<PAGE> 1
Filed Pursuant to Rule 424(b)(2)
Registration Statement No. 333-35997
PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED OCTOBER 1, 1997
$150,000,000
LOGO SPIEKER PROPERTIES, L.P.
6.75% NOTES DUE JANUARY 15, 2008
Spieker Properties, L.P., a California limited partnership (the "Operating
Partnership"), will issue 6.75% Notes Due January 15, 2008 (the "Notes") offered
hereby in the aggregate principal amount of $150,000,000. Interest on the Notes
is payable on January 15 and July 15 of each year, commencing July 15, 1998. The
Notes mature on January 15, 2008. The Notes may be redeemed at any time at the
option of the Operating Partnership, in whole or in part, at a redemption price
equal to the sum of (i) the principal amount of the Notes being redeemed plus
accrued interest to the redemption date and (ii) the Make-Whole Amount, if any.
See "Description of Notes -- Optional Redemption". The Notes are not subject to
any mandatory sinking fund. The Notes are unsecured obligations of the Operating
Partnership and will rank pari passu with all unsecured and unsubordinated
indebtedness of the Operating Partnership.
The Notes will be represented by a single Global Security registered in the
name of the nominee of The Depository Trust Company ("DTC"). Beneficial
interests in the Global Security will be shown on, and transfers thereof will be
effected only through, records maintained by DTC and its participants. Except as
described in "Description of Notes -- Book-Entry System", Notes in definitive
form will not be issued. The Notes will be issued only in denominations of
$1,000 and integral multiples thereof.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR PROSPECTUS TO WHICH IT
RELATES. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------------
THE ATTORNEY GENERAL OF THE STATE OF NEW YORK HAS NOT PASSED ON OR ENDORSED THE
MERITS OF THIS OFFERING. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
------------------------
<TABLE>
<CAPTION>
PROCEEDS TO
PUBLIC UNDERWRITING OPERATING
OFFERING PRICE(1) DISCOUNT(2) PARTNERSHIP(1)(3)
---------------------------------------------------------------
<S> <C> <C> <C>
Per Debenture..................... 99.71% 0.65% 99.06%
Total............................. $149,565,000 $975,000 $148,590,000
</TABLE>
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(1) Plus accrued interest, if any, from January 27, 1998.
(2) The Operating Partnership and the Company have agreed to indemnify the
several Underwriters against certain liabilities, including liabilities
under the Securities Act of 1933. See "Underwriting".
(3) Before deducting estimated expenses of $50,000 payable by the Operating
Partnership.
------------------------
The Notes are offered severally by the Underwriters, as specified herein,
subject to receipt and acceptance by them and subject to their right to reject
any order in whole or in part. It is expected that the Notes will be ready for
delivery in book-entry form only through the facilities of DTC in New York, New
York on or about January 27, 1998, against payment therefor in immediately
available funds.
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GOLDMAN, SACHS & CO.
MERRILL LYNCH & CO.
J.P. MORGAN & CO.
MORGAN STANLEY DEAN WITTER
------------------------
The date of this Prospectus Supplement is January 22, 1998.
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CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE NOTES, INCLUDING
OVER-ALLOTMENT, STABILIZING AND SHORT-COVERING TRANSACTIONS IN SUCH NOTES, AND
THE IMPOSITION OF A PENALTY BID, IN CONNECTION WITH THE OFFERING. FOR A
DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING".
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THE OFFERING
For a more complete description of the terms of the Notes specified in the
following summary, see "Description of Notes".
SECURITIES OFFERED............ $150,000,000 aggregate principal amount of
Notes.
MATURITY...................... January 15, 2008.
INTEREST PAYMENT DATES........ Interest on the Notes is payable semi-annually
on January 15 and July 15 of each year,
commencing July 15, 1998.
OPTIONAL REDEMPTION........... The Notes may be redeemed at any time at the
option of the Operating Partnership, in whole
or in part, at a redemption price equal to the
sum of (i) the principal amount of the Notes
being redeemed plus accrued interest to the
redemption date and (ii) the Make-Whole Amount,
if any. See "Description of Notes -- Optional
Redemption".
RANKING....................... The Notes are unsecured obligations of the
Operating Partnership and will rank pari passu
with all other unsecured and unsubordinated
indebtedness of the Operating Partnership,
except that the Notes will be effectively
subordinated to the prior claims of each
secured mortgage lender to any specific
Property which secures such lender's mortgage.
USE OF PROCEEDS............... The net proceeds to the Operating Partnership
from the offering of the Notes (the "Offering")
will be used to repay outstanding unsecured
debt. See "Use of Proceeds".
LIMITATIONS ON INCURRENCE
OF DEBT..................... The Indenture with respect to the Notes
contains various covenants, including the
following:
(1) The Operating Partnership will not incur
any Debt, if, after giving effect thereto, the
aggregate principal amount of all outstanding
Debt of the Operating Partnership is greater
than 60% of the sum of (i) Total Assets as of
the end of the Operating Partnership's fiscal
quarter ended immediately prior to the
incurrence of such Debt and (ii) the increase
in Total Assets since the end of such quarter,
including any increase in Total Assets
resulting from the incurrence of such
additional Debt (such increase, together with
the Total Assets, is referred to as "Adjusted
Total Assets").
(2) The Operating Partnership will not incur
any Secured Debt, if, after giving effect
thereto, the aggregate amount of all
outstanding Secured Debt is greater than 40% of
Adjusted Total Assets.
(3) The Operating Partnership will not incur
any Debt if the Consolidated Income Available
for Debt Service for the four consecutive
fiscal quarters most recently ended prior to
the date of the incurrence of such Debt, on a
pro forma basis, would be less than 1.5 times
the Annual Service Charge on all Debt
outstanding immediately after the incurrence of
such additional Debt.
(4) The Operating Partnership will maintain
Total Unencumbered Assets of not less than 165%
of the aggregate outstanding principal amount
of Unsecured Debt.
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USE OF PROCEEDS
The net proceeds to the Operating Partnership from the sale of the Notes
offered hereby are expected to be approximately $148.5 million. The Operating
Partnership will use all of the net proceeds from the Offering to repay
indebtedness then outstanding under the Operating Partnership's unsecured line
of credit.
As of January 22, 1998, the weighted average interest rate on the
short-term indebtedness expected to be repaid with the net proceeds of the
Offering was approximately 6.55%.
DESCRIPTION OF NOTES
The following summary sets forth the material terms and provisions of the
Notes and the Indenture (as hereinafter defined) and is qualified in its
entirety by reference to the terms and provisions of the Notes and the
Indenture, which are incorporated herein by reference. Capitalized terms not
otherwise defined herein shall have the meanings given to them in the Notes and
in the Indenture. The following description of the particular terms of the Notes
offered hereby (which are included in the "Debt Securities" described in the
accompanying Prospectus) supplements, and, to the extent inconsistent therewith,
replaces the description of the general terms and provisions of the Debt
Securities set forth in the Prospectus, to which description reference is hereby
made.
GENERAL
The Notes are to be issued pursuant to an Indenture, dated as of December
6, 1995 as supplemented by the Eleventh Supplemental Indenture, dated as of
January 27, 1998 (as supplemented, the "Indenture"), among the Operating
Partnership, as issuer, Spieker Properties, Inc. (the "Company"), as general
partner of the Operating Partnership, and First Trust of California, National
Association, as Trustee (the "Trustee"). The Notes will be limited to
$150,000,000 in aggregate principal amount. The terms of the Notes include those
provisions contained in the Notes and the Indenture and those made part of the
Indenture by reference to the Trust Indenture Act of 1939, as amended (the
"TIA"). The Notes are subject to all such terms, and holders of Notes are
referred to the Notes and the Indenture and the TIA for a statement thereof.
Copies of the Indenture and the form of the Notes are available for inspection
at the office of the Trustee located at One California Street, Suite 400, San
Francisco, California 94111.
The Notes will be direct, unsecured and unsubordinated obligations of the
Operating Partnership and will rank pari passu with all other unsecured and
unsubordinated indebtedness of the Operating Partnership from time to time
outstanding. However, the Notes will be effectively subordinated to mortgages
and other secured indebtedness of the Operating Partnership. Subject to certain
liabilities set forth in the Notes and the Indenture described below under the
caption "Covenants," the Indenture will permit the Operating Partnership to
incur additional indebtedness and additional secured indebtedness.
The Notes will be issued only in fully registered, book-entry form, in
denominations of $1,000 and integral multiples thereof, except under the limited
circumstances described below under "-- Book-Entry System".
Except as provided under "Description of Debt Securities -- Certain
Covenants -- Existence," "Description of Debt Securities -- Merger,
Consolidation or Sale" and "Description of Debt Securities -- Events of Default,
Notice and Waiver" in the accompanying Prospectus and under "-- Covenants"
below, the Notes and the Indenture do not contain any other provisions that
would afford Holders (as defined below) of the Notes protection in the event of
(i) a highly leveraged or similar transaction involving the Operating
Partnership, the management of the Operating Partnership or the Company, or any
affiliate of either such party, (ii) a change of control or (iii) a
reorganization, restructuring, merger or similar transaction involving the
Operating Partnership that may adversely affect the Holders of the Notes. The
financial covenants of the Operating Partnership described below would continue
to apply, unless waived by Holders of the Notes, in the event of a highly
leveraged or similar transaction involving the Operating Partnership, management
of the Operating Partnership or the Company, or any affiliate of either such
party. See "-- Covenants". In addition, subject to the limitations set forth
under "Description
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of Debt Securities -- Merger, Consolidation or Sale" in the accompanying
Prospectus, the Operating Partnership may, in the future, enter into certain
transactions such as the sale of all or substantially all of its assets or the
merger or consolidation of the Operating Partnership that would increase the
amount of the Operating Partnership's indebtedness or substantially reduce or
eliminate the Operating Partnership's assets, which may have an adverse effect
on the Operating Partnership's ability to service its indebtedness, including
the Notes.
The Operating Partnership has no present intention of engaging in a highly
leveraged or similar transaction involving the Operating Partnership. In
addition, certain restrictions on ownership and transfers of the Company's stock
designed to preserve its status as a REIT may act to prevent or hinder any such
transactions or a change of control.
The Notes are not guaranteed by the Company.
PAYMENT OF PRINCIPAL AND INTEREST ON THE NOTES
Interest on the Notes will accrue at the rate set forth on the cover page
of this Prospectus Supplement from January 27, 1998, or the most recent Interest
Payment Date (as defined below) to which interest has been paid or provided for,
and will be payable in U.S. Dollars semi-annually in arrears on January 15 and
July 15 of each year (each, an "Interest Payment Date"), commencing July 15,
1998. The interest so payable will be paid to the person (the "Holder") in whose
name the applicable Note is registered at the close of business on the date
(whether or not a Business Day, as defined below) fifteen calendar days
preceding the applicable Interest Payment Date (each, a "Regular Record Date").
The principal of each Note payable on the Maturity Date will be paid against
presentation and surrender thereof at the office of the Trustee c/o First Trust
National Association, 180 E. Fifth Street, St. Paul, MN 55101. Interest on the
Notes will be computed on the basis of a 360-day year consisting of twelve
30-day months. See "-- Book-Entry System".
MATURITY
The Notes will mature on January 15, 2008 (the "Maturity Date"). The Notes
may be redeemed at the option of the Operating Partnership at any time. See
"-- Optional Redemption". The Notes will not be entitled to the benefit of any
sinking fund.
COVENANTS
Limitations On Incurrence of Debt. The Operating Partnership will not, and
will not permit any Subsidiary to, incur any Debt (as defined below), other than
inter-company debt representing Debt to which the only parties are the Company,
the Operating Partnership and any of their Subsidiaries (but only so long as
such Debt is held solely by any of the Company, the Operating Partnership and
any Subsidiary) that is subordinate in right of payment to the Notes, if,
immediately after giving effect to the incurrence of such additional Debt, the
aggregate principal amount of all outstanding Debt of the Operating Partnership
and its Subsidiaries on a consolidated basis is greater than 60% of the sum of
(i) Total Assets (as defined below) as of the end of the calendar quarter
covered in the Operating Partnership's Annual Report on Form 10-K or Quarterly
Report on Form 10-Q, as the case may be, most recently filed with the Trustee
(or such reports of the Company if filed by the Operating Partnership with the
Trustee in lieu of filing its own reports) prior to the incurrence of such
additional Debt and (ii) the increase in Total Assets from the end of such
quarter including, without limitation, any increase in Total Assets resulting
from the incurrence of such additional Debt (such increase, together with the
Total Assets, is referred to as "Adjusted Total Assets").
In addition to the foregoing limitation on the incurrence of Debt, the
Operating Partnership will not, and will not permit any Subsidiary to, incur any
Debt if the ratio of Consolidated Income Available for Debt Service to the
Annual Service Charge (in each case as defined below) for the four consecutive
fiscal quarters most recently ended prior to the date on which such additional
Debt is to be incurred shall have been less than 1.5 to 1, on a pro forma basis
after giving effect to the incurrence of such Debt and to the
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application of the proceeds therefrom, and calculated on the assumption that (i)
such Debt and any other Debt incurred by the Operating Partnership or its
Subsidiaries since the first day of such four-quarter period and the application
of the proceeds therefrom, including to refinance other Debt, had occurred at
the beginning of such period, (ii) the repayment or retirement of any other Debt
by the Operating Partnership or its Subsidiaries since the first day of such
four-quarter period had been incurred, repaid or retired at the beginning of
such period (except that, in making such computation, the amount of Debt under
any revolving credit facility shall be computed based upon the average daily
balance of such Debt during such period), (iii) the income earned on any
increase in Adjusted Total Assets since the end of such four-quarter period had
been earned, on an annualized basis, during such period, and (iv) in the case of
any acquisition or disposition by the Operating Partnership or any Subsidiary of
any asset or group of assets since the first day of such four-quarter period,
including, without limitation, by merger, stock purchase or sale, or asset
purchase or sale, such acquisition or disposition or any related repayment of
Debt had occurred as of the first day of such period with the appropriate
adjustments with respect to such acquisition or disposition being included in
such pro forma calculation.
In addition to the foregoing limitations on the incurrence of Debt, the
Operating Partnership will not, and will not permit any Subsidiary to, incur any
Debt secured by any mortgage, lien, charge, pledge, encumbrance or security
interest of any kind upon any of the property of the Operating Partnership or
any Subsidiary ("Secured Debt"), whether owned at the date of the Indenture or
thereafter acquired, if, immediately after giving effect to the incurrence of
such additional Secured Debt, the aggregate principal amount of all outstanding
Secured Debt is greater than 40% of Adjusted Total Assets.
For purposes of the foregoing provisions regarding the limitation on the
incurrence of Debt, Debt shall be deemed to be "incurred" by the Operating
Partnership or a Subsidiary whenever the Operating Partnership and its
Subsidiary shall create, assume, guarantee or otherwise become liable in respect
thereof.
Maintenance of Total Unencumbered Assets. The Operating Partnership is
required to maintain Total Unencumbered Assets of not less than 165% of the
aggregate outstanding principal amount of all outstanding Unsecured Debt.
Modification and Waiver. Modification and amendments of the financial
covenants of the Operating Partnership described above may be made by the
Operating Partnership, the Company and the Trustee with the consent of the
Holders of not less than a majority in principal amount of the Notes which are
affected by such modification and amendment, provided that certain modifications
or amendments may not be made without the consent of the Holder of each Note
affected thereby. The Holders of not less than a majority in principal amount of
the Notes have the right to waive compliance by the Operating Partnership with
certain covenants relating thereto. See "Description of Debt
Securities -- Modification of the Indenture" in the accompanying Prospectus.
As used herein:
"Annual Service Charge" as of any date means the amount which is
expensed in any 12-month period for interest on Debt of the Operating
Partnership and its Subsidiaries.
"Consolidated Income Available For Debt Service" for any period means
Consolidated Net Income plus amounts which have been deducted for (a)
interest on Debt of the Operating Partnership and its Subsidiaries, (b)
provision for taxes of the Operating Partnership and its Subsidiaries based
on income, (c) amortization of Debt discount, (d) provisions for gains and
losses on properties, (e) depreciation and amortization, (f) the effect of
any noncash charge resulting from a change in accounting principles in
determining Consolidated Net Income for such period and (g) amortization of
deferred charges.
"Consolidated Net Income" for any period means the amount of
consolidated net income (or loss) of the Operating Partnership and its
Subsidiaries for such period determined on a consolidated basis in
accordance with generally accepted accounting principles.
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"Debt" of the Operating Partnership or any Subsidiary means any
indebtedness of the Operating Partnership or such Subsidiary, as
applicable, whether or not contingent, in respect of (i) borrowed money
evidenced by bonds, notes, debentures or similar instruments, (ii)
indebtedness secured by any mortgage, pledge, lien, charge, encumbrance or
any security interest existing on property owned by the Operating
Partnership or such Subsidiary, (iii) the reimbursement obligations,
contingent or otherwise, in connection with any letters of credit actually
issued or amounts representing the balance that constitutes an accrued
expense or trade payable or (iv) any lease of property by the Operating
Partnership or such Subsidiary as lessee which is reflected in the
Operating Partnership's consolidated balance sheet as a capitalized lease
in accordance with generally accepted accounting principles, in the case of
items of indebtedness under (i) through (iii) above to the extent that any
such items (other than letters of credit) would appear as a liability on
the Operating Partnership's consolidated balance sheet in accordance with
generally accepted accounting principles, and also includes, to the extent
not otherwise included, any obligation by the Operating Partnership or such
Subsidiary to be liable for, or to pay, as obligor, guarantor or otherwise
(other than for purposes of collection in the ordinary course of business),
indebtedness of another person (other than the Operating Partnership or any
Subsidiary).
"Subsidiary" means a corporation, partnership or limited liability
company, a majority of the outstanding voting stock, partnership interests
or membership interests, as the case may be, of which is owned or
controlled, directly or indirectly, by the Operating Partnership or by one
or more other Subsidiaries of the Operating Partnership. For the purposes
of this definition, "voting stock" means stock having the voting power for
the election of directors, general partners, managers or trustees, as the
case may be, whether at all times or only so long as no senior class of
stock has such voting power by reason of any contingency.
"Total Assets" as of any date means the sum of (i) Undepreciated Real
Estate Assets and (ii) all other assets of the Operating Partnership and
its Subsidiaries on a consolidated basis determined in accordance with
generally accepted accounting principles (but excluding intangibles and
accounts receivable).
"Total Unencumbered Assets" means the sum of (i) those Undepreciated
Real Estate Assets which have not been pledged, mortgaged or otherwise
encumbered by the owner thereof to secure Debt, excluding infrastructure
assessment bonds (totaling approximately $9.8 million as of September 30,
1997), and (ii) all other assets of the Operating Partnership and its
Subsidiaries determined in accordance with generally accepted accounting
principles (but excluding intangibles and accounts receivable) which have
not been pledged, mortgaged or otherwise encumbered by the owner thereof to
secure Debt.
"Undepreciated Real Estate Assets" as of any date means the cost
(original cost plus capital improvements) of real estate assets of the
Operating Partnership and its Subsidiaries on such date, before
depreciation and amortization, determined on a consolidated basis in
accordance with generally accepted accounting principles.
"Unsecured Debt" means Debt which is not secured by any mortgage,
lien, charge, pledge, encumbrance or security interest of any kind upon any
of the properties of the Operating Partnership or any Subsidiary.
Reference is made to the section entitled "Description of Debt
Securities -- Certain Covenants" in the accompanying Prospectus for a
description of additional covenants applicable to the Notes.
Compliance with the covenants described herein and such additional
covenants with respect to the Notes generally may not be waived by the Board of
Directors of the Company, as the General Partner of the Operating Partnership,
or by the Trustee unless the Holders of at least a majority in Principal amount
of all outstanding Notes consent to such waiver; provided, however, that the
defeasance and covenant defeasance provisions of the Indenture described under
"Description of Debt Securities -- Discharge, Defeasance and Covenant
Defeasance" in the accompanying Prospectus will apply to the Notes,
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including with respect to the covenants described in this Prospectus Supplement.
For a definition of what constitutes an Event of Default under the Indenture,
and the withholding of notice of such Event of Default from the Holders of the
Notes, see "Description of Debt Securities -- Events of Default, Notice and
Waiver" in the accompanying Prospectus.
The Operating Partnership will deliver to the Trustee, within 120 days
after the end of each fiscal year, a brief certificate as to the Operating
Partnership's compliance or non-compliance with the conditions and covenants
under the Indenture. Further, upon any request by the Operating Partnership to
the Trustee to take any action under the Indenture, the Operating Partnership
will furnish to the Trustee (a) an Officers' Certificate stating that all
conditions precedent, if any, provided for in the Indenture relating to the
proposed action have been complied with, and (b) an opinion of counsel stating
that in the opinion of such counsel all such conditions precedent, if any, have
been complied with.
OPTIONAL REDEMPTION
The Notes may be redeemed at any time at the option of the Operating
Partnership, in whole or from time to time in part, at a redemption price equal
to the sum of (i) the principal amount of the Notes (or portion thereof) being
redeemed plus accrued interest thereon to the redemption date and (ii) the Make-
Whole Amount (as defined below), if any, with respect to the Notes (or portion
thereof) (the "Redemption Price").
If notice has been given as provided in the Indenture and funds for the
redemption of any Notes (or any portion thereof) called for redemption shall
have been made available on the redemption date referred to in such notice, such
Notes (or any portion thereof) will cease to bear interest on the date fixed for
such redemption specified in such notice and the only right of the Holders of
such Notes will be to receive payment of the Redemption Price.
Notice of any optional redemption of any Notes (or any portion thereof)
will be given to Holders at their addresses, as shown in the security register
for such Notes, not more than 60 nor less than 30 days prior to the date fixed
for redemption. The notice of redemption will specify, among other items, the
Redemption Price and the principal amount of the Notes held by such Holder to be
redeemed.
The Operating Partnership will notify the Trustee at least 45 days prior to
giving notice of redemption (or such shorter period as is satisfactory to the
Trustee) of the aggregate principal amount of such Notes to be redeemed and
their redemption date. If less than all of the Notes are to be redeemed at the
option of the Operating Partnership, the Trustee shall select, in such manner as
it shall deem fair and appropriate, such Notes to be redeemed in whole or in
part.
