As filed with the Securities and Exchange Commission on December 12, 2000
Registration No. 333-49418
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 1 TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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ARDEN REALTY, INC.
(Exact name of Registrant as Specified in its Governing Instruments)
Maryland 95-04578533
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
11601 Wilshire Boulevard
Fourth Floor
Los Angeles, California 90025
310.966.2600
(Address of Principal Executive Offices)
Richard S. Davis
11601 Wilshire Boulevard
Fourth Floor
Los Angeles, California 90025
310.966.2600
(Name, Address, including Zip Code, and Telephone Number,
including Area Code, of Agent for Service)
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Copies To:
William J. Cernius
and
Joseph McCarthy
Latham & Watkins
650 Town Center Drive, Suite 2000
Costa Mesa, California 92626
714.540.1235
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Approximate date of commencement of the proposed sale of the securities to
the public: From time to time after the effective date of this Registration
Statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933 (the "Securities Act"), other than securities offered only in connection
with dividend or interest reinvestment plans, check the following box.
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering.
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering.
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box.
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE
OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT THAT SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
<PAGE>
P R O S P E C T U S
ARDEN REALTY, INC.
290,000 Shares
Common Stock
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This prospectus relates to the possible offer and sale from time to
time of up to 290,000 shares of our common stock, par value $.01 per share, by
the "Selling Stockholders" identified in this prospectus. See "Plan of
Distribution." We will not receive any proceeds from the sale of the shares of
common stock offered by the Selling Stockholders.
We are a self-administered and self-managed real estate investment
trust that owns, manages, leases, develops, renovates and acquires commercial
properties located in Southern California. We currently conduct all of our
operations through Arden Realty Limited Partnership, a Maryland limited
partnership referred to in this prospectus as the Operating Partnership. We are
the sole general partner of the Operating Partnership and as of June 30, 2000
owned a 96.7% interest in the Operating Partnership. Although we and the
Operating Partnership are separate entities, for ease of reference and unless
the context requires, all references in this prospectus to Arden Realty, us, we
or our refer to Arden Realty, Inc. and the Operating Partnership, collectively.
The Selling Stockholders were issued options to purchase 290,000 shares
of our common stock. The Selling Stockholders have the contractual right to
purchase these shares from us at the exercise prices reflected in the section
entitled "Selling Stockholders." We are registering, and this prospectus relates
to, the offer and sale by the Selling Stockholders of shares of common stock to
be received by the Selling Stockholders upon exercise of their stock options.
The registration of these shares however, does not necessarily mean that any or
all of these shares will be offered or sold by the Selling Stockholders. The
registration statement of which this prospectus is a part is being filed
pursuant to our contractual obligations with the holders of the options. We have
also agreed to pay all expenses of this registration.
Our common stock is listed on the New York Stock Exchange under the
symbol "ARI." On December 11, 2000, the last reported sales price of our common
stock on the NYSE was $24.93 per share.
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SEE "RISK FACTORS" IN OUR ANNUAL REPORT ON FORM 10-K FOR THE FISCAL
YEAR ENDED DECEMBER 31, 1999, WHICH IS INCORPORATED BY REFERENCE INTO THIS
PROSPECTUS, FOR CERTAIN RELEVANT FACTORS TO CONSIDER BEFORE MAKING AN INVESTMENT
IN OUR COMMON STOCK.
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NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this prospectus is December 12, 2000
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FORWARD-LOOKING STATEMENTS
In addition to historical information, we have made forward-looking
statements in this prospectus and in the documents incorporated by reference in
this prospectus, such as those pertaining to our capital resources and
performance of our operations. "Forward-looking statements" are projections,
plans, objectives or assumptions about our company. Forward-looking statements
involve numerous risks and uncertainties, and you should not place undue
reliance on these statements since there can be no assurance that the events or
circumstances reflected in these statements will actually occur. Forward-looking
statements can be identified by the use of forward-looking terminology such as
"believes," "expects," "may," "will," "should," "seeks," "approximately,"
"intends," "plans," "pro forma," "estimates" or "anticipates" or the negative
thereof or other variations thereof or comparable terminology or by discussions
of strategy, plans or intentions. Forward-looking statements are necessarily
dependent on assumptions, data or methods that may be incorrect, imprecise and
incapable of being realized. The following factors, among others, could cause
actual results and future events to differ materially from those set forth or
contemplated in the forward-looking statements:
o our anticipated growth strategies;
o our intention to acquire additional properties;
o anticipated trends in our business, including trends in the market for
office building leases in the Southern California market;
o future expenditures for development projects; and
o availability of capital to finance our business.
Readers are cautioned not to place undue reliance on forward-looking
statements. We assume no obligation to update forward-looking statements.
THE COMPANY
GENERAL
Through our controlling interest in the Operating Partnership and our
other subsidiaries, we own, manage, lease, develop, renovate and acquire
commercial office properties located in Southern California. As of September 30,
2000, our portfolio was comprised of 143 primarily suburban office properties,
or the Properties, with approximately 18.7 million net rentable square feet and
three properties with approximately 700,000 net rentable square feet under
development.
We operate from our Los Angeles, California headquarters and are a
fully-integrated real estate company with approximately 300 full-time employees
and in-house expertise in acquisitions, finance, asset management, leasing and
construction.
We are a Maryland corporation incorporated on May 1, 1996. Our
executive offices are located at 11601 Wilshire Boulevard, Fourth Floor, Los
Angeles, California 90025 and our telephone number is (310) 966-2600.
THE OPERATING PARTNERSHIP
Since the closing of our initial public offering in October 1996,
substantially all of our assets have been held directly or indirectly by, and
our operations conducted through, the Operating Partnership. We are the sole
general partner of the Operating Partnership and, as of June 30, 2000, owned a
96.7% interest therein. Our interest in the Operating Partnership entitles us to
share in cash distributions from, and in the profits and losses of, the
Operating Partnership in proportion to our percentage ownership. Certain
individuals and entities own the remaining OP Units, including Mr. Richard S.
Ziman, Arden Realty's Chairman and Chief Executive Officer and Mr. Victor J.
Coleman, Arden Realty's President and Chief Operating Officer, together with
other entities and individuals, which were primarily issued Operating
Partnership Units, or OP Units, in connection with the Company's acquisition of
certain Properties previously owned by those entities.
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As the sole general partner of the Operating Partnership, we generally
have the exclusive power under the Second Amended and Restated Partnership
Agreement of the Operating Partnership, or the Partnership Agreement, to manage
and conduct the business of the Operating Partnership, subject to limited
exceptions. Our Board of Directors will manage our affairs by directing the
affairs of the Operating Partnership. The Operating Partnership cannot be
terminated (except in connection with a sale of all or substantially all of our
assets, a business combination or as the result of judicial decree or the
redemption of all of the OP Units held by the Limited Partners) until the year
2096 without a vote of the partners of the Operating Partnership.
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SELLING STOCKHOLDERS
The following table provides the names of, and the maximum number of
shares of common stock that will be owned and offered from time to time under
this prospectus by, each Selling Stockholder following exercise of their
respective common stock options. Because the Selling Stockholders may sell all
or part of their shares of common stock pursuant to this prospectus, and the
offering is not being underwritten on a firm commitment basis, no estimate can
be given as to the number and percentage of shares of our common stock that will
be held by each selling stockholder upon termination of the offering.
