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Lexington Realty Trust 10-K 2010
 


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

FORM 10-K

(Mark One)
þ
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
   
 
For the fiscal year ended December 31, 2009
   
 
or
   
o
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)

Maryland
13-3717318
(State or other jurisdiction of
incorporation or organization)
One Penn Plaza, Suite 4015
(I.R.S. Employer
Identification No.)
New York, NY
10119-4015
(Address of principal executive offices)
(Zip Code)

Registrant’s telephone number, including area code (212) 692-7200

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class
Name of Each Exchange on which Registered
Shares of beneficial interests, par value $0.0001, classified as Common Stock
New York Stock Exchange
8.05% Series B Cumulative Redeemable Preferred Stock,
par value $0.0001
New York Stock Exchange
6.50% Series C Cumulative Convertible Preferred Stock,
par value $0.0001
New York Stock Exchange
7.55% Series D Cumulative Redeemable Preferred Stock,
par value $0.0001
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 ¨ No þ.

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 whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o 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, a non-accelerated filer or a smaller reporting company. See definition of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o  Accelerated filer þ  Non-accelerated filer o  Smaller reporting company o

(Do not check if a smaller reporting company)

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, 2009, which was the last business day of the Registrant’s most recently completed second fiscal quarter was $360,735,859 based on the closing price of common shares as of that date, which was $3.40 per share.

Number of common shares outstanding as of February 25, 2010 was 121,944,615.

Certain information contained in the Definitive Proxy Statement for Registrant’s Annual Meeting of Shareholders, to be held on May 18, 2010, is incorporated by reference in this Annual Report on Form 10-K in response to Part III, Item 10, 11, 12, 13 and 14.
 


 
 

 
 
TABLE OF CONTENTS

Item of
       
Form 10-K
 
Description
 
Page
         
   
PART I
 
 
1.
 
Business
  1
1A.
 
Risk Factors
  10
1B.
 
Unresolved Staff Comments
  18
2.
 
Properties
  18
3.
 
Legal Proceedings
  30
4.
 
Submission of Matters to a Vote of Security Holders
  31
   
PART II
   
5.
 
Market for Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities
  33
6.
 
Selected Financial Data
  36
7.
 
Management’s Discussion and Analysis of Financial Condition and Results of Operations
  37
7A.
 
Quantitative and Qualitative Disclosures about Market Risk
  50
8.
 
Financial Statements and Supplementary Data
  52
9.
 
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
  98
9A.
 
Controls and Procedures
  98
9B.
 
Other Information
  98
   
PART III
   
10.
 
Trustees and Executive Officers of the Registrant
  98
11.
 
Executive Compensation
  98
12.
 
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
  98
13.
 
Certain Relationships and Related Transactions
  99
14.
 
Principal Accountant Fees and Services
  99
   
PART IV
   
15.
 
Exhibits, Financial Statement Schedules
  99

 
i

 
 
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, 2009. When we use the term “REIT” we mean real estate investment trust.

All references to 2009, 2008 and 2007 refer to our fiscal years ended, or the dates, as the context requires, December 31, 2009, December 31, 2008, and December 31, 2007, respectively.

Newkirk Realty Trust, Inc., or Newkirk, was merged with and into us on December 31, 2006, which we refer to as the Newkirk Merger. Unless otherwise noted, (A) the information in this Annual Report regarding items in our Consolidated Statements of Operations as of December 31, 2006 and prior does not include the business and operations of Newkirk, and (B) the information in this Annual Report regarding items in our Consolidated Balance Sheet as of December 31, 2005 and prior does not include the assets, liabilities and noncontrolling interests of Newkirk.

Lexington Strategic Asset Corp., a former taxable REIT subsidiary, which we refer to as LSAC, was merged with and into us as of June 30, 2007. Lexington Contributions Inc., a former taxable REIT subsidiary, which we refer to as LCI, was merged with and into us as of March 25, 2008.

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 this Annual Report and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of this 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 REIT, 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 these properties are subject to triple net or similar leases, where the tenant bears all or substantially all of the costs and/or cost increases for real estate taxes, utilities, insurance and ordinary repairs. In addition, we acquire and hold investments in loan assets and debt securities related to real estate.

As of December 31, 2009, we had ownership interests in approximately 210 consolidated real estate properties, located in 40 states and the Netherlands and containing an aggregate of approximately 38.3 million square feet of space, approximately 91.5% of which was subject to a lease. In 2009, 2008 and 2007, no tenant/guarantor represented greater than 10% of our annual base rental revenue.
 
 
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In addition to our shares of beneficial interests, par value $0.0001 per share, classified as “common stock,” which we refer to as common shares, we have three outstanding classes of beneficial interests classified as preferred stock, which we refer to as preferred shares: (1) 8.05% Series B Cumulative Redeemable Preferred Stock, which we refer to as our Series B Preferred Shares, (2) 6.50% Series C Cumulative Convertible Preferred Stock, which we refer to as our Series C Preferred Shares and (3) 7.55% Series D Cumulative Redeemable Preferred Stock, which we refer to as our Series D Preferred Shares. Our common shares, Series B Preferred Shares, Series C Preferred Shares and Series D Preferred Shares are traded on the New York Stock Exchange, or NYSE, 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 taxable income that is currently distributed to shareholders.

History

Our predecessor was organized in Delaware in October 1993 upon the combination of two investment programs, Lepercq Corporate Income Fund L.P. and Lepercq Corporate Income Fund II L.P., which were formed to acquire net-lease real estate assets providing current income. Our predecessor was merged into Lexington Corporate Properties Trust, a Maryland statutory REIT, on December 31, 1997. On December 31, 2006, Lexington Corporate Properties Trust completed the Newkirk Merger. 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 Newkirk Merger, a 31.0% interest in the MLP. In connection with the Newkirk 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 Newkirk Merger, each share of Newkirk’s common stock was exchanged for 0.80 of our common shares, and the MLP effected a 1.0 for 0.80 reverse unit-split. Each unit of limited partner interest in the MLP, which we refer to as an MLP unit, other than the MLP units held directly or indirectly by us, was redeemable at the option of the holder for cash based on a value of our common shares or, if we elected, for our common shares on a one-for-one basis. As of December 31, 2008, the MLP was merged with and into us, and we issued 6.4 million common shares for the MLP units we did not already own.

We are structured as an umbrella partnership REIT, or UPREIT, and a portion of our business is conducted through our three operating partnership subsidiaries: (1) Lepercq Corporate Income Fund L.P.; (2) Lepercq Corporate Income Fund II L.P.; and (3) Net 3 Acquisition L.P. We refer to these subsidiaries as our operating partnerships and to limited partner interests in these operating partnerships as OP units. We are party to a funding agreement with our operating partnerships under which we may be required to fund distributions made on account of OP units. The UPREIT 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 generally redeemable, after certain dates, for our common shares on a one OP unit for approximately 1.13 common shares basis or cash, at our election 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. As of December 31, 2009, there were approximately 4.8 million OP units outstanding, other than OP units held directly or indirectly by us, that are currently redeemable for approximately 5.4 million common shares.

Current Economic Uncertainty and Capital Market Volatility

Our business continues to be impacted in a number of ways by the uncertainty in the overall economy and volatility in the capital markets. We encourage you to read “Risk Factors” in Part I, Item 1A of this Annual Report for a discussion of certain risks we are facing as a result of the current economic uncertainty and capital market volatility and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of this Annual Report for a detailed discussion of the trends impacting our business, including the impact of the current economic uncertainty and capital market volatility.

Objectives and Strategy

 General. Our current business strategy is focused on ways to reduce leverage, preserve capital, generate additional liquidity and revenue and improve our overall financial flexibility. Some of these strategies have included the following:

-
repurchasing our short-term debt and senior securities;
 
issuing longer-term debt to pay down shorter-term debt and thereby extend maturities;
 
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-
aggressively managing our core portfolio of office and industrial properties to maintain and improve our net operating income from these assets;
 
 
-
generating liquidity through sales to third parties of non-core and vacant assets or controlling expenses by disposing of non-performing assets;
 
-
employing cost-saving measures to reduce our general and administrative expenses;
 
 
-
reducing our per common share dividend and, during 2009, paying a portion of the common share dividend in common shares; and
 
issuing shares under our direct share purchase plan.
 
We view our “core” assets as general purpose, efficient, single-tenant net-leased assets, in well-located and growing markets.

