LXP

Business Context and Reporting Period

Company: Lexington Corporate Properties Trust (LXP Industrial Trust)

Filing Type: Form 10-Q (Quarterly Report)

Reporting Period: Quarter and nine months ended September 30, 2002

Business Overview: A self-managed REIT owning and managing a geographically diversified portfolio of net-leased office, industrial, and retail properties. As of September 30, 2002, the Company owned interests in 101 properties and managed 2 additional properties, totaling approximately 19.2 million square feet with 99.1% occupancy.

Key Financial Metrics

Material Changes vs. Prior Period

• Revenue Growth: Total revenues increased by $13.5 million (22%) for the nine months ended September 30, 2002, compared to 2001. This was driven by $11.4 million in rental revenue from properties acquired in 2001 and 2002, and $1.6 million from increased earnings in non-consolidated entities.
• Net Income: Net income more than doubled to $23.5 million from $11.7 million. The increase is attributed to portfolio growth, a $1.2 million gain on property sales, and the absence of a $3.1 million extraordinary charge recorded in 2001 related to debt repayment penalties.
• Acquisitions and Dispositions: The Company purchased seven properties (including non-consolidated entities) for $104.5 million and sold four properties plus an interest in a fifth for net proceeds of $18.8 million.
• Interest Rates: The weighted average interest rate on consolidated debt decreased to 7.28% for the nine months ended September 30, 2002, from 7.54% in the prior year period, due to refinancing and lower variable rates.

Guidance, Outlook, and Risks

• Dividends: The Company declared a quarterly dividend of $0.33 per share for the third quarter of 2002, payable November 14, 2002. The annualized dividend rate is $1.32 per share. Management intends to maintain a conservative payout ratio to fund expansion and debt reduction.
• Liquidity: The Company maintains a $60.0 million unsecured credit facility with $55.8 million available (as of September 30, 2002). Management anticipates cash flows from operations, equity issuances, and debt markets will provide necessary capital.
• Kmart Tenant Risk: Kmart, the Company's largest tenant (12% of 2001 rental revenue), filed for Chapter 11 bankruptcy in January 2002. The Company holds $8.9 million in receivables from Kmart, including $2.6 million in pre-petition rent. Kmart is current on post-petition rents, but the realization of pre-petition rent depends on lease affirmation during reorganization.
• Market Risks: The Company is exposed to variable rate debt (10.2% of total long-term indebtedness). A 100 basis point increase in interest rates would reduce net income by approximately $519,000 for the nine-month period.
• Commitments: The Company has committed to purchase a property in Fort Mill, South Carolina, for $17.9 million upon completion in December 2002 and is developing a property in Minneapolis, Minnesota.

Investor Verification Checklist

• Kmart Lease Status: Verify the outcome of Kmart's Chapter 11 reorganization regarding the affirmation of the lease and the collection of $2.6 million in pre-petition rent.
• Debt Maturities: Review the schedule of balloon payments, specifically the $80.9 million due in 2005, to assess refinancing risks.
• Acquisition Pipeline: Confirm the closing and financing terms for the committed Fort Mill, SC property and the Minneapolis, MN development.
• Variable Rate Exposure: Monitor interest rate trends given the $47.4 million in variable rate debt outstanding.
• UPREIT Conversions: Track the redemption of partnership units for common shares, which impacts share count and minority interest expenses.