Lexington Corporate Properties Trust Announces Third Quarter Results

NEW YORK, Oct. 26 /PRNewswire-FirstCall/ -- Lexington Corporate Properties Trust ("Lexington"), a real estate investment trust, today announced results for its third quarter ended September 30, 2006.

Third Quarter Events -- Acquired one property for $14.7 million in a non-consolidated entity; -- Sold one property resulting in an aggregate gain of $1.9 million; -- Entered into five new leases/ extensions on portfolio properties; -- Obtained $35.4 million of non-recourse mortgage financings (including $16.2 million in non-consolidated entities) secured by three properties at a weighted-average fixed interest rate of 6.2%; -- Invested $1.8 million in a mortgage note at a yield of Libor plus 300 bps, through a non-consolidated entity; -- Repurchased 68,404 common shares at an average cost of $19.77 per share; and -- Recorded a $28.2 million aggregate impairment charge related to the Warren, Ohio property. Quarterly Results

The Company's funds from operations were $(0.3) million, or $(0.00) per diluted share/unit, for the third quarter of 2006 after $0.5 million in aggregate debt satisfaction charges including minority interests' share and $28.2 million in aggregate impairment charges relating to the exercise of a purchase option by Kmart Corporation for the Warren, Ohio property, including minority interests' share, compared to $30.2 million, or $0.49 per diluted share/unit, after $0.7 million in debt satisfaction charges (recognized in a non-consolidated entity), and $0.2 million in impairment charges, for the third quarter of 2005. The aggregate impact of these items was a decrease of $28.7 million ($0.45 per diluted share/unit) in the third quarter of 2006 and a decrease of $0.9 million ($0.01 per diluted share/unit) in the third quarter of 2005 in reported Company funds from operations.

Rental revenues for the quarter totaled $46.2 million compared to rental revenues of $47.4 million for the same period last year. Net income (loss) allocable to common shareholders was $(21.7) million in the third quarter of 2006, which includes $1.5 million of gains on sales, $21.6 million in impairment charges, and $0.4 million in debt satisfaction charges, compared to $4.9 million, which included $1.6 million of gains on sale and $0.2 million in impairment charges, for the same period last year.

Nine Month Results

For the nine months ended September 30, 2006, the Company's funds from operations were $66.5 million, or $1.05 per diluted share/unit, after $5.6 million in aggregate debt satisfaction gains, including minority interests' share, $33.6 million in aggregate impairment charges and the accelerated amortization of above market leases, including non-consolidated entities, relating to the exercise of a purchase option by Kmart Corporation for the Warren, Ohio property, and two properties formerly leased to Dana Corporation and $6.9 million in gains realized on sale of Dana Corporation bankruptcy claims, including a non-consolidated entity, compared to $87.4 million, or $1.44 per diluted share/unit, after $0.9 million in impairment charges and $3.9 million in debt satisfaction gains, including $0.7 million in debt satisfaction charges recognized by a non-consolidated entity, for the same period last year. The aggregate impact of these items was a decrease of $21.1 million ($0.33 per diluted share/unit) for the nine months ended September 30, 2006 and an increase of $3.0 million ($0.05 per diluted share/unit) for the nine months ended September 30, 2005 in reported Company funds from operations.

Rental revenues for the nine months ended September 30, 2006 totaled $137.1 million, which is net of the accelerated amortization of an above market lease relating to a property formerly leased to Dana Corporation ($2.3 million), compared to rental revenues of $122.5 million for the same period last year. Net income allocable to common shareholders for the nine months ended September 30, 2006 was $1.7 million, which includes $17.5 million of gains on sales, $4.6 million in debt satisfaction gains, net, $6.2 million in gains realized on sale of bankruptcy claims (including non-consolidated entities) and $26.6 million in impairment charges and the accelerated amortization of above market leases, including non-consolidated entities compared to $22.1 million, which includes $0.8 million in impairment charges, $3.3 million in debt satisfaction gains (including non-consolidated entities), net and $6.7 million of gains on sale, for the same period last year.

Conference Call

Management will discuss the financial results and Lexington's business plan on a conference call today at 2:00 p.m. Eastern time. The toll-free dial- in number is 800-240-7305. A replay of the conference call will be available through November 2, 2006. The toll-free telephone number for the replay is 800-405-2236, passcode 11072657. International callers can access the conference call by dialing 303-262-2130 and the replay by dialing 303-590- 3000, passcode 11072657 (same passcode). The conference call can also be accessed on the internet at http://www.lxp.com/.