As part of our ongoing business efforts, we expect to continue to (1) recycle capital in compliance with regulatory and contractual requirements; (2) refinance or repurchase outstanding indebtedness when advisable; (3) effect strategic transactions, portfolio and individual property acquisitions and dispositions; (4) expand existing properties; (5) execute new leases with tenants; (6) extend lease maturities in advance of expiration; and (7) explore new business lines and operating platforms. Additionally, we may continue to enter into joint ventures and co-investment programs with third-party investors as a means of creating additional growth and expanding the revenue realized from advisory and asset management activities as situations warrant.

Capital Recycling. We began to dispose of non-core assets in 2007 and continued to dispose of non-core assets and core assets, subject to regulatory and contractual requirements, through 2009. During 2009 and 2008, we used the proceeds from such dispositions primarily to retire senior debt and preferred securities at what we believe were favorable spreads. Currently, we are focused on the disposition of non-core, vacant or non-performing assets.

Acquisition Strategies. When market conditions warrant, we seek to enhance our net-lease property portfolio through acquisitions of core assets, including through the investment in debt securities directly or indirectly secured by core assets. Prior to effecting any acquisitions, we analyze the (1) property’s design, construction quality, efficiency, functionality and location with respect to the immediate sub-market, city and region; (2) lease integrity with respect to term, rental rate increases, corporate guarantees and property maintenance provisions; (3) present and anticipated conditions in the local real estate market; and (4) 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.

In the Newkirk Merger, we succeeded Newkirk to an agreement with a third party pursuant to which we will pay the third party for properties acquired by us and identified by the third party in an amount equal to (1) 1.5% of the gross purchase price and (2) 25% of the net proceeds and net cash flow (as defined) after we receive all of our invested capital plus a 12% internal rate of return. As of December 31, 2009, only one property, which was acquired in 2006, has been acquired subject to these terms. We have no other sourcing agreements.

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 their network of relationships in the industry to achieve appropriate risk-adjusted yields through strategic transactions. Accordingly, we endeavor to pursue the (1) acquisition of portfolios of assets and equity interests in companies with a significant number of single-tenant assets, including through mergers and acquisitions activity and (2) participation in strategic partnerships, co-investment programs and joint ventures.

In 1999, we established our first co-investment program with the New York State Common Retirement Fund to acquire net-lease assets. Following a second co-investment program with the New York State Common Retirement Fund, we established co-investment programs with ING Clarion Lion Properties Fund and the Utah State Retirement Investment Fund, all with the purpose of acquiring net-leased assets. In addition, in the Newkirk Merger, we acquired what is now a 50% interest in Lex-Win Concord LLC, which we refer to as Lex-Win Concord, a joint venture with Winthrop Realty Trust, which we refer to as Winthrop. Lex-Win Concord’s primary asset is its interest in Concord Debt Holdings LLC, which we refer to as Concord, and Concord’s primary business is the ownership of real estate loan assets.
 
 
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During 2007, we established Net Lease Strategic Assets Fund L.P., which we refer to as NLS, a co-investment program with a subsidiary of Inland American Real Estate Trust, Inc., which we refer to as Inland NLS, to invest in specialty net-leased real estate. In addition, we acquired the interests of the New York State Common Retirement Fund and the Utah State Retirement Investment Fund in our co-investment programs with them, and we distributed the properties in the co-investment program with ING Clarion Lion Properties Fund to us and ING Clarion Lion Properties Fund, and terminated all of our co-investment programs except for NLS and Lex-Win Concord.

We believe that entering into co-investment programs and joint ventures with institutional investors and other real estate investment companies may mitigate our risk in certain assets and increase our return on equity to the extent we earn management or other fees.

Acquisitions of Portfolios and Individual Net-lease Properties. We seek to acquire portfolios and individual properties from (1) creditworthy companies in sale/leaseback transactions for properties that are integral to the sellers’/tenants’ ongoing operations; (2) 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; (3) other real estate investment companies through strategic transactions; and (4) sellers of properties subject to an existing lease. We believe that our geographical diversification and acquisition experience will allow us to compete effectively for the acquisition of such properties.

Competition

Through our predecessor entities, we have been in the net-lease business for over 35 years. Over this period, we have established a broad network of contacts, including major corporate tenants, 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 or other 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.

Co-Investment Programs and Other Equity Method Investment Limited Partnerships

  Net Lease Strategic Assets Fund L.P. NLS’s portfolio consists of 43 specialty net-leased assets and a 40% tenant-in-common interest in a property. These specialty net-leased assets include data centers, light manufacturing facilities, medical office facilities, a car dealership and a golf course.

Since its formation, Inland NLS has contributed $217.3 million in cash to NLS, and we have contributed 19 primarily net-leased properties, having an agreed upon value of $318.1 million, and $15.3 million in cash to NLS, and we sold fee and leasehold interests in 24 primarily net-leased properties and a 40% tenant-in-common interest in a property, having an agreed upon value of $425.4 million, to NLS. The properties we contributed and sold were encumbered by $339.5 million of mortgage debt with stated interest rates ranging from 5.1% to 8.5%, a weighted-average interest rate of 6.1% and maturity dates ranging from 2009 to 2025. The mortgage debt was assumed by NLS.

At December 31, 2009, Inland NLS owned 85%, and we owned 15% of NLS’s common equity, and we owned 100% of NLS’s preferred equity.

Lex-Win Concord LLC. We acquired a 50% common interest in Concord through the Newkirk Merger. Concord acquires and originates loans and debt securities secured, directly and indirectly, by real estate assets. As of December 31, 2009, the value of our investment in Lex-Win Concord has been reduced to zero. Concord’s obligations are non-recourse to us, and we have no obligation to fund the operations of Concord.

 Other Equity Method Investment Limited Partnerships. We are a partner in five other partnerships with ownership percentages ranging between 27% and 35%, which own primarily net-leased properties. All profits, losses and cash flows are distributed in accordance with the respective partnership agreements. As of December 31, 2009, the partnerships had $29.4 million in mortgage debt (our proportionate share was $8.8 million) with interest rates ranging from 9.4% to 11.5%, a weighted-average rate of 9.9% and maturity dates ranging from 2011 to 2016.

We have determined that as of December 31, 2009 and 2008, Lex-Win Concord and NLS have met the conditions of significant subsidiaries under Rule 1-02 (w) of Regulation S-X. The separate financial statements of NLS and Lex-Win Concord, as required pursuant to Rule 3-09 of Regulation S-X, are filed as Exhibits 99.1 and 99.2, respectively, to this Annual Report.

 
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Internal Growth and Effectively Managing Assets

Tenant Relations and Lease Compliance. We endeavor to maintain close contact with our tenants in order to understand their future real estate needs. In addition to our headquarters in New York City, we have regional offices in Chicago and Dallas. 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.

Extending Lease Maturities. We seek to extend our leases in advance of their expiration in order to maintain a balanced lease rollover schedule and high occupancy levels.

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 or if there is a better use of capital such as repurchasing our debt and senior securities.

Conversion to Multi-Tenant. If we are unable to renew a single-tenant net lease or if we are unable to find a replacement single tenant, we either attempt to sell the property or convert the property for multi-tenant use and begin the process of leasing space. When appropriate, we seek to sell our multi-tenant properties.

Property Management. From time to time, we use third-party property managers to manage certain of our properties. In 2010, we formed a joint venture with an unaffiliated third party to manage these properties. We believe this new joint venture will primarily provide us with better management of our assets and tenant relationships, and secondarily provide us with revenue-enhancing opportunities and cost efficiencies.

Financing Strategy

General. Since becoming a public company, our principal sources of financing have been the public and private equity and debt markets, property specific debt, our credit facility, term loans, issuance of OP units and undistributed cash flows.

Mortgage Debt. Generally, we seek to finance our assets with non-recourse secured debt that has amortization, term and interest rate characteristics matched to the term and characteristics of the cash flows from the underlying investments.

