<PAGE>
SCHEDULE 14A
(Rule 14a-101)
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the Registrant |X|
Filed by a Party other than the Registrant |_|
Check the appropriate box:
|_| Preliminary Proxy Statement |_| Confidential, for Use of the
|_| Definitive Proxy Statement Commission Only (as permitted
|X| Definitive Additional Materials by Rule 14a-6(e)(2))
|_| Soliciting Material Pursuant to
Rule 14a-12
Security Capital U.S. Realty
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(Name of Registrant as Specified In Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
|X| No fee required.
|_| Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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|_| Fee paid previously with preliminary materials:
|_| Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
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[The following sections of the Joint Proxy Statement/Prospectus of Security
Capital U.S. Realty and Security Capital Group Incorporated, dated as of
December 8, 2000 and filed with the Securities and Exchange Commission on
Registration No. 333-47926 (the "Proxy Statement/Prospectus"), were translated
into the German language and sent, in addition to the Proxy
Statement/Prospectus, to certain German beneficial holders (through Commerzbank
AG) of Security Capital U.S. Realty capital stock.]
***
To the best of my knowledge, the following constitutes a fair and accurate
English translation of the corresponding foreign language document.
By: /s/ Constance B. Moore
-----------------------
Constance B. Moore
Managing Director
***
<PAGE>
***
The following materials are being provided to you solely for your
convenience. These materials are excerpts in the German language from a Joint
Proxy Statement/ Prospectus (the "Proxy Statement/ Prospectus") of Security
Capital U.S. Realty ("U.S. Realty") and Security Capital Group Incorporated
("Security Capital") dated as of December 8, 2000 being provided to holders of
record of shares of U.S. Realty involving a proposed business combination
transaction between U.S. Realty and Security Capital. The Proxy
Statement/Prospectus has been prepared in the English language and the
translated excerpts are qualified in their entirety by the more detailed
information contained in the complete Proxy Statement/Prospectus. The translated
excerpts may not contain all of the information that is important to you in
connection with your making a decision with respect to the proposed business
combination transaction and, therefore, you should read the entire Proxy
Statement/Prospectus carefully.
***
[LETTERHEAD OF SECURITY CAPITAL U.S. REALTY]
Dear Fellow Shareholder:
You are cordially invited to attend an extraordinary general meeting of
shareholders of Security Capital U.S. Realty ("U.S. Realty") at 12 rue Jean
Engling, 1466 Luxembourg, at 3:00 p.m., local time, on Tuesday, January 16,
2001.
The extraordinary general meeting relates to our previously announced
transaction agreement with Security Capital Group Incorporated ("Security
Capital") to combine the businesses of U.S. Realty and Security Capital. Under
the terms of the agreement, shareholders of U.S. Realty will receive 1.15 shares
of Security Capital Class B common stock for each outstanding U.S. Realty share,
and Security Capital will acquire the assets and assume or provide the necessary
funds to satisfy the liabilities of U.S. Realty. You will be asked at the
extraordinary general meeting to consider and vote upon the transaction
agreement, and the transactions and matters contemplated thereby (sometimes
collectively referred to as the "transaction"), including:
o the sale by U.S. Realty to a subsidiary of Security Capital of all of the
outstanding shares and other equity interests of Security Capital Holdings
S.A. owned by U.S. Realty, U.S. Realty's interest in an agreement between
U.S. Realty and Security Capital Holdings S.A. and cash on hand, all in
exchange for shares of Security Capital Class B common stock and cash; and
o the subsequent liquidation of U.S. Realty, in which (1) all of the
shareholders of U.S. Realty (other than those who vote "against" the
transaction and who validly elect to receive cash instead of Security
Capital shares) will receive 1.15 shares of Security Capital Class B common
stock for each U.S. Realty share they own and (2) shareholders of U.S.
Realty who vote "against" the transaction and who validly elect to receive
cash instead of Security Capital shares will receive, for each U.S. Realty
share they own, an amount of cash equal to 1.15 multiplied by the average
of the daily high and low per share sales prices of the Security Capital
Class B common stock on the New York Stock Exchange during the fifteen
trading days ending on January 5, 2001 (the sixth trading day before the
U.S. Realty extraordinary general meeting), net of any required withholding
<PAGE>
taxes.
We believe that the transaction should provide important benefits for our
shareholders, and your board of directors has determined, having received the
recommendation of a special committee of three independent directors appointed
to review, evaluate and negotiate the transaction, that the terms of the
transaction agreement are advisable, fair to, and in the best interests of, the
shareholders of U.S. Realty (other than Security Capital and its affiliates).
ACCORDINGLY, YOUR BOARD UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR APPROVAL OF THE
TRANSACTION AGREEMENT, INCLUDING THE TRANSACTIONS AND MATTERS CONTEMPLATED
THEREBY.
The accompanying notice of meeting and proxy statement explain the proposed
transaction and provide specific information concerning the extraordinary
general meeting, the voting of your shares and the procedures to follow to elect
to receive cash. Please read these materials carefully.
We cannot complete the transaction without the affirmative vote of at least
two-thirds of the U.S. Realty shares present or represented at the extraordinary
general meeting, provided that at least a majority of the outstanding shares are
present or represented. Whether or not you plan to be present at the
extraordinary general meeting, please sign and return your proxy as soon as
possible in the enclosed envelope so that your vote will be recorded. Details
are outlined on the enclosed proxy card. Your vote is very important.
Very truly yours,
William D. Sanders Jay O. Light
Chairman Chairman of the Special Committee
December 8, 2000
This letter, the notice of meeting and the joint proxy statement/prospectus
are dated December 8, 2000. We are first mailing these documents to U.S. Realty
shareholders on or about December 12, 2000.
<PAGE>
IMPORTANT INFORMATION:
IF YOU WISH TO RECEIVE CASH INSTEAD OF SHARES OF SECURITY CAPITAL CLASS B COMMON
STOCK UPON THE LIQUIDATION OF U.S. REALTY, YOU MUST RETURN THE ENCLOSED PROXY
CARD CLEARLY MARKED TO INDICATE THAT (1) YOU VOTE "AGAINST" THE TRANSACTION AND
(2) IF THE TRANSACTION IS APPROVED, YOU WISH TO RECEIVE CASH INSTEAD OF SECURITY
CAPITAL CLASS B COMMON STOCK. IF YOU DO NOT FOLLOW THESE PROCEDURES FOR VOTING
YOUR SHARES, YOU WILL BE DEEMED TO HAVE CONSENTED TO RECEIVE SECURITY CAPITAL
CLASS B COMMON STOCK IN THE TRANSACTION.
SHAREHOLDERS WHO VOTE "FOR" THE TRANSACTION OR ABSTAIN FROM VOTING, SHAREHOLDERS
WHO VOTE "AGAINST" THE TRANSACTION BUT DO NOT CHECK THE BOX TO ELECT CASH, AND
SHAREHOLDERS WHO DO NOT RETURN THE PROXY CARD, WILL BE DEEMED TO HAVE CONSENTED
TO RECEIVE SECURITY CAPITAL CLASS B COMMON STOCK IN THE TRANSACTION.
SHAREHOLDERS VALIDLY ELECTING TO RECEIVE CASH WILL RECEIVE, FOR EACH U.S. REALTY
SHARE, AN AMOUNT OF CASH IN U.S. DOLLARS EQUAL TO 1.15 MULTIPLIED BY THE AVERAGE
OF THE DAILY HIGH AND LOW PER SHARE SALES PRICES OF THE SECURITY CAPITAL CLASS B
COMMON STOCK ON THE NEW YORK STOCK EXCHANGE DURING THE FIFTEEN TRADING DAYS
ENDING ON JANUARY 5, 2001 (THE SIXTH TRADING DAY BEFORE THE U.S. REALTY
EXTRAORDINARY GENERAL MEETING), NET OF ANY REQUIRED WITHHOLDING TAXES.
IF SHAREHOLDERS WHO VOTE "AGAINST" THE TRANSACTION ELECT TO RECEIVE CASH
PAYMENTS IN AN AMOUNT EXCEEDING $200 MILLION IN THE AGGREGATE, SECURITY CAPITAL
WILL HAVE THE RIGHT TO TERMINATE THE TRANSACTION AGREEMENT. IN THAT EVENT, THE
TRANSACTION WOULD NOT PROCEED, AND U.S. REALTY SHAREHOLDERS WOULD CONTINUE TO
OWN U.S. REALTY SHARES.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THE SECURITY CAPITAL CLASS B COMMON
STOCK TO BE ISSUED UNDER THIS JOINT PROXY STATEMENT/PROSPECTUS OR DETERMINED IF
THIS JOINT PROXY STATEMENT/PROSPECTUS IS ACCURATE OR COMPLETE. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE ARTICLES OF INCORPORATION OF SECURITY CAPITAL AND THE NOTICE GENERALE
REQUIRED BY LUXEMBOURG LAW HAVE BEEN FILED WITH THE CHIEF REGISTRAR OF THE
LUXEMBOURG DISTRICT COURT.
<PAGE>
[U.S. REALTY LOGO]
NOTICE OF GENERAL MEETING OF SHAREHOLDERS
TO BE HELD JANUARY 16, 2001
We will hold an extraordinary general meeting of shareholders of
Security Capital U.S. Realty ("U.S. Realty") at 12 rue Jean Engling, 1466
Luxembourg, at 3:00 p.m., local time, on Tuesday, January 16, 2001 . At the
meeting, we will ask you:
1. To approve a transaction agreement, dated as of September 26,
2000, among U.S. Realty, Security Capital Group Incorporated
("Security Capital") and a wholly owned subsidiary of Security
Capital, and the transactions and matters contemplated thereby. These
transactions and matters include:
o The sale by U.S. Realty to a subsidiary of Security Capital
of all of the outstanding shares and other equity interests
in Security Capital Holdings S.A. owned by U.S. Realty, U.S.
