Operator

Ladies and gentlemen, thank you for standing by and welcome to the Lexington Corporate Properties Trust and Newkirk Realty Trust merger conference call. At this time all participants are in a listen-only mode. Following today's presentation instructions will be given for the question and answer session. If anyone needs operator assistance at any time during the conference, please press the star followed by the zero. As a reminder, this conference is being recorded today, Monday, July 24, 2006.

C. Casaburri

Good morning, and welcome to Lexington Corporate Properties' Trust and Newkirk Realty Trust's merger announcement conference call. At this time management would like me to inform you that certain statements made during this conference call which are not historical may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Although we believe that the expectations reflected in any forward-looking statements are based on reasonable assumptions, we can give no assurance that its expectations will be attained. Factors and risks that could cause actual results to differ materially from those expressed or implied by forward-looking statements are detailed in yesterday's press release and from time to time in our filings with the SEC. Lexington and Newkirk do not undertake any duty to update any forward-looking statements.

W. Eglin

Thanks, Chris, and welcome everyone. Thanks for joining our call this morning. Yesterday, Lexington and Newkirk announce an agreement to merge that will create what we believe will be the dominant single tenant oriented real estate investment trust. Most importantly, we believe that the company we are creating with Newkirk will be the most attractive company for investors in the net lease sector due to the following characteristics.

R. Roskind

Thanks, Will. I think that Will has touched upon the most important attributes of the merger but in short this transaction provides answers to our most important fundamental question here at Lexington which is how do we make Lexington into a better company.

M. Ashner

Thank you, Robert. The merger is very exciting for our shareholders and for our unit holders. We believe the combined company with its richly diversified asset base and improved financial metrics will provide our shareholders with a platform for long term sustained growth. I also believe that both management teams' complementary skillsets with respect to standard and opportunistic investing should create enhanced returns for the combined company over both the short term and the long term.

W. Eglin

Thanks, Michael. Actually my remarks about the transaction begin with slide #5 on the Powerpoint presentation. If you look at slide 5, the first point would be that the slide contains a fairly straightforward overview of what the transaction accomplished.

Operator

Thank you. sir. Ladies and gentlemen, at this time we will begin the question and answer session. If you have a question, please press the star followed by the one on your pushbutton phone. If you'd like to decline from the polling process, please press star followed by the two. You will hear a three toned prompt acknowledging your selection. Your questions will be polled in the order they are received. If you are using speaker equipment you may need to lift the handset before pressing the numbers. One moment for our first question.

T. Paolone

I don't know the Newkirk portfolio very well. Can you spend just a couple minutes and talk about the lease expirations, the potential roll downs and exactly where the risk of I guess cash flow declines over the next few years comes from?

W. Eglin

Sure. Overall the transaction will shorten the weighted average lease term of our portfolio from about 7.5 years to 6 years. You're correct that the Newkirk portfolio does have a shorter lease expiration profile. One of the things that we've been impressed with since the IPO is that they've taken a real proactive approach toward extending some of those leases in advance and I think what you'll see going forward is a lot of those short leases will end up getting extended during the next several years before expiration. The track record of maintaining high occupancy has been very good. But of course the terms of those renewals have been taken into account in all of our cash flow modeling for the company.

T. Paolone

So if I understand it, it sounds like roll down risk is more in terms of above market rents, coming down to market and you'd think less of occupancy dipping? Is that how to think about it?

M. Ashner

I think that's a good characterization.

R. Roskind

This is Robert Roskind. One other point is if you study the Newkirk portfolio you'll see it's not just coming down to market, over market rents but in many instances, in fact in most instances it's rents which will be substantial under market during the renewal period, giving added strength to the lease renewals, the certainty of lease renewals.

M. Ashner

In that regard it should be noted that (this is Michael Ashner) that Newkirk has enjoyed a renewal rate in excess of 80%.

T. Paolone

So then if I look out say 3 years or so because it sounds like that's the big period of time for the amortization of the above market rents, any sense as to where LXP ends up versus sort of the trajectory you're on now in terms of your earnings?

W. Eglin

We believe that our earnings per share will be higher than they otherwise would have been if you look 4 to 5 years out.

T. Paolone

What's G&A expected to be in 2007?