Corporate Level Borrowings. We also use corporate-level borrowings, such as revolving loans and term loans, as needed, and when other forms of financing are not available or appropriate. On February 13, 2009, we refinanced our (1) unsecured revolving credit facility, with $25.0 million outstanding as of December 31, 2008, which was scheduled to expire in June 2009, and (2) secured term loan, with $174.3 million outstanding as of December 31, 2008, which was scheduled to mature in June 2009 (but could have been extended to December 2009 at our option), with a secured credit facility consisting of a $165.0 million term loan and a $85.0 million revolving loan with KeyBank National Association, which we refer to as KeyBank, as agent. The new facility bears interest at 2.85% over LIBOR and matures in February 2011 but can be extended until February 2012 at our option. With the consent of the lenders, we can increase the size of (1) the term loan by $135.0 million and (2) the revolving loan by $115.0 million (or $250.0 million in the aggregate, for a total facility size of 500.0 million, assuming no prepayments of the term loan are made) by adding properties to the borrowing base or admitting additional lenders. During the second quarter of 2009, we increased the availability under the revolving loan by $40.0 million, by admitting an additional lender to the bank group, thus increasing the total facility to $290.0 million The secured credit facility is secured by ownership interest pledges and guarantees by certain of our subsidiaries that in the aggregate own interests in a borrowing base consisting of 75 properties as of December 31, 2009. The borrowing availability of the facility is based upon the net operating income of the properties comprising the borrowing base as defined in the facility. As of December 31, 2009, the available additional borrowing under the facility was $96.6 million. As of December 31, 2009, $164.3 million was outstanding under the term loan, and $7.0 million was outstanding under the revolving loan. Subsequent to year end, we repaid $35.0 million of the term loan, all of the revolving loan borrowings and increased the availability under the revolving loan by $25.0 million by admitting an additional lender to the bank group.
 
 
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During the first quarter of 2010, we issued $115.0 million aggregate principal amount of 6.00% Convertible Guaranteed Notes. The notes pay interest semi-annually in arrears and mature on January 15, 2030. The holders of the notes may require us to repurchase their notes on January 15, 2017, January 15, 2020 and January 15, 2025 for cash equal to 100% of the notes to be repurchased, plus any accrued and unpaid interest. We may not redeem any notes prior to January 15, 2017, except to preserve our REIT status. The notes have an initial conversion rate of 141.1383 common shares per $1,000 principal amount of the notes, representing a conversion price of $7.09 per share. The initial conversion rate is subject to adjustment under certain circumstances. The notes are convertible by the holders under certain circumstances for cash, common shares or a combination of cash and common shares at our election.

Deleveraging. Our primary focus for 2009 was, and our primary focus for 2010 is, to effectively use our capital to deleverage our balance sheet by refinancing, satisfying and repurchasing our indebtedness. During 2009, we reduced our overall consolidated indebtedness by $305.6 million, including $123.4 million original principal amount of our 5.45% Exchangeable Guaranteed Notes at an average 18.1% discount to the original principal amount.

Common Share Dividends

During 2009, we issued approximately 13.3 million common shares in lieu of cash payments of common share dividends in accordance with Internal Revenue Service Revenue Procedure 2008–68, which we refer to as IRS Rev. Proc. 2008–68. IRS Rev. Proc. 2008–68, through a date certain, allows REITs to offer shareholders elective stock dividends, which are dividends paid in a mixture of stock and cash, of which at least 10% must be paid in cash. We retained approximately $52.9 million in cash by issuing partial common share dividends during 2009.

Common Share Repurchases

During 2008 and 2007, approximately 1.2 million and 9.8 million common shares/OP units, respectively, were repurchased under our Board of Trustees approved share repurchase program at an average cost of $14.28 and $19.83 per share/OP unit, respectively, in the open market and through private transactions with our employees and OP unit holders. During 2008, we entered into a forward equity commitment to purchase 3.5 million common shares at a price of $5.60 per share. We have prepaid $15.6 million of the $19.6 million purchase price. The contract is required to be settled no later than October 2011. No shares were repurchased in 2009. As of December 31, 2009, 1.1 million common shares/OP units remained eligible for repurchase under the share repurchase authorization.

Direct Share Purchase Plan

During 2009, we issued approximately 4.3 million common shares under our direct share purchase plan raising net proceeds of $20.9 million. The net proceeds were primarily used to retire short-term debt and senior securities at a discount.

Advisory Contracts

General. Members of our management have been in the business of investing in single-tenant net-lease properties since 1973. This experience has enabled us to provide advisory services to various net-lease investors.

Third Party Investors. In 2001, Lexington Realty Advisors, Inc., a wholly-owned taxable REIT subsidiary, which we refer to as 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. Under the agreement, LRA earns acquisition fees (90 basis points of total acquisition costs), annual asset management fees (30 basis points of gross asset value) and an incentive fee (16% of the return in excess of an internal rate of return of 10% earned by the investment fund). During 2007, the investment fund sold one of its two properties, and LRA recognized an incentive fee of $1.1 million, and an additional incentive fee $0.4 million was held back by the investment fund pursuant to the agreement. The investment fund made no purchases in 2009 or 2008.

Affiliated Investors. We provided advisory services to our former co-investment programs and also provide advisory services to NLS. In exchange for providing advisory services to NLS, LRA receives (1) a management fee of 0.375% of the equity capital, as defined, (2) a property management fee of up to 3.0% of actual gross revenues from certain assets for which the landlord is obligated to provide property management services (contingent upon the recoverability of such fees from the tenant under the applicable lease) and (3) an acquisition fee of 0.5% of the gross purchase price of each asset acquired by NLS.
 
 
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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 and generally upon acquisition of a property and prior to surrender by a tenant, 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 (1) the discovery of environmental conditions, the existence or severity of which were previously unknown; (2) changes in law; (3) the conduct of tenants; or (4) 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.

Non-Cash Impairment Charges

During 2009, we incurred $175.9 million of non-cash impairment charges related to (1) our investment in Lex-Win Concord and another non-consolidated investment, which are included in equity in earnings (losses) of non-consolidated entities in our Consolidated Statement of Operations, (2) sales and other dispositions of assets at below book value and (3) vacancies of certain assets. In addition, we may continue to take similar non-cash impairment charges, which could be material in amount, due to the current economic environment and the implementation our current business strategy.
 
Summary of 2009 Transactions and Recent Developments
 
The following summarizes certain of our transactions during 2009.
 
Sales. With respect to sales activity, we:
 
sold 15 properties to unaffiliated third parties for an aggregate net proceeds of $108.5 million;
 
transferred two properties to lenders and disposed of one property through bankruptcy;
 
sold our entire interests in two joint ventures generating $12.6 million in net proceeds;
 
sold two notes receivable for an aggregate discounted payoff amount of $3.9 million;
 
raised gross proceeds of $4.8 million in a sale/leaseback land transaction; and
 
sold investments in debt securities for aggregate proceeds of $9.5 million.
 
Acquisitions. We acquired a property in Greenville, South Carolina for $10.5 million. The tenant has an option to purchase the property on December 31, 2014 at fair market value, but not less than $10.7 million and not greater than $11.6 million. If the tenant fails to exercise its purchase option, we have the right to require the tenant to purchase the property for approximately $10.7 million. In addition, we acquired the remainder interests in a parcel of land in Long Beach, California in connection with a tenant’s lease surrender obligations for an estimated fair value of $2.5 million.
 
 
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Expansions. We funded $9.9 million in 2009 for the completion of a parking garage adjacent to our office building in Baltimore, Maryland, which had an aggregate construction cost of $23.3 million.
 
Leasing. We entered into 85 lease extensions and new leases encompassing an aggregate 3.8 million square feet, and we received $3.2 million from five lease termination and deferred maintenance payments.
 
Co-Investment Programs. Lex-Win Concord recognized $230.2 million of other-than-temporary impairments, loan losses and reserves, of which we recognized $66.6 million. In addition, we recorded $68.2 million in impairments on our investment in Lex-Win Concord, reducing our investment to zero.
 
Financing. With respect to financing activities, we:
 
-
repurchased $123.4 million original principal amount of our 5.45% Exchangeable Guaranteed Notes at an average discount of 18.1% to the original principal amount;
 
-
refinanced our (1) unsecured revolving credit facility, with $25.0 million outstanding as of December 31, 2008, which was scheduled to expire in June 2009, and (2) secured term loan, with $174.3 million outstanding as of December 31, 2008, which was scheduled to mature in June 2009 (or December 2009 at our option), with a secured credit facility consisting of a $165.0 million term loan and a $125.0 million revolving loan with KeyBank, as agent, and $27.9 million was repaid under our credit facilites in 2009;

-
made balloon payments of $11.6 million on property specific, non-recourse mortgage debt;
 
-
retired $95.2 million in property non-recourse mortgage debt due to sale/transfer of properties to unrelated third parties or lenders; and
 
-
refinanced a $13.2 million, 8.19% non-recourse mortgage loan due in April 2010 with an $11.5 million, 6.375% non-recourse mortgage loan that matures in August 2014.
 