<TABLE>
<CAPTION>
Percentage of
Maximum Number of Shares Outstanding Common
Shares of Common Stock of Common Stock Issuable Stock Following the
Owned Prior Upon Exercise and Exchange and Prior to
Name to the Exercise(1) Available for Resale(1) Resale(1)(2)
<S> <C> <C> <C>
Carl D. Covitz (2) 10,000 60,000 *
Larry S. Flax (3) 18,500 60,000 *
Peter S. Gold (4) 9,000 50,000 *
Steven C. Good (5) 11,600 60,000 *
Kenneth B. Roath (6) 10,000 60,000 *
</TABLE>
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* Less than 1%
(1) As of June 30, 2000.
(2) Includes 10,000 shares related to exercisable stock options under the 1996
Stock Option and Incentive Plan of Arden Realty, Inc. and Arden Realty
Limited Partnership, or the Plan.
(3) Includes 11,000 shares owned by Mr. Flax and 7,500 shares related to
exercisable stock options under the Plan.
(4) Includes 4,000 shares which are owned of record by a family trust of which
Mr. Gold is a co-trustee with shared investment and voting power and 5,000
shares related to exercisable stock options under the Plan.
(5) Includes 1,200 shares held in trust by the Good Swartz & Berns Pension
Plan, 400 shares in Mr. Good's 401(k) Plan with Good, Swartz & Berns and
10,000 shares related to exercisable stock options under the Plan.
(6) Includes 10,000 shares related to exercisable stock options under the Plan.
The Selling Stockholders identified above received the options listed
above as compensation for serving on our Board of Directors. We agreed to file a
registration statement with the Securities and Exchange Commission, or SEC,
covering the resale of the shares of common stock issued to each Selling
Stockholder upon exercise of options and to indemnify each Selling Stockholder
against claims made against them arising out of, among other things, statements
made in the registration statement.
FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of the federal income tax considerations we
believe are material to purchasers of our common stock. This summary is based on
current law, is for general information only and is not tax advice. Your tax
treatment will vary depending on your particular situation and this discussion
does not purport to deal with all aspects of taxation that may be relevant to a
holder of common stock in light of his or her personal investments or tax
circumstances, or to stockholders who receive special treatment under the
federal income tax laws, except to the extent discussed under the headings
"--Taxation of tax-exempt stockholders" and "--Taxation of non-U.S.
stockholders." Stockholders receiving special treatment include, without
limitation:
o insurance companies;
o financial institutions or broker-dealers;
o tax-exempt organizations;
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o stockholders holding securities as part of a
conversion transaction, or a hedge or hedging
transaction, or as a position in a straddle for tax
purposes;
o foreign corporations or partnerships;
o and persons who are not citizens or residents of the
United States.
In addition, the summary below does not consider the effect of any
foreign, state, local or other tax laws that may be applicable to you as a
holder of our common units or our common stock.
The information in this section is based on:
o the Internal Revenue Code;
o current, temporary and proposed treasury regulations
promulgated under the Internal Revenue Code;
o the legislative history of the Internal Revenue Code;
o current administrative interpretations and practices
of the Internal Revenue Service;
o and court decisions;
in each case, as of the date of this prospectus. In addition, administrative
interpretations and practices of the Internal Revenue Service include its
practices and policies as expressed in private letter rulings which are not
binding on the Internal Revenue Service, except with respect to the particular
taxpayers who requested and received these rulings. Future legislation, treasury
regulations, administrative interpretations and practices and/or court decisions
may adversely affect the tax considerations contained in this discussion. Any
change could apply retroactively to transactions preceding the date of the
change. We have not requested, and do not plan to request, any rulings from the
Internal Revenue Service concerning our tax treatment, and the statements in
this prospectus are not binding on the Internal Revenue Service or any court.
Thus, we can provide no assurance that the tax considerations contained in this
discussion will not be challenged by the Internal Revenue Service or if
challenged, will be sustained by a court.
YOU ARE URGED TO CONSULT YOUR TAX ADVISOR REGARDING THE SPECIFIC TAX
CONSEQUENCES TO YOU OF THE ACQUISITION, OWNERSHIP AND SALE OR OTHER DISPOSITION
OF OUR COMMON STOCK, INCLUDING THE FEDERAL, STATE, LOCAL, FOREIGN AND OTHER TAX
CONSEQUENCES; OUR ELECTION TO BE TAXED AS A REIT FOR FEDERAL INCOME TAX
PURPOSES; AND POTENTIAL CHANGES IN THE TAX LAWS.
TAXATION OF ARDEN REALTY, INC.
GENERAL. We elected to be taxed as a REIT under Sections 856 through
860 of the Internal Revenue Code, commencing with our taxable year ended
December 31, 1996. We believe we have been organized and have operated in a
manner which allows us to qualify for taxation as a REIT under the Internal
Revenue Code commencing with our taxable year ended December 31, 1996. We intend
to continue to operate in this manner. However, our qualification and taxation
as a REIT depends upon our ability to meet, through actual annual operating
results, asset diversification, distribution levels and diversity of stock
ownership, the various qualification tests imposed under the Internal Revenue
Code. Accordingly, there is no assurance that we have operated or will continue
to operate in a manner so as to qualify or remain qualified as a REIT. See
"--Failure to qualify."
The sections of the Internal Revenue Code that relate to the
qualification and operation as a REIT are highly technical and complex. The
following describes the material aspects of the sections of the Internal Revenue
Code that govern the federal income tax treatment of a REIT and its
stockholders. This summary is qualified in its entirety by the Internal Revenue
Code, relevant rules and treasury regulations promulgated under the Internal
Revenue Code, and administrative and judicial interpretations of the Internal
Revenue Code and these rules and treasury regulations.
If we qualify for taxation as a REIT, we generally will not be required
to pay federal corporate income taxes on our net income that is currently
distributed to our stockholders. This treatment substantially eliminates the
"double taxation" that ordinarily results from investment in a corporation.
Double taxation means taxation once at the corporate level when income is earned
and once again at the stockholder level when this income is distributed. We will
be required to pay federal income tax, however, under a number of circumstances,
as described in the Internal Revenue Code.
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REQUIREMENTS FOR QUALIFICATION AS A REIT. The Internal Revenue Code
defines a REIT as a corporation, trust or association:
(1) that is managed by one or more trustees or directors;
(2) that issues transferable shares or transferable certificates to
evidence beneficial ownership;
(3) that would be taxable as a domestic corporation but for Sections
856 through 860 of the Internal Revenue Code;
(4) that is not a financial institution or an insurance company within
the meaning of the Internal Revenue Code;
(5) that is beneficially owned by 100 or more persons;
(6) not more than 50% in value of the outstanding stock of which is
owned, actually or constructively, by five or fewer individuals, including
specified entities, during the last half of each taxable year; and
(7) that meets other tests, described below, regarding the nature of
its income and assets and the amount of its distributions.
The Internal Revenue 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 twelve months, or
during a proportionate part of a taxable year of less than twelve months.
Conditions (5) and (6) do not apply until after the first taxable year for which
an election is made to be taxed as a REIT. For purposes of condition (6),
pension funds and other specified tax-exempt entities generally are treated as
individuals, except that a "look-through" exception applies with respect to
pension funds. We believe that we have satisfied conditions (1) through (7)
inclusive. In addition, our charter provides for restrictions regarding
ownership and transfer of our shares. These restrictions are intended to assist
us in continuing to satisfy the share ownership requirements described in (5)
and (6) above.
These ownership and transfer restrictions may not ensure that we will,
in all cases, be able to satisfy the share ownership requirements described in
(5) and (6) above. If we fail to satisfy these share ownership requirements,
except as provided in the next sentence, our status as a REIT will terminate.
If, however, we comply with the rules contained in the treasury regulations that
require us to ascertain the actual ownership of our shares, and we do not know,
or would not have known through the exercise of reasonable diligence, that we
failed to meet the requirement described in condition (6) above, we will be
treated as having met this requirement. See "--Failure to qualify."
