equity position in LAC and LAC II to the Company. The
Company has the option of issuing common shares for the fair market value of CRF’s equity position
(as defined) or cash for 110% of the fair market value of CRF’s equity position. The per common
share value of shares issued for CRF’s equity position will be the greater of (i) the price of the
Company’s common shares on the closing date (ii) the Company’s funds from operations per share (as
defined) multiplied by 8.5 or (iii) $13.40 for LAC properties and (iv) $15.20 for LAC II
properties. The Company has the right not to accept any property (thereby reducing the fair market
value of CRF’s equity position) that does not meet certain underwriting criteria (e.g. lease term
and tenant credit). If CRF exercised this put, it is the Company’s current intention to settle this
amount in cash. In addition, the operating agreement contains a mutual buy-sell provision in which
either partner can force the sale of any property.
Lexington Columbia LLC (The Company has a 40% interest.)
Lexington Columbia LLC (“Columbia”) is a joint venture established December 30, 1999 with a
private investor. Its sole purpose is to own a property in Columbia, South Carolina net leased to
Blue Cross Blue Shield of South Carolina, Inc. through September 2009. The purchase price of the
property was approximately $42,500. In accordance with the operating agreement, net cash flows, as
defined, are allocated 40% to the Company and 60% to the other member until both parties have
received a 12.5% return on capital. Thereafter cash flows will be distributed 60% to the Company
and 40% to the other member.
During 2001, Columbia expanded the property by 107,894 square feet bringing the total square
feet of the property to 456,304. The $10,900 expansion was funded 40% by the Company and 60% by the
other member. The tenant has leased the expansion through September 2009 for an average annual rent
of $2,000. Cash flows from the expansion are distributed 40% to the Company and 60% to the other
member.
LRA earns annual asset management fees of 2% of rents collected.
Lexington/Lion Venture L.P. (The Company has a 30% interest.)
Lexington/Lion Venture L.P. (“LION”) was formed on October 1, 2003 by the Company and Clarion
Lion Properties Fund (“Clarion”) to invest in high quality single tenant net leased retail, office
and industrial real estate. The limited partnership agreement provides for a ten-year term unless
terminated sooner pursuant to the terms of the partnership agreement. The limited partnership
agreement provided for the Company and Clarion to invest up to $30,000 and $70,000, respectively,
and to leverage these investments up to a maximum of 60%. During 2005, the Company and Clarion
increased their equity commitment by $25,714 and $60,000, respectively. All funding requirements
have been met and the partners may agree to continue to purchase additional properties, but have no
additional funding obligations. LRA earns acquisition and asset management fees as defined in the
operating agreement. All allocation of profit, loss and cash flows are made 30% to the Company and
70% to Clarion until each partner receives a 12% internal rate of return. The Company is eligible
to receive a promoted interest of 15% of the internal rate of return in excess of 12%. No promoted
interest was earned in 2006 or 2005 by the Company.
Clarion can elect to put its equity position in LION to the Company. The Company has the
option of issuing common shares for the fair market value of Clarion’s equity position (as defined)
or cash for 100% of the fair market value of Clarion’s equity position. The per common share value
of shares issued for Clarion’s equity position will be the greater of (i) the price of the
Company’s common shares on the closing date (ii) the Company’s funds from operations per share (as
defined) multiplied by 9.5 or (iii) $19.98. The Company has the right not to accept any property
(thereby reducing the fair market value of Clarion’s equity position) that does not meet certain
underwriting criteria (e.g. lease term and tenant credit). If Clarion exercises this put, it is the
Company’s current intention to settle this amount in cash. In addition, the operating agreement
contains a mutual buy-sell provision in which either partner can force the sale of any property.
During 2006, LION purchased one property for a capitalized cost of $28,418 . This acquisition
was partially funded by $18,363 in a non-recourse mortgage, which bears interest at 6.10% and
matures in 2016.