Realty's interest in an agreement between U.S. Realty and
Security Capital Holdings S.A. and cash on hand, in exchange
for shares of Security Capital Class B common stock and
cash;
o The subsequent liquidation of U.S. Realty in accordance with
the plan of liquidation attached as an exhibit to the
transaction agreement, in which (1) all of the shareholders
of U.S. Realty (other than those who vote "against" the
transaction and who validly elect to receive cash instead of
Security Capital shares) will receive 1.15 shares of
Security Capital Class B common stock for each U.S. Realty
share they own and (2) shareholders of U.S. Realty who vote
"against" the transaction and who validly elect to receive
cash instead of Security Capital shares will receive, for
each U.S. Realty share they own, an amount of cash in U.S.
dollars equal to 1.15 multiplied by the average of the daily
high and low per share sales prices of the Security Capital
Class B common stock on the New York Stock Exchange during
the fifteen trading days ending on January 5, 2001, (the
sixth trading day before the U.S. Realty extraordinary
general meeting), net of any required withholding taxes we
must withhold from the payment; and
o The appointment of SC Transaction Corporation, a subsidiary
of Security Capital, as liquidator for the liquidation of
U.S. Realty.
2. To transact any other business as may properly come before the
extraordinary general meeting or any adjournment or postponement of
the extraordinary general meeting.
We have described the expected conduct of the extraordinary general
meeting and these matters, including the sequence in which they will be
accomplished, more fully in the joint proxy statement/prospectus accompanying
this notice. We have attached a copy of the transaction agreement, which
includes as an exhibit the plan of liquidation, as Appendix A to the joint proxy
statement/prospectus.
<PAGE>
You are entitled to notice of and to vote at the meeting or any
adjournment only if you were a U.S. Realty shareholder of record at the close of
business on December 8, 2000.
Whether or not you plan to attend the meeting in person, WE URGE YOU TO
VOTE YOUR SHARES BY MARKING, SIGNING, DATING AND RETURNING THE ENCLOSED PROXY
CARD PROMPTLY IN THE ENCLOSED ENVELOPE. If you wish to receive cash rather than
Security Capital Class B common stock, you must vote "against" the transaction
and indicate your election to receive cash on the proxy card (or ballot if you
vote in person at the meeting). You may revoke your proxy at any time before we
vote it at the meeting, and sending your proxy will not affect your right to
attend the meeting and vote in person.
By Order of the Board of Directors,
[Signature]
Laura L. Hamilton
Vice President
December 8, 2000
<PAGE>
QUESTIONS AND ANSWERS ABOUT THE TRANSACTION
Q: WHY ARE THE COMPANIES PROPOSING TO COMBINE THEIR BUSINESSES?
A: We believe that the transaction between Security Capital Group Incorporated
(which we refer to in this document as Security Capital) and Security
Capital U.S. Realty (which we refer to in this document as U.S. Realty)
will increase value for both Security Capital shareholders and U.S. Realty
shareholders through:
o the creation of a company with a simplified structure and a stronger
market profile for investors;
o the elimination of the complex structural relationship that exists
between the two companies and the transfer of all assets into a single
company, which should make it easier for investors to understand the
company;
o increased financial and operational flexibility for the combined
businesses and enhanced liquidity for the shareholders; and
o the enhancement of opportunities to improve shareholder value through
additional stock repurchases or future transactions that monetize or
consolidate existing businesses.
Q: WHAT ARE THE POSSIBLE DETRIMENTS TO THE TRANSACTION?
A. The number of shares of Security Capital stock that U.S. Realty
shareholders will receive for their U.S. Realty shares is fixed at 1.15.
As a result, the shares of Security Capital Class B common stock that U.S.
Realty shareholders may receive in the transaction may have a greater or
lesser value than the value contemplated at the time the transaction
agreement was signed because of fluctuations in the market price of shares
of Security Capital Class B common stock. Also, there is a risk that the
benefits sought in the transaction will not be obtained.
Q: WHAT WILL U.S. REALTY SHAREHOLDERS RECEIVE IF THE TRANSACTION IS APPROVED?
A: Unless you, as a U.S. Realty shareholder, vote AGAINST the transaction and
validly elect to receive cash instead of Security Capital shares, if the
transaction is approved and consummated, you will receive 1.15 shares of
Security Capital Class B common stock for each U.S. Realty share you own.
We will pay cash in U.S. dollars in lieu of any fractional shares of
Security Capital Class B common stock. If you, as a U.S. Realty
shareholder, vote AGAINST the transaction and validly elect to receive cash
instead of shares of Security Capital Class B common stock, if the
transaction is approved and consummated, you will receive an amount of cash
in U.S. dollars equal to 1.15 multiplied by the average of the daily high
and low per share sales prices of the Security Capital Class B common stock
on the New York Stock Exchange during the fifteen trading days ending on
January 5, 2001 (the sixth trading day before the U.S. Realty extraordinary
meeting) for each U.S. Realty share you own. We will subtract from the
cash payment any taxes that we must withhold under applicable
<PAGE>
laws. Your U.S. Realty shares will be cancelled as part of the liquidation
of U.S. Realty under the plan of liquidation, as described below. Depending
on your election, you will receive either Security Capital Class B common
stock or cash in the transaction. You will not receive both except for cash
in lieu of fractional shares.
If the total amount of cash required for distribution to U.S. Realty
shareholders who vote against the transaction and validly elect to receive
cash instead of Security Capital shares exceeds $200 million in the
aggregate, Security Capital will not be required to complete the
transaction and may abandon the transaction entirely.
Q: WHAT DO I NEED TO DO TO RECEIVE CASH INSTEAD OF SECURITY CAPITAL SHARES?
A: If you are a U.S. Realty shareholder, your proxy card contains a special
box that you must check if you wish to receive cash instead of Security
Capital shares. To make a valid election to receive cash, you must also
vote AGAINST the transaction in the portion of the proxy card where you
specify your vote.
Q: WHEN DO YOU EXPECT TO COMPLETE THE TRANSACTION?
A: We are working to complete the transaction as quickly as possible. We
expect to complete the transaction promptly following the required
shareholder approvals. However, we cannot assure you that we will then
complete the transaction.
Q: WHO IS ENTITLED TO VOTE AT THE SHAREHOLDER MEETINGS?
A: For U.S. Realty, only holders of record of U.S. Realty shares at the close
of business on December 8, 2000 may vote at the extraordinary general
meeting. If you own shares on the record date through a bank, you may vote
in person at your shareholder meeting only if you obtain a proxy from the
record holder with respect to your shares.
Q: WHEN AND WHERE IS THE MEETING?
A: U.S. Realty will hold its extraordinary general meeting on Tuesday, January
16, 2001, at 3:00 p.m., local time, at 12 rue Jean Engling, 1466
Luxembourg.
Q: WHAT DO I NEED TO DO NOW?
A: After carefully reading and considering the information contained in this
joint proxy statement/prospectus, please respond by completing, signing and
dating your proxy card and returning it in the enclosed envelope. If you
are a U.S. Realty shareholder and you wish to receive cash instead of
shares of Security Capital Class B common stock, you must vote AGAINST the
transaction and you must validly elect to receive cash on your proxy card
or ballot.
Q: WHAT IF I DON'T VOTE?
A: U.S. Realty Shareholders: If you fail to respond, it will have no effect
on approval or disapproval of the transaction agreement and the
transactions and matters contemplated thereby, so long as a majority of the
outstanding shares are otherwise
<PAGE>
present or represented at the meeting, since the vote required is based on
the number of shares present or represented. IF YOU PROPERLY EXECUTE AND
RETURN THE PROXY CARD AND DO NOT INDICATE YOUR VOTING PREFERENCE ON THE
PROXY CARD, WE WILL ASSUME YOU APPROVE AND VOTE YOUR SHARES IN FAVOR OF
APPROVAL OF THE TRANSACTION AGREEMENT AND THE TRANSACTIONS AND MATTERS
CONTEMPLATED THEREBY. If you respond and abstain from voting, it will have
the same effect as voting against approval of the transaction agreement and
the transactions and matters contemplated thereby, since your shares will
be counted as present but will not be voted in favor of approval of the
transactions and matters contemplated thereby. If the transaction agreement
and the transactions and matters contemplated thereby are approved,
however, in each of the above circumstances, you will be deemed to have
elected to receive Security Capital Class B common stock rather than cash.
Q: CAN I CHANGE MY VOTE AFTER I HAVE DELIVERED MY PROXY?
A: Yes, except that, as more fully described in the section entitled "U.S.
Realty Extraordinary General Meeting" - - What Will You Vote On", the form
of proxy we are soliciting from U.S. Realty shareholders provides that it
may not be revoked following the approval and consummation of the sale of
U.S. Realty's assets to Security Capital. Subject to this important aspect
of the transaction, you can change your vote at any time before we vote
your proxy. If you hold your shares through an account at a brokerage firm
or bank, you should contact your brokerage firm or bank to change your
vote.
Q: WHOM SHOULD I CALL IF I HAVE QUESTIONS?
A: If you have questions about the transaction or how to submit your proxy, or
if you need additional copies of this joint proxy statement/prospectus or
the enclosed proxy card, you should contact:
o if you are a U.S. Realty shareholder:
Georgeson Shareholder Communications Ltd. In Germany call toll free: 0
800 1800 305
<PAGE>
SUMMARY
This summary highlights selected information about the transaction and may
not contain all of the information that is important to you. To understand the
transaction better, you should read this entire document carefully, as well as
those additional documents to which we refer you. See "Where You Can Find More
Information." Each item in this summary refers to the page or pages where we
more fully discuss that subject. References in this joint proxy
statement/prospectus to "$'s" refer to U.S. dollars, unless otherwise noted.