In addition, we may not maintain our status as a REIT unless our
taxable year is a calendar year. We have and will continue to have a calendar
taxable year. .
OWNERSHIP OF A PARTNERSHIP INTEREST. Treasury regulations provide that
if we are a partner in a partnership, we will be deemed to own our proportionate
share of the assets of the partnership. Also, we will be deemed to be entitled
to our proportionate share of the income of the partnership. The character of
the assets and gross income of the partnership retains the same character in our
hands for purposes of Section 856 of the Internal Revenue Code, including
satisfying the gross income tests and the asset tests. Thus, our proportionate
share of the assets and items of income of the Operating Partnership are treated
as our assets and items of income for purposes of applying the requirements
described in this prospectus, including the income and asset tests described
below. In addition, for these purposes, the Operating Partnership's assets and
items of income include its share of assets and items of income of any
partnership in which it owns an interest. We have included a brief summary of
the rules governing the federal income taxation of partnerships and their
partners below in "--Tax aspects of the partnerships." We have direct control of
the Operating Partnership and will continue to operate it in a manner consistent
with the requirements for qualification as a REIT. The treatment described above
also applies with respect to the ownership of interests in limited liability
companies that are treated as partnerships for tax purposes.
INCOME TESTS. We must satisfy two gross income requirements annually to
maintain our qualification as a REIT:
o First, each taxable year we must derive directly or indirectly
at least 75% of our gross income, excluding gross income from
prohibited transactions, from (a) investments relating to real
property or mortgages on real property, including "rents from
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real property" and, in some circumstances, interest, or (b)
some types of temporary investments;
o Second, each taxable year we must derive at least 95% of our
gross income, excluding gross income from prohibited
transactions, from (a) the real property investments described
above, or (b) dividends, interest and gain from the sale or
disposition of stock or securities or (c) any combination of
the foregoing.
Rents we receive will qualify as "rents from real property" in
satisfying the gross income requirements for a REIT described above only if the
following conditions are met:
o the amount of rent must not be based in any way on the income
or profits of any person. An amount received or accrued
generally will not be excluded from the term "rents from real
property" solely because it is based on a fixed percentage or
percentages of receipts or sales;
o rents received from a tenant will not qualify as "rents from
real property" in satisfying the gross income tests if we, or
an actual or constructive owner of 10% or more of our capital
stock, actually or constructively owns 10% or more of the
interests in that tenant;
o 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 personal property will not qualify as "rents
from real property"; and
o for rents received to qualify as "rents from real property,"
we generally must not operate or manage our property or
furnish or render services to our tenants, subject to a 1% de
minimis exception, other than through an independent
contractor from whom we derive no revenue. We may, however,
directly perform services that are "usually or customarily
rendered" in connection with the rental of space for occupancy
only and are not otherwise considered "rendered to the
occupant" of the property. Examples of these services include
the provision of light, heat, or other utilities, trash
removal and general maintenance of common areas. Under
recently enacted legislation, described in greater detail
below, beginning in 2001, we may employ a "taxable REIT
subsidiary" which may be wholly or partially owned by us, to
provide both customary and noncustomary services to our
tenants without causing the rent we receive from those tenants
to fail to qualify as "rents from real property."
We generally do not intend to receive rent which fails to satisfy any
of the above conditions. Notwithstanding the foregoing, we may have taken and
may continue to take the actions which fail to satisfy one or more of the above
conditions to the extent that we determine, based on the advice of our tax
counsel, that receipt of such amounts those actions will not jeopardize our
status as a REIT. We believe that the aggregate amount of our nonqualifying
income, from all sources, in any taxable year will not exceed the limit on
nonqualifying income under the gross income tests.
If we fail to satisfy one or both of the 75% or 95% gross income tests
for any taxable year, we may nevertheless qualify as a REIT for the year if we
are entitled to relief under the Internal Revenue Code. Generally, we may avail
ourselves of the relief provisions if:
o our failure to meet these tests was due to reasonable cause
and not due to willful neglect;
o we attach a schedule of the sources of our income to our
federal income tax return; and
o any incorrect information on the schedule was not due to fraud
with intent to evade tax.
It is not possible, however, to state whether in all circumstances we
would be entitled to the benefit of these relief provisions. For example, if we
fail to satisfy the gross income tests because nonqualifying income that we
intentionally accrue or receive exceeds the limits on nonqualifying income, the
IRS could conclude that our failure to satisfy the tests was not due to
reasonable cause. If these relief provisions do not apply to a particular set of
circumstances, we will not qualify as a REIT. As discussed above in "-- Taxation
of the Company--General," even if these relief provisions apply, and we retain
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our status as a REIT, a tax would be imposed with respect to our non- qualifying
income. We may not always be able to maintain compliance with the gross income
tests for REIT qualification despite our periodic monitoring of our income.
PROHIBITED TRANSACTION INCOME. Any gain that we realize on the sale of
any property held as inventory or other property held primarily for sale to
customers in the ordinary course of business will be treated as income from a
prohibited transaction that is subject to a 100% penalty tax. Our gain includes
our share of any gain realized by the Operating Partnership. This prohibited
transaction income may also adversely affect our ability to satisfy the income
tests for qualification as a REIT. Under existing law, whether property is held
as inventory or primarily for sale to customers in the ordinary course of a
trade or business depends on all the facts and circumstances surrounding the
particular transaction. We intend to hold our properties for investment with a
view to long-term appreciation, and to engage in the business of acquiring,
developing and owning properties. We intend to make, and have made, occasional
sales of properties as are consistent with our investment objectives. We do not
believe that any of our sales were prohibited transactions. The IRS may contend,
however, that that one or more of these sales is subject to the 100% penalty
tax.
ASSET TESTS. At the close of each quarter of our taxable year, we also
must satisfy three tests relating to the nature and diversification of our
assets.
o First, at least 75% of the value of our total assets must be
represented by real estate assets, cash, cash items, and
government securities and specified temporary investments. For
purposes of this test, real estate assets include stock or
debt instruments that are purchased with the proceeds of a
stock offering or a long-term public debt offering with a term
of at least five years, but only for the one-year period
beginning on the date we receive these proceeds.
o Second, not more than 25% of our total assets may be
represented by securities, other than those securities
includible in the 75% asset test.
o Third, of the investments included in the 25% asset class, the
value of any one issuer's securities may not exceed 5% of the
value of our total assets, and we may not own more than 10% of
any one issuer's outstanding voting securities.
After initially meeting the asset tests at the close of any quarter, we
will not lose our status as a REIT for failure to satisfy the asset tests at the
end of a later quarter solely by reason of changes in asset values. If we fail
to satisfy the asset tests because we acquire securities or other property
during a quarter, we can cure this failure by disposing of sufficient
nonqualifying assets within 30 days after the close of that quarter. For this
purpose, an increase in our interests in the Operating Partnership. will be
treated as an acquisition of a portion of the securities or other property owned
by this partnership. We believe we have maintained and intend to continue to
maintain adequate records of the value of our assets to ensure compliance with
the asset tests. In addition, we intend to take such actions within the 30 days
after the close of any quarter as may be required to cure any noncompliance. If
we fail to cure noncompliance with the asset tests within this time period, we
would cease to qualify as a REIT.