W. Eglin

We're looking at putting both companies together. If you recall, Newkirk is presently advised with a management fee of about $4.8 million so we're forecasting a G&A budget for 2007 which is basically us for 2006 plus that so about $26.5 million in '07.

T. Paolone

Okay. Is there a break up fee?

W. Eglin

There is a break up fee both ways of $25 million and that will be detailed in the merger agreement that will be filed later today.

T. Paolone

Okay, thanks.

Operator

Our next question comes from Art Havener with AG Edwards. Please go ahead with your question.

A. Havener

Okay, thank you. I as well am not too familiar with the Newkirk portfolio. Can you quantify the above market amortization you expect to take?

W. Eglin

Sure. Based upon our estimates today the above market lease in 2007 offset by a potential below market lease which is the net effect of about $38.6 million.

A. Havener

Do you have a proforma diluted shares outstanding for '07?

W. Eglin

Sure. Based upon the exchange ratio of 0.8 it's about $115 million. Art, that includes the preferred, Series C preferred, convertible preferred that we have.

A. Havener

Okay, thank you. Is this considered a change of control and will there be severance charges in the fourth quarter?

W. Eglin

It is considered a change of control and Lexington management is waiving any rights that it has to receive any payments under its contract.

A. Havener

What about the other side?

R. Roskind [?]

It does constitute a termination of the advisory agreement. The advisor will be paid $12.5 million on termination. In addition, however, with respect to the lock up of my shares which have remaining life of approximately 4 years, that lock up will stay in effect.

A. Havener

Will, can you give us a little bit of color on the special dividend? I think it's 17 cents.

W. Eglin

Yeah, but that was just part of the negotiation, Art, in connection with determining the exchange ratio. That was just something we negotiated out with Newkirk in connection with the merger.

A. Havener

One more question. On the Newkirk side, can you give us an idea of how you arrived at the exchange rate because I believe it was below the stock price where it closed Friday?

W. Eglin

Through extensive negotiation.

A. Havener

Okay. Thank you.

Operator

Our next question comes from James Feldman with UBS. Please go ahead with your question.

J. Feldman

Thank you, just a quick follow up. Anyone that's locked up under the Newkirk IPO, I assume that those shares are no longer locked up. Is that the right way to think about it?

M. Ashner

No, that's not the right way to think of it. This is Michael Ashner. My shares are locked up for about three and a half years. They will remain locked up. By the time the merger were to occur, the Vornado and Apollo lock ups would have gone away in any event. So those lock ups will go away. In addition, Winthrop has a lock up of two years of which one year would be remaining and that lock up goes away so the lock up, the only lock up that remains is my lock up on my shares.

J. Feldman

Okay, thank you very much.

Operator

Our next question comes from Ken Avalos with Raymond James. Please go ahead with your question.

K. Avalos

Hey, Will, good morning. Could you spend a few minutes just talking about the pipeline, your targets for '07 and where you might deploy some of those proceeds either for the core or the JV programs?

W. Eglin

Overall I think we're looking at 2007 investment volume of about $500 million. Hard to say exactly what the breakdown would be between potential debt investments and equity of joint venture investments. But with the pipeline that we've got I think that looks like a comfortable number.

K. Avalos

So how's the pipeline changed versus yesterday? Can you help us quantify that?

W. Eglin

I think what we're starting to see, for example in the assets that we're looking at in Lexington Strategic is a little bit less cap rate pressure than we've seen earlier in the year. The cap rate pressure on investment grade lease buildings in the larger markets remains very tight but we're seeing some softening there which I think bodes well for growth in the Lexington Strategic area.

K. Avalos

Thanks.

Operator

Our next question comes from Andika Goel with Citigroup. Please go ahead with your question.

A. Goel

Hi. How will the $12.5 million termination payout be split between the different Newkirk advisors?

M. Ashner

$5.5 million will go Winthrop Realty Trust for a percent of management fee, the balance goes to the Newkirk Advisor. Of that amount 20% is shared, of the total amount approximately 20% is shared with Vornado Realty Trust.

A. Goel

So you're saying 20% of the $12 million?

M. Ashner

Yes, roughly that.

J. Lidham

It's John Lidham [sp] here as well. I missed some of the call. My recollection is Newkirk has this big rent roll down which is going to happen when all the cap ex is amortized. When does that start hitting?

M. Ashner

It has been occurring for some time now.