Capital. With respect to capital activities, we:
 
-
issued approximately 13.3 million common shares in connection with our quarterly common share dividends;
 
-
prepaid $2.8 million in cash on our forward equity commitment to purchase 3.5 million of our common shares at a price of $5.60 per share, leaving approximately $4.0 million remaining of the original $19.6 million purchase price;
 
-
converted 0.5 million of our Series C Preferred Shares by issuing 3.0 million common shares; and
 
-
issued approximately 4.3 million common shares under our direct share purchase plan, raising net proceeds of approximately $20.9 million.
 
Subsequent to December 31, 2009, we:
 
-
issued $115.0 million aggregate principal amount of 6.00% Convertible Guaranteed Notes, the terms of which are described above under “Financing Strategy – Corporate Level Borrowings”;
 
-
sold three properties for gross cash proceeds of $1.8 million, and the purchasers of two of these properties assumed the corresponding mortgage notes ($40.2 million at December 31, 2009);
 
-
repurchased $23.0 million original principal amount of 5.45% Exchangeable Guaranteed Notes at par;
 
 
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-
made a 15%, $11.0 million mortgage loan on an office building in Schaumburg, Illinois, which matures January 15, 2012, but can be extended one additional year by the borrower for a 50 basis point fee. The property is leased to Career Education Corporation from January 1, 2011 through December 31, 2022 for an average annual rent of $4.0 million. In addition to the initial $11.0 million investment, we are obligated to lend an additional $7.6 million over the two-year term of the mortgage upon the occurrence of certain events. If the borrower exercises the one-year extension option and certain other events occur, we will become obligated to lend an additional $12.2 million for tenant improvement costs;
 
-
made a $17.0 million mezzanine loan secured by  a combination of limited partner interests in entities that own, and second mortgage liens against, five medical facilities. The mezzanine loan is guaranteed by a parent entity and principal and matures in January 2012 and requires payments of interest only at a rate of 14% for the first year and 16% thereafter;
 
-
repaid $35.0 million on the term loan under our secured credit facility, repaid all outstanding borrowings on the revolving loan under our secured credit facility and increased the availability under the revolving loan by $25.0 million;
 
-
formed a joint venture with an unaffiliated third party to manage certain of our properties that require such property management services; and
 
-
purchased a parking lot in a sale/leaseback transaction with an existing tenant, Nevada Power Company, for $3.3 million and financed the purchase with a $2.5 million non-recourse mortgage note, which matures in September 2014, bears interest at 7.5% and has a 25 year amortization schedule. The parking lot is adjacent to our existing property in Las Vegas, Nevada, leased to Nevada Power Company. In connection with this transaction, the Nevada Power Company lease on our existing property has been extended from January 2014 to January 2029, the same expiration date as the parking lot lease.
 
Other

Employees. As of December 31, 2009, we had 59 full-time employees.

Industry Segments. We operate in primarily one industry segment, investment in net-leased real estate assets.

Web Site. Our Internet address is www.lxp.com and the investor relations section of our web site is located at http://www.snl.com/ irweblinkx/corporateprofile.aspx?iid=103128. We make available, free of charge, on or through the investor relations section of our web site or by contacting our Investor Relations Department, 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 and our Complaint Procedures Regarding Accounting and Auditing Matters. Within the time period required by the SEC and the NYSE, 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. Information contained on our web site or the web site of any other person is not incorporated by reference into this Annual Report.
 
Our Investor Relations Department can be contacted at Lexington Realty Trust, One Penn Plaza, Suite 4015, New York, NY 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, NY 10119-4015; our telephone number is (212) 692-7200.

 
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NYSE CEO Certification. Our Chief Executive Officer made an unqualified certification to the NYSE with respect to our compliance with the NYSE corporate governance listing standards in June 2009.

Item 1A. Risk Factors

Set forth below are material factors that may adversely affect our business and operations.

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 addition, we will be responsible for 100% of the operating costs following a vacancy at a single-tenant building.

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. The default, financial distress or bankruptcy of any of the tenants and/or guarantors of these properties could cause interruptions in the receipt of lease revenues 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 at all, or without incurring additional expenditures in connection with the re-leasing. See “Management’s Discussion and Analysis of Financial Conditions and Results of Operations – Overview – Leasing Trends” in Part II, Item 7 of this Annual Report for further discussion.

Our assets may be subject to impairment charges, which could materially adversely affect our business, financial condition and results of operations.

We periodically evaluate our real estate investments and other assets for impairment indicators. The judgment regarding the existence of impairment indicators is based on a variety of factors such as market conditions, the status of significant leases, the financial condition of major tenants and other factors that could affect the cash flow or value of our investments. During 2009, we incurred $175.9 million of non-cash impairment charges, primarily related to (1) our investment in Lex-Win Concord and another non-consolidated investment, which are included in equity in earnings (losses) of non-consolidated entities in our Consolidated Statement of Operations, (2) sales and other dispositions of assets at below book value and (3) vacancies of certain assets. In addition, we may continue to take similar non-cash impairment charges due to the current economic environment and the implementation of our current business strategy. These impairments could have a material adverse effect on our financial condition and results of operations.

Our notes receivable are subject to delinquency, foreclosure and loss.

Our notes receivable are secured by income-producing properties. These notes are subject to risks of delinquency as well as risk associated with the capital markets. The ability of a borrower to repay a note secured by an income-producing property is typically and primarily dependent upon the successful operation of such property rather than upon the existence of independent income or assets of the borrower. If a borrower were to default on a note, it is possible that we would not recover the full value of the note and the collateral may be non-performing.

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 or market rates. 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 earnings 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.

 
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We are highly leveraged, which increases risk of default on our obligations and debt service requirements.

We are highly leveraged compared to certain of our competitors. We have incurred, and may continue to incur, indebtedness in furtherance of our activities. Neither our amended and restated 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, and accordingly, we could become even more highly leveraged. High levels of leverage may result 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.

Market interest rates could have an adverse effect on our borrowing costs, profitability and 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 earnings. As of December 31, 2009, we had outstanding $171.3 million in consolidated variable-rate indebtedness, not subject to an interest-rate swap agreement. 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 earnings. 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.

Continued disruptions in the financial markets could affect our ability to obtain debt financing on reasonable terms and have other adverse effects on us.

The United States credit markets have experienced significant dislocations and liquidity disruptions which have caused the spreads on prospective debt financings to widen considerably. These circumstances have materially impacted liquidity in the debt markets, making financing terms for borrowers less attractive, and in certain cases have resulted in the unavailability of certain types of debt financing. Continued uncertainty in the credit markets may negatively impact our ability to access additional debt financing at reasonable terms, which may negatively affect our ability to make acquisitions. A prolonged downturn in the credit markets may cause us to seek alternative sources of potentially less attractive financing and may require us to adjust our business plan accordingly. In addition, these factors may make it more difficult for us to sell properties or may adversely affect the price we receive for properties that we do sell, as prospective buyers may experience increased costs of capital or difficulties in obtaining capital. These events in the credit markets have also had an adverse effect on other financial markets in the United States, which may make it more difficult or costly for us to raise capital through the issuance of our common shares or preferred shares. These disruptions in the financial markets may have other adverse effects on us or the economy in general.

We also have interest rate swap agreements directly and through our investment in Lex-Win Concord and have a direct forward equity commitment. The counterparties of these arrangements are major financial institutions; however, we are exposed to credit risk in the event of non-performance by the counterparties. In addition, we may be required to make additional prepayments pursuant to our forward equity commitment.

We have engaged and may engage in hedging transactions that may limit gains or result in losses.

We have used derivatives to hedge certain of our liabilities and this has certain risks, including losses on a hedge position, which have in the past and may in the future reduce the return on our investments and such losses may exceed the amount invested in such instruments. In addition, counterparties to a hedging arrangement could default on their obligations. We may have to pay certain costs, such as transaction fees or breakage costs, related to hedging transactions.

 
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We face risks associated with refinancings.

A significant number of our properties, as well as corporate-level borrowings, are subject to mortgage or other secured notes with balloon payments due at maturity. As of December 31, 2009, the consolidated scheduled balloon payments, for the next five calendar years, are as follows:
 
Year
 
Non-Recourse
Property-Specific
Balloon Payments
   
Corporate Recourse
Balloon Payments
 
2010
  $ 106.0 million     $  
2011
  $ 85.2 million     $ 171.3 million  
2012
  $ 191.0 million     $ 87.7 million  
2013
  $ 234.9 million     $ 60.7 million  
2014
  $ 233.6 million     $  
 
Our ability to make the scheduled balloon payments will depend upon our cash balances, the amount available under our secured credit facility and our ability either to refinance the related mortgage debt or to sell the related property. If we are unable to refinance or sell the related property, we may convey the property to the lender through foreclosure or the special purpose entity that owns title to the property may declare bankruptcy. However, the failure to pay the balloon payment may strain relationships with our lenders.