As discussed above, a REIT cannot currently own more than 10% of the
outstanding voting securities of any one issuer. Recently, legislation was
enacted that, beginning in 2001, limits a REIT's ability to own more than 10% by
vote or value of the securities of any single issuer. This legislation, however,
allows a REIT to own up to 100% of the vote and/or value of a corporation which
jointly elects with the REIT to be treated as a "taxable REIT subsidiary,"
provided that, in the aggregate, a REIT's total investment in its taxable REIT
subsidiaries does not exceed 20% of the REIT's total assets, and at least 75% of
the REIT's total assets are real estate or other qualifying assets. In addition,
dividends from taxable REIT subsidiaries will be nonqualifying income for
purposes of the 75%, but not the 95%, gross income test. Other than certain
activities relating to lodging and health care facilities, a taxable REIT
subsidiary may generally engage in any business, including the provision of
customary or noncustomary services to tenants of its parent REIT. This new
legislation contains provisions generally intended to insure that transactions
between a REIT and its taxable REIT subsidiary occur "at arm's length" and on
commercially reasonable terms. These requirements include a provision that
prevents a taxable REIT subsidiary from deducting interest on direct or indirect
indebtedness to its parent REIT if, under a specified series of tests, the
taxable REIT subsidiary is considered to have an excessive interest expense
level or debt to equity ratio. In some cases the new legislation also imposes a
100% tax on the REIT if its rental, service and/or other agreements with its
taxable REIT subsidiary are not on arm's length terms. As a result of this new
legislation it will also be necessary for us to monitor our investments in
certain entities in which we own an interest and, in some circumstances, modify
those investments if we own more than 10% of the voting power or value of
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another entity. The legislation concerning taxable REIT subsidiaries is
generally effective only for taxable years beginning after December 31, 2000.
ANNUAL DISTRIBUTION REQUIREMENTS. To maintain our qualification as a
REIT, we are required to distribute dividends, other than capital gain
dividends, to our stockholders in an amount at least equal to the sum of:
o 95% of our "REIT taxable income" as defined in the Internal
Revenue Code; and
o 95% of our after tax net income, if any, from foreclosure
property; minus
o the excess of the sum of specified items of our non-cash
income items over 5% of "REIT taxable income."
Our "REIT taxable income" is computed without regard to the dividends paid
deduction and our net capital gain. In addition, for purposes of this test,
non-cash income means income attributable to leveled stepped rents, original
issue discount on purchase money debt, or a like-kind exchange that is later
determined to be taxable.
We must pay these distributions in the taxable year to which they
relate, or in the following taxable year if they are declared before we timely
file our tax return for that year and paid on or before the first regular
dividend payment following their declarations. Except as provided below, these
distributions are taxable to our stockholders , other than tax-exempt entities,
as discussed below, in the year in which paid. This is so even though these
distributions relate to the prior year for purposes of our 95% distribution
requirement. The amount distributed must not be preferential. To avoid being
preferential, every stockholder of the class of stock to which a distribution is
made must be treated the same as every other stockholder of that class, and no
class of stock may be treated otherwise than according to its dividend rights as
a class. To the extent that we do not distribute all of our net capital gain, or
distribute at least 95%, but less than 100%, of our "REIT taxable income," as
adjusted, we will be required to pay tax on such income at regular ordinary and
capital gain corporate tax rates. We believe we have made, and intend to
continue to make, timely distributions sufficient to satisfy these annual
distribution requirements. In this regard, the partnership agreement for the
Operating Partnership authorizes us, as general partner, to take whatever steps
are necessary to cause the Operating Partnership to distribute to its partners
an amount sufficient to permit us to meet these distribution requirements.
We expect that our "REIT taxable income" will be less than our cash
flow because of depreciation and other non-cash charges included in computing
our "REIT taxable income." Accordingly, we anticipate that we will generally
have sufficient cash or liquid assets to enable us to satisfy our distribution
requirements. However, we may not always have sufficient cash or other liquid
assets to meet these distribution requirements because of timing differences
between the actual receipt of income and actual payment of deductible expenses,
and the inclusion of income and deduction of expenses in determining our taxable
income. If these timing differences occur, we may need to arrange for
short-term, or possibly long-term, borrowings or need to pay dividends in the
form of taxable stock dividends in order to meet the distribution requirements.
In addition, pursuant to recently enacted legislation, the 95% distribution
requirement discussed above will be reduced to 90%, effective for taxable years
beginning after December 31, 2000.
We may be able to rectify an inadvertent failure to meet our
distribution requirement for a year by paying "deficiency dividends" to
stockholders in a later year, which we may include in our deduction for
dividends paid for the earlier year. Thus, we may be able to avoid being taxed
on amounts distributed as deficiency dividends. However, we will be required to
pay interest based upon the amount of any deduction taken for deficiency
dividends.
In addition, we will be required to pay a 4% excise tax on the excess
of the required distribution over the amounts actually distributed if we fail to
distribute during each calendar year, or in the case of distributions with
declaration and record dates falling in the last three months of the calendar
year, by the end of January immediately following that year, at least the sum of
85% of our REIT ordinary income for the year, 95% of our REIT capital gain
income for the year, plus, in each case, any undistributed taxable income from
prior periods.
FAILURE TO QUALIFY.
If we fail to qualify for taxation as a REIT in any taxable year, and
the relief provisions of the Internal Revenue Code do not apply, we will be
required to pay tax, including any alternative minimum tax, on our taxable
income at regular corporate rates. Distributions to stockholders in any year in
which we fail to qualify as a REIT will not be deductible by us and we will not
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be required to distribute any amounts to our stockholders. As a result, we
anticipate that our failure to qualify as a REIT would reduce the cash available
for distribution by us to our stockholders. In addition, if we fail to qualify
as a REIT, all distributions to stockholders will be taxable at ordinary income
rates to the extent of our current and accumulated earnings and profits. In this
event, corporate distributees may be eligible for the dividends-received
deduction. Unless entitled to relief under specific statutory provisions, we
will also be disqualified from taxation as a REIT for the four taxable years
following the year during which we lose our qualification. It is not possible to
state whether in all circumstances we would be entitled to this statutory
relief.
TAX ASPECTS OF THE PARTNERSHIPS.
GENERAL. Substantially all of our investments are held indirectly
through the Operating Partnership and subsidiary partnerships and limited
liability companies. In general, partnerships and limited liability companies
are "pass-through" entities which are not required to pay federal income tax.
Rather, partners or members are allocated their proportionate shares of the
items of income, gain, loss, deduction and credit of a partnership or limited
liability company, and are potentially required to pay tax on this income,
without regard to whether they receive a distribution from the partnership or
limited liability company. We will include in our income our proportionate share
of these partnership and limited liability company items for purposes of the
various REIT income tests and in the computation of our REIT taxable income.
Moreover, for purposes of the REIT asset tests, we will include our
proportionate share of assets held by the Operating Partnership and its
subsidiary partnerships and limited liability companies.
ENTITY CLASSIFICATION. Our ownership of an interest in Operating
Partnership involves special tax considerations. These special tax
considerations include, for example, the possibility that the IRS might
challenge the status of the Operating Partnership or its subsidiary partnerships
or limited liability companies as partnerships, as opposed to associations
taxable as corporations, for federal income tax purposes. If the Operating
Partnership or one or more of its subsidiary partnerships or limited liability
companies were treated as an association, it would be taxable as a corporation
and therefore be subject to an entity-level tax on its income. In this
situation, the character of our assets and items of gross income would change
and prevent us from satisfying the REIT asset tests and possibly the REIT income
tests. This, in turn, would prevent us from qualifying as a REIT. In addition, a
change in the tax status of the Operating Partnership or its subsidiary
partnerships or limited liability companies might be treated as a taxable event.
If so, we might incur a tax liability without any related cash distributions.
