UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
Amendment No. 1
to
FORM 8-K
CURRENT REPORT PURSUANT
TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported) April 13, 2005
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Lexington Corporate Properties Trust
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(Exact Name of Registrant as Specified in Its Charter)
Maryland
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(State or Other Jurisdiction of Incorporation)
1-12386 13-3717318
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(Commission File Number) (IRS Employer Identification No.)
One Penn Plaza, Suite 4015
New York, New York 10119-4015
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(Address of Principal Executive Offices) (Zip Code)
(212) 692-7200
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(Registrant's Telephone Number, Including Area Code)
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(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions (see General Instruction A.2. below):
|_| Written communications pursuant to Rule 425 under the Securities Act
(17 CFR 230.425)
|_| Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17
CFR 240.14a-12)
|_| Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
|_| Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
Item 8.01 Other Events.
As previously reported on Lexington Corporate Properties Trust (the "Trust")
Current Report on Form 8-K dated April 13, 2005, the Trust, through its
subsidiaries and joint venture programs, completed the acquisition of
twenty-seven (27) properties from affiliates of Wells Real Estate Investment
Trust, Inc. (the "Sellers"). Twenty-one (21) properties were acquired by the
Trust and six (6) were acquired by various joint venture programs in which the
Trust has ownership interests of 25% and 30%.
Of the twenty-one properties (21) acquired by the Trust, six (6) properties (the
"Non-Net Leased Properties") were not subject to net leases. Financial
information with respect to the properties that are subject to net leases is not
required. A description of all of the Non-Net Lease Properties included in the
acquisition can be found in the Current Report on Form 8-K dated April 13, 2005.
Below is the location of each of the Non-Net Leased Properties:
6303 Barfield Road and 1311 Broadfield Blvd.
859 Mount Vernon Hwy. Houston, TX
Atlanta, GA
3201 Quail Springs Pkwy. 2800 Waterford Lake Dr.
Oklahoma City, OK Richmond, VA
5757 Decatur Blvd. 4000 Johns Creek Pkwy.
Indianapolis, IN Atlanta, GA
The acquisition of the Non-Net Leased Properties was not individually
significant to the Trust and none of the Sellers was an affiliate of the Trust.
This amendment to Current Report on Form 8-K is being filed to provide certain
historical and pro forma financial information related to this acquisition
pursuant to Rule 3-14 of Regulation S-X promulgated by the Securities and
Exchange Commission under the Securities Act of 1933, as amended.
Item 9.01 Financial Statements and Exhibits.
(a) Financial Statements of Businesses Acquired.
(1) Audited Statement of Revenues and Certain Operating Expenses for the
Year Ended December 31, 2004 for the Non-Net Leased Properties.
(b) Pro forma financial information.
(1) Unaudited Pro Forma financial information for the Trust is
presented as follows:
o Introduction to Pro Forma Condensed Consolidated Financial
Statements;
o Condensed consolidated balance sheet as of December 31,
2004;
o Condensed consolidated statement of operations for the year
ended December 31, 2004;
o Notes to Pro Forma Condensed Consolidated Financial
Statements;
o Estimated Twelve Month Pro Forma Statement of Taxable
Operating Results.
(c) Exhibits.
None.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Lexington Corporate Properties Trust
Date: June 29, 2005 By: /s/ Patrick Carroll
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Patrick Carroll
Chief Financial Officer
Report of Independent Registered Public Accounting Firm
The Shareholders
Lexington Corporate Properties Trust:
We have audited the accompanying statement of revenues and certain operating
expenses (the "Statement") of six properties acquired from affiliates of Wells
Real Estate Investment Trust, Inc. The Statement is the responsibility of the
properties management. Our responsibility is to express an opinion on the
Statement based on our audit.
We conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States of America). Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether
the Statement is free of material misstatement. The Company is not required to
have, nor were we engaged to perform, an audit of its internal control over
financial reporting. Our audit included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company's internal control over financial
reporting. Accordingly we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the statement. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the overall
presentation of the statement. We believe that our audit of the Statement
provides a reasonable basis for our opinion.
The accompanying Statement was prepared for the purpose of complying with Rule
3-14 of Regulation S-X of the Securities and Exchange Commission and for
inclusion in the Form 8-K of Lexington Corporate Properties Trust, as described
in Note 1, and is not intended to be a complete presentation of the six
properties acquired from affiliates of Wells Real Estate Investment Trust, Inc's
revenues and expenses.