During 2005, LION purchased three properties for a capitalized cost of $92,400. These
acquisitions were partially funded by $54,780 in non-recourse mortgages, which bear interest at
fixed rates ranging from 5.0% to 5.6% and mature at various dates ranging from 2012 to 2019.
78
Triple Net Investment Company LLC (The Company has a 30% interest.)
In June 2004, the Company entered into a joint venture agreement with the State of Utah
Retirement Systems (“Utah”). The joint venture entity, Triple Net Investment Company, LLC (“TNI”),
was created to acquire high quality office and industrial properties net leased to investment and
non-investment grade single tenant users; however, TNI has also acquired retail properties. The
operating agreement provides for a ten-year term unless terminated sooner pursuant to the terms of
the operating agreement. The Company and Utah initially committed to make equity contributions to
TNI of $15,000 and $35,000, respectively. In December 2005, the Company and Utah increased their
contribution by $21,429 and $50,000, respectively. As of December 31, 2006 and 2005, $86,914 and
$83,015, respectively, had been funded. In addition, TNI finances a portion of acquisition costs
through the use of non-recourse mortgages.
During 2006, TNI made one property acquisition for a capitalized cost of $13,456. The
acquisition was partially funded by $9,500 in a non-recourse mortgage, which bears interest at
5.91% and matures 2018.
During 2005, TNI made three acquisitions aggregating $126,781. The acquisitions were partially
funded through the use of $83,327 in non-recourse mortgages, which bear interest at fixed rates
ranging from 5.1% to 5.2% and mature at various dates ranging in 2012 and 2013.
In addition, TNI recorded an impairment charge of $1,838 and accelerated amortization of an
above market lease of $4,704 relating to the write-off of lease intangible and the above market
lease for a disaffirmed lease of a property whose lease was rejected by the previous tenant in
bankruptcy. TNI sold to an unrelated third party its bankruptcy claim to the disaffirmed lease for
$5,680, which resulted in a gain of $5,567.
Utah can elect to put its equity position in TNI to the Company. The Company has the option of
issuing common shares for the fair market value of Utah’s equity position (as defined) or cash for
100% of the fair market value of Utah’s equity position. The per common share value of shares
issued for Utah’s equity position will be the greater of (i) the price of the Company’s common
shares on the closing date (ii) the Company’s funds from operations per share (as defined)
multiplied by 12.0 or (iii) $21.87. The Company has the right not to accept any property (thereby
reducing the fair market value of Utah’s equity position) that does not meet certain underwriting
criteria (e.g. lease term and tenant credit). If Utah exercises this put, it is the Company’s
current intention to settle this obligation in cash. In addition, the operating agreement contains
a mutual buy-sell provision in which either partner can force the sale of any property.
Oklahoma City (The Company owns a 40% tenancy in common interest in a real property.)
Oklahoma City (“TIC”) is a tenancy in common established in 2005. The Company sold, at cost, a
60% tenancy in common interest in one of the properties it acquired during 2005 for $3,961 in cash
and the assumption of $8,849 in mortgage debt.
Lexington Strategic Asset Corp. (The Company had a 32.3% interest at December 31, 2005.)
