MALVERN, PA-Under a sale/leaseback agreement, New York City-based Lexington Corporate Properties buys the headquarters of IKON Office Solutions for $22.3 million, or $208.69 per sf, and leases it back to IKON under a net lease for 10 years.

The property is a three-story, class A office facility at 70 Valley Stream Parkway. IKON has occupied and controlled it since 1997 through a synthetic lease. Terms of IKON’s conventional lease with Lexington are undisclosed. The average asking rental rate for class A office space in the Exton/Malvern submarket ranges between $23 per sf and $26 per sf, according to brokers who operate in Chester County, PA. Cushman & Wakefield of Pennsylvania represented IKON in the negotiations

According to Richard J. Rouse, vice chairman and CIO of Lexington, this is the first transaction that Lexington has completed converting a synthetic lease to an operating lease. “We hope to do more transactions of this type in the future,” he says.

As synthetic leases, which allow companies to control their real estate without having to show it as an asset on the balance sheet, come under increasing scrutiny in the wave of corporate scandals, area brokers tell they expect to see more unraveling of synthetic leases. “It makes sense for buyers/investors to look for companies, especially public ones, that want to rid themselves of synthetic leases and still maintain some control over their real estate without having to purchase it,” one broker explains.

With the IKON acquisition, Lexington’s total purchases in third-quarter 2003 reached $115.3 million and raised the REIT’s total acquisition volume for the year to $176.4 million.

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