Share Repurchase

Lexington previously announced its intention to repurchase up to 2 million common shares / operating partnership units from time to time for cash in open market transactions or in privately-negotiated transactions in accordance with applicable federal securities laws. The timing and amount of the repurchases will be determined by Lexington's management based on their evaluation of market conditions, share price and other factors. The share repurchase program may be suspended or discontinued at any time. During the quarter ended September 30, 2006, Lexington acquired 68,404 common shares at an average cost of $19.77 per share.

About Lexington

Lexington is a real estate investment trust that owns and manages office, industrial and retail properties net-leased to major corporations throughout the United States and provides investment advisory and asset management services to investors in the net lease area. Lexington currently pays an annualized dividend of $1.46 per share. Additional information about Lexington is available at http://www.lxp.com/.

Lexington believes that funds from operations ("FFO") is a widely recognized and appropriate measure of the performance of an equity REIT. Lexington presents FFO because it considers FFO an important supplemental measure of Lexington's operating performance. Lexington believes FFO is frequently used by securities analysts, investors and other interested parties in the evaluation of REITs, many of which present FFO when reporting their results. FFO is intended to exclude generally accepted accounting principles ("GAAP") historical cost depreciation and amortization of real estate and related assets, which assumes that the value of real estate diminishes ratably overtime. Historically, however, real estate values have risen or fallen with market conditions. As a result, FFO provides a performance measure that, when compared year over year, reflects the impact to operations from trends in occupancy rates, rental rates, operating costs, development activities, interest costs and other matters without the inclusion of depreciation and amortization, providing perspective that may not necessarily be apparent from net income.

Lexington computes FFO in accordance with standards established by the National Association of Real Estate Investment Trusts, Inc. ("NAREIT"). FFO is defined by NAREIT as "net income (or loss) computed in accordance with GAAP, excluding gains (or losses) from sales of property, plus real estate depreciation and amortization and after adjustments for unconsolidated partnerships and joint ventures." FFO does not represent cash generated from operating activities in accordance with GAAP and is not indicative of cash available to fund cash needs. FFO should not be considered as an alternative to net income as an indicator of our operating performance or as an alternative to cash flow as a measure of liquidity.

Lexington includes in its calculation of FFO, which as included Lexington refers to as the "Company's funds from operations" or "Company FFO," Lexington's operating partnership units and Lexington's Series C Cumulative Convertible Preferred Shares because these securities are convertible, at the holder's option, into Lexington's common shares. Management believes this is appropriate and relevant to securities analysts, investors and other interested parties because it presents Company FFO on a company-wide basis as if all securities that are convertible, at the holder's option, into Lexington's common shares, are converted. Since others do not calculate FFO in a similar fashion, Company FFO may not be comparable to similarly titled measures as reported by others.

This release contains certain forward-looking statements which involve known and unknown risks, uncertainties or other factors not under Lexington's control which may cause actual results, performance or achievements of Lexington to be materially different from the results, performance, or other expectations implied by these forward-looking statements. These factors include, but are not limited to, (i) the failure to continue to qualify as a real estate investment trust, (ii) changes in general business and economic conditions, (iii) competition, (iv) increases in real estate construction costs, (v) changes in interest rates, (vi) changes in accessibility of debt and equity capital markets, and (vii) those other factors and risks detailed in Lexington's periodic filings with the Securities and Exchange Commission. Forward-looking statements, which are based on certain assumptions and describe the Company's future plans, strategies and expectations, are generally identifiable by use of the words "believes," "expects," "intends," "anticipates," "estimates," "projects" or similar expressions. Lexington undertakes no obligation to publicly release the results of any revisions to those forward-looking statements which may be made to reflect events or circumstances after the occurrence of unanticipated events. Accordingly, there is no assurance that Lexington's expectations will be realized.