As used herein:
"Make-Whole Amount" means, in connection with any optional redemption
or accelerated payment of any Notes, the excess, if any, of (i) the
aggregate present value as of the date of such redemption or accelerated
payment of each dollar of principal being redeemed or paid and the amount
of interest (exclusive of interest accrued to the date of redemption or
accelerated payment) that would have been payable in respect of each such
dollar if such redemption or accelerated payment had not been made,
determined by discounting, on a semi-annual basis, such principal and
interest at the Reinvestment Rate (determined on the third Business Day
preceding the date such notice of redemption is given or declaration of
acceleration is made) from the respective dates on which such principal and
interest would have been payable if such redemption or accelerated payment
had not been made, over (ii) the aggregate principal amount of the Notes
being redeemed or paid.
"Reinvestment Rate" means 0.25% plus the arithmetic mean of the yields
under the respective heading "Week Ending" published in the most recent
Statistical Release under the caption "Treasury Constant Maturities" for
the maturity (rounded to the nearest month) corresponding to the remaining
life to maturity, as of the payment date of the principal being redeemed or
paid. If no maturity exactly corresponds to such maturity, yields for the
two published maturities most closely
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corresponding to such maturity shall be calculated pursuant to the
immediately preceding sentence and the Reinvestment Rate shall be
interpolated or extrapolated from such yields on a straight-line basis,
rounding in each of such relevant periods to the nearest month. For the
purpose of calculating the Reinvestment Rate, the most recent Statistical
Release published prior to the date of determination of the Make-Whole
Amount shall be used.
"Statistical Release" means the statistical release designated
"H.15(519)" or any successor publication which is published weekly by the
Federal Reserve System and which establishes yields on actively traded
United States government securities adjusted to constant maturities, or, if
such statistical release is not published at the time of any determination
under the Indenture, then such other reasonably comparable index which
shall be designated by the Operating Partnership.
SATISFACTION AND DISCHARGE OF THE INDENTURE
The Indenture will, under certain circumstances, upon the Operating
Partnership's request cease to be of further effect with respect to the Notes,
and the Trustee will execute proper instruments acknowledging satisfaction and
discharge of its Indenture as to the Notes. See "Description of Debt
Securities -- Discharge, Defeasance and Covenant Defeasance" in the accompanying
Prospectus.
BOOK-ENTRY SYSTEM
The Notes will be issued in the form of a single fully-registered Note in
book-entry form (the "Global Note") which will be deposited with, or on behalf
of, The Depository Trust Company ("DTC") and registered in the name of DTC's
nominee. Except as set forth below, the Global Note may not be transferred
except as a whole by DTC to a nominee of DTC or by a nominee of DTC to DTC or
another nominee of DTC or by DTC or any such nominee to a successor of DTC or a
nominee of such successor.
So long as DTC or its nominee is the registered owner of the Global Note,
DTC or its nominee, as the case may be, will be considered the sole Holder of
the Notes represented by the Global Note for all purposes under the Indenture
and the beneficial owners of the Notes will be entitled only to those rights and
benefits afforded to them in accordance with DTC's regular operating procedures.
Upon specified written instructions of a Participant (defined below), DTC will
have its nominee assist Participants in the exercise of certain Holders' rights,
such as a demand for acceleration or an instruction to the Trustee. Except as
provided below, owners of beneficial interests in the Global Note will not be
entitled to have Notes represented by the Global Note registered in their names,
will not receive or be entitled to receive physical delivery of Notes of such
series in certificated form and will not be considered the registered owners or
Holders thereof under the Indenture.
If (i) DTC is at any time unwilling or unable to continue as depository or
if any time DTC ceases to be a clearing agency registered under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and a successor
depository is not appointed by the Company within 90 days, (ii) an Event of
Default under the Indenture or the Supplemental Indenture with respect to the
Notes has occurred and is continuing and the beneficial owners representing a
majority in principal amount of the Notes advise DTC to cease acting as
depository or (iii) the Operating Partnership, in its sole discretion,
determines at any time that the Notes shall no longer be represented by the
Global Note, the Operating Partnership will issue individual Notes of the
applicable amount and in certificated form in exchange for a Global Note. In any
such instance, an owner of a beneficial interest in the Global Note will be
entitled to physical delivery of individual Notes in certificated form of like
series and tenor, equal in principal amount to such beneficial interest and to
have such Notes in certificated form registered in its name. Notes so issued in
certificated form will be issued in denominations of $1,000 or any integral
multiple thereof, and will be issued in registered form only, without coupons.
The following is based on information furnished by DTC:
DTC is a limited-purpose trust company organized under the New York
Banking Law, a "banking organization" within the meaning of the New York
Banking Law, a member of the Federal
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Reserve System, a "clearing corporation" within the meaning of the New York
Uniform Commercial Code, and a "clearing agency" registered pursuant to the
provisions of Section 17A of the Exchange Act, DTC holds securities that
its participants ("Participants") deposit with DTC. DTC also facilitates
the settlement among Participants of securities transactions, such as
transfers and pledges, in deposited securities through electronic
computerized book-entry changes in Participants' accounts, thereby
eliminating the need for physical movement of securities certificates.
Direct Participants include securities brokers and dealers, banks, trust
companies, clearing corporations and certain other organizations ("Direct
Participants"). DTC is owned by a number of its Direct Participants and by
the New York Stock Exchange, Inc., the American Stock Exchange, Inc. and
the National Association of Securities Dealers, Inc. Access to the DTC
system is also available to others such as securities brokers and dealers,
banks and trust companies that clear through or maintain a custodial
relationship with a Direct Participant, either directly or indirectly
("Indirect Participants"). The rules applicable to DTC and its Participants
are on file with the Securities and Exchange Commission.
Purchases of Notes under the DTC system must be made by or though
Direct Participants, which will receive a credit for the Notes on DTC's
records. The ownership interest of each actual purchaser of each Note
("Beneficial Owner") is in turn recorded on the Direct and Indirect
Participant's records. A Beneficial Owner does not receive written
confirmation from DTC of its purchase, but such Beneficial Owner is
expected to receive a written confirmation providing details of the
transaction, as well as periodic statements of its holdings, from the
Direct or Indirect Participant through which such Beneficial Owner entered
into the transaction. Transfers of ownership interests in Notes are
accomplished by entries made on the books of Participants acting on behalf
of Beneficial Owners. Beneficial Owners do not receive certificates
representing their ownership interests in the Notes, except in the event
that use of the book-entry system for the Notes is discontinued.
To facilitate subsequent transfers, the Notes are registered in the
name of DTC's partnership nominee, Cede & Co. The deposit of the Notes with
DTC and their registration in the name of Cede & Co. effects no change in
beneficial ownership. DTC has no knowledge of the actual Beneficial Owners
of the Notes; DTC records reflect only the identity of the Direct
Participants to whose accounts the Notes are credited, which may or may not
be the Beneficial Owners. The Participants remain responsible for keeping
account of their holdings on behalf of their customers.
Conveyance of notices and other communications by DTC to Direct
Participants, by Direct Participants to Indirect Participants, and by
Direct Participants and Indirect Participants to Beneficial Owners are
governed by arrangements among them, subject to any statutory or regulatory
requirements as may be in effect from time to time.
Redemption notices shall be sent to Cede & Co. If less than all of the
Notes are being redeemed, DTC's practice is to determine by lot the amount
of the interest of each Direct Participant in such issue to be redeemed.
Neither DTC nor Cede & Co. will consent or vote with respect to the
Notes. Under its usual procedures, DTC mails a proxy (an "Omnibus Proxy")
to the issuer as soon as possible after the record date. The Omnibus Proxy
assigns Cede & Co.'s consenting or voting rights to those Direct
Participants to whose accounts the Notes are credited on the record date
(identified on a list attached to the Omnibus Proxy).
Principal and interest payments on the Notes will be made by the
Operating Partnership to the Trustee and from the Trustee to DTC. DTC's
practice is to credit Direct Participant's accounts on the payable date in
accordance with their respective holdings as shown on DTC's records unless
DTC has reason to believe that it will not receive payment on the payable
date. Payments by Participants to Beneficial Owners will be governed by
standing instructions and customary practices, as is the case with
securities held for the accounts of customers in bearer form or registered
in "street name," and will be the responsibility of such Participant and
not of DTC, the Trustee or the Operating
S-10
<PAGE> 11
Partnership subject to any statutory or regulatory requirements as may be
in effect from time to time. Payment of principal and interest to DTC is
the responsibility of the Operating Partnership or the Trustee,
disbursement of such payments to Direct Participants is the responsibility
of DTC, and disbursement of such payments to the Beneficial Owners is the
responsibility of Direct and Indirect Participants.
DTC may discontinue providing its services as securities depository
with respect to the Notes at any time by giving reasonable notice to the
Operating Partnership or the Trustee. Under such circumstances, in the
event that a successor securities depository is not appointed, Note
certificates are required to be printed and delivered.
The Operating Partnership may decide to discontinue use of the system
of book-entry transfers through DTC (or a successory securities
depository). In that event, Note certificates will be printed and
delivered.
The information in this section concerning DTC and DTC's book-entry
system has been obtained from sources that the Operating Partnership
believes to be reliable, but the Operating Partnership takes no
responsibility for the accuracy thereof. None of the Operating Partnership,
the Underwriters or the Trustee will have any responsibility or liability
for any aspect of the records relating to or payments made on account of
beneficial interests in the Global Note, or for maintaining, supervising or
reviewing any records relating to such beneficial interests.
FEDERAL INCOME TAX CONSIDERATIONS
The following discussion is a summary of the material U.S. federal income
tax considerations relevant to the purchase, ownership and disposition of the
Notes, but does not purport to be a complete analysis of all potential tax
consequences. The discussion is based upon the Internal Revenue Code of 1986, as
amended (the "Code"), U.S. Treasury Regulations, Internal Revenue Service
("IRS") rulings and pronouncements and judicial decisions all in effect as of
the date hereof, all of which are subject to change at any time, and any such
change may be applied retroactively in a manner that could adversely affect a
Holder of the Notes. The discussion does not address all of the U.S. federal
income tax consequences that may be relevant to a Holder in view of such
Holder's particular circumstances or to Holders subject to special rules, such
as certain financial institutions, insurance companies, dealers in securities,
tax-exempt organizations and persons holding the Notes as part of a "straddle,"
"hedge" or "conversion transaction." In addition, this discussion is limited to
persons purchasing the Notes for cash at original issue. Moreover, the effect of
any applicable state, local or foreign tax laws is not discussed. The discussion
deals only with Notes held as "capital assets" within the meaning of Section
1221 of the Code.
As used herein, "U.S. Holder" means a beneficial owner of the Notes, who or
that (i) is a citizen or resident of the United States, (ii) is a corporation,
partnership or other entity taxable as a corporation or partnership created or
organized in or under the laws of the United States or political subdivision
thereof, (iii) is an estate the income of which is subject to U.S. federal
income taxation regardless of its source, (iv) is a trust if (A) a U.S. court is
able to exercise primary supervision over the administration of the trust and
(B) one or more U.S. persons have authority to control all substantial decisions
of the trust, or (v) is otherwise subject to U.S. federal income taxation on a
net income basis in respect of the Notes. As used herein, a "Non-U.S. Holder"
means a Holder who or that is not a U.S. Holder.
Neither the Company nor the Operating Partnership has sought and neither
will seek any rulings from the IRS with respect to the matters discussed below.
There can be no assurances that the IRS will not take a different position
concerning the tax consequences of the purchase, ownership or disposition of the
Notes or that any such position would not be sustained.
PROSPECTIVE INVESTORS SHOULD CONSULT THEIR OWN TAX ADVISORS WITH REGARD TO
THE APPLICATION OF THE TAX CONSIDERATIONS DISCUSSED BELOW TO THEIR PARTICULAR
SITUATIONS AS WELL AS THE APPLICATION OF ANY STATE, LOCAL, FOREIGN OR OTHER TAX
LAWS, INCLUDING GIFT AND ESTATE TAX LAWS.
S-11
<PAGE> 12
U.S. HOLDERS
Interest. The stated interest on the Notes generally will be taxable to a
U.S. Holder as ordinary income at the time that it is paid or accrued, in
accordance with the U.S. Holder's method of accounting for federal income tax
purposes. It is not anticipated that the Notes will give rise to "original issue
discount" in the hands of U.S. Holders.
Sale, Retirement or Redemption of a Note. A U.S. Holder of a Note will
recognize gain or loss upon the sale, redemption, retirement or other taxable
disposition of such Note in an amount equal to the difference between (a) the
amount of cash and the fair market value of property received in exchange
therefor (other than amounts attributable to accrued but unpaid stated interest)
and (b) the U.S. Holder's adjusted tax basis in such Note. Any gain or loss
recognized will generally be capital gain or loss. The recently enacted Taxpayer
Relief Act of 1997 made certain changes to the Code with respect to the taxation
of capital gains of noncorporate taxpayers. In general, the maximum tax rate for
noncorporate taxpayers on long-term capital gain has been lowered to 20% from
the previous 28% rate with respect to capital assets (including the Notes), but
only if they have been held for more than 18 months at the time of disposition.
Capital gain on assets sold, having a holding period of more than one year but
not more than 18 months, will be taxed as "mid-term gain" at a maximum 28% rate.
U.S. Holders should be aware that the resale of the Notes may be affected
by the "market discount" rules of the Code under which a purchaser of a Note
acquiring the Note at a market discount generally would be required to include
as ordinary income a portion of the gain realized upon the disposition or
retirement of such Note, to the extent of the market discount that has accrued
but has not been included in income while the debt instrument was held by such
purchaser.
NON-U.S. HOLDERS
U.S. Withholding Tax
Interest paid to Non-U.S. Holders of the Notes will not be subject to U.S.
withholding tax, provided that (i) the Non-U.S. Holder does not actually or
constructively own 10 percent or more of the capital or profits of the Operating
Partnership, (ii) the Non-U.S. Holder is not (a) a controlled foreign
corporation for U.S. federal income tax purposes that is related to the
Operating Partnership through stock ownership or (b) a bank that received the
Note on an extension of credit made pursuant to a loan agreement entered into in
the ordinary course of its trade or business, and (iii) the beneficial owner of
the Note provides a statement signed under penalties of perjury that includes
its name and address and certifies that it is not a U.S. person in compliance
with applicable requirements or an exemption is otherwise established. If these
requirements cannot be satisfied, a Non-U.S. Holder will be subject to U.S.
withholding tax at a rate of 30% (or lower treaty rate, if applicable) on
interest payments on the Notes.
In general, any gain realized by a Non-U.S. Holder upon the sale, exchange,
redemption or other disposition of a Note will not be subject to U.S.
withholding tax. However, such gain will be subject to U.S. withholding tax if
(i) a Non-U.S. Holder is an individual who is present in the United States for a
total of 183 days or more during the taxable year in which the gain is realized
and certain other conditions are satisfied or (ii) the Non-U.S. Holder is
subject to tax pursuant to the provisions of U.S. tax law applicable to certain
U.S. expatriates.
U.S. Estate Tax
A Note held by an individual who is not a citizen or resident of the United
States at the time of his death will not be subject to U.S. federal estate tax
as a result of such individual's death, provided that, at the time of such
individual's death, the individual does not own, actually or constructively, 10%
or more of the capital or profits of the Operating Partnership and payments with
respect to such Note would not have been effectively connected witih the conduct
by such individual of a trade or business in the United States.
INFORMATION REPORTING AND BACKUP WITHHOLDING
Certain noncorporate U.S. persons may be subject to backup withholding at a
rate of 31% on payments of principal and interest on the Notes, and the proceeds
from a disposition of the Notes.
S-12
<PAGE> 13
Backup withholding will only be imposed where the Holder (i) fails to furnish
its taxpayer identification number ("TIN"), which, for an individual, would
ordinarily be his or her social security number, (ii) furnishes an incorrect
TIN, (iii) is notified by the IRS that it has failed to properly report payments
of interest or dividends, or (iv) under certain circumstances, fails to certify,
under penalties of perjury, that it has furnished a correct TIN and has not been
notified by the IRS that it is subject to backup withholding. Notwithstanding
the foregoing, the Operating Partnership will implement backup withholding with
respect to payments made on a Note to a Holder if instructed to do so by the
IRS. Holders of the Notes should consult their own tax advisors regarding their
qualification for exemption from backup withholding and the procedure for
obtaining such an exemption, if applicable. However, interest paid with respect
to a Note and received by a Non-U.S. Holder will not be subject to information
reporting or backup withholding if the payor has received appropriate
certification statements and provided that the payor does not have actual
knowledge that the Holder is a U.S. person.
The payment of the proceeds from the disposition of the Notes to or through
the U.S. office of any U.S. or foreign broker will be subject to information
reporting and possible backup withholding unless the owner certifies as to its
non-U.S. status under penalties of perjury or otherwise establishes an
exemption, provided that the broker does not have actual knowledge that the
Holder is a U.S. person or that the conditions of any other exemption are not,
in fact, satisfied. The payment of the proceeds from the disposition of a note
to or through a non-U.S. office of a non-U.S. broker that is not a U.S. related
person will not be subject to information or backup withholding. For this
purpose, a "U.S. related person" is (i) a controlled foreign corporation for
U.S. federal income tax purposes or (ii) a foreign person 50% or more of whose
gross income from all sources for the three-year period ending with the close of
its taxable year preceding the payment (or for such part of the period that the
broker has been in existence) is derived from the activities that are
effectively connected with the conduct of a U.S. trade or business.
In the case of the payment of proceeds from the disposition of Notes to or
through a non-U.S. office of a broker that is a U.S. related person, U.S.
Treasury Regulations require information reporting on the payment unless the
broker has documentary evidence in its files that the owner is a non-U.S. Holder
and the broker has no knowledge to the contrary. Backup withholding will not
apply to payments made through foreign offices of a broker that is a U.S. person
or a U.S. related person (absent actual knowledge that the payee is a U.S.
person).
Any amounts withheld under the backup withholding rates from a payment to a
Non-U.S. Holder will be allowed as a refund or a credit against such Non-U.S.
Holder's federal income tax liability, provided that the requisite procedures
are followed.
PROSPECTIVE FINAL REGULATIONS
On October 6, 1997, new Treasury Regulations ("New Regulations") were
issued that modify the requirements imposed on a Non-U.S. Holder and certain
intermediaries for establishing the recipient's status as a Non-U.S. Holder
eligible for exception from or reduction in U.S. withholding tax and backup
withholding described above. The New Regulations are generally effective for
payments made after December 31, 1998, subject to certain transition rules.
(However, new Temporary U.S. Treasury Regulations, effective for payments made
after December 31, 1997, will require some Non-U.S. Holders to satisfy certain
residency requirements when claiming the benefits of an applicable income tax
treaty.) In general, the New Regulations do not significantly alter the
substantive withholding and information reporting requirements but rather unify
current certification procedures and forms and clarify reliance standards. In
addition, the New Regulations impose more stringent conditions on the ability of
financial intermediaries acting for a Non-U.S. Holder to provide certifications
on behalf of the Non-U.S. Holder, which may include entering into an agreement
with IRS to audit certain documentation with respect to such certifications.
Non-Holders should consult their own tax advisors to determine the effects of
the application of the New Regulations to their particular circumstances.
S-13
<PAGE> 14
UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement and the
related Pricing Agreement, the Operating Partnership has agreed to sell to each
of the Underwriters named below, and each of the Underwriters has severally
agreed to purchase, the principal amount of the Notes set forth opposite its
name below:
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT OF
UNDERWRITER NOTES
--------------------------------------------------------------------- ------------
<S> <C>
Goldman, Sachs & Co.................................................. $ 90,000,000
Merrill Lynch, Pierce, Fenner & Smith Incorporated................... 20,000,000
J.P. Morgan Securities Inc. ......................................... 20,000,000
Morgan Stanley & Co. Incorporated.................................... 20,000,000
------------
Total...................................................... $150,000,000
============
</TABLE>
Under the terms and conditions of the Underwriting Agreement and the
relating Pricing Agreement, the Underwriters are committed to take all of the
Notes, if any are taken.
The Underwriters propose to offer the Notes in part directly to the public
at the initial public offering price set forth on the cover page of this
Prospectus Supplement and in part to certain securities dealers at such price
less a concession of .40% of the principal amount of the Notes. The Underwriters
may allow, and such dealers may reallow, a concession not in excess of .25% of
the principal amount of the Notes to certain brokers and dealers. After the
Notes are released for sale to the public, the offering price and other selling
terms may from time to time be varied by the Underwriters.
In connection with the offering, the Underwriters may purchase and sell the
Notes in the open market. These transactions may include over-allotment and
stabilizing transactions and purchases to cover short positions created by the
Underwriters in connection with the offering. Stabilizing transactions consist
of certain bids or purchases for the purpose of preventing or retarding a
decline in the market price of the Notes, and short positions created by the
Underwriters involve the sale by the Underwriters of a greater number of Notes
than they are required to purchase from the Operating Partnership in the
offering. The Underwriters also may impose a penalty bid, whereby selling
concessions allowed to broker-dealers in respect of the securities sold in the
offering may be reclaimed by the Underwriters if such Notes are repurchased by
the Underwriters in stabilizing or covering transactions. These activities may
stabilize, maintain or otherwise affect the market price of the Notes, which may
be higher than the price that might otherwise prevail in the open market; and
these activities, if commenced, may be discontinued at any time. These
transactions may be effected in the over-the-counter market or otherwise.
The Notes are a new issue of securities with no established trading market.
The Operating Partnership has been advised by the Underwriters that the
Underwriters intend to make a market in the Notes but are not obligated to do so
and may discontinue market making at any time without notice. No assurance can
be given as to the liquidity of the trading market for the Notes.
The Operating Partnership and the Company have agreed to indemnify the
several Underwriters against certain liabilities, including liabilities under
the Securities Act of 1933.
An affiliate of J.P. Morgan Securities Inc. is a lender under the Operating
Partnership's unsecured line of credit. To the extent the net proceeds from the
offering are used to repay indebtedness outstanding thereunder, such affiliate
will receive its share of such repayment.
VALIDITY OF NOTES
The validity of the Notes offered hereby will be passed upon for the
Operating Partnership by Sullivan & Cromwell, Los Angeles, California and for
the Underwriters by Willkie Farr & Gallagher, New York, New York. Sullivan &
Cromwell and Willkie Farr & Gallagher may rely upon the opinion of Piper &
Marbury L.L.P., Baltimore, Maryland, as to certain matters of Maryland law.