Treasury regulations that apply for tax periods beginning on or after
January 1, 1997, provide that a domestic business entity not otherwise organized
as a corporation and which has at least two members may elect to be treated as a
partnership for federal income tax purposes. Unless it elects otherwise, an
eligible entity in existence prior to January 1, 1997, will have the same
classification for federal income tax purposes that it claimed under the entity
classification treasury regulations in effect prior to this date. In addition,
an eligible entity which did not exist or did not claim a classification prior
to January 1, 1997, will be classified as a partnership for federal income tax
purposes unless it elects otherwise. The Operating Partnership and its
subsidiary partnerships and limited liability companies intend to claim
classification as partnerships under the final regulations. As a result, we
believe that these partnerships and limited liability companies will be
classified as partnerships for federal income tax purposes.
ALLOCATIONS OF THE OPERATING PARTNERSHIP'S INCOME, GAIN, LOSS AND
DEDUCTION. A partnership or limited liability company agreement will generally
determine the allocation of income and losses among partners or members. These
allocations, however, will be disregarded for tax purposes if they do not comply
with the provisions of Section 704(b) of the Internal Revenue Code and the
treasury regulations. Generally, Section 704(b) of the Internal Revenue Code and
the related treasury regulations require that partnership and limited liability
company allocations respect the economic arrangement of the partners and
members. If an allocation is not recognized for federal income tax purposes, the
relevant item will be reallocated according to the partners' or members'
interests in the partnership or limited liability company. This reallocation
will be determined by taking into account all of the facts and circumstances
relating to the economic arrangement of the partners or members with respect to
such item. The Operating Partnership's allocations of taxable income and loss
are intended to comply with the requirements of Section 704(b) of the Internal
Revenue Code and the treasury regulations thereunder.
TAX ALLOCATIONS WITH RESPECT TO THE PROPERTIES. Under Section 704(c) of
the Internal Revenue Code, income, gain, loss and deduction attributable to
appreciated or depreciated property that is contributed to a partnership or
limited liability company in exchange for an interest in the partnership or
limited liability company must be allocated in a manner so that the contributing
partner or member is charged with the unrealized gain or benefits from the
unrealized loss associated with the property at the time of the contribution.
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The amount of the unrealized gain or unrealized loss is generally equal to the
difference between the fair market value or book value and the adjusted tax
basis of the contributed property at the time of contribution. These 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 or members.
The Operating Partnership was formed by way of contributions of appreciated
property. Moreover, subsequent to the formation of the Operating Partnership
additional appreciated property has been contributed to it in exchange for
partnership interests. The partnership agreement requires that these allocations
be made in a manner consistent with Section 704(c) of the Internal Revenue Code.
In general, the partners of the Operating Partnership who acquired
their limited partnership interests through a contribution of appreciated
property will be allocated depreciation deductions for tax purposes which are
lower than these deductions would have been if they had been determined on a pro
rata basis. In addition, in the event of the disposition of any of the
contributed assets which have an unrealized gain or loss attributable to a
difference between the fair market or book value and the adjusted tax basis of
the asset at the time of contribution, all income attributable to this book-tax
difference will generally be allocated to the limited partners who contributed
the property. We will generally be allocated only our share of income
attributable to appreciation or depreciation, if any, occurring after the date
of contribution to the Operating Partnership. These allocations will tend to
eliminate the book-tax difference over the life of the Operating Partnership.
However, the special allocation rules of Section 704(c) of the Internal Revenue
Code do not always entirely eliminate 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 us to be allocated lower depreciation and other
deductions. We could possibly be allocated an amount of taxable income in the
event of a sale of these contributed assets in excess of the economic or book
income allocated to us as a result of the sale. This may cause us to recognize
taxable income in excess of cash proceeds, which might adversely affect our
ability to comply with the REIT distribution requirements.
Treasury regulations issued under Section 704(c) of the Internal
Revenue Code provide partnerships and limited liability companies with a choice
of several methods of accounting for book-tax differences, including retention
of the "traditional method" or the election of other methods which would permit
any distortions caused by a book-tax difference to be entirely rectified on an
annual basis or with respect to a specific taxable transaction such as a sale.
We have determined to use the "traditional method" for accounting for book-tax
differences for the properties initially contributed to the Operating
Partnership and for some assets acquired subsequently. We have not yet decided
what method will be used to account for book- tax differences for properties
acquired by the Operating Partnership in the future. Any property acquired by
the Operating Partnership in a taxable transaction will initially have a tax
basis equal to its fair market value, and Section 704(c) of the Internal Revenue
Code will not apply.
TAXATION OF TAXABLE U.S. STOCKHOLDERS.
As used below, the term "U.S. stockholder" means a holder of shares of
common stock who is for United States federal income tax purposes:
o a citizen or resident of the United States;
o a corporation, partnership, or other entity created or
organized in or under the laws of the United States or of any
state or in the District of Columbia, unless, in the case of a
partnership, treasury regulations provide otherwise;
o an estate which is required to pay United States federal
income tax regardless of the source of its income; or
o a trust whose administration is under the primary supervision
of a United States court and which has one or more United
States persons who have the authority to control all
substantial decisions of the trust.
Notwithstanding the preceding sentence, to the extent provided in treasury
regulations, some trusts in existence on August 20, 1996, and treated as United
States persons prior to this date that elect to continue to be treated as United
States persons, shall also be considered U.S. stockholders.
DISTRIBUTIONS GENERALLY. Distributions out of our current or
accumulated earnings and profits, other than capital gain dividends discussed
below, will constitute dividends taxable to our taxable U.S. stockholders as
ordinary income. As long as we qualify as a REIT, these distributions will not
be eligible for the dividends-received deduction in the case of U.S.
stockholders that are corporations. For purposes of determining whether
distributions to holders of common stock are out of current or accumulated
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earnings and profits, our earnings and profits will be allocated first to our
outstanding preferred stock, if any, and then to our common stock.
To the extent that we make distributions, other than capital gain
dividends discussed below, in excess of our current and accumulated earnings and
profits, these distributions will be treated first as a tax-free return of
capital to each U.S. stockholder. This treatment will reduce the adjusted basis
which each U.S. stockholder has in his or her shares of stock for tax purposes
by the amount of the distribution, but not below zero. Distributions in excess
of a U.S. stockholder's adjusted basis in his or her shares will be taxable as
capital gain, provided that the shares were held as capital assets. This gain
will be taxable as long-term capital gain if the shares have been held for more
than one year. Dividends we declare in October, November, or December of any
year and payable to a stockholder of record on a specified date in any of these
months will be treated as both paid by us and received by the stockholder on
December 31 of that year, provided we actually pay the dividend on or before
January 31 of the following calendar year. Stockholders may not include in their
own income tax returns any of our net operating losses or capital losses.
CAPITAL GAIN DISTRIBUTIONS. Distributions that we properly designate as
capital gain dividends will be taxable to taxable U.S. stockholders as gains
from the sale or disposition of a capital asset to the extent that these gains
do not exceed our actual net capital gain for the taxable year. Depending on the
tax characteristics of the assets which produced these gains, and on specified
designations, if any, which we may make, these gains may be taxable to
non-corporate U.S. stockholders at a 20% or 25% rate. U.S. stockholders that are
corporations may, however, be required to treat up to 20% of some capital gain
dividends as ordinary income.
PASSIVE ACTIVITY LOSSES AND INVESTMENT INTEREST LIMITATIONS.
Distributions we make and gain arising from the sale or exchange by a U.S.
stockholder of our shares will not be treated as passive activity income. As a
result, U.S. stockholders will generally be unable to apply any "passive losses"
against this income or gain. Distributions we make, to the extent they do not
constitute a return of capital, generally will be treated as investment income
for purposes of computing the investment interest limitation. Gain arising from
the sale or other disposition of our shares, however, may not be treated as
investment income depending upon your particular situation.