THE COMPANIES
SECURITY CAPITAL GROUP INCORPORATED (See Page 81)
125 Lincoln Avenue
Santa Fe, New Mexico 87501
Telephone: (505) 982-9292
website: http:// www.securitycapital.com
Security Capital is an international real estate research, investment and
operating management company. Security Capital operates its businesses through
two divisions: the Capital Division, which invests in high-growth real estate
operating companies, and the Financial Services Division, which provides capital
markets and capital management services primarily to Security Capital and its
affiliates. Security Capital is incorporated in the State of Maryland, United
States of America.
SECURITY CAPITAL U.S. REALTY (See Page 84)
25b, boulevard Royal
L-2449 Luxembourg
Telephone: (+352) (4637561)
website: http:// www.sc-usrealty.com
U.S. Realty is a European-based real estate company that holds, through its
subsidiary Security Capital Holdings S.A. (which we refer to as SC-Holdings),
significant strategic positions in leading real estate operating companies based
in the United States.
U.S. Realty, which was incorporated in July 1995 in Luxembourg as a Societe
d'Investissement a Capital Variable (or SICAV) and converted to a Societe
d'Investissement a Capital Fixe (or SICAF) in June 1997, has the following
strategic investments:
o CarrAmerica Realty Corporation, a publicly held national U.S. company
focused on providing office space to leading companies.
o City Center Retail Trust, a private start-up real estate operating company
focused on shopping centers. City Center Retail Trust is evaluating
strategic alternatives, which could include the sale of a portion or all of
its assets.
o CWS Communities Trust, a private start-up company focused on acquiring,
developing and owning manufactured housing communities in selected target
markets throughout the United States.
o Regency Realty Corporation, a publicly held national U.S. company focused
on
<PAGE>
grocery-anchored neighborhood infill shopping centers.
o Storage USA, Inc., a publicly held national U.S. company focused on self-
storage facilities.
o Urban Growth Property Trust, a private start-up company focused on
acquiring, developing and owning strategically located parking facilities
in key urban infill locations in selected target markets throughout the
United States. Urban Growth Property plans to merge in early 2001 with
Interparking Incorporated, the property manager for Urban Growth Property's
operations, following which Urban Growth Property will no longer be a REIT
but should have greater control over its assets and the opportunity to
extend its activities into parking facility management. The combined
parking company will continue to be a subsidiary of SC-Holdings.
Security Capital U.S. Realty Management Holdings S.A., a Luxembourg
corporation and a wholly owned subsidiary of Security Capital, acts as operating
advisor for U.S. Realty. As operating advisor, it provides U.S. Realty with
advice on all investment and operating matters and receives a fee for those
services.
Security Capital through its subsidiaries owns 40.6% of the outstanding
voting securities of U.S. Realty.
SHAREHOLDER APPROVALS (See Pages 53 and 57)
Approval of U.S. Realty Shareholders. U.S. Realty shareholders will vote on
approval of the transaction agreement and the transactions and matters
contemplated thereby, including the sale of U.S. Realty's assets described below
to a subsidiary of Security Capital, and the plan of liquidation for U.S. Realty
and appointment of SC Transaction Corporation as liquidator for the liquidation
of U.S. Realty. Approval of these matters requires the affirmative vote of at
least two-thirds of the U.S. Realty shares present or represented at the
extraordinary meeting, provided that a quorum consisting of at least a majority
of the outstanding shares is present or represented. If that majority quorum is
not present at the time the extraordinary meeting is first convened, U.S. Realty
will adjourn the meeting for at least 30 days and, upon resumption of the
meeting, there will be no quorum requirement.
As of the record date for the U.S. Realty extraordinary meeting, wholly
owned subsidiaries of Security Capital owned 30,401,683 U.S. Realty shares (or
approximately 40.6% of the total voting power of the U.S. Realty shares entitled
to vote at the extraordinary meeting). Security Capital has agreed in the
transaction agreement to cause its subsidiaries to vote those shares FOR the
transaction agreement and the transactions and matters contemplated thereby. As
of the record date for the U.S. Realty extraordinary meeting, the directors and
executive officers of U.S. Realty owned and were entitled to vote 27,505 U.S.
Realty shares (or approximately .04% of the total voting power of the U.S.
Realty shares entitled to vote at the extraordinary meeting).
Approval of Security Capital's Shareholders. Security Capital shareholders
will vote on a proposal to approve the issuance of up to 86,116,552 shares of
Security Capital Class B common stock in the transaction (51,154,616 net new
shares issued, after the cancellation of 34,961,936 Security Capital Class B
shares that U.S. Realty will distribute in the transaction to subsidiaries of
Security Capital that are U.S. Realty shareholders). Approval of the
<PAGE>
proposal requires the affirmative vote of at least a majority of the votes cast
by holders of Security Capital Class A common stock, Security Capital Class B
common stock and Security Capital Series B preferred stock, voting as a single
class, provided that the total vote cast represents over 50% of the voting power
of all shares entitled to vote on the proposal. Each share of Security Capital
Class A common stock is entitled to cast one vote. Each share of Security
Capital Class B common stock is entitled to cast .005 of a vote. Each share of
Security Capital Series B preferred stock is entitled to cast .0641 of a vote.
Holders of Security Capital Class A common stock, Security Capital Class B
common stock and Security Capital Series B preferred stock together are entitled
to cast a total of votes at the special meeting.
As of the record date for the Security Capital special meeting, the
directors and executive officers of Security Capital and their affiliates owned
and were entitled to vote shares of Security Capital Class A common stock,
shares of Security Capital Class B common stock and 257,642 shares of Series B
preferred stock (or % of the total voting power of the Security Capital shares
entitled to vote on the proposal to issue Security Capital shares in the
transaction).
RECOMMENDATIONS TO SHAREHOLDERS; FAIRNESS OF THE TRANSACTION (See Pages 31 and
38)
U.S. Realty. The U.S. Realty board of directors believes that the terms of
the transaction agreement are advisable, fair to, and in the best interests of,
the shareholders of U.S. Realty (other than Security Capital and its
affiliates), and unanimously recommends that you vote FOR the transaction
agreement and the transactions and matters contemplated thereby.
In addition, because two members of the U.S. Realty board are or were
affiliated with Security Capital at the time the transaction was considered by
the U.S. Realty board, and because U.S. Realty's articles of incorporation
require the independent directors of U.S. Realty to approve any transaction
between U.S. Realty and Security Capital, the U.S. Realty board established a
special committee of three independent directors to review, evaluate and
negotiate the proposed transaction. See the description of the background of the
transaction under "The Transaction--Background of the Transaction." None of the
members of the special committee is affiliated with or employed by Security
Capital or U.S. Realty (except in their positions as directors), except that
each member is also a director of Security Capital European Realty, an affiliate
of Security Capital, one member beneficially owns 38,900 shares of Security
Capital Class B common stock, and another member beneficially owns 15.5 shares
of Security Capital Class A common stock and approximately $12,500 of Security
Capital debentures. The special committee, like the full U.S. Realty board,
believes that the terms of the transaction agreement are advisable, fair to, and
in the best interests of, the shareholders of U.S. Realty (other than Security
Capital and its affiliates). The special committee negotiated and approved the
transaction agreement and recommended that the full U.S. Realty board approve
the transaction agreement. You should also refer to the factors that the special
committee and the U.S. Realty board of directors considered in determining
whether to approve, accept and declare advisable the transaction discussed under
"The Transaction--Recommendations of the U.S. Realty Special Committee and of
the Full U.S. Realty Board; Fairness of the Transaction."
Security Capital. The Security Capital board of directors believes that the
terms of
<PAGE>
the transaction agreement are advisable, fair to, and in the best interests of,
Security Capital and its shareholders. The Security Capital board unanimously
recommends that you vote FOR the proposal to issue shares of Security Capital
Class B common stock in the transaction.
OPINIONS OF FINANCIAL ADVISORS (See Pages 34 and 41)
Opinion of the Financial Advisor to the U.S. Realty Special Committee. In
deciding to approve the transaction, the special committee of independent
directors of the U.S. Realty board considered, among other matters, the oral
opinion confirmed in writing as of September 26, 2000 of Merrill Lynch, Pierce,
Fenner & Smith Incorporated, that, as of the date of the opinion and based on
and subject to the various factors and assumptions stated in the opinion, the
consideration to be received by U.S. Realty shareholders (other than Security
Capital and its affiliates) pursuant to the transaction agreement was fair to
such shareholders from a financial point of view. THE OPINION DOES NOT
CONSTITUTE A RECOMMENDATION BY MERRILL LYNCH AS TO HOW SHAREHOLDERS SHOULD VOTE
OR AS TO WHETHER A SHAREHOLDER SHOULD VOTE AGAINST APPROVAL OF THE TRANSACTION
AND ELECT TO RECEIVE CASH FOR HIS SHARES. WE ATTACH THE FULL TEXT OF MERRILL
LYNCH'S WRITTEN OPINION, WHICH SETS FORTH THE VARIOUS ASSUMPTIONS AND
QUALIFICATIONS CONSIDERED, AS APPENDIX B TO THIS JOINT PROXY
STATEMENT/PROSPECTUS. U.S. REALTY URGES ITS SHAREHOLDERS TO READ THE OPINION OF
MERRILL LYNCH IN ITS ENTIRETY.