J. Lidham

They think it's going to be a step function, right, when the rent drops down?

L. Johnson

This is Laura Johnson from Newkirk talking. Our primary term rent for many of the leases that haven't yet rolled in many cases are significantly above the contractual renewal option rents and in many cases significantly above market. We have a weighted average lease term of approximately 4.2 years remaining but we do have a very strong renewal history as Michael indicated.

J. Lidham

Yeah, but you're still going to lose the cap ex that's being amortization right? It's going to be ... you're going to have that roll down.

L. Johnson

There will be step down in rent to either the contractual rent or market rates.

J. Lidham

And the difference between your FFO forecast for '07 to $1.75, your AFFO forecast of $2.10 at the low end, does that capture the extent of the charge related to the roll down?

M. Ashner

Yeah, most of that difference relates to the amortization of above and/or below market leases.

J. Lidham

And did that number change because you're using purchase accounting until the lease start date got reset?

M. Ashner

That's correct.

J. Lidham

And so that's the 40 cents or so?

M. Ashner

That's correct.

J. Lidham

Now if we rolled forward and nothing else changed, where would the FFO be in '09 or '10.

W. Eglin

We've run a lot of business plan models and we think based on executing our game plan for the combined company we'll be ahead of where we otherwise would have been.

J. Lidham

No, but just the status quo, I mean nothing changes, you just pick up your rent or the rent rolls down. It'll be something less than $1.75, is that right?

W. Eglin

Yeah, but I think the ... we're really not looking at it as a situation where nothing's going to change. A lot's going to change. And we're going to do a lot of great things with this company.

J. Lidham

I guess one of the plans for Newkirk when you took it public was you were going to grow your way out of these roll downs and this certainly achieves a big slug of that. Is that the expectation that you'll continue to acquire stuff which will minimize the impact of these roll downs as time goes on?

W. Eglin

We're definitely going to continue to try to grow our business and we're hopeful that there will be numerous favorable acquisition opportunities for us. That's correct.

J. Lidham

Okay, thank you.

Operator

Our next question comes from Steve Tabb with Tocqueville Asset Management. Please go ahead with your question.

S. Tabb

Hi. Lexington has had a policy of buying most properties and having nonrecourse mortgage notes against them for the financing. What will the policy be in the future? I notice that Newkirk doesn't have too much in the way of mortgage notes.

R. Roskind

Steve, this is Robert. Newkirk in terms of its acquisitions since going public has followed the same policy as Lexington in terms of putting secured debt, non-recourse debt on their new acquisitions.

M. Ashner

This is Michael Ashner. Our financing on single tenant assets has been consistent with Lexington's history.

S. Tabb

Well you have a big note hanging above it. Didn't you used to ... that's a general note of the company, isn't it?

M. Ashner

Yes, it is, but on our ... since we've gone public with the IPO, on all of our new acquisitions our financings have been individually financed.

S. Tabb

I see, so you expect the new company to use primarily more, bigger notes that are unsecured or non-recourse. Is that correct?

M. Ashner

Primarily.

S. Tabb

Primarily? And what happens to ... what are the terms of your large mortgage note that you ... I mean general note payable? Is that going to be amortized or is that going to remain on the books as a flat amount or increased or what?

L. Johnson

This is Laura Johnson speaking again, Steve. The key bank, Bank of America facility currently bears interest at 175 basis points over LIBOR. We do have hedge agreements in place with regard to that. The required

S. Tabb

Um-hmm. Now changing a little, I think, Will, you said that Newkirk was going to add cash available for investment and I don't see where it's coming from.

W. Eglin

Newkirk presently has substantial cash on its balance sheet.

S. Tabb

Well I have the March. Has it changed quite a bit since March?

L. Johnson

At March 31 we had $131 million plus $14 million in restricted cash. When you aggregate that with the cash on Lexington's balance sheet which was approximately $61 million at March 31, that brings you to the roughly $200 million balance.

S. Tabb

I see.

L. Johnson

We have also since March 31 recently announced the disposition of our Albertson's portfolio, 50 stores, that was $160 million transaction. That has augmented the cash on our March 31 balance sheet and that's been offset by additional acquisitions that we've made in the second quarter that have been announced.