RETENTION OF NET LONG-TERM CAPITAL GAINS. We may elect to retain,
rather than distribute as a capital gain dividend, our net long-term capital
gains. If we make this election, we would pay tax on our retained net long-term
capital gains. In addition, to the extent we designate, a U.S. stockholder
generally would:
(a) include its proportionate share of our undistributed long-term
capital gains in computing its long-term capital gains in its
return for its taxable year in which the last day of our taxable
year falls;
(b) be deemed to have paid its proportionate share of the capital
gains tax imposed on us on the designated amounts included in the
U.S. stockholder's long-term capital gains;
(c) receive a credit or refund for the amount of tax deemed paid by
it;
(d) increase the adjusted basis of its common stock by the difference
between the amount of includible gains and the tax deemed to have
been paid by it; and
(e) in the case of a U.S. stockholder that is a corporation,
appropriately adjust its earnings and profits for the retained
capital gains as required by treasury regulations to be
prescribed by the IRS.
DISPOSITIONS OF COMMON STOCK.
If you are a U.S. stockholder and you sell or dispose of your shares of
common stock, you will recognize gain or loss for federal income tax purposes in
an amount equal to the difference between the amount of cash and the fair market
value of any property you receive on the sale or other disposition and your
adjusted basis in the shares for tax purposes. This gain or loss will be capital
if you have held the common stock as a capital asset. This gain or loss will be
long-term capital gain or loss if you have held the common stock for more than
one year. In general, if you are a U.S. stockholder and you recognize loss upon
the sale or other disposition of common stock that you have held for six months
or less, then after applying the relevant holding period rules, the loss you
recognize will be treated as a long-term capital loss to the extent you received
distributions from us which were required to be treated as long-term capital
gains.
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BACKUP WITHHOLDING.
We report to our U.S. stockholders and the IRS the amount of dividends
paid during each calendar year and the amount of any tax withheld. Under the
backup withholding rules, a stockholder may be subject to backup withholding at
the rate of 31% with respect to dividends paid unless the holder is a
corporation or is otherwise exempt and, when required, demonstrates this fact or
provides a taxpayer identification number, certifies as to no loss of exemption
from backup withholding, and otherwise complies with the backup withholding
rules. A U.S. stockholder who does not provide us with his or her correct
taxpayer identification number may also be subject to penalties imposed by the
IRS. Backup withholding is not an additional tax. Any amount paid as backup
withholding will be creditable against the stockholder's income tax liability.
In addition, we may be required to withhold a portion of capital gain
distributions to any stockholders who fail to certify their non-foreign status.
TAXATION OF TAX-EXEMPT STOCKHOLDERS.
The IRS has ruled that amounts distributed as dividends by a qualified
REIT do not constitute unrelated business taxable income when received by a
tax-exempt entity. Based on that ruling, except as described below, dividend
income from us and gain from the sale of our shares generally will not be
unrelated business taxable income to a tax-exempt stockholder. This income or
gain will be unrelated business taxable income, however, if the tax-exempt
stockholder holds its shares as "debt financed property" within the meaning of
the Internal Revenue Code or if the shares are used in a trade or business of
the tax-exempt stockholder. Generally, debt financed property is property, the
acquisition or holding of which was financed through a borrowing by the
tax-exempt stockholder. Tax-exempt shareholders should consult their tax
advisors regarding the application of the unrelated business taxable income
provisions of the Internal Revenue Code.
For tax-exempt stockholders which are social clubs, voluntary employee
benefit associations, supplemental unemployment benefit trusts, and qualified
group legal services plans exempt from federal income taxation under Sections
501(c)(7), (c)(9), (c)(17) and (c)(20) of the Internal Revenue Code,
respectively, income from an investment in our shares will constitute unrelated
business taxable income unless the organization is able to properly claim a
deduction for amounts set aside or placed in reserve for specific purposes so as
to offset the income generated by its investment in our shares. These
prospective investors should consult their tax advisors concerning these "set
aside" and reserve requirements.
Notwithstanding the above, however, a portion of the dividends paid by
a "pension-held REIT" will be treated as unrelated business taxable income as to
specified tax exempt trusts which hold more than 10%, by value, of the interests
in the REIT. A REIT's tax status as a "pension held REIT" depends, in part, on
the ownership of its stock. As a result of the limitations on the transfer and
ownership of stock contained in our charter, we do not expect to be classified
as a "pension-held REIT."
TAXATION OF NON-U.S. STOCKHOLDERS.
The preceding discussion does not address the rules governing U.S.
federal income taxation of the ownership and disposition of common stock by
persons that are non-U.S. stockholders. When we use the term "non-U.S.
stockholder" we mean stockholders who are not U.S. stockholders. In general,
non-U.S. stockholders may be subject to special tax withholding requirements on
distributions from us and with respect to their sale or other disposition of our
common stock, except to the extent reduced or eliminated by an income tax treaty
between the United States and the non-U.S. stockholder's country. A non- U.S.
stockholder who is a stockholder of record and is eligible for reduction or
elimination of withholding must file an appropriate form with us in order to
claim this treatment. Non-U.S. stockholders should consult their tax advisors
concerning the federal income tax consequences to them of an acquisition of
shares of common stock, including the federal income tax treatment of
dispositions of interests in and the receipt of distributions from us.
OTHER TAX CONSEQUENCES.
We may be required to pay state or local taxes in various state or
local jurisdictions, including those in which we transact business. Our
stockholders may be required to pay state or local taxes in various state or
local jurisdictions, including those in which they reside. Our state and local
tax treatment may not conform to the federal income tax consequences summarized
above. In addition, your state and local tax treatment may not conform to the
federal income tax consequences summarized above. Consequently, you should
consult your tax advisor regarding the effect of state and local tax laws on an
investment in our common stock.
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WHERE CAN YOU FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and
other information with the SEC. You may read and copy any materials we file with
the SEC at the SEC's Public Reference Rooms located at 450 Fifth Street, N.W.,
Washington, D.C. 20549. You may obtain information on the operation of the
Public Reference Room by calling the SEC at 1-800-SEC-0330. We file information
electronically with the SEC. The SEC maintains an Internet site that contains
reports, proxy and information statements and other information regarding
issuers that file electronically with the SEC. The address of the SEC's Internet
site is "http://www.sec.gov." You also may inspect copies of these materials and
other information about us at the New York Stock Exchange, 20 Broad Street, New
York, New York 10005.
The SEC allows us to "incorporate by reference" the information we file
with them, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference is
considered to be part of this prospectus, and information that we will file
later with the SEC will automatically update and supersede this information. We
incorporate by reference the documents listed below and any future filings that
we will make with the SEC under Sections 13(a), 13(c), 14 or 15(d) of the
Securities Exchange Act of 1934, before the termination of the offering of the
Offered Shares under this prospectus:
o Annual Report on Form 10-K for the fiscal year ended December
31, 1999;
o Proxy Statement for Annual Meeting of Stockholders held on May
22, 2000;
o Our most recent quarterly report on Form 10-Q for the three
month period ended September 30, 2000;
o The description of our common stock contained in our
Registration Statement on Form 8-A filed with the Commission
on September 18, 1996, as amended and filed on October 3,
1996, including any subsequently filed amendments and reports
updating such description; and
o The description of our Preferred Share Purchase Rights
contained in our Registration Statement in Form 8-A filed with
the Commission on August 26, 1998, including any subsequently
filed amendments and reports updating such description.
o The issuance of $100.0 million 8.5% by our operating
partnership senior unsecured notes due November 2010 as
reported in Form 8-K as filed with the Commission on November
20, 2000.