Opinion of Security Capital's Financial Advisor. In deciding to approve the
transaction, the Security Capital board of directors considered, among other
matters, the oral opinion of Goldman, Sachs & Co. (subsequently confirmed by a
written opinion dated September 26, 2000), that, as of the date of the opinion
and subject to the matters set forth in the opinion, the consideration to be
paid by Security Capital in connection with the transactions contemplated by the
transaction agreement was fair from a financial point of view to Security
Capital. THE OPINION OF GOLDMAN SACHS DOES NOT CONSTITUTE A RECOMMENDATION AS TO
HOW ANY HOLDER OF SECURITY CAPITAL VOTING STOCK SHOULD VOTE WITH RESPECT TO THE
TRANSACTION. WE ATTACH THE FULL TEXT OF GOLDMAN SACHS' WRITTEN OPINION, DATED
SEPTEMBER 26, 2000, WHICH SETS FORTH THE ASSUMPTIONS MADE, MATTERS CONSIDERED
AND QUALIFICATIONS AND LIMITATIONS ON THE REVIEW UNDERTAKEN IN CONNECTION WITH
THE OPINION, AS APPENDIX C TO THIS JOINT PROXY STATEMENT/PROSPECTUS. SECURITY
CAPITAL URGES ITS SHAREHOLDERS TO READ THE OPINION OF GOLDMAN SACHS IN ITS
ENTIRETY.
THE TRANSACTION (See Page 26)
In light of Luxembourg legal requirements, the transaction is structured as
a two-step transaction. Security Capital will first purchase assets from U.S.
Realty in exchange for shares of Security Capital Class B common stock and cash.
U.S. Realty will use a portion of that cash to satisfy and discharge the
Indenture under which U.S. Realty issued its convertible notes. Second, U.S.
Realty will be liquidated and as part of the liquidation will distribute to U.S.
Realty shareholders all of the Security Capital Class B common stock and the
remaining cash it received as consideration for the sale of its assets. Subject
to all of the conditions to
<PAGE>
closing described below, we expect to complete both steps promptly following the
required shareholder approvals.
THE PURCHASE AND SALE OF U.S. REALTY'S ASSETS
As the first step in the transaction, SC Realty Incorporated, a Nevada
corporation and indirect wholly owned subsidiary of Security Capital, will
purchase in exchange for shares of Security Capital Class B common stock and
cash:
o all of the outstanding shares of SC-Holdings (other than one share, which
is owned by a subsidiary of Security Capital);
o U.S. Realty's interest in an agreement between U.S. Realty and SC-Holdings
under which U.S. Realty has made cash advances to SC-Holdings; and
o any cash on hand.
The number of shares of Security Capital Class B common stock delivered to
U.S. Realty will be equal to the product of 1.15 multiplied by the number of
outstanding U.S. Realty shares (excluding those shares, if any, that a U.S.
Realty shareholder has voted against the transaction and as to which the
shareholder has made a valid election to receive cash instead of shares of
Security Capital Class B common stock). The amount of cash delivered to U.S.
Realty will be the cash required to pay the transaction consideration to U.S.
Realty shareholders who vote against the transaction and make a valid election
to receive cash, plus the cash needed to satisfy and discharge the Indenture
under which U.S. Realty issued its outstanding convertible notes. Security
Capital will not be obligated to proceed with the transaction if the total
amount of cash required for distribution to U.S. Realty shareholders who validly
elect to receive cash exceeds $200 million.
THE LIQUIDATION OF U.S. REALTY
As the second step in the transaction, after U.S. Realty satisfies and
discharges its convertible notes Indenture, U.S. Realty shareholders will
receive a distribution of either:
o a number of shares of Security Capital Class B common stock equal to 1.15
multiplied by the number of U.S. Realty shares they own, rounded down to
the next whole number, and shortly afterwards, a check for cash in U.S.
dollars in lieu of any fractional share; or
o if the U.S. Realty shareholder voted the shares "against" the transaction
and made a valid election to receive cash instead of shares of Security
Capital Class B common stock, an amount of cash in U.S. dollars equal to
1.15 multiplied by the average of the daily high and low per share sales
prices of the Security Capital Class B common stock on the New York Stock
Exchange during the fifteen trading days ending on January 5, 2001 (the
sixth trading day before the U.S. Realty extraordinary meeting), less any
taxes we must withhold from the payment. Following the close of trade on
the New York Stock Exchange on January 5, 2001, we will issue a press
release announcing the calculation of the amount of cash per U.S. Realty
share that those shareholders would receive and will so publish that
information in newspapers of general circulation in Luxembourg, Amsterdam
and New York.
<PAGE>
SC Transaction Corporation, a subsidiary of Security Capital, will serve as
the liquidator, subject to approval by the shareholders of U.S. Realty. Under
Luxembourg law, the liquidator will remain liable for any remaining liabilities
of U.S. Realty following the completion of the liquidation.
The distribution by U.S. Realty of the proceeds of the sale to U.S. Realty
shareholders of record on the date of the U.S. Realty extraordinary meeting is
expected to take place promptly following the approval of the transaction. In
order to assure any necessary tax withholding, to verify the identity of such
shareholders and to permit U.S. Realty shareholders who make valid cash
elections to receive cash, U.S. Realty shareholders will be provided with a
letter of transmittal by which each U.S. Realty shareholder would surrender its
shares, to be held, pending any further distributions, for cancellation by the
liquidator. There are not expected to be any further distributions in light of
the fact that all of U.S. Realty's assets will be sold in the first step of the
transaction.
As soon as possible under Luxembourg law, after the U.S. Realty
extraordinary general meeting, following completion of the purchase of U.S.
Realty's assets by Security Capital and the distribution to U.S. Realty
shareholders of the Security Capital Class B common stock and cash as described
above, U.S. Realty will hold an additional extraordinary general shareholder
meeting for the purpose of completing the final liquidation of U.S. Realty,
including to receive the report of the auditor for the liquidation and to
approve the liquidator's report. A separate notice will be sent to U.S. Realty
shareholders, but we do not expect to solicit proxies with respect to the
matters to be voted on at this final meeting. Approval of this final step in the
liquidation of U.S. Realty will require approval only of a majority of the
shareholders present, without the requirement of any quorum.
RELATED TRANSACTIONS
In accordance with the terms of the indenture under which U.S. Realty
issued its outstanding convertible notes, at the time we complete the first step
of the transaction, U.S. Realty, Security Capital and SC Realty Incorporated
will enter into an agreement with the Indenture trustee providing for the
satisfaction and discharge of the Indenture. At that time, U.S. Realty will
deposit with the trustee funds sufficient to redeem the convertible notes on the
later of May 23, 2001 (the earliest permitted redemption date under the U.S.
Realty Indenture) and the thirtieth day after closing of the transaction, at
their then-accreted value, and to pay any accrued and unpaid interest on the
convertible notes through the date of redemption. As of September, 2000 there
were $ 450 million in aggregate principal amount at maturity of outstanding U.S.
Realty convertible notes, with an aggregate accreted value at that date of
$399.4 million. SC Realty Incorporated has agreed to indemnify the trustee for
liabilities the trustee may incur in connection with the satisfaction and
discharge of the Indenture and the redemption of the convertible notes, and
Security Capital has agreed to guarantee SC Realty Incorporated's obligations.
In connection with the transaction, Security Capital will refinance U.S.
Realty's existing bank debt (which consists of an unsecured line of credit under
which SC-Holdings is the borrower) by providing SC-Holdings sufficient cash to
repay any outstanding amounts under the line of credit. As of November 30, 2000,
approximately $62.0 million was outstanding under SC-Holdings' line of credit.
<PAGE>
INTERESTS OF CERTAIN PERSONS IN THE TRANSACTION (See Page 50)
Some of the directors and executive officers of U.S. Realty, including the
U.S. Realty directors who are members of the special committee, have interests
in the transaction that are different from, and/or are in addition to, the
interests of U.S. Realty's shareholders. These interests include the
acceleration and receipt by U.S. Realty independent directors of cash payments
under U.S. Realty's share option equivalent incentive arrangements, the right of
directors and officers to continued indemnification and insurance coverage for
acts or omissions occurring before the transaction, and existing ownership of
securities issued by Security Capital.
CONDITIONS TO THE TRANSACTION (See Page 67)
Completion of the transaction requires:
o approval by the shareholders of Security Capital of the issuance of shares
of Security Capital Class B common stock in the transaction;
o approval by the shareholders of U.S. Realty of the transaction agreement
and the transactions it contemplates, including the sale of U.S. Realty's
assets, and the plan of liquidation and the appointment of the liquidator;
o the absence of any law or injunction preventing the transaction;
o approval by the New York Stock Exchange of the listing of the Security
Capital Class B common stock to be issued in the transaction;
o compliance in all material respects by Security Capital and U.S. Realty
with their transaction agreement covenants;
o the continuing accuracy of Security Capital's and U.S. Realty's
representations and warranties contained in the transaction agreement;
o receipt of authorizations, consents and approvals of governmental
authorities required to be obtained under the transaction agreement;
o the amount of cash to be distributed in the liquidation to U.S. Realty
shareholders who vote "against" the transaction and who validly elect to
receive cash instead of Security Capital shares totaling $200 million or
less;
o Security Capital having obtained sufficient financing for the transaction
under the commitment letter it received from its lenders or otherwise on
terms and conditions commercially available at the time of funding and
satisfactory to Security Capital; and
o the absence of any stop order suspending the effectiveness of the
registration statement of which this joint proxy statement/prospectus forms
a part or pending proceedings for that purpose.