S. Tabb

Another different area. You say that 56% of the portfolio will be investment grade. Can you give us any type of breakdown of what the other 44% will be? Will they be public companies at lower grades, will they be private companies, etc.?

W. Eglin

The balance is primarily public companies. Steve, if you're familiar with the Lexington portfolio, you'll know that 97% or 98% of our tenants are public. I think you'll see roughly the same. We would end up having unrated credit tenants representing about 27% of revenue and sub-investment grade at about 17.2%.

S. Tabb

What was the 27% again?

W. Eglin

Non-rated.

S. Tabb

Unrated?

W. Eglin

Many of those are very good companies that just don't have debt and then don't have ratings.

S. Tabb

I see. Well thank you very much.

W. Eglin

Thank you.

Operator

Our next question comes from Ross Nussbaum with Banc of America Securities. Please go ahead with your question.

R. Nussbaum

Hi. A couple questions. First, for Michael. Just curious. What was the series of events that led you to consider selling the company less than a year after going public? Was it anything related to ability to get acquisitions done, didn't like being public on your own? I mean what sort of contributed to the decision?

M. Ashner

We haven't sold the company. We are merging this company with and into Lexington so we don't see it, nor do our shareholders see it, our Board members see it as a sale. We do see it as a merger. The question is why would I want to recommend to our Board a merger of our company with another company, it's for the reasons that have been articulated today. I believe this industry requires a more commanding platform. This company will be the dominant platform and it'll be able to take advantage of many of the synergies that we as an independent company couldn't.

R. Nussbaum

Was this transaction contemplated before you had gone public?

M. Ashner

No.

R. Nussbaum

Okay and then a question for Wilson. Your AFFO guidance in 2007, if we exclude Newkirk, what would the guidance have been? I'm trying to get a sense of what your estimate of the accretion from the transaction is.

W. Eglin

We would have been $1.95 to $2.05 probably. In that range.

R. Nussbaum

Okay. Thank you.

Operator

Our next question comes from Phillip Martin with Cantor Fitzgerald. Please go ahead with your question.

P. Martin

Good morning, everybody. A question quickly on the ... back to the cap ex. Can you quantify the ... what cap ex do you estimate being required on the Newkirk portfolio going forward and can you quantify historically the cap ex that has already occurred and that's rolling through and amortizing over? Can you just quantify that so we understand it a bit better?

W. Eglin

These are all primarily bond type net leases that really require no capital expenditures by ...

P. Martin

... I know by the company but just at the property level. Just to get a sense of what condition this portfolio is in.

M. Ashner

I think the terms of our leases, the tenant is (this is Michael Ashner) the tenant's required to return the property to us in a good condition, reasonable wear and tear. So we get these properties back in an almost entirely leasable situation so it's not clear to me exactly what your question is about.

P. Martin

Okay. I just wanted to get a sense of ... I understand the triple net lease and all of that. I just ... at the property level ... I'm pretty familiar what condition the properties are in at Lexington. I just don't know the Newkirk portfolio as well.

M. Ashner

The properties are generally in excellent condition if that's your question.

P. Martin

Okay. How about in terms of Newkirk's tenant base, is there any way to quantify what the average investment is at the property level by the tenant? I know that's something you, Will, have talked a little bit about in the past with your portfolio. Any guidance there on the Newkirk portfolio?

L. Johnson

As we've disclosed (this is Laura Johnson speaking again), as we've disclosed historically in our 10-K, I can quantify it for you in terms of the portion of our revenues that are derived from tenants. Our major tenants in terms of revenue distribution are Raytheon, Legg Mason in our building in Baltimore, Federal Express is a large tenant, Nevada Tower, Entergy, Honeywell, Hibernia Bank.

P. Martin

Okay. Potential Newkirk assets that could go into Lexington Strategic, are there any identified properties there?

W. Eglin

None contemplated.

P. Martin

Okay so nothing contemplated there. Okay, thank you.

Operator

Our next question comes from Stephanie Krewson with BB&G. Please go ahead with your question.

S. Krewson

Hi. Three quick questions. One is what's the anticipated timing of the special dividend?

M. Ashner

Contemporaneous with the closing.

S. Krewson

Okay and I also am not familiar with Newkirk's portfolio so the next 2 questions revolve around that. I read things pretty quickly so I hope this isn't in the IPO prospectus or something but I'm not quite clear what Newkirk's limited partnerships were, the ones that have $82 million of mortgage debt associated with them. Could you clarify that and what Newkirk's ownership is? What I'm trying to do is look at real estate NAV on a proforma basis.