You may request a copy of these filings, at no cost, by writing or
telephoning us at the following address:
Arden Realty, Inc.
11601 Wilshire Boulevard, Fourth Floor
Los Angeles, California 90025
Attention: Secretary
Telephone number: (310) 966-2600
This prospectus is part of a registration statement we filed with the
SEC. This prospectus does not contain all of the information included in the
registration statement. We have omitted certain parts of the registration
statement in accordance with the rules and regulations of the SEC. For further
information, we refer you to the registration statement, including its exhibits
and schedules. We have authorized no one to provide you with any information
that differs from that contained in this prospectus. Accordingly, you should not
rely on any information that is not contained in this prospectus. We are not
making an offer of these securities in any state where the offer is not
permitted. You should not assume that the information in this prospectus is
accurate as of any date other than the date on the front cover of this
prospectus.
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PLAN OF DISTRIBUTION
This prospectus relates to the offer and sale from time to time by the
Selling Stockholders of up to 290,000 shares of common stock that may be issued
to the Selling Stockholders in connection with the exercise by the Selling
Stockholders of their options to purchase common stock. We are registering the
offer and sale of shares of our common stock by the Selling Stockholders, but
the registration of these shares does not necessarily mean that any or all of
such shares will be offered or sold by any of the Selling Stockholders.
We will not receive any proceeds from the sale of the shares by the
Selling Stockholders. "Selling Stockholder" includes donees, transferees and
pledgees selling shares received from a named Selling Stockholder after the date
of this prospectus.
The shares of our common stock issued upon exercise of their options to
purchase common stock may be offered and sold at various times by the Selling
Stockholders. The Selling Stockholders will act independently of us in making
decisions with respect to these shares of common stock that are being registered
hereby and may offer those shares of our common stock in one or more of the
following transactions:
o on the New York Stock Exchange;
o in the over-the-counter market;
o in transactions other than on such exchanges or in the
over-the-counter market;
o in brokerage transactions;
o in block trades;
o through put or call options;
o in privately negotiated transactions;
o in connection with short sales of the shares of Common Stock;
o by pledge to secure debts and other obligations;
o in open market sales in reliance upon Rule 144 under the
Securities Act of 1933, as amended (the "Securities Act");
o in connection with the writing of non-traded and
exchange-traded call options, in hedge transactions and in
settlement of other transactions in standardized or
over-the-counter options; or
o in a combination of any of the above transactions.
The Selling Stockholders may sell their shares of our common stock
issued upon exercise of their options to purchase common stock at market prices
prevailing at the time of sale, at prices related to such prevailing market
prices, at negotiated prices or at fixed prices. The Selling Stockholders
reserve the sole right to accept and, together with any agent of the Selling
Stockholders, to reject in whole or in part any proposed purchase of the shares
of our common stock issued upon exercise of their options to purchase common
stock.
The shares of our common stock issued upon exercise of their options to
purchase common stock may be sold from time to time to purchasers directly by
any of the Selling Stockholders or through underwriters, dealers or agents, who
may receive compensation in the form of discounts, concessions or commissions
from the Selling Stockholders and/or the purchasers of the shares of our common
stock for whom they may act as an agent (which compensation as to a particular
broker-dealer might be in excess of customary commissions). The Selling
Stockholders have advised the Company that they have not entered into any
agreements, understandings or arrangements with any underwriters or
broker-dealers regarding the sale of their shares of our common stock issued
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upon exercise of their options to purchase common stock, nor is there an
underwriter or coordinating broker acting in connection with the proposed sale
of the shares of our common stock by the Selling Stockholders. The Selling
Stockholders and any dealers or agents that participate in the distribution of
the shares of our common stock issued upon exercise of their options to purchase
common stock may be deemed to be "underwriters" within the meaning of Section
2(11) of the Securities Act, and any profit on the sale of the shares of our
common stock by them and any commissions received by any dealers or agents might
be deemed to be underwriting commissions under the Securities Act.
Because the Selling Stockholders may be deemed to be "underwriters"
within the meaning of Section 2(11) of the Securities Act, the Selling
Stockholders will be subject to the prospectus delivery requirements of the
Securities Act. We have informed the Selling Stockholders that the
anti-manipulative provisions of Regulation M promulgated under the Securities
Exchange Act of 1934, as amended, may apply to their sales in the market.
At a time any particular offer of shares of our common stock issued
upon exercise of its options to purchase common stock is made by a Selling
Stockholder, a supplement to this prospectus, if required, will be distributed
setting forth its name and the names of any dealers or agents and any
commissions and other terms constituting compensation from the Selling
Stockholders and any other required information.
Pursuant to an agreement with the Selling Stockholders, we will pay
substantially all of the expenses incident to the registration of the resale of
the shares of common stock issuable upon the exercise of options to purchase
common stock, estimated to be approximately $12,300. Under agreements entered
into with the Selling Stockholders, they and any underwriter they may utilize
will be indemnified by us against certain civil liabilities, including
liabilities under the Securities Act.
LEGAL MATTERS
Certain legal matters, including the validity under Maryland law of the
shares of our common stock offered hereby, will be passed upon for us by Ballard
Spahr Andrews & Ingersoll, LLP, Baltimore, Maryland.
EXPERTS
The consolidated financial statements of Arden Realty Inc. appearing in
Arden Realty Inc.'s Annual Report (Form 10-K) for the year ended December 31,
1999, have been audited by Ernst & Young LLP, independent auditors, as set forth
in their report thereon included therein and incorporated herein by reference.
Such consolidated financial statements are incorporated herein by reference in
reliance upon such report given on the authority of such firm as experts in
accounting and auditing.
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================================================================================
We have not authorized any person to make a statement that differs from
what is contained in this prospectus. If any person does make a statement that
differs from what is contained in this prospectus, you should not rely on it.
This prospectus is not an offer to sell, nor is it seeking an offer to buy these
securities in any state where the offer or sale is not permitted. The
information in this prospectus is complete and accurate as of its date, but the
information may change after that date.
290,000 SHARES
ARDEN REALTY, INC.
COMMON STOCK
-------------------
PROSPECTUS
-------------------
December 12, 2000
================================================================================
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PART II.
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
The following table itemizes the expenses incurred by Arden Realty,
Inc. (the "Registrant") in connection with the registration of the shares of the
Registrant's common stock, par value $.01 per share ("common stock"), offered
hereby. All amounts shown are estimates except the Securities and Exchange
Commission's registration fee.
Registration Fee - Securities and Exchange Commission $ 1,782.32
Legal Fees and Expenses 7,500.00
Miscellaneous Expenses 3,000.00
-------------
Total $ 12,282.32
Item 15. Indemnification of Directors and Officers.
The MGCL permits a Maryland corporation to include in its charter a
provision limiting the liability of its directors and officers to the
corporation and its stockholders for money damages except for liability
resulting from (a) actual receipt of an improper benefit or profit in money,
property or services or (b) active and deliberate dishonesty established by a
final judgment and which is material to the cause of action. The Charter of the
Company contains such a provision which eliminates such liability to the maximum
extent permitted by Maryland law.