<PAGE>
TERMINATION OF THE TRANSACTION AGREEMENT (See Page 68)
Security Capital and U.S. Realty may by mutual agreement terminate the
transaction agreement at any time. In addition, either company may terminate the
transaction agreement if specified events do or do not occur. These include:
o If a law, court order or other governmental action restrains or prohibits
the sale to Security Capital of U.S. Realty's assets or the liquidation of
U.S. Realty and can no longer be appealed;
o If either Security Capital or U.S. Realty fails to obtain its required
shareholder approval; and
o If Security Capital and U.S. Realty do not complete the transaction by
March 31, 2001 (which may be extended to no later than June 30, 2001 so
long as Security Capital's financing commitment is extended or replaced),
unless the failure to complete the transaction results from a breach of
covenants contained in the transaction agreement by the party seeking to
terminate.
In addition, Security Capital may terminate the transaction agreement if
the required U.S. Realty shareholder vote is obtained at the U.S. Realty
extraordinary meeting and the amount of cash required for distribution in the
transaction to U.S. Realty shareholders exceeds $200 million in the aggregate.
REGULATORY MATTERS (See Page 70)
The applicable waiting period under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976 expired on October 30, 2000.
As provided under Luxembourg law, U.S. Realty will remain under the
supervision of the Luxembourg supervisory authority until the completion of the
liquidation.
U.S. Realty qualifies in the Netherlands as an investment institution
within the meaning of the 1990 Act on the supervision of investment institutions
(Wet toezicht beleggingsinstellingen 1990) and is licensed and supervised by the
Dutch Central Bank (De Nederlandsche Bank N.V.). As a result, the transaction,
and the liquidation of U.S. Realty, is subject to the approval of the Dutch
Central Bank. Security Capital is not and will not be so licensed or
supervised, and accordingly shareholders of U.S. Realty who become Security
Capital shareholders will not have the benefit of such licensing and
supervision. In addition, the issue and offering by Security Capital of
Security Capital Class B common stock to the shareholders of U.S. Realty
residing in the Netherlands will require compliance with applicable Dutch
regulatory legislation.
APPRAISAL RIGHTS (See Page 106)
Holders of Security Capital securities are not entitled to appraisal rights
in connection with the proposal to issue shares of Security Capital Class B
common stock in the transaction. Under Luxembourg company law, there is no
established mechanism by which holders of U.S. Realty securities could seek any
appraisal or similar determination of the fair value of their shares by a court
in connection with the transaction or the liquidation.
<PAGE>
INCOME TAX CONSEQUENCES TO U.S. REALTY SHAREHOLDERS (See Page 71)
United States
A U.S. holder of U.S. Realty shares generally will recognize gain or loss
for U.S. federal income tax purposes upon the receipt of Security Capital Class
B common stock and/or cash in the transaction equal to the difference between
the fair market value of the Security Capital Class B common stock as at the
date received and/or the amount of cash received and the U.S. holder's adjusted
tax basis in the U.S. Realty share.
Germany
Based upon the prevailing opinion of commentators, German resident
individuals who receive Security Capital Class B common stock and/or cash in the
transaction should be treated for German tax purposes as if they had sold their
shares. Any gain should not be subject to German tax unless the German resident
exceeds certain ownership thresholds in U.S. Realty.
Luxembourg
Luxembourg resident individuals should not be subject to Luxembourg tax
upon the receipt of Security Capital Class B common stock or cash in the
transaction unless they have held their shares for less than six months.
Whether or not a Luxembourg corporation will be subject to Luxembourg tax upon
the receipt of such consideration in the transaction will depend on its tax
status.
ACCOUNTING TREATMENT (See Page 80)
Security Capital will account for the transaction using the purchase method
of accounting under U.S. generally accepted accounting principles ("GAAP"). See
"Unaudited Pro Forma Condensed Consolidated Financial Information."
<PAGE>
RISK FACTORS
You should consider carefully the factors set forth below in evaluating the
transaction. The following list summarizes material risks related to the
transaction and risks related to the business of Security Capital and to the
ownership of Security capital stock. This joint proxy statement/prospectus
contains forward-looking statements regarding the operations of Security
Capital, U.S. Realty and their combined businesses. Actual results could differ
materially from those set forth in the forward-looking statements. See
"Cautionary Statement Regarding Forward-Looking Statements."
RISK FACTORS RELATING TO THE TRANSACTION
SOME OF THE DIRECTORS OF U.S. REALTY HAVE A CONFLICT OF INTEREST.
In considering the recommendation of the U.S. Realty board of directors,
U.S. Realty shareholders should be aware that William D. Sanders, the non-
executive chairman of the board of U.S. Realty, also serves as chairman of the
board of Security Capital and is Security Capital's chief executive officer;
and, at the time the transaction agreement was approved, Jeffrey A. Cozad served
as a director on U.S. Realty's board of directors and as U.S. Realty's managing
director, and also served as managing director of U.S. Realty's operating
advisor, which is a wholly owned subsidiary of Security Capital. Officers of
Commerzbank serve on the boards of directors of both Security Capital and U.S.
Realty, and Commerzbank is the primary lender to both U.S. Realty and a
subsidiary of Security Capital and is expected to participate in the term loan
to finance the transaction. In addition, certain members of the U.S. Realty
special committee beneficially own shares of Class B and Class A common stock of
Security Capital and Security Capital debentures, and each member of the special
committee is also a director of Security Capital European Realty, an affiliate
of Security Capital.
THE TRANSACTION CONSIDERATION TO U.S. REALTY SHAREHOLDERS IS FIXED DESPITE
POTENTIAL CHANGES IN RELATIVE STOCK PRICES.
We will not adjust the number of shares of Security Capital Class B common
stock that U.S. Realty shareholders receiving stock will receive for each of
their U.S. Realty shares, or the basis for calculating the amount of cash that
U.S. Realty shareholders who vote against the transaction and elect to receive
cash will receive. The market prices of Security Capital's stock and U.S.
Realty's stock when the transaction is completed may differ from their prices at
the date the transaction consideration was determined, at the date of this joint
proxy statement/prospectus and at the date of the shareholder meetings. These
differences may be the result of changes in the business, operations or
prospects of Security Capital and U.S. Realty, market assessments of the
likelihood and timing of the transaction, general market and economic conditions
and other factors. At the time of the U.S. Realty shareholder meeting, U.S.
Realty shareholders will know the amount of cash they would receive if they vote
"against" the transaction and elect to receive cash instead of shares of
Security Capital Class B common stock, but will not know the exact value of the
shares of Security Capital Class B common stock they would otherwise receive
when the transaction is completed or the amount they could sell those shares for
in the market following completion of the transaction. You are urged to obtain
current market quotations for Security Capital and U.S. Realty.
<PAGE>
THE FAIRNESS OPINIONS DO NOT ADDRESS CHANGES IN THE RELATIVE VALUES OF THE
COMPANIES SINCE THE DATE THE OPINIONS WERE ISSUED.
The fairness opinion obtained by the Security Capital board of directors
and the fairness opinion obtained by the special committee of independent
directors of the U.S. Realty board are each dated September 26, 2000 and speak
only as of that date. The Security Capital board and the U.S. Realty special
committee do not presently intend to obtain updated fairness opinions from
Goldman Sachs or Merrill Lynch. Changes in the operations and prospects of
Security Capital and U.S. Realty, including general market and economic
conditions, may alter the relative values of the companies. Therefore, the
opinions of Goldman Sachs and Merrill Lynch do not address the fairness of the
transaction consideration at the time of the shareholder meetings or the time
the transaction is actually completed.
WE MAY NOT REALIZE OUR EXPECTATION THAT ANALYSTS AND INVESTORS WILL PERCEIVE
SECURITY CAPITAL'S POST-TRANSACTION STRUCTURE FAVORABLY.
Security Capital and U.S. Realty expect that the transaction will create a
company with a simplified structure and a correspondingly stronger market
profile for investors. Achieving this better market profile will depend in
large part on the perceptions of the investors and analysts who will follow
Security Capital after the transaction. Although analyst reports and stock
price movements have been favorable since the announcement of the transaction,
we cannot guarantee that these parties will continue to view the transaction as
creating a stronger market profile.
THE COMPANIES HAVE EXPENDED RESOURCES AND CAPITAL PURSUING THIS TRANSACTION, AND
IF THE TRANSACTION DOES NOT OCCUR, THE COMPANIES WILL NOT BENEFIT FROM THESE
EXPENDITURES AND MAY INCUR ADDITIONAL PAYMENTS.
We may not complete the transaction. If we do not complete the
transaction, Security Capital and U.S. Realty will have incurred substantial
expenses for which neither company will have received any ultimate benefit.
Additionally, in the event we terminate the transaction agreement, one party may
be required to reimburse the other party for documented out-of-pocket expenses,
not in excess of $2.1 million. See "The Transaction Agreement--Expenses."
Among the reasons that the transaction may not be completed would be a failure
of Security Capital to have obtained sufficient financing for the transaction.
While Security Capital has obtained a commitment letter for sufficient
financing, there can be no assurance that such financing or any other financing
will be consummated for the transaction.
THE RIGHTS OF SECURITY CAPITAL SHAREHOLDERS DIFFER FROM THOSE OF U.S. REALTY
SHAREHOLDERS.
Luxembourg law applicable to corporations formed under the laws of that
country and U.S. Realty's articles of incorporation currently govern the rights
of shareholders of U.S. Realty. Upon completion of the transaction, Maryland
law applicable to corporations formed under the laws of that state and Security
Capital's charter and bylaws will govern the rights of shareholders of U.S.
Realty who receive shares of Security Capital Class B common stock. The rights
of shareholders of U.S. Realty differ materially from the rights of shareholders
of
<PAGE>
Security Capital and the rights of former U.S. Realty shareholders in Security
Capital may be less favorable in some respects than their former rights as
shareholders of U.S. Realty, even if more favorable in other respects. See
"Comparison of Rights of Shareholders."