S-14
<PAGE> 15
$1,815,000,000
SPIEKER PROPERTIES, INC.
COMMON STOCK, PREFERRED STOCK,
DEPOSITARY SHARES,
SPIEKER LOGO WARRANTS AND GUARANTEES
SPIEKER PROPERTIES, L.P.
DEBT SECURITIES
------------------------
Spieker Properties, Inc. (the "Company") may from time to time offer in one
or more series or classes
(i) shares of its common stock, par value $0.0001 per share (the "Common
Stock"), (ii) shares or fractional shares of its preferred stock, par value
$0.0001 per share (the "Preferred Stock"), (iii) shares of Preferred Stock
represented by Depositary Shares (the "Depositary Shares"), (iv) warrants to
purchase Preferred Stock or Common Stock (the "Warrants"), and (v) unconditional
guarantees (the "Guarantees") of unsecured Debt Securities (as defined below)
issued by Spieker Properties, L.P. (the "Operating Partnership") in amounts, at
prices and on terms to be determined at the time of offering, with an aggregate
public offering price of up to $1,000,000,000 (or its equivalent in another
currency based on the exchange rate at the time of sale) in amounts, at prices
and on terms to be determined at the time of offering. The Operating Partnership
may from time to time offer in one or more series unsecured non-convertible
investment grade debt securities, which may be either senior debt securities
("Senior Securities") or subordinated debt securities ("Subordinated
Securities," and together with the Senior Securities, the "Debt Securities"),
with an aggregate public offering price of up to $815,000,000 (or its equivalent
in another currency based on the exchange rate at the time of sale) in amounts,
at prices and on terms to be determined at the time of offering. The Debt
Securities may be guaranteed by Guarantees of the Company as to payment of
principal, premium, if any, and interest. The Common Stock, Preferred Stock,
Depositary Shares, Warrants and Debt Securities (collectively, the "Offered
Securities") may be offered, separately or together, in separate series in
amounts, at prices and on terms to be set forth in one or more supplements to
the Prospectus (a "Prospectus Supplement").
The specific terms of the Offered Securities in respect to which this
Prospectus is being delivered will be set forth in the applicable Prospectus
Supplement and will include, where applicable (i) in the case of Common Stock,
the specific title and stated value and any initial public offering price; (ii)
in the case of Preferred Stock, the specific title and stated value, any
dividend, liquidation, redemption, conversion, voting and other rights, and any
initial public offering price; (iii) in the case of Depositary Shares, the
fractional share of Preferred Stock represented by each such Depositary Share;
(iv) in the case of Warrants, the duration, offering price, exercise price and
detachability; and (v) in the case of Debt Securities the specific title,
aggregate principal amount, currency, form (which may be registered or bearer,
or certificated or global), authorized denominations, maturity, rate (or manner
of calculation thereof) and time of payment of interest, terms for redemption at
the option of the Operating Partnership or repayment at the option of the
holder, terms for sinking fund payments, covenants, applicability of any
Guarantees and any initial public offering price. In addition, such specific
terms may include limitations on direct or beneficial ownership and restrictions
on transfer of the Offered Securities, in each case as may be appropriate to
preserve the status of the Company as a real estate investment trust ("REIT")
for federal income tax purposes.
The applicable Prospectus Supplement will also contain information, where
applicable, about certain United States federal income tax considerations
relating to, and any listing on a securities exchange of, the Offered Securities
covered by such Prospectus Supplement.
The Offered Securities may be offered directly, through agents designated
from time to time by the Company or the Operating Partnership, or to or through
underwriters or dealers. If any agents or underwriters are involved in the sale
of any of the Offered Securities, their names, and any applicable purchase
price, fee, commission or discount arrangement between or among them, will be
set forth, or will be calculable from the information set forth, in the
applicable Prospectus Supplement. See "Plan of Distribution." No Offered
Securities may be sold without delivery of the applicable Prospectus Supplement
describing the method and terms of the offering of such series of Offered
Securities.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
------------------------
THE DATE OF THIS PROSPECTUS IS OCTOBER 1, 1997.
<PAGE> 16
AVAILABLE INFORMATION
The Company and the Operating Partnership are subject to the informational
requirements of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and in accordance therewith the Company and the Operating Partnership
file reports, proxy statements and other information with the Securities and
Exchange Commission (the "Commission"). Such reports, proxy statements and other
information filed can be inspected and copied at the Commission's Public
Reference Section, 450 Fifth Street, N.W., Washington, D.C., 20549, and at the
following regional offices of the Commission: Seven World Trade Center, 13th
Floor, New York, New York 10048 and 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661-2511. Copies of such material can be obtained from the
Public Reference Section of the Commission, 450 Fifth Street, N.W., Washington,
D.C. 20549, at prescribed rates. The Commission also maintains a World Wide Web
site that contains reports, proxy and information statements and other
information regarding registrants, such as the Company and the Operating
Partnership, that file electronically with the Commission. The address of the
Commission's site is http://www.sec.gov. In addition, the Company's Common Stock
and Series B Preferred Stock are listed on the New York Stock Exchange and
similar information concerning the Company can be inspected and copied at the
offices of the New York Stock Exchange, Inc., 20 Broad Street, New York, New
York 10005.
The Company and the Operating Partnership have filed with the Commission
registration statements on Form S-3 (the "Registration Statements") (of which
this Prospectus is a part) under the Securities Act of 1933, as amended (the
"Securities Act"), with respect to the Offered Securities. This Prospectus does
not contain all of the information set forth in the Registration Statements,
certain portions of which have been omitted as permitted by the rules and
regulations of the Commission. Statements contained in this Prospectus as to the
contents of any contract or other documents are not necessarily complete, and in
each instance reference is made to the copy of such contract or other document
filed as an exhibit to the Registration Statements, each such statement being
qualified in all respects by such reference and the exhibits and schedules
thereto. For further information regarding the Company, the Operating
Partnership and the Offered Securities, reference is hereby made to the
Registration Statements and such exhibits and schedules which may be obtained
from the Commission at its principal office in Washington, D.C. upon payment of
the fees prescribed by the Commission.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The documents listed below have been filed by the Company under the
Exchange Act with the Commission and are incorporated herein by reference:
a. The Company's Annual Report on Form 10-K for the year ended
December 31, 1996;
b. The Company's Quarterly Reports on Forms 10-Q for the quarters
ended March 31, 1997 and June 30, 1997;
c. The Company's Current Reports on Form 8-K dated February 3, 1997,
June 27, 1997 and September 22, 1997;
d. The description of the Company's Common Stock contained in the
Company's Registration Statement on Form 8-A (File No. 1-12528); and
e. The description of the Company's Series B Preferred Stock contained
in the Company's Registration Statement on Form 8-A (File No. 1-12528).
The documents listed below have been filed by the Operating Partnership
under the Exchange Act with the Commission and are incorporated by reference
herein.
a. The Operating Partnership's Annual Report on Form 10-K for the year
ended December 31, 1996;
b. The Operating Partnership's Quarterly Reports on Forms 10-Q for the
quarters ended March 31, 1997 and June 30, 1997; and
2
<PAGE> 17
c. The Operating Partnership's Current Report on Form 8-K dated
February 3, 1997, June 27, 1997 and September 22, 1997.
Each document filed by the Company or the Operating Partnership pursuant to
Sections 13(a), 13(c), 14 and 15(d) of the Exchange Act subsequent to the date
of this Prospectus and prior to the termination of the offering of all Offered
Securities to which this Prospectus relates shall be deemed to be incorporated
by reference in this Prospectus and to be part hereof from the date of filing
such documents.
Any statement contained herein or in a document incorporated or deemed to
be incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
(or in the applicable Prospectus Supplement) or in any other subsequently filed
document which also is or is deemed to be incorporated by reference herein
modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus.
Copies of all documents which are incorporated herein by reference (not
including the exhibits to such information, unless such exhibits are
specifically incorporated by reference in such information) will be provided
without charge to each person, including any beneficial owner, to whom this
Prospectus is delivered upon written or oral request. Requests should be
directed to the Investor Relations Coordinator, Spieker Properties, Inc., 2180
Sand Hill Road, Menlo Park, California 94025, telephone number: (650) 854-5600.
THE COMPANY AND THE OPERATING PARTNERSHIP
Spieker Properties, Inc. (the "Company") is a self-administered and
self-managed equity real estate investment trust ("REIT") that was formed in
1993 to continue and to expand the business of owning, operating, managing,
leasing, acquiring, developing and redeveloping commercial property previously
conducted by Spieker Partners. As of June 30, 1997, the Company owned and
operated 180 income-producing properties (the "Properties"), aggregating
approximately 24.8 million rentable square feet. All of the Properties are
located in California, and in Washington, Oregon and Idaho (the "Pacific
Northwest").
The Company conducts substantially all of its activities through Spieker
Properties, L.P. (the "Operating Partnership") in which it owns an approximate
87.0% general partnership interest, as of June 30, 1997. An approximate 13.0%
limited partnership interest in the Operating Partnership is owned by senior
members of the Company's management and certain outside investors, as of June
30, 1997. As the sole general partner of the Operating Partnership, the Company
has control over the management of the Operating Partnership and over each of
the Properties.
The Company's Common Stock is listed on the New York Stock Exchange under
the Symbol "SPK." The Company is a Maryland corporation and the Operating
Partnership is a California limited partnership. The Operating Partnership was
formed in 1993 in connection with the formation of the Company. The Company's
and the Operating Partnership's executive offices are located at 2180 Sand Hill
Road, Menlo Park, California 94025 and telephone number is (415) 854-5600.
3
<PAGE> 18
USE OF PROCEEDS
The Company intends to invest the net proceeds of any sale of Common Stock,
Preferred Stock, Depositary Shares or Warrants in the Operating Partnership.
Unless otherwise indicated in the applicable Prospectus Supplement, the
Operating Partnership intends to use such net proceeds and the net proceeds from
the sale of any Debt Securities for general corporate purposes including,
without limitation, the acquisition and development of industrial and office
properties and the repayment of debt. Net proceeds from the sale of the Offered
Securities initially may be temporarily invested in short-term securities.
RATIO OF EARNINGS TO FIXED CHARGES
The Company's and the Operating Partnership's ratio of earnings to fixed
charges for the six months ended June 30, 1997 was 2.74x and for the years ended
December 31, 1994, 1995 and 1996 was 1.29x, 1.61x and 2.56x, respectively. The
Company's ratio of earnings to combined fixed charges and preferred stock
dividends for the six months ended June 30, 1997 was 2.23x and for the years
ended December 31, 1994, 1995 and 1996 was 1.26x, 1.53x and 1.97x, respectively.
For purposes of computing these ratios, earnings have been calculated by
adding fixed charges (excluding capitalized interest) to income (loss) from
operations, before extraordinary items. Fixed charges consist of interest costs,
whether expensed or capitalized, the interest component of rental expense, and
amortization of debt discounts and deferred financing fees, whether expensed or
capitalized.
Prior to the completion of the Company's initial public offering ("IPO") in
November 1993, the Company's predecessors (collectively, "SPP") operated in a
manner as to minimize net taxable income to the owners. As a result, although
the Company's properties historically have generally positive net cash flow, SPP
had net losses for the years ended December 31, 1992 and 1993. Consequently, the
computation of the ratio of earnings to fixed charges indicates that earnings
were inadequate to cover fixed charges by approximately $9.4 million and $13.5
million for 1992 and 1993 (which includes the Company's results of operations
for the period of November 19, 1993 through December 31, 1993, during which the
Company had no outstanding preferred stock), respectively.
The Company's IPO and the other transactions undertaken concurrently with
the IPO permitted the Company to significantly deleverage properties, resulting
in a significantly improved ratio of earnings to fixed charges.
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SPECIAL CONSIDERATIONS
Prospective investors should carefully consider the following information
in conjunction with the other information contained in this Prospectus and the
applicable Prospectus Supplement before purchasing Offered Securities.
GENERAL REAL ESTATE INVESTMENT RISKS
Real property investments are subject to varying degrees of risk. The
yields available from investments in real estate depend on the amount of income
and capital appreciation generated by the related properties. If the Properties
do not generate sufficient income to meet operating expenses, including debt
service, ground lease payments, tenant improvements, third-party leasing
commissions and other capital expenditures, the Company's income and ability to
make distributions to its stockholders and the Operating Partnership's ability
to make payments of any interest and principal on any Debt Securities will be
adversely affected. The performance of the economy in each of the regions in
which the Properties are located affects occupancy, market rental rates and
expenses and, consequently, has an impact on the income from the Properties and
their underlying values. The financial results of major local employers also may
have an impact on the cash flow and value of certain Properties. In terms of
rentable square feet, over 45% of the Properties as of June 30, 1997, were
located in the San Francisco Bay Area. As a result of this geographic
concentration, the performance of the San Francisco Bay Area commercial real
estate market will affect the value of the Properties in that area and, in turn,
the value of the Company.
Income from the Properties may be further adversely affected by the general
economic climate, local economic conditions in which the Properties are located,
such as oversupply of space or a reduction in demand for rental space, the
attractiveness of the Properties to tenants, competition from other available
space, the ability of the Company to provide for adequate maintenance and
insurance and increased operating expenses. There is also the risk that as
leases on the Properties expire, tenants will enter into new leases on terms
that are less favorable to the Company. Income and real estate values may also
be adversely affected by such factors as applicable laws (e.g., ADA and tax
laws), interest rate levels and the availability of financing. In addition, real
estate investments are relatively illiquid and, therefore, will tend to limit
the ability of the Company to vary its portfolio promptly in response to changes
in economic or other conditions.
COMPETITION
Numerous industrial, office and retail properties compete with the
Properties in attracting tenants to lease space. Some of these competing
properties are newer, better located or better capitalized than the Company's
Properties. The number of competitive commercial properties in a particular area
could have a material effect on the Company's ability to lease space in the
Properties or at newly developed or acquired properties and on the rents
charged.
ACQUISITION AND DEVELOPMENT ACTIVITIES
The Company intends to acquire existing commercial properties to the extent
that they can be acquired on advantageous terms and meet the Company's
investment criteria. Acquisitions of commercial properties entail general
investment risks associated with any real estate investment, including the risk
that investments will fail to perform as expected or that estimates of the cost
of improvements to bring an acquired property up to standards established for
the intended market position may prove inaccurate.
The Company intends to pursue commercial property development projects and
to develop certain landholdings as to which it has certain options. Such
projects generally require various governmental and other approvals, the receipt
of which cannot be assured. The Company's development activities will entail
certain risks, including the expenditure of funds on and devotion of
management's time to projects which may not come to fruition; the risk that
construction costs of a project may exceed original estimates,
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possibly making the project uneconomic; the risk that occupancy rates and rents
at a completed project will be less than anticipated; and the risk that expenses
at a completed development will be higher than anticipated. These risks may
result in a reduction in the funds available for distribution.
DEBT FINANCING
The Company will be subject to the risks normally associated with debt
financing, including the risk that the Company's cash flow will be insufficient
to meet required payments of principal and interest, the risk that existing
indebtedness on the Properties cannot be refinanced or that the terms of such
refinancing will not be as favorable as the terms of existing indebtedness.
ENVIRONMENTAL MATTERS
Under various Federal, state and local laws, ordinances and regulations, an
owner or operator of real estate is liable for the costs of removal or
remediation of certain hazardous or toxic substances on or in such property.
Such laws often impose such liability without regard to whether the owner or
operator knew of, or was responsible for, the presence of such hazardous or
toxic substances. The presence of such substances, or the failure to properly
remediate such substances, may adversely affect the owner's or operator's
ability to sell or rent such property or to borrow using such property as
collateral. Persons who arrange for the disposal or treatment of hazardous or
toxic substances may also be liable for the costs of removal or remediation of
such substances at a disposal or treatment facility, whether or not such
facility is owned or operated by such person. Certain environmental laws impose
liability for release of asbestos-containing materials into the air, and third
parties may seek recovery from owners or operators of real properties for
personal injuries associated with asbestos-containing materials. In connection
with the ownership (direct or indirect), operation, management and development
of real properties, the Company may be considered an owner or operator of such
properties or as having arranged for the disposal or treatment of hazardous or
toxic substances and, therefore, may be potentially liable for removal or
remediation costs, as well as certain other costs, including governmental fines
and injuries to persons and property.
The Company is not aware of any environmental liability with respect to the
Properties that would have a material adverse effect on the Company's business,
assets or results of operations. There can be no assurance that such a material
environmental liability does not exist. The existence of any such material
environmental liability would have an adverse effect on the Company's results of
operations and cash flow.
GENERAL UNINSURED LOSSES/SEISMIC ACTIVITY
The Company carries comprehensive liability, fire, flood, extended coverage
and rental loss insurance with policy specifications, limits and deductibles
customarily carried for similar properties. There are, however, certain types of
extraordinary losses which may be either uninsurable, or not economically
insurable. Further, a substantial number of the Properties are located in areas
that are subject to earthquake activity. Although the Company has obtained
certain limited earthquake insurance policies, should a Property sustain damage
as a result of an earthquake, the Company may incur substantial losses due to
insurance deductibles, co-payments on insured losses or uninsured losses.
Additionally, earthquake insurance may not be available for certain of the
Company's Properties, or if available, may not be available on terms acceptable
to the Company. Should an uninsured loss occur, the Company could lose its
investment in, and anticipated profits and cash flows from, a number of
Properties.
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DESCRIPTION OF DEBT SECURITIES
The following sets forth certain general terms and provisions of the
Indenture under which the Debt Securities are to be issued. The particular terms
of the Debt Securities will be set forth in a Prospectus Supplement relating to
such Debt Securities.
Unless otherwise specified in the applicable Prospectus Supplement, the
Debt Securities are to be issued under an Indenture dated December 6, 1995, as
amended or supplemented from time to time (the "Indenture"), among the Operating
Partnership, the Company and State Street Bank and Trust Company, as trustee
(together with any other trustee(s) appointed in a supplemental indenture with
respect to a particular series, the "Trustee"). The Indenture is available for
inspection at the corporate trust office of the Trustee, or as described above
under "Available Information." The Indenture is subject to, and governed by, the
Trust Indenture Act of 1939, as amended. The statements made hereunder relating
to the Indenture and the Debt Securities to be issued hereunder are summaries of
certain provisions thereof and do not purport to be complete and are subject to,
and are qualified in their entirety by reference to, all provisions of the
Indenture and such Debt Securities. All section references appearing herein are
to sections of the Indenture, and capitalized terms used but not defined herein
shall have the respective meanings set forth in the Indenture.
GENERAL
The Debt Securities will be direct, unsecured obligations of the Operating
Partnership. Except for any series of Debt Securities which is specifically
subordinated to other indebtedness of the Operating Partnership, the Debt
Securities will rank pari passu with all other unsecured and unsubordinated
indebtedness of the Operating Partnership. Under the Indenture, the Debt
Securities may be issued without limit as to aggregate principal amount, in one
or more series, in each case as established from time to time in or pursuant to
authority granted by a resolution of the Board of Directors of the Company as
sole general partner of the Operating Partnership or as established in one or
more indentures supplemental to the Indenture. All Debt Securities of one series
need not be issued at the same time and, unless otherwise provided, a series may
be reopened, without the consent of the Holders of the Debt Securities of such
series, for issuances of additional Debt Securities of such series (Section
301).
The Debt Securities may be unconditionally guaranteed by the Company as to
payment of principal, premium, if any, and interest. (Section 1601).
The Indenture provides that there may be more than one Trustee thereunder,
each with respect to one or more series of Debt Securities. Any Trustee under
the Indenture may resign or be removed with respect to one or more series of
Debt Securities, and a successor Trustee will be appointed to act with respect
to such series (Section 608). In the event that two or more persons are acting
as Trustee with respect to different series of Debt Securities, each such
Trustee shall be a trustee of a trust under the Indenture separate and apart
from the trust administered by any other Trustee (Section 609), and, except as
otherwise indicated herein, any action described herein to be taken by the
Trustee may be taken by each such Trustee with respect to, and only with respect
to, the one or more series of Debt Securities for which it is Trustee under the
Indenture.
TERMS
Reference is made to the Prospectus Supplement relating to the series of
Debt Securities being offered for the specific terms thereof, including:
(1) the title of such Debt Securities, whether such Debt Securities
are Senior Securities or Subordinated Securities and whether such Debt
Securities are guaranteed by a Guarantee;
(2) the aggregate principal amount of such Debt Securities and any
limit on such aggregate principal amount;
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(3) the percentage of the principal amount at which such Debt
Securities will be issued and, if other than the principal amount thereof,
the portion of the principal amount thereof payable upon declaration of
acceleration of the maturity thereof;
(4) the date or dates, or the method for determining such date or
dates, on which the principal of such Debt Securities will be payable;
(5) the rate or rates (which may be fixed or variable), or the method
by which such rate or rates shall be determined, at which such Debt
Securities will bear interest, if any;
(6) the date or dates, or the method for determining such date or
dates, from which any such interest will accrue, the Interest Payment Dates
on which any such interest will be payable, the Regular Record Dates for
such Interest Payment Dates, or the method by which such Dates shall be
determined, the Person to whom such interest shall be payable, and the
basis upon which interest shall be calculated if other than that of a
360-day year of twelve 30-day months;
(7) the place or places where (i) the principal of (and premium, if
any) and interest, if any, on such Debt Securities will be payable, (ii)
such Debt Securities may be surrendered for registration of transfer,
exchange or conversion and (iii) notices or demands to or upon the
Operating Partnership in respect of such Debt Securities, any applicable
Guarantees and the Indenture may be served;
(8) the period or periods within which, or the date or dates on which,
the price or prices at which and the terms and conditions upon which such
Debt Securities may be redeemed, as a whole or in part, at the option of
the Operating Partnership, if the Operating Partnership is to have such an
option;
(9) the obligation, if any, of the Operating Partnership to redeem,
repay or repurchase such Debt Securities pursuant to any sinking fund or
analogous provisions or at the option of a Holder thereof, and the period
or periods within which, or the date or dates on which, the price or prices
at which and the terms and conditions upon which such Debt Securities are
required to be redeemed, repaid or purchased, as a whole or in part,
pursuant to such obligation;
(10) if other than U.S. dollars, the currency or currencies in which
such Debt Securities are denominated and/or payable, which may be a foreign
currency or units of two or more foreign currencies or a composite currency
or currencies, and the terms and conditions relating thereto;
(11) whether the amount of payments of principal of (and premium, if
any) or interest, if any, on such Debt Securities may be determined with
reference to an index, formula or other method (which index, formula or
method may, but need not be, based on a currency, currencies, currency unit
or units or composite currency or currencies) and the manner in which such
amounts shall be determined;
(12) any additions to, modifications of or deletions from the terms of
such Debt Securities with respect to the Events of Default or covenants or
other provisions set forth in the Indenture;
(13) whether such Debt Securities will be issued in certificated
and/or book-entry form;
(14) whether such Debt Securities will be in registered or bearer form
and, if in registered form, the denominations thereof if other than $1,000
and any integral multiple thereof and, if in bearer form, the denominations
thereof and terms and conditions relating thereto;
(15) the applicability, if any, of the defeasance and covenant
defeasance provisions of Article XIV of the Indenture, or any modification
thereof;
(16) the terms and conditions, if any, upon which such Debt Securities
may be subordinated to other indebtedness of the Operating Partnership;
(17) whether and under what circumstances the Operating Partnership
will pay Additional Amounts as contemplated in the Indenture on such Debt
Securities in respect of any tax,
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assessment or governmental charge and, if so, whether the Operating
Partnership will have the option to redeem such Debt Securities in lieu of
making such payment; and
(18) any other terms of such Debt Securities not inconsistent with the
provisions of the Indenture (Section 301).