LEXINGTON CORPORATE PROPERTIES TRUST AND CONSOLIDATED SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (dollars in thousands, except per share data) Three Months Ended Nine Months Ended September 30, September 30, 2006 2005 2006 2005 Gross revenues: Rental $46,205 $47,437 $137,080 $122,521 Advisory fees 1,127 995 3,527 4,186 Tenant reimbursements 4,302 4,205 12,622 7,194 Total gross revenues 51,634 52,637 153,229 133,901 Expense applicable to revenues: Depreciation and amortization (20,054) (19,522) (59,576) (47,271) Property operating (8,113) (7,705) (23,126) (15,003) General and administrative (5,394) (4,154) (15,868) (13,153) Non-operating income 963 297 7,669 1,187 Interest and amortization expense (17,572) (17,963) (52,825) (45,373) Debt satisfaction (charges) gains, net (510) - (216) 4,632 Impairment charges - - (1,121) - Income before benefit (provision) for income taxes, minority interests, equity in earnings of non-consolidated entities and discontinued operations 954 3,590 8,166 18,920 Benefit (provision) for income taxes (178) 111 (23) 45 Minority interests (168) (484) (1,231) (2,154) Equity in earnings of non-consolidated entities 1,005 2,328 3,075 5,087 Income from continuing operations 1,613 5,545 9,987 21,898 Discontinued operations, net of minority interest and taxes: Income from discontinued operations 919 2,007 3,194 6,745 Debt satisfaction (charge) gain, net 15 - 4,913 (54) Impairment charges (21,612) (177) (21,612) (800) Gains on sales of properties 1,470 1,595 17,520 6,656 Total discontinued operations (19,208) 3,425 4,015 12,547 Net income (loss) (17,595) 8,970 14,002 34,445 Dividends attributable to preferred shares - Series B (1,590) (1,590) (4,770) (4,770) Dividends attributable to preferred shares - Series C (2,519) (2,519) (7,556) (7,556) Net income (loss) allocable to common shareholders $(21,704) $4,861 $1,676 $22,119 Company's funds from operations(1) $(313) $30,213 $66,497 $87,354 Per share/unit: Basic net income (loss) $(0.42) $0.10 $0.03 $0.45 Diluted net income (loss) $(0.42) $0.08 $0.03 $0.41 Company's funds from operations(1)-basic $(0.00) $0.49 $1.05 $1.45 Company's funds from operations(1)-diluted $(0.00) $0.49 $1.05 $1.44 LEXINGTON CORPORATE PROPERTIES TRUST AND CONSOLIDATED SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (dollars in thousands) 9/30/06 12/31/05 Real estate, at cost $1,840,739 $1,883,115 Accumulated depreciation (255,400) (241,188) Investment in joint ventures 181,246 191,146 Properties held for sale - discontinued operations 16,227 49,397 Intangible assets, net 128,932 128,775 Cash and cash equivalents 62,819 53,515 Deferred expenses, net 15,037 13,582 Rent receivable 3,264 7,673 Rent receivable - deferred 27,882 24,778 Other assets 76,135 49,439 $2,096,881 $2,160,232 Mortgages and notes payable $1,146,371 $1,139,971 Liabilities - discontinued operations 8,931 32,145 Other liabilities 38,829 35,434 Dividends payable 23,490 - Minority interests 52,641 61,372 Shareholders' equity 826,619 891,310 $2,096,881 $2,160,232 Common shares 53,099,996 52,155,855 Preferred shares - Series B 3,160,000 3,160,000 Preferred shares - Series C 3,100,000 3,100,000 Operating partnership units 5,619,358 5,720,071 1. Lexington believes that funds from operations ("FFO") is a widely recognized and appropriate measure of the performance of an equity REIT. Lexington presents FFO because it considers FFO an important supplemental measure of Lexington's operating performance. Lexington believes FFO is frequently used by securities analysts, investors and other interested parties in the evaluation of REITs, many of which present FFO when reporting their results. FFO is intended to exclude generally accepted accounting principles ("GAAP") historical cost depreciation and amortization of real estate and related assets, which assumes that the value of real estate diminishes ratably overtime. Historically, however, real estate values have risen or fallen with market conditions. As a result, FFO provides a performance measure that, when compared year over year, reflects the impact to operations from trends in occupancy rates, rental rates, operating costs, development activities, interest costs and other matters without the inclusion of depreciation and amortization, providing perspective that may not necessarily be apparent from net income. Lexington computes FFO in accordance with standards established by the National Association of Real Estate Investment Trusts, Inc. ("NAREIT"). FFO is defined by NAREIT as "net income (or loss) computed in accordance with GAAP, excluding gains (or losses) from sales of property, plus real estate depreciation and amortization and after adjustments for unconsolidated partnerships and joint ventures." FFO does not represent cash generated from operating activities in accordance with GAAP and is not indicative of cash available to fund cash needs. FFO