Certain of our properties are cross-collateralized, and certain of our indebtedness is cross-defaulted.>

As of December 31, 2009, the mortgages on two sets of two properties, one set of four properties and one set of three properties are cross-collateralized. In addition, (1) our credit facility is secured by a borrowing base of interests in 75 properties as of December 31, 2009, (2) our $45.0 million original principal amount secured term loan (of which $35.7 million was outstanding at December 31, 2009) is secured by a borrowing base of interests in certain properties and (3) our $25.0 million secured term loan is secured by interests in three properties. 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.

In addition, our secured credit facility, secured term loans, 5.45% Exchangeable Guaranteed Notes and 6.00% Convertible Guaranteed Notes (only with respect to recourse indebtedness) contain cross-default provisions, which may be triggered if we default on indebtedness in excess of certain thresholds.

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.

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.

 
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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 and the on-going military conflicts could have a material adverse effect on general economic conditions, consumer confidence and market liquidity.

The types of recent terrorist attacks and on-going military conflicts may affect interest rates, among other things. An increase in interest rates may increase our costs of borrowing, leading to a reduction in our earnings. 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 or impact our ability to grow.

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. 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.

 
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We may have limited control over our co-investment programs and joint venture investments.

Our co-investment programs and joint venture investments may involve risks not otherwise present for investments made solely by us, including the possibility that our 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 co-investment programs and joint venture investments include impasse on decisions, such as a sale, because neither we nor our partner has full control over the co-investment programs or joint venture. Also, there is no limitation under our organizational documents as to the amount of funds that may be invested in co-investment programs and joint ventures.

One of our co-investment programs, Lex-Win Concord, is owned equally by us and Winthrop. This co-investment program is managed by the members. Material actions taken by Lex-Win Concord require the consent of each of us and Winthrop. Accordingly, Lex-Win Concord may not take certain actions or invest in certain assets even if we believe it to be in its best interest. Michael L. Ashner, our former Executive Chairman and Director of Strategic Acquisitions is also the Chairman and Chief Executive Officer of each of Winthrop and WRP Sub-Management LLC, the administrative manager of Lex-Win Concord.

Another co-investment program, NLS, is managed by an Executive Committee comprised of three persons appointed by us and two persons appointed by our partner. With few exceptions, the vote of four members of the Executive Committee is required to conduct business. Accordingly, we do not control the business decisions of this co-investment.

Certain of our trustees and officers may face conflicts of interest with respect to sales and refinancings.

E. Robert Roskind, our Chairman, beneficially owns a significant number of OP units 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. Our Chairman 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 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. 

 
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We may be subject to the REIT prohibited transactions tax, which could result in significant U.S. federal income tax liability to us.

We previously announced a restructuring of our investment strategy, focusing on core and core plus assets. A REIT will incur a 100% tax on the net income from a prohibited transaction. Generally, a prohibited transaction includes a sale or disposition of property held primarily for sale to customers in the ordinary course of a trade or business. While we believe that the dispositions of our assets pursuant to the restructuring of our investment strategy should not be treated as prohibited transactions, whether a particular sale will be treated as a prohibited transaction depends on the underlying facts and circumstances. We have not sought and do not intend to seek a ruling from the Internal Revenue Service regarding any dispositions. Accordingly, there can be no assurance that our dispositions of such assets will not be subject to the prohibited transactions tax. If all or a significant portion of those dispositions were treated as prohibited transactions, we would incur a significant U.S. federal income tax liability, which could have a material adverse effect on our results of operations.

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 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 taxable 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, among other restrictions, our declaration of trust limits any shareholder from owning more than 9.8% in value of our outstanding equity shares, defined as common shares or preferred 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 four 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 may be entitled to severance benefits based on their current annual base salaries and trailing average of recent annual cash bonuses as defined in the employment agreements. Accordingly, these payments may discourage a third party from acquiring us.

Our ability to issue additional shares. Our amended and restated declaration of trust authorizes our Board of Trustees to cause us to issue shares of any class, including preferred shares, without shareholder approval. Our Board of Trustees is able to establish the preferences and rights of any such class or series of additional shares, 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. At December 31, 2009, in addition to common shares, we had outstanding 3,160,000 Series B Preferred Shares that we issued in June 2003, 2,095,200 Series C Preferred Shares, that we issued in December 2004 and January 2005, and 6,200,000 Series D Preferred Shares, that we issued in February 2007. Our Series B, Series C and Series D Preferred Shares 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 class or series of shares could make a change of control of us more difficult.

 
15

 
 
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 become 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, or an affiliate of 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 the Newkirk Merger, Vornado Realty Trust, which we refer to as Vornado, was 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 votes 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 exceptions. If voting rights of control shares acquired in a control share acquisition are not approved at a shareholders’ meeting or if the acquiring person does not deliver an acquiring person statement as required under the statute, 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 amended and restated 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 amended and restated 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 our amended and restated 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.

However, these restrictions and limits may not be adequate in all cases 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.
 
 
16

 
 
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 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 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 and 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 or with a first mortgage which is satisfied upon conveyance of a fully constructed and leased facility. 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.

At December 31, 2009, Vornado beneficially owned approximately 18.5 million common shares, and E. Robert Roskind, our Chairman, beneficially owned approximately 0.8 million of our common shares and 1.5 million OP units, which are currently redeemable for approximately 1.7 million common shares, or with respect to a portion of the OP units, at our election, cash. Each of Vornado and Mr. Roskind may have substantial influence over us and on the outcome of any matters submitted to our shareholders for approval. In addition, certain decisions concerning our operations or financial structure may present conflicts of interest between each of Vornado and Mr. Roskind and our other equity or debt holders. In addition, Vornado engages in a wide variety of activities in the real estate business and may engage in activities that result in conflicts of interest with respect to matters affecting us, such as competition for properties and tenants.
 
 
17

 
 
Securities eligible for future sale may have adverse effects on our share price.

An aggregate of approximately 7.6 million of our common shares are issuable upon the exercise of employee share options and on the exchange of OP units. Depending upon the number of such securities exercised or exchanged at one time, an exercise or exchange of such securities could be dilutive to or otherwise adversely affect the interests of holders of our common shares.

We are dependent upon our key personnel.

We are dependent upon key personnel whose continued service is not guaranteed. We are dependent on our executive officers for business direction. We have entered into two-year 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 and Patrick Carroll, our Executive Vice President, Chief Financial Officer and Treasurer.

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, 2009, we had ownership interests in approximately 38.3 million square feet of rentable space in approximately 210 consolidated office, industrial and retail properties. As of December 31, 2009, these properties were approximately 91.5% leased based upon net rentable square feet.

Our properties are generally subject to net leases; however, in certain leases we are responsible for roof, structural and other repairs. 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, and we may be responsible for a significant amount of operating expenses of multi-tenant properties.

Ground Leases. Certain of our properties 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. As of December 31, 2009, we had outstanding mortgages, notes payable and corporate level debt of approximately $2.1 billion with a weighted-average interest rate of approximately 5.7%.
 
 
18

 

LEXINGTON CONSOLIDATED PORTFOLIO
PROPERTY CHART
OFFICE
 
Property Location
 
City
 
State
 
Primary Tenant (Guarantor)
 
Net
Rentable
Square
Feet
 
Current
Lease
Term
Expiration
 
Percent
Leased
12209 W. Markham St.
 
Little Rock
 
AR
 
Entergy Arkansas, Inc.
  36,311  
10/31/2015
  100 %
13430 N. Black Canyon Fwy
 
Phoenix
 
AZ
 
Multi-tenanted
  138,940  
Various
  100 %
2211 S. 47th St.
 
Phoenix
 
AZ
 
Avnet, Inc.
  176,402  
11/14/2012
  100 %
2005 E. Technology Circle
 
Tempe
 
AZ
 
(i) Structure, LLC (Infocrossing, Inc.)
  60,000  
12/31/2025
  100 %
275 S. Valencia Ave
 
Brea
 
CA
 
Bank of America NT & SA
  637,503  
6/30/2012
  100 %
17770 Cartwright Rd
 
Irvine
 
CA
 
Multi-tenanted
  143,165  
Various
  81 %
26210 & 26220 Enterprise Court
 
Lake Forest
 
CA
 
Apria Healthcare, Inc. (Apria Healthcare Group, Inc.)
  100,012  
1/31/2012
  100 %
1500 Hughes Way
 
Long Beach
 
CA
 
Multi-tenanted
  490,054  
Various
  67 %
2706 Media Center Dr.
 