In our opinion, the Statement referred to above present fairly, in all material
respects, the revenues and certain operating expenses described in Note 2 to the
six properties acquired from affiliates of Wells Real Estate Investment Trust,
Inc. for the year ended December 31, 2004, in conformity with U.S. generally
accepted accounting principles.
Marks Paneth & Shron LLP
Certified Public Accountants
New York, New York
May 23, 2005
Non-Net Leased Properties
Statement of Revenues and Certain Operating Expenses for
the Year ended December 31, 2004
(amounts in thousands)
Revenues:
Rental $ 14,234
Tenant reimbursements 2,306
----------------
Total revenues 16,540
Property operating expenses 4,929
----------------
Revenues in excess of certain operating expenses $ 11,611
================
See notes to statement of revenues and certain operating expenses.
Non-Net Leased Properties
Notes to Statement of Revenues and Certain Operating Expenses for
the Year ended December 31, 2004
1. Organization and Basis of Presentation
The accompanying statement of revenues and certain operating expenses (the
"Statement") includes the accounts of the six (6) properties located in various
states which were acquired by Lexington Corporate Properties Trust (the "Trust")
from affiliates of Wells Real Estate Investment Trust, Inc that were are not
subject to a net lease (the "Non-Net Leased Properties") . The Non-Net Leased
Properties have a combined total of approximately 850,000 square-feet of office
space.
The Statement has been prepared for the purpose of complying with the provisions
of Rule 3-14 of Regulation S-X promulgated by the Securities and Exchange
Commission (the "SEC), which requires that certain information with respect to
real estate operations be included with certain SEC filings. The Statement for
the year ended December 31, 2004, includes the historical revenues and certain
operating expenses of the Non-Net Leased Properties, exclusive of certain
historical expenses such as corporate expenses, mortgage interest, income taxes
and depreciation and amortization, which may not be comparable to amounts
expected to be incurred in the future.
Neither the Trust nor its affiliates are related to the sellers of the Non-Net
Leased Properties. The Statement presents the results of operations of the
Non-Net Leased Properties and exclude, as permitted by Rule 3-14 of Regulation
S-X, items of revenue and expenses which are not comparable to the expected
future operations by the Trust. In assessing the Non-Net Leased Properties, the
Trust considered each property's revenue sources, including those which have
been affected and are expected to be affected in the future by factors
including, but not limited to, demand, supply and competitive factors present in
the local and national markets for office and industrial space and the ability
of tenants to make payments when due. The Trust also considered each property's
expenses including but not limited to, utility costs, tax rates and other
expenses, and the portion of such expenses which may be recovered from tenants.
Changes in these factors or as a result of other factors described in the notes
to the pro forma data provided may cause future operating results to differ from
the historical and pro forma operating results presented, but can not be
predicted at this time.
2. Significant Accounting Policies
Revenue Recognition
Rental income is recognized on a straight-line basis over the terms of the
respective leases. The excess of amounts recognized as revenue on a straight
line basis over the amounts due pursuant to the underlying leases was $730 for
the year ended December 31, 2004.
The Non-Net Leased Properties are subject to a concentration of credit risk as
four tenants aggregate approximately 81% of the amount recorded as revenue for
the year ended December
31, 2004. Each of these four tenants exceeded 10% of the amount recorded as
revenue for the year ended December 31, 2004. The most significant of the four
tenants represented approximately 35% of revenue for the year ended December 31,
2004, 45% of the revenue for the year ended December 31, 2004 was from two
properties in the Atlanta, Georgia area.
Use of Estimates
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires the properties'
management to make estimates and assumptions that affect the reported amounts of
revenues and expenses during the reporting period. Actual results could differ
from those estimates.
3. Minimum Future Rental Payments
Minimum future rental receipts under the noncancellable portion of tenant
leases, assuming no new or negotiated leases, for the next five years and
thereafter are as follows:
Year ending December 31,
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2005 $ 15,557
2006 15,703
2007 15,824
2008 16,032
2009 15,418
Thereafter 40,572
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$ 119,106
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The above minimum lease payments do not include reimbursements to be received
from tenants for certain operating expenses and real estate taxes.
4. Related Party Transactions
Wells Management Company, Inc. and Wells Capital Inc. are affiliates of Wells
Real Estate Investment Trust, Inc. For its services in connection with the
management of the Properties, Wells Management Company, Inc. received a net
management fee of 4.5% of gross receipts. Net management fees totaling $597 were
incurred by the Properties for the year ended December 31, 2004. For its
services in connection with its administrative staff Wells Capital Inc. was
reimbursed $75 for salaries.