RISK FACTORS RELATING TO THE BUSINESS OF SECURITY CAPITAL AND TO THE OWNERSHIP
OF SECURITY CAPITAL STOCK
SECURITY CAPITAL WILL RELY ON DIVIDENDS AND FEES FROM COMPANIES OVER WHICH IT
DOES NOT HAVE UNILATERAL CONTROL TO MEET ITS OPERATING EXPENSE NEEDS AND TO
SERVICE DEBT, AND ITS FLEXIBILITY REGARDING ITS INVESTMENT IN STRATEGIC
INVESTEES IS AND WILL BE LIMITED BY SIGNIFICANT CONTRACTUAL RESTRICTIONS.
Most of Security Capital's and U.S. Realty's cash flow and earnings come
from real estate operating companies in which they own shares. Security Capital
and U.S. Realty are, and Security Capital after the transaction will be,
partially dependent on dividends and fees it receives from these companies to
meet its operating expense needs and to pay principal and interest on its debt.
Although Security Capital and U.S. Realty have influence over these real estate
operating companies because of their significant ownership interest and
contractual rights, Security Capital and U.S. Realty have a non-majority
ownership interest and the right to designate nominees for fewer than a majority
of the board seats in several of these companies and does not have unilateral
control. Decisions or actions of investee management could adversely affect
Security Capital. In addition, the ability of the companies in which Security
Capital and U.S. Realty invest to pay dividends depends on the economic
performance of those companies, the prior claims of creditors or holders of
preferred stock of those companies and their compliance with United States
federal tax laws.
In addition, Security Capital has agreed with the public companies in which
it and U.S. Realty hold large strategic investments to significant restrictions
on, among other matters, disposing of any of those investments as a block or in
certain distributions without the consent of the investees. These restrictions,
which currently apply to U.S. Realty as well, have the effect of limiting the
liquidity of those investments and could materially adversely affect Security
Capital's ability to monetize its investments in those companies if it chose to
do so. See "Description of Business of U.S. Realty--Agreements with Strategic
Investee Companies."
SECURITY CAPITAL IS SUBJECT TO RISKS UNIQUE TO THE REAL ESTATE BUSINESS THAT
COULD ADVERSELY AFFECT FUTURE PERFORMANCE AND RESULTS OF OPERATIONS.
Security Capital is subject to the following risks unique to the re estate
business:
o Changes in specific economic conditions or commercial patterns that reduce
demand for real estate (for example, a recession or change in technology
that reduces demand for real estate facilities or which results in
bankruptcy of tenants);
o Changes in tax laws or market conditions that make real estate investment
less attractive relative to other investment opportunities. Such changes
would reduce the number of buyers for real estate and adversely affect real
estate asset values. Selling real estate assets typically takes longer than
selling other types of assets, so it is more
<PAGE>
difficult to anticipate unfavorable changes by selling the affected assets
before the change;
o Changes in tax laws or capital markets, which result in excess capital
flowing into new real estate development and excess real estate supply; and
o When equity and/or debt capital is unavailable or expensive for real estate
companies (as has been the case since mid-1998), Security Capital is
adversely affected, primarily because fee-earning capital markets
transaction volume suffers, the value of assets under management, on which
fees are based, is lower, and the ability to pursue attractive investment
opportunities, including new start-up companies, is limited (and investees
in the start-up phase may need to reduce activities and incur related
charges).
SECURITY CAPITAL HAS SEVERAL AFFILIATED COMPANIES AND FROM TIME TO TIME ENGAGES
IN TRANSACTIONS WITH THOSE COMPANIES, CREATING POTENTIAL CONFLICTS OF INTEREST.
Transactions between Security Capital and its affiliates have occurred and
may occur in the future. Several of Security Capital's directors or senior
officers are directors or trustees of its affiliates, or own shares of its
affiliates. Those persons may have conflicts of interest in affiliate
transactions. Where Security Capital engages in these types of transactions it
has obtained or will obtain disinterested director approval or shareholder
approval, when necessary, for transactions in which directors may have a
conflict of interest. Neither Security Capital's charter nor its bylaws
contains any restrictions on interested party transactions.
SECURITY CAPITAL WOULD BE MATERIALLY ADVERSELY AFFECTED IF IT WERE REQUIRED TO
REGISTER AS AN INVESTMENT COMPANY UNDER THE U.S. INVESTMENT COMPANY ACT.
Security Capital is not registered as an investment company under the U.S.
Investment Company Act of 1940, in reliance on an exemption provided by Rule 3a-
1 under that Act. The Investment Company Act does not require Security Capital
to register as an investment company because Security Capital is principally
engaged in the real estate business through companies that it primarily
controls. To the extent Security Capital and its affiliates dispose of some of
their equity interest in investees or do not elect to participate in future
equity offering by investees, or those investees issue substantial additional
equity securities in a business combination to unaffiliated parties, Security
Capital's ownership interest in and control over those investees could diminish.
Under those circumstances, Security Capital could potentially be required to
register, or to seek another exemption from registration, as an investment
company under the Investment Company Act. Security Capital would suffer
additional regulatory costs and expenses, and might be required to discontinue
some operations or investments, if the Investment Company Act required it to
register as an investment company.
<PAGE>
GERMAN TAX CONSIDERATIONS
The following is a summary of the principal German income tax consequences
that may be relevant to German resident individual shareholders of U.S. Realty
with respect to the receipt of the Liquidation Proceeds in consideration for
U.S. Realty shares or U.S. Realty ADS's in the Liquidation and the ownership and
disposition of Security Capital Class B common stock acquired in the
Liquidation. This summary is based on German tax law and German tax treaties
(conventions for the avoidance of double taxation) and relevant interpretations
in effect on the date of this prospectus. This summary is not binding on any
tax authority, regulator, court or government agency. Rulings have not been
requested. Changes in tax law or treaties or interpretations thereof could
materially alter the German tax burden of U.S. Realty shareholders, and no
responsibility is taken to update this summary for changes in law or fact.
German shareholders should consult their own tax advisors regarding the
particular consequences the liquidation of U.S. Realty may have with respect to
them. Since no specific provisions exist under German tax law and no clear
precedents are available regarding the German tax treatment of a liquidation of
a non-German company, any comments made below are based upon our understanding
of current German tax law and commentaries.
The following summary does not address all possible tax consequences
relating to an investment in U.S. Realty and does not address the tax
consequences applicable to all categories of shareholders (e.g., corporations,
tax exempt shareholders), some of which may be subject to special rules. In
particular, this summary does not address the tax consequences to any
shareholders under non-German tax laws. U.S. federal income tax aspects of a
disposal of Security Capital Class B common stock are described above under
"United States Federal Income Tax Considerations."
TO U.S. REALTY SHAREHOLDERS WHO ARE GERMAN RESIDENT INDIVIDUALS
This summary is based on the German Income Tax Law as well as applicable
tax treaties. Both of the foregoing are subject to change, which could apply
retroactively and which could affect the tax consequences described below. It
assumes that the German resident individuals own the shares in U.S. Realty and,
post-liquidation, the Security Capital Class B common stock as private
investments and not business assets. It is noted that, according to a ruling
from the "Bundesaufsichtsamt fur das Kreditwesen," U.S. Realty is not a foreign
investment fund within the meaning of Sec. 1 para. 1 Aus/InvestmG (German
Foreign Investment Fund Law).
CONSEQUENCES OF RECEIPT OF LIQUIDATION PROCEEDS
Regardless of the application of the Tax Treaty between Germany and
Luxembourg, Germany has the right to tax the Liquidation Proceeds received by
German shareholders in the transaction.
The prevailing opinion regarding the liquidation of non-German corporations
is that shareholders who receive liquidating proceeds are treated for German tax
purposes as if they had recognized a capital gain/loss from the disposal of
shares. Accordingly a German shareholder that receives Liquidation Proceeds
from U.S. Realty will realize capital gain or loss, respectively.
<PAGE>
German shareholders that do not exceed the participation threshold
referenced below should not be subject to German income tax on their receipt of
the Liquidation Proceeds. The German income tax should not apply even if the
shareholder had a holding period of one year or less with respect to the U.S.
Realty shares.
Shareholders that realize a capital gain on receipt of the Liquidation
Proceeds will be taxed if the shareholder (or its predecessor(s) in interest
from whom it received the shares without consideration) has had a direct or
indirect 10% (or more) interest in U.S. Realty at any time during the five year
period that precedes the Liquidation. The German Tax Reform Act
("Steuersenkungsgesetz"), generally effective January 1, 2001, will reduce the
relevant participation threshold from 10% to 1%. Furthermore, according to the
Tax Reform Act, a capital gain from the sale of shares will be subject to
taxation on 50% of such gain. It is presently unclear whether the portion of
the German Tax Reform Act dealing with capital gains arising from the sale of
non-German shares will be effective January 1, 2001 or alternatively January 1,
2002. It is expected that the German Federal Ministry of Finance will issue a
decree with regard to this issue. Any taxable capital gain will be included in
the calculation of the shareholder's taxable income and will be subject to tax
at the shareholder's applicable marginal tax rate. The top rate for 2000 is 51%
and for 2001 it is 48.5%. A solidarity surcharge is levied at a rate of 5.5% of
an individual's income tax liability and church tax, if applicable, is 8% or 9%
of income tax liability.
Taxable capital gains or losses are calculated by measuring the difference
between the fair market value of the Liquidation Proceeds received by the
shareholder and the shareholder's acquisition cost of the U.S. Realty shares,
less any related expenses incurred by the shareholder in connection with the
Liquidation. In the case where only 50% of the capital gains will be taxed
depending on the deemed effective date for portions of the German Tax Reform
Act, the deduction for related expenses will be limited to 50% of costs.