The Debt Securities may provide for less than the entire principal amount
thereof to be payable upon declaration of acceleration of the maturity thereof
("Original Issue Discount Securities"). Special U.S. federal income tax,
accounting and other considerations applicable to the Original Issue Discount
Securities will be described in the applicable Prospectus Supplement.
The Indenture does not contain any provisions that would limit the ability
of the Operating Partnership to incur indebtedness or that would afford Holders
of Debt Securities protection in the event of a highly leveraged or similar
transaction involving the Operating Partnership. However, restrictions on
ownership and transfers of the Company's common stock and preferred stock,
designed to preserve the Company's status as a REIT, may prevent or hinder a
change of control. Reference is made to the applicable Prospectus Supplement for
information with respect to any deletions from, modifications of or additions to
the Events of Default or covenants of the Operating Partnership that are
described below, including any addition of a covenant or other provision
providing event risk or similar protection.
GUARANTEES
The Debt Securities may be unconditionally and irrevocably guaranteed by
Guarantees of the Company, on a senior or subordinated basis, which will
guarantee the due and punctual payment of principal of, premium, if any, and
interest on such Debt Securities, and the due and punctual payment of any
sinking fund payments thereon, when and as the same shall become due and payable
whether at a maturity date, by declaration of acceleration, call for redemption
or otherwise. The applicability and terms of any such Guarantee relating to a
series of Debt Securities will be set forth in the Prospectus Supplement
relating to such Debt Securities. (Section 1601).
DENOMINATIONS, INTEREST, REGISTRATION AND TRANSFER
Unless otherwise described in the applicable Prospectus Supplement, the
Debt Securities of any series will be issuable in denominations of $1,000 and
integral multiples thereof (Section 302).
Unless otherwise specified in the applicable Prospectus Supplement, the
principal of (and premium, if any) and interest on any series of Debt Securities
will be payable at the corporate trust office of the Trustee, provided that, at
the option of the Holder, payment of interest may be made by check mailed to the
address of the Person entitled thereto as it appears in the Security Register or
by wire transfer of funds to such Person at an account maintained within the
United States (Sections 301, 305, 307 and 1002).
All amounts paid by the Operating Partnership to a paying agent or a
Trustee for the payment of the principal of or any premium or interest on any
Debt Security which remain unclaimed at the end of two years after the
principal, premium or interest has become due and payable will be repaid to the
Operating Partnership, and the holder of the Debt Security thereafter may look
only to the Operating Partnership for payment thereof. (Section 1003).
Any interest not punctually paid or duly provided for on any Interest
Payment Date with respect to a Debt Security ("Defaulted Interest") will
forthwith cease to be payable to the Holder on the applicable Regular Record
Date and may either be paid to the person in whose name such Debt Security is
registered at the close of business on a special record date (the "Special
Record Date") for the payment of such Defaulted Interest to be fixed by the
Trustee, notice whereof shall be given to the Holder of such Debt Security not
less than 10 days prior to such Special Record Date, or may be paid at any time
in any other lawful manner, all as more completely described in the Indenture
(Sections 101 and 307).
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Subject to certain limitations imposed upon Debt Securities issued in
book-entry form, the Debt Securities of any series will be exchangeable for
other Debt Securities of the same series, of a like aggregate principal amount
and tenor, of different authorized denominations upon surrender of such Debt
Securities at the corporate trust office of the Trustee. In addition, subject to
certain limitations imposed upon Debt Securities issued in book-entry form, the
Debt Securities of any series may be surrendered for conversion or registration
of transfer thereof at the corporate trust office of the Trustee referred to
above. Every Debt Security surrendered for conversion, redemption, registration
of transfer or exchange shall be duly endorsed or accompanied by a written
instrument of transfer. No service charge will be made for any registration of
transfer or exchange of any Debt Securities, but the Operating Partnership may
require payment of a sum sufficient to cover any tax or other governmental
charge payable in connection therewith (Section 305). If the applicable
Prospectus Supplement refers to any transfer agent (in addition to the Trustee)
initially designated by the Operating Partnership with respect to any series of
Debt Securities, the Operating Partnership may at any time rescind the
designation of any such transfer agent or approve a change in the location
through which any such transfer agent acts, except that the Operating
Partnership will be required to maintain a transfer agent in each Place of
Payment for such series. The Operating Partnership may at any time designate
additional transfer agents with respect to any series of Debt Securities
(Section 1002).
Neither the Operating Partnership nor the Trustee shall be required to (i)
issue, register the transfer of or exchange Debt Securities of any series during
a period beginning at the opening of business 15 days before any selection of
Debt Securities of that series to be redeemed and ending at the close of
business of the day of mailing of the relevant notice of redemption; (ii)
register the transfer of or exchange any Debt Security, or portion thereof,
called for redemption, except the unredeemed portion of any Debt Security being
redeemed in part; or (iii) issue, register the transfer of or exchange any Debt
Security which has been surrendered for repayment at the option of the Holder,
except that portion, if any, of such Debt Security which is not to be so repaid
(Section 305).
MERGER, CONSOLIDATION OR SALE
The Operating Partnership may consolidate with, or sell, lease or convey
all or substantially all of its assets to, or merge with or into, any other
person, provided (a) either the Operating Partnership shall be the continuing
person, or the successor (if other than the Operating Partnership) formed by or
resulting from any such consolidation or merger or which shall have received the
transfer of such assets shall expressly assume payment of the principal of (and
premium, if any) and interest on all of the Debt Securities and the due and
punctual performance and observance of all of the covenants and conditions
contained in the Indenture; (b) immediately after giving effect to such
transaction and treating any indebtedness which becomes an obligation of the
Operating Partnership or any Subsidiary as a result thereof as having been
incurred by the Operating Partnership or such Subsidiary at the time of such
transaction, no Event of Default under the Indenture, and no event which, after
notice or the lapse of time, or both, would become such an Event of Default,
shall have occurred and be continuing; and (c) an officers' certificate of the
Company as General Partner of the Operating Partnership and an opinion of
counsel covering such conditions shall be delivered to the Trustee (Sections 801
and 803).
CERTAIN COVENANTS
Existence. Except as permitted under "Merger, Consolidation or Sale," the
Indenture requires each of the Operating Partnership and the Company (if the
Company has guaranteed any Debt Securities) to do or cause to be done all things
necessary to preserve and keep in full force and effect its existence, rights
(partnership and statutory) and franchises; provided, however, that each of the
Operating Partnership and the Company shall not be required to preserve any
right or franchise if the Board of Directors of the Company determines that the
preservation thereof is no longer desirable in the conduct of the business of
the Operating Partnership and that the loss thereof is not disadvantageous in
any material respect to the Holders of the Debt Securities (Section 1004).
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Maintenance of Properties. The Indenture requires each of the Operating
Partnership and the Company (if the Company has guaranteed any Debt Securities)
to cause all of its material properties used or useful in the conduct of its
business or the business of any Subsidiary to be maintained and kept in good
condition, repair and working order, all as in the judgment of the Operating
Partnership may be necessary so that the business carried on in connection
therewith may be properly and advantageously conducted at all times; provided,
however, that the Operating Partnership or the Company, as the case may be, and
its Subsidiaries shall not be prevented from selling or otherwise disposing of
their properties for value in the ordinary course of business. (Section 1006).
Insurance. The Indenture requires the Operating Partnership and each of
its Subsidiaries to keep its insurable Properties insured against loss or damage
with commercially reasonable amounts and types of insurance provided by insurers
of recognized responsibility. (Section 1007).
Payment of Taxes and Other Claims. The Indenture requires each of the
Operating Partnership and the Company (if the Company has guaranteed any Debt
Securities) to pay or discharge or cause to be paid or discharged, before the
same shall become delinquent, (i) all taxes, assessments and governmental
charges levied or imposed upon it or any Subsidiary or upon its income, profits
or property or that of any Subsidiary and (ii) all lawful claims for labor,
materials and supplies which, if unpaid, might by law become a lien upon the
property of the Operating Partnership or any Subsidiary; provided, however, that
the Operating Partnership or the Company shall not be required to pay or
discharge or cause to be paid or discharged any tax, assessment, charge or claim
whose amount or applicability is being contested in good faith. (Section 1008).
Provision of Financial Information. The Operating Partnership will file
with the Trustee copies of annual reports, quarterly reports and other documents
(the "Financial Reports") which the Operating Partnership files with the
Commission or would be required to file with the Commission pursuant to Sections
13 or 15(d) of the Exchange Act if the Operating Partnership were subject to
such Sections; provided, however, that if the Operating Partnership is not
subject to such Sections, it may, in lieu of filing Financial Reports of the
Operating Partnership with the Trustee, file Financial Reports of the Company if
they would be materially the same as those that would have been filed by the
Operating Partnership with the Commission pursuant to Sections 13 or 15(d) of
the Exchange Act.
Additional Covenants. Reference is made to the applicable Prospectus
Supplement for information with respect to any additional covenants specific to
a particular series of Debt Securities.
EVENTS OF DEFAULT, NOTICE AND WAIVER
Unless otherwise provided in the Prospectus Supplement, the Indenture
provides that the following events are "Events of Default" with respect to any
series of Debt Securities issued thereunder: (a) default for 30 days in the
payment of any interest on any Debt Security of such series; (b) default in the
payment of any principal of (or premium, if any, on) any Debt Security of such
series when due; (c) default in making any sinking fund payment as required for
any Debt Security of such series; (d) default in the performance of any other
covenant or warranty of the Operating Partnership or the Company contained in
the Indenture with respect to any Debt Security of such series, continued for 60
days after written notice as provided in the Indenture; (e) default in the
payment of an aggregate principal amount exceeding $10,000,000 of any evidence
of indebtedness of the Operating Partnership or the Company (if the Company or
any subsidiary of the Company has guaranteed any indebtedness of the Operating
Partnership) or any mortgage, indenture, note, bond, capitalized lease or other
instrument under which such indebtedness is issued or by which such indebtedness
is secured, such default having continued after the expiration of any applicable
grace period and having resulted in the acceleration of the maturity of such
indebtedness, but only if such indebtedness is not discharged or such
acceleration is not rescinded or annulled; (f) certain events of bankruptcy,
insolvency or reorganization, or court appointment of a receiver, liquidator or
trustee of the Operating Partnership and the Company (if the Company has
guaranteed any Debt Securities), or any Significant Subsidiary or all or
substantially all of any of their respective property; and (g) any other Event
of Default provided with respect to a particular
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series of Debt Securities (Section 501). The term "Significant Subsidiary" means
each significant Subsidiary (as defined in Regulation S-X promulgated under the
Securities Act) of the Operating Partnership or the Company, as the case may be.
(Section 101).
If an Event of Default under the Indenture with respect to Debt Securities
of any series at the time Outstanding occurs and is continuing, then in every
such case the Trustee or the Holders of not less than a majority in principal
amount of the Outstanding Debt Securities of that series may declare the
principal amount (or, if the Debt Securities of that series are Original Issue
Discount Securities or Indexed Securities, such portion of the principal amount
as may be specified in the terms thereof) of all of the Debt Securities of that
series to be due and payable immediately by written notice thereof to the
Company (if the Company has guaranteed any Debt Securities under such Indenture)
and the Operating Partnership (and to the Trustee if given by the Holders).
However, any time after such a declaration of acceleration with respect to Debt
Securities of such series has been made, but before a judgment or decree for
payment of the money due has been obtained by the Trustee, the Holders of not
less then a majority in principal amount of Outstanding Debt Securities of such
series may rescind and annul such declaration and its consequences if (a) the
Operating Partnership shall have paid or deposited with the Trustee all required
payments of the principal of (and premium, if any) and interest on the Debt
Securities of such series plus certain fees, expenses, disbursements and
advances of the Trustee and (b) all Events of Default, other than the nonpayment
of accelerated principal or interest with respect to Debt Securities of such
series have been cured or waived as provided in the Indenture (Section 502). The
Indenture also provides that the Holders of not less than a majority in
principal amount of the Outstanding Debt Securities of any series may waive any
past default with respect to such series and its consequences, except a default
(x) in the payment of the principal of (or premium, if any) or interest on any
Debt Security of such series or (y) in respect of a covenant or provision
contained in the Indenture that cannot be modified or amended without the
consent of the Holder of each Outstanding Debt Security affected thereby
(Section 513).
The Trustee is required to give notice to the Holders of Debt Securities
within 90 days of a default under the Indenture; provided, however, that the
Trustee may withhold notice to the Holders of any series of Debt Securities of
any default with respect to such series (except a default in the payment of the
principal of (or premium, if any) or interest on any Debt Security of such
series or in the payment of any sinking fund installment in respect of any Debt
Security of such series) if the Responsible Officers of the Trustee consider
such withholding to be in the interest of such Holders (Section 601).
The Indenture provides that no Holders of Debt Securities of any series may
institute any proceedings, judicial or otherwise, with respect to the Indenture
or for any remedy thereunder, except in the case of failure of the Trustee, for
60 days, to act after it has received a written request to institute proceedings
in respect of an Event of Default from the Holders of not less than a majority
in principal amount of the Outstanding Debt Securities of that series, as well
as an offer of reasonable indemnity (Section 507). This provision will not
prevent, however, any Holder of Debt Securities from instituting suit for the
enforcement of payment of the principal of (and premium, if any) and interest on
such Debt Securities at the respective due date thereof (Section 508).
Subject to provisions in the Indenture relating to its duties in case of
default, the Trustee is under no obligation to exercise any of its rights or
powers under the Indenture at the request or direction of any Holders of Debt
Securities of any series then Outstanding under the Indenture, unless such
Holders shall have offered to the Trustee reasonable security or indemnity
(Section 602). The Holders of not less than a majority in principal amount of
the Outstanding Debt Securities of any series shall have the right to direct the
time, method and place of conducting any proceeding for any remedy available to
the Trustee, or of exercising any trust or power conferred upon the Trustee.
However, the Trustee may refuse to follow any direction which is in conflict
with any law or the Indenture, which may involve the Trustee in personal
liability or which may be unduly prejudicial to the Holders of Debt Securities
of such series not joining therein (Section 512).
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Within 120 days after the close of each fiscal year, the Operating
Partnership and the Company (if the Company has guaranteed any Debt Securities)
must deliver to the Trustee a certificate, signed by one of several specified
officers of the Company, stating whether or not such officer has knowledge of
any default under the Indenture and, if so, specifying each such default and the
nature and status thereof (Section 1005).
MODIFICATION OF THE INDENTURE
Modifications and amendments of provisions of the Indenture applicable to
any series may be made only with consent of the Holders of not less than a
majority in principal amount of all Outstanding Debt Securities which are
affected by such modification or amendment; provided, however, that no such
modification or amendment may, without the consent of the Holder of each such
Debt Security affected thereby, (a) change the Stated Maturity of the principal
of, or any installment of principal of or interest (or premium, if any) on, any
such Debt Security; (b) reduce the principal amount of, or the rate or amount of
interest on, or any premium payable on redemption of, any such Debt Security, or
reduce the amount of principal of an Original Issue Discount Security that would
be due and payable upon declaration of acceleration of the maturity thereof or
would be provable in bankruptcy, or adversely affect any right of repayment of
the Holder of any such Debt Security; (c) change the Place of Payment, or the
coin or currency, for payment of principal of, premium, if any, or interest on
any such Debt Security; (d) impair the right to institute suit for the
enforcement of any payment on or with respect to any such Debt Security on or
after the Stated Maturity thereof; (e) reduce the above-stated percentage of
Outstanding Debt Securities of any series necessary to modify or amend the
Indenture, to waive compliance with certain provisions thereof or certain
defaults and consequences thereunder or to reduce the quorum or voting
requirements set forth in the Indenture; or (f) modify any of the foregoing
provisions or any of the provisions relating to the waiver of certain past
defaults or certain covenants, except to increase the required percentage to
effect such action or to provide that certain other provisions may not be
modified or waived without the consent of the Holder of such Debt Security
(Section 902).
The Holders of not less than a majority in principal amount of Outstanding
Debt Securities of a particular series have the right to waive compliance by the
Operating Partnership or the Company with certain covenants in the Indenture
relating to such series (Section 1010).
Modifications and amendments of the Indenture may be made by the Operating
Partnership and the Company (if the Company has guaranteed any Debt Securities)
and the Trustee without the consent of any Holder of Debt Securities for any of
the following purposes: (i) to evidence the succession of another Person to the
Operating Partnership as obligor under the Indenture or succession of another
Person as Guarantor; (ii) to add to the covenants of the Operating Partnership
and the Company (if the Company has guaranteed any Debt Securities) for the
benefit of the Holders of all or any series of Debt Securities or to surrender
any right or power conferred upon the Operating Partnership or the Company in
the Indenture; (iii) to add Events of Default for the benefit of the Holders of
all or any series of Debt Securities; (iv) to add or change any provisions of
the Indenture to facilitate the issuance of Debt Securities in bearer form, or
to permit or facilitate the issuance of Debt Securities in uncertificated form,
provided that such action shall not adversely affect the interests of the
Holders of the Debt Securities of any series in any material respect; (v) to
change or eliminate any provisions of the Indenture, provided that any such
change or elimination shall become effective only when there are not Debt
Securities Outstanding of any series created prior thereto which are entitled to
the benefit of such provision; (vi) to secure the Debt Securities or Guarantees;
(vii) to establish the form or terms of Debt Securities of any series and any
related Guarantees; (viii) to provide for the acceptance of appointment by a
successor Trustee or facilitate the administration of the trust under the
Indenture by more than one Trustee; (ix) to cure any ambiguity, defect or
inconsistency in the Indenture, provided that such action shall not adversely
affect the interests of Holders of Debt Securities of any series in any material
respect; and (x) to supplement any of the provisions of the Indenture to the
extent necessary to permit or facilitate defeasance and discharge of any series
of such Debt Securities, provided that such action shall not
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adversely affect the interests of the Holders of the Debt Securities of any
series in any material respect (Section 901).
The Indenture provides that in determining whether the Holders of the
requisite principal amount of Outstanding Debt Securities of a series have given
any request, demand, authorization, direction, notice, consent or waiver
thereunder or whether a quorum is present at a meeting of Holders of Debt
Securities, (i) the principal amount of an Original Issue Discount Security that
shall be deemed to be outstanding shall be the amount of the principal thereof
that would be due and payable as of the date of such determination upon
declaration of acceleration of the maturity thereof, (ii) the principal amount
of a Debt Security denominated in a Foreign Currency that shall be deemed
outstanding shall be the U.S. dollar equivalent, determined on the issue date
for such Debt Security, of the principal amount (or, in the case of an Original
Issue Discount Security, the U.S. dollar equivalent on the issue date of such
Debt Security of the amount determined as provided in (i) above), (iii) the
principal amount of an Indexed Security that shall be deemed outstanding shall
be the principal face amount of such Indexed Security at original issuance,
unless otherwise provided with respect to such Indexed Security pursuant to
Section 301 of the Indenture, and (iv) Debt Securities owned by the Operating
Partnership or any other obligor upon the Debt Securities or any Affiliate of
the Operating Partnership or of such other obligor shall be disregarded (Section
101).
The Indenture contains provisions for convening meetings of the Holders of
Debt Securities of a series (Section 1501). A meeting may be called at any time
by the Trustee, and also, upon request, by the Operating Partnership or the
Holders of at least 25% in principal amount of the Outstanding Debt Securities
of such series, in any such case upon notice given as provided in the Indenture
(Section 1502). Except for any consent that must be given by the Holder of each
Debt Security affected by certain modifications and amendments of the Indenture,
any resolution presented at a meeting or adjourned meeting duly reconvened at
which a quorum is present may be adopted by the affirmative vote of the Holders
of a majority in principal amount of the Outstanding Debt Securities of that
series; provided, however, that, except as referred to above, any resolution
with respect to any request, demand, authorization, direction, notice, consent,
waiver or other action that may be made, given or taken by the Holders of a
specified percentage, which is less than a majority, in principal amount of the
Outstanding Debt Securities of a series may be adopted at a meeting or adjourned
meeting duly reconvened at which a quorum is present by the affirmative vote of
the Holders of such specified percentage in principal amount of the Outstanding
Debt Securities of that series. Any resolution passed or decision taken at any
meeting of Holders of Debt Securities of any series duly held in accordance with
the Indenture will be binding on all Holders of Debt Securities of that series.
The quorum at any meeting called to adopt a resolution, and at any reconvened
meeting, will be Persons holding or representing a majority in principal amount
of the Outstanding Debt Securities of a series; provided, however, that if any
action is to be taken at such meeting with respect to a consent or waiver which
may be given by the Holders of not less than a specified percentage in principal
amount of the Outstanding Debt Securities of a series, the Persons holding or
representing such specified percentage in principal amount of the Outstanding
Debt Securities of such series will constitute a quorum (Section 1504).