Los Angeles
 
CA
 
Playboy Enterprises, Inc.
  83,252  
11/7/2012
  100 %
3333 Coyote Hill Rd.
 
Palo Alto
 
CA
 
Xerox Corporation
  202,000  
12/13/2013
  100 %
5724 W. Las Positas Blvd.
 
Pleasanton
 
CA
 
NK Leasehold LLC
  40,914  
11/30/2010
  100 %
255 California St.
 
San Francisco
 
CA
 
Multi-tenanted
  173,455  
Various
  67 %
9201 E. Dry Creek Rd
 
Centennial
 
CO
 
The Shaw Group, Inc.
  128,500  
9/30/2017
  100 %
1110 Bayfield Dr.
 
Colorado Springs
 
CO
 
Honeywell International, Inc.
  166,575  
11/30/2013
  100 %
5550 Tech Center Dr.
 
Colorado Springs
 
CO
 
Vacant
  61,690  
None
  0 %
3940 S. Teller St.
 
Lakewood
 
CO
 
MoneyGram Payment Systems, Inc.
  68,165  
3/31/2012
  100 %
1315 W. Century Dr.
 
Louisville
 
CO
 
Global Healthcare Exchange, Inc. (Global Healthcare Exchange, LLC)
  106,877  
4/30/2017
  100 %
10 John St.
 
Clinton
 
CT
 
Vacant
  41,188  
None
  0 %
200 Executive Blvd. S.
 
Southington
 
CT
 
Hartford Fire Insurance Company
  153,364  
12/31/2012
  100 %
100 Barnes Rd
 
Wallingford
 
CT
 
3M Company
  44,400  
12/31/2010
  100 %
5600 Broken Sound Blvd.
 
Boca Raton
 
FL
 
Océ Printing Systems USA, Inc. (Océ -USA Holding, Inc.)
  136,789  
2/14/2020
  100 %
12600 Gateway Blvd.
 
Fort Meyers
 
FL
 
Gartner, Inc.
  62,400  
1/31/2013
  100 %
550 Business Center Dr.
 
Lake Mary
 
FL
 
JPMorgan Chase Bank, NA
  125,920  
9/30/2015
  100 %
600 Business Center Dr.
 
Lake Mary
 
FL
 
JPMorgan Chase Bank, NA
  125,155  
9/30/2015
  100 %
6277 Sea Harbor Dr.
 
Orlando
 
FL
 
Vacant
  355,840  
None
  0 %
9200 S. Park Center Loop
 
Orlando
 
FL
 
Corinthian Colleges, Inc.
  59,927  
9/30/2013
  100 %
Sandlake Rd./Kirkman Rd
 
Orlando
 
FL
 
Lockheed Martin Corporation
  184,000  
4/30/2013
  100 %
4200 RCA Blvd.
 
Palm Beach Gardens
 
FL
 
The Wackenhut Corporation
  114,518  
2/28/2011
  100 %
2223 N. Druid Hills Rd
 
Atlanta
 
GA
 
Bank of America, N.A. (Bank of America Corporation)
  6,260  
12/31/2014
  100 %
6303 Barfield Rd
 
Atlanta
 
GA
 
International Business Machines Corporation (Internet Security Systems, Inc.)
  238,600  
5/31/2013
  100 %
859 Mount Vernon Hwy
 
Atlanta
 
GA
 
International Business Machines Corporation (Internet Security Systems, Inc.)
  50,400  
5/31/2013
  100 %
956 Ponce de Leon Ave
 
Atlanta
 
GA
 
Bank of America, N.A. (Bank of America Corporation)
  3,900  
12/31/2014
  100 %
4545 Chamblee-Dunwoody Rd
 
Chamblee
 
GA
 
Bank of America, N.A. (Bank of America Corporation)
  4,565  
12/31/2014
  100 %
 
19

 
LEXINGTON CONSOLIDATED PORTFOLIO
PROPERTY CHART
OFFICE
 
 
Property Location
 
City
 
 
State
 
 
 
Primary Tenant (Guarantor)
 
Net
Rentable
Square
Feet
 
Current
Lease
Term
Expiration
 
Percent
Leased
201 W. Main St.
 
Cumming
 
GA
 
Bank of America, N.A. (Bank of America Corporation)
  14,208  
12/31/2014
  100 %
160 Clairemont Ave
 
Decatur
 
GA
 
Multi-tenanted
  121,686  
Various
  71 %
3468 Georgia Hwy 120
 
Duluth
 
GA
 
Vacant
  10,341  
None
  0 %
1066 Main St.
 
Forest Park
 
GA
 
Bank of America, N.A. (Bank of America Corporation)
  14,859  
12/31/2014
  100 %
825 Southway Dr. Blvd.
 
Jonesboro
 
GA
 
Bank of America, N.A. (Bank of America Corporation)
  4,894  
12/31/2014
  100 %
1698 Mountain Industrial
 
Stone Mountain
 
GA
 
Bank of America, N.A. (Bank of America Corporation)
  5,704  
12/31/2014
  100 %
4000 Johns Creek Pkwy
 
Suwanee
 
GA
 
Kraft Foods North America, Inc.
  87,219  
1/31/2012
  100 %
King St.
 
Honolulu
 
HI
 
Multi-tenanted
  239,291  
Various
  96 %
1275 N.W. 128th St.
 
Clive
 
IA
 
Principal Life Insurance Company
  61,180  
1/31/2012
  100 %
101 E. Erie St.
 
Chicago
 
IL
 
Draftfcb, Inc. (Interpublic Group of Companies, Inc.)
  230,684  
3/15/2014
  100 %
850 & 950 Warrenville Rd
 
Lisle
 
IL
 
National Louis University
  99,414  
12/31/2019
  100 %
500 Jackson St.
 
Columbus
 
IN
 
Cummins, Inc.
  390,100  
7/31/2019
  100 %
10300 Kincaid Dr.
 
Fishers
 
IN
 
Roche Diagnostics Operations, Inc.
  193,000  
1/31/2020
  100 %
10475 Crosspoint Blvd.
 
Fishers
 
IN
 
John Wiley & Sons, Inc.
  141,047  
10/31/2019
  88 %
5757 Decatur Blvd.
 
Indianapolis
 
IN
 
Allstate Insurance Company
  89,956  
8/31/2012
  100 %
11201 Renner Blvd.
 
Lenexa
 
KS
 
Applebee’s Services, Inc. (DineEquity, Inc.)
  178,000  
7/31/2023
  100 %
5200 Metcalf Ave
 
Overland Park
 
KS
 
Swiss Re American Holding Corporation
  320,198  
12/22/2018
  100 %
2300 Litton Lane
 
Hebron
 
KY
 
Multi-tenanted
  80,440  
Various
  100 %
4455 American Way
 
Baton Rouge
 
LA
 
Bell South Mobility, Inc.
  70,100  
10/31/2012
  100 %
147 Milk St.
 
Boston
 
MA
 
Harvard Vanguard Medical Association
  52,337  
12/31/2022
  100 %
33 Commercial St.
 
Foxboro
 
MA
 
Invensys Systems, Inc. (Siebe, Inc.)
  164,689  
7/1/2015
  100 %
100 Light St.
 
Baltimore
 
MD
 
Multi-tenanted
  523,240  
Various
  27 %
37101 Corporate Dr.
 
Farmington Hills
 
MI
 
TEMIC Automotive of North America, Inc.
  119,829  
12/31/2016
  100 %
26555 Northwestern Hwy
 
Southfield
 
MI
 
Federal-Mogul Corporation
  187,163  
1/31/2015
  100 %
3165 McKelvey Rd
 
Bridgeton
 
MO
 
BJC Health System
  52,994  
3/31/2013
  100 %
9201 Stateline Rd
 
Kansas City
 
MO
 
Swiss Re American Holding Corporation
  155,925  
4/1/2019
  100 %
200 Lucent Lane
 
Cary
 
NC
 
Alcatel-Lucent USA, Inc.
  124,944  
9/30/2011
  100 %
11707 Miracle Hills Dr.
 