Lexington Corporate Properties Trust
Introduction to Unaudited Pro Forma Condensed Consolidated Financial Statements
The following unaudited pro forma condensed consolidated balance sheet as of
December 31, 2004, reflects the financial position of Lexington Corporate
Properties Trust (the "Trust") as if the acquisition of the six (6) properties
(the "Non-Net Leased Properties") had occurred on December 31, 2004.
The unaudited pro forma condensed consolidated statement of operations for the
year ended December 31, 2004, present the results of operations of the Trust as
if the acquisition of the Non-Net Leased Properties had occurred on January 1,
2004. These unaudited pro forma condensed consolidated financial statements
should be read in connection with the financial statements of the Trust for the
year ended December 31, 2004, included in the Trust's Annual Report on Form 10-K
and the financial statements included in Item 9.01 (a) of the Trust's Amendment
No.1 to Form 8-K (date of earliest reported event: April 13, 2005).
These unaudited pro forma financial statements are not necessarily indicative of
the expected results of operations of the Trust for any future period.
Differences could result from, among other considerations, future changes in the
Trust's portfolio of investments, changes in interest rates, changes in the
capital structure of the Trust, changes in property level operating expenses,
and changes in property level revenues including rents expected to be received
on leases in place or signed during and after 2004.
Lexington Corporate Properties Trust
Unaudited Pro Forma Condensed Consolidated Balance Sheet
December 31, 2004
(amounts in thousands)
Historical Properties
(A) (B) Pro Forma
------------------ ------------------ ----------------
Assets
Real estate, at cost $ 1,407,872 $ 142,427 $ 1,550,229
Less: accumulated depreciation 180,610 - 180,610
------------------ ------------------ ----------------
1,227,262 142,427 1,369,689
Properties held for sale - discontinued operations 13,216 - 13,216
Intangible assets 54,736 29,667 84,403
Investment in and advances to non-consolidated entities 132,738 - 132,738
Cash and cash equivalents 146,957 (62,847) 84,110
Deferred expenses 7,860 727 8,587
Rent receivable, current and deferred 28,046 - 28,046
Notes receivable from affiliate 45,800 - 45,800
Other assets, net 40,471 - 40,471
------------------ ------------------ ----------------
$ 1,697,086 $ 109,974 $ 1,807,060
================== ================== ================
Liabilities and Shareholders' Equity
Liabilities:
Mortgages and notes payable $ 765,144 $ 108,535 $ 873,679
Liabilities - discontinued operations 1,688 - 1,688
Accounts payable and other liabilities 12,406 - 12,406
Accrued interest payable 5,808 - 5,808
Prepaid rent 3,818 - 3,818
Deferred revenue 4,173 1,439 5,612
------------------ ------------------ ----------------
793,037 109,974 903,011
Minority interest 56,759 - 56,759
------------------ ------------------ ----------------
849,796 109,974 959,770
------------------ ------------------ ----------------
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 an outstanding 76,315 - 76,315
Series C Cumulative Convertible Preferred, liquidation preference
$135,000, 2,700,000 shares issued and outstanding 131,126 - 131,126
Common shares, par value $0.0001 per share, authorized 80,000,000
shares, 48,621,273 shares issued and outstanding 5 - 5
Additional paid-in-capital 766,882 - 766,882
Deferred compensation, net (8,692) - (8,692)
Accumulated distribution in excess of net income (118,346) - (118,346)
------------------ ------------------ ----------------
Total shareholders' equity 847,290 - 847,290
------------------ ------------------ ----------------
$ 1,697,086 $ 109,974 $ 1,807,060
================== ================== ================
See accompanying notes to unaudited pro forma condensed consolidated financial
statements.
Lexington Corporate Properties Trust
Unaudited Pro Forma Condensed Consolidated Statement of Operations
December 31, 2004
(amounts in thousands, except per share data)
Pro Forma
Historical Adjustments of the Pro Forma as
(AA) Properties Adjusted
------------------- --------------------- -------------------
Revenues:
Rental $ 140,003 $ 16,551 BB $ 156,554
Advisory fees 4,885 - 4,885
Tenant reimbursement 6,337 2,306 BB 8,643
------------------- --------------------- -------------------
Total gross revenues 151,225 18,857 170,082
Expenses applicable to revenues:
Depreciation and amortization (38,930) (11,252) CC (50,182)
Property operating (10,451) (4,929) BB (15,380)
General and administrative (13,939) - (13,939)
Write-off - tenant bankruptcy (2,884) - (2,884)
Non-operating income 3,276 - 3,276
Interest and amortization expense (46,437) (5,771) DD (52,208)
------------------- --------------------- -------------------
Income (loss) before provision for income taxes,
minority interests, equity in earnings of
non-consolidated entities and discontinued
operations 41,860 (3,095) 38,765
Provision for income taxes (1,181) - (1,181)
Minority interests (4,196) - (4,196)
Equity in earnings of non-consolidated entities 7,194 - 7,194
------------------- --------------------- -------------------
Income (loss) from continuing operations $ 43,677 $ (3,095) $ 40,582
=================== ===================== ===================
Basic - Income from continuing operations $ 0.79 $ 0.72
=================== ===================
Diluted - Income from continuing operations $ 0.79 $ 0.72
=================== ===================
Basic weighted average shares outstanding 46,551,328 46,551,328
Diluted weighted average shares outstanding 52,048,909 52,048,909
See accompanying notes to unaudited pro forma condensed consolidated financial
statements.