Notwithstanding the foregoing provisions, if any action is to be taken at a
meeting of Holders of Debt Securities of any series with respect to any request,
demand, authorization, direction, notice, consent, waiver or other action that
the Indenture expressly provides may be made, given or taken by the Holders of a
specified percentage in principal amount of all Outstanding Debt Securities
affected thereby, or of the Holders of such series and one or more additional
series: (i) there shall be no minimum quorum requirement for such meeting and
(ii) the principal amount of the Outstanding Debt Securities of such series that
vote in favor of such request, demand, authorization, direction, notice,
consent, waiver or other action shall be taken into account in determining
whether such request, demand, authorization, direction, notice, consent, waiver
or other action has been made, given or taken under the Indenture (Section
1504).
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DISCHARGE, DEFEASANCE AND COVENANT DEFEASANCE
Unless otherwise provided in the Prospectus Supplement, the Operating
Partnership or the Company (if the Company has guaranteed any Debt Securities
under such Indenture) may discharge certain obligations to Holders of any series
of Debt Securities that have not already been delivered to the Trustee for
cancellation and that either have become due and payable or will become due and
payable within one year (or are scheduled for redemption within one year) by
irrevocably depositing with the Trustee, in trust, funds in such currency or
currencies, currency unit or units or composite currency or currencies in which
such Debt Securities are payable in an amount sufficient to pay the entire
indebtedness on such Debt Securities in respect of principal (and premium, if
any) and interest to the date of such deposit (if such Debt Securities have
become due and payable) or to the Stated Maturity or Redemption Date, as the
case may be (Section 401).
The Indenture provides that, unless otherwise provided in the Prospectus
Supplement, if the provisions of Article Fourteen are made applicable to the
Debt Securities of any series pursuant to Section 301 of the Indenture, the
Operating Partnership may elect either (a) to decease and be discharged from any
and all obligations with respect to such Debt Securities (except for the
obligation to pay Additional Amounts, if any, upon the occurrence of certain
events of tax, assessment or governmental charge with respect to payments on
such Debt Securities and the obligations to register the transfer or exchange of
such Debt Securities, to replace temporary or mutilated, destroyed, lost or
stolen Debt Securities, to maintain an office or agency in respect of such Debt
Securities to compensate the Trustee and to hold moneys for payment in trust)
("defeasance") (Section 1402) or (b) to be released from its obligations with
respect to such Debt Securities under Sections 1006 through 1008, inclusive, of
the Indenture (being the restrictions described under "Certain Covenants") or,
if provided pursuant to Section 301 of the Indenture, its obligations with
respect to any other covenant, and any omission to comply with such obligations
shall not constitute a default or an Event of Default with respect to such Debt
Securities ("covenant defeasance") (Section 1403), in either case upon the
irrevocable deposit by the Operating Partnership or the Company, as the case may
be, with the Trustee, in trust, of any amount, in such currency or currencies,
currency unit or units or composite currency or currencies in which such Debt
Securities are payable at Stated Maturity, or Government Obligations (as defined
below), or both applicable to such Debt Securities which through the scheduled
payment of principal and interest in accordance with their terms will provide
money in an amount sufficient to pay the principal of (and premium, if any) and
interest on such Debt Securities, and any mandatory sinking fund or analogous
payments thereon, on the scheduled due dates therefor.
Such a trust may only be established if, among other things, the Operating
Partnership has delivered to the Trustee an Opinion of Counsel (as specified in
the Indenture) to the effect that the Holders of such Debt Securities will not
recognize income, gain or loss for U.S. federal income tax purposes as a result
of such defeasance or covenant defeasance and will be subject to U.S. federal
income tax on the same amounts, in the same manner and at the same times as
would have been the case if such defeasance or covenant defeasance had not
occurred, and such Opinion of Counsel, in the case of defeasance, must refer to
and be based upon a ruling of the Internal Revenue Service or a change in
applicable United States federal income tax law occurring after the date of the
Indenture (Section 1404).
"Government Obligations" means securities which are (i) direct obligations
of the United States of America or the government which issued the Foreign
Currency in which the Debt Securities of a particular series are payable, for
the payment of which its full faith and credit is pledged or (ii) obligations of
a Person controlled or supervised by and acting as an agency or instrumentality
of the United States of America or such government which issued the Foreign
Currency in which the Debt Securities of such series are payable, the payment of
which is unconditionally guaranteed as a full faith and credit obligation by the
United States of America or such other government, which, in either case, are
not callable or redeemable at the option of the issuer thereof, and shall also
include a depository receipt issued by a bank or trust company as custodian with
respect to any such Government Obligation or a specific payment of interest on
or principal of any such Government Obligation held by such custodian for the
account of the holder of a depository receipt, provided that (except as required
by law) such custodian
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is not authorized to make any deduction from the amount payable to the holder of
such depository receipt from any amount received by the custodian in respect of
the Government Obligation or the specific payment of interest on or principal of
the Government Obligation evidenced by such depository receipt (Section 101).
Unless otherwise provided in the applicable Prospectus Supplement, if after
the Operating Partnership or the Company, as the case may be, has deposited
funds and/or Government Obligations to effect defeasance or covenant defeasance
with respect to Debt Securities of any series, (a) the Holder of a Debt Security
of such series is entitled to, and does, elect pursuant to Section 301 of the
Indenture or the terms of such Debt Security to receive payment in a currency,
currency unit or composite currency other than that in which such deposit has
been made in respect of such Debt Security, or (b) a Conversion Event (as
defined below) occurs in respect of the currency, currency unit or composite
currency in which such deposit has been made, the indebtedness represented by
such Debt Security shall be deemed to have been, and will be, fully discharged
and satisfied through the payment of the principal of (and premium, if any) and
interest on such Debt Security as the same becomes due out of the proceeds
yielded by converting the amount so deposited in respect of such Debt Security
into the currency, currency unit or composite currency in which such Debt
Security becomes payable as a result of such election or such cessation of usage
based on the applicable market exchange rate (Section 1405). "Conversion Event"
means the cessation of use of (i) a currency, currency unit or composite
currency either by the government of the country which issued such currency and
for the settlement of transactions by a central bank or other public
institutions or within the international banking community, (ii) the ECU either
within the European Monetary System or for the settlement of transactions by
public institutions of or within the European Communities or (iii) any currency
unit or composite currency other than the ECU for the purposes for which it was
established. (Section 101.) Unless otherwise provided in the applicable
Prospectus Supplement, all payments of principal of (and premium, if any) and
interest on any Debt Security that is payable in a Foreign Currency that cease
to be used by its government of issuance shall be made in U.S. dollars.
In the event the Operating Partnership or the Company, as the case may be,
effects covenant defeasance with respect to any Debt Securities and such Debt
Securities are declared due and payable because of the occurrence of any Event
of Default other than the Event of Default described in clause (d) under "Events
of Default, Notice and Waiver" with respect to Section 1006 through 1008 of the
Indenture (which Sections would no longer be applicable to such Debt Securities)
or described in clause (g) under "Events of Default, Notice and Waiver" with
respect to any other covenant as to which there has been covenant defeasance,
the amount in such currency, currency unit or composite currency in which such
Debt Securities are payable, and Government Obligations on deposit with the
Trustee, will be sufficient to pay amounts due on such Debt Securities at the
time of their Stated Maturity but may not be sufficient to pay amounts due on
such Debt Securities at the time of the acceleration resulting from such Event
of Default. However, the Operating Partnership and the Company (if the Company
has guaranteed any Debt Securities) would remain liable to make payment of such
amounts due at the time of acceleration.
The applicable Prospectus Supplement may further describe the provisions,
if any, permitting such defeasance or covenant defeasance, including any
modifications to the provisions described above, with respect to the Debt
Securities of a particular series.
SUBORDINATION
The terms and conditions, if any, upon which the Debt Securities are
subordinated to other indebtedness of the Operating Partnership will be set
forth in the applicable Prospectus Supplement relating thereto. Such terms will
include a description of the indebtedness ranking senior to the Debt Securities,
the restrictions on payments to the Holders of such Debt Securities while a
default with respect to such senior indebtedness in continuing, the
restrictions, if any, on payments to the Holders of such Debt Securities
following an Event of Default, and provisions requiring Holders of such Debt
Securities to remit certain payments to holders of senior indebtedness.
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DESCRIPTION OF CAPITAL STOCK
GENERAL
As of June 30, 1997, the total number of shares of all classes of capital
stock that the Company had authority to issue was 1,000,000,000 shares,
consisting of (i) 660,500,000 shares of Common Stock, par value $0.0001 per
share, (ii) 2,000,000 shares of Class B Common Stock, par value $0.0001 per
share, (iii) 1,500,000 shares of Class C Common Stock, par value $0.0001 per
share, (iv) 1,000,000 shares of Series A Preferred Stock, par value $0.0001 per
share, (v) 5,000,000 shares of Series B Cumulative Redeemable Preferred Stock
("Series B Preferred Stock"), par value $0.0001 per share, and (vi) 330,000,000
shares of excess stock (the "Excess Stock").
As of June 30, 1997, there were (i) 43,532,923 shares of Common Stock
issued and outstanding, (ii) 2,000,000 shares of Class B Common Stock issued and
outstanding, (iii) 1,176,470 shares of Class C Common Stock issued and
outstanding, (iv) 1,000,000 shares of Series A Preferred Stock issued and
outstanding, and (v) 4,250,000 shares of Series B Preferred Stock, issued and
outstanding. At any given time, there are reserved for issuance under the
Spieker Properties, Inc. 1993 Stock Incentive Plan (the "Plan") shares of the
Company's Common Stock equal to 9.9% of the number of shares of the Company's
stock outstanding (including shares of Common Stock issuable upon conversion of
partnership units in the Operating Partnership, Series A Preferred Stock, Class
B Common Stock and Class C Common Stock, and all classes of convertible
securities of the Company that may be issued in the future) as of the last day
of the immediately preceding quarter reduced by the number of shares of Common
Stock reserved for issuance under other stock compensation plans of the Company.
As of June 30, 1997, the Company had reserved for issuance under the Plan
5,361,748 shares of the Company's Common Stock and 150,000 shares of Common
Stock was reserved for issuance under the Spieker Properties, Inc. 1993
Directors Stock Option Plan. In addition, 2,531,645 shares of Common Stock have
been reserved for issuance upon the conversion of Class B Common Stock,
1,176,470 shares of Common Stock have been reserved for issuance upon the
conversion of Class C Common Stock and 1,219,512 shares of Common Stock have
been reserved for issuance upon the conversion of the Series A Preferred Stock.
Further, 7,239,389 shares of Common Stock have been reserved for issuance upon
the conversion of limited partnership units in the Operating Partnership.
COMMON STOCK
The following description of the Common Stock sets forth certain general
terms and provisions of the Common Stock to which any Prospectus Supplement may
relate, including a Prospectus Supplement providing that Common Stock will be
issuable upon conversion of Preferred Stock or Depositary Shares or upon the
exercise of Warrants issued by the Company. This description is in all respects
subject to and qualified in its entirety by reference to the applicable
provisions of the Company's Articles of Incorporation, as amended and restated
to date, and Articles Supplementary (collectively, the "Charter") and its
Bylaws. The Common Stock is listed on the New York Stock Exchange under the
symbol "SPK." The Bank of New York is the Company's transfer agent.
The holders of the outstanding Common Stock are entitled to one vote per
share for each director being elected and on all other matters voted on by
stockholders. The Charter does not provide for cumulative voting in the election
of directors.
The shares of Common Stock offered hereby will, when issued, be fully paid
and nonassessable and will not be subject to preemptive or similar rights.
Subject to the preferential rights of the Series A Preferred Stock, Series B
Preferred Stock and any preferential rights of any other outstanding series of
capital stock, the holders of Common Stock are entitled to such distributions as
may be declared from time to time by the Board of Directors from funds available
for distribution to such holders. The Company currently pays regular quarterly
dividends to holders of Common Stock.
In the event of a liquidation, dissolution or winding up of the Company,
the holders of Common Stock are entitled to receive ratably the assets remaining
after satisfaction of all liabilities and payment of
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liquidation preferences and accrued dividends, if any, on Series A Preferred
Stock, Series B Preferred Stock, Class B Common Stock and Class C Common Stock
and any other series of capital stock that has a liquidation preference. The
rights of holders of Common Stock are subject to the rights and preferences
established by the Board of Directors for any capital stock that may
subsequently be issued by the Company.
Subject to limitations prescribed by Maryland law and the Company's
Charter, the Board of Directors is authorized to reclassify any unissued portion
of the authorized shares of capital stock to provide for the issuance of shares
in other classes or series, including other classes or series of Common Stock,
to establish the number of shares in each class or series and to fix the
designation and any preferences, conversion and other rights, voting powers,
restrictions, limitations as to dividends, qualifications and terms and
conditions of redemption of such class or series. The rights, preferences,
privileges and restrictions of such class or series will be fixed by the
articles supplementary relating to such class or series. A Prospectus Supplement
will specify the terms of such class or series.
CLASS B COMMON STOCK
The following description of the Company's Class B Common Stock is in all
respects subject to and qualified in its entirety by reference to the applicable
provisions of the Company's Charter, including the Articles Supplementary
applicable to the Class B Common Stock, and Bylaws. The Company has issued
2,000,000 shares of Class B Common Stock, par value $0.0001 per share, all of
which were outstanding as of June 30, 1997.
The Class B Common Stock ranks on a parity with the Company's Common Stock
with respect to dividends. The Class B Common Stock was sold in May 1995 to an
institutional investor at a price per share of $25.00. The initial per share
dividend of the Class B Common Stock was set at $2.19, which was at a rate that
was equal to the dividend yield on shares of Common Stock sold concurrently with
the Class B Common Stock plus 0.25%. The dividend per share on the Class B
Common stock is increased or decreased by the same dollar amount as any increase
or decrease in the dividend distributions made to the holders of Common Stock.
The Company currently pays regular dividends to holders of Class B Common Stock.
In the event of any liquidation, dissolution or winding up of the Company,
the holders of Class B Common Stock are entitled to receive, on a parity with
the holders of Class C Common Stock and prior and in preference to the holders
of Common Stock, an amount per share of Class B Common Stock equal to all
declared but unpaid dividends for each share of Class B Common Stock. The Class
B Common Stock has not been registered under the Securities Act. The
institutional investor who purchased the shares of Class B Common Stock has
certain demand registration rights for eight years following the May 1995 sale
of such shares to register in each instance Common Stock having a market value
of $1.0 million or more. Subject to certain limitations, the Class B Common
Stock may be converted into Common Stock based on a certain formula three years
after the May 1995 sale or earlier upon the occurrence of certain events
including a change in management. Under such formula, 2,000,000 outstanding
shares of Class B Common Stock are currently convertible into 2,531,645 shares
of Common Stock. The holder of Class B Common Stock is not entitled to vote on
matters voted on by stockholders of the Company.
CLASS C COMMON STOCK
The following description of the Company's Class C Common Stock is in all
respects subject to and qualified in its entirety by reference to the applicable
provisions of the Company's Charter, including the Articles Supplementary
applicable to the Class C Common Stock, and Bylaws. The Company has issued
1,176,470 shares of Class C Common Stock, par value $0.0001 per share, all of
which were outstanding as of June 30, 1997.
The Class C Common Stock ranks on a parity with the Company's Common Stock
and Class B Common Stock with respect to dividends. The Class C Common Stock was
sold in March 1996 to an institutional investor at a price per share of $25.50.
The initial per share dividend of the Class C Common
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Stock was set at $1.73. The dividend per share on the Class C Common Stock is
increased or decreased by the same dollar amount as any increase or decrease in
the dividend distributions made to the holders of Common Stock. The Company
currently pays regular dividends to the holder of Class C Common Stock.
In the event of any liquidation, dissolution or winding up of the Company,
the holders of Class C Common Stock are entitled to receive, on a parity with
the holders of Class B Common Stock and prior and in preference to the holders
of Common Stock, an amount per share of Class C Common Stock equal to all
declared but unpaid dividends for each share of Class C Common Stock. The Class
C Common Stock has not been registered under the Securities Act. The
institutional investor who purchased the shares of Class C Common Stock has
certain demand registration rights for eight years following the March 1996 sale
of such shares to register in each instance Common Stock having a market value
of $1.0 million or more. Subject to certain limitations, the Class C Common
Stock may be converted into Common Stock on a one-for-one basis three years
after the March 1996 sale or earlier upon the occurrence of certain events
including a change in management. The holders of Class C Common Stock are not
entitled to vote on matters voted on by stockholders of the Company.
SERIES A PREFERRED STOCK
The following description of the Company's Series A Preferred Stock is in
all respects subject to and qualified in its entirety by reference to the
applicable provisions of the Company's Charter, including the Articles
Supplementary applicable to the Series A Preferred Stock, and Bylaws. The
Company is authorized to issue 1,000,000 shares of Series A Preferred Stock, all
of which were issued and outstanding as of June 30, 1997 and held of record by
one private investor. The Series A Preferred Stock ranks senior to the Company's
Common Stock, Class B Common Stock and Class C Common Stock as to dividends and
liquidation amounts. The dividend per share on the Series A Preferred Stock is
equal to the dividend per share on the Common Stock as multiplied by the number
of shares of Common Stock into which each share of Series A Preferred Stock is
convertible, provided that the dividend rate on the Series A Preferred Stock may
not be less than the initial dividend rate thereof. The dividends on the Series
A Preferred Stock are cumulative. The Company currently pays regular dividends
to holders of Series A Preferred Stock.
In the event of any liquidation, dissolution or winding up of the Company,
the holders of Series A Preferred Stock are entitled to receive on a parity with
the holders of Series B Preferred Stock, prior and in preference to any
distribution to the holders of Common Stock, Class B Common Stock and Class C
Common Stock, an amount per share of Series A Preferred Stock equal to the sum
of $25.00 and any accrued but unpaid dividends with respect thereto. The Company
may redeem, subject to certain exceptions, from any source of funds legally
available therefor, on or at any time after May 13, 1999, any or all outstanding
shares of Series A Preferred Stock at the option of the Company by paying in
cash therefor an amount per share equal to the sum of $25.00 and any accrued but
unpaid dividends with respect thereto.
Each share of Series A Preferred Stock is convertible, at the option of the
holder thereof at any time prior to a redemption date, into shares of Common
Stock based on a certain formula. Under such formula, the 1,000,000 outstanding
shares of Series A Preferred Stock are convertible into 1,219,512 shares of
Common Stock. The holder of each share of Series A Preferred Stock has the right
to one vote for each share of Common Stock into which such Series A Preferred
Stock can be converted, and with respect to such vote, such holder has the
voting rights and powers of the holders of each share of Common Stock, and is
entitled to notice of any stockholders' meeting in accordance with the Bylaws of
the Company, and is entitled to vote, together with holders of Common Stock,
with respect to any question upon which holders of Common Stock have the right
to vote.
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SERIES B PREFERRED STOCK
The following description of the Company's Series B Preferred Stock is in
all respects subject to and qualified in its entirety by reference to the
applicable provisions of the Charter, including the Company's Articles
Supplementary applicable to the Series B Preferred Stock, and Bylaws. The
Company is authorized to issue 5,000,000 shares of Series B Preferred Stock, of
which 4,250,000 shares were issued and outstanding as of June 30, 1997. The
holders of the Series B Preferred Stock are entitled to receive cumulative,
preferential cash dividends, when and as declared by the Board of Directors, of
$2.3625 per share. The Company currently pays regular dividends to holders of
Series B Preferred Stock.
In the event of any liquidation, dissolution or winding up of the Company,
the holders of Series B Preferred Stock are entitled to receive on a parity with
the holders of Series A Preferred Stock, prior and in preference to any
distribution to the holders of Common Stock, Class B Common Stock and Class C
Common Stock, an amount per share of Series B Preferred Stock equal to the sum
of $25.00 and any accrued but unpaid dividends with respect thereto. The Company
may redeem, subject to certain exceptions, from any source of funds legally
available therefor, on or at any time after December 11, 2000, any or all
outstanding shares of Series B Preferred Stock at the option of the Company by
paying in cash therefor an amount per share equal to the sum of $25.00 and any
accrued but unpaid dividends with respect thereto, without interest.
The Series B Preferred Stock is not convertible into or exchangeable for
any other property or securities of the Company at the option of the holder.
However, in order to preserve the Company's status as a REIT for federal income
tax purposes, the Series B Preferred Stock may be exchanged for Excess Stock.
See "Description of Common Stock -- General." Except in limited circumstances,
the holders of shares of Series B Preferred Stock have no voting rights.
RESTRICTIONS ON TRANSFER
For the Company to qualify as a REIT under the Internal Revenue Code of
1986, as amended (the "Code"), not more than 50% in value of its outstanding
stock may be owned, directly or indirectly, by five or fewer individuals (as
defined in the Code) during the last half of a taxable year, the stock 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 and
certain percentages of the Company's gross income must be from particular
activities (see "Federal Income Tax Considerations -- Requirements for
Qualification -- Gross Income Tests"). To enable the Company to continue to
qualify as a REIT, the Charter restricts the acquisition of shares of common
stock and preferred stock.
The Charter provides that, subject to certain exceptions specified in the
Charter, no stockholder may own, or be deemed to own by virtue of the
attribution provisions of the Code, more than 9.9% of the value of the
outstanding common stock and preferred stock (the "Ownership Limit"). The Board
of Directors may waive the Ownership Limit in certain limited situations if the
Board receives a ruling of the Internal Revenue Service (the "IRS")or an opinion
of counsel to the effect that such ownership will not jeopardize the Company's
status as a REIT. As a condition to such waiver, the Board of Directors may
require representations and undertakings from the applicant with respect to
preserving the REIT status of the Company. The Ownership Limit will not apply if
the Board of Directors and the stockholders of the Company determine that it is
no longer in the best interests of the Company to attempt to qualify, or to
continue to qualify, as a REIT. If the issuance or transfer of shares of common
stock or preferred stock to any person would cause such person to exceed the
Ownership Limit (unless a waiver of the Board of Directors has been obtained),
would cause the Company to be beneficially owned by fewer than 100 persons or
cause the Company to become "closely held" under Section 856(h) of the Code,
such issuance or transfer shall be null and void and the intended transferee
will acquire no rights to such shares.