Omaha
 
NE
 
Infocrossing, LLC (Infocrossing, Inc.)
  85,200  
11/30/2025
  100 %
700 US Hwy. Route 202-206
 
Bridgewater
 
NJ
 
Biovail Pharmaceuticals, Inc. (Biovail Corporation)
  115,558  
10/31/2014
  100 %
389 & 399 Interpace Hwy
 
Parsippany
 
NJ
 
Sanofi-aventis U.S., Inc. (Aventis, Inc. & Aventis Pharma Holding GmbH)
  340,240  
1/31/2010
  100 %
333 Mount Hope Ave
 
Rockaway
 
NJ
 
BASF Corporation
  95,500  
9/30/2014
  100 %
1415 Wyckoff Rd
 
Wall
 
NJ
 
New Jersey Natural Gas Company
  157,511  
6/30/2021
  100 %
29 S. Jefferson Rd
 
Whippany
 
NJ
 
CAE SimuFlite, Inc.
  123,734  
11/30/2021
  100 %
 
20

 
LEXINGTON CONSOLIDATED PORTFOLIO
PROPERTY CHART
OFFICE

Property Location
 
 
City
 
 
State
 
Primary Tenant (Guarantor)
 
Net
Rentable
Square
Feet
 
Current
Lease
Term
Expiration
 
Percent
Leased
6226 W. Sahara Ave
 
Las Vegas
 
NV
 
Nevada Power Company
  282,000  
1/31/2014
  100 %
180 S. Clinton St.
 
Rochester
 
NY
 
Frontier Corporation
  226,000  
12/31/2014
  100 %
2000 Eastman Dr.
 
Milford
 
OH
 
Siemens Shared Services, LLC
  221,215  
4/30/2016
  100 %
500 Olde Worthington Rd
 
Westerville
 
OH
 
InVentiv Communications, Inc.
  97,000  
9/30/2015
  100 %
4848 129th E. Ave
 
Tulsa
 
OK
 
HSBC Card Services, Inc. (HSBC Finance Corporation)
  101,100  
1/31/2011
  100 %
275 Technology Dr.
 
Canonsburg
 
PA
 
ANSYS, Inc.
  107,872  
12/31/2014
  100 %
2550 Interstate Dr.
 
Harrisburg
 
PA
 
New Cingular Wireless PCS, LLC
  81,859  
12/31/2013
  100 %
1701 Market St.
 
Philadelphia
 
PA
 
Morgan, Lewis & Bockius, LLC
  307,775  
1/31/2014
  100 %
1460 Tobias Gadsen Blvd.
 
Charleston
 
SC
 
Hagemeyer North America, Inc.
  50,076  
7/8/2020
  100 %
2210 Enterprise Dr.
 
Florence
 
SC
 
JPMorgan Chase Bank, NA
  179,300  
6/30/2013
  100 %
3476 Stateview Blvd.
 
Fort Mill
 
SC
 
Wells Fargo Bank, N.A.
  169,083  
5/31/2014
  100 %
3480 Stateview Blvd.
 
Fort Mill
 
SC
 
Wells Fargo Bank, N.A.
  169,218  
5/31/2014
  100 %
400 E. Stone Ave
 
Greenville
 
SC
 
Canal Insurance Company
  128,041  
12/31/2029
  100 %
15 Nijborg
 
3927 DA Renswoude
 
The Netherlands
 
AS Watson (Health & Beauty Continental Europe, BV)
  17,610  
12/20/2011
  100 %
17 Nijborg
 
3927 DA Renswoude
 
The Netherlands
 
AS Watson (Health & Beauty Continental Europe, BV)
  114,195  
6/14/2018
  100 %
207 Mockingbird Lane
 
Johnson City
 
TN
 
SunTrust Bank
  63,800  
11/30/2011
  100 %
1409 Centerpoint Blvd.
 
Knoxville
 
TN
 
Alstom Power, Inc.
  84,404  
10/31/2014
  100 %
104 & 110 S. Front St.
 
Memphis
 
TN
 
Hnedak Bobo Group, Inc.
  37,229  
10/31/2016
  100 %
3965 Airways Blvd.
 
Memphis
 
TN
 
Federal Express Corporation
  521,286  
6/19/2019
  100 %
350 Pine St.
 
Beaumont
 
TX
 
Multi-tenanted
  425,198  
Various
  82 %
4001 International Pkwy
 
Carrollton
 
TX
 
Motel 6 Operating, LP (Accor S.A.)
  138,443  
7/31/2015
  100 %
4201 Marsh Ln
 
Carrollton
 
TX
 
Carlson Restaurants Worldwide, Inc. (Carlson Companies, Inc.)
  130,000  
11/30/2018
  100 %
6301 Gaston Ave
 
Dallas
 
TX
 
Multi-tenanted
  173,855  
Various
  63 %
11511 Luna Rd
 
Farmers Branch
 
TX
 
Haggar Clothing Company (Texas Holding Clothing Corporation & Haggar Corporation)
  180,507  
4/30/2016
  100 %
10001 Richmond Ave
 
Houston
 
TX
 
Baker Hughes, Inc.
  554,385  
9/27/2015
  100 %
1311 Broadfield Blvd.
 
Houston
 
TX
 
Transocean Offshore Deepwater Drilling, Inc. (Transocean Sedco Forex, Inc.)
  155,040  
3/31/2021
  100 %
 
 
21

 


LEXINGTON CONSOLIDATED PORTFOLIO
PROPERTY CHART
OFFICE
 
Property Location
 
City
 
State
 
Primary Tenant (Guarantor)
 
Net
Rentable
Square
Feet
 
Current
Lease
Term
Expiration
 
Percent
Leased
16676 Northchase Dr.
 
Houston
 
TX
 
Anadarko Petroleum Corporation
  101,111  
7/31/2014
  100 %
810 & 820 Gears Rd
 
Houston
 
TX
 
IKON Office Solutions, Inc.
  157,790  
1/31/2013
  100 %
6555 Sierra Dr.
 
Irving
 
TX
 
TXU Energy Retail Company, LLC (Texas Competitive Electric Holdings Company, LLC)
  247,254  
3/31/2023
  100 %
8900 Freeport Pkwy
 
Irving
 
TX
 
Nissan Motor Acceptance Corporation (Nissan North America, Inc.)
  268,445  
3/31/2013
  100 %
6200 Northwest Pkwy
 
San Antonio
 
TX
 
United HealthCare Services, Inc.
  142,500  
11/30/2017
  100 %
12645 W. Airport Rd
 
Sugar Land
 
TX
 
Baker Hughes, Inc.
  165,836  
9/27/2015
  100 %
2050 Roanoke Rd
 
Westlake
 
TX
 
Chrysler Financial Services Americas, LLC
  130,290  
12/31/2011
  100 %
295 Chipeta Way
 
Salt Lake City
 
UT
 
University of Utah
  295,000  
9/15/2018
  100 %
100 E. Shore Dr.
 
Glen Allen
 
VA
 
Multi-tenanted
  67,508  
Various
  95 %
120 E. Shore Dr.
 
Glen Allen
 
VA
 
Capital One Services, LLC
  77,045  
3/31/2012
  100 %
130 E. Shore Dr.
 
Glen Allen
 
VA
 
Multi-tenanted
  79,675  
Various
  100 %
400 Butler Farm Rd
 
Hampton
 
VA
 
Nextel Communications of the Mid-Atlantic, Inc. (Nextel Finance Company)
  100,632  
12/31/2014
  100 %
421 Butler Farm Rd
 
Hampton
 
VA
 
Nextel Communications of the Mid-Atlantic, Inc. (Nextel Finance Company)
  56,515  
1/14/2010
  100 %
13651 McLearen Rd
 
Herndon
 
VA
 
US Government
  159,664  
5/30/2018
  100 %
13775 McLearen Rd
 
Herndon
 
VA
 
Equant, Inc. (Equant N.V.)
  125,293  
4/30/2015
  100 %
2800 Waterford Lake Dr.
 
Richmond
 
VA
 
Alstom Power, Inc.
  99,057  
10/31/2014
  100 %
22011 S.E. 51st St.
 
Issaquah
 
WA
 
OSI Systems, Inc. (Instrumentarium Corporation)
  95,600  
12/14/2014
  100 %
5150 220th Ave
 
Issaquah
 
WA
 
OSI Systems, Inc. (Instrumentarium Corporation)
  106,944  
12/14/2014
  100 %
           
Office Total
  16,364,876          
 
 
22

 

LEXINGTON CONSOLIDATED PORTFOLIO
PROPERTY CHART
INDUSTRIAL
 
 
Property Location
 
 
City
 
 
State
 
 
Primary Tenant (Guarantor)
 
Net
Rentable
Square
Feet
 
Current
Lease
Term
Expiration
 
Percent
Leased
2415 U.S. Hwy 78 E.
 