should not be considered as an alternative to net income as an indicator of our operating performance or as an alternative to cash flow as a measure of liquidity. Lexington includes in its calculation of FFO, which as included Lexington refers to as the "Company's funds from operations" or "Company FFO," Lexington's operating partnership units and Lexington's Series C Cumulative Convertible Preferred Shares because these securities are convertible, at the holder's option, into Lexington's common shares. Management believes this is appropriate and relevant to securities analysts, investors and other interested parties because it presents Company FFO on a company-wide basis as if all securities that are convertible, at the holder's option, into Lexington's common shares, are converted. Since others do not calculate FFO in a similar fashion, Company FFO may not be comparable to similarly titled measures as reported by others. LEXINGTON CORPORATE PROPERTIES TRUST AND CONSOLIDATED SUBSIDIARIES EARNINGS PER SHARE AND COMPANY'S FUNDS FROM OPERATIONS PER SHARE (dollars in thousands, except per share data) Three Months Ended Nine Months Ended September 30, September 30, 2006 2005 2006 2005 Earning Per Share Basic Income from continuing operations $1,613 $ 5,545 $9,987 $21,898 Less preferred dividends (4,109) (4,109) (12,326) (12,326) Income (loss) allocable to common shareholders from continuing operations - basic (2,496) 1,436 (2,339) 9,572 Total income (loss) from discontinued operations - basic (19,208) 3,425 4,015 12,547 Net income (loss) allocable to common shareholders - basic $(21,704) $4,861 $1,676 $22,119 Weighted average number of common shares outstanding 52,279,750 50,837,178 52,081,514 49,269,497 Per share data: Income (loss) from continuing operations $(0.05) $0.03 $(0.05) $0.19 Income (loss) from discontinued operations (0.37) 0.07 0.08 0.26 Net income (loss) - basic $(0.42) $0.10 $0.03 $0.45 Diluted Income (loss) allocable to common shareholders from continuing operations - basic $(2,496) $1,436 $(2,339) $9,572 Adjustments: Incremental income (loss) attributed to assumed conversion of dilutive securities - (48) - 695 Income (loss) allocable to common shareholders from continuing operations - diluted (2,496) 1,388 (2,339) 10,267 Total income (loss) from discontinued operations - diluted (19,208) 3,425 4,015 12,547 Net income (loss) allocable to common shareholders - diluted $(21,704) $4,813 $1,676 $22,814 Weighted average number of shares used in calculation of basic earnings per share 52,279,750 50,837,178 52,081,514 49,269,497 Add incremental shares representing: Shares issuable upon exercises of employee share options - 78,046 - 78,382 Shares issuable upon conversion of dilutive securities - 6,849,435 - 6,849,435 Weighted average number of shares used in calculation of diluted earnings per common share 52,279,750 57,764,659 52,081,514 56,197,314 Per share data: Income (loss) from continuing operations - diluted $(0.05) $0.02 $(0.05) $0.18 Income (loss) from discontinued operations - diluted (0.37) 0.06 0.08 0.23 Net income (loss) - diluted $(0.42) $0.08 $0.03 $0.41 LEXINGTON CORPORATE PROPERTIES TRUST AND CONSOLIDATED SUBSIDIARIES EARNINGS PER SHARE AND COMPANY'S FUNDS FROM OPERATIONS PER SHARE (dollars in thousands, except per share data) Three Months Ended Nine Months Ended September 30, September 30, 2006 2005 2006 2005 The Company's Funds From Operations Basic and Diluted Net income (loss) allocable to common shareholders $(21,704) $4,861 $1,676 $22,119 Adjustments: Depreciation and amortization 20,419 20,467 60,726 50,251 Minority interests-OP Units (6,031) 804 (3,342) 3,055 Amortization of leasing commissions 169 143 479 395 Joint venture adjustment-depreciation 5,785 4,754 16,848 12,374 Preferred dividends-Series C 2,519 2,519 7,556 7,556 Gains on sale of properties (1,470) (1,595) (17,520) (6,656) Gains on sale of properties - joint venture - (1,740) - (1,740) Taxes incurred on sale of property - - 74 - Company's funds from operations $(313) $30,213 $66,497 $87,354 Basic Weighted average shares outstanding-basic EPS 52,279,750 50,837,178 52,081,514 49,269,497 Operating partnership units 5,621,824 5,373,592 5,632,598 5,378,078 Preferred shares - Series C 5,779,330 5,779,330 5,779,330 5,779,330 Weighted average shares outstanding-basic 63,680,904 61,990,100 63,493,442 60,426,905 Company's funds from operations per share $(0.00) $0.49 $1.05 $1.45 Diluted Weighted average shares outstanding-diluted EPS 52,279,750 57,764,659 52,081,514 56,197,314 Operating partnership units 5,621,824 5,373,592 5,632,598 5,378,078 Preferred shares - Series C 5,779,330 5,779,330 5,779,330 5,779,330 Other - - 23,053 - Non-dilutive convertible shares - (6,849,435) - (6,849,435) Weighted average shares outstanding-diluted 63,680,904 62,068,146 63,516,495 60,505,287 Company's funds from operations per share $(0.00) $0.49 $1.05 $1.44