The Charter also provides that shares involved in a transfer or change in
capital structure that results in a person owning in excess of the Ownership
Limit (unless a waiver of the Board of Directors has been obtained), would cause
the Company to be beneficially owned by fewer than persons, or would cause
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the Company to become "closely held" within the meaning of Section 856(h) of the
Code will automatically be exchanged for Excess Stock. All Excess Stock will be
transferred, without action by the stockholder, to the Company as trustee of a
trust for the exclusive benefit of the transferee or transferees to whom the
Excess Stock is ultimately transferred. While the Excess Stock is held in trust,
it will not be entitled to vote, it will not be considered for purposes of any
stockholder vote or the determination of a quorum for such vote and it will not
be entitled to participate in any distributions made by the Company, except upon
liquidation. The Company would have the right, for a period of 90 days during
the time the Excess Stock is held by the Company in trust, to purchase all or
any portion of the Excess Stock from the intended transferee at the lesser of
the price paid for the stock by the intended transferee and the closing market
price for the stock on the date the Company exercises its option to purchase.
The Ownership Limit provision of the Charter will not be automatically
removed even if the real estate investment trust provisions of the Code are
changed so as to no longer contain any ownership concentration limitation or if
the ownership concentration limitation is increased. Except as otherwise
described above, any change in the Ownership Limit would require an amendment to
the Charter. Such amendments to the Charter require the affirmative vote of
holders owning a majority of the total number of shares of all classes of stock
outstanding and entitled to vote thereon. In addition to preserving the
Company's status as a real estate investment trust, the Ownership Limit may have
the effect of precluding an acquisition of control of the Company.
All certificates representing shares of common stock and preferred stock
will bear a legend referring to the restrictions described above.
All persons who own of record, more than 5% of the outstanding common stock
and preferred stock (or 1% if there are more than 200 but fewer than 2,000
stockholders or one-half of 1% if there are 200 or less stockholders of record)
must file an affidavit with the Company containing the information specified in
the Charter within 30 days after January 1 of each year. In addition, each
stockholder shall upon demand be required to disclose to the Company in writing
such information with respect to the direct, indirect and constructive ownership
of shares as the Board of Directors deems necessary to determine the Company's
status as a real estate investment trust and to ensure compliance with the
Ownership Limit.
The articles supplementary, if applicable, for the Offered Securities may
also contain provisions that further restrict the ownership and transfer of the
Offered Securities. The applicable Prospectus Supplement will specify any
additional ownership limitation relating to the Offered Securities.
DESCRIPTION OF PREFERRED STOCK
GENERAL
Subject to limitations prescribed by Maryland law and the Company's
Charter, the Board of Directors is authorized to issue, from the authorized but
unissued shares of capital stock of the Company, Preferred Stock in such classes
or series as the Board of Directors may determine and to establish from time to
time the number of shares of Preferred Stock to be included in any such class or
series and to fix the designation and any preferences, conversion and other
rights, voting powers, restrictions, limitations as to dividends, qualifications
and terms and conditions of redemption of the shares of any such class or
series, and such other subjects or matters as may be fixed by resolution of the
Board of Directors. The issuance of Preferred Stock may have the effect of
delaying, deferring or preventing a change in control of the Company.
Preferred Stock, upon issuance against full payment of the purchase price
therefor, will be fully paid and nonassessable. The specific terms of a
particular class or series of Preferred Stock will be described in the
Prospectus Supplement relating to that class or series, including a Prospectus
Supplement providing that Preferred Stock may be issuable upon the exercise of
Warrants issued by the Company. The description of Preferred Stock set forth
below and the description of the terms of a particular class or
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series of Preferred Stock set forth in a Prospectus Supplement do not purport to
be complete and are qualified in their entirety by reference to the articles
supplementary relating to that class or series.
The preferences and other terms of the Preferred Stock of each class or
series will be fixed by the articles supplementary relating to such class or
series. A Prospectus Supplement, relating to each class or series, will specify
the terms of the Preferred Stock as follows:
(1) The title and stated value of such Preferred Stock;
(2) The number of shares of such Preferred Stock offered, the
liquidation preference per share and the offering price of such Preferred
Stock;
(3) The dividend rate(s), period(s), and/or payment date(s) or
method(s) of calculation thereof applicable to such Preferred Stock;
(4) Whether such Preferred Stock is cumulative or not and, if
cumulative, the date from which dividends on such Preferred Stock shall
accumulate;
(5) The provision for a sinking fund, if any, for such Preferred
Stock;
(6) The provision for redemption, if applicable, of such Preferred
Stock;
(7) Any listing of such Preferred Stock on any securities exchange;
(8) The terms and conditions, if applicable, upon which such Preferred
Stock will be converted into Common Stock of the Company, including the
conversion price (or manner of calculation thereof);
(9) A discussion of any material federal income tax considerations
applicable to such Preferred Stock;
(10) Any limitations on direct or beneficial ownership and
restrictions on transfer, in each case as may be appropriate to preserve
the status of the Company as a REIT;
(11) The relative ranking and preferences of such Preferred Stock as
to dividend rights and rights upon liquidation, dissolution or winding up
of the affairs of the Company;
(12) Any limitations on issuance of any class or series of preferred
stock ranking senior to or on a parity with such class or series of
Preferred Stock as to dividend rights and rights upon liquidation,
dissolution or winding up of the affairs of the Company;
(13) Any other specific terms, preferences, rights, limitations or
restrictions of such Preferred Stock; and
(14) Any voting rights of such Preferred Stock.
RANK
Unless otherwise specified in the Prospectus Supplement, the Preferred
Stock will, with respect to dividend rights and rights upon liquidation,
dissolution or winding up of the Company, rank (i) senior to all classes or
series of common stock and excess stock of the Company, and to all equity
securities ranking junior to such Preferred Stock with respect to dividend
rights and rights upon liquidation, dissolution or winding up of the Company;
(ii) on a parity with all equity securities issued by the Company the terms of
which specifically provide that such equity securities rank on a parity with the
Preferred Stock with respect to dividends rights or rights upon liquidation,
dissolution or winding up of the Company; and (iii) junior to all equity
securities issued by the Company the terms of which specifically provide that
such equity securities rank senior to the Preferred Stock with respect to
dividend rights or rights upon liquidation, dissolution or winding up of the
Company.
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CONVERSION RIGHTS
The terms and conditions, if any, upon which any shares of any class or
series of Preferred Stock are convertible into Common Stock will be set forth in
the applicable Prospectus Supplement relating thereto. Such terms will include
the number of shares of Common Stock into which the shares of Preferred Stock
are convertible, the conversion price (or manner of calculation thereof), the
conversion period, provisions as to whether conversion will be at the option of
the holders of such class or series of Preferred Stock or the Company, the
events requiring an adjustment of the conversion price and provisions affecting
conversion in the event of the redemption of such class or series of Preferred
Stock.
DESCRIPTION OF DEPOSITARY SHARES
GENERAL
The Company may issue Depositary Shares, each of which will represent a
fractional interest of a share of a particular class or series of Preferred
Stock, as specified in the applicable Prospectus Supplement. Shares of a class
or series of Preferred Stock represented by Depositary Shares will be deposited
under a separate Deposit Agreement (each, a "Deposit Agreement") among the
Company, the depositary named therein (the "Preferred Stock Depositary") and the
holders from time to time of the depositary receipts issued by the Preferred
Stock Depositary which will evidence the Depositary Shares ("Depositary
Receipts"). Subject to the terms of the Deposit Agreement, each owner of a
Depositary Receipt will be entitled, in proportion to the fractional interest of
a share of a particular class or series of Preferred Stock represented by the
Depositary Shares evidenced by such Depositary Receipt, to all the rights and
preferences of the class or series of the Preferred Stock represented by such
Depositary Shares (including dividend, voting, conversion, redemption and
liquidation rights).
The Depositary Shares will be evidenced by Depositary Receipts issued
pursuant to the applicable Deposit Agreement. Immediately following the issuance
and delivery of the Preferred Stock by the Company to a Preferred Stock
Depositary, the Company will cause such Preferred Stock Depositary to issue, on
behalf of the Company, the Depositary Receipts. Copies of the applicable form of
Deposit Agreement and Depositary Receipt may be obtained from the Company upon
request, and the statements made hereunder relating to the Deposit Agreement and
the Depositary Receipt to be issued thereunder are summaries of certain
anticipated provisions thereof and do not purport to be complete and are subject
to, and qualified in their entirety by reference to, all of the provisions of
the applicable Deposit Agreement and related Depositary Receipts.
DIVIDENDS AND OTHER DISTRIBUTIONS
The Preferred Stock Depositary will distribute all cash dividends or other
cash distributions received in respect of a class or series of Preferred Stock
to the record holders of Depositary Receipts evidencing the related Depositary
Shares in proportion to the number of the such Depositary Receipts owned by such
holders, subject to certain obligations of holders to file proofs, certificates
and other information and to pay certain charges and expenses to such Preferred
Stock Depositary.
In the event of a distribution other than in cash, the Preferred Stock
Depositary will distribute property received by it to the record holders of
Depositary Receipts entitled thereto, subject to certain obligations of holders
to file proofs, certificates and other information and to pay certain charges
and expenses to the Preferred Stock Depositary, unless such Preferred Stock
Depositary determines that it is not feasible to make such distribution, in
which case the Preferred Stock Depositary may, with the approval of the Company,
sell such property and distribute the net proceeds from such sale to such
holders.
No distribution will be made in respect of any Depositary Share to the
extent that it represents any class or series of Preferred Stock converted into
Excess Stock or otherwise converted or exchanged.
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WITHDRAWAL OF STOCK
Upon surrender of the Depositary Receipts at the corporate trust office of
the Preferred Stock Depositary (unless the related Depositary Shares have
previously been called for redemption or converted or converted into Excess
Stock or otherwise), the holders thereof will be entitled to delivery at such
office, to or upon each such holder's order, of the number of whole or
fractional shares of the class or series of Preferred Stock and any money or
other property represented by the Depositary Shares evidenced by such Depositary
Receipts. Holders of Depositary Receipts will be entitled to receive whole or
fractional shares of the related class or series of Preferred Stock on the basis
of the proportion of Preferred Stock represented by each Depositary Share as
specified in the applicable Prospectus Supplement, but holders of such shares of
Preferred Stock will not thereafter be entitled to receive Depositary Shares
therefor. If the Depositary Receipts delivered by the holder evidence a number
of Depositary Shares in excess of the number of Depositary Shares representing
the number of shares of Preferred Stock to be withdrawn, the Preferred Stock
Depositary will deliver to such holder at the same time a new Depositary Receipt
evidencing such excess number of Depositary Shares.
REDEMPTION OF DEPOSITARY SHARES
Whenever the Company redeems shares of Preferred Stock held by the
Preferred Stock Depositary, the Preferred Stock Depositary will redeem as of the
same redemption date the number of the Depositary Shares representing shares of
such class or series of Preferred Stock so redeemed, provided the Company shall
have paid in full to the Preferred Stock Depositary the redemption price of the
Preferred Stock to be redeemed plus an amount equal to any accrued and unpaid
dividends thereon to the date fixed for redemption. The redemption price per
Depositary Share will be equal to the corresponding proportion of the redemption
price and any other amounts per share payable with respect to such class or
series of Preferred Stock. If fewer than all the Depositary Shares are to be
redeemed, the Depositary Shares to be redeemed will be selected pro rata (as
nearly as may be practicable without creating fractional Depositary Shares) or
by any other equitable method determined by the Company that will not result in
the issuance of any Excess Stock.
From and after the date fixed for redemption, all dividends in respect of
the shares of a class of series of Preferred Stock so called for redemption will
cease to accrue, the Depositary Shares so called for redemption will no longer
be deemed to be outstanding and all rights of the holders of the Depositary
Receipts evidencing the Depositary Shares so called for redemption will cease,
except the right to receive any moneys payable upon such redemption and any
money or other property to which the holders of such Depositary Receipts were
entitled upon such redemption upon surrender thereof to the Preferred Stock
Depositary.
VOTING OF THE PREFERRED STOCK
Upon receipt of notice of any meeting at which the holders of a class or
series of Preferred Stock deposited with the Preferred Stock Depositary are
entitled to vote, the Preferred Stock Depositary will mail the information
contained in such notice of meeting to the record holders of the Depositary
Receipts evidencing the Depositary Shares which represent such class or series
of Preferred Stock. Each record holder of Depositary Receipts evidencing
Depositary Shares on the record date (which will be the same date as the record
date for such class or series of Preferred Stock) will be entitled to instruct
the Preferred Stock Depositary as to the exercise of the voting rights
pertaining to the amount of Preferred Stock represented by such holder's
Depositary Shares. The Preferred Stock Depositary will vote the amount of such
class or series of Preferred Stock represented by such Depositary Shares in
accordance with such instructions, and the Company will agree to take all
reasonable action which may be deemed necessary by the Preferred Stock
Depositary in order to enable the Preferred Stock Depositary to do so. The
Preferred Stock Depositary will abstain from voting the amount of Preferred
Stock represented by such Depositary Shares to the extent it does not receive
specific instructions from the holders of Depositary Receipts evidencing such
Depositary Shares. The Preferred Stock Depositary will not be responsible for
any failure to carry out any instruction to vote, or for the manner or effect of
any such vote
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made, as long as any such action or non-action is in good faith and does not
result from negligence or willful misconduct of the Preferred Stock Depositary.
LIQUIDATION PREFERENCE
In the event of the liquidation, dissolution or winding up of the Company
whether voluntary or involuntary, the holders of each Depositary Receipt will be
entitled to the fraction of the liquidation preference accorded each share of
Preferred Stock represented by the Depositary Share evidenced by such Depositary
Receipt as set forth in the applicable Prospectus Supplement.
CONVERSION OF PREFERRED STOCK
The Depositary Shares, as such, will not be convertible into Common Stock
or any other securities or property of the Company, except in connection with
certain exchanges in connection with the preservation of the Company's status as
a REIT. See "Description of Common Stock -- Restrictions on Transfer."
Nevertheless, if so specified in the applicable Prospectus Supplement relating
to an offering of Depositary Shares, the Depositary Receipts may be surrendered
by holders thereof to the applicable Preferred Stock Depositary with written
instructions to the Preferred Stock Depositary to instruct the Company to cause
conversion of a class or series of Preferred Stock represented by the Depositary
Shares evidenced by such Depositary Receipts into whole shares of Common Stock,
other shares of a class or series of Preferred Stock (including Excess Stock) of
the Company or other shares of stock, and the Company has agreed that upon
receipt of such instructions and any amounts payable in respect thereof, it will
cause the conversion thereof utilizing the same procedures as those provided for
delivery of Preferred Stock to effect such conversion. If the Depositary Shares
evidenced by a Depositary Receipt are to be converted in part only, a Depositary
Receipt or Receipts will be issued for any Depositary Shares not to be
converted. No fractional shares of Common Stock will be issued upon conversion,
and if such conversion will result in a fractional share being issued, an amount
will be paid in cash by the Company equal to the value of the fractional
interest based upon the closing price of the Common Stock on the last business
day prior to the conversion.
AMENDMENT AND TERMINATION OF A DEPOSIT AGREEMENT
The form of Depositary Receipt evidencing Depositary Shares which represent
the Preferred Stock and any provision of the Deposit Agreement may at any time
be amended by agreement between the Company and the Preferred Stock Depositary.
However, any amendment that materially and adversely alters the rights of the
holders of Depositary Receipts or that would be materially and adversely
inconsistent with the rights granted to the holders of the related Preferred
Stock will not be effective unless such amendment has been approved by the
existing holders of at least two-thirds of the applicable Depositary Shares
evidenced by the applicable Depositary Receipts then outstanding. No amendment
shall impair the right, subject to certain anticipated exceptions in the Deposit
Agreements, of any holder of Depositary Receipts to surrender any Depositary
Receipt with instructions to deliver to the holder the related class or series
of Preferred Stock and all money and other property, if any, represented
thereby, except in order to comply with law. Every holder of an outstanding
Depositary Receipt at the time any such amendment becomes effective shall be
deemed, by continuing to hold such Depositary Receipt, to consent and agree to
such amendment and to be bound by the applicable Deposit Agreement as amended
thereby.
The Deposit Agreement may be terminated by the Company upon not less than
30 days' prior written notice to the Preferred Stock Depositary if (i) such
termination is necessary to preserve the Company's status as a REIT or (ii) a
majority of each series class or of Preferred Stock subject to such Deposit
Agreement consents to such termination, whereupon the Preferred Stock Depositary
will deliver or make available to each holder of Depositary Receipts, upon
surrender of the Depositary Receipts held by such holder, such number of whole
or fractional shares of each Preferred Stock as are represented by the
Depositary Shares evidenced by such Depositary Receipts together with any other
property held by preferred Stock Depositary with respect to such Depositary
Receipts. The Company has agreed that if
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the Deposit Agreement is terminated to preserve the Company's status as a REIT,
then the Company will use its best efforts to list each class or series of
Preferred Stock issued upon surrender of the related Depositary Shares. In
addition, the Deposit Agreement will automatically terminate if (i) all
outstanding Depositary Shares shall have been redeemed, (ii) there shall have
been a final distribution in respect of each class or series of Preferred Stock
in connection with any liquidation, dissolution or winding up of the Company and
such distribution shall have been distributed to the holders of the Depositary
Receipts evidencing the Depositary Shares representing such class or series of
Preferred Stock or (iii) each share of the related Preferred Stock shall have
been converted into stock of the Company not so represented by Depositary
Shares.
CHARGES OF A PREFERRED STOCK DEPOSITARY
The Company will pay all transfer and other taxes and governmental charges
arising solely from the existence of the Deposit Agreement. In addition, the
Company will pay the fees and expenses of the Preferred Stock Depositary in
connection with the performance of its duties under the Deposit Agreement.
However, holders of Depositary Receipts will pay the fees and expenses of the
Preferred Stock Depositary for any duties requested by such holders to be
performed which are outside of those expressly provided for in the Deposit
Agreement.
RESIGNATION AND REMOVAL OF DEPOSITARY
The Preferred Stock Depositary may resign at any time by delivering to the
Company notice of its election to do so, and the Company may at any time remove
the Preferred Stock Depositary, any such resignation or removal to take effect
upon the appointment of a successor Preferred Stock Depositary. A successor
Preferred Stock Depositary must be appointed within 60 days after delivery of
the notice of resignation or removal and must be a bank or trust company having
its principal office in the United States and having a combined capital and
surplus of at least $50,000,000.
MISCELLANEOUS
The Preferred Stock Depositary will forward to holders of Depositary
Receipts any reports and communications from the Company which are received by
the Preferred Stock Depositary with respect to the related Preferred Stock.
Neither the Preferred Stock Depositary nor the Company will be liable if it
is prevented from or delayed in, by law or any circumstances beyond its control,
performing its obligations under the Deposit Agreement. The obligations of the
Company and the Preferred Stock Depositary under the Deposit Agreement will be
limited to performing their duties thereunder in good faith and without
negligence (in the case of any action or inaction in the voting of a class or
series of Preferred Stock represented by the Depositary Shares), gross
negligence or willful misconduct, and the Company and the Preferred Stock
Depositary will not be obligated to prosecute or defend any legal proceeding in
respect of any Depositary Receipts, Depositary Shares or shares of a class or
series of Preferred Stock represented thereby unless satisfactory indemnity is
furnished. The Company and the Preferred Stock Depositary may rely on written
advice of counsel or accountants, or information provided by persons presenting
shares of Preferred Stock represented thereby for deposit, holders of Depositary
Receipts or other persons believed in good faith to be competent to give such
information, and on documents believed in good faith to be genuine and signed by
a proper party.
In the event a Preferred Stock Depositary shall receive conflicting claims,
requests or instructions from any holders of Depositary Receipts, on the one
hand, and the Company, on the other hand, the Preferred Stock Depositary shall
be entitled to act on such claims, requests or instructions received from the
Company.
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DESCRIPTION OF WARRANTS
The Company has no Warrants outstanding (other than options issued under
the Company's employee stock option plan). The Company may issue Warrants for
the purchase of Preferred Stock or Common Stock. Warrants may be issued
independently or together with any other Offered Securities offered by any
Prospectus Supplement and may be attached to or separate from such Offered
Securities. Each series of Warrants will be issued under a separate warrant
agreement (each, a "Warrant Agreement") to be entered into between the Company
and a warrant agent specified in the applicable Prospectus Supplement (the
"Warrant Agent"). The Warrant Agent will act solely as an agent of the Company
in connection with the Warrants of such series and will not assume any
obligation or relationship of agency or trust for or with any provisions of the
Warrants offered hereby. Further terms of the Warrants and the applicable
Warrant Agreements will be set forth in the applicable Prospectus Supplement.
The applicable Prospectus Supplement will describe the terms of the
Warrants in respect of which this Prospectus is being delivered, including,
where applicable, the following: (1) the title of such Warrants; (2) the
aggregate number of such Warrants; (3) the price or prices at which such
Warrants will be issued; (4) the designation, terms and number of shares of
Preferred Stock or Common Stock purchasable upon exercise of such Warrants; (5)
the designation and terms of the Offered Securities, if any, with which such
Warrants are issued and the number of such Warrants issued with each such
Offered Security; (6) the date, if any, on and after which such Warrants and the
related Preferred Stock or Common Stock will be separately transferable; (7) the
price at which each share of Preferred Stock or Common Stock purchasable upon
exercise of such Warrants may be purchased; (8) the date on which the right to
exercise such Warrants shall commence and the date on which such right shall
expire; (9) the minimum or maximum amount of such Warrants which may be
exercised at any one time; (10) information with respect to book-entry
procedures, if any; (11) a discussion of certain federal income tax
considerations; and (12) any other terms of such Warrants, including terms,
procedures and limitations relating to the exchange and exercise of such
Warrants.
CERTAIN PROVISIONS OF THE COMPANY'S CHARTER AND BYLAWS
Certain provisions of the Company's Charter and Bylaws might discourage
certain types of transactions that involve an actual or threatened change of
control of the Company. The Ownership Limit may delay or impede a transaction or
a change in control of the Company that might involve a premium price for the
Company's capital stock or otherwise be in the best interest of the
stockholders. See "Description of Common Stock -- Restrictions on Transfer."
Pursuant to the Company's Charter and Bylaws, the Company's Board of Directors
is divided into three classes of directors, each class serving staggered
three-year terms. In addition, directors may only be removed for cause and with
the vote of 80% of the shares eligible to vote. These provisions may reduce the
possibility of a tender offer or an attempt to change control of the Company.
The issuance of Preferred Stock by the Board of Directors may also have the
effect of delaying, deferring or preventing a change in control of the Company.
See "Description of Preferred Stock -- General."