L. Johnson

Are you speaking just about the partnerships that have assets that are encumbered by mortgage debt?

S. Krewson

It's what in your first quarter 10-Q. It just says limited partnerships and I find no description of them other than the limited partnerships in your IPO prospectus and in the 10-K and I know that you have 50% ownership in your joint venture, for example, but it's not clear what your ownership is in these limited partnerships.

L. Johnson

Our ownership varies among the partnerships. Many of them that aren't wholly owned are now consolidated but there are a handful that aren't consolidated. Among the assets, among the tenants are Arkansas Power and Light, Thedopsis [?] Hotel in Dallas, the two buildings leased to Hibernia Bank in New Orleans, buildings leased to Ragu and Unilever in Clinton, Connecticut and Owensboro, Kentucky. And then we own, these are both consolidated but our Raytheon buildings in Long Beach, California and El Segundo, California are not wholly owned assets either but they are consolidated.

S. Krewson

So your weighted average ownership, it's just not knowable. Okay. So from a real estate NAV perspective, there's only one estimate out on the Street and I believe it's $18 a share and I am not able to get to that number at all. Could you please give some comment on what you think Newkirk's real estate NAV is?

M. Ashner

We don't comment on that. That's an analyst's determination of what he believes the net asset value is and we don't comment on that.

S. Krewson

Okay, thank you.

Operator

Our next question comes from Geoffrey Dancey with Cutler Capital Management. Please go ahead with your question.

G. Dancey

Hi, I have 2 questions. First, I was wondering how this is going to affect the conversion ratio on Series C converts.

W. Eglin

As a result of the 17 cents, the conversion ratio will go down slightly.

G. Dancey

Have you calculated that yet?

W. Eglin

We have not calculated that exactly.

G. Dancey

Okay. And my second question is I guess for a while now you've been saying the Alex Pecom [sp] stock is under-valued and I was wondering what

W. Eglin

I think if you look at where both companies are trading, they're trading sort of proportionally at slightly less than net asset value so I think if you go through and look at the transaction, ultimately NAV is probably unchanged on a per share basis. The real question in our minds is can we combine and create more shareholder value and get this company combined to trade at a premium as we have in the past and I think that that's the gameplan.

G. Dancey

Okay. Sorry, but just going back to the first question on the conversion ratio. Did you say it would go down slightly?

W. Eglin

As a result of an increase in dividends to the common holders. That means that the preferred shareholders would get more common shares in the event of conversion.

G. Dancey

Alright, so the ratio goes up, the conversion price goes down?

W. Eglin/M. Ashner

That's right. Correct.

W. Eglin

It's very small, but it is.

G. Dancey

Okay, so that will go over that 1% threshold that you needed to actually change the ratio?

W. Eglin

Yeah, because of the dividend it exceeds the dividend thresholds set in the terms of the preferred. But it's pretty minimum.

G. Dancey

Okay. Thank you.

Operator

Our next question comes from Michael McGowan with Kensington Investment Group. Please go ahead with your question.

M. McGowan

Thanks. Good morning. What will management's insider ownership be on a proforma basis?

M. Ashner

We'll have to calculate that. I can't speak for Lexington. I can speak for ...

W. Eglin

... we're at about 7% today.

M. Ashner

Well Apollo's not management. Vornado will be how much, Laura? Vornado will be 7.4% and myself and my affiliates including Winthrop will be at what? 4.6%.

M. McGowan

Okay. Thanks very much.

Operator

Our next question comes from Benjamin Prince, a private investor.

B. Prince

Yes. My question is about how is this, the people who own Newkirk Master Limited Partnership were supposed to be able to convert into Newkirk Realty Trust. How will that be done? Thank you.

M. Ashner

They'll be able to convert into Lexington Realty Trust at effectively the same exchange ratio that Newkirk Realty shareholders will be converting into Lexington Realty Trust. In a sense it will be unaffected.

Operator

Our next question is a follow up question from Andika Goel with Citigroup. Please go ahead with your question.