Shareholders who realize a capital loss on the receipt of the Liquidation
Proceeds will only be permitted to deduct the loss for German income tax
purposes if the receipt of a capital gain would have been subject to tax, i.e.,
if the shareholder has met the participation threshold referenced above.
However, even if allowable, only 50% of the capital losses could be offset and,
then, only (in the same or future years) against corresponding taxable capital
gains from the sale, liquidations, or capital redemptions of other Luxembourg
corporations.
Should the Liquidation Proceeds, for whatever reasons, be considered as
dividends (by the German tax authorities or tax courts) instead of capital
gains/losses, such dividend would be subject to German income tax. Should the
transaction be qualified as an exchange of shares or exchange of shares against
cash, such transaction would be a deemed sale of shares. Hence, such sale would
be subject to German income tax if the German shareholder either realizes a
short-term capital gain (within a one year holding period) or exceeds the
participation threshold referenced above.
TAXATION TO GERMAN RESIDENT INDIVIDUALS OF OWNERSHIP OF SECURITY CAPITAL CLASS B
COMMON STOCK
The prevailing opinion of commentators is that German shareholders should
not be subject to German tax on a subsequent sale of Security Capital Class B
common stock provided that the shareholder's combined U.S. Realty and Security
Capital stock holding period exceeds one year and that the shareholder owns less
than the participation threshold
<PAGE>
discussed below and Security Capital stock was received as Liquidation Proceeds.
German shareholders that will own 10% or more of Security Capital will be
subject to tax on the sale of their Security Capital Class B common stock. The
applicable participation amount that will subject German shareholders to German
income tax on their sale of Security Capital Class B common stock will change to
1% or more after the effective date of the non-German corporation capital gains
portion of the German Tax Reform Act. Then, however, only 50% of the gain will
be taxable.
Shareholders who realize a capital loss on the sale of their Security
Capital Class B common stock will only be permitted to deduct the loss for
German income tax purposes if the receipt of a capital gain would have been
subject to tax, i.e., if the shareholder has met the participation threshold
referenced above. Unless Security Capital or its subsidiaries are engaged in
the active conduct of certain kinds of trade or business, a capital loss could
only be offset (in the same or future years) against corresponding taxable
capital gains from the sale, liquidation or capital redemption of other U.S.
corporations.
<PAGE>
DESCRIPTION OF BUSINESS OF SECURITY CAPITAL
GENERAL
Security Capital is an international real estate research, investment and
operating management company. Security Capital operates its businesses through
two divisions: the Capital Division, which invests in high-growth real estate
operating companies, and the Financial Services Division, which provides capital
markets and capital management services primarily to Security Capital and its
affiliates. The principal offices of Security Capital and its directly-owned
affiliates are in Amsterdam, Atlanta, Brussels, Chicago, Denver, El Paso,
Houston, London, Luxembourg, New York, and Santa Fe.
The Capital Division allocates capital to real estate operating companies
that are positioned to generate high internal earnings growth rates through
superior operations as well as property development and significant customer
service income. Its strategy is to focus on a select number of high-performance
businesses that can create brand value and ultimately be a leader in their
respective niche. Its objective is to hold significant ownership positions in
companies that meet these criteria. The Capital Division provides operational
and capital deployment advice to these companies and generates earnings for
Security Capital from its ownership in these affiliates. At September 30, 2000,
the Capital Division had direct and indirect investments in 16 real estate
operating companies focused on apartment communities, corporate extended-stay
lodging, corporate office, distribution and logistics, manufactured housing
communities, infill retail centers, parking, self-storage and senior assisted
living communities. These operating companies had a combined total market
capitalization of $26.3 billion as of September 30, 2000.
The Financial Services Division generates fees principally from capital
management and capital markets activities. The Global Capital Management Group
manages capital invested in real estate companies or securities for investment
entities and separate accounts. The Capital Markets Group provides capital
markets services to various affiliates, including operating companies and
investment entities and third party managed capital. In addition, Security
Capital also provides shared services to its affiliates in order to generate
economies of scale. The Corporate Services Group provides administrative,
processing, and technology infrastructure and related services. The Real Estate
Research Group conducts proprietary real estate, research and provides analyses
of short-term trends and long-term market conditions.
POLICIES WITH RESPECT TO CERTAIN ACTIVITIES
The following is a discussion of Security Capital's policies with respect
to investment, financing, and certain other activities. These policies are
determined by Security Capital's board of directors and may be amended or
revised from time to time at the discretion of the board without notice to or a
vote of the shareholders of Security Capital.
INVESTMENT POLICIES
Security Capital deploys its capital through the direct and indirect
ownership of public and private operating businesses with highly focused
strategies which are engaged in real estate activities.
Investments in Real Estate or in Interests in Real Estate. Security
Capital does not
<PAGE>
invest directly in real estate or in interests in real estate. All such
activities are conducted by its current direct investees (Archstone, ProLogis,
Homestead and Belmont Corp.) and its indirect investees (CarrAmerica, Storage
USA, Regency, City Center Retail, CWS Communities, InterParking and Urban Growth
Property Trust through U.S. Realty, and Interparking S.A., Access Self-Storage
Holdings S.A., Akeler Holdings S.A., City & West End Property Holdings S.A.,
Bernheim Comofi S.A., Millers Storage Holdings S.A. and London and Henley S.A.
through Security Capital European Realty) (collectively, "operating
businesses"). On November 8, 2000, Archstone, at Security Capital's request,
filed a registration statement covering the resale of Security Capital's shares
of Archstone. On December 5, 2000, Security Capital completed the sale of
3,750,000 shares of Archstone to an institutional investor, thereby reducing
Security Capital's interest in Archstone to 25.933%. In addition, Security
Capital manages or advises capital invested in focused funds which invest in
securities of real estate operating companies (Security Capital Preferred Growth
Incorporated, Security Capital U.S. Real Estate Shares and Security Capital
European Real Estate Shares (collectively the "Funds")) and through separate
accounts. The operating businesses are each focused on specific types of real
estate. The operating businesses are expected to acquire additional similar
properties and where appropriate, subject to applicable REIT qualification
rules, have sold and expect to sell certain of their properties. Existing and
future Operating Businesses may acquire additional properties in existing
markets or new markets targeted by the management of those businesses. Future
investments by Security Capital in companies which are engaged in real estate
activities, however, will not be limited to any geographic area, product type or
to a specified percentage of Security Capital's assets. The Funds are not
limited as to product type for real estate operating companies but are limited
as to concentration in the securities of any particular real estate operating
company and may be limited as to geographic area based on the particular Fund's
investment limitations contained in its organizational documents.
Investments in Real Estate Mortgages. Except as described below, Security
Capital does not invest directly in real estate mortgages and its operating
businesses have not invested substantial amounts in mortgages or similar
interests in properties. Security Capital owns mortgages in its direct
investee, Homestead. Certain operating businesses have invested in mortgage
loans to third-party owner/developers in connection with the development of
properties that are contractually required to be sold to the operating business
upon completion or convertible mortgage loans to affiliates in which the
operating business owns a substantial economic interest, or convertible mortgage
loans where the board of the operating business believes that such loans are in
the best interest of the operating business.
Securities of or Interests in Persons Primarily Engaged in Real Estate
Activities and Other Issuers. Security Capital has since its founding invested,
and will continue to invest, directly or indirectly, in securities of entities
engaged in real estate activities, including for the purpose of exercising
control. Security Capital does not expect that its investment in securities will
require it to register as an investment company under the Investment Company
Act, although certain Funds which Security Capital advises are registered under
the Investment Company Act. See "Risk Factors--Risk Factors Relating to the
Business of Security Capital and to the Ownership of Security Capital Stock."
FINANCING POLICIES
There are no limits on total debt, or ratio of debt to equity, or similar
restrictions, in Security Capital's charter or bylaws. Security Capital,
however, intends to maintain a prudent
<PAGE>
policy on indebtedness. Security Capital's proposed term loan to be used to
finance this transaction, its line of credit, and the indentures under which its
long-term notes were issued impose limitations on indebtedness. Security Capital
intends to comply with such limitations. The proposed term loan is described in
"The Transaction -- Transaction Financing." Security Capital uses its $470
million floating rate line of credit mainly for the purpose of facilitating
investments and for working capital. Security Capital currently has long-term,
fixed rate convertible subordinated indebtedness aggregating $231 million which
is due 2016. Security Capital currently has unsecured, fixed rate long-term
notes aggregating $700 million due between 2003 and 2028. Security Capital does
not intend to incur long-term floating rate debt. Security Capital may also
determine to issue securities senior to the Security Capital Class B common
stock, including preferred stock and debt securities (either of which may be
convertible into the Class B common stock). Security Capital's financing
policies are to replace line of credit borrowings with the proceeds of asset
sales, retained cash flow, equity offerings or unsecured long-term, fixed rate
debt with staggered maturities. From time to time, Security Capital may also
issue equity securities, but expects to be very selective in doing so. The
proceeds of any borrowings by Security Capital may be used to provide working
capital, to pay existing indebtedness, to finance investments in or expansions
of new business initiatives, and to fund stock repurchases.
Security Capital has issued options to purchase Class A common stock and
Class B common stock and restricted stock unit awards for the Class B common
stock to employees and directors and intends to issue additional options and
restricted stock unit awards under its long-term incentive plans and outside
directors plan.
POLICIES WITH RESPECT TO OTHER ACTIVITIES
Security Capital may make investments in addition to those previously
described. Security Capital's board of directors has authority to reclassify
unissued shares into senior securities, to offer shares or other securities and,
subject to certain restrictions under Maryland law, its line of credit, proposed
term loan, and its indentures, to repurchase or otherwise reacquire shares or
any other securities. Security Capital has on occasion repurchased its debt and
equity securities and expects to engage in such activities in the future.