FEDERAL INCOME TAX CONSIDERATIONS
The following summary of material federal income tax considerations is
based on current law and does not purport to deal with all aspects of taxation
that may be relevant to particular stockholders in light of their personal
investment or tax circumstances, or to certain types of stockholders (including
insurance companies, financial institutions and broker-dealers) subject to
special treatment under the federal income tax laws. Certain federal income tax
considerations relevant to holders of the Offered Securities will be provided in
the applicable Prospectus Supplement relating thereto.
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EACH PROSPECTIVE PURCHASER IS ADVISED TO CONSULT HIS OWN TAX ADVISOR
REGARDING THE SPECIFIC TAX CONSEQUENCES TO HIM OF THE PURCHASE, OWNERSHIP AND
SALE OF THE OFFERED SECURITIES.
GENERAL
The Company believes that since its formation it has operated in a manner
that permits it to satisfy the requirements for taxation as a REIT under the
applicable provisions of the Code. The Company intends to continue to operate to
satisfy such requirements. No assurance can be given, however, that such
requirements will be satisfied.
The sections of the Code relating to qualification and operation as a REIT
are highly technical and complex. The following sets forth the material aspects
of the laws that govern the federal income tax treatment of a REIT and its
stockholders. This summary is qualified in its entirety by the applicable Code
provisions, rules and regulations thereunder, and administrative and judicial
interpretations thereof. Morrison & Foerster LLP has acted as special tax
counsel to the Company in connection with the Company's election to be taxed as
a REIT.
In the opinion of Morrison & Foerster LLP, commencing with the Company's
taxable year ended December 31, 1993, the Company has been organized in
conformity with the requirements for qualification as a REIT, and its method of
operation has and will enable it to continue to meet the requirements for
qualification and taxation as a REIT under the Code. It must be emphasized that
this opinion is based on various assumptions and is conditioned upon certain
representations made by the Company as to factual matters. Moreover, such
qualification and taxation as a REIT depends upon the Company's ability to meet,
through actual annual operating results, distribution levels and diversity of
stock ownership, the various qualification tests imposed under the Code
discussed below, the results of which will not be reviewed by Morrison &
Foerster LLP. Accordingly, no assurance can be given that the actual results of
the Company's operations for any particular taxable year will satisfy such
requirements. See "-- Failure to Qualify."
In brief, if certain detailed conditions imposed by the REIT provisions of
the Code are satisfied, entities, such as the Company, that invest primarily in
real estate and that otherwise would be treated for federal income tax purposes
as corporations, are generally not taxed at the corporate level on their "REIT
taxable income" that is currently distributed to stockholders. This treatment
substantially eliminates the "double taxation" (i.e., taxation at both the
corporate and stockholder levels) that generally results from investing in
corporations.
If the Company fails to qualify as a REIT in any year, however, it will be
subject to federal income tax as if it were a domestic corporation, and its
stockholders will be taxed in the same manner as stockholders of ordinary
corporations. In this event, the Company could be subject to potentially
significant tax liabilities and the amount of cash available for distribution to
its stockholders could be reduced.
TAXATION OF THE COMPANY
In any year in which the Company qualifies as a REIT, in general, it will
not be subject to federal income tax on that portion of its net income that it
distributes to stockholders. However, the Company will be subject to federal
income tax as follows: First, the Company will be taxed at regular corporate
rates on any undistributed real estate investment trust taxable income,
including undistributed net capital gains. (However, a REIT can elect to "pass
through" any of its taxes paid on its undistributed net capital gains income to
its stockholders on a pro rata basis.) Second, under certain circumstances, the
Company may be subject to the "alternative minimum tax" on its items of tax
preference. Third, if the Company has (i) net income from the sale or other
disposition of "foreclosure property" which is held primarily for sale to
customers in the ordinary course of business or (ii) other nonqualifying income
from foreclosure property, it will be subject to tax at the highest corporate
rate on such income. Fourth, if the Company has net income from prohibited
transactions (which are, in general, certain sales or other dispositions of
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property held primarily for sale to customers in the ordinary course of
business, other than property held for at least four years, foreclosure
property, and property involuntarily converted), such income will be subject to
a 100% tax. Fifth, if the Company should fail to satisfy the 75% or the 95%
tests (as discussed below), and has nonetheless maintained its qualification as
a REIT because certain other requirements have been satisfied, it will be
subject to a 100% tax on the net income attributable to the greater of the
amount by which the REIT fails the 75% or 95% test. Sixth, if the Company should
fail to distribute during each calendar year at least the sum of (i) 85% of its
real estate investment trust ordinary income for such year, (ii) 95% of its real
estate investment trust net capital gain income for such year, and (iii) any
undistributed taxable income from prior periods, the Company would be subject to
a 4% excise tax on the excess of such required distribution over the amounts
actually distributed. Seventh, if the Company acquires any asset from a C
corporation (i.e., generally a corporation subject to full corporate-level tax)
in a transaction in which the basis of the asset in the Company's hands is
determined by reference to the basis of the asset (or any other property) in the
hands of the C corporation, and the Company recognizes gain on the disposition
of such asset during the 10 year period beginning on the date on which such
asset was acquired by the REIT, then, to the extent of any built-in gain at the
time of acquisition, such gain will be subject to tax at the highest regular
corporate rate.
REQUIREMENTS FOR QUALIFICATION
The Code defines a REIT as a corporation, trust or association (1) which is
managed by one or more trustees or directors; (2) the beneficial ownership of
which is evidenced by transferable shares, or by transferable certificates of
beneficial interest; (3) which would be taxable as a domestic corporation, but
for Sections 856 through 860 of the Code; (4) which is neither a financial
institution nor an insurance company subject to certain provisions of the Code;
(5) the beneficial ownership of which is held by 100 or more persons; (6) not
more than 50% in value of the outstanding stock of which is owned, directly or
indirectly, by five or fewer individuals (as defined in the Code) at any time
during the last half of each taxable year; and (7) which meets certain other
tests, described below, regarding the nature of income and assets. The Code
provides that conditions (1) to (4), inclusive, must be met during the entire
taxable year and that condition (5) must be met during at least 335 days of a
taxable year of 12 months, or during a proportionate part of a taxable year of
less than 12 months. Beginning in 1998, a REIT's failure to satisfy condition
(6) during a taxable year will not result in its disqualification as REIT under
the Code for such taxable year as long as (i) the REIT satisfies the stockholder
demand statement requirements described in the succeeding paragraph and (ii) the
REIT did not know, or exercising reasonable diligence would not have known,
whether it had failed condition (6).
In order to ensure compliance with the ownership tests described above, the
Company has placed certain restrictions on the transfer of the Common Stock and
Preferred Stock to prevent further concentration of stock ownership. Moreover,
to evidence compliance with these requirements, the Company must maintain
records which disclose the actual ownership of its outstanding Common Stock and
Preferred Stock. In fulfilling its obligations to maintain records, the Company
must and will demand written statements each year from the record holders of
designated percentages of its Common Stock and Preferred Stock disclosing the
actual owners of such Common Stock and Preferred Stock. A list of those persons
failing or refusing to comply with such demand must be maintained as part of the
Company's records. A stockholder failing or refusing to comply with the
Company's written demand must submit with his tax returns a similar statement
disclosing the actual ownership of Common Stock and Preferred Stock and certain
other information. In addition, the Company's Charter provides restrictions
regarding the transfer of its shares that are intended to assist the Company in
continuing to satisfy the share ownership requirements. See "Description of
Common Stock -- Restrictions on Transfer."
Although the Company intends to satisfy the stockholder demand statement
requirements described in the preceding paragraph, beginning in 1998, its
failure to satisfy these requirements will not result in its disqualification as
a REIT under the Code but may result in the imposition of IRS penalties against
the Company.
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In the case of a REIT that is a partner in a partnership, Treasury
Regulations provide that the REIT will be deemed to own its proportionate share
of the assets of the partnership and will be deemed to be entitled to the income
of the partnership attributable to such share. In addition, the character of the
assets and gross income of a partnership shall retain the same character in the
hands a partner qualifying as a REIT for purposes of Section 856 of the Code,
including satisfying the gross income tests and the asset tests, described
below. Thus, the Company's proportionate share of the assets, liabilities and
items of income of the Operating Partnership will be treated as assets,
liabilities and items of income of the Company for purposes of applying the
requirements described below.
ASSET TESTS
At the close of each quarter of the Company's taxable year, the Company
must satisfy two tests relating to the nature of its assets. First, at least 75%
of the value of the Company's total assets must be represented by interests in
real property, interests in mortgages on real property, shares in other REITs,
cash, cash items and government securities (as well as certain temporary
investments in stock or debt instruments purchased with the proceeds of new
capital raised by the Company). Second, although the remaining 25% of the
Company's assets generally may be invested without restriction, securities in
this class may not exceed either (i) 5% of the value of the Company's total
assets as to any one nongovernment issuer, or (ii) 10% of the outstanding voting
securities of any one issuer. The Company's investment in the Properties through
its interest in the Operating Partnership constitutes qualified assets for
purposes of the 75% asset test. In addition, the Company may own 100% of
"qualified REIT subsidiaries," which are, in general, 100% owned, corporate
subsidiaries of a REIT. All assets, liabilities, and items of income, deduction,
and credit of such a qualified REIT subsidiary will be treated as owned and
realized directly by the Company. The Company's investment in preferred stock of
Spieker Northwest, Inc. is not a qualifying asset for purposes of the 75% asset
test. The Company expects, however, that such investment will continue to
represent less than 5% of the Company's total assets and, together with any
other nonqualifying assets, will continue to represent less than 25% of the
Company's total assets.
GROSS INCOME TESTS
There are three separate percentage tests (two beginning in 1998) relating
to the sources of the Company's gross income which must be satisfied for each
taxable year. For purposes of these tests, where the Company invests in a
partnership, the Company will be treated as receiving its share of the income
and loss of the partnership, and the gross income of the partnership will retain
the same character in the hands of the Company as it has in the hands of the
partnership. See "-- Tax Aspects of the Company's Investment in the Operating
Partnerships -- General."
The 75% Test. At least 75% of the Company's gross income for the taxable
year must be "qualifying income." Qualifying income generally includes (i) rents
from real property (except as modified below); (ii) interest on obligations
collateralized by mortgages on, or interests in, real property; (iii) gains from
the sale or other disposition of interests in real property and real estate
mortgages, other than gain from property held primarily for sale to customers in
the ordinary course of the Company's trade or business ("dealer property"); (iv)
dividends or other distributions on shares in other REITs, as well as gain from
the sale of such shares; (v) abatements and refunds of real property taxes; (vi)
income from the operation, and gain from the sale, of property acquired at or in
lieu of a foreclosure of the mortgage collateralized by such property
("foreclosure property"); and (vii) commitment fees received for agreeing to
make loans collateralized by mortgages on real property or to purchase or lease
real property.
Rents received from a tenant will not, however, qualify as rents from real
property in satisfying the 75% test (or the 95% test described below) if the
Company, or an owner of 10% or more of the Company, directly or constructively
owns 10% or more of such tenant (a "related party tenant"). In addition, if rent
attributable to personal property, leased in connection with a lease of real
property, is greater than 15% of the total rent received under the lease, then
the portion of rent attributable to such personal property will not qualify as
rents from real property. Moreover, an amount received or accrued
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generally will not qualify as rents from real property (or as interest income)
for purposes of the 75% test and 95% test (described below) if it is based in
whole or in part on the income or profits of any person. Rent or interest will
not be disqualified, however, solely by reason of being based on a fixed
percentage or percentages of receipts or sales. Finally, for rents received to
qualify as rents from real property, the Company generally must not operate or
manage the property or furnish or render services to tenants, other than through
an "independent contractor" from whom the Company derives no revenue. The
"independent contractor" requirement, however, does not apply to the extent that
the services provided by the Company are "usually or customarily rendered" in
connection with the rental of space for occupancy only, and are not otherwise
considered "rendered to the occupant." For both the related party tenant rules
and determining whether an entity qualifies as an independent contractor of a
REIT, certain attribution rules of the Code apply, pursuant to which shares of a
REIT held by one entity are deemed held by another.
Under current law, if a REIT provides impermissible services to its
tenants, all of the rent from those tenants can be disqualified from satisfying
the 75% test and 95% test (described below). Beginning in 1998, however, rents
will not be disqualified if a REIT provides de minimis, impermissible services.
For this purpose, services provided to tenants of a property are considered de
minimis where income derived from the services rendered equals 1% or less of all
income derived from the property (threshold determined on a property-by-property
basis). For purposes of the 1% threshold, the amount treated as received for any
service shall not be less than 150% of the direct cost incurred in furnishing or
rendering the service.
The Company, through the Operating Partnership (which is not an independent
contractor of the Company), will provide certain services with respect to the
Properties and any newly acquired Properties. The Company believes that the
services provided by the Operating Partnership are usually or customarily
rendered in connection with the rental of space of occupancy only, and therefore
that the provision of such services will not cause the rents received with
respect to the Properties to fail to qualify as rents from real property for
purposes of the 75% and 95% tests. The Company does not intend to rent to
related party tenants or to charge rents that would not qualify as rents from
real property because the rents are based on the income or profits of any person
(other than rents that are based on a fixed percentage or percentages of
receipts or sales).
The 95% Test. In addition to deriving 75% of its gross income from the
sources listed above, at least 95% of the Company's gross income for the taxable
year must be derived from the above-described qualifying income, or from
dividends, interest or gains from the sale or disposition of stock or other
securities that are not dealer property. Dividends from a corporation other than
a REIT and interest on any obligation not collateralized by an interest on real
property are included for purposes of the 95% test, but not for purposes of the
75% test. For purposes of determining whether the Company complies with the 75%
and 95% tests, gross income does not include income from "prohibited
transactions." A "prohibited transaction" is a sale of dealer property,
generally excluding certain property held by the Company for at least four years
and foreclosure property. See "-- Taxation of the Company" and "-- Tax Aspects
of the Company's Investment in the Operating Partnership -- Sale of the
Properties."
The Company believes that it and the Operating Partnership has held and
managed the Properties in a manner that has given rise to rental income
qualifying under the 75% and 95% tests. Gains on sales of the Properties will
generally qualify under the 75% and 95% tests.
Even if the Company fails to satisfy one or both of the 75% or 95% tests
for any taxable year, it may still qualify as a REIT for such year if it is
entitled to relief under certain provisions of the Code. These relief provisions
will generally be available if: (i) the Company's failure to comply was due to
reasonable cause and not to willful neglect; (ii) the Company reports the nature
and amount of each item of its income included in the 75% and 95% tests on a
schedule attached to its tax return; and (iii) any incorrect information on this
schedule is not due to fraud with intent to evade tax. It is not possible,
however, to state whether in all circumstances the Company would be entitled to
the benefit of these relief provisions.
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If these relief provisions apply, the Company will, however, still be subject to
a special tax upon the greater of the amount by which it fails either the 75% or
95% test for that year.
The 30% Test. For each taxable year ending on or before December 31, 1997,
the Company must have derived less than 30% of its gross income from the sale or
other disposition of (i) real property held for less than four years (other than
foreclosure property and involuntary conversions), (ii) stock or securities held
for less than one year, and (iii) property in a prohibited transaction. The 30%
test has been repealed, effective for tax years beginning after December 31,
1997.
ANNUAL DISTRIBUTION REQUIREMENTS
The Company, in order to qualify as a REIT, is required to distribute
dividends (other than capital gain dividends) to its stockholders each year in
an amount equal to at least (A) the sum of (i) 95% of the Company's REIT taxable
income (computed without regard to the dividends paid deduction and the REIT's
net capital gain) and (ii) 95% of the net income (after tax), if any, from
foreclosure property, minus (B) the sum of certain items of non-cash income.
Such distributions must be paid in the taxable year to which they relate, or in
the following taxable year if declared before the Company timely files its tax
return for such year and if paid on or before the first regular dividend payment
after such declaration. To the extent that the Company does not distribute all
of its net capital gain or distributes at least 95%, but less than 100%, of its
REIT taxable income, as adjusted, it will be subject to tax on the undistributed
amount at regular capital gains or ordinary corporate tax rates, as the case may
be. (However, a REIT can elect to "pass through" any of its taxes paid on its
undistributed net capital gains income to its stockholders on a pro rata basis.)
Furthermore, if the REIT should fail to distribute during each calendar year at
least the sum of (i) 85% of its ordinary income for such year, (ii) 95% of its
net capital gain income for such year, and (iii) any undistributed taxable
income from prior periods, the REIT would be subject to a 4% excise tax on the
excess of such required distribution over the amounts actually distributed. For
these and other purposes, dividends declared by a REIT in October, November or
December of one taxable year and payable to a stockholder of record on a
specific date in any such month shall be treated as both paid by the REIT and
received by the stockholder during such taxable year, provided that the dividend
is actually paid by the REIT by January 31 of the following taxable year.
The Company believes that it has made timely distributions sufficient to
satisfy the annual distribution requirements. In this regard, the partnership
agreement of the Operating Partnership authorizes the Company, as general
partner, to take such steps as may be necessary to cause the Operating
Partnership to distribute to its partners an amount sufficient to permit the
Company to meet these distribution requirements. It is possible that in the
future the Company may not have sufficient cash or other liquid assets to meet
the 95% distribution requirement, due to timing differences between the actual
receipt of income and actual payment of expenses on the one hand, and the
inclusion of such income and deduction of such expenses in computing the
Company's REIT taxable income on the other hand. Further, as described below, it
is possible that, from time to time, the Company may be allocated a share of net
capital gain attributable to the sale of depreciated property that exceeds its
allocable share of cash attributable to that sale. To avoid any problem with the
95% distribution requirement, the Company will closely monitor the relationship
between its REIT taxable income and cash flow and, if necessary, will borrow
funds (or cause the Operating Partnership or other affiliates to borrow funds)
in order to satisfy the distribution requirement. The Company (through the
Operating Partnership) may be required to borrow funds at times when market
conditions are not favorable.
If the Company fails to meet the 95% distribution requirement as a result
of an adjustment to the Company's tax return by the IRS, the Company may
retroactively cure the failure by paying a "deficiency dividend" (plus
applicable penalties and interest) within a specified period.
FAILURE TO QUALIFY
If the Company fails to qualify for taxation as a REIT in any taxable year
and the relief provisions do not apply, the Company will be subject to tax
(including any applicable alternative minimum tax) on its
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taxable income at regular corporate rates. Distributions to stockholders in any
year in which the Company fails to qualify will not be deductible by the
Company, nor will they be required to be made. In such event, to the extent of
the Company's current and accumulated earnings and profits, all distributions to
stockholders will be taxable as ordinary income, and, subject to certain
limitations in the Code, corporate distributees may be eligible for the
dividends received deduction. Unless entitled to relief under specific statutory
provisions, the Company will also be disqualified from taxation as a REIT for
the four taxable years following the year during which qualification was lost.
It is not possible to state whether the Company would be entitled to such
statutory relief.
TAX ASPECTS OF THE COMPANY'S INVESTMENT IN THE OPERATING PARTNERSHIP
The following discussion summarizes certain federal income tax
considerations applicable solely to the Company's investment in the Operating
Partnership. The discussion does not cover state or local tax laws or any
federal tax laws other than income tax laws.
GENERAL
The Company holds a direct ownership interest in the Operating Partnership.
In general, partnerships are "pass-through" entities which are not subject to
federal income tax. Rather, partners are allocated their proportionate shares of
the items of income, gain, loss, deduction and credit of a partnership, and are
potentially subject to tax thereon, without regard to whether the partners
receive a distribution from the partnership. The Company includes its
proportionate share of the foregoing Operating Partnership items for purposes of
the various REIT income tests and in the computation of its REIT taxable income.
See "-- Taxation of the Company" and "-- Requirements for Qualification -- Gross
Income Tests." Any resultant increase in the Company's REIT taxable income
increases its distribution requirements (see "-- Requirements for
Qualification -- Annual Distribution Requirements"), but is not subject to
federal income tax in the hands of the Company provided that such income is
distributed by the Company to its stockholders. Moreover, for purposes of the
REIT asset tests (see "-- Requirements for Qualification -- Asset Tests"), the
Company includes its proportionate share of assets held by the Operating
Partnership.
TAX ALLOCATIONS WITH RESPECT TO THE PROPERTIES
Pursuant to Section 704(c) of the Code, income, gain, loss and deduction
attributable to appreciated or depreciated property that is contributed to a
partnership in exchange for an interest in the partnership (such as certain of
the Properties), must be allocated in a manner such that the contributing
partner is charged with, or benefits from, respectively, the unrealized gain or
unrealized loss associated with the property at the time of the contribution.
The amount of such unrealized gain or unrealized loss is generally equal to the
difference between the fair market value of contributed property at the time of
contribution, and the adjusted tax basis of such property at the time of
contribution (a "Book-Tax Difference"). Such allocations are solely for federal
income tax purposes and do not affect the book capital accounts or other
economic or legal arrangements among the partners. The Operating Partnership was
initially formed by way of contributions of appreciated property (including
certain of the Properties). Consequently, the partnership agreement of the
Operating Partnership requires such allocations to be made in a manner
consistent with Section 704(c) of the Code.
In general, the limited partners of the Operating Partnership will be
allocated lower amounts of depreciation deductions for tax purposes and
increased taxable income and gain on sale by the Operating Partnership of the
contributed assets (including certain of the Properties). This will tend to
eliminate the Book-Tax Difference over the life of the Operating Partnership.
However, the special allocation rules under Section 704(c) of the Code do not
always entirely rectify the Book-Tax Difference on an annual basis or with
respect to a specific taxable transaction such as a sale. Thus, the carryover
basis of the contributed assets in the hands of the Operating Partnership may
cause the company to be allocated lower depreciation and other deductions, and
possibly greater amounts of taxable income in the event of a sale of such
contributed assets in excess of the economic or book income allocated to it as a
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result of such sale. This may cause the Company to recognize taxable income in
excess of cash proceeds, which might adversely affect the Company's ability to
comply with the REIT distribution requirements. See "-- Requirements for
Qualification -- Annual Distribution Requirements." In addition, the application
of Section 704(c) of the Code to the Operating Partnership is not entirely clear
and may be affected by authority that may be promulgated in the future.