M. Bielerman

It's actually Michael Bielerman [sp]. I just wanted to get back to this rent roll down. I guess you have annualized rents of about $240 million and at the time of the IPO your contractual rents were about $140 million. Is that the effect of you have $100 million in rent roll down effectively embedded in the portfolio?

L. Johnson

It depends on whether the rents roll down ultimately to the contractual renewal rent or to market rents or some blend thereof. But the change in the lease part, there's been no substantial change in the lease profile since the IPO other than several extensions of leases that have been previously disclosed.

M. Bielerman

Where do you think the mark to market is today relative to your annualized revenues?

M. Ashner

I'm sorry.

M. Bielerman

Where do you think the mark to market is on your annualized revenue base today?

L. Johnson

Based on the market rent schedules that we've disclosed previously, the weighted average market rent for the portfolio is just under $9 and for 2006, and I'm speaking in terms of our share of the rent. And in terms of our current rent for 2006, our weighted average annual rent is approximately, it's a little bit less than $14 a square foot.

M. Bielerman

And how much square footage do you have today?

L. Johnson

On a consolidated basis exclusive of the Albertson's portfolio about 16.8 million.

M. Bielerman

So you're thinking about $100 million of rent roll down?

L. Johnson

It hasn't changed substantially since the IPO.

M. Bielerman

And then how does that compare to the $150 million liability account or the asset account for the above market leases?

M. Ashner

That's an accounting mechanism in accordance with FAS-141 in purchased accounting. It takes into consideration the current market rents and an estimate of renewal rents going forward in both above and below market. They pretty much offset each other. The issue though is from an accounting standpoint the above markets need to be amortized against revenue directly over the contractual lease term which is a much shorter period than the below markets which get over the contractual lease term in any bargain renews. So they kind of offset each other but it's just the timing of the amortization.

M. Bielerman

So is the below market leases, is that mostly relating to the Lexington portfolio, the $150?

W. Eglin

No, everything in this analysis is just on the Newkirk. Lexington doesn't get affected.

M. Bielerman

And so effectively the ... your $100 million rent roll down is a blend of your roll up and a roll down? Is that the way to look at it because shouldn't $150 be the $100?

M. Ashner

No, from an accounting standpoint $150 gets netted, well that doesn't get netted against each other. You have an asset and a liability but it's just at the same amortization period. You'd really have no impact on [inaudible] or have no impact on cash.

M. Bielerman

Right. What I'm trying to understand is if you have $100 million rent roll down that you just talked about, why do you have $150 million above market leases? Why is there a difference of $50 million bucks?

W. Eglin

The $100 million ... well the $150 million of above market leases is what we estimated when we were ... when Lexington was looking at this transaction, that's what we estimated as the above market leases on the Newkirk portfolio.

M. Bielerman

You're estimating something above what Newkirk management is saying is $100 million?

W. Eglin

That's correct.

M. Bielerman

So you've put an extra $50 million and you effectively will take that upfront to earnings so you should be able to see growth going forward?

R. Roskind [?]

We made an estimation of what we felt was above market leases in accordance with 141.

M. Bielerman

What's the big difference between $150 and $100 million? Is it certain assets, is it certain tenants? What's the difference in management's deal?

W. Eglin

It's a large portfolio and it's across the board. One comment. All of this step down renewal stuff has been taken into account in our FFO guidance to the $1.75 to $1.85.

M. Bielerman

Okay. Thank you.

Operator

Our next question is a follow up question from James Feldman with UBS. Please go ahead with your question.

J. Feldman

I just wanted to clarify that the management or the advisory fee, termination fee, did you say Vornado gets 20% of $7 or 20% of $12.5.

M. Ashner

Approximately 20% or close to $12.5.

J. Feldman

Okay, thank you.

Operator

Our next question is a follow up question from Tony Paolone with JP Morgan. Please go ahead with your question.

T. Paolone

Okay, thanks. Not to belabor this, for me to try to look at this in another way. So you start with $240 million of roughly in-place rents right now, net rents. What share of that is Newkirk's after you take out the minority pieces?

L. Johnson

I don't have the calculation in front of me.

T. Paolone

Okay but then just to understand, like over the next 3 years, you can lose $150 million of that? Am I thinking about that right?

M. Ashner

We believe that the rent roll down would be $100 million, not $150 million but that's in fact true.

T. Paolone

Okay and then you mentioned that the contractual renewals are in some cases lower than market. How does that work?