Lexington Strategic Asset Corp. (“LSAC”) was established in 2005. During 2005, the Company
contributed four properties at a carrying value of $50,821 (three of which were subject to
non-recourse mortgages of $21,293) plus financing deposits to LSAC in exchange for 3,319,600 common
shares of LSAC at a value of $10.00 per share. The mortgages bore interest at rates ranging from
5.1% to 5.3% and mature in 2015. In addition, LSAC sold 6,738,000 common shares to third parties,
at $10.00 per common share, generating net proceeds of $61,595, after deducting offering costs and
expenses. LRA is the advisor of LSAC. LRA earns a base advisory fee of (i) 1.75% of LSAC’s
shareholders’ equity, as defined, up to $500,000 and 1.50% of LSAC’s shareholders’ equity in excess
of $500,000 and (ii) incentive advisory fees (promoted interest) based upon LSAC’s performance. The
Company granted certain officers the right to 40% of the promoted interest earned by LRA. Also,
certain officers purchased 220,000 common shares of LSAC at its formation for $110, a portion of
which is subject to a claw back provision and an additional 100,000 common shares in the offering
for $1,000. As of December 31, 2006, the Company indirectly
holds approximately 76% of the Class A voting
limited partnership interests in LSAC OP (Class A Units), and 60% of the Class B limited
partnership interests in LSAC OP (Class B Units) and executive officers of the Company hold the
remaining 40% of the Class B Units. The Class A Units are entitled to a proportionate share of the
capital, profits and losses of LSAC OP, including distributions that will be equivalent to the
dividends on the LSAC’s common stock. The Class B Units have no voting rights. The Class B Units
are entitled to quarterly distributions based on financial performance. During 2006, the Company
purchased directly from shareholders 4.6 million common shares of LSAC for $42,619, increasing its
ownership to approximately 76% of the total common shares outstanding. Due to this increased
ownership percentage, LSAC became a consolidated entity as of November 1, 2006. During 2006, LSAC
acquired eight properties for an aggregate capitalized cost of $82,511 and obtained $61,951 in
non-recourse mortgages, which have a weighted average interest rate of 6.06% and mature between
2016 and 2021. During 2005, LSAC acquired two properties for an aggregate capitalized cost of
$25,036 and obtained a $10,100 non-recourse mortgage note, secured by one property, which bears
interest at 5.46% and matures in 2020.
79
Concord Debt Holdings LLC (The MLP has a 50.0% interest)
The MLP and WRT Realty L.P. (“Winthrop”) have a joint venture to acquire and originate loans
secured, directly and indirectly, by real estate assets through
Concord Debt Holdings, LLC, formerly 111 Debt Holdings Corp. (“Concord”). The Company’s Executive Chairman is also the Chief Executive Officer of the parent of
Winthrop. The joint venture is equally owned and controlled by the MLP and Winthrop. The MLP and
Winthrop have committed to invest up to $100,000 each in Concord. As of December 31, 2006, $91,342
has been invested by the MLP. All profits, losses and cash flows are distributed in accordance with
the respective membership interests.
The joint venture is governed by an investment committee which consists of two members appointed by
each of Winthrop and the MLP with one additional member being appointed by an affiliate of
Winthrop. All decisions requiring the consent of the investment committee require the affirmative
vote by three of the four members appointed by Winthrop and the MLP. Pursuant to the terms of the
joint venture agreement of Concord, all material actions to be taken by Concord, including
investments in excess of $20,000, require the consent of the investment committee; provided,
however, the consent of both Winthrop and the MLP is required for the merger or consolidation of
Concord, the admission of additional members, the taking of any action that, if taken directly by
Winthrop or the MLP would require consent of Winthrop’s Conflicts Committee or the Company’s
independent trustees.
Concord entered into a $300,000 repurchase agreement with Column Financial Inc. and a $200,000
repurchase agreement with Bear Stearns International Limited. As of December 31, 2006, these
facilities have an aggregate of $43,893 outstanding. In 2006, Concord completed its first
collateralized debt obligation offering by issuing $376,650 of debt and retaining a notional equity
investment of $88,351.
Other Equity Method Investment Limited Partnerships
The MLP is a partner in three partnerships with ownership percentages ranging between 24.0% and
30.5% and these partnerships own net leased properties. All profits, losses and cash flows are
distributed in accordance with the respective partners interests.
Summarized Financial Data
Summarized combined balance sheets as of December 31, 2006 and 2005 and income statements for
the years ending December 31, 2006, 2005, and 2004 for all non-consolidated entities (excluding
LSAC for 2006) are as follows:
| |
|
|
|
|
|
|
|
|
| |
|
2006 |
|
|
2005 |
|
Real estate, net |
|
$ |
1,395,422 |
|
|
$ |
1,384,361 |