The Charter of the Company authorizes it, to the maximum extent
permitted by Maryland law, to obligate itself to indemnify and to pay or
reimburse reasonable expenses in advance of final disposition of a proceeding to
(a) any individual who is a present or former director or officer who is made a
party to a proceeding by reason of his service in that capacity or (b) any
individual who, while a director of the Company and at the request of the
Company, serves or has served as a director, officer, partner or trustee of
another corporation, partnership, joint venture, trust, employee benefit plan or
other enterprise from and against any claim or liability to which such person
may become subject which such person may incur by reason of his status as a
present or former director or officer of the Company. The Bylaws of the Company
obligate it, to the maximum extent permitted by Maryland law, without requiring
a preliminary determination of the ultimate entitlement to indemnification, to
indemnify and to pay or reimburse reasonable expenses in advance of final
disposition of a proceeding to (a) any present or former director or officer who
is made a party to the proceeding by reason of his service in that capacity or
(b) any individual who, while a director of the Company and at the request of
the Company, serves or has served another corporation, partnership, joint
venture, trust, employee benefit plan or any other enterprise as a director,
officer, partner or trustee of such corporation, partnership, joint venture,
trust, employee benefit plan or other enterprise and who is made a party to the
proceeding by reason of his service in that capacity. The Charter and Bylaws
also permit the Company to indemnify and advance expenses to any person who
served a predecessor of the Company in any of the capacities described above and
to any employee or agent of the Company or a predecessor of the Company.
The MGCL requires a corporation (unless its charter provides otherwise,
which our Charter does not) to indemnify a director or officer who has been
successful, on the merits or otherwise, in the defense of any proceeding to
which he is made a party by reason of his services in that capacity against
reasonable expenses incurred in connection therewith. The MGCL permits a
corporation to indemnify its present and former directors and officers, among
others, against judgments, penalties, fines, settlements and reasonable expenses
actually incurred by them in connection with any proceeding to which they may be
made a party by reason of their service in such capacity unless it is
established that (a) the act or omission of the director or officer was material
to the matter giving rise to the proceeding and (i) was committed in bad faith
or (ii) was the result of active and deliberate dishonesty, (b) the director or
officer actually received an improper personal benefit in money, property or
services or (c) in the case of any criminal proceeding, the director or officer
had reasonable cause to believe that the act or omission was unlawful. However,
a Maryland corporation may not indemnify for an adverse judgment in a suit by or
in the right of the corporation or for a judgment of liability on the basis that
a personal benefit was improperly received, unless, in either case, a court
orders indemnification and then only for expenses. In addition, the MGCL permits
a corporation to advance reasonable expenses to a director or officer upon
receipt by the corporation of (a) a written affirmation by the director or
officer of his good faith belief that he has met the standard of conduct
necessary for indemnification by the corporation and (b) a written undertaking
by him or on his behalf to repay the amount paid or reimbursed by the
corporation if it shall ultimately be determined that the standard of conduct
was not met.
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The inclusion of the above provisions in our Charter and Bylaws may
have the effect of reducing the likelihood of stockholder derivative suits
against directors and may discourage or deter stockholders or management from
bringing a lawsuit against directors for breach of their duty of care, even
though such an action, if successful, might otherwise have benefited the Company
and its stockholders. Furthermore, it is the position of the Commission that
indemnification of directors and officers for liabilities arising under the
Securities Act is against public policy and is unenforceable pursuant to Section
14 of the Securities Act.
The Partnership Agreement also provides for indemnification and advance
of expenses of the Company and its officers and directors to a substantially
similar extent as indemnification and advance of expenses is provided to
officers and directors of the Company in our Charter and Bylaws, and limits the
liability of the Company to the Operating Partnership and its partners to a
substantially similar extent as liability of officers and directors of the
Company and its stockholders is limited under our Charter.
Item 16. Exhibits
See attached exhibit index.
Item 17. Undertaking.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section
10(a)(3) of the Securities Act;
(ii) To reflect in the prospectus any facts or events
arising after the effective date of the registration
statement (or the most recent post-effective
amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the
information set forth in the registration statement.
Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the
total dollar value of securities offered would not
exceed that which was registered) and any deviation
from the low or high end of the estimated maximum
offering range may be reflected in the form of
prospectus filed with the SEC pursuant to Rule 424(b)
if, in the aggregate, the changes in volume and price
represent no more than 20 percent change in the
maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the
effective registration statement; and
(iii) To include any material information with respect to
the plan of distribution not previously disclosed in
the registration statement or any material change to
such information in the registration statement.
PROVIDED, HOWEVER, that paragraphs (i) and (ii) do not apply
if the registration statement is on Form S-3, Form S-8 or Form
F-3, and the information required to be included in a
post-effective amendment by those paragraphs is contained in
periodic reports filed by the registrant pursuant to Section
13 or Section 15(d) of the Exchange Act that are incorporated
by reference in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be
deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering
thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain
unsold at the termination of the offering.
The undersigned Registrant hereby further undertakes that, for purposes
of determining any liability under the Securities Act, each filing of the
Registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Exchange Act) that is
incorporated by reference in the registration statement shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
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The undersigned Registrant hereby further undertakes to deliver or
cause to be delivered with the prospectus, to each person to whom the prospectus
is sent or given, the latest annual report to security holders that is
incorporated by reference in the prospectus and furnished pursuant to and
meeting the requirements of Rule 14a-3 or Rule 14c-3 under the Exchange Act;
and, where interim financial information required to be presented by Article 3
of Regulation S-X is not set forth in the prospectus, to deliver, or cause to be
delivered to each person to whom the prospectus is sent or given, the latest
quarterly report that is specifically incorporated by reference in the
prospectus to provide such interim financial information.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities
Act, and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act, and will be governed by the final adjudication of such issue.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
the Registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-3 and has duly caused this
Amendment No. 1 to the Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Los Angeles, State of
California, on December 12, 2000.
ARDEN REALTY, INC.
By: /s/ RICHARD S. ZIMAN
--------------------
Richard S. Ziman
Chairman of the Board and Chief Executive Officer
Pursuant to the requirements of the Securities Act, this Amendment No.
1 to the Registration Statement has been signed by the following persons in the
capacities indicated on December 12, 2000.
Signature Title
/s/RICHARD S. ZIMAN Chairman of the Board, Chief Executive Officer and
---------------------------
Richard S. Ziman Director (Principal Executive Officer)
/s/VICTOR J. COLEMAN* President, Chief Operating Officer and Director
---------------------------
Victor J. Coleman
/s/ANDREW J. SOBEL* Executive Vice President
---------------------------
Andrew J. Sobel
/s/DANIEL S.BOTHE* Senior Vice President, Co-Chief Financial Officer
---------------------------
Daniel S. Bothe
/s/RICHARD S. DAVIS* Senior Vice President, Co-Chief Financial Officer
---------------------------
Richard S. Davis and Treasurer (Chief Accounting Officer)
/s/CARL D. COVITZ* Director
---------------------------
Carl D. Covitz
/s/LARRY S. FLAX* Director
---------------------------
Larry S. Flax
/s/PETER S. GOLD* Director
---------------------------
Peter S. Gold
/s/STEVEN C. GOOD* Director
---------------------------
Steven C. Good
/s/KENNETH B. ROATH* Director
---------------------------
Kenneth B. Roath
* By: /s/RICHARD S. ZIMAN
---------------------------
Richard S. Ziman
as Attorney-in-Fact
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EXHIBIT INDEX
EXHIBIT
4.1 Rights Agreement, dated as of August 14, 1998, between
Arden Realty, Inc. and the Bank of New York as filed as an
exhibit to the current report on Form 8-K, dated August
26, 1998, and incorporated herein by reference.
5.1 Opinion of Ballard Spahr Andrews & Ingersoll, LLP regarding the
validity of the common stock being registered
8.1 Opinion of Latham & Watkins regarding certain federal income tax
matters
23.1 Consent of Ballard Spahr Andrews & Ingersoll, LLP (included in
Exhibit 5.1)
23.2 Consent of Latham & Watkins (included in Exhibit 8.1)
23.3 Consent of Ernst & Young LLP
24.1 Power of Attorney (included on signature page to the Registration
Statement)