M. Ashner

That's how it works.

W. Eglin

They were just established ... in many cases these are 25 year leases, Tony, so the renewal terms were just established a long time ago.

T. Paolone

Okay so when calculating this mark to market do you assume that most of the tenants are just going to renew at the renewal option, or whatever the lower of the two may be?

M. Ashner

The answer is if their renewal options are below what market is you have to assume that they exercise at the lower amount.

T. Paolone

And then how much of the portfolio's exposed to underground leases and what are those payments?

L. Johnson

Right now the payments on the ground leases are not significant. There is a significant portion of the Newkirk portfolio, although we've been acquiring ground over time, there is a significant portion of the Newkirk portfolio that is subject to either ground leases or land estate. But it's approximately 65% of the portfolio based on revenue.

T. Paolone

But you said the ground lease payments are diminimus?

L. Johnson

They are diminimus because the tenant is required under the improvement leases to pay the ground lease payments.

T. Paolone

I see. Thank you.

Operator

Our next question is a follow up question from Phillip Martin with Cantor Fitzgerald. Please go ahead with your question.

P. Martin

Yes, just one question on the debt platform that Newkirk brings. Is there any ... when you look at ... when you, Will, look at Lexington's portfolio, are there opportunities there from the debt side to do something with your portfolio in the next 6 to 12 months?

W. Eglin

I think the bigger opportunity is just as we look at all kinds of acquisition opportunities to the extent we are not winning when properties are brought to us. That's just a new opportunity to contact whoever the new buyer is and offer to provide part of the capital stack and the mez piece can be attractive because with where pricing is, that can be a very attractive and safer piece of the deal to invest in. So that's sort of our focus as opposed to looking at the current portfolio.

P. Martin

If you were to quantify over the last year or two, what percentage of the deals that you wanted but lost were because you didn't have the debt side?

W. Eglin

We didn't need the debt side to win any acquisitions from an investment standpoint. It was just more a function of deals being a bit away from where we wanted to invest. Our transaction flow's been more than like $10 billion a year so embedded in that there were probably numerous opportunities in the last year or two to offer to participate in transactions as a debt provider that we were not capitalizing on.

P. Martin

Okay. Thank you.

Operator

Our next question is a follow up question from Art Havener with AG Edwards. Please go ahead with your question.

A. Havener

Thank you. From the Lexington perspective, can you give us an idea of what kind of cap rate, cash cap rate you think you're getting the Newkirk merged into?

W. Eglin

We haven't focused exclusively on cap rate, Art, because of the way the revenue's structured. Obviously it's very high with the rents that are in place. So we've been more focused on looking at what the combined companies can do together from a platform standpoint, what's the balance sheet look like, what does the cash flow look like, what kind of cash flow can we distribute and where can we grow together. Cap rate because of the lease structure wasn't a big consideration that we looked at.

A. Havener

Okay but even so on a cash basis though you don't have a cap rate we can back into just so we have the numbers accurate?

W. Eglin

I wouldn't look at it that way.

A. Havener

Okay from the Newkirk side, did you ... can you talk about ... did you shop your portfolio around?

M. Ashner

No. Once again, I want to reiterate, we didn't ... we're not selling this company, we're merging the companies. It was a ... this transaction was the result of thoughtful conversations between the principals, management of Lexington and ourselves. It was just a unique view that we had that we shared and we moved forward on that view.

A. Havener

Okay I'm still trying to get an idea of why you merged at below the stock price. But was this ... has this been in the works for a while and is that why you sold the Albertson assets prior to announcing this?

M. Ashner

The transaction has been in the works for a while, as has the Albertson's transaction but the two aren't linked together.

A. Havener

Okay, you would have gone forward regardless?

M. Ashner

We would have gone forward with the Albertson's regardless, yes.

A. Havener

And from Will just so I understand from the Lexington Strategic standpoint, I think you mentioned that there are no assets that you've identified from the Newkirk portfolio?

W. Eglin

Correct.

A. Havener

Okay and you're still planning to go forward with the IPO?

W. Eglin

Yes, we are filed and are still proceeding down that path.

A. Havener

Okay, do you feel like you're staffed adequately trying to integrate this merger and the IPO?