Moody
 
AL
 
CEVA Logistics U.S., Inc. (TNT Holdings B.V.)
  595,346  
1/2/2014
  100 %
1665 Hughes Way
 
Long Beach
 
CA
 
Vacant
  200,541  
None
  0 %
2455 Premier Dr.
 
Orlando
 
FL
 
Walgreen Company
  205,016  
3/31/2011
  100 %
3102 Queen Palm Dr.
 
Tampa
 
FL
 
Time Customer Service, Inc. (Time, Inc.)
  229,605  
6/30/2020
  100 %
1420 Greenwood Rd
 
McDonough
 
GA
 
Versacold USA, Inc.
  296,972  
10/31/2017
  100 %
7500 Chavenelle Rd
 
Dubuque
 
IA
 
The McGraw-Hill Companies, Inc.
  330,988  
6/30/2017
  100 %
3686 S. Central Ave
 
Rockford
 
IL
 
Jacobson Warehouse Company, Inc. (Jacobson Distribution Company, Inc. and Jacobson Transportation Company, Inc.)
  90,000  
12/31/2014
  100 %
749 Southrock Dr.
 
Rockford
 
IL
 
Jacobson Warehouse Company, Inc. (Jacobson Distribution Company, Inc. and Jacobson Transportation Company, Inc.)
  150,000  
12/31/2015
  100 %
10000 Business Blvd.
 
Dry Ridge
 
KY
 
Dana Light Axle Products, LLC (Dana Holding Corporation and Dana Limited)
  336,350  
6/30/2025
  100 %
730 N. Black Branch Rd
 
Elizabethtown
 
KY
 
Dana Structural Products, LLC (Dana Holding Corporation and Dana Limited)
  167,770  
6/30/2025
  100 %
750 N. Black Branch Rd
 
Elizabethtown
 
KY
 
Dana Structural Products, LLC (Dana Holding Corporation and Dana Limited)
  539,592  
6/30/2025
  100 %
301 Bill Bryan Rd
 
Hopkinsville
 
KY
 
Dana Structural Products, LLC (Dana Holding Corporation and Dana Limited)
  424,904  
6/30/2025
  100 %
1901 Ragu Dr.
 
Owensboro
 
KY
 
Unilever Supply Chain, Inc. (Unilever United States, Inc.)
  443,380  
12/19/2020
  100 %
4010 Airpark Dr.
 
Owensboro
 
KY
 
Dana Structural Products, LLC (Dana Holding Corporation and Dana Limited)
  211,598  
6/30/2025
  100 %
5001 Greenwood Rd
 
Shreveport
 
LA
 
Libbey Glass, Inc. (Libbey, Inc.)
  646,000  
10/31/2026
  100 %
113 Wells St.
 
North Berwick
 
ME
 
United Technologies Corporation
  972,625  
4/30/2019
  100 %
1601 Pratt Ave
 
Marshall
 
MI
 
Joseph Campbell Company
  58,300  
3/31/2010
  100 %
43955 Plymouth Oaks Blvd.
 
Plymouth
 
MI
 
Tower Automotive Operations USA I, LLC (Tower Automotive Holdings I, LLC)
  290,133  
10/31/2012
  100 %
7111 Crabb Rd
 
Temperance
 
MI
 
CEVA Logistics U.S., Inc. (TNT Holdings B.V.)
  744,570  
8/4/2012
  100 %
7670 Hacks Cross Rd
 
Olive Branch
 
MS
 
MAHLE Clevite, Inc. (MAHLE Industries, Inc.)
  268,104  
2/28/2016
  100 %
1133 Poplar Creek Rd
 
Henderson
 
NC
 
Staples, Inc.
  196,946  
1/31/2014
  100 %
250 Swathmore Ave
 
High Point
 
NC
 
Steelcase, Inc.
  244,851  
9/30/2017
  100 %
2880 Kenny Biggs Rd
 
Lumberton
 
NC
 
Quickie Manufacturing Corporation
  423,280  
11/30/2021
  100 %
2203 Sherrill Dr.
 
Statesville
 
NC
 
LA-Z-Boy Greensboro, Inc. (LA-Z-Boy, Inc.)
  639,600  
4/30/2010
  100 %
121 Technology Dr.
 
Durham
 
NH
 
Heidelberg Web Systems, Inc.
  500,500  
3/30/2021
  100 %
1109 Commerce Blvd.
 
Swedesboro
 
NJ
 
Vacant
  262,644  
None
  0 %
75 N. St.
 
Saugerties
 
NY
 
Rotron, Inc. (EG&G)
  52,000  
12/31/2014
  100 %
10590 Hamilton Ave
 
Cincinnati
 
OH
 
The Hillman Group, Inc.
  248,200  
8/31/2016
  100 %
1650 - 1654 Williams Rd
 
Columbus
 
OH
 
ODW Logistics, Inc.
  772,450  
6/30/2018
  100 %
7005 Cochran Rd
 
Glenwillow
 
OH
 
Royal Appliance Manufacturing Company
  458,000  
7/31/2025
  100 %

 
23

 


LEXINGTON CONSOLIDATED PORTFOLIO
PROPERTY CHART
INDUSTRIAL
 
 
Property Location
 
City
 
State
 
Primary Tenant (Guarantor)
 
Net
Rentable
Square
Feet
 
Current
Lease
Term
Expiration
 
Percent
Leased
191 Arrowhead Dr.
 
Hebron
 
OH
 
Owens Corning Insulating Systems, LLC
  250,410  
Month to Month
  41 %
200 Arrowhead Dr.
 
Hebron
 
OH
 
Owens Corning Insulating Systems, LLC
  400,522  
5/31/2010
  100 %
10345 Philipp Pkwy
 
Streetsboro
 
OH
 
L'Oreal USA S/D, Inc. (L’Oreal USA, Inc.)
  649,250  
10/17/2019
  100 %
250 Rittenhouse Circle
 
Bristol
 
PA
 
Vacant
  255,019  
None
  0 %
245 Salem Church Rd
 
Mechanicsburg
 
PA
 
Exel Logistics, Inc. (NFC plc)
  252,000  
12/31/2012
  100 %
34 E. Main St.
 
New Kingston
 
PA
 
Vacant
  179,200  
None
  0 %
6 Doughten Rd
 
New Kingston
 
PA
 
Vacant
  330,000  
None
  0 %
224 Harbor Freight Rd
 
Dillon
 
SC
 
Harbor Freight Tools USA, Inc. (Central Purchasing, Inc.)
  1,010,859  
12/31/2021
  100 %
50 Tyger River Dr.
 
Duncan
 
SC
 
Plastic Omnium Exteriors, LLC
  221,833  
9/30/2018
  100 %
101 Michelin Dr.
 
Laurens
 
SC
 
CEVA Logistics U.S., Inc. (TNT Holdings B.V.)
  1,164,000  
8/4/2012
  100 %
6050 Dana Way
 
Antioch
 
TN
 
W.M. Wright Company
  674,528  
3/31/2021
  52 %
477 Distribution Pkwy
 
Collierville
 
TN
 
Federal Express Corporation
  120,000  
5/31/2021
  100 %
900 Industrial Blvd.
 
Crossville
 
TN
 
Dana Commercial Vehicle Products, LLC
  222,200  
9/30/2016
  100 %
3350 Miac Cove Rd
 
Memphis
 
TN
 
Mimeo.com, Inc.
  141,359  
9/30/2020
  84 %
3456 Meyers Ave
 
Memphis
 
TN
 
Sears, Roebuck & Company
  780,000  
2/28/2017
  100 %
3820 Micro Dr.
 
Millington
 
TN
 
Ingram Micro, LP (Ingram Micro, Inc.)
  701,819  
9/25/2011
  100 %
19500 Bulverde Rd
 
San Antonio
 
TX
 
Harcourt, Inc. (Harcourt General, Inc.)
  559,258  
3/31/2016
  100 %
2425 Hwy 77 N.
 
Waxahachie
 
TX
 
James Hardie Building Products, Inc. (James Hardie N.V.)
  335,610  
3/31/2020
  100 %
291 Park Center Dr.
 
Winchester
 
VA
 
Kraft Foods North America, Inc.
  344,700  
5/31/2011
  100 %
           
Industrial Total
  19,592,832          


 
24

 

LEXINGTON CONSOLIDATED PORTFOLIO
PROPERTY CHART
RETAIL/OTHER
 
 
Property Location
 
 
City