Lexington Corporate Properties Trust
Notes to Pro Forma Condensed Consolidated Financial Statements (unaudited)
Adjustments to Pro Forma Condensed Consolidated Balance Sheet
The adjustments to the pro forma condensed consolidated balance sheet as of
December 31, 2004 are as follows:
(A) Reflects the Trust's historical condensed consolidated balance sheet
as of December 31, 2004.
(B) Reflects the pro forma acquisition of the Non-Net Leased Properties
as follows:
Assets purchased:
Building $ 130,576
Land 11,851
-----------
Total real estate, at cost 142,427
Intangible assets 29,667
Deferred expenses 727
Less liabilities:
Mortgages and notes payable 108,535
Deferred revenue - below-market leases 1,439
-----------
Cash paid $ 62,847
===========
Adjustments to Pro Forma Condensed Consolidated Statement of Operations
The adjustments to the pro forma condensed consolidated statement of operations
for the year ended December 31, 204 are as follows:
(AA) Reflects the Trust's historical condensed consolidated statement of
operations for the year ended December 31, 2004.
(BB) Reflects the pro forma acquisition of the Non-Net Leased Properties
as follows:
Revenues: Historical Adjustments
Revenues and Resulting from
Certain Operating Purchasing the Pro Forma,
Expenses Properties Adjusted
-------------------- --------------------- -----------------
Rental $ 14,234 $ 2,317 $ 16,551
Tenant reimbursements 2,306 - 2,306
-------------------- --------------------- -----------------
Total revenues 16,540 2,317 18,857
Property operating expenses $ 4,929 $ - $ 4,929
Increase in rental revenues reflects (i) the recalculation of
straight-line rents as of January 1, 2004 and (ii) the amortization of
above and below-market leases on a straight-line basis over the remaining
term of in-place leases.
(CC) Depreciation has been adjusted to reflect the Non-Net Leased
Properties total acquisition cost depreciated on a straight line basis
over the estimated economic useful life of the real estate.
Amortization includes the pro forma effect of amortization of
intangibles on a straight-line basis over the remaining term of the
respective leases.
(DD) The pro forma adjustment to interest expense reflects additional
interest expense as a result of new mortgages obtained of $108,535 (at
a weighted average rate of 5.24%) to partially fund the acquisitions.
The pro forma adjustment to amortization expense reflects the pro
forma adjustment of deferred mortgage costs which are amortized over
the term of the related mortgages.
Lexington Corporate Properties Trust
Estimated Twelve Month Pro Forma Statement of Taxable Operating Results
(unaudited)
(amounts in thousands)
The following unaudited statement is a pro forma estimate for a twelve month
period of taxable operating results of the six (6) properties (the Non-Net
Leased Properties") acquired from affiliates of Wells Real Estate Investment
Trust, Inc. The pro forma statements are based on the audited Statement of
Revenues and Certain Operating Expenses for the year ended December 31, 2004
adjusted for certain items related to operations which can be factually
supported. This statement does not purport to forecast actual taxable operating
results for any period in the future.
This statement should be read in conjunction with (i) the statement of revenues
and certain operating expenses and (ii) the pro forma financial statements of
Lexington Corporate Properties Trust (contained elsewhere in this Form 8-K).
December 31, 2004
Revenues in excess of certain operating expenses $ 11,611
Estimated net adjustment for tax basis income recognition (Note 1) (730)
Estimated tax depreciation and amortization (Note 2) (3,970)
Estimated interest and amortization expense (5,771)
---------------------
Pro forma estimate of taxable operating results $ 1,140
=====================
Note 1: Represents the net adjustment to reverse the effect of rental revenue
recognized on a straight line basis.
Note 2: Tax depreciation is based on the original cost allocated to the
buildings, depreciated on a straight line basis over their respective
tax lives.