W. Eglin

I think that we were staffed fine for the IPO. We will be adding some Newkirk employees and we'll obviously have work to do integrating Newkirk with Lexington but Lexington Strategic we already had a gameplan for and so we're in good shape on that.

A. Havener

Okay, thank you.

Operator

Our next question is from Adrian MacKay with Freestyle Fund. Please go ahead with your question.

A. MacKay

Thank you. Could you explain the existing relationship between Winthrop and Newkirk and what that relationship will be after the transaction is closed?

M. Ashner

The existing relationship between the two companies is composed of a number of elements. First, Winthrop owns 3.675 million shares of Newkirk at this point in time. Is that right? That's the number? Yeah, 3.675 million shares.

A. MacKay

And all those shares will vest?

M. Ashner

All those shares will vest, that's right. Secondly, currently Winthrop is entitled to an incentive management fee with respect to Newkirk's operations on a going forward basis based on, calculated off of growth in FFO. Third, I am the Chairman of Winthrop as well as the Chairman of Newkirk. As between the two companies there is an exclusivity arrangement which bars, effectively bars Winthrop from engaging in any single tenant asset transaction. Post merger, Winthrop will continue to own its shares. I of course will continue to own my shares subject to my lock up. The exclusivity arrangement between Winthrop and Newkirk will be assigned over to

A. MacKay

And Winthrop gets the $5.5 million?

M. Ashner

That's subject to a 20%, 20% which is owed to Vornado.

A. MacKay

Okay, gotcha.

M. Ashner

No, I'm sorry, I'm corrected. Winthrop owns 4.375 million shares of Newkirk.

A. MacKay

And then the joint venture relationship between Winthrop and Newkirk will essentially continue?

M. Ashner

That's right. It'll be actually ... but Newkirk will be replaced obviously with Lexington.

A. MacKay

Right. Okay, thank you. That's helpful.

Operator

Our next question is a follow up from Stephanie Krewson with BB&T. Please go ahead with your question.

S. Krewson

Hey, Will, Will Eglin, with all due respect, I understand that you've told us not to look at this transaction on a cap rate perspective but that really does get back to what I was asking earlier about the real estate NAV for Newkirk because I'm coming up with a number that's quite low. Could you tell us how we should look at it because I really want to understand how you've underwritten this.

W. Eglin

A better way to look at it is to go through all the work and do a discounted cash flow analysis which takes into account the rents that exist, etc. It's just more detailed than applying a direct capitalization approach to it.

S. Krewson

Okay maybe this way then. What do you think you're paying on a price per square foot going in versus on a stabilized basis once you get through the roll downs?

W. Eglin

On a per foot basis I haven't looked at it asset by asset. But obviously the transaction has a certain value and the portfolio has a certain amount of square footage in it. But the real trick is to get into the detail and do a long term cash flow forecast and we'll make sure that we have disclosure for the companies that allows everyone to do that.

S. Krewson

Okay so I shouldn't feel so awful that reading through their publicly available information I was not able to get to a firm number?

W. Eglin

No.

S. Krewson

Can I circle back with Pat or someone offline?

W. Eglin

Absolutely.

S. Krewson

Thank you.

Operator

Our next question comes from Glen Trew with Stone Tower Capital. Please go ahead with your question.

G. Trew

Thanks. Hi, guys. I may have missed this earlier but with regard to on the Newkirk side the existing bank facility, is there any plans to refi or sort of take that out?

M. Ashner

We may well be. We, at Newkirk or Lexington just may be refinancing it but we have no current plans to do so.

G. Trew

Okay, thanks.

Operator

Our next question comes from John Guinee with Stifel Nicolaus. Please go ahead with your question.

J. Guinee

Yeah, hi, this is actually Michael Hudgins calling in on his behalf. I just had one question. With the Newkirk assets that you're taking over, do you plan on holding these all for the next like say 3 to 4 years or is there a plan to kind of reduce those holdings at any given point?

W. Eglin

We would apply the same discipline that we do to our own portfolio. There's a right time to sell any property and I would think that ... Newkirk's been working through its portfolio and selling some properties and I think it'll be business as usual from that standpoint.

M. Hudgins

Alright, thank you.

Operator

Management, at this time there are no further questions.

W. Eglin

Once again we'd like to say thanks very much for participating in the conference call. We look forward to preparing our proxy material and being out later this year. Thanks for your interest in the combined company.