SALE OF THE PROPERTIES
Generally, any gain realized by the Operating Partnership on the sale of
property held by the Operating Partnership will be capital gain, except for any
portion of such gain that is treated as certain depreciation or cost recovery
recapture. The Company's share of any gain realized by the Operating Partnership
on the sale of any dealer property generally will be treated as income from a
prohibited transaction that is subject to a 100% penalty tax. See "Taxation of
the Company" and "-- Requirements for Qualification -- Gross Income Tests -- The
95% Test." Under existing law, whether property is dealer property is a question
of fact that depends on all the facts and circumstances with respect to the
particular transaction. The Operating Partnership intends to hold the Properties
for investment with a view to long-term appreciation, to engage in the business
of acquiring, developing, owning and operating the Properties, and to make such
occasional sales of the Properties as are consistent with the Company's
investment objectives. Based upon such investment objectives, the Company
believes that in general the Properties should not be considered dealer property
and that the amount of income from prohibited transactions, if any, will not be
material.
TAXATION OF STOCKHOLDERS
TAXATION OF TAXABLE DOMESTIC STOCKHOLDERS
As long as the Company qualifies as a REIT, distributions made to the
Company's taxable domestic stockholders out of current or accumulated earnings
and profits (and not designated as capital gain dividends) will be taken into
account by them as ordinary income. Stockholders that are corporations will not
be entitled to a dividends received deduction. To the extent that the Company
makes distributions in excess of current and accumulated earnings and profits,
these distributions are treated first as a tax-free return of capital to the
stockholder, reducing the tax basis of a stockholder's Common Stock by the
amount of such distribution (but not below zero), with distributions in excess
of the stockholders tax basis taxable as capital gains (if the Common Stock is
held as a capital asset). In addition, any dividend declared by the Company in
October, November or December of any year and payable to a stockholder of record
on a specific date in any such month shall be treated as both paid by the
Company and received by the stockholder on December 31 of such year, provided
that the dividend is actually paid by the Company during January of the
following calendar year. Stockholders may not include in their individual income
tax returns any net operating losses or capital losses of the Company.
In general, distributions which are designed by the Company as capital gain
dividends will be taxed to stockholders as gain from the sale of assets held for
greater than 1 year, or "long-term term capital gain," without regard to the
period for which a stockholder has held his stock upon which the capital gain
dividend is paid. However, corporate stockholders may be required to treat up to
20% of certain capital gain dividends as ordinary income.
The Taxpayer Relief Act of 1997 (the "1997 Act") created several new
categories of capital gains applicable to noncorporate taxpayers. Under prior
law, noncorporate taxpayers were generally taxed at a maximum rate of 28% on net
capital gain (generally, the excess of net long-term capital gain over net
short-term capital loss). Noncorporate taxpayers are now generally taxed at a
maximum rate of 20% on net capital gain attributable to gains realized on the
sale of property held for greater than 18 months, and a maximum rate of 28% on
net capital gain attributable to gain realized on the sale of property held for
greater than 1 year and 18 months or less. In addition, a 25% rate now applies
to noncorporate taxpayers on certain gains realized on the sale of real
property. The 1997 Act retains the treatment of short-term capital gain and did
not affect the taxation of corporate taxpayers.
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The Treasury is authorized to issue regulations for application of the
reduced capital gains tax rates enacted under the 1997 Act to pass-through
entities, including REITs and partnerships (such as the Operating Partnership).
The IRS recently issued a notice which generally provides that such regulations,
when issued, will permit (but not require) the Company to designate the portion
of its capital gain dividends, if any, to which the 28%, 25% and 20% rates
(described in the preceding paragraph) apply, based on the net amount of each
class of capital gain realized by the Company.
The Company may elect to retain, rather than distribute as a capital gain
dividend, its net long-term capital gains. In such event, the Company would pay
tax on such retained net long-term capital gains. In addition to the extent
designated by the Company, a stockholder generally would (i) include his
proportionate share of such undistributed long-term capital gains in computing
his long-term capital gains in his return for his taxable year in which the last
day of the Company's taxable year falls (subject to certain limitations as to
the amount so includable), (ii) be deemed to have paid the capital gains tax
imposed on the Company on the designated amounts included in such stockholder's
long-term capital gains, (iii) receive a credit or refund for such amount of tax
deemed paid by the stockholder, (iv) increase the adjusted basis of his shares
by the difference between the amount of such includable gains and the tax deemed
to have been paid by him, and (v) in the case of a stockholder that is a
corporation, appropriately adjust its earnings and profits for the retained
capital gains in accordance with Treasury Regulations (which have not yet been
issued).
In general, any loss upon a sale or exchange of Common Stock by a
stockholder who has held such stock for six months or less (after applying
certain holding period rules) will be treated as a long-term capital loss, to
the extent of distributions from the Company required to be treated by such
stockholder as long-term capital gain.
BACKUP WITHHOLDING
The Company will report to its domestic stockholders and to the IRS the
amount of dividends paid during each calendar year, and the amount of tax
withheld, if any, with respect thereto. Under the backup withholding rules, a
stockholder may be subject to backup withholding at the rate of 31% with respect
to dividends paid and redemption proceeds unless such stockholder (a) is a
corporation or comes within certain other exempt categories and, when required,
demonstrates this fact, or (b) provides a taxpayer identification number,
certifies as to no loss of exemption from backup withholding, and otherwise
complies with applicable requirements of the backup withholding rules. The
Company may nevertheless institute backup withholding with respect to a
stockholder if instructed to do so by the IRS. A stockholder that does not
provide the Company with its correct taxpayer identification number may also be
subject to penalties imposed by the IRS. Any amount paid as backup withholding
will be creditable against the stockholder's federal income tax liability.
TAXATION OF TAX-EXEMPT STOCKHOLDERS
Based upon a published ruling by the IRS, distribution by the Company to a
stockholder that is a tax-exempt entity will not constitute "unrelated business
taxable income" ("UBTI") provided that the tax-exempt entity has not financed
the acquisition of its shares with "acquisition indebtedness" within the meaning
of the Code and the shares are not otherwise used in an unrelated trade or
business of the tax-exempt entity.
Notwithstanding the preceding paragraph, however, a portion of the
dividends paid by the Company may be treated as UBTI to certain domestic private
pension trusts if the Company is treated as a "pension-held REIT." The Company
believes that it is not, and does not expect to become a "pension-held REIT." If
the Company were to become a pension-held REIT, these rules generally would only
apply to certain pension trusts that held more than 10% of the Company's stock.
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TAXATION OF FOREIGN STOCKHOLDERS
The following is a discussion of certain anticipated U.S. federal income
tax consequences of the ownership and disposition of the Company's stock
applicable to Non-U.S. Holders of such stock. A "Non-U.S. Holder" is any person
other than (i) a citizen or resident of the United States, (ii) a corporation or
partnership created or organized in the United States or under the laws of the
United States or of any state thereof, or (iii) an estate or trust whose income
is includable in gross income for U.S. federal income tax purposes regardless of
its source. The discussion is based on current law and is for general
information only. The discussion addresses only certain and not all aspects of
U.S. federal income taxation.
DISTRIBUTIONS FROM THE COMPANY
1. Ordinary Dividends. The portion of dividends received by Non-U.S.
Holders payable out of the Company's current and accumulated earnings and
profits which are not attributable to capital gains of the Company and which are
not effectively connected with a U.S. trade or business of the Non-U.S. Holder
will be subject to U.S. withholding tax at the rate of 30% (unless reduced by
treaty). In general, Non-U.S. Holders will not be considered engaged in a U.S.
trade or business solely as a result of their ownership of stock of the Company.
In cases where the dividend income from a Non-U.S. Holder's investment in stock
of the company is effectively connected with the Non-U.S. Holder's conduct of a
U.S. trade or business (or, if an income tax treaty applies, is attributable to
a U.S. permanent establishment of the Non-U.S. Holder), the Non-U.S. Holder
generally will be subject to U.S. tax at graduated rates, in the same manner as
U.S. stockholders are taxed with respect to such dividends (and may also be
subject to the 30% branch profits tax in the case of a Non-U.S. Holder that is a
foreign corporation).
2. Non-Dividend Distributions. Unless the Company's stock constitutes a
USRPI (as defined below), distributions by the Company which are not paid out of
the current and accumulated earnings and profits of the company will not be
subject to U.S. income or withholding tax. If it cannot be determined at the
time a distribution is made whether or not such distribution will be in excess
of current and accumulated earnings and profits, the distribution will be
subject to withholding at the rate applicable to dividends. However, the
Non-U.S. Holder may seek a refund of such amounts from the IRS if it is
subsequently determined that such distribution was, in fact, in excess of
current and accumulated earnings and profits of the Company. If the Company's
stock constitutes a USRPI, such distribution shall be subject to 10% withholding
tax and may be subject to additional taxation under FIRPTA (as defined below).
The Company expects to withhold U.S. income tax at the rate of 30% on the
gross amount of any distributions of ordinary income made to a Non-U.S. Holder
unless (i) a lower treaty rate applies and proper certification is provided or
(ii) the Non-U.S. Holder files an IRS Form 4224 with the Company claiming that
the distribution is effectively connected with the Non-U.S. Holder's conduct of
a U.S. trade or business (or, if an income tax treaty applies, is attributable
to a U.S. permanent establishment of the Non-U.S. Holder). Pursuant to current
Treasury Regulations, dividends paid to an address in a country outside the
United States are generally presumed to be paid to a resident of such country
for purposes of ascertaining the requirement of withholding discussed above and
the applicability of an income tax treaty rate. However, under temporary
Treasury Regulations, certain Non-U.S. Holders who seek to claim the benefit of
an applicable treaty rate are required to satisfy certain residency
requirements.
3. Capital Gain Dividends. Under the Foreign Investment in Real Property
Tax Act of 1980 ("FIRPTA"), a distribution made by the Company to a Non-US.
Holder, to the extent attributable to gains ("USRPI Capital Gains") from
dispositions of United States Real Property Interests ("USRPIs"), which includes
the Properties, will be considered effectively connected with a U.S. trade or
business of the Non-U.S. Holder and therefore will be subject to U.S. income tax
at the rate applicable to U.S. individuals or corporations, without regard to
whether such distribution is designated as a capital gain dividend. In addition,
the Company will be required to withhold tax equal to 35% of the amount of
dividends to the extent such dividends constitute USRPI Capital Gains.
Distributions subject to FIRPTA may also be
36
<PAGE> 51
subject to a 30% branch profits in tax in the hands of a foreign corporate
stockholder that is not entitled to treaty exemption.
Distributions attributable to the Company's capital gains, which are not
USRPI Capital Gains, generally will not be subject to taxation, unless (i)
investment in the shares is effectively connected with the Non-U.S. Holder's
U.S. trade or business (or, if an income tax treaty applies, is attributable to
a U.S. permanent establishment of the Non-U.S. Holder), in which case the
Non-U.S. Holder will be subject to the same treatment as U.S. stockholders with
respect to such gain (except that a stockholder that is a foreign corporation
may also be subject to the 30% branch profits tax), or (ii) the Non-U.S. Holder
is a non-resident alien individual who is present in the United States for 183
days or more during the taxable year and either has a "tax home" in the United
States or sold his or her shares of Company stock under circumstances in which
the sale was attributable to a U.S. office, in which case the non-resident alien
individual will be subject to a 30% tax on the individual's capital gains.
New Withholding Regulations. Final regulations dealing with withholding tax
on income paid to foreign persons and related matters (the "New Withholding
Regulations") were recently promulgated. In general, the New Withholding
Regulations do not significantly alter the substantive withholding and
information reporting requirements, but unify current certification procedures
and forms and clarify reliance standards. For example, the New Withholding
Regulations adopt a certification rule which was in the proposed regulations
under which a foreign stockholder who wishes to claim the benefit of an
applicable treaty rate with respect to dividends received from a U.S.
corporation will be required to satisfy certain certification and other
requirements. In addition, the New Withholding Regulations require a corporation
that is a REIT to treat as a dividend the portion of a distribution that is not
designated as a capital gain dividend or return of basis and apply the 30%
withholding tax (subject to any applicable deduction or exemption) to such
portion, and to apply the FIRPTA withholding rules (discussed above) with
respect to the portion of the distribution designated by the REIT as capital
gain dividend. The New Withholding Regulations will generally be effective for
payments made after December 31, 1998, subject to certain transition rules.
EXCEPT FOR THIS PARAGRAPH, THE DISCUSSION SET FORTH ABOVE UNDER "TAXATION OF
FOREIGN STOCKHOLDERS" DOES NOT TAKE THE NEW WITHHOLDING REGULATIONS INTO
ACCOUNT. PROSPECTIVE NON-U.S. STOCKHOLDERS ARE STRONGLY URGED TO CONSULT THEIR
OWN TAX ADVISORS WITH RESPECT TO THE IMPACT TO THEM OF THE NEW WITHHOLDING
REGULATIONS.
Disposition of Stock of the Company. Unless the Company's stock constitutes
a USRPI, a sale of such stock by a Non-U.S. Holder generally will not be subject
to U.S. taxation under FIRPTA. The stock will not constitute a USRPI if the
Company is a "domestically controlled REIT." A domestically controlled REIT is a
REIT in which, at all times during a specified testing period, less than 50% in
value of its shares is held directly or indirectly by Non-U.S. Holders. The
Company believes that it is, and it expects to continue to be a domestically
controlled REIT, and therefore that the sale of the Company's stock will not be
subject to taxation under FIRPTA. Because the Company's stock will be publicly
traded, however, no assurance can be given the Company will continue to be a
domestically controlled REIT.
If the Company does not constitute a domestically controlled REIT, a
Non-U.S. Holder's sale of stock generally will still not be subject to tax under
FIRPTA as a sale of a USRPI provided that (i) the stock is "regularly traded"
(as defined by applicable Treasury regulations) on an established securities
market and (ii) the selling Non-U.S. Holder held 5% or less of the Company's
outstanding stock at all times during a specified testing period.
If gain on the sale of stock of the Company were subject to taxation under
FIRPTA, the Non-U.S. Holder would be subject to the same treatment as a U.S.
stockholder with respect to such gain (subject to applicable alternative minimum
tax and a special alternative minimum tax in the case of nonresident alien
individuals) and the purchaser of the stock could be required to withhold 10% of
the purchase price and remit such amount to the Service.
37
<PAGE> 52
OTHER TAX CONSIDERATIONS
DIVIDEND REINVESTMENT PROGRAM
Under the Company's dividend reinvestment program, stockholders
participating in the program will be deemed to have received the gross amount of
any cash distributions which would have been paid by the Company to such
stockholders had they not elected to participate. These deemed distributions
will be treated as actual distributions from the Company to the participating
stockholders and will retain the character and tax effect applicable to
distributions from the Company generally. See "Federal Income Tax
Considerations -- Taxation of Stockholders." Participants in the dividend
reinvestment program are subject to federal income tax on the amount of the
deemed distributions to the extent that such distributions represent dividends
or gains, even though they receive no cash. Shares of Common Stock received
under the program will have a holding period beginning with the day after
purchase, and a tax basis equal to their cost (which is the gross amount of the
deemed distribution).
STATE AND LOCAL TAXES
The Company and its stockholders may be subject to state or local taxation
in various jurisdictions, including those in which it or they transact business
or reside. The state and local tax treatment of the Company and its stockholders
may not conform to the federal income tax consequences discussed above.
Consequently, prospective stockholders should consult their own tax advisers
regarding the effect of state and local tax laws on an investment in the Common
Stock of the Company.
PLAN OF DISTRIBUTION
The Company and the Operating Partnership may sell the Offered Securities
to one or more underwriters for public offering and sale by them or may sell the
Offered Securities to investors directly or through agents, which agents may be
affiliated with the Company or the Operating Partnership. Any such underwriter
or agent involved in the offer and sale of the Offered Securities will be named
in the applicable Prospectus Supplement.
Sales of Offered Securities offered pursuant to any applicable Prospectus
Supplement may be effected from time to time in one or more transactions at a
fixed price or prices which may be changed, at prices related to the prevailing
market prices at the time of sale, or at negotiated prices. The Company and the
Operating Partnership also may, from time to time, authorize underwriters acting
as the Company's agents to offer and sell the Offered Securities upon the terms
and conditions as set forth in the applicable Prospectus Supplement. In
connection with the sale of Offered Securities, underwriters may be deemed to
have received compensation from the Company or from the Operating Partnership in
the form of underwriting discounts or commissions and may also receive
commissions from purchasers of Offered Securities for whom they may act as
agent. Underwriters may sell Offered Securities to or through dealers, and such
dealers may receive compensation in the form of discounts, concessions or
commissions from the underwriters and/or commissions from the purchasers for
whom they may act as agent.
Any underwriting compensation paid by the Company or the Operating
Partnership to underwriters or agents in connection with the offering of Offered
Securities, and any discounts, concessions or commissions allowed by
underwriters to participating dealers, will be set forth in the applicable
Prospectus Supplement. Underwriters, dealers and agents participating in the
distribution of the Offered Securities may be deemed to be underwriters, and any
discounts and commissions received by them and any profit realized by them on
resale of the Offered Securities may be deemed to be underwriting discounts and
commissions under the Securities Act. Underwriters, dealers and agents may be
entitled, under agreements entered into with the Company and the Operating
Partnership, to indemnification against and contribution toward certain civil
liabilities, including liabilities under the Securities Act. Any such
indemnification agreements will be described in the applicable Prospectus
Supplement.
Unless otherwise specified in the related Prospectus Supplement, each
series of Offered Securities will be a new issue with no established trading
market, other than the Common Stock and Series B
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<PAGE> 53
Preferred Stock which are listed on the New York Stock Exchange. Any shares of
Common Stock and Series B Preferred Stock sold pursuant to a Prospectus
Supplement will be listed on such exchange, subject to official notice of
issuance. The Company or the Operating Partnership may elect to list any other
series of Preferred Stock and any series of Debt Securities, Depository Shares
or Warrants on any exchange, but neither is obligated to do so. It is possible
that one or more underwriters may make a market in a series of Offered
Securities, but will not be obligated to do so and may discontinue any market
making at any time without notice. Therefore, no assurance can be given as to
the liquidity of the trading market for the Offered Securities.
If so indicated in the applicable Prospectus Supplement, the Company or the
Operating Partnership, as the case may be, may authorize dealers acting as the
Company's or the Operating Partnership's agents to solicit offers by certain
institutions to purchase Offered Securities from the Company or the Operating
Partnership at the public offering price set forth in such Prospectus Supplement
pursuant to Delayed Delivery Contracts ("Contracts") providing for payment and
delivery on the date or dates stated in such Prospectus Supplement. Each
Contract will be for an amount not less than, and the aggregate principal amount
of Offered Securities sold pursuant to Contracts shall be not less nor more
than, the respective amounts stated in the applicable Prospectus Supplement.
Institutions with whom Contracts, when authorized, may be made include
commercial and savings banks, insurance companies, pension funds, investment
companies, educational and charitable institutions, and other institutions but
will in all cases be subject to the approval of the Company or the Operating
Partnership, as the case may be. Contracts will not be subject to any conditions
except (i) the purchase by an institution of the Offered Securities covered by
its Contracts shall not at the time of delivery be prohibited under the laws of
any jurisdiction in the United States to which such institution is subject, and
(ii) if the Offered Securities are being sold to underwriters, the Company or
the Operating Partnership, as the case may be, shall have sold to such
underwriters the total principal amount of the Offered Securities less the
principal amount thereof covered by Contracts.
Certain of the underwriters and their affiliates may be customers of,
engage in transactions with and perform services for, the Company or the
Operating Partnership in the ordinary course of business.
EXPERTS
The consolidated financial statements and related financial statement
schedules of the Company and the Operating Partnership included in the Company's
and the Operating Partnership's respective Annual Reports on Form 10-K for the
year ended December 31, 1996, incorporated by reference herein, and the reports
on the combined statements of revenues and certain expenses of the Pasadena
Portfolio, Metro Plaza and the Three Property Transactions, dated April 29,
1997, April 29, 1997, and December 20, 1996, respectively, included in the
Company's and the Operating Partnership's respective Current Reports on Form 8-K
each dated June 27, 1997, incorporated by reference herein, have been audited by
Arthur Andersen LLP, independent public accountants, to the extent and for the
periods indicated in their reports and have been incorporated herein in reliance
on such reports given on the authority of that firm as experts in accounting and
auditing.
VALIDITY OF THE OFFERED SECURITIES
The validity of the Offered Securities will be passed upon for the Company
and the Operating Partnership by Sullivan & Cromwell, Los Angeles, California.
The description of the Company's qualification and taxation as a REIT under the
Code contained in this Prospectus under the caption entitled "Federal Income Tax
Considerations -- General" is based upon the opinion of Morrison & Foerster LLP.
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=========================================================
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS SUPPLEMENT AND THE
ACCOMPANYING PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED. THIS
PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS DOES NOT CONSTITUTE AN
OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN
THE SECURITIES TO WHICH IT RELATES OR AN OFFER TO SELL OR THE SOLICITATION OF AN
OFFER TO BUY SUCH SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR
SOLICITATION IS UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT AND
THE ACCOMPANYING PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE OPERATING PARTNERSHIP SINCE THE DATE HEREOF OR THAT THE
INFORMATION CONTAINED HEREIN OR THEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO
ITS DATE.
------------------------------
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
The Offering............................ S-3
Use of Proceeds......................... S-4
Description of Notes.................... S-4
Federal Income Tax Considerations....... S-11
Underwriting............................ S-14
Validity of Notes....................... S-14
</TABLE>
PROSPECTUS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information................... 2
Incorporation of Certain Documents by
Reference............................. 2
The Company and the Operating
Partnership........................... 3
Use of Proceeds......................... 4
Ratio of Earnings to Fixed Charges...... 4
Special Considerations.................. 5
Description of Debt Securities.......... 7
Description of Capital Stock............ 17
Description of Preferred Stock.......... 21
Description of Depositary Shares........ 23
Description of Warrants................. 27
Certain Provisions of the Company's
Charter and Bylaws.................... 27
Federal Income Tax Considerations....... 27
Plan of Distribution.................... 38
Experts................................. 39
Validity of the Offered Securities...... 39
</TABLE>
=========================================================
=========================================================
$150,000,000
SPIEKER PROPERTIES, L.P.
6.75% NOTES DUE
JANUARY 15, 2008
------------------
LOGO
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GOLDMAN, SACHS & CO.
MERRILL LYNCH & CO.
J.P. MORGAN & CO.
MORGAN STANLEY DEAN WITTER
======================================================