Security Capital has not engaged directly in trading, underwriting or agency
distribution or sale of securities of other issuers, although its broker-dealer
affiliate, Security Capital Markets, has engaged in and intends to continue to
engage in trading, agency distribution or sales of securities of Security
Capital and its affiliates.
Security Capital makes annual and quarterly reports to shareholders. The
annual reports contain audited financial statements.
PROPERTIES
Security Capital does not own any properties. For a general description of
the properties leased by Security Capital or owned by its affiliates, see Item 2
of Security Capital's Annual Report on Form 10-K for 1999 which is incorporated
by reference. None of the properties owned by any of Security Capital's
affiliates constitutes more than ten percent of the total consolidated assets of
Security Capital or provides more than ten percent of the gross consolidated
revenue of Security Capital. In the opinion of management of Security Capital
the properties of its affiliates are adequately covered by insurance.
<PAGE>
TAX TREATMENT OF SECURITY CAPITAL AND ITS SECURITY HOLDERS
See "Certain Tax Consequences of the Transaction."
<PAGE>
DESCRIPTION OF SECURITY CAPITAL STOCK
GENERAL
The following description of Security Capital's stock is qualified by the
full text of Security Capital's Charter, Articles Supplementary and Bylaws,
attached as exhibits to Security Capital's Annual Report on Form 10-K for the
year ended December 31, 1999, and incorporated in this document by reference.
See "Where You Can Find More Information." Capitalized terms used in the
summary below without definition have the meanings given to them in those
documents.
AUTHORIZED CAPITAL STOCK
As of November 30, 2000, Security Capital's authorized stock consisted of
15,543,012 shares of Class A Common Stock, par value $0.01 per share;
234,133,373 shares of Class B Common Stock, par value $0.01 per share; 257,642
shares of Series B Cumulative Convertible Redeemable Voting Preferred Stock, par
value $0.01 per share; and 65,973 shares of Series A Junior Participating
Preferred Stock, par value $.01 per share.
SECURITY CAPITAL CLASS A COMMON STOCK
Holders of Security Capital Class A common stock are entitled to one vote
for each share on all matters upon which shareholders are entitled to vote.
Holders of Class A common stock vote on all matters submitted to a vote of
shareholders as a single class with the holders of Class B common stock. Each
share of Class A common stock may at any time, at the option of the holder of
record, be converted into fifty (50) fully paid and nonassessable shares of
Class B common stock. Holders of Class A common stock are entitled to such
dividends or other distributions (including liquidating distributions) per
share, whether in cash or in kind, in stock (including a stock split) or by any
other means, when and as may be authorized by the board of directors of Security
Capital, but a holder of Class A common stock's rights to dividends and rights
upon liquidation are junior to the rights of holders of any preferred shares.
SECURITY CAPITAL CLASS B COMMON STOCK
Holders of Security Capital Class B common stock are entitled to one two-
hundredth ( 1/200th) of a vote for each share of Class B common stock on all
matters upon which shareholders are entitled to vote. Holders of Class B common
stock vote on all matters submitted to a vote of shareholders as a single class
with the holders of Class A common stock. Holders of Class B common stock do not
have any conversion, redemption or preemptive rights. The holders of Class B
common stock are entitled to dividends or other distributions (including
liquidating distributions) per share, whether in cash, in kind, in stock
(including a stock split), or by any other means, equal to one-fiftieth (
1/50th) of the amount per share authorized by the Security Capital board for
each share of Class A common stock. At such time as there are no shares of
Class A common stock outstanding, holders of Class B common stock would be
entitled to such dividends and distributions as may be authorized by the
Security Capital board. The rights of a holder of Class B common stock to
dividends and rights upon liquidation are junior to the rights of holders of any
preferred shares.
<PAGE>
VOTING INSTRUCTIONS
SECURITY CAPITAL U.S. REALTY
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR THE EXTRAORDINARY
GENERAL MEETING OF SHAREHOLDERS - JANUARY 16, 2001
The undersigned _____________________ residing at _____________________,
beneficial holder Security Capital U.S. Realty through Commerzbank AG, hereby
gives irrevocable instruction to Commerzbank, for and in the name of the
undersigned, to vote all shares, par value $4.00 per share, of Security Capital
U.S. Realty that the undersigned would be entitled to vote if personally present
at the Extraordinary General Meeting of Shareholders, to be held at 12 rue Jean
Engling, 1466 Luxembourg on January 16, 2001 at 3:00 p.m., local time, and any
adjournment thereof, upon the transactions and matters described in the Notice
of the Extraordinary General Meeting and Joint Proxy Statement/Prospectus dated
December ___, 2000, receipt of which is hereby acknowledged, and upon any other
business that may properly come before the meeting or any adjournment thereof,
hereby revoking any proxy heretofore executed by the undersigned to vote at said
meeting. Said proxies are directed to vote on the transactions and matters
described in the Notice of Extraordinary General Meeting and Joint Proxy
Statement/Prospectus as follows, and otherwise in their discretion upon such
other business as may properly come before the Extraordinary General Meeting or
any adjournment thereof.
THIS PROXY WILL BE VOTED AS DIRECTED. IF NO DIRECTION IS INDICATED, THIS PROXY
WILL BE VOTED "FOR" APPROVAL OF THE TRANSACTIONS AND MATTERS DESCRIBED IN THE
NOTICE OF EXTRAORDINARY GENERAL MEETING AND JOINT PROXY STATEMENT/PROSPECTUS.
CONTINUED AND TO BE SIGNED ON REVERSE SIDE
--------------------
SEE REVERSE SIDE
--------------------
<PAGE>
<TABLE>
Please mark
your vote
as indicated [x]
in this
example
The Board of Directors recommends a vote FOR Proposal 1.
<S> <C>
1. To approve the Transaction Agreement, dated as of 2. In their discretion on such matters as may
September 26, 2000, among, U.S. Realty, Security properly come before the meeting or any
Capital Group Incorporated and a wholly-owned adjournment therefore.
subsidiary of Security Capital and the transaction and
matters contemplated thereby as described in the NOTE: Please date and sign this proxy exactly as
Notice of Extraordinary General Meeting and Joint your name appears hereon. In the case of joint
Proxy Statement/Prospectus of Security Capital U.S. owners, each joint owner should sign. When signing
Realty and Security Capital Group Incorporated dated in a fiduciary or representative capacity, please
December 8, 2000.* give your full title. If this proxy is submitted by
a corporation or partnership, it should be executed
in the full corporate or partnership name by a duly
authorised person.
FOR AGAINST ABSTAIN
[ _ ] [ _ ] [ _ ]
See Election Form
Below if You
Vote AGAINST
Dated: , 200_
----------------------------------------
-----------------------------------------------------
Signature
-----------------------------------------------------
Signature
</TABLE>
* This proxy may not be revoked following approval and consummation of the sale
of shares of Security Capital Holdings S.A. pursuant to the Transaction
Agreement.
Election Form For Shareholders Voting AGAINST Approval:
-------------------------------------------------------
Important Information: If you wish to receive cash instead of shares of Class B
common Stock of Security Capital Group Incorporated ("Security Capital") upon
the liquidation of Security Capital U.S. Realty ("U.S. Realty"), you must return
this voting instruction card clearly marked to indicate that (1) you vote
AGAINST the transaction and (2) if the transaction is approved, you wish to
receive cash instead of shares of Security Capital Class B common stock.
Alternatively, if you wish to attend the extraordinary general meeting and are a
record holder, you may make a valid cash election at the meeting by voting
"against" the transaction at the meeting and checking the appropriate cash
election box on your ballot. [In order to assure any necessary tax withholding
and to verify the total amount of cash consideration, if you validly elect to
receive cash by either of the above methods you must also complete and return
the Letter of Transmittal before or at the Extraordinary General Meeting and (if
you hold physical certificates) attach your U.S. Realty share certificate(s) to
the Letter of Transmittal.] If you do not follow these procedures for voting
-------------------------------------------------
your shares and delivering the other required documents, you will be deemed to
------------------------------------------------------------------------------
have consented to receive Security Capital Class B common stock in the
----------------------------------------------------------------------
transaction.
-----------
Shareholders who vote FOR the transaction or abstain from voting, shareholders
who vote AGAINST the transaction but do not check the box to elect cash, and
shareholders who do not timely return the required documents, will be deemed to
have consented to receive Security Capital Class B common stock in the
transaction.
Shareholders validly electing to receive cash will receive, should the
transaction proceed, for each U.S. Realty share, an amount of cash in the U.S.
dollar equal to 1.15 multiplied by the average of the daily high and low per
share sales prices of the Security Capital Class B common stock on the New York
Stock Exchange during the fifteen trading days ending on January 5, 2001 (the
sixth trading day before the U.S. Realty extraordinary general meeting) net of
any required withholding taxes.
If the shareholders who vote AGAINST the transaction elect to receive cash
payments in an amount exceeding $200 million in the aggregate, Security Capital
will have the right to terminate the transaction agreement. In that event, the
transaction would not proceed, the U.S. Realty shareholders would continue to
own U.S. Realty shares. See the Notice of Extraordinary General Meeting and
Joint Proxy Statement/Prospectus of U.S. Realty and Security Capital dated
December 8, 2000 for a complete description of the transaction and related
matters.
The Articles of Incorporation of U.S. Realty and the notice legale required by
Luxembourg law have been filed with the Chief Registrar of the Luxembourg
District Court.
[ _ ] The above-named shareholder of Security Capital elects to
receive cash in the Transaction.
Please mark
as indicated in [x]
in this example
